MUMBAI, May 9: The inventory costs of confectionary major Cadbury India rose significantly to 13.5 per cent of sales at end-December 1996 against 12 per cent of the preceding year. The total inventory has risen to Rs 42.44 crore in 1996 from Rs 30.62 crore.

The inventory of finished goods nearly doubled to Rs 16 crore as on December 28, 1996, from Rs 8.6 crore in the previous year. As a result, the level of current assets increased by over Rs 15 crore. This was funded by an increase in cash credit outstandings and fixed deposits from the public and by stretching creditors.

The company has carried forward expenditure of Rs 3.84 crore as deferred revenue expenditure incurred during the period. Capital expenditure stood at Rs 33 crore in 1996. The company says it plans to spend a significantly higher amount during 1997 to modernise its factories and to add to capacities for existing and future products.

Cadbury India says that substantial investments have been made in marketing. Advertising revenues during 1996 amounted to Rs 25.6 crore, compared with Rs 19 crore in 1995. The company plans to increase its adspend further and these marketing requirements need to be supported by capital investments in the factories. Towards that end, it has chalked out a major capital expenditure programme.

Cadbury has already invested Rs 50 crore at its Malanpur factory. Further, major investments are being made in 1997, which will include Rs 40 crore each at Malanpur and Induri.

Last year, the increase in fixed assets was funded partly by an increase in borrowings. The outstanding loans doubled to Rs 30 crore. This has had an impact on the company's cash flow, as income generated from operations fell to Rs 42 crore from Rs 59 crore in 1995. This was largely due to cash locked up in blocked inventories.

In another effort to generate cash, the company in 1996 sold off its investment in units on the Capital Gains Unit Scheme at a profit. Meanwhile, the outstanding investments at the end of the year was Rs 45 lakh compared to Rs 3.7 crore at the end of 1995.

Cadbury India has managed to maintain its margins despite an increase in prices of raw materials. Price of cocoa beans, cocoa butter and cocoa powder has increased drastically to Rs 84.6 per kilo from Rs 58 per kilo in the previous year.

Debtors over six months old increased to 2.5 crore during the year from Rs 26 lakh in the previous year. Foreign exchange earnings in 1996 stood at Rs 5.5 crore compared to a foreign exchange outgo of Rs 39.27 crore in 1995.With the rights issue in early 1997, the company would be able to manage its cash flows during the year to fund its expansion and modernisation programme, said analysts. The Cadbury stock has climbed up from Rs 247 at the end of November 1996, to touch a high of Rs 364 on March 3.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.