Nazar S Project
Nazar S Project
Nazar S Project
CHAPTER-1
INTRODUCTION
Gross working capital refers to working capital as the total of current assets,
whereas the net working capital refers to working capital as excess of current assets over
current liabilities. In other words net working capital refers to current assets financed by
long term funds.
Accordingly,
The net working capital position of the firm is an important consideration, as this
will determine the firm’s profitability and risk. Here the profitability refers to profits after
expenses and risk refers to the probability that a firm will become technically insolvent
where it will be unable to meet obligations when they become due for payment.
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A finance manager has to make an appropriate financing mix, which will limit the risk
and increase the profitability. Financing mix refers to the proportion of current assets
financed by current liabilities and long term funds.
Aggressive approach
Conservative approach.
According to aggressive approach the long term funds are used to finance only the
core or fixed portion of current assets (e.g., minimum level of finished goods inventory,
raw material etc.) and the other portion i.e. temporary and seasonal requirements are
financed by short term funds. This is of high risk and high profit financing mix.
According to conservative approach the total current assets are financed from
long term sources and short term sources are used only in emergency situation i.e. when
there is an unexpected cash outflow. This is of low-risk and low-profit financing mix.
As we observed two methods of financing mix, one method is of high risk high
profit and other is of risk low profit. A finance manager has to trade off between these
two extremes.
Operating Cycle:
As there is a time lag between sales and realization of receivables there is a need
for sufficient working capital to deal with the problem which arises due to lack of
immediate realization of cash against goods sold. The operating cycle is the length of
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time required for conversion of non-cash assets into cash. This operating cycle refers to
the time taken for the conversion of cash into raw material, raw materials into work-in-
progress, work-in-progress into finished goods, finished into receivables into cash and
this cycle repeats.
The operating cycle length differs from firm to firm. If a firm has lengthy
production process or a firm has liberal credit policy the length of operating cycle will be
more. On the other hand, if a firm does not extend credit or the firm is not a
manufacturing concern i.e. where cash will be converted into inventory directly then the
length of operating cycle will be reduced to a greater extent.
Capital required for a business can be classified under two main categories via,
Fixed Capital
Working Capital
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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 assets 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.
Assets which can convert in to cash within a short period normally one accounting year.
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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 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 assets 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:
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:
Temporary working capital differs from permanent working capital in the sense
that is required for short periods and cannot be permanently employed gainfully in the
business.
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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.
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
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.
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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.
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.
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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 PRDUCTION 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.
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Others factors:
Operating efficiency.
Management ability.
Irregularities of supply.
Import policy.
Asset structure.
Importance of labor.
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As we know working capital is the life blood and the center 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.
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RATIO ANALYSIS
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.
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:
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1. Liquidity ratios.
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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
CURRENT RATIO
CURRENT ASSETS
CURRENT RATIO =
CURRENT LIABILITES
1) CURRENT ASSETS
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2) CURRENT LIABILITES
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.
QUICK RATIO
Quick ratio is a more rigorous test of liquidity than current ratio. Quick ratio may
be defined as the relationship between quick/liquid assets and current or liquid liabilities.
An asset is said to be liquid if it can be converted into cash with a short period without
loss of value. It measures the firms’ capacity to pay off current obligations immediately.
QUICK ASSETS
QUICK RATIO =
CURRENT LIABILITES
1) Marketable Securities
2) Cash in hand and Cash at bank.
3) Debtors.
A high ratio is an indication that the firm is liquid and has the ability to meet its
current liabilities in time and on the other hand a low quick ratio represents that the firms’
liquidity position is not good.
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meet its short-term obligations. However, a firm having high quick ratio may not have a
satisfactory liquidity position if it has slow paying debtors. On the other hand, a firm
having a low liquidity position if it has fast moving inventories.
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
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high amount of slow moving inventories. As both the ratios ignore the movement of
current assets, it is important to calculate the turnover ratio.
