BIRLA INSTITUTE OF TECHNOLOGY MESRA

Working Capital Management of Tata steel Ltd and Comparative analysis study
with respect to its major competitor’s

Project Report
Submitted in partial fulfil of the requirements
for the award of
Masters in Business Administration

(A TWO YEAR FULL TIME PROGRAM IN MANAGEMENT)

Corporate Guide: Faculty Guide:

Mr. Pranav Kumar Jha
Sr. Manager(Sales & (Associate
EPA) Professor)

Submitted by

Jyoti Sinha
MBA/10011/14

MBA2014-2016

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 DECLARATION

I hereby declare that the project entitled "WORKING CAPITAL MANAGEMENT OF

TATA STEEL LTD AND COMPARATIVE ANALYSIS BETWEEN TATA STEEL ,
SAIL AND JINDAL STEEL" is submitted in partial fulfilment of my SIP programme.
The project duration was from 26th of May to 14th of July. To the best of my knowledge it is
an original piece of work done by me and it has neither been submitted to any other
organization nor published at anywhere before.
The findings and conclusions of this report are based on my personal study and experience
during the tenure of my Summer Internship.

Name – Jyoti Sinha

College – BIT Mesra
Date – 14.07.2015

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 AUTHORIZATION

This is to certify that this is a bonafide project report submitted in partial fulfilment of my
SIP programme of BIT Mesra.
This report document titled "WORKING CAPITAL MANAGEMENT OF TATA STEEL
LTD AND COMPARATIVE ANALYSIS BETWEEN TATA STEEL, SAIL AND JINDAL
STEEL" is a submission of work done by Ms. Jyoti Sinha (MBA/10011/14).
This report has been formally submitted to BIT Mesra.
This report has been verified and authenticated by:
Mr. Pranav Kumar Jha
Date- 14.7.15

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 ACKNOWLEDGEMENT
A summer project is the way for a student to apply his knowledge for finding solution to real
life problem. It gives me great pleasure to submit my summer project on "Working Capital
Management".
I would like to extend my gratitude to Mr. Pranav Kumar Jha (Head of Sales and EPA,
Finance and Accounts) for giving me opportunity to work in such an important sphere and
sharing his vision and experience and for his continuous guidance and support.
My acknowledgement would be incomplete without mentioning the kind support and
guidance provided by my college HOD Mr.Utpal Baul, my mentor Mr Pranav Kumar Jha
and my faculty guide Mr.S.K.Bose and Mrs.Shradha Shivani for always encouraging me and
guiding me during my SIP. I am also thankful to my colleague in Tata Steel from different
colleges.
Last but not the least, I would want to thank my parents and friends for their support, who
helped me during the course of this project.

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 CONTENTS
EXECUTIVE SUMMARY............................................................................................ 5
INTRODUCTION AND COMPANY PROFILE...............................................................6
OVERVIEW OF IRON & STEEL INDUSTRY.............................................................7
 GLOBAL SCENARIO.................................................................................... 8
 Indian Scenario......................................................................................... 9
 Steel Demand Forecasts.........................................................................10
COMPANY PROFILE............................................................................................ 11
MISSION OF THE COMPANY............................................................................... 13
VISION OF THE COMPANY.................................................................................14
GOALS 2015..................................................................................................... 14
STRATEGIC BUSINESS UNITS.............................................................................15
SUBSIDIARY/ASSOCIATES/JV's...........................................................................17
CORPORATE SOCIAL RESPONSIBILITY...............................................................20
HUMAN RESOURCE POLICY OF TATA STEEL.......................................................20
TYPES OF PRODUCT.......................................................................................... 21
AWARDS AND RECOGNITION............................................................................ 25
Founders of TATA STEEL....................................................................................26
FINANCE AND ACCOUNTS DEPARTMENT OF TATA STEEL...................................31
REVIEW OF LITERATURE....................................................................................... 33
 Efficiency in management of working capital..........................................33
 Working capital management and profitability.......................................38
 Working capital management practices..................................................39
RESAERCH METHODOLOGY.................................................................................. 41
OBJECTIVE OF THE STUDY.................................................................................41
SCOPE OF THE STUDY....................................................................................... 41
RESEARCH DESIGN........................................................................................... 42
TOOLS AND TECHNIQUES FOR COLLECTION OF DATA:.....................................42
 PRIMARY SOURCE OF DATA......................................................................42
 SECONDARY SOURCE OF DATA................................................................42
ANALYSIS AND INTERPRETATION.......................................................................43
LIMITATIONS...................................................................................................... 43
SWOT ANALYSIS OF TATA STEEL........................................................................43
MICHAEL PORTER ANALYSIS.............................................................................. 45

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 WORKING CAPITAL MANAGEMENT....................................................................47
FINANCIAL RATIO WITH RESPECT TO WORKING CAPITAL..................................50
CONSEQUENCE OF OVER ASSESSMENT OF THE WORKING CAPITAL.................52
DATA ANALYSIS AND INTERPRETATION.................................................................54
TATA STEEL....................................................................................................... 55
Financial Ratios of Tata Steel:...........................................................................60
STEEL AUTHORITY OF INDIA LIMITED (SAIL).....................................................75
JINDAL STEEL & POWER LIMITED......................................................................86
Comparative analysis of Tata Steel,Jindal Steel and SAIL.................................94
Findings:......................................................................................................... 109
Recommendations:......................................................................................... 110
Conclusion...................................................................................................... 111
BIBLIOGRAPHY................................................................................................ 112

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EXECUTIVE SUMMARY
This internship is a bridge between the institute and organization. This training program is
designed to give the future manager a feel about the corporate happenings and work culture
of an organization. These real life situations are entirely different from the stipulated exercise
enacted in an artificial environment inside the classroom and it is precisely because of this
reason that this summer training program is designed, so that managers of tomorrow get ideas
about the real time business operations. The summer internship program helps us to apply our
theoretical knowledge into the practical field.
Working capital is the most important part of the current assets of an organization.
Management of working capital is important because it has a direct impact on the financial
resources of the organization. Excess investment on the part of inventory is not viable
because the funds then will be held up in inventories and will not be available for other
important segment of the business. Less investment is also detrimental because the company
might face a huge problem in fulfilling the requirement of the business. Therefore, proper
working capital management is very essential for an organization.
This project explains in details of working capital management and how it is operated in an
organization. Various ratio analysis have been taken out on the basis of the data provided so
as to find out the trends of working capital requirements in TATA STEEL LIMITED, a
leading manufacturer of the steel in the world. A brief study of Indian steel has carried out a
comparative analysis of TATA STEEL LIMITED (TSL) AND JINDAL STEEL AND
POWER LTD (JSPL) AND SAIL. Thus analysis studies the different techniques used by
different companies and how effective those prove in this competitive environment.

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 CHAPTER - I

INTRODUCTION AND COMPANY PROFILE

OVERVIEW OF IRON & STEEL INDUSTRY

Steel is one of the top manufactured products of the world. It contributes to about 1661.5
million tonnes and showing a growth of over 1.2% in 2013. (Source: World Steel Association
or WSA)Nearly 67% of this was contributed to by Asia. China's share was 49.2%.China
remained the world’s largest crude steel producer in 2014 (823 mt) followed by Japan (110.7
mt), the USA (88.3 mt) and India (83.2 mt) at the 4th position.The history of the modern steel
industry began in late 1850s, Ibut since then steel has been basic to the world's industrial
economy. Indian players like Tata Steel, SAIL and many others have gone global due to the
steel industry's growing rapidly and reaching new heights.
Steel is an important indicator to analyze the economic development of a country. The steel
industry is highly scientific and technology oriented. Technological advancement is very
important for the overall health of the steel industry.

• GLOBAL SCENARIO

In 2014, global demand is forecast to grow faster at about 3.3%. However, more demand
growth is expected to come from outside of China as the Chinese Government pushes
through economic restructuring with a focus on private consumption. With the exception of
China, global supply and demand for steel will largely follow economic growth recovery
around the world.
In China, national mandates to rationalize capacity will have an effect on supply and as the
Chinese economy moves to a more consumer-driven model, steel consumption is expected to
moderate. The short-term estimates by World Steel Association for global steel demand are
similar on an overall basis, with some more positive views for growth in the US, the EU,
Brazil and Russia but a relatively lower expectation for Asian countries.
Growth in the Chinese economy continues to be a determining factor for the global steel
market in the medium-to-long term. As China seeks to restrain investment activity,
rebalancing and deleveraging, current forecasts for 2014 are for lower growth rates in
production and demand with the removal of excess capacity. However, if urbanization
projects continue, accompanied by a strong domestic economy and a growing middle class,

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the demand for steel will continue to stimulate. It will also shift the product range as more
sophisticated consumer products, such as automobiles and home appliances, are sought after.
This will benefit steelmakers with high-end, value-added products. Two factors may cause
more rapid restructuring of the Chinese steel sector:
• The excessive levels of debt may allow Chinese policy banks to stop funding losses as a
catalyst to restructure.
• The use of steel stockpiles to collateralize debt to be used for speculation is expected to be
unwound.
Steel demand in Europe and the US is likely to improve during 2014–15. In Europe, it is
expected to increase by a robust 2% in 201411 on the back of investment in the infrastructure
and manufacturing sectors. Although the growth may be insufficient to absorb the capacity
overhang, the switch from decline to marginal growth can be important for industry margins
and overall sentiment. US steel demand is also expected to improve on the back of residential
construction, growing automotive production and energy investments. Other regions to
experience faster steel demand growth will be India, Brazil, Russia and MENA (the Middle
East and North Africa).

It is fairly clear that while there has been a continuous strong growth, year on year, in China.
However, the trends in Japan and USA have not been so. The European Union has not been
out of the financial mess and the emerging economies do not hold any strong promise to the
global investor community in the short run as their macro management has been far below
expectation. The latest report of IMF also point to gloomy prospects of the emerging
economies while at the same time, they have in fact seen some stability creeping into the
economies of the developed world.

• Indian Scenario

India's steel industry is more than a century old. Before the economic reforms of the early
1990s the Indian steel industry was predominantly regulated by the public sector. Tata Steel
was the only major private sector company involved in the production of steel in India. SAIL
and Tata Steel have traditionally been the major steel producers of India. In 1992,
liberalisation of the Indian economy led to the opening up of various industries including the
steel industry. Thus the number of producers increased, with increased investments in the
steel industry and increased production capacity.

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Indian Steel industry went through a rough phase between 1997 and 2001 when the overall
global steel was facing a downturn but recovered after 2002. The major factors that led to the
revival of steel industry in India were the rise of global demand for steel and the domestic
economic growth in India.
The Indian steel industry has entered into a new development stage from 2007-08, riding high
on the resurgent economy and rising demand for steel. Rapid rise in production has resulted
in India becoming the 4th largest producer of crude steel and the largest producer of sponge
iron or DRI in the world.

Production
 Steel industry was delicensed and decontrolled in 1991 & 1992 respectively.

 Today, India is the 4th largest crude steel producer of steel in the world.

 In 2013-14, production for sale of total finished steel (alloy + non alloy) was 87.67
mt and 65.197 mt during April-December 2014-15 (provisional).

 Production for sale of Pig Iron in 2013-14 was 7.95 mt and 6.08 mt during April-
December 2014-15 (provisional).

 India is the largest producer of sponge iron in the world with the coal based route
accounting for 89% of total sponge iron production in the country.

 Data on production for sale of pig iron, sponge iron and total finished steel (alloy +
non-alloy) are given below for last five years and April-December 2014-15:

• Steel Demand Forecasts

There are many studies projecting steel demand growth scenario over the next couple of
decades. In a recent study, the Boston Consulting Group (BCG) has made the following
observations. :
a) On the present pattern of growth - the real GDP of India grew from 2002 to 2013 was at
7.4per cent and the steel consumption grew by 8.2per cent in the said period. Over the next
12 years at a GDP growth of 6 – 6.5per cent, and a GDP elasticity of steel demand at 1.1, the
likely growth of steel consumption growth rate was estimated at 7.3per cent per year and the

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finished steel consumption in 2025-26, on this basis, was estimated to grow to 155 – 170
million tons by that year.
b) Bench marking India’s stage of economic growth with other countries – On another model,
following established trajectory of growth as seen in other countries, the per capita
consumption of steel in India would move from the level of 59 kgs in 2011 to 175 kgs in
2025-26, and given the fact that the population of India is projected to grow to 1.43 billion
that year, the steel consumption in 2025-26 is likely to be around 250 million tons. c) The
goal of India to increase share of manufacturing to 25per cent of GDP by 2025 – The above
target if achieved can propel the usage of finished steel from 16 kgs / $ PPP in the year 2012
to 22 – 25 kgs / $ PPP in the year 2025-25. This would mean a growth in steel consumption
of 9 -10per cent and the steel consumption in 2025-26 is likely to be around 230 – 255
million tons.

Fig. 4 Current as well as projected production capacity of steel industry.

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 COMPANY PROFILE

TATA STEEL LTD.

Established in 1907, TATA STEEL LTD is among the top ten global steel companies with an
annual crude steel capacity of over 28 million tons per annum(mtpa). it is now one of the
world's most geographically-diversified steel producers, with operations in 26 countries and a
commercial presence in over 50 countries.
TATA Steel's larger production facilities include those in India, the UK, Netherlands,
Thailand, Singapore, China and Australia. Operating companies within the group include Tata
Steel Europe Limited (formerly known as Corus), NatSteel, and Tata Steel Thailand
( formerly millennium steel).
Backed by 100 glorious years of experience in steel making, Tata Steel is the world's 6th
largest steel company with an existing annual crude steel production capacity of 30 Million
Tonnes Per Annum (MTPA). Established in 1907, it is the first integrated steel plant in Asia
and is now the world's second most geographically diversified steel producer and a Fortune
500 Company.
Tata Steel has a balanced global presence in over 50 developed European and fast growing
Asian markets, with manufacturing units in 26 countries.
It was the vision of the founder, Jamsetji Nusserwanji Tata, that on 27th February,1908, the
first stake was driven into the soil of Sakchi. His vision helped Tata Steel overcome several
periods of adversity and strive to improve against all odds.
Tata Steel's Jamshedpur(India) Works has a crude steel production capacity of 6.8 MTPA
which is slated to increase to 10 MTPA by 2010. The company also has proposed three
Greenfield steel projects in the states of Jharkhand, Odisha and Chhattisgarh in India with
additional capacity of 23 MTPA and a Greenfield project in Vietnam.
Through investments in Corus, Millennium Steel(renamed Tata Steel Thailand) and NatSteel
Holdings, Singapore, Tata Steel has created a manufacturing and marketing network in
Europe, South East Asia and pacific-rim countries. Corus, which manufactured over 20
MTPA of steel in 2008, has operations in the UK , the Netherlands, Germany, France,
Norway, Belgium.

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Tata Steel, through its joint venture with Tata BlueScope Steel Limited, has also entered the
steel building and construction applications market.
The iron ore mines and collieries in India give the Company a distinct advantage in raw
material sourcing. Tata Steel is also striving towards raw materials security through joint
ventures in Thailand, Australia, Mozambique, Ivory Coast (west Africa) and Oman. Tata Steel
has signed an agreement with Steel Authority of India Limited to establish a 50:50 joint
venture company for coal mining in India. Also
Tata Steel has brought 19.9% stake in New York Millennium Capital Corporation, Canada for
iron ore mining.
Tata Steel India is the first integrated steel company in the world, outside Japan, to be
awarded the Deming Application Prize 2008 for excellence in Total Quality Management.

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MISSION OF THE COMPANY

Consistent with the vision and values of the founder Jamsetji Tata, Tata Steel strives to
strengthen India's Industrial base through the effective utilization of staff and materials. The
means envisaged to achieve this high technology and productivity, consistent with modern
management practices.
Tata steel recognizes that while honesty and integrity are the essential ingredients of a strong
and stable enterprise, profitability provide the main spark for economic activity.
Overall, the company seeks to scale heights of excellence in all that it does in an atmosphere
free from fear, and thereby reaffirms its faith in democratic values.

VISION OF THE COMPANY

We aspire to be the global steel industry benchmark for

Value Creation and Corporate Citizenship.

We make the difference through:

 Our people, by fostering team work, nurturing talent, enhancing leadership capability
and acting with pace, pride and passion.
 Our offer, by becoming the supplier of choice, delivering premium products and
services, and creating value with our customers.
 Our innovative approach, by developing leading edge solutions in technology,
processes and products.
 Our conduct, by providing a safe working place, respecting the environment, caring
for our communities and demonstrating high ethical standards.

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 GOALS 2015
The Tata Steel Group is proud of its performance culture. We are committed to the
pursuit of challenging targets, and to safety of environment protection, continuous
improvement, openness and social responsibility in every aspect of our business
around the world.

We have set ourselves four key corporate goals to achieve by 2015

 Value creation: Deliver a 30% return on invested capital(ROIC)

 Safety: Achieve an industry leadership position by driving down our lost time
injury frequency rate (LTIF) to a maximum of 0.4 incidence per million hours
worked.
 Environment: Reduce carbon dioxide (CO2) emission to less than 1.9 tons per
ton of crude steel.
 People: Rank as an employer of choice in the top quartile across all industries.

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STRATEGIC BUSINESS UNITS

Apart from the main steel division, TATA STEEL"S operations are grouped under the
following strategic business units.

 Bearing Divisions: manufactures ball bearings, double roll self-aligning bearings,

clutch release bearings and tapped roller bearing for two wheelers, fans, water pumps
etc.

 Ferro Alloys and Minerals Division: operates chrome mines and has unit for making
Ferro chrome and Ferro manganese. It is one of the largest players in the global Ferro
chrome market.

 Rings and Agrico Division: the ring plant manufactures forged and rolled rings for
bearings and automotive components.

 Tata Agrico: it is the first organized manufacturer in India of hand tools and
implement application in agriculture.

 Tata Growth Shop (TGS): it has designed, developed, manufactured, erected and
commissioned thousands of tonnes of equipments ranging from overhead cranes to
high precision component, including a rocket launch pad for the Indian Space and
Research Organization.

 Tubes Division: the biggest steel tube manufacturer with the largest market share in
the country, it aspires to strengthen its market presence by expanding and
modernizing its commercial and precision tube manufacturing capacity.

