1

EXECUTIVE SUMMARY

India is one of the leading country in steel producing and growing economy with rapidly

expanding the financial service sector. Managing working capital is a matter of balance. A

company must have sufficient cash in hand to meet its immediate needs while ensuring that

idle cash is invested to the organization’s in best efficient way. It is necessary to have clear

and accurate reports on each of the components of working capital and awareness of the

potential impact of outside influences.

In the analysis for Bhilai Steel Plant it was found that the working capital has increased

which could be mainly due to increased sales. The main areas of emphasis were on inventory

turnover and creditor’s turnover and Debtor’s turnover. Creditor turnover is reducing that was

a good sign. Few suggestions that are recommended for better management of working

capital are reducing inter-corporate deposits and loans, reducing finished goods inventory,

etc.

The company uses Operating Cycle Method to calculate its Working Capital method.

Thus, good management of working capital is part of good financial management. Effective

use of working capital will contribute to the operational efficiency of a company, optimum

use will help to generate maximum returns.

1

WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES

2

Company

Analysis

2

3

STEEL AUTHORITY OF INDIA LIMITED (SAIL)

HISTORY OF SAIL

Steel Authority of India (SAIL) was established in 1973 to manage the operations of state-

owned steel companies Hindustan Steel (established in 1954) and Bokaro Steel (established

in 1964). In 1978, SAIL was restructured as an operating company.

The company established Durgapur Steel Plant (DSP) in the late 1950s with an initial annual

capacity of one million tons of crude steel. The capacity of DSP was later expanded to 1.6

million tons during the 1970s.

Over the years, SAIL established various steel plants. Bokaro Steel Plant (BSP), which was

originally incorporated as a limited company in 1964, was merged with SAIL, first as a

subsidiary and then as a business unit. Salem Steel Plant (SSP) was commissioned, in 1981.

The Indian Iron and Steel Company (IISCO), a subsidiary of SAIL, was declared a sick

industrial company by the Board for Industrial and Financial Reconstruction (BIFR), in 1994.

NTPC SAIL Power Company was established as a joint venture with National Thermal

Power Corporation (NTPC), in 2001. In the following year, SAIL established the Bokaro

Power Supply Company with Damodar Valley, and the Bhilai Electric Supply Company with

the NTPC.

In 2005, the Board of Directors of SAIL gave approval for two projects: the revamping of

Sinter Plant-2 in Bhilai Steel Plant and the installation of an air turbo compressor and an

oxygen turbo compressor at the Oxygen Plant in Bokaro Steel Plant.

IISCO was amalgamated with the parent company, in the first quarter of 2006. The

foundation stone of the INR96,000 million (approximately $2,384.6 million) Greenfield

modernization and expansion program of IISCO Steel Plant (ISP) of SAIL was laid at 3

4

Burnpur in West Bengal, in the last quarter of 2006. Installation of state-of-the-art

environment-friendly and energy-efficient steel making technology was expected to help ISP

multiply its crude steel production capacity to 2.5 million tons by the year 2010.

In February 2007, SAIL signed a memorandum of understanding (MOU) with Indian

Railways for supply of 34 high-power locomotives to SAIL over the next three years. These

locos would enable faster movement of materials on full-rake basis, leading to a substantial

reduction in detention time for the railway wagons.

In March 2007, the company signed a joint venture agreement with Jaypee Associates (an

India-based cement producer) for producing 2.2 million tones cement per annum from the

slag generated during the blast furnace operations at SAIL’s Bhilai Steel Plant.

In April 2007, the company’s board approved a proposal for modernization and capacity

expansion of Bhilai Steel Plant to 7 million tons of crude steel per annum at an indicative cost

of INR112,620 million (approximately $2,797.5 million). In the same month, SAIL,

Rashtriya Ispat Nigam (RINL, an India-based steel company), and National Mineral

Development Corporation (NMDC, an India-based company engaged in the exploration of a

range of minerals) agreed to enter into a strategic business relationship by forming a joint

venture company for setting up of an integrated iron and steel plant of four million tonnes

annual capacity in the state of Chhattisgarh (a state in India) initially. They also planned to

take this process further to other states of India as well.

In June 2007, SAIL signed a MOU with Manganese Ore India (MOIL, a public sector

company with large resources of manganese) for setting up of a joint venture company to

produce Ferro-manganese and silicon-manganese.

In August 2007, SAIL and POSCO, a South Korea-based steel company, signed a MOU to

establish a strategic alliance for aligning and cooperating with each other in a range of

strategic business and commercial interest areas. The MOU stated that the alliance partners

had agreed to cooperate in the areas of business which included information sharing in the

area of corporate strategy planning; joint usage of each other's existing marketing and

warehousing network; and co-ordination in procurement of coking coal, nickel, and ferro-

alloys and engagement of transportation vessels.4

5

Further in August 2007, SAIL, NMDC, and RINL, signed a MOU for jointly setting up a 4

million tonnes per annum capacity integrated steel plant in Chhattisgarh, a state in India.

In September 2007, SAIL signed a MOU with IL&FS Infrastructure Development

Corporation (IIDC, an infrastructure development and finance company) for formation of a

special purpose vehicle (SPV) to develop, operate, and maintain a steel sector special

economic zone (SEZ) at Salem in the state of Tamil Nadu in India.

In January 2008, SAIL and Tata Steel, an India-based steel company, signed an agreement to

establish a fifty-fifty joint venture company for coal mining in India. The joint venture would

identify, acquire, and develop coal blocks in India. In the same month, foundation stone for

the modernization and expansion of Rourkela Steel Plant (located in the state of Orissa in

India) of SAIL was laid.

In February 2008, an INR112,620 million (approximately $2,797.5 million) expansion

program for SAIL was inaugurated in Bhilai. In the same month, SAIL signed a shareholder's

agreement with Jaypee Associates to form a joint venture company, Bokaro Jaypee Cement,

for setting up a 2.1 million tonne capacity cement plant at Bokaro.

In April 2008, the foundation stone for INR110,000 million (approximately $2,732.4 million)

modernization and expansion project of the Bokaro Steel Plant of SAIL was laid.

In May 2008, SAIL signed a MOU with the government of Kerala (a state in India) for

revival of the loss-making Steel Complex; a 50,000 tonnes per annum company producing

continuous cast billets used by re-rollers for producing thermo mechanically treated (TMT)

bars for the construction industry.

5

6

INTRODUCTION TO SAIL

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.

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.

SAIL VISION

To be a respected world-class corporation and leader in India steel business in

quality, productivity, profitability, and customer satisfaction.

6

7

CREDO:

We build lasting relationships with customers based on trust and mutual benefit.

We uphold highest ethical standards in conduct of our business.

We create and nurture a culture that supports flexibility, learning and is proactive to

change.

We chart a challenging career for employees with opportunities for advancement and

rewards.

We value the opportunity and responsibility to make a meaningful difference in

people's lives.

CORE VALUES OF SAIL

Customer satisfaction.

Concern for people.

Consistent Profitability.

Commitment of Excellence.

THE SEVEN C’s OF SAIL

Consistent Quality.

Committed Delivery.

Customized Product Mix.

Contemporary Products.

Competitive Price.

Complaint Settlement.

Culture of Customer Services.

7

8

SAIL TODAY

SAIL today is one of the largest industrial entities in India. Its strength has been the

diversified range of quality steel products catering to the domestic, as well as the export

markets and a large pool of technical and professional expertise.

Today, the accent in SAIL is to continuously adapt to the competitive business environment

and excel as a business organization, both within and outside India.

Much has happened ever since SAIL’s Corporate Plan was announced in 2004. Investment

plans for the three specialty steel plants have been firmed up. Company has grown in size

with the amalgamation of IISCO (now renamed as IISCO Steel Plant). Production targets

have been revised from 19 million tonnes (MT) of steel to about 24 MT. Estimated

investments has increased from Rs 25,000 crore to around Rs 40,000 crore. And the time

period has been squeezed by two years, bringing the targeted year of completion of major

projects from 2012 to 2010.

SAIL’s GROWTH PLAN 2010

Much has happened ever since SAIL’s Corporate Plan was announced in 2004. Investment

plans for the three specialty steel plants have been firmed up. Company has grown in size

with the amalgamation of IISCO (now renamed as IISCO Steel Plant). Production targets

have been revised from 19 million tonnes (MT) of steel to about 24 MT. Estimated

investments has increased from Rs 25,000 crore to around Rs 40,000 crore. And the time

period has been squeezed by two years, bringing the targeted year of completion of major

projects from 2012 to 2010.

