Finance WC Ankur

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WORKING CAPITAL

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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 firms 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 shortterm debt and upcoming operational expenses.

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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 shortterm 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 materialsand minimizes reordering costsand 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.

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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 goods
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.

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OPERATING CYCLE OF MANUFACTURING BUSINESS

Realization

Sales
Accounts Receivable

Cash

Finished Goods

Purchases

Production
Production
Raw Materials

Work-in-progress

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CONCEPT OF WORKING CAPITAL

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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 firms 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 creditors 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.

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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 organizations 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.

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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.

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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 doesnt 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.

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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.

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RESEARCH METHODOLOGY

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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 ones 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.

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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 IndiaMart 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 IndiaMart. 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 companys balance sheet then I came to know since 3- 4 years they are in loss.
Companys expenses and current liabilities are more than profit and current assets respectively.

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OBJECTIVES OF THE STUDY

To study the various components of working capital.

To analyze the liquidity trend of IndiaMart Ltd.

To appraise the utilization of current asset and current liabilities and find out shortcomings if any.

To suggest measure for effective management of working capital.

To measure and evaluate the liquidity and profitability position of IndiaMart Ltd.

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LIMITATIONS OF THE STDY

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

IndiaMart 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 IndiaMart have given less information and data.

Lot of time consumed during survey.

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RESEARCH DESIGN

Problem: In IndiaMart, 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 IndiaMart in Others Industry, Alibaba Industry.

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

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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 companys working capital i.e. debtors, creditors,
receivables, payables, stock cycle etc. I have done survey in different glass industry i.e. Others
Industry, NSD Global Trade Pvt Ltd to collect data.

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

Sample Size Distribution


Department
Production
Marketing and Distribution
Finance
Total
Source: Primary Data

No of Respondents
5
15
20
30

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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 organization; 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.

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COMPANY PROFILE

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IndiaMART.com is India's largest online B2B marketplace for


Small & Medium Size Businesses, connecting global buyers
with suppliers. The company offers a platform & tools to over
1 million suppliers to generate business leads from over 5
million buyers, who use the platform to find reliable &
competitive suppliers. The company has over 4000
employees located across 75 offices in the country. Its
existing investors include Intel Capital and Bennett, Coleman
& Co. Ltd.

IndiaMART.com offers products that enable small & medium


size businesses generate business leads (online
catalogs/store-fronts), establish their credibility (third party
verified trust profile) and use business information (finance,
news, trade shows, tenders) for their business promotion.

IndiaMART.com has won numerous awards over the years,


which include coveted Red Herring Award, Emerging India
Award, among others. The company has also been widely
covered by media for its pioneering role in promoting SME
business in the country.

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Its existing investors include Intel Capital and Bennett,


Coleman & Co. Ltd (Times Group), India's largest print media
group.

IndiaMART Knowledge Services: An in-house unit involved in


SME research, forecasting, analysis and education. It
conducts independent surveys, etc. & holds workshops for
SMEs to educate them on specific areas such as Marketing,
IT, etc.

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The Board of Directors


Mr. DINESH AGARWAL
FOUNDER & CEO, IndiaMART.com
Dinesh Agarwal is the founder and CEO of
IndiaMART.com, India's largest online B2B
marketplace connecting Indian suppliers with
domestic and international buyers. Founded in 1996,
Dinesh is credited with leading IndiaMART.com through a decade
and a half with an unblemished record of being profitable from d
ay one - a feat no other online company in India has been able to
emulate.
Mr. BRIJESH AGRAWAL
COO, IndiaMART.com
Brijesh Agrawal is the Chief Operating Officer,
IndiaMART.com. Being a part of the core management
team, Brijesh has been the brainchild behind the
creation of a plethora of innovative products of IndiaMART.
Mr. DEEP KALRA
FOUNDER & CEO, MakeMyTrip.com
Deep Kalra holds rich past experience at GE
Capital, AMF Bowling Inc. and ABN AMRO Bank. He is
a member of the Executive Council of NASSCOM and
chairs the NASSCOM Internet Working Group.

