Case Study
“A study of
Working Capital Management -Policies and Practices at SABMiller India”
Author Dr Anubha srivastava
Sr. lecturer (Finance)
Amity Business School
Noida
Co-Author
Pankaj Ishpujani
Management trainee
HCL B Serve
Noida
Page | 1
Summary
Indian beer market is valued at INR 41 billion for the year ending 31st march 2010 and it is expected to
grow at 17.2% for the next year. Indian growth rates compare favorably with the global beer industry.
Foreign brewers are eyeing the Indian beer market which is largely untapped and has growth potential.
Apart from providing strong growth, India also provides attractive profit margins due to the
consolidated nature of the industry. The effect of this consolidation can be seen in the fact that beer
prices in India rarely go down with the competitive pressures of new product or brand launches. In the
past, whenever beer prices have gone down, it has been due to either the lowering of duties by the
government or the deregulation of distribution (leading to lower margins for the distribution channel
partners). The Indian beer market has been growing rapidly over the last 10 years, due to the positive
impact of demographic trends and expected changes, like:
 Rising income levels
 Changing age profile
 Changing lifestyles
The case study attempts to calculate various ratios and working capital requirement of SABMiller India
and compare it with the market leader (UBL), Since More than 80% of the Indian Beer market is
controlled by two major players’ united breweries limited (48%) and SABMiller (37%). The project is
completed at PALS Unit of SABMiller India which is situated in Aurangabad. This study includes
secondary data analysis for which data is being collected through the annual reports of both the
companies. The information gathered is thoroughly discussed with the concerned employees and
experts.
.
Page | 2
Introduction -Globally, over 133 billion litres of beer is sold each year. In comparison, the Indian beer
Industry contributes a meagre 1.28% of the global sales. The industry has been witnessing on an
average, a steady growth of about 10% per year over the last ten years with volumes crossing 172
million cases in 2008-2009 from 70 million cases in 2002. With a relatively younger population and
income levels on the rise, India is seeing an increase in the popularity of beer. Consumption of beer in
India is also constrained by lack of adequate market infrastructure. In China for instance, there is one
outlet for every 300 persons. In contrast, India has one outlet for every 21,000 persons hampering free
availability of beer. Total consumption of beer in China grew by 33.56% between the years 2000 and
2006 to reach a total market volume of 30.47 billion litres. With a per capita consumption of 25 litres,
China is one of the largest beer consuming nations in the world. Though beer is a milder form of
alcohol, it is taxed by most states on the same basis as Spirits. The charge is on absolute alcohol basis.
Globally on per unit of alcohol basis, beer bears approximately 50% of levies imposed on Spirits
whereas in India taxation is regressive on beer. India is predominantly a hard liquor market and beer
has a minority preference amongst those who consume alcohol. Typically the size of beer volumes in
most countries is 7 to 10 times larger than spirits, whereas in India, spirits is larger. The alcoholic
beverage industry in India operates under a very complex regulatory environment which is the biggest
challenge. In addition to restrictions on advertising, distribution infrastructure and retailing, varied tax
structures, controlled pricing and licensing make operations more complex, consequently leading to
higher costs, though providing entry barriers for new entrants as well..
.
Company Snapshot: SABMiller India, Business Highlights

Brands: Hayward’s 5000, foster’s , Royal challenge, Knock out, Hayward’s Black, Peroni

SABMiller India is a subsidiary of SABMiller PLC and registered in India as SKOL breweries

Business strategy – SABMiller has ten owned and one contract brewery located strategically
to serve the beer market efficiently

The company has 37% market share and stands in the second position.

The company has invested about INR 1250 mn in the past two years for upgrading its breweries
to global standards.
This case study has been divided into following sections
Section I
Company profile
Page | 3
Section II
Nature of Problem
Section III
Objectives of the study
Section IV
Area of consideration
Section V
Some key leanings
Section VI
Conclusion & Recommendation
Section I -Company profile
SABMiller PLC is a Public ltd which was founded in the year 1895 in Johannesburg, South African
Republic. It is one of the world’s largest brewing companies with distribution interests in six
continents. The headquarters of the company is in city of west minster, London, United Kingdom. The
CEO is Graham Mackay and Chairman is J. Meyer Kahn. Company has more than 200 brands of beer
with the total employee strength of 70000. SABMiller is listed on London and Johannesburg stock
exchanges with a market value of 21 billion Pounds.
The Company is widely spread across the six continents
 Latin America- In Latin America Company has 17 breweries and 16 bottling plants with
approximately 25000 employees.
 Europe- In Europe Company has 23 breweries with approximately 16000 employees.

North America- In North America Company has 8 major breweries with approximately 8600
employees

Africa and Asia – In Africa and Asia Company has 41 breweries and 14 bottling plants with
an approximately 14000 employees.

