Analysis of Working Capital Management of Chamundeshwari Sugar Limited, Mandya, Karnataka

Abstract

This paper studies working capital management practices at Sri Chamundeswari Sugars Limited, a sugar company headquartered in Karnataka, India. Analysis is based on recent financial statements for fiscal years 2022-23 and 2023-24. Efficiency of components of working capital such as inventories, receivables, payables and cash conversion cycles is evaluated and their effect on profitability is considered in light of a highly regulated industry facing big structural challenges. Results show that the company has greatly improved its net working capital position by reducing deficit from ₹172.167 crore to ₹177.921 crore. However, interest coverage ratio remains very low at 1.08 and operating profit margins have fallen from 1.60% to 0.97%. Persistent mismatch between price received for sugarcane (FRP) and minimum support price (MSP) of sugar at ₹31/kg since 2019 is identified as the main cause of stress on working capital. Despite generating strong operating cash flow of ₹882.522 crore in FY 2023-24, high leverage (Debt to Equity ratio of 2.57) and rising input costs continue to limit profitability. This research contributes empirical evidence on working capital management in sugar processing and offers policy recommendations including revision of MSP to ₹36 to 40 per kg and realigning ethanol prices to ensure sustainability of this sector and safeguard livelihoods of farmers.