1.1 INTRODUCTION TO THE STUDY The importance of working capital in any industry needs no special emphasis. Working capital is considered to be life-giving force to an economic entity. Management of working capital is one of the most important functions of corporate management. Every organization, whether profit oriented or not, irrespective of its size and nature of business, needs requisite amount of working capital. Working capital management is the process of planning and controlling the level and mix of the current assets of the firm as well as financing theses assets. Specifically working capital management requires financial managers to decide what quantities of cash, other liquid assets, accounts receivables, and inventories the firm will hold at any point in time. In addition, financial managers must decide how there currents assets are to be financed. Financing choices includes the mix of current as well as long term liabilities. The main aim of the study is to find out whether the company is efficiently managing its working capital. The effective working capital necessitates careful handling of assets to ensure short term liquidity and solvency of the business.
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1.1 INTRODUCTION TO THE STUDY
The importance of working capital in any industry needs no special emphasis.
Working capital is considered to be life-giving force to an economic entity. Management
of working capital is one of the most important functions of corporate management.
Every organization, whether profit oriented or not, irrespective of its size and nature of
business, needs requisite amount of working capital.
Working capital management is the process of planning and controlling the level
and mix of the current assets of the firm as well as financing theses assets. Specifically
working capital management requires financial managers to decide what quantities of
cash, other liquid assets, accounts receivables, and inventories the firm will hold at any
point in time. In addition, financial managers must decide how there currents assets are
to be financed. Financing choices includes the mix of current as well as long term
liabilities. The main aim of the study is to find out whether the company is efficiently
managing its working capital. The effective working capital necessitates careful handling
of assets to ensure short term liquidity and solvency of the business.
Keeping in view the pragmatic importance of working capital management as a
gray area of corporate financing function, an attempt has been made to examine working
capital management practices and the problems faced by Metal Industries Ltd in working
management process. In this study, also analyze the working capital management and
profitability position of the Metal Industries Ltd by using financial reports and other
documents given by the company.
1.2 EXECUTIVE SUMMARY
The project study gives analysis and interpretation about the short term solvency
and to ascertain about the liquidity of Metal Industries Ltd, Shoranur. Utmost care has
been taken at all the levels of project work right from the beginning of analyzing
accounting information provided by profit and loss account and balance sheet.
The main aim of the study is to find out whether the company is efficiently
managing its working capital. Inorer to accomplish the aim, secondary data is used for
the preparation. This helps to understand the company’s strength and weakness.
This analysis leads me to the conclusion that the working capital of the firm
shows a decreasing trend. This shows the improvement in the steps taken by the
management.
1.3 STATEMENT OF THE PROBLEM
Each and every decision requires the interpretation and evaluation of
information. A problem statement is the discrepancy between some current state of
affairs and the desired state. For each and every business organization, it is necessary for
them to know the working capital management in the organization, to take decisions for
now and the future.
The problem of the undergone study states that “Metal Industries Ltd,
Shoranur” is eager to know about their working capital management for the ten years.
The finance department recommended that the ratio analysis to conduct the research with
the help of balance sheet and profit & loss account for the year 2001-2010.
1.4 OBJECTIVES OF THE STUDY
The study is mainly intended to analyze the working capital position of Metal
Industries Ltd, Shoranur. Following are the main objectives of the study:
Primary objectives:
To study the position of working capital of Metal Industries Ltd, Shoranur.
Secondary objectives:
1. To ascertain the liquidity position of the firm.
2. To study about the various factors affecting the working capital management of
the firm.
1.5 SCOPE OF THE STUDY
The study was conducted over a period of six weeks entitled “A study on
Working Capital Management of Metal Industries Ltd, Shoranur. In order to accomplish
the aim descriptive research has been taken. As the researcher must be able to define
clearly what he wants to measure and must find adequate methods for measuring it. It is
the research of fact finding.
The management of working capital plays an important role in maintaining the financial
health of the firm during the normal course of business. It portrays the flow of resources
through the firm. Certain aspects covered in the research are to determine whether the
firm is able to carry its operations. To ascertain the liquidity position of the firm, to
evaluate the financial performance of the firm and to identify the factor that affecting
working capital management. Such an analyis is expected is to show and highlight the
streangth and weakness regarding various aspects of its liquidity and working capital
management.
1.6 LIMITATIONS OF THE STUDY
In any study or research conducted there would be some limitations associations with it.
Hence for the proper understanding of the project it is inevitable to specify the limitatios
of the study.
The time frame for the project is about six weeks ,had there been sufficient time
the study could have been more elaborate.
Data taken was for the period of five years as it was available only for those
years.
Only audited records are considered for analysis.
Non monetary factors like human behaviour, their relations etc.are not considered.
The study does not take into account the other areas of finance such as capial
budgeting, costing and cash management etc.
1.7 THEORITICAL BASIS
WORKING CAPITAL MANAGEMENT
The management of working capital plays an important role in maintaining the
financial health of the firm during the normal course of business. Working capital
management is the process of planning and controlling the level and mix of the
current assets of the firm as well as fianncing these assets. Specifically working
capital management requires fiancial managers to decide what quantities of cash,
other liquid assets, accounts receivable and inventories of the firm will hold at any
point in time. In addition, financial managers must decide how there currents are to
ne financed.
