Final report in working capital management of tata steel ltd.

SUMMER INTERNSHIP AT TATA STEEL LTD

SUMMER INTERNSHIP PROJECT REPORT AT

“WORKING CAPITAL MANAGEMENT OF TATA STEEL LTD AND

COMPARATIVE

ANALYSIS BETWWEN TATA STEEL, SAIL AND JINDAL”

A Project Report Submitted In Partial Fulfillment of the Requirement

For The Award of the

POST GRADUATE DIPLOMA IN MANAGEMENT

TO

M.S.RAMAIAH INSTITUTE OF MANAGEMENT

BY

NEHA SINGH

REG NO: 141257

BATCH: 2014-2016

UNDER THE GUIDANCE OF

PROF. ARVINDA REDDY M N

M.S RAMAIAH INSTITUTE OF MANAGEMENT

NEW BEL ROAD, BANGALORE- 560054

JULY 2015

M.S RAMAIAH INSTITUTE OF MANAGEMENT 1


CERTIFICATE

This is to certify that the Project Report undertaken by Neha Singh

(141257) conducted at TATA STEEL submitted in partial fulfillment of the

requirements for the award of the


TO


Is a record of bonafide internship carried out under my supervision and

guidance. She has attended the required guidance sessions held. This report

has not been submitted for the award of any other degree/diploma/fellowship

or similar titles or prizes.

Name: Prof. Aravinda Reddy M N

Qualification:

Guide’s signature:



STUDENT’S DECLARATION

I hereby declare that the Project Report conducted at TATA STEEL

Under the guidance of Prof. Aravinda Reddy M N

Submitted in Partial fulfillment of the requirements for the


TO


Is my original work and the same has not been submitted for the award of any

other Degree/Diploma/Fellowship or other similar titles or prizes.

Place: Bangalore NEHA SINGH

Date: 31st July 2015 Reg. No.:141257



ACKNOWLEDGEMENT

The fundamental characteristic of summer internship program lies not just

in the successful completion of a given project but also in the positive

expansion of the professional business person inside a student.

I extend my special gratitude to our Dean Dr.H.Muralidharan, Academic

Head Prof. V. Narayanan & Programme Head Dr. Savita Rani

Ramachandran for inspiring me to take up this project and also for their

able guidance and support in completing this internship.

I wish to acknowledge my sincere gratitude and indebtedness to my project

guide Mr. Aravinda Reddy M N of M.S. RAMAIAH INSTITUTE OF

MANAGEMENT Bangalore for his/her valuable guidance and constructive

suggestions in the preparation of project report.

I would like to extend my gratitude to Mr. Rahul Sharma (Financial

transaction and control) for giving me opportunity to work in such an

important sphere and sharing his vision and experience.

Last but not the least I would like to extend my thanks to all the employees

at finance department, my family and friends for their cooperation, valuable

information and feedback during my project

NEHA SINGH

REG NO: 141257



CONTENTSCHAPTER I - INDUSTRY ANALYSIS

1.1 Brief history of growth and development in iron and steel industry.1.2 Future growth prospects.1.3 Government Policies.1.4 Major players of Steel industry1.5 Michael E Porter’s Analysis of Tata Steel ltd.

CHAPTER II – COMPANY ANALYSIS 2.1 About the company2.2 Environment2.3 Marketing 2.4 Customers of Tata Steel2.5 Competitors2.6 Technology2.7 Human Resources2.8 Operations2.9 Finance2.10 Company Hierarchy2.11 SWOT Analysis

CHAPTER III – DISCUSSION ON TRAINING3.1 Roles and Responsibilities3.2 Description of tasks handled3.3 Contribution to the organization

CHAPTER IV – ANALYSIS OF TASK UNDERTAKEN4.1 Introduction 4.2 Research Design4.3 Data Analysis4.4 Findings4.5 Conclusion4.6 Recommendation

BIBLIOGRAPH

ANNEXURES



LISTS OF TABLES AND FIGURES

TABLES2.1 Market Share Competition2.2 Financial ratio of TATA STEEL2.3 Performance metrics

4.1 Tata Steel cost sheet4.2 Tata Steel profit and loss statement4.3 Tata Steel net working capital4.4 Cost Sheet of SAIL4.5 SAIL P/L Account4.6 Balance Sheet of SAIL4.7 Working Capital of SAIL4.8 Cost Sheet of Jindal4.9 Jindal P/L Account4.10 Balance Sheet of Jindal4.11 Working capital of Jindal4.12 Current ratio

Figures / Chart

1.1Current and Projected Production Capacity of STEEL2.1 Performance metrics

4.1 Net Working Capital

4.2 Net Working Capital



EXECUTIVE SUMMARY

This internship is a bridge between the institute and organization. This training program is

designed to give the future manager a feel about the corporate happenings and work culture

of an organization. These real life situations are entirely different from the stipulated exercise

enacted in an artificial environment inside the classroom and it is precisely because of this

reason that this summer training program is designed, so that managers of tomorrow get ideas

about the real time business operations. The summer internship program helps us to apply our

theoretical knowledge into the practical field.

Working capital is the most important part of the current assets of an organization.

Management of working capital is important because it has a direct impact on the financial

resources of the organization. Excess investment on the part of inventory is not viable

because the funds then will be held up in inventories and will not be available for other

important segment of the business. Less investment is also detrimental because the company

might face a huge problem in fulfilling the requirement of the business. Therefore, proper

working capital management is very essential for an organization.

This project explains in details of working capital management and how it is operated in an

organization. Various ratio analysis have been taken out on the basis of the data provided so

as to find out the trends of working capital requirements in TATA STEEL LIMITED, a

leading manufacturer of the steel in the world. A brief study of Indian steel has carried out a

comparative analysis of TATA STEEL LIMITED (TSL) AND JINDAL STEEL AND

POWER LTD (JSPL) AND SAIL. Thus analysis studies the different techniques used by

different companies and how effective those prove in this competitive environment.



CHAPTER - I

INDUSTRY ANALYSIS

INTRODUCTION AND COMPANY PROFILE



1.1 BRIEF HISTORY OF GROWTH AND DEVELOPMENT IN IRON &

STEEL INDUSTRYSteel is one of the top manufactured products of the world. It contributes to about 1661.5

million tones and showing a growth of over 1.2% in 2013. (Source: World Steel Association

or WSA) Nearly 67% of this was contributed to by Asia. China's share was 49.2%.China

remained the world’s largest crude steel producer in 2014 (823 mt) followed by Japan (110.7

mt), the USA (88.3 mt) and India (83.2 mt) at the 4th position. The history of the modern

steel industry began in late 1850s, but since then steel has been basic to the world's industrial

economy. Indian players like Tata Steel, SAIL and many others have gone global due to the

steel industry's growing rapidly and reaching new heights.

Steel is an important indicator to analyze the economic development of a country. The steel

industry is highly scientific and technology oriented. Technological advancement is very

important for the overall health of the steel industry.

1.1.1 GLOBAL SCENARIO

In 2014, global demand is forecast to grow faster at about 3.3%. However, more demand

growth is expected to come from outside of China as the Chinese Government pushes

through economic restructuring with a focus on private consumption. With the exception of

China, global supply and demand for steel will largely follow economic growth recovery

around the world.

In China, national mandates to rationalize capacity will have an effect on supply and as the

Chinese economy moves to a more consumer-driven model, steel consumption is expected to

moderate. The short-term estimates by World Steel Association for global steel demand are

similar on an overall basis, with some more positive views for growth in the US, the EU,

Brazil and Russia but a relatively lower expectation for Asian countries.

Growth in the Chinese economy continues to be a determining factor for the global steel

market in the medium-to-long term. As China seeks to restrain investment activity,

rebalancing and deleveraging, current forecasts for 2014 are for lower growth rates in

production and demand with the removal of excess capacity. However, if urbanization

projects continue, accompanied



By a strong domestic economy and a growing middle class, the demand for steel will

continue to stimulate. It will also shift the product range as more sophisticated consumer

products, such as automobiles and home appliances, are sought after. This will benefit

steelmakers with high-end, value-added products. Two factors may cause more rapid

restructuring of the Chinese steel sector:

• The excessive levels of debt may allow Chinese policy banks to stop funding losses as a

catalyst to restructure.

• The use of steel stockpiles to collateralize debt to be used for speculation is expected to be

unwound.

Steel demand in Europe and the US is likely to improve during 2014–15. In Europe, it is

expected to increase by a robust 2% in 201411 on the back of investment in the infrastructure

and manufacturing sectors. Although the growth may be insufficient to absorb the capacity

overhang, the switch from decline to marginal growth can be important for industry margins

and overall sentiment. US steel demand is also expected to improve on the back of residential

construction, growing automotive production and energy investments. Other regions to

experience faster steel demand growth will be India, Brazil, Russia and MENA (the Middle

East and North Africa).

It is fairly clear that while there has been a continuous strong growth, year on year, in China.

However, the trends in Japan and USA have not been so. The European Union has not been

out of the financial mess and the emerging economies do not hold any strong promise to the

global investor community in the short run as their macro management has been far below

expectation. The latest report of IMF also point to gloomy prospects of the emerging

economies while at the same time, they have in fact seen some stability creeping into the

economies of the developed world.

1.1.2 INDIAN SCENARIO

India's steel industry is more than a century old. Before the economic reforms of the early

1990s the Indian steel industry was predominantly regulated by the public sector. Tata Steel

was the only major private sector company involved in the production of steel in India. SAIL

and Tata Steel have traditionally been the major steel producers of India. In 1992,

liberalization of the Indian economy led to the opening up of various industries including the

steel industry.



Thus the number of producers increased, with increased investments in the steel industry and

increased production capacity.

Indian Steel industry went through a rough phase between 1997 and 2001 when the overall

global steel was facing a downturn but recovered after 2002. The major factors that led to the

revival of steel industry in India were the rise of global demand for steel and the domestic

economic growth in India.

The Indian steel industry has entered into a new development stage from 2007-08, riding high

on the resurgent economy and rising demand for steel. Rapid rise in production has resulted

in India becoming the 4th largest producer of crude steel and the largest producer of sponge

iron or DRI in the world.

Production

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

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

• India is the largest producer of sponge iron in the world with the coal based route

accounting for 89% of total sponge iron production in the country.

• Data on production for sale of pig iron, sponge iron and total finished steel (alloy +

non-alloy) are given below for last five years and April-December

1.2 FUTURE GROWTH PROSPECTS

There are many studies projecting steel demand growth scenario over the next couple of

decades. In a recent study, the Boston Consulting Group (BCG) has made the following

observations. :

a) On the present pattern of growth - the real GDP of India grew from 2002 to 2013 was at

7.4per cent and the steel consumption grew by 8.2per cent in the said period. Over the next

12

years at a GDP growth of 6 – 6.5per cent, and a GDP elasticity of steel demand at 1.1, the

likely growth of steel consumption growth rate was estimated at 7.3per cent per year and the

finished steel consumption in 2025-26, on this basis, was estimated to grow to 155 – 170

million tons by that year.



b) Bench marking India’s stage of economic growth with other countries – On another model,

following established trajectory of growth as seen in other countries, the per capita

consumption of steel in India would move from the level of 59 kgs in 2011 to 175 kgs in

2025-26, and given the fact that the population of India is projected to grow to 1.43 billion

that year, the steel consumption in 2025-26 is likely to be around 250 million tons. c) The

goal of India to increase share of manufacturing to 25per cent of GDP by 2025 – The above

target if achieved can propel the usage of finished steel from 16 kgs / $ PPP in the year 2012

to 22 – 25 kgs / $ PPP in the year 2024-25. This would mean a growth in steel consumption

of 9 -10per cent and the steel consumption in 2025-26 is likely to be around 230 – 255

million tons

FIGURE 1.1

Fig. 1 Current as well as projected production capacity of steel industry

1.3 GOVTERNMENT POLICIESThe economic reforms initiated by the Government since 1991 have added new dimensions

to industrial growth in general and steel industry in particular. Licensing requirement for

capacity creation has been abolished, except for certain locational restrictions. Steel industry

has been removed from the list of industries reserved for the public sector. Automatic

approval of foreign


2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-160

25

50

75

100

Finished Steel Production Finished Steel Capacity Production / Capacity


equity investment upto 100% is now available. Price and distribution controls have been

removed from January, 1992, with a view to make the steel industry efficient and

competitive. Restrictions on external trade, both in import and export have been removed.

Import duty rates have been reduced drastically. Certain other policy measures such as

reduction in import duty of capital goods, convertibility of rupee on trade account, permission

to mobilize resources from overseas financial markets and rationalization of existing tax

structure for a period of time have also benefited the Indian steel industry.

1.3.1 Important policy measures:

In the new Industrial Policy announced in July, 1991 Iron and Steel industry, among others,

was removed from the list of industries reserved for the public sector and also exempted from

the provisions of compulsory licensing under the Industries (Development and Regulation)

Act, 1951.

i. With effect from 24.5.92, Iron and Steel industry has been included in the list of `high

priority' industries for automatic approval for foreign equity investment upto 51%.