South Africa – In South Africa Company has 7 Breweries and 7 bottling plants with
approximately 130000 employees.
Historical Background
-This company entered in the Indian market by acquiring Narang
breweries and has since acquired several breweries and brands , the most notable being its
acquisition in June 2001 , of Mysore breweries (with Knock out Brand ) and in May 2003 of Shaw
Wallace ‘s Beer brands (Royal Challenge and Hayward’s
Page | 4
SABMiller India which is registered with the name SKOL Breweries ltd in India was incorporated on
18th November 1988 as a public limited company under the companies Act 1956; it is a subsidiary of
SABMiller Plc and is primarily engaged in the business of brewing, packaging, distribution, marketing
and sale of beer. SKOL Breweries is one of the largest manufacturers of variety of beer brands in
India. The company has approximately 37 %( 2009) market share and its biggest competitor is United
breweries limited with a 48% (2009) market share.
Core Brands of Skol Breweries
Hayward’s 5000 -Launched in 1983, Hayward’s 5000 is synonymous with strong beer and is one of
the largest Selling beers in India. The hallmark of an original and authentic strong beer, it perfectly
combines strength and quality to meet the high expectation of today’s demanding consumers. The
Brand has signed up Bollywood superstars Mr. Sanjay Dutt and Mr. Sunil Shetty as brand
ambassadors. The macho image of the stars goes well with the strong image of the Brand. The alcohol
content in Hayward’s 5000 beer is approximately 7.5%.
Royal Challenge-Launched in the year 1983, Royal Challenge Premium lager is the second largest
selling mild beer in India. The brand positioning is that this is the beer for the discerning consumer
who has the confidence to make choice based on superior taste and knowledge and stand apart rather
than be part of a crowd. It offers a difference with an edge besides its international class packaging,
premium image and path breaking advertising, what sets the brand apart is a distinctly smooth and easy
flowing taste.
Knock out-Launched in 1984, knock out has clearly carved for itself a distinctive segment- “The
Strongest Beer” and is the 3rd largest selling strong beer brand in the country. It has continued to
perform well. The brand has strong presence in most southern and central states in India. The brand
has Kannada action hero Mr. Darshan as its ambassador.
Foster’s-SABMiller acquired Foster’s brand in 2006-07. The brand had not been performing up to its
potential before it was taken up by the SABMiller on account of production and distribution
constraints. The brand has not only stemmed but the brand has grown over 45%. The Brand is now
available all over India. Foster’s is a clear leader in the premium segment both in volume and image
terms. It leads the development of what we call the worth more segment in India. Foster’s market share
Page | 5
YTD March 09 was 11.9% of the mainstream mild beer industry which was a 2.8% market share gain
over the previous year.
Indus Pride-The brand was launched in the year 2008 – 09 it has performed very well in Rajasthan. In
its very first year it has captured 20% of the market. It has also been well received in Karnataka, where
it was launched in March 2009. Indus pride is a mild segment beer and it is India’s first 100% maltbased beer along with a 100% malt- based beverage. This beer has been specially developed in
accordance with research findings to suit the Indian tastes.
Peroni -Company introduced its global brand Peroni in Mumbai in 2008. Peroni Nastro Azzurro is an
intensely crisp, dry and refreshing lager, with a clean character and clarity. It is expertly brewed in
Italy to the original recipe in Italy since 1963 and has an unmistakable touch of Italian style. This
premium beer uses the finest variety of spring- planted barley and the highest quality maize, malts and
hop. It has been very well received in the market. In Mumbai it already has 35% market share of the
imported beer market. The brand in India has become the symbol of Italian style in the beer market. It
is now available in the cities of Mumbai, Pune, Delhi and Bangalore. Peroni is the most premium beer
in the Indian beer Industry.
BREWING PROCESS AT PALS
Brewing: The process of producing beer from malted grains is called brewing.
Brewery: - The place where beer is produced, processed and packaged is called a brewery.
Brew houses at PALS: There are two Brew houses at PALS, one is ALFA LAVAL Brew house (old) and the other is
BRIGGS Brew house (new). The old Brew house has an adjunct cooker, a MCV, a lauter tun, a wort
kettle and a whirlpool. The brew length is of 110 HL. High Gravity brew can produce up to 145 HL of
beer. The new Brew house has a MCV, a lauter tun and two wort kettles cum whirlpools. The brew
length is of 440 Hl. High gravity brew can produce up to 500 HL of beer.
The new Brew house is operated through PLC (Programmable Logical Control). The set points of
various parameters such as time, temperature, pressure, flow etc are given to the PLC according to
which the operation is carried out and the whole process is monitored through SCADA (Supervisory
Control and Data Acquisition) by the brewer.
Section II-Nature of Problem
In this case study an effort has been made to find out the practices and process adopted by SAB Miller
India for working capital management. The inventory, cash and debtor management along with
Page | 6
creditors management has been analyzed and compared to evaluates the and compare the liquidity and
efficiency of the company with its rivals Initially the entire brewing process and the financial position
of the company were observed. After that the various problems faced by the units are discussed in this