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. Whereas 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.
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.
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.
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
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quality of debtors as a short collection period implies quick payment by debtors and vice-
versa.
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.
Cost of Sales
Working Capital Turnover Ratio =
Net Working Capital
SALES
Working Capital Turnover =
NETWORKING CAPITAL
CAHPTER - 2
RESEARCH DESIGN
To study the working capital management of Anu Solar Power Pvt Ltd.
To study the optimum level of current assets and current liabilities of the
company.
To study the liquidity position through various working capital related ratios.
To study the working capital components such as receivables accounts, cash
management, Inventory position
To study the way and means of working capital finance of the Anu Solar Power
Pvt Ltd
To estimate the working capital requirement of Anu Solar Power Pvt Ltd
To study the operating and cash cycle of the company.
The scope of the study is identified after and during the study is conducted. The
study of working capital is based on tools like trend Analysis, Ratio Analysis, working
capital leverage, operating cycle etc. Further the study is based on last 5 years Annual
Reports of Anu Solar Power Pvt Ltd. And even factors like competitor’s analysis,
industry analysis were not considered while preparing this project.
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1) Limited data: This project has completed with annual reports; it just
constitutes one part of data collection i.e. secondary. There were
limitations for primary data collection because of confidentiality.
2) Limited period: This project is based on five year annual reports.
Conclusions and recommendations are based on such limited data. The
trend of last five year may or may not reflect the real working capital
position of the company
3) Limited area: Also it was difficult to collect the data regarding the
competitors and their financial information. Industry figures were also
difficult to get
Research Methodology
Secondary data collection method: The secondary data are those which have
already collected and stored. Secondary data easily get those secondary data from
records, journals, annual reports of the company etc. It will save the time, money
and efforts to collect the data. Secondary data also made available through trade
magazines, balance sheets, books etc. This project is based on primary data
collected through personal interview of head of account department, head of SQC
department and other concerned staff member of finance department. But primary
data collection had limitations such as matter confidential information thus project
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CHAPTER-3
COMPANY PROFILE
Company Overview
Anu Solar Power is a pioneer on numerous fronts and has a blazing trail of
first’s to its credit. Our founders pioneered the introduction of bio-mass gasifiers for the
first time in India, we launched ‘Swosthe’ – smokeless chula for household cooking,
introduced the first of its kind solar water heaters with mild steel collectors, developed
the first indigenous fully automatic LPG baking oven- a leader in its space even today,
and established the first and only dedicated NBFC, Nagarjuna Credits and Capital Ltd in
the country to finance renewable energy products!
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We constantly raise the bar on performance, and thus, are early adopters of
evacuated tube collector systems in the country. We are also one of the first to offer
modular systems to commercial and industrial users. We now aggressively move towards
adopting glass reinforced polymer (GRP) tanks, which ensure high product durability to
our customers. The hallmark of Anu Solar Power products is quality and perfection, it’s
what leads us to assemble our LED lights in-house rather than have them imported, and
distributed. Our high quality inverters are developed in-house too.
Our motto is not just to develop exceptional solar energy products and deliver
them with a smile, but to ensure happy customers. These core values suffuse all our
activities and propel us as one of the most respected solar energy product companies in
the country.
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Vision
To pioneer the renewable energy sector with products that are indigenously
developed qualitatively superior and affordable to adopt
Mission
Values:
Customer Delight
Respect for Employees
Product Innovation
Flourishing Environment
We are a service oriented company that likes to WOW our customers every time.
We innovate, deliver world class products and support our customers as they make
decisions of foresight. We put our customers first and their contentment is our true
reward.
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Creativity and innovation are the sacred tenets of our existence. With or without
Government support we are committed to innovating in the field of alternate, renewable
energy, so that our consumers can access high quality products at affordable rates.
We are deeply committed to change, and an environment that is safe and healthy.
