Manoj Usha Martin Project


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Manoj Usha Martin Project

  2. 2. A Report onASCERTAINMENT OF WORKING CAPITAL REQUIREMENTS FOR THE YEAR 2012-13 OF USHA MARTIN LTD. - RANCHI UNIT By MANOJ KUMAR PRAMANIK CUJ/1/2009/MBA/14 A Report submitted in partial fulfilment of the requirements of MBA program of CUJ, Ranchi Submitted to CA Rajiv Singh Deputy Manager (Accounts and Commercial) Usha Martin Limited, Ranchi 2
  3. 3. DECLARATIONI hereby declare that this project report entitled “A PROJECT REPORT ONASCERTAINMENT OF WORKING CAPITAL REQUAIREMENT OF USHA MARTIN LTD.FOR THE FINANCIAL YEAR 2012-13” have been prepared by me in partial fulfilment ofthe requirement for the award of MBA. I also declared that the best of my knowledge, this project is a result of myown effort and it has not been submitted to any other university or institute for theaward of any professional degree.Date:Place: (Signature) 3
  4. 4. Certificate of GuideThis is to certify that Mr. Manoj Kumar Pramanik, Enrol No: CUJ/01/2009/MBA/14 ,student of the Central University of Jharkhand of MBA Program has undertaken theproject titled “A Report on ASCERTAINMENT OF WORKING CAPITAL REQUIREMENTSFOR THE YEAR 2012-13 OF USHA MARTIN LTD. - RANCHI UNIT” under my guidance.No portion of this project report is published or submitted to any other University ororganization. This study was done for the fulfilment of the requirements of SummerTraining Project of the MBA Program.The information in the report is genuine to the best of his knowledge and has beencollected from reliable sources, the Internet, and the annual reports of the Usha Martin.The analysis and compilation was the original work of the student based on secondarydata.He has completed his project satisfactorily. This certificate is being issue d for academicpurpose.CA- Rajiv SinghDeputy Manager (Accounts and Commercial)Usha Martin Limited. Tatisilwai, Ranchi 4
  5. 5. ACKNOWLEDGEMENTThere are times when one feels a sense of accomplishment combined with a sense ofgratitude. Writing the acknowledgement page in this project is one among them. Thisproject would have been a distant dream without the grace of almighty. So, first andforemost, I, profusely thank god for his blessings and grace, without which my projectwould not have seen the light of the day.I would like to say thankful to Mr. ARVIND KUMAR HR Department, Usha Martin who hasgiven me opportunity to do my internship in this organization. I would like to say thank to HOD sir, Prof. TAPOSH GHOSHAL, Dean of School ofManagement Sciences, Central University of Jharkhand, who provided me a golden chance forSummer Training and my especial thanks to Mr. RAJIV SINGH, Finance Department, UshaMartin Ltd., for his guidance and appreciative support in spite of busy schedule at UshaMartin Limited. 5
  6. 6. PREFACESummer training is essential to get the practical orientation of theoretical knowledgeand analysis of the business realities at the corporate level. This 1 month trainingprocedure made us understand the working culture of the business organization.The summer training in this reputed Company had been a challenging andexciting experience which brought us closer to the business organization.My topic is Ascertainment of Working Capital Requirement of Usha Martin Limited for theFinancial Year 2012-13(Wire Ropes and Speciality Product Division) in USHA MARTINLIMITED, TATISILWAI RANCHI, JHARKHAND. 6
  7. 7. EXECUTIVE SUMMARYThe basic idea behind selection of this topic is mainly due to its nature and importancein overall financial management of any organization. One of the most important areas in the day to day management of the firm is theascertainment of working capital. Working capital Ascertainment is the functional areaof finance that covers all the current accounts of the firm. It is concerned withmanagement of the level of individual current assets as well as the management of totalworking capital. Primary function of financial management is not only procurement of fund butalso their effective use with the objective maximizing the owner’s wealth. The allocationof funds, therefore, is an important function of financial management. 7
  8. 8. TABLE OF CONTENTS CONTENTS PAGE NUMBER1. Company Profile 9-112. Board of Directors 113. Organizational Structure 124. Products 135. Vision, Mission and Quality Policy 146. Milestone 15-177. Manufacturing Process 178. Best Practices at Usha Martin 18-219. Corporate Social Responsibility 2110. SWOT Analysis 22-2411. Core Competence 2412. Achievement 25-3113. Financial Analysis 31-39 - Shareholding Pattern - Cash Management - Debtors Management - Inventory Management14. Ascertaining of Working Capital 39-47 - About Working Capital - Objective of the Study - Research Methodology - Working Capital Cycle - Working Capital Management15. P/L Account & Working Capital Analysis 48-72 - Problem Formulation - Analysis of P/L Account - Ascertaining of Working Capital16. Recommendation 7317. Conclusions and My Learning 7418. Bibliography 75 8
  9. 9. 1. COMPANY PROFILE:-Usha Martin Limited, together with its subsidiaries, engages in the manufacture and saleof steel products in India and internationally. The company offers steel wire rods, rolledproducts, billets, pig iron, and allied products; wire and wire ropes products, such assteel wires, strands, wire ropes, cords, and bright bars; and related accessories,including wire drawing and allied machines, as well as jelly filled telecommun icationcables. It provides coil and bar products for wire rods and straight length applications;ropes for aerial, crane, elevator, engineering, fishing, mining, titan oil field, shipping,structural, and flexi and fancy fence applications; and wire and strands for power,construction, automobile, general engineering, and binding/stationary applications. Thecompany also offers structural products for suspension bridges, cable stayed bridges,tower guy strands, suspended roof structure, boom pendants, and architecturalapplications, as well as track ropes for bulk material handling systems, and fine andconveyor cords. In addition, it provides general engineering slings, sugar slings, pendantlines, grommet slings, cable laid slings, structural slings, deco rative slings, mooringlines, multi legged slings, stainless slings, flemish eye slings, and hand spliced slings, aswell as slings with mechanical splicing with ferrule and steel sleeves. The company wasfounded in 1961 and is based in Kolkata, India. Usha Martin Limited is a part of the UshaMartin Group.Inception of businessStarted in 1961 in Ranchi, Jharkhand as a wire rope manufacturing company, today theUsha Martin Group is a USD 1 billion conglomerate with a global presence. The grouphas set new standards in the manufacture of wire rods, bright bars, steel wires,speciality wires, wire ropes, strand, conveyor cord, wire drawing and cable machinery.With continuous growth in both the domestic and international markets, Usha Martin, 9
  10. 10. the Group’s flagship company has emerged as India’s largest and the world’s secondlargest steel wire rope manufacturer. For Usha Martin, the path to sustainable growth was long; the management constantlytried out innovative business practices. With initiative to diversify the customer baseby venturing into the international markets, moving up the value chain and fullyintegrating its business process to maximize stakeholder value.Thinking globalIn 1979, the company set up a steel plant with wire rod rolling mill at Jamshedpur, tobenefit from business integration. This ensured a steady supply of steel for themanufacture of value added products. Today, the Jamshedpur unit has a truly integratedspeciality steel manufacturing facility of 700,000 MT per annum. Out of which, about35% is consumed internally by its plant in Ranchi, Hoshiarpur & Bangkok, producingsteel wire, steel strand, steel cords, bright bar and steel wire ropes. All itsmanufacturing facilities are ISO 9000 certified and the steel plant was India’s first toreceive the TPM Excellence Award from JIPM, Japan.Going GlobalWith local success come global aspirations. Currently, the company has overseasmanufacturing operations in Thailand, UK and Dubai. Besides a vast network ofdistribution centres and marketing offices spread across the globe to support an evergrowing worldwide customer base. The company exports over 60% of the wire ropeoutput and about 20% of the total wire rods produced.Looking ForwardUsha Martin’s future plans are focused on its operation in Jharkhand – a state rich inmineral resources. Future priorities include product mix enrichment, cost reduction andinfrastructural improvements. Already flourishing in its recent foray into miningoperations, the company is planning to invest in its iron ore and coal mines, sinter plant,pellet plant, power plants, while also enhancing its steel making and value addedproducts capacity with an investment of Rs 2,100 crore.Building BridgesBut what set Usha Martin apart is its unwavering commitment to social responsibility.For over three decades the company has invested ample man-hours and capital oncommunity development projects for integrated prosperity in rural Jharkhand, througha CSR arm, Krishi Gram Vikas Kendra (KGVK). 10
