Final Project of Working Capital

ASTUDY ON WORKING CAPITAL OF BSP, Bhilai

A STUDY ON WORKING CAPITAL MANAGEMENT

OF THE BHILAI STEEL PLANT, BHILAI,

CHHATTISGARH

SUMMER PLACEMENT PROJECT

Submitted By

VISHAL KESHRI

(Reg. No: 0935F0631)

Under the guidance of

Ms. C. Vinotha, MBA, M. Phil

In the partial fulfillment of the requirement for the degree of

MASTER OF BUSINESS ADMINISTRATION

Of Bharathiar University, Coimbatore.

2009-2011

GURUVAYURAPPAN INSTITUTE OF MANAGEMENT

(AFFILIATED BY BHARATHIAR UNIVERSITY)

COIMBATORE-641105

http://www.sail.co.in/index.htm


(An exclusive institute offering MBA Programme,

approved by AICTE & affiliated to Bharathiar University)

CertificateThis is to certify that the project work entitled

“A STUDY ON WORKING CAPITAL MANAGEMENT OF

THE BHILAI STEEL PLANT, BHILAI, CHHATTISGARH”

Is the bonafide record of work done by

MR. VISHAL KESHRI

Reg. No: 0935F0631

And is submitted in partial fulfillment of the requirements

For the award of the Degree of

MASTER OF BUSINESS ADMINISTRATION

Of the Bharathiar University, Coimbatore

2009-2011

Director/ Principal Faculty Guide


DECLARATION

I, VISHAL KESHRI, student of Guruvayurappan Institute of

Management Coimbatore hereby declare that the project report

entitled “A STUDY ON WORKING CAPITAL MANAGEMENT OF

BHILAI STEEL PLANT, BHILAI CHHATTISGARH” which is

submitted to Bharathiar University in partial fulfillment of the

requirement for the award of the Degree of Master of Business

Administration, is a record of original research work done by me under

the guidance of Ms. C. Vinotha, MBA, M.Phil., of Guruvayurappan

Institute of Management, during the academic year 2009-2011

Place: Coimbatore VISHAL KESHRI

Date: (Reg.No. 0935F0631)


Acknowledgement

I sincerely feel that the credit of the project work could not be narrowed down to only one

individual. The work is an integrated effort of all those concerned with it, thorough whose

able cooperation and effective guidance I could achieve its completion.

I would like to express my sincere gratitude to Dr. VERGHESE MATHEW B.Sc. (Engg),

MBA, Ph.D., DGM (Germany), FIIE, the Director, Guruvayurappan Institute of

Management and Dr.THOMAS T. THOMAS, B.Sc., MBA, PGDPR&J, Ph.D. the

Principal, Guruvayurappan Institute of Management, for their active support and guidance

during the course of my studies in the Institute.

I am greatly indebted to my guide Ms. C. VINOTHA MBA, M.Phil, for his kind

cooperation, help, guidance and encouragement for preparing this project report.

I express my sincere gratitude to Mr. R.C.SRIVASTAV the deputy manager, Finance

Department, Bhilai Steel Plant, Bhilai for giving me the opportunity to conduct this project

work in their organization and whose immense support and guidance helped me to make this

project fruitful.

I would like to thank my family, friend and well wisher for their encouragement in

completing the project work

I take this opportunity to extend my sincere thanks to all who have helped me and encouraged

me all through out in bringing the best of project.

Vishal keshri


CONTENT

CHAPTER CONTENT

PAGE

NO.

LIST OF TABLES

LIST OF CHARTS

I INTRODUCTION

1.1 Industry Profile 1-13

1.2 Company Profile 14-51

1.3 Introduction to the topic 52-64

1.4 Objective of the study 65

1.5 Scope of the study 65

II REVIEW OF LITERATURE 66

III Design of the study

3.1 Research Methodology 67

3.2 Limitation of the study 68

IV ANALYSIS AND INTERPRETATION 69-88

V FINDINGS, SUGGESTIONS &

CONCLUSION

5.1 Finding 89

5.2 Suggestions 89

5.3 Conclusion 90-91

BIBLIOGRAPHI 92

ANNEXURE 93


TABLE

NO. LIST OF TABLES

PAGE

NO.

Table showing Asia- pacific steel market value 4

Table showing Asia- pacific steel market volume 5

Table showing Asia- pacific steel market segmentation 6

Table showing Asia- pacific steel market share 7

Table showing key facts 8

Table showing expansion plan 10

Table showing saleable steel capacities 18

Table showing main product & expected market share

2011-2012

20

Table showing market share of BSP’s product range 30

Table showing product mix 31

Table showing total production 31

Table showing total inventories 69

Table showing total current assets 70

Table showing current liabilities 71

Table showing working capital 72

Table showing liquidity ratio 73

Table showing current ratio 75

Table showing quick ratio 76

Table showing absolute ratio 77


Table showing current turnover ratio 79

Table showing inventory ratio 80

Table showing calculation of forecasting

working capital

83

Table showing forecasting working capital 84

Table showing profit after tax 85

Table showing cash profit 85

Table showing operating profit 86

Table showing gross marging 86

Table showing profitability ratio 87


CHAPTER I


INTRODUCTION

There’s a little bit of SAIL in everybody’s life….

“STEEL is the basic framework which has built nations, and it is on this strength that

nation stand apart. This man-made metal has an extraordinary quality of contributing to every

aspect of life while it keeps the wheels of industry turning. It also lends ever-lasting quality to

all kinds of structure and infrastructure.”

‘SARDAR VALLABH BHAI PATEL’

Many students may have done work on this project in different ways/styles. I have also tried

to work on this project in a different way. It was for the first time I got the opportunity to

work in such a prestigious and well-known organization and things which I have experienced

in my training period are going to help me through out my life time. I have worked on this

project with great enthusiasm and zeal. I have tried to cover almost all the things, which I

have experienced and learned during the training period. To run a giant organization each and

every department has to play its role effectively. In this era of cut-throat competition there is

no room for complacency. Steel is the basic framework which has built nation, it contributes

every aspect of life.

The main goal of my project is the “A Study on working capital management of the

Bhilai Steel Plant, Bhilai. It would be my great pleasure, if this project can help this

company to achieve its goal higher. This project has been undertaken to study the procedures

and practices followed in Finance and Accounts department. The Finance & Accounts

Department of Bhilai Steel Plant is divided into various sections and each section specializes

in different activities. This report is prepared on the basis of the extensive study carried out at

Finance & Accounts Department of SAIL, Bhilai Steel Plant.


Industry profile


1.1 Industry introduction

The global steel industry has been going through major shifts in focus. Not only has a new

steel making giant emerged the entire geographical focus of steel production has been

undergoing major changes. Such changes have been taking place on a critical scale since the

Second World War but have completely taken many by surprise in the last quarter of a

century.

Steel is a strong material. The strength of steel reflects the strength of nation. It is reflected in

two ways, economic and military. The quantum of steel consumed has been the barometer for

measuring development & economic progress. Whether it is construction or industrial goods,

steel is the basic raw material.

Global steel production grew enormously in the 20th century from a mere 28 MT at the

beginning of the century to 780 MT at the end. That was the period when the steel industry

developed in Western Europe & the USA followed by the Soviet Union, Eastern Europe &

Japan. However, steel consumption in the developed countries has reached a high stable level

& growth has tapered off.

Attention has now shifted to the developing regions. In the West, steel referred to as a sunset

industry. In the developing countries, the sun is still rising, for most it is only a dawn.

Towards the end of the last century, growth of steel production was in the developing

countries such as China, South Korea, Brazil & India.

World crude steel production reached 1,220 million metric tons for the year of 2009. This is a

decrease of -8.0% compared to 2008.

Steel production declined in nearly all the major steel producing countries and regions

including the EU, North America, South America and the CIS in 2009. However, Asia, in

particular China and India, and the Middle East showed positive growth in 2009.

China’s crude steel production in 2009 reached 567.8 MMT, an increase of 13.5% on 2008.

This is a record annual crude steel production figure for a single country. China’s share of

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world steel production continued to grow in 2009 producing 47% of world total crude steel,

an increase of 9 percentage points compared to 2008.

Asia produced 795.4 MMT of crude steel in 2009, an increase of 3.5% compared to 2008. Its

share of world steel production increased to 65% in 2009 from 58% in 2008. Japan produced

87.5 MMT in 2008, a decrease of -26.3% on 2008. India’s crude steel production was 56.6

MMT in 2009, 2.8% growth on 2008. South Korea showed a decrease of -9.4%, producing

48.6 MMT in 2009.

In 2008 International Iron & Steel Institute (IISI) changed its name to World Steel

Association (world steel) and launched the Safety and Health Excellence Recognition Award,

given to Arcelor Mittal Dofasco Inc, BlueScope Steel, Corus Group, Nucor Corporation and

Subic-Saudi Basic Industries Corporation.

The World Steel Association (world steel) is forecasting that apparent steel use will contract

worldwide by -8.6% to 1,104 MMT in 2009 after declining by -1.4% in 2008. This is an

improved figure over the spring forecast issued in April 2009 which predicted a decrease of -

14.1%. The improvement is largely due to the exceptionally strong growth in steel demand in

China. With signs, from the beginning of the second half of 2009, of a recovery across the

world now apparent, global steel demand in 2010 is forecast to grow by 9.2% to 1,206 MMT

which is a recovery to the level of 2008.

The healthy world economic growth & demand in emerging market countries, notably in

Asia, where major infrastructure projects were under way, acted as the key trigger to the

significant production rise. But this trend seems rather transitory.

Some important points regarding Global Steel Industry are as follows:

During 2009, the world crude steel production reached 1,220 million metric tons

Its shows a decrease of -8.0% compared to 2008.

China retained it’s No.1 position by producing around 567 Million Tonnes,

followed by Japan with production of 87.5 Million Tones & USA with production

at around 59.9 Million Tonnes.

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India with production of 56.6 Million Tones ranked 5th amongst world steel

producing countries.

Steel Production in India is expected to reach 124 million tons by 2012 and 275

million tons by 2020 which could make it the second largest steel maker.

China is expected to account for 47.7% of world steel apparent use and excluding

China, potential world steel demand would have fallen by -24.4%.

The president of the China Iron and Steel Association (CISA), Deng Qilin, stated on

February 5 that apparent consumption of crude steel in China is expected to grow by

8-10 percent in 2010.

During the year 2005, USA ranked No.1 as net importer country at 20.8 Million

Tonnes followed by Thailand at 10.8 Million Tonnes & Iran at 6.9 Million Tonnes.

In 2010, Russia produced 5.2 million metric tons of crude steel, up 33 percent year

on year,

Global steel production at 1,200 million tons in 2009. This represents a 9.5 percent

reduction on the outturn in the previous twelve month period.

In January, China's crude steel production totaled 48.7 million metric tons, an

increase of 18.2 percent, while Japan produced 8.7 million metric tons of crude

steel, up 36.8 percent, both compared to the same month last year. South Korea

showed an increase of 32.4 percent from January 2009, producing 4.5 million metric

tons of crude steel in January 2010.

