Internship/ Field Project

On

“WORKING CAPITAL MANAGEMENT”

Master of Business Administration

Of

GRAPHIC ERA (Deemed to be University)

DEHRADUN (UTTRAKHAND)

Session 2023-25

Supervision by Submited by
Name of the Guide Name of the student
Designation Roll no…………
Enrollment no……….

1
 DECLARATION
I hereby declare that the Internship Project entitled TRIVENI ENGINEERING &

INDUSTRIES LTD. submitted

for the Degree of Master of Business Administration, is my original work and the

Internship Project has not formed the basis for the award of any degree, diploma,

associateship,

fellowship or similar other titles. It has not been submitted to any other University or

Institution for the award of any degree or diploma.

(Signature of Student)

Name of the Student

2
 Acknowledgement

I express my sincere thanks to my project guide, ABHISHEK MISHRA

Professor, Department of management for guiding me right form the
inception till the successful completion of the project. I also record my
indebtedness to my supervisor, Prof. Dr. Navneet Rawat, for his counsel
and guidance during the preparation of this Internship. I wish to record
my sincere thanks to members of TRIVENI ENGINEERING & INDUSTRIES
LTD . for their help and cooperation throughout our project. My thanks are
due to those who have helped in collecting data or analysis or typesetting
etc..

(Signature of Student)

ANSHU CHAURASIYA

3
 CERTIFICATE BY INTERNAL GUIDE
I have the pleasure in certifying that Ms. ANSHU CHAURASIYA is a student of Graphic
Era
(Deemed to be University) of the Master’s Degree in Business Administration (MBA).
His/her
University Roll No is 1403853 She has completed her Internship/ Field Project titled as “
WORKING CAPITAL MANGEMENT under my guidance. I certify that this is his original
effort & has not been copied from any other source. This project has also not been submitted
in any other university for the purpose of award of any Degree. This project fulfils the
requirement of the curriculum prescribed by Graphic Era (Deemed to be University),
Dehradun, for the said course.
I recommend this Internship Project for evaluation & consideration for the award of
Degree to the student.

Signature:

Name of the Guide:

Signature:
Name of
the Area Chair/ HOD:

4
5
 INDEX

S.NO TOPICS

1. INTRODUCTION

2. ABOUT THE COMPANY

3. SUGAR BUSINESS

4. SUSTAINABLE SOURCING

5. SHORT TERM FINANCE

6. CREDIT RATING

7. CONCLUSION

6
 Introduction
About working capital management

Working capital management is a business process that helps companies make effective use
of their current assets and optimize cash flow. It’s oriented around ensuring short-term
financial obligations and expenses can be met, while also contributing towards longer-term
business objectives. The goal of working capital management is to maximize operational
efficiency. By improving the way they manage working capital, companies can free up cash
that would otherwise be trapped on their balance sheets. As a result, they may be able to
reduce the need for external borrowing, fuel growth, fund mergers or acquisitions, or invest
in R&D. Working capital is essential to the health of every business and improving your
working capital position can provide a boost to the operational efficiency of a business, but
managing it effectively is something of a balancing act. Companies need to have enough
cash available to cover both planned and unexpected costs, while also making the best use
of the funds available to fuel growth. This is achieved by the effective management
of accounts payable, accounts receivable, inventory, and cash.

Gross working capital Sum total of all current assets that can be converted into
cash within a year.

Net working Capital Current Assets – Current Liabilities

Permanent working capital It refers to the minimum level of current assets required
to carry on day to day activities of the firm.

Temporary working capital It refers the excess of working capital over permanent or
fixed working capital.

Current assets refer to the assets that can be converted into cash within a year such as cash
& cash equivalents, inventory, accounts receivable, marketable securities, prepaid expenses
etc and current liabilities refers to the liabilities that would become due within a year such
as accounts payable, short term loans, overdraft, accrued expenses becoming due in a
year’s time etc.

Having positive working capital can be a good sign of the short-term financial health of a
company because it shows that the firm has enough liquid assets remaining to pay off its
short-term bills and to internally finance the growth of its business. Without additional
working capital, a company may have to borrow additional funds from banks. Negative
working capital on the other hand means that assets are not being used effectively, and the

7
company is facing liquidity crisis. Even if a company has lots invested in fixed assets, it will
still face financial challenges if liabilities become due in short period of time. This will lead to
more borrowings, late payments to creditors and suppliers and, as a result, a lower
corporate credit rating for the company.

Working capital management talks about managing the two components of working capital
(current assets and current liabilities) efficiently to ensure short term liquidity of the firm. It
focuses on two aspects quantum of working capital required and cost of working capital.
The former varies from industry to industry depending upon the policies adopted by the
firm whereas the latter can be minimized by adopting effective working capital strategies.

Working Capital Management Policies

 Conservative policy – This policy aims at maintaining higher levels of current assets
to honor the current liabilities. Both liquidity and profitability are high in this case.
 Aggressive policy – This policy aims at maintaining lower levels of current assets.
Liquidity is very low and it has a direct impact on profitability as well.
 Moderate policy – It is mix of both conservative and aggressive policy.

Working Capital Management Strategies

 Hedging – According to this strategy long term funds should be used to finance long
term assets and short term funds should be used to finance short term assets. This
strategy is also called maturity matching strategy as the maturities of assets are
matched with the financial instruments.
 Conservative – In this strategy a part of temporary working capital is also financed
apart from financing the whole of permanent working capital.
 Aggressive – In this strategy a part of permanent working capital is also financed
apart from financing whole of temporary working capital.

Importance of Effective Working Capital Management

 It ensures higher return on capital

 Improves credit profile & solvency
 Provides better liquidity and profitability
 Efficient management helps in streamlining of operations
 Business value appreciation
 Readiness for shocks and peak demand
 Edge over competitors

The working capital cycle (WCC) is a key metric in finance and accounting that measures the
time it takes for a company to convert its net current assets and liabilities into cash. It

8
effectively tracks the efficiency of a company’s operations and its ability to manage its
working capital.

NATURE OF RESEARCH

The type of research conducted for preparing the report is analytical research as the
documents pertaining to the short term finance have been analyzed. Analytical research
involves analyzing and reviewing the files & documents or the data so collected.

RESEARCH METHODOLOGY

The research method involved the analysis of the excel sheets &documents prepared w.r.t
working capital management, circulars of Department of food & distribution (DFPD). Both
primary and secondary data have been used for preparing the report. Primary data was
collected through interaction with the staff and secondary data has been collected via
company’s documents, website, excel sheets etc.

OBJECTIVES OF THE PROJECT

 To study the working capital management of the company’ sugar business & process
involved in producing sugar.
 To understand how the financial statements and reports in respect of working are
prepared.
 To calculate DP and financial ratios on the basis of information provided.
 To understand the schemes & programmes of the government for the sugar
industry.
 To understand the modes for raising short term finance.
 To analyze the reasons for decline in company’s financial cost.

