CHAPTER 1: INDUSTRY PROFILE

1.1 INTRODUCTION TO THE INDUSTRY

1.1.1 Indian Economy

In the beginning of the year 2008 the economy was on a higher growth path with the macroeconomic fundamentals inspiring confidence and a general optimism about the medium to
long term prospects of the economy. The economy was expected to slow down marginally
from the three years of 9% plus growth in real GDP reflecting a cyclical downturn in the
global economy and expectations were that the growth would be around 8.5%. High oil prices
and domestic inflation and worsening of international financial crisis which had surfaced in
2007 have been definite areas of concern. But the global situation deteriorated massively after
mid-September 2008 following collapse of series of investment banks in the US. This
resulted in choking of credit and global crash in stock markets. Crisis of this magnitude in
industrialized countries has impact around the world especially in the emerging market
countries like India. The Indian economy which started with a strong economic performance
lost the momentum once the ripple effects of the gloom in the global economy set in. Sensex
in January 2008 was all time high at 21206, came down to around 9000 towards the end. The
high cost of crude oil around US$ 150 per barrel in August, 2008 added to the countrys woes
in terms of higher import bill. Rupee weakened against dollar sliding down from Rs.39 in the
beginning of the year to Rs.48 towards the end.
According to the estimates released by Central Statistical Organisation (CSO) the real GDP
growth was 7.6% in the second quarter of 2008-09 as compared to 9.3% of the corresponding
quarter of 2007-08, reflecting deceleration in growth of industry and services. The
agricultural production was below the estimate. The index of industrial production recorded
3.9% as compared to 9.2% in the previous year. Indias balance of payments position
witnessed widening of trade deficit. The crisis in global financial markets deepened since
September, 2008 exerting pressure on financial markets and crashing of equity markets
leading to wide spread volatility. The global turmoil in the financial markets spilled over the
emerging markets. This has finally affected the manufacturing sector. As a result, authorities
in several countries embarked upon an unprecedented way of policy initiatives to contain
systematic risk, arrest the plunge in asset prices and shore of the confidence in the
international banking system. This has brought about some level of stability. The Indian
Government has not lagged behind. It has been successful in bringing down inflation from
12.9% in August, 2008 to around 6% towards the end of the year. The challenges of high
growth and now global recession have become more complex especially with increased
globalization of world economy and growing influence of global developments, economic
and no economic. Upgrading infrastructure such as energy, roads, inflation management,
1

promoting growth of industrial sector, stability in financial market, containing deficit, both
domestic and external, promoting exports amidst global recession are the major challenges
that are faced by Indian economy.

1.1.2 Pumps Industry

Indian pumps, catering to a range of sectors from agriculture to nuclear power generation, are
expected to capture a bigger slice of the world market. With exports already reaching around
70 countries, the Indian pump industry is poised to register a faster growth rate than the
global average, says an industry study. The Indian pump industry is set to grow at 6-7 percent
over the next three years (against the 4 percent of the world pump market).
The growth witnessed by the Pumps Industry was in line with the performance of the Indian
economy. The growth in these sectors mainly came from Energy sector. This was the result of
capacity additions in Super Critical plants including Ultra Mega Plants. On the other hand,
increased forays from Chinese contractors into Energy Sector continued to exert pressure on
the demand. Demand for Submersible pumps is weather dependent and varies with
geographical location. Growth in standard industrial pumps is closely linked to the
development in the industrial sector of the economy. Trends in waste water sewage market
are encouraging due to increased Government spending. The earlier buoyant demand for
industrial valves tapered off in the latter part of the year due to drop in activities in Steel and
General Industry.
The industry, now holding euro 500 million worth of global market share, "is expected to
grow at a rate faster than the world pump market growth, capturing a larger share of the
market," states the study released by the Confederation of Indian Industry (CII). According to
industry estimates, India produces around one million pumps of various kinds. There are
around 800 large, medium and small units producing the pumps for sectors from agriculture
to nuclear power generation. "Indian pump manufacturers are able to meet most of the
domestic market demand," said Sarita Nagpal, head of manufacturing services of CII, which
works closely with the Indian Pump Manufacturers Association.
Exports have registered a 11 percent growth in the last two years after reversing a negative
11.5 percent trend in 2002-03 to clock 45 percent growth in 2003-04. India has today become
a reliable, technically competent, competitive and enterprising outsourcing option for many
multinational
companies
in
industrial
pumps
and
systems.
The growth story has emerged through technical collaborations and joint ventures that Indian
companies have had with multinational majors. Technical know-how of global standard has
thus
been
well
absorbed.
In addition, various research institutes such as the Small Industries Testing and Research

Centre (Si'Tarc) in Coimbatore, have developed energy-efficient designs for pumps to meet
the norms of Indian standards.
The Indian pump industry has an outstanding record of indigenous research and development
in all three areas of technological intensities - from mass-produced pumps for agriculture to
gigantic pumps for interlinking rivers, and pumps for critical services such as nuclear power
generation. The Bureau of Indian Standards has developed 42 specifications for indigenous
pumps.

1.2 GLOBAL PUMP MARKET OUTLOOK AND GROWTH DRIVERS

The world pump market is governed by the demand in United States, European Union and
Japan. With these countries burdened by recession, market forecasts up to 2013 have been
revised to a compounded average growth rate of just 0.3% from 3-4%. The global market for
centrifugal pumps in 2009 and 2010 is likely to contract, while that for positive displacement
pumps will post good gains. Consolidation of players in the pump industry through mergers
and acquisitions, may catch momentum in 2009 -10 in spite of the present recessionary
trends.
Although water and sewage, power, building services, industry, oil and gas are major drivers
of the global pump market, for KBL, water, power and irrigation will continue to be chief
market drivers.

1.2.1 Factors affecting growth of the global pump industry:

Per capita availability of water in Asia is less than other continents; and it will
continue to grow rapidly, thus increasing demand for delivery and treatment of that water.
Rising consumption with decreasing supplies of uncontaminated water is pushing up the
market of desalination plants for treating seawater.

Urbanization of Asia has seen relocation of more than one billion migrants from
villages to cities. This is creating pressure on the existing infrastructure including delivery
of utility water and removal and treatment of wastewater.

Most governments in Asia and in Africa are likely to increase their spending on
infrastructure projects like irrigation and drinking water schemes.

The world is moving towards energy efficient products and services to be able to
sustain the growth rates achieved in the past few years with petroleum being the primary
energy source.

CHAPTER 2: COMPANY PROFILE

2.1 PROFILE
Our technology. Your success.
KSB is the brand with the greatest technical expertise in pumps and valves. This approach
means that KSB employees are close to customers on all continents, providing them with
pumps and valves for almost all applications involving the transportation of fluids. A
comprehensive range of services rounds off this customer-focused portfolio.
KSB has been growing continuously since it was founded in 1960. Today the KSB in India is
a leading international manufacturer of pumps and valves and has a presence on all continents
with its own sales and marketing companies, manufacturing facilities and service operations.
More than 2,000 employees generate annual consolidated sales revenue of over two billion
euros.