In the EU, Germany's crude steel production for January 2010 was 3.4 million

metric tons, with an increase of 27.7 percent compared to January 2009.

The steel market consists of the production of crude steel in the stated country or region.

Crude Steel Production refers to production of first solid steel product upon solidification of

liquid steel. It includes Ingots (in conventional mills) and Semis (in modern mills with

continuous casting facility).

Crude Steel also includes liquid steel which goes into production of steel castings. Market

values have been calculated using appropriate regional annual average steel prices. Market

shares reflect revenues earned in this market during the last year for which financial data was

available for all companies listed.

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http://news.alibaba.com/article/list/1/steel.html

http://news.alibaba.com/article/list/1/iron.html

http://news.alibaba.com/article/list/1/china.html


Any currency conversions used in this report have been calculated using constant exchange

rates.

For the purpose of this report the Americas comprises Argentina, Brazil, Canada, Chile,

Colombia, Mexico, the US, and Venezuela.

Western Europe comprises Belgium, Denmark, France, Germany, Italy, Netherlands,

Norway, Spain, Sweden, and the UK.

Eastern Europe comprises the Czech Republic, Hungary, Poland, Romania, Russia and

Ukraine. Europe is the sum of Eastern and Western Europe. Asia-Pacific comprises Australia,

China, Japan, India, Singapore, South Korea and Taiwan. The global figure comprises the

Americas, Asia-Pacific and Europe.The Asia-Pacific steel market generated total revenues of

$382.9 billion in 2008, representing a compound annual growth rate (CAGR) of 14.5% for

the period spanning 2004-2008.Market consumption volumes increased with a CAGR of

10.8% between 2004-2008, to reach a total of 755.6 million metric tons in 2008.

Region Year2007 Year2008 %change

Africa 18.8 18.8 0

Middle East 15.4 16.4 6.7

C.I.S. 119.9 124 3.4

Asia 675.6 754.3 11.6

South America 45.3 48.3 6.5

North America 131.7 132.1 0.4

Other Europe 28.1 30.5 8.5

EU-27 206.8 210.3 1.7

World 1250.2 1343.5 7.5

The performance of the market is forecast to accelerate, with an anticipated CAGR of 21.9%

for the five-year period 2008-2013, which is expected to drive the market to a value of

$1,030.2 billion by the end of 2013.

Global Crude Steel Production (IISI) (Million Tonnes) Table No.1.1.1

Source: IISI

page 4


Top 10 steel producing countries

Table1.1.3

Rank Country 2009 2008 %2009/2008

1 China 567.8 500.3 13.5

2 Japan 87.5 118.7 -26.3

3 Russia 59.9 68.5 -12.5

4 US 58.1 91.4 -36.4

5 India 56.6 55.1 2.7

6 South Korea 48.6 53.6 -9.4

7 Germany 32.7 45.8 -28.7

8 Ukraine 29.8 37.3 -20.2

9 Brazil 26.5 33.7 -21.4

10 Turkey 25.3 26.8 -5.6


CAGR Analysis For Last Five Years: -

MARKET VALUE

The Asia-Pacific steel market shrank by -6.8% in 2008 to reach a value of $383 billion.

The compound annual growth rate of the market in the period 2004-2008 was 14.5%.

Page5


Table 1.1.2

Page6


MARKET VOLUME

The Asia-Pacific steel market grew by 1.7% in 2008 to reach a volume of 755.6 million

metric tons.

The compound annual growth rate of the market volume in the period 2004-2008 was 10.8%.

Table 1.1.3

Page7


MARKET SEGMENTATION

China generates 63.4% of the Asia-Pacific steel market's value.

Japan accounts for a further 20.9% of the steel market's value.

Table 1.1.4

Page8


Page9


MARKET SHARE

Arcelor Mittal generates 16% of the Asia-Pacific steel market's revenue.

In comparison, POSCO accounts for a further 7.7% of the market's value.

Table1.1.5

Page10


FIVE FORCES ANALYSIS

The steel market will be analyzed taking steel makers as players. The key buyers will be

taken as end-users come from numerous industries, but mainly include automotive,

construction and engineering firms that utilize metals in the production of their goods, and

producers of raw materials, such as iron ore and coal as the key .

Page11

INDIAN STEEL INDUSTRYINDIAN STEEL INDUSTRY


The Indian Steel Industry is almost100 years old now. Till 1990, the Indian Steel industry

operated under a regulated environment with insulated markets & large scale capacities

reserved for the public sector. Production & Prices were determined & regulated by the

Government, while SAIL & Tata Steel were the main producers, the latter being the only

player. In 1990, the Indian steel Industry had a production capacity of 23 MT. 1992 saw the

onset of liberalization & the Indian economy was opened to the world. Indian Steel Sector

also witnessed the entry of several domestic private players & large private investments

flowed into the sector to add fresh capacities.

The last decade saw the Indian Steel Industry integrating with the global economy &

evolving considerably to adopt world-class production technology to produce high quality

steel. The total investment in the Indian Steel since 1990 is over Rs. 19,000 crores mostly in

plant equipments, which have been installed after 1997 & 2001 when there was a downturn in

the global steel industry. The progress of the industry in terms of capacity additions,

production, consumption, exports & profitability plateaued off during this phase. But the

industry weathered the storm only to recover in 2002 & is beginning to get back on its feet

given the strong domestic economic growth & revival in global markets.

With a current capacity of 35 MT the Indian Steel Industry is today the 8 th largest producer

in the world. India produces international standard steel of all most all grades/ varieties & has

been net exporter for the last few years, underling the growing acceptability of its product in

the global market.

Steel is a highly capital intensive industry & cyclical in nature. Its growth is intertwined with

growth of economy at large & in particular the steel consuming industries such as

manufacturing, housing & infrastructure. Steel given its backward and forward linkages has

its large multiplier effect.

With capital investments of over Rs.100, 000 crores, the Indian Steel Industry currently

provides direct/indirect employment to over 2 Million people. As India moves ahead in the

new millennium, the Steel Industry will play a critical role in transforming India into an

economic superpower.

Page12


1. Indian economy growing @ 8 to 9% is of the fastest growing economies in the world.

2. Industrial production showing encouraging trends. Index of industrial production for

Capital goods is growing @ 8.4% CAGR and growth in index for consumer durables was

@ 10.5% CAGR during 2005-06.

3. The 10th plan investment in infrastructure has been envisaged at around Rs.880, 550

crores.

4. The major sector wise anticipated investment is likely to be Rs.292000 crores in power,

Rs.145000 crores in Roads & Bridges, irrigation Rs.111000 crores.

5. During 11th plan (2007-08 to 2011-12), the projected investment towards infrastructure is

likely to be Rs.2027000 crores, an increase of 180% over 10th plan.

6. Per capita Steel consumption at 35 kg low as world average of 150 kg & 300 kg for

China.

7. National Steel Policy, as formulated by Indian Ministry of Steel envisages the following:-

Crude Steel production of 110 Million Tonnes by 2019-20 at CAGR of 7.1%

from 2005-06.

The demand of Steel by 2020 is likely to be 90 Million Tonnes at CAGR of

6.9% from 05-06.

Steel exports by 2020 are likely to grow at CAGR of 13.3% from 04-05 to 26

Million Tonnes.

Steel importers to the country by 2020 shall grow of 7.1% from 04-05 to 6

Million Tonnes.

8. Lot of Steel projects both Brownfield and Greenfield likely to come up and are in various

stage of execution.

9. As per the news, Steel Minister has projected India’s Steel production to be around 124

Million Tonnes by 2012 and a capacity of around 275 Million Tonnes by 2019-20.

10. Due to infrastructure focus, production of long products is gradually increasing & ratio of

flat to long products is narrowing.

11. With due focus on infrastructure development & strong economic indicators, the demand

for Steel in India shall to remain robust.

Page13

Current

Scenario:

Current

Scenario:


Company profile


Page14


1.2 Company profile

STEEL AUTHORITY OF INDIA LIMITED (SAIL)

HISTORY:

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

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

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

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

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

million tons during the 1970s.

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

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

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

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

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

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

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

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

the NTPC.

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

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

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

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

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

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

Burnpur in West Bengal, in the last quarter of 2006.

Page15


Installation of state-of-the-art environment-friendly and energy-efficient steel making

technology was expected to help ISP multiply its crude steel production capacity to 2.5

million tones by the year 2010.

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

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

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

reduction in detention time for the railway wagons.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

produce ferro-manganese and silico-manganese.

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

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

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

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

area of corporate strategy planning;

Page16


joint usage of each other's existing marketing and warehousing network; and co-ordination in

procurement of coking coal, nickel, and ferro-alloys and engagement of transportation

vessels.

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

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

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

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

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

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

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

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

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

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

India) of SAIL was laid.

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

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

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

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

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

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

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

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

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

bars for the construction industry.

Page17


EXPANDING HORIZON (1959-1973)

Hindustan Steel (HSL) was initially designed to manage only one plant the Rourkela. For

Bhilai and Durgapur Steel Plants, the preliminary work was steel ministry. From April 1957,

the supervision and control of these two transferred to Hindustan Steel. The registered office

was originally in New Calcutta in July 1958, and ultimately to Ranchi in December1959.

A new Steel company, Bokaro Steel Limited, was incorporated in January operate the steel

plant at Bokaro. The 1 MT phases of Bhilai and Rourkela completed by the end of December

1961. The 1 MT phase of Durgapur Steel completed in January 1962 after commissioning of

the wheel and axis plant production of HSL went up from .158 MT (1959-60) to 1.6 MT. T

he second plant was completed in September 1967 after commissioning of the wire of the 1.8

MT phase of Rourkela- the Tandem Mill –was commissioned the 1.6 MT stage of Durgapur

Steel Plant was completed in August 1969 the Furnace in SMS. Thus with the completion of

the 2.5 MT stage at Bhilai and 1.6 MT at Durgapur, the total crude steel production capacity

of HSL 1968-69 and subsequently to 4 MT in 1972-73.

Key Facts:

Table No.-1.2.1

Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a

fully integrated iron and steel maker, producing both basic and special steels for domestic

construction, engineering, power, railway, automotive and defense industries and for sale in

export markets.

Page18


Ranked amongst the top ten public sector companies in India in terms of turnover, SAIL

manufactures and sells a broad range of steel products, including hot and cold rolled sheets

and coils, galvanized sheets, electrical sheets, structural, railway products, plates, bars and

rods, stainless steel and other alloy steels.

SAIL produces iron and steel at five integrated plants and three special steel plants, located

principally in the eastern and central regions of India and situated close to domestic sources

of raw materials, including the Company's iron ore, limestone and dolomite mines. The

company has the distinction of being India’s largest producer of iron ore and of having the

country’s second largest mines network. This gives SAIL a competitive edge in terms of

captive availability of iron ore, limestone, and dolomite, which are inputs for steel making.

The Environment Management Division and Growth Division of SAIL operate from their

headquarters in Kolkata. Almost all our plants and major units are ISO Certified.

