project company profile main copy 1

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An Introduction to the study.

This report is based on the project study on the performance of receivables management

and its effect on performance of a firm, conducted at “UNIBIC FOODS INDIA

PRIVATE LTD”, which is one of the youngest company which manufacturer’s and

sells the different flavored cookies in India and all around the world. It is located at the

heart of Bangalore city which is the electronic capital of India. The company Unibic

Biscuits India Private Ltd was started in the year 2004 as a subsidiary of Unibic

Australia and later became the subsidiary of Peepul capital fund III LLC, Mauritius

Company and thus was renamed “Unibic foods India pvt ltd.

In this report the Accounts receivables performance of Unibic Foods India Pvt limited

has been studied and analyzed. Accounts receivable are customers who have not yet

made payment for goods or services which the firm has provided. The objective of the

debtor management is to minimize the time-lapse between completion of sales and

receipts of payment. The management of accounts receivable is largely influenced by

the credit policy and collection policy of a firm. Excessive level of debt in a company

could affect the profitability position of a firm. This is because if a firm has so many

Debtors to pay, then they may become short of cash which may lead to difficulty in

settling their short-term financial obligations. Profit may be called real profit after

receivables are turned into cash. Thus the proper management of receivables in a

company would help the organization to have a good position in profitability and in

working capital.The study was done for a period of two months from 1st March to 30th

April 2016, focusing on the performance of receivables management and how does this

receivables performance affect the financial performance of Unibic Foods India Pvt

Limited., its financial performance, Company profile, and its products in their fields of

business activities. The industry and the environment of the firm is analyzed in brief.

The study revealed that the company has a good credit policy with its customers which

neither to liberal nor strict. Thus the firm is able to run with not much cash being stuck

in the form of receivables and thus able to enjoy a good position both in the area of

Liquidity and Profitability. Hence with such a strong financial position the company

would be able to achieve more success in the future.

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Statement of the Problem.

The problem at hand is to analyze the receivables performance of the company with

the aid of ratio analysis, that are used for better understanding of the financial

performance of the company in the outlook of receivables performance. The issues

relating to receivables management are looked into with suitable tools for the analysis.

Correlation between receivables and sales and working capital, are used for analyzing

the receivables performance of the company.

Significance of the Study

Receivables performance is one of the major factor that are used to analyse how

financially well the company is being performing in the industry. It is used as the basis

for providing short term loans and credits to the company by external financial

companies. Thus a company should give importance to receivables and should ensure

that it being managed well so that both liquidity and profitability factors are positively

affected by it.This study is important as it helps to know the efficiency with which

receivables are being managed at Unibic Foods India Pvt limited, Bangalore. The study

helps to gain awareness about the various policies that are being followed regarding to

receivables and how it effects the profitability and liquidity performance of the

company.

Objectives.

To study the performance of receivables management

To find out the Proficiency with which Receivables are Managed

To Assess the Role of receivables on sales

To Find out the Role of receivables on working capital position

To Evaluate the Role of receivables on operating profit of the company

3

Literature Review.

Barot Haresh (2012), this paper observed a negative relationship between accounts

receivables and corporate profitability and a positive relationship between accounts

payable and profitability. Consequently, it appears that profitability dictates how

managers act in terms of managing accounts receivables. Thus, the findings of this

paper suggest that managers can create value for their shareholders by reducing the

number of days for accounts receivables. In addition, the negative relationship between

accounts receivables and firm’s profitability suggest that less profitable firms should

pursue a decrease of their accounts receivables in an attempt to reduce their cash gap

in the cash conversion cycle. On the basis of findings of this paper, we conclude that

profitability can be enhanced if firms manage their working capital in a more efficient

way.

Cash conversion cycle and the time of receivable turnover as its part is considered as

closely linked to the performance of the small firms. Studies investigating this linkage,

regardless of national conditions or branch, have proved that firms with more efficient

cash conversion cycles reach higher firm performance and higher returns [Charitou et

al., 2010, Ebben & Johnson 2011]. The studies also confirmed a positive relation

between firm value and trade credit at low levels of receivable and a negative one at high

levels [Ebben & Johnson, 2011].

Ranchandran, A and Janakiraman, M, (2009), Analyzed the relationship between

working efficiency and earnings before interest and tax of the paper Industry in Indian.

The study revealed that cash conversion cycle and inventory days had negative

correlative with earnings before interest and tax, while accounts payable days and

accounts receivable days related positively with earnings before interest and tax.

Padachi.K (2006), examined the trends in working capital management and its impact

on firms performance. The results proved that a high investment in receivables

management would lead to lower profitability in a firm.

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Lazaridis and Tryfonidis (2006) also investigated relationship between accounts

receivables management and corporate profitability for the firms listed in Athens Stock

Exchange for a sample of 131 listed companies. The researcher used the company

financials from 2001-2004 for the study. The results of the study of regression analysis

showed that there was a statistically significant relationship between gross operating

profit, a measure of profitability and the cash conversion cycle. He suggested that by

optimizing the cash conversion cycle the managers could create value for the

shareholders. Results of empirical analysis show that there is statistical evidence for a

strong relationship between the firm’s profitability and its receivables management

efficiency

Deloof M. (2003) discussed that most firms had a large amount of cash invested in

working capital. It can therefore be expected that the way in which working capital is

managed will have a significant impact on profitability of those firms. Using

correlation and regression tests he found a significant negative relationship between

gross operating income and the number of days accounts receivable, inventories and

accounts payable of Belgian firms. On the basis of these results he suggested that

managers could create value for their shareholders by reducing the number of days’

accounts receivable and inventories to a reasonable level.

Debasish Suret al. (2001). Attempted to study the association between the liquidity

and profitability of Indian Private Sector enterprises as a case of Aluminum producing

industry. He identified that there is a very high degree of positive correlation

between liquidity and profitability of selected companies. They also observed that

liquidity variables jointly influences of profitability of the selected companies.

Hyderabad (1999) found that long-term funds were used for working capital and

observed that flexibility and adjustment in the requirement of working capital

depends on the availability and cost of working capital. Debasish Sur, (1997)

conducted a study about in Working capital management in Colgate (Palmolive)

India Ltd.

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He observed that working capital management is not satisfactory while

compared with the conventional standard. This study has identified that the

research gap for further research from the above reviews that this study can be

viewed in component wise which could be researched in this study.

Strischek , Dev (2001),A contractor's receivables represent two significant elements of

contractor cash flow and working capital. Receivables constitute the major source of cash

inflow, and payables absorb a big share of cash outflow. A construction company's ability

to extend credit to its customers depends on its own trade creditors' willingness to wait

for their payments from the contractor's collection of its progress billing receivables. The

delicate balance of receivables and payables is key to the financial success of the

contractor. Contract receivables take longer to collect, and the trade creditors expect

prompt payment. The receivables ratio is a quick-and-easy test of contractor viability.

Sims, C Paul, Jr; True, Patrick, (1997), Accounts receivable can represent a very sound

repayment source because they will typically convert to cash faster than any other asset

on the balance sheet. For the same reason, accounts receivable also can represent

additional risks.

There are 5 keys to relying on accounts receivable as a repayment source:

1. Making a prudent initial credit decision

2. Maintaining accurate and timely information

3. Ensuring control of the cash

4. Establishing effective monitoring procedures

5. Protecting against changing credit circumstances

The 5 C's of credit - character, capacity, conditions, capital, and collateral - play a vital

role in any prudent initial credit decision. The need for businesses to free cash from their

receivables is not going to disappear. The banks most successful at capitalizing on this

market opportunity will be those that recognize and control their receivables risk.

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Methodology of the Study.

The research work focus on the empirical analysis of the relationship between

receivable management and performance of Unibic food India Pvt ltd. The ex-post

factor research design was used because it involves events that have already taken place

in the past. The records observed were observed a period of Six years. The variables

tested were accounts receivable, PBT, operating profit, Working capital and sales.

Research Design

The function of research design is to provide for the collection of relevant evidence

with minimal expenditure of effort time and money. This study is analytical and

descriptive in nature.