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  Wire Division: a pioneer in the manufacturing of steel wires in India, it produces
coated and uncoated wires, branded as TATA WIRON. The division also operates a
wholly owned subsidiary in SRILANKA.
SUBSIDIARY/ASSOCIATES/JV's

CORUS:
Europe's 2nd largest steel maker with operations in the UK and mainland Europe and over
40000 employees worldwide. It is long and strip products cater to the construction,
automotive, packaging, engineering and other markets worldwide. CORUS is implementing
major investments at its plants at IJmuiden, in the Netherlands and at Scunthorpe in the UK
as part of its drive to strengthen product differentiation, improve operation efficiency and
reinforce existing competitive positions, particularly in the constructions and automotive
sectors, including the development of new advanced high strength steels.

The Tinplate Company of India ltd.

Over 35% market share in India. It has a capability to supply all tinning line products
including electrolytic tinplate/ tin-free steel and cold-rolled products.

Tayo Rolls Ltd.

Country's leading roll manufacturer and supplier. The company produces rolls which find
application in integrated steel plants, power plants, the paper, textile and food processing
sectors, and the government mint.

Tata Ryerson Ltd.

In the business of steel processing and distribution. It offers hot and cold rolled flat steel
products in customized sizes and quantities through processing services and materials
management services.

Tata Refractories Ltd.

Largest producer of refactories in India. It produces high alumina, basic, dolomite, silica and
monolithic refactories and offers design, procurement and re-lining application services. It is
one of the few companies worldwide to produce silica refactories for coke ovens and the
glass industries. The company has a basic bricks manufacturing unit in China.

Tata Sponge Ltd.

TSIL is the first Indian sponge iron plant based on Tata Steel's Direct Reduction Technology.
Its major product lines are sponge iron lumps and fines. Has an installed capacity of 2.4 lakh
tonnes.
Tata Metaliks Ltd.
Among the top wealth creating companies (EVA+) in the country, Tata Metaliks is engaged in
the business of manufacturing and selling foundry grade pig iron.

Tata Pigments Ltd.

TPL's range of products includes oxides of iron, dry cement paint, exterior emulsion paint
and distemper. Its products are used in paints, emulsion, cement floors, plastic etc.

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Jamshedpur Injection Powder Ltd.
JAMIPOL manufactures carbide de-sulphurising compounds which are used for de-
sulphurising hot metal for the production of low-sulphur, high quality steel.

TM International Logistics Ltd.

TMILL provides material handling and port operation services at Haldia and Paradip Ports in
addition to providing ports in addition to providing freight forwarding and chartering
services.

Indian Steel and Wire Products.

Recently acquired by Tata Steel, ISWP has two units- a wire unit comprising wire drawing
mills, wire rod mills and a fastener division and a steel roll manufacturing unit named
Jamshedpur Engineering and Machining Company - JEMCO.

Mjunction services ltd.

Mjunction, operating at the cutting edge of Information Technology, is a 50:50 venture of
SAIL and Tata Steel. It is India's largest eCommerce company and the world's largest
eMarketplace for steel. Mjunction offers a wide range of selling, sourcing and knowledge
services that empower businesses with greater process efficiencies.

Dharma Port Company, Orissa.

A JV between Larsen & Turbo Ltd. and Tata Steel Ltd., the company will build a deep-
draft(18 metres) all weather port on the east coast of India. The port will handle 80 million
tonnes per annum of cargo.

TRF Ltd.
TRF, one of India's leading companies in the business of design, manufacture, supply,
installation and commissioning of engineered-to-order equipment and systems in the areas of
bulk material handling, processing, reclaiming and blending. TRF has also made its mark in
the field of coke oven equipment, coal dust injection systems for blast furnaces and coal
beneficiation systems.

Jamshedpur Utility and Service Company Limited (JUSCO)

Re-engineered out of Tata Steel's town services, JUSCO is a wholly owned subsidiary of Tata
Steel and is the country's first enterprise that provides municipal and civic services for
townships. JUSCO is the only EMS 14001 civic services provider in the country.

Hooghly met Coke & Power Company

A joint venture with West Bengal Industrial Development Corporation Ltd., HMC&PC
envisages an annual met coke production of coke production capacity of 1.2 million tonnes
and 90 MW of electric power.

Tata Blue Scope Steel Ltd.

A Joint Venture with Blue Scope Steel Ltd, Australia, Tata Blue Scope Steel Ltd offers a
comprehensive range of branded steel products for building and construction applications.
The company is constructing a state-of-the-art metallic coating and painting facility at
Jamshedpur.

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ASSOCIATED AND SUBSIDIARIES - OVERSEAS

Lanka Special Steel Ltd.

A wholly owed subsidiary it is he only unit in srilanka manufacturing galvanized wires.

Sila eastern Co.Ltd.

A 49% joint venture to undertake development of lime stones mines in Thailand.

NatSteel Holdings (NSH)

A leading supplier of premium steel products for the construction industry.
NatSteel Holdings became a 100% subsidiary of Tata Steel in February 2004.
NSH produces about 2 MT of steel products annually across its regional operations in
seven countries.

Tata Steel Thailand.

The company is the dominant steel producer in Thailand. The company has the
capacity to produce 1.7 million tonnes of steel for the construction industry per year.

Apart from this, the company has also been able to establishing strategic partnership with
international players like :-

1. NIPPON STEEL CORPORATION,JAPAN.

2. MARCELO, FRANCE.
3. POSDATA, SOUTH KOREA.
4. REASON, USA (a joint venture with this company)
5. VIVID WATER, UK.
6. PAUL WORTH, LUXEMBERG.

This has been possible because of low level of cost that is maintained by the company.

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CORPORATE SOCIAL RESPONSIBILITY

 Tata Steel believes that the primary purpose of a business is to improve the quality of
life of people.
 Tata Steel shall volunteer its resources, to the extent it can reasonably afford, to
sustain and improve healthy and prosperous environment and to improve the quality
of life of the employees and the communities it serves.
 Tata Steel shall conduct its business ever mindful of its social accountability,
respecting applicable laws and with regard for human dignity.
 Tata Steel shall positively impact and influence its partners in fostering a sense of
social commitment for their stakeholders.

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HUMAN RESOURCE POLICY OF TATA STEEL

 Tata Steel is an equal opportunity employer.

 Tata Steel recognizes that its people are the primary source of its competitiveness.
 It will pursue management practices designed to enrich the quality of life of its
employees, develop their potential and maximize their productivity.
 It will aim at ensuring transparency, fairness and equality in all its dealings with its
employees.
 Tata Steel strive continuously to foster a climate of openness, mutual fund and team
work.
 In the process, Tata steel shall strive to be the employer of choice by attracting the
best available talent and ensuring a cosmopolitan workforce.

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TYPES OF PRODUCT

1. RAW PRODUCTS - With a century of experience in sourcing raw material through

scientific research and development mining. TATA STEEL's three main areas of raw
material, operation are iron-ore, chromites and coal. The company's long term strategy has
been designed to have greater control over raw material.

2. AGRICULTRAL IMPLEMENTS - Tata Steel manufactures superior quality agricultural

implements through its Agrico Division from Tata High Carbon Steel, after using a single
piece by forging. The high quality of the products makes them the first choice in agricultural
equipment procurement both in the public and private sectors alike.

3. FLAT PRODUCTS - Galvanized corrugated sheets under brand name Tata Shaktee
Steelium, another product of the Flat Products Division happens to be the world's first
branded Cold Rolled Steel and has a strong presence in the retail segment through exclusive
shops called Steelium zones.

4. LONG PRODUCTS- Thermo Mechanically Treated (TMT) rebars from the Long
Products Division are produced under the brand name "TISCON" and are the first of its kind
to have been introduced in India. Tisco has been the first rebar in the country to be awarded
the 'Super Brand' status in the construction rebars category.

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5. TUBES - Pipes manufactured by the company's strategy business unit TATA TUBES, is
the most prominent brand in the industry today which is related through a wide distribution
network. A deeply thought out branding exercise was under taken in order to unleash the
power of the 'TATA PIPES' brand in the wielded steel. The tube division's main works is
situated at Jamshedpur and the marketing Head Office is in Kolkata.
Its three main lines of business are:-
 Commercial Tubes- For the conveyance segments, sold under the brand name of "Tata
Pipes".
 Structural Tubes- For the construction segment, sold under the brand name of "Tata
Structure".
 Precision Tubes- For the Auto, Boiler and Engineering segments.

6. WIRES - Steel Wires under the brand name Tata Wiron comprise 30% of market share of
the organized wire market in India. A wide range of wires manufactured by Tata Steel's wire
market in India. A wide range of wires manufactured by TATA STEEL's wire division cater to
the needs of the various industry segments such as automobiles, infrastructure, power and
genera engineering. The products are well established across the markets of Europe, USA,
Middle East Asia, Australia, South Asia and Asia-Far East. The range includes:
 Auto segment (Tyre Bead Wire, Spring Wire, Spoke Wire, Ball Bearing Wire)
 Construction Segment (LRPC,PC Wires)
 Power Segment (Cable armour, ACSR)
 Textile Industry (Card Clothing Wire)
 Galvanized Wires (Farming/Fencing)

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7. BEARING - A wide variety of bearing and auto assemblies are manufactured at TATA
STEEL at its bearing division with a production capacity of 30 million bearing numbers per
annum, TAsTA bearing and auto components happen to be the preferred choice of the key
players in the targeted industry segment. The product range includes:
 Ball Bearings
 Tapered Roller Bearings
 Magneto Bearings
 Double Row Angular Contact Bearings
 Clutch Release Assemblies
 Fan Support Assemblies
 Cylindrical Roller Bearings

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AWARDS AND RECOGNITION
 Tata steel was awarded the ‘2015 world’s Most Ethical company’ award under the
Metals category by the Ethisphere Institute. This way the third time, that Tata Steel
won this award.
 The Ministry of Steel awarded Tata Steel the prime Minister’s trophy for ‘Best
Performing Integrated Steel Plant’ in the year 2010-11, thus making it the eighth time
that Tata steel received this award since the trophy’s institution in 1992-93.
 In 2014, Tata steel received the ‘Top Indian Company in the Iron and Steel Sector’
Dun & Bradstreet Corporate Award 2014, after entering the list of India’s Top 500
Companies published by Dun & Bradstreet and excelling along various business and
social parameters.
 In the year 2013, Tata steel was ranked Indian’s 7th most admired company by Fortune
magazine. It was India’s most admired company in 2012.
 In 2013, Tata Steel received the Most Admired Knowledge Enterprises (MAKE)
award for 2012 at Global and Asian level. The company has previously been
recognised by the indian MAKE awards on six accounts since its inception in 2005.
 It won the ‘Golden peacock’ award in 2009 for its corporate social responsibility
(CSR) initiatives.
 In 1996, the Tata Bearings division was awarded the “Best of all” Rajiv Gandhi
National Quality Award.
 In 2008, Tata Steel was awarded Deming application prize for excellence in Total
Quality Management.
 In 2012, Tata Steel became the first integrated steel company in the world to be
awarded the Deming Grand Prize.

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Founders of TATA STEEL

JAMSHEDJI NUSSERWABJI TATA(1839-1904)

He was a visionary behind TATA STEEL. He realised that India’s real freedom is dependent
on its self sufficiency knowledge, power and steel, thus devoted the major part of his life, and
his fortune to three great enterprises-the Indian Institute of Science at Bangalore, the Hydro-
Electric scheme and the iron & Steel works at Jamshedpur. He envisaged and conceived a
steel town to the very last detail, later to be named as Jamshedpur.

SIR DORABJI TATA (1859-1933)

Sir Dorabji Tata carried out the bequest with scrupulous zeal and distinction,thus,even though
it was Jamshedji Tata who had envisioned the mammoth projects,it was in fact Dorabji Tata
who actually brought the venture to existence and fruition.He was the first chairman of
gigantic Tata enterprises.

J.R.D TATA (1904-1993)

He has been one of the greatest builders and personalities of modern India in the twentieth
century. He assumed chairmanship of Tata Steel at the young age of 34, but his charismatic,
disciplined and forward looking leadership over the next 50 years led the Tata group to new
height of achievement, expansion and modernization. His style of management was to pick
the best person for the job at hand and let him have the latitude to carry out the job. He was
the visionary whose thinking was far ahead of his time, which helped Tata group launching
its own airline, now known as Air India. He was awarded the country’s highest civilian
honour, Bharat Ratna in 1992.

RATAN NAVAL TATA

Ratan Naval Tata was born on December 28, 1937, in Surat. He was the chairman of Tata
group, India’s largest conglomerate founded by later generation of his family. He is one of the
most well known and respected industrialists in India. Ratan Tata completed his degree in
architecture with structural engineering from Cornell University in 1962 and the advance
management program from Harward Business School in 1975. He joined the Tata group in
December 1962 on the advice of JRD Tata. He was first sent to Jamshedpur to work at Tata
Steel. He worked on the floor with the blue collar employee, shoveling limestone and
handling the blast furnaces. He was appointed the Director in the charge of the National
Radio & Electronics Company Limited (NALCO) in 1971 and was successful in turning
Nalco around.

CYRUS. P. MISTRY

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Cyrus P Mistry, 45, is the sixth Chairman of Tata Sons and was appointed as the Chairman of
the board in December 2012. He has been a Director of the company since 206. In addition to
being Chairman of Tata Sons, Mr Mistry is also the Chairman of major Tata companies
including Tata Steel, Tata Motors, Tata Consultancy Services, Tata Power, Indian Hotels
Company, Tata Global Beverages and Tata Chemicals.
Mr Mistry was earlier managing Director of the Shapoorji Pallonji Group. Under his
leadership, Shapoorji’s construction business grew from revenues of $20 million to
approximately $1.5 billion. The business evolved from pure – play construction to executive
of complex projects in the marine, oil and gas and rail sectors, across a number of
international geographies.

Mr Mistry graduated with a degree in civil engineering from Imperial College London, UK,
in 1990. In 1997, he received an MSc in Management from London Business School. He is a
recipient of the ‘Alumni Achievement Award’ from the London Business School. He is also a
fellow of the Institution of Civil Engineers, London.

29 | P a g e
 Board of directors

Mr. Cyrus P Mistry Chairman, Not- independent,

Non-Executive Director

Mr. Subodh Bhargava Independent, Non -

Independent Executive Director

Mr. O. P. Bhatt Independent, Non-Executive

Director

Mr. Koushik Chatterjee Group Executive Director

(Finance and Corporate)

Mr. Ishaat Hussain Not Independent, Non -

Executive Director

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 Dr. Karl Ulrich Koehler Not Independent, Non-
Executive Director

Mr. D. K. Mehrotra Independent, Non-Executive

Director

Mr. T. V. Narendran Managing Director - Tata

Steel India and South East
Asia

Mr. Andrew M. Robb Independent, Non -

Executive Director

Mr. Jacobus Schraven Independent, Non -

Executive Director

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 Ms. Mallika Srinivasan Independent, Non-Executive
Director

Mr. Nusli Neville Wadia Independent, Non-Executive

Director

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 FINANCE AND ACCOUNTS DEPARTMENT OF
TATA STEEL

Scaling the plethora of success, the TATA STEEL has very well upgrade and maintained the
latest technology giving a good cut throat competition to its market rivals. The finance and
accounts department of TATA STEEL has been effectively and efficiently coordinated with
latest sassy technologies.

The asset of finance and accounts section lies in the fact that everybody works in prowess
proving their prudential and mettle, thus making TATA STEEL proud of its competent
employee and at the same breath stimulating it to explore its credentials.

Functions of Department
Functions performed by the division and the reports provided to the top management
includes:
 Monthly Profit Statement
 Monthly, Quarterly & Annual Reports
 Decision Support System
 Payment of Wages, Salaries and other due to employees
 Various analysis
 Payment to vendors

Group and Sections of Finance & Accounts Department

The whole section of finance in Jamshedpur division of TATA STEEL is divided into five sub
sections:
 CASH OFFICE
 FINANCE AND COST
 PAYROLL ACCOUNTS
 PURCHASE AND CAPITAL GROUP
 SALES AND INDIRECT TAXATION

Debtors are dealt by sales and Indirect Taxation group. Everything related to debtors
is termed as sundry debtors work.

Sales and Indirect Group is responsible for activities such as:

 FREIGHT-OUTWARD AND INWARD - ROAD AND RAIL
 INVOICE

Indirect Taxation matters - Excise and sales tax. It is also related to the post
sales. Activities like debtors and Town Accounting. It comprises of the
following section:

 EXCISE SECTION
 FREIGHT SECTION

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  TOWN DEBTORS SECTION
 SUNDRY DEBTORS SECTION
Market sector

 AUTOMOTIVE
 CCONSTRUCTION
 CONSUMER GOODS
 ENGINEERING
 PACKAGING
 LIFTING AND EXCAVATION
 ENERGY AND POWER
 AEROSPACE
 SHIPBUILDING
 RAIL
 DEFENSE AND SECURITY

Competitors of Tata Steel

1. SAIL (STEEL AUTHORITY OF INDIA LIMITED)
2. JSW STEEL LTD
3. VISA STEEL LTD
4. ESSAR STEEL LTD
5. ELESCTRO STEEL STEELS LTD
6. OCL IRON AND STEEL LTD
7. TECHNO CRAFT INDUSTRIES LTD
8. GALLANTISPAT LTD
9. STEEL EXCHANGE INDIA LTD
10. ARCELOR MITTAL

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 Chapter II
REVIEW OF LITERATURE

Efforts have been made to present a common scheme of various facets and issues relating to
this empirical studies carried out in past at the national and international stage in different
companies. Some important conclusions and research gap have been drawn from the review
of some research papers, articles, theses and textbooks available in the accessible libraries
and Internet sources. Different researchers have done studies in the field of management of
working capital that have been summarized into following three parts: -

• Efficiency in management of working capital

Verma (1989) examined working capital management in Tata Iron and Steel Company Ltd.
(TISCO), Steel Authority of India Ltd. (SAIL) and Indian Iron and Steel Company (IISCO)
during the period from 1978-79 to 1985-86 by using the financial tools and statistical
techniques. The study revealed that Tata Iron and Steel Company Limited had better working
capital management in comparison to Steel Authority of India Limited and Indian Iron and
Steel Company. Results also revealed that all the three firms under study had made excessive
use of bank borrowings to finance the working capital requirements.

Majumdar (1992), in order to know the pattern of financing the corporate working capital in
India, has analyzed balance sheets of 20 companies- 10 from private sector and 10 from
public sector for the period from 1981 to 1990. For the purpose of analysis researcher has
used statistical techniques and financial tools. Study indicates that major share of working
capital finance is from borrowings and effect of cost on the selection of sources of working
capital is not at all significant.