SAIL VISION:

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

quality, productivity, profitability, and customer satisfaction.

CREDO:

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

We uphold highest ethical standards in conduct of our business.

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

change.

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

rewards.

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

people's lives.

Page19

CORE VALUES OF SAIL:


Customer satisfaction.

Concern for people.

Consistent Profitability.

Commitment of Excellence.

THE SEVEN C’s OF SAIL:

Consistent Quality.

Committed Delivery.

Customized Product Mix.

Contemporary Products.

Competitive Price.

Complaint Settlement.

Culture of Customer Services.

SAIL Today:

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

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

markets and a large pool of technical and professional expertise.

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

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

EXPANSION PLAN 2012: Table No.-1.2.2

Item 2006-07(Actual) Capacity as per Expansions 2010

Hot Metal 14.61 26.18

Crude steel 13.51 24.59

Saleable Steel 12.58 23.13

Source: SAIL

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

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

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

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

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

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

projects from 2012 to 2010.

Table No.-1.2.3

Saleable Steel Capacities (MT)

PLANT 2010

Bhilai Steel Plant 6.21

Durgapur Steel Plant 2.85

Rourkela Steel Plant 2.90

Bokaro Steel Plant 6.50

IISCO Steel Plant 2.37

Alloy Steels plant 0.43

Salem Steel Plant 0.36

Visvesvaraya Iron & Steel Plant 0.22

SAIL’s Growth Plan 2010SAIL’s Growth Plan 2010


Graph No.- 1 Saleable Steel Production Capacity

Page21

MAJOR UNITS

Integrated Steel Plants

Bhilai Steel Plant (BSP) in Chhattisgarh

Durgapur Steel Plant (DSP) in West Bengal

Rourkela Steel Plant (RSP) in Orissa

Bokaro Steel Plant (BSL) in Jharkhand

IISCO Steel Plant (ISP) in West Bengal

Special Steel Plants

Alloy Steels Plants (ASP) in West Bengal

Salem Steel Plant (SSP) in Tamil Nadu

Visvesvaraya Iron and Steel Plant (VISL) in Karnataka

Maharashtra Elektrosmelt Limited (MEL) in Maharashtra

Joint Ventures

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

commerce.


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

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

Ltd.), it manages the captive power plants at Rourkela, Durgapur and Bhilai with a

combined capacity of 314(MW).

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

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

302-MW power generation and 1880 tonnes per hour steam generation facilities at

Bokaro Steel Plant.

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

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

Page22

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

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

of adding value to steel.

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

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

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

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

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

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

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

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

Development Corporation (NMDC) and Russian promoters for marketing Romelt

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

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


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

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

markets & a large pool of technical & professional expertise.

Ownership and Management

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

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

and financial autonomy.

Page23


OTHER UNITS:

SAIL Consultancy Division.

Center of Engineering & Technology.

Management Training Institute.

Safety Organization.

Environmental Management Division.

Raw Material Division.

Growth Division.

Central Power Training Institute.

Central Marketing Organization.

Major Capital Schemes:

Bhilai Steel Plant:

Rebuilding of Coke O

Coke oven batteries.

Modernization of BFs (including Gas Cleaning Plant).

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

Revamping of existing Slab Casters in phased manner.

New Pipe Plant of 0.2 million tonnes capacity

New Bar & Rod Mill (1 million tonnes).

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

Logistics & infrastructure.

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

Durgapur Steel Plant:

Bloom Caster & associated facilities.

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

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

Rebuilding of Coke Oven battery.

Installation of a new Billet Caster.

Page24


Rourkela Steel Plant:

Rebuilding of Coke Oven battery.

New Blast Furnace-2,000 m3.

CDI & Reconstruction of BFs.

Revamping of Sinter Plant including Pollution Control Scheme.

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

Bokaro Steel Plant:

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

Installation of Slab Caster.

Installation of New modern BOFs.

IISCO Steel Plant:

Modernization of Steel Making Facility.

New Multi purpose Section mill/ Universal mill.

Development of collieries.

SWOT Analysis of SAIL

STRENGTH

Largest player in the Indian Steel industry.

Strong backward integration like iron ore and power.

Very aggressive expansion plans.

The single largest rail manufacturer in the world.

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

IISCO’s underutilized iron ore and coalmines.

All its plants are a profit centers.

SAIL is a virtually Debt-Free Company.

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

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

WEAKNESS

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

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

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

Page25


OPPORTUNITIES

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

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

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

sector. Robust demand in construction and retail industry.

Low per capita steel consumption offers a higher growth.

Rich Geological Resource base.

THREAT

Steel prices may remain stumpy on account of over supply from China.

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

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

High cost of energy.

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

export). Cyclical nature of Steel Industry.

Deficit infrastructure.

Page26


ORGANISATION STRUCTURE OF

SAIL

DIRECTOR (TECH)

DIRECTOR PERSONNEL

DIRECTOR FINANCE

CHIEF VIGILANCE

EXE. DIR (OPERATION)

EXE. DIR (IA)

ED (TECH & LEGAL SERVICE)

EXE. DIR (PROJECTS)

EXE. DIR (CMMG)

EXE. DIR. (CIG)

EXE. DIR. (CP)

CHAIRMAN

MANAGING DIRECTOR, BSP

MANAGING DIRECTOR, BSL

MANAGING DIRECTOR, RSP

MANAGING DIRECTOR, DSP

EXECUTIVE DIRECTOR VISL

EXECUTIVE DIRECTOR SSP

EXECUTIVE DIRECTOR ASP


Page27


Company vision:

India 2020 – a vision for the new Millennium

“We still have a number of persons in our country in steel Authority of India Limited

(SAIL)…….. They have the will to excel and transform the country, given a long term

vision”

- Dr. A.P.J.ABDUL KALAM -

Bhilai Steel Plant, a unit of Steel Authority of India Limited - a public sector undertaking

was conceived under aegis of Indo - USSR Treaty in the 2nd Five year plan. This was in

accordance with erstwhile government policy for strengthening economy and self reliance

through development of core sector.

Nine - time winner of Prime Minister’s Trophy for best Integrated Steel Plant in the country,

Bhilai Steel Plant (BSP) is India’s sole producer of rails and heavy steel plates and major

producer of structural. The plant is the sole supplier of the country's longest rail tracks of 260

meters. With an annual production capacity of 3.153 MT of saleable steel, the plant also

specializes in other products such as wire rods and merchant products. Since BSP is

accredited with ISO 9001:2000 Quality Management System Standard, all saleable products

of Bhilai Steel Plant come under the ISO umbrella.

At Bhilai IS0: 14001 has been awarded for Environment Management System in the Plant,

Township and Dalli Mines and it is the only steel plant to get certification in all these areas.

The Plant is accredited with SA: 8000 certification for social accountability and the OHSAS-

18001 certification for Occupational health and safety. These internationally recognized

certifications add value to Bhilai’s products and helps create a place among the best

organizations in the steel industry.

Bhilai steel plant profile

Bhilai Steel Plant is a flag ship unit of Steel Authority of India Limited. SAIL, a fully

integrated iron and steel maker, produces both basic and special steels for domestic

construction, engineering, power, railway, automotive and defense industries and for sale in

export markets. In terms of annual production SAIL is the 18th largest steel producer in the

world.

Page29


Living up to the description by Jawaharlal Nehru as significant symbol of a new age in India,

Bhilai Steel Plant has been performing consistently despite many odds and has achieved

profits for the 18th consecutive year. It broke its own record of highest ever profit of Rs 1932

crore by any steel plant in 2003-04 and registered a profit of Rs 4042 crores in 2004-05. In

the year 2005-06 also it earned a handsome profit of Rs. 2781 Crores despite input price

escalation. The true testimony to BSP’s status of a world class steel plant is that BSP’s

EBITDA margin of 33% is quiet comparable to many International steel players like POSCO

(30%), NIPPON (19%), MITTAL STEEL (16%0, ARCELOR (16%), etc. Its Gross Margin

to average capital employed at 182% is a Global Benchmark. Maintaining the track record,

BSP continued to operate above the rated capacity in production of the three main items viz.

Hot Metal, Crude Steel and Saleable Steel. BSP is the first steel plant in India to have crossed

the annual production of 5MT crude steel in the year 2005-06.

In order to meet the challenges of Corporate Plan 2012 and to maintain the leadership

position of BSP in Indian steel industry, the leadership has taken bold steps to make

significant investments for breakthrough improvements in efficiency, resource management,

knowledge and skill by deploying world class tools. This year is a milestone in BSP journey

when new tools have been introduced viz. ERP, Knowledge Management, Six Sigma, Multi-

skilling etc.

Building Future Capabilities

BSP is on its way to equip itself with assets required by 21st century. New state of the art

technologies for improvement in productivity, yield, quality and operational costs have been

planned under Corporate Plan 2012. The plant capacity will be 7 MT of hot metal by 2012.

The key goals of CP-2012 are capacity enhancement, 100% Comcast production, reduction in

semis, achieving international benchmarks in eight selected parameters, higher percentage of

value added products and essentially to become a true world class steel plant. Apart form

investing in plant, technology and machinery, BSP has taken bold steps to make significant

investments to leverage its most precious and differentiating resource, the human resource by

deploying ERP, Knowledge Management, Six Sigma, and Multi-skilling and other

performance enhancing tools.

Page29


“The principal products and key customers of Bhilai Steel Plant along with key segments;

key competitors and market share in that segment are given as per the format specified in”

“A glimpse of product portfolio and targeted market share after proposed implementation of

unit perspective Plan 2012 is given in” Table No.-1.2.4

Table: Main Products & Expected Market Share 2011-12

Main Products Current Market ShareExpected DomesticMarket Share

Rails 100% 100%

Plates 24% 30%

Bars, Rods & Structural. 4.8% 10%

HR Coils / Sheets Nil 6%

Pipes Nil 6%

The Beginning

This Leadership of free, India took a visionary decision to set up integrated steel plants under

the exclusive responsibility of the state owing to the massive investment needed for creating

additional Steel capacity, which private industry would not be able to mobilize and the

cardinal role steel would play in rapid economic advancement as a major step towards this

goal, government of INDIA and USSR entered into an agreement signed at New Delhi on 2nd

march 1955, for the establishment of an integrated Iron and Steel works at Bhilai with an

initial capacity of one million tonnes of ingot steel.

The main consideration which responsible for setting up the plant at Bhilai, was the

availability of Iron ore at Delhi-Rajhara at a distance of about 90 Km from the site limestone

from Nandini at 22 km and dolomite at HIRRI at 41 km. The plant was commissioned with

the inauguration of the first blast furnace by the then president of India. Dr. Rajendra Prasad

on 4th February 1959. The plant was soon expanded to 2.5 Million tonnes in September 1967

and in further expansion to 4 MT was completed in 1988. The main focus in the 4 MT stage

was on the continuous casting unit and the plate mill, a new technology in steel casting and

shaping for any integrated steel plant to India during those time

Page30


The Organization

Bhilai Steel Plant functions as a unit of SAIL with its corporate office at New Delhi. SAIL is

governed by a Board consisting of function Directors, Managing Directors and government

nominee Directors, 85.62% of the shares of SAIL are with Indian Government and balance

are with financial institutions, mutual funds, Indian Public and others, corporate office

formulate Policies, strategies and overall guidelines for its unit, central organization like

CMO (Central Marketing Organization) RDCIS (Research and Development Center for Iron

& Steel ) CET ( Center for engineering and Technology ) look after the relevant activities for

the plates under SAIL.