Data used for the research has been collected from primary and secondary sources.

Primary sources

Primary data are collected through formal interview with company officials. This

was collected from the company officials in the finance department of Unibic

Foods India Private limited using both quantitative and qualitative techniques.

Quantitative data was collected through structured and formal questionnaires that

were filled by the researcher himself while conducting the formal interviews.

Qualitative data was collected by generating field notes and also conversations.

Secondary Sources

Secondary data on the other hand includes those data, which are collected from

company records, books and journals on financial management, Balance sheet,

Statement of Profit And Loss, Auditors Report and website.

Data Analysis and Interpretation

Various methods that can be used for analysing the data are Ratio analysis, Correlation

study and Percentage analysis. Tables and Clustered Column Charts are some the

various tools that can be used for presenting the data.

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Limitations of the Study

All the research projects are hindered in their smooth flow by some unforeseen factors.

The problems arise in the form of constraints by time and scope of the study. The

current project was also faced by certain problem. Some of the problems faced in the

course of the research are as follows:

Some of the limitations of the study that may affect are that the financial statements

contain historical data which are not true indicators of the future. Also the data for

project mainly from Profit and loss account and balance sheet of company.

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INDUSTRY PROFILE

Introduction.

Unibic Foods India Pvt Limited belongs to the Biscuits and cookies industry. Indian

Biscuits Industry came into major existence and started gaining a sound status in the bakery

Industry in the later part of 20th

century when the urbanized society called for readymade

food products at a tenable cost. Biscuits were assumed as sick men’s diet in earlier days.

But today it has become one of the most loved fast food products for every age growth.

Biscuits are always easy to carry, tasty to eat, cholesterol free and reasonable at cost. States

that have the larger intake of biscuits are Maharashtra, West Bengal, Andhra Pradesh ,

Karnataka & Uttar Pradesh .Maharashtra and West Bengal are the most Industrial

developed states; hold the maximum amount of consumption of biscuits. Even, the rural

sector consumes around 55% of the biscuits in the bakery products.

Indian biscuits Industry seems to be the largest among all the food Industries and has a

turnover of around Rs.14500 Cr in the fiscal year 2014-15. Indian subcontinent is known

to be the third largest manufacturer of biscuits , the first being USA and second being China

. The Industry is classified under two sectors: Organized and Unorganized. Bread and

Biscuits are the major part of the bakery Industry and covers around 80% of the total bakery

products in India. Biscuits today stand at a higher value and production level than bread.

This belongs to the unorganized sector of the bakery Industry and covers over 70% of the

total production.

The penetration of biscuits in India among the urban and rural market is 85% and 55%

respectively. Biscuits are always hygienically packaged nutritious snack food available at

very competitive prices, volumes and different tastes. According to the NCAER analysis,

biscuits are predominantly consumed by people from the lower strata of society,

particularly children in both rural and urban areas with an average monthly income of

Rs.750and above. While the country is the largest biscuit consuming nation, per capita

consumption is low at 2.1kg – compared to Ireland, which is the highest at 21.76kg. The

market for biscuits and cookies in India has come a long way accounting for 72 per cent of

the sales in the bakery industry.

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Increasing consumption of packaged and convenience food, the availability of a variety of

biscuits and an increase in disposable incomes have provided a major boost to the industry.

Biscuits can he broadly categorized into the following segments in the Indian biscuit

industry- Glucose Marie Cream Cookie Milk Others in this industry. Some companies

focus only on some segments whereas giants like Britannia and Parle focus on all these

major segments of biscuits.

Current Scenario. India’s biscuit and cookie industry was valued at INR 145 billion (US

$2.41bn) in financial year 2014, of which Britannia and Parle, account for 61 per cent of

the market share, according to a Value Notes report entitled Biscuits and Cookies Industry

in India: 2015-2019. The industry is expected to grow at a CAGR of 14 per cent, to reach

INR 279 billion (USD $4.65bn) by 2019. Manufacturers are now aggressively entering the

premium segment of the market. Biscuits and cookies were considered to be a product of

mass consumption. However, with changing tastes and preferences, and increasing

affluence, this no longer seems to be the case. Increasing indulgence, health concerns and

familiarity with luxurious taste, which has developed among Indian consumers has led

Indian manufacturers to experiment with a variety of biscuits and cookies. This has also

led to higher growth in the premium segment compared to the economical and mid

segments of the industry.

Today Biscuits contributes to over 33 % of the total production of bakery and above 79 %

of the biscuits are manufactured by the small-scale sector of bakery industry comprising

both factory and non-factory units in the country. Today the large scale bakery

manufacturers like Cadbury, Nestle, and Brooke bond had traded in the biscuit industry but

couldn't hit the market because of the local companies that produced only biscuits.

Government has established The Federation of Biscuit Manufacturers of India (FBMI)

which has confirmed a bright future of India Biscuits Industry. According to FBMI, a

steady growth of 15 % per annum in the next 10 years will be achieved by the biscuit

industry of India. Besides, the export of biscuits will also surpass the target and hit the

global market successfully.

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Total Contribution to the Economy/ Sales in India. The total revenue of the biscuit

industry for the fiscal year 2014-15 was 14500 crores. Biscuit industry contribute Rs.8,000

crore to the FMCG industry today, provides vast opportunity for growth, as the per capita

consumption of biscuits is less than 2.1 kg in our country. It is one of the major contributor

to the GDP of India and creates a major impact on the development of the Indian economy.

Apart from Big 3(Britannia, Parle, ITC) there are around 150 medium to small biscuit

factory in India.

Key Verdicts for the Industry in India. The biscuits and cookies industry in India, valued

at INR 145bn in FY 2014, has been growing at a CAGR of 10% over the last three years.

It is estimated that the industry will be worth nearly INR 279bn by FY 2019, growing at a

CAGR of ~14%.Growth of this segment is expected to slow down as manufacturers are

offering discounts to push volume sales, which in turn has slowed down the value growth

of the industry. The share of glucose biscuits is expected to decline as they have reached a

point of saturation. With rising incomes, consumers are being lured towards cream biscuits

and cookies instead of glucose biscuits. Share of premium biscuits is likely to increase by

FY 2019 as manufacturers are now aggressively entering the premium biscuit and cookie

segment on account of higher margins prevalent in the segment. Increase in disposable

income, changing lifestyles, growth in organized retail and increasing consumption of

processed and packaged food are the main drivers of the industry. Latest trends witnessed

in the industry reveal that companies are engaged in improving product packaging

Also, concerns like growing media coverage on health, rising incidence of health

conditions, increasing concerns over physical appearance, changing lifestyle and soaring

costs of healthcare have led the biscuits and cookies market to move towards a healthier

path.

Impact on the Biscuit and cookie industry. These trends offer huge risks and equally

outsized opportunities for the for the Indian Biscuit and Cookies industry. To address them

in a way that results in real competitive advantage, it’s critical to understand the specific

ways that these trends are already affecting companies in the industry.

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E-retailing of bakery products. This is new trend in this industry which can create

a major impact on the top line of all major companies in this industry.

E-Retailing has been adopted by many companies as strategy for reaching all levels

of customers all around the country. It is an unexplored distribution channel in this

industry which can be explored and exploited by the companies in this industry.

Shift in consumer demand. Consumers appear to be rethinking their relation with

Biscuits brands and are viewing biscuits as food not only as a snack but also the

health content and taste. Although this is not likely to have a major impact on sales

volume, it is affecting how much people are willing to pay for Biscuits. Consumers

are also demanding more cookies in the premium segment, and are expecting more

tasty and quality features in the biscuits.

Improved Packaging. Packaging is one of the major factor that affect the demand

for baked products. There are many new technologies that can provide both safety

and aesthetic quality for the products. Hence the companies in this industry should

try to make upgradation in there packing as and when required. The Aesthetics

qualities and features of the package of such biscuits also create a major impact on

the demand for the products in this industry.