2.2 FIELDS OF APPLICATION

KSB supplies pumps and valves for the following applications

2.2.1 ENERGY
Excellence is energy in constant motion
Energy is in high demand! Consumption continues to increase. So power stations have to run
very efficiently and reliably. Advanced technology from KSB lets Utility operators produce
more and more power from less and less fuel. They want to generate electricity with
maximum efficiency and minimum environmental impact.

Our belief is in conserving energy resources by helping produce power more safely and
economically. The KSB range of high pressure Pumps and Valves supplies and circulates
Boiler Feed Water, Condensate and Cooling Water to ensure high safety standards and cost
efficiency under the toughest and most critical conditions. Our Primary Heat Transfer Pumps,
Residual Heat Transfer Pumps, Primary Pressurizing Pumps, Main Boiler Feed Pumps,
Multistage Condensate Extraction Pumps, Re- Heater Drain Pumps and Auxiliary Boiler Feed
Pumps go about their business efficiency in thermal and nuclear power plants, refineries and
offshore oil rings.
Reliable operation of KSB power station pumps and valves
KSBs power station pumps give reliable service in primary and secondary circuits all over
the world. They reliably handle boiler feed water, condensate, cooling water and coolants and
recirculate boiler water. Our high-pressure globe, gate and butterfly valves safely shut off
these fluids.

Applications of KSBs power station products

KSBs power station pumps and high-pressure valves are ideally suited for use in nuclear and
fossil-fuelled power stations. Furthermore, they are especially suitable for renewable energy
applications and for operating district heating systems. Power station pumps and valves from
KSB are also employed in power stations with carbon capture and storage.

2.2.2 OIL AND INDUSTRY

Act tough with our products ...Our strength flows from it

The use of oil and gas has a long and fascinating history spanning thousands of years. The
development of oil and gas has evolved over time and its numerous uses have also expanded
and become an integral part of today's global economy. Oil and gas, also known as
hydrocarbons or petroleum, are the energy sources that power cars and aero planes, and
provide heating in many parts of the world. Oil is one of the most dynamic elements of
nature. Whenever need arises to harness this vibrant energy, KSB provides the ultimate
technology. Wherever the task, whatever the expectations!

Special metallurgy, time tested KSB designs ensure the highest standards of safety of our
Pumps and Valves, since they are often involved in transporting Oil, along with aggressive
and corrosive liquids! Whatever be your process, you can trust KSB Pumps and Valves to
handle extreme temperatures and high pressures. Our Pumps and Valves do the job with great
aplomb! After all your challenge gives us the strength and inspires us to engineer customized
solutions.

2.2.3 WATER
We move liquids and lives
As Nature's most revered elemental force, water flows freely and uninhibited, touching,
cleansing, healing and vitalizing lives.
As it flows; cascades; rises; recedes; stagnates and percolates; it blesses; admonishes or
disappoints too. KSB has developed the understanding to befriend it through innovative, ecofriendly and prudent technology by deciding its direction; its flow; its force; its volume
through engineering products and solutions.
Millions of people have inadequate water supplies. Millions more live in areas frequently
flooded by rivers or oceans. State-of-the-art KSB technology is good news in both cases.
Where people and crops need water transported over vast distances, our pumps and butterfly
valves ensure the job is done to perfection. Whether its water for agriculture, industry
community water supply or waste water disposal, our wide range of submersible pumps, non
clog submersible pumps, end suction and axially split water pumps and even our vertical inline pumps move water from any place, any depth, and any height with ease.

2.2.4 WATER WASTE

Responsibility means keeping everything under perfect control
When it comes to waste water issues; we chart a responsible course. The global demand for
waste water treatment products is growing just as steadily as the need for environmental
protection. For this reason, our employees are committed both to ensure maximum product
and service quality and to preserve the natural environment in which we all live.
6

At KSB, we are not simply familiar with waste water; we know it inside out. For over 140
years, KSB has been writing one success story after another with its pumps and valves,
worldwide.
In India, this unparalleled experience has helped us in offering the finest solutions through
our waste water products. Whether in industrial, municipal or domestic waste water
applications, the absolute reliability of components is a pre-condition for the efficiency of the
whole process.
Wherever and whenever waste water has to be handled, look to us for first-class solutions:
pumps, valves, automation, drives and systems with an impressive availability and economic
efficiency for every application!
Providing effective solutions for handling municipal sewage & industrial effluent and for
waste water management reflects our commitment to a cleaner and greener earth.

2.2.5 PROCESS INDUSTRIES

Quality is performance in extreme conditions
Extreme temperatures, high pressure and corrosion.. KSB pumps & valves are engineered
to withstand them all. Whether it means - transporting acids, lyes, rinsing water or sludge;
sandy water, flue gas or other gaseous substances, hot water, heat transfer media or even
foods and solids, or ensuring greater safety in dewatering and water logging operations. In
fact, KSB handles almost all media that need moving in chemical, petrochemical or
pharmaceutical industries, iron & steel, refineries, food processing units as well as mining
industries and sand and gravel quarries.
Aggressive, corrosive, explosive, solids-laden or viscous fluids, high pressures and extreme
temperatures; our products carry on performing under the toughest conditions.From
conventional chemical pumps to magnetic drive models and canned motor pumps as well as
gate, globe and check valves in carbon steel and stainless steel, we've got all the products to
match these exacting requirements.

Benefits of KSBs products

Powerful performance
Efficient
Long service life
Environment-friendly

2.2.6 CONSTRUCTION
Elevation is an art of controlled movement

Whatever may be the needs of your building, our products rise to the occasion. Our range
of pumps and valves keeps water flowing wherever it's needed even to the top of high rise
buildings. From water and circulation pumps, pressure boosting units, drainage and waste
water pumps to butterfly valves, we meet all the needs of private and commercial buildings.
KSB sets its sights high. Building services are a case in point. Our pumps are at home in
skyscrapers across the globe. They are, for example, cooling the world's tallest tower, the
Burj Dubai.
KSB pumps and valves are at the heart of numerous hot water, heating, air-conditioning,
drinking water and waste water systems in domestic apartments, offices, airports and
industrial complexes. Automation solutions like the Pump Drive Variable Speed System or
the Level Control system make life easier in high-rise blocks; complex water handling,
cooling and heating systems. And, if the needs are to drain cellars and pits, or keep parks and
tennis courts green, KSB is right there with effective solutions.

2.2.7 KSB products are used to transport or shut off fluids, including

Clean or contaminated water

Aggressive and explosive fluids
Corrosive and viscous fluids
Fluid/solid mixtures and slurries

2.3 SUSTAINABILITY

KSBs business activities are focused on achieving sustainable, profitable growth to ensure
the long-term financial independence of the Group. KSBs social responsibility to its
employees and society is one of the foundations of the companys activities.

2.4 HISTORY
Heir To A Lofty Tradition

Mr. F. K. Heller is ranked amongst those personalities who have decisively influenced IndoGerman Economic relations in the post war era. Mr. Heller, together with the German Consul
General Mr. Von Pochhammer and Mr. V. C. Setalvad, founded the Indo-German Chamber
of Commerce in India, in the year 1956.
On 11th April 1960, the foresight of Mr. F. K. Heller and Mr. V. C. Setalvad gave birth to
KSB Pumps Limited. They had the vision to recognize that KSB AG on the verge of its
centenary, had through an Indian company a vital role to play in India's development by
supplying the diverse requirements of the pump market. Modern pump technology from
Germany made inroads into India as KSB established its presence with the setting up of a
factory at Pimpri, Pune in 1960.

