New Changed Report

PROJECT REPORT ON
CASH MANAGEMENT SYSTEM

AND
INLAND DISCOUNTING
ORGANIZATION
BHUSHAN STEEL LIMITED, SAHIBABAD

(Formerly Bhushan Steels and Strips Limited)
Submitted to:- Submitted by:-
Mr
General Manager (Finance) Student of college
BHUSHAN STEEL LIMITED,
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CONTENTS
1. ACKNOWLEDGEMENT…………………………..
2. PREFACE…………………………………...............
3. INTRODUCTION…………………………………..
- Cash Management……………………………
- Service………………………………………..
4. OBJECTIVE AND SCOPE OF RESEARCH………
5. METHODOLOGY………………………………….
6. OVERVIEW OF STEEL SECTOR…………………
7. PROFILE OF THE ORGANIZATION……………..
- About the Company…………………………..
- Research and Development…………………..
- Products from group Companies……………..
- Company’s Performance at a glance…………
- Cash Flow Statement…………………………
- Performance Spotlight………………………..
- Comparitive Analysis of Financial Statement
- Ratio analysis
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8. ACTIVITIES ENGAGED IN………………………
9. BUSINESS GOALS AND STRATEGIES…………
10. S.W.O.T. ANALYSIS………………………………
11. CASH MANAGEMENT……………………………
- Importance of Cash for Company……………
- Cash Management at BHUSHAN STEEL LIMITED
12.LETTER OF CREDIT(INLAND DISCOUNTING….
13.TYPES OF CREDIT & IMPORTANCE
14. ANALYSIS AND FINDINGS………………………
15. CONCLUSION……………………………………..
16. RECOMMENDATION…………………………….
17. BIBLIOGRAPHY…………………………………..
ACKNOWLEDGEMENT
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In pursuit of MBA , internship is a critical component of the entire
package. Bhushan Steel limited has given me the opportunity to gain
invaluable experience under the guidance of Mr. Pankaj Tiwari, (GM
Finance). His continuous support and co-operation along with his invaluable
in hand experience about the Cash Management Service provided me with
the conceptual understanding and practical approach needed to work
efficiently for this project.
I am also indebted to him for sharing vital information critical

to the accomplishment of the project objectives and providing direction in
the pursuance of the project. The constant support rendered not only by him,
but by the entire Bhushan Steel Limited family is praiseworthy.
Last but not the least; I would like to take the opportunity to thank my trainer
Mr. Harish Tiwari ,Mr.Vineet Nandedkar,Ms.Vimla Pandeyfor his intellectual
stimulation and moral support through out my project.I hope this report reflecting
my learning in the past 8 weeks is as beneficial to the organization as it has been to
me.
Again, I sincerely thank all of them.

Sneha Srivastav
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PREFACE
As a part of PGDM Programme, a student has to pursue a project duly approved

by the Director of the Institute. I had the privilege of undertaking a project on
Cash Management at BHUSHAN STEEL LIMITED. Steel industry had been
facing difficulties over the past few years. Lately however, it has witnessed a boom
as a result of infrastructure development in the country and increasing demand in
the world market.
Cash management is very important for a company for its day to day operation. For
cash management the very first requirement is the procurement of funds at lowest
possible cost. Banks have realized this need of corporate and have come up with
CASH MANAGEMENT SERVICES (CMS). This project evaluates the cost
benefits of CMS to BHUSHAN STEEL LIMITED as compared to the
conventional collection method when sale is on cash basis.
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INTRODUCTION
CASH MANAGEMENT SYSTEM:-