According to Shubin, “ working capital is the amount of funds necessary to cover
the cost of operating the enterprize”.
Working capital is the difference between inflow and outflow of funds. In other
words, it is the net cash flow. It is the assets and liabilities required to operate a
business on day to day basis.
Financial managers devote a considerable amount of attention to the management
of working capital. Net working capital provides a accurate assessment of the
liquidity position of the firm. An examination of the components of working capital
is helpful because of the preoccupation of management with the proper combination
on assets and liabiliities constitute the portion of funds which have been planned for
and raised.
CONCEPT OF WORKING CAPITAL
There are two concepts of working capital
a) Gross working capital
b) Net working capital
Gross working capital refers to the firm’s investment in current asset. The
current asset, which can be converted into cash with in an accounting year. It
includes cash short-term security, debenture ans stock.
Net working capital refers difference between current asset and current
liability. Current liabilities are those claims out side’s which ae expected to mature
for payment with in an accounting year and it’s include creditirs, bills payable and
outstanding expenses. Alternatively networking capital is a portion of current asset,
which finances with long term funds. Net working capital measures liquidity of the
firm.
Net working capital may be
a) Positive working capital
b) Negative working capital
When curent assets exceeds current liability that will be positive net
working capital. When current liability exceeds current assets that will be negative
working capital. Gross working capital is a going concept and net working capital is
a accounting concept, some time gross working capital is used because,
1. It shows current amount of working capital at right time.
2. Management is more interested in the total asset than source from where it’s made
available.
3. Every increase in the funds of enterprize would increase its working capital as per
gross concept.
4. It is more useful in determine rate of return.
Net working capital is also important because:
1. It is qualitative concept.
2. It indicates the excess current assets and current liability.
3. It indicate fiancial soundness.
4. It suggest need for financing as a part of working capital from permanent sources.
On the basis of time working capital is classified in to
Permanent / fixed working capital
Temporary / variable working capital
Permanent working capital is the maximum amount required for the effective
utilization fixed capacity and for maintain circulation of curretn asset. Always a
maximum level of current asset, which is continously required by the enterprize to carry
out normal business operation.
For e.g. Raw material,finished goods in work in progree and cash balances.
Temporary working capital is the capital required to meet the seasonal demend
and special exigencies. Temporary working may be seasonal and special working capital
is required for short period and cannot permanently employed. Seasonal working capital
may be need where the raw material is seasonal or the business is in seasonal nature.
IMPORTANCE OF ADEQUATE WORKING CAPITAL
A business firm must maintain an adequate level of working capital in order to
run its businesss moothly. It is worthy that both excessive and inadequate working
capital postions are harmful. However, out of the two, inadequacy of working capital is
more dangerous for a firm. Excessive working capital results in idle funds no profit is
earned. Similarly inefficiency of working capital results in interruption. This will ,lead
to inefficiencies, increase in costs and reduction in profits.
Working capital is just like the heart of business. It it becomes a week, the
business can hardly and surv ices. No business can run succesfully without an adequate
amount of working capital. The following are a few advantages of adequate working
capital in the business:
Advantage of maintain adequate working capital
Increases the solvency of business
Increase goodwill of the business
Get easy loan
Firm get cash discount on purchase hence reduce cost
Regular supply of raw materials
Regular payment of wages and salaries
Exploitation of faavourable market conditions
Quick and regular return and investment
Adequate working capital create an environment of confidence and high morale.
DANGER OF INADEQUATE WORKING CAPITAL
When working capital is inadequate, a firm faces the following problems;
It may not be able to take advantage of cash discount.
It cannot by its requirements in bulk and unable to utilize the production
facilities fully.
It may not be able to take advantage of profitable business opportunities.
It may fail to pay its dividend because of non availability of funds.
Its low liquidity may lead to low profitability.
Short term liabilities cannot be paid because of inadequate working capital.
Credit-worthiness of the firm may be damaged because of lack of liquidity.
Low liqudity position may lead to liquidation of firm.
DANGER OF EXCESSIVE WORKING CAPITAL
When there is too much working capital, it is also dangerous. Excessive working capital
raises the following problems:
A firm may be tempted to over and loss heavily.
The situtation may lead to unnecessary purchases and accumulation of
inventories.
There arises an imbalance between liquidity and profitability.
Excessive working capital means funds are idle.
The situation leads to greater production which may not have matching demand.
The excess of working capital lead to carelessness about cost of production.
SOURCES OF WORKING CAPITAL
The financial manager is always interested in obtaining the working capital at the right
time, at a reasonable cost and the best possible favourable terms. In any concern a part of
the working capital investments are permanent investments in fixed assets. Because there
is always a minimum level of current assets which are continously required by the
enterprise to carry its day to day operations. The minimum level cannot be expected to
reduce at any time. The minimum level of current assets gives rise to permanent working
capital, which is permanently blocked in current assets.