9
About the company
Triveni Engineering & Industries Limited (TEIL) is an Indian conglomerate with diversified
businesses in sugar and engineering, headquartered in Noida, India. It was founded in
1932. The company is engaged in sugar and alcohol, including ethanol production,
power co-generation, power transmission, including industrial gears & gearboxes and
defence, water treatment solutions and FMCG brands. It is the second-largest sugar
producer in India.

The company was founded on 27 July 1932, and incorporated under the provisions of
Companies Act 1956, as The Ganga Sugar Corporation Limited. It received a certificate of
commencement of business on 6 February 1933. It acquired the Khatauli sugar plant in
1952.

In 1973, it was renamed Gangeshwar Limited from The Ganga Sugar Corporation. It was
renamed Triveni Engineering & Industries Limited in 2000.

In 2007, the company entered the alcohol business by setting up its first distillery in
Muzaffarpur, which has a capacity to produce 160 kilo per day. In 2019, the company set
up another distillery at Sabitgarh unit with a capacity of 160 KLPD.

On 13 June 2018, a concession agreement was signed between National Mission for
Clean Ganga (NMCG), Uttar Pradesh Jal Nigam, and Triveni Engineering to develop
India's first city-wide integrated sewage infrastructure for Mathura at an estimated cost
of over ₹437 crore on a Hybrid Annuity-based mode.

In November 2021, Engineering Power Transmission business signed a 10-year contract

with US-based GEAE Technology to manufacture the 'LM2500' gas turbine base and
enclosure, which powers many of the Indian Navy's vessels.

Operations

The company operates seven sugar mills at Khatauli, Deoband, Sabitgarh, Chandanpur,
Rani Nangal, Milak Narayanpur and Ramkola in Uttar Pradesh. The company also has

10
 two co-generation power plants at Khatauli (46 MW), Deoband (22 MW) and a 160000
litre per day capacity distillery in Muzaffarnagar and Sabitgarh. TEIL has co-generation
plants with a total capacity to generate power of 105 MW.

SUGAR BUSINESS

Triveni is one of the largest integrated sugar manufacturers in India with sugar mills
strategically located across the western, eastern and central parts of the sugarcane rich
areas of Uttar Pradesh (UP). The company produces premium quality multigrade plantation
white, refined & pharmaceutical sugar. The mills must be loacted within the radius of 15
Kms from the cane fields ,otherwise the water content available in the sugarcane would
evaporate rendering the sugarcane useless.

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 Sugar Manufacturing Unit Operational Crushing Location
Since Capacity
Sabitgarh unit 2005 7000 TCD Bulandshahar (West U.P)

Khatauli unit 1933 16000 TCD Muzaffarnagar (West U.P)

Deoband unit 1932 14000 TCD Saharanpur (West U.P)

Rani Nangal unit 2007 5500 TCD Moradabad (Central U.P)

Chandanpur unit 2006 6000 TCD Amroha (Central U.P)

Ramkola unit 1931-32 6500 TCD Kushinagar (Eastern U.P)

Milak Narayanpur unit 2006-07 6000 TCD Rampur (Central U.P)

Note : TCD (Tonnes crushed per day)

The company has a collective sugar production capacity of 61000 TCD and all the units are
located in the state of Uttar Pradesh (U.P). More than 50% of TEIL’s crushing capacity is
located in the western part of U.P, this area is ideal for cane cultivation as the land is highly
fertile and well irrigated. Sugar refinery is set up at two of its units where raw sugar is
processed to produce refined sugar. Refined sugar accounts for approx. 40% of the total
sugar produced by the company.

Key Highlights of Sugar Business for 2023-24

 Current sugarcane capacity 61,000 TCD, expansion to 63000 TCD from SS 2024-25
 During FY 24, the Company’s Sugar segment reported revenues of ` 3,858 crore,
lower by 11.6% on a year-on year basis. The decline was the outcome of 16.4%
lower overall dispatches, both domestic and international. The Government did not
announce any export programme for SS 2023-24, and the only sugar exported during
the financial year was a balance of 14,531 tonnes from the previous year’s
programme
 Blended sugar realisations improved 5.8% y-o-y to ` 38,175/tonne, mitigating some
of the impact of lower dispatches and cost increases.
 Segment PBIT was largely flat y-o-y at 306 crore, with margins enhancing by ~90 bps
to 7.9% in FY 24.

WHAT IS SUGAR

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Sugar or sucrose is a carbohydrate which is an essential source of energy for the body. It is
present in all types of fruits and vegetables. Sucrose is produced by plants through
photosynthesis (Process plants use to transform the sun’s energy or sunlight into food).
Sun’s energy is used to convert water and carbon dioxide into sucrose. Sugar beet &
sugarcane have the highest quantity of sucrose over other plant types, which is why they
are processed by mills to produce sugar.

Carbohydrate is a macronutrient which includes starches, sugar and other sugars. The term
sugar refers only to sucrose a disaccharide whereas the term sugars refer to broad
categories of all monosaccharides and disaccharides.

Monosaccharides or one molecule sugars

 Glucose (Dextrose)
 Fructose (Fruit sugar)
 Galactose (Occurs in milk)

Disaccharides or two monosaccharides linked together

 Sucrose (Table sugar) = Glucose + Fructose
 Lactose (Milk sugar) = Glucose + Galactose
 Maltose (Malt sugar) = Glucose + Glucose

Polysaccharides or more than 10 monosaccharides linked together

 Starch (Glucose Polymer)

TYPES OF SUGAR

 White sugar is also known as granulated sugar or refined sugar. The raw sugar is
refined to produce white sugar. Sugarcane or sugar beet are used for producing the
same.

 Brown sugar is either made by directly boiling a brown sugar syrup or mixing white
sugar with various amount of molasses. It is considered to be more beneficial for the
body as compared to white sugar.

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  Liquid sugar refers to a light, clear syrup which is made from a concentrated sugar
solution. It consists of sucrose and water.

The different varieties of white sugars, brown sugars & liquid sugars are given below

Granulated sugar is also known as white sugar or

White
refined sugar. It is the most common type of sugar
Granulated
used in cooking and baking and is produced from
Sugar
sugarcane and sugar beet.

It is a superfine granulated white sugar which is ideal

Caster Sugar for making cocktails and syrups.

It is also known as powdered sugar, this is a type of

Confectioners’
white sugar that has been crushed into a fine powder
Sugar
and it is ideal for making icing and frosting.

Baker’s Special It is more fined than fruit sugar and was developed
Sugar especially for baking industry.

White
It can have large or fine crystals and provides sparkling
Sanding Sugar
sugars appearance, used mainly in baking and confectionery.

It is smaller and more uniform in crystal size than

Fruit Sugar regular sugar and is ideal for making desserts and
powdered drinks.

It has a larger size than regular sugar crystal and

Coarse Sugar results from the crystallization of molasses rich sugar
syrups. It is used in making fondants, liquors etc.

Dark brown sugar has a deeper colour and stronger

Light and Dark molasses flavour than light brown sugar and it is ideal
Brown Sugar for gingerbread, baked beans etc. Light brown sugar is
often used in sauces and baked foods.
brown
Turbinado It is also known as Demerara sugar or raw cane sugar
sugars
Sugar which retains naturally present molasses. It has a
blond colour, mild brown sugar flavour& large crystals
than brown sugars used in baking.