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Mr. M. K. Chouhan
MANAGING DIRECTOR, Mahendra&Ardneham Consulting
(P) Ltd.
Mr. RAJESH SAWHNEY
PRESIDENT, Reliance Entertainment Private Ltd.

Core values
For us they are simple and straight; take responsibility, work with passion and commitment,
move ahead as a team and conserve the integrity.
We firmly believe that core values keep organizations stable and focused to the common goal.
Our core values have helped us achieve our mission to bring measurable benefits to our
customers.
Responsibility

Responsibility, not just of quality work but of


continuous self-development, of
our
decisions and of our actions. This helps us think
rationally and provides a sense of accountability
to ourselves, our commitment to customers and to
our colleagues.
Passion

Work at IndiaMART.com involves constant innovation and


creativity. It involves a continuous thought process to get tangible
benefits to our customers, taking into account the uniqueness of
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their purpose. Passionate people with a determination to make


the difference are the ones who make this possible.

Team Work

Together we can achieve the impossible" is our


belief. Our success is a result of our team
work. Experts from the field of
management, marketing, IT, arts,
content & various other disciplines work as a team on
every project, every endeavour. Dedication, passion
and teamwork are the true means to our mission
fulfillment.

Integrity

We realize the importance of the job &


information we handle. We understand the
responsibility that each member of our team has
to shoulder and we do that with highest levels of
trust, honesty and integrity - of purpose and
action.

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Awards & Achievements


Success of our customers is our greatest achievement. Their confidence in us and our innovation,
to give them the best, has got us applauds from various sources.
IndiaMART.com wins the Red Herring 100 Asia Awards 2008

IndiaMART.com nominated among the top three at Emerging India Awards 2008

IndiaMART.com's successful business model featured on CNBC India as analyzed by


McKinsey

Bestowed with "Amity Corporate Excellence Award" on the occasion of the Tenth
Business International Horizon INBUSH 2008

Recognized by Business Money (UK's leading financial magazine) for IndiaMART's


ten years of successful contribution to Indian businesses

Declared as India's only profit-making dotcom company by Business World (Cover


story)

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Special footage for IndiaMART.com's contribution in enabling e-business for exporters


from Moradabad; Mr Dinesh Agarwal interviewed (India Tomorrow - BBC News)
www.indiantravelportal.com bags eighth "BIG" Award from
Britannicaindia.com

IndiaMART.com nominated for Britannica Internet Guide (BIG) Awards for


excellence on Internet

IndiaMART.com listed among Top Indian Websites under Business-to-Business


category by Ecomready Top Indian Site by www.indiatimes.com

Termed as 'Online Gateway to Indian marketplace'- The Economic 7Times

Best Travel Site- www.indiantravelportal.com by India Online: DD News

Site of the day - Handicraft.IndiaMART.com by Zee News

Listed in the Top Indian IT organisations survey by Dataquest

Nominated amongst the Top 5 Indian Sites by Microsoft.

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Fact Sheet

We endeavor to maximize value for our customers by


offering them efficient and cost-effective solutions for business
promotion, process support and transaction accomplishment.

1996-97

IndiaMART.com, India's first online B2B directory, launched

Successfully introduces free listing & free-query forwarding concept to familiarize Indian
SMEs with benefits of Internet for business promotion

Accomplishes India's first e-commerce project for Nirula's (http://nirulas.com)

Achieves break-even within 6 months of the launch

1997-98

Successfully crosses 100 clients mark

Initiates franchisee network program

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1998-99

Launches Handicraft, Apparel & Finance channels

Increases workforce to 40

B2B marketplace network surges to 1 million page views/month mark

1999-2000

Accomplishes 'Bharat On Line' - MTNL's online portal project

Launches auto industry channel

Opens branch office in financial hub of India - Mumbai

Crosses Rs 1 crore revenue mark

2000-01

Touches 5 million page views/month

Crosses 1000 clients mark

Registers 100,000 business queries/month

Accomplishes prestigious online projects for HHEC, Jindal Organization, ModiCorp

Wins Britannica (BIG) Award for Travel.IndiaMART.com

Profits increased by 128% over last year

Company becoming limited, from InterMESH Systems, to IndiaMARTInterMESH


Limited

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2001-02

Business World magazine declares IndiaMART.com as "the only profitable Indian


Dotcom, with positive cash flows" [Cover Story: 14 May 2001 issue]

