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CHAPTER - I

INTRODUCTION

INTRODUCTION
Every business needs funds for two purposes, for its establishment and to carry
outs its day-to-day operations. Long term funds are required to create production facilities
though purchase of fixed assets such as plants and machinery, land, building, furniture,
etc. investments in these assets represent that part of firms capital which is blocked in a
permanent or fixed basis funds are also needed for short-term purposes for that purchase
of raw marital, payment of wages and other day-to-day expenses, etc. these funds are
known as working capital. In simple words, working capital refers to that part of the
firms capital which is required for financing short term or current assets such as cash,
marketable securities, debtor and inventories.
In the words of SHUBIN, working capital is the amount of funds necessary to
cover the cost or operating the enterprise.
According to GENESTENBERG, circulating capital means current assets of a company
that are changed in the ordinary course of business from one form to another form, as per
example from cash to inventories, inventories to receivables, receivables into cash.
In simple words, working capital refers to that part of the firms capital which is
required for financing short term or current assets such as cash, marketable securities,
debtors and inventories. Funds, thus, invested in current asst keep revolving fast and are
being constantly converted into cash and this cash flows out again in exchange for other
current assets. Hence, it is also known as revolving or circulating capital or short term
capital.
That working capital refer to that difference between current assets and current
liabilities, it is excess of current assets over current liabilities.
Working capital= current assets-current liabilities

Operating Cycle of Working Capital


It is clear that working capital is required because of the time gap between the
sales and their actual realization into cash. This time gap is technically called as
Operating cycle of the business.
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 material into work in progress.

Conversion of work in progress into finished goods.

Conversion of finished goods into accounts receivable, and

Conversion of account receivable into cash.


This cycle will be repeated again and again. The speed with which the working

capital

completes one cycle determines the requirements of working capital Longer the

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


The operation cycle of manufacturing business can be shown as the following chart.
Accounts
Receivables

Cash

Finished
Goods

Raw
Materials

Work in
Progress

Need of working capital management


The need for working capital gross or current assets cannot be over emphasized. As already
observed, the objective of financial decision making is to maximize the shareholders wealth.
To achieve this, it is necessary to generate sufficient profits can be earned will naturally
depend upon the magnitude of the sales among other things but sales cannot convert into
cash. There is need for working capital in the form of current assents to deal with the problem
arising out of lack of immediate realization of cash against goods sold. Therefore sufficient
working capital is necessary to sustain activity. Technically this is refers to operating or cash
cycle. If the company has certain amount of cash, it will require for purchasing the raw
material may be available on credit basis.
Management of working capital
Guided by the above criteria, management will use a combination of policies and
techniques for the management of working capital. These policies aim at managing the
current assets (generally cash and cash equivalents, inventories and debtors) and the short
term financing, such that cash flows and returns are acceptable.
1. Cash management: cash management identify the cash balance which allows for the
business to meet day to day expenses, but reduces cash holding costs.
2. Inventory management: inventory management identifies the level of inventory which
allows for uninterrupted production but reduces thee investment in raw material and
minimized costs and hence increased cash flows.
3. Debtors management: debtors management identify the appropriate credit policy i.e.
credit terms which 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.
4. Short Term Financing: short term financing identify the appropriate source of financing,
given the cash conversion cycle.

CLASSIFICATION
Working capital may be classified in to two ways:
1. On the basis of concept
2. On the basis of time
ON THE BASIS OF CONCEPT
CONCEPT OF WORKING CAPITAL
There are two concepts of working capital management
1. Gross working capital
Gross working capital refers to the firms investment in current assets. Current
assts are the assets which can be convert into cash within year includes cash, short term
securities, debtors, bills receivable and inventory.
2. Net working capital
Net working capital to the difference between current assets and current liabilities.
Current liabilities are those claims of outsiders which are expected to mature for payment
within an accounting year and include creditors, bills payable and outstanding expenses. Net
working capital can be positive or negative efficient working capital management required
that firms should operate with some amount of net working capital, the exact amount varying
from firm to firm and depending, among other thins; on the nature of industries, net working
capital is necessary because the cash out flows and inflows do not coincide. The cash out
flows resulting from payment of current liabilities are relatively predictable. The cash inflow
are however difficult to predict. The more predictable the cash inflows are the less net
working capital will be required.
The concept of working capital was, first evolved by Karl Marx. Marx used the
term variable capital means outlays for payrolls advance to workers before the completion
or work. He compared this with constant capital which according to him in nothing but
dead labor. This variable capital is nothing wage fund which remains blocked in terms of
financial management, in working process along with the other operating expenses until it is

released through sale of finished goods although Marx did not mentioned that workers also
gave credit to the firm by accepting periodical payment of wages which funded a portioned of
W.I.P. the concept of working capital, as we understand today was embedded in his variable
capital.
ON THE BASIS OF TIME:
On the basis of concept working capital can be classified as gross working capital
and net working capital. On the basis of time, working capital may be classified as:
1. Permanent working capital
Permanent or fixed working capital is minimum amount which is required to
ensure effective utilization of fixed facilities and for maintaining the circulation of current
assets. Every firm has to maintain a minimum level of raw material, work-in-process,
finished goods and cash balance. This minimum level of current assets is called permanent or
fixed working capital as this part of working is permanently blocked in current assets. As the
business grow the requirement of working capital also increase due to increase in current
assets.
2. Temporary working capital
Temporary or variable working capital is the amount of working capital which as
required to meet the seasonal demands and some special exigencies. Variable working capital
can further be classified as seasonal working capital and special working capital. The capital
required to meet the seasonal need of the enterprise is called seasonal working capital.
Special working capital is the part of working capital which is required to meet special
exigencies such as launching of extensive marketing of conducting research, etc. temporary
working capital differs from permanent working capital in the sense that is required for short
periods and cannot be permanently employed gainfully in the business.