Over the years, Bhilai Steel Plant has developed an organizational culture that run forces its

commitment to values and stimulates continuous improvements and higher levels of

performance.

Bsp’s Organizational Objectives

To encage customer satisfaction through:-

Improvement in productivity and product quality.

Skill enhancement of our people by competence commitment and culture-

Building.

Production as per customer requirements.

Quality Policy of Bsp

Attending market leadership through enhancing customer satisfaction.

Achieving continual improvement in productivity, quality and salability of our

products.

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

Page31


Product Profile

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

1. Semis Product

2. Long Products

3. Flat Products

MARKET SHARE OF BSP’S PRODUCT RANGE:

Table No.1.2.5

SAIL BSP

BARS & RODS 08.70% 05.90%

STRUCTURALS 17.90% 13.90%

RAILWAY MATERIALS 89.30% 85.90%

TOTAL LONG PRODUCT 14.80% 11.80%

PLATES 52.90% 23.90%

TOTAL FINISHED STEEL 22.40% 07.70%

TOTAL SEMIS 13.00% 06.10%

TOTAL SALEABLES STEEL 20.00% 07.30%

PRODUCT-MIX TONNES/ANNUM

Semis 5,33,000

Rail & Heavy Structural 7,50,000

Merchant Products

(Angles, Channels, Round & TMT bars)5,00,000

Wire Rods (TMT, Plain & Ribbed) 4,20,000

Plates (up to 3600 mm wide) 9,50,000

Total Saleable steel 31,53,000

Table No.:1.2.6

Page31

PLANT AND FACILITIES:


Process Flow of Bhilai Steel Plant:

Captive mines:

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

Limestone - Nandini, 23 kms from Bhilai

Dolomite - Hirri, 150 kms from Bhilai

Page32


Coke Ovens:-

BATT NO. NO. OF

OVENS

OVEN

HEIGHT

(M)

COAL

HOLDING

CAPACITY

PER OVEN

(T)

USEFUL

VOLUME

PER OVEN

CU.M.

SP.HEAT

CONSPN.

KCAL/KG

1-8 65 4.3 16.8 21.6 625-675

9&10 67 7.0 32.0 41.6 625-675

Blast Furnaces:

3 of 1033 Cu m capacity each.

3 of 1719 Cu m capacity each.

1 of 2350 Cu m capacity.

Steel Melting Shop:

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

3 converters of 110/130 T.

VAD unit, RH degasser, Ladle furnace.

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

Annual Capacity: 1.425 MT Cast steel.

Merchant Mill: Capacity - 5, 00,000 Tonnes.

Products:

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

TMT Bars

Angles

Page33


Rail & Structural Mill: Capacity - 7, 50,000 T

Products:

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

international standards.

Thick web asymmetric rail

Beams

Channels

Angles

Crossing Sleeper.

Crane Rails

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

Bhilai Rails:

Largest producer and leading rail maker of the world.

Four and a half decades of experience in rail making.

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

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

rails.

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

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

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

Wire Rod Mill:

Capacity - 4, 20,000 T

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

ribbed, and 12 mm plain in coil form

8, 10, and 12 mm TMT


Page34


Plate Mill:

Capacity - 9,50,000 T

Plates thickness - 8-120 mm

Width - 1500-3270 mm

Length - 5-12.5 M

Product Mix: Saleable Steel Production: table 1.2.7


Page35


Major suppliers of Bhilai steel plant:

1. Apollo industrial corporation Mumbai.

2. Ashok Leyland Chennai.

3. BHEL Bhopal and Mumbai.

4. Bharat petroleum gas Nagpur.

5. Birla Corporation limited Kolkata.

6. Cimmco Birla limited New Delhi.

7. Dunlop India limited Kolkata.

8. Siemens casting limited Mumbai.

9. Simplex casting limited Raipur.

10. HMT ltd. Ranchi.

Major buyers:

1. Indian railways.

2. Vizard profiles limited.

3. High pressure boiler plant BHEL Trichy.

4. NTPC super thermal power project.

5. Jindal steel and power limited Raigarh.

6. NTPC limited New Delhi.

7. Chandigarh industrial journalism and development corporation Chandigarh.

8. Cropro international Italy.

9. Sangyong Corporation Japan.Competitors:

1. Ispat industries limited.

2. Lloyds steel limited.

3. Essar steel limited.

4. Jindal steel and power limited.

5. Jindal strips limited.

6. National steel industries limited.

7. Bhusan steel and strips limited.

Page36


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

14001 certification for its Environment Management System.

ISO 14001 certification

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

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

Reduction in noise levels.

Conservation of electricity and lubricants.

Environment Management System established at Dalli Mines.

Pollution Control Measures:

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

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

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

ten cleanest industrial townships in the country.

Green City:

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

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

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

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

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

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

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

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

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

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

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

Page37


The water to the township is supplied from the Maroda water treatment plant having a

capacity of 30 million gallons per day. Water is distributed throughout the township through

a system of underground reservoirs and overhead tanks.

Energy Consumption:

Continuous monitoring

Apex Committee Inspection by HODs.

Quarter review of Safety activities by ED (W)

Fixing responsibility of line managers.

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

exhibitions

Safety workshops

Regular inspections:

Inspection of gas pipelines Inspection of structures, equipments and installations

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

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

Quality Management System:

Facilities relating to quality,

ISO 9001 SEAL OF QUALITY

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

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

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

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

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

sections and wire rods.


Page38


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

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

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

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

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

metallographic investigation with modern instruments like Scanning Electron Microscope,

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

The key points of control are:

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

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

inspection.

Monitoring and control of heating/reheating parameters.

Dimensional and surface check during rolling and on finished product.

Human Resource Development :

Training need assessment is a continuing process.

About 19,000 employees are imparted training every year.

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

SWOT Analysis of BSPs:

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

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

functions and task assign to it from time to time, both with regards to production and

execution of other functions of SAIL, such as design consultancy, training and

development etc. The primary analysis of any organization begins with the SWOT

Analysis.

Page39


SWOT

Strengths:

Capacity of plant,

Product Mix,

Quality of Products,

Human Resource & Management.

Weakness:

Supply of Raw Materials,

Demurrages,

Rigidity of Labor Law compared to other countries.

Opportunities:

Upsurge in Indian Economy,

Technological Edge,

Human Resource Management.

Threats:

Effect of Custom Duty,

International Competition,

Domestic Competition,

Increase in Oil Prices,

Depleting Mines.

Page40


ORGANISATIONAL STRUCTURE OF BHILAI STEEL PLANT

Page41

MANAGING DIRECTOR

ED (F&A)

90GM (F&A)

GM (M&SP)

GM (IA)

GM I/C (MINES)

DIR (M&HS)

ACVO

COC

ED (PROJECTS)

GM (PROJECTS)

GM (PP&E & BEDB)

GM I/C (SERVICES)

GM (SAFETY)

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

GM (P MILL & MILLS-LP)

GM (CO, CCD & SP, OHP)

GM I/C (PE, EN & STEEL)

GM (QUALITY)

GM (CCS) - SMS-II

ED (WORKS)

ED (P&A)

GM (TS)

GM (PERS)

GM (HRD)

GM (MS)

DGM (L & A)

ED (MM)

GM (MM)

GM (IT)


Item (Unit : MT) 2007-08 2008-09 % Rated Capacity

Hot Metal 5.27 5.18 121.0*

Crude Steel 5.05 5.18 132.1

Saleable Steel 4.43 4.49 142.5

With respect to BFs in operation

TURNOVER (Rs Crore)

11389 11217

13526.31

16518

7557.98 7949.1

9736.0810479.41

13246

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

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

9 Months

Yearwise

Page42

PERFORMANCE HIGHLIGHTS 2008-2009BHILAI STEEL PLANT

PERFORMANCE HIGHLIGHTS 2008-2009BHILAI STEEL PLANT


PROFIT (Before Tax) (Rs Crore)

4042

2781.07

4287.29

5366

2365.64 2175.52

3048.893367.14 3266

0

1000

2000

3000

4000

5000

6000

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

9 Months

Yearwise

Record production of 7.46 MT of Total Sinter, surpassing the previous best of 7.23 MT in 07-

08 and registering a growth of 3.2% over previous Year.

Production of Total Sinter ('000T)

5741

69336647

72297459

4000

4700

5400

6100

6800

7500

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

Page43


Record production of 5.39 MT of Hot Metal, exceeding previous best of 5.27 MT in 07-08

and registering a growth of 2.3% over the previous Year.

Production of Hot Metal ('000T)

4511.2

5178.3

4816.8

5267.75387.2

4000

4300

4600

4900

5200

5500

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

Record production of 5.2 Million Tonnes of Total Crude Steel, surpassing the previous best

of 5.1 Million Tonnes in 07-08 and registering a growth of 2.6% over the previous Year.

Production of Total Crude Steel ('000T)

4581.7

5053.7

4798.4

5054.6

5183.5

4000

4240

4480

4720

4960

5200

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

Page44


Record production of 4.49 Million Tonnes of Saleable Steel, surpassing the previous best of

4.43 T achieved in 07-08 and registering a growth of 1.4% over the previous Year.

Production of Saleable Steel ('000T)

3935.1

4285.64222.9

4428.94491.6

3500

3700

3900

4100

4300

4500

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

"Sinter Plant-3 crossed the 20 MT landmarks in July ‘08

Record Cast Steel production of 2.65 MT from SMS-2”.

Record production of 756,232 T of Merchant products, surpassing the previous best of

730,660 T achieved in 07-08 and registering a growth of 3.5% over the previous Year.

Production of Finished Rails ('000T)

868.4855.2

880.9

916.1

978.7

700

760

820

880

940

1000

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

Page45


Record production of 3604.6 Thousand Tonnes Finished Steel, surpassing the previous best

of 3603.1 Thousand Tonnes in 2007-08.

Production of Merchant Products ('000T)

592.7 582.7

610

730.7756.2

500

550

600

650

700

750

800

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

“Plate Mill completed 25 years in March ’08 with cumulative output of about 18.13 MT”.

Best-ever Energy rate at 6.503 G Cals/TCS against previous best of 6.503 G Cals/TCS in

2007-08.

Highest ever production of Special Steel & value-added products at 2.85 MT surpassing the

previous best of 2.17 MT in 07-08 and registering a growth of 31.1% over previous year.

