TABLE OF CONTENTS

Sr. No. Contents Page No.

1 Preface 2
2 Acknowledgement 3
3
Declaration 4
4
Certificate
5
E!ec"ti#e S"mmar$ %
6
&ntrod"ction To T'e St"d$ ()*+

(A)
Objective Of The Study

(B)
Research Methodology and Scope Of Study

(C )
Limitation Of The Study
7
&ntrod"ction) &ndian Al"mini"m &nd",tr$ **)2*

(A)
Aluminium Structure, Inputs and roducts

(B)
!inancial "ear#$%

(c)
rospects

(D)
Salient !eatures Of The Industry

(E)
&uantitative Industry

(F)
'onsumption Of Aluminium In India
8
&ntrod"ction - NALCO 22)34

(A)
(rief )istory

(B)
Achievements

(C)
*alco# products

(D)
+ years performance , physical and highlights

(E)
roduction # ne-t + years
9
Introduction#.or/ing 'apital 3)42
1
.orking Ca/ital 0anagement 43)*

(A)
'onse0uences of under and over assessment of .1'

(B)
Types of .1'

(C)
!inancing .1'

(D)
Inventory Management

(E)
'ash Management

(F)
Receivables Management
11
Important Terms and Ratios 2graphical presentation3 2)12
12
Concl",ion 13
13
Bi2liogra/'$ 14
E3EC4T&5E S400E67
The major objective of the study is to proper understanding the 4or/ing capital of
*AL'O 5 to suggest measures to overcome the shortfalls if any1
!unds needed for short term needs for the purpose li/e ra4 materials, payment of
4ages and other day to day e-penses are /no4n as 4or/ing capital1 6ecisions
relating to 4or/ing capital 2'urrent assets#'urrent liabilities3 and short term
financing are /no4n as 4or/ing capital management1 It involves the relationship
bet4een a firm7s short#term assets and its short term liabilities1 (y definition,
4or/ing capital management entails short#term definitions, generally relating to
the ne-t one year period1
The goal of 4or/ing capital management is to ensure that the firm is able to
continue its operation and that it has sufficient cash flo4 to satisfy both maturing
short term debt and upcoming operational e-penses1
.or/ing capital is primarily concerned 4ith inventories management, Receivable
management, cash management 5 ayable management1
&n#entorie, management at NALCO8
*AL'O is a large scale manufacturing company involved in mining of (au-ite
and production of Aluminum1 Therefore, it has to maintain large 0uantity of
inventories at production units for its smooth running and functioning1
Ca,' management at NALCO8
*AL'O has been accumulating huge cash surpluses over last several years, 4hich
enables the organi8ation to maintain ade0uate cash reserves and to generate
re0uired amount of cash1
6ecei#a2le, management at NALCO8
NALCO has set up its mar/eting office at all metro cities in India i1e1 Mumbai,
9ol/ata, *e4 6elhi, 'hennai, (angalore, and ondicherry1 This mar/eting office
obtains sales order from Aluminum users in India as 4ell as globally1 On the basis
of order received for different products it mar/s production planning of different
i1e1 Ingot so4 ingot, (illets, .ire etc1
&NT6OD4CT&ON
.orking Ca/ital8)
The life blood of business, as is evident, signified funds re0uired for day#to#day
operations of the firm1 The management of 4or/ing capital assumes great
importance because shortage of 4or/ing capital funds is perhaps the biggest
possible cause of failure of many business units in recent times1 There it is of great
importance on the part of management to pay particular attention to the planning
and control for 4or/ing capital1 An attempt has been made to ma/e critical study
of the various dimensions of the 4or/ing capital management of NALCO, a Star
Trading )ouse 4ith NA56ATNA Status1
6ecisions relating to 4or/ing capital and short term financing are referred to as
working ca/ital management1 These involve managing the relationship bet4een
a firm:s short#term assets and its short#term liabilities1 The goal of .or/ing capital
management is to ensure that the firm is able to continue its operations and that it
has sufficient money flo4 to satisfy both maturing short#term debt and upcoming
operational e-penses1
O29ecti#e of t'e ,t"d$8)
The follo4ing are the main objective 4hich has been underta/en in the present
study;
<1 To determine the amount of 4or/ing capital re0uirement and to calculate
various ratios relating to 4or/ing capital1
=1 To ma/e an item 4ise study of the components of the 4or/ing capital1
>1 To suggest the steps to be ta/en to increase the efficiency in management of
4or/ing capital1
Place of ,t"d$8)
The project study is carried out at the !inance 6epartment of NALCO 'orporate
office Situated at (hubanes4ar, ORISSA1 The study is underta/en as a part of the
?6M curriculum from $= MA" =$$@ to $= ABL" =$$@ in the form of summer
placement1
St"d$ de,ign and met'odolog$8)
T4o types of data are collected, one is primary data and second one is secondary
data1 The primary data 4ere collected from the 6epartment of finance, *AL'O1
The secondary data 4ere collected from the Annual Report of *AL'O, *AL'O
4ebsite, etc1
Limitation,8)
There may be limitations to this study because the study duration 2summer
placement3 is very short and it7s not possible to observe every aspect of 4or/ing
capital management practices1
&ND&AN AL40&N&40 &ND4ST67
Aluminium Industries in India is one of the leading industries in the Indian
economy1 The gro4th of the aluminum Metal industry in India 4ould be sustained
by the diversification and e-ploration of ne4 hori8ons for the industry1 India has
huge deposits of natural resources in form of minerals li/e copper, chromite, iron
ore, manganese, bau-ite, gold, etc1 The India aluminum industry falls under the
category of non iron based 4hich include the production of copper, tin, brass, lead,
8inc,aluminum,andmanganese1
The main operations of the of the India aluminum industry is mining of ores,
refining of the ore, casting, alloying, sheet, and rolling into foils1 At present,
)indalco and *alco are one of the most economical in the production of aluminum
in the 4orld1 !or the sustenance of the gro4th the aluminum industry in India has
to develop research and development units to assist the production and improve on
the 0uality measures to /eep a stringent 0uality control1
The India aluminum Metal Industries sector in the previous decade e-perienced
substantial success among the other industries1 The India aluminum industry is
developing fast and the advancement in its technologies is boosting the gro4th
even faster1 The utili8ation of both international and domestic resources 4as
significant in the rapid development of the India aluminum industry1 This rapid
development has made the India aluminum industry prominent among the
investors1 The India aluminum industry has a bright future as it can become one of
the largest players in the global aluminum mar/et as in India the consumption is
fairly lo4, the industry may use the surplus production to cater the international
need for aluminum 4hich is used all over the 4orld for several applications such as
aircraft manufacturing, automobile manufacturing, utensils, etc1
The per capita consumption of aluminium in India is only $1+ /g as against =+ /g1
In BSA, <@ /g1in Aapan and <$ /g1 In Curope , Cven the .orld7s average per
capita consumption is about <$times of that in India1 One reason of lo4
consumption in the country could be that consumption pattern of aluminium in
India is vastly different from that of developed countries1 The demand of
aluminium is e-pected to gro4 by about @ percent per annum from present
consumption levels1 This sector is going through a consolidation phase and e-isting
producers are in the process of enhancing their production capacity so that a
demand supply gap e-pected in future is bridged1 )o4ever, India is a net e-porter
of alumina and aluminium metal at present1
AL40&N&40)ST64CT46E
The aluminium industry in India can be classified as;
2a3 The primary producers 4ho produce ingots and billets 2primary form of
aluminium3 using bau-ite1
2b3 The secondary producers 4ho add value to the ingots and billets to
produce semi#fabricated products1
At present there are only five companies in the primary aluminium mar/et
vi81 :indalco, Indian Aluminum 2&ndal3, Madras Aluminum 20alco3,
*ational Aluminum 2Nalco3 and (harat Aluminum 2Balco31 The former
three are private sector companies 4hile the latter t4o are government
o4ned1
All the primary producers have integrated for4ard into the manufacture of
high value semi#fabricated products li/e rods, rolled products, e-trusions
and foils1
6eg"lated till *(%(
o Bntil <@%@, the Aluminum 'ontrol Order 2A'O3 re0uired all domestic
manufacturers to ensure that atleast +$D of their ingot production 4as
electrical grade, for use by the transmission po4er industry1 The government
fi-ed ingot prices on the basis of a Retention ricing Mechanism, ta/ing into
consideration the average retention prices of all producers and a minimum
return on e0uity1
o The above control resulted in a s/e4ed product mi- and shortages of
aluminum for other sectors1 The problem 4as further compounded by the
vulnerable financial position of State Clectricity (oards 2the main users of
electrical grade aluminum3 and high import and e-cise duties1 The producers
resorted to inflated prices for other types of aluminium to compensate for the
disadvantages they suffered because of this regulation1
o The A'O 4as scrapped in <@%@ and in <@@< the government lifted
restrictions on capacity additions resulting in a free mar/et environment1
Al"mini"m - &n/"t,
The aluminium industry in India can be classified as; 'aptive po4er, ample
bau-ite reserves, coupled 4ith cheap labour costs ma/e Indian companies
amongst the most competitive aluminium producers globally1
The main ra4 material for the manufacture of aluminium includes bau-ite,
caustic soda, calcined petroleum co/e, coal tar pitch, and LSE!S furnace oil1
The production process for manufacture of aluminium is briefly outlined
belo41
The mined bau-ite ore is mi-ed 4ith caustic li0uor and is refined to produce
alumina1 This is then smelted 2through electrolysis in a smelter3 to obtain
aluminium1 6epending on the 0uality of bau-ite, =1+ , > tonnes are re0uired
for manufacture of < tonne of alumina1 In turn, = tonnes of alumina are
re0uired for manufacture of < tonne of aluminium1
Ba"!ite
o Indian bau-ite reserves at > bn tonnes, are the +th largest in the 4orld, and
account for FD of total 4orld reserves1 Most alumina refineries are designed
around the bau-ite reserves to reduce transportation costs1 'ost per tonne of
bau-ite varies for players depending on the location of the refinery and
bau-ite mines1
o !or e-ample, *alco has an estimated <,F$$ m tonnes of bau-ite reserves
only =$ /ms from its alumina refinery, enabling it to become one of the most
economical bau-ite producers in the 4orld1
Power
o4er constitutes the single largest cost component for aluminium
manufacturers 2>+,G$D of operating costs31 Almost all the major Indian
companies have captive po4er plants thus giving them access to cheap
po4er1 This ma/es India one of the most competitive lo4 cost aluminium
producers in the 4orld1
)indalco and *alco7s production costs are amongst the lo4est in the 4orld1
(oth companies have the advantage of <$$D captive po4er, vital in a po4er
intensive industry and in a po4er deficit country li/e India1
Al"mini"m - Prod"ct,
o Aluminium products can be segregated into rolled products, e-trusions, and
foils1
o Rolled products find applications in automobiles 2paneling, floors and
4indo4s, but are yet to find use in structural parts and bodies3, construction
2roofing and 4alls3, consumer durables, engineering applications, 4eb stoc/
for laminated pac/aging 2for toothpastes31 A major portion of rolled products
capacity is accounted for by the five integrated producers 2around %=D31
o C-trusions include products as bars, pipes and tubes1 Major users of
e-truded aluminium products are buildings, transportation and electrical
sector
o roduction in this segment is 4idely spread and the top three players control
around ><D of the mar/et 2the largest company # )indalco commands
around <GD mar/et share in this segment31
o !oils are sheets having thic/ness of less than $1= mm up to $1$$F mm
finding application mainly in the pac/aging sector1 Major users of
aluminium foils include the pharmaceutical, consumer products, cigarette
and cable manufacturing industries1