Objectives
The primary objective of working capital management is to ensure that sufficient
cash is available to:
1. Meet day to day cash flow needs.
2. Pay wages and salaries when they fall due
3. Pay creditors to ensure continued suppliers of goods and services
4. Pay government taxation and providers of capital dividends
5. Ensure the long term survival of the business entity.
It is critical to understand that profits is not cash. A company can be very
profitable but it can collapse simply because it has insufficient cash/liquidity to pay its
relevant bill (as stated above)
Always remember that any company liabilities are settled with cash and not by profit
Use of working capital
Working capital is the measure of a companys ability to pay off its short term debt
is the deference between current assets and current liabilities.
Working capital is used to finance the following:

Construction, renovation or improvements to the leasehold.

To but furniture, fixtures, machinery, or equipment.

To replenish inventory.

For day to day operations of a business and payroll (expect owners salary).

For down payment assistance on the purchase of real estate for the business.

Sources of working capital


There are typically five components of working capital that are important for a
small business to understand and monitor.
1. Cash and equivalents represent the most liquid form of working capital. Every small
business should understand the time dependency between cash inflow and outflow,
when peak cash is needed and the level of borrowing needed to meet shortfalls of cash.
2. Accounts receivable represents the credit that the business extends to its customers.
Small businesses need to know the amount of accounts receivable reasonable relative
to sales, how rapidly are receivables being collected, and the slow paying customers.
3. Inventory can be as much as 50 percent of a small businesss current assets. A small
business should know whether the levels are reasonable compared with sales and how
fast is the inventory turnover relative to industry trends.
4. Accounts payable is the amount of money owned suppliers. Every small business
should know whether the level is reasonable relative to purchase and if the payment
policy negatively impacts the businesss credit rating.
5. Accrued expenses and taxes payable are time obligations of the business and represent
a future cash outflow.

FACTOS DETERMINING THE WORKING CAPITAL REQUIREMENTS


1. NATURE AND SIZE OF BUSINESS
The size of business also has an important impact on its working capital needs.
Size may be measured in terms of the scale of operations. A firm with large scale of
operations will need working capital than small term. The working capital requirement of
a firm are basically influenced by the nature of business trading and financial firm has
very less investment in fixed assets, but requires a large sum of money to be invested in
working capital.

2. TECHNOLOGY AND MANUFACTURING POLICY


The manufacturing cycle starts with the purchase and use of raw materials and
completes with the production of finished goods. Longer the manufacturing cycle, larger will
be the firm working capital requirements. An extended manufacturing time span means a
larger tie-up of funds in inventories. Thus if there are alternative technologies of
manufacturing a product, the technological process with the shortest manufacturing cycle
may be chooses.

3. FIRMS CREDIT POLICY


The credit policy of the firm affects the working capital by influencing the level of
debtors. The credit term to be granted to customers may depend upon the forms of the
industry to which the firm belongs.

4. AVAILABILITY OF CREDIT
Creditors also affect the working capital requirement of a firm. A firm will need
less wronging capital if liberal credit terms are available to it.
5. OPERATING EFFICIENCY
The operating efficiency of the firm relates to the optimum utilization of resources
at minimum costs. The firm will be effectively contributing in keeping the working
capital investment at a lower level if it is efficient to controlling operating costs and
utilizing current assets. The use of working capital is improved and pace of a cash
conversion cycle is accelerated with operating efficiency.
6. BUSINESS FLUCTUATIONS
Most firm experience seasonal and cyclical fluctuation in the demand for their
products and services. This business variation effects the working capital requirements
especially the temporary working capital requirement of the firm. When there is an
upward swing in the economy, sales will increase and vice-versa.

7. PRODUCTION POLICY
A steady production policy will cause inventories to accumulate during the offseason periods and the firm will be exposed to greater inventory cost and risk. Thus, if the
cost and risks of maintaining a constant production schedules are high, the firm may
adopt the policy of varying its production schedules in accordance with change in
demand.
8. GROWTH AND EXPANSION ACTIVITIES
The working capital needs of firm increases it growth in terms of sales of fixed
assets. It it is difficult to precisely determine the relationship between volume of sales and
the working capital needs. The critical fact however that is the need for increased working
capital funds does not follow growth in business activities but precedes it.

CHAPTER - II

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY
Good research is carefully planned and is conducted professionally and generates
dependable data. Data generated from good research can be used reliably for managerial
decision making.
1. The research should be described in details. Each step in the research process should
be explained in details so that another researcher will be able to repeat the research.
The sources of the data should be revealed and the means by which they were
obtained should be made clear.
2. Researcher should take care to protect the privacy of the respondents. The researcher
should be taking into consideration the welfare of the participants of the studies as
well as that of their client.
3. Data obtained from research should be used to justify the conclusion. Personal
interpretations or experiences of the researcher should be avoided.
4. Any drawback in the design should be revealed by the researcher and its effects on the
finding should be estimated.
BENEFITS OF RESEARCH:
1. Research can help businesses to communicate with their stake holders like customers,
suppliers etc. they can device important conclusions through business research.
2. Research helps businesses to identify the opportunities and threats.
3. Risks and uncertainties can be minimized through business research. Research is very
important for evaluating the progress of the business and to exploit more opportunities
4. It can help the business to track their benchmark and to avoid any loss which they can
incur without having market and business information.

OBJECTIVES OF THE STUDY:


The following are the objective of the study.
1. To study the working capital management of CIPLA LIMITED.
2. To examine the feasibility of present system of managing cash, debtor and inventory.
3. To study the management of current assets and current liabilities of CIPLA
LIMITED.
4. To evaluate the financial position of the company.
5. To know the liquidity position of the company.
6. To examine the working capital turnover of the company.
7. To give suggestions for better working capital management.