Hike in Central Excise Duty and other taxes by the government. All the

companies in this industry expected that the government would reduce the central

Excise duty on the food products. But there hasn’t been any change in the duty and

also there has been a small hike in the duty. Hence the companies are forced to

increase the price of their product. The taxes on the raw materials and finished

goods are still continuing to be a major problem in this segment. Especially the

non-implementation of GST tax system is affecting the industry badly.

Rise in the prices of basic Raw materials. There has been a hike in the price of the

basic raw materials that are used for the production of cookies and biscuits like

Milk, Sugar, Flour and Butter etc. For the past 5 years there has been a constant rise

in the price of raw materials that are being used for the production of biscuits and

cookies.

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COMPANY PROFILE

Introduction.

Unibic Foods India Pvt Limited (Formerly known as Unibic Biscuits India Pvt Limited) is

a leading domestic Cookie brand with an exclusive focus on the "premium" segment of the

cookies market in India. The Company mainly focuses on the "Indulgence" and "Health &

Wellness" category and offers differentiated products. Unibic Foods India Private limited

was incorporated in July 2004, with an initial investment of Rs 15 Crore. The company

was established as an Indian subsidiary of the fourth largest Australian cookie maker,

Unibic Australia. Unibic has been manufacturing and marketing premium cookies in India

since 2004, with the objective of carving a niche at the premium end of the market and the

company has been satisfying the consumers with great taste.

However, today UNIBIC Foods India Pvt Ltd. is a privately held company backed by

reputed international private equity firms. The company is headed by its Managing Director

Mr. Nikhil Sen. Headquartered in Bangalore, UNIBIC has a state-of-the-art manufacturing

unit located a little outside the city. The company has been manufacturing and marketing

premium cookies for 10 years in India.

UNIBIC India started as an organization marketing two variants of cookies and now the

company grown leaps and bounds since. The company now market close to 30 different

types of cookies in the Indian market. It also export to multiple countries across the world.

It is one of the fastest growing FMCG brands in the country and we remain committed to

delighting consumers with unique, premium products.

Unibic operates in the high-margin cookies segment in India, with a share of around 8%.

The company retails biscuits in India, has strategic alliances to make cookies for PepsiCo's

Quaker, Future Group's Tasty Treat and Cafe Coffee Day besides exports. Sen says it will

continue to focus on the health and wellness platform. Its recent launch was a sugar-free

cookie. The 12,000-crore biscuits market consists of big players such as Parle Products,

Britannia, ITC, United Biscuits and Cremica, besides several regional players. In India the

largest markets for the company are in the South of the country.

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The company is also present in various cities and towns in Maharashtra, West Bengal, and

North East and in Delhi NCR. The company is growing rapidly and are entering new

markets every month. The company also export to countries like UK, Korea, Australia,

New Zealand, Middle East and many more.

Forward looking statement. We have grown, and intended to grow, focusing on

harnessing our willingness to experiment and innovate our ability to transform our drive

towards excellence in quality, our people first attitude and our strategic direction.

Vision. To achieve this by delighting customers with Fresh and healthy food products,

those are a benchmark for quality in the Industry.

To be a preferred employer by nurturing entrepreneurship, managing career aspirations and

providing innovation avenues for enhanced employee prosperity.

Mission. Providing customers with hygienic, affordable and convenient supply of fresh

and healthy food products.

Tag Line. “Delight in Every Bite”

Slogan.

When you are happy, we are happy

We live for your Health and Happiness

Customer.

Timely supply of Quality & Healthy Products. High customer satisfaction.

Employees.

Enhancing the Technical and Managerial skills of Employees through continuous training

and development. Best appraisal systems to motivate employees. Incentives, bonus and

rewards systems to encourage employees

Qualities of Management Principles. Customer focuses to understand and meet the

changing needs of the expectations of customers. People involvement to promote team work

and tap the potential of people. Leadership to set constancy of purpose and promote quality

culture throughout the organization. Process approach to assess the efficiency and

effectiveness of each process. System approach to understand the sequence and interaction

of process. Factual approach to decision making is used to ensure its accuracy.

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Unibic follows a social marketing principle for all its brands. Globally, the company

supports such social initiatives through association with various charitable organizations.

On the promotional side, the brand is not an aggressive promoter compared to its

competitors. Infact some of their advertisements landed them into trouble in the past. When

Unibic was launched, it directly pitted itself against the market leader Britannia.

Share Holding Pattern. Unibic foods India is a private company limited by shares. The

shares of Unibic are held majorly held by Peepul capital fund III LLC (72%), Mauritius,

which is the holding company of Unibic Foods. Around 25% of the remaining share are held

by Busi India Holdings Limited. Remaining shares of the company are held by the promoters

of the company.

Figure 1:

Share Holding of Unibic Foods India Pvt Limited

Brief History. Since the early 1950s, Australian food manufacturer Unibic has been

producing fine specialty biscuits, cakes and pastries for local and international markets. In

order to meet rising market demand for its popular brands, Unibic recently upgraded its

Melbourne production facility with the addition of a new high-output manufacturing line.

Unibic the Australian company is known for manufacturing specialty biscuits and cookies.

Unibic came to India in 2005. The company at that time had three brands: Anzac, Bradman

and Butter Cookies.

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Unibic was incorporated in India in August 2004 as a joint venture between premium

cookies maker Unibic Australia and Dhruv Deepak Saxena, a Melbourne-based serial

entrepreneur, who has since exited the business. The company started operations in March

2005 importing two cookie brands, Anzac (oatmeal) and Bradman (chocolate chip), from

Unibic Australia. By late 2005, its manufacturing unit in India was up and running,

producing cookies at costs that were as much as 40% lower than procuring them from

Australia. A five-year deal with Amalgamated Bean Coffee Trading Co for supplies to its

Café Coffee Day outlets came as a shot in the arm for Unibic India. It went on a marketing

overdrive, spending Rs.7.5 crore on advertising and promotions in 2006. Around 60% of

this was for television commercials aired on southern regional and national channels. The

rest was on association with sports events and cricket, where it brought the Unibic Bradman

20/20 tournament to India

Unibic Foods India Pvt Ltd had its genesis in Australia where the brand Unibic originated.

Unibic India was set up as a subsidiary of Unibic Australia. By early 2007, Nikhil Sen was

on board with sweat equity, as COO. Soon after, it established a retail and distribution

presence in a few southern states, and bagged an export deal from Australian supermarket

Coles. This was also the time that US-based private equity firm Lighthouse Capital picked

up a reported 20% stake in the company. The next few years saw the company further

consolidate its presence in South India, sign on Australian supermarket chain Woolsworth

as a customer, and receive an eligibility certificate by the British Retail Consortium for

exporting cookies to the UK market. Its private label business had begun to grow by now,

as well. By 2010, its revenues had reportedly touched Rs.60 crore.

Unibic’s fresh-off-the-oven success caught the fancy of FMCG major Marico, which

evinced interest for a 51% stake in the company in late 2010. The protracted talks

eventually fell through, and in 2011, Lazard India Private Equity picked up Unibic

Australia’s majority share in the Indian holdings. Yet again, in late 2012, private equity

firm Peepul Capital bought out Lazard private equity’s majority stake in Unibic India for

a reported Rs.100 crore. Its current owners now include Peepul Capital and Lighthouse

Capital, with Sen’s holdings said to be in the 10-15% range.

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The Indian business continues to pay a nominal royalty to Unibic Australia for use of the

brand. However, today Unibic Foods India Pvt Ltd. is a privately held company backed by

reputed international private equity firms.

The company is headed by its Managing Director Mr. Nikhil Sen. Headquartered in

Bangalore, Unibic has a state-of-the-art manufacturing unit located a little outside the city.

