Alok Finance

INTRODUCTION TO FINANCE

It would be worthwhile to recall what Henry ford once remarked “Money is an arm or a leg; you either can use it or lose it”. This statement throws light on the significance of money or finance. A budding concern may need a small amount of money and yet it may be difficult for it to commence business simply because it is not in the position to get required funds. A firm’s success and survival mainly depends upon its ability to generate sufficient funds when need arises. Finance holds the key to all the activities. The role of financial manager, that is, the one who is in charge of the finance function, is difficult because he has to play that role and relate it to the role of other managers.

DEFINITIONS OF FINANCE

Ray G. Jones and Dean Dudley observe that the word finance comes indirectly from the Latin word Finis. Finance is defined as the issuance of the distribution of and the purchase of liability and equity claim issued for the purpose of generating revenue-producing assets. These claims are commonly referred to as financial claims.

According to Paul.G.Hasings, ”Finance” Is the management of the monitory affairs of the company. It includes determining what has to be paid for and when, raising the money on the best terms available, and devoting the available funds to the best uses. Kenneth Midgely and Ronald Burns define financing as “a process of organizing the flow of funds so that a business can carry out its objectives in the most efficient manner and meet it’s obligations as they fall due”.

FINANCE FUNCTIONS

Finance function is a task of providing the funds required by an enterprise on the terms most favourable to it in the light of the objectives of the business. This long-held concept has the merit of highlighting the core of the finance function keeping the business the most suitable way and, on the best possible terms, is the central part of the finance supplied with enough funds to accomplish its objectives. Getting the required funds in job

Finance presents itself in a broad spectrum of activities. There are a number of basic functions underlying finance. It is an essential, and at the same time a very distinct, segment of the overall managerial function. It is the lifeblood of any business activity and no business function can be

discharged without it. Finance must be used judiciously. It has to be systematically controlled and regulated so that it may contribute to the different functions of business administration. If the finance function is properly blended with production, marketing, personnel, accounting and other business functions, the wastage of funds can be avoided.

FINANCIAL PLANNING

In simple words financial planning means deciding well in advance as to how much finance is required, when is it required, what are the sources through which finance is available and how should it be put to use, so as to obtain organizational objectives. The aim in financial planning should be to match the needs of the companies with those of investors with a sensible gearing of short term and long-term interest

Financial planning helps the financial manager to see the financial situations clear of stress and strains and to develop a deep insight-an essential prerequisite for financial stewardship. The importance of financial planning lies essentially in the fact that it enables the financial manager to develop a diagnostic skill of analyzing complex situations and arriving at suitable solutions.

STEPS INVOLVED IN FINANCIAL PLANNING

The various steps involved in financial planning are as follows:

1. Establishing objectives:

Every business enterprise will have to establish its financial objectives. It will

have to state how much capital is employed in various factors of production over the long run and how much productivity can be ensured through the employment those factors. It would be necessary for every business enterprise to stipulate both short-run and long run objectives so that it may operate in a dynamic society.

2. Policy formulation:

Financial policies will have to have a thrust on following policies:

 Determining the control by the parties who furnish the capital. For example, if debt exceeds in unassuming portions, it would obviously mean dilution of control.

 Acting as a guide in the use of debt or equity capital. For example, the business enterprise will have to state clearly its plans about the debt-equity proportions.  Guiding management in the selection of the source of funds. This also

3. Forecasting:

Forecasting is usually done on the basis of facts; but facts do not become readily available, more particularly when they are addressed to the future. In that case, financial management will have to forecast the future predicting the variability of the factors influencing the type of policies the enterprise intends to formulate.

Formulation of procedures:

Policy for formulation must invariably be backed up by suitable procedures, for financial policies procedures which are broad guidelines which must be capable of being translated into detailed procedures. Very often, there is a gap between financial plans and h results in chaotic conditions in a business enterprise. Financial managers often take shelter under the plea that the right type of procedures are not available to support the accomplishment of the goals and objectives of the firm, where as the chief executives grumble over the short comings inherent in the procedures because they are not able to accomplish the plans by reason of the fact that procedures do not support financial plans.

Factors to be considered while estimating financial requirements.

 Cost of finance.

 Availability of funds.

 Repayments.

 Interest.

 Risk.

 Seasonality.

 Estimating costs of other functions.

 Fixed assets requirements.

 Expenditure on current assets.

 Budgetary appropriations.

 Distribution system.

 Break-even.

PART A.INTRODUCTION TO THE INDUSTRY

In India, traditional beer has been prepared from rice or millet for thousands of years. In the 18th century, the British introduced European beer to India. One-third of Indians don't consume alcohol due to religious and cultural reasons. The consumption of beer compared to other

alcoholic beverages with high alcohol content, like whisky, is low.

History

Traditional beer

Traditional beer vats in Meghalaya

Beer was not unknown in India before the arrival of Europeans. The Vedas mention a beer-like drink called sura. It was the favourite of the god Indra. Sura is also

mentioned in the Ramayana. Megasthenes has recorded usage of rice beer in India. Kautilya has also mentioned two intoxicating beverages made from rice called Medaka

Rice beer or handia has been traditionally prepared by indigenous tribes of India, in which Ruellia suffruticosa is sometimes added for flavor. Rice beer also has

ceremonial use among the Asur people. Millet beer is also prepared by some tribes. According biologist J. B. S. Haldane, local beer helped in keeping diseases like beri beri checked in these tribes. Recently, government and social workers have been trying to curb alcohol usage among these tribes. Elephant herds have been known to attack villages to drink this rice beer for which they have acquired a taste.

European beer

Mohan Meakin logoEuropean-style beer was introduced in India by the British. By 1716, pale ale and Burton ale were being imported to India from England. To protect the beer from spoiling during the long journey, it had to had high alcohol content and hops were added to the it. This led to the invention of India pale ale in about 1787 by Bow Brewery.

In 1830, Edward Dyer travelled to India and set the up India's first brewery in Kasauli. It produced the beer brand Lion, which is still available. In 1835, the Kasauli brewery

Later, more brewries were built across India, Burma and Sri Lanka, and added to it. Later, H. G. Meakin bought the Solan brewery and added some more. It came to be known as Dyer-Meakin & Company. By the year 1882, there were 12 breweries in India in all, including one in Rangoon.

In the year 1892, 4,831,127 gallons of beer was produced in India. Out of this

2,748,365 gallons were purchased by commissariat and rest was left for consumption by the civilian population. But, British soldiers reportedly didn't like local beer and preferred imported beer which they were able to acquire cheaply.