SCOPE OF THE STUDY:


The following are the scope of the study.
1. The scope was limited to the operations of CIPLA LIMITED.
2. The study was confined to the evolution of last five years report (2007-2011).
3. The study focuses on analyzing the working capital management.
4. The information obtained from primary and secondary sources was limited to CIPLA
LIMITED.

LIMITATIONS OF THE STUDY:


The followings are the limitations of the study.
1. As the study period was very short, the complete financial status of the company was
not done.
2. The study having limited scope of gathering sufficient information as it is
confidential.
3. The study is limited up to the data and information provided by CIPLA LIMITED.
4. The study has concentrated only on the working capital of the company. The other
financial aspects or components were ignored.
5. This study is confined to the CIPLA LIMITED.

COLLECTION OF DATA
Research methodology is a systematic procedure of collecting information in order to
analyze and verify a phenomenon. Data collection is a term used to describe a process of
preparing and collecting data.
Data collection is important aspects of any type of research study, inaccurate data can
impact the result of the study and ultimately lead to invalid results.
Data collection sources are two types:
1 .primary data
2. Secondary data
1. Primary Data:
In primary data collection, the data will be collected by using questionnaires and interviews.
There are many methods of collecting primary data and the main methods include:
1. Interviews
2. Observation
2. Secondary Data:
Secondary data available from publishers, in-house database, research
agencies etc. it constitutes readymade information that can be used for research
purpose with minimal analysis. However, the research should bear in mind secondary
data is published for purpose other than the current research.
Secondary data helps researchers to save time. While primary research takes a
considerable amount of time in the form of collecting and analyzing the data,
secondary data offers readymade solutions.

SOURCES OF DATA
Methodology is systematic process of collecting information in order to analyze and
verify a phenomenon, the collection of the data two principles process.
1. Primary data
2. Secondary data
1. Primary data
The data that is collected first time for any statistical investigation and is used in
the statistical analysis is termed as primary data.
The primary data is obtained by having personal interviews with the officials of the
company, interacting with the manager & other concerned executives at the
administrative office of the company.
2. Secondary data
the data whether published, which have been already collected and processed by
some agency or person and take over from them and used by any other agency or
person for their statistical work are termed as secondary data.
The secondary data was collected mainly from the following source.
1. Annual report
2. Manuals and magazines.
3. Reference to journals, text books and news papers.
4. Company website http://www.cipla.com

CHAPTER - III

COMPANY PROFILE

HISTORY
Ciplas journey began in 1935 when our founder, Dr. K. A. Hamied, set up an enterprise with
the vision to make India self-sufficient in healthcare. Over the past 77 years, we have
emerged as one of the worlds most respected pharmaceutical names, not just in India but
worldwide.
We have 34 state-of-the-art manufacturing facilities that make Active Pharmaceutical
Ingredients (APIs) and formulations, which have been approved by major international
Regulatory Agencies. We have over 2000 products in 65 therapeutic categories; with over 40
dosage forms, covering a wide spectrum of diseases ranging from communicable, noncommunicable, common and emerging diseases to even rare diseases. Our Research and
Development (R&D) centre is focused on developing innovative products and drug delivery
systems,

giving

the

country

and

the

world

many

Firsts'.

Today, we are one of the worlds largest generic pharmaceutical companies with a strong
presence in over 170 countries. We maintain world-class quality across all our products and
services.
Whether its for millions or for just a few hundreds, our journey to care for all humanity
continues.
Milestones

In 1935, our founder, Dr. K. A. Hamied set up Cipla to make India self-reliant in
healthcare.

In 1939, Mahatma Gandhi visited Cipla and inspired our founder to make essential
medicines for the country, and strive for self-sufficiency. During World War II, when
India was dependent on imported medicines and there was an alarming shortage of lifesaving drugs, we manufactured them for the country.

In the 1960s, we pioneered API manufacturing in the country and helped lay the
foundation for the bulk drug industry in India.

In 1970, we spearheaded the New Patent Law by which an Indian pharmaceutical


company was allowed to manufacture a patented product as long as the process to
manufacture it was changed. This enabled Indian companies for the first time to
manufacture any medicines and make them available and affordable for all Indians.

In 1978, we pioneered inhalation therapy in India with the manufacture of MeteredDose Inhaler (MDI), at a time when the country stopped receiving imported supplies.
Today, we have the worlds largest range of inhaled medication and devices.

In 1994, we launched Deferiprone, the worlds first oral iron chelator which
revolutionized the treatment for thalassemia. For the first time patients with
thalassemia had an option that was affordable, painless and convenient.

In 1996, we gave the world the first transparent dry powder inhaler which was so
simple and easy to use, it changed the face of inhalation therapy in India.

In 2001, we pioneered the access to HIV treatment by making antiretrovirals (ARVs)


available at less than a Dollar a Day'. The cost of treatment dramatically fell from
$12,000 per patient per year to $300 per patient per year. This caused a revolution
where HIV treatment became a reality for the world and millions of lives could be
saved.

During the 2005 Bird Flu epidemic, we produced an anti-flu drug within a period of
2-3 months, which would have normally taken at least 3 years to develop.

In 2012, we made a breakthrough in reducing the prices of cancer drugs, thus making
world-class medicines affordable and accessible to cancer patients.

We are committed to addressing the unmet medical needs of the world by venturing
into newer challenges in platform technologies, biotechnology and stem cells.

We will continue to support, improve and save millions of lives with our high-quality drugs
and innovative devices. And with the dedication of 20,000 employees, we are ready to face
the future challenges of healthcare.

