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Working Capital Management & Analysis

A study on TATA RYERSON LIMITED MATERIALS MANAGEMENT SERVICES

NAME: - RUPAK SAHA ST.XAVIERS COLLEGE, KOLKATA B.COM (HONS)-MORNING 3RD YEAR; 6TH SEMESTER ROOM: - 006 ROLL: - 056

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ACKNOWLEDGEMENT

A Debt of gratitude: to my teachers at St.Xaviers College, Kolkata, especially to Prof. Soummya Banerjee, without whose immense assistance and timely guidance this project would have ever taken any shape. To my college of course, St.Xaviers, for providing us an opportunity to showcase our talents in whatever way possible. Mr.Ajay Mukherjee, Manager (Accounts & Finance)-TATA RYERSON LTD. who provided with many such invaluable inputs. A heart-felt thanks to my parents of course, the perennial source of everything and I would be sinner if I dont mention about my friends, who all contributed in their own ways.

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INDEX
SL.NO
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Introduction Corporate Social Responsibility Milestones Shareholders Information Cash Flow Statement (as per AS-3) Profit & Loss A/C Balance Sheet Graphical Analysis(of 10 years) Ten Years at a glance(Financial Results) Nature of Working Capital Management Financial Results Working Capital Chart(2004-08) Related Ratios Graphical Analysis of Working Capital Tabular summery(2003-08) Some TATA RYERSON facts Conclusion Bibliography

CONTENTS

PAGE
4 5 6 7 8 9 11 13 14 16 20 21 22 25 27 28 30 31

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INTRODUCTION

Recognizing the vast gap between steel producers offerings and steel users requirements Tata Steel Ltd. and the erstwhile Ryerson Inc, USA, formed a 50:50 JV company Tata Ryerson Ltd to promote the novel idea for the first Steel Service Center in the organized sector in India. With 6 large processing units, 16 sales locations and a host of partners like external processing agencies, suppliers, retailers and other stakeholders, today Tata Ryerson Ltd is probably the nations largest steel organization. The past 10 years brought astounding changes in the Indian growth scenario and Tata Ryerson Ltd maintained its strong path with commitments to quality processing, innovation and exceptional customer focus. Keeping in the rapid expansion, consolidation, technology change and a great number steel consumers which is perpetually increasing , Tata Ryerson Ltd went into a series of timely expansions and ventured successfully into new business areas Rebar processing, Stainless Steel(TRYNOX, the only branded product of TRyL) and the recent Plate fabrication operations. The journey that started in 1997 with a small unit at Bara, Jamshedpur and a meager turnover of Rs. 1.8 Crores in 1997-98 and continuously soaring high with a mind boggling figure of Rs.1225 Crores in just 11 years with a volume of over 1.3 Million tones, speaks volume about the strategic directions and stable vision of the company.

TRyL is strongly equipped with processing units in Jamshedpur, Faridabad and Pune and is coming up with new expansions at Chennai, Pantnagar and Singur (now shifted to Gujarat) to support major OEMs with facilities like Roll forming, Stretch bending, plate fabrication. And this is integrated with SAP R/3 ERP package. During the last fiscal year (2007-08) it is augmenting its processing base by 0.5 million tones. It is also planning to invest over 100 Crores over the next two years to support the growth path.

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CORPORATE SOCIAL RESPONSIBILITY

INSPIRATION
Serving the community. Enhancing human excellence and improving the quality of life. Addressing environmental, ecological & biodiversity concerns as an integral part of social responsibilities. Synergizing leadership with trust.

ENVIRONMENT
Tata Ryerson Ltd (TRyL) has always been enthusiastic towards the environment management efforts, which are reflected through initiative: TRyL products do not have any adverse effects on the society as the processes are all green. TRyL operates ETPs to neutralize the effluents from the pickling operations. Associated risks, if any, on TRyLs products and services are also addressed by confirming to ISO/TS norms. TRyL proactively addresses public concerns with its products, services & operations.

SOCIAL (COMMUNITY INITIATIVES)

TRyL continues to actively support social and community welfare activities in its various locations of operations. The community activities that were carried out by TRyL are given below: TRyL is involved with UDBAS which provides education support to underprivileged children. The company also supports the Veterans Football Club by organizing U-16 Football Tournaments.