In 1937, Burma was separated from India and the company lost its Burmese assets. The company was restructured and renamed as Dyer Meakin Breweries. It was listed on the London Stock Exchange. In 1949, N. N Mohan acquired all the assets of Dyer Meakin Breweries and added a few more units. In 1967, the company was renamed to Mohan Meakin Breweries.

In recent years, foreign companies have been entering India and acquiring local businesses. In 1999, United Breweries floated a subsidiary called Millennium AlcoBev. It was a joint venture between United Breweries, UK-based Scottish & Newcastle and Ravi Jain. In 2000, SABMiller India entered Indian market by

acquiring Narang Breweries. In June 2001, it acquired the Mysore Breweries. In 2003, SABMiller India acquired 50% stake in local Shaw Wallace's beer business. In

November 2002, SABMiller India acquired Rochees Breweries.

In May 2005, SABMiller India acquired Shaw Wallace's beer assets for Rs. 600 crore. Also in 2005, Carlsberg entered India with its local venture South Asian Breweries. Also in 2005, Singapore-based Asia Pacific Breweries acquired a 76% shared the local Aurangabad Breweries. In late 2005, UK-based Cobra Beer entered the Indian market by beginning negotiations with in December. In 2006, SABMiller India acquired Foster's Indian assets.

In February 2006, Anheuser-Busch Inbev, the makers of Budweiser, entered a

partnership with Hyderabad-based Crown Beers. Also in 2006, Ravi Jain divested his holdings in Millennium AlcoBev. In 2010, United Breweries consolidate its assets, merging Millennium AlcoBev and other units back into itself. In 2011, United Breweries announced that they would produce the Heineken brand beer in India. In 2012 after India allowed foreign-direct investment from Pakistan, Murree Beer representatives stated that they were seeking to export their brand to India. The Rawalpindi-based Murree Beer, which was established in 1861, has been trying to enter the Indian market since 2003.

Brewers and brands

Major breweries in India are Carlsberg, SABMiller India, Anheuser-Busch Inbev and United Breweries. United Breweries has a market share of 55% and SABMiller India has a share of 23%. Carlsberg's Tuborg Booster Strong brand (8% ABV) and

Anheuser-Busch Inbev's Budweiser Magnum (6.5% ABV) are sold only in India. United Breweries' Kingfisher Strong (8% ABV) is India's best selling brand. SABMiller India owns the Haywards brand and Foster's Indian units. Alcohol including beer advertisements are illegal in India. Brands circumvent this ban by advertising bottled water and soft drinks with their labels. Although imported beer brands like, Corona, Singha, Tsingtao, Victoria Bitter, St. ERHARD, Geist and

Christoffel, are available in India, they are costly due to high import duties reaching up to 100%.

Major beer brands in India

Beer bars

Beer Cafe and The Pint Room are two beer bar chains in India.

Craft beer and awards

In 2011, International Breweries' Australian MAX (7-8% ABV) won the titles of the "World's Best Strong Lager" and "Asia's Best Strong Lager". Australian MAX is brewed at Khoday Brewery in Bangalore.

Sales and consumption

India is the world's third fastest growing beer market. The beer market in India was estimated to be more than Rs. 200 billion in 2012. It is expected to be Rs. 430 billion

The per capita consumption of beer is 1.6 litres. The increased consumption has raised the price of barley in India.

Indians prefer stronger alcoholic drinks, like whisky, over beer because it is cheaper and has higher alcohol content. Indians have been known to consume mostly stronger brews. Strong beer with alcohol content in the 5-8% range accounted for 83% of the total beer sales in the year 2012. Beer still contents for only 5% of the total alcohol consumed. The low consumption is attributed to high cost, availability and stringent regulations. Karnataka is only state in India, which has a lower tax rate for beer compared to other alcoholic beverages. Maharashtra has the highest tax on alcohol at 43%.

Indian Whisky

A single malt whisky from India. The tropical climate of India makes the traditional aging of whisky in wood barrels a technical challenge.

Distilled alcoholic beverages that are labelled as "whisky" in India are commonly blends based on neutral spirits that are distilled from fermented molasses with only a small portion consisting of traditional malt whisky, usually about 10 to 12 percent. Outside India, such a drink would more likely be labelled a rum. Ninety percent of the whisky consumed in India is molasses-based, although whisky wholly distilled from malt and other grains, is also manufactured and sold.

Scotch-style whisky is the most popular distilled alcoholic beverage in India. India has traditionally been thought to lack a domestic drinking culture, though locally-produced beverages are popular throughout the country. For instance there are the popular

palm-wines of the North East like sonti. Whisky, however, has become fashionable among affluent Indians. Brand names of Indian molasses-based whisky, including Bagpiper, McDowell's No.1, Royal Stag, White & Blue Whisky, and MaQintosh, suggest that the inspiration behind Indian whiskies is Scotch whisky, despite these products being produced chiefly from molasses.

History

The drinking of Scotch whisky was introduced to India in the nineteenth century, during the British Raj. In the late 1820s, Edward Dyer moved from England to set up the first brewery in India at Kasauli. The brewery was soon shifted to nearby Solan (close to the British summer capital Shimla), as there was an abundant supply of fresh springwater there. The Kasauli Brewery site was converted to a distillery becoming India's first distillery, which is currently operated by Mohan Meakin. Dyer brought his brewing and distilling equipment from England and Scotland. Some of the original equipment, such as the copper pot stills, is still in use today. Dyer chose the location of the distillery because its climate was similar to that of Scotland, but also added bonus of a market of British troops and civilians in Shimla and Punjab. The Kasauli distillery is the oldest continually used distillery in Asia.

India produces a large amount of sugarcane, making molasses cheaply available as a by-product of sugar processing. This is used to manufacture most spirits in India, known as Indian Made Foreign Liquor. Indian whisky has generally been made by flavouring and colouring neutral spirits made from molasses, and sometimes blending it with imported Scotch whisky. Production of alcohol from grain was hampered by shortage of extra grain, due to food shortages. Allowing grains to be used for alcohol

manufacture is an emotive subject in India, due to poverty and alcohol's ambivalent reputation.