Special Quality & Value-added Products ('000 T)

1358.21444.2

1555.7

2170.9

2845.6

1000

1400

1800

2200

2600

3000

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

Page46


Best ever production of 430,494 Tonnes of TMT Bars from Merchant Mill, surpassing the

previous best of 417,591 Tonnes in 07-08, registering a growth of 3.1% over previous year.

Production of TMT Bars ('000T) Merchant Mill

187.1156.7

210.6

417.6 430.5

0

100

200

300

400

500

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

Best ever production of 403,175Tonnes of TMT Rods from Wire Rod Mill, surpassing the

previous best of 277,488Tonnes in 07-08, registering a growth of 45.3% over previous year.

Production of TMT Wire Rods ('000T) Wire Rod Mill

109.5 107.2 109.8

277.5

403.2

0

100

200

300

400

500

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

Best ever production of 814,805 Tonnes of UTS-90 Rails, surpassing the previous best of

791,541 Tonnes in 07-08, registering a growth of 2.9% over previous year.

Page47


Best ever loading of 213,652 Tonnes of 26 metre rails and 106,284 T of 130 & 260 metre

rails, surpassing the previous best of 197,708 Tonnes and 101,104 T, respectively in 2007-

08.

Production of HT (H/S) Plates ('000T)

110 106.198.2 99.4

122.8

0

30

60

90

120

150

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

NEW PROJECTS:-

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

Financial Year 2008-09.

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

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

signed.

Project Website and Online Contract Billing & Accounting System have been

launched.

MAJOR PROJECTS COMPLETED:-

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

Slab Caster in SMS-II.

Installation of MSDS-VI.

End Forging Plant for Thick Web in RSM.

Page48


MAJOR PROJECTS COMMISSIONED:-

Hot Metal Desulphurisation Unit in SMS-II.

Ladle Furnace in SMS-II.

RH Degasser in SMS-II.

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

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

ONGOING PROJECTS:-

COB-11, New Coal Handling Plant, CDCP.

Rebuilding of COB-6 (Battery Proper).

Augmentation of Plate Mill capacity.

Basic Oxygen Furnace Shop – SMS-III.

MSDS-7.

Compressed Air Station-4.

Ore Handling Plant – Plant-A.

Electro Magnetic Stirrer in Bloom Caster in SMS-II.

Implementation of ERP.

Installation of 30 MLD Sewerage Treatment Plant with Recycling facilities at

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

and Indira place Market area for industrial use.

Hot Metal Desulphurization for SMS-III.

Installation of MSDS-V.

Up gradation of Nitrogen Network.

6.6 KV Switchgear for Substation 21 of SP-II.

Enabling works for 7 MT expansions.

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

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

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

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

Station.

SPU at Ujjain, Hoshangabad & Gwalior.

Page49


OTHER PROJECTS COMPLETED:-

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

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

6.

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

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

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

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

One Pair Ladle Tilting Stand at SMS-II.

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

OTHER PROJECTS COMMISSIONED:-

Replacement of By-product equipment (Pkg. 4A) at COB-5.

Replacement of Exhauster at COB-5.

Replacement of 4 numbers Ash Slurry Pipeline.

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

UPCOMING PROJECTS:-

Implementation of Manufacturing Executing System.

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

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

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

New Blast Furnace – 8 (4060 cu m).

Continuous Casting Shop –SMS III.

o 2*6 Strand Billet Casters.

o 1*4 Strand Bloom-cum-Billet Casters.

o 183 Strand Beam Blank Caster.

New Bar 7 Rod Mill (0.90 MT Capacity).

New Universal Rail Mill (1.2 MT Capacity).

Universal Beam Mil (1.0 MT Capacity).

New 2 *1250 TPD Oxygen Plant on BOO basis.

Page50


ORGANISATIONAL STRUCTURE OF

FINANCE AND ACCOUNT DEPARTMENT OF BHILAI STEEL PLANT

Bifurcation and coordination of Finance and Accounts department

Page51

Finance and accounts

department

Finance and accounts

department

Invoicingng

Invoicingng


Introduction of the topic


Chapter 1.3

Finance is considered the life blood of any business. It is defined as “the provision of money

at the time it is wanted”. All the plans of a businessperson would remain mere dreams unless

adequate money is available to convert them into reality. It has given birth to “Financial

management” as a separate subject.

Financial management refers to that part of managerial activity concerned with procurement

and utilization of funds for business purpose. In other words it involves the application of

general management principles to financial operations. Thus financial management is

concerned with estimation of a fixed and working capital and management of earnings.

Finance management, also referred to as corporate finance, emerged as a distinct field of

study at the turn of the 20th century. Financial management is that management activity which

is concerned with the planning and controlling of the firm’s financial resources.

Financial management involves the procurement and use of funds. Its fundamental objective

is to use business funds in the most profitable manner. But it must contribute towards the

accomplishment of organizational goals. Although the importance of financial functions

largely on the size of the firm, financial management is an integral part of the overall

management of the firm.

Page52


Introduction to WORKING CAPITAL

Working Capital is the capital available for conducting the day-to-day operations of an

organization, normally, the excess of current assets over current liabilities.

In accounting terms this is a static balance sheet concept referring to the excess at a particular

moment in time of permanent capital plus long-term liabilities over the fixed assets of the

business. As such it depends on accounting rules, such as what is capital and what is revenue,

what constitutes a retained profit, the cut-off between long term and short term (12 months

from the balance sheet date), and when revenue should be recognized.

A business must be able to generate sufficient cash to meet its immediate obligations and

therefore continue trading. Unprofitable business can survive for quite some time if they have

access to sufficient liquid resources, but even the most profitable business will quickly go

under without adequate liquid resources. Working capital is therefore essential to the

company’s long-term success and development, and the greater the degree to which current

assets cover the current liabilities, the more solvent the company. Efficient managing of

working capital is important from the points of view of both liquidity and profitability.

Gross working capital:

It refers to the firm’s investment in current assets. Current assets are the assets, which can be

converted into cash within an accounting year or within an operating cycle. You can include

here cash, short-term securities, debtors (accounts receivable & book debts), and bills

receivable and stock.

Net working capital:

The net working capital refers to the difference between current assets and current liabilities.

Current liabilities are those claims of outsider, which are expected to mature for payment

within an accounting year & include creditors, bills payable & the outstanding expenses. In

other words we can say that this is the excess of current assets over current liabilities.


Page53


Working capital

Current assets Current liabilities

Cash Accounts Payable

Accounts receivable Notes payable

Notes receivable Accrued expenses

Marketable securities Taxes payable

Inventory Short term loans

Prepaid expenses Bank overdraft

Total current assets Total current liabilities

Net working capital = CA-CL

Kinds of Working Capital:

1. Permanent Working Capital:

Permanent working capital is the minimum amount of current assets, which is needed

to conduct a business even during the dullest season of the year. The minimum level

of current assets is called permanent or fixed working capital as this part is

permanently blocked in current Assets. This amount varies from year to year,

depending upon the growth of the company and the stage of the business cycle in

which it operates.

2. Temporary Working Capital:

Temporary working capital represents a certain amount of fluctuations in the total

current assets during a short period. These fluctuations are increased or decreased and

are generally cyclical in nature. Additional current assets are required at different

times during the operating year. Variable working capital is the amount of additional

current asset that are required to meet the seasonal needs of a firm, so is also called as

the seasonal working capital. For example: additional inventory will be required for

meeting the demand during the period of high sales When the peak period is over

variable working capital starts decreasing or very little during the normal period.

Page54


Page55


IMPORTANCE OR ADVANTAGE OF ADEQUATE WORKING CAPITAL

SOLVENCY OF THE BUSINESS: Adequate working capital helps in maintaining

the solvency of the business by providing uninterrupted of production.

Goodwill: Sufficient amount of working capital enables a firm to make prompt

payments and makes and maintain the goodwill.

Easy loans: Adequate working capital leads to high solvency and credit standing

can arrange loans from banks and other on easy and favorable terms.

Cash Discounts: Adequate working capital also enables a concern to avail cash

discounts on the purchases and hence reduces cost.

Regular Supply of Raw Material: Sufficient working capital ensures regular

supply of raw material and continuous production.

Regular Payment Of Salaries, Wages And Other Day TO Day Commitments: It

leads to the satisfaction of the employees and raises the morale of its employees,

increases their efficiency, reduces wastage and costs and enhances production and

profits.

Exploitation Of Favorable Market Conditions: If a firm is having adequate

working capital then it can exploit the favorable market conditions such as purchasing

its requirements in bulk when the prices are lower and holdings its inventories for

higher prices.

Ability To Face Crises: A concern can face the situation during the depression.

Quick And Regular Return On Investments: Sufficient working capital enables a

concern to pay quick and regular of dividends to its investors and gains confidence of

the investors and can raise more funds in future.

High Morale: Adequate working capital brings an environment of securities,

confidence, high morale which results in overall efficiency in a business.

Page56


EXCESS OR INADEQUATE WORKING CAPITAL

Every business concern should have adequate amount of working capital to run its

business operations. It should have neither redundant or excess working capital nor

inadequate nor shortages of working capital. Both excess as well as short working capital

positions are bad for any business. However, it is the inadequate working capital which is

more dangerous from the point of view of the firm.

DISADVANTAGES OF REDUNDANT OR EXCESSIVE WORKING

CAPITAL

1. Excessive working capital means ideal funds which earn no profit for the firm

and business cannot earn the required rate of return on its investments.

2. Redundant working capital leads to unnecessary purchasing and accumulation of

inventories.

3. Excessive working capital implies excessive debtors and defective credit policy

which causes higher incidence of bad debts.

4. It may reduce the overall efficiency of the business.

5. If a firm is having excessive working capital then the relations with banks and

other financial institution may not be maintained.

6. Due to lower rate of return n investments, the values of shares may also fall.

7. The redundant working capital gives rise to speculative transactions

Page57


DISADVANTAGES OF INADEQUATE WORKING CAPITAL

Every business needs some amounts of working capital. The need for working capital arises

due to the time gap between production and realization of cash from sales. There is an

operating cycle involved in sales and realization of cash. There are time gaps in purchase of

raw material and production; production and sales; and realization of cash.

Thus working capital is needed for the following purposes:

For the purpose of raw material, components and spares.

To pay wages and salaries

To incur day-to-day expenses and overload costs such as office expenses.

To meet the selling costs as packing, advertising, etc.

To provide credit facilities to the customer.

To maintain the inventories of the raw material, work-in-progress, stores and spares

and finished stock.

For studying the need of working capital in a business, one has to study the business

under varying circumstances such as a new concern requires a lot of funds to meet its

initial requirements such as promotion and formation etc. These expenses are called

preliminary expenses and are capitalized. The amount needed for working capital depends

upon the size of the company and ambitions of its promoters. Greater the size of the

business unit, generally larger will be the requirements of the working capital.

The requirement of the working capital goes on increasing with the growth and expensing

of the business till it gains maturity. At maturity the amount of working capital required is

called normal working capital.