;E7 PO&NTS
S"//l$ ) Supply of aluminum is in e-cess and any deficit can be imported at
lo4 rates of duty1 'urrently, domestic production comfortably meets domestic
re0uirements1
Demand) 6emand for aluminium is estimated to gro4 at FD#%D per annum in
vie4 of the lo4 per capita consumption in India1 Also, demand for the metal is
e-pected to pic/ up as the scenario improves for user industries, li/e po4er,
infrastructure and transportation1
Barrier, to entr$) Large economies of scale1 'onse0uently, high capital costs1
Bargaining /ower of ,"//lier,) Most domestic players operate integrated
plants1 (argaining po4er is limited in case of po4er purchase, as ?overnment
is the only supplier1 )o4ever, increasing usage of captive po4er plants 2'3
4ill help to rationalise po4er costs to a certain e-tent in the long#term1
Bargaining /ower of c",tomer,) (eing a commodity, customers enjoy
relatively high bargaining po4er, as prices are determined on demand and
supply1
Com/etition) competition is primarily on 0uality and price, as being a
commodity, differentiation is difficult1 )o4ever, the recent spate of consolidation
has reduced the competitive pressure in the industry1 !urther, increasing value
addition to aluminium products has helped some companies protect themselves
from the high volatilities 4itnessed in this industry1
F&NANC&AL 7EA6)+%
?lobal production of primary aluminum rose from >= million tons 2MT3 in
=$$+ to >G MT in =$$F, a jump of FD1 In =$$H, it further increased to >%
MT, an increase of <=D "o"1 'hina alone accounted for =@D of global
primary aluminum production1 Asia, once again sho4ed the largest annual
increases in consumption of primary aluminum, driven largely by increased
industrial consumption in 'hina, 4hich has emerged as the largest aluminum
consuming nation, accounting for >$D of global primary aluminum
consumption in =$$H1 As far as global consumption is concerned, it
increased by %1=D in =$$F and touched >G1H MT1 In =$$H, the corresponding
figures 4ere <$D and >H1% MT respectively1
The Indian aluminium industry registered a strong double#digit gro4th in
=$$H in tune 4ith the economic gro4th1 Strong gro4ths in industrial,
infrastructure, automobile, transportation and po4er sectors 4ere the drivers
for the metals demand1 )o4ever, macroeconomic parameters li/e the rupee
appreciation, import duty cut and unrelenting cost#push impacted the sector
adversely1 Thus causing margins to s0uee8e at both ends1 Although the
average LMC remained strong but could not help the companies li/e
)indalco to increase the domestic realisation due to fall in import duty and
rupee appreciation, causing a drop in average rupee realisation per tonne of
the primary metal as compared to !"$H1
P6OSPECTS
o ?lobally, ne4er pac/aging applications and increased usage in automobiles
is e-pected to /eep the demand gro4th for aluminium over +D in the long#
term1 Asia 4ill continue to be the high consumption gro4th area led by
'hina, 4hich is e-pected to continue to register double#digit gro4th rates in
aluminium consumption in the medium#term1
o .ith /ey consuming industries forming part of the domestic core sector, the
aluminium industry is sensitive to fluctuations in performance of the
economy1 o4er, infrastructure and transportation account for almost >EGth
of domestic aluminium consumption1 .ith the government focusing to4ards
attaining ?6 gro4th rates above %D, the /ey consuming industries are
li/ely to lead the 4ay, 4hich could positively impact aluminium
consumption1 6omestic demand gro4th is estimated to average in the region
of over %D over the longer#term1
o Lo4ering of duties reduces the net tariff protection for domestic aluminium
producers1 Aluminum imports are currently subject to a customs duty of +D
and an additional surcharge of >D of the customs duty1 The customs duty
has been reduced in a series of steps from <+D in =$$> to +D in Aanuary
=$$H1 .ith reduction in import duties, domestic realisation of aluminium
majors, namely )indalco and *alco, is li/ely to be under pressure, as the
buffer on international prices is reduced1 Moreover, 4ith greater lin/age to
international prices, volatility in financials could increase1 )o4ever,
producers are moving do4nstream to negate the higher volatility1
Salient feat"re, of &ndian Al"mini"m &nd",tr$
)ighly concentrated industry 4ith only five primary plants in the country
'ontrolled by t4o private groups and one public sector unit
(ayer#)all#)eroult technology used by all producers
Clectricity, coal and furnace oil are primary energy inputs
All plants have their o4n captive po4er units for cheaper and un#interrupted
po4er Supply
Cnergy cost is G$D of manufacturing cost for metal and >$D for rolled
products
lants have set internal target of < , =D reduction in specific energy
consumption in the ne-t + , % years
Cnergy management is a critical focus in all the plants
T4o plants have declared formal energy policy
Cach plant has an Cnergy Management 'ell
Achievements in energy conservation are highlighted in the Annual Report
of the 'ompany
Cnergy targets are based on best energy figures achieved in their sector E
region and by the plant itself in the past
?enerally, government policies 4ere rated as conducive to energy
management
ITas/ !orce7 formed by (CC in this sector to 4or/ as catalyst in promoting
energy efficiency
)igh cost of technology is the main barrier in achieving high energy
efficiency
<"antitati#e detail,