The manufacture of whisky from malted grains in India was pioneered by Amrut Distilleries. In 1982, Neelakanta Jagdale, Chairman and Managing Director of Amrut Distilleries, decided to create a premium whisky from a combination of malted and unmalted barley, while most distillers in India were manufacturing whisky by converting molasses to alcohol. Amrut Distilleries began procuring barley from farmers in Haryana, Punjab and Rajasthan, in addition to molasses, and launched Prestige Blended Malt Whisky in the Canteen Stores Department in 1986. The first batch of single malt whisky was ready within 18 months. Because India had no culture of consuming single malts at the time, the company did not consider bottling it as a single malt. Instead, the whisky was blended with alcohol distilled from sugarcane to produce MaQintosh Premium Whisky. Amrut Distilleries faced difficulties until the 1990s, as most of the technology used for distillation was homegrown due to heavy restrictions in India. According to Neelakanta Jagdale, "The alcoholic beverages industry was not a priority in the country. Although we received help to a certain extent from the Central Food Technological Research Institute (CFTRI), we had to find our own ways to learn about improved distilling methods".

After liberalization in the 1990s, import duties were reduced moderately, to about 35%, giving distillers access to better technology. Technology upgradation by plant manufacturers and India's sufficiency in grain production from 2000, gave a boost to grain-based alcohol. Another factor was the entry of foreign players to the market, whose brands seen as more authentic and attractive by affluent Indian consumers.

end of the market. Other factors included volatility in molasses' prices, and the pressure in procuring molasses due to growing demand from other users such as the fuel and chemical industries. This led several Indian manufacturers to acquire foreign liquor companies. Under Vijay Mallya's direction, the Indian company United

Breweries acquired a number of noted whisky brands and distilleries in Scotland, including Dalmore, Isle of Jura, and Whyte & Mackay. United Breweries has been increasing production at its Scottish facilities, and has moved to double the production of whisky at Invergordon. Some of the Scotch whisky so produced is used to blend with the Indian molasses whisky. According to data from Praj Industries, a firm that undertakes turnkey projects for companies in the alcohol business, grain-based lot of all potable alcohol produced in India was at about 10% in 2010, up from 2-3% five years earlier.

Amrut Distilleries launched Amrut, the first single malt whisky to be made in India, on 24 August 2004. The production of Amrut single malt whisky was the result of the distillery having malt that was ageing far in excess of what was needed for its medium range Prestige Malt Whisky. Initially, Amrut aged malt whisky for around a year before blending it. However, due to changing customer preferences, less malt whisky was being added into blended variants. The company had a surplus stock of malt whisky by 1995, and Jagdale decided to allow some barrels to age longer to see how they would turn out. The whiskies had been ageing for almost four to five years by the year 2000, and the company discovered that hot weather makes whisky mature faster in India than it does in Europe or the United States. The fraction lost to evaporation during aging, known as the angel's share, is also higher in India, at 11-12% per year,

India is equal to three years of ageing in Scotland. John Distilleries had been making blended whisky since its foundation, but decided to manufacture single malt whisky in 2008 in an attempt to enter the premium end of the market. John Distilleries chose to use Indian ingredients in the first bottling, to give the whisky characteristics of its country of origin. The first bottling of Paul John whisky, branded "Paul John Single Cask 161 Whisky", was officially launched on 4 October 2012. The brand's second release, also in 2012, was "Paul John Single Cask 163 Whisky". Following the single cask release, Paul John released two single malt whiskies in May 2013. They were branded Paul John Single Malt Whisky Brilliance and Paul John Single Malt Whisky Edited.

Domestic market

The Indian whisky market is the third largest in the world, after China and Russia. It has a complex tax structure with taxes leveled by both Central and State Governments. Import taxes are applied by the Central Government on imported spirits. State level taxes are levied by each individual State, with taxation levels and methods varying significantly. The sale of alcohol is also prohibited in some States. The Indian domestic market was completely closed to all imported spirits until 1 April 2001, under former import licensing restrictions. However, Scotch whisky was widely available through bootleggers and via duty-free allowances. Restrictions were

removed in 2001, but an additional customs duty (ACD) was introduced, which raised the cumulative duty burden on imported spirits to between 450% and 700%. This had a significant impact on sales of high-value spirits such as single malts. ACD was removed in 2007, but import duty remains high at 150%, which makes the market difficult for foreign distillers.

Whisky accounts for nearly 60% of the IMFL market. India accounted for nearly half the global whisky market by volume in 2010. The market is generally divided info segments based on price.

Trade controversy

The consumption of native distilled molasses-based whisky in India is encouraged by tariff barriers of up to 150% that impose a significant markup on imported whiskies in India. Imported Scotch whisky bottled under its own brand names makes up only 1% of the total market share. The substantial tax markup on imported whiskies has been categorized by the Scotch Whisky Association as "pure protectionism". Indian distillers have political influence, and believe that a cut in import duties would boost Scotch rapidly and would be a "catastrophe" for domestic distillers. The All India Distillers Association also accuses Scotch and other European spirits distillers as having the advantage of agricultural subsidies for their grain. Indian distillers also accuse the European Union of erecting its own sort of trade barriers by means of rules that forbid the marketing of molasses-based spirits as "whisky". Mallya has objected to the EU's refusal of entry to molasses-based whiskies, claiming that the "imposition of British imperialism is unacceptable". In a lawsuit brought in India by the Scotch Whisky Association, the Delhi High Court enjoined Indian whisky manufacturers from labelling their product with the words "Scot" or "Scotch".

India is the world's fifth largest Scotch whisky market by volume (16.42 million litres of pure alcohol) and 19th largest by value (£61.59 million / 532.10 crores) as of 2012. Exports of single malt from Scotland have risen by 190% from £268 million to £778 million between 2001 and 2012.

Manufacturers

Following is a list of whisky producers in

India:- Alcobrew Ltd

 Allied Blenders and Distillers Ltd

 Amrut Distilleries (Bangalore, Karnataka)

 Jagatjit Industries

 John Distilleries (Bangalore, Karnataka)

 Khemani Group

 Khoday India Limited (Bangalore, Karnataka)

 Premier Distilleries

 Mohan Meakin (Ghaziabad, Uttar Pradesh)

 N.V. Group

 Radico Khaitan (Rampur, Uttar Pradesh)

 Seagram Manufacturing Ltd, owned by Pernod Ricard

 Tilaknagar Industries

 United Spirits Limited (Bangalore, Karnataka)

 Vinbros & Co.