case , Further it is a descriptive and analytical case in nature.
“More business fails for lack of cash than for want of profit”. Efficient management of working
capital is one of the most important conditions for the success of an enterprise. Better management of
working capital means management of working capital in such a way that an adequate amount of
working capital is maintained for the smooth functioning of a firm and for the fulfillment of the two
most important objectives of any firm and these are profitability and liquidity. While inadequate
amount of working capital impairs the firm’s liquidity and holding of excess working capital results in
the reduction of the profitability. But the proper estimation of working capital actually required, is a
difficult task for the management because the amount of working capital varies across firms over the
periods depending upon the nature of the business, production cycle, credit policy, availability of raw
material etc.
Section III-Objectives of the study
Objectives -The objectives of the project are To study the financial position of SABMiller India and compare it with market leader (UBL)
 To comparative analysis between SAB Miller and UBL
 To calculate the gross and Net working capital requirement of both the companies
 To study the trend of current assets and current liabilities over the last three years and do a
comparative analysis
Section IV -Area of consideration
Need for working capital- The basic objective of financial management is to maximize shareholders
wealth. For this it is necessary to generate sufficient profits. The extent to it, which the profit can be
earned, largely depends on the magnitude of sales. However sales do not convert into cash. There is
invariable the time gap between the sales of goods and receipts of cash. There is, therefore, a need for
working capital in the form of current assets to deal with the problem arising. Out of the lack of
immediate realization of cash again goods sold. Therefore sufficient working capital is necessary to
sustain sales activity. Working capital is needed for the following purpose:
 For the purchase of raw material, components and spares
Page | 7
 To incur day to day expenses and overhead costs such as fuel, power and office expenses, etc.
 To meet selling costs as packing, advertisement etc
 To provide credit facilities to the customers.
 To maintain the inventories of raw material, work in progress, stores and spares and finished
goods.
 To pay wages and salaries
RATIO’S ASSOCIATED WITH WORKING CAPITAL MANAGEMENT
SABMiller India (Rs)
S.NO
1
PARTICULARS
2008-09
2007-08
2006-07
OPENING STOCK
1,183,482,865
774,519,494
539,306,405
2
CLOSING STOCK
1,650,081,511
1,183,482,865
774,519,494
3
AVERAGE STOCK
1,416,782,188
9,790,011,80
656,912,950
4
NET SALES
13,160,176,239
10,365,641,037
8,644,700,383
5
NET PROFIT
(648,759,941)
344,777,187
401,891,802
6
SUNDRY DEBTORS
3,390,344,214
2,536,219,383
1,484,582,230
7
SUNDRY CREDITORS
1,763,037,875
744,667,154
920,907,472
8
NET CREDIT PURCHASES
5,830,587,436
4,128,183,757
9
COST OF GOODS SOLD
6,839,899,584
3,059,852,296
2,197,111,990
10
NET WORKING CAPITAL
1,242,611,005
683,245,298
3,647,457,932
7,306,498,230
Page | 8
11
CURRENT ASSETS
6,104,394,695
4,741,406,233
7,091,443,760
12
CURRENT LIABILITIES
4,861,783,690
4,058,160,935
3,443,985,828
S.NO
1
SABMILLER RATIO’S
Current Ratio
2009
1.26
2008
1.17
2007
2.06
2
Liquidity Ratio
0.79
0.74
1.74
3
Inventory turnover Ratio
9.28
10.59
13.16
4
Debtor turnover ratio
4.44
5.16
5.83
5
Creditor Turnover ratio
5.82
7
5.53
6
Average collection period
81 days
70 days
62 days
7
Average payment period
62 days
51 days
65 days
9
Working capital turnover ratio
10.59
15.17
2.37
10
Current asset turnover ratio
2.16
2.19
1.22
11
Stock working capital ratio
1.33
1.73
0.21
Page | 9
UNITED BREWERIES LIMITED (Rs)
S.NO
PARTICULARS
2008-09
2007-08
2006-07
1
Opening stock
1,169,167,000
1,123,634,300
735,963,000
2
Closing stock
1,630,376,000
1,169,167,000
1,123,634,300
3
Average stock
1,399,771,500
1,146,400,650
929,798,650
4
Net Sales
16,982,709,000
13,690,611,000
9,984,247,000
5
Net profit
624,940,000
624,725,000
650,918,000
6
Sundry debtors
4,699,634,000
3,244,040,000
2,148,312,000
7
Sundry creditors
1,208,637,000
1,205,662,000
898,379,000
8
Net purchases
8,640,762,000
6,450,325,700
4,892,839,300
9
Current assets
7,710,487,000
5,257,330,000
5,520,310,000
10
Current liabilities
2,065,734,000
2,285,431,000
2,026,424,000
11
Net Working capital
5,644,753,000
2,971,899,000
3,493,886,000
Page | 10
UNITED BREWERIES LIMITED RATIO’S
S.NO
RATIO’S
2009
2008
2007
1
Current Ratio
3.73
2.30
2.72
2
Liquidity Ratio
3.18
1.61
2.09
3
Inventory turnover Ratio
12.13
11.94
9.79
4
Debtor turnover ratio
4.28
5.07
5.79
5
Creditor Turnover ratio
7.16
6.13
5.45
6
Average collection period
84 days
71days
62 days
7
Average payment period
50 days
59days
66 days
8
Working capital turnover
ratio
3.00
4.60
2.85
9
Current asset turnover
ratio
2.20
2.60
1.81
10
Stock working capital
ratio
0.29
0.39
0.32
WORKING NOTES
1. Net sales include sale of traded goods and excludes excise duty and discounts.
2. For the purpose of calculating current assets, in loans and advances only advances
recoverable in cash or in kind or for value to be received, prepaid expenses, rental deposit
and other deposit have been taken as short term advances.
Page | 11
3. The formula used to calculate net purchases is
Closing stock – opening stock + Cost of goods sold = Net purchases
4. Here net purchases is assumed to be net credit purchases
5. In case of SABMiller’s COGS the cost of container’s is include which is given only for
2008-09. Henceforth the same proportion of containers has been taken for the year 2007-08
and 2006-07.
6. All the purchases and sales are assumed to be on credit bases
NET SALES
