Print Himanshu ,Project_2

STEEL LTD.

BENGAL INSTITUTE OF BUSINESS STUDIESKOLKATA

AT

“JSW STEEL LTD”

Torangullu, Bellary

A Project Report On

“WORKING CAPITAL MANAGEMENT” @

SUBMITTED TO

BENGAL INSTITUTE OF BUSINESS STUDIESIN PARTIAL FULFILLMENT AS A REQUIREMENT TOWARDS COMPLETION OF

MASTER OF BUSINESS ADMINISTRATION

2010-2012

SUBMITTED BY

Mr. HIMANSHU KR. SINGH

Under the Guidance of

Organization Guide Institute Guide

Mr. W. MURLIDHAR Prof. SUDHASANTA DE

(DGM, Finance.JSW STEEL ltd) Faculty BIBS, Kolkata

Bengal Institute of Business StudiesPage 1

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ACKNOWLEDGEMENT:

No work is said to be complete without thanking the people who have helped me in completing the job. So this acknowledgment is for those who have played their role in completion of my project entitles “A study of Working Capital Management at JSW Steel Ltd”. The project would not have been completed without the kind of cooperation and help of certain individuals to who I owe this heartfelt gratitude.

At the very outset, I would like to thank my external guide Mr. Murlidhar Wuntakal, (DGM, Finance) who constantly guided and inspired me in completion of this project.. During this project I experienced the real environment, market situation, mannerism etc. that are very much needed in this competitive environment.

I expressed my sincere thanks to Mr. Achutha Raghava (HR) and Mr. Mallappa for granting the permission to undergo project in JSW STEEL LTD, Torangallu.

I would also like to acknowledge all those respondents who have lend their precious time without which this project work would not have been successful.

I expressed my sincere gratitude to the whole of JSW Steel Ltd. Bellary for extending their warm support and guidance in various natures.

My sincere thanks to my project Internal guide Prof.Sudhasanta De for his valuable support and guidance in the completion of this project successfully.

Finally I thank my Family, friends and each one who have directly or indirectly helped me in making this project successful and memorial.


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Certificate

This is to certify that the dissertation entitled “WORKING CAPITAL

MANAGEMENT @ JSW STEEL LTD” is a benefited work and independent

project study conductedby Mr. Himanshu Kumar Singh has successfully

completed his Summer In Plant project training in partial fulfillment of Masters

Degree in Business Administration awarded by Bengal Institute of Business

Studies, Kolkata, for the Academic Year 2010-2012 under my guidance.

INTERNAL GUIDE CHAIRMAN

Prof. Sudhasanta De Mr. Vidur Kapoor

Faculty BIBS, Kolkata BIBS, Kolkata


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DECLARATION

I ,Himanshu Kr. Singh hereby declare that this project was carried out by me under the guidance of Mr.W.Murlidhar (AGM, Finance, JSW Steel Ltd) Torangullu, Bellary. And it is submitted in partial fulfillment of the requirement during my Masters of Business Administration at Bengal Institute of Business Studies, Kolkata.

This report is based on primary and secondary data collected be me and this report cab be as a reference copy for working capital

Place: Kolkata

Date: 16/05/2011 – 16/07/2011


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TABLE OF CONTENTS

Sl. No. CONTENTS PAGE NO.

1 Industry Profile 06

2 Company profile 12

3 Production Info 26

4 SWOT Analysis 31

5 Market price Data 33

6 Executive Summary 36

7 General Introduction 37

8 Analysis & Interpretations of Data 50

9 Findings, Suggestion & Conclusion 68

10 Learning Experience 69

11 Bibliography 70

INDUSTRY PROFILE


STEEL LTD.

THE GLOBAL STEEL INDUSTRY

The Global Steel Industry has been going through major changes since 1970. China has emerged as a major producer and consumer, as has INDIA to a lesser extent. Consolidation has been rapid in Europe.

GROWTH OF INDUSTRY

Global steel production grew enormously in the 20 th century from a mere 28 million tons at the beginning of the century to 781 million tons at the end.

WORLD STEEL PRODUCTION IN THE 20th CENTURY

Over the course of the 20th century, production of crude steel has risen at an astounding rate, now fast approaching a production level of 800 million tons per year. Today, it is difficult to imagine a world without steel.

During the 20th century, the consumption of steel increased at an annual rate of 3.3%.In 1900, the USA was producing level of 800 million tons per years . Today, it is difficult to imagine a world without steel.

During the 20th century, the consumption of steel increased at an average annual rate of 3.3%. In 1900 , the USA was producing 37% of the world’s steel . With post war industrial development in Asia that region now (at the turn of the century) account for almost 40%, with Europe (including the former soviet union)Producing 36% and North America 14.5%

Toward the end of the last century, growth of steel production was in the developing countries such as china, Brazil and India, as well as newly developed south Korean, steel production and consumption grew steadily in china in the initial years but later it picked up momentum and the consumption grew steadily in china in the initial years but later it picked up momentum and the closing year of the century saw steadily in china in the initial years but later it picked up momentum and the closing years of the century saw it racing ahead of the rest of the world .

GROWTH PROTENTIAL OF THE INDUSTRY

Growth of the Chinese steel industry appears to be staggering .however, when one considers that China has developed of 1.3 billion, the per capital steel consumption is around or below that of the development countries. Indeed, while China had been progressively raising steel production for many years, it has also been important substantial quantities of steel.

Amongst the other newly steel producing countries, South Korea has stabilized at around at around 46.48 million tons, and Brazil at around 30 plus million tones. This brings the focus of


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the industry to India. Considering a steel consumption of 300 kg per man year to be a fair level of economic development, India will have to come up to somewhere around 300 million tones, if it is to fulfill its ambition of being a developed country. In the developed countries, the trends are on consolidation of industry. Cross-border mergers have been taken place for several years. The focus is on technological improvement and new products.

INDIAN STEEL INDUSTRY

The last decade saw the Indian Steel Industry integrating with the global economy and evolving considerably to adopt world class production technology to produce high quality steel, the total investment in India steel since 1990 is over Rs 19000 cores mostly in plant equipments, which have been installed after 1990.

With a current capacity of 35mt the Indian steel industry is today the 8 th largest producer of steel in the world. Today, India produces international standard steel of almost all grades and had been a net exporter for the past few years, underlining the growing acceptability of its production in the global markets.

Expansion to meet this growing demand. Steel is crucial to the development of any modern economy and is considered to be the backbone of human civilization. The level of per capita consumption of steel is treated as an important index of the level of socioeconomic development and living standards of the people in any country.

EXPORT AND IMPORT OF STEEL FROM INDIA

The steel export of India over the decided the compounded annual growth rate (CAGR) of 22.27% against CAGR of import of steels, which accounted 14.20% in the respective period. In 1991-92, very inception of the liberalization, the steel exports amounted to 368 thousand tons, which increased year-by-year and reached to5221 thousand tons in 2003-04. It accounted for thirteen-fold increase over the period. The annual growth rate of exports of steel for the period showing the fluctuating trends, which ranged between 14.41% in 1992-93 in 2003-04, the growth rate was 15.87% iron & steel are freely exportable. Advance licensing scheme allowing duty free import of raw materials for exports. Duty entitlement pass book scheme (DEPB) introduced to facilitate exports.

From 1997-98, India exported steel and steel products which was more than its imports of steel and steel products.


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IMPORT OF IRON & STEEL

Iron & steel are freely importable as per the extant policy

Last four year import of finished (carbon) steel is given below

Years In Millions2003-04 1.5402004-05 2.1092005-06 3.8502006-07 4.1002007-08 0.800

POSITIVE KEY POINTS OF INDIAN STEEL INDUSTRIES

Growth Potential: The per capita consumption of steel is around 33kgs in India as against 242hgs in china and an average of over 400kgs in the developed countries. This wide gap in relative steel consumption indicates that the potential ahead for India to raise its steel consumption is high.

