“WORKING CAPITAL MANAGEMENT OF VERKA MILK PLANT

SANGRUR”

SUBMITTED FOR THE PARTIAL FULFILLMENT OF THE DEGREE

OF

MASTER OF BUSINESS ADMINISTRATION

AFFILIATED TO

PUNJABI UNIVERSITY, PATIALA

By

RAMANDEEP SINGH

University Roll No : 5480

Under The Supervision Of

Mr. GUNJAN MUNJAL

Chandigarh Group of Colleges, Gharuan, Mohali

Year: 2012

ACKNOWLEDGEMENT

I would like to thank General Manager Verka Milk Plant, Sangrur, for providing

me this wonderful opportunity to work with ‘Sangrur Distt. Milk Producers Union

Cooperative Ltd.’

I am extremely thankful to Mr. Balwinder Singh (General Manager) and entire

staff division for their invaluable support and inputs in this project.

I extend my sincere gratitude to various respondents and citizens of Sangrur,

Sunam who spared their valuable time and contributed to dealer survey.

DECLARATION

I undersigned here by declare that the summer training project report

submitted to my college chandigarh group of college. In partial fulfillment

for the degree of master of business administration on “study of working

capital management of Verka sangrur ” is a result of my own work

under continous guidance and kind co-operation of our college faculty

member Mr. GUNJAN MUNJAL. I have not submitted this training report

to any other university for the award of degree.

………………

….

CERTIFICATE OF COMPLETION

This is Certify that Mr Gagandeep (2nd semester) has successfully completed

her project titled “Study of dealers behaviour about verka products” under

the guidance of Mr. Gunjan Munjal This is in the partial fulfillment of her MBA

curriculum (Accounts)

Dated:

……………………..

(Project guide)

PREFACE

For management careers, it is very important to develop managerial skills .In

order to achieve positive and concrete results, along with theoretical concepts,

the exposure of real life situation existing in a corporate world is very much

needed. To fulfill this need, this type of practical training is required.

I underwent summer training in VERKA MILK PLANT, located in Sangrur. It was

my fortune to get training in a very healthy company. I got great opportunity to

view the overall working of the organization. In the forthcoming pages, I have

attempted to present a report covering different aspects of my training.

Chapters

Chapter 1: Introduction 

Chapter 2: Literature review

Chapter 3: Introduction of Topic

Chapter 4: Methodology

Chapter 5: Surveys, Feedback and Data Analysis, Interpretation of

questionnaire with table as well as graphs.

Chapter 6: Suggestion, Recommendation, Conclusion

TABLE OF CONTENTS

Chapter No.

Contents Page No.

1.Introduction

1 to 27

2 Literature review 28 to 32

3 Introduction of Topic 33 to 57

4 Methodology 58 to 59

5Surveys, Feedback and Data

Analysis, Interpretation of

questionnaire with table as well as

graphs.

60 to 64

6 Suggestion, Recommendation, Conclusion

65 to 69

Chapter 1:

Introduction

Relevance at India & World Level

-India retains position as World's top Milk Producer

India has retained its number one position as world’s largest milk producing

country by pushing the United States to second position. This is the ninth year in

a row that India enjoys the numero uno status in milk production. India’s milk

production grew almost 4.2% as against the world’s average growth of less than

1%. In India, milk has a special role to play for its many nutritional advantages as

well as providing supplementary income to some 70 million farmers in over

500,000 remote villages.

And milk remains as the number one commodity product by India pushing wheat

and rice behind. Country’s output now covers 100 million tones and is valued at

nearly two lakh crore rupees. In spite of being the world’s largest milk producer;

India’s milk processing industry is not very large. Only 12% of milk is delivered

to dairies as against the world average of 70%.

In certain countries like New Zealand almost 98% of milk production is

processed. Bulk of Indian milk is utilized for drinking or in the unorganized sector

for making sweets or other traditional products. The Indian dairy industry is

contributing significantly to the country's economy, besides improving the health

standards by increasing the nutrition value of the food. The value of output from

dairy sector increased to Rs. 5,00,510 million in 1994-95 from Rs. 2,75,080

million in 1990. India occupies first position in the world having a total bovine

population of 288 million compared to the world's total bovine population of 1420

million.

Milk procurement and processing

The organized dairy sector (both co-operative and private) is presently

handling only 10-12 percent of total milk production in the country.

The targets and achievements of milk production, procurement and

processing in co-operative sector by the end of VIII Five Year Plan are

given in Annexure II.

Thus it indicates, there is a wide scope for processing of milk and

manufacture of milk products for domestic consumption as well as export.

Export performance

Dairy products form one of the fastest growing segments in the livestock

produce export.

The major products exported are malted milk foods, ghee and cheese (to

some extent) to the countries like Bangladesh, UAE, Nepal, Sri Lanka,

Bahrain and Oman.

Export potential and marketing

Bangladesh, United Arab Emirates, Nepal, Sri Lanka and Oman are the

potential countries for export of malted milk products, butter and ghee. The

export of milk and milk products to currently existing markets would increase

to Rs. 285 million and to new markets to Rs. 155 million. Thus exports are

likely to touch Rs.440 million by the turn of the century. The GATT agreement

further gave a boost to the dairy industry, as India has a comparative cost

advantage in regard to milk production. NABARD has been actively involved

in credit disbursement in a number of schemes in dairy sector. It also

encourages development of new products through its Research and

Development Fund besides guiding various entrepreneurs in new areas of

business and technology.

HISTORY

Milkfed is not an unknown name for the people of Punjab. It is very

popular among the people. There is a very long history behind this popularity.

In 1959, a village named 'Verka' near Amritsar, Chief Minister of Punjab

Sardar Partap Singh Kairon established a Dairy Development Corporation for

safeguards of farmers and increase dairy business. After some times four more

Milk Plants were established i.e. in Chandigarh, Mohali, Ludhiana and Bathinda.

There after it progressed and the number of Milk Plants roses to 8 Plants upto

1980. Before 1981 it is fully under the control of Punjab Govt. But after it in 1981

the Govt. has developed its name from Punjab State Co-operative Milk

Producers Union Ltd. into MILKFED Punjab. All the plants were controlled by

Head Office which is established at Chandigarh. Only one balance sheet was

prepared for all plants in Punjab and Profit & Loss for all the plants was prepared

collectively. But in 1981 all plants started to make their own Balance Sheet and

calculate Profit & Loss for their own plant. The fully Co-operative Society System

was adopted and presently is in continue.

1 MILKFED-PUNJAB

(Introduction)

The Punjab State Cooperative Milk Producers’ Federation Limited popularly

known as MILKFED Punjab, came into existence in 1973 with a twin objective of

providing remunerative milk market to the Milk Producers in the State by value

addition and marketing of produce on one hand and to provide technical inputs to

the milk producers for enhancement of milk production on the other hand.

Although the federation was registered much earlier, but it came to real self in the

year 1983 when all the milk plants of the Punjab Dairy Development Corporation

Limited were handed over to Cooperative sector and the entire State was

covered under Operation Flood to give the farmers a better deal and our valued

customers better products. Today, when we look back, we think we have fulfilled

the promise to some extent. The setup of the organization is a three tier system,

Milk Producers Cooperative Societies at the village level, Milk Unions at District

level and Federation as an Apex Body at State level. MILKFED Punjab has

continuously advanced towards its coveted objectives well defined in its byelaws.

1.2 Objectives of MILKFED

1. To provide remunerative prices to milk producers by value addition and

marketing of produce.

2. To provide technical inputs for enhancement of milk production on the other

hand.

3. To carry out activities for promoting production, procurement processing and

marketing of milk and milk products for economic development of the farming

community;

4. To purchase and/or erect buildings, plants, machinery and other ancillary

equipment to carry out business;

5. To study problems of mutual interest related to production, procurement and

marketing of dairy and allied products;

6. To establish research and quality control laboratories;

7. To make necessary arrangements for transfer of milk allied milk products and

commodities;

8. To market its products under its own trade name/brand name with its Member

Union’s trade mark/brand;

9. To promote the organization of primary societies and assist members in

organization of the Primary Societies.

Critical analysis of Milkfed

Corporate Focus

MILKFED is serving the cause of Milk producers of the state in collaboration with

National Dairy Development Board by increasing the number of functional

MPCSs from 4642 in 1990-91 to 6248 in 2000-01 and their membership rose by

90000 from 2.63lac in 1991 to 3.53lac during the same period. This has resulted

in increase of milk procurement from 1438lac in 1991 to 3371lac liter in 2000-01.

However, rehabilitation plan of sick Milk unions has yet to reach the

implementation stage.

