A STUDY ON INVENTORY MANAGEMENT

OF TATA STEEL AND COMPARISON WITH ITS COMPETITORS

Submitted in partial fulfillment of the curriculum required of

Masters of business administration BIT Mesra, Ranchi.

MASTERS IN BUSINESS ADMINISTRATION

Under the guidance of: Submitted by:

VIVEK SINHA Devya Sinha

IMTIAZ AHMAD Ref. no.- VT20190754

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 DECLARATION

I, DEVYA SINHA hereby declare that the project entitle “Inventory Management
at TATA STEEL” is in the record of authentic and original work carried out by me
during the period of 14th May to 9th July in partial fulfillment of Master of
Business Administration (MBA) of Birla Institute of Technology Mesra, Ranchi.

This work is completed by me under the guidance and supervision of is Mr. Vivek
Sinha (Head-Accounts and Finance) and facilitator Mr. Imtiaz Ahmad of Tata
Steel, Jamshedpur.

To the best of my knowledge, it is an original piece of work done by me and it has

neither been submitted to any other organization nor published anywhere before.
The contents of this report are based on the research done by me during my
tenure of the internship at the FINANCE & ACCOUNTS DIVISION, TATA STEEL,
Jamshedpur.

Name: Devya Sinha

Date: 9th July, 2019

Place: Tata Steel, Jamshedpur

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 ACKNOWLEDGEMENT

Any accomplishment requires the coordination of many people, so this work

is not so different.

This project for me was a great practical learning process along with the
theoretical knowledge which I have gained. To work under the guidance,
support and motivation of all business leaders of “TATA STEEL LTD” was a
great experience for me.

First and foremost I would like to thank “TATA STEEL LTD” for giving me an
opportunity to undertake this project work. I take this opportunity to express
my gratitude towards those whose guidance and co-operation has helped me
immensely during the completion of this project. I express my sincere thanks
to Mr. Vivek Sinha and Mr. Imtiaz Ahmad without whose guidance this
project would not have assumed real dimensions.

Finally, I would like to thank all the staff members of “TATA STEEL” for
helping me at various situations when required.

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 TABLE OF CONTENT
Sl No. Content Page No.
1. Executive Summary 5
2. Company Overview 6-7
3. Board of Directors 8
4. Inventory management 9-14
 Objectives
 Importance
 Types of inventory
 Inventory management at Tata Steel
 Policies maintained by Tata Steel
 Consequences of over & under inventory
5. Ratios Analysis & Interpretation of Tata Steel 15-28
6. Competitors of Tata Steel 29-30
7. Comparative Analysis with Competitors of Tata Steel 31-42
8. Trend Analysis 43-44
9. Findings 45
10. Conclusion 46
11. Bibliography 47
12. Annexure 48-51

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 EXECUTIVE SUMMARY

Established in 1907, Tata Steel is Asia’s first and India’s largest integrated private
sector steel company with its captive iron ore and coal mines and one of the
world most modern steel making facilities at Jamshedpur in eastern India which
includes a state-of-art cold rolling mill complex. Tata Steel is among the lowest
cost producer of steel in the world.

The aim of the project is to understand what inventory management is and how it
works in Tata Steel and other steel companies. What is the various method of
inventory management and what method does Tata Steel follows for the same.
Inventory management is very crucial at TATA STEEL as it is a manufacturing firm
and a slight delay or other issues related to stock poses serious problems and
huge losses.

The objectives of the project are:

 To understand the concept of inventory management and its management
in Tata Steel.
 To calculate the various inventory ratios and interpret the results thereon.
 To analyze the efficiency of purchase department, supply chain department
and finance and accounts department related to inventory management.
 To understand and analyze the deviation in the theoretical aspect and
practical implementation of an inventory system.

The aim of the project is to make use of the study of various inventory
management methods and utilizing them to find the best inventory management
method, the steel industry should try to minimize problem the plant faces.

The project concludes with major findings and recommendations.

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 Company Overview

Tata Steel, formerly known as Tata Iron and Steel Company Limited (TISCO), is an Indian
multinational steel-making company headquartered in Mumbai, Maharashtra.
Established in Jamshedpur, India in the year 1907, Tata Steel is part of the 150-year-old
Tata group. Bringing to reality the vision of its founder, J. N. Tata, who inspired the steel
and power industry in India, the Tata Steel Group is the 10th largest steel manufacturer
in the world and is known to be the hallmark of corporate citizenship and business
ethics.
With the operations in 26 countries and its commercial presence in 50 countries,
the Tata Steel Group has a steel production capacity of 27.5 MnT per annum (as on
March 31, 2018). Tata Steel India also has its manufacturing units at Jamshedpur,
Jharkhand, with a production capacity of 10 MnT per annum and at Kalinganagar,
Odisha, with a production capacity of 3 MnT per annum. TISCO also exports
ferromanganese, chrome ore, steel tubes, strips, wires, rounds and agriculture
implements to the United States, China and the Middle East. The company together
with its subsidiaries is engaged in the manufacture and sale of steel products in India
and internationally. They offer hot and cold rolled coils and sheets, galvanized sheets,
tubes, wire rods, construction rebars and bearings. Tata Steel is one of the few
companies that are fully integrated- from mining to the manufacturing and marketing of
finished products.

Tata Steel is by far the most important, multi-functional and most adaptable of
materials. The role of Iron and Steel industry in GDP is very important for the
development of the country.

Vision:

“We aspire to be the global steel industry benchmark for ‘value Creation’ and
‘Corporate Citizenship”.

Mission:

Consistent with the vision and values of the founder, Jamshedji Tata, Tata Steel
strives to strengthen India’s industrial base through the effective utilization of staff
and materials. The means envisaged to achieve this are high technology and
productivity, consistent with modern management practices. Tata Steel recognizes
that while honesty and integrity are the essential ingredients of a strong and stable

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enterprise, profitability provides the main spark for economic activity. Overall, the
company seeks to scale the heights of excellence in all that it does in an atmosphere
free from fear and, thereby, its faith in democratic values.