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 It is also known as Barbados sugar whose molasses has
Muscovado
been removed. Dark brown in colour and has a strong
Sugar
molasses flavour.

It is also known as granulated brown sugar having less

Free Flowing
moisture than regular brown sugar. Usually, it is used
Brown Sugar
as a topping on cereals and oatmeal.

It refers to the white granulated sugar that has been

dissolved in water. Simple syrup is liquid sugar with a
Liquid Sugar
1:1 ratio of water & sugar. It is often used in drinks.

liquid Inversion is the process of splitting the two

components of sugars, glucose and fructose and the
sugars
Invert Sugar resulting product is called invert sugar with equal parts
of glucose and fructose. It is sweeter than white sugar
due to the presence of fructose.

SUGAR MANUFACTURING PROCESS

15
 I II III
Transportation of
Cane is received Tippler &
sugarcane (cane)
at mill Weighbridge
from cane fields

VI V IV
Defecation Milling Train Shredder

Bagasse It is sent to co-gen plants

for generating electricity

VII VII IX
Evaporation I
Settling Crystallization
Station

Press XI X
Mud Drying & Storing
Centrifugation
of raw sugar
It is sent to cane
fields where it is
used as fertilizers Molasses

It is sent to distillery
for producing
ethanol

1. Transportation
This is the first step in the manufacturing of sugar from sugarcane. The cane grown in the
fields is transported to the sugar mills where is it processed to produce sugar. The cane
is transported to the mills via truck, tractors etc.

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2. Cane Receival
This step talks about the receival of cane from cane fields. The mills are in contact with
the cane suppliers who supply it in huge quantities.

3. Tippler/Weighbridge
The cane in the truck or tractor is then unloaded onto the cane carrier which takes is for
further processing. Truck tipplers, wagon tipplers are used to unload the loose raw
materials or cane in this case and the cane is then weighed with the help of weighbridge.

4. Shredding
In this step the cane which has been unloaded and weighed moves to the cane shredder
which shreds the cane to facilitate the juice extraction process. The main objective of
shredder is to maximize the sucrose extraction. Shredders equipped with latest
technology are even capable of easy functioning, maintenance and repair of the system.
Such modern shredders help the unit in reducing unit downtime.

5. Milling Train
The shredded cane then passes through the milling train to extract the juice. Milling
refers to the process involved in squeezing the sugarcane by using high pressure
between heavy iron rollers. Sugar mills have upto 6 rolls and every set of mills is called
mill train or tandem mill and water is added to improve extraction efficiency. Hot water is
poured just before the cane enters the last mill in the milling train. By product ‘bagasse’
is stored in bagasse storage as it is used in generating steam and electricity.

6. Defecation
The juice extracted from milling passes onto the defecation or clarification process to
remove both insoluble and soluble impurities that have not been removed in the
preliminary stages. Lime and heat are used as clarifying agents. Lime neutralizes the
natural acidity of the juice and the same is heated to precipitate the other substances
present such as albumin, fats, gums, waxes etc. This process traps the suspended solids
as well as minute particles to clarify the juice. A sample of the juice is sent to laboratory
to analyse the sugar content.

7. Settling

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 Sedimentation helps in removing mud or dirt from the juice and further filtration helps in
removing other impurities. There are different types of clarifiers to facilitate the filtration
process. Another by product ‘press mud’ is produced in this stage which is sent back to
the cane fields where it used as fertilizers.

8. Evaporation Station
In this stage the water is evaporated out of the juice by steam to form a thick syrup. The
objective is to increase the concentration of sucrose in the juice. Generally, multiple
effect evaporators are used which boils the water in a series of vessels, the vapour form
one vessel is used to heat the next one but the first vessel requires an external source of
heat. The vapour form the last vessel goes to the condenser.

9. Crystallization
The syrup so formed in the previous stage moves to the next stage which is
crystallization. The syrup is sent to vacuum pans to further evaporate till crystals are
formed. Fine seed crystals are added and the sugar mother liquor forms solid precipitate
of about fifty percent by weight crystalline sugar. The first crystallization yields A sugar or
A strike leaving behind a residual mother liquor ‘A Molasses ‘ which is further processed
to produce B strike or B sugar and low grade B molasses is processed to produce C strike
or C sugar and final molasses or blackstrap. The final molasses contains approx. 25%
sucrose, 20% glucose and fructose, at these levels sugar cannot be crystallized.

10. Centrifugation
In this stage, the sugar crystals are separated from the mother liquor. Centrifuges are
spun at a very high speed to separate the crystals from the syrup and water is sprayed on
the sugar pressed against the walls of the centrifuge basket, thus reducing the syrup
coating on each sugar crystal. This stage leads to the production another by product
‘molasses’ which is used for producing ethanol.

11.Drying & Storing

Once the sugar crystals have been separated from molasses then the wet sugar crystals
are cooled down and dried up by sugar driers. The colour of the raw sugar or sugar
crystal is pale brown to golden yellow with sucrose content ranging from 97 – 99 percent.
The raw sugar is then further processed to produce refined sugar.

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DISTILLERY BUSINESS

Molasses is one of the by products of sugar manufacturing process and it is used in

producing ethanol. Molasses is a thick dark syrup left after the sugar has been removed
from the juice. It is mixed with water and fermented at 30 degrees celsius for 36 to 48 hrs
and then distilled to produce ethanol. The company has set up its molasses based distillery
in UP to ensure efficient utilization of molasses.

Key Highlights of Distillery Business for 2023-24

Achieved production of 18.44 crore litres & sales of 18.27 crore litres during FY 24
• The net turnover in Distillery business increased by 8.6% over the previous year, mainly
due to 1.3% higher dispatches, 2.9% higher average realisation price on account of increase
in the ethanol prices and product mix, and higher turnover of IMIL business driven by 34%
higher dispatches (44.73 lakh cases in FY 24 as compared to 33.36 lakh cases in the previous
year)
• During the year, revenues from the distilleries contributed 24% of TEIL’s net turnover
• Ethanol constituted 93% of alcohol sales during FY 24, similar to last year
• Sale of Ethanol / ENA produced from sugarcane-based feedstocks (majorly B-heavy)
constituted 67% of the total alcohol sales for FY 24 (75% for FY 23), while Ethanol / ENA
produced from grain contributed to the balance 33% in FY 24 (25% in FY 23).

POWER TRANSMISSION
Include 3 business segments – Gears, Defence, Built-to-Print, powered by a state-of-the-art
integrated manufacturing facility in Mysuru, Karnataka. TEIL is the largest manufacturer of
high speed gears and gearboxes in India. The gears & gearboxes are provided for steam
turbines, compressors, gas turbines, pumps etc. The company also manufactures low speed
gearboxes for steel mills, sugar mills, cement mills etc. Apart from selling these in India they
are also exported to different parts of the world. The company has over 38 years of
experience in this business which allows it to deliver quality to its clients.