Armed with sufficient funds, this time around Unibic is betting on a favorable environment

to grow faster than it has so far. Its timing could be just right. The composition of India’s

biscuits market has changed significantly over the past couple of years with the share of

glucose biscuits, traditionally the largest selling category, coming down. Hence the

company also should make the adjustments according to the industry so as to capture more

share of cream of the biscuit industry

Nature of Business Carried. The company Unibic Foods India Pvt limited mainly focus

at the premium segment of the Indian Biscuit industry. Its nature of business is basically

manufacturing of different flavours of cookies. The company also started operating in the

health segment of the biscuit industry by providing sugar free cookies to its customers. The

company is in operation only for more than a decade in India from being established from

2004 with a strong base of existence in Australian cookie market for the past 60 years. The

company is tailored to meet the needs of the customers from both higher and lower income

strata of the market. The company believes on the philosophy of carrying on business not

only with aim of making profit but also to serve the society by providing high quality

products with great taste to the customers.

Current Market. Unibic India started as an organisation marketing two variants of cookies

and now the company have grown leaps and bounds since. It has market close to 30

different types of cookies in the Indian market and also exports to multiple countries across

the world. Unibic cookies are being retailed through more than 100,000 outlets across the

country. 60% of sales of Unibic comes from south India, and the rest from metros such as

Delhi and Mumbai. While Unibic’s retail brands bring in 70% of revenues, its contract

manufacturing and private label business contributes another 20-25%.

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It makes cookies for Café Coffee Day and Indigo for its onboard service, and for the private

labels of Future Group for its Tasty Treat store brand and Aditya Birla Retail’s “More

chain”, which sells its own food products under the Feasters label. The rest comes from

exports to the US, UK, New Zealand and countries in West and South East Asia. Unibic

have around 7-8% of the premium cookie market and hope to achieve 10% market share

over the next 12-18 months. The Company is also looking to expand its market share in

the health and wellness segment.

Business Performance. During the year 2014-2015 the company had a turnover of 140

crores. Compared to last year the company had an increase of 77% increase in revenue. In

the year 2015-16 the company also made a net profit of Rs.9 crores. The company made a

net profit for the first time after being established in the year 2004.The company has a shelf

spaces in all major branded retail stores like Big Bazar, Spar stores, Reliance stores and

Lulu. As a result of this the products of the company has even become renowned all over

India with a short span of time. Hence the company is growing in its revenue and customer

loyalty year by year.

Exports. Unibic has a good market base in the foreign markets also. It makes exports to

all major countries in the world. Some of the countries to which the company makes its

exports are Australia, China, UAE, Qatar, Bahrain, Oman, Jordan, Kuwait and many more.

The revenue which the company earns from exports are increasing year by year. It makes

exports under two brands Unibic cookies and Unibis cookies. UNIBIS is the flagship

international brand from UNIBIC Foods India Pvt. Ltd. UNIBIS is sold in the USA, the

UK and 12 other countries around the world.

UNIBIS cookies are made using the finest ingredients and meet high quality standards.

Around 4% of the total revenue of the company comes from exports of cookies. But the

percentage increase in the revenue from exports is comparatively less compared to

domestic sales, thus efforts should be taken by the companies to increase its revenue from

foreign markets.

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Manufacturing Facilities. The factory of the company is located at Huskur Road in

Bengaluru. It has state-of-the-art machines imported from Italy with two oven lines

working at 75% capacity. The processes are employed to make its cookies lend an authentic

texture. The company claims that is the first biscuit maker in India to use wire cut

technology in baking cookies and it is the only method available to make cookies softer

and chewy, unlike biscuits. Biscuits are typically made through sheeting and cutting or

rotary molding.

In sheeting and cutting, the dough is passed through rollers to get the desired thickness and

then cut using plastic or metal dies. The dough has to be kept hard so that it retains its shape

when the extra scrap is being removed after. In rotary molds, the dough needs to be

compressed into dies or slots mounted on a roller with extra dough being scraped off. The

dough needs to be stiff here as well for the biscuits to retain their shape. In wire cut

technology, the short dough or much softer dough is extruded through a die and cut by

wires at regular intervals without being pressed by rollers.

Future Plans. With growth in the cookie market estimated at 20-25%, the company

expects its business to grow faster at 35% in the near future. It is lining up new products

such as chyavanprash based and a sugar-free cookies, even as it works on growing reach

among the top 20% population towns. “Expanding distribution is key for the company and

it is working on it diligently. The target is to eventually have a pan-India presence,

especially by increasing retail reach in north Indian cities such as Jaipur and Chandigarh,

and in cities such as Pune and Nasik in the West, by the end of the current financial year.

Also in the case of promotion the focus is strictly on below-the-line (BTL) activities such

as in-store promotions and on social media outreach. Thus the company has already started

making and implementing strategies to achieve these plans and targets.

19

Corporate Information.

Incorporated name

Unibic Foods India Pvt Ltd.

Head Quarters Address

Unibic Foods India Pvt Ltd.

Shreeram Nivas, No.1134.

100ft Road, HAL 2nd Stage, Indiranagar,

Bangalore - 560038

Phone no

91 80 2520 1359 Connected to all

Departments

Website

www.unibicindia.com

Class of Company

Private Company

Year of Establishment

8th July2004

Holding Company

Peepul Capital Fund III LLC

Managing Director

Nikhil Sen

Business Outline

Manufacturing, sales and related business of

wide varieties of quality cookies.

Figure 2:

Corporate Information about Unibic Foods India Pvt Limited

http://www.unibicindia.com/

20

PRODUCT PROFILE

Unibic is leading cookie brand in Australia for 40 years, The Company has the pride for

crafting cookies that are a cut above the rest. Having already taken Australia, New Zealand

& UK by storm, the company has begun its romance with India in 2004. And since then,

we have not looked back. With a strong pan-India presence in over 100000 outlets and an

extensive coverage across all channels, Unibic is the largest “real cookie” company in

India.

For the last ten years, the bakers at UNIBIC have been baking perfect, crunchy and

delightful cookies. The cookies of Unibic are made with the best ingredients and mixed

with selected fruits, nuts and spices to create a range over 20 flavors that will delight our

taste buds! Unibic provides cookies that would indulge our senses with chocolate, love

butter and cashews, which is a savoury snack to go with tea or even want to go sugar free,

the company has the perfect cookie for every want of the customers.

The company started selling cookies in India with two iconic flavors, – Anzac Oatmeal

Cookies and Bradman Choco chip Cookies – that has a legacy with connection with

Australian cookies. Then it created many more flavors and today it offer a Bicalcious range

of over 20 different cookies. The company also plans to increase its no of varieties in the

cookie segment as the demand for the cookies are increasing day by day. Even the exports

of the cookies are being increasing both geographically and revenue wise. The Export name

of the cookies are “Unibis” Instead of Unibic. They are being exported to all major

countries around the world. Health segment is another segment where the company has a

firm foot print. It provides wide varieties of sugar free cookies which helped the company

to enter that segment. Chocolate Flavored cookies of Unibic are the most demanded variety

of cookie demanded by the customers.

Unibic today provides flavors from chocolate, milk, fruit & nut, honey oatmeal, multigrain,

cashew, pista-badam, butter, oatmeal, chilly, sugar free, sugar free cream cookies, special

cookies for gifting and many more. Some of the cookies that are provided by Unibic are

provided below:

21

1. Unibic Cashew Cookies are an all-time favorite of customers. It is combined with the

rich taste of butter and the crunchy goodness of cashew nuts. These cookies are highly

preferred eatables for the breakfast.

2. Unibic Pista Badam. Cookies packed with real goodness of Pista & Badam along with

the crunchiness it is available in various delicious tastes, these Cookies can also be

eaten as raw and liked by the people of all the age groups.

3. The Ginger nut cookies. Are acknowledged as a heartwarming combination of real

ginger and real cinnamon, in golden syrup. These are prepared under hygienic

environment using advanced technology and quality assured ingredients.

4. Unibic Butter Cookies are baked with dollops of butter, these crisp cookies let you

savour the real taste of butter. These cookies contain 15% butter, three times more than

all other butter cookies that are available in the market.

5. Choco Ripple Cookies are the latest addition to the UNIBIC Family. This chocolaty

cookie crumbles with every bite. Priced at Rs. 10 for 75 Gram this cookie is a crispy

crunchy delight for your taste buds as well as your pocket.

