Working Capital Management

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A PROJECT REPORT ON
WORKING CAPITAL MANAGEMENT
WITH REFRENCE TO VISAKHAPATNAM STEEL PLANT
RASHTRIYA ISPAT NIGAM LIMITED
In partial fulfilment for the award of the degree
MASTER OF BUSINESS ADMINISTRATION
SUBMITTED BY
PRAKASH RAJIV S
REGISTER NO – 14381044
DEPARTMENT OF BANKING TECHNOLOGY
PONDICHERRY UNIVERSITY
VIZAG STEEL PLANT
VISAKHAPATNAM, ANDHRA PRADESH

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CERTIFICATE OF DECLARATION
I hereby declare that this project entitled “Working Capital
Management” at Visakhapatnam Steel Plant is my original work and prepared
by me under the esteem guidance and supervision of Mr.
G.SATYANARAYANA, JUNIOR MANGER, (Finance & Accounts
Department) of Visakhapatnam Steel Plant.
I also declare that, I have not submitted this project report to any other
university (or) institution for the award of any degree.
PLACE : VISAKHAPATNAM PRAKASH RAJIV S
DATE:

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ACKNOWLEDGEMENT
I would like to thank each and every employee who has directly or
indirectly helped me in carrying out this project.
I take this opportunity to express my heartfelt thanks to my project
guide Mr. G.SATYANARAYANA, JUNIOR MANGER, (F&A) for his
guidance and suggestions during the progress of my project. I am thankful to the
VISAKHAPATNAM STEEL PLANT, for giving me an opportunity to
undertake my project work.
My special thanks to Mr. O.R.M.RAO, AGM (HRD) & Mr. M.L.S
VARMA, Dy.M (HRD) of VISAKHAPATNAM STEEL PLANT, for his
valuable suggestions and co-operation throughout the project work.
I want to express my sincere thanks to my Guide Mr.G.SATYANARAYANA,
JUNIOR MANGER, (F&A) for his constant moral support and valuable
guidance in successful completion of the project work.
Finally I would like to thank other faculty members for their extended co-
operation & suggestions which have helped a lot.
PRAKASH RAJIV S

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PREFACE
This project report is a presentation of my effort to study the practice of
Financial Management in a public sector enterprise, with reference to Rashtriya
Ispat Nigam Limited, Vishakhapatnam. The report presents the practical
approach in the subject of Financial Management, mainly in the field of
“WORKING CAPITAL MANAGEMENT ". It intends to provide brief
knowledge of various concepts, Principles, approaches, considerations relevant
to this field. The Project Report has undergone a realistic survey of actual theory
and practices in VSP although there may be much gap to be bridged.
This report seeks to cover the topics of Financial Management, mainly
focusing on the aspects like Working Capital Management, Cash Management,
Receivables Management, Inventory Management, etc.
The report has been divided into five chapters and the arrangements of
topics in various chapters have been grouped according to the analysis of the
subject.

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CONTENTS
S.NO PARTICULARS PAGE NO
1 Introduction 8
2 Industry profile 16
3 Company profile 25
4 Theoretical frame work 43
5 Analysis and Interpretation 62
6 Summary and Suggestions 75
7 Conclusion 77
8 Appendix 79
9 References 95

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Introduction
Finance is the process of commission of accumulated funds to productive use. Finance
helps to direct flow of economic activity and facilitates its smooth operation. Finance is the
agent that produces this result.
There are many definitions of all the best was of Howard and upon “those
administrative areas of assets of organisation which have to do with management of flow of
cash so that the possible and at the same time meet its obligations as they become due”.
Finance is concerned with the task of providing funds to the enterprises on the item that
is most favourable toward the attainment of the organisation foals objects. The function finance
is merely furnishing funds to the organisation. Finance has a boarder meaning and it covers
financing planning, forecasting of cash receipts and disbursement, rising of funds, use and
allocation of funds and financial control.
The area of operation of finance manager is vague from one company to another and
industry to industry etc.
Significance of Finance Management
Financial management is the managerial activity, which is concerned with planning and
controlling of the firm’s financial resources.
The subject of finance management is of immense interest both to academician and
practicing managers. The practicing managers All interested in this subject become the most
crucial decision of the firm All those which results to the finance and on understanding of
theory of finance management provides them conceptual analysis insights to make these
decision skilfully.
As a separate activity and discipline it is of recent origin. It was a branch of economics
till 1890.Today financial management is recognized as the most important branch of business
administration.
Financial management may be defined as the part of management, which is concerned
mainly with raising funds in the most economic and suitable manner, using these funds as
possible planning future operations, and controlling current performance and future
development through financial accounting, cost accounting, budgeting statistics and other
means. It guides investment where opportunity is the greatest production relatively uniform

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yard strikes judging most of the firms operations and projects and is continually necessary for
survival and attracting of new capital.
According to Howard and upon, financial management involves the application of
general management principles to a particular operation.
N.G.Wright says finance management is intimately itself woven into the fabric of the
management itself. Its central role is concerned with the some objectives as these of the
management which the way in which the resources of the business are employed and how the
business is finance. He divides financial management into three main areas:
1. Decision on the structures,
2. Allocation of available funds to specific uses,
3. Analysis and appraised of problems.
Financial management includes planning of finance, cash budgets and sources of
finance. EZRA Solomon and john piglet insists that financial management must attend to
investment decision because if these decision that affects in a large measure the future of a firm
major financial management is an operational function it is involved with financial planning,
forecasting and providing of finance as well as the formation of financial policies.
Hunt William and Donald son have called financial management as resources
management because in a large organisation, the finance managers are the members of
planning, organisation, performing and controlling the financial affairs of the enterprise. The
financial management is of great importance in the present day corporate world. It is the science
of money, which permits the authorities to go further.
The Significance of Financial management can be summarized as:
 It assists in the assessment of financial needs of industries large or small and
indicates the internal and external resources for meeting them.
 It assessment the efficiency and effectiveness of financial institutions in mobilizing
individual or corporate savings. It also prescribed savings into desirable investment
channels.
 It assists the management while investing the funds in profitable projects and it
permits the management to safeguard the interests of shareholders by properly

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utilizing the funds procured from different sources and it also regulates and controls
the funds to get maximum use.
 Analysing the viability of that project through capital budgeting techniques.
It permits the management to safeguard the interest of shareholder of proper utilizing the funds
procured from different sources and also regulates and controls the funds to get maximum use.
Introduction to Working Capital
Working capital management is an integral part of the overall financial management.
To that extent, it is similar to the long-term decision making process because both entail
analysis of the effect of risk and profitability.
The problems involved in the management of working capital differ from those in the
management of fixed assets. In the first place, fixed assets are acquired to be retained in the
business over a period of time and yield returns over the life of the assets.
Definitions
“Working capital is the amount of funds necessary to cover the cost of operating the
enterprise”.
“Circulating capital means current assets of a company that are changed in the ordinary
course of business from one from to another. For example, from cash to inventories, inventories
to receivables, receivables to cash.
Objectives of Working Capital Management
The need of working capital arises due to the time gap between production and
realization of cash from sales. There is an operating cycle involved in the sales and realization
of cash. There are time gaps in purchase of raw materials and production; production and sales;
and sales and realization of cash.
Thus, working capital is needed for the following purposes.
 For the purpose of raw materials, components and spares.
 To pay wages and salaries.
 To incur day-to-day expenses and overhead costs such as fuel, power and office
expenses, etc.

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 To meet the selling costs like packing, advertising, etc.
 To maintain the inventories of raw materials, work-in-progress, stores and spares and
finished stocks.
Importance of Working Capital
Working capital is the life blood and nerve centre of business. Just as how circulation
of blood is essential in the human body for maintaining life, working capital is very essential
to maintain the smooth running of a business.
Composition of working capital:
The individual composite items of working capital consists of
1. Current assets and
2. Current liabilities
Current Assets
Current assets are those, which can be converted into cash within one year without
effecting the operations of the firm.
List of current assets:
 Cash in hand and bank balance
 Bills receivables
 Sundry debtors
 Short-term loans and advances
 Inventories of stock
 Prepaid expenses
Current Liabilities
Current liabilities are those, which are intended to be paid in the ordinary course of
business within a short period of normally one year out of the current assets or the income of
the business.
List of current liabilities:
 Bills payables

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 Sundry creditors or accounts payables
 Short term borrowings
 Dividends payables
 Bank overdrafts
 Accrued or outstanding expenses
 Provision for taxation
 Sales tax and excise tax
Optimum Working Capital Position
The firm should maintain a sound working capital position. It should have adequate
working capital to run its business operations. Both excessive as well as inadequate working
capital positions are dangerous from the firm’s point of view. Excessive working capital means
idle funds, which earn no profits for the firm. Paucity of working capital not only impairs the
firm’s profitability but also results in production, interruption and efficiencies.
Disadvantages of Excessive Working Capital
 The business cannot earn proper rate of return on its investments.
 It may lead to have more changes of theft, waste and losses.
 Excessive working capital implies excessive debtors and defective credit policy which
may cause higher incidence of bad debts.
 It may result into overall in efficiency in the organization.
 When there is excessive working capital, relations with banks and other financial
institutions may not be properly maintained.
 Due to low rate of return on investments, the value of shares may also fall.
 The redundant working capital gives rise to speculative translations.
Dangers of Inadequate Working Capital
 It stagnate the growth.
 It becomes difficult for the firm to undertake profitable projects due to inadequate
funds.
 It becomes difficult to implement operating plans and achieve firms profit targets.
 Operating inefficiencies creep in and it becomes difficult day-to-day commitments.
 Fixed assets are not efficiently utilized for the lack of working capital funds. Thus the
firms profit would deteriorate.

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 Paucity of working capital funds renders the firm unable to avail attractive credit
opportunities.
Working Capital Analysis
The analysis of working capital can be conducted through a number of devices such as:
 Ratio analysis
 Funds flow analysis
 Budgeting
Ratio analysis
A ratio is simple arithmetical expression of the relationship of one number to another.
The techniques of ratio analysis can be employed for measuring short-term liquidity or working
capital position of a firm. Some of the ratios are:
 Current ratio
 Acid test ratio
 Absolute liquid ratio
 Inventory turnover ratio
 Receivables turnover ratio
 Payables turnover ratio
 Working capital turnover ratio
Funds Flow Analysis
Funds flow analysis is a technical device designed to study the sources from which
additional funds were derived and use to which these sources were put. It is an effective
management tool to study changes in the financial position (working capital) of a business
enterprise between beginning and ending financial statement dates. The funds flow analysis
consists of
 Preparing schedule of changes in working capital.
 Statement of sources and application of funds.

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Budgeting
The objective of a working capital budget is to ensure availability of funds as and when
needed, and to ensure effective utilisation of these resources. The successful implementation
of working capital budget involves the preparing of separate budgets for various elements of
working capital, such as cash, inventories and receivables, etc.

