LIST OF TABLES

TABLE NO. DESCRIPTION PAGE NO.

Table 1 Sample Size Distribution 18

Table 2 Clients of Sejal Glass 22
Table 3 Five years financial performance of Sejal Glass 31

Table 4 Relationship between Receivables and Payables 32

Relationship between Short term borrowings and Short
Table 5 term loans & advances 33

Table 6 Cash Conversion Cycle 34

Table 7 Comparison of current Assets & Current liabilities 35
Table 8 Relationship between Total sales and Expenditure 36
Table 9 Respondents from different Company 37
Table 10 Company’s Collection Period 38

Table 11 Company’s Payable Period 39

Table 12 Company’s Inventory Cycle 40

Table 13 Credit Risk in Company 41

Table 14 Bad debt level in Company’s Accounts Receivables 42

Table 15 Discount Offer to Customers for Prompt Payment 43
Table 16 Reminding customers by phone to pay the balance amount 44

Table 17 How often does company review its working capital 45

7
 LIST OF GRAPHS

FIGURE NO. DESCRIPTION PAGE NO.

FIGURE 1 Clients of Sejal Glass 22

FIGURE 2 Relationship between Receivables and Payables 32

Relationship between Short term borrowings and Short
FIGURE 3 33
term loans & advances
FIGURE 4 Cash Conversion Cycle 34

FIGURE 5 Comparison of current Assets & Current liabilities 35

FIGURE 6 Relationship between Total sales and Expenditure 36

FIGURE 7 Respondents from different Company 37

FIGURE 8 Company’s Collection Period 38

FIGURE 9 Company’s Payable Period 39

FIGURE 10 Company’s Inventory Cycle 40

FIGURE 11 Credit Risk in Company 41

FIGURE 12 Bad debt level in Company’s Accounts Receivables 42

FIGURE 13 Discount Offer to Customers for Prompt Payment 43

FIGURE 14 Reminding customers by phone to pay the balance amount 44

FIGURE 15 How often does company review its working capital 45

8
 CHAPTER 1

WORCKING CAPITAL

INTRODUCTION

Every business whether big, medium or small, needs finance to carry on its operations and to
achieve its target. In fact, finance is so indispensable today that its rightly said to be the lifeblood
of an enterprise. Without adequate finance, no enterprise can possibly accomplish its objectives.
So this chapter deals with studying various aspects of working capital management that is
necessary to carry out the day-to-day operations. The term working capital refers to that part of
firm’s capital which is required for financing short term or current assets such as cash,
marketable securities, debtors and inventories funds 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 known as revolving or circulating capital. On the whole, Working
Capital Management performs a key function and is of top priority for every finance manager.
All managers must, however, keep in mind that n their pursuit to liquidity, they should not lose
sight of there basic goal of profitability. They should be able to attain a judicious mix of liquidity
and profitability while managing their working capital.

Working capital management deals with the most dynamic fields in finance, which needs
constant interaction between finance and other functional managers. The finance manager acting
alone cannot improve the working capital situation. In recent times a few case studies regarding
management of working capital in selected companies have been in order to make in-depth
analysis of the several experts of working capital management, The finding of such studies not
only throws new lights on the technical loopholes of management activities of the concerned
companies, but also helps the scholars and researchers to develop new ideas techniques and
methods for effective management of working capital.

Decisions relating to working capital and short term financing are referred to as working
capital management. These involve managing the relationship between a firm's short-term assets
and its short-term liabilities. The goal of working capital management is to ensure that the firm is
able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-
term debt and upcoming operational expenses.

9
 WORKING CAPITAL MANAGEMENT
In simple terms working capital means is that the amount of funds that a company
require finance for its day-to-day operations. Working capital states that the period of
debtors, receivables etc for a company to raise finance from them at the earliest. Finance
manager should develop sound techniques of managing current assets.
Working capital management involves managing the relationship between a firm's
short- term assets and its short-term liabilities. The goal of working capital
management is to ensure that the firm is able to continue its operations and that it has
sufficient cash flow to satisfy both maturing short-term debt and upcoming operational
expenses.

The following should be effective in working capital management:

Cash management: Identify the cash balance which allows for the business to meet day to
day expenses, but reduces cash holding costs.

Inventory management: Identify the level of inventory which allows for uninterrupted
production but reduces the investment in raw materials—and minimizes reordering costs
—and hence increases cash flow. Besides this, the lead times in production should be
lowered to reduce Work in Process (WIP) and similarly, the Finished Goods should be
kept on as low level as possible to avoid over production.

Debtors management: Identify the appropriate credit policy, i.e. credit terms, discounts
etc. which will attract customers, such that any impact on cash flows and the cash
conversion cycle will be offset by increased revenue and hence Return on Capital.
Debtors credit period should be less than 90 days to achieve good working capital ratio
and position of the company.

10
 OPERATING CYCLE
The operating cycle is the average period of time required for a business to
make an initial outlay of cash to produce goods, sell the goods, and receive cash from
customers in exchange for the goods. If a company is a reseller, then the operating cycle
does not include any time for production - it is simply the date from the initial cash outlay
to the date of cash receipt from the customer.

The operating cycle is useful for estimating the amount of working capital that a
company will need in order to maintain or grow its business. A company with an
extremely short operating cycle requires less cash to maintain its operations, and so can
still grow while selling at relatively small margins. Conversely, a business may have fat
margins and yet still require additional financing to grow at even a modest pace, if its
operating cycle is unusually long.

In case of a manufacturing company, the operating cycle is the length of time

necessary to complete the following cycle of events –

➢ Conversion of cash into raw materials

➢ Conversion of raw materials into work-in-progress
➢ Conversion of work-in-progress into finished good
➢ Conversion of finished goods into accounts receivables
➢ Conversion of accounts receivable into cash

The above operating cycle is repeated again and again over the period depending upon
the nature of the business and type of product etc. the duration of the operating cycle for
the purpose of estimating working capital is equal to the sum of duration allowed by the
suppliers.s

11
 OPERATING CYCLE OF MANUFACTURING
BUSINESS

Realization Sales

AcAcoccuonutsntR
’seRceeciv
eiavbalbele

Finished Good’s

Cash

Purchases
Production

Production

RAW Materials Wo
Worrckk--iinn--pprrooggrreesssss

12
 CONCEPT OF WORKING CAPITAL

Concept of Working
Capital

Gross Working Capital Net Working Capital

The concept of working capital includes current assets and current liabilities
both. There are two of working capital they are gross and net working capital.

