sravan wcm 1117

8/6/2019 SRAVAN WCM 1117

1/64

GAUHATI

UNIVERSITY

A Training Report submitted in partial fulfillment of the requirements for the

award of Degree of the Bachelor of Business Administration (Industry

Integrated), Gauhati University on

WORKING CAPITAL MANAGEMENT WITH RESPECT TO BHPV.

Under organizational Guidance of: Under Institutional Guidance of

Prepared And Submitted By:

G. Sravan Kumar Sem IV MBA

G.U. Registration No.

CERTIFICATE

8/6/2019 SRAVAN WCM 1117

2/64

8/6/2019 SRAVAN WCM 1117

3/64

This is to certify that G.Sravan kumar of MBA[ Industry Integrated ] Course of

GAUHATI University at Sun Institute of Technology & Management Learning

Center has undergone management training in A STUDY ON INDUSTRIAL

RELATIONS at our Organization from

1ST MARCH 2011 To 31ST MAY 2010.

Her Performance during the Training Period was found to be .

and we wish her all the best in her Career ahead.

For BHPV.

Visakhapatnam.

Authorized Signatory.

Manager.

COMPANY SEAL

8/6/2019 SRAVAN WCM 1117

4/64

STUDENTS DECLARATION

I HERE BY DECLARE THAT THE PROJECT REPORT CONDUCTED AT

BHARAT HEAVY PLATES AND VESSELS

VISAKHAPATNAM

UNDER THE GUIDANCE OF

MR.

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS

FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION

[INDUSTRY INTEGRATED]

TO

GAUHATI UNIVERSITY, GUWAHATI

IS MY ORIGINAL WORK AND THE SAME HAS NOT BEEN SUBMITTEDFOR

THE AWARD OF ANY OTHER DEGREE / DIPLOMA /FELLOW SHIP

OR OTHER SIMILAR TITLES OR PRIZES.

PLACE G.SRAVAN KUMAR

DATE: REG.NO:

8/6/2019 SRAVAN WCM 1117

5/64

ACKNOWLEGMENT

I am extremely grateful and wish to express my profound sense of gratitude with great

admiration to Prof. D. Panduranga Rao {CEO}, Mr. Srikanth Jasti {CMD}, Mrs. Asha

Jasti {ED}, Mrs. K.Rajani Priya {H.O.D}, Mr. Raghu Ram {Faculty Guide},

Mr.yogeshwar {training officer in charge, Niam}, Mr [ Manager In-Charge.] of

BHPV, Visakhapatnam and other staff members, colleagues, friends, family members for

being a constant source of inspiration and motivation for the successful completion of this

project work.

ON THE TOPIC

A STUDY ON THE INDUSTRIAL RELATIONS AT BHPV.

I, sincerely convey my regards to all of them for their encouragement, support, guidance and

assistance for undergoing management training and for the successful accomplishment of the

project report.

G.Sravan kumar

Registration No.

8/6/2019 SRAVAN WCM 1117

6/64

CONTENTS:

CHAPTER-1 Industrial Profile1.1 General Introduction about the sector.1.2 Industry profile.A. Origin and development of the industry.B. Growth and present status of the industry.C. Future of the industry.

CHAPTER 2 Organizational Profile

2.1 Origin of the Organization.2.2 Growth and Development of the Organization.2.3 Present status of the Organization.2.4 Functional Department of the Organization.

2.5 Organization structure.2.6 Product and Service profile of the Organization.2.7 Market profile of the Organization.

CHAPTER 3 Discussion on training

3.1 Students work profile (Roles and responsibilities), tools and techniques used.3.2 Key learnings.

Chapter-4 Study of selected research problem

4.1 Statement of Research problem.4.2 Statement of Research objectives.4.3 Research design and methodology.

CHAPTER 5 Analysis

5.1 Analysis of Data.5.2 Summary of Findings.

CHAPTER 6 Summary and Conclusions

6.1 Outcome of Learning Experience & Recommendations.

CHAPTER-1

8/6/2019 SRAVAN WCM 1117

7/64

Industrial Profile

1.1 General Introduction about the sector.

1.2 Industry profile.

A. Origin and development of the industry.

B. Growth and present status of the industry.

C. Future of the industry.

INTRODUCTION ABOUT THE SECTOR

8/6/2019 SRAVAN WCM 1117

8/64

Steel Industry Analysis is an important aspect of steel industries around the globe

because the needs and the technologies are subject to rapid change with the passage of

time. Steel Industry Analysis is required for maintaining the competitive advantage of a

country over the other.

The demand for steel is always on the upside because of constant increased want for steel

in the following sectors :-

Construction sector

Infrastructure sector

Automobile sector

Steel Industry Analysis is mostly concerned about making the steel more user friendly

such as making it light weighted, etc. Another important aspect associated with the Steel

Industry Analysis is the constant concern for environment. The analysis helps the

industry experts to evaluate the aspects for reduction of pollution related with the

production of steel.

The invention of the recycling process of steel is the outcome ofSteel Industry

Analysis. This analysis also helps the experts in identifying the market share of each

country in the production of steel. It shows that after the end of World War 2, the position

of USA in the world arena slid slowly but steadily from the largest single producer of

steel. Its place was taken over by China after the 1980s.

Steel Industry Analysis is generally performed by consultancy firms where the

8/6/2019 SRAVAN WCM 1117

9/64

professionals and experts in this field perform all sorts of physical and economic analysis

on different forms of steel and alloys. Some of the aspects on which the Steel Industry

Analysis is done involve :-

Consumption pattern of steel in the domestic as well as foreign market

Demand structure of steel in different countries

Existence of market for steel for the intermediary goods

Existence of market for steel for the final goods

Cost of production of steel by each firm on a country wise stratification

Prospect of trade in the steel industry all over the world

Comparative analysis of the price variation of steel between different

Countries

Indian Steel Industry is going gaga in the world steel market because of the demand for

steel generated around the world especially by the developing countries. There are mainly

four industry types which are generating the domestic demand forIndian Steel Industry

History Of The Steel Industry dates back to the ancient times in Armenia which is

approximately around three thousand and five hundred Before Christ. Steel is nothing but

the alloy of iron and carbon. But the History Of The Steel Industry in the modern times

was initiated during the medium half of nineteenth century (during 1850s to be precise).

The initiator of it was a person named Mr. Henry Bessemer of England. At the same time,

another person named Mr. William Kelly, a resident of United States, has also started the

production of steel and was completely an independent approach from Mr. Bessemer. The

process in which the first ever production of steel was carried out came to be known as

8/6/2019 SRAVAN WCM 1117

10/64

Bessemer Process. This helped the steel industries to produce steel in large quantities and

also at comparatively low costs.

The global steel industry has been going through major changes since 1970. China has

emerged as a major producer and consumer, as has India to a lesser extent. Consolidation

has been rapid in Europe.