PART B. INTRODUCTION TO WORKING CAPITAL

Empirical observations show that the financial managers have to spend much of their time to the daily internal operations relating to current assets and current liabilities of the firms. As the largest portion of the manager’s time is devoted to working problems, it is necessary to manage working in the best possible way to get maximum benefit. The effective management of the business, among other things primarily depends upon the manner in which the short-term assets and short run sources of financing are managed. The management or current assets management consists of inventories, accounts receivable and cash & bank balances as the major components. There is a difference between current assets and fixed assets in terms of their liquidity. A firm requires many years to recover the initial investments in fixed assets such as plant and machinery and land and buildings. On the contrary, investments in current assets are turned over many times a year. Investments in current assets such as inventories and book debts are realized during the firm’s working capital cycle, which is usually less than a year. Working capital is that proportion of a company’s total capital, which is employed in short-term operations.

Even though, it is one segment of the capital structure of a business, it constitutes an inter-woven part of the total integrated business system. Therefore, neither it can be

isolation. Thus, a study in this field is of major importance to both internal and external analysis, for its close relationship with the day-to-day operations of a business.

There are many aspects of working capital management, which form an important function of a financial

manager:- Working management represents a large portion of the firm’s investment in assets.

 Working management has greater significance not only for small firms but also for large firms.

 The need for working capital is directly related to sales growth.

Most of the work dealing with working capital management in confined to the balance sheet, which is directed towards optimizing the levels of cash and marketable securities, receivable and inventories. For the most part, optimization of these current assets is isolated from the optimization of the other current assets and the overall valuation of the firm.

The decision concerning cash and resources, receivable, investments and current liabilities is with an objective of maximizing the overall value of the firm. Once decisions are reached these areas, the levels of working capital are also reduced.

An appropriate level of working capital is to be maintained as the excessive working capital interrupts the smooth flow of the business activity and curbs profitability. Also, there are a lot of circumstances where shortage of working capital has proved to be the

objectives get blurred. The suppliers and the creditors give the firm an adverse credit rating and tighten up credit terms.

The problem of managing working capital has got a separate entity as against different decision-making issues concerning current assets individually. Working capital has to be regarded as one of the conditioning factors in the long run operations of a firm, which is often inclined to treat it as an issue of short-run analysis and decision-making. The management of working capital hence involves constant vigilance to ensure that the right quantum is available on a continuing basis to support and promote the activities. Sound financial and statistical techniques, supported by judgment, should be used to predict the quantum of working capital needed at different time periods.

DEFINITIONS OF WORKING CAPITAL

Working capital has been in several ways as given below.

Operating capital: - As the working capital is the capital required to operate the

business and is the capital invested in the current assets, it is called as operating capital.

Circulating capital: - Interchangingly used word for working is circulating capital.

Gerestenberg gas suggested this item ‘circulating capital’ as all the assets of business change from one form to another.

Conceptually, working capital is either explained as: - Net Working Capital or Gross Working Capital. These concepts are not exclusive; rather they have equal significance from management viewpoint. Gross working capital refers to the firm’s investment in current assets. Net working capital refers to the difference between current assets and current liabilities.

GROSS WORKING CAPITAL CONCEPT

It is called as ‘qualitative’ aspect of working capital and focuses attention on two aspects of current assets management:

1. Optimum investment in current asset

It is conventional rule to maintain the level of current assets twice the level of current liabilities to constitute a margin or buffer for maturing obligation of a business.

2. Financing of current asset

Another aspect of gross working capital points to the need of arranging funds to finance current assets.

NET WORKING CAPITAL CONCEPT

Net working capital can be positive or negative. A positive net working capital will arise when current assets exceed current liabilities. A negative net working capital mean excess current liabilities over current assets.net working capital being the difference between current assets and current liabilities, is ‘qualitative’ concept and hence it:

2. Suggests the extent to which working capital needs may be financed by permanent sources of funds:- i.e., it covers the question of judicious mix of long term and short term funds for financing current assets. Thus, it may be emphasized that both gross and net concepts of working capital are equally important for the efficient management of working capital.

NEED FOR WORKING CAPITAL FINANCE

The need for working capital finance is over-emphasized. Every business needs some amount of working capital. The need for working capital arises due to the time gap between production and realization of cash from sales. There is an operating cycle involved in the sales and realization of cash. There are time gaps between purchase of raw materials & production, production & sales and realization of cash. Thus, working capital is needed for the following purposes.

 For the purpose of raw materials, components and spares.  To pay wages and salaries.

 To incur day-to-day expenses and overhead costs such as fuel, power and office expenses, etc.

 To meet the selling costs as packing, advertising etc.  To provide credit facilities to the customers.

 To maintain the inventories of raw materials, work in progress, stores  And spares and finished stock.

Operating cycle indicates the length of time between firm’s paying for materials entering into stock and receiving the cash from sale of finished goods. In other words, the duration of the required time to complete the sequence of events is called operating cycle. The operating cycle may take the following sequence:

1. In a manufacturing concern

 Conversion of cash into raw materials.

 Conversion of raw materials into work in progress.  Conversion of work in progress into finished goods.  Conversion of finished goods into debtors.

 Conversion of debtors and bills receivables into cash.

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The following figure shows the operating cycle of a trading concern :

TYPES OF WORKING CAPITAL

The working capital is classified in to two types. They are I. Permanent working capital

II. Temporary working capital

 Permanent working capital:

Permanent or fixed working capital is the minimum amount, which is

required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. This investment if of a permanent type and as the size of the firm expands the requirement of working capital also increases.

 Temporary working capital:

Temporary working capital is also called as the fluctuating or variable working capital, which varies according to the problem and sales. It is the capital required in addition to the working capital.

 Net working capital:

It is the difference between current assets and liabilities. It is the excess of current assets over current liabilities. This concept enables a firm to determine the exact amount available at its disposal for operational requirements.

 Gross working capital:

It refers to the total current assets of the business. It is also known as circulating capital, because the current assets are rotating in their nature.

 Negative working capital:

When a current liability exceeds current assets, it is called as negative working capital.

NEED FOR MAINTENANCE OF ADEQUATE WORKING

CAPITAL

An adequate or optimum working capital balance refers to the desired working capital where a firm will not have excess or shortage of working capital and indicates both profitability and liquidity for the firm. It is necessary to maintain an optimum cash balance, an optimum level of inventory and an optimum level of debtors and receivable.

DANGERS OF EXCESS WORKING CAPITAL

 It results in unnecessary accumulation of inventory in the form of raw material or work in progress or finished goods, leading to a high cost of storage, space, Insurance, increased theft, deterioration in the quality of goods, etc.

 Also, it is an indication of defective credit policy and slack collection period.  Excess cash in hand indicates idle cash and even though the liquidity position

of the company is good, it lacks profitability.

 Excessive working capital makes the management complacent, which degenerates into managerial inefficiency.

