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INTRODUCTION The net working capital of a business is its current assets less its current liabilities. Current Assets include: - Stocks of raw materials - Work-in-progress - Finished goods - Trade debtors - Prepayments - Cash balances Current Liabilities include: - Trade creditors - Accruals - Taxation payable - Dividends payable - Short term loans Every business needs adequate liquid resources in order to maintain day-to-day cash flow. It needs enough cash to pay wages and salaries as they fall due and to pay creditors if it is to keep its workforce and ensure its supplies. Maintaining adequate working capital is not just important in the short-term. Sufficient liquidity must be maintained in order to ensure the survival of the business in the long-term as well. Even a profitable business may fail if it does not have adequate cash flow to meet its liabilities as they fall due. Therefore, when businesses make investment decisions they must not only consider the financial outlay involved with acquiring the new machine or the new building, etc, but must also take account of the additional current assets that are usually involved with any expansion of activity. Increased production tends to engender a need to hold additional stocks of raw materials and work in progress. Increased sales usually mean that the level of debtors will increase. A general increase in the firm’s scale of operations tends to imply a need for greater levels of cash. Then we should know, why should the managers of a business pay special attention to working capital? Management must ensure that a business has sufficient working capital. Too little will result in cash flow problems highlighted by an organization exceeding its agreed overdraft limit, failing to pay suppliers on time and being unable to claim discounts for prompt payment. In the long run, a business with insufficient working capital will be unable to meet its current obligations and will be forced to cease trading even if it remains profitable on paper. On the other hand, if an organization ties up too much of its resources in working capital it will
earn a lower than expected rate of return on capital employed. Again this is not a desirable situation. The three components, which put affects on working capital, are as: 1. Inventory 2. Receivable 3. Cash Operating cycle
For a manufacturing company like; steel industry; cement industry and many other manufacturing companies, Inventory management is the most crucial part for the organization. Inventories which may classified as: 1. Raw material 2. Work-in-progress 3. Finished goods Whereas receivable and cash management can be done after sales but inventory management must be done before sale. It requires appropriate forecasting of production and sales. As it is based on forecasting, so it becomes difficult task for any financial manager for any organization.
Inventory Management must be designed to meet the dictates of market place and support the company’s Strategic Plan. The many changes in the market demand, new opportunities due to worldwide marketing, global sourcing of materials and new manufacturing technology means many companies need to change their Inventory Management approach and change the process for Inventory Control. Inventory Management system provides information to efficiently manage the flow of materials, effectively utilize people and equipment, coordinate internal activities and communicate with customers. Inventory Management does not make decisions or manage operations; they provide
The basic building blocks for the Inventory Management system and Inventory Control activities are: 1) Sales Forecasting or Demand Management 2) Sales and Operations Planning 3)Production Planning 4)Material Requirements Planning 5)Inventory Reduction If we see for TATA STEEL. . The Inventory Management system and the Inventory Control Process provides information to efficiently manage the flow of materials. coordinate internal activities. the purchaser may classify it as a raw material if his or her firm had no input into its production. effectively utilize people and equipment. These inventory items may be commodities or extracted materials that the firm or its subsidiary has produced or extracted. CHAPTER-2 MAJOR TYPES OF INVENTORY 2. They also may be objects or elements that the firm has purchased from outside the organization. Inventory Management and the activities of Inventory Control do not make decisions or manage operations.the information to managers who make more accurate and timely decisions to manage their operations. company is maintaining more than 5% inventories in their hand. subassemblies. or finished products. Also the company consuming raw material more than 20% of sale value in the last year. they provide the information to Managers who make more accurate and timely decisions to manage their operations.1>Raw material Raw materials are inventory items that are used in the manufacturer's conversion process to produce components. and communicate with customers. Even if the item is partially assembled or is considered a finished good to the supplier. So inventory management is one of the essential for the organization.
sent to distribution centers. sold to retailers. finished goods inventory is the stock of completed products. casters. . 3. CHAPTER-3 ACCOUNTING POLICY FOR VALUATION OF INVENTORY(as per IAS-2) 3. 2.Typically. and subassemblies that are being processed or are waiting to be processed within the system. costs of conversion and other costs incurred in bringing the inventories to their present location and condition. grain. parts (components). legs. and even engines may be regarded as raw materials if they are purchased from outside the firm. assemblies. the leg assembly and casters are labeled as subassemblies because the leg assembly consists of legs and casters and the casters are assembled from wheels. frames. wood. This generally includes all material—from raw material that has been released for initial processing up to material that has been completely processed and is awaiting final inspection and acceptance before inclusion in finished goods. ball bearings. finished goods can be sold directly to their final user. Therefore. raw materials are commodities such as ore. These goods have been inspected and have passed final inspection requirements so that they can be transferred out of work-in-process and into finished goods inventory. 2. However. ball bearings. axles. leg assemblies. wheels. chemicals. petroleum. Actually.1>Measurement of Inventories Inventories should be valued at the lower of cost and net realizable value. steel.3>Finished goods A finished good is a completed part that is ready for a customer order.2>Cost of Inventories The cost of inventories should comprise all costs of purchase. and casters. and food items. or held in anticipation of a customer order. and caster frames. Any item that has a parent but is not a raw material is considered to be work-in-process. seats. key stock. paint. items such as nuts and bolts. minerals. paper. A glance at the rolling cart product structure tree example reveals that work-in-process in this situation consists of tops. sold to wholesalers.2>Work-in-process Work-in-process (WIP) is made up of all the materials. From this point.
freight inwards and other expenditure directly attributable to the acquisition. with the volume of production. When the costs of conversion of each product are not separately identifiable. or nearly directly. by their nature. for example. they are allocated between the products on a rational and consistent basis. Fixed production overheads are those indirect costs of production that remain relatively constant regardless of the volume of production. The actual level of production may be used if it approximates normal capacity. The amount of fixed production overheads allocated to each unit of production is not increased as a consequence of low production or idle plant. The allocation may be based. In periods of abnormally high production. duty drawbacks and Other similar items are deducted in determining the costs of purchase. such as direct labor. are immaterial. they are often measured at net realizable value and this value is deducted from the .3. Variable production overheads are those indirect costs of production that vary directly. the amount of fixed production overheads allocated to each unit of production is decreased so that inventories are not measured above cost. Most by-products as well as scrap or waste materials. Normal capacity is the production expected to be achieved on an average over a number of periods or seasons under normal circumstances. on the relative sales value of each product either at the stage in the production process when the products become separately identifiable. Variable production overheads are assigned to each unit of production on the basis of the actual use of the production facilities. 3.3>Costs of Purchase The costs of purchase consist of the purchase price including duties and taxes (other than those subsequently recoverable by the enterprise from the taxing authorities). Trade discounts. They also include a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods. taking into account the loss of capacity resulting from planned maintenance. when joint products are produced or when there is a main product and a by-product.4>Costs of Conversion The costs of conversion of inventories include costs directly related to the units of production. or at the completion of production. such as depreciation and maintenance of factory buildings and the cost of factory management and administration. for example. This is the case. When this is the case. Unallocated overheads are recognized as an expense in the period in which they are incurred. The allocation of fixed production overheads for the purpose of their inclusion in the costs of conversion is based on the normal capacity of the production facilities. such as indirect materials and indirect labour. A production process may result in more than one product being produced simultaneously. rebates.
The formula used should reflect the fairest possible approximation to the cost incurred in bringing the items of inventory to their present location and condition. depending upon the circumstances of the enterprise. Specific identification of cost means that specific costs are attributed to identified items of inventory. an enterprise could obtain predetermined effects on the net profit or loss for the period by selecting a particular method of ascertaining the items that remain in inventories. it may be appropriate to include overheads other than production overheads or the costs of designing products for specific customers in the cost of inventories. regardless of whether they have been purchased or produced. Under the weighted average cost formula. The cost of each item is determined from the weighted average of the cost of similar items at the beginning of a period and the cost of similar items purchased or produced during the period. first-out (FIFO). The average may be calculated on a periodic basis. when there are large numbers of items of inventory which are ordinarily interchangeable. For example. The FIFO formula assumes that the items of inventory which were purchased or produced first are consumed or sold first. should be assigned by using the first-in. other than those dealt with in paragraph 14 of IAS-2. or as each additional shipment is received. in such circumstances. This is an appropriate treatment for items that are segregated for a specific project. The formula used in determining the cost of an item of inventory needs to be selected with a view to providing the fairest possible approximation to the cost incurred in bringing the item to its present location and condition. the carrying amount of the main product is not materially different from its cost. 3. As a result.6>Cost Formulas The cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated for specific projects should be assigned by specific identification of their individual costs. 3. A variety of cost formulas is used to determine the cost of inventories other than those for which specific identification of individual costs is appropriate. However. and consequently the items remaining in inventory at the end of the period are those most recently purchased or produced. .cost of the main product. or weighted average cost formula. specific identification of Costs are inappropriate since.5>Other Costs Other costs are included in the cost of inventories only to the extent that they are incurred in bringing the inventories to their present location and condition. The cost of inventories.
The cost of the inventory is determined by reducing from the sales value of the inventory the appropriate percentage gross margin. In some circumstances. if necessary. however. Estimates of net realisable value are based on the most reliable evidence available at the time the estimates are made as to the amount the inventories are expected to realise. may be used for convenience if the results approximate the actual cost. 3. such as the standard cost method or the retail method. If the sales contracts are for less than the inventory quantities held. These estimates take into consideration fluctuations of price or cost directly relating to events occurring after the balance sheet date to the extent that such events confirm the conditions existing at the balance sheet date. the net realisable value of the quantity of inventory held to satisfy firm sales or service contracts is based on the contract price. finished goods. revised in the light of current conditions. efficiency and capacity utilization. the net realisable value of the excess inventory is based .8>Net Realizable Value The cost of inventories may not be recoverable if those inventories are damaged. or all the inventories in a particular business segment. The percentage used takes into consideration inventory which has been marked down to below its original selling price.7>Techniques for the Measurement of Cost Techniques for the measurement of the cost of inventories. for example. Inventories are usually written down to net realisable value on an item by item basis. The retail method is often used in the retail trade for measuring inventories of large numbers of rapidly changing items that have similar margins and for which it is impracticable to use other costing methods. This may be the case with items of inventory relating to the same product line that have similar purposes or end uses and are produced and marketed in the same geographical area and cannot be practicably evaluated separately from other items in that product line. it may be appropriate to group similar or related items. Estimates of net realisable value also take into consideration the purpose for which the inventory is held. The practice of writing down inventories below cost to net realisable value is consistent with the view that assets should not be carried in excess of amounts expected to be realised from their sale or use. They are regularly reviewed and. Standard costs take into account normal levels of consumption of materials and supplies. or if their selling prices have declined.3. It is not appropriate to write down inventories based on a classification of inventory. The cost of inventories may also not be recoverable if the estimated costs of completion or the estimated costs necessary to make the sale have increased. labour. For example. if they have become wholly or partially obsolete. An average percentage for each retail department is often used.
