AVINASH REPORT 1.pdf
- 1. i A SUMMER TRAINING REPORT ON “A STUDY ON WORKING CAPITAL MANAGEMENT’’ AT KOTAK MAHINDRA BANK” Submitted in the partial fulfillment of the requirement for the award of the degree of MASTER OF BUSINESS ADMINISTRATION (MBA) SESSION (2021-2023) UNDER THE SUPERVISION OF: SUBMITTED BY: Mr. RAVI GUPTA AVINASH KUMAR SR. MANAGER MBA- 3rd semester Univ. Roll no.210163740 GEETA ENGINEERING COLLEGE, NAULTHA(PANIPAT) (Approved by AICTE, Affiliated to Kurukshetra University, Kurukshetra)
- 3. iii DECLARATION This is to certify that I, AVINASH KUMAR student of GEETA ENGINEERING COLLEGE, NAULTHA (PANIPAT) studying in MBA 3RD Semester, University. Roll No. 210163740 have prepared a Summer Training report entitled “A Study ON WORKING CAPITAL MANAGEMENT AT KOTAK MAHINDRA BANK.” the partial fulfillment of degree of Master of Business Administration from Kurukshetra University, Kurukshetra. I hereby declare that the Summer Training Report submitted to the Kurukshetra University, Kurukshetra is a record of an original work done by me Under the Supervision of Mr. RAVI GUPTA, SR. MANAGER OF KOTAK MAHINDRA BANK. The matter presented in this project work has not been submitted by me for the award of any Degree or diploma/ associate ship / fellowship and similar degree or any other institution. Signature of Candidate Name- AVINASH KUMAR University Roll No-210163740 Date:
- 4. iv ACKNOWLEDGEMENT Perseverance, inspiration & motivation have always played a key role in the success of any venture. The successful completion of the project would have been far from reality without mentioning the people who made an indelible impression while making the research project. I would like to express my deep and sincere gratitude to the following individuals without whom my research project not has been successful one. I am thankful for tremendous support and guidance provided to me by Mr. Rajesh (Assistant Professor) of GEC. His expert opinion and effort to direct my views in the right direction helped in the successful completion of the research project. Finally, I hereby take the opportunity to express my hearties gratitude to Dr. Ritesh (Head, Department of Business Studies) and all the faculty member of Geeta Engineering College, Panipat for extending a lot of support and sparing time to support me in my research work. It has been a very insightful and fulfilling skill here.
- 5. vii EXECUTIVE SUMMARY The research studies are of a great help in enhancing the knowledge of a person. Practical knowledge is a suffix to theoretical knowledge. Classroom lectures clarify the fundamental. But classroom lectures must be correlated with the practical research situation. It is in this sense that the research project is made compulsory for the curriculum and has a significant role to play in the field of business management. Through this type of project one can understand the application of theory into practical. But it is only difficulties, which makes the success dears. In this project I have put a lot of efforts to make it a success. If any findings & recommendations go in any way to prove some new ground in helping the commodity future sector, I shall deem my efforts have duly served the purpose. In the forthcoming pages an attempt has been made to present report covering different aspects of my project.
- 6. viii INDEX CHAPTER NO PARTICULAR PAGE NO TITLE PAGES CERTIFICATE DECLARATION ACKNOWLEDEMENT EXECUTIVE SUMMARY INDEX i ii iii iv v vi 1. INTRODUCTION 1.1) INTRODUCTION TO THE INDUSTRY 1.2) INTRODUCTION TO THE COMPANY 1.3) INTRODUCTION TO THE TOPIC 1-26 1-9 10-16 17-26 2. REVIEW OF LITERATURE 27-31 3. RESEARCH METHODOLOGY 3.1 RESEARCH METHODOLOGY 3.2 OBJECTIVE OF THE STUDY 3.3 SAMPLE SIZE 3.4 SAMPLE AREA 3.5 SAMPLING TECHIQUE 3.6 RESEARCH DESIGN 3.7 METHOD OF DATA COLLECTION 3.8 LIMITATION OF THE STUDY 32 32 32 32 32 32 32-33 33 33 4. DATA ANALYSIS & INTERPRETATION 4.1) Data analysis and interpretation 34-50 5. FINDINGS, SUGGESTIONS AND CONCLUSION 5.1 FINDING 5.2 SUGGESTIONS 5.3 CONCLUSION 51-53 51 52 53 BIBLIOGRAPHY I ANNEXURE II-III
- 8. 1 1.1 INTRODUCTION TO THE INDUSTRY Banking in India, originated in last decade of the 18th century. Among the first bank were the bank of Hindustan, which was established in 1770 and the general bank of India, established in a 1786 but failed in 1791. The largest bank and the oldest still in existence, is the state bank of India. It originated as the bank of Calcutta in June 1806. This was one of the three banks founded by a presidency government; the other two were the bank of Bombay and the bank of Madras. The three banks were merged in 1921 to form the imperial bank of India later it become state bank of India. The Indian banking sector is broadly classified into scheduled and non-scheduled bank. The scheduled banks are those included under the 2nd scheduled to reserve bank of India act, 1934. Both scheduled and non-scheduled commercial banks regulated under the banking regulation act, 1949. The banking system of the country is the base of the economy and economic development of a country. It is the most leading part of the financial sector of the country as it is responsible for more than 70% of the fund following through the financial sector in the country. The banking system in the country has three primary functions: a. Operations of payment systems b. Depositor and protector of people’s savings c. Issue a loan to individual and company The oxford dictionary defines the bank as, “An establishment for the custody of money, which it pays out, on a received from or on Behalf of its custom pay their drafts unit. Its profits arise from the use of the money left employed them. -Oxford Dictionary Bank is an institution which traders in money, establishment for money, as also for making loans and discounts and facilitating the transmission of remittances from one place to another. -Western ‘s Dictionary
- 9. 2 MAJOR PLAYERS IN A BANKING INDUSTRY HDFC BANK Type: Public company Industry: Financial services Founded: 1994 Headquarters: Mumbai Assets: USD 66.7 Billion Number of employees: 87555 ICICI BANK Type: Private sector bank Industry: Banking, financial services Founded: 1994 Headquarter: Mumbai Assets: USD10.3 Billion Types of bank Scheduled bank Nationalize bank Development bank Regional rural bank Foreign bank Private banks Non scheduled bank Urban cooporative State cooperative
- 10. 3 Number of employees: 74096 PUNJAB NATIONAL BANK Type: Public Industry: Bank in financial Founded: 1894-122 year ago Headquarter: New Delhi Assets: US$ 96Billion Number of employees: 62392 AXIS BANKS Type: Private Industry: Banking, financial services Founded: 1993 Headquarter: Gujarat Assets: us$ 78 Billion Number of employees: 56084 KOTAK MAHINDRA BANK Type: Private Industry: Banking, financial services Founded: February 2003 Headquarter: Mumbai Assets: US$32 billion Number of employees: 33013
- 11. 4 IDBI BANK Type: Government -owned bank Headquarter: Mumbai Assets: US$ 56 billion INDIAN BANKING SECTOR HAS GROWN AT HEALTHY PACE IN CREDIT SECTOR 1. Credit off- take has been increasing over ahead the past decade, aided by strong economic growth, increasing disposable income, increasing consumerism and easier access to credit. 2. Bank credit grew at 12.84 per cent year-on-year to Rs. 86.16 lakh Crore (US$ 1285.20 billion ) on June 2018 from Rs. 76.36lakh crore (US$ 1,139.02 billion ) on June 23,2017 3. During FY07-21, credit off-take grew at CAGR of 10.99 per cent As of Q4 FY21, total credited extended surged to Rs 86,825, 727 million (US$ 1, 120, 42 billion 4. credit to non-food industries increased by 9.53 per cent reaching 5. demand has been growth for both corporate and retail loans; particular the services, real state , consumer durables and agriculture allied sector have led growth in credit
- 12. 5 INDIAN BANKING SECTOR HAS GROWN AT HEALTHY PACE IN DEPOSIT SECTOR 1. During FY07-18, deposits grew at a CAGR of 11.66 per cent and reaches US$1.6 trillion by FY17. Deposit at the end of Q4 FY17-18 stood at rs 114,792,883 million (US$ 1781.12 billion ) 2. Bank deposit grew at 7.59 per cent year–on year to Rs 113.54 lakh Crore (US$1693.62 Billion) in June 22, 2018 from 105.52 lakh Crore (US$1573.99 Billion ) in June 23,2017. 3. Deposit under Pardhan Mantra Dhan Jan Yojana (PMJDY) have also increased Rs 78952.09 crore (US$ 11.78 billion ) were deposit and 31.75 million account were opened in India 4. Strong growth I n saving rising disposable income levels are the major factor influencing deposit growth. 5. At the same time Indian banking sector has been stable despite global upheavals , thereby retaining public confidence over the years 6. Access to banking system also have been improved over the year due to persistent government effort to promote banking technology and promote expansion in unbanked and non-metropolitan region 0 200 400 600 800 1000 1200 1400 FY10FY11FY12FY13FY14FY15FY16FY17FY18FY19FY20FY21 Growth in credit off-take over past few years(US$ Billion ) Growth in credit off-take over past few years(US$ Billion )
