Working Capital Management

A PROJECT REPORT ON WORKING CAPITAL MANAGEMENT AT TATA REFRACTORIES LIMITED, BELPAHAR, ORISSA
SUBMITTED BY JINESH J. TANNA MASTER OF BUSINESS ADMINISTRATION 2007-2009
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VISHWAKARMA INSTITUTE OF MANAGEMENT KONDHWA, PUNE UNIVERSITY OF PUNE
ACKNOWLEDGEMENT
At the prime outset I owe my sincere gratitude to the management and allied discipline of TRL, Belpahar for giving me an opportunity to undergo training for a period of 2 month. A large number of individual have contributed in making this project analysis of Trend analysis. I am thankful to all of them for their help and encouragement. My project has been influenced by annual report of the company and information provided by employee in the field. As far as possible they have been fully acknowledge at their appropriate places. I express my gratitude to all of them. My deepest sense of gratitude goes to Mr. C.S. Panigrahi and Mr. A.K. Mohanty. My special thank to Mr.K.V.Rao for his special guidance. I would very much appreciate and sincerely acknowledge suggestions from Mr. M.K.Patel who has always been a source of incessant motivation and encouragement to mean who has always extended his UN stinted support to me in making this project.
Jinesh J. Tanna M.B.A (2007-08) VIM, Pune
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TO WHOM IT MAY CONCERN

This is to certify that Mr. Jinesh J. Tanna student of M.B.A 2nd Year from Vishwakarma Institute of Management, Pune under University of Pune has undergone Vocational Training from Belpahar. He has completed his Project Successfully. We wish him all success in life. to and prepared a Project Report on WORKING CAPITAL MANGEMENT at TATA Refractories Ltd,
Date
Faculty Guide
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DECLARATION BY THE CANDIDATE

I, Jinesh J. Tanna, a student of M.B.A 2nd Year of Vishwakarma Institute of Management, Pune, Session 2007-2009 do hereby declare that that the Summer Project Report entitled WORKING CAPITAL MANAGEMENT has not been done by any University/Institution for the award of any degree or any Professional Diploma .
Date
Signature of Candidate
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TABLE OF CONTENTS
1. EXECUTIVE SUMMARY 05 2. METHODOLOGY 06 3. OBJECTIVES OF STUDY 07 4. INDUSTRY ANALYSIS 08 5. COMPANY ANALYSIS 16 6. WORKING CAPITAL MANAGEMENT 28 7. RECEIVABLE MANAGEMENT 43 8. INVENTORY MANAGEMENT 55 9. CASH MANAGEMENT 62 10. 74 WORKING CAPITAL FINANCE
11. CONCLUSION AND SUGGESTIONS 78

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12. BIBLIOGRAPHY 80
13. APPENDIX 81
EXECUTIVE SUMMARY
This project is aimed at studying Working Capital Management at TATA REFRACTORIES LIMITED for five years (2003-04 to 2007-08). The analysis of working capital management of the company includes Operating cycle, Receivables management, Inventory management, Cash management and Working capital financing of the company. In the operating cycle Net Working Capital is required to be calculated. Net working capital includes Raw material conversion period, Work in progress conversion period, Stores and Spares conversion period, Fuel conversion period, finished goods conversion period, Account receivable conversion period and Payable deferral period. Liquidity ratios, Activity ratios and Profitability ratios are calculated. For receivable management, collection procedure of a company is studied and outstanding debtors are also ascertained. For inventory management inventory control system of the company is studied and its effect on working capital. An overview of cash management has been undertaken in order to ascertain the cash position of the company. By studying the working capital of a company the efficiency of different functional departments come into picture along with that of finance department. Though TRL is managing its working capital well, a thorough study of the working capital management of the company brings out many opportunities for improvement.
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METHODOLOGY
This report is based on experience while working as a trainee at TATA REFRACTORIES LTD, Belpahar. Two sources of data are used: Primary data Information gathered from discussion with officers in the finance department and materials department on various aspects of working capital formed the primary source of data for the analysis. Secondary data Annual report (2003-04 to 2007-08), magazines and journals in knowledge centre in TRL; internet formed the secondary information source.
The following steps have been taken while preparing the report: Observation and handling of activities in the finance department Preparing financial statements, cash flow statement, operating cycle and other related documents.
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OBJECTIVES OF THE STUDY

To know the financial performance of the company. To study the Refractories industry and determine the position of the company viz. a viz. its competitors To study the overall operating cycle of the company To study receivable management, inventory management and cash management To study the working capital financing practices of the company.
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CHAPTER-1
INDUSTRY ANALYSIS
REFRACTORY INDUSTRY REFRACTORY INDUSTRY LINKED TO IRON AND STEEL INDUSTRY INDIAN REFRACTORIES INDUSTRY SIZE OF THE INDUSTRY CRITICAL APPRECIATION OF DOMESTIC REFRACTORIES INDUSTRY
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REFRACTORY INDUSTRY
Refractories are a term given to a class of materials which are produced from non-metallic mineral and possess capability to withstand heat and pressure. These are products that confer properties like high temperature insulation, resistance to corrosive and erosive action of hot gases, liquids and solids at high temperatures in various kilns, furnaces, driers, gas fires and reformers. Refractories are consumed by the iron and steel, non-ferrous, cement, copper, glass, aluminum, fertilizer, thermal power plants and petro-chemical industries etc, which are witnessing robust growth. These sectors are giving high thrust on productivity, quality cost, energy, conservation and cleaner environment which necessitates new generation of Refractories with specific requirements.
Sources: www.irmaindia.org
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REFRACTORY INDUSTRY LINKED TO IRON AND STEEL INDUSTRY

The fortunes of the refractory industry are considerably linked to the growth of iron and steel sector which consumes a massive 75% of the Refractories produced. Demand for steel continues to be strong in emerging markets of the BRIC countries. Stupendous growth in the steel sector is being witnessed with the announcement of ambitious capacity expansion plans by SAIL, TISCO, Essar Steel, JSW Steel and many other players in the private sector.
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Global capacity is also expected to continue to grow strongly, as some governments have been encouraging investments in the steel industry in order to meet growing infrastructure needs and demand from expanding industrial sectors. Robust demand scenario in the steel industry in India and globally has prompted both Indian industrial houses and multinationals like Mittal Steel and POSCO to set up Greenfield steel units in India. Based on the major expansion and green field projects coming up in the steel sector, the refractory production is expected to increase by 16% per annum for the next few years.
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INDIAN REFRACTORIES INDUSTRY
Its been a long journey for the Indian refractory industry since the first factory line production of Refractories started in Kolkata or Calcutta as the city was called then in the year 1874. Today, the industry comprises over 100 established units, with 11 large plants, 24 medium-scale units and the rest in the small-scale sector. However, while the refractory industry in India took off in the late 19th century, the real growth came in th e late 1950s when the public sector steel plants were set up and Tata Steel embarked upon its expansion plans. Currently, the Indian refractory industry has an aggregate production capacity of 20 lakh tones per annum. The capacity utilization, however, currently stands at around 60 per cent, or 11.5-12 lakh tones per annum. About 75 per cent of the Refractories that are manufactured find application in the steel industry, 12 per cent in the cement industry, 5-6 per cent in non-ferrous industries, three per cent in the glass industry and the balance in other industries. Necessarily, Refractories are used either where high temperature or high rate of abrasion / corrosion/erosion is involved. Traditionally, Refractories are made of naturally-occurring minerals, such as bauxite, kyanite, magnetite, fireclay, chrome ore, etc. Lately, however, the industry has been using man-made raw materials, such as brown-fused alumina, tabular alumina, fused magnesia, silicon carbide, magnesia alumina, etc.
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SIZE OF THE INDUSTRY
Dr J.J Irani, former MD of Tata Steel
The size of the Indian refractory industry has been pegged at Rs 2,300 crore and it is stated to be growing at 8-10 per cent per annum. Although the specific consumption of Refractories has gone down from 30 kg per tone of steel about 20 years ago to 12-13 kg on an average for the steel industry as a whole and as low as 7-8 kg in the case of some more efficient steel units, the scope for growth is good in view of the continuing growth in the Indian economy and the governments focus on infrastructure development. Says Dr J.J. Irani, Director of Tata Sons and Former Managing Director of Tata Steel: With the government aiming to invest more and more on infrastructure development, the steel industry in the country is slated to grow to, possibly, 120 million tones or even up to 150 million tones by 2015. According to most reports, the cement, aluminum and other industries are also to grow to unprecedented heights. This should be good news for refractory producers in India. According to Dr Irani, Refractory producers in India have to rise to the occasion by providing ready, regular, speedy and consistent supplies. It would also be important for Indian refractory manufacturers to focus on their raw materials security, he says. Industry insiders do acknowledge that raw materials security is a concern especially with China imposing quantitative restrictions on export of raw materials and also jacking up prices over the last year or so. Cheaper refractory imports from China are also putting a pressure on the industrys margins . Hiring and retaining skilled manpower is a major challenge that the Indian refractory industry has to cope with.
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CRITICAL APPRECIATION OF DOMESTIC REFRACTORIES INDUSTRY

There are signs of revival in the the domestic refractory industry that had been going through difficult times for the past three to four years. This is partly due to an easing of the cash flow problems of the steel industry, which accounts for 75 per cent of the total domestic refractories consumption. But, perhaps, a more important reason is the significant export performance. In fact, the export prospects have never been so encouraging for the refractory makers in the past. Standing the refractory makers in good stead also is the reduction, after repeated pleas to the Finance Ministry, in the import duty on important refractory raw materials and thereby correcting the anomalous situation in which raw materials had been attracting more import duty than finished refractories. Further, the Centre has revised the DEPB entitlement for export of certain high alumina and alumina carbon refractories. The decline in the fortunes of the steel industry in the last three years has had an adverse impact on the finances of the refractory makers; for there was total uncertainty about payments against supplies made. In view of their cash flow problems, the steel plants took recourse to what may be termed as the recognized practice of issuing credit notes for steel supply to the refractory manufacturers who, in turn, were giving it to dealers at a discount of 2.5 to 3 per cent, depending on the products, to realize their dues. With conditions permitting the steel companies to increase prices in installments from April 2002, as a result of which their liquidity has improved, they have discontinued the practice of giving credit notes. This has meant a welcome change in the situation for the refractory units; although the steel plants are still taking four to five months to square up their dues. In this context, it may be mentioned that because of the up gradation of technology and processes by major steel plants and their improved quality of refractories, there had been a significant drop in the specific consumption of iron and steel making refractories. In some steel plants, the specific consumption of refractories is down to about 11 kg per tone of liquid metal from about 23 kg three years ago. This factor also applies to the other refractory consuming industries, such as cement, glass and non-ferrous metals, which, like steel, also have not seen much growth in recent years. No wonder, the refractory industry, which has a capacity of about 15-lakh tones, has not been able to go beyond 46 to 47 per cent utilization.
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This was mentioned by Mr C.D. Kamath, the immediate past chairman of Indian Refractory Makers Association, at its AGM held here on July 22 last. The upturn in export performance, in these circumstances, has, therefore, come as a major relief and confidence booster. The value of the refractory industry's exports, which stood at Rs 55 crore in 1998-99, rose to Rs 86 crore in the last financial year. Judging by the orders already received and expected, the industry is hoping to register exports worth Rs 100 crore in 2002-03. Its assessment is that if the trend persists, Rs 200 crore worth of exports will be a reality, say, by the terminal year of the Tenth Plan. Some 13 years ago, it could export only Rs 1 crore worth of refractories. The volume of exports and unit realization in 1998-99 were 23,682 tones and Rs 23,500 respectively. The figures in 2001-02 were 29,912 tones and Rs 29,000 respectively. Earlier, exports would be only to Bangladesh, Sri Lanka, Malaysia, Indonesia, Egypt and Syria. Now, its products are also being shipped to the US, the UK, Germany, Sweden, Finland and Chile. The market diversification has given the industry a confidence level that it never had in the past. The export growth logically should facilitate better capacity utilization.
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CHAPTER-2
COMPANY ANALYSIS
TATA GROUP TATA REFRACTORIES LIMITED SWOT ANALYSIS FINANCIAL OVERVIEW OF TRL
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TATA GROUP
135 years old
Best known most respected business in India
Group Turnover
US $ 70 Billion
Total Sale Represent
5 % of Indias GDP
Indias Largest Foreign Exchange Earner
US $ 1.42 Billion
Indias The Largest Employer on The Private Sector
300000 Employees
PURPOSE
Improve the quality of life through leadership in targeted sectors of national economy significance.
GROUP AS A PIONEER
Indias first indigenous steel mill. Indias first power utility. Indias first hotel chain. Indias largest salt work. Indias first international airline. Indias first fully indigenous passenger car. Indias first software venture.
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TATA REFRACTORIES LIMITED