6. Choco Nut Cookies. Are mainly for who love nuts as much as chocolates will love this

nutty and chocolaty combination. Choco Nuts are best served with piping hot coffee.

These are made with purest and good quality nuts and chocolates.

7. The Choco chip cookies. From Unibic are sprinkled with chocolate chips, which is

also its most prominent distinguishing ingredient. The ingredients of this traditional

recipe are butter, white and brown sugar and semi-sweet chocolate chips.

22

8. The Fruit and Nut Cookies. These are deliciously chewy and soft and are stuffed by

experts with cranberry, blackberry, cashew, glazed fruits, and almond bits that make

your taste buds go nuts. These are prepared with whole wheat flour and other needed

ingredients.

9. Unibic Multigrain Cookies are made with the exotic blend of 5 grains, which are

coupled with natural richness of black currant, cranberry, almond, dates and honey. It

has a longer shelf life, Healthy for body growth and Good in taste.

10. Unibic Oatmeal Digestive cookies are the most demanded cookie in the health

segment, these Oatmeal Digestive Cookies can also be eaten as raw and liked by the

people of all the age groups.

11. Unibic Milk cookies. It offers only one cookie now in this segment. Unibic Milk

Cookies have always been one of the preferred choices of children and adults owing to

their pleasing mouth-watering taste and shapes.

12. Doosra Jeera Cookies. Are known for their freshness, purity, rich taste, crispiness,

remarkable packaging options, longer shelf life, flavor, affordable prices and color.

13. Unibic Gift Range are available with wide variety of cookies in a single pack. These

package are provided on different festivals and celebrations. Different Packages contain

different flavoured cookies and these are of great demand among the customers. The

company provide these Cookies in hygienic and customer friendly packing,

23

DATA ANALYSIS AND INTERPRETATION

In the following chapter the data collected from the organization has been analyzed and

interpreted. All the analysis has been made strictly according to the objectives of the project

study. The main focus of the study was analyzing the performance of receivables

management in the organization and also how it affects the performance of the

organization. That is how it affects the profitability and Liquidity performance of the

organization. Accounts receivable are customers who have not yet made payment for goods

or services which the firm has provided. The objective of the debtor management is to

minimize the time-lapse between completion of sales and receipts of payment. The

management of accounts receivable is largely influenced by the credit policy and collection

policy of a firm. Excessive level of debt in a company could affect the profitability position

of a firm. This is because if a firm has so many Debtors to pay, then they may become short

of cash which may lead to difficulty in settling their short-term financial obligations. Profit

may be called real profit after receivables are turned into cash. Thus the proper

management of receivables in a company would help the organization to have a good

position in profitability and in working capital

Various methods that can be used for analysing the data are Ratio analysis, Correlation

study and Percentage analysis. Tables and Clustered Column Charts are some the various

tools that can be used for presenting the data. These methods are used to analyze and

interpret the objectives for this study. All the evaluations are being done with the help of

the data provided by the company.

Data collection was done from the company’s financial statements. Depth interviews were

conducted by interviewing the officials in the receivables department, to get solicit and

direct information of the performance of receivables management. Correlation as well as

percentage were also used for analysis of some of the data. The following shows details of

analysis and the interpretation that was done from the same

24

Current Ratio. The standard test of liquidity is the current ratio. It measures the firm’s

ability to pay off its short term liabilities with current assets. It is also called Working

Capital Ratio or Bankers Ratio. The accepted standard of liquidity is 2:1.

Table: 1

Current Ratio

Year Current Asset (in Rs.) Current Liabilities (in Rs.) Current Ratio

2009 89,009,470 64,603,654 1.38

2010 111,223,912 71,781,838 1.55

2011 180,181,846 92,766,952 1.94

2012 176,954,241 162,903,169 1.09

2013 284,710,161 195,553,843 1.46

2014 215,442,011 209,608,191 1.03

2015 352,484,766 209,612,636 1.68

Source: Secondary Source

25

Figure 3 Current Ratio Source: Secondary Source

Interpretation.

Here the current ratio shows a varying trend for the 7 years starting from 2009 to 2015 that

makes the ratio to increase as well as decrease. In the year 2009-2010, the current ratio was

at 1.38 and now it has increased to 1.68 in the year 2015 with a high and low ratio in

between. Although the current ratio of the company are fluctuating every year, the rate of

change is less which is a good sign. It shows that the company is able to maintain a good

liquidity position. Basically it shows that even if the current liabilities of the companies are

increasing. The current assets position are also increasing at a higher rate. Also the increase

in current assets are happening mainly because of the rise in components like Cash and

Receivables than inventories, which shows that the company is able to quickly convert its

inventories into sales and able to collect the cash back from credit sales.All in all the

company is able to maintain its current ratio at an average of 1.5 for the seven years which

is below the standard of 2:1, but is good as more than 60% of the current asset are being

held as receivables and cash.

2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5

1.381.55

1.94

1.09

1.46

1.03

1.68

CURRENT RATIO

Current Ratio

26

Working Capital Position. Working capital is a measure of both a company's efficiency

and its short-term financial health. It indicates whether a company has enough short term

assets to cover its short term debt

.

Working Capital = Current Assets - Current Liabilities

Table: 2

Working Capital Position

Year Current Asset (In Rs.) Current Liabilities (In Rs.) Working Capital

2009 89,009,470.00 64,603,654

24,405,815

2010 111,223,912.00 71,781,838 39442074

2011 180,181,846.00 92,766,952 87414894

2012 176,954,241.00 162,903,169 14051072

2013 284,710,160.76 195,553,843 62702778

2014 215,442,011.00 209,608,191 5833820

2015 352,484,766.00 209,612,636 142872130


27

Figure 4



Interpretation

This chart shows the working capital position of the company for the past 7 years starting

from 2009 to 2015.The Company was able to maintain a positive working capital position

for the past 7 years successfully. During the years 2012 and 2014 there has been a huge fall

in the working capital position but still it hasn’t gone to negative level. This shows that the

company has a good liquidity position with which it would be able to pay off its short term

liabilities. It also shows that funds are not being tied up in the form of inventory or

receivables. The highest level of working capital has been recorded in the latest year that

is 2014-15. This provides a good insight that the company would be able to make

expansions in the future.

-

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

2009 2010 2011 2012 2013 2014 2015


28

Distribution of Working Capital. It is done to analyze which component of the current

assets and current liabilities contribute maximum to the working capital requirement of the

company. Here Items like Receivables, Inventory and Payables contribution to working

capital are being considered.

Table: 3

Proportionate Contribution of Receivables, Inventory and Payables to Working Capital


Year

Receivables

Proportionate

of Receivables

in Working

capital

Inventory

Proportionate

of Inventory

in Working

capital

Payables

Proportionate

of Payables

in Working

capital

Working

capital

2009

49,774,745

2.04

22,165,728

0.91

38,902,847

1.59

24,405,816

2010

57.877,610

1.47

31,665,326

0.80

68,457,630

1.74

394,42,074

2011

102,392,593

1.17

54,949,126

0.63

86,673,992

0.99

874,14,894

2012

107,120,837

7.62

55,517,181

3.95

70,718,198

5.03

14,051,072

2013

77,019,301

1.23

47,164,024

0.75

48,758,390

0.78

62,702,778

2014

92,801,797

15.91

73.305,566

12.57

106,160,05

3

18.20

5,833,820

2015

110,633,035

0.77

92,602,684

0.65

95,002,912

0.66

142,872,130

29

Figure 5

Proportionate contribution to Working capital


Interpretation

This chart shows which component is given importance in the working capital of the

company for the past 7 years starting from 2009 to 2015. From the study it is evident that

all three components are given equal importance by the company. But more amount of

working capital is being held in the form of receivables and payables than as inventory.

This shows that as and when the goods are produced by the company, it is quickly getting

sold off. Thus cash conversion cycle for the company would be less since they are able to

convert finished goods into sales and sales into cash faster.