This limit has been recently increased to 100%.

ii. Price and distribution of steel were deregulated from January 1992. At the same time,

it was ensured that priority continued to be accorded for meeting the requirements of

small scale industries, exporters of engineering goods and North Eastern Region of

the country, besides strategic sectors such as Defence and Railways.

iii. Iron & Steel are freely importable as per the Extant Policy.

iv. Iron & Steel are freely exportable.

v. Advance Licensing Scheme allows duty free import of raw materials for exports.

vi. The floor price for seconds and defectives continues till date.

vii. Imports of seconds and defectives of steel are allowed only through three designated

ports of Mumbai, Calcutta and Chennai.

viii. Mandatory pre inspection certificate by a reputed international agency for every

import consignment of seconds and defectives.

ix. In the union Budget 2007-08 the import duty on seconds and defective has been

further reduced from 20% to 10%



1.4 MAJOR PLAYERS OF STEEL INDUSTRYThe major players of steel in India are:

1. Vedanta Resources is a London Stock Exchange listed, globally

diversified natural resources major with interests in Zinc, Lead, Silver, Copper, Iron

Ore, Aluminum, Power and Oil & Gas. Our exploration portfolio from all the four

continents that we operate in, follows a history of consistent geological discovery.

2. Bajaj Steel Industries Ltd is counted among the reputed manufacturers,

exporters and suppliers of cotton processing equipment, fully automatic ginning plant,

cotton bale wire ties, double roller ginning machine spare parts, electrical panels, gear

blanks, head spigot, steel reels, turbine housings, winder cam, windmill shafts etc.

3. Visa Steel Ltd is a flagship company of the Visa Group, which has

business interests in steel, power, cement, international trading and urban

infrastructure etc. Visa Steel is a leading player in the special steel, ferro chrome and

metallurgical coke business in India.

4. Kirloskar is a US$ 1.20 billion engineering conglomerate driving

critical industries. They are century old pioneers in our areas of specialization like

power, construction and mining, agriculture, industry and transport, oil and gas and

environment protection with a range of world-class industrial products and turnkey

services.

5. National Mineral Development Corporation (NMDC) was incorporated

in 1958 as a Government of India fully-owned public enterprise. NMDC is under the

administrative control of the Ministry of Steel, Government of India. Since its

inception, the company has been involved in the exploration of a wide range of

minerals, including iron ore, copper, etc.



6. Tata Steel was founded in 1907 by Mr. J N Tata. It started as Asia's first

integrated private sector steel company and presently is among the top ten global steel

companies with an annual crude steel capacity of nearly 30 million tones per annum

(MTPA). It is now the world's second-most geographically-diversified steel producer.

7. Rashtriya Ispat Nigam Ltd (RINL) is the corporate entity of

Visakhapatnam Steel Plant and is a Navratna PSE under the Ministry of Steel,

8. Jindal South West Steel or JSW Steel is the flagship company of the JSW

Group. Originally starting off from a single steel mill in 1982, JSW steel is now a

US$ 9 billion global conglomerate spread over six locations in India and with a

footprint that extends to the US, South America and Africa.

9. Steel Authority of India Ltd (SAIL) is the leading steel-making company

in the country. It is fully integrated iron and steel maker, producing both basic and

special steels for domestic construction, engineering, power, railway, automotive and

defense industries and for sale in export markets. SAIL is also among the seven

Maharatnas of the country.

10. Jindal Steel and Power Ltd Jindal Steel and Power Ltd (JSPL) is one

of India's major steel producers with a significant presence in sectors like mining,

power generation and infrastructure. With an annual turnover of over US$ 3.6 billion,

JSPL is a part of the US$ 18 billion diversified O P Jindal Group.



1.5 MICHAEL E. PORTERS ANALYSIS OF TATA STEEL

Porter five forces analysis is a framework to analyze the level of competition within an

industry and business strategy development. It draws upon industrial organization (IO)

economics to derive five forces that determine the competitive intensity and therefore

attractiveness of an Industry. Attractiveness in this context refers to the overall industry

profitability. An "unattractive" industry is one in which the combination of these five forces

acts to drive down overall profitability. A very unattractive industry would be one

approaching "pure competition", in which available profits for all firms are driven to normal

profit. This analysis is associated with its principal innovator Michael E. Porter of Harvard

University.

Porter referred to these forces as the micro environment, to contrast it with the more general

term macro environment. They consist of those forces close to a company that affect its

ability to serve its customers and make a profit. A change in any of the forces normally

requires a business unit to re-assess the marketplace given the overall change in industry

information.

The overall industry attractiveness does not imply that every firm in the industry will return

the same profitability. Firms are able to apply their core competencies, business model or

network to achieve a profit above the industry average. A clear example of this is the airline

Industry. As an industry, profitability is low and yet individual companies, by applying

unique



Business models, have been able to make a return in excess of the industry average. Porter’s

five forces include - three forces from 'horizontal' competition: the threat of substitute

products or services, the threat of established rivals, and the threat of new entrants; and two

forces from 'vertical' competition: the bargaining power of suppliers and the bargaining

power of customers.

In this article, we have analyzed the domestic steel sector through Michael Porter's five force

model so as to understand the competitiveness of the sector.

1.5.1 COMPETITION

It is medium in the domestic steel industry as demand still exceeds the supply. India is a net

importer of steel. However, a threat from dumping of cheaper products does exist.

1.5.2 BARRIERS TO ENTRY

We believe that the barriers to entry are medium. Following are the factors that vindicate our

view.

1. Capital Requirement: Steel industry is a capital intensive business. It is estimated that to

set up 1 mtpa capacity of integrated steel plant, it requires between Rs 25 bn to Rs 30 bn

depending upon the location of the plant and technology used.

2. Economies of scale: As far as the sector forces go, scale of operation does matter. Benefits

of economies of scale are derived in the form of lower costs, R& D expenses and better

bargaining power while sourcing raw materials. It may be noted that those steel companies,

which are integrated, have their own mines for key raw materials such as iron ore and coal

and this protects them for the potential threat for new entrants to a significant extent.

3. Government Policy: The government has a favorable policy for steel manufacturers.

However, there are certain discrepancies involved in allocation of iron ore mines and land

acquisitions. Furthermore, the regulatory clearances and other issues are some of the major

problems for the new entrants.

4. Product differentiation: Steel has very low barriers in terms of product differentiation as

it doesn't fall into the luxury or specialty goods and thus does not have any substantial price

difference. However, certain companies like Tata Steel still enjoy a premium for their

products



because of its quality and its brand value created more than 100 years back. Bargaining

power of buyers: Unlike the FMCG or retail sectors, the buyers have a low bargaining power.

However, the government may curb or put a ceiling on prices if it feels the need to do so. The

steel companies either sell the steel directly to the user industries or through their own

distribution networks. Some companies also do exports.

1.5.3. BARGAINING POWER OF SUPPLIERS

The bargaining power of suppliers is low for the fully integrated steel plant like Tata Steel, as

they have their own mines of key raw material like iron ore coal. However, those who are

non-integrated or semi integrated has to depend on suppliers. An example could be SAIL,

which imports coking coal.

1.5.4 BARGAINING POWER OF BUYERS

Bargaining power of buyers is moderate as there are few players in this industry and for Tata

Steel as the industry is very competitive and due to globalisation more and more intruders are

Prompting to invest in India and the major competitors are also looking for the opportunity to

grab the business so buying power for the buyers is moderate.

1.5.5 THREAT OF SUBSTITUTE

It is medium to low. Although usage of aluminum has been rising continuously in the

automobile and consumer durables sectors, it still does not pose any significant threat to steel

as the latter cannot be replaced completely and the cost differential is also very high

---------------------------------------------xxxxxxxxxxxxxxxx--------------------------------------------------



CHAPTER II

COMPANY ANALYSIS

2. COMPANY PROFILEM.S RAMAIAH INSTITUTE OF MANAGEMENT 19


2.1 ABOUT THE TATA STEEL LTD.

Established in 1907, TATA STEEL LTD is among the top ten global steel companies with an

annual crude steel capacity of over 28 million tons per annum (mtpa). It is now one of the

world's most geographically-diversified steel producers, with operations in 26 countries and a

commercial presence in over 50 countries.

TATA Steel's larger production facilities include those in India, the UK, Netherlands,

Thailand, Singapore, China and Australia. Operating companies within the group include

Tata Steel Europe Limited (formerly known as Corus), NatSteel, and Tata Steel Thailand

(formerly millennium steel).

Backed by 100 glorious years of experience in steel making, Tata Steel is the world's 6th

largest steel company with an existing annual crude steel production capacity of 30 Million

Tones Per Annum (MTPA). Established in 1907, it is the first integrated steel plant in Asia

and is now the world's second most geographically diversified steel producer and a Fortune

500 Company.

Tata Steel has a balanced global presence in over 50 developed European and fast growing

Asian markets, with manufacturing units in 26 countries.

It was the vision of the founder, Jamsetji Nusserwanji Tata, that on 27th February, 1908, the

first stake was driven into the soil of Sakchi. His vision helped Tata Steel overcome several

periods of adversity and strive to improve against all odds.

Tata Steel's Jamshedpur (India) Works has a crude steel production capacity of 6.8 MTPA

which is slated to increase to 10 MTPA by 2010. The company also has proposed three M.S RAMAIAH INSTITUTE OF MANAGEMENT 20


Greenfield steel projects in the states of Jharkhand, Odisha and Chhattisgarh in India with

additional capacity of 23 MTPA and a Greenfield project in Vietnam.

Through investments in Corus, Millennium Steel (renamed Tata Steel Thailand) and NatSteel

Holdings, Singapore, Tata Steel has created a manufacturing and marketing network in

Europe, South East Asia and pacific-rim countries. Corus, which manufactured over 20

MTPA of steel in 2008, has operations in the UK, the Netherlands, Germany, France,

Norway, and Belgium.

Tata Steel, through its joint venture with Tata BlueScope Steel Limited, has also entered the

steel building and construction applications market.

The iron ore mines and collieries in India give the Company a distinct advantage in raw

material sourcing. Tata Steel is also striving towards raw materials security through joint

ventures in Thailand, Australia, Mozambique, Ivory Coast (West Africa) and Oman. Tata

Steel has signed an agreement with Steel Authority of India Limited to establish a 50:50 joint

venture company for coal mining in India. Also

Tata Steel has brought 19.9% stake in New York Millennium Capital Corporation, Canada

for iron ore mining.

Tata Steel India is the first integrated steel company in the world, outside Japan, to be

awarded the Deming Application Prize 2008 for excellence in Total Quality Management.

2.1.1 VISION OF THE COMPANY

We aspire to be the global steel industry benchmark for

Value Creation and Corporate Citizenship.

2.1.2 MISSION OF THE COMPANY

Consistent with the vision and values of the founder Jamsetji Tata, Tata Steel strives to

strengthen India's Industrial base through the effective utilisation of staff and materials. The

means envisaged to achieve this high technology and productivity, consistent with modern

management practices.Tata steel recognises that while honesty and integrity are the essential

ingredients of a strong and stable enterprise, profitability provide the main spark for

economic



activity. Overall, the company seeks to scale heights of excellence in all that it does in an

atmosphere free from fear, and thereby reaffirms its faith in democratic values.

2.1.3 STRATEGIC OBJECTIVES OF TATA STEEL

A key to address the demands of the future.

Making giant strides towards commissioning.

Achieving growth with sustainability.

2.1.4 QUALITY POLICY OF TATA STEEL

• Tata Steel is an equal opportunity employer.

• Tata Steel recognises that its people are the primary source of its competitiveness.

• It will pursue management practices designed to enrich the quality of life of its

employees, develop their potential and maximize their productivity.

• It will aim at ensuring transparency, fairness and equality in all its dealings with its

employees.

• Tata Steel strive continuously to foster a climate of openness, mutual fund and team

work.

• In the process, Tata steel shall strive to be the employer of choice by attracting the

best available talent and ensuring a cosmopolitan workforce.

2.2 ENVIRONMENT2.2.1 INTERNAL ENVIRONMENT

Tata Steel reaffirms its commitment to provide safe work place and clean environment to its

employees and other stakeholders as an integral part of its philosophy and values. We will

continually enhance our Environmental, Occupational Health & Safety (EHS) performance

iN

Our activities, products and services through a structured EHS management framework.

Towards this commitment, we shall:

Establish and achieve EHS objectives and targets



Ensure compliance with applicable EHS legislation and other requirement and

go beyond .

Conserve natural resources and energy by constantly seeking to reduce

consumption and promoting waste avoidance and recycling measures

Eliminate, minimize and/ or control adverse environmental impacts and

occupational health and safety risks by adopting appropriate ‘state-of-art’

technology and the best EHS management practices at all levels and

functions.

Enhance awareness, skill and competence of our employees and contractors

so as to enable them to demonstrate their involvement, responsibility and

accountability for sound EHS performance.