Material for development and war

The volume of steel consumed has been the barometer for measuring development and

economic progress. Whether it is construction or industrial goods, steel is the basic raw

material. Lighter metals and stronger alloys have been developed. Plastics and synthetics

have replaced steel in many areas.

Steel is made from ores still found in abundance around the world. Technological

developments have brought down the time for transformation from iron ore to steel to

within a day. Even after decades of use, it can be sent back to the furnaces as scrap,

melted and remade into new qualities of steel. It is the most recycled material in the

world. In developed countries, recycling accounts for almost half of the steel produced.

Another major feature is the continuous improvement of steel grades. Half of todays

steel grades were not available ten years ago. Just take the example of the most

commonly used steel rods or bars, used as reinforcement material with cement concrete.

It used to be plain bars even in the sixties, then came the ribbed bars, followed by the cold

twisted deformed bars and now it is thermo mechanically treated bars. Each development
http://www.economywatch.com/world-industries/steel-industry/history.htmlhttp://en.wikipedia.org/wiki/Steelhttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Steelhttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Indiahttp://www.economywatch.com/world-industries/steel-industry/history.html

8/6/2019 SRAVAN WCM 1117

11/64

has added to the strength of construction. Older varieties of steel have been improved

upon and newer grades introduced. The process continues.

Growth of the industry

Global steel production grew enormously in the 20th century from a mere 28 million

tonnes at the beginning of the century to 781 million tonnes at the end.

World Steel Production in the 20th Century

Bethlehem Steel in Bethlehem, Pennsylvania was one of the world's largest

manufacturers of steel before its 2003 closure.

Over the course of the 20th century, production of crude steel has risen at an astounding

rate, now fast approaching a production level of 800 million tons per year. Today, it is

difficult to imagine a world without steel.

During the 20th century, the consumption of steel increased at an average annual rate of

3.3%. In 1900, the USA was producing 37% of the worlds steel. With post war industrial

development in Asia that region now (at the turn of the 20th century) accounts for almost

40%, with Europe (including the former Soviet Union) producing 36% and North

America 14.5%.

Steel consumption increases when economies are growing, as governments invest in

infrastructure and transport, and build new factories and houses. Economic recession

meets with a dip in steel production as such investments falter. If you were to overlay the

above graph with a time sheet showing major historical events, the peaks and dips
http://en.wikipedia.org/wiki/Bethlehem_Steelhttp://en.wikipedia.org/wiki/Bethlehem,_Pennsylvaniahttp://en.wikipedia.org/wiki/Bethlehem_Steelhttp://en.wikipedia.org/wiki/Bethlehem,_Pennsylvania

8/6/2019 SRAVAN WCM 1117

12/64

become meaningful. Note for example the peaks corresponding to the years of the two

World Wars, followed each time by a dip, and soon after by strong climbs as the major

economies recovered from the war and entered new periods of prosperity and growth,

most notably in the 1950s and 1960s. The trend over the past three decades can also be

seen to be in line with cyclical economic trends, with alternating periods of prosperity

and recession. That was the period when the steel industry developed in Western Europe

and the USA followed by the Soviet Union, Eastern Europe and Japan. However, steel

consumption in the developed countries has reached a high stable level and growth has

tapered off.

After being in the focus in the developed world for more than a century, attention has

now shifted to the developing regions. In the West, steel is referred to as a sunset

industry. In the developing countries, the sun is still rising, for most it is only a dawn.

Towards the end of the last century, growth of steel production was in the developing

countries such as China, Brazil and India, as well as newly developed South Korea. Steel

production and consumption grew steadily in China in the initial years but later it picked

up momentum and the closing years of the century saw it racing ahead of the rest of the

world. China produced 220.1 million tonnes in 2003, 272.2 million tonnes in 2004 and

349.36 million tonnes in 2005. That is much above the production in 2005 of Japan at

112.47 million tonnes, the USA at 93.90 million tonnes and Russia at 66.15 million

tonnes. For details of country-wise steel production see Steel production by country.
http://en.wikipedia.org/wiki/Steel_production_by_countryhttp://en.wikipedia.org/wiki/Steel_production_by_country

8/6/2019 SRAVAN WCM 1117

13/64

Growth potential of the industry

Amongst the other newly steel-producing countries, South Korea has stabilised at around

46-48 million tonnes, and Brazil at around 30 plus million tonnes. This brings the focus

of the industry to India. Considering a steel consumption of 300 kg per man per year to be

a fair level of economic development, India will have to come up to somewhere around

300 million tonnes, if it is to fulfil its ambitions of being a developed country. That of

course is a long journey from the present production level of around 50 million tonnes but

one must consider its past before coming to a conclusion about its potential. India was

producing only around a million tonnes of steel at the time of its independence in 1947.

By 1991, when the economy was opened up steel production grew to around 14 million

tonnes. Thereafter, it doubled in the next 10 years, and then it is doubling again, maybe

over a slightly longer span. Steel Production in India is expected to reach 124 million tons

by 2012 and 275 million tons by 2020 which could make it the second largest steel

maker.

In the developed countries, the trend is on consolidation of industry. Cross-border

mergers have been taking place for several years. The focus is on technological

improvements and new products.

Globally, the steel industry became a billion tonne industry in 2004. How much more it

will grow will depend primarily on how much more steel is consumed in the developing

countries.

8/6/2019 SRAVAN WCM 1117

14/64

Reduction in workforce

Steel is no more the labour-intensive industry it used to be. Earlier, it was often

associated with the image of huge work force living in a captive township. All that has

changed dramatically. A modern steel plant employs very few people. In South Korea,

Posco employs 10,000 people to produce 28 million tonnes. As a rule of thumb, one can

put the direct employment potential at 1,000 per million tonnes. It could be less.

However, steel being a basic industry, it generates substantial growth of both upstream

and downstream facilities. According to some estimates one person-year of employment

in the steel industry generates 3.5 person-years of employment elsewhere. Considering all

these, total employment generation will be substantial.

The third quarter of the twentieth century witnessed massive growth of the global steel

industry. Annual production rose more than three times in 15 years from 1960. In the last

quarter of the century, production reached a plateau, rising only by around 100 million

tonnes. Increase in production gave way to increases in productivity. See also steel crisis.

During the period 1974 to 1999, the steel industry had drastically reduced manpower all

around the world. In USA, it was down from 521,000 to 153,000. In Japan, it was down

from 459,000 to 208,000. In Germany, it was down from 232,000 to 78,000. In UK, it

was down from 197,000 to 31,000. In Brazil, it was down from 118,000 to 59,000. In

South Africa, it was down from 100,000 to 54,000. South Korea already had a low figure.