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

2009 2010 2011 2012 2013 2014 2015

Proportionate Contribution of Receivables, Inventory and Payables to Working Capital

Proportionate of Receivables on Working capital Proportionate of Inventory on Working capital

Proportionate of Payables on Working capital

30

Debtors Turnover Ratio. It is an activity ratio. The ratio indicates the velocity of debt

collection of a firm or number of times average debtors are turned over during a year.

Volume of sales can be increased by following a liberal credit policy.

Net Sales is calculated by deducting sales returns from sales. Average Debtors is calculated

by adding together the beginning and ending accounts receivables and dividing it by two.

Table: 4

Debtors Turnover Ratio

Year Average debtors Sales Debtors Turnover Ratio

2009 65,702,663 361,192,937.40 5.50

2010 53,826,178 401,325,486.00 7.46

2011 80,135,102 521,986,942.00 6.51

2012 104,756,715 530,113,565.00 5.06

2013 92,070,069 501,112,097.00 6.51

2014 84,910,549 741,167,432.00 8.94

2015 101,717,416 1,313,531,451.00 12.91


31

Figure 6



Interpretation

This chart shows the debtors turnover ratio of the company for the past 7 years starting

from 2009 to 2015. Here we can observe that the company is able to maintain a high level

of debtor’s turnover ratio throughout the period of study. And in the latest year that is in

the year 2014-15 the company has maintained the ratio at 12.91, which is the highest

recording during the period of study. High level of debtor’s turnover ratio is a good sign

for the company because it shows that the company is able to collect the cash which are

stuck in receivables as and when required. Also it shows that the company has an efficient

credit policy because it is not as strict as the top line of the company is continuously

increasing at a higher rate and at the same time able to collect cash from the debtors.

2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 1 0 3 2 0 1 4 2 0 1 5

5.5

7.466.51

5.066.51

8.94

12.91

DEBTORS TURNOVER RATIO


32

Days Sales Outstanding. Day’s sales outstanding (DSO) is a measure of the average

number of days that a company takes to collect revenue after a sale has been made.

Days Sales outstanding = Average Receivables / Net sales *365

Table: 5

Days Sales Outstanding

Year Average debtors Sales Days sales outstanding

2009 65,702,663 361,192,937.40 66

2010 53,826,178 401,325,486.00 49

2011 80,135,102 521,986,942.00 56

2012 104,756,715 530,113,565.00 72

2013 92,070,069 501,112,097.00 56

2014 84,910,549 741,167,432.00 41

2015 101,717,416 1,313,531,451.00 28


33

Figure 7



Interpretation

This chart shows the day’s sales outstanding of the company for the past 7 years starting

from 2009 to 2015. Here we can observe that the company is able to collect the credit sales

amount from its customers within a period of 2 to 2 and half months (highest). The

maximum was observed during the 2012 where it took 72 days for collecting the

receivables amount. It shows that the company has an efficient collection policy due to

which the no of days the invoices are outstanding are less.

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5

66

49

56

72

56

41

28

DAYS SALES OUTSTANDING


34

Operating Cycle Period or Cash Conversion Period. The cash conversion cycle (CCC)

is a metric that expresses the length of time, in days, that it takes for a company to convert

resource inputs into cash flows. The cash conversion cycle attempts to measure the amount

of time each net input dollar is tied up in the production and sales process before it is

converted into cash through sales to customers. This metric looks at the amount of time

needed to sell inventory, the amount of time needed to collect receivables and the length

of time the company is afforded to pay its bills without incurring penalties.

Operating Cycle Period = Days sales outstanding + Days Inventory Outstanding – Days

Payable outstanding

Table: 6

Operating Cycle Period


Date

Days sales

outstanding

Days Inventory

Outstanding

Days Payable

Outstanding Operating Cycle Period

2009

66 43 75 34

2010

49 40 79 10

2011

56 50 89 17

2012

72 58 83 47

2013

56 58 67 47

2014

41 48 62 27

2015

28 42 50 19

35

Figure 8



Interpretation

Operating cycle is a measure of the operating efficiency and working capital management

of a company. It is able to maintain the cash conversion cycle consistently in the range of

10-50, which is not so fluctuating. A short operating cycle is good as it tells that the

company's cash is tied up for a shorter period. Here the cash conversion cycle of the

company is of shorter period which is a good sign of efficient financial performance. This

shows that the cash of the company is not tied up in receivables or inventory. Also since

the products the company is dealing with are FMCG that has a great demand in the markets,

thus would be able to realize the cash and maintain operational efficiency.

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5

34

10

17

47

47

27

19

OPERATING CYCLE PERIOD


36

Average Days Delinquent. Average Days Delinquent (ADD) calculates the average days

invoices are past due. This provides a snapshot to evaluate individuals, subgroups or

overall collection performance.

Average Days Delinquent = Days Sales Outstanding - Best Possible DSO

Table: 7

Average Days Delinquent

Year


( In days)

Best Possible DSO

( In days)


( In days)

2009 66 50 16

2010 49 53 -4

2011 56 72 -16

2012 72 74 -2

2013 56 56 0

2014 41 46 -5

2015 28 31 -2


37

Figure 9



Interpretation

This chart reveals the collection performance of the company for the past 7 years. Here

we can observe that the ADD and DSO are moving in the same direction till 2011 and in

the year 2015. It means when the DSO of the company rises ADD also rises and when DSO

falls ADD also fall. It shows the relation between credit and collection process. When there

is an improvement in credit policy then the collection figures also improve. When there is

a downfall of the same the other also fall. Here there was a fall in 2010 in credit policy as

a result it affected the collection also. But after that there is an improvement in both till

2012.From 2012-2014 we can observe that DSO and ADD are moving in the opposite

direction. This reveals that some external changes must have affected the receivables

performance. Basically due to change in credit terms or policies. Hence the company

should take steps to avoid such opposite movement of DSO and ADD.

2009 2010 2011 2012 2013 2014 2015

16

-4-16

-2 0 -5 -2

66

4956

72

56

41

28

Average Days Deliquent DSO

38

Collection Effectiveness Index (CEI). The collection effectiveness index (CEI) is a

measure of the ability of the collections staff to collect funds from customers. It operates

at a somewhat higher level of precision than the day’s sales outstanding measurement, and

so is finding increasing popularity among collection managers. The collection effectiveness

index compares the amount that was collected in a given time period to the amount of

receivables that were available for collection in that time period. A result near 100%

indicates that a collection department has been very effective in collecting from customers.

Collection Effectiveness Index (CEI) = (Beginning AR + Sales – Ending AR) / (Ending

AR + Sales – Current AR) * 100

Table: 8 –

Collection Effectiveness Index


Year Sales Debtors

Collection Effectiveness

Index (CEI)

2009 361,192,937 49,774,745 97.5

2010 401,325,486 57,877,610 98.0

2011 521,986,942 102,392,593 91.5

2012 530,113,565 107,120,837 99.1

2013 501,112,097 77,019,301 98.4

2014 741,167,432 92,801,797 97.9

2015 1,313,531,451 110,633,035 98.6

39

Figure 10

Collection Effectiveness Index


Interpretation

This chart reveals the Collection Effectiveness Index of the company for the past 7 years

from 2009. CEI near 100% indicates that a collection department has been very effective in

collecting from customers. The study reveals that for the period of study the Collection

Effectiveness Index is closer to 100%. Which is a good sign and shows that the receivables

performance of the company is efficient. Only during the 2011 it has fallen but still is above

90%.

2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5

97.5 98

91.5

99.198.4 97.9

98.6

COLLECTION EFFECTIVNESS INDEX

Collection Effectivness Index

40

Correlation between Sales and Receivables. This actually shows the relation between

the sales value and the receivables of the company. It helps to analyze whether the company

is able to increase its turnover by providing or availing the facility of credit sales to the

customers.

