`
WORKING CAPITAL
MANAGEMENT
Comparison Analysis
&
Working Capital Policy
SUMITTED By:
Abdulraqeeb Alareqi
Class: MBA (Finance)
University Roll NO: 2219000000015
SUMITTED TO:
Dr. Ajai Prakash
`
Acknowledgement
I would like to express my sincere gratitude to Dr. Ajai Prakash
for giving me the opportunity to work on this assignment. I would also like
to thank my classmates who have extended their moral support throughout
the course of this assignment.
Abdulraqeeb Alareqi
`
Table of Contents
Manufacturing industries: ....................................................................... 4
Manufacturing Companies: .................................................................... 6
1. Tata Motors Limited: ..................................................................... 6
2. ITC Limited: ................................................................................... 6
Service Industries: .................................................................................. 7
Service Companies: .............................................................................. 10
1. Infosys Limited: ........................................................................... 10
2. HDFC Bank Limited: ................................................................... 10
Comparative Analysis........................................................................... 11
1. Two Manufacturing Industry companies: .................................... 11
2. Two Services Industry companies: .............................................. 14
3. One Manufacturing and One Service ........................................... 17
Working Capital Policy: ....................................................................... 20
Manufacturing Industry ..................................................................... 20
Service Industry ................................................................................. 22
`
Manufacturing industries:
Manufacturing industries involve the production of goods through the
transformation of raw materials or components into finished products. This sector
plays a crucial role in economic development and typically includes a diverse
range of activities, from traditional manufacturing to high-tech production. Here
are some key points about manufacturing industries:
Key Features of Manufacturing Industries:
Production Processes:
Manufacturing involves various processes, including fabrication, assembly, and
processing, to create tangible goods.
Diversity of Sectors:
Manufacturing spans various sectors, such as automotive, electronics, aerospace,
textiles, chemicals, pharmaceuticals, food and beverages, and more.
Technology and Automation:
Modern manufacturing increasingly relies on advanced technologies and
automation to enhance efficiency, reduce costs, and improve product quality.
Global Supply Chains:
Many manufacturing industries operate within global supply chains, with
components and materials sourced from different countries.
`
Employment Generation:
Manufacturing has historically been a significant source of employment, providing
jobs in production, engineering, logistics, and support services.
Innovation and R&D:
Research and development (R&D) play a crucial role in manufacturing, driving
innovation in products and processes.
Examples of Manufacturing Industries:
Automotive Manufacturing:
Companies like Toyota, General Motors, and Volkswagen produce automobiles
and automotive components.
Electronics Manufacturing:
Companies such as Samsung, Apple, and Intel manufacture consumer electronics,
semiconductors, and electronic components.
Aerospace Manufacturing:
Boeing, Airbus, and Lockheed Martin are examples of companies manufacturing
aircraft and aerospace components.
Pharmaceutical Manufacturing:
Pharmaceutical companies like Pfizer, Novartis, and Johnson & Johnson produce
pharmaceutical drugs and medical products.
Food and Beverage Manufacturing:
Nestlé, Coca-Cola, and Unilever are involved in the manufacturing of food and
beverage products.
`
Textile Manufacturing:
Companies like Nike, Adidas, and Levi Strauss are engaged in the production of
textiles and apparel.
Manufacturing Companies:
1. Tata Motors Limited:
Industry: Automotive Manufacturing
Tata Motors is a flagship company of the Tata Group and one of the largest
automotive manufacturers in India. It operates in various segments, including
passenger vehicles, commercial vehicles, and defense and aerospace. The company
is known for its popular passenger vehicles such as the Tata Harrier and Tata
Nexon, as well as commercial vehicles like trucks and buses.
Tata Motors has a global presence with operations in the United Kingdom, South
Korea, Thailand, South Africa, and Indonesia.
The company has been actively involved in electric and sustainable mobility
solutions, with the launch of electric vehicles like the Tata Nexon EV.
2. ITC Limited:
Industry: Diversified (Fast-Moving Consumer Goods and Tobacco).
ITC Limited is a diversified conglomerate with a significant presence in the fast-
moving consumer goods (FMCG) sector. In addition to its FMCG business, ITC is
involved in businesses such as hotels, agri-business, paperboards, and packaging.
`
ITC's FMCG portfolio includes popular brands like Aashirvaad, Sunfeast, Bingo,
and Classmate.
The company has a strong focus on sustainability and is known for its efforts in
environmental and social responsibility
Service Industries:
Service industries, also known as the tertiary sector, encompass a broad range of
economic activities that provide intangible value to customers. Unlike
manufacturing, service industries don't produce physical goods; instead, they offer
various services to individuals, businesses, or other organizations. Here are some
key characteristics and examples of service industries:
Key Features of Service Industries:
Intangibility:
Services are intangible and cannot be touched or held. They are experiences,
performances, or actions provided by people, systems, or machines.
