tata steel

A REPORT ON WORKING CAPITAL MANAGE MENT AT

SRI BHAGAWAN MAHAVEER JAIN COLLEGE

SUBMITTED BY: V.RAVI KISHOR


Page 1

I. II.III.

IV.

PREFACE ACKNOWLEDGEMENT EXECUTIVE SUMMARY DECLEARATION

TABLE OF CONTENTS Ser no. Contents Page no.

Chapter 1 1.1 1.2

Introduction- Industry overview Global steel industry Indian steel industry

07-15 07 10

Chapter 2

Company Profile

16-30

2.1 2.2 2.3 2.4 2.5 2.6 2.7

Background of TATA STEEL Strategic business units Vision and Mission of Tata steel Global ranking Products of Tata steel Subsidiaries of Tata steel Swot Analysis

16 20 21 23 24 26 29

Chapter 3

Working Capital Management

31-45

3.1

Meaning of Working Capital

31


Page 2

3.2 3.3 3.4 3.5 3.6

Kinds of Working Capital Need for Working Capital Factors determining the Working Capital Requirements Working Capital Cycle Different aspects of Working Capital

31 35 37 41 42

3.7 3.8 3.9 3.10 3.11

Working Capital Management of Tata Steel Working Capital Management of Sail Working Capital Management of Essar Steel Working Capital Management of Jindal Steel Comparative analysis

46-65 66-81 82-96 97-104 105-109

Chapter 4 Chapter 5 Chapter 6

Conclusions Recommendations Bibliography

110 111 112

PREFACEThe summer project has been really a great learning experience for me. The training has enriched my knowledge regarding the corporate culture and how different types of works are carried out in a big organization like Tata steel ltd. The summer internship has helped me to become a more mature individual, prepared to take challenges of the corporate world.SRI BHAGAWAN MAHAVEER JAIN COLLEGE Page 3

This report has helped me to understand the nuances of working capital and significance in the day operation of the company. The project also helped me to imbibe qualities like team spirit, goal achievement and punctuality. The plant visit helped me to actually see the whole production process and visits to various departments helped me to understand how different departments coordinate their activities. I will be ever grateful to tata steel for giving me this golden opportunity to be a part of this highly reputed organization and helping me throughout in understanding some of the important facts concerned with this organization.


Page 4

ACKNOWLEDGEMENT

I take this opportunity to express my profound gratitude and deep regards to my guide Mr.INDRAJIT ROY ,Head Financial Accounts Tata steel for his exemplary guidance, monitoring and

constant encouragement throughout the course of this project work. The blessing, help and guidance given by them time to time shall carry me a long way in my journey of life on which I am about to embark. Sincere appreciation is extended to Mr. IMTIAZ AHMED, for his immense help during the course of this work. In those moments, when things used to turn dark, his presence had a soothing effect. I am grateful to Mrs.Nisha Kuwait, Professor SBMJC Bangalore, for guiding me during the course of my project. Last but not the least I would express my heartfelt gratitude to Mr.N.R.SAIFI for allowing me to do this project at TATA STEEL. My several well-wishers helped me directly or indirectly; I virtually fall short of words to express my gratefulness to them. Therefore I am leaving this acknowledgement incomplete in their reminiscence.


Page 5


Page 6

EXECUTIVE SUMMARYThe project on working capital management has been a very good experience. Every manufacturing company faces the problem of working capital management in their day to day processes. An organizations cost can be reduced and the profit can be increased only if it is able to manage its working capital efficiently. At the same time the company can provide customer satisfaction and hence can improve their overall productivity and profitability. This project is a sincere effort to study and analyze the working capital management of TATA steel. This project was focused on making a financial overview of the company by conducting a time series analysis of TATA steel for the years 2004-05 to 2008-09 and a comparative analysis of TATA steel with its domestic competitors SAIL, Jindal and Essar emphasizing on working capital and financial ratios. The internship is a bridge between the institute and the organization. This made me to be involved in a project that helped me to employ my theoretical knowledge about the fascinating facets of finance. The experience that I gathered over the past one & half months has certainly provided the orientation which I believe will help me in shouldering any responsibility in future.


Page 7

DECLARATION

I, V.Ravi kishor, a bonafide student of SRI BHAGAWAN MAHAVEER JAIN COLLEGE, BANGALORE, would like to declare that the project entitled WORKING CAPITAL MANAGEMENT OF TATA STEEL is submitted in partial fulfillment of Post Graduate Diploma in Business Management and is my original work.

Place: jamshedpur Date

V. Ravi kishor (Signature of Student)


Page 8

1. INDUSTRY OVERVIEW1.1. Global Steel industryThe current global steel industry is in its best position in comparison to last decades. The price has been rising continuously. The demand expectations for steel products are rapidly growing for coming years. The shares of steel industries are also in a high pace. The steel industry is enjoying its 6th consecutive years of growth in supply and demand. And there is many more merger and acquisitions which overall buoyed the industry and showed some good results. The subprime crisis has lead to the recession in economy of different countries, which may lead to have a negative effect on whole steel industry in coming years. However steel production and consumption will be supported by continuous economic growth. The countries like China, Japan, India and South Korea are in the top of the above in steel production in Asian countries. China accounts for one third of total production i.e. 419m ton, Japan accounts for 9% i.e. 118m ton, India accounts for 53m ton and South Korea is accounted for 49m ton, which all totally becomes more than 50% of global production. Apart from this USA, BRAZIL, UK accounts for the major chunk of the whole growth.


Page 9

Figure 2.1.Global Steel ProductionThe world steel industry outlook is promising with production seen rising to 1.5 billion tonnes in 2009, up from 1.4 billion tones, in 2008. The future outlook for the worldwide steel industry is very good. Demand is also seen growing with apparent steel use expected to total 1.282 billion tonnes this year, up 6.7 percent from 2007, according to data from the International Iron and Steel Institute (IISI). Brazil, Russia, India and China (BRIC) were leading growth with an expected increase of 11.1 per cent for 2008 and 10.3 percent for 2009. China's apparent steel use is expected to grow by over 10 percent in 2008 and by 10 percent in 2009. China accounted for 35 percent of the world total this year. In the European Union a total of 210 million tonnes of steel were produced in 2007, up 1.6 percent from the previous year. World steel production capacity is seen increasing by nearly 19 percent between 2007 and 2010. The steel industry has undergone a few structural changes in the past 3-4 years. So, the outlook for the next few years is likely to be driven by the kind of consolidation that has taken place in the past few years. The other factor that is likely to affect outlook is the extent of demand emerging from BRIC countries. In addition to these two major factors, a cost-push is coming from raw material


Page 10

suppliers. Hence, steel manufacturers have to contend with strong demand on one hand, and cost-push on the other. The outlook for the domestic industry looks bright, since India has good iron ore deposits, skilled manpower and growing demand for steel. There is an apprehension that if China slows down, it may dump its surplus steel into India. An analysis of global data shows that even if an economy slows down, steel consumption does not fall dramatically. In the case of China, a slowdown can mean that the growth rate may fall from 19-20% to a lower level. But that doesnt mean growth will not take place. China produced around 470 million tonnes (mt) of steel last year, out of which, 66 mt was exported and the rest was consumed within the country. The measures undertaken by the Chinese government recently will reduce exports significantly in the current year. There is also a change in the consumption pattern. For instance, if construction activity slows down, the consumption of white goods will pick up and demand for flat steel products will go up. The new capacities coming up in China are on the flat products side and not on the long products side. Overall, the impact on the supply side will be less. Similarly, the cost of production is very high it costs around $500 per ton to produce more than 100 mt of steel in China. Since the cost of production is very high and exports are not allowed, many of these plants will be closed down by 09-10.This will reduce the supply of steel. Theres a feeling that India doesnt have much iron ore, considering the recent capacity expansion plans of domestic and foreign steel companies in India. There is a possibility that if we continue exporting iron ore, we may run out of reserves. Currently, we export 90-100 mt every year and this is steadily increasing. Ideally, we should increase our steel production capacity we are a net importer of steel so that rather than exporting iron ore, we can add value to it. India should also look at investing in exploring new mines.


