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Fund Management!
By

Chakrapani Srinivasa

1

About the Author
Chakrapani Srinivasa (Padmaja), Freelance journalist from India possesses Bachelor degree in
Engineering (B
...
He has
worked as Associate Editor of ‘Naradar’ fortnightly journal in Chennai, India
...


He has written many articles and e books in English through Smashwords Inc, Kindle Direct
Publishing, Atlanta Publications, Cooperjal publications (UK), lulu
...
com,
shvoong
...
com, Smashwords Publications (USA) and a news journal (Germany)
...


Contributed articles, short stories, cartoons, jokes, and travelogues in Tamil, which were
published in leading journals like Ananda Vikatan, Kumudam, Savi, Kalki, Dinamani Kadhir,
Dinamani daily, Idhayam Pesukirathu, Naradar,Thisaigal, etc
...
com
and Notion Press

Amazon, Draft2Digital and Smashwords have published several books in English
...


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Preface
Knowing about Fund Management in an organization is an art
...


Life saving drug of all organizations is the Working Capital
...


Hence utmost care and significance is given to this topic in an organization while meeting
our long term and short term commitments especially under inflationary regime
...


Routine activities in an organization depend wholly on this capital
...


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Contents
Working Capital
...
6
Inflationary Regime
...
9
Raw Materials
...
10
Indigenization
...
11
Motivation
...
12
Payment to Creditors
...
13
Peaceful Industrial Relations
...
13
Purchase Procedures
...
14
Social Responsibilities
...
15
Immediate Mobilization
...
16
Political Instability
...
17
Creation of Sound Goodwill
...
18
Period of Slump
...
18
Optimum Capital Structure
...
19
Simplicity
...
20
Intensive Use
...
21
Contingencies
...
22
Cash Ratio depends upon
...
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Extractions from 40th Annual Report of this PSU
...

It is essential that every finance manager know the intricacies in Funds Management
...

Breathing in and out is made feasible with this Working Capital only
...

A few words and definitions will suffice before studying in detail
...

To run the show effective in all spheres of the management, the Cash Readiness plays a
vital role
...


Above bifurcation in Working Capital is as follows:
-Working capital- gross working capital -current assets
-Net working capital- current assets- current liabilities

For operating purpose total Current Assets (Gross Working Capital) constitute the total funds
and an organization is more concerned with it
...


With permanent source of funds like:
-Owners capital
-Debentures
-Long term debt
-Preference capital
-Retained earnings
This forms the Qualitative aspect while Gross Working Capital figures out in a
Quantitative way
...


From the above definitions and notions we see that the production is based on
procurement and availability of raw materials
...

Importing Oil is a very costly affair
...


Also coal imported from Australia, Indonesia, etc is a costly affair in terms of

inflationary trends
...
The calorific value is adequate (2500 KCal) to run the show
...
Overhead expenses are so controlled, as
this raw material is utilized and excavated in large quantities
...
5 mt to 10
...
Based on these expansions modernizations of
conveyor belt (2400 mm width conveyor belt-steel chord) were introduced for rapid transport of
lignite
...


Hence additional

Thermal Station – II was installed and extension of Thermal Station – I (from 600 MW to 820
MW) was taken up
...


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The funds for these were floated from KFW, Germany for erection of giant excavators
(1400 Ltrs) and sophisticated Spreaders which will speed up the production of Lignite
...


With funds given by Government of India, exploration works were taken up in
Mannargudi, Kudigadu Block, Jayamkondan, Rajasthan, Gujarat etc
...


Hence the organization was able to achieve a record profit of Rs270 crores, with highest
Plant Load factors of 71% (against the national norm of 57%) and largest quantum of lignite
excavated 172 mt
...

Hence special cell has been started to monitor energy conservation to monitor Unit
Auxiliary Consumption, power factor correction etc
...


All samples of Lignite are tested for Gross Cal value, Net Cal Value, Moisture Content,
Fixed Carbon, Fly ash % etc to monitor the quality and improvement in production
...


Quality Circle

This circle of members meets every month and discusses the possibilities of improving
Quality and Production
...


Persons, who apprise of new methods, innovations are honored and gifted
...


Motivation

Wages play a vital role in motivation
...


Other motivations are:
-

Incentives

-

Bonus

-

Leave Travel Concessions

-

Medical Amenities at free of cost

-

Subsidiary Canteen

-

Recreation

-

Awards

-

Free Education for Children on merit (till P
...
Level)
11

-

Liberal Loan Schemes (House building, Vehicles, Marriage etc)

All these above factors influence production as the persons engaged in it are motivated and
released from tension and strain
...


Or else high dues will cause drop in working capital and the net result will affect the
organization badly
...


Hence Trip Analysis Committee has been formed for any rescue of the plant
...


Payment to Creditors

Thousands

of agencies local, national and international involve in our organization

activities
...

Hence even a few month delays in payment will create a bad reputation and tarnish the goodwill
of our organization
...


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Hence utmost care is taken in this regard
...