The above graph explains the Net Sales pattern of SABMiller, UBL, the Market size from 2007 till
2009 and also the Estimated Market size for 2010 and 2011. For the years 2010 and 2011 the
estimated Market size is Rs. 4100 crores and 4800 crores respectively which means a continuous
growth of 17%. For Year Ending 2007- Total market size was Rs. 2350 crores. SABMiller’s Net Sales
were Rs 864 Crores (36.7%) and UBL’s Net Sales were Rs. 998 Crores (42.4%).Clearly Both UBL and
SABMiller dominated Indian Beer market. For Year Ending 2008- Market Size grew to Rs 3000 crores
from Rs 2350 making it a 36% growth in Net sales over the previous year. During this period Sales of
SABMiller crossed Rs. 1000 crores (1036) leading to a 20% growth over the previous year. At this
point SABMiller’s Market share was 34.5% declining from 36.7%. UBL’s Net Sales increased from
Rs. 998 to Rs. 1369 crores leading to 37% growth of Sales over previous year making a total of 45% of
their share in the market. Clearly UBL’s growth during the year was better then the industry growth
hence their market share improved and on the other hand SABMiller’s growth was less than the
industry growth. Hence their market share declined. For Year Ending 2009 - Total market size
increased to Rs. 3500 crores from Rs. 3000 crores which made an approximately 17% increase over the
Page | 12
previous year. SABMiller’s Net Sales increased to Rs.1316 crores from Rs. 1036 crores leading to a
27% growth over the previous year. Hence SABMiller’s market share improved to 37.5% from
34.5%.Similarly UBL’s Net Sales Increased to Rs. 1698 crores from 1369 crores leading to a 24%
growth. UBL’s market share rose to 48.5% from 45%.Clearly both companies’ Share increased more
than the industry growth therefore market share also improved.
NET PROFIT
The above graph explains the Net profit pattern for both the companies for the years ending 2007,
2008, 2009. This is a widely used measure of performance and comparable across companies in similar
industries. For the year 2006-07 – SABMiller made a Net profit of 40.18 crores which was around
4.65% of Net sales and UBL’S Net profit was 65.09 crores which made around 6.52% of Net sales. For
the year 2007-08 – SABMiller made a Net Profit 34.47 crores which was around 3.32% of Net sales
and UBL’s Net profit was 62.47 crores which made around 4.56% of Net sales. For the year 2008-09
– SABMiller’s Net Loss was 64.87 crores which made around 4.92% of Net sales and UBL’s Net
profit was 62.49 crores which made around 3.68% of Net sales. Clearly For both the companies the
percentage of Net profit is decreasing however UBL has been outperforming and making a good
amount of Net profit. UBL has managed to squeeze in profits in the tough time which holds the key for
them and Similarly SABMiller’s Net profit also declined however for 2008-09 it was worst where the
company made a Net loss of 64 crores.
CURRENT ASSETS OR GROSS WORKING CAPITAL
Page | 13
The above graph shows the pattern of Current assets or gross working capital for SABMiller and UBL
for the year ending 2007, 2008, and 2009. For the year ending 2007 Current assets were 709 crores for
SABMiller as compared to 552 crores for UBL. The reason for such high Currents assets for
SABMiller is the huge amount of cash and bank balances maintained by the company. Then next year
for SABMiller it came down to 474 crores and 526 crores for UBL. During this year companies made
huge investments in existing plant and machinery upgrading their capacity due to this the cash reserves
came down completely However again the investments in current assets came up for the year 2008-09
for both the companies it was because of increase in the debtors which were consistently increasing for
UBL. Sufficient working capital helps the company to avoid stoppage of work and effects on
profitability.
CURRENT LIABILITIES
Page | 14
The above graph explains the current liabilities pattern for SABMiller and UBL for the year ending
2007, 2008, and 2009. The current liabilities pattern shows that for SABMiller there has been a
continuous increase in the three years from 344 crores in 2007 it went to 486 crores in the year
2009.The reason for such an increase is because of the continuous increase in the sundry creditors of
the company. This shows that purchases are done heavily on credit basis. On the other hand Current
liabilities pattern of UBL has been same in those three years which means that their short term
liabilities are less as compared to SABMiller.
NET WORKING CAPITAL
The above graph explains the Net working capital pattern for SABMiller and UBL for the years 2007,
2008, and 2009. It is clear that the pattern of Net working capital is fluctuating from high to low and
then again high. The trend has been same for both the companies and it is an uneven trend. The year
2007- 08 has the lowest Net working for the both the companies compared to all the three years. The
Net working capital measures the liquidity of the firm. The greater the margins better the liquidity of
the firm. For the year 2008-09 UBL’S Net working capital was 564 crores which were the highest.
This is due to the continuous increase in the sundry debtors of UBL. There should be an appropriate
amount of Net working capital maintained for the smooth functioning of the business.
CASH & BANK BALANCES
Page | 15
The above graph explains the pattern of cash and bank balances for SABMiller and UBL for the years
2007, 2008, and 2009. It is clear that there has been a huge declined in the cash and bank balances
from the year 2007 for both the companies. In 2007 where SABMiller had 405 crores as bank
balance, UBL had 139 crores as bank balance. Thereafter the balances reduced drastically for both the