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Industry Profile
Steel is crucial to the development of any modern economy and is considered to be the
backbone of human civilization. The level of per capita consumption of steel is treated as an
important index of the level of socioeconomic development and living standards of the people
in any country. Steel industry was in the vanguard in the liberalization of the industrial sector
and has made rapid strides since then. Output has increased, the industry has moved up in the
value chain and exports have raised consequent to a greater integration with the global
economy. At the same time the domestic steel industry was facing new challenges. The demand
too has not improved to significant levels. The litmus of the steel industry will be to surmount
these difficulties and remain globally competitive.
History of steel
Steel was discovered by the Chinese under the reign of Han dynasty in 202BC till
220AD.Prior to steel, iron was a very popular metal and it was used all over the globe. Even
the time period of around 2to 3 thousand year before Christ is termed as Iron Age as iron was
vastly used in that period in each and every part of life. The Chinese people invented steel as
it was harder than iron and it could serve if it is used in making weapons from china, the process
of making steel from iron spread to its south and reached India.
High quality steel was being produced in southern India in as early as 300BC.around
9th
century AD, the smiths in the Middle East developed techniques to produce sharp and
flexible steel blades. In 17th
century, smiths in Europe came to know about a new process of
cementation to produce steel.
The Global Steel Industry
The current global steel industry is in its best position in comparing to last decades. The
price has been rising continuously. The demand expectations for steel products are rapidly
growing for coming years. The shares of steel industries are also in a high pace. The steel
industry is enjoying its 6th
consecutive years of growth in supply and demand.
And there is many more merger and acquisitions which overall buoyed the industry
and showed some good results. The supreme crisis has lead to the recession in economy of
different countries, which may lead to have a negative effect on whole steel industry I coming

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years. However steel production and consumption will be supported by continuous economic
growth.
Iron and steel making as a craft has been known to India for a long time. However, its
production in significant quantities is known only after 1900.
Steel Industry in India
Steel has been the key material with which the world has reached to a developed
position. All the engineering machines, mechanical tools and most importantly building and
construction structures like bars, rods, channels, wires angles etc are made of steel for its
features being hard and adaptable.
After independence, successive governments placed great emphasis on the
development of an Indian steel industry. In financial year 1991, the six major plants, of which
five were in the public sector, produced 10 million tons. The commissioning of Tata Iron &
steel company’s production unit at Jamshedpur, Bihar in 1911-12 heralded the beginning of
modern steel industry in India.
Following independence and the commencement of five year plans, the government of
India decided to set up four integrated steel plants at Rourkela, Durgapur, Bhilai, and Bokaro,
the Bokaro steel plant was commissioned in 1972.The most recent addition is a 3MT integrated
steel plant with modern technology at Vishakhapatnam. Steel authority of India (SAIL)
accounts for over 40% of India’s crude steel production.
SAIL owns mines and subsidiary companies. Production capacity have recorded a year-
on-year growth rate of 13.4% ,15.7% ,11.7% ,in net sales operating profit and net profit,
respectively ,during the second quarter of 2007-2008.
Soaring demands by sectors like infrastructure, real estates and automobiles, at home
and abroad, has put India’s steel industry on the world steel map.
The Growth was as following
1830-Jasiah Marshall Health constructed the first manufacturing plant at part move in madras
presidency.
1874-James Erkisn founded the Bengal iron works.
1899-Jamshedji Tata initiated the scheme for integrated steel plant.

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1906-Formation of TISCO
1911-Tata Iron & Steel Company started production.
1916-TISCO was founded
1940-50-Formation of MYSORE Iron and limited, and Bhadravati in Karnataka.
1950-56-First five year plan.
No new plant came up. The Hindustan steel Ltd. (HSL) was born on 19th
January, 1954;
with the decision of setting up three steel plants each with one million tonnes input steel per
year at Rourkela, Bhilai and Durgapur, TISCO started its expansion programme.
1956-61-Second five year plan
 A bold decision was taken up to increase the steel output in India to 6 million tonnes
per year and production at Rourkela, and Durgapur steel plans started.
1961-66- Third five year plan During the third five year the three steel plants under HSL,
TISCO & HSCO were expanded s show
Steel Plant Original (MT/Year) Expanded (MT/Year)
Rourkela
Bhilai
Durgapur
TISCO
IISCO
1.0
1.1
1.0
1.0
0.5
1.8
2.5
1.6
2.0
1.0
In January 1964 Bokaro steel plant came into existence
1966-69-Recession Period
 The entire expansion programme was actively executed during this period.
1969-74-Fourth Five year plan

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 Salem Steel Plant started
 Licenses were given for setting up of many mini steel plant and re-rolling mills.
 Govt. of India accepted setting up two more steel plants in .South: One each at
Visakhapatnam (Andhra Pradesh) and Hospet (Karnataka).
 SAIL was formed during this period on 24th
January 1973. The total installed capacity
from 6 integrated plants was 106 MT.
1979-Fifth Five Year plan
 The erstwhile Soviet Union agreed to help in setting up the Visakhapatnam Steel Plant.
1980-85-Six Five Year Plan
 Work on Visakhapatnam Steel Plant was started with a big bank and top priority war
accorded to start the plant.
 Scheme for modernization of Bhilai Steel Plant, Rourkela, Durgapur Steel Plant and
TISCo were Initiated.
1985-91-Seventh Five Year Plan
 Expansion work of Bhilai and Bokaro Steel Plants Completed.
 Progress on Visakhapatnam Steel Plant picked-up and the rationalized concept has
been introduced to commission the plant with 3.0 MT liquid steel capacity by 1990.
1991-96-Eighth Five Year Plan
 Visakhapatnam Steel Plant started its production.
 Modernization of other steel plant is also duly envisaged.
1997-2002-Ninth five Year Plan
 Visakhapatnam Steel Plant had foreseen a 7% growth during the entire plan period.
2002-2007-Tenth Five Year Plan
 Steel industry registers a growth of 9.9%
 Visakhapatnam steel plant has high regime targets and achieved the best of them.
Steel Production in India
India is one of the few countries where the steel industry is poised for rapid growth.
Steel production of India accounted for 14.33million tons in 1990-1991, which gradually
increased to 36.12 million tonnes in 2003-2004. Today India plays a significant role in the
production of steel in the world. Steel demand continued to remain upbeat in 2008-2009 with
consumption of finished steel growing by decent 6.8%during April - May 2008.during April

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2008 finished steel output rose by modest 3.8%.further in may it increased by 5.2%.aggregate
production growth during April - May stood at 5.1% in view of no major capacities coming on
stream we estimate finished steel production to touch 60 million tonnes in 2008-2009.
In the event of an upward revision in the figure of 2007-2008, the actual growth in steel
production in 2008-2009 would turn out to be less as compared to our estimates.
Major players of Steel in India
Public sector
Steel authority of India Limited (SAIL)
It is a company registered under the Indian companies act, 1956and is an enterprise of
the government of India. It has five integrated steel plants at Bhilai (Chhattisgarh), Rourkela
(Orissa), Durgapur (West Bengal), Bokaro (Jharkhand), and Burnpur (West Bengal). SAIL has
three special and alloy steel plant at Salem (Tamil Nadu) and Visvesvaraya iron and steel plant
at Bhadravati (Karnataka).
Rashtriya Ispat Nigam ltd (RINL)
RINL, the corporate entity of Vishakhapatnam steel plant is the first shore based
integrated steel plant located at Vishakhapatnam in Andhra Pradesh. The plant was
commissioned in August 1992 with a capacity to produce 3 Million Tonnes per Annum of
liquid steel. RINL has prepared a road map to expand the plant’s capacity up to 16 MTPA in
phases.
Private sector
The private sector of the steel industry is currently playing an important and dominant
role in production and growth of steel industry in the country. not only play an important role
in production of primary and secondary steel, but also contribute substantial value addition in
terms of quality, innovation and cost effective.
Tata Steel Ltd
Tata steel has an integrated steel plant, with an annual crude steel making capacity of 5
million tonnes located at Jamshedpur, Jharkhand. The company has planned to take the
capacity to 10 million tonnes by the fiscal year 2012. Tata steel‘s green field project in Orissa

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and Chhattisgarh are progressing on schedule with placement of equipment order for Kalinga
Nagar project, Orissa. Jharkhand project is awaiting announcement of relief and rehabilitation
policy of the state Govt.
Jindal Steel &Power Ltd. (JSPL)
Jindal steel & power limited is one of the fast growing steel units in the country. The
Raigarh plant of JSPL has a present capacity of 1.37 million tonne per annum sponge iron
plant, 2.40 MTPA steel melting shop, 1.0 MTPA plant mill,2.30 sinter plant ,0.8 MTPA coke
oven and a 330 Megawatt captive power plant.
Ispat Industries Ltd. (IIL)
IIL has set up one of the largest integrated steel plant in the private in India at Dolvi in
Raigad Dist, Maharashtra with a capacity to manufacture 3 Million Tonnes per Annum of hot
rolled steel coils. This plant is using converter-cum-electric arc furnace route for producing
steel. In this project, IIL have uniquely combined the usage of hot metal and sponge iron the
electric arc furnace for production of liquid steel for the first time in India.
BHUSHAN POWER AND STEEL
Incorporated in 1989, Bhushan Steel is a leading integrated steel and power producer in India.
It is India’s third largest Secondary Steel Producer Company with an existing steel production
capacity of 2 million tonnes per annum (MTPA).
The company’s manufacturing facilities are strategically located as regards proximity to
customers, raw material and export infrastructure. It has three manufacturing units in the states
of Uttar Pradesh (Sahibabad Unit), Maharashtra (Khopoli unit), and Orissa (Meramandali unit)
in India and sales network across many countries.
The company is a source for vivid variety of products such as cold rolled closed annealed,
galvanised coil and sheet, high tensile steel strapping, colour coated coils, hardened and
tempered steel strips and HFW/ERW Pipe.
As one of the prime movers of the technological revolutions in the Indian Cold Rolled Steel
Industry, the company has emerged as the country’s largest and the only cold rolled steel plant
with an independent line for manufacturing cold rolled coil and sheet up to a width of 1700
mm, as well as galvanised coil and sheet up to a width of 1350 mm.
Bhushan Steel: The Diverse Shades of Steel

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2007 Approves the setting up of a 6 million tonne per annum (MTPA)
integrated steel plant as an expansion of its existing plant being set up at
Meramandali in Orissa
2004 Commissions the Khopoli plant in Maharashtra
1996 Becomes the first to set up a high Tech Plant to cater to automobile and
white goods sector, in technical tie up with Sumitomo Metals, Japan
1987 Starts operations from Sahibabad, UP
Factors holding back the Indian Steel Industry
 Energy supply.
 Problems procuring raw materials inputs.
 Inefficient transport system
NMDC Ltd. Chhattisgarh Greenfield project at Bastar (3 MTPA)
Proposed capacity:3.0 MTPA
Total land requirement – 1934 acres. 1783 acres already in possession. Balance land is under
process of allotment.
Total expenditure to be made-Rs.15525 crores.
Stage 1 clearance for diversion of 63.56 acres forest land has been received.
MoU signed between NMDC and CMDC Ltd. for allocation, development, production and
marketing of iron ore of Bailadila Deposit No.4 for meeting the requirement of steel plant.
Date of completion – 42 months from”Zero date” i.e. receipt of all statutory
clearance/approvals and placement of orders for major technological packages.