Mills (1996) has explored the question of the impact of inflation on the capital budgeting
process. The study reveals that it is reasonable to expect that the cost of capital will increase
at the same rate as the rate of inflation on an ex-ante basis, and that this increase will be a
multiplicative relationship. It also reveals that the higher the net working capital the greater is
the impact of inflation on capital spending.

Vijaykumar and Venkatachalam (1996) have made efforts to do in depth study of Tamil
Nadu Sugar Corporation for the period of 1985-86 to 1993-94. Results indicate that the
corporation has maintained moderate level of working capital, fewer amounts from long

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term-funds has been used for meeting short term liabilities and due to excess liquidity,
profitability was affected during the period of study.

Bansal (2001) has studied working capital management in Himachal Pradesh Agro Industries
Corporation Limited for the period from 1985-86 to 1994-95 with the help of financial tools.
The study reveals that the corporation under study has adopted conservative policy of
financing current assets that resulted in inadequate working capital. Cash, Inventory,
receivable and production capacity have not been managed properly by the company under
study.

Batraand Sharma (2001) have studied working capital management practices in Goetze
India Limited for the period from 1989-90 to 1993-94 with the help of financial tools. The
study reveals that overall position of working capital management was satisfactory but there
were some gaps in management of inventory, receivable and payable which require some
improvement.

Filbeck (2001) in his study analyzed the performance of the firms using the CFO magazine’s
annual working capital management Survey. The researcher discovered that significant
difference existed between industries in working capital measures across time and also found
that these measures for working capital changed significantly within industries across time.

Garg (2001) studied working capital trend and liquidity of 8 Haryana Government owned
industrial enterprises in Haryana during the period from 1978-79 to 1987-88 with the help of
accounting tools and statistical techniques. The study reveals that due to high investments in
current assets most of the enterprises had experienced shortage of funds for buying raw
material and paying other liabilities. Blockage of fund in current assets has also adversely
affected the operating efficiency of the enterprises under study.

Pathania (2001) studied working capital management in Himachal Pradesh State

Cooperative Agricultural and Rural Development Bank for the period starting from 1990- 91
to 1994-95 with the help of ratio analysis. The study reveals that the Bank under study has
not used cash efficiently and effectively which resulted in decrease in profitability.

Tewolde (2002) attempted to study the working capital management practices of Government
owned, transitional and privatized manufacturing firms in Eritrea. The results show that
though the managers of the Government and transitional firms are efficient but they are not
empowered to manage the working capital effectively due to imposition of Government
regulations. Managers of the private firms have also not done well in managing working
capital efficiently due to lack of managerial empowerment, lack of clarity of objective and
lack of availability of skilled personnel.

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Ghosh and Maji (2003) examined the efficiency of working capital management of the
Indian cement companies during the period from 1992-93 to 2001-02. For analyzing the
efficiency of working capital management three indices were calculated. Using industry norm
as target-efficiency level of the individual firm, researcher also tested the speed of achieving
that target level of efficiency by an individual firm during the period of study. Findings of the
study reveal that the Indian
Cement Industry as a whole did not perform remarkably well during the study period.

Ghebreghiorgis (2004) analyzed the working capital practices and efficiency in managing
the same in Keren Metal, Wood and Cement Works, a manufacturing firm operating under
joint venture in Eritrea. The study reveals that the firm only managed the working capital to
ensure that the internal control of the firm is maintained and not to create value by optimal
utilization of the working capital.

Mohanlal (2004) studied the working capital management in five non-profit organizations
from Durban South Area-Chatsworth with the help of case study methodology. The
researcher found that financial managers of the non-profit organizations under study were
inadequately trained to manage the working capital due to which they did not implement the
policies of the management to achieve the goals of the organizations.

Aggarwal and Bansal (2006) made comparative analysis of working capital practices of the
large manufacturing firms in India and their joint ventures/wholly owned subsidiaries abroad.
The study reveals that the basic concept of working capital management remained same
irrespective of the location of the firms; however, some differences appear due to distinct
size, environment and goodwill of overseas ventures in their respective markets that makes
the working capital management of these units more complex.

Chiou and Cheng (2006) investigated the determinants of management of working capital in
19180 firms. They found that when working capital is managed improperly, allocating funds
more than required on one hand, will render management non-efficient and reduce the
benefits of short-term investment and on the other hand, if working capital is too low, the
company may miss profitable investment opportunities or suffer short-term liquidity crises,
leading to degradation of company credit, as it cannot respond effectively to temporary
capital requirements.

Jafar and Sur (2006) studied the efficiency in management of working capital in National
Thermal Power Corporation Ltd. during the period from 1983-81 to 2002-03. The researchers
have applied financial tools and statistical techniques and revealed that the company has
managed its working capital efficiently during the post-liberalization era by adapting itself to
the new environment resulting from liberalization, globalization and competitiveness.

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Meszek and Polewski (2006) analyzed the profiles of the selected construction companies
from the viewpoint of working capital formation and their management strategies applied to
working capital. Financial tools were applied. Researcher revealed that construction
companies under studies differ in their level of working capital and the same is influenced by
the formation of partial elements. They suggested that construction companies require the
development of methodology of working capital control on the formation of desired
parameters using the knowledge of organization of investment processed.

Padachi (2006) has examined the trend in working capital management and its impact on
performance of 58 Mauritian small manufacturing firms. For purpose of analysis, financial
tools and statistical techniques have been used. Researcher revealed that there is a strong
significant relationship between working capital management and profitability. The findings
also reveal an increasing trend in the short-term component of working capital financing.

Sayaduzzaman (2006) investigates the efficiency in management of working capital in

British American Tobacco Bangladesh Company Limited. The study covers a five-year period
from 1999-2000 to 2003-04. The researcher has analyzed the case with the help of financial
tools and statistical techniques and has found that working capital management of British
American Tobacco Bangladesh Company Limited is highly effective.

Zingwiro (2006) tried to study the impact of hyperinflationary environment on management

of working capital in Zimbabwe. The finding reveals that cash and receivable were not kept
at optimal level and funds were borrowed at higher rate of interest that resulted in poor
management of working capital during hyperinflationary environment.

Beydokhti (2007) studied to know the system, concept, process and efficiency in
management of working capital in 60 firms of small-scale industry in and around Pune.
Findings reveal that motivation of manpower can increase efficiency of the organization,
proper management and coordination of operations can decrease the cost, efficient
management and administration of liquidity can determine efficient management of working
capital, small-scale firms should improve their overall efficiency by applying modern
management techniques in production, marketing and finance. Efforts should be made to
improve the profitability of the firms by effective management of working capital.

Bhunia (2007) made an assessment of management of working capital of Steel Authority of

India Limited and Indian Iron and Steel Company Limited from 1991-92 to 2002-03 with the
help of financial tools and statistical techniques. Finding reveals that both the companies have
maintained inadequate working capital, poor liquidity, and managed 70 inventory &
receivables inefficiently during the period of study.

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Ganesan (2007) has tried to analyze the working capital management efficiency of firms
from telecommunication equipment industry. Researcher has examined the efficiency of
working capital management with the help of correlation, regression analysis and ANOVA
analysis. For the study purpose, data of a sample of 349 firms from telecommunication
equipment industry were collected for the period 2001-07. The study found that even though
“day’s working capital” is negatively related to the profitability, it is not significantly
impacting the profitability of firms in telecommunication equipment industry.

Menon (2007) studied the working capital management during the period from 2001-02 to
2005-06 in Kirloskar Pneumatics Co. Limited, Hadapsar. Results show that company did not
keep components of working capital at optimal level and working capital turnover ratio
shows a continuously decreasing trend during the period of study.

Pandey and Upadhyay (2007) had undertaken the study to evaluate the efficiency of
management of working capital in Bokaro Steel Plant during the period from 1999 to
2005.Results show that position of payment of liability was satisfactory but the management
of inventory and receivable was good.

Paul (2007) undertook a comprehensive study of working capital management in Motor

Industries Company Limited during the period from 2001 to 2005 by applying ratio analysis.
Results show that working capital of the company under study has not been managed
efficiently and effectively.

• Working capital management and profitability

Vijaykumar and Venkatachalam (1995) studied the impact of working capital on

profitability in sugar industry in Tamil Nadu by selecting a sample of 13 companies over the
period 1982-83 to 1991-92 by applying simple correlation and multiple regressions 71
analysis on working capital and profitability ratios. The study concluded that liquid ratio
inventory turnover ratio, receivables turnover ratio and cash turnover ratio affected the
profitability of companies under study. The study also revealed that sales and interest rate
also affected working capital and its components.

Shin and Soenen (1998) investigated the relation between the firm’s net trade cycle and its
profitability by using correlation and regression analysis. They used a composite sample of
58985 firms covering the period from 1975-1994. The researchers found that there is a strong
negative relation between the length of the firm’s net-trade cycle and its profitability. They
also found that shorter net-trade cycles are associated with higher risk adjusted stock returns.

Deloof (2003) investigated to know the relation between working capital management and
corporate profitability in a sample of 1009 Belgian non-financial firms for the period from

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1992 to 1996. Researcher used descriptive statistics and financial tools for analysis. The
results show that managers can increase corporate profitability by reducing the number of
days, accounts receivable and inventories. The negative relationship between accounts
payable and profitability is consistent with the view that less profitable firms wait longer to
pay their bills.

Bhyani (2004) made efforts to study the impact of working capital management on the
profitability of Gujarat Ambuja Cements Ltd during the period from 1993-94 to 2002-03 by
applying statistical techniques and financial tools. Out of nine ratios analyzed, seven ratios
show negative correlation between working capital management and profitability while
remaining two ratios show positive relationship.

Lazaridis and Tryfonidis (2006) investigated the relationship between profitability and
working capital management of 131 companies listed with Athens Stock Exchange for the
period of 2001-04. The results reveal that there is statistical significance between
profitability, measured through gross operating profit, and the cash conversion cycle. They
further reveal that manager can generate profits for their companies by keeping the
components of working capital at an optimal level.

Shah and Sana (2006), analyzed the effect of working capital management on the
profitability of 7 oil and gas companies listed with Karachi Stock Exchange for the period
from 2001 to 2005 with the help of ratio analysis and statistical techniques. Results show a
negative relationship between gross profit margin and number of days inventory and number
of days accounts receivable, cash conversion cycle and sales growth whereas there is a
positive relation between gross profit margin and number of days accounts payables.

Raheman and Nasr (2007) have studied the effect of different variables of working capital
management on the profitability of Pakistani firms. Researchers have used Pearson’s
correlation and regression analysis for study. The results show that there is a strong negative
relationship between variables of the working capital management and profitability of the
firm. They also found that there is a significant negative relationship between liquidity and
profitability and debt used by the firm and its profitability. Also positive relationship was
found between size of the firm and its profitability.
Teruel and Solano (2007) tried to measure the effect of working capital management on
profitability of 8872 Spanish SME firms covering the period 1996-2002 using panel data
method. The results show that managers can create value by reducing their inventory and the
number of days for which their accounts are outstanding and firm’s profitability can be
improved by shortening the cash conversion cycle.

• Working capital management practices

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Ricci and Morrison (1996) prepared a report on the results of a survey of the international
working capital management practices of the Fortune 200 companies in the U.S.A. The
purpose of the survey was to obtain information on some international aspects of working
capital management in major U.S.A firms. Study indicates that the Fortune 200 companies
are fairly advanced and practical in their international working capital management activities,
particularly in using those methods that impact sales increase.

Weinraub and Visscher (1998) examined the relationship between aggressive and
conservative working capital practices in ten diverse industry groups from 1984 to 1993. The
study reveals that there is high and significant negative correlation between industry assets
and liability policies during the period 1996-2002 using panel data method. The results show
that managers can create value by reducing their inventory and the number of days for which
their accounts are outstanding and firm’s profitability can be improved by shortening the cash
conversion cycle.

Ricci and Vito (2000) investigated the results of a survey on the international working capital
management practices of the top 200 companies in the U K. The purpose of the survey was to
obtain information on some international aspects of working capital management in major
British firms. Study indicates that decision regarding working capital is typically made at
corporate level. Majority of the firms are not using value dating, factoring and consignment.
Top U K companies continue to rely on simple, low cost, low risk methods of managing their
foreign exchange activities.

Parsuraman (2004) made efforts to study the relationship between credit policy and
profitability of fifty pharmaceutical companies during the year 2001 and 2002. The results
show that increase in profits leads to increase in requirement of working capital. The 74
leading pharmaceutical companies strategically employed greater working capital for
enhancing profitability.

Chaudhry and Amin (2007) have critically examined the policies and practices during the
year from 2000 to 2005 relating to management of working capital in eight pharmaceutical
companies listed with Dhaka Stock Exchange. The study reveals that companies under study
have managed their working capital management efficiently and the impact of overall
working capital policy on profitability in the companies is proved to be significant. Further it
has also been found that there is positive correlation between current assets management and
financial performance.

Sajid and Afza (2007) examined the relationship between the aggressive/conservative
working capital policies and profitability as well as risk of firms for 208 public limited
companies listed with Karachi Stock Exchange for the period from 1998-99 to 2004-05. The
researcher revealed that there is negative relationship between working capital policies and
profitability and there is no relationship between the level of current assets and liabilities and

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risk of the firms. The above summarized review of studies in India and abroad reveals that a
large number of studies have been undertaken on national and international level on the topic
of efficiency in working capital management, working capital management & profitability
and working capital management practices. Though some studies have been undertaken on
fertilizer industry of India but no appropriate study has been conducted to evaluate the
efficiency and effectiveness of management of working capital. Though working capital is a
significant constituent in the efficient functioning of the organization, it has not attracted
much attention and consideration of management. Aforementioned studies that have been
undertaken, so far, have exercised philosophical influence on the understanding of working
capital management. Hence, there exists some definite research gap and this study
approximately titled, “Management of Working Capital in Fertilizer Industry: A Comparative
Study” is an endeavor which will help to plug this gap up to some extent.

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 CHAPTER 3

RESAERCH METHODOLOGY

OBJECTIVE OF THE STUDY

 To study the concept and importance of working capital management.
 To study the methods and modes of analysis of working capital management.
 To analyze and interpret the existing situation of the working capital management.
 To compare the position of TATA STEEL LTD with the major steel players of the
world.
 To appreciate the areas of achievement and analyze the areas of weakness.

SCOPE OF THE STUDY

The whole project has been made by collecting data through primary secondary sources.
Primary source stands for that information i.e. collected by direct queries to concern.
 To carry out a critical analysis of TATA STEEL LTD. Working capital.
 To find out the area of the weakness the existing Tata Steel working capital.
 To extrapolate the company’s position with the steel industry

RESEARCH DESIGN
The project is based on descriptive research. The project deals with working capital of Tata
Steel and there has been a lot of research already been done on the topic. I have tried to
understand the functioning of working capital and its impact on the company. The research
also includes comparison between Tata Steel companies and which one of these is better in its
operations with research to working capital.

TOOLS AND TECHNIQUES FOR COLLECTION OF DATA:

Data collection method can be broadly classified into:

 Primary Data
 Secondary Data
Data collected from primary methods or which is the first hand information is known as
primary data. Data collected from secondary methods or which is already available, second
hand data is known as secondary data.
• PRIMARY SOURCE OF DATA

Discussion with the supervisor for better understanding of the topic.

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 • SECONDARY SOURCE OF DATA

 Annual report
 Study of files and other documents.
 Different records by the accounts and bill section.
 Web sites of Tata Steel Ltd.
 Web sites of SEBI, other Steel companies.
 Review of previous reports related to the topic.
 Study about the topic ‘Working Capital’ from books.
Secondary Data’s were collected by using company website, SEBI website, newsletters,
TMDC library, Annual report and books.
In this I have used secondary data most of which was obtained from internal records of the
company. Usage of secondary data enjoys some advantages but it suffers some limitations.

ANALYSIS AND INTERPRETATION

Detailed Analysis of working capital of Tata Steel and other companies have been done.
Along with the interpretation of the calculated Data have also been done. Interpretation of all
the ratios calculated related to working capital has been stated in the project. Relationship
between Net Working Capital has been interpreted.

LIMITATIONS
 The biggest limitation with respect to the topic was that the data was only the
secondary data and no primary data was provided because of the company rules and
regulations.
 The study is limitation to the scope of data provided publically.
 The terms of credit policies have not been revealed due to the company rule and
regulations.
 As only secondary data is used in this project, it was difficult to determine the
accuracy of the data.
 Some amount of data was updated and was not of match use.
 A considerable amount of conflicting data was not of match use.
 Because of the company’s policy of maintaining secrecy some amount of data was not
made available to me which could have helped me in making my project better.
 Time resection was only two months of the project work in the organization.
 The information, which was needed, could not be made public by the organization.
 The findings and suggestions cannot be generalized.
 The study covered a wide concept hence wide collection was not possible.
 The companies which are taken for the purpose of comparison may or may not follow
the same accounting policies, which Tata Steel is currently following.
 The study is just of 5 years.

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SWOT ANALYSIS OF TATA STEEL

STRENGTHS WEAKNESSES

SWOT
ANALYSIS

OPPORTUNITIES THREATS

STRENGTHS:
 Strong brand name of TSL and TATA group.
 Indian operations capable of meeting its own iron requirements.
 Raw material security building through global operations.
 Leading sales and distribution capability.
 Expanding market share in sectors.
 Strong position in Europe through Corus.
 Value chain efficiencies
 Low wage labour availability.

WEAKNESS:
 High reliance on coking coal Imports.
 Overdependence on few markets
 Low R&D investment.
 Unscientific mining.
OPPORTUNITIES:
 Unexplored rural market.
 Growing domestic markets.
 Growing global markets.
 Developing countries not restrained under the KYOTO protocol.
 Carbon credit trading on the rise.
 High invest in infrastructure development.
 Proactive production cuts.
 Emerging technology to change the metal and mining.
 Strategic acquisition.

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THREATS:
 Environmental regulations.
 Operational Risks.
 Slump in Steel demand.
 Declining growth in automobile market.
 World’s big producer of steel.
 China set to becoming a net exporter
 High duties relations to pollution control and high energy cost.

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MICHAEL PORTER ANALYSIS

Michael Porter had identified five competitive forces that shape every single industry and the
market. These forces help in analyzing the industry from the intensity of competition to the
probability and attractiveness of an industry.