Strength/Care Competency/Opportunities:

MILKFED earned a net profit of Rs.3.19crore in 2000-01. Its core competency in

marketing of Milk &Milk products by creating a marketing infrastructure is serving

a social purpose by providing income to land-less laborers small and marginal

farmers scheduled caste families and households headed by women having just

one or two cattle only as nearly 90% of the member of Milk producer’s

Cooperative Societies belong to these categories

(Annexure 20) “Operation Flood” programmed of dairy development is

implemented by it in the state.

MILK VISION 2004 to stabilize the gap between Milk procured during peak

seasons and lean season has been drawn by MILKFED to optimally utilize Milk

plants for reducing their losses. Moreover, Model diary farms in collaboration with

Technology information and Assessment Council (TIFAC) are being developed

by it at a capital outlay of Rs.2.00crore.

Restructuring/revival

Export Ropar and Ludhiana Milk unions the remaining 9 unions are incurring

losses. Their combined accumulated looses are Rs.76.33crore as on 31-03-

2001. This way, cooperative Milk union’s structure of MILKFED is losing its

commercial viability over the last two years by restricting itself to the sale of Milk

and Milk products only and not exploiting its well developed procurement sale

and supply distribution channels to market fresh vegetables and fruits along with

processing and procurement of oil seeds. To make these plants viable and

socially sustainable the introduction of latest technology in Milk; plants and full

exploitation of its marketing strength in procurement and marketing network is

the need of the hour. MILKFED is a vital mechanism for more them one reason in

the Punjab context. First and foremost it is engaged in raising the viability of

Agriculture of the small/marginal farmers. Landless labors, families with no male

earners and the scheduled castes. It is therefore of utmost importance that the

Government of Punjab make its due contribution for the purpose of leveraging

finances or the National Dairy Development Board and other cooperative

institutions. Infect, If necessary Government should get District Milk Union

Cooperative so that hitherto slow extension is intensified and the

Maximum potential for cost reduction is achieved. The other important reason for

Government to support this activity even by subsides to induce a shift out of the

paddy- wheat rotation by encouraging the cultivation of better seeds vegetable,

Fruits and eventually oil seeds and meat products.

1.3 INTRODUCTION &

GENERAL FEATURES OF MILK PLANT SANGRUR

NAME: Verka Milk Plant.

ADDRESS: Verka Milk Plant

Patiala Road, Sangrur

RAW MATERIAL: Milk.

PRODUCTS: Ghee, Pasteurized milk,

Milk powder, Curd, Cheese,

Milk Cake, Sweet flavored milk.

WORKING HOURS: 24 hours (3 shifts).

TOTAL WORKERS: 200 Workers in the Three Shifts

Capacity One Lakh Ltrs per day.

PROFILE OF THE UNIT

1:- IntroductionInitially the Union was registered vide registration No. 931

dated 24.03.1973. The change of name of Union was further registered on

20.7.1988 as “The Sangrur Distt. Co-op. Milk Producers’ Union Ltd., Sangrur”.

The area of operation of the union is whole Sangrur Distt. The main object of the

union is to promote the economic interest of the Milk Producers. The union

organized co-op Milk Producers through these societies to achieve the object,

but union has failed to achieve object of collecting milk as per capacity of the

plant, which is one lac litres daily & some proposed organized societies not got

registration after completions of 90 days. Although union renders technical and

veterinary facilities & arranges to distribute the cattle feed and fodder seeds to

the producers, but it is not appropriate. Milk products sold through consignee

branches at the rates fixed by Milkfed without keeping in view the cost of

production and upward trend of marketing. The attention of Management is

drawn towards the sale price of products as these rates are less than cost price,

so the sale policy should be reviewed.

2:- Financial Position

The financial position of the plant is very deteorating. The

plant is in loss many years. Accumulated losses of the plant are increased year

by year. During the period under audit the plant increased loss to the tune of Rs.

22524084.90. Total Losses of the plant 399656833.29. The main reason of the

loss is due to low procurement of milk, which resulting plant run under capacity.

The other reason is interest burden on working capital and loans from NDDB.

3:- Capacity UtilizationAs per information made available to audit, the total

production / processing capacity of the plant is 2.25 lac ltr. Milk daily. ( 1.05 lacs

processing plant and 1.20 lacs ltr powder plant) but handling capacity is about

one lac liters daily.

The Three years comparative figures is as below:-

Items Capacity Capacity Utilized

Per day 2008-09 2009-10

2010-11

________________________________________________________________

_________________

Milk 100000 Ltr 52449 59776 57975

(52%) (60%) (58%)

SMP 10000 Kg. 1101 1624 968

(11%) (16%) (10%)

Ghee 6000 Kg 996 1701 1362

(17%) (28%) (23%)

Panner 200 Kg 178 162 1218

(89%) (81%) (109%)

Curd 600 Kg. 240 235 306

(40%) (39%) (51%)

Though the capacity utilization decreased in the current year as compare

to the previous year but under utilization of installed capacity of the plant is the

main cause of loss of the plant. The management is advised to take efforts for

collection of milk, though the capacity of the plant is fully utilized.

4. Management

ORGANISATIONAL STRUCTURE OF THE UNIT

GENERAL MANAGER

Manager Manager Manager Manager ManagerProduction Marketing Accounts Procurement Q. Control

Dy. Manager Dy. Manager Dy. Manager Dy. Manager Dy. ManagerProduction Marketing Accounts Procurement Q. Control

Pack. Sup/Plant Op FSR Accountant MPS Chemist

Jr. Plant Op. Salesman Jr. Accountant MPA Lab

Asstt.

Workers Workers Clerk Lab Attendent

DHCC

MANAGEMENT OF MILK PLANT BOARD OF DIRECTORS

DESIGNATION

1. Sh. Balwinder Singh GENERAL MANAGER

2. Sr. Kushpal Singh CHAIRMAN

3. Sr. Nirmal Singh DIRECTOR

4. Sr. Gurminder Singh DIRECTOR

5. Sr. Naib Singh DIRECTOR

6. Sr. Navtej Singh DIRECTOR

7. Sr. Harjinder Singh DIRECTOR

8. Sr. Sukhjinder Singh DIRECTOR

9. Sr. Shamsher Singh DIRECTOR

10. Sr. Jarnail Singh DIRECTOR

11. Sr.Gurnam Singh DIRECTOR

12. Sr.Naginder Singh DIRECTOR

5:- MEMBERSHIP

Membership as on 31.3.11 is as under:-

Particulars Membership Members admitted Membership Membership

as on during cancelled as on

1.4.10 the year during year 31.03.11

………………………………………………………………………………

M.P Societies 482 13 6 489

Pb. Govt. 1 --- ------- 1

………………………………………………………………………………

483 13 6 490

There is increase of thirteen members during the period under audit.

137cancelled societies have been stand as members of the union.

List of the cancelled societies is annexed at page no………. of the report.

Although pointed out in previous year reports for correction, but the management

paid no attention in this respect. Although the resolution of the board has been

passed for correction, so management is advised to correct the membership

register.

I the undersigned auditor have audited the Balance Sheet, Profit & Loss

Account for the year ending 31st March 2011 and also examined account books

for the said period subject to the given remarks / comments in the succeeding

paragraphs:-

LOCATION AND LAYOUT

In the milk plant there are hard receiving departments: Production and

Engineering. The location of the stores department is carefully planned out and it

is housed in a position which is very near to production department so that

transportation charges are minimum. It is also easily accessible to all other

departments like engineering, boiling, refrigeration, powder plant and workshop.

The layouts of plants store are properly planned. There are shelves, racks,

admirals and handling devices for keeping the material and equipments properly.

The store is divided into racks which are further sub-Divided into small spaces

allocated. Special attention is paid to storage of material which is liable to

leakage or evaporation and deterioration.

MILK PROCUREMENT IN DIFFERENT SEASONS

Milk Plant Sangrur procures milk in three seasons. First comes the lean season

i.e. the months of May. June, July and August. In this season milk is available in

very low quantity i.e. 25000 liters per day. The second season is mid-season i.e.

the months of March, April, September and October. In this season the

procurement of milk is about 50000 liters per day. The most awaiting season is

flush season i.e. the months of November, December, January and February. In

this season the procurement of milk is maximum i.e. 65000 liters.

MILK PROCUREMENT IN LAST 7 YEARS:

Year saver age milk procurement per day (in liters) total milk handling.

