Renu Final Edited

8/6/2019 Renu Final Edited

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A Summer Internship Report on Working CapitalManagement

The on the job training is an integral part of MBA course which

gives the student a practical knowledge about the functioning

of an organization. The main objective of the training is to

provide a platform to learn and acquire different business skills

from the professionals. It teaches the students to adapt

themselves to various challenges in the work front, which helps

to develop professionalism within them. The sole objective ofthis project was to analyze the working capital management of

Rourkela steel Plant (RSP) for four years from 2005-06 to 2008-

09. Working capital involves deciding upon the amount and

composition of current asset and the manner in which to

finance them. Determining the appropriate levels of working

capital involves fundamental decisions with regard to the firm's

liquidity and trade off between risk and profitability. Greater the

amount of working capital level maintained, the lesser is the

risk of running out of cash, although profitability will be less, in

case of lower level working capital, the profitability will be

greater but the risk of running out of capital to meet the day-to-

day requirement will be more.

This two and half months of training gave me valuable

information about the Rourkela Steel Plant, its performance,

liquidity position, sales, funds availability, working capital

requirement, etc. The area of study is as follows:

1. Analyzing the working capital of RSP.

2. Measuring the operating cycle.

3. Ratio analysis.

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EXECUTIVE SUMMARY


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Each and every firm has got a specified source of funds. The

objectives of the study comes out to be enhancing one'sknowledge by analyzing how a firm like RSP with limitedamount of funds has been progressing by a better fundmanagement.

The objective of my project is as follows:-

To learn the functioning of the organization and skills,roles and responsibilities, of the financial manager in an

organization.

To know the day to day finance of RSP.

To know the efficiency of financial operations of RSP.

To know the trends of the working capital over the lastfour years.

To analyze the elements of the current asset and currentliabilities and to identify those elements which are responsible

for the changes in the working capital?

6.To assess the significance of the working capital byselecting a few parameters such as Current Ratio, Quick Ratio,Working Capital Ratio.

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Study OBJECTIVES


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To familiarize with the various financial statistics such assales, profit, production and manpower resource of a large

scale-manufacturing unit like RSP for the last four years.

Sources of information

Mainly the study was based on two types of data.

1. Primary data2. Secondary data

1. Primary data :Primary data are those data collected from individual officialguides view from organizations these data are collectedthrough personnel interview observation of records, ledger, file,etc, collection of those data is time consuming but these aremost important and reliable.

2. Secondary data:

Secondary data are those data which are already gatheredand available. There may be internal source within plant;externally that source may include book, periodicals, publishedreport, data service, annual reports.For collections of secondary data following are considered:-

Books on subject Published reports relevant to the subject Commercial data Files Published Records of the plant

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PROJECT DESIGN AND METHODOLOGY


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Period of the study:In the summer training project I have analysed themanagement of working capital of Rourkela steel plant (RSP)Rourkela for the past four years from 2004-05 to 2007-08.

Area of the study:In the summer training project I have prepared the reportentitledManagement of working capital in Rourkela steel plant. Thearea of theStudy is as follows:

1. Analysis of operating cycle2. Measuring the working capital3. Ratio analysis

Sample designIn this study, the samples of four financial years 2004-05 to

2007-08 are taken from in Rourkela steel plant, Rourkela. in thisstudy I am using secondary data for collecting the valuableinformation. The sources of secondary data for the study arethe balance sheet and their related schedules of the plant fourfinancial years 2004-05 to 2007-08 of Rourkela. Globally, thesteel production is close to 28 million tone and growing at therate of 5-6 % every year. The main demand creators for SteelIndustry are Automobile industry, Construction Industry,Infrastructure Industry, Oil and Gas Industry, and Container

Industry. New innovations are also taking place in Steel Industryfor cost minimization and at the same time productionmaximization. Some of the cutting edge technologies that arebeing implemented in this industry are thin-slab casting,making of steel through the use of electric furnace, vacuumdegassing, etc.

The Steel Industry has enough potential to grow at a muchaccelerated pace in the coming future due to the continuity of

the developmental projects around the world. This industry is atpresent working near its productive capacity which needs to be

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increased with increasing demand. India being one among thefastest growing economies of the world has been considered asone of the potential global steel hub internationally. Over theyears, particularly after the adoption of the liberalizationpolicies all over the world, the World steel industry is growingvery fastkela steel plant, Rourkela

Steel, plays a vital role in the development of any modern

economy. The per capita consumption of steel is generally

accepted as a yardstick to measure the level of socio-

economic development and living standards of the people.

As such, no developing country can afford to ignore the steel

industry. There have been almost revolutionary changes in

the global steel scene with fierce competitive pressures on

performance, productivity, price reduction and customersatisfaction. National boundaries have melted to encompass

an ever increasing world market. Trade in steel products has

been on the upswing with the production facilities of both

the developed and the developing countries complementing

each other in the making of steel of different grades and

specialty for the world market.

GLOBAL STEEL INDUSTRY SCENARIO

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INTRODUCTION TO STEEL INDUSTRY


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Steel Industry is a booming industry in the whole world. Steel Industry is

becoming more and more competitive with every passing day. The

increasing demand for it was mainly generated by the developmentproject that has been going on along the world, especially the

infrastructural works and real estate projects that has been on the boom

around the developing countries.

During the period 1960s to late 1980s, the steel market used to be

dominated by OECD (Organization for Economic Cooperation and

Development) countries. Steel Industry was till recently dominated by the

United Sates of America but this scenario is changing with a rapid

pace with the Indian steel companies on an acquisition spree. Butwith the fast

Emergence of developing countries like china, India and South Korea

in this sector has led to slipping market share of OECD countries.

The balance of trade line is also tilting towards these countries.

It has been observed that steel industry has grown tremendously in

the last one and a half decade with a strong financial condition. The

increasing need of steel by the developing countries for its

infrastructural projects has pushed the companies in this industry

near their operative capacity

INTRODUCTION:- Steel Industry in India is on an upswingbecause of the strong global and domestic demand. India's rapideconomic growth and soaring demand by sectors likeinfrastructure, real estate and automobiles, at home and abroad,has put Indian steel industry on the global map. According to thelatest report by International Iron and Steel Institute (MSI), India is theseventh largest steel producer in the world. The Indian steel industryis organized in three categories i.e., main producers, other majorproducers and the secondary producers. The main producers andother major producers have integrated steel making facility with

plant capacities over 0.5 mT and utilize iron ore and coal/gas forproduction of steel. The main producers are Tata Steel, SAIL, and

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SCENARIO OF INDIAN STEEL INDUSTRY


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RINL, while the other major producers are ESSAR, ISPAT and JVSL.

PRODUCTION :- Steel production grew at 1.2 percent in theJanuary-march quarter of 2008-09 over the same period last year.The fourth quarter saw most of the large steel companies such asSAIL, Tata Steel, Essar and JSW operating at full capacity.

The national steel policy has a target for taking steel production upto 110 MT by 2019-20. The ministry of steel has projected India'ssteel capacity to touch 124.06 MT by 2011-12. In, based on thestatus of Memoranda Of Understanding (MOUs) signed by theprivate producers with the various state government, India's steelcapacity is likely to be 293 MT by 2020.

CONSUMPTION :-lndia is the 5th largest consumer of steel in

the world. It consumes about 1.5 MT of stainless steel a year witharound 70 percent accounting for kitchenware. However, its usesin railway coaches, wagon, airport, hotel and retail stores isgrowing immensely. Demand for steel in India is likely to grow ataround 12 percent against the' global average of 5-6 percent. Steelconsumption grew at 3.8 percent in the January-March quarter of2008-09 over the same period last year.

A credit Suisse Group study states that India steel consumption will

continue to grow by 16 percent annually till by 2012, fuelled bydemand for construction projects worth US s 1 Trillion

EXPORT :- Out of India's annual iron-ore production ofmore than 200MT, about 5 to 12.6 MT in February 2009 from 10.8 MT in thesame month a year ago, owing to moderate revival in demandfrom Chinese steel producer.

INVESTMENTS :- A host of steel companies have lined upmajor investment proposals. Furthermore, with an expandingconsumer market, the Indian steel industry is likely to receivedomestic and foreign investments.

1. According to Investment Commission of India, investmentsof over US$ 30 billion is in the pipeline over the next 5years.

2. Japan's Sumitomo Metal Industry, is planning to build a

blast furnace steel plant in India with mid- tier producerBhushan steel investing as much as US $ 3 billion.