Page 11

Figure 2.3. World Steel Consumption

1.2. Indian Steel Industry-An OverviewIndia has traditionally been one of the major producers of steel in the world. Till the 1990s the steel industry of India was regulated and controlled by government policies. After the economic reforms of the early 1990s, the Indian steel industry has evolved significantly to conform to global standards. India has set a vision to be an economically developed nation by 2020. The steel industry is expected to play a major role in India's economic development in the coming years. The steel industry of India has a very high growth potential and is expected to register


Page 12

significant growth in the coming decades. India is expected to emerge as a strong force in the global steel market in coming years. The two major aspects that are expected to play a significant role in the growth of the steel industry in India are Abundant availability of iron ore in the country The country as well established facilities for steel production. Steel production in India has grown from 17 MT in 1990 to 36 MT in 2003. It is expected that by 2011, the steel production in India will grow to 66 MT. The major sectors where consumption of steel is expected to grow in the coming years are Construction. Housing. Ground transportation. Hi-tech engineering industries such as power generation, petrochemicals, fertilizers

The current scenario of the Indian steel industry indicates that there is huge growth potential in this industry. The per capita-consumption of steel in India, according to latest available estimates, is only 29 kg. This is much less compared to the global average of 140kg. The per capita consumption level of developed nations like the United States of America is 400kg. In this respect, one of the major initiatives that need to be taken is to focus on increasing the consumption of steel in the rural areas of India. The potential for the growth of consumption of steel in the rural areas of India for purposes like rural housing, rural infrastructure, etc is high which needs to be tapped efficiently. In order to realize the growth potential in the steel industry of India, it is essential to ensure that the industry can remain competitive. One of the major aspects in this regard is the availability of inputs. Shortage of inputs like coke has led to increase in costs earlier. Moreover proper infrastructure facilities like transport infrastructure, power etc are of prime importance in maintaining the competitiveness of the industry. Most developed countries have regulations that are aimed to protect the domestic steel industry. The Indian steel industry has comparatively much lesser protection through regulations. Proper regulatory measures should be adopted by the government to protect the domestic steel industry. The performance of the Indian steel industry has been quite satisfactory over the last decade. Aided by the cutting-edge technology, the steel industry in Asia has made advancements in all areas ofSRI BHAGAWAN MAHAVEER JAIN COLLEGE Page 13

operation. There has been a substantial increase in demand for Indian steel products in the global market in the recent times. This has helped in the growth of Indian steel industry. The industry recorded the highest growth rate in the period from 2004-2005, when the growth rate of the steel sector was 4%. The increased consumption of the finished steel products in the domestic market acted as a positive catalyst in the growth process of the Indian steel industry. The favorable market condition has helped the companies operating in Indian steel industry to expand their operations and earn huge profit. India continually posts phenomenal growth records in steel production. In 1992, India produced 14.33 million tones of finished carbon steels and 1.59 million tones of pig iron. Furthermore, the steel production capacity of the country has increased rapidly since 1991 in 2008, India produced nearly 46.575 million tones of finished steels and 4.393 million tones of pig iron.

Figure 2.4. Steel Production in India Both primary and secondary producers contributedtheir share to this phenomenal development, while these increases have pushed up the demand for finished steel at a very stable rate.

In 1991, a substantial number of economic reforms were introduced by the Indian government. These reforms boosted the development process of a number of industries the steel industry in India in particular which has subsequently developed quite rapidly. In 1992, the total consumption of finished steel was 14.84 million tones. In 2008, the total amount of domestic steel consumption was 43.925 million tones. With the increased demand in the national market, a huge part of the international market is also served by this industry. Today, India is in seventh position among all the crude steel producing countries. The top companies of the Indian steel sector mostly operate in four different forms like producers of pig iron, producers of stainless steel, producers of finished steel products, and producers of semi-finished steel. The companies functional in the steel industry of India are both public sector companies and private sector companies. Some of the leading companies in Indian steel industry are as follows: Bokaro Steel Plant: Steel manufacturer.


Page 14

Essar Steel: Producer of sponge iron, steel and iron ore pellets. Jindal Iron & Steel: Producer of galvanized steel products. Jindal Steel & Power: Manufacturer of mild steel slabs and sponge iron. Steel Authority of India: Manufacturer of steel and iron. Tata Steel: Producer and supplier of wire rods, bars, and steel flats. Vizag Steel: Producer of pig iron and steel.

The rate of production of steel in India has been going up at a steady rate in the last few years. In the recent times Orissa and Jharkhand have been identified as the potential steel destinations of India - the ones that would provide the Indian steel industry with its necessary raw material. There are also a number of steel companies in India like Tata and Arcelor-Mittal that are either coming up or have established themselves as prominent forces in the world steel scenario. In the recent times a lot of foreign direct investment is being made in the Indian steel industry. In fact the rate of investment has increased in the last few years and, to a certain extent, this increase has been contributed to by the growth potential of the steel industry of India that is thought of as being impressive in the international steel circle. In the recent years a number of major steel corporations of the world have come flocking to India to avail the benefits of the flourishing steel industry of India. The number of steel projects in India has increased as well and this implies that the number of companies lining up to participate in these projects would be increasing too.

Sector structure/Market size The steel industry in India has been moving from strength to strength and according to the Annual Report 2009-10 by the Ministry of Steel, India has emerged as the fifth largest producer of steel in the world and is likely to become the second largest producer of crude steel by 201516.


Page 15

Recently, Steel Minister, Mr Virbhadra Singh said that India will become the world's secondlargest steel producer by 2012, more than doubling its capacity to 124 million tonnes (MT) as part of the push being given to assist overall infrastructure development. Production Steel production rose 4.2 per cent to reach 60 MT in 2009-2010, according to the Ministry of Steel. The National Steel Policy 2005 had projected an annual steel consumption growth of 7 per cent based on GDP growth rate of 7-7.5 per cent and production of 110 MT of crude steel by 20192020. Nonetheless, with the current rate of ongoing greenfield and brownfield projects, the Ministry of Steel has projected that these growth trends are likely to be exceeded and it is envisaged that in the next five years demand will grow at higher annual average growth rate of over 10 per cent as compared to around 7 per cent growth achieved between 1991-92 and 200506. Moreover, according to the ministry, the crude steel production capacity in the country by 201112 will be nearly 124 MT. According to the Ministry of Steel, 222 memorandum of understanding (MoUs) have been signed with various states for planned capacity of around 276 MT. Major investment plans are in Orissa, Jharkhand, Chattisgarh, West Bengal, Karnataka, Gujarat and Maharashtra. According to the Annual Report 2009-10 by the Ministry of Steel, domestic crude steel production grew at a compounded annual growth rate of 8.6 per cent during 2004-05 and 200809. Consumption India's steel consumption rose 8 per cent in the year ended March 2010, over the same period a year ago on account of improved demand from sectors like automobile, infrastructure and housing. The countrys steel consumption increased to 56.3 MT in the 12 months to March 2010 from 52.3 MT in the previous year, as per the Ministry of Steel.


Page 16

Investments A host of steel companies have lined up major investment proposals. Furthermore, with an expanding consumer market, the Indian steel industry is likely to receive huge domestic and foreign investments. The domestic steel sector has attracted a staggering investment of about US$ 238 billion, according to the Minister of State for Steel, Mr A. Sai Prathap. This consists of nearly 222 MoUs signed between the investors and various state governments mostly in the states of Orissa, Jharkhand, Chhattisgarh and West Bengal. SAIL is planning to set up a 12-million tonne plant in Jharkhand. In December, Indias largest engineering conglomerate Larsen & Toubro (L&T) and state-owned Nuclear Power Corporation of India Limited (NPCIL) formed a US$ 373.2 million joint venture for specialised steel and forging products. Stainless steel manufacturer and exporter, Varun Industries, is setting up a US$ 171.8 million stainless steel-cum-alloy steel plant at Rohat, Jodhpur. Tata Steel has entered into a joint venture with Japans Nippon Steel for production and sales of automotive cold-rolled flat products at Jamshedpur. The JV is expected to invest US$ 400 million to set up an automobile venture in India. Steel major, JSW Steel has earmarked a capex of US$ 1.6 billion for 2010-11 and plans to increase capacity of its Bellary plant in Karnataka from 7 MT to 10 MT by end of 2010-11. Government Initiative As per the Press Information Bureau, during 2009, the government took a number of fiscal and administrative steps to contain steel prices. Central value added tax (CENVAT) on steel items was reduced from 14 per cent to 10 per cent with effect from February 2009.


Page 17

Moreover, in the Union Budget 2010-11, the government has allocated US$ 37.4 billion to the infrastructure sector and has increased the allocation for road transport by 13 per cent to US$ 4.3 billion which will further promote the steel industry.


Page 18

2. Company Profile - TATA STEEL2.1. BackgroundTata Steel, formerly known as TISCO and Tata Iron and Steel Company limited, is the worlds sixth largest steel company, with an annual crude steel capacity of 30 Million Tonnes Per Annum (MTPA). It is the second largest private sector steel company in India in terms of domestic production. Ranked 315th on Fortune Global 500, it is based in Jamshedpur, Jharkhand, India. It is part of Tata Group of companies in private sector with consolidated revenues of Rs.1,32,110 crore and the net profit of over Rs.12,350 crore, during the year ended March 31st, 2008. Its main plant is located in Jamshedpur, Jharkhand, with its recent acquisition; the company has become a multinational with operations in various countries. The registered office of Tata Steel is in Mumbai. The company was also recognized as the worlds best steel producer by the World Steel Dynamics in 2005. The company is listed on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), and employs about 36000 people (as of 2007). Tata Steel is backed by 100 glorious years of experience in steel making. 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. 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, Orissa 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


Page 19

Steel has created a manufacturing and marketing network in Europe, South East Asia and the pacific-rim countries. Corus, which manufactured over 20 MTPA of steel in 2008, has operations in the UK, the Netherlands, Germany, France, Norway and Belgium. Tata Steel Thailand is the largest producer of long steel products in Thailand, with a manufacturing capacity of 1.7 MTPA. Tata Steel has proposed a 0.5 MTPA mini blast furnace project in Thailand. NatSteel Holdings produces about 2 MTPA of steel products across its regional operations in seven countries. Tata Steel has lined up a series of Greenfield projects in India and outside which includes: a) 6 million tonne plant in Orissa (India). b) 12 million tonne plant in Jharkhand (India). c) 5 million tonne plant in Chhattisgarh (India). d) 3 million tonne plant in Iran. e) 5 million tonne capacity expansion at Jamshedpur (India). f) 4.5 million Plant in Vietnam (feasibility study underway). 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 bought 19.9% stake in New Millennium Capital Corporation, Canada for iron ore mining.

