A STUDY TO ASSESS THE EFFECTIVENSS OF WORKING CAPITAL MANAGEMENT

AT

JSW Steel Ltd. Torangallu, Vijaynagar works.

Submitted to
In Partial fulfilment of as a requirement towards completion of PGDM in 2010-12

Mr. Muralidhar W
DGM (Finance & Accounts) JSW steel Ltd.

Prof. G.N Venkatesh

Finance & Control International school of business & media By Sridip Sarkar Roll No. 610030

International School of Business & Media. Plot No. 241, Sompura Industrial Area, Nidvanda Village, Sompura Hobli, Nelamangala Taluk, Bengaluru - 562111

Acknowledgment
No work is said to be complete without thanking the people who have helped me in completing the job. So this acknowledgment is for those who have played their role in completion of my project entitles A study of Working Capital Management at JSW Steel Ltd. The project would not have been completed without the kind of cooperation and help of certain individuals to who I owe this heartfelt gratitude. At the very outset, I would like to thank my external guide Mr. Murlidhar Wuntakal, (DGM, Finance) who constantly guided and inspired me in completion of this project. During this project I experienced the real environment, market situation, mannerism etc. that are very much needed in this competitive environment. I expressed my sincere thanks to Mr. Achutha Raghava (HR) and Mr. Mallappa for granting the permission to undergo project in JSW STEEL LTD, Torangallu. I would also like to acknowledge all those respondents who have lend their precious time without which this project work would not have been successful. I expressed my sincere gratitude to the whole of JSW Steel Ltd. Bellary for extending their warm support and guidance in various natures. My sincere thanks to my project Internal guide Prof. G N. Venkatesh for his valuable support and guidance in the completion of this project successfully. Finally I thank my Family, friends and each one who have directly or indirectly helped me in making this project successful and memorial. Last but not the least I express my thanks to all my friends for helping me the project work.

DECLARATION
I SRIDIP SARKAR declare that this Project on THE ASSESSMENT OF EFFECTIVENSS OF WORKING CAPITAL MANAGEMENT at JSW STEEL LTD TORNAGALLU, BELLARY is a record of bonified research carried out by me under the guidance of, Mr. Wuntakal Muralidhar (Dy. General Manager, F&A) and under the supervision of Professor G.N. Venkatesh , Department of Finance & Control, ISB&M Bangalore. I further declare that this has not previously formed the basis of the award of any degree, diploma or similar title of recognition.

Date: 04/05/11 Place : Bangalore

SRIDIP SARKAR Roll No.610030

Table of Contents:

Executive Summary General Introduction Research Methodology Industry & Company profile Swot Analysis Mc Kinsey 7S Model Data Analysis & Interpretation Findings, Suggestions & Conclusions Annexure Bibliography

EXECUTIVE SUMMARY
This is final project a study of working capital in Jindal South West Steel Ltd deals to ascertain the efficiency of working capital management of the company. Working capital may be regarded as lifeblood of business; working capital is needed to meet the day-to-day requirement of the business unit. The exploitation of working capital assets is possible only by efficient working capital management. This study on working capital management is conducted in JSW Ltd. Working capital management not only shows the financial efficiency of business, but also its credit worthiness, which has gained importance in these days of credit squeeze. Therefore, study of the management of working capital is very necessary. Objective of the project was to study the pattern and procedures followed for managing various components of working capital, so as to evaluate the efficiency of working capital management. So, this study intends to comprehensively evaluate the inventory, receivables, creditors and cash management. The study also aims to analyze the alternative sources of working capital financing employed by JSW Ltd. Desk research method is adopted for this study. The required information was collected through secondary sources. Secondary data were collected from various sources including the annual reports of the company for the year 2004-05, 2005-06, 2006-07, 2007-08, and 200809.

1. General Introduction
Finance is the life blood of business. It is rightly termed as the science of money. Finance is very essential for the smooth running of the business. Finance controls the policies, activities and decision of every business MEANING AND SIGNIFICANCE OF WORKING CAPITAL One of the vital aspects of companys financial management is to manage its current assets and the current liabilities in such a way that a satisfactory level of working capital is maintained. Working capital management means administration of all aspects or working capital i.e. current assets and current liabilities. Firm has to manage it properly in order to attain its goal of wealth maximization.

Meaning:
Working capital is that part of total capital which is used for carrying out routine business operations. In simple terms, working capital is the capital with which the business of the company is worked over. Working capital it is the controlling system of every business firm. The working capital management is concerned with the problems that arise in attempting to manage the current assets and current liabilities and the interrelationships that exist between them. This tries to evolve how much funds to be invested in each type of current assets and what should be the proportion of long term funds to short term funds and which are the sources that are ideal for financing current assets.

Significance of the working capital:

To fulfil its endeavour to maximize the shareholders wealth, firm has to earn sufficient return from its operations, which needs a successful sales activity, the firm has to invest sufficient funds in current assets to succeed in sales, as the sale do not convert into cash instantaneously because of time gap between the sale of goods and actual receipts in cash. Hence there is a need for working capital in the form of current assets to sustain sales activity during that period. Since cash inflows and cash out flow dont match, firms have to necessarily keep cash or investment in short term liquid securities to fulfil its obligations as and when they become due. The adequate stock of inventory provides a cushion against being out of stock and help as a guard to meet the demand for its products. To be competitive, the firm must sell its products to their customers on credit, which necessitates the holding of accounts receivables therefore an adequate level of working capital is absolutely necessary for the smooth sales activities, which in turn enhance the owners wealth. The working capital need arises for the following purpose:

For purchasing raw materials, components and spare parts For paying wages and salaries To incur day to day expense and overhead costs like fuel, power and office expense etc.

To meet selling costs of packing advertising etc.

2. Research Methodology:

Statement of the problem:

The working capital is the most critical problem in financial management, Importance of working capital management.

A substantial portion of total investment is invested in current assets. Level of current assets and current, which can be determined, by the level of current assets and current liability. The composition of current assets and current liabilities.

Need and Importance of Study:

To fulfil its endeavour to maximize the shareholders wealth, firm has to earn sufficient return from its operation, which needs a successful sales activity. The firm has to invest sufficient funds in current asset to succeed in sales, as the sales do not covert into cash instantaneously because of the time gap between the sales of goods and actual receipts in the cash. Hence there is a need for working capital in the form of current assets to sustain sales activity during that period. Since cash inflow and cash outflow dont match, firms has to keep cash or investment in short term liquid securities to fulfil its obligations as and when they become due. The adequate stock of inventory provides a cushion against being out of stock and help as a guard to meet the demand for its product. To be competitive, the firm must sell

its product to their customer on credit, which capital is absolutely necessary for the smooth sales activities, which in turn enhance the owners wealth.

The working capital need arises for the following purposes:

For purchasing raw material, components and spare parts For paying wages and salaries. To incur day today expenses and overhead costs like fuel, power and office expense etc. To meet selling costs of packing advertising etc, To provide credit facilities to customers.

Objective of study:

To study the efficiency of working capital management of the company. To analyse the working capital trends in the company to study the efficiency of cash, inventory and receivable management of the company. To understand and analyse the working capital position of JSW Ltd.
to measure the overall financial position of the organization with the help of ratio analysis.

Scope of the study:

Since the decision regarding working capital are of operating nature not one time decision, the scope of the study is geared toward identifying important areas of control and to establish model for better control of the various components of working capital.

The study would also attempt to identify the various sources available for financing of working capital.

The study gives a fair idea of improvement and efficiency of working capital management and also to have proper control over the components of working capital and managing of efficiency.

Methodology:

Desk research method is adopted for the study. The required information was collected through secondary sources.

Secondary data were collected from various sources including the annual reports of company for the years between 2005 to 2010.

Limitation of the study:

The study deals with the data made available. Hence the result of this study cannot judge the business of the firm in general. The study has been influenced by the limitation of the ratio analysis. The study extensively uses the data provided is the financial report of the firm which may also have their own limited perspective. The analysis made on the working capital management is for a particular period of time the current assets and current liabilities will change for an analysis made at any order of time.

3. INDUSTRY AND COMPANY PROFILE Introduction:

Steel has been part of some of the greatest achievement in history. Nearly 15 years ago steel sparked off the industrial revolution, the steel industry has an important role to pay in the development of any industrial nation. It is a critical intermediate for industry, and the strength of construction. Steel is a product of a capital intensive and complex industry that requires national attention for its development. The demand of steel is basically a derived demand; growth in the industry is dependent on the level of activity of the steel consuming industries specifically the construction, automotive, appliances and other consumer durable. India is the 6th largest steel producer of iron-ore, and the 9th largest industry is equipped to meet over 90% of the countrys total requirements of steel, with imports restricted preliminary to a small sophisticated high level addition products. Jindal organization is faster growing group with enviable business trend record and a strong market presence in India today. Jindal was established by OMPRAKASH JINDAL in the year 1952 with a small making steel pipes bends and sockets at Liluah near Kolkata. OMPRAKASH JINDAL has developed into a multifaceted organization and is one of the largest steel producers in India.

The steel industry is in the threshold of a new era, the departure from a regime of control of free market, from protection to completion, from public sector to private investment and an inward marketing policy to a global vision has all placed. The industry in a course of development and that has been endless opportunities also at the same time stiff challenges and a terrain of uncertainty to

improve its strength and competitive edge to product good quality products at lower prices. The steel industry being a core sector, tracks the overall economic growth in the long term. Also, the growth of the steel industry is dependent on the development of steel consuming industries like automobiles, consumer durable and infrastructure and realty development in the country the past few years have witnessed an increase in steel consumption and in order to match the even the steel industries have geared up with capacity expansions to meet this growing demand.

COMPANY PROFILE Background and inception of the company

Jindal Vijaynagar Steel Works (JSW) is ranked 4th amongst the top Indian business houses in terms of sales and profit the Rs. 19700 crores. Jindal organization is faster growing group with enviable business trend record and a strong market presence in India today. Jindal has recognized in India and Asia pacific region. It is the 4th largest sales turnover in the private sector after reliance, Tatas and Aditya Birla groups. Jindal was established in 1972 by OMPRAKASH JINDAL. The group has grown from a single unit making steel pipes bends and sockets at Liluar near Calcutta (present day Kolkata) to the present multi location, multi product giant from the mining of iron ore/coal/chrome-ore to the manufacturing of value added steel products it has a preeminent position in the flat steel segment in India and is today more than 20000 people are working in the organization. Jindal Vijaynagar Steel Ltd. This plant is located at Tornagallu in the BellaryHospet area the heart of high grade iron-ore belt; spread over 3700 acres of land. The plant is 340 kms from Bangalore and well connected to Goa and Chennai ports. The steel industry bring them on the threshold of adopting new technology we took a lead in adopting the latest technology of steel making as COREX developed by vest alpine of Austria. The JVSL was the first Greenfield project to save COREX as a mainstream facility. The other who had it as a part of brown field expansion was ISCOR of South Africa and POSCO of South Korea.

Mining of iron ore to the manufacturing of value added steel products Jindal has a preeminent position in the flat steel segment in India as is on its way to be a major global player, with its overseas manufacturing and marketing alliances with other world leaders.

Where there is a challenge there is Jindal If it is Jindal, it must be first class Nature of the business carried:
Indias only fully integrating stainless steel plant Until the mid 70s huge chunks of Indias stainless steel requirements were met by imports the challenge was to produce high quality stainless steel at less than world steel prices. In 1979-80 the Jindal were successful in using Argon Oxygen Decarburization Converter, a state of art technology development in house. A process integrating of the different stages in the manufacturing of stainless steel was successfully done. As a result everything from the conversion of raw material in the billets and slabs, to hot rolling to strip and plates, as well as cold rolling was done in house. Since then, Jindal strips ltd(JSL) has forged ahead and has become Indias largest stainless steel produce in the countries private sector with a capacity of 2 lakh. Indias only integrated private sector galvanized steel producer.

In 1982, a decision was taken to increase the product mix under the dannes of Jindal. Iron and steel co ltd a plant acquired at Tarapur to produce slabs and addendum to this, a facility was set up at Vasind to manufacture hot rolls, plates, JISCO has burgeoned in to leading cold roller and a largest producer and exporter of

galvanized steel and high value steel product in the country, JISCO has a production capacity of 4lakh MT in galvanized products.

Ferro chrome: another breakthrough in Jindal

Ferro-Chrome an essential ingredient in manufacture of stainless steel was, until recently was imported from other countries. In 1987, Jindal Ferro Alloys Ltd; at Vishakhapatnam was the first to manufacture Ferro-Chrome 100% In house technology, which was conceived marginalize the monopoly of outside suppliers. To establish a synchrony and to develop a market base, JFAAL has been recently merged with JSL as autonomous division, INDIAS ONLY INTEGRATED GREEN FIELD STEEL PROJECT. JSW, a green field integrated steel plant with integrated steel plant with integrated steel plant with a capacity of 1.60 million ton per annum of hot rolled coils. JSW has collaborated with voest Alpine of Australia, which will provide a unique advantage in manufacturing and technology. Other Significant Breakthrough: Jindal have also pioneered Indias first continuous slab casting machine and Indias first hot stickle mill to produce hot rolled stainless steel coils. Jindals are the people to have developed the Indian private sectors, first DD(deep drawing) and EDD(extra deep drawing)grade mill steel wide strips. The process of DD and EDD grades of steel involves a consistent adeptness and knowledge; it calls for a technology of higher order. Jindals are also pioneers in India to use the newly introduced process of COREX c-2000 module, developed by voest Alpin, Australia to manufacturing pig iron. Jindal breakthroughs are almost limitless; it has become axiomatic to say.

JSW vision, mission and values Vision:

TRANSFORM STEEL DOMAIN THROUGH INNOVATIONS

Jindals 5 Years Vision:

Value and groom people for innovating the future Continuous improvement in the value chain for cost stewardship Nurture lasting customer relationship by anticipating their needs and delivering beyond expectation Catalyst for growth of Indias steel and power industries. Out of the box marketing of value added branded products for domestic and global markets. Inspire community growth with utmost care for the environment in areas in which we operate.

To achieve a turnover of Rs 20000 crores by march 2009.

Mission:
JSW corporate mission guide the approach to the work and environment, which transforms the way we deliver our products and services. MAXIMIZE CUSTOMER SATISFACTION AND SHAREHOLDERS VALUE

THROUGH HRD. With our young thinking, we promise to innovate the future by driving with leadership and a crystal clear focus while differentiating the benefit of our deliverables to all stakeholders.

Core values:

Attitude- crystal clear

Behavior-drive with leadership

Creativity-differentiate the benefit

Delivery- innovate the future

3.1 Ownership pattern:

Categories Promoters NRI FII OCB No of Holders 11372 18152 7 12 No of Shares 776995188 53218087 3426012 567200 % of Holding 60.19 4.12 0.27 0.04

IFI IMF Banks Employees Body Corporate Public Trust Total

7 26 6 4179 3119 831847 6

38990003 7813900 12301824 1026100 102879988 291408341 2371357

3.0 0.61 0.95 7.95 7.97 22.57 0.18

868733

1290998000

100

3.2 SHAREHOLDING PATTERN Categories Promoters Foreign Corporate Institutions Public % of holding 45.0 30.75 3.2 5.9 15.1

Competitors information Major competitors Major players in the field of iron and steel manufacture are as follows: 1. Steel authority of India (SAIL) 2. Rastreeya Ispat Nigam Ltd (RINL) 3. ISPAT 4. Tata steel co (TISCO) 5. Essar steel 6. Lloyds steel industries ltd 7. National mineral development corporation (NMDC)

Infrastructural Facilities

The plant has concrete roads everywhere, shuttle services and dust recycling systems, separate buildings for each department, canteen facilities, well equipped furniture & computers. JSW imparts compulsory safety training to all its employees. JSW foundation works for welfare of society, which provides services like education, health, computers, rehabilitation for the surrounding villages. Sandur shivaji high school was renovated, bypass road was constructed & passenger airport has also been done by JSW. There is a 58 room centrally air-conditioned and well furnished guest house serving Indian and continental food. Sanjeevani hospital is built to cater the medical needs of employees as well as general public. It has telemedicine facility with 200 specialists & mediclaim insurance scheme also. Good transport facilities. Good sports & medical facilities. Modern sports town ship with excellent amenities. Club and knowledge centre facilities for all the JSW employees. Jindal Vidya Mandir with high standards of education etc.

Achievements/Awards
JSW is today Indias third largest integrated steel company with a capacity of 2.5 million tonnes of steel. They have a 15% market share in Indian and a 50% in their home in South India, and have a play a pivotal role in growing Indias finished steel market in 14.84 MT in 1991-92 to 38 MT in 2004-05. All units operating above rated capacity Lowest water consumption (3.30 m3/tes) Zero effluent discharge Highest manpower productivity( 1273 tes/JSW works employee) Lowest plant inventory of finished products.

 Lowest stores & spares inventory

Awards:
Frost and Sullivan India Manufacturing excellence award (IMEA) National Quality Award 2004, from Indian Institute of Metals for Best quality Managements Practices amongst Integrated Steel Plants. Steel Metallurgist Award- 2004 from Indian Institute of Metal to Dr. Shayam Sunder Gupta. Silver Award in Metal sector 2003-04 for constituted by CII own in the category of Excellent water efficient unit. CII- EXIM Bank Award- 2004 for strong commitment to Excel. JSW energy wins Business Leadership Award in 2010-11 Karnataka Chapter Safety Award 2009-10 ISO-14001:2004 Certification National Award for excellence in Energy Management 2009 CII- EXIM Award 2009 IMC Ramakrishna Bajaj National Quality Award

Future Growth and Prospects.

We are the future of Steels A part of multi products, multi industrial group popularly known as Jindal Organization innovation product mix backed by strong in-house R&D activities, world class quality, highly competitive prices, on time deliveries and excellent sales network have enabled Jindal to emerge as a front runner in Indian steel industry. From mining of iron-ore to manufacturing of value added steel product, Jindal has a pre-eminent position in the flat steel segment in Indian and is on its way to be major global player, with its overseas manufacturing facility and strategic manufacturing and marketing alliances with other world leaders.

Work Flow Model

The below chart shows work flow model of the Jindal South West Steels Ltd.
Raw material Handling System Beneficiation System Pellets & Sinter Making Coke Oven & Cement Plant Corex & Blast Furnace Basic Oxygen Furnace Inspection

Quality Checking

Continues Casting

Hot Strip Mill

SWOT ANALYSIS OF JSW:

STRENGTHS: JSW has reputation in steel market. This is the result of long experience of aroung 3 decades in the steel industry. Major strength of JSW lies with the prices. JSW enjoys reduction in cost due to very low cost of power (generated by COREX gas) States of art & technology, the Corex process makes it a low cost production of steel in the industry. Excellent work force well-qualified and highly experienced Employees. Production quality is the strength of the JSW. Well planned Infrastructure for inward & outward by rail & road as base foundation for future growth. Cost effective & compact rail network system. Well designed yard for receipt dispatches with inter-connectivity. Multi entry/exit to the yard for greater flexibility.

Support from the state Government. It is a continuous process and large scale production is undertaken. Future demand for steel industry.

WEAKNESS: Raw material through GOA port due to capacity constraints, railways network is not likely to support. Krishnapatnam port movement is not smooth. Challenge in handling 52MTPA cargos at signal location. Over dependence on Railway for movement of materials. With increasing intensity of operations, tipper performance would become a serious concern.

OPPORTUNITY: Capacity expansion plan of IR network are well co-ordinate with overall expansion plan of JSW. A special incentive from Indian Railways to Steel Industries is under Consideration. Located in the centre of Bellary-Hospet region, a high grade iron belt. Easy access to the main parts of Goa, Chennai and Mumbai.

THREAT: IR has not taken any initiative for DFC to develop their network serving JSW plant.

Foreign companies like Mittal Steel and Posco entering the Indian steel market. Dumping of metal from countries like Korea is another major threat. Inordinate delay in construction of the world already sanctioned by the Railways & which is in progress. User to create their own infrastructure for smooth inward/outward movement. Availability of Railways wagon for outward movement. Priority for Iron ore export affecting wagon, supply, rolling stock and locomotive. Poor road conditions & weak bridges between Hospet- Bellary.

S
STRENGTHS 1. Growing Economy 2. Low Manpower Cost 3. High manpower Productivity 4. Skilled and vibrant workforce OPPORTUNITIES

W
O

WEAKNESSES 1. Sourcing of skilled Manpower 2. Compensation 3. Infrastructure

A N

THREATS 1. Poaching of employees by Competitors and other Industries. 2. Even changing market Condition 3. Volatile job market

1. Lucrative market condition 2. Organic and inorganic Expansion mode

A L Y S I S

MC KINSEYS 7S MODEL.

The 7-S framework of MC Kinsey is a Value Based Management (VBM) model that describes how one can holistically and effectively organizes a company. Together

these factors determine the way in which a corporation operates. The 7S framework first appeared in The Art of Japanese Management by Richard Pascal and Anthony Athos in 1981. They had been looking at how Japanese industry had been so successful, at around the same time that Tom peters and Robert Waterman were exploring what made a company excellent. The 7-S models were born at a meeting of four authors in 1978. It went to appear in In search of Excellence by Peters and Waterman and was taken up by as a basic tool by the Global Management Consultancy firm Mckinsey.

Structure
Organizational structure refers to formal hierarchical relationships & positional arrangements. It deals with how members communicate with others, how information flows, what roles he performs, rules & procedures existing to guide the activities of members as part of the organization. It refers to type of organization say autocratic, flat structured, democratic etc.

With reference to JSW it has good mentor, disciplined relationship, encouragement, help & guidance. Board of Directors 1) Mrs. Savitri Devi Jindal, Chairperson

2) Mr. Sajjan Jindal, Vice Chairman Director Managing Director

3) Dr. B.N. Singh, Jt.Managing Director and CEO (Upstream SBU)

4) Mr. Raman Madhok, Jt. Managing Director and CEO (Downstream SBU)

5) Mr. Seshagiri Rao M.V.S. Director (Finance)

6) Mr. Balaji Swaminathan Nominee Director of ICICI Bank Ltd.

7) Mr. R.N Roy, Nominee Director of IDBI Ltd.

8) Mr. I.M. Vittala Murthy, IAS, Nominee Director of KSIIDC

9) Mr. Jambunathan, IAS (Retd.), Nominee Director of UTI Asset Management Company Pvt. Ltd.

10)Mr. S. David Chandrashekran, Nominee Director of LIC of India.

11)Dr. S.K. Gupta, Director

12)Mr. Anthony Paul Pedder, Director

13)Mr. Vijay Kelkar, Director

14)Mr. Sudipto Sarkar, Director

15)Dr. Ram Swami P. Aiyar, Director.

Organizational Structure: Key Persons

Chairman

Managing Director

JMD & CEO

ED OPERATIONAL

ED COMMERCIAL

ED

DIRECTOR FINANCE

VP STEEL

VP COMMERCIAL

GM PROJECT

VP PALLET

GM MARKETING

VP HSM

VP COMMERCIAL

SKILL:

Skills are capabilities of organization as a whole. Skills, which describe the organization as part of its character is, core competence like in JSW has manufacturing skills, R&D etc.

The skills, which JSW process are assertive, Decision- making, business knowledge, leadership, attitude, adaptability courageous & dynamism. However the skill requirement varies from job to job.

STYLE:
According to MC Kinsey style is patterns of actions taken by top management.

In JVSL, there are 66 Quality circles where the employees can suggest any improvements in systems. There is a grass root level participation. These suggestions are implemented either by interdepartmental communications, mutual understanding, or by top-level analysis, where huge investments ate involved. Even the policy decisions are taken with consultancy of respective persons. Employees take casual decisions & their immediate head gives the feedback. From the above facts we can say that JSW has a participative management style.

STRATEGY:
It includes basic purposes, missions, objectives, goals & major action plans & policies. In JSW, every department has its own strategies & policies.

Human Resource Department:

The HR dept ensures that whether the goals are in line with business plans or not. The main strategy of HR is To make JSW the most preferred employee.

Marketing Strategies:

Focusing on selected major customers in terms of their locations, segments, potential demands etc. Customization of product so that the best advantage by using JSW product in terms of yield, lower costs etc.

Pricing strategies:

JSW is into industrial goods segment where sales are made according to customer specifications. Hence not much of publicity & market leadership techniques are required.

Price fixation:

It defines for exports & domestic markets according to the Industry analysis made. At international market current price is around $570 pt.

Credit terms:

JSW has certain terms like credit and payment towards the letter credit.

Payment period:

JSW allows period of 15 days to a month as a payment period to its customers.

Promotional strategies:

The production is done on the basis of customer order; therefore the organization has not engaging in advertising activity, But as a promotional tool it is giving-

Quick delivery

Better customer relation

Direct marketing

Packing and labeling:

The steel products are not perishable one, so it need not have any proper packing as compared to consumer products. Binding with wire tag does the packing and labeling is done by metal strip in different colors. Brand image of JSW is a Indias leading producer of HR coils and special grade of steel, as for end use applications, so the name of company i.e. JSW is the brand image of its products.

Policies:

Major action plans:

To build a slag based cement plant, build new blast furnace & DRI plant using cortex off gas. Sustain leadership, facilities decision making & promote team based cultures & ethics.

Environment Policy:

JSW has worked for continues up gradation of its systems in the environmental interests with a view to create a green world. JSW follows all the statutory rules & also educates its employees to maintain eco friendly operations. JSW has installed dust-recycling system. It has hence adopted COREX technology which emits less toxic gases & its stack gases is reused by power plant and thus creating zero wastages. Safety Policy:

Providing a safe and healthy work place for all employees on the basis of hazard identification, risk assessment and its control of all activities. Providing appropriate levels of education and training to all employees including contractors employees. Quality Policy:

Company has developed quality manual covering requirement standards, prepared with reference to quality systems. Level 1- System manual Level 2- System procedures Level 3- Work instruction & master parameter sheets Level 4- Formats & records

Vendor rating is done on quality& delivery time. Commercial department collects information on supplier & trail order is placed.

SYSTEMS:

It refers to all rules, regulations & procedures both formal & informal. It includes production plans, control system, capital budgeting systems, cost accounting procedures, budgetary systems, valuation methods, recruitment training & development plans. In JSW, every department has got their own Management Information System.

Human resource information system:

There is an HR package which stores all employees profile such as employee ID, code no, joining date, place of posting, name, personal profile, bank name, A/c no, grade, department, qualifications, designation, experience, pay scale & history. On the basis of this data rating is done. It also gives information of overall employee structure like no of persons joined in a month, transfers, promotions, land giver category, loan taken employees etc.

Performance appraisal system:

The criteria used for appraisal is: Main: Business perspective & customer focus, result oriented & cost consciousness. Others: Job knowledge, customer satisfaction, human relations, safety orientation, clarity in communication, taking initiative to get task done, innovations, quality & quantity considerations etc. Annual & periodical appraisal is done with to assess the performance to decide rewards, promotions based on vacancy & potential. Quality Systems: Every production department has quality packages. They have their own targets & grades. JSW has laboratory, R& D & Testing facilities. For eg: pellet plant is supplier to corex department so

corex checks the quality specification while purchasing from pellet plant. Hence, there is a value chain. Finance & Accounts Information system:

Following are the external & internal customers for the department whose profile Transaction details are maintained.

External: Suppliers, contractors, Government dpet, Banks, Financial Institutions, Consultants, Buyers & Auditors.

Internal: Materials department, Stores, Shops, Employees, HRD, Marketing department & Internal auditors.

STAFF:

Staffing is process of procurement of manpower required to achieve organizational

4. DATA ANALYSIS AND INTERPRETATION 4.1 GROSS WORKING CAPITAL POSITION FOR THE LAST FIVE YEARS YEARS 2004-05 2005-06 2006-07 2007-08 2008-09 GROSS WORKING CAPITAL 1894 2745.42 2485.63 3086.54 4631.64

ANALYSIS
From the above table Gross Working Capital of the JSW are Rs 1894 crores in the year 2004-005, Rs 2745.42 crores in the year 2005-06, Rs 2485.63 crores in the year 2006-07, Rs 3086.54 crores in the year 2007-08,and Rs 4631.64 crores in the year 2008-09.

GROSS WORKING CAPITAL

4.1

GR SW OS ORK INGC IT AP AL

5000 4000
R TIO A

4631.64

3000 2000 1000 0

1894

3086.54 2745.42 2485.63

GR S OS WOR ING K C APITAL

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

Y R EA S

INTERPRETATION:
The gross working capital of the company increased from year to year and the performance of company is in good position. The gross working capital of the year Rs 1894 crores, 2745.42 crores, 2485.63 crores,3086.54 crores, 4631.64 crores in the year 2004-2005, 2005-2006, 2006-2007, 2007-2008, 2008-2009 with respectively

4.2NET WORKING CAPITAL POSITION FOR THE LAST FIVE YEARS YEARS 2004-05 NET WORKIG CAPITAL 285.74

2005-06

425.30

2006-07

199.90

2007-08

-1015.83

2008-09

-2925.53

ANALYSIS
From the above table Net Working Capital of the JSW are Rs 285.74 crores in the year 2004-005, Rs 425.30 crores in the year 2005-06, Rs 199.90 crores in the year 2006-07, Rs (1015.83) crores in the year 2007-08,and Rs (2925.53) crores in the year 2008-09.

4.2

NE W K T OR ING C ITAL AP
500 0 -500 -1000 R IO AT -1500 -2000 -2500 -3000
285.74 425.3 199.9

-1015.83

net workingca l pita

-2925.53

2004- 2005- 2006- 2007- 200805 06 07 08 09

Y AR E
INTERPRETATION:
The net working capital of the company decreased from year to year and the performance of company is in not in good position. The net working capital of the year Rs 285.74 crores, 425.30 crores, 199.90 crores 2004-2005, 2005-2006,and 2006-2007 respectively and it reached negative figure in the further years ,it as to look after its liabilities its heavy.

4.3 INVENTORY MANAGEMENT

Managing inventory is a juggling act. Excessive stocks can place a heavy burden on the cash resources of a business. Insufficient stocks can result in lost sales, delays for customers etc. the day is to know how quickly your overall stock is

moving or, put another way, how long each item of stock sit on shelves before being sold. Obviously, average stock-holding periods will be influenced by the nature of the business. For example, a fresh vegetable shop might turn over its entire stock every few days while a motor factor would be much slower as it may carry a wide range of rarely-used spare parts in case somebody needs them. Now a days, may large manufactures operate on a just in time bases whereby all the components to be assembled on a particular today, arrive at the factory early that morning, no earlier no later. This helps to minimize manufacturing costs as JIT stocks take up little space, minimize stock holding and virtually eliminate the risks obsolete or damaged stock. Because JIT manufacturing holds stock for a very short time, they are able to conserve substantial cash. JIT is a good to strive for as it embraces all the principles of prudent stock management. The key issue for a business is to identify the fast and slow stock movers with the objectives of establishing optimum stock levels for each category and thereby minimize the cash tied up in stocks. Factors to be considered when determining optimum stock levels include: The broad range of project management and financial advisory services include:

What are the projected sales of each product? How widely available are raw material, component etc How long does it take for delivery by supplier.

Can you remove slow movers from our product range without compromising best seller?

Remember that stock sitting on shelves for long periods of time ties up money, which is not working for you. For better stock control, one can follow the following:

Review the effectiveness of existing purchasing and inventory system Know the stock turn for all major items of inventory Apply tight controls to the significant few items and simplify controls for the trivial many

Sell off outdated or slow moving merchandise it gets more difficult to sell the longer you keep it

Consider having part of your product outsourced to another manufacturer rather than make it yourself.

Review your security procedures to ensure that no stock is going out the back door

Composition of inventory:
Composition of inventory generally depends upon the nature of business. The proportion of each component in the total inventory varies from industry to industry. In order to assure effective control investment in inventories sit is desirable to maintain a proper balance in all the components. The structure of inventory shows us that which part of the inventory is more the organization.

Costs related to inventory:

One operating objective of inventory management is to minimize the cost. Excluding the cost of merchandise, the costs associated with inventory fall into two basic categories: (1) Ordering or acquisition or set up costs, and

(2) Carrying costs. These are important elements of the optimum level up inventory decisions.

Ordering cost:
This category of costs is associated with the acquisition ordering of the inventory. Firms have to place the orders with the supplier to replenish inventory of raw material. The expenses involved are referred to as ordering costs. Apart from placing the order outside, the various production departments have to acquire materials from the stores. Any expenditure involved here is also a part of ordering cost. Including in the ordering costs are the costs are the costs involved in

Preparing a purchase order of requisition form Receiving, inspection and recording the goods received to ensure both quality and quantity The cost of acquiring material consists of clerical costs and costs of

stationery, it is, therefore called a set up cost. They are generally fixed per order placed, irrespective of the amount of the order.

Carrying costs:
The second broad category of costs associated with inventory is the carrying costs. They are involved in maintaining or carrying inventory. They cost of holding the inventory may be divided into two categories. 1. Those that arise due to the storage of inventory; the main components of this category of carrying costs are

a) Storage costs, that is, tax, depreciation, insurance, maintenance of the building, utilities and janitorial services b) Insurance of inventory against fire and theft c) Deterioration in the inventory because of pilferage, fire, technical

obsolescence, style obsolescence and price decline. 2. Opportunity cost of funds: this consists of expenses in raising funds to finance the acquisition on inventory. If the funds were not locked up into inventory, they would have earned a return. This is the opportunity cost of the funds or the financial costs component of the cost. The sum of ordering costs and carrying costs and carrying costs represent the total costs of the inventory.

Benefits of holding inventory:

The second element in the optimum inventory decisions deals with the benefits associated with holding the inventory. The major benefits of holding the inventory are the basic function of inventory. In other words, inventories perform certain basic functions which are of crucial importance in the firms production and marketing strategies since inventories enable uncoupling of the key activities of the firm, each of them can be operated at the most efficient rate. This has several beneficial effects on the firms operations. The effects of uncoupling are follows. Benefits of purchasing: if the purchasing of raw materials and other goods is not tied to production/sales, that is, a firm can purchase independently to ensure the most efficient, purchase, several advantages would become available. In the first place, a firm can purchase larger quantities than is warranted by the usage in production or sales level. Second the firms can purchase the goods before the anticipated or announced price increase. This will lead to declining in the cost of production.

Benefits in production: finished goods inventories serves to uncouple the production and sale. This enables production at a rate different from that of sale. That is production can be carried on at a rate higher or lower than the sales rate. The levels of production are more economical as it allows the firms to reduce the costs of discontinuities in the production process. Benefits in work in progress: the inventory of work in process performs two functions. In the first place, it is necessary because production processes are not instantaneous. The amount of such inventory depends upon technology and the efficiency of production. The larger the steps involved in the production process, the larger the work in process inventory and vice-versa. Benefits in sales: the maintenance of inventory also helps a firm to enhance its sales efforts. For one thing, if there are no inventories of sales will depend upon the level of production. A firm will not be able to meet demand instantaneously. There will be a time lag depending upon the production process. If the firm has inventory, actual sales will not have not depend on lengthy manufacturing processes.

Debtors management: Accounts receivable: 1. Loans and advance to suppliers 2. Credits extended to the buyer of the goods Motives of extending the trade credit: Operating motive: Anxiety of the producer to deep its manufacturing function insulated from the vagaries of the market.

Marketing motive:

Entering to new market Increasing market share in existing market Means of price discrimination in a very competitive market

Financial motive: Seller having a better access to the capital than its competitors would profit by giving trade credit to the latter. Credit evaluation: Sourcing credit information: Bankers of the customer Other supplier to the customer Financial analysis of the prospective client: Fixed asset turnover ration Inventory turnover ration Creditors turnover ratio Debt service coverage ratio Subjective evaluation Capacity Capital Condition Character Credit scoring: Altman Z score

 Weighted average score based on the ratios analysis for the customer Some issues in credit policy formulation: Determining the credit limit: NPV=(COGS+tax)-PV(sp,a,f) The maximum value of TC that keeps the NPV positive is the amount of time for which the credit limit can be extended to the buyer of the goods.

Maximum discount that can be offered: Time value of money principle Credit policy variation: Profit=s(1-v)-[s(b+q)+ics365] Based on above formula the impact of lengthening of trade credit limit can be checked. Sale of goods act 1930 Contact of sale Goods Sell & agreement to sell.

AS-IX: Delivery delayed at buyer request & buyer takes title & accepts billing. Delivered subject to conditions.

Purchase makes a series of installments, payments & the seller delivers the goods only when the final payment is received.

Special order & shipments Sale repurchase agreement Sale to intermediate parties

Monitoring receivables: Debtors ageing schedule Collection matrix Day sales outstanding Provision for doubtful debts and bad debts

Debtors management in JSW:

Small customer Large customer Advance Discount policy.

The steel major Debtors turnover Average collection

JSW 38.23 9.54

Essar 15.56 23.45

ISPAT 13.50 27.00

JSW Debtors turnover Average collection period

2009 41.14

2008 43.36

2007 38.23

2006 26.79

2005 19.94

8.72

8.41

9.54

13.62

18.30

4.4 CASH MANAGEMENT:

Cash is the liquid money, which a firm can disburse immediately without any restriction. The term cash includes coins, currency and cheques held by the firm and balances in its bank accounts. Sometimes near cash items, such as marketable securities or bank time deposits are also included in cash. The basic characteristics of wear cash assets are that they can readily be converted into cash, and we invest it in marketable securities. The kings of investment contribute some profit to the firm. Approximately 1.5% of the average industrial firms assets are held in form of cash, which is defined as the demand deposits plus currency. Cash is often called as non earning asset. It is needed to pay for labor and raw materials, to buy fixed assets, to pay taxes, to service debts, to hold for use in conducting its normal business activities. It is the same time it should have sufficient cash.

1. To take trade discounts 2. To maintain this credit rating

3. To meet unexpected cash need The cash management is concerned with the managing of 1. Cash flows into and out of the firm 2. Cash flows within the firm at 3. Cash balance held by the firm at a point of time by financing deficit.

Cash management techniques of procedures:

1. Improving forecasts of cash flows 2. Synchronizing cash inflows and outflows 3. Speed up the cheque clearing process 4. Using float 5. Accelerating collections 6. Getting available funds to where they are needed
7. Controlling disbursements.

Collection techniques:
1. Speedy cash collections 2. Prompt payment by customer 3. Early conversion of payments into cash

Liquidity ratios:
Liquidity refers to the ability of a firm to meet its obligations in the short run, usually one year. Liquidity ratios are generally based on the relationship between current assets (the sources for meeting short term obligations) and current liabilities. The important liquidity ratios are: current ratio, acid-test ratio and cash ratio.

1. Current ratio:
This is most widely used ratio to know the working capital position. This ratio expresses the relationship between current assets and current liabilities. This ratio gives the information about firm ability to meet short term and long term working capital.

Components of current ratio

Current assets Cash in hand Cash at bank Marketable securities Short term investment Bills receivable Sundry debtors Inventories Work in progress Current liabilities Outstanding or accrued expenses Bills payable Sundry creditors Short term advances Income tax payable Dividends payable Bank overdraft

Prepaid expenses

Current ratio= current assets/current liabilities 4.5

particulars/years current assets current liabilities current ratio 2004-05 1894 1608.26 1.17767 2005-06 2745.42 2538.75 1.081406 2006-07 2749.18 2427.28 1.132618 2007-08 3086.54 4399.9 0.701502 2008-09 4631.64 7557.21 0.612877

4.5

Interpretation:

The above table and graph shows that the current ratio of the company was 1.17767 in the year 2004-05 which has been decreased to 1.081406 in the year 2005-06. In the year 2006-07 the current ratio of the company increased to 1.132618 and in the year 2007-08 the current ratio has been decreased to 0.701502 and in the year 2008-09 the current ratio has further decreased to 0.612877. The standard current ratio should be 1.33 but in 2007-08 the current ratio of the company is less than one. Obviously, in this case it should not be considered to be a sign of financial weakness.

Quick ratio:
Liquid ratio express the relationship between liquid assets and liquid liabilities, the ideal ratio for a concern is 1:1. This ratio is measure repayment of immediate liabilities.

Acid-test ratio= current assets inventory / current liabilities 4.6

particulars/years quick assets current liabilities quick ratio 2004-05 1150.59 1608.26 0.715425 2005-06 1821.19 2538.75 0.717357 2006-07 1474.28 2427.28 0.607379 2007-08 1537.38 4399.9 0.349412 2008-09 2620.22 7557.21 0.346718

4.6

Interpretation:
The above table and graph shows that the quick ratio of the company was 0.715425 in the year 2004-05 which has been maintained as 0.717357 in the year 2005-06. In the year 2006-07 the quick ratio has been decreased to 0.607379 and which is further decreased to 0.349412 in the year 2007-08 and in the year 2008-09 it has been maintained as 0.346718. The company has not maintained more than the standard quick ratio of 1:1 for all the above years. It shows that company was not maintaining its liquidity position up to standard ratio so it should give importance to improve the liquidity position.

Cash ratio:
It is the ratio of equivalent balance to current liability it can be calculated

Cash ratio= cash/current liabilities 4.7

particulars/years Cash current liabilities cash ratio 2004-05 127.37 1608.26 0.0792 2005-06 103.75 2538.75 0.04087 2006-07 354.86 2427.28 0.1462 2007-08 554.97 4399.9 0.12613 2008-09 419.96 7557.21 0.05557

4.7

Interpretation:
The above table and graph shows that the cash ratio of the company was 0.0792 in the year 2004-05 which has been decreased to 0.04087 in the year 200506. In the year 2006-07 the cash ratio was increased to 0.1462 and which was decreased to 0.12613 in the year 2007-08 and in the year 2008-09 it has been decreased to 0.05557, which is almost near to standard ratio 0.5:1. Lack of immediate cash may not matter if the firm can stretch its payments or borrowings of money at short notice if it is not able to do this, firm should maintain adequate cash and bank balance to meet short term obligations.

Leverage ratios:
Financial leverage refers to the use of debt finance. While debt capital is a cheaper source of finance, it is also a riskier source of finance. Leverage ratios help in assessing the risk arising from the use of debt capital. Two types of ratios are commonly used to analyze financial leverage; structural ratios and coverage ratios.

Structural ratios are based on proportions of debt and equity in the financial structure of the firm. The important structural ratios are: debt equity ratios and debt asset ratio.

Debt Equity ratio:

The debt equity ratio shows the relative contribution of creditors and owners. It is defined as:

Debt-equity ratio= debt/equity 4.8

particulars/years debt equity debt equity ratio 2004-05 3873.93 3149.72 1.229928 2005-06 4838.08 4356.22 1.110614 2006-07 5185.69 5594.05 0.927001 2007-08 8798.37 7677.25 1.146031 2008-09 12693.79 7959.25 1.594848

4.8

Interpretation:
The above table and graph shows that the debt equity ratio is 1.229928 in the year 2004-05 which has been decreased to 1.110614 in the year 2005-06. In the year 2006-07 debt equity ratio decreased to 0.927001 and which has increased to 1.146031 in the year 2007-08 and it is increased in the year 2008-09 is 1.594848. It shows that a high ratio shows a large share of financing by the creditors of the firm; a low ratio implies a smaller claim of creditors.

Debt to asset ratio:

The debt to asset ratio measures the extent to which borrowed funds supports the firms assets. It can be defined as

Debt to asset ratio=debt/asset

4.9
particulars debt asset debt to asset ratio 2004-05 3568.44 7291.62 0.489389 2005-06 4096.05 9194.3 0.445499 2006-07 4173.03 10779.74 0.387118 2007-08 7546.53 16475.62 0.458042 2008-09 12693.79 20653.04 0.614621

4.9

Interpretation:
The above table and graph shows that the debt to asset ratio is 0.489389 times in the year 2004-05 which has been decreased to 0.445499 times in the year 2005-06. In the year 2006-07 debt to asset ratio decreased to 0.387118 times and which has been increased to 0.458042 times in the year 2007-08 and in the year 2008-09 it has been increased to 0.614621. This ratio indicates that extent to which borrowed funds support the firms assets. In terms of company increase the asset proportion regarding this company is efficiency in management the compnay not depend on the external funds.

Turnover ratio:
Turn over ratios, also referred to as activity ratios or assets management ratios, measure how efficiently the assets are employed by a firm. These ratios are bases on the relationship between the level of activity, represented by sales or cost of goods sold, and levels of various assets. The important turnover ratios are:

inventory turnover ratio, average collection period, receivables turnover ratio, fixed assets turnover ratio and total assets turnover ratio.

Inventory turnover ratio:

This ratio indicates the number of times inventory is replaced during the year. It measures the relationship between the cost of goods sold and the inventory level. The ratio can be computed in two ways.

Inventory turnover ratio=sales/closing inventory (or) COGS/Avg inventory 4.10

particulars/years Sales average inventory inventory turnover ratio 2004-05 6679.36 743.41 8.984759 2005-06 6180.1 924.23 6.686755 2006-07 8554.36 1011.35 8.458358 2007-08 11420 1549.16 7.371737 2008-09 14001.25 2051.42 6.82515

4.10

Inventory:
The above table and graph show that the inventory turnover ratio is 9 times in the year 2004-05 which has been decreased to 6.7 times in the year 2005-06. In the year 2006-07 inventory turnover ratio increased to 8.5 times and which has been decreased to 7.4 in the year 2007-08 and this once again decreased to 6.8 times in the fiscal year 2008-09. This ratio indicates how fast the inventory is converted into sales. Here high ratio implies good inventory management but in coming year 200405 and 2005-06 decreased compared to previous years now its maintained good inventory management approximately to 7 for the year 2008-09.

Fixed asset turnover ratio:

This ratio measures sales per rupee of investment in fixed assets It is defined as,

FATR=Net Sales/Avg Fixed Assets.

4.11
particulars/years Net sales Avg fixed assets Fixed Asset Turnover Ratio 2004-05 2005-06 2006-07 2007-08 2008-09 6679.36 6180.1 8554.36 11420 14001.25 5835.81 7402.79 9285.98 13380 19447.5 1.144547 0.834834 0.925529 0.853513 0.71995

4.11

20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 2004-05 2005-06 2006-07 2007-08 2008-09 net sales avg fixed assets

Fixed Asset Turnover Ratio 1.2 1 0.8 0.6 0.4 0.2 0 2004-05 2005-06 2006-07 2007-08 2008-09 Fixed Asset Turnover Ratio

Interpretation:
The above table and graph shows that the fixed asset turnover ratio is 1.14 times in the year 2004-05 which has been decreased to 0.83 time in the year 200506. In the year 2006-07 fixed asset capital turnover ratio increased to 0.93 times and which has been further decreased 0.85 times in the year 2007-08, in the year 200809 it decreased to 0.72 times. This ratio is to measure the efficiency with which fixed assets are employed A high ratio indicates a higher degree of efficiency in asset utilization and a low ratio reflects inefficient use of assets. In this case company utilizing the assets efficiently.

Working capital turnover ratio:

Working capital of a concern is directly related to sales. This ratio measures the efficiency with which working capital is being used by a company.

WCTR= Net Sales/ Net working capital

4.12
particulars/years Net sales Net working capital Working Capital Turnover Ratio 2004-05 2005-06 2006-07 2007-08 2008-09 6679.36 6180.1 8554.36 11420 14001.25 285.74 425.3 193.45 -1015.83 -2925.57 23.37566 14.53115 44.42719 -11.242 -4.78581

4.12
16000 14000 12000 10000 8000 6000 4000 2000 0 -2000 -4000 2004-05 2005-06 2006-07 2007-08 2008-09 net sales net working capital

W orking Capital Turnover Ratio 50 40 30 20 10 0 -10 -20 2004- 2005- 2006- 2007- 200805 06 07 08 09 W orking Capital Turnover Ratio

Interpretation:
The above table and graph shows that the working capital turnover ratio is 23 times in the year 2004-05 which has been decrease to 14.5 times in the year 200506. In the year 2006-07 working capital turnover ratio has been increased to 44.5 times and which has been a further decreased to (11) time in the year 2007-08. In the year 2008-09 this ratio was further increased to (5) times. It shows the higher the ratio indicates the efficient utilization of working capital and lower ratio indicates inefficient management of working capital.

Current Asset Turnover Ratio:

Current Asset Turnover Ratio= Net Sales/ Current Assets 4.13

particulars/years Net sales Current Assets Current Assets Turnover Ratio 2004-05 2005-06 2006-07 2007-08 2008-09 6679.36 6180.1 8554.36 11420 14001.25 1894 2745.42 2485.63 3086.84 4631.64 3.526589 2.251058 3.457651 3.699576 3.022953

4.13

16000 14000 12000 10000 8000 6000 4000 2000 0 2004-05 2005-06 2006-07 2007-08 2008-09 net sales current assets

Current Assets Turnover ratio 4 3.5 3 2.5 2 1.5 1 0.5 0 2004- 2005- 2006- 2007- 200805 06 07 08 09 Current Assets Turnover ratio

Interpretation:
The above table and graphs show that the current assets turnover ratio is 3.5 in the year 2004-05 which has been decreased to 2.3 times in the year 2005-06. In the year 2006-07 current assets turnover ratio increased to 3.5 times and which has been further increased to 3.7 times in the year 2007-08. In the year 2008-09 it decreased to 3 times. It shows that the ability of the company to generate sales per rupee of current asset which has been increasing and decreasing every year which has to be improved by the company in coming years.

Total Assets Turnover Ratio:

The output-capital ratio in economic analysis. Total assets turnover ratio can be defined as:

TA Turn over Ratio= Net Sales/ AvgTA 4.14

particulars/years Net sales Avg Total Assets Total Assets Turnover Ratio 2004-05 6679.36 7285.21 0.916838 2005-06 6180.1 11125.3 0.555555 2006-07 8554.36 11812.73 0.727557 2007-08 11420 19654.46 0.581039 2008-09 14001.25 26960.14 0.519331

4.14
30000 25000 20000 15000 10000 5000 0 net sales avg total assets

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

Total A ssets turnover ratio 1 0.8 0.6 0.4 0.2 0 Total Assets turnover ratio

2004-052005-062006-072007-082008-09

Interpretation:
The above table and graph shows that the total assets turnover ratio is 0.92 times in the year 2004-05 which has been decreased to 0.6 times in the year 200506 and which has been increased to 0.7 times in the year 2006-07. In the year 200708 the total assets turn over ratio was decreased to 0.6 times and by 2008-09 it is further decreased to 0.5 times. This ratio measures that efficiency of management and utilization of assets here from the year 2004-05. More the ratio implies that the more efficiency and utilization of assets and lower the turnover ratio underutilization of available resources and presence of idle capacity.

Sales to current assets ratio:

Sales to current asset ratio can be defined as:

Sales to Current Assets ratio= Net sales/ Current asset 4.15

particulars/years Net sales Current assets Total Assets Turnover Ratio 2004-05 6679.36 1894 3.526589 2005-06 6180.1 2745.42 2.251058 2006-07 8554.36 2485.63 3.323925 2007-08 11420 3086.84 3.699936 2008-09 14001.25 4631.64 3.022953

4.15
16000 14000 12000 10000 8000 6000 4000 2000 0 2004-05 2005-06 2006-07 2007-08 2008-09 net sales current assets

Sales to Current Assets Ratio 4 3.5 3 2.5 2 1.5 1 0.5 0 2004- 2005- 2006- 2007- 200805 06 07 08 09 Sales to Current Assets Ratio

Interpretation:
The above table and graphs show that the sales to current asset turnover ratio is 3.5 times in the year 2004-05 which has been decreased to 2.25 times in the year 2005-06. In the year 2006-07 sales to current asset turn over ratio increased to 3.3 and which has been further increased to 3.7 times in the year 2007-08 and by the year 2008-09 it has been decreased to 3 times. This ratio indicates that how the company utilize the current assets. In the current situation it is showing the efficiency of the company to use its current assets to a maximum extend to attain maximum output and it also measures sufficient utilization of working capital.

5. Analysis and interpretation of data Evaluating the financial performance of Jindal steel and iron mfg, ltd. Working capital management Schedule showing working capital for financial years Calculation of gross working capital
Particular 2004-05 2005-06 2006-07 2007-08 2008-09

A. Current assets
Inventories Sundry debtors Cash and 122.49 98.87 337.80 339.22 419.96 743.41 266.6 924.23 229.19 1011.35 245.16 1549.16 337.39 2051.42 398.14

bank balance Loans advances Other current -----assets Total current 1849.00 assets capital or gross working 2745.42 2485.63 3086.54 4631.64 513.70 342.04 18.62 17.24 and 761.50 979.42 549.28 842.15 1744.88

Calculation of net working capital Inventories Sundry 743.41 266.60 924.23 229.19 1011.35 245.16 1549.16 337.39 2051.42 398.14

debtors Cash balance Loans advances Other current ------assets Total current 1894 asset capital or grossworking 2745.42 2485.63 3086.54 4631.64 513.70 342.04 18.62 17.24 and 761.50 979.42 549.28 842.15 1744.88 and 122.49 98.87 337.80 339.22 419.96

B.Current Liabilities Liabilities Provisions 1375.95 232.31 1926.86 393.26 2320.12 2210.51 75.22 2285.73 3666.36 436.01 4102.37 7476.28 80.93 7557.21

Total current 1608.26 liabilities (A-B)= working capital net 285.74

425.30

199.90

(1015.83)

(2925.57)

Liquidity ratios: Particulars/years 2004-05 Current ratio Quick ratio 1.17767 0.715425 2005-06 1.081406 0.717357 2006-07 1.132618 0.607379 2007-08 0.701502 0.349412 2008-09 0.612877 0.346718

Cash ratio

0.0792

0.04087

0.1462

0.12613

0.05557

Leverage ratios: Particulars/years Debt-equity ratio Debt-asset ratio 2004-05 1.2299 0.4894 2005-06 1.1106 0.4455 2006-07 0.9270 0.3871 2007-08 1.1460 0.4580 2008-09 1.5948 0.6146

Turnover ratios: Particulars/years 2004-05 Inventory turnover ratio Fixed-asset turnover ratio Working capital 23.3757 turnover ratio Current-asset turnover ratio Total-asset turnover ratio Sales-current asset ratio 3.5266 2.2511 3.3239 3.6999 3.0229 0.9168 0.5556 0.7276 0.5810 0.5193 3.5270 2.2511 4577 3.7 3.023 14.5312 44.4272 -11.242 -4.7858 1.1445 0.8348 0.9255 0.8535 0.7200 8.9848 2005-06 6.6866 2006-07 8.4584 2007-08 7.3717 2008-09 6.8252

6. FINDING, SUGGESTIONS AND CONCLUSION: FINDINGS

The study is made for the purpose of findings of efficiency of working capital management in JSW following are the findings arrived at after analysis,

JSW is ranked 4th amongst the top business houses in terms of sales and profit the Rs. 19700 crores

The Gross Working Capital of the JSW is increasing from year to year i.e. Rs 1894 crores in the year 2004-005 and Rs 4631.64 crores in the year 2008-09.

The Net Working Capital of the JSW is decreased from Rs 285.74 crores in the year 2004-005 to Rs (2925.53) crores in the year 2008-09.its suffering from loss.

The current ratio of the company is found that ratio is less than the standard ratio fixed. In the year 2004-05 ratio is 1.17 and its decreased to 0.61 in the year 2008-09. .

The quick ratio of the company was 0.715425 in the year 2004-05 and in the year 2008-09 is 0.346718. Its decreased year by year The Company has not maintained more than the standard quick ratio of 1:1 for all the years.

The debt equity ratio shows that a low ratio implies a smaller claim of creditors.

The debt to assets ratio implies that the use of internal fund is more but the company doesnt depend on outside funds.

The company maintaining good inventory turnover ratio. The fixed assets turnover ratio is to measure the efficiency with which fixed assets are employed. The company utilizing the assets efficiently.

The working capital turnover ratio indicates that the company is inefficient management of working capital.

The total assets turnover ratio measures that efficiency of management and utilization of assets. The company is not utilizing available resources.

The company is utilizing the current assets and working capital to get maximum output..

Marketing of products is a problem for the company. The cash and bank balances shows increasing trend in 2006-07, 2007-08 and 2008-09.

Current assets turnover ratio is decreased compared to 2004-05 it was 3.53 to 2008-09 it is 3.

The liabilities of the company is showing increasing trend from year by year. Which is decreasing the net working capital

Working capital turnover ratio is in downward trend.

7. SUGGESTIONS

The company can improve its current ratio by taking suitable measures, so that it meets the ideal ratio.

 The quick ratio is low. The company may increase the investment on quick assets to meet the ideal ratio. Current assets turnover ratio is reduced so steps can be taken for utilization of current assets.

The company can increase the debt content in its capital structure to give higher return to its shareholders which shows better debt equity ratio.

If we see the current liabilities, it is going on increasing year by year. The management should pay out its liabilities as it may effect the liquidity position of the company. It is clear from the inventory turnover ratio that major parts of funds have been invested in stores and spares. The management can see to invest fewer amounts in inventories.

CONCLUSION
This report includes the in depth analysis of working capital management. On the basis of the analysis following conclusions have been made. JSW is a growing company and the third largest producer of steel in India. Production of other items is also increasing because domestic and international demand of steel products is continuously rising.

With the ongoing expansion activities, working capital carries immense importance in an organization such as jsw Trade creditors, amount owed by the business for supplies and services, are a plus in the working capital equation. The higher the figure, the more has been extended by other (usually at no cost) towards working capital needs. But there are limits to the good news. Firms that go beyond agreed credit limits run into trouble; they lose out on cash discounts, can incur interest charges, and upset their find themselves in court with additional costs and penalties to pay. Therefore, companies should try to find out the ways to delay the payments to its creditors so that more funds are available for daily operations At a plant level mostly the finished goods are sold on credit it increase upon the market share and retain the consumer. Control of the debtors element ( the amount owed the business in the short term) involves a fundamental trade-off between the cost of providing credit to customer and the additional net revenue that can be earned by doing so. The former can be kept to a minimum level. Cash management is a very important element of working capital management. Forecasting is thus a planning tool. There are many kinds of forecasts are done in a business. Like sales forecasts, production forecasts, material, machinery etc. all these forecasts are different from cash forecast. All these forecast are based on accrual basis. Cash forecasting is very important in the realm of overall business forecasting. Its is concerned with every segment of business environment, be it permanent or temporary, capital or revenue, income or expenses. In 2008 the American recession affects Indian steel industries a lot, the prices of steels were came down but in spite of that the Jindal is doing well in market.

Result of the study

The steel era is depicting a tremendous improvement in par with the globalization of the economy. This boom of steel industry is the advantage accessed by the company under study. The products of the company have good market, both national and international. The study was conducted to analyze the WORKING CAPITAL MANAGEMENT of the company .the findings revealed an overall efficient working capital management, showing a substantial improvement in inventory debtors thereby increasing the company sales and profit. The company had also achieved to manufacture its product in such a manner so as to customer requirement and not required to maintain stock, this shows the demand for the companys products. The data analysis thus depicts an overall satisfactory working capital position of the company.

ANNEXURE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2005-06, 2006-07, 2007-08&2008-09.
Years Mar ' 09 Mar ' 08 Mar 07 Income Operating income ' Mar 06 ' Mar 05 '

14,006.5 9

11,391.0 5

8,595.0 3

6,092.3 9

6,675.1 4

Expenses Material consumed

9,101.25

6,276.58

4,443.7 7

3,372.6 6 488.44 127.04 293.65 117.48 4,399.2 7 1,693.1 2 15.86 1,708.9 8 365.01 405.82 61.79 876.36

3,193.4 0 640.65 107.21 276.39 132.14 4,349.7 9 2,325.3 5 13.19 2,338.5 4 474.70 359.54 60.48 1,443.8 2

Manufacturing expenses Personnel expenses Selling expenses Administrative expenses Expenses capitalized Cost of sales

867.10 288.75 602.93 285.39 11,145.4 2

698.01 273.98 539.69 246.56 8,034.82

480.94 175.47 506.52 169.69 5,776.3 9

Operating profit

2,861.17

3,356.23

2,818.6 4

Other recurring income Adjusted PBDIT

185.53 3,046.70

187.61 3,543.84

24.47 2,843.1 1

Financial expenses Depreciation Other write offs Adjusted PBT

836.82 827.66 1,382.22

494.84 687.18 2,361.82

406.81 498.23 109.02 1,829.0 5

Tax charges Adjusted PAT

306.52 1,075.70

722.77 1,639.05

639.33 1,189.7 2

437.60 438.76

603.02 840.80

Non recurring items

-794.00

122.30

86.13

344.25

19.84

Other adjustments

non

cash 176.80

-33.16

16.15

73.52

-10.12

Reported net profit

458.50

1,728.19

1,292.0 0

856.53

850.52

Earnings appropriation Equity dividend Preference dividend Dividend tax Retained earnings

before 3,964.36

3,995.75

2,623.6 6

1,576.1 0 125.58 27.90 21.53 1,401.0 9

718.62

18.71 28.99 8.11 3,908.55

261.87 29.06 49.44 3,655.38

204.98 27.90 33.49 2,357.2 9

103.23 27.91 20.58 566.90

Balance sheet as at 31st March 2005-06 & 2006-07 2007-08 & 2008-09

Mar ' 09 Sources of funds Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus Loan funds Secured loans Unsecured loans Total Uses of funds Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments 8,214.61 3,058.02 248.08 288.93 7,422.24

Mar ' 08

Mar ' 07 Mar ' 06 Mar ' 05

248.08 288.93 7,140.24

225.01 21.76 279.03 5,068.25

218.03 279.03

190.10 279.03

3,859.16 2,680.59

5,497.08 2,049.45

3,632.50 540.53

4,058.71 3,568.44 37.34 267.97

19,231.88 15,223.78 9,767.08

8,452.27 6,986.13

16,896.75 13,952.32 10,512.76 8,368.43 7,520.30 3,810.31 2,996.83 2,323.66 -

1,850.45 1,443.91 6,517.98 6,076.39 1,861.90 349.30 85.08 229.57

13,086.44 10,955.49 8,189.10 9,242.06 1,250.11 5,612.43 923.53 2,002.93 192.94

Net current assets Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total 4,849.54 9,196.27 3,223.03 5,490.70 2,603.06 3,415.82 2,745.41 1,894.00 3,062.15 1,913.75 -316.74 304.05 -19.75 350.62

-4,346.73 -2,267.67 -812.76 194.87

19,231.88 15,223.78 9,767.08

8,452.27 6,986.13

BIBLOGRAPHY

Books referred: 1. C.R.KOTHARI Research Methodology, Wishtra Prakashan 2. I.M, PANDY Financial management, Vikas publishing Housing Pvt Ltd 3. KHAN&JAIN FINANCIAL MANAGEMENT, TATA Mc Graw-hill publishing co.

REPORTS 1. The Challengers 2008-09 (Annual report). 2. Profile of JSW. Websites: www.jsw.in www.jindal.com