Key Highlights of power transmission for 2023-24

• PTB order booking stood at ` 375.4 crore, registering a growth of 42%, and revenues stood
at ` 291.8 crore - a growth of 30% over FY 23
• Aftermarket contributed ~36% to the overall revenue from the Power Transmission
Business • PBIT for the business grew faster than revenues at 40.1% to ` 107 crore, with
PBIT margins of 36.7%, up 276 bps on a year-on-year basis

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 • Steam Turbine Generator segment continues to be the mainstay for PTB, while the
emerging compressors segment shows the highest potential for growth in the future. From
end users’ point of view, sectors like Sugar, Ethanol, Oil & Gas, Steel and Cement have
witnessed considerable investments, with large power range orders coming from
infrastructure sectors like Steel.

WATER BUSINESS
The company provides solutions for water treatment, waste water treatment, recycle & zero
liquid discharge and water & waste water network management. The aim is to provide
efficient and cost effective solutions to its clients and they have also employed the latest
technology for providing the same. The company’s clientele comprises of few big names
such as Larsen & Toubro (L&T), Steel Authority of India (SAIL), Gas Authority of India Ltd.
(GAIL), Bajaj Hindustan Ltd, Delhi Jal Board (DJB), GMR Industries Ltd and many more.

Key Highlights of water business for 2022-23

• The Water business achieved turnover of ` 246.33 crore in FY 24, lower by 30.1% y-o-y due to slow
execution in certain projects and delay in receipt of new projects for which the Company’s lowest
bids are awaiting award

• PBIT stood at ` 31.41 crore in FY 24, higher by 29.4% y-o-y. The higher profitability was driven by
cost optimisation/ savings in various projects executed during the year

• FY 24 PBIT margins stood 12.8%, up 586 bps y-o-y

• WBG’s regular participation in new bids in India and overseas has given it a strong market
recognition and WBG is now recognised as a major force in this business

• Going forward, the majority of investments are expected from NMCG, BWSSB, DJB, UP, Telangana,
Andhra Pradesh and Maharashtra. WBG is well positioned to undertake more jobs in its areas of
expertise. Following its success in Bangladesh and Maldives, it is targeting selected overseas markets
in Asia, Africa and Eastern Europe and others for new opportunities

Sustainable sourcing
Their robust sourcing strategy enables the effective selection of vendors based on
sustainable requirements. This ensures alignment of their performance with TEIL and
contributes to our supply chain resilience.

Sugar
• Established efficient logistics arrangements, including the use of GPS and geofencing to
track movements. These ensure efficient movement of raw materials and products,

20
contributing to reduced transport-related emissions, associated costs and timely deliveries
which maintains sugarcane quality.

• Seamless and resourceefficient supply of bagasse from own sugar units to cogeneration
plants .

Alcohol
• Sourcing of feedstock (molasses, sugarcane juice/ syrup and grain) from own sugar mills
and market, alongside transport arrangement monitoring ensures uninterrupted operations.

Power Transmission Business

• Most supplies are engineered-to-order and ‘largely outsourced’ to approved vendors, and
inspected in line with our Quality Assurance program and directly deliver at the project
sites.

• Structured mechanism to develop vendors and maintain approved vendors list for various
requirements to ensure efficiency .

Water
• Vendor selection based on past performance, cost competitiveness and compliance with
regulations and various ESG matter .

21
 SHORT TERM FINANCE

SHORT TERM FINANCING INSTRUMENTS

Cash Credit (CC)

It is a source of short term financing in which the bank allows the borrower to
withdraw money from the current account without having credit balance in the
account but the amount so withdrawn must not exceed the credit limit sanctioned
by the bank. The interest in this case is charged on the money withdrawn and not on
the credit limit allowed. The limit depends upon the drawing power of the company.
Security has to be provided against CC. Therefore, the company pledges the stocks to
take cash credit facility from banks.

Bank Interest Rate

Central Bank of India (CBI) 8.50%

Punjab National Bank (PNB) 8.80%

Oriental Bank of Commerce

9.75%
(OBC)

State Bank of India (SBI) 8.90%

Canara Bank 9.95%

Axis Bank 9.90%

IDBI 11.50%

YES Bank 10.20%

RBL Bank 9.70%

Working Capital Demand Loan (WCDL)

22
It is same as working capital loan which refers to loan acquired for financing working
capital needs of the organization but unlike working capital loan WCDL offers flexible
financing and can be acquired when the organization needs it. Not all businesses can
take WCDL only corporate having turnover of above 500 crores can apply for such
loan. WCDL is taken for a specific purpose such as for the payment of cane dues,
setting up plant etc.

Interest
Bank
Rate

Central Bank of India (CBI) 8.40%

Punjab National Bank (PNB) 8.10%

Oriental Bank of Commerce

9.05%
(OBC)

State Bank of India (SBI) 8.35%

Canara Bank 8.45%

Axis Bank 9.15%

RBL Bank 9.50%

Process involved in raising funds through CC& WCDL

- Proposal and CMA report specifying the requirement of additional funds or

limits to be enhanced and information regarding the company’s current &
projected level of performance of the company are sent along with the
request letter to the lead bank
- Once the proposal has been submitted the bank requires additional financial
documents to check the firm’s eligibility. The department also handles the
queries of lead bank with respect to the proposal sent.
- Then, Bank issues PBF note which includes information regarding cane
crushed, recovery rate, assessment of permissible bank finance unit wise &
consolidated, details of PBF and bank vise exposure and other details. The
note is to be shared with the other consortium members also.
- At last, the sanction letter is issued which specifies the fund based and non
fund based ceiling or the limits sanctioned.

Role of Lead Bank

23
 The lead bank handles the loan syndication process and receives a fee for
such service which includes recruiting the syndicate members and negotiating
the financing terms. The lead bank & syndicate members are also known as
consortium leader and consortium members respectively. As per RBI’s Lead
Bank Scheme (LBS) each district in the country has been assigned a leadbank
which depends upon the bank having major presence in a particular
district.The lead bank acts as a leader for coordinating the efforts of all credit
institutions in the allotted districts to increase the flow of credit to
agriculture, small-scale industries & other economic activities included in the
priority sector in the rural and semi-urban areas. The company’s lead bank is
PNB as it has the maximum exposure.

Lead bank Sugar units

CBI Khatauli & Ramkola

PNB Deoband, Sabitgarh, Chandanpur, Raninangal & Milaknarainpur

Commercial Paper (CP)

It is another source of short term finance for the organization. CP is a type of
promissory note issued to obtain funds to meet the daily requirements of business.
It is issued at a discount and redeemed at face value. It can be issued from a period
ranging from 7 days to a year and in the denominations of 5 lakhs or multiples
thereof. The difference between the face value and discount value is the interest
amount earned by the investor of CP.

Eligibility requirement to apply for CP

- Tangible net worth as per the latest audited balance sheet should be atleast 4 Cr.
- Working capital limit has been sanctioned by either banks or all India financial
institutions.
- Borrowal A/c of the company should be a standard asset by the financing
institutions.