2004- 85000 liters per/day

2005- 80000 liters per/day

2006- 70000 liters per/day

2007- 75000 liters per/day

2008- 70000 liters per/day

2009-65000 liters per/day

2010- 60000 liters per/day

2011- 62000 liters per day

MAIN CENTRES AND THEIR BRANCHES:

About 300 milk producing societies come under Milk Plant Sangrur which is

operating in the whole Sangrur district. All these are divided into six main

centers which are as under:

LOCAL SANGRUR 140

MALERKOTLA 50

SEHNA 30

MEHAL KALAN 30

CHANGALIWALA 30

SANDHORE 20

(A) MILK PROCUREMENT PER DAY

NAME OF THE SOCIETYMILK PER DAY (in liters)

Local Sangrur 40000

Sehna 8000

Mehal Kalan 5000

Chanhaliwala 7000

(B) PRODUCTION

Production is the foundation on which every organization is built. Production is an

internal act of producing something in an organized manner. It is the fabrication

of a physical object through the use of men, Material and equipment. Thus the

basis of production is the transformation of inputs into goods and services. In

milk plant Sangrur two different plants are established for the production of Ghee

and SMP. These are called:

1. Powder Plant.

2. Production plant.

In powder plant Skimmed Milk Powder is prepared from spreta milk which comes

from production department. In production plant Ghee is prepared from cream

after its separation from milk. Here pasteurized milk is also prepared. Sometimes

milk cake is also prepared according to its requirement. In addition to it there are

arrangements for filling sweet milk bottles. Powder and Ghee are made only in

flush season when milk is available in large quantity. In lean season production

fails because of non-availability of milk. In months of May, June, August is done;

sometimes glucose is made here on contract basis.

(C) QUALITY CONTROL

Quality control includes techniques and systems for the achievement of the

required quality of the raw material as well as final products. Most often milk

vendors adulterate the milk in such a way that normally consumers are to be

fooled. Consumers remain obvious to the various ways and means adopted by

milk vendors to adulterate milk. Here are some eye openers:

1. Urea, caustic soda and salt are added to thicken the milk.

2. Milk powder is also used for thickening and usually the powder used is

sub- standard.

3. Synthetic milk is added to pure milk to increase the quantity.

4. Sometimes pure milk is separated, the cream is removed and the

skimmed milk powder is added to it.

(D) ACCOUNTING :

Accounting is the art of recording, classifying and summarizing in a significant

manner, and in terms of money transactions and events which are in part at least

of financial character and interpreting the results thereof. In milk plant Sangrur

this section performs the functions of maintaining the accounts of stores material

and milk products by union and to make payments at right time. Like this to

maintain the accounts of milk and milk products sold by the union and to receive

the payment for goods sold to consumers, concerned sections and branches.

The bills are prepared by accounts branch according to 10 days milk purchase

from producers and societies. It is the duty of this section to maintain the

accounts according to rules and regulations mentioned by Registrar Co-operative

Department and to follow the restrictions and suggestions imposed by auditor.

(E) MARKETING

Milkfed Punjab is serving nationwide consumers through its network of regional

offices and strong distribution channels. Milkfed markers a wide variety of

products liquid milk, skimmed milk powder and many more.

MARKETING STRATEGY OF MILKFED, PUNJABMilkfed is

serving nationwide consumers through its network of Regional offices and very

strong Distribution channels. Milkfed markets a wide range variety of Verka

products which include liquid milk, skimmed  milk powder, whole milk powder,

infant food, ghee,  butter,  cheese, lassi, SFM, Ice Cream, Malted food etc. The

annual turnover of milkfed has crossed Rs.931 crores. Verka is a brand leader in

milk powders particularly in northern eastern sectors and SMP marketed

by MILKFED commands a premium price over powders manufactured by

competitors which include multi-national as well as private trade and other

Cooperative Federations. Now Verka is known for its quality, freshness,  purity

and of course its homemade taste.EXTENSION OF THE BRAND: After

winning faith of innumerable consumers, Verka did not stop. Changing times

brought new trends, needs, tastes and hopes. Verka, dynamic

as ever too acquired newer forms of adding values to milk and milk products.

Apart from introducing new variants of UHT long shelf life milk and SFM in carry

away bottles, Milkfed has a plan to add more variety of flavours in SFM. VERKA

Ice Cream in different flavours and packagings is available in the market. Many

new products are in pipe line. In true sense, milk had never meant so much

before.MAJOR COMPETITORS OF MILKFED

PUNJAB AMULAmul was formally registered on Dec 14,1946. It was

suggested by a quality control expert in Anand. Some cite the origin as an

arcronym to (Anand Milk Producers Union Limited). The Amul revolution was

started as awareness among the farmers. It grew and matured into a protest

movement that was channeled towards economic prosperity.GUJRAT

COOPERATIVE MILK MARKETING FEDERATIONIn 1954, kaira

District Co-op Milk Producers' Union built a plant to convert surplus milk

produced in the cold seasons into milk powder and butter. In 1958, a plant to

manufacture cheese and one to produce baby food were added. Subsequent

years saw the addition of more plants to produce different products. In 1973, the

milk societies/district level unions decided to set up a marketing agency to

market their products. This agency was the GCMMF. It was registered as a co-op

society on 9 July 1973.NESTLENestle realtionship with India dates back to

1912, when it began trading as The Nestle Anglo-Swiss Condensed Milk

Company (Export) Limited, importing and selling finished products in the Indian

Market. Nestle has been a partner in India's growth for over nine decades now

and has built a very special relationship of trust and commitment with the people

of India. The company's activities in India have facilitated direct and indirect

employement and provides livelihood to about one million people including

farmers, suppliers of pacakaging materials, services and other goods.MOTHER

DAIRYSince 1974 millions of consumers in Delhi have been walking up to the

goodness and freshness of mother dairy milk. Mother Dairy has established itself

as an integral part of their lives be it in terms of providing pure wholesome milk or

rich, delicious milk products. The drop logo, used by coopratives across the

country is a symbol of purity and freshness, qualities which Mother Dairy over the

years has come to be closely associated with.THE PROMOTERSThe

company is promoted by two young entrepreneurs Gagan Matta and Garry Matta

under the visionary guidance of their respected father Mr. Kulwant Singh Matta.

Gagan Matta migrated to Canada in the year 1996 and with the support of his

brother Garry Matta back in India established a successful company “GLOBAL

TRADERS” engaged in the distribution of all types of Grocery, Food Products,

Fruits & Vegetable and Articles of Daily use all across Canada . With a very

strong dealer and distribution network Gagan Matta presently is the sole

distributor of the products of various internationally acclaimed Companies and

Brands like Brooke Bond Red Label, Lipton, Taj Mahal from Unilever/Hindustan

Lever, Bikano Namkeens and Sweets from Bikanervala, Sohna Saag from

Markfed Punjab, World Famous Tilda Rice and Golden Temple Atta, Biscuits

from Britannia, Verka Ghee & Paneer, Mazza Mango Juice from Parle, Chetak

Cookware and many more. These two enterprising young men have also

successfully promoted a famous brand

“Mr. Orange”. It has become a national brand in just two years of its launch in

Dec. 2004. Now they are poised to launch a famous Indian Food Chain in North

America.ACHIEVEMENTS Milk Procurement: - Milk Plant SANGRUR

procured about 55,000 Lt. of milk per day through 19 Milk routes in the Flush

Season. Animal Health Care & Other Technical Inputs: - In addition to

Organizing the remunerative Milk market system Through milk producers

cooperative societies, Milk Plant is also providing regular health coverage by

running 2 vet nary routes and 55 Artificial Insemination Service Stations at

Society level.Genetic Improvement of Milch Animals Under this, lay inseminators

are trained who are in-turn, doing Artificial Insemination at the door steps of Dairy

Farmers.Supply of Balanced Cattle Feed: - Special attention has been

paid to the supply of balanced cattle feed to the milk producers so as to enhance

the milk production. Four types of cattle feeds are being supplied i.e. ISI Type,

High Energy, Bye Pass Protein Feed & Buffalo super feed to meet the

requirements of Milk Producers.Supply of Improved Varieties of Fodder

Seeds: - A cow does not produce ample milk without ample fodder. Through

research and seed-farms, Milkfed has worked t provide the farmers high yielding

forages at low cost. Fodder Development activities initiated by Milkfed have

created a good demand for improved fodder seeds in Punjab. Milkfed established

its own seed processing unit in 1985, the unit is automated and has the capacity

to grade 16 million tons of fodder seed per day.Quality Assurance

Program: Quality Assurance Program (QAP) which is a part and parcel of

Dairy Plant Improvement Program (DPIP) was taken up in Ludhiana Milk Union

with the Technical guidance from NDDB. The main objective of the program is to

improve efficiency of Plants coupled with loss management to bring down the

cost of production, improve the quality of milk and milk products manufactured to

ameliorate the general hygienic and house keeping standards and above all to

enhance the profitability and financial viability of the Milk Plants to enable milk

producers to get better price for their produce.MAIN PRODUCTS

MANUFACTURED BY MILK PLANT SANGRUR The main products

which are manufactured by the milk plant Sangrur are as under:1. Ghee.2.