DANGERS OF INADEQUATE WORKING CAPITAL

 The production process will be obstructed if there is shortage of working capital.  Fixed assets are not efficiently utilized if there is lot of working capital funds,

which leads to deterioration in profits.

 The firm loses its reputation when it is not in a position to honor its short-term obligations.

 Ultimately it leads to the reduction in sale, as the firm cannot meet the demand of the customers.

EFFECT OF INADEQUATE WORKING CAPITAL ON DECISION

MAKING:-1) Stagnates the growth of the firm, 2) Threatens the solvency of the firm,

4) Renders the firm unable to avail the attractive credit opportunities

EFFECTS OF EXCESS WORKING CAPITAL ON DECISION

MAKING

 Impairs firm’s profitability through idle cash and  Makes dividend policy liberal,

 Creates difficulties to cope with the future, on the failure of the estimated speculative profits.

IMPORTANCE OF WORKING CAPITAL

Even though the skills for maintaining the working capital are somewhat unique, the goals are the same-viz. to make an efficient use of funds for minimizing the risk of loss to attain profit objectives.

Firstly, the adequate of working capital contributes a lot in raising the credit-standing of a corporation in terms of favorable rates of interest on bank loan, better terms on goods purchased, reduced cost of production on account of the receipt of cash discounts, etc.

Secondly, a company with sufficient working capital is always in a position to take the advantage of any favorable opportunity either to purchase raw materials or to execute a special order or to wait for better market position.

In the third place, the ability to meet all reasonable demands for cash without inordinate delay is a great psychological factor to improve the all rounds efficiency of the business.

Lastly, during slump the demand for working capital, instead of coming down, shoots up. A good amount of working capital is locked up in the inventories and book debts. Concerns having ample resources can tide over that period of depression.

Thus, working capital is regarded as one of the conditioning factors in the long run operations of the firm, which is often inclined to treat it as an issue of short run analysis and decision making.

FACTORS INFLUENCING WORKING CAPITAL

 Nature of business

The working capital requirement of a firm basically depends upon the nature of it’s business public utility undertakings like electricity, water supply and railways need very little working capital because they offer cash sales only and supply services, not products and such no funds are tied up in inventories and receivables. The manufacturing undertakings also require sizable working capital along with fixed investments because they have also to build up inventories.

 Size of business

The working capital requirements of a concern are directly influenced by the size of its business, which may be measured in terms of scale of operations. Greater the size of business unit, generally, larger will be the requirements of working capital.

However in some cases, even a smaller concern may need more working due to high overhead charges, inefficient use of available resources and other economic disadvantages of small size.

Production capacity

In certain industries the demand is subject to wide fluctuations due to seasonal variations. The requirements of working capital in such cases depend on the production policy.

 Manufacturing process

In manufacturing business the requirements of working capital increase in direct proportion to length of manufacturing process. Longer the process period of manufacture, larger is the amount of working capital required.

 Seasonal variations

In certain industries, raw material is not available through out the year. They have to buy raw materials in bulk during the season to ensure an uninterrupted flow and process them during the entire year. A huge amount is, thus, blocked in the form of material inventories during such season, which gives rise to more working capital requirements.

 Working capital cycle

In a manufacture concern, the working capital starts with the purchase of raw materials and ends with the realization of cash from the sale of finished

determines the requirements of working capital. Longer the period of cycle, larger is the requirement of working capital.

 Rate of stock turn over

There is a high degree of inverse correlation ship between the quantum of working capital and the velocity or speed with which the sales are affected. A firm having as high rate of stock turnover will need lower amount of working capital as compared to a firm having a low rate of turnover.

 Credit policy

The credit policy of a concern in its dealings with debtors and creditors influences considerably the requirements of working capital. A concern that purchases its requirements on credit sells its products/services on cash requires lesser amount of working capital.

 Business cycle

Business cycle refers to alternate expansion and contraction in general business actively. In a period of boom i.e., when the business is prosperous, there is a need for larger amount of working capital due to increase in sales, rise in prices, optimistic expansion of business, etc. on the contrary, in the times of depression i.e., when there is a down swing of the cycle, the business contracts, sales decline, difficulties are faced in collections from debtors and firms may have a large amount of working capital lying idle.

 Rate of growth of business

The working capital requirements of a concern increase with the growth and expansion of its business activities.

 Earning capacity and dividend policy

Some firms have more earning capacity than others due to quality of their products, monopoly conditions, etc. such firms with high earning capacity may generate high cash profits from operations and contribute to their working capital. The dividend policy of a concern also influences the requirement of its working capital.

 Price level changes

Changes in the price level also affect the working capital requirements. Generally, the rising prices will require the firm to maintain larger amount of working capital, as more funds will be required to maintain the same current assets. The effect of rising prices will be different for different firms. Some firms may be affected much while some may not be affected at all by the rise in prices.

 Other factors

Certain other factors such as operating efficiency, management ability, irregularities of supply, import policy, asset structure, importance of labour, banking facilities, etc., also influence the requirements of working capital.

SOURCES OF WORKING CAPITAL

The various of working capital for the financing of working capital are as follows:

Sources of working capital

Permanent or fixed Temporary or variable

1) Shares 1) Commercial banks 2) Debentures 2) Indigenous bank

3) Public deposits 3) Trade credits 4) Ploughing back of profits 4) Installment credit 5) Loans from financial institutions 5) Accounts receivables

FINANCING OF PERMANENT, FIXED OR LONG TERM

WORKING CAPITAL

Permanent working capital should be financed in such a manner that the enterprise may have its uninterrupted use for a sufficiently long period. There are five important sources of permanent or long-term working capital:

 Shares

Issue of shares is the most important source for raising the permanent or long capital. A company can issue various types shares as equity shares, preference shares.

 Debentures

A debenture is an instrument used by the company acknowledging its debt to its holder. It is also an important method of raising long term or permanent working capital.

 Public deposits

Public deposits are the fixed deposits accepted by a business enterprise directly from the public. This source of raising short term and medium term finance was very popular in the absence of banking facilities.

 Ploughing back of profits

Ploughing of profits means the re-investment by a concern of its surplus earnings in its business. It is an internal source of finance and a most suitable for an established firm for its expansion, modernization and replacement, etc.

 Loans for financial institutions

FINANCING OF TEMPORARY, VARIABLE OR SHORT- TERM

WORKING CAPITAL

The main sources of short-term working capital are as follows:  Commercial banks

Commercial banks are the most important source of short-term capital. The major portion of working capital loans is provided by commercial banks. They provide a wide variety of loans tailored to meet the specific requirements of a concern. The different forms in which the banks normally provide loans and advances are loans, cash credits, overdrafts, purchasing and discounting of bills.