Optimum utilization of human resources to achieve higher production and productivity
are the aims every year
...

A mutual trust and confidence has been built
...


Welfare Schemes
-

Social Welfare

-

Community Welfare

-

Medical Services

-

Family Welfare

-

Afforestation
13

Above schemes were taken up for the betterment of living standards of working force,
which will uplift production and enable us to face the working capital at times of inflationary
regime
...


Purchase Procedures

The purchase procedures have been so designed to see that only the desired and most
wanted are purchased and materials required later are postponed
...


Especially in the inflationary trend this purchasing procedure will do a lot for the working
capital safety
...


Holding Cash

Holding cash phenomenon is a vital factor for an organization as well as for financial
personnel’s
...


Other motives for holding cash may be classified as follows:

Social Responsibilities

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Every organization has a strong linking with social responsibilities
...


The flue gas from our Thermal Station caused air pollution, which affected the living all
around it
...
Expenses had to be borne by the management to
safeguard the public
...
Hence this PSU had to shell out cash for bore wells and for canalizing immediately the
pumped out water from mines I & II
...


Recent spreading of AIDS in India caused the management to spend on AIDS Awareness
Programs for educating the public
...


For the demands of the public, a mobile library had to be introduced and a fund was
allocated for this as an educational development program
...


Enforcement of Policy Changes

The incentive policy of the management was changed at the time of Deepavali festival
...


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The salary/wage settlement issue was pending for a long period and the management’s
policy was altered and deferred from giving the due amount to the employees
...
Cash was needed in this juncture to face the situation
...


Hence huge funds had to be mobilized immediately to excavate from a distant, critical
area
...


Safety

A safe working place is a precious working place
...


Chimney erection was going on
...


So also in the Ash bund which resulted in flow of slurry water to nearby village fields
...


Seminars, Symposiums, VIP visits etc are also factors, which demand cash in hand
...
Hot line phone connections, helipad, and area reconstructions were carried
out with cash in hand
...


Political Instability

This aspect has a fluctuating impact on the organization and ready cash had to be kept to
overcome it
...


Morality

Sufficient cash in hand will enhance the morality and picture the organization in the
minds of the public and employee in the form of a sound and safe organization
...


Any lapse will tarnish the image which will be difficult to set right
...
Hence loan sanctioning of these organization very much depend on
the cash in hand management of the organization
...

Cash Discount

Full payment enables us to get Cash Discount
...


This adds to profitability of the concern
...


Our goal is to achieve smooth running of the organization
...


Optimum Capital Structure

Gaining firm ground in the financial aspects, an organization is bound to have a sound
Capital Structure
...


The Long Term Sources of Funds

-

Debentures

-

Long term debt

-

Preference share capital

-

Equity share capital

-

Reserves

-

Surpluses

A proper plan to develop this Capital Structure will pave a way of success and prosperity to
the organization
...


While formulating the capital structure our organization monitors the following aspects
genuinely:
-

Simplicity

-

Foresight

-

Intensive use

-

Elasticity

-

Contingencies Anticipated

-

Liquidity

-

Economy

-

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Simplicity

Our capital structure is made simple and free from complication or suspicion
...


Further the financial plan has been drafted in terms of the purpose for which the
enterprise is organized
...
With definite goal in mind and with
definite plans to achieve them, the capital structure has been formed
...


The scopes of operations were dealt in depth
...


Life Extension Program of Thermal Station was expected to fetch several millions of
revenue
...


Intensive Use

All

care was taken that there should neither be surplus nor deficit of capital and

procurement of adequate capital was aimed at and no stone was left unturned to make best use of
it
...
New project proposals at Mannargudi, Kudigadu, Rajasthan, and
Gujarat were executed with skill and care
...


For want of expansions, shares were disinvested to various Financial Institutions, Mutual
Funds, and Nationalized Banks etc
...

It’s a ticklish job and needs statesman like dexterity to tackle reduction in capital
...


Contingencies

Lifelong smooth sailing is not possible and guaranteed; it is likely that contingencies
may arise
...


In slump days shares will not be attracted due to lack of dividends
...


Hence utmost care is taken to forecast the type of contingencies our organization will be
called upon to face and how they can be provided for
...
The Board of
Directors therefore constrained not recommending declaration of dividend for this year
...


It means that a reasonable percentage of the current assets must be kept in the form of
liquid cash
...

Adequate liquidity will be necessary to absorb shocks of its normal operations
...


The

interests were paid to the Debenture holders but the dividends were not paid as they were used
for ongoing projects as mentioned earlier
...

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Or else to raise funds it has to go for issue of shares or other debts
...


It has also not accepted Fixed Deposits from the Public so far
...


Extractions from 40th Annual Report of this PSU:
-

Share capital: Rs
...
1796
...
104
...


-

Offer of company’s shares: Rs
...


-

Issue of bonds: Rs 1019
...


-

It has totally avoided taking loan from the Government and it is managing with its own
resources dexterously and prudently

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