  11. 11. This NGO undertakes various development initiatives, following a model of Total VillageManagement (TVM). Focusing on key areas like Watershed development, agriculturalproductivity, better health practices, education, empowering women and encouragingmicro enterprise. In recognition to its effort Usha Martin has been awarded theprestigious TERI Award for Corporate Social Responsibility in 2006.2. BOARD OF DIRECTORS: - 1. Mr. Prashant jhawar (chairman) 2. B K jhawar (chairman-Emeritus) 3. Brij k jhawar (Director) 4. N J jhawar (Director) 5. A K choudhari (Director) 6. Mr Ashok basu (Director) 7. Mr Salil singhal (Director) 8. Mrs Ramni nirula (director) 9. G n bajpai (Director) 10. Mr Nripendra mishra (Director) 11. Rajiv Jhawar (MD) 12. P Bhattacharya (JT MD) 13. Dr Vijay sharma (Ex Director & CE,steel business) 14. P K Jain (Ex Director & CE, wire & Wire rope) 11
  13. 13. PRESENCE: - • Headquartered in Kolkata, India; • Iron ore mine (Barajamda) and captive coal mines (Daltonganj) in the state of Jharkhand, India; • Steel manufacturing facilities located in Jamshedpur and Agra; • Wire and wire rope manufacturing facilities located in Ranchi (Jharkhand) and Hoshiarpur (Punjab) in India, Bangkok (Thailand), Dubai (the UAE) and Nottinghamshire (the UK); • High–value wire and conveyor cord manufacturing facilities at Ranchi; • Machinery manufacturing and engineering application canters in Ranchi and Bangalore; • Manufacturing units for bright bars in Ranchi and Sriperumbudur (Tamil Nadu); Rigging shops in the Netherlands and the UK. • Telecommunication cables manufacture at Silvassa (India).Wide global network of marketing and distribution warehouses in Singapore,4. PRODUCTS: -Following are the products manufactured by the company. 1. Coils and Bars. 2. Bright and Bars. 3. Ropes. 4. Wire and Strand. 5. Structural. 6. Silings. 7. Cord. 8. Machinery. 9. Telecables.Use of Ropes:- 1. Arial rope. 2. Crane rope. 3. Elevator rope. 4. Engineering rope. 5. Fishing rope. 6. Mining rope. 7. Structural rope. 13
  14. 14. Use of Wire and Strand:- 1. Power. 2. Construction. 3. Automobile. 4. General engineering.PRODUCT QUALITY /TESTING FACILITIES:- 1. ISO-9001 ANAB. 2. ISO-9001 UKAS. 3. ISO-14001. 4. TPM certificate. 5. API-certificate. 6. ABS-manufacturing Assessment. 7. ABS-API9A. 8. DNV -certificate. 9. Lloyd’s-certificate. 10. Inmetro-certificate.5. VISION, MISSION AND QUALITY POLICY:Vision:-To be a respected, world class & leadership in business, in quality, productivity,profitability & customer satisfaction.Mission:-  To be a customer and shareholder observed factory.  To enhance value to shareholders and services to all stake holders.  To develop highly motive team with a sense of satisfaction.  To excel as a value driven organization.  To create the value in case of quality.  To expand its area of its operation& utilize the raw material efficiently.Quality policy:-  Providing product & services that meet customer expectation.  Continual improvement to our quality management system and process.  Continues enrichment of the skills and knowledge through training and training. 14
  15. 15.  Compliance to all applicable statutory and regulatory.  Fostering the professional development of our employee.  Our suppliers and customers are our partner in progress.6. MILESTONES:-The Company is a part of the Usha Martin Group, which was formed in India in the early1960s with the establishment of Usha Martin Industries Limited (UMIL), engaged in themanufacture of steel wires, wire ropes and other related products. The group waspromoted by Mr. B. K. Jhawar, who is the Chairman of the Company. Usha BeltronLimited was incorporated on 21 May, 1986 as a joint venture between Usha MartinIndustries Limited, Bihar State Electronics Development Corporation Limited, AEGKabel, Germany (now Kabelrhydt and a member of the Alcatel group) and DEG,Germany, to manufacture Jelly Filled Telephone Cables (JFTC). Pursuant to the Orders ofthe Honble High Court of Kolkata and Patna( Ranchi Bench) Usha Martin IndustriesLimited merged with Usha Beltron Limited with effect from 15th May, 1998. Thereafterthe registered office was shifted from Tatisilwai, Ranchi, Jharkhand to Kolkata in theState of West Bengal in the year 2000. The name of Usha Beltron Limited was changedto Usha Martin Limited with effect from 1st May, 2003.Group Companies USSIL Usha Siam Steel Industries (“USSIL") was incorporated in 1980 as a joint venture between Usha Martin Industries, India and Leading Industrialists in Thailand - Promoted by Board of Investment ("BOI") for production of Steel Wires and Ropes. USSIL became a Public Company Limited in 1997 and subsequently become a wholly owned subsidiary of the Usha Martin Limited, India. USSIL is among the largest integrated Steel Wires, Industrial Strands, Control Cables and Wire ropes Plants based in the ASEAN region with an annual manufacturing capacity of 36,000 MT. UM Singapore Established in 2000, is a wholly owned subsidiary of Usha Martin Limited, India. It has been operational as a distribution center for Usha Martin Group’s core business of steel wire ropes and related products in South East Asia. It also has 15
  16. 16. distribution set up in Australia, Vietnam & Indonesia.BWWREstablished in 2003, Brunton Wolf Wire Ropes FZCO is a jointventure between Usha Martin Limited of India and GustavWolf of Germany.BWWR is the first wire rope factory set up in the middle east,situated in Jebel Ali Free Zone Enterprise (FZE) with an annualcapacity of 12,000 MT. The product range includes generalengineering rope, elevator rope, crane rope, off-shoreapplication rope, etc.UM CablesA wholly owned subsidiary of Usha Martin Limited, located atSilvassa, Western India, manufactures PIJF Copper Telecomcables and Optical Fibre Cables and has an annual capacity of2.9 MCKM and 35000 RKM respectively.UMILEstablished in 1997, Usha Martin International Limited is awholly owned subsidiary of Usha Martin Limited, formed tofacilitate distribution & marketing of the group’s wire & wirerope products in Europe. The company also acquired in 2001 aNottinghamshire based Wire Rope manufacturing company“Brunton Shaw UK” with an annual capacity of 6,000 MT. Italso specialises in providing services to oil drilling andoffshore exploration activities thru its arm EuropeanManagement & Marine Corporation having offices in Aberdeen(UK).UM AmericaA wholly owned subsidiary of Usha Martin Limited, India. Ithas been operational as a distribution center for Usha MartinGroup’s core business of steel wire ropes and related productsin United States of America. 16
  17. 17. 7. MANUFACTURING PROCESS: -(Wire & Strands) a) The wire rod is sent for surface treatment for cleaning and then for drawing. After this it’s packed and despatched as direct drawn wire. b) The drawn wire is patented and again drawn. Then it’s packed and despatched as ungalvanised wire. c) The drawn wire is galvanised and then it’s packed and despatched as galvanised steel wire. d) The drawn wire is stranded & then packed and despatched as galvanised steel wire.The drawn wire is again stranded and sent for induced heating and then it packed anddespatched as P C Strand. 17
  18. 18. (Ropes) a) First the wire rod is sent for surface treatment for cleaning of the rod. b) Then the cleaned rod is sent for drawing. c) The drawn rod is sent for patenting and further for galvanisation. d) After galvanisation the rod is again drawn and strands are formed. e) The strands are coiled to form the “wire rope”.8. BEST PRACTICES AT USHA MARTIN A. Business Drivers: - (PQCDSM). 1. Productivity. 2. Quality. 3. Cost-effective. 4. Delivery. 5. Safety. 6. Moral. 18
  19. 19. B. 5 S Framework:- 1. Sort. (To find out necessary as per value.) 2. Set in order. (For reducing searching time.) 3. Shine. (Remove dirt and dust.) 4. Standardisation. 5. Sustain.(Self -discipline).TPM (Total Productive Maintenance) policy:- Productivity 5S Speed Framework Cost Quality TPM pillars Innovation. Motivation Deliver yMcKinsey 7’S FrameworkThe model is most often used as a tool to assess and monitor changes in the internalsituation of an organization.The model is based on the theory that, for an organization to perform well, these sevenelements need to be aligned and mutually reinforcing. So, the model can be used to helpidentify what needs to be realigned to improve performance, or to maintain alignment(and performance) during other types of change.Whatever the type of change – restructuring, new processes, organizational merger,new systems, change of leadership, and so on – the model can be used to understand 19
  20. 20. how the organizational elements are interrelated, and so ensure that the wider impactof changes made in one area is taken into consideration.When it comes to asking the right questions, the website, Mind Tools (,has developed a checklist and a matrix to keep track of how the seven elements alignwith each other.OBJECTIVE OF THE MODEL (To analyze how well an organization is positioned toachieve its intended objectiveUsage  Improve the performance of a company  Examine the likely effects of future changes within a company  Align departments and processes during a merger or acquisition  Determine how best to implement a proposed strategyThe Seven Interdependent Elements  The basic premise of the model is that there are seven internal aspects of an organization that need to be aligned if it is to be successfulHard Elements  Strategy  Structure  SystemsSoft Elements  Shared Values  Skills  Style  Staff WORLD’S LARGEST ARCH BRIDGE IN DUBAI 20