It was only 58,000 in 1999. The steel industry had reduced manpower around the world

by more than 1,500,000 in 25 years.
http://en.wikipedia.org/wiki/Steel_crisishttp://en.wikipedia.org/wiki/Steel_crisis

8/6/2019 SRAVAN WCM 1117

15/64

CHAPTER-2

Profile of the Organization [ABRL]

2.1 Origin of the Organization.

2.2 Growth and Development of the Organization.

2.3 Present status of the Organization.

2.4 Functional Department of the Organization.

2.5 Organization structure.

2.6 Product and Service profile of the Organization.

2.7 Market profile of the Organization

8/6/2019 SRAVAN WCM 1117

16/64

COMPANYPROFILE

BHARAT YANTRA NIGAM LIMITED :( Holding company)

Bharat Yantra Nigam Limited (BYNL) was incorporated in July, 1986 with corporate

office at Allahabad (UP), with the main objective to integrate, monitor and coordinate the

activities of the subsidiary companies with a view to secure optimum utilization of

resources and to provide package and turnkey services to various core sectors. It has

following 6 companies as its subsidiaries.

1. Bharat Heavy Plate & Vessels Limited, Visakhapatnam

2. Bharat Pumps & Compressors Limited, Naini, Allahabad.

3. Bridge & Roof Company (India) Limited, Calcutta.

4. Richardson & Cruddas (1972) Limited, Mumbai.

5. Tungabhadra Steel Products Limited, Hospet, Karnataka.

6. Triveni Structural Limited, Naini, Allahabad.

8/6/2019 SRAVAN WCM 1117

17/64

BHARAT HEAVY PLATES AND VESSELS LIMITED:

Bharat Heavy Plates & Vessels Limited, (BHPV) was set up in the year 1966 for catering

to the requirement of equipments for core sectors, such is, Fertilizers, Oil Refineries,

Petrochemicals, etc.

The company has 3 product divisions namely, Process Plant Division, Cryogenics

Division, and Boiler Division. The company is radually shifting its emphasis, from mere

manufacturing and supply of equipment to system sales. The Company has entered into

MOUs, on a case-to-case basis, with world renowned companies for transfer of

technology. The production of the Company for the year 1999-2000 is anticipated to be

Rs.255 crores.

BHARAT PUMPS & COMPRESSORS LIMITED:

Bharat Pumps & Compressors Limited, (BPCL) was incorporated in January, 1970 at

Naini, Allahabad. The Company is catering to the needs of sectors like, oil, fertilizer,

chemicals etc. For various types of pumps & compressors. The Company is likely to end

the year1999-2000 with a production ofRs. 45 crores.

BRIDGE AND ROOF COMPANY (INDIA) LIMITED:

Bridge & Roof Company (India) Limited (B&R) was initially a subsidiary of Blamer

Lawry & Co. Ltd. Subsequently, Government of India directly invested additional equity

capital of Rs.174 lakhs in December, 1978 and became a Government company.

8/6/2019 SRAVAN WCM 1117

18/64

INDUSTRY OVERVIEW: ENGINEERING

The engineering sector is the largest segment of the overall Indian industrial sector. India

has a strong engineering and capital goods base.

The important groups within the engineering industry include machinery & instruments,

primary and semi finished iron & steel, steel bars & rods, non-ferrous metals, electronic

goods and project exports. The engineering sector employs over 4 million skilled and

semi skilled workers (direct and indirect)

The sector can be categorized into heavy engineering and light engineering segments.

Heavy engineering segments forms the majority of the engineering sector in India. In the

year 2003-04, out of the total engineering production of US$ 22 billion, the heavy

engineering market contributed over 80 percent with the light engineering segment

accounting for the remaining.

The performance of the engineering sector is linked to the performance of the end user

industries for the sector. The user industries for engineering include power utilities,

industrial majors (refining, automotive and textiles), government (public investment) and

retail consumer (pumps and motors). The engineering sector has been growing, driven by

growth in end user industries and the new projects being taken up in the power, railways,

infrastructure development, private sector investment being taken up in the power,

railways, infrastructure development, private sector investment fields etc. Many factors

contribute to growth of engineering sector in India.

THE KEY GROWTH DRIVERS ARE:

8/6/2019 SRAVAN WCM 1117

19/64

8/6/2019 SRAVAN WCM 1117

20/64

The organizational mission of BHPV is to supply projects, systems, equipment and

services to the process industry and help the country in achieving self-advance in this

field.

Corporate objectives

To own core sector plans downstream petrochemical plants to run the business.

To develop capability to build equipments like CNC Gas cutting and CNC laser cutting.

To develop capability in project consultancy, computer software and other peripheral

service.

To achieve a leading position in research and development in different filed of

engineering and technology in the areas of work related to the business so as to provide

adequate Technology backup for the business.

To strive for total self-reliance through import substitution by research and development

and Indigenization of Equipment.

To achieve optimum utilization of capacities installed.

To develop export markets for products and services with a view to earn at least to the

foreign exchange component of imported materials.

To start joint ventures with reputed foreign parties with in India and abroad.

To develop export markets for products and services with a view to earn at least to the

foreign exchange component of imported materials.

8/6/2019 SRAVAN WCM 1117

21/64

To start joint ventures with reputed foreign parties with in India and abroad.

To develop a team of experts consisting of engineering quality control production

erection and commissioning to make available consultancy services so as to guide and

supervise performance of other companies.

To make up overseas operation of the plants by installing, maintaining and requirements

BHPV.

To develop infrastructure facilities of the fabrication shop to shift to shift to high tech

areas by providing the latest CNC machines in all the areas and off-laid low-tech

equipments.

To earn fair and return of capital employed in order to generate adequate internal

Resource to finance growth of the company.

HEAD OFFICE: - Visakhapatnam, Andhra Pradesh

Branch office: - Mumbai, Calcutta, Chennai, Hyderabad, New Delhi and vadosara

Bharat heavy plates and vessels Ltd, it is a public limited company. It is a job order/ shop

production industry. According to customer specifications and requirements it produces

various products.

Fore seeing the countrys need for fabricating of an exclusive factory with the main

object of reducing dependence on foreign suppliers and become self sufficient over

selves. Thus the birth of BHPV LTD in the year 1966 to meet the demands of process

8/6/2019 SRAVAN WCM 1117

22/64

equipment for core industry like fertilizers, petrochemicals, petroleum and other chemical

industries initially.

BHPV Ltd using different types of materials manufactured and supplied several built

equipments such as pressure vessels, heat exchangers, columns, internal trays etc. After

executing some important orders, BHPV Ltd gained full confidence of customers which

cleared the way to enter the line of cryogenic filed, pulp cooking plant, evaporation plant

and industrial boilers on a total turnkey basis which of later years helped in augmenting

turnover of the company and increasing profitability.

In India these heavy engineering industries occupy a crucial role in its economic

development in view of the huge investment as well as the critical importance to nation.

These industries are mostly confines to the sector only.