Customer-Centric:
Many service industries are heavily focused on meeting the specific needs and
expectations of customers, as customer satisfaction is often a key determinant of
success.
`
Diversity of Sectors:
The service sector encompasses a wide array of industries, including finance,
healthcare, education, hospitality, information technology, transportation, and
more.
Human Interaction:
Human involvement is a common feature in service delivery, and the quality of
customer service often plays a critical role in customer satisfaction.
Innovation and Technology:
Technology plays a significant role in service delivery, with many service
industries adopting digital platforms, automation, and other technological
innovations.
Customization:
Services are often customizable to meet the unique needs and preferences of
individual customers.
Examples of Service Industries:
Financial Services:
Banks, insurance companies, investment firms, and financial advisors provide a
range of financial services, including banking, insurance, investment management,
and financial planning.
Healthcare Services:
Hospitals, clinics, doctors, and other healthcare providers offer medical services,
including diagnosis, treatment, and preventive care.
`
Education Services:
Schools, colleges, universities, and online learning platforms provide educational
services such as teaching, training, and skill development.
Information Technology (IT) Services:
Companies like IBM, Accenture, and TCS offer IT services, including software
development, consulting, system integration, and IT support.
Hospitality and Tourism:
Hotels, restaurants, travel agencies, and tourism services provide accommodation,
dining, travel, and leisure experiences.
Transportation Services:
Airlines, shipping companies, taxi services, and public transportation systems offer
transportation services for people and goods.
Professional Services:
Legal firms, consulting companies, accounting firms, and other professional
service providers offer specialized expertise and advice.
Retail and E-Commerce:
Retailers and online platforms provide services related to the sale of goods,
including product selection, purchasing, and delivery.
`
Service Companies:
1. Infosys Limited:
Industry: Information Technology and Services
Infosys is a leading global provider of IT consulting and services. It offers a wide
range of services, including software development, application maintenance,
system integration, and consulting. Infosys plays a crucial role in the digital
transformation of businesses worldwide.
Infosys is known for its emphasis on innovation and has dedicated research and
development centers to stay at the forefront of technology.
The company has a global workforce and operates in various industry verticals,
including finance, healthcare, retail, and manufacturing.
2. HDFC Bank Limited:
Industry: Banking and Financial Services
HDFC Bank is one of the largest private sector banks in India, providing a
comprehensive range of financial products and services. It caters to both retail and
corporate customers, offering services such as savings accounts, loans, credit
cards, and investment banking.
HDFC Bank is known for its robust digital banking infrastructure, providing
customers with online and mobile banking services.
The bank has a widespread network of branches and ATMs across India,
contributing to its strong retail presence.
`
Comparative Analysis
1. Two Manufacturing Industry companies:
I. Tata Motors Limited (Automotive Manufacturing):
Business Focus:
Tata Motors is primarily focused on the automotive industry, manufacturing a wide
range of vehicles, including passenger cars, utility vehicles, buses, and commercial
trucks.
Geographical Presence:
Tata Motors has a significant presence in India and operates globally with a
presence in the United Kingdom, South Korea, Thailand, South Africa, and
Indonesia.
Product Portfolio:
The company's product portfolio includes a diverse range of vehicles catering to
different market segments. Tata Motors has also entered the electric vehicle (EV)
market with models like the Tata Nexon EV.
Innovation and Sustainability:
Tata Motors has shown a commitment to innovation and sustainability, investing in
research and development to stay competitive. The company is actively exploring
environmentally friendly technologies.
`
II. ITC Limited (Diversified Manufacturing - FMCG and
Others):
Business Diversification:
ITC Limited is a diversified conglomerate with a presence in multiple industries,
including fast-moving consumer goods (FMCG), hotels, agri-business,
paperboards, and packaging.
FMCG Portfolio:
In the manufacturing sector, ITC is known for its FMCG products, which include
popular brands in segments such as food, personal care, and hygiene. Brands like
Aashirvaad, Sunfeast, and Bingo fall under its FMCG umbrella.
Sustainability and Social Responsibility:
ITC has a strong focus on sustainability and social responsibility, with initiatives in
areas such as environmental conservation and community development. It aims to
balance economic, environmental, and social goals.
Comparative Analysis:
Industry Focus:
Tata Motors operates exclusively in the automotive manufacturing industry,
whereas ITC Limited is a diversified conglomerate with a presence in FMCG and
various other industries.
`
Product Range:
Tata Motors focuses on manufacturing vehicles, offering a wide range from
passenger cars to commercial trucks. In contrast, ITC Limited manufactures a
diverse array of products, including FMCG items, agri-products, and packaging
materials.
Global Reach:
While Tata Motors has a global presence with operations in multiple countries,
ITC Limited's global footprint is relatively smaller, with a more pronounced focus
on the Indian market.