FINANCING OF LONG TERM WORKING CAPITAL
Long term working capital should be provided in such a manner that the enterprize may
have its unintrrupted use for a long time. It can be conveniently financed by the
following sources:
1. Issue of shares:
Issue of shares is the most important sources for raising the permanent working
capital. Maximum amount of permanent capital should be raised by the issue of shares.
2. Floating of shares:
A debenture is an instrument issued by the company acknowledgement its debt to
its holder. It is also important source of long term working capital.
3. Ploughing back of profit:
It means reinvestment by a concern of its surplus earning in its business. That is,
a part of the earned profit may be ploughed back by the firm, in meeting their working
capital needs.
4. Long term loans:
Financial institution such as commerical banks , Life Insurance Corporation of
India etc provide all types of loans long-term, medium term and short term loans.
5. Accepting public deposits:
Public deposits are the fixed deposits accepted by a concern enterprize directly
from public.
Financing short-term working capital
The category of funds covers the need of working capital for financing day-to-day
business requirements. There are two types- Internal source and External source.
A. Internal sources
Depreciation funds: Depreciation reserve provides a source of funds for
working capital.
Provision for taxation: The provision for taxation can also be used by the
concern as a source of working capital during intermittent periods.
Accrued expenses: The firm can postponed the payment of expenses for short
periods.
B. External sources
Trade credit
Credit papers
Bank credit
Customer’s credit
Government assistance
Loan from directors
Security of employees
DETERMINANTS OF WORKING CAPITAL
Nature of business:
Working capital requires of the firm basically influence by the nature of its
business. Trading and fiancial firms have very small investment in fixed assets but
require a large sum of money to be invested in working capital. Manufacturing and
construction firms also have to invest substancially in working capital and a nominal
amount in fixed assets.
Production cycle:
Production cycle comprises of the purchases and use of raw material and the
production of finished goods. Longer the manufacuring cycle, large will be the firm’s
working capital requirement. A study prodution policy will cause inventories to
accumulate during off-season periods and the firm will be exposed to greater inventory
cost and risks.
Production policy:
Working capital need of the firm is related to its sales. Sales depend on demand
condition. Most firm experience seasonal and cyclical variation in the demand for those
product and service. These business variations affect the working capital requirement
specially the temporary working capital requirement of the firm.
Growth and expansion:
Growth and expansion of the firm will affect the working capital. Growth and
expansion of the business in the future will lead more working capital requirement.
Credit policy of the firm:
Credit policy of the firm affects the working capital by influencing the label of
debtors.
Credit policy will be affect in two ways.
1). Credit term granted to customers.
2). Credit term available to firm from creditors.
The firm should be prompt in making collection’s high collection period will
mean tie up of large funds in book debt. Stock collection procedure can increase chances
of bead debt.
Availability of raw materials:
Raw materials availability also affects the working capital requirement. The
availability of raw material is an seasonal the temporary working capital is needed high in
the season.
Price level changes:
Rise in the price level require a firm to maintain higher amount of working capital
and aslo same level of current asset is needed, increased investment when price are
increasing. So the company which can immediately revise these product prices with
rising price level will not face a serve working capital problem.
Operating efficiency:
Operating efficiency of the firm related to the optimal utilization of resources at
minimum cost of the firm will effectively contributing in keeping the working capital
investment at a lower level if it is efficient in controlling the operating cost and utilizing
current asset. Better utilization of resources improves the profitability and this helps in
realizing the pressure on working capital.
INVENTORY MANAGEMENT
Inventory is stock of product a company is manufacturing for sales and
component that make up the product. The various forms of inventory are raw material,
work in progress and finished goods. Other material consumable stores etc. proper
planning of purchasing handling storing and accounting should form a part of inventory
management.
Efficient system of inventroy management determined
a). What to purchase
b). How to purchase
c). From where to purchase
d). Where it store.
Objectives:
1. Determine and maintain optimal level of inventory investment to eliminate duplication
in ordinary or replenishing.
2. Minimize loss through deterioration, wastage and damage.
3. Ensure right quality of goods at reasonable price.
4. Facilitating and finishing of data or short term and term planning and control of
inventory.
5. Ensure continous supply of raw materials to facilitate uninterrupted production.
6. Maintain sufficient finished goods inventory for smooth sales operation and efficient
customer service.
Mainly cost os managing inventory is two parts:
a). Ordering cost
b). Carrying cost
ordering cost is entire cost incurred for acquiring raw materia. These costs
include purchase requisition, purchase ordering, transporting, receiving and storing.
Ordering cost increases in proportion to the number of orders placed.
Carrying cost: Costs incurred for maintaining a given level of inventory are
called carrying cost. It includes cost of storage, insurance recording inspection. It
increases in proportion to the volume of inventory.
IMPORTANT WORKING CAPITAL MANAGEMENT RATIOS
The working capital magnitude of a concern should neither be too inadequate nor
too excessive as cpmpared to its requirement. Maintaining adequate working capital
ensures the improvement of profitability. The finance managers always tries to maintain
the adequate working capital at every time so as to carry on the operations succesfully
and maximize the return on investment. The following are the important ratios to
measure the efficiency of working capital management.