Information about the carrying amounts held in different classifications of inventories and the extent of the changes in these assets is useful to financial statement users. when there has been a decline in the price of materials and it is estimated value. Contingent losses on firm sales contracts in excess of inventory quantities held and contingent losses on firm purchase contracts are dealt with in accordance with the principles enunciated in Accounting Standard (AS) 4. In such circumstances. and loose tools. the materials are written down to net realisable value. 3. Materials and other supplies held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. Common classifications of inventories are raw materials and components. CHAPTER-4 HISTORY OF INDIAN STEEL SECTOR . and.on general selling prices. including the cost formula used. However. An assessment is made of net realisable value as at each balance sheet date. work in progress. Contingencies and Events Occurring after the Balance Sheet Date. (b) The total carrying amount of inventories and its classification appropriate to the enterprise. finished goods.9>Disclosure The financial statements should disclose: (a) The accounting policies adopted in measuring inventories. stores and spares. the replacement cost of the materials may be the best available measure of their net realisable value.
the iron pillar of Kutab Minar near Delhi dates back to about 400 AD and the iron beams of Sun temple of Konark in Orissa dates back to 13th century. Steel industry has been removed from the list of Industries under the control of state sector.1>During Ancient Period The history of iron and steel making in India goes back by several centuries.1. Technological advancement is very important for the overall health of the steel industry. The steel industry is highly scientific and technology oriented. It dates to 480 BC when archers in India used arrows tipped with steel. 4. The high cost of developing technology in this sector proved to be a major hindrance. That's when the government decided to go for synergy with other countries for technology transfer.3>After Independence India found it difficult to sustain development in steel sector after independence on its own due to the lack of technological development.Steel is an important indicator to analyze the economic development of a country.1. The takeover of the . Some of the prominent steel plant set up then was in Rourkela in collaboration with West Germany and in Bokaro in collaboration with Russia.1>Indian Steel Industry 4. freedom to mobilize resources from overseas financial markets and restructuring of existing tax structure have immensely benefited the industry. 4.2>Before Independence The roots of the Indian Steel industry in modern times can be traced to the year 1874. One of the most important landmarks in the history of Indian steel industry was the commencement of the Tata Iron and Steel Company at Jamshedpur in the state of Bihar in 1907.4>Post Liberalization The post liberalization scenario in the Indian Steel industry has witnessed a monumental shift. These pillars are a testimony to ancient India's expertise in the making of steel. 4.1. Some of the salient features are: • • • • • The need for license for increasing capacity has been abolished. The iron pillar of Dhar near Indore in Madhya Pradesh dates back to about 321 AD.The other prominent steel manufacturers before independence were Indian Iron and Steel Company (1922).1. 4. 4. These steel plants came under the purview of public sector enterprises. Foreign equity investment in steel has gone up to 74%. In January 1992 the price and distribution controls were removed. Policies like convertibility of rupee on trade account. when a company called Bengal Iron works at Kulti near Asansol in West Bengal produced iron.2>Milestone The Indian steel industry has come a long way since its humble beginnings.Mysore Iron and Steel Works(1923) and Steel Corporation of Bengal (1937).
It is estimated that India's steel consumption will grow at nearly 16% annually till 2012. Tata Steel. but the steel industry is trying to offset the negative effect of the recession by focusing on transportation and construction projects which are usually funded by the government.3>Future trends • It has to be said that the global recession has affected the Indian steel industry especially stainless steel. The National Steel Policy has forecasted the demand for steel would reach 110 million tons by 2019-2020.British steel giant Corus steel by Tata Steel and the acquisition of Arcelor by Mittal Steel herald a new beginning for the Indian steel industry. Sail and Rinl. Some of the prominent steel producers today are Posco. Ispat. These events signify the fact that the Indian steel industry has acquired a global identity and are today extremely competitive globally. • • • . Essar.01 per cent for the period January -March 2009. India is the only country globally to record a positive overall growth in crude steel production at 1. 4.
However. The National Steel Policy has envisaged steel production to reach 110 million tonnes by 2019-20. India’s steel consumption will continue to grow at nearly 16% rate annually. The scope for raising the total consumption of steel is huge.228 • • 5.02 40. such as Credit Suisse that.544 4.299 Million Tonnes.1>Production • • • • • 4.314 58. till 2012. . Ministry of Steel has projected that the steel capacity in the county is likely to be 124. Today. Production of Pig Iron in 2010-09 was 5.233 5. Further. Gaps in Availability are met mostly through imports. it is expected that India’s steel capacity would be nearly 293 million tonne by 2020. Rapid rise in production has resulted in India becoming the 5th largest producer of steel. India is the 7th largest crude steel producer of steel in the world. complaints related to quality. production of Finished (Carbon) Steel was 59. fuelled by demand for construction projects worth US$ 1 trillion. both in Greenfield and Brownfield. Last 5 year's production of pig iron and finished (carbon) steel is given below: (in million tonnes) Category Pig Iron Finished Carbon Steel 2004-05 2005-06 2006-07 2007-08 2010-09 3.2>Demand .Availability Projection • • • • Demand – Availability of iron and steel in the country is projected by Ministry of Steel annually.416 5. given that per capita steel consumption is only 40 kg – compared to 150 kg across the world and 250 kg in China.289 59. Steel industry was delicensed and decontrolled in 1991 & 1992 respectively. In 2010-09. based on the status of MOUs signed by the private producers with the various State Governments. based on the assessment of the current ongoing projects. Interface helps in redressing availability problems. It has been estimated by certain major investment houses.CHAPTER-5 SCENARIO OF PRESENT STEEL INDUSTRY IN INDIA • The Indian steel industry have entered into a new development stage from 2005-06.695 44. riding high on the resurgent economy and rising demand for steel.06 million tonnes by 2011-12.02 million tonnes. which is conducted on regular basis.055 (Source: Joint Plant Committee) 5. Interface with consumers by way of a Steel Consumer Council exists.993 55.
(In Million Tonnes) 2004-2005 2.436 (Partly estimated) 2007-08 6. Honorable Steel Minister has held discussion with all major steel investors including Arcellor-Mittal. There has been an up-trend in the domestic steel prices since 2006-07 and the trend accentuated since January this year. The Government also took various fiscal and other measures for stabilizing the steel prices like exempting pig iron. Last five years import of Finished (Carbon) Steel is given below:Year Qty.1.3>Steel Prices • • • • Price regulation of iron & steel was abolished on 16. Rise in raw material prices. strong demand in the international and domestic market and up-trend in the global steel prices have been some of the reasons cited by the industry for increase in the steel prices in the domestic market. Essar. The mismatch in demand and supply is considered to be the main reason on the demand side for the rise in steel prices. 10% export duty on cold rolled coils/sheets and pipes and tubes and 5% export duty on galvanized steel in coil/sheet form in order to further curtail rising prices and increase supply of steel in the domestic market.4>Imports of Iron & Steel • • .1992. and hot rolled coils/sheet. Iron & Steel are freely importable as per the extant policy. ferroalloys and met coke from customs duty. POSCO. non alloy steel and steel making inputs like zinc.5. In May 2010. RINL to explore the possibility of expediting the ongoing as well as envisaged steel projects. Since then steel prices are determined by the interplay of market forces. withdrawing DEPB benefits on export of various categories of steel products and bringing back railway freight on iron ore from classification 180 to 170 for domestic steel producers. Ispat and also SAIL.109 2005-2006 3. the Government imposed 15% export duty on semi-finished products. Tata Steel.581 2010-2009 5149 (Partly estimated) (Source: Joint Plant Committee) • • 5.850 2006-2007 4.
are granted due credits which would entitle them to import duty free goods.482 0. Under this scheme exporters on the basis of notified entitlement rates. in Million Tonnes) Year 2004-2005 2005-2006 2006-2007 (Prov. to increase availability in the domestic market.350 0. Duty Entitlement Pass Book Scheme (DEPB) introduced to facilitate exports.5.750 4. The DEPB benefit on export of various categories of steel items scheme has been temporarily withdrawn from 27th March 2010.627 3.560 0.5>Exports of Iron & Steel • • • Iron & Steel are freely exportable.381 4.393 0. Advance Licensing Scheme allows duty free import of raw materials for exports.478 4.440 0. Exports of finished carbon steel and pig iron during the last five years and the current year is as : Exports (Qty.estimated) Finished (Carbon) Steel Pig Iron 4.350 • (Source: Joint Plant Committee) .estimated) 2007-2010 2010-2009 (Prov.
And one of the key requisites for successful diversity management is a shared vision. 6.1>Company profile Managing a global workforce and setting global benchmarks is primarily about managing diversity. The Indian operations draws its greatest strength and its competitive position as one of the lowest cost producers of steel in the world from the quality and yield of its raw material units.147. 329 Crores (US$ 28.8 million tonnes of crude steel making capacity at Jamshedpur.962 million) in 2010 . 6. The long-term strategy is to continue to pursue capacity expansion in India through Greenfield projects as well. With the acquisition of Corus in 2007 leading to commencement of Tata Steel's European operations. every person contributes to the blueprint of the future and is truly committed to the stated objectives. The Company has. capacity expansion in India is one of the key strategies for Tata Steel. Tata Steel’s Indian operations are one of the most competitive assets in the global steel industry and therefore.2009. The Group recorded a turnover of Rs. continuously modernized and expanded its raw material facilities right from the 1950s. The Company has always had significant impact on the economic development in India and now seeks to strengthen its position of pre-eminence in international domain by continuing to lead by example of responsibility and trust. therefore. corporations and communities is the most effective route to growth.000 across five continents.CHAPTER-6 ABOUT TATA STEEL 6. The 3-mtpa expansion at Jamshedpur will enable Tata Steel to strengthen its market share in the Flat Products segment and simultaneously reduce the operating costs over a large volume of production. the Company today. In a process of inclusive growth. . which will be further augmented by 3 million tonnes through the ongoing brown field expansion. is among the top ten steel producers in the world with an existing annual crude steel production capacity of around 30 million tonnes per annum and employee strength of above 80. The Tata Steel Group over the years has focused on enhancing raw material security and announced major joint ventures in various parts of the globe.3>Projects and operations: India The Tata Steel Group’s growth and globalization strategy is driven by its business expansion while maintaining profitability and mitigating risks.2>Present scenario of TATA steel The Tata Steel Group has always believed that mutual benefit of countries. when it had launched its two million tonne expansion programme. In the financial year 2010-09. the Company commissioned its 1. The mines have successfully offered raw material security and have partially insulated Tata Steel from the volatility of the global markets. by 2011. Tata Steel has not limited its operations and businesses within India but has built an imposing presence around the globe as well.
The first phase of 6 mtpa is likely to be set up within 36 months to 54 months from the date of obtaining all statutory clearances. 1.Therefore the India growth strategy remains a fundamental part of the long-term strategy of the Tata Steel Group. The project includes the development of iron ore mines and other raw materials sources including coal and logistic linkages for this plant. Tribal cultural centre. Project Update: Tata Steel is awaiting the R&R Policy from the State Government for its Greenfield project. Co-operation in the area of Human Resource Development through Industrial Training Institutes. Seraikela Plant Greenfield Project Project Highlights: • • Setting up a 12 million tonnes per annum Greenfield integrated steel plant in the state. Jharkhand honors Tata Steel Sports Persons. Jharkhand 1. Graduation ceremony of trainees at Tata Steel’s technical training centre in Seraikela. Press Releases • • • • Telemedicine centre inaugurated at Tata Main Hospital. The capacity of the Jamshedpur plant is expected to become 10 mtpa by December 2011. Capacity: 12 mtpa integrated steel plant. Tata Steel organized the award ceremony for Jyoti Fellowship and Moodie Endowment. Jamshedpur Plant Brownfield Project Project Highlights MoUs with the Government of Jharkhand was signed in 2005 for:• • • Expansion of Tata Steel's existing plant at Jamshedpur from 5 mtpa to 10 mtpa.8 mtpa has essentially been completed. Project Update: The first phase which entails reaching a crude steel capacity of 6. Commissioning of Coated Steel Manufacturing Plant . The Greenfield project is to be set up in two phases.