2.2.2 External Environment

TATA STEEL ltd enjoys active demand in the International as well as domestic markets.

These products are continuously demanded worldwide, whole of the year.

The customers are willing to pay for quality products

The sales of this sectors were $40 billion in the past year.

2.2.3 Economic

Tata Steel ltd is influenced by the macro-economic factors. There has been a change in

macro-economic factors of India and tata steel is influenced by these factors. The increase in

taxes has an adverse effect on the company’s revenue. Government of India is committed to

deregulate and liberalize industry through privatization of state-owned companies.

2.2.4 International

Tata Tiscon partners with international manufactures.

Tata Tiscon have signed agreements with world’s leading companies to increase

business by updating market needs and fulfilling them.

Tata Tiscon shares are sold internationally.

2.3 MARKETING



2.3.1 PRODUCT PORTFOLIO

a)Raw products: With a century of experience in sourcing raw material through scientific

research and development mining. TATA STEEL’s three main areas of raw material,

operation are iron-ore, chromites and coal. The company's long term strategy has been

designed to have greater control over raw material.

b) Agricultural implements - Tata Steel manufactures superior quality agricultural

implements through its Agrico Division from Tata High Carbon Steel, after using a single

piece by forging. The high quality of the products makes them the first choice in agricultural

equipment procurement both in the public and private sectors alike.

c) Flat products - Galvanized corrugated sheets under brand name Tata Shaktee Steelium,

another product of the Flat Products Division happens to be the world's first branded Cold

Rolled Steel and has a strong presence in the retail segment through exclusive shops called

Steelium zones.

d) Long Products- Thermo Mechanically Treated (TMT) rebars from the Long Products

Division are produced under the brand name "TISCON" and are the first of its kind to have

been introduced in India. Tisco has been the first rebar in the country to be awarded the

'Super Brand' status in the construction rebars category.



e) Tubes- Pipes manufactured by the company's strategy business unit TATA TUBES, is the

most prominent brand in the industry today which is related through a wide distribution

network. A deeply thought out branding exercise was under taken in order to unleash the

power of the 'TATA PIPES' brand in the wielded steel. The tube division's main works is

situated at Jamshedpur and the marketing Head Office is in Kolkata.

Its three main lines of business are:-

• Commercial Tubes- For the conveyance segments, sold under the brand name of "Tata

Pipes".

• Structural Tubes- For the construction segment, sold under the brand name of "Tata

Structure".

• Precision Tubes- For the Auto, Boiler and Engineering segments.

f) Wires - Steel Wires under the brand name Tata Wiron comprise 30% of market share of the

organized wire market in India. A wide range of wires manufactured by Tata Steel's wire

Market in India. A wide range of wires manufactured by TATA STEEL's wire division cater

to the needs of the various industry segments such as automobiles, infrastructure, power and

General engineering. The products are well established across the markets of Europe, USA,

Middle East Asia, Australia, South Asia and Asia-Far East. The range includes:

➢ Auto segment (Tyre Bead Wire, Spring Wire, Spoke Wire, Ball Bearing Wire)

➢ Construction Segment (LRPC,PC Wires)

➢ Power Segment (Cable armour, ACSR)

➢ Textile Industry (Card Clothing Wire)

➢ Galvanized Wires (Farming/Fencing0



g) BEARING - A wide variety of bearing and auto assemblies are manufactured at TATA

STEEL at its bearing division with a production capacity of 30 million bearing numbers per

annum, Tata’s bearing and auto components happen to be the preferred choice of the key

players in the targeted industry segment. The product range includes:

➢ Ball Bearings

➢ Tapered Roller Bearings

➢ Magneto Bearings

➢ Double Row Angular Contact Bearings

➢ Clutch Release Assemblies

➢ Fan Support Assemblies

➢ Cylindrical Roller Bearings

2.3.2 DISTRIBUTION CHANNEL OF TATA STEEL

1. G C Sheets: Traditionally G C sheets were considered as a commodity. Over time, TISCO

has succeeded in differentiating its product and becoming a market leader. Presently it has

32% market share in the G C sheets industry. The company serves a wide variety of

consumers, ranging from reputed contractors to retail users from the private sector

organization to the public sector undertakings. These consumers can be classified into 3

major groups:

a. Government,

b .Retailer (B TO C),

c. Private sector consumers (B TO B).

To cater to the needs of all its consumers, the company does both (B to B selling) and retail

outlets (B to C selling). Bulk orders come under direct selling and small order from retail



Outlets. Tata steel has selected 28 distributors in different location across India. Every

distributor is given 2 days training session, after which they become confident about the

product and learn how to differentiate its product from its competitor product. Aggressive

distribution strategy needs to be adopted for covering large rural area. Distributors keep

active sales force to cover all the retailers in their geographical area. Their sales force visits

different rural and urban areas to attract retailers so that they can maximize their sales. Also,

the sales force comes up with attractive schemes for the retailers to help them achieve their

target sales. Dealers keep RSU vans which is used for transportation and advertising. All the

distributors have upgraded warehouse with weighing machine.

Tata steel segments its retailers in 4 categories:

1. The STAR.

2. The CHALLENGER.

3. The FRIEND.

4. The DOG.

In the diagram below we have the potential of the retailer to meet sales targets in y axis and

the retailer’s loyalty in the x axis.

Star – high potential and high loyalty

Challenge – high potential but low loyalty

Friend – high loyalty but low potential

Dog – low potential and low loyalty

POTENTIAL

LOYALTY


CHALLENGE STAR

DOGS FRIENDLY


Tata Shakti has 5000 retailer across India. It has 683 retailers in Maharashtra. They had

classified its retailer on the basis of potential and loyalty. They had offered different schemes

to retailer according to their sales. They offer great discount for their star retailer, so it act as

a motivator for the challenge retailers to come in star segment. Channel capability can be

built by deployment of effective sales force and by ROI guarantee schemes for retailers.

Stock points are located at convenient locations which are easily assessable by customers.

They follow a simple philosophy for distribution: To create a Professional distribution

through an organized retail network focused on servicing natural local market that captures

value of brand.

Tata sells about 40 per cent of its total flat products, both hot-rolled and cold rolled products,

through the distribution channel while the remaining 60 per cent is directly sold to customers.

2.3.3 MARKETING MIX OF TATA STEEL

Marketing is the process by which a product or service originates and is then priced,

promoted, and distributed to consumers. The principal marketing functions involve market

research and product development, design, and testing. It is the business activity of presenting

products or services in such a way as to make them desirable. One has to consider promotion

that is balanced with a suitable product available at a reasonable price, provided at all places

to maximize the sale of one’s product.

MARKETING MIX

PRODUCT PRICE PROMOTION PLACE

Brand Pricing Strategy Personal Selling Channels of

Distributions

Packaging Pricing & Quality Advertising Physical Distribution

Innovations Price & Alterations Public Relations Wholesaler & Retailers

Quality Discounts

1. PRODUCT (Brand, Packaging, Innovations, Quality) :



a. Brand: Advertising is often used to make consumers aware of a product’s special

low price or its benefits. But an even more important function of advertising is to

create an image that consumers associate with a product, known as the brand

image. The brand image goes far beyond the functional characteristics of the

product. The products of Tata Motors have many special characteristics to them,

but when consumers think of it, they not only think of its features, but they may

also associate it with quality, performance, and class. All of these meanings have

been added to the product by advertising. Consumers frequently buy the product

not only for its functional characteristics but also because they want to be

identified with the image associated with the brand. Tata Motors have been

successful in creating and maintaining a professional brand image.

b. Packaging: A vehicle cannot have a material packaging. Here, packaging refers

to and effective assembly of features. Tata Motors provide many innovative

features to suit the target customers and the product. E.g. Tata Safari Dicor has

‘Reverse Guide System’ which includes a weather-proof camera to help the driver

while reversing the vehicle.

c. Innovations: The various motives behind buying an automobile are Need,

Prestige, Comfort, Fashion, Jealousy and Novelty. The R & D Department

continuously strives to bring new innovations in their product. Tatas have an

industrial experience of over 100 years and they are well known with the

Psychology of Indian customers, who desire more at less price. This experience

has helped them to develop products which fulfill the expectations of Indian

consumers.

d. Quality Control: Tata Motors have their Quality Control standards and the QC

Dept. ensures that the customer does not face any inconveniences of a defective

product.

2. PRICE (Pricing Strategy, Alterations, Discounts)

a. Pricing Strategy: The prices are fixed keeping in mind a number of factors. As

told by Mr. Desai, prices have to be at par with the prices of the competitors. Tata

Motors give a relative price advantage as compares to its competitors. The various

Determinants of price are:

i. Market ConditionM.S RAMAIAH INSTITUTE OF MANAGEMENT 29


ii. Costs incurred

iii. Profit percentage desired by the Co.

iv. Dealer Profit

b. Alterations: The Company does not allow any alterations to any of the features of the

product. If there is an alteration which affects the performance of the engine, then the

warranty becomes void. However, there may be alterations in the accessories, if desired by

the customer.

c. Discounts: Discounts are decided by the Co. every month. Any further discounts made

from the profits of the dealer. However, the Co. may compensate the dealer for the discounts

allowed to a certain extent.

3. PROMOTION (Personal Selling, Advertising, Sales Promotion, Public Relations)

a. Personal Selling: There is minimal personal selling involved. The Sales Officers at the

dealerships collect prospective customer databases and perform cold calling to attract

customers.

b. Advertising: Advertising is a form of commercial mass communication designed to

promote the sale of a product or service. Tata Motors is responsible for the advertising of its

products. The dealer does play any role in the advertising. The various media used for

advertising are T.V., Newspapers, Magazines, Hoardings, and Internet etc. The dealer

conducts point-of-purchase displays to advertise the products. The advertisements done by

the Co. help the dealer to capitalize on the market.

c. Sales Promotion: The purpose of sales promotion is to supplement and coordinate

advertising and personal selling; Sales promotions are designed to persuade consumers to

purchase immediately by providing special incentives such as cash rebates, prizes, extra

product, or gifts. The Co. conducts intensive sales promotion during festivals such as festive

discounts during Diwali.

d. Public Relations : Public Relations is a management function that creates, develops, and

carries out policies and programs to influence public opinion or public reaction about an idea,

a product, or an organization. The Co. takes serious measures to maintain good public

relations. The Co. follows business ethics to ensure that the customer is satisfied and receives

good service whenever and wherever he desires.

4. PLACE (Channels of Distribution, Physical Distribution)



a. Channels of Distribution: In case of vehicles, dealership method of distribution and sales

is generally adopted. Tata Motors have also adopted dealership method of distribution of

its products. The dealers purchase products from the Co. at a negotiated price. The MRP is

fixed by the Co. and the dealer gets a profit within these prices. As the Co. deals in

commercial and passenger vehicles, there may be a single or distinct dealerships to market

its commercial and passenger vehicles in a town. However, if there is a single dealership

appointed, then the commercial and passenger vehicles are managed under Commercial

Vehicles Dept. and Passenger Vehicles Dept. respectively. Tata Motors have contracts

with the Government of India and it supplies buses and passenger vehicles, in some cases,

to the Govt. Sometimes, bulk quantities of vehicles are ordered by a Govt. Dept. or a

private company. The sales, distribution and billing of these are looked after by the Co.

itself.

b. Physical Distribution: The commercial vehicles are manufactured at Jamshedpur,

Lucknow and Pantnagar whereas the passenger vehicles are manufactured at Pune plant.

From the plant, the finished product is transported to the dealerships. The nation-wide

dealership, sales, services and spare parts network comprises over 2,000 touch points. The

dealerships are strategically located in the target and potential markets to ensure efficient

and timely availability of its products in the market.

2.3.4 MARKET SHARE COMPETITION

Table 2.1Name Last Price Market Cap.

(Rs. cr.)Sales

TurnoverNet Profit Total Assets

Tata Steel 296.30 28,777.11 41,785.00 6,439.12 87,274.77

SAIL 60.10 24,824.49 45,710.78 2,092.68 66,933.05

JSW Steel 871.45 21,064.87 46,087.32 2,166.48 49,259.16

Visa Steel 16.55 182.05 922.16 -241.44 2,690.73

Manaksia Steels 1.00 6.55 - - -

2.4 Customers of Tata Steel ltdM.S RAMAIAH INSTITUTE OF MANAGEMENT 31

http://www.moneycontrol.com/india/stockpricequote/steellarge/manaksiasteels/MS28

http://www.moneycontrol.com/india/stockpricequote/steellarge/visasteel/VS15

http://www.moneycontrol.com/india/stockpricequote/steellarge/jswsteel/JSW01

http://www.moneycontrol.com/india/stockpricequote/steellarge/steelauthorityindia/SAI

http://www.moneycontrol.com/india/stockpricequote/steellarge/tatasteel/TIS


Domestic customers

Tinplate Company of India Lt

MECON Ltd

Usha Martin Limited

Salem Steel

Concast

2.5Competitors of Tata Steel

1. SAIL (STEEL AUTHORITY OF INDIA LIMITED)

2. JSW STEEL LTD

3. VISA STEEL LTD



4. ESSAR STEEL LTD

5. ELESCTRO STEEL STEELS LTD

6. OCL IRON AND STEEL LTD

7. TECHNO CRAFT INDUSTRIES LTD

8. GALLANTISPAT LTD

9. STEEL EXCHANGE INDIA LTD

10.ARCELOR MITTAL

2.6 TechnologyTISCO rolls steel power with SAP technology SAP enables seamless remodeling of Tata

Steel from product-driven to a customer-driven enterprise of the Internet economy "Implementing any ERP system is a challenge for an organization because of the declining

success rate of ERP implementations world-wide. The challenge is compounded if the ERP

provider is a world leader - SAP"

"Post the introduction of the SAP solution, the results have been terrific. The company has

spent close to Rs 40 crore on SAP implementation, and has already saved Rs 33 crore"

Choosing the platform and technology

The management at Tata Steel wanted the software to seamlessly integrate with its existing

information system and further provide compatibility with its future implementations. After

anin-depth study of functionality, cost, time, compatibility, esteem, operability, support and

future organizational requirements was done, SAP topped the list of contenders.