We will do all in our power to give consumers environmentally friendly choices, and
develop products that a qualitatively superior and less burdensome on the environment.
Management
(Managing Director)
Mr. T J Joseph has been conferred the CMO Asia Award in 2010 for excellence in
promoting solar water heaters in India and is the motivating force steering Anu Solar
towards a one lakh strong employee base.
(Technical Director)
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He had successfully interned at SEI AG, Germany and was actively involved in
the technology transfer between SEI AG and Anu Solar for the solar power generators. In
his current capacity as Technical Director, he is actively involved with the engineering
team at Anu to innovate and explore newer technologies in the field of renewable energy.
He is actively involved in the introduction of Anu Smart Solar Power Generators to the
Indian Market.
JIBIN JOSEPH
Finance Director
(Director)
Erich, a qualified engineer with specialization in hydraulic
engineering and hydrology, founded his first Company in 1980.
Since then, he has increasingly overseen international projects and
has been working together with numerous international
organizations and development.
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From 1987 to 1994 Mr. Hauck has held the post of technical expert for the
Thermie-Program, division hydropower, for DG XVII Energy of the European Union in
Brussels.. He has played at numerous international conferences as chairman and
participated in a number of published articles. He is also a member of several national
and international organizations. Erich Hauck is the Managing Director of Smart Power
Systems International GmbH, which has emerged as one of the founding companies in
SEI AG.
Since the year 2000, Smart battery generators which is developed by him and
patented are distributed worldwide. Realizing the huge potential of Solar Power
Generators in India and also the reduced manufacturing cost, in April of 2012, SEI AG
signed a JV with Anu Solar for in-house manufacturing of Solar Power Generators in
India.. With his vast experience in numerous related fields and urge to innovate
new technologies in the solar generator series, his vision is to take this industry to new
horizons.
Milestones
1987: Pioneered the introduction of Bio-mass gasifiers for the first time in India.
1991: Introduced first of its kind solar water heaters with mild steel collectors.
1996: Developed first indigenous fully automatic LPG baking oven- a leader in this
space even today.
2001: Established first and only dedicated NBFC, Nagarjuna Credits and Capital Ltd in
the country to finance renewable energy products.
2004: Company rechristened Anu Solar Power Pvt. Ltd with a renewed vision to stay
focused on solar energy.
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2008: First to develop and introduce modular type system in evacuated tube collector
(ETC) for the Indian Market.
2008: Conceptualized India’s first clean development mechanism (CDM) project in solar
water heaters.
2011: Indigenously developed LED bulbs / street lights for Indian market.
2011: Accredited as Channel Partner for Ministry of New & Renewable Energy
(MNRE).
2012: Developed glass reinforced polymer (GRP) tanks – a permanent solution against
corrosion in solar water heaters for domestic and industrial applications.
2012: JV Partnership for Anu Smart Generators between Anu Solar Power Pvt Ltd and
Smart Energy systems International (SEI)
2014: Introduction of Portable Home Lighting Systems and a Wide Range of LED
Lumanries Introduced
2015: Moved to the New Manufacturing Facility In Peenya , Bangalore. State of the art
facility with a built area of over 140000 sqft making it one of the largest solar
manufacturing plant in the country. MNRE Channel Partner for Rooftop Solar Program
2016: Introduction of Solar Roof Tiles and its first successful Installation at a residence
in Thrissur for the first time ever in India.
2017: Own Store concept introduced in Karnataka with already 10 shops operational
Facilities
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With extensive domain expertise in renewable energy, a culture that goes back to
the nationalistic entrepreneurial spirit of the seventies, and a modern state-of-the-art
research and development unit, Anu Solar Power Pvt. Ltd. Prides itself for offering solar
energy solutions that are indigenous and commercially viable.
Our foresight and tremendous grit have powered us forward and besides
numerous victories, we are today one of the largest evacuated tube collector based solar
water heating system manufacturer in India.
