PROJECT ON

A COMPARATIVE STUDY OF WORKING CAPITAL MANAGEMENT OF

TATA STEEL LTD

A Project Submitted to

University of Mumbai for partial completion of degree of Master in Commerce

Under the Faculty of Commerce

BY

Miss. HARSH RAVINDRA PATIL

Under the Guidance of

Prof. Arushi Dube

MAHATMA EDUCATION SOCIETY’S

Pillai HOC College of Arts, Science and Commerce

Rasayani, 410207

2022-2023

1
 PROJECT ON
A COMPARATIVE STUDY OF WORKING CAPITAL MANAGEMENT OF
TATA STEEL LTD.

A Project Submitted to

University of Mumbai for partial completion of degree of Master in Commerce

Under the Faculty of Commerce

BY

Miss. HARSH RAVINDRA PATIL

Under the Guidance of

Prof. Arushi Dube

MAHATMA EDUCATION SOCIETY’S

Pillai HOC College of Arts, Science and Commerce

Rasayani, 410207

2022-2023

2
 CERTIFICATE

This is to certify that Miss. HARSH RAVINDRA PATIL has worked and duly
completed her/his Project Work for the degree of Master in Commerce under the Faculty
of Commerce in the subject of MCOM (Advanced Accountancy) and her/his project is
entitled, “A COMPERATIVE STUDY OF WORKING CAPITAL MANAGEMENT
OF TATA STEEL LTD” under my supervision. I further certify that the entire work has
been done by the learner under my guidance and that no part of it has been submitted
previously for any Degree or Diploma of any University.

It is her/ his own work and facts reported by her/his personal findings and investigations.

Name and Signature of

Seal of
the Guiding teacher
college

Date of submission:

3
 DECLARATION BY LEARNER

I, the undersigned Miss. HARSH RAVINDRA PATIL here by, declare that the work
embodied in this project work titled “A COMPERATIVE STUDY OF WORKING
CAPITAL MANAGEMENT OF TATA STEEL LTD” forms my own contribution to the
researchwork carried out under the guidance of Prof. ARUSHI DUBE is a result of my own
research work and has not been previously submitted to any other University for any other
Degree/ Diploma to this or any other University.

Wherever reference has been made to previous works of others, it has been clearly indicated
as such and included in the bibliography.

I, here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

Name and Signature of the learner

Certified by
Name and Signature of Guiding Teacher

Arushi Dube

4
 ACKNOWLEDGMENT

I would like to acknowledge the following as being idealistic channels and fresh dimensions
in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do this
project.

I would like to thank my Principal, Dr. LATA MENON for providing the necessary
facilities required for completion of this project.

I take this opportunity to thank our Coordinator Prof. ARUSHI DUBE for her moral
support and guidance.

I would also like to express my sincere gratitude towards my project guide PROF whose
guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference books and
magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in
the completion of the project especially my Parents and Peers who supported me
throughout my project.

5
 INDEX

Chapter Title of the Chapter Page No.

No.
Chapter 1 Introduction 8-21
1.1 Selection and relevance of the problem 22
1.2 History 23-28
1.3 Company profile 29-36
1.4 Definition of related aspects 37
1.5 Characteristics of study 38

Chapter 2 Research Methodology 39

2.1 Objectives 40
2.2 Hypothesis 41
2.3 Scope of the study 42-43
2.4 Significance of the study 44
2.5 Selection of the problem 45
2.6 Data collection 46
2.7 Techniques and tools to be used 47
Chapter 3 Literature Review 48-53

Chapter 4 Data Analysis, Interpretation and Presentation 54-72

Chapter 5 Suggestions, conclusions and limitations 73

5.1 Suggestions 74-75
5.2 Conclusions 76-77
5.3 Limitations 78
References 79-80
Bibliography 81
Appendix 82

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 ABSTRACT

Efficient management of Working Capital is very important for the success of an

enterprise. In present time greater importance is given to Working Capital. So, here an
attempt is made by me to study the working capital management of the selected unit i.e.,
TATA STEEL LTD. From the financial management point of view, capital in broader
sense can be divided into two main categories- fixed capital and working capital. Here I
am going to study the concept of working capital. After this study the research finds that
the working capital position of the Tata Steel Ltd. is not satisfactory.

Keywords: Tata Steel Ltd., Working Capital Management, Current Assets.

7
 CHAPTER 1: INTRODUCTION

Working capital means the part of the total assets of the business that change from
one form to another form in ordinary course of business operations.

Concept of Working Capital:

The word working capital is made of two words.

1. Working
2. Capital

The word working means day to day operation of the business, whereas the word
capital monetary value of all assets of the business.

Working capital:

Working capital may be regarded as the life blood of business. Working capital is
of major importance to internal and external analysis because of its close relationship with
the current day to day operations of a business. Every business need funds for two
purposes.

 Long term funds are required to create production facilities through purchase of
fixed assets such as plants machineries, lands, buildings & etc.
 Short term funds are required for the purchase of raw materials, payments of
wages and other day to day expenses. It is otherwise known as revolving or
circulating capital it is nothing but the difference between current assets and
current liabilities. i.e.

Working capital = Current Assets – Current Liabilities

8
 Business use capital for construction, renovation, furniture, software, equipment
or machinery. It is also commonly used to purchase inventory, or to make payroll. Capital
is also used often by business to put a down payment down on a piece of commercial real
estate. Working capital is essential for any business to succeed. It is becoming increasingly
important to have access to more working capital when we need it.

Concept of Working capital

Gross working capital = Total of Current Asset

Net working capital =Excess of Current Asset over current liability

Current Assets Current Liabilities

 Cash in hand/ at bank  Bills payable
 Bills receivable  Sundry creditors
 Sundry Debtors  Outstanding expenses
 Short term loans  Accrued expenses
 Inventory/ Stock  Bank over draft
 Temporary investment
 Prepaid expenses
 Accrued incomes

Cash and cash equivalents: All of the money the company has on hand. This includes
foreign currency and certain types of investments such as money market accounts with
very low risk and very low investment term periods.

Inventory: All of the unsold goods being stored. This includes raw materials purchased
to manufacture, partially assembled inventory that is in process, and finished goods that
have not yet been sold.

9
Accounts Receivable: All of the claims to cash for inventory items sold on credit. This
should be included net of any allowance for doubtful payments.

Notes Receivable: All of the claims to cash for other agreements, often agreed to
through a physically signed agreement.

Prepaid Expenses: All of the value for expenses paid in advance. Though it may be
difficult to liquidate these in the event of needing cash, they still carry short-term value
and are included.

Others: Any other short-term asset. An example is some companies may recognize a
short-term deferred tax asset that reduces a future liability.

10
Concept of Working Capital Analysis

From the financial management point of view, capital in broader sense can be
divided into two main categories- fixed capital and working capital. Here I am going to
study the concept of working capital. The term working capital generally is used in two
senses – ‘Gross working capital’ which denotes total current asset and ‘Net working
Capital’ which denotes the excess of current assets over current liabilities. Both the
concepts have their own significance and relevance. In common parlance, working
capital is that part of capital, which is in working or which is used to meet day-to-day
expenses. To understand the exact meaning of the term ‘Working Capital’, it will be
appropriate to understand its two components – current assets and current liabilities.
The current assets are those assets, which can be converted into cash within a short
period of time, say not more than one year during the operating cycle of business or
without affecting normal business operations. Current liabilities are such liabilities as
are to be paid within the normal business cycle a within the course of an accounting
year out of current assets.

Gross working Capital Concept

According to the gross concept, working capital means total of all the current
assets of a business. It is also called gross working capital.

Gross working Capital = Total Current Assets

11
Net Working Capital Concepts

The concepts of Net Working Capital refer to the excess of current assets over
current liabilities. It indicates the surplus value of current assets. Since, all the current
liabilities are met out of current assets and after meeting the current liabilities what
remains in the enterprise is called net working capital. Net working capital will exist only
in that case when long-term funds, to some extent, are invested in current assets and
comparatively less amount of short-term funds are involved in current assets.

Net working capital formula

Net working capital (NWC) is almost always used interchangeably with working
capital. However, some analysts define NWC more narrowly to provide a more
comprehensive picture of a company's health. In this case, the formula excludes cash assets
and debt liabilities:

Net working capital = current assets (minus cash) - current liabilities (minus debt)

Some define it even more narrowly, excluding most types of assets, to give the
most comprehensive picture:

Net working capital = accounts receivable + inventory - accounts payable

12
Components of Working Capital

The working capital consists of two components current assets and current
liabilities. Assets of a concern are of two types- Fixed assets and current assets: Fixed
assets are to be in business on permanent basis and are not intended for sale whereas the
current assets are for conversion into cash at the earliest. Similar is the case with liabilities,
which may be long-term liabilities and current liabilities. Long-term liabilities are those
maturing over a long period of time usually five or ten years whereas short-term liabilities
are those maturing within a short period usually less than a year.

What is a good working capital ratio?