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3. Arcelor- Mittal, the largest steel maker of the world, isplanning to set up a captive port near Paradip in Orissa.

The port will be used to serve to mega integrated steelplants of the company proposed in Orissa and Jharkhand.

GOVERNMENT INITIATIVES :- Subsequently the recentfall in international prices of commodities and to protect Indianproducer, the Indian government has announced somechanges in the custom duty rates, which were effective fromNovember 2008. Iron and steel products like pig iron,spiegeleisen, semi-finished products, flat products and longproducts are now subject to a basic custom duty of 5 per centad valorem.

CONCLUSION :. The outlook for Indian steel industry isvery bright. India's lower wages and favourable energy priceswill continue to promise substantial cost advantages comparedto production facilities in (Western) Europe or the US. It is alsoexpected that steel industry will undergo a process ofconsolidation since industry players are engage in anunfettered rush for scale. This is evident from the recentacquisition of Corus by Tata. The deployment of modernproduction systems is also enabling Indian steel companies to

improve the quality of their steel.

Steel Authority of India Limited (SAIL) is India's largest steel

producing company. With a turnover of Rs. 40, 000 crore, thetop five highest profit earning corporate of the country. It is a

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INTRODUCTION TO SAIL:-

Vision statement:

"To be a respected world class corporation and the leader in

Indian steel business in quality, productivity, profitability

and customer satisfaction."


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fully integrated iron and steel maker, producing both basic andspecial steels for domestic construction, engineering, power,railway, automotive and defense industries and for sale inexport markets. SAIL manufactures and sells a broad range ofsteel products, including hot and cold rolled sheets and coils,galvanized sheets, electrical sheets, structurals, railwayproducts, plates, bars and rods, stainless steel and other alloysteels. SAIL produces iron and steel at five integrated plantsand three special steel plants, located principally in the easternand central regions of India and situated close to domesticsources of raw materials, including the Company's iron ore,limestone and dolomite mines. The company has the distinctionof being India's largest producer of iron ore and of having thecountry's second largest mines network. This gives SAIL a

competitive edge in terms of captive availability of iron ore,lime.

OWNERSHIP AND 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. Major Units of SAIL

1. 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 in West Bengal

2. Special steel plants

Alloys steel plants (ASP) in West Bengal

Salem steel plant (SSP) in Tamilnadu

Visvesvarya Iron and Steel Plant (VISL) in

Karnataka

3. Subsidiaries

Maharashtra Elektrosmelt limited (MEL) in

Maharashtra

Bhilai Oxygen Limited (BOL) in New Delhi

SAIL Consultancy Division in New Delhi

Research and Development Centre for Iron and

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Steel in Ranchi

Management and Training Institute in Ranchi

SAIL Safety Organization

Environment Management Division in Kolkata

Growth Division in Kolkata Central power Training institute in Rourkela

Center Coal Supply Orgainisation in Jharkhand

4. Joint Ventures

Bokaro Power Supply Company Pvt Limited

Bhilai Electric Supply Company Pvt Limited

UEC SAIL Information Technology Limited

Metaljunction.com private Limited SAIL Bansal Service Center Pvt Ltd

Bengal Dolomite Limited

PRODUCTION:

As part of the plan SAIL will increase hot metalproduction from its plants to a level of about 20 million

tones per annum (MTPA) by 2012 against the currentlevel of 13MT.in view of emerging market requirement,SAIL ahs also planned to raise its output of finishedsteel to 16.6 MTPA by 2011-12 from the current level of8.6 MT, and reduce generation of semi-finished steelfrom 20% of saleble steel to 40%.This will enableinclusion of more value-added products in thecompany's product basket. The envisaged growth involumes are planned to be achieved by-

Realization of full potential of existing assets De-bottlenecking

Linked facilities for value addition

Capacity enhancement in growth segments

MANAGEMENT OF THE SAIL:- Steel Authority of India Limited is managed by an efficient

and experienced board of directors aided by the

chairman.

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Chairman of SAIL: shri S.K. Roongta

MD of Rourkela Steel Plant: Shri B.N. Singh

MD of Bokaro Steel Plant: Shri V.K. Srivastava.

MD of IISCO Steel Plant: Shri Nilotpal Roy.

Other board of directors of SAIL are:- Shri Mohammad Yusuf Khan,

Shri G. Ojha, G. Elias, Dr. Velu Annamalai, Dr.S.C Jain, Shri

P. K.

Sengupta, Shri Arun Kumar Rath.

SOCIAL CONTRIBUTION OF STEEL AUTHORITY OF

INDIA LIMITED:-

Steel Authority of India Limited is involved in a number of

social activities and has taken up the job of the overall

management and restoration of 5 monuments within

the Lodhi Gardens, located at Delhi as a part of its

social responsibility. The company strives to improve

the condition of women in India and has therefore,

created certain samities within the steel manufacturing

units. These units are involved in:1.Community Welfare Activities

2. Manufacturing products for general use in plants

. Providing vocational training to women

4. Romelt SAIL (India) Ltd

4. Assistance during natural calamities.

Steel Authority of India Limited has also arranged for All

awareness programs, anti-leprosy camps and a host of

other social welfare programs tone, and dolomite which

are

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

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financial autonomy. Major Units of SAIL

1. Integrated steel plants

Bhilai steel plant (BSP) in Chhattisgarh

Durgapur steel plant (DSP) in West BengalRourkela steel plant(RSP) in Orissa

Bokaro steel plant(BSL) in Jharkhand

IISCO steel plant in West Bengal

2. Special steel plants

Alloys steel plants (ASP) in West Bengal

Salem steel plant (SSP) in Tamilnadu

Visvesvarya Iron and Steel Plant (VISL) in

Karnataka3. Subsidiaries

Maharashtra Elektrosmelt limited (MEL) in

Maharashtra

Bhilai Oxygen Limited (BOL) in New Delhi

SAIL Consultancy Division in New Delhi

Research and Development Centre for Iron and

Steel in Ranchi

Management and Training Institute in Ranchi SAIL Safety Organization

Environment Management Division in Kolkata

Growth Division in Kolkata

Central power Training institute in Rourkela

Center Coal Supply Orgainisation in Jharkhand

4. Joint Ventures

Bokaro Power Supply Company Pvt Limited

Bhilai Electric Supply Company Pvt Limited UEC SAIL Information TechnologyLimited Metaljunction.com privateLimited

SAIL Bansal Service Center Pvt LtdBengal Dolomite Limited

SAIL IN FUTUREAs the largest steel producer in the country, Steel Authority of

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India limited (SAIL) has always believed in structured planningfor achieving organization growth. This has also contributedsignificantly to national interests, given the steel sector's strongbackward and forward linkages. Changes in businessenvironment call for periodical review of long term plans. In thebackdrop of the upheavals faced by the global steel business inthe recent past, the general perception that the current phaseof buoyancy in the market will last for a longer time- span, andmarket growth projections of around 13%, SAIL felt it necessarya long term perspective plan for itself, superceding the lastsuch plan drawn up in 1992.'corporate plan- 2012', which hasbeen drawn up as a consequence, provides a blueprint for thecompany's growth in the coming years in tandem with agrowing market. By 2012, the consumption of steel in india is

expected to reach around 55 to 60 million tones (MT), nearlydouble the current level. Given its available infrastructure andskill base, SAIL has the comparative advantage to supplyadditional volumes at the most competitive cost to the nation.Besides, the centre for policy research, in its November 2002report dealing with perspectives up to 2025, indicates that theconstruction, cold-reducing and oil &gas transportationsegments are poised for major growth in India. TMT Bars &Rods,structural, HR/CR Coils, plates and pipes have been identified as

the key growth products for the domestic steel industry. ForSAIL which is an established and significant player in theseproducts segments, the scenario holds a huge potential forgrowth. Corporate Plan 2012 envisages enhancement in SAIL'sdomestic market share from the current level of around 50% (itis estimated that in 2003-04 steel consumption in the countrycrossed 100MT) to around 47% (of the projected 100-150 MT)through a mix of measures, including stepped- up production,further intensification of market- orientation, and improved andmultiple managerial interventions to optimize resource u SAIL

has estimated that the measures to be taken to achieve thetargeted levels of growth and sustain higher levels of cost andquality competitiveness will require investment in the region ofrs 25000 crore by 2011-12. The immediate priority schemes, tobe taken/ completed by 2006-07, have been estimated to bearound RS4300 crore. The capital expenditure envisaged will befinanced mainly through internal accruals, and will besupplemented by market borrowing if the need arises. Care willbe taken to ensure that the company's debt-equity ratio attains.