Tata Refractories limited is one of India most modern plants, was promoted as joint Venture of TATA STEEL & DIDIER WERKEA.G, of Germany. The plant is situated at Belpahar in Jharsuguda district of Orissa with an installed capacity Of 1, 49,000 tones of refractories per annum & is equipped with a modern research & development laboratory & a pilot plant. The production activities extended to Jamshedpur & Chennai to meet customer requirements. Besides TRL has its own sintering plant at KARUPPUR, TAMILNADU, for dead burnt magnetite & non-plastic fire clay mines at TALBASTA, ORISSA. TRL product range includes various types of fire clay & high alumina bricks, coke oven, silica bricks, various types of basic bricks like magnesite bonded mag chrome bricks, burnt mag-dole bricks with & without tar imprenation. Special product likes slide gate refractory (basic & high alumina slide plates) & its accessories zirconia nozzles mullite, zircon. With technical know how from KUROSAKI refractories company limited (KRC), One of the largest manufacturers of hi tech refractories in JAPAN, TRL is now producing improved variety of magnesia carbon bricks, basic gunning mixes, superior grade well blocks for various applications. TRL has in hand an expansion programmed which will include production of dolomite bricks & continues costing refractories. It major client are integrated mini & other steel plant & various non-ferrous, Glass, petro chemical & fertilizer industries. TRL also extends technical services to its customers 7 helps in designing & application of refractories.
HISTORY Major Milestone

1958 promoted by TATA Steel. 1959 Started production of basic, high alumina and silica. 1971 Research and development facilities establish. 1986 Christened as TRL. 1993 Established leading market position. 1994 Commissioned 30000MT pa dolomite plant. 1999 ISO9002 Certification for the whole plant. 2006 Expansion on modernization projected detected to nation (10 th April, 06).
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LEADERSHIP WITH TRUST

TRL is the first associate company of the TATA group to sign BEBP (Business Excellence Branch Promotion) agreement with TATA sons and has been authorized to use the new TATA market. It has adopted TBEM (TATA Business Excellence Model) since last seven year and has been recognized for serious adoption in 2003-04 and for active promotion 2004-05 for ethical business practices, it flows TATA code of conduct and encourages all its stakeholders.
VISION
A Global Refractories Company.
MISSION
TATA Refractories shall be a high performance and technology driven organization committed to create value for all its stakeholders.
VALUES
Customer delight Leadership by example Integrity and transparency Fairness Furthering excellence
QUALITY POLICY
We, at TATA Refractories, dedicate ourselves to Total Quality. We are committed to enhance customer satisfaction on a continuous basis through implementation of an effective Quality Management System. Continuous improvement, credibility, consistency and concern shall be our guiding values.
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FOREIGN COLLABORATIONS
Various organizations have made collaborations with TRL viz. M/S KROSAKI REFRACTORIES, JAPAN. M/S DOLOMIT WERKE, GMBH, GERMANY M/S STOPINC SWITZERLAND. A.P. GREEN U.S.A. ELKEM, NORWAY
MAJOR PRODUCTS
Basic bricks High Alumina bricks Silica bricks Dolomite bricks Monolithic refractories Flow control products.
MAJOR SERVICES
Total refractories solution for equipment for making steel, copper, aluminum, glass etc. Total refractories management i.e. providing running maintainces of customers equipment such as ladles, kilns, Furnaces etc.
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SWOT ANALYSIS
Strength:
Tata brand image & code of conduct. Implementation of TQM. Implementation of ERP system (Baan). TRL provides Total Refractory Solutions (TRS) Technical collaboration with global alliances. Set up of high tech machinery ex- SACMI for pressing of products. New packaging solution. Team TRL.
Weakness:
Lack of profitable investment. Over stocking of assets. High cost of production. Low yield.
Opportunity:
Cost control. Increased efficiency. Quality product. Increased profit
Threats:
Global challenges: Large refractory manufacturers such as RHI have now targeted. Indian refractories market. Business challenge: Existence of large number of small refractories in the unorganized sectors operating at 40-50% capacity utilization. Customer: Customers of refractories product generally belongs to large industrial organization therefore have strong negotiating position. Suppliers: In highly competitive environment & ever increasing customer expectations.
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Key challenge is to meet the need of continuous cost reduction demand through efficient supply chain management. Environment: Intrinsic nature of raw material & manner of their processing result in air pollution, high dust content water contamination.
COMPETITORS OF TRL:
As other fields have competitions, the Refractories market also has a competition. Here we are discussing about the main competitors of TRL. ORISSA CEMENT It has the turnover of 200 crore & the export worth RS 25 crore. Presently they are trying to establish the production & quality of ladle tundish shrouds. OCL is capturing order of the mini steel plant for well blocks in LCC 90 quality & feedback report form mini steel plant is very good. BHARAT REFRACTORIES BRL as around 125 M.T of specialty product per month as INDO FLOGATES are presently taking from OAL, the slide plates. They are approaching MSP & TISCO for supply specialty product.
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ACC CEMENT It has turnover for the year was 179 crore. Along with other competitors, acc is also making his presences in domestic market.
IFGL REFRACTORIES VISHUVYAS REFRACTORIES.
POTENTIAL THREAT:
TRL competitors M/S oil operating from china is a major threat in the Southeast Asia & the Far East. As they available to supply basic bricks at a very low price in view of raw material availability & freight advantages they have already get the order from NAT STEEL (Singapore) & PT ISPAT (INDONESIA) for the magnesia is carbon for supply from there china plant. In spite of all these competition TRL is the leading company in the field of Refractories within country & now trying already to expand its wing in the international market also. It has already set up many of the potential outsiders customer in AUSTRALIA, SRILANKA, BHUTAN. In future this company may become the world number 1 Refractories company.
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FINANCIAL OVERVIEW OF TRL

During year 2007-2008 the company encountered innumerable challenges. Firstly, imports of critical raw materials from China have become extremely difficult not only due to exorbitant price increases but also because of export restrictions imposed by the Chinese government. This has adversely effected production and profitability of the company. Secondary, soaring energy prices are negatively impacting the profitability. Thirdly, production was affected for four days due to lighting strikes called by an unruly group of workmen protesting suspension/termination of workmen guilty of gross misconduct. Fourthly, due to closer of all gas producers and Silica tunnel Kiln on account of pollution problem, not only Silica bricks production had to be stopped for about four months, excess energy costs had also to be incurred due to substitution of gas by oil. Fifthly, appreciation of Rupee against Dollar had a serious impact on export performance and profitability. Despite the above adverse situations the company has achieve highest ever performance in terms of production, sales and revenues, there by the company continued to retain its leadership position in the Indian Refractories Industry. This was possible because of the inherent strengths of the company in aspects such as technological advancement, innovation capabilities professional competence, financial stability and above all determination of employees to face adverse situations with full commitment. For the year 2007-08 the revenues of the company- at Rs 587 Crores on stand alone basis-were higher by Rs 66 Crores compared to previous year, establishing an all time record. The consolidated revenues of the company along with those of TRL China were Rs. 610 Crores, a new milestone in the 50-year history of the company. The company continues to be the No. 2 fired dolomite Refractories producer in the world. In India the company is the commercial producer of dolomite Refractories and has a market share of over 90%. The company achieved the highest ever export turn over of Rs. 68 Crores, i.e. an increase of 21% company to that of previous year.
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Performance
In 2007-08 the company reached new milestones surpassing all previous records of production, sales revenues and exports. The total revenues of the company at Rs. 587 Crores are the highest in its history. The consolidated revenues of the company along with its subsidiary, TRL china limited, breached the Rs. 600 Crores mark to reach Rs. 610 Crores the company retained its position as the no. 1 Refractories manufacturer in India in terms of revenues. Overall sales volume at 2, 56,414 t. of previous year. The production during the year at 2,13,427 t. against 2, 03,234 t. of previous year, was higher by 5%. Prices of raw materials and energy continued to climb steeply during the year. Interest costs have also risen because of higher rates as well as increased borrowings for meeting working capital requirements. Profit before taxes for the year is Rs. 37 Crores against Rs. 31 Crores in the previous year (an increase of 19%) and profit after taxes is Rs. 19 Crores last year (an increase of 16%).
Exports
Driven by the capital flows in the system, the Indian rupees appreciated by 13.25 against the U.S dollar in T-O-Y basis as on December, 2007 thus adversely affecting Indias exports. Despite this adverse condition the company has achieved the highest ever exports of Rs. 68 Crores compared to Rs. 56 Crores of the previous year; an increase of 21% . at present the company is exporting to more than 30 countries, our exports account for over 23% of the total Refractories exported from India, and 12% of companys total turnover comes from exports. The company has taken several measures to strengthen its presence in international markets.
Subsidiary companies
The company has two subsidiary companies viz. TRL Asia Private Limited (special Purpose vehicles and TRL China Limited, a 100% subsidiary of TRL Asia Private Limited is 88%. TRL China started commercial operations from 28 th December 2006. TRL China has earned a profit during the first full year of its operation itself. It has achieved a turn-over of Rs.67 Crores and PBT of Rs.0.63 Crores. Profitability of TRL China has been, however, seriously affected due to withdrawal of VAT benefits by the Chinese government as well as by the strengthening of Chinese currency (RMB) against the dollar. In order to meet market demands, TRL China is undertaking the phase-II expansion of its production facilities at an estimated capital expenditure of Rs. 14.95 Crores. The funds required for phase-II expansion shall be raised by TRL China Limited itself through loans and internal generations.
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Form for disclosure of particulars with respect to Technology Absorption

Research & Development 1. Specific areas in which R & D work was carried out by the company. New product development, quality improvement of existing products, process improvement for higher yields, higher productivity, reduction in raw material costs and exploration of new sources of raw materials 2. Benefits derived as a result of the R & D programmers. Savings through redesign of products and processes (Raw materials cost, yield etc.). Sales through new and modified products.
3. Future plan of action In the coming year, the Technology Division plans to focus on Microwave heating of Refractories. Synthetic raw materials Plant waste reduction and value added utilization. Use of non oxides and nano materials in Refractories. High performance constables and precast products. Chrome free Refractories for replacing Mag-chorome bricks.
4. Expenditure on R & D a) Capital b) Recurring c) Total d) Total R & D expenditure

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: : :
Rs. 63.09 Lakhs Rs. 129.75 Lakhs Rs.192.84 Lakhs
as a percentage of total turnover
0.33%
Foreign Exchange Earnings and Outgo

Total foreign exchange used and earned: Foreign Exchange used Foreign Exchange earned Rs. 98 Crores. Rs. 69 Crores.
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CHAPTER-3
WORKING CAPITAL MANAGEMENT

INTRODUCTION CONCEPT OF WORKING CAPITAL OPERATING CYCLE ISSUES IN WORKING CAPITAL MANAGEMENT
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INTRODUCTION
Working capital is the life blood and every managers primary task is to help to keep it managing. Good management of working capital generate cash and helps to improves profits and reduce risk. In other words working capital is the current asset the management of which is different from fixed asset. For example the discounting and compounding techniques, in capital budgeting is not required in WCM. Another difference is a large amount of working capital strengthen firms liquidity position but at the same time it also reduces the over all profitability . Current asset can be adjusted with sales fluctuations in the short run. Thus the firm has a greater degree of flexibility in managing current or working capital.
CONCEPT OF WORKING CAPITAL