- 13. 6 ASSET BASE CONTINUES TO EXPAND 1. Asset of public sector bank, which account for more than 70 per cent of the total banking assets, grew at CGAR of 7.43 per cent 2. Corporate demand for bank loans grown due to continue infrastructure investment and due to other policy decision such as reducing oil subsidies, issuing of telecom spectrum license and the proposed abolition of penalty on road payment 3. FY13-17 growth in assets of bank across sector 4. Total banking sector asset have increases at a CGAR of 8.83 per cent to US$ 2.02 trillion during FY 13-17 Notes: CGAR - compound annual growth rate 0 200 400 600 800 1000 1200 1400 1600 1800 2000 FY07FY08FY09FY10FY11FY12FY13FY14FY15FY16FY17FY18 Growth in deposits over the past years (US$billion) Growth in deposits over the past years (US$billion)
- 14. 7 INTEREST INCOME GROWTH IN INDIAN BANKING SECTOR (US$ BILLION) 1. Public sector bank account for over 67.31 per cent of interest income in the sector in FY17 2. Interest income of public banks was witnessed to be US$105.55 billion FY17 3. They lead pack in interest income growth with CGAR of 7.86 per cent CGAR during FY09-17 4. The interest income for the sector has grown at 8.46 per cent during CGAR FY00-17 0 200 400 600 800 1000 1200 1400 1600 FY13 FY14 FY15 FY16 FY17 public sector private sector foreign banks
- 15. 8 RETURN TO ASSET UPTREND -2 -1.5 -1 -0.5 0 0.5 1 1.5 2 2.5 FY12 FY13 FY14 FY15 FY16 FY17 SBI NATIONALISED BANK PUBLIC SECTOR PRIVATE SECTOR FOREIGN SECTOR 0 20 40 60 80 100 120 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 PRIVATE SECTOR PUBLIC SECTOR BANK FOREIGN BANK
- 16. 9 LOAN TO DEPOSIT RATIO SHOWING AN UPTREND 1. Loan-to-deposit ratio for banks across has increased over the year 2. Private and foreign bank have posted high return on asset rather than public sector bank and nationalised bank 3. It shows that most of the foreign bank started their operation in India 0 10 20 30 40 50 60 70 80 90 100 FY12 FY13 FY14 FY15 FY16 FY147 SBI NATIONALISED BANK PUBLIC SECTOR PRIVATE SECTOR FOREIGN BANK
- 17. 10 1.2) INTRODUCATION TO THE COMPANY KOTAK MAHINDRA BANK To be the most trusted global Indian Financial services brand and the most preferred financial services employer with focus on creating value. THE GLOBAL INDIAN FINANCIAL SERVICES LIMITED Our customer will enjoy the benefit of dealing with a global Indian brand the best understand their needs and delivers customized pragmatic solution across multiple platform. We will be a world class Indian financial services group. Our technology and best practices will be bench- Market long international lines while our understanding of customers will be uniquely Indian. We will be more than a repository of our customer’s saving. We, the group, will be the single window to every financial service in a customer’s universe. Significance of the group’s logo The symbol of the infinite Ka reflects our global Indian personality. The Ka is uniquely I0ndian while its curve forms the infinity sign, which is universal, on the basic tenets of economists is that man’s needs are unlimited. The infinite Ka symbolize that we have infinitive number of ways to meet these needs. COMPONY PROFILE
- 18. 11 In 1985 by UAY KOTAK established what an Indian financial services conglomerate became in February 2003, KOTAK MAHINDRA Finance limited (KMFL) LTD. The group’ flagship company received a banking licence from the reserve bank of India (RBI). With this, KMFL became the first non- banking company in India to be converted into a bank – KOTAK MAHINDRA BANK LIMITED (KMBL) ltd. It offers a wide range of banking products and financial services for corporate and retail customer through a variety of delivery channel and specialized subsidiaries in the area of personal finance, investment banking, life insurance, and wealth management. KOTAK MAHINDRA BANK has a network 1369 branches across 689 location and 2163 ATMs in the country (as on 31 MARCH, 2017). In 2016 it was the fourth largest private bank in India by market capitalization. Key groups company and their profile KOTAK MAHINDRA BANK Ltd is a one stop shop for all banking needs. The bank offer personal finance solution of every kind from saving account to credit card, distribution to mutual fund to life insurance products .KOTAK MAHINDRA BANK offer transaction banking , operate lending verticals, manages IPOs and provide working capital loans. KOTAK has one of the largest and most respected wealth management team in India, providing the widest range of solution to high net worth individuals, entrepreneurs, business families and employed professionals. KOTAK SECURITIES KOTAK securities are one of the largest broking houses in India with a wide geographical reach. KOTAK securities operation includes stock broking and distribution of various financial products including private and secondary placement of debts, equity and mutual funds. KOTAK securities operate in five main areas of business: 1. Stock broking (retail and institutional). 2. Depository services. 3. Portfolio management services. 4. Distribution of mutual funds. 5. Distribution of KOTAK MAHINDRA old mutual life insurance Ltd Products. KOTAK MAHINDRA Old Mutual Life Insurance ltd KOTAK MAHINDRA old mutual life insurance limited is a 74.26 joint venture between KOTAK
- 19. 12 MAHINDRA BANK Ltd, its affiliates and old mutual plan. A company that combines its international strength and local advantage to offer its customer a wide range of innovative life insurance products, helping them takes important financial decision at every stage in life and stays financially independent. The company covers 3 million lives and is one of the fastest growing insurance company in India. KOTAK MAHINDRA General Insurance Company ltd KOTAK MAHINDRA general insurance company ltd is a 100% subsidiary of KOTAK MAHINDRA bank ltd, one of the fastest growing banks in India. KOTAK MAHINDRA general insurance company limited was established to service the growing non- life insurance need of an emerging India, emphasizing of customer services, quality and innovation. KOTAK MAHINDRA Capital Company (KMCC) KOTAK investment banking (KMCC) is a full-service investment bank in India offering a wide suite of capital market and advisory solution to leading domestic and multinational corporation, banks, financial institution and government companies. KOTAK MAHINDRA Prime Ltd KOTAK MAHINDAR prime ltd is among India’s largest dedicated passenger vehicle finance company. KMPL offer loans for entire range of passenger cars, multi utility vehicle and pre-owned cars. Also, on offer are inventory funding and infrastructure funding to car dealers with strategic arrangement via various car manufactures in India as their preferred financier. KOTAK International business KOTAK international business specializes in providing a range of services to overseas customer seeking to invest in India. For institution and high net worth individual outside India, KOTAK international business offers asset management through a range off shore funds with specific advisory and discretionary investment management services. KOTAK MAHINDRA Assets Management Company ltd (KMAMC)KOTAK MAHINDERA Assets Management Company offer a complete bouquet of assets management’s products and services that are designed to suite the diverse risk return profile of each and every type of investor. KMAMC and KOTAK MAHINDRA BANK are the sponsors of
- 20. 13 KOTAK MAHINDRA pension fund ltd, which has been appointed as one of six fund manager to manage pension fund under the pension scheme (NPS). KOTAK Private Equity Group (KPEG) KOTAK Private Equity group helps nurture emerging businesses and mid-size enterprise to evolve into tomorrow industry leaders. With a proven track record of helping build companies, KPEG also offer expertise with a combination of equity capital, strategic support and value-added services. KOTAK Realty Fund KOTAK realty fund deal with equity investment covering sector such as hotels, I t, parks, residential township, shopping centre, industrial real estate, health care ,retail ,education and property management. HIERACHY LEVEL OF KOTAK MAHINDRA BANK employee value proposition vice - president assistant vise president cheif manager manager deputy manager assistant manger