companies. The lowest bank balance for SABMiller was 31 crores in the year 2008 and for UBL it
was 8 crores in 2008. Hence it is ascertained that both the company’s Cash balances came down
hugely in the year 2008
AVERAGE COLLECTION PERIOD
The above graph shows the pattern of Average collection period for SABMiller and UBL for the years
ending 2007, 2008, and 2009. There is an increasing pattern of Average collection period for both the
companies. It was the lowest in the year 2007 for both the companies. However after that it kept on
increasing. In the year 2009 the Average collection period was 81 for SABMiller and for UBL it was
Page | 16
84 Overall the Average collection period is increasing for both the companies year after year which is
not a good sign.
AVERAGE PAYMENT PERIOD
The above graph explains the pattern of Average payment period for SABMiller and UBL for the years
ending 2007, 2008, and 2009. It is the relationship between the no. of working days and the creditor
turnover ratio. There is a decreasing pattern of Average payment period for both the companies. In the
year 2007 where it was highest for both the companies and thereafter decreasing every year. It is
noticed that for SABMiller the trend is uneven that is from 65 in 2007 to 51 in 2008 and again
increasing 62 in 2009. The above analysis explains that for the year 2009 the Creditors management
has been better for SABMiller than UBL.
CURRENT RATIO
Page | 17
The above graph explains the pattern of current ratio for SABMiller and UBL for the years 2007, 2008,
and 2009. In 2007 both the companies had current ratio better than the ideal ratio however
SABMiller’s current ratio for that period was very close to the ideal ratio. In 2008 SABMiller’s
Current ratio came down from 2.03 to 1.17 which was very low from the ideal ratio comparatively
UBL’s Current ratio 2.3 was still above the ideal ratio. Hence for 2008 current ratio’s position was
favorable for UBL as compared to SABMiller. In 2009 again the current ratio of SABMiller is quite
low than the ideal ratio and comparatively UBL’s Current ratio has gone up very high to 3.73 this is
very much above than the ideal ratio. For SABMiller it is essential to reduce their liability otherwise
this ratio shows the insolvency of the company.
LIQUIDITY RATIO
The above graph explains the pattern of Liquidity ratio for SABMiller and UBL for the years 2007,
2008, and 2009. The pattern for Liquidity ratio is fluctuating for the past three years. In 2006-07 liquidity ratio
for SABMiller was 1.74 and for UBL was 2.09 this is clearly above the ideal ratio which shows their ability of
both the companies to cover their short term liabilities. For the year 2007-08 the ratio falls for both the
companies and for SABMiller it was 0.74 which was less than the ideal ratio this shows that the
liquidity position was not good for that year. And for UBL it was 1.61 which was above the ideal ratio
and shows a good liquidity position for the company for the year 2008-09 the ratio increased for both
the companies however the increase for SABMiller was marginal leading it to 0.79 from 0.74 and for
UBL the increase was heavy which led the ratio to 3.18 from 1.61.Clearly UBL has better liquidity
position than SABMiller.
STOCK OR INVENTORY TURNOVER RATIO
Page | 18
The above graph shows the pattern of Inventory turnover ratio for SABMiller and UBL for the years
2007, 2008, and 2009 Stock turnover ratio- Net Sales/Average inventory In 2006-07 the Stock turnover
ratio For SABMiller was 13.16 and for UBL it was 9.79 In 2007-08 the Stock turnover ratio For
SABMiller it was 10.59 and for UBL it was 11.94. In 2008-09 the Stock turnover ratio For SABMiller
it was 9.28 and for UBL it was 12.13. It is said that a high turnover ratio indicates the efficient
management of inventory more frequently stocks are sold there is an opposite pattern for Inventory
turnover ratio for both the companies, clearly only for 2006-07 SABMiller has outperformed its
competitor and thereafter the ratio has been declining for SABMiller and increasing for UBL for the
next two year
WORKING CAPITAL TURNOVER RATIO
Page | 19
The above graph explains the pattern of Working capital turnover ratio for SABMiller and UBL for the
year ending 2007, 2008, and 2009. The working capital ratio has been the lowest for the year 2006-07
for both the companies, more the ratio, better it is for the company. In the year 2007-08 where the ratio
has been highest for SABMiller (15.17), comparatively it was 4.6 for UBL. In the year 2008-09 again
the ratio was significant for SABMiller as it was 10.59 as compared to 3 for UBL. The above analysis
signifies that working capital is better utilized in SABMiller as compared to UBL.
CURRENT ASSET TURNOVER RATIO
The above graph explains the current assets turnover ratio for SABMiller and UBL for the years
ending 2007, 2008, 2009. There is an uneven trend which is followed by both the companies however
current assets turnover has been lowest in 2006-07 for both the companies and maximum in 2007-08.
It is to be noted that in all the years UBL’s ratio is more than SABMiller’s. Hence it shows that current
assets are more efficiently used in UBL than SABMiller.
STOCK WORKING CAPITAL RATIO
Page | 20
The above graph explains the pattern of Stock working capital ratio for SABMiller and UBL for the
years ending 2007, 2008, and 2009. The analysis explains that stock working ratio has been good for
UBL as compared to SABMiller for the past three years. It is noticed that the performance has been
consistent for UBL and for SABMiller there was an uneven trend. In the year 2007 SABMiller’s STR
was better than UBL and in the year 2009 it increased to 1.33 which is way above the ideal ratio.
Total & Net Operating Cycle Period for SABMiller & UBL (2009)
Cycle
Calculation
SABMiller
UBL