Each components of working capital has two dimensions. One is time and another is money. When it comes managing working time of money, if M/S TRL can get money to move faster around the cycle or reduce the amount of money tied up, the business will generate more cash or it will need to borrow less money to found working capital. As a consequence it will reduce the cost of bank interest. There are two concepts of working capitalggross working capital and Net working capital. 1. Gross Working Capital refers to the firms investment in current assets. Current assets are the assets which can be converted in to cash within an accounting year and include cash, short term securities, debtors, and stocks. The table below shows the gross working capital of TRL from 2005 to 2008 i.e. of four accounting years. A Glance At TRL's Current As on As on 31.03.200 31.03.200 Current Assets 8 7 a) Stores and Spare Parts (at 8,53,67,15 6,40,02,68 cost) 4 4 b) Loose Tools 18,22,760 11,64,815 c) Stock-in 85,13,94,5 58,61,30,3 Trade 81 68 d) Sundry 109,44,61, 103,75,57, Debtors 154 010 e) Cash and 6,47,80,69 3,42,38,27 Assets As on 31.03.200 6 4,35,67,56 6 10,77,258 63,21,91,9 56 78,13,27,6 86 3,47,76,84
As on 31.03.200 5 4,46,55,04 2 11,69,508 63,65,90,0 22 66,67,41,5 34 9,27,98,67
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Bank Balances Total Current Assets
2 0 14929413 14419547 08 76 Sources: Annual Report, TRL 2. Net Working Capital refers to the difference between current assets and current liabilities. Current liabilities those claims of outsiders which are expected to matured for payment within an accounting year and include creditor, bills payables, and outstanding expanses. Net working capital can be positive or negative. A positive net working capital will arise when current assets exceeds current liabilities. Negative net working capital occurs when current liabilities are in excess of current assets.
5 20978263 44
6 17230931 53
The table below shows the net working capital of TRL from 2005 to 2008 i.e. of four accounting years.
A GALANCE AT TRL'S NET WORKING CAPITAL As on As on As on As on 31.03.2008 31.03.2006 31.03.2005 Current Assets 31.03.2007 a) Stores and Spare Parts (at cost) 8,53,67,154 4,35,67,566 4,46,55,042 6,40,02,684 b) Loose Tools 18,22,760 10,77,258 11,69,508 11,64,815 c) Stock-in Trade 85,13,94,581 63,21,91,956 63,65,90,022 58,61,30,368 d) Sundry Debtors 109,44,61,154 78,13,27,686 66,67,41,534 103,75,57,010 e) Cash and Bank Balances 6,47,80,695 3,47,76,842 9,27,98,670 3,42,38,276 Total Current Assets 2,097,826,344 1,723,093,153 1,492,941,308 1,441,954,776 Current liabilities a) Acceptances 6,17,43,902 64,82,700 96,25,532 8,41,65,532 b) Sundry Creditors 66,84,41,252 64,36,62,467 62,39,47,395 56,61,04,791 c) Advances received from customers 10,83,12,593 14,96,82,413 2,82,85,001 10,92,81,991 d) Interst accrued but not due 1,86,88,757 89,06,511 72,91,624 27,30,208 e) Other Liabilities 3,31,894 10,64,452 11,02,460 12,95,679 Total Current Liabilities 85,75,18,398 80,97,98,543 67,02,52,012 76,35,78,201
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NET WORKING CAPITAL(Net Current Assets)
1,240,307,946
913,294,610
822,689,296
678,376,575
Sources: Annual Report, TRL
OPERATING CYCLE
The need for working capital to run the day to day to day business activities cannot be over emphasized. The firm has to invest enough funds in current assets for generating sales. Current assets are needed because sales dont convert in to cash instantaneously. There is always an operating cycle involved in the conversion of sales into cash. Operating cycle is the time duration required to convert sales, after the conversion of resources into inventories, into cash. The operating cycle of TRL includes three phases: Acquisition of resources, such as raw materials, labour, power, and fuel etc. Manufacture of the product which includes conversion of raw material into work-in-progress in to finished goods. Sale of the product either for cash or credit. A credit sale creates accounts receivable for collection.
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The above cycle is the TRLs operating cycle which shows different stages of conversion of raw materials into cash. The length of the operating cycle of TRL is the sum of inventory conversion period and debtor conversion period. The inventory conversion period is the total time taken for producing and selling the product. Typically it includes, raw material conversion period, work-in-progress conversion period, stores and spares conversions period, fuel conversion period, and finished goods conversion period. The debtor conversion period is the time required to collect the outstanding amount from the customer. The total of inventory conversion period and debtors conversion period is refers to as gross operating cycle (GOC). TRL may also acquire resources on credit and temporarily postponed payment of certain expenses. Payables, which the firm can differ, are spontaneous sources of capital to finance investment in current assets. The creditors deferral period (CDP) is the length of time the firm is able to differ payments on various resource purchases. The difference between gross operating cycle and payable deferral period is net operating cycle (NOC).
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We had calculated the raw material conversion period, work-in-progress conversion period and finished goods conversion periods, debtors conversion period, creditor conversion period, and net working capital of TRL for five years from the dates available by the annual report and the other sources as given by our guide at TRL.
WORKING CAPITAL AS ON 31.03.2008

Rs. Crores ACTUAL AS ON DIFF. 31.03.2 006 109.44 ( 68 DAYS ) 32.00 ( 59 DAYS ) 13.47 ( 11 DAYS ) -4.23
ITEMS
NORMS
AS PER NORM
DEBTORS
70 DAYS OF SALES
113.67 ( 70 DAYS ) 24.80 ( 45 DAYS ) 20.03 ( 15 DAYS )
RAW MATERIAL
45 DAYS OF CONSMN.
7.2
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WIP
15 DAYS COST OF PROD.
-6.56
STORES & SPARES
120 DAYS OF CONSMN.
2.52 (120 DAYS ) 2.41 ( 15 DAYS ) 44.85 ( 30 DAYS ) 46.59 254.87
5.15 (246 DAYS ) 3.56 (23 DAYS ) 39.66 ( 27 DAYS ) 46.59 249.87
2.63
FUEL
15 DAYS OF CONSMN.
1.15
FINISHED GOODS
30 DAYS COST OF PROD. PLUS E.D.
-5.19
OTHERS TOTAL CURRENT ASSETS CREDITORS ( OPERATION )
ACTUAL
0.00 -5
45 DAYS, COST OF PROD.
60.10 ( 45 DAYS ) 25.29
73.01 ( 66 DAYS ) 25.29
12.91
OTHER CREDITORS & PROVISIONS Incl. Not due within one year TOTAL CURRENT LIAB. NETWORKING CAPITAL
ACTUAL
0.00 12.9 1 17.9 1
85.39 169.48
98.3 151.57

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ITEMS
NORMS
AS PER NORM
Rs. Crores ACTUAL DIFF AS ON . 31.03.2
006 DEBTORS 60 DAYS OF SALES 86.12 ( 60 DAYS ) 16.39 ( 30 DAYS ) 17.66 ( 15 DAYS ) 2.52 ( 90 DAYS ) 1.96 ( 15 DAYS ) 103.75 ( 73 DAYS ) 19.02 ( 35 DAYS ) 14.06 ( 12 DAYS ) 3.82 (137 DAYS) 2.68 (21 DAYS ) 17.6 3
RAW MATERIAL
30 DAYS OF CONSMN.
2.63
WIP
-3.6
STORES & SPARES
90 DAYS OF CONSMN.
1.3
FUEL
15 DAYS OF CONSMN.
.72
FINISHED GOODS
40.08 ( 30 DAYS ) 37.00 201.73
25.52 ( 18 DAYS ) 37.00 205.85
14.5 6
ACTUAL
0.00 4.12 12.0 3
45 DAYS, COST OF PROD.
52.98 ( 45 DAYS ) 17.69
65.01 ( 56 DAYS ) 17.69
OTHER CREDITORS & PROVISIONS
ACTUAL
0.00
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Incl. Not due within one year TOTAL CURRENT LIAB. NETWORKING CAPITAL
70.67 131.06
82.7 123.15
12.0 3 7.91

Rs. AS PER NORM Crores ACTUAL AS ON 31.03.2 006 78.13 ( 62 DAYS ) 25.27 ( 51 DAYS ) 15.39 ( 16 DAYS ) 3.42 ( 66 DAYS ) 1.05 (10 DAYS ) DIFF .
ITEMS
NORMS
DEBTORS
70 DAYS OF SALES
75.61 ( 60 DAYS ) 22.30 ( 45 DAYS ) 14.42 ( 15 DAYS ) 4.66 ( 90 DAYS ) 1.57 ( 15 DAYS )
2.52
RAW MATERIAL
35 DAYS OF CONSMN.
2.97
WIP
0.97
STORES & SPARES
90 DAYS OF CONSMN.
-1.24
FUEL
15 DAYS OF CONSMN.
-0.52
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FINISHED GOODS
24.09 ( 30 DAYS ) 84.43 227.08 43.19
22.56 ( 24 DAYS ) 84.43 230.25 63.35 ( 66 DAYS ) 53.99
-1.53
ACTUAL
0.00 3.17 20.1 6
45 DAYS COST OF PROD. ( 45 DAYS )
ACTUAL
53.99
0.00 20.1 6 16.9 9
97.18 129.90
117.34 112.91

Rs. Crores ACTUAL AS ON DIFF 31.03.2 . 006 66.67 ( 61 DAYS ) 1.10
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ITEMS
NORMS
AS PER NORM
DEBTORS
70 DAYS OF SALES
65.57 ( 60 DAYS )
RAW MATERIAL
35 DAYS OF CONSMN.
19.48 ( 45 DAYS ) 9.75 ( 15 DAYS ) 4.40 ( 90 DAYS ) 1.13 ( 15 DAYS ) 24.09 ( 30 DAYS ) 50.53 174.95 37.03
30.31 ( 70 DAYS ) 14.07 ( 18 DAYS ) 3.91 ( 80 DAYS ) 0.68 (9 DAYS )
10.8 3
WIP
4.32
STORES & SPARES
90 DAYS OF CONSMN.
-0.49
FUEL
15 DAYS OF CONSMN.
-0.45
FINISHED GOODS
19.28 ( 24 DAYS ) 50.53 185.45 65.02 ( 79 DAYS ) 44.34
-4.81
ACTUAL
0.00 10.5 0 27.9 9
45 DAYS COST OF PROD. ( 45 DAYS )
ACTUAL
44.34
0.00 27.9 9 17.4
81.37 93.58
109.36 76.09
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Rs. Crores ACTUAL AS ON DIFF 31.03.2 . 006 10.4 3
ITEMS
NORMS
AS PER NORM
DEBTORS
70 DAYS OF SALES
60.25 ( 70 DAYS ) 12.19 ( 35 DAYS ) 9.75 ( 15 DAYS ) 4.26 ( 90 DAYS ) 1.00 ( 15 DAYS ) 22.62 ( 30 DAYS )
49.82 ( 58 DAYS ) 23.97 ( 68 DAYS ) 11.64 ( 18 DAYS ) 3.67 ( 78 DAYS ) 0.92 (14 DAYS ) 20.42 ( 27 DAYS )
RAW MATERIAL
35 DAYS OF CONSMN.
11.7 8
WIP
1.89
STORES & SPARES
90 DAYS OF CONSMN.
-0.59
FUEL
15 DAYS OF CONSMN.
-0.08
FINISHED GOODS
-2.20
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ACTUAL
25.01 135.08
25.01 135.45
0.00 0.37 11.3 6
29.25 ( 45 DAYS ) 30.44
40.61 ( 62 DAYS ) 30.44
ACTUAL
0.00 11.3 6 10.9 9
59.69 75.39
71.05 64.40
Determinants of working capital of TRL

Seasonality of operation Market conditions Present position of Refractories market Condition of supply Nature business
ISSUES IN WORKING CAPITAL MANAGEMENT

Working capital management is the administration of all components of working capital. It is necessary to determine the level and composition of current assets and then see the right sources to finance the current asset and pay the current liability on time. Investment in current asset represents a very significant portion of the total investment in assets.
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Current Assets in proportion to Total Assets Year Current Total Assets Assets Ratios 2007-2008 540423279 38.82 2097826344 7 % 2006-2007 497933752 34.60 1723093153 5 % 2005-2006 462303631 32.30 1492941308 7 % 2004-2005 369276926 39.04 1441954776 4 % 2003-2004 298477162 37.74 1126367562 6 %
Sources: Annual Report, TRL There is a direct relationship between an firms growth and its working capital needs. As sales grow company needs to invest more in inventories and debtors. As the firms out put and sales increases, the need for current asset increases, but current asset dont increase in direct proportion to output. TRLs sales for five years are shown below. The amount of current asset in relation to current asset in not a function of direct proportionality. These figures are shown below in table and graph.
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Year 2007-2008 2006-2007 2005-2006 2004-2005 2003-2004
Current asset Turnover Ratio Sales Current Assets 584,59,23,088 2097826344 516,75,44,869 455,70,76,293 400,54,21,306 317,07,24,228 1723093153 1492941308 1441954776 1126367562
Ratio 2.79 3 3.05 2.78 2.81
Current Asset to Fixed Asset Ratio:

The level of current asset can be measured by relating to current asset by fixed assets. A higher CA/FA indicates a conservative current asset policy. A lower CA/FA indicates a aggressive current asset policy.
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A conservative policy implies greater liquidity and lower risk; while an aggressive policy indicates higher risk and poor liquidity. Moderate current asset policy fall in the middle of conservative and aggressive policy.
CURRENT ASSETS FINANCING POLICY Current Fixed Years Assets Assets CA/FA 249,72,17,8 330,64,06,4 2007-08 31 53 0.75526 254,66,60,2 325,62,44,3 2006-07 34 72 0.78208 230,24,50,9 313,00,95,0 2005-06 05 09 0.73558 185,44,90,2 225,08,14,4 2004-05 92 88 0.82391 135,45,16,5 185,84,04,0 2003-04 43 64 0.72886
Interpretation: By seeing the increasing and decreasing trend of investment in current asset as compared to investment in fixed assets, it is clears that TRL adopts moderate current asset policy. In other words it pays more attention towards profitability and liquidity.
Aim of working capital management