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MILESTONES
1997- TRyL formed: a JV between Tata Steel and Ryerson Tull, USA. 1998- SAP & WAN went at Bara & Ranjangaon Plant. 1999- CR at Ranjangaon becomes operational. 2000- Bara unit certified as ISO: 9002 company. 2001- Received QS 9000 certification. 2002- First strategy meets at Phuket. 2003- Received CII-Exim Bank award. 2004- Tata Ryerson revisits vision, missions, and values. 2nd strategic meets at Lankawi: Road map to Vision 2010. 2005- Crossed 500 score in TBEM. CR & Rebar processing plant commissioned at Faridabad. 2006- Companywide launch of Knowledge Management initiative. 2007- Crossed 550 score in TBEM. 2008- Rajiv Gandhi National quality award for large scale service sector category.

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SHAREHOLDERS INFORMATION
FINANCIAL HIGHLIGHTS Year ASSETS EMPLOYED
Net Fixed Assets Net Current Assets Others Deferred Tax Liability Total

Rs. (in lacs) 2007-08

12836 24903 1913 (686) 38965 6825 15150 21975 16991 38965

Rs. (in lacs) 2006-07

10849 18377 1518 (687) 30055 6825 10912 17737 12318 30055

FINANCED BY
Equity Share Capital Advance against share capital Reserves & Surplus Shareholders Fund Loan Fund Total

SALE OF PRODUCTS & SERVICES PROFITS & APPROPRIATIONS

Profit before Depreciation & Tax(PBDT) Depreciation Profit Before Tax(PBT) Current Tax Deferred Tax Fringe Benefit Tax Profit After Tax(PAT) Profit Brought Forward Adjustments of Employee benefits on changed requirements of AS-15 Dividends & Dividend Distribution Tax(DDT) Retained Earnings

128530
7410 1184 6225 2226 (94.77) 39 4055 10912 182 15150

103623
6434 1127 5307 1923 (140.32) 32 3493 7516 (96.60) 10912

IMPORTANT FINANCIAL RATIOS

Financial Parameters
Long term Debt to Equity Basic EPS(Rs.) Book Value Interest Coverage Ratio EVA(Rs.lakhs) Return on Capital Employed Net Profit to Net Income Net Working Capital to Total Income Net Sales to Net Assets Return on Net Worth

2007-08
0.27 5.94 32.20 6.10 1040 15.2% 3.16% 0.19 3.66 18%

2006-07
0.17 5.12 25.99 7.28 850 14.88% 3.37% 0.18 3.78 20%

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Cash flow statement

Particulars A. Cash flow from operating activities
Net profit before tax Adjustment for Depreciation Interest income Dividend income Interest expenditure Unrealized (gain) /loss Loss on sale of fixed assets Profit on sale of investments Provision for doubtful debts Provision for leave salary Provision for gratuity Provision for retirement benefits Operating profit before WC change Adjustment for: (Inc) /Dec in sundry debtors (Inc) /Dec in inventories (Inc) /Dec in payables (Inc) /Dec in loans & advances Cash generated from operations Direct taxes paid

31.03.2008 Rupees lacs

31.03.2008 Rupees lacs

6,225.34

31.03.2007 Rupees lacs

31.03.2007 Rupees lacs

5,307.08

1,184.27 (1.06) (106.99) 1,220.55 (110.36) 4.67 (2.84) 127.52 33.66 77.09 76.70 2,503.21 8,728.55

1,127.09 (6.27) (109.52) 844.97 (21.53) 0.25 (32.47) 0.83 101.26 1904.61 7,211.69

(4,050.21) (2,325.12) 2,254.49 (1,368.45)

(5,489.29) 3,239.26 (2,190.18)

(5,423.92) (3,310.53) 4,507.80 (1,084.09)

(5,310.74) 1,900.95 (1,841.63)

Net cash from operating activities

1,049.08

59.32

B. Cash flow from investing activity

Purchase of fixed assets Sale of fixed assets Purchase of current investments Sale of current investments Interest received Dividend received (3,130.59) 24.55 (4,129) 3,736.79 1.06 106.99 (2,336.80) 1.74 (4,452.51) 6,103.99 6.27 109.52