BHPV Ltd is the largest fabricator of process equipment in India for the petroleum,

chemical and allied industries. It is fully owned by the government of India and is

managed by an autonomous board of directors. Situated in the city of destiny of

Visakhapatnam on the western see coast of the Deccan plateau, BHPV Ltd is accessible

by road, rail, sea an is well connected to all metropolitan cities by air.

M/s BHARAT HEAVY PLATES AND VESSELS LTD Visakhapatnam is a public

sector undertaking. M/s BHPV Ltd has been selected for the study. The topic selected is

A study on the Industrial Relations with reference to M/s BHPV LTD.

HISTORY OF BHPV

8/6/2019 SRAVAN WCM 1117

23/64

Licensed to start construction of plant at Visakhapatnam in 1966, BHPV confronted

many obstacles such as water problems, frequent power cuts both at initial stage as well

as the time when construction was going on .In spite of all those obstacles the civil and

structural work completed to a major extent by the end of 31 st March, 1967. The licensed

and installed capacity is 23210MT. The initial capital outlay being Rs.17.5 crores.

Later after completion of installation work had received orders for the 1st time from M/s

BOKARO steel plant and Fertilizer Corporation of India Ltd., for fabrication and supply

of equipment. The factory at initial stages had suffered a loss in fabrication and delivery

of factory was scheduled to go into production initially in july, 1967, but due to backlog

of some uncompleted construction work the minister of state for steel and heavy

engineering inaugurated the initial production in 1970 where some production facilities

has already been established by installation of fabricating machinery like bending rolls,

welding equipment etc.

During the first year production, the company has incurred a loss of Rs 27.47 lakhs

mainly due to incidence of fixed expenditure apportion-able to production like

establishment, depreciation etc. The same loss position was continued till 1978-1979. The

continuous losses put BHPV far from profiteering companies. The existence of excessive

accumulated interest on loan taken from GOI resulted in heavy loss to the company. In

1978-1979 the company had suffered a loss of Rs 538 Lakhs due to incidence of delayed

delivery of equipment, excessive increase in cost of imported raw materials and other

administration costs.

PRODUCTION FUNCTION

8/6/2019 SRAVAN WCM 1117

24/64

BHPV supplied quality process plant equipments, turnkey Cryogenic, Combustion,

Oil & Gas Systems and services tailor made to the specific requirements of the

Customers and to their satisfaction. BHPV has come a long way since its

inception in 1971 to a current turnover of about US $ 26 millions with an eye

on US $ 250 million in the near future.

This is one company which houses excellent engineering skills, Asia's

biggest fabrication facility, uncompromising quality control, dedicated erection &

commissioning team under one roof, a combination resulting in India's self

reliance.

BHPV acquired various National and International quality accreditations such as

ASME, LLOYDS etc.

BHPV with ISO 9001 accreditation is the leading EPC Company in South East

Asian region serving following sectors :

Refineries

Petrochemicals

Oil & Gas

Steel & Metallurgy

Power

Nuclear

Defense

Paper & Pulp

8/6/2019 SRAVAN WCM 1117

25/64

Pharmaceuticals

Cryogenics

Process Plant & Equipment

Boiler Plant & Equipment, Systems

Production facilities

Factory Area : 197 Acres

Total Covered Area : 90,000 sq. Meters

Covered area of Production Shops : 56,000 sq. Meters

Power Requirement : 3,000 KW from APSEB

No. of Ancillary Units : 11 Units

IMPORTANT MACHINERY:

The factory is provided with comprehensive and modern manufacturing and testing

facilities and suitable material handling equipment.

The maximum crane lifting capacity is 120 tones, but loads up to 250 tones can be

lifted with improvised

Maximum Rolling capacity is 60mm in cold condition and 170mm in hot

condition.

8/6/2019 SRAVAN WCM 1117

26/64

BHPV has the largest heat treatment furnace in India, the size being 5.5 meters

width, 5.5meters height and 36.5 meters long. One more furnace of 200 Ton capacity and

15mtrs. Bogie length has been added.

Other critical equipment available with BHPV is Deep Drawing Hydraulic Press of

1600T capacity.

Single Spindle CNC Deep hole Drilling Machine with Gun Drilling attachment and

2Nos. CNC drilling machines which can employ conventional drills. Another CNC Deep

hole drilling machine has been installed recently by HMT

A number of Welding Rotators of capacity up to 250 Tones.

Welding equipment such as manual Arc, Sub merged Arc, TIG, MIG, Plasma

including the latest high productive welding equipment such as Twin Head submerged arc

welding, and Bi-cathode TIG welding.

Tube Fining Machine.

A number of vertical and horizontal boring machines with a maximum capacity of

5 meters dia and 200mm spindle dia respectively.

Different types of Non-destruction Testing Equipment.

Well equipped Physical and Chemical Laboratories.

8/6/2019 SRAVAN WCM 1117

27/64

FUNCTIONS OF HRM DEPARTMENT

He looks after all the moments which are related to salary and wage

administration of employees.

Separate estate administration department working under him.

He looks after the time office particulars

Legal proceedings which are related to collective bargaining, disciplinary

discussions and enquiry proceedings are conducted in present of him.

Contract lobour problems, tenders, daily wages negotiation with presence of him.

Hindi language cell is to teach Hindi to all employees.

Functions of Sr.manager HR: under him five departments are there. He has

ultimate control over the departments.

P&IR departments deputy manager looks after the industrial relations and

workers problems, grievances.

Separate hospital in township, which is headed by the medical superintendent.

Canteen Administration.

Security and five departments.

Welfare department administration.

Classification of officers

Senior executives : E4 and above

8/6/2019 SRAVAN WCM 1117

28/64

Middle mangt.Executives : E2 and E4

Executives : E1

Classification of supervisors:

Senior Supervisors : S3

Junior Supervisors : S1 and S2

Classification of workmen : HSW-I, HSW-II, HSW-III

Skilled : WG-III TO WG-VI

Semi skilled : WG-II

UN skilled : WG-I

Eligibility:

Candidate for appointment must by

A citizen of India or

A Tibetan refugee who came over to India before 1st January 1962, with the

intention of prominently setting in India or a repatriate from Burma, srilanka or

East Asia, on

A person of India who is migrated form Pakistan eight the interim of permanent settlingin India.

8/6/2019 SRAVAN WCM 1117

29/64

CHAPTER-3

DISCUSSION ON THE TRANING

3.1 Students work profile (Roles and responsibilities),

tools and techniques used.

3.2 Key learnings.

8/6/2019 SRAVAN WCM 1117

30/64

Students work profile (Roles and responsibilities), tools

and techniques used.

According to Genestenberg, Circulating capital means current assets of a

company that are changed in the ordinary course of business from one form to another, as

for example, from cash to inventories, inventories to receivables, receivables into cash.

I have to study the functioning of the working capital management at BHPV.

I have to analyse the balance sheet of the Organization.

I have to understand the operations of the finance department.