Corporate Plan, 2012 (CP12) was formulated in 2004 for 4

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integrated steel plants for increase in Hot Metal production to 20 MT

by 2012. After merger of in IISCO February 2006, the Hot Metal

production Plan was revised to 22.5 Mt by 2012. Expansion of

Special Steel Plants was also included. Besides capacity

enhancement, the plan also addresses the need of SAIL Plants

towards eliminating technological obsolescence, energy savings,

enriching product mix, pollution control, developing mines &

collieries to meet higher requirement of key raw materials, introduce

customer centric processes and have matching infrastructure

facilities in the Plant to support higher production volumes.

Investment to the tune of Rs 34,982 crore was envisaged under the

Corporate Plan. It was envisaged to take up the Projects in

segregated manner based on the Techno-economic viability of each

project.

The Govt, of India under the ablest leadership of the then PrimeMinister Pt. Jawaharlal Nehru, decided to set up large SteelPlants by the Govt, itself after the general election of 1952.Rourkela and its adjacent areas are rich in iron ores, manganese,dolomite and limestone's, the basic materials for production ofiron and steel. Considering Rourkela to be best place for a steelplant, the survey work was completed in the year 1954.

The infrastructure work of the plant was accomplished inbetween 1955 and 1960. Almost thirty-two villages were

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ROURKELA STEEL

PLANT


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alienated and the people of the villages were resettled. TheRepublic of Germany extended technical knows how for theconstruction of the steel plant and the plant was considered a

joint venture of the Govts. Of Indian and Germany. The initialproduction limit of one million tones steel per annum was raised

to 1.8 million tones in the subsequent years. The internationallyreputed firms like the Krrups, Dimag, G.H.H. Sag, Scholomen,Cemens and Voist Eipine etc. Supplied different machines andmachinery parts to the plant at the beginning stage. TheRourkela Steel Plant took the part of leadership in the process ofsteel production under L.D. techniques. It could also establisheditself as one of the premier industries of the world under thesystem of basic oxygen converter.

The extension work of the plant was over by the year 1968. Acircular welding pipe plant and special plate plant were set up inthe decade of seventies for production of different ready-madematerials. To avoid scarcity of power supply the plant set up apower plant by itself with a capacity of 120 M.W. The powerplant is able to cater the requirement of power supply from theyear 1986.

The modernization of Rourkela steel plant was begun in themonth of August 1988 with a view to producing qualitative

materials and establishing its importance in the world market.The process of modernization entailed an expenditure outlay ofrupees 4500 cores. Some nine main packages including someancillary packages were executed at the first phase. This phaserevamped the process of supply of raw materials, new oxygenplant, improved techniques in blast furnaces, selling of dolomiteplant, Cast house slag glandular plant, supply of raw materialstwo number of Sintering plant and coal handling plants etc.

Similarly with the implementation of some sophisticatedsystems in the second phase of modernization Rourkela SteelPlant could get the status squo of a modern industrial unit in theworld.

The materials being produced from the Steel Plant are steel ingots, iron sheets, ultra thin plates, electric steel plates, coldrolled coils, hot rolled coils, tin plates and different kinds of pipesetc. The byproducts of the plant are fertilizer "Sona", bitumenand benjol etc.

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MISSION STATEMENT OF RSP:-

"The future of our steel plant lies in our hands. It is our individual

and collective responsibility to rebuild our plant into a profitable,

harmonious and vibrant organization. We will do whatever thingsare necessary which are good for our plant. We shall never do

anything that hurts our plant".

OBJECTIVE OF THE RSP:-

"Achieving total safety, perfect quality, optimum cost and

maximum productivity in a harmonious environment."

THE SAMSKAR OF RSP:-

"We have to create and sustain a peaceful work environment

where every employee can contribute to the plant in assigned

area of work with full freedom and dignity and without fear".

THE SANKALPA STATEMENT OF RSP:-

"We the employees of Rourkela Steel Plant have full faith in our

unlimited potential and we resolve to sustain our samskar and

commit ourselves to achieving total safety, perfect quality,

optimum cost and maximum productivity. It is our Sankaipa to

spread Samridhi in our steel plant, Steel Township and in the

region." SPECIAL FEATURE OF RSP:-

1. 1st

public sector integrated plant to be set up in the country.2 .Exclusively produces flat products.

3. Finest plant in India to adopt L.D process of steel making.

4. It has got an electrical sheet mill capable of capable of

producing both Dynamo and Transformer grade electric

sheet.

5. It has a special plate plant where special alloy steel plates

are shaped to different shapes as per requirement in the

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defence sector.

6.RSP has the distinction of being the unique steel plant in

india with an integrated Fertilizer Complex.

7. It has two captive power plant(CPP) with a generation

capacity of around 120 mw.

Rourkela city, Orissa state, central India, at the confluence of

the Koel and Sankh rivers. The city is built around a large iron

and steel plant. Others products are heavy machinery,

fertilizers, and chemicals. Rourkela Steel Plant is located in the

northwestern tip of Orissa and at the heart of a rich mineral

belt. Being situated on the Howrah-Mumbai mainline, Rourkela

is very well connected with most of the important cities of India.

Rourkela also has an Airstrip maintained by Rourkela Steel

Plant. The nearby airports are:-

1. Ranchi(173km)

2. Bhubaneswar (378 km)

3. Kolkata(413KM).

4. Mumbai (1555 km)5. New Delhi (1706

km) 7. Chennai (1440

km)

The steel plant is well connected with rail and road. The nearestrailway station is Rourkela railway station of the S.E railways

RAW MATERIAL AND ITS SOURCES:-

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OVERVIEW OF ROURKELA STEEL PLANT


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RAW MATERIAL SOURCES

Iron ore------------------------Captive mines of Barsua, Kalta,Kiribur,

Meghtaburu, Bolani etc.Limestone---------------------Jaisalmer.

Dolomite----------------------Biramitrapur, Katini

Manganese---------------------Barjamada, Koira

Ferro-----------------------------Maharashtra Electro Mill LTD.

Coal-----------------------------Indigenous source-BCCL/CCL,

Australia,

Canada, USA

PRODUCT USES:-Steel as a basic building block will determine

growth over several other sectors. Every attention thus needs

to be given to steeping up capacity for steel. There is an urgent

need to balance the interest of the producers and the

consumers of steel.On flat products widely used by a variety of

consumers industries, the increase has been by around 60%

from around Rs 14000 to over rs 22000 per tones. On certain

special steels used by automobile component manufacturers

the increased from around rs 15600 per tones to around

rs23000 per tones during November- aug2003. With thepressure of completing construction within the stipulated time,

on grounds of penalties for delays this segment depends on the

market for its daily requirement and hence, seems to suffer the

most.Hr coils are used in number of engineering application.

These coils are used in tube making &cold rolling of low carbon

DD&EDD quality HR coils are also used like telephone poles and

also used in railway coaches and auto poly components. SW

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Pipes are also used in transportation of crude oil, natural gas.

Cold rolled coils/ sheets are the primary products of rsp and

used making steels furniture , refrigerator bodies, automobiles

bodies, railway coaches, etc. galvanized sheets are used in

roofing paneling, industrial sheeting, air conditioning ducts and

in structural constructions. Electrolytic tin plates available in

equal and differential coating range from 5.6 gm/m square

coating weight and variety suitable for manufacture of

beautifully printed and plan containers for packing all kinds of

products. PRODUCT MIX:-PRODUCT TONNES/ANNUM

PLATE MILL PLATES 2,99,000

HR PLATES 92,500

HR COILS 3,98,000

ERW PIPES 75,000

SW PIPES 55,000

CR SHEETS AND COILS 4,33,000GALVANIZED SHEETS(GP 1,60,000

ELECTROLYTIC TIN PLATES 85,000

SILICON STEEL PLATES 73,500

TOTAL SALEABLE STEEL 16,71,000

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PRODUCTS AND THEIR APPLICATIONS :-

Products Applications

HR Coils LPG Cylinders, automobile, railway

Plates Pressure vessels, ship building and

Chequered Plates Flooring & staircases in the industrial

CR Sheets & Coils Steel furniture, white goods like

refrigerators, washing machines,

automobile bodies, railway , drums,

barrels, deep drawing and extra deep

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Galvanised Sheets Roofing, paneling, industrial sheeting,

air conditioner ducting and structural

Electrolytic TinPlates Containers for packaging of various

products including edible oils,

vegetables and confectionary items.