1. Gross working capital: Gross working capital refers to the firm’s investment in
current assets. Current assets are the assets, which can be converted into cash within an
accounting year or operating cycle. It includes cash, short term securities debtors
(account receivables or book debts), bills receivables and stock (inventory).

2. Net working capital: Net working capital refers to the difference between current
assets and liabilities are those claims of outsiders, which are expected to mature for
payment within an accounting year. It includes creditor’s or accounts payables bills
payable and outstanding expenses. Net working copulate can be positive or negative. A
positive working capital will arise when current assets exceed current liabilities and vice
versa.

13
 OBJECTIVES

Every company has their own objectives of working capital that is they try to keep
company position at upper level through working capital. Company may get good
position by giving less credit period to debtors, receivables, etc. and by taking more credit
period from creditors, payables etc. Its main objective is to get back cash in short term
period and meets companies day to day operations. Effective working capital helps a
company to borrow short term funds and long term funds from public, banks, investment
banking and financial institutions.

The overall financial management objectives of an organization could be summarized in

terms of the following five objectives:
• To ensure that the organization always has enough cash to meet its legal
obligations and avoid illiquidity- that is, to maintain adequate short-term financial
flexibility.
• To arrange to obtain whatever funds are required from external sources at the
right time, in the right form, and on the best possible terms.
• To ensure that the organization’s assets and liabilities – current and long-term,
financial and operating are utilized as effectively as possible.
• To forecast and plan for the financial requirements of future operations.
• To make all decisions and recommendations on the basis of one primary criterion:
maximizing the long-term value of the organization. This objective is attained in a
publicly owned corporation through maximization of the wealth of the owners
(stockholders) by maximizing stock price.

The last point is particularly important; without this requirement, financial executives
could find many suboptimal solutions to problems. It would be easy, for example, to
satisfy the first requirement by maintaining enormous cash balances or investing very
large sums in readily salable short –term securities; but such a policy would normally not
be in the best interests of the stockholders of a typical corporation.

14
 IMPORTANCE

Proper management of working capital is very important for the success of an enterprise.
“It aims at protecting the purchasing power of assets and maximizing the return on Investment.
The manager of administration of current assets to a very large extent determines the success of
the operations of a firm. Constant management is required to maintain appropriate levels in the
various working capital accounts. A study of working capital is of major importance to internal
and external analysis because of its close relationship to current day-to-day operations of
business, Inadequacy or mismanagement of working capital is the leading cause of business
failures. Shortage of working capital, so often advanced as the main cause of failure of Industrial
concerns, is nothing but the clearest evidence of mismanagement, which is so common. The
current assets and current liabilities flow round in a business like an electric current. The
working capital plays the same role in the business as the role of the heart in the human body.
Just as the heart gets blood and circulated the same in the body, in the same enterprise, adequate
amount of working capital is pre-requisite. The adequacy of cash and current assets together with
their efficient handing virtually determine the survival or demise of a concern. Inadequate
working capital is a business ailment as compared to the availability of excess working capital
may lead carelessness.

About costs and therefore, to inefficiency of operations. Many a times business failure
takes place due to lack of working capital. If a concern maintains an adequate amount of working
capital, it enjoys a good credit rating and gets discount on payment. It will ensure proper
functioning of the business operations and help in the maximization of threat of return. A
business house can maximize its rate of return on the capital invested provide in keeps pace with
the scientific and technological developments taking place in the field to which it pertains. As
soon as some technological and scientific development takes place, a business enterprise in order
to accelerate its profitability should immediately introduce the same to its productive process. In
reality, however the sufficiency of working capital will determine the course of decision in this
regard.

Working capital helps to operate the business smoothly without any financial problem for
making the payment of short-term liabilities. Purchase of raw materials and payment of salary,
wages and overhead can be made without any delay. Adequate working capital helps in
maintaining solvency of the business by providing uninterrupted flow of production. Quick
payment of credit purchase of raw materials ensures the regular supply of raw materials from
suppliers. Suppliers are satisfied by the payment on time. It ensures regular supply of raw
materials and continuous production. A firm having adequate working capital, high solvency and
good credit rating can arrange loans from banks and financial institutions in easy and favorable
terms.
15
 WORKING CAPITAL ANALYSIS

CURRENT ASSETS:
Current assets are those which can be converted into cash as and when needed,
i.e., those assets which can turn to cash as per the requirement of the business within the
accounting period.

SUNDRY DEBTORS
Debtors are those to who products are supplied on credit basis. These amounts are
collected within the accounting period. Therefore, they are converted into cash as per
requirement, hence they are considered under current assets.

INVENTORIES
Closing stocks or inventory includes raw materials, work in progress and finished
goods, which are needed for the smooth running of the organization. Generally inventory
is maintained by every organization, which is bound to meet its demand in the market.
The amount of inventory maintained by the firm represents its profitability position. The
quality must not be in excess or inadequate, it must be according to the requirement. The
quality stores must be able to meet the market demand.

CASH AND BANK

Every organization or firm maintains cash reserves in their accounts. This is the
major key on which working of the entire organization is dependent upon. This is
required in every aspect of production, marketing, financing etc. In other words, it can be
said that it plays a vital role in the functioning of any organization.