I have to understand the job descriptions of the finance staff

I have to analyze the roles and responsibilities of the department

I have to understand the applications and sources of funds.

I have to analyse the funding process of the Organization.

8/6/2019 SRAVAN WCM 1117

31/64

CHAPTER-4

STUDY OF SELECTED RESEARCH PROBLEM

4.1 Statement of Research problem.

4.2 Statement of Research objectives.

4.3 Research design and methodology.

8/6/2019 SRAVAN WCM 1117

32/64

Statement of Research problem.

To study the WORKING CAPITAL MANAGEMENT with respect to

BHPV.

DEFINITION:

In the words Shubin, Working Capital is the amount of funds necessary to cover the cost

of operating the enterprise.

According to Genestenberg, Circulating capital means current assets of a company that

are changed in the ordinary course of business from one form to another, as for example,

from cash to inventories, inventories to receivables, receivables into cash.

Every business needs investment to procure fixed assets, which remain in use for a longer

period. Money invested in these assets is called 'Long term funds 'or' fixed capital'.

Business also needs funds for short term purposes to finance current operations.

Investments in short term assets like cash, inventories, debtors etc., are called 'Short term

funds'or 'Working capital'. Working capital can be categorised as funds needed for

carrying out day-to-day operations of the business smoothly. The management of the

working capital is equally important as the management of long-term financial

investment.

WORKING CAPITAL CYCLE

While managing the working capital, two characteristics of current assets should be kept

in mind like (1) short life span, and (2) swift transformation into other form of current

asset. Each component of current asset has comparatively very short life span. Investment

remains in a particular form of current asset for a short period. The life span of current

8/6/2019 SRAVAN WCM 1117

33/64

assets depends upon the time required in the activities of procurement; production, sales

and collection and degree of synchronization among them. A very short life span of

current assets results into swift transformation into other form of current assets for a

running business. These characteristics have certain implications.

Decision regarding management of the working capital has to be taken frequently

and on a repeat basis.

The various components of working capital are closely related and

mismanagement of any one component adversely affects the other components

too.

The difference between the present value and the book value of profit is not

significant.

The working capital has the following components, which are in several forms of current

assets:

Stock of cash

Stock of raw material.

CLASSIFICATION OF WORKING CAPITAL:

Working capital can be classified into two ways.

(a). On the basis of concept

(b). On the basis of time

8/6/2019 SRAVAN WCM 1117

34/64

DETERMINANTS OF WORKING CAPITAL:

The need for working capital is not always the same, it varies from year to year or even

month to month depending upon a number of factors. There is no set of rules or formulate

to determine the working capital needs of the firm. Each factor has its own importance

and the importance of the factors changes for a firm over a time.

In order to determine the proper amount of working capital of a concern, the following

factors should be considered carefully.

Nature of the business:

The amount of working capital is basically related to the nature and volume of the

business concern where the cost of the raw materials to be used in the manufacturing of a

product is very large in proportion to its total cost of manufacturing the requirements of

working capital will be very large.

Size of the business unit:

The size of the business unit has an important impact on its working capital needs. Size

may be measured in terms of operations. A firm with large scale of operation will need

more working capital then a small firm.

Seasonal variation:

Seasonal industries require more working capital to stock the raw materials during the

season.

8/6/2019 SRAVAN WCM 1117

35/64

CONSEQUENCES OF UNDER ASSESSMENT OF WORKING CAPITAL:

Growth may be stunted. It may become difficult for the enterprise to undertake

profitable projects due to non-availability of working capital

Implementation of operating plans may become difficult and consequently the

profit goals may not be achieved.

Cash crisis may emerge due to paucity of working funds.

Optimum capacity utilization of fixed assets may not be achieved due to non-

availability of the working capital .

The business may fail to honor its commitment in time, thereby adversely

affecting its credibility. This situation may lead to business closure.

The business may be compelled to buy raw materials on credit and sell finished

goods on cash. In the process it may end up with increasing cost of purchases and

reducing selling prices by offering discounts. Both these situations would affect

profitability adversely.

Non-availability of stock due to non-availability of funds may result in production

stoppage.

While under assessment of working capital has disastrous implications on

business, over assessment of working capital also has its own dangers.

8/6/2019 SRAVAN WCM 1117

36/64

CONSEQUENCES OF OVER ASSESSMENT OF WORKING CAPITAL:

Over assessment of working capital causes more consequences.

Excess of working capital may result in unnecessary accumulation of inventories.

It may lead to offer too liberal credit terms to buyers and very poor recovery

system and cash management.

It may make management complacent leading to its inefficiency.

Over investment in working capital makes capital less productive and may reduce

return on investment.

INVENTORY MANAGEMENT:

Every enterprise needs inventory for smooth running of its activities. It serves as a link

between production and distribution process. There is, generally a time lag between the

recognition of a need and its fulfillment. Greater the time lag the higher the requirements

for inventory. The unforeseen fluctuations in the demand and supply of goods also

necessitate the need for inventory. It also provides a cushion for future price fluctuations

CASH MANAGEMENT:

Cash is the one of the current assets of a business. It is needed at all times to keep the

business going. A business concern should always keep sufficient cash for meeting its

obligations. Any shortage of cash will hamper the operations of a concern and any excess

of it will be unproductive. Cash is the most unproductive of all the assets. While fixed

assets like machinery, plant etc and current assets such as inventory will help the business

8/6/2019 SRAVAN WCM 1117

37/64

in increasing its earning capicity, cash in hand will not add anything to the concern. It is

in this context that cash management has assumed much important.

RECEIVABLES MANAGEMENT:

Given a choice, every business would prefer selling its produce on cash basis. However,

due to factors like trade policies, prevailing marketing conditions, etc., businesses are

compelled to sell their goods on credit. In certain circumstances, a business may

deliberately extend credit as a strategy of increasing sales. Extending credit means

creating a current asset in the form of Debtors or Accounts receivables.

PAYABLES MANAGEMENT:

Management of accounts payable is as much important as the management of such

accounts receivable. How ever there is a basic difference between the approaches adopted

by the finance manager in both the cases. The underlying objective in such case of

accounts receivables is to maximize the acceleration of collection process while incase of

accounts payable it is to slow down the payments process as much as possible. The delay

in payments of accounts payable may result in saving of some interests costs but proves

very costly to the firm in the form of loss of credit in the market. The finance manager

therefore has to ensure that the payments to the credits are made at the stipulated time

period after obtaining the best credit term possible.

8/6/2019 SRAVAN WCM 1117

38/64

CHAPTER-5

ANALYSIS

5.1 Analysis of Data.

5.2 Summary of Findings.

8/6/2019 SRAVAN WCM 1117

39/64

DATA ANALYSIS AND INTERPRETION

Working capital Management is the concept of how effectively holding the current

assets and current liabilities of an organization.

RINL is the steel manufacturing industry. In RINL production of steel is done in 24 hours

continuously. It follows the most effective and perfect methods for holding the working

capital.