Cash management system (CMS) is one of the product ranges under the Collection
& Production Services (CAPS) offered by banks in the country. CMS envisages
elimination of one leg of movement of cheque from drawer to beneficiary’s place
and travel bank to speed up the process. The corporate can access the collections
effected at meaning (around 170/ corp. banks & 488 locations by ICICI bank)
locations across the country covered under the management within 24 to 48 hours
at the location of corporate choice.
CASH MANAGEMENT SERVICES:
Cash management service, as the name suggest is intended at management of cash
with corporate entities. It is a service provided by banks to corporate which enables
them to have collection from their debtors/receivables with in a period of time
earlier than mentioned on the instrument (check/DD). Every organization has
receivables to collect from its dealers/ debtors/ customers. Every revenue collected
by the organizations gets paid in one form or the other. CMS provides customized
solutions to corporate needs in the liquidity management.
A CMS facility in any organization will enable that organization to have prompt
collection from its debtors who are located at distant places from the corporate
office. Had this facility not been there, collection would have meant collection
either through outstation cheque or through Demand Draft. In that case DD’s worth
corers of rupees would have brought substantial amount of DD charges to the
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company’s P/L a/c or in the other case, the outstation would take days to reach the
company’s accounts department & then some more days to get cleared with
deduction of some bank charges from the cheque amount.
Both of these options shall mean that neither we get our collection quickly nor we
get the full amount as banks would charges (deduct) some commission on the
amount of cheque. Here CMS comes to our rescue. It is a beautiful facility giving
us the desired liquidity in the shortest period of time. This service saves enormous
amount places where the transaction volume is high.
The Cash Management System manages the transfer of funds between your cash
accounts, cash management investment accounts, asset based revolving line of
credit and line of credit accounts, according to the rules you set up for them. For
each account, you must establish minimum and maximum balances and determine
the relative priority for applying cash to the account, or using cash from the
account.
The Cash Management System applies these rules automatically throughout the
Plan Period, using the other /miscellaneous cash account as a balancing account.
The balance in the Other/Miscellaneous cash account will be calculated as
containing whatever cash is available after all of the Cash Management System
rules have been applied for the other accounts in the Cash Management System. If
there is inadequate cash in the system, this will result in Other/Miscellaneous cash
having a negative balance.
Applying Extra Cash to the Cash Management Accounts - Cash is first applied
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to put enough cash in each of the Cash Management accounts so that their
minimum balance requirements are met. This will occur even if it leaves the
Other/Misc Cash account with a negative balance.
If additional cash exists after the minimum balance requirements are met for all of
the Cash Management Accounts, then cash is first applied to 'fill up' the Priority 1
account until it reaches its maximum allowed balance. If additional cash exists, it is
next applied to the Priority 2 account, and so on until all Cash Management
accounts have been filled to their maximum allowed balance, or the Other/Misc
Cash account has run out of cash to apply. If the system runs out of extra cash to
apply, the disbursement ends, leaving the Other/Misc Cash account with a zero
balance. If all of the Cash Management accounts are filled to their maximum
allowed balance, or the Other/Misc Cash account has run out of cash to apply. If
the system runs out of extra cash to apply, the disbursement ends, leaving the
Other/Misc Cash account with a zero balance. If all of the Cash Management
accounts are filled to their maximum limits, then all remaining cash will be left in
the Other/Misc. Cash account.
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Using Needed Cash from the Cash Management Accounts - If the other/Misc.
Cash account has a positive balance; cash is first used from it until it is reduced to
a zero balance. If more cash is required, it is then taken from the Priority 1 account,
until it is reduced to the minimum amount, or no more cash is required. Next, cash
is used from the Priority 2 account, and so on in similar fashion, until no more cash
is needed or until all Cash Management Accounts have been reduced to their
minimum amounts and more cash is required, then cash is removed from the
Other/Misc. Account even if this results in a negative balance.
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The Cash Management System, located under the Assumptions/ Assumption Tools
branch of the Organization Tree, allows us to view and set the cash management
priorities for all of the Cash Accounts BBB's and Lines of Credit BBB's that is set
up in the model.
ADVANTAGES OF CMS:
1. Saves a huge amount in form of DD commission and clearing charges.