Manufacturing Facility:
Operational Excellence:
integrated through a SAP ERP. We thrive on automation and control over our
manufacturing, so that our customers access only the best products.
Trained Employee:
Management Experts:
Certification:
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Solar energy is the most abundant, easy and cost effective renewable energy to
harvest. It’s not just a sense of responsibility towards the environment, but legislative
compliance too that should propel you to explore and leverage renewable energy like that
from the sun. Solar voltaic panels can be non-obtrusively placed on the roof of your
building or home, it can help you reduce your demand for expensive polluting energy
generated from fossil fuel, and considerable reduce your monthly energy bill.
Important to remember is that while the initial investment may be high, the
renewable energy system be it a solar water heater or solar powered LED lights can last
for up to 15 or 20 years. The maintenance on this infrastructure is low and soon, the solar
energy harvesting system begins to pay for itself.
Are you wondering if your home, housing colony or company could be used to
harvest the energy of the sun?
Anu Solar Power has 27 years of deep domain expertise in developing world class
solar energy products, from solar water heaters to solar powered LED lights. Call us to
conduct a Green Audit of your location.
Detail report on areas for improvement and optimization. Our report includes
budgets so you understand your total cost of ownership and investment
commitment
Since we research, develop, and manufacture an array of world class solar energy
products, Anu Solar Power can help you take your green audit to the next level and
implement it too.
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Prominent ways to reduce the impact of your building on the environment and
also make a statement that is pro-environment is to adopt solar water heaters and solar
powered LED lights.
With over 27 years of deep domain expertise and extensive knowledge of auditing
and implementing green solutions across a host of geographies and constructed areas, our
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green building consultancy is process driven. At Anu Solar Power we offer you holistic
Solutions that can be easily and quickly implemented without burning a hole in
your pocket. We are sensitive to esthetics and offer solutions you would be proud to
implement.
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your budget. We also train your staff to get them on board with your green initiatives and
to continue infrastructure maintenance.
INDUSTRY PROFILE
Power is one of the most critical components of infrastructure crucial for the economic
growth and welfare of nations. The existence and development of adequate infrastructure
is essential for sustained growth of the Indian economy.
India’s power sector is one of the most diversified in the world. Sources of power
generation range from conventional sources such as coal, lignite, natural gas, oil, hydro
and nuclear power to viable non-conventional sources such as wind, solar, and
agricultural and domestic waste. Electricity demand in the country has increased rapidly
and is expected to rise further in the years to come. In order to meet the increasing
demand for electricity in the country, massive addition to the installed generating
capacity is required.
India ranks third among 40 countries in EY’s Renewable Energy Country Attractiveness
Index, on back of strong focus by the government on promoting renewable energy and
implementation of projects in a time bound manner.
India has moved up 73 spots to rank 26th in the World Bank's list of electricity
accessibility in 2017, according to Mr Piyush Goyal, Minister of State (Independent
Charge) for Power, Coal, Renewable Energy and Mines, Government of India.
In September 2017, the Government of India launched the Saubhagya scheme to provide
electricity connections to over 40 million families in rural and urban areas by December
2018 at a cost of US$ 2.5 billion.
Market Size
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Indian power sector is undergoing a significant change that has redefined the
industry outlook. Sustained economic growth continues to drive electricity demand in
India. The Government of India’s focus on attaining ‘Power for all’ has accelerated
capacity addition in the country. At the same time, the competitive intensity is increasing
at both the market and supply sides (fuel, logistics, finances, and manpower).
Total installed capacity of power stations in India stood at 330,860.58 Megawatt (MW)
as on December, 2017.
The Ministry of Power has set a target of 1,229.4 billion units (BU) of electricity
to be generated in the financial year 2017-18, which is 50 BU’s higher than the target for
2016-17. The annual growth rate in renewable energy generation has been estimated to be
27 per cent and 18 per cent for conventional energy.
