A Salem Steel plant an Overview

Dr.M.Prakash.M.Com.,M.Phil.,PhD
Head/Supervisor
&
Mr.M.Manickam
M.Phil Research Scholar
Department of Commerce,PEE GEE College of Arts And Science, Periyanahalli, Dharmapuri

ABSTRACT

The Paper an Salem Steel Authority of India Ltd. Finance is very important for any business. Finance
is a life blood for any organization. The main objective of the study is to overview of the Salem Steel
Plant. The research is based on the following methodology. Analytical research design is the research
design adopted in this study. Secondary data was obtained from various records of the Salem Steel
Plant. The collected data is analyzed by using Statement of changes in Working Capital, Common Size
Statement. The study helps to identify the financial position of the company. Optimum utilization of
working capital can be planned so as to result in sound financial position of the company.

Keywords: Finance, Salem Steel Plant, and Working Capital.The First Steel Plant World Wide

The first attempt to establish iron and steel works in India has just been started by a rich firm in
Bombay, supported by other wealthy individuals and by the government of India. The capital is fixed
at $7.725,000.And the output of the works will be about 200,000 tons and the royalties to government
for the first thirty years will be one and three quarter cents per ton and for the second thirty ten cents
per ton. After careful calculation by competent accountant the gross profits of the proposed works will
be for the first year $805,000. The future income of the plant is based on the imports or iron steel into
India for 1903 s, for the classes intended to be produced by the company, which was615,000 tons ,and
for the past twelve years 409,000 tons annually .The imports are in excess of the estimated output of
the proposed plant ,which at first will be 120,000 tons of pig iron ,and the conversion of 85,000 tons
thereof into 72000 tons of finished steel .

SAIL – Steel Authority of India limited

SAIL – Steel Authority of India limited, Is one of “Navaratna” Companies in the business of Steel.
SAIL ranks premium position among the steel producers of the world and it has the capacity to
produce India’s most precious raw material – 13 million tons of crude steel and saleable steel capacity
10.7 million tones.
Whether it is power, water irrigation, railways, petroleum, housing, defense of industry the country’s
net economic capacity depends on steel. SAIL produces over 34% of India’s steel requirement. Apart
from steel, a number of by-product that are critical inputs in making vital sectors of economy are
produced by SAIL ‘JRA & SONA the brand of fertilizers produced by SAIL have contributed their
mite to usher in the green revolution.

Unique, Features
The company has the distinction of being India's largest producer of iron Ore owing the second
largest mines network provides SAIL a competitive edge in term of captive availability of iron ore and
flux. Sail is R & D center for iron and steel at Ranch equipped with large diagnostic facilities is
considered the largest in Asia.
Business Development
The company is presently implement a growth plan, which aims at increasing steel production to the
level of 22mt by 2010, an increase of nearly 60 percentage compared to existing levels.

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Major Units
Rourkela Steel Plant
To Rourkela goes credit of having been the first steel plant in the public sector to come into
production. The first coke oven battery was lighted on December 3, 1985 and first blast furnace was
commission on February 3, 1959. The first heat of LD oxygen blow steel was made on December 27,
1959. The Hot Strip Mill was commission on February 28, 1961.
Rourkela Steel plant has the unique distinction of being the trend setter with regards to the
technology of iron and steel on the country. It was here that LD oxygen steel making was adopted at a
time when even leading steel producers of the world has not opted for it.
A singular feature of Rourkela is fertilizer plan, which was specially conceived to utilize the
nitrogen available from the air separation units of oxygen plant and hydrogen to be separated from the
air separation units of oxygen plant and hydrogen to be separated from the coke oven gas. It was the
risk integrated steel plant in India designed to produce only flat products.
With the recent modernization activities the plant’s production capacity has been enhanced to
1.9 MT of Crude Steel.

Bhilai Steel Plant

The plant began its operation on January 31, 1959 when coke oven battery No.1 was
commissioned. The first blast furnace was inaugurated on February 4, 1959 and production of steel
started October 12, 1959 with the commissioning of open hearth furnace No.1 the million tones plant
was completed in 1961. Ballad has the unique distinction of level of production of one million tone of
ingot steel during 1962-63. The expansion of the plant to 2.5 million tones of ingot steel was taken up
during the sixties.
A significant feature was installation of 500 tones capacity open – heart furnaces in September 1987.
The last unit of the expansion was a high speed multistoried wire rod mill, commissioned in September
1987.
The plant has already been expanded to a capacity of 4.0 million tones of Ingot steel. The new
stream has the BOF process of steel making, continuous casting and a 3600mm wide plate mill, which
is one of the biggest of its kind in Asia. Bhilai Steel Plant won the Prime Minister’s trophy for “The
Best Integrated Steel Plant” in the country thrice in four years since inception of the award.