RMCP
RAW
MATERIAL
CONVERSION
PERIOD

WPCP
WORK IN
PROGRESS
CONVERSION
PERIOD
RMCP
Average Raw material stock X 360
Total Raw material consumption
491730522 X 360
6651961523
= 27 DAYS
336039000 X 360
2141148000
= 24 DAYS
WPCP
Average Work-in-progress X 360
Total cost of production
153874210 X 360
4256201006
ASSUMED
= 13 DAYS
= 13 DAYS
Page | 21

FGCP
FINISHED
GOODS
CONVERSION
PERIOD

RCP
RECEIVEBLE
CONVERSION
PERIOD


TOCP
DP
DEFFERED
PERIOD

FGCP
Average Finished Goods
Total Cost of goods sold
X 360
679832914 X 360
6839899584
603385500 X 360
6092195000
= 36 DAYS
= 36 DAYS
RCP
Average Receivable X 360
Total Credit sales
(RMCP+WPCP+FGCP+RCP)
2963281799 X 360
13,160,176,239
3971837000 x 360
16982709000
= 81 DAYS
= 84 DAYS
157 DAYS
157 DAYS
62 DAYS
50 DAYS
DP
Average Creditors
Total Credit purchase
X 360
NOCP
TOCP LESS DP
= 95 DAYS
= 107 DAYS
NET
OPERATING
CYCLE
PERIOD
OPERATING CYCLE PERIOD
The above Line graph shows the Total & Net Operating Cycle period for SABMiller & UBL for the
year 2009. Working capital majorly depends on the length of operating cycle and shorter the cycle net
operating cycle period, better it is for the company. For the year 2009 the Raw material conversion
period was 27 days for SABMiller and 24 days for UBL. Work in progress conversion period (13
Page | 22
Days) and finished goods conversion period (36 Days) was same for both the companies. Receivables
conversion period for SABMiller was 81 days and for UBL it was 84 days.
After adding all the Total operating cycle period for SABMiller and UBL comes up to 157 days.
Deferred payment period for SABMiller was 62 days and for UBL it was 50 days. Hence Net
operating cycle period for SABMiller was 95 days and for UBL it was 107 days. The cycle period was
less for SABMiller as compared to UBL.
Section V -Some key leanings
From the first analysis of Net Sales it is concluded that in order to compete with UBL and improve
market share. SABMiller has to make sure that every year the growth in the Net Sales is more than the
Industry growth otherwise there are greater chances that market share of SABMiller may decline in the
coming years. This is because there is a huge potential for beer market in coming years. For example –
From the analysis and Interpretations it is found that In the year 2007-08 the Net Sales growth in Beer
market was 36% and SABMiller’s growth was only 20% hence their share decreased to 34.5% from
36.7%. Keeping this in mind and looking at the estimated growth in beer market for 2010 and 2011
which is 17%. It is very important for SABMiller to grow with minimum of 17%.The Net sales of
SABMiller for the year ending 2008-09 were Rs. 1316 crores and their market share was 37.5%. For
the company to maintain the same market share the Net sales for the year ending 2010 and 2011 should
be1. For the year ending 2010 – ( 1316+ 17% 0f 1316) =Rs 1539 crores
2. For the year ending 2011- (1539 + 17% of 1539) = Rs 1800 crores
This is the minimum amount of Net sales that the company should have in order to maintain the existing
market share of 37.5%. However this is the minimum level of Net Sales and Beer market is set to
flourish in the coming years where major foreign players are ready to enter this untapped Indian beer
market and there are greater chances that market may grow more than 17%. It is recommended that
company should look to improve beyond these figures and try best to improve the market share. It is
also found that this can be possible as the company has a diversified portfolio. Hence SABMiller’s Net
Sales should be more than Rs1539 crores for the year ending 2010 and Rs 1800 crores for the year
ending 2011. This will lead to company’s consistent growth just like UBL and help them to compete in
the market.
The analysis of net profit concludes that the performance of SABMiller was poor in the
year 2008-09 and that is why the company went into losses and on the other hand UBL was consistent
with the profit even though there were so many fluctuations in the Market.
Page | 23
The reasons for Net Loss in the year 2008-09- The company justified two reasons for losses in the
year 2008 -09 and these are1. One time Charge of Rs 34 crores during the year due to change in the accounting policy to align
accounting as per income tax for treatment of containers.
2. The temporary suspension of Charminar Brewery for 38 days in peak season.
3. Cost analysis – The cost analysis explains the reason why company went into losses. It is found
that for the year 2008-09 cost for various segments were more for SABMiller than UBL.
COST DISTRIBUTION
The pie chart shows the cost distribution for both the companies for the year ending 2008-09. This will
explain the difference in the occurrence of cost in different departments. The comparison is done
keeping Net Sales for the year as the base for both the companies.
1. Cost of material which include (Cost of traded goods sold, raw material and packing material,
Malt processing charges) were 51.8% of Net sales for SABMiller and for UBL they were
48.2%.
2. Other Expenses
which include (Sales scheme expenses, Commission on sales, Freight
outward, Advertisement and publicity, Management fees, Travel and conveyance, Rent,
Repairs, Telephone and other communication, Training and development, Printing and
stationary etc) were approximately 37.3% of Net sales for SABMiller and for UBL they were
just 29% approximately.
3. Personnel expenses which include (Salaries, Bonus, Wages, Contributions to provident funds
