Project Final Dsp

WORKING CAPITAL MANAGEMENT &RATIO ANALYSIS WITH REFERANCE TO DURGAPUR STEEL PLANT

Abstract

By minimizing the amount of funds tied up in current assets, firms are able to reduce financing costs and/or increase the funds available for expansion. By using the SAIL annual accounts book Working Capital Management Survey, we provide insights into the performance of surveyed firms across key components of working capital management. We discover that significant differences exist between industries in working capital measures across time. In addition, we discover that these working capital measures, themselves, change significantly within industries across time.

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PREFACE

This project has been prepared in partial fulfillment for the degree of M B A (Master of Business Administration). A project is a work plan device through investigation and analysis to achieve a set of objective within a set of period. A student assigned a topic and required to prepare a report after making a study of working of an organization.

I was assigned to prepare a project report of Durgapur Steel Plant, a unit of Steel Authority of India Limited (SAIL). Financial management has emerged as interesting and exciting area for academic studies as well as for the practical financial managers. Financial Management covers the decision taken by and individual or a business firm, which have financial implication. In case of corporate form of organization, where there is a separation of ownership and management, as well as in other form of implications of decision process is evaluated in terms of maximization of value of the firm. So the decision process is oriented towards the objective of maximization of wealth of shareholders as reflected in market price of the share.

Working Capital or net current asset is the excess of Current Assets over current liabilities. All organization has to carry working capital in one form or the other. The efficient management of working capital is important, from the view point both liquidity and profitability.

* Poor management of working capital means that firms are unnecessary tied up in idle assets, hence, reducing the liquidity and also reducing the ability to invest in productive assets such as plant and machinery, so affecting the profitability.*

An effort has been made in the present study titled “Study on Working Capital Management on SAIL with special reference to “Durgapur Steel Plant” to understand the different financial implication and to make a detailed and in depth study of various elements of working capital in Durgapur Steel Plant to come out with an effective result of the study and simultaneously to suggest scope for further improvement.

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ACKNOWLEDGEMENT

For any task to be successful hard work and dedication are must .If it is backed with the blessing of god along with unhindered support and guidance it will reach the ultimate without losing the track.

I wish to express my gratitude to all the concerned person who have extended their kind help, guidance and suggestion without which it could impossible for me to complete this project report.

At first I would like to pay my sincere thank to my external guide Mr.S.K.NAYAK,(Assistant General Manager) Finance and accounts department ,Durgapur steel Plant for not only his valuable guidance but also for the freedom he rendered to me during this project. I am also thankful to Main Accounts department (DSP) for providing us all data related to our research.

I am also thankful to my college INTERNATIONAL INSTITUTE OF PLANNING AND MANAGEMENT, NEW DELHI, for providing me this golden opportunity to do internship and learn with industry exposure. Lastly I would like to thanks Mr.Amit Bagga for his support to make me understand financial management without which I could not do this project.

Last but not the least I would like to thanks all the staff of Durgapur steel plant and the respondent for their valuable time and support for this project.

The data, facts, figures mentioned, and information provided we will be the solely responsible

for any remaining errors of fact or judgment.

(…………………………..)

VED PRAKASH CHOUBEY

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Indian Steel Industry: An Overview

The economic liberalization 1991 marked the emergence of several private players in this space. Private investment flowed into the sector, adding fresh capacities. The private sector produced 59% of the crude steel in 2005.

Current economic indicators all predict growth. Continuously improving macro-economic factors, a younger demographic profile, urbanization, government focus on infrastructure, increasing demand for automobiles and houses are likely to push up demand for steel. Industrial production grew at a CAR of 6.5% during 1995-2005, with demand for passenger vehicles growing at 11%.

Key findings:

-Steady GDP growth and investment in infrastructure are crucial for pushing up the demand for steel.

-In 2005; the government drafted the Nation Steel Policy (NSP) to pave the way for a modern and efficient steel industry. The policy targets an increase in production to 110 million tones by 2020 to meet the expected expansion in domestic and international demand.

-Current state of low per capita consumption of steel (30kg) provides an opportunity for the steel industry.

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*-Global steel demand is rising on the back of accelerated infrastructure activity in China, CIS and India, housing boom in USA, and white goods resurgence in Europe. During the recent recessionary phase, the industry has consolidated in terms of ownership as well as mothballing of inefficient capabilities. Steel prices continue firming up.*

-For the first time in last 20 years, there is demand growth all over the world for steel.

-In US, the demand is led by booming housing industry. Additionally, the auto industry is showing signs of recovery as auto sales hit their strongest levels for the year in July even as US posted a 2.4% GDP growth.

-In Europe, there is demand from a buoyant housing and white goods industry sources.

-In India, China and other Asian countries the demand is led by emphatic Investment activities in infrastructure,

-Russia and other CIS nations are also witnessing string internal demand.

-Iraq reconstruction work is expected to fuel further demand for steel over the next three years.

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-China is consuming steel like never before its infrastructure with investments such as Three Gorges project on Yangtze as well as part of its build to the Beijing Olympics in 2008 and the Shanghai Expo in 2010.

-The demand supply gap is expected to increase and this will drive steel prices northwards, even as the global steel industry is not prepared for this demand onslaught.

1. Introduction

1.1. Industrial Definition

The Indian steel industry comprises producers of finished steel, semi-finished steel, stainless steel and pg iron. The private sector controls almost two-thirds of the steel market, while the public sector producers have the remaining on-third market structure.

1.2. Industrial Segments

The industry can be classified into the following categories:

a) Iron Ore b) Pig Iron c) Sponge Iron

d) Flat Steel e) Long Steel f) Alloy Steel

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2. Market Dynamics

2.1 Market Overview

India occupied the eighth position in terms of worldwide crude steel output. India’s per capita steel

consumption is low at 30kg compared to global standards for developed countries at 400 to 500

kg.

2.2 Market Trends

*Low Per Capita Consumption Rise of the Private Sector Public Sector

versus Private Sector Gradual Industry Consolidation.

2.3 Key Drivers

Huge Investment in Infrastructure Booming Industrial Production

2.4 Major Issues and Implications

Rising Raw Material Prices High Cost of Imported Coking Coal Low R&D Expenditure Inefficient Mining of

Iron Ore Demand-Supply Gap

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3. Political, Economical, Social, Technological Analysis (PEST Analysis)

3.1 Political Factors

Recommendations on Captive Mines National Steel Policy to Remove

Bottlenecks.

3.2 Economic Factors

*GDP Growth Rate Reduction in Customs Duty

3.3 Social Factors

Rural-Urban Divide Higher Disposable Income

3.4 Technological Factors

Popularity of Steel Portals Applications of SML(Steel Markup

Language)

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4. Michael Porters Five Forces Analysis

4.1 Buyer’s Power

Increasing Demand for Steel Fragmented Coke Suppliers.

4.2 Supplier’s Power

High Raw Material Prices Lack of Captive Source Hurting Steel

Producers Lack of Transportation

Backward Integration.

4.3 Intensity of Competition

Competition from Foreign Players Spurt in Merger and Acquisition

Activities.

4.4 Threat of New Entrants

High Cost of Basic Inputs and Services.

4.5 Threat of Substitutes

Use of Aluminum/Plastic

5. Industry Outlook

The steel industry is in the growth phase. Indian steelmakers plan to increase annual steel production capacity to 8.14 million Tones by FY10, larger than the domestic forecast of 65 million.

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ORGANISATIONAL PROFILE

An introduction

Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a fully integrated iron and steel maker, producing both basic and special steels for domestic construction, engineering, power, railway, automotive and defense industries and for sale in export markets.

Ranked amongst the top ten public sector companies in India in terms of turnover, SAIL manufactures and sells a broad range of steel products, including hot and cold rolled sheets and coils, galvanized sheets, electrical sheets, structural, railway products, plates, bars and rods, stainless steel and other alloy steels. SAIL produces iron and steel at five integrated plants and three special steel plants, located principally in the eastern and central regions of India and situated close to domestic sources of raw materials, including the Company's iron ore, limestone and dolomite mines. The company has the distinction of being India’s largest producer of iron ore and of having the country’s second largest mines network. This gives SAIL a competitive edge in terms of captive availability of iron ore, limestone, and dolomite which are inputs for steel making.

SAIL's wide range of long and flat steel products is much in demand in the domestic as well as the international market. This vital responsibility is carried out by SAIL's own Central Marketing Organization (CMO) and the International Trade Division. CMO encompasses a wide network of 34 branch offices and 54 stockyards located in major cities and towns throughout India.

With technical and managerial expertise and know-how in steel making gained over four decades, SAIL's Consultancy Division (SAILCON) at New Delhi offers services and consultancy to clients world-wide.

SAIL has a well-equipped Research and Development Centre for Iron and Steel (RDCIS) at Ranchi which helps to produce quality steel and develop new technologies for the steel industry. Besides, SAIL has its own in-house Centre for Engineering and Technology (CET), Management Training Institute (MTI) and Safety Organization at Ranchi. Our captive mines are under the control of the Raw Materials Division in Kolkata. The Environment Management Division and Growth Division of SAIL operate from their headquarters in Kolkata. Almost all our plants and major units are ISO Certified.

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About SAIL

SAIL was formed on January 24th, 1973 with the objective of promoting and integrated and efficient development of the Iron and Steel Industry to achieve national economic objective. Over the years the corporate structure of SAIL has undergone transformation, with several subsidiaries merging into SAIL to secure better management and greater efficiency in their working and few units being de-linked.

SAIL is the largest integrated Steel producer in India and the 10 th largest Steel making company in the World. It has multi-location facilities to manufacture a variety of basic and especially steel products. Rourkela Steel Plant (RSP) primarily manufacturer flat products while Bhilai Steel Plant (BSP) AND Durgapur Steel Plant (DSP) predominantly manufacturer long products. The special steel plant, Alloy Steel Plant (ASP) and Salem Steel Plant (SSP) manufacturer Alloy and Steel Products. The aggregates capacity of saleable steel is 9.48 million tones.