Measuring Profitability. Measuring Solvency.
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Methodology used for working capital analysis

i) Liquidity Ratios Liquidity ratios measure the ability of the firm to meet its current obligations (liabilities). In fact, analysis of liquidity needs the preparation of cash budget and cash fund flow statement; but liquidity ratios, by establishing a relationship between cash and other current assets to current obligations, provide a quick measure of liquidity.
Ratios Current Ratio Quick Ratio Cash Ratio Interval Measure
LIQUID RATIOS 20072006200508 07 06 2.446 2.128 2.227 2.35 2.04 2.16 0.076 0.042 0.052 155.474 139.59 142.741
200405 2003-04 1.888 2.082 1.83 2.71 0.1215 0.055 159.8 155.57
ii) Activity Ratios Funds of creditors and owners are invested in various assets to generate sales and profits. The better the management of assets the larger the amount the amount of sales. Activity ratios are employed to evaluate the efficiency with which the firm manages and utilizes its assets. These ratios are also called turnover ratios because they indicate the speed with which assts are being converted or turned over into sales. Activity ratio, thus, involve a relationship between sales and assets. A proper balance between sales and assets generally reflects that assets are managed well. Several activity ratios can be calculated to judge the effectiveness of asset utilization.
Ratios Inventory Turnover Ratio
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ACTIVITY RATIO 2007200608 07 5.623 7.168
200506 5.498
200405 4.764
200304 4.431
Debtors Turnover Ratio Net Asset Turnover Ratio Current Asset Ratio Working Capital Turnover Ratio Report, TRL
5.341 1.673 2.787 4.713
4.98 1.554 2.99 5.658
5.832 1.512 3.052
6.007 2.155 2.778
6.364 2.209 2.815
5.539 5.904 5.416 Sources: Annual
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CHAPTER-4
RECEIVABLES MANAGEMENT
INTRODUCTION: ASPECTS OF CREDIT MANAGEMENT MODE OF PAYMENT BY DEBTORS MONITORING RECEIVABLES FACTORING
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INTRODUCTION
A firm grants trade credit to protect it sales from the competitors and to attract the potential customers to buy its product at favorable terms. Trade credit creates accounts receivable or trade debtors that the firm is expected to collect in the near future. The customer from whom receivable or book debt have to be collected in the future are called trade debtors or simply as debtors and represents the firms claim or asset. A credit sale has three characteristics. It involves an element of risk that should be carefully analyzed. Cash sales are riskless, but not the credit sales as the cash payments are yet to be received. It is based on economic value. To the buyer, the economic value in goods or services passes immediately at the time of sale, while the seller expects an equivalent value to be received later on. It implies futurity. The buyer will make the cash payment for goods or services received by him in a future period.
A firms investment in accounts receivables depends on volume of credit sales and collection periods. Trade credit arises when a firm sales it products or services on credit and doesnt receive cash immediately. Due to which debtors are arises in the firm, thus trade debtors represent investment. As substantial amounts are tied-up in trade debtors, it needs careful analysis and proper management, so this arise receivable management. Debtors constitute a substantial portion of current asset of several firms. Basically trade debtors, after inventories, are the major component of current assets. They form about one third of current asset in India. Granting credit and creating debtors amounts to the blocking of the firms fund. The interval between the date of sale and the date of payment has to be financed out of working capital. This necessitates the firm to get funds from banks or other sources.
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Percentage of debtors over current asset of TRL for five years is shown below in the form of table and graph. YEARS 20072008 20062007 20052006 20042005 20032004 DEBTORS 109,44,61, 154 103,75,57, 010 78,13,27,6 86 66,67,41,5 34 49,82,40,4 90 CURRENT ASSETS 249,72,17, 831 209,19,80, 916 209,19,80, 916 185,44,90, 292 135,45,16, 543 RATIOS 43.83% 49.60% 33.94% 35.95% 36.78%
Sources: Annual Report, TRL Interpretation: If we evaluate the gross current asset of TRL we can very well observe that about 49% of it is represented by debtors in the financial 7year 20062007, which are Rs 102.507 corers more than its norms. However it may be observed that in subsequent years TRL has reduced the gap and brought the debtors position at par level of norms. As debtors plays a vital role in working capital management, TRL has properly analyzed in details how exactly debtors are managed here. A firms investment in accounts receivable depends on the volume of credit sales and the collection period. So it is also essential to find out the collection period to know the system of collection on time. It is finding by the following formula i.e.
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Average collection period (ACP) = Debtors/Credit Sales x 360 It also helps to find the firms average investment in account receivable. Average collection period of TRL for five years is shown below in the form of table and graph. YEARS 20072008 20062007 20052006 20042005 20032004 DEBTORS 109,44,61, 154 103,75,57, 010 78,13,27,6 86 66,67,41,5 34 49,82,40,4 90 CREDIT SALES 584,59,23, 088 516,75,44, 869 455,70,76, 293 400,54,21, 306 317,07,24, 228 ACP 67.398 days 72.282 days 61.723 days 59.926 days 56.57 days
So in above table the average collection period i.e. ACP determines the speed of payment by customers. It measures the number of days for which credit sales remains outstanding. The longer the ACP, the higher the firms investment in account receivable.
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Sources: Annual Report, TRL Interpretation : So here we are seeing that in financial year 2006-2007 the average collection period is very high that means TRLs investment in account receivable is also higher.TRL has setup a task force comprising of members from marketing and finance department. The task force is mostly set to identify the loc mina in the system of collection on time and also given more attention for collecting the old dues.
ASPECTS OF CREDIT MANAGEMENT

1. Terms of payment 100% advance. 30 days credit. 60 days credit. Letter of credit. Payment on the basis of performance
2. Credit policy variables Credit standard: It is the criteria which a firm follows in selecting customers for the purpose of credit extension.TRL gives credit according to the past history and past experience of the customer. Credit period: The credit period given by TRL is generally 60 days. Cash discount: The discount rate is 3% on list price if it is paid on advance.
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Collection effort: department.
In TRL collection effort is done by the marketing
3. Credit evaluation of customer TRL adopt traditional credit analysis, so it calls for assessing prospective customers in terms of four C. Character, capacity, condition and collateral. TRL has categories its customers in three categories: Red- It indicates financially very weak, high risk customers. Yellow- It indicates customers with moderate health and risk. Green- It indicates financially strong customers.
4. Credit-granting decision Once the firm has assessed the creditworthiness of a customer, it has to decide weather or not credit should be granted. In TRL the basically there is no thumb rule for credit granting decision. All decisions related to credit granting is taken by the heads of three profit centre i.e. (Basic and Dolomite, Alumina and Silica, Monolithic and Flow control), joint MD and MD. 5. Control of accounts receivables TRL has set up a task force comprising of members from marketing and finance department. The task force is mostly set to identify the loc mina in the system of collection on time and also given more attention for collecting the old dues. 6. Measures commonly employed for studying bad debt losses ratios. Default rate can be measured in terms of bad losses ratios indicates default risk. Default risk is the likelihood that a customer will fail to repay the credit obligation. YEAR CONSIDER ED DOUBTFUL 20072008 12,58,14 2 20062007 29,58,14 2 20052006 29,01,25 5 20042005 1,78,83,5 24 20032004 1,56,66,6 05
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Sources: Annual Report, TRL So while seeing on the above table we can conclude that TRL has taken some major steps to control doubtful debts.
Mode of Payments by Debtors

The debtors pay to TRL in the form of: 1. Advance Payment It is the payment received in advance before delivering the goods or services to the customer. Advance Payments are usually made by small customers or for short term. In other words TRL usually take advance payment from their Red customers and sometimes from yellow customers. 2. Letter of Credit Payment(L/C) A letter of credit (LC) is a Bank Instrument that is issued to protect the beneficiary in a commercial transaction. Technically a letter of credit is not a guarantee although it does guarantee payment of an obligation to a beneficiary.
Contents of LC: Terms Conditions Procedures
Parties of LC: There are five parties to the letter of credit Issuer Applicant Beneficiary Advising bank Confirming Bank
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Basically LC is win- win situation for both the parties. TRL uses SBI Commercial Branch, Rourkela as an issuer bank for letter of credit. 3. Credit Payment Of 30 days and 60 days: Steel plants are the major customers of the company and they have generally makes the payment for the credit allowed to them in 30 days. For Other customers the credit payment is 30 days or 60 days. 4. Other modes of payment by debtor i) Postdated cheques: many customers of TRL in northern region prefer to make this mode of payment.TRL takes postdated cheques with Bank guarantee certificate. Payment on the basis of performance: For customers like Integrated Steel Plants (ISP) TRL collect the money from them on the basis of performance of the product. Guarantee of the product performance is supported by the help of R&Ds approval certificate with bank guarantee certificate, which is issued by SBI Samada, Belpahar. A slab has been made by TRL which shows the payment procedure. 10% of payment at the time of delivering the product, for that bank guarantees, 80% of payment during the performance of the product and another 10% of payment after customer satisfaction.
ii)
MONITORING RECEIVABLES
A firm needs continuously monitoring and controlling its receivables to ensure the success of collection effort. TRL uses Aging Schedule method for evaluating the management of receivables. Aging Schedule shows the outstanding amount with a limited credit period which is remains uncollected that period. It breakdown the receivables according to the length of time for which they have been outstanding. Aging Schedule provides more information about the collection experience. It helps to spot out the slow paying debtors. The Aging Schedule of TRL for the financial year 2006-2007 has been shown below.
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DEBTORS OUTSTANDING AS ON 31.03.2007

(Rupees in Lakhs )
Customers code and name D20001 D20002 D20003 D20004 D20005 D20006 D20007 D20009 TATA STEEL LIMITED SAIL - BHILAI STEEL PLANT SAIL-ROURKELA STEEL PLANT SAIL-BOKARO STEEL PLANT SAIL-DURGAPUR STEEL PLANT SAIL - ALLOY STEEL PLANT INDIAN IRON & STEEL CO. LTD., RASHTRIYA ISPAT NIGAM LTD,(RIN Total Tata International Ltd Direct Export D10007 D16041 D15122 D21009 D07244 D10006 D95025 D96009 D07239 D10033 D58005 D07002 D97092 D15120 D15078 D07182 D04003 D05019 D20011 D10003 D10032 AARTI STEELS LIMITED ACTION ISPAT & POWER (P) LTD ADHUNIK METALIKS LTD ADITYA COKE PVT. LTD AIA ENGINEERING LTD AMBICA STEELS LIMITED APEX TRADING AGENCY ARORA REFRACTORIES ASSOCIATED INDUSTRIAL FURNACES BANIAN & BERRY ALLOYS PVT. LTD BHARAT ALUMINIUM COMPANY LIMIT BHARAT HEAVY ELECTRICALS LIMIT BHAWANI INDUSTRIES LTD BHUSHAN POWER & STEEL LIMITED BHUSHAN STEEL & STRIPS LTD., BHUTAN FERRO ALLOYS LTD. BRIJ LAL PAWAN KUMAR ELETROTHERM (INDIA) LTD ESSAR STEEL LIMITED FACOR STEELS LIMITED GEE ISPAT PVT. LTD 10 0 60 0 30 0 20 0 30 0 10 0 40 0 40 0 30 0 10 0 20 0 30 0 30 0 30 0 60 0 60 0 40 0 30 0 10 0 50 0 10 BG 10 0 10 0 10 0 10 0 20 0 10 0 30 0 20 0 Balance 1,806.5 1 233.10 348.21 182.35 90.71 21.72 9.29 468.35 3,160.2 4 45.24 755.37 12.01 32.57 12.05 13.19 12.34 60.96 19.71 15.93 55.60 43.76 41.18 10.33 11.56 54.04 137.91 18.84 19.40 244.06 141.09 328.63 20.66 Bills within 3 months 1,658.2 2 149.18 248.28 174.62 53.92 15.36 9.21 110.98 2,419.7 7 2.41 635.27 12.01 32.43 12.05 13.19 9.25 60.96 17.60 15.72 49.81 43.76 31.13 4.74 11.56 54.04 137.91 0.00 18.44 241.49 106.05 301.02 20.66 Bills 3-6 mths 43.64 21.69 32.44 7.74 13.49 1.36 0.08 69.32 189.76 0.00 65.38 0.00 0.00 0.00 0.00 3.08 0.00 0.51 0.21 5.79 0.00 3.68 0.00 0.00 0.00 0.00 0.00 0.96 2.57 35.02 23.43 0.00 Bills 6-9 mths 51.34 34.76 67.49 0.00 0.05 0.31 0.00 90.53 244.48 37.93 45.64 0.00 0.00 0.00 0.00 0.00 0.00 1.32 0.00 0.00 0.00 0.00 5.24 0.00 0.00 0.00 6.65 0.00 0.00 0.00 4.18 0.00 Bills 9-12 mths 24.80 13.33 0.00 0.00 3.89 4.70 0.00 99.38 146.10 0.00 0.00 0.00 0.14 0.00 0.00 0.00 0.00 0.28 0.00 0.00 0.00 0.01 0.35 0.00 0.00 0.00 12.19 0.00 0.00 0.01 0.00 0.00 Bills 12-24 mths 28.51 14.13 0.00 0.00 12.75 0.00 0.00 98.15 153.54 4.91 9.08 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.14 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Bills more than 24 mths 0.00 0.00 0.00 0.00 6.60 0.00 0.00 0.00 6.60 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.22 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
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D07243 D10008 D50001 D16003 D96001 D95020 D15005 D20012 D07014 D07175 D50007 D10031 D10001 D15017 D20010 D15018 D97008 D15023 D15024 D27001 D15027 D95001 D15028 D96066 D65009 D95030 D95006
GLOBAL HITECH INDUSTRIES LIMIT HARYANA STEEL & ALLOYS LIMITED HINDALCO INDUSTRIES LTD. HITECH SERVICES IFGL REFRACTORIES LIMITED INTEGRATED SERVICES ISMT LIMITED ISPAT INDUSTRIES LIMITED JAMSHEDPUR ENGG.& MACHINE JAYASWALS NECO LIMITED JHAGADIA COPPER LIMITED JINDAL STAINLESS LIMITED JINDAL STAINLESS LIMITED JINDAL STEEL & POWER LIMITED-U JSW STEEL LIMITED KALYANI CARPENTER SPECIAL STEE LARSEN & TOUBRO LIMITED MAHINDRA UGINE STEEL CO. LTD., MARMAGOA STEEL LIMITED MEENA AGENCY PRIVATE LIMITED MODERN STEELS LIMITED MORTEX (INDIA) MUKAND LIMITED NAVEEN TRADERS NEUTRAL GLASS & ALLIED INDS. L OSWAL HYDRAULICS & PNEUMATICS PADMAJA INC Total Grand Total
0 30 0 10 0 10 0 40 0 30 0 40 0 30 0 10 0 30 0 50 0 10 0 60 0 10 0 30 0 20 0 30 0 20 0 10 0 30 0 30 0 30 0 40 0 10 0 40 0 20 0 40 0 40 0
30.94 18.77 283.04 47.75 74.00 83.28 23.23 265.02 16.08 18.56 32.33 96.70 33.94 148.95 54.53 24.45 1,016.4 4 22.37 33.51 533.04 20.05 38.81 41.18 12.36 11.57 11.52 116.45 5,215.3 0 8,375.5 4
30.94 15.13 250.60 34.94 74.00 83.28 19.03 265.02 5.93 0.00 2.64 96.70 29.02 31.06 33.75 22.09 1,014.1 0 22.37 33.51 0.07 19.97 38.81 33.24 12.36 11.57 11.52 104.38 4,127.5 3 6,547.3 0
0.00 3.64 3.03 4.34 0.00 0.00 4.19 0.00 10.15 0.00 3.53 0.00 2.96 11.69 0.00 0.06 2.34 0.00 0.00 38.30 0.00 0.00 2.20 0.00 0.00 0.00 12.08 239.14 428.90
0.00 0.00 2.94 3.94 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.85 15.53 17.65 0.00 0.00 0.00 0.00 46.12 0.00 0.00 0.65 0.00 0.00 0.00 0.00 188.64 433.12
0.00 0.00 5.00 4.43 0.00 0.00 0.00 0.00 0.00 12.60 26.17 0.00 0.11 17.35 3.14 2.29 0.00 0.00 0.00 263.15 0.00 0.00 0.00 0.00 0.00 0.00 0.00 347.22 493.32
0.00 0.00 21.46 0.00 0.00 0.00 0.00 0.00 0.00 5.96 0.00 0.00 1.00 73.31 0.00 0.00 0.00 0.00 0.00 185.41 0.01 0.00 0.00 0.00 0.00 0.00 0.00 306.28 459.82
0.00 0.00 0.00 0.10 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.06 0.00 5.10 0.00 0.00 0.00 0.00 6.48 13.08
FACTORING
Factoring is a popular mechanism of managing, financing and collecting receivables by companies.It is a method of converting a non-productive, inactive asset into a productive asset by selling receivables to a company that specializes in
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their collection and administration. In other words it means getting the money before due date (selling bills receivables to bank) The factor is the financial institution that purchases the clients accounts receivable and in relation thereto, controls the credit, extended to customers. Factoring facility is given by TRL only to its green customers. The factor (bank) which gives service to TRL for bills discounting facility is HSBC, Bhubaneswar.
Types of factoring done by TRL:

