INTRODUCTION

THE FOUNDER : LATE O.P JINDAL- Babuji (The man of destiny)

(1930-2005).

The jindal orgination owes its brilliant growth to the dedicated endeavors of
its employees with a strong emphasis on quality and on time delivery to our customer as per their
specification our progresses as well as successful achievement have made the jindal org as a
leading name in INDIA.

Late O.P jindal, the founder of jindal org, which is now a US $4 billion
conglomerate, started his industrial career with a small bucket manufacturing unit in HISSAR
.the life journey of MR.Jindal from a farmer’s son to be successful industrialist, a philanthropist,
a politician and a leader would sense, as a great source of inspiration for generation to come. He
was the first industrialist of India to be elected as a member of parliament.

JINDAL STEEL AND POWER (JSPL)

Background

 Jindal Steel & Power Ltd. (JSPL), formed in 1998 with the transfer of the Raipur and
Raigarh units of Jindal Strips Limited (JSL), is the largest coal-based steel producer with a
production of 0.62 mn tpa. Under the scheme of transfer, equity capital of JSL was split
between JSL and JSPL in the ratio 60:40.
 . The Raigarh division (consisting of sponge iron, mild steel slabs and captive power
consumption units), iron ore mines at Tensa (Orissa),
 Coal mines at Gare, Tamnar (C G.) and heavy engineering equipment unit at Raipur (C.G.)
were transferred to JSPL. JSPL has added various manufacturing facility gradually during
1988 to 2007 Mainly Rail and Universal Beam mill 0.75 Million MT, Steel Making Capacity
of 2.4 Million MT, Power 340 MW, Hot Metal 1.5 Million MT, Plate Mill 1 Million MT,
High Carbon Ferro Chrome 36000 Mt, Sponge Iron (Coal Based which is largest in the
World) 1.32 Million MT.
 OBJECTIVE OF STUDY

This project was undertaken to analyze the working capital policies, working capital
management of the company and to reduce down their problems and finding the solutions with
respect to the working capital management of the company.

The objective of the study is to provide the solutions for reducing down the duration of the
operating cycle, to analyze the working capital position of the company and the liquidity
position, finding out the problems that the company is facing in managing the working capital
and showing trend of particular ratios in future and at same suggesting them to solve their
problems.

To study the working capital concept.

To see how the day-to-day operations of the company takes place.

To study the working capital management process in Jindal Steel & Power Ltd.

To see whether the company is prepared with enough working capital to face any
kind of contingencies.

To compare the performance of W/C for a particular year with previous years.

To assess Liquidity position, Long term solvency, operational efficiency, and overall
profitability of JSPL.

Providing suggestions to solve the problems of the company.

High level of vertical integration, a sustainable competitive advantage: JSPL is a highly
integrated steel producer. It has captive iron ore and coal mines. It also has a captive source of
power. Its low input costs make it one of the lowest cost producers of sponge iron in the world.
Its high value added products like rails and structural help it to 1earn higher margins.

Diversified business model: JSPL is diversifying its business risk by transforming itself from a
pure steel producer to a diversified, steel and power producer. We believe that change in revenue
stream from a pure cyclical steel business to a mix of steel and power will result in rapid Growth
of the company. Jindal Steel & Power (JSPL) is one of the lowest cost producers of sponge iron
in the world. Besides sponge iron, the company has interests in the steel and power businesses.

Riding on steel cycle upturn

On the back of the upturn in the steel cycle, JSPL has shown impressive profit growth during the
last three years. Due to the sharp growth in volumes and realizations, The Company has achieved
revenue CAGR at 62.4%. We estimate EBITDA and net profit CAGR at 60.9% and 67.9%,
respectively.

Long-term growth plans

 JSPL is taking advantage of the present steel cycle upturn to scale up its operations. It has a
definite expansion plan, which will make it one of the leading players in the steel and power
sector.