2.5 MILESTONES

1960 - KSB in India established

1960 - Submersible motor pumpsets
1964 - High pressure multistage pumps WK/WL
1968 - End suction process pumps CPK
1970 - Non-clog pumps for sewage and solid handling
1974 - Inception of Foundry division at Vambori
1976 - Vertical in-line pumps for condensate extraction WKT
1978 - Inception of Power Projects Division at Chinchwad
1978 - High pressure multistage boiler feed pumps HDB
1980 - Primary coolant pumps for nuclear power stations
1984 - Manufacturing of Submersible pumps for sewage KRTU
1987 - Inception of Valves division at Coimbatore
1988 - Verticle high pressure modular pumps MOVI
1989 - High pressure multistage pumps HG
1990 - Barrel casing pumps CHT
- Pressure seal GGC valves
1991 - Barrel casing pumps for refinery applications CHTR
1992 - End suction stock pumps APP

1993 - Centrifugal back pullout pumps Mega

- New series of gate type industrial valves
1994 - Inception of Water Pumps Division at Sinnar
1999 - High Pressure Multistage pump MULTITEC
2005 - Sewage Submersible motor Pumps - KRT E (62kW)
2006 - Openwell monobloc pumpset MONOSUB R
2006 - Higher range of condensate extraction pumps - WKTB
2007 - Mini monobloc series HYDROBLOC
2008 - Submersible re-windable 100 mm motor UMA I
2008 - Sewage Submersible pumps- Jacket Cooled - KRT K
2008 - Centrifugal monobloc pumpsets - CENTRIBLOC
2009 - Openwell monobloc pumpset MONOSUB RE
2010 - Water pressure boosting systems - moviBOOST
2011 - Openwell vertical submersible pumps - MONOSUB RV
2011 - Self priming Centrifugal jet pumps - CENTRIJET
2012 - Mini booster systems - moviBOOST M
2012 - New generation end suction process pumps - MegaCPK
2014 - End Suction process pumps - Etanorm

2.6 MISSION, VALUES AND SUCCESS

2.6.1 MISSION
We are committed to provide effective HR services to our customers and eventually
emerge as a business partner by way of measurable contribution to the growth of the
organization and strive to become a preferred employer.
Vision
We want to be the most successful company in out markets.
So we operate close to our customers worldwide, and fulfil their wishes as perfectly possible.
We concentrate our activities on sectors in which we can achieve volume growth, and are
either already market leaders or could become so.
We want to demonstrate more skill than our competitors.
The quality with which we perform should be exemplary.This is the responsibility of every
single employee. We always aim to adapt quickly to change in customer wishes and find new
technical solutions.
10

We want to be an independent and profitable company.

We aim to maintain a minimum return on sales of 5% across all our business activities. Our
profitability is designed to underpin our companys independence and the security of the jobs
it provides.
We want employee who take on leadership responsibilities.
Direction and decisions are needed close to where they determine actions. Our managers
must have the skills to develop and achieve goals with their teams. They also motivate and
enable staff to improve the company day by day.
We want to be the best peoples best company.
Our employees have the opportunities to use their skills and be successful members of KSB.
We communicate openly, reward on performance, and encourage individuals professional
development. Our company culture, achievements and goals make us attractive for people
who want to base their working lives around success.
We want to respect social values and the environment.
Our behaviour respects local social values wherever we operate. Worldwide our standards of
environmental protection are stricter than legislation requires. Our communication with
society at large builds credibility, strengths public trust in us, and contributes to a positive
image.

2.6.2 VALUES

Trust
Trust has to be earned. It requires level of credibility, which each of us should seek to achieve
& actively develop through reliability and professionalism in our day to day work
Honesty
The overall interest of the company has top priority in our work & ranks ahead of
departmental & individual interests. What we do should therefore not serve to gain advantage
at the expense of others. Integrity and an appropriate level of modesty are defining elements
of the way we present ourselves.
Responsibility
Responsibility means accepting the consequences of ones actions. This especially applies to
each and every one of us in our work. And it also applies to our company in its business and
social relations.

11

Professionalism
We have a good command of the techniques and methods we need for our work, and seek to
continually acquire further knowledge to improve our effectiveness and efficiency. In the
search for solutions to problems we apply due care and act with foresight.
Appreciation
We are attentive to others and further our cooperation by showing respect and appreciation.
Remaining receptive and open to other people and ideas enables us to learn from each other
and to develop together.

2.7 OUR BEHAVIOUR

Collaboration:
At a cross-functional level, we work together to achieve our shared objectives. To ensure the
successful fulfillment of our tasks, we clarify roles and reach clear agreements. We also
observe our values in our collaboration with customers and partners.
Leadership means maximizing the contribution of the entire team towards the success of the
company. To this end, our managers develop their staff and support them in optimizing their
performance. We rely on fairness and sincerity in our dealings with each other.

Communication:
Our communications are clear, fact-based and geared to an open exchange of ideas. By
considering different standpoints and addressing conflicts constructively, we arrive at the best
solutions and results. We deal with information responsibly.
Regular feedback helps us to make a realistic assessment of our actions and their effect, and
helps us with course correction.

Evolution:
By questioning the status quo in a targeted and logical manner, we are able to develop new
solutions while safeguarding proven ideas and methods. The ultimate aim is to achieve a
continuous improvement in our products and services, as well as in our work processes.
Flexibility, innovativeness and willingness to learn are important prerequisites for making a
success of any change.

12

2.8 LIFE AT KSB

BEST is available to those who learn about it and work for it

We believe that, individuals best is articulated, only when there is a good platform for ideas
to flow freely and opinions to be shared explicitly.
KSB provides such opportunities to young and experienced professionals to join and grow
with us. Currently we have around 42% of young and dynamic Management staffs which is
below 40 years of age. The right mix of diversified and multicultural professionals has helped
us to understand our global customers and strengthen our competitive edge.
Open communication forums, planned work priorities, positive work environment, and well
established Learning and Leadership development Programmes are key features highly talked
about by our employees who express KSB as a place where work balances the life and life
balances the work.

2.9 MANAGEMENT
Introducing the management team
Responsible company management and controlling, innovative technology and excellent
service rank highly at KSB India. This philosophy is backed by people committed to it in
their daily work.
Meet the management of KSB India:

Mr. Werner Spiegel, Managing Director, KSB India & Regional Executive Officer - Region
Asia West
Mr. Dinesh Khanna, Director (Marketing & Sales)
Mr. Nandan Paranjape, Director (Operations)
13

Mr. Verghese Oommen, Director (Finance)

Mr. Shirish Kulkarni, Director (Human Resources)

2.10 LOCATIONS

2.10.1 KSB PUMPS LTD

KSB develops and manufactures bespoke solutions and offers first-class service on a global
scale. In India, KSB supports its customers as a competent regional partner.
In India, KSB operates through its 5 own manufacturing facilities and 24 sales and service
sites. The factories are situated at Pimpri, Chinchwad, Vambori, Sinnar and Coimbatore.
While the zonal sales offices are located in NOIDA, Kolkata, Mumbai and Chennai the
service stations are located in NOIDA, Raipur, Odhav and Chennai. Here,
over 2000 employees ensure faultless production, optimal customer support and excellent
service.
KSB Indias factories cover a total area of 50,000 sq. mtrs. On this area, KSB manufacturers
comprehensive range of standard Industrial end suction and high pressure multistage pumps,
submersible motor pumps and monobloc pumps and necessary spare parts.
Information on Authorised Dealers & Service Centres
KSB India maintains trustful business relations with it's over 700 Authorised Dealers and
more than 100 Authorised Service Centers (ASCs) to be able to give all customers spread
across in India comprehensive support and assistance at any time.