Pasteurized Milk.3. Milk Powder.4. Sweetened Flavoured Milk

(PIO).5. Milk Cake.6. Cheese.7. Curd.8. Panjiri9. Lassi

Plan10. PaneerDISTRIBUTION CHANNEL

MILKFED COMPANY

WHOLESALER RETAILER

CUSTOMER PRODUCTS OF VERKAMilkfed has formulated

company specifications for its milk & milk products to provide standard and

quality of products to  consumers.

Milk Cheese SFM(Pio)

Ghee Ice cream & Sweets Milk Powder

Curd, Kheer... Table Butter   Rasella

Plan Lassi Paneer Panjiri

Milk Cake

Now Verka has arrived on the sheer strength of its quality, freshness and purity

and of course its home made taste and its products being of most affordable

prices. To people today, Verka is part of their daily life. 1. Liquid Milk

Pasteurized Pouch Packed Milk:- It is pouch packed milk. It may be used

as such or for milk based preparations. It shall be kept under refrigerated

conditions. It is packed in half ltr. Pouch. Its length of shelf life is 48 hours under

refrigerated conditions. It is sold in arid around sangrur, sunam, dhuri, barnala

areas. Special distribution control is needed, under refrigerated condition if

transported to very long distance. Verka Milk Plant is preparing three types of

milk pouch:- Standardized Milk Full Cream Milk Double

Toned Milk2. Milk Powder:- Dried Milk or Milk Powder is product

obtained by the removal of water from milk by heat or other suitable means to

produce a solid containing 5% or less moisture. Whole milk, defatted or skim"

milk may be used for drying. It comes in packing of 200 gms, 500 gms. etc. It can

be stored for 1 year before use. 3. Ghee:- Ghee may be defined as

clarified butter fat prepared chiefly from cow or buffalo milk. The product can be

used on roti/pranthas or can be used as cooking other material for food. It is

preserved at ambient temperature for one year. It is packed on 500 gms, 2 Kgs.,

5 Kgs. & 15 Kgs. bulk pack in tin. It is sold anywhere in Punjab and abroad also.

No special distribution control is needed. 4. Butter: - Butter may be defined as

a fat concentrate which is obtaining by churning cream, gathering the fat into a

compact mass and then working it. The product obtained from cow and buffalo

milk or a combination thereof or from cream or curd obtained from cow or buffalo

milk or a combination thereof, with or without the addition of common salt and

colouring matter. It can be kept under refrigeration for three months. This comes

in packs of 10 gms. 100 gms. And 500 gms. 5. Lassi:- Lassi, also called

chhas refers to desi butter milk which is by product obtained when churning curd

led whole milk with curd indigenous devices for the production of desi butter.

Verka Lassi is very popular, especially in Punjab and it is also liked by the people

of other states. It comes in the 200 ml. tetra pack. 6.

SFM:-It is known as Sweetened flavoured milk or bottle milk. The product

used in the form of drinking sweet milk. It is preserved at ambient temperature. It

is packed in 200 ml. bottle, 200 ml. tetra packs. The length of shelf life of product

can be held far three months under ambient temperature. It is sold in and around

Punjab and upcountry market mainly Delhi. 7. Ice

Cream:- Ice Cream may be defined as a frozen dairy product made suitable

blending and processing of cream and other milk products, together with sugar

and flavour, with or without colour and with the incorporation of air during the

freezing process. There are mainly three types of Verka Kulfies i.e. Malai Kulfi,

Choco bar and Mango bar. Malai Kulfi made with milk, malai andCrushed nuts.

Choco bar contained chocolate and Mango bar kulfi contain mango flavour.8.

Paneer:- Paneer refers to the small sized soft cheese. The product can

be consumed as such or can be fried and consumed. It can also be used as an

ingredient for making Indian Sweets and paneer based dishes. It is preserved

under refrigerated condition for 20 days from the date of packing. The product is

packed in poly film bags. The pack size is 200 gms. For consumer pack and 5

Kg. Capacity in bulk pack as agreed by contracted buyer.

9. Curd/Dahi:- Dahi or curd is the product obtained

from boiled milk by souring, natural or otherwise, by a harmless lactic acid or

other bacterial culture. It should have the same percentage of fat and solids - not

- fat as the milk for which it is prepared. 10.

Raseela:- Raseela is a very popular product of Verka which was

launched in 1995. It comes in two flavours - i) Mango Raseela and ii) Pine apple

Raseela. Mango Raseela is prepared from mango pulp and Pineapple Raseela

from pineapple pulp. These are coming in 200 ml. tetra pack. SWOT

ANALYSIS Strengths:- Good brand image of Verka products in the mind of

people.

1. Brand Loyalty among the people for Verka products.

3. Faith on Verka products by the rural and urban population.

4. Rural people satisfaction with quality, price, quantity and availability is also

strengthen the dairy business.

Weaknesses:-

1. Lack of proper advertisements by the plant, such as posters, glow signs,

etc.

2. Lack of proper distribution system.

3. Lack of proper marketing network in rural areas as like in urban areas.

4. Very high rates of products such as sweet lassi Rs.10/100g only.

Opportunities:-

1. Greatly improved expert potential for milk products of western as well as

traditional types.

2. Proper utilization of available resources to decrease the per unit cost.

3. By product utilization for import substitution.

4. Growing demand for milk and milk products.

5. Cost of procurement of raw milk could be decrease significantly.

Threats:-

1. Introduction of foreign products in Indian market.

2. Poor quality of raw milk.

3. The liberalization of Dairy Industry is likely to be exploited by multi -

nationals. They will be interested in manufacturing milk products which

yield high profits. It will create milk shortage in the country adversely

affecting the consumers.

5. A large number of brands entering into dairy industry and there

increasing market share.

Chapter 2:

Literature review

Literature review

Review of literature is the most useful and simple method of formulating the

research problem. The researches done by previous researchers are reviewed

and their usefulness is evaluated to serve as basis for further research. Thus

researcher reviews builds upon the work of others. The reviews that are collected

by the researcher should give an insight into the field under study. The reviews

must explain the need and scope of the study under consideration. It is not

necessary that the reviews are to be in accordance with the objectives. Being a

layman in the research field, I as a researcher have covered reviews that are

related to Credit Rating Agencies.

Ria Goel (2007):-

Ratio Analysis Milkfeed, Ratio Analysis is A tool used to conduct a quantitative

analysis of information in a company's financial statements. Ratios are calculated

from current year numbers and are then compared to previous years, other

companies, the industry to judge the performance of the company. Milkfeed, the

leading independent Punjab’s milk house operator of more than 282stores, which

has been voted the top rated brand by consumers for the last six consecutive

years. It had another year of solid progress, again achieving revenue and profit

growth. Its revenue gone   up by 29% to 35 cr. where as in year 2005 it was 29

Cr. Earnings before interest, tax , depreciation and amortization has increased by

38% to 36 Cr. whereas it as 26 Cr. in year 2005. Operating profit (before prior

year goodwill write off) improved by 38% to 19 Cr.

Vadu Krishna(2008):-

Annual report analysis of Verka Milk Plant, Mohali, Financial statements provide

an overview of a business' financial condition in both short and long term. They

help in understanding the past performance of the company and making future

predictions about the company. It thus helps us to look beyond the profit figures.

There are 3 basic financial statements are used. They are income statement,

balance sheet and cash flow statement, the purpose of financial statements "The

objective of financial statements is to provide information about the financial

position, performance and changes in financial position of an enterprise that is

useful to a wide range of users in making economic decisions."

Arunam Jain(2008):-

Ratio Analysis Of Verka Plant, Mohali, CURRENT RATIO. It is a liquidity ratio

that measures a company's ability to pay short-term obligations. Also known as

"liquidity ratio", "cash asset ratio" and "cash ratio". By putting to test a company's

financial strength, deduces company's ability to pay back its short-term liabilities

(debt and payables) with its short-term assets (cash, inventory, receivables).The

higher the current ratio, the more capable the company is of paying its

obligations. An acceptable current ratio varies by industry.   Generally, the more

liquid the current assets, the smaller the current ratio can be without cause for

the concern.

Jitesh Chudasama(2009):-

Analysis Of Annual Report Of Milkfeed,  Every limited company has to declare

it’s annual report at the end of every year.   It is compulsory for each and every

limited company to do so as per company’s law.. The annual report of the

company gives financial position to the insiders and outsiders of the company.

This project report gives practical knowledge of financial analysis, which is

prepared by me on financial analysis of Milkfeed Ltd. for two years with

interpretation. It covers financial Ratio Analysis, Common Size statement and

Comparative Analysis. This ratio is made in order to analyze financial condition of

MIlkfeed Ltd. including tables as and when required. The project to prepare the

financial analysis of an organization has bridged the gap between the academics

and the practical work.