  21. 21. WIRE AND WIRE ROPE DIVISIONThe Usha Martin Ltd. is produce 100,000 MT / annum manufacturing facilities at Ranchi(Eastern India) is amongst the top four wire rope producers in the world. Since itsinception, the division has continuously developed and expanded its range of productofferings and is considered a pioneer in certain classes of products in India. Steel wireropes manufactured by the division find wide applications in oil exploration, mining,elevators, Crane, fishing, construction, load transportation and general engineeringsectors. HOWRAH BRIDGE & INCHEON BRIDGE NEW SONGDO CITY, KOREA9. CORPORATE SOCIAL RESPONSIBILITY:-  Usha Martin has strongly believed in its social responsibility being an important part of business philosophy. The company has promoted Krishi Gram Vikas Kendra (KGVK), as its’ social arms to take appropriate initiative in various areas which affect health, social life and economic well being of people for a period of over 35 years. Presently, KGVK reaches out to about one lack household of tribal people and weaker sections of society in over 700 villages across 6 districts in the State of Jharkhand.  KGVK has been taking on various activities in basic health, hygiene and sanitation, education, women empowerment, community development, agriculture, integrated watershed development, micro enterprise development, capacity building and need based training to generate self employment and 21
  22. 22. sustainable income for weaker section of society. It has successfully completed many projects and earned and earned recognition, appr eciation and accolades from wide section of NGOs, government and semi government agencies at state, national and international levels.  KGVK has been getting active support from, and through alliance and partnerships with, reputed national and international agencies such as US-AID, CEDPA, FUTURE, CARE, CAPART, ICICI Bank, NFI, IRH, Georgetown University, IFC Washington, World Bank funded SWA-Shakti, CINI, JTDS, National Foundation of Indian, Goal India, Partners in Change, BAU, ISRO, ICAR Palandu, NABARD, SIDBI, Lac Research Institute, Govt. of Indian, Govt. of Jharkhand and local NGO’s.10. SWOT ANALYSIS:-Strength: 1. Business model: The Company is extensively integrated from iron ore and coal block mines to captive power to the manufacture of steel, wires and wire ropes. 2. Proximity: The Company’s iron ore mines and coal mines are 160 km and 250 km respectively from downstream consuming centres, saving logistic costs. 3. Geographic mix: The Company’s revenues are drawn from India (76%) and the rest of the world (24%). Global revenues are drawn from 14 countries. 4. Product mix: The Company’s product portfolio comprises rolled products, steel wire rods, wires, strands, wire ropes, cords and cables, among others. 5. Presence: The Company enjoys an Indian and global presence. Ten manufacturing units are located within India and three abroad. The Company’s customers are pan- India and pan-global, serviced by a large number of dealers, stock points and representatives. 6. Certifications: The Company’s manufacturing units are ISO 9000- certified. The Company was accredited with TERI award and TPM Excellence award in 2006 and 2008 respectively. 7. Financials: The Company enjoyed a gearing of 1.02, a sub-7% average cost of debt as on 31st March, 2010 and interest cover of 3.94 times for 2009-10. 8. Customisation: The Company manufactures customised products resulting in value-addition, repeat business and enduring client relationships. 22
  23. 23. 9. Engineering skills: The Company’s decades of engineering knowledge related to the manufacture of wire and cable–making machines helped optimise plant, equipment and production facilities. 10. Technology: The Company invested in cutting-edge technologies across its manufacturing units; it deployed an advanced ERP solution for operational support. 11. Social responsibility: The Company’s social initiative arm, an NGO namely Krishi Gram Vikas Kendra (KGVK) earned trust and respect for undertaking activities like education, natural resource management, health, trade facilitation, dairy, farming and livelihood, among others, across 350 villages Technology:Weakness: 1. Machine & tools have become old & obsolete 2. Over looked small customer. 3. Semi – Automatic planned 4. High production cost 5. Demand of elevator ropes has increased due to global infrastructure development 6. Non effective advertising imageOpportunity: 1. UML can develop device for measuring breaking load 2. Fishing is developing in the southern coastal cities 3. Mushrooming of apartment in India & Abroad UMI can increase its profit, its fives more emphasis on direct marketing with customer 4. Now present condition reliance has found crude oil resources in Krishna Godavari basin in south, new opportunities present for UML to produce rope 5. UML can develop device for measuring breaking load 6. Competition are not much strong in secondary marketThreat: 1. Low price of the rivals product are a great threat for UML 2. High production cost 3. Local political instability 23
  24. 24. Competitors:-These are the main competitors of the company in this sector. 1. Elango Industries Ltd. 2. Inducto Steel Ltd. 3. Jindal Stainless Ltd. 4. Mahindra Ugine Steel Company Ltd. 5. Mukand Ltd. 6. Panchmahal Steel Ltd. 7. Shah Alloys Ltd.11. Core Competence: -Cost control: The vertical integration – from natural resources to wire rope – facilitatesthe adequate availability of key inputs at a significantly low cost compared withpurchases from the open market and provides a near-complete control over the entirevalue chain, strengthening the Company’s competitive edge. 1. Quality products: The Company manufactures products where product quality is of paramount importance (namely wire ropes for critical applications). The vertically integrated model allows a stringent monitoring of product quality across every process and ensures consistent product quality across batches – a big competitive advantage. The Company’s wire ropes, earned the confidence of global customers and authorities of repute including OTIS, JIPM, ABS, API, LLOYDS and ISO, a recognition of its high quality. 2. Delivery speed. The vertically-integrated business model facilitates reducing cycle time (from indent to product delivery) and allows the Company to meet delivery schedules of clients owing to minimal dependence on external inputs and factors. Besides, a complete control on the value chain allows the Company 24
  25. 25. to meet urgent client deliveries (when necessary), strengthening business relationships 3. Product basket Integration allows the Company to create a product range which caters to diverse applications across multiple sectors. For example, the Company’s wire rope product basket is one of the largest globally. This enables it to capitalise on most of the emerging opportunities in its business space. Besides, the Company’s presence across the value chain created multiple revenue verticals – pig iron, billets, structurals, bars, wire rods, wires, strands, cords and wire ropes –providing diverse growth drivers. 4. Customisation. Integrated operations help customise products to suit specialised applications for key customer requirements, enhancing customer loyalty. 5. Profit maximisation. A footprint across the value chain allows the Company to provide an optimum sales mix in line with the external environment helping maximise profitability. Besides, this business model enables the Company to protect its business profitability in adverse market conditions. 6. Capacity increase Complete control of the back-end of the value chain, namely iron ore and coal reserves, allows the Company to expand downstream capacities to capitalise on emerging stabilising cost opportunities 7. Cyclicality protection The Company is protected from the vagaries of price fluctuations in key inputs, namely iron ore and coal, stabilising costs. It also enables the Company to capture the upside in the marketplace when prices rise (without a commensurate increase in costs).12. ACHIEVEMENTS:-- The company was incorporated on 22nd May, and obtained the Certificate ofCommencement of Business on 17th July, 1986. It was promoted jointly by Usha MartinIndustries Ltd. (UMI) and Bihar State Electronic Development Corporation Ltd.(BSEDC).- The Company undertook to set up a project for the manufacture of 5,00,000 conductorkilometres (CKM) per annum of jelly filled cables.- The Company entered into a technical agreement with AEG Kabel of West Germany fortechnical know-how and training of Indian technicians at the collaboratorsplant.1988- The Company had developed PCM system cable used for transmission of digital signalsand supplied higher size cables upto 1600 pairs. The Company had also developed foam 25
  26. 26. skin type cable of size 1800 x 0.4 for the first time in India.- 70 shares subscribed for by the signatories to the Memorandum of Association.70,99,930 shares were then issued at par out of which the following shares werereserved and allotted on a firm basis:- (i) 16,96,930 shares to Usha Martin Industries Ltd., its directors, their friends, etc.;- (ii) 18,46,000 shares to BSEDC;- (iii) 10,72,000 shares to AEG - Kabel of West Germany and- (iv) 7,10,000 shares to DEG of West Bermany. Out of the remaining 17,75,000 shares,3,55,000 shares were reserved for preferential allotment to employees, etc., but only14,800 shares taken up. The balance 14,20,000 shares along with 3,40,200 shares nottaken up by employees, were offered for public subscription during April 1988 (Allwere taken up).1989- During May/June 1989, the company offered 14,20,000 rights equity shares in theprop. 1:5 (All were taken up). Simultaneously, 71,000 No. of equity shares were alsooffered to the employees on an equitable basis. Only 5,200 shares taken up. Balance65,800 shares allowed to lapse.1994- The Company issued 10,00,000 No. of equity shares of Rs 10 each at a premium of Rs169 per share on preferential basis to promoters.- During October, the Company issued 32,71,028 GDRs and these representing32,71,028 No. of equity shares were issued at a price of Rs 335.66 per share.- Usha Martin Telekom Ltd., a joint venture along with Usha Martin Industries Ltd. &Telekom, Malaysia have been providing cellular phone services in Calcutta under thebrand name "COMMAND". 1996- The Company was closely monitoring the development in power sector and wasevaluating various options.- Summit Usha Martin Finance Corporation Ltd. (Formerly Usha Martin FinanceCorporation Ltd.) became a 50:50 joint venture between Usha Martin Group ofIndustries & Sumitomo Corporation of Japan. 26