Durgapur Steel Plant

Erected in west Bengal in the late fifes, the plant started with a capacity of one million tones of
ingot steel per annum. Production of iron began on December 29, 1959 and the first steel ingot was
made on April 24, 1960. it was subsequently expanded to 1.6 million tones capacity in sixties. The
plant is major producer of railway materials like wheels and axles, first plants and sleepers, it also
produces and medium section, merchant section and scalp. The production of Durgapur Steel plant has
further been expanded to 1.876Mt Crude Steel.

Bokaro Steel Plant

Bokara Steel Limited (BSL) was formed on Janu29, 1964 to carry out the project. The project
took off with the signing of an agreement with the government of USSR on January 25, 1963. The
construction started on April 6, 1963. The first blast furnace on October 3, 1972 and the first converter
was commission on January 3, 1974. The Indian engineering and equipment suppliers played a major
role in setting up of this plant. The plant was envisaged with an initial capacity of 1.7 million tones of
Ingot steel. The expansion of the plant to 4.0 million tones ha already been and cold rolled sheets, colls
and slit colls in many specification and sizes.

LISCO Steel Plant

IISCO is the oldest integrated steel plant in India, next the TISCO. The plant was taken over by
the Government of India on July 14, 1972 and it was a fully owned subsidiary of SAIL. Now it merged

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with SAIL with effect from 16th February 2006 and renamed IISCO Steel Plant (ISP). The plant has a
capacity of producing 0.4 million tones acid Bessemer converter and basic open health furnaces.
It has range wide range of products including structural, special section, rails, bars, hot rolled
and galvanized sheets. Spun iron pipes are produced in its units at Kulti.

Alloy Steel Plant

Alloy Steel plant was installed at Durgapur 1,00,000 tones of ingot steel in 1960, with Japanese
assistance. This is the largest alloy steel producing unit in the country. The plant was subsequently
expanded to under the stage-II programme to augment the crude steel capacity to 2,46,000 tones per
year. The plant has on slabcum twin bloom continuous casting machine, the only of its kind in India.

Salem Steel Plant

A steel plant in Salem was a long cherished dream. Government of India decided in May 15,
1972 to set up an integrated special steels plant at Salem in the State of Tamil Nadu for the production
of sheets are strips of electrical stainless and other special and steels on the basic of sound techno –
economic considerations.
The construction of the plant was inaugurated in June 13, 1972 by the late Shri Mohan
Kumaramangalam, the Minister for Steel & Mines. Thus a dream of having a steel plant in Salem had
started taking a shape in the foot –hills of Kanjamalai. The company “Salem Steel Limited” was
registered on October 25, 1972. It was a government of India undertaking and subsidiary of Steel
Authority of India Limited (SAIL).
Shir V. Subramaniam was the Managing Director of the Salem Limited. During 1981 the plant
was designed to roll out 32,000 tones of cold rolled stainless steel strips and wide sheets per annum.
In the First Phase, situated in Tamil Nadu, the plant bring to India the latest sophistication in
cold rolling technology
In the second phase during 1991 the production capacity was increased to 70,000 tones per
annum by installing the second Sendizimir Mill. Stainless steel from Salem finds application in many
industries Nuclear, petroleum, Chemicals, Fertilizer, Food processing, pharmaceuticals, dairy,
households appliances and Cutely. The plant is actively pursuing development activities to use of
stainless steel in new areas such as Coinage, railway coaches, Building, Furniture, and Automobiles
etc. In addition to the Cold Rolling Mills, Blanking Line was commissioned during the year 1993 with
a capacity of producing 3600 tones coin blanks per annum and the provision is here to make utility
blanks,

Product –Mix
Salem Steel Plant specializes on the production of wide cold rolled stainless steel and coils.
During the first stage, the plant had a capacity of producing 32,000 tones of stainless steel sheets and
coils with thickness ranging from 0.3mm to 6.00 mm and widths varying from 600mm to 1250mm. for
sheet the length varies from 500mm to 4000mm. for slit coils, the minimum width can be as low
50mm.
In addition to the common 2D and 2B finishes, a wide range of surface finishes, mirror and
hair – line finishes are produced in a variety of grades, conforming to international standards.