Continued Demand: Strengthening of steel prices since 2003 till early 2006 helped the domestic steel companies immensely as many of them managed to reduce their debt burden considerably going forward, the demand for the metal is likely to sustain on the back of continuing demand within India and from US and other south east Asian nations.

NEGATIVE KEY POINTS OF INDIAN STEEL INDUSTRY

Fragmented Industry: while there have been concerted efforts to control the fragmented nature of the industry through consolidation and closures, the problem continues to persist. Further, the biggest threats to the industry remains from the cyclicality of the sector, which could put immense pressure on steel prices if steel consumption shows signs of faltering or supply exceeds the demand considerably.

Capped Benefits: Indian steel companies have to bear additional costs pertaining to capital equipment, power and inefficiencies (low per employee productivity).this has capped the edge they would have otherwise enjoyed due to availability of cheap labor and raw material

Import Threats: another possible threat to the domestic steel sector continues to be from dumping by international companies.

INDUSTRY DEVELOPMENT:


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The tightness in the debt capital market, sagging equity capital market, surging oil prices, rising food and commodity prices and spiraling inflation across the world, are excepted to have some dampening effect on the world sector such as capital goods sector, growing industrial sector and infrastructure spending in emerging economics, are expected to support the secular trends growth momentum and generate demand for steel.

The global apparent steel consumption is estimated to grow at a CAGR of 6.2% between 2007 and 2009. With capacity additions not keeping pace, the demand is clearly outpacing the supply, leading to high finished steel prices and low inventory level, on account of supply shortage.

The domestic demand for steel products continues to be buoyant considering large pipeline of committed investment in India. Import of steel products is becoming unattractive due to higher international prices relative to domestic prices. As a result, there is a strong demand for domestic steel products, which will benefit the domestic steel industry.

COMPANY PROFILE

A. Background and inception of the company.

In the 15th century, Krishnadevaraya (1509-29) ruled the royal vijaynagar dynasty located in southern India, famous for its peace and prosperity, Reminiscing the past glory and grandeur of vijayanagar, JSW (JINDAL SOUTH WEST) the mega steel plant has come up at Toranagallu, 29kms from Bellary. The Principal Promoter of JSW is JISCO, both belong to Om Prakash Jindal group with 50 year of experience in steel industry.

JVSL has an interesting history; Mrs. INDIRA GANDHI inaugurated this site in 1971, for an integrated steel plant which was to be named VijayaNnagar steel plant. In 1994, GOVT of Karnataka approved Jindal who succeeded in setting up of JSW, largely because they dared to choose not so commercial but most environment friendly for iron making, COREX as agent conventional process of Blast furnace. The company was promoted by Jindal group with participation from Karnataka steel investment and development corporation Ltd.

JSW plant is located at TORANGALLU in bellary-hospet area the high grade iron-ore belt; spread over 4500 acres of land. The plant is 340 kms from Bangalore and well connected to GOA and CHENNAI ports.


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The steel industry bring them on the threshold of adopting new technology we took a lead in adopting the largest technology of steel making as COREX TECHNOLOGY developed by voest alpine of Austria. The JSW was the first Greenfield project to save COREX as a mainstream facility.

The other who had it as a part of brown expansion was ISCOR of South Africa and POSCO of South korea.

Mining of iron ore to the manufacturing of valve added steel products JSW has a preeminent position in the flat steel segment in India as is on its way to be a major global player, with its overseas manufacturing and marketing alliances with other world leaders.

“Where there is a challenge there is jindal”

“If it is jindal, it must be first class”


STEEL LTD.

GROUP COMPANY PROFILE:


Om Prakash Jindal

P.R. JINDAL SAJJAN JINDAL RATAN JINDAL NAVEEN JINDAL

Jindal saw Ltd

Saw Pipes Inc

JSW STEEL LTD

SOUTHERN AND STEEL l

JINDAL THERMAL POWER CO.LTD

VIJAYNAGAR MINERALS

JINDAL PARAXAIR OXYGEN CO.LTD

JINDAL STAINLESS STEEL.LTD

JINDAL STRIPS LTD

JINDAL STEEL AND POWER LTD

STEEL LTD.

Registered office:

Po:VidyaNagar(Toranagallu) Taluka:sandur Dist:Bellary.

Corporate Office:

Mumbai:[Headoffice] Jindalmansion 5A,Dr.G.DeshmukhMarg; Mumbai 400026

BOARD OF DIRECTORS:

Mrs.Savitri Jindal , Chair person Mr. sajjan Jindal , vice-chairman and managing Director Mr.Sheshagiri Rao M.V.S , managing director & Group CFO Dr.Vinod Nova , Director CEO Vijayanagar works Mr.Jayant Acharya , Director (sales & marketing ) Mrs. Zarin Duruw , Nominee director of ICICI bank Mrs. Vandita Sharma IAS , Nominee director of KSIIDC Mr.B Babu R , Nominee director of the administration of the Undertaking of unit trust of

India Dr.S K Gupta , Director Dr.Uday M Chitale , Director Mr.Vijayaraghavan , Director Mr. Anthony Paul , Director

STATUTORY AUDITORS:

M/s. Deloitte Haskins & SellsChartered Accountants

COMPANY SECRETARY :

Mr.Lancy Varghese

BANKERS


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Allahabad Bank Bank of Baroda Bank of India ICICI Bank Limited IDBI Bank Limited Indian Bank Indian Overseas Bank Punjab National Bank State Bank of India State Bank of Indore State Bank of Mysore State Bank of Patiala Union Bank of India Vijaya Bank

REGISTRARS & SHARE TRANSFER AGENTS

Karvy Computershare Private LimitedPlot No.17 to 24, Vittalrao Nagar,Madhapur, Hyderabad - 500 081Tel.: 040 - 23420815-824Fax: 040 - 23420814E-mail: [email protected]: www.karvy.com

Breakthrough in Jindal

Ferro-Chrome an essential ingredient in manufacturing of stainless steel was, until recently was imported from other countries. In 1987 , jindal ferro Alloys Ltd; at Vishakhapatnam was the first to manufacture ferro-chrome 100% in house technology , which was conceived marginalize the monopoly of outside suppliers. To establish a synchrony and to develop a market base, JFAAL has been recently merged with JSl as autonomous division , INDIA’s ONLY INTEGREATED GREEN FIELD STEEL PROJECT.

JSW, a green field integrated steel plant with a capacity of 1.60 million ton per annum of hot rolled coils. JSW has collaborated with VOEST ALPINE of AUSTRALIA, which will provide a unique advantage in manufacturing and technology.


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JSW have also pioneered India’s First continuous slab casting machine and India’s first Hot Stickle mill to produce sector, first DD (deep drawing) and EDD (extra deep drawing) grade mill steel wide strips. The process off DD and EDD grades of steel involves a consistent adeptness and knowledge , it calls for technology of higher order

JSW are also pioneers in INDIA to use the newly introduced of COREX c-2000 module, developed by VOEST ALPINE AUSTRALIA to manufacturing pig iron. Jindal breakthroughs are almost limitless.

The Group of JSW companies are.

STEEL ENERGY ALUMINIUM CEMENT INFRASTURACTURE NATURAL RESOURSES SERVICES

1. JINDAL STAINLESS LIMITED; India’s largest integrated manufacturer of stainless steel is JSW. This is catering to about 40% of Indian demand. The plant is located at Hissar, Haryana with a maximum capacity of 500,00 T.P.A

2. JINDAL IRON AND STEEL COMPANY LIMITED. India’s largest integrated galvanizing facilities in private sectorAccounting for 25% of total galvanizing production in the country engaged in HR, CR and galvanizing business. It exports 75% of production in the country. The plant is located at Vasind and Tarapur, maharastra

3. SAW PIPES LIMITED. Manufacture of large diameter U-O-E submerged arc welded pipes. Also has protective coating application facilities Viz. Polyethylene, polypropylene, fusion bond epoxy coal tar enamel or bitumen and concrete coating. The plant is located at Kosikalam- Utter Pradesh.