Values:

Integrity| Unity | Pioneering | Excellence | Responsibility

Products

The steel plant produces:

 Iron
 Soft Iron
 Cast Iron
 Alloy

They also produce:

 Locomotive parts
 Machinery, tinplate
 Agricultural equipment
 Cable and wire
 Rebar’s

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 Board of Directors

S.No. Name Position held

1. Mr. Ratan N. Tata Chairman
2. Mr. T.V. Narendran Chief Executive officer & Managing
Director
3. Dr. Peter Blauwhoff Independent Director
4. Mr. D.K. Mehrotra Non-executive Director
5. Mr. O.P. Bhatt Independent Director
6. Mr. Deepak Kapoor Independent Director
7. Mr. Saurabh Agrawal Non-executive Director
8. Mr. Koushik Chatterjee Executive Director & Chief Financial
Officer
9. Mr. Natarajan Chairman of the Board Non-executive
Chandrasekaran Director
10. Ms. Mallika Srinivasan Independent Director
11. Mr. Aman Mehta Independent Director
12. Mr. Parvatheesam K Company Secretary
(Source: Annual Report)

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 INVENTORY MANAGEMENT
Inventory or stock is the goods and materials that a business holds for the ultimate goal
of resale or repair. Inventory management is a discipline primarily about specifying the
shape and placement of stocked goods.

Inventory Management is a business process which is responsible for managing,

storing, moving, sorting, arranging, counting and maintaining the inventory i.e. goods,
components, parts etc. Inventory management ensures that the right inventory is
available as per the demand at low costs. Inventory Management makes sure that the
core processes of a business keep running efficiently by optimizing the availability of
inventory.

Objectives of inventory management

The main objective of inventory management is to maintain inventory at appropriate

level to avoid excessive or shortage of inventory because both the cases are undesirable
for business. Thus, management is faced with the following conflicting objectives:

1. To keep inventory at sufficiently high level to perform production and sales

activities smoothly.
2. To minimize investment in inventory at minimum level to maximize
profitability.
3. To ensure that the supply of raw material & finished goods will remain
continuous so that production process is not halted and demands of
customers are duly met.
4. To minimize carrying cost of inventory.
5. To keep investment in inventory at optimum level.
6. To reduce the losses of theft, obsolescence & wastage etc.
7. To make arrangement for sale of slow moving items.
8. To minimize inventory ordering costs

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Importance of inventory management

Inventory Management includes managing and controlling raw materials, stocks,

finished goods, warehousing, storage and other aspects which help reach the product
from production to distributor or retailer. Each organization regularly strives on efficient
inventory management to uphold optimum inventory to be able to meet its necessities
and avoid over or under inventory that can impact the monetary statistics of the firm.
Inventory is forever dynamic. A prerequisite of inventory management is steady and
vigilant assessment of exterior and interior factors and control via planning and
evaluation. Most of the businesses have an individual department of inventory planners
who incessantly observe, control and evaluate inventory and interface with
manufacturing, procurement and finance sections of the firm.

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 Types of Inventory

Inventory is generally categorized as raw materials, work-in-progress, and finished

goods.

 RAW MATERIALS: Raw materials are inventory items that are used in the
manufacturer's conversion process to produce components or finished products.
These are unprocessed materials used to produce a good. Examples of raw
materials used in Tata Steel are coal, dolomite, High Volatile Coal, coke,
limestone etc.

 WORK-IN-PROGESS: Work-in-progress inventory is the partially finished goods

waiting for completion and resale; work-in-progress inventory is otherwise
known as inventory on the production floor. For example, a half-assembled
airliner or a partially completed yacht would be work-in-process.

 FINISHED & SEMI-FINISHED GOODS: Finished goods are products that have
completed production and are ready for sale. These goods have been inspected
and have passed final inspection requirements so that they can be transferred
out of work-in-process and into finished goods inventory. Example- export yard,
wire & rod mill, hot strip mill, steel, rings etc. are used in Tata Steel.

Retailers typically refer to this inventory as "merchandise". Common examples of

merchandise include electronics, clothes, and cars held by retailers.

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 Inventory management at TATA STEEL

Inventory management is one of the most important managerial activities. TATA steel
has its own mines and quarries in India as well as in some other countries. The raw
material inventory includes materials from its own source as well as purchased from
others. Raw material inventory therefore lies both at works and its place of extraction.
These are transported to works both by road and rail.
To maintain the minimum required inventory is not an easy task. There are
many reasons for each different organization as to what the quantity should be
maintained. TATA STEEL’s raw material inventory consists of mainly coal and iron ore,
but there are many other things included in it in small quantities. TATA STEEL has its
transportation system which helps in carrying the materials from different locations to
Jamshedpur works.

Each types of production department maintain separate inventory level. TATA steel
maintains different types of inventory i.e. raw material, WIP, finished goods, transit
inventory, buffer stock etc. For valuation of inventory TATA Steel generally uses FIFO
method and for ordering, they use EOQ method.

First in first out (FIFO): A method of valuation of inventory, by which the cost are
allocated on the assumption that goods are consumed or sold in the order in which they
are received and taken in to stock.

Economic Ordering Quantity (EOQ): It is the optimum quantity of goods for which if
orders are placed, the aggregate order placing cost and the aggregate inventory carrying
cost will be equal and economical. There will not be any loss by either way. For any item
of goods, annual requirement in units, cost of placing one order, cost of carrying one
unit in inventory for one year are the influencing factors. Any change in one or more of
them will change the EOQ of that item.
To find out EOQ; the formula is= √2AO/C
Where; A= Annual consumption; O= ordering cost, C= carrying cost

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 Policies maintained by TATA STEEL for Inventories

 Finished and semi-finished products produced and purchased by the company

are carried at lower of cost and net realized value.

 Work in progress is carried at lower of cost and realized value.

 Coal, iron ore and other raw materials produced and purchased by the company
are carried at lower of cost and net realized value.

 Stores and spare parts are carried at cost. Necessary provision is made and
charges to revenue in case of identified obsolete and non-moving items.

 Cost of inventories is generally ascertained on the “weighted average” basis.

Work in progress and finished and semi-finished products are valued on full
absorption cost basis.

TATA STEEL has own electric plant, water preserver and gas preserver for regular
production. Dimna Lake is one of the advance point of Jamshedpur plant.

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Consequences of over investment & under investment in
inventory

Both over investment and under investment in inventory is undesirable as both

have consequences.

Following are the consequences of over investment:

- Unnecessary blockage of funds in inventory
- Excessive storage is required to store the inventory.
- Excessive insurance cost.
- Risk of liquidity: Value of the inventory reduces due to the long holding period as
the inventories once purchased are difficult to dispose of at the same value.

Following are the consequences of under investment:

- Under investment in the inventory may cause frequent interruptions in
production process.
- Insufficient stock of finished goods may create problems in meeting customers’
demands and they may shift to the competitors.