HERITAGETHE FOUNDER


Page 20

JAMSHEDJI NUSSERWANJI TATA (1839-1904) At the age of 43, Jamshedji Nusserwanji Tata read a report by a German geologist, Ritter Von Schwartz on the, availability of iron ore in Chanda district in the central Provinces, which gave him the idea of giving India a steel plant. Jamshedji Nusserwanji Tata formed the Tata Iron and Steel Company Limited in 1907 at Mumbai

SIR DORABJI TATA J.N. Tata had exhorted to his sons to pursue and develop his lifes work his elder son, through his endeavours in setting up Tata Steel and Tata power, Sir Dorabji Tata was instrumental in transforming his fathers grand vision into reality. He was the first chairman of the gigantic Tata.

Sir Ratan Tata: Jamsetji Tata's younger son had a personality that reflected his sensitivity to the struggles of ordinary people and his desire to utilize his considerable wealth to enhance the quality of public life. A philanthropist all his life, he created a trust fund for "the advancement of learning and for the relief of human suffering and other works of public utility".

JEHANGIR RATANJI DADABHAI TATA


Page 21

India's first pilot; established Air India International as India's first international airline; Chairman of Tata & Sons for 50 years; recipient of Bharat Ratna in 1992. Enterprising, indomitable and undaunted JRD Tata is the pioneer who was driven by the spirit of the skies. Representing an exalted idea of Indian-ness: progressive, benevolent, ethical and compassionate, JRD Tata is recognized as the most enterprising Indian entrepreneurs of all times. Recognised as the fourth Chairman of the Tata Group at the young age of 34 only, JRD is credited with placing the Tata Group on the international map.

Ratan N. TataHe is the present chairman of TATA STEEL. With his efficient leadership TATA is soaring new heights.Tata Steel is India's largest integrated private sector steel company. Established in 1907, its steel plant at Jamshedpur produces four million tonnes of hot and cold rolled flat and long products. The company is backward integrated with owned iron ore mines and collieries. With its competitive advantage in raw materials, efficient operations and the benefits of a recently-completed $2.3 billion programme of modernization, Tata Steel is among the lowest cost steel producers in the world.


Page 22

2.2. Strategic Business UnitsApart from the main steel division, Tata Steel's operations are grouped under the following strategic business units. Bearings Divisions: Manufactures ball bearings, double row 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. Its one of the largest players in the Rings and Agrico Division global ferro chrome market. 1. Tata Agrico is the first organized manufacturer in India of hand tools and implements for application in agriculture. 2. Tata Growth Shop (TGS): Has designed, developed, manufactured, erected and commissioned thousands of tonnes of equipments ranging from overhead cranes to high precision components, including a rocket launch pad for the Indian Space and Research Organization. Wire Division: A pioneer in the manufacture of steel wires in India, it produces coated

and uncoated wires, branded as Tata Wiron. The division also operates a wholly owned subsidiary SriLanka. 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.


Page 23

2.3. VISION AND GOALS OF TATA STEEL

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 for 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.


Page 24

Value Creation Action To increase earnings from current operations by optimizing assets; differentiation in the marketplace; continuous improvement; and achieving synergies across all Business Units. To achieve strategic growth through capacity expansion; mining projects; enhanced Research and Development and innovation; in the area of construction and automotive; and new territories. Safety Action Focus on high hazard facilities Increase occupational safety Focus on overall health Environment Action Continuous process improvements Technology breakthroughs Responsible product development Employee engagement Proactive role in global steel sector initiatives Employer of Choice Action Embed a performance driven culture Build leadership capability Nurture talent A continuous quest for global talent Build and enhance technical capability


Page 25

2.4. Global Rankings This is a list of countries by steel production in 2007 and 2008, based on data provided by the World Steel Association, accessed in May 2009. Crude steel production (million tons):

Rank Country/Region World 1 People's Republic of China European Union 2 Japan 3 United States 4 Russia 5 India 6 South Korea 7 Germany 8 Ukraine 9 Brazil 10 Italy

2007 1,351.3 494.9 209.7 120.2 98.1 72.4 53.1 51.5 48.6 42.8 33.8 31.6

2008 1326.5 500.5 198.0 118.7 91.4 68.5 55.2 53.6 45.8 37.1 33.7 30.6


Page 26

2.5. PRODUCTS OF TATA STEEL Long Products Flat Products Wire Rods, Rebars Hot and Cold Rolled Sheets, Hot and Cold Rolled Coils, Galvanized Coils and Sheets, Hot Rolled Plates Semi Products Tubes Finished Steel Billets and Slabs Standard Pipes, ERW Precision Tubes, Cold

Structural Bearing Wires, Rolled Rings, Forged Rings, Machine Rings, Bearings, Plain and Coated Steel Minerals Concentrate Others Wires Coal and Coke, Iron Ore, Dolomite, Chrome Ore, Chrome Ferro Alloys, Agricultural Implements, Services like Project Studies, Design and Engineering, personnel and Technical Training, Automation, Information Branded Products Technology, Power and Water. Branded products include Tata Shaktee GC Sheets, Tata Steelium Cold Rolled Steel, and Tata Tiscon construction rods, Tata Pipes, Tata Bearings, Tata Wiron and Tata Agrico.


Page 27

BRANDS OF TATA STEEL


Page 28

2.6. SUBSIDIARY/ ASSOCIATIONS/ JOINT VENTURES OF TATA STEELCORUS: Corus is Europes second largest steel maker with operation in the UK and mainland Europe and over 40,000 employees worldwide. The long and strip products of Corus cater to the Construction, automotive, packaging, engineering and other markets worldwide. On January 31, 2007 Tata Steel limited acquired the Anglo Dutch steel producer Corus for US $ 12.11 billion. This acquisition was te biggest overseas acquisition by an Indian company. Tata Steel emerged as the fifth largest steel producer in the world after the acquisition. The acquisition gave Tata Steel access to Corus strong distribution network in Europe. Corus expertise in making the grades of steel used in automobiles and in aerospace could be used to boost Tata Steels supplies to the automobile market. Corus in turn was expected to benefit from Tata Steels expertise in


Page 29

low cost manufacturing of steel. However, some financial experts claimed that the price paid by Tata Steel for the acquisition was too high.

Tinplate Company of India Limited (TCIL): With a market share of over 35%, it is the industry leader in India. It has the capability to supply all tinning line product including electrolytic tinplate / tin-free steel and cold-rolled products. Tayo Rolls Limited: The country's leading roll manufacturer and supplier, the company produces rolls which find application in integrated steel plants, the paper, textile and food processing sectors, and the government mint. It also produces special castings for use in power plants. Tata Ryerson Limited (TRYL): Is 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. It also provides materials management services. Tata Refractories Limited (TRL): Produces High Alumina Refractory, Basic Refractory, Dolomite Refractory, Silica and Monolithic Refractoriness. It is one of the fewcompanies worldwide to produce silica refractory for coke ovens and the glass industry.TRL offers Total Refractory Solutions, which include design, procurement, reliningapplications etc. (www.tataeref.com) Tata Sponge Iron Limited (TSIL): Has the first Indian sponge iron plant based onindigenously developed Direct Reduction Technology. Its major product lines are spongeiron lumps and fines.(www.tatasponge.com)


Page 30

Tata Metaliks: Is among the top wealth creating companies (measured in terms of EVA)in the country. Tata Metaliks is engaged in the business of manufacturing and sellingfoundry grade pig iron (www.tatametaliks.com) Tata Pigments Limited: Its range of products includes synthetic iron oxide pigmentsused to lend colour to paints, emulsions, cement floors, plastics etc. Its three mainproducts Tata Red, Tata Yellow and Cemplus enjoy premium positioning. Jamshedpur Injection Powder Limited (Jamipol): Manufactures carbide andmagnesiumbased de-sulphurising compounds which are used for de-sulphurising hot metal for the production of low-sulphur, high-quality steel. TM International Logistics Limited (TMILL): Provides material handling and portoperation services at Haldia and Paradip Ports in addition to freight forwarding and chartering services to Tata Group companies and other enterprises. MetalJunction.com Private Limited (MJ): A joint venture company between SAIL and Tata Steel, it is in the business of providing e-business services and solutions to Indian industry. MJ has two divisions--metaljunction.com (e-selling business unit) and commercejunction.com (e-procurement business unit). It also offers complete e-sourcing services TRF Limited: It is 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, loading and unloading, processing, reclaiming and blending of bulk materials. With world-class technical associates, TRFhas also made its mark in the fields of coke oven equipment, coal dust injection systems for blast furnace and coal beneficiation systems.