Future Plans

 The price of sponge iron is firming up and is expected to remain stable. The benefits of the
additional sponge iron capacity should now be enjoyed.
 In order to further reduce the variable cost of steel production, the company is setting up a
power Plant of 2x135 MW at the coalmine itself. This is also expected to reduce cost of
power generation.
 RESEARCH METHODOLOGY

Information Requirement:

Since my objective was to analyze the working capital policies, working capital management of
the company and to reduce down their problems and finding the solutions with respect to the
working capital management of the company. So, I required the annual report of the company,
CMA of last few years and its working capital data to analyze the position of the company and
correlate the theoretical and practical aspects of working capital management, to analyze the
efficiency of the management in managing the working capital and to find out what are the
problems that the company is facing. So, the company provided me the required information.
Then relevant calculations and analysis were done.

Research Methodology:

The methodology adopted for the project was divided into two types of analysis: Qualitative and
Quantitative

Qualitative analysis required studying the business profile of the company, its
nature, its functioning, the hierarchy and the functioning of the management of the
company, the performance of the company in last few years and what policy they
adopt and studying what role the working capital plays in a manufacturing concern.
Quantitative analysis required analyzing the current assets and the current liabilities
of the company, the statement of working capital changes, performing the analysis for
estimating the working capital requirement, analysing the operating cycle, analyzing
the Working Capital Ratios to reveal the financial position and soundness of the
business and give a good basis for quantitative analysis of financial problems and use
of modern working tools to show the trend of working capital for upcoming year with
adopting trend analysis.
 ANALYSIS

The current ratio is the measure of whether a company has enough short-term assets to cover its
short-term debt and is index of strength of working capital. Anything below 1 indicates negative
W/C (working capital). While anything over 2 means that the company is not investing excess
assets. A ratio of greater than one means that the firm has more current assets then current
claims.

Current ratio of the company has increased from 1.20 in Year 2004-05 to 1.39 in Year 2006-07.
Current Ratio of the company depicts that for every Re.1 worth of current liability there are
assets worth Re.1.39. The company has sufficient liquidity as the ratio is increasing. This year
there is an increase in ratio due to almost double inventory level in current year in comparison
with previous year.

But during the year 2009 there was steep increase in the current ratio of the company, not due to
increase in the inventory level, but due to huge holding of the cash which was recovered from the
debtors & not invested during that year.

During last year i.e. 2011, the current ratio was found to be decreased because of the increase in
sundry debtors and decrease in current investments..

SUGGESTIONS

In order to increase current ratio current assets should be increased. If we look into
the detailed schedule of current assets then we can find out that major portion of
current assets is due to debtors and inventories.
Company should make market survey and should decide first that what should be the
optimum amount of finished goods so that major portion of it can be sold off in the
market. This will help in reducing the locking of funds or working capital in the
finished goods.
 FINDINGS

The study conducted on working capital management of Jindal Steel & Power Limited shows the
evaluation of management performance in this context. Major findings and suggestions thereon
are narrated as under:

1. Current asset of the year 2009-10 is comprised of 25% of total investment in assets of the
company. As current ratio is showing a decreasing trend year on year, which implies that
current asset, are less compared to current liabilities.

2. High current assets turnover ratio is more judicious and shows efficiency of management
and proper utilization of the assets.

3. Current ratio (1.03:1) and quick ratio (0.73:1) of the year 2009-10 are lesser than that of
the ideal figures i.e. ideal current ratio is 2:1 while quick ratio is 1:1.

4. Inventory turnover ratio depict the fluctuating trend which indicates the accumulation of
inventory in turn which cause loss to the company by way of deterioration of stock,
interest loss on blockage of stock etc.

5. Debtors Turnover ratio reveals an increasing trend during the period of study and average
collection period came down from 60 to 30 days which shows that company is having
specific policy for debtors’ management.

6. From regression analysis the working capital requirement for the next year is estimated to
be 515.36 Rs/Crs.
7. The operating cycle of the firm is disturbed, as it is continuously increasing which is not
good for the company.
8. The optimum need for working capital on an average basis company roughly will require
more than 455.26 Rs/Crs as its working capital.
 SUGGESTIONS
Keeping in view of detailed analysis for the 4 years of study and findings mentioned in above
paragraphs, the following suggestions shall be helpful in increasing the efficiency in working
capital management.