LOANS AND ADVANCES

Advances to staff are those advances, which are given to the employees as festival
advances. These advances are treated as current assets as they are given advance to the
employees and are collected with in the accounting year. It doesn’t result in any default payment
as the amount is deducted from their salaries directly during their payment. Their advances
are prepared and are collected in the accounting year. These are the loans and advances amount
that are given by the organization in procuring of raw materials. Amount is given in advance to
its supplier in supplying the raw materials required and this is adjusted after receiving the raw
material. The final settlements take place only after deducting the advances amount from
total amount.
16
CURRENT LIABILITIES:
Current liabilities are those which are payable during an accounting year. These
are paid out of current assets like cash. When current assets availability is present there
exist the current liabilities but current assets must always be in excess to current
liabilities. This provides the organization to be in a good position.

SUNDRY CREDITORS
Creditors are those from whom products are purchased on credit basis. These
amounts are paid within the accounting period. If the creditors number increase the
amount payable also increases which further increases the liquidity.

LINE OF CREDIT:
Banks to new business do not often give lines of credit. However, if your new
business is well capitalized by equity and you have good collateral, your business might
qualify for one. A line of credit allows you to borrow funds for short terms needs when
they arise. The funds are repaid once you collect the accounts receivables that resulted
from the short-term sales peak. Lines of credit typically are made for one year at a time
and are expected to be paid off for 30 to 60 consecutive days sometime during the year to
ensure that the funds are used for short-term needs only.

SHORT TERM LOAN:

While your new business may not qualify for a line of credit from a bank, you
might have success in obtaining a one-time short-term loan (less than a year) to finance
your temporary working capital needs. If you have established a good banking
relationship with a banker, he or she might be willing to provide a short-terms note for
one order or for a seasonal inventory and/or accounts receivable buildup. In addition to
analyzing the average number of days it takes to make a product (inventory days) and
collect on an account (account receivable days) Vs. the number of days financed by
accounts payable, the operating cycle analysis provides one other important analysis.
From the operating cycle, a computation can be made of the dollars required to support
one day of accounts receivables and inventory and the dollars provided by a day of
accounts payable. Working capital has a different impact on cash flow in a business.

17
 CHAPTER 2

RESEARCH METHODOLOGY

What is Research…?

Research means search for facts in order to find answers to certain questions or to
find solutions to certain problems. It is often referred to as ‘scientific inquiry’ or
‘scientific investigation’ into a specific problem or situation. This is because; the search
for facts should be made by scientific method rather than by arbitrary method. The
scientific method uses systematic rational approach to search for facts, whereas, the
arbitrary method attempts to find answers to questions on the basis of imagination and
one’s own beliefs and judgment.

In simple words Research is the systematic process of finding out problems

between variables by investigating inside or outside of the company and giving better
solutions to it.

18
 TYPES OF RESEARCH
Types of research are very important to research something in the company or
somewhere else. There are many researches which suits for different areas to find out the
problems in an organization, for e.g. quantitative research at numerical area. I have been
used three types of researches for my project work that is Descriptive Research,
Historical Research and Quantitative Research.

Descriptive Research:
Descriptive research helped me to find out facts and details of the Sejal Glass ltd. I
have been enquired directly to senior executives and senior employees about what has
happened and what is happening in the company.

Historical Research:
Through historical research I have been found past details which is affecting
current situation of Sejal Glass. They sold their float glass manufacturing plant to
Saint Gobain ltd. Since that day they are spending a lot for raw materials and creditors
are more than debtors.

Quantitative Research:
This research has undertaken to measure the quantity or amount of the company. I
glanced at company’s balance sheet then I came to know since 3- 4 years they are in loss.
Company’s expenses and current liabilities are more than profit and current assets
respectively.

19
 OBJECTIVES OF THE STUDY

• To study the various components of working capital.

• To analyze the liquidity trend of Sejal Glass Ltd.

• To appraise the utilization of current asset and current liabilities and find out
short- comings if any.

• To suggest measure for effective management of working capital.

• To measure and evaluate the liquidity and profitability position of Sejal Glass Ltd.

20
 LIMITATIONS OF THE STDY

• Time factor is the most crucial one. The study was conducted within a short
period of two months.

• Sejal glass executives were hesitating to provide information.

• I had to wait for a long time to make contact with the executives, because they
were busy with their work.

• Due to busy work schedule, detailed discussions were not possible

• It is also found that some of the executives lack interest, enthusiasm,

initiative and involvement, which was de-motivated me.

• Competitors of sejal glass have given less information and data.

• Lot of time consumed during survey.

21
 STATEMENT OF PROBLEM

Sejal Glass limited sold their Float Glass manufacturing plant to Saint Gobain
because it was continuous production plant so company could not have reduced their
production where their sales was less because of more competition. They could not
have reduced their fixed cost, so day by day expenditure was increasing, it was not their
cup of tea to reduce the cost therefore they sold the plant.

After selling plant, company facing many problems from suppliers because of low
capital they are unable to make payment on time so more than 50% of suppliers are not
supplying on credit basis. So that company has to make payment in advance and on
delivery.

Customers delaying invoice payment was deemed by survey respondents to have

had a high or very high impact on working capital over the past 12 months. Similarly,
customers exerting pressure on businesses to extend their credit and payment terms were
also placing high or very high pressure on working capital.

The main problem from suppliers i.e. 80% suppliers are from India from that 70%
suppliers allowing 30 - 45 days credit and for rest of them company has to make payment
in advance. 20% suppliers from rest of the country from that 40% of suppliers allowing
60 - 90 days credit and for rest of them company has to make payment in advance.

Stretching credit period of suppliers is the main source to improve working capital
but here it is not there. So this is one of the cause for working capital. Company spending
a lot for unnecessary things therefore Company’s expenditure is also more than income
since 3 years.

22
 REVIEW OF LITERATURE

Working capital is very important for every company to meet day to day operation
expenses and urgent payments. Effective working capital increase the company profit and
vice versa. For effective working capital, collection days should be less and payment
days should be more overall cash conversion cycle days should very low or in negative.

