WORKING CAPITAL MANAGEMENT OF HINDALCO INDUSTRIES LTD.

Hindalco - An Overview
Hindalco Industries Limited is a non-ferrous metals powerhouse, in the country. Its operations are organized into two Strategic Business Units Aluminium and Copper Incorporated in 1958, Hindalco commenced production of Aluminium in 1962 at Renukoot Uttar Pradesh. The Group operates in 25 countries India, UK, Germany, Hungary, Brazil, Italy, France, Luxembourg, Switzerland, Australia, USA, Canada, Egypt, China, Thailand, Laos, Indonesia, Philippines, Dubai, Singapore, Myanmar, Bangladesh, Vietnam, Malaysia and Korea.

VISION, MISSION & VALUES

VISION

To be a premium metals major, global in size and reach, excelling in everything we do, and creating value for its stakeholders.
MISSION

To relentlessly pursue the creation of superior shareholder value, by exceeding customer expectation profitably, unleashing employee potential, while being a responsible corporate citizen, adhering to our values
VALUES

Integrity:- honesty in every action Commitment:- deliver on the promise Passion:- energized action seamlessness:-boundry less in letter and spirit speed:- one step ahead always

WORKING CAPITAL
Working Capital refers to that part of the firms capital, which is required for financing short- term or current assets such as cash, marketable securities, debtors and inventories. It is required for day-to-day operations, or more specifically, for financing the conversion of raw material into finished goods. WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITIES

CLASSIFICATION OF WORKING CAPITAL

ON THE BASIS OF CONCEPT Gross Working Capital Net Working Capital
ON THE BASIS OF TIME Permanent Working Capital Temporary Working Capital

WORKING CAPITAL CYCLE

 Working capital cycle indicates the length of time between a companys paying for materials, entering into stock and receiving the cash from sales of finished goods It can be determined by adding the number of days required for each stage in the cycle.

Determinants of Working Capital at Hindalco

Nature of Business Current Asset = 7,739.91 Total Assets = 17016.51 Current Liabilities = 1868.91 NWC = CA-CL = 7739.91 1868.91 = 5871.00 NET WORKING CAPITAL TO TOTAL ASSETS RATIO = (NWC100)/TA = (5871.00 * 100)/17061.51=34.50% Production Cycle Raw material Storage period = 21 days Work-in-progress period = 05 days Finished Goods storage period = 04 days Total = 30 days

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Business Cycle Production Policy Speedy production policy Variable production policy Credit Policy If give more credit to customer/ buyer, then needed more working capital If give less credit to customer/ buyer, then needed less working capital Growth and Expansion Availability of Raw Material Profit Level Price Level Change Operating Efficiency

Ratio Analysis
The following ratio may be calculated for the purpose of analyzing the working capital of Hindalco: Liquidity Ratio Leverage Ratio Turnover Ratio Profitability Ratio

 Liquidity Ratio:1. Current Ratio:CR=CA/CL 2. Quick Ratio:QR=LA/CL 3. Cash Ratio:Cash Ratio = Cash + Marketable Security/ Current Liabilities

 Leverage Ratio Debt Equity Ratio Debt Equity Ratio = Long Term Debt/ Shareholders Fund Total Assets to Debt Ratio Total Asset to Debt ratio = Total Asset/ Long Term debt Proprietary Ratio Proprietary Ratio = Shareholder Fund/ Total Assets Equity Ratio Equity ratio = Capital Employed/ Net Worth

 Activity or Turnover Ratio Inventory Turnover Ratio Inventory Turnover ratio = Net Sales/ Average Inventory Debtor Turnover Ratio Debtor turnover ratio = Net sales/ Sundry Debtor Average Collection Period Average Collection Period = 360/ Debtor turnover Ratio Working Capital Turnover Ratio Working Capital Turnover Ratio = Net Sales/Working Capital

Profitability Ratio

Gross Profit Ratio Gross Profit Ratio = Gross Profit x100 Net Sales Net Profit Ratio Net profit Ratio = Net Profit x100 Net Sales Operating Profit Ratio Operating Profit Ratio = Operating Profit x100 Net Sales Return on Total Asset Return on Total Assets = Net Profit x100 Total Assets Return on Investment Return on Investment=Net Profit/Capital employed Return on Equity Return on Equity= Net Profit x100 Net Worth Earnings per Share (EPS) Earnings per Share (EPS)= Net Profit after Tax / No. Of Equity Shares

Conclusion
Hindalco has shown robust top line growth over the past 5 years. The growth in 2007-08 looks particularly impressive because of the acquisition of Novelis Inc. Its net consolidated revenue registered a quantum leap, touching US$ 15 billion (Rs.60,013 crores), up by 211% and EBITDA at US$ 1.8 billion (Rs.7,291 crores) rose by 50%. Of the revenues, over US$ 12 billion (Rs.47,000 crores) came from aluminium business while copper accounted for US$ 3 billion (Rs.12,340 crores). It has good liquidity position to meet it current dues. It also has good leverage ratios as it has debt equity of 0.36 in the FY 2007-08, which means Hindalco industries ltd. has a very good borrowing capacity to meet its long term financing problems. Turnover ratios are also good which shows that the resources are being utilized properly. The profitability ratios are also good

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To sum up, company recorded a commendable performance in a very difficult year fraught with several challenges such as- adverse currency movement, reduced duty protection, acute cost push and increasing competition. Despite falling alumina prices in the international market, Hindalco Industries Ltd. was able to maintain high realization largely