The order for equipment and services has been placed in accordance to the stipulations in the MoUs signed with the Orissa State Government. West Bengal 1. and Larsen and Toubro for the development of a deep water port in Dhamra. Tata BlueScope Steel Ltd. Capacity: Greenfield Steel Plant of capacity 6mtpa. 2005. is a 50:50 joint venture between Tata Steel Ltd. The project also includes development of captive iron ore mines to meet the iron ore requirements of this plant. Capacity: 5 mtpa Greenfield integrated steel plant. Orissa 1. is under construction at Jamshedpur and is expected to be completed by March 2010. Greenfield Project at Kalinganagar Project Update: Preliminary work focusing on land acquisition. Orissa.Project Highlights: The manufacturing facility for coated steel of Tata BlueScope Steel Ltd. 2. Jagdalpur Plant (Bastar) Project Highlights • • • MoUs with the Chhattisgarh government was signed on June 04. is a 50:50 joint venture between Tata Steel Ltd. Project Updates: The process of acquiring land is under progress. The integrated steel plant will have an ultimate capacity of 5 mtpa of steel with 2 mtpa in the first phase. A grant for the mining lease of iron ore has been sought. The Company has also applied for environmental clearances and other licenses. rehabilitation and resettlement work is in progress. Chhattisgarh 1. Haldia Plant . Port Project at Dhamra The Dhamra Port Company Ltd. and BlueScope Steel Australia.
Tata Relief Committee initiative for Tsunami affected victims of Tamil Nadu. Prospecting license over 80 sq. inaugurated.4>Projects and operations: International The Tata Steel Group’s growth and globalization strategy is driven by its business expansion while maintaining profitability and mitigating risks. Capacity: 1. • Capacity: 60. Tuticorin Mines Project Highlights • • • • MoUs with the Government of Tamil Nadu signed on June 27. is a 100% subsidiary of Tata Steel.e. Environmental Impact Assessment of the project carried out and Environmental Management Plan drawn with the assistance of MIN-MEC Consultancy. Titania project involves mining. Press Releases • • • Tata Steel committed to its Titanium-dioxide project in Tuticorin and Tirunelveli. The feasibility study conducted with the help of Consortium Partners comprising Outokumpu Finland's physical separation division based in USA. Project Update: Capacity of plant is likely to be increased to 1. pigments production in phases subject to techno. Tata Steel signs MoUs with Tamil Nadu Government for its Titanium Oxide project. The Company was set up to produce low ash metallurgical coke primarily to meet Tata Steel’s requirement at its Jamshedpur plant and also to supply hot gases to Tata Power for electricity generation by adopting heat recovery route. Tirunelveli. Outokumpu-Lurgi.Project Highlights: Hoogly Met Coke and Power Company Ltd. (incorporated in 2005).economic viability. Tamil Nadu 1. a resource and mining consulting company and L&T. 6.km area granted by the Government of Tamil Nadu in the districts of Tirunelveli and Tuticorin with due approval from Government of India. “TATA COLONY” at Koottappanai Village.2 mpta of coke. USA. The Tata Steel Group over the years has . 2002. Pincock Allen and Holt. mineral separation and value addition i.000 tonnes per annum of titanium di-oxide.6 mtpa in 2009. Germany.
focused on enhancing raw material security and announced major joint ventures in various parts of the globe. Project Updates • • Commissioning of the large scale and new mining equipment (Long wall). Press Releases • • . Tata Steel on December 14. which will be one of the largest in Australia. Tata Steel and Vale. Bowen Basin Project Location: Bowen Basin in Central Queensland. • • • • • • Capacity: Mining capacity of 58 million tonnes of raw coal for 14 years. There is a further potential resource of 100 million tonnes of raw coal in the unexplored areas and deeper seams. Australia. Australia 1. Tata Steel also signed an off take agreement for a proportion of the production over life of the project. JFE and POSCO) have undertaken a large scale expansion of the Carborough Downs Coal Mine near Moranbah in Central Queensland in Australia. The Carborough Downs coal project is majority owned and operated by a subsidiary of AMCI Holdings Australia Pty Ltd. The clean coal envisaged to be produced would be low-ash coking coal and PCI coal. The second phase of expansion has been undertaken. at the end of which the company is expected to produce 3. 2005 signed agreements to buy a 5% interest in the Carborough Downs Coal Project located in Queensland. Tata Steel acquires stake in Australian coal mines. The project life is currently estimated to be 14 years and approximately 58 million tonnes of raw coal is expected to be mined during this period.7mtpa of coking coal and PCI coal. Tata Steel's investment for the expansion of production at Carborough downs coal mine in Australia. along with other joint venture partners (Nippon steel. is expected by mid 2009. highly suitable for steel making. The first raw coal production started in August 2006 and the mine is currently producing around 1 mtpa. Project Highlights • • • Tata Steel has a joint venture with Vale in Australia for a Coking Coal Mine.
.9% stake in NML with an option to acquire an 80% equity interest in NML’s Direct Shipping Ore project. Iron ore project Location: Northern Quebec. along with NML is trying to work out an economically viable solution to advance the project. Nimba Iron ore Project Location: Nimba Iron ore deposits in Ivory Coast.2 billion tonnes of inferred resources. wherein Tata Steel will have a major shareholding (75%). • Capacity: The DSO resource is estimated to be approximately 100 million tonnes. Nimba deposit spread over 3 countries – Liberia. The project will be implemented by a joint venture company – Tata Steel Cote d’ivoire. The Mt. Project Highlights: • • • • Tata Steel Limited and SODEMI (State Owned Company for Mineral Development). through its subsidiaries. signed a Heads of Agreement memorandum with New Millennium Capital Corporation. Canada. The initial phase will involve exploration and detailed feasibility assessments followed by construction of the mine and beneficiation facilities. These reserves are contained in the 4. Labrador and Newfoundland provinces. The iron ore from this project will serve Tata Steel’s European facilities. on December 11.Canada 1. The feasibility study for the DSO project is progressing and production is expected to commence in 2011.5 billion tonnes of proven and potential mineral reserves. Ivory Coast 1. Tata Steel will have 100% off take rights to the produce of the mine at the time of production commencement. 2007 entered into Joint Venture agreement for the development of Mount Nimba Iron ore deposits in Ivory Coast (West Africa).6 billion tonnes of measured and indicated resources and 1. Project Update: Tata Steel. The aim was to develop iron ore projects in the region. The LabMag deposit consists of 3. Project highlights: • • • • • Tata Steel. Tata Steel holds a 19. The agreement also provides exclusivity to Tata Steel in the Labmag taconite iron ore property. Guinea and Ivory Coast is one of the biggest iron ore deposits in West Africa.
Capacity: Potential to extract 720 million tonnes by open-cut methods from a major coal resource in the Benga License. Tata Steel will pay AUD100 million (approximately 88. 2007. Project Update: The project is in its initial phase that involves exploration and detailed feasibility assessments followed by construction of the mine and beneficiation facilities. Key coal exploration tenements Location: Key coal exploration tenements (the Benga and Tete licensees) held by Riversdale in Mozambique. The coking coal derived from this project will be supplied to the Tata Steel Group's facilities in Europe. which is a signal for the Benga Coal project to commence. The JV comprises two licenses (the Benga and Tete licenses) and covers an area of 24. Press Releases: Tata Steel’s joint venture in Ivory Coast for Mount Nimba Iron Ore.• The iron ore from this project will be supplied to Tata Steel Group facilities especially those located in the United Kingdom and The Netherlands.960 hectares (approximately 96. Capacity: To be assessed. The Government of Mozambique has approved the mining contract for the tenements. Project Highlights • • • • • Tata Steel and Riversdale Mining Ltd. Press Releases • • Tata Steel Signs MoUs with Riversdale Mining Limited. Tata Steel signs JV with Riversdale Mining for Mozambique Coal Project The Netherlands .2 million USD) to acquire 35% of Riversdale's Benga and Tete licenses. Australia signed a joint venture agreement on November 30. Project Update: The feasibility study for the project is in progress. Asia and elsewhere. Mozambique 1.7 square miles). Under the terms of agreement.
which lies in the Salalah province of Oman and has large deposits of limestone. 2010 – Tata Steel has a 70% stake in the joint venture. Orders have been placed for building two new Supramax vessels.6mtpa. the European Commission and the Dutch government. Project Highlights • Tata Steel Limited and the members of the Al Bahja Group. Press Releases: Tata Steel’s joint venture in the Sultanate of Oman for Uyun limestone. with a production capacity of 7. the project will considerably reduce the carbon dioxide emissions of the existing integrated steelmaking process.000tpa pilot plant is intended to prove the commercial and technical viability of a new iron making process called Hisarna. Tata NYK Shipping Pvt Ltd. • • Updates: Exploration and feasibility studies are in progress. Capacity: To be assessed. Limestone Project Location: Uyun region in the Salalah province. Tata NYK has entered into a long term charter for 8 Supramax / Panamax vessels. a leading business house of Oman signed a Joint Venture Agreement on January 16. The Company handled a total of 4. Singapore 1. Hisarna would also be more energy efficient than existing technology and use cheaper and more abundant raw materials. Among them is a €20m pilot plant that is being jointly funded with ULCOS. Oman 1. The 60. Japanese shipping major. Project Update: . The shipping firm would handle the Tata Steel Group’s requirements for moving raw materials and steel. The project envisages mining of limestone in the Uyun region (limestone is the key raw material for producing good quality steel).48 million tonnes of cargo in FY 09. The Company would ensure a strategic control over logistics in the future. Projects: A number of capital expenditure schemes are in progress at IJmuiden.Operations: The IJmuiden Steelworks is Corus’ largest and most cost-efficient steel making facility. Project Highlights • • • • • • The JV was set up to cater to ship bulk cargo such as coal. iron ore and steel. If successful. Tata NYK Shipping Pte Limited is a Singapore based 50:50 joint ventures between Tata Steel and Nippon Yusen Kabushiki Kaisha (NYK line).
1. The downstream business comprising direct sales to contractors uses 45 knowledge-centric services and consists of a cut and bend facility and products like mesh.00. The business model of the plant includes taking high quality Chrome Ore from India and elsewhere. 2006. and lesser space requirement and just in time steel in desired sizes. A Ferro Chrome Plant was commissioned at Richards Bay in 2010 to produce High Carbon Ferro Chrome. NatSteel Holdings NatSteel.000 tonnes per year. and exporting the finished product to various customer destinations. and the annual production capacity will be 134. pre-cages.000 tonnes of bars and rods and the other is a wire drawing plant at Wuxi. The downstream facility in Singapore. Australia. 50. The briquette technology being used by the company is environment friendly and relatively new to South Africa. mesh. and is the largest single location facility in the world. Malaysia. a 100% subsidiary of the Tata Steel Group. Thailand. The Singapore operations comprise steel making and rolling operations of capacity 7.000 tonnes per annum of cut and bends bars. bore pile cages etc. in the business of producing Ferro Chrome and Charge Chrome. with a capacity of 1. TSKZN is one of the most environment compliant plants globally. higher productivity. one is a rolling mill at Xiamen producing about 5. the market share is about 25%. is headquartered in Singapore and has presence in Vietnam. converting it into Ferro Chrome in Richards Bay.500 Metric Tonnes Per Annum (mtpa) in Phase I. Of the two units operating in China.As part of its long-term strategy. Tata Steel (KZN) (PTY) Ltd. 00. The proposed plant in South Africa will manufacture High Carbon Ferro Chrome with a Chrome content of +64%. the Company plans to enter into a long term charter for capsize vessels in 2009. for global consumers. In the Xiamen city. TSKZN is a South Africa based subsidiary of Tata Steel. produces over 4.00.. South Africa 1. • • • .000 tonnes per annum and have a well-established downstream business. China. Philippines and Singapore. cages and couplers which benefits the customers in terms of higher yields. Location: Richards Bay (in uMhlathuze Municipality) Project Highlights • • The ground-breaking ceremony of Ferro Chrome Project was held at Richards Bay on August 21.
