Working capital (abbreviated WC) is a financial metric which represents operating

liquidityavailable to a business, organization, or other entity, including governmental entity. Along

with fixed assets such as plant and equipment, working capital is considered a part of operating
capital. Net working capital is calculated as current assets minus current liabilities. It is a
derivation of working capital, that is commonly used in valuation techniques such as DCFs
(Discounted cash flows). If current assets are less than current liabilities, an entity has aworking
capital deficiency, also called a working capital deficit.

Working Capital = Current Assets

Net Working Capital = Current Assets − Current Liabilities

A company can be endowed with assets and profitability but short of liquidity if its
assets cannot readily be converted into cash. Positive working capital is required to
ensure that a firm is able to continue its operations and that it has sufficient funds to
satisfy both maturing short-term debt and upcoming operational expenses. The
management of working capital involves managing inventories, accounts receivable
and payable and cash.

Current assets and current liabilities include three accounts which are of special importance.
These accounts represent the areas of the business where managers have the most direct
impact:

 accounts receivable (current asset)

 inventory (current assets), and
 accounts payable (current liability)

The current portion of debt (payable within 12 months) is critical, because it represents a short-
term claim to current assets and is often secured by long term assets. Common types of short-
term debt are bank loans and lines of credit.

An increase in working capital indicates that the business has either increased current
assets (that is has increased its receivables, or other current assets) or has decreased current
liabilities, for example has paid off some short-term creditors.

Implications on M&A: The common commercial definition of working capital for the purpose of a
working capital adjustment in an M&A transaction (i.e. for a working capital adjustment
mechanism in a sale and purchase agreement) is equal to:

Current Assets – Current Liabilities excluding deferred tax assets/liabilities, excess cash, surplus
assets and/or deposit balances.
Cash balance items often attract a one-for-one purchase price adjustment.

Working capital management

Decisions relating to working capital and short term financing are referred to as working capital
management. These involve managing the relationship between a firm's short-term assets and
its short-term liabilities. The goal of working capital management is to ensure that the firm is able
to continue itsoperations and that it has sufficient cash flow to satisfy both maturing short-term
debt and upcoming operational expenses.

Decision criteria
By definition, working capital management entails short term decisions - generally, relating to the
next one year period - which are "reversible". These decisions are therefore not taken on the
same basis as Capital Investment Decisions (NPV or related, as above) rather they will be based
on cash flows and / or profitability.

 One measure of cash flow is provided by the cash conversion cycle - the net number of
days from the outlay of cash for raw material to receiving payment from the customer. As a
management tool, this metric makes explicit the inter-relatedness of decisions relating to
inventories, accounts receivable and payable, and cash. Because this number effectively
corresponds to the time that the firm's cash is tied up in operations and unavailable for other
activities, management generally aims at a low net count.

 In this context, the most useful measure of profitability is Return on capital (ROC). The
result is shown as a percentage, determined by dividing relevant income for the 12 months
by capital employed; Return on equity (ROE) shows this result for the firm's shareholders.
Firm value is enhanced when, and if, the return on capital, which results from working capital
management, exceeds the cost of capital, which results from capital investment decisions as
above. ROC measures are therefore useful as a management tool, in that they link short-term
policy with long-term decision making. See Economic value added (EVA).

Management of working capital

Guided by the above criteria, management will use a combination of policies and techniques for
the management of working capital. These policies aim at managing the current
assets (generally cash andcash equivalents, inventories and debtors) and the short term
financing, such that cash flows and returns are acceptable.
  Cash management. Identify the cash balance which allows for the business to meet day
to day expenses, but reduces cash holding costs.
 Inventory management. Identify the level of inventory which allows for uninterrupted
production but reduces the investment in raw materials - and minimizes reordering costs -
and hence increases cash flow. Besides this, the lead times in production should be lowered
to reduce Work in Progress (WIP) and similarly, the Finished Goods should be kept on as low
level as possible to avoid over production - seeSupply chain management; Just In
Time (JIT); Economic order quantity (EOQ); Economic quantity
 Debtors management. Identify the appropriate credit policy, i.e. credit terms which will
attract customers, such that any impact on cash flows and the cash conversion cycle will be
offset by increased revenue and hence Return on Capital (or vice versa); see Discounts and
allowances.
 Short term financing. Identify the appropriate source of financing, given the cash
conversion cycle: the inventory is ideally financed by credit granted by the supplier; however,
it may be necessary to utilize a bank loan (or overdraft), or to "convert debtors to cash"
through "factoring".