Threat of new Entrants

The easier it is for new companies to enter the industry, the more cut-throat competition there
will be. Steel industry is highly capital intensive and is estimated that to set up 1 MTPA
capacity of integrated steel plant, it requires around Rs. 30 billion of investment depending
upon the location of the plant and technology used. The government follows a favorable
policy for steel manufacturers but certain discrepancies involved in allocation of iron ore
mines and land acquisition in India.
Bargaining power of supplier
If one supplier has large impact on the company's margin and volume then it holds substantial
power. In the steel industry the bargaining power of supplier is very low because the big
players in the industry have their own mines for major raw materials. However, still a few
companies have to depend up on suppliers for the raw materials.

Bargaining power of buyers

47 | P a g e
In the steel industry unlike the household goods market the buyers have a very low
bargaining power. The only effort which can be done towards ensuring that the buyers are
saved in the curb or ceiling laid by the government on the prices which can be charged by the
companies on its products. However, most of the sale of steel is to the other industries or to
through the distribution network and very less to the common man.

Competitive Rivalry
In India the steel industry is dominated by a major few players only and the degree of
competitive rivalry is very low as the demand is always more than the supply or the
production of the companies.
Threats of substitutes
The presence of substitutes products increases the propensity of consumers to switch to
alternatives. The usage of aluminium has been constantly growing in the automobile sector
which used to be the major customer of the steel industry. However, because of the durability
and other features of the steel, aluminium does not stand as a threat in the market.

48 | P a g e
WORKING CAPITAL MANAGEMENT

FIXED
CAPITAL CAPITAL
MANAGEME
NT WORKING
CAPITAL
Fixed Capital: Long term funds required for purchase of fixed assets such as P&M, Land,
Building, Furniture etc. Investments in such type of assets leads to blockage of a part of
capital and this is the reason it is called fixed capital.
Working Capital: These are referred to as short term funds which are necessary for tuning
the day to day business. It includes marketable securities, debtors & inventories and other
current assets.
** Both Fixed and Working Capital are equally important.

WORKING Capital = Current Assets – Current Liabilities

Factors determine the working Capital Requirements
a) Nature of Business: If the organization is a service oriented such as electricity, railways or
any other it will require less of working capital because it supply services and not products
and they offer cash sales but in case of financial firms the investment will be more in working
capital.
b) Size of the Business: Greater the size of the business greater the requirement of working
capital.
c) Seasonal Variations: If the firm produces seasonal products or as per the demand it needs
to increase its working capital.
d) Working Capital Cycle: Longer the cycle larger will be the working capital requirement.
e) Price level changes: Changes in price level also affects the working capital requirement,
rise in price leads to increase in working capital.

49 | P a g e
f) Manufacturing Cycle: Manufacturing production of finished goods. Longer the
manufacturing cycle more would be the working capital.
g) Growth and Expansion: As the business grows and expands there is need of more and
more of working capital.

Analysis of working Capital:

a)Ration Analysis
b) Fund Flow Analysis
c) Working Capital Budget

Classification of Working Capital

 On the basis of time
 On the basis of concept

On the basis of time

PERMANENT WORKING CAPITAL TEMPORARY WORKING

Permanent Working Capital: There is always a minimum level of working capital, which is
continuously required by a firm in order to maintain its activities. Every firm must have a
minimum of cash, stock and other current assets .This minimum level of current assets which
must be maintained by any firm all the times, in known as permanent working capital for that
firm.
Temporary Working Capital: Any amount over and above the permanent level of working
capital is temporary, fluctuating or variable working capital.

On basis of concept of working capital:

GROSS WORKING NET WOKING CAPITAL

Gross working Capital: It refers to firm’s investment in current assets. Current assets are
assets, which can be converted into cash within a financial year. The gross working capital
points to the need of arranging funds to finance current assets.
Net Working Capital: It refers to the difference between current assets and current
liabilities. It can be either positive or negative. A positive net working capital will arise when
current assets exceed current liabilities and vice versa for negative working capital.

50 | P a g e
CONSTITUTENTS OF CURRNET ASSETS:
 Cash in hand and cash at bank
 Bills receivables
 Sundry Debtors
 Short term loans and advances
 Inventories of Stock like:
o Raw material
o Work in progress
o Stores and spares
o Finished goods
 Temporary investment of surplus funds
 Prepaid expenses
 Accrued expenses
 Marketable securities
Net working capital can be positive or negative. When the current assets exceeds the current
liabilities then net working capital is positive. Current liabilities are those liabilities which are
intended to be prepaid in the ordinary course of business within the short period of normally
one accounting year out of the current assets or the income business.

CONSTITUTENTS OF CURRENT LIABILITIES

 Accrued or outstanding expenses
 Short term loans, advances and deposits
 Dividends payable
 Bank overdraft
 Provision for taxation
 Bills payable
 Sundry creditors

51 | P a g e
FINANCIAL RATIO WITH RESPECT TO WORKING CAPITAL

LIQUIDITY RATIO

 Current Ratio: This ratio explains the relationship between current assets and
current liabilities of a company. An ideal current ratio should be 2:1.

Current Ratio= Currents assets /Current liabilities

 Acid test Ratio: It indicates whether the company is in a position to pay its
current liabilities within a month or immediately. An ideal current ratio should
be 1:1.

Acid test Ratio=Liquid assets/currents liabilities

 Cash Ratio: A cash ratio of 1.00 and above means that the business will be
able to pay all its current liabilities in immediate short term. Therefore,
creditors usually prefer high cash ratio.

Cash Ratio= (Cash and bank balance + current investment) / current

liabilities

PROFITABILITY RATIO
 Net Profit Ratio: This ratio shows the relationship between net profit and
sales.

Net Profit Ratio= (Net Profit/Net Sales)*100

 Gross profit Ratio: This ratio shows the relationship between gross profit and
sales.

Gross Profit Ratio= (Gross profit/Net Sales)*100

 Return on assets: Its numerator measure the return to shareholders (equity

and preference) whereas its denominator represents the contribution of all the
investors.

ROA= (Profit after tax/Average total assets)*100

TURNOVER RATIO
 Debtors Turnover Ratio: This measures the number of times an average
accounts receivables are collected during the period. It determines the liquidity
of one item of current assets and finds out how faster debts are being
collected. Higher the ratio, the better it is.

52 | P a g e
 Debtors Turnover Ratio= Net Credit Sales/Average Debtors

 Inventory Turnover Ratio: This measures the number of times an average

the inventory is sold during the period. Its purpose is to measure the liquidity
of the inventory. Higher the ratio, the better it is because it shows that finished
stock is rapidly turned-over. A low stock turnover ratio is not desirable
because it reveals the accumulation of obsolete stock or the carrying of too
much stock.

Inventory Turnover Ratio=Net Sales/Average Inventory

 Average Collection period: It represents the number of days’ worth of credit

sales that is logged in the trade receivable.
Average Collection Period= Average trade receivables/Average daily
credit

VALUATION RATIO
It indicates how the company and its equity are assessed in the capital market.
 Price earnings ratio: Is the summary measure which primarily reflect the following
factors: growth prospects, risk characteristics, shareholder orientation, degree of
liquidity and corporate image.
Price earnings ratio= market price per share/ earnings per share

LAVERAGE RATIO
It refers to the use of debt finance. It helps in assessing the risk arising from the use of debt
capital.
 Debt equity ratio: It shows relative contribution of creditors and owners.

Debt equity ratio= total liabilities (debt)/ shareholders, funds

(equity)

 Debt asset ratio: Measure theextend to which borrowed the funds and support the
firm’s assets.

Debt/ asset= (debt / equity)/ (1+ (debt / equity))

 Interest coverage ratio: high interest coverage ratio means that the firm can easily
meets its interest burden even if earnings before interest and taxes suffers
considerable decline.

Interest coverage ratio = Profit before interest and taxes/ interest.

CONSEQUENCES OF UNDER ASSESSMENT OF WORKING CAPITAL

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  Growth may be slow down because it may be difficult for the enterprise to undertake
profitable projects due to shortage of working capital
 Shortage of cash may arise due to shortage in working capital funds.
 Non availability of stocks due to non –availability of funds may result in production
stoppage.
 Under assessment of working capital will not lead to profit goals of the firm and
hence the credibility of the business get affected which may lead to closure of the
business.

CONSEQUENCE OF OVER ASSESSMENT OF THE WORKING CAPITAL

 Excess of working capital may result in unnecessary of accumulation inventories
 It may lead to inefficiency of the firm.
 Over investment in working capital makes capital less productive and may reduce
return on investment.
Operating cycle:
Operating cycle it’s the time duration required to convert sales, after the conversion of
resources into the inventories then to cash. The operating cycle of manufacturing
company involves three phases:
1. Acquisition of resources: Raw material, labour, power and fuel etc.
2. Manufacturing of the product: Conversion of raw material into the work in
progress then to finished goods.
3. Sale of the product.

Raw
Material
consumed

Cash Work in
Realizatio Process
n

Finishe
Credit
d
Sales
goods

54 | P a g e
 DATA ANALYSIS AND INTERPRETATION
TATA STEEL

COST SHEET OF TATA STEEL

2012-
Particulars 2009-2010 2010-2011 2011-2012 2013 2013-2014
Raw Material Consumed 5494.74 6244.01 8014.37 9877.4 9678
Wages 2361.48 2837.46 3047.26 3608.52 3673
Prime Cost(A) 7856 9081 11062 13486 13351
Manufacturing Overhead
Conversion Charges 1132.79 1192.89 1513.97 1955.19 2004
Fuel oil consumed 115.16 153.63 186.44 189.06 207.7
repairs to building 29.84 39.84 61.08 85.42 74.46
Factory rent 15.54 16.76 30.88 33.63 46.04
relining exp 32.45 30.89 28.87 38.49 44.6
purchase of power 1268.28 1404.86 1803.72 2321.11 2564.61
Insurance 24.63 31.76 36.48 41.77 44.06
Freight and handling 1357.27 1540.84 1703.98 2260.76 2755.08
Repairs to machinery 978.93 1064.26 1162.95 1381.08 1733.92
Consumption of stores and
spares 1335.36 1417.26 1693.48 2090.89 2611.23
Depreciation and Amortization 1083.18 1146.19 1151.44 1640.38 1928.7
Manufacturing Cost 7373.43 8039.18 9373.29 12037.78 14014.4
Opening stock of WIP 73.17 158.65 81.19 53.83 65.88
Less: Closing stock of WIP 158.65 81.19 53.83 65.88 35.99
Total Manufacturing Cost 7287.95 8116.64 9400.65 12025.73 14044.29
Administration overhead:
Rates & Taxes 236.91 290.73 371.71 423.18 508.61
Royalties 275.72 615.01 912.43 1152.43 1129.8
Excise duty 81.13 88.8 94.95 134.94 2345.78
other expenses 1284.55 1270 2098.84 2150.86 2345.78
Less: Transfer to Cap Exp A/C 326.11 198.78 478.23 876.13 1029.92
Administration Cost 1552.2 2065.76 2999.7 2985.28 5300.05
Cost of Production 16696 19264 23462 28497 32695
purchase of semi Finished
goods 169.08 180.2 209.52 453.34 353
Opening Stock of finished
goods 1361.85 1414.4 1392.51 1639.83 2032.34
Less: Closing stock of finished
goods 1141.4 1392.51 1639.83 2032.34 2216.14
Cost of Good Sold 17085.9 19465.96 23424.18 28557.76 32864.54
Commission/Discount/Rebate 82.17 109.36 128.42 142.67 163.98
Cost of Sales 17168.07 19575.32 23552.6 28700.43 33028.52

55 | P a g e
Profit 7853.91 9821.03 10380.86 9499 8682.48
Net Sales 25021.98 29396.35 33933.46 38199.43 41711
Calculation of Net Sales
31902.1 42317.2
Revenue from operation 26757.8 4 37005.71 4 46309.34
Less: Excise duty 1735.82 2505.79 3072.25 4118 4598.31
29396.3 38199.2
Net Sales 25021.98 5 33933.46 4 41711.03

Reconciliation Statement
Profit as per cost sheet 7853.91 9821.03 10380.86 9499 8682.48
Add: Other income 853.79 790.67 886.43 902.04 787.64
Less: Finance charge 1508.4 1300.49 1925.42 1877 1821
Provision of wealth tax 1 1.28 1.7 2 2
Provision of doubtful debts -16 8.23 5.41 11.15 60.53
Profit before Exceptional items
and Tax 7214.3 9301.7 9334.76 8510.89 7586.59
Exception Items:
Profit on sale of non-current
investment 0 0 511.01 12.33 0
Provision for diminution in the
value of investment/doubtful 0 0 0 -686.86 -141.76
Less: Tax 2167.5 2436.01 2638.34 2761.06 1032.83
Profit After Tax 5046.8 6865.69 6696.42 5062.97 6412

56 | P a g e
 Profit and loss statement

Particulars Mar '14 Mar '13 Mar '12 Mar '11 Mar '10
Income
Sales Turnover 46,309.34 42,317.24 37,005.71 29,396.35 26,757.60
Excise Duty 4,598.31 4,117.81 3,072.25 0.00 1,816.95
Net Sales 41,711.03 38,199.43 33,933.46 29,396.35 24,940.65
Other Income 645.88 227.51 1,397.44 1,176.45 1,241.08
Stock Adjustments 155.18 404.60 220.72 173.65 -134.97
Total Income 42,512.09 38,831.54 35,551.62 30,746.45 26,046.76
Expenditure
Raw Materials 12,641.57 12,421.63 9,917.37 7,841.47 8,356.45
Power & Fuel Cost 2,772.31 2,510.17 1,990.16 1,558.49 1,383.44
Employee Cost 3,673.08 3,608.52 3,047.26 2,837.46 2,361.48
Other Manufacturing Expenses 0.00 0.00 0.00 0.00 2,419.89
Selling and Admin Expenses 0.00 0.00 0.00 0.00 417.90
Miscellaneous Expenses 9,962.35 8,937.47 7,662.62 5,850.29 1,287.04
Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 -326.11
Total Expenses 29,049.31 27,477.79 22,617.41 18,087.71 15,900.09
Operating Profit 12,816.90 11,126.24 11,536.77 11,482.29 8,905.59
PBDIT 13,462.78 11,353.75 12,934.21 12,658.74 10,146.67
Interest 1,820.58 1,876.77 1,925.42 1,735.70 1,848.19
PBDT 11,642.20 9,476.98 11,008.79 10,923.04 8,298.48
Depreciation 1,928.70 1,640.38 1,151.44 1,146.19 1,083.18
Other Written Off 0.00 0.00 0.00 0.00 0.00
Profit Before Tax 9,713.50 7,836.60 9,857.35 9,776.85 7,215.30
Extra-ordinary items 0.00 0.00 0.00 0.00 0.00
PBT (Post Extra-ord Items) 9,713.50 7,836.60 9,857.35 9,776.85 7,215.30
Tax 3,301.31 2,773.63 3,160.93 2,911.16 2,168.50
Reported Net Profit 6,412.19 5,062.97 6,696.42 6,865.69 5,046.80
Total Value Addition 16,407.74 15,056.16 12,700.04 10,246.24 7,543.64
Preference Dividend 0.00 0.00 0.00 0.00 45.88
Equity Dividend 971.21 776.97 1,165.46 1,151.06 709.77
Corporate Dividend Tax 66.19 128.73 181.57 156.71 122.80
Per share data (annualised)
Shares in issue (lakhs) 9,712.15 9,712.15 9,712.14 9,592.14 8,872.14
Earning Per Share (Rs) 66.02 52.13 68.95 71.58 56.37

57 | P a g e
Equity Dividend (%) 100.00 80.00 120.00 120.00 80.00
Book Value (Rs) 629.60 568.46 541.81 487.55 418.94

58 | P a g e
59 | P a g e
 Balance Sheet

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10
Sources Of Funds
Total Share Capital 971.41 971.41 971.41 959.41 887.41
Equity Share Capital 971.41 971.41 971.41 959.41 887.41
Share Application Money 0.00 0.00 0.00 178.20 0.00
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves 60,176.58 54,238.27 51,649.95 45,807.02 36,281.34
Networth 61,147.99 55,209.68 52,621.36 46,944.63 37,168.75
Secured Loans 4,400.55 4,311.02 4,190.47 3,509.18 2,259.32
Unsecured Loans 21,726.23 21,600.49 19,503.35 22,639.00 22,979.88
Total Debt 26,126.78 25,911.51 23,693.82 26,148.18 25,239.20
Total Liabilities 87,274.77 81,121.19 76,315.18 73,092.81 62,407.95
Application Of Funds
Gross Block 39,019.72 38,056.28 23,081.58 22,497.83 22,306.07
Less: Revaluation Reserves 0.00 0.00 0.00 0.00 0.00
Less: Accum. Depreciation 14,753.97 13,181.23 11,715.32 10,692.73 10,143.63
Net Block 24,265.75 24,875.05 11,366.26 11,805.10 12,162.44
Capital Work in Progress 18,509.40 8,722.29 16,058.49 5,612.28 3,843.59
Investments 54,661.80 50,418.80 50,282.52 46,564.94 44,979.67
Inventories 6,007.81 5,257.94 4,858.99 3,953.76 3,077.75
Sundry Debtors 770.81 796.92 904.08 424.02 434.83
Cash and Bank Balance 961.16 2,218.11 3,946.99 4,138.78 500.30
Total Current Assets 7,739.78 8,272.97 9,710.06 8,516.56 4,012.88
Loans and Advances 5,863.68 9,587.82 8,773.73 17,052.84 6,678.55
Fixed Deposits 0.00 0.00 0.00 0.00 2,733.84
Total CA, Loans & Advances 13,603.46 17,860.79 18,483.79 25,569.40 13,425.27
Deferred Credit 0.00 0.00 0.00 0.00 0.00
Current Liabilities 19,957.78 17,098.06 15,958.34 12,037.59 8,699.34
Provisions 3,807.86 3,657.68 3,917.54 4,421.32 3,303.68
Total CL & Provisions 23,765.64 20,755.74 19,875.88 16,458.91 12,003.02
Net Current Assets -10,162.8 -2,894.95 -1,392.09 9,110.49 1,422.25
Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00

NET WORKING CAPITAL

60 | P a g e
 PARTICULAR 2009-10 2010-11 2011-12 2012-13 2013-14
CURRENT ASSETS
Sundry debtors 434.83 428.03 904.08 796.92
Inventories 3077.75 3953.76 4858.99 5257.94
Cash & Bank balance 3234.14 4141.54 3946.99 2,192.36
Other Current assets 0 0 76.09 615.8
Short term loan and advances 5499.68 6458.94 1829.25 2207.83
Current investment 0 0 1204.17 434

TOTAL CURRENT ASSETS (A) 12246.4 14982.27 12819.57 11504.85

CURRENT LIABILITIES
Provisions 2346.52 2220 2065 1545
Other current liabilities 0 6263 8799 8504
Subsidiary company 1515 0 0 0
Interest accrued but not due 677 0 0 0
Advances received from customers 335 0 0 0
Liability towards investors
education 40.49 0 0 0
Sundry creditors 4086.65 4465 5974 6369.91
Short term Borrowing 0 150 65.62 70.94

TOTAL CURRENT
LIABILITES (B) 9000.66 13098 16903.62 16489.85

NET WORKING CAPITAL (A -

B) 3245.74 1884.27 -4084.05 -4985

Interpretation
The net working capitals of the company is negative since last 3 years this is due to reduction
in loans and advances which reduces the current asset of the company.