Adds exclusive services to its portfolio - Electronic Trade Offers & Request for
Quotation / Request for Proposal

CNBC India recognizes IndiaMART.com as one of the only profitable dotcoms in India
based on report by McKinsey

2002-03

Moves operations to state-of-the-art NOIDA development center

Launches Exim.IndiaMART.com

Crosses 200,000 business queries mark with 12 million page views

2003-04

Launches TrustSEAL to bridge the trust gap in B2B trade

Crosses 3000 clients mark

Touches 26 million page views per month, generating more than 300,000 business
queries

2004-05

Becomes first ISO 9001:2000 company in its domain

Surpasses 8000 clients mark

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2005-06

IndiaMART.com completed ten successful years (1996-2006)

Crossed 10,000 clients mark

Launches MDC, a four-page online catalog for clients

Implements corporate-wide WEBERP

Acquires new office at B-6, Sec 8, NOIDA

2006-07

BCCL (Times of India Group) makes strategic investment in IndiaMART.com

Launches new Templated Product Catalogs

2007-08

Launches IndiaMART Sourcing Guide

Commences International Trade Fair Participation initiative

Wins 'Amity Corporate Excellence Award 2008'

Wins 'ShiromaniYojanaPuraskar' award

5,00,000 members registered on IndiaMART.com

2008-09

Intel Capital makes strategic investment in IndiaMART.com

Wins 'Emerging India Award 2008' as a second runner-up

Wins 'Red Herring 100 Asia 2008' award

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Launches Video Profiles for "Leading Suppliers"

IndiaMART.com footprints cover over 100 towns in India

Participates in more than 100 international & 200 domestic trade shows

2009-10

IAMAI declares IndiaMART.com as India's largest online B2B marketplace

Mr. Deep Kalra (Founder & CEO of Makemytrip.com) & Dr. NachiketMor (President,
ICICI Foundation) join IndiaMART.com Board of Directors

More than 300,000 products listed on IndiaMART.com

2010-11

Takes a giant leap in SME space & launches 'IndiaMART Leaders of Tomorrow Awards'

IndiaMART.com member base surges to 1 million suppliers

Celebrates 14 years of grand success

Launches FREE tenders service - a first in India

Being a socially responsible corporate, associates with "MeriDilliMeri Yamuna"


campaign

The SmartTechie ranks IndiaMART.com among India's '25 Most Promising Internet Cos.'

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Dynamic Catalog

A comprehensive online marketing program that provides enhanced enquiry generation.

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Trust Seal

Trust Seal is a business verification service that checks supplier's records of existence,
credibility and trustworthiness for the benefit of buyers.

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Star Supplier
With Star Supplier to your support, you can get premium
positioning among suppliers in all the relevant categories.

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Leading Supplier

Leading Supplier is the right choice for companies who have


a right mix of infrastructure, management capabilities and
experience in servicing global buyers.

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Banner Advertising
Build your brand & drive traffic to your website with Banner
Advertising

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FIVE YEARS FINANCIAL PERFORMANCE OF INDIAMART

(Rs in crores)

TABLE 3:
Financial Performance

2012-13

2011-12

2010-11

2009-10

2008-09

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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

-8.97

-0.57

-96.21

1.31

3.17

-16.00

-52.64

-63.90

2.52

2.12

0.07

0.08

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

54.98

Net Worth

340.11

160.59

141.94

33.55

33.55

33.55

28.80

28.00

1.45

4.20

138.06

197.53

305.11

127.59

113.94

171.61

231.08

340.11

160.59

141.94

Profit Before Taxation


Profit After Taxation
Earning Per Share
Balance Sheet

Share Capital
Share Warrant / Share Application
Money
Reserved and Surplus
Net Worth
Source: Secondary data

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DATA ANALYSIS AND INTERPRETATIONS

DATA ANALYSIS AND INTERPRETATIONS

Relationship between Receivables and Payables.