14

2.10.2 KSB TECH PVT LTD

KSB Tech Private Limited has been formed as a 100% subsidiary of KSB Aktiengesellschaft
("KSB AG"), Johann-Klein-Strasse 9, Frankenthal, Germany. KSB AG is a Public Joint Stock
Company incorporated in Germany in the year 1871. It is engaged in manufacturing and
trading of a wide range of pumps and valves, and its accessories and allied products. KSB's
products are used for handling and transportation of water, chemicals, sewage, etc. in various
sectors such as agriculture, industry, energy, building, etc. KSB is a multinational company
and has its presence in all the major countries of the world through its subsidiaries.
To meet its global requirements of engineering inventions, designs, renovations,
improvements and of developing and improving computer software, firmware and
information technology programs useful for its business and activities, KSB Tech Private
Limited has been formed in India, as its 100 % subsidiary.

2.11 CSR AT KSB PUMPS LTD.

KSB stands for active commitment to corporate social responsibility. In all our business
activities, we are guided by the principles of sustainability and fairness in the way we
deal with people and the environment.
This is how KSB applies corporate social responsibility day after day:
Global Compact
KSB is a signatory to the United Nations Global Compact. The principles defined by the UN
are to promote sustainability and fairness in the business environment.
Environmental protection
KSB supports the goals of the Kyoto Protocol and places great value on optimal energy
efficiency for all products and technologies. In addition, our work processes and working
environment are designed to require as little energy and as few raw materials as possible.
Occupational health and safety for employees
In order to ensure maximum safety in the workplace, KSB has defined its own EHS
guidelines (Environmental Health and Safety) while also meeting national and international
15

standards.
Social commitment
KSB has an objective as to provide sustainable solutions to improve quality of life in a
proactive and sensitive manner by undertaking projects especially for the Underprivileged,
Children, Women and Elders. Our approach has been to identify the projects in and around
our Manufacturing locations and complete the projects within reasonable period of time.
We are proud of our efforts to contribute to this social change.

2.12 QUALITY
Premium Quality Standards At KSB National & International Certificates
As a leading supplier of Pumps, Valves and related systems, KSB India is committed to
provide its customers high quality, energy efficient and safe products and services. This is
achieved through effective implementation of Integrated Management system consisting of
Quality,Environment, Occupational Health & Safety
Our Sustainability policy and the principles of the Integrated Management system Maximum customer satisfaction with reasonable product and service cost, high competence
and satisfaction of our - employees sets the standards of our Quality and Financial success.
Environmental consideration is a key element in all our operations. We always strive to
prevent or minimize effects of our products, processes and services on the environment.
With the application of this comprehensive Integrated Management system in all sectors of
our company, we ensure the continuous improvement of our Customer-to-Customer processes
and satisfy our customers expectations.

2.12.1 QUALITY ASSURANCE PROCEDURES

Our Quality Assurance Department is manned by qualified engineers to ensure completion of
raw materials and final pumps with relevant quality norms. The activities are divided into raw
material inspection, in-process inspection and final inspection.
Sintech Precision Products Limited has in house facilities and equipments required for
ensuring quality, such as

Hydrostatic machine for hydrostatic test of the casing

16

Dynamic balancing machine for dynamic balancing of the impeller.

For non-destructive testing such as ultrasonic test magnetic particle test inspection is carries
out through external reputed agencies.A well laid test field for performance testing having
sophisticated flow meter with digital display by which flow of the liquid can be tested
accurately is available at our works.

CHAPTER 3: RESEARCH METHODOLOGY

3.1 INTRODUCTION
The project undertaken is on WORKING CAPITAL MANAGEMENT IN KSB Pumps Ltd.
It describes about how the company manages its working capital and the various steps that
are required in the management of working capital.

Cash is the lifeline of a company. If this lifeline deteriorates, so does the company's ability to
fund operations, reinvest and meet capital requirements and payments. Understanding a
company's cash flow health is essential to making investment decisions. A good way to judge
a company's cash flow prospects is to look at its working capital management (WCM).
17

Working capital refers to the cash a business requires for day-to-day operations or, more
specifically, for financing the conversion of raw materials into finished goods, which the
company sells for payment. Among the most important items of working capital are levels of
inventory, accounts receivable, and accounts payable. Analysts look at these items for signs
of

company's

efficiency

and

financial

strength.

The working capital is an important yardstick to measure the companys operational and
financial efficiency. Any company should have a right amount of cash and lines of credit for
its business needs at all times.

This project describes how the management of working capital takes place at
KSB.

3.2 THE PROBLEMS

In the management of working capital, the firm is faced with two key problems:

1.

First, given the level of sales and the relevant cost considerations, what are the optimal
amounts of cash, accounts receivable and inventories that a firm should choose to maintain?

2.

Second, given these optimal amounts, what is the most economical way to finance these
working capital investments? To produce the best possible results, firms should keep no
unproductive assets and should finance with the cheapest available sources of funds. Why? In
general, it is quite advantageous for the firm to invest in short term assets and to finance short-term
liabilities.

18

3.3 OBJECTIVES

The objectives of this project were mainly to study the inventory, cash and receivable at KSB
PUMPS LTD.
To analyse the above, the required objectives are:
1. To understand the planning and management of working capital at KSB PUMPS LTD .
The following objectives are formulated:
Working Capital Management Analysis at KSB PUMPS Ltd.
Working Capital Ratio Analysis at KSB PUMPS Ltd.

2. To suggest ways for better management and control of working capital at KSB PUMPS
LTD.

3.4 RESEARCH METHODOLOGY

This project requires a detailed understanding of the concept Working Capital

Management. Therefore, firstly we need to have a clear idea of what is working capital, how
it is managed in KSB, what are the different ways in which the financing of working capital
is done in the company.

The management of working capital involves managing inventories, accounts

receivable and payable and cash. Therefore one also needs to have a sound knowledge about
cash management, inventory management and receivables management.

Then comes the financing of working capital requirement, i.e. how the working
capital is financed, what are the various sources through which it is done.

And, in the end, suggestions and recommendations on ways for better

management and control of working capital are provided.
19

3.5 SCOPE OF THE STUDY

This project is vital to me in a significant way. It does have some importance for the
company too. These are as follows

This project will be a learning device for the finance student.

Through this project I would study the various methods of the working
capital management.

The project will be a learning of planning and financing working capital.

The project would also be an effective tool for credit policies of the companies.

This will show different methods of holding inventory and dealing with cash and
20

receivables.