1. CURRENT RATIO
It is the ratio of current assets to current liabilities. It shows the relationship
between total current assets and total current liabilities. It is a measure of firm’s short
term solvency. Current ratio is also called working capital ratio.
Current assets Current ratio =
Current liabilities
Current assets mean cash or those assets which can be converted into cash within
a year. Current asset normally include cash in hand and cash at bank, marketable
securities, stock, suntry debtors, bills receivables and prepaid expenses. Current
liabilities are those liabilities which are to be repaid within a year. Current liabilities
include suntry creditors, bills payable, bank overdraft, provision for taxation etc.
2. LIQUID RATIO
It is the ratio of liquid assets to liquid liabilities. It established the relationship
between quick assets and quick liabilities. It is also known as acid test ratio. It is
computed as follows:
Liquid assetsLiquid ratio=
Liquid liabilities
Liquid or quick assets include cash, bank balances, debtors, bills receivables and short
term marketable securities. In other words, they are current assets minus stock and
prepaid expenses. Stock cannot be included in quick assets because it is not easily and
readily convertible into cash. Perpaid expenses by their nature cannot be used for
payment of quick liabilities. Liquid liabilities are current liabilities minus bank overdraft.
The exclusion of bank overdraft is due to the fact that it tends become a permenant mode
of financing.
3. DEBTORS TURNOVER RATIO
It is also called receivables turnover ratio. It related net credit sales to suntry
debtors. It measures how fast debts are collected. It is calculated as follows:
Total sales Debtors turnover ratio= Average debtors
Average debtors
×365Avarage collection period= Total sales
4. CREDITORS TURNOVER RATIO:
It is the ratio between net credit purchases and the amount of suntry creditors. It
implies the credit period enjoyed by the firm in paying creditors. It is computed by using
the following formula:
Net credit purchasesCreditors turnover ratio =
Creditors
Accounts payable Avarage payment period = × 365 Net credit purchases
5. WORKING CAPITAL TURNOVER RATIO:
This ratio is computed to test the efficiency with which the net working capital is
utilized. In other words, this ratio indicates whether working capital is effectively used in
making sales. It is calculated as follows:
Net SalesWorking capital turnover ratio = Net working capital
6. INVENTORY TURNOVER RATIO
This ratio is also known as stock turnover ratio. It establishes the relationship
between cost of goods sold and avarage inventory. Besides help in determining the
liquidity of a business concern, this ratio indicates how many times during the period the
firm has turned its inventory. In other words, it shows the rate at which inventories are
converted into sales and then into cash. It is computed as follows:
Cost of goods soldInventory turnover ratio =
Average inventory
7. FIXED ASSETS TURNOVER RATIO:
Fixed assets turnover ratio shows the relationship between sales and fixed
assets. It shows whether fixed assets are fully utilized. To be more clearly, this ration
measures the efficiency with which the firm is utilizing its fixed assets in generating the
sales. It is computed as follows:
SalesFixed assets turnover ratio =
Fixed assets
8. GROSS PROFIT RATIO:
This ratio is also known as gross margin. This is the ratio of profit to net
sales. It is usually expressed as percentage. It is computed as follows:
Gross profit Gross profit ratio = ×100
Net sales
Net sales means total sales minus return. Gross profit means sales minus
cost of goods sold. In the case of trading concern, cost of goodssold would be equal to
opening stock plus purchases plus all direct expenses charged to Trading Account minus
closing stock. In the case of manufacturing concerns, it would be equal to the sum of
cost of material consumed, wafes, direct expenses and all factory or manufacturing
expenses.
Gross profit ratio indicates the margin of profit on sale. This ratio
indictes the efficiency of production or trading operations. It is useful to ascertain
whether the average percentage of the mark-up on the goods sold is maintained. A high
G/P ratio is a sign of good management.
9. NET PROFIT RATIO:
Net profit ratio is the ratio of net profit to sales. It is also known as profit
margin. It is usually expressed as percentage. It is calculated as follows:
Net profit Net profit ratio = ×100
Net sales
Here, net profit is the balance of profit and loss account after adjusting interest
and taxes and all non oerating expenses like loss on sale of fixed assets, provisions for
contigent liability etc. and all non operating income like profit on sale of assets, interest
on investment, dividend received etc.
Net profit ratio indicates management’s efficiency in manufacturing,
administrating and selling of the product. This is a measure of overall profitability. This
ratio also indicates the firm’s capacity to withstand adverse economic conditions. A high
N/P rtio would indicated higher overall efficiency of the business, better utilization of
limited resources and reasonable return to owners. A low N/P ratio would mean low
efficiency and inadequate return to owners.
10. OPERATING RATIO:
This is the ratio of cost of goods sold plus operating expenses to net sales. This
ratio shows the percentage of sales absobed by the cost of goods sold and operating
expenses. Operating expenses include office and administrative expenses and selling and
distribution expenses. A low ratio is favourable because it will leave a large amount of
operating income to meet interest, tax and fair return to owners.