6aw material and /rod"ct t$/e8
(au-ite and calcined petroleum co/e are primary ra4 materials for this industry1
)o4ever, alumina is ra4 materials for smelters and aluminium metal is ra4
material for fabrication units1
F"el 4,age8
'oal, !urnace oil and electricity are primary energy inputs in aluminium
production1 'oal is primarily used to generate steam, 4hich is used in the process
4hile fuel oil is mainly used in 'alcinations of alumina and various furnaces in
fabrication plants1 Clectricity is the major energy input in aluminium production
and is considered to be prime factor in determining economics of aluminium
production1 )ence, all primary metal producers have installed their o4n captive
po4er plants to supply cheaper and uninterrupted po4er for their use1 Majority of
electricity consumed in this industry is supplied by their captive po4er plants1
Tec'nolog$ Stat",8
Invented over <$$ years ago, (ayer#)all#)eroult is the only available commercial
technology, even today, for the production of aluminium1 Alumina is the basic ra4
material for the production of aluminium metal through electrolytic process1 The
production of alumina obtained from bau-ite, a mineral containing up to F$D in
the form of monoEtribhydrate is carried out through the (ayer route, 4hich is an
e-tractive hydro#metallurgical process1
Con,"m/tion of Al"mini"m in &ndia
The consumption of aluminium in India of $1H /g per person in =$$+ is very lo4 in
/eeping 4ith the countries lo4 ?61 )o4ever, the lo4 per capita consumption of
aluminum in India is in fact an opportunity for gro4th in aluminium consumption
against the bac/ drop of fast gro4ing economic conditions in India1
)o4ever, aluminum consumption has increased <=1FD in =$$F to around <1$%mt1
'onsumption is estimated to have increased to a + year 'A?R of <=1@D1
Secondary aluminium demand also shot up to $1F MT last year1
Sector)wi,e al"min"m con,"m/tion
Aluminium is used in various sectors, such as, transportation, pac/aging,
building E construction and electricity1 )o4ever, the usage pattern differs
significantly for Indian and rest of the 4orld1 ?lobally, the automotive, pac/aging
and the construction sectors are the major end users of aluminium, 4hile in India
the po4er sector consumes most follo4ed by automotive and housing sectors1
Sector wi,e con,"m/tion 2reak "/

Clectrical , F+D
Transport#=<D
'onstruction #%D
ac/aging , +D
Industrial machinery , GD
'onsumer durables , GD
Steel s4eetening, po4ers 5 chemicals , <>D
The Transportation sector is a major driver of aluminum consumption in the future
4here the onus of gro4ing consumption lies 4ith the industry1 The automobile
segment has attracted major global producers to set up their manufacturing
facilities in the country1 All these manufacturers are no4 engaged in bringing out
high 0uality fuel#efficient cars in the mar/et for India as 4ell as global mar/ets1
(esides cars, there are commercial vehicles 4hich have also 4itnessed 0uantum
gro4th over the years1
Bse of Aluminum as an alternative to steel has huge potential in the rail4ays1 The
government has ta/en note of this and has started 4or/ing on that1 Aluminum
castings are primarily used in transport and automobile sectors1
The global casting is currently estimated at around H1G million tons, against that
consumption in India as only around <<$,$$$ tons1 The country7s share in the
global do4nstream sector is lo4 as compared to other developed countries1

'asting of aluminum alloys is a particularly versatile process and offers greater
degree of fle-ibility than other methods of manufacture, and can be done by
various methods li/e in sand, in metallic dies, under gravity or pressure, and cast
by modern methods li/e lo4#pressure die# casting 2L6'3, investment casting, and
s0uee8e casting1 *o other metal can be cast under such a 4ide range of processes
and si8es varying from a fe4 grams to <$$ /g1
Although, domestic aluminum production e-ceeds the domestic demand, India
imports on an average <+#=$ per cent of the total supply of aluminum1 Imports are
necessary, due to the shortage of domestically produced ingots1 India7s imports of
aluminum and products primarily comprise of un4rought items li/e ingots, billets,
scrap, bars and rods1 Imports of primary aluminum products account for less than
<$ per cent of domestic consumption1 India also e-ports aluminum products such
as, scrap, po4der and fla/es, bar rods, foil, pellets, sheets, tubes and pipes1 C-ports
figures hovers around %=$$$ tons annually and the major importer countries of
Indian aluminium are (angladesh, Sri Lan/a, Cgypt and Ira01
NAT&ONAL AL40&N&40 CO0PAN7 LTD=
National Al"mini"m Com/an$ Ltd= >Nalco? is considered to be a turning
point in the history of Indian Aluminium Industry1 In a major leap for4ard, *alco
has not only addressed the need for self#sufficiency in aluminium, but also given
the country a technological edge in producing this strategic metal to the best of
4orld standards1 *alco 4as incorporated in <@%< in the ublic Sector, to e-ploit a
part of the large deposits of bau-ite discovered in the Cast 'oast1 The 'aptive
o4er lant 2'3 5 Smelter lant are situated near Angul1
*alco is one of the biggest and Asia7s largest integrated comple-, encompassing
(au-ite mining, Alumina refining, Aluminium smelting and casting po4er
generation, rail and port operations1 *AL'O 4as established in <@%< as a public
sector enterprise of the ?ovt1of India1 It is considered a truing point in the +$#year#
old history of the Indian aluminum industry1
In Orissa, for setting up Asia:s largest integrated alumina#aluminium comple- in
<@%<, *ational Aluminium 'ompany Limited 2*alco3 ac0uired H=F> acres of land
at 6amanjodi in 9oraput district and G$+H acres at Angul1 6uring the inception of
the company, F>+ families in +< villages 4ere displaced # F$$ families in
6amanjodi sector and >+ families in Angul sector1 !rom these F>+ displaced
families, employment has been provided to F=+ nominees1 'onfusion regarding
educational bac/ground and nomination status of balance <$ families has been
ta/en up at appropriate level1 (esides, <G@+ families 4ere substantially affected
2i1e1 parting 4ith one third or more land3 in Angul sector1 Cven from these, jobs
have been provided to <$F$ persons1 *alco has also been sponsoring ITI training
to such persons and +G> have been technically trained so far1 Apart from financial
compensation, employment and rehabilitation pac/ages, *alco has also spent more
than Rs1 <$$ crore to4ards various social sector development activities1 'reation
of infrastructure in the surrounding villages for communication, education, health
care and drin/ing 4ater gets priority in the periphery development plans of the
company1 'ommunity participation in innovative farming, pisciculture, social
forestry and sanitation programmes apart, encouragement to sports, art, culture and
literature are all a part of *alco:s deep involvement 4ith the life of the community1
Successful operations of the company have led to employment and income
generation for the local people in many significant 4ays1
AL40&N&40 S0ELTE6 PLANT


The =, >$,$$$ tpa capacity Aluminium Smelter is located at Angul in Orissa1
(ased on energy efficient state#of#the#art technology of smelting and pollution
control, the Smelter lant is in operation since early <@%H1
resently, the capacity is being e-panded to >, G+,$$$ tpa1

T'e ,alient feat"re,;

o Advanced <%$ 9A cell technology
o Micro#processor based pot regulation system
o !ume treatment plant 4ith dry#scrubbing system for pollution control
and fluoride salt recovery
o Integrated facility for manufacturing carbon anodes, bus bars, anode
tems etc1
o G - >+ tone and G - G+ tone furnaces and = - <+ tph and = - =$ tph
ingot casting machines
o G - G+ tonne furnaces and = - @1+ tph 4ire rod mills
o = - G+ tonne furnaces and F$EG= per drop billet casting machine
o = - <1+ tonne induction furnace 4ith a G tph alloy ingot casting machine
o =F,$$$ tpa strip casting machines
.ith the ac0uisition and subse0uent merger of International Aluminium
roducts Limited 2IAL3 4ith *alco, the +$,$$$ tpa e-port#oriented Rolled
roducts Bnit is all set to produce foil stoc/, fin stoc/, can stoc/, circles, coil
stoc/, cable 4raps, standard sheets and coils

CAPT&5E PO.E6 PLANT

'lose to the Aluminium Smelter at Angul, a 'aptive o4er lant of H=$ M.
capacity, comprising F - <=$ M. clusters, has been established for firm supply
of po4er to the Smelter1
resently, the capacity is being e-panded to @F$ M.1

T'e ,alient feat"re,8

Micro#processor based burner management system for optimum thermal
efficiency

'omputer controlled data ac0uisition system for on#line monitoring

Automatic turbine run#up system

Specially designed barrel type high pressure turbine

Clectrostatic precipitators 4ith advanced intelligent controllers

.et disposal of ash

The 4ater for the lant is dra4n from River (rahmani through a H /m long
double circuit pipeline1 The coal demand is met from a mine of >1+ million tpa
capacity opened up for *alco at (haratpur in Talcher by Mahanadi 'oalfields
Limited1 The o4er lant is inter#connected 4ith the State ?rid1
Brief :i,tor$8
After the discovery of <$$$ million tons of (au-ite reserves in the Castern ?hats,
the govt1 of India on the =%
th
March, <@H%, authori8ed Aluminum echiney of
!rance to prepare a feasibility report on the industrial e-ploration of bau-ite for the
establishment of an integrated
Aluminum comple-1 The result of this study led to sifting of focus of attention to
anchpattermali, >$/m1Cast of 9oraput 6istrict of Orissa1 *alco 4as incorporated
in <@%<as a public sector Bnit1 The ne4ly founded *AL'O signed an agreement
of collaboration 4ith aluminum echiney, the 4orld leader in this field for
incorporation of technical /no4#ho4 to set up Asia7s largest integrated aluminium
comple-1
Location8
6egi,tered office@@@@@@@@@@@@===(hubanes4ar
Ba"!ite mine@@@@@@@@@@@@@@=anchpatmali
Al"mini"m refiner$@@@@==============================6amanjodi
Ca/ti#e /ower /lant@=@@@@@@@@@@Angul
Al"mini"m ,melter@@@@@@@@@@==@Ang"l
Port facilitie,@=@@@@@@@@@@@@@=Jisa/hapatnam
6olled /rod"ct "nit@@@@@@@@@@@@=Angul