Many researchers have studied working capital from different views and in
different environments. The following ones were very interesting and useful for our
research:

Eljelly (2004) Identified the relation between profitability and liquidity who was
examined, as measured by current ratio and cash gap (cash conversion cycle) on a sample
of joint stock firms in Saudi Arabia. The study found that the cash conversion cycle
was of more importance as a measure of liquidity than the current ratio that affects
profitability. The size variable was found to have significant effect on profitability at the
industry level. The results were stable and had important implications for liquidity
management in various Saudi firms. First, it was clear that there was negative
relationship between profitability and liquidity indicators such as current ratio and cash
gap in the Saudi sample examined. Second, the study also revealed that there was great
variation among industries with respect to the significant measure of liquidity.

Lazaridis and Tryfonidis (2006) have explored the relationship between

corporate profitability and WCM in the Athens Stock Exchange. The finding of results
shows a negative relationship between profitability and working capital indicators like
days of accounts receivable, account payable and cash conversion cycle. They concluded
that firms can create profits by effectively handling each component of the cash
conversion cycle.

Saswata Chatterjee (2010) Focused on the importance of the fixed and current
assets in the successful running of any organization. It poses direct impacts on the
profitability liquidity. There have been a phenomenon observed in the business that most
of the companies increase the margin for the profits and losses because this act shrinks
the size of working capital relative to sales. But if the companies want to increase or
improve its liquidity, then it has to increase its working capital. In the response of this
policy the organization has to lower down its sales and hence the profitability will be
affected due to this action. For this purpose 30 United Kingdom based companies were
selected which were listed in the London Stock exchange. The data were taken of three

23
years 2006-2008. It analyzed the impact of the working capital on the profitability. The
dimensions of working capital management included in this research which is quick
ratios, current ratios C.C.C, average days of payment, Inventory turnover, and A.C.P
(average collection period. on the net operating profitability of the UK companies.

Mohamad and Saad (2010) Used Bloomberg's database of 172 listed companies
randomly selected from Bursa Malaysia main board for five year period from
2003 to 2007. Applying correlations and multiple regression analysis, they found that
current assets to total asset ratio shows positive significant relationship with Tobin Q,
ROA and ROI. Cash conversion cycle, current asset to current liabilities ratio and current
liabilities to total assets ratio illustrate negative significant relations with Tobin Q, ROA
and ROIC.

All the above studies provide us a solid base and give us idea regarding working
capital management and its components. They also give us the results and conclusions of
those researches already conducted on the same area for different countries and
environment from different aspects. On basis of these researches done in different
countries, we have developed our own methodology for research.

24
 RESEARCH DESIGN

Problem: In Sejal Glass, since 3 years there is negative and equal relationship between
current assets and current liabilities. Collection period is more than payment period so
cash conversion cycle is more which should be less or negative. This is main pressure on
working capital.

Objective: The main objective of research is to appraise the utilization of current asset
and current liabilities and find out short-comings if any and to suggest measure for
effective management of working capital.

Sampling Design: I have been used judgement method in non random sampling.
Because all will not be good respondents to answer my questions. I have selected those
who know about working capital, debtors, creditors, stock etc. Sample size is 50 in
different glass industry from different departments.

Data Collection: I have been collected data through both primary and secondary.
Primary data from Questionnaire, Observation and Personal interview with CFO,
executives and senior employees. Secondary data from annual reports and company
websites.

Areas of Data Collection: I was visiting different company to collect data. I have
done survey other than Sejal Glass in FG Glass Industry, NSD Glass Industry.

Time Frame: I have done this research activity in two months.

25
 SAMPLING DESIGN

Sampling Method:
I have been used appropriate sample to collect right data from respondents. For
research in finance we cannot ask information to everyone regarding finance. We should
concern the person who is aware about the company finance. So that I have used non
random sampling under this I have used judgement method to collect data. I have
gathered data by judgement. I have concerned the one those who aware about company’s
working capital i.e. debtors, creditors, receivables, payables, stock cycle etc. I have done
survey in different glass industry i.e. FG Glass Industry, NSD Global Trade Pvt Ltd to
collect data.

Sample Size:
The study encompassed a representation of a sample of 30 respondents from Sejal
Glass, FG Glass Industry and NSD Global Trade Pvt Ltd.

TABLE 1: Sample Size Distribution

Department No of Respondents
Production 5
Marketing and Distribution 15
Finance 20
Total 30
Source: Primary Data

26
 DATA COLLECTION

Sources of Data:
There were mainly two major sources of data namely;

Primary Data:
Primary data has been obtained through personal discussions with managers and senior
officials of the organisation, observations and questionnaire both open ended and closed
ended.

Secondary Data:
Secondary data has been obtained from published reports like the annual reports of the
company, balance sheets, and profit and loss account, websites, records such as files,
reports maintained by the company.

27
 CHAPTER 3

INTRODUCTION

In 1991, Mr. Amrut Gada, a first generation entrepreneur started with a small
glass trading retail outlet, Sejal Glass House. Envisioning the demand for glass in the
Indian Market, he expanded to a processing unit in Charkop, Mumbai with Sejal Glass
Craft Pvt Ltd. Glass was being increasingly used in construction. Recognizing this trend
quickly, SEJAL GLASS LTD was established.

Sejal Glass Limited, was incorporated as a private limited Company in the year
1998, and its was changed to a public limited company on March 08, 1999. Sejal glass is
one of the leading glass processors and retailers in India. The Company is also set to
venture into float glass manufacturing with the commencement of its float glass project in
September 2009 at Bharuch, Gujarat. It will become an integrated player in the field,
having presence right from the flat glass production to glass processing to retailing of
glass products. With the float glass production capacity operational, Sejal will emerge
among the top four float glass manufacturers in the country.

The company’s glass Processing unit is located in Silvassa, Gujarat . The plant
has state of the art machines and equipment, imported from European manufacturers and
the company’s processing facility is also certified by European Glass Manufacturers. The
biggest advantage of the unit is its proximity to the A-grade cities of Gujarat and
Maharashtra, enabling it to tap the demand and ensure faster response to major centres of
real estate development through its products. The company is having processing
facilitiesfor insulating, toughened, laminated glasses and for decorative glass as well.