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List of steel companies
S.No. Company Location State Current
approximate
Capacity*
1 Steel Authority of India
Limited
IISCO, Burnpur West Bengal 0.50
2. Steel Authority of India
Limited
Bokaro Jharkhand 4.36
Limited
Bhilai Chhattisgarh 3.93
Limited
Rourkela Orissa 1.90
Limited
Durgapur West Bengal 1.80
6 Rashtriya Ispat Nigam
Limited
Visakhapatanam Andhra
Aradesh
2.90
7 Tata Steel Limited Jamshedpur Jharkhand 6.8
8 Essar Steel Limited Hazira Gujarat 4.6
9 JSW Steel Limited Vijayanagar Karnataka 6.6
10. Jindal Steel & Power
Limited
Raigarh Chhattisgarh 2.4
11 Ispat Industries Limited Dolvi Maharastra 3.0
12 Bhushan Power & Steel
Limited
Jharsugda Orissa 1.2
13 Bhushan Steel Limited Angul-Dhenkanal Orissa 1.5

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Introduction
Visakhapatnam steel plant (VSP), the first coast based steel plant of India is located,16
km south west of city of destiny i.e. Visakhapatnam. Bestowed with modern technologies, VSP
has an installed capacity of 6.3 million tonnes per annum of liquid steel and 2.656 Million
Tonnes of saleable steel.VSP products meet exacting international quality standards such as
JIS,DIN,BIS,BS etc.
Visakhapatnam steel plant has become the first integrated steel plant In the country to
be certified to all the three international standards for quality (ISO-9001) for environment
management (ISO-14001) & for Occupational health & safety (OHSAS-18001).
Visakhapatnam exports quality pig iron & steel products to Srilanka, Myanmar, Nepal,
Middle East, USA, China, and South East Asia. Having total manpower of about 18,072. VSP
has envisaged a labour productivity of 265 tonnes per man year of liquid steel
RINL-VSP is the first integrated Steel Plant to be certified for ISO 9001:2008, ISO
14001:2004 and OHSAS 18001:2007 standards. It is also the first PSE to be certified for ISO
50001 - Energy Management Systems and CMMI Level 3 Certification for Software
Development.
Background
With a view to give impetus to industrial growth and to meet the aspirations of the
people from Andhra Pradesh, Government of India decided to establish integrated steel plant
in public sector at Visakhapatnam. The announcement to this effect was made in the parliament
on 17th
april”1970 by the then prime minister of India late Smt. Indira Gandhi. The foundation
stone for the plant was laid by Smt. Indira Gandhi on 20.01.1971.
An agreement was signed between governments of India and the erstwhile USSR on
June 12th
, 1979 for setting up of an integrated steel plant to produce structural & long products
on the basis of detailed project report prepared by M/s M.N. Dastur& Company.
The construction of the plant was started on 1st
February 1982; Government of India on
18th
February 1982 formed a new company called Rashtriya Ispat Nigam ltd. (RINL) and
transferred the responsibility of constructing, commissioning & operating the plant at
Visakhapatnam from steel authority of India Ltd. to RINL.

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The plant was dedicated to the nation by the then prime minister of India late Sri P.V.
NarasimhaRao on 1st
August 1992.
Research and Development
Research and Development activity at RINL has been more thrust by focusing on
present and future requirements of the plant in the areas of process improvement, environment
protection,waste management cost reduction new product development and new technology.
Some of the important projects under taken by RINL
 Lance tip design for optimal performance of BOF in terms of slag-metal reaction, heat
transfer to lance and lance skulling.
 Improvement of MGO-C brick quality to enhance the converter of life.
 Removal of carbon dioxide from flue gases by sequestration.
Technology
State-of-the-art:
 7 meter tall coke oven batteries with coke dry quenching.
 Bell-less top charging system in blast furnace.
 100% slag granulation at the BF cast house.
 Suppressed combustion –LD gas recovery system.
 100% continuous casting of liquid steel.
 Tempcore and stelmor cooling in LMMM & WRM respectively.
 Extensive waste heat recovery systems.
 Comprehensive pollution control measures.
Water supply
An operational water requirement of 36 Mgd is being met from the yeluru water supply
scheme.
Recovery of 572 MG of water by treating in Appikonda & Balacheruvu waste water
Treatment plants and the ultra Filtration Unit was the best for an year.

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Power supply
Operational power requirement of 180 to 200 MW is being met. Through captive power
plant. The capacity of the power plant is 286.5 MW. Visakhapatnam steel plant is supplying
60 MW power to Andhra Pradesh state electricity board.
Generation of 2,32,521 MWH power through waste energy recovery at the rate of 26.5
MW was the best for an year.
Major Resource of Raw Material
Raw material Source
Iron ore lumps & fines Bailadilla, MP
BF lime stone Jaggayyapeta, AP
SMS lime stone Middle East
BF dolomite Madharam, AP
SMS dolomite Madharam , AP
Manganese Chipurupalli, AP
Boiler coal Talcher, Orissa
Coking coal Australia
Medium coking coal(MCC) Gidi/ swang/ rajarappa/ kargali.
Major units
Department Annual capacity
(‘000 T)
Units(3.0 mt stage)
Coke ovens 2,261 Batteries of each 67 ovens &7 mtrs height
Sinter plant 5,256 2 sinter machines of 312 sq. mtrs grate area
each
Blast furnace 3,400 2 furnaces of 3200cu.mtr.volume each
Steel melt shop 3,000 3 ld converters each of 133cu.mtr.volume
and six 4 strand bloom casters
LMMM 710 4 strand finishing mill
WRM 850 4 strand high speed continuous mill
MMSM 850 6 strand finishing mill

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Main Products of VSP
Steel products By-products
Blooms Nut coke Granulated slag
Billets Coke dust Lime fines
Channels, angles Coal tar Ammonium sulphate
Beams Anthracene oil
Squares Hp naphthalene
Flats Benzene
Rounds Toluene
Re-bars Zylene
Wire rods Wash oil
Major departments
Continuous Casting Department
VSP has six-4 strand continuous casting machines capable of producing 2.82 Million
Tonnes per year. Blooms of size 250*250 mm and 250*320 mm, entire quantity of molten steel
produced is continuously cast in radial bloom casters which help in energy conservation as well
as production of superior quality products. Gas cutting machines for cutting the blooms in
required lengths.
DNW Department
Distribution network (DNW)department deals with receipt, transmission of electrical
power at extra high voltage(EHV)220 KV, distribution of high tension (HT) power at 33
KV,11KV and 6.6 KV level. DNW department also coordinates with AP Transco and
APEPDCL for export and import of power respectively.
Traffic Department
A steel plant of the size of VSP has to handle around 60-65 MT traffic comprising of
incoming traffic, outgoing traffic. To handle this huge quantities of traffic, VSP has a fleet of
31 locomotives, hot metal ladle cars, torpedo ladle cars, captive wagons of different types,5
Internal Railway Stations ,loco and wagon repair shop and many number of weigh bridges.

28
Works Contract Department
 Processing for and obtaining administrative approval on receipt of contractual proposal
from indenting departments, tendering, and awarding of work.
 Preparing COM / Board Note for decisions at those forums.
 Participating in Claims and arbitration proceedings and legal cases pertaining to
contracts.
 Registration of agencies under various categories &classes of work regularly.
Safety Engineering Department
Safety engineering department advises and assists the management in the fulfilment of
obligation concerning prevention of accidents and maintaining a safe working environment.
SED conducts safety campaigns and safety competitions amongst the employees to promote
safety. SED co-ordinates and liaison with AP factories department.
Design & Engineering Department
 Preparation of drawings, design and specifications for AMR and Non AMR jobs.
 Layout clearances of various facilities coming in the plant and township.
 Operation of consultancy contracts.
Marketing department
It has 24no.of branch sales offices all over India and four regional offices viz. north- Delhi,
South-Chennai, West- Mumbai, East- Kolkata and Headquarter sales. Main activities of
marketing are as follows:
 Collecting market feedback and customer requirements for the preparation of annual
plan in coordination with works department.
 Preparation of market policies.
 Finalising of long term contracts, MoUs, spot sale agreements etc., in domestic and
export markets. Rendering after sales services, obtaining customer feedback and
customer relations management.

29
Visakhapatnam Steel Plant Policies
Human resource policy
To realize the full potential of employees, the company is committed to:
 Ensure functioning of effective communication channels with employees.
 Empower employees for enhancing commitment responsibility and accountability.
 Encourage teamwork, innovativeness and high achievement oriented.
 Provide systems for maintain transparency, fairness and equality in dealing with
employees.
Human resource development
 Leadership training.
 Training in motivation and attitude.
 Team building
 Skill training
 Induction and orientation
 Plant practice lectures
 Basic engineering lectures
 Plant specialized training
 Management development
Pollution control and environmental protection
Generally integrated steel plant is considered as a major contributor to environmental
pollution as it discharges volume of waste products. Elaborate measures have been adapted to
combat air and water pollution. In order to be echo friendly, Visakhapatnam steel plant has
planted more than 3 million trees over an area of 35sq.kms and in corporate various
technologies at a cost of 460crs towards pollution control measures.

30
Statistical Information
Production performance for past five years (000’tonnes)
Year Hot metal Liquid steel Saleable steel Labour
productivity
2007-2008 3,913 3,126 3,074 389
2008-2009 3,546 3,322 2,701 359
2009-2010 3,900 3,145 3,167 389
2010-2011 3,830 3,399 3,077 358
2011-2012 3778 3310 2990 360
2012-2013 3814 3250 2900 363
Man power at glance
Year Total
2010-2011 17829
2011-2012 18079
2012-2013 18072
Company Vision, Mission and Objectives
Vision
 Harness our growth potential and sustain profitable growth.
 Deliver high and cost competitive products and to be the first choice of customers.
 Achieve excellence in enterprise management.
 Be a respected citizen, ensure clean and green environment and develop vibrant
communities around us

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Mission
 To attain 20 million tonnes of liquid steel capacity through technological up gradation,
operational efficiency and expansion.
 To produce steel at international standards of cost and quality.
Objectives
 Expand plant capacity to 6.3 MT by 2013-2014 with the mission to expand further in
subsequent phases as per the corporate plan.
 Sustain gross margin to turnover ratio ≥ 25%
 Be amongst top 5 lowest cost liquid steel producers in the world.
 Achieve higher levels of customer satisfaction than competitors.
 Be recognised as an excellent business organisation by 2013-2014.
Sources of funds:
VSP raise its working capital from of 10 Bankers. The following are the 10 banks. Where
funds for finance are raised
 State Bank of India
 Canara Bank
 UCO Bank
 Bank of Baroda
 Andhra Bank
 State Bank of Hyderabad
 Allahabad Bank
 HSBC
 Industrial Development Bank of India ( IDBI)
 Indian Overseas Bank ( IOB)
Achievements and Awards
The efforts of VSP have been recognized at various forums. Some of the major awards
received by VSP are in the area of energy conservation, environment protection, safety, quality,
circles, Rajbhasha. MoU, sports and a number of awards at the individual level.