Page 31

Jamshedpur Utility and Service Company Limited (JUSCO): Re-engineered out of Tata Steel's town services, JUSCO 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. The Indian Steel and Wire Products Limited (ISWP): Recently acquired by Tata Steel, ISWP has two units-a wire unit comprising wire drawing mills, wire rod mills and fastener division and a steel roll manufacturing unit named Jamshedpur Engineering and Machining Company (JEMCO). Lanka Special Steel Limited: The only unit in Sri Lanka manufacturing galvanized wires. SilaEasten Company Limited: Established to develop limestone mines in Thailand,mainly for the captive use of Tata Steel.


Page 32

2.7. SWOT ANALYSISSTRENGTHS:

TataSteel is the largest Steel player in India and 6th largest in the world. Brown field expansion in Jamshedpur and Greenfield project at Kalingangar to meet increasing demand in future. It is one of the lowest cost producer and most efficient steel plant in the world. TSL has formed a Global Minerals Group, in-order to explore various opportunities to secure access to iron ore and coal in various geographies. The company has strong clientele base, which includes all major players in user industries like automobiles, consumer durables and engineering.

WEAKNESSES: High Inventory Cost. With Corus acquisition, raw material self- sufficiency has decreased from 80% to 17%. TSLs bottom line will be affected to increase in Interest cost, due to long term debt raised by the company for Corus acquisition.

OPPORTUNITIES:

Strong Economy growth (second fastest growing Economy after China). The amount allocated for development of infrastructure for 11th Five year plans amounts to USD 320 bn. As a result, the domestic steel consumption is expected to increase to 65 mn. Tones by FY 10 and over 125 mn. tonnes by FY 15. Strong demand in automobile sector, consumer durables sector and engineering goods sector.


Page 33

Low per capita steel consumption offers a higher growth Low labor cost and high productivity.

THREATS: Increase in imported raw material prices may affect the operating margins of the companies. Change in economic environment. High cost of Energy. Threat of increased production in China and its ability to export. Bureaucratic nature of Government - Socio - Political interventions (in leasing mines).


Page 34

3. WORKING CAPITAL - OVERALL VIEW3.1. MEANING:Working Capital management is the management of assets that are current in nature. Current assets, by accounting definition are the assets normally converted in to cash in a period of one year. Hence working capital management can be considered as the management of cash, market securities receivable, inventories and current liabilities. In fact, the management of current assets is similar to that of fixed assets the sense that is both in cases the firm analyses their effect on its profitability and risk factors, hence they differ on three major aspects: 1. In managing fixed assets, time is an important factor discounting and compounding aspects of time play an important role in capital budgeting and a minor part in the management of current assets. 2. 3. The large holdings of current assets, especially cash, may strengthen the firms liquidity position, but is bound to reduce profitability of the firm as ideal car yield nothing. The level of fixed assets as well as current assets depends upon the expected sales, but it is only current assets that add fluctuation in the short run to a business.

3.2. KINDS OF WORKING CAPITALTo understand working capital better we should have basic knowledge about the various aspects of working capital. To start with, there are two concepts of working capital:


Page 35

Gross Working Capital Net working Capital Gross Working Capital:-Gross working capital, which is also simply known as working capital, refers to the firms investment in current assets: Another aspect of gross working capital points out the need of arranging funds to finance the current assets. The gross working capital concept focuses attention on two aspects of current assets management, firstly optimum investment in current assets and secondly in financing the current assets. These two aspects will help in remaining away from the two danger points of excessive or inadequate investment in current assets. Whenever a need of working capital funds arises due to increase in level of business activity or for any other reason the arrangement should be made quickly, and similarly if some surpluses are available, they should not be allowed to lie ideal but should be put to some effective use. Net Working Capital:-The term net working capital refers to the difference between the current assets and current liabilities. Net working capital can be positive as well as negative. Positive working capital refers to the situation where current assets exceed current liabilities and negative working capital refers to the situation where current liabilities exceed current assets. The net working capital helps in comparing the liquidity of the same firm over time. For purposes of the working capital management, therefore Working Capital can be said to measure the liquidity of the firm. In other words, the goal of working capital management is to manage the current assets and liabilities in such a way that a acceptable level of net working capital is maintained. On the basis of time working capital may be classified as : Permanent or fixed working capital Temporary or variable working capital.


Page 36

Permanent or fixed capital :- permanent or fixed capital is the minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. There is always a minimum level of current asset which is continuously required by the enterprise to materials, work in process, finished goods and cash balance. This minimum level of current assets is called permanent or fixed working capital as this part of capital is permanently blocked in current assets. The permanent working capital can further be classified as regular working capital and reserve working capital required to ensure circulation of current assets from cash to inventories. Temporary or variable working capital:- Temporary or variable working capital is the amount of working capital which is required to meet the seasonal demands and some special exigencies. Variable working capital can be further classified as seasonal working capital and special working capital. Most of the enterprise have to meet the seasonal needs of the enterprise is called seasonal working capital. Special working capital is the part of working capital which is required to meet special exigencies such as launching of extensive marketing campaigns for conducting research. temporary working capital differs from permanent working capital is the sense that it is required for short periods and cannot be permanently employed gainfully in the business.

Perm anent W orking CapitalDOLLAR AMOUNT

T m o ry e p ra W rk g C p l o in a itaT e a o n o c rre t a s ts th t v rie h mu t f u n se a a s w s a o a re u m n . ith e s n l q ire e ts T m o ry c rre t a s ts e p ra u n se

DOLLAR AMOUNT

The am ount of current assets required to m eet a firm long s -term m inim um needs.

Perm anent current assets

P rm n n c rre t a s ts e a et u n se

TIME

T E IM


Page 37

IMPORTANCE OF WORKING CAPITAL MANAGEMENTManagement of working capital is very much important for the success of the business. It has been emphasized that a business should maintain sound working capital position and also that there should not be an excessive level of investment in the working capital components. As pointed out by Ralph Kennedy and Stewart MC Muller, the inadequacy or mis-management of working capital is one of a few leading causes of business failure. Current assets, in fact, account for a very large portion of the total investment of the firm. It can be visualized from the table that in the first year of our study i.e. 2004 it was 31% which was reduced to 26% in the next year and in 2006 it is 35% shows fluctuating trend.

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 utilisation of fixed assets may not be achieved due to non-availability of the working capital.


Page 38

The business may fail to honour 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 stocks due to non-availability of funds may result in production stoppage. While underassessment of working capital has disastrous implications on business, overassessment of working capital also has its own dangers.

CONSEQUENCES OF OVER ASSESSMENT OF WORKING CAPITAL 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.


Page 39

Working capital is very essential for success of a business and, therefore, needs efficient management and control. Each of the components of the working capital needs proper management to optimize profit.

3.3. WORKING CAPITAL NEEDS OF BUSINESSDifferent industries have different optimum working capital profiles, reflecting their methods of doing business and what they are selling. Businesses with a lot of cash sales and few credit sales should have minimal trade debtors. Supermarkets are good examples of such businesses; Businesses that exist to trade in completed products will only have finished goods in stock. Compare this with manufacturers who will also have to maintain stocks of raw materials and work-in-progress. Some finished goods, notably foodstuffs, have to be sold within a limited period because of their perishable nature. Larger companies may be able to use their bargaining strength as customers to obtain more favourable, extended credit terms from suppliers. By contrast, smaller companies, particularly those that have recently started trading (and do not have a track record of credit worthiness) may be required to pay their suppliers immediately. Some businesses will receive their monies at certain times of the year, although they may incur expenses throughout the year at a fairly consistent level. This is often known as seasonality of cash flow. For example, travel agents have peak sales in the weeks immediately following Christmas. Working capital needs also fluctuate during the year


Page 40

The amount of funds tied up in working capital would not typically be a constant figure throughout the year. Only in the most unusual of businesses would there be a constant need for working capital funding. For most businesses there would be weekly fluctuations. Many businesses operate in industries that have seasonal changes in demand. This means that sales, stocks, debtors, etc. would be at higher levels at some predictable times of the year than at others. In principle, the working capital need can be separated into two parts: A fixed part, and A fluctuating part The fixed part is probably defined in amount as the minimum working capital requirement for the year. It is widely advocated that the firm should be funded in the way shown in the diagram below:


Page 41

The more permanent needs (fixed assets and the fixed element of working capital) should be financed from fairly permanent sources (e.g. equity and loan stocks); the fluctuating element should be financed from a short-term source (e.g. a bank overdraft), which can be drawn on and repaid easily and at short notice.

3.4. DETERMINANTS OF WORKING CAPITAL:There are not set rules or formulae to determine the working capital requirements of firms. A large number of factors, each having a different importance, influence working capital needs of firms. The importance of factors also changes for a firm over time. Therefore, an analysis of relevant factors should be made in order to determine total investment in working capital. The


Page 42

following is the description of factors which generally influence the working capital requirements of firms.