. Recourse: In this method of factoring TRL is not protected against the risk of bad debts.TRL has no indemnity against unsettled or uncollected debts. If the factor (Bank) has advance funds against book debts on which a customer subsequently defaults, the TRL will have to refund the money. Basically this facility is only given to green customers. Non-Recourse: Under this method book debts are purchased by the factor, assuming 100% credit risk. The company is protected against the bad debt. In this customer are required to make payment directly to the factor. The factor maintains the sales ledger and accounts and prepares age wise reports of outstanding book debts. TRL only gives this facility to its holding company which is Tata Steel, Jamshedpur. The specimen of factoring of TRL for the financial year 2007-2008 has been shown below.
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CHAPTER-5
INVENTORY MANAGEMENT
INTRODUCTION DECISION IN INVENTORY MANAGEMENT
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INTRODUCTION
Inventory constitutes about 60 percent of current assets of public limited companies. The inventories can be in the form of raw materials, work-in-process and finished goods, fuel, stores and spares.
Need for inventory management:

To facilitate smooth production and sales operations. To guard against the risk of unpredictable changes in usage rate and delivery time. To take advantage of price fluctuations.
1. A fundamental requirement for good inventory management is extensive database with respect to monthly consumption and lead time 2. Higher the fluctuation in either of the parameter larger should be the database that is data to be available for a longer period of time. In order to reduce the working capital days TRL has to force on inventory control. In TRL the Baan ERP software system has been implemented. This makes easier for the control of inventory. For procurement and control of raw material stock the material management department in TRL looks at the following in display item data Safety stock. Inventory on hand. Inventory on hold. Inventory on order. Allocated inventory. Economic stock.
For inventory control EOQ method, max level, min level, reordering level is used. i) Average monthly consumption= total consumption No. of month ii) Lead time = Lead for procurement.
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The formula used for inventory control is: a) Minimum stock level: MSL 1.65*L.T*std.deviation (AMC) b) Maximum stock level: Max.S.Level=min S.L+ (LT*AMC) c) Reordering quantity: = 2*AMC*Ord.cost Inventory cost
DECISION IN INVENTORY MANAGEMENT

What should be the size of the order for replenishment of stock? At what level of stocks should the order be placed?
Inventory Management Involves:

a) Two primary variables: Monthly consumption(MC) or demand Lead time from order initiation to stock replenishment. This is also known as procurement period. b) Three control points : Minimum stock level (MSL) Re-order point(ROP) Re-order quantity (ROQ)
Definition
Monthly Consumption (MC) - Average of monthly consumption of the three months in the previous quarter. Q1- April- June Q2- June- September Q3- October- December Q4- January- March Note The MC for the months of Q2 will be the avg. of consumption during the Q1 quarter month.
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High MC- Avg. MC is higher than a days/ shifts production (Each department to decide this norm for itself.) Low MC- Where the MC is less than the above norm. FormulasMSL- High MC item= .5MC Low MC item= MC ROP- High MC item= MC Low MC item= 2MC
ITEMS High MC Low MC
MSL .5MC MC
ROP MC 2MC
ROQ MC 3MC
Note: - In the above formulas lead time has been eliminated for the sake of simplification to that extent there will be some inaccuracy which can mostly be corrected after 3months of experience.
Factors which are not taken into account in fixing ROP

Sudden/ unanticipated scarcities. Price changes Obsolescence risk. Govt. restrictions. Marketing/ strategic considerations.
Four different models depending upon.

of
inventory
management
Constant MC and constant lead time (LT). Constant MC and variable LT. Variable MC and variable LT. Varying MC and constant LT.
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Note: - Model 1 is the simplest and model 4 is the most complex. In our case 4 is normally applicable.
Cost associated with order size:

Ordering cost: Requisition, placing of order, transportation, receiving, inspecting and storing and clerical and staff services. Ordering cost is fixed per order. Therefore, they decline as the order size increases. Carrying cost: warehousing, handling, clerical and staff services, insurance and taxes. Carrying cost vary with inventory holding. As order size increases, average inventory holding increases and therefore the carrying cost increases. Note: -These costs should be optimized in order to minimize overall costs.
Re-order point (ROP):

In the real world procurement of material takes time. Hence the order level must be such that the inventory at the time of ordering must be sufficient to meet the need of production during the procurement period. I.e. during lead time.(LT). ROP= (ALT*AMC)+minimum stock Where, ALT is the average lead time AMC is the average monthly consumption.
Minimum stock level (MSL):

It is also known as safety stock level. (SSL). Inventory carrying cost is proportional to the level of inventories carried. Hence it is rarely make sense to seek 100% protection against stock out. The optimal level of safety stock is usually less than the level of safety stock required less than the level of safety stock required to achieve total protection against stock out. Normally a satisfaction level (also called service level of 95% or 99% is selected as the goal. Formula for MSL is: MSL= Z*F Where, Z= (ALT*dm + AMC * dl). dm= Standard deviation of monthly consumption. dl= standard deviation of lead time. F= F factor (service level)
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For example: ALT= 5 dm= .0228 AMC= 29.832 dl= 1.619 So, Z= (5*.0228 + 29.832*1.619) Z= 6.958 F= 1.64(constant) Therefore, MSL= 6.958*1.64 = 11.411 For calculating the ROP, ROQ, AMC and MSL, We have taken data from TRLs ERP software system. We have taken ten items for calculating the above mentioned values. Baan ERP uses the formulas for calculating these values. Those formulas are displayed earlier on the above. On the date 9th July 2008 the ROP, ROQ, AMC, and MSL for ten items are given below.
st. on Ha nd 10 6 2 3 5 8 10 11 14 MS L val ue 0 0.02 0.02 0.13 0.06 0 0 0 0 RO Q Qty . 0.88 0.65 0.31 0 0.45 0.35 0.88 0.51 1.04 7 AM C Qty . 5.3 1 3.9 1 1.8 8 0 2.7 1 2.1 4 5.3 3.1 1 6.2 8 AM C Val ue 195 6 492 4 595 8 0 389 7 176 258 143 373 LT in da ys 5 5 5 10 5 5 5 5 5
Item 223000 35 223000 40 223000 55 223001 00 223001 60 223002 50 223003 16 223003 20 223003 25
Bearing ball 6203 Bearing ball 6203 ZZ
46 59
0 0
10 10
10.5 11.6
484.42 688.32
23.92 62.27
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Descripti on Bearing ball 1211 K Bearing ball 1213 K.TV.C Bearing ball 1218 K.C3 Bearing ball 1318 K Bearing ball 2308 K Bearing ball 60042 RS Bearing ball 6202 ZZ
Rat e/ Unit 368 126 2 315 4 675 0 143 5 82 48
Inv. val ue 0.03 0.07 0.06 0.2 0.07 0 0
MS L 1 2 0 2 4 2 6
RO P Qty 2.4 2.65 1.2 2 5 2.3 6.8
ROP Value 878.03 3346.1 2 3831.9 13500. 22 7153.8 193.82 335.94
ROQ Value . 324.0 3 820.7 4 993.0 4 0 649.5 5 29.36 43.14
Sources; ERP data base, TRL.
Guidance For The Above Table From TRL.

Use a two year data base for monthly consumption and lead time for determining AMC, ALT, dm and dl. Recalculate these figures on 1st April and 1st October every year. We have analyzed the balance sheet of TRL then it can be observe that out of total current assets major amount is inventory. It is one of the major factors affecting working capital cycle of TRL in order to reduce working capital days TRL has to force on inventory control. TRL has adopted BaaN ERP software system display item data of all the raw materials forming part of inventory. The percentage of inventory over current assets is calculated and displaced below in form of table and graph for five years.
Percentage of Inventory over Current Assets

Year 2007-2008 2006-2007 2005-2006 2004-2005 2003-2004 Inventory 85,13,94,581 58,61,30,368 63,21,91,956 63,65,90,022 56,02,67,707 Current Assets 249,72,17,831 209,19,80,916 230,24,50,509 185,44,90,292 135,45,16,543 Ratios 34.094% 28.018% 27.457% 34.327% 41.363%
Sources: Annual report, TRL.