Silicon Steel sheets& Coils

Small generators, stators for high

efficiency rotating equipment and

Spiral Weld pipes High pressure transportation of crude

oil, natural gas and slurry

transportation, water supply, sewage

disposals, grain silos, civil

ERW Pipes High pressure transportation of oil and

water, sewage disposal, tube wells

Hot Rolled Coils, Sheets and Skelp

Hot rolled coils, sheets and skelp (narrowcoil), are the largest product category ofthe company in terms of both sales volumeand revenue. Hot rolled coils are primarilyused for making pipes and have many

direct industrial and manufacturing applications, including theconstruction of tanks, railway cars, bicycle frames, ships,

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DIFFERENT TYPES OF PRODUCT


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engineering and military equipment and automobile and truckwheels, frames and body parts. Hot rolled coils are also used asfeedstock for cold rolling mills where they undergo furtherprocessing. Hot rolled coils are also delivered to the company'sown cold rolling mills and silicon sheet mill and pipe plant in a

wide range of widths and thicknesses as the feedstock for highervalue-added steel products. The company is the largestproducer of hot rolled coils, sheets and skelp in India.

Semi-Finished ProductsThe company produces semifinishedproducts, including blooms, billets andslabs, which are converted into

finished products in the company'sprocessing plant and, to a lesserextent, sold to rerollers for conversionto finished products.

Plates

Steel plates are used mainly for the manufacture of bridges,steel structures, ships, large diameter pipes, storage tanks,boilers, railway wagons and pressure vessels. The companyalso produces weatherproof steel plates for the construction ofrailcars. The company iscurrently the largest producer ofsteelplates in India with a domestic

market share of more than 80percent for these products. Thecompany is the only producer ofwide and heavy plate products inIndia.

Cold Rolled Products

Cold rolling of hot rolled products produces a superior surfacefinish, improves the physical properties of the steel, such as

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tensile strength, and reduces its thickness to precise gauges. Asa result, cold rolled products generally command higher pricesthan hot rolled products. The products of the cold rolling millinclude cold rolled sheets and coils, which are usedprimarily forprecision tubes, containers, bicycles, furniture and for use by the

automobile industry to produce car body panels. Cold rolledproducts are also used for further processing, including forcolour coating, galvanizing and tinning. The company alsoproduces further processed cold rolled products, includinggalvanized sheets and tin plates.

MAJOR UNITS OF RSP:-

1. Ore Bedding and Blending plant2.Coke oven3.Sintering plants4.Blast furnace5. Steel melting shop6.Plate mills7. Hot strip mills8. Electrolytic tinning line9. Galvanizing lines10.Silicon steel mills11. Pipe plants

12.Traffic & Raw material13. Environment Management14. Computerization15.HRD centre16. CPTI

IMPORTANT DEPARTMENTS OF RSP:-

Purchase (general purchase, spares, refractories, import,and ispat

general hospital). Marketing (central marketing organization for main

product, marketing

department for disposal of old assets).

Finance and accounting Central accounts. Costing and budget.(operation) Finance (operation)

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Cash Sales tax and excise Pay section Claims and frights Stock verification Works modernization and expansion

Personnel (motivating employees, rationalizationman power)

Human resource (for induction training, competence

enhancement,

foreign & external training)

LAW (responsible for protecting the policies of the

company)

Town engineering (looks after the maintenance of 18

sectors in the

industrial township)

Sports (conduct various sports activities in the state

and district level)

TQM department (to establish companywide total

quality movement)

Public relation department (RSTV, ISPAT press,

Documentation

centre)

CISF (for safeguarding the total 33.89 sq km covered

by 23km long

perimeter long wall)

Project department (working as project purchase,

project finance,project execute)

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GOAL SETTING:-

The major reforms and interventions at Rourkela Steel Plant are

aimed at

enhancing the motivation of the employees and addressing all

HRD issues that generally hamper performance and progress.

The ten priorities, spelled out in the mission are :-

Employee motivation and employee pride.

Leadership practice

Environment relations and organizational image.

Plant maintenance and equipment health.

Small investment schemes for maintaining current

operations.

Sustained operation and consistent production.

Strengthening secondary streams of cash generation.

Operational and purchase cost reduction.

Sustaining the benefits of operation Vijay the turnaround

project of RSP.

Enhancing Gross Margin and Net sales realization

VALUE

Meeting commitments made to external and internal

customers

Fostering learning, creativity and speed of response.

Loyalty and pride in the company. *

Respect for dignity and potential of individual.

Team playing

Zeal to excel

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Integrity and fairness in all

GOVERNMENT POLICIES:-

SAIL has been one of the navartnas of the PSU. So the

government has been keen towards the growth in this sector.

The government is revising its policies from time to time to help

revive the steel industry in India. We can site the government

initiative to increase the consumption of steel in the

construction sector in India. The housing construction that

constitutes about 3-5% of GDP in developed countries, in India

it is just about 1%. In order to produce it the government has

announced several schemes such as Valmiki Ambedkar Awas

Yojna, Indira Awas Yojana, Birla Awas Yojana, through NGOs and

self - help groups, etc. apart from it the development of national

highway development programme will also increase the

demand of steel.The iron and steel sector has received variousincentives to promote exports in the current EXIM policy (2002-

2007). First the quantitative restrictions on exports have been

removed except in the case of a few sensitive items. Second

the setting up of overseas banking units in special Economic

Zones has been permitted. Third the duty matters.

GOVERNMENT POLICIES:-

SAIL has been one of the navartnas of the PSU. So the

government has been keen towards the growth in this sector.

The government is revising its policies from time to time to help

revive the steel industry in India. We can site the government

initiative to increase the consumption of steel in the

construction sector in India. The housing construction that

constitutes about 3-5% of GDP in developed countries, in India

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it is just about 1%. In order to produce it the government has

announced several schemes such as Valmiki Ambedkar Awas

Yojna, Indira Awas Yojana, Birla Awas Yojana, through NGOs and

self - help groups, etc. apart from it the development of national

highway development programme will also increase the

demand of steel.

The iron and steel sector has received various incentives to

promote

exports in the current EXIM policy (2002-2007). First the

quantitativerestrictions on exports have been removed except in the case

of a few

sensitive items. Second the setting up of overseas banking

units in special

Economic Zones has been permitted. Third the duty

suspended in March 04, it had proved to be quite beneficial in

helping exporters increase their overseas market. The most

important move has been the abolition of duty Exemption

Entitlement scheme in order to reduce the transaction time.

The.other promotional measures relates to the tariff structure.

The tariffs saw a sharp reduction (25% to 50%) in the

liberalization era, opening up

the domestic sector to international competition. To safeguardthe interest of the domestic producers, the government tried toenhance domestic production by reducing the import of rawmaterials to as low as 5% (non-coking coal, met coke, nickel )and even nil ( cooking coal). Also the advance licensing schemehas been introduced which allows duty free import of rawmaterial for exports. A steel exporters forum has also been setup to meet the need of producers and exporters and to resolveissues problems and bottlenecks related to exports.

VARIOUS ACHIEVEMENTS OF RSP:-

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RSP bagged the CII-Exim Bank award for business

excellence in 2008. RSP created history by surpassing the

annual rated capacity in hot etal(2MT), crude steel(1.9

MT), total saleable steel(1.67 MT) for three consecutive

years.

Rourkela steel plant was awarded second prize in theintegrated steel plant category on 14th November 2007 byIndian Institute of Metals.

Govt, of India conferred the steel plant with thecertificate of merit for energy conservation in 2007

Golden Peacock Innovation award for excellence inenvironment management

The prestigious Greentech environment excellence Goldaward for fourth consecutive year by Greentchfoundation.

It was the first steel plant in Asia and third in the worldto have introduced LD steel making technology when it wasI it's nascent state of development.

Rourkela Steel Plant bagged two awards under thenatural safety awards 2005 instituted by Union Ministry ofLabor and Employment.

Five quality circle teams of RSP created a new recordby bagging the excellent award at the 20th NationalConvention of Quality Circles 2006 organized by the Quality

circle Forum of India at IIT Kanpur.

MODERNIZATION OF ROURKELA STEEL PLANT:-

In order to overcome technological obsolescence and to continueto remain competitive in the market place, even internationally,RSP went in for modernization, which was conceived in the year1988.

Phase-I of modernization, which emphasized on improving the

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quality of raw materials consisted of a new Oxygen Plant,upgradation schemes for Blast Furnaces, Dolomite BrickPlant, Cast House Slag Granulation Plant at Blast Furnace-4,Raw Material Handling system, Coal Handling Plant (in CokeOvens) and Power Distribution system, was completed in the

year 1994.