3.6 DATA SOURCES

The following sources have been sought for the preparation report:

Secondary sources like previous years annual reports, CMA Data, reports on

working capital for research, analysis and comparison of the data gathered.
While doing this project, the data relating to working capital, cash management,

receivables management, inventory management and short term financing was required.

This data was gathered through the companys websites, its corporate intranet,
KSBs annual reports and CMA Data of the last three years.

A detailed study on the actual working processes of the company is also done
through direct interaction with the employees and by timely studying the happenings at the
company.

CHAPTER 4: FINDINGS AND ANALYSIS

4.1 WORKING CAPITAL MANAGEMENT AT KBS PUMPS LTD.

4.1.1CASH MANAGEMENT IN KSB PUMPS LTD

The cash management system followed by the KSB is mainly lock box system.
Cash Management System involves the following steps:

1. The branch offices of the company at various locations hold the collection of cheques of the
customers.
2. Those cheques are either handed over to the CMS agencies or bank of the particular location
take charge of whole collection.
3. These CMS agencies or bank send those cheques to the clearing house to make them realized.
These cheques can be local or outstation.

21

4. The CMS agencies or bank send information to the central hub of the company regarding
realization/cheque bounced.
5. The central hub passes on the realized funds to the company as per the agreed agreements.
6. The CMS agencies or concerned bank provides the necessary MIS to the company as per
requirement.
In cash management the collect float taken for the cheques to be realized into cash is irrelevant and
non-interfering because banks such as Standard Chartered, HDFC and CitiBank who give credit on
the basis of these cheques after charging a very small amount. These credits are given to immediately
and the maximum time taken might be just a day. The amount they charge is very low and this might
cover the threat of the cheque sent in by two or three customers bouncing. Even otherwise the time
taken for the cheques to be processed is instantaneous. Their Cash Management System is quite
efficient.

4.1.2 RECEIVABLES MANAGEMENT

Cash flow can be significantly enhanced if the amounts owing to a business are collected faster. Every
business needs to know.... who owes them money.... how much is owed.... how long it is owing.... for
what it is owed.

Late payments erode profits and can lead to bad debts.

Slow payment has a crippling effect on business; in particular on small businesses whom can least
afford it. If you don't manage debtors, they will begin to manage your business as you will gradually
lose control due to reduced cash flow and, of course, you could experience an increased incidence of
bad debt.
The following measures will help manage debtors:
1.

Have the right mental attitude to the control of credit and make sure that it gets the priority it
deserves.

2.

Establish clear credit practices as a matter of company policy.

22

3.

Make sure that these practices are clearly understood by staff, suppliers and customers.

4.

Be professional when accepting new accounts, and especially largerones.

5.

Check out each customer thoroughly before you offer credit. Use credit agencies, bank references,
industry sources etc.

6.

Establish credit limits for each customer and stick to them.

7.

Continuously review these limits when you suspect tough times are coming or if operating in a
volatile sector.

8.

Keep very close to your larger customers.

9.

Invoice promptly and clearly.

10.Consider charging penalties on overdue accounts.
11.Consider accepting credit /debit cards as a payment option.
12.Monitor your debtor balances and aging schedules, and don't let any debts get too old.
Debtors due over 90 days (unless within agreed credit terms) should generally demand immediate
attention. Look for the warning signs of a future bad debt. For example..

1.

Longer credit terms taken with approval, particularly for smaller orders.

2.

Use of post-dated checks by debtors who normally settle within agreed terms.

3.

Evidence of customers switching to additional suppliers for the same goods.

4.

New customers who are reluctant to give credit references.

5.

Receiving part payments from debtors.

Here are few ways in collecting money from debtors:

Develop appropriate procedures for handling late payments.

Track and pursue late payers

Get external help if you own efforts fail.

Dont feel guilty asking for money .. its yours and you are entitled to it.

Make that call now. And keep asking until you get some satisfaction.

In difficult circumstances, take what you can now and agree terms for the remainder, it lessens the
problem.

When asking for your money, be hard on the issue but soft on the person. Dont give the debtor
any excuses for not paying.

Make that your objective is to get the money, not to score points or get even.

23

4.1.3 MANAGING PAYABLES

Creditors are a vital part of effective cash management and should be managed carefully to
enhance the cash position.
Purchasing initiates cash outflows and an over-zealous purchasing function can create liquidity
problems.

Consider the following: -

Who authorizes purchasing in your company - is it tightly managed or spread among a number of
(junior) people?

Are purchase quantities geared to demand forecasts?

Do you use order quantities, which take account of stock holding and purchasing costs?

Do you know the cost to the company of carrying stock?

24

How many of your suppliers have a return policy?

Are you in a position to pass on cost increases quickly through price increases to your customers?

If a supplier of goods or services lets you down can you charge back the cost of the delay?

There is an old adage in business that "if you can buy well then you can sell well". Management of
your creditors and suppliers is just as important as the management of your debtors. It is important to
look after your creditors- slow payment by you may create ill feeling and can signal that your
company is inefficient (or in trouble!).

Remember that a good supplier is someone who will work with you to enhance the future
viability and profitability of your company.

4.1.4 FINANCING CURRENT ASSETS

The firm has to decide about the sources of funds, which can be availed to make investment in current
assets.
Long term financing:
It includes ordinary share capital, preference share capital, debentures, long term borrowings from
financial institutions and reserves and surplus.
Short term financing:
It is for a period less than one year and includes working capital funds from banks, public deposits,
commercial paper etc.
Depending on the mix of short and long term financing, the company can follow any of the
following approaches.
Matching Approach
In this, the firm follows a financial plan, which matches the expected life of assets with the expected
life of source of funds raised to finance assets. When the firm follows this approach, long term
25

financing will be used to finance fixed assets and permanent current assets and short term financing to
finance temporary or variable current assets.
Conservative Approach

In this, the firm finances its permanent assets and also a part of temporary current assets with
long term financing. In the periods when the firm has no need for temporary current assets,
the long-term funds can be invested in tradable securities to conserve liquidity. In this the
firm has less risk of facing the problem of shortage of funds.
Aggressive Approach
In this, the firm uses more short term financing than warranted by the matching plan. Under
an aggressive plan, the firm finances a part of its current assets with short term financing.

4.2 WORKING CAPITAL POSITION ANALYSIS IN KSB

Net working Capital ( CURRENT ASSETS CURRENT
LIABILITIES)
(Rs.in lacks)
YEAR

31.03.07

31.03.08

31.03.09

INVENTORIES

180.26

291.13

653.95

SUNDRY DEBTORS

114.33

390.84

219.79

10.81

34.30

28.22

6.67

28.08

21.99

CURRENT ASSETS

CASH AND BANK

OTHER CURRENT ASSETS

26

LOANS & ADVANCES

TOTAL CURRENT ASSESTS

21.44
-------------333.51
--------------

78.74
-------------823.09
--------------

83.92
--------------1008.67
---------------

LESS:CURRENT LIABILITIES AND PROVISIONS

Short term borrowing
Sundry creditors

94.54

336.70

315.76

159.49

256.33

305.99

18.16

59.88

Advanced received

25.30

Provisions

21.56

59.05

64.05

Instalments of term loan

14.66

21.11

72.00

Other current liabilities

16.82
-------------332.37
---------------1.14

29.36
-------------720.71
-------------102.38

TOTAL CURRENT LIABILITIES

NET WORKING CAPITAL

27

70.34
-------------888.02
--------------120.65

ANALYSIS THROUGH CHART

140
120.65

120
102.38

100
80
AMOUNT(IN LACKS)

60
40
20
0

1.141 1
2007

2 2
2008

3 3
2009

YEAR

DATA INTERPRETATION
If we analysis the three years working capital position of the company, we find out that company has
sufficient working capital to meets its short term liability, it is good indicator for the company but in
2008, working capital is increased by 101.24 lacs which shows that a sufficient amount has been
blocked in working capital which could be used for some other more beneficial purpose.