Diversification Strategy:
Tata Motors diversifies within the automotive sector, producing vehicles for
different market segments and exploring new technologies. ITC's diversification
strategy spans multiple industries, providing a buffer against economic
fluctuations.
Sustainability Initiatives:
Both companies emphasize sustainability, but their approaches differ. Tata Motors
focuses on sustainability in the automotive industry, especially with electric and
sustainable mobility. ITC emphasizes sustainability across its diversified
businesses, including agriculture and FMCG.
`
2. Two Services Industry companies:
I. Infosys Limited (Information Technology and Services):
Core Business:
Infosys is a global leader in information technology and consulting services. The
company provides services such as software development, maintenance, system
integration, and consulting to clients worldwide.
Revenue Streams:
Infosys generates revenue through service contracts, software development
projects, and consulting engagements. Its income is primarily tied to the demand
for IT services globally.
Global Presence:
Infosys has a substantial global presence with operations in various countries. It
serves clients in diverse industries, including finance, healthcare, retail, and
manufacturing.
Technology Focus:
As an IT services company, Infosys places a strong emphasis on technological
innovation. It continually invests in research and development to stay at the
forefront of emerging technologies.
Workforce:
Infosys has a large and diverse workforce, including skilled professionals in areas
such as software development, data analytics, artificial intelligence, and digital
transformation.
`
II. HDFC Bank Limited (Banking and Financial Services):
Core Business:
HDFC Bank is one of the largest private sector banks in India, providing a wide
range of financial services. Its offerings include retail banking, wholesale banking,
and treasury operations.
Revenue Streams:
HDFC Bank generates revenue from interest income on loans, fees and
commissions, investment banking, and other financial services. Its income is
closely tied to the overall economic conditions and financial markets.
Geographical Presence:
While HDFC Bank is based in India, it has a vast network of branches and a
growing international presence. It serves retail and corporate clients across various
segments.
Technology Integration:
HDFC Bank has been at the forefront of technology adoption in the banking sector.
It has invested in digital banking infrastructure, mobile banking, and online
services to enhance customer experience.
Risk Management:
Being a financial institution, HDFC Bank places significant emphasis on risk
management. This includes credit risk, market risk, and operational risk
management to ensure financial stability.
`
Comparative Analysis:
Industry Focus:
Infosys operates in the information technology and consulting services industry,
catering to a diverse set of clients. HDFC Bank, on the other hand, is in the
banking and financial services sector.
Global vs. Regional Presence:
Infosys has a more global footprint, serving clients worldwide. HDFC Bank's
primary operations are in India, with a growing international presence.
Revenue Models:
Infosys generates revenue through service contracts and IT projects, while HDFC
Bank's revenue is derived from interest income, fees, and commissions related to
financial services.
Nature of Services:
Infosys provides intangible services related to technology, consulting, and software
development. HDFC Bank provides financial services, which involve a
combination of tangible and intangible elements.
Market Sensitivity:
The financial performance of Infosys is closely linked to the demand for IT
services, technology trends, and global economic conditions. HDFC Bank's
performance is influenced by interest rates, economic growth, and financial market
dynamics.
`
3. One Manufacturing and One Service
• Tata Motors Limited:
Product Portfolio:
Tata Motors offers a diverse range of vehicles, including compact cars, sedans,
SUVs, commercial vehicles (trucks and buses), and electric vehicles. Some well-
known brands include the Tata Tiago, Tata Harrier, and Tata Nexon.
Research and Development:
Tata Motors has a dedicated focus on research and development, investing in
technologies related to electric and sustainable mobility. The company is actively
involved in creating innovative solutions for the automotive industry.
Global Operations:
Tata Motors has a global footprint with operations in the United Kingdom (Jaguar
Land Rover is a subsidiary), South Korea, Thailand, South Africa, and Indonesia.
This global presence enables the company to cater to diverse markets.
Sustainability Initiatives:
Tata Motors has demonstrated a commitment to sustainability. The introduction of
electric vehicles, such as the Tata Nexon EV, reflects the company's efforts to align
with global trends toward greener mobility solutions.
`
Financial Performance
Tata Motors faced challenges, including the impact of the COVID-19 pandemic on
the automotive industry. However, the company continued its focus on cost
optimization and efficiency measures.
• Infosys Limited:
Service Offerings:
Infosys provides a wide range of information technology and consulting services,
including application development, system integration, cybersecurity, data
analytics, and artificial intelligence. The company caters to clients across
industries, including finance, healthcare, retail, and manufacturing.
Global Delivery Model:
Infosys operates on a global delivery model, with service delivery centers in
various countries. This model allows the company to provide cost-effective
solutions, leveraging a skilled global workforce.
Digital Transformation:
Infosys is at the forefront of digital transformation initiatives. The company assists
clients in adopting digital technologies to enhance efficiency, improve customer
experiences, and stay competitive in the rapidly evolving business landscape.