8

9

Saleable Steel Capacities (MT)

PLANT 2010

Bhilai Steel Plant 6.21

Durgapur Steel Plant 2.85

Rourkela Steel Plant 2.90

Bokaro Steel Plant 6.50

IISCO Steel Plant 2.37

Alloy Steels plant 0.43

Salem Steel Plant 0.36

Visvesvaraya Iron & Steel Plant 0.22

Graph No.- 1 Saleable Steel Production Capacity

BHILAI

DURGAPUR

ROURKELA

BOKAROIIS

CO

0

1

2

3

4

5

6

7

4.2

1.6 1.9

3.8

0.4

Existing capacity Planned increase

Mill

ion

To

nn

e

2.3

1.21.9

2.7

2.0

MAJOR UNITS

9

10

Integrated Steel Plants

Bhilai Steel Plant (BSP) in Chhattisgarh

Durgapur Steel Plant (DSP) in West Bengal

Rourkela Steel Plant (RSP) in Orissa

Bokaro Steel Plant (BSL) in Jharkhand

IISCO Steel Plant (ISP) in West Bengal

SPECIAL STEEL PLANTS

Alloy Steels Plants (ASP) in West Bengal

Salem Steel Plant (SSP) in Tamil Nadu

Visvesvaraya Iron and Steel Plant (VISL) in Karnataka

Maharashtra Elektrosmelt Limited (MEL) in Maharashtra

JOINT VENTURES

SAIL has promoted joint ventures in different areas ranging from power plants to e-

commerce.

NTPC SAIL Power Company Pvt. Ltd: A 50:50 joint venture between Steel

Authority of India Ltd. (SAIL) and National Thermal Power Corporation Ltd. (NTPC Ltd.), it

manages the captive power plants at Rourkela, Durgapur and Bhilai with a combined capacity

of 314(MW).

Bokaro Power Supply Company Pvt. Limited: This 50:50 joint venture between

SAIL and the Damodar Valley Corporation formed in January 2002 is managing the 302-

10

11

MW power generation and 1880 tonnes per hour steam generation facilities at Bokaro Steel

Plant.

Junction Services Limited: A joint venture between SAIL and Tata Steel on 50:50

bases, this company promotes ecommerce activities in steel and related areas.

SAIL-Bansal Service Center Ltd: SAIL has formed a joint venture with BMW

industries Ltd. on 40:60 basis to promote a service center at Bokaro with the objective of

adding value to steel.

Bhilai JP Cement Ltd: SAIL has also incorporated a joint venture company with M/s

Jaiprakash Associates Ltd to set up a 2.2 MT cement plant at Bhilai.

SAIL has signed an MOU with Manganese Ore India Ltd (MOIL) to set up a joint venture

company to produce Ferro-manganese and silico-manganese at Bhilai.

North Bengal Dolomite Limited: A joint venture between SAIL and West Bengal

Mineral Development Corporation ltd on 50:50 basis was formed for development of Jayanti

Dolomite Deposit, Jalpaiguri for supply of Dolomite to DSP and other plants.

Romelt-SAIL (India) Ltd: A joint venture between SAIL, National Mineral

Development Corporation (NMDC) and Russian promoters for marketing Romelt

11

12

Technology developed by Russia for reducing of iron bearing materials, which is carried out

with carbon in single stage reactor with the use of oxygen.

SAIL today is one of the largest industrial entities in India. Its strength has been the

diversified range of quality steel products catering to the domestic, as well as the export

markets & a large pool of technical & professional expertise.

OWNERSHIP & MANAGEMENT

The Government of India owns about 86% of SAIL's equity and retains voting control of the

Company. However, SAIL, by virtue of its ‘Navratna’ status, enjoys significant operational

and financial autonomy.

OTHER UNITS:

SAIL Consultancy Division.

Center of Engineering & Technology.

Management Training Institute.

Safety Organization.

Environmental Management Division.

Raw Material Division.

Growth Division.

Central Power Training Institute.

Central Marketing Organization.

MAJOR CAPITAL SCHEMES

12

13

Bhilai Steel Plant:

Rebuilding of Coke Oven batteries.

Modernization of BFs (including Gas Cleaning Plant).

Installation of new Slab Caster, RH Degsser & Ladle Furnace ().

Revamping of existing Slab Casters in phased manner.

New Pipe Plant of 0.2 million tones capacity

New Bar & Rod Mill (1 million tons).

AMR (Additions, Modifications & Replacements) & other Schemes including.

Logistics & infrastructure.

Installation of new Steel Melting Shop (SMS) – (3.9 million tons capacity).

Durgapur Steel Plant:

Bloom Caster & associated facilities.

New 0.7 mtpa Bar & Rod Mill & 0.4 mtpa Medium Structural Mill.

Up gradation of BFs & CDI (Coal Dust Injection) in BFs.

Rebuilding of Coke Oven battery.

Installation of a new Billet Caster.

Rourkela Steel Plant:

Rebuilding of Coke Oven battery.

New Blast Furnace-2,000 m3.

CDI & Reconstruction of BFs.

Revamping of Sinter Plant including Pollution Control Scheme.

New Plate Mill (0.7-1.0 Million Tonnes Capacity – Wide width.

13

14

Bokaro Steel Plant:

New 2.5 million tones hot strip mill & 0.6 million tones cold rolling mill.

Installation of Slab Caster.

Installation of New modern BOFs.

Rebuilding of Coke Oven batteries.

CDI in blast furnace.

IISCO Steel Plant:

Modernization of Steel Making Facility.

New Multipurpose Section mill/ Universal mill.

Development of collieries.

SWOT ANALYSIS OF SAIL

14

15

STRENGTH

Largest player in the Indian Steel industry.

Strong backward integration like iron ore and power.

Very aggressive expansion plans.

The single largest rail manufacturer in the world.

Merger with IISCO would boost its profitability, as SAIL would have access to

IISCO’s underutilized iron ore and coalmines.

All its plants are a profit centers.

SAIL is a virtually Debt-Free Company.

The approved acquisitions and merger of NINL, NISCO and MEL would result in

synergy benefits, operating efficiencies, cost savings and thus higher profit.

WEAKNESS

Concern in obtaining new mining leases and renewal of old leases.

Low liquidity in Stock Exchange (85.82% shares is held by GOI itself).

Heavily dependent on import of raw materials (coking coal).

It has high operation cost when compared to its peers like Tata Steel, JSW Steel.

OPPORTUNITIES

Strong Economy growth (second fastest growing economy after China).

Booming infrastructure sector (Roads, Ports, Airports, SEZs, Power).

Strong demand in automobile sector, consumer durables sector and engineering goods

sector. Robust demand in construction and retail industry.

Low per capita steel consumption offers a higher growth.

Rich Geological Resource base.

Large consumer base, low labor cost and high productivity.

THREAT

15

DIRECTOR (TECH)

DIRECTOR PERSONNEL

CHAIRMAN

MANAGING DIRECTOR, BSP

MANAGING DIRECTOR, BSL

16

Steel prices may remain stumpy on account of oversupply from China.

Bureaucratic nature of Government - Socio-Political interventions (in leasing mines).

Rising interest rates could affect expansion programmed (High cost of Finance).

High cost of energy.

Big ticket investment by POSCO and Mittal could swallow the market (specifically

export). Cyclical nature of Steel Industry.

Deficit infrastructure.

High ash coal.

ORGANISATION STRUCTURE OF SAIL

16

17

BHILAI STEEL PLANT

17

18

INTRODUCTION

Bhilai Steel Plant - a symbol of Indo-Soviet techno-economic collaboration, is one of the first

three integrated steel plants set up by Government of India to build up a sound base for the

industrial growth of the country, The agreement for setting up the plant with a capacity of 1

MT of Ingot steel was signed between the Government of erstwhile U.S.S.R. and India on

2nd February, 1955, and after a short period of 4 years, India entered the main stream of the

steel producers with the commissioning of its first Blast Furnace on 4th February, 1959 by

the then President of India, Dr Rajendra Prasad. Commissioning of all the units of 1 MT stage

was completed iby1961. In the initial phase the plant had to face many teething problems,

mostly unknown to the workforce at the time, But by meticulous efforts and team-sprit, these

problems were surmounted and the rated capacity production was achieved only within a year

of integrated operation of the plant.