A higher ratio means there’s more cash-on-hand, which is generally a good thing.
A lower ratio means cash is tighter, so a slowdown in sales could cause a cash flow issue.

Generally speaking, a ratio of less than 1 can indicate future liquidity problems,
while a ratio between 1.2 and 2 is considered ideal. If the ratio is too high (i.e., over 2), it
could signal that the company is hoarding too much cash, when it could be investing it
back into the business to fuel growth.

How to calculate your working capital requirement?

Many businesses incur expenses before receiving money back from sales. This time
delay between when your business pays money out (e.g., to suppliers) and when it receives
money back (e.g., from sales) is known as the working capital or operating cycle. The
working capital requirement of your business is the money you need to cover this time
delay.

The working capital cycle formula is:

Inventory days + receivable days - payable days = working capital cycle in days

13
Operating cycle:

Working capital is the life blood of any business, without which the fixed assets
are inoperative. Working capital circulates in the business, and the current assets change
from one form to the other. Cash is used for procurement of raw materials and stores
items and for payment of operating expenses, then converted into work-in-progress, then
to finished goods.
When the finished goods are sold on credit terms receivables balances will be
formed. When the receivables are collected, it is again converted into cash. The need for
working capital arises because of time gap between production of goods and their actual
realization after sales. This time gap is called technically called as ‘operating cycle’ or
‘working capital cycle’.

RAW MATERIAL

CASH WIP

DEBRORS FINISHED
& RECEVIANLE GOODS

SALES

14
 The operating cycle of a company consists of time period between the
procurement of inventory and the collection of cash from receivables. The operating cycle
is the length of time between the company’s outlay on raw materials, wages and other
expenses and inflow of cash from sale of goods. Operating cycle is an important concept in
management of cash and management of working capital.

The operating cycle reveals the time that elapses between outlay of cash and
inflow of cash. Quicker the operating cycle less amount of investment in working capital is
needed and it improves the profitability. The duration of the operating cycle depends on
the nature of industry and the efficiency in working capital management.

15
Significance of working capital:

Factors requiring consideration while estimating working capital.

PAYMENT
OF
SUPPLIER

DIVIDEND
EASY LOAN
FROM BANK DISTRIBUT
ION
SIGNIFICAN
CE OF
WORKING
CAPITAL
INCREASE
INCREASE
DEBT
EIFFICIANCY
CAPACITY

INCREASE IN
FIXED
ASSETS

Factors requiring consideration while estimating working capital:

 The average credit period expected to be allowed by suppliers.

 Total cost incurred on material and wages.

 The length of time for which raw material are to remain in store before they
are issued for.

 The length of production cycle or work in process.

 The length sales cycle during which finished goods are to be kept waiting for
sale.

 The average period of credit allowed to customers.

The amount of cash required to make advance payment.

16
Importance of working capital ratios:

Ratio analysis can be used by financial executive to check upon efficiency with which
working capital is being used in the enterprise. The following are the important ratio to
measure the efficiency of working capital

Ratio Formula Result Interpretation

Stock Average stock x =x Average inventory is typically used to even out
turnover 365/Cost of days spikes and dips from outlier changes
ratio goods sold represented in one segment of time, such as a
day or month. Average inventory thus renders a
more stable and reliable measure.

Receivables Debtors x =x The accounts receivables turnover ratio

ratio 365/sales days measures the number of times a company
collects its average accounts receivable
balance. It is a quantification of a company's
effectiveness in collecting outstanding balances
from clients and managing its line of credit
process.
Payables Creditors x =x The accounts payable turnover ratio measures
ratio 365/cost of sale days how quickly a business makes payments to
creditors and suppliers that extend lines of
credit. Accounting professionals quantify the
ratio by calculating the average number of times
the company pays its AP balances during a
specified time period
Current ratio Total current =x The current ratio is a liquidity ratio that
assets / Total days measures a company’s ability to pay short-term
current obligations or those due within one year. It tells
liabilities investors and analysts how a company can
maximize the current assets on its balance sheet
to satisfy its current debt and other payables.

Quick ratio (Total current =x It measures the ability of a company to meet its
assets- days short-term financial obligations with quick
Inventory)/ assets. It is mostly used by analysts in analyzing
Total current the creditworthiness of a company or assessing
liabilities how fast it can pay off its debts if due for
payment right now.
Working Inventory+ As The working capital ratio is calculated by
capital ratio Receivable- sales dividing current assets by current liabilities.
payable/ sales % This figure is useful in assessing a company's
liquidity and operational efficiency.

17
Determinants of working capital:

 Nature and Size of Business: The requirement of working capital depends on the
nature and size of business manufacturing concerns require larger amounts of working
capital in comparison to trading concerns.

 Length of production cycle: In some business-like machine tools industry, the

time gap between the acquisition of raw material till end of final production of
finished products itself is quite high. As such amount is blocked either in raw
material or in work in progress or finished goods or even in debtors. Naturally there
need of working capital is high.

 Size and growth of business: In very small company working capital requirement
is quite high due to high overhead, higher buying and selling cost etc. as such
medium size business positively has edge over the small companies. But if the
business start growing after certain limit, the working capital requirements may
adversely affect by the increasing size.

 Business/Tread cycle: If the company is the operating in the time of boom, the
working requirement may be more raw material, may increase the production and
sales to take the benefit of favourable market, due to increase in sales, there may
more and more amount of funds blocked on stock and debtors etc. similarly in the
case of depression also, working capital may be high as the sale terms of value and
quantity may be reducing, there may be unnecessary piling up of stack without
getting sold, the receivable may not be recovered in time etc.

 Terms of purchase and sale: Some time due to competition or custom, it may be
necessary for the company to extend more and more credit to customers, as result
which more and more amount is locked up in debtor or bills receivable which
increase the working capital requirement. On the other hand, in the case of
purchase, if the credit is offered by supplier of good and services, a part of working

18
 capital requirement may be financed by them, but it is necessary to purchase on the
cash basis, the working capital requirement will be higher.

 Profitability: The profitability of business may be very in each and every

individual case, which is in term it depends on numerous factors, high profitability
will positively reduce the strain on working capital requirement of the company,
because the profits to the extent that they earned in cash may be used to meet the
working capital requirement of the company.

 Operating efficiency: If the business is carried on more efficiently, it can operate

in profit which may reduce the strain on working capital; it may ensure proper
utilization of existing resources by eliminating the waste and improved
coordination etc.

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The Important of Working capital Management

Proper management of working capital is essential to a company’s

fundamental financial health and operational success as a business. A Hallmark of good
business management is the ability to utility working capital management to maintain a
solid balance between growth, profitability, and liquidity. A business usesworking in
daily operation working capital is a difference between a business current assets and
current liabilities or debts. Working capital serves as a metric for how efficiently a
company is operating and how financially stable it is the short term. The working
capital ratio, which divides current assets by current liabilities indicate whether a
company has adequate cash flow to cover short term debts and expenses.

Key Take Ways:

 The goal of working capital management it to maximize operational efficiency.

 Efficient working capital management helps maintain smooth operation and can
also help improve the company’s earning and profitability.
 Management of working capital include inventory management and management of
accounts receivables and accounts payables.

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Feature of Working Capital:

• Short Term Need: Working capital is being utilities in acquire current

assetswhich converted to cash for a short period only.
• Circular Movement: Working capital is being converted to cash constantly
whichwill just. Be turned as working capital all over again.
• Element of Permanently:

• Although it is just a kind of short-term capital, working capital is needed by

business forever and always.

• Elements of fluctuation: working still fluctuates every now and then even
it issomething permanent
• Liquidity: It is very liquid for it can be converted as cash any time without
losing anything.
• Less Risky: Investment in current assets such as working capital comes with
lessrisk for it is just for short term.

• Special Accounting system no Needed: since working capital is a short-term

asset that will last for a year only there will be no need for adoption of a special
accounting system.

21
 1.1 SELECTION AND RELEVANCE OF THE PROBLEM

In case of should also keep in mind the even working capital in recessive quantify
the basic objective of working capital management is to avoid overinvestment or under
investment in current assets may lead to the reduced profitability due to cost of funds.
working capital management is considered to be one of the most important functions of
finance. The term “working capital” may mean gross working capital assets and net
working capital means current assets fewer current liabilities.

Lack of visibility on cash and working capital performance across the

organization. Lack of cash awareness across departments and geographies. High levels
of overdue receivables and bad debt write-offs. Poor controls in relation to setting and
managing payment terms of customers and suppliers.

22
1.2 HISTORY

Tata Iron and Steel Company (TISCO) was founded by Jamshedji Nusserwanji
Tata and established by Sir Dorabji Tata on 26 August 1907. TISCO started pig iron
production in 1911 and began producing steel in 1912 as a branch of Jamshedji’s Tata
Group. The first steel ingot was manufactured on 16 February 1912. During the First
World War (1914–1918), the company made rapid progress.

In 1920, The Tata Iron & Steel Company also incorporated The Tinplate Company of
India Ltd (TCIL), as a joint venture with then Burmah Shell to manufacture Tinplate.
TCIL is now Tata Tinplate and holds 70% market share in India.