Process
Salem Steel Plant employs the latest technology in cold rolling and incorporates the modern
equipment, supplied by the leading machinery manufacturers all over world.
The raw materials for Salem Steel Plant is hot rolled stainless steel coils, called hot bands. These are
processed in Coil Bulled – UP line (CBL). Coils form CBL are softened and decaled in Annealing and
picking Lines (APL). From here they are sent for cold rolling in the Sendzimir Mill (Z-Mill) to the
desired final thickness. The cold rolled coils are again softened and decaled to obtain the optimum
finish and mechanical properties.

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These are passed through the Skin pass Mill (SPM) to give a bright finish and necessary flatness. The
coils are ultimately either slit or sheared into finished products in the form of slit / divided coils or cut-
lengths. The special surface finishes are obtained in sheet in steel Grinding and in the coil from in the
strip Grinding Line (SGL).

Equipments suppliers and other agencies of CRM

The Salem Steel Plant bears contribution by way of equipment from 13 major foreign suppliers
in eight countries, twelve public sector undertakings and several private sector industries in India. In
valued, only 38 percent of the equipment have been paid in foreign exchange, with 20 percent supplied
by public sector undertaking in Indian and 42 percent supplied by Indian private sector. The erection
of the equipment is totally Indian, the Hindustan Steel Works Construction Limited providing civil and
structural requirements and TamilNadu Water Supply Drainage (TWAD) Boards providing water
supply and sewage facilities. One of the biggest liquefied Petroleum Gas Storage sewage facilities In
the country as at Salem Steel Plant, put up Indian Agencies.
The production know-how for cold rolling stainless steel and finishing was obtained from M/s
Ugine of France.
The Banking Line, supplied by M/s Schuler, germany, uses the state of the arts technology to
produce high quality stainless steel banks for coins and utility purpose. It consists of a 160 Tones
capacity press with scope for 60 to 630 strokes per minute. The line has facility for debarring
degreasing, rimming, annealing and picking, counting and packing facility. The press supplies 25
paisa, 50 paisa and re 1 coil blanks to the government of Indian Mint.

Export Performance Of SSP

The product of SSP plant especially stainless steel occupies a pride of place in international
market. And is exported to more than 37 countries worldwide such as Spain, Uk, Japan Germany
Switzerland.
Denmark Portugal, morocco, Netherlands, Rumania, turkey Kuwait Thailand Singapore
Australia and Bangladesh. Quality occupies the summit of SSP priorities .the product is well accepted
in the national and international markets for it’s too much quality .The en Classification of exports
As per the export and import policy of the government of India, there are two types of export
Viz., physical exports and deemed export.

Awards and Accoldess

 1st rank to SAIL for largest &most profitable steel company (public sector at construction
world NICMAR awards 2007.
 International quality summit awards 2007 in the gold category to ssp from business intiative
directions(BID) for excellence & business prestige at the quality summit in new York ,usa.

Highlights 2007-2008
 Best ever turnover at RS.45,555 crore ,up by 16%.
 Best ever profit before Tax at RS11,469 crore, up by 22%.
 Best ever profit after tax at Rs .7,537 crore, up by 22%.
 Highest ever dividend of 37% up by 19%.
 Highest ever Hot Metal, crude steel production crossing 15million tones, 14million tones
and 13million tones respectively.
 Highest ever sales of 12.3 million tones up by 14%.
 Lowest ever energy consumption at 6.95 G.Cal/ TCS achieved.
 Marketing dealer’s network expended to all districts of the company.

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Table-1
Showing the position of Return on Investment Rs in cores
Operating Capital Return on
Year profit employed investment
2004 – 2005 5135 15405.96 29.99
2005 – 2006 5706 17117.73 33.33
2006 – 2007 9423 21027.35 44.81
2007 – 2008 11469 24690.18 46.45
2008 – 2009 13189 28393.70 53.42
Source: Annual Report from Salem Steel Plant.
The above table shows the returns on investment is 29.99 in the year of 2004-2005, and increased to
33.33 in the year of 2005-2006, increased to 44.81 in the year of 2006-2007, again increase to46.45 in
the year of 2007-2008, and increased to 53.42 in the year 2008-2009.

Chart-1
Showing the position of Return On Investment

Return On Investment
60
53.42
50
44.81 46.45
40
33.33
30 29.99
Return On Investment
20

10

0
2004-05 2005-06 2006-07 2007-08 2008-09

Table-2
Showing the position of Debtors Collection Period Rs in cores
Year Days Debtors Turnover Ratio Debtors Collection Period
2004 – 2005 365 13.324 27 Days
2005 – 2006 365 14.805 24 Days
2006 – 2007 365 14.655 25 Days
2007 – 2008 365 12.961 28 Days
2008 – 2009 365 14.905 25 ays
Source: Annual Report from Salem Steel Plant

The above table shows the debtor’s collection period is 27 days at the year of 2004-2005, decreased to
24 days in the year of 2005-2006, 25 days in the year of 2006-2007,28 days in the year of 2007-2008,
and decreased to 25 days in the year of 2008-2009 The overall average debtor’s collection period is.
The debtor outstanding is under control.