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4. JINDAL VIJAYNAGAR STEEL LIMITED. An environment friendly integrated steel plant manufacturing HR coils using the re-voluntary corex technology for iron coils to group company JISCO for values addition and to south India only HR coil manufacture in south India . tie up with steel leaders gives unique advantage in manufacturing and technology. The plant is located at Torangallu, Karnataka with maximum capacity of 7 million tons per annum

5. JINDAL STEEL AND POWER LIMITED .

Asia’s largest and world’s second largest coal based sponge iron plant and also it manufactures rails, blooms and generating power. The plant is located at raigarh, Madhya Pradesh . a 150 mw power plant at raigarh, iron ore mining in Orissa and coal mining in Madhya pardesh ensure quality raw material at an lowest cost

6. SAW PIPES USA Inc.

Manufacturing largest diameter DSAW PIPES using in large the U-O-E process, the plant is located at bay town USA.

7. JINDAL UNITED STEEL CORPORATION

Manufactures steel plates for using in large diameter Pipes, construction and fabrication industries. The plant is located at bay town, texes , USA.

8. JINDAL THERMAL POWER COMPANY LIMITED .

Produces power from both coal and corex gas of JSW steel plant. The plant is located at Torangallu Karnataka.

9. JINDAL PRAXAIR OXYGEN COMPANY LIMITED .

Joint-venture with Praxair Inc.world largest air separation plant. It supplies necessary oxygen for JSW plant iron and steel making. The plant is located at toranagallu, Karnataka.

10.VIJAYNAGAR MINARALS PRIVATE LIMITED.

It is a joint-venture for mininf of iron ore. The plant is located at 20kms of JSW plant (Torangallu).

VISION, MISSION, CORE VALUES & OUALITY POLICY


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VISION:

“It is said that in the journey of life, more important than where you are, is where you are heading to.”-Sajjan Jindal, Vice-Chairman & MD,JSW Steel Ltd

“TRANSFORM STEEL DOMAIN THROUHG INNOVATIONS”

To be a respected world-class corporation and leader in India steel business in quality, productivity, profitability and customer satisfaction.

Groom people for innovating future Continues improvement in the valve chain for cost stewardship. Nurture lasting customer relationship by anticipating their needs and delivering beyond

expectation. Marketing of values added branded products for both domestic and global market. Catalyst for growth amongst the nation’s steel industries.

“Global recognition for size, culture and quality, While nurturing nature and society”

MISSION:

JSW corporate mission guide the approach to the work and environment, which transforms the way we deliver our products and services.


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“MAXIMIZE CUSTOMER SATISFACTION AND SHAREHOLDERS VALUES THROUGH HRD”

Without young thinking, we promise to innovate future by driving with leadership and crystal clear focus while differentiating the benefits of our deliverables to all stakeholders.

“Supporting the nation’s growth in power and steel with speed and innovation”

CORE VALUES:

Crystal clear Passion for excellence Drive with leadership Young thinking Challenging status quo

OUALITY POLICY:

Quality is the way of life at jindal. JSW follows strict norms of quality when it comes it to resource managements, production, services, commitment and working environment. JSW believes the quality consciousness is a panacea for all economic and social ills. It may be quality of life or quality of business. The trust that is vested on company by their clients and customers stems from company’s consistent adherence to quality standards. JSW shall achieve it through:

Participation of all concerned in an atmosphere of cooperation ad oneness. Imparting training and enhancing development of all employee in the organization. Delivering quality products and services at a competitive price and to achieve customer

satisfaction. Adopting environment friendly technologies and to nurture a clean and healthy

surrounding. Achieving and sustaining leadership through concerted effort towards creativity and

innovation. Promoting team based culture, which encompasses human values and ethics.

Domestic and International Business of JSW


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Market shares in DOMISTIC.

NORTH SOUTH EAST WESTMarket share 10% 65% 10% 15%

JSW’s 40-50% sales go to JISCO, & rest 50% of its sales are done in other parts of India & abroad. Out of 50%, 60% of it is sales made in south India, & the rest 40% of 50% is exported.

JSW is a major steel supplier in southern Indian. Some of the domestic customer are. Hero Cycle Ltd – Ludiana. Wheels India Pennar Industries-Hyderabad Asrani Tubes-hyderabad ITN Signode India-Hyderabad Demech Ltd-Mumbai Maharashtra seamless-Mumbai J.T. shirwal Paleji steel co.Gujarat Ltd. NSIL-Indoor Ruche strips-Indore JSW entered into international business through exports. JSW

started its export business in the year 1999 by exporting its products to Srilanka, and thereafter extended to USA, Italy, China and Europe etc. currently it export to total 70 countries world over.

The region was justifying chosen for the venture because of the availability of rich iron and ore in the region.

Other raw material required for various processes from the adjoining areas like, bijapur and Sundur. Availability of water from Tungabhadra dam.

Competitors in INDIA.

Steel authority of India (SAIL) Rashtriya Ispat Nigam Ltd Tata Steel (Tisco) Essar Steel.


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Ispat steel.

Steel Authority of India (SAIL)

It is contemplating cost reduction through cutting operation expenses, purchasing expenses, social infrastructure expenses, inventory carrying costs etc. the company is aiming at reducing its main power from a level of 170000 to 100000 in next 3-4 years through a combination of natural attribution and VRS schemes. SAIL, is redeploying assets within its own units to productive use.

Rashtriya ispat Nigam Ltd

The company has taken number of restricting majors to improve financial performance of the plant with Govt, assistance.

Tata Steel

It is amongst the lowest cost steel producer of hr coils in the world and their Vision is to become lowest cost steel producer of the world in neat future. Based on the platform of low cost raw materials and a modern plant the company targets to produce HR coils at costs below OSD 170/ton. The labor productivity is still poor and in absence of safety net, it is difficult to play off redundant labor.

ESSAR STEEL.

It uses power from its own captive plant and uses 70% lump are to achieve cost reduction. The company is planning of installing a pallet plant for reducing cost of production and achieving economy of operation

LIOYD’s STEEL INDUSTRIES LTD:

The company entered into an agreement with western coalfields Ltd,(WCL) for opening an underground mine exclusively for the use of Lloyd’s steel.

The demand for steel is also expected to go up with automobile sector, which is a major user segment showing signs of revival. The government, at the center is accepted to increase spending on infrastructure activates there by increasing the demand for steel.

INFRASTRUCTURAL FACILITIES:

Jindal education and medical test Jindal adarsha vidyalaya Narl vikas Kendra Community initiatives Garbage disposal


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Jindal swimming academy Art,culture and heritages initiative Jindal art foundation Day Jindal vidya mandir Shramasadhana training centre Jindal Sanjeevani hospital Roads Jindal Squash academy vidyanagar sports club Jindal badminton academy Sports initiatives

ACHIEVEMENTS AND AWARDS1) G 3 Award for good green governance 2007.2) Award TERI Corporate Environment 20083) CII-EXIM Award 2008.4) CII-National Energy Management award-2008.5) Golden Peacock Award for Corporate Social Responsibility (CSR)-2008.6) National Award for excellence in water Mangement-2008.7) Indian Manufacturing Excellence Award.8) Prime minister national award.9) National Quality Award from IIM. 10) National energy management award 2008.11) Best township award.