is headquartered in London in the United Kingdom. the USA and in other parts of the world. Operations: Corus produces carbon steel by the basic oxygen steel making method at three integrated steelworks in the UK at Port Talbot. the European arm of the Tata Steel Group. NTS and SCSC.479 mtpa of saleable grade Charge Chrome. Corus Corus. Capacity: 1. Corus’ crude steel capacity in the UK is in the region of 13mtpa.539m).570 crore (US$ 21. Nine ex-cadets of TFA to represent India in South Africa. In the year 2010. In addition. The Company continuously improves its business processes and systems in accordance with its commitment to environmental responsibilities. there are a number of downstream rolling. The Company also has been improving continuously in the past few years with its various initiatives focused on reducing cost. its three main subsidiaries are SISCO.07 million tonnes while sales at 1.000 tonnes per annum. improving productivity and quality. Scunthorpe and Teesside (currently mothballed). Project Update: The Ferro Chrome used in the manufacture of stainless steel will be exported to Tata Steel’s customers in Asia.• TSKZN commenced commercial production on 1st July.4 million tonnes. Tata Steel Thailand is committed to moving forward in the journey for excellence and social accountability.1. United Kingdom 1. Press Release • • Tata Steel steps into South Africa. 2010 and in the first year it has achieved a production of 63. Turnover for the period was Rs. Tata Steel Thailand registered sales of 1.1 million tonnes. coating and processing facilities. Thailand Tata Steel Group’s equity in Tata Steel Thailand is 67. Performance: Liquid steel production in 2010-09 at 16 million tonnes was 20% lower than that of 2007-08. 51.09. .1%. Production during FY 09 was at 1. The Company’s predominant market is in Thailand and its market share in 2010 was 31% in the long products business. Headquartered in Bangkok. Europe. and special and alloy steels through the electric arc furnace method in Rotherham.
which is the cold rolling mill. Vietnam Steel Corporation and Tata Steel sign a MoUs. Ha Tinh Project Location: Ha Tinh province.2 million tonnes with a product mix ranging from crude steel. to be developed in 3 phases. On the successful completion of the study and financial closure. Project Highlights • • A proposed steel complex with an estimated capacity of 4. in collaboration with VNSteel and VICEM has also completed the detailed project report for Phase1.Projects: A number of capital expenditure schemes are in progress in the UK. Among them is the £60m BOS gas recovery plant at Port Talbot. Vietnam Steel Corporation and Tata Steel sign a Memorandum of Cooperation. Vietnam Steel Corporation and Vietnam Cement Industries. which would undertake mining in the Thach Khe iron ore mine. Vietnam 1. Another MOU was signed to set up a cold rolling mill in Ha Tinh province. Tata Steel is partnering with VSC in establishing a steel complex in Ha Tinh province. The total capacity of VNSteel including that of its joint ventures is around 2. Tata Steel will also have a stake of 30% in Thach Khe Iron Ore Joint Stock Company. Tata Steel.5 million tonnes per year. Project Updates: The Company has completed the feasibility study for the steel complex. Press Releases • • • JV between Tata Steel.5 million tonnes per year. which will be phased over 10 years. • • Capacity: A proposed steel complex with an estimated capacity of 4. . Tata Steel signed a MoUs with Vietnam Steel Corporation (VSC) on May 29. 2010 to develop a steel complex in Ha Tinh. 1. Tata Steel will have a stake of minimum 65% and VSC will have a stake of 35% in the Steel complex. which is expected to significantly reduce natural gas and electricity purchases and materially reduce carbon dioxide emissions at the site through the utilization of gas generated inside the Basic Oxygen Steel plant. VNSteel is Vietnam’s largest steel company and has various manufacturing plants and a distribution system across the country. high quality construction steel to sheet and plate products serving other economic sectors. VNSteel Overview: Established in 995 by a merger of Metal Corporation and Steel Corporation.
Indian Tube co ltd. approval were received for investment of Rs.78 crores was commissioned under the second phase of modernization. was amalgamated with the company.• Vietnam Prime Minister visits Tata Steel. During the year Tata steel agreed to purchase the bearing manufacturing plant of Metal box India of Kharagpur. On 11th August. 1987 On 2nd March. 1907 The Tata iron and steel company was formed at Mumbai. 1988 . the wholly owned subsidiary. . a company promoted by Tata steel. was amalgamated with the company. 16 crores in the capital of Tata Timken ltd. 50. 300000 tonnes capacity bar and rod mill costing about Rs. West Bokaro Ltd. 1983 During the year Indian tube company Ltd.000 equity shares were issued at par and 26.370 per share. 1917 During the year 1. 1973 With the effect from 1st April. was amalgamated with TISCO. 1985 With the effect from 1st October.250 deferred shares were issued at a premium of Rs. CHAPTER-7 HISTORICAL ACHIEVEMENT OF TATA STEEL Below is a chronological list of major business decisions in the history of Tata Steel ltd.
1998. and their associate companies on exercise of warrant held by them.185 crores. of equity shares allotted to Tata sons ltd. following a successful open offer to the shareholder of TSSL.During the period the company.37. Maharashtra. 1997 Tata steel’s international trading division was awarded the prestigious ISO-9002 certification by the Indian Register Quality System (IQRS).018.246 no. the flagship of Tata group.. LIC.2 million tones cold rolling in Jamshedpur. which will be available in the retail market. Tata steel has tied up with the POSCO-Hyundai steel processing venture located in Chennai for getting its cold rolled coil process. 1998 As of March 31.5% non-convertible debenture worth Rs. 2002 . has entered into understanding with Tata International to export 30% of production at Tata steel major’s new 1.3 million tones per annum.584 ordinary shares of the company have been dematerialized. a specially construction grade steel. Tisco acquired the cold rolled steel unit of Rs 776 crore named as Tata SSL ltd in Tarapur. 7. installed a new sinter plant with a capacity of 1.99. Tata steel has launched its largest branded steel product. 2000 Tata steel. Army group insurance fund and GIC and its subsidiaries 17. 1992 During the year company privately placed with UTI. 2001 Tata SSL has become a subsidiary of Tata Iron and steel company. Tata Tiscon. 1995 30.
TISCO entered into a power distribution business. the seven. TISCO has began distribution power in Jamshedpur. Tata steel and L&T signs definitive agreement to form a 50:50 joint venture for setting up a port at Dhamra in Orissa on 29th October. TISCO establishes processing unit at Noamundi Mine. named Steel Junction.2 billion. a branded galvanized brand. 2007 Tata steel’s hard-fought. 2004 Tata steel started METAL JUNCTION-the online trading and procurement with the joint venture of SAIL. Acquisition of Millennium steel. 2006 Tata steel sets up Jiggling and Hydro-cyclone plant. aiming at sales target of three lakh tons. Tata steel has signed a memorandum of understanding with Nippon steel. Tata steel launched India’s first steel retail store. Tata steel bought Singapore’s NatSteel. 2005 TISCO signs joint venture agreement with Iranian Mines and Mining Industries Development and Renovation Organization to join them in proposed steel making projects and mining operations in Iran. Tata steel ranked among global companies in the world’s most respected companies survey. Tata steel launched “WIRON”. Corporation of Japan for its proposed 6 million tones per annum steel plant in Kalinga Nagar in Orissa.year old AngloDutch company formerly known as the British steel. had created the world’s fifth largest steel .pound acquisition of Corus. Thailand. 6.
13. Tata steel completed 100 years of glorious existence on August 26th. The scheduled date for completion of the project is April 2011. CHAPTER-7 LEGENDARY HEROES OF THE TATA STEEL .900 crore.7 mtpa.8 mtpa to 9. at an estimated cost of Rs. 2010-09 Jamshedpur plant’s crude steel making capacity from 6.maker. the second most global steel company and dramatically put India on the corporate world’s take over map.
. power generation. information technology etc. now known as Air India. which gave him the idea of giving India a steel plant. anxiety. Sir Dorabji Tata was instrumental in transforming his father’s grand vision into reality. adventure and achievement. He was the first chairman of gigantic Tata. encompassing steel. the number of TATA venture grew from 13 to 80. with his efficient leadership TATA group is soaring new heights. Jamsetji read a report by a German Geologist Ritter Von Schwartz on the availability of iron ore in Chanda district in central provinces. At the age of 43. It is the story of struggle. Ratan N Tata is the present chairman of TATA group of sons. JAMSHETJI NUSSERWANJI TATA The founder of TATA Steel began with a textile mill in central India in 1870’s. JEHANGIR RATANJI DADABHAI TATA The late chairman of the TATA group pioneered civil aviation on the subcontinent in 1932 by launching TATA airlines. RATAN NAVAL TATA Mr. SIR DORABJI TATA J. from Corus take over to brands like Jaguar and Land Rover. They believe building India means not only earning money but also to increase the wealth o the country’s people. consultancy services. Tata had exhorted to his sons to pursue and develop his life’s work his elder son. Under his control. N. hotel.Here is the story of some heroes/ tycoons who thought to build India. through his endeavors in setting up TATA steel and TATA power.
Anthony Hayward Mr. Nusli N. S. M. Muthuraman (Vice Chairman) Mr. Ratan N. H. B. Palia Mr. Irani Mr. Kirby Adams Mr. Subodh Bhargava Mr. Nerurkar SENIOR MANAGEMENT . Jamshed J.BOARD OF DIRECTORS AS ON 25 JUNE 2009 • • • • • • • • • • • • • • MR. Wadia Mr.M. Suresh Krishna Mr. Jacobus Schraven Dr. Andrew Robb Mr. James Leng Mr. Ishaat Hussain Dr. Tata (Chairman) Mr.
Debashish Bhattacharjee CHAPTER-8 TOP COMPETITORS OF TATA STEEL . Muthuraman(Managing Director) Kirby Adams (Chief executive officer) H.M Nerurkar Kaushik Chatterjee Jean-Sebastien Jacques Arun Baijal Manzer Hussain Avneesh Gupta R. S. Misra Frank Royle Om Narayan Tor Farquhar Radhakrishnan Nair Partha Sengupta Hridayeshwar Jha N.• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Mr. V. P. B. N. Misra Binay Kumar Singh Santi Charnkolrawee T. Singh Marjan Oudeman Anand Sen Scott MacDonald Varun Jha Phil Dryden Abanindra M. Narendran V. K. Murty Helen Matheson Sandip Biswas Lim Say Yan Bimlendra Jha Dr.
• • •
Jindal Steel SAIL Essar steel
SOME OTHER MAJOR PLAYER IN THIS INDUSTRY • • • • • • • • • • • Saw pipes Uttam steel ltd Ispat industry ltd Mukand ltd Mahindra Ugine steel co.ltd Usha ispat ltd Kalyani steel ltd Electro steel casting ltd Sesa Goa ltd NMDC Llyod steel industry ltd
CHAPTER-9 VISION AND MISSION STATEMENT OF TATA STEEL Vision
We aspire to be the global steel industry benchmark for Value Creation and Corporate Citizenship
We make the difference through: Our people, by fostering team work, nurturing talent, enhancing leadership capability and acting with pace, pride and passion. Our offer, by becoming the supplier of choice, delivering premium products and services, and creating value for our customers. Our innovative approach, by developing leading edge solutions in technology, processes and products. Our conduct, by providing a safe working place, respecting the environment, caring for our communities and demonstrating high ethical standards.
Consistent with the vision and values of the founder Jamsetji Tata, Tata Steel strives to strengthen India’s industrial base through the effective utilization of staff and materials. The means envisaged to achieve this are high technology and productivity, consistent with modern management practices.
MAJOR BRANDs OF TATA STEEL
The Tata Steel Group’s Brand building endeavors have always been directed at building assurance, reliability and superior product quality in every segment. Outstanding performance by the Company’s different divisions have surpassed their own brand standards and created higher quality parameters for each other.
Galvano™ is Galvanized Plain (GP) steel offering available in sheet and coil forms for all customer segments like white goods, panels, bus bodies etc. Galvano™ meets the diverse and specific needs of the general engineering segment. Unlike the ordinary spangled and crushed spangled products available in the market, Galvano™ is a Zero spangled product with unmatched surface finish and mechanical properties.