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Interpretation: Inventory amount to forty percent of current asset investment of TRL. Inventories are stock of the product, company is manufacturing for sale and component that make up the product.
CHAPTER-6
CASH MANAGEMENT
INTRODUCTION CASH PLANNING MANAGING CASH COLLECTIONS AND DISBURSMENTS
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INTRODUCTION
Cash is one of the most important current assets of the firm. Cash or fund is the basic input needed to keep the business in a running condition; it is also the ultimate output expected to be realized by selling the service or product manufactured by the firm. The firm should keep sufficient cash, neither more nor less. Cash shortage will disrupt the firms manufacturing operations while excessive cash will simply remain idle, without contributing anything towards the firms profitability. So to effective cash flow inside and outside the firm there should be effective management of cash. Basically in TRL cash management is known as funds management. An asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value. Cash is the most liquid asset. Other assets that are considered relatively liquid and included in quick assets are debtors, loose tools, and marketable securities. Inventories are considered to be less liquid. Inventories normally require some time for realizing in to cash; their value also has a tendency to fluctuate. The quick ratio is found out by dividing quick assets by current liabilities. Quick Ratio = (Current Assets Inventories) / Current liabilities) Percentage of Quick assets over current liabilities of TRL for five years is shown below in the form of table and graph. CURRENTASSE TS 201,24,59,190 165,90,90,469 144,93,73,742 139,72,99,734 108,14,21,667 CURRENT LIABILITIES 85,75,18,398 80,97,98,543 67,02,52,012 76,35,78,201 39,96,72,264
YEAR 20072008 20062007 20052006 20042005 20032004
RATIOS 2.35 2.04 2.16 1.83 2.71
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Sources: Annual Report, TRL Interpretation: A quick ratio of 1 to 1 is considered to represent a satisfactory current financial condition. Although quick ratio is a more penetrating test of liquidity than the current ratio, a quick ratio of 1 to 1 or more does not necessarily imply sound liquidity position. It should be remembered that all debtors may not be liquid, and cash may be immediately needed to pay operating expenses. It should also be noted that inventories are not absolutely non-liquid. To a measurable extent, inventories are available to meet current obligations. So here TRL is having high value of quick ratio which tends to shortage of funds if it has slow paying, doubtful and long duration outstanding debtors. Since we know that cash is the most important liquid asset, so here TRL has to also examine cash ratio and its equivalent to current liability. Cash Ratio = (Cash + marketable securities) / current liabilities. The Ratio of cash over current liabilities of TRL for five years is shown below in the form of table and graph. CASH AND BANK 6,47,80,695 3,42,38,276 3,47,76,842 9,27,98,670 2,19,89,892 CURRENT LIABILITIES 85,75,18,398 80,97,98,543 67,02,52,012 76,35,78,201 39,96,72,264
0.055
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YEAR 20072008 20062007 20052006 20042005 20032004
RATIOS 0.076 0.042 0.052 0.1215
Sources: Annual Report, TRL Interpretation: So here TRL dont have to be worried about the lack of cash because its having a high reserve borrowing power and it also having a credit limit sanctioned from banks and can easily draw cash in future.
Cash management is concerned with the managing of:

1. Cash flow into and out of the firm In TRL the cash which comes from debtors through the sale of product(Bricks) is the cash inflow and the cash which is paid to creditors for the purchase of raw-materials(Dolomite, Silica, etc), spares and parts, machinery etc is the cash outflow. 2. Cash flow within the firm Cash flow within TRL would constitute: a) TRL is paying wages and salary to their employees and labour. b) It has made separate department for provident fund (PF) trust. c) For the payment of gratuity TRL has tie up with LIC gratuity. d) For super annuation TRL is deducting 15% of basic salary which is deposited with LIC for 55 years after which a monthly pension is given to employee for lifetime. 3. Cash balances held by the firm at a point of time by financing deficit or investing surplus cash At the time of deficit of cash TRL takes short term loans(STL) from their respective bankers(SBI, Samada and CBI, Belpahar) and at the time of surplus cash it does not invest in marketable securities until it pays its debts.
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CASH PLANNING
Its a technique to plan and control the use of cash. It helps to anticipate the future cash flows and needs of the firm and reduces the possibility of idle cash balances(which lowers firms profitability) and cash deficits(which can cause the firms failure). Cash planning protects the financial condition of the firm by developing a projected cash statement from a forecast of expected cash inflows and outflows for a given period. The forecast may be based on the present operations or the anticipated future operations. Cash plans are very crucial in developing the overall operating plans of the firm. In TRL the management makes 5 year business plan for future, if it requires they also make 10 year business plan. Taking this into consideration they make cash planning for annual business plan for one year.
Cash Budgeting
Cash budget is the most significant device to plan for and control cash receipts and payments. Cash budget is a summary statement of the firms expected cash inflows and outflows over a projected time period. It gives information on the timing and magnitude of expected cash flows and cash balances over the projected period. In TRL the cash budgeting is done for every month for determining cash requirements if cash flows show extreme fluctuations. It is highly advantageous because it helps to determine the net cash inflow or outflow so that at the end it can arrange its funds. Cash forecasts are needed to prepare cash budgets. In TRL cash forecasting is done on short term and long term basis. For short term decisions the head of finance department takes his own decision and for long term board of directors (BOD) of TRL takes decision. The cash inflow includes sales realization, export packing credit, short term loan, term loan, receipt of fixed deposit etc. The cash outflows from the firm are raw materials, fuel, salary and wages, gratuity, bonus, stores and spares, repairs, power, sales tax, income tax, interest capital expenditure (CAPEX) etc. The Projected cash
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inflow and cash outflow statement for the financial year 2008-2009 has been prepared by TRL and it has been shown in the below table
PARTICULARS IN-FLOW Sales Realization Export Packing Credit Miscellaneous Income Short Term Loan Term Loan Receipt of Fixed Deposits. Recourse bill discounting TOTAL IN-FLOW OUT-FLOW Raw Materials Fuels Salaries & Wages Gratuity/Superannuation Bonus &Cash reward Stores, Spares and Repairs Power Other Expenses Freight & Forwarding Excise Duty Sales Tax Income Tax Interest Capital Expenditure Repayment of F.D. Repayment of Packing Credit Repayment of TL - CBI Repayment of TL - SBI Repayment of STL Repayment of HSBC Friendly Departure Scheme Dividend Tax TOTAL OUT-FLOW Surplus/(Deficit) for the month Opening Balance Closing Balance Sanctioned Cash Credit Apr 2008 51.00 2.00 0.50 0.02 53.52 27.00 6.00 2.60 May 2008 51.00 2.00 0.50 0.02 5.00 58.52 27.00 6.00 2.60 June 2008 56.00 2.00 0.50 20.00 10.00 0.02 5.00 93.52 28.50 6.00 4.10 0.30 2.40 1.10 2.50 2.10 4.00 1.50 1.86 0.95 11.55 0.02 2.00 2.50 1.00 20.00 2.45 0.23 95.06 (1.54) (22.14) (23.68) 38.00 July 2008 58.00 5.00 0.50 0.02 5.00 68.52 28.50 6.00 3.06 Aug 2008 58.00 2.00 0.50 0.02 5.00 65.52 28.50 6.00 3.06 1.70 2.40 1.10 2.50 2.10 1.00 1.50 0.95 0.60 0.02 2.00 2.40 1.10 2.50 2.10 4.00 1.50 0.95 2.05 0.02 2.00 2.40 1.20 3.13 2.10 4.00 1.50 1.05 2.00 0.02 2.00 2.40 1.20 3.13 2.10 4.00 1.50 1.05 3.26 0.02 2.00 2.40 1.20 3.13 2.10 4.00 1.50 3.66 1.05 3.04 0.02 2.00 2.50 1.00 20.00 5.00 0.23 90.69 6.83 (28.80) (21.97) 38.00 2.40 1.20 3.45 2.20 4.00 1.50 1.05 1.56 0.02 2.00 2.40 1.20 3.45 2.30 4.00 1.50 1.05 5.00 0.02 2.00 2.40 1.25 3.45 2.30 4.00 1.50 3.66 1.05 7.05 0.02 2.00 2.50 1.00 20.00 5.00 0.23 95.27 (7.25) (13.81) (21.06) 38.00 Sep 2008 60.00 2.00 0.50 20.00 10.00 0.02 5.00 97.52 28.50 6.00 3.06 0.30 Oct 2008 60.00 2.00 1.00 0.02 5.00 68.02 28.50 6.00 3.06 Nov 2008 60.00 2.00 1.00 0.02 5.00 68.02 28.50 6.00 3.06 Dec 2008 60.00 2.00 1.00 20.00 0.02 5.00 88.02 28.50 6.00 3.06 0.30 Jan 2009
60.00 2.00 1.00
20.00 0.02 5.00
88.02
29.75 6.50 3.06
2.40 1.25 3.45 2.30 4.00 1.50
1.10 15.35 0.02
2.00
5.00 0.23 55.00 (1.48) (19.73) (21.21) 38.00
5.00 0.23 59.45 (0.93) (21.21) (22.14) 38.00
5.00 0.23 11.82 74.01 (5.49) (23.68) (29.17) 38.00
5.00 0.23 65.15 0.37 (29.17) (28.80) 38.00
5.00 0.23 62.17 5.85 (21.97) (16.12) 38.00
5.00 0.23 65.71 2.31 (16.12) (13.81) 38.00
5.00
0.23
77.91
10.11 (21.06 (10.95 38.00
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Once the cash budget has been prepared and appropriate net cash flow established, so TRL should ensure that there does not exist a significant deviation between projected cash flows and actual cash flows. TRL prepares every year the projected cash flow for the next financial year. The projected and actual cash flows are compared and differences are calculated and the variances are highlighted. The comparison between the projected and actual cash flow for the previous year 20072008 is shown below.
CASH FLOW ACTUAL VS PROJECTION FOR THE PERIOD FROM APR'07 TO MARCH'08
( Rupees in Crores ) Apr'07 N o. 1 . 2 . Miscellaneous Income 12.16 3 Recourse bill . discounting 41.84 TOTAL PAYMENT 1 2 3 597.56 6.00 6 07.00 6 Total Payments 572.80 Borrowings, Other than CC (Net) 6.31 Repayment of bill discounting 29.43 TOTAL CASH CREDIT Surplus/(Deficit) Opening Balance Closing Balance Sanctioned Cash Credit 608.54 ( 10.98) (8.75) ( 19.73) 38.00 27.22) 38.00 (18.47) (8.75) ( 7.49
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to Mar'08 Projectio n 6
DIFF.
PARTICULARS RECEIPT
Actual
(5 7.44) 6.16 4 1.84 ( 9.44) (3 1.77) (1 4.59) 2 9.43
Collection from Debtors
543.56
01.00
04.57 20.90 6 25.47
(1 6.93) 7.49 -
Interpretation: It can be seen from above table that only 90 percent i.e.Rs.543.56 Crores had been collected from debtors and remaining 10 percent i.e. Rs.57.44 Crores are expected to be collecting in next financial year. So here TRL has to be more conscious about its collection procedure. To achieve this, cash management efficiency will have to be improved through a proper control of cash collection and disbursement. The twin objective in managing the cash flows should be to accelerate cash collections as much as possible and to decelerate or delay cash disbursements as much as possible.
MANAGING CASH COLLECTIONS AND DISBURSMENT

1. Accelerating cash collections A firm can conserve cash and reduce its requirements for cash balances if it can speed up its cash collections. The first hurdle in accelerating the cash collections is the extra time enjoyed by the customers in clearing of bills. Cash collection can be accelerated by reducing the lag or gap between the time a customer pays bill and the time the cheque is collected and funds become available for the firms use. For accelerating cash collection TRL has adopted several strategies viz. use of cash management system a/c (CMS a/c) with ICICI bank and HDFC bank. CMS a/c makes online payment transactions possible which leads to drastic reduction in processing time than the traditional way. ICICI bank charges .05 paisa per thousand per day collection. HDFC bank charges are nil for these transactions. TRL is planning to close its a/c with ICICI bank and open a new a/c (CMS a/c) with AXIS bank (charges nil).
2. Stretching
Accounts Payables One basic strategy of efficient
cash management is to stretch the accounts payables. In other words, a firm should pay its accounts payable as late as possible without damaging its credit standing. It should, however take advantages of the cash discount available on prompt payment.
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As in TRL collection procedure is very fast in same way it also makes prompt payment to their suppliers. So TRL does not adopt the policy of stretching
account payables. It pays to their suppliers according to their convenience in one of the following ways: i) Multicity cheques The banker issuing this cheque is SBI Belpahar. With this cheque being presented in any of the SBI branches, the amount due thereon is immediately paid and the a/c of TRL with SBI, Samada is debited respectively. At par cheque The banker issuing this cheque is SBI, Samada and CBI, Gomadera. No charges are deducted by the bank when encashed. MICR The banker issuing this instrument is SBI. In this the clearing process has been highly automated. Electronic data is used instead of paper. So TRL have started using MICR to automate the clearing process. They maintain an account with Reserve Bank of India (RBI) which is debited for inward clearing and credited for outward clearing.
ii)
iii)
3. Other income Sources of other income for TRL are:

i) ii) iii) Scrap sale Hospital Jehangir Ghandy hospital. Application (of Refractories product)
Note:-TRL does not invest its surplus cash in short term marketable securities. The surplus cash is used to repay the debts .
Two scenario of cash management

(A) Ample cash Inter corporate deposits (a decade back)
(B) Limited funds Unsecured loan Secured loan (hypothecation of working capital)
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a. Working capital b. Termed loan (e.g. Project finance)
Cash credit facility Demand loan Short-term loan
renewal of hypothecation takes once in a year
LOAN
Unsecured loan
Secured loan (Hypothecation)
Promissory note
Letter of delivery
Working capital
Term loan
Cash credit
Demand loan
Short-term loan
Packing credit loan
DEMAND LOAN
A loan which is repayable on demand (i.e. without prior notice), rather than on a specific date. Certain loan limit is set-aside to the company the loan as and when required. Generally, the rate of interest of the above said loan is higher than the short term loan. TRL takes demand loan from CBI, Gomadera and SBI, Samada. 80% of the demand loan is payable in a certain period of time while remaining 20% is can be withdrawn and deposited as per its convenience.
CASH CREDIT
Cash credit means the firm can overdraw up to a certain limit. A bank provides this type of funding, but only after the required security is given to secure the loan. Once a security for repayment has been given, the business that receives the loan can continuously draw from the bank up to a certain specified amount. This type of financing is similar to a line of credit.
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TRL takes cash credit from CBI, Gomadera having a cash credit limit of 21 Crores with an interest rate of 13 %.
PACKING CREDIT
You have an extended, flexible finance period usually 90 days before the shipment date The credit covers manufacturing costs such as raw materials and employee wages Supports cash flow while goods are being packed and waiting for shipment Simple pro-rata repayment from Documentary Credit proceeds or buyer remittance Credit terms can be structured to suit your business You can win new business by offering more competitive terms to trading partners
Purpose: It is given to procure the given raw material, fuel after the placement of the order. 1) This is specifically meant to encourage exports. Rate of interest will be lesser than the STL as well as Demand Loan. It can be avoided both in Rupee as well as any foreign currency. The loan is adjusted against export realization. Packing credit is available to TRL at an interest rate of 7.5% to 9%.
2) Margin (75%, 80%, 90%) EXAMPLE 75% of 100,000 orders Loan 75% of loan = 75,000 3) Realization should be done in 180 Days from the date of disbursement. (Reserve Bank Notification) 4) In case your material is rejected and unable to realize in 180 days it is to be reported to RBI. 5) Some private banks demand ECGC (Export Credit Guarantee Corporation) these conditions.
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SHORT TERM LOAN