Phase-ll consisted of a new Sinter Plant, Basic OxygenFurnace and Slab Casting Shop in Steel Melting Shop-ll,modification of Plate Mill & Hot Strip Mill and installation ofSlab Casting Shop in SMS-I, Except for Hot Strip Mill, whichwas completed in the year 1999, all the other areas werecompleted in the year 1997.

SOCIAL RESPONSIBILITY:-

Caring, sharing and spreading smiles

Rourkela Steel Plant has imbibed a credo to make quality steeland spread

lasting smiles amongst the people living inits neighborhood. Going beyond the realmsof philanthropy or charity, RSP has adopted astrategy of ushering in sustainabledevelopment in its peripheral villages. From

education to women's empowerment,providing health care facilities to improvinginfrastructure, promoting advanced

techniques of agriculture to skill enhancement, land and watermanagement to livestock development - the multi-facetedapproach of RSP aims at touching and shaping every aspect oflife andliving of its community neighbors.

Taking a unique step forward, the Steel Plant has set up the

Institute for Periphery Development that is functioning as thenerve centre of all the activities taken up under peripherydevelopment. Villagers from nearby areas are being trained invarious income generation activities in this Institute. Adoption of18 villages as Model Steel Villages is another significant stridetaken up by Rourkela Steel Plant to create sustainable modelsof economic development. The objective of Rourkela SteelPlant, which is 'Spreading Samridhi', finds its true expression inthe myriad activities taken up by the Steel Plant for the people

living in its periphery.

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ENHANCING THE QUALITY OF LIFE:

Rourkela steel plant is playing a responsible as well as a

responsive role to spread prosperity in the peripheral villages.

An institute for Peripheral Development (IPD), has been set up

which is now functioning as the nerve centre of RSP's efforts.

The plant has also signed a Memorandum of Understanding

(MoU) with BAIF, pune on 4th august 2005 to enhance

livelihood opportunities. A long- term sustained initiative has

been undertaken to educate, empower and create a favorable

environment for the local population to lead an independent

and respectable life.

PARTNERS IN PROGRESS

Rourkela steel plant has always treated the small scale

industries (SSI) as its partners in progress. An exclusive wing-

peripheral industries and vendor Development (PIVD) has been

set up in RSP under its Materials Management Department for

catering to the development needs of local SSI units.

THE PICTUREQUE STEEL TOWNSHIP With the sincere efforts

being made to beautify the steel township and upgrade thefacilities today the steel city of Rourkela can be considered

as one of the modern industrial townships. A number of

aesthetically designed and artistically crafted monuments have

been grace of the sylvan surroundings significantly, but have

also showcased the innovation usage of steel for creating

objects of art. The Indira Gandhi Park of RSP is another effort

made by the plant to showcase nature in all its glory and

grandeur, right at centre of the steel city.RONMECREATING A HEALTHY ENVINT

Rourkela Steel plant 's concern for a healthy environment is

symbolized by its medical and Health Services. Ispat General

Hospital (IGHI), a 685 bed hospital run by RSP for its

employees is a premier medical centre in the eastern region.

A wide network of medical services provides adequate health

care to the employees. In IGH the doctors to bed ratio is

1:4.8 and the occupancy is 87%.

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MAKING ROURKELA A SPORTS HUB

RSP strongly believes that one of the most fruitful

investments that can be made in the present generation in

the field of sports. The Biju Patnaik Hockey stadium is the

only full-fledged hockey stadium in the region to be equipped

with synthetic turf. The sports department of Rourkela steel

plant has conducted several national, regional, steel plant,

district and even school level tournaments to impart a fresh

impetus to the sports activities and hone the budding talents.

AN HIV/AIDS POLICY HAS BEEN PREPARED AND HAS BEEN

APPROVED BY THE BOARD OF DIRECTORS OF SAIL Rourkela

steel plant provides ample opportunities to its employees and

their children for nurturing their creative talents in the field of

art and culture. The company maintains and manages an

auditorium of 650 seating capacity, in the centre of the city,

where various socio-cultural activities are organized. RSP

activity supports the various socio-cultural organization which

operate in the township, by providing various facilities. SAIL hasbeen continuously trying to maintain its social concerns towards

the people. SAIL has undertaken various projects, and always

contributed towards various calamities and other disastrous

that affected the nation. SAIL is committed to provide a healthy

environment in and around its steel plant. Over 2 lakhs trees

have been planted in 2004-2005. Greentech foundation, New

Delhi, gives gold award in metal sector for outstanding

achievement in environment management for 2003-2004 to

RSP. SAIL has set up various education institutes to provide

compulsory education to children. It also contributed heftily

towards the tsunami relief fund programmes etc.

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Sales of RSP shows gradual rise in every year. Sales has by increased 2642.5 crores in 2007-08

compared to 2004-- 05. Thus , from 4679.16 crores, it has reached 7321.66 crores

in 2007-

08. Increase in sales indicate a strong position of thecompany.

NET PROFIT OF ROURKELA STEEL PLANT FROM YEAR2005-06 TO 2008-09.ARE AS FOLLOWS:-

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

NETPROFIT

496.51 1336.40 1401.13 1018.62

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INTERPRETATION:-

Profitability of RSP was 496.51 in 2005-06,then there wasa rise and the profitability increased to 1336.40 crores in2006-07,there was a increase in sales.

This increase was manily due to the increase in sales in

that year. In the year 2007-08 there was a increase in profitability

due to again increase in sales.But in 2008-09 there was adownfall in profitability which was manily due to decreasein sales in that year.

Thus the profit of RSP has increased over three years n inlast year it was decreased due to manily deceased insales.

PRODUCTION OF SALEABLE STEEL FROM YEAR2005-06 TO 2008-09 ARE AS FOLLOWS:-

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

PRODUCTIONOF SALEABLESTEEL

1615839 1942144 207735 1988570


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INTERPRETATION:

Production has shown gradual increase overtwo years but it downfall in 2008-09.

Production of saleable steel was 1615839tonnes in 2005-06 and it decreased to 1988570tonnes in 2008-09

This indicates that demand for saleable steelhas decreased.

MANPOWER RESOURCE OF RSP FROM YEAR 2005-06 TO2008-09 ARE AS FOLLOWS :-

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

Executive(incl MT) 1689 1634 1649 2280

Func. executives 607 576 530 510

Jr. Officer(JO) 0 0 0 0

Total executives 2296 2210 2179 2790

Non-executives 20001 19470 18926 17780

Total 22297 21680 21105 20570Trainees(Excl. MTs) 0 0 0 0

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Grand Total 22297 21680 21105 20570

Note:- manpower fig. are taken from relevant files of

the plant

INTERPRETATION:-

Manpower resource of RSP shows a gradual decrease over the fouryears.

In 2005-06, it was 22297 which has decreased over the four years toreach 20570.

The above analysis shows that although manpower resource has decreased over thefour years ,there is increase in production since 2005-06.Thus it is conluded thatthere is improvement of machinery and advancement in technology in RourkelaSteel Plant.

INTRODUCATION

Working capital refers to the quantum of capital resource abusiness requires for day-to-day operations, or, more

specifically, for financing the conversion of raw materials intofinished goods, which the company ultimately sells in themarket for payment. Among the most important items ofworking capital are levels of inventory, accounts receivable, andaccounts payable. Analysts look at these items for signs of acompany's efficiency and financial strength. The better acompany manages its working capital, the less the companyneeds to borrow. Even companies with cash surpluses need tomanage working capital to ensure that those surpluses areinvested in ways that will generate suitable returns forinvestors.

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WORKING CAPITAL MANAGEMENT


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Working capital is vital to a business. They have to have fundsavailable to pay their day to day bills, wages and so on. It isvery important to a company to manage its working capitalcarefully. This is particularly true where there is a substantialtime lag between making the product and receiving the money

for it. In this situation the company has paid out all the costsassociated with making the product (labour, raw materials andso on) but not yet got any money for it. They must thereforeensure they have enough cash to do this.

THEORETICAL ASPECT OF WORKING CAPITAL

One of the most important areas in the day to-daymanagement of firms is the management of working capital.Working capital management is a significant fact of financialmanagement. Its importance stems from two reasons:

Investment in current assets represents a substantial

portion of total investment.

Investment current assets and the level of current

liabilities have to be geared quickly to changes in sales. To

be sure, fixed assets investment and long term financing

are also responsive to variation in sales. However, this

relationship is not as close and direct as it is in the case of

working capital components.