Karnataka Cooperative Milk Producers' Federation Limited (KMF) is the Apex Body in Karnataka
representing Dairy Farmers' Co-operatives. It is the second largest dairy co-operative amongst
the dairy cooperatives in the country. In South India it stands first in terms of procurement as well
as sales. One of the core functions of the Federation is marketing of Milk and Milk Products. The
Brand "nandini" is the household name for Pure and Fresh milk and milk products.
KMF has 13 Milk Unions throughout the State which procure milk from Primary Dairy Cooperative
Societies(DCS) and distribute milk to the consumers in various Towns/Cities/Rural markets in
Karnataka.
The first ever World Bank funded Dairy Development Program in the country started in Karnataka
with the organisation of Village Level Dairy Co-operatives in 1974. The AMUL pattern of dairy co-
operatives started functioning in Karnataka from 1974-75 with the financial assistance from World
Bank, Operation Flood II & III. The dairy co-operatives were established under the ANAND
pattern in a three tier structure with the Village Level Dairy Coordination of activities among the
Unions and developing market for Milk and Milk products is the responsibility of KMF. Marketing
Milk in the respective jurisdiction is organized by the respective Milk Unions. Surplus/deficit of
liquid milk among the member Milk Unions is monitored by the Federation. While the marketing of
all the Milk Products is organized by KMF, both within and outside the State, all the Milk and Milk
products are sold under a common brand name NANDINI.
THE GROWTH PROCESS
The growth over the years and activities undertaken by KMF is summarised briefly hereunder:
1976-77 2010-2011(Up to Nov'10)
Dairy Co-operatives Nos 416 12089 Regd./10626 Funct.
Membership Nos 37000 20.50 Lacs
Milk Procurement Kgs/day 50000 38.50 / Peak Proc.41.83 LKPD
Milk Sales Lts/day 95050 26.10 / Curds: 2.41 LKPD
Cattle Feed Consumed Kgs/DCS 220 2459
Daily Payment to
Rs.Lakhs 0.90 584
Farmers
Turnover Rs.Crores 3802.00

World Bank Study - Observations

The World Bank, in its study on the effect of Co-operative dairying in Karnataka, has pointed out
that :
• The villages with Dairy Co-operative Societies are much better off than those without.
• The families with dairy cattle are economically better than those without dairy cattle.
• Women who had no control on the household income have better control in terms of Milk
Money.
• A single commodity �MILK� has acted as a catalyst in the change in the Socio-
Economic impact of the rural economy.
• There is a positive impact on those at the lower end of the economic ladder both in terms
of landholding and caste.

