SUMMER INTERNSHIP PROJECT ON WORKING CAPITAL MANAGEMENT IN CENTRAL COALFIELDS

LIMITED.

SUBSIDIARY OF COAL INDIA LIMITED

Priyanka KumariPGDM IB

COMPANY PROFILE

CIL

C.C.LRanchi

S.E.C.LBilaspur

W.C.LNagpur

N.C.LSingrauli

M.C.LSambalpur

B.C.C.LDhanbad

E.C.LAsansol

Introduction To CCL

• C.C.L (Central Coalfields Limited) is a subsidiary unit of

Coal India Limited.

• C.C.L. has been awarded as the miniratna company.

• C.C.L provides coal to different power sectors and steel

sectors in India.

• Headquarter of C.C.L is situated in Ranchi.

Project

• Detailed study and analysis of the working capital management in Central Coalfields Limited.

.

Working capital management in C.C.L

In C.C.L working capital management is done on three basis:

1. Cash management2. Debtors management3. Inventory management

Working Capital Turnover Ratio

0

100000

200000

300000

400000

500000

600000

2008 2009 2010

sales

net workingcapital

working capitalturnover

0

20

40

60

80

100

120

2008 2009 2010

working capitalturnover ratio

Cash Management

Cash management is concerned with the managing of: -

• Cash flow – Inside the firm and Outside the firm

• Cash balances held by the firm at a point of time by financing deficit or investing surplus funds.

Customers

Jharkhand state electricity board (JSEB) Punjab state electricity board (PSEB) Haryana state electricity board (HSEB) Delhi Vidyut corporation (DVC) National thermal power corporation (NTPC) Steel sector like

1.Steel authority of India limited (SAIL) 2.Vizag steel plant etc.

Other sector includes 1.Defence 2.Chemical industry etc.

Debtors Management

CCL sells coal to it’s customers on two basis:

1.cash

2.credit

CCL sells 10%of it’s production on cash and the rest 90% on credit.

The Sector wise position of Debtors as on 31 March 2009

Sector As on 31.03.2009(figs. In crores)

As on 31.03.2008(figs.in crores)

power 777.71 617.43

Steel 358.54 219.28

others 12.53 10.97

total 1148.78 847.68

Sundry Debtors

including provisionyear amoun (Rs.in lakh)

2000 829092001 62982.852002 62846.162003 66868.32004 64922.682005 65984.022006 61106.592007 47217.312008 54130.982009 74526.482010 51244.83

sundry debtors

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

1 2 3 4 5 6 7 8 9 10 11

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

82909

62982.85 62846.1666868.3 64922.68 65984.02

61106.59

47217.3154130.98

74526.48

51244.83

year amoun (Rs.in lakh)

1 2 3 4 5 6 7 8 9 10 11

year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

amoun (Rs.in lakh) 82909 62982.85 62846.16 66868.3 64922.68 65984.02 61106.59 47217.31 54130.98 74526.48 51244.83

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

Axis

Titl

e

Chart Title

Debtors Turnover Ratio

0

100000

200000

300000

400000

500000

2008 2009 2010

sales

average debtors

debtor turnoverratio

6.8

7

7.2

7.4

7.6

7.8

8

2008 2009 2010

debtorsturnover ratio

Inventory Management

• Inventory management of CCL is working directly under the Chief Material Manager (CMM).

• In CCL the inventory includes: 1.Coal as on 31st march of the year end 2.Spares and stores 3.Finished goods and work in progress 4.Press 5.Medicine

Valuation Method

•Earlier FIFO (first in first out) method was used in valuation

but now Weighted Average Method is used in C.C.L.

•The inventory management followed in C.C.L follows ABC

analysis method.

Inventory Department In C.C.L

Following diagram shows the structure of inventory department in CCL:-

Contd.

year amt(Rs. In lakh)2000 43312.922001 41721.842002 44016.92003 42611.782004 50084.142005 60586.292006 71584.552007 81363.512008 99117.942009 96806.322010 117717.53

INVENTORY

1 2 3 4 5 6 7 8 9 10 11

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

43312.9241721.84 44016.9 42611.7850084.14

60586.2971584.55

81363.51

99117.9496806.32

117717.53

Chart Titleyear amt(Rs. In lakh)

0

20000

40000

60000

80000

100000

120000

140000

1 2 3 4 5 6 7 8 9 10 11

Chart Title

year amt(Rs. In lakh)

Inventory Turnover Ratio

0

1

2

3

4

5

6

2008 2009 2010

inventoryturnover ratio

0

100000

200000

300000

400000

500000

2008 2009 2010

cost of goodssold

average stock

inventoryturnover ratio

Conclusion

The overall performance of Central Coalfields Limited is on a

good track. The financial performance of the company is

appreciable. The profit has almost doubled to Rs.1500 crores in

2009-2010 from the previous year profit of Rs.763.80 crore.

The surplus fund is deposited to the banks in the form of fixed

deposit. There is no bank loan in respect of CCL to fulfill its

working capital needs. This shows that CCL has enough cash

balance to fulfill its day to day requirements of cash.

Suggestions

For Cash management1. Firm should try to prepare the invoice documents

immediately after the dispatch of goods and should mail them to the clients at the earliest.

2. Collection can be accelerated by reducing the lag between the time a customer pays the bill and the cheque is collected.

Contd.

For Inventory Management1. Better coordination among various department namely

purchase, marketing and finance will help in achieving greater efficiency in inventory management.

2. Ideas like JIT can be used to improve inventory management.

Contd.

For debtors management1.There must be proper negotiation for the quality and price of coal so as to minimize the disputed amount.

2.Securitization scheme should be started for all the states so as to clear the outstanding dues through long term loans.