28
 The Company has also operates its trading division from its premises named ‘Sejal
Encasa', which is located at Kandiva li, Mumbai. It offers a comprehensive range of glass
wares, decoration items, artworks, light fittings, chandeliers, mirrors, doors, luminaries,
and other brands from renowned manufacturers. The strategy is to offer one-stop
solutions in glass projects used outside or in the house or offices. Company is having
strong distribution network around 300 dealers all over India.

On May 2011 the Company has transferred the entire business of manufacturing
and selling of float glass, to Saint-Gobain Glass India Limited a 100% subsidiary of the
France-based Compagnie de Saint Gobain, a world leader in Building Materials, by way
of Slump Sale as defined under Section 2(42C) of the Income Tax Act, 1961 on a going
concern basis w.e.f. May 31, 2011 for a total value of Rs.686 Crores. After this event, the
Company is in the process of expanding the existing Value Addition of Glass business as
well as developing new business.

Sejal alslo forayed into real-estate segment as a non-core activity during 2012-13.
Being a supplier to all major real estate developers since the past decade, company has
gained tremendous understanding of the operations, economies and key factors
governing profitability in the segment. With the in-house professional team, they had
already proved their project execution capability in the construction of the state of art
float glass manufacturing facility in Bharuch, in the state of Gujarat as well as in the
construction of the corporate office building in Mumbai.

Being non core business, they have decided to unlock value from these
investments through joint-venture route as well as forming subsidiaries. They have
entered into joint venture model with leading and respected real estate developers in
Mumbai and Surat for society redevelopment projects, township projects.

29
 CLIENTS OF SEJAL GLASS
TABLE 2:

BUILDERS CORPORATES HOTELS ARCHITECTS

ITC Maratha Hotel Vivek Bhole &
K Raheja Corp Emirates Airlines
Mumbai Associaes
Standard Chartered ITC Grand Central
Lodha Builders Talati & Panthaky
Bank Hotel Mumbai
Niteen Parulekar
Kalpataru Builders J P Morgan Stanley Pride Hotel Mumbai
Architects Pvt Ltd

HDIL Godrej & Boyce Park Hyatt Pune Ar. Reza Kabul

Keystone Realtors Pvt

Nimit Steel Cosmos Resort Goa
Ltd
Alok Infrastructure Granville Hotel Pvt
Wadhwa Developers
Ltd Ltd Mumbai

Ekta World Indian Broiler Group

Mayfair Housing Pvt

Ltd

The Phoenix Mills Ltd

Vinayak Developers

Source: Secondary Data

30
FIGURE 1:

CLIENTS OF SEJAL GLASS

Architects 15%
Builders 37%
Hotels 22%

Corporates
26%

31
 VISION & MISSION

Vision:

It is this vision of the Sezal Group to create a brand image for Sezal
that evokes a sense of awe, blind faith and inspiration and to achieve for itself the
position of industry leader in the field of value addition business of processed
glass, by investing into integrated operations and deliver world-class products.

Processes, operating systems and procedures shall be adopted with

the objective of surpassing the exacting international standards for product and
systems.

Creating and multiplying wealth of the company with continuous

expansion for a better future of all stakeholders.

Mission:

• To bring to our customers the benefits of industry leading technology from

concepts to ralisation.

• To provide to our customers the best of glass solutions.

• To set standards in service to customers.

32
 MILESTONES

1998: Sejal Arhitectural Glass Limited, was incorporated as a private limited

company in December 1998.

2000: Silvassa unit started its commercial operations by setting up a processing

facility for insulating glass.

2001: Started another process for toughened glass in the year 2001.

2007: Added an automated lamination line &

Started ‘Sejal Encassa’ the company’s retail showroom at Kandivali, Mumbai.

2008: Initiated backward integration by commencement of float glass project at

Bharuch, Gujarat.
Raised IPO funds of Rs. 105.73 cr.

2009: Completed the construction of our float glass plant.

2011: Float glass manufacturing plant sold to Saint-Gobain Glass India Limited in
May due to low sales.

33
 SWOT ANALYSIS

Strengths Weakness

Opportunities Threats

Strengths:

• First generation entrepreneur

• Qualified and expert team of professional and management
• World-class technology and equipment
• Continuous innovation and quality control
• Strong branding
• Favorable demand & supply situation will keep the margins intact
• The Company is moving into production of float glass, which is a high
growth segment.

Weakness:
• No established reputation in float glass segment
• Competition from established players with global backing

34
Opportunities:
• Strong entry barrier due to the capital-intensive nature of the industry
• Float glass production is going to put the company into a diverse trajectory

Threats:
• Competition in processing from established international players
• Operational teething problems in the new plant

35
 DRIVERS OF SEJAL FUTURE GROWTH

At Sejal, we feel the following factors will ensure our growth in the coming years:

MEN: Our people collectively make our organization. We have always believed in
recruiting quality people having the zeal to outperform and a passion to excel. In 2008-
09, we focused on creating a strong management team, as a result recruited senior
professionals with in depth experience in the glass industry. This initiative would enable
us harness our intellectual capital to efficiently outperform the challenges in the industry.

METHOD: During the year, we focused on controlling costs and improving quality.
We initiated steps to control inventory, reduce process costs and machine downtimes and
ensuring efficient utilization of energy during the year. In doing this, our ERP system
played a vital role in identifying addressable segments within the processes. The cost and
quality consciousness at Sejal would sustain our efforts in creating a formidable brand in
glass products.

MATERIAL: With the commencement of our float glass plant, we will command
presence across the value chain of glass products. To ensure better results, we initiated a
seeding activity with the dealers and distributors of float glass. Currently, we import float
glass, which form the raw material for our processing division. With the commencement
of the float glass plant, our dependence on imported products will decrease, resulting in
higher margins and superior quality of the products. In addition, our ability to produce a
range of quality products in decorative and façade glass, and specialty glass segments,
would enable us reach deeper into the demand centres across India.