(Cost of goods sold + Operating expenses)Operating ratio = ×100
Net sales
1.8 DEFINITION OF TERMS
Profitability
Profitability analysis comprises the study of sales, analysis of cost of
goods sold, analysis of gross margin on sales, analysis of operating expenses, analysis of
operating profit and analysis of profit in relation to sales and capital. Profit margin ratios
reflect the relationship between profit and investments. Profitability ratios can be
determined on the basis of either sales or investments.
Liquidity
Liquidity is a business, economics or investment term that refers to an
assets ability to be easily converted through an act of buying or selling without causing a
significant movement in the price and with minimum loss of value. An act of exchange
of a less liquid asset is called liquidation. Liquidity also refers both to that quality asset is
called liquidation. Liquidity also refers both to that quality of business which enables it
to meet its payment obligations, in terms of processing sufficient liquid assets and to such
assets themselves.
Inventory
The raw materials, work-in-progress goods and completely finished goods
that are considered to be the portion of a business’s assets that is ready or will be for
selling. Inventory represents one of the most important assets that most businesses
possess, because the turnover of inventory represents one of the primary sources of
revenue generation and subsequent earning for the company’s shareholders or owners.
Cash management
Identify the cash balances which allow for the business to meet day to day
expenses, but reduces cash holding costs. When liquidity is highly restricted in terms of
cash and cash equaivalents, this ratio should be calculated. Liquidity ratio measures the
relationship between cash and near cash items at one hand, and immediately maturing
obligations on the other.
Debtors
Identify the appropriate credit policy, i.e.credit terms which attract
customers, such that any impact on cash flows and the flows and the cash converstion
cycle will be offset by increased revenue and hence return on capital (or vice versa).
Creditors
A business firm usually purchases on credit goods, raw materials and
services from other firms. The amount of total payable of a concern depends upon the
purchase policy of the concern. Longer the period of outstanding payable is, lesser is the
problem of working capital of the firm. But when the firm does not pay off its creditors
within time, it may have adverse effect on business.
Accounts receivables
Accounts receivable is one of the series of accounting transactions
dealing with the billing og customers who owe money to a person, company or
organization for goods and services that have been provided to the customer. In most
business entities this is typically done by generating an invoice and mailing electronically
delivering it to the customer which is to be paid within as established time frame called
credit or payment terms.
Accounts payable
Accounts payable is a file or account that contains money that a person
or company owes to suppliers, but hasn’t paid yet when you receive and invoice you add
it to the file, and then you remove it when yopu pay. Thus, A/P is a form of credit that
suppliers offer to their purchasers by allowing them to pay for a product or service after it
has already been received.
INDUSTRY PROFILE
METAL INDUSTRY
The Metal Industry is primarily concerned with metallurgy and metal working.
At first the metals are extracted from the metal- ores found in their natural state deep
within the earth and then these ores are purified a detailed procedure to obtain the metals
in their pure form of the metals in their pure form, these processes comprise metallurgy.
Then the pure form of the metal so obtained is used to manufacture structures as well as
different machines and parts of machines. The procedures which involve the
manufacturing of machines and other useful items form the so obtained through the
metallurgical processes constitute metalworking.
The manufacturing of alloys is also carried out in the Metal Industry through the
proportionate homogeneous mixing of two of more metallic elements 9metal in the pure
state). The alloys so formed are mainly manufactured in order to enhance the natural
properties of the metals by combining together. Steel is one of the most popular as well
as useful alloys of iron, formed through the chemical combination of mainly iron and
carbon. In addition, it may also contain other metals, as added to the combination in
order to attain desired properties form the alloy. Metal industries are indispensable part
of an economy; they from the backbone of industrial development of any country.
HISTORY
India ought to be known as the Great Grandfather of the World Metallurgical
Industry. However due to the unfortunate Historical circumstances many Indians
themselves remain ignorant of this fact. The art of Bronze Casting had been practiced in
India several centuries before the Modern World Discovered “Metallurgy’. Copper and
bronze were perhaps the earliest Non- Ferrous Metals which man shaped into tools.
Metal is the part of the Indian mystique as each Metal has its own alchemic and healing
powers as documented in ancient Indian Scriptures written over 5000 years ago. Metal in
India has been used as a way of expressing Art in several forms using techniques such as
Inlay, Casting, Carving, Appliqué Enameling, Engraving etc. Metal craft has also been
and integral part of Indian culture.Indian “Metallurgists” had perfected the complex
process of extracting Zinc from its ores by the Downward Distillation method that
required exceptional care in the type of furnace, retorts and a reducing atmosphere as
well as temperature management, as evidenced by the archaeological finds at Zawar in
Rajasthan as early as the 4th century BC. It may be noted that it was only in the 18 th
century AD that the same process was re-adopted in Britain, and patented too. In the
classical age of India, the metallurgy of Copper also assumed macro-dimensions. In the
field of Copper Metallurgy too, the huge 5th century Copper Statue of the Buddha, over
two meters in height and one tone in weight, (now in the Safe Custody of Birmingham
Museum) is a remarkable product of macro technology.