Page58


Determinants Working Capital:

We can explain the determinants of working capital as follows:

Nature of business:

Terms of sales and purchases:

Manufacturing cycle:

Rapidity of turnover:

Business cycle:

Changes in technology:

Seasonal variation:

Market conditions:

Seasonality of operation:

Dividend policy:

Working capital cycle: Larger the working capital cycle, more is the requirement of working capital.

Page59


If working capital thus defined exceeds net current operating assets (stocks plus debtors less

creditors) the company has a cash surplus (usually represented by bank deposits and

investments); otherwise it has a deficit (usually represented by a bank loan and/or overdraft).

On this basis, therefore, the control of working capital can be sub divided into areas dealing

with stocks, debtors, creditors and cash.

Poor managing of working capital means that the funds are unnecessarily tied up in idle

assets, hence reducing liquidity, and also reducing the ability to invest in productive assets as

plant and machinery, so affecting the profitability.

The Investment Decision

All businesses, to one degree or another need working capital. The actual amount of working

capital will depend on many factors like age of the firm, the type of business activity, credit

policy and also time of the year. There is no standard fixed requirement. It is essential that an

appropriate amount of working Capital is budgeted to meet anticipated future needs. Failure

to budget correctly could result in the business being unable to meet its liabilities as the fall

due. If a business finds itself in such a situation, it is said to be technically insolvent. In

conditions of uncertainty firms must hold some minimal level of cash and inventories based

on expected sales, plus additional safety stocks. Firms with an aggressive working capital

policy hold minimal safety stock. Such a policy would minimize costs, but it could lower

sales because a firm may not be able to respond rapidly to changes in demand. Conversely, a

conservative working capital policy would call for large safety stocks. Conservative policy

has lower returns but lesser risk when compared to an aggressive policy. A moderate policy

falls somewhere between the two extreme policies.

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The Financing Decision

Working capital decisions involve the determination of the mix of long term versus short-

term debt. When the yield curve is upward sloping, short-term debt costs less than long term

debt. A firm with an aggressive financing policy finances part of its permanent asset base

with short-term debt (which generally provides the highest expected return but is very risky)

while a firm with a conservative finance policy has permanent financing (long term debt plus

equity) more than its permanent base of assets. This has much lower returns but also is much

safer.

Current Assets

It consists of cash of cash, investments, inventory and receivables and other market securities.

Current assets are normally converted into cash within a year.

These assets consist of:

1) Cash and bank balances

2) Investments

a) Government and other trustee’s securities.

b) Fixed deposits of banks, which are not earned, marked for any specific purpose,

maturing within one year.

3) Receivables

a) Sundry debtors arising out of sales other deferred receivables.

b) Bills discounted.

c) Investments of deferred receivables due within one year.

4) Inventory

a) Raw materials and components include those in transit.

b) Stock in process including semi finished goods.

Page61


c) Finished goods including goods in transit.

d) Consumable stores and spares.

5) Other current assets

a) Advanced payment of tax.

b) Advance for the purchase of raw materials, components and stores.

Inventories- They consist of tangible assets held for sale in business, for process of

production, or currently consumed in the production of goods or services for sale. Raw

materials are basically used in manufacture of the project, finished goods are final goods for

sale and semi finished goods are goods in process of production.

The constituents of inventory carrying cost are interest, storage, insurance, physical

deterioration and obsolescence. Inventory procurement also involves ordering cost consisting

of number of deliveries multiplied by the cost of delivery. These two costs make up the total

cost of inventory. The economic order quantity or lot size is to be found where the total

inventory cost is minimal.

Cash-Cash is the important component of current assets, which is kept to meet running

expenses and meet expenses and meet emergencies. It is the most liquid of current assets and

its level is determined by the liquidity of other assets. Cash is kept in the bank deposits or

readily convertible temporary investments.

Receivables-It rises out of delivery of goods or rendering of services on credit. They

include book accounts, notes and bills and accrued receivables. It represents claims against

others for future receipt of money, goods and services. They are considered on earning asset

because they finance sales. Their values depend upon the volume of the credit sales and

policy of collection of credit. Accounts receivables are valued at face value after deduction of

market rate of discount.

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Market Securities-A portion of current earnings may be invested in government

securities, bonds, debentures and shares which are readily marketable and may be converted

into cash at short notice.

Current Liabilities

Current liabilities consist of estimated or accrued amounts, which are anticipated to cover

expenditure within a year, for known obligation.

Current liabilities include:

Borrowings:

a) From banks

b) From other

Others:

a) Unsecured loans

b) Public deposits maturing within one year.

c) Sundry creditors for raw materials and stores.

d) Interest and other charges accrued but not due for payment.

e) Advance/progress payments from customers

f) Deposits from dealers, selling agents etc.

Statutory liabilities:

a) Provident fund dues

b) Provision for tax.

c) Sales taxes, excise etc

Miscellaneous current liabilities:

a) Dividends

b) Liabilities for expenses

c) Gratuity payable within one year.

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Current Liabilities

They comprise of borrowing from banks, trade credits, assessed tax and unpaid dividends.

The share of each constituent to total current liabilities partly determines the availability of

working capital. There is very little scope of maneuvering current liabilities.

Working Capital Management

It involves the management the administration of current assets liabilities. It consists of

optimizing the levels of current assets in a partial equilibrium context. Investment in current

assets should be made in such a manner similar to NVP approach used in making investment

decision in fixed assets. Current assets constitute a continuously fluctuating level of liquid

assets that is rapidly transformed from one form to another.

The normal rule for investment in fixed assets – invest in it if its NPV is positive cannot be

applied to current assets because the useful life of current asset cannot be determined. The

level and nature of current assets depend on product types, operating cycle, level of sales,

operating expenses, management and pricing. Current assets provide the liquidity necessary

to support the realization of the expected returns from long time investment. It is also true

that different assets have different type of liquidity. In terms of assets liquidity means the

time necessary to covert the asset into money and the degree of certainty associated with such

conversions.

Working capital is also necessary to synchronize cash flows from long-term assets that are

uncertain and irregular.

Amount of Working Capital

The amount of working capital it requires varies from unit to unit and between units in

different industries current assets are required because the operations do not convert into cash

instantaneously there is always an operating cycle which converts cash into raw materials,

raw material into goods in process, good in process into finished goods and finished good

into debtors through credit sales and finally debtors into cash..

Page64


1.4 Objective of the study

To evaluate the working capital management of the company.

To optimum investment in current assets.

To study and to analyze the various financial statements using ratio analysis.

To make a comparative analysis of sail’s financial performance & bsp’s financial

performance.

To offer suggestion for better cash management of BSP.

To forecast working capital for future.

1.5 scope of the study

To analyze the working capital position of BSP, Bhilai on the basis of calculation and

interpretation of some important parameters of liquidity such as current ratio quick

ratio, inventory turnover ratio & profitability ratio.

To give an overview of the company in which the project was carried out.

To find out the liquidity position of the company.

To find out the profitability position of the company.

Page65


Chapter II


REVIEW OF LITERATURE

Working cpital is a firm’s capacity in raising, handling and using money. Otherwise, it can be

said as a company’s ability to generate new sources, form day to day operation, over a given

period. Financial analysis is a powerful tool for the studying the working capital of a

company. Ti is the process of identifying the strengths and weakness of the company with

help of accounting information provided by profit & loss account and & balance sheet. It

make use of various tools like ratio analysis, trend analysis etc.

In attempt has been made to study the available literature in the area of “working capital” of

enterprises. The review mainly concentrated on the working capitalof the company up &

down of enterprises & current assets & liabilities etc. Review of literature shows that the

majority of the studies were conducted based on published dataof the companies & similar

line of to other studies. The related studies referred are presented below:

A study entitles “working capital in Korba, Chhattisgarh : A evalution on working capital of

NTPC was conducted by Bumitra Tripathi. The study was undertaken to examine & evaluate

the working capital of NTPC. The study which was descriptive was conducted using five

year’s financial statement of the company.

Rupesh gupta (2006) made “A study on the working capital management with reference to

Jindal steel industries raigarh”. The objective of the study was to analyze & evaluate the

working capital management, to analyze the liquidity position of the company, inventory

management of the company, to receivables, payables & cash management & suggest ways

& means to improve the present state of working capital. The author suggested the proper

management of inventory.

Page66


CHAPTER III


3.1 RESEARCH METHODOLOGY

Research in common parlance refers to a search for knowledge. One can also define research

as a scientific and systematic search for pertinent information on a specific topic.

Research methodology is a way to systematically solve the research problem. Research

methodology just does not deal research method but also consider the logic behind the

method. It facilitates the researcher with reason for evaluating the research problem.

DATA COLLECTION

The study is based on the secondary data obtained from published accounts and annual

reports of Bhilai Steel Plant.

1. Annual report for the period from 2005 to 2010

2. Journals

3. Plant visit

4. Personal discussion & interaction

The study covers a period of 5 years from 2006 to 2010. The research design adopted for the

purpose of working capital analysis was analytical and descriptive in nature.

THE TOOLS USED FOR ANALYSIS

Percentage analysis

Ratio analysis

Trend analysis

Page67


3.2 Limitations of the Study

The limitation encountered in the study on working capital management:-

Detailed analysis was not possible due to time constraints.

Limitation in non availability of data.

The analysis is based on the annual reports of the company.

The limitation of the data given in the annual reports is also applicable for the data

used in the study.

Non monetary factors like human behavior, their relationship etc are not considered.

Page68


CHAPTER IV


Current Assets

It consists of cash of cash, investments, inventory and receivables and other market securities.

Current assets are normally converted into cash within a year.

Current assets of B.S.P

Total inventories (in

Rs.crores) Table No.4.1

Particulars

Inventories:2005-2006 2006-2007 2007-2008 2008-09 2009-10

Stores and

Spares417.62 444.12 465.75 570.51 592.19

Raw materials

Stock353.99 342.95 284.73 484.18 588.77

Semi/Finished

goods734.15 769.59 962.42 1828.45 1430.96

Total 1505.76 1556.66 1712.90 2883.14 2611.92

Interpretation

Inventories are a major part of current asset. The inventories has increased by 68% in the

year 2008-2009 but for the accounting year 2009-2010 the inventories has decreased by

9.4%.

Page no 69


Total current assets:

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

Total

inventories1505.76 1556.66 1712.90 2888.52 2611.92

Sundry

debtors20.53 18.82 13.7 13.42 19.08

Cash and

bank balances33.81 36.80 39.86 43.14 51.40

Other current

assets16.55 16.55 12.6 10 10.11

Loans to

Others218.44 325.12 480.73 473.14 947.65

Total 1795.09 1951.26 2259.79 3419.25 3640.16

(In crores) Table no4.2

Interpretation

There is a nominal increase of 6% in the year 2009-2010 in current asset with respect to a

increase of 51% in the year 2008-2009. This slow increase is due to decrease of level of

inventories by 9.5% in the year 2009-2010 with respect to year 2008-2009.Although a

nominal increase , but increase in current asset shows the liquidity soundness of company.

Current Liabilities

Current liabilities consist of estimated or accrued amounts, which are anticipated to cover

expenditure within a year, for known obligation.