(Rs. in crore)

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Year

Receivables

Payables

2013-14

66

55

2012-13

35

30

2011-12

24

18

2010-11

32

121

2009-10

22

73

179

297

Total
Source: Secondary data
140

121

120
100
80

Rs. in crores

60

66

73
55
35

40

30

24

32
18

Receivales
Paybles

22

20
0
2013-14 2012-13 2011-12 2010-11 2009-10

Years

INTERPRETATION:
It is inferred that there is poor 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.

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

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2012-13

32

26

2011-12

14

40

2010-11

96

67

2009-10

75

50

250

193.5

Total
Source: Secondary Data

120
100
80
60
Rs. in crores

40

Short term borrowings


Short term loans & advances

20
0

Years

INTERPRETAION:
The relationship between short term borrowings and loans & advances is
poor. 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.

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Cash Conversion Cycle


Year

Days

2013-14

53

2012-13

135

2011-12

-357

2010-11

40

2009-10
Source: Secondary Data

47

CCC
200
100

No. of days

0
2013-14
-100

2012-13

2011-12

2010-11

2009-10

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.

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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

Rs. In Crores

180
160
140
120
100
80
60
40
20
0

Current Assets
Current Liabilities

Years

INTERPRETATION:
On an average companys 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.

Relationship between Total sales and Expenditure

(Rs. In Crore)

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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

FIVE YEARS SALES PERFORMANCE


300.00
250.00
200.00

AMOUNT

Sales
Expense

150.00
100.00
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.

COMPARISON WITH COMPETITORS


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Respondents from different Company


Respondents

No. of Respondents

IndiaMart Ltd.

20

Alibaba Pvt. Ltd

Others Pvt. Ltd.

Total

30

Percentage of Respondents

17%

India Mart Ltd


Alibaba Pvt Ltd
Others Pvt Ltd

17%
67%

INTERPRETATION:

From the above graph, more number of respondents from IndiaMart


that is 67%. 17% from Others and 16% from Alibaba. All employees were matured and well
educated. Most of the employees have more than 3years experience. Respondents have
cooperated well during the survey.

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Companys Collection Period


IndiaMart
(Frequency)

Alibaba
(Frequency)

Others
(Frequency)

0-30 days

50%

20%

0%

30-60 days

39%

80%

20%

60-90 days

0%

0%

40%

Above 90 days

11%

0%

40%

Respondents

Source: Primary data

No. of Respondents

10
9
8
7
6
5
4
3
2
1
0

India Mart Pvt


Alibaba Pvt Ltd
Others Pvt Ltd

No. of Days

INTERPRETATION:
From the above table 50% respondents of IndiaMart is saying collectin
money 0-30 days. It is excellent compare to others like Alibaba & Others. 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 Alibaba is doing better than IndiaMart Alibaba 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.

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Companys Payable Period


IndiaMart
(Frequency)

Alibaba
(Frequency)

Others
(Frequency)

0-30 days

24%

20%

0%

30-60 days

47%

80%

40%

60-90 days

11%

0%

60%

Above 90 days

18%

0%

0%

Respondents

Source: Primary data

8
7
6
5
4
No. of Respondents

India Mart Pvt Ltd


Alibaba Pvt Ltd
Others Pvt Ltd

2
1
0

Days

INTERPRETATION:
From the above table 47% respondents of IndiaMart 80 % of Alibaba they
used to take 30-60 days. IndiaMart is pulling credit days above 90 days whereas other

47 | P a g e

competitors are not doing. Even though Others also extending upto 90 days. So company should
always count forward creditors days as far as possible to run company effectively.
Companys Inventory Cycle
IndiaMart
(Frequency)

Alibaba
(Frequency)

Others
(Frequency)