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INVENTORY RATIOS

Page 15
1. Average Collection Period- This ratio represents the average number of days
between the date a credit sale is made and the date payment is received from
the credit sale.
𝑇𝑟𝑎𝑑𝑒 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒
Average Collection Period (per day) = ∗ 365
𝑁𝑒𝑡 𝐶𝑟𝑒𝑑𝑖𝑡 𝑆𝑎𝑙𝑒𝑠 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑦𝑒𝑎𝑟

(in crores)

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14

Trade Receivable 1875.63 2006.52 1133.17 491.46 770.81
Net Credit Sales 60519.37 53260.96 38210.24 41785.00 41711.03
Average collection period 11.31 days 13.75 days 10.82 days 4.29 days 6.75 days

Average collection period

16.00
13.75
14.00
12.00 11.31
9.69
10.00
8.00 6.08
Days
6.00
3.85
4.00
2.00
0.00
2017-18 2016-17 2015-16 2014-15 2013-14
Years

Interpretation-

As we can see from the table, the average collection period of Tata Steel is quite
good. It has been marked the lowest in the year 2014-15 but it has increased after
that, the reason being constant increase in the Net credit sales and also trade
receivable with time.

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2. Debtor’s conversion period- The period on average that a business takes to
collect the money owed to it by its trade debtors.
Debtors
Debtors conversion period =
(𝐶𝑟𝑒𝑑𝑖𝑡 𝑠𝑎𝑙𝑒𝑠/365)

(In crores)

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14

Debtors 1875.63 2006.52 1133.17 491.46 770.81
Credit sales 60519.37 53260.96 42697.44 46577.26 46309.34
Debtors conversion period 11.31 13.75 9.69 3.85 6.08

16.00
Debtors conversion period
13.75
14.00
12.00 11.31
9.69
10.00
Days 8.00
6.08
6.00
3.85
4.00
2.00
0.00
2017-18 2016-17 2015-16 2014-15 2013-14
Years

Interpretation-

As we can see from the table, that the ratio is quite good for the company. The
ratio was marked lowest in the year 2014-15. Though the ratio has increased but
a ratio up to a period of 45 days is considered good.

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3. Raw material conversion period- This ratio states that for how much time (in
terms of days) raw materials will be kept in the warehouse before it is sent to
the production department for work-in-progress. Low raw material holding
period indicates greater ability of a company to recover cost incurred in
production were as high raw material holding period means increasing
warehousing cost and thus less profit.

𝑅𝑎𝑤 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

Raw material conversion period =
(𝑅𝑎𝑤 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙 𝑐𝑜𝑛𝑠𝑢𝑚𝑝𝑡𝑖𝑜𝑛/365)

(In crores)

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14

Raw material Inventory 4953.20 3898.99 2368.61 3235.96 2035.78
Raw material consumption 16877.63 12496.78 9700.01 11707.83 9677.71
Raw material conversion period 107.12 days 113.88 days 89.13 days 100.88 days 76.78 days

Raw material conversion

2013-14,
period 2017-18,
76.78
107.12

2014-15,
100.88
2016-17,
113.88
2015-16,
89.13

Interpretation:

The raw material conversion period of TATA STEEL is quite high throughout the
five years. Although the conversion period falls in the year 2015-2016, but it
increases further in the preceding years. This is not a favorable sign as this
increases the storing cost also this has happened due to the increase in the raw
materials consumed like Ferro alloys, iron ore, coal. Hence the company should try
to optimize the use of raw material.

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4. Work in progress conversion period- This ratio indicates the time period which
the company takes to convert its work in progress into finished goods. Lesser
the work in progress holding period, lesser will be the blockage of company’s
fund.

𝑊𝑜𝑟𝑘 𝑖𝑛 𝑝𝑟𝑜𝑔𝑟𝑒𝑠𝑠
Work in progress conversion period =
(𝐶𝑜𝑠𝑡 𝑜𝑓 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛/365)
(In crores)
Particulars 2017-18 2016-17 2015-16 2014-15 2013-14
Work in progress 6.77 5.88 18.30 44.32 35.99
Cost of production 47025.86 45164.22 31617.94 33629.91 30428.76
Work in progress conversion period 0.05 0.05 0.21 0.48 0.43

Work in progress conversion period

0.05 0.05
0.43 0.21 2017-18
2016-17
2015-16
2014-15
0.48 2013-14

Interpretation-

Over the five years, the conversion period has decreased which is good sign as
lower conversion period increases the efficiency of the company as there is less
blockage of funds. The work in progress is the lowest in the year 16-17 and 17-18
which shows the increase in the demand of steel products in India due to increase
in the infrastructure activities.

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5. Finished goods conversion period- It refers to the time taken for the finished
goods to be sold out or the time period between production and sales when the
finished goods are kept in the warehouse before the actual sale is made.
𝐹𝑖𝑛𝑖𝑠ℎ𝑒𝑑 𝑔𝑜𝑜𝑑𝑠 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
Finished goods conversion period =
(𝐶𝑜𝑠𝑡 𝑜𝑓 𝑠𝑎𝑙𝑒𝑠/365)

(In crores)

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14

Finished goods Inventory 3602.13 4096.56 2739.00 2888.47 2216.14
Cost of Sales 48413.18 44910.47 32909.21 33745.74 30760.30
Finished goods conversion period 27.16 33.29 30.38 31.24 26.30

Finished goods conversion period

26.30 27.16
2017-18
2016-17
2015-16
31.24 33.29
2014-15
2013-14
30.38

Interpretation-

The finished goods holding period is the highest in the year 2013-14 which
shows inefficiency. There are low sales as we can see from the table that the
finished goods inventory is the highest as compared to all the years. The finished
goods holding period is the lowest in the year 2017-2018 due to efficient sales
policies adopted by the company and the demand is met efficiently. It signifies
better liquidity position of the company in 2017-2018 as compared to 2013-2014.