Antonio C. David (2007):- In this paper we attempt to analyze whether price-

based controls on capital inflows are successful in insulating economies against

external shocks. We present results from vector autoregressive (VAR) models,

which indicate that Chile and Colombia, countries that adopted controls on capital

inflows, seem to have been relatively well insulated against certain types of

external disturbances. Subsequently, we use the autoregressive distributive lag

(ARDL) approach to co-integration in order to isolate the effects of the capital

controls on the pass-through of external disturbances to domestic interest rates in

those economies. We conclude that there is evidence that the capital controls

have allowed for greater policy autonomy.

Lilia Costabile(2004):-

A ‘disequilibrium’ between saving and investment decisions determines a

maladjustment in production, the disruption of capital, and a downturn in

economic activity, according to the ‘Austrian’ approach. By contrast, the

‘Dynamists’ argue that it may lead to economic growth, as disequilibrium may well

be instrumental to capital accumulation. What explains these different predictions

in otherwise similar models? The key is in the interplay between the analytical

features and the ideological options underlying each of these approaches:

alternative lines of thought, entirely compatible with their analytical models, were

abandoned by some of these authors when they conflicted with their pre-

analytical views. This paper illustrates the argument by exploring the models of

two ‘fathers’, von Mises and Robertson.

 Sasandifer(2009):-

Ratio Analysis Of Starbucks Vs Mcdonald's, McDonald’s Corporation operates in

the food service industry. The company has its restaurants in more than 100

countries of the world. McDonald’s, the world’s largest food chain is

headquartered in U.S. having an employee population of 390000 (About

McDonald's..., 2008), Starbucks Corporation, Seattle based, Starbucks

Corporation is the leading coffeehouse chain in the world. The company has its

operations in more than 44 countries. The main products offered by Starbucks

various kinds of drinks, snacks, coffee beans. The company also operates in the

field of marketing of music, books (The Company, 2008). Ratio Analysis.

Ratios Starbucks McDonalds

Current Ratio 0.79 0.80

Quick Ratio 0.30 0.67

Debt Equity Ratio 1.34 0.92

Proprietary Ratio 0.43 0.52

Solvency Ratio 0.57 0.48

Inventory Turnover Ratio 12.13 118.77

Gross Profit Ratio (%) 23.34 34.69

Net Profit Ratio (%) 7.15 15.67

Return on Proprietors' Funds (%) 29.45 15.67

Earning Per Share 0.91 2.06

Icarr (2006):-

Nike, Inc. Financial Ratio Analysis, In assessing the significance of various

financial data, experts engage in financial analysis, the process of determining

and evaluating financial ratios. A ratio is a relationship that indicates something

about a company's activities, such as the ratio between the company's current

assets and current liabilities or between its accounts receivable and its annual

sales. The basic source for these ratios is the company's financial statements

that contain figures on assets, liabilities, profits, and losses. Ratios are only

meaningful when compared with other financial information. Since compared with

industry data, ratios help an individual understand a company's performance

relative to that of competitors, and used to trace performance over time (Venture

Line, 2005).

Chapter 3:

Introduction of Topic

WORKING CAPITAL

Capital required for a business can be classified under two main categories via,

1)     Fixed Capital

2)     Working Capital

        Every business needs funds for two purposes for its establishment and to

carry out its day- to-day operations. Long terms funds are required to create

production facilities through purchase of fixed assets such as p&m, land,

building, furniture, etc. Investments in these assets represent that part of firm’s

capital which is blocked on permanent or fixed basis and is called fixed capital.

Funds are also needed for short-term purposes for the purchase of raw material,

payment of wages and other day – to- day expenses etc.

These funds are known as working capital. In simple words, working capital

refers to that part of the firm’s capital which is required for financing short- term

or current assets such as cash, marketable securities, debtors & inventories.

Funds, thus, invested in current assts keep revolving fast and are being

constantly converted in to cash and this cash flows out again in exchange for

other current assets. Hence, it is also known as revolving or circulating capital or

short term capital.

CONCEPT OF WORKING CAPITAL

There are two concepts of working capital:

1.     Gross working capital

2.     Net working capital

The gross working capital is the capital invested in the total current assets of

the enterprises current assets are those Assets which can convert in to cash

within a short period normally one accounting year. In a narrow sense, the

term working capital refers to the net working. Net working capital is the

excess of current assets over current liability, or, say:

NET WORKING CAPITAL = CURRENT ASSETS – CURRENT

LIABILITIES.

Net working capital can be positive or negative. When the current assets

exceeds the current liabilities are more than the current assets. Current

liabilities are those liabilities, which are intended to be paid in the

ordinary course of business within a short period of normally one

accounting year out of the current assts or the income business.

The gross working capital concept is financial or going concern concept whereas

net working capital is an accounting concept of working capital. Both the

concepts have their own merits.

The gross concept is sometimes preferred to the concept of working capital for

the following reasons:

1.     It enables the enterprise to provide correct amount of working capital at

correct time.

2.     Every management is more interested in total current assets with which

it has to operate then the source from where it is made available.

3.     It take into consideration of the fact every increase in the funds of the

enterprise would increase its working capital.

4.     This concept is also useful in determining the rate of return on

investments in working capital. The net working capital concept, however,

is also important for following reasons:

CLASSIFICATION OF WORKING CAPITAL

Working capital may be classified in to ways:

On the basis of concept.

 On the basis of time.

On the basis of concept working capital can be classified as gross

working capital and net working capital. On the basis of time, working

capital may be classified as:

1. Permanent or fixed working capital.

2. Temporary or variable working capital

PERMANENT OR FIXED WORKING CAPITAL

Permanent or fixed working capital is minimum amount which is required to

ensure effective utilization of fixed facilities and for maintaining the circulation of

current assets. Every firm has to maintain a minimum level of raw material, work-

in-process, finished goods and cash balance. This minimum level of current assts

is called permanent or fixed working capital as this part of working is permanently

blocked in current assets. As the business grow the requirements of working

capital also increases due to increase in current assets.

TEMPORARY OR VARIABLE WORKING CAPITAL

Temporary or variable working capital is the amount of working capital which is

required to meet the seasonal demands and some special exigencies. Variable

working capital can further be classified as seasonal working capital and special

working capital. The capital required to meet the seasonal need of the enterprise

is called seasonal working capital. Special working capital is that part of working

capital which is required to meet special exigencies such as launching of

extensive marketing for conducting research, etc.

IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING

CAPITAL

    SOLVENCY OF THE BUSINESS: Adequate working capital helps in

maintaining the solvency of the business by providing uninterrupted of

production.

     Goodwill: Sufficient amount of working capital enables a firm to make

prompt payments and makes and maintain the goodwill.

     Easy loans: Adequate working capital leads to high solvency and credit

standing can arrange loans from banks and other on easy and favorable

terms.

     Cash Discounts: Adequate working capital also enables a concern to

avail cash discounts on the purchases and hence reduces cost.

     Regular Supply of Raw Material: Sufficient working capital ensures

regular supply of raw material and continuous production.

     Regular Payment Of Salaries, Wages And Other Day TO Day

Commitments: It leads to the satisfaction of the employees and raises the

morale of its employees, increases their efficiency, reduces wastage and

costs and enhances production and profits.

     Exploitation Of Favorable Market     Conditions: If a firm is having

adequate working capital then it can exploit the favorable market

conditions such as purchasing its requirements in bulk when the prices are

lower and holdings its inventories for higher prices.

     Ability To Face Crises: A concern can face the situation during the

depression.

     Quick And Regular Return On Investments: Sufficient working capital

enables a concern to pay quick and regular of dividends to its investors

and gains confidence of the investors and can raise more funds in future.

     High Morale: Adequate working capital brings an environment of

securities, confidence, high morale which results in overall efficiency in a

business.

EXCESS OR INADEQUATE WORKING CAPITAL

Every business concern should have adequate amount of working capital to

run its business operations. It should have neither redundant or excess

working capital nor inadequate nor shortages of working capital. Both excess

as well as short working capital positions are bad for any business. However,

it is the inadequate working capital which is more dangerous from the point of

view of the firm.

DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING CAPITAL

1.     Excessive working capital means ideal funds which earn no profit for

the firm and business cannot earn the required rate of return on its

investments.

2.     Redundant working capital leads to unnecessary purchasing and

accumulation of inventories.

3.     Excessive working capital implies excessive debtors and defective

credit policy which causes higher incidence of bad debts.

4.     It may reduce the overall efficiency of the business.

5.     If a firm is having excessive working capital then the relations with

banks and other financial institution may not be maintained.

6.     Due to lower rate of return n investments, the values of shares may

also fall.