Table: 9

Correlation between Sales and Receivables

No

Year

Sales (X) in crores

Receivables (Y) in

crores

x2

y2

XY

1

2009

36

5

1296

25

180

2

2010

40

6

1600

36

240

3

2011

52

10

2704

100

520

4

2012

53

11

2809

121

583

5

2013

50

7

2500

49

350

6

2014

74

9

5476

81

666

7

2015

131

11

17161

121

1441

Total

436

59

33,546

533

398


Karl Pearson’s Coefficient

Correlation

41

= 7*398 - 436* 59

(7*33456-(436)2) * (7*533 – (59)2)

= 234822 - 56244

10526 * 44726

= 21492

21698

= 0.99

Interpretation

The Correlation results indicates that there is a strong positive relation between sales and

receivables. It means when the receivables increase sales also increases and if one

decreases the other also would decrease.

42

Trend of Sales and Receivables. It is done to analyze how both sales and receivables have

moved throughout the period of 7 years. It shows weather sales and receivables are going

up or down

Table: 10

Trend of Sales and Receivables

Year Sales Debtors

2009 361192937.40 49,774,745.00

2010 401,325,486.00 57,877,610.00

2011 521,986,942.00 102,392,593.00

2012 530,113,565.00 107,120,837.00

2013 501,112,097.00 77,019,301.00

2014 741,167,432.00 92,801,797.00

2015 1,313,531,451.00 110,633,035.00


43

Figure 11

Trend of sales and receivables


Interpretation

This chart shows the trend of sales and receivables for the 7 years of study. It reveals the

as the receivables balance go up, the top line of the company also go up .When it falls the

other also falls. It show the positive relationship between receivables and sales. The highest

sales was recorded during the year 2014-15 financial years. From the last year the company

has a 70% rise in the topline for the company.

36.0040.00

53.00 53.00 50.00

74.00

131.00

5.00 6.00 10.00 11.00

7.00 9.00 11.00

2008 2009 2010 2011 2012 2013 2014 2015 2016

Sales in Cr Debtors in Cr

44

Correlation between Days sales outstanding and operating profit. This actually shows

the relation between the Days sales outstanding value and the operating profit of the

company. It helps to analyze whether the company is able to increase its operating profit

by improving the no of days required for collecting the receivables.

Table: 11

Correlation between Days Sales Outstanding and operating profit

No

Year

Days Sales

Outstanding (X)

Operating Profit (y) in

crores

x2

y2

XY

1

2009 66 8 4408 64 4408

2

2010 49 9 2397 81 2397

3

2011 56 11 3140 121 3140

4

2012 72 13 5202 169 5202

5

2013 56 14 3147 196 3147

6

2014 41 21 1668 441 1668

7

2015 28 52 799 2704 799

Total 369 128 20761 3776 20761



Correlation

45

= 39473 - 47196

97 * 100

= -7723

9700

= -0.79

Figure 12

Correlation of DSO and Operating profit


Interpretation

The Correlation results indicates that there is a strong negative relation between days sales

outstanding and operating profit. It means when the Days sales outstanding increase

operating profit falls and if one decreases the other would Increase.

0

10

20

30

40

50

60

70

80

2008 2009 2010 2011 2012 2013 2014 2015 2016

Correlation between Days Sales Outstanding and Operating profit

46

Proportionate Contribution of Receivables to Current Asset. It is done to analyze how

much of current assets are being held in the form of receivables.

Table: 12

Proportionate Contribution of Receivables to Current Asset

Year Current Asset Debtors

% of Debtors on

CA

2009

89,009,470.00

49,774,745.00 55.92

2010

111,223,912.00

57,877,610.00 52.04

2011

180,181,846.00

102,392,593.00 56.83

2012

176,954,241.00

107,120,837.00 60.54

2013

284,710,160.76

77,019,301.00 27.05

2014

215,442,011.00

92,801,797.00 43.08

2015

352,484,766.00

110,633,035.00 31.39

Total

597,619,918.00 326.83

Average

85,374,274.00 46.69

Max

110,633,035.00 60.54

Min

49,774,745.00 27.05

St dev 2.1 12.2


47

Figure 13

% of Receivables on Current asset


Interpretation

This chart shows the percentage of current assets that are being held in the form of

receivables in the company. From 2009 to 2012 we can observe that more than 50% of the

current assets are being held up by receivables. But after that the company was able to

reduce the level of receivables, which shows that the company has an efficient credit and

collection policy which enabled them to get back the amount on credit sales and at the same

time improve the sales also.

2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5

55.9252.04

56.8360.54

27.05

43.08

31.39

% OF RECIEVABLES TO CURRENT ASSET

% Of Recievables to Current Asset

48

Correlation between Receivables and Working capital. This actually shows the relation

between the Working capital value and the receivables of the company. It helps to analyze

whether the company is able to maintain a good liquidity position if it has a good

receivables performance.

Table: 13

Correlation between Working capital and Receivables

No

Year

Receivables (X) in

crores

Working capital

(Y) in crores

x2 y2 XY

1

2009

5

2

25

4

10

2

2010

6

4

36

16

24

3

2011

10

8

100

64

80

4

2012

11

1

121

1

11

5

2013

7

6

49

36

42

6

2014

9

1

81

0.25

4.5

7

2015

11

1

121

1

11

Total

59.00

22.50

533

122.25

182.50 Source: Secondary Source


Correlation

= 1277 - 1327

250* 349

= -50

87375

49

= -0.17

Figure 14

Correlation of working capital and Receivables


Interpretation

The Correlation results indicates that there is a strong negative relation between Working

capital position and receivables. It means when the receivables increase working capital

falls and if one decreases the other would Increase.

0

2

4

6

8

10

12

2009 2010 2011 2012 2013 2014 2015

Correlation between Receivables and Working capital

Working capital Receivables

50

Regression Analysis between operating cycle period and operating profit. This

actually shows the regression between the operating cycle period and operating profit of

the company. It helps to analyze whether the company is able to able to increase its

operating profit by maintain a good position in operating cycle period.

Table: 14 –

Regression between Operating cycle period and operating period

No Year Operating Cycle

period (X) in days

Operating Profit

(Y) in crores

x2 y2 XY Y^

1

2009

34

8

1156

64

272

16.903

2

2010

10

9

100

81

90

22.663

3

2011

17

11

289

121

187

20.983

4

2012

47

13

2209

169

611

13.783

5

2013

47

14

2209

196

658

13.783

6

2014

27

21

729

441

567

18.583

7

2015

19

52

361

2704

988

20.503

Total

201.00

128.00

7,053.00

3,776.00

3,373.00

127.201 Source: Secondary Source

Regression Y on X, Y^ = a + b (x)

a = 25.63

b = -0.24

51

Figure 15

Correlation of working capital and Receivables Source: Secondary Source

Interpretation

The Regression Analysis results indicates that there is a negative relation between Working

Operating cycle period and operating profit. It means when the cycle period increase

operating profit falls and if one decreases the other would Increase. The “a” value is 25.63

and the “b” value is -0.24. Hence if the company is able to reduce its operating cycle period

then its operating profit would shoot up as double of the current period.

2008 2009 2010 2011 2012 2013 2014 2015 2016

0

5

10

15

20

25

0

10

20

30

40

50

60

2009 2010 2011 2012 2013 2014 2015

REGRESSION ANALYSIS

Y Operating Profit y^ Prediction

52

SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION

Summary of Findings.

The study evaluates the performance of receivables management of Unibic foods India Pvt

limited and also analysis how it affects the performance of the company as a whole. It

analyses both liquidity and profitability of the company and their relationship with

receivables.

From the study it was evident that the company has a good and efficient performance in

the case of receivables. From all the tools that were used for the analysis of receivables

management performance it was evident that company has an efficient Credit management,

Credit policy and collection policy. When we consider the liquidity position of the

company, it is satisfactory and it shows that it is strong enough to meet its short term

obligations. The average current ratio of the company was 1.5 for the 7 years of study. In

the case of working capital also the organization is maintaining a good position and it was

evident that the company is giving more importance to receivables as much of the working

capital was being held in the form of receivables.