  27. 27. - Other joint ventures of the company are Usha Siam Steel Industries Ltd., Usha MartinEurope Ltd. and Usha Martin Americas Inc. 1997- The Company decided to spin-off the Software Division into one of the subsidiaries ofthe company.- Usha Martin Industries Ltd. was merged with the company. After amalgamationcompany has become a multi-divisional company, covering the manufacture of pig iron,steel wires and wire rods, wire ropes and jelly-filed cables.- 11,477,334 No. of equity shares issued to the shareholders of erstwhile Usha MartinIndustries Ltd. Pursuant to the Scheme of Amalgamation with the Company and13,56,200 No. of equity shares of Rs 10 each held by erstwhile Usha Martin IndustriesLtd. were canacelled due to Amalgamation with the Company.- Ubest a division of the Usha Beltrons Ltd. has signed an agreement with SwissTelecom PTT to offer Indian cellular operators natel sim card application platform(sicap) software product for immediate implementation.- Usha Beltron Ltd. (UBL) was promoted jointly in 1986 by Usha Martin Industries andBihar State Electronic development Corporation in technical collaboration with AEGKabel, Germany to manufacture jelly filled tele-cables (JFTC).- The company will have three major divisions-wire and wire ropes, software andtelecom.1998- Crisil has downgraded the outstanding ratings of Usha Beltron Ltd. (UBL) and alsoremoved them from rating watch.- The Jhawars-promoted wire rope-to-jelly filed cables firm, Usha Beltron Ltd, is set toextend its activities into telecommunications in a big way.- Usha Beltrons telecom foray will include extending activities to different fields ofoperating, maintaining and providing telecommunications services of all types andother value-added services and to design, instal and/or erect all types oftelecommunication network systems and enter into joint venture agreement withIndian and foreign parties.- Usha Beltron Ltd. of the Jhawars is all set to change its name to Usha Martin Ltd thisfiscal, according to sources in the company. This is for the second time, in a span of justone year, that the company is going to change its name. 27
  28. 28. - The company has initiated moves to restructure its international marketing anddistribution business.- The Company embarked on creating a new cable manufacturing facility at Silvassawith a capacity of 27 lckm through UM Cables Ltd., a wholly owned subsidiary of thecompany.1999- The company has introduced a voluntary retirement scheme at its cable and wire ropefactories in Ranchi from last month. The scheme has been offered to workers andofficers who are of and over forty years of age and have completed 10 years of service.- UM Cable Ltd, a wholly-owned subsidiary of Usha Beltron Ltd. belonging to the Rs.1,000-crore plus Usha Martin Group, is being launched in Silvassa, near Mumbai, tomanufacture jelly-filled telecommunication cables.- Usha Beltron Ltd. (UBL), the wire and wire ropes major of the Jhawar group, is settingup a holding company to streamline its overseas distribution network.- Usha Communications Technology, a wholly-owned subsidiary of Usha Beltron Ltd,and Compaq Computer Corporation singed a comprehensive worldwide solutiondevelopment marketing agreement on May 7 at Portland, Oregon, the US.- UBL recently entered into an agreement with American Express Bank for fundingworth $15 million. "The rest of the $10 million will be through equity expansion andbringing in a joint venture partner."- Usha Beltron Limited, the flagship of the city-based Usha Martin Group, is setting up ajoint venture with an Australian firm to produce leaded steels.- Usha Beltron Limited (UBL) of the Calcutta-based Jhawars have acquired 10 per centequity control in its Thai ropes and wire making joint venture -- Usha Siam Limited.- Umicor, UK, a joint venture between Usha Beltron Ltd. (UBL) and Exim Bank, hasacquired EMMC UK, a firm specialising in providing services and solutio ns for the wirerope industry, for $3.5 million.- While software companies are making a beeline for India, Usha Beltron Ltd. of theJhawars is setting up a holding company - Usha Communications Technology - forsoftware development in the United Kingdom. 28
  29. 29. - The new company is being set up in collaboration with Entryline Holdings Ltd, aPentire group company of the UK.- Usha Beltron Limited (UBL), the city-based Jhawar groups flagship, has decided toenter into a 50:50 joint venture with Martin Bright of Australia to set up a Rs 40-crorespecial steel manufacturing facility in Jamshedpur.- The Usha Beltron Group of the Jhawars has flagged off a major restructuring exercisefor its global software activities by initiating the process to set up a new holdingcompany in the United States by January 2000, which is likely to be named UBESTAmerica.2000- Usha Beltron is all set to joint the big league of corporates flourishing on growthopportunities inknowledge-based sectors such as infotech and telecom. The companyhas set up technical training centres.- The Company has approved a Scheme of Arrangement proposed to be made betweencompany and Usha Martin Infotech Ltd, (UMIL) and their respective shareholders.- Usha Beltron Ltd, the flagship of the Calcutta-based Jhawars, will issue globaldepository receipts (GDRs) in a couple of months.- Calcutta-based Usha Beltron has acquired the wire rope business of Brunton Shaw ofthe UK, a subsidiary of the 180-million Carclo, UK.- The Company issued 35,00,000 Global Depository Receipts (each GDR represented byone equity share of Rs 10 each) at a price of US$3.25 per GDR.2001- Mr Pradip P. Shah, Director has resigned from the board effective from 24th January.2002-Ties up with Gustav Wolf of Germany to manufacture steel cords in India.-Board approves in setting up of a Direct Reduced Iron (DRI) Plant with the capacity of100 KT per annum. 29
  30. 30. -Usha Beltron Ltd announces the change in management as follows:1. Mr Biswajit Choudhuri appointed as a nominee of Unit Trust of India on the Board ofthe Company in place of Mr S K Saha2. Mr Dilip Mondal appointed as a nominee of Industrial Development Bank of India onthe Board of the Company.-Board approves for the issue and allotment of securites on preferential basis: 1)53,45,455 equity shares of Rs.5/- each of the company at a price of Rs.33/- per share(inclusive of premium of Rs.28/- per share) being the price which is in accordance withchapter X111 of SEBI (Disclosure and Investor Protection) Guidelines to InternationalFinance Corporation, Washington. 2) 53,45,455 equity shares of Rs.5/- each of thecompany at a price of Rs.33/- per share (inclusive of premium of Rs.28/- per share)being the price which is in accordance with chapter X111 (Guidelines for preferentialissues) of SEBI ( Disclosure and Investor Protection) Guidelines to Promoters, PromoterGroup, Directors, their relatives and associates. 3) The BOD have also decided toconvene an EGM on July 18, 2002 to consider the above matters.-IFC signs agreement with UBL to invest Rs.120.5cr in the company.-UMIL acquires 30,00,000 shares amounting to 9.45% voting rights on preferentialallotment basis.2003- DEG financed Rs.50cr to UBL and the debt cost stands at Libor plus 275 basis pointswith 11 years time span.-Purchases a wire rope plant in Dubai-Acquisition of 49.55% stake in Usha Martin International Ltd, UK (UMIL)-Ministry of coal alloted captive coal block in Jharkhand having a reserve of more than30 MN T and contains Grade A & B coal, which would be required by the company for itsSponge Iron (DRI Project) Plant expansion.-Mr. T K Banerjee, Nominee of Life Insurance Corporation of India resigned from theBoard of Directors of the Company.2005-Usha Martin executes a Business Transfer Agreement with JCT 30
  31. 31. 2007 - Usha Martin Ltd has appointed Mr. Suresh Neotia and Mr. Ashok Basu, as additional directors of the Company with effect from May 17, 2007. - The Company has splits its face value from Rs5/- to Rs1/-. 2010 - Usha Martin Limited has appointed Dr. Vijay Sharma and Mr. P. K. Jain as executive Directors on the Board of the Company. - Usha Martin Ltd has appointed (a) Mr. G N Bajpai as Additional Director [non- executive & independent] with effect from March 18, 2010; and (b) Mr. Nripendra Misra as Additional Director [non-executive & independent] with effect from March 22, 2010. - Usha Martin Ltd has appointed Mr. Jitender Balakrishnan as Additional Director (non - executive & independent) with effect from June 10, 2010. 13. FINANCIAL ANALYSIS: - Shareholding patternShareholding pattern - Usha Martin Ltd. No of % Share Holders Name Shares Holding Promoters 88459017 29.03% Foreign Institutions 52943476 17.37% National Banks Mutual Funds 50900204 16.70% Foreign Promoter 33336135 10.94% General Public 31008972 10.18% Financial Institutions 23206663 7.62% Other Companies 20157943 6.61% The shareholding pattern says that only around 10% of the total shares are open for the general public. The company’s shares had Face Value of INR 5.00 from 2003 to 2007; however the year ending ’08 it has been changed to INR 1.00. 31