4.2.1 INVENTORY ANALYSIS

Inventory means stock of three things :1.

Raw materials
2.
Semi finished goods.
3.
Finished goods.
28

Position of inventory in KSB Pumps Ltd.

(Rs.in lacks)
YEAR
Stores, Spare Parts etc.

31.03.07

31.03.08

31.03.09

10.10

0 .87

25.57

37.04
78.74

26.93
184.53

41.76
340.08

Stock In trade-

Finished Goods
Raw Materials
Material under process

54.38
------------180.26
--------------

78.80
-------------291.13
---------------

ANALYSIS THROUGH CHART

29

246.54
------------653.95
-------------

700
600
500
400
AMOUNT (IN LACKS)

300
200
100
0
2007

2008

2009

YEAR

DATA INTERPRETATION
By analyzing the 3 years data, We are looking increasing pattern in inventories. We can see that
inventories are increased from 180.26 lacs to 291 lacs in the year 2008 and in the year 2009 it is
increased from 291 lacs to 653 lacs. By seeing this pattern we can say that the company is managing
the inventory according to the sale. Company have a great demand for the pump in the year 2010 that
is biggest reason for increase in inventories. From other point of view we can say that the liquidity of
firm is blocked in inventories but to stock is very good due to uncertainty of availability of raw
material in time.
30

4.2.2 SUNDRY DEBTORS ANALYSIS

Debtors or an account receivable is an important component of working capital and fall under current
assets. Debtors will arise only when credit sales are made.

Position of KSB PUMPS LTD.

(Rs.in lacks)
YEAR
Sundry Debtors

31.03.07

31.03.08

31.03.09

114.33

390.84

219.79

------------114.33
-------------

-----------390.84
------------

-----------219.79
------------

ANALYSIS THROUGH CHART

31

400
350
300
250
AMOUNT ( IN LACKS)

200
150
100
50
0
2007

2008

2009

YEAR

DATA INTERPRETATION
In the table and figure we see that there is rise in the debtors in the year 2008 and decrease in the year
2009. A simple logic is that debtors increase only when sales increase and decrease if sales decrease.
In the year 2008, sales is increased by 72.30% and decreased by 19.24% in the year 2009. We can say
that it is a good sign as well as negative also. Company policy of debtors is very good but a risk of
bad debts is always present in high debtors. when sales is increasing with a great speed the profit also
increases. If company decreases the Debtors they can use the money in many investment plans.

4.2.3 CASH AND BANK BALANCE ANALYSIS

Cash is called the most liquid asset and vital current assets, it is an important component of working
capital. In a narrow sense, cash includes notes, bank draft, cheque etc while in a broader sense it
includes near cash assets such as marketable securities and time deposits with bank.

Position of Cash and Bank Balance in KSB Pumps Ltd

(Rs.in lacks)
32

YEAR

31.03.07

Cash Balance in hand

Bank BalanceWith Scheduled Banks

31.03.08

1.45

31.03.09

27.30

9.36
------------10.81
-------------

7.00
------------34.30
-------------

2.90
26.12
-----------29.02
-----------

ANALYSIS THROUGH CHART

35
30
25
20
AMOUNT ( IN LACKS )
15
10
5
0
2007

2008

2009

YEAR

DATA INTERPRETATION
If we analyze the above table and chart we find that it follows a uneven pattern. In the year 2007 it
had maintained a low amount of cash and bank balance. But in the year 2008, cash and the bank
balances has increased from 10.81 lacs to 34.30 lacs which is not a good sign for the company
because it shows that company is not using its cash for beneficial activities. Although, in the year
2009, cash has reduced from 34.30 lacs to 29.02 lacs but this is very good sign for company because
they are not holding the cash in hand but using the cash for better projects, but still it is not conducive.
From the other point of view, company will not face the problem of liquidity as company is
maintaining the cash balance.

4.2.4 LOANS AND ADVANCES ANALYSIS

33

Loans and Advances here refers to any to amount given to different parties, company, employees for
a specific period of time and in return they will be liable to make timely repayment of that amount in
addition to interest on that loan.

Position of Other Loans & Advances in KSB PUMPS LTD.

(Rs.in lacks)
YEAR

31.03.07

Advances to suppliers
Advances
Deposits

10.91
10.53
6.67
--------------28.11
----------------

31.03.08
39.69
39.05
28.08
--------------106.82
-------------

31.03.09
44.62
39.30
21.99
------------105.91
-------------

ANALYSIS THROUGH CHART

120
100
80

AMOUNT ( IN LACKS )

60
40
20
0
2007

2008
YEAR

DATA INTERPRETATION

34

2009

If we analyze the table and the chart we can see that it follows an increasing trend which is a good
sign for the company. We can see that from the year 2007 to 2008 it increased more than triple. We
can see that the increase of 275% and 6.08% in 07-08 and 08-09 respectively from previous year.
The increasing pattern shows that company is giving advances for the expansion of plants and
machinery which is good sign for better production of pumps and other goods. Although companys
cash is blocked but this is good that company is doing modernization of plants In time to compete
with other competitors in market.

4.2.5 CURRENT LIABILITIES ANALYSIS

Current liabilities are any liabilities that are incurred by the firm on a short term basis or current
liabilities that has to be paid by the firm with in one year.
Position of Other Current Liabilities in KSB PUMPS LTD.

YEAR
Current Liabilities
Sundry Creditors
Bank Loan
Advance Received
Provisions for taxes
Other Liabilities

(Rs.in lacks)
31.03.07

159.49
94.54
25.30
21.56
16.82
----------------332.37
-----------------

35

31.03.08

256.33
336.70
18.16
59.05
29.36
---------------720.71
-----------------

31.03.09

305.99
315.76
59.88
64.05
70.34
--------------888.02
---------------

ANALYSIS THORUGH CHART

DATA INTERPRETATION
If we analyze the above table then we can see that it follow an uneven trend. The important
component of current liabilities is sundry creditors and other liabilities. In 07-08 it decreased from
359.41 lacs to 256.33 lacs and in 08-09 it increased from 256.33 lacs to 305.99 lacs. This is liability
for company so this should be less. when company have minimum liabilities it creates a better
goodwill in market. High current liabilities indicate that company is using credit facilities by
creditors.