By 1939, it operated the largest steel plant in the British Empire. The company
launched a major modernisation and expansion program in 1951. Later, in 1958, the
program was upgraded to 2 million metric tonnes per annum (MTPA) project. By 1970,
the company employed around 40,000 people at Jamshedpur, and a further 20,000 in the
neighbouring coal mines.

In November 2021, Tata Steel was the most profitable company in the Tata Group.

23
Amalgamation
In 2022, Tata Group's Metal Companies Merged into Tata Steel.

Upcoming plans

1. A 6 million tonne per annum capacity plant in Kalinga Nagar, Odisha, India.
2. An expansion of the capacity of its plant in Jharkhand, India from 6.8 to 10 million
tonnes per annum.
3. A 5 million tonne per annum capacity plant in Chhattisgarh, India (Tata Steel
signed a memorandum of understanding with the Chhattisgarh government in
2005; the plant is facing strong protest from tribal people)
4. A 3 million tonne per annum capacity plant in Iran.
5. A 2.4 million tonne per annum capacity plant in Bangladesh.
6. A 10.5 million tonne per annum capacity plant in Vietnam (feasibility studies are
underway)
7. A 6 million tonne per annum capacity plant in Haveri, Karnataka.
8. Acquisition of Neelachal Ispat Nigam Ltd in Odisha, India

24
Nationalisation attempts

There were two attempts one in 1971 and another in 1979, nationalise the
company. Both were unsuccessful attempts. In 1971 Indira Gandhi regime tried to
nationalise the company, but failed. In 1979 Janata Party regime (1977–79), wanted to
nationalise TISCO (now Tata Steel). Then Minister for Industries George Fernandes, at the
instigation of Biju Patnaik, Minister for Steel threatened nationalisation, but due to the
unions protests the move failed.

In 1990, the company began to expand, and established its subsidiary, Tata Inc.,
in New York. The company changed its name from TISCO to Tata Steel Ltd. in 2005.

Expansions:
Acquisitions

NatSteel in 2004: Tata Steel agreed to acquire the steel making operations of the
Singapore-based NatSteel for $486.4 million in cash. NatSteel had ended 2003 with
turnover of $1.4 billion and a profit before tax of $47 million. The steel businesses of
NatSteel would be run by the company through a wholly owned subsidiary called NatSteel
Asia Pte Ltd. The acquisition was completed in February 2005. At the time of acquisition,
NatSteel had a capacity of about 2 million tonnes per annum of finished steel.

Millennium Steel in 2005: Tata Steel acquired a majority stake in the Thailand-based
steelmaker Millennium Steel for a total cost of $130 million. It paid US$73 million to
Siam Cement for a 40% stake and offered to pay 1.13 baht per share for another 25% of
the shares of other shareholders. Millennium Steel has now been renamed to Tata Steel
Thailand and is headquartered in Bangkok. On 31 March 2013, it held approx. 68% shares
in the acquired company.

25
Corus: In 2006 Tata Steel signed a deal with Anglo-Dutch company, Corus to buy 100%
stake at £4.3 billion ($8.1 billion) at 455 pence per share. On 19 November 2006, the
Brazilian steel company Companhia Siderúrgica Nacional (CSN) launched a counter offer
for Corus at 475 pence per share, valuing it at £4.5 billion. On 11 December 2006, Tata
pre-emptively upped its offer to 500 pence per share, which was within hours trumped by
CSN's offer of 515 pence per share, valuing the deal at £4.9 billion. The Corus board
promptly recommended both the revised offers to its shareholders. On 31 January 2007,
Tata Steel won their bid for Corus after offering 608 pence per share, valuing Corus at
£6.7 billion ($12 billion).
In 2005, Corus employed around 47,300 people worldwide, including 24,000 in the
UK. At the time of acquisition, Corus was four times larger than Tata Steel, in terms of
annual steel production. Corus was the world's 9th largest producer of Steel, whereas Tata
Steel was at 56th position. The acquisition made Tata Steel world's 5th largest producer of
Steel.

Tayo Rolls in 2008, formerly Tata-Yodogawa Limited is a metal fabrication and

processing company headquartered in Jamshedpur, India. It was founded in 1968 as a joint
venture between Tata Steel and the Japan-based Yodogawa Steels. In 2008, the company
made the rights issue which was subscribed for only about 50% of its total value – Rs 60-
crore. Due to undersubscription, the promoters acquired them, as result Tayo Rolls became
a Tata Steel Subsidiary. Tata Steel owns 55.24% of the Tayo Rolls.

Steel Engineering and Vina steel in 2007: Tata Steel through its wholly owned Singapore
subsidiary, NatSteel Asia Pte Ltd, acquired controlling stake in both rolling mill
companies located in Vietnam: Structure Steel Engineering Pte Ltd (100% stake) and Vina
steel Ltd (70% stake). The enterprise value for the acquisition was $41 million. With this
acquisition, Tata Steel got hold of two rolling mills, a 250,000 tonnes per year bar/wire rod
mill operated by SSE Steel Ltd. and a 180,000 tonnes per year reinforcing bar mill
operated by Vina steel Ltd.

Bhushan Steel in 2018: Tata Steel acquired the entire company in 2017–18, when
Insolvency proceedings were initiated against the former company on 26 July 2017
under IBC. Tata steel emerged as the highest bidder and took over the company through its
wholly owned subsidiary Bamnipal Steel Ltd. The company was renamed as Tata Steel
BSL. Later in 2021 Tata Steel amalgamated Bamnipal Steel Ltd. and Tata Steel BSL
thereby the latter became a direct subsidiary of Tata Steel (72.65%).

26
Nilachala Ispat Nigam Ltd in 2022: Tata Steel through its wholly owned subsidiary, Tata
Steel Long Products (TSLP), acquired controlling stake in NINL. It beat Jindal
Steel and JSW Steel to acquire Odisha-based Neelachal Ispat Nigam Ltd (NINL)
for ₹12,100 crore (US$1.5 billion).

Issues with Europe business

Since Tata Steel's Corus acquisition in 2007, Tata Steel's Europe unit faced issues
from oversupply in the market, labour unions, inexpensive imports from Chinese steel
makers, and pressure from regulators for decarbonisation (green taxes) which forced Tata
Steel to consolidate its businesses in Europe.

In 2015, Tata Steel was looking to sell its facilities in Port Talbot, Hartlepool,
Rotherham and Stocksbridge, which was put on hold due to Brexit. In April 2016, Tata
Steel's Long Products Europe Division located in Scunthorpe, England was sold to
Greybull Capital LLP. The unit was renamed as British Steel Limited.

In February 2017, the company decided to sell its specialty division to Liberty House
Group.

In September 2017, ThyssenKrupp of Germany and Tata Steel announced plans to

combine their European steel-making businesses. The deal will structure the European
assets as Thyssenkrupp Tata Steel, an equal joint venture. The announcement estimated
that the company would be Europe's second-largest steelmaker, and listed future
headquarters in Amsterdam. However, in 2019, antitrust regulators of EU refused to accept
deals citing reduction in competition. In 2019 Tata Steel decided to sell some of its non-
core business units in UK.

In June 2020, the company requested £500 million in UK government support.

Later in July media houses reported that the company has proposed to give away 50% of
its stake in Port Talbot Steelworks to UK Government in return for capital injections
amounting to £900 million.

In November 2020, SSAB of Sweden announced its intention to buy Tata Steel's
unit in IJmuiden, Netherlands. However, in 2021, SSAB backed out of citing technical and
cost issues involved with the deal.

27
 In October 2021, Tata Steel Europe officially split its businesses into two
independent entities Tata Steel Netherlands and Tata Steel UK.

Indian steel giant stops business with Russia

In April 2022, Tata Steel announced that they had to find alternative sources of coal
for their steel production plants in the UK and Netherlands after European nations stopped
doing business with Russia because of its invasion of Ukraine.

Issues with South East Asia Business

In January 2019, citing debt issues and consistent losses Tata Steel, decided to sell
70 per cent stake its S.E. Asia business (NatSteel and Tata Steel Thailand) to China's state-
owned HBIS Group for $327 million. But the deal fell through citing regulatory issues.

Later in 2019, Tata Group signed a memorandum of understanding with the Private
Equity firm, Synergy Metals and Mining Fund for divestment of 70% shareholding in Tata
Steel (Thailand) Public Company Ltd. (excluding NatSteel)

In 2021, Tata Steel decided against divesting the South East Asian businesses citing
improvement in financials, including reduction in total debt and increase in the cash flow.
This was confirmed through its regulatory filing where Tata Steel reclassified its S.E.
Asians assets from 'held for sale' to 'continuing operations'.

In Oct 2021, Tata Steel announced the sale of its subsidiary NatSteel Holdings Pte.
Ltd to Top Tip Holding Pte, a Singapore-based steel and iron ore trading company. The
deal was valued at $172 million (₹1,275 crore). The deal included two Singapore facilities
and one Malaysian facility excluding the wire business in Thailand.