The Steel Authority of India Limited (SAIL) is a wholly owned enterprise of the Government of India, responsible of management of five integrated Steel Plant at Bhilai, Bokaro, Burnpur, Durgapur and Rourkela and the Alloy and the special steel plant at Durgapur, Salem. Maharashtra electro smelt limited has become a subsidiary of SAIL with effect from October 18, 1986. Visvesvarya Iron and Steel Limited, Bhadrabati earlier known as Mysore Iron and Steel Limited has come under the fold of SAIL from July, 1989.

The Steel Authority of India Limited (SAIL) was formally incorporated at New Delhi on 24 th

January with an authorized capital of Rs. 2000 crores. The paid up capital as on 31st March 1974 was Rs. 1326 crores. The shares in the companies listed below and held by president of India were transferred in March 1973 to SAIL and become subsidiaries of SAIL:-

Hindustan Steel Limited. Hindustan Steel Work Construction Limited. Bokaro Steel Limited. Salem Steel Limited. Bharat Cooking Coal Limited.

Integrated Steel Plants

Bhilai Steel Plant (BSP) in Chhattisgarh

Durgapur Steel Plant (DSP) in West Bengal

Rourkela Steel Plant (RSP) in Orissa

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Bokaro Steel Plant (BSL) in Jharkhand

IISCO Steel Plant (ISP) in West Bengal

Expanding Horizon (1959-1973)

Hindustan Steel (HSL) was initially designed to manage only one plant that was coming up at Rourkela. For Bhilai and Durgapur Steel Plants, the preliminary work was done by the Iron and Steel Ministry. From April 1957, the supervision and control of these two steel plants were also transferred to Hindustan Steel. The registered office was originally in New Delhi. It moved to Calcutta in July 1956 and ultimately to Ranchi in December 1959.

A new steel company, Bokaro Steel Limited, was incorporated in January 1964 to construct and operate the steel plant at Bokaro. The 1 MT phases of Bhilai and Rourkela Steel Plants were completed by the end of December 1961. The 1 MT phase of Durgapur Steel Plant was completed in January 1962 after commissioning of the Wheel and Axle plant. The crude steel production of HSL went up from .158 MT (1959-60) to 1.6 MT. The second phase of Bhilai Steel Plant was completed in September 1967 after commissioning of the Wire Rod Mill. The last unit of the 1.8 MT phase of Rourkela - the Tandem Mill - was commissioned in February 1968, and the 1.6 MT stage of Durgapur Steel Plant was completed in August 1969 after commissioning of the Furnace in SMS. Thus, with the completion of the 2.5 MT stage at Bhilai, 1.8 MT at Rourkela and 1.6 MT at Durgapur, the total crude steel production capacity of HSL was raised to 3.7 MT in 1968-69 and subsequently to 4MT in 1972-73.

Holding Company

The Ministry of Steel and Mines drafted a policy statement to evolve a new model for managing industry. The policy statement was presented to the Parliament on December 2, 1972. On this basis the concept of creating a holding company to manage inputs and outputs under one umbrella was mooted. This led to the formation of Steel Authority of India Ltd. The company, incorporated on January 24, 1973 with an authorized capital of Rs. 2000 crore, was made responsible for managing five integrated steel plants at Bhilai, Bokaro, Durgapur, Rourkela and Burnpur, the Alloy Steel Plant and the Salem Steel Plant. In 1978 SAIL was restructured as an operating company.

Since its inception, SAIL has been instrumental in laying a sound infrastructure for the industrial development of the country. Besides, it has immensely contributed to the development of technical and managerial expertise. It has triggered the secondary and tertiary waves of economic

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growth by continuously providing the inputs for the consuming industry.

JOINT VENTURES

SAIL has Promoted Joint Ventures In different areas power plant to E-Commerce NTPC SAIL power Company Pvt. Ltd. set up in March 2001: this 50:50 joint venture between SAIL and the National Thermal Power Corporation (NTPC) operates and manages the captive Power Plants – II of the Durgapur and Rourkela Steel Plant which have a combined capacity of 240 M W.

Bokaro Power Supply Pvt. Ltd

This 50:50 joint venture between SAIL and Damodar Valley Corporation (DVC) formed in January 2002 in managing the 320 MW power generation and 1880 tones per hour steam facilities at Bokaro Steel Plant.

Bhilai Electrical Supply Company Pvt. Ltd.

Another SAIL NTPC joint venture on 50:50 basic formed in March 2002 manages the 74 MW Power Plant –II of Bhilai Steel Plant which has an additional capacity of producing 150 tones of steam per hour.

UES SAIL Information Technology Ltd.

This 40:60 joint venture between SAIL and USX Engineers and Consultants. A subsidiary of the US steel Corporation, Promotes information technology in steel sector.

Metal junction Company Pvt. Ltd.

A joint Venture between SAIL and TATA Steel on 50:50 basic this company Promotes E-Commerce activities in steel and related areas.

SAIL-Bansal Services Centre Pvt. Ltd.

SAIL has formed a joint venture with BMW industries Ltd. In 40:60 basic to promotes a service centre at Bokaro with the objective of adding value to steel.

North Bengal Dolomite Ltd.

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A joint venture between SAIL And West Bengal Mineral Development Corporation Ltd. On 50:50 basic was formed for development of Jayanti Dolomite Deposit, Jalpaiguri for supply of Dolomite to Durgapur Steel Plant and other plants.

Romelt – SAIL (India) Ltd.

A joint venture between SAIL. National Mineral Development Corporation (NMDC) and Russian promoters for marketing Romelt technology developed by Russia for reducing iron bearing materials, which is carried out with carbon in single reactor with the use of oxygen.

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About Durgapur Steel Plant

Durgapur Steel Plant is one of the integrated steel plants of Steel Authority of India Limited, located in Durgapur, in the eastern India state of West Bengal. It is one of the plants that have played a historically important part in the industrial development of India. Although not a separate company, it is the largest industrial unit in the state of West Bengal.

Historical background

Durgapur is an industrial metropolis in the state of West Bengal, India, located about 160 km from Kolkata. It was a dream child of the great visionary Dr. Bidhan Chandra Roy the second chief minister of the state. The well laid out Industrial Township was designed by Joseph Allen Stein and Benjamin Polk It is home to the largest industrial unit in the state, Durgapur Steel Plant one of the integrated steel plants of Steel Authority of India Limited. Alloy Steels Plant of SAIL is also located here. There are a number of power plants, chemical and engineering industries. Some metallurgical units have come up in recent year.

Set up in the late 1950s with an initial annual capacity of one million tonnes of crude steel per year, the capacity of Durgapur Steel Plant (DSP) was later expanded to 1.6 million tonnes in the 1970s. A massive modernization programme was undertaken in the plant in early ‘90s, which, while bringing numerous technological developments in the plant, enhanced the capacity of the plant to 2.088 million tonnes of [hot metal], 1.8 million tonnes crude steel and 1.586 million tonnes saleable steel. The entire plant is covered under ISO 9001to 2000 quality management system.

The modernized Durgapur Steel Plant now has state-of–the-art technology for quality steel making. The modernized units have brought about improved productivity, substantial improvement in energy conservation and better quality products. DSP’s Steel Making complex and the entire mills zone, comprising its Blooming & Billet Mill, Merchant Mill, Skelp Mill, Section Mill and Wheel & Axle Plant, are covered under ISO: 9002 quality assurance certification.

After the commissioning of the modernized units, DSP is all set to produce 2.088 million tonnes of hot metal, 1.8 million tonnes of crude steel and 1.586 million tonnes of saleable steel annually.

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Location

Situated at a distance of 158 km from Kolkata, its geographical location is 23° 27' North and 88° 29' east. It is situated on the banks of the Damodar River. The Grand Trunk Road and the main Calcutta-Delhi railway line pass through Durgapur.

The city of Durgapur

Durgapur is on the main Kolkata–New Delhi line. From a sleepy settlement, the town today hosts a variety of educational institutions, shopping malls, complexes with eateries and a multiplex, amongst other commercial attractions. Durgapur is fast turning into the central location for the entire region—with the entry of big sex business houses and entrepreneurs, the city is all set to undergo a change in its own lifestyle and in the outlook of its residents. Durgapur is situated in between the two rivers—Damodar and Ajay— and also between two districts—Bankura and Birbhum. There are many townships here mainly "Steel Township", "DPL Township", "MAMC Township" etc. once Durgapur was the only city in India with two steel plants, Durgapur Steel Plant and Alloy Steel Plant.

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PRODUCTS OF SAIL

SEMIS Bloom, Billets and SlabsLONG PRODUCTS Structural

Crane RailsBar, Rods and Re-BarsWire Rods

FLAT PRODUCTS HR Coils, Sheets and Skelp Plates,CR Coils and Sheets, GC Sheets, Tin Plates, Electrical Steel.

TUBULAR PRODUCTS PipesRAILWAY PRODUCTS Wheels, Axles, Wheel Sets.

PLANT WISE DETAILS

BHILAI STEEL PLANT Blooms, Billets and Slabs, Beams, Channels, Angels, Crane Rails, Plates, Pig Irons, Chemicals, Fertilizers.

BOKARO STEEL PLANT HR Coils and Sheets, Plates, CR Coils and Sheets, GP Sheets, Pig Iron, Chemicals and Fertilizers.

DURGAPUR STEEL PLANT Blooms, Billets and Slabs, Joists, Channels, Angels, Bar, Rods, Re-Bar, Skelp, Wheels, Axels, Pig Iron, Chemicals and Fertilizers.

ROURKELA STEEL PLANT HR Coils, Plates, Cr Coils and Sheets, GP Sheets, Tin Plates Electrical Sheets, Pipes, Pig Irons, Chemicals and Fertilizers.

