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Company Profile

LT Overseas to LT Foods Ltd: Small beginnings to Global Presence When it all began
about 30 years ago, nobody could have even dreamt that the small trading company that
came into being as Lalchand Tirathram Mills could one day be on its way to become a
leadingglobal food company.

1965, Bhikiwind, in a little village in Amritsar (Punjab, India); Shri Raghunath

Arorastarted a small trading company which grew from being a commissioning agent to a
partnership firm by 1977, as Lalchand Tirathram Rice Mills.

1978: Mr. V.K.Arora joined the family business with his father, with a clear vision of
taking his company to a global level. In 1980, the company started exporting Premium
Rice. This was the first step towards making this vision a reality.

Simultaneously, the company decided to face the challenges in domestic markets by

setting up a modern, state-of-the-art rice factory in Sonepat, Haryana in 1984.
Unorganized players with inconsistent quality products were crowding the market. In this
scenario, Mr. V K Arora felt the need to promote branded and packaged products. In line
with this vision, the company started the business of milling, processing and marketing of
branded basmati rice and manufacturing of rice food products in the domestic and
overseas market.


Our Company was incorporated as LT Overseas Private Limited on 16th October 1990
having registered office at 532/4, Naya Bazaar, Delhi. Consequent to conversion to
public limited company, the name of the Company was changed to LT Overseas Limited
vide fresh Certificate of Incorporation dated 03rd May 1994. We started our operations in
the year 1993 using certain processing facilities of Lal Chand Tirath Ram Rice Mills
(LCTRRM), an associate concern, on lease. We got our registration as manufacturer
exporter in 1993 from APEDA. In 1994-95 we filed our draft prospectus with SEBI and
Stock Exchanges in Mumbai, Delhi, Jaipur and Ahmedabad. The object of the Issue was
to part finance the expansion programmed for setting up a milling plant with a capacity of
2 MTPH. We received the observation letter from SEBI but we did not take the matter
forward on account of the then prevailing poor conditions in the capital markets.
However, we completed the expansion plan through term loan from Banks. We set up
milling capacity (paddy to rice) of 4 MTPH in the year 1995, at Kakroi Road Sonepat.
We have been making investments in plant and machineries and other assets in a bid to
upgrade and modernize its production processes to meet the consistent quality
requirements of customers. In pursuance of succession agreement dated March 26, 1999,
we took over the business of Lal Chand Tirath Ram Rice Mills having milling capacity of
6 MTPH, thus making the total milling capacity available with the Company at 10
MTPH. In the year 1999-2000, we started setting up a new manufacturing facility at
Bahalgarh, Haryana. The commercial production commenced in December, 2000. This
factory increased our manufacturing capacity by 4 MTPH. However, our total milling
capacity remained same i.e. 10MTPH due to obsolescence of some machineries at Kakroi
Road Factory. Between 2002-2005 we increased our capacity to 18 MTPH and in the
year 2005, we disposed off our Kakroi Road unit (which had a capacity of 6 MTPH)
there by reducing our available capacity to 12 MTPH at the end of 2005-2006. However
with increase in capacity during 2006-07, our current owned capacity stands at 27

Achievements - Awards & Recognitions

1990-91 Incorporation of our Company as a Private Limited Company

1993-94 Converted into a Public Limited Company

1994-95 set up our own milling capacity of 4 TPH

1995-96 Certificate of merit was awarded by APEDA for significant contribution in the
export of Indian Long Grain rice registered the brand ‘DAAWAT’ in United States of

1997-98 Awarded ‘APEDA Export award’ for outstanding contribution to promotion of

agricultural and processed food products during the year 1996-97.

1998-99 took over the business of Lal Chand Tirath Ram Rice Mill having capacity of

1999-00 recognized as Star Trading House by Government of India Registered and

launched the brand ‘DAAWAT’ in Mauritius, Saudi Arabia and New Zealand

2000-01 started the processing facility at Bahalgarh Unit of 4 TPH Registered and
launched the brand ‘DAAWAT’ in Australia

2001-02 Registered and launched the brand ‘DAAWAT’ in Canada

Obtained ISO 9001:2000 certification
Obtained HACCP certification
Obtained certification of SQF (Safe Quality Food)
2000CM for comprehensive food safety and Quality management systems

2002-03 Received the right to use APEDA certification mark “Quality Produce of
India” for exports enhanced the capacity in Bahalgarh unit from 4 TPH to 10 TPH,
making the total capacity to 16 MTPH.

2003-04 Award from APEDA for export promotion and quality development of Basmati

2004-05 India Star Award from Indian Institute of Packaging enhanced the capacity in
Bahalgarh unit from 10 TPH to12 TPH, making the owned capacity to 18 MTPH.

2005.6 Awarded ‘Udyog Ratna’ by PHD Chamber of Commerce and Industry

presented by Shri Bhupinder Singh Hooda Hon’ble Chief Minister, Haryana
for valuable contribution to Economic Development of Haryana.
2006-07 Inauguration of Silos Complex Increase in capacity from 18 MTPH to 27

2007-LT Overseas Ltd has signed a MOU with Madhya Pradesh State Industrial
Corporation Ltd Corporation, Bhopal.-LT Overseas Ltd has signed a Shareholders
Agreement on June 10, 2007 with LT Overseas North America (LTO NA) - a Company
incorporated under the Laws of Ontario. The Company will be holding 55.26% shares in
LTONA and in pursuance of the same LTO NA will become a subsidiary of the

2008- Company name has been changed from LT Overseas Ltd to LT Foods Ltd.

2010- LT Foods Limited has informed regarding the outcome of Board Meeting which
are as follows (1) Appointment of Ms. Radha Singh as Independent Director of the
Company w.e.f. January 29, 2010; (2) Appointment of Mr. Suneet Gupta as Alternate
Director of Mr. Rajesh Kumar Srivastava, Nominee Director of the Company.