28
1.3 COMPANY PROFILE

Name: Tata Iron and Steel Company Limited (TISCO)

Type: Public
Industry: Steel Iron
Traded as: BSE: 500470
NSE: TATASTEEL
BSE SENSEX Constituent
NSE NIFTY 50 Constituent
Founded: August 25, 1907; 112 years ago
Founder(S): Jamshedji Tata
Headquarters: Mumbai, India
Key People: Natarajan Chandrasekaran (Chairman)
T.V Narendran (CEO& Managing Director)
Product: Steel, Long steel products, Structural steel, wire product, Steel casing
pipes, Household goods.
Revenue: US$31 billion (2022)
Operating Income: US$6.2 Billion (2022)

Net Income: US$5.1 Billion (2022)

Total Assets: US$36 Billion (2022)

Total Equity: US$14 Billion (2022)

Number of employees: 32,364 (2021)

Parents: Tata Group

29
Subsidiaries: Tata steel Europe
Tata Steel Long Products
Tata Steel Thailand
NatSteel
Tata Tinplate
Tayo Rolls
Jamshedpur FC
Website: www.tatasteel.com

30
 TATA STEEL

INDIA:

Tata Steel was established in India as Asia’s first integrated private steel company
in 1907. With this, we also developed India’s first industrial city at Jamshedpur. Today, we
are among the leading global steel companies. Our annual crude steel capacity across
Indian operations is nearly 20 MnTPA and we registered a turnover of INR 91,037 crore in
FY21. We also set up our second greenfield steel plant of 3 MnTPA in the eastern state of
Odisha in 2016; the expansion to 8 MnTPA in currently underway. We possess and
operate captive mines that help us maintain cost- competitiveness and production
efficiencies through an uninterrupted supply of raw material. This is how we ensure that
we remain the lowest cost producer of steel in Asia.

The Indian product portfolio is divided into four segments – Automotive and
Special Products; Industrial Products, Projects and Exports; Branded Products and Retail;
and Services and Solutions. The Company supplies hot-rolled, cold-rolled, galvanised,
branded solution offerings and more.

31
EUROPE:

Tata Steel is one of the largest steel producers in Europe with a crude steel
production capacity of over 12.4 MnTPA. We established our presence in the European
continent after acquiring Corus in 2007. The manufacturing facilities in Europe comprise
primary steel-making facilities in the Netherlands and the United Kingdom, with
downstream operations in the Netherlands, the United Kingdom, Germany, France,
Belgium, Sweden, and Turkey. The European operations produce a wide range of high-
quality quality strip steel products for demanding markets such as construction,
automotive, packaging and engineering.
Visit website: www.tatasteeleurope.com

32
SOUTH-EAST ASIA:

Tata Steel’s operations in South-East Asia, with 2.2 MnTPA capacity, began in
2004 with the acquisition of NatSteel, Singapore. The operations are run by NatSteel
Holdings Pte Ltd., a wholly-owned subsidiary of Tata Steel. The Company’s flagship
facility at Singapore is one of the largest single downstream rebar fabrication operations in
the world. This plant is the only local steel mill with an integrated upstream and
downstream operation, where steel is manufactured through recycling scrap, and fabricated
according to customers’ needs.

In 2015, we acquired a majority stake in Thailand-based steelmaker Millennium

Steel, which strengthened our South-East Asian operations. is the largest and most diverse
long steel manufacturer in Thailand using recyclable steel scrap as raw material. The
product range includes High Tensile Rebars, ready to use Cut & Bend products, light
structural, and specialty wire rods for making Tire Cord, Tire bead, Wire Ropes, and stick
electrodes. The company has a pan Thailand distribution network and regularly exports
steel to Laos, Cambodia, Indonesia, Malaysia, India, and Bangladesh.

Visit websites: www.natsteel.com.sg | www.tatasteelthailand.com

33
Driving excellence

Inputs: 2021-2022

Financial capital
Net worth (In crore): 1,25,434
Net debt (In crore): 33,494

Manufactured capital
Installed capacity - Crude Steel (MnTPA) Jamshedpur: 11.00

Kalinga Nagar: 3.00

Meramandali: 5.60
Steel processing centres - Own (nos.): 38

Intellectual capital
Collaborations/Memberships: 35
(Technical Institutes) (nos.)

Patents filed (nos.): 125

R&D spend (In crore): 213

Human capital
Employees on Roll1 (nos.): 35,927
Investment in employee training: 159
and development (In crore)
Employee training (person-days): 4,13,542
Natural capital
Energy Intensity (GJ/tcs) 23.62
Specific freshwater consumption (m3 /tcs): 2.71
Capital spends on environment (In crore): 554
Raw Material Consumption2 (MnT): ~44

34
Social and relationship capital
Pan-India dealers (nos.): 15,566
Pan-India distributors (nos.): 273
Customer-facing processes (nos.): 11
Customer service teams (nos.): 25
Active supplier base (nos.): 6,264
CSR spend (In crore): 406

Value creation approach

Vision: Tata stell aspire to be the global steel industry benchmark for value creation and
corporate citizenship.
Values: Integrity,
Excellence,
Unity,
Responsibility,
Pioneering.
Strategic objectives:
 Leadership in India
 Consolidate position as global cost leader
 Attain leadership position in adjacent businesses
 Leadership in sustainability

35
Tata steel value chain:

CUSTOMERS

Mining
OUTBOUND
LOGISTICS
Processing Processed
centers raw material

PRODUCTS TATA STEEL INBOUND

VALUE CHAIN LOGISTICS

Rolling
Ironmaking
Product

Steelmaking
BY PRODUCTS

36
1.4 DEFINITION OF RELATED ASPECTS:

• “Working capital is the excess of C.A over current liabilities”. H.G Guthmann

• “Working capital is descriptive of that capital which is not fixed but the
more common use of the working capital is to consider it as the difference
between thebook value of the C.A and current liabilities”. Hoglend Bierman,
and A.K MC Adams

• “Working capital represent the excess of C.A over current liabilities”. J L

Brown and L R

• “Working capital to firms’ investment in short term cash short term Securities,

accounts, receivable and inventories”

37
1.5 CHARCTERISTICS OF STUDY:

TATA STEEL's Working Capital is a measure of company efficiency and

operating liquidity. The working capital is usually calculated by subtracting
Current Liabilities from Current Assets. It is an important indicator of the firm
ability to continue its normal operations without additional debt obligations.

1. Working capital comprises current assets which are distinct from other assets.
In the first instance, current assets consist of those assets which are of short
duration. For example, cash is held idle for a week or so, accounts receivables
may not have a life span of more than three months and inventories may be
held for one to three months.
2. The actual duration of each of these assets is contingent upon the time required
in the activities relating to procurement, production, sales and collection and
degree of synchronization among them. Another distinguishing characteristic of
current assets is that they change their character swiftly.
3. For instance, cash is used to buy raw materials which are, in turn, transformed
into work-in-progress and then in finished goods. With the sale of the
merchandise, finished goods turn into accounts receivable when goods are sold
on credit terms.

38
 CHAPTER 2: RESEARCH METHODOLOGY

INTRODUCTION

● Research is way to systematically solve the research problem.

● It may be understood as a science of studying now research id done systematically.
● In that various steps those are generally adopted by research in studying
his problem along with the logic behind them.
● It is important for research to know not only the research method but also
know methodology.
● all this means that it is necessary for researcher to design his methodology for
hisproblem as the same may differ from problem to problem.

39
1.1 OBJECTIVES

Study of the working capital management is important because unless

the workingcapital is managed effectively, monitored efficiently planed
properly and reviewed periodically at regular intervals to remove bottlenecks if
any company can’t earn profit and increase its turnover. with this primary
objective of the study. The following further objectives are framer for a depth
analysis.

1. To study the working capital management of TATA STEEL PVT.LTD.

2. To study process of ascertaining working capital requirement of TATA
STEEL PVT. LTD.
3. To make comparison of working capital
4. To assessed contain of working capital management.
5. To study optimum level of current assets and current liabilities of company.
6. To study the way and means of working capital finance of the TAT STEEL
PVT.LTD

7. The objectives of working capital management are profitability and liquidity.

8. The objective of profitability supports the primary financial management objective,
which is shareholder wealth maximization.
9. The objective of liquidity ensures that liabilities can be met as they fall due.

40
2.2 HYPOTHESIS

Financial management refers to Firm’s financial resources. it deals with

finding out various sources for raising funds for firms.

Working capital management is concerned with the management of assets.

it is an integral part of financial management as short term survival is a perquisite
for longterm success. One aspects of working capital management are the tread
off between profitability and risk.

Following is the hypothesis for present study:

Hypothesis 1

H0 – There is a significant association between working capital management and

financial performance of company.

H1- There is no significant association between working management and

financial performance of company.