CONCEPT OF WORKING CAPITAL

There are two concepts ofworking capital:

Gross working capital

Net working capital

GROSS WORKING CAPITAL

The gross working capital refers to the firm's investment incurrent assets.Current assets are the assets which can be converted into cashwithin an Accounting year. The term Gross Working Capitalmeans the total currentassets.

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Gross Working Capital = Total CurrentAssets

The total Current assets are:-

Cash in handCash at BankMarketable securitiesShort term investmentsBills receivableSundry Debtors InventoriesWork in process

NET WORKING CAPITAL

Net working capital refers to the difference between currentassets and current liabilities.Net working capital is the excess ofcurrent assets over current liabilities. The net working capitalmay be positive or negative. A positive net working capital willarise when current assets exceed current liabilities. A negativenet working capital occurs when current liabilities are in excess

of current assets. Net working capital=current assets - currentliabilitiesNet working capital is a qualitative concept. It indicates theliquidity position of the firm and suggests the extent to whichworking capital needs may be financed by permanent sourcesof funds. Current assets should be sufficiently in excess ofcurrent liabilities to constitute a margin or buffer for maturingobligations within the ordinary operating cycle of a business. Inorder to protect their interest, short- term creditors always likea company to maintain current assets at a higher level than

current liabilities. It is a conventional rule to maintain the levelof current assets twice the level of current liabilities. A weakliquidity position poses a threat to the solvency of the companyand makes it unsafe and unsound. A negative working capitalmeans a negative liquidity and may prove to be harmful for thecompany reputation. Excessive liquidity is also bad because itrequires servicing which puts burden on the company'sprofitability. It may be due to mismanagement of currentassets.

CURRENT LIABILITIESCurrent liabilities are those claims of outsiders, which are

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expected to mature for payments within an accounting yearand include creditors (account payable), bill payable, andoutstanding expenses.

The total current liabilities are:-

Sundry creditors

Outstanding Bills Payable

Short term

Income tax

Dividends payable

Bank overdraft

Prepaid expenses

THE GOAL OF WORKING CAPITAL MANAGEMENT

The goal of working capital management is to manage the

firm's current assets and current liabilities in such a way that a

satisfactory level of working capital is maintained. This is so

because if the firm cannot maintain a satisfactory level of

working capital, it is likely to become insolvent and may, even

be forced into bankruptcy. The current assets should be largeenough to cover its current liabilities in order to ensure a

reasonable margin of safety. Each of the current assets must be

managed efficiently in orderto maintain the liquidity of the firm

while not keeping to high a level of any one of them. Each of

the short-term sources of financing must be continuously

managed to ensure that they are obtained and used in the best

possible way. The interaction between current assets and

current liabilities is, therefore, the main theme of the theory ofworking capital management.

FOCUS ON MANAGEMENT OF CURRENT ASSETS

The gross working capital concept focuses attention on twoaspects of current management:

Q How to optimize investment in current assets?

Q How should current assets be financed?

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The consideration of the level of investment in current assetsshould avoid two-danger point - excessive or inadequateinvestment in current assets. Investment in current assetsshould be just adequate to the needs of the business firm.Excessive investment in current assets should be avoided

because it impairs the firm's profitability, as idle investmentearns nothing. On the other hand inadequate amount ofworking capital can threaten solvency of the firm because of itsinability to meet its current obligations. The managementshould be prompt to initiate an action and correct imbalances.Another aspect of the gross working capital point to the need ofarranging funds of finance current assets. Whenever a need forworking capital funds arise due to increasing level of businessactivity or for other reason, financing arrangement should bemade quickly. Similarly if suddenly, some surplus funds arisethey should not be allowed to remain idle, but should beinvested in short-term securities. Thus the financial managershould have knowledge of the sources of working capital fundsas well as investment avenues where idle funds may betemporarily invested.

THE NEED AND OBJECT OF WORKING CAPITAL

Every business needs some working capital. The need forworking capital arises due to the time gap between productionand realization of cash from sales. The working capital isneeded for the following purpose:-

For the purchase of raw materials components and spares.

To pay wages and salaries

To incur day- to - day expenses and overheads such as fuel, power

and office expenses etc. To meet the selling costs as packing, advertising etc.

To provide credit facilities to the consumers,

To maintain the inventories of raw material, work - in

-progress, stores and spares and finished stock.

FINANCING POLICIES FOR WORKING CAPITAL MANAGEMENT:-

A large number of factors , each having a different importance,

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influence working capital needs of firms. The importance offactors also changes for a firm over time. Therefore an analysisof relevant factors should be made in order to determine totalinvestment in working capital. The following is the descriptionof factors which generally influence the working capital

requirements of firms.

Nature of business

Trading and financial firms have a small investment infixed assets, but require a large sum of money to be inworking capital. Some manufacturing businesses, such astobacco and construction firms, also have to investsubstantially in working capital and a nominal amount infixed The working capital requirements of a firm are

basically influence by the nature of its business, assets. Incontrast public utilities may have limited need for workingcapital and have to invest abundantly in fixed assets.

Seasonality of operations

Firms which have marked seasonality in their operationusually have - highly fluctuating working capitalrequirement. The sale of ceiling fans reaches a peakduring the summer months and drops sharply during the

winter period. The working capital need of such a firm islikely to increase considerably in summer month anddecrease significantly during the winter period. On theother hand a firm manufacturing a * product like lampswhich have fairly even sales round the year tends to havestable working capital needs.

Production policy

firm marked by pronounced seasonal fluctuation in its

sales may pursue a production policy which may reducethe sharp variation in working capital requirements. Market conditions:-

The degree of competition prevailing in the market placehas an important bearing on working capital needs. Whencompetition is keen , a larger inventory of finished goods isrequired to promptly serve customers who may not beinclined to wait because other manufacturer are ready tomeet their needs. Further generous credit terms may haveto be offered to attract customers in a highly competitive

market. Thus working capital need tend to be highbecause of greater investment in finished goods inventory

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and account receivables. Conditions of supply

The inventory of raw materials spares and stores dependon the conditions of supply. If the supply is prompt andadequate, the firm can manage with small inventory.However, if the supply is unpredictable and scant, then thefirm in to ensure continuation of production, would have toacquire stocks as and when they are available and carryinventory on an average. A similar policy may have to befollowed when the raw material is available onlyseasonally and production operations are carried outround the year.

FINANCING POLICIES FOR WORKING CAPITAL MANAGEMENT:-

A firm can adopt different financing policies for its current

assets. Three types of financing may be distinguished.

Long term financing: - The sources of long termfinancing include ordinary share capital, preference share

capital,debentures, long- term borrowings from financial

institutions and resources and surplus. Short term financing: - The short term financing is

obtained for a period less than one year. It is arranged in

advance from banks and other suppliers of short term

finance in the money market. Short term finances include

working capital funds from banks, public deposit deposits,

commercial paper, factoring of receivable etc.

Spontaneous financing : - Spontaneous financing refers to

the automatic sources of short term funds arising inthe normal course of business. Trade credit and

outstanding expenses are examples of spontaneous

financing. There is no explicit cost of spontaneous

financing. A firm is expected to utilize their sources of

finance to the fullest extent. The real choice of

financing current assets, once the spontaneous

sources of financing have been fully utilized, is

between the long term and short term sources offinances. Depending on the mix of short and long term

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financing.

Financing of working capital

After determining the level of working capital, a firm has to

decide how it is to be financed. The need for financing

arises mainly became the investment in working

capital/current assets, that is, raw materials, work-in-

process, finished goods and receivables typically

fluctuations during the year.

Trade credit:

Trade credit refers to the credit extended by the supplier

of goods and services in the normal course of

transaction/business/sale of the firm. According to tradepractices cash is not paid immediately for purchases but

after an agreed period of time. Thus, deferralpayment of

trade credit represents a source of finance for credit

purchase.

Bank Credit:

Bank credit is the primary institutional source of working

capital finance in India. In fact, it represents the most

important source for financing of current assets.

Forms of Credit: Working capital finance is

provided by banks in five ways :

Cash credit/overdraft

Loans

purchase/discount bills

letter of credit

working capital loans

1. Cash credit/overdrafts:

Under cash credit/overdraft form of arrangement of bank

finance,the bank predetermined borrowing/credit limit. The

borrower can draw/borrow up to the stipulated credit/overdraftlimit. The interest is determined on the basis of the running

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balance/ amount actually utilized by the borrower and not on

the sanctioned limit. However, a minimum charge may be

payable on the unutilized balance irrespective of the level of

borrowing for availing of the facility.