Less than
30 days

39%

20%

60%

30-60 days

44%

80%

40%

17%

0%

0%

Respondents

More than
60 days
Source: Primary data

Inventory Cycle

No. of Respondents

9
8
7
6
5
4
3
2
1
0

India Mart Pvt Ltd


Alibaba Pvt Ltd
Others Pvt Ltd

Days

INTERPRETATION:
From the above table 39% of respondents of Indiamart, 20% of Alibaba
and 60% of Others taking less than 30 days its pretty good. 44% of Indiamart , 80% of Alibaba,
and 60% said 30-60 days. Here Indiamart is much better than others but it should not take more

48 | P a g e

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.
Credit Risk in Company
IndiaMart
(Frequency)

Alibaba
(Frequency)

Others
(Frequency)

Bellow 5%

22%

100%

40%

5-10%

45%

0%

40%

Over 10%

33%

0%

20%

Respondents

Source: Primary data

12
10
8

No. of Respondents

Others Pvt Ltd


Alibaba Pvt Ltd
India Mart Pvt Ltd

4
2
0

Bellow 5%

5-10%

Over 10%

Percentage

INTERPRETATION:
From the above table more credit risk is in Indiamart that is 33%
respondents said over 10% whereas Alibabas risk is bellow 5% . Even Othress risk is also less
compare to Indiamart. If there are more credit risk then company should take advance receipts
from customers or dealers so that these things may not be happened.

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Bad debt level in Companys Accounts Receivables


IndiaMart
(Frequency)

Alibaba
(Frequency)

Others
(Frequency)

Bellow 1%

6%

0%

20%

1%-5%

44%

100%

60%

6%-10%

28%

0%

20%

Over 10%

22%

0%

0%

Respondents

Source: Primary data

Over 10%

6%-10%
Percentage

Others Pvt Ltd


Alibaba Pvt Ltd
India Mart Pvt Ltd

1%-5%

Bellow 1%
0

8 10 12
14 16

No. of Respondentse

INTERPRETATION:
From the above table the bad debt level of IndiaMart is more compare to
others i.e. 1% to 10%. Whereas Alibabas bad debt level is upto 5%. This is also one the reason
for IndiaMart 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.

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Discount Offer to Customers for Prompt Payment


IndiaMart
(Frequency)

Alibaba
(Frequency)

Others
(Frequency)

Yes

15

83%

80%

40%

No

17%

20%

60%

Respondents

Source: Primary data

Yes
No

INTERPRETATION:
From the above table more than 80% of the respondents from Indiamart
and Alibaba, 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 | P a g e

Reminding customers by phone to pay the balance amount


IndiaMart
(Frequency)

Alibaba
(Frequency)

Others
(Frequency)

Weekly

10

56%

80%

40%

Monthly

22%

20%

60%

Quarterly

22%

0%

0%

Annually

0%

0%

0%

Respondents

Source: Primary data

25
20
15
No. of Respondents

Others Pvt Ltd


Alibaba Pvt Ltd
India Mart Pvt Ltd

10
5
0
Yes

No

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

52 | P a g e

How often does company review its working capital


IndiaMart
(Frequency)

Alibaba
(Frequency)

Others
(Frequency)

Weekly

11%

100%

10%

Monthly

28%

0%

40%

Quarterly

33%

0%

40%

28%

0%

0%

Respondents

Whenever
Necessary
Source: Primary data

6
5
4
3
No. of Respondents

India Mart Pvt Ltd


Alibaba Pvt Ltd
Others Pvt Ltd

1
0

INTERPRETATION:
From the above table 100% respondents of Alibaba said they are doing
weekly working capital review so that they can arrange fund from other sources whereas
maximum respondents of Indiamart 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.