PERSPECTIVE PLAN 2010

After the closure of OF-III project. Government of Karnataka and NDDB signed an MOU during
February 2000, for further strengthening the Dairy Development Activities in Karnataka with an
outlay of Rs.250 Crores. Consequent to the announcement of new lending terms and conditions
by NDDB through an evolution of an action plan - Perspective 2010 to enable the dairy
cooperatives to face the challenges of the increased demand for milk and milk products by
focusing efforts in the four major thrust areas of Strengthening the Cooperatives. Enhancing
Productivity, Managing Quality and building a National Information Network, plans are under
implementation.
FUTURE VISION
To consolidate the gains of Dairying achieved in the state of Karnataka and with a view to
efficiently chill, process and market ever developing and increasing milk procurement with an
utmost emphasis on the Quality and in the process conserve the socio-economic interests of rural
milk producers, the Govt. of Karnataka through KMF has proposed to undertake several projects
with financial and technical support of NDDB for which an MOU was signed between Govt. of
Karnataka and NDDB on 10th Nov. 2004.
PROJECTS:
• Channaraypatna Milk Powder Plant consisting of 30 MT Powder Plant, 4 LLPD Dairy and
butter making facility - Established & UHT of 1LLPD is being commissioned
• Proposed for establishment of Cattle Feed Plants
- Hassan 300 MTPD Capacity - project execution under progress
- Shimoga 300 MTPD Capacity
- Challagatta (Near B'lore) 500 MTPD Capacity
• Multi packaging unit and Ice Cream Plant at Bellary Milkshed area.
GOI PROJECT - RKVY (Rashtriya Krushi Vikas Yojane)
• Fodder densification unit at different place of capacity 10 Tonnes each.
• Bio Security measures at Nandini Sperm Station, unit of KMF
• Strengthening of Training Centres at Bangalore, Mysore, Dharwad.
• Strengthening Works at Bijapur, Gulbarga, Bidar & Bellary Daiy.

Other GOK Financial Support:

1. To support Milk Producers of DCS members GOK is providing an amount of Rs.2.00 per
litre as incentive to the milk producer from 2008-09 onwards.
2. GOK is providing financial assistance for strengthening Dairy Development infrastructure
facilities at Northern Karnataka milk unions jurisdiction which will also redress regional imbalance
as per Dr. Nanjundappa's report.
UNITS OF KMF
KMF has the following Units functioning directly under its control:
• Mother Dairy, Yelahanka,Bangalore.
• Milk Product Plant, Channarayapatna.
• Nandini Milk Products, KMF Complex, Bangalore.
• Cattle Feed Plants at Rajanukunte/Gubbi/Dharwad/Hassan.
• Nandini Sperm Station (formerly known as Bull Breeding Farm & Frozen Semen Bank) at
Hessaraghatta.
• Pouch Film Plant at Munnekolalu, Marathhalli.
• Central Training Institute,Bangalore & Traning Institutes at Mysore/Dharwad.
• Sales Depots at B'lore,Mysore,M'lore,Hubli,Gulbarga,Tirupathi & Kannur.
 Organization and Leadership

KMF has 13 Milk Unions throughout the State which procure milk from Primary Dairy Cooperative
Societies(DCS) and distribute milk to the consumers in various urban and rural markets in
Karnataka.

Managing Director: A. S. Premanath Chairman : G. Somashekara Reddy

Karnataka Milk Federation (KMF) sells products by the name of Nandini. They are famous for taste
and quality. Nandini sweets like pedha,jalebi, paneer, curds and milk are savored by thousands of
people in India. As the name suggests it is the federation of milk producers association working
on cooperative principles. Almost every district in state of Karnataka has milk producing co-
operatives. The milk is collected from farmers who are its members, processed and sold in the
market by the brand of Nandini. It is the second largest milk co-operative in India after AMUL.
Karnataka Milk Federation (KMF) is the largest cooperative dairy Federation in South India, owned
and managed by milk producers of Karnataka State. KMF has over 2 million milk producers in over
10500 Dairy Cooperative Societies at village level, functioning under 13 District Cooperative Milk
Unions in Karnataka State. The mission of the federation is to usher rural prosperity through dairy
development. During the last four decades of cooperative dairy development by KMF, the dairy
industry in Karnataka has progressed from a situation of milk-scarcity to that of milk-surplus.