Annual Report
The Directors have pleasure in presenting the 19th Annual Report of your Company
together with the Audited Statement of Accounts for the financial year ended 31st March

The summarized Financial Results for the year ended March 31, 2009 are as follows:
(Rs. in Lakhs)

Particulars 2008-09 2007-08

Sales and other income 70212.66 57910.28
Profit Before Tax 1000.96 3161.05
Tax on profits (69.37) 338.86
Profit After Tax 1070.33 2822.19
Dividend 222.70 334.05
Tax on Proposed Dividend Nil 56.77
Transfer to General Reserves 107.03 181.38
Dividend Tax for Earlier years Nil 6.61

* Figures have re-grouped / re-arranged wherever necessary in the current year.

Key Ratios:
The underlying performance can be ascertained from the following key ratios:

2008-09 2009-10

Earning Per Share ( Rs.) 4.81 12.67

Dividend Per Share (Rs.) 1.00 1.50
Return on Tangible Net Worth (%) 7.16 20.25


During the year under review, the Company achieved turnover of Rs. 69439.55 Lacs and
PBDIT of Rs.7966.60 Lacks. The Company’s Profit after tax and is Rs.1070.33 Lacs and
Earning per Share Rs.4.81. With Consolidated turnover of 1060.97 Crores, the LT Group
has achieved another milestone, which reflects the efforts of the Organization to stride it
to great heights. The details of the Company’s operations have been provided in the
Management Discussion Analysis Report, which forms a part of this report. Audited
Consolidated Financial Statement for the year ended 31st March, 2009 also forms a part
this report.


In order to strike a balance between the need to sustain strategic investments for secure
future and the annual expectation of shareholders for growing income, your Board of
Directors at the meeting held on 30th June 2009, recommended a final dividend Re .l per
share (@10%) of Rs.10/- each for the financial year 2008-09, subject to the approval of
shareholders at the ensuing Annual General Meeting absorbing a sum of Rs.2,22,69,929/-
(exclusive of Dividend distribution tax). Dividend distribution tax will be borne by the


An amount of Rs.107.03 Lakhs is proposed to be transferred to General Reserve.


Your Directors had proposed the change of name of your Company from LT Overseas
Limited to LT Foods Limited to match the vision of the Company of becoming a Leading
Global Food Company. Consequently, approval of the shareholders was taken in the
previous Annual General Meeting for the same. An application was made to the Registrar
of Companies, NCT Delhi & Haryana seeking the change of name and the same was
accorded by the Registrar of Companies vide fresh Certificate of Incorporation w.e.f.
25th September, 2008.


Your Company has been conferred with APEDA Export Award in this year for the
performance pertaining to year 2007-08. Daawat Foods Limited, a wholly owned
subsidiary of the Company has been awarded Export Excellence award for its excellence
in operations and export by State of Madhya Pradesh in its first full year of operations.


India is the worlds second largest producer of food, and has the potential to become the
biggest with the food and agricultural sector. The total food production is expected to
double in the next ten years and there is opportunity for large investment in food and food
processing technologies. Health food and health food supplement is another rapidly rising
segment in the Industry which is gaining vast popularly. The food processing industry is
presently growing at 14% against 6-7% growth in 2003-04.

India is one of the major food producers but accounts for less than 1.5 % of International
food trade, whereas the global processed food market is estimated at US.2 trillion. This
indicates a vast scope in the industry.


Overall this was a year of great challenges and a meltdown in the economic market.
Despite the recession in the global scenario, the Company has achieved significant
growth in Domestic as well as in International market as the impact of the same was
considerably less on our Company, being in the food industry. The Company had made
investments in its subsidiaries in the preceding years, and as a result of overall
performance and contribution of the subsidiaries, and in line with the goal, the LT Group
has been able to reach the milestone of a turnover of 1060.97 Crores. Through a well
defined and conscious strategy, the Company is able to expand its retail and distribution
network, domestically and well as internationally.

In the midst of economic crises globally, your Company will continue to pursue the
strategy to identify and exploit profitable growth opportunities by increasing the
consumer preferences, increase brand relevance, improve availability, structurally build
capability and efficiencies to be cost competitive.


The year 2008-09 has been a year of corporate developments for our group, where our
different subsidiaries have become operational and have been able to provide good return
for the investments made in the same, in the initial year of its operation. The Company
has hired a panel of technicians, professionals and consultants for different areas, who are
well experienced in their respective fields, and whose services have helped the Company
in optimum utilization of the resources and prevention of loss and increase in
profitability. The Company with their innovative guidance has been able to leverage its
operations in different aspects.

The Company continues to make inroads into new segments/ markets, exploring new
territories and introducing new products in the market. The Company has hired the
services of experienced consultants, who are assisting us in sales and distribution
transformation, retail excellence and supply chain refinement. In addition, they will also
help improve significantly the service levels and acute scientific forecasting


The Company always has a vision to be a global rice food Company. In furtherance to its
vision, the Company has been taking initiative to improve domestic operations and
increase the bandwidth of the Company. It is also taking considerable steps for
strengthening its international presence and leverages the existing strengths of the
business. It is continuously in the process of injecting latest technology commensurate
with its operations. The Company is also in the process of increasing the product
portfolio of the Company.


As a result of the nature of the activity of the Company, it is always in need of working
capital, and the Company has endeavored to procure finance for the operations of the
Company at a competitive rate. The Company has obtained loans from a consortium of
banks and has also obtained loans from other banks at a competitive rates. Having
significant portion of exports, the Company has the policy to hedge funds for the pending
orders in hand.


The year has been a challenging year for our economy as well as for the Company. The
market dynamics were very strongly dominated by world economy changes. This year we
achieved domestic revenue of Rs 370.65 Crores in value which was result of increase in
overall volume as well as increase in sale of consumer pack. For the year 2009-10 also,
we have taken a challenging target looking at the potential and growth rate in the
domestic market. We are undergoing various changes and corrections to improve our
performances and to increase our market share. We have utilized the services of
renowned consultants to revamp our operations and make them more effective, geared to
take the challenges of this year. They are helping us both in penetrating further in our
present markets as well as capturing untapped markets by identifying new opportunities.
The plan this year is to catapult the growth through increasing our effective penetration
from present 450 towns to 653 towns through direct or indirect coverage. We are sure
that this will bring healthier and more profitable and sustainable growth of the

Daawat is prominently placed in 23 states and is performing outstanding with the pace of
70% growth in new states i.e. Bihar and Jharkhand, wherein Daawat was launched last
year only.