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 Before 2011 company had positive working capital due to high loans and advances which
increases the current asset of the company.
Negative working capital generally depicts bad liquidity position and reduces the credit
worthiness of the company but this is not held true in case of Tata Steel because the company
enjoys good reputation due to which credit worthiness of the company good.

Financial Ratios of Tata Steel:

2009- 2010- 2011- 2012-

Particular 2010 2011 2012 2013 2013-2014
Current Assets 10379.2 18162.5 12,819.57 11,504.85 11564.6
Current Liabilities 8999.61 11144.9 16,838.49 16,488.65 18,881.78
Net Working Capital 1379.59 7017.6 -4018.92 -4983.8 -7317.18
Current Ratio 1.15 1.63 0.76 0.70 0.61

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 Current Ratio
2.00

1.50
Current Ratio
1.00

0.50

0.00
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Interpretation

Current ratio measures the liquidity of the company at a certain date and it is a useful test of
the short term debts paying ability of any business. A ratio of 2:1 is considered to be
satisfactory and the logic behind this is that even if actual value of current assets is reduced to
half, the firm will not face any problem in meeting its current liabilities.
In case of a company which is in a financial crisis negative current ratio means that it is in
trouble. But in case of Tata Steel the case is totally different, it is in a position where short
term lenders, trade creditor show their trust and readily supply goods, with a belief that they
will get their due. As for Tata Steel 0.5 is the standard for current ratio. The current ratio of
0.61 of Tata Steel in the year 2013-14 shows that it had Rs 0.61 in current assets for every
rupee of current liabilities. In year 2010-11 the current ratio is highest because of the current
assets (mainly because of loans taken). The current ratio of Tata Steel is satisfactory and it
ensure that the value of their current assets cover the amount of their term obligations. Thus it
show credit worthiness of creditors towards the company and its brand name.

Quick ratio

2009- 2010- 2012-

Particular 2010 2011 2011-2012 2013 2013-2014
Quick assets 9168.65 11028.51 7960.58 6246.91 5556.79
Current Liabilities 8999.61 11144.9 16838.49 16488.65 18881.78
Quick ratio 1.02 0.99 0.47 0.38 0.29

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 Quick ratio
1.2
1
0.8 Quick ratio
0.6
0.4
0.2
0
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Interpretation

Quick ratio compares a company’s cash and near-cash assets, called quick assets, to its
current liabilities. It is considered a more reliable test of short-term solvency than current
ratio because it shows the ability of the business to pay short term debts immediately. A quick
ratio of 1:1 is considered to be satisfactory. As we can see above that the quick ratio of Tata
Steel showing a satisfactory fragrance because it is under the company standard of Tata Steel.
In the current year 2013-14 the ratio is 0.29 which has decreased from the previous year
which clearly shows that the company keeps a lot of buffer stock with itself since the
.production process is very long and also clears off its expenses in advance. In year 2009-10
the Quick ratio is highest which is not good because it is beyond the standard and it suggests
that the company is investing too many resources in the working capital of the business.

Net Profit Ratio

2012-
Particular 2009-2010 2010-2011 2011-2012 2013 2013-2014
Net Profit 5046.8 6865.69 6696.42 5062.97 6412
Net Sales 25022 29396.4 33933.5 38199.4 41711.03
Net Profit Ratio 20.17 23.36 19.73 13.25 15.37

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 Net Profit Ratio
25

20

15 Net Profit Ratio

10

0
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

INTERPRETATION

Net profit (NP) ratio is a useful tool to measure the overall profitability of the business. This
ratio indicates the efficiency of management in manufacturing, administering and selling the
product. From the above table it is understood that the net profit of the company has
increased in the year 2013-14 by 26.64% from the previous year 2012-13, which is a good
sign for the company as the returns to owners has improved, the company will find it easier to
raise further capital for expansion. In year 2010-11 the profit is maximum, the company was
able to control its expenses and raw material consumed was less and hence profit was good.
But in the year 2013-14 the production capacity has increased and with that the raw material
consumed has increased because of which the profit has reduced comparatively.

Gross Profit Ratio

2011- 2012- 2013-

Particular 2009-2010 2010-2011 2012 2013 2014
Gross profit 7214.3 9776.85 9857.35 7836.6 9713.5
Net Sales 25022 29396.35 33933.5 38199.4 41711.03
Gross Profit Ratio 28.83 33.26 29.05 20.51 23.29

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 Gross Profit Ratio
35
30
25
20 Gross Profit Ratio

15
10
5
0
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Interpretation:
This ratio throws light at the degree of managerial efficiency in production and sales
performance. If we compare the gross and net profit of the difference is very high which is
shown in the table above. There is fluctuation in the gross profit ratio from year 2010 to
2014. This is mainly because of the current tax and the fringe benefit tax that the company
has to pay which has kept on increasing right from the year 2010 to 2014. This is the reason
why gross profit is high and net profit is not so. In the year 2013-14 the gross profit ratio
increased by 23.95% from that of previous year due to rise in selling price . Though there is
an increase in gross profit but the increase is comparatively low because of increase in cost
of production .Therefore management should detect the cause of increase in production cost
and aims in reducing it so as to increase its overall profitability.

Debtors turnover Ratio

2009- 2010- 2011- 2012- 2013-
Particular 2010 2011 2012 2013 2014
Net Sales 25022 29396.35 33933.5 38199.4 41711.03
Average debtors 535.41 431.43 664.05 850.5 784
Debtors turnover Ratio 46.73 68.14 51.10 44.91 53.20

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 Debtors turnover Ratio
80
70
60
50 Debtors turnover Ratio
40
30
20
10
0
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Interpretation:
Accounts receivable turnover ratio or debtor’s turnover ratio measures the liquidity of
accounts receivables. Debtors turnover ratio tells that out of total sales how much debtors are
created. The ratio indicates the speed with which the amount is collected from debtors. The
higher the ratio the better it is. The ratio is highest which means that the receivables are more
liquid and are being collected promptly. The debtors turnover ratio has increased from that of
the previous year which shows better liquidity position of the company

Creditors Turnover Ratio

2011-
Particular 2009-2010 2010-2011 2012 2012-2013 2013-2014
Net Purchase 9346.33 10606.5 9546.84 9887.77 10030
Average creditors 3964.72 4383.66 5219.02 6126.92 7316.76
Creditors Turnover
ratio 2.36 2.42 1.83 1.61 1.37

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 Creditors Turnover ratio
3.00
2.50
2.00
1.50 Creditors Turnover ratio
1.00
0.50
0.00
10

11

12

13

14
20

20

20

20

20
-

-
09

10

11

12

13
20

20

20

20

20
Interpretation:
The creditors turnover ratio tells that out of total purchase how much creditors are made. This
ratio indicates the speed with which amount is being paid to creditors. . A low paid ratio
shows the liberal credit terms given by the suppliers which is good from company's point of
view, but creditors looks for high ratio which means he will get his money soon. As we see
from the data that in the year 2011-12 the ratio is 1.83 and in 2012-13 it has increased and
come to 1.86 and in 2013-14 it has decreased and come to 1.37. It means that in 2012-13 the
creditors have been paid quickly and company has got less credit period, and in 2013-14 the
creditors have not been paid as quickly as in 2012-13.
.

Working Capital Turnover ratio

2009- 2010- 2011- 2012- 2013-

Particular 2010 2011 2012 2013 2014
Net sales 25021.98 29396.35 33933.46 38199.43 41711
Net working Capital 3245.74 1884.27 -4084.05 -4959.25 -7317.18
Working Capital Turnover ratio 7.71 15.60 -8.31 -7.70 -5.70

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 Working Capital Turnover ratio
20

15

10 Working Capital Turnover

ratio
5

0
10

11

12

13

14
20

20

20

20

20
-5
-

-
09

10

11

12

13
20

20

20

20

20
-10

Interpretation:
The working capital turnover ratio measures how well a company is utilizing its working
capital to support a given level of sales. There is a direct relation between the working capital
and sales. A company has better control on its working capital because a company can change
its working capital according to its needs. Both high and low working capital is not good for
the company. From 2009-10 to 2010-11 the table and graph shows a positive working capital
which means a favourable position for the company, but from 2011-12 to current year 2013-
14 the working capital is negative which does not means that the organization is in trouble, it
shows the credit worthiness of the company. Care should exercised by the company in
maximizing the working capital.

Inventory Turnover Ratio

Particular 2009-10 2010-11 2011-12 2012-13 2013-14
Cost of Good Sold 17085.9 18944.2 23424.2 28557.8 32864.54
Average Inventory 3279.11 3515.62 4406.24 5058.46 5632.87
Inventory Turnover Ratio 5.21 5.39 5.32 5.65 5.83

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 Inventory Turnover Ratio
6

5.8

5.6
Inventory Turnover Ratio
5.4

5.2

4.8
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Interpretation:
Every firm has to maintain a certain level of inventory of finished goods so as to be able to
meet the requirement of the business. But the level of inventory should neither be too high
nor too low. The inventory turnover ratio measure the number of times a company sells its
inventories during the year. From the above table we can see that the inventory turnover ratio
from 2009-10 to 2013-14 is fluctuating. But in year 2013-14 it has increased which is a good
sign for the company as it indicates that high turnover sales and the company is efficiently
managing and selling its inventory and thus increases the profitability of the firm.

Conversion Period of Tata Steel

PARTICULARS 2009-10 2010-11 2011-12 2012-13 2013-14

(A) RAW MATERIALS CONVERSION
PERIOD
Opening Stock Of Raw Materials 1433.26 1153.94 1763.88 2241.96 1685.99
Closing Stock Of Raw Materials 1153.94 1763.88 2241.96 1685.99 2035.78
1860.88
Avrage Stock Of Raw Materials 1293.6 1458.91 2002.92 1963.975 5
Raw Materials Consumed 5,494.74 6,244.01 8,014.37 9,877.40 9,677.71
RAW MATERIALS CONVERSION
PERIOD (IN DAYS) 85.93 85.28 91.22 72.57 70.18
RAW MATERIALS CONVERSION PERIOD = (AVERAGE STOCK OF RAW MATERIALS

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 CONSUMED/RAW MATERIALS CONSUMED)*365

RAW MATERIALS CONVERSION PERIOD (IN DAYS)

100

80
RAW MATERIALS
60 CONVERSION PERIOD (IN
DAYS)
40

20

0
2009-10 2010-11 2011-12 2012-13 2013-14

Interpretation
The raw material period of Tata Steel is quite high throughout 5 years which is shown in the
table and graph above. One thing is commendable that the conversion period has been steady
between 90 and 70 and there are not many fluctuations in it. The conversion period is same
during 2010 and 2011 because sales have increased in comparison to that the conversion
period has been steady. The increase in conversion period in the year 2012 is also because of
sales. During 2013 and 2014 the ratio is lower compared to other previous years due to
increase in raw material consumed and average stock of raw material.

PARTICULARS 2009-10 2010-11 2011-12 2012-13 2013-14

(B) WORK-IN-PROGRESS
CONVERSION PERIOD
Opening Stock Of Work-In-Progress 73.17 158.65 81.19 53.83 65.88
Closing Stock Of Work-In-Progress 158.65 81.19 53.83 65.88 35.99
Avrage Stock Of Work-In-Progress 115.91 119.92 67.51 59.855 50.935
Cost Of Production 16,696.37 19,061.72 23,461.98 28,496.96 30,428.76
WORK-IN-PROGRESS CONVERSION
PERIOD (IN DAYS) 2.53 2.3 1.05 0.77 0.61
WORK-IN-PROGRESS CONVERSION PERIOD = (AVERAGE STOCK OF WORK-IN-
PROGRESS/COST OF PRODUCTION)*365

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WORK-IN-PROGRESS CONVERSION PERIOD (IN DAYS)
3
2.5
WORK-IN-PROGRESS
2 CONVERSION PERIOD
1.5 (IN DAYS)
1
0.5
0
2009-10 2010-11 2011-12 2012-13 2013-14

Interpretation
The work in progress conversion period of Tata Steel has been fluctuating in the five years.
The work in progress was much higher in 2009-2010 as compared to the previous year
because there was an increase in purchase of power mainly due to additional volumes of
power to cater to the requirement for additional production. From the year 2011 to 2014 the
conversion period has decreased drastically and is below one day and this is because of the
marginally increased demand WIP was converted to finished goods.

PARTICULARS 2009-10 2010-11 2011-12 2012-13 2013-14

(C) FINISHED GOODS
CONVERSION PERIOD
Opening Stock Of Finished Goods 1361.85 1141.4 1392.51 1640.59 2033.14
Closing Stock Of Finished Goods 1141.4 1392.51 1640.59 2033.14 2218.21
Average Stock Of Finished Goods 1251.625 1266.955 1516.55 1836.865 2125.675
Cost Of Goods Sold 17,085.90 18,990.81 23,423.42 28,557.75 30,596.32
FINISHED GOODS
CONVERSION PERIOD (IN
DAYS) 26.74 24.35 23.63 23.48 25.36

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FINISHED GOODS CONVERSION PERIOD (IN DAYS)
28
27
26 FINISHED GOODS
CONVERSION PERIOD (IN
25
DAYS)
24
23
22
21
2009-10 2010-11 2011-12 2012-13 2013-14

Interpretation
The finished goods conversion period is highest during 2009-10 but it decreases after that
due to increase in cost of goods sold. However in the current year the conversion period has
increased drastically this is due to increase in average stock of finished goods .The increase in
the finished goods shows how over the years Tata Steel has captured the market and increased
sales. The major reason for this Tata Steel Marketing division which records data of all its
customers and keeps taking feedback. Along with this its credit policies is such that it attracts
the customer easily.

PARTICULARS 2009-10 2010-11 2011-12 2012-13 2013-14

(D) STORES & SPARES
CONVERSION PERIOD
Opening Stock Of Stores and Spares 612.2 623.8 716.2 922.6 1472.9
Closing Stock Of Stores and Spares 623.8 716.2 922.6 1472.9 1717.8
Average Stock Of Stores and Spares 618.0 670.0 819.4 1197.8 1595.4
Cost Of Consumption 1335.4 1430.9 1693.5 2090.9 2611.2
STORES & SPARES CONVERSION
PERIOD (IN DAYS) 168.9 170.9 176.6 209.1 223.0
STORES & SPARES CONVERSION PERIOD =(AVERAGE STOCK OF STORES AND
SPARES/COST OF CONSUMPTION)*365

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STORES & SPARES CONVERSION PERIOD (IN DAYS)
250.0

200.0
STORES & SPARES
150.0 CONVERSION PERIOD (IN
DAYS)
100.0

50.0

0.0
2009-10 2010-11 2011-12 2012-13 2013-14

Interpretation
As we can see in the graph and table above the stores and spares conversion period is very
high. This shows that the time taken by Tata Steel to consume its inventory is very high. The
inventory itself is high because of bulk purchase made by Tata Steel. Due to this although the
company has material for longer time but the cost involved for keeping these materials is also
high. But still it is beneficial for the company since it gets huge credits because of bulk
purchase.

PARTICULARS 2009-10 2010-11 2011-12 2012-13 2013-14

(E) DEBTORS CONVERSION
PERIOD
Opening Stock Of Debtors 636.0 434.8 424.0 904.1 796.9
Closing Stock Of Debtors 434.8 424.0 904.1 796.9 770.8
Average Stock Of Debtors 535.4 429.4 664.1 850.5 783.9
Credit Sales 25022.0 29396.4 33933.5 38199.4 41711.0
DEBTORS CONVERSION PERIOD
(IN DAYS) 7.8 5.3 7.1 8.1 6.9
DEBTORS CONVERSION PERIOD =(AVERAGE STOCK OF DEBTORS/CREDIT
SALES)*365

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 DEBTORS CONVERSION PERIOD (IN DAYS)
10.0
8.0
DEBTORS CONVERSION
6.0 PERIOD (IN DAYS)
4.0
2.0
0.0
2009-10 2010-11 2011-12 2012-13 2013-14

Interpretation
Debtor’s conversion period is the period within which the company’s debtors will pay to
company for the goods purchased on credit. The conversion period during 2013-2014 has
reduced from that of the previous year this is due to increase in the credit sales and decrease
in average debtor. In the year 2012-13 the debtors increased and are the highest among all
five years. But still the conversion period is not the highest in this year because the credit sale
of the company has also increased simultaneously.

PARTICULARS 2009-10 2010-11 2011-12 2012-13 2013-14

(F) CREDITORS
CONVERSION PERIOD
Opening Stock Of
Creditors 3135.2 4046.3 4464.8 5021.8 5188.5
Closing Stock Of
Creditors 4046.3 4464.8 5021.8 5188.5 6654.2
Average Stock Of
Creditors 3590.7 4255.5 4743.3 5105.1 5921.3

(a) Raw Materials

(Imported Directly) 3941.9 4672.6 6116.9 7035.8 6539.9
(b) Stores and Spares
(Imported Directly) 521.9 492.9 497.4 830.5 1589.2
( c) Indigenous Obtained 2057.9 2377.9 2746.2 3077.9 3101.5
(d) Purchase Of Finished
Goods 169.1 180.2 209.5 453.3 352.6

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 CREDIT PURCHASE
( a+b+c+d) 6690.8 7723.7 9569.9 11397.6 11583.2
CREDITORS
CONVERSION PERIODS
(IN DAYS) 195.9 201.1 180.9 163.5 186.6
CREDITORS CONVERSION PERIODS =(AVERAGE STOCK OF
CREDITORS/CREDIT PURCHASE)*365

CREDITORS CONVERSION PERIODS

(IN DAYS)
250.0
CREDITORS
200.0
CONVERSION PERIODS
150.0 (IN DAYS)

100.0

50.0

0.0
2009-10 2010-11 2011-12 2012-13 2013-14

Interpretation
The credit conversion period of Tata Steel is high and the reason for this is the bulk purchase made by
Tata Steel. The seller are also aware of the credit worthiness of the company and its reputation.
Another reason for Tata Steel bulk purchase is that it has very high production capacity. The credit
purchase as compared to previous year is less but the average creditor is more and hence the
conversion period is so high. This allows the company to pay to its creditors in a longer duration but
at the same time the liability of the company also extends till that time.