In order to issue commercial paper the company appoints IPA (Issuing & Paying
Agent), to verify the boards resolution of the issuer authorizing the issue of CP,
retain the original copy of CP, ensure that the issuer has complied with the rules and
regulations of RBI, check the authenticity of credit rating letters and completes all

24
 the formalities of redemption and ensures that the beneficiary of CP gets the money
on or before the due date. The company issues IPA certificate which specifies the
name of IPA, date of allotment, date of maturity, face value of shares, units to be
credited in CP allotment account, details of CP allotment account, ISIN code
(required for listed companies). It is redeemed as per the terms decided in the
contract. The redemption letter states whether full or partial payment has been
made.

Overdraft (OD)
Such facility is provided to the existing account holders on the basis of their credit
worthiness. As per this facility, the existing account holders can withdraw excess
balance from their account up to a specified limit. Interest is charged only on the
excess amount so withdrawn. Such facility unlike CC facility is not securitized by
tangible assets as it purely depends upon the existing balance of the account holder.

GOVERNMENT SCHEMES, PROGRAMMES & POLICIES

 Sugarcane Pricing Policy

FRP (Fair & Remunerative Price) - The concept of SMP (Statutory Minimum Price)
was replaced by FRP for sugar season 2009 -10 and subsequent SSs (Sugar Season).
FRP is set by central government on the recommendations of CACP (Commission For
Agricultural Costs & Prices) in consultation with the state government after taking
proper feedback from the associations of sugar industry. The FRP is decided on the
basis of basic recovery rate of sugar as the government ensures that the farmers get
premium for higher recovery of sugar from sugarcane. The Fair and Remunerative
Price (FRP) of sugarcane for the 2023-24 sugar season is ₹340 per quintal. The FRP is
the minimum price that sugar mills must pay to farmers for sugarcane. The FRP is
based on a basic recovery rate of 10.25%. For every 0.1% increase in recovery,
farmers receive an additional ₹3.32, and for every 0.1% decrease in recovery, they
receive a deduction of the same amount. Even if the sugar recovery is less than
10.25%, farmers are still guaranteed the FRP of ₹315.10 per quintal.

The FRP for SS starting from 2013– 2025 is given below :

Table No. 7

25
SAP(State Advised Price) - The state advised price or SAP is set by the state government
unlike FRP which is fixed by the central government. Due to differences in cost of
production, productivity levels and pressure from farmers' groups, some states declare their
state specific sugarcane price called State Advised Price (SAP) which is usually higher than
FRP. States such as UP, Haryana etc have declared state advised price for their respective
state.

The SAP for SS starting from 2017-24 is mentioned below :

Table No. 8

SS (Sugar Season) SAP per quintal

2017-18 315

2018-19 315
When the state
2019-20 315 government
issues SAP then the mills
2020-21 315

2021-22 350

2022-23 350

2023-24 26 370
 are bound to purchase sugarcane at that price itself irrespective of the FRP set by
central government.

 MSP (Minimum Selling Price)

This is another initiative by the government to help farmers and the industry.MSP
refers the minimum price at which sugar must be sold in the open market by sugar
mills. Such price helps sugar mills to get fair remunerative price on sugar sold so that
they are able to cover their cost of production and earn a reasonable margin on the
same. The main rationale behind this is to provide fair margin to the mills so that the
firm is in a position to clear dues of farmers. The price of sugar has increased by 7%
i.e. from Rs. 2900 per quintal to Rs. 3100 per quintal.

 Scheme For Financial Assistance to Sugar Mills For SS

As per this scheme, the government would provide financial assistance of Rs. 13.88
per quintal of cane crushed in the SS 2018 - 19 to sugar mills to reduce the cane dues
of farmers. The amount would be directly credited into the accounts of farmers on
behalf of sugar mills against the cane price payable.

 MIEQ (Minimum Indicative Export Quotas)

Due to high levels of inventory in the country and the cost associated with holding
the same, the government has allocated export quotas mill wise. The government
provides financial liquidity to mills via MIEQ scheme by providing production and
transport subsidy. This scheme extends to all grades of sugar like raw, plantation
white and refined. Mill’s average production of sugar in the current SS and last two
SSs is taken in account while fixing the export quotas. As per DFPD’s (Department of
Food & Distribution) circular dated 28 th Sep’18, 50 lakh MT is allocated amongst the
mills on prorate basis for SS 2018-19.

The calculation of unit wise export entitlement for SS 2019-20 is mentioned below
Table No. 9

 EBP (Ethanol Blended Programme)

EBP was launched in 2003 to promote alternate and environment friendly fuels & to
reduce import dependency for energy requirements. Molasses produced while

27
 manufacturing sugar is used for producing ethanol through fermentation process.
Ethanol helps in the complete combustion of fuel due to the presence of oxygen in it,
thereby reducing emissions and environmental pollution. Under this programme the
central government has scaled up blending targets from 5% to 10%. Initially, this
programme was launched in 9 states and 4 union territories (UT). At present the
programme is extended to 21 states & 4 UTs.

 Custom Duty on Exports & Imports

The central government has increased the custom duty on import of sugar from 50%
to 100% to prevent unnecessary import of sugar and to stabilize the domestic price
of the same. Also, custom duty on export of sugar has been withdrawn. Earlier,
custom duty @20% was levied on export of sugar which has now been waived off.

 Scheme of Soft Loan

The objective of this scheme is to facilitate the payment of cane dues of the farmers.
Soft loan refers to a loan having lenient credit terms, payment options etc.

- The sugar mills must have cleared 25% of the cane price payable for the current SS in
order to be eligible for soft loan scheme.
- The banks would provide loan equivalent to 85% of the stock value of 40 lakh MT
(Metric Tonne) @ Rs. 31000 per MT. Therefore, the loan amount cannot exceed Rs.
10540 Cr.
- Soft loan would be backed up by security & collateral.
- Mill wise quantum of soft loan is determined on the basis of 10.55% of its white
sugar production in the previous SS & this facility would be available to those mills
which have produced sugar in previous & current SS.
- Interest burden on such loan would be borne by the government for a period
extending upto 1 year at 7% simple interest rate or rate charged by the bank
whichever is earlier .

DRAWING POWER STATEMENT

28
 DP (Drawing Power) Statement refers to the statement which shows the drawing power
or the amount that can be withdrawn from the limits sanctioned by the bank. Such
statement acts as a credit monitoring tool for the bank as they keep a check on the
company’s performance via the same. It is prepared daily in sugar business as the bank
requires such firms to calculate DP and submit it to them on daily basis. The sanctioned
limit is the maximum amount that can be with drawn, therefore DP is calculated to
compare the amount withdrawn with the sanctioned limit. The DP of each unit is
calculated separately. It is an important concept of cash credit where the company
cannot utilize more than the sanctioned limit and the interest is also calculated on the
amount withdrawn or utilized and not on the complete limit sanctioned. In order to take
cash credit the firm has to pledge its stocks and only the stock which has been insured is
considered in the calculation of DP.

Margin Percentage

Certain percentage of the following items is kept as margin which is to be financed from
long term sources or firm’s own funds.