Ac'ie#ement, of Nalco8
*(%+8
A Memorandum of Bnderstanding 4as signed in Aanuary, by the ?overnment of
India for technical collaboration and financing of an integrated alumina#aluminium
comple- 4ith Aluminium echiney of !rance1
*(%*8
The 'ompany 4as incorporated on Hth Aanuary, as a 4holly o4ned enterprise of
?overnment of India1 The 'ompany Manufacture aluminium hydrate, claimed
alumina, aluminium ingots and aluminium 4ire rods1
*((38
*AL'O signed a project co#operation agreement 4ith )ydro Aluminium A?,
*or4ay to carry out a joint study for feasibility of setting up a<$$D e-port
oriented aluminium plant of $1@ million tonnes per annum capacity1
<,=%,%F,<@,=$$ *o1 of shares allotted
*((48
The 'ompany proposed to underta/e e-pansion of bau-ite mine from=1Gmillion
TA1 to G1% million tpa1 and alumina refinery from %,$$,$$$ tpa1 to <>,+$,$$$ tpa1
This 4as subject to necessary clearances1
*((8
A Smelter plant at Angul 4as underta/en 4ith a capacity of =F$$$ T" of strip
casting facility1 A special Alumina plant at 6amanjodi 4as underta/en 4ith a
'apacity of =$,$$$ T"1 A <$,$$$ T" detergent grade Keolite 2Keolite#A3 plant at
6amanjodi, 4as underta/en1
*((18
The proposal to e-pand the capacities of bau-ite mine at anchpatmali from =G
la/h tonnes to G% la/h tonnes and alumina refinery at 6amanjodi from % la/h
tonnes to <+1H+ la/h tonnes 4as approved by the ?overnment on <%1<=1<@@F1
*((A8
Subject to necessary approvals being obtained the company proposed to convert
+$D of its e-isting e0uity capital into debt1 The public sector aluminium giant,
*ational Aluminium 'ompany 2*AL'O3 set up in technical collaboration 4ith
echiney, !rance is the largest integrated aluminium company in Asia1 *ational
Aluminium 'ompany Ltd 2*alco3, country:s largest Aluminium 'ompany, has
opened a stoc/yard at (hi4andi in Thane district1 *ational Aluminium 'ompany
2*alco3, India:s largest producer ande- porter, got the ISO <G$$< certification for
environmental e-cellence1 The *ational Aluminium 'ompany, (hubanes4ar,
signed an agreement of national importance 4ith the *R6' for licensing from the
*R6' the /no4ho4 to manufacture gallium from the sodium alumina plant1
*((%8
The company has been forced to curtail its po4er generation capacity due to a
drastic reduction in inta/e by ?ridco1 # the nodal po4er transmission and
distribution agency in Orissa1
*(((8
The *ational Aluminium 'ompany Ltd 2*AL'O3 a ?overnment of India
underta/ing is setting up a plant for e-traction of gallium at its aluminium refinery
comple- at 6amanjodi1 The *ational Aluminium 'ompany 2*alco3 4ill ta/e over
International

2+++8
Icra has retained the Laaa rating for the Rs FG=1+%#crore *on#convertible
debenture issue of the company, 4hile it has assigned an A< rating to the Rs +#
crore ' issue of *armada 'hematur etrochemicals1
2++*8
A public sector Aluminium 'ompany ma/ing a foray into detergent business
sounds out of place1 (ut if senior officials of *ational Aluminium 'ompany
2*alco3 are to be believed, the country7s second largest aluminium company 4ill
be doing that at its 8eolite plant scheduled to start operations in Auly end1
2++28
S (ehuria appointed as part time official 6irector of *alco1 *alco:s alumina
refinery capacity increased to <+1H+ la/h tone

2++38
'ommissions one unit of 'aptive o4er lant 4ith a capacity of <=$ M. and <=$
pots of Smelter 4ith a capacity to produce +H,+$$ MT of Aluminium per year
*alco members o/ay delisting of securities from stoc/ e-changes of
(hubanesh4ar, 6elhi, 'alcutta 5 Madras
2++48
*ational Aluminium 'ompany Limited 2*AL'O3 has informed that Madras Stoc/
C-change Limited vide its letter dated 6ecember ==, =$$> have 4ithdra4n the
admission granted to dealings on their e-change for the securities of *AL'O1
*alco open offer to ac0uire =$D sta/e for Ondeo *alco India1
2++8
*alco in/s agreement 4ith *M6'1

NALCO)P6OD4CTS
Al"mini"m 0etal
&ngot,
Sow,
Billet,
.ire rod,
Allo$ wire rod,
Ca,t ,tri/,
Al"mina B :$drate
Calcined Al"mina
Al"mina :$drate
Ceolite)A
$ear, /erformance at a glance >/'$,ical?
particulars units =$$HE$% =$$FE$H =$$+E$F =$$GE$+ =$$>E$G
<1production

(au-ite MT
GF,%G,F%G GF,=>=H% G%+G=+> G%+<H=< G%,<F,HF=
Alumina
)ydride
MT
<+H++$$ <GH+=$$ <+,@$,$$$ <+H++$$ <++F<$$
Alumina for
In
consumption
MT >,F$,G+H >,+%,H>G >,+%,@+G >,>%,G%> =,@%,=$H
Rolled products MT <$,$$G =,+%H +,$G$ %+% =,FF$
o4er2net3 MB +,F$@ +,@F% +,FH@ +,F<> +,<==
=1C-port sales

Alumina MT %,+@,@G> H,H>,+H> %,F=,F<F @,$@,$%< @,>G,%HG
Aluminum MT <,$$,%GH @=,FH% @+,HGH <,>=,H>$ <,=@,H<%
>16omestic
sales

Alumina
Ehydride
MT <<,>$H <$,@=$ <=,@@G =<,<HH <H,H%G
Aluminum MT =,G>,$FG =,F<,F>F =,+%,$@G =,$+,H@G <,FF,F+$
o4er MB <=@ G=< >== G$F G@%

7EA6S PE6FO60ANCE :&D:L&D:TS

*= SALES - 6,=crore,
2= E3PO6TS)6,=crore,
3= NET P6OF&T)6,=crore,
4= EA6N&ND PE6 S:A6E)6,=
P6OD4CT&ON)NE3T 7EA6S
.orking Ca/ital
Cvery business needs investment to procure fi-ed assets, 4hich remain in use for a
longer period1 Money invested in these assets is called ILong term !unds7 or I!i-ed
'apital71
(usiness also needs funds for short#term purposes to finance current operations1
Investment in short term assets li/e cash, inventories, debtors etc1, is called IShort#
term !unds7 or I.or/ing 'apital71 The I.or/ing 'apital7 can be categori8ed, as
funds needed for carrying out day#to#day operations of the business smoothly1 The
management of the 4or/ing capital is e0ually important
as the management of long#term financial investment1
Cvery running business needs 4or/ing capital1 Cven a business 4hich is fully
e0uipped 4ith all types of fi-ed assets re0uired is bound to collapse 4ithout
o ade0uate supply of ra4 materials for processingL
o cash to pay for 4ages, po4er and other costsL
o creating a stoc/ of finished goods to feed the mar/et demand regularlyL and,
o The ability to grant credit to its customers1
All these re0uire 4or/ing capital1 .or/ing capital is thus li/e the lifeblood of a
business1 The business 4ill not be able to carry on day#to#day activities 4ithout the
availability of ade0uate 4or/ing capital1
.or/ing capital cycle involves conversions and rotation of various constituents
'omponents of the 4or/ing capital1 Initially Icash7 is converted into ra4 materials1
Subse0uently, 4ith the usage of fi-ed assets resulting in value additions, the ra4
materials get converted into 4or/ in process and then into finished goods1 .hen
sold on credit, the finished goods assume the form of debtors 4ho give the
business cash on due date1 Thus Icash7 assumes its original form again at the end of
one such 4or/ing capital cycle but in the course it passes through various other
forms of current assets too1 This is ho4 various components of current assets /eep
on changing their forms due to value addition1 As a result, they rotate and business
operations continue1 Thus, the 4or/ing capital cycle involves rotation of various
constituents of the 4or/ing capital1
.hile managing the 4or/ing capital, t4o characteristics of current assets should
be /ept in mind vi81 2i3 short life span, and 2ii3 s4ift transformation into other form
of current asset1
Cach constituent of current asset has comparatively very short life span1
Investment remains in a particular form of current asset for a short period1 The life
span of current assets depends upon the time re0uired in the activities of
procurementL production, sales and collection and degree of synchroni8ation
among them1 A very short life span of current assets results into s4ift
transformation into other form of current assets for a running business1
T'e,e c'aracteri,tic, 'a#e certain im/lication,;
6ecision regarding management of the 4or/ing capital has to be ta/en
fre0uently and on a repeat basis1
The various components of the 4or/ing capital are closely related and
mismanagement of any one component adversely affects the other
components too1
The difference bet4een the present value and the boo/ value of profit is not
significant1
The 4or/ing capital has the follo4ing components, 4hich are in several forms of
current assets;
o Stoc/ of 'ash
o MStoc/ of Ra4 Material
o MStoc/ of !inished ?oods
o MJalue of 6ebtors
o Miscellaneous current assets li/e short term investment loans 5 Advances
A n"m2er of definition, 'a#e 2een form"lated8 /er'a/, t'e mo,t widel$
acce/ta2le wo"ld 2eE
N.OR9I*? 'AITAL represents the e-cess of 'BRRC*T ASSCTS over
'BRRC*T LIA(ILITICS N
The same may be designated in the follo4ing e0uation;
.O6;&ND CAP&TALF C466ENT ASSETS - C466ENT L&AB&L&T&ES;
!unds thus invested in current assets /eep revolving fast and are being constantly
converted in to cash and this cash flo4s out again in e-change for other current
assets1 Thus it is /no4n as revolving or circulating capital or short term capital1
T'e,e are two conce/t, of working ca/ital;#
a1 ?ross .or/ing 'apital1
b1 *et .or/ing 'apital1
?ross 4or/ing capital is the total of all current assets1 *et 4or/ing capital is the
difference bet4een current assets and current liabilities1 Though the later concept
of 4or/ing capital is commonly used it is an accounting concept 4ith little sense to
say that a firm manages its net 4or/ing capital1 .hat a firm really does is to ta/e
decisions 4ith respect to various current assets and current liabilities1 The
constituents of current assets and current liabilities are sho4n in table A1