As per strategic move to improve, we have realigned modern retail business with our
subsidiary Company i.e. Staple Distribution Company Limited, engaged in the
distribution business. They are directly focusing their resources & aligning their activities
as per modern retail needs.


In consonance with its vision of becoming a Global Food Company and a major exporter
of rice, the Company has been continuously making all efforts and harnessing all
opportunities and has been able to develop a strong global distribution network at
International level.

The Export operations of the Company are currently spread in more than 60 countries,
with several new markets opened in this financial year. The Companies endeavor to
capture new markets and exports to these markets have achieved major successes. We are
currently leading the pack in countries such as UAE, UK and US. The Company is
continuously making efforts to explore and capture, further the potential in the export
market. Various agreements with new channel partners have been done in many new

In the Middle East, African, European and the US markets, we have been able to make
steady progress with growth having surpassed previous targets. Despite the slowdown in
some economies and market hit with recession, we continue to grow at a steady pace.

In the year 2008-09, the export revenues exceeding Rs. 323.74 Crores as compared to
revenue of Rs. 247.57 Crores in 2007-08. We are also consolidating operations in the
existing markets where we have a set up by introducing some innovative promotion
schemes to keep the customers interest alive for brand Daawat. We will be expanding our
product portfolio with emphasis on total quality improvement thereby improving our

service delivery efficiencies. We have undertaken upon ourselves an aggressive target in
addition to our objective to enhance our customer base across different markets.

During the year the Company has been awarded by APEDA for their contribution in
exports during the previous year.


The funds raised by the Initial Public Offering of the company have been fully utilized
and a certificate towards the same has been received from the Monitoring Agency.


Indian Entities:

Daawat Foods Limited

The wholly owned subsidiary of LT Foods Limited was set up with state of art
technology, milling unit in Mandideep, Bhopal, for production of parboiled rice. The total
investment made in the subsidiary is of an amount of Rs.13.5 Crores as on date. This was
the first year of its operation, in which it has set a benchmark of a turnover of more than
Rs.200 Crores, which is the relentless effort of the ambitious and dedicated workforce.

The status of the Company has been changed from Private Limited Company to Public
Limited Company by deletion of the word private from its name.

The Subsidiary has implemented ERP. It has embarked on the journey to practice S-5 in
the plant and has developed an automated environment, which resulted in higher output

and reduction in average cost with emphasis on training the employees of the Company.
The Company has a dedicated research team and consultants, which has helped the
Company by helping the farmers and remunerating them for adoption of basmati

The Company has decided to add value added products in its portfolio and work has
been started on the Food Plant, which shall be operational in the second quarter of year

The Company has been awarded Export Excellence award for its excellence in
operations and exports by MP State Minister of Commerce and Industry.

Daawat Brown Rice Super Basmati Rice
The product is available in Super Basmati rice - Just
attractive carton boxes of have spoonful of this
1kg and 500 gms. The wonderful flavorsome rice
product is available in and you will know why
many modern and they say God visits
traditional retail stores. mortals in the form of food.
The secret of launching Daawat Super Basmati
Daawat Brown Rice lies in Rice boasts of the taste
its nutritional ...... that can ......

Rozana Basmati Rice Chef’S Secretz Basmati

Rozana Basmati rice Rice
Celebrate each day with Nurtured in the sun-kissed
the super economical, fertile plains of Northern
super tasty Rozana India, Daawat Chef’s
Basmati Rice. Basmati Secretz Basmati rice is
rice that fits perfectly in polished, graded and
your budget. Daawat passed through colour
Rozana with its taste, sorter machine to give it a
aroma, long grain and ...... distinctive pearly
texture. ......

India’S Authentic Basmati Long Grain Rice

Rice It is long grain rice which
Let its exquisite aroma fill is suitable for the daily
the air while you simmer it needs of households. This
to perfection. And your is very popular among the
family will be lured to the diverse population across
dining table bound by the geography.
spell. Daawat Select
Basmati rice is known far
and wide for the
magic ......

Heritage Basmati Rice Gold Basmati Rice

Heritage Basmati Rice as Gold Basmati rice royal
a brand already made its long grains that are what
presence felt for more defines Daawat Gold
than a decade, its not just Basmati rice. It is
another product of LT amazingly white luster,
Overseas Ltd. but is also the enchanting aroma
one of the trusted brands and an unforgettable
in the industry since taste. Be it biryani, risotto
years ...... or your special ......

Board of directors of L.T. Food Ltd.

Company Name LT Foods Ltd.
Gurgaon - 122002, Haryana, India
Phone No 91-124-3055100/3055182
Fax 91-124-3044199
Contact Person Mr. Kamal Kant Kanaujia (brand executive )
Mobile +919650806782

Management - LT Foods
Chairman and Managing director
Vijay Kumar Arora
Joint Managing Director
Surinder Arora
Independent Director
Pramod Bhagat
Independent Director
Radha Singh
Alternate Director
Suneet Gupta
Joint Managing Director
Ashwani Arora
Independent Director
Suparas Bhandari
Independent Director
Jagdish Chandra Sharma

Rajesh Kumar Srivastava Nominee Director

All India Service Network


Ajmer Gawhati








Working Capital refers to the cash a business requires for day-to-day, or, more

specifically, for financing the conversion of raw material into finished goods,

which the company sells for payment. In other words ‘Working Capital’ is the

money the business process consumes. The longer the process takes, the more

money is consumed. Working Capital is calculated by deducting current assets

from current liabilities. Current assets are resources, which are in cash or will

soon be converted into cash (normally with in one year). Whereas Current

liabilities are commitments, which will soon require cash settlement in the

ordinary course of business.

Working Capital can also be defined with an approach that encompasses all the

processes surrounding accounts payable, accounts receivable and inventory and

one begins to understand the potential knock-on impacts of a change in working

capital practice or policy. When looking in detail at any of these three core areas,

it soon becomes clear that WCM can touch all the firm buys makes and sells. A

‘total’ approach to working capital covers all the company’s activities relating to

vendor, the customer and the product.

Concepts of Working Capital

Gross Working Capital Concepts

Net working Capital Concepts

Gross working capital concept

According to this concept, working capital means working capital which is total of

the current assets of a business.