Net cash from investing activities

(3,390.48)

(567.49)

C. Cash flow from financial activities

Proceeds from L.T. Borrowings Repayment of L.T. Borrowings Proceeds from S.T. Borrowings Repayment of S.T. Borrowings Interest paid 4,831.98 (1,739.46) 5,690.53 (4,000.00) (1,290.93 3,99.88 (1,349.95) 4,000.00 (1,762.12) (934.84)

Net cash from financing activity

Net increase in cash & cash equivalent(A+B+C) At the beginning Cash & bank balances

3.492.12
1,150.72 1,533.46

352.97
(155.97) 1.688.96

At the end Cash & bank balances

2,684.18

1,533.46

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PROFIT AND LOSS A/C

For the year ended 31st March, 2008

Profit & Loss Account for the year ended 31st March, 2008 Year ended 31.03.2008 INCOME
Sale of Products & Services Other Income Schedule J K Rupees Lacs 128,000.98 528.53 128,529.51

Year ended 31.03.2007

Rupees Lacs 103,336.19 287.11 103,623.30

EXPENDITURE
Manufacturing and other expenses Depreciation L 120,038.31 1,184.27 121,222.58 Less : Expenditure transferred to Fixed Assets and other accounts 138.96 121,083.62 Interest M 1,220.55 122,304.17 96,450.63 1,127.09 97,577.72 106.47 97,471.25 844.97 98,316.22 5,307.08

Profit for the year before taxation Taxes

(a) Income Tax

6,225.34

2,226.00

1,923.00

- 10 (b) Deferred Tax (c) Fringe Benefit Tax (94.77) 39.00 4,055.11 10,912.44 14,967.55 Add :Leave Encashment adjustment on changed requirements for AS -15 (revised) Less : Deferred Tax on the above 275.91 93.78 15,149.68 (140.32) 31.60 3,492.80 7,516.24 11,009.04 (145.61) (49.01) 10,912.44

Profit after taxation Profit brought forward

Profit carried to the Balance Sheet

Earnings Per share of Rs. 10 each Basic (Rs.) Diluted (Rs.)

5.94 5.94

5.12 5.12

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BALANCE SHEET as at 31st march, 2008

Balance Sheet as at 31st March, 2008 Sources of Funds Schedule Shareholders' Funds Share Capital Reserves and Surplus: Balance in Profit and Loss Account Total Shareholders' Fund Loan Funds Secured Loans Unsecured Loans B 16,734.65 255.99 16,990.64 Deferred Tax Liability (Net) Total Application of Funds Fixed Assets Gross Block Less: Depreciation/Amortization Net Block C 17,839.66 7,664.13 10,175.53 15,506.38 6,488.36 9,018.02 N 686.42 39,651.74 8,317.95 4,000.00 12,317.95 687.41 30,742.80 15,149.68 21,974.68 10,912.44 17,737.44 A 6,825.00 6,825.00 31.03.2008 Rupees Lacs 31.03.2007 Rupees Lacs

- 12 Capital work in progress 2,660.62 12,836.15 Investments Current Assets, Loans and Advances Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Total Current Assets Less : Current liabilities and Provisions Current liabilities Provisions Total Current Liabilities and provisions Net Current Assets Total I 10,423.56 577.70 11,001.26 24,902.70 39,651.74 8,169.07 625.90 8,794.97 18,376.56 30,742.80 E F G H 10,644.60 19,446.88 2,684.18 3,128.30 35,903.96 8,319.48 15,524.19 1,533.46 1,794.40 27,171.53 D 1,912.89 1,830.65 10,848.67 1,517.57

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Total Income ( Rs in Lacs )

PAT ( Rs in Lacs )

Net Worth ( Rs in Lacs )

Return on Capital Employed ( % )

Distribution of Revenue( % )

Fig.:-GRAPHICAL ANALYSIS (of 10 years).

