Determinants of Working Capital in the Indian Sugar Industry

This study examines the firm-level determinants of working capital for sugar manufacturing companies in India. Working capital management is particularly important for sugar manufacturing companies, as inventory cycles in the sugar industry generally tend to be relatively long, as its raw material inputs are seasonal and thus require a longer period of storage. The sample for the study included 15 listed sugar manufacturing companies for the period 2008–18. The study uses fixed-effects panel regression models, with size (logarithm of total assets), leverage (debt-equity ratio), asset tangibility (fixed assets as a percentage of total assets), growth rate of sales and profitability (return on assets) as the independent variables, and the current ratio, inventory cycle, receivables cycle, payables cycle, cash conversion cycle, total assets turnover ratio, fixed assets turnover ratio, inventory turnover ratio, receivables turnover ratio and payables turnover ratio as the dependent variables. The key results of the study were significant positive size and leverage effects and a significant negative asset-tangibility effect on working capital in the Indian sugar industry.