Gross Working Capital = Total current assets

Net Working Capital Concept

According to this concept, working capital means net working capital which is the

excess of current assets over the current liabilities

Net Working Capital = Current Assets – Current liabilities


The better a company manages its working capital, the less the company needs to

borrow. Without adequate working capital there can be no progress. A business must

expand and assert itself in a competitive world. If expansion takes place without the

firm being able to cover its commitments, then over trading will be the result.

Available working capital is stretched a capacity until, finally, bankruptcy or

liquidation is forced upon the business. Even companies with cash surpluses need to

manage working capital to ensure that those surpluses are invested in ways that will

generate suitable returns for investors.

The lengths of production and sales cycle pay an important part in the over trading

process. If short, and the period of credit is not excessive, then money from sales

will help to replenish working capital. However the longer the total period from the

buying of the raw material to the receipt of the cash from sales, the more likely is


Working capital management can be subject to compromise and best practice is

often hard to identify, pursue or benchmark. From a funding optimization

perspective, however, generating extra cash from internal sources has the advantage

over bank and public debt of greater opportunity and access, typically at lower cost.

In terms of the impact felt across the company in the business units and customer-

facing staff, it is not the financial but the operational benefits that are most keenly

felt following a reappraisal of working capital practices. The greater efficiencies in

dealing with customers and suppliers greater control of and information on the

processes related to ordering/ paying and delivering / getting paid- can ultimately

feed into improve delivery of goods and services at lower cost. Improve working

capital leads to increase shareholder value because it enables firms to generate more

profit with less capital.

Nature of Working Capital

Along with the fixed capital almost every business requires working capital
through the extent of working capital requirements differs in different
businesses. Working capital is needed for running day to day business
activities. When a business is started, working capital is needed for
purchasing raw materials. The raw material is then converted into finished
goods by incurring some additional costs on it. Now goods are sold. Sales do
not convert into cash instantly because there is invariably some credit sales.
Thus there exist a time lag between sales of goods and receipt of cash. During
this period, expenses are to be incurred for continuing the business operations.
For this purpose working capital is needed. The time period which is required
to convert raw material into finished goods and then into cash is known as
operating cycle. Operating cycle of a manufacturing concern involves five
1. Conversion of cash into raw material

2. Conversion of raw material into work-in-progress

3. Conversion of work in progress into finished goods

4. Conversion of finished goods into debtors by credit sales

5. Conversion of debtors into cash by realizing cash from them.

Thus the operating cycle starts from cash, finishes at cash. Need for working capital

depends upon period of operating cycle. Greater the period more will be the need for

working capital. Period of operating cycle in a manufacturing concern is greater than

period of trading concern.

Management of Working Capital

Guided by the above criteria, management will use a combination of policies and
techniques for the management of working capital. These policies aim at managing the
current assets (generally cash and cash equivalents, inventories and debtors) and the short
term financing, such that cash flow returns are acceptable.

• Cash management: Identify the cash balance which allow for the to meet day to
day expenses, but reduce cash holding cost.

• Inventory management: Identify the level of inventory which allow for

uninterrupted production but reduce the investment in raw material and minimize
recording cost and hence increase cash flow.

• Debtor management: Identify appropriate credit policy, i.e. credit term which will
attract customer, such that any impact on cash flow and the cash conversion cycle
will be offset by increase revenue and hence return on capital, (or vice versa).

• Short term financing: Identify the appropriate source of financing, given by cash
conversion cycle: the inventory ideally financed by credit granted by supplier,
however it may be necessary to utilize a bank loan (or overdraft), or to “convert
debtor to cash” thought “factoring”.


For a fresher like me, in a big organization like L.T. Food group ltd. gave me a feel of the

real working atmosphere. It enhanced my horizons about how the members of the

organization work as a team, co-coordinating with each other, and their interdependence

on each other. I became aware of the synergy effect i.e., how different members in

different profiles produce greater results with co-ordination.

The usefulness of Study:

 In-depth knowledge of Company’s workings.

 Familiar atmosphere of Company motivates the researcher.

 Awareness of difference between the bookish knowledge and the practical workings

of the company.

 Knowledge of Company’s policies.

 Motivates to work as a team member.

 To get aware of Current Position of the Company.

 The various designations in an organization, the respective work profiles and the

interdependence among them.

 Synergy effect.


 It helps to understand how to tackle work pressure and meet dead lines.

 Difference between budgeted and actual performance.

 Time utilization.

 Wealth maximization.

 Data analysis and interpretation helps to increase capability of mind.

 Knowledge of Company’s decisions to solve the problems.


It is well known fact that we remember 20% of what we hear, we remember 40% of

what we see but we remember 75% of what we do.

There are two fold of the management of working capital

• Maintenance of working capital at appropriate level.

• Availability of ample funds as and when they are needed.

The present study in ,L.T. FOODS LTD. mainly focus on the above objectives as

well as some other objectives which I have taken into consideration during the

project training.

• To access the requirement of working capital of the company.

• To assess the changes in working capital needs over the years.

• How management of working capital affects the financial position of the


• Evaluate current assets and current liabilities to find out liquidity position of the


• To prepare the statement of working capital of the concern.

• To know about the current assets and current liabilities position of LT Foods Ltd.

• To determine the ratios relating to the working capital.

• To find out the Gross Working Capital position of LT Foods Ltd.

• To know about the net working capital position of LT Foods Ltd.

The goal of working capital management is to manage the current assets and

current liabilities of a company in such a way that working capital is maintained at a

satisfactory level. The main objectives are follows:

• To determine the adequate investment in Working Capital.

• To determine the composition or structure of Current Assets.

• To maintain a proper balance between Liquidity and Profitability.

For determining what proportion of current assets should be financed by short-term

sources and how much from long-term sources? The decision will determine the

financing mix. There are three approaches to determine the financing mix:

1. Matching Approach: According to this approach, the expected life of the

asset will be matched with the expected life of the sources of fund raised

to finance such assets. For example, if stock is to be sold in 30 days, a

short-term loan for 30 days may be taken. Under this approach, the

liquidity is low and the risk and profitability are high

2. Conservative Approach: According to this approach, all the financial

Needs of a firm are financed from long-term funds. Short-term fund are

used in emergency situations

3. Aggressive Approach: When a firm follows aggressive approach, amount

of long-term funds remain same as in matching approach but the amount

of short-term funds is maintained at a higher level than under the matching

approach. It provides more liquidity.