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INTRODUCTION

The management of fixed assets and long –term financing .The management of current assets is similar to that of fixed assets in the sense that in both cases a firm analyses their effects on its return and risk .The management of fixed and current assets ,however, differ in three important ways: first, in managing fixed assets , the time is a very important factor ; consequently ,discounting and compounding and compounding techniques play a significant role in capital budgeting and a minor one management of current assets . Second, the large holding of current assets, especially cash, strengthens the firm’s liquidity position and reduce riskiness but also reduce the overall profitability. Thus, a risk –return trade off is involve in holding current assets . Third, level of fixed as well as current assets depend upon expected sales, but it is only current assets which can be adjusted with sales fluctuations in the short run. Thus, the firm has a greater degree of flexibility in managing currents assets.

CONCEPTS OF WORKING CAPITAL

There are two concepts of working capital –gross and net.

Goss working capital refers to the firm’s investment in current assets . Current assets are the assets which can be convert be into cash within an accounting year and include cash, short – term securities, debtors , accounting receivable or book debts bill receivable and stock inventory

Net working capital refers to the difference between current assets and current liabilities . Current liabilities are those claims of outsiders which are expected to mature for payment within an accounting year and include creditors accounting payable, bill payable and outstanding expenses. Net working capital can be positive or negative. A positive net working capital will arise when current assets exceed current liabilities. A negative net working capital occurs when current liabilities are in excess of current assets.

The two concepts of working capital –gross and net- are not exclusive; rather, they have equal significance from the management viewpoint.

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REVIEW LITERATUE

INTRODUCTION

Working capital management refers to Management of current assets and current liabilities. Working capital only the investment in current assets, which include short-term assets cash & Bank balance inventories, receivables and other marketable securities.

Working Capital Management

Concepts of Working Capital

There are two concepts of working capital:

Gross Working Capital Net Working Capital

GROSS WORKING CAPITAL

Gross is the total of all current assets. It is the total investment in short-tem curren assets. It refers to the firm’s investment in total current circulating assets. The concept of gross working capital is applied where the firm has no current liabilities. The investment which firm has made in current assets is from their own internal source and they have not taken any short-term loan. Or they have not incurred any current liabilities.

Net Working Capital

Net working capital is the difference between current assets and current liabilities. Normally any organization includes some current liabilities to finance. Their current Assets so, after realization of investment on current liabilities from the total current assets in order to get the net current assets.

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Formula of Net Working Capital:

Net working capital = Current asset-Current liabilities.

Current Assets

a) Raw materials and components

b) Work in process

c) Finished Goods

d) Trade Debtors

e) Loan and Advances

f) Cash and Advances

g) Inventories

Current Liabilities

Sundry creditors Trade advances Borrowings (short-term) Provision

Generally any organizations uses the concept of Net working capital because

They have some current liabilities with the help of which they make

Investments in current assets. So practically the concept of

(Current assets – Current liabilities) is applicable.

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Working capital management is a significant facet of financial management, its importance stems from the following reasons:-

Invest in current asset represents a substantial portion of total investment. Existence of working capital is imperative .in any firm. Fixed assets generally consume a large chunk of total funds that can be used at optimum level supported by sufficient working capital.

Investment in current asset and the level of current liabilities have to be geared quickly to change cells. Fixed asset investment and long-term financing are also responsive to variation in sells. However the relation is not as close and direct as in the case of working capital components.

The working capital component involves investment of funds of farm. If working capital level is properly maintained and managed, then it may result in unnecessary blockage of scarce resource resources of farm.

NEED OF WORKING CAPITAL

To sustain sales activities in operating cycle period To perform day to day operations To purchase raw materials payments of wages and other expenses required for the

manufacture of goods Increase in good will

Classifications of Working capital

Permanent working capital

This represents what the firm requires even at the bottom of its sales Cycles. It refers the minimum amount of investment in current assets. This is required at all time to carry out the minimum level of business activities. In other words it represents the current assets required on current basis over the entire year.

Temporary Working capital

It reflects a variable component that moves in line with seasonal fluctuations. This is the amount of Working Capital that keeps on fluctuating on the basis of business activity. In other words, represents additional current assets required at different times during the operating period.

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Several strategies are available to a firm for financing capital requirements. These are as follows:-

Strategy A :- Long term financing is used to meet fixed assets requirements as well as peak working capital requirements. When the working capital requirements is less than its peek level, the surplus is invested in liquid assets(cash and marketable securities).

Strategy B :- Long term financing is used to meet fixed asset requirements. Permanent working capital requirement and a portion of fluctuating working capital requirement. During seasonal upswing, short-term financing is used. During seasonal downswing, surplus is invested in liquid assets.

Strategy C :- Long term financing is used to meet fixed asset requirement and permanent working capital requirement. Short-term financing is used to meet fluctuating working capital requirement.

Capital Requirements and Their Financing

Working capital cycle is required because of the time gap between sales and actual sales realization in cash. This gap is technically known as operating cycle.

In manufacturing unit, operating cycle goes like this:-

Convention of cash into raw material. Convention of raw material into work in progress. Convention of work in process into semi finished goods. Convention of semi finished goods into finished goods. Convention of finished goods into debtors.

The total operating cycle can be divided into following period:-

Accounts Payable period:-

The time required between date of sales and date of payments.

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Inventory Period

Firm purchases raw material and converts these raw materials into finished gods and sell the same. The time is between the purchase of raw materials and the sale of finished goods is the inventory period.

Accounts Recieveable period:-

When the finished goods are sold for cash. Some are sold on credit and are realized later. The period that elapses between the date of sales and the date of collection of receivables is known as Accounts receivable period.

Operating Cycle:-

This time that elapses between the purchase of raw materials and collection of cash from sales is referred to as operating cycle.

Thus we can say

that,

Operating cycle =Inventory period + Accounts Receivable period

Cash Cycle:-

The time leg between the payment for raw material purchased and the collection of cash for sales is referred to as cash cycle, we can say that,

Operating Cycle=(Inventory period + Accounts receivable period) – Accounts payable period.

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Note:-

In some manufacturing unit, the semi-finished goods are also sold on cash basis or on credit basis. As Durgapur Steel Plant, semi finished goods like slab, blooms billates are sold either on cash basis or on credit basis.

Finished goods are not always sold for cash. They are also sold on credit, which gets converted into accounts receivables which after realization get converted into cash. As in Durgapur Steel Plant, they directly sell some finished products on credit basis.

2.2 E) Objective of Management of Working Capital

The basic objective of working capital management is to manage the firm’s current assets and current liabilities in such a way so as to maintain a satisfactory level of working capital. The current assets should be enough to cover the current liabilities to maintain a reasonable safety margin. It should be taken into consideration that the current liability should not be more than current assets or the working capital should not paying up for current liabilities. Also the different working capital components are to be balanced.

Working capital management has a great effect to firm’s profitability, liquidity and structural health. Financial manger therefore chalks out appropriate working capital management policies in respect to each components and sound structural health of the organization.

Function of Working Capital management

a) In order to determine the working capital requirement of the firm, a number of factors like product policies, length of manufacturing process, rapidly to turnover, seasonal fluctuations are considered.

Techniques of assessment of working capital management

Estimation of components of working capital. Percentage of sales method. Operating cycle approach.

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Where O= R + W + F = D - C

R=raw material and stock store period

W=word in process period

F=finished goods storage period

D=debtors collection period

C=Creditors payment period

b) Source from which the funds are to be raised:-

The working capital requirements can be met both from short-term and long-term sources of fund. It will be appropriate to meet at least 2/3 of permanent working capital requirements from long-term sources of fund.

1.Factors influencing working capital requirements:-

The working capital needs of a firm are influenced by numerous factors. The important factors are:-

The working capital requirement of a firm’s closely related to the nature of business. A service firm generally has a short operating cycle and sells on cash basis and has a modest working capital requirement. On the other hand, a manufacturing unit has a long operating cycle, which sells largely on credit and has substantial working capital requirements.

2.Seasonality of Operations:-

Firms, which have seasonal sales, or firms who deal in seasonal products have highly fluctuating working capital requirement. The working capital requirements of such a firm increases significantly during the peek season when there a demand for the product and again decrease during off season. On the other hand, firms having even sale during the year tends to have stable working capital requirements.

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3.Production policy:-

Firms which are having seasonal fluctuation in working capital requirement may follow a production policy, which may reduce the variations working capital requirement.

For example, manufactures season products may maintain a steady production through and the year rather than to intensify the products activity during the peak business season. Such a production policy may result in decrease in fluctuation working capital requirements.

4.Market Condition:-

Degree of competition in the market has also its effect on working capital needs. When the competition is big, huge inventory of finished have to be maintained to meet the demand of customers as customer will not wait for that specific brand, as goods from different brands are available in the market. Again in competition how, a firm can manage with a smaller inventory of finished products because in this situation customers can serve the delay. Also in this situation a firm can insist on cash payment and avoid lack of funds counts receivable.

Thus in a competitive market, working capital requirements are more because of more investment in finished product, inventory and accounts receivable whereas in the market where the competition is weak, situation is reverse.

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FINANCING OF WORKING CAPITAL OF DIFFERENT SOURCES

SOURCES OF WORKING CAPITAL

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LONG TERM SOURCE

Issuer of Share

Issue of Debenture

Ploughing back of profit

Taking long term loan

Short term Source

Internal SourcesProvision of Depreciation

Provision for tax.

External SourcesLoan from Bank or other

Financial institutions

Trade credit and other


Factors effecting the work capital requirements

Nature of Business Seasonality of operation Product policy Market conditions Condition of supply

Some of the sources of finance that are used to support current assets. Accruals trade credit.

Working capital advance by commercial banks. Regulation of bank finance. Public deposit. Inter corporate deposit.