Vision
• To march forward with a missionary zeal which will make KMF a trailblazer of exemplary
performance and achievements beckoning other Milk Federations in the country in pursuit of
total emulation of its good deeds.
• To ensure prosperity of the rural Milk producers who are ultimate owners of the
Federation.
• To promote producer oriented viable cooperative society to impart an impetus to the rural
income, dairy productivity and rural employment.
• To abridge the gap between price of milk procurement and sale price.
• To develop business acumen in marketing and trading disciplines so as to serve
consumers with quality milk, give a fillip to the income of milk producers.
• To compete with MNCs and Private Dairies with better quality of milk and milk products
and in the process sustain invincibility of cooperatives.
MISSION
Heralding economic, social and cultural prosperity in the lives of our milk
producer members by promoting vibrant, self-sustaining and holistic cooperative
dairy development in Karnataka State
Objectives
KMF is a Cooperative Apex Body in the State of Karnataka representing organisations of milk
producers' and implementing alround dairy development activities to achieve the following
objectives:
• To ensure assured and remunerative market round the year for the milk produced by the
farmer members.
• To make available quality milk and other premier dairy products to urban consumers.
• To build & develop village level institutions as cooperative model units to manage the
dairy activities.
• To ensure provision of inputs for milk production, processing facilities and dissemination
of know how.
• To facilitate rural development by providing opportunities for self employment at village
level, preventing migration to urban areas,introducing cash economy and opportunity for a
sustained income.
The philosophy of dairy development is to eliminate middlemen and organise institutions to be
owned and managed by the milk producers themselves, employing professionals. To sum it up,
every activity of KMF revolves around meeting one basic objective: 'Achieve economies of scale
to ensure maximum returns to the milk producers, at the same time facilitate wholesome milk at
reasonable price to urban consumers'. Ultimately, the complex network of cooperative
organisation should build a bridge between masses of rural producers and millions of urban
consumers and in the process achieve a socio-economic revolution in every hinterland of the
State.

EVOLUTION:

Karnataka Milk Federation which is most popular as KMF, evolved itself as a premier and most
profitable dairy farmers' organization in the State of Karnataka.
As an agency in 1975 to implement the World Bank Aided Dairy Development Projects,Karnataka
Dairy Development Corporation (KDDC) was formed, the company grew itself fast and as it
spreads the wings of new found rural economic activity - Dairying all over the State, the genesis
of apex cooperative body took the shape of KMF in 1983 encompassing entire State with 13
District Co-operative Milk Unions executing the various parameters of Dairy activity - organization
of Dairy Co-operatives, Milk Routes, Veterinary Services, Procurement of milk in two shifts of the
day, Chilling, Processing of milk, distribution of milk and also establishment of Cattle Feed Plants,
Nandini Sperm Station, Liquid Nitrogen Supply, Training Centres - as its main stay.
The entire system was reconstructed on the model of now well known `ANAND' pattern dairy
cooperative societies. Eight southern districts of Karnataka was considered initially with a target
of organizing 1800 Dairy Co-operative Societies, four Milk Unions and processing facilities were
set up to the tune of 6.5 lakhs per day by 1984.
Under Operation Flood - II &III, project which started in 1984 & 1987 covered the remaining parts
of Karnataka. Thirteen milk unions are organized in 175 talukas of all 20 districts then and the
field work was extended by organizing more dairy cooperative societies. The processing facilities
i.e. chilling centers, milk dairies and powder plants were transferred in phases to the
administrative control of respective cooperative milk unions and the activities continued to be
implemented by these District Organisations. Additional processing facilities were created &
existing facilities augmented every decade with the help of Govt. / Zilla Panchayat and NDDB to
handle ever increasing milk procurement without declaring milk holidays. The processing facility
as exists at 32.25 lakh liters/day is further strengthened.

Organization chart:
Organisation Chart

The organization is three tiered on Co-operative principles.

A. Dairy Co-operative Societies at grass root level.
B.District Co-operative Milk Unions at single / multi district level.
C.Milk Federation at State level.
All above three are governed by democratically elected board from among the milk producers.
Under the direction of elected boards, KMF, various functional Units & Unions are performing the
assigned tasks to ensure fulfilment of organisation objectives.