41
1.2 SCOPE OF THE STUDY

 Working capital management implicates the administration of current assets

aswell current liabilities
 The scope of the study is identified after and the during the study is conducted.
 The study of working capital is based on tools like trend analysis ratio,
workingcapital leverage operating cycle etc.
 Further study is based on last some year annual reports of TATA STEEL PVT.LTD.
 The inventory turnover ratio shows how efficiently a company sells its stock of
inventory. A relatively low ratio compared to industry peers indicates a risk that
inventory levels are excessively high, while a relatively high ratio may indicate
inadequate inventory levels.
 Business managing their working capital efficiently are able to maintain proper
liquidity. It will improve their cash management and will reduce their dependency
on external financing as large amount of funds is tied up in working capital.
Management of working capital will enable them in paying all short-term debts and
operating expenses on time.

 Efficient management of working capital enables business in facing emergency

situations such as depression. It ensures proper availability of funds at all times so
that business can easily face time of crisis or peak demand where they need to
boost up their production.
 Improving the business value and position in market is another important
advantage of working capital management. Businesses having sound working
capital position enjoy better liquidity and credit rating. It helps them in raising
funds from various external sources easily at favourable terms.
 Management of working capital leads to better relations with supplier and all
creditors. It enables business in paying all dues to suppliers or trade creditors on
time through always maintaining sufficient amount of funds. This will result in
gaining confidence of creditors towards business.
 Every business wants to expand its activities over the time for which it needs
additional capital. Proper management of cash will provide business with necessary
funds timely and make expansion programs successful.

42
 Business through management of funds is able to reduce their cost and avoid
wastages of resources. They can earn sufficient profits by offering their products
even at low prices to customers. It will help in gaining competitive advantage in
market and generating large revenue.

43
1.3 SIGNIFICANE OF THE STUDY

The Study establishes that working capital management significant to the

electricity distribution sector as it is pivotal to the health, performance and value
enhancement of all business enterprises.

Working capital management that are linked to improved liquidity

profitability and enhance value creation and growth are insistent sable to the
electricity.

Impact of working capital management enables the sector to plough back

its own profits into the require capital investment, thus reducing dependence on
expensive debt financing.

44
2.5 SELECTION OF THE PROBLEM

Tata Steel’s Indian operations, though, heldup somewhat, despite a

slowdown in the domestic economy. Steel production rose 23% year-on-year to
4.5 million tonnes (Mt), while sales increased 18% year-on-yearto 3.96 mt. As a
result, domestic revenues rose by 12.7% from a year earlier. Higher operating
costs, however, saw its domestic net profit shrink marginally, though subdued
economic activity and liquidity issues will weigh on domestic consumption.

 Firms with two few current assets may incur shortages and
difficulties maintaining smooth operations.
 The projects are helpful in knowing the company's position of funds maintenance
and setting the standards for working capital inventory levels, quick ratio current
amount turnover level and web torn turnover level.
 This project is helpful to the management for expanding the dualism and the
project viability and present availability of funds.
 This project is also useful as it companies the present year data with the previous
year data and thereby it shows the trend analysis i.e., increasing fund or decreasing
fund.
 The project is useful in further expansion decision to be taken by
Management.

45
2.6 DATA COLLECTIONS

Data collected from sources that has already been published is any from
is called as secondary data. The review of literature it may research is based on
secondary data mostly from books journals and periodicals.

Secondary data can be less valid but it’s important is still there.
Sometimes it is difficult to obtain primary data; in these cases, getting information
from secondary sources is easier and possible.

As stated above, data was collected in several ways. These were an initial
industry sampling from quantitative secondary data in annual reports, qualitative
interviews, a quantitative questionnaire, and quantitative secondary data from the
questionnaire respondents’ quarterly reports. This approach was chosen since it
was possible to collect data from different sources and through triangulation
extract interesting information that could have otherwise been overlooked.
Information collected from the initial industry sample was together with insights
gained for the interviews, used to construct a framework for the design of the
questionnaire survey. The questionnaire provided the data for an in-depth analysis
of its respondents.

46
2.7 TECHNIQUES AND TOOLS TO BE USED

Working capital analysis is used to determine the liquidity and

sufficiency of currents assets in comparison to current liabilities. This information
is needed to determine whether an organisation needs additional long-term
investment vehicles. The first part of working capital is to examine the timelines
withing current liabilities are due for payment. There are sometolls of data analysis
are as below.

1.Graph

2.Percentage

3.Mean

4.Mode

47
 CHAPTER 3. REVIEW OF LITERATURE

Information about studies done on the respective issue:

Tata Steel conducted a pan-India exercise to identify the ESG issues that are
material to value creation, by engaging with close to hundred stakeholders viz.
customers, investors, suppliers, shipping and logistics partners, media, industry
associations, government and regulatory bodies, employees including contract
employees and union leaders, and community representatives. The findings were
then classified into the ‘Focus’ (high), ‘Track’ (medium) and ‘Discuss’ (low) categories.
Addressing ‘Focus’ issues are incorporated in the strategy and planning process.
These issues are reviewed monthly by the issue owners and quarterly by the senior
management, and reported in the Integrated Report. The material issues related to all the
capitals are tracked and reported to the senior management on a quarterly basis.
Exceptions on any of the parameters are reportedon an interim basis. Among the
material issues, we target to achieve specific carbon emission of <2 tCO2/tcs, 100%
waste utilization, zero effluent discharge and doublingof our CSR reach by 2025 as part
of this strategy. Tata Steel’s strategic planning process incorporates the economic,
environmental, social, and governance material issues relevant for -the long-term
growth and financial success of the Company.

The material issues are taken into consideration while defining and
executing our strategic objectives. While the Environmental, Social and Governance
(ESG) related material issues have been arrived at through an exclusive and
extensive stakeholder engagement process, the economic material issues have been
revisited through various stakeholder engagement processes and business reviews
by the senior leadership.

Occupational health & safety leadership capability development for safety at

all levelsto achieve zero harm

Identification and mitigation of hazards and risks

Reduction in safety incidents on road and rail to sustain zero fatalities

inside plant premises

48
 Excellence in Process Safety Management (PSM)

Establishment of industrial hygiene and improvement in occupational health

Laboure relations Robust grievance mechanism
Implementation of the Human Rights Policy, principles of SA8000,
UniversalDeclaration of Human Rights (UDHR) and ILO convention.

49
Specify how the study undertaken is relevant

J.P. Singh and Shishir Pandey (2008)

have studied on topic impact of working capitalmanagement on profitability of
Hindalco industries limited. This study is based on secondary data and data are collected
from annual reports of company for 17year period. i.e., 1990-2007 The research
methodology used in this paper is ratio analysis. percentage method correlation coefficient
and multiple regression analysis, regression result of the study show that current ratio,
liquid ratio, receivables turnover ratio and working capital to total assets ratio have
statistically significant impact on the profitability of Hindalco industry limited.
Shishir Pandey and Vikas Kumar Jaiswal (2011)
analyzed the effect of working capital management on profitability of
manufacturing firm, the study period for paper was 5 years i.e., 2005-2010. The research
methodology apply by author is correlation and regression analysis. (2 different method
fixed effects model and ordinary least squares model. The result of correlation analysis
show there is negative relationship between profitability and debtors. days, inventory days,
and creditors day, the result of regression analysis shows cash velocity, size of the firm, and
net working capital leverage are significant both methods.
The Research & Development and Scientific Services division of Tata Steel
Limited at Jamshedpur set up in 1937 as the ‘Research and Control Laboratory’ was one of
its kind in India. Its three departments – Research and Development, Scientific Services
and Refractory Technology Group – support the Tata Steel group, particularly its
operations in India and South East Asia, by developing new products and processes to
create competitive advantage, better environmental performance and enhanced
sustainability.
The Company realized quite early that a strategy ("DOING RIGHT
THINGS"!) is a necessity after which the right processes ("DOING THINGS RIGHT "!)
have to be adopted. Further, after the strategy and the processes are in place, the evaluation
of the performance on various indices needs to be done and that, several such E&I
(evaluation- improvement) cycles are required to be run. The starting point of the R&D
process is its alignment with the Company's strategy as enshrined in the Company's Vision
statement and the balance score card of the MD/ senior management. Consequently, the
balance score cards (BSCs) of the senior management is kept in view while preparing the

50
Key Result Areas (KRAs) for R&D. The main items of KRAs are
(i) Finance [improved product mix., evaluations for branding, commercialization of
consultancy, involvement in new business etc.]
(ii) Customers [value creating partnerships and improving their satisfaction
(iii) Internal Processes (value creating partnerships with suppliers, lowering cost of
production, ensure safety and environment sustainability, improve.