Particulars Margin percentage

15%
Free Sugar

Buffer Stock
0%

50%
Brown Sugar

25%
Molasses

25%
Debtors

Store Inventory
25%

Calculation of DP

DP considers paid stock (pledged and insured) of free sugar, brown sugar & buffer stock and
also includes molasses, store inventory and debtors. The stock of current as well as previous
sugar season is considered while calculating the drawing power of the firm. The sugar
season (SS)or SY (sugar year) starts from October and ends in September.

Table No. 11

29
 Value
Opening Production Dispatches Closing of
Pledged Rate Margin Margin DP
Stock on date on date Stock Closing
Particulars
stock
Qtls. Qtls. Qtls. Qtls. Rs./
Qtls. Rs. % Rs. Rs.
Qtl.
Current
Season

Free sugar 15%

Buffer Stock 0%

Brown Sugar 50%

Sub-total (a)
Previous
Season
Free sugar 15%

Buffer Stock 0%

Brown Sugar 50%

Sub-total (b)

Total(a+b)

Molasses 25%

Debtors 25%
Store
25%
Inventory
Total Drawing Power

Note : 1. Opening stock is the closing stock of the previous day.

2. Pledged component relates to the free sugar, molasses etc that has been
pledged as security for the cash credit facility taken from bank.
3. Closing stock is arrived by the following formula :
Closing stock = Opening stock (pledged stock) + Purchases – stock sold
(Dispatched)
4. Value of closing stock is closing stock multiplied by rate.
5. Margin amount is calculated by multiplying margin percentage with the
value of closing stock.
6. DP is calculated by deducting margin amount from value of closing stock.
7. Free sugar refers to the sugar that is sold to the retail outlets across the
country.
8. Levy sugar is a kind of sugar that can be sold exclusively in the government
run. ration shops. The government has abolished the levy on sugar produce

30
 since 2012.
9. Buffer stock refers to the excess stock lying in the godown.
10. Molasses refers to the thick syrup left after the sugar has been crystallized.

CONCEPT OF CANE TAGGING

The concept of cane tagging extends to both firms who have taken cash credit facility from
banks against the pledging of stock and those who have not taken cash credit facility from
banks. As per Department of food & distribution’s circular dated 30.10.2018 the sugar mills
are required to open an escrow account with the bank where the tagged amount would be
transferred. An escrow account refers to an account where funds are accumulated for a
specific purpose. 85% from the sale proceeds of free sugar, press mud, molasses and
bagasse are transferred to escrow account. Such tagging is done to ensure that the cane
suppliers or farmers get their dues on time. The payment is made to farmers via RTGS or
NEFT from this account.

The calculation of cane tagging is mentioned below: Table No. 12

Sugar
Rate per Value of Cane DP Cane Tagged
Date produced till
Qtl. sugar per lakh (85% of the value) (85% of DP)
date (Qtls)
10 Nov'23 4500 2900 130.50 110.93 94.29

18 Nov'23 15000 2900 435.00 369.75 314.29

25 Nov'23 35000 2900 1015.00 862.75 733.34

5 Dec'23 50000 2900 1450.00 1232.50 1047.63

CMA REPORT

A CMA (Credit Monitoring Arrangement) report reflects the working capital management of
the loan applicant. Such report helps the bankers and financial analysts in ascertaining the
financial health of the organization or loan applicant. Most bankers require such report to
understand the flow and application of funds in the business. It is mandatory for every
organization requiring short term loan to prepare and submit such report to their respective
bank as in its absence the bank might not extend working capital loan or provide any other
kind of financial assistance to the applicant. CMA report of the company considers current
and previous years’ performance. It makes projections for the future on the basis of

31
company’s actual performance. Therefore, we can say that this report shows the past
financial history, current financial position & future financial planning of the organization.

The CMA reports includes the following statements :

 Particulars of current and proposed limits - This statement highlights the

company’s existing fund based, non fund based limit and also mentions the limit
applied for by the company. Fund based limit is one where the banks provides loan
or facility from which money can be withdrawn or utilized such as Cash Credit (CC),
Term loan for purchase of fixed assets, Overdraft Limit etc. Non Fund based limit is
one where the bank does not provide physical cash but instead gives an assurance to
the third party such as Bank Guarantee (BG), Letter of Credit (LC) etc.

 Operating statement - This statement shows the company’s current and projected
operating expenses, profit before & after tax, cost of production, cost of salesnet
sales etc. It considers the company’s past 2 years performance, current year
performance with projections for coming months and estimates the next year’s
performance on the basis of actual level of performance of the firm.

 Balance sheet analysis - The objective of balance sheet is to reflect the company’s
financial position. The purpose of submitting this statement is to get detailed
information about the company’s current assets, non-current assets, current
liabilities, non-current liabilities, net worth etc of the company. A thorough analysis
of balance sheet is to be presented to the bank and the information of the balance
sheet is used by bankers and the company itself for calculation of various ratios such
as debt-equity ratio, current ratio etc.

 Comparative statement of current assets and current liabilities - This statement

helps in deciding about the borrower’s capacity to meet the working capital
requirements and actual working capital cycle for the projected period. The premise
is to see the extent to which the company can meet its working capital needs
through its current assets.

 Calculation of MPBF (Maximum Permissible Bank Finance) - It refers to the

maximum amount organization can take from the bank for meeting its short term
needs. As per the recommendations of Tandon committee which was headed by Mr.
Prakash Tandon to study the entire gamut of bank’s finance and suggest ways for
optimum utilization of bank credit, the corporate should be discouraged for
maintaining huge stocks of raw material, work in process and finished goods. The
committee emphasized that the finance should depend upon the performance of the

32
organization as the company would be in a position to honor its commitments if it
performs well. The committee has laid down three methods for calculating MPBF :

Method I

The MPBF as per this method is 75% of the difference between current assets and
current liabilities (other than bank borrowings). Therefore, the borrower has to
finance the rest of the balance which is 25% from long term sources.

MPBF = 75% of (C.A – C.L other than bank borrowings)

The current ratio under this method has to be at least 1:1.

Method II

The MPBF as per this method is the difference between 75% of current assets and
current liabilities (other than bank borrowings). The Tandon committee came up
with the term ‘core current assets’ which refers to the permanent component of
current assets essential for smooth functioning of the business throughout the year.
These assets are not liquid so when the company is in need of money then it sells off
its non-core assets first and then moves to core assets. If the company is ready to
raise money by selling its core current assets then it implies that the company is in
dire need of money or close to bankruptcy. Therefore, the borrower has to raise the
balance left from long term sources.

MPBF = 75% of C.A – C.L other than bank borrowings

The current ratio has to be at least 1.33:1

Method III

The MPBF as per this method is the difference between 75% of current assets after
deducting core current assets and current liabilities other than bank borrowings.
Therefore, the borrower has to rely on long term sources for financing core current
assets and the rest of the balance which is 25%.

MPBF = 75% of (C.A – C.C.A) – C.L other than bank borrowings

The current ratio in this case has to be at least 1.5:1.