VARIOUS FINANCE DEPARTMENT VISITED

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As I am doing a project in finance I am concerned with the finance department of the company. The different departments in finance are:-

COST AND COST CONTROL : - The function of cost section is to provide pre determined and

historical costs of production and services produced in the plant during the year. Beside normal routine work, this section endeavors to focus attention on the areas of high cost and analysis reasons for the same.

ESTABLISHMENT AND ADMINSTRATION SECTION : - Objective of the section is to

function as a centralized controller in rendering service. To the several of FAD in the matter of personal, procurement, for timely availability of required of printing & Stationary Furniture and other articles arranging service contract for matters of personal, management for running of the department.

FUNCTIONS:-

Travelling Allowance L.T.C\L.L.T.C Festival Advance Loan for Purchase Motor\Car etc. Medical Advance\Bill Tuition Fees Reimbursement (for the employee’s wards who are studying other then DSP

School) P.F Loan (Refundable\Non-Refundable) Granting Assistance Towards Funeral Expenses Imprested Cash

PURCHASE SECTION:-

1. To attain opening of tender for purchase of stores, spares, raw material, capital item etc.2. To check the co-operative statement prepared on the basic of the offers received from the

supplier against tender floated by the M.M Departments.3. To attain the commercial price negotiation meeting under the Chairmanship of head of

MMD, CMM or senior Manager along with the representative of intending departments.4. To attain purchase committee meeting and assist the member in evaluating the offers.5. To examine the recommendation for extension of delivery timing in acceptance of excess

quantity supplied by the suppliers.6. To attend the materials review board meeting raw materials supplied are off from

satisfaction

PURCHASE AUDIT CELL:-

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Ensure receipt of weekly statement from each purchase officer. Failure to submit weekly

statement of order placed to purchase Audit will be treated as a serious branch of procedure.

FOLLOW UP ACTION TO AUDIT QUIERY :-

Audit issued by purchase audit cell immediately examine the files, specify that reply to audit memo should reach audit cell within 15 days. Weekly remainder are to be issued for non receipt of replies to audit memo.

MAIN ACCOUNTS:-

Main Accounts section is primarily responsible for compiling the monthly, half yearly, quarterly, and annual accounts keeping in view the provisions of company Act and to ensure the implementation of chart of account of SAIL and guidelines given in the accounts manual. In addition to this the section prepares various MIS report relating to financial management for information and management control.

The functions of main account section are indicated as under:-

MIS and other report Co-ordination and review of financial statement Inter Unit Current Account(IUCA) Routine accounting Asset register and accounting of assets Compilation of accounts Consolidation of accounts

MISCELLANIOUS BILLS AND ACCOUNT SECTION:- This section

deals with work order and misc.

NATURE OF MIICELLANOUS BILLS:- As mentioned above, it posses

various types of bills as detailed below:-

Contingent advance Legal charges Library books Holding tax, Road tax, Vehicle insurance etc. Audit fees Bus bills-final CISF bills (other than pay) Canteen bills Donation and contribution

31


Sports, funeral, gardening expenses Machining Bills Canteen subsidy canteen interest Repair and maintenance bills Medical bills and telephone bills

SALES INVOCING SECTION:- Invoices are required to be raise in respect of

DSP products

Sold to customer Transferred to various stockyard Transferred to sister units

Invoices are also raised for:-

Sale of skull Sale of rejected products through auction

Transferred to sister unit after getting DSP products further processed by outside contractor

THE BASIC DOCUMENTS REQUIRED FOR RAISING INVOICES ARE:-

Sale order Amendment to sale order Dispatch advice

Sale orders are issued by stores department of DSP for sale of Skull and sale through action and by marketing department for items sold to customers or transferred to sister plants after getting the DSP products processed/machined by contractors.

BUDGETS & BUDGGETARY CONTROLL SECTION BUDGETS:-

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A budget is the comprehensive and coordinate plain, express in financial terms for the operation and resources of an enterprise for some specific period of the feature.

OBJECTIVES:-

The objectives of setting budget are as follows:-

A budget is blue print of the desired plan of action or operation. The budget serves as declaration of policies and also defines the objective for executives

at all level of management Budgets provide means of coordination of the business as a whole Budgets are means 0f communication. Complex plans laid down by the top

management are passed on to those who are responsible for putting them into action. Budgets facilities Centralized control with delegated authority and responsibility.

BUDGETS CONTROL:-

In a big organization like DSP, budgetary control is an effective tool for implementing cost control and cost reduction program. Budgets section is mainly entrusted with following function:-

Preparation of operation Budget Preparation of capital Budgets Preparation of foreign exchange Budgets

Objective:-

The advantage of budgetary control system arises from the achievement of the objects of budgetary control system arise from the achievement of the objectives of budgeting i.e., profit planning and expenditure control are as follow:-

Budgetary control aims maximization of profits through effective planning and control of income and expenditure- Directing capital and resources to the best and most profitable channel.

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There is a planned approach to expenditure and financing of the business so that economy is affected in the utilization of funds to the optimum benefits of the concern.

As budgets are set for each item of expenditure against department and against each employee, they provide a motivating force arising all concern to work efficiently and effectively.

Budgeting ensure adequate fund or working capital in the business during the operational period.

THE OBJECTIVE OF PAY SECTION:-

To ensure correct payment / Deduction as per the status and the rules of the company To ensure timely payment Expedition settlement of separate employees Prompt payment separate employees. To ensure compliance with the statutory requirement Correct and timely accounting of all such payments and deduction under appropriate

head of account.

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35


COMPRATIVE ANALYSIS OF WORKING CAPITAL

SAIL is having four main manufacturing units where the most of the productions are carried on they are as follows:-

Bhilai Steel Plant Bokaro Steel Plant Durgapur Steel Plant Rourkela Steel Plant

Apart from these steel plants, where are also other plants like Salem and Visvesvarya Steel Plant. I have taken these four plants for comparative analysis. I have considered data for five consecutive years starting from 2003. This comparative study will help to evaluate efficiency of working capital management in DSP by analyzing trend of working capital. We can frame appropriate credit policy. We can minimize blockage of fund by knowing working capital. I have calculated working capital of all four plants sequentially and try to find trend in working capital in past five years. Our analysis in plant’s other then Durgapur Steel Plant is based on only financial data provided by balance sheet. But, working capital management analysis needs some non-financial details. So, it is not possible to take in depth analysis of other plant. So, our in depth analysis confined to Durgapur Steel Plant. I have not taken financial details of current year 2007-2008 because it is in audit and not available for use.

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CALCULATION OF WORKING CAPITAL FOR ROURKELA STEEL PLANT

(In Crores)

YEAR 2007 2006 2005 2004 2003Current Assets

Inventories 746.7 718.11 500.44 466.86 698.23Sundry Debtors 17.43 14.60 12.44 8.57 8.51Cash And Bank 15.64 17.22 15.75 0.12 0.14

Interest Receivable 39.82 2.55 2.62 3.23 3.91Loan & Advance 0.00 0.00 0.00 1.42 2.84

Others 175.00 212.72 195.93 199.83 213.55Total Current Asset 914.95 965.20 727.18 680.03 927.18

CURRENT LIABILITIES AND PROVISIONS

YEAR 2007 2006 2005 2004 2003Current Liabilities 422.96 400.82 395.69 451.17Provisions 14.60 18.05 26.16 35.01Total Current Liabilities 618.30 437.56 418.87 421.85 486.18Net working capital 105.80 527.64 308.31 258.18 433.89Current Ratio 1.74:1 2.21:1 1.74:1 1.61:1 1.91:1

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CURRENT LIABILITIES AND PROVISIONS

Durgapur Steel Plant Bokaro Steel Plant Bhilai Steel Plant Rourkela Steel Plant

Particulars 07-08 06-07 05-06 07-08 06-07 05-06

07-08 06-07 05-06 07-08 06-07

05-06

Current Liabilities

472.34

428.63 361.92 1024.56

846.66 849.66

1303.23

1037.99

917.92 672.33

557.26

499.45

Provisions 704.66

490.17 440.49 1870.81

1322.67

1239.82

1774.75

1088.90

960.81 939.67

635.75

569.48

1177.00

918.80 802.41 2895.37

2169.53

2088.88

3077.98

2166.39

1877.43

1612.00

1193.01

1068.93

Current Assets, Loans & Advances

914.95

808.25 639.09 1835.88

1862.44

1826.11

2259.79

1951.26

1795.09

1147.18

1142.08

965.12

Current RatioCa/Cl

0.77:1

0.87:1 0.80:1 0.63:1 0.86:1 0.87:1

0.73:1 0.92:1 0.96:1 0.72:1

0.96:1

0.90:1

262.05

110.55 163.32 1059.49

307.09 262.77

818.19 175.13 82.84 464.82

50.93

103.81

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ANALYSISLiabilities The mount of current liabilities for last three years of DSP has increased, especially in the previous it has increased by more than 10% due to increase in other liabilities (472.34 crore 07-08 , 428.63 crore in 06-07) This shows that payment period of DSP either of long duration or due to the infrastructure development they are getting the raw material in less time that is they do not have to order now before more than a month they get the product in less time this is possible because of good infrastructure in the country. Other plants of SAIL like Bokaro, Bhilai, Rourkela, Analysis of current ratio which is maintained at the rate of 1.2:1. Hence all the plants are maintaining current ratio at the rate of 1.2:1. Which decreasing working capital. The ratio 1.2:1 is a sign of good working capital management i.e. less blockage of the capital. The main reason for this is that now ordering time has decreased.

Provision include gratuity, accrued leave wage revision employs family benefits scheme etc. The provision for the year 07-08 is 704.66 Crores and for the year06-07 is 790.17 crore. There is a increased in provision by 44% which is mainly due to wage revision from 17.73 crore to 203.71 crore from 06-07 to 07-08 respectively. When we compare to other plants of SAIL the provision increase by around 41%. From this weekend conclude that in the previous year 07-08 there was provision for wage revision in all the plants of SAIL which actually led to decrease in working capital for all the plant of SAIL (comparatively).