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FINDINGS OF THE STUDY

54 | P a g e

Findings
After I completed my training in indiaMART, I had a very mixed experience regarding the online
promotions . My analysis showed the customr were very happy in interacting with Indiamart
.Indiamart is having a very good standing in the market at the present market outset. Being an
online promotional company , they have taken subtle online promotional strategies which is
fruitful for the company. During this session ,I had managed to interact to many buyers ,prepared
the questionnaire for their buyers perception towards the activities of Indiamart.com and I come
up with the companys positive and the negative aspects along with some limitations.
1. Some of the important findings in Indiamart was that most of the Buyers were very
reluctant to spend money on the online Purchasing of products.
2. They have a very good knowledge of the online retail websites which are prevalent in the
market and they are interested also.
3. They are also aware of the other competitors in the market like alibaba.com,
tradeindia.com, etc
4. Most importantly they have enough faith on indiamart.com and they are very much
interested in buying the product through the indiamart as they know the number of
Suppliers in Indiamart are very high.
5. They are also in the belief that if they want to Buy product globally globally, online
purchasing are necessary.
6. During the interaction with the buyers ,it was very much clear of the fact that the service
rendered by indiamart is of supreme quality and they want to be the client of the
company.

ANALYSIS
Thus it could be said the company is in a good position in the market and
is expected to have a bright future ahead.

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LIMITATIONS OBSERVED

Following are some limitations which affect our performance in the organization. Indiamart.com
is providing eminent facilities so as to increase and maintain the performance of each and every
employee in the organization.
1. Some of the suppliers are satisfied with the present status of their Purchases. They dont want
to buy further due to limited money or lack of vision and like to avoid risk.
2. The price factor also plays key role in generating leads because aware customers are likely to
respond to that services which offer maximum advantages at minimum cost. For e.g.
tradeindia.com provides almost same services but at considerably low amount as compared to
indiamart.com.
3. Some of the clients are not able to afford the cost or price that indiamart.com offers. It
necessitates keeping record of their status at regular interval. For e.g. with the help of
appointment at regular intervals, the probability of converting the prospect into regular client can
be found out.
4 .Many of the clients had bad experiences as a result they have withdrawn from it. The most
likely reasons are late service or late delivery.
.
5. Most of the organizations are controlled from their respective headquarters as a result the
decision remains pending for a long period of time. Regular follow up is required to maintain
their proper status.
6. The absence of respective departmental head because of meetings or on leave requires follow
up on continuous basis.
7. Some of the clients are very satisfied with market locally and so they do not go for online
marketing.

8.Few clients are satisfied with their present service provider in all respect so they dont want to
change it.
9. Some of the organizations are positive about online promotional services but they cant afford
it at present

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RECOMMENDATION

57 | P a g e

Recommendations
For an effective online promotional marketing strategy for a manufacturer, there are some
recommendations which need to be followed so as to increase the revenue of the company.

REGISTRATIONS AT B2B MARKETPLACES


Leveraging services of an online B2B marketplace opens up numerous doors of
opportunities. It offers both options for registrations free and paid. The latter offers
additional features to enhance business prospects. To gain maximum exposure
manufacturing companies should register at many online B2B marketplaces as possible
and be visible to buyers visiting from across the globe.

BUILD A WEBSITE
A website that covers complete product and company information along with client
testimonials has become a prerequisite for manufacturers looking for web presence.
Updating the product catalogue and other latest happenings such as trade fare
participations at regular intervals is also essential to keep the customers and visitors
interest. The company must be prompt in replying to business queries from buyers over
email or phone.

SEARCH ENGINE OPTIMISATION

Also the manufacturer firms should register themselves at Google Local , Google Maps, and
similar services across all search engines, both major and minor.

EMAIL MARKETING
A concrete database of the target customers from a reliable source should be obtained
and send mailers using a service that gives detailed statistics of its rate ,click through ,etc.

58 | P a g e

BUILD TRUST
Online marketing is mainly based on trust. You can capitalize on mechanism which
bridge the trust gap associated with the online medium and enhance your
credibility.Indiamart.com has a business verification service Trust Seal and that needs to
be used in a very fair way to obtain the customers trust.

SOCIAL MEDIA MARKETING:


It is a powerful tool to speed the word about your company and increase network
possibilities , social media , holds immense potentials. Sending regular update messages
in your LinkedIn network , updating companys products at various blogs,uploading
product pictures on photo sharing sites like Flickr,putting product videos on all video
sharing siteslike You Tube, placing company presentations and documents on document
sharing sites, such as Slide shares, Scribd,etc can improve the suppliers perceptions over
the online promotional products.