33
 Note : MPBF for gear business & water business is calculated as per the methods
mentioned above whereas MPBF for sugar business is calculated on the basis of peak
level.

 Fund flow statement - This statement is also called statement of sources and
application of funds and it shows the flow of funds for a given period. It reports the
sources from which the funds have been raised and their application. If the funds or
working capital increases then it is called inflow of funds and if the fund decreases
then it is termed as outflow of funds. There are cases which does not affect the flow
of funds such as exchange of fixed assets, collection from debtors or payment to
creditors, conversion of debentures into shares etc. It is an important tool that
indicates financial analysis and control.

 Ratio analysis - This statement reflects the company’s performance in several key
areas. It is used to evaluate the company’s liquidity, profitability, efficiency of
operations etc. Debt equity ratio, gross profit ratio, net profit ratio, current ratio,
quick ratio etc are computed to get insights about the company’s standing and
growth over the years.

The CMA report shows the company’s actual performance, past performance, projected
performance of the remaining months in the current sugar season and estimated
performance of the next year.

C-I, C-II & C-III Statements

C I Statement Shows the actual performance of previous SSs

C II Statement Shows the actual performance of the current SS and projected

performance of the remaining months in the current SS

C III Statement Shows the calculation of MPBF

The C-I, C-II and C-III statements form a part of CMA report as such statements are used in
preparing the report. C-I statement reflects the actual unit wise performance of the sugar
business of the company in the sugar season. C-II statement on the other hand reflects the
unit-wise projected performance based on the company’s current level of performance and
past performance and C-III statement reflects the MPBF (Maximum Permissible Bank

34
Finance) limits of the organization. Both C-I & C-II unit-wise statements are used for
preparing consolidated C-I and C-II respectively.

C-I & C-II provides the following information :

 Provides information about basic data such as sugarcane crushed, recovery rate
(Percentage of sugar produced from crushed sugarcane), sugar produced etc.
 Production, opening stock and dispatches (sale) of levy sugar, free sugar, raw sugar
etc.
 Closing stock of sugar which is equal to production of sugar plus opening stock of
sugar minus stock of sugar sold.
 Information about average realization from sale of sugar in Rs. per quintal.
 Total receipts which includes receipts from sale of sugar (levy, raw sugar, free sugar
etc) and other receipts.
 Total payments which includes cane price payment, power & fuel, repair&
maintenance etc.
 The difference of total receipts and payments gives monthly deficit or surplus.
 Information about permissible DP, net DP, cane price tagging, cane dues payable etc.

C-III provides the following information

 Information about the fund based and non fund based limits assigned to the unit.
 Calculation of maximum permissible bank finance on the basis of peak level of DP.
The peak level relates to the month where total available DP is maximum.

MPBF calculation for sugar industry is as follows :

Table No. 13

Particulars Amount

Opening stock of sugar produced (levy, free, raw & Brown sugar) & free XXX
buffer stock
+ Production of sugar up to peak level XXX
- Dispatches up to peak level XXX

= Closing stock of sugar up to peak level XXX

35
 XRate XXX

= Value of closing stock XXX

- Margin amount XXX

= Net of margin XXX

+ Net of margin on molasses, margin store & debtors XXX

XXX
= Total net of margin or (Peak DP)

MPBF is the lower of sanctioned limit and total net of margin

COMPANY’S COST

Total cost of manufacturing, selling, administration and other costs excluding the finance
cost has increasedby 205.88 cr. as the company has acquired more raw materials or cane
compared to previous year which has pushed other costs associated with that upwards.
Moreover, the average realization rate and turnover fell as compared to the previous year.

Note : * These are the provisional figures subject to declaration by the company.

REASONS FOR FALL IN THE COMPANY’S FINANCE COST

Increase in recovery rate

The recovery rate of 11.29% in financial year ending 2018 increased to 11.78% for
the financial year ending 2019. Hence, the company produced more sugar compared
to previous year.

Increase in cane crushed

Cane crushed increased from 7.34 million MT for FY ending 2018 to 7.68 MTin FY
ending 2019. Hence, the company witnessed an increase of 4.63% in the FY ending
2019.

Fall in theinterest rate

36
 The average cost of borrowing fell from8.87% p.a in FY ending 2018 to7.9% p.a in FY
ending 2019.

Prepayment of dues
The company paid the dues in advance thereby saving the interest cost. Moreover,
the government expects the mills to clear the dues of farmers within 14 days.

Note : 1. FY (Financial Year)

2. MT (Metric Tonne)

CREDIT RATING

The credit rating provides information regarding the credit worthiness of the firm. The credit
ratings of the company are given by ICRA (Investment information and credit rating agency)
a public ltd company, which was set up in 1991 by leading financial institutions, commercial
banks and financial services companies. ICRA is listed on both NSE and BSE and Moody’s
investor service has the major stake in the company’s shareholding. The following ratings
have been given to the company by ICRA.

LONG TERM RATING – AA-

Instruments with this type of rating are considered to have high degree of safety regarding
timely servicing of their financial obligations and such instruments carry very low credit risk.
Hence, we can say that the company has a stable long term financial profile but the rating of
AA- is a notch lower than the rating of AA.

37
SHORT TERM RATING – A1+

Instruments with this type of rating are considered to have a very strong degree of safety
regarding timely payment of financial obligations. Such instruments carry lowest credit risk.
This is the best rating given as per its short term rating scale. This rating is a notch higher
than the rating of A1. Hence we can say that it has an excellent short term financial profile.

The rating depends upon the following factors :

Industry Risk Analysis

- Agro-climatic risk
- Regulatory risk

Business Risk Analysis

- Operational performance

Financial Risk Analysis

- Profitability margins
- Liquidity

Promoter & Management Profile

COMPANY Vs COMPETITORS

BASIC INFORMATION ABOUT COMPANY & ITS COMPETITORS

Table No. 16

Company

Particulars

Balrampur Chini Bajaj Hindustan EID-Parry India

TEIL Mills Ltd Sugar Ltd Ltd

Listed on NSE or
Yes Yes Yes Yes
BSE

38
 kamal Nayan
Chairman Dhruv Sawhney Saraogi & Sumit V. Ravichandran
Mazumder
Kushagra Bajaj
Dhruv Sawhney &
Managing Director Vivek Saraogi S. Suresh
Tarun Sawhney

Incorporation Year 1932 1975 1931 1788

Headquater Uttar Pradesh Kolkata Mumbai Chennai

Employee base 6620 3792 10931 5214

Parent
Triveni Group - Bajaj Group Murugappa Group
organization

No. Of sugar mills 7 10 14 9

Market cap in Cr. 1680 3327 983 3597

Production
61000 TCD 76500 TCD 136000 TCD 45800 TCD
capacity of sugar

Note : TCD (Tonnes crushed per day)

COMPANY LIQUIDITY & SOLVENCY ANALYSIS

Liquidity Ratios

The liquidity ratio of an organization gives an insight into the ability of an organization to
meet its short term obligations and helps the business owner focus on the short term
survival of the company.

Current Ratio
The current ratio shows the firm’s ability to pay off its short term liabilities with
current assets. The ratio of 2:1 is considered to be an ideal one.