FUTURE GROWTH & PROSPECTUS:

JSW is part of US $8 Billion O.P.JINDAL Group. Under the Dynamic and visionary leadership of Mr. Sajjan Jindal, JSW today is a US $3.7 billon group with its presence across various sectors – STEEL, MINERALS, PORT & INFRASTRUCTURE, CEMENT, ALUMINUM AND IT. JSW STEEL is the largest private steel producer in India with manufacturing facilities in Karnataka, Maharashtra and Tamil Nadu. It is engaged in manufacture of flat and long products viz. pellets, Slabs, HR Plates / Coils / sheet, Galvanized & Galvalume (Plain & Color Coasted) Coils / Sheets / profiles , Bar, Rounds & Rebar’s.

DNA reported that JSW steel’s expansion of its Vijayanagar plant in Karnataka to 10 million tons per annum from the present 7 million tons per annum is progressing as per schedule and the company has fully tried up funds for the project.


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The report cited Mr.Seshangiri Rao, Director, finance of JSW Steel as saying that “We have tied up funds till 10 million tons per annum and the expansion is on track.”

As per the report, JSW is aiming to complete the facilities, which would be the first 10 million tons per annum steel plant in India at a single location, by September 2010 and is now in the process of tying up iron ore for the plant.

JSW STEEL has established a strong presence in the global value- added steel segment with the acquisition of steel mills in US and Service Centre in UK. JSW steel has also formed a joint venture for setting up a steel plant in Georgia. With its upcoming Greenfield steel plant in west Bengal and Jharkhand, the company plans to produce 32 MTPA steel by 2030.

The company currently procures iron ore from the open market for its steel plant at Torangallu in Bellary as the state government is yet to fulfill its assurance of grant of a lease for mine with reserved of 110 million tons in the Bellary region.

The company required around 25 million tons iron ore to feed its plant once the expansion was completed, said Sajjan Jindal, Vice-Chairman and Managing director, JSW STEEL Ltd.

Acquisition of mine in Bellary is Crucial for the company as it is in the process expanding its steel making capacity to 1o MTPA by 2010. The company has also received the state government’s approval to further expand the capacity to 16 MTPA at an Investment of Rs 20,000 cores.

SWOT ANALYSIS OF JSW:

STRENGHTS :

JSW has reputation in steel market. This is the result of long experience of around 3 decades in the steel industry.

Major strength of JSW lies with the prices. JSW enjoys reduction in cost due to very low cost of power (generated by COREX gas)

State of art & technology, the Corex process makes it a low cost production of steel in the industry.

Excellent work force well-qualified and highly experienced Employees.

Production quality is the strength of the JSW.

Well planned Infrastructure for inward & outward by rail & Roads as base foundation for future growth.

Cost effective & compact rail network system.


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Well designed yard for receipt dispatches with inter- connectivity. Multi entry / exit to the yard for greater flexibility. Support from the state Government. It is a continuous process and large scale production is undertaken. Future demand for steel industry.

WEAKNESS:

Raw materials receipts through Goa port due to capacity constraints, railways network is not likely to support.

Krishnapatnam port movement is not smooth.. Challenge in handling 52 MTPA cargos at signal location. Over dependence on Railway for movement of materials. With increasing intensity of operations, tippler performance would become a serious

concern.

OPPORTUNITY:

Capacity expansion plan of IR network are well co-ordinate with overall expansion plan of JSW.

A special incentive from India Railways to Steel Industries is under Consideration. Located in the center of Bellary- Hospet region, a high grade iron belt. Easy access to the major parts of Goa, Chennai and Mumbai. JSW has a good reputation in the steel market. This is the result of long experience of

around 3 decades in the steel industry.

THREAT:

IR has not taken any initiative for DFC to develop their network serving JSW plant. Foreign companies like Mittal Steel and posco entering the Indian steel market. Dumping of metal from countries like Korea is another major threat. Inordinate delay in construction of the world already sanctioned by the Railways &

which is in progress. User to create their own infrastructure for smooth inward/outward movement. Availability of Railways wagon for outward movement. Priority for Iron ore export affecting wagon, supply, rolling stock and locomotive. Poor road conditions & weak bridges between Hospet – Bellary.


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Qualification profile of JSW Employees:

PercentageDiploma holders 33.46%Engineers 25.29%Graduates and post-graduates 13.12%ITI’s 9.16%CA/CS/ICWA 1.67%MBA’s 1.87%Others 15.43%

Market Price Data:The monthly high/low market price of the shares and the quantities tradedDuring the year 2009-10 at the Bombay and National Stock Exchanges areAs under.

Months Bombay Stock Exchange National Stock ExchangeHigh( in Rs.per Share)

Low (in Rs per Share)

No. of Shares Traded

High (in Rs. Per Share )

Low (in Rs. Per Share )

No. of Shares Traded

April 09 387.70 232.50 23027867 387.70 232.50 73505518May 09 596.00 345.80 26626254 596.00 346.20 94854834June 09 720.00 494.00 21228786 722.00 480.53 80761606July 09 713.90 475.05 19022615 713.95 475.15 77489895Aug 09 762.51 648.00 12677359 762.55 648.05 49914670Sep 09 852.00 654.55 8649572 851.00 653.00 32189059Oct 09 935.00 710.00 9789650 935.90 707.75 36495588Nov 09 1039.80 652.00 21416277 1040.00 652.65 74529384Dec 09 1051.00 935.10 10204674 1051.70 936.30 40812523Jan 10 1205.95 932.00 7731775 1206.10 967.90 32092969Feb 10 1109.00 937.5 8630025 1085.35 960.50 35031982Mar 10 1284.80 1113.40 6292438 1284.35 1112.75 33282887

Percentage change in comparison to Broad Based indices – BSE


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Sensex and Nifty as on March 31, 2010Financial Year JSW Share:

financial year JSW Share price (%)

Sensex (%) JSW Share price (%)

NIFTY (%)

2009-10 533 181 530 1742008-09 -71.71 -38.44 -71.57 -36.132007-08 65.99 18.21 66.18 23.882006-07 63.01 13.22 62.78 12.312005-06 -16.04 42.33 -16.45 76.14

SHARE HOLDING PATTERN:

As on 31.03.2010Category No. of holders No. of Shares % of HoldingPromoters 112 84175673 45.00NRI 11630 3101605 1.66FII 319 59591549 31.86OGB 7 40712 31.86FBC 2 8218685 4.39IFI 5 5818696 3.11IMF 71 1701778 0.91BANKS 24 2032832 1.09Bodies Corporate 2683 7572699 4.05Public 521338 13642278 7.29Trust 11 833140 0.45HUF 2164 255133 0.14Transit A/c 1 1196 0.00Total 540606 187048682 100

21% of growth in contribution to Government & Society

Accounting Functions in JSW Steel Ltd: Accounts payable section. Accounts receivable section. Costing section. Taxation section. Financial administration section. Treasure section. General ledger section.


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PART-A

Working Capital Management. @

Executive Summary:

This summer project A study of working capital management in JSW Steel Ltd. Deals in ascertaining the efficiency of working capital management of the company.

Working capital may be regarded as lifeblood of business. Working capital is needed to meet the day to requirement of the business unit. The exploitation of working capital assets is possible only by efficient working capital management. This study on working management is conducted in JSW Ltd.

Working capital management not only shows the financial efficiency of business, but also its credit worthiness, which has gained importance in these days of credit squeeze. Therefore, study of the management of working capital is very necessary. Objective of the project was to study the pattern and procedure followed for managing various components of working capital, so as to evaluate the efficiency of working capital management. So this study intends to comprehensively evaluate the inventory, receivables, creditors and cash management. The study also aims to analyze the alternative sources of working capital employed by JSW Ltd.

Desk research method is adopted for this study. The required information was collected through secondary sources.

Secondary data were collected from various sources including the annual report of the company for the various years.

General Introduction:

Statement of the problem:

The working capital is the most critical problem in financial management, Importance of working capital management.