Page70


Current Liabilities of B.S.P

(In Rs. Crores) Table No. 4.3

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

Sundry creditors 518.08 521.81 771.77 991.52 1362.75

Security deposits 42.13 35.07 37.28 61.07 63.52

Other liabilities 289.95 353.20 446.71 658.70 745.47

Provisions 29.36 132.58 620.29 919.01 1001.09

Total current

liabilities879.52 1042.66 1810.88 2433.17 2580.11

Interpretation

Current liabilities shows company short term debts pay to outsiders. In the accounting year

2009-2010 the current liabilities increases by 6.8%..

Working capital management of BSP

The basic goal of working capital management is to ensure that a firm is able to continue its

operations and that it has sufficient ability to satisfy both maturing short-term debt and

upcoming operational expenses. The management of working capital involves managing

inventories, accounts receivable, accounts payable and cash.

Page71


WORKING CAPITAL

(In Rs. Crores) Table No: 4.4

Interpretation

Working capital is required to finance day to day operations of a firm. There should be an

optimum level of working capital. It should not be too less or not too excess. In the company

there is increase in working capita by 18% with respect to 2008-2009. The increase in

working capital arises because the company has expanded its business.

Methods of Analysis of Working Capital

Analysis of working capital is significant for both management and short-term creditors.

Managements can assess the efficiency of the working capital employed in the business.

Such an analysis helps management to detect trends and initiate corrective measures. It helps

the shareholders and creditors to determine the prospects of payment of dividend and interest.

The analysis of Working Capital helps in determining the ability of the company to repay its

current debt promptly, assess the effectiveness of management of working capital, adequacy

of working capital and to undertake credit ratings. Analysis of working capital relates to an

examination of circulation, liquidity, level and structural aspects of working capital. In

analysis of working capital the tools used are ratio analysis and funds flow analysis of the

company.

Page72

YearTotal current

assets

Total current

liabilities

Working

capital

(F-G=H)

2005-2006 1795.09 879.52 915.57

2006-2007 1951.26 1042.66 908.6

2007-2008 2259.79 1810.88 448.91

2008-2009 3424.25 2527.70 896.55

2009-2010 3640.16 2580.11 1060.05


Ratio Analysis

To analyze the current financial position of a company, ratios computed on the basis of the

figure appearing in the balance sheet are compared with norms set for the ratios. Depending

upon the purpose, various ratios are used. The ratio discussed here relate to liquidity,

circulation level and structure of working capital.

Liquidity Ratios

Net working capital is sometime used as a measure of firm’s liquidity.

1. Net working capital to total assets : It is the ratio between net working capital and

the total assets of a company.

Liquidity Ratios of B.S.P

Net working capital ratio = Net working capital

Net assets

Table No.4.5Year Total current assets Working capital Ratio

2005-2006 1795.09 915.56 0.51001:1

2006-2007 1951.26 908.60 0.46565:1

2007-2008 2259.79 448.91 0.19865:1

2008-2009 3424.25 896.55 0.26182:1

2009-2010 3640.16 1060.05 0.29120:1

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Interpretation Liquidity refers to the ability of a firm to meet its current obligations as and when these

become due. The short-term obligations are met by realizing amounts from current, floating

or circulating assets. The current assets should either be liquid or near about liquidity. These

should be convertible in cash for paying obligations of short-term nature. The sufficiency or

insufficiency of current assets should be assessed by comparing them with short-term

liabilities. If current assets can pay off the current liabilities then the liquidity position is

satisfactory. On the other hand, if the current liabilities cannot be met out of the current assets

then the liquidity position is bad.

To measure the liquidity of a firm, the following ratios can be calculated:

1. CURRENT RATIO

2. QUICK RATIO

3. ABSOLUTE LIQUID RATIO

1) Current ratio: It is the ratio between a firm’s current assets and its current

liabilities. It is the most frequently used ratio also called working capital ratio. It

is considered as an index of solvency of a company. It indicates the ability of a

company to meet its current obligations. Changes in current ratio can be

misleading. If a company raises money through commercial paper and invests

the amount in marketable securities, net working capital is unaffected but the

current ratio changes.

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a) Current Ratio:

Current Ratio = Current Assets

Current Liabilities

Table no. :4.6

Year Current assets Current liabilities Ratio

2005-2006 1795.09 879.52 2.04099:1

2006-2007 1951.26 1042.66 1.87143:1

2007-2008 2259.79 1810.88 1.2478:1

2008-2009 3424.25 2527.70 1.3546:1

2009-2010 3640.16 2580.11 1.4108:1

Interpretation

As we know that the ideal current ratio for any firm that ideal current ratio is 2:1. If we see

the current ratio of the company for last three years it is less than the ideal ratio. This

signifies that the company does not have a sound liquidity position. .It’s current assets is less

than that of its current liabilities.

b) Quick (or acid-test) ratio:

A high ratio is an indication that the firm is liquid and has the ability to meet its current

liabilities in time and on the other hand a low quick ratio represents that the firms’ liquidity

position is not good. As a rule of thumb ratio of 1:1 is considered satisfactory. It is generally

thought that if quick assets are equal to the current liabilities then the concern may be able to

meet its short-term obligations. However, a firm having high quick ratio may not have a

satisfactory liquidity position if it has slow paying debtors. On the other hand, a firm having a

low liquidity position if it has fast moving inventories.

The liquidity arises because finished goods cannot be sold for more than production cost.

Page75


The interval expressed in number of days measures the ability of the company to finance its

daily expenditure with the current assets in its position even if it receives no further cash.

Quick Ratio:

Quick Ratio = (Cash + Marketable Securities + Receivables) / Current Liabilities

Table no.: 4.7Year Cash +Marketable

Securities+ReceivablesCurrent Liabilities Ratio

2005-2006 289.33 879.52 0.32:12006-2007 394.60 1042.66 0.37:12007-2008 546.89 1810.88 0.30:12008-2009 536.11 2527.70 0.21:12009-2010 1028.24 2580.11 0.40:1

Interpretations

A quick ratio is an indication that the firm is liquid and has the ability to meet its current liabilities

in time. The ideal quick ratio is 1:1. Company’s quick ratio is less than ideal ratio. This shows

company may have liquidity problem. However, a firm having high quick ratio may not have a

satisfactory liquidity position if it has slow paying debtors

C) ABSOLUTE LIQUID RATIO

2. Although receivables, debtors and bills receivable are generally more liquid than

inventories, yet there may be doubts regarding their realization into cash immediately

or in time. So absolute liquid ratio should be calculated together with current ratio and

acid test ratio so as to exclude even receivables from the current assets and find out

the absolute liquid assets. Absolute Liquid Assets includes :

ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSETS

CURRENT LIABILITES

ABSOLUTE LIQUID ASSETS = CASH & BANK BALANCES.

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Table no:4.8

Interpretation

Year Cash& bank Current liabilities Ratio

2007-2008 39.86 1810.88 0.022

2008-2009 43.14 2527.70 0.017

2009-2010 51.40 2580.11 0.019

These ratio shows that company carries a small amount of cash. But there is nothing to be worried

about the lack of cash because company has reserve, borrowing power & long term investment. In

India, firms have credit limits sanctioned from banks and can easily draw cash.

Circulation of Working Capital

An analysis of circulation aspect throws light on the efficiency with which working capital is

being utilized in a firm. Various turnover ratios covering each component of current assets

have been developed to analyze the efficiency in the use of working capital. The higher the

turnover of these components, the lower will be the need of working capital. These ratios

may be divided into 5 categories as

Inventory turnover ratios

Receivables turnover ratio

Current assets turnover ratio

Working capital turnover ratio

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Inventory turnover ratios: Inventory turnover ratios show the extent of use of working funds in

different types of inventory. These ratios include

Turnover of raw materials inventory : this ratio shows the number of times the raw

materials were replaced during a year. It is obtained by dividing raw materials issued

to the factory by raw materials in ending inventory. A low ratio indicates that

excessive raw materials have been procured and a high ratio indicates that more raw

materials are required.

Turnover of goods-in-process : It is obtained by dividing the value of goods produced

in a year by the value of goods in process at the end of the fiscal year. A high ratio

shows less accumulation of inventory.

Turnover of finished goods inventory : It is obtained by dividing net sales by finished

goods inventory. A high turnover indicates that a higher level of sales has been

attained with less investment in finished goods inventory.

Turnover of aggregate inventory: It is obtained by dividing net sales in a year by the

value of aggregate inventory at the end of the year. A high turnover quickens the flow

of funds from inventory.

Turnover of current assets: This ratio measures the turnover of total current assets used in

business operations. The ratio is obtained by dividing cost of goods sold by total current

assets. A lower turnover indicates utilization of working capital. .

Current asset turnover ratio:

Page78

C.A.T.R = sale

Avg. Current asset


Table no.4.9

YearOpening

balance

Closing

balance

Average current

assetSales

Current asset

turnover ratio

2005-06 1297.22 1795.09 1546.16 9564.63 6.18times

2006-07 1795.09 1951.26 1873.18 11771.09 6.28times

2007-08 1951.26 2259.79 2105.52 14156.35 6.72 times

2008-09 2259.79 3424.25 2842.02 18496.70 6.5 times

2009-2010 3424.25 3640.16 3532.205 15874.30 4.49times

Interpretation Funds

are invested in various assets in business to make sales and earn profits. The efficiency with which

assets are managed directly affects the volume of sales. The better the management of assets, large is

the amount of sales and profits

Current assets movement ratios measure the efficiency with which a firm manages its resources.

These ratios are called turnover ratios because they indicate the speed with which assets are converted

or turned over into sales.

1) Inventory Turnover Ratio

Every firm has to maintain a certain amount of inventory of finished goods so as to meet the

requirements of the business. But the level of inventory should neither be too high nor too low.

Because it is harmful to hold more inventory as some amount of capital is blocked in it and some cost

is involved in it. It will therefore be advisable to dispose the inventory as soon as possible.

Page79


Inventory turnover ratio measures the speed with which the stock is converted into sales. Usually a

high inventory ratio indicates an efficient management of inventory because more frequently the

stocks are sold; the lesser amount of money is required to finance the inventory. Where as low

inventory turnover ratio indicates the inefficient management of inventory. A low inventory turnover

implies over investment in inventories, dull business, poor quality of goods, stock accumulations and

slow moving goods and low profits as compared to total investment.

Inventory turnover ratio = cost of good sold / average inventory

Inventory conversion period

Table no.:4.10

YearOpening

balance

Closing

balance

Average

inventory

Inventory

turnover ratio

Inventory holding

period

2005-06 1041.68 1505.76 1273.72 5.33 times 68 days

2006-07 1505.76 1556.66 1531.21 4.9 times 73 days

2007-08 1556.66 1712.90 1634.78 5.31times 62 days

2008-09 1712.90 2883.79 2298.345 6.298 times 58 days

2009-2010 2883.79 2611.92 2747.855 5.8 times 62 days

Page80

I.C.P = 360

Inventory turnover


Interpretations:

A) Inventory turnover ratio:

This ratio shows how rapidly the inventory is turning into receivable through sales.