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TEN YEARS AT A GLANCE (1999-2008)

Profit and Loss Account (Rs. in Lacs) 2008 Total Income Sales and Processing Charges EBDIT EBIT Profit Before Tax Profit After Tax Surplus/(Accumulated Loss) 2007 2006 2005 2004 2003 2002 2001 2000 1999

128,530 103,623 75,409 58,834 35,703 19,432 10,241 6,860 2,173 1,011 128,001 103,336 74,449 58,705 35,571 8,630 7,446 6,225 4,055 15,150 7,279 6,152 5,307 3,493 10,912 5,843 4,827 4,054 2,755 7,516 5,082 4,103 3,778 2,115 4,762 3,905 2,943 2,538 1,893 2,647 9,986 6,678 1,822 1,606 1,007 428 385 395 925 505 574 225 766 308 135 108 96 91

18,775 2,819 1,921 1,282 884 753

101 (174) 93 (174) 10 (83)

Balance Sheet (Rs. in Lacs) 2008 Gross Block 2007 2006 2005 2004 2003 2002 2001 2000 1999

17,840 15,506 12,824 11,898 11,830

11,519 9,044

11,301 7,424 5,407 5,181

Net Block Capital Work in Progress Net Current Asset Capital Employed Debt

10,176

9,018

7,458

7,539

8,431

9,724 6,443 4,847 4,969

2,661

1,831

2,072

157

30

35

25

584

495

41

24,903 18,377 13,582

9,496

5,649

3,908

2,382 1,499 2,338 2,773

38,965 30,055 25,371 18,449 15,139 16,991 12,318 11,030 7,428 6,792

12,692 6,256

12,248 8,914 7,779 7,995 6,194 3,972 2,947 3,000

- 15 Equity Total Capital Misc Expenditure not w off Net Worth 21,975 17,737 14,341 11,022 8,347 6,453 6,095 5,010 4,917 5,091 12,289 8,982 7,864 8,091

38,965 30,055 25,371 18,449 15,139

12,710

17

41

68

85

97

21,975 17,737 14,341 11,022

8,347

6,436

6,054 4,942 4,832 4,995

Financial Ratios 2008 EBDIT/Total Income Return on Net worth Total Debt to Equity Total Debt to Total Capital Fixed Asset Turnover Working Capital Turnover Current Ratio Sales & Processing Charges/Employee (Rs in Mil) 6.7% 2007 7.0% 2006 7.7% 2005 8.6% 2004 2003 2002 2001 2000 1999

10.9% 14.5% 15.7% 13.5% 26.4% 30.4%

18.5%

19.7%

19.2%

19.2%

22.7% 13.7%

6.4%

1.9% -3.6%

1.9%

0.77

0.69

0.77

0.67

0.81

0.97

1.02

0.80

0.61

0.60

0.44

0.41

0.43

0.40

0.45

0.49

0.50

0.44

0.37

0.37

12.58

11.46

9.98

7.79

4.22

2.08

1.03

1.04

0.38

0.15

5.14 3.26

5.62 3.09

5.48 4.26

6.18 2.77

6.30 2.49

4.80 2.60

4.19 1.80

4.46 2.18

0.78 3.80

0.28 5.61 6.90

254.48 223.19 212.10 188.16 118.97 68.02 37.26 26.82 12.07

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NATURE OF WORKING CAPITAL MANAGEMENT:

1. WC management basically concerned with the management or administration of current assets and current liabilities. In common parlance, WC is considered as funds available for meeting day-to-day requirements of the firm. 2. WC generates the elements of cost, viz., materials, wages and expenses. These costs occur gradually at a flow and do not occur at a moment. 3. Investments of cash as WC have to be continued till sales revenue starts flowing in regularly. 4. In case of a going concern, additional provisions of maintenance of current assets come from short term sources outside the business. 5. Funds employed as WC constantly changes its form to keep the wheels of the business moving. WC is sometime termed as circulating capital. 6. WC is used for purchase of raw materials, payment of wages and expenses. As a result, cash flow occurs. 7. Higher the amount of WC, the lower will be the Return on Investments (ROI) and lower WC means higher risk of meeting short-term debt. Thus it strikes a nice balance between risk and profitability.

Significance of WC management :
Regularity in the supply of raw materials. Economy in purchase. Smooth flow of production. Regularity in payment of wages, salaries, dividends and interests. Withstanding unforeseen contingencies. Efficient use of fixed assets. Procurement of loans. Avoidance of over or under capitalization. Maintenance of optimum level. Goodwill.