Net Operating Cycle

PARTICULARS 2009-10 2010-11 2011-12 2012-13 2013-14

Raw materials conversion
period (in days) 85.9 85.3 91.2 72.6 70.2
Work-in-progress
conversion period (in
days) 2.5 2.3 1.1 0.8 0.6
Finished goods conversion
period (in days) 26.7 24.4 23.6 23.5 25.4
Stores & spares
conversion period (in
days) 168.9 170.9 176.6 209.1 223.0
Debtors conversion period
(in days) 7.8 5.3 7.1 8.1 6.9
Gross operating cycle 291.9 288.2 299.7 314.0 326.0
Less: creditors conversion 195.9 201.1 180.9 163.5 186.6

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 periods (in days)
Net operating cycle 96.0 87.1 118.7 150.6 139.4

350.0
300.0
250.0
200.0
GROSS OPERATING
150.0 CYCLE
100.0 NET OPERATING CYCLE
50.0
0.0
10

12

13
11

14
-

-
09

10

11

12

13
20

20

20

20

20

Interpretation
The net Operating cycle is the time within which the company get back the cash it has
invested in its operations. It has been seen that the net operating cycle has been increased
from 2010 to 2013 and in the current year it has decreased .Though there is a reduction in the
operating cycle still the company has enough funds to support its operations since the net
operating cycle of the company is positive.

STEEL AUTHORITY OF INDIA LIMITED (SAIL)

Steel Authority Of India Limited (SAIL) is the leading steel-making company in India. It is a
fully integrated iron and steel maker, producing both and special steels for domestic
construction, engineering, power, railway, automotive and defence industries and for sale in
export markets. SAIL is also among the seven Maharatnas of the country’s Central Public
Sector Enterprises.
SAIL manufactures and sells a broad range of steel products, including hot and cold rolle
sheets and coils, galvanised sheets, electrical sheets, structural, railway products, plates, bar
and rods, stainless steel and other alloy steels. SAIL produces iron and steel at five integrated
plants and three special steel plants, located principally in the eastern and central regions of
largest producer of iron ore and of having the captive availability of iron ore, limestone, and
dolomite which are inputs for steel making.
SAIL’s wide range of long and flat steel products are much in demand in the domestic as well
as the international market. This vital responsibility is carried out by SAIL’s own central
Marketing Organization (CMO) that transacts business through its network of 37 Branch

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Sales Offices spread across the four regions, 25 Departmental Warehouses, 42 Consignment
Agents and 27 Customer Contacts Offices. CMO’s domestic marketing effort is
supplemented by its ever-widening networkof rural dealers who meet the demands of the
smallest customers in the remotest corners of the country. With meet the demands of the
smallest customers in the remotest corners of the country. With the total number of dealers
over 2000, SAIL’s wide marketing spread ensures availability of quality steel in virtually all
the districts of the country.
SAIL’s International Trade Division (ITD), in New Delhi- an ISO 9001:2000 accredited unit
of CMO, undertakes exports of Mild Steel products and Pig Iron from SAIL’s five integrated
steel plants.
SAIL has a well equipped Research and Development Centre for Iron and Steel (RDCIS) at
Ranchi, which helps to produce quality steel and develop new technology for the steel
industry. Besides, SAIL has its own in-house Centre for engineering and technology (CET),
Management Training Institute (MTI) and safety Organization at Ranchi. Our captive mines
are under the control of the Raw Materials Division in Kolkata. The Environment
Management Division and Growth Division of SAIL operate from their headquarters in
Kolkata. Almost all plants and major units are ISO certified. The company is among the top
five highest profits earning corporate of the country.

MAJOR UNITS:
SAIL INTEGRATED STEEL PLANTS:
 Rourkela Steel Plant (RSP) in Orissa set up with German collaboration (the first
integrated steel plant in the public sector in India, (1959)).
 Bhilai Steel Plant (BSP) in Chattisgarh set up with Soviet collaboration (1959).
 Durgapur Steel Plant (DSP) at Durgapur, West Bengal set up with British
collaboration(1965).
 Bokaro steel Plant (BSP) in Jharkhand (1965) set up with Soviet collaboration (the
plant is hailed as the country’s first swadeshi steel plant, built with maximum
indigeneous content in terms of equipment, material and know-how).
 IISCO Steel Plant (ISP) at Burnpur, West Bengal.
SPECIAL STEEL PLANTS:
 Alloy Steel Plant (ASP), Durgapur, West Bengal.
 Salem Steel Plant (SSP), Tamilnadu.
 Visveswaraya Iron and Steel Plant (VISL), at Bhadrawati, Karnataka.
SUBSIDIARIES:
 Maharashtra Electro-smelt Limited (MEL) in Maharashtraa.

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 CENTRAL UNITS:
 Centre for engineering and technology
 Research and Development Centre for Iron and Steel
 Management Training Institute
 SAIL safety organization
 Raw materials division
 Central marketing organization

COST SHEET OF SAIL :

PARTICULAR 2009-10 2010-11 2011-12 2012-13 2013-14
Raw material consumed 17340.18 22076.4 23020.82 21198.48 19271.76
Direct wages 5416.81 7623.33 7932.05 8637.2 9578.66

PRIME COST 22756.99 29699.73 30952.87 29835.68 28850.42

Factory Overhead:
Depreciation and Amortisaton expenses 1337.24 1485.8 1567.03 1402.98 1716.09
Consumption of Stores & Spares parts 3163.43 3309.75 1779.07 2133.22 2340.03
Power and Fuel 3369.35 3597.04 4469.74 4830.44 4942.15
Repairs and Maintenance 569.74 670.04 744.31 824.46 931.53
Freight Outward 674.28 705.33 696.03 953.12 976.43
Handling Expenses of Raw material and Scrap 313.78 387.86 381.45 362.39 476.64
Conversion Charges 287.66 330.98 339.67 328.76 277.65
Demurrage & Wharfage 65.59 51.79 61.84 55.99 93.72
Water Charges & Cess on Water Pollution 44.55 63.39 63.97 76.57 92.75
Insurance 4.74 7.14 8.08 16.31 17.06
Rent 19.5 17.67 12.65 13.84 24.77

FACTORY COST 32606.85 40326.52 41076.71 40833.76 40739.24

ADD: Opening stock of WIP 0 0 1490.51 2014.76 1966.97
LESS: Closing stock of WIP 0 0 2004.76 1960.82 2437.42

NET FACTORY COST 32606.85 40326.52 40562.46 40887.7 40268.79

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Administrative Overhead
Royalty and Cess 261.01 580.44 851.3 976.63 916.51
Excise Duty on Inter-Plant Transfer/ Internal
Consumption 76.94 181.14 237.27 385.47 461.94
Postage, Telegram & Telephone 22.57 17.39 22.73 19.57 18.8
Printing & Stationery 11.37 10.76 10.57 10.54 9.77
Rates &Taxes 33.3 46.94 44.97 68.51 72.17
Security Expenses 236.87 226.44 283.83 321.48 356.05
Travelling Expenses 179.08 185.99 191.42 216.8 190.29
Training Expenses 16.19 17.71 19.67 26.36 39.55
Remuneration to Auditors 3.24 4.22 3.32 3.53 3.71
Cost Audit Fee and Reimbursement of Expenses 0.02 0.12 0.3 0.14 0.15
Voluntary Retirement compensation 0.05 0 0 0.23 0.01
Handling Expenses - finished goods 80 85.98 100.34 122.68 125.79
Miscellaneous 531.12 535.8 252.81 289.79 415.82
Directors' Fees 0.19 0.22 0.37 0 0

COST OF PRODUCTION 34058.8 42219.67 42581.36 43329.43 42879.35

ADD: Purchase of Stock in Trade 2.79 4.22 4.88 3.21 0.78
LESS: Excise Duty on accretion (-)/Depletion to stock -3.56 -119.02 -145.86 -274.81 71.2
ADD: Opening stock of finished goods 5817.84 4660.39 4641.57 5641.69 5294
LESS: Closing stock of finished goods 4660.39 6132.08 5641.69 7976.53 6534.1

COST OF GOODS SOLD 35222.6 40871.22 41731.98 41272.61 41568.83

Selling & Distribution Overhead

Cash Discount (Net) 39.23 40.69 48.89 64.81 75.28
Commission to Selling Agents 6.7 6.92 6.39 7.59 7.6
Export Sales Expenses 12.13 14.26 24.34 18.37 25.36

COST OF SALES 35280.66 40933.09 41811.6 41363.38 41677.07

Profit 5270.72 1785.62 4530.19 3265.32 5021.34
Net Sales 40551.38 42718.71 46341.79 44628.7 46698.41

Reconciliation Statement:

2010- 2011- 2012- 2013-

2009-10 11 12 13 14
Profit as per cost sheet 5270.72 1785.62 4530.19 3265.32 5021.34
ADD: Other Income 2768.23 2199.96 1622.98 964.44
LESS: Finance Costs 402.01 474.95 677.7 747.66 967.64
LESS: Provisions 71.07 48.83 51.01 53.31 198.46
LESS: Write - Offs- Miscellaneous 10.33 1.12 1.03 0.34 7.71
LESS: Foreign Exchange Fluctuation 0 0 0 0 0
ADD/LESS(-): Adjustments pertaining to Earlier
Years 23.22 103.7 -10.54 41.53 150.08
ADD: Inter Account Adjustments 2553.27 3629.93 0 0 0

Profit Before Tax and Exceptional Items 10132.0 7194.31 5412.89 3469.98 2265.43

80 | P a g e
 3
LESS: Exceptional Items 262.02 229.32 959.12
LESS: Tax 3377.66 2289.57 1608.15 1070.31 608.07
Profit After Tax 6754.37 4904.74 3542.72 2170.35 2616.48

Profit and loss account

Particulars Mar '14 Mar '13 Mar '12 Mar '11 Mar '10
Income
Sales Turnover 52,375.70 44,598.26 46,341.79 47,156.25 44,059.72
Excise Duty 5,677.29 0.00 0.00 4,621.95 3,463.82
Net Sales 46,698.41 44,598.26 46,341.79 42,534.30 40,595.90
Other Income 1,840.53 735.12 1,500.13 2,038.97 2,557.00
Stock Adjustments -894.63 2,016.09 1,368.51 1,471.69 -1,157.45
Total Income 47,644.31 47,349.47 49,210.43 46,044.96 41,995.45
Expenditure
Raw Materials 21,611.97 23,334.91 24,804.77 22,642.47 18,611.12
Power & Fuel Cost 4,942.15 4,830.44 4,469.74 3,586.07 3,364.30
Employee Cost 9,578.51 8,637.20 7,932.05 7,530.24 5,417.00
Other Manufacturing Expenses 0.00 0.00 0.00 1,310.00 870.35
Selling and Admin Expenses 0.00 0.00 0.00 1,927.46 1,754.02
Miscellaneous Expenses 5,752.88 5,197.15 4,458.56 45.42 206.62
Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00
Total Expenses 41,885.51 41,999.70 41,665.12 37,041.66 30,223.41
Operating Profit 3,918.27 4,614.65 6,045.18 6,964.33 9,215.04
PBDIT 5,758.80 5,349.77 7,545.31 9,003.30 11,772.04
Interest 967.64 747.66 677.70 474.61 402.01
PBDT 4,791.16 4,602.11 6,867.61 8,528.69 11,370.03
Depreciation 1,716.69 1,402.98 1,567.03 1,482.20 1,337.24
Other Written Off 0.00 0.00 0.00 1.12 10.33
Profit Before Tax 3,074.47 3,199.13 5,300.58 7,045.37 10,022.46
Extra-ordinary items 150.08 41.53 -10.54 163.71 184.80
PBT (Post Extra-ord Items) 3,224.55 3,240.66 5,290.04 7,209.08 10,207.26

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Tax 608.07 1,070.31 1,608.15 2,304.34 3,452.89
Reported Net Profit 2,616.48 2,170.35 3,681.89 4,904.74 6,754.37
Total Value Addition 20,273.54 18,664.79 16,860.35 14,399.19 11,612.29
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Equity Dividend 834.35 826.10 826.10 991.30 1,363.03
Corporate Dividend Tax 141.67 135.19 134.02 161.15 227.52
Per share data (annualised)
Shares in issue (lakhs) 41,305.25 41,305.25 41,305.25 41,304.01 41,304.01
Earning Per Share (Rs) 6.33 5.25 8.91 11.87 16.35
Equity Dividend (%) 20.20 20.00 20.00 24.00 33.00
Book Value (Rs) 103.30 99.32 96.38 89.75 80.66

Source : Dion Global Solutions Limited

Balance Sheet
Particulars Mar '14 Mar '13 Mar '12 Mar '11 Mar '10
Sources Of Funds
Total Share Capital 4,130.53 4,130.53 4,130.53 4,130.40 4,130.40
Equity Share Capital 4,130.53 4,130.53 4,130.53 4,130.40 4,130.40
Share Application Money 0.00 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves 38,535.82 36,894.11 35,680.79 32,939.07 29,186.30
Net worth 42,666.35 41,024.64 39,811.32 37,069.47 33,316.70
Secured Loans 11,560.89 8,746.16 7,481.91 11,813.91 7,755.90
Unsecured Loans 12,705.81 12,754.41 8,615.30 8,351.58 8,755.35
Total Debt 24,266.70 21,500.57 16,097.21 20,165.49 16,511.25
Total Liabilities 66,933.05 62,525.21 55,908.53 57,234.96 49,827.95
Application Of Funds
Gross Block 53,874.36 42,461.10 41,367.19 38,260.60 35,382.49
Less: Revaluation Reserves 0.00 0.00 0.00 0.00 0.00
Less: Accum. Depreciation 27,103.71 25,683.70 24,239.81 23,180.54 21,780.91
Net Block 26,770.65 16,777.40 17,127.38 15,080.06 13,601.58
Capital Work in Progress 33,650.54 35,890.85 28,049.14 22,228.43 15,039.83
Investments 720.20 718.36 684.94 684.14 668.83
Inventories 15,200.82 16,008.21 13,742.37 11,302.79 9,027.46
Sundry Debtors 5,481.98 4,424.18 4,761.32 4,161.30 3,493.90
Cash and Bank Balance 2,855.95 3,850.35 6,415.70 143.99 230.76
Total Current Assets 23,538.75 24,282.74 24,919.39 15,608.08 12,752.12
Loans and Advances 7,281.75 6,549.11 5,556.17 6,175.81 5,155.32
Fixed Deposits 0.00 0.00 0.00 17,334.87 22,205.61
Total CA, Loans & Advances 30,820.50 30,831.85 30,475.56 39,118.76 40,113.05
Deferred Credit 0.00 0.00 0.00 0.00 0.00

82 | P a g e
Current Liabilities 19,105.61 14,976.39 14,606.26 13,994.33 13,383.67
Provisions 5,923.23 6,716.86 5,822.23 5,882.10 6,211.67
Total CL & Provisions 25,028.84 21,693.25 20,428.49 19,876.43 19,595.34
Net Current Assets 5,791.66 9,138.60 10,047.07 19,242.33 20,517.71
Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00
Total Assets 66,933.05 62,525.21 55,908.53 57,234.96 49,827.95

Contingent Liabilities 35,228.85 31,283.83 31,836.92 30,519.80 28,382.46

Book Value (Rs) 103.30 99.32 96.38 89.75 80.66

Source : Dion Global Solutions Limited

83 | P a g e
WORKING CAPITAL OF SAIL

84 | P a g e
Particulars 2009-10 2010-11 2011-12 2012-13 2013-14
CURRENT ASSETS
Inventories:
Raw Materials 2656.49 3065.56 3865.4 3531.03 3521.31
Finished & Semi finished goods 4660.39 6132.08 7646.45 9937.35 8971.52
Stores & Spares 1710.58 2105.15 2230.52 2539.83 2707.99
Trade Receivables: 3493.9 4130.27 4761.32 4424.18 5481.98
Cash &Bank balances:
Cash in hand 1.13 1.61 1.2 1.32 1.01
Cheques & draft on hand 196.7 107.78 243.71 243.91 194.59
Balances with bank 22238.5 552.68 134.39 32 19.31
16818.0
Other bank balances 0 2 6036.4 3589.67 2641.74
Other Current assets:
Interest receivable/accrued 765.63 482.25 57.9 49.14 44.73
Others 12.08 1901.76 2067.83 1814.96 2191.49
Gold coins on hand 2.63 0.4 0.4 0.26 0.26
Short term loan and advances 3416.09 1246.09 1385.77 988.73 1160.51

TOTAL CURRENT ASSETS 39154.1 36543.6 28431.2 27152.3 26936.4

(A) 2 5 9 8 4

CURRENT LIABILITIES
Trade payables:
Micro and Small Enterprises 15.27 24.8 12.08 13.86 21.44
Sundry Creditors- Subsidiary
Company 17.49 5.2 6.5 5.31 5.43
Sundry Creditors- Capital
Works 2114.48 0 0 0 0
Others 4066.64 3156.54 3201.17 3302.87 3178.47
Short term provisions:
Provision for Employee
Benefits: 3245.9 583.27 381.36 390.39 335.34
Other Provisions:
Taxation 2.71 1.52 0.47 0 51.96
Pollution Control & Peripheral
Development 112.92 121.56 118.75 117.62 106.62
Exchange Fluctuation 16.43 17.2 3.18 8.17 0
Proposed Dividend 702.17 495.65 330.45 165.23 0
Tax on Dividend 116.62 80.43 53.65 28.08 0
Wage Revision 1243.22 871.1 1085.75 1472.3 1130.39
Mines Afforestation /
Overburden removal 625.49 437.44 250.93 237.25 262.59
Others 64.9 75.28 72.5 93.66 84.42
Gratuity 89.26 0 0 0 50.63
VRS 10.53 0 0 0 0
12478.5
Others Current Liabilities: 4704.5 8308.46 8396.03 8654.7 1
10003.2 10634.4
Short term borrowings: 0 4 4510.55 8015.02 8

TOTAL CURRENT 17148.5 24181.6 18423.3 22504.4 28340.2

85 | P(B)
LIABILITIES age 3 9 7 6 8

NET WORKING CAPITAL 22005.5 12361.9 10007.9

( A-B ) 9 6 2 4647.92 -1403.84
Interpretation:
The company has been able to maintain positive working capital since 2008-09 onwards till 2012-13
but it had a negative working capital in 2013-14. The company had best working capital in the
year2009-10 and although it reduced in the next years it remained positive till 2012-13. From the
year 2008-09 the company has been improving its working capital but in the year 2012-13 the
working capital has gone down and gone negative in the year 2013-14 which should be a major
concern for the company. But even in this situation the company has tried not only to reduce its
current assets but also to reduce its current liability which is again a good sign.