Tata Agrico, a division of Tata Steel is the pioneer manufacturer of superior quality agricultural implements in the country under the brand name 'Agrico'. Since 1925, it has been the leading brand in shovels, powrahs, crowbars, kudalies, pickaxe and hammers. These implements cater to the needs of Agricultural, Horticulture Industry, maintenance of roads, dams, railway- tracks, collieries etc. in India and abroad. The Agrico products are the first in India to be manufactured with ISO: 9002 Certification. All Tata Agrico implements are guaranteed against manufacturing defects and are distributed all over the country through a network of consignment agents and distributors. The Agrico division recently expanded its product offerings by launching three new products and many more variants in the existing category.
Tata Bearings manufactures a wide variety of bearings and auto assemblies, like Ball Bearings, Tapered Roller Bearings, Magneto Bearings, Double Row Angular Contact Bearings, Clutch Release Assemblies, Fan Support Assemblies and Cylindrical Roller Bearings. It is the only Bearings Manufacturer in India to win TPM Award from Japan Institute of Plant Maintenance, Tokyo and is amongst the largest bearing manufacturers in India.
Tata Pipes has matured into a fully bloomed brand since 1996. A deeply thought out branding exercise was undertaken in order to unleash the power of the ‘Tata Pipes' Brand. Tata Pipes are manufactured with the HFIW process in the Long Products Division's high-tech facility at Jamshedpur.
Tata Shaktee is Tata Steel’s flagship brand in the field of galvanised corrugated sheets. Since Tata Shaktee was launched in Feb 2000, the brand has been consistently delivering on its promises of longevity and strength. Tata Shaktee is the only brand, which produces 4 ft wide GC sheets called "Tata Shaktee Wider GC Sheets".
Tata Steelium is another brand of the Flat Products Division of Tata Steel. Apart from providing a certain level of quality the name also assures the customer of the genuineness of the product. It goes a long way in meeting the challenge of gaining a sustainable competitive edge in the marketplace. The brand has acquired new customers in retail untapped areas and made an aggressive entry into the retail segment through exclusive shops called Steelium zones. Customer relationship building programmes are undertaken with a view to increasing market share.
Tata Tiscon is the first Thermo Mechanically Treated (TMT) rebar in the country. Every Tata Tiscon rebar is made from pure steel, with the most advanced TMT technology from Tempcore, Belgium. Tata Tiscon is available for both residential and project applications. It has the best combination of strength, ductility and unparalleled quality consistency. Tata Tiscon forms an unbreakable and unshakeable bond with cement (atoot jod), and together they lend a strong foundation for building construction.
Tata Tiscon became the first rebar in India to be awarded the ‘Superbrand' status in the construction rebar category. Retail sales have received a boost through new marketing initiatives and consumer schemes launched as a result of continuous monitoring of consumer sales.
Tata Steel Wire Division is the leading producer of steel wires under the brand name Tata Wiron, with a 30% market share of the organized wire market in India. It manufactures a wide range of wires catering to the needs of the various industry segments such as automobile, infrastructure, power and general engineering. The products are well established across the markets of Europe, USA, Middle East Asia, Australasia, South Asia and Far East Asia. Tata Wiron GI wires have a distinct brand identity of being a valued business partner for its consumers.
The efficiency of inventory management model at TATA Steel requires a thorough knowledge of iron making process and expertise in identifying the materials. This company follows various accounting policies. The accounting is as well as in planning the control of inventory is thoroughly studied by ratio analysis. Data analysis and interpretation. Primary source • Personal interview • Finance and Accounts department • Purchase department • Plant visit I. The data analysis has been done using various inventory ratios. Secondary source • Concern data • Website • Annual report • Company records • Intranet of company Presentation of data • • • Data is presented in the form of tables. Ratio alone cannot show whether performance is good or bad. Limitation of the studies • • • • The study is based on the comparison across companies. Hence the choice of accounting for the companies to an extent distort the inter company comparison. diagram and trend lines.The study is based on descriptive and applied research. Data collection method I. The data is pertaining up to the year 2009. Ratio does not take into account the impact of certain non-financial parameters. The study is limited CHAPTER-12 12.1>INVENTORY MANAGEMENT IN TATA STEEL .
For any item of goods. The raw material inventory includes materials from its own source as well as purchased from others. TATA steel has its own mines and querries in India and also in some other countries. cost of placing one order. First in first out (FIFO): A method of valuation of inventory. annual requirement in units. anticipation inventory and cycle inventory. but there are many other things included in it in small quantities. There are many reasons for each different organization as to what the quantity should be maintained. O= ordering cost. TATA STEEL’s raw material inventory consist of mainly coal and iron ore. C= carrying cost Channels of ordering raw material: . transit inventory. To find out EOQ. To maintain the minimum required inventory is not an easy task. TATA STEEL has its transportation system which helps in carrying the materials from different locations to Jamshedpur works. There will not be any loss by either way. Each types of production department maintain separate inventory level. cost of carrying one unit in inventory for one year are the influencing factors. they use EOQ method. A= Annual consumption. by which the cost are allocated on the assumption that goods are consumed or sold in the order in which they are received and taken in to stock. Economic Ordering Quantity (EOQ): It is the optimum quantity of goods for which if orders are placed.e. Raw material inventory. TATA steel maintains different types of inventory i. raw material. the aggregate order placing cost and the aggregate inventory carrying cost will be equal and economical. finished goods. These are transported to works both by road and rail. WIP.Inventory management is one of the most important managerial activities. buffer inventory. therefore lies both at works and its place of extraction. the formula is= √2AO/C Where. For valuation of inventory TATA Steel generally uses FIFO method and for ordering. Any change in one or more of them will change the EOQ of that item.
Work-in-progress is carried at lower of cost and net realizable value.12. water preserver and gas preserver for regular production. Cost of inventories is generally ascertained on the ‘weighted average’ basis. Work-inprogress and finished and semi-finished products are valued on full absorption cost basis.3>Balance sheet of TATA Steel . TATA STEEL has own electric plant. Coal. Stores and spare parts are carried at cost. Dimna lake is one of the advance point for Jamshedpur plant.2>Policies maintained by TATA STEEL for inventories • • • • • Finished and semi-finished products produced and purchased by the Company are carried at lower of cost and net realizable Value. 12. iron ore and other raw materials produced and purchased by the Company are carried at lower of cost and net realizable value. Necessary provision is made and charged to revenue in case of identified obsolete and non-moving items.
73 1033.67 9201.86 -3808.44 -3699.72 428.45 23176.7 33348.8 1071.78 30193.33 748.3 14482.69 681.92 2739.3 47075.16 31st MAR 05 553.24 2432.07 58741.73 18021.66 155.42 14096.56 4103.53 25597.16 2701.56 6106.27 14617.26 30176.77 12623.15 9645.04 -8974.67 6506.59 214.74 -6768.52 31st MAR 07 727.66 8248.99 383.71 14617.14 1382.77 31st MAR 08 6203.74 1234.73 13368.18 585.5 3002.3 2516.7 829.11 47075.19 11040.05 4578.52 10646.66 5707.73 -5453.42 1541.3 .15 957 1388.25 7059.96 9112.16 3055.63 9755.3 21097.22 42371.05 4069.65 3613.26 26946.05 1311.04 105.5 31st MAR 06 553.43 27300.26 12143.94 1107.78 471.6 58741.88 253.Rs in Crores Particulars Share capital Reserve and Surplus Total share holder's fund Loans Deferred tax liabilities Provision for employee separation Total funds employed Application of funds Fixed asset Investments Foreign currency translation diff a/c Current assets Loans and advances (-) Current liabilities and provisions Net current assets Miscellaneous expenditure Total assets 31st MAR 09 6203.08 25597.18 9865.23 202.82 12143.
4>Profit & Loss a/c of TATA Steel .12.
73 5239.01 6413.17 5387.1 -112.28 -1823.5 786.84 819.33 4687.77 308.36 -2379.16 .99 973.67 17984.96 -1733.4 -343.04 2007-08 19691.82 186.76 15394.69 17308.87 5201.5 775.8 9259.03 10813.03 242.44 10101.61 -2113.5 4222.9 11571.36 6635.15 2004-05 14498.38 8658.98 15525.27 24624.58 3506.39 254.15 9320.43 7315.95 148.74 11852.09 433.03 14646.62 118.29 -236.61 7315.61 -175.47 7066.65 1152.02 173.65 -2039.83 2006-07 17551.81 5297.5 13298.78 -204.42 5292.76 2005-06 15139.75 6261.41 618.8 19933.Rs in Crore Particulars Sales and other operating expenses Other income Total Income Expenditure Manufacturing and other expenses Depreciation (-)Expenditure transferred to capital a/c Net financial charges Total expenditure Profit before taxes and exceptional items Profit before taxes (-) Taxes Profit after tax 2010-09 24315.75 834.12 3474.
71 -0.19 2498.46 2368.81 1305.44 1291 3687.48 14423.71 -80.93 -28.28 -32.91 3429.87 -1361.27 14874.08 -1000.17 1000.61 28.7 936.94 -71.6 -1078.71 887.17 -86.23 2527.94 13300.24 .97 620.53 -0.27 358.17 18917.51 4038.3 2305.55 819.23 1454.83 4647.58 -61.68 1377.48 -73.62 12012.08 446.83 775.22 656.88 -52.29 23.42 -23.47 1078.97 1117.18 -0.49 -1 1251.82 10555.28 -64.Particulars Raw material consumed Payment and provision for employee Operation and other expenses (-)Commission (-)Provision for wealth tax Freight and handling charges Excise duty Depreciation Adjustment of WIP (+) Opening stock of WIP (-) Closing stock of WIP COST OF PRODUCTION Adjustment of finished goods (+)Opening stock of finished goods (+) Purchase of finished goods (-)Closing stock of finished goods COST OF GOODS SOLD 12.85 18989 1589.96 973.08 13673.45 2210.1 32.93 11469.62 450.52 834.28 -887.4 71.42 9516.78 9.75 -0.5>COST SHEET OF TATA STEEL 2010-09 2007-08 2006-07 2005-06 5709.32 2004.31 1351.39 Rs in crore 2004-05 1715.77 5068.95 -1074.52 3121.81 6213.92 618.8 1004.71 1074.95 1098.
Average stock of raw material Total raw material consumed x 365 . the formula is. 13. So here some ratios are given which are related to inventories and with analysis. To find this ratio.FINANACIAL ANALYSIS OF TATA STEEL RELATED TO INVENTORY Ratio analysis is the major and efficient tool for management to analyze the data.1>Raw material conversion period This ratio shows in how many day raw materials is used to manufacturing.
71 2004-05 13. Average stock of work-in-process x 365 Cost of production Where average stock of WIP = (Op.62 2368.54 655.97 As we can see in the chart that WIP converted into finished product within a day in the year 2004-05 to 2006-07.48 72.)/2 Particulars Opening stock of raw material Closing stock of raw material Average stock of raw material Total raw material consumed 2010-09 901.Where average stock of raw material = (Op.56 1433. To find out this ratio.47 2006-07 23.94 73.7 707. Because as soon as raw material is used for production the storing cost will be less.52 714.71 14423. But in recent year it is taking more than one day.93 28. stock of WIP+ Cl.94 26. then we can easily observe that.48 28.44 13300.7 445. in how many days the WIP converted into finished products.42 23.36 1715.17 71.2>WIP conversion period This ratio shows. the formula is.02 603. 13. stock of raw mat. So this chart is showing how efficiently TATA steel is reducing it’s storing cost and how fast raw material is used for production.17 2005-06 32.04 3429.+ Cl.42 23.26 1167.325 50.91 2007-08 720. It very good sign for the company.93 28. This trend is showing that the period for conversion of raw material is decreasing year by year. the raw material conversion period is too high than the year 2010-09.52 901.03 3121.09 9516.54 720.21 18917.56 811.46 2005-06 603.52 2006-07 707.14 If we look towards for the year 2004-05. Stock of WIP)/2 Particulars Opening stock of WIP Closing stock of WIP Average stock of WIP Cost of production 2010-09 2007-08 71. Stock of raw mat.76 32. If we measure this chart. .3 2004-05 287.41 5709.18 11469.