Components of Working Capital :

1. A. Currents Assets : o Stock or Inventories Raw materials Work-in-progress Consumable stores and spares Finished goods

- 17 o Sundry debtors o Bills receivable o Short term loans and advances o Prepaid expenses o Accrued income o Cash-at-Bank o Cash-in-hand 2. B. Current liabilities : o Sundry Creditors o Bills payable o Outstanding expenses o Short term loans, advances and deposits o Bank overdraft o Provision for taxes o Proposed dividend o Currently payable outstanding liabilities

Factors to be taken into account while determining the requirement of working capital :
i. Time needed for production of goods : The average time which is needed for the production of goods, i.e. ,the time gap between the commencement and end of the production cycle determines the amount of working capital Cost of raw materials in proportion to the total cost of the final product: If the cost of raw materials needed for the production of a product is high in proportion to the total cost of the final product, then the WC requirements will be large. Degree of mechanization and the usage of manual labour in production: In case capital-intensive manufacturing units the production span tends to be shorter thus requires less WC than a labour-intensive unit. Rapidity of turnover: Turnover means the ratio of annual gross sales to average working assets. It is the speed of recovery of WC by sale of goods. The related ratios are as follows: Stock turnover ratio. Debtors turnover ratio. Creditors turnover ratio. Terms of purchase and sales: The amount of WC depends on the credit period allowed and enjoyed. Requirements of Cash: The amount of cash required for meeting the various operational activities of the business determines the need of WC.

ii.

iii.

iv.

v. vi.

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Factors affecting WC :
A. B. C. D. E. F. G. H. I. J. K. L. M. N. O. P. Nature of the business. Scale of operation. Production cycle. Business cycle. Credit policy. Inventory policy. Seasonality of business Operational efficiency Inflation. Expansion and growth of the firm. Cash profit. Market conditions. Abnormal factors. Supply conditions. Level of taxes. Dividend policy.

Management of WC:
WC management refers to all aspects of the administration /management of current assets and liabilities. Objectives: 1. The fundamental objective of WC management is to manage current assets and liabilities in such a way that there is neither excess nor inadequate WC. 2. In order to maintain a reasonable safety margin and ideal financial solvency the current assets should be adequate to cover the current liabilities. The ideal ratio is 2:1. 3. The components of WC are to be properly balanced. 4. In order to make use of resources, the firm should maintain proportionate cash and bank balances. 5. The finance manager has to chalk out appropriate WC management policies in such a way that each component of WC should ensure i. Higher profitability of the firm. ii. Proper liquidity of the firm. iii. Sound structural health of the organization.

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Functions: 1. 2. 3. 4. 5. 6. 7. Assessment of WC requirements. Sources of funds for WC. Management of cash. Management of inventories. Management of accounts payable. Management of receivables. Management of over and under trading.

Financing of Working Capital:

Financing through long-term debts. Financing through short-term debts. Spontaneous financing.

o Long term financing of working capital

Equity Share capital Preference share capital Retained earnings Debentures and bonds Long term loans Short term financing a. Short term bank financing Cash credit Letter of credit Bills finance Overdraft Working capital demand loan b. Public deposits c. Factoring d. Commercial papers

o Spontaneous financing Trade credit Outstanding expenses Provision for depreciation Provision for taxes

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Financial results (2006-07 & 2007-08)

(Directors report) Financial Results 2007-2008 (Rs. in Lacs) 128,529.51 1,21,083.62 1,220.55 6,225.34 4,055.11 15,149.68 2006-2007 (Rs. in Lacs) 103,623.30 97,471.25 844.97 5,307.08 3,492.80 10,912.44

Total Income Operating Cost Finance Charge Profit before tax (PBT) Profit after tax (PAT) Net Profit/ Loss carried to Balance Sheet

Net Profit/ Loss carried to Balance Sheet Profit after tax (PAT)

Profit before tax (PBT) 2006-2007(Rs.in Lacs) Finance Charges 2007-2008(Rs.in Lacs)

Operating Cost

Total Income 0 40000 80000 120000

Fig: - graphical representation

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TATA RYERSON LTD

WORKING CAPITAL CHART (2004-2008)