The Indian solar industry has installed a total of 2,247 megawatts (MW) in the
third quarter of 2017, from 1,947 MW in the second quarter of 2017. The cumulative
installed capacity reached 7,149 MW in the first nine months of 2017, covering more
than one-third of total new power capacity addition in 2017.
Two under-construction hydro projects of NHPC in Himachal Pradesh and
Jammu & Kashmir (J&K), expected to be commissioned in 2018, will produce 4,458.69
million units of additional power, according to the Ministry of Power, Government of
India.
The total estimated potential of tidal energy in India is about 8,000 megawatt
(MW), of which 7,000 MW is in the Gulf of Kambhat, 1,200 MW is in the Gulf of Kutch
and 100 MW in the Gangetic Delta.
The number of small hydro power projects set up in India stood at 1,085 with total
installed capacity of 4,399.355 megawatt (MW) as of November 30, 2017.
Investment Scenario
Around 293 global and domestic companies have committed to generate 266 GW
of solar, wind, mini-hydel and biomass-based power in India over the next 5–10 years.
The initiative would entail an investment of about US$ 310–350 billion.
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Between April 2000 and September 2017, the industry attracted US$ 12.3 billion in
Foreign Direct Investment (FDI), accounting for 3.44 per cent of total FDI inflows in
India.
Some major investments and developments in the Indian power sector are as follows:
Energy Efficiency Services Ltd (EESL) has raised US$ 454 million from Global
Environment Facility (GEF) for its energy-efficiency projects in an attempt to
boost India's move towards becoming a low carbon economy.
IL&FS Financial Services Ltd has partnered with Jammu and Kashmir (J&K)
Bank Ltd to finance nine hydropower projects in J&K with a total capacity of
2,000 MW, which require financing of around Rs 20,000 crore (US$ 3.12 billion).
Sterlite Power has won one of the largest 1,800 km power transmission project
worth US$ 800 million in Brazil, the company's third project in Brazil and the
largest ever project won by an Indian company in Latin America.
With the aim of giving a boost to renewable energy, the State Bank of India (SBI)
and the World Bank have decided to sanction credit worth Rs 2,317 crore (US$
356.82 million) to seven corporates towards solar rooftop projects to generate a
total of 575 megawatt (MW) of solar energy.
India added 467 MW of grid interactive wind power capacity between January-
November 2017, while wind power projects with cumulative capacity of 9,500
MW are expected to be bid out by March 2018, according to Mr R K Singh,
Minister of State (Independent Charge) for Power and New & Renewable Energy,
Government of India.
A total of 26.3 million households which are below poverty line (BPL) have been
electrified under the Rural Electrification component of Deen Dayal Upadhyay
Gram Jyoti Yojana (DDUGJY), according to the Ministry of Power, Government
of India.
Government Initiatives
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The Government of India has identified power sector as a key sector of focus so
as to promote sustained industrial growth. Some initiatives by the Government of India to
boost the Indian power sector:
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CHAPTER-3
Table : 1
(Amount in ‘000)
CURRENT ASSETS,
LOANS AND
ADVANCES
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CURRENT
LIABILITIES
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AND PROVISIONS
(A) Current
Liabilities
(B) Provisions
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Analysis
Working capital is the funding that a company needs to support its accounts
receivable and inventory, and is offset by the amount of funding it obtains from its
suppliers through accounts payable.
Working capital can have a much greater impact on a company’s cash flows than
the results of its operations. One of the best ways to positively impact the amount of cash
flow that a company spins off is to take tight control of its working capital and eliminate
much of the investment in this area.
After analysis the 5 year data we can conclude that the Working Capital
requirement is increasing year by year. We are looking increasing pattern in working
capital.
The company is managing working capital very precisely as we know that Anu
Solar is high working capital oriented organization. The sale is increasing year by year
which results into increase in working capital requirement. Anu Solar is getting new
order at regular interval as it gives importance to quality.
