A

COMPARATIVE ANALYSIS
OF
WORKING CAPITAL MANAGEMENT BETWEEN PUBLIC &
PRIVATE SECTOR STEEL COMPANIES
IN
INDIA
1

CONTENT

About Steel Industry

Objective of the Study

Research Methodology

Scope of the Study

Research Approach &Tools of Analysis

Data Collection

Limitation Of the Study

References

CHAPTER WISE SCHEME

Introduction

Management of Working capital (Theory)

Profile of steel industry

Analysis of working capital

Analysis of Inventory management

Analysis of Receivable management

Analysis of Management of cash

Findings and Suggestions.

ABOUT STEEL INDUSTRY

Global Scenario

In 2014, the world crude steel production reached 1665 million tonnes (mt)
and showed a growth of 1% over 2013.

China remained the worlds largest crude steel producer in 2014 (823 mt)
followed by Japan (110.7 mt), the USA (88.2 mt) and India (86.5 mt) at the 4
th position.

WSA has projected Indian steel demand to grow by 6.2% in 2015 and by 7.3%
in 2016 as compared to global steel use growth of 0.5% and 1.4% respectively.
Chinese steel use is projected to decline in both these years by 0.5%.

Per capita finished steel consumption in 2014 is estimated at 217 kg for world
and 510 kg for China by WSA.

Domestic Scenario

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 3 rd largest producer of
crude steel in 2015 and the country continues to be the largest producer of sponge
iron or DRI in the world.

As per the report of the Working Group on Steel for the 12 th Five Year Plan, there
exist many factors which carry the potential of raising the per capita steel
consumption in the country.

CONT...
At

the time of its release, the National Steel Policy 2005 had envisaged steel

production to reach 110 million tonnes (mt) by 2019-20.

However, based on the assessment of the current ongoing projects, both in greenfield
and brownfield, the Working Group on Steel for the 12 th Five Year Plan has
projected that domestic crude steel capacity in the county is likely to be 140 mt by
2016-17 and has the potential to reach 149 mt if all requirements are adequately met.

The

National Steel Policy 2005 is currently being reviewed keeping in mind the rapid

developments in the domestic steel industry (both on the supply and demand sides) as
well as the stable growth of the Indian economy since the release of the Policy in
2005.

Production

Steel industry was de-licensed and de-controlled in 1991 & 1992 respectively.

India is the 3 rd largest producer of crude steel in the world.

In 2014-15, production for sale of total finished steel (alloy + non alloy) was 91.46
mt, a growth of 4.3% over 2013-14.

Production for sale of Pig Iron in 2014-15 was 9.7 mt, a growth of 22% over 2013-14.

India is the largest producer of sponge iron in the world with the coal based route
accounting for 90% 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:
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OBJECTIVES OF THE STUDY

The objective of the study is to examine the relationship between the working
capital management efficiency and profitability of the steel industry in India.

1.

The following are the specific objectives :To analyze the efficiency in Working capital management in the steel
industry in India.

2.

To analyze the relationship between Working capital management efficiency

and profitability of selected companies in the steel industry in India.

3.

To assess the relative signification of various source of financing of working

capital.

4.

To examine the profitability position of the selected Steel industries.

CONT...
5.

To examine the management of cash, inventory and accounts

receivable of selected steels industries

6.

To assess the current liability positions and the efficiency with which
the overall working capital is being managed.

7.

To suggest some measures for improvement in working capital

management

RESEARCH METHODOLOGY

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SCOPE OF THE STUDY

The present study is confined to the leading units in steel industry.

The study covers a period of ten years from 2004 to 2014.(2005 to

2015)

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RESEARCH APPROACH AND TOOLS

OF ANALYSIS

The research approach is descriptive observational research.

The observed secondary data is used for financial analysis purpose .

In the course of analysis use of various accounting and statistical

techniques the arithmetical mean, standard deviation, coefficient of
variation maximum ,minimum, simple and average growth rates, corelation coefficient and liner regression equations will be applied other
techniques in SPSS.
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CONT...

The use of all these techniques at different places has been made in
the light of nature and suitability of data available and requirements
of analysis.

The primary aim is to investigate the impact of WCM on corporate

profitability and the relevancy between profitability and liquidity.

I extend my study by also analyzing the trends in working capital

need of firms and to examine the possible causes for any significant
differences between public and private sectors.
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DATA COLLECTION

The study is mainly based on Secondary data.

Secondary data Will be taken CMIE , Prowess Database and

published annual reports of the steel companies.

In addition to that, Financial Literature and published articles

on the related aspects also considered.

The secondary data is basically for financial analysis purpose.

Various publication of Steel Industry Association, National
Council for steel and stock exchange official directory Will
be used for this purpose.

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CONT...

Other information related to the industry are collected from

the Economic Times, Financial Express, Business Standard
,RBI Bulletin, Other Periodicals ,Journals and other various
documents of the companies.

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LIMITATIONS OF THE STUDY

1.

The following limitations

The main source of information is annual reports. They represent
financial information/position on particular date. What happened
between such two dates cannot easily be presumed or predicated.

2.

The annual reports mostly contain quantitative and financial

information and as regards to qualitative aspect of financial
performance, my source was limited due to far away location of
head offices of the selected units.
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CONT...
3.

The financial performance covering a large period say 20 years

or 30 years can give a much clear picture of management
practices of financial performance. My study covering a period
of 10 years can touch only a part of the problem

17

REFERENCES
Adolphusj.

Toby, Liquidity performance Relationship in Nigerian Manufacturing

Companies (1990-2002), Finance India, March 2008, pp.117-131.

Chaudhary

S.B.:Analysis of company Financial Statements, Bombay Asia Publishing

House,1964.
Ghose

S.K. and Maji, S. G. 2003. Working Capital Management Efficiency: A study

on the Indian Cement Industry, The institute of Cost and Works Accountants of India.
Guthman

H.G.: Analysis of Financial Statements, Principles Hall of India (P)

Ltd.,New Delhi,1978.
Gupta

L.N.: Profitability of Government Companies, New Delhi oxford & IBH

Publishing Co.,1977.
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CONT...

Indian association of Trade and Industry, comparative study of

Productivity and Profitability1964.

Jain N.K, Working capital Financing by Indian banks, Journal of

management accounting and Research,Vol3,No.4, April June2000.

John N.Myer.: Financial statement Analysis, prantice Hall Inc.,

New Jersey,1969.

Shin, H. H. and Soenen, L.1998.2Efficiency of Working Capital

Management and Corporate Profitability, Financial Practice and Education
Vol8 No. 2, pp 37-45.

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Thank you
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