So formula for FGCP is.we can say that the efficiency level of TATA steel is reducing year by year to convert WIP to finished goods.3>Finished goods conversion period It refers to the time in which the finished goods are converted into sales or in other way we can say that the time period between production and sales when the finished goods kept in the ware house before the actual sale is made.62 1078. Stock of finished goods)/2 Particulars Opening stock of finished goods Closing stock of finished goods 2010-09 1074.08 2005-06 887.27 2006-07 1000. Average stock of finished goods x 365 Cost of goods sold Where average stock of finished goods = (Op. stock of finished goods +Cl. 13.13 887.08 1074.85 2007-08 1078.82 .27 1361.62 2004-05 622.82 1000.
24 From the table and the chart we can easily observed that.975 12012.Average stock of finished goods Cost of goods sold 1218.18 14874.28 2006-07 720.89 2005-06 707.7 4083.52 13701.54 4237.26 10047. But fortunately the recession period couldn’t hit the sales for the year 2006-07 to 2010-09.35 13673. though in the year 2005-06 the conversion period increased than the year 2004-05.39 10555.4>Raw material to current asset It indicates the percentage of raw materials in the current asset of the company. Raw material(closing) Current asset Particulars Raw material(Closing) Current asset x 100 2010-09 1433.48 2007-08 901.6 2004-05 603.31 944.22 754. It shows the efficiency of not only quality of the steel but also the efficiency of marketing department of TATA steel.23 1039.06 18989 1076.56 6636. The finished goods were converted into sales even less than only 25 days in the year 2010-09.58 . To find out this. 13.
So the formula is. Which reduce the percentage of raw material to current asset. 13. but due to huge cash in hand increase the current asset. Finished goods are such a component of the current assets which can be easily converted into cash. Finished goods(closing) Current asset Particulars x 100 2010-09 2007-08 2006-07 2005-06 2004-05 . the raw material trend is nearly same to other years. in the year 2006-07. which is less than 6%. If we observe carefully then we can see that.This chart and table can show the one unexpected downfall in the year 2006-07.5>Finished goods to current asset It indicates the percentage of finished goods in the current assets of the company.
08 13701.58 As we saw in the raw material to current assets.85 10047.89 1000. 13. inventory+ Cl. the percentage of finished goods is lesser than the other years.6>Average inventory turnover ratio It indicates the percentages of inventory with gross sales.27 6636.6 887. Due to huge amount of cash held in the year 2006-07. Inventory)/2 .22 4083.28 1078.62 4237.48 1074.Finished goods(Closing) Current asset 1361. which is same as finished goods to current assets. The formula is. But in the year 2005-06 it is near to 25%. Average inventory x 100 Gross sales Where average inventory = (Op. which is less than 15%. But the percentage is going downwards in the year 2010-09.
09 1532. except the year 2004-05.31 1937.28 2457.54 2047.22 1227.80 26843 2007-08 1827.Particulars Opening inventory Closing inventory Average inventory Gross sales 2010-09 2047.87 As we can observed that.43 22191. It shows the constant growth of sales and inventory. the trend is showing nearly constant.7>Stock turnover ratio Every firm has to maintain a certain level of inventory of finished goods so as to be able to meet the requirements of the business.34 1632.91 1732. .63 17144.54 1779.09 1827. But the level of inventory should neither be too high nor too low.57 2005-06 2004-05 1532.34 922.82 19762.8 2006-07 1732.22 15876.31 2868. The inventory level is increasing as well as the gross sales. 13.
Cost of goods sold Average stock Where average stock = (Op.8 2007-08 14874. Inventory)/2 Particulars Cost of goods sold Average stock 2010-09 18989 2457.63 As we can find out that in the year 2004-05 the ratio was very high as compare to other years.82 2005-06 2004-05 12012.24 1632. inventory+ Cl.22 1227. In the year 2005-06 it is even less than 7.8>Average age of stock This ratio shows how many days stock are kept as inventory in the company before sales.31 1779. but after that TATA steel maintained the consistency on its growth. .39 10555.The stock turnover ratio measures the number of times a company sells its inventory during the year. 13.23 1937.43 2006-07 13673. The formula for stock turnover ratio is.5.
37 2004-05 8. But in the recent year it is near to 48 day. . in the year 2005-06 it is near to 50 days. we can see that average age of stock is not more than 50 day in any of the year. TATA steel needs to reduce the day.72 2007-08 7.67 2006-07 7. through its sale with the help of marketing department.68 2005-06 7.To find out the average age of stock is. But in year 2004-05 it is near to 40 days where. 365 Stock turnover ratio Particulars Stock turnover ratio 2010-09 7.63 From the chart as given below.
9>Spare parts index It shows the index of spare parts.06 9112.05 2004-05 349. .44 11040.44 11040.24 This index is showing downwards in recent years.56 2007-08 442.05 2006-07 505.13. So TATA steel should try to reduce this index. which are used to fixed asset.5. the formula is.66 9865.66 9865. And in the year 2006-07 it is more than 4. Stores and spares parts(closing) Net block of fixed asset x 100 Particulars Stores and spares parts(closing) Net block of fixed assets 2010-09 505. But in the year 2004-05 it is less than 4. But the chart is showing very impressive that index is reducing year by year.56 2005-06 442. To find out spare parts index.
34 15139.77 19693.09 2005-06 2004-05 1732. So it shows the inefficiency for the company.31 24315. Inventories(closing) Sales/365 Particulars Inventories(Closing) Sales 2010-09 2007-08 2868.28 2006-07 1827. The formula is.10>Inventory conversion period This ratio shows in how many days inventories are converted into sales.54 17551. It is major ratio analysis for cash conversion period.28 2047.09 1523.95 From this chart we can observed that in the year 2007-08 and 2006-07. the inventory was most efficiently converted into sales.39 14498. But unfortunately it is very high in the year 2010-09.13. . Because it is the first component of the cash conversion period.
28 6768. Rest of the year maintained the consistency.48 8974.89 5453. So 2006-07 heavy cash amount saved in the year 2007-08.6 3808.72 2004-05 4083.66 2005-06 4237. .11>Current ratio This ratio is used to judge the short term solvency of a company and is worked out by dividing the aggregate Current Assets by its aggregate Current Liabilities. which is just above 1. From here we can say that company has huge liquidity but in other sense we can say that company blocked this huge amount of cash without investing. the formula is. because the recession hit the world in the year 2007-08 and company has huge amount of liquidity to face the crisis moment.05 2007-08 6636.13. Again we can see that the in the year 2007-08 the ratio is even less than 1. To find out the current ratio.78 2006-07 13701. Again it is very good sign for the company.99 In the year 2006-07 this ratio is too high due to huge amount cash held in the company.58 3699. Current asset Current liabilities Particulars Current asset Current liability 2010-09 10047.
Here also this ratio is highest than the other due to heavy amount of cash. .54 5453. Because inventory is less liquidity than other current assets.Inventories Current liabilities Particulars Current assets Inventories Current liability 2010-09 10047.34 3699. Here we can see that the current ratio of the year 2005-06 and 2010-09 was same.78 2006-07 13701.58 1523. in the year 2006-07 is highest than the others.31 6768.05 2007-08 6636.28 2047. So for the year 2007-08 liquidity is little bit better than 2005-06. But due to less inventory percentage in current assets the acid test ratio is higher than the year 2005-06.66 2005-06 4237. which shows the most liquidity.89 1827. Here we exclude the inventory from the current asset.13.12>Acid test ratio It measures the company’s most liquidity against the current liability. And it is slowly moving upwards in the year 2010-09. after facing the crisis period.72 2004-05 4083.09 3808.28 8974. Current assets. 2005-06 ratio is even less than the year 2007-08.99 As we have seen in the current ratio. The formula to find acid test ratio. So it indicates the coverage of current liabilities with quick realizable assets.48 2868.6 1732.
3 The percentage level is decreasing year by year to increase the liquidity level.16 2004-05 1523.13. The formula is.31 58741.28 2047.5 2005-06 1732.77 47075. Total Inventories(closing) Total assets Particulars Total inventory Total Assets x 100 2010-09 2007-08 2868. it is very low because of recession period to increase the liquidity percentage. But in the year 2007-08. .34 12143.52 2006-07 1827.13>Total inventories to total assets This ratio shows the percentage level of inventories in compare to total asset.09 14617.54 25597.
CHAPTER-14 RAW MATERIAL CONSUMPTION OF TATA STEEL .
Below all the details of raw material is given. Major part of raw material is taken from its own mines and some from various country i.e. Australia. Australia is major supplier of coal. TATA steel is also consuming raw material from various sources. 14. That may be steel industry or may be cement industry or any kind of manufacturing industry. Same way.1>RAW MATERIAL CONSUMPTION Tonnes Types of raw material Iron ore Coal Coke Limestone and Dolomite Ferro Manganese Zinc and Zinc Alloys Spelter. Here all the details of amount of raw material consumption. value of raw material and price per tonne of raw material are given with charts and analysis. Sulphur and Others 2010-09 2007-08 2006-07 2005-06 2004-05 9545665 751972 3315206 1949523 18895 22137 1200105 8681492 706076 3088582 1865223 16165 22325 1157095 8724458 713982 3133450 1729070 15824 19299 784802 8486755 1019483 2773807 1863757 16516 20692 798141 5986753 841649 2422875 1464970 16844 21327 487102 .Raw material is important for any kind of manufacturing industry.
03 . coke. In year 2010-09 iron ore and spelters.56 1093.6 Limestone and Dolomite 391.35 Coal 455. zinc and alloys are purchased more in the year 2007-08. All these raw material are required to produce in a systematic manner.47 134. coal.71 300.79 181.84 159.45 Ferro Manganese 62.87 102.1 834.72 316.To produce steel iron ore.36 513. sulphurs. Total cost of raw material 2010-09 2007-08 Types of raw material Iron ore 504.76 50.84 273. sulpphur are required mostly.3 529.99 48.48 71.63 362.91 1510.52 Zinc and Zinc Alloys 210. coke and ferro manganese are purchased more than the others.32 206. ferro manganese. Whereas. In the last year due to heavy production.65 217.03 345.48 Others *Pie charts are showing the percentage of expenses 2006-07 2005-06 Rs in Crore 2004-05 368. Sulphur and 877.78 92.3 Spelter.52 445. raw material consumption is more than others.85 Coke 3695 1873.89 318.94 327 557. zinc alloys and spelters.53 226.29 287.
From the above chart we can see that the expenses percentage on coke is reducing year by year. Whereas. limestone and dolomite expenses percentage is increasing. Price per Tonnes Types of raw material 2010-09 2007-08 2006-07 2005-06 2004-05 .
65 4575.5 154669.61 169438.53 6055.22 43497.83 7108.63 1094.18 .01 11145.45 4821.14 4032.3 3942.55 7423.28 3444.57 6066.21 1707.87 1487.33 303.2 60834.61 2010.2 512.86 94877.21 75966.27 1831.3 30015.71 63126.3 2222.18 33336.97 32191.99 1612.03 322.35 7310.94 422. Sulphur and Others *values are in rupees 528.Iron ore Coal Coke Limestone and Dolomite Ferro Manganese Zinc and Zinc Alloys Spelter.94 6437.98 2929.
importing raw material is increasing year by year. Even in the year 2010-09 more than two times than the last year.In the year 2006-07 the entire material rate is hiked.2 5 1226.7 5 1542. 14. coke is prepared.3>Comparison of various segment related to inventory . From coal. But the ferro manganese price per tonne is showing downwards.8 2 878.2>Raw material imported 2010-09 2007-08 2006-07 2005-06 Rs in crore 2004-05 4146. The entire raw material price is increasing except ferro manganese and zinc and alloys. But coal is near to half price than coke.7 9 1592.12 Here we can observe that. Iron ore is cheapest raw material for TATA STEEL. It is becoming cheaper year by year. 14.