Nature of business Working capital requirements of a firm are basically influenced by the nature of its business. Trading and financial firms have a very small investment in fixed assests,but require a large sum of money to be invested in working capital. Retail stores, for example, must carry large stocks of a variety of goods to satisfy varied and continuous demands of their customers. A large departmental store like wal-mart maycarry, say, over 20,000 items. Some manufacturing businesses, such as tobacco manufacturers and construction firms, also have to invest substantially in working capital and a nominal amount in fixed assests. In contrast, public utilities may have limited need for working capital and have to invest abundantly in fixed assests. Market and demand conditions The working capital needs of a firm are related to its sales. However, it is difficult to precisely determine the relationship between volumes of sales and working capital needs. in practice, current assets will have to be employed before growth takes place. it is,therefore,necessary to make advance planning of working capital for a growing firm on continuous basis. Growing firms may need to invest funds in fixed assets in order to sustain growing production and sales. this will, in turn, increase investment in current assets to support enlarged scale of operations. growing firms need funds continuously. They use external sources as well as internal sources to meet increasing needs of funds. These firms face further problems when they retain substantial portion of profits, as they will not be able to Pay dividends to shareholders. It


Page 43

is ,therefore, imperative that such firms do proper planning to finance their increasing needs of working capital. Technology and manufacturing policy The manufacturing cycle comprise of the purchase and use of raw materials and the production of finished goods. Longer the manufacturing cycle ,larger will be the firms working capital requirements.therefore the technological process with the shortest manufacturing cycle may be chosen.once a manufacturing technology has been selected, it should be ensured that manufacturing cycle must be completed within the specified period. This nees proper planning and coordination at all levels of activity.any delay in the manufacturing process will result in the accumulation of WIP and waste of time. In order to minimize their investment in working capital, some firms ,specifically those manufacturing industrial products,have a policy of asking for advance payments from their customers. Non manufacturing firms,services and financial enterprises do not have a manufacturing cycle. Credit policy The credit policy of the firm affects the working capital by influencing the level of debtors. The credit terms to be granted to customers may depend upon the norms of the industry to which the firm belongs. But a firm has the flexibility of shaping its credit policy within the constraint of industry norms and practices. The firm should use discretion in granting credit terms to its customers. Depending upon the individual case, different terms may be given to different customers. A liberal credit policy, without rating the credit worthiness of customers, will be detrimental to the firm and will create a problem of collection later on. The firm should be prompt in making collections. A high collection period will mean tie up of large funds in debtors. Slack collection procedures can increase the chance of bad debts. In order to ensure that unnecessary funds are not tied up in debtors, the firm should follow a rationalized credit policy based on the credit standing of customers and other relevant factors. The firm should evaluateSRI BHAGAWAN MAHAVEER JAIN COLLEGE Page 44

the credit standing of new customers and periodically review the credit worthiness of the existing customers. The case of delayed payments should be thoroughly investigated.

Availability of credit from suppliers The working capital requirements of a firm are also affected by credit terms granted by its suppliers. A firm will needless working capital if liberal credit terms are available to it from suppliers. Suppliers credit finances the firms inventories and reduces the cash conversion cycle. In the absence of suppliers credit the firm will borrow funds for bank. The availability of credit at reasonable cost from banks is crucial. It influences the working capital policy of the firm. A firm without the suppliers credit, but which can get bank credit easily on favourable conditions, will be able to finance its inventories and debtors without much difficulty. Operating efficiency The operating efficiency of the firm relates to the optimum utilization of all its resources at minimum costs. The efficiency in controlling operating costs and utilizing fixed and current assests leads to operating efficiency. The use of working capital is improved and pace of cash conversion cycle is accelerated with operating efficiency. Better utilization of resources improves profitability and thus,helps in releasing the pressure on working capital. Although it may not be possible for a firm to control prices of materials or wages of labour,it can certainly ensure efficient and effective utilization of materials ,labour and other resources. Price level changes


Page 45

The increasing shift in price level make functions of financial manager difficult. He should anticipate the effect of price level changes on working capital requirement of the firm. Generally,rising price levels will require a firm to maintain a higher amount of working capital. Same levels of current assests will need increased investment when prices are increasing. However, companies that can immediately revise their product prices with rising price levels will not face a severe working capital problem. Further, Firms will feel effects of increasing general price level differently as prices of individual Products move differently. Thus,it is possible that some companies may not be affected by rising prices while others may be badly hit.

3.5. WORKING CAPITAL CYCLEThe way working capital moves around the business is modelled by the working capital cycle. This shows the cash coming into the business, what happens to it while the business has it and then where it goes. A simple working capital cycle may look something like:-


Page 46

Between each stage of this working capital cycle there is a time delay. For some businesses this will be very long where it takes them a long time to make and sell the product. They will need a substantial amount of working capital to survive. Others though may receive their cash very quickly after paying out for raw materials etc... (perhaps even before they've paid their bills?) they will need less working capital.


Page 47

3.6. Different Aspects of Working Capital Management:

Management of Inventory. Management of Receivables/Debtors. Management of Cash. Management of Payables/Creditors.

MANAGEMENT OF INVENTORYMeaning of Inventory and Inventory Management: InventoryMeaning of the Term Inventory Inventory means Tangible property which is held: For Sale in the ordinary course of Business OR; In the process of Production (i.e. WIP) for Sale OR; For Consumption in the production of good & services which will be used for sale in the ordinary course of Business Inventory Includes Raw-Material, FG, WIP, Spares, Consumables etc. Meaning of the Term Inventory Magt Inventory Management means: An Optimum Investment in the Inventories Striking balance between Adequate Stock & Investment Maintain Adequate Stock and that too by keeping Investment at Minimum Level. It is also known as Optimum Level of Inventory Maintaining Inventory at the Optimum Level is called Inventory Magt.


Page 48

MANAGEMENT OF RECEIVABLESMeaning of Receivables and Receivables Management: Receivables

Meaning of the ReceivablesIt is amount/Debt which is receivable for the goods or Also known as Trade, Debtors, Sundry Debtors, Trade Receivables, Book Debts

Meaning of the Term Receivables Magt.Maintain Receivables at a level at which there is a Services provided on Credit trade-off between profitability & Cost This is called Optimum Level of Receivables Three Aspects of Managing Accounts Receivables

CharacteristicsIt Involves an Element of Risk It is based on Economic Value Cash Payment will be made in Future

ObjectivesIt Involves an Element of Risk Increase in Profit (Volume) Increase & Margin Increase) Strategy to Face Competition

Costs of MaintainingIt Involves an Element of Risk Administrative Cost Collection Costs

Establishing Credit PolicyDetermining the Level of Credit Sales

Establishing Collection Policy of Concern Control of the Account ReceivablesDetermining Policy & Procedures to followed it means maintaining of

Determining the credit standards Determining the credit terms

for the collection of the account receivables.

the account receivable at minimum possible level.


Page 49

MANAGEMENT OF CASHMeaning & Importance of Cash & Cash Management: Cash & Cash Management-Cash means Liquid Assets that a Business Owns. It includes Cheques, Money Orders & Bank Drafts - Cash Management means efficient Collection & Disbursement of cash and any Temporary Investment of Cash (Maintaining Optimum Level of Cash in an Organization is called Cash Management).

Objectives of Cash Management -To meet cash disbursement as per payment schedule. -To meet cash collection as per flows. Repayment schedule -To minimize funds locked up as Cash balance by maintaining Optimum cash balance.

Motives of Holding Transaction motive Speculative motive Precautionary motive

Importance of Cash Management Most significance & least productive asset. Difficult to predict cash (cash inflow or outflow) Cash planning. Cash forecasting.


Page 50

SOURCES OF WORKING CAPITAL FINANCEVarious Sources of securing Working Capital Finance: Sources of Finance

Long Term Sources (Regular Working Capital)

Other Sources

Short Term Sources (Seasonal Working Capital)

Internal Sources External Sources Retained Earnings - Issue of Equity Shares (Profit & Loss A/c) - Issue of Preference Shares Sale of FAs - Issue of Debentures - Loans from FIs - Security from Employees -Security from Customers.

External Sources Accrual Accounts - Trade Credit (Provision for Tax) (Open Acct/ Acceptance) Depreciation Funds - Public Deposit - Customer Advances - Credit Papers. - Indigenous Bankers. - Govt. Assistance. - Bank Credit.

Internal Sources

- Commercial Papers - Zero Coupon Bonds - Factoring (Recourse & Non Recourse)


Page 51


Page 52

3.7

WORKING CAPITAL MANAGEMENT OF TATA STEEL


Page 53

FUNDS EMPLOYED: Share capital & Share Warrants Reserves & surplus Total shareholders fund Loan Amount: Secured Unsecured Total Loans Deferred Tax Liability(Net) Provision for Employee separation compensation

BALANCE SHEET OF TATA STEEL LTD. FROM 2004-05 TO 2008-09 PARTICULARS 2004-05 2005-06 2006-07 2007-08 2008-09553.67 6506.25 7059.92 2468.18 271.52 2739.70 829.42 1514.26 553.67 9201.63 9755.30 2191.74 324.41 2516.15 957.00 1388.7114617.16

727.73 13368.42 14096.15 3758.92 5886.41 9645.33 748.94 1107.0825597.50

6203.30 21097.43 27300.73 3520.58 14501.11 18021.69 681.80 1071.3047075.52

6203.45 23972.81 30176.26 3913.05 23033.13 26946.18 585.73 1033.6058741.77

TOTAL FUNDS EMPLOYED(NET) 12143.30 APPLICATION OF FUNDS:

Fixed Assets: Gross Block (-)Impairment (-)Depreciation Net Block (FA) Investments Foreign currency Trans. OR Goodwill Current Assets: Stores & Spare Parts Stock-in-Trade Sundry Debtors Interest accrued on Investments Cash & Bank Balances Loans & Advances Total Current Assets (-)Current Liabilities (-)Provisions (-)Total Current Liabilities Net Current Assets(TCA-TCL)

15055.25 (97.52) (5845.49) 9112.24 2432.65 ------349.06 1523.34 581.82 0.20 246.72 2701.14 1382.44 4083.58 (2689.83) (1010.16) 3699.99

16564.90 (94.19) (6605.66) 9865.05 4069.96 -------442.66 1732.09 539.40 0.20 288.39 3002.74 1234.86 4237.60 (2835.99) (972.73) 3808.72

18526.93 (100.41) (7385.96) 11040.56 6106.18 ------505.44 1827.54 631.63 0.20 7681.35 10646.16 3055.73 13701.89 (3523.20) (1930.46) 5453.66

20847.04 (100.47) (8123.01) 12623.56 4103.19 ------557.67 2047.31 543.48 0.20 465.04 3613.70 3348.74 36962.44 (3855.26) (2913.52) 6768.78

23544.69 (100.47) (8962.00) 14482.22 42371.78 471.66 612.19 2868.28 635.98 ----1590.60 5707.04 4578.04 10285.09 (6039.86) (2934.19) 8974.05


Page 54

Misc. Expenses Total Asset(NET)

383.59 214.82

428.88 253.27

8248.23 202.53

30193.66 155.11

1311.04 105.07

12143.3 0

14617.1 6

25597.5 0

47075.5 2

58741.7 7

PROFIT AND LOSS ACCOUNT OF TATA STEEL LTD. FOR FIVE YEARS PARTICULARS 2004-05 2005-06 2006-07 2007-08 2008-09Income: Sales & other operating 15876.87 income (-)Excise duty (1377.92) Other income 148.03 14646.98 Expenditure: Manf. & other Expenses 8658.41 Depreciation 618.78 (-)Expenditure (other than interest) transferred to cap. a/c (204.82) Interest 186.80 9259.17 PBT & Exceptional item 5387.81 (-)Employee separation (119.11) scheme (-)Contribution for sports ------Exchange gain ------Profit before taxes 5297.28 Taxes: Current Tax 1797.17 Deferred Tax (10.54) Fringe benefit Tax ------Education cuss on I.T. 36.49 1823.12 Profit after tax 3474.16 Balance brought forward from last year 637.42 Amount available for Appropriations 4111.58 Appropriations: Proposed dividends 719.51 Dividends on 17144.22 (2004.83) 254.76 15394.15 9320.50 775.10 (112.62) 118.44 10101.42 5292.73 (52.77) ------------5239.96 1579.00 127.58 27.00 ------1733.58 3506.38 1790.21 5296.59 719.51 19762.57 (2210.55) 433.67 17985.69 10814.77 819.29 (236.02) 173.90 11571.94 6413.75 (152.10) ------------6261.65 2076.01 (52.51) 16.00 ------2039.50 4222.15 2976.16 7198.31 943.91 22191.80 (2498.52) 335.00 20028.28 11645.24 834.61 (175.50) 878.70 13183.05 6845.23 (226.18) (150.00) 597.31 7066.36 2252.00 108.33 19.00 ------2379.33 4687.03 4593.98 9281.01 1168.93 26843.73 (2527.96) 308.27 24624.04 15525.99 973.40 (343.65) 1152.69 17308.43 7315.61 ------------------7315.61 2173.00 (75.13) 16.00 ------2113.87 5201.74 6387.46 11589.20 1168.95


Page 55

conv.Pref. Shares Tax on Dividend General Reserve Balance Carried Balance Sheet

------101.86 1500.00 To 1790.21

------100.92 1500.00 2976.16

------160.42 1500.00 4593.98

22.19 202.43 1500.00 6387.46

109.45 214.10 600.00 9496.70

COST OF PRODUCTION AND COST OF GOODS OF TATA STEELPARTICULARS Raw Material Consumed + Opening Stock Of R.M + Purchase + Own Production (-) Closing Stock Of R.M Employee Cost Wages Contribution to P.F. Freight And Handling 2004-05 292.82 1288.95 737.07 603.70 1715.14 1059.46 231.45 936.68 2227.68 150.03 89.38 13.12 252.53 4195.35 621.33 66.30 35.98 636.97 24.07 629.65 712.00 19.95 618.78 3365.03 2005-06 603.70 1710.01 761.79 707.54 2368.30 1180.00 171.51 1004.32 2355.83 169.39 55.65 20.60 245.64 4969.77 737.74 78.40 55.49 624.27 32.65 640.52 819.17 13.63 775.10 3776.97 2006-07 707.54 2263.01 871.43 720.54 3121.46 1236.32 218.43 1117.45 2572.28 176.08 56.66 29.23 261.97 5955.41 1072.91 106.15 41.77 587.18 52.98 745.16 921.69 10.86 819.29 93.63 4451.62 2007-08 720.52 2352.80 1256.76 901.56 3429.52 1390.69 199.08 1098.19 2687.96 171.91 151.18 25.37 256.13 6373.61 936.11 115.33 48.88 739.21 30.14 856.86 932.78 10.75 834.61 38.50 4543.25 2008-09 901.56 4266.89 1974.56 1433.26 5709.91 2015.60 290.75 1251.23 3557.04 227.67 202.02 25.54 455.23 9722.18 1248.70 131.11 47.37 809.62 48.69 1041.50 1041.50 11.95 973.45 (32.75) 5370.96

Direct CostRoyalty Rates Insurance

Prime Cost

Factory overheads Stores Fuel Repairs to Building Repairs To Machinery Relining Conversion Charges Power Rent Deprecation Excise duty


Page 56

Works cost(+) opening WIP (-) closing WIP

7560.38 9.28 32.42 7537.24 620.81 1305.28 887.22 8576.11 86.18 8662.29 5836.66 14498.95

8746.74 32.42 23.93 8746.23 887.22 656.08 1000.62 9297.91 80.75 9378.66 5760.73 15139.39

10407.03 23.93 28.94 10407.02 1000.62 450.60 1078.08 10775.16 64.71 10839.87 6712.15 17552.02

10916.86 28.94 71.84 10874.32 1087.08 446.95 1074.27 11325.08 52.53 11377.61 8315.67 19693.28

15093.14 71.48 73.17 15091.45 1074.27 358.87 1361.85 15162.74 61.49 15224.23 9091.54 24315.7

Cost Of Production+ opening Stock Finished Goods + purchase of finished goods (-) Closing Stock Of Finished Goods

Cost Of Goods Sold+ Selling Exp And Commission Cost Of Sales Profit Sales


Page 57

METHOD OF CALCULATION ParticularsRaw material consumed Raw material consumption per day Average Raw material inventory

Raw material conversion period

Explanation

Raw material conversion period

The value of raw material consumption is taken from schedule 4 of the profit and loss account The value of raw material consumption per day is taken by dividing raw material consumption by 360 days The opening and closing raw material inventory is taken from schedule G of the balance sheet. The schedule G contains the breakup of entire inventories. The last year closing balance is consider as the opening for the current year and the average is calculated Holding days are calculated by dividing raw material inventory by raw material consumption per day. The value of cost of production is taken from schedule 4 of profit and loss account under manufacturing expenses. The entire

Work in progress conversion periodCost of Production


Page 58

Cost of production per day Average Work in progress inventory

Work in progress conversion period

manufacturing is given in the cost sheet format. The end value is taken as the cost of production The value of cost of process per day is calculated by dividing cost of production by 360 days The opening and closing value of work in progress inventory is taken from schedule G of the balance sheet. The schedule G contains breakup of entire inventories. The last year closing balance is considered as the opening for the current year and the average is calculated. Holding days are calculated by dividing work in progress inventory by cost of process per day.

Finished goods conversion periodCost of goods sold The value of cost of goods sold is calculated by subtracting profit before taxation from net sales. The net sales are taken from profit and loss account as well as profit before taxation. Then the result is calculated The value is calculated by dividing cost of goods sold by 360 days The opening and closing value of finished goods inventory is taken from schedule G of the balance sheet. The schedule G contains the breakup of entire inventories. The last year closing balance is consider as the opening for the current year and the average is calculated The value is calculated by dividing finished goods inventory by cost of goods sold per day. The value of entire net sales from profit and loss account is taken as the credit sales for the particular year. The entire net sales is considered as the credit sales The value is calculated by dividing the entire

Cost of goods sold per day Average Finished goods inventory

Finished goods conversion period

Debtors Collection periodCredit sales

Credit Sales per day


Page 59

Average Debtors Debtors collection period

credit sales by 360 days. The value of debtors is taken from the balance sheet. Debtors comes under the head of current assets in the balance sheet The value of outstanding days is calculated is calculated by dividing debtors by sales per day.

Creditors deferral periodCredit purchase For the year 2008-2009, no purchases is shown Therefore we have calculated the percentage from raw material consumed and then the entire calculation is done. The value is calculated by dividing the entire credit purchase by 360 days The value of creditors is taken from the schedules of current liabilities and provision(schedule k) The value of deferral period is calculated by dividing creditors by purchase per day.