Thereafter, the plant was expanded to 2.5 MT capacity per year, and then to 4 MT of crude

steel per year,. Bhilai expanded its production capacity in two phases - first to 2.5 MT which

was completed on Sept. 1, 1967 and the 4 MT stages, which was completed in the year 1988

All the units of the plant have been laid out in sequential formation according to

technological inter-relationship so as to ensure uninterrupted flow of in-process materials like

Coke, Sinter, Molten Iron, Hot Ingots, as well as disposal of metallurgical wastages and slag

etc., minimizing the length of various inter-plant communications, utilities and services.

Bhilai has its own captive mines spread over 10929.80 acres. Iron ore from Dalli-Rajhara

group of mines, 85 kms south-west of Bhilai. Limestone requirements are met by Nandini

mines, 20 kms north of Bhilai and dolomite comes from Hirri in Bilaspur district, 135 kms

18

19

north-east of the plant. To meet the future requirement of iron ore, another mining site

Rowghat , situated about 100 km south of Rajhara, is proposed to be developed; as the ore

reserves at Rajhara are depleting.

The plant now consists of ten coke oven batteries. Six of them are 4.4 meters tall. The 7

meter tall fully automated Batteries No 9 & 10 are among the most modern in India. Of

Bhilai's seven blast furnaces, three are of 1033 cu. meter capacity each, three of 1719 cu.

meter and one is 2000 cu. meter capacity. Most of them have been modernised incorporating

state-of-the-art technology.

Steel is made through twin hearth furnaces in Steel Melting Shop I as well as through LD

Convertor -continuous Casting route in SMS II. Steel grades conforming to various national

and international specifications are produced in both the melting shops. Production of cleaner

steel is ensured by flame enrichment and oxygen blowing in SMS I while secondary refining

in Vaccum Arc Degassing ensures homogenous steel chemistry in SMS II. Also in SMS II is

a 130 T capacity RH Degassing Unit, installed mainly to remove hydrogen from rail steel and

Ladle Furnace to meet present and future requirements of quality steel. Bhilai is capable of

providing the cleanest and finest grades of steel.

The rolling mill complex consists of the Blooming & Billet Mill, Rail & Structural Mill,

Merchant Mill, Wire Rod Mill and also a most modern Plate Mill. While input to the BBM

and subsequently to Merchant Mill and Wire Rod Mill comes from the Twin Hearth

Furnaces, the Rail & Structural Mill and Plate mill roll long and flat products respectively

from continuously cast blooms and slabs only. The total length of rails rolled at Bhilai so far

would circumvent the globe more than 4.5 times.

To back this up, there is the Ore Handling Plant, three Sintering Plants - of which one is most

modern, two captive Power Plants with a generating capacity of 110 MW, two Oxygen

Plants, Engineering Shops, Machine Shops and a host of other supporting agencies giving

Bhilai a lot of self-sufficiency in fulfilling the rigorous demands of an integrated steel plant.

Power Plant No.2 of 74 MW capacity has been divested to a 50:50 SAIL/NTPC joint venture

company NSPCL.

19

20

BSP is the sole manufacturer of rails and producer of the widest and heaviest plates in India.

Bhilai specializes in the high strength UTS 90 rails, high tensile and boiler quality plates,

TMT bars, and electrode quality wire rods. It is a major exporter of steel products with over

70% of total exports from the Steel Authority of India Limited being from Bhilai.

The distinction of being the first integrated steel plant with all major production units and

marketable products covered under ISO 9002 Quality Certification belongs to BSP. This

includes manufacture of blast furnace coke and coal chemicals, production of hot metal and

pig iron, steel making through twin hearth and basic oxygen processes, manufacture of steel

slabs and blooms by continuous casting, and production of hot rolled steel blooms, billets and

rails, structural, plates, steel sections and wire rods. The plant's Quality Assurance System

has been awarded ISO 9001:2000 certification.

Not content with the Quality Assurance system for production processes, Bhilai has obtained

ISO 14001 certification for its Environment Management System and for its Dalli Mines.

Besides environment-friendly technology like Coal Dust Injection System in the Blast

Furnaces, de-dusting units and electrostatic precipitators in other units, BSP has continued a

vigorous afforestation drive, planting trees each year averaging an impressive 1000 trees per

day in the steel township and mines.

A leader in terms of profitability, productivity and energy conservation, BSP has maintained

growth despite recent difficult market conditions. Bhilai is the only steel plant to have been

awarded the Prime Minister's Trophy for the best integrated steel plant in the country seven

times.

BSP’s ORGANIZATIONAL STRUCTURE

To enhance customer satisfaction through:-

20

21

Improvement in productivity and product quality.

Skill enhancement of our people by competence commitment and culture.

Production as per customer requirements.

QUALITY POLICY OF BSP

Attending market leadership through enhancing customer satisfaction.

Achieving continual improvement in productivity, quality and salability of our

products.

Active involvement of all our people in achieving our goals, objectives and target.

PRODUCT PROFILE

Bhilai Steel Plant (BSP) has mainly three types of products:-

21

22

Semis Product

Long Products

Flat Products

The product range at Bhilai Steel Plant and their end use/consumers is as :

A. FINISHED PRODUCTS

  Product End use / consumers

1.  Rail & Structural Mill

 

Rails in 13m, 26m, 65/78 m

length and

welded panels of 130m/260m

length

Indian Railways, Export

 Heavy Structurals Construction

 Crane Rails Cranes

 Crossing sleepers Broad gauge sleepers

2. Merchant Mill

  Lt. Structural’s

Engineering and Construction  Med. Rounds (Plain & TMT)

  Heavy rounds (Plain)

3. Wire Rod Mill

  Wire Rods- PlainConstruction

  Wire Rods- TMT

  EQ Wire Rods Electrodes

4. Plate Mill

  Plates Boilers, Defence ,Railways, Ship building, LPG

22

23

cylinders, Export

B. SEMIS

  Billets (from BBM)

Re-rollers

  Blooms (from BBM)

  Narrow width slabs

  CC Blooms

  Killed Slabs

C. Pig Iron Foundry

D. By Products

  Coal Chemicals

Ammonium Sulphate (Fertilizer)Tar and tar products,

(Pitch, Naphthalene, Creosote Oil Road Tar,

Anthracene oil, Dephenolised oil, PCM etc.), Benzol

& its products (NG Benzene, Toulene, Xylene,

Solvent oil, By. Benzol etc.)

 Processed Slag

Granulated slag from CHSG Plants & SGP for cement

manufacture

CAPTIVE MINES

23

24

Iron-Ore - Dalli-Rajhara Iron Ore Complex, 80 kms from Bhilai

Limestone - Nandini, 23 kms from Bhilai

Dolomite - Hirri, 150 kms from Bhilai

COKE OVENS

BATT NO. NO.OF

OVENS

OVEN

HEIGHT (M)

COAL

HOLDING

CAPACITY

PER OVEN

(T)

USEFUL

VOLUME

PER OVEN

CU.M.

SP.HEAT

CONSPN.

KCAL/KG

1-8 65 4.3 16.8 21.6 625-675

9&1067 7.0 32.0 41.6 625-675

BLAST FURNANCE

3 of 1033 Cu m capacity each.

3 of 1719 Cu m capacity each.

1 of 2350 Cu m capacity.

STEEL MELTING SHOPS

Steel-making through BOF, VAD/Ladle Furnace/RH-Degasser and Continuous casting route:

3 converters of 110/130 T.

VAD unit, RH degasser, Ladle furnace.

3 Slab Casters, 1 bloom caster, 1 Combi caster.

Annual Capacity: 1.425 MT Cast steel.

24

25

MERCHANT MILL

Capacity - 5, 00,000 Tones.

Products:

Plain Rounds: dia 28, 32, 36,40, 50,53, 56, 63 & 67

TMT Bars

Lt. Structural

Angles

RAIL & STRUCTURAL MILL

Capacity - 7, 50,000 T

Products:

Rails - R52 Kg/m & R60 Kg/m specifications according to Euro norms and international standards.

Thick web asymmetric rail

Beams

Channels

Angles

Crossing Sleeper.

Crane Rails

Bhilai is the sole supplier of the country's longest rail tracks of 260 meters.

Bhilai Rails:

Largest producer and leading rail maker of the world.

Four and a half decades of experience in rail making.

Produced over 15 million tonnes of rails; 2.7 lakh km in length.

Indian Railways World’s second largest rail company moves exclusively on Bhilai

rails.

Bhilai rails are subjected to worlds highest traffic density and axle loads.