7.     The redundant working capital gives rise to speculative transactions

DISADVANTAGES OF INADEQUATE WORKING CAPITAL

Every business needs some amounts of working capital. The need for working

capital arises due to the time gap between production and realization of cash

from sales. There is an operating cycle involved in sales and realization of cash.

There are time gaps in purchase of raw material and production; production and

sales; and realization of cash.

Thus working capital is needed for the following purposes:

       For the purpose of raw material, components and spares.

       To pay wages and salaries

       To incur day-to-day expenses and overload costs such as office

expenses.

       To meet the selling costs as packing, advertising, etc.

       To provide credit facilities to the customer.

       To maintain the inventories of the raw material, work-in-progress,

stores and spares and finished stock.

For studying the need of working capital in a business, one has to study the

business under varying circumstances such as a new concern requires a lot

of funds to meet its initial requirements such as promotion and formation etc.

These expenses are called preliminary expenses and are capitalized. The

amount needed for working capital depends upon the size of the company

and ambitions of its promoters. Greater the size of the business unit,

generally larger will be the requirements of the working capital.

The requirement of the working capital goes on increasing with the growth

and expensing of the business till it gains maturity. At maturity the amount of

working capital required is called normal working capital.

There are others factors also influence the need of working capital in a

business.

FACTORS DETERMINING THE WORKING CAPITAL REQUIREMENTS

1.  NATURE OF BUSINESS: The requirements of working is very

limited in public utility undertakings such as electricity, water supply

and railways because they offer cash sale only and supply services not

products, and no funds are tied up in inventories and receivables. On

the other hand the trading and financial firms requires less investment

in fixed assets but have to invest large amt. of working capital along

with fixed investments.

2.  SIZE OF THE BUSINESS: Greater the size of the business,

greater is the requirement of working capital.

3.  PRODUCTION POLICY: If the policy is to keep production steady

by accumulating inventories it will require higher working capital.

4.  LENTH OF PRODUCTION CYCLE: The longer the

manufacturing time the raw material and other supplies have to be

carried for a longer in the process with progressive increment of labor

and service costs before the final product is obtained. So working

capital is directly proportional to the length of the manufacturing

process.

5.  SEASONALS VARIATIONS: Generally, during the busy season,

a firm requires larger working capital than in slack season.

6.  WORKING CAPITAL CYCLE: The speed with which the working

cycle completes one cycle determines the requirements of working

capital. Longer the cycle larger is the requirement of working capital.

                         

Operating cycle

  

7.     RATE OF STOCK TURNOVER: There is an inverse co-

relationship between the question of working capital and the velocity or

speed with which the sales are affected. A firm having a high rate of

stock turnover wuill needs lower amt. of working capital as compared

to a firm having a low rate of turnover.

8.     CREDIT POLICY: A concern that purchases its requirements on

credit and sales its product / services on cash requires lesser amt. of

working capital and vice-versa.

9.     BUSINESS CYCLE: In period of boom, when the business is

prosperous, there is need for larger amt. of working capital due to rise

in sales, rise in prices, optimistic expansion of business, etc. On the

contrary in time of depression, the business contracts, sales decline,

difficulties are faced in collection from debtor and the firm may have a

large amt. of working capital.

10. RATE OF GROWTH OF BUSINESS: In faster growing

concern, we shall require large amt. of working capital.

11. EARNING CAPACITY AND DIVIDEND POLICY: Some firms

have more earning capacity than other due to quality of their products,

monopoly conditions, etc. Such firms may generate cash profits from

operations and contribute to their working capital. The dividend policy

also affects the requirement of working capital. A firm maintaining a

steady high rate of cash dividend irrespective of its profits needs

working capital than the firm that retains larger part of its profits and

does not pay so high rate of cash dividend.

12. PRICE LEVEL CHANGES: Changes in the price level also affect

the working capital requirements. Generally rise in prices leads to

increase in working capital.

PROFIT AND LOSS ACCOUNT

Profit and loss account is depicted from the Balance Sheet. According to this

account, the company comes to know about the real position of the company by

knowing that whether the company has gained or loss. As the checking of this

account reveals that profit and loss account for the year 31.03.2011, 31.03.2012

was misrepresentation of accounts and depicts the position which is not correct

because the plant authorities had shown appropriation loss account of Rs

49,69,96,162.62/- on 31.03.2011, Rs 53,41,04,641.63/- on 31.03.2012 in

Balance Sheet by preparing separate P & L appropriation account by the union

when provision of this expenses which were increased from 2011-2012 was not

made. Plant concealed net loss for the concerned years to the tune of Rs 1,

79,01,905.58/- and Rs 1,45,36,884.77/- for 31.03.2011 and 31.03.2012

respectively by not showing as net loss for that year.

Besides many reasons the main reason for loss as explained by the plant

authorities is running the plant in under capacity resulting high production cost

and fixed cost, low margin between purchase/production price and sale price

does not cover the various expenditures which are incurred in procurement.

MANUFACTURING, TRADING &PROFIT & LOSS ACCOUNT OF 2011 - 2012

Previous year(amount)

Particulars Current year(amount)

Previous year(amount)

Particulars Current year(amount)

7,13,42,395.80 Opening stock

8,12,58,066.00

36,81,24,938.64

Sale of milk&milk products

37,55,13,351.17

28,66,99,619.42 Purchase of milk& milk products

31,64,46,682.57

32,64,995.00 Misc. income 10332870.49

2,36,48,275.32 ProcurementExpenses

2,72,95,223.18

8,12,58,066.00

Closing stock 10,35,47,007.00

57,90,158.68 Processing expenses

71,01,192.68

2,28,33,697.78 Production expenses

2,44,74,667.01

2,28,33,697.78 Packing expenses

1,79,69,644.70

1,18,69,119.60 Store/Purcha--se/ Engg expenses

1,37,25,203.34

4,14,73,523.80 Admn/accounts expenses

2,59,04,726.79

2,64,46,257.40

Sale on Consignment Basis

3,01,74,528.20

2,557.00 Service Tax 4,202.00

97,77,021.75 Distribution expenses

99,37,265.84 1,79,01,905.58

Loss for theYear

1,45,36,884.77

27,33,803.65 Depreciation 27,11,437.89

49,69,96,162.62 53,41,04,641.63

49,69,96,162.62

53,41,04,641.63

THE BALANCE SHEET OF 2010-11

Liabilities Year 2010-11 (amount)

Assets Year 2010-11 (amount)

Share capital 1,32,76,100.00 Fixed assets 9,93,20,509.34

Reserves and surplus

8,04,28,468.37 Investments 1,55,00,100.00

Secured loans 3,07,84,483.00 Current assets 11,04,14,541.25

Current liabilities and provision

31,59,48,287.93 Stock in transit

Hare stabilization fund

1,54,775.00 Accumulated losses

19,37,34,246.13

Appropriate losses 37,20,812.00

Loss of the year 1,79,01,905.58

Total 44,05,92,114.30 44,05,92,114.30

THE BALANCE SHEET OF 2011-12

Liabilities Year 2011 – 12 (amount)

Assets Year 2011 – 12 (amount)

Share capital 1,37,67,100.00 Fixed assets 10,225,97,23.94

Reserves and surplus

9,80,11,843.34 Investments 1,55,00,100.00

Secured loans 3,33,31,243.00 Current assets 12,38,81,995.71

Current liabilities and provision

32,63,82,079.85 Stock in transit -

Hare stabilization fund

43,402.00 Accumulated losses

21,53,56,963.71

Appropriate losses

Loss of the year

Total 47,15,35,668.19 47,15,35,668.19

MANAGEMENT OF WORKING CAPITAL

Management of working capital is concerned with the problem that arises

in attempting to manage the current assets, current liabilities. The basic

goal of working capital management is to manage the current assets and

current liabilities of a firm in such a way that a satisfactory level of working

capital is maintained, i.e. it is neither adequate nor excessive as both the

situations are bad for any firm. There should be no shortage of funds and

also no working capital should be ideal. WORKING CAPITAL

MANAGEMENT POLICES of a firm has a great on its probability, liquidity

and structural health of the organization. So working capital management

is three dimensional in nature as

1.     It concerned with the formulation of policies with regard to

profitability, liquidity and risk.

2.     It is concerned with the decision about the composition and level of

current assets.

3.     It is concerned with the decision about the composition and level of

current liabilities.

WORKING CAPITAL ANALYSIS

As we know working capital is the life blood and the centre of a business.

Adequate amount of working capital is very much essential for the smooth

running of the business. And the most important part is the efficient

management of working capital in right time. The liquidity position of the

firm is totally effected by the management of working capital. So, a study

of changes in the uses and sources of working capital is necessary to

evaluate the efficiency with which the working capital is employed in a

business. This involves the need of working capital analysis.