Con,tit"ent, of C"rrent A,,et, and C"rrent Lia2ilitie,
C"rrent A,,et,
Inventories , Ra4 materials and components, .or/ in progress, !inished
goods, other1
Trade 6ebtors1
Loans and Advances1
Investments1
'ash and (an/ balance1
C"rrent Lia2ilitie,
Sundry 'reditors1
Trade Advances1
(orro4ings1
rovisions1
T'e working ca/ital need, of a 2",ine,, are infl"enced 2$ n"mero",
factor,= T'e im/ortant one, are di,c",,ed in 2rief a, gi#en 2elow;
Nat"re of Enter/ri,e
The nature and the 4or/ing capital re0uirements of an enterprise are interlin/ed1
.hile a manufacturing industry has a long cycle of operation of the 4or/ing
capital, the same 4ould be short in an enterprise involved in providing services1
The amount re0uired also varies as per the natureL an enterprise involved in
production 4ould re0uire more 4or/ing capital than a service sector enterprise1
0an"fact"ringGProd"ction Polic$
Cach enterprise in the manufacturing sector has its o4n production policy, some
follo4 the policy of uniform production even if the demand varies from time to
time, and others may follo4 the principle of :demand#based production: in 4hich
production is based on the demand during that particular phase of time1
Accordingly, the 4or/ing capital re0uirements vary for both of them1
.orking Ca/ital C$cle
In manufacturing concern, 4or/ing capital cycle starts 4ith the purchase of ra4
materials and ends 4ith reali8ation of cash from the sale of finished goods1 The
cycle involves the purchase of ra4 materials and ends 4ith the reali8ation of cash
from the sale of finished products1 The cycle involves purchase of ra4 materials
and stores, its conversion in to stoc/ of finished goods through 4or/ in progress
4ith progressive increment of labor and service cost, conversion of finished stic/
in to sales and receivables and ultimately reali8ation of cash and this cycle
continuous again from cash to purchase of ra4 materials and so on1
O/eration,
The re0uirement of 4or/ing capital fluctuates for seasonal business1 The 4or/ing
capital needs of such businesses may increase considerably during the busy season
and decrease during the slac/ season1 Ice creams and cold drin/s have a great
demand during summers, 4hile in 4inters the sales are negligible1
0arket Condition
If there is high competition in the chosen product category, then one shall need to
offer sops li/e credit, immediate delivery of goods etc1 for 4hich the 4or/ing
capital re0uirement 4ill be high1 Other4ise, if there is no competition or less
competition in the mar/et then the 4or/ing capital re0uirements 4ill be lo41
Credit Polic$
The credit policy is concerned in its dealings 4ith debtors and creditors influence
considerably the re0uirements of the 4or/ing capital1 A concern that purchases its
re0uirements on credit and sells its productsEservices on cash re0uires lesser
amount of 4or/ing capital1 On the other hand a concern buying its re0uirements
for cash and allo4ing credit to its customers, shall need larger amount of funds are
bound to be tied up in debtors or bills receivables1
B",ine,, C$cle
(usiness 'ycle refers to alternate e-pansion and contraction in general business
activities1 In a period of born i1e1 4hen the business is prosperous there is a need
for larger amount of 4or/ing capital due to increase in sales, rise in prices,
optimistic e-pansion of business etc1 On the country at he time of depression i1e1
4hen there is a do4n s4ing of the cycle, business contracts, sales decline,
difficulties are faced in collections from debtors and firms may have a large
amount of 4or/ing capital lying ideal
A#aila2ilit$ of 6aw 0aterial
If ra4 material is readily available then one need not maintain a large stoc/ of the
same, thereby reducing the 4or/ing capital investment in ra4 material stoc/1 On
the other hand, if ra4 material is not readily available then a large inventoryEstoc/
needs to be maintained, thereby calling for substantial investment in the same1

Drowt' and E!/an,ion
?ro4th and e-pansion in the volume of business results in enhancement of the
4or/ing capital re0uirement1 As business gro4s and e-pands, it needs a larger
amount of 4or/ing capital1 *ormally, the need for increased 4or/ing capital funds
precedes gro4th in business activities1
Earning Ca/acit$ and Di#idend /olic$

Some firms have more earning capacity than others due to the 0uality of their
products, monopoly conditions etc1 Such firms 4ith high earning capacity may
generate cash profits from operations and contribute to their capital1 The dividend
policy of a concern also influences the re0uirements of the 4or/ing capital1 A firm
that maintains steady high rate of cash dividend irrespective of its generation of
profits needs more capital than the firm retains larger part of its profits and does
not pay high rate of cash dividend1
Price Le#el C'ange,
?enerally, rising price level re0uires a higher investment in the 4or/ing capital1
.ith increasing prices, the same level of current assets needs enhanced investment1
0an"fact"ring C$cle
The manufacturing cycle starts 4ith the purchase of ra4 material and is completed
4ith the production of finished goods1 If the manufacturing cycle involves a longer
period, the need for 4or/ing capital 4ould be more1 At times, business needs to
estimate the re0uirement of 4or/ing capital in advance for proper control and
management1 The factors discussed above influence the 0uantum of 4or/ing
capital in the business1 The assessment of 4or/ing capital re0uirement is made
/eeping these factors in vie41 Cach constituent of 4or/ing capital retains its form
for a certain period and that holding period is determined by the factors discussed
above1 So for correct assessment of the 4or/ing capital re0uirement, the duration
at various stages of the 4or/ing capital cycle is estimated1 Thereafter, proper value
is assigned to the respective current assets, depending on its level of completion1