Rails exported to 10 countries with exports to South Korea, New Zealand, Argentina,

Turkey, Iran, Egypt, Ghana, Bangladesh and Malaysia.

WIRE ROD MILL

25

26

Capacity - 4, 20,000 T

Wire Rods (Plain, Electrode Quality & TMT) in 5.5, 6, 7, 8 & 10 mm plain and

ribbed, and 12 mm plain in coil form

8, 10, and 12 mm TMT

PLATE MILL

Capacity - 9,50,000 T

Plates thickness - 8-120 mm

Width - 1500-3270 mm

Length - 5-12.5 M

Product Mix: Saleable Steel Production:

26

27

SWOT ANALYSIS OF BSP

The primary function of Bhilai Steel Plant are derived from the functions of the mother

organization SAIL. As a production unit of SAIL, BSP carries out the specific functions and

task assign to it from time to time, both with regards to production and execution of other

functions of SAIL, such as design consultancy, training and development etc. The primary

analysis of any organization begins with the SWOT Analysis. It gives a complete picture so

as to where an organization stands with respect to its competitors.

And areas where its lags behind. It also gives a bird eye view f the possible opportunity that

exists which can be capitalize upon the threats that may affect its operations at present or in

the future.

Strengths:

Capacity of plant,

Product Mix,

Quality of Products,

Human Resource & Management.

27

MANAGING DIRECTOR

ED (F&A)

90

GM (F&A)

GM (M&SP)

GM (IA)

GM I/C (MINES)

DIR (M&HS)

ACVO

ED (PROJECTS)

GM (PROJECTS)

GM (PP&E & BEDB)

GM I/C (SERVICES)

GM (SAFETY)

GM I/C (M&U) (REFR)

GM (P MILL & MILLS-LP)

GM (CO, CCD & SP, OHP)

ED (WORKS) ED (P&A)

GM (TS)

GM (PERS)

GM (HRD)

GM (MS)

DGM (L & A)

ED (MM)

GM (MM)

28

Weakness:

Supply of Raw Materials,

Demurrages,

Rigidity of Labor Law compared to other countries.

Opportunities:

Upsurge in Indian Economy,

Technological Edge,

Human Resource Management.

Threats:

Effect of Custom Duty,

International Competition,

Domestic Competition,

Increase in Oil Prices,

Depleting Mines.

ORGANISATIONAL STRUCTURE OF BHILAI STEEL PLANT

28

29

Major suppliers of Bhilai steel plant:

Apollo industrial corporation Mumbai.

Ashok Leyland Chennai.

BHEL Bhopal and Mumbai.

Bharat petroleum gas Nagpur.

Birla Corporation limited Kolkata.

Cimmco Birla limited New Delhi.

Dunlop India limited Kolkata.

Siemens casting limited Mumbai.

Simplex casting limited Raipur.

HMT ltd. Ranchi.

Major buyers:

1. Indian railways.

2. Vizard profiles limited.

3. High pressure boiler plant BHEL trichy.

29

GM (IT)

30

4. NTPC super thermal power project.

5. Jindal steel and power limited raigarh.

6. NTPC limited New Delhi.

7. Common India limited Delhi.

8. Chandigarh industrial journalism and development corporation Chandigarh.

9. Cropro international Italy.

10. Sangyong Corporation Japan.

Competitors:

1. Ispat industries limited.

2. Alloys steel limited.

3. Essar steel limited.

4. Jindal steel and power limited.

5. Uttam steels limited.

6. National steel industries limited.

7. Bhusan steel and strips limited.

Environment Management A conscious corporate citizen, BSP has gone in for ISO-

14001 certification for its Environment Management System.

ISO 14001 certification

Environment Management System established at Plate Mill, Rail & Structural Mill,

Wire Rod Mill, Merchant Mill and Steel Melting Shop-1.

Reduction in noise levels.

Conservation of electricity and lubricants.

Environment Management System established at Dalli Mines.

Pollution Control Measures:

The plant has introduced environment friendly coal dust injection system in the Blast

Furnaces, de-dusting system and electrostatic precipitators in other units and has planted

lakhs of trees in a concerted a forestation drive that has seen Bhilai transform into one of the

ten cleanest industrial townships in the country.

30

31

Green City:

Contrary to the popular perception about industrial townships being dirty and polluted, the

city of Bhilai is characterized by blue skies, clean air and green expanses. A green-fingered

population and a management aware of its obligations as a corporate citizen have come

together for a massive tree-plantation drive over a period of years that has resulted in the

township that stands starkly green in a dry regional backdrop. About 48.4 lakhs saplings have

been planted so far with a survival rate of 90%. The sprawling Maitri Bagh has the biggest

musical fountain in the country, a zoo with a variety of quadrupeds and birds, an artificial

lake with boating facilities, a toy train etc. A number of small and large parks in the

residential sectors of the steel city are maintained by the Plant's Town Administration

Department which also undertakes the civic amenities such as street lighting, cleaning and

maintenance of the tree-lined carpeted roads inside the steel township. The water to the

township is supplied from the Maroda water treatment plant having a capacity of 30 million

gallons per day. Water is distributed throughout the township through a system of

underground reservoirs and overhead tanks.

Energy Consumption:

Continuous monitoring

Apex Committee Inspection by HODs.

Quarter review of Safety activities by ED (W)

Fixing responsibility of line managers.

Contractor workers safety - IPSS procedure enforcement, contractors' audit, safety

exhibitions

Safety workshops

Regular inspections:

Inspection of gas pipelines Inspection of structures, equipments and installations

Risk Control Grading System implemented in Coke Ovens Battery 9 & 10, Blast

Furnace, SMS-1 and extended to BBM, Foundry Shop, and SMS-II.

31

32

Quality Management System:

Facilities relating to quality,

ISO 9001 SEAL OF QUALITY

All major production units and marketable products in Bhilai Steel Plant are covered under

ISO 9001:2000 Quality Management Systems. This includes manufacture of blast furnace

coke and coal chemicals, production of hot metal and pig iron, steel making through twin

hearth and basic oxygen processes, manufacture of steel slabs and blooms by continuous

casting, and production of hot rolled steel blooms, billets and rails, structurals, plates, steel

sections and wire rods.

Bhilai's products come with a complete assurance of quality. Right from selection of input

material for steel making, the process parameters are kept under close control. Intensive

checking of all quality parameters continues throughout the subsequent operations of casting,

reheating and rolling. Express analysis with the help of sophisticated, direct-reading

spectrograph and gas analyzer ensures a narrow range of chemical composition. Intensive

metallographic investigation with modern instruments like Scanning Electron Microscope,

Image Analyzer and Micro Hardness Tester is carried out to assess the quality of the product.

The key points of control are:

Chemical analysis of hot metal, liquid steel and final product.

Inspection of surface and internal quality of the product by visual and ultrasonic

inspection.

Monitoring and control of heating/reheating parameters.

Dimensional and surface check during rolling and on finished product.

Human Resource Development:

Training need assessment is a continuing process.

About 19,000 employees are imparted training every year.

The focus is on need-based innovative programmers, such as Action Collaboration.

Multi-Skilling 32

33

NEW PROJECTS:-

A Capital Expenditure exceeding Rs 800 crore was incurred by BSP during the

Financial Year 2008-09.

During the year 2008-09, Turnkey projects of Rs 3959 crore, projects under Capital

Budget of Rs 67.43 crore & projects under Revenue of Rs 2.87 crore have been

signed.

Project Website and Online Contract Billing & Accounting System have been

launched.

MAJOR PROJECTS COMPLETED:-

COB-5 (Pkg-I) Battery Proper & Oven Machine.

Slab Caster in SMS-II.

Installation of MSDS-VI.

End Forging Plant for Thick Web in RSM.

MAJOR PROJECTS COMMISSIONED:-

Hot Metal Desulphurization Unit in SMS-II.

Ladle Furnace in SMS-II.

RH Degasser in SMS-II.

VVVF Drive for ID fan 1 & 2 of Converter Shop at SMS-II.

VVVF Drive for Booster Fan 1, 2 & 3 at SMS-II.

ONGOING PROJECTS:-

COB-11, New Coal Handling Plant, CDCP.

Rebuilding of COB-6 (Battery Proper).

Augmentation of Plate Mill capacity.

Basic Oxygen Furnace Shop – SMS-III.

MSDS-7.

Compressed Air Station-4.

Ore Handling Plant – Plant-A.

33

34

Electro Magnetic Stirrer in Bloom Caster in SMS-II.