Credit Purchase per day Average Creditors Creditors collection period


Page 60

OPERATING CYCLE OF TATA STEELPARTICULARS 2004-05 2005-062368.30 6.58 655.62 99.64 8755.23 24.32 28.18 1.16 9297.91 25.83 943.92 36.54 15139.39 42.05 539.40 12.824715.64 13.09 2534.03 193.58 150.16

2006-073121.46 8.67 714.03 82.35 10402.02 28.89 26.44 0.92 10775.16 29.93 1039.35 34.73 17552.02 48.75 631.63 12.955527.82 15.35 3145.99 204.95 130.95

2007-083429.52 9.53 811.04 85.10 10874.32 30.21 50.21 1.66 11325.08 31.46 1076.18 34.21 19693.28 54.70 543.48 9.936059.09 16.83 3243.42 192.71 130.9

2008-095709.91 15.86 1167.41 73.61 15091.45 41.92 72.33 1.73 15162.74 42.12 1218.06 28.92 24315.77 67.54 635.98 9.418974.36 24.92 3842.78 154.20 113.67

Raw Material Conversion Period Raw material consumed 1715.14 Raw material consumed per day 4.76 Average raw material inventory 448.26 RMCP 94.17 Work In Progress Conversion Period Cost of production 7537.24 Cost of production per day 20.93 Average work in progress inventory 20.85 WIPCP 0.99 Finished Goods Conversion Period cost of goods sold 8576.11 Cost of goods sold per day 23.82 Average finished goods inventory 754.02 FGCP 31.65 Debtors Collection Period Credit sales 14498.95 Credit sales per day 40.27 Average debtors 581.82 DCP 14.44 Creditors deferral period 6660.53 Credit purchase 18.50 Credit purchase per day 2374.98 Average creditors 128.32 CDP GROSS OPERATING CYCLE (GOC) NET OPERATING CYCLE (NOC)141.25

12.93

(43.42)

( 74)

(61.81)

(40.53)


Page 61


Page 62

NET WORKING CAPITAL OF TATA STEEL PARTICULARSCURRENT ASSETS Stores and spares Stock in trade Sundry debtors Interest accrued on investment Cash and bank Loans and advances TOTAL(CA) CURRENT LIABILITIES Sundry creditors Subsidiary companies Interest accrued but not due Advances received from customers Liability towards investors edu and pro fund Provision for retiring gratuities Provision for employee benefits Provision for taxation Provision for fringe benefits Proposed dividend TOTAL(CL) NET WORKING CAPITAL(A-B)

2004-05349.06 1523.34 581.82 0.2 246.72 1382.44 4083.58 2319.96 58.1 85.15 199.51 27.11 6.77 0 283.88 0 719.51 3699.99 383.59

2005-06442.66 1732.09 539.4 0.2 288.39 1234.86 4237.6 2534.03 62.37 24.29 185.07 30.23 .81 0 250.04 2.37 719.51 3808.72 428.88

2006-07505.44 1827.54 631.63 0.2 7681.35 3055.73 13701.89 3145.99 102.61 47.11 198.28 29.21 0 519.5 448.68 18.37 943.91 5453.66 8248.23

2007-08557.67 2047.31 543.48 0.2 465.04 33348.74 36962.44 3243.42 115.74 231.05 226.03 39.02 0 848.54 854.74 19.12 1191.12 6768.78 30193.66

2008-09612.19 2868.28 635.98 0 1590.60 4578.04 10285.09 3842.78 1358.1 506.68 297.37 34.91 0 1143.0 493.59 19.12 1278.4 8973.95 1311.14


Page 63

PERCENTAGE CHANGE IN WORKING CAPITAL OF TATA STEELPARTICULARSCURRENT ASSETS Stores and spares Stock in trade Sundry debtors Interest accrued on investment Cash and bank Loans and advances TOTAL(CA) CURRENT LIABILITIES Sundry creditors Subsidiary companies Interest accrued but not due Advances received from customers Liability towards investors edu and pro fund Provision for retiring gratuities Provision for employee benefits Provision for taxation Provision for fringe benefits Proposed dividend TOTAL(CL)

2004-05 2005-066.55 39.41 -11.94 0.00 -1.62 -39.73 -7.33 14.11 61.65 48.66 33.04 3.13 17.72 0 395.23 0 48.71 622.25 21.14 12.05 -7.86 0.00 14.44 -11.95 27.82 8.44 6.84 -250.55 -7.80 10.32 -735.80 0 -13.53 100 0 -892.4

2006-0712.42 5.22 14.60 0.00 96.24 59.58 188.06 19.45 39.21 48.43 6.66 -3.49 0 100 44.27 87.09 23.77 365.42

2007-089.37 10.73 -16.21 0.00 -1551.76 -90.83 -1638.7 3.00 11.34 79.61 12.27 25.14 0 38.77719 47.50 3.92 20.75 242.33

2008-098.90 28.62 14.54 0.00 70.78 -628.45 -505.61 15.59 91.47 54.39 23.99 -11.77 0 25.76202 -73.16 0 6.82 127.17


Page 64

RATIOS ANALYSIS OF TATA STEEL

WORKING CAPITAL TURNOVER RATIO:

Formula: Net sales / net working capital PARTICULARS Net Sales Net Working Capital WCTR 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 14498.95 383.59 37.79 15139.39 428.88 35.29 17552.02 8248.23 2.12 19693.28 30193.66 0.65 24315.77 1311.14 18.54

INTERPRETATION: The above graph shows the need of the net current asset as compared to sales. The reciprocal of WCTR (37.79) for year 2004-05 is 0.026. this indicate that for every one rupees of sales it needs only 0.026 of net current asset but during the year 2006-08, the need of current assets is increased in getting the sale due to low industry performance due to recession. This gap will be met from borrowings and long-term sources of funds. In 2008-09 working capital turnover ratio is 18.54 and in 2007-08, 0.65 which is much more than current year. There has been much more improvement in utilization of fixed asset and current assets.

CURRENT RATIO:

Formula: Current Asset / Current Liability PARTICULARS Current Assets Current Liabilities CURRENT RATIO 2004-2005 4083.58 3699.99 1.1036 2005-2006 4237.6 3808.72 1.1126 2006-2007 13701.89 5453.66 2.51242 2007-2008 36962.44 6768.78 5.460724 2008-2009 10285.09 8973.95 1.1461051


Page 65

INTERPRETATION: Current ratio mainly indicates how fast the firm provides liquidation. Current asset represent the payment that will be made by the firm in future and this also include current liabilities. Current ratio estimates short term solvency of the firm. As a conventional rule current ratio of 2:1 represents the satisfactory condition of the firm. Current ratio of 2006-07 is 2.51and 2007-08 5.46 represents the satisfactory condition of the firm and rest of the year it is not satisfactory.

QUICK RATIO:

Formula: Quick assets / Current liability PARTICULARS Current asset-inventory Current liabilities QUICK RATIO 2004-2005 2005-2006 2006-2007 2560.24 3699.99 0.6919586 2505.51 3808.72 0.657835 11874.35 5453.66 2.1773176 2007-2008 2008-2009 34915.13 6768.78 5.1582604 7416.81 8973.95 .826482


Page 66

INTERPRETATION: Quick ratio of 1 to 1 is considered to represent the satisfactory condition. Quick ratio is better to measure liquidity of firm. It is also not necessary that 1 to 1 imply sound liquidity position in 2008-09 quick ratios is 0.82.quick asset is 0.82 times greater than current liabilities.

DEBTORS TURNOVER RATIO:

Formula: Net Sales / Average debtors PARTICULARS Average debtors Net sales DTR 2004-2005 2005-2006 2006-2007 581.82 14498.95 24.91 539.40 15139.39 28.06 631.63 17552.02 27.78 2007-2008 2008-2009 543.48 19693.28 36.23 635.98 24315.77 38.23

INTERPRETATION: Debtors turnover indicates number of times debtors turn over each year higher the value of debtors turn over the more efficient will be the credit of the management debtors turnover represents how fast debtors provide liquidity higher the value of debtors turnover the more efficient will be the management of the credit. In 2008-09 DTR are 38.23 which are much higher than as we compare with previous year.


Page 67

PARTICULARS Cost of goods sold Average stock STR

2004-2005 2005-2006 2006-2007 8576.11 754.01 11.37 9297.91 943.61 9.85 10775.16 1039.35 10.36

2007-2008 2008-2009 11325.08 1080.67 10.47 15162.74 1218.06 12.44

STOCK TURNOVER RATIO:

Formula: Cost of goods sold / average stock

INTERPRETATION: This ratio evaluates the efficiency of the firm in selling its product This ratio indicates the number of times inventory has been converted into sales during the year. In manufacturing company inventory of finished goods is used to calculate inventory turnover.in2008-09 Tata steel is turning inventory of finished goods into sales 12.44 times in a year which is marginally higher than compare to previous year.

CREDITORS TURNOVER RATIO:

Formula: Net Purchases / Average Creditors PARTICULARS Average Creditors Net Purchases 2004-2005 2005-2006 2006-20072374.98 6660.53 2534.03 4715.64 3145.99 5527.82

2007-2008 2008-20093243.42 6059.09 3842.78 8974.36


Page 68

CTR

2.80

1.86

1.75

1.86

2.33

INTERPRETATION Creditors turnover ratio of sail was high in the year 2004-2005i.e 2.8 which meant that the sail collected its payment from its creditors 2.8 times in that financial year. The high liquidity of the creditors is beneficial for SAIL in carrying out its business. Increase in net purchases continuously also increased the average creditors which automatically increased the creditors turnover ratio in year 2008-2009.