AT A GLANCE
Cipla was established in 1935 with the vision of making India self-reliant and self-sufficient
in healthcare. Today, we are one of the worlds largest generic pharmaceutical companies
with a presence in over 170 countries. We are renowned for making affordable, world-class
medicines that meet the needs of patients across therapies. We also offer services like
consulting, commissioning, plant engineering, technical know-how transfer and support.
Incorporated

1935

Corporate Office

Cipla Ltd., Mumbai Central, Mumbai 400 008, India

Chairman

Dr. Yusuf K. Hamied

Managing Director

Mr. M.K. Hamied

Listing Equity Shares

: BSE Limited and National Stock Exchange of India Limited

Global Depository Receipts : Luxembourg Stock Exchange


Turnover*

USD 1.4 billion

Employees*

20,000

Approvals

US FDA, WHO-Geneva, MHRA-UK, TGA-Australia, SUKL-

Slovak Republic, APVMA-Australia, MCC-South Africa, PIC-Germany, Danish Medical


Agency, ANVISA-Brazil, INVIMA- Colombia, NDA-Uganda, Department of Health-Canada
Highlights

One of the worlds largest generic companies.


Over 2,000 products, 65 therapeutic categories, over 40 dosage forms.
34 state-of-the-art manufacturing facilities approved by major international regulatory

agencies.
Continuous innovation in R&D; over 20 world firsts.

Board of Directors
Founder

Dr. K.A.Hamied

Chairman

Dr. Yusuf K Hamied

Executive Vice-Chairman

Mr. M.K. Hamied

Whole-time Director

Mr. S. Radhakrishnan

Managing Director and Global CEO

Mr. Subhanu Saxena

Non-Executive Directors:
Dr. H.R.Manchanda
Mr. V.C.Kotwal
Mr. M.R.Raghavan
Mr. Pankaj Patel
Dr. Ranjan Pai
Mr. Ashok Sinha

(1898-1972)

CODE OF CONDUCT
As required under revised Clause 49 of the Listing Agreement the following code of conduct has been
approved by the Board of Directors and is applicable to the Directors and Senior Management of the
Company.
1. Ethical conduct
All directors and senior management employees shall deal on behalf of the Company with
professionalism, honesty, integrity as well as high moral and ethical standards. Such conduct shall be
fair and transparent and be perceived to be as such by third parties.
2. Conflict of interest
Any director or senior management employee of the Company shall not engage in any business,
relationship or activity, which might detrimentally conflict with the interest of the Company.
3. Transparency
All directors and senior management employees of the Company shall ensure that their actions in the
conduct of business are totally transparent except where the needs of business security dictate
otherwise. Such transparency shall be brought about through appropriate policies, systems and
processes.
4. Legal compliance
All directors and senior management employees of the Company shall at all times ensure compliance
with all the relevant laws and regulations affecting operations of the Company. They shall keep
abreast of the affairs of the Company and be kept informed of the Company's compliance with
relevant laws, rules and regulations. In the event that the implication of law is not clear, the course of
action chosen must be supported by eminent legal counsel whose opinion should be documented.
5. Rightful use of the Companys assets
All the assets of the Company both tangible and intangible shall be employed for the purpose of
conducting the business for which they are duly authorized. None of the assets of the Company
should be misused or diverted for personal purpose.
6. Cost consciousness

All the directors and senior management employees of the Company should strive for optimum
utilization of available resources. They shall exercise care to ensure that costs are reasonable and there
is no wastage. It shall be their duty to avoid ostentation in Company expenditure.
7. Confidential information
All directors and senior management employees shall ensure that any confidential information gained
in their official capacity is not utilized for personal profit or for the advantage of any other person.
They shall not provide any information either formally or informally to the press or to any other
publicity media unless specifically authorized to do so. They shall adhere to the provisions of SEBI
(Prohibition of Insider Trading) Regulations, 1992.
8. Relationships with Suppliers and Customers
The directors and senior management employees of the Company during the course of interaction
with suppliers and customers, shall neither receive nor offer or make, directly and indirectly, any
illegal payments, remuneration, gifts, donations or comparable benefits which are intended or
perceived to obtain business or uncompetitive favours for the conduct of its business. However, this is
not intended to include gifts of customary nature.
9. Interaction with Media
The directors and senior management employees other than the designated spokespersons shall not
engage with any member of press and media in matters concerning the Company. In such cases, they
should direct the request to the designated spokespersons.
10. Safety and Environment
The directors and senior management employees shall follow all prescribed safety and environmentrelated norms.

Sustainability
Sustainability is an integral part of Ciplas business strategy. We believe in the responsible
management of our growth. This goes hand in hand with caring for the environment and improving
the quality of life for society at large.
Caring for Health, Safety and Environment
Occupational Health, Safety and Environment (HSE) initiatives are an important part of our business
activities. All our facilities maintain high standards of occupational HSE practises and most of them
are certified for ISO 14001 and OHSAS 18001 standards. We also have a defined environmental
strategy that focuses on reducing our carbon footprint by saving energy, and following water and

waste management procedures. We were among the first companies to manufacture CFC-free inhalers
a good 10 years before the Montreal Protocol January 2010 deadline.

Some of our continuous efforts to upgrade HSE standards:

Establishing well-equipped facilities and safety laboratories.


Conducting regular safety training programmes, including those on behavioral safety to

increase safety awareness at all working levels.


Celebrating Safety Week, Fire Service Day and Electrical Safety Day to create awareness and
motivate employees. Villagers and school children living around the Companys plants across

India also participate in such programmes.


Conducting a green drive programme of mass tree plantation to celebrate World Environment

Day and Earth Day.


Maintaining a modern, well-equipped effluent treatment plant at all our manufacturing
facilities. Treated water from these zero discharge facilities is used for maintaining green belts
around the factory premises.