Implementation of ERP.

Installation of 30 MLD Sewerage Treatment Plant with recycling facilities at

Township. This will enable recycling of sewerage water from 10 residential sectors

and Indira place Market area for industrial use.

Hot Metal Desulphurization for SMS-III.

Installation of MSDS-V.

Up gradation of Nitrogen Network.

6.6 KV Switchgear for Substation 21 of SP-II.

Enabling works for 7 MT expansions.

Repl. Of DN 3000 Blast Furnace Header from BF-1 to BF-6.

Repl. Of Main Drives MG sets by Thyristor Converters at Plate Mill.

700 TPD (ASU 4) Unit with associated facility at OP-2.

2*150 T capacity in-motions Weigh Bridge in Peripheral Yard 7 Raw Material

Station.

SPU at Ujjain, Hoshangabad & Gwalior.

OTHER PROJECTS COMPLETED:-

Procurement of 9 WDS-6 Locos for T&D Organization.

Enabling works, Fabrication & Erection of TOPR and Supply of Drawings for COB-

6.

Replacement of 6.6 KV Switchgear section of S/s 1 of CO & CCD.

Diversion of Nallah at outlet no 14 for liquid slag of BF.

180 + 50 T/15T Ladle Crane in Slab Caster.

Replacement of Thyristor & Automation Drive at CCS.

Replacement of CO Gas Pipeline from column 214 to Plate Mill Gas Booster Station.

One Pair Ladle Tilting Stand at SMS-II.

4*200 T in motion Weigh Bridge at line 42, 43, 68 & 69 of BF.

OTHER PROJECTS COMMISSIONED:-

Replacement of by-product equipment (PKg 4A) at COB-5.

Replacement of Exhauster at COB-5.

34

35

Replacement of 4 numbers Ash Slurry Pipeline.

11 numbers Belt Weighing System at Coke Sorting Plant of CO & CCD.

UPCOMING PROJECTS:-

Implementation of Manufacturing Executing System.

Augmentation of Coal Grinding facility for CDI unit at BF-6 & BF-7.

7 numbers WDS-6 Loco & 1 no WDG-3A Loco.

Installation of 2nd Sinter M/c in Sinter Plant-III (320 m2).

New Blast Furnace – 8 (4060 cu m).

Continuous Casting Shop –SMS III.

2*6 Strand Billet Casters.

1*4 Strand Bloom-cum-Billet Casters.

183 Strand Beam Blank Caster.

New Bar 7 Rod Mill (0.90 MT Capacity).

New Universal Rail Mill (1.2 MT Capacity).

Universal Beam Mil (1.0 MT Capacity).

New 2*1250 TPD Oxygen Plant on BOO basis.

35

36

OBJECTIVE

The main objectives of undertaking this Project may be summarized under the following

points:-

To ensure optimum investment in current assets.

To understand the various financial ratio generally affecting the working capital assessment

To know the performance of Bhilai Steel Plant.

Facilitating cost & expenditure control with appropriate data & analysis

To analyze whether the method being used for ascertainment of working capital requirement is efficient or not.

36

37

WORKING CAPITAL MANAGEMENT

MEANING

Working Capital is the operating capital required for running the business along with the

fixed assets and liabilities. It is calculated as current assets minus current liablities. If current

assets are less than current liabilities, an entity has a working capital deficiency or working

capital deficit.

Positive working capital is required to ensure that the firm is able to continue its operations

and that it has sufficient funds to satisfy both maturing short-term debt and upcoming

Operational Expenses. The management of working capital involves managing Inventories,

Accounts Receivable, Accounts Payable and Cash.

Collection from Debtors Payment to

Purchase of Raw Materials

OPERATING CYCLE OF MANUFACTURING COMPANY

Issue of Materials for Production

Sales Production of Finished Goods

37

CASHCREDITORS

(Accounts Payable)

STOCK OF RAW

MATERIALS

MATERIALS ADDED WITH

LABOUR AND OVERHEAD (W.I.P)STOCK OF FINISHED

GOODS

DEBTORS (Accounts

Receivable)

38

A. OPERATING CYCLE OF THE MANUFACTURING UNIT

The operating cycle of any company starts with cash which is the important assets for the

company to meet the day to day expenses of the company. If the company is starting its

business then the first requirement for that company is cash and then the process starts. If the

company is a running firm then in that case the cash is used for purchasing raw materials for

starting the production, with the help of labour and overheads Finished Goods are produced.

These finished goods are then sold on cash or credit to debtors, after that cash is received for

the goods that are sold on credit to the debtors then payment to creditors are made and the

cycle goes on like this.

Operating Cycle= Inventory Period + Accounts Receivable – Accounts Payable

B. MANAGEMENT OF WORKING CAPITAL FINANCE

Management of Working Capital includes managing all short -term cash and cash equivalents

assets and liabilities. It includes

Cash Management is the most essential aspect which allows for the business to identify the

cash balance to meet the day to day expenses.

Inventory Management is essential for the company to identify the level of inventory so that

the production does not get interrupted investment in raw materials is reduced and reordering

costs are minimized and hence increases cash flow is increased. It is managed by JIT, EOQ

and Supply Chain Management.

Debtors Management helps to identify the appropriate credit policy, i.e. credit terms

which will attract customers. The credit period should not be too high otherwise the chance of

bad debts increases.

Short Term Financing identifies the appropriate source of financing given by cash

conversion cycle. It is ideally financed by the credit guaranteed by the supplier, necessary

bank loan (Bank Overdraft) or to convert debtors into cash in short period of time.

38

39

C. SOURCES OF WORKING CAPITAL FINANCE

Line of Credit

An arrangement in which bank or vendor extends a specified amount of unsecured credit a

specified borrower for a specified borrower for a specified time period called Credit Line. A

line of credit may take several forms such as cash credit, overdraft, demand loan, export

packing credit, term loan, discounting or purchase of commercial bills etc.

Accounts Receivable Financing

The selling of a company’s account receivable, at a discount to a factor, which assumes the

risk of the debtors account and receives cash from the debtors to settle their accounts. A firm

that sells its accounts receivable may not be confident of its ability to collect those debts, or

might think that the cost of collecting that debt is more than the discount which must be

provided to the factor when of selling their receivables also called Accounts Receivable

Financing.

Inventory Financing

A loan made to a manufacturer using its inventory as collateral. Inventory financing is often

used by manufacturers of consumer products, for whom inventory tends to form a significant

percentage of assets. Inventory Financing is advantageous for businesses with a large amount

of physical inventory ready to ship. Inventory Financing is used as a stop-gap against

temporary cash flow problems resulting from inventory ready to sell but not sold. Term

Loan

A bank loan to a company, with a fixed maturity and often featuring amortization of

principal. If this loan is in the form of a line of credit, the funds are drawn down shortly after

the agreement is signed. Otherwise, the borrower usually uses the funds from the loan soon

after they become available. Bank term loans are very common kind of lending. The major

advantage of term loans is their ability to fund long-term needs.

39

40

SCOPE OF THE PROJECT

Steel Authority of India Limited (SAIL) is one of the leading industries in steel producing in

India. Bhilai Steel Plant is one of the units which is situated in Bhili state Chhattisgarh. The

main scope of my project is to know the performance of Bhilai Steel Plant on the bases of

working capital calculation.

40

41

METHODOLOGY

The study is based on personal decision, interview schedules, documentary observation; the

data has been collected from the executives of the organization and through the published

sources.

41

42

RESEARCH

The study is based on the outcomes of personal interviews and documentary observation. But

the extreme care has been taken to involve the constructive suggestion from the executives.

The success of research basically depends upon the method, which is adopted to solve the

research problem i.e.

a. To collect desired information and data in a systematic manner.

b. Appropriate selection of method is necessary.

The first & foremost step in any research procedure is:-

STEP 1: Problem Formulation

It is a very important step which has to be understood properly and clearly on which the study

is based because it tells the scope of the study and it should not go beyond it nor should

execute some irrelevant aspect.

STEP 2: Objectives of the Study

After the problem formulation the objectives should be clear through which specific type of

information can be collected. The objective of this is to study about the management of

Working Capital for day to day business transactions.

STEP3: Determine source data

The third step includes the collection of data, which is from the source i.e. primary secondary

data. After the collection of data, it should be organized and analyzed to check whether the

objectives are fulfilled or not.