32
 Indira PriyadarshiniVrikshaMitra award -1992-93 Nehru Memorial National award
for pollution control in 1992-93 &1993-94.
 EEPC export excellence award-1994-95.
 Steel Minister Trophy for “BEST SAFETY PERFORMANCE”-1996.
 Ispat Suraksha Puraskar for longest accident free period 1991-1994.
 Best labour management award from the Govt of AP.
 SCOPE award for best turn around-2001.
 Best enterprise award from SCOPE, WIPS-2001-2002.
 ISTD award for best HR practices -2002.
 CII (southern region) energy conservation award-1995-1996.
 Prime Minister Trophy for best integrated steel plant -2002-2003.
 Organisational Excellence Award for 2003-2004 conferred by INSSAN.
 National Energy Conservation Award 2004 and special prize from ministry of
power, Govt of India.
 National Award for Excellence in Water Management by CII-2005
 Certificate of Appreciation by Institution of Engineers, AP chapter-2005
 Business Achievement Award for Excellence-2005
 Organizational Excellence Award-2005
 National Award for e-Governance-2007-08
 Sri PK Bishnoi, CMD was awarded the Best Chief Executive Gold Award of 'Indira
Gandhi Memorial National Awards-2007' by Institution of Engineers (India)
Hyderabad.-2007
 Enterprise Excellence Award 2007 conferred by Indian Institute of Industrial
Engineering (IIIE) in May 2008.
 RINL ranked No.2 globally for the popularity of website among the global steel
makers.
 Adjudged Energy Efficient Unit award by Confederation of Indian Industry Godrej
Green Business Centre at the 10th National award.-2009
 Global Human Resource Development Award of International Federation of
Training and Development Organization, London-2010
 "Excellent Water Efficient Unit" award by CII-2010
 'Indira Gandhi Rajbhasha shield' given by His Excellency Vice President of India
Dr. Hamid Ansari-2010

33
 First Prize - IIM Sustainability Award-2011 by Indian Institute of Metals-2011
 Awards at INSSAN -2012 - 1st place in the ‘Excellence in Suggestion Scheme’ &
3 Merit prizes-2013
 Cost Management Excellence Award by Institute of Cost Accountants of India ,
New Delhi-2013
 First prize of prestigious Indira Gandhi Rajbhasha Shield-2013
 Excellence Award by Institute of Economic Studies-2014
A land mark year of growth
The year 2005-2006 saw the company registering then best ever sales turnover of Rs.8482
cores a 3.6% growth over previous year. The company stated a record net profit of Rs.1252.37
crores and this is the third consecutive year that the company has been earning net profit with
this the accumulated losses have bought down with this accumulated losses have set up to out
the Rs.906 crores and your Company is all shortly also your “MINI RATNA’ by government
of India.
Rashtriya Ispat Nigam Limited, the corporate entity of Visakhapatnam Steel Plant (VSP), has
been conferred ‘Navratna’ status.
It works under the following slogan:
“Let Excellence not only is our goal.
Let us make it out standard”
Innovations
The government proposes to bring in a new steel policy. It would define the framework
of government action in each relevant are as also to create ground conditions for private sector
initiative whatever possible. The ministry of Steel has striven to provide an effective interface
between the industry and the various economic agencies like government departments,
financial institutions, providers of input materials and essential service and multilateral
agencies.
The steel industry’s growth and development trajectory will be heavily dependent on
its ability to mobilize the necessary resources for investment in the coming years. Till recently,

34
when the steel industry was passing through one of the most turbulent phases, even the strong
companies in the industry would have encountered difficulty in mobilizing financial resources
from the capital market.
The perceived risks that hindered the industry’s resource mobilization efforts are now
being replaced by a general feel good factor. This will help the industry significantly. The turn
– around in the industry has come at a very opportune time.
The Indian steel industries continue to remain focused on the merging opportunities
in the world market. Chain is offering great. Opportunities to the Indian industry. Despite the
massive growth in steel output in China, there will always be opportunities for the Indian
exporters. The international business has to be carried out consistently Else the market will be
lost at the first sign of a downturn. The Indian steel industry has come a long way from the
days of control and strive to remain globally competitive. This is the age of technology and we
have the requisite resources to the lead in take the steel sector.

35
BOARD OF DIRECTORS
CHAIRMAN-CUM-MANAGING DIRECTOR SHRI P MADHUSUDAN, DIRECTOR
DIRECTOR ( PERONNEL) SHRI DR. G.B.S PRASAD
DIRECTOR ( COMMERICAL) SHRI T.K.CHAND
DIRECTOR ( OPERATIONS) SHRI UMESH CHANDRA
DIRECTOR (FINANCE) SHRI P.MADHUSUDHAN
DIRECTOR ( PROJECTS) SHRI PC MOHAPATRA,
INDEPENDENT DIRECTORS SHRI V S JAIN
SHRI ASHOK KUMAR JAIN
SHRI AJAY KUMAR GOYAL
GOVT. DIRECTORS SHRI V.K. THAKRAL
SHRI LOKESH CHANDRA,
CHIEF VIGILANCE OFFICER SHRI B SIDDHARTHA KUMAR
REGISTERED OFFICE ADMINISTRATIVE BUILDING,
VISAKHAPATNAM STEEL PLANT,
VISAKHAPATNAM – 31

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ORGANIZATION STRUCTURE:
Joint venture mechanism
The company is one of the PSU’s as a joint venture partner in IVCL which was incorporated
for acquiring overseas coal assets.
The company has also formed joint venture with MOIL(another PSU) with 50:50 shares for
the purpose of setting up of Ferro alloys Allys unit at Bobbilli in Andhra Pradesh.
Profile of Visakhapatnam steel plant
Introduction
Steel occupies the foremost place among the materials in use today and pervades all
walks of life. All key discoveries of human genius, for instance, Steam Engine, Railway, means
of Communication and Connection, Automobiles, Aero Plane and Computers are in one way
or other; fastened together with steel and its sagacious and Multifaceted applications.

37
Steel is versatile material with multitude of useful properties, making it indispensable
for furthering and achieving continual growth of economy be it Construction, manufacturing,
infrastructure or consumables. The level of steel consumption has long been regarded as an
index of industrialization and economic maturity attained by a country.
Keeping in view of the importance of steel, the following integrated steel plants with
foreign collaborations were set up in public sector in post - independence era.
Integrated steel plants in India
STEEL PLANT COLLABORATION
Durgapur Steel Plant Britain
Bhilai Steel Plant Erstwhile USSR
Bokaro Steel Plant Erstwhile USSR
Rourkela Steel Plant Germany
OBJECTIVES OF THE STUDY
 To find out working capital position of the company for last five years.
 To identify the liquidity position in the Visakhapatnam steel plant.
 To study the liquidity position through various working capital related ratios.
 To examine the policies and procedures of the working capital management.
 To examine the cost of capital.
 To examine the utilization of current assets and management of inventory receivables.
 To study and analyse the changes in working capital.
 To draw conclusion and to suggest suitable measures to overcome the problems and to
improve its performance by comparing the working capital position with other
companies in the steel industry.

38
NEED FOR THE STUDY
The study is concerned for the following needs.
 Working capital decides not only liquidity and solvency but also operating efficiency
of the organization.
 This project is done as a whole entirely. It will give overall view of the organization
and it is useful in further expansion decision to be taken by management.
 To study the working capital needs and strength of the organization in meeting and
managing working capital of the organization.
 This project also useful as it combines the present year data with the previous year data
and thereby it shows the trend analysis, i.e. increasing or decreasing.
 This project also helpful in comparing the working capital status with other companies
in the industry.
 This project also takes care in comparing cost of capital of other companies in the
industry with RINL.
METHODOLOGY
Research methodology is a way to solve the research problems systematically. Research
may be one common parlance referred to as knowledge. In research methodology we not only
talk of the research methods, but also consider the logic behind the methods we use in the
content of our research study and explain why we are using a particular method or technique.
Hence in this study various steps that are generally adopted in studying research problem along
with the logic behind them. It is a broad outline of the method and procedure adopted for the
purpose of the study.
Data collection methods:
 Primary data
 Secondary data

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Primary data
Any information which is collected a fresh and for the first time is called primary data
the primary data happen to be original in character. The information is gathered from concerned
employees and managers of the financial department have provided the information needed for
the study.
Secondary data
Information which has already been collected by somebody else or some other agency
with definite purpose and which has already been proposed is called secondary data. The
secondary data for the study have been gathered from the balance sheets, profit and loss
accounts, annual reports and other books and manuals of the RASHTRIYA ISPAT NIGAM
LTD.
SCOPE OF THE STUDY
 As longer as the accounting practices more or less the same over time, examining trends
in raw financial data and financial ratios can draw meaningful interpretations.
 Since all the steel industries operate almost similarly, the analysis of the financial
performance of Visakhapatnam steel plant will certainly help in comparing the
performance of the other industries operating in the same field and analyze the overall
performance of the steel industry.
 The project helps to understanding the financial analysis works carried over in the
organisations on accounting basis.
LIMITATIONS OF THE STUDY
Though this project is completed successfully a few limitations may be limitations.
 Although every effort has been made to study the “WORKING CAPITAL
MANAGEMENT AND COST OF CAPITAL” in detail, in an organization of VSP size,
it is not possible to make an exhaustive study in a limited duration of 6 weeks.
 Apart from the above constraints, one serious limitation of the study is that it is not
possible to reveal some of the financial data owing to the policies and procedures laid
down by VSP. However the available data is analysed with great effort to get an insight
into working capital management in VSP.

40
 And analysis of sub topics is limited to some extensions.
 The study is carried basing on the information and documents provided by the
organization and based on the interaction with the various employees of the respective
departments.
 Due to lack of time constraint data is collected only five years.
 Due to income tax problem eliminate the top secretes of the company.

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THEORETICAL FRAME WORK
Working capital Management is concerned with the problems that arise in attempting
to manage the current assets, current liabilities and the inter relationship between them. Its
operational goal is to manage the current assets and current liabilities in such away that a
satisfactory level of working capital is maintained. Successful and effective Management of
working capital results in improved rate of returns on the capital invested in short term assets.
CONCEPTS
There are two concepts of working capital
Gross working capital
Gross Working Capital refers to the company’s investment in current assets. Current
assets are the assets which can be converted into cash within an Operating Cycle time or within
an accounting year i.e., within 12 months. This includes cash, short term securities, debtors,
Bills receivable and inventory. This Gross Working Capital concept is also called “Economist
Concept”.
The gross working capital concept focuses attention on two
Aspects Of current assets management.
a) Optimum investment in current assets and
b) Financing of current assets.
Net working capital
Net working capital refers to the difference between current assets and current liabilities.
This Net Working Capital concept is also called as “Accountants Concept”. Current liabilities
are the claims of outsiders which are expected to mature for payment within an accounting
year. Net working capital concept also covers the question of judicious mix of long term and
short term funds for financing current assets.
The level of NWC has a bearing on the Company’s Profitability as well as the risk, in the
sense that it affects the ability or otherwise of the firm to meet its obligations as and when they
become due. Therefore, a trade-off between profitability and risk is an important element in

43
evaluation of the level of NWC. In general, the higher the NWC, the lower the risk and
profitability and vice versa.
Working Capital Management Goal
The goal of working capital management is to manage the firms’ Current Assets and
Current Liabilities in such a way that a satisfactory level of working capital is maintained. This
is so because if the firm cannot maintain a satisfactory level of working capital, it is likely to
become insolvent and may even be forced into bankruptcy. Sometimes, a Company may have
tremendous potential for profitability in the long run, but may languish due to inadequate
liquidity. The interaction between current assets and current liabilities therefore, the main
theme of the theory of working capital management.
Types of working capital
Working Capital of any enterprise consists of two parts viz.,
 Permanent Working Capital and
 Temporary or Variable Working Capital.
Permanent Working Capital
Some portion of the working capital investment is always locked-up in the form of raw
materials, Work-in-Progress, Finished Goods, Book Debts and minimum Cash Balance etc. at
any point of time. This portion is the minimum level of investment that is required to continue
the operations of the business without any interruption is referred to as the Permanent Working
Capital portion. According to the TANDON COMMITTEE recommendations, a portion of
the Current Assets are to be financed from the Long Term funds.
Variable Working Capital
This is also known as circulating of transitory Working Capital. This is the portion of the
total Working Capital that is required to take care of the seasonal fluctuations in the business
activity.

