A

SUMMER TRAINING REPORT

ON
WORKING CAPITAL MANAGEMENT OF HMT LTD. P1NJORE

SUBMITTED TO KURUKSHETRA UNIVERSITY, KURUKSHETRA

IN THE PARTIAL FULFILLMENT OF THE REQUIREMENT
OF THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION (2013-2015)

SUBMITTED TO
MRS. ZEENAT THAKUR

SUBMITTED BY
SEEMA RANI
ROLL NO 121
MBA IIIRD SEMESTER

SWAMI DEVI DAYAL INSTITUTE OF ENGINEERING OF TECHNOLOGY

BARWALA (PANCHKULA, HARYANA)

DECLARATION
I Seema Rani, Student of MBA IIIrd Semester of Swami Devi Dayal Institute of Engineering of
Technology, Barwala, Panchkula, hereby declare the Summer Internship report on WORKING
CAPITAL MANAGEMENT OF HMT LTD. PINJORE, submitted to Kurukshetra University,
Kurukshetra in partial fulfillment of degree of Master of Business Administration is the original
work conducted by me.
The information and data given in the report is authentic to the best of my knowledge.
This summer internship report is not being submitted to any other university for award of any
other degree, diploma or fellowship.
(Seema Rani)

ACKNOWLEDGEMENT
3

Preservation, inspiration and motivation have always played a key role in the success of any
venture. In the present world of competition and success, project is like a bridge between the
theoretical and practical working, willingly I prepared this report. First of all I would like to
thank the supreme power, the GOD who is obviously the one who has always guided me to work
on the right path of my life. I would at the outset to thank
MR. J. K. JAIN (GMF) and also thank to MR. DHARMVEER (manager of accounts
department) for the time to time help in completing this report. I also thank to the staff of H.M.T.
Ltd. Who spent their valuable time in completion of my report?
At last but not the least I am heartily thankful to those entire people who help me directly or
indirectly in completion of my report.

(SEEMA RANI)

PREFACE
Practical training is an important part of theoretical studies. It covers all that which remains
uncovered in the classrooms and the books. It offers all that which remains invaluable treasure of
experience. It provides an exposure to practical of management of business organization.
As we all know that practical training plays an important role of future building of an individual.
One can easily overcome the fear from that life in which he has to join as a member after some
time.
Just theoretical knowledge is not sufficient for the success of an individual so one should have
the practical knowledge about the theory of general life.
I have been given the opportunity to do the practical training in H.M.T. Ltd., PINJORE. I availed
of this opportunity in a very satisfactory manner. I expect that it will be very beneficial for me in
future building.
The analysis of research data is done with the help of tabulation and diagrammatically
representation of the data in respect to attitudes of workers towards respective facilities. At last
finding and suggestion, which came out after going through the whole survey of the organization
are mentioned.

TABLE OF CONTENTS
Sr.No. TOPIC

Page No.

TRAINING CERTIFICATE

DECLARATION

ACKNOWLEDGEMENT

PREFACE

CHAPTER-1
1

INTRODUCION OF INDUSTRY PROFILE

PROFILE OF THE COMPANY-PINJORE UNIT

10

INTRODUCTION OF WORKIND CAPITAL

37

CHAPTER-2
4

REVIEW OF LITRATURE

45

CHAPTER-3
5

RESEARCH MATHODOLOGY

48

CHAPTER-4
6

DATA ANALYSIS AND INTERPRETION

54

CHAPTER-5
7

FINDING & RECOMMENDATION

75

CHAPTER-6
8

CONCLUSION & BIBLIOGRAPHY

79

CHAPTER-7
9

ANNEXURE

82

CHAPTER 1
INDUSTRY PROFILE

INDUSTRY PROFILE
HMT was conceived by the Government of India in 1949, and was incorporated in 1953,
with the objective of producing a limited range of machine tools, required for building
an industrial edifice for the country. As a Machine Tool manufacturing company.
With the success achieved in the initial years in absorbing the technology and in
attaining production competence far ahead of the original plans, the company launched
a bold plan of diversification and expansion which resulted in the duplication of the
Bangalore Unit and the setting up of new units at Pinjore, Kalamassery and Hyderabad.
In 1967, recession struck the Indian engineering industry and the consumption of
machine tools dipped drastically. The traumatic years of recession did indeed serve to
bring to the fore two latent strengths of HMT, namely, the urge to survive and the
confidence to innovate. With these strengths at full play, the Company emerged from
the recession.
With a Watch Factory already established in 1961-62, additional capacities for watch
production were contemplated to provide a greater cushion against cyclical fluctuations
in capital goods markets and also to meet the burgeoning demand for watches.
The 70s witnessed the fructification of all the diversification plans as envisaged by the
company. Then HMT setup, HMT' International Limited as a subsidiary company to
channel HMTs products and technical services abroad, and two more units for
manufacture of Watches, one at Srinagar and one at Tumkur.
HMT took over Machine Tool Corporation at Ajmer as its sixth machine tool unit. In
1990s the company restructured itself into five Business Groups viz., Machine Tools,
Watches, Tractors, Industrial Machinery and Engineering Components as part of
Business Reorganization.

To navigate through the challenges of the new millennium, HMT seeks strategic
alliances from global leaders to synergise its own strengths with symbiotic inputs from
the partners.
The products of the company include; Machine Tools, Watches, Bearing, Tractors,
Printing Machinery and Food Processing Machinery HMT MACHINE TOOLS
LIMITED is the subsidiary of the company having its manufacturing units at five
locations with each unit specialized in a particular family of Machines. The Sales and
Service network is spread across the length and breadth of the country.
2000, the company received the approval of the Government of India for the turnaround
plan submitted by the company, Consequently, the company signed a Memorandum of
Understanding with the Government of India on August 11, 2000 detailing various
actions to be taken on a time bound manner both by the Government and the company.
As per the restructuring plan, two separate subsidiary companies, namely HMT Machine
Tools Ltd and HMT Watches Ltd have been incorporated and these subsidiaries will take
over the business of Machine Tools and Watches of the company. In the year 2004, the
company signed agreement with UK-based Tractor for high power tractors. Also, they
signed Moue with State Bank of India (SBI) for tractor finance. During the year 200405, an Emission Testing Lab with an investment of 4 crore was set up to upgrade each
of the engines to conform to emission norms. During the year 2004-05, they increased
the installed capacity of Machine Tools to 1479 Nos with the increase of 90 Nos.
In the year 2006, the company established a high tech Engine Emission Testing Laboratory in
R&D Centre at their Tractor Division, Pinjore with an investment of Rs 50 million. During the
year 2007-08, Praga Tools Ltd, a subsidiary company was amalgamated with HMT Machine
Tools Ltd, another subsidiary company. During the year 2008-09, the company initiated a number
of operational measures such as improvement in their products, rationalization of product mix,
operational methods, and capital investments, new strategies for marketing and distribution and
introduction of productivity improvement schemes.