A substantial portion of total investment is invested in current assets.Level of current assets and current, which can be determined, by the level of current assets and current liability.The composition of current assets and current liabilities.

Need and Importance of Study:


STEEL LTD.

To fulfill its endeavor to maximize the shareholder’s wealth, firm has to earn sufficient return from its operation, which needs a succeful sales activity. The firm has to invest sufficient funds in current assets to succeed in sales, as the sales do not convert into cash instantaneously because of the time gap between the sales of goods and actual receipts in the cash. Hence there is a need for working capital in the form of current assets to sustain sales activity during that period. The adequate stock of inventory provides a cushion against being out of stock and help as a guard to meet the demand for its product. To be competitive, the firm must sell its product to their customer on credit, which capital necessitates the holding of accounts receivables therefore an adequate level of working capital is absolutely necessary for the smooth sales activities, which in turn enhance the owner’s wealth.

The working capital need arises for the following purposes:

* For purchasing raw materials, components and spare parts* For paying wages and salaries.* To incur day today expenses and overhead costs like fuel, power and office expense etc.* To meet selling costs of packing advertising etc,* To provide credit facilities to customers.

Objectives of study:

*To study the efficiency of working capital management of the company.*To analyze the working capital trends in the company to study the efficiency of cash, *inventory and receivable management of the company.*To understand and analyze the working capital position of JSW Ltd.*To measure the overall financial position of the organization with the help of ratio analysis.

Scope of the study:

Since the decision regarding working capital are of an operating nature not one time decision, the scope of the study is geared towards identifying important areas of control and to establish model for better control of the various components of working capital.

The study would also attempt to identify the various sources available for financing of working capital.

The study gives a fair idea of improvement I efficiency of working capital management and also to have proper control over the components of working capital and managing of efficiency.


STEEL LTD.

Methodology:

Desk research method is adopted for this study. The required information was collected through secondary sources.

Secondary data were collected for various sources including the annual reports of company for the years between 2005 to 2010.

Limitation of the study:

* This study deals with the data made available. Hence the result of this study cannot judge the business of the firm in general. * The study has been influenced by the limitation of the ration analysis. * The study extensively uses the data provided is the financial reports of the firm which may also have their own limited perspective. * The analysis made on the working capital management is for a particular period of time the current assets and current liabilities will change for an analysis made at any order of time.

Theoretical Background:

Introduction:

One of the vital aspects of company’s financial management is to manage its current assets and the current liabilities in such a way that a satisfactory level of working capital is maintained. Working capital management means administration of all aspects or working capital i.e. current assets and current liabilities. Firm has to manage it properly in order to attain its goal of wealth maxima ion.

Meaning:

Funds required for short term purposes or day to day expenses are working capital. WC refers to part of firm’s capital required for financial short term or current assets also known as revolving or short term capital or circulating capital.

Working capital is that part of the total capital which is used for carrying out routine business operations. In simple terms, working capital is the capital with which the business of the company is worked over. Working capital is the life bold of business and it is the controlling system of every firm.

In simple words, working capital is the excess of current asset over current liabilities.


STEEL LTD.

The working capital management is concerned with the problem that arises in attempting to manage the current assets and current liabilities and the interrelationships that exist between them. This tries to evolve how much funds to be invested in each type of current assets and what should be the proportion of long terms funds and which are the sources that are ideal for financing current assets.

Concepts of working capital:

There are two concepts of working capital, they are;

1.Gross Working Capital Concept

2.Net Working Capital Concept

GROSS WORKING CAPITAL CONCEPT:

Gross working capital concepts refer to firm investment in its current assets. Current assets are assets, which can be converted into cash with in an accounting year (or operating cycle) and includes cash, short term securities, debtors, bill’s receivables and inventories.

The gross working capital is a financial concept. It also called as current capital or circulating capital concept mainly focuses on two aspects of current asset management.

* Optimum investment in current assets* Financing of current assets

NET WORKING CAPITAL CONCEPT:

Net working capital is the difference between current assets and current liabilities. It may be positive or negative. A positive working capital arises when current assets exceeds current liabilities and Vice- versa.

Net working capital = current assets – current liabilities

Net working capital is a qualitative concept and it indicates:

1. Liquidity position of the firm 2. Suggest the extent to which working capital needs may be financed by permanent sources of funds


STEEL LTD.

The current assets of the firm should be sufficiently in excess of current liabilities to constituting maturing obligations within the ordinary operating cycle of the business. A weak liquidity position poses a threat to solvency position of the firm and makes it unsafe and unsound. A negative working capital may prove to be harmful for the company’s reputation. On the other hand, excessive liquidity is also bad which may lead to mismanagement of current assets.

Even though both gross and net working capital concepts are the important facets of working capital, there is no precise way to determine the exact gross or net working capital for every firm. The working capital needs depends upon the business operations of the firm.

Significance of the working capital:

To fulfill its endeavor to maximize the share holder’s wealth, firm has to earn sufficient return from its operations, which needs a successful sales activity, the firm has to invest sufficient funds in current assets to succeed in sales, as the sales of goods and actual receipts in cash. Hence there is need of working capital in the form of current assets to sustain sales activity during that period. Since cash inflow and cash outflow don’t match, firm have to necessarily keep cash or investment in short term liquid securities to fulfill its obligations as and when they become due.

The adequate stock of inventory provides a cushion against being out of stock and help as a guard to meet the demand for its product.

The working capital need arise for the following purpose.

For purchasing raw materials, components and spare partsFor paying wages and salaries.To incur day to day expenses and overhead cost like fuel, power and office expenses etc.To meet selling costs for packing, advertisement etc.

Classification of working capital:

On the basis of concept

1. Net Working Capital

This is the difference between current assets and current liabilities; current liabilities are those that are expected to mature with in an accounting year. It includes creditors, bills payable and outstanding expenses.


STEEL LTD.

Investment in current assets represents a very significant portion of the total investment in assets, in case of public limited companies in India; current assets constitute around 60% of the total capital employed. Therefore the finance manager should pay attention towards working capital management.

The working capital needs increases as the firm groups. As sales grow, the firm needs to invest more in debtors and inventories. The finance manager should be aware of such needs and finance them quickly.

Gross working capital:

This refers to the firm’s investment in current assets. Current assets are the assets which can be converted into cash within a short period say, an accounting year. Current assets include cash, debtors, bills receivables, short terms securities etc.

B. On the basis of time:

1. Permanent working capital:

Permanent working capital is permanently locked up in the circulation of current assets. It covers the minimum amount requested locked up in the circulation of current assets. It covers the minimum amount requested for maintaining the circulation of current assets.

a) Initial working capital:As its inception and during the formative period of its operations a company must have enough cash fund to meet its obligations. The need for initial working capital is for every company to consolidate its position.

b) Regular working capital:It refers to minimum amount of capital required to keep up the circulation of the capital from the cash inventories to accounts receivables and from accounts receivables to back again cash. It consist of adequate stock of raw materials and finished goods and amount of receivables.

2. Variable working capital:

It refers to the past of the working capital which changes with the volume of business; it may be divided into two classes-

A) Seasonal working capital

There are many lines of business where the volumes of operations are different and hence the amount of working capital varies with the seasons. The capital required to meet the seasonal needs of the enterprise is known as seasonal working capital.


STEEL LTD.

B) Special working capital

The capital required meeting any special operations such as experiments with new product or new techniques of production and making interior advertising campaign etc, are also known as special working capital.

Determinants of working capital:

The following factors determine the amount of working capital

Nature of industry: The composition of current assets is a function of the size of a business and the industry to which it belongs. A public utility concern, for example, mostly employs fixed assets in its operations, while merchandising department depends generally on inventory and receivables.

Size of business: A business size may be measured in terms of scale of operations. A firm with large scale of operation will need more working capital than small firm.