MACHINERY: As a conscious decision to create world-class quality products, we

installed the best of machines and technology in our plants. With the difference in cost
being substantial as compared to the Chinese machines, our plant would be able to ensure
superior product quality, leading to higher realizations.

36
PRODUCTS OF SEJAL GLASS

37
38
 FIVE YEARS FINANCIAL PERFORMANCE OF
SEJAL GLASS

TABLE 3: (Rs in crores)

Financial Performance 2012-13 2011-12 2010-11 2009-10 2008-09
Profit & Loss Account
Gross Sales 62.67 44.86 279.62 44.89 37.11
Total Income 74.27 53.45 294.19 51.17 51.59
Depreciation 2.44 2.34 40.09 2.65 2.50
Interest 8.10 1.73 66.73 3.80 3.76
Profit Before Taxation -8.97 -0.57 -96.21 1.31 3.17
Profit After Taxation -16.00 -52.64 -63.90 2.52 2.12
Earning Per Share - - - 0.07 0.08
Balance Sheet
Fixed Assets 91.65 153.02 840.34 668.16 389.56
Investments 4.31 3.72 0.08 0.06 0.06
Net Current Assets -4.89 39.14 37.09 11.01 30.97
Net Deferred Tax Asset 22.42 29.35 31.22
Loan Funds 23.84 32.36 623.61 517.55 276.17
Provisions 0.35 0.31 - 1.09 2.47
Profit & Loss A/c 0 0 54.98
Net Worth 0 0 340.11 160.59 141.94
Share Capital 33.55 33.55 33.55 28.80 28.00
Share Warrant / Share Application
Money - - 1.45 4.20 -
Reserved and Surplus 138.06 197.53 305.11 127.59 113.94
Net Worth 171.61 231.08 340.11 160.59 141.94
Source: Secondary data

39
 CHAPTER 4
DATA ANALYSIS AND INTERPRETATIONS

TABLE 4: Relationship between Receivables and Payables. (Rs. in crore)

Year Receivables Payables
2013-14 66 55
2012-13 35 30
2011-12 24 18
2010-11 32 121
2009-10 22 73
Total 179 297
Source: Secondary data

FIGURE 2:

140
121
120
100
Rs. in crores

80
73
66
55 Receivales
60
35 30 32 Paybles
40 24 22
18
20
0

2013-14 2012-13 2011-12 2010-11 2009-10

Years

INTERPRETATION:
There is not better relationship between receivables and payables.
Always receivables should be much more than payables. For effective working capital company
should always count back debtor days and count forward creditor days. Company should always
pull creditor days up to 90 days and customers days should not be extended above 60 days.
Therefore company can maintain liquidity position. Here receivables are more so company
should convert it into cash as soon as possible.
40
TABLE 5: Relationship between Short term borrowings and Short term loans &
advances
(Rs. In crore)
Year Short term borrowings Short term loans & advances
2013-14 33 10.5
2012-13 32 26
2011-12 14 40
2010-11 96 67
2009-10 75 50
Total 250 193.5
Source: Secondary Data

FIGURE 3:

120

100

80
Rs. in crores

60
Short term borrowings
40 Short term loans & advances

20

0
2013-14 2012-13 2011-12 2010-11 2009-10
Years

INTERPRETAION:
The relationship between short term borrowings and loans & advances
is
not good. On average 50cr is borrowing and 38.5cr is loans & advances. For positive
working capital, company should decrease borrowings and increase loans. Company
should take care of borrowings, if they are borrowing they should clear suppliers
payment.
41
 TABLE 6: Cash Conversion Cycle

Year Days
2013-14 53
2012-13 135
2011-12 -357
2010-11 40
2009-10 47
Source: Secondary Data

FIGURE 4:

CCC
200

100
No. of days

2013-14 2012-13 2011-12 2010-11 2009-10

-100
Days

-200

-300

-400
Years

INTERPRETAION:
Cash Conversion Cycle should be very effective to meet working
capital
needs where it is absence over here. During 2011-12 CCC was very good i.e. payable
period was more than receivables. CCC can be effective when it comes in negative. It
meant payable days are more than receivables and inventory days.
42
 TABLE 7: Relationship between Current Assets and Current Liabilities.
(Rs. in Crore)
Years Current Assets Current Liabilities
2013-14 109 134

2012-13 91 96

2011-12 104 64

2010-11 161 123

2009-10 68 102

Total 532 520

Source: Secondary Data

FIGURE 5:

180
160
140
120
100
Rs. In Crores

80
60
40
20 Current Assets
Current Liabilities

0
2013-14 2012-13 2011-12 2010-11 2009-10
Years

INTERPRETATION:
On an average company’s working capital ratio is good. The
relationship between current assets and current liabilities is good. Average current assets
is 532cr and current liabilities is 520cr so current assets is more than current liabilities.
Average current ratio is 1.023 which should not be less than 1. This much ratio is enough
to release fund from bank to meet day to day operations.
43
TABLE 8: Relationship between Total sales and Expenditure (Rs. In Crore)

Years Sales Expenses

2013-14 126.37 135.45

2012-13 62.67 73.73

2011-12 44.86 53.36

2010-11 279.62 283.58

2009-10 44.89 42.39

Total 558 589

Average 112 118

Source: Secondary Data

FIGURE 6:
FIVE YEARS SALES PERFORMANCE
300.00

250.00

200.00
AMOUNT

150.00

100.00 Sales
Expense

50.00

0.00
2013-14 2012-13 2011-12 2010-11 2009-10
YEARS
INTERPRETATION:
Expenditure is the main cause for the company to getting into loss.
There is big gap between expenditure and total sales. On an average 112cr is the total
sales and 118cr is the expenditure. In the year 2010-11 there was more sales still
company is in loss because of more expenditure than sales. So company should take care
of unnecessary expenses.

44
 COMPARISON WITH COMPETITORS

TABLE 9: Respondents from different Company

Respondents No. of Respondents

Sejal Glass Ltd. 20

NSD Glass Pvt. Ltd 5

FG Glass Pvt. Ltd. 5

Total 30

FIGURE 7:

Percentage of Respondents

17%

Sejal Glass Ltd.