Saswata Chatterjee (2010)

"When to Buy How to Buy Where to Buy "

Versatile professional, successful in planning and implementing Procurement &

Sourcing strategies within strict time schedule, cost & quality as per the requirement & best
practice guidelines & norms targeting strategic level assignments in Purchase / Sourcing /
Supply Chain with anorganization of high repute. The importance of the fixed and current
assets in the successful running of any organization. It poses direct impact on the
profitability liquidity.
Tata Steel India’s Award of the Deming Application Prize-2008 for excellence in
Total Quality Management was a first to an integrated steel company outside Japan. Mr. B.
Muthu Raman, Managing Director, Tata Steel, received the coveted medal from Mr. Fujio
Mitarai, Chairman of the Deming Prize Committee, at a formal function in Tokyo, Japan.
During the assessment process, the Japanese examiners were not only impressed by the
quality parameters followed at Tata Steel, but also by the social commitment of Tata Steel
and its work done in the rural areas over the last 100
years. Tata Steel’s leadership in sectors of economic, social and environmental
significance brings a unique set of capabilities. The heritage of returning to society what
the company earns evokes trust among all its stakeholders, including consumers,
employees, shareholders, communities and government regulatory bodies. Because of its
strong commitment to the cause of sustainable development, certification to environment
management systems, quality standards, and the beliefthat better environmental
management leads to superior business performance, the Company won a number of
national and international awards and accolades during the year.

51
Application of study area which ultimately helps the learner to undertake
further study on same issue:

Working capital also called net working capital reflects the amount of money a
company has at its disposal to pay for immediate expenses. Of course, the more working
capital, the better it for a company's financial situation. The amount of working capital a
company needs to run smoothly can vary widely. Some businessesrequire increased amounts
of working capital to cope with expenses that ebb and flow seasonally.
For example, retail businesses often experience a spike in sales during certain times
of the year, such as the holiday season. Retailers need an increased amount of working
capital to pay for the additional inventory and staff that'll be needed for the high-demand
season. As a result, a retailer would likely see higher expenses in the off-season relative to
revenues leading up to the holidays. Conversely, when sales are down in the off-season, the
company would still need topay for its normal staffing despite lower sales revenue. Working
capital helps businesses smooth out the gaps in revenue during the times of the year when
sales are slow.
Oftentimes, banks will lend to companies providing a working capital credit line,
which allows companies to tap into during off-peak seasons when there are capitalshortfalls.
As a result, company executives as well as banks that lend to companies monitor working
capital very closely. In order to understand a company's working capital needs, it's critical to
know the specific items that can lead to increases or decreases in working capital.

Drivers of Working Capital

Companies have both short-term assets and liabilities. A company's short-term assets
are called current assets, while short-term liabilities are called current liabilities. A
company's working capital is the difference between the value of thecurrent assets and its
current liabilities for the period.

Current Assets
A current asset is an asset that is available for use within the next 12 months.
Current assets are a company's short-term assets that can be easily liquidated—orconverted
into cash—and used to pay debts within the next year.

52
Current assets typically include:

Cash and cash equivalents including cash, such as funds in checking or savings
accounts, while cash equivalents are highly-liquid assets, such as money-market funds and
Treasury bills.

Marketable securities such as stocks, mutual fund shares, and some typesof bonds
Inventory the merchandise that can be quickly sold or liquidated in lessthan one year
Accounts receivable or money owed to the company by its customers orother debtors for
products and services sold.

Current Liabilities
A current liability is a short-term expense that a company owes and must pay within
a 12-month period. Current liabilities can include:

• Short-term debt payments, which can include payments for bank loans or
commercial paper issued to fund operations

• Suppliers and vendors owed for inventory, raw materials, and services, such
as technology support

• Accounts payable, which are short-term bills owed.

• Interest payments due to bondholders and banks, which can include interest
owed on short-term debt as well as the current interest payments due for long-
term debt.

• Taxes owed, such as income and payroll taxes due in the next year

The total amount of a company's current liabilities changes over time—similar tocurrent
assets—since it's based on a rolling 12-month period.

53
 CHAPTER 4. DATA ANALYSIS, INTERPRETATION AND
PRESENTATION

Statement showing changes in working capital (2018-2022)

PARTICULARS Mar-18 Mar-19 Mar-20 Mar-21 Mar-22

12months 12months 12months 12months 12months
(In Rs. Cr.) (In Rs. Cr.) (In Rs. Cr.) (In Rs. Cr.) (In Rs. Cr.)
A. CURRENT
ASSETS
Current 14,908.97 2,524.86 3,431.87 7,218.89 8,524.42
Investments
Inventories 28,331.04 31,656.10 31,068.72 33,276.38 48,824.39

Trade 12,415.52 11,811.00 7,884.91 9,539.84 12,246.43

Receivables
Cash And Cash 7,937.85 3,341.37 8,054.72 5,782.18 15,898.93
Equivalents
Short Term 256.48 239.7 215.68 5.59 5.84
Loans and
Advances
Other Current 4,027.30 9,417.95 8,076.82 4,389.02 7,056.60
Assets
TOTAL 67,877.16 58,990.98 58,732.72 60,211.90 92,556.61
CURRENT
ASSETS

54
B. CURRENT
LIABILITIES

Short Term 15,884.98 10,802.08 19,184.48 14,968.97 24,064.61

Borrowings

Trade Payables 20,413.81 21,716.96 21,380.85 25,967.49 36,764.87

Other Current 18,092.98 27,266.37 19,431.91 25,205.35 26,990.03

Liabilities
Short Term 1,269.64 1,248.72 1,663.67 4,725.32 2,768.49
Provisions
TOTAL 55,661.41 61,034.13 61,660.91 70,867.13 90,588.00
CURRENT
LIABILITIES

C. WORKING 12,215.75 -2,043.15 -2,928.19 -10,655.23 1,968.61

CAPITAL

55
Working capital:

WORKING CAPITAL
15,000.00

10,000.00

5,000.00

0.00
MARCH 2018 MARCH 2019 MARCH 2020 MARCH 2021 MARCH 2022

-5,000.00

-10,000.00

-15,000.00

Working Capital = Current Assets – Current Liabilities

In the above graph working capital of Tata Steel is positive in 2018 and 2022 and 2019
to 2021graph is negative. Working capital can be negative if current liabilities are greater
than current assets. As we see in 2021 working capital Rs -10,655.23 and in 2022 working
capital is Rs 1,968.6 (In cr), Tata Steel filled this huge gap in one year.

56
Net Working Capital:

Net Working Capital

50 38.1

0
-3.7
-50
-40.8

-100

-150 -138.8

-200
-190.6

-250

2018 2019 2020 2021 2022

Net Working Capital = Current Assets (minus cash) – Current Liabilities (minus debt)

Tata Steel's net working capital hit its five-year low in March 2021 of -$998.9 million.
Tata Steel's net working capital decreased in 2018 ($1.349 billion, -3.7%), 2020 ($1.103
billion, -40.8%) and 2021 (-$998.9 million, -190.6%) and increased in 2019 ($1.863 billion,
+38.1%) and 2022 ($387.2 million, -138.8%).

57
 Calculation of ratios:

Liquidity ratios:

1. Current ratio:

Current ratio
1.4
1.22
1.2
1.02
0.97 0.95
1
0.85
0.8

0.6

0.4

0.2

2018 2019 2020 2021 2022

Current Ratio = Current Assets

Current Liabilities

The current ratio (also known as the working capital ratio) indicates how well a
firm is able to meet its short-term obligations, and it's a measure of liquidity. If a
company has a current ratio of less than 1.00, this means that short-term debts and bills
exceed current assets, a signal that the company's finances may be in danger in the short
run.

58
2. Quick Ratio:

Quick Ratio
0.8
0.71
0.7

0.6
0.48
0.5 0.45 0.45
0.38
0.4

0.3

0.2

0.1

2018 2019 2020 2021 2022

Quick Ratio = Current Assets - Inventory

Current Liabilities

In above graph quick ratio is highest in 2018, then in 2019 and 2020 its same 0.45%
after that in 2021 its lowest as compare to previous years. In 2022 its 0.48%. The quick ratio
communicates how well a company will be able to pay its short-term debts using only the
most liquid of assets. The ratio is important because it signals to internal management and
external investors whether the company will run out of cash. The quick ratio also holds more
value than other liquidity ratios such as the current ratio because it has the most conservative
approach on reflecting how a company can raise cash.

59
 2. Inventory turnover ratio:

Inventory turnover ratio

6

4.98
5 4.66 4.79

2
1.32
0.95
1

2018 2019 2020 2021 2022

Inventory Turnover Ratio = Net Sales

Average Inventory
at Selling Price

The inventory turnover ratio shows how efficiently a company sells its stock of inventory.
A relatively low ratio compared to industry peers indicates a risk that inventory levels are
excessively high, while a relatively high ratio may indicate inadequate inventory levels.

60
 3. Dividend payout ratio (NP):

Dividend payout ratio (NP)

120

100 95.6

80

60

40

20 15.28
9.2 11.2
7.48

2018 2019 2020 2021 2022

Dividend Payout NP = Dividend per Share

Earnings per Share

Note: NP doesn’t contain pattern

The dividend pay-out ratio is the ratio of the total amount of dividends paid out to
shareholders relative to the net income of the company. It is the percentage of earnings paid
to shareholders via dividends. Dividend payout ratio NP is calculated by using Nat Income
and Dividend payout ratio.