  32. 32. % Share Holding 6.61% 7.62% Promoters 29.03% Foreign Institutions 10.18% National Banks Mutual Funds Foreign Promoter 10.94% General Public Financial Institutions 17.37% Other Companies 16.70% CASH MANAGEMENT: -Meaning and Importance of cashCash, the most liquid asset and also referred to as the life blood of a business enterpriseis of vital importance to the daily operations of business firms. Its efficient managementis crucial to the solvency of the business because cash is the focal po int of the funds flowin a business. Cash plays a very important role in the entire economic life of anorganization. A firm needs cash to make payments to its suppliers, to incur day to dayexpenses and to pay salaries, wages, interest and dividend etc. Cash is money that iseasily accessible either in the bank or any business.It is very essential for a business to maintain an adequate balance of cash. But many atimes a concern operates profitably and yet it becomes very difficult to pay taxes anddividends. This may be because: Although huge profit have been earned yet cash may not have been received because of large credit sale was made.  Even if cash has been received, it may have drained out (used for some other purposes).This movement of cash is of vital importance to the management, so propermanagement of cash is very important. 32
  33. 33. Cash/fund managementCash/Fund, the most liquid assets is the vital importance to the daily operations of thebusiness firms. The proportion of corporate assets held in the form of cash is very small,often between 1 and 3 percent, its efficient management is crucial to the solvency of thebusiness enterprise because in a very important sense cash is the focal point of fundflows in business. It is generally referred to as the “life blood of a business enterprise”.There are three possible motives for holding cash: i. Transaction motive ii. Precautionary motive iii. Speculative motiveThe need for holding cash arises from a variety of reasons which are briefly summarizedbelow.Transaction motiveA company is always entering into transactions with other entities. While some of thesetransactions may not result in an immediate inflow/outflow of cash (e.g. creditpurchases and sales), other transactions cause immediate cash inflows and outflows. Sofirms always keep a certain amount as cash to deal with routine transactions whereimmediate cash payment is required.Precautionary motiveContingencies have a habit of cropping up when least expected. A sudden fire may breakout, accidents may happen, employees may go on strike, creditors may present billsearlier than expected or debtors may make payments later than warranted. Thecompany has to be prepared to meet these contingencies to minimize its losses. For thispurpose companies generally maintain some amount in the form of cash.Speculative motiveFirms would like to tap profit making opportunities arising from fluctuation incommodity price, security price, interest rate, and foreign exchange rates. A cash richfirm is better prepared to exploit such bargains. Firms which have such speculativeleanings may carry additional liquidity. Most firms their reserve borrowing capacity andmarketable securities would suffice to meet their speculative needs. 33
  34. 34. Cash Management CycleCash management is concerned with the managing of:  Cash flows into and out of the firm.  Cash flows within the firm.  Cash balances held by the firm at a point of time by financing deficit or investing surplus cash.It can be represented by a cash management cycle as shown below. Sales generate cashwhich has to be disbursed out. The surplus cash has to be invested while deficit has tobe borrowed. Cash management seeks to accomplish this cycle at a minimum cost. Atthe same time, it also seeks to achieve liquidity and control. The management of cash isimportant because it is difficult to predict cash flows accurately, particularly the inflowsand there is no perfect coincidence between the inflows and outflows of cash. Duringsome periods, cash outflows exceed cash inflow, because payment for taxes, dividendsor seasonal inventory builds up. At other times, cash inflow can be more than cashpayment because there may be large cash sales and debtors may be realized in largesums promptly.Cash management is also important because cash constitutes the smallest portion of thetotal current assets, yet management’s considerable time is devoted in managing it. Anobvious aim of the firm now-a-days is to manage its cash affairs in such a way as to keepcash balance at a minimum level and to invest the surplus cash in profitable investmentopportunities. Cash Collectio Business Deficit ns Operation Surplus s s Information Borrow And control Invest Cash Payments 34
  35. 35. DEBTORS MANAGEMENT: -The basic objectives of the debtor’s management are to optimize the return oninvestment on the assets. Its main aim is to promote sales and profit until that point isreached where the return on investment is further funding of debtors is less than thecost of funds raised to finance that additional credit.When a firm makes sale of goods and services and does not receive payment, it grantstrade credit and creates Debtors accounts, which would be collected in the future. Theserepresent the extension of credit on an open A/c by the firm to its customers, as thesubstantial amount is tied up in trade debtors; it needs careful analysis and propermanagement.  Size of Investment in Debtors: Investment in debtors A/c is a major part of their assets in most of business enterprises. Debtors A/c is one of the major components of working capital. The financial executives should pay due attention to the management of debtors, so that each rupee invested in debtors may contribute to the net worth o f the organization.  The Basic Problem of Debtors Management: The basic problem of debtor’s management is the balancing of profitability & liquidity. Soft credit terms attract sales and so the longer the time a company allows to pay to its customers the greater the sales and higher the profits.The longer the period of credit the greater the risk, the greater the level of debt andgreater the strain on the liquidity of the company. INVENTORY MANAGEMENT: -Inventory consists of raw material, semi-manufactured products and completelymanufactured products. It has been defined by the Accounting Principles Board as “Theaggregate of those items of tangible personal property which (a) are held for sale in theordinary course of business, (b) are in the process of production for such sales, or (c)are to be currently consumed in the production of goods or services to be available forsale”.Every firm invests a huge amount to maintain a certain level of inventory, or say stocks.Thus a large portion of working capital is involved in stock. On an average, inventoriesare approximately 60% of the total current assets in public limited companies in India. 35
  36. 36. The level of inventories for a firm depends upon the nature of its business. Amanufacturing firm will have high level of all three types of inventories, while a retail orwholesale firm will have a very high level of finished goods, no raw material and nowork in progress inventories.Firm also maintain a fourth kind of inventory suppliers OR store s and spares. Itincludes office and plant cleaning materials like soap, brooms, oil, bulb etc. Thesematerials do not directly enter in production but are necessary for production process.Because of the large size of inventory and the considerable fund engaged in Inventoriesit is become necessary to manage it in an effective and efficient manner. Material is asmuch cash as cash as cash itself and any theft, waste and excessive use of materialsleads to immediate and direct financial loss. The process of managing inventory iscalled INVENTORY MANAGEMENT.PURPOSE FOR HOLDNG INVENTORYAs we all know that huge fund is required to maintain a certain level of inventory, so thequestion is if it is expensive to maintain inventory, why do firms hold invento ries? Acompany should maintain adequate stock of material for a continuous supply to thefactory for an uninterrupted production. Sometime it is not possible for the company toprocure raw material whenever it is needed. Also there exists uncertainty in procuringraw material in time in many occasions. The procurement of material may be delayedbecause of such factors as, transport, disruption, short supply, strike etc. Therefore, thefirm should maintain sufficient stock of raw materials at a given time to streamlineproduction.Other factors which may necessitate purchasing and holding of raw material inventoriesare quantity discount and anticipate price increase. The firm may purchase largequantities of raw material than needed for the desired production and sales levels toobtain quantity discount of bulk purchasing. At times the firm would like to accumulateraw material in anticipation of price rise.Thus there are three general purposes for holding inventories:  Transaction motive  Precautionary motive  Speculative motive1. TRANSACTIONS MOTIVE: It emphasizes the need to maintain inventories to facilitate smooth production and sales operation. 36