- 21. 14 This is the hierarchy level of the employee in KOTAK MAHINDRA BANK. Each employee promotion will be after 3 year according to their performance. Hierarchy start with assistant manager and end on EVP SERVICES OF KOTAK MAHINDRA BANK A. Deposit and Saving Account 1. Ace saving account 2. Edge saving account 3. Pro saving account 4. Classic saving account 5. Nova saving account 6. My junior account B. CURRENT ACCOUNTS 1. Ace current account 2. Global current 3. account 4. Ace salary account 5. Edge salary account C. TERM DEPOSIT 1. Regular term deposit 2. Senior term deposit 3. Tax saving deposit 4. Recurring deposit D. LOANS 1. Home loan 2. Personal loan 3. Educational loan 4. LAP 5. Gold loan 6. Commercial vehicle loan
- 22. 15 E. INVESTMENT AND INSURANCE 1. Life insurance 2. Mutual fund 3. Demat accounts 4. New pension scheme F. VALUE ADDED PRODUCT AND SERVICES 1. Net banking 2. Mobile banking 3. SMS banking alerts 4. Phone banking 5. ATM network G. DEBIT CARDS AND CREDIT CARDS 1. Golden debit card 2. Platinum debit card 3. Classic debit card 4. Royal signature card 5. Privy league signature card 6. NRI royal signature card 7. PVR platinum card 8. Easy day platinum card 9. Fortune gold card
- 23. 16 LIST OF COMPETITORS COMPANY SALES TURN- OVER NET PROFIT TOTAL ASSETS ST BK OF INDIA 220499.31 -654.45 3287614.06 HDFC BANK 80241.36 17486.73 1018170.57 PNB 47275.99 1324.80 704314.33 ICICI BANK 54156.28 9801.09 702710.29 BANK OF BARODA 43648.54 -2431.81 697281.56 AXIS BANK 45780.31 275.68 665084.12 BANK OF INDIA 38071.41 -6043.71 599983.79 UNION BANK 32748.00 -5247.37 479279.17 IDBI BANK 27791.37 -5158.14 347465.73
- 24. 17 1.3) INTRODUCATION TO THE TOPIC WORKING CAPITAL MANAGEMENT “Working capital refers to a firm’s investment in a short-term assets-cash, short term securities, accounts receivable and inventories”. -Weston & Brigham In simple words working capital is the excess of current assets over current liabilities. Working capital has ordinarily been defined as the excess of current assets over current liabilities. Working capital is the heart of the business. If it is week business cannot survives. It is therefore said the fake of small scale investment in fixed assets often determines a relatively small amount of current asset .As the working capital is important to lifeline of company. If this lifeline deteriorates so that the company ability to fund operation, reinvest to meet capital requirement and payment. Understanding company cash flow health is essential to making investment decision. A good way to judge company cash flow prospects is to looks as its working capital management. The company must have adequate working capital as much as needed by the company. It should never be excessive or nor inadequate. Excessive working capital show the company cuisses for idle funds lying with the firm without earning any profit, where as inadequate working capital shows the company does not have sufficient firm for financing its daily need working capital management involves study of the relationship between firm’s current assets and current liabilities. The goal of working capital management is to ensure that a short term debt and upcoming operational expenses. The better a company manages it working capital the less the company need to borrow. Even company with cash surpluses need to manage working capital to ensure those surpluses are invested in ways that will generate suitable return for investor. “The primary objective of working capital management is to ensure that sufficient cash is available to”. a. Meet day to day cash flow needs. b. Pay wages and salaries when they fall due. c. Pay creditor to ensure continued supplies of goods and services. d. Pay government taxation and provider of capital-dividend. Ensure the long term survival of the business entity. Working capital can be classified either on the basis of its concept or on the basis of periodicity of its requirement.
- 25. 18 Gross working capital Gross working capital refer to firm’s investment in current asset, Current asset are asset that are converted into cash with in the accounting year. Current assets include cash and bank balance, short term securities, debtor bill receivable and inventory. The gross working capital concept focuses attention on two aspect of current asset management. (a) Optimum investment in current assets. (b) Financing on current asset. Net working capital Net working capital refers to difference between current asset and current liabilities. Current liabilities are those claims of outsider, which are expected to mature for payment within an accounting year and include bills payment and outstanding expenses. Net working capital capacity indicates the liquidity position of the firm. Generally networking capacity is referred to as working capital. Operating cycle It is clear that working capital is required because of time gap between the sales and their actual realisation in cash. The time gap is technically termed as “operating cycle of the business. Fund required investing in inventories; debtor and other current asset keep on changing shape and volume. Like a company has some cash in the beginning. The cash may be to supplier of raw material, to meet labour cost and other overheads. These three combined would generate, which will be converted into finished goods on completion of production process. On sales this finished goods get converted into debtors and debtor pays, the firm will again have a cash .This cash will again use for financing raw material, WIP, etc. Thus there is a complete cycle when cash can converted into raw material, WIP finished goods, debtor and finally again cash. Working capital Gross working capital Net working capital
- 26. 19 In case of a manufacturing company, the operating cycle is the length of time necessary to complete the following cycle of events: (a) Conversion of cash into raw material. (b) Conversion of raw material into work -in-progress. (c) Conversion of work in progress into finished goods. (d) Conversion of finished goods into account receivables. (e) Conversion of account receivable into cash. The operating cycle of a business can be shown as in the following chart. TYPE OF WORKING CAPITAL The operating cycle creates the need for current assets (working capital). However the need does not come to end after the cycle is completed to explain this continuing need of current asset a destination should be drawn between permanent and temporary working capital. A. PERMANENT WORKING CAPITAL The need for current asset arises, as already observed, because of the cash cycle. To carry on business certain minimum level of working capital is necessary on continues and interrupted basis. For all practices purpose, this requirement will have to be permanent as with other fixed assets Cash Raw material work in progress Finished goods sales Account receivable
- 27. 20 B. TEMPORARY WORKING CAPITAL Any amount over and above the permanent level of working capital is temporary, fluctuating or variables, working capital this is required to meet fluctuation in demand As shown in Figure: HOW TO ANALYZE WORKING CAPITAL THE PROCESS OF ANALYISIS OF WORKING CAPITAL IS A THREE STEPS PROCESS. THIS PROCESS IS INCLUDING THE FOLLOWING: 1. STEP: 1. The first step of analysing of working capital begins by determining current assets 2. Current asset are comprised of cash, marketable securities, accounts receivables and current inventory 3. The sum of total of all value are current asset
- 28. 21 2. STEP 1. The second step is determining current liabilities. 2. Current liabilities include account payable, accrued expenses, notes payable, are under in it 3. The sum of all those are current liabilities 3. STEP 1. Now subtracted current asset with current liabilities 2. The outcome will be working capital In simple words difference between current asset and current liabilities CONSTITUENTS OF CURRENT ASSETS 1) Cash in hand and cash at bank 2) Bills receivables 3) Sundry debtors 4) Short term loans and advances. 5) Inventories of stock as: a. Raw material b. Work in process c. Stores and spares d. Finished goods 6. Temporary investment of surplus funds. 7. Prepaid expenses 8. Accrued incomes. 9. Marketable securities.