Ot'er Factor,
'ertain other factors such as operating efficiency, management ability,
irregularities a supply, import policy, asset structure, importance of labor, ban/ing
facilities etc1 also influences the re0uirement of 4or/ing capital1
Com/onent of .orking Ca/ital Ba,i, of 5al"ation
Stoc/ of ra4 material urchase cost of ra4 materials
Stoc/ of 4or/ in process At cost or mar/et value, 4hichever is lo4er
Stoc/ of finished goods 'ost of production
6ebtors 'ost of sales or sales value
'ash .or/ing e-penses
Cach constituent of the 4or/ing capital is valued on the basis of valuation
Cnumerated above for the holding period estimated1 The total of all such valuation
becomes the total estimated 4or/ing capital re0uirement1
The assessment of the 4or/ing capital should be accurate even in the case of small
and micro enterprises 4here business operation is not very large1 .e /no4 that
4or/ing capital has a very close relationship 4ith day#to#day operations of a
business1 *egligence in proper assessment of the 4or/ing capital, therefore, can
affect the day#to#day operations severely1 It may lead to cash crisis and ultimately
to li0uidation1 An inaccurate assessment of the 4or/ing capital may cause either
under#assessment or over#assessment of the 4or/ing capital and both of them are
dangerous1
.O6;&ND CAP&TAL 0ANADE0ENT
.or/ing 'apital Management refers to management of current assets and current
liabilities1 The major thrust of course is on the management of current assets 1This
is understandable because current liabilities arise in the conte-t of current assets1
.or/ing 'apital Management is a significant fact of financial management1 Its
importance stems from t4o reasons;#
Investment in current assets represents a substantial portion of
total investment1
Investment in current assets and the level of current liabilities have to be
geared 0uic/ly to change in sales1 To be sure, fi-ed asset investment and
long term financing are responsive to variation in sales1 )o4ever, this
relationship is not as close and direct as it is in the case of 4or/ing capital
components1
The importance of 4or/ing capital management is effected in the fact that financial
manages spend a great deal of time in managing current assets and current
liabilities1 Arranging short term financing, negotiating favorable credit terms,
controlling the movement of cash, administering the accounts receivable, and
monitoring the inventories consume a great deal of time of financial managers1
The problem of 4or/ing capital management is one of the NbestO utili8ation of a
scarce resource1
Thus the job of efficient 4or/ing capital management is a formidable one, since it
depends upon several variables such as character of the business, the lengths of the
merchandising cycle, rapidity of turnover, scale of operations, volume and terms of
purchase 5 sales and seasonal and other variations1
CONSE<4ENCES OF 4NDE6 ASSESS0ENT OF .O6;&ND
CAP&TAL
o ?ro4th may be stunted1 It may become difficult for the enterprise to
underta/e profitable projects due to non#availability of 4or/ing capital1
o MImplementation of operating plans may become difficult and conse0uently
the profit goals may not be achieved1
o M'ash crisis may emerge due to paucity of 4or/ing funds1
o Optimum capacity utili8ation of fi-ed assets may not be achieved due to non
availability of the 4or/ing capital1
o MThe business may fail to honour its commitment in time, thereby adversely
affecting its credibility1 This situation may lead to business closure1
o The business may be compelled to buy ra4 materials on credit and sell
finished goods on cash1 In the process it may end up 4ith increasing cost of
purchases and reducing selling prices by offering discounts1 (oth these
situations 4ould affect profitability adversely1
o *on#availability of stoc/s due to non#availability of funds may result in
production stoppage1
o .hile underassessment of 4or/ing capital has disastrous implications on
business, over assessment of 4or/ing capital also has its o4n dangers1
CONSE<4ENCES OF O5E6 ASSESS0ENT OF .O6;&ND
CAP&TAL
o MC-cess of 4or/ing capital may result in unnecessary accumulation of
inventories1
o It may lead to offer too liberal credit terms to buyers and very poor recovery
system and cash management1
o MIt may ma/e management complacent leading to its inefficiency1
o Over#investment in 4or/ing capital ma/es capital less productive and may
reduce return on investment1 .or/ing capital is very essential for success of
a business and, therefore, needs efficient management and control1 Cach of
the components of the 4or/ing capital needs proper management to
optimi8e profit1
T'e working ca/ital in certain enter/ri,e ma$ 2e cla,,ified into t'e
following kind,=
*= &nitial working ca/ital1 The capital, 4hich is re0uired at the time of the
commencement of business, is called initial 4or/ing capital1 These are the
promotion e-penses incurred at the earliest stage of formation of the enterprise
4hich include the incorporation fees1 Attorney:s fees, office e-penses and other
e-penses1
2= 6eg"lar working ca/ital1 This type of 4or/ing capital remains al4ays in the
enterprise for the successful operation1 It supplies the funds necessary to meet the
current 4or/ing e-penses i1e1 for purchasing ra4 material and supplies, payment of
4ages, salaries and other sundry e-penses1
3= Fl"ct"ating working ca/ital1 This capital is needed to meet the seasonal
re0uirements of the business1 It is used to raise the volume of production by
improvement or e-tension of machinery1 It may be secured from any financial
institution 4hich can, of course, be met 4ith short term capital1 It is also called
variable 4or/ing capital1
4= 6e,er#e margin working ca/ital= It represents the amount utili8ed at the time
of contingencies1 These unpleasant events may occur at any time in the running life
of the business such as inflation, depression, slump, flood, fire, earth0ua/es, stri/e,
lay off and unavoidable competition etc1 In this case greater amount of capital is
re0uired for maintenance of the business1
Financing .orking Ca/ital
*o4 let us understand the means to finance the 4or/ing capital1 .or/ing capital or
current assets are those assets, 4hich unli/e fi-ed assets change their forms
rapidly1 6ue to this nature, they need to be financed through short#term funds1
Short#term funds are also called current liabilities1 The follo4ing are the major
sources of raising short#term funds;
&= S"//lierH, Credit
At times, business gets ra4 material on credit from the suppliers1 The cost of ra4
material is paid after some time, i1e1 upon completion of the credit period1 Thus,
4ithout having an outflo4 of cash the business is in a position to use ra4 material
and continue the activities1 The credit given by the suppliers of ra4 materials is for
a short period and is considered current liabilities1 These funds should be used for
creating current assets li/e stoc/ of ra4 material, 4or/ in process, finished goods,
etc1
ii= Bank Loan for .orking Ca/ital
This is a major source for raising short#term funds1 (an/s e-tend loans to
businesses to help them create necessary current assets so as to achieve the
Re0uired business level1 The loans are available for creating the follo4ing current
Assets;
MStoc/ of Ra4 Materials
Stoc/ of .or/ in rocess
Stoc/ of !inished ?oods
6ebtors
(an/s give short#term loans against these assets, /eeping some security margin1
The advances given by ban/s against current assets are short#term in nature and
ban/s have the right to as/ for immediate repayment if they consider doing so1
Thus ban/ loans for creation of current assets are also current liabilities1
iii= PromoterH, F"nd
It is advisable to finance a portion of current assets from the promoter7s funds1
They are long#term funds and, therefore do not re0uire immediate repayment1
These funds increase the li0uidity of the business1
0anagement of &n#entor$
Inventories constitute the most significant part of current assets of a large majority
of companies in India1 On an average, inventories are appro-imately F$ D of
current assets in public limited companies in India1
(ecause of the large si8e of inventories maintained by firms maintained by firms, a
considerable amount of funds is re0uired to be committed to them1 It is, therefore
very necessary to manage inventories efficiently and effectively in order to avoid
unnecessary investments1 A firm neglecting a firm the management of inventories
4ill be jeopardi8ing its long run profitability and may fail ultimately1
The purpose of inventory management is to ensure availability of materials in
sufficient 0uantity as and 4hen re0uired and also to minimi8e investment in
inventories at considerable degrees, 4ithout any adverse effect on production and
sales, by using simple inventory planning and control techni0ues1

Need, to 'old in#entorie,8)
There are three general motives for holding inventories;#
Tran,action moti#e emphasi8es the need to maintain inventories
to facilitate smooth production and sales operation1

Preca"tionar$ moti#e necessities holding of inventories to guard against
the ris/ of unpredictable changes in demand and supply forces and other
factors1

S/ec"lati#e moti#e influences the decision to increases or reduce inventory
levels to ta/e advantage of price fluctuations and also for saving in re#
ordering costs and 0uantity discounts etc1

O29ecti#e of &n#entor$ 0anagement8)
The main objectives of inventory management are operational and financial1 The
operational mean that means that the materials and spares should be available in
sufficient 0uantity so that 4or/ is not disrupted for 4ant of inventory1 The financial
objective means that investments in inventories should not remain ideal and
minimum 4or/ing capital should be loc/ed in it1
The follo4ing are the objectives of inventory management;#
o To ensure continuous supply of materials, spares and finished goods1
o To avoid both over#stoc/ing of inventory1
o To maintain investments in inventories at the optimum level as re0uired by
the operational and sale activities1
o To /eep material cost under control so that they contribute in reducing cost
of production and overall purchases1
o To eliminate duplication in ordering or replenishing stoc/s1 This is possible
4ith the help of centrali8ing purchases1
o To minimi8e losses through deterioration, pilferage, 4astages and damages1
o To design proper organi8ation for inventory control so that management1
'lear cut account ability should be fi-ed at various levels of the
organi8ation1
o To ensure perpetual inventory control so that materials sho4n in stoc/
ledgers should be actually lying in the stores1
o To ensure right 0uality of goods at reasonable prices1
o To facilitate furnishing of data for short#term and long term planning and
control of inventory

0anagement of ca,'
'ash is the important current asset for the operation of the business1 'ash is the
basic input needed to /eep the business running in the continuous basis, it is also
the ultimate output e-pected to be reali8ed by selling or product manufactured by
the firm1
The firm should /eep sufficient cash neither more nor less1 'ash shortage 4ill
disrupt the firm7s manufacturing operations 4hile e-cessive cash 4ill simply
remain ideal 4ithout contributing anything to4ards the firm7s profitability1 Thus a
major function of the financial manager is to maintain a sound cash position1
'ash is the money, 4hich a firm can disburse immediately 4ithout any restriction1
The term cash includes coins, currency and che0ues held by the firm and balances
in its ban/ account1 Sometimes near cash items such as mar/eting securities or
ban/ term deposits are also included in cash1 ?enerally 4hen a firm has e-cess
cash, it invests it is mar/etable securities1 This /ind of investment contributes some
profit to the firm1