39 3506.9 7 15506 2045. Geographically Revenue generated by geographical market Regio n India 2010-09 2007-08 200607 2005-06 2004-05 20914.0 2 17491.13 Other 3401.77 5201.71 18989 10047.3 5 1979. but compare to sales and profit after tax is very high.6 1732.95 3474.89 1827.4>Revenue generated by TATA Steel.75 2201.077% 18.28 4687. Cost of production and cost of goods sold is compare to same with each other.799% 10.46 13300.34 14498. 14.16 CGPA 35.28 24315. This CGPA shows compounded growth or average growth.48 2868.47 14874.17 13673.91 18917. For this calculation we have taken the last 5 year data of each segment. So here we can observed that as raw material consumption price increasing more than 35%.28 2047.618% Here we have calculated the CGPA (compounded growth per annum).58 1523.0 9 13160.Comparing details Total raw material consumed Cost of production Cost of goods sold Current asset Inventories(Closing) Sales Profit after tax 2010-09 5709.243% 17.24 4083.39 4237.739% 15.38 2004-05 1715.31 13701.74 2007-08 3429.09 4222.09 15139.23 6636.14 9516.71 12012.140% 13.97 10555.31 s *The rupee values are in crore .04 12187.52 14423.8 2 2311.3 11469.15 2005-06 2368.03 2006-07 3121.54 17551.31 19693.813% 25.
It is a very good sign for TATA STEEL. CHAPTER-15 . I personally prey that this should increase year after year. Here we can see in a regular basis the revenue in other country is increasing year by year. It shows not only the improvement of TATA STEEL’s sales but also it is showing how Indian people per capita consumption on steel is increasing. Here we can see that revenue in Indian market.TATA STEEL is one of the biggest importers but this company is big seller in international market. Even in the year 2010-09 it crossed Rs 3000cr. It crossed more than Rs 20000cr.
amalgamating and growing..P. the Jindal Organization is a celebrity. Haryana to the present multi-billion.. New directions. set up in 1970 by the steel visionary Mr.COMPARISON WITH OTHER COMPANIES Here I am doing comparison with three other major players in this sector. the Group today is a US $10 Billion conglomerate. JINDAL STEEL In the world of business. Jindal Organization. As per me. new objectives. multi-locational and multiproduct steel conglomerate. we should understand about that company in brief. Ranked sixth amongst the top Indian Business Houses in terms of assets. has grown from an indigenous single-unit steel plant in Hisar. The organization is still expanding. they are • JINDAL STEEL • ESSAR STEEL • SAIL So first of all. Jindal. O. integrating. but the Jindal motto remains the .
Yet. competitive price and excellent after sales service.same. The group has been technology-driven and has a broad product portfolio. Jindal Organization aims to be a global player. efficient delivery schedules. the focus at Jindal has always been steel. it is committed to maintain world-class quality standards."We are the Future of Steel ". From mining of iron-ore to the manufacturing of value added steel products. with its overseas manufacturing facilities and strategic manufacturing and marketing alliances with other world leaders. Jindal has a pre-eminent position in the flat steel segment in India and is on its way to be a major global player. . In pursuance of its objectives.
929.745.47 5.40 5.243.33 2.3 2.00 5.362.918.4 15.004.4 2.01 2.28 937.036.27 430.27 3.079.392.159.82 3.48 1.57 2.490.51 336.595.11 4.05 0.09 3.233.66 1.302.377.146.31 1.08 1.02 10.75 4.85 2.590. In crore Particulars 31st MAR 09 31st MAR 08 31st MAR 07 31st MAR 06 31st MAR 05 Sources of funds Owner's fund Equity share capital Preference share capital Reserves & surplus 15.11 6.98 1.619.700.801.96 7.189.72 1.48 1.74 4.28 361.857.01 1.481.33 2.299.24 Loan funds Secured loans Unsecured loans Total Uses of funds Fixed assets Gross block Less : accumulated depreciation Net block Capital work-in-progress Investments 7. loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total 5.08 15.617.19 4.077.6 4.03 781.90 1.45 15.98 22.214.171.124.94 1.115.67 266.815.45 1.7 33.399.39 206.619.530.780.24 .49 2.77 964.90 2.4 1 1.84 709.62 1.97 3.829.783.64 1.183.97 3.24 6.740.05 542.147.3126.96.36.1995.Financial data of Jindal steel Balance sheet Rs.76 2.50 1.38 Net current assets Current assets.036.61 1.115.45 312.30 769.735.4 1.318.83 660.28 4.590.73 15.39 2.64 3.16 10.35 2.53 345.14 7.73 1.004.
91 576.96 90.02 10.03 3.13 50.419.27 1.584.2 514.068.166.8 1 26.57 -11.072.9 6 3.19 6.4 8 4.46 327.2 0 465.6 0 46.2 2.02 1.4 2 265.7 5 2.11 7.47 0.Profit and loss account Particulars 2010-09 2007-08 2006-07 2005-06 2004-05 Income Operating income 7.637.3 2 267.46 1.27 935.2 2 243.34 935.99 2.2 264.08 -12.19 336.9 5 5.33 1.0 8 1.2 3 2.4 1.49 92.78 10.55 1.85 171.532.670.005.18 148.8 3 3.9 7 3.0 8 .057.032.2 7 1.87 72.565.7 7 46.445.47 167.02 219.43 8.8 7 -144.48 572.34 1.48 1.44 79.87 132.368.76 337.78 1.51 152.8 0 -144.476.253.837.55 3.136.96 241.8 1 36.5 4 62.87 2.4 0 670.2 3 1.9 1 57.1 0 528.536.49 5.239.337.94 1.5 0 510.33 4.0 5 55.18 158.8 6 199.7 1.73 277.136.353.14 276.8 3 108.4 6 916.0 4 2.27 731.16 1.15 19.6 0 Expenses Material consumed Manufacturing expenses Personnel expenses Selling expenses Adminstrative expenses Cost of sales Operating profit Other recurring income Adjusted PBDIT Financial expenses Depreciation Other write offs Adjusted PBT Tax charges Adjusted PAT Non recurring items Other non cash adjustments Reported net profit Earnigs before appropriation Equity dividend Dividend tax Profit carried to balance sheet 536.48 -3.46 2.08 1.46 -12 8.236.071.74 222.37 154.85 694.42 1.1 702.113.84 181.677.9 7 2.11 532.2 8 85.19 6.498.039.058.727.71 545.17 0.658.1 4 1.392.409.02 451.523.03 0.2 2.31 690.9 515.528.295.89 433.4 2 773.51 0.31 2.48 0.8 9 173.
Gujarat. The complex's sophisticated infrastructure includes independent water supply and power. oxygen and lime plants. Hazira facility Our steel complex at Hazira. Seamless integration A major strategic advantage is our high level of forward and backward integration.from raw material to finished products. providing vital raw material for the steel plant at Hazira. a township and a captive port capable of handling up to 8 MTPA of cargo with modern handling equipment like barges and floating cranes.0 MTPA sponge iron plant. which ensures the highest quality iron ore. and Maruti Suzuki. cost and real time inventory management.ESSAR STEEL Essar Steel is one of India's largest exporters of flat products. . houses a 5. including Caterpillar. the Konkan Railway. This plant is fed with inputs from four electric arc furnaces and three casters. Bailadilla facility: Iron ore beneficiation At Bailadilla. A number of major client companies have approved our steel for their use. Hyundai. Essar Steel has acquired extensive quality accreditations. We are totally integrated . which has a capacity of 8 MTPA. and to the growing markets of South East Asia and the Middle East. Visakhapatnam facility: Pelletization The slurry is received at our pellet plant at Visakhapatnam. Our lean team gives us one of the highest productivities and lowest manpower costs among steel plants internationally. the first and largest of India's new generation steel mills. yielding advantages in quality.6 MTPA hot rolled coil (HRC) plant. The plant provides raw materials for our state-of-the-art 4. adding value at every stage of the manufacturing process. the world's largest gas-based sponge iron plant in single location. where some of the world's richest and finest ore is available. we have set up a beneficiation plant of 8 MTPA capacity. The iron ore slurry is pumped through a 267 km pipeline (the second longest in the world) to the pellet plant. Swaraj Mazda. exporting to the highly demanding US and European markets.
97 10.87 4.61 791.47 10.664.928.28 1.761.6 3.62 993.554.95 581.35 12.414.12 1.53 6.48 43.383.46 12.48 43.049.126.887.22 1.691.080.43 2.36 182.447.248.75 4.83 589.01 12.6 3.59 1.19 5.34 3.12 515.465.19 4.03 9.747.24 0.246.42 4.91 5.889.689.11 733.64 768.580.45 2.355.85 6.27 6.25 1.78 2.27 686.940.89 575.317.31 5.13 4.77 12.367.54 Loan funds Secured loans Unsecured loans Total 6.037.140.32 409.74 383.140.27 1.75 5.13 3.829.885.568.533.98 530.447.19 7.20 650.78 433.18 507.592.32 684.411.52 3.98 9.229.398.17 2.140.38 Uses of funds Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments 15.535. loans & advances Less : current liabilities & provisions Total net current assets Total 5.22 14.82 5188.8.131.52 6.535.60 8.07 3.445.91 6.48 246.204.38 .Financial data Balance sheet Particulars Sources of funds Owner's fund Equity share capital Preference share capital Reserves & surplus 31st MAR 09 31st MAR 08 31st MAR 07 31st MAR 06 31st MAR 05 1.66 4.39 11.09 6.688.273.43 13.554.049.612.68 10.38 Net current assets Current assets.747.049.037.661.27 980.92 11.128.411.80 1.23 3.
54 781.087.09 215.07 291.78 436.717.02 2.02 -14.25 2.55 6.56 1.098.50 890.49 530.950.63 4.505.65 1.108.03 -88.2 1.39 110.04 1.35 410.01 772.918.587.48 2.9 1.07 -707.062.10 1.72 430.04 440.8 152.18 -874.75 76.48 985.3 5 8.722.70 2.32 837.18 -874.11 947.03 1.673.10 10.5 1.80 233.5 151.637.83 38.57 2.Profit and loss account Particulars 2010-09 2007-08 2006-07 2005-06 2004-05 Income Operating income 11.14 185.72 225.94 611.19 165.52 631.75 445.19 1.149.77 172.49 530.29 745.16 39.874.80 2.39 Expenses Material consumed Manufacturing expenses Personnel expenses Selling expenses Administrative expenses Cost of sales Operating profit Other recurring income Adjusted PBDIT Financial expenses Depreciation Adjusted PBT Tax charges Adjusted PAT Nonrecurring items Other non cash adjustments Reported net profit Earnings before appropriation Preference dividend Dividend tax Profit carried to balance sheet 4.204.859.78 .48 6.09 362.18 599.95 2.859.01 55.96 1.533.69 171.4 0 3.721.13 861.01 570.65 124.17 4.56 2.24 317.98 9.66 6.949.402.15 59.02 1.75 2.168.29 4.07 248.13 234.49 436.9 244.94 204.04 482.59 1.085.360.512.401.31 -184.1 394.983.8 99.12 337.78 11.249.13 8.73 269.42 658.48 766.73 383.861.495.64 265.32 436.64 84.002.63 828.426.95 2.763.49 530.14 41.005.36 2.67 3.98 -16.