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6. Inventory Turnover Ratio- This ratio is an efficiency ratio which shows the
efficiency of the firm in producing and selling its products.
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑
Inventory Turnover Ratio =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

(In crores)

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14

Cost of goods sold (A) 48413.18 44703.33 32726.43 33581.39 30596.32
Opening Inventory 10236.85 7137.38 8042.00 6007.81 5257.94
Closing Inventory 11023.41 10236.85 7083.81 8042.00 6007.81
Average Inventory (B) 10630.13 8687.12 7562.91 7024.91 5632.88
Inventory Turnover Ratio (A/B) 4.55 times 5.15 times 4.33 times 4.78 times 5.43 times

Inventory Turnover Ratio

6.00 5.15 5.43
4.55 4.78
5.00 4.33
4.00
3.00
2.00
1.00
0.00
2017-18 2016-17 2015-16 2014-15 2013-14
Years

Interpretation-

Though the average inventory has increased over the years but the cost of goods
sold has also increased which shows the efficiency of the company in selling its
products. We can see from the table, that the turnover ratio is more or less
constant. Slight changes can be seen in the year 2015-16 as well in 2017-18. But
overall the ratio is good which indicates the efficiency of the company.

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7. Inventory Holding Period- The holding period refers to the time between an
asset purchased and its sale. A short term holding period is defined as less
than a year were as a long term holding period is more than a year.
365
Inventory Holding Period =
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑅𝑎𝑡𝑖𝑜

(In crores)

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14

Inventory turnover ratio 4.55 5.15 4.33 4.78 5.43
Inventory Holding period 80.14 70.93 84.35 76.35 67.20

Inventory Holding period

2017-18 2016-17 2015-16 2014-15 2013-14

67.20 80.14

76.35
70.93

84.35

Interpretation-

From the table we can conclude that the inventory holding period has increased
gradually over the years were as the inventory turnover ratio is comparatively
low. The reason for the same might be an increase in the inventory size but the
sales do not increase over the years at a fast rate. This will lead to an increase in
the number of inventory days.

Page 22
8. Days Payable Outstanding Ratio- It is an efficiency ratio which measures the
average number of days a company takes to pay its suppliers.
𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑃𝑎𝑦𝑎𝑏𝑙𝑒
Days Payable Outstanding Ratio = *365
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑆𝑎𝑙𝑒𝑠

(In crores)

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14

Accounts Payable 11242.75 10717.44 7706.13 5801.98 8263.61
Cost of sales 48413.18 44910.47 32909.21 33745.74 30760.30
Days payable o/s Ratio 84.76 87.10 85.47 62.76 98.06

Days payable o/s Ratio

98.06
100.00 84.76 87.10 85.47
62.76
Days 50.00

0.00
2017-18 2016-17 2015-16 2014-15 2013-14
Year

Interpretation-

As we can see that from the table the days payable ratio is quite high over the
years except for the year 2014-15. The reason behind this is due to high inventory
holding period which affects the liquidity position of the company and in turn
increases the outstanding days to pay its creditors.

Page 23
9. Average Days to Sell Inventory Ratio- It is a financial ratio that indicates the
average time in days that a company takes to turn its inventory, including
goods that are a work in progress, into sales.
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
Average Days to Sell Inventory Ratio = *100
𝐶𝑂𝐺𝑆

(In crores)

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14

Avg. Inventory 10630.13 8687.12 7562.91 7024.91 5632.88
Cost of Goods Sold 48219.32 44703.33 32726.42 33581.39 30596.32
Avg. days to sell inventory 22.05 19.43 23.11 20.92 18.41

Avg. days to sell inventory

25.00
22.05 23.11
20.00 20.92
19.43 18.41
15.00
Days
10.00

5.00

0.00
2017-18 2016-17 2015-16 2014-15 2013-14
Year

Interpretation-
As we can see that, the trend is nearly constant except for the year 2016-17
were average days is less as compared to previous year as well as the
preceding year. Also the average inventory level is increasing along with the
cost of sales at a steady rate.

Page 24
10. Debtors Turnover Ratio- This ratio is an efficiency ratio that shows how a
company is using its assets. The debtor turnover ratio measures the number of
times over a given period that a company collects its average accounts
receivable.
𝐶𝑟𝑒𝑑𝑖𝑡 𝑆𝑎𝑙𝑒𝑠
Debtors Turnover Ratio =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐷𝑒𝑏𝑡𝑜𝑟𝑠 𝑜𝑟 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒

(In crores)

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14

Credit Sales 60519.37 53260.96 42697.44 46577.26 46309.34
Avg. Receivable 1941.08 1569.85 562.13 631.14 783.87
Debtors turnover ratio 31.18 33.93 75.96 73.80 59.08

Debtors turnover ratio

75.96 73.80
80.00 59.08
60.00
31.18 33.93
40.00
20.00
0.00
2017-18 2016-17 2015-16 2014-15 2013-14
Years

Interpretation:

This ratio finds out how faster debts are being collected by the company. The
lower the better it is as the credit sales are being converted to cash easily. The
above chart and table of Tata steel ltd. shows that the debtors turnover ratio has
constantly increased over the years but after 2016-17 it has decreased due to
increase in both credit sales as well as avg. receivable. This shows that Tata Steel
is being able to recover the debts from credit sales faster as compared to previous
years and within comparatively less time.

Page 25
11.Inventory conversion period- This ratio shows that in how many days
inventories are converted into net sales and it generate revenue for the
company.
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
Inventory conversion period = ∗ 365
𝑆𝑎𝑙𝑒𝑠

(In crores)

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14

Inventory 11023.41 10236.85 7083.81 8042.00 6007.81
Sales 60519.37 53260.96 42697.44 46577.26 46309.34
Inventory conversion period 66.48 70.15 60.56 63.02 47.35

Inventory conversion period

80.00 66.48 70.15
60.56 63.02
70.00
60.00 47.35
50.00
Days 40.00
30.00
20.00
10.00
0.00
2017-18 2016-17 2015-16 2014-15 2013-14
Year

Interpretation:

The inventory conversion period shows how efficiently inventory is converted into
sales. The Smaller is the Inventory Conversion period, the better it is for the
company’s performance. In 2013-14,it has decreased by 0.47% further In 2014-15
it has increased 0.63% ,in the year 2015-16 decreased by 0.61% and in 2016-2017
increased by 0.70%,.This ratio establishes the relationship between sales with
inventory. Therefore the company should make an attempt to increase its sales in
order to minimize its inventory conversion cost.

Page 26
12. Current Ratio- This ratio measures the company’s ability to pay short-term
obligations or those due within one year.

