Table of Contents

Sr No Particulars Page Nos

Authorization 3
Acknowledgement 4
1 Abstract 6
2 Company Profile 7
3 Product Profile 8
4 Topic of Study 9
5 Ratio Analysis 10-17

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 Abstract

The company is a public sector undertaking in India which is involved in the exploration,
production, and sale of various minerals such as iron ore, diamond, gold, tin, etc. The objective of
my study is to conduct Industry analysis and study the history of the company along with its
various operations and subsidiaries. To assess whether the company is able to effectively manage
its short-term assets and liabilities in order to meet its operational and financial obligations. This
includes managing the cash flow cycle, inventory levels, accounts receivable and payable, and
other aspects of the company's working capital. To meet my objectives till now I’ve gathered the
data from the annual reports of the company and website of BSE and NSE. Through the study of
ratio analysis I would be able to assess whether a company has sufficient liquidity to meet its short-
term obligations while maintaining its operations. 

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 Company Profile

NMDC Limited (formerly known as National Mineral Development Corporation) is a public sector
undertaking (PSU) under the Ministry of Steel, Government of India. The company is engaged in
the exploration, mining, and production of iron ore, diamonds, and other minerals. Founded in
1958, NMDC is headquartered in Hyderabad, Telangana, India, and has operations across India
and in other countries such as Australia, Mozambique, and Tanzania. It operates three iron ore
complexes in India, namely Bailadila Iron Ore Mines in Chhattisgarh, Donimalai Iron Ore Mines
in Karnataka, and Kumaraswamy Iron Ore Mines in Karnataka.

The company has an annual production capacity of around 35 million tonnes of iron ore and is one
of the largest iron ore producers in India. The company also operates diamond mines in Panna,
Madhya Pradesh, and is engaged in the exploration and mining of a range of minerals such as
copper, gold, tungsten, graphite, and potash. It has a strong presence in the international market
and exports its products to countries such as Japan, South Korea, China, and the Middle East. The
company has also formed joint ventures with international companies to explore and develop
mineral resources in various countries. As of 2021, NMDC has a workforce of around 5,000
employees and has been consistently ranked among the top PSUs in India in terms of profitability
and market capitalization.

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 Product Profile 

NMDC Limited is primarily engaged in the exploration, mining, and production of iron ore,
diamonds, and other minerals. The company has a dominant presence in the iron ore mining
industry in India and operates three iron ore complexes located in Chhattisgarh and Karnataka
states. The company's flagship iron ore mines are located at Bailadila, which is one of the largest
iron ore mines in the world, producing high-grade iron ore. NMDC has also expanded its
operations to diamond mining, with its diamond mines located in Panna, Madhya Pradesh.

In addition to iron ore and diamonds, NMDC is also involved in the exploration and mining of
other minerals such as copper, gold, tungsten, graphite, and potash. The company has entered into
joint ventures with international companies for exploration and development of mineral resources
in various countries, including Australia, Mozambique, and Tanzania. NMDC has a strong
presence in the international market and exports its products to countries such as Japan, South
Korea, China, and the Middle East. The company has also diversified into renewable energy and
has set up a 10 MW solar power plant in Karnataka. Overall, NMDC's business is focused on the
exploration, mining, and production of various minerals and its exports to both domestic and

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international markets. The company aims to maintain its leadership position in the iron ore mining
industry and diversify into other minerals and renewable energy sources.

Topic of the study

Working capital management refers to the process of managing a company's short-term assets and
liabilities to ensure that it has enough liquidity to meet its day-to-day operational needs. This
involves balancing the company's current assets, such as inventory, accounts receivable, and cash,
with its current liabilities, such as accounts payable and short-term debt. Effective working capital
management is critical for the financial health of a company, as it ensures that it has sufficient
funds to cover its short-term obligations and maintain its operations. Some key aspects of working
capital management that we will be focussing on are: 

Inventory management: Ensuring that the company has the right amount of inventory on hand to
meet demand without tying up too much cash.

Accounts receivable management: Monitoring and collecting outstanding payments from

customers to ensure that cash is coming into the company.

Accounts payable management: Managing payments to suppliers to ensure that the company has
sufficient credit and does not incur late payment fees.

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Cash management: Managing cash flow to ensure that the company has sufficient liquidity to meet
its day-to-day obligations.

Short-term financing: Obtaining short-term financing, such as bank loans or lines of credit, to
cover temporary shortfalls in working capital.

Overall, effective working capital management involves maintaining a balance between the
company's short-term assets and liabilities and ensuring that it has sufficient liquidity to meet its
operational needs. This helps to improve the company's financial health, reduce the risk of
insolvency, and enhance its ability to invest in growth opportunities.

Research Methodology

The entire research will be based on the following two methodologies

● Descriptive Research
● Analytical Research

 Descriptive Research
This is sometimes referred to as Statistical Research which is mainly concerned with the data
and description of the previous and current financials in detail. It will give answers to the
questions of who, what, how, and when on the basis of different scenarios. Descriptive Research
refers to the questions, detailed study of the topic, and analysis conducted. Here the major focus is
to study various non-financial factors that helped the company with revenue generation and how it
affected the company.