Manufacturing Cycle: Longer the manufacturing process, the higher will be requirements of working capital and vice versa

Production policy: The production schedule has great influence on the level of inventories. In case of labor intensive industry, working capital requirement will be more. While in case of highly automated plant requirement of long term fund is more.

Terms of purchase and sales: A firm which allows liberal credits to its customers may enjoy higher sales but will need more working capital as compared to a firm enforcing strict credit terms.

Business Cycle: Business expands during the period of prosperity and declines during the period of depression, consequently, more working capital is required during the period of depression.

Growth and Expansion: If business firm has ambitious plan for expansions. It requires more working capital to fulfill such requirements.

Fluctuations in the supply of raw materials: Certain companies have to obtain and maintain large reserves of raw materials due to their irregular sales and intermittent supply thus working capital requirements of such industries and hard.

Price level changes: Generally, rising price levels will require a firm to maintain higher amount of working capital. The same level of current assets will need increased investment when prices are increasing.


STEEL LTD.

Operating efficiency: Refers to the optimum utilization of resources at minimum cost. The firm will be effectively contributing to its working capital if it is efficient in controlling the operations coasts. Better utilization of resources improves profitability and thus, helps in releasing the pressure on working capital.

Profit margin: A net profit margin contributes towards the working capital pool. In fact net profit is a source of working capital to the extent it has been earned in cash.

Profit appropriation: Even if net profits are earned in cash at the end of the period whole of it is not available for working capital would be affected by the way in which profits are appropriated. The availability of cash generated from operations thus depends upon taxation, dividend and retention policy and depreciation policy.

Sources of working capital:

1. Internal sources 2. External sources

Internal sources:

Shares DebenturesRetained earningsLong term loansSale of fixed assetsDepreciation fundUsing the resource meant for taxation

External sources:

Bank creditCustomer advancesShort term public depositsInstallment creditFactoring commercial papersIndigenous bankerTrade creditOutstanding expenses

Operating cycle of working capital :


STEEL LTD.

It is essential that the operating cycle should be kept up continuously. Other fixed assets will remain idle and to the cost without bringing any reserve, so long with fixed capital ready and adequate working capital is necessary to get the understanding successful on a sound pedestal.


CASH

Purchase raw

materials

Creation of accounts payable

Manufacturing operations

Payment of creditors

Office, Selling , Distribution and other expenses.

Ware housing of finished goods

Sale of finished goods

Creation of accounts receivables

Receipts from debtors

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Inventory Management:

Managing inventory is a juggling act. Excessively stocks can replace a heavy burden on the cash resources of a business. Insufficient stocks can result in lost sales, delays for customers etc. the day is to know how quickly your overall stocks is moving or. Put another way, how long each item of stock sit on shelves before being sold. Obviously, average stock holding periods will be influenced by the nature of the business.

The key issue for a business is to identify the first and slow stock movers with objective of establishing optimum stock levels for each category and there by minimize the cash tied up in stocks. Factories to be considered when determining optimum stock levels include:

The broad range of project management and financial advisory services include:

What are the projected sales of each project?How widely raw materials and components are available?How long it takes for supplier to deliver?Can slow movers be removed, for our product range without compromising best seller?

Composition of inventory:

Composition of inventory generally depends upon the nature of business. The proportion of each component in the total inventory varies for industry to industry. In order to assure effective control investment in inventories sit is desirable to maintain a proper balance in all the components.

Costs related to inventory:

One operating objective of inventory management is to minimize the cost. Excluding the cost of merchandise, the costs associated with inventory fall into two basic categories.

Ordering or acquisition or set up costs.

Carrying costs.

Benefits of holding inventory:

The second element in the optimum inventory decision deals with the benefits associated with the benefits associated with holding the inventory. The major benefits of holding the inventory are the basic function of inventory. In other words, inventories perform certain basic functions which are of crucial importance in the firm’s production and marketing strategies since inventories enable uncoupling of the key activities of the firm, each of them can be operations at the most efficient rate. This has several beneficial effects on the firm’s operations. The effects of uncoupling are follows.


STEEL LTD.

Benefits of purchasingBenefits in productionBenefits in work-in-progressBenefits in sales.

Debtor’s Management:

Accounts receivable.

* Loans and advance to suppliers

* Credit extended to the buyer of the goods

Motives of extending the trade credit:

* Operating motive* Marketing motive* Financial market*Credit evaluation

Financial analysis of the Prospective client.

Fixed assets turnover ratio Inventory turnover ratio Creditors turnover ratio Debt service coverage ratio

Subjective evaluation:

Capital Capacity Condition Character

Credit scoring:

Altman Z score Weighted average score based on the ratios analysis for the customer

Debtor’s management in JSW:

Small customer Larger customer Advances Discount policy


STEEL LTD.

JSW 2010 2009 2008 2007 2006Debtors turnover

34.56 41.14 43.36 38.23 26.79

Average collection period

10.56 8.76 8.41 9.54 13.62

Cash Management:

Cash is the liquid money, which a firm can disburse immediately without any restrictions. The term cash includes coins, currency, and cheques held by the firm and balance in its bank accounts. Sometimes near cash items, such as marketable securities or bank time deposits are also included in cash. The basic characteristics of wear cash assets are that they can readily be converted into cash, and we invest it in marketable securities. The king of investment contributes some profits to the firm.

Approximately 1.5% of the average industrial firms assets are held in form of cash, which is defined as the demand deposits plus currency. Cash is often called as non earning asset. It is needed to pay for labour and raw materials, to buy fixed assets, to pay taxes, to service debts, to hold for use in conducting its normal business activities. It is the same time it should have sufficient cash.

To give trade discountTo maintain this credit ratingTo meet unexpected cash needs

The cash management is concerned with the managing of.

Cash flows into and out of the firm.Cash flows within the firm.Cash balance held by the firm at a point of time by financing deficit.

Cash Management techniques of procedures:

Improving forecasts of cash flowsSynchronizing cash inflow and outflowSpeed up the cheque clearing processUsing floatAccelerating collections


STEEL LTD.

Getting available funds to where they are neededControlling disbursement

Collection Techniques:

Speedy cash collection.Prompt payment by customers.Early conversion of payment into cash.

Analysis and Interpretation of Data;

Evaluating the financial performance of JSW STEEL LTD…”

Working Capital Management

CALCULATION OF GROSS WORKING CAPITAL: (Rs Crores)

Particular 2005-06 2006-07 2007-08 2008-09 2009-10

A. Current

Assets

Inventories 924.23 1011.35 1549.16 2051.42 2585.77

Sundry

Debtors

229.19 245.16 337.39 398.14 563.25

Cash and

Bank balance

98.87 337.80 339.22 419.96 287.11

Loans and

Advances

979.42 549.28 842.15 1744.88 2123.39

Other Current

Assets

513.70 342.04 18.62 17.24 ---

Total Current Assets 2745.42 2485.63 3086.54 4631.64 5559.52


STEEL LTD.

or Gross Working

Capital

ANALYSIS

From the above table Gross Working Capital of the JSW are Rs 2745.42 crores in the year 2005-

06, Rs 2485.63 crores in the year 2006-07, Rs 3086.54 crores in the year 2007-08, Rs 4631.64

crores in the year 2008-09, and Rs 5559.52 crores in the year 2009-10.

NET WORKING CAPITAL –Calculation ( Rs Crores)

Particular 2005-06 2006-07 2007-08 2008-09 2009-10

A. Current

Assets

Inventories 924.23 1011.35 1549.16 2051.42 2585.77

Sundry

Debtors

229.19 245.16 337.39 398.14 563.25

Cash and 98.87 337.80 339.22 419.96 287.11


STEEL LTD.