The analysis of working capital can be conducted through a number of

devices, such as:

1.     Ratio analysis.

2.     Fund flow analysis.

3.     Budgeting.

 

1.    RATIO ANALYSIS

A ratio is a simple arithmetical expression one number to another. The

technique of ratio analysis can be employed for measuring short-term

liquidity or working capital position of a firm. The following ratios can be

calculated for these purposes:

1. Current ratio.

2. Quick ratio

3.  Absolute liquid ratio

4.  Inventory turnover.

5.  Receivables turnover.

6.  Payable turnover ratio.

7.  Working capital turnover ratio.

8.  Working capital leverage

9.  Ratio of current liabilities to tangible net worth.

 

2.    FUND FLOW ANALYSIS

Fund flow analysis is a technical device designated to the study the

source from which additional funds were derived and the use to which

these sources were put. The fund flow analysis consists of:

 

a.      Preparing schedule of changes of working capital

b.     Statement of sources and application of funds.

It is an effective management tool to study the changes in financial

position (working capital) business enterprise between beginning and

ending of the financial dates.

 

3.    WORKING CAPITAL BUDGET

A budget is a financial and / or quantitative expression of business plans

and polices to be pursued in the future period time. Working capital budget

as a part of the total budge ting process of a business is prepared

estimating future long term and short term working capital needs and

sources to finance them, and then comparing the budgeted figures with

actual performance for calculating the variances, if any, so that corrective

actions may be taken in future. He objective working capital budget is to

ensure availability of funds as and needed, and to ensure effective

utilization of these resources. The successful implementation of working

capital budget involves the preparing of separate budget for each element

of working capital, such as, cash, inventories and receivables etc.  

 

ANALYSIS OF SHORT – TERM FINANCIAL POSITION OR TEST OF LIQUIDITY

The short –term creditors of a company such as suppliers of goods of

credit and commercial banks short-term loans are primarily interested to

know the ability of a firm to meet its obligations in time. The short term

obligations of a firm can be met in time only when it is having sufficient

liquid assets. So to with the confidence of investors, creditors, the

smooth functioning of the firm and the efficient use of fixed assets the

liquid position of the firm must be strong. But a very high degree of

liquidity of the firm being tied – up in current assets. Therefore, it is

important proper balance in regard to the liquidity of the firm. Two types

of ratios can be calculated for measuring short-term financial position or

short-term solvency position of the firm.

1.     Liquidity ratios.

2.     Current assets movements ‘ratios.

 

A)   LIQUIDITY RATIOS

Liquidity refers to the ability of a firm to meet its current obligations as

and when these become due. The short-term obligations are met by

realizing amounts from current, floating or circulating assts. The current

assets should either be liquid or near about liquidity. These should be

convertible in cash for paying obligations of short-term nature. The

sufficiency or insufficiency of current assets should be assessed by

comparing them with short-term liabilities. If current assets can pay off

the current liabilities then the liquidity position is satisfactory. On the

other hand, if the current liabilities cannot be met out of the current

assets then the liquidity position is bad. To measure the liquidity of a

firm, the following ratios can be calculated:

1.     CURRENT RATIO

2.     QUICK RATIO

3.     ABSOLUTE LIQUID RATIO

 

1.   CURRENT RATIO

Current Ratio, also known as working capital ratio is a measure of

general liquidity and its most widely used to make the analysis of short-

term financial position or liquidity of a firm. It is defined as the relation

between current assets and current liabilities. Thus,

CURRENT RATIO = CURRENT ASSETS 

                                     CURRENT LIABILITES

The two components of this ratio are:

1)     CURRENT ASSETS

2)     CURRENT LIABILITES

Current assets include cash, marketable securities, bill receivables,

sundry debtors, inventories and work-in-progresses. Current liabilities

include outstanding expenses, bill payable, dividend payable etc. A

relatively high current ratio is an indication that the firm is liquid and has

the ability to pay its current obligations in time. On the hand a low current

ratio represents that the liquidity position of the firm is not good and the

firm shall not be able to pay its current liabilities in time. A ratio equal or

near to the rule of thumb of 2:1 i.e. current assets double the current

liabilities is considered to be satisfactory.

2. QUICK RATIO

ether with current ratio and acid test ratio so as to exclude even

receivables from the current assets and find out the absolute liquid

assets. Absolute Liquid Assets includes :

ABSOLUTE LIQUID RATIO =      ABSOLUTE LIQUID ASSETS

                                                       CURRENT LIABILITES

ABSOLUTE LIQUID ASSETS = CASH & BANK BALANCES.

B) CURRENT ASSETS MOVEMENT RATIOS

Funds are invested in various assets in business to make sales and

earn profits. The efficiency with which assets are managed directly

affects the volume of sales. The better the management of assets, large

is the amount of sales and profits. Current assets movement ratios

measure the efficiency with which a firm manages its resources. These

ratios are called turnover ratios because they indicate the speed with

which assets are converted or turned over into sales. Depending upon

the purpose, a number of turnover ratios can be calculated. These are :

1.                 Inventory Turnover Ratio

2.                 Debtors Turnover Ratio

3.                 Creditors Turnover Ratio

4.                 Working Capital Turnover Ratio

The current ratio and quick ratio give misleading results if current assets

include high amount of debtors due to slow credit collections and

moreover if the assets include high amount of slow moving inventories. As

both the ratios ignore the movement of current assets, it is important to

calculate the turnover ratio.

1. INVENTORY TURNOVER OR STOCK TURNOVER RATIO :

Every firm has to maintain a certain amount of inventory of finished

goods so as to meet the requirements of the business. But the level

of inventory should neither be too high nor too low. Because it is

harmful to hold more inventory as some amount of capital is

blocked in it and some cost is involved in it. It will therefore be

advisable to dispose the inventory as soon as possible.

INVENTORY TURNOVER RATIO =      COST OF GOOD SOLD

                                                     AVERAGE INVENTORY

Inventory turnover ratio measures the speed with which the stock is

converted into sales. Usually a high inventory ratio indicates an

efficient management of inventory because more frequently the

stocks are sold ; the lesser amount of money is required to finance

the inventory. Where as low inventory turnover ratio indicates the

inefficient management of inventory. A low inventory turnover

implies over investment in inventories, dull business, poor quality of

goods, stock accumulations and slow moving goods and low profits

as compared to total investment.

AVERAGE STOCK  =   OPENING STOCK + CLOSING STOCK

                                                                 2

2. INVENTORY CONVERSION PERIOD:

INVENTORY CONVERSION PERIOD =   365 (net working days)

                                                INVENTORY TURNOVER RATIO

3. DEBTORS TURNOVER RATIO :

A concern may sell its goods on cash as well as on credit to

increase its sales and a liberal credit policy may result in tying up

substantial funds of a firm in the form of trade debtors. Trade debtors are

expected to be converted into cash within a short period and are

included in current assets. So liquidity position of a concern also

depends upon the quality of trade debtors. Two types of ratio can be

calculated to evaluate the quality of debtors.

a)       Debtors Turnover Ratio

b)      Average Collection Period

DEBTORS TURNOVER RATIO = TOTAL SALES (CREDIT)

                                                         AVERAGE DEBTORS

Debtor’s velocity indicates the number of times the debtors are

turned over during a year. Generally higher the value of debtor’s

turnover ratio the more efficient is the management of debtors/sales or

more liquid are the debtors. Whereas a low debtors turnover ratio

indicates poor management of debtors/sales and less liquid debtors.

This ratio should be compared with ratios of other firms doing the same

business and a trend may be found to make a better interpretation of the

ratio.

AVERAGE DEBTORS= OPENING DEBTOR+CLOSING DEBTOR

                                                        2

2. AVERAGE COLLECTION PERIOD :

Average Collection Period =    No. of Working Days

                                             Debtors Turnover Ratio

The average collection period ratio represents the average number

of days for which a firm has to wait before its receivables are converted

into cash. It measures the quality of debtors. Generally, shorter the

average collection period the better is the quality of debtors as a short

collection period implies quick payment by debtors and vice-versa.

Average Collection Period =      365 (Net Working Days)  

                                             Debtors Turnover Ratio

3. WORKING CAPITAL TURNOVER RATIO :

Working capital turnover ratio indicates the velocity of utilization of

net working capital. This ratio indicates the number of times the

working capital is turned over in the course of the year. This ratio

measures the efficiency with which the working capital is used by

the firm. A higher ratio indicates efficient utilization of working

capital and a low ratio indicates otherwise. But a very high

working capital turnover is not a good situation for any firm.

Working Capital Turnover Ratio =           Cost of Sales

                                                        Net Working Capital

 Working Capital Turnover       =                   Sales                

                                                    Networking Capital

e.g.