Net Working Capital= Current Assets-Current Liabilities YEARS 2004 2005 2006 2007 2008
80000 70000 60000 50000 40000 30000 20000 10000 0 2004 2005 2006 2007 2008 Net WC Rs.(in lacs) Current liabilities Rs.(in lacs) Current Assets Rs.(in lacs)

Current Assets Rs.(in lacs) 9429.76 14858.60 17743.98 27171.53 35903.96

Current liabilities Rs.(in lacs) 3781.18 5362.70 4161.99 8794.07 11001.26

Net WC Rs.(in lacs) 5648.57 9495.90 13581.99 18376.56 24902.70

Fig: graphical analysis Related ratios:

Current Ratio Quick Ratio Debtors turnover Ratio & debtors velocity Creditors turnover Ratio & creditors velocity Inventory turnover Ratio& inventory period Working capital related ratios

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1. CURRENT RATIO:
Current assets Current liabilities This ratio is also known as working capital ratio. This includes current assets and current liabilities. Current assets consists of cash, bank, sundry debtors, stocks, advances, bills receivable, etc. and current liabilities include creditors, bills payable, loans, bank overdrafts, etc. Last 5 years at a glance:

2004 2.49

2005 2.77

2006 4.26

2007 3.09

2008 3.26

The standard of the normal ratio is 2:1 i.e. for every Re. 1 of the current liabilities, there should be Rs. 2 of the current assets. This ratio reveals the firms ability to meet its current liabilities. From the above table it is understood that the amount of current assets is greater than current liabilities which indicates that the liabilities can be paid off in a proper and without any difficulty.
2. QUICK RATIO: Current assets Stock Current liabilities bank overdraft This ratio is considered as subsidiary to the current ratio as this also reveals the actual financial ability of the concern to pay off its immediate impending liabilities. The standard ratio in this case4 is 1:1. This ratio is used for testing the solvency of the enterprise. Last 5 years at a glance. 2004 2005 2006 2007 2008 1.85 1.73 3.13 2.14 2.30 From above it can be concluded that the liabilities are realized immediately without any difficulty. 3. DEBTORS TURNOVER & DEBTORS PERIOD: 1) Debtors turnover ratio: Debtors Credit Sales *365

This ratio indicates the time or the number of days that the debtors enjoy as credit period allowed to them. The credit period normally varies from, 2 to 3 months. Last 5 years at a glance.

- 23 2004 2005 6.35 8.97 ii) Debtors period/velocity: 365 Drs Turnover 2004 58 2006 7.37 2007 6.66 2007 6.58

2005 41

2006 50

2007 55

2008 55

4. CREDITORS TURNOVER & CREDITORS PERIOD: 1) Creditors turnover ratio: Creditors *365

Credit purchase This ratio reveals the number of days the business or the company enjoys as credit period from its Sundry trade creditors. The normal credit period is 2 months. Last 5 years at a glance. 2004 2005 12.48 13.12 2) Creditors period/velocity:
365 Creditors turnover The ratios

2006 20.33

2007 12.65

2008 12.28

2004 29

2005 28

2006 18

2007 29

2008 30

5. INVENTORY TURNOVER & INVENTORY PERIOD: i) Inventory turnover ratio:

Sales Average stock

This ratio reveals the relation between stocks and inventories with sales. It also informs about the velocity of movement of stock during the year. A high ratio indicates a good position of the business. 5 years at a glance. 2004 14.52 2005 10.50 2006 14.86 2007 12.42 2008 12.02

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ii) Inventory period/velocity:

365

Stock turnover 2004 25 2005 35 2006 25 2007 29 2008 30

6. WORKING CAPITAL TURNOVER & GAP & REQUIREMENT: i) Working capital turnover:
Sales

WC This ratio is utilized and analyzed for checking the efficiency of the management in day-to-day operation of the business or running the business. 2004 6.30 2005 6.18 2006 5.48 2007 5.62 2008 5.14

ii) Working capital Gap: [Days receivable + Inventory holding period Days payable] This ratio helps in determining the number of days for which working capital is required. 2004 53 2005 48 2006 56 2007 55 2008 56

iii) Working Capital requirement: This determines the amount of working capital required for the continuous operations of the business. [WC gap * Sales processing / 365] 2004 5203 2005 7664 2006 11449 2007 15675 2008 19670