An equally remarkable micro technology, namely the production of High quality
Steel now known as Wootz Steel (an Iron Carbon alloy with 1.3 to 1.6 percent Carbon is
also in use). This production was particularly prevalent in South India and emerged as an
accomplished Metallurgical technique by about the 6th century, after which India steel
was sought after for the production of what was termed the Damascus Sword in West
Asia, around the 10th century AD. Metallurgists in the Universities of Stanford and Lowa
State (USA0 have investigate Wood Steel with a view to reproducing the ancient India
process. The former have even patented a process for the production of Utah- high-
Carbon Steel (1.3 to 1.6 % carbon that could be used for certain automobile and aero
plane components.
CLASSIFICATION OF METAL INDUSTRIES
METAL FABRICATION INDUSTRY
The main function of the Metal Fabrication Industry is to produce component
metal parts will fit in along with other parts, to form larger machinery. In this way the
Metal Industry proves to be an essential section of the entire global metal industry as it
produces minute spare parts of larger heavy machinery and equipments, which cannot be
manufactured simultaneously with the manufacturing of the heavy machines.The process
involved in the manufacture of tools and machine parts in the Metal Fabrication Industry.
The construction of fine and minute machine parts involve several procedures
which require a lot of concentration on the part of the person involved in it. They are
therefore not carried out by the large scale metal industries are in the fact manufactured
in the small scale Metal Fabrication Industry. The production of minute machine parts
(most commonly, smaller constituents of a heavy machine) includes the processes as
given below:
Cutting
Molding
Finishing
The Metal sheets that used in the Metal Fabrication Industry are at first cut in to
finer sections, in order to the fit the size of the parts or the finished products that are to be
manufactured in the Metal Fabrication Industry.
METAL CASTING INDUSTRY
The Metal Casting Industry employs the process of pouring molten metals
(“hot metal” in industry parlance into casts (or models), which takes a definite permanent
shape after cooling. The industrial casting procedure that is followed in the Metal
Casting Industry is be classified as non-disposable, as it involves processes that retain
that cast (or mold) for several applications, in contrast to the use of molds made of sand,
plaster or plastics etc, which cannot be used more than once, and are therefore unfit for
application in the Metal Casting Industry. These rather domestic mold casting
procedures are termed as disposable mold casting.
WORLD METAL INDUSTRY
The World Metal Industries in fact provide an overview of the different metal
industries which are making the lives of people easier around the globe through their
advanced innovations. In fact, we should not forget that all the industries around the
globe are dependent upon metallic elements. Metals are an indispensable part of every
industry for all machinery and equipment are made from metallic elements of alloys.
The products of World Metal Industries have now become and almost
indispensable part of our lives for everything we use are either directly made of metallic
elements or alloys (which are proportionate homogeneous mixtures of alloys), or they ere
manufactured through the use of machinery, that is made of metals or alloys.
METAL STAMPING INDUSTRY
The Metal Stamping Industry looks set to replace the machining die casting,
fabricating and forging processes which were the traditional methods into definite shapes.
The Metal Stamping Industry is more affordable and cost effective in comparison to all
the other processes followed to give desired shapes to the metal and alloy sheets that are
in vogue. Even the machinery used for pressing the metals into shapes, in the metal
stamping industry actually involves the method of bending, clipping and molding
metallic and alloy sheets in to definite forms. These procedures of bending, clipping and
molding are carries out in the Metal Stamping Industry to actually give definite form to
the larger metal and alloy sheets. The major products of the Metal Stamping Industry
consists of finer components of larger machinery, equipments and bigger metal
structures, and these smaller items may also be used as spare parts of the same machines.
The metal or alloy sheets are stamped or pressed in to definite fixed shapes and
than the shaped metal is plated with nickel, tin, or some other metallic elements to protect
it from corrosion. Basically alloys of an iron (steel), zinc, nickel, and aluminum are used
in the Metal Stamping Industry as these alloys are strong, durable, do not break easily,
portable, non-poisonous, and affordable at same time.The business is classified under
metal manufacturing are
Metal furniture, shelves, lockers, cabinets and fixtures
Primary metal products
Fabricated metal products
Machinery including electrical and electronic machinery, equipment and supplies.
Storage of primary batteries.
Motor vehicle parts and accessories
Measuring, analyzing, or controlling equipment
Other metals items such as clocks and watches, costume and precious metal
jewelry, needles, pins, and similar notions, signs and advertising displays, burial
caskets,. Silverware or stainless steel flatware.
Metal Industries also include facilities that are involved in metal working
activities such as
Rolling, drawing, and extruding of non-ferrous metals
Heat treating
Coating, engraving and allied services.
Metal Industries businesses performs many different processes including
Machining
Polishing
Forming
Forging
Enameling
Finishing
Grinding
Welding etc.
METAL INDUSTRIES IN INDIA
Metal Industries are the indispensable part of an economy; they form the
backbone of industrial development of any country. In India the industrial development
began with the setting up of Tata Iron and Steel Company (TISCO) at Jamshedpur in
1907. it started its production in 1912. then came up Burnpur and Bhadrawathi Steel
Plants in 1919 and 1923 respectively. It was, however, only after the independence that
the steel industry has been able to find its feet. Barring the Jamshadpur plant of the
Tatas, all are in public sector and looked after by the steel Authority of India Ltd.(SAIL).