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Durgapur Steel Plant LOANS AND ADVANCES(Rupees in crore)

40


Particulars

LOANS 2008 2007 2006Employs 19.3 15.49 10 -% of turnover 0.42% 0.41% 0.30%

Stores Issued _ _ _ -% of turnover _ _ _

Others 0.2 0.21 0.21 -% of turnover 0.00% 0.01% 0.01%

ADVANCESContractor and supplier 7.59 8.44 11.29 -% of turnover 0.16% 0.23% 0.35%

Employees 8.97 9.49 1.11 -% of turnover 0.19% 0.25% 0.03%

Income tax paid on order 0.8 0.36 0.26 -% of turnover 0.02% 0.01% 0.01%

Other 17.85 11.59 10.54 -% of turnover 0.39% 0.31% 0.32%

Export Incentive Receivable _ _ _ -% of turnover _ _ _

DEPOSITPort, Trust, Excise, Railway etc. 26.4 11.93 13.99 -% of turnover 0.57% 0.32% 0.43%

Others 0.11 0.13 0.11 -% of turnover 0.02% 0.03% 0.03%

Bokaro Steel Plant

LOANS AND ADVANCES(Rupees in crore)

Particulars

41


LOANS

Employs 95.26 80.94 59.09

-% of turnover 0.85% 0.72% 0.81%

Stores Issued _ _ _

-% of turnover _ _ _

Others 5.15 5.23 5.96

-% of turnover 0.05% 0.06% 0.07%

ADVANCES

Contractor and supplier 62.91 42.02 57.93

-% of turnover 0.61% 0.44% 0.71%

Employees 3.15 1.99 7.52

-% of turnover 0.03% 0.02% 0.09%

Income tax paid on order 0.62 _ _

-% of turnover 0.01% _ _

Other 121.01 77.34 82.97

-% of turnover 1.17% 0.82% 1.02%

Export Incentive Receivable _ _ _


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DEPOSIT

Port, Trust, Excise, Railway etc. 80.34 37.92 77.41

-% of turnover 0.77% 0.40% 0.95%

Others 105.25 39.4 35.48

-% of turnover 1.01% 0.42% 0.43%

Bhilai Steel Plant


Particulars

LOANS

Employs 116.71 83.59 58.74

-% of turnover 0.81% 0.72% 0.61%

Stores Issued _ _ _


Others _ _ _


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ADVANCES


-% of turnover 0.26% 0.11% 0.13%

Employees _ _ _


Income tax paid on order _ _ _


Other 1.63 0.75 3.58

-% of turnover 0.01% 0.01% 0.04%

Export Incentive Receivable 2.22 1.04 1.26

-% of turnover 0.02% 0.01% 0.01%

DEPOSIT


-% of turnover 0.59% 0.29% 0.23%

Others 119.79 97.01 73.24

-% of turnover 0.84% 0.83% 0.76%

Rourkela Steel Plant44



Particulars

LOANS

Employs 31.13 25.27 17.02

-% of turnover 0.50% 0.46% 0.43%

Stores Issued _ _ _


Others 0.93 0.93 0.93

-% of turnover 0.02% 0.02% 0.02%

ADVANCES


-% of turnover 0.21% 0.24% 0.14%

Employees 0.11 0.32 0.12

-% of turnover 0.002 0.01 0.03%

Income tax paid on order _ _ _


Other 124.48 123.74 128.87

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-% of turnover 1.47% 2.27% 3.28%

Export Incentive Receivable _ _ _


DEPOSIT


-% of turnover 0.17% 0.25% 0.18%

Others 10.02 6.94 6.95

-% of turnover 0.16% 0.13% 0.18%

ANALYSISLoans to Employees: - By the last three year data I came to the conclusion that the percentage of loans to employee is increasing. It gives the idea that DSP cater very much to the needs of its employee with housing and other asset loan but when I go for comparison with other plant I found that it is less than the others that is Bhilai, Bokaro, and Rourkela has more loans to employee than DSP.

Loans to Other : - Forms a very negligible percentage of turnovers. Last year it has shown a decline as compare to 06-07 and 05-06, it forms a source of income as interest is received from inter unit some time loans are also provided to the registered suppliers and contractors to meet the demand of requirement of DSP.

Advances: - From the above data we can conclude that advances to contractors and suppliers are decreased. This is again because of the brand equity of DSP in the market were as trends shows that other plants are unable to maintain its consistency in advances to contractors and suppliers.

Advances to Employee: - In Durgapur Steel Plant, advances paid to employee are consistent but in other plants this figure is very decreasing in nature. The advances to employee are various in

46


natures some may be due to industrial to, training, festivals advances. DSP tries to provide its employee with the latest skills and comfort by providing benefits\funds to employees.

Advances Income Tax: - Income tax paid in advance is shown in every `year’s account where as Bokaro and Bhilai shows highest paid income tax it is due to from the last year income/Sales of DSP, BSP and Bhilai are gone up as compare to the previous year.

Deposits: - Port trust, excise, railways etc. shows deposit train in mix nature it is decreased in 06-07 but increase in 07-08. This increase figure may be due to DSP business had increased drastically. Due to this deposit are in good train but when we compare to other plants of SAIL lacks behind in the case of Bokaro and ahead of Rourkela, so we can analyze that this mix picture in comes of deposit.

Deposit Other: - DSP deposit with other is very negligible in comparing to other plants. Also, it has decreased in comparison to 06-07. Deposit with other may include.

PERCENTAGE OF EXPENDITURE AND NET PROFIT OF NET INCOME (2007-08)

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48


INTRODUCTION TO RATIO ANALYSIS

Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishments and interpreting several of various ratios helping in marketing certain decisions. However, ratio analysis is not an end in itself. It is only a mean of better understanding of financial strength and weakness of a firm. Calculation of a mere ratio does not serve any purpose, unless several appropriate ratios analyzed and interpreted. There are number of ratio which can be calculated from the information n given in the financial statements.

USES AND SIGNIFICANCE OF RATIO ANALYSIS:-

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The use of ratio is not confined financial managers only .There are different parties interested in the ratio analysis for knowing the financial position of a firm for different purpose.

The supplier of goods on credit, banks, financial investor, share holder and management all make use of ratio analysis as a toll in evaluating the financial position and performance of a firm for grating credit, providing loans.

With the use of ratio analysis one can measure the financial condition of a firm and can point out whether the condition is strong, good questionable or poor.

Following are the some of the uses:-

a)Help in decision making:- Financial statements are prepared preliminary for decision making .But the information provided the financial statements is not an end in itself and no meaningful .Conclusion can be drawn from this statements alone. Ratio analysis help in marketing decision from the information provided in this financial statement.

B) Helps in financing forecasting and planning:- Ratio analysis is of much help in financial forecasting and planning .planning is looking ahead and the ratio calculated for a number of years work as a guide for the future. Meaningful conclusion can be drawn for future from ratio.

C) Helps in communication: - The financial strength and weakness of a firm are communicated in a more easy and understandable manner by the use of a meaningful manner to the one for whom it is meant.

Thus ratio in communication and enhance the value of financial statements.

D) Ratio even helps in co ordination, which is of most important in effective business management. Better communication of efficiency and weakness of an enterprise result in better coordination in the enterprise.

E) Help in control:-Ratio analysis even help in making effective control of the business. Standard ratios can be based upon performance of a financial statements and variance or deviation, if any can be found by comparing the actual with the standard so as the take a corrective action at the right time.

LIQUIDITY RATIO

The liquidity ratio measures the ability of a firm to meets its short –term obligation and reflect the short term financial strength of a firm. Liquidity ratio comprises of:-

Net Working Capital.

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Current Ratio.

Acid Test or Quick Ratio.

Net Working Capital

Net working capital represents the excess of current assets over current liabilities. The term current assets refers to assets which in the normal course of business get converted into cash without diminution in value over a short period , usually not exceeding one year or length of operation /cash cycle whichever is more

Current liabilities are those liabilities which are to be paid in short period , normally a year .

. Net Working Capital= Current assets –Currents Liabilities

Although Net Working capital is really not a ratio , it is frequency employed as a measure of company ‘s liquidity position . An enterprise should have sufficient net working capital in order to meet claims of the creditor’s and day-to-day needs of business. The greater is the amount of net working capital the greater is the liquidity of the firm.

Acid Test RatioFormula: - Quick Assets/ Quick Liabilities

Ideal Norms: - 1:1

Purpose or Use: - It is used for measuring short term liquidity or solvency. Quick Ratio is useful to verify the trend indicated by current ratio.

Significance & Interpretation:-

1) A high quick ratio or current ratio indicates a good short term solvency capacity of the firm.

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2) Even if the current ratio is high or low quick ratio does not indicate a good debt repayment capacity of the firm.

3) The decision taken on the basis of current ratio can be verified through quick ratio.4) A high quick ratio ensures the safety of the safety of the investment of the investment

of the creditors

Components:-

1. Quick Assets = Current Assets-(stock + prepaid exp.)2. Quick liability = Current Liability-Bank Overdraft

Inventory Turnover Ratio:-

Formula : - Net Sales/Average Stock

Ideal Standard: The average stock turnover followed in the industry may be taken as ideal Norm.

Purpose & Use:

It is used into measure the short term solvency and overall activity of the firm .The efficiency in inventory management can also be assessed on the basis of ratio.

Significance:-

1) It show the rapidly with inventory trams into receivable through sales.

2) A low inventory turnover ratio indicates maintenance of high level of inventory in the opening cycle process.

3) A high inventory turnover ratio implies low inventory level and quick conversion of inventory into sales.