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GRAPHICAL ANALYSIS OF WORKING CAPITAL

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2004 2005 2006 2007 2008

CURRENT RATIO QUICK RATIO

Fig.1:- Current & quick ratio

25 20 15 10 5 0 2004 2005 2006 2007 2007 DEBTORS' TURNOVER CREDITORS' TURNOVER INVENTORY TURNOVER

Fig.2:- Debtors, Creditors & Inventory turnover Ratio

70 60 50 40 30 20 10 0 2004 2005 2006 2007 2008 DEBTORS' VELOCITY(DAYS) CREDITORS' VELOCITY(DAYS) INVENTORY HOLDING PERIOD(DAYS)

Fig.3:- Debtors velocity, Creditors velocity & inventory holding Period (All figures in days).

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WORKING CAPITAL TURNOVER

7 6 5 4 3 2 1 0 2004 2005 2006 2007 2008 WORKING CAPITAL TURNOVER

Fig.4:- Working Capital Turnover.

WORKING CAPITAL GAP(DAYS)

58 56 54 52 50 48 46 44 2004 2005 2006 2007 2008 WORKING CAPITAL GAP(DAYS)

Fig.5:- Working Capital Gap (in days)

WC REQUIREMENTS(Rs. Lacs)
25000 20000 15000 10000 5000 0 2004 2005 2006 2007 2008 WC REQUIREMENTS(Rs. Lacs)

Fig.6:- Working Capital Requirements (in RS. Lacs)

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TABULAR SUMMERY (2003-2008):-

Particulars Total Sales & Processing charge Debtors Inventory Creditors Net Current asset

2003-04 35571 5604.67 2449.26 2851.16 5648.57

2004-05 58705 6547.28 5591.11 4474.52 9495.89

2005-06 74449 10101.11 5008.95 3661.27 13581.99

2006-07 103336 15524.19 8319.48 8169.07 18376.56

2007-08 128001 19446.88 10646.6 10423.56 24902.7

Particulars Debtors Turnover Days Receivable Inventory Turnover Inventory holding period (days) Creditors Turnover Days Payable Net Working Capital (Rs.) Working Capital Turnover Working Capital Turnover (Days) Working Capital Gap (Days) Sales & processing Charge Working Capital Requirement

2003-04 6.35 58 14.52 25 12.48 29 5,649 6.30 58 53 35571 5203

2004-05 8.97 41 10.50 35 13.12 28 9,496 6.18 59 48 58705 7664

2005-06 7.37 50 14.86 25 20.33 18 13,582 5.48 67 56 74449 11449

2006-07 6.66 55 12.42 29 12.65 29 18,377 5.62 65 55 103336 15675

2007-08 6.58 55 12.02 30 12.28 30 24,903 5.14 71 56 128001 19670

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SOME TATA RYERSON FACTS:Today, TATA RYERSON LTD. is not only Indias largest, but one of the worlds leading steel service centers. Tata Ryerson has its presence in sixteen locations across the country reaching nearly one thousand customers nationwide. Now TATA RYERSON LTD is offering customized solutions for your stainless steel flat rolled requirements. It maintains a ready stock of a variety of grades, sizes and finishes. Its state-of-the-art processing lines in Pune are capable of converting HR and CR stainless steel coils and sheets to your desired requirement for custom sheets, blanks or slit coils, vinyl application. Supply Linkages Ryerson Inc., Tatas JV promoter and the largest stainless steel distributor in the world, procures stainless steel from a range of qualified global sources. TATA RYERSON LTD has leveraged Ryersons purchasing strength to select a set of reliable producing mills, both domestic and overseas, who share common values of profitable growth through partnership to effectively reach various stainless steel consumers. Their global reach and enduring relationships with select suppliers ensures a wide range of top quality products, globally competitive pricing, and reliable service performance. Processing Lines Their Ranjangaon Coil Processing Centre with modern facilities covering 21 acres near Pune is fully equipped to process Hot Rolled (HR) and Cold Rolled (CR) stainless steel coil, sheet, and plate gauge products. HR processing facilities include a wide slitting and both wide and medium width cutto-length lines plus multiple close tolerance shearing machines. CR processing encompasses a full range of equipment, namely a wide slitting line and both wide and narrow width cut-to-length lines with levelers for sheeting and blanking input coils. The processing equipments have been carefully selected from a qualified group of reputed International Suppliers with proven credentials. If you are a stainless steel User or a Fabricator doing business in any of the following segments: 1. Consumer Durables/Appliance Manufacturing 2. Pressure Vessels 3. Automotive, Railways & Transport ART

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4. 5. 6. 7.