RINL working capital management seems to be best in the industry with better utilization

of available resources. They are taking advantages of cheap working capital credit and

investing their funds at a very good rate of returns.

Management efforts over the few years have been to inculcate cash consciousness

through constant emphasis on working capital, manly inventory and book debtors. In all

these, it is to be kept in mind that RINL is a multi product undertaking, where

management decisions affecting working capital is taken at the top managerial level.

DETERMINANTS OF WORKING CAPITAL IN RINL :-

It is understood that working capital is the vital component for future growth of the firm.

Financial manager has to maintain adequate level of working capital. There are several

factors influence the determinants of working capital. It is necessary to know those

factors which identifying the optimum size of working capital. In RINL working capital

is generally deter mind by these factors.

8/6/2019 SRAVAN WCM 1117

40/64

They are :

1. Market Coverage

2. Manufacturing Cycle

3. Advances

4. Growth of the firm

5. Seasonal fluctuations

6. Global Market boom

7. Expansion Chances

8. Credit Policy

The Management of working capital in RINL encompasses the following problems :-

1. To decide upon the optimal level of investment in various current assets.

2. To decide upon the optimal mix of short-term funds high relation to long term

capital.

3. To locate the appropriate means of short-term financing.

Sources of working capital funds :-

RINL raise its working capital from a consortium of 11 Bankers. The following are the

11 banks, where funds for working capital raised.

1. State bank of India

2. State bank of Hyderabad

3. Bank of Baroda

4. Canara bank

5. UCO bank

8/6/2019 SRAVAN WCM 1117

41/64

6. Andhra bank

7. Allahabad bank

8. Indian overseas bank

9. HSBC bank Ltd

10. IDBI bank Ltd

11. Indian bank

In RINL working capital requirement is assessed by

Fixing the target production for the year

Preparation of Budget (in Rupees)

Working capital requirement are prepared taking into account

Previous two years actual

Projected for the next two years

Procedure for procurement of funds :

RINL applies a Credit Monitoring And Appraisal (CMA) Report (a Fourty pages

document) consists of historical data about the company and profit and loss account,

balance sheet, current assets, current liabilities, working capital assessment, fund flows

etc., State Bank of India subscribes the maximum working capital limit (up to extent of

38%) of the entire working capital assessed. The other banks of the under the multiple

banking arrangement above provide the rest of working capital limits.

Limits :

8/6/2019 SRAVAN WCM 1117

42/64

RINL is having fund based limits of 613.85 crores and non fund based limits up to 2029

crores in 2006-07year.

YEAR WISE CHANGES IN WORKING CAPITAL

YEARS

GROSS

WORKING

CAPITAL

NET

WORKING

CAPITAL

Amount

(In Lakhs)

Change

percentage

Amount

(In Lakhs)

Change

percentage

2001-02

171378.57 - 49279.44 -

2002-03 186360.02 8.74 63385.73 26.62

2003-04 271668.92 46.31 149133.81 135.27

2004-05 604752.10 121.78 462336.44 210.01

2005-06 825200.00 36.45 66614.00 44.14

2006-07 104410.00 26.61 834380.00 25.20

Interpretation :

The above table indicates that working capital is highest for the year 2006-07. The net

working capital has shown a gradual increase from 2003 till 2007. Statement of changes

in working capital is done in pages that follow to give the complete picture of variations

in working capital.

8/6/2019 SRAVAN WCM 1117

43/64

Statement of changes in working capital for the year 2001-2002

Particulars 2001 March2002

MarchIncrease Decrease

Current Assets :

Inventories 1207.47 1111.38 - 96.09

Sundry debtors 173.83 212.49 38.66

Cash and bank bal 163.66 161.12 - 2.54

Other current assets 6.35 5.41 - 0.94

Loans and advances 243.03 223.38 - 19.65

Total current assets 1794.34 1713.78

Current Liabilities

Liabilities 1255.1 1143.16 111.94

Provision 48.42 77.83 - 29.41

Total current liabilities 1303.52 1220.99

Net increase in Working Capital 1.9

Total 150.6 150.6

Source: Annual reports of RINL

Interpretation:

There is a Net increase in working capital of (1.97 Crores) due to the decrease in

liabilities and increase in sundry debtors. A Negative is observed in all the current assets

excluding sundry debtors. So that the net effect is net increase in working capital.

8/6/2019 SRAVAN WCM 1117

44/64


Particulars 2002 March2003

MarchIncrease Decrease

Current Assets

Inventories 1111.38 857.55 - 253.83

Sundry debtors 212.49 217.58 5.09 -

Cash and bank bal 161.12 541.57 380.45

Other current assets 5.41 5.26 0.15

Loans and advances 223.38 241.63 18.25


Current Liabilities

Liabilities 1143.16 1139.04 4.12

Provision 77.83 90.70 12.87


Net Increase in Working Capital 141.06

Total 407.91 407.91


Interpretation:

There is a net increases in working capital of (141.06 crores) due to the cash & bank

balances have shown positive with an increase of 380.45 added to this is the decrease in

liabilities. This resulted in increases in Net working capital.

8/6/2019 SRAVAN WCM 1117

45/64


Particulars

2003

March

2004

March Increase Decrease

Current Assets

Inventories 857.55 706.34 151.21

Sundry debtors 217.57 85.62 131.95

Cash and bank bal 541.57 1359.71 818.14




Current Liabilities

Liabilities 1140.38 1078.84 61.54

Provision 90.70 156.51 65.81



Total 1207.80 1207.80


Interpretation:

The Increase in net working capital in 2004 over 2003 is 858.83 crores . For the second

consecutive year the cash & bank balances have shown an increasing trend. Other four

current assets and loan advances have also increased. All these changes have brought

about on increase in net working capital.


8/6/2019 SRAVAN WCM 1117

46/64

Particulars

2004

March

2005


Current Assets

Inventories 706.34 1255.31 548.97

Sundry debtors 85.62 49.30 36.31

Cash and bank balance 1359.71 3932.61 2572.90



Total current assets (A) 2726.89 6047.52

Current Liabilities

Liabilities 1078.84 1154.88 76.05

Provision 156.51 269.27 112.76

Total current liabilities (B) 1235.35 1424.16


Total 3356.94 3356.94

Interpretation:

There is a significant increase in net working capital, which amounts to 3131.82

crores. There noticeable increase in net working capital is due to increase in cash &

bank balances. The increase in cash is 2572.90 (189%). A positive growth is observed

in loan & advances and other current assets. The increase is offset by the increase in

total current assets.


Particulars 2005 2006 Increase Decrease

8/6/2019 SRAVAN WCM 1117

47/64

March March

Current Assets

Inventories 1257.53 1216.45 41.08

Sundry debtors 49.30 165.65 116.35

Cash and bank bal 3932.61 5621.70 1689.09




Current Liabilities

Liabilities 712.46 871.49 159.03

Provision 269.27 716.37 447.10



Total 2243.34 2243.34

Interpretation:

There is a significant increase in net working capital which amounts to 1596.13crores.