Employee Base and Talent Development:
Infosys has a large and diverse workforce, including professionals with expertise in
various domains. The company places significant emphasis on talent development,
training, and skill enhancement to meet the evolving needs of the IT industry.
`
Financial Performance :
Infosys reported stable financial performance, with a focus on digital services
driving revenue growth. The company continued to expand its client base and
strengthen its position in the global IT services market.
Comparative Analysis:
Revenue Models:
Tata Motors' revenue is largely driven by the sale of physical products (vehicles),
while Infosys' revenue is derived from service contracts, digital solutions, and
consulting engagements.
Market Sensitivity:
Tata Motors is sensitive to factors such as consumer demand for vehicles,
economic conditions, and manufacturing efficiency. Infosys is influenced by the
demand for IT services, technological trends, and global economic conditions.
Technological Focus:
Tata Motors' technological focus is on automotive engineering and manufacturing
processes. Infosys' technological focus is on IT, software development, and digital
solutions.
Human Capital:
Tata Motors relies on a workforce skilled in manufacturing and engineering.
Infosys relies on a workforce skilled in IT, consulting, and digital technologies.
`
Global Presence:
Both companies have a global presence, but Tata Motors' global operations involve
physical manufacturing facilities and distribution networks, whereas Infosys
delivers services digitally.
Working Capital Policy:
Manufacturing Industry
1. Tata Motors Limited (Automotive Manufacturing):
➢ Inventory Management: Given the nature of the automotive industry, Tata
Motors may have a focus on efficient inventory management. This involves
optimizing the levels of raw materials, work-in-progress, and finished goods
to balance production requirements with cost considerations.
➢ Receivables Management: Managing receivables is crucial in the
automotive sector. Tata Motors may employ strategies to ensure timely
payments from distributors and dealers, possibly through credit terms and
monitoring payment cycles.
➢ Payables Management: Efficient management of payables involves
negotiating favorable terms with suppliers while ensuring timely payments.
This helps optimize cash flows and maintain good relationships with
suppliers.
➢ Cash Conversion Cycle: Tata Motors may aim to minimize its cash
conversion cycle, which is the time it takes for the company to convert its
investments in raw materials into cash from sales. A shorter cash conversion
cycle can enhance liquidity.
`
2. ITC Limited (Diversified Manufacturing - FMCG and Others):
➢ Inventory and Supply Chain Management: ITC, being diversified, may
focus on managing inventories across its various business segments,
including FMCG. Effective supply chain management helps optimize
inventory levels and reduce carrying costs.
➢ Receivables and Credit Management: In the FMCG sector, managing
receivables is critical. ITC may have policies in place to monitor credit
terms, credit limits, and collections to maintain healthy cash flows.
➢ Vendor Negotiations: ITC's diversified nature involves interactions with
various suppliers. Negotiating favorable payment terms with suppliers and
maintaining strong vendor relationships can contribute to effective working
capital management.
➢ Cash Flow Forecasting: Both companies may engage in rigorous cash flow
forecasting to anticipate and plan for future cash needs. This involves
understanding cash inflows and outflows to maintain liquidity.
`
Services Industry
1. Infosys Limited (Information Technology and Services):
➢ Cash Management: Infosys, being an IT services company, may
emphasize efficient cash management. This involves optimizing cash
conversion cycles and maintaining sufficient liquidity for day-to-day
operations.
➢ Receivables Management: Given the nature of IT services, Infosys may
have policies to manage receivables effectively. This includes
monitoring client credit terms, invoicing promptly, and implementing
robust collection procedures.
➢ Payables Management: Efficient payables management involves
negotiating favorable terms with suppliers and managing payment
schedules. Infosys may prioritize maintaining strong relationships with
its vendor ecosystem.
➢ Technology Investments: As an IT company, Infosys may strategically
invest in technology to automate and streamline working capital
processes, enhancing efficiency and reducing manual interventions.
`
2. HDFC Bank Limited (Banking and Financial Services):
➢ Liquidity Management: Liquidity is critical for a financial institution
like HDFC Bank. The bank may have policies in place to manage
liquidity risks effectively, ensuring that it can meet its short-term
obligations.
➢ Credit Risk Management: HDFC Bank's working capital policies
likely involve robust credit risk management practices. This includes
assessing the creditworthiness of borrowers and monitoring the quality
of the loan portfolio.
➢ Regulatory Compliance: Being a bank, HDFC Bank must comply
with various regulatory requirements. Its working capital policies may
include measures to ensure compliance with central bank regulations
and other financial standards.
➢ Treasury Operations: HDFC Bank may engage in active treasury
operations to manage its cash flows, investments, and market risks
effectively. This involves optimizing the use of financial instruments
and managing interest rate and currency risks.