Components:

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1) Net sales

Here the actual sales is taken as the Net sales

2) Average stock =Opening stock +Closing Stock/2

GROSS PROFIT RATIO

Formula: Gross Profit /Net sales X100

Ideal Norm : The ideal range is taken as 25%to35%

PURPOSE &USE

It is used to measure the profitability and managerial efficiency.

Significance:

1) A higher gross profit ratio indicates more profitability and the managerial efficiency.2) A lower gross profit reveals the week profitability and managerial inefficiency.3) A negative gross profit ratio means the direct cost are more than the turnover and

the firm is not able to meets its indirect cost.4) It is always to analyze the gross profit a time series gross profit ratio of a single year

may not truly reveal the operating efficiency of the firm but if it studied as a time series the analyst Can known the increasing or decreasing trend.Component1) Gross Profit The profit before Depreciation, interest .And tax is taken as Gross Profit.2) Net Sales

NET PROFIT RATIOFormula:- Net profit/Net Sales X100Ideal Norms:- Absent Purpose & Use It is used to measure the overall profitability and the efficiency of the management in generating additional revenue over and above and the total operating cost.Significance

i. The net profit ratio shows the net Contribution made by sales of rupee 1 to owner fund.

ii. Higher net profit ratio indicates better, overall profitability and management efficiency managerial efficiency.

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iii. A lower net profit ratio reveals the net earning is lower and profitability and managerial efficiency is not up to the mark.

iv. If a firm has low net profit inspire of high gross profit ratio it seems it has excessive indirect expenses.

Component: 1) Net profit Profit before Tax is taken as the net profit. 2) Net Sales The total sale is taken as the net sales.Operating ratioFormula : Cost of goods sold/Net sales X100Ideal norm : 70% to 80% is accepted as a standard ratioPurpose & use : It is used to analyze the profitability and marginal efficiency. Significance: 1) A low operating ratio indicates that the firm has more surpluses In its hand after meeting operating cost. 2) A low operating ratio is indicator of high profitability and good efficiency. 3) A very high operating ratio reveals poor surplus available to the Firm after meeting operating cost.

4)Operating ratio must be used with caution because it may be effected by uncontrollable factor beyond the firms control.

Current Ratio: - Current ratio relates current ratio to current liabilities. According to

the convention, current ratio should be 1.2:1. But according to standard books 2:1 are standard ratio is 2:1. The ratio 1.2:1 is just because of high level of infrastructure development. Now DSP do not have to order its raw material more than two month in advance.

Companie 2008 2007 2006 2005 2004

54


s

B.S.P CA=1686.76 CA=1597.22 CA=1493.09 CA=1297.22 CA=1219.44

CL=917.67 CL=830.25 CL=879.52 CL=919.42 CL=945.46

CR=1.83:1 CR=1.9:1 CR=1.69:1 CR=1.41:1 CR=1.28:1

D.S.P CA=1054.65 CA=808.25 CA=639.09 CA=589.34 CA=485.22

CL=532.65 CL=475.97 CL=310.99 CL=339.60 CL=434.51CR=1.98:1 CR=1.6:1 CR=2.05:1 CR=1.71:1 CR=1.11:1

R.S.P CA=1187.54 CA=1065.13 CA=965.02 CA=727.18 CA=680.03CL=517.65 CL=459.24 CL=437.56 CL=418.87 CL=421.85CR=2.29:1 CR=2.31:1 CR=2.21:1 CR=1.74:1 CR=1.60:1

B.S.L CA=2787.55 CA=2437.45 CA=1826.11 CA=1279.78 CA=1001.77CL=1043.56 CL=934.65 CL=831.68 CL=731.64 CL=741.87CR= CR=2.60:1 CR=2.19:1 CR=1.74:1 CR=1.35:1

SAIL CA=2387.67 CA=20664.74 CA=17383.7 CA=14333.63 CA=8201.33CL=6025.56 CL=5276.65 CL=5191.70 CL=6437.91 CL=6104.80CR=2.29:1 CR=3.91:1 CR=3.34:1 CR=2.22:1 CR=1.34:1

This ratio is the indicator of the short term liquidity position of the farm. Liquidity means the ability of the farm to meets it short-term obligation in traditional view the conventional ratio is taken at 2:1 (i.e. every current liability of Re=1 should be taken by a current asset of Rs. =2). But the modern view the conventional ratio is taken at 1.2:1 (i.e. every current liability of Rs.1should be taken by a current asset of Rs.1.2). The position of D.S.P with respect of SAIL and its other plants can be viewed from the Table (01) in the year 04-05the position of current ratio is better for D.S.P and SAIL in compare to other years

DATA FOR CALCULATING FINANCIAL RATIO

FOR LAST 4 YEARS & BUDGETING FOR 2007-08

DURGAPUR STEEL PLANT

(Rs. Lakh)

BUDGETITEMS 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

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Gross Block 618199 620172 621149 626136 641137 681118Net Block 338731 310802 282254 257225 244319 250066Working Capital 4734 23055 31568 40245 29665 37158Capital Employed 343465 333857 313822 297470 273984 287224Turnover (Including inter plant transfer) 300516 414187 383990 448807 564283 641254Sundry Debtors 3580 3909 878 1088 1743 1100Inventories 38782 47307 53923 69151 76197 82105Current Assets 49045 58132 63909 80825 91495 94805Current Liabilities 26157 33553 36192 42863 47234 46200Employees Remuneration & Benefits 56424 46531 41839 54283 81749 65786Net Sales Realization 262021 362085 325959 381794 483193 555839Gross Profit (before interest &Depreciation) 45980 116444 60692 93913 133760 111460Net Profit 8125 78401 26093 62376 100861 76700Value of production 264605 363663 326693 392833 491144 553952

NOTE:-

1. Gross Block excluded Work-in-progress2. Net Sales Realization represents Gross sales and Inter-plant transfer excluding Excise

duty, Freight Outward, SDF, JPC and other pool fund.3. Capital Employed represents Net block excl. WIP, plus working capital.4. Value of prod. Represents Net Sales (+)/(-) Stock Accrn./Decrn.5. Working capital represents Operation only.

COMPERATIVE FINANCIAL RATIOS

FIGURE IN %

ITEMS 2005-06 2006-07 2007-082008-09 BUDGETED

TURN OVER TO GROSS BLOCK 61.8 71.7 88 94.1NET SALES REALISATION TO GROSS BLOCK 84.9 85.1 85.6 86.7SUNDERY DEBTORS(SALES) TO TURNOVER(GROSS) 0.2 0.2 0.3 0.2STOCK OF SEMI\FINISHED PRODUCT TO TURNOVER 7.7 9.6 9.5 8.7STOCK OF SEMI\FINISHED PRODUCT TO COST OF SALES 9.9 13.4 14 11.6

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NET PROFIT TO GROSS BLOCK 4.2 10 15.7 11.3NET PROFIT TO TURNOVER 8 16.3 20.9 13.8NET PROFIT TO CAPITAL EMPLOYED 8.3 21 36.8 26.7CURRENT ASSET TO CURRENT LIABILITIES 176.6 188.6 193.7 205.2QUICK ASSET TO CURRENT LIABILITIES 27.6 27.2 32.4 27.5WORKING CAPITAL TO COST OF SALES 10.5 12.6 7.7 7.7WORKING CAPITAL TO NET BLOCK 11.2 15.6 12.1 14.9WORKING CAPITAL TO TURNOVER(GROSS) 8.2 9 5.3 5.8COST OF SALES TO TURNOVER (GROSS) 78.2 71.3 67.9 74.8INVENTORIES (OPRN)TO VALUE OF PRODUCTION 16.5 17.6 15.5 14.8COST OF PRODUCTION TO VALUE OF PRODUCTION 92 84.1 79.5 86.2LABOUR COST TO TURN OVER(GROSS) 10.9 12.1 14.5 10.3

ANALYSIS OF DIFFERENT RATIO”S

ACID TEST RATIO : - WE can find that SAIL is a whole is having a comfortable liquidity position and it can meet its current obligation without any type of hurdles at any time. Again it has to be said that the differences between current between current ratio and quick ratio is that of inventory. So, from this scenario we can easily say that inventory play a vital role in the composition of capital structure.

INVENTORY TYRNOVER:- It is always desirable for a firm to maintain a balance level of inventory. All the manufacturing plants have improved their inventory turnover ratio from the

57


previous year. Through DSP demoted in rank as compared to previous year i.e. 2005, but it has

improved its inventory turnover ratio to a good extent from 8.88 times in 2005 to 9.33 in 2006.

NET PROFIT

Net profit margin ratio measures the overall profitability and efficiency of the management in generating additional revenue over the total operating cost. It can be viewed that inspire of having positive gross margin the net margin ratio is negative for Durgapur Steel Plant, RSP as well for SAIL in the year 2002 and 2003. This is mainly due to excessive indirect expenses on which it has no control like on the wastage of raw materials and expenditure and surplus labor. In this year2006 and 2005, the position of DSP and SAIL has been improved. So, by analyzing GP ratio and NP ratio we can say that the performance of DSP is not as satisfactory is it should be.

GROSS PROFIT RATIO

The gross margin ratio is used to explain the relation between sales and gross earning .it shows after matching of dividend expenses according to the above data, the position of Durgapur steel plant was better as compared to SAIL as whole in the year 2004.In the year 2005the gross margin of DSP falls from 8.34%to 7.5%, where else in case of sales it increased from 6.25%to 11.25%. This improvement is due to the good performance of BSL.Again it has to be said that year 2006 is good for both DSP and SAIL. But in the year 2007 the ratio took a fall due to fall in price.to2002 that indicates

OPERATING RATIO

The figure shows that the operating ratio of DSP decreases in2004 that is 81.32% in compare to 2003 this indicates that surplus in the hand of DSP in current year 2007decreases then compare to the previous year for the payment of interest and dividend. This decrease in surplus is incurred mainly due to increase in cost of production.