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Chart-2
Showing the position of Debtors Collection Period

Debtors Collection Period

25 27
2004-05
2005-06
28 24
2006-07
25

Table-3
Showing the position of Inventory Turnover Ratio Rs in cores
Cost of Average Inventory Turnover
Year Goods Stock Ratio
2004 – 2005 10074.89 2393.24 3.788
2005 – 2006 11194.32 2659.16 4.209
2006 – 2007 12985.76 3369.39 3.854
2007 – 2008 13529.14 7458.94 1.813
2008 – 2009 15558.51 8577.78 2.084
Source: Annual Report from Salem Steel Plant

The above table shows that the inventory turnover ratio is 3.788 in the year 2004-2005, 4.209 in the
year of 2005-2006, 3.854 in the year of 2006-2007, 1.813 in the year of 2007-2008and increased to
2.084 in the year of 2008-2009.

Chart-3
Showing the position of Inventory Turnover Ratio

Inventory Turnover Ratio

4.209
3.788 3.854

2.084
1.813 Inventory Turnover Ratio

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

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Table-4
Showing the position of Debtors Turnover Ratio Rs in cores
Year Sales Debtors Debtors Turnover Ratio
2004 – 2005 25074 1693.56 14.026
2005 – 2006 27860 1881.73 15.584
2006 – 2007 33923 2314.75 18.976
2007 – 2008 39508 3048.12 22.100
2008 – 2009 45434 3505.34 25.415
Source: Annual Report From Salem Steel Plant

The above table shows that the debtor’s turnover ratio is 14.26 in the year 2004-2005, 15.584 in the
year of 2005-2006, 18.976 in the year of 2006-2007, 22.100 in the year of 2007-2008 and increased to
21.415 in the year 2008-2009.The overall average debtor’s turnover is times for during the study
period. Salem Steel Plant is maintaining good level in debtor’s turnover.

Chart-4
Showing the position of Debtors Turnover Ratio

Debtor's Turnover Ratio

30

25 25.415
22.1
20
18.976
15 15.584
14.026
Debtor's Turnover …
10

0
2004-05 2005-06 2006-07 2007-08 2008-09

Table-5
Showing the position of Creditors Turnover Ratio Rs in cores
Year Credit Purchase Accounts Payable Creditors Turnover Ratio
2004 – 2005 11093.07 2290.56 4.065
2005 – 2006 12325.63 2545.07 4.508
2006 – 2007 13274.91 2427.36 4.854
2007 – 2008 13960.16 2981.55 5.104
2008 – 2009 16054.18 3428.78 5.870
Source: Annual Report From Salem Steel Plant

The above table shows that the credit turn over ratio is 4.65 in the year of 2004-2005, 4.508 in
the year of 2005-2006, 4.854 in the year of 2006-2007, 5.104 in the year of 2007-2008 and increased
to 5.870 in the year of 2008-2009. The creditor turnover has reduced from 4.065 in 2004 to 4.508 in
2005 due to reduced credit purchase.

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Chart-5
Showing the position of Creditors Turnover Ratio

Creditor's Turnover Ratio

4.065
5.87
2004-05
2005-06
4.508 2006-07
5.104 2007-08
2008-09
4.854

Conclusion
The study was conducted based on the analysis of financial performance in steel authority of
India Ltd, Salem. Tools used such as ratio analysis, comparative working capital, and comparative
balance sheet have been used to find out the companies efficiency in performing all its functions. The
analysis reveals that the short term solvency position is not good, but the long term solvency positions
satisfactory. So, the firm has a healthy condition of finance for long term. The cash balances have a
positive sign in all the five years but it has decrease over the years. Show, short term financial position
of the company can be rated as satisfactory.

Reference
 Principles and practices of cost Accounting, Third Edition, Published by prentice hall of India
private limited, New Delhi 2005.
 Inventory management commonwealth publishers, In association with Indian institutue at
Business management.
 Advanced Cost Accounting. First edtion 2001. Himalaya publishing house, Bangalore.
 Material Management. Himalaya publishing house, Delhi,
 Kothari C.R. Research Methodology methods and techniques, whishwa prakashan seventh
edition, 19997. P.G.

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