- 29. 22 CONSTITUENTS OF CURRENT LIABILITIES 1. Accrued or outstanding expenses. 2. Short term loans, advances and deposits. 3. Dividends payable. 4. Bank overdraft. 5. Provision for taxation, if it does not amount to app. Of profit. 6. Bills payable. 7. Sundry creditors. SOURCES OF WORKING CAPITAL FINANCE BANK FINANCE FOR WORKING CAPITAL: Bank are main institutional sources of working capital. Finance in India after trade credit, bank credit is the most important sources of financing of working capital in India. A bank considers a firms sales and production plan and desirable levels of current assets in determining its working capital requirements. The amount approved by bank for the firms working capital is called credit limits. The sources of short-term funds used for financing variable part of working capital mainly include the following: 1. Loans from commercial banks 2. Public deposits 3. Trade credit 4. Factoring 5. Discounting bills of exchange
- 30. 23 6. Bank overdraft and cash credit 7. Advances from customers 8. Accrual accounts These are discussed in turn. 1. Loans from Commercial Banks: Small-scale enterprises can raise loans from the commercial banks with or without security. This method of financing does not require any legal formality except that of creating a mortgage on the assets. Loan can be paid in lump sum or in parts. The short-term loans can also be obtained from banks on the personal security of the directors of a country. Such loans are known as clean advances. Bank finance is made available to small- scale enterprises at concessional rate of interest. Hence, it is generally a cheaper source of financing working capital requirements of enterprise. However, this method of raising funds for working capital is a time- consuming process. 2. Public Deposits: Often companies find it easy and convenient to raise short- term funds by inviting shareholders, employees and the general public to deposit their savings with the company. It is a simple method of raising funds from public for which the company has only to advertise and inform the public that it is authorized by the Companies Act 1956, to accept public deposits. Public deposits can be invited by offering a higher rate of interest than the interest allowed on bank deposits. However, the companies can raise funds through public deposits subject to a maximum of 25% of their paid up capital and free reserves. But, the small-scale enterprises are exempted from the restrictions of the maximum limit of public deposits if they satisfy the following conditions: The amount of deposit does not exceed Rs. 8 lakhs or the amount of paid up capital whichever is less. (i) The paid up capital does not exceed Rs. 12 lakhs. (ii) The number of depositors is not more than 50%.
- 31. 24 (iii) There is no invitation to the public for deposits. The main merit of this source of raising funds is that it is simple as well as cheaper. But, the biggest disadvantage associated with this source is that it is not available to the entrepreneurs during depression and financial stringency. 3. Trade Credit: Just as the companies sell goods on credit, they also buy raw materials, components and other goods on credit from their suppliers. Thus, outstanding amounts payable to the suppliers i.e., trade creditors for credit purchases are regarded as sources of finance. Generally, suppliers grant credit to their clients for a period of 3 to 6 months. Thus, they provide, in a way, short- term finance to the purchasing company. As a matter of fact, availability of this type of finance largely depends upon the volume of business. More the volume of business more will be the availability of this type of finance and vice versa. Yes, the volume of trade credit available also depends upon the reputation of the buyer company, its financial position, degree of competition in the market, etc. However, availing of trade credit involves loss of cash discount which could be earned if payments were made within 7 to 10 days from the date of purchase of goods. This loss of cash discount is regarded as implicit cost of trade credit. 4. Factoring: Factoring is a financial service designed to help firms in managing their book debts and receivables in a better manner. The book debts and receivables are assigned to a bank called the 'factor' and cash is realised in advance from the bank. For rendering these services, the fee or commission charged is usually a percentage of the value of the book debts/receivables factored. This is a method of raising short-term capital and known as 'factoring'. On the one hand, it helps the supplier companies to secure finance against their book debts and receivables, and on the other, it also helps in saving the effort of collecting the book debts. The disadvantage of factoring is that customers who are really in genuine difficulty do not get the opportunity of delaying payment which they might have otherwise got from the supplier company. In the present context where industrial sickness is spreading like an epidemic, the reason for which particularly in SSI sector being delayed payments from their suppliers; there is a clear-cut rationale for
- 32. 25 introduction of factoring system. There has been some progress also on this front. 5. Discounting Bills of Exchange: When goods are sold on credit, bills of exchange are generally drawn for acceptance by the buyers of goods. The bills are generally drawn for a period of 3 to 6 months. In practice, the writer of the bill, instead of holding the bill till the date of maturity, prefers to discount them with commercial banks on payment of a charge known as discount. The term 'discounting of bills' is used in case of time bills whereas the term, 'purchasing of bills' is used in respect of demand bills. The rate of discount to be charged by the bank is prescribed by the Reserve Bank of India (RBI) from time to time. It generally amounts to the interest for the period from the date of discounting to the date of maturity of bills. If a bill is dishonoured on maturity, the bank returns the dishonoured bill to the company who then becomes liable to pay the amount to the bank. The cost of raising finance by this method is the amount of discount charged by the bank. This method is widely used by companies for raising short-term finance. 6. Bank Overdraft and Cash Credit: Overdraft is a facility extended by the banks to their current account holders for a short-period generally a week. A current account holder is allowed to withdraw from its current deposit account up to a certain limit over the balance with the bank. The interest is charged only on the amount actually overdrawn. The overdraft facility is also granted against securities.Cash credit is an arrangement whereby the commercial banks allow borrowing money up to a specified-limit known as 'cash credit limit.' The cash credit facility is allowed against the security. The cash credit limit can be revised from time to time according to the value of securities. The money so drawn can be repaid as and when possible. The interest is charged on the actual amount drawn during the period rather on limit sanctioned. The rate of interest charged on both overdraft and cash credit is relatively higher than the rate of interest given on bank deposits. Arranging overdraft and cash credit with the commercial banks has become a common method adopted by companies for meeting their short- term financial, or say, working capital requirements.
- 33. 26 7. Advances from Customers: One way of raising funds for short-term requirement is to demand for advance from one's own customers. Examples of advances from the customers are advance paid at the time of booking a car, a telephone connection, a flat, etc. This has become an increasingly popular source of short-term finance among the small business enterprises mainly due to two reasons. First, the enterprises do not pay any interest on advances from their customers. Second, if any company pays interest on advances, that too at a nominal rate. Thus, advances from customers become one of the cheapest sources of raising funds for meeting working capital requirements of companies. 8. Accrual Accounts: Generally, there is a certain amount of time gap between incomes is earned and is actually received or expenditure becomes due and is actually paid. Salaries, wages and taxes, for example, become due at the end of the month but are usually paid in the first week of the next month. Thus, the outstanding salaries and wages as expenses for a week help the enterprise in meeting their working capital requirements. This source of raising funds does not involve any cost.
- 35. 27 Working capital is a main ingredient for smoothly running of the business. . I have included relevant article and research on different component of working capital management Indian scholar have also conducted research studies exploring various aspects of working capital. 1. Mrs.Divya P. Solanki (2020): she gives more emphasis in depth analysis on two aspects, working capital on profitability of firm and working capital management. The chief issues with previous literature are lack of survey-based approach and lack of methodical theory advance study, which gives direction and idea for future research. The proposed future research direction is given in this paper may help to develop a better understanding of determinants and practices of working capital management. 2. Madhavi K. (2020): -She has done research to explore co relation among liquidity position profitability of the paper mills in Andhra Pradesh. That has been evaluated ineffective working capital negatively effect on profitability of the paper mills. 3. Gurumurthy N. and Reddy Jayachandra K. (2020): -He has conducted research on working capital management position in four pharmaceutical companies APSPDCL, APEPDCL, APNPDCL and APCPDCL and come out with fact that working capital management was not so good in positionandneedtodobetter 4. Kaur Harsh V. and Singh Sukhdev (2019): -This research conducted on cash conversion efficiency and setting up the operating cycle days. The study tests the relationship between the working capital attain and profitability calculated by income to current assets and in come to average total assets. Authors did study with companies listed in BSE 200 that is spread over 19 industries for the period 2000 to 2010. 5. Madhavi K. (2019): -She has done research based on empirical study of co relation among liquidity position and profitability of the paper mills in Andhra Pradesh. 6. Rao and Rao Ramachandran (2018): -Main aim of his study is to evaluate the trends and parameters of effectiveness of working capital and its utilization in terms of volume of the firms of cotton textiles industry in India. For that three parameters are taken i.e. different indices first one performance Index, utilization index and efficiency Index. For the study industry is divided in threecategory means small, medium and large. The output of the study is like that linear growth rate model is used to find out the significance with working capital and PI, UI and EI are significant in respect of small size companies while in medium size only UI is significant. On an average we can say that working capital efficiency was not so satisfied despite having PI in growth mode. The reason behind is that continuousfactorsaredeclining.