After analyzing the data investigation of research had worked out with the

help of following steps:

42

43

Research Design Tools & Techniques Collection of Data

RESEARCH DESIGN:

A research is an arrangement of conditions for the collection & analysis of data in a manner

that aims the research purpose and achievements of goal with economy in procedure

depending on research problem. The study of Working Capital is generally based on

documentary evidences.

TOOLS AND TECHNIQUES:

In order to conduct the study the following methods were adopted.

Personal Discussion: There is certain information related to the subject which is known

to employees of the office so through connecting with the employees and executives the

information is gathered. Like, about the company profile, its inception, growth etc.

Direct Personal Interviews: The investigator personally approaches the concerned

people and asks them to furnish information, which is of material input for the enquiry.

Therefore these ideas, suggestions views are collected on the topic through interview.

Documents observation: The investigator consults the secondary sources like journals,

annual reports, magazines, books, and unpublished material from library, internet and the

area office.

COLLECTION OF DATA

Primary data: are those that are collected for the first time by the investigator and the

primary data used ad collected for this study are:-

Direct Personal Interview with my project guide at BSP

Indirect Oral Investigation auditors and other concerned employees at BSP

43

44

Secondary data: are not collected but obtained from the published and unpublished

sources and the secondary data collected for this study are:-

Published data about BSP through newspapers, magazines, journals and books.

Unpublished data through scholars, libraries, area office in BSP

Company information from their SAIL official website.

44

45

LIMITATION

Bhili Steel Plant is one of the biggest plants of SAIL. It has a huge production unit and many

books of account are maintained and it was difficult to get data from BSP. Some of the

limitation is as follow:-

There was limited time provided for the completion of the project.

Some of the data necessary for the preparation of the project was not provided

by the BSP.

The current year Balance Sheet was not provided by the BSP as it has not been

approved by the SAIL.

Lack of personal interaction with the mentors.

45

46

PERFORMANCE HIGHLIGHTS

2008-2009

OF

BHILAI STEEL PLANT

46

47

PERFORMANCE HIGHLIGHTS 2008-2009 OF

BHILAI STEEL PLANT

TURN OVER GRAPH

2005-06 2006-07 2007-08 2008-09

TURNOVER 1121727 1352631 1651781 1849670

100000300000500000700000900000

11000001300000150000017000001900000

TURNOVER

Rs I

n La

khs

Year 2008-09 2007-08 2006-07 2005-06

Sales Amt.(Inlakhs) 1849670 1651781 1352631 1121727

Net Increase 197889 299150 230904 -17189

% increase 11.98% 22.11% 20.58% -1.5%

INTERPRETATION

From the given chart it is absolutely clear that the company sales has been steadily raising to

the consecutive years and the current sales for the given year 2008-09 is Rs.18,49,670 lakhs

in compare to 16,51,781 lakhs to the last year i.e. 11.98% (approx) increase.

47

48

The profit has been increased but the percentage of turnover has dropped down, where the

percentage of profit increased in the year 2006-07 was 53.59% but the profit percentage for

the year 2007-08 was 25.62% (app.) which came down to 10.13% in the year 2008-09.The

reason might be that global crisis hitting the U.S. market has shown a dip in the profit

percentage of the company. The company maximum businesses come from abroad so the

company has to see the sales dip in percentage terms.

While doing my analysis the basic thing which I found was that the company is doing fairly

well and due to the infrastructure development and common wealth games the demand for the

steel will increase and hence it will increase the total turnover of the company.

PAT GRAPH

2005-06 2006-07 2007-08 2008-09

PAT 2781 4272 5366 4965

500

1500

2500

3500

4500

5500

PAT

IN C

RORE

S

Year 2008-09 2007-08 2006-07 2005-06

Amt. (IN CRORES) 4965 5366 4272 2781

Net Increase -401 1094 1491 -

% increase -7.4% 25.6% 53.6% -

From the given chart it is clear that the PAT has drop down to -7.4% in the year 2008-09 as

compared to the previous year which was 25.6% growth in the year 2007-08 from the year

2006-07. And in the year 2006-07 it was a increase of 53.6% from the profit of 2005-06.

48

49

Though the plant was in profit in the financial year 2008-09 but there was a decline in the

profit percentage as compare to the previous year.

PROFIT OF THE SISTER PLANTS

Bhilai S.P DSP RSP IISCO SP BOKARO S.P

PBT (2008-09)

4965.45 754.25 1011.2 -182.36 1292.78

-500

500

1500

2500

3500

4500

5500

PBT (2008-09)

Rs C

rore

s

As we all know that SAIL has 5 sister’s unit from which BSP is one of the plants which

contributed more profit to the SAIL as compare to other sister units in the year 2008-09.

After BSP, Bokaro plant then RSP and DSP contributed to the same .But IISCO has incurred

a loss.

49

50

PRODUCTION OF SINTER GRAPH

2004-05 2005-06 2006-07 2007-08 2008-09

Production of total Sinter (000T)

5741 6933 6647 7229 7459

500250045006500

Production of total Sinter (000T)

Rs C

rore

s

Record production of 7.459 MT of Total Sinter, surpassing the previous best of 7.229 MT in

07-08 and registering a growth of 3.2% over previous Year. But in the year 2009-10 it is

expected to grow about 9.2% of production of sinter.

PRODUCTION OF HOT METAL GRAPH

2004-05 2005-06 2006-07 2007-08 2008-09

Production of Hot Metal('000T)

4511.2 5178.3 4816.8 5267.7 5387.2

4100450049005300

Production of Hot Metal('000T)

Rs cr

ores

Record of production of 5.39 MT of HOT METAL exceeding previous best of 5.27MT in

07-08 and registering a growth of 2.3% over previous year.

50

51

PRODUCTION OF TOTAL CRUDE STEEL

2004-05 2005-06 2006-07 2007-08 2008-09

production of To-tal Crude Steel ('000T)

4581.7 5053.7 4798.4 5054.6 5183.5

4300

4700

5100

Production of Total Crude Steel ('000T)

Rs C

rore

s

Production of 5.2 MT of total Crude Steel, surpassing the Previous beat of 5.1 MT in 07-08

and registered a growth of 2.6% over the previous year. But we can see in the graph that in

the year there was a decline in 2006 -07.

PRODUCTION OF TOTAL SALEABLE STEEL GRAPH

2004-05 2005-06 2006-07 2007-08 2008-09

Production of To-tal Saleable Steel ('000T)

3935.1 4285.6 4222.9 4428.9 4491.6

36503850405042504450

Production of Total Saleable Steel ('000T)

Rs in

Cro

res

51

52

Production of 4.49 MT of saleable steel, surpassing the previous best of 4.43 MT achieved in

the year 2007-08 and registering a growth of 1.4% over the previous.

52

53

PRODUCTION OF TOTAL FINISHED RAIL

2004-05 2005-06 2006-07 2007-08 2008-09

Pro-duc-tion of Fin-ished Rail

868.4 885.2 880.9 916.1 978.7

810870930990

Production of Finished Rail

Rs in

cror

es

There was the highest growth of 6.8% in the year 2008-09 as compared to the last five years

which recorded the Rs 978.7 crores in the year.

PRODUCTION OF TMT BAR GRAPH

2004-05 2005-06 2006-07 2007-08 2008-09

Prodution of TMT Bar ('000T) mer-chant Mill

187.1 156.7 210.6 417.6 430.5

25125225325425

Prodution of TMT Bar ('000T) merchant Mill

Rs I

n Cr

ores

Production of 430.5 MT of TMT Bars from Merchant Mill, surpassing the previous best of

417.6 MT in 07-08, registering a growth of 3.1% over previous year.

53

54

PRODUCTION GRAPH OF TMT WIRE RODS

2004-05 2005-06 2006-07 2007-08 2008-09

Production of TMT Wire Rods('000T)

109.5 107.2 109.8 277.5 403.2

25125225325425

Production of TMT Wire Rods('000T) R

s in

Cror

es

Best ever production of 403.2 MT of TMT Rods from Wire Rod Mill, surpassing the

previous best of 277.5 MT in 07-08, registering a growth of 45.3% over previous year.