Determinants of Working Capital

1. Nature of Business

2. Size of Business

3. Growth and Expansion

4. Production cycle

5. Business Fluctuation

6. Credit Policy Relating to Sales

7. Credit Policy Relating to Purchase

8. Availability of Raw Material

9. Availability of Credit from banks

10. Volume of profit

11. Efficiency of Management.


Although every effort has been in to collect the relevant information through the sources
available, still some relevant information could not be gathered.

 Busy Schedule of Concerned Executives: The concerned executives were having

very busy schedule because of which they were reluctant to give appointment.

 Time: The time duration could not provide ample opportunity to study every detail of

working capital management of the company.

 Unawareness: Executives were unaware of many terms related to working capital

study while asking to them.

 Confidential Information: As the company on account of confidential report has not

disclosed some figures. Moreover, in some cases separate accounts of division are not

separately maintained thereby, leading to restrictions in study.





Accounting Policy


The accompanying financial statements are prepared in accordance with Generally

Accepted Accounting Principles (GAAP) in India under the historical cost convention on
the accrual basis. GAAP comprises mandatory accounting standards issued by the
Institute of Chartered Accountants of India (ICAI) and the provisions of Companies Act,
1956.These accounting policies have been consistently applied, except where newly
issued accounting standard is initially adopted by the company. Management evaluates
the effect of accounting standards issued on an-on-going basis and ensures they are
adopted as mandated by the ICAI.


The Company generally follows mercantile system of accounting and recognizes

significant items of income and expenditure on accrual basis.

The preparation of the financial statements in conformity with Accounting Standards &
GAAP requires management to make estimates and assumptions that affect the reported
balances of assets, and liabilities and disclosure relating to contingent assets and
liabilities as at the date of the financial statements and reported amounts of income and
expenses during the period. Examples of such estimates include useful life of fixed
assets, provisions for doubtful debts, income taxes, write-off of deferred revenue
expenditures an intangible asset. Contingencies are recorded when it is probable that
liability will be incurred, and the amount can be reasonably estimated. Actual results
could differ from those estimates.


(a) Fixed assets are stated at cost less accumulated depreciation/amortization and
impairment loss. All costs including financing cost till the respective asset is put to use
and attributable to the fixed assets are capitalized.

(b) Depreciation on fixed assets is provided on written down value method at the rates
and in the manner prescribed in schedule XIV of the Companies Act, 1956.

(c) Intangible Assets i.e. Goodwill, Brand Equity, Trade mark and assets similar in
nature, acquired from outside, are amortized over a period of 20 years.

(d) License for ERP software, taken as intangible asset, acquired is amortized over a
period of 10 years, as the license is for the indefinite period, in accordance with the
Accounting Standard on Intangible Assets (AS- 26) issued by the Institute of Chartered
Accountants of India.


Trade Investments are the investment made to enhance the company business interest.
Investments are either classified as Current or Long Term, based on management
intention at the time of purchase. Current Investments are carried at the lower of cost and
fair value. Cost of, an overseas investment comprises the Indian Rupee Value of the
consideration paid for the investment.

Long Term Investments are carried at cost and provisions recorded to recognize any
decline, other than temporary, in the carrying value of each investment. Dividends, if any,
are recorded as income in the Profit & Loss Account. The amounts paid under Key man
Insurance Policies are considered as Investment.


Items of inventories are measured at lower of cost or net realizable value. Cost of
inventories comprises of cost of purchase, cost of conversion and other costs incurred in
bringing them to their respective present location and condition. Borrowing cost is
included in the cost of inventory as inventory generally held by the Company is an asset
that necessarily takes a substantial period of time to get ready. Cost of raw materials,
stores and spares, packing materials, jute bags, trading and other products are determined
on FIFO basis. By Products are valued at net realizable value. Cost of finished goods is
determined on Absorption costing method. Material in process, being not material, is
taken as part of raw materials and measured accordingly.


Foreign currency transactions (1) transactions denominated in foreign currencies are

recorded at the exchange rate prevailing at the date of transaction (2) monetary items
denominated in foreign currencies at the year end are restated at year end rates (3) non
monetary foreign currency items are carried at cost (4) any income or expense on account
of exchar difference either on settlement or translation is recognized in the profit and loss

Forward Exchange- Contract

Forward exchange contracts (1) entered into to hedge an existing asset/liability (i) the
premium or discount arising at the inception of such forward contract is amortized as
expense or income over the life of the contract (ii) forward exchange contract is recorded
as an asset / liability and (2) entered into to hedge a firm commitment or highly probable
forecast transaction, the loss or gain is recognized in the profit and loss account.


In determining earning per share, the company considers the net profit after tax. The
number of shares used in computing earning per share is the weighted average number of
shares outstanding during the period. The number of shares used in computing diluted
earning per share comprises the weighted average shares considered for deriving basic
earning per share, and also the weighted average number of equity shares that could have
been issued on the conversion of all dilutive potential equity shares.


Cash flow are reported using the indirect method, thereby profit before tax is adjusted for
the effects of transactions of a non-cash nature and any deferrals or accruals of past or
future cash receipts or payments. The cash flows from regular revenue generating,
financing, and investing activities of the company are segregated.



The undiscounted amount of short term employee benefits expected to be paid in
exchange for services employees services rendered, after deducting amount already paid,
is recognized as a liability in the balance sheet and expensed in the profit and loss
account unless another accounting standard requires or permits the inclusion of the
benefits in the cost of an asset. Cost of accumulating compensated absences that has
accumulated on the balance sheet date is measured and recognized as short term benefits


(I) GRATUITY: Company is recognizing liability of gratuity payable to its

employees to the extent of contribution is determined to be paid by
contribution plan undertaken by the company with Life Insurance Corporation
of India. In the view of the company, such contributions to the plan
undertaken by the company will take care of its liability on account of gratuity
payable under the payment of Gratuity Act. Accordingly, company has not
undertaken the exercise of measuring and recognizing gratuity liability under
defined benefit plan in accordance with The Payment of Gratuity Act, 1972.
The amount for defined contribution plan is recognizes as an expense in the
profit and loss account, unless another accounting standard requires or permits
the inclusion of the benefits in the cost of an asset.
(II) PENSIONS: The pension benefits are recognized in the form of defined
contribution plan required to be made by the company in accordance with and
under The Employees Provident Fund and Miscellaneous Provisions Act,
1952 and rules made there-under
(III) OTHER LIABILITIES: Company is not measuring and recognizing any
other liability.