Bank balance

Loans and Advances 979.42 549.28 842.15 1744.88 2123.39

Other Current

Assets

513.70 342.04 18.62 17.24 ---

Total Current

Assets or Gross

Working Capital

2745.42 2485.63 3086.54 4631.64 5559.52

B. Current

Liabilities

Liabilities 1926.86 2210.51 3666.36 7476.28 7357.67

Provisions 393.26 75.22 436.01 80.93 264.22

Total Current

Liabilities

2320.12 2285.73 4102.37 7557.21 7621.89

(A-B)=Net Working

Capital

425.30 199.90 (1015.83) (2925.57) (2062.37)

ANALYSIS

From the above table Net Working Capital of the JSW are Rs 425.30 crores in the year

2005-06, Rs 199.90 crores in the year 2006-07, Rs (1015.83) crores in the year 2007-08,Rs

(2925.53) crores in the year 2008-09 and Rs(2062.37) crores.


STEEL LTD.

INTERPRETATION:

The net working capital of the company decreased from year to year and the performance

of company is in not in good position. The net working capital of the year Rs 425.30 crores,

199.90 crores, 2005-2006,and 2006-2007 respectively and it reached negative figure in the

further years ,it as to look after its liabilities its heavy.

Liquidity ratio:

Liquidity refers to the ability of the firm to meet its obligations in the short-run, usually one year. Liquidity ratio is generally based on the relationship between current assets (the sources foe meeting short term obligations) and current liabilities. The important liquidity ratio are : current ratio, acid test ratio and cash ratio.

1. CURRENT RATIO:This is most widely used ratio to know the capacity position. This ratio expresses the relationship between current assets and current liabilities. This ratio gives the information about to meet short term and long term working capital.Components of Current Ratio

CURRENT ASSETS CURRENT LIABILITIESCash in hand Outstanding or accrued expenses


STEEL LTD.

Cash at bank Bills payableMarketable securities (short term) Sundry creditorsShort term investments Short term advancesBills receivables Income tax payableSundry debtors Dividend payableInventories (stock) Dividend payableWork-in-progress Bank overdraft (if not permanent

arrangement)Prepaid expenses

Current Ratio =

(In. Cores)

Particulars 05-06 06-07 07-08 08-09 09-10Current assets

2745.41 2485.63 3086 4631.64 5559.52

Current liabilities

2320.12 2285.73 4101.83 7557.21 7621.89

Current ratio

1.18 1.09 0.75 0.61 0.73

Interpretation:


STEEL LTD.

The standard current ratio should be 1.33:1 but from 2007-2008 to 09-10, the current ratio of the company is less than one. Even though we find variation in the current ratio, the company met its current obligations by making huge profits. The ratio presents the margin of safety.

Quick Ratio:Liquid ratio expresses the relationship liquid assets and liquid liabilities. The ideal ratio for a concern is 1:1 this ratio measures the repayment of immediate liabilities.

Acid test ratio =

(In. Cores)

Particulars 05-06 06-07 07-08 08-09 09-10Quick assets 1821.18 1474.28 1536.84 2580.22 2973.75Current liabilities

2320.12 2285.73 4101.83 7557.21 7621.89

Quick ratio 0.79 0.65 0.38 0.34 0.39

Interpretation:The above table and graph shows the company has not maintained more than the standard quick ratio of 1:1 for all the above years. It shows that company is not maintaining its


STEEL LTD.

liquidity position up to standard ratio. So it should give important to improve the liquidity position.

Cash ratio:It is the ratio of cash equivalent balance to current liability. It can be calculated as follows:

Cash Ratio =

(In. Cores)

Particular 05-06 06-07 07-08 08-09 09-10Cash 98.87 98.87 337.80 339.22 419.96 287.11Current liabilities

2320.12 2285.73 4101.83 7557.21 7621.89

Cash ratio 0.04 0.15 0.09 0.06 0.038

Interpretation:


STEEL LTD.

We can see lot of variation which is not near to standard ratio 0.5: 1. Lack of immediate cash may not matter if the firm can stretch its payment or borrow money at short notice if it is not able to do this firm should maintain adequate cash and bank balance to meet short term obligations.

Leverage Ratio:

Financial leverage refers to the use of debt finance. While debt capital is cheaper source of finance it is also riskier source of finance. Leverage ratios helps in assessing the risk arising from the use of debt capital. Two types of ratios are commonly used to analyze financial leverage structural ratios and coverage ratios. Structural ratios are based on the proportions of debt and equity in the financial structure of the firm. The important structural ratios are debts equity ratios and debt assets ratio.

Debt equity ratio:

The debt equity shows the relative contribution of creditors and owners. It is defined as:

Debt equity ratio =

(In. Cores)

Particular 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010Debt 4096.05 4173.03 7546.53 11272.63 11585.10Equity 4356.22 5594.05 7677.25 7959.25 9706.34Debt equity ratio

0.94 0.75 0.98 1.42 1.19


STEEL LTD.

Interpretation:

The above table and graph shows the debt equity ratio is 0.98: 1 in year 2007-2008. In 2008-2009 it increased to 1.42: 1. But in year 2009-2010 it decreased to 1.19:1. Higher ratio shows a larger share of financing by the creditors of the firm, a low ratio implies a smaller claim of creditors.

Inventory Turnover ratio:

This ratio indicates the number of times inventory is replaced during the year. It measures the relationship between the cost of goods sold and the inventory level. The ratio can be compared in two ways.

Inventory turnover ratio = or

(In. Cores)

Particulars 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010Sales 6180.10 8554.36 11420 14001.25 18202Average 924.23 1011.35 1549.16 2051.42 2586


STEEL LTD.

inventoryInventory turnover ratio

6.68 8.46 7.37 6.83 7.04

Interpretation:

This ratio indicates how fast the inventory is converted into sales. Here high ratio implies good inventory management. In year 2006-2007 the ratio was high and in year 2009-2010 it was 7.04. We can see that there is less variation, which shows the consistency in managing the inventory.

Raw material turnover ratio:

RMTR =

(In. Cores)

Particulars 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010Raw material consumed

3112.05 3964 5888.53 8735.70 10872

Average stock of raw

473.88 546.54 715 810 1279

Material 6.57 7.25 8.23 10.79 8.50


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Interpretation:

The above table and graph shows that raw materials turnover ratio is 6.57 in years in 2005-2006 which has been increased to 7.25 in years 06-07. It was very high in year in 08-09 at 10.79 and was 8.50 in year 09-10. This ratio indicates how fast the raw material is converted into sales. So the company needs to improve this ratio.

Raw material conversion period:

Raw material conversion period =

(In. Cores)

Particulars 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010Days in year 365 365 365 365 365Raw mat. Turnover ratio

6.57 7.25 8.23 10.79 8.50

RMC-Period 55 50 44 34 43

WIP Turnover Ratio:


STEEL LTD.

WIP turnover ratio =

(In. Cores)

Particulars 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010Cost of production

4306.95 5602.15 7791.42 10879.39 13648.23

Average WIP

80.27 72.27 63.10 88.08 98.43

WIP turnover ratio

53.66 77.52 123.48 123.52 138.66

Interpretation:

This ratio indicates how fast the WIP is converting in to sales. So the company needs to improve in this ratio further.

WIP conversion period =

(In. Cores)

Particulars 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010Days in years 365 365 365 365 36580.27 53.66 77.52 123.48 123.52 138.66WIP conversion period

7 5 3 3 3

Debtor’s turnovers ratio:

This ratio shows how many times sundry debtors turn over during the year. It can be defined as:

Debtors turnover ratio =


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(Rs in crores)

Particulars 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010Credit sales 6180.10 8594.44 11420 14001.25 18202Average debtors

247.89 243.21 291.27 367.5 525

Debtors turnover ratio

24.93 35.34 39.20 38.11 34.67

Interpretation:

The above table and graph shows that the debtors turnover ratio is 24.93 times in the years 2005-2006, which has been increased to 35.34 times in the year 06-07 and which has further increased to 39.20 in the year 07-08. It indicates that the speed of collection of credit sales is increasing every from 05-08. In the year 08-09 it decreased to 38.11 and in year 2009-2010 it again decreased and reached to 34.67.