Year 2009 2010 2011

Sales 166.0 151.5 169.5

Networking Capital 53.87 62.52 103.09

Working Capital Turnover 3.08 2.4 1.64

Interpretation :

          This ratio indicates low much net working capital requires for

sales. In 2011, the reciprocal of this ratio (1/1.64 = .609) shows that for

sales of Rs. 1 the company requires 60 paisa as working capital. Thus

this ratio is helpful to forecast the working capital requirement on the

basis of sale.

INVENTORIES

(Rs. in Crores)

Year 2008-2009 2009-2010 2010-2011

Inventories 37.15 35.69 75.01

Interpretation :

       Inventories is a major part of current assets. If any company wants

to manage its working capital efficiency, it has to manage its inventories

efficiently. The graph shows that inventory in 2008-2009 is 45%, in 2009-

2010 is 43% and in 2010-2011 is 54% of their current assets. The

company should try to reduce the inventory upto 10% or 20% of current

assets.

CASH BNAK BALANCE :

(Rs. in Crores)

Year 2008-2009 2009-2010 2010-2011

Cash Bank Balance 4.69 1.79 5.05

Interpretation :

       Cash is basic input or component of working capital. Cash is

needed to keep the business running on a continuous basis. So the

organization should have sufficient cash to meet various requirements.

The above graph is indicate that in 2008 the cash is 4.69 crores but in

2009 it has decrease to 1.79. The result of that it disturb the firms

manufacturing operations. In 2010, it is increased upto approx. 5.1%

cash balance. So in 2011, the company has no problem for meeting its

requirement as compare to 2008.

DEBTORS :

(Rs. in Crores)

Year 2008-2009 2009-2010 2010-2011

Debtors 17.33 19.05 25.94

Interpretation :

       Debtors constitute a substantial portion of total current assets. In

India it constitute one third of current assets. The above graph is depict

that there is increase in debtors. It represents an extension of credit to

customers. The reason for increasing credit is competition and company

liberal credit policy.

 

CURRENT ASSETS :

(Rs. in Crores)

Year 2008-2009 2009-2010 2010-2011

Current Assets 81.29 83.15 136.57

Interpretation :

       This graph shows that there is 64% increase in current assets in

2011. This increase is arise because there is approx. 50% increase in

inventories. Increase in current assets shows the liquidity soundness of

company.

 

CURRENT LIABILITY :

(Rs. in Crores)

Year 2008-2009 2009-2010 2010-2011

Current Liability 27.42 20.58 33.48

Interpretation :

       Current liabilities shows company short term debts pay to outsiders.

In 2011 the current liabilities of the company increased. But still increase

in current assets are more than its current liabilities.

 

NET WOKRING CAPITAL :

(Rs. in Crores)

Year 2008-2009 2009-2010 2010-2011

Net Working Capital 53.87 62.53 103.09

Interpretation :

       Working capital is required to finance day to day operations of a

firm. There should be an optimum level of working capital. It should not

be too less or not too excess. In the company there is increase in

working capital. The increase in working capital arises because the

company has expanded its business.

Chapter 4:

Methodology

RESEARCH METHODOLOGY

Definition of Research

The word research is derived from the Latin word meaning to know. It is a

systematic and a replicable process which identifies and defines problems,

within specified boundaries. It employs well designed method to collect the

data and analyses the results. It disseminates the findings to contribute to

generalize able knowledge.

The data used in this research was acuired from internet & web site of

the firm. the sample is based o the fiancial statement of the firm. In this

research we have provided two types of data analsis , descriptive and

quantitative .

Research Design

This research was descriptive and conclusion oriented research.

a) Descriptive Research:

The research was a descriptive research as it was concerned with specific

predictions, with narration of facts and characteristics concerning individuals,

groups or situations.

Sampling Techniques: The sampling techniques used are convenient technique

and simple random sampling technique.

Convenient Technique: A non-probability sampling technique that attempts to

obtain a sample of convenient elements. The selection of sampling units is left

primarily to the interviewer.

Data resources

Both primery and secandery data has been used for study . primery data has

been collected through direct interaction with finance department and

secondry data is collected with the help of internet

Chapter 5:

Surveys, Feedback and

Data Analysis,

Interpretation of

questionnaire with table

as well as graphs.

ANALYSIS & INTERPRETATION

1. Average Collection Period

Year Days

2010 40

2011 46

3. Current Asset to Total Assets

Year Percentage

2010 35%

2011 26%

It can be visualized from the table that in the first year of our study i.e. 2010 it

was 35% which was reduced to 26% in the next year.

VERKA MILK PLANTRATIO USEFUL TO ANALYIS WORKING CAPITAL MANAGEMENT

(A)Efficiency Ratios 2010 2011 Ideal Ratio

1. Working Capital

Turnover(times)

4.84 10.23 -

2. Current Asset

Turnover(times)

1.78 2.98 -

3. Inventory Turnover (ratio) 9.49 9.20 -

(B) Liquidity Ratio

1. Current Ratio 2.12 1.80 2.0

2. Acid Test Ratio 1.15 .98 1.0

3. Cash ratio .57 .08 .5

1. Table showing Gross Profit Ratio

Year Percentage

2010 10%

2011 12%

2.Table Showing Net Profit Ratio

Year Percentage

2009-10 -9% (loss)

2010-11 -8% (loss)

3. Showing Operating Ratio

Year Percentage

2010 7%

2011 5%

Chapter 6:

Suggestion,

Recommendation,

Conclusion

SUGGESTIONS & RECOMMENDATION

Though the survey revealed that rural people like Verka's products to a great

extent and there is more demand of Verka brand but then also some people want

a change in its price, quality, quantity and some in availability. Therefore, to

make its customers fully satisfied, some measures should be taken which will

also add to its sales and improve its position in the rural market. So, there were

some suggestions given by the people which are summed up as follows:-

a) Increase in profit margin:- Generally, shopkeepers are not satisfied

with the prices of 'Verka products'. They feel the products are bit expensive &

provide a very little profit margin. Some other dairy brand like Baba milk, Today

milk give big share of M.R.P. as profit margin compare to verka thus we should

try to increase the profit margin. So that market share of verka may increase and

we could dominate the market.

b) Distribution System should be improved:- Shopkeepers of

large area are not satisfied with the distribution system. So, distribution system

should be improved and verka should maintain its access even to small

shopkeepers.

c) Lack of Advertisement:- Significant no of shopkeepers have also

complained about the advertisement of the brand Verka. It should be made

popular through more and more advertisements and schemes so as to attract

people of all age groups. More hoardings should be put in villages and with the

help of word of mouth more awareness about products should be given

d) Availability :- The products of Verka should be easily available in

societies. There are some area where Verka products are not available easily in

societies. Therefore, Verka should expand its market in rural area, so that

products are available easily. More variety of products should be send to the

societies.

e) Communication and soft skill training:- Some dealer’s complaint

about the behavior of delivery boys. They are the face of the company need to

provide proper training that who to deal with the shopkeepers and get work done.

And..

(i) Verka milk plant should concentrate more on marketing strategies.

(ii) Expand themselves to other states also.

(iii) Feasibility of home delivery system for city supply milk to be exposed.

(iv) Innovative energy saving measures is required to bring down the cost of

production and improve profitability.

(v) try to create retained earning reserve and utilize it for its own development.

(vi) Bring more varieties in its product range.

CONCLUSION

While testing the short-term liquidity position, Current Ratio (Current Ratio,

Absolute Liquid ratio, Liquid ratio) and Efficiency Ratios (Inventory turnover ratio,

Creditor turnover ratio, Debtors turnover ratio and Working Capital turnover ratio)

are not near to the rule of thumb, it can be said that verka has not good short-

term financial position.

While testing it profitability ratio is not good. However, gross profit ratio is fair.

Overall conclusion of the study is that the’ Financial Position’ of Verka is not

good. The short-term financial position is bad because current ratio, quick ratio

and absolute ratio is not satisfied.

Bibliography:

Pandey I.M., financial management, Ninth addition, UBS Publication New

Delhi.

Horne Wwachonicz, J.R.Bhaduri (2009), Fundamentals and Financial

management, 12th edition, Pearson publisher.

Jain. P.K. Financial Management,5th edition, Publisher Mc grew hill

companies.

Income statement and financial statement of 2009-10 as obtained from

Gurdaspur Dairy.

SEARCH ENGINES

* www.milkfedpunjab.com

* www.businessstandard.com

* www.24/7.com

* www.verka.com

- www.milkfed.nic.in

- www.milffed.org

- www.indiaagronet.com/indiaagronet/Dairy.htm

- www.punjabgovt.govt.in/government/milkfed.htm