54

55

WORKING CAPITAL

ANALYSIS

55

56

STATEMENT OF WORKING CAPITAL POSITION

(IN CRORES)

CURRENT

ASSETS

2005-06 2006-07 2007-08 2008-09

Inventories 1505.76 1556.66 1712.90 2883.14

S. Debtors 20.53 18.82 13.70 13.42

Cash &Bank 33.81 36.8 39.86 43.14

Other C.A 16.55 13.86 12.60 10.81

Loans & advs 218.44 325.12 480.73 473.74

TOTAL (A) 1795.09 1951.26 2259.79 3424.25

CURRENT

LIABILITIE

S

S. Creditors 518.08 521.81 661.35 737.95

Sec. deposits 42.13 35.07 37.28 59.06

Other liab. 289.95 353.20 491.96 717.15

Provisions 29.36 52,05 507.73 1013.54

TOTAL (B) 879.52 962.13 1698.32 2527.70

WORKING

CAPITAL (A-

B)

915.57 989.13 561.47 896.55

56

57

2005-06 2006-07 2007-08 2008-09

WORKING CAPITAL 915.6 989.1 561.5 896.6

100

300

500

700

900

1100

WORKING CAPITAL

IN C

RORE

S

From the above figures, it is observed that from the year 2005-06 the working capital

was steadily increased in 2006-07, while in 2007-08 the working capital has significantly

decreased. This can be possible due to decrease in current assets and increase in current

liabilities. But in the year 2008-09 Working capital has increased as compared to the year

2007-08 which is 59.79% increase due to more increase in current asset as compared to the

increase in current liability.

The basic objective of working capital management is to make optimum investments.

Hence, in 2008-09 the company has increased Working capital and the company has utilized

their resources and capital in efficient manner.

57

58

SCHEDULE FOR WORKING CAPITAL CHANGES

(IN CRORES)

PARTICULARS 2008-09 2007-08 INCREASE DECREASE

CURRENT

ASSETS

Inventories 2883.14 1712.90 1170.24

S. Debtors 13.42 13.70 0.28

Cash &Bank 43.14 39.86 3.28

Other C.A 10.81 12.60 1.79

Loans & advs 473.74 480.73 6.99

TOTAL (A) 3424.25 2259.79

CURRENT

LIABILITIES

S. Creditors 737.95 661.35 76.6

Sec. deposits 59.06 37.28 21.78

Other liab. 717.15 491.96 225.15

Provisions 1013.54 507.73 505.81

TOTAL (B) 2527.70 1698.32

WORKING

CAPITAL (A-B) 896.55 561.47

INCREASE IN

WORKING

CAPITAL

335.12

1173.52 1173.52

There was increase in working capital in the year 2008-09 to the previous year 2007-08.As

there was increase in current asset of Rs 1173.52 and decrease in current liability of 829.34 as

58

FGSP = Average stock of finished good Inventory Turnover

59

compared to the last financial year which has resulted in increase in working capital of Rs

335.12.

OPERATING CYCLE

Inventory holding period:

Year

Opening

balance

Closing

balance

Average

inventory

Inventory

turnover ratio

Inventory

holding period

2005-06 1041.68

1505.76

1273.72

5.33 times 68 days

2006-07 1505.76

1556.66

1531.21

4.9 times

73 days

2007-08 1556.66

1712.90

1634.78

5.31times

62 days

2008-09 1712.90

2883.79

2298.345

6.298 times 58 days

Interpretation

From the above figures, it is observed that inventory has decreased from year to year

this is a good sign for the company. If no. of day is less, it means that inventory is

soled sooner into the market.

59

W.I.P. T.P. = Cost of goods manufactured Avg. work in process inventory

Debtors collection period = 360 Debtors turnover Debtor Turnover

60

Work in process inventory turnover period:

Year Average inventory

of finished /semi

finished goods

Cost of

production

Work in process

inventory turnover

period (times)

Work in process

inventory turnover

period (days)

2004-05 390.25 5731.35 14.69 25

2005-06 559.94 4450.36 7.95 46

2006-07 751.87 6236.89 8.3 44

2007-08 856.99 8324.86 10.27 35.03

2008-09 1395.44 8805.35 6.32

Debtor’s collection period:

60

Creditor payment period = Avg.trade credit Credit purchase per day

61

Note

Debtor collection is not possible to calculate because as per interviewed by BSP

finance manager, he told that BSP does not show accurate Sundry Debtor, so it was

difficult to calculate Debtor collection period.

Creditor’s payment period:

Year Opening bal. Closing bal. Average trade credited

Average of trade credit purchased per day

Credit payment period in days

2004-05 530.72 581.26 555.99 12.88 442005-06 581.26 518.08 549.67 16.42 342006-07 518.08 521.81 519.95 16.84 312007-08 521.81 661.35 591.58 17.01 34.772008-09 661.35 737.95 349.83 11.89 29.42

Interpretation

The Creditors Payment Period has decreased drastically from 34.77 times in 2007 -08 to

29.42 times in 2008-09. This shows that the company is able to pay its debt earlier then

previous year.

61

62

Some Important ratio

KEY RATIOS 2007-08 2008-09 INCREASE/DECREASE

NET PROFIT/NET SALES 37.9% 30.18% -20%

PBIDT/TOTAL INCOME 36.8% 28.2% -23.36%

PBT/NET WORTH20.7% 16.09% -22.2%

PAT/NET WORTH 20.7% 16.09% -22.2%

CURRENT RATIO1.33:1 1.35:1 1.5%

EARNINGS PER SHARE (RS.) 41.04 37.97 -7.48%

BOOK VALUE PER SHARE (RS.) 197 235.9 19.7%

INTEREST COVERAGE 91.7 76.9 -16.13%

62

63

Workings:

2007-08 2008-09

NET PROFIT/NET SALES    

Net Profit after tax 5366.37 4965.45

Net Sales 14156.35 16452.02

% 37.9% 30.18%

PBIDT/TOTAL INCOME

PBIDT 5401.69 4997.21

TOTAL INCOME 14657.41 17720.50

% 36.8% 28.2%

PBT/NET WORTH    

PBT 5366.37 4965.45

Net Worth 25864.23 30846.35

% 20.7% 16.09%

PAT/NET WORTH    PAT 5366.37 4965.45Net Worth 25864.23 30846.35

% 20.7% 16.09%CURRENT RATIO    Current Asset  2259.79  3424.25

Current liability  1698.32  2527.70

Ratio 1.33:1 1.35:1EARNINGS PER SHARE    Total Earnings 5366.37 4965.45No. of Share 130.75 130.75EPS 41.04 37.97NET WORTH RATIO    Capital 25864.23 30846.35No. of Shares 130.75 130.75

63

64

Book Value Per Share 197 235.9

INTEREST COVERAGE RATIOPBIDT 5401.69 4997.21Interest 58.91 64.99Ratio 91.7 76.9

OPERATING RATIOS

G.P. RATIO

G.P. Ratio = Gross Profit * 100 Sales

2007-08 2008-09

= 255289 * 100 1670924

= 246411 * 100 1891613

= 15.28% = 13.03%

Interpretation:. Above G.P. ratio indicates that the gross profit if the firm is around

15.28% in 2007-08 which has reduced to 13.03% of the total sales from the operations

This is not a good sign for the company.

NET PROFIT RATIO

Net Profit Ratio = PAT *100 Income

2007-08 2008-09

= 5366.37 * 100 14657.41

= 4997.21 * 100 17720.50

= 36.61% = 28.20%

64

ANALYTICAL REVIEW OF THE COMPANY

65

Interpretation: The above ratio indicates that the net profit to sales ratio which is

calculated on PAT (Profit after Tax) divided by the total income and it is 17.95% which is

comparatively lower than the year 2007-08 which was 36.61%. This not a good sign for the

BSP.

OPERATING RATIO

Operating Profit Ratio = Operating Profit * 100 Net Sales

2007-08 2008-09

= 5401.69* 100 14156.35

= 4997.21* 100 16452.02

= 38.15% = 30.37%

Interpretation: Looking at the above ratio we can say that the company was doing a very

well job where the company’s operating profit is 38.16 of Net Sales but it has shown a dip of

around 2% (difference) and the company’s operating profit ratio of the current year is

30.37%. this not a good sign for the company. To overcome from this loss, company should

reduce their operating expenses for the future.

RETURN ON ASSETS

ROA= (PBT/Total Assets)*100

2007-08 20008-09

= 5365.57* 100 27203.01

= 4964.67 *100 32413.35

= 19.72% = 15.3%

From the above figure we can see that as compare to previous year this return on assert has

declined due to increase in the expenditure. They increased the assert but the production on

65

66

certain area might have reduce (assumption). To improve this, company has to use their assert

in best possible way.