Bhilai and Bokaro plants were set up with the Soviet collaboration. Durgapur and
Rourkela came up with British and German technology know-how respectively.
Iron and steel industry is be nature a heavy industry. Proximity to raw materials
and access to efficient transportation network are crucial to this industry. The
Chotanagpur plateau boarding West Bengal, Bihar, Orissa and Madhya Pradesh therefore
has been the natural core of this industry. Besides iron and steel industry, heavy
engineering and machine tools industries are the main dealers of metals. These industries
have witnessed a phenomenal growth and produce a whole range of capital goods and
consumer durables. The capital industry required for textile industry, fertilizer plants,
mining, construction and agricultural machineries such as equipment for irrigation
projects, diesel engines, pumps and tractors, transport vehicles etc. are being produced
indigenously.
The heavy Engineering Corporation Limited., set up at Ranchi in 1958 fabricates
huge machines required for the iron and steel industry. Locomotives are manufactured
by three units, viz, Locomotive Works, Chitharanjan (West Bengal), Diesel Locomotive
Works, Varanasi (Uttar Prdesh), and Tata Engineering and Locomotive Co.Ltd.(TELCO),
Jamshadpur. The Hindustan Machine Tools Ltd (HMT) is a major manufacture of a wide
range of machines and tools. It has in units in Banglore, Pinjore (Hariyana) Kalamassery
(Kerala), and Hyderbad. The HMT also produces a wide range of watches.
The Bhart Heavy Electricals Limited (BHEL) is a public sector undertaking
which produces power generation equipments. Its manufacturing plants are located at
Bhopal, Thiruchirapally, Hyderbad, Haridwar, Ranipet, Banglore and Jagadishpur (Uttar
Pradesh). The Hindustan Aeronautics Ltd., Banglore has acquired capability of
manufacturing aircrafts of different types. It has its manufacturing units are Banglore,
Kanpur, Nazik, Koraput, Hyderbad and Lucknow, Vishakhapattanam, Mumbai, Calcutta
and Kochi are the major center of ship-building industry.
THREE TOP PLAYERS IN KERALA
CHESTER METAL INDUSTRIES
Chester Metal Industries, in their ceaseless pursuit of excellence have made major
advances and perfected ferrous& non ferrous casting into a fully proven process for a
wide range of precision casting for various engineering, automobile and industrial sectors
we are calibrating to deliver moldest products as desired by customers. Crafted from
high quality and various metals, they offer line of products in various precise geometrics.
D-TECH ENGINEERING INDUSTRIES LIMITED
D-TECH engineering Ltd is a steel fabrication unit engaged in structural steel roof work,
skylights, general steel fabrication work, manufacture of steel door frames, doors,
windows and ventilators, steel furniture, sheet metal work, kitchen cabinets, steel bridges
etc their products are widely used in industries, residential and commercial buildings,
educational institutions, hospitals and government departments.
STEEL AND INDUSTRIAL FORGINGS LIMITED
Steel and Industrial Forgings Limited (SIFIL) is an ISO 9001:2008 certified
Public Sector Undertaking fully owned by Government of Kerala, incorporated in 1983
and started commercial production in 1986, SIFIL rapidly forged ahead to become a
name to reckon with. We are master in Titanium and Special alloy forgings. Untiring
efforts of two decades as saddled SIFL firmly in the Forgings Industry of India and
abroad with best ratings for its products and services. Forgings with exquisite designs
and shapes, flawless forms of contours, broad bands and spectra of metals like alloy steel,
super alloys, aluminum and titanium. All in wide range of weights and unmatched
equality made have SIFL the most sought after forging company in the country for
critical components.SIFL’s diverse product mix caters to a wide range of sectors. These
include complex and high precision aerospace forgings, specialized forgings for defense,
Heavy Forgings for Commercial vehicles, railways and other components for
automobiles etc.
SWOT ANALYSIS
STRENGTHS:
Availability of iron ore and coal
Low labour wage rate
Abundance of quality manpower
Mature production base
WEAKNESSES:
Unscientific mining
Coking coal import dependence
Low R&D investment
Inadequate infrastructure
OPPORTUNITIES:
Unexplored rural market
Growing domestic demand
Exports
Consolidation
THREATS:
China becoming net exporter
Protectionism in the west
Dumping by competitors
Global economic slowdown
RECENT TRENDS
It’s been a Luke warm year for manufacturing. Sort of, let’s dip the big toe and
see how cold the water still is, kind of thing. It’s difficult to look at how well the
industry is actually doing without looking at the past few years to compare. So based on
some research, I’m going to point out a few key points of where the industry was, and
where it’s headed for 2011. Rumors of a double dip recession are still being circulated,
which would be another blow to the industry, but most economists are keeping the glass
half full in this regard against it.Raw materialsPrices have clearly fluctuated with the
crash of the market in 2008, and are slowly starting to creep back to pre-recession prices.