Need to 'old ca,'
The firm7s need to hold cash may be attributed to the follo4ing three motives;#
T'e Tran,action 0oti#e8 The transaction motive re0uires a firm to hold cash to
conduct its business in the ordinary course1 The firm needs cash primarily to ma/e
payments for purchases, 4ages and salaries, other operating e-penses, ta-es,
dividends, etc1
T'e Preca"tionar$ 0oti#e8 A firm is re0uired to /eep cash for meeting various
contingencies1 Though cash inflo4s and outflo4s are anticipated but there may be
variations in these estimates1 !or e-ample a debtor 4ho pays after H days may
inform of his inability to pay, on the other hand a supplier 4ho used to give credit
for <+ days may not have the stoc/ to supply or he may not be in opposition to give
credit at present1
S/ec"lati#e 0oti#e8 - The speculative motive relates to the holding of cash for
investing in profit ma/ing opportunities as and 4hen they arise1

The opportunities to ma/e profit changes1 The firm 4ill hold cash, 4hen it is
e-pected that interest rates 4ill rise and security price 4ill fall1
Com/onent, of working ca/ital are calc"lated a, follow,;
*? 6aw 0aterial, Storage PeriodPAverage stoc/ of ra4 materialsEAverage cost
of ra4 material consumption per day1
2=? .)&)P :olding /eriodFAverage 4#i#p in inventoryEAverage cost of production
per day1
3=? Store, and ,/are, con#er,ion /eriodF Average stoc/ of Stores and sparesE
Average consumption per day1
4=? Fini,'ed good, con#er,ion /eriodF Average stoc/ of finished goodsEAverage
cost of goods sold per day1
=? De2tor, collection /eriodFAverage boo/ debtsEAverage credit sales per day1
1=? Credit /eriod a#ailedFAverage trade creditorsEAverage credit purchase per
day1
0anagement of 6ecei#a2le,
A sound managerial control re0uires proper management of li0uid assets and
inventory1 These assets are a part of 4or/ing capital of the business1 An efficient
use of financial resources is necessary to avoid financial distress1 Receivables
result from credit sales1
A concern is re0uired to allo4 credit sales in order to e-pand its sales volume1 It is
not al4ays possible to sell goods on cash basis only1 Sometimes other concern in
that line might have established a practice of selling goods on credit basis1 Bnder
these circumstances, it is not possible to avoid credit sales 4ithout adversely
affecting sales1
The increase in sales is also essential to increases profitability1 After a certain level
of sales the increase in sales 4ill not proportionately increase production costs1 The
increase in sales 4ill bring in more profits1 Thus, receivables constitute a
significant portion of current assets of a firm1 (ut for investment in receivables, a
firm has to insure certain costs1 !urther, there is a ris/ of bad debts also1 It is
therefore, very necessary to have a proper control and management of receivables1
Need, to 'old ca,'8
Receivables management is the process of ma/ing decisions relating to investment
in trade debtors1 'ertain investments in receivables are necessary to increase the
sales and the profits of a firm1 (ut at the same time investment in this asset
involves cost consideration also1 !urther, there is al4ays a ris/ of bad debts too1
Thus, the objective of receivable management is to ta/e a sound decision as
regards investments in debtors1 In the 4ords of (olton, S1C1, the need of
receivables management is Nto promote sales and profits until that point is reached
4here the return of investment in further funding of receivables is less than the
cost of funds raised to finance that additional credit1O


&m/ortant Term,
.orking Ca/ital C$cle
'ash flo4s in a cycle into, around and out of a business1 It is the business:s life
blood and every manager:s primary tas/ is to help /eep it flo4ing and to use the
cash flo4 to generate profits1 If a business is operating profitably, then it should, in
theory, generate cash surpluses1 If it doesn:t generate surpluses, the business 4ill
eventually run out of cash and e-pire1
The faster a business e-pands , the more cash it 4ill need for 4or/ing capital and
investment1 The cheapest and best sources of cash e-ist as 4or/ing capital right
4ithin business1 ?ood management of 4or/ing capital 4ill generate cash 4ill help
improve profits and reduce ris/s1 (ear in mind that the cost of providing credit to
customers and holding stoc/s can represent a substantial proportion of a firm:s total
profits1
There are t4o elements in the business cycle that absorb cash # &n#entor$ 2stoc/s
and 4or/#in#progress3 and 6ecei#a2le, 2debtors o4ing you money31 The main
sources of cash are Pa$a2le, 2your creditors3 and EI"it$ and Loan,1
Cach component of 4or/ing capital 2namely inventory, receivables and payables3
has t4o dimensions 11111111TIMC 111111111 and MO*C"1 .hen it comes to managing
4or/ing capital # T&0E &S 0ONE71 If you can get money to move faster around
the cycle 2e1g1 collect monies due from debtors more 0uic/ly3 or reduce the amount
of money tied up 2e1g1 reduce inventory levels relative to sales3, the business 4ill
generate more cash or it 4ill need to borro4 less money to fund 4or/ing capital1
As a conse0uence, you could reduce the cost of ban/ interest or you:ll have
additional free money available to support additional sales gro4th or investment1
Similarly, if you can negotiate improved terms 4ith suppliers e1g1 get longer credit
or an increased credit limitL you effectively create free finance to help fund future
sales1
If you....... Then......
'ollect receivables 2debtors3 faster "ou release cash
from the cycle
'ollect receivables 2debtors3 slo4er "our receivables
soa/ up cash
?et better credit 2in terms of
duration or amount3 from suppliers
"ou increase your
cash resources
Shift inventory 2stoc/s3 faster "ou free up cash
Move inventory 2stoc/s3 slo4er "ou consume more
cash
It can be tempting to pay cash, if available, for fi-ed assets e1g1 computers, plant,
vehicles etc1 If you do pay cash, remember that this is no4 longer available for
4or/ing capital1 Therefore, if cash is tight, consider other 4ays of financing capital
investment # loans, e0uity, leasing etc1 Similarly, if you pay dividends or increase
dra4ings, these are cash outflo4s and, li/e 4ater flo4ing do4ns a plug hole, they
remove li0uidity from the business1
0ore 2",ine,,e, fail for lack of ca,' t'an for want of
/rofit=
So"rce, of Additional .orking Ca/ital
Sources of additional 4or/ing capital include the follo4ing;
C-isting cash reserves
rofits 24hen you secure it as cashQ3
ayables 2credit from suppliers3
*e4 e0uity or loans from shareholders
(an/ overdrafts or lines of credit
Long#term loans
If you have insufficient 4or/ing capital and try to increase sales, you can easily
over#stretch the financial resources of the business1
This is called overtrading1 Carly 4arning signs include;
o ressure on e-isting cash
o C-ceptional cash generating activities e1g1 offering high discounts for early
cash payment
o (an/ overdraft e-ceeds authori8ed limit
o See/ing greater overdrafts or lines of credit
o art#paying suppliers or other creditors
o aying bills in cash to secure additional supplies
o Management pre#occupation 4ith surviving rather than managing
!re0uent short#term emergency re0uests to the ban/ 2to help pay 4ages, pending
receipt of a che0ue31
:andling 6ecei#a2le, >De2tor,?
'ash flo4 can be significantly enhanced if the amounts o4ing to a business are
collected faster1 Cvery business needs to /no41111 4ho o4es them money1111 ho4
much is o4ed1111 ho4 long it is o4ing1111 for 4hat it is o4ed1
Late /a$ment, erode /rofit, and can lead to 2ad de2t,=
Slo4 payment has a crippling effect on businessL in particular on small businesses
4ho can least afford it1 &f $o" donJt manage de2tor,K t'e$ will 2egin to manage
$o"r 2",ine,, as you 4ill gradually lose control due to reduced cash flo4 and, of
course, you could e-perience an increased incidence of bad debt1
T'e following mea,"re, will 'el/ manage $o"r de2tor,;
<1 )ave the right mental attitude to the control of credit and ma/e sure that it
gets the priority it deserves1
=1 Cstablish clear credit practices as a matter of company policy1
>1 Ma/e sure that these practices are clearly understood by staff, suppliers and
customers1
G1 (e professional 4hen accepting ne4 accounts, and especially larger ones1
+1 'hec/ out each customer thoroughly before you offer credit1 Bse credit
agencies, ban/ references, industry sources etc1
F1 Cstablish credit limits for each customer111 and stic/ to them1
H1 'ontinuously revie4 these limits 4hen you suspect tough times are coming
or if operating in a volatile sector1
%1 9eep very close to your larger customers1
@1 Invoice promptly and clearly1
<$1'onsider charging penalties on overdue accounts1
<<1 'onsider accepting credit Edebit cards as a payment option1
<=1Monitor your debtor balances and ageing schedules, and don:t let any debts
get too large or too old1
Recogni8e that the longer someone o4es you, the greater the chance you 4ill never
get paid1 If the average age of your debtors is getting longer, or is already very
long, you may need to loo/ for the follo4ing possible defects;
4ea/ credit judgement
poor collection procedures
la- enforcement of credit terms
slo4 issue of invoices or statements
errors in invoices or statements
'ustomer dissatisfaction1
6ebtors due over @$ days 2unless 4ithin agreed credit terms3 should generally
demand immediate attention1 Loo/ for the 4arning signs of a future bad debt1 !or
e-ample111111111
o longer credit terms ta/en 4ith approval, particularly for smaller orders
o use of post#dated chec/s by debtors 4ho normally settle 4ithin agreed terms
o evidence of customers s4itching to additional suppliers for the same goods
o ne4 customers 4ho are reluctant to give credit references
o Receiving part payments from debtors1
Profit, onl$ come from /aid ,ale,=
The act of collecting money is one 4hich most people disli/e for many reasons and
therefore put on the long finger because they convince themselves there is
something more urgent or important that demand their attention no41 T'ere i,
not'ing more im/ortant t'an getting /aid for $o"r /rod"ct or ,er#ice= A
c",tomer w'o doe, not /a$ i, not a c",tomer=
0anaging Pa$a2le, >Creditor,?
'reditors are a vital part of effective cash management and should be managed
carefully to enhance the cash position1
urchasing initiates cash outflo4s and an over#8ealous purchasing function can
create li0uidity problems1 'onsider the follo4ing;
o .ho authori8es purchasing in your company # is it tightly managed or
spread among a number of 2junior3 peopleR
o Are purchase 0uantities geared to demand forecastsR
o 6o you use order 0uantities 4hich ta/e account of stoc/#holding and
purchasing costsR
o 6o you /no4 the cost to the company of carrying stoc/R
o 6o you have alternative sources of supplyR If not, get 0uotes from major
suppliers and shop around for the best discounts, credit terms, and reduce
dependence on a single supplier1
o )o4 many of your suppliers have a returns policyR
o Are you in a position to pass on cost increases 0uic/ly through price
increases to your customersR
o If a supplier of goods or services lets you do4n can you charge bac/ the cost
of the delayR
o 'an you arrange 24ith confidenceQ3 to have delivery of supplies staggered or
on a just#in#time basisR
There is an old adage in business that if you can buy well then you can sell well1
Management of your creditors and suppliers is just as important as the
management of your debtors1 It is important to loo/ after your creditors # slo4
payment by you may create ill#feeling and can signal that your company is
inefficient 2or in troubleQ31
6emem2erK a good ,"//lier i, ,omeone w'o will work wit' $o" to en'ance t'e
f"t"re #ia2ilit$ and /rofita2ilit$ of $o"r com/an$
;e$ .orking Ca/ital 6atio,
The follo4ing, easily calculated, ratios are important measures of 4or/ing capital
utili8ation1