CORPORATE SOCIAL RESPONSIBILITY


Being a good corporate citizen is an integral part of our core value - caring for life.
The Cipla Palliative Care and Training Centre in Pune continues to provide holistic care to terminally
ill cancer patients and their families free of charge. Till now the Centre has given treatment, comfort
and solace to more than 7,700 patients. The focus of the Cipla Palliative Care Centre is to reach out to
more cancer patients who need Palliative Care and to integrate Palliative medicine with curative
therapy.
We extend support to Manavya, a Pune-based organization which runs a home for children with HIV
infection. Manavya operates a mobile dispensary in villages on the outskirts of Pune and it is fully
funded by the company.
On the occasion of Ciplas Platinum Jubilee in 2010, we set up the Cipla Foundation by contributing a
sum of Rs. 5 crore. The Foundation aims to provide care and financial support to people in need of
healthcare and education in India.
In a humanitarian effort to support cancer patients and relieve their burden, we made a breakthrough
in reducing the prices of cancer drugs, thus making world-class medicines accessible to patients in
India.
We work closely with several reputed non-profit organizations such as Drugs for Neglected Diseases
Initiative, Medecins Sans Frontieres and the Clinton Foundation in order to make drugs for malaria,

HIV/AIDS and several neglected diseases, available at affordable prices. We also provide medicines
to treat over a million poor, aged patients in slums and villages through non-profit organizations. In
addition, we support several health, educational and welfare activities in communities surrounding the
companys factories, both directly and through our Charitable Trusts, by providing healthcare
education, improvement of community infrastructure, scholarships, etc. This is part of our
commitment to improve the quality of life for these communities.
LEADERS IN DRUG DELIVERY
Cipla's Research & Development (R&D) is focused towards developing new products, improving
existing products as well as drug delivery systems and expanding product applications. Hundreds of
scientists work on all facets of pharmaceutical development and technology.
In-house R&D forms the backbone of our operations. With almost 5-6% of the company turnover
being invested towards R&D each year, our strategy focuses on:

Developing new drug formulations for existing and newer drug substances.
Improving processes for existing API and formulation products.
Developing new drug delivery systems for existing and newer active drug substances, as well

as newer medical devices, mainly in the area of respiratory medicine.


Tie-ups with independent research teams to develop new products.
Strengthening our intellectual property, including the patenting of new products, drug delivery

systems and medical devices, mainly in the area of respiratory medicine.


Conducting clinical and bio-equivalence studies for obtaining regulatory approvals for new
products and services.

In addition, for our international business, our R&D team works with our strategic partners to file
Drug Master Files (DMFs) and Abbreviated New Drug Applications (ANDAs) in the US, and seek
marketing authorizations in Europe and file product registrations in other jurisdictions.
We have earned a name for maintaining world-class quality across all our manufacturing units,
products and services. We have consistently introduced more than 40 products annually, over the last
decade.
We have been granted about 100 patents. Patent filing includes drug substances, drug products,
platform technologies, IP on polymorphs and crystallinity, and medical devices.

139 DMFs, 87 registered ANDAs and 25 ANDAs under review in the US.
About 1000 DMFs for a total of 101 APIs; 49 COS approved.
Over 700 marketing authorizations in Europe.
Over 10,000 product registrations globally.
49 products pre-qualified by World Health Organization (WHO).
Supported 2 NDA filings for our partners and have 16 NDAs of our own.

We also leverage our R&D efforts to provide our customers with technical dossiers, plant layouts for
pharmaceutical product manufacturing, development of processes and regulatory batches.

Cipla's pool of Innovation


Cipla has over 2000 products in 65 therapeutic categories available in over 40 dosage forms,

including:
Liposome Injection
Microsphere Injection
Topical Delivery System
Inhalation Technology:
Metered-Dose Inhaler
Dry Powder Inhaler & Respiratory Solutions
Nasal Drug Delivery
Ophthalmic Solutions
Pre-filled Syringe
Hormone Injection
Nanotechnology
Melt Extrusion & Hot Melt Granulation
Particle Engineering

Cipla was among the first Indian companies to develop and manufacture Active Pharmaceutical
Ingredients (APIs), the vital raw material for making the drug products. Thus helping lay the
foundation for the pharmaceutical industry in India.
Today, we manufacture over 200 generic APIs. This formidable portfolio covers a broad spectrum of
therapeutic categories, reaching out to over 170 countries around the world. We meet stringent
international standards of quality to deliver API. Thats the Cipla benchmark.
We have three API manufacturing plants in India, located at Patalganga, Kurkumbh and Bengaluru
which rank among the best in the world. Approved by major international regulatory agencies, they
are capable of producing synthetic high potency APIs in grams and tonnes.
To meet the increasing demand for APIs in the future, we are multiplying our efforts and gearing up to
deliver uncompromising quality and customized solutions.

COLLABORATIONS

The core of our international business is strategic alliances for product development, registration and
distribution of our products. In addition, we also maintain long-standing relationships with nongovernment organizations and institutions globally.
Our international business continues to be a major revenue driver for the company. Our overseas sales
have consistently grown and represent almost 53% of our total income. In order to meet the increasing
demand, we are continuously expanding and modernizing our Manufacturing and Research &
Development facilities.
We collaborate with others in industry, academia, government and non-government organizations and
healthcare providers as a strategy to develop a diversified global business, and deliver more products
of value through:

Joint ventures in Manufacturing & Technology


Marketing and Distribution collaborations
Know-how transfer Products, Process, New Developments
Quality Management
Turnkey Projects
cGMP Training
Plant Engineering
Contract Manufacturing
Consulting

We are one of the largest exporters of pharmaceutical products from India, exporting API and
formulation products to over 170 countries. This includes the U.S., Canada and countries in Europe,
Africa, Australasia, Latin America and the Middle East.