 Indigenous bankers

Private moneylenders and country bankers used to be the only source of finance prior to the establishment of commercial banks. They used to change very high rates of interest and exploit the customers to the largest extent possible.

 Installment credit

This is another method by which the assets are purchased and the possession of goods is taken immediately but the payment is made in installments over a predetermined period of time.

 Trade credits

As present day commerce is built upon credit, the rate credit arrangement of a concern with its suppliers is an important source of short-term finance. The main advantages of this source are: it is very convenient method of finance; it is flexible and it may be possible to obtain favorable terms.

 Advances

Some business houses get advances from their customers and agents against orders and this source is a short-term source of finance for them.

 Accounts receivables

Accounts receivable is a permanent investment in the business. As old receivables are collected and new receivables are created, it is the major component of the current assets.

CASH MANAGEMENT

INTRODUCTION

Cash is the most liquid asset and all assets of business are finally converted into cash. Cash is considered as the lifeblood of the business. It is essential for a business to carry out all its transactions. Cash of a business includes cheques, currencies and bank drafts. The cash determines the credit worthiness, solvency and liquidity position of a

current assets because cash is the most significant and least productive asset of a business.

Management of cash is important not only because it is the most liquid asset but also because all the liabilities of the business are to be met in cash. Though cash forms the smallest part in the total assets of the company it requires a lot of time for its management.

MOTIVES FOR HOLDING CASH

A business may hold cash with the following motives:

 Transaction motive

It requires a firm to hold cash to conduct day-to-day operations of business. The firm needs cash to make payments for purchases, wages and operating expenses and other inevitable payments.

 Precautionary motive

The firms to meet emergencies i.e., the unforeseen events of the business also maintain cash. A business firm will have to fan a number of risks because it has an environment of its own. The environment consists of many uncontrollable factors like government legislation, natural calamities, unpredictable consumer behaviour etc, to face all these risks, the firm needs to hold cash in a business.

To take advantage of unexpected opportunities, a firm holds cash for investing in profit making opportunities. Such a motive is purely speculative in nature.

 Security motive

A firm should maintain cash reserves for future requirements if a firm is not in a position to obtain finance from any other source, then it can utilize the cash reserves.

 Compensatory motive

It is a motive to have cash to compensate against loss arising in business.

OBJECTIVES OF CASH MANAGEMENT

 To meet the payment schedule

The main objective of cash management is to make the payments to the various types of expenditure. Every business will have payment schedule and hence it has to generate cash inflows to meet the cash outflows.

 To maintain minimum cash reserves

Another important objective of cash management is to maintain optimum cash balance. To meet the expenses a firm need not maintain huge reserves of cash. Huge reserves will mean idle cash, which is not productive. On the other hand if there is no cash reserve, a firm finds it difficult to meet the expenses. Hence, minimum cash reserves are to be maintained.

STRATEGIES OF CASH MANAGEMENT

Following are the various strategies for cash management.

 Cash planning

Cash planning is necessary to project the surplus or deficit of cash. It also helps to maintain the cash balance for the planned period. It is a technique to plan and control the use of cash. Cash planning may be done on daily, weekly or monthly basis. The period and frequency of cash planning generally depends upon the size of the firm.

Cash planning requires the use of two techniques namely - Cash forecasting and

- Cash budgeting

 Cash forecasting

It refers to the prediction of cash requirements and the sources of cash generation. Cash forecasts are required to prepare cash budgets. It may be done on a short-term basis or a long-term basis. The most commonly used methods for cash forecasting are:

1) The receipts and disbursement method 2) Net adjusted income method

 Cash budgeting

Cash budget is the most significant device for planning and controlling the receipts and payments. It is a summary statement of the firms expected

of a cash budget may differ from firm to firm. Daily, weekly or monthly. Cash budget should be prepared for determining the cash requirements.

 Management of cash inflows

Once the cash budget has been prepared the financial manager should that their does not exit a significant deviation between projected cash inflows and actual cash flows. The two objectives of managing cash flows are: - Accelerating cash inflows and

- De-accelerating cash outflows

 Optimum cash balance

Cash management involves the maintenance of optimum cash balance. Optimum cash balance is desired amount of cash to be held by the firm. If a firm has an optimum cash balance it will not suffer with the ideal cash or with shortage of cash. Cash by itself cannot generate until it is invested. Having excess cash will mean an opportunity cost to the business. If a firm runs short of cash it cannot fulfill the basic objectives of meeting the payment schedules hence optimum cash balance is necessary.

 Management of idle cash

Business firm will face the problem of managing idle cash. At times a business will have more cash inflows and shortage of cash. It is necessary for the firm to generate something out of the idle cash and keep ready the same cash at that time when it runs to shortage of cash. The best option to

invest on the securities like shares and debentures of other companies. While investing on the securities of other it has to consider the following three factors: 1) Safety 2) Marketability 3) Maturity

RECEIVABLES MANAGEMENT

Receivables management is a permanent investment in the business. As old receivables are collected and new receivables are created, it is a major credit of the current assets. This emerges because of the existence of credit sales. It shows the amount receivable from the purchases. This is called by different names such as bills receivables, accounts receivable, trade debtors, sundry debtors, trade receivables etc.

Receivables derive benefits to the firm and also involve cost to the firm. If the benefit is more the cost is also more and hence the risk increases. On the other hand, if the benefits are less the cost and risk is also less. Receivable management tries to trade of between benefits and cost arising from receivables.

INTRODUCTION

The important component of working capital is inventory. Inventory refers to the stock of goods yet to be sold by a business firm. It is denied as the stock of goods a firm is offering for sale and the components that make the goods. In other words the inventory includes raw materials, work in progress and finished goods.

OBJECTIVES OF INVENTORY MANAGEMENT

 To provide continuous supply of raw materials for production  To reduce the wastage and to avoid loss of breakage and

deterioration

 To meet the demand for goods of ultimate consumers on time  To provide right material at time and at right places

 To avoid excess and inadequate storing of materials

MOTIVES FOR HOLDING INVENTORY

Generally inventories are held by three motives

 The transaction motive, which emphasizes the need to maintain inventories to facilitate smooth production and sales operation.

 The precautionary motive which necessitates holding of inventories to guard against the risk of unpredictable changes in demand and supply process and other factory.