61
 4. Dividend payout ratio (CP):

Dividend payout ratio (CP)

16
14.49
14

12

10

8 6.84
6.37 6.51
6.09
6

2018 2019 2020 2021 2022

Dividend Payout CP = Dividend per Share

Earnings per Share

Note: CP contains pattern

The dividend payout ratio is a key financial metric used to determine the
sustainability of a company’s dividend payment program. It is the number of dividends paid
to shareholders relative to the total net income of a company. t is commonly calculated on a
per-share basis by dividing annual dividends per common share by earnings per share (EPS).
Dividend payout ratio CP is calculated by using free cash flow.

62
 5. Earning retention ratio:

Earning retention ratio

94
92.52
92 90.8

90 88.8

88

86
84.72
84 82.89

82

80

78

218 2019 2020 2021 2022

Earning Retention = Net Income – Dividend Distribution

Net Income

In the above graph the lowest ratio is 82.89% in 2020. The retention ratio is the

proportion of earnings kept back in the business as retained earnings. The retention ratio

refers to the percentage of net income that is retained to grow the business, rather than being

paid out as dividends.

63
 6. Cash earning retention ratio:

Cash earning retention ratio

96
93.63 93.91
94 93.49 93.16

92

90

88

86 85.51

84

82

80

2018 2019 2020 2021 2022

Cash Earning Retention Ratio = Retained Earnings

Net Income

The retention ratio is the proportion of earnings kept back in the business as retained
earnings. The retention ratio refers to the percentage of net income that is retained to grow
the business, rather than being paid out as dividends

64
Profitability ratios:

7. Net profit margin ratio:

Net profit margin ratio

18 16.84
16

14 13.3

12

10

8
5.62
6 5.02

2 0.66
0

2018 2019 2020 2021 Series 5

Net Profit Margin = Revenue - Cost

Revenue

Net Profit Margin is a financial ratio used to calculate the percentage of profit a
company produces from its total revenue. Expressed as a percentage, the net profit margin
shows how much of each dollar collected by a company as revenue translates into profit.

65
 8. Return on assets:

Return on assets
16
14.06
14

12

10

8
6.4
6
4.37
4 3.05

2
0.62
0

2018 2019 2020 2021 2022

Return on Assets = Operating Income

Total Assets

The term return on assets (ROA) refers to a financial ratio that indicates how
profitable a company is in relation to its total assets. Return on assets (ROA) is a profitability
ratio that measures how well a company is generating profits from its total assets, important
when investing

66
 9. Total debt/equity ratio:

Total debt/equity ratio

1.8
1.59
1.6 1.51
1.37
1.4

1.2 1.1

0.8
0.6
0.6

0.4

0.2

2018 2019 2020 2021 2022

Total Debt / Equity Ratio = Total Debt

Total Shareholder equity

The debt-to-equity (D/E) ratio indicates how much debt a company is using to
finance its assets relative to the value of shareholders' equity. It is regarded as an important
ratio in accounting as it establishes a relationship between the total liabilities and
shareholders’ equity of a company.

67
 10. Asset turnover ratio:

Asset turnover ratio

80

70 67.5
63
59.48
60

50

40

30

20

10
0.39 0.55
0

2018 2019 2020 2021 2022

Asset Turnover Ratio = Net Sales

Average Total Assets

The asset turnover ratio measures the efficiency of a company's assets in generating
revenue or sales. It compares the dollar amount of sales (revenues) to its total assets as an
annualized percentage. Thus, to calculate the asset turnover ratio, divide net sales or revenue
by the average total assets.

68
How does Tata Steel's Net Working Capital benchmark against
competitors?

We've identified the following companies as similar to Tata Steel Limited because
they operate in a related industry or sector. We also considered size, growth, and various
financial metrics to narrow down the list to the ones listed below.

Name Net Working Capital

Tata Steel Limited 327.3 M

Materials 2.483 M

Usha Martin Limited 114.7 M

Shyam Metalics and Energy Limited 243.6 M

JSW Steel Limited 710.4 M

Steel Authority of India Limited -721.8 M

D.P. Wires Limited 16.126 M

Rajratan Global Wire Limited 19.448 M

Jindal Steel & Power Limited 554.1 M

Hindalco Industries Limited 1.543 B

Kamdhenu Limited 24.677 M

Vedanta Limited -1.435 B

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Sector Benchmark Analysis:

The distribution of net working capital for companies operating in

the Materials sector in the Developing economic region. Over 2,400 companies were
considered in this analysis, and 1,836 had meaningful values. The average net working
capital of companies in the sector is 32.957 M with a standard deviation of 53.11 M.

Tata Steel Limited's Net Working Capital of 372.3 M is significantly outside the
interquartile range and is excluded from the distribution. The following table provides
additional summary stats:

Net Working Capital in The Materials Sector

Economic Risk Region Developing

Total Constituents 2,403

Included Constituents 1,836

Min -126 M

Max 211.1 M

Median 13.5 M

Mean 32.957 M

Standard Deviation 53.11 M

70
The analysis pertaining to collected data will be done by the learner:

Data analysis is the most crucial part of any research. Data analysis
summarizes collected data. It involves the interpretation of data gathered through the
use of analytical and logical reasoning to determine patterns, relationships or trends.
The working capital ratio shows current assets divided bycurrent liabilities and
indicates to investors and analysts whether a company has the adequate short-term
assets to cover its short-term obligation.

Working capital analysis

Primary data analysis is the original analysis of data collected for a

research study. Analyzing primary data is the process of making sense of the
collected data to answer research questions or support or reject research hypothesis
that a study is originally designed to assess. The choice of data analysis method
depends on the type of data collected, quantitative or qualitative, Qualitative data are
collected when researches rely on measurement, or assigning numerical values to
units, to indicate the relative levels or degrees of the variables under investigation,
whereas qualitive dataare textual data that are produced in the form of participants
transcribed or researches descriptive accounts. This entry provides on overview of
basic quantitative and qualitative data analysis techniques.

To make an effective analysis interpretation of financial statements, the

following groundwork are required to be completed.

1. The objectives of financial statements analysis are the basic for the selection of
techniques of analysis, Decided the purpose of financial statement analysis.
2. The extent of interpretation is also decided to select right type of techniquesof
financial statement analysis.

71
The application of selected tools or techniques will be used to arrive at
findings:

1. Working capital management techniques such as the intersection of carrying

cost and shortage cost, working capital financing policy, cash budgeting, EOQ
and JIT areapplied to manage different components of working capital like
cash, inventories, debtors, financing of working capital, etc. Trade
Receivables. It is also known as account receivables and is represented as
current liabilities in balance sheet.
2. Inventory turnover is another metric that affects working capital. This metric is
calculated by dividing the total cost of goods sold by the inventory balance. A
company needs to have an inventory balance that is sufficient to meet demand but
not so much that it has stale inventory that is not selling.
3. Cash and Bank Balances.
4. Trade Payables.
5. The turnover of accounts receivable is an important indicator of a company's ability
to sell products and collect its funds. Accounts receivable turnover can be
calculated as total sales divided by the number of accounts receivable. For example,
if a company had annual sales of $1.2 million and had average accounts receivable
of $100,000 then its turnover ratio would be 12 times. If the company were selling
on 30-day terms then this would be a perfect ratio. Unfortunately, the real world
does not always work this way. If the accounts receivable balance were $150,000,
then the turnover ratio would drop to eight, which indicates a collection period of
45 days, 360 days divided by eight.
6. Working capital management techniques such as the intersection of carrying
cost and shortage cost, working capital financing policy, cash budgeting, EOQ
and JIT areapplied to manage different components of working capital like cash,
inventories, debtors, financing of working capital, etc.

72
CHAPTER 5: SUGGESTIONS, CONCLUSIONS AND LIMITATIONS

The previous chapter discuss the methodology use in the study it described
the use interview in the collections of data and discus how the data was gathered and
transited into written text. The transcribed data were the analyzed using the method
of discourse analysis, in order to understand the meaning about the topic, the
researcher re-read the protocols and recorded interviews.
The researcher after analysing the interpretation of the obtained data needs to
discuss the findings and give some suggestions and recommendations. This chapter is the
last major step in research process, which tells the interested
reader the problem investigated, the method used to solve the problem, the results
and the conclusions.
It must contain relevant details required by the reader to comprehend the findings
and to determine validity of the results. The researcher must try to clarify his own
thoughts in order to make the results meaningful to the users. It should contain the main
findings of the research investigation.
This must clearly explain weather the hypothesis has been established or rejected
supported by scientific and logical arguments.

73
 5.1 SUGGESTIONS:

Suggestion can be use by the firm for the betterment increased of the firm
after study and analysis od project report on study and analysis of working capital. I
would like to recommend.