The implementation of SAP software was associated with certain strategic goals in mind. With

this implementation, TISCO wanted to bring forth a culture of continuous learning and

change. This would enable TISCO to achieve a world-class status for its products and services

and

strengthen its leadership position in the industry. Besides this, TISCO also wanted the software

to result in quick decision-making, transparency and credibility of data and improve

responsiveness to customers across all areas.



Achieving Business Agility through SAP

Marching ahead, Web enabling of SAP R/3 is on the cards. On the surface, it means it would

allow anyone to access our SAP R/3 over the Internet. But beneath it, the implications are

tremendous, as it would result in sharing of information with enterprise accounts and key

customers. The success in Marketing and Sales has prompted a re-visit of the existing system in

the works and a detailed rollout is expected as below.

Phase I - To Extend SAP in Works with FI, CO, MM, PP & QM

Phase II - To implement SAP modules such as Asset Management & Budget

management sub-modules of FICO, Plant maintenance, Human Resources,

Production Optimizer (such as SAP APO)

Phase III - SEM (Strategic Enterprise Management)

The company also plans to adopt the mySAP Customer Relationship Management solution to

enhance its customer relationships in the near term and eventually realize its dream of a

becoming the most efficient and competitive company in the world in its vertical

2.7 HUMAN RESOURCE2.7.1 SENIOR MANAGEMENT AS OF MAY 25, 2011

Mr. Cyrus P Mistry

Chairman, Not – independent, non -executive

H. M Renrurkar Managing director

Dr Karl Ulrich KoehlerManaging director and chief executive officer.

Koushik ChatterjeeGroup Chief Financial Officer.

Anand SenVice president (TQM and Shared Service) TSL

Theo Henrar

Director (sales and marketing) TSL 2.7.2 Department and functions



Functions performed by the division and the reports provided to the top management

includes:

✓ Monthly Profit Statement

✓ Monthly, Quarterly & Annual Reports

✓ Decision Support System

✓ Payment of Wages, Salaries and other due to employees

✓ Various analysis

✓ Payment to vendors

Group and Sections of Finance & Accounts Department

The whole section of finance in Jamshedpur division of TATA STEEL is divided into five

sub sections:

• CASH OFFICE

• FINANCE AND COST

• PAYROLL ACCOUNTS

• PURCHASE AND CAPITAL GROUP

• SALES AND INDIRECT TAXATION

Debtors are dealt by sales and Indirect Taxation group. Everything related to debtors is

termed as sundry debtors work.

Sales and Indirect Group is responsible for activities such as:

• FREIGHT-OUTWARD AND INWARD - ROAD AND RAIL

• INVOICE

Indirect Taxation matters - Excise and sales tax. It is also related to the post sales. Activities

like debtors and Town Accounting. It comprises of the following section:

• EXCISE SECTION

• FREIGHT SECTION

• TOWN DEBTORS SECTION

• SUNDRY DEBTORS SECTION

Market sector

✓ AUTOMOTIVEM.S RAMAIAH INSTITUTE OF MANAGEMENT 35


✓ CONSTRUCTION

✓ CONSUMER GOODS

✓ ENGINEERING

✓ PACKAGING

✓ LIFTING AND EXCAVATION

✓ ENERGY AND POWER

✓ AEROSPACE

✓ SHIPBUILDING

✓ RAIL

✓ DEFENCE AND SECURITY

2.7.3 Staff strength NUMBER OF EMPLOYEES (80931 AS ON 31ST MARCH)

2.7.4 Recruitment

Through 2008-2009, the Tata Steel Group has continued to demonstrate that the recruitment

of the best of talent and the engagement of its employees is an asset through both high and

low demand cycles in the industry.

The Tata Steel Management Trainee Programme and the Corus Graduate Programme

continue to attract and offer exciting career options to young engineers who are from amongst

the best colleges of the country. The Group has continued the recruitment of apprentices,

graduates and targeted external middle and senior management staff to meet the current need

and prepare the bench strength for future operations.

2.7.5 Training and DevelopmentThe Group has continued to invest in and improve its managerial and technical capabilities

through the internal development of its own employees across Europe, India and South East

Asia

To bridge functional skill gaps and to identify candidates for focused learning in line with the

current and future needs of Tata Steel, a scheme called ‘Directed Learning Initiatives’ was

introduced in Tata Steel. The emphasis was to create a pool of experts in different technical M.S RAMAIAH INSTITUTE OF MANAGEMENT 36


areas. Apart from creating specialists, the policy also focusses on managerial learning which

consists of modular programmes with tie-ups with various management institutes.

With a view to augment the technical capabilities of the employees, a pilot programme in line

with the Technical Competency Assessment System was introduced in Tata Steel. Based on

the results, the learnings from the programme will be introduced to the rest of the

organisation.

The Performance Improvement Committee has continued to focus on improving both

knowledge management and the adoption of best practices across the Tata Steel Group. This

has benefitted TSE alongside the other operations of Tata Steel, NatSteel and Tata Steel

Thailand.

During the year, a greater focus was assigned to the ‘On-the-Job Learning’ for executives.

This is being offered through cross functional assignment/taskforce, role

enhancement/enrichment

and improvement Initiatives. The executives were also encouraged to undertake special

projects arising from their work assignments which had focused measures and deliverables.

2.7.6 Appraisal and Retention practicesIt is a fundamental principal of the Tata Steel Group that all the employees across the globe

are compensated fairly. Last year, like the previous years, compensation was based on market

benchmarking to ensure that Tata Steel remains an attractive and competitive employer in the

market place. Throughout the year, greater synergy was established between TSE, Tata Steel

India and the South East Asian operations. This included secondment of employees across

geographies. The Performance Improvement Committee has improved both the Knowledge

Management and the Adoption of Best Practices Initiatives across the Tata Steel Group and

this has benefitted TSE alongside the other operations of Tata Steel.

2.7.7 Measurement metrics.

As part of the global talent management initiatives, the year saw a greater movement of

executives between Tata Steel India, Tata Steel Europe, NatSteel and Tata Steel Thailand to

enable the cross pollination of ideas and practices and also provide executives with a global

Experience. The Management Trainee Programme has been re-designed to include special

modules of six months each in the areas of TQM, engineering and projects, and safety. This

will help the fresh graduate engineers prepare in a better way, for future assignments



2.8 Operations2.8.1 Functions and Processes

Design and Automation- Over a period of time Automation has evolved from

‘modifications, enhancements and up gradation to focusing on providing ‘Solution Design,

Product Development and Product Life Cycle management’. Globally, Tata Steel production

is controlled and monitored through highly automated, computer-based systems. Such

processes include automatic sequencing of equipment, material detection and tracking, strip

rolling, furnaces, boilers, material coating, water cooling and many more. All these processes

are

Measured by on-line instrumentation, and controlled through advanced industrial computers

which themselves are networked to operator screens, databases, and setup models and data

analysis software.

Process Control & Automation (PC&A) engineers use their knowledge of software,

application computers, and control and instrumentation technology to maintain optimum

performance of plants. A highly accomplished team of specialist engineers, software experts,

and professionals in various disciplines (laser, robotics, instrumentation, mathematical

modelling and simulation) is involved in producing designs and engineering drawings for all

aspects of planning, manufacturing, civil, structural and electrical or mechanical engineering

projects. The PC&A Engineers specialize in monitoring, maintaining and developing

equipment to its optimum performance and reliability to meet customer and business

requirements.

The Automation Division of Tata Steel in India is the central agency for design, development,

integration and implementation of Process Automation for the Company’s Indian operations

and is also an international supplier of high level automation for the metal industry. It is

situated in the premises of the steel plant at Jamshedpur in its highly advanced Automation

Development Center and also in various plant sites developing and implementing process automation

systems. Research and Development-The Group's advanced Research and Development centers give it the

competitive edge to meet emerging challenges and ensure that the Company always stays on the path

of innovation. Tata Steel combines dedicated customer service with world-class research facilities to

develop and deliver high quality steel products that add value to the customer‘s business. The Group’s M.S RAMAIAH INSTITUTE OF MANAGEMENT 38


research programme comprises programs funded by the separate business units and work on a number

of identified thrust areas that receive corporate funding. The thrust areas also incorporate the projects

that were previously a part of the strategic programme of Tata Steel in Europe. Currently, the Tata

Steel Group has five research centres with over 1000 people involving themselves in R&D activities.

Jamshedpur R&D Centre (India): The Jamshedpur R&D Centre in India was established in

1937 and is one of the oldest industrial R&D centres in the country. Since its inception, this

Centre has played a pivotal role in the development of steel products and process routes that

have given the Company a competitive advantage in local and global markets.

Consulting Services- Tata Steel Europe's business services include providing expertise and

knowledge in a wide range of iron, steel and metals related matter that cover the entire steel

value chain. Tata Steel Consulting also warrants technology developed for Tata Steel's

internal production facilities and processes. Business planning assistance is provided to a

range of industrial sectors, operating independently or along with other groups within the

consulting business and sometimes in alliance with external bodies.

2.9 Finance:Capital Structure (Tata Steel)

Period Instrument Authorized Capital

Issued Capital - P A I D U P -

From To (Rs. cr) (Rs. cr) Shares (nos) Face Value Capital2013 2014 Equity Share 2100 972.13 971215405 10 971.222012 2013 Equity Share 2100 972.13 971215229 10 971.22



2011 2012 Equity Share 2100 972.13 971214450 10 971.212010 2011 Equity Share 2100 960.13 959214450 10 959.212009 2010 Equity Share 1750 888.13 887214196 10 887.212008 2009 Equity Share 1750 731.37 730592471 10 730.59

2.9.1 Capital structure

2.9.2 Financial Ratios of Tata Steel:Table 2.2

Particular 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014Current Assets 10379.2 18162.5 12,819.57 11,504.85 11564.6Current Liabilities 8999.61 11144.9 16,838.49 16,488.65 18,881.78Net Working Capital 1379.59 7017.6 -4018.92 -4983.8 -7317.18Current Ratio 1.15 1.63 0.76 0.70 0.61

2.9.3 Performance Metrics Table 2.3

RATIO 2013 2009(CPM %) 15.84 23.00COMPONENTS 2013 2009SALES (in Rs .Crore) 42317.24 26843.53PAT plus Depreciation 6705.23 6175.14Source: Moneycontrol.com

Interpretation:

We see a decline in the ratio from 2009 to 2013 indicating a decline in the company’s operating performance. This is again due to the decline in company’s ability to generate cash/profit from its sales.

FIGURE 2.1



2.9.4. Balance sheet as at 31st march 2014

Rs. crores

Note Page As at31.03.2013

EQUITY AND LIABILITIES (1) Shareholders'Funds 2 146 (a) Share capital 971.41 971.413 148 (b) Reserves and surplus 60,176.58 54,238.274 150 (2) Hybrid Perpetual Securities 61,147.99 55,209.68 (3) Non-current Liabilities 2,275.00 2,275.005 150 (a) Long-term borrowings 23,808.09 23,565.576 152 (b) Deferred tax liabilities (net) 2,038.98 1,843.747 152 (c) Other long-term liabilities 983.52 380.878 153 (d) Long-term provisions 1,905.05 2,113.42 28,735.64 27,903.60 (4) Current Liabilities 5 150 (a) Short-term borrowings 43.69 70.949 153 (b) Trade payables 8,263.61 6,363.6610 153 (c) Other current liabilities 8,671.67 8,509.798 153 (d) Short-term provisions 1,902.81 1,544.26 18,881.78 16,488.65

ASSETS 1,11,040.41 1,01,876.93

(5) Non -current Assets (a) Fixed assets

11 154 (i) Tangible assets 24,064.43 24,650.5412 155 (ii) Intangible assets 201.32 224.51



(iii) Capital work-in-progress 18,509.40 8,722.29 42,775.15 33,597.3413 156 (b) Non-current investments 52,318.56 49,984.8014 161 (c) Long-term loans and advances 4,080.07 6,574.1515 162 (d) Other non-current assets 302.03 215.79 99,475.81 90,372.08 (6) Current Assets 16 162 (a) Current investments 2,343.24 434.0017 163 (b) Inventories 6,007.81 5,257.9418 163 (c) Trade receivables 770.81 796.9219 163 (d) Cash and bank balances 961.16 2,192.3614 161 (e) Short-term loans and advances 1,299.20 2,207.8320 164 (f) Other current assets 182.38 615.80 11,564.60 11,504.85

1,11,040.41 1,01,876.93

1-49 144 Notes to Balance Sheet and Statement of Profit and Loss

2.10 ORGANISATIONAL HIERA



Mr.CyrusPMistry

Chairman, Not- independent, Non-Executive Director

Mr. Cyrus P. Mistry is the Chairman of Tata Sons. He is a graduate of Civil Engineering from

Imperial College, UK, and has a M.Sc. in Management from London Business School.