The loan is usually repayable with in one year. It can be availed for 90 days, 180 days, and 270 days. It can be floating rate or fixed rate. Floating rate means it is linked to PLR or MIBOR. Fixed rate is fixed for the term loan. It may be a secured or unsecured loan. Hypothecation Inventory, Finished stock PLR of CBI is 13% PLR of SBI is 12.75%
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CHAPTER-7
WORKING CAPITAL FINANCE

INTRODUCTION BANK FINANCE FOR WORKING CAPITAL OTHER SOURCES OF FINANCE
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INTRODUCTION
External funds available for a period of one year or less are called short term finance. In TRL, short term funds are used to finance working capital. Two most significant short term sources of finance for working capital are: trade credit and bank borrowing. Trade credit as a ratio of current asset is about forty percent. Bank borrowing is the next important source of working capital finance. Two other sources of working capital finance which have recently used in TRL are factoring and commercial paper.
Trade credit
Trade credit refers to the credit that of customer gets from supplier of goods in the normal course of business. In practice, immediate cash payment is not required to be made for the purchase. This deferral of payments is a short term financing called trade credit. Trade credit is mostly an informal arrangement, and is granted on an open account basis. A supplier sends goods to the buyer on credit which the buyer accepts, and thus, in effect, agrees to pay the amount due as per sales terms in the invoice.
Credit term
It refers to the condition under which the supplier sells on credit to the buyer, and the buyer is required to repay the credit. This condition includes the due date and the cash discount given for prompt payment. Due date is the date by which supplier expects payment. Credit term indicate the length and beginning date of the credit period. The due date for trade credit for TRL Normal goods - 30 to 90 days. Imported goods- 60 to 90 days.
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Cash discount
Cash discount is the concession offered to the buyer by the supplier to encourage him to make payment him promptly. The cash discount can be availed by the buyer if he pays by a certain date which is quite earlier than the due date. The cash discount enjoyed by TRL is about 10 to 15 percent per annum. In context of TRL there are three types of creditors Suppliers, Employees and Miscellaneous creditors. In addition to trade credit deferred income are other spontaneous source of short term financing. Deferred income represents funds received by the firm for goods and services which it has agreed to supply in future. This receipt increases the firms liquidity in the form of cash; therefore they constitute an important source of financing. Advance payments made by customer constitute the main item of deferred income. These payments are not recorded as revenue until goods and services have been delivered to the customers.
BANK FINANCE REQUIRED FOR WORKING CAPITAL

Banks are the main institutional sources of working capital finance. After trade credit, bank credit is the most is the most important source of financing working capital requirements. A bank considers a firms sales and production plans and the desirable levels of current assets in determining its working capital requirements. The amount approved by the bank for the firms working capital is called credit limit. Credit limit is the maximum fund which a firm can obtain from the banking system. In practice banks dont lends 100 percent of the credit limit, they deduct the margin money from the amount applied for. SBI, Samada and CBI, Gomadera deducts 25% margin from short term loans extended to TRL. It uses following forms of work finance : Cash credit Discounting of bills Letter of credit Short term loans
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Security required in Bank Finance

Bank generally does not provide working capital finance without adequate security. TRL uses following mode of security which a bank may require:
Hypothecation Under hypothecation, TRL is provided with working

capital finance by the bank (SBI, CBI) against the security of inventories and debtors for obtaining short term loans. Hypothecation is the charge against property for an amount of debt where neither ownership nor possession is passed to the creditors.
OTHER SOURCES OF FINANCE
Commercial paper It is an important money market instrument,

used to raise short term finance. On the recommendation of vaghul working group, the RBI introduces the scheme of commercial paper in 1989. The commercial paper of TRL continued to be rated at A1+ by ICRA, the highest credit rating assigned to this instrument .
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CONCLUSION AND SUGESSTIONS

Working capital being the life and blood of a company, so it is but natural that different major departments like production, marketing, purchase, material management, maintenance along with the finance department have to function efficiently for maintaining a good working capital management. Though TRL is trying to overcome its shortcomings at various levels, here are some suggestions for TRL, which may help to improve the working capital position. 1. TRL has introduced task force to study the drawbacks of method of collecting money. At one area where TRL is lacking and it has to take immediate action is regularity in collection from debtors. Many times it has been observed that the focus on collections is irregular. 2. In the 30 days credit payment M\S TRL actually receives its money by the end of 55th or 60th day. If possible they can try to reduce the number of credit days and encourage customers by allowing some discounts or lowering price of the product. Track and purse late payers. Getting external help if TRLs efforts fail. Debtors should not given any excuses or not paying. TRL marketing personals have to be hard on issue. Solve the problem of the customers viz. problem of invoice not received, problem of wrong invoice etc.
3. Manufacturing cycle of a product does effect the working capital cycle days. If individual production department can reduce the manufacturing cycle days by implementing better technology and proper planning to reduce time. 4. The production departments can try to improve the quality and minimize the rejections with aid of suitable techniques. 5. The finished stocks should be stored properly other wise some of the products which get hydrated very fast will be damaged quickly and they will be treated as non-moving current asset.
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6. Special care should be taken to reduce the non-moving finished stock should be evaluated and production departments have to plan to minimize occurrence of such causes. 7. TRL gets coal from MCL which is very near to Belpahar working unit. TRL can negotiate with MCL and receive coal on regular basis thus stock of coal can be reduced more. 8. Material management department along with finance department can try to bargain with supplier to reduce the price and change the mode off payment, which is suitable for the company. 9. Individual person assigned for different task which directly or indirectly effects the working capital should be made realize their responsibilities. This can be done by giving the persons at work more authority, responsibility, remuneration for increasing their efficiency. All different works relating persons, as it is needed as together form a team. 10. The work-in-process at different stages kept in the plant is high considering their cycle time. Steps may by taken to reduce such high stock, which will help in reducing current assets.
By studying the working capital of a company the efficiency of different functional departments come into picture along with that of finance department. Though TRL is managing its working capital well, a thorough study of the working capital management of the company brings out many opportunities for improvement of the company.
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BIBLIOGRAPHY
Annual report (2003-04 to 2007-08) The Analyst (magazine published by CFA) Magazines (published by TATA group and TRL) The Hindu Business Standard www.tataref.com www.irmaindia.org www.skpsecurities.com www.ifgl.com www.bharatrefractories.com www.tatasteel.com
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ANNEXURE
BALANCE SHEET AS ON 31ST MARCH, 2008 AND 2007
Particulars FUNDS EMPLOYED 1. Share Capital 2. Reserves and Surplus 3. Share Application Money Pending Allotment 4. Total Shareholders Funds 5. Loans : a) Secured b) Unsecured 6. Deferred Payment Credit 7. Deferred Tax Liability (Net) 8. Provision for Employee Separation Compensation 9. Total Funds Employed APPLICATION OF FUNDS 10. Fixed Assets a) Gross Block b) Less : Depreciation c) Net Block 11. Investments 12. Current Assets, Loans and Advances a) Stores and Spare Parts (at cost) b) Loose Tools c) Stock-in Trade d) Sundry Debtors e) Cash and Bank Balances f) Income accrued on deposits g) Loans and Advances Total Current Assets 13. Less: Current Liabilities & Provisions a) Current Liabilities b) Provisions 14. Net Current Assets 15. Total Assets (Net) 8,53,67,154 18,22,760 85,13,94,581 109,44,61,154 6,47,80,695 7,945 39,93,83,542 249,72,17,831 6,40,02,684 11,64,815 58,61,30,368 103,75,57,010 3,42,38,276 52,627 36,88,35,136 254,66,60,234 As at 31.3.2008 Rupees 20,90,00,000 179,96,37,740 Nil 200,86,37,740 As at 31.3.2007 Rupees 20,90,00,000 166,86,67,304 Nil 187,76,67,304
124,34,93,987 1,69,15,448 Nil 13,81,95,577 8,74,21,010 349,46,63,762
113,71,48,864 2,39,43,000 Nil 17,50,65,246 11,22,54,335 332,60,78,749
330,64,06,453 153,77,49,761 176,86,56,692 33,89,34,595
325,62,44,372 137,54,29,725 188,08,14,647 33,89,34,595
85,75,18,398 25,26,26,958 111,01,45,356 138,70,72,475 349,46,63,762
89,95,46,583 54,07,84,144 144,03,30,727 110,63,29,507 332,60,78,749
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BALANCE SHEET AS ON 31ST MARCH, 2006, 2005, AND 2004