NET OPERATING CYCLE :

OPERATING CYCLE OF SAIL

PARTICULARS 2009-10 2010-11 2011-12 2012-13 2013-14
(A) RAW MATERIALS
CONVERSION PERIOD
Opening Stock Of Raw
Materials 2610.67 2656.49 3065.56 3865.40 3531.03
Closing Stock Of Raw
Materials 2656.49 3065.56 3865.40 3531.03 3521.31
Avrage Stock Of Raw
Materials 2633.58 2861.03 3465.48 3698.22 3526.17
17340.1 23020.8
Raw Materials Consumed 8 22076.40 2 21198.48 19271.16
RAW MATERIALS
CONVERSION PERIOD
(IN DAYS) 55.44 47.30 54.95 63.68 66.79

(B) WORK-IN-
PROGRESS
CONVERSION PERIOD
Opening Stock Of Work-
In-Progress 0.00 0.00 1490.51 2004.76 1960.82
Closing Stock Of Work-In-
Progress 0.00 0.00 2004.76 1846.52 2437.42

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Avrage Stock Of Work-In-
Progress 0.00 0.00 1747.64 1925.64 2199.12
31534.6 42613.1
Cost Of Production 9 38612.04 2 43439.59 42851.08
WORK-IN-PROGRESS
CONVERSION PERIOD
(IN DAYS) 0.00 0.00 14.97 16.18 18.73

(C) FINISHED GOODS

CONVERSION PERIOD
Opening Stock Of Finished
Goods 5817.84 4660.39 4641.57 5641.69 8090.83
Closing Stock Of Finished
Goods 4660.39 6132.08 5641.69 8090.83 6534.10
Average Stock Of Finished
Goods 5239.12 5396.24 5141.63 6866.26 7312.47
32698.4 41763.7
Cost Of Goods Sold 9 37263.59 4 41268.47 44223.09
FINISHED GOODS
CONVERSION PERIOD
(IN DAYS) 58.48 52.86 44.94 60.73 60.35

(D) STORES & SPARES

CONVERSION PERIOD
Opening Stock Of Stores 1732.68 1710.58 2105.15 2230.52 2539.83
Closing Stock Of Stores
and Spares 1710.58 2105.15 2230.52 2539.83 2707.99
Average Stock Of Stores
and Spares 1721.63 1907.87 2167.84 2385.18 2623.91
Cost Of Consumption 3202.15 3309.75 1810.59 2133.22 2377.00
STORES & SPARES
CONVERSION PERIOD
(IN DAYS) 196.24 210.40 437.02 408.11 402.91

(E)DEBTORS CONVERSION PERIOD

Opening Stock Of Debtors 3058.76 3493.90 4161.30 4761.32 4424.18

Closing Stock Of Debtors 3493.90 4161.30 4761.32 4424.18 5481.98
Average Stock Of Debtors 3276.33 3827.60 4461.31 4592.75 4953.08
43204.0 46341.7
Credit Sales 6 42718.71 9 44598.26 46698.41
DEBTORS CONVERSION
PERIOD (IN DAYS) 27.68 32.70 35.14 37.59 38.71

(F) CREDITORS CONVERSION PERIOD

Opening Stock Of
Creditors 4108.58 6335.41 6074.17 3190.42 3302.87

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 Closing Stock Of Creditors 6335.41 6074.17 3190.42 3302.87 3205.34
Average Stock Of
Creditors 5222.00 6204.79 4632.30 3246.65 3254.11

(a) Raw Materials 15169.0

(Imported Directly) 6171.17 13688.84 3 12692.19 13333.85
(b) Stores and Spares
(Imported Directly) 43.42 343.69 407.05 393.15 397.98
( c) Indigenous Obtained 683.93 2993.51 3448.63 3610.31 3486.48
(d) Purchase Of Finished
Goods 9.58 4.22 4.88 3.21 0.78
CREDIT PURCHASE 19029.5
( a+b+c+d) 6908.10 17030.26 9 16698.86 17219.09
CREDITORS
CONVERSION PERIODS
(IN DAYS) 275.91 132.98 88.85 70.96 68.98

GROSS OPERATING
CYCLE
(A+B+C+D+E) 337.84 343.26 587.01 586.28 587.50
NET OPERATING
CYCLE
(A+B+C+D+E-F) 61.93 210.28 498.16 515.32 518.52

Net Operating Cycle

700.00

600.00

500.00 GROSS OPERATING CYCLE

(A+B+C+D+E)
400.00 NET OPERATING CYCLE
(A+B+C+D+E-F)
300.00

200.00

100.00

-
2009-10 2010-11 2011-12 2012-13 2013-14

Interpretation:

88 | P a g e
The Net Operating cycle of the company is an area of concern since it has been increasing since the
year 2009-10. The increase has also been very high and which is not a good sign for the company. In
the year 2011 the company has been able to reduce the cycle which again shows some positive signs.
But in the year 2012-13 and 2013-14 the cycle increases which is why the working capital of the
company has gone down. This situation has to be improved in the future.

JINDAL STEEL & POWER LIMITED

INTRODUCTION OF JINDAL STEEL PLANT

JINDAL STEEL AND POWER LIMITED (JSPL) is one of India’s major steel producer’s
with a significance presence in sectors like mining, power generation and infrastructure. With
an annual turnover of over 15 crores, JINDAL Group and consistently tapping new
opportunities by increasing production capacity, diversifying investment, and leveraging its
core capabilities to venture into new businesses. The company has committed investment
exceeds in the current year and has several business initiative running simultaneously across
continents.
Mr. NAVEEN JINDAL, the youngest son of the legendary shri. O P JINDAL spearheads
JSPL and its group companies. The company produces economical and efficient steel and
power through backward and forward integration.
From the widest flat products to a whole range of long products, JSPL today sports a product
portfolio that caters to varied needs in the steel market. The company also has the distinction
of producing the world’s longest 121 meter rails and large size parallel flange beams for the
first time in India.
JSPL operates the largest coal-based sponge iron plant in the world and has an installed
capacity bar mil at Patratu, Jharkhand, a medium and light structural mail at Raigarh,
Chhattisgarh and a plate mil to produce up to 5.00 meter wide plates at Angul, Orissa. The
company aims for a fast-paced growth so as to contribute substantially to India’s prosperity.

89 | P a g e
An enterprising spirit and the ability to discern future trends have been the driving force
behind the company’s remarkable growth story. The company has scaled new heights with
the combined force of innovation, adaption of new technologies and the collective skills of its
15000 strong, committed workforce.

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COST SHEET OF JINDAL STEEL
2009- 2010- 2013-
PARTICULAR 10 11 2011-12 2012-13 14
2225.7 2730.3 4265.7
Raw materials consumed 1 5 4529.84 4943.3 1
Direct Wages 214.87 277.78 385.44 447.89 552.32
2440.5 3008.1 4818.0
PRIME COST 8 3 4915.28 5391.19 3
Manufacturing overhead
1221.4
Depreciation 512.16 687.77 867.19 1048.46 4
Goods purchasae for resale 179.63 176.8 0 0 0
Rent 6.84 7.88 12.27 8.34 9.17
Repairs and Maintenance 234.1 215.92 289.65 270.86 289.43
Conversion charges (Manufacturing
expenses) 152.31 214.67 259.66 693.58 752.41
Insurance 7.59 11.16 14.46 16.76 16.71
Power & fuel 391.8 568.47 838.37 939.38 926.75
1135.4 1838.2
Store & Spares Consumed 814.1 5 1457.17 1698.66 4
2298.5 3018.1 5054.1
Manufacturing Cost 3 2 3738.77 4676.04 5
ADD: Opening stock of WIP 61.37 119.72 165.58 179.03 192.93
- -
LESS: Closing stock of WIP 119.72 163.58 -179.03 -192.93 -94.35
2240.1 2974.2 5152.7
Total manufacturing cost 8 6 3725.32 4662.14 3
Administrative Overhead
Miscellaneous expense 241.56 313.23 419.05 438.61 343.21
Rates & Taxes 12.57 15.82 16.65 21.68 27.67
Research & Development 0 5.8 6.46 14.25 9.47
Loss arising from Business investment 0 0 167.2 233.03 0
Royalty 85.51 119.7 172.96 185.34 156.83
Donation 55.5 73.96 87.98 41.66 52.26
loss on sale / discard of fixed assets 2.49 2.4 5.33 0.66 11.74
Directors sitting fees 0.07 0.06 0.08 0.18 0.18
Auditors remuneration 0.36 0.52 0.84 0.81 1.2
Administration Cost 398.06 531.49 876.55 936.22 602.56
5078.8 6513.8 10989.5 10573.
COST OF PRODUCTION 2 8 9517.15 5 3
Purchase of stock in trade 0 0 452.75 286.58 273.31
Excise duty on account of change in
stock of finished goods 20.15 30.16 47.46 25.2 -40.31
ADD: Opening stock of finished 1451.8
goods and scrap 570.32 560.9 879.06 1292.31 1
LESS: Closing stock of finished goods - - - - -
and scrap 552.03 878.64 1292.31 1451.81 1124.1

91 | P a g e
 5117.2 11141.8 11134.
COST OF GOODS SOLD 6 6226.3 9604.11 3 1
Selling & Distribution overhead
Selling expenses 202.55 355.64 349.91 420.02 660.32
Commission on sales 7.13 2.94 0 0 0
5326.9 6584.8 11561.8 11794.
COST OF SALES 4 8 9954.02 5 4
2040.6 2988.7 2749.6
Profit 5 5 3379.93 3392.85 2
7367.5 9573.6 13333.9
Net sales 9 3 5 14954.7 14544

92 | P a g e
Profit and loss account

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10
Particulars

93 | P a g e
Income
Sales Turnover 16,324.4 16,885.8 13,333.9 9,574.17 7,895.5
Excise Duty 1,780.44 1,931.14 0.00 0.00 548.14
Net Sales 14,544.0 14,954.7 13,333.9 9,574.17 7,347.4
Other Income 146.85 159.28 184.48 143.16 192.87
Stock Adjustments -386.03 148.20 379.24 333.45 40.06
Total Income 14,304.8 15,262.1 13,897.6 10,050.7 7,580.3
Expenditure
Raw Materials 6,377.26 6,928.54 6,439.76 4,042.60 3,219.4
Power & Fuel Cost 926.75 939.38 838.37 568.47 391.80
Employee Cost 552.32 447.89 385.44 277.78 219.72
Other Manufacturing 0.00 0.00 0.00 0.00 446.60
Expenses
Selling and Admin Expenses 0.00 0.00 0.00 0.00 320.90
Miscellaneous Expenses 2,542.80 2,848.64 1,987.13 1,436.22 233.56
Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00
Total Expenses 10,399.1 11,164.4 9,650.70 6,325.07 4,832.0
Operating Profit 3,758.86 3,938.45 4,062.49 3,582.55 2,555.4
PBDIT 3,905.71 4,097.73 4,246.97 3,725.71 2,748.3
Interest 1,083.63 820.77 536.77 285.00 331.66
PBDT 2,822.08 3,276.96 3,710.20 3,440.71 2,416.6
Depreciation 1,221.44 1,048.46 867.19 687.77 512.16
Other Written Off 0.00 0.00 0.00 0.00 0.00
Profit Before Tax 1,600.64 2,228.50 2,843.01 2,752.94 1,904.5
Extra-ordinary items 0.00 0.00 0.00 0.00 2.93
PBT (Post Extra-ord Items) 1,600.64 2,228.50 2,843.01 2,752.94 1,907.4
Tax 308.69 635.95 732.36 688.82 427.78
Reported Net Profit 1,291.95 1,592.55 2,110.65 2,064.12 1,479.6
Total Value Addition 4,021.87 4,235.91 3,210.94 2,282.47 1,612.5
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Equity Dividend 137.23 149.57 149.46 140.19 116.52
Corporate Dividend Tax 1.22 3.32 3.15 3.75 4.28
Per share data (annualised)
Shares in issue (lakhs) 9,148.86 9,348.34 9,348.34 9,342.69 9,312.3
Earning Per Share (Rs) 14.12 17.04 22.58 22.09 15.89
Equity Dividend (%) 150.00 160.00 160.00 150.00 125.00
Book Value (Rs) 142.80 132.09 116.01 93.01 72.44

Balance sheet
Particulars Mar '14 Mar '13 Mar '12 Mar '11 Mar '10
Sources Of Funds
Total Share Capital 91.49 93.48 93.48 93.43 93.12
Equity Share Capital 91.49 93.48 93.48 93.43 93.12
Share Application Money 0.00 0.00 0.00 0.00 0.00

94 | P a g e
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves 12,972.84 12,254.59 10,751.93 8,595.91 6,652.88
Networth 13,064.33 12,348.07 10,845.41 8,689.34 6,746.00
Secured Loans 12,707.31 11,577.42 6,848.09 5,085.01 4,235.16
Unsecured Loans 9,959.60 7,923.52 7,524.37 6,356.69 4,148.10
Total Debt 22,666.91 19,500.94 14,372.46 11,441.70 8,383.26
Total Liabilities 35,731.24 31,849.01 25,217.87 20,131.04 15,129.26
Application Of Funds
Gross Block 24,150.58 18,821.38 15,163.15 12,757.46 8,814.21
Less: Revaluation Reserves 0.00 0.00 0.00 0.00 0.00
Less: Accum. Depreciation 5,891.25 4,665.19 3,614.14 2,757.04 2,110.15
Net Block 18,259.33 14,156.19 11,549.01 10,000.42 6,704.06
Capital Work in Progress 11,663.17 11,483.94 10,493.96 7,081.06 7,225.21
Investments 1,350.52 1,330.72 1,412.17 1,210.01 1,067.11
Inventories 3,936.25 3,598.52 3,051.31 2,204.12 1,328.50
Sundry Debtors 1,460.96 1,426.13 905.06 737.12 622.36
Cash and Bank Balance 762.00 36.77 30.94 43.71 49.49
Total Current Assets 6,159.21 5,061.42 3,987.31 2,984.95 2,000.35
Loans and Advances 8,717.43 7,777.66 6,115.66 5,111.03 3,164.54
Fixed Deposits 0.00 0.00 0.00 0.00 10.61
Total CA, Loans & Advances 14,876.64 12,839.08 10,102.97 8,095.98 5,175.50
Deferred Credit 0.00 0.00 0.00 0.00 0.00
Current Liabilities 7,132.86 4,988.13 5,868.89 4,360.09 3,701.93
Provisions 3,285.56 2,972.79 2,471.35 1,896.34 1,343.71
Total CL & Provisions 10,418.42 7,960.92 8,340.24 6,256.43 5,045.64
Net Current Assets 4,458.22 4,878.16 1,762.73 1,839.55 129.86
Miscellaneous Expenses 0.00 0.00 0.00 0.00 3.02
Total Assets 35,731.24 31,849.01 25,217.87 20,131.04 15,129.26

Contingent Liabilities 15,349.60 13,356.75 11,184.81 12,839.18 8,733.08

Book Value (Rs) 142.80 132.09 116.01 93.01 72.44

Source : Dion Global Solutions Limited

WORKING CAPITAL OF JINDAL STEEL

PARTICULAR 2009-10 2010-11 2011-12 2012-13 2013-2014
CURRENT ASSETS
Inventories:
Stores & Spares 347.28 403.52 464.65 582.56 632.15
Trading goods 0 0.88 0 0 0
Raw Materials 300.6 755.08 1115.32 1371.22 2085.7

95 | P a g e
Work in progress 119.72 165.58 179.03 192.93 94.35
Finished goods 560.43 872.5 1279.17 1440.5 1121.48
Scrap 0.47 6.56 13.14 11.31 2.57
Sundry debtors: 622.36 737.12 905.06 1426.13 1460.96
Cash Bank balance:
Cash in hand 1.11 1.1 1.1 0.86 1.27
Cheques & draft on hand 0.07 0.78 1.6 7.95 25.07
Balances with bank 58.92 49.68 28.24 27.96 735.68
Other Current assets:
Prepaid expenses 0 0.98 2.34 1.94 2.78
Interest 0 184.69 280.08 368.73 258.01
Dividends Receivables 0 117.05 0 130.06 130.06
Other Receivables 0 17.15 25.22 107.38 166.59
Short term loan and
advances: 3865.94 3929.92 4806.29 5943.54 6543.65

TOTAL CURRENT
ASSETS (A) 5876.9 7242.59 9101.24 11613.07 13260.32

CURRENT LIABILITIES
Sundry Creditors: 2211.71 709 998.31 628.2 1637.34
Short term provision:
Provision for Employee
benefit 45.36 36.98 50.21 60.18 80.54
Other provisions 1298.35 1850.87 2402.42 2891.67 3185.43
Other Current Liabilities:
Statutory Dues 0 384.88 472.01 548.94 406.94
Advances 165.63 170.2 289.73 282.36 285.65
Other payables 521.06 2077.05 2899.79 1753.09 2762.36
Short term borrowings: 0 4081.99 5878.54 7640.02 9146.13

TOTAL CURRENT
LIABILITIES (B) 4242.11 9310.97 12991.01 13804.46 17504.39

NET WORKING
CAPITAL ( A-B ) 1634.79 -2068.38 -3889.77 -2191.39 -4244.07

96 | P a g e
 20000

15000

10000 TOTAL CURRENT ASSETS

TOTAL CURRENT
5000
LIABILITIES
0 NET WORKING CAPITAL
10

13
11

12

14
-5000

20
-

-
09

10

11

12

-
20

20

20

20

13
20
-10000

Interpretation
In the graph and the table above the net working capital of Jindal Steel and Power Plant Ltd
have been going down every year from 2010 onwards.In 2010 the networking capital was
positive but after that net working capital shows a negative balance which is the risky
situation for the company as current liabilities is more than current assets.The major reason
for increase in working capital is due to short term borrowings which increases over a period
of time.Therefore the company needs to check its working capital so as to maintain the
liquidity position of the company.