There noticeable increase in net working capital is due to increase in cash &bank

balances. The increase in cash is 1689.09 cores. A positive growth is observed in

loans & advances and other current assets. The increase in liabilities is offset by the

increase in total current assets.


Particulars 2006 March

2007


8/6/2019 SRAVAN WCM 1117

48/64

Current Assets

Inventories 1218.35 1203.24 15.11

Sundry debtors 166.27 216.8 50.53

Cash and bank bal 5621.7 7194.68 1572.98



Total current assets 8252 10448.1

Current Liabilities

Liabilities 785.77 1011.53 225.76

Provision 716.37 1092.77 376.4



Total 2211.21 2211.21

Interpretation :

There is a significant increase in net working capital, which amounts to 1593.94

crores. There noticeable increase in net working capital is due to increase in cash & bank

balances. The increase in cash is 1572.98 crores. A positive growth is observed in loan &

advances and other current assets. The increase in liabilities is offset by the increase in

total current assets. The net effect of the above changes has brought about the increased

working capital.

Year

Gross Working Capital

(Rs.In crores)

2001-2002 1713.79

8/6/2019 SRAVAN WCM 1117

49/64

2002-2003 1863.60

2003-2004 2726.69

2004-2005 6047.52

2005-2006 8252.00

2006-2007 10448.10

GROSS WORKING CAPITAL IN VARIOUS YEARS

0

2000

4000

6000

8000

10000

12000

G W C

1 2 3 4 5 6

years

1

2

3

4

5

6

Net working capital:

The net working capital of RINL shows an increasing trend from 2001-02 to 2006-07. It

is showing a positive figure till 2006-07.

8/6/2019 SRAVAN WCM 1117

50/64

The main reason for the decreasing trend in the years is due to the increasing creditors

year after year. If also indicates a weak cash balance to meet the liabilities. The current

liabilities of the company is increasing by 200 corers almost every year.

The increase in working capital is due to better sales and full capacity utilization. Which

has resulted in reduction of cost of production. The net working capital of RINL for the

past 6 years is depicted in the table.

Year

Net Working Capital

(Rs.In crores)

2001-2002 492.79

2002-2003 633.86

2003-2004 1491.34

2004-2005 4623.36

2005-2006 6664.14

2006-2007 8343.80

Net working capital

8/6/2019 SRAVAN WCM 1117

51/64

1 23

4

5

61

2

3

4

5

6

Current ratio:

A current ratio of 2:1 is considered to do ideal. The ration is an indicator of the firms

commitment to meet its short-term liabilities. It indicates the rupees of current assets

available for each rupee of current liability. The higher the current ratio the higher the

funds available for a rupee of current liabilities. As a convention rule a current ratio of

2:1 or more is considered satisfactory.

The higher the current ratio the higher the funds available for a firm.

current assets

Current ratio=

current liabilities.

YEAR CURRENT RATIO

2001-2002 1.4

8/6/2019 SRAVAN WCM 1117

52/64

2002-2003 1.5

2003-2004 2.2

2004-2005 4.2

2005-2006 5.2

2006-2007 5.0

The ratio has started increasing from there on and is at 5.2 in 2005-06. Further there is a

little decrease in the year 2006-07.

Working capital turn over ratio:

Working capital turnover ratio of sales to net working capital. It is indicator of efficiency

of working capital management. Higher the ratio greater is the efficiency.

The working capital turnover ratio has constantly increased from 2001-02 to 2006-2007.

his mainly due to increased sales and delay in payment to creditors.

Working capital turn over ratio= net sales / average working capital.

The turn over ratio for the last 6 accounting periods is as shown:

YEAR

WORKING CAPITAL

TURNOVER RATIO

2001-2002 8.3

2002-2003 8.0

2003-2004 4.1

2004-2005 1.8

2005-2006 1.3

8/6/2019 SRAVAN WCM 1117

53/64

2006-2007 1.02

Working capital turnover ratio

WORKING CAPITAL TURNOVER RATIO

0

1

2

3

4

5

6

7

8

9

2001-

2002

2002-

2003

2003-

2004

2004-

2005

2005-

2006

2006-

2007

WORKING CAPITAL

TURNOVER RATIO

8/6/2019 SRAVAN WCM 1117

54/64

CHAPTER-6

SUMMARY AND CONCLUSIONS

6.1 Outcome of Learning Experience & Recommendations.

8/6/2019 SRAVAN WCM 1117

55/64

Outcome of Learning Experience & Recommendations.

The total sales of VSP are showing a positive trend despite cut down in steel prices across

the globe. The rise in sales is 32.5% in terms of sales turnover during 2005-2006

compared to 2004-2005 and 22.03% during 2004-2005 compared to 2003-2004. The

increase in sales by over 20% indicates the excellence achieved by VSP in spite of over

capacity problem in the market.

The gross margin of VSP has increased from Rs 2073 crores in 2003-2004 to

Rs503.89 crores in 2004-05 (an increase of 57.79%).

The payable turnover ratio is maintained on an average at 3.0 from 1999 onwards.

The consumption at raw material stage has increased from Rs 1394.32 crores in 2001-02

to Rs 2050.44 crores in 2002-03.

All units in VSP have achieved their rated capacity during the year 2001-02 and poised to

exceed the same current year. This has resulted in

Reduction in cost of production of saleable steel. The cost of production of VSP 1

following a decreasing trend over the past few years. This is evident from following table

given overleaf.

The reduction is cost of production has increased the leverage to extend cash discount to

push sales. This is one of the major reasons for cap to register impressive sales figures in

spite of huge dumping from international players.

8/6/2019 SRAVAN WCM 1117

56/64

VSP has started making net profits from 2003-04. The net profit during 2004-05 was

Rs1547 crores while the net profits touched Rs2000 crores in 2005-06. The net

profit was due to higher cash income than cash expenditure. This is also reflected by

net position of VSP.

YEAR COST OF PRODUCTION

2001-02 13075

2002-03 11921

2003-04 1127

2004-05 11697

2005-06 10234

2006-07 3238.15

For the first time VSP was able to raise working capital funds at an interest rate of less

than 4%. It is in the range of 1.8-3.6% in 2004-05 compared to 8-9% in the previous year.

This has resulted in the increase in net working capital significantly.

He current ratio of VSP is being maintained at 4.2. it shows a very high degree of short

term liquidity position of the firm.

The dues payment by VSP is able to pay its dues early. For the past three years VSP is

able to pay its dues early.

8/6/2019 SRAVAN WCM 1117

57/64

SUMMARY AND SUGGESTIONS

The concept of working capital is used in two ways i.e., gross and net. Gross working

capital refers to the firms investments in current assets. Net working capital means the

difference between current assets and current liabilities, and therefore represents the

position of current assets, which is financed either from long term funds or banks

borrowings.