- 36. 28 7. Rahman Mohammad M. (2018): - this Research is conducted on correlation among working capital and profitability. To analyses the effectiveness of working capital management of the selected textile companies. Conclusion of the study found that overall good management in working capital management of selected textile companies and thus most of the companies are profitable way going on. 8. Dr Arbab Ahmed and Dr Matarneh Bashar (2018): -this Research conducted with registration technique which is very powerful statistical tool to forecast the working capital. The area of working capital management, that is possible to make the projection after starting the average relationship in the past. For the purpose different components are used and to be finalized result. And it is presented indiagrammaticwayaswellmathematicalway. 9. Dr KaddumiThair A. and Dr Ramadan Imad Z. (2018): -This research conducted in 49 Indian companies they are listed in Amman Stock Exchange, the carried with topic like effect of workingcapitalmanagementontheprofitabilityinatargetedcompanyfortheperiod2005to2009. This goal could be achieved with help of two different measures one is for profitability and another one is for performance of working capital management. 10. Samiloglu F. and Demirgunes K. (2018): -This research is conducted to examine effect of working capital management on firm’s prosperity. The study carried with manufacturing companies listed in Istanbul Stock Exchange (ISE) the tenure for the study is 1989 to2007. For the study multi regression statistical method is used. Observed come outs of study revealed that some factors having negative impact and some having positive impact on profitability of firms. Positive factors like growth of sale on other hand debtors’ payment period, stock conversion period as well as debt interest negative 11. Chowdhury Anup and Amin Md. Muntasir (2018): this research conducted on pharmaceutical companies listed in Dhaka Stock Exchange. Observation of the study based on the financial management, according to this major problem found in area of working capital management. It is true that working capital effects go on business performance and growth. The main objective of the study is to evaluate working capital practicability and implication of working capital policy and strategies in the targeted industry. To obtain the goal, evaluation was made regarding principles, procedures and techniques of stock management, creditors’ management, and debtors’ management.
- 37. 29 12. Meszek Wieslaw and Polewski Marcin (2017): -By observation of selected construction companies at area of working capital management and strategies implication. The Study was based to develop the controlling methodology forwo rking capital. here, study that was going on construction company having the specific factors are to be consider like functional factors and market requirements which make working capital area wide andmorefocused. 13. Virani Varsha (2017): - this research conducted into examine financial performance and second one is to examine profitability trend and at the last to find out assets operational model and evaluate liquidity position of the company. To achieve these goals used two classy analytical tools i.e. ratio analysis and correlation analysis. The study shows relationship between different ratios. That is also observed that correlation and coefficient is near about there is a high degree of negative and positive correlation between various ratios. 14. Ramachandran Azhagaiah and Janakiraman Muralidharan (2017): - In this study author examine the relationship among working capital management proficiency and earnings before interest and tax. The study was made on Paper industry in India during 1997 to 2005. For the measurement of working capital management three indexes are taken into consideration performance index, utilization index and efficiency index, and EBIT of the selected companies for the study period are taken. As a conclusion of the study says paper companies of India performed well during period. Some having very good index and some of them need to improve the working capital man 15. Mc clure.B (2017): The research conducted on working capital describes cash is the lifeline of the company. If this lifeline destroyed so does the company ability to refund operation reinvest and meet capital requirement and payment understanding company cash flow health is essential to making investment decision. A good way to judge a company’s cash flow prospects is to look at working capital management. Cash is king especially at time when find raising harder than ever letting it slip away is an over side that investor should not forgive. Analysing a company working capital can provide excellent inside into how well company hardness its cash, answer whether it is likely to have any on hand to fund growth and contribute shareholder value.
- 38. 30 16. Thachappily G (2016): this research has been conducted on working capital is cash need to carry on operations during the cash conversion cycle i.e.: the days from paying for raw material to collecting cash from customers. Raw material and operating supplies must be bought store to ensure interrupted production. Wages, salaries and utility charges and other incide3ntals must be paid for converting the materials into finished product. The customer must be allotting credit period that is standard in the business. Only at the end of the cycle does cash flow in again 17. Jain P. K. and YadavSurendra S. (2016): - this research has been conducted of corporate Working capital management related practices in India, Singapore and Thailand. This study tried to understand the relationship of working capital management and current assets and current liabilities. In other hand, authors have revealed the analysis liquidities ratios like current assets and current liabilities. Every sample of study have been pertained these ratios for the management of working capital. In a sum up of the paper the data of samples of three countries confirm that there were wide inter-industry variations in liquidity ratios. At the end, authors suggest the serious consideration attention to be given by respective nation as well industry groups of three companies and should develop corrective measures to take care of areas concern. 18. Dutta (2017): - Author Dutta has done study on “Working Capital Management of Horticulture Industry in Himachal Pradesh” that was a case study of Himachal Pradesh Horticulture Produce Marketing and Processing Corporation for the stage1991 to 1998. The study was thrown the light on financing pattern of working capital management. The study exposed that the working capital of HRMC was going worse gradually during the study period. Though, huge losses of the firm holding the huge amount of inventory and that was a main cause of failed trade off among liquidity and profitability. The conclusion of study like that there was no significant correlation between gross working capital and sales 19. RaoGovinda D. and Rao P. M. (2017): -this research has been conducted as per working capital is constant process. So that proper observation on various components is needed. At the end relationship between different components are needed. This provides proper direction. 20. Han Shin an LUC Semen (2016): -The research has been conducted on the efficiency of the working capital management and business profitability. There are 58 companies are taken for the research and period for the study is 1975 to 1994, study found that there is a strong negative relationship if firm having long Net Trade Cycle and its profitability. In other side short Net Trading cycle created the risk. It has also found measuring liquidity differently, need to be maintain appropriate current ratio having positive relation with profitability
- 39. 31 21. Swamy (2016): -Swamy was done research with 19 key agricultural area in the contour of Dakshina Kannada district in Karnataka. The research exposed that maintenance of liquidity and profitability is a major problem in the targeted are. To be safe in side of working capital management were found to be suffered and low profitability due to the interest burden. The effects of these firms raised the fund for working capital requirement by borrowing fund from depositors. This study has been given stressed on proper management of working capital so the future of business would be bright. 22. Rafuse (2016):-The article stressed on working capital enhancement by halting payment of creditors. That was clear many UK companied delayed payment for the long period. Very surprisingly the story revealed in 1994 by the Forum for Private Business, that was a small business association, and reverse side 50 days before payment of debtors where been paid beyond the due date. This article stressed to maintain healthy and close relationship among supplier and customer. The discovery of the study warranted the firms to reduce inventory level as fast as possible in order to increase the profit of the firms. Another fact of study was that control over working capital responsibility goes on theheadoffinancemanager. 23. Vijayakumar and Venkatachalam (2016): -This research has been conductedon analysis in working capital and profitability. Study was carried with 13 firms belonging sugar industry for the 10 years period from 1982-1983 to 1991-92. The correlation and regression statistical method has been used to analyses the impact of working capital ratios on profitability. In this study total four ratios have been taken in to consideration; Liquidity ratio, inventory turnover ratio, receivable turnover ratio and cash turnover ratio. The discovery of the study said that liquid ratio and cash turnover ratio have harmful impact on profitability on the other hand inventory turnover ratio and receivables have positive impact on profitability. 24. Siddhartha and Das (2016): this research has been conducted on “Working Capital Turnover in Pharmaceutical companies” tried to determine efficient use of working capital in selected pharmaceutical firms in India. 10 years data 25. Fazzari Steven M. and Petersen Bruce C. (2016): -Research has been put light on financial restrain on investment by giving focus the ignoring role of working capital in both as use and source of funds. As per the views of author liquidity can be maintain by maintaining working capital on smooth manner means to be investment in a manner which does not create cash flow constrain. Through the research found that working capital investment should be “excessively sensitive” with summing up that controlling on smoothing working capital create a long-term impact of finance constraints and reported in many other studies also.