Then coming to the measurement of receivables management, the study showed that the

organization has a good management policy for receivables. It was able to maintain a high

debtor turnover ratio throughout these 7 years which shows that even though the amount

of receivables are going up it is able to collect it also as and when required. Also the average

no of days the invoices remain outstanding in a year is 2 to 3 months which shows the

efficient collection policies of the company. This is one of the main reason why the

company has a short cash conversion cycle because of which the company is able to

maintain good amount of current assets in the form of cash and are capable to meet its short

term obligation. The collection effectiveness index of the company also reveals the same,

the company is able to maintain the CEI % closer to 100 in these 7 years of period under

the study. Even when we consider the current assets of the company it shows that 50% of

the current assets are being held in the form of receivables. Thus the tools used for the

analysis discloses that company has an efficient management of receivables for the period

under study

53

The next part of the study focuses on how the receivables part affect the performance of

the company as a whole. Here the study focuses on how is the relation of receivables with

sales, how it affects the working capital of the company and the operating profit of the

company. The correlation coefficient of debtors and sales was positive, tested through the

hypothesis and concluded that the correlation between debtors and sales is significant. Also

there is a positive relationship between days sales outstanding and operating profit. Thus

the study as a whole shows that the organization has an efficient management of

receivables and thus has a strong liquidity and profitability position and would be able to

maintain the same in the future and achieve more success.

Suggestions

From the study it was evident the company focus mainly on increasing its top line and

efforts are made to increase them to. They are not focusing on Bottom line for the present

moment .But still the company was able to achieve a net profit for the first time in the year

2014-15.Thus the company should put more efforts to maintain this profit position and to

make improvement in the future. The average collection period should be maintained

the same level because the debtor’s collection period is found to be satisfactory. Also

they should try to this with the average day delinquent that is when one increase the other

should also increase. The company can also adopt measures to further increase the

receivables so that at the same time sales can also increase since there is appositive

relationship between both. When the sales increases automatically the profitability position

of the company can be improved. Also since the company has an efficient policy for

receivables management it can further increase the level of receivables. Hence if the

company is able to make these few changes it can further achieve more success in this

industry and can reach further heights as it is having a strong financial position.

54

CONCLUSION

The project study on the topic “study on performance of receivables management and how

it affects the performance of the company” was done at Unibic Foods India private Ltd.it

helped me to get clear picture of how an organization efficiently manages its receivables

and how the performance of receivables affects performance of the organization as a whole.

UNIBIC FOODS INDIA PRIVATE LTD”, which is one of the youngest company which

manufacturer’s and sells the different flavored cookies in India and all around the world. It

is located at the heart of Bangalore city which is the electronic capital of India. The main

products of Unibic are various varieties of cookies. It has a strong market base all around

India and even around the world.

Accounts receivable are customers who have not yet made payment for goods or services

which the firm has provided. The objective of the debtor management is to minimize the

time-lapse between completion of sales and receipts of payment. The management of

accounts receivable is largely influenced by the credit policy and collection policy of a

firm. Excessive level of debt in a company could affect the profitability position of a firm.

This is because if a firm has so many Debtors to pay, then they may become short of cash

which may lead to difficulty in settling their short-term financial obligations. Profit may

be called real profit after receivables are turned into cash. Thus the proper management of

receivables in a company would help the organization to have a good position in

profitability and in working capital

The study has accomplished several goals. The study has given a general idea about how

efficiently the organization is managing its receivables. It helped to analyze and understand

how the performance of receivables affects the performance of the organization especially

the liquidity and profitability positions. Since an organization cannot perform well

financially if it doesn’t have a good management of receivables, because it is asset where

a lot of cash of the organization gets held up. Thus an organization needs to manage it

efficiently and UNIBIC is able to do so due to which only the company able to achieve a

good financial platform within a short period of existence in India

55

BIBLIOGRAPHY

A. BOOKS AND JOURNALS

Agrawal, N.K. (2003) Management of Working Capital, Sterling

Publishers Pvt, Ltd, New Delhi.

Pandey, I.M. (1983): Financial Management, Vikas Publishing House Pvt.

Ltd., New Delhi.

Annual reports of Unibic Foods India private Limited

Maheshwari S.N, (1997) Financial Management Principles and Practice

Sultan Chand & Sons New Delhi.

Jain, P.k. Khan, M.Y. (2005). Financial management. Place of publishing:

Tata McGraw-Hill Publishing Company Ltd, Fourth edition.

Kothari, C.R. (2004). Research Methodology: Methods and technique

(2nd Ed). New Delhi: New Age International Publishers.

Unibic Foods India Private Limited – Company Brochure

B. WEB SITES

www.accountingtools.com

www.unibicindia.com

www.investopedia.com

http://www.unibicindia.com/

56

ANNEXURE

57

Balance Sheet Unibic Foods India Private Limited

As on 31st March 2015

Particulars Notes As on 31st March 2015 As on 31st March 2014

EQUITIES AND LIABILITIES

Share holders Fund

Share Cpaital 4 821266740 700459920

Reserves and Surplus 5 -366265350 -505137062

455001390 195322858

Non Current Liabilities

Long term Borrowings 6 3188048 0

Long term provisions 10 6388233 3308279

9576281 3308279

Current Liabilities

Short Term Borrowings 7 4594851 56050845

Trade Payables 8 95002912 106160053

Other current liabilities 9 109478032 46790428

Short Term Provisions 10 536841 606865

209612636 209608191

TOTAL 674190307 408239328

ASSETS

Non Current Assets

Fixed Assets

Tangible Assets 11 158474063 46154184

Intangible Assets 12 2864700 3470256

Capital Work in progress 0 4110828

Non Current Investments 13 16000 16000

Deffered Tax Assets 14 138802990 99473261

Long term Loans and advances 15 19014740 17746894

Other Non Current Assets 16 2533048 21825894

321705541 192797317

Current Assets

Cash and Bank balances 17 131470001 34853136

Trade receivables 18 110633035 92801797

Inventories 19 92602684 73305566

Short term loans and Advances 15 10601129 8873874

Other current assets 16 7177917 5607638

352484766 215442011

TOTAL 674190307 408239328

58

Receivables Performance Analysis Questionnaire for Expert Interview

Name:

Designation:

Date:

1. What is the basic objective for the company for the Next 5 years

o Increase Top line

o Increase Bottom Line

2. What is the Expected sales closing for the year 2015-16?

o 175 Crores

o 195 Crores

o 220 Crores

o More Than 240 Crores

3. What type of credit policy does the Unibic follow? ( Liberal or Strict)

4. What are some of the factors about customers are considered before granting

credit purchase facility?

59

5. How is the Ageing schedule of the debtors classified in Unibic (Eg. 10-20

Days .30-60 Days)

6. When is a customer account considered to be a Bad Debt?

7. How would you rate the collection effectiveness of receivables by the Depos

1

2

3

4

5

(Very Low) (Moderate) (Very High)

8. How do you Track the payment from the Customers

o Territory wise

o Channel wise

o Sales Person wise

o Others (Specify)

60

9. How do you receive the payments from the customers?

o Cash

o Cheque

o RTGS

o Others (Specify)

10. Do the company provide the facility of credit sales to foreign customers? “If yes”

do the company provide more time for repayment?

11. Does the aged accounts receivable balances periodically reviewed by supervisory

personnel? If yes how, Monthly or quarterly?

12. Does the cost of collecting receivables create a major impact on company’s

Bottom line?

61

13. What are the usual procedure followed for collecting receivables from customers?

(Mention in order)

14. How would you rate the overall receivables performance of the company for the

current year 2015-16

1

2

3

4

5

(Very Low) (Moderate) (Very

High)

15. What is your suggestion for furthering improving the receivables management of

the company? (New methods, If any)

Signature

a) e)

b)

f)

c)

d)

62

Product Profile

Unibic Multigrain Cookies Unibic Oatmeal Digestive Cookies

Unibic Milk Cookies Unibic Doosra Jeera Cookies

Unibic Cashew Cookies Unibic Pista Badam Cookies

Unibic Butter Cookies Unibic Choco Nut Cookies

Unibic Gift Pack

project company profile main copy 1

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