Company has not determined and recognized liability and expense on account of other
long term benefits to employees as in its opinion no reliable estimate of the obligation
can be made at present. The company, though, may have such liability on account of long
term compensated absences and long term disability benefits.


Company has not recognized termination benefits as a liability and an expense as in its
opinion, at present it is not possible to make a reliable estimate of the amount of the


Income taxes are computed using the tax effect accounting method, where taxes are
accrued in the same period in which the related revenue and expenses arise. A provision
is made for income tax annually, based on the tax liability computed, after considering
tax allowances and exemptions. Provisions are recorded when it is estimated that a
liability due to disallowances or other matters is probable
The differences that result between the profit considered for income taxes and the profit
as per the financial statement are identified, and thereafter a deferred tax asset or deferred
tax liability is recorded for timing differences, namely the differences that originate in
one accounting period and reverse in another, based on the tax effect of the aggregate
amount being considered. The tax effect is calculated on the accumulated timing
differences at the end of an accounting period, based on prevailing enacted or
substantially enacted regulations. Deferred tax assets are recognized only if there is
reasonable certainty that they will be realized and are reviewed for the appropriateness of
their respective carrying values at each balance sheet date.


Borrowing Costs attributable to the acquisition, construction or production of a qualifying

asset are capitalized as part of the cost of that asset. Borrowing costs, which are not
relatable to qualifying assets, are recognized as an expense in the period in which they are


All known liabilities are provided for in the accounts except liabilities of a contingent
nature, which have been adequately disclosed in the accounts.


Pending compliance with AS 30 Financial Instruments Recognition and Measurement

issued by the Institute of Chartered Accountants of India, premium paid, gains and losses
on derivatives are recognized in the Profit & Loss account in accordance with
announcement of the Institute of Chartered Accountants of India.


These are consistent with the generally accepted accounting principles and practices.





Research methodology is a way to systematically solve the research problem. In

it step by step methods are followed to solve a particular problem. It refers to a

search for knowledge. It can also be defined as a scientific search for pertinent

information on a specific topic. In fact, research is an art of scientific investment.

Redman & mory defines research “systematized effort to gain new



Research Designs the way in which the research is carried out. It works as a blue

print. Research Design is the arrangement of the conditions for the collections

and analysis of data in a manner that to combine relevance to the research

purpose with economy in procedure.


 Exploratory Research Design

 Descriptive & Diagnostic Research Design

 Experimental Research Design

Exploratory Research Design

In it, a problem is formulated for precise investigation and working and

hypothesis are developed.

Descriptive & Diagnostic Research Design

In descriptive research design: those studies are taken which are concerned with

describing the characteristics of a particular individual or a group.

Experimental Research Design

In it casual relationships between the variables are tested. It is also known as

Hypothesis Testing Research Design

The present project is descriptive in nature. The major purpose of descriptive

research is the description of the state of affairs, as it exists in present. The main

characteristic of this method is that the researcher has no control over the

variables. He can only report what has happened or what is happening.


It is not possible for any researcher to include each and every member of the

universe in his research process. So, he selects small portion of the universe,

which is its true representative. This group is known as sample and this process

is called sampling.

Sampling Techniques can be categorized into two broad categories namely:

 Non-probability Sample

 Probability Sampling

Non-probability Sampling

In it, researcher selects sample deliberately, by using his own judgment, in it

every item of the universe does not have equal chances of inclusion in the


It can be of following type:

 Convenience Sampling
 Judgment Sampling
 Quota Sampling

Probability Sampling

It is known as “Random Sampling” or “Chance Sampling”. In it, each population

element has equal chance of selection.

It can be of following types:

 Simple Random Sampling

 Stratified Sampling

 Cluster Sampling

In the present project, non-probability sampling has been used because sample is

selected by researcher’s own view and every item of the universe has not equal

chances of being selected. Under non-probability sampling, convenient sampling has

been used because sample has been selected according to own convenience.


The data can be of two types:

 Primary Data

 Secondary Data

Primary Data

Primary data are those data, which is originally collected afresh.

Secondary Data

Secondary data are those data which are already collected and stored and which

has been passed through statistical research.

In this project, Secondary data has been collected from following sources:-

• Annual report

• Books

• M.I.S

Other material and report published by company







• Good image in market.

• Ability to deliver in time.

• Excellent distributorship network across the India.

• Latest technology.

• Good quality standards.

• Better services.


• High prices as compared to the market.

• Physical distance between plant & marketing department.


The growing domestic demand for basmati rice promises a very good future for
company’s core business. L.T. Food ltd manufacturing basmati rice for people and some
rice for charity and mainly export the goods.

Computation of Working Capital Method

A number of methods are used to determine working capital needs of a business. The

important among them are:

2. Operating Cycle Method

3. Forecasting of Current Assets and Current Liabilities Method

4. Cash Forecasting Method

5. Percentage of sales Method

6. Projected Balance Sheet Method

Computation of working capital: (L.T. Foods Ltd.)

For 2008-09

Gross Working Capital = Current Assets


Net Working Capital =Current Assets-Current Liabilities

=Rs. 217398093- Rs.151324371

=Rs. 66073722

Calculation for optimum working capital of the company

Current Ratio= Current Asset /Current Liabilities

= Rs.217398093/ Rs.151324371


Quick Ratio= Quick Assets/ Current Liabilities

= Rs.127043935/ Rs.151324371

= .83:1

Here, the short-term financial position of the company is not sound because its current

ratio is 1.43, which is less than the ideal ratio 2:1.Quick ratio of the company is .83:1,

which is less than ideal ratio of 1:1.Both the ratio shows inefficient working capital.

Therefore, it can be said that the company is not in a position to pay its current liabilities

in time.