CONCLUSION AND RECOMMENDATION

i. After analysis of various components of working capital and trend in last 5 year ,we can conclude that DSP is managing its working capital efficiently .It has reduced inventory of raw materials and increased stock of finished and semi finished products it has also

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reduced stores and spares thus investing reasonable working capital. It has also reduced its current liability to a large extent.

ii. Again from working capital turnover ratio we can see that performance of DSP is very close to ideal ratio 1.21:1.In the past 2 years current ration was bit high, it is mainly because of some poor planning. As plant has all capability, a good pool of managerial talent so very soon it will attain ideal ratio.

iii. We have also done inventory analysis and have shown, components of inventories separately and found that the stock of these different components remain unused in stores for very brief period. This reduces blockage of fund in terms of inventories.

iv. In comparison with other major steel plant working capital in DSP is little more and shows an upward trend, it is mainly because of rapid development of plant.DSP has increased its capacity many fold. Increased capacities require more working capital

Thus by making a component analysis of working capital management of DSP by giving individual focus on working capital turnover ratio , inventory analysis , trend of turnover of different products .Ultimately we conclude that DSP is having a good working capital management.

SUGGESTION1. DSP should concentrate more on JIT technique of manufacturing and inventory

management. This will minimize the blockage of fund by reducing holding cost.

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2. Company should search for more supply sources (other than available sources). So that company can minimize cost of raw materials.

3. Company must develop a dynamic team of marketing professionals.4. Company should have close watch over wastage of electricity, raw materials and labor

hours etc.5. The equity becomes an important tool of differentiation so company must incorporate

TQM in all departments.6. Very few cases, Plant go for credit. The credit policy of plant should be evaluated

regularly so as to prevent increase of bad debt.7. The security should be made sticker to control the losses due to theft.8. Use security in case of import or export to control the losses due to theft.9. Use new techniques to make the production good or more.

Research Methodology

Statement of the Problem:-

“To Study the method of working capital management and it’s financing for the steel industry with special reference to Durgapur Steel Plant.”

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The steel industry is going through a very critical phase, with prices of raw material rising, high demand both in domestic and international market, increasing pressure from the government and a production crunch.

In such a situation, effective management of working capital is very essential for optimizing operating cost and to deal with such adverse situations efficiently.

The project will be highlighting the various strategies and methods for managing of working capital and it’s financing.

Scope of the Study

A study on financial strategy of DURGAPUR STEEL PLANT, with the practical training on working capital management & it’s financing.

To find out the working capital management & it’s financing to Durgapur Steel Plant. To gain familiarity with the components of working capital in DSP. To find how different components of working capital are managed at DSP. To come out with any solution for improvement in working Capital Management at DSP. To know the practical practices in Durgapur Steel Plant.

Objectives of the Study

This study can help in following ways:

This study will help the new players to decide which method of working capital management and its financing they can adapt to fully utilize their resources, in the steel industry.

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The study will help the existing players to understand and implement an appropriate working capital management.

To find out the feasibility of the working capital management and financing method followed by Durgapur Steel Plant.

This study will help players in the steel industry to reduce costs incurred.

The study will help in reducing the idleness of cash and provide efficient working capital through maintaining need based cash balance without distributing the liquidity needs of the business.

The study will also show the challenges that the steel industry will face and market share and growth rate they will have in the future.

Tools for Data Collection:-

To have a proper understanding and defining the boundaries of research brainstorming was done within the team, discussion were held with experts in management fields, and a few relevant books and magazines were studied.

I have prepared my project to collect both Primary data & Secondary data.

1. Primary Data

The data are taken from meetings and interviews with various managers and employees of finance department of Durgapur Steel Plant. As per instruction of my external guide, I have visited to the following departments.

Main Cash Department Billing and Operation Department Cash & Budget Department Raw-Material Department

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Purchase Department Sales Department Project Management Department

2. Secondary Data

The other already available data were obtained from various sources namely.

Balance Sheet. Profit & Loss Account. Annual Report. Accounting Reports. Costs & Budgets Report. Cash Report. Creditors Report. Debtors Report. Raw Material Report. Stock Report. Production Report. Sales Report. Financial Report. Plant Account Books.

DURATION

We have the time constraint of 30 days.

Contact Method :- Interview

Limitations

1. SAIL/DSP is a huge steel plant so that in 4 weeks it is not possible to study deeply.2. Components of inventories are huge in number and are materials wise, so, it is not

again possible to study deep into each of those inventories.3. In some cases actual figure is not available.4. Calculation is confusing in some cases.5. Due to financial year ending, the concerns officers were not available at the time

when needed.

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Due to financial year ending & auditing, the information about the year 2007-08 was not available for the analysis.

BIBLIOGRAPHY

Profit & loss A/C of DSP for the year 2002-2003, 2003-2004,2004-2005,2005-2006.

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Balance sheet of DSP for the year 2002-2003,2003-2004,2004-2005,2005-2006.

Annual report of SAIL for the year 2004-2005,2005-2006. www.sail.co.in. Financial management by I. M. Pandey. Accounting theory & Management Accounting by Debasish Banerjee Financial Bulletin of Durgapur Steel Plant. Profit & loss A/C ,Balance sheet & Annual report OF BHILAI STEEL

PLANT for the year 2002-2003,2003-2004, 2004-2005 , 2005-2006. Profit &loss A/C , Balance sheet & Annual report OF ROURKELA STEEL

PLANT for the year 2002-2003,2003-2004,2004-2005,2005-2006. Profit &loss A/C ,Balance sheet &Annual report OF BOKARO STEEL

PLANT for the year 2002-2003,2003-2004,2004-2005,2005-2006.

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ANNEXURE

ROURKELA STEEL PLAN

Balance sheet as at 31 st March 2008

31st March,2008 31st March,2007 31st March,2006(Rs in crores) (Rs in crores) (Rs in crores)

SOURCES OF FUNDSShareholder's Fundreserves and surplus 218.08 0 0Loan Fundssecured loans 16.94 21.41 21.27unsecured loans 0 2.75 5.36

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inter unit current account 16.94 24.16 26.639566.9 10321.67 10102.12

9801.92 10345.83 10128.75APPLICATION OF FUNDSFixed AssetsGross Block 6519.92 6320.24 6303.26less:depreciation 3634.92 3341.999 3083.06net block 2885 2978.25 3220.2capital work in progress 296.24 182.96 114.57

3181.24 3161.21 3334.77

InvestmentsCurrent Assets,Loans & Advancesinventories 870.13 877.56 718.11sundry debtors 11.66 12.96 14.6cash & bank balances 20.66 18.79 17.22interest receivable/accrued 1.58 1.83 2.47loans & advances 248.15 230.94 212.72

1147.18 1142.08 965.12

less:current liabilities & provisionscurrent liabilities 672.33 557.26 499.45provisions 939.67 635.75 569.48

1612 1193.01 1068.93

Net Current Assets -464.82 -50.93 -103.81Miscellaneous Expenditure 7.39 15.41 26.27Profit & Loss Account Debit Balance 0 1183.25 2516.95Inter Unit Current Account 7078.11 6036.89 4354.57

9801.92 10345.83 10128.75

PROFIT AND LOSS ACCOUNT


INCOMESales 7321.66 6335.9 4586.65less:excise duty 1012.01 873.99 662.02

6309.65 5461.91 3924.63finished products internally consumed 29.09 27.91 28.5interest earned 10.63 10.3 7.52other revenues 79.15 78.95 61.83

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provisions no longer required written back 6.86 16.68 9.69stock transfer to other units 63.19 59.11 46.07

6498.57 5654.86 153.611078.24

EXPENDITUREaccretion(-)/depletion to stocks 26.16 -24.49 -161.34raw materials consumed 2311.81 2144.68 1680.59employees remunaration & benefits 1114.77 738.81 591.3stores & spares consumed 483.23 438 370.88power & fuel 397.91 364.49 302.14repairs &maintenance 59.39 47.75 56.1freight outward 105.99 108.34 131.62other expenses 164.26 155.58 153.21share of expenditure over income corporate office 57.78 39.45 31.4 CMO 38.81 33.88 36.69 CCSO 5.34 2.82 2.52Interest & finance charges 79.65 32.8 112.23depreciation 304.37 291.92 288.27total 5149.47 4374.03 3595.61less:inter account adjustments 52.03 53.97 19.46

5097.44 4320.06 3576.15Profit for the year 1401.13 1334.8 502.09adjustments pertaining to earlier years 0.2 1.6 -5.58Net profit for the year 1401.33 1336.4 496.51balance brought forward -1183.25 -2516.95 -3031.46less:provision towards long service 0 2.7 0 awards to employees upto 31-03-06Balance carried over to balancesheet 218.08 -1183.25 -2516.95

INVENTORIES


Stores and spares 320.52 303.44 216.36add: in-transit 19.7 19.85 24.92

340.22 323.29 241.28less:provision for non moving/obsolete items 39.58 39.34 39.2

300.64 283.95 202.08raw materials 139 151.04 108.41

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add:in-transit 35.19 24.8 15.46174.3 175.84 123.87

less:provision for unusable materials 0.99 1.28 1.26173.31 174.56 122.61

semi/finished products (including scrap) 396.18 419.05 393.42870.13 877.56 718.11

BOKARO STEEEL PLANT,P & L ACCOUNT,31ST MARCH,2008

31st March,200831st March,2007

31st March,2006

(Rs in crores)

(Rs in crores)

(Rs in crores)


10376.62 9481.53 8175.19finished products internally consumed 42.59 39.88 45.41interest earned 16.85 12.48 10.68other revenues 115.68 151.3 107.73provisions no longer required written back 12.59 8.17 17.2stock transfer to other units 719.47 514.52 531.89