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Determinants of Working Capital
The need of working capital is not always the same it varies from year to year or even
month-to-month depending upon a number of factors. There is no set of rules or formulate to
determine the working capital needs of the firm. Each factor has its own importance and its
importance of the factors changes for a firm over time.
In order to determine the proper amount of working capital of concern, the following factors
should be considered.
 Nature of business.
 Size of the business unit.
 Seasonal variation.
 Time consumed in manufacturing.
 Turnover of circulating capital.
 Need to stockpile raw material and finished goods.
 Growth and expansion.
 Business cycle fluctuations.
 Terms of purchase and sale.
 Pricing level changes.
 Inventory turnover.
 Dividend policy.
Approaches of Working Capital Determination
There are 3 well known types of deciding on the quantum of Working Capital
requirement. They are
 Hedging Approach
 Conservative Approach
 Trade off Approach
In Hedging approach, the core current assets are financed through long term funds and
the seasonal and other requirements are met from temporary sources. This approach is more
profitable and more risky. In the case of Conservative approach, the total requirement is met
from long term sources and the requirement due to cyclical and unforeseen situations are met
from short term funds. This approach is less profitable and less risky. Both these approaches

45
are two extremes. Therefore, the rational approach, ‘Trade off Approach’ is followed whereby
a trade-off between profit and risk is arrived and that level of Net Working Capital is decided.
Problems of inadequate working capital
 Firm may not be able to take advantage of profitable business opportunities.
 Production facilities cannot be utilized fully.
 Short-term liabilities cannot be paid because of non-availability of funds.
 Its low liquidity may lead to low profitability. In the same way, low profitability results
in low liquidity
 It may not be able to take advantages of cash discounts.
 Credit worthiness of the firm may be damaged because of lack of liquidity. Thus it may
be lose its reputation; thereafter a firm may not be able get credit facilities.
Danger of excessive working capital
 A firm may be tempted to over trade and lose heavily.
 Unable to extract benefits of customer credit.
 The situation may lead to unnecessary purchases and accumulation of inventories. This
cause more chances of theft, waste, losses etc.
 There arises an imbalance between liquidity and profitability.
 Excessive working capital means funds are idle.
 The situation leads to greater production, which may not be having matching demand.
 The excess of working capital leads to carelessness about cost of production.
Ratios to measure the efficiency of working capital
 Current Ratio: Current assets/Current liabilities.
 Quick Ratio: (current assets – Inventories) /Current liabilities.
 Sales to cash: Sales during a period / Average cash balance.
 Average collection period: Debtors dividend by annual credit sales and the resulting
figure multiplied by 365.This ratio indicates how many days of credit is being obtained
from the suppliers.

46
 Average payment Period: Creditors divided by annual credit purchase and the resultant
figure is multiplied by 365. This ratio indicates how many days of credit are being
obtained from the suppliers.
 Inventory turnover ratio: Sales /Average inventory.
Working capital Policy
Working capital management policies have a great effect on firm`s profitability, liquidity and
ts structural health. A finance manager should therefore, chalk out appropriate working capital
policies in respect of each component of working capital so as to ensure high profitability,
proper liquidity and sound structural health of the organization.
In order to achieve this objective the financial manager has
To perform basically following two functions.
 Estimating the amount of working capital.
 Sources from which these funds have to be raised.
Components of working capital:
Current Assets
Inventories:
 Raw material
 Work in progress
 Finished goods
Trade debtors
 Loans and advances
 Investment (short term)
 Cash bank balances
Current liabilities
Sundry creditors
 Trade Advances

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 Borrowings
 Commercial banks
 Provisions Current
Operating cycle or circulating cash format
Working Capital refers to that part of firm’s capital which is required for financing short
term or current assets such as cash, marketable securities, debtors and inventories. Funds thus
invested in current assets keep revolving fast and being constantly converted into cash and these
cash flows out again in exchange for other current assets. Hence it is also known as revolving or
circulating capital. The circular flow concept of working capital is based upon this operating or
working capital cycle of a firm.
Working capital may be classified in two ways
 On the basis of concept
 On the basis of time
 On the basis of concept, working capital is classified as gross working capital and net
working capital. The classification is important from the point of view of the financial
manager.
 On the basis of time, working capital may be classified as:
 Permanent or Fixed working capital
 Temporary or Variable working capital

48
Flow chart
Permanent or fixed working capital
Permanent or fixed working capital is the minimum amount which is required to ensure
effective utilization of fixed facilities and for maintaining the circulation of current assets.
There is always a minimum level of current assets which is continuously required by the
enterprises to carry out its normal business operations.
Temporary or variable working capital
Temporary or variable working capital is the amount of working capital which is
required to meet the seasonal demands and some special exigencies. Variables working capital
can be further classified as second working capital and special working capital. The capital
required to meet the seasonal needs of the enterprises is called the seasonal working capital.
On the basis of concept On the basis of time
Net Working
capital
Permanent or
fixed working
capital
Temporary or
variable
working
capital
Gross
Working
capital
Kinds of Working Capital
Seasonal Working
Capital
Reserve Working
Capital
Regular
Working Capital
Special Working
Capital

49
Temporary working capital differs from permanent working capital in the sense that is
required for short periods and cannot be permanently employed gainfully in the business.
The need or objects of working capital
The need for working capital cannot be emphasized. Every business needs some amount
of working capital. The need of working capital arises due to the time gap between production
and realization of cash from sales. There is an operating cycle involved in the sales and
realization of cash. There are time gaps in purchase of raw materials and production, production
and sales,
And sales, and realization of cash, thus, working capital is needed for the following purposes:
 For the purchase of raw materials , components and spaces
 To pay wages and salaries
 To incur day to day expenses and overhead costs such as fuel, power and office
expenses etc.
 To meet the selling costs as packing, advertising etc.
 To provide credit facilities to the customers.
 To maintain the inventories of raw materials, work –in- progress, stores and spares and
finished stock.
Factors determining the working capital requirement
The working capital requirements of a concern depend upon a large number of factors
such as nature and size of the business, the characteristics of their operations, the length of
production cycle, the rate of stock turnover and the state of economic situation. However the
following are the important factors generally influencing the working capital requirements.
Nature or characteristics of a business
The nature and the working capital requirement of enterprises are interlinked. While a
manufacturing industry has a long cycle of operation of the working capital, the same would
be short in an enterprises involve in providing services. The amount required also varies as per

50
the nature, an enterprises involved in production would require more working capital then a
service sector enterprise.
Manufacture production policy
Each enterprises in the manufacturing sector has its own production policy, some follow
the policy of uniform production even if the demand varies from time to time and other may
follow the principles of demand based production in which production is based on the demand
during the particular phase of time. Accordingly the working capital requirements vary for both
of them.
 Operations
The requirement of working capital fluctuates for seasonal business. The working capital needs
of such business may increase considerably during the busy season and decrease during the
cycle of business
 Market condition
If there is a high competition in the chosen project category then one shall
need to offer sops like credit, immediate delivery of goods etc for which the working capital
requirement will be high. Otherwise if there is no competition or less competition in the market
then the working capital requirements will be low.
 Availability of raw material
If raw material is readily available then one need not maintain a large stock of the
same thereby reducing the working capital investment in the raw material stock. On other hand
if raw material is not readily available then a large inventory stocks need to be maintained,
there by calling for substantial investment in the same.
 Growth and expansion
Growth and Expansions in the volume of business result in enhancement of the
working capital requirements. As business growth and expands it needs a larger amount of the
working capital. Normally the needs for increased working capital funds processed growth in
business activities.
 Price level changes
Generally raising price level require a higher investment in the working capital. With
increasing prices, the same levels of current assets needs enhanced investments.

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Manufacturing cycle
The manufacturing cycle starts with the purchase of raw material and is completed with
the production of finished goods. If the manufacturing cycle involves a longer period the need
for working capital would be more. At time business needs to estimate the requirement of
working capital in advance for proper control and management. The factors discussed above
influence the quantum of working capital in the business. The assessment of the working capital
requirement is made keeping this factor in view.
Each constituent of the working capital is valued on the basis of valuation
Enumerated above for the holding period estimated. The total of all such valuation becomes
the total estimated working capital requirement.
Principles of working capital management policy:
The following are the general principles of a sound working
Capital management policy.
COMPONENTS OF WORKING
CAPITAL BASIS OF VALUATION
Stock of Raw Material Purchase of Raw Material
Stock of Work -in- Process
At cost of Market value which is
lower
Stock of finished Goods Cost of Production
Debtors Cost of Sales or Sales Value
Cash Working Expenses
PRINCIPLES OF
RISK VARIATION
VARIATIONS
PRINCIPLES OF
COST OF CAPITAL
CAPITAL
PRINCIPLES OF
EQUITY POSITION
PRINCIPLES
PRINCIPLES OF
MATURITY OF
PAYMENTS
PRINCIPLES OF WORKING CAPITAL MANAGEMNT POLICY

52
Principle of risk variation (current assets policy)
Risk here refers to the inability of a firm to meet its obligations as and when they become
due for payment. Larger investment in current Assets with less dependence on short term
borrowings, increase liquidity, reduces risk and thereby decreases the opportunity for gain or
loss. On the other hand less investments in current assets with greater dependence on short term
borrowings, reduces liquidity and increase profitability. In other words there is a definite
inverse relationship between the degree of risk and profitability.
Principles of cost of capital:
The various source of raising working capital finance have different cost of
capital and the degree of risk involved. Generally, higher and risk however the risk lower is the
cost and lower the risk higher is the cost. A sound working capital management should always
try to achieve a proper balance between these two.
Principle of equity position
The principle is concerned with planning the total investments in current assets.
According to this principle, the amount of working capital invested in each component should
be adequately justified by a firm’s equity position. Every rupee invested in current assets should
contribute to the net worth of the firm. The level of current assets may be measured with the
help of two ratios:
1. Current assets as a percentage of total assets and
2. Current assets as a percentage of total sales
While deciding about the composition of current assets, the financial manager may
consider the relevant industrial averages.
Inventory management:
Inventory includes all type of stocks. For effective working capital management,
inventory needs to be managed effectively. The level of inventory should be such that the total
cost of ordering and holding inventory is the least. Simultaneously stock out costs should be
minimized. Business therefore should fix the minimum safety stock level reorder level of
ordering quantity so that the inventory costs is reduced and outs management become efficient.
CASH MANAGEMENT