CHAPTER - IV

DATA ANALYSIS
AND
INTERPRETATION

STATEMENT SHOWING CHANGES IN WORKING CAPITAL


FOR THE YEAR ENDED 2007-2008

(Rs. In Crores)
As on 31st December

Changes in Working capital

2007(Rs)

2008(Rs)

Increase(Rs)

Decrease(Rs)

Inventories

978.60

1120.49

4.11

---

Sundry Debtors

1028.78
131.49

1393.91

---

21.04

79.28

---

50.33

1115.81

---

17.53

2809.85

3709.49

4.11

88.90

Current liabilities

18.11

18.02

0.9

---

Provisions

39.51

4.33

35.18

---

TOTAL CURRENT LIABILITIES(B)

57.62

22.35

35.27

---

NET WORKING CAPITAL =(A-B)

80.29

30.77

39.38

88.90

---

49.52

49.52

----

80.29

80.29

88.90

88.90

PARTICULARS

CURRENT ASSETS

Cash and Bank Balance


Loans and advances

TOTAL CURRENT ASSETS (A)

670.98

CURRENT LIABILITIES

Increase / Decrease in Net Working


Capital
TOTAL

INTERPRETATION:
From the above table, it can be observed that

1. Inventories were increased by Rs.4.11 crores, due to increased purchase of raw


materials.
2. Sundry debtors were decreased by Rs.21.14 crores, due to decrease in credit sales.
3. Cash and bank balances were decreased by Rs.50.33 crores, due to decrease in sales.
4. Loans and advances were decreased by Rs.17.53 crores, due to decrease in loans
provided by the company.
5. Current liabilities were decreased by Rs.0.09 crores, due to the payment of pending
claims.
6. Provisions were decreased by Rs.35.18 crores, due to decrease in current liabilities.
7. The overall net working capital has been decreased by Rs.49.52 crores, due to
decrease in current assets.
8. The company should improve its net working capital position.

STATEMENT SHOWING CHANGES IN WORKING CAPITAL


FOR THE YEAR ENDED 2008-2009
(Rs. In Crores)

As on 31st December

Changes in Working capital

2008(Rs)

2009(Rs)

Increase(Rs)

Decrease(Rs)

34.51

54.81

20.30

---

7.28

22.84

15.56

---

1.78

1.26

---

0.52

9.55

17.70

8.15

---

53.12

96.61

44.01

0.52

Current liabilities

18.02

18.49

---

0.47

Provisions

4.33

15.16

---

10.83

TOTAL CURRENT LIABILITIES(B)

22.35

33.65

---

11.03

NET WORKING CAPITAL =(A-B)

30.77

62.96

44.01

11.82

Increase / Decrease in Net Working

32.19

---

---

32.19

62.96

62.96

44.01

44.01

PARTICULARS

CURRENT ASSETS
Inventories
Sundry Debtors
Cash and Bank Balance
Loans and advances

TOTAL CURRENT ASSETS (A)


CURRENT LIABILITIES

Capital
TOTAL

INTERPRETATION:
From the above table, it can be observed that
1. Inventories were increased by Rs.20.30 crores, due to increased purchase of
chemicals.
2. Sundry debtors were increased by Rs.15.56 crores, due to increase in credit sales.

3. Cash and bank balances were decreased by Rs.0.52 crores, due to increase in
advances provided to suppliers.
4. Loans and advances were increased by Rs.8.15 crores, due to the company provided
loans to the employees.
5. Current liabilities were increased by Rs.0.47 crores, due to the credit purchases of raw
materials.
6. Provisions were increased by Rs.10.83 crores, due to increased current liabilities.
7. The overall net working capital has been increased by Rs.32.19 crores, due to
increased current assets.
8. The net working capital position of the company was satisfactory.

STATEMENT SHOWING CHANGES IN WORKING CAPITAL


FOR THE YEAR ENDED 2009-2010
(Rs. In Crores)

As on 31st December

Changes in Working capital

PARTICULARS
2009(Rs)

2010(Rs)

Increase(Rs)

Decrease(Rs)

Inventories

54.81

70.25

15.44

---

Sundry Debtors

22.84

62.01

39.17

---

1.26

3.57

2.31

---

17.70

35.68

17.98

---

96.61

171.51

74.90

---

Current liabilities

18.49

26.58

---

8.09

Provisions

15.16

11.10

4.06

---

TOTAL CURRENT LIABILITIES(B)

33.65

37.68

4.06

8.09

NET WORKING CAPITAL =(A-B)

62.96

133.83

78.96

8.09

Increase / Decrease in Net Working

70.87

---

----

70.87

133.83

133.83

78.96

78.96

CURRENT ASSETS

Cash and Bank Balance


Loans and advances

TOTAL CURRENT ASSETS (A)


CURRENT LIABILITIES

Capital
TOTAL

INTERPRETATIONS:
From the above table, it can be observed that
1. Inventories were increased by Rs.15.44 crores, due to increased purchases.
2. Sundry debtors were increased by Rs.39.7 crores, due to increase in credit sales.
3. Cash and bank balances were increased by Rs.2.31 crores, due to increased cash sales.

4. Loans and advances were increased by Rs.17.98 crores, due to the company have
provided more loans to the employees and also advanced to the suppliers of raw
materials.
5. Current liabilities were increased by Rs.8.09 crores, due to increase in creditors.
6. Provisions were decreased by Rs.4.06 crores, due to increased cash and bank
balances.
7. Total current assets were increased by Rs.74.9 crores, due to increased debtors and
loans and advances.
8. The overall net working capital has been increased by Rs.70.87 crores. Hence, the
working capital position of the company satisfactory.