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
Current Ratio=
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Where,
Current Assets = Total C.A – Investment
Current Liabilities = Trade payables- Current maturities of non-current borrowings
and finance lease obligations + Provisions + Other current liabilities

(In crores)
Particulars 2017-18 2016-17 2015-16 2014-15 2013-14
Total C.A 34643.91 20110.40 14421.49 11994.56 11,564.60
Less: Investments 14640.37 5309.81 4320.17 1000.08 2,343.24
Current Assets 20003.54 14800.59 10101.32 10994.48 9,221.36
Trade payables 11242.75 10717.44 7706.13 5801.98 8263.61
Provision 735.28 700.60 2005.03 1675.41 1,902.81
Income tax liability 454.06 465.72 0.00 0.00 0.00
other financial liability 6541.40 4062.35 0.00 0.00 0.00
Other current liabilities 5857.06 3543.80 6115.81 9256.91 8,671.67
less: Curent maturities &
finance lease obligation 2886.97 350.59 924.37 4263.19 4,065.48
Current Liabilities 21943.58 19139.32 14902.60 12471.11 14772.61
Current Ratio 0.91 0.77 0.68 0.88 0.62

Current Ratio
1.00 0.91
0.88
0.80 0.77
0.68
0.60 0.62

0.40
0.20
0.00
2017-18 2016-17 2015-16 2014-15 2013-14
Years

Page 27
Interpretation-
As a conventional rule a current ratio of 2:1 is considered satisfactory has turned
out to be an old concept in today’s world. The current ratio represents a margin
of safety for creditors. The higher the current ratio the higher is the margin of
safety. But here we can see that the ratio is below the accepted standard norm in
Tata Steel, i.e. it lies between the ranges of 0.6-0.9. This indicates that the
company is ready to take risk as the liabilities are more than the assets in all the
years. But since the company is able to manage the risk efficiently, therefore all
obligations are met efficiently within time.

Page 28
 Competitors of TATA STEEL

JINDAL STEEL :

JSPL is an industrial powerhouse with a dominant presence in steel, power, mining and
infrastructure sectors. Part of the US $ 22 billion OP Jindal Group, the Company is
continuously scaling its capacity utilizations and efficiencies to capture opportunities for
Building a Nation of Our Dreams.

Led by Mr. Naveen Jindal, the company produces economical and efficient steel
and power through backward and forward integration. JSPL’s business operations span
across the states of Chhattisgarh, Odisha and Jharkhand in India, where it operates
some of India’s most advanced steel manufacturing and power generation capacities of
global scale.

JINDAL STEEL AND WORKS (JSW) :

The JSW Group is known across the country as “strategic first mover”. It is a $14 billion
leading conglomerate, with a presence across all the vital sectors of the Indian
economy. The company occupies a pivotal part of the O. P. Jindal Group that has
emerged as an undisputable world leader in a short span of three decades.
Some of the key elements that define the JSW Group are:

 It has a strong foothold across India, South America, South Africa & Europe
 JSW Group is spearheading initiatives in core sectors like Steel, Energy, Cement,
Infrastructure, Ventures & Sports.
 It has a diverse workforce of over 40,000 individuals.
 The Group has proven to play a significant role in the growth of the country.

Steel Authority of India Ltd. (SAIL) :

Steel Authority of India Limited (SAIL) is the largest steel-making company in India and
one of the seven Maharatna’s of the country’s Central Public Sector Enterprises. The
Company is engaged in the manufacturing of flat products, such as hot rolled (HR) coils,
HR plates, cold rolled (CR) coils, pipes and electric sheets, and long products, such as
thermo mechanically treated (TMT) bars and wire rods.

Page 29
 The Company's segments include Bhilai Steel Plant (BSP), Durgapur Steel Plant
(DSP), Rourkela Steel Plant (RSP) and OTHERS. It also offers rails, structural, merchant
products, electric resistance welded pipes, and spiral welded pipes and silicon steel
sheets.

ESSAR STEEL :

Essar Steel is one of India’s largest exporters of flat products, exporting to the highly
demanding US and European markets, and to the growing markets of South East Asia
and the Middle East.
A number of major client companies have approved their steel for their use,
including Caterpillar, Hyundai, Swaraj Mazda, the Konkan Railway and Maruti Suzuki.
Essar Steel has acquired extensively quality accreditions. Seamless integration- a major
strategic advantage in our high level of forward and backward integration. We are
totally integrated from raw materials to finished products, adding value at every stage
of manufacturing process.

Page 30
 Comparative Analysis with Competitors

1. Average Collection Period

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14 Company Avg.

TATA STEEL 11.31 13.75 10.82 4.29 6.75 9.38
Jindal 16.01 18.08 20.30 31.40 33.89 23.94
JSW 25.86 25.32 22.43 14.68 16.43 20.94
Sail 23.96 21.43 26.15 16.46 38.2 25.24

Interpretation-
Among all the companies Tata Steel has the lowest average collection period, with an
average of 8.9 or 9 days as compared to all the other companies. The lower the
collection period the better it is as this shows the no. of days in which payment from the
credit sales will be received. Jindal steel has the highest average of 23.94 or 24 days due
to higher net credit sales but comparatively lower trade receivable.

Page 31
2. Debtors Conversion period

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14 Company Avg.

TATA STEEL 11.31 13.75 9.69 3.85 6.08 8.94
Jindal 16.01 18.08 20.30 31.40 33.89 23.94
JSW 25.86 25.32 22.43 14.68 16.43 20.94
Sail 23.96 21.43 26.15 16.46 38.20 25.24

Interpretation-
With the lowest average of 8.94 or 9 days Tata Steel has the lowest debtor’s conversion
which is quite good as compared to other companies. As this indicates that the debtors
are quite good in repaying the money in the given time. Sail as compared to all the other
companies has constantly high debtor’s conversion period throughout the period of 5
years which is mentioned above in the table.

Page 32
3. Raw material conversion period

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14 Company Avg.

TATA STEEL 107.12 113.88 89.13 100.88 76.78 97.56
Jindal 84.03 51.21 65.01 140.61 178.47 103.87
JSW 49.87 46.14 50.74 43.60 39.71 46.01
Sail 62.84 44.65 36.05 61.61 47.83 50.60

Interpretation:

If we look at the table above JSW has the lowest raw material conversion period with an
average of 46 days while Jindal steel takes the highest conversion time with an average
of 104 days if we look at the past 5 years data. Compared to Tata Steel, JSW has
constantly maintained lower time period taken for the conversion of raw materials due
to high raw material consumption .The lower the conversion period the better it is as it
reduces the storing cost and indicates fast production.

Page 33
4. Work in progress conversion period

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14 Company Avg.