- 41. 32 3.1 RESEARCH METHODLOGY: It is systematic way to solve the research problem. It may be understood by way of science how research is done scientifically. The logic behind taking research methodology into consideration is that one can have knowledge about the method and procedure adopted for achievement of the project. With adoption of these evaluate to others. The methodology adopted for studying the objective was calculating various ratios. so keeping in view the nature of requirement of the study collecting all the relevant information regarding the financial statement of KOTAK MAHINDRA BANK. Direct personal interview methods have been adopted for collecting the primary data related to project report. Secondary data also been collecting from various magazine, newspaper, through books 3.2 OBJECTIVE OF THE STUDY 1) To verify and test important facts 2) To analyze an event or process or phenomenon to identify the cause and effect relationship 3) To overcome and solve the problem occurring in our daily life 4) To find solution in scientific, non –scientific and social problem 5) To develop new scientific tools, concepts and theory and understand scientific and non- scientific problem 3.3SAMPLE SIZE It is the substantial portions of the largest population that are sampled achieve reliable results.Sample size – the last four years, i.e. 2018 to 2021 balance sheet of the company. 3.4 SAMPLE AREA The Area of the Research was Kotak bank, section 13, Panipat 3.5 SAMPLING TECHNIQUE A probability sampling method is any method of sampling that utilizes some form of random selection. In order to have a random selection method, you must set up some process or procedure that assures that the different units in your population have equal probabilities of being chosen 3.6 RESEARCH DESIGN: It specifies the method and procedure for conducting a particular study. A research design is the arrangement of studying his research problem along with logic behind them. Research designs broadly classified into three types are:
- 42. 33 1. Exploratory research 2. Descriptive research 3. Casual research design I have chosen the Descriptive Research Design. This type of research describes the present happening of the area. Descriptive research cannot be used to show the relationship of cause and effect. 3.7 METHOS OF DATA COLLECTION There are basically two type of data collection 1) Primary data 2) Secondary data 1) PRIMARY DATA It refers to collecting data for the first time and not available before. It can be collected through the face to face by means of survey and questionnaire 2) SECONDARY DATA It refers to data that already available and do some changes in existing data. It is easy to collect secondary data rather than primary data. Secondary data not only consist published report and records it also include unpublished record 3.8 LIMITATION OF THE STUDY 1) SHORTAGE OF DATA: it was the big limitation for collecting primary data because of the confidential of the information. My project report is based upon mainly on secondary data. 2) LIMITED PERIOD: this project report based upon four year of annual report and data will be collected on the basis of these four year are not show the true picture of the working capital of company. 3) WIDER AREA: Working capital is too much wider concept it is very impossible to cover all the area regarding loan proceeding. 4) The nature of financial statement is historical. Analysis and interpretation are done on the historical basis that tells about weakness and strength about company 5) The study of financial statement are shown only financial status of the bank
- 44. 34 4.1 NET CURRENT ASSET: current asset is those assets are converted easily in one year. And these assets are needed for the day- to-day operations. YEARS CURRENT ASSET 2018 74384.28 2019 139447.98 2020 167978.14 2021 198843.89 Figure no.1 INTERPRETATION: From the above data we can see that current asset of KOTAK MAHINDRA BANK are going up as per year. In 2015 current asset are 74384.28 and from this year rise continuously, and it is good for the company too. From these we can see that bank having more liquid position to provide a loan to the customer and enhance market share of the business too. 0 50000 100000 150000 200000 250000 2015 2019 2020 2021 NET CURRENT ASSET IN CRORE NET CURRENT ASSET IN CRORE
- 45. 35 4.2 NET CURRRENT LAIBILITES: Current liabilities are those liabilities that are paid in one year or fulfil obligation related to your debt within one year. YEARS CURRENT LIABILITIES 2018 8678.96 2019 4857.97 2020 8450.68 2021 9652.15 Figure No.2 INTERPRETATION: from the above data we can see that liability of the bank are also increase year by year, it means that are not good positioning for the bank. Debt increments are problem for each and every bank and that lead to not providing loan at time. In 2021current liability are increased by 9652.15 cores. 0 2000 4000 6000 8000 10000 12000 2015 2016 2017 2018 NET CURRENT LABILITY IN CRORE NET CURRENT LABILITY IN CRORE
- 46. 36 4.3 NET WORKING CAPITAL As analysis of the net working capital will be very help full for knowing the operational efficiency of the company. The following table provides the data relating to the net working capital of KOTAK MAHINDRA BANK. NET WORKING CAPITAL= CURRENT ASSET – CURRENT LIABILITIES YEARS CURRENT ASSET CURRENT LIABILITIES NWC 2018 74384.28 8678.96 69526.31 2019 139447.98 4857.97 130769.02 2020 167978.14 8450.68 159527.46 2021 198843.89 9652.15 189191.74 Figure No.3 Interpretation: It is seen from the above chart that net working capital are going positively and increasingly year by year. Through 2018 to 2021 it increases by 36 per cent KOTAK MAHINDRA BANK. 0 20000 40000 60000 80000 100000 120000 140000 160000 180000 200000 2018 2019 2020 2021 NWC in crore NWC in crore
- 47. 37 4.4 GROSS WORKING CAPITAL As analysis of gross working capital will be very helpful for know about current asset of the company. The following table provide data relating to the total current asset of KOTAK MAHINDRA BANK GROSS WORKING CAPITAL= TOTRAL CURRENT ASSET YEARS TOTAL CURRENT ASSET 2018 74384.28 2019 139447.98 2020 167978.14 2021 198843.89 Figure No. 4 Interpretation: it is clearly seen from the diagram that gross working capital of KOTAK MAHINDRA BANK also positive and increase year by year. As in 2018 GWC are 74384.28 and going increase in year 2021by 38 per cent and shows that having good asset positioning to pay their debt 0 50000 100000 150000 200000 250000 2018 2019 2020 2021 GWC in crores NWC in crores
- 48. 38 4.5 RATIO ANALYSIS It is a power full tool of financial analysis. It is a process of comparison of one figure against other: 4.5.1 LIQUIDITY RATIOS A) Current ratio: it shows the relationship between current asset and current liability. an ideal ratio are 2:1 CURRENT RATIO = current asset/ current liability YEAR CURRENT RATIO 2018 0.98 2019 1.10 2020 1.14 2021 0.40 Figure No. 5 INTERPRETATION: It is seen from the above chart during the year 2018 the current ratio was 1.53 and increasing every year that shows that they have enough current asset in KOTAK MAHINDRA BANK to meet his current liability obligations 0 0.2 0.4 0.6 0.8 1 1.2 2018 2019 2020 2021 CURRENT RATIO current ratio
- 49. 39 B) ABSOLUTE RATIOs: it includes cash in hand and cash at bank. The standard ratios are Absolute ratio= cash& bank balance / current liability YEAR ABSOLUTE LIQUID RATIO 2018 1.28 2019 1.25 2020 2.67 2021 2.03 Figure No.5.1 INTERPRETATION: Through this analysis we can see that in during 2020 gradually increasing 2.63 but in 2021 little bit reduce to .03 in ratios and it is show that they have good liquidity position of the bank 0 0.5 1 1.5 2 2.5 3 2018 2019 2020 2021 ABSOLUTE RATIO absolute liquidity ratios
- 50. 40 C) QUICK RATIO: It measures the firm capacity to pay off current obligations immediately Quick ratio= current asset- inventory/ current liability YEAR QUICK RATIO 2018 14.83 2019 15.61 2020 18.09 2021 19.49 Figure No.5.3 INTERPRETATION: As we see in graph quick ratio of kotak bank is higher in 2021and it shows that higher quick ratio are higher in paying their debt quickly and lower ratio shows vice-versa. So it is good position for bank having their higher ratios 0 2 4 6 8 10 12 14 16 18 20 2015 2016 2017 2018 QUICK RATIO QUICK RATIO
- 51. 41 4.5.2 FIXED ASSET TURNOVER RATIO: it is ratio of sales to the value of fixed assets. It indicates how well the business is using fixed assets to generate sales Fixed asset turnover ratio= net asset/ average net fixed asset YEAR FTR 2018 0.10 2019 0.12 2020 0.09 2021 0.09 Figure No.4.5.2 INTERPRETATION: Through this graph we can see that in 2016 this ratio is too high it means less money tied up with fixed asset but in 2017, 2018 are declining shows that over-invested in plant and equipment and other fixed asset 0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 2015 2016 2017 2018 FATR FATR
- 52. 42 a) TURNOVER RATIOS: These ratios are indicating with which asset are converted or turned over into sales b) WORKING CAPITAL TURNOVER RATIO: This ratio indicate that number of times working capital is turn over the course of the year a higher in ratios indicate use of working capital and vice-versa Working capital turnover ratios: net sales / net working capital YEARS NET WORKING CAPITAL NET SALES WCTR 2018 69526.31 9719.87 7.15 2019 130769.02 16384.18 7.98 2020 159527.46 17698.93 9.01 2021 189191.74 23800.70 7.94 Figure No. 4.5.2.1 INTERPRETATION: Through this graph we can see that during 2018,2019 working capital turnover ratio is stable while in 2020 using of working capital is too high in relate to other years and in 2021 it reduce by 9.01 to 7.94 it means in current year using of working capital is less. 0 1 2 3 4 5 6 7 8 9 10 2015 2016 2017 2018 WCTR WCTR