INVENTORY MANAGEMENT TECHNIQUES

In managing inventories, the firm’s objective should be in consance with the wealth maximization principle. To achieve this, the firm should determine the optimum level of inventory. Efficiently controlled inventories make the firm flexible. To manage inventories efficiently, the understanding economic order quantity and reorder point can answer the questions.

ECONOMIC ORDER QUANTITY

One of the major inventory management problems to be resolved is how much inventory should be added when inventory replenished. Economic order quantity is that quantity of material, which is most economical in buying taking into account the operational requirements of the company. The economic order quantity is that inventory level, which minimizes the total ordering cost and carrying cost.

PRINCIPLES OF WORKING CAPITAL MANAGEMENT

The objectives of working capital management are to manage the firm’s current assets and current liabilities in such a way that a satisfactory level of working capital is maintained. The following general principles help us to maintain a sound working capital:

 Principle of risk variation  Principle of cost of capital  Principle of Equity position 

 PRINCIPLE OF RISK VARIATION

Risk here refers to the capability of a firm to meet its obligations as and when they become due for payment. Larger investment in current assets with less dependency on short-term borrowing increases liquidity, like for example: conversion of resources into inventories, into cash, here cash outflows occur before cash inflow. But then the cash inflows are not certain because sales and collections, which give rise to cash inflows, are difficult to forecast

accurately. Cash outflows on the other hand are relatively certain. The firm is therefore, required to invest in current assets for a smooth, uninterrupted functioning. It needs to maintain liquidity to purchase raw materials and pay expenses such as wages and salaries, other manufacturing administrative and selling expenses as there is hardly a matching between cash inflows and outflows.

On the other hand investment in current assets with greater dependence on short-term borrowings increases risks, reduces liquidity and increases profitability. For example: Acquiring resources on credit, temporarily postpones payment of certain expenses. Thus, the time interval between cash collections from sale of products and cash payments for resources acquired by the firm reduces liquidity and increases profitability. In other words there is a definite inverse relationship between the degree of risk and profitability. The various working capital policies, such as conservative policy, moderate policy, and aggressive policy indicate the relationship between current assets and sales.

A conservative management prefers to minimize risk by maintaining a higher level of current assets for working capital while a moderate or aggressive management assumes comparatively greater risk by reducing working capital. However, the goal of the management should be to establish a suitable trade off between profitability and risk.

 PRINCIPLE OF COST OF CAPITAL / PERMANENT AND VARIABLE CAPITAL

Cost of capital varies with the source of finance and the degree of risk involved. Generally, it is, higher the risk, lower is the cost and lower the risk higher is the cost. A sound working capital management should always try to achieve a proper balance between these two.

The magnitude of current assets needed is not always the same; it keeps fluctuating (increases and decreases) over time. However there is always a minimum level of current assets, which is continuously required by the firm to carry on its business operations. This minimum level of current assets is referred to as permanent, or fixed, working capital. Depending upon the changes in production a sales, the need for working capital over and above permanent working capital will fluctuate.

For example: extra inventory of finished goods will have to be maintained to support the peak periods of and investment maintained to support the peak period of sale, and investment in receivables may also increase during such periods. On the other hand, investment in raw material, work in progress and finished goods will fall if the market is slack

The extra working capital, needed to support the changing production and sales activities is called fluctuating, variable or temporary working capital. The firm to meet liquidity requirements that will last only temporarily creates temporary working capital.

 PRINCIPLE OF EQUITY POSITION

This principle is concerned with planning how much to earmark for CA from the total investment. According to this principle, the amount of working capital invested in each component should be adequately justified by a firm’s equity position. Every rupee invested in the current assets should contribute to the net worth of the firm. Excessive working capital needs idle funs, which earn no profits for the firm. Paucity of working capital not only impairs the firm’s profitability but also results in production interruptions and inefficiencies.

 PRINCIPLE OF MATURITY OF PAYMENT

This principle is concerned with planning the source of finance for working capital. A firm should make every effort to relate maturities of payment (sundry creditors) to this flow of internally generated funds. Maturity pattern of various current obligations is an important factor in risk assumptions and risk assessments. Generally, shorter the maturity schedule of current liabilities in relation to expected cash inflow, greater the liability to meet its obligations in time. In the words of Louis Brand, “we need to know when to look for working capital funds, how to use them and how to measure, plan and control them”. To achieve the above-mentioned objectives of working capital management, the

a) Estimating the working capital requirements. b) Analysis and control of working capital. c) Financing of working capital needs.

DESIGN OF THE STUDY

TITLE OF THE STUDY:

A study conducted for SABMiller India Limited on Working Capital Management.

STATEMENT OF PROBLEM

Working capital is an important requirement for any business, without which no business can survive. Every activity of the business is related to the availability of the

terms, controlling the movement of cash, administering the account receivable and monitoring the investment in inventories. All this consumes a great deal of time of finance managers. Also the obstacles inhabiting the effective working capital management throws open challenges to the finance managers in managing working capital.

OBJECTIVES OF THE STUDY

 The study was conducted mainly to understand and analyze the issue of working capital management, being practically employed in SABMiller India Limited.

 To understand the practical difficulties faced by managing the working capital.  To analyze the various external and internal factors effecting working capital

management in SABMiller India Limited.

 To understand and learn the various policies framed by SABMiller India Limited for effective management of working capital.

DATA AND METHODOLOGY

Mainly data is obtained from the annual reports of the company. Further data is collected through interviews with the key personnel and concerned of the company. Sampling techniques are not applicable to the study as it pertains to the study of a single company. Media of collecting the data is the office of this company’s chartered accountant, B S R & Co. in Bangalore.

The study of working capital management is limited to the specific company, SABMiller India Limited.

REFERENCE PERIOD

The study period covered in this case study is for 2 financial years i.e., from 2011-2012, 2012-2013.

DEFINITIONS OF CONCEPTS

Some of the concepts used in different senses from time to time in the literature of financial management are discussed below in order to make the study clear and meaningful.

WORKING CAPITAL

It is the fund, which is used to finance its day to day activities of business, and it has to be employed in short term operations. There are two concepts of working capital-gross concept and net concept.

WORKING CAPITAL MANAGEMENT

PROFITABILITY

It is the ability of the firm to meet the claims of suppliers of short-term capital for building up of current assets and also means short-term debt repaying capacity of enterprise, in a limited sense.

OPERATING CYCLE

It is a period involved from the time cash is invested in inventory till the time cash is recovered from sales of goods.

LIMITATIONS OF STUDY

 This report is based on the annual reports, which are provided by the company that cannot be relied upon.

 The collection of data for analysis is restricted to SABMiller India Limited only and

 Time was major limiting factor to the study.