STATEMENT SHOWING CHANGES IN WORKING CAPITAL


FOR THE YEAR ENDED 2010-2011
(Rs. In Crores)

As on 31st December

Changes in Working capital

PARTICULARS
2010(Rs)

2011(Rs)

Increase(Rs)

Decrease(Rs)

Inventories

70.25

74.50

4.25

---

Sundry Debtors

62.01

67.01

5.0

---

Cash and Bank Balance

3.57

4.53

0.96

---

Loans and advances

35.68

45.34

9.66

---

171.51

191.38

19.87

---

Current liabilities

26.58

31.06

---

4.48

Provisions

11.10

8.55

2.55

---

TOTAL CURRENT LIABILITIES(B)

37.68

39.61

2.55

4.48

NET WORKING CAPITAL =(A-B)

133.83

151.77

22.42

4.48

Increase / Decrease in Net Working

17.94

---

---

17.94

151.77

151.77

22.42

22.42

CURRENT ASSETS

TOTAL CURRENT ASSETS (A)


CURRENT LIABILITIES

Capital
TOTAL

INTERPRETATION:
From the above table, it can be observed that
1. Inventories were increased by Rs.4.25 crores, due to increased purchases.
2. Sundry debtors were increased by Rs.5.00 crores, due to increase in credit sales.
3. Loans and advances were increased by Rs.9.66 crores, due to company provided
advances to suppliers.

4. Current liabilities were increased by Rs.4.48 crores, due to increase in creditors.


5. Provisions were decreased by Rs.2.55 crores, due to increased bank balances.
6. The overall net working capital has been increased by Rs.17.94 crores, due to increase
in current assets.
7. The net working capital position of the company was satisfactory.

STATEMENT SHOWING CHANGES IN WORKING CAPITAL


FOR THE YEAR ENDED 2011-2012
(Rs. In Crores)

As on 31st December
PARTICULARS

Changes in Working capital

2011(Rs)

2012(Rs)

Increase(Rs)

Decrease(Rs)

Inventories

74.50

69.19

---

5.31

Sundry Debtors

67.01

55.17

---

11.84

Cash and Bank Balance

4.53

6.80

2.27

---

Loans and advances

45.34

49.21

3.87

---

191.38

180.37

6.14

17.15

Current liabilities

31.06

18.72

12.34

---

Provisions

8.55

9.56

---

1.01

TOTAL CURRENT LIABILITIES(B)

39.61

28.28

12.34

1.01

NET WORKING CAPITAL =(A-B)

151.77

152.09

18.48

18.16

0.32

---

---

0.32

152.09

152.09

18.48

18.48

CURRENT ASSETS

TOTAL CURRENT ASSETS (A)


CURRENT LIABILITIES

Increase / Decrease in Net Working


Capital
TOTAL

INTERPRETATION:
From the above table, it can be observed that
1. Inventories were decreased by Rs.5.31 crores, due to decreased purchases.
2. Sundry debtors were decreased by Rs.11.84 crores, due to decrease in credit sales.
3. Cash and bank balances were increased by Rs.2.27 crores, due to collection of amount
from sundry debtors.
4. Loans and advances were increased by Rs.3.87 crores, due to the company provided
loans to the employees.

5. Current liabilities were decreased by Rs.12.34 crores, due to decrease in amount of


credit purchases.
6. Provisions were increased by Rs.1.01 crores, due to decrease in sundry debtors.
7. The overall net working capital has been increased by Rs.0.32 crores, due to increase
in current assets.
8. The net working capital position of the company was showing average performance.

CURRENT RATIO:
Current ratio is the common ratio for measuring liquidity, being related to working
capital analysis; it is also called as the current ratio, which expresses the relationship
between current assets and current liabilities. The current ratio is the ratio of total current
asset to total current liabilities. It is calculated by dividing current assets by current
liabilities.
FORMULA:

Current Assets
Current ratio= --------------------------Current Liabilities

Standard Current Ratio: Generally 2:1 is considered as ideal for the concern

CURRENT RATIO TABLE:

( Rs.

In

Crores)

Years

Current Assets(Rs)

Current liabilities (Rs)

Ratio

2007-2008

53.12

22.35

2.37

2008-2009

96.61

33.65

2.87

2009-2010

171.51

37.68

4.55

2010-2011

191.38

39.61

4.83

2011-2012

180.37

28.28

6.37

692.99

161.57

4.28

Average Current Ratio

INTERPRETATION:
1. The analysis shows that the current ratio of the company has been showing an
increasing trend during the period of the study.
2. The increase in the current ration is 4.28:1 due to the increase of current assets over
the current liabilities.
3. The average current ratio is 4.28:1. So the companys liquidity position is satisfactory.
4. The current ratio reveals that the companys short-term funds are locked in current
assets.
5. It shows the inefficient management of current assets.

QUICK RATIO:

Quick ratio is also known as liquidity ratio or acid test ratio or near money ratio. It is
the ratio between quick or liquid and current liabilities. This ratio is calculated by
dividing the quick assets by the current liabilities.

FORMULA:
Quick Assets
Quick ratio= -------------------------------Current Liabilities

Standard for Quick Ratio: Generally 1:1 is considered as ideal for the concern.