and other funds, Staff welfare expenses etc.) were 7.5% of Net sales for SABMiller and for
UBL they were 5.1%.
Page | 24
4. Borrowing cost which include (Interest, Bank charges, foreign exchange loss) were just 3.4%
of Net Sales for SABMiller and for UBL they were 5.2% of Net Sales.
5. Miscellaneous segment in UBL’s Pie diagram include (deprecation, provision and also the Net
profit) and on the other hand this segment doesn’t exist for SABMiller because the first four
costs account for 100% of Net sales
The amount of current assets is also insignificant for SABMiller as compared to UBL clearly because
of which the current ratio of the company is way below than the ideal ratio of 2:1. Another reason for
that cause can be continuous increase in the current liabilities of the company for the last three years.
For the year ending 2009 the current ratio of SABMiller was 1.26 which was way below the Ideal ratio
of 2:1. Another finding is that the current ratio of UBL for the year ending 2009 was 3.73:1, which is
way above the ideal ratio. It shows that there was more than required blockage in the current assets
because of which the working capital required was more and henceforth the Borrowing cost of UBL
was more than SABMiller. Hence it is important for the SABMiller to increase the current ratio and
maintain a minimum of 2:1. So that it maintains a good liquidity in order to meet its short term
liabilities. Current Ratio can be improved only if there is an increase in current assets of the company
and decrease in the current liabilities. It is to be noted that the current liabilities of company are
continuously increasing.
Net working capital was very less for SABMiller as compared to UBL for
the year ending 2009. A higher working capital always shows a better a liquidity position for the
company. The reason for decline in the Net working capital is the reduction in the cash & bank
balances and certainly because of which the liquidity ratio (.79:1) was also below the ideal 1:1. Hence
there is a greater need for the company to maintain a bit higher cash balances so that the liquidity ratio
reaches to 1:1 from 0.79:1. The Stock turnover ratio of SABMiller is also decreasing every year. In
2007 where it was 13.16 it came down to 9.28 in the year 2009. The conversion period of stock
through sales is increasing year after year. From the working capital turnover ratio it can be concluded
that there is a better utilization of working capital as compared to UBL. However it is also found that
the average collection period for the companies is increasing over the years and for SABMiller from 62
days in 2007 it has gone to 81 in 2009. For 2009 the average collection period for UBL was 84 days
which means SABMiller’s average collection from debtors was better than UBL. The average payment
period has an uneven trend for SABMiller and for UBL it has a decreasing trend in the year 2009
where Average payment period was 62 days for SABMiller it was 50 days for UBL.
.
Section VI -Conclusion and Recommendation
Page | 25
It can be concluded that UBL follows a liberal strategy towards its debtors and creditors in order to
maintain better relationship. The above analysis shows that the trend followed by both the companies
in past three years has been more or less the same and both have made efforts to increase plant size in
order to produce more. However the following are the major areas that SABMiller should focus in the
near future in order to improve its market share and earn a sustainable profit.
 Increase the amount of cash and bank reserve so that a better liquidity ratio is maintained.
 Company has to reduce its Raw material conversion period from 27 days as it is too high.
 Company’s stock turnover ratio is quite poor it should focus on improving it.
 Current liabilities of SABMiller are increasing every year as compared to UBL’s consistent current
liabilities. So SABMiller should focus on reducing the amount of current liabilities.
 Another major area of concern for the company is the amount of bottle loss that it is bearing. In
bottling Industry the most critical factor is the acquisition and handling of bottles. Since Bottle
market is always fluctuating so it is very difficult to control the cost however the factor that can be
controlled is the bottle breakage loss.
Recommendations-The following are the ways in which the Sales of the company can be increased.
 Tamil Nadu is one of the biggest beer markets in India and No brand of SABMiller is sold in
that region just because of the governments Policy. This market can certainly be targeted with
contract brewing in Tamil Nadu. This way the policy of Tamil Nadu government will be
followed and a major market can also be captured.
 Not only just Tamil Nadu rather company should target more on the following five major states
of Beer consumption in India to improve its sales figure
 As strong beer has 74% market share in India. Company should focus on developing new
strong beer brands as Indian consumers drink beer as an alternative to spirits. This can enhance
the sales.
 Concept of Dumping can help SABMiller to Improve SalesOther Recommendations
It is recommended that SABMiller should focus on giving more discounts for on spot payment.
This way buyer would be attracted and hence cash balances would increase because it is
important for company to increase its current cash balances.