1. Company should raise fund through short term sources for short term
requirement of fund, which comparatively economical as compare to long term
fund.
2. Company should raise fund through short term source for short term
requirement of fund, which comparatively economical as compare to longterm
fund.
3. Company has to take control on cash is nonearning assets and increasing cost of
funds.
4. Working capital of the company has increasing every year. Profit alsoincreasing every
year this is good sign for the company. It has to maintain it further, to run the business
long term.
5. Establish systems to measure working capital. Check whether. levels of working
capital can be measured accurately and regularly, ideally on a daily basis, and
certainly, on a weekly basis.
6. It needs system that will allow the company to state the, amount of cash, bills
receivable, bills payable, debtors and creditors.
7. Record past and current levels of working capital knowing the point.
This helps in setting a realistic budget and will enable the company to establish
times of the month/year when elements of working capital are higher/lower.
8. Management of cash is one of the most important areas in the management of
working capital in company.
9. Managing cash should involves the following issues:
a. The preparation and use of cash budget.
b. Management of short-term cash investment.
c. Use of cash management models.

74
10. companies should determine how much working capital should be invested and
how should the investment in working capital be financed.
11. The decision regarding the level of overall investment in working capital is a
cost/benefit trade-off between Liquidity & profitability, or Cash flow& profits.

75
 5.2 CONCLUSIONS:

Since the researcher has chosen the study of working capital management from
company the researcher will need literatures i.e., books articles newspapers etc.
Which are related to same problem so as to get some idea about what is working
capital and how to be calculated.
Then the researcher can frame his objectives limitation and hypothesis on
working capital and the researcher should also see that the objective is fulfilled and its
hypothesis is tested and proven.
TATA STEEL LTD. is a major player in steel manufacturing sector in India.
After making analysis of working capital management, we find that performance of
TATA STEEL LTD. is not much better during the period of the study. It is due to the
reason the current Liabilities of the company shows increasing trend during the period of
the study, which is not considered better from the financial point of views. Whereas the
current assets of the company show almost constant trend. So, the management of the
company should try to control this position efficiently
Working capital management is important aspect of financial management. The
study of working capital management of TATA STEEL Pvt Ltd. has revealed that the
current ratio was as per the standard industrial practice but the liquidity position of the
company showed an increasing tread. The study has been conducted on working capital
ratio analysis, working capital leverage, working capital components which help the
company to manage its working capital efficiency and affectively.
1. Positive working capital indicates that company has the ability of payments of short-
term liabilities
2. TSE started the FY 2021-22 operating in a much-improved steel market which, along
with many other industries, was severely affected in FY 2020-21 following the
restrictions imposed on the economy to contain the COVID-19 health crisis. TSE was
well placed to serve the strong demand from the market following the economic
recovery once restrictions were lifted because, whilst production was reduced in FY
2020-21, no permanent capacity reductions were made. TSE’s focus during the year
was to improve operational stability and respond to demand whilst managing the
significant pressures on working capital arising from increases in input costs.

76
3. Company’s current assets were always more than requirement it effect on profitability
of the company.
4. Current assets are more than current liabilities indicates that company use long term
funds for short term requirements, where long term funds are most costly than short
term funds. During the year under review, the net increase in cash and cash equivalents
was ₹450 crore as against an increase of ₹504 crore in the previous year. The increase
in cash operating profits during the year was utilized primarily in working capital,
payment of taxes, capital expenditure, higher dividend payments and strategic
investments in Group companies for growth.
5. The Company continued to reduce its working capital requirement on account of raw
materials. This was through implementation of Vendor Managed Inventory at Indian
ports for coal and supplier credit enhancement.
6. Tata Steel has powered its balance sheet with a strong debt reduction of ₹50,188 crore
in the last two years despite the volatility in prices and Covid-19 restrictions. At the
end of the June quarter, the country’s largest steel maker had a gross debt of ₹82,597
crore and net debt of ₹54,504 crore.

The steelmaker has reduced ₹24,340 crore net debt in the financial year 2021-22
(FY22). In the previous year, the debt was lowered by ₹29,390 crore. The company,
which has been struggling with the $12 billion legacy acquisition of Corus Plc in
2007, had a debt of ₹104,692 crore in June 2020, when the country witnessed the first
lockdown.

Even after spending ₹17,500 crore as capital expenditure in the last two financial
years, Tata Steel has been able to cut down the debt massively, said the officials. The
net debt to EBITDA stood at 0.87 times and net debt to equity at 0.48 times in June.
Tata Steel posted a consolidated profit of ₹7,765 crore in June ended quarter. The net
profit was lower by 12.8%, compared to ₹8,907 crore recorded a year back. On a
sequential basis, it fell 20.4% from ₹9,756 crore profit in the March-ended quarter.
The revenue rose 18.6% to ₹63,430 crore from ₹53,465 crore a year-ago.

77
5.2 LIMITATIONS:

To know the extent to which the study is reliable it is necessary to note the
limitations under which the study has been completed. The following important
limitations have been noted while conducting the present study. The main source of
information is annual report. The present financial information/position on particular
date, what happened between such two dates cannot easily be presumed or predicated.
The annual report mostly contains quantitative and financial information and as
regards to qualitative aspects of financial performance, my sources was limited dueto
far away location of head offices of the selected units. The financial performance
coverings a large period say 20 or 30 years can a give much clear picture of
management practice of financial performance.

1. Limited Data: This project has completed with annual report; it consists one part
of data collection i.e., secondary. There were limitations for primary data
collection because of confidentiality.

2. Limited period: This project is based on five years annual report. Conclusion and
recommendation are based on such limited data. The trend of last five years may
or may not reflect the real working capital position of the company.

3. Limited Area: Also, it was difficult to collect the data regarding the competitors
and their financial information. Industry figures were also difficult to get.

4. Type of data used for this project: This project is completely based on
secondary data collected from various sources like internet book, etc.

78
 REFERENCES

• "Contact Information". TataSteel.com. Archived from the original on 21

September 2013. Retrieved 31 August 2013.
• Jump up to: a b c d e f "Tata Steel Ltd. Financial
Statements". moneycontrol.com.
• "JSW Steel has become the second largest steel producer in the countryafter
state-owned Steel Authority of India (SAIL)".

• economictimes.com. Archived from the original on 12 June 2013. Retrieved 3

June 2013.
• Jump up to: a b c d e "Statement of profit and loss". Tata

• Steel. Archived from the original on 3 January 2019. Retrieved 16 May 2018.
• Vaswani, Karishma (16 August 2007). "Indian firms move to world

• stage". BBC News. Archived from the original on 26 July 2013. Retrieved 31
August 2013.
• "Global 500: 486 Tata Steel". Fortune. 22 July 2014. Archived from the
original on 28 April 2015. Retrieved 31 August 2014.
• "India's top 50 brands". brandirectory.com. Archived from the original on 23
August 2013. Retrieved 19 August 2013.
• "Tata Steel Jamshedpur blast furnace completes 100 years". The Hindu. 2
December 2011. Retrieved 31 August 2013.
• "Sustainability Report 2012". Tata Steel India. Archived from the original on 14
September 2013. Retrieved 31 August 2013.
• Jump up to: a b "Indian Steel Industry History, First Steel Plant in India".
tatasteel100.com. Archived from the original on 26 September 2013.
Retrieved 31 August 2013.

• "Tata Steel Group's Sustainability Report for 2019Q1" (PDF). Archived from the
original (PDF) on 8 August 2020. Alt URL
• "Tata Steel Group's Sustainability Report for 2020Q1" (PDF). Archived from the
original (PDF) on 5 March 2021. Alt URL

79
• "Tata Steel Group's Sustainability Report for 2021Q1" (PDF). Archived from the
original (PDF) on 8 June 2021. Alt URL
• "Tata Steel Group's Sustainability Report for 2021Q1" (PDF). Archived from the
original (PDF) on 8 June 2021. Alt URL
• "Tata Steel Group's Sustainability Report for 2021Q1" (PDF). Archived from the
original (PDF) on 8 June 2021. Alt URL
• "Tata Steel Group's Sustainability Report for 2021Q1" (PDF). Archived from the
original (PDF) on 8 June 2021. Alt URL

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 BIBLIOGRAPHY

BOOKS:

1. Financial Management BY. KHAN & JAIN

2. management Accounting 6th edition BY M.Y. KHAN, P.K. JAIN
3. 3.Fincial Accounting for Mangers BY SANJAY DHANMIJA

WEBSITES:

1.www.tatasteel.com
2.www.wikipedia.org
3.www.goggle.com

ANNUAL REPORT:

1.TATA STEEL 17-18

2.TATA STEEL 19-20

3.TATA STEEL 20-21

4.TATA STEEL 21-22

81
 APPENDIX

1. What distinguishes a well-functioning WCM?

2. Regarding WCM, what aspect or questions do you perceive get the most attention
and what is usually focused upon?
3. What industries do you believe are most affected by changes in working capital?
4. What aspects and components of working capital do you consider to be of
greatest importance?
5. Have you reflected over how companies have changed their WCM over time? (In
connection to financial crisis’s etc.)
6. Have you noticed any shift in focus on WCM over time?
7. Are there situations where it is more suitable to increase focus on WCM, less
suitable? Do you consider it to be possible to combine a focus on WCM and
revenue growth?
8. What is your perception on how WCM is incorporated in a larger perspective, as
part of the “larger picture”?
9. Do you consider WCM to be more important for some industries than others?
Which?

82