TATA STEEL 0.05 0.05 0.21 0.48 0.43 0.24
Jindal 5.94 6.83 12.67 6.97 2.87 7.06
JSW 4.66 5.83 5.89 7.48 4.85 5.74
Sail 21.11 28.46 37.54 25.61 18.84 26.31

Interpretation:
Tata Steel has the best average of 0.24 over all the other companies while Sail takes the
highest time period to convert the work in progress to finished goods with an average of
26.31 days. The lower the conversion period the better it is.

Page 34
5. Finished goods conversion period

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14 Company Avg.

TATA STEEL 27.16 33.29 30.38 31.24 26.30 29.67
Jindal 15.16 9.41 17.19 33.76 30.95 21.29
JSW 18.72 28.31 23.51 26.45 14.40 22.28
Sail 28.89 41.79 40.25 53.92 47.73 42.52

Interpretation:
If we look at the ratios calculated above, Jindal Steel has the lowest finished goods
conversion period. This indicates that in an average of 21.29 days Jindal steel converts
its finished goods to sales. On the other hand Sail takes the maximum time period that is
42.5 days to convert the finished goods to sales. In comparison with the other
companies Tata Steel stands in the 3rd position with an average of approximately 30
days.

Page 35
6. Inventory turnover ratio

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14 Company Avg.

TATA STEEL 4.55 5.15 4.33 4.78 5.43 4.85
Jindal 4.47 4.33 2.81 2.22 2.26 3.22
JSW 3.85 4.18 3.06 4.18 5.44 4.14
Sail 2.31 2.26 4.51 2.78 2.06 2.78

Interpretation -

This ratio shows the company’s ability to produce and sell its product efficiently. We can
conclude from the table, that the turnover ratio is highest for TATA STEEL and it is
marked lowest for Sail. But overall the ratio is good for all the companies as the
fluctuations marked is slight which indicate the efficiency of the companies.

Page 36
7. Inventory holding period

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14 Company Avg.

TATA STEEL 80.14 70.93 84.35 76.35 67.2 75.794
Jindal 81.66 84.30 118.51 165.16 161.50 122.226
JSW 94.81 87.32 119.28 87.32 67.1 91.166
Sail 158.01 161.5 80.93 131.29 177.18 141.782

Interpretation -
The lower the inventory holding period the better it is and also the products are being
sold efficiently. From the above table we can conclude that Tata Steel has the lowest
average of 76 days whereas Sail has the highest average of 142 days approximately. The
reason for the same might be an increase in the inventory size but the sales do not
increase over the years at a fast rate. This will lead to an increase in the number of
inventory days.

Page 37
8. Days Payable Outstanding Ratio

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14 Company Avg.

TATA STEEL 84.76 87.10 85.47 62.76 98.06 83.63
Jindal 77.09 56.60 50.02 39.39 45.94 53.81
JSW 92.65 88.75 109.54 104.17 84.88 96.00
Sail 49.17 37.46 30.76 28.13 24.03 33.91

Interpretation-

According the rule of thumb the lower the ratio the better it is. This ratio shows the
average number of days a company takes to pay its suppliers. So, as per the rule Sail has
the lowest average of 33.9 days were as JSW has the highest average of 96 days. Tata
Steel in comparison with all the companies stands in the 3rd position with an average of
83.6 or 84 days.

Page 38
9. Avg. days to sell inventory ratio

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14 Company Avg.

TATA STEEL 22.05 19.43 23.11 20.92 18.41 20.78
Jindal 22.37 23.07 35.53 45.13 44.26 34.07
JSW 25.99 23.93 32.69 23.94 18.39 24.99
Sail 43.29 44.34 22.18 35.97 48.59 38.87

Interpretation-
Tata Steel has the lowest average among all the other companies which is considered
good, whereas Sail takes maximum days to sell inventory. The reason behind this is high
inventory holding period which affects the liquidity position of the company and in turn
increases the outstanding days to pay its creditors.

Page 39
10.Debtors Turnover Ratio

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14 Company Avg.

TATA STEEL 31.18 33.93 75.96 73.80 59.08 54.79
Jindal 15.16 13.09 8.60 7.24 7.30 10.28
JSW 10.52 12.69 12.45 15.59 16.59 13.57
Sail 12.14 10.81 11.32 7.71 7.31 9.86

Interpretation:
Sail has the lowest average as well as if look at the graph of last 5 years it has the lowest
efficiency ratio as compared to the other companies. As well the efficiency ratio is
considered the lower the better it is as it indicates how fast the debts will be collected
by the company. Comparatively Tata Steel has the highest ratio and the trend shows
that it has increased in the year 2015 & 16 but then lowered in the consecutive years.

Page 40
11. Inventory conversion period ratio

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14 Company Avg.

TATA STEEL 66.48 70.15 60.56 63.02 47.35 61.51
Jindal 62.45 42.79 59.16 88.39 91.30 68.82
JSW 55.56 59.45 60.53 62.18 45.88 56.72
Sail 105.22 115.23 122.12 22.79 105.93 94.26

Interpretation –
JSW having the lowest conversion period indicates that in an average of 56.7 days the
company has the potential to convert the inventories into net sales and this will
eventually generate sales for the company. When we compare the ratio of JSW with
Tata Steel, Tata Steel has a higher inventory size as well as higher sales because of
which the average ratio is higher.

Page 41
12. Current ratio

Particulars 2017-18 2016-17 2015-16 2014-15 2013-14 Company Avg.

TATA STEEL 0.91 0.77 0.68 0.88 0.62 0.77
Jindal 1.42 1.62 1.34 3.40 1.59 1.87
JSW 1.27 1.51 0.83 1.07 1.03 1.14
Sail 1.07 1.06 1.15 1.53 1.61 1.28

Interpretation –
From the above table we can say that ratio is good as the average of all the companies is
more than satisfactory. The current ratio represents the firm’s ability meet its
obligation. It also represents a margin of safety for creditors. The larger the amount of
current assets in relation to the current liability more will be the firm’s ability to meet its
current obligations. From the conventional rule aspect we can say that Jindal is the best
among all the companies. But from the aspect of management of risk efficiently TATA
STEEL is the best performing company.