2. Loans:

Under this arrangement, the entire amount of borrowing is

credited to the current account of the borrower or released in

cash. The borrower has to pay interest on the total amount. The

loans are repayable or demand or in periodic installments. They

can also be renewed from time to time.

3. Bills purchased / discounted:

The modes operandi of bill finance as a source of working

capital financing is that a bill arises out of a trade sale-purchase

transaction on credit. The seller of goods draws the bill on the

purchaser of goods, payable on demand or after a usance

period not exceeding 90 days. On acceptance of the bill by the

purchaser the seller offers it to the bank for discount/purchase.

On discounting the bill, the bank releases the funds to the

seller. The bill is presented by the bank to the purchaser /

acceptor of the bill on due date for payment.

4. Term loans for working capital:-

Under this arrangement, banks advance loans for 3-7 years

repayable in yearly or half-yearly installments.

5. Letter of Credit:-

Under this method the purchaser of goods on credit strains a

letter of credit from a bank. The bank undertakes the

responsibility to make payment to the supplier in case the

buyer fails to meet his obligation.

ANALYSIS OF THE ELEMENTS OF CURRENTS ASSETS OF RSP

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FROM YEAR 2005-06 TO 2008-09:-

CASH AND BANK BALANCE:-

(Rs in crores)

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

CASH & BANK

BALANCE

17.22 18.79 20.66 22.44

GRAPHICAL REPRESENTATION OF CASH AND BANK BALANCE

INTERPRETATION:-

Cash is the most important liquid asset of the business.

Any firm

should keep sufficient liquid asset for day to day operation. There has been continuous increase in the cash and bank

balance of

RSP for 3 consecutive years i.e from 2006-07 to 2008-

09.

The increasing trend has been over 9% in all the 3

years when

compared to the previous years.

In 2006-07, it has increased to 18.79 crores i.e an increase

of 9.12%

compared to 2005-06 whereas in 2007-08, it has increased

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to 20.66

crores i.e an increase of 9.95% and in 2008-09 .there is

8.61% increase compared to 2007-08.

From the above analysis it can be inferred that the

liquidity position ofRSP is very strong.

INVENTORIES:-

(Rs in crores)

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

INVENTORIES

718.11 877.56 870.13 1228.56

GRAPHICAL REPRESENTATION OF INVENTORIES

Note: - inventories are the total of raw materials, stores andspares, finished/semi-finished products taken from schedules of

the balance sheet.INTERPRETATION:-

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Inventories of RSP include raw materials, stores and

spares and

finished and semi-finished products.

Being a manufacturing company, inventories constitute

the maximumaportion of current assets of RSP.

As can be seen from the bar chart, the inventories

have increased for 1st years i.e in 2006-07 and in

2007-08 there is negligible fall of 0.8% and in 2008-

09 again there is increase in inventories.

In 2006-07, the inventories have increased by 22%

compared to the previous year. Inventories, when compared with sales figure shows that

productivity and efficiency of the company has improvedas sales have gone up subsequently.

SUNDRY DEBTORS:-

(Rs in crores)

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

SUNDRY DEBTORS 14.6 12.96 11.66 13.32

GRAPHICAL REPRESENTATION OF SUNDRY CREDITORS

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Note: sundry debtors fig. are taken from balance sheet of

RSP.

INTERPRETATION:-

Sundry debtors have shown a downfall in 2006-07

compared to 2005-06 i.e from 14.6 crores to 12.96 crores.

Thus it can be inferred that credit sales of RSP has

decreased.

However for the next years, sundry debtors have shown a

downfall i.e from 12.96 crores it has decreased to 11.66

crores and in next it has increased to 13.32crores. Thus,there is a downfall in 2 consecutive year and it has

increased in last year i.e 2008-09.which indicates increase

in defective products of RSP,which normally calls for credit

sales

Thus, downfall in sundry debtors is a good .

LOANS AND ADVANCES

(Rs in crores)

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

LOANS AND ADVANCES 212.72 230.94 243.15 00

GRAPHICAL REPRESENTATION OF LOANS AND ADVANCES

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Note: loans & advances fig. are taken from balance sheet.INTERPRETATION:-

Loans and advances play a major role in current asset of RSP after

inventories. It has shown a gradual rise from 2005-06 to 2007-08 and

becomes zero in 2008-09

OTHER CURRENT ASSETSRs in crores

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

OTHER CURRENTASSETS

2.47 1.83 1.58 1.41

GRAPHICAL REPRESENTATION OF OTHER CURRENT ASSETS

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Note:- other current asset fig. are taken from balancesheet of RSP.

INTERPRETATION:-

In case of RSP, there is continuous downfall of other current

assets over the four years. However, accrued interest an important component of other

current assets plays an important role in the operation of RSP.

It shows the claim of RSP against its customers and outside

parties. If it shows lower percentage then it can be said that the

company has got a conservative collection policies. And if it shows a

higher percentage, then it can be inferred that the company is unable

to collect money from outside parties and it adversely affects the

operation of the company. Thus, it can be inferred that RSP has got a good collection policy

which increases the profitability of RSP.

TREND ANALYSIS OF CURRENT ASSETS

The financial statements may be analyzed by computing trends ofseries of information. This method determines the direction upwards or

downwards and involves the computation of the percentage relationshipthat each statement item bears to the same item in base year. Theinformation for a number of years is taken up and one year, generallythe first year, is taken as a base year. The analyst is able to see thetrend of figures, whether upward or downward.

PROCEDURE FOR CALCULATING TRENDS:- One year is taken as a base year. Generally, the first or the last is

taken as a base year. The figure of base year is taken as 100.

Trend percentages are calculated in relation to base year. If afigure in other year is less than the figure in base year the trendpercentage will be less than 100 and it will be more than 100 iffigure is more than base year figure. Each year's figure is dividedby the base year's figure.

TREND ANALYSIS OF CURRENT ASSETS OF RSP FROM YEAR 2005-06TO 2008-09

TREND PERCENTAGE (BASE YEAR 2005-06=100)

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YEAR AMOUNT(Rs in crores) TREND PERCENTAGE

2005-06 965.12 100

2006-07 1142.08 118

2007-08 1147.18 119

2008-09 1522.97 158GRAPHICAL REPESENTATION OF TREND % OF CURRENT ASSETS

INTERPRETATION:-

The current assets have continuously increased in all the year from

2005-06 to 2008-09.

The increase in current assets is more in 2008-09 compared to

other

years.

All the elements of the current asset have increased in 2008-

09except other current assets.

This increase has been mainly due to the huge rise in inventory in

2008-09 specially finished and semi-finished products.

ANALYSIS OF ELEMENTS OF THE CURRENT LIABILITIES OF RSP FROMYEAR 2005-06 TO 2008-09:-

SUNDRY CREDITORS:-(Rs in crores)

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

SUNDRY CREDITORS 233.04 292.23 307.94 265.77

GRAPHICAL REPRESENTATION OF SUNDRY CREDITORS:-

Note: sundry creditors fig. are taken from balance sheet of RSP.

INTERPRETATION:-

Sundry creditors have shown a increase in two consecutive year.

However, for the next two years, there is rise in sundry creditors

but in last year i.e 2008-09 there is a downfall, which is a bad

sign as inventories are not financed by these creditors.

Thus, it can be inferred that the creditworthiness of the RSP has

decreased.

SECURITY AND OTHER DEPOSIT

(Rs in crores)

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

SECURITY ANDOTHER DEPOSIT

27.08 32.72 33.25 43.77

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GRAPHICAL REPRESENTATION OF PROVISIONS

INTERPRETATION:- Security and other deposits are obligatory deposits of outsideparties, which are necessary for the company to keep asguarantee.

In 2005-06, it was 27.08 crores, then it increased to32.72crores in 2006-07.

Then it has shown an upward trend for the next 2 years. Itensures the credibility of the company towards fulfillment ofobligations.

PROVISIONS

(Rs in crores)

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

PROVISION 49.57 80.06 327.09 300

GRAPHICAL REPRESENTATION OF PROVISIONS

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INTERPRETATION:- Provisions are deferred payments due to employees etc. either

to be paid at the time of final decision or terminal point as the

case may be.

Provision has shown a huge increase in 2007-08 compared tothe previous years because of the pending wage revisionpayments.

OTHER CURRENT LIABILITIES: (Rs in crores)

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

OTHER C.L 160.77 159.58 198.59 176.71

GRAPHICAL REPRESENTATION OF OTHER LIABILITIESNote:other current liabilities fig. are taken from balance sheet.