Mr.SubodhBhargava

Independent, Non - Executive Director

Mr. Subodh Bhargava is a Mechanical Engineer from the University of Roorkee. He was the

Group Chairman and Chief Executive Officer and on the Board of Eicher Group of

Companies. He is now the Chairman Emeritus of the same group. He is on the Board of Tata

Steel Limited since 2006.

Mr.O.P.Bhatt

Independent, Non-Executive Director

Mr. O. P. Bhatt is a graduate in Science and a post graduate in English Literature (Gold

Medalist). In his last assignment, from July 1, 2006 to March 31, 2011, he was the Chairman,

State Bank Group, which includes State Bank of India, India’s largest commercial bank; five



associate banks in India; five overseas banks; SBI Life, the country’s largest private life

insurer; SBI Capital Markets, India’s leading investment bank; SBI Fund Management; and

other subsidiaries spanning diverse activities

Mr.T.V.Narendran

Managing Director - Tata Steel India and South East Asia

Mr. T.V. Narendran is a Mechanical Engineer from REC (NIT), Trichy. He joined Tata Steel

after completing his MBA from IIM Calcutta in 1988. He is a Chevening Scholar and has

also attended the Advanced Management Programme in CEDEP - INSEAD, Fontainebleau,

France. He became the Managing Director of Tata Steel India and South East Asia on

November 1, 2013

2.11 SWOT ANALYSIS OF TATA STEEL

SWOT ANALYSIS



Strength

1. Raises over 14 million tonnes of ores from its

captive collieries, iron ore mines and quarries

2. Adaptability of company in the fast changing

environment

3. Excellent integration with Corus which has more

than 2000 metallurgists

4. Control over raw materials

5. Economies of scale

6. Strong backing of Tata brand name

7. Operations in 26 countries and a commercial

presence in over 50 countries

Weakness

1. Operational efficiency are not as good as

international leaders

2. Slightly lagging in technological front

Opportunity

1. Newer technologies- The Corex process, The

Hismelt process, Direct iron ore smelting

2. Public private partnership

3. Acquisition of coal blocks in Asia, Africa etc.

Threats

1. Rising coking coal prices

2. India is plagued with violent agitation against land

acquisition

3. Government & regulatory norms

4. International competition

CHAPTER III

Task Accomplished during training



3.1 Roles and Responsibility

3.1.1 Role Description

The role which we were given is to assist the staff member of Tata Steel in Financial

Transaction department in managing the day to day activity and learn about the working

capital management and its practical approach and how important and key factor it is for the

organization to properly maintain the current asset and current liability of the organization.

We also have to learn practical scenario and get the exposure for the holistic market.

From the above we had to work in a team so as to study the positive approach towards the

task assigned and handle it properly with a single aim.

3.1.2 Responsibility assigned

The basic responsibility which we played in the organization was to know the meaning and

uses of Working capital management in an organization and study the balance sheet of the

company and compare it with the major competitor of the organization where we have to find

out the basic indicator such as ratio analysis, cash flow, trend analysis etc of the organization

as well as other major player in the market to compare and analyze the current situation of the

company and scope for betterment.

The Responsibility which we have been assigned was for

1. Detailed study of balance sheet

2. Finding the current position of the company by deriving data from different sources such

as internal source provided by the company and external source such as internet,

websites, surveys done by others etc.

3. Taking out the different Ratio’s to know exactly the current position of the company.

4. Fetching out the ratio from balance sheet of other competitors for comparison.

5. Comparing the data found from the from the above and finding the exact loop holes and

strong points of the company and the current position it holds.

6. Risk associated with the analyzed data from the standard benchmark of Ratio’s.



7. Suggestion to improve the position of the organisation and also help improve the

profitability.

3.2 Description of the task handled

It has already been mentioned above that we have worked out for knowing the working

capital management and its practical uses for which we have to segregate and study the

balance sheet and find out its elements which can be worked out for different analysis.

On day to day basis we have

1. Assisted the staff member in financial and transaction department in daily entry and daily

logistic and stock handling of the organisation.

2. Helped out and studied various law (Mercantile Law) related to financial section in

logistic and payment to the various vendor and customers of Tata Steel.

3. Helped in carrying out the smooth system for payment to the different customers and

different bills related to internal and external resources.

4. We have worked out for detailed study of balance sheet of the organisation in carrying

out the items for study the working capital management of the organisation.

5. How current asset and current liability should be managed properly by the company to

keep the things and financial position of the company in track.

6. Study various ratios of the company in regarding to the working capital management.

7. Study various ratios of other companies / competitors in comparison with the ratios of

Tata Steel.

8. Focused on the footfalls of Tata Steel based on the different analysis.

9. Given suggestion accordingly which was submitted for the rectification on the current

position which is not unto the standard as will appear in the next chapter of the project.

3.3 Contribution to the Organisation

Tata Steel is a big organization and being associated with it was a privilege. There is a

dedicated team in finance department for handling each and everything related to the the risk



associated with Working capital Management, Market discipline, operational risk, etc. We

also took out the ratio analysis and compared it with the other major companies/competitors.

Which has been submitted to our guide Mr. Rahul Sharma, who appreciated the dedication

and promised us to get this issues reach at the top management to get rectified. In the light of

above what we contributed for the organization are:

1. Finding of our project which will be used to know the current scenario of the company

and current position of the company.

2. Suggestion on the problem raised in the finding.

3. Day to day activity work as a employee to the organization for smooth process of work.

4. Contributed in the marketing activity held during the period of internship.

5. Contributed being the volunteer in CSR activity of the company. (Plantation and Lungar

for beggars and poors)

CHAPTER IVANALYSIS OF THE RESEARCH

4.1 Introduction – Conceptual introduction to the research topic



Comparative ratio analysis and working capital management of TATA STEEL LTD with Sail

and Jindal.

4.1.1 Working capital

Fixed Capital: Long term funds required for purchase of fixed assets such as P&M, Land,

Building, Furniture etc. Investments in such type of assets leads to blockage of a part of

capital and this is the reason it is called fixed capital.

Working Capital: These are referred to as short term funds which are necessary for tuning

the day to day business. It includes marketable securities, debtors & inventories and other

current assets.

WORKING Capital = Current Assets – Current Liabilities

Classification of Working Capital

On the basis of time

On the basis of concept

4.2 Research Design

4.2.1 Statement of the problem To analyze the working capital and financial position of the company.

Understanding the company’s balance sheet, ratios, cost sheet of the Tata Steel ltd and

comparative analysis between the Tata Steel, Sail and Jindal.

4.2.2 Objectives of research problem To study the concept and importance of working capital management.

To study the methods and modes of analysis of working capital management.

To analyze and interpret the existing situation of the working capital management.

To compare the position of TATA STEEL LTD with the major steel players of the

world.

To appreciate the areas of achievement and analyze the areas of weakness.

4.2.3 SCOPE OF THE STUDYThe whole project has been made by collecting data through secondary sources. Primary

source stands for that information i.e. collected by direct queries to concern.

To carry out a critical analysis of TATA STEEL LTD. Working capital.

To find out the area of the weakness the existing Tata Steel working capital.M.S RAMAIAH INSTITUTE OF MANAGEMENT 49


To extrapolate the company’s position with the steel industry.

4.2.4 MethodologyThe project is based on descriptive research. The project deals with working capital of Tata

Steel and there has been a lot of research already been done on the topic. I have tried to

understand the functioning of working capital and its impact on the company. The

research also includes comparison between Tata Steel companies and which one of these

is better in its operations with research to working capital.

4.2.4.1 TOOLS AND TECHNIQUES FOR COLLECTION OF DATA:

Data collection method can be broadly classified into:

Secondary Data

Data collected from primary methods or which is the first hand information is known as

primary data. Data collected from secondary methods or which is already available, second

hand data is known as secondary data

SECONDARY SOURCE OF DATA

Annual report

Study of files and other documents.

Different records by the accounts and bill section.

Web sites of Tata Steel Ltd.

Web sites of SEBI, other Steel companies.

Review of previous reports related to the topic.

Study about the topic ‘Working Capital’ from books.

Secondary Data’s were collected by using company website, SEBI website, newsletters,

TMDC library, Annual report and books.

In this I have used secondary data most of which was obtained from internal records of the

company. Usage of secondary data enjoys some advantages but it suffers some limitations.

4.2.4.2 ANALYSIS AND INTERPRETATION

Detailed Analysis of working capital of Tata Steel and other companies have been done.

Along with the interpretation of the calculated Data have also been done. Interpretation of all

the ratios calculated related to working capital has been stated in the project. Relationship

between Net Working Capital has been interpreted.



4.2.4.3 LIMITATIONS

The biggest limitation with respect to the topic was that the internship is based on

secondary data.

The study is limitation to the scope of data provided publically.

The terms of credit policies have not been revealed due to the company rule and

regulations.

As only secondary data is used in this project, it was difficult to determine the

accuracy of the data.

Some amount of data was updated and was not of match use.

4.3 DATA ANALYSIS AND INTERPRETATION

Table 4.1TATA STEEL - COST SHEET

Particulars 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014Raw Material Consumed 5494.74 6244.01 8014.37 9877.4 9678Wages 2361.48 2837.46 3047.26 3608.52 3673Prime Cost(A) 7856 9081 11062 13486 13351Manufacturing Overhead Conversion Charges 1132.79 1192.89 1513.97 1955.19 2004Fuel oil consumed 115.16 153.63 186.44 189.06 207.7repairs to building 29.84 39.84 61.08 85.42 74.46Factory rent 15.54 16.76 30.88 33.63 46.04relining exp 32.45 30.89 28.87 38.49 44.6purchase of power 1268.28 1404.86 1803.72 2321.11 2564.61Insurance 24.63 31.76 36.48 41.77 44.06Freight and handling 1357.27 1540.84 1703.98 2260.76 2755.08M.S RAMAIAH INSTITUTE OF MANAGEMENT 51


Repairs to machinery 978.93 1064.26 1162.95 1381.08 1733.92Consumption of stores and spares 1335.36 1417.26 1693.48 2090.89 2611.23Depreciation and Amortization 1083.18 1146.19 1151.44 1640.38 1928.7Manufacturing Cost 7373.43 8039.18 9373.29 12037.78 14014.4Opening stock of WIP 73.17 158.65 81.19 53.83 65.88Less: Closing stock of WIP 158.65 81.19 53.83 65.88 35.99Total Manufacturing Cost 7287.95 8116.64 9400.65 12025.73 14044.29Administration overhead: Rates & Taxes 236.91 290.73 371.71 423.18 508.61Royalties 275.72 615.01 912.43 1152.43 1129.8Excise duty 81.13 88.8 94.95 134.94 2345.78other expenses 1284.55 1270 2098.84 2150.86 2345.78Less: Transfer to Cap Exp A/C 326.11 198.78 478.23 876.13 1029.92Administration Cost 1552.2 2065.76 2999.7 2985.28 5300.05Cost of Production 16696 19264 23462 28497 32695purchase of semi-Finished goods 169.08 180.2 209.52 453.34 353Opening Stock of finished goods 1361.85 1414.4 1392.51 1639.83 2032.34Less: Closing stock of finished goods 1141.4 1392.51 1639.83 2032.34 2216.14Cost of Good Sold 17085.9 19465.96 23424.18 28557.76 32864.54Commission/Discount/Rebate 82.17 109.36 128.42 142.67 163.98Cost of Sales 17168.07 19575.32 23552.6 28700.43 33028.52Profit 7853.91 9821.03 10380.86 9499 8682.48Net Sales 25021.98 29396.35 33933.46 38199.43 41711

Calculation of Net Sales Revenue from operation 26757.8 31902.14 37005.71 42317.24 46309.34Less: Excise duty 1735.82 2505.79 3072.25 4118 4598.31