Mile Stones
• 1955
First Dairy in Karnataka set up at Kudige, Kodagu Dist.
• 1965
Biggest Dairy in Karnataka with 1.5 lakh ltrs. per day liquid milk processing facility
• a) Set up at Bangalore
 • b) Expansion date

• 1974
World Bank aided Karnataka Dairy Development project implemented.
• 1974
Karnataka Dairy Development Corporation (KDDC) is born.
• 1975
First Spear Head Team is positioned.
• 1975
First registration of Milk Producers' Co-operative Society.
• 1975
Government dairies transferred to KDDC.
• 1976
First registration of Union.
• 1980
Karnataka Milk Products Limited established.
• 1982
First Milk product dairy started at Gejjalagere, Mandya.
• 1983
Corporate brand name‘Nandini' given.
• 1983
• a) First Cattle Feed Plant commissioned at Rajanukunte
• b) Capacity Expanded from 100MT to 200 MT

• 1984
Nandini Sperm Station (formerly known as Bull Breeding Farm & Frozen Semen Bank)
Commissioned.
• 1984
Operation Flood-II implemented.
• 1984
Karnataka Milk Federation is born.
• 1984
KDDC transformed into KMF.
• 1984
Product Dairy, Dharward Commissioned.
• 1984
Mother Dairy Started functioning.
 • 1985
Remaining Govt. Dairies transferred to KMF.
• 1987
Operation Flood-III implementation.
• 1987
Dairies at Hassan, Tumkur & Mysore transferred to district milk unions.
• 1988
Dairies at Bangalore,Gejjalagere, Dharwad,Belgaum and Mangalore transferred to district
milk unions.
• 1988
Training centres at Mysore,Dharwad & Gulbarga transferred to unions.
• 1989
Milk Supply to Kolkata Mother Dairy through railway tankers from Mother Dairy, Bangalore.
• 1989
Centralised Marketing Organised.
• 1989
Last Milk Shed registered as a union (Raichur & Bellary Union).
• 1991
KHAFBA registered (Karnataka Holstein Friesian Breeders Association).
• 1991
Chilling & Processing plants at Bijapur, Gulbarga, Bellary, Shimoga and Kolar transferred to
District Milk Union.
• 1991
First Pilot Project on Embryo transfer technology implemented.
• 1992
Commercial production & marketing of Nandini flavoured milk launched.
• 1993
Milk procurement on a single day crosses million Kg level in Dec. 1986 & average milk
procurement per day for The year crosses million kg level.
• 1994
Liquid Milk Sale Crosses Million Litres/day.
• 1994
Starting of Sales Depot at Bangalore.
• 1995
Starting of Sales Depot at Hubli.
• 1995
Varieties of New Nandini Products viz. Nandini Paneer, Burfi, Khova & Sweet curds
launched.
• 1996
 • a) Foundation Stone laid for Cattle Feed Plant at Hassan
• b) Production Started

• 1996
• a) Foundation Stone laid for Pouch Film Manufacturing Unit at Munnekolalu,
Bangalore
• b) Production Started
• c) Plant restarted production

• 1996
Foundation Stone laid for Mega Dairy & New Powder Plant at B'lore, Mini Dairy Schemes &
other development programmes.
• 1997
Inauguration of Ice-cream manufacturing unit
• a) At Mother Dairy Premises, B'lore
• b) Expansion of Plant from 3.000 LPD to 10.000 LPD

• 1998
Installation of LN2 Distribution system for Karnataka state.
• 1998
Launching of New Products
• a) Jamoon Mix
• b) Mysore Pak
• c) Tetra Fino Packaged Nandini “Goodlife”milk

• 1999
Starting of Sales Depot at Tirupathi.
• 2000
Launching of New Products
• a) Badam Powder January 2000
• b) Kunda January 2003
• c) Yoghurt August 2004
• d) Besan laddoo Sept 2004
• e) Good life High fat milk Dec 2000
• f) Nandini Goodlife Slim May 2002
 • g) Goodlife 200ml Tetrabrick July 2002
• h) Goodlife 1 ltr Tetra Brik July 2002