53
Meaning of cash
The term ‘cash’ is used in two senses. In a narrower sense it includes currency notes,
cheques, bank drafts held by a firm with it and the demand deposits held by it in banks. In a
broader sense it also includes near cash assets such as marketable securities and time deposits
with bank.
The main reason for a firm to hold cash is to meet the needs of day-to-day transactions
and to protect the firm against uncertainties characterizing its cash flows. While cash serves
these functions, it is an idle resource which has an opportunity cost. The liquidity provided by
cash holding is at the expense of profits sacrificed foregoing alternative opportunities. Hence,
the finance manager should carefully plan and control cash.
Cash is the one of the current assets of a business. It is needed at all times to keep the
business going. A business concern should always keep sufficient cash for meeting its
obligations. Any shortage of cash will hamper the operations of a concern and any excess of it
will be unproductive. Cash is the most unproductive of all the assets.
Cash itself doesn’t produce goods and services. It is used as a medium to acquire other
assets. It is the other asset, which is used in manufacturing goods or providing services. The
ideal cash can be deposited in bank to earn interest. A business has to keep required cash for
meeting various needs. The assets acquired by the cash again help the business in producing
cash. The goods manufactured are sold to acquire cash. The firm will have to maintain a critical
level of cash. If at a time it doesn’t have sufficient cash with it, it will have to borrow from the
market for reaching required level.
There remains gap between cash inflows and outflows. Sometimes cash receipts are
more than cash payments. It is called surplus. Sometimes cash payments are more than cash
receipts. This is called as deficiency. A financial manager tries to synchronise cash inflows and
cash outflows. Perfect synchronization of receipts and payments of cash is only an ideal
situation.
Cash management has assured importance because it is the most significant of all the
current assets. It is required to meet business obligations and it is unproductive when not used.
It is deals with the following.
a) Cash Planning

54
Cash planning is a technique to plan and control the use of cash. A projected cash flow
statement may be prepared, based on the present business operations and anticipated future
activities. The cash inflows from various sources may be anticipated & cash outflows will
determine the possible uses of cash.
b) Cash forecasts and budgeting
A cash budget is the most important device for the control of receipts and payment of
cash. A cash budget is an estimate of cash receipts. It is an analysis of flow of cash in a business
over a future, short or long period of time. It is a forecast of expected cash intake and outlay.
The short-term forecasts can be made with the help of cash flow projections. The long-term
cash forecasts are also essential for proper cash planning. These estimates may be for three,
four, five or more years.
 Receipts and disbursements method.
 Adjusted net income method.
Objectives
 To meet cash disbursement need as per the payment schedule.
 Utilization of cash effectively.
 To minimize amount locked up as cash balances.
Motive for holding cash
There are four motives for holding cash
 Transaction motive
 Speculative motive
 Compensation motive
 Precautionary motive
 Transaction motive
A firm enters into a variety of business transactions resulting in both inflows
and outflows.
 Speculative Motive

55
A firm keeps cash balance to take advantage of unexpected opportunities,
typically outside the normal course of the business such motive is therefore is purely
speculative motive.
 Compensation motive
Banks provide certain services to their clients free of charge. They therefore,
usually require clients to keep to minimum cash balance with them which keep them
to earn interest and they compensate them for the free services so provided.
 Precautionary Motive
A firm keeps cash balance to meet unexpected cash needs arising out of
unexpected contingencies.
Cash management basic problems
Cash is the life blood of a business firm, it is needed to acquire supplies, sources
equipment, and other assets used in generating the products and service provided by the firm.
It is also needed to pay wages and salaries to workers and managers, taxes to governments,
interest and principal to creditors, and dividends to shareholders.
 Cash system
The cash system of a firm is the mechanism that provides the linkage between cash flows.

56
Elements of a cash management system
Receivables management
Given a choice, every business would prefer selling its produce on cash basis.
However, due to factors like trade policies, prevailing marketing conditions, etc., businesses
are compelled to sell their goods on credit. In certain circumstances, a business may
deliberately extend credit as a strategy of increasing sales. Extending credit means creating a
current asset in the form of Debtors or Accounts receivables. Investment in this type of
current assets needs proper and effective management as it gives rise to costs such as:
 Cost of carrying receivable
 Cost of debt losses
Thus the objective of any management policy pertaining to accounts receivables would be to
ensure that the benefits arising due to the receivables are more than the cost incurred for
receivables and the gap between benefit and cost increases resulting in increased profits.
Effective control of receivables helps a great deal in properly managing it. Each business
should, therefore try to find out an average credit extended to its client using the below given
formula
Concentration
bank
Lock box
bank 2
Deposit
Bank 2
Deposit
Bank 1
Lock box
bank 2
Disbursement
bank 1
Disbursement
bank 1
C.P.
C.P.
C.P.
C.P.
C.P.
C.P.
C.R.
C.R.
C.R
C.R.
C.R.
C.R.

57
Total amount of receivables
Average credit extended=
Average credit sales per day
Each business should project expected sales and expected investment in receivables
based on various factors, which influences the working capital requirement. From this it would
be possible to find out the average credit days using the above seven formula. Otherwise of
investment in the working capital would increase and as a result activities may get squeezed.
This may lead to cash crisis.
Sources of working capital funds
RINL raise its working capital multiple banking which includes
State bank of India, State bank of Hyderabad, Bank of Baroda, Canara bank, UCO
bank, Andhra bank, PSB, IndusInd bank.etc.
In RINL working capital requirement is assessed by
 Fixing the target production for the year
 Preparation of Budget (in Rupees)
Working capital requirement are prepared taking into account
 Previous two years actual
 Projected for the next two years
Procedure for procurement of funds
RINL applies a Credit Monitoring And Appraisal (CMA) Report (a Forty pages
document) consists of historical data about the company and profit and loss account, balance
sheet, current assets, current liabilities, working capital assessment, fund flows etc., State Bank
of India subscribes the maximum working capital limit (up to extent of 38%) of the entire
working capital assessed. The other banks of the under the multiple banking arrangement above
provide the rest of working capital limits.

58
Types of working capital sources
Fund based limits
Under this source, RINL can obtain working capital finance by bank borrowing in the
form of cash credit of export packing credit.
Non-fund based limits
RINL receives non-fund based working capital in the form of
 Letter of credit
 Bank guarantee
What is letter of credit and bank guarantee?
A letter of credit is a document typically issued by a bank or financial institution,
which authorizes the recipient of the letter (the "customer" of the bank) to draw amounts of
money up to a specified total, consistent with any terms and conditions set forth in the letter.
This usually occurs where the bank's customer seeks to assure a seller (the "beneficiary") that
it will receive payment for any goods it sells to the customer.
In simple terms, a letter of credit could be said to document a bank customer's line of
credit, and any terms associated with its use of that line of credit. Letters of credit are most
commonly used in association with long-distance and international commercial transactions.
Payables management
Management of accounts payable is as much important as the management of such
accounts receivable. However there is a basic difference between the approaches adopted by
the finance manager in both the cases. The underlying objective in such case of accounts
receivables is to maximize the acceleration of collection process while in case of accounts
payable it is to slow down the payments process as much as possible. The delay in payments
of accounts payable may result in saving of some interests costs but proves very costly to the
firm in the form of loss of credit in the market. The finance manager therefore has to ensure
that the payments to the credits are made at the stipulated time period after obtaining the best
credit term possible.

59
Control of accounts payable
Computing the average age of payable can be calculated by any of the following
methods. Months or days in the period / Accounts payable turnover = Credit purchase in the
period / Average accounts payable.

61
DATA ANALYSIS AND INTERPRETATION
CURRENT ASSETS
TABLE
current assets
Mar-09 Mar-10 Mar-11 Mar-12 Mar-13
vizag steel 11859.32 9550.66 7625.21 8662.85 9977.75
tata steel 11591.66 13425.27 25569.4 18483.79 17860.79
SAIL 35666.84 40113.05 39118.76 30475.56 30831.85
JSW 4849.54 5652.18 10188.37 15906.56 17265.96
jindal steel 5189.28 5175.5 8095.98 10102.97 12839.08
GRAPH
INTERPRETATION
Current Assets of Vizag steel are comparatively low with other companies in the steel
industry. Tata steel and SAIL has good current assets which helps them pay their liabilities
easily. Vizag steel got general decrease in current assets from 2009 to 2011 but again got back
to good position in the year 2013 which clearly explains that they have good chances of paying
their liabilities.
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
vizag steel
tata steel
sail
jsw
jindal steel

62
CURRENT LIABILITIES
TABLE
current liabilities
vizag steel 4181.32 4307.84 4607.49 5209.43 10184.67
tata steel 11899.95 12003.02 16458.91 19875.88 20755.74
SAIL 19609.72 19595.34 19876.43 20428.49 21693.25
JSW 9196.27 9679.5 12381.77 19791.4 18134.19
jindal steel 4111.64 5045.64 6256.43 8340.24 7960.92
GRAPH
INTERPRETATION
Current liabilities of Vizag steel are comparatively low with other companies which is
good sign. But it can be better decided with the ratio of other industries. Current liabilities are
increasing year by year for Vizag steel which is not at all a good sign.
Tata steel, Sail, Jsw and Jindal steel having general increase in current liabilities. The
reason for increase of current liabilities are as the cost of material and labour increasing and if
company is not seeing high profits which may lead to need of money from the outside sources.
If company having good debts can manage the current liabilities very well.
0
5000
10000
15000
20000
25000
vizag steel
tata steel
sail
jsw
jindal steel

63
CURRENT RATIO
TABLE
current ratio
vizag steel 2.83 2.21 1.65 1.66 0.97
tata steel 0.97 1.11 1.55 0.92 0.86
SAIL 1.81 2.04 1.96 1.49 1.42
JSW 0.52 0.58 0.82 0.80 0.95
jindal steel 1.26 1.02 1.29 1.21 1.61
GRAPH
INTERPRETATION
Current ratio of Vizag steel is more comparatively more with other companies in the
industry. Tata Steel, Sail, Jindal steel having gradual changes in their current ratio. whereas,
Jsw current ratio is increasing gradually. Company with high current ration explains that they
have good composition of current assets compared to current liabilities.
The change in current ratio is decreasing for vizag steel which is not at all a good sign
for the company, which clearly shows that companies’ current liabilities are increasing. But
they recovered well in the year 2012 which is of very less percentage. The best current ratio
they acquire is in the year 2008.
0
0.5
1
1.5
2
2.5
3
vizag steel
tata steel
sail
jsw
jindal steel