QUICK RATIO TABLE:


Years

(Rs. In Crores)

Current Assets (Rs)

Current liabilities (Rs)

Ratio

2007-2008

18.61

22.35

0.83

2008-2009

41.8

33.65

1.24

2009-2010

101.26

37.68

2.68

2010-2011

116.88

39.61

2.95

2011-2012

111.18

28.28

3.93

389.73

161.57

2.41

Average Quick Ratio

INTERPRETATION:
1. The analysis shows that the quick ratio was increasing from year to year during the
period of the study.
2. In the year 2011-2012 the ratio was satisfactory, because of increased quick assets.
3. The average quick ratio is 2.41:1. So, the liquidity position of the company is
satisfactory.
4. Ever though the liquidity position is good, the analysis showing that there are idle
funds locked in quick assets.
5. It reflects the inefficient management of short-term funds, it should be avoided.

WORKING CAPITAL TURNOVER RATIO:


This ratio indicated the velocity of the utilization of net working capital. This ratio
indicates the number of times the working capital is turned over into sales in the course of
a year. The ratio measures the efficiency with which the working capital is being used by
a firm. A higher ratio indicates the efficient utilization of working capital and a low ratio
indicates otherwise.

FORMULA:
Cost of goods sold
Working capital turnover ratio =

--------------------------Working capital

Working capital = Current assets-Current Liabilities

WORKING CAPITAL TURNOVER RATIO TABLE: (Rs. In Crores)


Years

Current Assets

Current liabilities (Rs)

Ratio

(Rs)

2007-2008

107.82

30.77

3.50

2008-2009

151.37

62.96

2.40

2009-2010

160.78

133.83

1.20

2010-2011

204.46

151.77

1.34

2011-2012

269.64

152.09

1.77

894.07

531.42

1.68

Average Working
Capital Turnover Ratio

INTERPRETATION:
1. By observing the above working capital turnover ratio table, the ratio was showing
fluctuating trend during the study period.
2. The ratio was showing an increasing trend from 2010-2011 to 2011-2012, due to
increased net sales.
3. In the year 2009-2010. It is having a less working capital turnover ratio of 1.20 times,
because of increased expenses.
4. The average working capital turnover is 1.68:1. So, the company is not efficiently
managing its working capital.

ABSOLUTE LIQUID RATIO:


Absolute liquid ratio is also called as cash position ratio. This ratio established
the relationship between the absolute liquid assets and current liabilities. Absolute
liquid assets include cash in hand, cash at bank, and marketable securities.
The optimum value for this ratio should be one, i.e., 1:2

Formula:
Absolute liquidity ratio = ( Cash In Hand and Bank + Marketable Securities )/
Current Liabilities

ABSOLUTE LIQUID RATIO TABLE:


Years

Absolute liquid

(Rs. In Crores)

Current liabilities (Rs)

Ratio

Assets (Rs)

2007-2008

1.78

53.12

0.033

2008-2009

1.26

96.61

0.013

2009-2010

3.57

171.51

0.021

2010-2011

4.53

191.38

0.024

2011-2012

6.80

180.37

0.038

Average Absolute Liquid

17.94

692.99

0.026

Ratio

INTERPRETATION:
1. By observing the above absolute liquid ratio table, it is fluctuating year to during the
period of the study.
2. The ratio was showing an decreasing trend from 2007-2008 to 2008-2009, due to
decreased cash and bank balances.
3. In the year 2010-2011 to 2011-2012, the absolute liquid ratio is in better position by
comparing the other years.
4. The average absolute liquid ratio is 0.026 times. So, the companys liquidity position
of the company is satisfactory.

INVENTORY RATIO:
In order to ascertain that there is no overstocking, the ratio of inventory to working
capital should be calculated. It is worked out as follows:

FORMULA:
Inventory
Inventory Ratio =

------------------------Working capital

INVENTORY RATIO TABLE:


Years

(Rs. In Crores)

Inventory (Rs)

Working capital (Rs)

Ratio

2007-2008

30.40

80.29

0.37

2008-2009

34.51

30.77

1.12

2009-2010

54.81

62.96

0.87

2010-2011

70.25

133.83

0.52

2011-2012

74.50

151.77

0.49

264.47

459.62

0.674

Inventory Ratio

INTERPRETATION:
1.

The analysis shows that the Inventory Ratio was decreased from year to year
during the period of study.

2.

In the year 2008 to 2009 the inventory was satisfactory, because of increased
inventory ratio.

3.

By observing the above Inventory Ratio table, it is fluctuating year to during


the period of the study.

4.

From the year 2008-2012 the ratio was continuously decreasing.

5.

The companys Inventory Management is not satisfactory.

CHAPTER - V

CONCLUSIONS
AND
SUGGESTIONS

CONCLUSIONS

1. During the study period inventories have been showing an increasing trend, except in the
year
2011-2012.
2. Current assets were increased during the study period.
3. The analysis reveals there are more idle funds in current assets.
4. The analysis shows that the company is showing more funds in quick assets than the
required
5. Loans and advances were increased during the study period.
6. During the study period sundry debtors have been showing an increasing trend, except in
the
Year 2011-2012.
7. Cash and bank balances were increased during the study period.
8. During the study period the company is having more funds in current assets. It shows that
there are Non Performing Assets with company.

SUGGESTIONS
1. The company has to take proper measures to improve its working capital position.
2. It is better to offer credit facility to the same extent to its customers in order to
increase the sales.
3. The company has to maintain cash balances to meet daily requirements as per
standards.
4. The company has to manage current assets properly to improve liquidity position.
5. The company has to manage its funds in quick assets properly.
6. The company has to make policies to improve its efficiency in managing inventory
and Debt management services.
7. The idle funds, which were locked in current assets, should be utilized properly.

BIBLIOGRAPHY

BIBLIOGRAPHY

TITLE OF THE BOOK

AUTHOR

PUBLISHERS

Management Accounting,

Shashi K Gupta & R.K.Sharma

Kalyani

Financial Management,

M.Y.Khan and P.K.Jain

Tata McGraw-Hill

Financial Management,

S.N. Maheshwari

Sultan Chand & Sons

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