Net Sales 25021.98 29396.35 33933.46 38199.24 41711.03 Reconciliation Statement Profit as per cost sheet 7853.91 9821.03 10380.86 9499 8682.48Add: Other income 853.79 790.67 886.43 902.04 787.64Less: Finance charge 1508.4 1300.49 1925.42 1877 1821Provision of wealth tax 1 1.28 1.7 2 2Provision of doubtful debts -16 8.23 5.41 11.15 60.53Profit before Exceptional items and Tax 7214.3 9301.7 9334.76 8510.89 7586.59Exception Items: Profit on sale of non current investment 0 0 511.01 12.33 0



Provision for diminution in the value of investment/doubtful 0 0 0 -686.86 -141.76Less: Tax 2167.5 2436.01 2638.34 2761.06 1032.83Profit After Tax 5046.8 6865.69 6696.42 5062.97 6412

Table 4.2 TATA STEEL-PROFIT AND LOSS STATEMENT

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



Shares in issue (lakhs) 9,712.15 9,712.15 9,712.14 9,592.14 8,872.14Earnings Per Share (Rs) 66.02 52.13 68.95 71.58 56.37Equity Dividend (%) 100.00 80.00 120.00 120.00 80.00Book Value (Rs) 629.60 568.46 541.81 487.55 418.94

Sources Of FundsTotal Share Capital 971.41 971.41 971.41 959.41 887.41Equity Share Capital 971.41 971.41 971.41 959.41 887.41Share Application Money 0.00 0.00 0.00 178.20 0.00Preference Share Capital 0.00 0.00 0.00 0.00 0.00Reserves 60,176.58 54,238.27 51,649.95 45,807.02 36,281.34Networth 61,147.99 55,209.68 52,621.36 46,944.63 37,168.75Secured Loans 4,400.55 4,311.02 4,190.47 3,509.18 2,259.32Unsecured Loans 21,726.23 21,600.49 19,503.35 22,639.00 22,979.88Total Debt 26,126.78 25,911.51 23,693.82 26,148.18 25,239.20Total Liabilities 87,274.77 81,121.19 76,315.18 73,092.81 62,407.95Application Of FundsGross Block 39,019.72 38,056.28 23,081.58 22,497.83 22,306.07Less: Revaluation Reserves 0.00 0.00 0.00 0.00 0.00Less: Accum. Depreciation 14,753.97 13,181.23 11,715.32 10,692.73 10,143.63Net Block 24,265.75 24,875.05 11,366.26 11,805.10 12,162.44Capital Work in Progress 18,509.40 8,722.29 16,058.49 5,612.28 3,843.59Investments 54,661.80 50,418.80 50,282.52 46,564.94 44,979.67Inventories 6,007.81 5,257.94 4,858.99 3,953.76 3,077.75Sundry Debtors 770.81 796.92 904.08 424.02 434.83Cash and Bank Balance 961.16 2,218.11 3,946.99 4,138.78 500.30Total Current Assets 7,739.78 8,272.97 9,710.06 8,516.56 4,012.88Loans and Advances 5,863.68 9,587.82 8,773.73 17,052.84 6,678.55Fixed Deposits 0.00 0.00 0.00 0.00 2,733.84Total CA, Loans & Advances 13,603.46 17,860.79 18,483.79 25,569.40 13,425.27Deferred Credit 0.00 0.00 0.00 0.00 0.00Current Liabilities 19,957.78 17,098.06 15,958.34 12,037.59 8,699.34Provisions 3,807.86 3,657.68 3,917.54 4,421.32 3,303.68Total CL & Provisions 23,765.64 20,755.74 19,875.88 16,458.91 12,003.02Net Current Assets -10,162.8 -2,894.95 -1,392.09 9,110.49 1,422.25Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00( Source: Secondary Data) Table 4.3 TATA STEEL NET WORKING CAPITAL

PARTICULAR 2009-10 2010-11 2011-12 2012-13 2013-14CURRENT ASSETS Sundry debtors 434.83 428.03 904.08 796.92 770.81Inventories 3077.75 3953.76 4858.99 5257.94 6007.81Cash & Bank balance 3234.14 4141.54 3946.99 2,192.36 961.16Other Current assets 0 0 76.09 615.8 182.38



Short term loan and advances 5499.68 6458.94 1829.25 2207.83 1299.2Current investment 0 0 1204.17 434 2343.24TOTAL CURRENT ASSETS (A) 12246.4 14982.27 12819.57 11504.85 11564.6 CURRENT LIABILITIES Provisions 2346.52 2220 2065 1545 1902.81Other current liabilities 0 6263 8799 8504 8671.67Subsidiary company 1515 0 0 0 0Interest accrued but not due 677 0 0 0 0Advances received from customers 335 0 0 0 0Liability towards investors education 40.49 0 0 0 0Sundry creditors 4086.65 4465 5974 6369.91 8263.61Short term Borrowing 0 150 65.62 70.94 43.69 TOTAL CURRENT LIABILITES (B) 9000.66 13098 16903.62 16489.85 18881.78 NET WORKING CAPITAL (A - B) 3245.74 1884.27 -4084.05 -4985 -7317.18

Chart 4.1

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

-10000-5000

05000

10000150002000025000

NET WORKING CAPITAL

TOTAL CURRENT ASSETS TOTAL CURRENT LI-ABILITES NET WORKING CAPITAL

InterpretationThe net working capitals of the company is negative since last 3 years this is due to reduction

in loans and advances which reduces the current asset of the company.

Before 2011 company had positive working capital due to high loans and advances which

increases the current asset of the company.

Negative working capital generally depicts bad liquidity position and reduces the credit

worthiness of the company but this is not held true in case of Tata Steel because the company

enjoys good reputation due to which credit worthiness of the company good.



STEEL AUTHORITY OF INDIA LIMITED (SAIL)

Table 4.4

COST SHEET OF SAIL

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

PRIME COST 22756.99 29699.73 30952.87 29835.68 28850.42 Factory Overhead: Depreciation and Amortisaton expenses 1337.24 1485.8 1567.03 1402.98 1716.09Consumption of Stores & Spares parts 3163.43 3309.75 1779.07 2133.22 2340.03Power and Fuel 3369.35 3597.04 4469.74 4830.44 4942.15Repairs and Maintenance 569.74 670.04 744.31 824.46 931.53Freight Outward 674.28 705.33 696.03 953.12 976.43Handling Expenses of Raw material and Scrap 313.78 387.86 381.45 362.39 476.64Conversion Charges 287.66 330.98 339.67 328.76 277.65Demurrage & Wharfage 65.59 51.79 61.84 55.99 93.72Water Charges & Cess on Water Pollution 44.55 63.39 63.97 76.57 92.75Insurance 4.74 7.14 8.08 16.31 17.06Rent 19.5 17.67 12.65 13.84 24.77 FACTORY COST 32606.85 40326.52 41076.71 40833.76 40739.24ADD: Opening stock of WIP 0 0 1490.51 2014.76 1966.97LESS: Closing stock of WIP 0 0 2004.76 1960.82 2437.42 NET FACTORY COST 32606.85 40326.52 40562.46 40887.7 40268.79 Administrative Overhead Royalty and Cess 261.01 580.44 851.3 976.63 916.51Excise Duty on Inter-Plant Transfer/ Internal Consumption 76.94 181.14 237.27 385.47 461.94Postage, Telegram & Telephone 22.57 17.39 22.73 19.57 18.8Printing & Stationery 11.37 10.76 10.57 10.54 9.77Rates &Taxes 33.3 46.94 44.97 68.51 72.17Security Expenses 236.87 226.44 283.83 321.48 356.05Travelling Expenses 179.08 185.99 191.42 216.8 190.29Training Expenses 16.19 17.71 19.67 26.36 39.55Remuneration to Auditors 3.24 4.22 3.32 3.53 3.71Cost Audit Fee and Reimbursement of Expenses 0.02 0.12 0.3 0.14 0.15Voluntary Retirement compensation 0.05 0 0 0.23 0.01Handling Expenses - finished goods 80 85.98 100.34 122.68 125.79



Miscellaneous 531.12 535.8 252.81 289.79 415.82Directors' Fees 0.19 0.22 0.37 0 0

COST OF PRODUCTION 34058.8 42219.67 42581.36 43329.43 42879.35ADD: Purchase of Stock in Trade 2.79 4.22 4.88 3.21 0.78LESS: Excise Duty on accretion (-)/Depletion to stock -3.56 -119.02 -145.86 -274.81 71.2ADD: Opening stock of finished goods 5817.84 4660.39 4641.57 5641.69 5294LESS: Closing stock of finished goods 4660.39 6132.08 5641.69 7976.53 6534.1 COST OF GOODS SOLD 35222.6 40871.22 41731.98 41272.61 41568.83 Selling & Distribution Overhead Cash Discount (Net) 39.23 40.69 48.89 64.81 75.28Commission to Selling Agents 6.7 6.92 6.39 7.59 7.6Export Sales Expenses 12.13 14.26 24.34 18.37 25.36 COST OF SALES 35280.66 40933.09 41811.6 41363.38 41677.07Profit 5270.72 1785.62 4530.19 3265.32 5021.34Net Sales 40551.38 42718.71 46341.79 44628.7 46698.41

Reconciliation Statement:

Particulars 2009-10 2010-11 2011-12 2012-13 2013-14Profit as per cost sheet 5270.72 1785.62 4530.19 3265.32 5021.34ADD: Other Income 2768.23 2199.96 1622.98 964.44 LESS: Finance Costs 402.01 474.95 677.7 747.66 967.64LESS: Provisions 71.07 48.83 51.01 53.31 198.46LESS: Write - Offs- Miscellaneous 10.33 1.12 1.03 0.34 7.71LESS: Foreign Exchange Fluctuation 0 0 0 0 0ADD/LESS(-): Adjustments pertaining to Earlier Years 23.22 103.7 -10.54 41.53 150.08ADD: Inter Account Adjustments 2553.27 3629.93 0 0 0 Profit Before Tax and Exceptional Items 10132.03 7194.31 5412.89 3469.98 2265.43LESS: Exceptional Items 262.02 229.32 959.12LESS: Tax 3377.66 2289.57 1608.15 1070.31 608.07Profit After Tax 6754.37 4904.74 3542.72 2170.35 2616.48

Table 4.5 PROFIT AND LOSS ACCOUNT OF SAIL

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



Sales Turnover 52,375.70 44,598.26 46,341.79 47,156.25 44,059.72Excise Duty 5,677.29 0.00 0.00 4,621.95 3,463.82Net Sales 46,698.41 44,598.26 46,341.79 42,534.30 40,595.90Other Income 1,840.53 735.12 1,500.13 2,038.97 2,557.00Stock Adjustments -894.63 2,016.09 1,368.51 1,471.69 -1,157.45Total Income 47,644.31 47,349.47 49,210.43 46,044.96 41,995.45Expenditure

Raw Materials 21,611.97 23,334.91 24,804.77 22,642.47 18,611.12Power & Fuel Cost 4,942.15 4,830.44 4,469.74 3,586.07 3,364.30Employee Cost 9,578.51 8,637.20 7,932.05 7,530.24 5,417.00Other Manufacturing Expenses 0.00 0.00 0.00 1,310.00 870.35Selling and Admin Expenses 0.00 0.00 0.00 1,927.46 1,754.02Miscellaneous Expenses 5,752.88 5,197.15 4,458.56 45.42 206.62Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00Total Expenses 41,885.51 41,999.70 41,665.12 37,041.66 30,223.41Operating Profit 3,918.27 4,614.65 6,045.18 6,964.33 9,215.04PBDIT 5,758.80 5,349.77 7,545.31 9,003.30 11,772.04Interest 967.64 747.66 677.70 474.61 402.01PBDT 4,791.16 4,602.11 6,867.61 8,528.69 11,370.03Depreciation 1,716.69 1,402.98 1,567.03 1,482.20 1,337.24Other Written Off 0.00 0.00 0.00 1.12 10.33Profit Before Tax 3,074.47 3,199.13 5,300.58 7,045.37 10,022.46Extra-ordinary items 150.08 41.53 -10.54 163.71 184.80PBT (Post Extra-ord Items) 3,224.55 3,240.66 5,290.04 7,209.08 10,207.26Tax 608.07 1,070.31 1,608.15 2,304.34 3,452.89Reported Net Profit 2,616.48 2,170.35 3,681.89 4,904.74 6,754.37Total Value Addition 20,273.54 18,664.79 16,860.35 14,399.19 11,612.29Preference Dividend 0.00 0.00 0.00 0.00 0.00Equity Dividend 834.35 826.10 826.10 991.30 1,363.03Corporate Dividend Tax 141.67 135.19 134.02 161.15 227.52Per share data (annualised)Shares in issue (lakhs) 41,305.25 41,305.25 41,305.25 41,304.01 41,304.01Earning Per Share (Rs) 6.33 5.25 8.91 11.87 16.35Equity Dividend (%) 20.20 20.00 20.00 24.00 33.00Book Value (Rs) 103.30 99.32 96.38 89.75 80.66(Source: Dion Global Solutions Limited)

