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2012

Summer Internship Program

11BSPHH010573 SIL 1/1/2012

Summer Internship Program

A REPORT ON

Feasibility Study of VALUE ADDED PRODUCT (VAP) MANUFACTURING UNITS and understanding the Macro Economic Environment affecting to SIL

BY Name: Payal Bhattacharya Enrollment No: 11BSPHH010573

IBS, HYDERABAD

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A REPORT ON

Feasibility Study of VALUE ADDED PRODUCT (VAP) MANUFACTURING UNITS and understanding the Macro Economic Environment affecting to SIL By Payal Bhattacharya 11BSPHH010573 IBS Hyderabad A report submitted in partial fulfillment of requirements of MBA program of IBS,Hyderabad Submitted to: Company Guide: B.P.Nayak Assistant Manager SIL,orissa
Name of the Organisation

the

Faculty Guide: Prof T.Koti.Reddy IBS,Hyderabad

Shreeji Ispat Limited Date of Submission: 04.06.2012

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AUTHORIZATION

This is to certify that this report has been submitted in partial fulfillment of the requirements of MBA program IBS, Hyderabad. The project report titled Feasibility Study of the Value added products(VAP) MANUFACTURING Units and understanding the Macro Economic affecting to SIL has been done by Payal Bhattachrya , Enrollment No.11BSPHH010573 , of IBS Hyderabad as a part of her completion of study during her Summer Internship Program at Shreeji Ispat Limited,Odisha. The report has been submitted to:

CompanyGuide: B.P.Nayak Assistant Manager SIL

Faculty Guide: Prof T.Koti .Reddy IBS,Hyderabad

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ACKNOWLEDGEMENT I would like to take this opportunity to express my sincere thanks to the Mr. Nitai Bhattacharya, General Manager of SIL, Odisha for allowing me to carry out the Summer Internship program in the SIL, in the area of Finance. I would like to express sincere thanks to my company guide, Mr. B.P.Nayak, Assistant Manager, CA Nitin Manek, Ms.Santoshi Mishra (Project Analyst) Odisha for providing valuable suggestions and regular guidelines throughout activities of the project. Their guidance was extremely useful for timely completion of the project.

I am extremely grateful to my faculty guide, Prof. T.Koti.Reddy for his continuous support and timely guidance during the course of the completion of this project. His regular advices were a constant source of motivation for carrying out the activities of the project smoothly. Lastly I would like to thank my family, friends and all the concerned people associated with the project for their valuable help and support.

Payal Bhattacharya Enrollnment no: 11BSPHH010573 IBS,Hyderabad

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CONTENTS
Internship Certificate Acknowledgement Executive Summary 1) Introduction 1.1 Study Background 1.2 Industry Analysis Steel Industry Value Chain End Products Growth Drivers Industry Structure 1.3 Indian Scenario 1.4 Global Scenario 1.5 Company Overview Ingots Tmt & Structurals. Re-rolling unit (Jagatpur) Induction furnance unit (Barbil) 2) Objective 2.1 Purpose of the Project 4) Methodology 5) Scope & Limitation 6) Economy Analysis 6.1 Demand and supply 6.2 Outlook domestic steel industry 6.3 Outlook Indian steel industry 6.4 Opportunities and Barriers 6.5 Challenges and Issues.
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7) Company Analysis 7.1 Ratio Analysis 7.2 Fund Flow Statement 7.3 Working Capital Requirement 7.4 Capital Budgeting 8) Project Specific Analysis 9) Outcome/Contribution 10) Learning from SIP 11) References 12) Appendix (if any)

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List of Figures
FIGURES FIGURE 1.2.1 FIGURE 1.2.2 FIGURE 1.2.3 FIGURE 1.2.5 FIGURE 1.3.7 FIGURE 1.3.8 FIGURE 1.3.9 FIGURE 6.1.1 FIGURE 6.1.2 FIGURE 6.1.3 FIGURE 6.1.5 FIGURE 6.1.6 FIGURE 7.1.1 FIGURE 7.1.2 FIGURE 7.1.7 FIGURE 7.1.9 FIGURE 7.1.11 FIGURE 7.1.14 FIGURE 7.1.15 PAGE NO.S 15 17 19 23 28 28 31 39 40 43 45 46 49 49 50 52 53 54 54

LIST OF TABLES
TABLES TABLES 1.2.4 TABLES 1.2.6 TABLES 1.3.9 TABLES 1.3.10 TABLES 1.3.11 TABLES 1.3.12 TABLES 1.3.13
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TABLES 1.3.15 TABLES 6.1.4 TABLES 7.1.1 TABLES 7.1.3 TABLES 7.1.4 TABLES 7.1.5 TABLES 7.1.10 TABLES 7.1.12 TABLES 7.1.13 TABLES 7.1.14 TABLES 7.1.15 TABLES 7.2.1 TABLES 7.2.2 TABLES 7.2.3 TABLES 7.2.4 TABLES 7.2.5

34 43 49 51 51 51 53 54 55 56 56 58 59 61 61 61

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EXECUTIVE SUMMARY

The project tells about the entire study starting from the process of making the rods to the final rods. Its necessary for every industry to grow its profit as well as sell. So it can build a goodwill among the outsiders which includes investors, financial institution and customers. But before starting an industry, money and fund is required which is the backbone of every company. Every company maintains a proper record of each and every transaction to know the inflow and outflow of fund. The project work deals with Shreeji Ispat Pvt.Ltd, cuttack, (Odisha). The project depicts about its background and where it stands in the competition of other peer companies. A company analysis work is done to know about the performance of the company and capital budgeting procedure is adopted to know which product of the company gives much better profit in comparison to other products. It also shows a clear picture about the outcome of investment to investors. A Macro Environment analysis is done by taking various methods and theories. The last but not the least, in the training process we come to know all the industrial work which will help out in future.

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1.1

INTRODUCTION :

BACKGROUND OF SHREEJI ISPAT LIMITED (SIL) SIL when it was started, the owner of the company thought to be in stand its company in the list of successful companies. So employees were recruited to functionalize the operation of the company. But after 2 years, it was found that instead of earning profit, it was suffering losses. There were many rumors about the company of its liquidity position and closing down the company. Lastly it was found that the employees were not honest and loyal to their company. In fact they were greedy persons due to which the company was suffering losses. At last the company was closed, and then an owner tried to reopen the company once again, named Mr. Surendra ku. Behera(MD). He is the one of the board of directors. He invested his own money and through the bank loan he established the company in two places of Odisha (i) Jagatpur (ii) Barbil. In Barbil, M.S.Ingot is being manufactured and in Jagatpur, TMT & STRUCTURALS are being manufactured. These both units are being controlled and directed by Mr.Surendra Ku. Behera. It has been certified by ISO:9001-2008 and it has also taken care of surrounding environment and supported of that society. It has also a sister concern named, M/s S.K.Mineral Handling Pvt.Ltd and Hotel lucky India(in this group) which is established at Barbil, a 3 star rated hotel.
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As the company was closed in 2010, and the operation got started in 2011 with every in was duly maintained by the Company Act, 1956. Slowly, the dealers and investors started to invest all equipment and machines of two manufacturing unit. Now around 200 workers and 50 employees are working in the company and in their respective specialized department. The total sales of the company is Rs.88.69cr. which is a great achievement for the company.Mr. Surendra Ku. Behera and its employees has successfully converted to vision into mission. Now the Finance and Marketing department are also doing it well. In Odisha Tv channel they have used advertisement to popularize their product and hoardings are also placed in every corner of Odisha so that customers can recognize their company and aware of the products. It is good to know about the background/ history of SIL, the processes of adopting the new technology and emerging towards its successful zone in the world of steel manufacturing Industry.

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1.2)

industry analysis
Steel Industry

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In order to ensure the growth of any economy across the globe, steel is considered to be the backbone for the development process. Globally, per capita consumption of steel is treated as one of the most important indices of socio-economic improvement and quality of living standard. The industry is characterised as a large and technologically complex, having strong forward and backward linkages in terms of material flow and income generation. All major industriallised economies are characterised by existence of a strong steel industry and growth of many of these economies has largely been shaped by strength of their steel industries during their initial stages of development.

The steel industry in India is more than 100 years old. Liberalisation of Indian economy in 1991, (which emphasised on several reforms including, delicensing, price de-control, lowering of import restrictions, lowering of duties and abolition of freight equalisation) resulted in increased domestic
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production driven by increased demand. India currently is the fifth-largest producer of crude steel in the world with a production capacity of 80.2million MT in 2011-12. The industry is driven mainly by the strong internal demand generated from the construction, infrastructure and capital goods sector. Indian steel industry over the past 100 years, have moved up the value chain with better quality products, lower costs of manufacturing and increased production of value added products. Both public sector and private sector players played significant role in the development of a vibrant Indian steel industry. It is important to note that currently Indias per capita steel consumption is abysmally low at about 46 kg , which is far below the consumption of steel in China which is at about 340 Kg. The high consumption of steel China is mainly driven by the huge infrastructure development activities in that country. The lower level of steel consumption signifies the latent potential in the Country.

Value Chain
Steel finds wide applications in various key industries like construction, transport, communication, agriculture and energy.The industry has witnessed major technological advancements during the past few decades to produce right quality of metal to suit the requirement of these key industries. Value chain analysis, which is an effective method of scanning an industry, indicates that, iron ore is the major raw material for manufacturing of steel, which is followed by steel scrap. Although about 20 to 25% of the global steel produced is through use of scrap, it can never overshadow the demand for iron ore. The value chain of the steel industry is indicated in Figure 1.2.1
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Figure 1.2.1: Value Chain - Iron & Steel Industry

Iron ore can be converted into steel using the classical / primary route or through modern / secondary route. The classical route consisting of Blast Furnace (BF) and Basic Oxygen Furnace (BOF) has been the primary route for steel production for ages. Over the period the processes have been
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refined to make it more production friendly. However, this route is energy intensive and also to a great extent non environment friendly. On the contrary, the secondary route is a relatively modern innovation. It uses Electric Arc Furnace (EAF) or Induction Furnace (IF) and normally uses Direct Reduced Iron (DRI) and steel scrap as raw materials. Secondary route also uses high quality and high grade iron ore (lumps), if available at a reasonable price. On analysis of Figure 1.2.1 and market scenario, the Consultants conclude that The manufacturing process from iron ore to finished product involves production of a large number of intermediate products. All the intermediate products have demand in the domestic as well as a global market. Sponge iron, being an intermediate product, is primarily used by secondary steel producers who operate with induction furnaces or electric arc furnaces for producing steel. It is also used as a substitute for scrap. Sponge iron is also charged into Blast Furnace, which helps in reducing coke consumption, which in turn increases hot metal productivity. As a result of this, sponge iron has succeeded in becoming the most preferred additive in BF as a replacement of scrap and iron ore lump in steel making. Steel billets are considered fresh and raw, and they must undergo a series of manufacturing processes before they can be used for various purposes. While billets have already been put in the furnace, they still require a series of shaping and moulding procedures such as hot and cold working, milling and cutting before they are sold in hardware stores, or used for different applications.

End Products
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The finished product in the steel industry is restricted to flat product or long products. Long products refer to rods, bars and TMT, while flat products refer to plates and metal sheets. Figure 1.2.2 shows the composition of these products in the domestic market during 2012. Figure1.2.2:CompositionofEndProduct

Source: Ministry of Steel Annual Report 2011-2102. Steel market is primarily divided into two categories - flat and long.

Flat Steel: Plate or a (hot or cold) rolled strip product. Typical products are plates, HR coils, HR sheets, CR coils, CR sheets, Galvanised plates (GP), Galvanised coils (GC), pipes etc Long Steel: Rod or a bar. Typical rod products are the reinforcing rods made from sponge iron for concrete, ingots, billets, engineering products, gears tools etc.

On analysis of the industry, the Consultants note that, About 47% of the total steel produced in the country is towards production of flat products. The remaining production is for long products. The major consumption of long products is in the construction, infrastructure and industrial sector, while the major consumption of flat products is in the automobile and capital goods segment. The flat products are produced through hot rolling and cold rolling processes. These flat products are used as it is or it is transformed into different shapes.
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Alloy Steel (including Stainless Steel) accounts for about 5% of the total steel production, which may be flat or long product.

The Consultants note from Figure 1.2.3 that, In India there is huge untapped potential for increasing steel consumption, even to reach the level of other developing economies like China and Russia. Singapore and Taiwan have reached the peak point of consumption level and it is expected to stabilize or dip down in the future. In developed countries the consumption is mainly due to infrastructural maintenance and up gradation works.

Figure 1.2.3:

Trend in Per Capita Consumption Phase Country wise

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Growth Drivers
India being front runner in the developmental project and industrial expansion initiatives offers several advantages to the steel industry. Some of the growth drivers for steel industry are, India has competitive advantage due to large availability of raw material, skilled and unskilled workforce and technology. Iron ore and coal constitute the primary raw materials for steel production. India is bestowed with large reserves of iron ore. The iron ore-rich states of India are Orissa, Jharkhand, Chhattisgarh, Karnataka and MTPA to 50 MTPA by 201415 through the capacity expansion of existing mines as well as by setting up new mines. The total coal production, including raw coal and lignite, stood at 525.3 MT in 200809. It has increased at a CAGR of 6.2% between 2004 09. The key raw material for the production of steel is metallurgical coal, which accounts for 17% of the countrys coal reserves. The construction sector is the major consumer of long-products like rods, bars/coil sections, wire and reinforcing. Increasing population drives construction sector in India. Infrastructure sector is expected to regain momentum over the next few years, with the Indian Government laying emphasis on infrastructure development and increasing expenditure on developmental activities across sectors. Eleventh Five Year Plan (20072012) has allocated investments to the tune of US$ 514 billion for the core infrastructure sector, comprising power (32%), roads and highways (15%), railways (13%), telecommunication (13%), irrigation (12%), water supply (7%) ports (4%, airports (2%) and mining (2%). A large amount of the planned investment is pending even today, which is an indicarion of high demand in the ongoing five year plan. It is understood from market sources that the potential allocation during

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Goa. National Minerals Development Corporation (NMDC) plans to expand its iron ore production capacity from current level of 30 the 12th five year plan will be to the tume of US$ 1 trillion which is close to double the 11th plan. India has a vibrant automobile sector and it is the worlds second-largest manufacturer of two wheelers and the fifth-largest manufacturer of commercial vehicles. As per Automobile Component Manufacturers Association (ACMA), the production of passenger and commercial vehicles is expected to reach 4.9 million and two and three-wheeler production is expected to reach 36.5 million by 2016. Automobile sector demands huge amount of automonile grade steel. The oil and gas sector is on an expansion mode. As demand outstrips supply, companies are aiming at increasing the gas grid network. This sector is expected to raise the demand for the longproducts. The Table 1.2.4 indicates the sector wise steel consumption in India during 2012.

Sector
Share

Sector

Share

Share

Residential 9% Industrial 13% Total Construction Cars 6% Aviation, Shipping and Rail Transport Machinery 14% Domestic Appliances Equipment Consumer Goods
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22% Non- residential 6% Infrastructure 50% Passenger 7% Trucks 3% Total 16% 14% Metal Products 3% Electrical 3% Total Capital and 34%

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Industry Structure
The structure of the steel industry is done based on the type of the producer. In the industry, two types of producers exist. They are, Integrated producers Secondary producers.

Integrated producers
The players whose value chain extends from iron ore processing to finished steel production at a single location or at a combination of locations are known as Integrated Producers. These include players like Steel Authority of India Limited (SAIL), JSPL, Jai Balaji Industries Limited, Tata Steel, JSW and Rashtriya Ispat Nigam Limited (RINL).

These players mostly adopt the primary route for manufacturing steel. The major charecteristics of the integrated producers are, 1) Integrated players are big in size with facility starting from BF to rolling mills, that is they operate in the entire value chain. 2) Some of the integrated players also have iron ore mining facility of their own or through their subsidiary. 3) These players generate better margin because of their presence in the entire value chain. 4) Overall, many of these players have been the pioneers in the industry in India.

Secondary Products
Secondary Producers are referred to those players, who may not be operating in the entire value chain. These include players like Essar Steel, Lloyds Steel and
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Ispat Industries. These players mostly adopt the secondary route for manufacturing of steel. Figure 1.2.5 Indian Steel Industry

The characteristics of the secondary steel producers are,


Secondary players may not be operating in the entire value chain and mostly operate in a few product lines. For example, it may be operating in the BF section or in the cold rolling section. A large number of small players exists in the secondary producers segment. While large players in the secondary producers segment generates good margin due to economics of scale, small players strive for survival.

Table 1.2.6 indicates the major players operating in different areas in the steel manufacturing value chain.

PRODUCTS

MAJOR PLAYERS

FEATURES

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Iron Ore

Pig Iron

Sponge Iron

NMDC, Kudremukh Iron Ore Company,Sesa Goa, SAIL, Tata Steel RINL, Sesa, Ushers Ispat, Malvika Steel, Kalinga Steel, Kirloskar, SAIL Essar, Ispat, VikramIspat

Hot Coils/Sheets

Rolled SAIL, Tata, Essar, Ispat, Bhushan Steel, Lloyds Steel, JSW Steel SAIL, Tata, Ispat, Essar, JSW SAIL, Tata, Ispat, Essar, JSW

Cold RolledCoils/Sheets Galvanized Sheets

Long Products

SAIL, Tata, RINL, JSPL, JSW

Alloy Steel Products

MukundMusco,Kalyani, UshaMartin,Facor,Sunflag, Viraj

India ranks 4th in Iron Ore production in the World Total DomesticCapacity is 31MTPA and demand is 40 MT India is the largest producer of SpongeIron in the World with annual capacity of about 26 MTPA Total Capacity is about 30 MTPA used in automobiles,engineering, pipes and CRC Used for manufacturing coated sheets,galvanized sheets Used in fabrication work like car bodies, ducts, consumer durables Total installed capacity isabout 4.5 million TPA Bars, Structural Products, wire rods, angles, and channels. Used in construction industry. Total installed capacity is about 25 million TPA Installed Capacity is about 30 MTPA. Used in Auto Component, ball bearings, engineering items.

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1.3) Indian Scenario

The Indian steel industry has entered into a new development phase from 2005-06, riding high on a resurgent economy and rising demand for steel. The sharp rise in production has lead to India becoming the fifth largest producer of steel in the world, with a 2008 crude steel production of above 55 million tonnes. The growth phase in India's steel industry is expected to pick pace further. India's steel consumption is projected to increase annually by above 10% till 2012, fuelled by demand for construction projects. The scope for raising the total consumption of steel in India is huge, given that per capita steel consumption is only 40 kg - compared to 150 kg across the world and 250 kg in China. The National Steel Policy has envisaged steel production to reach 110 million tonnes by 2019-20. However, Ministry of Steel has projected that the steel capacity in the county is likely to be 124.06 million tonnes by 2011-12 itself. Iron and steel are freely exportable and importable as per current government guidelines. India is estimated to have exported 4.6 million tonnes and imported 6.6 million tonnes of carbon steel in 2007-08.

1.4) Gl obal Scenario

Global steel production grew enormously in the 20th century from a mere 28 million tonnes at the beginning of the century to 781 million tonnes at the end. Further progress has been seen in the first decade of the 21st century. The global crude steel production in 2008 is reported to be 1,330 million tonnes. Steel consumption of a country increases when its economy is growing, as its government invests in infrastructure and transport, and the nation sees building of new factories and houses. Construction industry accounts for around 50% of the global steel consumption. Cars, which accounts for 13% of the global steel consumption is the second largest consuming sector. The main producing and consuming regions of steel have shifted from the developed world to the developing regions with Asia accounting for more than 55% of the global steel production. The five largest producers of crude in 2008 are China (500 million tonnes), Japan (199 million

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tonnes), US (91 million tonnes), Russia (68 million tonnes) and India (55 million tonnes) Global steel-making capacity has outstripped consumption in recent years. The world-wide apparent steel use in 2008 is estimated to be around 1197 million tonnes, which is down by 1.4% from the 2007 figures. The largest consumers in 2008 are China (425.7 million tonnes), US (97.5), Japan (76.4), South Korea (58.6) and India (52.6 million tonnes) Steel is one of the most recycled materials, basically because it is economical to do so and does not result in any loss of properties. It is estimated that currently over a third of global steel comes from recycled material. However, recycling rates vary a lot between countries with Spain and Turkey producing nearly 90% of their steel from recycled material in 2008, followed by Italy (77%), the United States (64%), South Korea (52%), Russia/Ukraine (48%) and Germany (45%). The share of recycling-based production is estimated to be considerably lower in China, India and Brazil.

1.5)

Company Overview

INGOTS
OVERVIEW: Mild Steel Ingots are the basic raw material for manufacturing various types of rerolled products. With the increased infrastructural activities in the country, the demand for mild steel ingots are very high now-a-days.

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DIMENSIONS(MM*MM)

LENGTH(MM)

3* 4 2.5*3.5

55 55

PROCESS OF MANUFACTURE M.S.Scrap of predetermined composition is melted in Induction furnace and Liquid hot metal is transferred in pouring ladle. From pouring ladle the liquid metal is transferred into ingot moulds. The ingot moulds are placed on the bottom plate at the correct position. Ingot moulds are C.I.Moulds placed with larger cross section at bottom. The central trumpet which receives the liquid metal is lined with bricks inside. General practice is to use three sets of bottom plates with moulds. Ingot moulds are cleaned from rust and dust from the inner surface with compressed air and suitable coating of graphite powder is given inside for easy removal ingot moulds.

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After the hot metal gets solidified, the ingot moulds are removed by crane. The ingots are then knocked out and transferred to cooling area for. Any surface defect if observed is removed by grinding, chipping, etc. Ingots are batch marked of grade/heat number and stocked for dispatch. Induction melting of steel uses pig iron and sponge iron as charge material in the project report.

The Figure 1.3.7 explains the process by a flow chart for better clarification: MELTING OF STEEL IN FURNACE TRANSFER OF METAL IN POURING LADLE POURING OF METAL TO INGOT MOULDS SOLIDIFICATION OF INGOTS SOLID INGOTS ARE TAKEN OUT FROOM MOULDS GAS CUTTING, CLEANING OF INGOTS DESPATCH

Or Figure 1.3.8 for layman explanation we can follow this diagram:

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Molten Metal, Metal Moulds

Scrap, Furnace

Physical Inspection

Ingot ready for dispatch.

MAJOR PLAYERS: DHANLAXMI IRON INDUSTRIES G.G TRADING CO. GANPATI ISPAT AMBIKA WASTE MANAGEMENT PVT LTD. ARIHANT SALES NETWORK ASHAR METAL PRODUCTS ALL INDIA METAL CORPORATION SKS ISPAT & POWER LTD.

INVESTMENT: Table 1.3.9 depicts about the investment : Particulars 1. Land & land Development costs
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Ingot Plant 41.80

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2. 3. 4. 5.

Building &Civil Construction Plant & Machineries Miscellaneous Fixed Assets Security Deposits TOTAL

71.36 453.69 Nil 173.84 740.69

MEANS OF FINANCE: Table 1.3.10 tells the means of finance: Particulars Promoters Contribution Institutional Finance Total PROFITABILTY ASSUMPTIONS: As the sales turnover of steel Ingots Rs.3940.22 lakhs then annually profit of the year is Rs. 118.206 lakhs. Ingot Amount 262.55 478.14 740.69

TMT & STRUCTURALS

OVERVIEW:
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Introduction: Steel is a product of a large and technologically complex industry having strong forward and backward linkages in terms of material flows and income generation. TMT Bars are Re-Rolled bars from Ingots/Billets. The finished product TMT bars are of Fe 415 & Fe 500 Grade steel Bars. TMT Bars have proven record in resisting loss of strength at high temperatures as experienced during fires. These bars are corrosion resistant. TMT Bars can be described as new-generation- high strength steel having superior properties such as weld ability, strength, ductility and tensile strength, which meet the highest international quality standards.

Market: The growth in construction activity and infrastructure projects in India has buoyed the demand for steel industry. There is a demand for steel products such has Thermo Mechanically Treated (TMT) Bars, Structural steel viz., angles, plates, channels, rounds etc. Raw Material : The raw materials used in manufacturing of TMT Bars are Ingots and Billets which are manufactured from Scrap and sponge iron. Manufacturing Process: TMT (Thermo Mechanically Treated) Bar is a manufactured in a process in which the ribbed bar is heat-treated in three stages during the production process itself. The bar is rapidly cooled/quenched in high pressure water jacket / Spray system as it emerges from the finishing stand of the rolling mill.

The process of manufacturing TMT Bars is explained in the following process flow diagram Figure 1.3.9 :
Raw material Receipt with desired shapes (Ingots)

Heating in Reheating Furnace


Hot Rolling into TMT Bars in Mill Stands (Roughing Mill,
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Cutting
Cooling by means of quenching Inspection Storage Yard and Dispatch

DIMENSIONS (MM*MM) LENGTH (MM)

Table 1.3.10

3 * 4 2.5*3.5

45 45

TECHNOLOGY: The technology/Machinery required for steel Melting Shop unit are: Melting shop Machinery item like Induction furnance , dies for casting and other misc. items etc. Rolling Mill Electricals like Motors, drivers,pumps,electrical panels, cables, liquid Starters and Transformer of 1500 KVA etc. Rolling Mill Auxiliary equipments like EOT cranes, Air compressor, gas cutting machines and other Misc. auxiliary equipments etc. INVESTMENT: Table 1.3.11 Particulars 1. Land & land Development costs 2. Building &Civil Construction 3. Plant & Machineries 4. Miscellaneous Fixed Assets
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Rolling (TMT) 37.76 154.10 261.87 112.79

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5. Security Deposits Total

21.40 587.92

MEANS OF FINANCE: Table 1.3.12 Particulars Promoters Contribution Institutional Finance Total

Rolling (TMT) 587.92 39.00 626.92

PROFITABILTY ASSUMPTIONS: The sales turnover of rolling units are Rs.234.564 lakhs.

Rerolling unit (Jagatpur)


As we have discussed about the company named Shreeji Ispat (P) Ltd. Is a re-rolling mill where manufacture of Ingots and TMT & Structural are manufactured and distributed to the others secondary company . Its utilization capacity shown in the following table 1.3.13:

Capacity and utilization No.of months operation Installed capacity(TPA) Capacity Utilization Total Output Of Liquid Steel (TPA) Total Output of Ingots (TPA) Inhouse Consumption Add: Opening Stock Less: Closing Stock Ingots Available For sale(TPA)
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2012 12 48000 60% 28800 27360 13770 260 1140 12710

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Induction Furnance(Barbil)
We have also an induction furnance unit at Tanto, P.O: Bhadrasahi, Barbil ,Dist: Keonjhar(Odisha). Manufacturing high quality M.S Ingot. Its utilization capacity shown in table 1.3.14: Capacity and utilization 2012 No.of months operation 12 Installed capacity(MT) 30000 Capacity Utilization 45% Total Output Of Long Products (MT) 13500 Inhouse Consumption(TPA) 0 Add: Opening Stock 946 Less: Closing Stock 1125 Long products available For sale(TPA) 13321

3.

objective

Purpose of the project The purpose of the project is that to get the knowledge in very department of the project such as: 1) Finance department In this department I have come to know the transaction part of the products. The first and foremost thing is backbone of every company and it plays a vital role in it. In simple language we say journal of transactions of daily wise. The management of fund flow, cash flow, maintenance of working capital as daily activities. All the financial statements and its analysis part. The main thing is ratios
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which help to know about the financial position and its performance of the company. The fund flow tell us that how the sources are utilized in the uses of the company. The finance department also helps in handling the resources and maintain the degree of leverage in it by utilizing the funds and sources in a proper way. 2) Sales and Marketing Department

It deals with the sales and marketing of products. The marketing and selling department is a board term where products should be reached to every corner of Odisha by transporting the products. In every manufacturer companies it is necessary to make an appropriate price by which the buyer should be agreed and it should be match up with the market value of the product as well as the price which has been set up by the competitors. It is all about the selling department. Now comes the marketing department where the selling comes under of it. Without marketing , selling is impossible. The main fundas of marketing to satisfy the needs and wants of customers. Marketing includes promotion,selling and advertisement. SIL has done a great job in marketing department where the sales turnover has been increased. Now they are competing with the companies located in Odisha. The main thing is of dealing of price with the customers.

Operation Department : Operation Department where the work involves of manufacturing and process of M.S.Ingot and TMT & Structurals. Its also controlled the part of workers. Actually , the operation department helps to company in giving the
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information as if how many workers are required to complete the target of sales turnover. The equipment required for it. As it is a medium-scaled industry it doesnt apply high quality method and technique except total quality management(TQM), findout Poka-Yoke in techniques, instead of maintaining SAP, they use TALLY to record daily operation and transactions of the company.

Production System : Production system deals with the manufacturing of products. It should know all the techquines or technology where the output can be fast and without delay. Here I have come to know the machines and techquines of SIL where the products can be produced in higher quality.

4.

Approach and methodology

The following distinct activities have been considered for the Project Review of overall business plan. Review of technology and technology selection. Review of environment management plan. Review of the estimates for the capital and the operating costs Of the project. Review the assessment of overall viability of the Project.

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5. SCOPE OF WORK The Scope of Work includes (SOW) :Project Background Review the basic objectives and scope of the Project. Review the assessment of key Project participants Market Assessment Review Review the key markets for the study products. Review the end-use markets. Review the estimate for the current market size of the study product. Review the supply-side including pricing, distribution network and packaging. Review the assessment of the existing demand-supply scenario. Review the demand drivers for the study product. Review the estimate for the demand-supply scenario for the study products. SWOT Analysis of the Company. Review the Marketing Plan. Location Selection Review Review the selected location based on - Availability of sufficient industrial land for setting up a new Plant. - Socio-political stability of the location. - Land rate and cost of land development. - Proximity to raw material. - Proximity to markets for finished goods. - Logistics of incoming material and outgoing products. - Availability of power, water and fuel. - Social infrastructure in the vicinity.
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- Availability of skilled manpower and related costs. Technical Assessment Review Review of - Overall material flow. - Description of the process. - Technical specifications of the product plant & machinery Required at the plant. Review of the estimation of - Overall electrical power requirement. - Requirement of other utilities such as water, compressed air And fuel. - Typical facilities proposed at the plant Review of the proposed implementation schedule Review the estimation of manpower requirement Review of Project cost estimation including cost of - Cost of land and land development. - Buildings and civil work. - Plant and machinery. - Miscellaneous fixed assets. - Engineering, consultancy and other prelimenary & Preoperative expenses. - Contingency. - Margin for working capital. Financial Assessment Review Estimate - Revenue Stream. - Operating Cost Stream. - Operating Profit Margin. - Working Capital Requirement. Evaluation of the financial viability of the Project
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- Net Present Value. - Debt Service Coverage Ratio. - Payback Period. Project Risk assessment (with sensitivity analysis) suggested mitigation measures.

6. ECONOMIC ANALYSIS
6.1 HISTORICAL DEMAND AND SUPPLY

Demand:
Investment in infrastructure, construction and engineering sectors have driven the demand for steel industry over the past few years. The major activities that have driven the demand for steel industry during the period 2005-11 are: Increased infrastructure investments in Asia, particularly China and India. Construction activities in Middle East, particularly Dubai, Abu Dhabi and Qatar. Major power distribution network overhauling in the UK. Investments in power distribution particularly in Asia. Investments in transport infrastructure like airports, highways and railway terminals. Penetration of telecommunication in the developing countries like India and China. The global crude steel demand vis--vis that of Asia and rest of the world is shown in Figure 6.1.1:

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Source: world steel yearbook 2011 The global steel demand grew at CAGR of 2% from a level of 1134 MT in 2005 to 1261 MT in 2010. On the contrary, the Asia markets have grown at a CAGR of 7% with China, Japan, South Korea and India being major contributors to the growth. During the same period the rest of the world (ROW) suffered a negative CAGR of 5%. Evidently the strengthening of Asian steel demand was driven by huge internal demand.

Supply:
The World crude steel production reached 1414 MT for the year 2010. The supply trend for the Global steel production has seen a CAGR movement of 4.3% during 2005-10 and during the same period Asias steel production has grown at a CAGR of 8.2% where-as CAGR movement for ROW has been negative at 0.6%. Figure 6.1.2 says about the annual growth trend of crude steel production

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Source: MM analysis From the above figure, the consultant has observed in a following points: During the global financial downturn, when entire industry was badly hit, the global supply has seen reaching negative jurisdiction. Year 2011 has brought new lights of hope with a complete turnaround of the industry. The year on year (Y-o-Y) growth in 2011 for world steel production over 2009 was 16.7%. Unlike the global scenario, Asia could sustain a positive growth during 2011 driven mainly by the investment in infrastructure sector. While the decline was huge in the case of ROW during 2009, the turnaround was also significant. It registered a growth above 25% in 2011 which was mainly driven by growth in US (growth 38%), Germany (growth 34%) and Brazil (growth 24%). The contrast in the percentage share of different countries/regions in world crude steel production for the year 2005 an 2010 is shown in Figure 6.1.3: Asian countries including China, Japan, South Korea and India are the major contributors of steel in the world. China remained the largest contributor of steel in the world with over 44.33% market share. The market share of China has increased drastically from 31% of 2005. The Chinese growth was driven by the huge demand from internal infrastructure projects. In addition, China
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also became a major exporter of steel at competitive price to the neighbouring countries.

While the producers in the developing countries concentrate more on low grade high volume products, the developed countries like, Germany, Japan and US are known to be more in the high grade high priced products. In European Union, Germany is the largest contributor in steel production contributing nearly 25% of the total production for EU. Russia and Ukraine are the major producers of steel in the CIS countries. Over the period from 2005 -10, USA, Japan, EU has lost their market share mainly to China and India.

Demand Supply Gap The global demand-supply gap is depicted in Table 6.1.4. From analysis of the industry operating characteristics and Table 6.1.4, the Consultants note that;
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The industry normally suffers from over supply syndrome. Baring one year in the stretch of five years span, the industry has consistently seen over supply. The Consultants conclude that the equilibrium in the global steel industry is met at oversupply only. In such cases, where demand exceeds supply, user industry faces crunch in supply. In 2009, the demand outpaced supply potentially due to the fact that the producers were caught in mis-judging the demand. The demand picked up suddenly and the producers were hesitant in operating at higher capacity. In addition, credit crunch, mainly for small players, was also a matter of concern in 2009. The excess supply situation in 2010 was indicative of favourable market condition and increased producers confidence level. The excess supply has to some extend impacted steel pricing in 2010.

Outlook for domestic steel demand

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Domestic demand for steel is anticipated to grow by around 12% in the next two years on the back of forecast strong GDP growth,with long steel in greater demand than flat steel, although both are set to increase. The short term demand forecast for both long and flat steel anticipates growth of about 10%-12%, respectively, over two years.

Outlook for Indian steel industry


Given its direct correlation to GDP growth, Ernst & Young expects the Indian steel industry to experience robust growth, with future demand lifting Indias per capita consumption of steel from its low base of around 54kg to far higher levels. We believe the sectors long-term positive indicators (such as strong demand from key end-use sectors and iron ore availability) will exceed its challenges (such as land allotment issues, shortage of coking coal and environmental clearances). As a basic industry , steel propels down stream industrialization and is expected to remain a key sector for the Government. This is reflected in the Governments encouraging growth goals for the steel sector and in the number of Memorandum of
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Understandings (MOUs) the central and state governments have signed for greenfield projects. Capacity additions by major steel producers to meet increasing demand -India was the worlds fifth largest producer of crude steel in 2010 and is expected to become second largest producer in coming years, if all planned capacity expansion projects become operational. Projects expected to be operational in the next three years include those by Tata Steel, JSW steel, SAIL and ESSAR . Based on collected data and estimated project completions, total crude steel capacity in INDIA is expected to be around 112.5 million tonnes by 2015 a growth rate of 9%. International steel majors are expanding their Indian presence -Attracted by the growth potential of the Indian steel industry, several global steel players have been planning to enter the market or have announced expansion plans for their Indian business. For instance, Arcelormittal and POSCO have planned mega Greenfield projects at various locations in India. Some global players have entered strategic partnerships or joint ventures with Indian steel majors,as they feel Greenfield projects may take longer to become profitable , while establish companies already have an existing client base in the region . For instance, Arcelormittal has required a significant stake in Uttam Galva, while Sumitono Metal industries has partnered with Bhushan Steel for technological and marketing collaboration, which may be extended to equity participant in future Greenfield projects. JFE has also joined JSW steel as a strategic partner, with a 15% equity share. SAIL has entered a joint venture with POSCO to have FINEX technology at its Bokaro Plant and many more strategic alliances and joint ventures are in the pipeline is shown in Figure 6.1.5.

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Opportunities/barriers to entry the competitive landscape :


Five forces determine the resilience of the Indian steel industry and its competitive position in Figure 6.1.5.

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Challenges and issues:


Steelmakers have had a challenging couple of years in the wake of the global financial crisis. In 2010, recovery in steel demand was far from consistent and steelmakers had to work hard at managing every aspect of their business in the face of fluctuating demand. This is compounded by increasing raw material costs. The fluctuation in demand as well as raw material price volatility is the two biggest challenges facing steel makers. And with these market conditions likely to persist, steelmakers need to factor this volatility into their business models. In doing so, steelmakers have to consider the following issues: Scarcity of coking coal Raw material price volatility Increasing operational efficiency and cost effectiveness. Improving energy efficiency Improving product mix

Challenges and issues have to face by all the companies which is a crucial part of external environment of every company. Here SIL has some challenges and issues with the above followings points. To produce steel products coking coal is required which is not easily available in all places. The changes in quality of the products can also cause in difference of dissatisfaction of customers. In this case, SIL has given a tough challenge to its competitors in maintaining the quality of its products. It has also increased the operational efficiency and cost effectiveness. Cost factor is the main factor of
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every manufacturing company. The market price of products affect to the local price to its product. The buyers started to negotiate in the market price where as the company wants to deal the products where it can earn profit out of it. The most important challenge is to competewith the local competitors who give cut-throat competition.

7. COMPANY ANALYSIS
7.1 RATIO ANALYSIS :Ratios analysis is a powerful tool of financial analysis. A ratio is defined as the indicated quotient of two mathematical expressions and as the relationship between two or more things. In financial analysis the ratios are considered are the financial indicators which show the position and the performance of the firm. Mainly there are four types of ratios: Liquidity ratios Leverage ratios Activity ratios Profitability ratios Liquidity ratios It is necessary for a firm to be able to meet the obligations as they become due. Liquidity Ratios measure the ability of the firm to meet the current obligations (liabilities). The most common ratios which indicate the extent of liquidity are (1) Current Ratio (2) Quick Ratio (3) Cash Ratio (4) Net Working Capital. (1) Current Ratios: Current ratio is generally calculated by dividing current assets by current liabilities 2007 2008 2009 2010 2011 Current 1.49 1.02 1.27 4.79 0.92 ratio

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The above table 7.1.1 shows the current ratios of the company for past 5 years. As a conventional rule, a current ratio of 2:1 or more is considered satisfactory. The current ratio indicates Margin of Safety for creditors. As in the above given table we can analyzed that 2007-09 the ratios are below the standard level. It doesnt prove that the company might be in satisfactory level or going in an unsatisfactory level. But in the case of SIL it shows a negative impact on it or we can say it is unsatisfactory level as it can be also compared with 2010 where it is observed that ratio is of 4.79 which is much higher than the standard ratio so what does it indicates??? It indicates the loss of the company. The company had a huge loss on this year by overstocking of the inventory and selling of products was not up to the level as a result it has shown the a higher ratio.
2025 2020 2015 2010 2005 2000 1 2 3 4 5 Series4 Series3 Series2 Series1

The above figure 7.1.2 shows the clear picture of the position and the performance of the firm. It also shows that when the company started to earn profit it has maintained a standard level of ratio i.e., 0.92.

(2) Quick Ratio :


Quick ratio is also called as acid test ratio establishes a relationship between quick, or liquid, assets and current liabilities. An asset is liquid if it can be converted into cash immediately.

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6 4 2 0 1 2 3 4 5 Series1

It is a graphical representation of given table 7.1.3: 2007 Quick ratio 1.40 2008 2009 0.96 2010 1.18 2011 3.90 0.43

Generally, a quick ratio of 1:1 is considered to represent a satisfactory current financial condition. Rather quick ratio is more preferable to current ratio. As the ratios depicts about the liquidity condition of SIL. In the year 2010, it says that it has a shortage of funds or long duration of outstanding of debtors. But suddenly it came down to 0.43 in 2011 which shows the debtors are paying in correct time and cash is immediately becoming lliquid within shorter period of time. (3) Cash Ratio : Since cash is the most liquid asset, the ratios shows the availability of cash in a company or a firm. It can depicted in this table table 7.1.4 2007 2008 2009 2010 2011 Cash Ratio 0.09 0.07 0.01 1.29 0.17 (4) Net Working Capital: The difference between current assets and current liabilities excluding short term bank borrowings is called Net Working Capital. It tells about the firms potential reservoir of funds. 2007 2008 2009 2010 2011 NWC 0.17 0.01 0.11 0.36 0.59

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As the table 7.1.5 2011 has more funds in comparison to 2010 and rest of the years.

LEVERAGE RATIOS
As we know that there are two types of creditors (i) short-term (ii) long term. The short term creditors are like bankers and suppliers of raw materials, which are more concerned with the debt paying ability. On the other hand, long term creditors, like debentures holders, Financial Institutions are more concerned about the long term financial strength. So to judge a financial strength of the company leverage ratios are needed: (i) Debt: Asset Ratio (ii) Debt: Equity Ratio (iii) Fixed Asset Coverage Ratio (iv) Interest Coverage Ratio. (i) Debt : Asset Ratio : The debt/asset ratio shows the proportion of a company's assets which are financed through debt. If the ratio is less than one, most of the company's assets are financed through equity. If the ratio is greater than one, most of the company's assets are financed through debt.Companies with high debt/asset ratios are said to be "highly leveraged," and could be in danger if creditors start to demand repayment of debt. The above given table 7.1.6 will give a clear description about the leverage condition of SIL. 2007 2008 2009 2010 2011 Debt:Assets 0.34 0.28 nil nil 0.71 Ratio As the operation was not in a proper way due to which the ratios are less than 1. Due to heavy losses the company was closed as well as operations too. But suddenly when it got the start up and it continued to earn the profit the leverage of the firm was in satisfactory level which is around 1 in 2011. SIL has cleared up all the debt regarding short term and long term dues and it was only possible through the financing through the assets of the company. The given figure 7.1.7 shows a clear picture of debt:asset ratio.
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0.8 0.6 0.4 0.2 0 1 2 3 4 5 Series1

(ii)

Debt-Equity Ratio : It describes the relationship between the lenders


contribution for each rupee of the owners contribution is called debt-

equity ratio. As the given table 7.1.8 shows: 2007 2008 2009 2010 Debt 1.32 0.76 nil equity ratio This can be depicted from the above figure 7.1.9 :
15 10 5 0 1 2 3 4

2011 0.27

0.49

Series1

(iii) Interest Coverage Ratio : The ratio indicates the extent to which earnings may fall without causing any embarrassment to the firm regarding the payment of the interest charges. A higher ratio is desirable but too high ratio that the firm is too conservative in using debt and that it is not using credit to the best advantage of shareholders. The below table 7.1.10 will clearly explains the above statement: 2007 2008 2009 2010 2011 Interest -1.02 -0.04 -0.9 2.07 0.74 Coverage Ratio

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From the beginning 2007 it had shown a negative ratios till 2009 due not clearing up the interest charges. Suddenly it rose in 2010, but this doesnt show a good symbol of SIL. In 2011, as ratio is 0.74 its satisfactory one as it fulfill the payment of interest to the bank as well as lenders and maintained good relationship with them.

The figure 7.1.11 shows a line graph of SIL of IOC:


3 2 1 0 -1 -2 1 2 3 4 5 Series1

Activity ratio
Activity ratios are employed to evaluate the efficiency with which the firm manages and utilization its assets. Turnover ratios indicate the speed with which assets are being converted or turned over into sales. There are several activity ratios such as (i) Inventory Turnover ratio (ii) Assets Turnover Ratio (iii) Debtors Collection Turnover (i) Inventory Turnover Ratio : It indicates the efficiency of the firm in producing and selling its product. 2007 2008 2009 2010 2011 nil nil nil nil 111

Inventory turnover ratio.

As the table 7.1.12 operation started from the 2011, efficiency of producing and selling started.

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(ii)

Asset Turnover Ratio : Its manages assets efficiently to


maximize the sales. The relationship of sales and assets are called as Asset Turnover Ratio.

2007 ATR 1.57

2008 nil

2009 nil

2010

2011 0.007 0.94

A firms ability to produce a large volume of sales for a given amount of net assets is the most important aspect of its operating performance. Unutilized or underutilized assets increase the firms need for costly financing as well as expenses for maintenance and upkeep. It shows 0.94 times of sales for one rupee of capital employed in net assets. (iii)

Debtors collection period: The liquidity position of the firm


depends on the quality of debtors to a great extent.

The below table 7.1.13 shows debtors collection period of SIL: 2007 DCP nil 2008 nil 2009 2010 nil 2011 nil 61

Or else; Figure 7.1.14 implies a clear view on it:


80 60 40 20 0 1 2 3 4 5 Series1

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It tells as the operation began, SIL started to depend on debtors to get funds out of them. So as to maintain the stability of its liquidity position of it.

Profitability Ratios
A Company should earn profits to survive and grow over a long period of time. Profits are essential, but it would be wrong to assume that every action initiated by the management should be aimed at maximizing profits, irrespective of concerns for customers, employees, suppliers or social consequences. There are some ratios such as (i) Net Profit Margin (ii) Return on Investment. (i) Net Profit Margin: Net profit is obtained when operating expenses, interest and taxes are subtracted from the gross profit. It also indicates the firms capacity to withstand adverse economic conditions. A firm with a high net margin would be in an advantageous position to survive in the face of falling selling prices, rising costs of production or declining demand for the product. The below table 7.1.14 shows the net profit margin of SIL: 2007 2008 2009 2010 2011

NPM -0.03 Nil Nil 0.00% -2.25% The profit margin is very poor in case of SIL. The company was liquidated due to which the profit level was NIL. As they began the operation it didnt earn sufficient profit.
0.8 0.6 0.4 0.2 0 1900 1900 1900 1900 1900 Series1

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(ii) Return on Investment : The term investment may refer to total assets

or net assets. The funds employed in net assets are known as capital
employed. The given table 7.1.15 shows how SIL has utilized total assets and return of investment.

2007
ROI -0.22

2008
-0.03

2009

2010
-0.05

2011
0.72 0.38

0.8 0.6 0.4 0.2 0 -0.2 -0.4 1 2 3 4 5 Series1

The above graphs shows continuously it raises but slowly it declines. As the company was in liquidation period so it was unable to give return on investment. Simply the investors were not investing the funds in the company due to this liquidity position but when it started to run the operation it started to give confidence to the investors and they started to get return out of it.

7.2 FUND FLOW STATEMENT


2011 1. SOURCES a.Net profit b.Depreciation 0.38 c.Increase in capital 0.00 d.Increase in Term Liabilities (including public 2.51 deposits)
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2012

0.94 0.49 2.50

0.00

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e.Decrease in (i) Fixed asset (ii) Other noncurrent assets 3.56 6.45 0.09 3.33 7.35

f. Others g.TOTAL 2. USES

a.Net loss 0.63 b.Decrease in term 0.00 liabilities (including public deposists) c.Increase in (i) Fixed assets 7.49 (ii) Other non- 2.03 current assets 0.00 10.15 -3.70

1.25

0.00

d.Dividend payments e.Others f. TOTAL 3.Long Term Surplus(+)/Deficit (-) [12] 4.Increase/Decrease in current assets 5. Increase/Decrease in current liabilities other than the bank borrowings 6. Increase/Decrease in working capital gap 7. Net Surplus/Deficit (-) [3-6] 8. Increase/Decrease in bank borrowings
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0.00 1.25 6.10

13.37 2.64

6.02 -0.65

10.73 -14.43 14.43

6.67 -0.57 0.57

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9. Increase/Decrease in 27.94 NET SALES

60.70

INTREPRETATION: The Fund Flow Statement implies flow of funds from one transaction to another transaction. It determines only the sources and uses of working capital between dates of two balance sheets. The above given table 7.2.1 shows the fund flow statement where it gives a clear picture of increase or decrease of assets and liabilities. In case of SIL, it says that 2011 has incurred losses and 2012 has earned profit. As depreciation is charged around 0.38 but there is no capital invested. 7.3 WORKING CAPITAL REQUIREMENT : PARTICULARS CURRENT ASSETS 1. Raw materials 2. Consumables 3. Work-in-Progress 4. Finished Goods 5. Sundry Debtors 6. Other Current Assets A. TOTAL CURRENT ASSETS CURRENT LIABILITIES Sundry Creditors
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2012 844.63 17.25 20.28 337.19 181.08 53.00 1453..44

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B. TOTAL CURRENT LIABILITIES C. Working Capital Gap(A-B) D. Margin For Working Capital E. Bank Finance Capital For

85.33 1368.00 368.00

Working 1000.00 135.00

Interest on Bank Borrowings

The above table 7.2.2 shows how SIL has used its working capital in current assets and current liabilities. The current assets of a company are considered to be more liquid than fixed assets. Even among the current assets, some items are considered to be much more liquid than others. Raw materials, Consumables, Work-in-progress, Finished Goods, and Sundry Debtors can be easily converted into cash. So SIL should have proper management of working capital so that it collects the money from debtors in given period as it can be utilized in investing of other assets and it can be used in other activities. As per current liabilities, it is necessary to payback them in due time otherwise they will lose the confidence on SIL. From 2007-2010,SIL was unable to manage working capital , the employees of SIL was not able to utilized it in all activities where the optimized costs was higher than investment costs. The expenses was higher, the cost was decreasing.

7.4 CAPITAL BUDEGTING DECISIONS


IRR NPV 10% 11% 12% 10% ($73.65) ($225.74) ($358.67)

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14%

($575.99)

Net cash Investment Cumulative Investment Balance Flow cash Flow Left 107.96 587.92 1331.269 3323.13 1991.871 0.051 121.656 626.92 986.95 740.69 114.703 1367.61 922.358 951.925 922.846 714.884 119.404 932.527 769.818

Years 4.44

The table 7.2.3 shows capital budgeting decisions which depicts the better product investment should be done in SIL. For a layman term, the below table 7.2.4, Product M.S.INGOT shows an investment of Rs.498,746.98 where the profitability index of M.S.INGOT shows PI=1. Year Inflows P.V at 10% P.V CUM P.V 2007 Nil Nil Nil Nil 2008 Nil Nil Nil Nil 2009 Nil Nil Nil Nil 2010 Nil Nil Nil Nil 2011 740.69 673.65 498,746.98 498,746.98 Even the IRR=1, therefore the product M.S.INGOT should be invested where the profit is expected and investors can have the confidence to get back the return out of it within shorter period of time. Now, in case of TMT& STRUCTURALS, the capital budgeting is: YEAR
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Inflows

P.V at 10%

P.V

CUM P.V

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2007 2008 2009 2010 2011

Nil Nil Nil Nil 626.92

Nil Nil Nil Nil 569.93

Nil Nil Nil Nil 357,298.81

Nil Nil Nil Nil 357,298.81

The above table 7.2.5 shows capital budgeting decisions which clearly depicts about the investment, whether investment should be done or not. As in comparison to M.S.INGOT the investment is less than it so for first impression an investor can go for it but when it comes to profitability Index it doesnt go suitable as it PI<1 which is risky in nature and return can be less. 8) PROJECT SPECIFIC ANALYSIS The specific about the project is to gain knowledge the corporate field of work and practicing theoretical in a practical way. Summer Internship program of 3 months gives us opportunities to know about the corporate knowledge which help us to experience in gaining the decorum, rules and regulations of the company. In SIP, my project is all about the feasibility study of VALUE ADDED PRODUCTS OF MANUFACTURING UNIT AND UNDERSTANDING MACROENVIRONMENT AFFECTING TO SIL. Here, I have to find out the financial condition of the firm as well as the benefits derived out of two products. The methods applied in it: 1) 2) 3) 4) Ratio Analysis Fund Flow Analysis Working capital Requirement Capital Budegting Decisions. Ratio analysis is the financial indicators of the firm. Fund Flow Analysis tells about the utilization of funds in the company. Working capital requirement tells the management of working capital in day-to-day activities. Capital
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budgeting decisions help to decide which investment should give better return out of it?? Or else, which project or product is better one ?? In my project specific analysis is basically divide into economic analysis and financial analysis. It is necessary to know how well you understand the topic of the project and find out the any of the bugs in the company. As it is said capital budgeting decisions, before going to a conclusion we have to know the basic things about the project: 1) Financial statements a) Balance statements b) Profit and loss statement 2) Ratios analysis 3) Fund flow statement 4) Working capital requirement 5) Capital budgeting decisions. These are the techquines / methods which will be used in completing the report. After lots of lots calculation, the interpretation is the main thing to come in a conclusion. To know the financial position of the company, it is necessary to understand the current position of the company comparing with past years. A comparative study among the competitors and relating to the past performance helps in making out a conclusion. It is also important to bring out the SWOT analysis: STRENGTH: 1) Competition is not tough 2) Quality of products is good rather than competitors. 3) Proper utilization of fund. 4) Cash management has utilized in purchasing equipments and machines. 5) Profits are distributed equally among directors and employees too. 6) Marketing department is handled in a very efficient manner. 7) Price of the steel products are affordable
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8) As it was loss making company, the pickup was good enough and it is managed properly. 9) Services of the company is better than the competitors.

WEAKNESS: 1) Investors have less confidence due to their past performance. 2) Chances of liquidation and losses, if cash management is not done properly. 3) The company should try to popularize their product outside their local areas. 4) More investment is required. 5) Fund is misutilized or else is not properly handled which can further be a great problem for the company. 6) No advanced technology is used. 7) Less no. of employees and workers. OPPURTUNITIES: 1) If marketing will be strong so that the customers can be aware of the steel products of the SIL, then it can be popularize in ODISHA. 2) It should sell the products outside of ODISHA, as to aware the products across INDIA. 3) Advanced technology should be adopted to improvised the products and fasten the delivery system. THREATNESS: 1) 2) 3) 4) Tough competition Government policies and economic conditions Fluctuations of price. Quality of product.

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5) Scarcity of coking coal. 6) Raw material price volality.

9) Outcome/ Contribution:
Three months of internship has made friendly with the surrounding of corporate world. Outcomes of project and internship are that the theoretical assignments of college but doing the same assignments and project in practical corporate world makes a different situation. Errors of college assignments can be rectified but errors in corporate really create a big problem in real life. Here, I came to know the practical knowledge of working style. The basic fundamentals which I havent learn from the books, I get to know that basic things out of internship. The contribution work which I have done it: 1) Way bill transaction 2) A record of Bonus of all employee 3) SBI Account 4) SBI Consortium 5) SBI Repayment List 6) Total Budget List 7) Total Electronic Charges 8) Total Production Charts. 9) Costing 10) Total expenses sheet 11) Conversion sheet 12) FFR-1 13) Stock statement 14) Dispatch statement
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15) Project financing work 16)Due Diligence Certificate. 17) Credit rating proposal 18) Get to know about the discussions with the promoters of the company And lot of technical work which have done within a period of internship. The most outcomes from it, to enhance the knowledge in your particular field of work and to gain experience out of it.

10)

LEARNING FROM SIP:

SUMMER INTERNSHIP PROGRAM, a program of three months has taught us wonderful experience where I got a tremendous knowledge and practical knowledge. The first day in the office, out of the home and your campus, no friends and familiar faces, an unknown environment and faces. All employees were busy in their work; no one was there to take responsibility of yours. A repetitive follow up behind them regarding the data and work. The first and foremost thing in the corporate to gain trust from your company guide who will guide us in each and every step in the work. Company guide teaches us to do our work in a very efficient way and to acre of the rules and regulations of the company. When I started my internship for the first I was feeling monotonous in work but when the work gets too excited, I started to give my effort in the work. In manufacturing industry, there many technical stuffs to understand it. Way-bill, the word is very uncommon but I came to know that it is the mandatory paper work which should be shown at the gate while importing the steel products. The total manufacturing process of Steel Ingot and TMT bars, their means of finance and their operation work. How to deal the price with the customers? The Role of taxes in buying and selling of steel products in the market. Besides project financing work also helped me to enhance the

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knowledge. In this field of work, the main function is to get a proposal and sanction the loan from the bank. The procedure of sanctioning the bank the loan. The information about the MCA21( Ministry of Corporate Affairs) where every company has updated all its confidential work in it and it is mandatory. In that website there we can get every type of confidential information about the company such asform 20B- Annual Return, form 23AC- B/S, form 23ACA-P/L, form 66-compliance certificate. In project financing a very imp thing is to get a proposal and getting sanction from the bank. These are followings documents are used before sanctioning the bank loan and approving any project.
due

diligence report audit report cc utilization submitted to bank cma data crisil rating . Besides knowing all financial work, I learn others work too for eg: to maintain discipline, having interest of knowing the smaller work of the organization. Due respect to every employee of the organization. SIP helps us to aware the facts of the real practical scenario of the world.

11)
1) 2) 3) 4) 5) 6)

Reference

www.google.com www.economicstimes.com www.steelindustry.com www.worldsteelindusty.com Audited Reports www.MMAnalysis.com

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Summer Internship Program

Thank you!!

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