59 | P a g e

CONCLUSION

60 | P a g e

Conclusions
The main purpose of Dissertation is to gain practical knowledge and apply our skills in practical
and real environment. It is the time when we have to sharpen our skills, abilities and knowledge
which would help me in getting final placement.
In Indiamart.com, I have got an opportunity to explore my potential. By preparing extensive
research reports I have attained fundamental knowledge of online promotional services, its
scope, the suppliers perceptions towards the different online promotional tools provided by the
company and its importance in coming years. I have also come across various technicalities
related to online promotional services. I am very confident that after completing my internship in
Indiamart.com Company I would have mastered in various online promotional services.
The purpose of this study was to give an insight to customer preferences in the services market,
and the objectives were achieved to some extent. The research results of this study provide new
information as to which areas more effort should be put into. The research could have been
more extensive to get a deeper view of the customers opinion on the product itself, even though
the research provided a general picture of the market preferences.

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REFERENCES

62 | P a g e

References:Kotler, Philip Marketing Managementpublished byVikaspublishing house Pvt. ltd.


New Delhi.
Kothari, C. R. .Research Methodology. (third. edition 2007) published by. new age
international (P) ltd.
CMA Magazine (Cement Manufacturers Association)
Aaker, D.A. and Shansby, J. (1982) Positioning your Product, Business Horizons, 25,
(May/June), 56-62
Crawford, C. M. (1985) A New Positioning Typology, journal of Product Innovation
Management, 4 , 243-253

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BIBLIOGRAPHY

Web Based References:-

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http://www.birlacorporation.com
http://www.amzon.com
http://www.wikipedia.com
http://www.answer.com
http://www.cma.com

ANNEXURE
65 | P a g e

Questionnaire
Name:
Designation:

Date:

(Tick as Appropriate)
Section-A: Personal Data
1. Your Age
1) Bellow 25 yrs
2. Gender
1) Male

2)25-29 yrs

3) 30-34 yrs

4) 35 yrs & Above

2) Female

3. What is Your Qualification?


1) Undergraduate
2) Graduate

3) Post-Graduate

4. How long have you been working in this company?


1) Less than 3 yrs
2)3-5 yrs
3) Above 5 yrs
Section-B: Working Capital
5. How would you rate the level of importance by which working capital is placed in the
organization?
1) High
2) Average
3) Low
4) Not at all
6. How many days credit do you give to Customers/ Debtors?
1) 0-30 days 2) 30-60 days 3)60-90
days 4) Above 90 days
7. Is there Bill of Exchange facility in your company? If yes, why dont you release cash
from bank against bill.
________________________________________________________________________
_______________________________________________________________________

8. Do you charge interest if customers/ debtors will pay you after due date?
1) Yes
2) No

66 | P a g e

(If no why?) _____________________________________________________________


9. How many days credit do you take from Suppliers/ Creditors?
1) 0-30 days 2) 30-60 days 3)60-90
days 4) Above 90 days

10. How often does your company remind customers to pay the balance amount?
1) Weekly
2) Monthly 3) Quarterly 4) Annually
11. Do you give discount offer to customers/ Debtors for early payment?
1) Yes
2) No
If No why? ______________________________________________________________
12. What is stock cycle in your company?
1) Less than 30 days 2) 31 days 60 days 3) more than 60 days
13. Rate the percentage of credit risk in your company
1) Less than 5%
2) 5-10%
3) Over 10%
14. What is the bad debt level in your accounts receivable?
1) Less than 1%
2) 1% - 5% 3) 6% - 10% 4) Over 10%
15. How many days do you take to convert into finished goods from the date of purchase of
raw materials?
1) Less than 10 days 2) 10 days - 20 days 3) more than 20 days
16. Do you use banking source to finance your working capital?
1) Yes
2) No
If No why?______________________________________________________________
17. How often does your company review its working capital policy?
1) Weekly

2) Monthly

3) Quarterly

4) Whenever necessary

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