1. In case of inventory management ABC analysis, FSN technique, VED technique should
be adopted to increase the efficiency of inventory management. Further a inventory
monitoring system should be introduced to avoid holding of excess inventory.

2. It is suggested to maintain a favorable current and quick ratios which shows a lesser than
ideal figures. It can be done either through increasing current assets or decreasing
liabilities.

3. With the help of proper inventory management systems, like demand-based management,
etc. the company can reduce the need for working capital and inventories can be financed
through accounts payable.

4. The company should try and maintain an optimum level of working capital in order to
improve upon the workings of the company.

LIMITATIONS

1. Availability of the financial data was very limited which is not disclosed due to sensitive
nature for the company.
2. The main component of working capital is cost of capital, which is not described in the
project because of confidential nature.
3. External environment influence was not considered while doing the theoretical standard
rather than the industrial standard because of unavailability of any such specific standard.
4. The scope of the study was limited to Jindal Steel & Power Limited.
 BIBLIOGRAPHY

Agarwal J.D.A Goal Programming Model for Working Capital Management,Finance

India,Vol.II, No. 2, June 1988
Arunachalam, S., Working Capital Management in Road Transport Corporations In Tamil
Nadu.Finance India, Vol.VIII, No.1,March 1994
Asthana ,Rojul , Simulation for working capital management, Dissertation submitted in
Centre for Systems and Management Studies.IIT,Delhi, 1982
Bannerjee,B.,Financing of working capital, The Indian Practice. The Management
Accountant, Vol. 17, No. 8, August 1982
Bhadra , Biswajit The Role Of Working Capital In Public And Private Enterprises , Working
Capital Management
Bhattacharya S.K.,Raghavachari, M and Singh A.K.,Determinants of working capital
management, IIM,Ahmedabad
Block, Stanley and Geoffrey Hirt ,Foundations of Financial Management, Homewood, ILL:
Richard D. Irwin, 1987
Brealey, R.A., S.C. Myers and A.J. Marcus. Fundamentals of Corporate Finance (1999), 2nd
Edition, The McGraw-Hill Companies, Inc.
Chowdhary ,A.B.Roy ,Working Capital Management, Eastern Law House,1978
Das, P.K., Working capital Management in the Public Sector Undertakings in India – A Case
Study. The Management Accountant, Vol. 28, No. 12, December 1993
ICWAI Exposure Draft Guidelines on Inventory Management. The Management Accountant
Vol-28, No-2, Feb 1993
Gitman, L.J. Principles of Managerial Finance (2000), 9th Edition, Addison Wesley
Longman, Inc.
Michael ,F., - Management of Working Capital, London ,The MacMillan Press Ltd.,1976
N.Chinta Rao & K.V.Rao , Management of Working Capital –Perceptions of Chief
Executives- Working Capital Management
Pandey, I M, Financial Management, Vikas Publishing House Pvt. Ltd.
Ross, S.A., R.W. Westerfield and B.D. Jordan. Essentials of Corporate Finance (1999), 2nd
Edition, Irwin/McGraw-Hill.
Scott, D.F., J.D. Martin, J.W. Petty and A. Keown. Basic Financial Management (1999), 8th
Edition, Prentice-Hall, Inc.
Richard I Levin, David S. Rubin. Statistics for Management 2007, 7th Edition, Pearson

REFERENCES

Khan M.Y, Financial Management.

Principles of Corporate Finance, Brealy and Myers, 7th edition
Pandey I.M., Financial Management
Annual Report of Jindal Steel & Power Ltd.
Working Capital data of Jindal Steel & Power Ltd.
www.indiansteel.com
www.nseindia.com
www.indianinfoline.com
www.steelex.com
www.jindalsteelpower.com
www.moneycontrol.com