CMO’s domestic marketing effort is supplemented by its ever widening network of rural dealers who meet the demands of the smallest . railway products. 25 Departmental Warehouses. including the Company's iron ore. automotive and defense industries and for sale in export markets. stainless steel and other alloy steels. producing both basic and special steels for domestic construction. and dolomite which are inputs for steel making. It is a fully integrated iron and steel maker. This gives SAIL a competitive edge in terms of captive availability of iron ore. SAIL manufactures and sells a broad range of steel products. electrical sheets. located principally in the eastern and central regions of India and situated close to domestic sources of raw materials. bars and rods. galvanised sheets. engineering. SAIL's wide range of long and flat steel products are much in demand in the domestic as well as the international market. including hot and cold rolled sheets and coils. Ranked amongst the top ten public sector companies in India in terms of turnover. limestone.STEEL AUTHORITY OF INDIA Steel Authority of India Limited (SAIL) is the leading steel-making company in India. 42 Consignment Agents and 27 Customer Contact Offices. railway. structural. SAIL produces iron and steel at five integrated plants and three special steel plants. This vital responsibility is carried out by SAIL's own Central Marketing Organisation (CMO) that transacts business through its network of 37 Branch Sales Offices spread across the four regions. plates. limestone and dolomite mines. The company has the distinction of being India’s second largest producer of iron ore and of having the country’s second largest mines network. power.
40 13. SAIL has its own in-house Centre for Engineering and Technology (CET).065.853.176. SAIL's International Trade Division ( ITD).119. SAIL's Consultancy Division (SAILCON) at New Delhi offers services and consultancy to clients world-wide.17 925.03 4.40 6.an ISO 9001:2000 accredited unit of CMO.48 15. Almost all our plants and major units are ISO Certified.130.69 20.93 26.471.60 6. With the total number of dealers over 2000 .40 23.16 3.31 2.67 4. Management Training Institute (MTI) and Safety Organization at Ranchi.603.81 16.46 17.86 30.customers in the remotest corners of the country.198.522.130.46 16.130.922.043.360.912.44 Loan funds Secured loans Unsecured loans Total Uses of funds Fixed assets Gross block Less : accumulated depreciation 32.00 29.624. Financial data Balance sheet Particulars Sources of funds Owner's fund Equity share capital Reserves & surplus 31st MAR 09 31st MAR 08 31st MAR 07 31st MAR 06 31 st MAR 05 4.75 1.728.108.351. in New Delhi.73 19. Our captive mines are under the control of the Raw Materials Division in Kolkata.459.182. undertakes exports of Mild Steel products and Pig Iron from SAIL’s five integrated steel plants.89 4.076.558.01 1.71 18.70 1.40 18. With technical and managerial expertise and know-how in steel making gained over four decades.98 4.899.175.40 8.933.13 21.5184.108.40.206 29. SAIL's wide marketing spread ensures availability of quality steel in virtually all the districts of the country.473.315.39 2. SAIL has a well-equipped Research and Development Centre for Iron and Steel (RDCIS) at Ranchi which helps to produce quality steel and develop new technologies for the steel industry.130.81 4.493. Besides. The Environment Management Division and Growth Division of SAIL operate from their headquarters in Kolkata.19 35.32 28.25 1.130.41 .
29 -1.471.37 13.4 8 13.539.087.493.279.200.597.67 12. loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total Profit and loss account Particulars 2010-09 2007-08 2006-07 2005-06 2004-05 Income Operating income 43.806.98 129.793.489.3 3 253.1 3 2.224.447.76 28.155.73 935.24 652.94 292 18.930.066.7 7 15.035.811.05 21.4 7 332.609.7 1 6.691.90 1.165.427.71 18.07 366.44 -1.45 4.03 12.108.354.27 59.25 294.01 15.645.71 15.08 24.12 2.78 -1.958.3 7 676.317.67 -921.321.016.684.485.75 13.81 11.80 15.656.999.69 12.2 27.8 3 250.83 6.899.76 1.04 513.13 215.6 7 16.323.13 28.554.55 11.389.544.31 2.73 1.67 3.55 538.317.75 971.71 1.798.401.963.5 3 11.788.673.309.99 -1.9 3 10.05 Expenses Material consumed Manufacturing expenses Personnel expenses Selling expenses Administrative expenses Expenses capitalized Cost of sales Operating profit Other recurring income Adjusted PBDIT Financial expenses .82 16.68 1.9 2 605.14 757.267.7 220.127.116.118.84 19.40 34.644.821.48 606.2 3 2.89 11.521.3 7.74 7.236.77 8.5 8 3.79 21.268.93 16.97 1.925.72 16.644.857.77 8.11 3.423.22 28.941.28 1.762.96 10.903.1 4 8.51 1.042.2 6 9.108.78 780.571.714.12 1.89 11.143.666.3 0 11.076.919.162.Net block Capital work-in-progress Investments 12.12 35.064.057.48 26.156.522.77 892.3 3 2.15 21.94 34.44 2.07 467.550.5 8 22.44 Net current assets Current assets.352.24 39.43 5.328.832.1 4 1.3 9 3.74 11.
66 6.59 9.97 6.249.6 3 1.12 4.1> Here for comparison the best method is the comparison is ratio analysis of these company and TATA Steel ltd.3 1.4 5 5.49 11.073.97 7.48 75.66 -14.03 185. Ratio analysis Raw material to current asset Finished goods to current asset Stock .244.408.9 64.26 20.08 115.80 6.27 3.536.66 1.67 -277.98 11.12 181.694.35 174.12 128.561.4 7 1.284.78 18.02 9.253.861.5 1.348. 83 33 .2 1.57 6.30 181. T A T A 14 .79 12.554.528.03 2. 72 12 .656.073.75 60.47 53.816.270.27 161.187.26 6.285.47 826.4 3 1.21 45.327.2 8 5.37 6.363.89 9.25 258.44 5.24 5.280.235.91 16.211.95 3.934.174. JI N D A L 17 .126.64 71.0 2 7.4 15.65 7.95 184.590.2 6 13 .207.81 22.Depreciation Other write offs Adjusted PBT Tax charges Adjusted PAT Nonrecurring items Other non cash adjustments Reported net profit Earnings before appropriation Equity dividend Dividend tax Profit carried to balance sheet 1.896.3 17 .3 1. ES S S AI A L R 5.86 6.012.310.797. 8.36 3.61 7.592.42 197.886.9 2 3.839.28 6.57 1.90 181.48 128.291.919.5 5 7.052.
6 67.1 08 71.46% 43150.85 85. If we compare for TATA STEEL with other companies. all the necessary charts are given below.95 48 66.61 2.79 5% 24315.61 0.25 4.12 0. So.34 9. then we can see that TATA STEEL’s raw material to current asset is neither too high nor too low.01 1.38 1.74 77 46.498.89 17. It is maintaining a required amount of raw material in hand.797.93% 14001.42 27.08 20.44% 11688.28 39 1.turnover ratio Average age of stock Inventory conversion period Current ratio Acid test ratio Total inventories to total asset Sales Profit after tax 72 47.97 53. Where ESSAR STEEL is maintaining very low amount of raw material in hand.49 0.68 0. .3 1859.77 5201.3 It will easy to understand when it will put into chart.
Here we can see that SAIL is playing a defensive role in case of finished goods. . TATA STEEL never tried to block its capital. But still TATA steel has limited finished goods to sell. In this case TATA STEEL is far ahead than ESSAR STEEL and SAIL. Both TATA STEEL and JINDAL STEEL have the good stock turnover ratio.
So from here we can conclude TATA STEEL is the fastest converter company for Inventory.As the stock turnover ratio is too high. so the average age of stock is less than 50 days. . Even SAIL age of stock is more than 70 days. Inventory conversion period is lowest than other company for TATA STEEL. Where SAIL and ESSAR age of stock is too high.
. Where SAIL is blocking its working capital there TATA STEEL is keeping appropriate coverage for current liability.Current ratio of TATA STEEL is in standard position. Where JINDAL steel’s current ratio is less than 1 and SAIL’s current ratio is more than 2.
From this chart it is clearly shown that SAIL is always maintaining a defensive position. where SAIL maintained huge amount of highly liquid money. TATA STEEL has less inventories percentage to total asset than other companies. This company never tried to block its current money.TATA STEEL maintained exact amount of highly liquid money in hand. It is a good sign for TATA STEEL. . So in this case TATA STEEL is good enough to maintain the highly liquid money.
the percentage of profit against sale is high for JINDAL Steel than TATA STEEL. These are as follows: My observations: • • • • • • • TATA STEEL is maintaining three major types of inventories i. TATA STEEL is maintaining an appropriate amount of liquidity to cover its current liability while we see its current ratio and acid test ratio. TATA STEEL is managing its inventory very cleverly. TATA STEEL’s inventory conversation period is too efficient than its competitors. raw material consumption etc. I also learned about inventory management in TATA STEEL. I am happy to work here for last two months. TATA STEEL has prepared high quality inventory storing house to minimize the cost relating to it. which is lesser than other competitors. As per my concern. . that the sale is higher than JINDAL steel and ESSAR Steel. It shows its aggressiveness. During this period I found some good points and some which I think will help in improving the performance of the company. But the sale price of TATA STEEL is less than JINDAL Steel. work-inprocess and finished goods. It never tried to block its money unnecessarily. It is keeping only 5% of its total asset. CHAPTER-16 Conclusion During my project. But still TATA STEEL is in second position. I personally learned a lot of things i.e. how TATA STEEL is working in case production. It shows efficiency level of TATA STEEL.Here it is clear that SAIL’s sale and profit is higher than other companies. It gave me nice experience as well as a value addition to my carrier. So. It is very less than the others. The raw material inventory of SAIL is very low in percentage in comparison to TATA STEEL. Cost of inventories is valued under ‘weighted average method’. raw material. As SAIL is Government undertaking organization.e. it is getting lot of subsidiaries and also other facilities from Government. But if we see TATA STEEL and JINDAL steel.
My suggestion: • • • • • • • • • For better inventory control TATA STEEL must apply VED analysis or ABC analysis.• • • • • • The Compounded Annual Growth Per Annum of the value of raw material consumed is more than 35% but sales value is not increasing that much. Where finished goods conversion period and raw material conversion period is decreasing. Raw material conversion period is decreasing year by year. Expenses on coke are increasing year by year. . Try to generate more revenue from other country. TATA STEEL should try for acquisition of more mines in India to reduce the raw material outsourcing or import cost. Where percentage of expenses on ferro manganese is decreasing. E=Essential. TATA STEEL should try to minimize its inventory conversion period and also try to minimize the average age of stock to reduce the cost of inventories. But it is far efficient than the others. D=Desirable. Where in rest of the year TATA STEEL was using own mines for raw material. Because cost of goods sold CGPA is still less than 3% than Cost of production CGPA. Cost of production and Cost of goods sold CGPA should tally. * ABC Analysis: It is a part of inventory management in which. Try to make same CGPA of closing stock of inventory and profit after tax. It shows its efficiency level. Inside the plant one quotation is there ‘work must but safety first’. there work in process conversion period is increasing. As sale price per unit is lesser than the competitors it must keep trend increasing mode of sales to reduce the blockage of its price in its inventory. TATA STEEL must keep eye on its WIP conversion period. It should be obeyed by all the employees at least who are working in production and inventory maintenance departments. Because PAT CGPA is still 5% less than Inventory CGPA. lower value occupying more space and others. It is the one of the major part of inventory management. All the raw material price is increasing except ferro manganese and zinc alloys. Inventories should divide according to their importance. *VED Analysis: V=Vital. Import of raw material is the maximum in the year 2010-09. the items included in the inventory are classified into different categories as items of higher value occupying lesser space.
2007-08.jindalsteel.com www.com www.in www. 2010-09. 2006-07.co.in www.sail.com www.Bibliography Books • • Financial management by Prasanna Chandra Fundamental Financial management by Bringham & Houston Websites • • • • • • • www.com Other references • Annual report of TATA STEEL for the year 2004-05. .steel.economywatch.wikipedia. 2005-06.nic.essarsteel.tatasteel.com www.
ESSAR steel for the year 2010-09. JINDAL. ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ .• Annual report of SAIL.