INTERPRETATION:-

Other current liabilities show a fluctuating trend. It was 160.77 crores

in 2005-06 then it decreased to 159.58 crores in 2006-07. In the nextyear it increased and then it has again decreased in 2008-09.

These are the liabilities of unusual nature which may occur one time as

the case may be.

Aim of RSP should be to reduce the other current liabilities to

maintain the optimum working capital level.

TREND ANALYSIS OF CURRENT LIABILITIES OF RSP from

YEAR 2005-06 TO 2008-09 .

* TREND PERCENTAGE(BASE YEAR 2005-06=100)

YEA AMOUNT(Rs.crores) TREND

200 06 470.46 100200 07 564.59 120200 08 866.87 184

200 09 866.44 184

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GRAPHICAL REPRESENTATION OF TREND ANALYSIS OF CURRENT LIABILITIES OF

RSP

Note:- each year figure is divided by the base year's figure

INTERPRETATION:-

The current liabilities show an upward trend from year 2004-05 to

2007-08. This is because sundry creditors has increased which

means creditworthiness of the company has increased.

In 2005-06, the increase in current liabilities has mainly due to rise in

other current liabilities which has increased by 26.24%.

The rise in current liabilities is more in the year 2007-08 compared toother years because there is mammoth rise in provision in that year.

NET WORKING CAPITAL OF ROURKELA STEEL PLANT FROM YEAR 2005-

06 TO 2008-09 ARE AS FOLLOWS:-

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

A.CURRENT ASSETS:

CASH ANDBANK 17.22

18.79 20.66 22.44

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RAW MATERIALS 122.61 174.56 173.31 225.47

STORES AND SPARES 202.08 278.67 300.64 491.16FINISHED/SEMI-FINISHED PRODUCTS

393.42 424.33 396.18 184.08

SUNDRY DEBTORS 14.60 12.96 11.66 13.32LOANS AND ADVANCES 212.72 230. 94 243.15 00

OTHER CURRENT 2.47 1.83 1.58 1.41

TOTAL(A) 965.12 1142.08 1147.18 937.88

B.CURRENT

LIABILITIES:SUNDRY CREDITORS 233.04 292.23 307.94 265.77SECURITY ANDOTHER DEPOSITS

27.08 32.72 33.25 36.73

OTHER LIABILITIES 160.77 158.95 198.59 176.71

PROVISIONS 49.57 80.06 327.08 300

TOTAL(B) 470.46 564.59 866.87 779.21

WORKINGCAPITAL(A-B) AS PERRSP'S BOOKS

494.66 577.49 280.31 158.67

ADD-.NET CURRENTASSETS RELATING TO

RSP IN CMO'S BOOKS

404.53 552.34 740.53 780.35

NET WORKING

CAPITAL

899.19 1129.83 1020.84 939.02

SCHEDULE OF CHANGES IN THE WORKING CAPITAL

The schedule of changes is supplementary to fund flow statement s. It

indicates the direction in which working capital has moved and its

quantum.SCHEDULE OF CHANGES IN THE WORKING CAPITAL f2004-05 -2005-

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061:-

PARTICULARS 2005-06

2006-07 INCREASE IN

DECREASE IN

A.CURRENT ASSETS

CASH AND BANK 17.22 18.79 1.57RAW MATERIALS 122.61 174.56 51.95

STORES AND SPARES 202.08 278.67 76.59

FINISHED AND SEMIFINISHED PRODUCTS

393.42 424.33 30.91

SUNDRY DEBTORS 14.60 12.96 1.64

LOANS AND ADVANCES 212.72 230.94 18.22

OTHER CURRENT ASSETS 2.47 1.83 0.64

TOTAL CURRENT ASSETS 965.12 1142.08

B.CURRENT LIABILITIES

SUNDRY CREDITORS 233.04 292.23 59.19

SECURITY AND OTHER 27.08 32.72 5.64

OTHER CURRENT 160.77 159.58 1.19

PROVISIONS 49.57 80.06 30.49

TOTAL CURRENT 470.46 564.59

WORKING CAPITAL (A)-(B) 494.66 577.49ADD:NET CURRENTASSET RELATING TORSP IN CMO'S BOOKS

404.53 552.34 147.81

TOTAL WORKING 899.19 1129.83

INCREASE IN W.C 230.64 230.64

NET TOTAL 1129.8 1129.83 328.24 328.24

PARTICULARSS 2007-08 2008-09 INCREASE IN W.CDECREASE IN W.C

A.CURRENT ASSETS

CASH N BANK BALANCE 20.66 22.44 1.78

RAW MATERIAL 173.31 225.47 52.16

STORES N SPARES 300.64 491.16 190.52

FINISHED N SEMI FINISHED

GOODS

396.18 627.09 230.91

SUNDRY DEBTORS 11.66 13.32 1.66

LOANS N ADVANCES 243.15 00 243.15

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OTHER CURRENT ASSETS 1.58 1.41 1.97

TOTAL CURRENT ASSETS 1147.18 1380.89

B.CURRENT LIABILITIES

SUNDRY CREDITORS 307.94 265.77 42.17

SECURITY N OTHER

DEPOSITS

33.25 43.77 10.52

OTHER CURRENT

LIABILITIES

198.59 36.73 161.86

PROVISION 327.09 941.54 614.45

TOTAL CURRENT

LIABILITIES

866.87 1274.68 169.77

WORKING CAPILTAL(A-B0 280.31 106.21

ADD;NET CURRENTASSETS RELATING TO RSP

IN CMOS BOOK

740.53 1381.67 641.14

TOTAL W.C 1020.84 886.56

INC IN W.C 134.28 134.28

NET TOTAL 1020.84 1020.84 1228.26 1228.26

INTERPRETATION:-

Working capital has increased by 287.4 crores in 2005-06 compared to the

previous year to reach a figure of 899.19 crores.

On careful analysis it is found that there is 32.7% increase in

current asset compared to previous year. This increase is mainly due

to the sharp increase in inventories i.e finished/ semi-finished

products which has increased by 86%.

Cash and bank balances, sundry debtors and loan and

advances have also increased in 2005-06.

The current liabilities have also shown a negligible increase of

4.25%.This is mainly due to the rise in other current liabilities which

includes accured interest.

Compare sales and working capital, we will find that although

Working capital has increased, sales has decreased in 2005-06,

which says that there has not been proper utilization of resources in thatparticular year.

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Decrease in sales has lead to the accumulation of inventory i.e stock

of finished products have increased sharply.

Net current assets according to CMO's books have also shown an

increase of 20%.

Thus, as a total effect the working capital has increased to 899.19 crore.

TREND ANALYSIS OF OVERALL NET WORKING CAPITAL

FROM YEAR 2005-06 TO 2008-09 ARE AS FOLLOWS:-

TREND PERCENTAGE(BASE YEAR 2005-06=100)

YEAR AMOUNT(Rs in crores) TREND PERCENTAGE

2005-06 899.19 100

2006-07 1129.83 125

2007-08 1020.84 1132008-09 1228.83 136

Note :- each year's figure is divided by the base year's figure

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INTERPRETATION:- Net working capital shows an upward trend in 2005-06 and 2006-07.

However, there is a sudden downfall in 2007-08 i.e from 1129.83 crores,ithas reached to 1020.84 crores.

This downfall is mainly due to increase in the items of the currentliabilitiesie provision.Although working capital has decreased in 2007-08, there is increase in sales as well as profit in the same year.

Thus, it can be inferred that there has been proper utilization of rawmaterial.

Thus it is concluded that RSP is achieving profit. There is continuous increase

in cash and bank balance which states that the liquidity position of thecompany is strong. RSP is also able to avail more credit i.e confidence of thecreditors on the company has increased. Thus RSP has sufficient liquidity to

pay the day to day expenses.

THE FOLLOWING TABLE SHOWS THE ACTUAL WORKING CAPITALAS PER RSP'S BOOKS AND BUDGETED WORKING CAPITAL:-

YEAR 2005-06 2006-07 2007-08 2008-09Actual working capital as

per RSP's books

494.66 577.49 280.31

158.67Budgeted working capital 200.36 690.48 581.56 181.42Actual production 1615839 1942144 2067735 1988570Budgeted Production 1758000 1920000 2065000 2250000

The above graph shows the difference between actual workingcapital as per RSP's books and budgeted working capital.

Introduction:

In 2004-05, increase in budgeted production has lead to theincrease in budgeted working capital; Depletion of stock hastaken place in the actual workin

Renu Final Edited

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