16% NSD Glass Pvt. Ltd
FG Glass Pvt. Ltd.

67%

INTERPRETATION:
From the above graph, more number of respondents from Sejal glass
that is 67%. 17% from FG glass and 16% from NSD glass. All employees were matured
and well educated. Most of the employees have more than 3years experience.
Respondents have cooperated well during the survey.

45
 TABLE 10: Company’s Collection Period
Sejal Glass NSD Glass FG Glass
Respondents (Frequency) % (Frequency) % (Frequency) %

0-30 days 9 50% 1 20% 0 0%

30-60 days 7 39% 4 80% 1 20%

60-90 days 0 0% 0 0% 2 40%

Above 90 days 2 11% 0 0% 2 40%

Source: Primary data

FIGURE 8:
10
9
8
7
6
No. of Respondents

5
4
3
2 Sejal Glass
1 NSD Glass FG Glass
0

0-30 days30-60 days60-90 daysAbove 90 days

No. of Days

INTERPRETATION:
From the above table 50% respondents of Sejal glass is saying
collectin money 0-30 days. It is excellent compare to others like NSD & FG Glass. 39%
respondents said 30-60 days it is also good but 11% respondents said above 90 days. So
company always should give less period to debtors where NSD Glass is doing better than
Sejal Glass. NSD respondets said upto 60 days they have been given to debtors. So
company should always count backward debtors days as far as possible to run company
effectively.
46
TABLE 11: Company’s Payable Period
Sejal Glass NSD Glass FG Glass
Respondents (Frequency) % (Frequency) % (Frequency) %

0-30 days 4 24% 1 20% 0 0%

30-60 days 8 47% 4 80% 2 40%

60-90 days 2 11% 0 0% 3 60%

Above 90 days 3 18% 0 0% 0 0%

Source: Primary data

FIGURE 9:
9
8
7
6
5
No. of Respondents

4
3
2
1 Sejal Glass
0 NSD Glass FG Glass

0-30 days30-60 days60-90 daysAbove 90 days

Days

INTERPRETATION:
From the above table 47% respondents of Sejal glass 80 % of NSD
glass they used to take 30-60 days. Sejal Glass is pulling credit days above 90 days
whereas other competitors are not doing. Even though FG glass also extending upto 90
days. So company should always count forward creditors days as far as possible to run
company effectively.
47
 TABLE 12: Company’s Inventory Cycle
Sejal Glass NSD Glass FG Glass
Respondents (Frequency) % (Frequency) % (Frequency) %
Less than
7 39% 1 20% 3 60%
30 days
30-60 days 8 44% 4 80% 2 40%
More than
60 days 3 17% 0 0% 0 0%
Source: Primary data

FIGURE 10:

Inventory Cycle
9
8
7
6
5
No. of Respondents

4
3
2
1 Sejal Glass
0 NSD Glass FG Glass

Less than 30 days 30-60 days More than 60 days

Days

INTERPRETATION:
From the above table 39% of respondents of sejal, 20% of NSD and
60% of FG glass taking less than 30 days its pretty good. 44% of sejal , 80% of NSD, and
60% said 30-60 days. Here Sejal is much better than others but it should not take more
than 60 days where competitors are absence so it may opportunity for them. So company
reduce inventory cycle by adopting advance technology or more employees.

48
TABLE 13: Credit Risk in Company
Sejal Glass NSD Glass FG Glass
Respondents (Frequency) % (Frequency) % (Frequency) %

Bellow 5% 4 22% 5 100% 2 40%

5-10% 8 45% 0 0% 2 40%

Over 10% 6 33% 0 0% 1 20%

Source: Primary data

FIGURE 11:
9
8
7
6
5
No. of Respondents

4
3
2
1 Sejal Glass NSD Glass
0 FG Glass

Bellow 5% 5-10% Over 10%

Percentage

INTERPRETATION:
From the above table more credit risk is in Sejal that is 33%
respondents said over 10% whereas NSD’s risk is bellow 5% . Even FG’s risk is also less
compare to Sejal. If there are more credit risk then company should take advance receipts
from customers or dealers so that these things may not be happened.
49
TABLE 14: Bad debt level in Company’s Accounts Receivables
Sejal Glass NSD Glass FG Glass
Respondents (Frequency) % (Frequency) % (Frequency) %

Bellow 1% 1 6% 0 0% 1 20%

1%-5% 8 44% 5 100% 3 60%

6%-10% 5 28% 0 0% 1 20%

Over 10% 4 22% 0 0% 0 0%

Source: Primary data

FIGURE 12:
9
8
7
6
5
No. of Respondentse

4
3
2
1 Sejal Glass
0 NSD Glass FG Glass

Bellow 1%1%-5%6%-10%Over 10%

Percentage

INTERPRETATION:
From the above table the bad debt level of sejal glass is more
compare to others i.e. 1% to 10%. Whereas NSD bad debt level is upto 5%. This is also
one the reason for Sejal glass to getting into loss. If there is more bad debts then company
should take advance receipts from customers or dealers so that these things may not be
happened.
50
TABLE 15: Discount Offer to Customers for Prompt Payment
Sejal Glass NSD Glass FG Glass
Respondents (Frequency) % (Frequency) % (Frequency) %

Yes 15 83% 4 80% 2 40%

No 3 17% 1 20% 3 60%

Source: Primary data

FIGURE 13:
16

14

12
No. of Respondents

10

8
Sejal Glass NSD Glass
6 FG Glass

0
Yes No

INTERPRETATION:
From the above table more than 80% of the respondents from Sejal
and NSD, they are providing discount offer for prompt payment is being made by
customers. This one of the things attract customers to pay promptly. Company should
provide offers like discounts, gifts, vouchers, coupons etc. So that company can maintain
good liquidity position.