Computation of working capital cycle

1. Raw material holding period = Average Raw Material / Raw material

Consumption per day

Average raw material= Opening Balance+ closing balance /2

= (83498217+62759491)/2 =Rs.73128854

Raw material consumption per day= Raw material /2


Raw material holding period = 73128854/1350841.11=54.135 days

2. Work in progress period = Average WIP/ Raw material

Consumption per day

Average WIP= Opening Balance+ closing balance /2.=

(3523266+1245051)/2=Rs. 2384158.5

Work in progress period = 2384158.5/1350841.11= 1.764 days

1. Finished Good period = Average Finished Goods/ Raw material Consumption per


Average Finished Goods = Opening Balance+ closing balance/2

= (3332675+17302451)/2 =Rs.10317563

Finished Good period =10317563/1350841.11=7.63 days

Computation of working capital: (L.T. Foods Ltd.)

For 2009-2010

Gross Working Capital = Current Assets


Net Working Capital =Current Assets-Current Liabilities

=Rs. 252453549- Rs.117098157

=Rs. 135355392

Calculation for optimum working capital of the company

Current Ratio = Current Assets /Current Liabilities

= Rs.252453549/ Rs. 117098157

= 2.16:1

Quick Ratio = Quick Assets/ Current Liabilities

= Rs.149550684 / Rs. 117098157

= 1.28:1

Here, the short-term financial position of the company is sound because its current ratio

is2.16, which is greater than the ideal ratio 2:1.Quick ratio of the company is1.28, which

is greater than ideal ratio of 1:1.Both the ratio shows efficient working capital. Therefore,

it can be said that the company is in a position to pay its current liabilities in time.

Computation of working capital cycle

2. Raw material holding period = Average Raw Material / Raw material

Consumption per day

Average raw material= Opening Balance+ closing balance /2

=(94095974+84498217)/2 =Rs.89297095.5

Raw material consumption per day= Raw material /365


Raw material holding period = 89297095.5/1599621.34=55.82 days

2. Work in progress period = Average WIP/ Raw material

Consumption per day

Average WIP= Opening Balance+ closing balance /2.

=(3523266+1463539)/2=Rs. 2493402.5

Work in progress period = 2493402.5/1599621.34 =1.558s days

3. Finished Good period = Average Finished Goods/ Raw material

Consumption per day

Average Finished Goods = Opening Balance+ closing balance /2

= (3332675+17302451)/2 =Rs.10317563

Finished Good period =10317563/1599621.34=6.45days


1. Appropriately incentives management to improve cash performance.

2. Effectively manage payment terms for customers and suppliers (with terms and
conditions appropriate to the current environment).

3. Improve speed and accuracy of billing and cash collections and deal with disputes

4. Use data captured for disputes to eradicate the root cause.

5. Increase billing frequency (noting, however, the extra costs associated with this) and
use of e billing.

6. Develop an agile supply chain that can be more responsive to changing market

7. Build greater linkage and closer collaboration among the various participants of the
working capital value chain internally and externally, focused around sharing of demand
signals and planned response down the chain.

8. Maintain metrics that monitor the financial health of customers and suppliers.

9. Identify the key drivers of working capital consumption and focus on improving them
(forecast error, lead-times, minimum lot sizes, supply variability, capacity constraints,
speed and accuracy of billing, customer segmentation and appropriate collection

10. Identify, understand and quantify the trade-offs that need to be made (e.g., order fill
rates or inventory levels, early payment discounts or longer payment for payables
optimization, larger batch sizes or inventory levels).

Chapter- VI



• L.T. Food ltd has the total share capital of Rs. 6,50,00,000 & issued subscribed &

paid up capital Rs. 6,00,81,280.

• As we see in the project report the current ratio of the company is1.43:1 & the

quick ratio of the company is .83:1. Here, the short-term financial position of the

company is not sound because its current ratio is 1.43, which is less than the ideal

ratio 2:1.Quick ratio of the company is .83:1, which is less than ideal ratio of

1:1.Both the ratio shows inefficient working capital. Therefore, it can be said that

the company is not in a position to pay its current liabilities in time.

• As we see in the project report the current ratio of the company is 2.16:1 & the

quick ratio of the company is 1.28:1. Here, the short-term financial position of the

company is sound because its current ratio is12.16:1, which is grater than the

ideal ratio 2:1.Quick ratio of the company is 1.28:1, which is grater than ideal

ratio of 1:1.Both the ratio shows efficient working capital. Therefore, it can be

said that the company is in a position to pay its current liabilities in time.

• From the starting L.T. Food Ltd is a loss making company. But from the year

2006 the company earns the profit and covers the all losses. Now the company is

a profit making company.

• The net profit of the company for the year ended 2007-2008 is Rs. 49808128.45.

• The turnover of the company is 943438801.

• The actual production of the basmati rice.


• It can be observed that Current Ratio of LT Foods Ltd varied between 1.7776 to 2.0658

during the period from 2005-2008-2007. It is evident that, on an average, per one rupee

of current liability, the company has been maintaining 2.0216 rupee of current assets as a

cushion to meet the short- term liabilities. Usually, a Current Ratio of 2:1 is considered to

be the standard to indicate sound liquidity position, and LT Foods Ltd has been

successfully maintaining as a rule of thumb is 1:1 is considered satisfactory. In 2007-08 it

is 0.72 which again can be considered non satisfactory. It may not be able to meet its

current liabilities on time, which is not good sign for the enterprises.

• The inventory turnover ratio shows how rapidly the inventory is turning into receivables
through sales. This ratio has been continuously increasing since FY 2005-06 compared to
the 2004-05. A high inventory turnover indicates the efficient management of inventory
because more frequently the stocks are sold. So we can say that enterprises have a very
good turnover ratio. Thus LT Foods Ltd has a very good inventory management.

• Working Capital Turnover Ratio indicates the efficiency of the firm in utilizing the
working capital in the business. It varies between 2.74 times and 4.89 times. This ratio
signifies that on an average, a rupee of working capital generate Rs. 4.3107 worth of
business/sales of the firm, which is excellent for the management of the firm.

• The Debtors Turnover Ratio was highest (12.2688 times) in 2007-2008 and lowest
(9.1288 times) in 2006-2005 and average is 11.416 times. Debtors and Receivables
management appears to be excellent. More the number of times debtors' turnover, better
the liquidity position of the firm. The combined effect of better management of inventory
and debtors & receivables has enabled the firm to generate reported business of the firm.