Page 42
 Trend Analysis
Financial statement analysts usually evaluate company performance over a period
of time. Financial ratios on its own will give little or no meaningful information but
when combined with trend analysis can be insightful. Ex- financial ratios of five
years will give more information. It is agreed that trend analysis establishes the
pattern for elements in the financial statement over a period and will give an
indication of grey areas in the financial statement. For instance, the Days payable
outstanding ratio for a particular year may be acceptable but the trend analysis
may indicate steady rise in the number of days taken to payback. This might be a
concern for the suppliers of raw materials for the company as, if the inventory is
not selling at a steady rate this ultimately leads to the blockage of funds.

1.
70,000.00
60,000.00 R² = 0.6727
Revenue
50,000.00 from
40,000.00 operations
30,000.00
20,000.00 Linear
(Revenue
10,000.00 from
0.00 operations)
2013 2014 2015 2016 2017 2018

Graph: Trend line for Revenue from Operations

The trend line shows the deviation of actual from the predicted values. The revenue
from operations of Tata Steel was higher than the trend line in the year 2013 &2014
were as it was lower in the year 2016&2017 but it has risen again in the year 2018. In
the graph it is also shown the trend for the next 2 years which is predicted if the
revenue from operations increases at the same rate.

Page 43
 2.
7,000.00
6,000.00
Profit
5,000.00
for the
4,000.00 Year
3,000.00 R² = 0.4436 Linear
(Profit
2,000.00
for the
1,000.00 Year)

0.00
2013 2014 2015 2016 2017 2018
Graph: Trend line of PAT

The trend line is downward sloping which mainly due to huge expenses incurred. Also
the profits for next 2 years are predicted.

3.

14,000.00
12,000.00 R² = 0.8883

10,000.00
Inventory
8,000.00
6,000.00 Linear
4,000.00 (Inventory)

2,000.00
0.00
2013 2014 2015 2016 2017 2018

Graph: Trend line of Inventories

The trend line is an upward moving and it also shows the prediction for next 2 years.

Page 44
 Findings
During my project work, I learned a lot of things i.e. how Tata Steel is working in production,
raw material consumption etc. I also learned about inventory management in Tata Steel.
During this period I also found some points which are mentioned below:

 Major types of inventory in Tata steel includes raw material, work-in-progress, finished
and semi-finished goods and spare parts.

 Cost of inventory is valued under “weighted average method”.

 Tata steel has adopted strategic sourcing concept. Using this, organization is achieving a
substantial amount of savings through the adoption of different techno-commercial,
cost effective measures and leveraging the knowledge.

 The inventory ratio shows the efficient and effective inventory management by Tata
steel because it is able to reduce inventory level year by year.

 Value of inventory has increased inventory in terms’ of rupees but decreased in tones
because of increase in cost of raw material.

 Standard costing is used by Tata steel for accounting of inventories.

 The organizations efficient labor force and efficient utilization of material contributed
to take less time to clear the stock.

 As per my concern, Tata Steel is maintaining an appropriate amount of liquidity to cover

its current liability while we see its current ratio. This shows that the company is not
blocking its funds unnecessarily.

Page 45
 Conclusion

Inventory management has to do with keeping accurate records of finished goods

that are ready for shipment. This often means positioning the production of newly
completed goods to the inventory totals as well as subtracting the most recent
shipments of finished goods to buyers. When the company has a return policy in
place, there is usually a sub-category contained in the finished goods inventory to
account for any returned goods inventory makes it possible to quickly convey
information to sales personnel as to what is available and ready for shipment at
any given time.

Inventory management is important for keeping costs down, while meeting

regulation. Supply and demand is delicate balance, and inventory management
hopes to ensure that the balance is undisturbed. Highly trained Inventory
management and high quality software will help to make Inventory management
a success. The ROI of Inventory management will be seen in the form of increased
revenue and profits, positive employee atmosphere, and on overall increase of
customer satisfaction.

Page 46
 Bibliography
Books:

 Financial Management by I.M. Pandey

 Financial Management by Prasanna Chandra

Websites:
 www.tatasteel.com
 www.jindalsteel.com
 www.sail.co.in
 www.moneycontrol.com

Annual report:
 Tata Steel
 Jindal Steel plant ltd.
 JSW
 Sail

Page 47
 Annexure
(In crores)
Balance Sheet
31-Mar-18 31-Mar-17 31-Mar-16 31-Mar-15 31-Mar-14
Assets
Non-current assets
(a) Property, plant and equipment 70,942.90 71,778.97 49,561.05 50,882.48
(b) Capital work-in-progress 5,641.50 6,125.35 28,174.01 24,153.78 18,509.40
(c) Tangible assets 24,064.43
(d) Intangible assets 786.18 788.18 527.34 177.14 201.32
(e) Intangible assets under
31.77 38.61 31.87 16.46
development
(f) Investments in subsidiaries,
3,666.24 3,397.57 3,340.97 3148.89
associates and joint ventures
(g) Financial assets
(i) Investments 5,970.32 4,958.33 4,119.45 10,853.13 52,318.56
(ii) Loans 213.5 211.97 205.96 141.83 4080.07
(iii) Derivative assets 12.13 0.12 0.8 40.91
(iv) Other financial assets 21.21 79.49 36.92 60.7
(h) Income tax assets (net) 1,043.84 867.75 837.66 723.57
(i) Other assets 2,140.84 3,121.64 3,325.18 2845.87 302.03
Total non-current assets 90,470.43 91,367.98 90,161.21 93,044.76 99475.81
Current assets
(a) Inventories 11,023.41 10,236.85 7,137.38 8,023.35 6007.81
(b) Financial assets
(i) Investments 14,640.37 5,309.81 4,325.00 1001.15 2343.24
(ii) Trade receivables 1,875.63 2,006.52 1,133.17 1057.02 770.81
(iii) Cash and cash equivalents 4,588.89 905.21 974.68 497.16 961.16
(iv) Other balances with bank 107.85 65.1 61.45 56.66
(v) Loans 74.13 27.14 18.75 82.04 1299.2
(vi) Derivative assets 30.07 6.26 6.2 614.1
(vii) Other financial assets 480.62 315.06 207.75 234.01
(c) Other assets 1,822.94 1,225.48 1,088.87 1025.09 182.38
Total current assets 34,643.91 20,097.43 14,953.25 12,588.58 11564.6
Total assets 1,25,114.34 1,11,465.41 1,05,114.46 1,05,633.34 1,11,040.41
Equity and Liabilities
Equity
(a) Equity share capital 1,146.12 971.41 971.41 971.41 971.41
(b) Hybrid perpetual securities 2,275.00 2,275.00 2,275.00 2,275.00 2275
(c) Other equity 60,368.72 48,687.60 45,665.97 49217.9 60176.58
Total equity 63,789.84 51,934.01 48,912.38 52464.31 63422.99

