WORKING CAPITAL

MANAGEMENT:
NEBULA HOME PRODUCTS PVT. LTD

Done By: Group 2

Members:
Akshar Alornekar
Joyston T. Brito
Raveena Kuttikar
Sumedha Narvekar
Rishikesh Satardekar
Vandita Nagvekar
Shreya Vasta

Introduction
Nebula Home Products Pvt. Ltd., established in Goa, 1994, is a leading name in the field of
manufacturing and supply of packaging products. Promoters of Nebula are the Mendes family. The
group entered into the packaging business in Bombay with - M/s. Fit-rite Packaging & P. J. Packs and
Prints.They specialize in design and manufacture of Printed and E-Fluted Cartons.Company
manufactures packaging products for some of the most well-known international brands - Colgate,
Nestle, Philips, Balsara and Kodak, among many others. Nabulas packaging suppliers to ColgatePalmolive (I) Ltd. for last 35 years and also promoters of contract manufacturing unit for Colgate tooth
paste since 1992.Nebula is a spin-off that caters 100% of the carton requirements for the Colgate
toothpaste produced in Goa as well as the other contract manufacturers for Colgate in Hyderabad and
the Colgate plants in Himachal Pradesh and Aurangabad. Nebulas manufacturing plant is self-sufficient.
It is equipped with the most modern manufacturing machinery and equipment required for making
Printed E-Fluted Cartons.
Company manufactures packaging products for some of the most well-known international and national
brands such as Colgate Palmolive India Ltd, Nestle India Limited, Unibic Biscuits India Limited, Pioma
Industries ( Rasna), Bio Veda Action research P Ltd, Elder Pharmaceutical Limited, Rialto Enterprises (
ORAL B), Indoco Remedies limited, Unichem India Private limited, Geno Pharmaceutical limited, Geltec
India Limited, Kodak India Limited, Konica , Philips India Limited.
The company is growing at an annual rate of 25% in terms of its scale of operation. The companies
major competitors are ITC, Borker Packaging, TCPL packaging, Parkson Packaging. But it stand 1st in tem
of customer base, volume and service.

INVENTORY MANAGEMENT
Being a packaging industry, the companys raw materials consist of:

Paper Board
Inks
Varnish
Glue/Adhesive
Films (silver foil)

These are the main heads of raw material. Each one has its own classification. They are ordered as per
the requirements of the customers.
The company has a major raw material supply who supplies almost 2/3rd of the materials. 1/3rd of its raw
material requirement is met through small vendors for purpose of safety. The supplier is selected on the
basis of raw material Quality, Service and Price.
The raw materials are finance using companys own revenue which is generated through sales. In event
of shortage short term loans, overdrafts from banks are the source of financing.
Inventories of the company at valued at cost and the company follows the system of recording stock on
the basis of First In First Out method. The stock taking is done on a weekly basis to keep a proper
track of the inventory and to ensure continuous supply of material for production purpose.
The inventory wastage level is kept under control and is maintained at level of 4-6%. This is in
accordance to the standard industry wastage level of 5%.

The following table will give a picture of the period for conversion of raw material into finished good.

Particulars

Amount (Rs)

Raw Material Consumption Period

RM consumption
RM consumption per day
RM inventory
RM inventory holding period

580800000
1613333.333
52500000
33 days

WIP conversion Period

Cost of Production
Cost of Production per day
WIP inventory
WIP inventory holding days

789600000
2193333.333
17500000
8 days

FG conversion period
Cost of goods sold
Cost of goods sold per day
FG inventory
FG inventory holding days

Following are the steps of its manufacturing process in the order of processing:

Printing
Foiling (value addition)
Lamination
Varnishing
Punching
Folding and gluing
Window pasting and lining

162000000
450000
4000000
9 days

DEBTOR MANAGEMENT
Almost 90% of Nebulas sales are on credit basis. 10%is on cash basis that also as advance. Advances are
generally taken from new customers only.
The credit is given to those customers to who are loyal, are reputed companies and who have excellent
credit worthiness.
Nebula has a credit policy which allows it debtors 40 to 45 days days of credit period. After which the
company charges penalty interest of 24% p.a. But the default rate of customers is very low at around
0.5% to 1% only.
In order to appreciate quick payment and bulk purchases, customers are given discount. Volume forms
the criteria for bulk sales and earlier payments is the criteria for cash discount. Discount rate of 1-2% is
provided for early payment.
In case of default of payment the company follows rigorous procedure:

Phone calls
Email
Personal negotiations
Legal action

Sometimes, the debtors collection period has extended to 90 days. The company has had bad debts in
the past. But they have been recovered. The firm have not availed any factoring services.
This table shows the companys debt collecting ability last financial year 2012-13:
Collection Period
Credit Sales
Sales per day
Debtors
Debtors outstanding days

Amount
840000000
2333333.333
105000000
45

Creditors:
The creditors generally extend credit policies varying from 40 days to 45 days. The company claims that
it has been paying all its dues on time. This is supported with following data of FY 2012-13.
Credit deferral period
Credit purchase
Purchase per day
Creditors
Creditors outstanding period

Amount
864000000
2400000
76800000
32

CASH MANAGEMENT
Cash is the life line of any business. Nebula generate enough cash from it sales to meet its day to day
expenses. In case of any cash shortage it uses the overdraft facilities provided by the bank. If still the
cash is not enough for meeting its working capital needs, the short term loans are taken from the banks.
These are its 3 main sources of working capital.
It maintains its current asset to current liability ratio at 1.5:1. The bank generally requires a ratio of 2:1.
But due no default credit worthiness and trust of the Company, the banks make credit available to them
as and when required.
The company keeps a cash balance of Rs.20000 to Rs.30000 in hand every day. This is for the purpose of
meeting immediate daily expense of transportation, wage laborers, refreshments for clients etc.
The company has taken a policy of its cash box. The cheques have joint signatories to them.

CONCLUSION AND SUGGESTIONS

The company is growing at 25% in terms of its revenues.
The business is non-seasonal in nature. The company follows a steady production policy.
Therefore, there is continuous need for working capital management at the factory since the
activities are always high due to stable and high customer demand.
It follows a liberal credit policy. Also its policies defer from customer to customers.
Its plant is highly automated and technology driven. It has 3 printing press, 2 foiling machine, 3
lamination machine, 4 varnishing machine, 4 punching machine and 4 folder & gluing machine
and one window pasting & lining machine.
The company does face a problem at the time of collecting its dues. This can be improved by
raising its discount to a higher level at 4% as against its present practice of 1-2%. This will surely
help in collecting dues at earlier pace, avoiding bad debts and avoiding interest on bank loans.