Cash is required to meet a firms transactions and precautionary needs. A firm needs cash

to make payments for acquisitions of resources and services for normal conduct of

business. Cash is also held to meet emergency situations. Some firms hold cash to take

advantage of speculative changes in prices of input and out put. Management of cash

involves three things.

a) managing cash flows in and out of a firm

b) managing cash flows within a firm

c) financing deficit or investing surplus cash

And thus, controlling cash balance sat any point of time. Firms prepare cash budget to

plan and control and cash flows. Cash budget can serve its purpose only when firm can

manage its collection and payments with in the allowed limits. A firm should hold

optimum amount of cash at any time and invest the temporary excess amount in short

term securities.

8/6/2019 SRAVAN WCM 1117

58/64

Trade credit creates book debts accounts receivable. It issued as a marketing tool to

expand or maintain the firms sales. A firms sales. A firms investment on account

receivable depends on volume of credit sales and collection period through credit policy.

Credit policy. Credit policy includes credit terms and collection efforts the firms credit

policy will be considered optimum at the three methods monitor book debts.

They are:

a) average collection period

b) ageing schedule

c) collection experience matrix

The first two methods are based on the showing payments patterns and hence do not

provide meaningful information for collecting book debts. The third approach uses the

desegregated data and it is better method than first two methods.

Inventories constitute about 60% of current assets to public limited companies of India.

The manufacturing companies hold inventories in the form of raw materials work in

process and finished goods. They are three motives for holding inventories. They are

transaction motive, precautionary motive and speculative motive.

VSP is a multi product manufacturer unit with varying cycle time for each product. The

capital required by each manufacturing unit of VSP depends on the individuals products

8/6/2019 SRAVAN WCM 1117

59/64

cycle of each item. The department wise capital whose capital requirement coupled with

their production target for a year invites and effective working capital management.

In finance, working capital is synonymous with current assets; VSP is a multi product

large organization with huge capital turnover where the working capital requirement

depends on the level of operation and the length of operation cycle. monitoring the

duration of the operating cycle is an important aspect of current assets management and

control.

* Scope of enhancing:

During the year 2004-05 the turnover is Rs8181 crores and profit is Rs2008 crores,

during the year 2003-04 turnover is rs6174 crores and profit is rs1547 crores. It indicates

that the net profit forms nearly 25% of the total sales turnover. During the last financial

year average rate is of interest 2-3%. In such situation the company should try to go for

expansion, such as production enhancement system, so that the company comes to a

position for further increasing its profits.

* During the financial year 2003-04 the companys average cost of interest is 3-4%,

which the company has acquired by forex funds replacing domestic loans and working

capital facilities. If the company utilizes the forex replacing domestic loans and

working capital facilities. F the company utilizes the forex funds where ever it is

possible i.e. when ever the payment are made in Indian rupees of foreign currency such

as ocean freight, other music payments like suppliers. The company will be in position

to take a better advantage to increase the profits.

8/6/2019 SRAVAN WCM 1117

60/64

* Currently the companys payables towards raw material are replaced with buyers

credit/suppliers credit in the form of forex funds. The company has tried to nullify the

exchange risk by going for forward cover considering Indias dependency on other

countries in exchange .Better risk monitoring would be required at the expansion stage

when the quantum of import rises.

* The steel industries are having very good time but VSP could not able to take full of

its advantage due to the constraints, primarily raw materials. Unlike any other steel

company, VSP is not having its own sources of raw material i.e coal mine. These are

very basic needs as the company always depends on its supplier for its raw material.

Had the company always depends on its supplier for its raw material. Had the company

utilized its 2-3 half% of working capital limits for acquisition of mines, purchasing of

mines, etc. It could have been a favorable situation.

* The company is getting all its funds i.e. day zero(0) when the rates are compared, the

company is investing surplus funds at 8-8.5% and paying at 7-8% to get the funds on

zero(0) day. This spread should be maintained during the time of expansion also.

* The company has already accumulated funds in excess of Rs.5500 Crores and can

look forward to bigger investment in building up capacities as compared to the

proposed 6.1 Million tons.

* VSP should invest its short investments in short term, low risk and medium return

instruments rather than in the fixed deposits which it is presently employing for surplus

funds, this would help the company manage its funds better at the time of expansion

when the liquidity would be at premium.

8/6/2019 SRAVAN WCM 1117

61/64

CONCLUSIONS

1) The interest rate at which VSP is producing its working capital is about 14-15%

against a normal rate of 9-12% in 2000-01, in 2001-02 it was 12%-14%, in 2002-03 it

was 8%-9% and in 2003-04, and it was only 1.8%-3.6% because of forex and exchange

credit. Also higher profit realization by selling the produces in higher margins will

eventually result in higher cash accrual and hence higher credit rating. Higher credit

rating results in reduction in interest rates. Hence the company should either try to

enhance the production facilities or better investment opportunities other than fixed

deposits what the company currently is using for investing surplus funds.

2) The non moving inventory is one of the gray areas in VSPs working capital

management. They account for 1/3 rd of value total inventory. This is really a critical area

where VSPs management should focus to bring down the level of non moving inventory.

VSP has to identity areas for using inventory to dispose it. Also identification of such

items will help in preventing procurement of such items on future.

3) The other main area where VSP has tremendous scope for improvement is in

manufacturing value an added product. This will result in better sales realization and

higher profit.

4) The export sales of VSP are only 30% of total sales during 2005-06. present scenario

of steel industry indicates the need for more steel even with the cause of lower production

facilities. The company should now give more importance to exports because it provides

good net sales realization but also export benefits.

8/6/2019 SRAVAN WCM 1117

62/64

The following table the contribution of export sales to sales and the justification for the

above suggestions.

Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

Export

sales 290 295 314 371 626 768 2482

Domestic

sales 2471 2678 3114 3710 4433 5406 7933

Total sales 2762 2973 3436 4081 5059 6174 8181

% Export

sale to

total

sale 11 10 9 8 12 12 30

Considering the fact that the margins in the export sales are low, but have the potential to

rise in the near future, the company can maintain a minimum level of presence in the

global market.

BIBLIOGRAPHY:

8/6/2019 SRAVAN WCM 1117

63/64

BIBLOGRAPHY

Financial management I. M. pandey

Financial management Prasanna Chandra

Working capital Management I.M. pandey

Annual Reports Of Rashtrya Ispath Nigam Limited

General Articles And Magazines Of Rashtrya Ispath Nigam Limited

Website: www.vizagsteel.com, www.indianinfoline.com,

BOOKS: Survay of Indian industry-the Hindu

Newspapers: Deccan Chronicle, The Hindu.

8/6/2019 SRAVAN WCM 1117

64/64

sravan wcm 1117

Documents