Investment in the current asset is also increasing with increase in the span. On the
other hand there is also increase in the current liabilities. From the above statement we
can say that current assets and current liabilities go hand in hand.
Graph 1
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(Amount in ‘000)
60,000.00 57,668.62
50,000.00 45,960.06
40,000.00 35,312.27
Amount
30,000.00
21,670.83
20,000.00
10,939.60
10,000.00
0.00
2016-17 2015-16 2014-15 2013-14 2012-13
years
Interpretation
The above graph depicts that the working capital requirement of the company has
been increased year by year. The net difference in the working capital requirement,
between the first year i.e., 2012 and the final year i.e., 2016-17 has been 46729020. The
increase in the working capital requirement is due to enlargement of the scale of
operations of the company.
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Table: 2
(Amount in ‘000)
Gear (Transmission
Equipments) 36,132.05 35,873.70 28423.36 21017.08 18893.6
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Graph: 1
TOTAL SALES
90,000.00
80,000.00
70,000.00
60,000.00
50,000.00
40,000.00
30,000.00
20,000.00
10,000.00
0.00
2017 2016 2015 2014 2013
TOTAL SALES
Interpretation :
Here we have the sales figure of last 5 years. From the available data we can say
that the sale is increasing with increasing span. There should Sales increasing by 47, 67,
9, and 8 % in each every consecutive year. By this growth we can say that the company is
growing very rapidly in engineering sector. With increasing sales the company is trying
to make a great presence in the market. Anu Solar is also entering in new business which
results into increase in sales revenue.
Graph : 2
20.80%
Interpretation :
The sales of Material handling equipment from different industries, the highest
sales in the Power sector (55.83%), Steel (20.80%) and the lowest sales in wind mill
(1.72%) industries.
Graph : 3
Page | 51
Interpretation :
The sales in Solar Power Products with different industries, the highest sales in
the material handling equipment (23%), Steel Conversion (15%), Sugar (10%), and the
lowest sales in the Chemical & Fertilizers industry (3%), mining industry (3%).
Table : 3
Page | 52
cost or net
realizable value)
Interpretation :
In the first category, raw materials, an inventory increase can be caused by over
purchasing by a company, the elimination of a finished good that used to require specific
raw materials, or deliberate over purchasing by a company because of a very low level of
inventory accuracy that requires a company to keep excessive stocks on hand in order to
avoid stock-out problems.
Page | 53
By analyzing 5 year data we can about inventories we can say that the levels of
inventories are increasing year by year. There is an increasing trend in the inventory
level. As compare d to last year the level of inventory has been increased by 60 % which
indicates the growth of the company in Solar power sector. It is fact that the company
uses more inventories when there is demand in the market and Anu Solar is having in
great demand when quality comes first than other things. From other point of view we
can say that the liquidity of the firm is blocked in inventories but proper inventory on
other side is good due to uncertainty of availability of raw material in time.
Page | 54
Table : 4
Mechanical, Electrical
and Electronic
1,461.36 1,272.71 1,185.70 760.21 577.14
Spares (as taken, valued
and certified
by the Management) at
lower of cost or net
realizable value
Certified by the
Management)
Page | 55
Considered Good) :
Page | 56
Page | 57
Interpretation :
Current assets are important to businesses because they are the assets that are used
to fund day-to-day operations and pay ongoing expenses and depending on the nature of
the business.
From the above table of 5 year current assets we can say that there is increasing
trend in current assets as the business is of such nature there is increase in blockage of
money in current assets more as compared to fixed assets. The level of current assets has
been increased by 24% as compared to last year which is a good symptom of growth.
Page | 58
Table : 5
Interpretation :
In the above table five years debtors’ information is given I which we can see that
there is increase in debtors except last year. The change might be occurred due to change
in collection policy, credit policy and others.