Company should also focus on increasing the Average collection period because currently the
period is 81 days which is less than UBL’s period. Hence by increasing the Average collection
period the sales of the company will increase because more buyers would be attracted.
Page | 26
Discussion QuestionsQ. What selling techniques can be used by SABMiller to enhance there sales in order to increase their
market share?
Q. What is the appropriate level of Working capital ratio that should be maintained by the brewing
companies in order to have an optimum level liquidity?
Q .How the current ratio of SABMiller is being affected by the continuous increase of current
liabilities over the past three years?
Q. What plan should be adopted by SABMiller in order to maximize their production so that wastage
can be prevented and demands can be met during season time?
Page | 27
ANNEXURES
SABMILLER INDIA BALANCE SHEETS
SOURCES OF
FUNDS
As at 31st March 2009
As at 31st March 2008
As at 31st March 2007
Share Capital
2,311,837,450
2,311,837,450
1,979,158,880
Reserves and surplus
6,140,637,748
6,406,852,856
4,610,316,326
Shareholder's Funds
Share application
money pending
allotment of shares
1,863,000,000
Loan Funds
Unsecured Loans
6,170,031,896
Deferred tax liability,
net
TOTAL
3,774,422,006
4,652,648,467
63,744,046
14,622,507,094
12,556,856,348
13,105,123,673
Gross Block
13,556,110,406
10,973,596,079
8,795,466,503
Less; Accumulated
depreciation
[2,397,970,441]
[2,074,943,657]
[1,525,150,636]
Less; Provision for
impairment of fixed
assets
[143,814,725]
[156,563,671]
[52,523,898]
506,703,130
1,491,630,978
756,309,965
11,521,028,370
10,233,719,729
7,974,101,934
11,359,225
11,359,225
2,178,050
APPLICATION OF
FUNDS
Fixed assets
Capital work-in progress
Investments
Current Assets, loans
and advances
Page | 28
Inventories
1,650,081,511
1,183,482,865
774,519,494
Sundry debtors
3,390,344,214
2,536,219,383
1,484,582,230
Cash and bank
balances
317,395,443
311,251,107
4,047,462,855
Loans and advances
1,176,231,356
1,242,942,582
1,202,005,377
6,534,052,524
5,273,895,937
7,508,569,956
6,104,394,695
4,741,406,233
7,091,443,760
Current liabilities
4,861,783,690
4,058,160,935
3,443,985,828
Provisions
421,930,244
361,193,684
457,868,326
5,283,713,934
4,419,354,619
3,901,854,154
Net current assets
1,250,338,590
854,541,318
3,606,715,802
Amalgamation
adjustment reserve
account
1,457,236,076
1,457,236,076
1,457,236,076
Debit balance in
Profit and loss
account
1,600,944,149
1,296,961,395
Less; Balance in
general reserve
account
[1,218,399,316]
[1,232,069,584]
382,544,833
64,891,811
Actual current assets
Current liabilities
and provisions
TOTAL
14,622,507,094
12,556,856,348
13,105,123,673
SABMILLER INDIA PROFIT AND LOSS ACCOUNTS
PROFIT AND LOSS
ACCOUNT
For the year ended
31st march 2009
For the year ended
31st march 2008
For the year ended
31st March 2007
INCOME
Page | 29
Sale of manufactured
goods, gross
21,622,215,155
17,120,144,115
13,384,952,487
Sale of traded goods,
gross
96,894,530
296,758,472
100,449,130
21,719,109,685
17,416,902,587
13,485,401,617
Less; Excise duty
[7,518,279,022]
[6,307,912,578]
[4,840,701,234]
Less; Discounts
[1,040,654,424]
[743,348,972]
Sales, Net
13,160,176,239
10,365,641,037
8,644,700,383
Income from contract
bottling
143,573,120
Other income
185,950,917
281,767,214
179,188,724
219,335,661
331,222,390
13,489,700,276
10,866,743,912
9,155,111,497
Cost of material
6,839,899,584
3,059,852,296
2,197,111,990
Personnel cost
974,679,780
804,928,296
603,282,581
Other expenses
4,982,476,471
5,469,854,808
5,064,541,864
Depreciation
651,299,955
858,090,043
625,247,195
Provision for
impairment of fixed
assets
[7,066,845]
117,306,243
[101,662,427]
Opening adjustment for
returnable containers
340,493,099
Borrowing cost
433,651,970
148,166,541
313,366,314
[LOSS]/ PROFIT
BEFORE TAX
[725,733,738]
408,545,685
453,223,980
Income from marketing
operations
TOTAL
EXPENDITURE
Provision for tax
-Current tax
[375,737,24]
Page | 30
-Pertaining to earlier
years [reversal]
[48,582,678]
[37,573,724]
-fringe benefit tax
35,160,648
30,320,522
-deferred tax
[credit/charge]
[63,744,036]
70,783,158
-wealth tax
192,269
238,542
[LOSS]/PROFIT
AFTER TAX
[648,759,941]
344,777,187
401,891,802
Debit balance in profit
and loss account
brought forward
[952,184,208]
[1,296,961,395]
[1,698,853,197]
Debit balance in profit
and loss account carried
over to balance sheet
[1,600,944,149]
[952,184,208]
[1,296,961,395]
Basic earnings per share [2.81]
1.52
2.14
Diluted earnings per
share
1.49
2.13
[13,758,454]
EARNINGS PER
SHARE
[2.81]
UNITED BEWERIES LIMITED BALANCE SHEETS
As at 31st march 2009
As at 31st march 2008
As at 31st March 2007
Share Capital
2,709,048,000
2,685,043,000
2,685,043,000
Reserves and surplus
8,106,431,000
3,427,554,000
2,891,310,000
SOURCES OF
FUNDS
Shareholder's Funds
Share application
money pending
allotment of shares
Page | 31
Loan Funds
Secured loans
4,410,559,000
4,538,387,000
4,340,644,000
Unsecured Loans
1,753,006,000
809,985,000
416,988,000
Deferred tax liability,
net
173,122,000
90,302,000
60,715,000
Deferred credit
Total Sources
4,044,000
17,152,166,000
11,551,271,000
10,398,744,000
Gross Block
9,272,547,000
7,149,646,000
5,090,062,000
Less; Accumulated
depreciation
[2,294,917,000]
[1,547,755,000]
955,018,000
Net block
6,977,630,000
5,601,891,000
4,135,044,000
Capital work-in
progress
865,308,000
1,576,089,000
1,127,308,000
Investments
1,940,957,000
1,040,709,000
590,699,000
Inventories
1,630,376,000
1,169,167,000
1,123,643,000
Sundry debtors
4,699,634,000
3,224,040,000
2,148,312,000
Cash and bank
balances
417,733,000
78855000
1,392,732,000
Other current assets
140,769,000
2,282,000
10,202,000
Loans and advances
2,728,788,000
1,171,620,000
1,972,175,000
9,617,300,000
5,645,964,000
6,647,064,000
APPLICATION OF
FUNDS
Fixed assets
Less; Provision for
impairment of fixed
assets
Current Assets, loans
and advances
Page | 32
Current liabilities and
provisions
Current liabilities
2,065,734,000
2,291,592,000
2,026,424,000
Provisions
183,295,000
124,143,000
74,947,000
2,249,029,000
2,415,735,000
2,101,371,000
7,368,271,000
3,332,582,000
4,545,693,000
11,551,271,000
10,398,744,000
Net current assets
Amalgamation
adjustment reserve
account
Debit balance in
Profit and loss
account
Less; Balance in general reserve account
Total applications
17,152,166,000
UNITED BREWERIES LIMITED PROFIT AND LOSS ACCOUNTS
PROFIT AND LOSS
ACCOUNT
For the year ended
31st march 2009
For the year ended
31st march 2008
For the year ended
31st March 2007
Sale of manufactured goods,
gross
24,604,481,000
19,802,844,000
14,264,437,000
Less; Excise duty
7,621,772,000
6,112,233,000
4,280,190,000
Sales, Net
16,982,709,000
13,690,611,000
9,984,247,000
Other income
492,991,000
257,948,000
764,491,000
TOTAL INCOME
17,475,700,000
13,948,559,000
10,748,738,000
Cost of Sales
10,472,894,000
8,672,344,000
6,596,961,000
Other expenses
4,327,570,000
3,303,517,000
2,536,711,000
INCOME
EXPENDITURE
Page | 33
Interest and finance charges
896,377,000
428,282,000
279,788,000
Depriciation and
Amortization
762,150,000
612,276,000
385,352,000
PROFIT BEFORE TAX
1,016,709,000
932,140,000
949,926,000
-Current tax
{294,549,000}
{264,889,000}
{294,129,000}
- fringe benefit tax
{14,400,000}
{12,000,000}
{19,880,000}
- deferred tax [
credit]/charge
{82,820,000}
{30,526,000}
{15,001,000}
PROFIT AFTER TAX
624,940,000
624,725,000
650,918,000
Dividend
{170,912,000}
{86,658,000}
{146,689,000}
Provison for tax
538,067,000
Transfer to General Reserve
{65,000,000}
Profit carried to balance
sheet
389,028,000
{70,000,000}
Profit brought from previous
year
489,385,000
55,156,000
Profit carried forward to the
balance sheet
1,027,452,000
489,385,000
2.49
2.62
EARNINGS PER SHARE
Basic/Dilluted)
2.29
Page | 34