6atio Form"lae 6e,"lt &nter/retation
Stoc/
Turnover
2in days3
Average Stoc/
S >F+E
'ost of ?oods
Sold
P -
days
On average, you turn over the value of
your entire stoc/ every - days1 "ou may
need to brea/ this do4n into product
groups for effective stoc/ management1
Obsolete stoc/, slo4 moving lines 4ill
e-tend overall stoc/ turnover days1 !aster
production, fe4er product lines, just in
time ordering 4ill reduce average days1
Receivables
Ratio
2in days3
6ebtors S >F+E
Sales
P -
days
It ta/es you on average - days to collect
monies due to you1 If you7re official credit
terms are G+ day and it ta/es you F+ days111
4hyR
One or more large or slo4 debts can drag
out the average days1 Cffective debtor
management 4ill minimi8e the days1
ayables
Ratio
2in days3
'reditors S
>F+E
'ost of Sales
2or urchases3
P -
days
On average, you pay your suppliers every
- days1 If you negotiate better credit terms
this 4ill increase1 If you pay earlier, say, to
get a discount this 4ill decline1 If you
simply defer paying your suppliers
24ithout agreement3 this 4ill also increase
# but your reputation, the 0uality of service
and any fle-ibility provided by your
suppliers may suffer1
'urrent
Ratio
Total 'urrent
AssetsE
Total 'urrent
Liabilities
P -
times
'urrent Assets are assets that you can
readily turn in to cash or 4ill do so 4ithin
<= months in the course of business1
'urrent Liabilities are amount you are due
to pay 4ithin the coming <= months1 !or
e-ample, <1+ times means that you should
be able to lay your hands on T<1+$ for
every T<1$$ you o4e1 Less than < times
e1g1 $1H+ means that you could have
li0uidity problems and be under pressure
to generate sufficient cash to meet
oncoming demands1
&uic/ Ratio 2Total 'urrent
Assets #
P -
times
Similar to the 'urrent Ratio but ta/es
account of the fact that it may ta/e time to
Inventory3E
Total 'urrent
Liabilities
convert inventory into cash1
.or/ing
'apital
Ratio
2Inventory U
Receivables #
ayables3E
Sales
As D
Sales
A high percentage means that 4or/ing
capital needs are high relative to your
sales1
Other 4or/ing capital measures include the follo4ing;
(ad debts e-pressed as a percentage of sales1
'ost of ban/ loans, lines of credit, invoice discounting etc1
6ebtor concentration # degree of dependency on a limited number of
customers1
Once ratios have been established for your business, it is important to trac/ them
over time and to compare them 4ith ratios for other comparable businesses or
industry sectors1
.hen planning the development of a business, it is critical that the impact of
4or/ing capital be fully assessed 4hen ma/ing cash flo4 forecasts1
DATA ANAL7S&S AND &NTE6P6ETAT&ON
(Rs in cores)
=$$GE$+ =$$+EF =$$FEH =$$HE%
A8 C466ENT ASSETS8
&n#entorie,8 2(=+1 (*=% 134=(1 1%1=1
S"ndr$ de2tor,8 (2=%* 2(=42 34=*3 1+=1
Ca,' and 2ank 2alance8 A=2* 2*(3=A* 31%1=3 3*1=41
Ot'er c"rrent a,,et,8 %2=+* **%=12 2*2=4 231=41
Loan, and ad#ance,8 3*=( 314=( 4+1=42 4*=*+
@@@@@@@@@@@@@@@@@@@@@@@@@@@@@==
TOTAL8 *%**=+4 32A=%% +4*=33 4(A4=+%
B8 C466ENT L&ABEL&T&ES8
S"ndr$ creditor,8
a? On ca/ital aGc8 14=A2 44=3( *+2=+( 2A2=A%
2? on ot'er,8 *1(=3% 222=( 21+=A4 324=(4
Ot'er lia2ilitie,8 321=(2 2%4=(1 424=14 A=(4
Sec"rit$ de/o,it8 =(2 =*+ A4=11 *12=1(
Book o#er draft @@= @@@ (=(% @@=
Pro#i,ion,8 *(+=*4 332=%2 341=4( 222=A
@ @@@@@@@@@@@@@@@@@@@@@@
TOTAL8 %+1=3( (4+=* *2*%=1* *4+=4+
.O6;&ND CAP&TAL >A)B?8 *++4=1 23*A=A3 3%22=A2 3433=1%
&0PO6TANT 6AT&OS OF NALCO

*= OPE6AT&ND P6OF&T 0A6D&N >L?
2= NET P6OF&T 0A6D&N >L?
3= 6ET46N ON NET.O6T: >6ON.? >L?
4= 6ET46N ON CAP&TAL E0PLO7ED >6OCE?
CONCL4S&ON
After studying the components of 4or/ing capital management system
of NALCO1 It is found that the company has a sound and effective
policy and its performance is very good even in this bad recession
situation company has managed to post good profit1 'ompany is
competing 4ell at the domestic as 4ell as the international level and it is
among the lo4 cost producers of aluminium in the 4orld only because
of its proper management of finance, specially the short term finance
/no4n as the 4or/ing capital1
The company is a matured one and it has contributed 4ell in the
countries gro4th and development and 4ill also continue to perform and
contribute to the 4hole nation1
In conclusion ,4e can say that the companies management is an effective
one and /no4s 4ell the management of finance, its 4or/ing capital
management system is very good because of 4hich only the company
has got the status of NA56ATNA company1
B&BL&OD6AP:7
<1 !inancial ManagementVV11rasanna 'handra
=1 !inancial ManagementVV1I1M1andey
>1 Annual Report of NALCO1
G1 Auditors Report, 6irectors Report and Investors Report1
+1 *alco7s official 4ebsiteV14441nalco1co1in
F1 4441google1co1in