A simple logic is that debtors increases only when sales increases. More and more
debtors higher the chances of bad debts. When sales are increases the profit also
Page | 59
increases. If company decreases the debtors they can use the spare money in many
investment plans.
Table : 6
to be received
(Net of Provision)
Interpretation :
If we analyze the above table we can say that there is increase in loans and
advances in more or less percentage.
The company is providing loans to staff which is good symptoms. Most of the
advances are given to the government for the purpose of taxes and other duties. From the
above table we can say that company is sincere in paying taxes and duties. The advances
recoverable are high which is good for the company. In the year 2016-17 the loans and
advances are increased by 30 % as compared to previous year which contribute highly to
the current assets.
Table : 7
Page | 61
Interpretation :
The obligations are such as deferred dividend, trade credit, and unpaid taxes,
arising in the normal course of a business and due for payment within a year.
If we analyze the above table we can say that each and every item in the current
liabilities reveals uneven trend. But at aggregate level it shows an increasing trend Anu
Solar is charging 50 % of advance from the customer which increases the current
liabilities of the company. In 2016-17 current liabilities has been increased by 24% the
Page | 62
main reason behind that is increase in advances from the customer. It indicates change in
sales policy .While in 2015-16 current liabilities has been increased because of increase
in other liabilities by 32%. The company having minimum liability has good prestige in
the market.
Page | 63
Table : 8
Interpretation :
Above table indicates that company is making provision of only 3 things i.e.
gratuity, dividend and dividend tax. Company is continuously paying dividend to its
shareholders each and every year. Company is also providing more emphasis on paying
gratuity to their employees it shows company‘s awareness.
Page | 64
The provisions increases with increases in time span. The provisions are increased
by 10% in 2016-17 while it increased by nearly 300% which indicates the company’s
presence in the market by providing regular dividend.
Table : 9
(Rupees in lacs)
Page | 65
Graph : 4
Current Ratio
2.4
2.3
2.2
Current Ratio
2.38
2.1 2.33 2.32
2.31
2
1.9
1.8
2017 2016 2015 2014 2013
Interpretation:-
QUICK RATIO
Table : 10
Page | 66
(Rupees in lacs)
Graph : 5
Page | 67
Quick ratio
1.8
1.6
1.4
1.2
Quick ratio
1
0.8
0.6
0.4
0.2
0
2017 2016 2015 2014 2013
Interpretation:
Table : 11
Page | 68
Graph : 6
Page | 69
Liquid Ratio
1.4
1.35
1.3
Liquid Ratio
1.25
1.2
1.15
1.1
2017 2016 2015 2014 2013
Page | 70
Table : 12
INVENTOR 4.68 Times 4.51 Times 5.04 Times 3.58 Times 3.31 Times
Y
TURNOVER
RATIO
Page | 71
Graph : 7
Interpretation:
This ratio shows how rapidly the inventory is turning into receivable through sales.
In 2010 the company has high inventory turnover ratio but in 2016 and 2017 it has
reduced. This shows that the company’s inventory management technique is less efficient
as compare to last year.
Table : 13
Page | 72
Graph : 8
Page | 73
100
80
inventory conversion period
(Days)
60
40
20
0
2017 2016 2015 2014 2013
Interpretation:
Inventory conversion period shows that how many days inventories takes to
convert from raw material to finished goods. In the company inventory conversion period
is decreasing. This shows the efficiency of management to convert the inventory into
cash.
Table : 14
Page | 74
Graph : 9
Page | 75
4
Debtors Turnover Ratio
3
0
2017 2016 2015 2014 2013
Interpretation:
This ratio indicates the speed with which debtors are being converted or turnover
into sales the higher the values or turnover into sales. The higher the values of debtors
turnover, the more efficient is the management of credit. But in the company the debtor
turnover ratio is decreasing year to year. This shows that company is not utilizing its
debtor’s efficiency. Now their credit policy becomes liberal as compare to previous years.