4.2.6 SUNDRY CREDITORS ANALYSIS

36

Creditors or an account payable is an important component of working capital and fall under current
liability. Creditors will arise only when credit purchases are made.
Position of Sundry Creditors in KSB PUMPS LTD.
(Rs.in lacks)
YEAR

31.03.07

Sundry Creditors

31.03.08

159.49
------------159.49
--------------

256.33
-------------256.33
----------------

31.03.09
305.99
-------------305.99
--------------

ANALYSIS THROUGH CHART

350
300
250
200
AMOUNT ( IN LACKS)

150
100
50
0
2007

2008

2009

YEAR

DATA INTERPRETATION
In the table and figure we see that there is continuous rise in the creditors in the company
in the successive years. A simple logic is that creditors increase only when purchases increase and if
purchase increases on credit it is not good sign for growth. This is liability for company so this should
be less. when company have minimum liabilities it creates a better goodwill in market. High current
liabilities indicate that company is using credit facilities by creditors.

4.2.7 BANK LOANS AND ADVANCES ANALYSIS

37

Position of Bank Loans & Advances in KSB PUMPS LTD.

(Rs.in lacks)
YEAR
Bank Loan
Advances from the customers

31.03.07
94.54
25.30
--------------122.84

31.03.08
336.70
18.16
--------------354.86

31.03.09
315.76
59.88
------------375.64

ANALYSIS THROUGH CHART

400
350
300
250
AMOUNT ( IN LACKS )

200
150
100
50
0
2007

2008

2009

YEAR

DATA INTERPRETATION
If we analyze the table and the chart we can see that it follows an increasing trend which is not a
good sign for the company. We can see that from the year 2007 to 2008 it increased more than double.
The increasing pattern shows that company is taking loan for the expansion of plants and machinerecy
which is not a good sign because company depends on the external source. On the other hand,
company has reduced the bank loan in 2009 and increase in advances received from the customer, this
is good sign for company.

4.2.8 PROVISIONS ANALYSIS

38

Position of Other Provisions in KSB PUMPS LTD.

(Rs.in lacks)

YEAR
Provision for Taxes

31.03.07

31.03.08

21.56
--------------21.56
---------------

59.05
--------------59.05
---------------

31.03.09
64.05
------------64.05
-----------

ANALYSIS THROUGH CHART

70
60
50
40
AMOUNT ( IN LACKS )
30
20
10
0
2007

2008

2009

YEAR

DATA INTERPRETATION
From the above table we can see that provision shows an increasing trend and the huge amount is
being kept in these provisions. Though the profits of the company are increased income tax is also
increased which is good that company is creating goodwill in market by paying income tax in time.
Although company is paying more income tax but also they are earning more. Other provisions are
also for the benefit of employees and public. This is good sign for Company growth.

4.3 WORKING CAPITAL RATIO ANALYSIS IN KSB PUMPS LTD.

39

FORMULA
INVENTORY + RECIVEABLE - PAYABLE
WORKING CAPITAL RATIO= ------------------------------------------------------------(AS % OF SALES)
SALES

YEAR

31.03.07

WORKING CAPITAL RATIO

31.03.08

18

31.03.09

32

53

ANALYSIS THROUGH CHART

60
50
40
AS %

30
20
10
0
2007

2008

2009

YEAR

DATA INTERPRETATION
This ratio indicates whether the investments in current assets or net current assets ( i.e., working
capital ) have been properly utilized. In order words it shows the relationship between sales and
working capital. Higher the ratio lower is the investment in working capital and higher is the
profitability. But too high ratio indicates over trading.
This ratio is an important indicator about the working capital position. Now if we analyze the three
years data, we find that it follows an increasing trend which means that its investment in working
capital is lower and the company is utilizing more of its profit. But we find that ratio is increasing at a
very fast rate which is not a good sign for the company and the company is required to look into these
matters closely.

4.3.1 CURRENT RATIO IN KSB PUMPS LTD.

40

FORMULA
TOTAL CURRENT ASSETS
CURRENT RATIO= -------------------------------------------TOTAL CURRENT LIABILITIES

YEAR
CURRENT RATIO

31.03.07

31.03.08

31.03.09

1.00

1.14

1.14

ANALYSIS THROUGH CHART

1.2
1.15
1.1
1.05
1
0.95
0.9
2007

2008

2009

YEAR

DATA INTERPRETATION
This ratio reflects the financial stability of the enterprise. The standard of the normal ratio is 2:1 but in
most of companies standard is taken according to Tandon Committee which is taken as 1.33:1.
Now if we analyze the three years data it can be predicted that it holds a stable position all through
out period but it is seen that it holds a low position than the standard one and the company is required
to improve its position.

4.3.2 QUICK RATIO IN KSB PUMPS LTD.

41

FORMULA
TOTAL CURRENT ASSETS - INVENTORIES
QUICK RATIO= ----------------------------------------------------------------TOTAL CURRENT LIABILITIES

YEAR

31.03.07

QUICK RATIO

31.03.08

0.46

31.03.09

0.74

0.40

ANALYSIS THROUGH CHART

0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2007

2008

2009

YEAR

DATA INTERPRETATION

It is the ratio between quick liquid assets and quick liabilities. The normal value for such ratio is taken
to be 1:1. It is used as an assessment tool for testing the liquidity position of the firm. It indicates the
relationship between strictly liquid assets whose realizable value is almost certain on one hand and
strictly liquid liabilities on the other hand. Liquid assets comprise all current assets minus stock.
By analyzing the three years data it can be said that its position was weak in the year 2007 but it
improved significantly in the next year and again it is declined during the 2009. It is to be said that it
does not meet with the standard but in the year 2008 it was very close to the standard and it can be
said that its liquidity position is not good & stable.

42

4.3.3 CURRENT ASSETS TO FIXED ASSETS RATIO IN KSB PUMPS

LTD.
FORMULA
CURRENT ASSETS
CA TO FA RATIO = ----------------------------FIXED ASSETS
YEAR
CA TO FA RATIO

31.03.07

31.03.08

1.65

2.93

31.03.09
3.21

ANALYSIS THROUGH CHART

3.5
3
2.5
2
DAYS

1.5
1
0.5
0
2007

2008
YEAR

43

2009

DATA INTERPRETATION
Assuming a constant level of fixed assets, a higher CA/FA ratio indicates a conservative
current assets policy and a lower CA/FA ratio means an aggressive current assets policy
assuming other factors to be constant. A conservative policy i.e. higher CA/FA ratio implies
greater liquidity and lower risk; while an aggressive policy i.e. lower CA/FA ratio indicates
higher risk and poor liquidity.
Now if we analyze the three year data we find the CA TO FA Ration in increasing pattern, so
we can say that company is following the conservative policy to finance its short term capital
requirement.

4.3.4 INVENTORY TURNOVER RATIO IN KSB PUMPS LTD.

FORMULA
AVERAGE STOCK
STOCK TURN OVER RATIO ( IN DAYS )= --------------------------------------- * 365
COST OF GOODS SOLD
YEAR

31.03.07

INVENTORY TURNOVER RATIO

( in Days)

31.03.08

104

79

44

31.03.09

227

ANALYSIS THROUGH CHART

250
200
150
DAYS

100
50
0
2007

2008

2009

YEAR

DATA INTERPRETATION
This ratio tells the story by which stock is converted into sales. A high stock turnover ratio reveals the
liquidity of the inventory i.e., how many times on an average, inventory is turned over or sold during
the year. If a firm maintains a minimum stock level in order to maximize sales by quick rotation of
inventory and the holding cost of inventory will be minimum. A low stock turn over ratio reveals
undesirable accumulation of obsolete stock.
By analyzing the three year data it seen that it follows an uneven trend. We see that it is reduced to 79
from the 104 days in 2008 and in 2009 it is increased by 148 days, Which is not a good indicator for
the company. Company should have to reduce the inventory conversion period in order to reduce the
cost.