In 2008-09 the company has high inventory turnover ratio but in 2009-2010 it has

reduced to 5.8 times. This shows that the company’s inventory management

technique is less efficient as compare to last year.

B)Inventory conversion period

Inventory conversion period shows that how many days’ inventories take to convert from raw

material to finished goods. In the company inventory conversion period is fluctuating. This shows the

inefficiency of management to convert the inventory into cash.

2) Debtor’s Turnover Ratio

A concern may sell its goods on cash as well as on credit to increase its sales and a liberal

credit policy may result in tying up substantial funds of a firm in the form of trade debtors.

Trade debtors are expected to be converted into cash within a short period and are included in

current assets. So liquidity position of a concern also depends upon the quality of trade

debtors. Two types of ratio can be calculated to evaluate the quality of debtors.

a) Debtors Turnover Ratio b) Debtors Collection Period

DEBTORS TURNOVER RATIO = TOTAL SALES / AVERAGE DEBTORS

Debtor’s velocity indicates the number of times the debtors are turned over during a year.

Generally higher the value of debtor’s turnover ratio the more efficient is the management of

debtors/sales or more liquid are the debtors. Whereas a low debtors turnover ratio indicates

poor management of debtors/sales and less liquid debtors. This ratio should be compared with

ratios of other firms doing the same business and a trend may be found to make a better

interpretation of the ratio.

Page81


3) Creditor’s payment period:

NOTE - In B.S.P we do not have debtors and creditor’ turnover as the finished goods produced in all the plants of SAIL are directly transferred to CENTRAL MARKETING ORGANIZATION (CMO) headquarters were further marketing of these finished goods occurs , so B.S.P has nothing to do with creditors and debtors.

Page82

Debtors collection period = 360

Debtor Turnover

Creditor payment period = Avg.trade credit

Credit purchase per

day


Table showing forecasting working capital for the next five financial years

using least square trend method

∑Y=na+b∑x ∑xy

= a ∑ x+ b∑x2

(In crores) table no:4.11

Year ending

31st march

Net working

capital (y)

Deviation from

middle year(x) X2 XY

2006 915.57 -2 4 1813.14

2007 908.60 -1 1 908.60

2008 448.91 0 0 0

2009 896.55 1 1 896.55

2010 1060.05 2 4 2120.1

∑y= 4229.68 ∑x2= 10 ∑xy= 5738.39

We have n= 5

4229.68= 5a + bx 0 5738.39 = 0 + b x 10

a = 845.94 b = 573.84

Page83


Table showing forecasting working capital using least square method

Table no.4.12

Year end X Y = a + b x

2011 3 845.94 + 573.84*3 = 4259.34

2012 4 845.94 + 573.84*4= 5679.12

2013 5 845.94 + 573.84*5= 7098.9

2014 6 845.94 + 573.84*6= 8518.68

2015 7 845.94 + 573.84*7= 9938.46

Page84


A Comparative Study of SAIL, Contribution of B.S.P in SAIL Profit Financial accounts

a) UNDERSTANDING PROFIT & LOSS ACCOUNT

PROFIT AFTER TAX (PAT) = Profit before tax – Tax.

Table no.4.13

Particulars SAIL (Rs. /Crs.) BSP (Rs. /Crs.)

PBT10132.03

4270.48

LESS : TAX3377.66

PAT6754.37

4270.48

Interpretation

The company SAIL has achieved a profit of Rs6754.37crs (profit after tax) in SAIL profit the

Bhilai Steel Plant comprises for 63% of profit, contributing the most.

CASH PROFIT = Profit before tax (PBT) + Depreciation

Depreciation Is added because it s not actual cash outflow, it is an appropriation of fund

Future replacement of old assets with new assets

DEPRECIATION IS CHARGED AT THE RATE PRESCRIBED UNDER SCHEDULE XIV

OF THE COMPANY ACT, 1956.

Table no. 4.14

Page85


Profit Before tax(PBT)

10132.03 4270.48

Add :Depreciation 1337.24269.11

Cash Profit 11469.274539.59


Interpretation

Adding depreciation to the profit after tax the cash profit of SAIL is found to be Rs.

11469.27crs. The bhilai steel plant alone contributes a cash profit of Rs.4539.59crs. i,e

approximately 40%.of the total cash profit.

Operating profit

OPERATING PROFIT = PROFIT BEFORE TAX + INTEREST & FINANCE CHARGES.

Table no :4.15



10132.03 4270.48

Add Int.& Fin. Charges402.01 133.01

Operating Profit 10534.04 4403.49

Gross margin

GROSS MARGIN = PROFIT BEFORE TAX + INTERST + DEPRECIATION.



10132.03 4270.48

Add Int.& Fin. Charges 402.01 133.01


Depreciation1337.24 269.11

Gross Margin 11871.284672.60

Table no.4.16

Page86


Profitability ratios

Gross profit / Margin ratio = Gross margin / turnover *100 Net Profit Ratio = Operating profit / Turnover * 100 Operating Ratio = Operating profit / turnover * 100

Profitability ratiosTable no.4.17

Particulars SAIL (Rs./Crs.) B.S.P (Rs./Crs.)

Turn Over (Sales)43934.70 15874.30

Gross Margin11871.28 4672.60

Operating Profit10534.04 4403.49


10132.03 4270.48

Gross MarginRatio

27.02% 29.43%

Operating Ratio23.98% 27.74%

Net Profit Ratio23.06%

26.90%

Interpretations

The net profit as seen in the calculations above is seen to be 23.06% of SAIL of which B.S.P

contributes of about 26.90%.

Turnover of BSP11389 11217

1352616518

1849715874

0

4000

8000

12000

16000

20000

04-05 05-06 06-07 07-08 08-09 09-10


Page87

Profit of B.S.P

Interpretations

As seen in the graph the net profit has increased by 25% in the year 2007-08(base year 2006-

07), but later the profit has started to decline. In the year 2008-09 the profit declined by 7.4%.

Further in the year 2009-2010 the profit declined by 14%.

This decline in profit is due to decrease in turnover by 14%. Resulting in decrease of sales.

A good co-ordination between raw material conversion period and finished goods conversion

period has to be maintained by the organization.

4. Debtors conversion period = Debtors × 360 Credit sales

4042

2781

4272

53664966

4270

0

1000

2000

3000

4000

5000

6000

04-05 05-06 06-07 07-08 08-09 09-10


5. Creditors deferral period = Creditors × 360 Debit sales

Note: - BSP doesn’t go for the calculation of DCP & CDP as both the things are dealt in

corporate office, hence due to this reason working capital management is not done at BSP.

Page88

CHAPTERV


Finding, suggestion &

conclusion



5.1 SUGGESTIONS & FINDINGSI came across following suggestions and findings during undergoing the project work

on topic “A STUDY ON WORKING CAPITAL MANAGEMENT OF THE BHILAI

STEEL PLANT, BHILAI, CHHATTISGARH

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

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

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

Accounts department, which makes it possible.

2. In the BSPs there not to create debtors they generally deal with first to receive the

cash or cheque, and then they supply the finished material.

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

SAP system to manage the over all activity.

4. During the study I find that their is no huge variation in budget decided and the

actual one.

5. Bills of store handling contracts and freights payments are not processed through

MMIS. As a result records of these payments are not available in the system,

which makes task tedious and hence ERP is to be implemented to resolve the

problem.

6. Government is not having the commercial approach regarding the implementation

of taxes.

7. The taxation policy is to be made flexible because of which bulkiness of the work

is to be removed.

8. The tendering process time is to be minimized so that the current market price

benefits if any can be availed.

9. Monthly return filling is not on line process, hence sales and excise department

face problem.

10. Online inventory valuation can be implemented

11. The departmental policies is to made flexible which leads to decrease in the work

flow process as well as it leads in better profits.

Page89


5.2 Conclusion

Bhilai Steel Plant a major unit of sail has been generating continuous profits as compared to

previous year with current year. To summaries, working capital at a plant level, this mainly

involves forecasting and monitoring of various components, which is done systematically.

Whereby major portions of receivables are managed by central marketing organization for all

plants level. Other important components of working capital are bill payables and borrowings

of funds monitored by corporate level.

Finance Department of Bhilai Steel Plant and various individual units decides the amount of

funds requirement during the preparation of operation budget, and then requirement of fund is

intimated to corporate office. Cash inflows and outflows are estimated in budget.

The marketing of all SAIL’s prime products are done by the central marketing organization

and the receipts of sale are directly sent into the inner unit current account which is centrally

controlled by the corporate office allocates the funds as per intimation to individual units.

Cash is monitored every day and intimated to the top management as well as fortnightly to

the company.

Inventory is monitored differently for raw materials, work in progress, finished goods and

stores. Monthly inventory report is sent to chairman through the finance department to

corporate office, but the major portion of debtor are dealt by central marketing organization.

Bhilai Steel Plant (BSP) is an enormous unit and hence the evaluation of its working capital

management cannot be done thoroughly but in our brief stay we have at our best tried to

present a general idea of the working capital management at BSP.

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

current ratio, both of which have been explained earlier. The current ratio is the indication of

the amount of money that a company has in comparison to what it owes and it is generally

considered adequate to have a current ratio of more than 2:1. Post observing the ratios for the

last five years it can be observed that the ratio in nearly all cases is more than one which

indicates that BSP always has money at hand.

Page90


It is also noticeable that the ratio for most of the years is very close to two and it ascertains

that BSP is in very good health and also that the working capital management of this

behemoth is exceptionally good.

The quick ratio is a measurement of the liquid assets that the unit in question has at hand.

Basically if one takes out inventories from the calculation of current ratios we get the quick

ratio. It is usually expected that the quick ratio be more than 1:1 but in case of BSP it has

remained at an even level of nearly 0.3. This is because the expected quick ratio is for

industries where inventories are not as important as they are in the steel industries. It is said

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

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

hand. Besides the company that is as big as BSP the liquid assets still amount to nearly 300

crores which is adequate for all transactions that may need to be carried out.

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

nearly 4,000 crores. The reasons behind these are excellent management of the finances. This

statement can easily be supported by the statistics of the years 2003-04 in which one can see

that BSP made a profit of nearly 4000 crores with a working capital of -93.14 crores.

Page91


BIBLIOGRAPHY

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

1. Web Sites:

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

1.2.www.indiansteelalliance.org,

1.3.www.sail.co.in.

2. Books:

2.1.Financial Management, I M Pandey,

2.2.Project Management and Control (2000), Narendra Singh.

3. Other Reference:

3.1. Functional & Finance accounts manual ,

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

3.3. Previous finance year book,

3.4. SAIL journal,

3.5. BSP news magazine,

3.6. BSP Performance Highlights 2008-2009 magazine,

Page92

http://www.sail.co.in/

http://www.indiansteelalliance.org/

http://www.google.co.in/


AnnexureLIST OF ABBREVIATIONS :

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

page93

Final Project of Working Capital

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