• Average Collection Period is the relationship between no. Of days in a year and debtor
turnover ratio. Here in the FY 2004-05, FY 2005-06, FY 2006-07 and FY 2007-08 it is
30days, 39days, 30days and 30days. In the FY2005-06 it is increased but in the other FY
it is same. This is again good sign for the enterprise.

Chapter- VII




Financial Management- S.K Gupta

Management Accountancy-D.K. GOEL,

Cost and Management Accountancy, S.N.Maheshwari

Financial Management and Policy, James C.Van Horne

World Wide Web

Other than Web





⇒ REGISTERED OFFICE: A-21, Green Park, Main Aurobindo Marg,

New Delhi -110017








o PRODUCT : Rice, basmati rice



o FINANCIAL CONCERN : MR. Suparas Bhandari



Current Ratio 2.16:1

Quick ratio 1.28:1

Debt/Equity Ratio 0.03:1

Gross Profit% 26.62%

Net Profit% 5.82%

Receivable turnover in days 26.87days

(Payment performance of debtors)


Cash in hand 184815.60 Dr.

Bank a/c 59289788.64 Cr.

Sundry debtors 77819541.21 Dr.

Sundry creditors 7661065.21 Cr.

Sales A/C 855418805.21 Cr.

Purchase A/C 636948517.01 Dr.

Net Profit 49808128.45 Cr.

Balance Sheet
------------------- in Rs. Cr.
Balance Sheet of LT Foods -------------------

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 12 12 12 12
mths mths mths mths mths
Sources Of Funds

Total Share Capital 6.89 7.23 22.27 22.27 22.27

Equity Share Capital 6.89 7.23 22.27 22.27 22.27

Share Application Money 0.00 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves 43.92 53.69 97.72 121.97 130.45

Revaluation Reserves 0.00 0.00 0.00 0.00 0.00

Net worth 50.81 60.92 119.99 144.24 152.72

Secured Loans 178.89 203.57 207.36 340.30 375.67

Unsecured Loans 20.90 20.00 74.52 75.95 85.44

Total Debt 199.79 223.57 281.88 416.25 461.11

Total Liabilities 250.60 284.49 401.87 560.49 613.83

Application Of Funds Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12mths 12 mths 12 mths 12 mths 12 mths

Gross Block 64.72 63.21 95.11 109.53 145.51

Less: Accum. Depreciation 27.50 27.49 34.11 44.24 56.22

Net Block 37.22 35.72 61.00 65.29 89.29

Capital Work in Progress 0.77 16.27 10.83 13.92 4.66

Investments 1.23 7.58 9.07 41.92 44.40

Inventories 171.49 182.05 241.93 341.07 422.76

Sundry Debtors 61.45 44.58 76.82 112.15 117.48

Cash and Bank Balance 1.37 2.84 7.00 2.76 3.47

Total Current Assets 234.31 229.47 325.75 455.98 543.71

Loans and Advances 12.29 20.06 40.72 80.06 66.72

Fixed Deposits 4.23 6.29 3.67 4.63 1.24

Total CA, Loans & Advances 250.83 255.82 370.14 540.67 611.67

Deferred Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 40.18 33.43 47.05 85.90 91.72

Provisions 3.39 2.94 6.54 20.31 47.63

Total CL & Provisions 43.57 36.37 53.59 106.21 139.35

Net Current Assets 207.26 219.45 316.55 434.46 472.32

Miscellaneous Expenses 4.12 5.47 4.44 4.90 3.14

Total Assets 250.60 284.49 401.89 560.49 613.81

Contingent Liabilities 7.25 17.22 5.88 138.58 239.41

Book Value (Rs) 73.70 84.21 53.88 64.77 68.58

Profit & Loss account of LT Foods

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths


Sales Turnover
362.53 403.07 482.53 571.45 717.36
Excise Duty
0.00 0.00 0.00 0.00 0.00
Net Sales
362.53 403.07 482.53 571.45 717.36
Other Income
3.61 0.81 1.70 1.71 -54.55

Stock Adjustments
-5.47 -1.00 46.13 38.38 29.75
Total Income
360.67 402.88 530.36 611.54 692.56

Raw Materials
285.32 326.67 417.86 471.04 527.81
Power & Fuel Cost
3.72 3.51 5.17 6.64 5.96

Employee Cost 8.06 8.44 8.63 10.12 11.39

Other Manufacturing
Expenses 0.68 0.46 1.20 1.50 3.55

Selling and Admin

Expenses 33.51 28.58 42.33 49.91 70.78

Miscellaneous Expenses
2.07 2.01 1.10 1.85 2.38
Preoperative Exp
Capitalized 0.00 0.00 0.00 0.00 0.00

Total Expenses
333.36 369.67 476.29 541.06 621.87

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Operating Profit
23.70 32.40 52.37 68.77 125.24

PBDIT 27.31 33.21 54.07 70.48 70.69

13.93 14.36 22.29 26.85 46.64
13.38 18.85 31.78 43.63 24.05
6.43 5.72 6.98 10.51 12.82
Other Written Off
0.70 1.10 1.43 1.51 1.76
Profit Before Tax
6.25 12.03 23.37 31.61 9.47
Extra-ordinary items
0.22 0.95 -1.00 1.48 2.70
PBT (Post Extra-or Items)
6.47 12.98 22.37 33.09 12.17
1.48 1.64 1.78 4.94 1.46
Reported Net Profit
4.97 11.31 20.59 28.22 10.70
Total Value Addition
48.05 43.01 58.42 70.01 94.06
Preference Dividend
0.00 0.00 0.00 0.00 0.00
Equity Dividend
0.00 1.81 2.23 3.34 2.23
Corporate Dividend Tax
0.00 0.25 0.31 0.57 0.00
Per share data (annualized)

Shares in issue (Lakhs)

68.95 72.35 222.70 222.70 222.70
Earning Per Share (Rs)
7.21 15.64 9.25 12.67 4.81
Equity Dividend (%)
0.00 25.00 10.00 15.00 10.00

Book Value (Rs) 73.70 84.21 53.88 64.77 68.58