  37. 37. 2. PRECAUTIONARY MOTIVE: It necessitates holding of inventories to guard against the risk of unpredictable change in demand and supply forces and factors.3. SPECULATIVE MOTIVE: It influences the decision to increase or deduce inventory level to take advantage of price fluctuations.OBJECTIVES OF INVENTORY MANAGEMENT The objective of inventory management is to maintain sufficient inventory for thesmooth production and sales operations and to avoid excessive and inadequate levels ofinventory. Some other objectives are as below;  Ensure a continuous supply of raw material to facilitate uninterrupted production.  Maintained sufficient stock of raw material in period of short supply and anticipate price changes.  Maintain sufficient finished goods inventory for smooth sales operation and efficient customer service.  Minimize the carrying cost and time and  Control investment in inventories and keep it at an optimum level.INVENTORIES MANAGEMENT TECHNIQUESVarious techniques commonly used for inventory control are listed below:  ABC technique  Stock level – minimum, maximum and re-order level  Economic order quantity (EOQ)  Inventory turnover ratio to review slow and non – moving material  Perpetual inventory system  Methods of pricing of material ABC TECHNIQUEABC Technique is a value based system of material control. In this technique materialare analyzed according to their value so that costly and more valuable materials aregiven greater attention and care. All items are classified according to their value ie,high, medium and low values, which are known as A, B and C items respectively. 37
  38. 38. A items: High in value and low in quantity. These items engage 70% of funds and 10%of space in the inventory.B items: Medium in value and medium in quantity. These items engage 20% of fundsand 20% of space in the inventory.C items: Low in value and high in quantity. These items engage only 10% of fund and70% of space in the inventory. Thus the ratio between A, B and C is as follows:- 1. PRICE WISE – 7:2:1 2. QUANTITY WISE – 1:2:7 STOCK LEVELS In order to check under stocking and over stocking most of the largecompanies adopt a scientific approach of fixing stock levels.These levels are:  Maximum level = Re – order level + Re – order quantity – (Max. consumption* Max. re-order period)  Minimum level = Re-order level-(Normal consumption* Maximum Re-order period)  Re-order level=Maximum consumption * Maximum re-order period  Average stock level = ½ (Maximum level + Minimum level)  Danger level = Normal consumption *Maximum re – order period under emergency condition. ECONOMIC ORDER QUANTITY (EOQ) Economic order quantity is that size of order which gives maximumeconomy in purchasing any material and ultimate contribution towards maintaining thematerial at the optimum level and at minimum cost. It is also called RE-ORDERQUANTITY. EOQ=√ (2*O.C.*A.D./C.C)Where, O.C. = Ordering cost, the cost of placing an order. 38
  39. 39. A.D. = Annual demand, annual consumption of material in units. C.C. = Carrying cost, this is the cost of holding the stock in storage. INVENTORY TRUNOVER RATIO TO REVIEW SLOW AND NON-MOVING MATERIAL Inventory turnover ratio tells us how many times in a year stock are usedup and replaced. The greater the stock turnover, the more efficient is the stock policy.  Stock turnover ratio= Cost of material consumed during the period/ Average stock of materials during the period  Stock turnover in terms of days= days of period / stock turnover rate In order to detect the slow and non-moving materials, a standard stock turnover rate should be computed for each item of material with the help of following formula: Turnover rate of an item = Budgeted consumption/Average stock levelPERPETUAL INVENTORY SYSTEM A perpetual inventory system is defined as “The method of recordingstores balance after each receipt and issue to facilitate regular checking and obviateclosing down for stock taking.”METHOD OF PRICNING OF MATERIALSSome important methods of pricing are as follows:  LIFO (Last in fast out)  FIFO (First in first out)  Simple Average Price  Weighted Average Price14. ASCERTAINING OF WORKING CAPITAL: -About Working CapitalOne of the most important areas in the day-to-day management of the firm deals withthe management of Working Capital, which is defined as the short-term assets used indaily operation. Funds are needed for short term purposes for the purchase of raw materials,payment of wages and other day to day expenses etc. These funds are known as 39
  40. 40. WORKING CAPITAL. In simple words working capital refers to that part of firm’s capitalwhich is required for financing short term or current assets such as cash, marketablesecurities, debtors and inventories. Funds, thus invested in current assets keeprevolving fast and are being constantly converted into cash and this cash flows out againin exchange for other current assets. Hence it is also known as revolving or circulatingcapital so working capital is the amount of funds necessary to cover the cost ofoperating the enterprise.Long term funds are required to create production facilities through purch ase of fixedassets such as plant and machinery, land, building, furniture, etc. Investments in theseassets represent that capital which is fixed. Kinds of Working Capital On the On the Basis of basis of Concept timeGross Working Net Working Variable FixedCapital Capital working working Capital Capital Special Seasonal Reserve Regular Working Working Working Working Capital Capital Capital Capital 40
  41. 41. Classification of working capital:  On the basis of concept:  Gross working capital  Net working capital  On the basis of periodicity of requirement:  Fixed and permanent working capital  Variable working capital  On the basis of conceptThere are two interpretations of working capital under basis of concept: a) GROSS WORKING CAPITAL b) NET WORKING CAPITAL a) Gross working capital: Gross working capital is the capital invested in total current assets of the enterprise. Current assets are those assets which in the ordinary course of business can be converted into cash within a short period of normally one accounting year such as: Cash Short term securities Debtors Bills receivable Inventory Temporary investment of surplus fundsThe concept of gross working capital focuses attention on two aspects of current assetsmanagement:  Optimum investment in current assets  Financing of current assets b) Net working capital: Net working capital is the difference between current assets and current liabilities. According to this concept working capital refers to the difference between current assets and current liabilities. It is the excess of current assets over current liabilities. Current liabilities refers to the claims of outside which are expected to the mature payment within an accounting year. 41
  42. 42. It includes – Creditors for goods Bills payable Bank overdraft Short term bank loans and advances Prepaid expenses Net working capital can be “positive” or “negative”.  Positive net working capital: it arises when current assets exceed current liabilities.  Negative net working capital: it occurs when current liabilities are in excess of current assets. The net working capital concept indicates the liquidity position of the firm and suggests the extent to which working capital need may be financed by permanent sources of funds.Thus gross working capital concept is financing or going concern concept whereas networking capital is an accounting concept of working capital. Both concepts have go ttheir own merit, but in general practice net working capital is given more priority.  On the basis of periodicity of requirement -  Fixed & permanent working capital: It represents the part of capital permanently locked up in the current assets to carry out the business smoothly this investment in current assets is of the permanent nature. It increases as the size of the business expands. Such as investment required the maintenance of minimum quantity of raw material, work-in-progress, finished products etc.The permanent working capital can again be sub divided into two parts:  Regular working capital  Reserve margin working capital  Regular working capital: It is the minimum amount of liquid working capital required to keep up the circulation of the capital from cash to inventories to receivable and again to cash. This includes minimum bank balance to discount all bills to maintain adequate supply of raw material etc.  Reserve margin of working capital: It is the excess capital over the need or regular working capital that should kept in reserve for contingencies that may arise at any time. These contingencies include rising price. Business depression, strikes, special operations such as experiments with new product etc. 42
  43. 43.  Variable working capital: Variable working capital change with the increase or decrease in the value of business. It may also be sub divided into seasonal and special working capital. o Seasonal variable working capital: The working capital to meet the seasonal liquidity of the business is seasonal variable working capital. o Special variable working capital: It is the part of variable working capital which is required for financing special operations such as extensive marketing campaigns, experiments with product or model of production. OBJECTIVES OF THE STUDY  TO study and analyze the working capital policy of the USHA MARTIN LTD.  TO study the affairs of the company with reference to the working capital ascertainment and methods of its estimation used in the company.  To understand the general performance of the company.  To use quantities data for defining company’s financial performance.  To know the profitability, production and efficiency of the firm.  To study the methods of financing working capital.  To analyses the performance effectiveness of the company. RESEARCH METHODOLOGYResearch Design: The study is based on descriptive and applied research.Data Source: Both primary and secondary data are used for the collection of theinformation required for the report.Primary data: 1. Interview schedules with officers of account department. 2. Interview schedules with officers of inventory department. 3. Interview schedules with officers of cash department. 4. Interview schedules with officers of purchase department. 43