4.3.5 RECEIVABLE RATIO IN KSB PUMPS LTD.

FORMULA
DEBTORS
RECEIVABLE RATIO = ---------------- * 365
SALES
YEAR

31.03.07

31.03.08
45

31.03.09

RECEIVABLE RATIO (IN DAYS)

54

70

104

ANALYSIS THROUGH CHART

120
100
80
DAYS

60
40
20
0
2007

2008

2009

YEAR

DATA INTERPRETATION
Generally a low debtors turnover ratio implies that it considered congenial for the business as it
implies better cash flow. The ratio indicates the time at which the debts are collected on an average
during the year. Needless to say that a high Debtors Turnover Ratio implies a shorter collection period
which indicates prompt payment made by the customer.
Now if we analyze the three year data we can say that it holds a good position while receiving its
money from its debtors. The ratios are in an decreasing ternd, which implies that recovery position is
not good company and Company have to reduce the receivable period.

4.3.6 PAYABLE RATIO IN KSB PUMPS LTD

FORMULA
CREDITORS
PAYABLE RATIO= ----------------------------- * 365
46

COST OF SALES

YEAR

31.03.07

PAYABLE RATIO (IN DAYS)

31.03.08

92

31.03.09

69

135

ANALYSIS THROUGH CHART

160
140
120
100
80
DAYS
60
40
20
0
2007

2008

2009

YAER

DATA INTERPRETATION
Actually this ratio reveals the ability of the firm to avail the credit facility from the suppliers
throughout the year. Generally a low creditors turnover ratio implies favorable since the firm enjoys
lengthy credit period
Now if we analyze the three years data we find that in the year 2008 the ratio was very
high which means that its position of creditors that year was not good, but in the 2009 it is seen that it
has followed a decreasing trend which is very good sign for the company. So we can say it enjoys a
very good credit facility from the from the suppliers.

47

4.3.7 OPERATING CYCLE IN KSB PUMPS LTD.

Formula = Inventory Conversion Period + Receivable Conversion Period Deferral
Period
Calculation of Operating Cycle at KSB PUMPS LTD :Particulars
ICP
RCP
Gross
Operating
Cycle
DP
Net OP

( All Figures in Days)

2007-08
104
54
158

2008-09
79
70
149

2009-10
227
104
431

92
66

69
80

135
296

ANALYSIS THROUGH CHART

350
300
250
200
Days

150
100
50
0
2007-08

2008-09

2009-10

YEAR

DATA INTERPRETATION

When a company has lower d/e ratio, it means that company is utilizing its own funds and reserves
rather than taking loans from outsiders. Company have a uneven trend in d/e ratio. In the year 2007 it
was 1.02 but in the year 2009 it is declined to .55 so we can say that now company is using more its
fund as compare to previous year, but still the ratio is high. Company have to reduce the ratio.
48

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS

5.1 CONCLUDING ANALYSIS
Statement Showing Difference from Previous Year
(amt. in lacks)

Particulars
Working Capital

07-08

08-09

102
by 5000%

121
by
19%
-1069
by
19.10%
1009
by
23%

Sales

1323
by 72%

Current Assets
Sundry Debtors

823
by 146%

Inventories

Cash & Bank

Bank Loan and

Advances

391
by 243%

220
by 44%

291
by 62%

654
by 125%

34
by 209%

-29
by 15%

107
by 269%

106
by .93

Current Liabilities

721
by 117%

Sundry Creditors

256
by 42%

306
by 19.53%

Bank Loan and

Advances

355
by 196%

376
by 6%

Provisions &
Deposits

80.16
by121.31%

136
by70%

Other Liabilities

29.36
by 74.55%

70.34
by 139.5%
49

888
by
23%

Working Capital is increased by 19% only in 2008-09 as compare to 5000% increase in 2007-08
and if we analysis the working capital with sales, the sales is decreased by 19% in 2008-09, thats
why working capital is increased by 19% only.

Current assets and Current liabilities are increased by 23% in 2008-09 as compare to previous
year but current assets are increased by 146% in 2007-08 as compare to 117% increase in current
liabilities, so we can say that working capital is increased because of increase in current assets.

i)

Inventory is increased by 125% in 2008-09 as compare to 2007-08, so we can say that current
assets are increased due to the increase in the inventory.

ii)

Cash and the bank balances are decreased by 15% which shows company might face the
liquidity problem.

iii)

Debtors are decreased by 44% in 2008-09 whereas creditors are increased by 19.37% in 200809, which shows that company enjoys the good payable period and goodwill among the
creditors.

iv)

Bank loan and Advances are increased by 6% only as compare to 196% increase in 2007-08,
which shows that company using more of its debt to fund the short term requirements.

3. Operating cycle of the company is increasing which shows the poor receivable collection
policy.

5.2 CONCLUSIONS

The working capital position of the company is sound and the various sources

through which it is funded are optimal.

The company has used its purchasing, financing and investment decisions to good
effect can be seen from the inferences made earlier in the project.

The debts doubtful have been doubled over the years but their percentage on the
debts has almost become half. This implies a sales and collection policy that get along
with the receivables management of the firm.

The various ratios calculated are an indicator as to the fact that the profitability of
the firm and sales are on a rise and also the deletion of the inefficiencies in the working
capital management.

The firm has not compromised on profitability despite the high liquidity is
commendable.
50

5.3 LIMITATIONS OF THE STUDY

We cannot do comparisons with other companies unless and until we have the data of

other companies on the same subject.

Only the printed data about the company will be available and not the backend
details.

Future plans of the company will not be disclosed to the trainees.

Lastly, due to shortage of time it is not possible to cover all the factors and details

regarding the subject of study.

The latest financial data could not be reported as the companys websites have not
been updated.

5.4 SUGGESTIONS AND RECOMMENDATIONS

The management of working capital plays a vital role in running of a successful business. So,
things should go with a proper understanding for managing cash, receivables and inventory.
KSB Ltd. is managing its working capital in a good manner, but still there is some scope for
improvement in its management. This can help the company in raising its profit level by
making less investment in accounts receivables and stocks etc. This will ultimately improve
the efficiency of its operations.
Following are few recommendations given to the company in achieving its desired
objectives:
The business runs successfully with adequate amount of the working capital but the
company should see to it that the cash should not be tied up in excessive amount of
working capital.
Though the present collection system is near perfect, the company as due to the
increasing sales should adopt more effective measures so as to counter the threat of bad
debts.
The over purchasing function should be avoided as it could lead to liquidity problems.
The investment of cash in marketable securities should be increased, as it is very
profitable for the company.
Holding of excessive and insufficient stock must be avoided as it creates a burden on the
cash resources of a business and results in lost sales, delays for customers, etc
respectively.

51