- 53. 43 c) TOTAL ASSET TURNOVER RATIO: it is an efficiency ratio that measure company ability to generate sale from it asset by comparing net sale with average total asset Total asset turnover ratio: revenue/ total asset YEAR REVENUE TOTAL ASSET RATIO 2015 9719.87 101154.11 9.6 2016 16384.93 183580.83 8.9 2017 17698.93 206139.28 8.5 2018 19748.50 255281.25 7.7 Figure No.4.5.2.2 INTERPRETATION: through this analysis we can see that asset turnover ratio is too high in 2018 year but it declines by year and year in 2019, 2020, 2021 like 8.9, 8.7 and 7.7 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2015 2016 2017 2018 TATR TATR
- 54. 44 4.5.3 PROFITABILITY RATIOS: a) Operating margin ratio Operating margin ratio: it is measure of profitability. It indicates how much of each dollar of revenues is left over after both cost of goods sold and operating expenses are considered. Operating margin ratio= operating earnings / revenue Figure no. 4.5.3 INTERPRETATION: Through this analysis we can see that in 2021 ratio of operating margin is too high relate to other year and it shows that higher ratio are favorable because that time company having enough money to pay for its variable cost as well as fixed cost 0 2 4 6 8 10 12 14 16 18 20 2018 2019 2020 2018 OPERATING MARGIN RATIO operating margin ratio YEAR RATIO 2018 11.95 2019 10.47 2020 15.81 2021 17.26
- 55. 45 4.5.4 RETURN ON NET WORTH RATIO: It measures how much company earn within specific period in relation to the amount that invested in common stock and also known as return on equity Return on equity = net income/ shareholder equity YEAR RATIO 2018 13.19 2019 8.72 2020 12.35 2021 10.89 Figure No. 4.5.4 INTERPRETATION: Through this analysis in 2018 ratio is too high it means shareholder money will be used efficiently but it decreases gradually in 2019 it shows that shareholder money will not use properly and little bit increased in 2020 and also decrease in 2021 0 2 4 6 8 10 12 14 2018 2019 2020 2021 RETURN ON NET WORTH RETURN ON NET WORTH
- 56. 46 4.5.5 RETURN ON LONG TERM FUND: it measures how efficiently a company can generate profits from its capital employed Return on long term fund = EBIT/ NET CAPITAL EMPLOYED YEAR RATIO 2018 58.89 2019 52.62 2020 53.30 2021 43.54 Figure No. 4.5.5 INTERPRETATION: Through this analysis we can see return on long term fund will be reduced year by year and in 2021 it will be reduced by 10% and it shows that less ratio would be unfavourable because it means that less dollar profit are generated by each dollar of capital employed 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2018 2019 2020 2021 RETURN ON LONG TERM FUNDS RETURN ON LONG TERM FUNDS
- 57. 47 4.6 LEVERAGE RATIO: 4.6.1 FIXED ASSET TURNOVER RATIO: It is ratio of sales to the value of fixed assets. It indicate how well the business is using fixed assets to generate sales Fixed asset turnover ratio= net asset/ average net fixed asset YEAR RATIO 2018 0.10 2019 0.12 2020 0.9 2021 0.9 Figure No. 4.6.1 INTERPRETATION: Through this graph we can see that in 2016 this ratio is too high it means less money tied up with fixed asset but in 2017, 2018 are declining shows that over-invested in plant and equipment and other fixed asset 0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 2018 2019 2020 2021 FIXED ASSET TURN OVER RATIO FIXED ASSET TURN OVER RATIO
- 58. 48 4.6.2 EPS (EARNING PER SHARE): It measures how many dollars of net income have been earned by each share of common stock EPS= net income-preferred dividend/weighted average no. of share outstanding YEAR RATIO 2018 21.16 2019 11.39 2020 18.53 2021 21.43 Figure No. 4.6.2 INTERPTRETATION: Above from all the data we can see that EPS OF 2021 are high rather than other years it means higher the earning per share is, the more money your share of stock will be worth because investor are willing to pay more for higher profits. But EPS also reduced in 2019 by 11.39 it means it is harmful for the banks because investor are not willing to invest more 0 5 10 15 20 25 2018 2019 2020 2021 EPS EPS
- 59. 49 4.6.3 DIVIDEND PER SHARE: It is sum of declared dividends issue by the company for every ordinary share outstanding DIVIDEND PER SHARE= D-SD/S D: sum of dividend over per year SD: special, one time dividend in the period S: ordinary share outstanding for the period YEAR RATIO 2018 0.90 2019 0.50 2020 0.60 2021 0.70 Figure No. 4.6.3 INTERPRETATION: From the above graph we can see that increasing in DPS in 2018 and 2021 are .090 and 0.70 it means Increasing DPS is good way for company to single strong performance to its shareholder, but it decreases in 2019 and 2020 by 0.50, 0.60 that means not good for the company by the shareholder point of view DPS 2015 2016 2017 2018
- 60. 50 4.6.4 OPERATING PROFIT PER SHARE: It is measure of profit that excludes the tax benefit of debt financing Operating profit per share= gross profit- operating expenses YEAR RATIO 2018 15.04 2019 9.36 2020 15.20 2021 17.89 Figure No. 4.6.4 INTERPRETATION: From the above data we can see that operating profit of the share will be increase year by year by 17.89% as it means ability of the management in running the business will be increase year by year. But it gradually decreases in 2019 by 9.36% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2018 2019 2020 2021 OPPS OPPS
- 62. 51 5.1 FINDINGS The research is conducted with the data of five years. And from this data I found that as follow: 1. From the above data is observed that the bank having good liquidity position to meet their obligations 2. From the above data is observed that bank have decrease in turnover ratio in 2021 0.9 to 0.7 that means asset are not generating full enough revenue 3. Higher in profitability shows good impact on company balance sheet 4. During 2021 performance of the bank increased by 17.86 in operation margin ratio 5. Working capital of the bank also increased in 2021 are 2189191.93in KOTAK MAHINDRA BANK 6. KOTAK MAHINDRA BANK having good liquidity position in every year by increasing in net working capital 7. The company current asset was always more than requirement it also effect on profitability of KOTAK MAHINDRA BANK 8. Revenue of the bank also having increased by 23870.80 in 2021 9. Profit of the bank also increased by 1.19 % in 2021 10. Efficiency of the bank also by increased by leverage ratio in 2021 by 2.6% that lead to good management capacity to their work
- 63. 52 5.2 SUGGESTIONS: The research is conducted with the data of past four years. However, better insight could be obtained if the research is continued with the data with number of years 1. Current asset of company should not exceed over because it is increasing the investment of company 2. The net working capital should be balance not be fluctuating excessively 3. The major income of the bank will be interest income so bank get more interest when it lends more and advances are the major part of the asset of the bank, so bank tries to increase their advances 4. Now a day’s competition is in peak so it is very important for the bank to understand the importance of advertisement and do advertisement of the product even it is bad or good 5. The bank should have sufficient working capital, that help to maintain liquidity 6. Bank have to concern issue relating NPAs that effect on working capital finance too because it leads to short of cash then it reduces the credit creation in bank and continue affect adversely on profits. 7. All necessary steps should be taken to increase the liquidity position. 8. The company should adopt or, maintain good debt redemption policy for prompt collection of debt. 9. Bank also considered on NPAs control measure 10. Company must undertake better financial management practices in order to promote financial growth
- 64. 53 5.3 CONCLUSIONS: A study entitled “A STUDY ON WORKING CAPITAL MANAGEMENT OF KOTAK MAHINDRA BANK “has been undertaken in order to identify the working capital position of the company for a period of four years commencing from 2015 to 2018. The working capital position has been analyzed on the basis of data collected from the annual report and financial statement of a company. The tool used for analysis are scheduled of changes in working capital and ratio analysis the financial position of the bank are analyzed through annual report of the bank from 2014 to 2018. The main objective of the study was to analyze the working capital position of KOTAK MAHINDRA BANK along with the liquidity position and evaluate the financial performance of KOTAK MAHINDRA BANK. The current ratio of KMB in 2015 to 2018 are gradually increased which indicate the good financial position of the bank. After analysis ratio of KOTAK MAHINDRA BANK, it can be observed that financial statement are good sound and return on investment, turnover ratio, acid test ratio, profitability ratio, absolute ratio all are in positive state. Overall working capital position and financial performance of KOTAK MAHINDRA BANK are good.