Formula
Current Ratio = Current Assets / Current Liabilities

Quick Ratio or Asset Test Ratio

39
 This ratio is a more stringent analysis than current ratio as excludes least liquid
current assets such as inventory and prepaid expenses. The ratio of 1:1 is considered
to be ideal.

Formula
Quick Ratio = Current Assets – Inventory – Prepaid Expenses/ Current Liabilities

Cash Ratio or Cash Asset Ratio

This ratio shows the capacity of the firm to pay off its short term financial obligations
via cash and cash equivalents.

Formula
Cash Ratio = Cash & Cash Equivalents / Current Liabilities

Operating Cash Flow Ratio

This ratio indicates the firm’s capacity to pay off its short term financial obligations
via the cash flow generated from the core operations of the business.

Formula
Operating Cash Flow Ratio = Cash Flow from Operations / Current Liabilities

Solvency Ratios

The solvency ratio of an organization gives an insight into the ability of an organization to
meet its financial obligations. It measures the ability of a company to pay its long-term debt
and helps the business owner determine the chances of the firm's long-term survival.

Debt-Equity Ratio
This ratio highlights the firm’s capital structure which could be inclined towards debt
or equity. It shows the relationship between borrowed funds and owner’s capital
which is a popular measure of the long term financial solvency of the firm.

Formula
Debt-Equity Ratio = Long Term Debt / Net worth

Equity Ratio or Proprietory Ratio

The ratio indicates the proportion of assets financed by equity or shareholder’s
funds.

40
 Formula
Equity Ratio = Total Equity / Total Assets

Debt Ratio
This ratio shows how many assets the company must sell in order to pay off all of its
liabilities.

Formula
Debt Ratio = Total Liabilities or Total Debt / Total Assets

Net Working Capital

It refers to the excess of current assets over current liabilities.

Formula
Net Working Capital = Current Assets – Current Liabilities

Note : 1. Current assets refers to assets that can be converted into cash in a year’s time.
2. Current liabilities refer to liabilities whose maturity is less than one year.
3. Cash & cash equivalents are marketable securities, commercial paper etc.
4. Cash flow from operations equals to the sum total of net income, non-cash
expenses and increase in working capital.
5. Long term loan includes debentures and long term loans.
6. Shareholders fund or net worth or owner’s equity equals to sum total of equity
share capital, preference share capital and reserves, minus fictitious assets.

TEIL’s Comparison with Competitors for FY 2017-18

a) Financial Data Table No. 17

Amount in Cr.

Bajaj Hindustan Balrampur EID-Parry India

Particulars TEIL
Sugar Ltd Chini Mills Ltd Ltd
Non Current Assets 978.81 8675.6 1596.6 2398.4
Current Assets 1988 *3917.06 2065.5 1643.8

41
 Total Assets 2966.81 12592.66 3662.1 4042.2
Non Current Liabilities 117.9 6592.01 203.3 292.7
Current Liabilities 1968 4502.79 1871.6 2111.43
Total Liabilities 2085.9 11094.8 2074.9 2404.13
Net Working Capital 20 1414.27 193.9 -467.63
Inventories 1579.2 2847.88 1802.2 1097.6
Prepaid Expenses - - - -
Quick Assets 408.8 1069.18 263.3 564.2
Equity 880.9 3497.86 1587.15 1638.1
Cash & cash
3.39 31.28 2.45 0.7
equivalents
Net Operating cash
626.99 950.56 1179.84 -5.98
flows

Note : * Marked figure excludesan amount of Rs. 2000 cr. as it is the loan & advances to its
own subsidiaries & associate companies.
b) Ratio comparison
Table No. 18

Bajaj Balrampur
EID Parry India
Ratios TEIL Hindusthan Chini Mills
Ltd
Sugar Ltd Ltd
CA Ratio 1.01 0.87 1.10 0.78
Liquidity Ratios

Quick Ratio 0.21 0.24 0.14 0.26

Cash Ratio 0.002 0.01 0.001 0.0003
Operating cash flow
0.32 0.21 0.63 -0.003
Ratio
Debt equity ratio 0.13 1.88 0.13 0.18
Solvency
Ratios

Equity ratio 0.30 0.24 0.43 0.41

Debt ratio 0.70 0.76 0.57 0.59

Interpretation

Current ratio of over 1 indicates that the firm can pay off its short term obligations
through current assets whereas below that indicates the firm is not in a position to
pay off its short term obligations through current assets. Balrampur Chini Mills Ltd is

42
in a much better position in terms of paying back its short term obligations
compared to other firms.

Quick ratio of below 1 signifies that the firm is not in a position pay of its short term
obligation with liquid assets (current assets excluding inventory and prepaid
expenses). EID Parry India Ltd is in a better position compared to other firms w.r.t
paying off its short term loans via liquid assets.

Cash ratio indicates the short term obligations that can be paid through cash & cash
equivalents. All the companies have a very low ratio. Therefore, we can say that a
very small portion of current liabilities can be paid through cash & cash equivalents.

Operating cash flow ratio indicates the current liabilities that can be repaid via the
cash flows generated from the core business of the firm. Balrampur Chini Mills Ltd
has a better operating cash flow ratio compared to other firms.

Debt equity ratio of less than 1 indicates that the company has used more of equity
for financing its assets whereas more than 1 indicates that the firm has used more
debt for financing its assets.Bajaj Hindustan Sugar Ltd has more debt compared to its
equity.

Equity ratio shows how much equity has been used in financing assets. Balrampur
Chini Mills Ltd has used maximum equity as compared to other firms for financing its
assets.

Debt ratio shows how much debt has been used in financing assets. Bajaj Hindustan
Sugar Ltd has used the maximum debt followed by TEIL, EID Parry & Balrampur Chini
Mills Ltd. Lower the ratio the better it is as it would reduce the dependence upon
external sources.

43
 CONCLUSION

Indian sugar industry is a highly cyclic one as there are times when the production of cane is
low and times when there is bumper production. The production of sugar entirely depends
upon the cane production which further depends upon climatic conditions. In India the
sugar consumption has remained fairly static whereas the production of sugar has increased
tremendously. The government has taken various steps to help the farmers and industryas a
whole.FRP &MSP were introducedto improve the condition of both farmers & firms. The
company raises short term funds through CC & WCDL. The latter is more beneficial as the
interest rate is lower compared to CC. The statements prepared by the firm w.r.t to short
term finance acts a credit monitoring tool for the company and banks.The company has
performed well in the FY ending 2017 – 18 compared to previous financial years as the
company achieved its highest crush and recovery rate ever. Moreover, the company was
able to reduce their finance cost by almost 8.5 cr. The company’s liquidity and solvency ratio
indicates the firm is highly solvent and has a good footing in the industry.

LIMITATIONS OF THE STUDY

Information regarding the future plans of the business is not shared with the trainee.
Limited access to financial data of the company and otherfacilities available to the
employee.
Exposure was limited to the finance department only.
Opportunity to interact with the parties dealing withcompany is limited too.

44
45