51
TABLE 16: Reminding customers by phone to pay the balance amount
Sejal Glass NSD Glass FG Glass
Respondents (Frequency) % (Frequency) % (Frequency) %

Weekly 10 56% 4 80% 2 40%

Monthly 4 22% 1 20% 3 60%

Quarterly 4 22% 0 0% 0 0%

Annually 0 0% 0 0% 0 0%
Source: Primary data

FIGURE 14:
16

14

12
No. of Respondents

10

8 Sejal Glass NSD Glass

FG Glass
6

0
Yes No

INTERPRETATION:
From the above table NSD’s 80% respondents , 56% of Sejal and
40% of FG said weekly. Monthly is also good to remind customers but quarterly bad
where 22% of Sejal respondents said quarterly. Company should call every week or
month to inform customers about discount offers for early payment.

52
TABLE 17: How often does company review its working capital
Sejal Glass NSD Glass FG Glass
Respondents (Frequency) % (Frequency) % (Frequency) %

Weekly 2 11% 5 100% 1 10%

Monthly 5 28% 0 0% 2 40%

Quarterly 6 33% 0 0% 2 40%

Whenever
5 28% 0 0% 0 0%
Necessary
Source: Primary data

FIGURE 15:
7

5
No. of Respondents

3 Sejal Glass NSD Glass

FG Glass

Weekly Monthly Quarterly Whenever Necessary

INTERPRETATION:
From the above table 100% respondents of NSD said they are doing
weekly working capital review so that they can arrange fund from other sources whereas
maximum respondents of Sejal said quareterly and whenever necessary. Company should
review about working capital once in a week or 15days so that company can understand
where fund is tied up.
53
 CHAPTER 5

FINDINGS AND SUGGESTIONS

FINDINGS:
• Sejal Glass limited sold their Float Glass manufacturing plant to Saint Gobain
because it was continuous production plant so company could not have reduced
their production where their sales was less because of more competition. They
could not have reduced their fixed cost, so day by day expenditure was increasing,
it was not their cup of tea to reduce the cost therefore they sold the plant.

• After selling plant, company facing many problems from suppliers because of low
capital they are unable to make payment on time so more than 50% of suppliers
are not supplying on credit basis. So that company has to make payment in
advance and on delivery.

• Customers delaying invoice payment was deemed by survey respondents to have

had a high or very high impact on working capital over the past 12 months.
Similarly, customers exerting pressure on businesses to extend their credit and
payment terms were also placing high or very high pressure on working capital.

• The main problem from suppliers i.e. 80% suppliers are from India from that 70%
suppliers allowing 30 - 45 days credit and for rest of them company has to make
payment in advance. 20% suppliers from rest of the country from that 40% of
suppliers allowing 60 - 90 days credit and for rest of them company has to make
payment in advance.

• Stretching credit period of suppliers is the main source to improve working capital
but here it is not there. So this is one of the cause for working capital. Company
spending a lot for unnecessary things therefore Company’s expenditure is also
more than income since 3 years.

• Since three years Receivables is more than Payables and borrowings is also more
than advances & loans.

54
SUGGESTIONS:

Debtors & Receivables:

• Company should keep reminding customers about outstanding amount on a weekly
basis.
• Company should call and inform customers about cash discount offered for early
payment.
• Company should try to convince customer for acceptance of bill so you can
release cash from bank with discount.
• Company should count back debtor days as far as possible.

Creditors & Payables:

• Because of long outstanding amount suppliers are not ready to supply on credit so
company should try to clear outstanding amount of suppliers so that they can ask
more credit days as far as possible.
• Company should maintain good relationship with suppliers, for that they have to
make payment on due date.
• Company should make payment on due date so they can escape from interest.

Inventory:
• Company should try to reduce inventory cycle.
• Company should ensure that on time delivery.

Liquidity:
• Company should maintain liquidity in bank so they can meet urgent needs.

Cash Conversion Cycle:

• Since 3 years inventory days and receivables days are more than payables days
which should be less. So they should work on it.

55
 CHAPTER 6

CONCLUSION
Liquidity is an attribute that signifies the capacity to meet financial obligations of
the company when required. The importance of liquidity to meet the day to day
operations and urgent payment to suppliers. A firm should maintain adequate level of
working capital to meet the day to day operations and maintain business operations. The
effective management of working capital requires both medium-term planning and
immediate reactions to the fast changes taking in the present business environment. The
effectiveness of working capital depends on all current assets and current liabilities.

Sejal Glass Limited should not have sold their manufacturing plant to Saint
Gobbain. They could have made joint-venture with them. After selling plant they are not
able to pay to suppliers for materials on time. They are spending more for unnecessary
things even though they are in loss. For effective working capital company needs to be
taken care of current assets and current liabilities i.e. Receivables, Payables, Inventory,
liquidity etc.

Sejal Glass should count back credit days of customers and they should keep
reminding them about outstanding amount and they should give discount offers for early
payment. Company should settle outstanding amount of suppliers and maintain good
relationship then they should pull suppliers credit days as far as possible.

Raw materials used to be in factory for high period to convert into finished goods.
Receivables days also more so more days tied up with inventory and receivables.
Therefore Sejal Glass should be taken care of operating cycle and cash conversion cycle.

56
 BIBLIOGRAPHY

Books:
• Research Methodology- R.C. Kothari.
• Research Methods In Business- Dhruv Shah, Rupal Jain.
• Research Methodology- Michal Vaz, Madhu Nair.
• Financial Management – Prasanna Chandra.

Journals:
• CAMS Journal of Business Studies and Research ISSN : 0975-7953 July-September
• Asian Journal of Management Research Volume 4 Issue 2, 2014
• International Journal of Economics and Financial Issues, Vol. 2, No. 4, 2012, pp.488-
495
• Proceedings of the 3rd International Conference on Management and Economics
(ICME 2014)

Annual Reports:
• Sejal Glass limited Annual Report from 2009 to 2013

Websites:
• www.google.com
• www.wikipedia.com
• www.fm-magazine.com
• www.accountingtools.com

57