Table 4.6BALANCE SHEET OF SAIL

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



Sources Of Funds

Total Share Capital 4,130.53 4,130.53 4,130.53 4,130.40 4,130.40

Equity Share Capital 4,130.53 4,130.53 4,130.53 4,130.40 4,130.40

Share Application Money 0.00 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves 38,535.82 36,894.11 35,680.79 32,939.07 29,186.30

Net worth 42,666.35 41,024.64 39,811.32 37,069.47 33,316.70

Secured Loans 11,560.89 8,746.16 7,481.91 11,813.91 7,755.90

Unsecured Loans 12,705.81 12,754.41 8,615.30 8,351.58 8,755.35

Total Debt 24,266.70 21,500.57 16,097.21 20,165.49 16,511.25

Total Liabilities 66,933.05 62,525.21 55,908.53 57,234.96 49,827.95

Application Of Funds

Gross Block 53,874.36 42,461.10 41,367.19 38,260.60 35,382.49

Less: Revaluation Reserves 0.00 0.00 0.00 0.00 0.00

Less: Accum. Depreciation 27,103.71 25,683.70 24,239.81 23,180.54 21,780.91

Net Block 26,770.65 16,777.40 17,127.38 15,080.06 13,601.58

Capital Work in Progress 33,650.54 35,890.85 28,049.14 22,228.43 15,039.83

Investments 720.20 718.36 684.94 684.14 668.83

Inventories 15,200.82 16,008.21 13,742.37 11,302.79 9,027.46

Investments 720.20 718.36 684.94 684.14 668.83

Inventories 15,200.82 16,008.21 13,742.37 11,302.79 9,027.46

Sundry Debtors 5,481.98 4,424.18 4,761.32 4,161.30 3,493.90

Cash and Bank Balance 2,855.95 3,850.35 6,415.70 143.99 230.76

Total Current Assets 23,538.75 24,282.74 24,919.39 15,608.08 12,752.12

Loans and Advances 7,281.75 6,549.11 5,556.17 6,175.81 5,155.32

Fixed Deposits 0.00 0.00 0.00 17,334.87 22,205.61

Total CA, Loans & Advances 30,820.50 30,831.85 30,475.56 39,118.76 40,113.05

Deferred Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 19,105.61 14,976.39 14,606.26 13,994.33 13,383.67

Provisions 5,923.23 6,716.86 5,822.23 5,882.10 6,211.67



Total CL & Provisions 25,028.84 21,693.25 20,428.49 19,876.43 19,595.34

Net Current Assets 5,791.66 9,138.60 10,047.07 19,242.33 20,517.71

Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00

Total Assets 66,933.05 62,525.21 55,908.53 57,234.96 49,827.95

Contingent Liabilities 35,228.85 31,283.83 31,836.92 30,519.80 28,382.46Book Value (Rs) 103.30 99.32 96.38 89.75 80.66(Source : Dion Global Solutions Limited)

Table 4.7 WORKING CAPITAL OF SAIL


Particulars 2009-10 2010-11 2011-12 2012-13 2013-14CURRENT ASSETSInventories:Raw Materials 2656.49 3065.56 3865.4 3531.03 3521.31Finished & Semi finished goods 4660.39 6132.08 7646.45 9937.35 8971.52Stores & Spares 1710.58 2105.15 2230.52 2539.83 2707.99Trade Receivables: 3493.9 4130.27 4761.32 4424.18 5481.98Cash &Bank balances:Cash in hand 1.13 1.61 1.2 1.32 1.01Cheques & draft on hand 196.7 107.78 243.71 243.91 194.59Balances with bank 22238.5 552.68 134.39 32 19.31Other bank balances 0 16818.02 6036.4 3589.67 2641.74Other Current assets:Interest receivable/accrued 765.63 482.25 57.9 49.14 44.73Others 12.08 1901.76 2067.83 1814.96 2191.49Gold coins on hand 2.63 0.4 0.4 0.26 0.26Short term loan and advances 3416.09 1246.09 1385.77 988.73 1160.51 TOTAL CURRENT ASSETS (A) 39154.12 36543.65 28431.29 27152.38 26936.44 CURRENT LIABILITIES Trade payables: Micro and Small Enterprises 15.27 24.8 12.08 13.86 21.44

Sundry Creditors- Subsidiary Company 17.49 5.2 6.5 5.31 5.43Sundry Creditors- Capital Works 2114.48 0 0 0 0Others 4066.64 3156.54 3201.17 3302.87 3178.47Short term provisions: Provision for Employee Benefits: 3245.9 583.27 381.36 390.39 335.34


FIGURE 4.2


Other Provisions: Taxation 2.71 1.52 0.47 0 51.96Pollution Control & Peripheral Development 112.92 121.56 118.75 117.62 106.62Exchange Fluctuation 16.43 17.2 3.18 8.17 0Proposed Dividend 702.17 495.65 330.45 165.23 0Tax on Dividend 116.62 80.43 53.65 28.08 0Wage Revision 1243.22 871.1 1085.75 1472.3 1130.39Mines Afforestation / Overburden removal 625.49 437.44 250.93 237.25 262.59Others 64.9 75.28 72.5 93.66 84.42Gratuity 89.26 0 0 0 50.63VRS 10.53 0 0 0 0Others Current Liabilities: 4704.5 8308.46 8396.03 8654.7 12478.51Short term borrowings: 0 10003.24 4510.55 8015.02 10634.48 TOTAL CURRENT LIABILITIES (B) 17148.53 24181.69 18423.37

22504.46 28340.28

NET WORKING CAPITAL ( A-B ) 22005.59 12361.96 10007.92 4647.92 -1403.84


2009-10 2010-11 2011-12 2012-13 2013-14-5000

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

NET WORKING CAPITAL

TOTAL CURRENT ASSETS (A)TOTAL CURRENT LIABILITIES (B)NET WORKING CAPITAL ( A-B )

Interpretation:

The company has been able to maintain positive working capital since 2008-09 onwards till

2012-13 but it had a negative working capital in 2013-14. The company had best working

capital in the year2009-10 and although it reduced in the next years it remained positive till

2012-13. From the year 2008-09 the company has been improving its working capital but in

the year 2012-13 the working capital has gone down and gone negative in the year 2013-14

which should be a major concern for the company. But even in this situation the company has

tried not only to reduce its current assets but also to reduce its current liability which is again

a good sign.

JINDAL STEEL & POWER LIMITEDM.S RAMAIAH INSTITUTE OF MANAGEMENT 62


Table 4.8COST SHEET OF JINDAL STEEL

PARTICULAR 2009-10 2010-11 2011-12 2012-13 2013-14Raw materials consumed 2225.71 2730.35 4529.84 4943.3 4265.71Direct Wages 214.87 277.78 385.44 447.89 552.32PRIME COST 2440.58 3008.13 4915.28 5391.19 4818.03Manufacturing overheadDepreciation 512.16 687.77 867.19 1048.46 1221.44Goods purchasae for resale 179.63 176.8 0 0 0Rent 6.84 7.88 12.27 8.34 9.17Repairs and Maintenance 234.1 215.92 289.65 270.86 289.43Conversion charges (Manufacturing expenses) 152.31 214.67 259.66 693.58 752.41Insurance 7.59 11.16 14.46 16.76 16.71Power & fuel 391.8 568.47 838.37 939.38 926.75Store & Spares Consumed 814.1 1135.45 1457.17 1698.66 1838.24Manufacturing Cost 2298.53 3018.12 3738.77 4676.04 5054.15ADD: Opening stock of WIP 61.37 119.72 165.58 179.03 192.93LESS: Closing stock of WIP -119.72 -163.58 -179.03 -192.93 -94.35Total manufacturing cost 2240.18 2974.26 3725.32 4662.14 5152.73Administrative OverheadMiscellaneous expense 241.56 313.23 419.05 438.61 343.21Rates & Taxes 12.57 15.82 16.65 21.68 27.67Research & Development 0 5.8 6.46 14.25 9.47Loss arising from Business investment 0 0 167.2 233.03 0Royalty 85.51 119.7 172.96 185.34 156.83Donation 55.5 73.96 87.98 41.66 52.26loss on sale / discard of fixed assets 2.49 2.4 5.33 0.66 11.74Directors sitting fees 0.07 0.06 0.08 0.18 0.18Auditors remuneration 0.36 0.52 0.84 0.81 1.2Administration Cost 398.06 531.49 876.55 936.22 602.56 COST OF PRODUCTION 5078.82 6513.88 9517.15 10989.55 10573.3Purchase of stock in trade 0 0 452.75 286.58 273.31Excise duty on account of change in stock of finished goods 20.15 30.16 47.46 25.2 -40.31ADD: Opening stock of finished goods and scrap 570.32 560.9 879.06 1292.31 1451.81LESS: Closing stock of finished goods and scrap -552.03 -878.64 -1292.31 -1451.81 -1124.1COST OF GOODS SOLD 5117.26 6226.3 9604.11 11141.83 11134.1Selling & Distribution overheadSelling expenses 202.55 355.64 349.91 420.02 660.32Commission on sales 7.13 2.94 0 0 0



COST OF SALES 5326.94 6584.88 9954.02 11561.85 11794.4Profit 2040.65 2988.75 3379.93 3392.85 2749.62Net sales 7367.59 9573.63 13333.95 14954.7 14544

Table 4.9 PROFIT AND LOSS ACCOUNT OF JINDAL



ParticularsMar '14 Mar '13 Mar '12 Mar '11 Mar '10

Income



Sales Turnover 16,324.4 16,885.8 13,333.9 9,574.17 7,895.5Excise Duty 1,780.44 1,931.14 0.00 0.00 548.14Net Sales 14,544.0 14,954.7 13,333.9 9,574.17 7,347.4Other Income 146.85 159.28 184.48 143.16 192.87Stock Adjustments -386.03 148.20 379.24 333.45 40.06Total Income 14,304.8 15,262.1 13,897.6 10,050.7 7,580.3ExpenditureRaw Materials 6,377.26 6,928.54 6,439.76 4,042.60 3,219.4Power & Fuel Cost 926.75 939.38 838.37 568.47 391.80Employee Cost 552.32 447.89 385.44 277.78 219.72

Other Manufacturing Expenses 0.00 0.00 0.00 0.00 446.60Selling and Admin Expenses 0.00 0.00 0.00 0.00 320.90Miscellaneous Expenses 2,542.80 2,848.64 1,987.13 1,436.22 233.56Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00Total Expenses 10,399.1 11,164.4 9,650.70 6,325.07 4,832.0Operating Profit 3,758.86 3,938.45 4,062.49 3,582.55 2,555.4PBDIT 3,905.71 4,097.73 4,246.97 3,725.71 2,748.3Interest 1,083.63 820.77 536.77 285.00 331.66PBDT 2,822.08 3,276.96 3,710.20 3,440.71 2,416.6Depreciation 1,221.44 1,048.46 867.19 687.77 512.16Other Written Off 0.00 0.00 0.00 0.00 0.00Profit Before Tax 1,600.64 2,228.50 2,843.01 2,752.94 1,904.5Extra-ordinary items 0.00 0.00 0.00 0.00 2.93PBT (Post Extra-ord Items) 1,600.64 2,228.50 2,843.01 2,752.94 1,907.4Tax 308.69 635.95 732.36 688.82 427.78Reported Net Profit 1,291.95 1,592.55 2,110.65 2,064.12 1,479.6Total Value Addition 4,021.87 4,235.91 3,210.94 2,282.47 1,612.5Preference Dividend 0.00 0.00 0.00 0.00 0.00Equity Dividend 137.23 149.57 149.46 140.19 116.52Corporate Dividend Tax 1.22 3.32 3.15 3.75 4.28Per share data (annualised)Shares in issue (lakhs) 9,148.86 9,348.34 9,348.34 9,342.69 9,312.3Earning Per Share (Rs) 14.12 17.04 22.58 22.09 15.89Equity Dividend (%) 150.00 160.00 160.00 150.00 125.00Book Value (Rs) 142.80 132.09 116.01 93.01 72.44

Table 4.10 BALANCE SHEET OF JINDAL

Particulars Mar '14 Mar '13 Mar '12 Mar '11 Mar '10Sources Of Funds

Total Share Capital 91.49 93.48 93.48 93.43 93.12Equity Share Capital 91.49 93.48 93.48 93.43 93.12Share Application Money 0.00 0.00 0.00 0.00 0.00Preference Share Capital 0.00 0.00 0.00 0.00 0.00



Reserves 12,972.84 12,254.59 10,751.93 8,595.91 6,652.88Networth 13,064.33 12,348.07 10,845.41 8,689.34 6,746.00Secured Loans 12,707.31 11,577.42 6,848.09 5,085.01 4,235.16Unsecured Loans 9,959.60 7,923.52 7,524.37 6,356.69 4,148.10Total Debt 22,666.91 19,500.94 14,372.46 11,441.70 8,383.26Total Liabilities 35,731.24 31,849.01 25,217.87 20,131.04 15,129.26