CASH RATIO:

Cash +Marketable securities / Current liabilities PARTICULARS Cash+ marketable securities Current liabilities CASH RATIO 2004-2005 2005-2006 2006-20071814.02 3359.13 11373.88

2007-2008 2008-20091598.78 4859.93

3699.99 0.49

3808.72 0.88

5453.66 2.08

6768.78 0.23

8973.95 0.54

INTERPRETATION


Page 69

Cash ratio is the most liquid asset. Ratio of cash ratio is equivalent of current liabilities. Trade investment and marketable securities are equivalent to cash therefore they may be included in cash ratio. The company in 2008-09 carries 0.54 cash. which is not a big amount but there is nothing to worry about because company can easily borrow cash from banks.

NO. OF DAYS INVENTORY:

360 Days / Inventory Turnover PARTICULARS No. of days Inventory Turnover NO.OF DAYS INVENTORY 2004-2005 2005-2006 2006-2007 360 11.37 63.8 360 9.85 56.07 360 10.36 52.63 2007-2008 2008-2009 360 10.47 52.47 360 12.44 51.13

INTERPRETATION The above graph indicates a decline in the inventory holding days in Tata steel. As shown above for year 2004-05 , it was 63.8 days but it has been constantly in following financial years which means that Tata Steel has been successful in decreasing the warehousing cost as inferred from the current year days of inventory holding i.e. 51.13 days.

DEBTORS COLLECTION PERIOD:SRI BHAGAWAN MAHAVEER JAIN COLLEGE Page 70

360 / Debtors turnover

PARTICULARS No. of days Debtors Turnover DCP

2004-2005 2005-2006 2006-2007 360 24.91 14.45 360 28.06 12.86 360 27.78 12.95

2007-2008 2008-2009 360 36.23 9.93 360 38.23 9.41

INTERPRETATION Debtors collection period indicates quality of debtors. The shorter will be the collection period the higher will be the quality of debtors. In 2008-09 the debtors collection period is 9.41 which is the shortest collection period from 2004-05 and which represent the better quality of debtors. In 2004-05 the collection period is more which indicates the quality of debtors is not satisfactory.

CURRENT ASSETS TURNOVER RATIOS:

Formula: Sales / Current assets PARTICULARS Sales Current assets CATR 2004-2005 2005-2006 2006-2007 14498.95 4083.58 3.55 15139.39 4237.6 3.57 17552.02 13701.89 1.28 2007-2008 2008-2009 19693.28 36962.44 .053 24315.77 10285.09 2.36


Page 71

INTERPRETATION As per the graph the current asset turnover ratio for the year 2004 and 2005 is more or less same but during the year 2006-08, it has decreased due to recession in getting the sales form current assets. But during current financial year 2008-09, it has shown a positive recovery i.e. 2.36.


Page 72

WORKING CAPITAL MANAGEMENT OF SAIL (STEEL AUTHORITY OF INDIA LIMITED)

3.8


Page 73

SAILSteel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a fully integrated iron and steel maker, producing both basic and special steels for domestic construction, engineering, power, railway, automotive and defence industries and for sale in export markets. Ranked amongst the top ten public sector companies in India in terms of turnover, SAIL manufactures and sells a broad range of steel products, including hot and cold rolled sheets and coils, galvanized sheets, electrical sheets, structurals, railway products, plates, bars 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 India and situated close to domestic sources of raw materials, including the Company's iron ore, limestone and dolomite mines. The company has the distinction of being Indias second largest producer of iron ore and of having the countrys second largest mines network. This gives SAIL a competitive edge in terms of 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 Sales Offices spread across the four regions, 25 Departmental Warehouses, 42 Consignment Agents and 27 Customer Contact Offices. CMOs domestic marketing effort is supplemented by its ever widening network of rural dealers who 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 SAILs five integrated steel plants. With technical and managerial expertise and know-how in steel making gained over four


Page 74

decades, SAIL's Consultancy Division (SAILCON) at New Delhi offers services and consultancy to clients world-wide.

NET 0PERATING CYCLE (SAIL)


Page 75

ITEMSRaw material conversion period Raw material consumed Raw material consumption per day Average raw material inventory RMCP Work in progress conversion period Cost of production Cost of production per day Average Work in progress inventory WICP Finished goods conversion period Cost of goods sold Cost of goods sold per day Average Finished goods inventory FGCP Debtors Collection period Credit sales Credit Sales per day Average Debtor DCP Creditors deferral period Credit purchase Credit Purchase per day Average Creditors

200405 9351.46 25.97 649.65 25.00 21088.6 7 58.57 374.34 6.39 18979.5 5 52.72 1765.14 33.48 28344.9 78.73 1908.45 24.23 9837.86 27.32 2207.5

200506 12325.6 3 34.23 1013.17 29.59 25027.8 3 69.52 562.21 8.08 22131.8 3 61.47 2586.91 42.07 27837.5 7 77.32 1881.73 24.33 12566.2 7 34.90 2427.36

200607 13274.9 1 36.87 1167.65 31.66 27907.4 8 77.52 996.99 12.86 24500.5 68.05 3369.39 49.50 33923.1 2 94.23 2314.75 24.56 13343.2 3 37.06 2545.07

200708 13960. 14 38.77 980.3 25.27 11467. 44 31.85 1794.0 3 56.32 28039. 72 77.88 3726.8 3 47.84 39508. 45 109.74 3048.1 2 27.77 13517. 12 37.54 2985.2

200809 20076. 92 55.76 1147.2 15 20.57 9399.6 7 26.11 4466.8 9 171.07 36975. 87 102.71 4881.4 0 47.52 43150. 08 119.86 3024.3 6 25.23 20853. 77 57.92 4150.8Page 76


NET WORKING CAPITAL (SAIL) CURRENT ASSETSInventories Sundry debtors Cash and bank balance Interest receivable Loans and advances 200405 4220.69 1908.45 6132.12 142.18 1930.19 14333. 6 2005-06 2006-07 2007-08 200809 10121.4 5 3024.36 18228.5 3 1014.47 2122.06 34510. 87

6210.06 1881.73 6172.64 85.48 3033.82 17383.7

6651.47 2314.75 9609.83 152.56 1650.01 20378.6

6857.23 3048.12 13759.4 4 273.08 2379.75 26317.6 2

TOTAL(A)

CURRENT LIABILITIESSundry creditors Advances Security deposits Interest accrued but not due on loans Unpaid dividend Unclaimed matured deposits Unclaimed matured bonds Interest accrued on unclaimed deposits Other liabilities

200405 2207.5 524.47 209.67 527.75 0.19 11.03 0.83 4.37 1293.11

200506 2427.36 536.26 232.3 375.82 3.27 5.14 0.6 2.59 1608.36

200607 2545.07 631.68 257.76 198.79 4.3 2.19 0.2 0.74 1757.47

200708 2985.24 643.49 243.09 115.64 5.88 1.8 0.55 0.66 2404.57

200809 4156.7 7 565.64 431.2 95.58 7.55 1.6 0.25 0.63 2454.1Page 77


Provision for gratuity Provision for accrued leave Provision for taxation Provision for pollution control Provision for exchange fluctuation Provision for proposed dividend Provision for tax on dividend Provision for voluntary retirement Provision for employees family benefit scheme Provision for post retirement medical benefits Provision for wages revision Others

1851.19 1013.37 748.06 84.23 0 743.47 104.27 114.19 170.2 479.93 0 78.24 10166. 1 4167.56

2289.75 1223.82 1939.75 86.44 13.95 309.78 43.45 84.29 201.68 490.33 342.52 210.68 12428. 1 4955.5 9

1718.2 1371.43 736.26 44.32 83.11 0 619.56 105.29 58.92 512.58 223.96 77.15 10949

718.16 1346.7 832.06 38.18 89.05 743.47 125.54 40.15 0 0 2459.66 404.86 13198. 75 13118. 87

7 573.17 1602.0 8 1048.7 5 364.01 99.73 536.95 91.26 21.43 0 0 4552.9 4 517.89 17121 .6 17389 .27

TOTAL(B)NET WORKING CAPITAL

9429.6 4


Page 78

RATIO ANALYSIS OF SAIL WORKING CAPITAL TURNOVER RATIO

PARTICULARS

2004-05 28344.9 4167.56

2005-06 27837.6 4955.59

2006-07 33923.1 9429.64

2007-08 39508.5 13118.9

2008-09 43150.1 17389.3Page 79

Net sales Net working capital


Working capital turnover ratio

6.80

5.61

3.59

3.01

2.48

INTERPRETATIONThe above graph shows the working capital turnover ratio of sail. The decreasing trend of the graph shows that sail has been failure in managing the gap between net current asset and sales. For the financial year 2004-05 it needed 0.

tata steel

Documents

working capital requirements

meaning of working capital

nuances of working capital

capital factors

kinds of working capital

project work

business management

contents page