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NFL, is a Mini Ratna Company was incorporated on 23rd August

1974. It is the second largest producers of Nitrogenous Fertilizers in


the country with 16.6% share in Urea production during 2005-2006.
NFL operating plants are at Nangal, Bathinda, Panipat and Vjaipur.
The Govt. of India, in 1984,
entrusted the Company to execute
the countrys first inland gas
based fertilizer project of 7.26 lakh tonnes
Urea capacity in District Guna of
Madhya Pradesh & commercial
production started from 01-07-1988.
NFLs mission is to be the market
leader in fertilizers and a significant
player in all its other business,
reputed for customer satisfaction,
reasonable reward to shareholders,
ethics, professionalism and
concern for ecology and the
community.



COMPANY PROFILE
INDUSTRY
These are the following products and services NFL delivers:
PRODUCTS
Bio fertilizers
Neem coated urea
Indutrial products
Kisan urea
Traded products
SPECIALIZED SERVICE
Commissioning Activities of Plant &
Equipments
Heavy Equipment Erection
supervision
Laboratory Services
Consultancy in Project Management

LANDMARK
NFL received the Excellent MoU
rating for the ninth time for the
year 2008-09. Vijaipur unit
received Green Tech Safety
Award 2009 in fertilizer sector
from Green Tech Foundation, New
Delhi, for best safety practices.
It also bagged the Silver Award
for outstanding achievement in
Environment Management by M/s
Green tech Foundation,
Hyderabad in the year 2010-11.
NFL received the Excellent MoU
rating for the ninth time for the
year 2008-09.
STATEMENT OF PROBLEM AND
OBJECTIVE
To understand the working capital management
and liquidity position of NFL.
To assess the impact of working capital on
profitability.
To determine the working capital leverage for
examining the sensitivity of ROE to changes in the
level of gross working capital of the company.
The Major Objective of this study is to understand
the working capital management of National
Fertilizers Limited and to suggest necessary
measures to overcome the shortfalls if any in the
industry.


METHODOLOGY
Methodology may be a description of process, or may be
expanded to include a collection of theories, concepts or ideas
as they relate to a particular discipline or field of inquiry.
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
National Fertilizers Limited, what are the different ways in which
the financing of working capital is done in the organization etc.
OPERATING
CYCLE
Working capital, also known as net working capital, is a
measurement of a businesss current assets, after subtracting
its short-term liabilities. It is a valuation of the assets that a
business or organization has available to manage and build
the business.
Generally speaking, companies with higher amounts of
working capital are better positioned for success because they
have the liquid assets that are essential to expand their
business operations when required.
The need for working capital gross or current assets cannot
be over emphasized. As already observed, the objective of
financial decision making is to maximize the shareholders
wealth.

ANALYSIS
The features of working capital distinguishing it from the fixed capital are as
follows:
Short term Needs: Working capital is used to acquire current assets which
get converted into cash in a short period.
Circular Movement: Working capital is constantly converted into cash which
again turns into working capital.
Liquidity: Working capital is more liquid than fixed capital. It is due to this
trait of working capital that the companies with a larger amount of working
capital feel more secure.
There are two concepts of working capital:
Gross working capital
Net working capital(NET WORKING CAPITAL = CURRENT ASSETS CURRENT
LIABILITIES)


TURNOVER RATIO (Net sales / Inventory)
The Inventory turnover is a measure of the number of times
inventory is sold or used in a time period such as a year.
Turnover for the company has been increasing steadily for
the past ten years, with a growth of 81.23 percent since
2001-02.
The marginal decrease/increase in sales turnover in the
following years is on the account of decrease/increase in
prices of petroleum products.
This in turn results in decrease/increase in the amount of
subsidy provided by the government, which in the end results
in lower/higher turnover.
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
QUICK RATIO [(Current Assets - Inventories) / Current
Liabilities ]
An indicator of a company's short-term liquidity. The
quick ratio measures a company's ability to meet its
short-term obligations with its most liquid assets. The
higher the quick ratio/ ATR, the better the position of the
company.
Looking at the chart we can see that for NFL, the quick
ratio/ATR is more than 1 with some exception in the
early 2000s.
This shows that the company is in a good position to
handle its current liabilities and has passed the acid test.
Also as said earlier, NFL with its up-gradation plans, this
excess liquidity will help it in the days to come.


2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
DEBT EQITY RATIO (Debt/Equity)
It is a measure of the company's financial leverage
calculated by dividing its total liabilities by stockholders'
equity. It indicates what proportion of equity and debt
the company is using to finance its assets.
A high debt/equity ratio generally means that a
company has been aggressive in financing its growth
with debt. The debt equity ratio of NFL has been
reducing continuously over the years.
This is for the reason that NFL is trying to become a
debt free company and has been striving for the same.
But in the year 2011-12, this ratio is expected to go
higher as many expansion and modernization projects
have been carried out.

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
FINDINGS & CONCLUSION
Working capital of the company was increasing and
showing positive working capital each year. It shows
good liquidity position.
Positive working capital indicates that company has
the ability of payments of short terms liabilities.
Working capital increased because of increment in the
cash and bank balance and reduction is sundry
creditors.
Current assets components shows sundry debtors
were the major part in current assets it shows that the
efficient receivables collection management.
The profitability of the company has a positive relation with
the accounts receivable of the company. This shows that in
the Indian fertilizer industry in which most of the customers
are farmers, who are poor, will be happy to see themselves
get credit sales. This brings in more customers and higher
sales.
Liquidity of the company is seen to be stable and good. It
was also found that liquidity also has a positive impact on
the profitability of the company. The analysis shows us that
with increase in the liquidity of the company the profitability
also gets a good lift.

RECOMMENDATIONS

Better credit policies and collection policies can help the
company is reducing the average collection period and also
expand on the number of people who can go for credit
purchase . Company can use legal ways or through collection
agencies to keep a strict check on the defaulters.
NFL has a high inventory holding period, considering that the
production is done with gas and coal. With the conversion of all
plants to gas based plant, the company should strive for a
minimum inventory concept, as pipelines are used to provide
these plants with gas continuously.
To face the present global challenges the human resources
department should be develop to improve various skills among
the employees specially the motivational skills and having the
regular training for the employees about various developments
in the market.
NFL right now has only three zonal offices Chandigarh,
Lucknow and Bhopal. Company should try to expand its zones
to the south too, as they are also one of the most farming
intensive states.

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