Application Of FundsGross Block 24,150.58 18,821.38 15,163.15 12,757.46 8,814.21Less: Revaluation Reserves 0.00 0.00 0.00 0.00 0.00Less: Accum. Depreciation 5,891.25 4,665.19 3,614.14 2,757.04 2,110.15Net Block 18,259.33 14,156.19 11,549.01 10,000.42 6,704.06Capital Work in Progress 11,663.17 11,483.94 10,493.96 7,081.06 7,225.21Investments 1,350.52 1,330.72 1,412.17 1,210.01 1,067.11Inventories 3,936.25 3,598.52 3,051.31 2,204.12 1,328.50Sundry Debtors 1,460.96 1,426.13 905.06 737.12 622.36Cash and Bank Balance 762.00 36.77 30.94 43.71 49.49Total Current Assets 6,159.21 5,061.42 3,987.31 2,984.95 2,000.35Loans and Advances 8,717.43 7,777.66 6,115.66 5,111.03 3,164.54Fixed Deposits 0.00 0.00 0.00 0.00 10.61Total CA, Loans & Advances 14,876.64 12,839.08 10,102.97 8,095.98 5,175.50Deferred Credit 0.00 0.00 0.00 0.00 0.00Current Liabilities 7,132.86 4,988.13 5,868.89 4,360.09 3,701.93Provisions 3,285.56 2,972.79 2,471.35 1,896.34 1,343.71Total CL & Provisions 10,418.42 7,960.92 8,340.24 6,256.43 5,045.64Net Current Assets 4,458.22 4,878.16 1,762.73 1,839.55 129.86Miscellaneous Expenses 0.00 0.00 0.00 0.00 3.02Total Assets 35,731.24 31,849.01 25,217.87 20,131.04 15,129.26

Contingent Liabilities 15,349.60 13,356.75 11,184.81 12,839.18 8,733.08Book Value (Rs) 142.80 132.09 116.01 93.01 72.44(Source : Dion Global Solution Limited) Table 4.11 WORKING CAPITAL OF JINDAL STEEL

PARTICULAR 2009-10 2010-11 2011-12 2012-13 2013-2014CURRENT ASSETSInventories:Stores & Spares 347.28 403.52 464.65 582.56 632.15Trading goods 0 0.88 0 0 0Raw Materials 300.6 755.08 1115.32 1371.22 2085.7Work in progress 119.72 165.58 179.03 192.93 94.35Finished goods 560.43 872.5 1279.17 1440.5 1121.48Scrap 0.47 6.56 13.14 11.31 2.57Sundry debtors: 622.36 737.12 905.06 1426.13 1460.96Cash Bank balance:Cash in hand 1.11 1.1 1.1 0.86 1.27



Cheques & draft on hand 0.07 0.78 1.6 7.95 25.07Balances with bank 58.92 49.68 28.24 27.96 735.68Other Current assets:Prepaid expenses 0 0.98 2.34 1.94 2.78Interest 0 184.69 280.08 368.73 258.01Dividends Receivables 0 117.05 0 130.06 130.06Other Receivables 0 17.15 25.22 107.38 166.59Short term loan and advances: 3865.94 3929.92 4806.29 5943.54 6543.65

TOTAL CURRENT ASSETS (A) 5876.9 7242.59 9101.24 11613.07 13260.32

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

TOTAL CURRENT LIABILITIES (B) 4242.11 9310.97 12991.01 13804.46 17504.39

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

FIGURE 4.3

2009-10 2010-11 2011-12 2012-13 2013-2014

-10000

-5000

0

5000

10000

15000

20000

TOTAL CURRENT ASSETSTOTAL CURRENT LIABILITIES NET WORKING CAPITAL

Interpretation



In the graph and the table above the net working capital of Jindal Steel and Power Plant

Ltdhave been going down every year from 2010 onwards. In 2010 the networking capital was

positive but after that net working capital shows a negative balance which is the risky

situation for the company as current liabilities is more than current assets. The major reason

for increase in working capital is due to short term borrowings which increases over a period

of time. Therefore the company needs to check its working capital so as to maintain the

liquidity position of the company.

Comparative analysis of Tata Steel, Jindal Steel and SAIL

Table 4.12CURRENT RATIO

Particular 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014TATA STEEL 1.15 1.63 0.96 0.88 0.62JINDAL 1.4 0.8 0.7 0.8 0.8SAIL 2.3 1.5 1.5 1.2 0.9

FIGURE 4.4

2009-2010 2010-2011 2011-2012 2012-2013 2013-20140

0.5

1

1.5

2

2.5

TATA STEELJINDALSAIL

Interpretation



Current ratio is a useful test of the short-term-debt paying ability of any business. A ratio of

2:1 or higher is considered satisfactory for most of the companies but analyst should be very

careful while interpreting it. We have calculated Current ratio for 5 years. The current ratio of

Tata steel is comparatively lower than SAIL and Jindal in the current year. The current ratio

of Tata Steel had gone down because they are making one new project in Kalinganagar,

Orissa. They had invested money on that project. This does not affect the liquidity position of

the company because the credit worthiness of the company is good.

Table 4.13

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

FIGURE 4.5

1 2 3 4 50.000.200.400.600.801.001.201.401.601.802.00


Interpretation

Quick ratio is considered a more reliable test of short-term solvency than current ratio

because it shows the ability of the business to pay short term debts immediately. A

Quick ratio of 1:1 is considered satisfactory. Like current ratio, this ratio should also

be interpreted carefully. Quick ratio of SAIL is comparatively higher then Tata Steel

AND Jindal during 2009 to 2012 but during 2013 to 2014 current ratio of Jindal is

higher than other two companies. Just because the quick ratio is less than 1 does not

mean that the company has a weak liquidity position, it can also happen that the

companies with low quick ratio has a fast moving inventories through which the

company generates money to pay their debts



Table 4.14

NET PROFIT RATIO


FIGURE 4.6

2009-2010 2010-2011 2011-2012 2012-2013 2013-20140.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0


Interpretation

Net profit (NP) ratio is a useful tool to measure the overall profitability of the

business. A high ratio indicates the efficient management of the affairs of business. In

this graph, we can clearly see that net profit of Jindal is highest in all 5 years.

However net profit of Tata Steel is higher than that of SAIL. The graph shows a

decreasing trend in overall net profit of all the companies over the period of time. This

may be due to increase in the production capacity of the company and with that the

raw material consumed has also increased because of which the profits have reduced.

Table 4.15

GROSS PROFIT RATIOParticular 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014TATA STEEL 28.8 33.3 29.0 20.5 23.3



JINDAL 27.7 31.2 25.3 22.7 18.9SAIL 25.0 16.6 11.1 7.3 6.9

Table 4.16DEBTORS TURNOVER RATIO


FIGURE 4.7

2009-2010 2010-2011 2011-2012 2012-2013 2013-20140.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0


Interpretation

The Debtors Turnover ratio should always be high. It shows that the receivables more

liquid and are collected promptly. From this graph, we can see that Tata Steel has

more debtors’ turnover ratio as compared to Jindal Steel and SAIL. SAIL has the least

debtors’ turnover ratio for all the 5 years with respect to Tata Steel and Jindal Steel.

For the current year 2013-14, the debtors’ turnover ratio of Tata Steel is 53.2 and we

can see that Jindal Steel and SAIL has very less debtors’ turnover ratio i.e. 10.1 for

Jindal Steel and 9.4 for SAIL. Here we can easily say that Tata Steel has the good

reputation in Debtors’ from all 3 companies

Table 4.17

CREDITORS TURNOVER RATIO

Particular 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014TATA 2.36 2.42 1.83 1.61 1.37



STEELJINDAL 3.14 2.30 3.36 4.87 3.86

SAIL 1.34 2.76 4.09 5.13 5.28

FIGURE 4.8

1 2 3 4 50.00

1.00

2.00

3.00

4.00

5.00

6.00


Interpretation

The creditors turnover ratio tells that out of Total purchase how much creditors are made.

This ratio indicates the speed with which amount is being paid to creditors. The creditors

turnover ratio for Tata Steel is least among the three companies. This does not signifies that

the credit worthiness of TATA STEEL is poor but it shows the confidence creditors repose

on the company. Since Tata steel has a good reputation therefore credit worthiness of the

company is good even after low credit turnover ratio.

Table 4.18

WORKING CAPITAL RATIO

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



FIGURE 4.9

1 2 3 4 5

-40.00

-30.00

-20.00

-10.00

0.00

10.00

20.00


Interpretation

The working capital turnover ratio measures how well a company is utilizing its

working capital to support a given level of sales. Working capital turnover ratio of

Tata Steel is positive for first 2 years and for last 3 years it become negative whereas

for Jindal Steel the ratio was positive for first years i.e. 2009-10 and after that last 4

years, there ratio is also in negative. But in case of SAIL the ratio was positive since

last 4 years but has reduced drastically in the current year. When the working capital

turnover ratio is negative it shows that the company credit worthiness is good.

Table 4.19

INVENTORY TURNOVER RATIO




FIGURE 4.10

2009-2010 2010-2011 2011-2012 2012-2013 2013-20140.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00


InterpretationEvery firm has to maintain a certain level of inventory of finished good so as to be

able to meet the requirement to the business. But the level of inventory should neither

be too high nor too low. Tata Steel has the highest inventory turnover ratio for all the

5 years as compared to Jindal Steel and SAIL. Tata Steel has the inventories ratio

between 5 and 6 which is good for the company, but companies less than 5, we can’t

say that the companies having bad inventories turnover ratio.

Table 4.20

NET OPERATING CYCLE

Particular 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014TATA STEEL 96.04 87.06 118.74 150.55 139.43JINDAL -48.01 -7.51 238.97 294.53 309.67SAIL 61.93 210.28 498.16 515.32 518.52

FIGURE 4.11



2009-2010 2010-2011 2011-2012 2012-2013 2013-2014-100.00

0.00

100.00

200.00

300.00

400.00

500.00

600.00


Interpretation

The net operating cycle of Jindal has been best among all the three companies during 2010

and 2011.But the noticeable point is that in the year 2012 to 2014 the operating cycle of

Jindal has increased drastically and this is because of sudden work in progress conversion it

has built up.

The operating cycle of Tata steel is the least in the current year but the conversion period of

Tata steel is not good and it is quite high because of which at times it has shown negative

working capital.

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



4.4.1 Findings

The ideal current ratio is 2:1 and as for Tata Steel 0.5 is the standard for current ratio.

Tata Steel has been improved from the past years. It is able to meet the standard.

The ideal quick ratio is 1:1. In the current year 2013-14 the ratio has decreased from

the previous year which clearly shows that the company keeps a lot of buffer stock

with itself since the production process is very long and also clears off its expenses in

advance.

The profit has been increasing over the years but had declined in the previous years

and has been improving in 2013-14.

Tata Steel is also following good strategy for blocking its funds for a longer period of

time when it comes for payment.

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

Finished goods Conversion period has increased from the previous years.

Working capital turnover ratio of Tata Steel is positive for first 2 years and for last 3

years it become negative. When the working capital turnover ratio is negative it shows

that the company credit worthiness is good.



Tata Steel's Raw Material Conversion Period has decreased over the years which is a

good sign for the company.

4.4.2 Conclusions

The success of an organization primarily depends on its ability to sustain its comparative

advantage irrespective of the strategy it adopts. The project studies the Working Capital of

Management of TATA STEEL, which is one of the most important aspects of any

organization, as it deals in managing the entire current assets and current liablities.After

analyzing the financial statement and having a in-depth study of working capital cycle and

various ratio of the company we conclude that the management of capital requires an

evaluation of cost and benefits associated with each elements. Tata Steel maintains sound

position of working capital its efficiency in receivable and deferral management is reflected

in a constantly decreasing operating cycle. The company has primarily been on cash drawn

from the market and reaping full benefits of its brand name. The company makes full

utilization of its fund before making payments to outsiders.

In the end we can conclude that working capital management has a great effect on the

profitability of the company and the managers can create value for the shareholders by

decreasing receivables accounts and inventory and the managers must look for the method

that by means of them and correct management be effective on the profitability of the

companies.



4.4.3 Recommendations

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

following recommendations :

The financial ratios need a change to an extent.

Advance payment should be avoided or else should be made against securities.

Maintenance of cash and bank balances is improving to a large extent. Hence the

fluctuations in net working capital are reduced.

There should be proper co-ordination between working capital group and its related

department i.e. debtors, inventory etc.

The work in progress conversion period has reduced from the previous years hence

this is a good sign for the company.

Maintenance of cash and bank balances has to be improving so that fluctuations in net

working capital could be avoided.

The raw material conversion period is reducing.



BIBLIOGRAPHY

Financial Management-IM Pandey

www.moneycontrol.com

www.tatasteel.com

www.Jindal steel.com

Financial report-Tata Steel, Jindal, SAIL

Annual Report-JSPL,TSL,SAIL

Report from TMDC Library


http://www.Jindal/

http://www.tatasteel.com/

http://www.moneycontrol.com/

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Final report in working capital management of tata steel ltd.

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