NET OPERATING CYCLE

NET OPERATING CYCLE
Particulars 2013-14 2012-13 2011-12 2010-11 2009-10
Raw material conversion period 166.60 105.10 89.06 86.11 50.88

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Work in progress conversion period 6.09 6.75 7.12 8.77 7.19
Finished goods conversion period 53.39 58.49 54.97 54.19 43.87
Stores conversion period 202.23 165.44 139.11 144.48 159.44
Debtors conversion period 36.22 28.44 22.47 22.01 22.93

GROSS OPERATING CYCLE 464.55 364.23 312.74 315.57 284.31

Less: Creditor conversion period 154.88 69.70 73.76 323.07 332.31
NET OPERATION CYCLE 309.67 294.53 238.97 (7.51) (48.01)

500

400

300
GROSS OPERATING CYCLE
200
NET OPERATION CYCLE
100

0
2013-14 2012-13 2011-12 2010-11 2009-10
-100

Interpretation
In the year 2010 the net profit cycle of the company is very low.Which results that the cash
availability with the company is very good but it is slightly in the year 2011 and from then it
increases drastically and its effect can be seen since the company had to borrow more
money.The result of such situation is that net working capital of the company goes to
negative.

Comparative analysis of Tata Steel,Jindal Steel and SAIL

Current
Ratio
2009- 2010- 2011- 2012- 2013-
Particular 2010 2011 2012 2013 2014
TATA
STEEL 1.15 1.63 0.96 0.88 0.62

98 | P a g e
 JINDAL 1.4 0.8 0.7 0.8 0.8
SAIL 2.3 1.5 1.5 1.2 0.9

2.5

1.5 TATA STEEL

1 JINDAL
SAIL
0.5

0
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Interpretation
Current ratio is a useful test of the short-term-debt paying ability of any business. A ratio of
2:1 or higher is considered satisfactory for most of the companies but analyst should be very
careful while interpreting it. We have calculated Current ratio for 5 years. The current ratio
of Tata steel is comparitively lower than SAIL and Jindal in the current year. The current
ratio of Tata Steel had gone down because they are making one new project in Kalinganagar,
Orissa. They had invested money on that project. This does not effect the liquidity position of
the company because the credit worthiness of the company is good.

Quick Ratio
Particular 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014
TATA STEEL 1.02 0.99 0.47 0.38 0.29
JINDAL 1.1 0.5 0.5 0.6 0.5
SAIL 1.8 1.0 0.8 0.5 0.4

99 | P a g e
 2.00

1.50
TATA STEEL
1.00 JINDAL
SAIL
0.50

0.00
1 2 3 4 5

Interpretation

Quick ratio is considered a more reliable test of short-term solvency than current ratio
because it shows the ability of the business to pay short term debts immediately. A
Quick ratio of 1:1 is considered satisfactory. Like current ratio, this ratio should also
be interpreted carefully. Quick ratio of SAIL is comparitively higher then Tata Steel
AND Jindal during 2009 to 2012 but during 2013 to 2014 current ratio of Jindal is
higher then other two companies. Just because the quick ratio is less than 1 does not
mean that the company has a weak liquidity position, it can also happen that the
companies with low quick ratio has a fast moving inventories through which the
company generates money to pay their debts.

Net Profit Ratio

2009- 2010- 2011- 2012- 2013-
Particular 2010 2011 2012 2013 2014
TATA STEEL 20.2 23.4 19.7 13.3 15.4
JINDAL 27.7 31.2 25.3 22.7 18.9
SAIL 16.7 11.3 7.6 4.9 5.6

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 35.0
30.0
25.0
20.0
15.0 TATA STEEL
10.0 JINDAL
5.0
0.0 SAIL
10

11

12

13

14
20

20

20
20

20
-

-
09

10

11

12

13
20

20

20

20

20
Interpretation
Net profit (NP) ratio is a useful tool to measure the overall profitability of the
business. A high ratio indicates the efficient management of the affairs of business. In
this graph, we can clearly see that net profit of Jindal is highest in all 5 years.
However net profit of Tata Steel is higher then that of SAIL.The graph shows a
decreasing trend in overall net profit of all the companies over the period of time. This
may be due to increase in the production capacity of the company and with that the
raw material consumed has also increased because of which the profits have reduced.

Gross profit ratio

Particul 2009- 2010- 2011- 2012- 2013-
ar 2010 2011 2012 2013 2014
TATA
STEEL 28.8 33.3 29.0 20.5 23.3
JINDAL 27.7 31.2 25.3 22.7 18.9
SAIL 25.0 16.6 11.1 7.3 6.9

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 35.0
30.0
25.0
20.0 TATA STEEL
15.0 JINDAL
10.0 SAIL

5.0
0.0
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

The gross profit ratio measures the margin of profit available on sales. The higher the gross
profit ratio better it is. From the above graph, we can see that Tata Steel has the maximum
gross profit for all the 5 years as compared to Jindal Steel with SAIL as the minimum gross
profit ratio, which shows Tata Steel’s efficiency in producing a good amount of profit for the
firm. Therefore Tata steel gross profit is best as compared the 2 companies because of huge
production of goods.

Debtors turnover ratio

2009- 2010- 2011- 2012- 2013-
Particular 2010 2011 2012 2013 2014
TATA STEEL 46.7 68.1 51.1 44.9 53.2
JINDAL 14.5 14.1 16.2 12.8 10.1
SAIL 12.4 11.3 10.4 9.7 9.4

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 80.0
70.0
60.0
50.0
TATA STEEL
40.0
JINDAL
30.0
SAIL
20.0
10.0
0.0
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Interpretation
The Debtors Turnover ratio should always be high. It shows that the receivables more
liquid and are collected promptly. From this graph, we can see that Tata Steel has
more debtors’ turnover ratio as compared to Jindal Steel and SAIL. SAIL has the least
debtors’ turnover ratio for all the 5 years with respect to Tata Steel and Jindal Steel.
For the current year 2013-14, the debtors’ turnover ratio of Tata Steel is 53.2 and we
can see that Jindal Steel and SAIL has very less debtors’ turnover ratio i.e. 10.1 for
Jindal Steel and 9.4 for SAIL. Here we can easily say that Tata Steel has the good
reputation in Debtors’ from all 3 companies

Creditors turnover ratio

2009- 2010- 2011- 2012- 2013-
Particular 2010 2011 2012 2013 2014
TATA STEEL 2.36 2.42 1.83 1.61 1.37
JINDAL 3.14 2.30 3.36 4.87 3.86
SAIL 1.34 2.76 4.09 5.13 5.28

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 6.00

5.00

4.00
TATA STEEL
3.00 JINDAL
SAIL
2.00

1.00

0.00
1 2 3 4 5

Interpretation

The creditors turnover ratio tells that out of Total purchase how much creditors are made.
This ratio indicates the speed with which amount is being paid to creditors. The creditors
turnover ratio for Tata Steel is least among the three companies. This does not signifies that
the credit worthiness of TATA STEEL is poor but it shows the confidence creditors repose on
the company. Since Tata steel has a good reputation therefore credit worthiness of the
company is good even after low credit turnover ratio.

Working Capital Ratio

2009- 2010- 2011- 2012- 2013-
Particular 2010 2011 2012 2013 2014
TATA STEEL 7.71 15.60 -8.31 -7.70 -5.70
JINDAL 4.51 -4.63 -3.43 -6.82 -3.43
SAIL 1.84 3.50 4.63 9.59 -33.26

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 20.00

10.00

0.00 TATA STEEL

1 2 3 4 5 JINDAL
-10.00
SAIL
-20.00

-30.00

-40.00

Interpretation
The working capital turnover ratio measures how well a company is utilizing its
working capital to support a given level of sales. Working capital turnover ratio of
Tata Steel is positive for first 2 years and for last 3 years it become negative whereas
for Jindal Steel the ratio was positive for first years i.e. 2009-10 and after that last 4
years, there ratio is also in negative. But in case of SAIL the ratio was positive since
last 4 years but has reduced drastically in the current year. When the working capital
turnover ratio is negative it shows that the company credit worthiness is good.

Inventory Turnover Ratio

2009- 2010- 2011- 2012- 2013-
Particular 2010 2011 2012 2013 2014
TATA
STEEL 5.21 5.39 5.32 5.65 5.83
JINDAL 4.04 3.52 3.65 3.35 2.96

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 SAIL 4.23 4.26 3.70 3.00 2.99

7.00
6.00
5.00
4.00 TATA STEEL
3.00 JINDAL
2.00 SAIL
1.00
0.00
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Interpretation
Every firm has to maintain a certain level of inventory of finished good so as to be
able to meet the requirement to the business. But the level of inventory should neither
be too high nor too low. Tata Steel has the highest inventory turnover ratio for all the
5 years as compared to Jindal Steel and SAIL. Tata Steel has the inventories ratio
between 5 and 6 which is good for the company, but companies less than 5, we can’t
say that the companies having bad inventories turnover ratio.

Raw material conversion period

2010- 2011- 2012- 2013-
Particular 2009-2010 2011 2012 2013 2014
TATA STEEL 85.93 85.28 91.22 72.57 70.18
JINDAL 50.88 86.11 89.06 105.10 166.60

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 SAIL 55.44 47.30 54.95 63.68 66.79

180.00
160.00
140.00
120.00
100.00 TATA STEEL
80.00 JINDAL
60.00 SAIL
40.00
20.00
0.00
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Interpretation

Raw Material conversion period is the time period between receiving the raw material
and sending them for production. It is the period of stocking the raw materials for
usage. From the above table and graph it is clear that Jindal Steel has highest raw
material conversion period 199.60 days which is not a good sign for the company as
cost of holding period is increasing. Tata & SAIIL maintains a superior raw material
conversion period (70.18 days and 66.79 days) respectively. SAIL has better raw
material conversion period in comparison with last four years from Tata Steel and
Jindal Steel.

Work in progerss conversion period

2009- 2010- 2011- 2012- 2013-
Particular 2010 2011 2012 2013 2014
TATA STEEL 2.53 2.30 1.05 0.77 0.61
JINDAL 7.19 8.77 7.12 6.75 6.09

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 SAIL 0 0 14.97 16.18 18.7318

20.00

15.00
TATA STEEL
10.00
JINDAL
5.00 SAIL

0.00
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Interpretation

Work in progress conversion period indicates the speed with which the company is
converting its semi-finished goods into finished goods. If the work in progress
conversion period increase it means the company is taking more time to convert it into
finished goods i.e., production is delayed. Lesser the work in progress holding period
lesser will be the blockage of company’s fund in the production process.
In the above graph it has been seen that Tata Steel has the lowest WIP conversion
period which indicates that it has a very efficient and smooth production process.
Jindal has a slightly higher WIP conversion period as compared to Tata Steel. Sail
does not have any conversion period till 2010-11 but since then conversion period is
noticed and it is more than Tata Steel and Jindal Steel. In fact the WIP of SAIL id
highest in the current year.

Finished goods conversion period

2009- 2010- 2011- 2012- 2013-
Particular 2010 2011 2012 2013 2014
TATA STEEL 26.74 24.35 23.63 23.48 25.36
JINDAL 43.87 54.19 54.97 58.49 53.39
SAIL 58.48 52.86 44.94 60.73 60.35

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 70.00
60.00
50.00
40.00 TATA STEEL
30.00 JINDAL
20.00 SAIL
10.00
0.00
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Interpretation
Finished goods conversion period is the time of storage of finished goods in the
warehouse until they are sold. Jindal and Tata Steel is superior in converting their
finished goods to sales. Whereas SAIL has a very high conversion period which
indicates that they incur high holding costs. Tata Steel finished goods conversion
period which is 25.36 days is the least as compared to the other two companies as we
in this graph plotted above.
SAIL has a high conversion period because its operations are very large but Jindal
should not be having such high conversion period. This will result in extra stock
which will require cost to take care, which should be avoided.

Stores and Spares conversion period

2009- 2010- 2011- 2012- 2013-
Particular 2010 2011 2012 2013 2014
TATA
STEEL 168.91 170.90 176.61 209.09 223.00
JINDAL 159.44 144.49 139.11 165.44 202.24
SAIL 196.24 210.40 437.02 408.11 402.91

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 500.00

400.00

300.00 TATA STEEL

200.00 JINDAL
SAIL
100.00

0.00
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Interpretation

Stores & Spares conversion period tells about the time within which the inventory
kept with the company is used up and stocks are not lying idle. Among the three
companies i.e., Tata Steel, Jindal and SAIL it can be seen in the graph and table above
that SAIL takes maximum days in stores conversion for all five years
Tata steel also has high stores conversion period which it is not able to improve in all
the five years and the best conversion period is that of Jindal Steel whose conversion
period have been less than the other two companies but the conversion period of
Jindal Steel has also been increasing steadily.

Debtors conversion period

2009- 2010- 2011- 2012-
Particular 2010 2011 2012 2013 2013-2014
TATA STEEL 7.81 5.33 7.14 8.13 6.86
JINDAL 22.93 22.01 22.48 28.45 36.23

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 SAIL 27.68 32.70 35.14 37.59 38.71

50.00

40.00

30.00 TATA STEEL

20.00 JINDAL
SAIL
10.00

0.00
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Interpretation

Among the three companies the Debtor conversion period of Tata Steel is the best.
This shows that Tata Steel does not keep many debtors and maintains good reputation
in the market. On other hand Jindal has a very high conversion period which affects
its operation since its cash gets blocked. But if we look at SAIL than even with high
conversion period the company manages its operations very well and has positive
working capital and this is why it has high debtors. Lastly it should be mentioned that
Tata Steel not only has low debtors conversion period but is even improving on that
which is commendable.

Creditors conversion period

2009- 2010- 2011- 2012- 2013-
Particular 2010 2011 2012 2013 2014
TATA STEEL 195.88 201.11 180.91 163.49 186.59
JINDAL 332.32 323.08 73.77 69.70 154.88

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 SAIL 275.91 132.98 88.85 70.96 68.98

350.00
300.00
250.00
200.00 TATA STEEL
150.00 JINDAL
100.00 SAIL
50.00
0.00
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Interpretation

In the credit deferral period the company which is best is Tata Steel. This shows the
reputation and faith the creditors have on Tata Steel. It has huge deferral period but
slowly it is reducing and slowing down which is a good sign since the company is
trying to maintain the creditors.
Jindal on the other hand has standard deferral period but in the year 2012 it has
reduced drastically which tells that the company is trying to reduce its creditors and
has been able to do that. But with this there is pressure to pay to the creditors in quick
time period.
SAIL has the least deferral period which tells us the cash reserve the company is
having. Not only that the company has very less creditors and as a result of this there
working capital always remains in positive and they are keeping it under control by
reducing their creditors further more.However in the current year the working capital
of SAIL has reduced drastically due to other current liabilities and not creditors.

Net Operating cycle

2009- 2010- 2011- 2012- 2013-
Particular 2010 2011 2012 2013 2014
TATA STEEL 96.04 87.06 118.74 150.55 139.43
JINDAL -48.01 -7.51 238.97 294.53 309.67

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 SAIL 61.93 210.28 498.16 515.32 518.52

600.00
500.00
400.00
TATA STEEL
300.00
JINDAL
200.00
SAIL
100.00
0.00
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014
-100.00

Interpretation

The net operating cycle of Jindal has been best among all the three companies during 2010
and 2011.But the noticeable point is that in the year 2012 to 2014 the operating cycle of
Jindal has increased drastically and this is because of sudden work in progress conversion it
has built up.

The operating cycle of Tata steel is the least in the current year but the conversion period of
Tata Steel is not good and it is quite high because of which at times it has shown negative
working capital.

As for SAIL even with such high operating cycle the company has been able to maintain its
operations and keep its working capital in positive which is recommendable.

Findings:

 The ideal current ratio is 2:1 and as for Tata Steel 0.5 is the standard for current ratio.
Tata Steel has been improved from the past years. It is able to meet the standard.

113 | P a g e
  The ideal quick ratio is 1:1. In the current year 2013-14 the ratio has decreased from
the previous year which clearly shows that the company keeps a lot of buffer stock
with itself since the production process is very long and also clears off its expenses in
advance.

 The profit has been increasing over the years but had declined in the previous years
and has been improving in 2013-14.

 Tata Steel is also following good strategy for blocking its funds for a longer period of
time when it comes for payment.

 The Inventory Turnover ratio is to be reduced as it displays better management.

 Finished goods Conversion period has increased from the previous years.

 Working capital turnover ratio of Tata Steel is positive for first 2 years and for last 3
years it become negative. When the working capital turnover ratio is negative it shows
that the company credit worthiness is good.

 Tata Steel's Raw Material Conversion Period has decreased over the years which is a
good sign for the company.

Recommendations:

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After going through all the information collected and ratio calculations, I would go for the
following recommendations :

 The financial ratios need a change to an extent.

 Advance payment should be avoided or else should be made against securities.
 Maintenance of cash and bank balances is improving to a large extent. Hence the
fluctuations in net working capital are reduced.
 There should be proper co-ordination between working capital group and its related
department i.e. debtors, inventory etc.
 The work in progress conversion period has reduced from the previous years hence
this is a good sign for the company.
 Maintenance of cash and bank balances has to be improving so that fluctuations in net
working capital could be avoided.
 The raw material conversion period is reducing.

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Conclusion

The success of an organisation primarily depends on its ability to sustain its comparative
advantage irrespective of the strategy it adopts. The project studies the Working Capital of
Management of TATA STEEL, which is one of the most important aspects of any
organisation, as it deals in managing the entire current assets and current liabilities .After
analysing the financial statement and having a in-depth study of working capital cycle and
various ratio of the company we conclude that the management of capital requires an
evaluation of cost and benefits associated with each elements. Tata Steel maintains sound
position of working capital its efficiency in receivable and deferral management is reflected
in a constantly decreasing operating cycle. The company has primarily been on cash drawn
from the market and reaping full benefits of its brand name. The company makes full
utilisation of its fund before making payments to outsiders.

In the end we can conclude that working capital management has a great effect on the
profitability of the company and the managers can create value for the shareholders by
decreasing receivables accounts and inventory and the managers must look for the method
that by means of them and correct management be effective on the profitability of the
companies.

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BIBLIOGRAPHY

Financial Management-IM Pandey

www.moneycontrol.com
www.tatasteel.com
www.Jindalsteel.com
Financial report-Tata Steel, Jindal, SAIL
Annual Report-JSPL,TSL,SAIL
 Report from TMDC Library

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