• 2000
MOU agreement signing by GOK & NDDB for implementation of Perspective Plan.
• 2000
Chilling Centre of 150 TLPD capacity at Hosakote started in Bangalore Union.
• 2000
“Mega Dairy”started functioning in Bangalore Union.
• 2001
Starting of Sales Depo at M'lore in addition to Depos at B'lore,Hubli & Thirupathi.
• 2002
Adoption of “Mnemonic Symbol”
• a) In Bangalore, D.K. & Mysore
• b) in Shimoga & Dharwad

• 2002
Release of 50gm. SMP in metalized Polypack.
• 2002
Registration of KMF website as “www.kmfnandini.coop”.
• 2002
‘Nandini Shop on Wheels' started (Mobile display cum sales vehicle).
• 2002
Release of Urea Molasses Brick(3Kg Pack)
• 2002
Powder plant of 30 MT capacity started at Mother Dairy.
• 2004
MOU agreement signing by GOK & NDDB for implementation of Perspective Plan 2010.
• 2005
Laying of Foundation stone for 30 MTs Powder Plant at Channarayapatna.
• 2005
Launching of‘ Nandini Set Curd'.
• 2006
Packing Station commissioned at Kumbalgodu (Mandya Union).
• 2006
Depos opened at Kerala (Kannur & Ernakulam).
• 2006
Foundation stone laid for New 300 MTs capacity at Hassan & Inauguration of Existing CFP
expansion from 100 MTs to 200 MTs.
• 2006
• a) Expansion of Gubbi CFP from 100MTs to 150 MTs.
• b)Expansion of Dharwad CFP from 100 MTS to 150 MTs.

• 2006
Release of new generation Drinks Tetra Pack variants of Flavored milk & Buttermilk.
• 2007
Release of Nandini Homogenized cow milk(3.5%Fat / 8.5%SNF) in Bangalore.
• 2007
Opening of“Nandini Dairy Farmers Welfare Trust” hostel.
• 2007
Launching of“Bounce” brand milk at GOA.
• 2007
Inauguration of additional Infrastructure facilities for UHT milk production at Kolar from
existing 40,000 LPD to 1.5 LLPD.
• 2008
Commissioning of Channarayapatna Product Plant at a total cost of Rs. 72 Crores.
• a) Launch of New products & new stunning packs (Sundae, Crazy Cone ice
cream/Lite Skimmed Milk/ Cool Milcafe/Choco Milk Shake/Dairy Whitener)
• b) Launch of Goodlife Slim in 1Ltr Brik.

• 2009
Gulbarga Dairy & Milk Marketing taking over by KMF

Human Resource Development

There are at present 20.35 Lakh dairy farmers as primary members including 3.5 Lakhs of SC/ST
and 6.6 Lakh woman members.
Dairy Co-operatives employ more than 32000 people and 5200 are permanent KMF Units and
Unions employees.
Indirect employment thro' veterinary services, milk transportation, milk sales etc. activities is to
the tune of 52000 people.
This sector has also created demand and employment in manufacturers of equipments required
by DCS, Dairies, printing and the like
Training Centres
The Training Centres of KMF at Bangalore, Mysore and Dharwad are imparting wide range of
need-based training programs in various subjects, contributing to dairy development in the State.
These training programs have been successful in improving the skills and knowledge of milk
producers, DCS staff, WDCS members and officers / staff of KMF, Unions and Units.
Central Training Institute, B'lore has a well-stocked library and is fully equipped with other
training related facilities. Regular guest lectures from experts and need based workshops are also
being regularly organized.
The Energy Conservation programs have been great success and effective implementation of
the skills learnt in these programmes have resulted in energy savings to the tune of Rs. 7 crores
in dairies and cattle feed plants of KMF.
Clean Milk Production programmes and other related programmes have been able to motivate
trainees to bring-about qualitative improvements in all stages of milk production and procurement.

Products

Milk

•
Pasteurised Toned Milk

•
Shubham Milk

•
Nandini Double Toned Milk
 Curds & other fermented products

•
Curd

•
Butter Milk

•
Premium Curd

Recips: