A REPORT ON

Working Capital Management at Tinplate Company of India Limited

Jamshedpur,
Jharkhand

A report submitted in partial fulfillment of the requirements of

Post Graduate Diploma in Management (2015-17)

By
Bibekananda Tripathy
Roll No. 15/DBS/PGDM/02
PGDM (2015-17)

Faculty Guide
Industry Guide
Prof. Nitya Sundar Nanda
Mr. Supravat Goswami
Designation: Dean
Designation: Accounts Manager
Department: Finance

DRIEMS-B SCHOOL, Cuttack

 Summer Project Certificate

This is to certify that Mr. / Ms. _______________________________________

Roll No. 15/DBS/PGDM/____, a student of PGDM ( Specialization)

has Worked on a summer project titled
________________________________________________________________

________________________ at COMPANY NAME

_____________________after Trimester-II in partial fulfillment of the

Requirement for the Post Graduate Diploma in Management programme. This

is His/her original work to the best of my knowledge.

Signature _____________________

Date: ___________ (_____________________)

DRIEMS SEAL Name & Designation of Faculty Mentor

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 (COMPANY LETTERHEAD)

Date:

TO WHOMSOEVER IT MAY CONCERN

Sub: Summer Internship Certificate

We hereby certify that Mr. /Ms. , a Full Time Student of

Post Graduate Diploma In Management Course, 2015-2017, of Dhaneswar Rath Institute
of Engineering & Management Studies (DRIEMS), Cuttack has undergone his / her
Summer Internship as mandated for the completion of the above course from DRIEMS, for
a period of 6/8 weeks starting from________________.

The title and scope of his/her project was ________________________. The project
was carried out under the guidance of Mr. / Ms. _____________,
Designation__________,

We found him/her to be a dedicated and diligent student. We take this opportunity to wish
him/her every success in his future endeavors.

Sincerely,

Mr. / Ms. _______________________

Designation _____________________

Location________________________

(Seal)

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 Faculty Guide Declaration

This is to certify that from Dhaneswar Rath

Institute of Engineering & Management Studies, Cuttack (DRIEMS) has done
summer training at from to_________.

The project work titled embodies the original work done

by during his summer project.

Signature ________________

(_________________________)
Name of Faculty

DRIEMS SEAL

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 ACKNOWLEDGEMENT
This project bears the imprint of many people who have assisted me in the successful
completion of this report. I gratefully acknowledge the contribution of all the people who
took active part and provided valuable support to me during the course of this project.

To begin with, I would like to offer my sincere thanks to Tinplate Company of India
Limited for giving me an opportunity to do my summer internship with the esteemed
organization.

With due reverence, I acknowledge the valuable support of Mr. Supravat Goswami,
ACCOUNTS MANAGER, for giving me the opportunity to do my summer internship
under his / her guidance. Without his/her guidance, support and valuable suggestions during
the research, the project would not have been accomplished.

My heartfelt gratitude also goes to the entire Accounts Department team for their co-
operation and willingness to answer all my queries, and provide valuable assistance.

I also sincerely thank Prof: Nitya Sundar Nanda, my faculty mentor at DRIEMS-B
SCHOOL, who provided valuable suggestions, shared his/her rich corporate experience, and
helped me script the exact requisites.

Last, but not least, I would like to thank all Dealers/Customers/company etc.* (whichever is
applicable) for sharing their experience and giving their valuable time to me during the
course of my project.

Name: Bibekananda Tripathy

PGDM (2015-17)

Roll No. 15/DBS/PGDM/02

DRIEMS-B SCHOOL, Cuttack Place: Jamshedpur, Jharkhand

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 Declaration by Student

I BIBEKANANDA TRIPATHY , a student of Dhaneswar Rath Institute of

Engineering & Management Studies (DRIEMS), hereby declare that I have worked on
a project titled Working Capital Management during my summer internship at Tinplate
Company of India Limited, in partial fulfillment of the requirement for the Post Graduate
Diploma in Management program.

I guarantee/underwrite my research work to be authentic and original to the best of my

knowledge in all respects of the process carried out during the project tenure.

My learning experience at Tinplate Company of India Limited, under the guidance of

Industry Mr. SUPRAVAT GOSWAMI, ACCOUNTS MANAGER, and Prof: Nitya
Sundar Nanda, Dean, has been truly enriching.

Name ( Bibekananda Tripathy )

Roll No. 15/DBS/PGDM/02

PGDM (Batch 2015-17)

Date: Place: TCIL, Jamshedpur

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 Table of content
Sl. no Pages

1. Executive Summary11-13

1.1 Introduction.12

1.2 Research Methodology12

1.3 Major Findings12-13

1.4 Conclusion.13

2. Steel Industry.14-15

2.1 Introduction15

2.2 Market size..15

2.3 Growth15

3. Tinplate Company of India Ltd..16-35

3.1 Company Profile..17

3.2 Company Overview..17-18

3.3 Introduction18

3.4 Global Tinplate Business.19

3.5 Indian Tinplate Industry.19-20

3.6 Consumer Awareness..20-21

3.7 SWOT analysis22

3.8 Tinplate Products23-25

3.9 TCILs process flow.26

3.10 Manufacturing Process.27

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 3.11 Stages of Production..28

3.12 Awards/Recognition for TCIL..29-31

3.13 Vision, Mission and Strategic Goals of TCIL.32

3.14 TCILs Management Profile..33-34

3.15 Share Holding Pattern in TCIL35

4. Literature Review...36-39

5. Working Capital...40-48

5.1 Working Capital Financing Policy.41-42

5.2 Sources of Working Capital....42-45

5.3 Net working Capital..45-46

5.4 Operating Cycle concept46-48

6. Research Methodology48-49

6.1 Research design..48

6.2 Tools and Techniques of Data Collection..48-49

6.3 Limitation of the study49

7. Data Analysis.50-72
7.1 Liquidity Measurement Ratios .51-54

7.1a Working Capital Turnover Ratio.51-52

7.1b Current Ratio..52-53

7.1c Quick Ratio53-54

7.1d Stock turnover Ratio54

7.2 Debts Ratio...55-57

7.2a Debtors Turnover Ratio.55

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 7.2b Debtor Collection Period..56

7.2c Debt-Equity Ratio57

7.3 Creditor Turnover Ratio58-59

7.3a Creditor Turnover Ratio58

7.3b Payables Outstanding Turnover Ratio59

7.3c Creditor Payables Period.59

7.4 Operating Performance Ratios60-62

7.4a Total Asset Turnover Ratio.60

7.4b Inventory Turnover Ratio61

7.4c Inventory Turnover Days61-62

7.5 Profitability Indicator ratios.62-67

7.5a Operating Profit Margin.62-63

7.5b Net Profit Margin Ratio..63-64

7.5c Return on Assets (ROA)64-65

7.5d Return on Equity (ROE)65-66

7.5e Return on Capital Employed (ROCE)66-67

7.6 Investment Valuation Ratio67-68

7.6a Earnings per Share67-68

7.6b EPS vs. ROE68

7.7 Net Operating Cycle.69-70

7.8 Cost Sheet of TCIL..71-72

8. Cash Management73-75

8.1 Introduction.73

8.2 Cash flow planning.73

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 8.3 Motivation for Holding Cash74

8.4 Cash Management Problems..74

8.5 Cash Management and Working Capital.74

8.6 Cash Ratios.74-75

8.6a Cash Holding.75

9. Forecasting .76-79

9.1 Sales Growth77-78

9.2 Operational Cost..78-79

10. Major Findings80-81

11. Conclusion & Recommendation.82-83

12. References..............................84-85

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EXECUTIVE SUMMARY

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1.1 Introduction
The project proposed is to study the Working Capital Management at Tinplate Company of
India Limited standalone. With an aim to learn how TCIL manage his working capital. How
they arrange capital for day to day operation. How much working capital required for
production. Major part of working capital requirement companies get from bank, so bank
have to follow certain norms in granting working capital finance to companies. The norms of
working capital financing followed by bank since mid-70s. And these norms are made by
some committee recommendation to strength the procedures for working capital finance by
banks. Some of major committees are Daheija, Tandon, Chore committee. Project contains
the credit policy of TCIL and inventory management system taken by the company. The
study is also covers how much working capital demand affect the operation and are they
facing time lag to get funds.

1.2 Research Methodology Adopted

The basic type of research used to prepare this project is descriptive. The study is mainly
based on secondary data which are already collected and available. These include internal
sources within the company and external sources like books and periodically published
annual report of TCIL. Interaction with various employees of costing department had a
major source of information. The study is limited to five financial year i.e. from 2011-2016.
The data used in this study has taken from the financial statement and their related
schedules of TCIL Jamshedpur. Calculation of various ratios related to working capital (like
current, quick, debtor turnover, creditor turnover, cost sheet and net operating cycle) has
done in this report to know the liquidity position of the company and cash conversion cycle.
Working capital requirement of TCIL for next three year also projected in this report.
Estimation of working capital for next three year is done through CAGR method and also
taken care of external factors (like; expansion plan of TCIL, raw material availability and
market study of steel sector).

1.3 Major Findings

These are some major finding i got to know during the study of working capital management
at Tata steel.

1. TCIL takes working capital loan/cash credit from SBI, Union Bank of India, HSBC, and
HDFC and term loan from IDBI Bank Ltd, Union Bank of India, Allahabad Bank, State
Bank of Hyderabad, State Bank of Patiala.

2. TCIL uses Cash-Credit/Working Capital Term Loans facility and prefers it over short-
term loan. Cash-Credit Account is a primary method in which Banks lend money
against the security of commodities and debt. In TCIL, cash credit is secured by

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 hypothecation of Raw Materials, Finished Goods, W.I.P, General stores and Book
Debts.
3. Bank follows certain norms while funding companies for working capital. And these
norms are made by committee recommendation. There are several committee
report (Tandon Committee, Daheija Committee, Chore Committee) and companies
are supposed to follow one of the committee report.

4. TCIL purchase some part of raw material from credit basis and remaining part from
cash basis and they follow 45 Days creditor policy. But some time its varying creditor
to creditor. Again for debtor its vary debtor to debtor. The minimum time period is
allowed by TCIL to its debtor is 30 Days.

5. TCIL do not use EOQ method for ordering raw material. EOQ i.e. economic order
quantity is not done by the management. It is a very important part of inventory
which is ignored. EOQ can give the company adequate or optimum level of
inventory.

6. Companys operating cycle/cash conversion cycle is 26days. It shows the credibility

of company. Company has a good relationship with its creditors so, that they give a
huge time period to TCIL for paying them.

1.4 Conclusion

Working capital is a vital part for keep running the production. And its important for all
manufacturing companies. And a company should maintain positive working capital, so that
will be able to pay off its current liabilities at any time. Last four year TCIL does not maintain
idle ratio because the lots of loan but this year TCIL maintaining an idle ratio of working
capital. Because they pay the entire loan and the reducing raw material price.TCIL cash
conversion cycle is only 26 days, which is very less as compared to its competitor.

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INDIAN STEEL SECTOR

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2.1 Introduction
The role of iron and steel industry in India GDP is very important for the development of the
country. In India the visionary Shri Jamshededji Tata set up the first iron and steel
manufacturing unit called Tata iron and steel company, at Jamshedpur in Jharkhand. Iron
and steel are among the most important components for the infrastructure development in
the country. The Indian steel sector enjoys advantages of domestic availability of raw
materials and cheap labour. Iron ore is also available in abundant quantities. This provides
major cost advantage to the domestic steel industry.

2.2 Market Size

Steel production capacity of the country expanded from about 75 million tonnes per annum
(MTPA) in 2009-10 to about 101.02 million tonnes (MT) in 2013-14, when output was 81.7
MT. India produced 7.07 MT of steel in January 2015 reporting the fourth highest
production level globally which was 1.7 per cent higher than the country's steel production
in the same month last year. The steel sector in India contributes nearly five per cent of the
countrys gross domestic product (GDP) and employs over 600,000 people. The per capita
consumption of total finished steel in the country has risen from 51 Kg in 2009-10 to about
60 Kg in 2013-14.

2.3 Growing at a Fast Pace

Total crude steel production rose at a CAGR of 7.9 per cent over the last five years to reach
81.54 MT in FY14. Finished steel production increased 8.3 per cent to 85.0 MT in FY14;
analysts expect production figures to improve rapidly. Over the next five years, with the
Ministry of Steel forecasting production levels at 115.3 MT by FY17. SAIL is the leader in
Indias steel sector; in FY14, the company accounted for 12 per cent of the countrys
finished steel production and 16.7 per cent in the countrys crude steel production. Tata
Steel, another household name in the country, leads private sector activity in the steel
sector. During 2014, the firm accounted for 9 per cent of finished steel production and 11.2
per cent in the countrys crude steel production. India is the fourth-largest steel producer in
the world, and is expected to become the second largest by 2016. The government has
stepped up infrastructure spending from the current 5 per cent of GDP to 10 per cent by
2017, and the country is committed to investing USD1 trillion in infrastructure during the
12th Five Year Plan. Considering 15 per cent as steel component in the total investment, the
initiative has a potential to generate an additional demand for steel of 18.75mtpa.

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THE TINPLATE COMPANY OF INDIA LIMITED
A TATA Enterprise

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3.1 COMPANY PROFILE
TCIL is today the largest indigenous producer of tin coated and tin free steel sheets in India,
enjoying 35-40% market share and undoubtedly the industry Leader for more than 90 years.
The company exports about 20-25% of its production directly to end-users (canmakers) and
its products are well accepted in the markets of SE Asia, Middle East and some developed
countries in Europe.

Headquarter in Kolkata; the Companys Works is located at Jamshedpur, Jharkhand. There

are presently 11 offices in India and a distribution network with 16 stocking points.

TCIL Works, situated at Golmuri, Jamshedpur has presently two Electrolytic Tinning Lines
(ETLs) and Cold Rolling Mills (CRMs).

The Company is in the business of manufacturing and supplying reliable, cost-effective,

value-added tin mill products. It manufactures various grades of Electrolytic tinplates, tin
free steel sheets and Full Hard Cold Rolled Sheets (FHCR) used for metal packaging.

In pursuit of its downstream agenda, the company has been bonding with food processors
and fillers by way of world class printing and lacquering facilities at the "Solution Centre".

3.2 COMPANY OVERVIEW

The company was incorporated in 1920 and the site chosen was Golmuri, Jamshedpur. The
first steel plate of Tinplate gauge was rolled on 18th Dec 1922 at the Hot Dip Plant (HDP)
producing Hot Dip Tinplate, from tin bars supplied by Tata Steel and this continued till 1979
albeit with capacity enhancements. For 50 years, TCIL thus almost singlehandedly built up
the Indian Tinplate Industry.

To keep pace with technological developments, TCIL was the first to set up a combination
line capable of producing both Electrolytic Tinplate (ETP) and Tin Free Steel (TFS). This plant,
the first of its kind in India, was commissioned in 1978 and commenced production in
January 1979. In 1982, Tata Steel bought the shareholding of Burmah Oil, the then major
shareholder and took over the management of the company.

In 1991-92, TCIL undertook backward integration to setup a Cold Rolling Mill (CRM) for
production of TMBP Coils, based on Hot Rolled Coil supplies from Tata Steel, which was also
setting up its Hot Strip Mill (HSM) at the same time. The CRM was thus a strategic fit for TCIL
with Tata Steel. The Cold Rolling Mill (CRM) was commissioned in 1996-97 but with heavy
time and cost overruns, the company started incurring severe losses. A turnaround strategy
was developed focusing on:

Operational Improvements
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 Financial Restructuring

Hot Dip Plant(HDP) phase out and downsizing

Since April 1998, TCIL operates under a conversion arrangement with Tata Steel for its
business and with its continuing yearn for quality and customer service, looks forward to the
future with confidence.

Company Tinplate Company of India Ltd. (TCIL)

Established 1922
Chairman Mr. Koushik Chatterjee
Managing Director Mr. Tarun Daga
Industry Mining/Minerals/Metals
Headquarter 4, Bank shall Street, Kolkata
Works Golmuri, Jamshedpur, Jharkhand
Product Range Oil cans (OC)
Non-oil cans (NOC)
Open Top Sanitary Cans (OTC)
Tin-free Steel
Auditors Price Waterhouse (301112E)
BSE Code 504966
NSE Code TINPLATE
F.V. of Share Rs10

TINPLATE COMPANY of INDIA LIMITED

3.3 Introduction

Tinplate is a packaging substrate and is one of the most suitable substrate for processed
foods owing to its physical and metallurgical properties vis--vis other alternates (glass,
paper, plastic, aluminum, tetra pack). Tinplate, a value added flat steel product, evokes trust
in steel since it is ideally suited for packaging processed edibles: approx. 65-70% of global
tinplate consumption is for processed foods and beverages.

The world is today grappling with environmental concerns and packaging waste is a major
cause of concern. Tinplate is the most eco-friendly packaging media and in the developed
world has played a major role in facilitating growth of processed foods and beverage
industry, ensuring protection, improved shelf life and aesthetics/ shelf appeal to promote
brand equity of the product packed inside, better than any other media.

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3.4 Global Tinplate Business

Worldwide packaging industry growth is dependent on the rate of economic growth of a

region/country. The growth at relatively higher rates in emerging economies of BRICS and
ASEAN as compared to developed economies (Europe, USA, and Japan) will ensure that
Asian markets will be the prime driver of growth. The global Tinplate market is estimated to
be 15 million Tons. Although main consumers have been developed nations in Europe, US,
Japan (consuming nearly 73% of world Tinplate), off late, increasing
production/consumption is noticeable in developing economies like Brazil, India, China and
Mexico etc. Moreover increasing labor costs have put Europe, USA, and Japan in a
comparatively disadvantageous position as compared to the developing nations.

With Asia becoming the driver for growth, new capacities are coming up in the emerging
economies like China, India, and Thailand. Major producers in Europe/ USA/ Australia are
rationalizing capacities or shifting manufacturing facilities to cost advantageous regions.

With emergence of alternate substrata ( tetra pack, pet, plastics) especially for packaging
edibles, the tinplate industry globally, has had to address Substitution Threat and has been
focusing on Light- weighting to improve cost competitiveness (for example, it is estimated
that beverage cans have become 35% lighter over last two decades).

World-wide tinplate continues to have a strategic presence in portfolio businesses of major

integrated flat steel producers. For any integrated steel player, the Tinplate business
balances the portfolio and offsets the capacity with auto and construction businesses.
Tinplate business, being dependent (70%) on foods/ beverages has lesser cyclicity when
compared with auto and construction. Across the world, key players (CSN Brazil, Corus,
Arcelor Mittal, Bao Steel China) have also made strategic downstream investment in various
forms to defend and promote their leadership position in metal packaging.

3.5 Indian Tinplate Industry

Consumption of Tinplate in India is low i.e. approx. 0.42 kg/ capita compared to 10 kg/capita
in many developed nations, even a similar developing economy like China, consumes more
than 1 kg/ capita. The consumption in India is presently, estimated to be about 0.49 million
tons.

Weak regulatory mechanism to enforce packaging laws has led to use of sub-standard
imported tinplate as also cans being re-cycled for multiple uses- example, in edible oils
packaging, cans are used up to four times and if as per existing laws only fresh tin cans were
to be used, tinplate consumption would increase manifold. Recognizing the weakness, the
Government gazettes a Steel Quality control but later dropped its implementation under
pressure from can makers.

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The Indian packaging industry is poised for growth. The rapidly growing GDP in India and
changing lifestyle in urban India is going to bring a boom in the packaging industry as a
whole. Historical figures comparing Packaging Spend per capita and GDP per capita shows
that packaging spend grows rapidly once the per capita income crosses the USD 4000 per
annum and India is now around that threshold.

India has strong GDP growth and a strong correlation exist between the rates of packaging
growth and increasing income level / economic growth. Also India has vast potential and
perfect credentials to be the food factory to the world, being the largest producer in the
world of many food items. The Government of India has envisioned that by 2015, the
processed food industry in India may grow by three times. The demand of tinplate in India
has reached approx. 490000 MT in FY 09-10.

3.6 Consumer Awareness

Today cans have become such an integral part of our lives that we use them almost
unconsciously. In Foods, Beverages, Toys, Chemicals, Gifts, Household items, and a huge
number other common and everyday items cans are indeed part of our lives today. Other
advantages:

Tin cans are ecofriendly.

Offers highest shelf life hence preferred by retailers.
Food products is best packed & preserved is OTS cans.
Excellent printability.
Aroma & flavor retention.

80 FRESHNESS (%)
60

40

20

0
Tin Polythene Glass PET Tetrapack

Tin cans are ideal for packaging food products. The food is preserved, long-life (air tight
packaging) and fresh. The nutritive value remains.

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 50
SAFETY (%)
40

30

20

10

0
Tin Polythene Glass PET Tetrapack

Tin cans are safer, and coatings prevent the food from bacteria and UV rays, packaging
preserves the taste and aroma of the food.

ATTRACTIVENESS (%)
70
60
50
40
30
20
10
0
Tin Polythene Glass PET Tetrapack

Tin cans are made attractive by engraving labels, lacquered and printed soft drink cans are
popular among youth.

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3.7 SWOT Analysis of TCIL
SWOT analysis is an examination of the strength, weakness, opportunities and threats faced
by a company during its phase of operation. A SWOT analysis is important for TCIL to
evaluate its current position and formulate strategies to tackle its competitors.

Strength Weakness

HRC supplies from Tata Steel; 1. Low R&D capability as well as can-
Capabilities to manufacture all products making, Inadequate downstream value
categories; 25%+ of production chain knowledge, relationship with food
consistently exported; Solution processors/fillers.
development and downstream 2. Inadequate captive TMBP Capacity
capability. for catering both ETL 1 & 2.

Inept regulatory mechanism: use of TFS

Light-weighting; Growing Indian food / TMBP / non-prime tinplate/ re-used
processing industry; Low per capita cans for food packaging, Drop in custom
tinplate consumption; Growing market duty for non-prime and non-prime
in Indias vicinity. imports continuing, Substitute
packaging media.

Opportunity Threats

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3.8 Tinplate Products

Oil Can (OC)

Non-Oil Can (NOC)
Open Top Sanitary Can (OTSC)
Tin Free Steel (TFS)
Double reduced Tinplate sheet
Crown Cork
Cold rolled coils
Printed and lacquered sheet

BROCHURES

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3.9 TCILs process flow

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3.10 Manufacturing Process

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3.11 Stages of Production

All tinplate originates as in the steel-making furnace (Tata Steel), where the proper
chemistry for steel is obtained to meet the specific needs of the end user. All tin mill
products start their production process in a Basic Oxygen Furnace (Tata Steel).

Cold Rolling to produce TMBP Coils

Electro- tinplating

CRM - Process Flow Diagram

Process Flow Diagram of Electrolytic Tinplating Plant

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3.12 Awards/Recognition for TCIL
(2015-16)

Silver Award" in CCQC-Kolkata 2015.

Excellent Award in NCQC 2015 at Chennai.

Merit Awards for Best Theme Paper, Poster Contest And English Slogan at
INSSAN National Convention 2015.

(2014-15)

QC Team Akarshan & Pragati got certificate of Appreciation in 26th QC Circle

Convention (CII-Jharkhand State Level) Dec14.

INSSAN 3rd Prize in Hindi Slogan Dec14, Merit Award in English slogan, Hindi
Poem and Best evaluator Of suggestion.

(2013-14)

Best Associated Company (TIS Group) in Safety Performance in FY'13.

Quality Circle Teams "ANVESHAN" bagged Excellent Award, in National Competition

for Quality Circle (NCQC2013) Dec'-2013.

CII (ER) Productivity Award Certificate of Appreciation for Significant Improvement in

TQM Mar'14.

INSSAN Merit Prize for Best Evaluator of Suggestion Feb'14.

(2012-13)

TCIL ' ANVESHAN' bagged Excellent Award , in National Competition for Quality Circle
(NCQC-2013), held during 20-23 Dec. '2013 at Techno India College of Technology,
Kolkata.

TCIL Received Certificate of Appreciation from CII in recognition of commendable

efforts towards significant improvement in Safety, Health and Environment in SHE
contest 2012-2013 in the category of large scale companies.

TCIL 'AKARSHAN' quality circle team from CRM (E&E) department won '3 STAR'
(Gold) in international Quality Circle Convention at Kuala Lumpur, Malaysia.14th to
19th Oct 2012.
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 (2011-12)

TCIL secured first position under 'Significant' category in CII Eastern Region
Productivity Awards 2011-2012.

Quality Circle Teams "SUDHAR" and "AKARSHAN" bagged Par Excellence (Gold
Medal), in National Convention on Quality Circles (NCQC-2011), which was held
during 09-12 December, 2011 at Hyderabad, organized by Quality Circle Forum of
India, Hyderabad Chapter.

TCIL received MERIT Prizes-INSAAN 2011

Quality Circle Teams "SUDHAR" and "AKARSHAN" bagged Gold Medal, in Quality
Circle Competition (CCQC-2011) held on 20th September, 2011 at Taj Bengal, Kolkata
organized by Quality Circle Forum of India, Kolkata Chapter.

(2010-11)

TCIL Commended Certificate of Recognition for CII(ER) Energy Conservation Award

2010-11.

Quality Circle Team AKARSHAN bagged Excellent Award in 24th National Convention
on Quality Concept(NCQC-2010), which was held during 27-30 December, 2010, at
the College of Engineering (Autonomous Andhra University), Visakhapatnam (AP).

TCIL has been conferred with the CII Exim Prize 2010.

Quality Circle Team SUDHAR bagged SILVER Medal in the International Convention
on Quality Concept Circle Competition (ICQCC-2010) held on 12-15 October, 2010 at
Hyderabad, organized by Quality Circle Forum of India, Hyderabad.

Quality Circle Team AKARSHAN bagged Gold Medal, (1st Position) in Quality Circle
Competition held on 21st September, 2010 at Taj Bengal, Kolkata organized by
Quality Circle Forum of India, Kolkata Chapter.

TCIL received the recognition for sustained excellence.

TCIL won the award in the Dare to try category TATA INNOVISTA 2010.

TCIL certified under ISO: 22000 2005 Food Safety Management System.
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 TCIL bagged the 2nd position among Institutional Donors in Jharkhand during 2009-
10.
(2009-10)

1st position in Regional "22nd CII CONVENTION ON QC CIRCLES" held ON

22.12.2009. WILLIAMSON MEGAR HALL, KOLKATA.

Certificate of appreciation for its sustained and unquestionable commitment to

excellence 17th Dec 2009. New Delhi.

3rd Position in Operation & Production Group CII-9th Supervisory Skills Competition
held at Kolkata.

3rd Position in Turner Trade CII-22nd Work skills Competition held at Kolkata.

2nd position in 22nd CONVENTION ON QC CIRCLES held on 8 December 2009 at

Hotel Green Horizon, Ranchi.

MSDTCIL certified under ISO/IEC 27001:2005.

Recognition to "SUDHAR" QC team Eastern Region Chapter Convention on Quality

Circles-CCQC-2009.

Personal Achievement Bhagwati Devi wins GOLD medal at ASIAN POWERLIFTING

CHAMPIONSHIP 2009 held at Udaipur, Rajasthan.

(2009-10)

1st Position in 8th CII (Eastern Region) Skills Competition held at Kolkata.

TCIL wins CII-EXIM Bank Prize for Business Excellence.

Tinplate Hospital: ISO 9001:2000 Accreditation.

2nd Position in TURNER trade 21st Regional Work skills Competition, organized by CII
Eastern Region.

TCIL won the CII Sustained High Overall Productivity Award 2007-08.

TCIL bagged the 2nd position among Institutional Donors in Jharkhand during 2007-
08.

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3.13 Vision, Mission and Strategic Goals of TCIL

Mission:

Service customer requirements of green packaging by offering reliable, cost-effective &

value added tin mill products.

Strategic Goals:

Create and enhance value for the stakeholders through Growth and
Competitiveness.

Reach status of supplier of choice for tin mill products in Asia.

Establish as an exemplar in corporate sustainability.

Create an exciting and safe work place for our employees.

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3.14 TCILs Management Profile
Board of Directors as on 31st October 2015

Mr. Koushik Chatterjee Chairman

Mr. Anand Sen Nonexecutive Directors

Mr. Dipak Kumar Banerjee Independent Director

Mr. Ashok Kumar Basu Independent Director

Dr. Sougata Ray Independent Director

Mr. B N Samal Independent Director

Mrs. Atrayee Sanyal Nonexecutive Director

Mr. Tarun Daga Managing Director

Committees of the Board as on 31st October, 2015

Names of Committees Directors

Mr. Dipak Kumar Banerjee Chairman

Audit Committee Mr. Ashok Kumar Basu
Dr Sougata Ray
Ms Atrayee Sanyal

Mr. Dipak Kumar Banerjee Chairman

Nomination and Remuneration Mr. Koushik Chatterjee
Committee Mr. Ashok Kumar Basu

Mr. Ashok Kumar Basu Chairman

Stakeholders Relationship Mr. Anand Sen
Committee Mr. B N Samal

Mr. Anand Sen Chairman

Corporate Social Responsibility Dr Sougata Ray
Committee Mr. Tarun Kumar Daga

33 | Page
 Management as on 1st December 2015

Mr. Tarun Kumar Daga Managing Director

Mr. Chacko Joseph Chief Financial Officer

Mr. Santosh Antony Vice President Marketing & Sales

Mr. S Venkat Raman Deputy General Manager Works

Mr. Harjit Singh Chief (Corporate Services)

Dr. Atul Srivastava Chief (Medical Services)

Mr. Kaushik Seal Company Secretary

34 | Page
 3.15 Share Holding Pattern in TCIL

Category Shares held % of Shareholding

1. PROMOTERS HOLDING:
Tata Steel Ltd. 78,457,640 74.96

2. PUBLIC SHAREHOLDING

A.Institutions

Mutual Funds/UTI 9,317 0.01

Financial Institution/Banks 87,339 0.08

1,650 0.00
Insurance Companies
2, 50,823 0.24
Foreign Institutional Investors/FPIs

B.Non-Institution

Bodies Corporate 54, 34,597 5.19

Individuals-

Individuals shareholders holding

Nominal share capital Up to Rs.1 lakh 1, 58, 05,334
15.11
Individuals shareholders holding 46, 19,513
Nominal share capital in excess 4.41
Of Rs. 1lakh

Directors & their Relatives 1,000 0.00

Trusts 425 0.00

Total 10, 46, 67,638 100.00

35 | Page
Literature Review

36 | Page
Gilbert and Reichert (1995)
Find that accounts receivable management models are used in 59 percent of these firms to
improve working capital projects, while inventory management models were used in
60percent of the companies. More recently Farrgher, Kleiman and sahu (1999) find that
55percent of the firms in the S&P industrial index complete some form of a cash flow
assessment, but did not present insights regarding accounts receivable and inventory
management, or the variation of any current asset accounts or liability accounts across
industries. Thus, mixed evidence exists concerning the use of working capital management
techniques. Theoretical determination of optimal trade credit limits are the subject of many
articles over the years (e.g. Schwartz 1974; Scherr 1996), with scant attention paid to actual
accounts receivable management. Across a limited sample,

Weinraub and Visscher (1998)

Observe a tendency of firms with low levels of current ratio to also have low levels of
current liabilities. Simultaneously investigating accounts receivable and payable issues, Hills,
Sartoris, and Ferguson (1984) find differences in the way payment dates are defined. Payees
define the date of WCM insight across firms, industries, and time can add to this body of
research. Maness and Zietlow present two models of value creation that incorporate
effective short-term financial management activities. However, these models are generic
models and do not consider unique firm or industry influences. Maness and Zietlow discuss
industry influences in a short paragraph that includes the observation that, An industry a
company is located in may have more influence on that companys fortunes than overall
GNP

Eljelly (2004)

Elucidated that efficient liquidity management involves planning and controlling current
assets and current liabilities in such a manner that eliminates the risk of inability to meet
due short-term the relation between profitability and liquidity was examined, as measured
by current ratio and cash gap (cash conversion cycle) on a sample of joint stock companies
in Saudi Arabia using correlation and regression analysis. The study found that the cash
conversion cycle was of more importance as a measure of liquidity than the current ratio
that affects profitability. The size variable was found to have significant effect on
profitability at the industry level. The results were stable and had important implications for
liquidity management in various Saudi companies. First, it was clear that there was a
negative relationship between profitability and liquidity indicator such as current ratio and
cash gap in Saudi sample examined. Second, the study also revealed that there was great
variation among industries with respect to the significant measure of liquidity.

37 | Page
Bergami Robert (2007)

Analysis that international trade transactions carry inherently more risk than domestic trade
transactions, because of differences in culture, business processes, laws and regulation. It is
therefore important for trade to ensure that payment is received for good dispatched and
that the goods received and paid for comply with the contact for sale. One effective way of
managing these risks has been for traders to rely on the letter of credit as a payment
method. However for exporters in particular, the letter of credit has presented difficulties in
meeting the compliance requirements the current rules that govern letter of credit
transactions (UCP 500) have been review for the past three years and an updated set of
rules (UCP 600) is expected to be introduced on 1st July 2007. This paper focuses on the
changes mooted for 2007 and compares these main issues with the existing rules and other
associated guidelines and regulations governing this method of payment. This paper
considers the implication to changes of letter of credit transactions and the sharing of risk.
Firstly the paper provides some background to letters of credit, then comments on existing
literature and models, and subsequently an analysis of the most important changes to the
existing rules, before reaching a conclusion. The conclusion is that the UCP 600 have not
paid enough consideration to traders and service providers and are likely to engender an
environment of uncertainty for exporters in particular.

Singh and Pandey (2008)

Said that working capital management is the management of current assets and current
liabilities. Maintaining high inventory level reduce the cost of possible interruption in the
production process or of loss of business due to scarcity of product, reduce supply cost and
protects against price fluctuations. Granting trade credit favours the firms sales in various
ways. Trade credit can act as an effective price cut and incentives to customers to acquire
merchandise at time of low demands.

De Loof (2003)

Discussed that most firms had large amount of cash invested in working capital. It can
therefore be expected that the way in which working capital is managed will have a
significant impact on profitability of those firms. Using correlation and regression tests he
found a significant negative relationship between gross income and the number of days,
accounts receivable, inventories and accounts payable of Belgian firms.

Shin and Soenen (1998)

Highlighted that efficient working capital management was very important for creating
value to shareholders. The way working capital was managed had a significant impact on
both profitability and liquidity. The relationship between the length of net trading cycle,
corporate profitability and risk adjusted stock return was examined using correlation and
regression analysis, by industry and capital intensity.
38 | Page
Pradeep Singh (2008)

Empirically analysed that a firms working capital consists of investment in current assets,
which includes short term assets, cash and bank balance, inventories, receivable and
marketable securities. Therefore, the working capital management refers to the
management of the levels of all these individual current assets. On the other hand inventory
which is one of the important elements of current assets, reflect the investment of the firms
fund.

Vellanki S. Kumar, Awad S. Hanna, Tersa Adams (2000)

Conducted research and examined that the systematic assessment of working capital
requirement in construction project deals with the analysis of various quantitative and
qualitative factors in which information is subjective and based on uncertainty. This paper
presents a methodology to incorporate linguistic variables into workable mathematical
propositions for the assessment of working capital using fuzzy set theory.

39 | Page
WORKING CAPITAL

40 | Page
Working capital is the capital available for conducting the day-to-day operations of an
organization; normally the excess of current assets over current liabilities. Working capital
management is the management of all aspects of both current assets and current liabilities,
to minimise the risk of insolvency while maximising the return on assets. The main objective
of working capital management is to get the balance of current assets and current liabilities
right.

Working capital management techniques such as intersection of carrying cost and shortage
cost, working capital financing policy, cash budgeting, EOQ and JIT are applied to manage
different components of working capital like cash, inventories, debtors, financing of working
capital etc. These effective techniques mainly manage different components of current
assets.

Working capital management techniques are very effective tools in managing the working
capital efficiently and effectively. Working capital is the difference current assets and
current liabilities of a business. Major focus is on current assets because current liabilities
arise due to current assets only. Therefore, controlling the current assets can automatically
control the current liabilities. Now, current assets include Inventories, Sundry Debtors or
Receivables, Loans and Advances, Cash and Bank Balance.

All working capital management techniques attempt to find optimum level of working
capital because both excess and shortage of working capital involves cost to the business.
Excess working capital carries the carrying cost or interest cost on the capital lying
unutilized. Shortage of working capital carries shortage cost which include disturbance in
production plan, loss in revenue etc. Finding the optimum level of working capital is the
main goal or winning situation for any business manager.

There are certain techniques used for finding the optimum level of working capital or
management of different items of working capital.

Intersection of Carrying Cost and Shortage Cost: One of the important methods of finding
the optimum level of working capital is the point of intersection of carrying cost and
shortage cost. The total of carrying and shortage cost is minimum at this point. Here, the
levels of current assets are optimum at the point where the shortage and carrying costs are
meeting or intersecting.

5.1 Working Capital Financing Policy

Working capital can be divided into two viz. Permanent and Temporary. Permanent working
capital is the level of working capital which is always required and maintained. Temporary
working capital is the part of working capital which keeps on fluctuating. It is high in good
seasons and low in bad seasons. There are two types of financing available. They are long
term financing and short term financing. Three strategies are possible with respect to
financing of working capital. Efficient financing of working capital reduces carrying cost of
capital.

41 | Page
1. Long term financing is used for both permanent and temporary WC.
2. Long term financing is used for permanent and some part of temporary WC. Remaining
part of temporary WC is financed through short term financing as and when required.
3. Long term financing is used for permanent and short term financing for temporary WC.

These strategies should be chosen so as to match the maturity of source of finance with the
maturity of the asset.

5.2 Sources of Working Capital

Cash Budgeting

Cash budgeting is another important technique for working capital management which
helps keeping optimum level of cash in the business. Cash budgeting involves estimating the
requirements of cash by estimating all the fore coming receipts and payments. For effective
management, a balance is needed between both excess and shortage of cash. It is because
both ends are costly. Speeding up of collection and getting relaxed credit terms from the
creditors can reduce the cash requirements.

42 | Page
Inventory Management

Inventory is an important component of working capital or current assets. Optimum level of

inventory can save on costs heavily.

EOQ
Economic Order Quantity (EOQ) model is a famous model for managing the inventories. It
helps the inventory manager know how to find the right quantity that should be ordered
considering other factors like cost of ordering, carrying costs, purchase price and annual
sales. The formula used for finding EOQ is as follows:

EOQ = { (2 * A * O) / (P * C)}

A Annual Sales

O Cost per Order

P Purchase price per unit

C Carrying Cost

Just-in-Time
Just-in-time is another very important technique which brought about paradigm shift in the
management of inventories. It did not reduce cost of inventory but it abolished it
completely. Just-in-time means acquiring raw material or manufacturing product at the time
when it is required by the customer. This strategy is very difficult to implement but if
implemented can bring down inventory cost to minimum levels.

These are some important techniques discussed here. They are very effective in managing
working capital. Managing working capital means managing current assets. Current assets
like cash can be managed using cash budgeting; inventory can managed using inventory
techniques like EOQ and JIT. Debtors and financing of working capital can be managed using
appropriate sources of finance.

The cash operating cycle is the length of time between the company's outlay on raw
materials, wages and other expenditures and the inflow of cash from the sale of goods. The
faster a firm can 'push' items around the cycle the lower its investment in working capital
will be.

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Calculation of Cash operating cycle
Raw material Holding period = (xxxx)

Less; Payment payable period = (xxxx)

WIP Holding period = (xxxx)

Finished Goods Holding period = (xxxx)

Receivables collection Period = (xxxx)

Working Capital Liquidity Ratio

Two key measures, the current ratio and the quick ratio, are used to assess short-term
liquidity. Generally a higher ratio indicates better liquidity.

Current ratio
Measures how much of the total current assets are financed by current liabilities.

Current Assets
________________

Current Liability

A measure of 2:1 means that current liabilities can be paid twice over out of existing current
assets.

Quick (acid test) ratio

The quick or acid test ratio measures how well current liabilities are covered by liquid
assets. This ratio is particularly useful where inventory holding periods are long.

Current Assets Inventory

______________________
Current Liability

A measure of 1:1 means that the company is able to meet existing liabilities if they all fall
due at once.

44 | Page
Working capital turnover
One final ratio that relates to working capital is the working capital turnover ratio and is
calculated as:

Sales Revenue
______________
Net Working Capital

This measures how efficiently management is utilising its investment in working capital to
generate sales and can be useful when assessing whether a company is overtrading. It must
be interpreted in the light of the other ratios used.

5.3 Net Working Capital Block (TCIL A/c):

NET WORKING CAPITAL=CURRENT
ASSTES- CURRENT LIABILITY
Current Assets 2011-12 2012-13 2013-14 2014-15 2015-16
INVENTORIES 5255 6185 6592 6728 9071
DEBTORS 4049 8377 5903 3520 5090
CASH & BANK 138 157 81 179 476
OTHER C.A 4 8 0 1 501
LOAN & ADV 8340 2817 1799 2313 1998
TOTAL C.A (A) 17786 17544 14375 12741 17136
Current Liabilities 2011-12 2012-13 2013-14 2014-15 2015-16
CURRENT LIABILITIES 13486 16619 14833 14343 8298
PROVISIONS 7660 3062 3781 3142 3398
TOTAL C.L (B) 21146 19681 18614 17485 11696
Net working capital (A-B) -3360 -2137 -4239 -4744 5440

Net working capital (A-B)

6000

4000

2000

0
2011-12 2012-13 2013-14 2014-15 2015-16
-2000

-4000

-6000

45 | Page
INTERPRETATION:-
A measure of both a companys efficiency and its short-term financial health. The working
capital ratio indicates whether a company has enough short term assets to cover its short
term debt. Anything below 1 indicates negative working capital, while anything over 2
means that the company is not investing excess assets. Most believe that a ratio between
1.2 and 2 is sufficient.

But in the case of TCIL, from FY2011-12 to FY2014-15 companys net working capital is in
negative figures. If a companys current assets do not exceed its current liability, then it may
run into trouble paying back creditors in the short term. But here creditors are not asking
for their money, So company is getting a huge time period to pay creditors and dont
required to maintain an idle working capital ratio. In the context of current assets company
is having a less amount of cash and bank balance. It doesnt mean that company is unable to
pay its current obligations. Company just taking an advantage of allowed time by creditors
and FY2015-16 Company maintain an idle working capital ratio because of paying short-
term loan.

5.4 Operating Cycle concept

The operating cycle is the average period of time required for a business to make an initial
outlay of cash to produce goods, sell the goods, and receive cash from customers in
exchange for the goods. The operating cycle is useful for estimating the amount of working
capital that a company will need in order to maintain or grow its business. A company with
an extremely short operating cycle requires less cash, and so can still grow while selling at
relatively small margins.

46 | Page
Operating Cycle concept= DIO+DSO-DPO
Where: Days Inventory Outstanding (DIO) = 365/Inventory T.O ratio.

Days Sales Outstanding (DSO) = 365/Debtors T.O ratio.

Days Payable Outstanding (DPO) = 365/Payables T.O ratio

Days Inventory Outstanding is

calculated by:(Average
Inventory/COGS per day)
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16
Net Sales (A) 62703 87716 105907 91116 83385
EBIDT (B) 9336 13283 17303 15140 18400
COGS (A-B) 53367 74433 88604 75976 64985
COGS per day 146.21 203.92 242.75 208.15 178.04
Opening Inv. 4162 5255 6185 6592 6728
Closing Inv. 5255 6185 6592 6728 9071
Average Inv. 4708.5 5720 6388.5 6660 7899.5
DIO (days) 32.20 28.04 26.31 31.99 44.36

Days Sales Outstanding is

calculated by: (Average
Debtors/Sales per Day)
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16
Net Sales 62703 87716 105907 91116 83385
Sales per day 171.78 240.31 290.15 249.63 228.45
Opening Debt. 3130 5029 9327 6168 3739
Closing Debt. 4049 9327 6120 3740 5302
Avg. Debtors. 3589 7178 7723 4954 4520
DSO (days) 20.89 29.86 26.61 19.84 19.78

Days Payable outstanding is calculated by: (Average Payables/COGS per day)

Particulars 2011-12 2012-13 2013-14 2014-15 2015-16
COGS per day 146.21 203.92 242.75 208.15 178.04
Opening Payables 2441 5199 5378 7180 7572
Closing Payable 4381 5378 6752 7418 6262
Average Payable 3411 5288.5 6065 7299 6917
DPO (days) 23.32 25.93 24.98 35.06 38.85

47 | Page
 Particulars 2011-12 2012-13 2013-14 2014-15 2015-16
DIO (days) 32.20 28.04 26.31 31.99 44.36
DSO (days) 20.89 29.86 26.61 19.84 19.78
DPO (days) (23.32) (25.93) (24.98) (35.06) (38.85)
Operating Cycle (days) 29.76 31.98 27.95 16.77 25.30

INTERPRETATION:-
The operating cycle is the number of days from cash to inventory to accounts receivable to
cash. The operating cycle reveals how long cash is tied up in receivables and inventory. A
long operating cycle means that less cash is available to meet short term obligations.

Research methodology
6.1 Research design:
This study is based mostly on the applied and descriptive research. The study will focus on
the efficiency and efficacy of the working capital model of TCIL. Through ratio analysis the
result of the controlled mechanism can be summarised which will help in identifying the
usefulness of the system under the preview. Hence the ratio analysis will be used to arrive
at the conclusion.

6.2 Tools and Techniques of Data Collection:

Data will be collected both from primary and secondary sources.

Primary Sources

1. Discussion with experts

2. Department visits
3. Datas from accounts and finance department

Secondary Sources

1. Annual reports
2. Journals and books
3. Research articles
4. Websites
5. Intranet of TCIL
48 | Page
Statistical Tools:

The project report entitled Report on Working Capital Management of TCIL is purely
based on annual reports and other published reports. Therefore this study mainly consists
of interpretation of financial statement. The major tools of interpretation of the financial
statement are

Ratio analysis
Tables
Graphs
Charts

6.3 Limitation of the study

Time restriction was only two months of project work in the organization
The study is limited to five financial year i.e. from 2011-2016.
The data used in this study is taken from the financial statement and their related
schedules of TCIL.
The scope and the area of the study are limited to general office of TCIL Jamshedpur
only.
The companies which are taken for the purpose of comparison may or may not
follow the same accounting policies, which TCIL is currently following.

49 | Page
Data Analysis of TCIL

50 | Page
 7.1 LIQUIDITY MEASUREMENT RATIOS

7.1a Working Capital Turnover Ratio

It is a measurement comparing the depletion of working capital to the generation of sales

over a given period. This provides some useful information as to how effectively a company
is using its working capital to generate sales. A company uses working capital (current assets
- current liabilities) to fund operations and purchase inventory. These operations and
inventory are then converted into sales revenue for the company. The working capital
turnover ratio is used to analyze the relationship between the money used to fund
operations and the sales generated from these operations. A high ratio indicates the firm is
in a good liquidity position and vice-versa.

WORKING CAPITAL TURNOVER RATIO= NET SALES/ NET WORKING CAPITAL

PARTICULARS 2011-12 2012-13 2013-14 2014-15 2015-16
NET SALES 62702 87716 105907 91116 83385
NET WORKING CAPITAL -3360 -2137 -4239 -4744 5441
WORKING CAPITAL TURNOVER RATIO -18.66 -41.04 -24.98 -19.20 15.32

WORKING CAPITAL TURNOVER RATIO

20

10

0
2011-12 2012-13 2013-14 2014-15 2015-16
-10

-20

-30

-40

-50

INTERPRETATION:-

A measurement comparing the depletion of working capital to the generation of sales over a
given period. This provides information as to how efficiently a company is using its working
capital to generate sales. In a general sense, the higher the ratio the better, because it
means that the company is generating a lot of sales compare to the money it uses to fund
the sales. Working capital turnover ratio is good tool to take decision to manage sales. It
shows the use of working capital for sales. Both high and low working capital turnover ratio
is not good. Because low WCTR means low inefficient use of working capital in operation
and very high working capital turnover ratio does not show good position of company
51 | Page
because its shows company is operating with high short-term debt obligations. Ratio has
been decreased to a negative level from -18.66 in FY2011-12 to -19.20 in FY2014-2015
which is also harmful for any organisation because if an organisation is not having ample
funds then it could adversely affect its day to day functioning which has a negative effect on
the smooth functioning of the organisation. In FY2015-16 ratio is increase due to increase in
net working capital.

7.1b Current Ratio

The current ratio is a popular financial ratio used to test a company's liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities. The concept behind this ratio is to ascertain whether a
company's short-term assets (cash, cash equivalents, marketable securities, receivables and
inventory) are readily available to pay off its short-term liabilities (notes payable, current
portion of term debt, payables, accrued expenses and taxes). In theory, the higher the
current ratio, the better.

Current ratio=Current assets/Current liability

Particular 2011-12 2012-13 2013-14 2014-15 2015-16
Current assets 17786 17544 14375 12741 17136
Current liabilities 21146 19681 18614 17485 11696
Current ratio 0.84 0.89 0.77 0.72 1.46

Current ratio
1.6

1.4

1.2

0.8

0.6

0.4

0.2

0
2011-12 2012-13 2013-14 2014-15 2015-16

INTERPRETATION:-

A current ratio that measures a companys ability to pay short term obligations, also known
as liquidity ratio cash assets ratio and cash ratio. The ratio is mainly used to give an
idea of the companys ability to pay back its shot term liability with its short term assets. The
higher the ratio, the more capable the company is of paying its obligation. A ratio under I
52 | Page
suggest that the company would be unable to pay off its obligations if they due at that
point. Idle current is 2:1.

In FY2011-12 to FY2015-16 Its CL continuously declining. It means company has paying

short-term loan. TCIL always maintain below then idle ratio But it doesnt mean that
company is unable to pay off its current liability. Company never keep cash ideally, it always
keep short term investing. And a good relationship with creditor allows paying off the
obligation with companys convenience.

7.1c Quick Ratio

The quick ratio - aka the quick assets ratio or the acid-test ratio - is a liquidity indicator that
further refines the current ratio by measuring the amount of the most liquid current assets
there are to cover current liabilities. The quick ratio is more conservative than the current
ratio because it excludes inventory and other current assets, which are more difficult to turn
into cash. Therefore, a higher ratio means a more liquid current position.

QUICK RATIO=CURRENT ASSETS INVENTORY/CURRENT LIABILITY

Particular 2011-12 2012-13 2013-14 2014-15 2015-16
Current assets 17786 17544 14375 12741 17136
STOCK IN TRADE 5255 6185 6592 6728 9071
Current liabilities 21146 19681 18614 17485 11696
QUICK RATIO 0.59 0.57 0.41 0.34 0.68

QUICK RATIO
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2011-12 2012-13 2013-14 2014-15 2015-16

53 | Page
INTERPRETATION:-

The quick ratio measure a companys ability to meet its short term obligation with its most
liquid assets. The quick ratio is more conservative than the current ratio because it excludes
inventories from current assets. Generally companies should aim to maintain a quick ratio
that provides sufficient leverage against liquidity risk given the level of predictability and
volatility in a specific business sector among other consideration.

The ideal standard in case of quick ratio is 1:1. And if it is more it is considered to be better.
The idea behind this is that for every rupee of current liabilities, there should be at least one
rupee of liquid asset. Quick ratio is thus a rigorous test of liquidity and gives a better picture
of short term financial position of the firm.

7.1d Stock turnover Ratio

STOCKTURNOVER RATIO= COST OF GOODS SOLD/ AVG STOCK

PARTICULAR 2011-12 2012-13 2013-14 2014-15 2015-16
COST OF GOODS SOLD 53367 74433 88604 75976 64985
AVERAGE STOCK 4708 5720 6388 6660 7900
STOCKTURNOVER RATIO 11.33 13.01 13.86 11.40 8.22

STOCKTURNOVER RATIO
16
14
12
10
8
6
4
2
0
2011-12 2012-13 2013-14 2014-15 2015-16

INTERPRETATION:-
A ratio showing how many times a companys inventory is sold and replaced over a period.
This ratio should be compared against industry average. A low turnover implies poor sales
and therefore excess inventory. A high ratio implies either strong sales or ineffectively
buying. High inventory levels are unhealthy because they represent an investment with a
rate of return of zero. Here we can see a increasing trend in stock turnover ratio in FY2011-
12 to 2013-14 and then after it decreasing in FY2014-15 to FY2015-16 and the highest ratio
in FY2013-14 is 13.86 it means company has a 26days inventory turnover period and the
lowest ratio in FY2015-16 is 8.2 it means company has a 44days inventory turnover period.
54 | Page
7.2 Debts Ratio

7.2a Debtors Turnover Ratio

Debtors Turnover Ratio or Receivables Turnover Ratio indicates the relationship between
net sales and average debtors. It shows the rate at which cash is generated by the turnover
of debtors.

DEBTORS TURNOVER RATIO=NET SALES/AVERAGE DEBTOR

PARTICULARS 2011-12 2012-13 2013-14 2014-15 2015-16
NET SALES 62703 87716 105907 91116 83385
AVERAGE DEBTOR 3589.50 6212.68 7139.89 4734.15 4304.81
DEBTORS TURNOVER RATIO 17.46 14.11 14.83 19.24 19.37

25
DEBTORS TURNOVER RATIO

20

15

10

0
2011-12 2012-13 2013-14 2014-15 2015-16

INTERPRETATION:-

The debtor turnover ratio is an activity ratio measuring how efficiently a firm uses its assets.
Debtor turnover is the number of times per year that a business collects its average
accounts receivable. The ratio is intended to evaluate the ability of a company to efficiently
issue credit to its customer and collect funds from them in a timely manner. A high turnover
ratio indicates a combination of a conservative credit policy and an aggressive collection
department, as well as a number of high quality customers. TCIL has a good control over its
receivables. On FY 2015-16 the ratio was 19.37 means TCIL collect the cash immediately
after giving the delivery, i.e. 18.8 days after sale on an average. It show how efficiently
company collects money from its debtor and utilise it for further purchase of raw material.

55 | Page
 7.2b Debt Collection Period

The term Debtor Collection Period indicates the average time taken to collect trade debts. In
other words, a reducing period of time is an indicator of increasing efficiency. It enables the
enterprise to compare the real collection period with the granted/theoretical credit period.
Days Sales Outstanding is a short term (operating) Activity ratio which tells us about the
debtors holding time. The more the holding period the more risky it becomes for the
company. A high debt collection period indicates that the company is taking time to collect
cash from its debtors. The cash is not being collected on time which is not a good sign for
the company, it is a red flag.

Debt Collection Period= 365/ DEBTORS TURNOVER

RATIO
PARTICULARS 2011-12 2012-13 2013-14 2014-15 2015-16
DEBTORS TURNOVER RATIO 17.46 14.11 14.83 19.24 19.37
No of Days 365 365 365 365 365
Debt Period 20.89 25.85 24.60 18.96 18.84

Debt Collection Period

30

25

20

15

10

0
2011-12 2012-13 2013-14 2014-15 2015-16

INTERPRETATION:-

Debt collection period means the average number of days that the debtors take to get
converted to cash. In other words, credit sales are locked up in debtors for the number of
days. As we can see TCILs Debt collection period is high, which is an indication of slow or
late payments by debtors. TCIL was successful in decreasing after FY2013-14 as because an
unsecured but good debtor was reduced.

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7.2c Debt-Equity Ratio

Debt to equity ratio is also known as external-internal equity ratio. This ratio indicates the
extent to which debt is covered by shareholders funds. It reflects the relative position of
the equity holders and the lenders and indicates the companys policy on the mix of capital
funds. The ratio measures how the company is leveraging its debt against the capital
employed by its owners. If the liabilities exceed the net worth then in that case the creditors
have more stake than the shareowners.

Debt-Equity Ratio=Total long term

debt/Shareholder's fund
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16
Share Capital 21713 20727 15110 10480 10480
Res & Surplus 38946 39492 42859 44416 49234
Equity 60659 60219 57969 54896 59714
Unsecured Loans 9941 11345 5183 785 0
Secured Loans 161 105 69 33 0
Total Debt 10102 11450 5252 818 0
Debt-Equity 0.16 0.19 0.09 0.01 0

0.2
Debt-Equity

0.15

0.1

0.05

0
2011-12 2012-13 2013-14 2014-15 2015-16

INTERPRETATION:-
A high debt/equity ratio generally means that a company has been aggressive in financing
its growth with debt. This can result in volatile earnings as a result of the additional interest
expense.

57 | Page
7.3 Credit Ratio

7.3a Creditor Turnover Ratio

The creditors turnover ratio concerns with analysing the rapidity of creditors payment. It
indicates the velocity of creditors during concerned accounting year. This ratio is also known
as creditor velocity ratio.

Creditor Turnover= Credit Purchase/ Avg Debtor

PARTICULARS 2011-12 2012-13 2013-14 2014-15 2015-16
Credit Purchase 11888 13793 15618 13550 9890
Avg Creditor 3410 5288 6065 7299 6917
Creditor Turnover 3.48 2.60 2.57 1.85 1.42

4
Creditor Turnover Ratio
3.5

2.5

1.5

0.5

0
2011-12 2012-13 2013-14 2014-15 2015-16

INTERPRETATIO

Accounts payable turnover is a ratio that measures the speed with which a company pays its
supplier. If the turnover ratio decline from one period to next period, this indicates that the
company is paying its supplier more slowly, and may be an indicator of worsening financial
position. If a company is paying its supplier very quickly, it may mean that the suppliers are
demanding very fast payment terms or that the company is taking advantage of early
payment discount.

58 | Page
 7.3b Payables Outstanding Turnover Ratio

Payables Outstanding Turnover Ratio=Net

Sales/Trade Payables
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16
Net Sales 62703 87716 105907 91116 83385
Payables 4381 5378 6752 7418 6262
Payables T.O. 14.31 16.31 15.68 12.28 13.31

Payables T.O
18
16
14
12
10
8
6
4
2
0
2011-12 2012-13 2013-14 2014-15 2015-16

7.3c Payables period in Days

Payables period in
Days=365/Payables T.O. Ratio
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16
Payables T.O. 14.31 16.31 15.68 12.28 13.31
No. of days 365 365 365 365 365
Payables period 25.50 22.37 23.27 29.71 27.41

35
Payables period
30
25
20
15
10
5
0
2011-12 2012-13 2013-14 2014-15 2015-16

59 | Page
7.4 Operating Performance Ratios

7.4a Total Asset Turnover

Asset turnover measures a firm's efficiency at using its assets in generating sales or revenue
- the higher the number the better. It also indicates pricing strategy: companies with low
profit margins tend to have high asset turnover, while those with high profit margins have
low asset turnover. This ratio offers managers a measure of how well the firm is utilizing its
assets in order to generate sales revenue. An increasing Total Asset Turnover would be an
indication that the firm is using its assets more productively. The asset turnover ratio simply
compares the turnover with the assets that the business has used to generate that turnover.
In its simplest terms, we are just saying that for every Rs.1 of assets, the turnover is Rs. X.

Total Asset Turnover Ratio=NET

SALES/TOTAL ASSET
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16
Net Sales 62703 87716 105907 91116 83385
Total Assets 99857 99754 94138 87085 85791
Asset T.O 0.62 0.87 1.12 1.04 0.97

Asset T.O
1.2

0.8

0.6

0.4

0.2

0
2011-12 2012-13 2013-14 2014-15 2015-16

INTERPRETATION:-

The Asset T.O ratio will be high only when Net Sales value will be higher than the Total
Asset.

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7.4b Inventory Turnover Ratio

The Inventory Turnover Ratio measures the efficiency of the firms inventory management.
A higher ratio indicates that inventory does not remain in warehouses or on the shelves but
rather turns over rapidly from the time of acquisition to sales. A lower inventory turnover
ratio means accumulation of inventories, over investment in inventory or unsalable goods.

Inventory Turnover Ratio=NET

SALES/INVENTORY
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16
Net Sales 62703 87716 105907 91116 83385
Inventory 5255 6185 6592 6728 9071
Inventory T.O 11.93 14.18 16.06 13.54 9.19

Inventory T.O
18
16
14
12
10
8
6
4
2
0
2011-12 2012-13 2013-14 2014-15 2015-16

INTERPRETATION:-

The ratio indicates whether the stock has been efficiently used or not. It shows the speed
with which the stock is turned into sales during the year. From the graph we can say that
the firm is efficient in utilizing its asset in order to generate sales, and it has maintained
stability all the years.

7.4c Inventory Turnover Days

Inventory Turnover
Days=365/INVENTORY T.O RATIO
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16
Inventory T.O 11.93 14.18 16.06 13.54 9.19
No. of days 365 365 365 365 365
T.O days 30.59 25.73 22.71 26.95 39.70

61 | Page
 Inventory T.O days
45
40
35
30
25
20
15
10
5
0
2011-12 2012-13 2013-14 2014-15 2015-16

INTERPRETATION:-

The ratio indicates whether the stock has been efficiently used or not. It shows the speed
with which the stock is turned into sales during the year.

7.5 Profitability Indicator ratios

7.5a Operating Profit Margin

Operating profit margin is a measurement of what proportion of a company's revenue is left

over after paying for variable costs of production such as wages, raw materials, etc. A
healthy operating margin is required for a company to be able to pay for its fixed costs, such
as interest on debt. Operating margin gives analysts an idea of how much a company makes
(before interest and taxes) on each dollar of sales. When looking at operating margin to
determine the quality of a company, it is best to look at the change in operating margin over
time and to compare the company's yearly or quarterly figures to those of its competitors. If
a company's margin is increasing, it is earning more per dollar of sales. A high margin is
more preferable for a company.

Operating Profit Margin=OPERATING

PROFIT/NET SALES
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16
PBIT 7439 11144 14767 12385 16594
Net Sales 62703 87716 105907 91116 83385
Operating Margin (%) 0.11 0.12 0.13 0.13 0.19

62 | Page
 Operating Margin (%)
0.25

0.2

0.15

0.1

0.05

0
2011-12 2012-13 2013-14 2014-15 2015-16

INTERPRETATION:-

This profitability ratio is the percentage of operating profit on the net sales revenue of a
business concern. Operating profit margin ratio of 0.19% in FY2015-16 indicates that a net
profit of Rs0.19 is made on each Rs100 sales. Thus a higher value of operating margin ratio is
favorable which indicates that more proportion of revenue is converted to operating
income. During FY2011-12, TCIL had the lowest operating margin ratio of 0.11%, which
means the company was able to generate only Rs0.11 on Rs100 sales.

7.5b Net Profit Margin Ratio

The net profit margin, also known as net margin, indicates how much net income a company
makes with total sales achieved. A higher net profit margin means that a company is more
efficient at converting sales into actual profit. Under gross profit, fixed costs are excluded
from calculation. With net profit margin ratio all costs are included to find the final benefit
of the income of a business.

Net Profit Margin

Ratio=PAT/NET SALES
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16
PAT 1655 2823 6280 4460 7338
Net Sales 62703 87716 105907 91116 83385
Net Profit ratio (%) 0.02 0.03 0.05 0.04 0.08

63 | Page
 Net Profit ratio (%)
0.1
0.09
0.08
0.07
0.06
0.05
0.04
0.03
0.02
0.01
0
2011-12 2012-13 2013-14 2014-15 2015-16

INTERPRETATION:-

For TCIL rising operating expenses is a major concern as it is eating up the profit to a huge
extent. TCIL was able to generate only Rs0.08 on Rs100 sales during FY2015-16 after
meeting all the fixed and variable expenses. TCIL has to be more cautious and efficient in
managing their cost of sales, selling and distribution and other fixed cost.

7.5c Return on Assets (ROA)

ROA gives an idea as to how efficient management is at using its assets to generate
earnings. ROA tells you what earnings were generated from invested capital (assets). Return
on Assets shows how many rupees of earnings result from each rupee of assets the
company controls. Return on Assets ratio gives an idea of how efficient management is at
using its assets to generate profit. The assets of the company are comprised of both debt
and equity. Both of these types of financing are used to fund the operations of the
company. The ROA figure gives investors an idea of how effectively the company is
converting the money. The higher the ROA number, the better, because the company is
earning more money on less investment.

Return on Assets
(ROA)=PAT/TOTAL ASSETS
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16
PAT 1655 2823 6280 4460 7338
Total Assets 99857 99754 94138 87085 85791
ROA (%) 0.01 0.02 0.06 0.05 0.08

64 | Page
 0.09
ROA (%)
0.08
0.07
0.06
0.05
0.04
0.03
0.02
0.01
0
2011-12 2012-13 2013-14 2014-15 2015-16

INTERPRETATION:-

There is no industry average for ROA, however for packaging and containers production
CNN Fortune 500 says that 8.66% is economical. Looking at that average, TCIL is lagging
behind and should manage its assets efficiently; old and obsolete assets should be replaced
with new assets. Since stakeholders invest in a company with an intention to get higher
returns, so TCIL should be more aggressive in converting the assets into money.

7.5d Return on Equity (ROE)

The amount of net income returned as a percentage of shareholders equity. Return on
equity measures a corporation's profitability by revealing how much profit a company
generates with the money shareholders have invested. The return on equity figure takes
into account the retained earnings from previous years, and tells investors how effectively
their capital is being reinvested.

Return on Equity
(ROE)=PAT/SHAREHOLDERS
EQUITY
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16
PAT 1655 2823 6280 4460 7338
Equity 60659 60219 57969 54896 59714
ROE (%) 0.02 0.04 0.10 0.08 0.12

65 | Page
 0.14
ROE (%)
0.12

0.1

0.08

0.06

0.04

0.02

0
2011-12 2012-13 2013-14 2014-15 2015-16

INTERPRETATION:-

In FY2015-16, 0.12% was the return that management was earning on shareholders equity.
During the year 2015 Companys operating performance improved significantly compared to
the previous year, in terms of sales, production and margin as well. It may be noted that the
financial performance of the tinplate industry worldwide had been declining till the previous
year and the situation was expected to continue. However, in the first half of the year, the
general business environment became favorable with increase in demand and prices,
leading to healthier margins for the tinplate industry world-wide. Accordingly TCIL
generated significantly higher realizations over key input costs of hot rolled coils and tin, as
compared to the previous year. In addition, TCIL also commissioned its second tinning line
having 3, 79,000 tons per annum capacity, at its premises in Jamshedpur.

7.5e Return on Capital Employed (ROCE)

Return on capital employed (ROCE) is the ratio of net operating profit of a company to its
capital employed. It measures the profitability of a company by expressing its operating
profit as a percentage of its capital employed.

Return on Capital Employed (ROCE)=(EBIT/CAPITAL EMPLOYED)*100

Particulars 2011-12 2012-13 2013-14 2014-15 2015-16
EBIT 7439 11144 14767 12385 16594
Equity 60659 60219 57969 54896 59714
Total Debt 10102 11450 5252 818 0
Capital Employed 70761 71669 63221 55714 59714
ROCE (%) 10.51 15.54 23.35 22.22 27.78

66 | Page
 30 ROCE (%)
25
20
15
10
5
0
2011-12 2012-13 2013-14 2014-15 2015-16
ROCE (%) 10.51 15.54 23.35 22.22 27.78

INTERPRETATION:-

This ratio is an important profitability ratio to analyses the overall efficiency of a business
enterprise. It is most useful for inter-firm comparison in order to judge the comparative
efficiency. This ratio concern with establishing the relationship between the profit and the
amount of capital employed in the business concern.

7.6 Investment Valuation Ratio

7.6a Earnings per Share

Earnings per share are generally considered to be the single most important variable in
determining a share's price. This is the amount of income that the common stockholders
are entitled to receive (per share of stock owned). This income may be paid out in the form
of dividends, retained and reinvested by the company, or a combination of both. Growth in
EPS is an important measure of management performance because it shows how much
money the company is making for its shareholders.

Earnings per Share=PAT ATTRIBUTABLE

/EQUITY SHARES OUTSTANDING
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16
Equity Shares 104667638 104916992 104916992 104916992 104916992
PAT 1655 2823 6280 4460 7338
(Pref. Div.) 955 899 815 393 0
(Tax on Pref. Div) 155 153 138 80 0
PAT attributable 545 1771 5327 3987 7338
Basic EPS 5.20 1.68 5.07 3.80 6.99
Face value of each Equity Share is Rs10.

67 | Page
INTERPRETATION:-

EPS was increasing significantly for TCIL in FY2015-16; the company was able to distribute
Rs6.99 per share. During FY2012-13 the company was able to distribute only Rs1.68 per
share to its equity shareholders because of decreasing profit after meeting every expense.

7.6b EPS vs. ROE

Return on equity and earnings per share are profitability ratios. ROE measures the return
shareholders are getting on their investments. EPS measures the net earnings attributable
to each share of common stock. ROE indicates management's ability to generate a return for
each dollar of common equity investment. EPS measures the return on a per-share basis. A
high ROE usually means market dominance and pricing power, while a low ROE normally
means that a combination of competitive forces and poor execution is squeezing the
bottom line.

Particulars 2011-12 2012-13 2013-14 2014-15 2015-16

Basic EPS 5.21 1.68 5.07 3.80 6.99
ROE (%) 0.027 0.046 0.108 0.081 0.122
All figures in %

INTERPRETATION:-

Equity and Shares Outstanding are not the same. ROE tells you how well the company is
utilizing its resources. EPS tells you how much income belongs to each share outstanding.
Both are dependent on Net Income, so that's why they appear to trend the same way.

68 | Page
 7.7 Net Operating Cycle

Particulars/ Year 2011-12 2012-13 2013-14 2014-15 2015-16

Raw Material Holding Period
Opening Raw Material 434 279 107 107 111
Closing Raw Material 279 107 107 111 109
Avg Of Raw Material 356 193 107 109 110
Consumption of Raw Material per day 3.94 0.51 0 2.06 0.07
Raw Material Holding Period (a) 90.48 378.43 0 52.91 1571.42
Stores and Spare parts Holding Period
Opening Stores and spares 2721 3667 4851 5272 5154
Closing Stores and spares 3667 4851 5272 5154 6759
Avg of Stores and spares 3194 4259 5061.5 5213 5956.5
Consumption of Stores and spare per day 12.16 14.28 16.53 14.99 13.53
Stores and spares Holding Period (b) 262.66 298.24 306.20 347.76 440.24

Finished Goods Holding Period

Opening of Finished Goods 1007 1308 1227 1212 1463
Closing of Finished Goods 1308 1227 1212 1463 2202
Avg of Finished Goods 1157 1267 1219 1337 1832
Cost of Goods Sold per day 146.21 203.92 242.75 208.15 178.04
Finished Goods Holding Period 7.91 6.21 5.02 6.42 10.29
Receivable Collection Period
Opening of Trade Receivable 3130 5029 9327 6168 3739
Closing of Trade Receivable 4049 9327 6120 3740 5302
Avg of Trade Receivable 3589 7178 7723 4954 4520
Credit Sales 62702 87716 105907 91116 83385
Sales per day 171.78 240.31 290.15 249.63 228.45
Receivable Collection Period (d) 20.89 29.86 26.61 19.84 19.78

Gross Operating Cycle (a+b+c+d) 381.95 712.76 337.84 426.94 2041.7

Creditor Deferral Period
Opening of Trade payable 2441 5199 5378 7180 7572
Closing of Trade Payable 4381 5378 6752 7418 6262
Avg Trade Payable 3411 5288 6065 7299 6917
Net credit Purchase 11888 13793 15618 13550 9890
Net Credit Purchase Per Day 32.56 37.78 42.78 37.12 27.09
Creditor Deferral period 104.72 139.94 141.74 196.61 255.27

Net Operating Cycle ((a+b+c+d)-e) 277.22 572.81 196.10 230.33 1786.4

69 | Page
NOTE:
Average Raw Material Inventory = (Opening stock of raw material +
Closing stock of raw material) / 2

Average Stores and Spares Consumed = (Opening stock of Stores and

Spares + Closing stock of Stores and Spares) / 2

Average Finished goods inventory = (Opening stock of finished goods +

Closing stock of finished goods) / 2

Average Debtors = (Opening stock of debtors + Closing stock of debtors)

/2

Average Creditors = (Opening stock of creditors + Closing stock of

creditors) / 2

Net Credit Purchase = Raw Materials (imported) + Components, Stores &

Spare Parts (D.G.)

FORMULAE:
Raw-material holding period [RMHP] = Average Raw-Material
Inventory / Raw-material consumed per day

Stores and spares holding period [SSHP] = Average Stores and spares
consumed / stores and spares consumed per day

Finished goods holding period [FGHP] = Average Finished goods

Inventory / Cost of goods sold per day

Debtors Collection Period [DCP] = Average debtors / Net credit sales per
day

Creditors Deferral Period [CDP] = Average Creditors / Net credit

purchase per day

Gross Operating Cycle [GOC] = RMHP + SSHP + FGHP + DCP

Net Operating Cycle [NOC] = GOC CDP

70 | Page
 7.8 Cost Sheet of TCIL

In Lacs
PARTICULARS / Year 2011-12 2012-13 2013-14 2014-15 2015-16

Raw material consumed 1441 187 0 755 27

Direct wages 8647 10581 11826 12256 11606

Prime cost 10088 10768 11826 13011 11633

FACTORY OVERHEAD
Depreciation 4803 5795 6106 6966 7100
Consumption of packing material 2408 3762 4878 4561 4056
Consumption of stores and spares 4442 5214 6036 5472 4940
Repairs to buildings 676 1036 997 931 1162
Repairs to Machinery 3400 4938 5762 6835 6827
Fuel oil consumed 4168 6019 5869 5019 3887
Purchase of power 4168 5367 5597 6223 7594
Conversion charges 72 0 0 0 0
Freight and handling 1762 3307 3878 3231 2642
Rent 150 169 198 219 212
Insurance 93 119 123 116 166

WORK COST 36230 46494 51270 52584 50219

Add: Opening stock of WIP 563 593 1017 1043 1278

Less: Closing stock of WIP 593 1017 1043 1278 964

NET WORKCOST 36200 46070 51244 52349 50533

ADMINISTRATIVE OVERHEAD
Amortisation 16 6 13 171 177
Rates and Taxes 78 114 150 158 396
Excise duty 152 159 170 183 111
Other expenses 2329 2803 2069 2668 2127
Less: Expenditure transfer to capital 0 0 120 0 0

NET ADMINISTRATIVE OVERHEAD 2575 3082 2282 3180 2811

COST OF PRODUCTION 38775 49152 53526 55529 53344

71 | Page
Add: Purchase finished goods 21418 32783 43277 30305 21267
Add: Opening stock of finished goods 1007 1308 1227 1212 1463
Less: Closing stock of finished goods 1308 1227 1212 1463 2202

COST OF GOODS SOLD 59892 82016 96818 85583 73872

Commissions, discounts and rebates 166 323 323 232 204

COST OF SALES 60058 82339 97141 85815 74076

Profit 2645 5377 8766 5301 9309

Net Sales 62703 87716 105907 91116 83385

PARTICULARS / Year 2011-12 2012-13 2013-14 2014-15 2015-16

Reconciliation Statement
Profit as per cost sheet 2645 5377 8766 5301 9309
Add: Other income 1897 2138 2536 2755 1806
Less: Finance charges 1727 2528 2115 1221 605
Provision for wealth tax 3 10 3 3 0
Provision for doubtful debts and adv. 22 24 115 50 -8

Profit before exceptional items and tax 2790 4953 9069 6782 10518

72 | Page
 CASH MANAGEMENT

8.1 Introduction

Every organization must have adequate cash resources (including undrawn bank overdraft
facilities) available to meet the financial commitments of day-to-day trading (e.g. wages and
taxation). Cash is also required to meet contingencies, to take advantage of discounts and
other opportunities available and to finance expansion. Firms should avoid holding too
much cash with the resulting underutilization of resources. The quality of working capital
management can make the difference between survival and failure, by ensuring that the
firm always has sufficient funds to pay what it owes and avoid liquidation. Time spent in
credit control can be as important as time spent developing new business.

8.2 Cash flow planning

To understand cash management we need to be aware of the difference between profits

and cash flow. Profit is the amount by which income exceeds expenditure when both are
matched on a time basis. Cash flow, however, is the actual flow of cash in and out of the
organization with no adjustments made for prepayments or accruals. A business which has
insufficient cash may be forced into liquidation by its unpaid creditors even if it is profitable.
Profitability and liquidity are complementary, and are both crucial. While planning and
controlling the use of resources to achieve profitability is essential for a companys long-
term success, planning and controlling the use of cash to achieve liquidity may be essential
for the companys short-term survival.

In the short term this is done by cash flow budgeting, which can be daily, weekly, monthly or
yearly, ensuring that the organization has sufficient cash inflows to meet its outflows as they
become due. Such budgets should fit in with the overall budgetary scheme that the
company operates. If a shortage is expected, then the firm can arrange finance, perhaps by
increasing its overdraft, accelerating cash inflows from debtors, postponing cash outflows
by delaying payment to creditors.

To help cash management of groups, a facility called cash pooling may be requested from
the groups bank. The process of cash pooling allows the offsetting of surplus and deficits
held at the bank by the groups companies using a dummy account. The net balance is the
one on which interest is payable or receivable and the group can then decide how to
allocate this cost or income.

73 | Page
8.3 Motivation for Holding Cash

There are three reasons why a firm holds cash:

To meet its day-to-day needs.

To compensate for the uncertainty associated with its cash flows.
To satisfy bank requirements.

8.4 Cash management problems

There are several reasons why a business may encounter problems with its cash flow:

Overtrading: occurs when a company grows rapidly without an adequate increase in its
long-term capital to fund its increased working capital requirements.

Growth: a firm may need to finance new assets to replace old and obsolete ones.

Loss-making: if a business continually trades at a loss for a protracted period cash

problems will materialize.

Inflation: the replacement costs of stock will be at a higher price when there is inflation;
however, competitive pressure may prevent a corresponding increase in selling price.

Payment delays: either due to the businesss inefficiency or external delays.

Bad debts: a large customer going into liquidation can create severe problems with a
companys cash flow.

8.5 Cash management and Working Capital

Working capital and cash management are truly two sides of the same coin. Cash
management is about the logistics of cash, whereas working capital management is about
the timing of the cash flow. Working capital management is a proactive form of cash
management and treasury needs to be involved.

8.6 Cash Ratios

Ratio analysis can help in cash management and serve as an indicator of the cash holding
position. It only looks at the most liquid short-term assets of the company, which are those
that can be most easily used to pay off current obligations. It also ignores inventory and
receivables, as there are no assurances that these two accounts can be converted to cash in
a timely matter to meet current liabilities.

74 | Page
 8.6a Cash Holding
This ratio indicates the proportion of current assets which are held as cash. Generally, the
financial manager will want to keep this figure at the safe minimum to be able to service
immediate current outflows.

Cash Holding=(CASH/CURRENT
ASSET)*100
Particulars 2011-12 2012-13 2013-14 2014-15 2015-16
Cash & Bank 138 157 81 179 476
Total C.A 17786 17544 14375 12741 17136
Cash Holding (%) 0.77 0.89 0.56 1.40 2.77

Cash Holding (%)

10

0
2011-12 2012-13 2013-14 2014-15 2015-16

INTERPRETATION:-

An increasing level of cash in current assets could be caused by a reduction in the credit
given by the companys suppliers or by too high cash balance. The first may be unavoidable;
the second is not. During the FY2015-16 the weightage of cash on Current Asset was 2.77%
as compare of previous FY2014-15 (increase by 3.15).

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Forecasting of Working Capital Requirement
For Next Three Years

76 | Page
 9.1 Sales Growth

Sales Growth
Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Net Sales 79218 62703 87716 105907 91116 83385
Growth on Net Sales 79.15 139.89 120.73 86.03 91.51

Sales Growth
160
140
120
100
80
60
40
20
0
2011-12 2012-13 2013-14 2014-15 2015-16

Sale is declining after FY2013-14, but still its growing up Before FY2014-15 because of
increasing production every year. And next year company runs is production unit on full
capacity and produce more than last year, its impact we are seeing on sales growth.

Sales Growth for next three FY (CAGR method (@10%)

2016-17 2017-18 2018-19

91723.5 100895.8 110985.4
110 110 110

As we can see companys sales is declining last year by 5% but management is saying every
year they are touching new milestone of production and sales. So I assume that TCIL will
grow with a steady growth rate of 10 % for the next three year. I used CAGR (compounding

77 | Page
 annual growth rate) to calculate sales for the next three FY. And the results are above in the
table.

But there are some constraints in production so company cant produce more than its
capacity. Right now companys tin production capacity is 3, 79,000tpa and there is no
expansion plan for next three year. Until companys capacity is increased it cant raise its
sales drastically.

In FY 2015-16 company produce 3,13,552 tons per annum while its capacity was
3,79,000tpa, and achieved an overall capacity utilization of 83%, if in FY2016-17 company
runs with its full capacity then also it cant raise its sales by 10%.

9.2 Operational Cost

Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Operational cost 69420 53367 74433 88604 75976 64985
Growth 76.87 139.47 119.03 85.74 85.53

160
Operational cost
140

120

100

80

60

40

20

0
2011-12 2012-13 2013-14 2014-15 2015-16

As we can see operational cost was very volatile form last five year. In FY 2012-13 it grows
by 39% up to last year because of increase in raw material consumption. In FY 2013-14
operational costs goes up by 19%, but as compare of FY2012-13 is decreasing by 15%
because in FY2013-14 raw material consumption is zero. After FY2013-14 growth declining
continuously because the shortage of raw material.

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Operational Cost requirement for next three FY (CAGR method @10%)

2016-17 2017-18 2018-19

71483.5 78631.8 86495.03
110 110 110

On FY 2015-16 company produce 3,13,552 tons per annum while its capacity was
3,79,000tpa, and achieved an overall capacity utilization of 83%, if on FY2016-17 company
runs with its full capacity then also it cant raise its sales by 10%. So I assume that TCIL will
grow with a steady operational cost rate of 10 % for the next three year. I used CAGR
(compounding annual growth rate) to calculate sales for the next three FY. And the results
are above in the table. In FY2015-16 there is no short-term and long-term loan, it means the
company paying all the due and TCIL conservation of power installing VFD and installing LED
light for reducing electric units, so I think company will growing up in next three year.

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Major Findings

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 Companys has an aggressive credit policy. Debtor turnover ratio is
19.37, that money to pay off its current obligations and invest remaining
money in short term.

Debtors are also paid attention in working capital. They are of two types
domestic and export. The total inventory is then taken out by summing
up all the raw materials, work in process, total of finished goods, scrap
stock, stores stock and the advances for stores.

Consist of all the goods produced in all the plants like ETP, CRM and
Solution center. Stocks consist of stock yards and port stocks. Advances
for stores are introduced in working capital recently. It deals with the
advance payment done for the goods.

On an average, inventories are approximately 60 per cent of current

assets in public limited companies in India. Because of the large size of
inventories maintained by committed to them. It is, therefore,
absolutely imperative to manage inventories efficiently and effectively.

The free cash flow from operation in India has been very robust and has
funded their growth opportunities.

Well managed working capital is crucial to the running of a healthy and

successful business. Working capital is the cash available for the day to
day running of business.

Working capital is the life blood and nerve centers of business. And TCIL
use external source to funding working capital takes from SBI, Union
Bank of India, HSBC, and HDFC and term loan from IDBI Bank Ltd, Union
Bank of India, Allahabad Bank, State Bank of Hyderabad, State Bank of
Patiala.

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Conclusion & Recommendation

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The study has identified and examines the main elements of working capital. It
has been observed that the management of working capital requires an
evaluation of both costs and benefits associated with each element. Some of
these costs and benefits may be hard to quantify in practice. Some assessment
must be in order to try and optimise the use of funds within the business. The
study has examined various techniques for management of working capital.
These techniques vary in their sophistication; some rely heavily on
management judgement while others adopt a major objective, quantitative
approach.

TCIL maintains sound position interns for working capital. Its efficiency in
receivables and deferral management is reflected in the constantly decreasing
operating cycle. The company has primarily been operating on cash drawn
from the market and reaping full benefits of its brand name. Management of
inventory which constitutes an important component of working capital in a
steel manufacturing company has to be improved. So, the conversion period of
raw material needs to be worked upon. The company has a well build supply
chain and all its process of inventory maintenance are SAP linked. It has a
competent control system in place for managing stores, spares and finished
goods. Nevertheless there is a scope for improvement in raw material
management.

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Reference

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Websites:
https://www.google.co.in

http://www.tatatinplate.com/

https://www.wikipedia.org/

http://www.investopedia.com/

https://www.worldsteel.org/

http://www.moneycontrol.com/

Books:
I M Pandey 2013, Financial Management, 10th edition, Vikas Publishing
House Pvt Ltd

Ravi M. Kishore, 2008, Financial Management, 6th edition, Taxman

Allied Services (p) Ltd

Application for the TATA business excellence model

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