COMPANY PROFILE
INTRODUCTION TO THE COMPANY
The Metal Industries Limited, METIND Nagar, Shoranur, Palakkad, India- 679122 is a
Kerala state Public Sector Undertaking Unit established in the year 1928 perhaps the one
among the first few pioneer industries in pre independent India and the first one in south
India. The activities of the company are to manufacture and market various agricultural
implements and tools required for agro farming, handicrafts and artisans community.
The major clients of the products are Public and Government sectors. The factory is
located at Shoranur, a major industrial destination of Malabar Region of Kerala in 24
acres of land. The ownership of the unit as a public sector undertaking owned and
promoted by the Government of Kerala.
“METIND” is known for Quality, Durability and Reliability of its products and is still
remains on the zenith. A special type of alloy steel used as raw materials of
manufacturing, which undergoes a series of scientific forging and treatment processes to
refine the grain structure and thus makes our implements resistance to wear, tear and
corrosion. This unique feature of the products has sky rocketed the fame of our company
in capturing the local market within the country and now capable to tap the global market
in agricultural implements sector.
The development of Indian economy mainly depends on the agricultural income of the
country. Being the developing nation, almost all the states from top to bottom even
thought some states have advanced to some extend by way of industrialization are
utilizing a major portion of their areas for agricultural purpose in Southern States; the
agricultural activities have a strong impact because the majority of villages are engaged
in agricultural activities. This factor gives an immense scope for the production and
marketing of agricultural implements.
HISTORY OF THE COMPANY
The Metal Industries Limited, a public company was established in the 6th March 1928
with the main object of manufacturing agricultural implements, state tools, horticulture
implements and hand tools etc. the founder of the company was Late Shri C.K Menon.
The Metal Industries Ltd is a SSI established in 1928, perhaps one among the first few
pioneer industries of pre independent India and the first one of south India to cater all
sorts of implements and hand tools needed for agriculture, estate and artisan workers of
our country. Due to various reasons, Shoranur was considered as an ideal place for the
business of agricultural implements manufactured. Most important is the presence of
large number of conventional artisans and blacksmith, who are extended in
manufacturing the agricultural implements. There is a 11 KV sub station at Kulappully,
which provide uninterested supply of electric which is an indispensable facility to be
acquired by the company in order to overcome the power crisis. Company installed a
diesel generator, set 125 KVA capabilities. In the beginning, company has good market
throughout South India. The company markets its product under the brand name
“TUSKERS”. Generally known as METIND. The main raw materials of the company
are rejected rails and billet. The quality and reputation maintained by the company
throughout these years were remarkable.
The company uses special type of alloy, steel uses a raw materials for manufacturing
implements undergoes a series of scientific heat treatment and gorging process to refine
the grain structure and thus to make the implements resistance to wear, tear, corrosion, a
rare phenomenon not seen in any alien products. The company has developed certain
technologists for advanced solid removing equipment and vehicle suitable for urban area.
The company uses simple but economical in design with most technology and quality
with robust in structure to isolates its products from others. The company are now in on a
fresh move for building and fabricating bodies of passenger buses suitable for private and
KSRTC, mini and tourist buses used by KTDC… etc.
For about 30 years in corporation METIND was the pioneer in the market of these
products in South India and Srilanka. However during 1960s and 1970s the company
faced many problems which led to intermittent stoppage of its operation and the company
closed down in 1975 for working capital. With a view to revive, the state Government
made any discussions with Canara Bank, as a result, the bank agreed to grant financial
assistance and needed for rehabilitation. With effect from 18th October 1980, METIND
was converted as a Public Sector Unit under the Government of Kerala, with an equity
participation of 58.78%; the government of Kerala acquired the majority state in the
company. The production was started in the year 1982 with board of
direction nominated by government. Again in 1989 the unit is struggled due to lack of
order from government department. Then the company entered into private market. The
Government of Kerala instructed to other government concern and local bodies to
purchase the required product from this company. Now the company has established
itself in the, market and facing unhealthy competition from numerous units in Kerala,
Tamil Nadu, Karnataka and Andhra Pradesh. Now the company is facing stiff
competition from private owned company like SIMCO, MAYIL VAHANAM.. At
present 95% of the share is held by the Government of Kerala and the balanced by its
shareholders. Slowly the company increased the production and achieved their target
level.
The major products of the company are double faced sledge hammers of all types,
different varieties of mamma ties, pick axes, mammatty forks, wedges, digging forks,
rubber taping knifes etc…, which are mainly used in agricultural operation, quarry works
and industry.
The company has already established reputation of quality. South India is considered as
the pioneer manufacture of the agriculture implements. The reputation is mainly because
of the quality of the products and workmanship. The two important competitors of the
company are MAYILVAHANAM & SIMCO, both these company are situated nearest to
the company. The three important products produced by the company are:
Sledge hammer
Mammatties
axes
COMPANY DETAILS
Name of the company The Metal Industries Limited (A Government of
Kerala undertaking)
Type of company A PSU of Govt.of Kerala & registered as an SSI
unit
Registered Number 1542
Date of incorporation 06/03/1928
Registered office Metind Nagar, Shoranur – 679122
Authorized capital 2,00,000/-
Issued, Subscribed and Paid up capital 1,47,95,686/-