COMPANY PROFILE
(PINJORE UNIT)

10
6

COMPANY PROFILE
HMT Ltd is a public limited commercial organization involved in the manufacture and sales
of engineering goods as well as project consultancy. The company is engaged in the business
of manufacturing and selling tractors and food processing machines. Their segments include
machine tools, watches, tractors, bearings and exports. The company's products include
printing machine, bearings, and food processing machine, machine tools, watches and
tractors. They have five subsidiaries namely HMT Machine Tools Ltd, HMT Watches Ltd,
HMT Chinar Watches Ltd, HMT (International) Ltd and HMT Bearings Ltd. HMT Ltd was
incorporated in the year 1953 by the Government of India as a Machine Tool manufacturing
company with the name Hindustan Machine Tools Ltd. The company was incorporated with
the objective of producing a limited range of machine tools, required for building an
industrial edifice for the country.
Over the years, the company diversified into Watches, Tractors, Printing Machinery, Metal
Forming Presses, Die Casting & Plastic Processing Machinery, and CNC Systems &
Bearings. In 1960s, the company set up new units at Pinjore, Kalamassery and Hyderabad. In
1970s, they set up HMT International Ltd as a subsidiary company to channel HMT's
products and technical services abroad. They set up two units for manufacture of watches,
one at Srinagar and another at Tumkur. Also, they took over Machine Tool Corporation at
Ajmer as their sixth machine tool unit. In May 13, 1977, the company was converted into a
public limited company and in September 12, 1978, the name of the company was changed
from Hindustan Machine Tools Ltd to HMT Ltd.
In 1980s, the company as a part of vertical integration efforts, launched units to manufacture
Watches at Ranibagh, Watch Cases at Bangalore, Stepper Motors at Tumkur, CNC Systems at
Bangalore and Ball screws for use on CNC machines at Bangalore. They took over IndoNippon Precision Bearings Ltd, a state owned unit as a subsidiary, which was renamed HMTBearings Ltd. Also, they took over Praga Tools Ltd as another subsidiary. In 1990s, the
company restructured themselves into five Business Groups viz., Machine Tools, Watches,
Tractors, Industrial Machinery and Engineering Components as part of Business
Reorganization. In the year 1993, they launched two new brands, namely 'Ramani' for gents
and 'Utsav' for ladies.
11

HMT WATCHES LIMITED: It manufactures Mechanical and Quartz Analog

watches. The manufacture of wristwatches started as part of diversification strategy of
HMT in the year 1962, under Technical collaboration with CITIZEN Watch Company of
Japan with a manufacturing unit at Bangalore.
The product range of HMT WATCHES includes more than 1500 models to choose from
catering to all segments of the market, from Economy to Premium and Young to the
Old.

HMT CHINAR WATCHES LIMITED: HMT, the first company to start watch
manufacturing in India has incorporated 'HMT CHINAR WATCHES LIMITED' as its
fully owned subsidiary on 4th September 2000 with Jammu as its head quarters.HMT
manufactures mechanical and quartz range watches.
HMT Bearings Limited: It was formerly known as Indo-Nippon Bearings & was
incorporated in the year 1970. It is the only company of its kind in the public sector set
up to manufacture Ball & Roller Bearings. The company was established in technical
collaboration with M/s Koyo Seiko Co. Ltd., Japan an internationally reputed
manufacturer of Bearings.
In the year 1981, the company became a subsidiary of HMT. The manufacturing unit is
located in Hyderabad and marketing and sales offices cater to the whole of India. The
company designs, manufactures and supplies Ball Bearings, Cylindrical Roller Bearings
and Taper Roller Bearings.

HMT (INTERNATIONAL) LIMITED: It was set up in 1974 as a wholly owned

subsidiary of HMT, to undertake exports of goods manufactured by HMT and other
leading Indian manufacturers. HMT (I) is headquartered at Bangalore and has a global
network extending over 38 countries with 67 representations to service its clientele
worldwide. HMT (I) has sold over 12,500 machines in more than 70 countries with
efficient after sales service.
12

Praga Tools Limited: HMT took over Praga Tools Limited as one of its subsidiaries with
the transfer of majority of the share holding in the year 1988.Praga Tools has
contributed to the development of machine tool industry in the country and created a
vast band of skilled technicians...
Milestones achieved

HISTORY OF HMT LTD

HMT was incorporated in 1953 by the Government of India as a machine tool manufacturing
company. Over the years diversified into watches, '-'actors, printing machinery, metal forming
presses, die casting & plastic processing machinery, CNC systems & bearings. Successful
technology absorption in all product groups through collaborations with world renowned
manufacturers and further strengthened by continuous in-houseR&D. Today, HMT comprises six
subsidiaries under the ambit of a holding company, which also manages the tractors business
directly.
HMT Limited has 18 manufacturing units. The constituent subsidiaries are given below while the
holding company retains the tractors business group.
HMTs tractor business commenced its operations in 1971 in technical collaboration with M/s
MOTOKOV, Czechoslovakia. HMT started the operation with the manufacture of 25 HP tractor
at the manufacturing plant in Pinjore, Haryana state. Over the years, it has developed tractors
ranging from 25 HP to 75 HP.
HMT Limited took over Praga Tools Limited as one of its subsidiaries 1988*^. Praga Tools
Limited was established in May, 1943 as Praga Tools Corporation Limited to manufacture
machine tools with its head quarters at Secunderabad. It was renamed as Praga Tools Limited in
1963. It is mainly involved in manufacture of machine tools including CNC machines.

13

HMT was conceived by the Government of India in 1949, and was incorporated in 1953, with
the objective of producing a limited range of machine tools, required for building an
THE 1960s:
With the success achieved in the initial years in absorbing the technology and in attaining
production competence far ahead of the original plans, the Company launched a bold plan of
diversification and expansion which resulted in the duplication of the Bangalore Unit and the
setting up of new units at Pinjore, Kalamassery and Hyderabad.

10

14

Pinjore

Kalamassery

Hyderabad

In 1967, recession struck the Indian Engineering Industry and the consumption of machine tools
dipped drastically. The traumatic years of recession did indeed serve to bring to the fore two
latent strengths of HMT, namely, the urge to survive and the confidence to innovate. With these
strengths at full play, the Company emerged from the recession:
With the world's widest range of machine tools and associated services under a single corporate
entity.
With action plans firmly launched for diversification into
Presses and Press Brakes, Printing Machines, Die Casting
and Plastic Injection Moulding Machines, that were
considered to have economic cycles that are different from
those of machine tools.
With export markets of enormous potential under active development.
THE 1970s:
The '70s witnessed the fructification of all the diversification plans as envisaged.
HMT setup

HMT International Limited as a subsidiary company to channel HMT's products and

technical services abroad.

15

HMT took over Machine Tool Corporation at Ajmer

as its sixth machine tool unit

Historical background of company

After establishing the two machine tools factories and watch factory in Bangalore, the pinjore
jnit was established as the third machine tool factory. It went into production on 1 st oct. 1963.the
factory has been designed, built and commissioned entirely by Indian talent in a record period of
17 months of the ground on may2,1962.
The main points we will discuss in his chapter are:

THE PROFILE OF H.M.T. LTD.

CORPORATE MISSION AND OBJECTIVES

CORPORATE OBJECTIVES AND GOALS

H.M.T. AT A GALANCE

H.M.T. UNIT. PINJORE

16

Location

Tractor division

Product profile(tractor)

Organisation structure

Overall working of the company

Swot analysis

17

THE PROFILE OF H.M.T. LTD.

In 1949 the idea of public sector tools to be a comer stone for the companys industrial
development plans. This led to the birth of HMT at Bangalore in 1953, set up technical
collaboration with overvikonbuhrle holding and machine tools work Switzerland.
Birth of HMT

Pandit Jawaharlal Nehru, inaugurating HMTs First Manufacturing Unit, (Machine Tools,
Bangalore)
on June 10, 1955,
The constantly growing demand for machine tools prompted the company to conceive a planned
approach to diversification and expansion, which resulted in set up new units spread over the
country. The six machine tools factory of HMT together with homological machinery diversion
now reduce very wide range machine tools. The product mix for each factor has been involved to
produce specific families of machine tools.
Wrist watches were taken up for production as first steps towards diversification in the early
i960. HMT precision manufacturing capabilities led to the company to watch manufacturing over
the year. HMT has also diversifies into the manufacture of other enquiring products like tractors,
printing machine, presses, die casting and plastic injunction machine, lamp and lamp making
machinery, diary machinery, cnc system, ball screws and electronic ganging.
18

HMT machine tools expertise has been developed to such an extent that it can be design any kind
of machine. Pioneering the concept of technology in India, HMT has the distinction of being the
first company of CNC technology in India. HMT has the distinction of being the first company
to successfully manufacturing its own system in association with siwmwns HMTs commitment
to the development of machine technology is clearly reflected in fact that HMT has as may as
eleven Iso-9000 certified exclusive tools units spread across the country.
In 1975 HMT international ltd. Was set up to handle the international marketing of HMT is
organized in the mentioned business group of which machine and tools business group (TRP) are
located in Pinjore.