Particulars FUNDS EMPLOYED 1. Share Capital 2. Reserves and Surplus 3. Share Application Money Pending Allotment 4. Total Shareholders Funds 5. Loans : a) Secured b) Unsecured 6. Deferred Payment Credit 7. Deferred Tax Liability (Net) 8. Provision for Employee Separation Compensation 9. Total Funds Employed APPLICATJON OF FUNDS 10. Fixed Assets a) Gross Block b) Less : Depreciation c) Net Block 11. Investments 12. Current Assets, Loans and Advances a) Stores and Spare Parts (at cost) b) Loose Tools c) Stock-in Trade d) Sundry Debtors e) Cash and Bank Balances f) Income accrued on deposits g) Loans and Advances Total Current Assets 13. Less: Current Liabilities & Provisions a) Current Liabilities b) Provisions 14. Net Current Assets As at 31.3.2006 Rupees 20,90,00,000 161,65,65,593 Nil 182,55,65,593 As on 31.3.2005 Rupee s 11,00,00,000 61,46,64,680 26,44,69,840 98,91,34,520 As on 31.3.2004 Rupees 11,00,00,000 38,62,91,362 Nil 49,62,91,362
80,34,24,,189 8,77,10,855 2,02,28,416 13,85,51,901 13,84,69,881 301,39,50,835
37,15,94,969 12,95,91,749 7,87,77,632 12,72,07,749 16,22,16,980 185,85,23,599
40,86,54,812 12,67,79,147 12,98,57,895 8,65,34,833 18,74,90,094 143,56,08,143
313,00,95,009 125,49,49,206 187,51,45,803 1,00,96,325
225,08,14,488 116,32,54,660 108,75,59,828 1,00,96,270
185,84,04,064 110,18,68,978 75,65,35,086 1,19,50,530
4,35,67,566 10,77,258 63,21,91,956 78,13,27,686 3,47,76,842 9,750 80,94,99,847 230,24,50,905
4,46,55,042 11,69,508 63,65,90,022 66,67,41,534 9,27,98,670 25,739 41,25,09,777 185,44,90,292
4,49,45,895 9,23,578 56,02,67,707 49,82,40,490 2,19,89,892 1,16,424 22,80,32,557 135,45,16,543
67,02,52,012 50,34,90,186 117,37,42,198 112,87,08,707
76,35,78,201 33,00,44,590 109,36,22,791 76,08,67,501
51,77,75,891 16,96,18,125 68,73,94,016 66,71,22,527
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15. Total Assets (Net)
301,39,50,835
185,85,23,599
143,56,08,143
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2008 & 2007
Particulars INCOME 1. Sale of products and services Less : Excise duty 2. Other income 3. Total Income EXPENDITURE 4. Manufacturing and Other Expenses 5. Depreciation 6. Interest 7. Less : Expenditure included in above items (other than interest) capitalized 8. Employee Separation Compensation Total Expenditure PROFIT BEFORE TAXES 9. Provision for Income Tax : a) Current b) Deferred c) Fringe Benefit Tax d) Taxation for earlier years PROFIT AFTER TAXES 10. Balance brought forward from last year 11. Amount available for appropriation 12. Appropriations : a) Proposed dividend b) Corporate dividend tax c) Transferred to General Reserve Balance carried to Balance sheet Earnings per share 464,17,32,539 18,10,51,81 11,74,80,260 (1,45,08,497 ) 54,04,319 493,11,59,802 36,76,31,781 (12,60,00,000) 3,68,69,669 (38,00,000) (5,81,49,171) 21,65,52,279 19,30,09,320 40,95,61,599 7,31,50,000 1,24,31,843 15,00,00,000 17,39,79,756 10.36 Nil 10 410,69,91,619 17,17,71,165 8,82,37,087 (4,00,65,0 89) 66,90,836 433,36,25,618 30,59,49,696 (5,00,00,000) (6,29,52,787) (33,52,637) 1,48,492 18,97,92,664 23,87,98,499 42,85,91,163 7,31,50,000 1,24,31,843 15,00,00,000 19,30,09,320 9.08 Nil 10 31st March 2008 584,59,23,088 57,38,24,714 527,20,98,374 2,66,93,209 529,87,91,583 31st March 2007 516,75,44,869 57,20,23,668 459,55,21,201 4,40,54,013 463,95,75,214
Face value per share
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PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2006, 2005 AND 2004
Particulars INCOME 1. Sale of products and services Less : Excise duty 2. Other income 3. Total Income EXPENDITURE 4. Manufacturing and Other Expenses 5. Depreciation 6. Interest 7. Less : Expenditure included in above items (other than interest) capitalized 8. Employee Separation Compensation Total Expenditure PROFIT BEFORE TAXES 9. Provision for Income Tax : a) Current b) Deferred c) Fringe Benefit Tax d) Taxation for earlier years PROFIT AFTER TAXES 10. Balance brought forward from last year 11. Amount available for appropriation 12. Appropriations : a) Proposed dividend b) Corporate dividend tax c) Transferred to General Reserve Balance carried to Balance sheet Earnings per share 354,40,72,995 11,13,17,185 3,16,49,521 (14,47,43,641) 1,20,63,999 355,43,60,059 51,67,15,482 (14,45,00,000) (1,13,44,152) (68,29,895) Nil 35,40,41,435 12,93,97,586 48,34,39,021 8,29,99,800 1,16,40,722 15,00,00,000 23,87,98,499 21.33 21.33 10 306,62,56,350 8,15,97,822 3,37,40,749 (9,61,31,330) 1,10,53,529 309,65,17,120 46,65,54,651 (13,26,00,000) (4,06,72,916) Nil (27,20,604) 29,,05,61,131 5,10,24,268 34,15,85,399 5,50,00,000 71,87,813 15,00,00,000 12,93,97,586 26.41 25.73 10 242,00,72,065 8,22,55,900 4,94,81,837 (3,18,02,514) 2,90,73,092 254,90,80,380 26,58,49,299 (8,60,00,000) (1,43,80,862) Nil Nil 16,54,68,437 2,27,83,956 18,82,52,393 3,30,00,000 42,28,125 10,00,00,000 5,10,24,268 15.04 15.04 10 31st march 2006 455,70,76,293 63,31,74,649 402,39,01,644 4,71,73,897 407,10,75,541 31st March 2005 400,54,21,306 47,24,81,890 353,29,39,416 3,01,32,355 356,30,71,771 31st March 2004 317,07,24,228 37,28,14,875 279,79,09,353 1,70,20,326 281,49,29,679
Face value per share
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CASH FLOW STATEMENT FOR THE YEAR END 31st March (Rs. In Lakhs)
Sl No. A. PARTICULARS Cash Flow from Operating Activities Net Profit Before Tax & Extraordinary Item Adjustment for Depreciation Profit/Loss on Sale of Assets Profit on Sale of Investment Interest Income Dividend Income Miscellaneous Expenses (Amortized) Interest Charged to P/L Account Employee Separation Compensation Refund of Sale Tax Provision for Wealth Tax TOTAL Operating Profit before W.C Changes Trade & Other Receivables Inventories Trade Payables & Other Liabilities Cash Generated from Operation Direct Tax Refund Sales Tax Cash Flow Before Extraordinary Item Employee Separation Compensation Net Cash from Operating Activities (A) Cash Flow from Investing Activities Purchase of Fixed Assets Sales of Fixed Assets Purchase/Sale of Investment Interest Received Dividend Received Net Movement in Creditor Advance of TRL Asia Pvt. Ltd. Net Cash from Investing Activities (B) Cash Flow from Financing Activities Proceeds from Share Application Deferred Payment Credit Borrowings Interest Paid Dividend Paid Net Cash from Financing Activities (C) Net Inc/Dec in Cash & Cash Equivalent(A+B+C) 2007-08 3676.32 1810.51 19.29 0.00 (118.87) (14.34) 0.00 1174.80 54.04 0.00 1.18 2926.61 6602.93 (94.24) (2872.87) (467.66) 3168.16 (666.00) 0.00 2502.16 (302.37) 2199.79 (728.66) 20.45 0.00 5.04 14.34 (265.90) 0.00 (954.73) 0.00 0.00 993.17 (1076.98) (855.82) (939.63) 305.43 2006-07 3059.50 1717.71 71.05 0.00 (112.97) (19.76) 0.00 882.37 66.91 (112.13) 1.18 2498.36 5557.55 (2426.71) 255.39 2684.64 6067.18 (884.57) 112.13 5294.74 (329.07) 4965.67 (1876.04) 30.60 (2679.98) 112.97 19.76 (1263.02) 0.00 (5655.71) 0.00 (202.28) 2699.57 (866.22) (946.41) 684.66 (5.38)
B.
C.
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Add: Opening Cash and Cash Equivalent Closing Cash and Cash Equivalent
342.38 647.81
347.76 342.38
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CASH FLOW STATEMENT FOR THE YEAR END 31st March (Rs. In Lakhs)
Sl No. A. PARTICULARS Cash Flow from Operating Activities Net Profit Before Tax & Extraordinary Item Adjustment for Depreciation Profit/Loss on Sale of Assets Profit on Sale of Investment Interest Income Dividend Income Miscellaneous Expenses (Amortized) Interest Charged to P/L Account Employee Separation Compensation Refund of Sale Tax Provision for Wealth Tax TOTAL Operating Profit before W.C Changes Trade & Other Receivables Inventories Trade Payables & Other Liabilities Cash Generated from Operation Direct Tax Refund Sales Tax Cash Flow Before Extraordinary Item Employee Separation Compensation Net Cash from Operating Activities (A) Cash Flow from Investing Activities Purchase of Fixed Assets Sales of Fixed Assets Purchase/Sale of Investment Interest Received Dividend Received Net Movement in Creditor Advance of TRL Asia Pvt. Ltd. Net Cash from Investing Activities (B) Cash Flow from Financing Activities Proceeds from Share Application Deferred Payment Credit Borrowings Interest Paid Dividend Paid Net Cash from Financing Activities (C) Net Inc/Dec in Cash & Cash Equivalent(A+B+C) Add: Opening Cash and Cash Equivalent Closing Cash and Cash Equivalent 2005-06 5167.15 1113.17 (113.05) (12.89) (6.46) (25.33) 0.00 316.50 120.64 0.00 1.06 1393.64 6560.79 (2695.85) 55.77 (182.85) 3737.86 (1811.37) 0.00 1926.49 (358.11) 1568.38 (9187.65) 312.07 12.89 6.46 25.33 (900.95) (608.40) (10340.25) 5770.30 (585.50) 3899.48 (270.76) (621.88) 8191.64 (580.23) 927.99 347.76 2004-05 4665.55 815.98 (107.53) (17.76) (8.15) (21.90) 0.00 337.41 110.54 (40.00) 1.25 1069.84 5735.39 (1737.25) (762.77) 1359.85 4595.22 (1818.85) 40.00 2816.37 (363.27) 2453.10 (4329.04) 310.34 36.31 8.15 21.90 1165.74 0.00 (2786.60) 2644.70 (510.80) (342.47) (379.11) (370.73) 1041.59 708.09 219.90 927.99 2003-04 2658.49 822.56 (57.38) 0.00 (4.67) (17.01) 290.73 489.83 0.00 0.00 0.36 1524.42 4182.91 (982.30) (913.21) 1471.23 3758.63 (924.10) 100.25 2934.78 (349.42) 2585.36 (2676.50) 57.79 0.00 4.16 17.01 0.00 0.00 (2597.54) 0.00 854.44 (305.27) (548.87) (198.51) (198.21) (210.39) 430.29 219.90
B.
C.
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BALANCE SHEET ABSTRACT ON COMPANYS GENERAL BUSINESS PROFILE

1. Registration details :
Registration No. State Code. Balance sheet date 349/ 8 15 31st march 2008.
2. Capital raised during the year

Public issue Right issue Bonus issue Public issue Private placement Nil Nil Nil Nil Nil
3. Position of mobilization and development of funds.

Total Liabilities Total Assets Sources of Funds: Paid-up-capital Reserves and Surplus Secured loan Unsecured loan Deferred tax liability Other liabilities Application of Funds: Net fixed assets Investments Net current assets 349,46,63,762 349,46,63,762 20,90,00,000 179,96,37,740 124,34,93,987 1,69,15,448 13,81,95,577 3,31,894 176,86,56,692 33,89,34,595 138,70,72,475
4. Performance of Company:
Turnover Total expenditure Profit before tax Profit after tax Earnings per share (EPS) in Rs Dividend rate % 584,59,23,088 493,11,59,802 36,76,31,781 21,65,52,279 10.36 35
5. Generic names of three principal products of company

A) Item code number. Product description. B) Item code number. : 69021004 : Bricks & shape, magnesia carbon. : 69039004 : Monolithic/ Castables (Fireclay, Basic, Silica, High Alumina, Insulating). : 69022002
C)
Product description. Item code number
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Product description.
: Bricks & shapes, High Alumina.
GRAPHS
GROSS REVENUE (Rupees in Crores) YEARS 20072008 20062007 20052006 20042005 20032004 GROSS REVENUE 587.26 521.17 460.43 403.55 318.77
Sources: Annual Report SHAREHOLDERS FUNDS (Rupees in Crores)
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YEARS 20072008 20062007 20052006 20042005 20032004
SHAREHOLD ERS FUND 200.86 187.77 182.56 98.91 49.63
Sources: Annual Report
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Working Capital Management

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A PROJECT REPORT ON WORKING CAPITAL MANAGEMENT AT TATA REFRACTORIES LIMITED, BELPAHAR, ORISSA

SUBMITTED BY JINESH J. TANNA MASTER OF BUSINESS ADMINISTRATION 2007-2009

VISHWAKARMA INSTITUTE OF MANAGEMENT KONDHWA, PUNE UNIVERSITY OF PUNE

Jinesh J. Tanna M.B.A (2007-08) VIM, Pune

TO WHOM IT MAY CONCERN

DECLARATION BY THE CANDIDATE

11. CONCLUSION AND SUGGESTIONS 78

OBJECTIVES OF THE STUDY

REFRACTORY INDUSTRY LINKED TO IRON AND STEEL INDUSTRY

INDIAN REFRACTORIES INDUSTRY

SIZE OF THE INDUSTRY

Dr J.J Irani, former MD of Tata Steel

CRITICAL APPRECIATION OF DOMESTIC REFRACTORIES INDUSTRY

135 years old

Best known most respected business in India

Total Sale Represent

Indias Largest Foreign Exchange Earner

Indias The Largest Employer on The Private Sector

TATA REFRACTORIES LIMITED

HISTORY Major Milestone

LEADERSHIP WITH TRUST

IFGL REFRACTORIES VISHUVYAS REFRACTORIES.

FINANCIAL OVERVIEW OF TRL

Form for disclosure of particulars with respect to Technology Absorption

4. Expenditure on R & D a) Capital b) Recurring c) Total d) Total R & D expenditure

Rs. 63.09 Lakhs Rs. 129.75 Lakhs Rs.192.84 Lakhs

as a percentage of total turnover

Foreign Exchange Earnings and Outgo

WORKING CAPITAL MANAGEMENT

CONCEPT OF WORKING CAPITAL

As on 31.03.200 5 4,46,55,04 2 11,69,508 63,65,90,0 22 66,67,41,5 34 9,27,98,67

Bank Balances Total Current Assets

NET WORKING CAPITAL(Net Current Assets)

Sources: Annual Report, TRL

WORKING CAPITAL AS ON 31.03.2008

113.67 ( 70 DAYS ) 24.80 ( 45 DAYS ) 20.03 ( 15 DAYS )

15 DAYS COST OF PROD.

STORES & SPARES

120 DAYS OF CONSMN.

2.52 (120 DAYS ) 2.41 ( 15 DAYS ) 44.85 ( 30 DAYS ) 46.59 254.87

30 DAYS COST OF PROD. PLUS E.D.

OTHERS TOTAL CURRENT ASSETS CREDITORS ( OPERATION )

45 DAYS, COST OF PROD.

60.10 ( 45 DAYS ) 25.29

73.01 ( 66 DAYS ) 25.29

0.00 12.9 1 17.9 1

WORKING CAPITAL AS ON 31.03.2007

Rs. Crores ACTUAL DIFF AS ON . 31.03.2

15 DAYS COST OF PROD.

STORES & SPARES

30 DAYS COST OF PROD. PLUS E.D.

40.08 ( 30 DAYS ) 37.00 201.73

25.52 ( 18 DAYS ) 37.00 205.85

OTHERS TOTAL CURRENT ASSETS CREDITORS ( OPERATION )

0.00 4.12 12.0 3

45 DAYS, COST OF PROD.

52.98 ( 45 DAYS ) 17.69

65.01 ( 56 DAYS ) 17.69

OTHER CREDITORS & PROVISIONS

WORKING CAPITAL AS ON 31.03.2006

15 DAYS COST OF PROD.

STORES & SPARES