Table : 15
Page | 76
Graph : 10
Page | 77
80
70
60
Average Collection Period
50 (Days)
40
30
20
10
0
2017 2016 2015 2014 2013
Interpretation:
The average collection period measures the quality of debtors and it helps in
analyzing the efficiency of collection efforts. It also helps to analysis the credit policy
adopted by company. In the firm the average collection period is increasing year to year.
It shows that the firm has Liberal Credit policy. These changes in policy are due to
competitor’s credit policy.
Table : 16
Page | 78
SALES
Graph : 11
Page | 79
2.5
2
Credit Turnover Ratio
1.5
0.5
0
2017 2016 2015 2014 2013
Interpretation:
It signifies the credit period enjoyed by the firm in paying creditors. Accounts
payable include both sundry creditors and bills payable. Higher the payable period lower
the working capital requirement, but on the other hand it may affect the prestige of the
firm so the company has to frame creditor’s policy in such manner. The creditors’ ratio is
improving as compare to the last years. This situation enhances the credit worthiness of
the company.
Table : 17
Page | 80
Page | 81
Graph : 12
2.5
1.5
0.5
0
2017 2016 2015 2014 2013
Interpretation:
This ratio indicates low much net working capital requires for sales. In 2016, 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 sales.
FINDINGS
Anu Solar is the fastest growing company in Solar Power products world. I have
taken a summer internship program for my project at Anu Solar Ltd. I have prepared a
project on Working Capital Management of Anu Solar. Following are some findings of
my research work:
1. Company’s main strength is its employees and company is properly taking care of
that by providing safety working conditions, canteen facilities etc
2. Anu Solar is investing more and more money in subsidiary companies for its
faster growth.
3. Working capital of the Anu Solar Power Pvt Ltd. is increasing and showing
positive working capital per year
5. Company gives 75% of dividend since last two years, instead of giving 75%
dividend the company should give 60 to 65% and reinvest the balance amount in
financing the working capital.
7. Company should try to utilize cheap source of finance for financing working
capital requirements.
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8. The current ratio is maintained by the company is 2:1; the company exceed
minimum current ratio at all the years statement
9. The quick asset ratio minimally maintained by the company are 1:1 , the company
was satisfy this position
10. The company has been maintaining sufficient amount of working capital in all the
years
CONCLUSION
Anu Solar is continuously trying to maximize the wealth of share holders. As per
my knowledge Anu Solar is running successfully and in Karnataka it is on number one
position in Solar Power.
At last I wish bright future of Anu Solar, and may got first rank in all over world
The overall performance of Anu Solar Company Limited is going on good track. The
turnover has been increased by 15.57% while the profit is increased by 14.19%. With the
increase in capacity on account of the expansion projects being undertaken by the
company.
The recent boom in the Solar Power Engineering and technology sector has
coupled with continuous thrust of government on infrastructure projects is expected to
sustain healthy growth of engineering products demand. Almost all major players have
Page | 84
announced substantial increase in capacity which results into increase in sales of Anu
Solar.
An increase in tax rates, transportation charges, railway freight, and cost of coal
can add worries for the company.
1) It is suggested that the company should follow the present working capital.
3) The current ratio is maintained at a satisfied level. So that company peruses this
much of current assets to meet the objective of the firm.
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5) For better results company has to maintain cash inflows to overcome current
liabilities of the firm.
6) To gain good profits company has to improve the sales through inventory
management.
7) The company b should try to reduce external liabilities, having pay high EPS &
DPS.
ANNEXURE
CURRENT ASSETS,
LOANS AND
ADVANCES
Page | 86
Page | 87
Page | 88
CURRENT
LIABILITIES
AND PROVISIONS
Page | 89
(B) Current
Liabilities
(B) Provisions
Page | 90
Page | 91
BIBILOGRAPY
Books Referred :
Websites Referred :
www.anusolar.com
www.netmba.com
www.bizmove.com
Page | 92