COMPANY PROFILE

PROFILE OF SABMiller India Limited (Formerly SKOL

BREWERIES LIMITED)

SABMiller India Limited is the operating entity of SABMiller Group in India. The Company was hitherto known as SKOL Breweries Limited and the name was changed to SABMiller India Limited effective 22nd _{June 2012 to reflect the SABMiller Group}

identity in India. SABMiller entered India in 2000 by entering into a joint venture with Narang Breweries Limited. Subsequently, the Group acquired many individual brewing companies and in the year 2005 acquired the brewing business of Shaw Wallace Group in India.

The Company headquartered at Bangalore has 10 high quality breweries located strategically across 9 states in India, well placed to service the markets quickly and efficiently. Our mission is to nuture local and international brands that are the first choice of the consumer and in line with this mission, your company has acquired and nurtured local brands like Hayward’s 5000, Hayward’s 2000, Knock Out and Royal Challenge. Other brands being Foster’s, Miller High Life and Peroni Nastro Azzurro are the international brands of the SABMiller Group which have been introduced with many to follow.

Indus Pride is an indigenously developed and brewed product and during the year the brand was relaunched brewed with spices in four variants, a first of its kind in India.

All these brands of beer coupled with the SABMiller’s stringent global quality standards have made them a discerning choice for millions of consumers in India. The growing demand for these brands of beer has propelled the company to cross production and sales of 5.5 million hectoliters during the year 2012-13 representing turnover of Rs.3348.75 Crores.

SABMiller plc, London, the ultimate holding company holds indirectly 99.43% equity in SABMiller India Limited.

SABMiller Plc

SABMiller plc headquartered at London is one of the world’s leading brewers with more than 200 beer brands and about 70,000 employees in over 75 countries. SABMiller has created leading positions in both emerging and developed markets across the world. For the year ended 31st _{March 2013 SABMiller globally sold 306}

million hectoliters of larger and thereby clocking turnover of US$ 34,487 million and EBITA of US$ 6,421 million. Its international portfolio of brands includes premium international beer such as Pilsner Urquell, Peroni Nastro Azzurro, Miller Genuine

Draft and Grolsch. SABMiller is also one of the world’s largest bottlers of Coca- Cola products.

SABMiller has a rich heritage spanning more than 115 years. Hitherto known as South African Breweries (SAB) was founded in 1985 in Johannesburg, South Africa. SAB raised first international equity in 1996. In 2000, SAB entered India by acquiring Narang Breweries. In 2002, SAB acquired Miller Brewing Company, the second largest brewery in the United States by volume and changed its name to SABMiller plc. Upon this acquisition, SABMiller became the second largest brewer in the world. In 2006, SABMiller acquired Foster’s brewing business and brand in India. SABMiller acquired Foster’s Group of Australia in 2011. SABMiller has grown through a culture of operational excellence, delivering high quality products, innovation and sustainable growth.

SABMiller is listed on the London and Johannesburg stock exchanges.

VISION, MISSION And VALUES

We believe that our business is not separate from society, and that the success of SABMiller is inextricably linked to the well-being of the wider community. Everywhere we operate, we’re working to build strong local businesses that contribute to their local economies. That’s what makes SABMiller global leaders in doing business locally.

Our success is built upon a clear strategic direction and a shared commitment to the company’s vision, mission and values.

Our Vision

To own and nurture local and international brands that are the first choice of the consumer.

BRANDS OF SABMiller

5.Royal Challenge Strong 6.Foster’s

7.Miller High Life 8.Peroni Nastro Azzurro

1.

Indus Pride

Indians have always had a taste for the finer things in life, whether it is for music, the arts or food. Indus Pride is a tribute to this exquisite sense of taste. It also has the distinction of being the first Indian beer to be brewed with spices and the choicest hops

comes in a range of variants like Citrusy Coriander, Citrusy Cardamom, Spicy

Fennel and Fiery Cinnamon.

2.Haywards 5000

Haywards 5000 was launched in the year 1983 and is one of the largest selling strong beer in India. Haywards 5000 name with its red, black and gold coloured label is synonymous with strong beer in India.

Haywards 5000 perfectly combines strength with quality credentials that meet the high expectations of today’s demanding consumers.

Haywards 5000 is the hallmark of original and authentic strong beer which other beer brands aspire for.

The popularity of the brand over the decades made few unscrupulous brewers copy the numeral 5000 which are being successfully thwarted bt SABMiller India through legal action.

Haywards 5000 continues to be the flagship brand of SABMiller India.

3.Knock Out

Ever since its launch in 1984, Knock Out has evolved it’s brand positioning from strength to cold refreshment to establish itself as one of the largest selling strong beer brands in the country. Today, there are millons of consumers in the states of Karnataka, Maharastra and Andhra Pradesh for whom the brand has come to acquire an iconic

Knock Out today comes with an innovative thermochromic label ( a

Label that changes when it becomes cold) in the states of Maharastra and Karnataka. Knock Out is brewed in modern, state of the art breweries to ensure consistent conformance of the highest international quality standards. Modern techniques help to ensure that the beer is produced under hygienic conditions, free from any external impurities.

4.Royal Challenge

Launched in the year 1993, Royal Challenge Premium Lager is the second largest selling mild beer in India. Royal Challenge is brewed with the choicest 6 row barley malt. Its long brew duration provides it with a distinct, smooth taste and rich flavour. The brand has moved from strength to strength since its relaunch by SABMiller and

5.Royal Challenge Strong

Royal Challenge Strong Beer is one of the newest additions to the SABMiller Portfolio. It is a strong beer that is smooth and easy drinking.

Royal Challenge Strong uses the highest quality barley and the choicest hops picked from the country’s best farms. The hops are subjected to a long brewing process along with high quality barley malt. Through this customized process, the brew acquires a silky smooth consistency and gives a better drinking experience.

Foster’s Lager is a uniquely Australian beer, brewed with the finest sun-dried malted barley, the purest water, and Foster’s own specially bred ‘Pride of Ringwood’ hops imported directly from Australia to give the beer an authentic flavor. Foster’s Lager Beer has always been at the forefront of brewing technology and the Foster’s Lager brewed today is the result of over a century of attention to the brewing art. Quality has been the strength of Foster’s since its earliest days and remains a paramount concern at every stage of the beer’s journey from brewery to consumer. Foster’s crisp, clean flavor won it immediate international acclaim when it was first brewed in Melbourne in 1888. Today, more than one hundred years later, it is still recognized as one of the world’s best beers.