CORPORATE MISSION AND OBJECTIVES

To establish ourselves as one of the worlds premier companies in the engineering field

having strong international competitiveness.

To achieve market leadership in India through ensuring customer satisfaction by

supplying internationally competitive products and services.

To achieve sustained growth in the earning of the group on behalf of shareholders.

CORPORATE OBJECTIVES AND GOALS

To encourage the modernization of Indian industry through the supply of engineering

goods and services of world class excellence.

19

To maintain technological leadership through continuous efforts to update product

technology and manufacturing methods.

To globalize our company operations by developing a mix of international markets and

business.

To ensure a satisfactory return on capital employed, to meet the growth needs as the

aspirations of ours stakeholders.

To present an active, pleasant and productive working environment.

20

HMT AT A GLANCE

21

HMT UNIT PINJORE

October 23rd 1963 was a great a day not to only those who have the proud privilege of belongings
to Hindustan machine tools but to the entire nation. India took another step forward on the road
of industrialization when prime minister Pandit Jawaharlal Nehru declared open third unit of
HMT at pinjore on this auspicious day.
It was the first HMT factory to be allocated away from HMT complex Bangalore where two
machine tools factories and watch factory had earlier been established situated seventeen miles
away from Chandigarh on the national highway linking Shimla and Delhi. The factory is spread
over an area of 900 acres gifted by the Govt, of Punjab.
This factory was designed built and commissioned by Indian talent without foreign collaboration
in record period of 17 months. Later in 1971 HMT tractor commenced here a further investment
of 6069 lacks has since made for the tractor project 30.03.2002 876 persons were employed in
the machine tools divisions & 2547 in the tractor business group.

22

LOCATION
Located at foothills of the Himalaya at Pinjore in the north Indian state of Haryana is HMTs
state of the art manufacturing facility. Pinjore was chosen as the ideal plant site as it is centrally
and well connected by both rail and road. It is situated close to the legendry Grand Truck road; it
is 250 km from New Delhi and only 20 km from Chandigarh - the symbol of irx'dern India.
Apart from being easily accessible, Pinjore is the hub of mechanized market acd is in close
proximity to the thriving ancillary industry in north India.

23

TRACTOR DIVISION
HMT established tractor plant In Pinjore in 1971 to provide impetus to the country green
revolution. To begin with it started assembly of 25 HP. Tractor collaboration with m/s motocov
of erst while Czechoslovakia manufacturer of zetor brand of tractor pinjore was selected for the
project because it was with high vicinity.
At present HMT has its production line for nine models in the 25 HP,35 HP,49HP and 75 HP
ranges out of these the 345 HP models were developed by HMT own efforts. HMT also
manufactured and market stationary engines of different configurations. Like the product of the
machine tools division the product of the tractor division has been well received.
Through HMT was virtually the last one two enter the tractor industry. It enjoy sizeable marked
share and is the manufacture widest range of tractors in spite if though competition from old and
established manufacturers. HMT tractor has also received overwhelming response in
international market. It has received and executed export orders from USA, Australia, Srilanka,
Nepal, Zambia, Mauritius, and Slovenia etc.

24

PRODUCT PROFILE

MODEL
2522

HP RANGE

MAIN FEATURE

25 AVL fuel efficient engines & new style bonnet

2522 OS
2522 FX
2522 DX

Orchard special
Hydraulic engine break
Direct excel manual break

3522

35

AVL adapted fuel efficient engine

4511

45

HMT design

3522 CS

35

Wet land cultivation

3522 DX

35

Direct axle drive

4022 SP

40

Power speed

5022 RX

50

Hydraulic break

6522 NPS

65

Hydraulic break

7522

75

Hydraulic break & heavily work

25

ORGANISATION STRUCTURE
HMT ltd is a public sector undertaking with its head office at Bangalore and having units and
subsidiaries in various comer of India. Pinjore unit is headed by ED (T) tractor business group.
Who is reporting to chairman and managing director of HMT ltd. To general manager one each
for tractor and machine tool supports the executive director.
Division and functional chief i.e. finance, R&D, personal, project, production, maintenance,
aerials, purchase, engineering and marketing.

26

OVERALL WORKING OF THE COMPANY

Machine

Tools

Product Range
TURNING MACHIENES

GRINDING MACHINES

GEAR MANUGACTURING MACHINES

MACHINING CENTRES

OTHER GPMs

SPECIAL APPLICATION MACHINES

DIECASTING MACHINES

PRESSES

CNC SYSTEMS

PRECISION BALLSCREWS

TURNING MACHINES
GRINDING MACHINES

27

CNC Surface Grinding Machine

SGC1

Cylindrical Grinders CNC

Internal Grinders - CNC
Centre less Grinders - Non-CNC
Surface Grinders - Non-CNC
Double Disc Grinders - Non-CNC
Grinders - Others
Cylindrical Grinders - Non-CNC
Centre less Grinders - CNC
Surface Grinders - CNC
Double Disc Grinders - CNC
Tool & Cutter Grinders

GEAR MANUFACTURING MACHINES

Gear Hobbers - CNC

Gear Shapers - CNC
Gear Hobbers - Non-CNC
Gear Shapers - Non- CNC

CNC High Speed Gear Shaper WS1

CNC-3A
MACHINING CENTRES
OTHER GPMs

28

 Programmable

CNC Vertical Tool Room Milling

Knee

Type

Milling

Machine
Turret Ram Type Milling Machine
Column Drill
Broaching Machine
Knee Type Milling Machine
Radial Drill
Carbide Tool Lapping Machine
Vertical Surface Broaching Machine

Machine CTR-1

SPECIAL APPLICATION MACHINES

Machining Solutions - For large size components
-For specialized applications
-For large volume productions

Multi Station Round Table SPM

SPM for Battery Manufacturing

2-Axes CNC Precision Co-ordinate Table

Dual Spindle Case Trimming Machine

Duplex Milling Machines

Bilateral Master- Slave Servo manipulators

CNC Heavy Duty Internal Grinding Machine

CNC Drilling & Reaming Machine

CNC Stitching & Hole Drilling Machine

Head Turning & Mouth Reaming Machine

Rotary Indexing Machines

Flash Hole Drilling Machines

CNC 4-Axes Chucker

29

CNC Precision Internal Grinding Machine

Multi Station Round Table SPM

SPM for Battery Manufacturing

2-Axes CNC Precision Co-ordinate Table

Dual Spindle Case Trimming Machine

Duplex Milling Machines

Bilateral Master- Slave Servo manipulators

CNC Heavy Duty Internal Grinding Machine

CNC Drilling & Reaming Machine

CNC Stitching & Hole Drilling Machine

Head Turning & Mouth Reaming Machine

Rotary Indexing Machines

Flash Hole Drilling Machines

CNC 4-Axes Chucker

CNC Precision Internal Grinding Machine

DIE CASTING & PLASTIC INJECTION MOULDING MACHINES

30

HMT offers 9 models of Die-Casting Machines with

locking forces ranging from 80 to 1100 tones to cover
a wide range of pressure Die-Casting of Aluminum,
Zinc, Magnesium, Copper, Lead & Tin components.
The salient features of these machines include digital
setting Die-closing / Opening and Ejector Speed,
Horizontal

Cold

Chamber

Flying Piston type accumulator individually

pressure Die casting Machine DC

adjustable speeds and pressures, large adjustable

500

opening stroke and programmed logic control.

HMT manufacturing six models of Plastic Injection
Molding Machine ranging from 80 to 630 tones
locking force.

PRECISION BALL SCREW

A wide range of PRECISION BALL SCREWS used in
CNC Machine Tool, Roto Gravure printing machines
and various engineering products for conversion of
rotary motion into linear movement and vice versa.
The range covers Ball Screws in sizes from Dia 25 MM
to Dia 80 MM with leads 5,8, 10 & 12 MM pitches.
Maximum length up to 3500 MM

CNC SYSTEMS

31

CNC Systems covering controls for

Turning Machine

Machining Centers

Grinders & Punch Presses

Turning Centers

Twin Spindle Chucker

PRODUCTS & FACILITIES AND RANGE

PRODUCT RANGE IN MM
S.NO

PRODUCTS & FACILITIES

MIN ID MAX OD

Double row self aligning Ball

20

Ball Bearings

20

Cylindrical Roller Bearings

20

Taper Roller Bearings

20

BALL BEARINGS:

32

They range from Single Row deep groove and self

- aligning ball bearings.
The deep groove ball bearings are of the Conrad
type, assembled without the aid of a filling slot.
Deep uninterrupted raceways, though designed
primarily for light and moderated radial loads,
will tolerate thrust loads in either direction as well
as combined radial and thrusts loads. The availability

of bearings with shields, seals, grooves on outer

rings make them ideally suited for a wide and
varied
range of applications.
The
Self-aligning
ball bearings are particularly
suited to applications where housing alignment
of shaft deflection pose difficult problems. The
use of these bearings eliminates the need for
The company
withmachining
a well -ofestablished
expensive
precision
housings. dealer
Network

throughout the country, is truly well-

entrenched to

serve both OEMs and the re-

CYLINDRICAL ROLLER BEARINGS :

placement market, Sectors Catered Automobile,

These bearings offer
maximum
flexibility and
Commercial
Vehicles,
Tractors,
Industrial
optimum
performance.
Two basic types are
Machinery,
Defense, Railways.
produced-separable inner race and separable
outer race, with variations such as N, NF, NU,
NUS, NJ. NH, NUP, NK, etc.,
The design options give the engineer complete
flexibility in selecting the right bearing for the
right application. These bearings combine
valuable performance with least installation cost.
The company has successfully designed and
Manufactured specialized bearings of bore sizes
up to 160mm to be used in the defense & Railway
applications.

TAPER ROLLER BEARINGS:

33

Taper Roller Bearings range from extra light, light and medium series.

SWOT ANALYSIS OF HMT LIMITED

STRENGTH OF HMT LIMITED

Strong government support.

Good brand image and market leadership due to high quality, low price and reliability.
Companys liquidity position has been quite comfortable. Adequate availability of

tangible assets such as land and buildings.

Record of good industrial relations.

WEAKNESS OF HMT LIMITED

The manpower of HMT ltd is in excess that is a burden on PSU which is already going in

loss.
HMT ltd Pinjore is also facing the problem of financial inflow. Because of this way are
not able to meet the industrial demand at time.

34

In production department some machines are too old. There is no machine

replacement policy.
As the unit has to depend on its head office for major decision. It is not able to
meet its competitors in marketing.

OPPORTUNITIES
HMT has become a generic name for tractor. So the company has great opportunities in such
irket, if supply will be regular at reasonable prices. In 1987, HMT occupy second position tractor
industry.

THREATS

Its competitors are providing facilities which company not providing, that are why
customers of the company are attracting towards them.

Expansion of tractor industry creates new threats for the existing players.

35

INTRODUCTION OF
WORKING CAPITAL
MANAGEMENT

36

INTRODUCTION OF WORKING CAPITAL MANAGEMENT

Working capital management is an important component of overall financial management.
Management of working capital like long term financial decisions effects risk and profitability of
business. In business, money is required for:

Fixed assets

Current assets

Fixed assets include land and building, plant and machinery, furniture and fittings etc. Fixed
assets are required to be retained in the business for a long period and yield returns over the life
of such assets.
Current assets, on the other hand, are required for day to day operation of the business and for
the efficient and effective use of fixed assets. Current assets include cash, bank, stock, debtors,
bill receivable, marketable securities etc. The capital employed in these assets is called working
capital. In any business there should be proper balance between fixed assets and current assets
and thus the main objective of working capital management is to determine the optimum amount
of working capital required.

DEFINITION OF WORKING CAPITAL

There is difference of opinion among authors about the definition of working capital.
Considering the objective and scope of working capital, it can be defined in two ways:

Gross working capital

Net working capital

GROSS CONCEPT OF WORKING CAPITAL

Gross working capital means total of the current assets of a business. It is also called working
capital.

37

NET CONCEPT OF WORKING CAPITAL

Net working capital means excess of current assets over current liabilities. If current assets are
equal to current liabilities then net working capital will be zero and if current liabilities are more
than current assets then net working capital will be negative.
Current assets are those assets which are converted into cash within a short period of time not
exceeding one year, e.g. cash, bank, debtors, bill receivable, stock, accrued income etc.
Current liabilities means those liabilities which have to be paid within a short period of time not
exceeding one year, e.g. creditors, bills payable, outstanding expenses, short term loans etc.

TYPES OF WORKING CAPITAL

Working capital can be classified in two ways. Firstly on the basis of concept and secondly on
the basis of its need.

ON THE BASIS OF CONCEPT:

Gross working capital

Net working capital

ON THE BASIS OF NEED:

Permanent working capital

Temporary working capital

NEED FOR WORKING CAPITAL

Along with the fixed capital almost every business requires working capital though the extent of
working capital requirement differs in different businesses. Some of its important needs are
given below:

Working capital is needed for the purchase of raw material and for the payment of various

day to day expenses.

38

Financial management aims at maximizing the wealth of shareholders. To achieve this

objective it is necessary to earn adequate profits.

To remove the gap between sale of goods and conversion of cash the working capital is

required.

FINANCING OF WORKING CAPITAL

After determining the requirements of working capital, next task before the financial manager is
to select the appropriate sources of working capital. There are mainly two sources from where a
company can finance its working capital and these sources are:Long term sources including equity shares, preference shares, debentures, retained earning etc.
Short term sources including short term loans, trade creditors, commercial paper etc.
There are basically 3 approaches to determine an appropriate financing mix of various
sources and these approaches are:-

HEDGING APPROACH
This approach is also called matching approach. In this approach there is a proper matching of
expected life of asset with the duration of fund. Usually, according to this approach longterm
sources are used for financing permanent current assets and fixed assets & short-term sources are
used for financing temporary current assets:

Temporary current assets

39

Short term financing

A
S
S
E
T
S

en
ent curr
n
a
m
r
e
P

t assets

Long term financing

Assets

Time

CONSERVATIVE APPROACH
In this approach there is more reliance on long-term financing in comparison to short-term
financing. Even some part of the temporary current is compared to finance from long-term
sources because long-term sources are less risky in comparison to short-term.

Temporary current assets

Short term financing

A
S
S
E
T
S

Permanent current assets

Fixed Assets
Time
AGGRESSIVE APPROACH

40

Long term financing

In this approach there is more reliance on short term financing and even a part of permanent
current assets is financed from short-term finance.

Temporary current assets

Short term financing

A
S
S
E
T
S

Permanent current assets

Long term financing
Assets

Time
In HMT Ltd., the current assets are financed from short term sources as well as long term sources, so
they follow conservative approach.

41

FACTORS DETERMINING WORKING CAPITAL REQUIREMENTS

NATURE OF THE BUSINESS
The working capital requirements of a firm basically depend on the nature of its business. A large scale
firm needs more working capital and small scale firms needs less working capital. HMT Ltd. is
producing capital goods like tractors and it is thus a large scale firm and so it needs large amount of
working capital.

SIZE OF BUSINESS
Working capital requirements of a concern are directly influenced by the size of its business which may
be measured in terms of scale of operations. In HMT Ltd. products are of nature using in many
operations and thus its scale of operations is much greater in size and so it needs large amount of
working capital.

CREDIT POLICY
Dealings with debtors and creditors influence considerably the requirement of working capital. HMT
Ltd. allowed 90 days credit period to customers & get 300 days from creditors.

DIVIDEND POLICY
HMT Ltd. has no dividend policy.

PRICE LEVEL CHANGES

HMT Ltd. decides price of product as per the prices of competitors and market strategies.

42

ADEQUATE WORKING CAPITAL

Solvency of business
Adequate working capital helps in maintaining solvency of the business by providing uninterrupted flow
of production.

Goodwill
Sufficient working capital enables a business concern to make prompt payments and helps in creating
and maintaining goodwill.

Easy loan
A concern having adequate working capital can arrange loan from banks and other sources on easy and
favorable terms.

Cash discount
Adequate working capital also enables a concern to avail cash discount on purchases and hence it
reduces costs.

Regular supply of raw material

Sufficient working capital ensures regular supply of raw material and continuous production.

Ability to face crisis

Adequate working capital enables a company to face business crisis in emergencies such as
depression during such period, generally there is much pressure on working capital.
So, keeping in view all these points we can say that a business should have adequate working

43

Chapter-2
REVIEW OF
LITERATURE

44

The purpose of this chapter is to present a review of literature relating to the working capital
management. Although working capital is an important ingredient in the smooth working of
business entities, it has not attracted much attention of scholars. Whatever studies have
conducted, those have exercised profound influence on the understanding of working capital
management good number of these studies

which pioneered work in this area have been

conducted abroad, following which, Indian scholars have also conducted research studies
exploring various aspects of working capital. Special studies have been undertaken, mostly
economists, to study the dynamics of inventory investment which often represented largest
component of total working capital. As such the previous studies may be grouped into three
broad classes (1) studies conducted abroad, (2) studies conducted in India, and (3) studies
relating to determine of inventory investment. Studies on Working Capital Management Studies
adopting a new approach towards working capital management are reviewed here. Sagan in his
paper (1955),1 perhaps the first theoretical paper on the theory of working capital management,
emphasized the need for management of working capital accounts and warned that it could
vitally affect the health of the company. He realized the need to build up a theory of working
capital management. He discussed mainly the role and functions of money manager inefficient
working capital 48 management. Sagan pointed out the money managers operations were
primarily in the area of cash flows generated in the course of business transactions. However,
money manager must be familiar with what is being done with the control of inventories,
receivables and payables because all

these accounts affect cash position. Thus, Sagan

concentrated mainly on cash component of working capital. Sagan indicated that the task of
money manager was to provide funds as and when needed and to invest temporarily surplus
funds as profitably as possible in view of his particular requirements of safety and liquidity of
funds by examining the risk and return of various investment opportunities. He suggested that
money manager should take his decisions on the basis of cash budget and total current assets
position rather than on the basis of traditional working capital ratios. This is important because
efficient money manager can avoid borrowing from outside even when his net working capital
position is low. The study pointed out that there was a need to improve the collection of funds
45

but it remained silent about the method of doing it. Moreover, this study is descriptive without
any empirical support.
Realising the dearth of pertinent literature on working capital management, Walker in his study
(1964)2 made a pioneering effort to develop a theory of working capital management by
empirically testing, though partially, three propositions based on risk-return trade-off of working
capital 49management. Walker studied the effect of the change in the level of working capital on
the rate of return in nine industries for the year 1961 and found the relationship between the level
of working capital and the rate of return to be negative. On the basis of this observation, Walker
formulated three following propositions:
Proposition I If the amount of working capital is to fixed capital, the amount of risk the firm
assumes is also varied and the opportunities for gain or loss are increased. Walker further stated
that if a firm wished to reduce its risk to the minimum, it should employ only equity capital for
financing of working capital; however by doing so, the firm reduced its opportunities for higher
gains on equity capital as it would not be taking advantage of leverage. In fact, the problem is not
whether to use debt capital but how much debt capital to use, which would depend on
management attitude towards risk and return. On the basis of this, he developed his second
proposition.
Proposition II The type of capital (debt or equity) used to finance working capital directly
affects the amount of risk that a firm assumes as well as the opportunities for gain or loss.
Walker again suggested that not only the debt-equity ratio, but also the maturity period of debt
would affect the risk-return trade-off. The longer the period of debt, the lower be the risk.
For, management would have enough opportunity to acquire funds from operations to meet the
debt obligations. But at the 50same time, long-term debt is costlier. On the basis of this, he
developed his third proposition: Proposition III The greater the disparity between the
maturities of a firms debt instruments and its flow of internally generated funds, the greater the
risk and vice-versa.

46

Chapter-3
RESEARCH
METHODOLOGY

47

RESEARCH METHODLOGY
OBJECTIVE OF THE STUDY
Working capital is synonymous with current assets. There is no denying the fact that working
capital is one of the most important tools in the hands of the company for the uccessful operation
of the business. It is imperative for the finance manager to properly ccess the future requirement
of working capital in the company,

Primary objective

To analyze the working capital position of the company.

To know that the operating cycle of the company.
To analyze the liquidity position of the organization

Secondary objective

To examine profitability position of the management.

The main conclusion and give recommendation it is necessary to search about the given topic. As
my topic is related to the working capital, the secondary data has been very useful r this purpose.
The cost audit reports of various years have been used in analyzing the data. Mainly secondary
data has been used. To know about the working capital management, I have talked to various
persons in accounts departments.

Main topics of Research methodology are:

Reason for choosing this topic

Research Methodology
Steps in Research Methodology
Collection of data
Organization of data
Presentation of data
Interpretation of data

REASON FOR CHOOSING THIS TOPIC

48

It will be helpful to me in my professional career.

Working capital is an important part for every organization.

It will be helpful for checking the financial position of the company.

It will be helpful for making decision.

It will be helpful to draw the shortcomings faced by the organization.

It will be helpful for studying why profits are decreasing and liabilities are increasing.

TYPES OF RESEARCH
This research employed four type of research:

Descriptive research.
Analytical research.
Qualitative research.
Quantitative research.

DESCRIPTIVE RESEARCH OR EX-POST FACT RESEARCH

To conduct the research work accurately, we conducted descriptive research. It includes surveys
and fact finding inquires of diff. Kinds.

It is done to know following fact:

The HMT sales are move influenced by quality.
Frequency of using HMT product.
Liking in respect of quality.
Media for awareness of schemes.

ANALYTICAL RESEARCH
In it, we have to use facts and information already available and analysis these to make
an evaluation for project.

QUALITATIVE RESEARCH
In selecting the approximate research design of the study and the type of data needed, the choice
of data collection techniques is four grouped. It is done for:

Consumers needs.
Consumers preference for brand.
In depth understanding of consumers.
Availability for consumers.

QUANTITATIVE RESEARCH
Quantitative research is obtained to rate the different aspect on parameters.

Image of brand.
49

Brand loyalty.

Expectation of customers.

Awareness among consumers for schemes

Switch ability of consumers.

METHODOLOGY
The project includes both primary & secondary sources of data. The data collected through these
sources has been org. analyzed and interpreted so as to draw conclusion and arrive at appropriate
recommendation.

Primary source of data: - personal interview from various account officers in the
enterprise.

Secondary source of data: - annual report, website of HMT ltd. Company which contains
details which is helpful for making my project report.

STEPS IN METHODOLOGY
Collection of Data
Organization of Data
Presentation of Data
Analysis of Data
Interpretation of Data

50

COLLECTION OF DATA: both the primary and secondary data has been collected from
the market and the company respectively. The secondary data are provided through the annual
report; website etc. of the company and the primary data was collected through the medium of
face-to-face intersection/interviews with the business person in the market. Organization of data:
Data once collected needed to be organization for further processing. Data collected by me was
carefully gone through then the relevant and useful matter was assorted and properly organized.
Secondary data means data which are already available i.e. they refer to the data which have
already been collected and analyzed by someone else. Secondary data may be published or
unpublished data. The secondary data includes the Annual reports, website of HMT ltd.
Company which contains details which have contributed to complete my study and also to my
project report.

PRESENTATION OF DATA: The data collected is no use unless and unstill it is given in
presentable form. Thus after proper organization the data is given in a presentable form with
complete detail with the help of bar diagrams, pie chart etc.

ANALYSIS OF DATA: The data is carefully analyzing keeping in consideration both the
pros and cons for the purpose of arriving at concentrate conclusion.

INTERPRETATION OF DATA: After carefully analyzing the data, it has been apply
interpreted in order to give concrete conclusion and proper recommendation.

51

LIMITATIONS OF THE STUDY

In spite of best efforts of the investigators the study was subjected to the following limitations:

Some officers were too busy to give a sincere response to investigators and hence their

response may not relate to real picture.

Manager some time denied disclosing some important financial matters, which can be

helpful in the study.

Some information related to the study, which had been collected from the company was

rounded off because of some influence.

At some place approximate figures had been taken as per instruction of company officers.
The time period given to me for the completion of the project was short in such a short of
span of time it is difficult to complete any project in detail.

52

CHAPTER-4
ANALYSIS &
INTERPRETATION

53

DATA ANALYSIS OF HMT LTD.

After collecting data from the cost audit reports and other sources, data of HMT Ltd. has
been analyzed in such a manner shown in the following pages of this report. Various accounts,
graphs, tables and charts have been prepared for these purposes. These are as follows:

P&L A/c of last three years

Balance sheet of last three years
Ratio Analysis for the last three years
Operating cycle
Fund Flow Statement

54

RATIO ANALYSIS
Ratio analysis is a very popular and important technique of analyzing financial statements, Ratio
is a quantitative relationship between two or more items of profit and loss account, Profit
and loss account and balance sheet, or Balance sheet. The comparison between different
absolute figures leads to some meaningful conclusions by establishing relationship between
various facts as the presentation of figures in profit and loss account or 1 a balance sheet do not
reveal hard facts.
For example, the net profit shown in profit and loss account do not reveal any fact unless and
until it is compared with sales to get percentage of net profit on sales or compared with capital to
get percentage rate of return.
According to John Myers, Ratio analysis is a study of relationship among the various financial
factors of a business.

1. CURRENT RATIO;
Current ratio may be defined as the relationship between current assets and current liabilities.
This ratio also known as working capital ratio is a measure of general liquidity and is most
widely used to make the analysis of a short term financial position or liquidity of a firm. A ratio
equal or near to the rule of thumb of 2:1 i.e. current assets double the current liabilities is
considered to be satisfactory.

Current Assets
Current Ratio =
Current Liabilities

55

YEAR

2010-2011

2011-2012

2012-2013

CURRENT ASSETS

743.83

710.37

726.68

CURRENT
LIABILITIES

207.11

194.45

214.37

3.59

3.65

3.39

Current Ratio

CURRENT
RATIO

INTERPRETATION:As it can be observed from the above graph that Current Ratio is increasing from year 2011 to
2012 and decreasing from 2010 to 2011. As we know that a high current ratio indicates that the
firm is liquid and has the ability to pay its obligation.

From above graph we can see that current ratio is highest in year 2010.

This is due to more assets, thats why we have seen that company has less profit due to
more were deducted by head Depreciation.

But we have seen in every year this ratio is much higher than the standards.

56

2. QUICK RATIO OF HMT LTD.

With the help of this ratio the capacity of the firm to pay off its current liabilities within a
month or immediately is measured.
This ratio expresses the relationship between the liquid assets and current liabilities.
Liquid assets are those assets which can be converted into cash quickly without much loss of
time and value.
An ideal quick ratio is said to be 1:1. The idea is that for every rupee of current liabilities,
there should be at least one rupee of liquid assets.
As such the quick ratio is calculated by dividing liquid assets by current liabilities:-

Quick ratio

Liquid assets
Current liabilities

Where,
LIQUID ASSETS = CURRENT ASSETS - PREPAID EXPENSES - STOCK

LAST THREE YAERS COMPARISON OF QUICK RATIOS OF HMT LTD.

Year
Quick Ratio

2010-2011

2011-2012

2012-2013

3.28

3.45

3.25

57

INTERPRETATION
An acid test or quick ratio of 1:1 is considered satisfactory. As above diagram and
calculation shows that quick ratio of HMT is more than 1:1. So it is satisfactory.

SUGGESTIONS
Company should maintain the standard. It should not be more than that nor be less than
standard ratio.
Company should try to make good investments in short term assets.

58

3. FIXED ASSETS TO NET WORTH RATIO:

The ratio establishes the relationship between fixed assets and shareholders funds, i.e.,

share capital plus reserves, surpluses and retained earnings.

This ratio is also known as Fixed Assets to Net worth Ratio.
This ratio is calculated to find out what portion of the fixed assets is financed with

owners funds.
The long term solvency position of judged with the help of these ratios.

Fixed Assets to Net Worth Ratio = Fixed Assets

Shareholder's Funds

Fixed assets to net worth ratio of HMT ltd

YEAR
FIXED
ASSETS
SH.HOLDER
FUND
RATIO

2010-2011

2011-2012

2012-2013

803.22

807.06

805.84

820.94

750.35

697.24

0.97

1.07

1.15

59

INTERPRETATION

This ratio depicts the long - term financial soundness of the business.

This ratio should be less than 1.

The lower the ratio, better it is from the solvency point of view.

In the above graph shows that year 2010 is higher so that no better for company point of
view.

60

4. DEBTOR TURNOVER RATIO OF HMT LTD.

This ratio indicates the speed with which the amount is collected for debtors. The higher
the ratio, the better it is, since it indicates that amount from debtors is being collected more
quickly. A lower debtor turnover ratio will indicate the inefficient credit sales policy of the
management. It means that credit sales have been made to customer who does not deserve much
credit.
Trade debtors are expected to be converted into cash within a short period and are
included in current assets. Hence, the liquidity position of a concern to pay its short term
obligations in time depends upon the quality of its trade debtors. Two kinds of ratios can be
computed to evaluate the quality of debtors:-

Debtors Turnover Ratio

Formula for its computation is:Debtors Turnover Ratio =

Net credit sales

Average debtors

Where,
NET CREDIT SALES = TOTAL CREDIT SALES - RETURN INWARDS AVERAGE
DEBTORS = (OPENING DEBTORS + CLOSING DEBTORS) / 2

LAST THREE YEARS COMPARISON OF DEBTORS TURNOVER RATIO

OF HMT

Year
debtor turnover ratio

2010-2011

2011-2012

2012-2013

0.86:1

0.21:1

2.63:1

61

INTERPRETATION
This ratio also indicates that it decreases in 2011-2012 in comparison of 2010-2013. But
in 2010-2011 it increases very much in comparison of previous year.

5)

WORKING CAPITAL TURNOVER RATIO

This ratio is of particular importance in non-manufacturing concerns where current assets

play a major role in generating sales.A high working capital turnover ratio shows efficient use of
working capital and quick turnover of current assets like stock and debtors. Formula to compute
this ratio is:Working Capital Turnover Ratio = Cost of goods sold
Working Capital

LAST THREE YEARS COMPARISON

TURNOVER RATIO OF HMT LTD.

OF WORKING

CAPITAL

(Amount in Lakhs)
Year

2010-2011

2011-2012

2012-2013

4.9:1

0.98:1

1.72:1

Working capital turnover ratio

62

INTERPRETATION
This ratio also indicate the weak position of working capital but as compare to 20102013, present position of working capital ratio in HMT is much better. So this ratio indicates the
under utilization of working capital.

SUGGESTIONS
Company should try to improve its working capital management.

6) STOCK TURNOVER RATIO OF HMT LTD.

This ratio reveals how well inventory is being managed. This ratio is also known as
Velocity. It is a measure of number of times average inventory has been sold during the year, t
indicates whether inventory has been efficiently used or not. The purpose is to see whether only
required minimum funds have been locked up in the inventory. The greater the number >f times
per year inventory turnover is, the more efficiently it is being used. The smaller the inventory

63

turnover is in relation to annual sales, the greater the sales activity that the inventory is able to
support.
In short, it shows the speed with which the stock is rotated into sales or the number of
times the stock is turned into sales during the year. The higher the ratio, the better it is since it
indicates that stock is selling quickly.

64

Formula to compute this ratio is:-

Inventory turnover ratio =

Cost of goods sold

Average stock or inventory

Where,
COST OF GOODS SOLD = OPENING STOCK + PURCHASES + DIRECT
EXPENSES -CLOSING STOCK
AVERAGE STOCK = (OPENING STOCK + CLOSING STOCK) / 2

LAST THREE YEARS COMPARISON OF STOCK TURNOVER RATIO OF

HMT LTD.
Year
Inventory turnover ratio

2010-2011

2011-2012

2012-2013

4.4:1

4.2:1

0.64:1

65

INTERPRETATION
The conversion of stock into sales is measured by inventory turnover ratio. As above calculation
and diagram shows that inventory turnover ratio of HMT is not satisfactory it is decreasing
continuously but last few years it is increasing. It means we are able to effective utilization of
inventory.

SUGGESTIONS

Company should take care of stock turnover ratio and try to increase it.

Company should decrease its conversion period.

66

PROFIT AND LOSS ACCOUNT RATIOS

These ratio deals with the relationship between two profit and loss a/c items, e.g. the ratio of
gross profit to sales, or the ratio of net profit to sales. Both the items must, however, belong to
the same profit and loss a/c.

4. NET PROFIT RATIO:

Net profit ratio is one of the ratio used check the profitability and operating/ management
efficiency of a firm.

It examines how good management is at turning their efforts into profits.

Generally, higher margin ratios are more desirable.

Net Profit Ratio=

Net Profit
*100
Net Sales

Net profit ratio of HMT ltd

YEAR

2010-2011

2011-2012

2012-2013

-44.67

-70.79

-52.91

NET SALE

171.19

162.52

190.20

N.P.R.

-26.09

-43.55

-27.81

NET
PROFIT

67

YEAR

ANALYSIS AND INTERPRETATION:

From above graph we can see that this ratio shows good sign in year 2012-2013, but there
is sudden decline in year 2010-2011 and making a loss.

Loss decreases from 2011-2012 to 2012-2013

Profitability decreases.

68

Schedule of Change In Working Capital

For the year ended 31st MARCH 2013
(Rs in crore)

PARTICULARS

CURRENT ASSETS

Previous
Year
(2012)

Current
Year
(2013)

743.83

710.37

207.11

194.45

536.73

515.92

Effect On Working Capital

(Increase) (Decrease)

33.46

Total (A)
CURRENT
LIABILITIES

12.66

Total (B)
(A-B)
Net Decrease in Working
Capital
TOTAL

536.73

20.81

20.81

536.73

33.46

33.46

Analysis of 2011-2012
This statement also shows the negative balance of working capital. There is decrease in
the current assets. So the over all result is that there is decrease in working capital than previous
year.

69

Schedule of Change In Working Capital

For the year ended 31st MARCH 2013
(Rs in crore)

PARTICULARS

CURRENT ASSETS

Previous
Year
(2012)

Current
Year
(2013)

710.37

726.68

194.45

214.37

515.92

512.31

Effect On WorkingCapital
(Increase) (Decrease)

16.31

Total (A)
CURRENT
LIABILITIES

19.92

Total (B)
(A-B)
Net Decrease in Working
Capital
TOTAL

515.92

3.61

3.61

515.92

19.92

19.92

Analysis of 2011-2012
This statement also shows the negative balance of working capital. There is increase in
the current assets. So the over all result is that there is Increase in working capital than previous
year.

70

OPERATING CYCLE OF HMT LTD.

After calculation of ratio analysis we can make the operating cycle of HMT Ltd. which
can tell us following things:

Conversion of cash into raw material.

Conversion of raw material into work in progress.

Conversion of work in progress into finished goods

Conversion of finished good into debtors by credit sale.

Conversion of debtor into cash by realization cash from them.

Thus the operating cycle starts from cash, finishes at cash and then again restarts from

cash. Net working capital depends upon period of operating cycle. Greater the period more will
be the need of working capital. Period of operating cycle in a manufacturing concern because in
trading concern because in trading unit cash is directly converted into finished goods.
Because of the time involved in an operating cycle there is a needed of working capital in the
form of current asset. Firm have to keep adequate stock of raw material to avoid risk on
availability of raw material. Similarly concern must have adequate stock of finished goods to
meet the demand in the market on continuous basis to avoid being out of stock. Concern also has
to sell finished good on credit due to completion, which necessities the money in debtors bill
receivables.
We can prepare operating cycle of HMT Ltd. Which the help of comparative statement inventory
as on 31st march 2011 this is as follow:

71

OPERATING CYCLE OF HMT LTD.

Above diagram shows the operating cycle of HMT Ltd. In HMT Ltd. the days are as
follows:-

Conversion of cash into raw material

27.61 days

Conversion of raw material into work-in-progress

20.27 days

Conversion of work-in-progress into finished goods

17.62 days

Conversion of finished goods into debtors by credit sales

20.48 days Conversion of

213 days

debtors into cash by realizing cash from

Them

So, debtor collection period in HMT Ltd. is high, which should be below 213 days.

72

CHAPTER-5
FINDINGS &
RECOMANDATIONS

73

FINDINGS

Company has liquidity position with 3.39 as current ratio and 3.25 as liquid ratio.
The net loss of company decreases from 43.55crore to 27.81crore.
Debtor collection period in HMT Ltd. is high.
Current assets of company increases from 710.37crore to 726.68 crore and current

liabilities also increases from 194.45crore to 214.37 crore.

Working capital turnover ratio increases from 0.98 to 1.72
Schedule of changes in working capital shows decreasing trend in working capital in

2009 and 2010

When HMT Ltd. established in Pinjore at that time there was mainly three manufacturing
companies of tractor in India. One was HMT and other two were Mahindra & Mahindra

and Escorts. So these companies were the major players in the tractor industry.
In production department many machines are too old. These machines installed at the
time of establishment so its maintenance and repair costs affect the production cost.
Production department is facing the problem of inflow of funds. Many time productions
get delayed because of the problem of shortage of funds. Sometimes order is not
completed at the right time. So it becomes the reason of unsatisfaction of the buyers.

74

RECOMMENDATIONS

In HMT collection period is very high which may result in bad debts for company. So it
should be controlled.

HMT needs to reduce payment period so that company should pay debt in time & credit
worthless in not spoiled.

No purchases should be made till stock is disposed off.

Worker participation in management should be encouraged. Training should be given to

them so as to make them aware of new technologies.

Input Output ratio should be increased.

Vendor development should be corrected.

Optimum utilization of Man-Power

The product of HMT is good. But main problem is related to inadequacy of funds. So
management should stress on sufficient funds, so that supply can be according to demand.

Advertising budget of Rs.2crore in HMT is as follows

Press 40%
Outdoor 30%
Print

10%

Exhibition 20%
So above budget states that there is no place for electronic media i.e. T.V, Radio,
advertisement. So HMT Ltd. should plan for electronic media because these days electronic
media has major place in advertisements.

75

REASONS FOR LOSS IN HMT LTD.

The company mainly deals with the Government sectors like Defense and Automobile
sectors.
When the company was set up in 1963, at that time it was manufacturing only milling
machines but in early 1970s the company started making CNC machines. HMT started
designing its machines by its own through the constant study of the market. Earlier the CNC
machines were being imported from Germany and Japan. HMT started manufacturing CNC
machines in house.
In 1963, when company set up, the main motto was to give the employment to maximum
people. But in 1995-1996 when the stage of recession came the company had to face tough
competition due to the high cost of product on account of more employees with higher wages.
And in order to overcome the situation VRS was launched. In this scheme many efficient and
technically expert engineers and employees left HMT and joined its competitors.
Company was competent to face the challenges but on him other hand competitors
offered higher wages to HMTS VRS candidates as their labour cost is less. The cost of machines
manufactured by them was lower than HMT and their same machinery was on the higher side.
But company continued and still continuing to manufacture the machines with the high standard
involving more costs.
First of all watches were also being manufactured by HMT. It was the thinking of the
people that the person wearing HMT watch belongs to high societies.
HMT used to send their employees and directors to other countries for market research.
In early 80s one of the director of HMT joined TATA Group and suggested to
manufacture watches with the name of Titan. TATAS started manufacturing Titan watches with
lower prices similar to HMT watches.
So it will not be wrong to say that
HMT Watches is the mother of Titan Watches
The above resulted in fewer sales of HMT and company started incurring losses.

76

CHAPTER-6
CONCLUSION &
BIBLOGRAPHY

77

CONCLUSIONS
After completing all the study of the project of working capital management in HMT Ltd., the
result, which I found in this study are as follows:

HMT Tractors at present occupy 7th position in the tractor industry which was 2nd in
1986-87. this was due to :

Increase in competition

Non-modernization of production methods

Entry of new private companies in the tractor market.

Due to increase in the time period for the realization of debtors, cash and bank balances
has been decreased.

The company is more dependent on outsiders funds.

Production has started decreasing from 2010-2014. It needs a special attention of the
management to remove all the bottlers possible for such a downward trend which affects
profitability negatively.

Stock turnover ratio is decreasing constantly it shows that capital is blocked into the
inventory.

A lower debt turnover ratio indicates that sales have been made to customers who did not
deserve much credit.

78

BIBLIOGRAPHY

Book References

V.K Bhalla : Working capital management

Management accounting : Gupta, Shashi K. Gupta and Sharma R.K

Financial Management: I.M. Pandey

Internet References

www.hmtindia.com
www.hmttractors.com

Other References

Audit Report of HMT ltd.

Annual reports/ financial statements of HMT ltd.

79

CHAPTER- 9
ANNEXURE

80

Balance sheet or HMT Ltd. Pinjore as on dated

31st march 2013(Rs crore)
1
5
.
9
.

1
Equity share capital

2. Mar'13
6. 760.35

3. Mar12
7. 760.35

4. Mar'11
8. 760.35

Share application
money

10.443.00

11.443.00

12. 443.00

13. Preference share

capital
17. Reserves & surplus

14.-

15.-

16.-

18. -506.11

19. -453.20

20. -382.41

2
1
2
5
2
9
3
3
3
7
.
4
1
.

. Secured loans

22. 254.65

23.341.70

24. 324.91

. Unsecured loans

26. 366.26

27. 231.42

28. 196.07

, Total

30. 1,318.16

31. 1,323.27

32. 1,341.92

. Gross block

34. 136.39

35. 132.49

36. 120.02

Less : revaluation
reserve

38.-

39.-

40.-

Less : accumulated
depreciation

42. 96.93

43. 93.42

44. 90.36

4 Net block
5
49. Capital work-inprogress

46. 39.46

47. 39.06

48. 29.66

50. 0.82

51.2.29

52. 7.85

53. Investments

54. 765.56

55. 765.71

56. 765.71

57. Current assets, loans

& advances

58. 726.68

59.710.37

60. 743.83

6
1
.
6
5
.

62.214.37

63. 194.45

64. 207.11

66. 512.31

67. 515.92

68. 536.73

Less : current
liabilities &
provisions
Total net current
assets/Working
capital

81

69. Miscellaneous
expenses

70. -

71.0.29

74. 1,318.16

75. 1,323.27

73. Total

72. 1.98
76.1,341.92

82

Profit and loss a/c of HMT Ltd. Pinjore

As on dated 31st march 2013(Rs crore)
1.

2. Mar'13

3. Mar'12

4. Mar11

5.

Sales Turnover

6. 191.64

7. 164.44

8. 174.14

9.

Excise Duty

10. 1.44

11. 1.92

12. 2.95

13

NET SALES

14. 190.20

15. 162.52

16. 171.19

18. 0.00

19. 0.00

20. 0.00

22. 200.98

23.218.01

24. 242.53

26. 3.97

27. 4.37

28.5.13

31. 117.86

32. 120.23

34. 66.14

35. 63.67

36. 64.72

38. 0.00

39. 5.02

40. 5.62

42. 27.06

43. 35.11

44. 26.85

46. 0.00

47. -4.67

48. -4.34

51. 0.00

52. 0.00
CT

17. Other Income

21.

TOTAL
INCOME

25. Manufacturing
Expenses

29. Material Consumed 30. 133.06

33.

Personal
Expenses

37. Selling Expenses

41.

Administrative
Expenses

45. Expenses
Capitalized
49.

Provisions Made 50. 0.00

not written 73. Total

83

53. TOTAL
EXPENDITURE

54. 230.24

55. 221.37

56. 218.21

57. Operating Profit

58. -40.04

59. -58.85

60. -47.02

61. EBITDA

62. -29.26

63. -3.36

64. 24.33

65. Depreciation

66. 3.92

67. 3.40

68. 2.99

69. Other Write-offs

70. 0.00

71. 1.38

72. 1.27

73. EBIT

74. -33.18

75. -8.14

76. 20.07

77. Interest

78. 19.68

79. 63.68

80. 65.83

81. EBT

82. -52.86

83.-71.83

84.-45.76

85. Taxes

86. 0.00

87. 1.81

88.-1.31

Profit and Loss for the

-52.86
Year

-73.64

-44.46

Non Recurring Items

0.00

-0.9

-2.17

Other Non Cash

Adjustments

-0.0

3.77

1.96

Other Adjustments

0.00

0.00

0.00

REPORTED PAT

-52.91

-70.79

-44.67

84

Ratios
Per share ratios
Adjusted EPS (Rs)

-0.71

-0.96

-0.58

Adjusted cash EPS (Rs)

-0.64

-0.90

-0.52

Reported EPS (Rs)

-0.69

-0.93

-0.58

Reported cash EPS (Rs)

-0.61

-0.86

-0.53

Dividend per share

Operating profit per share (Rs)

-0.43

-0.77

-0.61

Book value (excl rev res) per share

(Rs)
Book value (incl rev res) per share
(Rs.)
Net operating income per share (Rs)

3.34

4.04

4.94

3.34

4.04

4.94

2.54

2.14

2.25

Free reserves per share (Rs)

-6.66

-5.96

-5.06

Profitability ratios
Operating margin (%)

-17.25

-36.21

-27.46

Gross profit margin (%)

-19.27

-38.30

-29.21

Net profit margin (%)

-21.44

-32.47

-18.41

Adjusted cash margin (%)

-19.72

-31.58

-16.57

Adjusted return on net worth (%) -21.42

-23.99

-11.82

Reported return on net worth (%) -20.80

-23.07

-11.88

Return on long term funds (%)

1.95

-1.11

2.61

Long term debt / Equity

1.84

1.39

1.03

Total debt/equity

2.44

1.87

1.38

Owners fund as % of total source

29.05

34.89

42.04

Fixed assets turnover ratio

1.42

1.23

1.43

Leverage ratios

85

Mar 13 Mar 12 Mar 11

Liquidity ratios
Current ratio
Current ratio (inc. st loans)

3.39
1.73

3.65
1.82

3.59
2.01

Quick ratio

3.25

3.45

3.28

Inventory turnover ratio

4.4

4.2

.64

Dividend payout ratio (net profit)

Dividend payout ratio (cash profit)

Earning retention ratio

Cash earnings retention ratio

Adjusted cash flow time total debt

Financial charges coverage ratio

0.29

-0.05

0.36

Fin. charges cov.ratio (post tax)

0.31

-0.03

0.38

Material cost component (%

earnings)
Selling cost Component

62.45

65.20

82.If

3.43

3.08

3.28

Exports as percent of total sales

0.02

0.10

Import comp, in raw mat. consumed 0.31

0.34

0.17

Solvency ratio

0.52

0.53

0.51

Debtor turnover ratio

0.86

0.21

2.63

Payout ratios

Coverage ratios

Component ratios

86