  44. 44. Secondary Data: 1. Annual report of the company. 2. Company’s data records. 3. Company’s website.WORKING CAPITAL CYCLEThe working capital cycle refers to the length of time between the firms paying cash formaterials etc., entering into the production process/stock and the inflow of cash fromdebtors (sales).It indicates the length of time between a company’s paying for materials, entering intostock and receiving the cash from sale of finished goods. It can be determined by addingthe number of days required for each stage in the cycle. For example, a company holdsraw materials on an average for 60 days, it gets credit from the supplier for 15 days,production process needs 15 days, finished goods are held for 30 days and 30 dayscredit is extended to debtors. DEBTORS CASH RAW SALES MATERIALS FINISHED WORK IN GOODS PROGRESS Fig. Operating cycleThe totals of all these, 120 days is the total working capital cycle. The duration of theoperating cycle for the purpose of estimating working capital is equal to the sum of thedurations of each of the above said events, less the credit period allowed by thesuppliers. 44
  45. 45. Thus there is a complete cycle from cash to cash wherein cash gets converted into rawmaterials, work in progress, finished goods, debtors and finally into cash again. Shortterm funds are required to meet the requirements of funds during this time period. Thistime period is dependent upon the length of time within which the original cash getsconverted into cash again. This cycle is also known as operating cycle or cash cycle.Working capital management: A managerial accounting strategy maintaining efficient level of bothcomponents of working capital, current assets & current liabilities in respect to eachother. Working capital management ensures a company has sufficient cash flow in orderto meet its short term debt obligations and operating expenses. Working capital management or short term financial management which isconcerned with decision relating to current assets & current liabilities; short termfinancial decision typically involve cash flow within a year or within the operating cycleof the firm.Definition: Working capital management is concerned with the problem that arises inattempting to manage the current assets & current liabilities and the interrelationshipthat exists between them.Working capital management refers to all aspects of the administration of both currentassets & current liabilities. Working capital management is divided into six parts, these are as follows: 1. Working capital policy 2. Cash and liquidity management 3. Credit management 4. Inventory management 5. Working capital financing 6. Working capital management: extensions 1. Working capital policy:Working capital management is a significant fact of financial management its importantstems policy is two reasons: 1. Investment is current assets represents substantial portion of total investment. 2. Investment is current assets and the level of current liabilities has to be geared quickly to changes in sales. 45
  46. 46. Working capital policy is divided into seven heads, these are as follows: 1. Characteristic of current assets 2. Factors influencing working capital requirements 3. Level of current assets 4. Current assets financing policy 5. Profit creation for working capital (A)Characteristic of current assets: In the management of working capital two characteristic of current assets must be borne in mind: (i) short life span and (ii) swift transformation in other assets form. Current assets have a short life span. Cash balance may be held idle for a week or two; account receivable may have a life span of 30 to 60 days, and inventories may be held for 30 to 100 days. It depends upon the time requir ement. (B)Factors influencing working capital requirements: The working capital need of a firm is influenced by numerous factors. The important ones are: a) Nature of business b) Seasonality of operation c) Production policy d) Market conditions e) Condition of supply a) Nature of business: The working capital requirement of a firm is closely related to the nature of its business. A service firm, like electricity undertaking, it has a short operating cycle and its sales predominantly on cash basis, has a modest working capital requirement. On the other hand a manufacturing concern likes a machine tools unit, which has a long operating cycle and which sales largely on credit have a very substantial working capital requirement. b) Seasonality of operation: Firms which have marked seasonality in their operations usually has highly fluctuating working capital requirements. To consider firm manufacturing ceiling fans, the sale of ceiling fan reaches a peak during the summer months and drop sharply during the winter period. c) Production policy: A firm marked by pronounced seasonal fluctuation in its sales may pursue a production policy which may reduce the sharp variation in working capital requirements. d) Market condition: The degree of competition prevailing in the market place has an important bearing on working capital need. 46
  47. 47. e) Condition of supply: The inventory of raw material spares and stores depend on the condition of supply. If the supply is prompt and adequate, the firm can manage with small inventory. A similar policy may have to be followed when the raw material is available only seasonally and operation is carried out around the year.(C) Level of current assets: An important working capital policy decision is concerned with thelevel of investment in current assets. Under a flexible policy, the investment in currentassets is high and under a restrictive policy the investment in current assets is low.(D) Current assets financing policy: After establishing the level of current assets, the firm must deter mine how theseshould be financed and what mix of long term capital and short term debit should thefirm employee to support its current assets. Several strategies are available to a firm for financing its capital requirements.  Strategy A: Long term financing is used to meet the fixed assets requirements as well as peak working capital requirement. When the working capital requirement is less than its peak level, the surplus is invested in liquid assets.  Strategy B: Long term financing is used to meet fixed assets requirement, permanent working capital requirement and a portion of fluctuating working capital requirement during seasonal up wings, short term financing is used during seasonal down swing, surplus is invested in liquid assets.  Strategy C: Long term financing is used to meet fixed assets requirement and permanent working capital requirement. Short term financing is used to meet fluctuating working capital requirement.(E) Profit creation for working capital: Current assets can be easily liquidated and value realized on liquidation wouldbe more or less equal to the amount invested initially put differently investment incurrent assets is reversible. For reversible investment the certain of net profit perperiod is equivalent to the certain of net present value. 47
  48. 48. 15. PROFIT & LOSS ACCOUNT AND WORKING CAPITAL ANALYSISWorking capital levelThe consideration of the level investment in current assets should avoid twodanger points excessive and inadequate investment in current assets. Investment incurrent assets should be just adequate, not more or less, to the need of th e businessfirms. Excessive investment in current assets should be avoided because it impairs thefirms’ profitability, as idle investment earns nothing. On the other hand inadequateamount of working capital can be threatened solvency of the firms because of it sinability to meet it s current obligation. It should be realized that the working capitalneed of the firms may be fluctuating with changing business activity. This may causeexcess or shortage of working capital frequently. The management should be prompt toinitiate an action and correct imbalance. Expected value of the P/L Account of the Ranchi unit. Usha Martin Limited Projected Profitability of Ranchi unit for FY 2012-13 Rs./lacs Q1 FY 2012-13 Q2 FY 2012-13 Q3 FY 2012-13 Q4 FY 2012-13 Total FY 2012- 13Productions(M/T)WireRope & 15, 15, 17, 16, 65,9Convey 975 881 327 732 15er CordWire &Strand 19, 19, 19, 19, 79,2s 648 798 898 898 40BrightBars 4,0 4,1 4,2 4,4 16,8 00 50 50 00 00 39, 39, 41, 41, 1,61, 623 829 475 030 955Particu N Qt Rat Rs./ Qt Rat Rs./ Qt Rat Rs./ Qt Rat Rs./ Qty Ra Rs./llars or y e lacs y e lacs y e lacs y e lacs te acs m sSalesDomes 8, 1,0 8,7 8, 1,0 8,8 8, 1,0 8,9 8, 1,0 8,9 33, 35,4tic - 30 5,3 47. 35 6,1 69. 42 5,9 23. 47 5,5 46. 55 87.0Wire 0 93 65 6 45 51 2 49 00 7 43 92 5 8Rope &C cord- Wire 16 52, 8,8 16 52, 8,9 16 52, 8,9 16 52, 8,9 67, 35,7& ,7 768 63. ,9 83 54. ,9 83 54. ,9 83 54. 64 26.8Strand 98 78 48 6 37 48 6 37 48 6 37 0 9- 3, 67, 2,5 3, 67, 2,6 4, 67, 2,7 4, 67, 2,7 15, 10,7Bright 80 788 75. 90 78 43. 00 78 11. 10 78 79. 80 10.5 48