Page 48
Non-current liabilities
(a) Financial liabilities
(i) Borrowings 24,568.95 24,694.37 23,926.76 24316.1 23808.09
(ii) Derivative liabilities 70.08 179.33 116.01 171.97
(iii) Other financial liabilities 19.78 18.22 396.51 841.89
(b) Provisions 1,961.21 2,024.74 1,862.05 1320.99 1905.05
(c) Retirement benefit obligations 1,247.73 1,484.21 1,252.45 1623.23
(d) Deferred income 1,365.61 1885.19 2,228.48 2130.58
(e) Deferred tax liabilities (net) 6,259.09 6,111.27 5,610.70 6231.55 2038.98
(f ) Other liabilities 224.71 77.74 76.79 19.67 983.52
Total non-current liabilities 35,717.16 36,475.07 35,469.75 36,655.98 28,735.64
Current liabilities
(a) Financial liabilities
(i) Borrowings 669.88 3239.67 5,888.00 819.74 43.69
(ii) Trade payables 11,242.75 10,717.44 6,196.88 4935.96 8263.61
(iii) Derivative liabilities 16.41 270.17 78.23 129.17
(iv) Other financial liabilities 6,541.40 4,062.35 4,633.35 7738.9
(b) Provisions 735.28 700.6 280.64 182.99 1902.81
(c) Retirement benefit obligations 90.5 56.58 56.67 51.53
(d) Income tax liabilities (net) 454.06 465.72 732.58 505.75
(e) Other liabilities 5,857.06 3,543.80 2,865.98 2149.01 8671.67
Total current liabilities 25,607.34 23,056.33 20,732.33 16,513.05 18,881.78
Total Equity and Liabilities 1,25,114.34 1,11,465.41 1,05,114.46 1,05,633.34 1,11,040.41

Page 49
 Cost Sheet
Particulars FY2017-18 FY2016-17 FY2015-16 FY2014-15 FY2013-14

Raw Materials consumed 16877.63 12,496.78 9,700.01 11,707.83 9,677.71

Wages 4828.65 4,605.13 4,324.90 4,601.92 3,673.08
PRIME COST 21706.28 17,101.91 14,024.91 16,309.75 13,350.79
Factory/ Works Overhead
Conversion charges 2,838.13 2,701.03 2,204.43 1,885.98 2,003.63
Fuel oil consumed 154.21 111.17 138.07 134.26 207.7
Repairs to buildings 71.79 70.8 57.41 76.51 74.46
Rent 75.43 75.6 73.53 75.34 46.04
Relining expenses 51.79 55.44 43.1 45.58 44.06
Purchase of power 2,770.99 2,769.75 2,743.10 2,570.16 2,564.61
Insurance charges 111.22 79.61 56.82 57.18 44.06
Freight and handling charges 4,102.23 3,783.56 2,994.88 2,883.32 2,755.08
Repairs to machinery 2,602.61 2,281.82 2,025.30 1,864.44 1,733.92
Consumption of stores and spares 3,306.45 2,751.81 2,425.11 2,305.47 2,611.23
Depreciation and amortisation expenses 3,727.46 3,541.55 1,933.11 1,997.59 1,928.70
19,812.31 18,222.14 14,694.86 13,895.83 14,013.49
MANUFACTURING COST 41,518.59 35,324.05 28,719.77 30,205.58 27,364.28
Opening stock of W.I.P 5.88 18.30 44.32 35.99 65.88
Less: Closing stock of W.I.P 6.77 5.88 18.3 44.32 35.99
-0.89 12.42 26.02 -8.33 29.89
FACTORY/ WORKS COST 41,517.70 35,336.47 28,745.79 30,197.25 27,394.17
Administrative overhead:
Royalty 1,572.69 1,145.51 938.62 807.22 1,129.80
Rates and taxes 966.02 1,298.41 752.83 684.85 508.61
Excise duty 902.55 5,267.94 -47.18 106.93 80.32
Other expenses 2,403.56 2,333.41 1,826.77 2,420.35 2,345.78
Less: Transfer to capital a/c -336.66 -217.52 598.89 586.69 1,029.92
5,508.16 9,827.75 2,872.15 3,432.66 3,034.59
COST OF PRODUCTION 47,025.86 45,164.22 31,617.94 33,629.91 30,428.76

Purchases of finished, semi-finished products 647.21 881.18 991.54 688.32 352.63

Add: Openings stock-in-trade and finished goods 4,204.51 2862.44 2,925.82 2218.21 2033.14

3,658.26 4204.51 2,808.87 2955.05 2218.21

Less: Closing stock-in-trade and finished goods
1,193.46 -460.89 1,108.49 -48.52 167.56
COST OF GOODS SOLD 48,219.32 44,703.33 32,726.43 33,581.39 30,596.32

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SALES AND DISTRIBUTION EXPENSES:
Commission, discounts and rebates 193.87 207.14 182.78 164.35 163.98
COST OF SALES 48,413.19 44,910.47 32,909.21 33,745.74 30,760.30
PROFIT 12,106.18 8,350.49 5,301.13 8,039.26 10,950.73
SALES 60,519.37 53,260.96 42,686.29 46,577.26 46,309.34
Less: Excise duty Nil Nil 4,475.95 4,792.26 4,598.31
NET SALES 60,519.37 8,350.49 38,210.34 41,785.00 41,711.03

RECONCILIATION STATEMENT
Particulars Amount (Rs) Amount (Rs) Amount (Rs) Amount (Rs) Amount (Rs)
Profit as per Cost Sheet 12,106.19 8,350.49 5,301.13 8,039.26 10,950.73
Add: Other income 763.66 414.46 3,890.70 582.78 787.64
Less: Finance Cost -2,810.62 -2,688.55 -1,460.27 -1,975.95 -1,820.58

Allowance for credit -54.48 -16.09 Nil Nil Nil

losses/provision for advances
Provision for wealth tax Nil Nil Nil -2 -2

Provision for doubtful debts and Nil Nil -22.49 -26.05 -60.53
advances
-2,101.44 -2,290.18 2,407.94 -1,421.22 -1,095.47
PROFIT BEFORE EXCEPTIONAL 10,004.75 6,060.31 7,709.07 6,618.04 9,855.26
ITEMS AND TAXES

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