This factor emerges from a study of trends in the inventories-to-sales ratio of 50 major manufacturing companies (sales above Rs 500 crore) between 1994-95 and 1998-99. The ratio for these 50 companies decreased from 21.77 per cent in 1994-95 to 16.31 per cent in 1998-99, reflecting better management of inventories by the big corporate sector.

Of the 50 companies in this study, 38 reported a decline in the ratio, while 12 experienced a rise. Many of them, particularly those in the consumer goods industry and engineering (others), showed significant decreases in their ratios during 1998-99 from the level of 1994-95. This indicates that they have managed their inventory levels in a systematic manner.

In the engineering(others) group, Larsen & Toubro showed a significant decline in its ratio from 85.79 per cent in 1994-95 to 29.04 per cent in 1998-99. While its actual inventory level declined by 23.3 per cent to Rs 1,999 crore during 1998-99 from Rs 2,605 crore four years ago, its sales figure increased by 126.7 per cent during the same period. This indicates that inventory management in Larsen & Toubro has improved significantly during this period.

In 1998-99, nine big companies, including Larsen & Toubro, had inventory-to-sales ratios above 22 per cent. The others were Ashok Leyland (23.52 per cent), Bata India (22.50 per cent), Cipla (26.87 per cent), Global Tele-Systems (23.40 per cent), GSFC (22.98 per cent), ITC (26.06 per cent), Ranbaxy Laboratories (24.41 per cent) and Raymonds (22.83 per cent).

In 1994-95, there were 14 companies with inventories-to-sales ratios of 22 per cent or more. They were: Ashok Leyland (22.49 per cent), Bata India (32.29 per cent), Castrol India (24.63 per cent), Century Textiles (22.33per cent), Cipla (34.98 per cent), EID Parry (25.31 per cent), Godrej Soaps (23.09 per cent), GSFC (23.95 per cent), Indal (26.07 per cent), ITC (26.31 per cent), Larsen & Toubro (85.79 per cent), Modi Rubber (24.16 per cent), Raymond (22.19 per cent) and Siel (23.80 per cent).

Those with very low inventory-to-sales ratios in 1998-99 were Ballarpur Industries (8.16 per cent), Madras Cement (9.97 per cent), Marico Industries (8.87 per cent), Motor Industries (8.89 per cent) and Nirma (9.72 per cent). The best achievers in the year 1994-95 were Chambal Fertilisers (9.62 per cent), HindLever Chemicals (5.34 per cent) and Marico Industries (8.10 per cent).

Companies which have lowered their inventory share in sales significantly during the fiscal 1998-99 from the levels of 1994-95 were Bata India (32.29 per cent in 1994-95 to 22.50 per cent in 1998-99), Castrol India (24.63 per cent to 15.42 per cent), Cipla (34.98 per cent to 26.87 per cent), Godrej Soaps (23.09 per cent to 11.93 per cent), Larsen & Toubro(85.79 per cent to 29.04 per cent), Mahindra & Mahindra (20.51 per cent to 12.68 per cent) and Modi Rubber (24.16 per cent to 17.68 per cent). In the case of Godrej Soaps, the inventory level has declined by 15.7 per cent to Rs 103 crore during 1998-99 from the level of Rs 122 crore during 1994-95. But its sales has increased by 63.1 per cent during the same period.

Similarly, in the case of Modi Rubber, the company managed to reduce its inventory level by 8.4 per cent to Rs 118 crore during 1998-99 from the level of Rs 128 crore during 1994-95 with the help of better inventory management.

On the other hand, companies which noticed a sharp increase in the ratio from 1994-95 to 1998-99 were Chambal Fertilisers (9.62 per cent in 1994-95 to 20.44 per cent in 1998-99), HindLever Chemicals (5.34 per cent to 11.36 per cent), Global Tele-Systems (17.44 per cent to 23.40 per cent) and Kesoram Industries (11.32 per cent to 17.92 per cent). The sharp increase in the ratio of Chambal Fertilisers during 1998-99 canbe explained from the inventory figures. The inventory of the company increased by 154.9 per cent to Rs 162 crore in 1998-99 from the level of Rs 64 crore in 1994-95.

Industries, which witnessed an improvement in inventory management, were aluminium (21.44 per cent in 1994-95 to 18.96 per cent in 1998-99), manmade fibres (13.36 per cent to 12.24 per cent), engineering (others) (68.46 per cent to 27.25 per cent), tobacco (26.31 per cent to 26.06 per cent), sugar (25.31 per cent to 19.42 per cent), iron & steel (19.14 per cent to 18.27 per cent), cement (12.51 per cent to 11.65 per cent), tyres & tubes (18.83 per cent to 15.35 per cent), electrical goods (16.04 per cent to 14.03 per cent), automobiles (16.97 per cent to 14.73 per cent), paper & products (12.97 per cent to 8.16 per cent), consumer goods (20.22 per cent to 12.46 per cent), fertilisers (19.32 per cent to 18.62 per cent) and food products (11.49 per cent to 11.14 per cent).

An increase in the inventory-sales ratio was recorded inpharmaceuticals (19.12 per cent in the fiscal 1994-95 to 20.92 per cent in 1998-99). The percentage changes in inventories of this industry were higher than the percentage change in total sales during 1998-99 from the level of 1994-95. In the group of four pharmaceuticals companies, inventory increased by 81.1 per cent to Rs 735 crore in 1998-99 from Rs 406 crore in 1994-95. But the total sales of these companies increased by 65.5 per cent to Rs 3,513 crore in 1998-99 from Rs 2,122 crore in 1994-95. This indicates that the growth of total sales in the pharmaceuticals industry was lower than the growth of inventories during 1998-99 from the level of 1994-95.