  49. 49. Bars 0 .17 95 0 8 74 0 8 53 0 8 32 0 3Export 7, 84, 6,4 7, 84, 6,3 8, 85, 7,5 8, 84, 7,0 32, 27,3- Wire 67 237 65. 52 08 27. 90 34 99. 25 83 03. 36 95.4Rope 5 20 5 7 58 5 0 53 5 5 15 0 6- Wire 2, 56, 1,6 2, 56, 1,6 2, 56, 1,6 2, 56, 1,6 11, 6,58& 85 876 20. 85 87 20. 95 62 70. 95 62 70. 60 2.86Strand 0 96 0 6 96 0 6 46 0 6 46 0s- 20 55, 110 25 55, 138 25 55, 138 30 55, 165 1,0 553.Bright 0 320 .64 0 32 .30 0 32 .30 0 32 .96 00 20Bars 0 0 0ISMAL/M.Divis 970 895 1,8 1,8ion .08 .76 76. 09. 02 09Scrap 538 540 566 558 .78 .41 .61 .51 39 75, 29, 39 75, 29, 41 78, 32, 41 77, 31, 1,6 71 1,16, ,6 445 893 ,8 29 990 ,4 21 439 ,0 71 887 1,9 ,9 456. 23 .06 29 9 .62 75 6 .81 30 9 .77 55 06 02Less :Excise 1,9 1,9 2,0 2,0duty 73. 95. 20. 24. 52 52 15 63NETSALES 27, 27, 30, 29, 919 995 419 863 .53 .10 .66 .15ExpensesWire 386 38 38 38Rods 41 43 15, 41 67 16, 43 65 16, 42 70 16, 1,6 65,2 ,2 948 ,4 6 045 ,1 7 690 ,7 1 537 8,6 21.6 70 .16 87 .45 76 .57 32 .51 65 8Zinc 116 11 11 11 56 000 650 56 60 655 60 60 703 58 60 680 2,3 2,68 1 .61 5 00 .11 7 00 .89 6 00 .24 19 9.86Lubric 31 105 31 10 34 10 32 10ant 5 656 332 2 62 331 1 59 361 9 61 349 1,2 1,37 .66 91 .67 82 .36 03 .14 97 4.83Fibre 22 114 22 11 23 11 22 11 4 488 256 4 44 256 5 44 268 9 44 261 91 1,04 .09 88 .92 88 .59 88 .72 1 3.32OtherRaw 1,6 1,6 2,3 2,2materi 55. 17. 38. 65.als 11 18 50 57Power 4.7 20 4.7 21 4.7 20 4.7 20 0 957 1 0 961 2 0 1,0 8 0 996 82 3,93 0 .21 .94 15. .75 0.6 1.21 30 8Fuel 49
  50. 50. 561 561 584 577 2,28 .23 .23 .97 .05 4.47Stores& 419 419 480 473 1,79Spares .13 .34 .48 .81 2.76Contractor & 445 446 473 470Proces .97 .29 .76 .81singchargesFreight& 1,9 1,9 2,1 2,0 8,16other 53. 63. 71. 79. 8.17selling 74 86 01 56expenseOtherExpens 1,4 1,4 1,4 1,4es - P 25. 25. 55. 55.&A 00 00 00 00Expense total : 24, 24, 26, 26, 86,5 604 683 543 147 06.2 .91 .99 .41 .17 9PBIDT 3,3 3,3 3,8 3,7 29,9 14. 11. 76. 15. 49.7 62 10 25 97 4 3,3 3,3 3,8 3,7 14. 11. 76. 15. 62 10 25 97 3,3 3,3 3,8 3,7 14. 11. 76. 15. 62 10 25 97 0.0 - 0.0 0.0 0 0 0Problem formulation: -The company is trying to find out how much working capital is being required forsmooth functioning and operations of wire and wire rope manufacturing during thefinancial year 2012-13.Why? -As per the business plan and sales forecasting of previous year the company has giventhe target to the marketing department for the future projection/forecasting of sales andhow much working capital will be required for the manufacturing process of itsproducts. According to that the marketing department does the market survey. Thatsurvey report they submit to the company. According to that market survey the companyestimate that how much working capital is needed to the production department for theproduction of wire and wire rope product. 50
  51. 51. What? -According to the forecasted figure, which is given by the marketing department, thecompany execute that how much working capital is required and how much of rawmaterials should keep in hand for the operation of business. According to that we have tomake P/L account and working capital of different department and consolidate it thatwhat are the expenses that company incur in the production and what types of workingcapital is required. First of all company has given the estimated target to the marketing departmentthat these much amount of products should be produced during the financial year 2012 -13. According to the estimation of marketing department the production department ofthe company is functioning that how much raw materials will be required for theproduction of these goods and what are the expenses that the company has to incur formanufacturing of wire, rope, conveyer cord, strands and bright bars. According to this company manages fund that keeps as inventory, which isneeded in production so that the production process does not stop. The company alsokeep watch on holding period, because if the holding period increases, then companyhas to incur additional capital and probably the chance of bad debt increases. At last themost important thing is that to keep cash in hand for their day to day expenses and forrunning the production process conveniently. After the management of working capital the company procures the rawmaterials i.e. used in production process. Company brings its main raw materials i.e.wire rode from its Jamshedpur Unit. The company Usha Martin basically produces wireand wire rope. These are the main products i.e. manufactured by its Usha Martin Ltd.Ranchi unit. For proper running of the machine different kind of fuels are beingrequired, that the company has to keep in advance any time.Project Stages: -Stage 1: -First of all the Business Plan sheet (as a primary data) is given to me on behalf of thecompany where following are the things are mentioned: - 1. Highlights of the Business Plan 2. Business Plan Norms 3. Contribution Summery 4. Wire and Wire Rope Contribution 5. SPD Contribution 6. P&L Overall Ranchi 7. Expenses Overall 8. P&L WWR 9. Expenses of WWR 10. P/L Machinery Division 11. Expenses of Machinery Division 12. P/L ISMAL 51
  52. 52. 13. Expenses of ISMAL 14. P/L Power Project 15. Expenses of Power Project 16. Consumption 17. Power Plant Working 18. FC DataAfter getting the Business Plan we have analyzed all the data that are mentioned in theBusiness Plan and according to that we have prepared P/L account and Working Capitalof the company Usha Martin Ltd., Ranchi unit.Stage 2: -After getting the Business Plan Sheet, we carefully understand and analyzed that what ishappening actually in the company. We analyzed on the following question: - 1. How the company is performing its day to day activities? 2. How the funds are raising by the company? 3. From where the company is getting raw materials for its production? 4. What are the consumption norms? 5. How much inventory is company maintaining for the uninterrupted production process? 6. How much amount of money is expensing on any kind of project like- - WWR - Machinery Division - Power Project - ISMAL etc.Stage 3: -After the carefully analyzing of Business Plan, I prepared a consolidated P/L account ofRanchi unit.Analysis of P/L account quarter wise of Ranchi unit.-1st Quarter of the FY 2012-13 Productions (MT) Wire Rope & Conveyer Cord 15,975 Wire & Strands 19,648 Bright Bars 4,000 39,623Interpretation- The total production of the Wire Rope & Conveyer Cord for the firstquarter would be 15975 MT in the 1 st quarter of the FY 2012-13. Here it is calculated asWire production 15,475 MT + 500 MT Conveyor Cord productions. Wire and Strands 52
  53. 53. included total production of strand + LRPC strand + Ply strand +wire , [535+8400+1500+9213] MT, that equals 19,648 MT. The third component is bright bars.The expected production is 4000 MT. Particulars Norms Qty Rate Rs./lacs Sales Domestic - Wire Rope & C cord 8,300 105,393 8,747.65 - Wire & Strand 16,798 52768 8863.78 - Bright Bars 3,800 67788.17 2,575.95 Export - Wire Rope 7,675 84,237 6,465.20 - Wire & Strands 2,850 56,876 1,620.96 - Bright Bars 200 55,320 110.64 ISMAL/M. Division 970.08 Scrap 538.78 39,623 75,445 29,893.06 Less : Excise duty 1,973.52 NET SALES 27,919.53Interpretation- the company sales its products in domestic market as well as in foreignmarket (i.e. exports). In each market company sales the three main product groupings-wire ropes and cord; wire and strand; and bright bars. The sales figure for each iscalculated by multiplying quantity sold to its rate.DOMESTIC-Wire Ropes and Cord- the estimated sales of Wire Rope and C Cord would be total8300 MT quantities at the rate of INR 105393 per MT. The items included are from Wireand Wire Ropes sheet. These include Total Home Rope+ Total LCWR (Lock Coil WireRopes) +Slings +Anchor Mooring Ropes+ Roof Stitching Wires. Calculates as6975+365+340+120+0. Also, as per the division total Conveyor Cord domestic sales of500 is also added (all units in MT).Methods which is used-Weighted average rate method = Quantity * Rate * Excise Duty/ Total Quantitye.g. - Weighted average rate ={(6975*89876)+(365*163699)+(340*140000)+(120*82000)+(0)+(500*98000)}/8300(total quantity) *1.1236(12.36% excise duty)=105,393 The final sales amount = 8300* 105,393 53
  54. 54. =INR 87476.1900 in lacs (rounded off).Wire and Strand – the expected sales of these products would be 16798 MT in the firstquarter of the FY 2012-13. Here two items are included for quantity calculation. Theseare Total Domestic Strand + Wire + Fine Wire i.e. 9415 + 7383 + 0 = 16798 MT.Calculation by Weighted Average Rate method - {(9415*44837)+(7383*51671)+(0)}/16798(total weights) * 1.1236(12.36% excise duty)=52,768.The final sales amount = 16798* 52768= INR 8863.78 in lacsBright Bars- the total sales of Bright Bar in the domestic market would be 3800 MTquantity at the rate of INR 67788.17 MT. There is just one item included in bright bars.Quantity taken directly from the total sales provided= 3800 MT.Rate calculation - = (3800* 61458) / 3800 * 1.1236(12.36% excise duty provided)Total Sales = INR 2575.95 in lacs (rounded off).EXPORT –Wire Ropes and Cord- the company would export Wire Rope in foreign market is 7675MT at the rate of Rs. 84237 per MT.Rate calculations -= {(7675* 84237) + (0)} / 7675= INR 84,237.The sales amount = 7,675 * 84,237 = INR 6,465.20 in lacs.Wire and Strands- the expected value of the products that company will export in the1st quarter of the financial year 2012-13 is 2850 MT at the rate of Rs. 56876 per MT. Thetotal quantity is taken as the summation of PC Strands + LRPC Strands + Galv. Strands +Fine Wire. 900+120+1800+30= 2850.Rate calculations -= {(900*47397) + (120*64176) + (1800*60793) + (30*77000)} / 2850= INR 56,876The total amount would be INR 1620.96 lacs. 54