Average collection period:

Average collection period =

(Rs in cores)

Particulars 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010


STEEL LTD.

Days in year 365 365 365 365 365Debtors turnover ratio

24.93 35.34 39.20 38.11 34.67

Avg.Collection period

15 11 9 10 11

Interpretation:

This ratio which indicates the extent to which debt have been collected in time. It indicates the average time taken by the firm to collect its debt. In short, it is the ratio, which indicates the average collection period or the average period of credit allowed to debtors. In the years 2007-2008 average collection period decreased but further in 2009-2010 it has increased by 1 day.

Fixed asset turnover ratio:

This ratio measures sales per rupee of investment in fixed assets. It is defined as:

FATR =

(Rs in cores)

Particulars 2005-2006 2006-07 2007-08 2008-09 2009-10Net sales 6180.10 8594.44 11420 14001.25 18202Avg.Fixed assets

7402.79 9285.98 13380 15424.54 19346.17

Fixed assets turnover ratio

0.83 0.93 0.85 0.91 0.94

Interpretation:

The above table and graph shows that the fixed assets turnover ratio is 0.83 times in the year 2005-06 which has been increased to 0.93 and further it has been decreased to 0.85 times in the year 2007-08 and further increased to 0.91 in the year 2008-09. In year 09-10 it was 0.94. this ratio is to measure the efficiency with which fixed assets are employed a high ratio indicates a higher degree of efficiency in assets utilization and low ratio reflects inefficient use of assets. In this case company utilization the assets effectively.

Working Capital Turnover Ratio:


STEEL LTD.

Working capital of a concern is directly related to sales, this ratio measures the efficiency with which working capital is being used by a company. It can be defined as:

WCTR =

(Rs in cores)

Particulars 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010Net sales 6180.10 8594.44 11420 14001.25 182020Net working capital

425.30 193.45 (1015.83) (2925.57) (2062.37)

Working capital turnover ratio

14.53 44.43 (11.24) (4.79) (8.83)

Interpretation:

The above table and graph shows that the working capital turnover ratio is 14.53 times in the year 2005-06 and in the year 2006-07 it had been increased to 44.43 times. In the ear 2007-08 WCTR has decreased to negative and further also it decreased to 8.83. It shows that the higher the ratio indicates the efficiency utilization of working capital. This lower ratio indicates inefficient management of working capital.

Current Asset Turnover Ratio:


STEEL LTD.

Current asset turnover ratio =

(Rs in cores)

Particulars 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010Net sales 6180.10 8594.44 11420 14001.25 18202Current assets

2745.41 2485.63 3086 4631.34 5559.52

Current asset turnover ratio

2.25 3.46 3.70 3.02 3.27

Interpretation:

The above table and graph shows that the current assets turnover ratio is 2.25 times in the year 2005-06 which has been increased to 3.46 times in the year 2006-07. In the year 2007-08 current assets turnover ratio increased to 3.70 times and in the year 2008-09 it decreased to 3.02 times but in year 2009-10 it increased to 3.27 times. It shows the ability of the company to generate sales per rupee of current asset which has been increasing and decreasing every year which has been increasing and decreasing every year which has to be improved by the company in coming year.

Total Assets Turnover Ratio:


STEEL LTD.

Total assets turnover ratio =

(Rs in crores)

Particulars 2005-2006 2006-2007 2007-2008 2008-2009 2009-10Net sales 6180.10 8594.44 11420 14001.25 18202Avg.Total assets

11125.30 11812.73 19653.92 26960.14 29109.93

Total assets turnover ratio

0.56 0.73 0.58 0.52 0.63

Interpretation:

The above table and graph shows that the sales to current assets turnover ratio is 2.25 times in the year 2005-06 which increased to 3.46 in the year 2006-07. It is further increased to 3.70 times in the year 2007-08. In the year 2009-10 it was 3.27 times. This ratio indicates that how the company utilizes the current assets. In the current situation so this shows efficiency at the company to use its utilization the current assets. In the current situation so this shows efficiency at the company to use its current assets to a maximum extend to get a maximum output and it also measure sufficient utilization of working capital.


STEEL LTD.

FINDING, SUGGESTIONS AND CONCLUSION:

FINDINGS

The study is made for the purpose of findings of efficiency of working capital management

in JSW following are the findings arrived at after analysis,

JSW is ranked 4th amongst the top business houses in terms of sales and profit the Rs.

19700 crores

The Gross Working Capital of the JSW is increasing from year to year i.e. Rs

2745.42crores in the year 2005-06 and Rs 5559.52 crores in the year 2009-10

The Net Working Capital of the JSW is decreased from Rs 425.30 crores in the year

2005-06 to Rs (2062.37) crores in the year 2009-10.its suffering from loss.

The current ratio of the company is found that ratio is less than the standard ratio fixed. In

the year 2004-05 ratio is 1.17 and it’s decreased to 0.61 in the year 2008-09.

The debt equity ratio shows that a low ratio implies a smaller claim of creditors.

The debt to assets ratio implies that the use of internal fund is more but the company

doesn’t depend on outside funds.

The company maintaining good inventory turnover ratio.

The company is utilizing the current assets and working capital to get maximum output.


STEEL LTD.

Marketing of products is a problem for the company.

The cash and bank balances shows increasing trend in 2006-07, 2007-08 and 2008-09.

The liabilities of the company is showing increasing trend from year by year. Which is

decreasing the net working capital

Working capital turnover ratio is in downward trend.

SUGGESTIONS

The company can improve its current ratio by taking suitable measures, so that it meets

the ideal ratio.

The quick ratio is low. The company may increase the investment on quick assets to meet

the ideal ratio.

It is clear from the inventory turnover ratio that major parts of funds have been invested

in stores and spares. The management can see to invest fewer amounts in inventories.

CONCLUSION

This report includes the in depth analysis of working capital management. On the basis of

the analysis following conclusions have been made.

JSW is a growing company and the third largest producer of steel in India. Production of

other items is also increasing because domestic and international demand of steel products is

continuously rising.

With the ongoing expansion activities, working capital carries immense importance in an

organization such as jsw


STEEL LTD.

In 2008 the American recession affects Indian steel industries a lot, the prices of steels

were came down but in spite of that the Jindal is doing well in market.

LEARNING EXPERIENCE

The experience in JSW Limited enriched the knowledge. To start with, JSW is an industry where human resources and technology come together to manufacture products that gain worldwide recognition strategically situated at toranagallu, (Dist Bellary).

My overall experience in the company was very good with the support of the company employees and the response got from the management of JSW was appreciable. I would like to mention the nature of Mr.W.Muralidhar. Who guided me in this project without which my project would not have been successful. The atmosphere & working condition were encouraging in the company.

During the first week, it was totally a new experience entering in to such a big organization. On the first day of the training had to go a safety training which gave me a chance to understand the companies importance to safety of its employees and workers, factory manager detailed me very clearly about the company & guidelines to be followed with respect to maintaining the discipline of the organization and also informed the safety measures.

Understanding of Financial affairs was not possible without the support of my External guide Mr.W.Murlidhar, (DGM, FINANCE, JSW STEEL Ltd).

The success of organization is the result of co-ordination between the management and workers in the company.

Bibliography:

Books Authors

1. Financial management By Khan and Jain2. Financial management By A. D. Bhat.3. Books from Jindal Knowledge Centre.

Annual report of JSW Steel Limited from 2005-06 to 2009-10.


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Company Journals.

Websites:

www.jsw.com www.jsw.in www.wikipedia.com


http://www.wikipedia.com/

http://www.jsw.in/

http://www.jsw.com/

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