Analytical Research
This is mainly concerned with the events behind a particular result through causal relationships.
There can be one or more relationships depending on the parameters or the variables chosen
like the profit of the company, the stock price movements etc.

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Data Collection Procedure
After finding out the research problem and identifying the key areas of research, data collection
starts, and a design plan is chalked out. While preparing the area of study, the researcher should
keep in mind the two most important sources of data.

Secondary Data
It is mainly concerned with already existing data available from sources such as newspapers,
journals, websites, blogs, etc. This study is primarily based on secondary research and so
relevant sources like money control, yahoo Finance, RBI website, official websites of NSE & BSE,
etc were used to assimilate all the data. Once the data is collected, the analysis will be carried out
through various statistical methods.

Data Analysis and Interpretation

Current Ratio 
The current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations
or those due within one year. It tells investors and analysts how a company can maximize the
current assets on its balance sheet to satisfy its current debt and other payables.

 Formula: Current Assets/Current Liabilities 

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A current ratio of less than 1.00 may appear concerning, but different circumstances can have a
negative impact on the current ratio in a solid company. In theory, the higher the current ratio,
the better a company is at meeting its obligations because it has a higher proportion of short-
term asset value relative to short- term liabilities. However, while a high ratio—say, greater
than 3.00—could indicate that the company can cover its current liabilities three times over, it
could also indicate that the company is not using its current assets efficiently, is not securing
financing well, or is not managing its working capital properly. When placed in the context of
what has historically been normal for the company and its peer group, the current ratio can be a
useful measure of a company's short-term solvency. When calculated repeatedly over several
periods, it also provides more insight From the above graph, we can interpret that the current
ratio is showing a mixed trend from the year it went down to approximately 1.94 in 2021,
whereas it bounced back to 2.24 in 2022.

Quick Ratio
The quick ratio is an indicator of a company's ability to meet short-term obligations with its most
liquid assets. It is also known as the acid test ratio because it indicates the company's ability to
immediately use its near-cash assets (assets that can be converted quickly to cash) to pay down its
current liabilities. An "acid test" is a slang term for a quick test that produces immediate results.
The quick ratio compares the dollar amount of a company's liquid assets to the dollar amount of its
current liabilities. Liquid assets are current assets that can be quickly converted into cash with little
impact on the price received in the open market, whereas current liabilities are debts or obligations
owed to creditors that must be paid within one year.

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Formula: Quick Assets / Current Liabilities

A company may have a large amount of money in accounts receivable, which may raise the quick
ratio. However, if the customer's payment is delayed due to unavoidable circumstances or if the
payment has a due date that is a long time in the future, such as 120 days based on the terms of
sale, the company may be unable to meet its short-term liabilities. From the above graph it can be
seen that the quick ratio of the company has shown a decrease from 2018 to 2022.

Trade Receivables Ratio 

The accounts receivable turnover ratio, also known as the debtor’s turnover ratio, is an efficiency
ratio that gauges how efficiently a firm is collecting money – and by extension, how efficiently it is
using its assets. The average number of times a firm collects its accounts receivable during a
specific time period is measured by the accounts receivable turnover ratio.

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A high ratio is ideal since it implies that the company’s collection of accounts receivable is regular
and efficient. A high accounts receivable turnover also implies that the firm enjoys a high-quality
client base that is able to pay its bills swiftly. A high ratio may also indicate that a cautious credit
strategy, such as net-20 days or even net-10 days, is used by the firm, whereas a low accounts
receivable turnover ratio, on the other hand, may indicate that the company's collection efforts are
ineffective. This can be a result of the business giving credit conditions to unworthy clients who
are struggling financially. From the above graph, it can be inferred that the ratio of trade
receivables has shown a downfall from 2018 to 2020. The reason can be attributed to the increase
in trade receivables.

Inventory Turnover ratio 

Inventory turnover is a financial ratio that shows how frequently a company's inventory is sold and
replaced over a given time period. The number of days in the period can then be divided by the
inventory turnover formula to calculate how long it will take to sell the inventory on hand.
Calculating inventory turnover can help businesses make better decisions about pricing,

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manufacturing, marketing, and purchasing new inventory. Inventory turnover is a measure of how
quickly a company's inventory is sold.

A low turnover rate indicates poor sales and possibly excess inventory, also known as
overstocking. It could be the result of a problem with the goods being offered for sale, or it could
be the result of insufficient marketing. A high ratio, on the other hand, indicates either high sales or
a lack of inventory. The former is preferable, whereas the latter may result in lost business. From
the above graph, it can be inferred that there have been a significant decrease in the Inventory
turnover ratio from 0.69 to 0.31. This can be attributed to a greater increase in the average
inventory in comparison to COGS.

Conclusion
From the above study, it may conclude that the working capital management of NMDC Ltd has
been satisfactory during all the years under study. Most of the ratios are doing very well except for
inventory management. The company should focus on these issues. It is also concluded from the
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study that though the company’s earnings are increasing every year, the company’s funds are not
properly utilized. Therefore NMDC Ltd should try to improve its financial position in the coming
years. But the company’s overall position is still very good it is in a liquid position and pays its
current as well as non-current liabilities very easily and on time. As it is also concluded from the
data company’s investment in current assets is quite high on the one hand, it increases the
company’s solvency, but on the other hand, it also decreases its profitability.

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