11283.8 10207.88 8888.1

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EXPENDITUREaccretion(-)/depletion to stocks 188.88 -7.41 -274.95raw materials consumed 3672.82 3765.56 3548.09employees remunaration & benefits 1956.93 1262.05 1039.37stores & spares consumed 845.37 814.8 682.57power & fuel 857.52 793.6 776.7repairs & maintenance 96.01 65.09 69.69freight outward 168.18 192.14 250other expenses 360.56 314.76 365.73share of expenditure over income corporate office 115.56 78.9 62.79 CMO 63.45 57.54 75.32 CCSO 2.82 3.07 3.36Interest & finance charges 40.41 34.17 114.16depreciation 246.7 241.09 253.38total 8615.21 7615.36 6966.21less:inter account adjustments 161.84 144.44 132.13

8453.37 7470.92 6834.082830.43 2736.96 2050.02

adjustments pertaining to earlier years 0 0 1.54profit/loss(-)before tax 2830.43 2736.96 2055.56less:provision for taxationbalance brought forward 13357.07 10625.81 8570.25less:provision towards long service awards to employees upto 31st march,2006 0 5.7 0amount available for appropriation 16187.07 13357.07 10625.81

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BOKARO STEEL PLANT

, Balance sheet as at 31st march.2008 31st march,2008 31st march,2007 31st March,2006(Rs in crores) (Rs in crores) (Rs in crores)

SOURCES OF FUNDSShareholder's Fundreserves and surplus 16187.54 13357.11 10625.85Loan Fundssecured loans 69.42 87.18 90.52inter unit current account 2602.88 2880.09 2806.5

18859.84 16324.38 13522.87APPLICATION OF FUNDSFixed Assets

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Gross Block 7072.41 6746.53 6686.89less:depreciation 4790.17 4581.66 4347.66net block 2282.24 2164.87 2339.23capital work in progress 376.53 273.16 164.91

2658.77 2438.03 2504.14

Investments 0.1 0.1 0.1Current Assets,Loans & Advancesinventories 1185.74 1407.49 1365.56sundry debtors 7.74 8.95 12.51cash & bank balances 44 41.08 37.9interest receivable/accrued 10.95 14.02 18.96loans & advances 587.45 390.9 391.18

1835.88 1862.44 1826.11


2895.37 2169.53 2088.88

Net Current Assets -1059.49 -307.09 -262.77Miscellaneous Expenditure 14.81 29.41 42.85Inter Unit Current Account 17245.65 14163.93 11238.55

18859.84 16324.38 13522.87

INVENTORIES31st March,2008

31st March,2007

31st March,2006

(Rs in crores) (Rs in crores) (Rs in crores)Stores and spares 458.69 369.96 327.53add: in-transit 61.93 62.99 65.81


467.98 378.46 341.29raw materials 149.3 229.52 203.69add:in-transit 19.34 21.97 52.52

168.64 251.49 256.21

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less:provision for unusable materials 0.36 0.36 0168.28 251.13 256.21

semi/finished products (including scrap) 549.48 777.9 768.061185.74 1407.49 1365.56

BHILAI STEEL PLANT,

P&L Account for the year ended 31st march.2008 31st March,2008

31st March,2007

31st March,2006

(Rs in crores)

(Rs in crores) (Rs in crores)


14352.36 11689.81 9682.91finished products internally consumed 99.56 101 88.86interest earned 23.59 17.19 13.54other revenues 183.84 199.88 243.92provisions no longer required written back 1.24 3.07 10.67stock transfer to other units 191.43 341.56 169.25

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14852.02 12352.51 10209.15

EXPENDITUREaccretion(-)/depletion to stocks -113.46 -30.2 -322.24raw materials consumed 4718.58 4302.72 4214.3employees remunaration & benefits 2085.51 1306.58 1028.95stores & spares consumed 1141.6 991.24 896.48power & fuel 827.63 770.18 801.69repairs &maintenance 166.46 117.65 105freight outward 273.96 220.51 235.02other expenses 451.48 389.47 349.53share of expenditure over income corporate office 115.56 78.9 62.78 CMO 109.64 78.27 79.84 CCSO 4.17 2 2.06Interest & finance charges 58.91 14.65 140.63depreciation 216.68 223.43 204.37total 10056.72 8465.4 7798.41less:inter account adjustments 570.27 400.18 370.47

9486.45 8065.22 7427.415365.57 4287.29 2781.21

adjustments pertaining to earlier years 0.8 -15.7 -0.14Profit before tax 5366.37 4271.59 2781.07balance brought forward 19192.77 14926.94 12145.87less:provision towards long service awards to employees upto 31st march,2006 0 5.76 0Balance carried over to balancesheet 24559.14 19192.77 14926.94

SAIL,BHILAI STEEL PLANT,Balance sheet as at 31st march.2008

31st March,2008

31st March,2007

31st March,2006

(Rs in crores) (Rs in crores) (Rs in crores)SOURCES OF FUNDSShareholder's Fundreserves and surplus 24572.51 19205.34 14937.16Loan Fundssecured loans 71.59 43.65 45.61inter unit current account 2476.1 2725.31 2706.69

27120.2 21974.3 17689.46APPLICATION OF FUNDSFixed AssetsGross Block 6649.05 6642.36 6306.7

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less:depreciation 4363.96 4244.08 4051.52net block 2285.09 2398.28 2255.18capital work in progress 728.83 273.1 216.55

3013.92 2671.38 2471.73

Current Assets,Loans & Advancesinventories 1712.9 1556.66 1505.76sundry debtors 13.7 18.82 20.53cash & bank balances 39.86 36.8 33.81interest receivable/accrued 12.6 13.86 16.55loans & advances 480.73 325.12 218.44

2259.79 1951.26 1795.09


3077.98 2126.39 1877.93

Net Current Assets -818.36 -257.45 -82.84Miscellaneous Expenditure 15.8 28.19 54.83Inter Unit Current Account 24908.84 19532.18 15245.74

27120.2 21974.3 17689.46

INVENTORIES31st March,2008

31st March,2007

31st March,2006

(Rs in crores)

(Rs in crores) (Rs in crores)




284.85 343.07 354.11less:provision for unusable materials 0.12 0.12 0.12

284.73 342.95 353.99semi/finished products (including scrap) 962.42 769.59 734.15

1712.9 1556.66 1505.76

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DURGAPUR STEEL PLANT,

Balance sheet as at 31st march.200831st March,08

31st March,07

31st March,06

(Rs in crores)(Rs in crores)

(Rs in crores)

SOURCES OF FUNDSLoan Fundssecured loans 107.5 22.36 7.37inter unit current account 8843.04 9378.77 9419.26

8950.54 9401.13 9426.63APPLICATION OF FUNDSFixed AssetsGross Block 6614.37 6261.36 6211.49less:depreciation 3968.18 3689.11 3388.95net block 2443.19 2572.25 2822.54capital work in progress 225.26 274.33 200.52

2668.45 2846.58 3023.06

Investments 0.01 0.01 0.01

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Current Assets,Loans & Advancesinventories 761.97 691.51 539.23sundry debtors 17.43 10.88 8.78cash & bank balances 15.64 13.58 12.28interest receivable/accrued 0.57 0.74 1.07loans & advances 119.34 91.54 77.73

914.95 808.25 9426.639426.63

less:current liabilities & provisions 9426.63current liabilities 472.34 428.63 9426.63provisions 704.66 490.17 9426.63

1177 918.8 9426.639426.63

Net Current Assets -262.05 -110.55 9426.63Miscellaneous Expenditure 3.6 7.83 9426.63Profit & Loss Account Debit Balance 1593.84 2602.45 9426.63Inter Unit Current Account 4946.69 4054.81 9426.63

8950.54 9401.13 9426.63

INVENTORIES 31st March,08 31st March,07 31st March,06(Rs in crores) (Rs in crores) (Rs in crores)




74.67 123.41 126.18less:provision for unusable materials 0 0 0

74.67 123.41 126.18semi/finished products (including scrap) 536.08 429.39 297.08

761.97 691.51 539.23

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SAIL,DURGAPUR STEEL PLANT,P & L ACCOUNT,31ST MARCH,2008 31st March,08

31st March,07

31st March,06

(Rs in crores) (Rs in crores) (Rs in crores)INCOMESales 5274.73 4287.68 3760.49less:excise duty 645.24 530.07 483.99

4629.49 3757.61 3276.5finished products internally consumed 6.02 4.03 3.14interest earned 7.36 5.85 3.72other revenues 85.88 70.78 43.88provisions no longer required written back 6.29 1.63 4.99stock transfer to other units 368.1 200.39 79.41

5103.14 4040.29 3411.64

EXPENDITUREaccretion(-)/depletion to stocks -79.51 -110.39 -7.34raw materials consumed 1856.61 1668.75 1523.41purchases of finished/semi- finished products 0 0 0employees remunaration & benefits 817.49 542.83 418.39stores & spares consumed 382.44 358.52 323.62

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power & fuel 244.99 225.37 225.45repairs &maintenance 88.63 63.13 44.79freight outward 119.91 119.5 95.06other expenses 274.01 200.41 159.06share of expenditure over income corporate office 57.78 39.45 31.4 CMO 37.43 31.76 26.94 CCSO 3.32 1.76 1.83Interest & finance charges 27.73 15.47 50.31depreciation 301.26 299.9 295.68total 4132.09 3456.42 3189.5less:inter account adjustments 37.75 42.04 41.67

4094.34 3414.38 3174.831008.8 625.91 263.81

adjustments pertaining to earlier years -0.19 -2.15 -2.88profit/loss(-)before tax 1008.61 623.76 0profit/loss(-)after tax 1008.61 623.76 0Net profit for the year 260.93amount transferred from bonds redemption reserve 0 0balance brought forward -2602.45 -3224.24 -3484.17less:extaordinary items 0 1.97

amount available for appropriation -1593.84 -2602.45 -3224.24

APPROPRIATIONSBalance carried over to balancesheet -1593.84 -2620.45 -3224.24

-1593.84 -2620.45 -3224.24

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Project Final Dsp

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