64
NET WORKING CAPITAL
TABLE
NET WORKING CAPITAL
vizag steel 7678 5242.82 3017.72 3453.42 -206.92
tata steel -308.29 1422.25 9110.49 -1392.09 -2894.95
SAIL 16057.12 20517.71 19242.33 10047.07 9138.6
JSW -4346.73 -4027.32 -2193.4 -3884.84 -868.23
jindal steel 1077.64 129.86 1839.55 1762.73 4878.16
GRAPH
INTERPRETATION
The Net working capital is high for vizag steel and SAIL compared to other companies in the
industry. As they have good composition of current assets than more liabilities, they have net
working capital ratio.
Tata steel and Sail have good ratios but they have gradual changes and don’t have
consistency in their operations. Even vizag steel has gradual changes but comparatively in good
position. There was a high decrease in the years 2011, 2012 with a slight negative in 2013.
-10000
-5000
0
5000
10000
15000
20000
25000
vizag steel
tata steel
sail
jsw
jindal steel

65
WORKING CAPITAL TURNOVER RATIO
TABLE
WORKING CAPITAL TURNOVER RATIO
vizag steel 1.18 1.87 3.46 3.80 -60.72
tata steel -78.97 17.53 3.22 -24.37 -13.19
SAIL 2.72 1.97 2.21 4.61 4.88
JSW -3.22 -4.51 -10.53 -8.24 -40.87
jindal steel 7.12 56.57 5.20 7.56 3.06
GRAPH
INTERPRETATION
Working capital turnover is a measurement comparing the depletion of working capital by the
generation of sales for a certain period. It provides us with some important data in order to have
effective transformation in its working capital.
Working capital turnover ratio of vizag steel comparatively low with other companies
in the industry. Other companies having their working capital in gradual components. Jindal
steel is too low in value when compared to vizag steel. The reason behind these values are the
sales value of their products or the cost incurred on sales are not much efficient with their
working capital on that product. The value of product is high for Tata steel and Jindal steel
which shows that even if they have less or more current assets they are managing the companies
very well.
-100
-80
-60
-40
-20
0
20
40
60
80
vizag steel
tata steel
sail
jsw
jindal steel

66
QUICK RATIO
TABLE
QUICK RATIO
vizag steel 2.06 1.64 0.94 1.00 0.60
tata steel 0.68 0.86 1.31 0.68 0.60
SAIL 1.30 1.58 1.39 0.81 0.68
JSW 0.30 0.31 0.48 0.54 0.68
jindal steel 0.96 0.76 0.94 0.84 1.16
GRAPH
INTERPRETATION
Quick ratio is decreasing gradually low for Vizag steel . Tata steel, Sail has very good
value til 2011 and started decreasing from 2011 to 2013. This clearly explains that they liquefy
the assets easily compared to others.jindal steel have a high liquidity in the year 2013
0
0.5
1
1.5
2
2.5
vizag steel
tata steel
sail
jsw
jindal steel

67
DEBTORS TURNOVER RATIO & CONVERSION PERIOD
TABLE
DEBTORS TURNOVER RATIO
vizag steel 47.72 54.14 31.67 30.76 12.44
tata steel 38.28 57.35 69.32 37.53 47.93
SAIL 14.48 11.61 10.22 9.73 10.08
JSW 35.18 32.25 27.54 23.52 19.05
jindal steel 19.61 11.80 12.98 14.73 10.48
DEBTORS CONVERSION PERIOD
vizag steel 7.64 6.74 11.52 11.86 29.32
tata steel 9.53 6.36 5.26 9.72 7.61
SAIL 25.20 31.41 35.70 37.50 36.20
JSW 10.37 11.31 13.25 15.51 19.15
jindal steel 18.60 30.91 28.10 24.77 34.80
GRAPH
0
10
20
30
40
50
60
70
80
vizag steel
tata steel
sail
jsw
jindal steel

68
INTERPRETATION
It is an accounting measure used by the company in order to quantify a firm’s quality
in extending the credit as well as collecting debts faster. It also explains about how firm uses
its assets effectively.
Vizag steel and TATA steel has very high debt turnover ratio compared to other
companies in the industry. This explains that they are having more credit sales and less debtors.
Sail and Jindal steel having very less values but it’s a good sign when concentrating on
debtors.JSW debtors have decreased gradually.
Vizag steel has very low conversion period when compared to other companies in the
industry. This explains that they have less debtors and they are taking less time in converting
that in to cash whereas Tata steel, Sail and Jindal Steel have high conversion period.
0
5
10
15
20
25
30
35
40
vizag steel
tata steel
sail
jsw
jindal steel

69
PAYABLES TURNOVER RATIO & CONVERSION PERIOD
TABLE
PAYABLE TURNOVER RATIO
vizag steel 2.18 2.27 2.27 2.52 1.23
tata steel 2.04 2.07 1.78 1.70 1.84
SAIL 2.23 2.07 2.13 2.26 2.05
JSW 1.52 1.87 1.86 1.61 1.95
jindal steel 1.86 1.45 1.53 1.59 1.87
PAYABLE CONVERSION PERIOD
vizag steel 167.19 160.29 160.60 144.67 295.82
tata steel 178.38 175.66 204.36 213.79 198.32
SAIL 163.41 176.18 170.56 160.90 177.54
JSW 239.64 194.46 195.65 225.45 186.49
jindal steel 195.46 250.65 238.51 228.30 194.30
GRAPH
0
0.5
1
1.5
2
2.5
3
vizag steel
tata steel
sail
jsw
jindal steel

70
INTERPRETATION:
It is a short – term liquidity measure used to quantify the rate at which a company pays
off its suppliers.
Vizag steel has very good payables turnover ratio compared to other companies in the
industry. This explains that they are having more credit purchases and less debtors. Tata steel,
Sail and Jindal steel are also having very good values but it’s a good sign when concentrating
on debtors.
Vizag steel has very low conversion period when compared to other companies in the
industry. whereas in 2013 it has high conversion period. This explains that they have less
debtors and they are taking less time in converting that in to cash whereas Sail Jsw and Jindal
Steel have almost similar period.
0
50
100
150
200
250
300
350
vizag steel
tata steel
sail
jsw
jindal steel

71
INVENTORY TURNOVER RATIO & CONVERSION PERIOD
TABLE
INVENTORY TURNOVER RATIO
vizag steel 2.83 4.00 3.21 3.8 3.28
tata steel 6.99 8.10 7.43 6.98 7.26
SAIL 4.32 4.49 3.76 3.37 2.78
JSW 6.82 7.02 5.58 6.18 7.39
jindal steel 6.34 5.53 4.34 4.36 4.15
INVENTORY CONVERSION PERIOD
vizag steel 128.56 91.22 113.45 94.50 111.20
tata steel 52.17 45.04 49.09 52.26 50.24
SAIL 84.34 81.16 96.99 108.23 131.01
JSW 53.45 51.95 65.39 58.99 49.35
jindal steel 57.52 65.99 84.02 83.52 87.82
GRAPH
0
1
2
3
4
5
6
7
8
9
vizag steel
tata steel
sail
jsw
jindal steel

72
INTERPRETATION:
It is a ratio showing how many times a company’s inventory is sold and replaced over
a certain period.
Vizag steel has very good inventory turnover ratio compared to other companies in the
industry. This explains that they are having more sales and less inventory. Tata steel, Sail, Jsw
and Jindal steel are also having very good values but it’s a good sign when concentrating on
inventory.
Vizag steel has very high conversion period when compared to other companies in the
industry. This explains that they have certain inventory and they are taking less time in
converting that in to cash whereas Tata steel, Sail and Jindal Steel have high conversion period.
Cash conversion cycle
CASH CONVERSION PERIOD
vizag steel -30.97 -62.33 -35.63 -38.30 -155.29
tata steel -116.68 -124.25 -150.00 -151.80 -140.46
SAIL -53.86 -63.60 -37.86 -15.16 -10.32
JSW -175.81 -131.20 -117.01 -150.94 -117.98
jindal steel -119.33 -153.74 -126.38 -120.00 -71.66
0
20
40
60
80
100
120
140
vizag steel
tata steel
sail
jsw
jindal steel

74
SUGGESTIONS:
 During the period of study it is clearly observed that the amount of working capital is
increasing continuously year by year. The reason for increase is due to high inventories
and cash balance.
 The company is having high current assets comparing to current liabilities which lead
to high current ratio. Since the ratio is more and consistent the financial position of the
firm is in the better form.
 As there was expansion of the firm the cash balance and bank balance is decreasing
year by year. So after the expansion it can yield better position again.

76
CONCLUSION:
 Company’s position is currently good and the utilization of all the available funds must
be efficient to acquire good position in the industry.
 It has good future after the expansion of the industry and once it is listed in the share
market the profits of the company will be increase vastly.
 It will be good competitors for other companies in the steel industry after the expansion.

78
VIZAG STEEL
BALANCE SHEET:
BALANCE SHEET
RS. CRS RS. CRS RS. CRS RS. CRS
PARTICULARS MARCH,
2009
MARCH,
2010
MARCH,
2011
MARCH,
2012
SHAREHOLDERS FUNDS
SHARE CAPITAL 7827.32 7827.32 7827.32 7727.32
RESERVES AND SURPLUS 4592.59 5057.68 5401.9 5931.97
LOAN FUNDS
SECURED LOANS 907.72 407.28 274.89 1002.4
UNSECURED LOANS 100.04 825.27 861.87 1572.74
DEFFERED TAX LIABILITY
(NET)
124.49 97.82 79.97 60.98
TOTAL 13552.16 14215.37 14445.95 16295.41
APPLICATION OF FUNDS
FIXED ASSETS
GROSS BLOCK 9005.99 9473.9 9794.6 10393.87
LESS: DEPRECIATION 7749.74 8008.55 8264.71 8607.02
NET BLOCK 1256.25 1465.35 1529.89 1786.85
HELD OF DISPOSAL 0.05 0.05 0.03 0.12
CAPITAL WORK-IN-
PROGRESS
4617.81 7506.9 9536.71 10692.44
CURRENT ASSETS 5874.11 8972.3 11066.63 12479.41
INVESTMENTS 0.05 0.25 361.6 362.58
CURRENT ASSETS, LOANS & ADVANCES
INVENTORIES 3215.28 2451.52 3254.71 3403.11
SUNDRY DEBTORS 191.27 181.18 330.61 427.15
CASH & BANK BALANCES 6624.17 5415.54 1998.89 2068.34
OTHER CURRENT ASSETS 258.91 137.4 75.96 82.99
LOANS & ADVANCES 1569.69 1365.02 1965.04 2681.26
11859.32 9550.66 7625.21 8662.85
LESS: CURRENT LIABILITIES &
PROVISIONS
LIABILITIES 2560.79 2871.95 3271.43 4119.26
PROVISIONS 1620.53 1435.89 1336.06 1090.17
4181.32 4307.84 4607.49 5209.43
NET CURRENT ASSETS 7678 5242.82 3017.72 3453.42
TOTAL 13552.16 14215.37 14445.95 16295.41