Machinery & Equipment Architectural, Building & Construction (ABC) General Metal Fabrication, or Other Commercial and Industrial Sectors

Then TATA RYERSON LTD can offer you the following reliable benefits: 1. AVAILABLE INVENTORY: Tata Ryerson is a complete one-stop shop for your outsourcing needs. Our inventory includes a full range of grades, shapes and sizes of flat-rolled HR and CR stainless steel. 2. ON TIME DELIVERY: We constantly strive to achieve our goal of 100% on-time delivery performance and can provide quick turn-around on emergency requirements. 3. COMPETITIVE PRICES: Our enhanced material handling capabilities and highyield equipment enable us to maximize our efficiency, leading to low total cost competitive pricing for TRYNOXTM solutions. 4. QUALITY PRODUCTS: Our precision processing equipment and advanced quality systems ensure close tolerances to meet your exact specifications. 5. RAPID RESPONSE: Our trained representatives can understand your processing needs, respond promptly to your enquiries, and give each order the desired attention it deserves. STEEL SERVICE CENTRE A Steel Service centre is an intermediary between steel producers and the end users and is the most vital link in the steel supply chain. It supplies steel in the exact quantity and the exact customized form at the exact time that customers require, often processing or adding value to the material. A Steel service centre procures steel products in large quantities from producing mills, holds the material in inventory and either process it or simply trades it in smaller units, to the customers. Service centers usually offer varying degrees of material "pre-processing which involves Slitting, Shearing, Cutting to Length, Pickling & Oiling, Plate Burning, Roll Forming, Bending etc. thus making the steel immediately usable by the customer, greatly reduces the customer's time. The type, quantity, and sophistication of pre-processing services offered by a particular Service centre are determined by the Service centre's product and customer mix. Service centers handle millions of items each year and are the domestic steel industry's largest customer group. They serve as industry's working reservoir of materials and services. Approximately 300,000 firms buy a large portion of their metal requirements from service centers. In fact, every single metal user in the country and worldwide deals with service centers at one time or other. TATA RYERSON LTD. is the first of such in India.

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CONCLUSION:

From the various data acquired and analyzed, the result obtained implies that TATA RYERSON LTD has a very sound financial condition and is proceeding towards the high targets set by the eminent management team of TATA RYERSON LTD. It has been a positive approach determined by the powerful current assets management to foster the ever-increasing Working Capital requirements. The incremental Working Capital, has been planned out and funded properly through a mix of Cash Credit facility from Banks, Channel Financing Arrangements with the supplier of raw materials in association with the bank, use of the letter of credit for purchases, discounting of bills with respect to sales made and Working Capital Demand Loan. The Working Capital management at TATA RYERSON is proper and adequate and this can be concluded from the fact that with the increase of sales and Working Capital requirements the limits for the source of funds are also increased. The Current Ratio and Quick Ratio are always above the industry requirements which the sufficiency of the Working Capital to meet the day-to-day requirements. TATA RYERSON LTD. makes proper utilization of the assets as fixed assets would remain useless without adequate Working Capital.

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BIBLIOGRAPHY

Financial Management Prasanna Chandra Tata McGraw-Hill Education (India) Ltd. Financial Management B.Banerjee Prentice-Hall of India. Financial Statement Analysis Ashis Kr. Bhattacharya. Annual Reports TATA RYERSON LTD. years(2003-2008) Official Website of TATA RYERSON LTD-www.tataryersonindia.co.in www.google.com/portal08_steel_report/india www.wikipedia.com www.sailindia.com/industry_survey02-06/portal.pdf/77 www.tatasteel.com