- 65. I BIBLIOGRAPHY
- 66. II Reference and Journal: For the purpose of collecting information the following sources were referred: 1. Krish Rangarajan, Anil misra(2008) , working capital management 2. Tulsaimp.c(2007), financial statement, financial accounting 3. Ray.K.K. (2014), Efficiency of working capital management and profitability: a case of hind Alco review of management, 4 (1/2) ,19-30 4. Ross, S.A; westerfield, RA. W& Jordan, B.D (2013) essential of corporate finance (8th edition). 5. Manuals from KOTAK MAHINDRA BANK WEBSITES: a. www.kotakbank.com b. www.wikepedia.com c. www.scribd.com d. www.google.com e. www.moneycontrol.com f. www.economictimes.com
- 67. III ANNEXURE
- 68. IV BALANCE SHEET – KOTAK MAHINDRA BANK RS. IN CRORE PARTICULARS Mar 22 Mar 21 Mar20 Mar 19 LIABILITIES Share capital Reserve surplus 12 MONTHS 954.99 36528.83 12 MONTHS 922.32 26695.62 12MONTH S 920.60 2304.81 12MONTHS 389.71 13754.91 Net worth 37483.82 27617.94 23962.47 14144.08 Secured loan 25154.15 21095.48 20975.34 12149.71 Unsecured loan 192643.27 157425.86 138643.02 74860.31 Total liability 255281.25 206139.28 183580.83 101154.11 ASSETS Gross block - Acc. dep 1527.16 .00 1537.63 .00 1551.59 .00 1206.71 .00 Net block 1527.16 1537.63 1551.59 1206.71 Capital and work in progress Investments Inventories Sundry debtor Cash & bank Loans advances .00 64526.35 .00 .00 19620.11 179223.78 .00 45074.19 .00 .00 22572.01 145440.6 .00 51260.22 .00 .00 10879.72 128568.26 .00 30421.09 .00 .00 6262.36 68121.92 Total current assets 198843.89 167978.14 139447.98 74384.28 Current liabilities 9652.15 8450.68 8678.96 4857.97 provisions .00 .00 .00 .00
- 69. V Total current liability 9652.15 8450.68 8678.96 4857.97 Net current asset 189191.74 159527.46 130769.02 69526.31 Misc. expenses .00 .00 .00 .00 Total asset (A+B+C+D+E) 255281.25 206139.28 183580.83 101154.11 PROFIT AND LOSS ACCOUNT Mar 22 Mar 21 Mar20 Mar 19 12 mths 12 mths 12 mths 12 mths INCOME Interest / Discount on Advances / Bills 14,727.95 13,402.10 12,470.37 7,468.67 Income from Investments 3,933.00 3,681.04 3,456.01 2,215.85 Interest on Balance with RBI and Other Inter-Bank funds 755.29 218.32 92.91 24.06 Others 332.25 397.47 364.90 11.29 Total Interest Earned 19,748.50 17,698.93 16,384.18 9,719.87 Other Income 4,052.21 3,477.16 2,612.23 2,028.45 Total Income 23,800.70 21,176.09 18,996.42 11,748.32 EXPENDITURE Interest Expended 10,216.81 9,572.78 9,483.81 5,496.13 Payments to and Provisions for Employees 2,950.23 2,768.53 2,816.97 1,466.68 Depreciation 302.69 290.66 287.38 193.00 Operating Expenses (excludes Employee Cost & Depreciation) 3,172.80 2,559.30 2,367.17 1,595.05 Total Operating Expenses 6,425.72 5,618.50 5,471.52 3,254.73 Provision Towards Income Tax 2,133.92 1,800.31 1,036.12 895.97 Provision Towards Deferred Tax 0.00 -63.74 -2.32 70.95
- 70. VI Provision Towards Other Taxes 0.00 0.00 0.14 0.06 Other Provisions and Contingencies 939.95 836.74 917.37 164.50 Total Provisions and Contingencies 3,073.87 2,573.31 1,951.31 1,131.48 Total Expenditure 19,716.40 17,764.59 16,906.64 9,882.34 Net Profit / Loss for The Year 4,084.30 3,411.50 2,089.78 1,865.98 Net Profit / Loss After EI & Prior Year Items 4,084.30 3,411.50 2,089.78 1,865.98 Profit / Loss Brought Forward 10,756.29 8,214.12 5,095.26 4,005.29 Transferred on Amalgamation 0.00 0.00 1,674.71 0.00 Total Profit / Loss available for Appropriations 14,840.59 11,625.62 8,859.75 5,871.27 APPROPRIATIONS Transfer To / From Statutory Reserve 1,021.08 852.88 522.45 466.50 Transfer To / From Special Reserve 55.00 55.00 45.00 28.00 Transfer To / From Capital Reserve 24.00 10.55 9.17 5.91 Transfer To / From General Reserve 0.00 0.00 0.00 93.30 Transfer To / From Investment Reserve 0.00 -48.49 -41.52 86.65 Equity Share Dividend 114.21 0.07 91.84 82.07 Tax On Dividend 21.70 -0.68 18.70 13.58 Balance Carried Over To Balance Sheet 13,604.60 10,756.29 8,214.12 5,095.26 Total Appropriations 14,840.59 11,625.62 8,859.75 5,871.27 OTHER INFORMATION EARNINGS PER SHARE Basic EPS (Rs.) 21.54 18.57 11.42 24.20 Diluted EPS (Rs.) 21.51 18.55 11.40 24.14 DIVIDEND PERCENTAGE Equity Dividend Rate (%) 14.00 12.00 10.00 18.00
- 71. VII CASH FLOW OF KOTAK MAHINDRA BANK Mar 21 Mar 20 Mar19 Mar 18 12 mths 12 mths 12 mths 12 mths 12 mths Net Profit Before Tax 4084.30 3411.50 2089.78 1865.98 1502.52 Net Cash From Operating Activities -10274.92 14407.62 6133.72 5121.93 9001.63 -2515.50 -2971.84 -6363.01 -4112.53 -549.06 Net Cash (used in)/from Financing Activities 9837.22 256.52 -1463.91 -726.93 -6161.84 Net (decrease)/increase In Cash and Cash Equivalents -2951.90 11692.29 -1693.19 282.47 2290.73 Opening Cash & Cash Equivalents 22572.01 10879.72 12572.91 5979.89 3689.16 Closing Cash & Cash Equivalents 19620.11 22572.01 10879.72 6262.36 5979.89