79
As per schedule VI of new format:
BALANCE SHEET 2013
share holders fund
share capital 6346.82
reserves and surplus 6130.5
non current liabilities
longterm borrowings 1241.56
deffered tax liabilities 229.21
other long term liabilities 105
long term provisions 414.77
current liabilities
short term borrowings 3658.44
trade payables 737.94
other current liabilities 5615.19
short term provisions 173.1
Total 24652.53
Assets
NON CURRENT ASSETS
fixed assets
tangible assets 3787.07
intangible assets 2.74
capital wip 9965.24
intangible assets under development 22.2
13777.25
non current investments 362.58
long term loans and advances 498.36
other non current assets 36.58
current assets
Inventories 3828.6
trade recievables 1009.65
cash and bank balance 1625.02
short term loans and advances 3417.75
other current assets 96.73
Total 24652.52

80
PROFIT & LOSS ACCOUNT:
PROFIT AND LOSS
ACCOUNT
RS. CRS RS. CRS RS. CRS RS. CRS
PARTICULARS MARCH
, 2009
MARCH
, 2010
MARCH
, 2011
MARCH
, 2012
INCOME
GROSS SALES 10410.63 10634.63 11516.99 14461.87
LESS: EXCISE DUTY
RECOVERED ON SALES
1282.25 825.48 1045.81 1318.7
NET SALES 9128.38 9809.15 10471.18 13143.17
INTEREST CONSUMPTION 114.1 121.07 87.7 100.3
INTEREST EARNED 787.21 534.71 347.54 249.56
OTHER REVENUE 75.02 101.25 90.32 86.37
TOTAL 10104.71 10566.18 10996.74 13579.4
EXPENDITURE
RAW MATERIALS
CONSUMED
5896.25 5535.11 7188.36 8472.22
DEPLETION -916.65 415.35 -532.32 45.37
EMPLOYEES
REMUNERATION &
BENEFITS
1156.68 1399.74 1272.95 1466.67
STORES & SPARES
CONSUMED
501.23 466.48 471.22 518.3
POWER & FUEL 340.31 408.27 425.03 462.36
REPAIRS &
MAINTENANCE
149.81 142.13 145.18 168.48
FREIGHT OUTWARD 286.53 301.65 300.72 356.35
OTHER EXPENSES &
PROVISIONS
377.12 334.63 397.02 456.65
INTEREST 88.14 77.55 164.55 190.6
DEPRECIAITON 240.46 277.17 265.94 344.86
WEALTH TAX 0.89 0.45 0.49 0.52
8120.77 9358.53 10099.14 12482.38
LESS: INTER ACCOUNT
ADJUSTMENTS - RAW
MATERIAL MINING COST
38.06 43.26 49.1 50.03
NET EXPENDITURE 8082.71 9315.27 10050.04 12432.35
PROFIT FOR THE YEAR 2022 1240.41 946.7 1103.77
PRIOR PERIOD
ADJUSTMENTS - NET
CREDIT
4.59 7.24 34.96 6.24
PROFIT BEFORE TAX 2026.59 1247.65 981.66 1110.01
PROVISION FOR
TAXATION
CURRENT TAX 746.38 463.08 369.1 388.2

81
FRINGE BENEFIT TAX 4.66 -0.05 0 0
EARLIER YEARS
ADJUSTMENTS
-21.39 14.62 -28.08 -10.66
DEFFERED TAX -38.63 -26.67 -17.85 -18.99
PROFIT AFTER TAX 1335.57 796.67 658.49 751.46
BALANCE OF PROFIT
BROUGHT FORWARD
3652.55 1653.83 2117.83 2776.32
AMOUNT AVAILABLE FOR
APPROPRIATION
4988.12 2450.5 2776.32 3527.78
APPROPRIATIONS
INTERIM DIVIDEND 0 100.01 0 0
PROPOSED DIVIDEND 339.18 185.28 271.47 190.82
TAX ON INTERIM
DIVIDEND
0 16.61 0 0
TAX ON PROPOSED
DIVIDEND
57.64 30.77 44.04 30.96
RESERVE FOR
REDEEMING PREFERENCE
SHARE CAPITAL
2937.47 0 0 0
BALANCE CARRIED TO
BALANCE SHEET
1653.83 2117.83 2460.81 3306
TOTAL APPROPRIATIONS 4988.12 2450.5 2776.32 3527.78
BASIC AND DILUTED
EARNIGS PER SHARE
273.13 113.89 85.79 126.18
TOTAL SHARES 4.89 7.00 7.68 5.96
EQUITY 4890 4890 4890 4890
FACE VALUE 2539.926
787
1842.008
172
1723.541
411
2293.574
125

82
As per schedule VI of new format:
PROFIT AND LOSS ACCOUNT 2013
INCOME 13565.28
EXCISE DUTY 1454.59
OTHER INCOME 455.42
TOTAL REVENUE 1256.11
EXPENSES
COST OF MATERIALS
CONSUMED
8098.66
CHANGES IN INVENTORY -303.74
EMPLOYEE BENEFITS 1469.07
FINANCE COSTS 359.25
DEPRICIATION AND
AMORTIZATION
186.88
OTHER EXPENSES 2296.75
TOTAL EXPENSES 12106.87
LESS : INTER ACC
ADJUSTMENTS
52.17
NET EXPENSES 12054.7
PROFIT BEFOR PPI 511.41
PPI 15.06
PROFIT BEFORE TAX 526.47
TAX EXPENSE
CURRENT TAX(MAT) 103.98
LESS:MAT CREDIT ENTILEMENT 96.88
EARLIER YEAR ADJUSTMENTS -1.69
DEFFERED TAX 168.23
352.83
PROFIT/LOSS FOR THE PERIOD 352.83
EPS 0.48

83
TATA STEEL – BALANCE SHEET:
Balance Sheet of Tata Steel
------------------- in Rs. Cr. -------------------
Mar '13 Mar '12 Mar '11 Mar '10 Mar '09
12 mths 12 mths 12 mths 12 mths 12 mths
Sources Of Funds
Total Share Capital 971.41 971.41 959.41 887.41 6,203.45
Equity Share Capital 971.41 971.41 959.41 887.41 730.79
Share Application Money 0 0 178.2 0 0
Preference Share Capital 0 0 0 0 5,472.66
Reserves 54,238.27 51,649.95 45,807.02 36,281.34 23,501.15
Revaluation Reserves 0 0 0 0 0
Networth 55,209.68 52,621.36 46,944.63 37,168.75 29,704.60
Secured Loans 4,311.02 4,190.47 3,509.18 2,259.32 3,913.05
Unsecured Loans 21,600.49 19,503.35 22,639.00 22,979.88 23,033.13
Total Debt 25,911.51 23,693.82 26,148.18 25,239.20 26,946.18
Total Liabilities 81,121.19 76,315.18 73,092.81 62,407.95 56,650.78
Application Of Funds
Gross Block 38,056.28 23,081.58 22,497.83 22,306.07 20,057.01
Less: Accum. Depreciation 13,181.23 11,715.32 10,692.73 10,143.63 9,062.47
Net Block 24,875.05 11,366.26 11,805.10 12,162.44 10,994.54
Capital Work in Progress 8,722.29 16,058.49 5,612.28 3,843.59 3,487.68
Investments 50,418.80 50,282.52 46,564.94 44,979.67 42,371.78
Inventories 5,257.94 4,858.99 3,953.76 3,077.75 3,480.47
Sundry Debtors 796.92 904.08 424.02 434.83 635.98
Cash and Bank Balance 2,218.11 3,946.99 4,138.78 500.3 463.58
Total Current Assets 8,272.97 9,710.06 8,516.56 4,012.88 4,580.03
Loans and Advances 9,587.82 8,773.73 17,052.84 6,678.55 5,884.61
Fixed Deposits 0 0 0 2,733.84 1,127.02
Total CA, Loans &
Advances
17,860.79 18,483.79 25,569.40 13,425.27 11,591.66
Deffered Credit 0 0 0 0 0
Current Liabilities 17,098.06 15,958.34 12,037.59 8,699.34 8,965.76
Provisions 3,657.68 3,917.54 4,421.32 3,303.68 2,934.19
Total CL & Provisions 20,755.74 19,875.88 16,458.91 12,003.02 11,899.95
Net Current Assets -2,894.95 -1,392.09 9,110.49 1,422.25 -308.29
Miscellaneous Expenses 0 0 0 0 105.07
Total Assets 81,121.19 76,315.18 73,092.81 62,407.95 56,650.78
Contingent Liabilities 18,999.02 18,039.57 14,288.41 13,184.61 12,188.55
Book Value (Rs) 568.46 541.81 487.55 418.94 331.68

84
PROFIT & LOSS ACCOUNT:
Profit & Loss account of Tata Steel
------------------- in Rs. Cr. -------------------
Income
Sales Turnover 38,199.43 33,933.46 29,396.35 26,757.60 26,843.53
Excise Duty 0 0 0 1,816.95 2,495.21
Net Sales 38,199.43 33,933.46 29,396.35 24,940.65 24,348.32
Other Income 227.51 1,397.44 1,176.45 1,241.08 603.07
Stock Adjustments 404.6 220.72 173.65 -134.97 289.27
Total Income 38,831.54 35,551.62 30,746.45 26,046.76 25,240.66
Expenditure
Raw Materials 12,421.63 9,917.37 7,841.47 8,356.45 8,568.71
Power & Fuel Cost 2,510.17 1,990.16 1,558.49 1,383.44 1,222.48
Employee Cost 3,608.52 3,047.26 2,837.46 2,361.48 2,305.81
Other Manufacturing
Expenses
0 0 0 2,419.89 2,127.48
Selling and Admin
Expenses
0 0 0 417.9 400.24
Miscellaneous Expenses 8,937.47 7,662.62 5,850.29 1,287.04 1,180.08
Preoperative Exp
Capitalised
0 0 0 -326.11 -343.65
Total Expenses 27,477.79 22,617.41 18,087.71 15,900.09 15,461.15
Operating Profit 11,126.24 11,536.77 11,482.29 8,905.59 9,176.44
PBDIT 11,353.75 12,934.21 12,658.74 10,146.67 9,779.51
Interest 1,876.77 1,925.42 1,735.70 1,848.19 1,489.50
PBDT 9,476.98 11,008.79 10,923.04 8,298.48 8,290.01
Depreciation 1,640.38 1,151.44 1,146.19 1,083.18 973.4
Other Written Off 0 0 0 0 0
Profit Before Tax 7,836.60 9,857.35 9,776.85 7,215.30 7,316.61
Extra-ordinary items 0 0 0 0 0
PBT (Post Extra-ord Items) 7,836.60 9,857.35 9,776.85 7,215.30 7,316.61
Tax 2,773.63 3,160.93 2,911.16 2,168.50 2,114.87
Reported Net Profit 5,062.97 6,696.42 6,865.69 5,046.80 5,201.74

85
Total Value Addition 15,056.16 12,700.04 10,246.24 7,543.64 6,892.44
Preference Dividend 0 0 0 45.88 109.45
Equity Dividend 776.97 1,165.46 1,151.06 709.77 1,168.95
Corporate Dividend Tax 128.73 181.57 156.71 122.8 214.1
Per share data (annualised)
Shares in issue (lakhs) 9,712.15 9,712.14 9,592.14 8,872.14 7,305.92
Earning Per Share (Rs) 52.13 68.95 71.58 56.37 69.7
Equity Dividend (%) 80 120 120 80 160
Book Value (Rs) 568.46 541.81 487.55 418.94 331.68

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