B. Liquidity Ratios

CURRENT RATIO

Current Ratio = Current Assets Current Liabilities

2007-08 2008-09 = 2259.79 1698.32

= 3424.25 2527.70

= 1.33 : 1 = 1.35 : 1

Interpretation: The current ratio of the company is 1.33: 1 in the year 2007-08 which was

not good because the ideal Current Ratio must be 2:1 which indicates that, for paying a

liability of Re.1 the company must have an asset of Rs.2 which the company doesn’t satisfies

because the company has an asset of Rs.1.33 for paying a liability of Re.1.in the financial

year 2008-09 the current ratio was 1.35 which is also not good.

QUICK RATIO

Quick Ratio = Current Assets – Stock Current Liabilities

2007-08 2008-09

= 2259.79 – 1712.90 1698.32

= 3424.25 – 2883.14 2527.70

= 0.32 : 1 = 0.21 : 1

66

67

Interpretation: The ideal quick ratio considers satisfactory for the company should be

1:1.From the above table it is clear that the quick ratio or the acid-test ratio of the company is

0.21 in the year 2008-09 and 0.32 in 2007-08 which is a bad indicator that the company is not

in a good position as it holds more liability as compare to its assets.

C. Activity Ratios

ASSETS TURNOVER RATIO

Assets Turnover Ratio = Net Sales Fixed Asset

2007-08 2008-09

= 14156.35 2285.09

= 16452.02 3027.03

= 6.19:1 = 5.43:1

Interpretation: Looking at the assets turnover ratio we can say that the company is

utilizing its assets in much efficient way and it is a good sign of the growth of the company

because the ideal ratio must be nearer to 1.

INVENTORY TURNOVER RATIO

Inventory Turnover Ratio = Net Sales Avg. Inventory

2007-08 2008-09

= 14156.35 1634.78

= 16452.023 2298.02

= 8.65 = 7.1

67

68

Interpretation: From above figure we can see that in the year 2008-09 there is a decrease

in the inventory turnover as compared to previous year i.e. 8.65 to 7.1.

If the stock turnover is low as compare to previous year then it means that there is slump in

the business or we can say that there is a over investment in stock. There is an imbalance in

the stock or used in a misappropriation manner.

CREDITORS TURNOVER RATIO

Creditors Turnover Ratio = Net Sales Creditors

2007-08 2008-09

= 14156.35 661.35

= 16452.023 737.95

= 21.40 = 22.29

Interpretation

As we can see that creditor turnover or payable turnover has increased. We can suggest that

increase in creditor turnover would have decreased the working capital position of the

company. Since creditor purchase is cheaper and it is easily available for BSP, and the

company could have earned extra profit by employing this increased working capital finance.

CURRENT ASSET TURNOVER RATIO

Current Asset Turnover Ratio = Sales Current Asset

2007-08 2008-09

= 14156.35 2259.79

= 16452.023 3424.25

= 6.2 = 4.8

68

69

Interpretation

As we can see that assert turnover has decreased from the 6.2 in the year 2007-08 to 4.2 in

the year 2008-09. This shows that what BSP is investing into the company is not able to

cover as compare to previous year, thought they have the return from the investment but

compare to previous year there is a decline this year. This ratio shows the efficiency in the

use of current assert or shows the over or under investment in current assert.

WORKING CAPITAL TURNOVER RATIO

Working Capital Turnover Ratio = Sales ,

Working Capital

2007-08 2008-09

= 14156.35 561.47

= 16452.023 896.55

= 25.21 = 18.35

Interpretation:

The working capital turnover ratio measures the efficiency with which the working capital is

being used by a firm. A high ratio indicates efficient utilization of working capital and a low

ratio indicates otherwise. But in this working capital turnover has decreased this means that

company has not utilized their resources properly.

69

70

FINDINGS

&

SUGGESTIONS

70

71

FINDINGS

I came across following findings during undergoing the project work on topic

“Analysis of Working Capital Management -A Study in Bhilai

Steel Plant”.

In BSP the coordination among the various sections of the Finance & Accounts

department is very appreciative, as the Finance & Accounts department is a big

department consisting of near about 32 sections. It is the work force of the Finance

& Accounts department, which makes it possible.

During the study I find that there is no huge variation in operation budge and the

actual one.

From my scrutiny of the annual statement of the company I found that the company

has to keep a huge amount of provisions for bad debts for the unsecured debtors in the

year 2008-09.

BSP generally do not go for credit sale therefore they do not have much amount in

there debtors account. They prefer cash sale then to credit sale.

Production of Finished Rail mill contributes maximum to the profit percentage.

There was increase in working capital in the year 2008-09 as compared to the last

year.

They maintain a current ratio of 1.35:1 which is less than an idle ratio.

BSP has become more efficient to pay out its liability.

In the BSPs there working capital management is very good, they use the MMIS &

SAP system to manage the overall activity.

Suggestion

The departmental policies should be made flexible which can help to decrease the

work flow process and generate more profits.

BSP should reduce the overall cost of production because cost of production of other

steel plants is less as compared to BSP and TISCO is the cost leader.

71

72

CONCLUSION

Bhilai Steel Plant is a major unit of SAIL. In the Analysis, which is done in Bhilai Steel

Plant, I found that BSP generating continuous profits as compared to previous year with

current year and BSP contributes more profit in SAIL overall profit. The main areas of

emphasis were on the Inventory turnover, creditor turnover and debtor turnover. As we can

see that BSP has reduced the creditor payment period and this is a good sign for the BSP

because they are paying their debts sooner.

The two main ratios we used for our analysis were the quick ratio or the acid test ratio and the

current ratio, both of which have been explained earlier. The current ratio of BSP is not good

as compare to ideal ratio i.e. 2:1. Thought company is liable to pay its liability and BSP has

more fund in hand and they had already created more provision for the bad debt. But BSP

should try to maintain their ratio and use the recourses efficiently.

Liquid ratio is also very important for the BSP. As we know that liquid ratio is calculated

when inventory are deducted from the current assert, liquid ratio has been calculated. And the

Ideal ratio is 1:1 but in case of BSP it has remained at an even level of nearly 0.33. It is said

that if even one blast furnace has to be cooled the BSP suffers losses of up to 10 crores. So an

adequate stock of inventory is maintained this affects the level of the liquid assets and cash at

hand.

Bhilai Steel Plant (BSP) is one of the few public sector units that make a profit on the scale of

nearly 4,900 crores, which is highest contribution among the sail unit.

72

73

BIBLIOGRAPHY

The above report has been prepared from the following sources of data and information:

1. Web Sites:

www.google.co.in (regarding Global Steel Industries),

www.indiansteelalliance.org,

www.sail.co.in.

2. Books:

a. Financial Management, Dr. S.P. Gupta

b. Management accounting, Dr. S.P. Gupta

3. Other Reference:

a. Functional & Finance accounts manual ,

b. Previous project reports done at the Finance & Accounts department ,

c. Previous finance year book,

d. SAIL journal,

e. BSP news magazine,

f. BSP Performance Highlights 2008-2009 magazine,

73

74

AnnexureLIST OF ABBREVIATIONS :ACVO : Additional Chief Vigilance OfficerAP : Automatic ProcurementBG : Bank GuaranteeCA : Competent AuthorityCE : Chief ExecutivesCEC : Commercial Evaluation CommitteeCVC : Central Vigilance CommissionCVO : Chief Vigilance OfficerCMMG : Corporate Materials Management GroupCPA : Centralised Procurement AgencyDGS&D : Director General of Supplies & DisposalDOP : Delegation of PowerDRO : Direct Reporting OfficerEMD : Earnest Money DepositFIFO : First In First OutGARN : Goods Acceptance/Rejection NoteGCC : General Conditions of ContractHOMM : Heads of Material ManagementHOD : Head of the DepartmentIPSS : Inter Plant Steel StandardsISO : International Organization for StandardsLCNS : Landed Cost Net of Set OffLTE : Limited Tender EnquiryMD : Managing DirectorMM : Materials ManagementNIT : Notice Inviting TenderOEM : Original Equipment ManufacturerOTE : Open Tender EnquiryHOP : Head of PersonnelLD : Liquidated DamageOA : Operating AuthorityPAN : Permanent Account NumberP2K : Purchase/Contract Procedure 2000PCP-06 : Purchase/Contract Procedure 2006PS : Post ScriptPGB : Performance Guarantee BondPO : Purchase OrderPSU : Public Sector UnitsRA : Reverse AuctionSSI : Small Scale IndustriesSTE : Single Tender EnquiryTC : Tender CommitteeTC/GC : Test Certificate/Guarantee Certificate

74