2. All high value cheque gets cleared and credit is given the same day.
3. We desired the desired liquidity in form of cash very quickly. This means
there is a saving of interest on the amount that would have remained blocked
under the normal course of clearing and credit by banks.
4. Even if the cheque gets dishonored we can use the amount till the banks get
to know it. During this time we can use this money.
5. When credit is given same day, we have our cash position by evening we
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can accordingly plan our investment and expenditures accordingly for
coming days.
6. We can have an accurate figure of what were our collections from which
place.
LIMITATIONS OF CMS:
1. Collection would have meant collection either through outstation cheque or

through DD.
2. DD’s worth crores of rupees would have brought substantial amount of DD
charges to the company’s P/L account.
3. The outstation cheque would take days to reach to the company’s account s
department and some more days to get cleared with deduction of some bank
charges from the cheque amount.
HOW DOES CMS WORKS:
Banks offering CMS allow the debtors of a corporate to deposit cheque for
payment to the corporate at their place of origin. For example, if BSSL has an
account with ICICI bank at Delhi and debtors at Chennai who wants to send this
payment to BSSL through bank, CMS would allow him to deposit the cheque at
ICICI Chennai in the account of BSSL. ICICI would not charge anything from the
depositor and would give the credit of the cheque amount of BSSL in the evening
at the same day. ICICI would charge a very nominal amount from BSSL, which is
charged according to the cheque amount.
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Now this means that the cheque that would have taken 3 days to reach us through
some courier and 3 more days to get cleared and involving some real transit costs,
now gets cleared the same day it is deposited and involving nominal charges. At
the same time the DD commission and clearing charges would no longer be
deducted from the collectable amount.
This CMS facility may seem convincing while going through this part of the
report, but it is very useful and efficient as would be seen in the later part of the
report.
LETTER OF CREDIT
A letter of credit is a document issued mostly by a financial institution which

usually provides an irrevocable payment undertaking (it can also be revocable,
confirmed, unconfirmed, transferable or others e.g. back to back: revolving but is
most commonly irrevocable/confirmed) to a beneficiary against complying
documents as stated in the credit. Letter of Credit is abbreviated as an LC or L/C,
and often is referred to as a documentary credit, abbreviated as DC or D/C,
documentary letter of credit, or simply as credit (as in the UCP 500 and
UCP600). Once the beneficiary or a presenting bank acting on its behalf, makes a
presentation to the issuing bank or confirming bank, if any, within the expiry date
of the LC, comprising documents complying with the terms and conditions of the
LC, the applicable UCP and international standard banking practice, the issuing
bank or confirming bank, if any, is obliged to honor irrespective of any instructions
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from the applicant to the contrary. In other words, the obligation to honor (usually
payment) is shifted from the applicant to the issuing bank or confirming bank, if
any. Non-banks can also issue letters of credit however parties must balance
potential risks.
The LC can also be the source of payment for a transaction, meaning that an
exporter will get paid by redeeming the letter of credit. Letters of credit are used
nowadays primarily in international trade transactions of significant value, for
deals between a supplier in one country and a wholesale customer in another. They
are also used in the land development process to ensure that approved public
facilities (streets, sidewalks, storm water ponds, etc.) will be built. The parties to a
letter of credit are usually a beneficiary who is to receive the money, the issuing
bank of whom the applicant is a client, and the advising bank of whom the
beneficiary is a client. Since nowadays almost all letters of credit are irrevocable,
(i.e. cannot be amended or cancelled without prior agreement of the beneficiary,
the issuing bank and the confirming bank, if any). However, the applicant is not a
party to the letter of credit. In executing a transaction, letters of credit incorporate
functions common to giros and Traveler's cheque. Typically, the documents a
beneficiary has to present in order to avail himself of the credit are commercial
invoice, bill of lading, insurance documents. However, the list and form of
documents is open to imagination and negotiation and might contain requirements
to present documents issued by a neutral third party evidencing the quality of the
goods shipped.
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DIAGRAMATIC REPRESENTATION OF THE WORKING OF LETTER
OF CREDIT
OBJECTIVE AND SCOPE OF RESEARCH

BSL has saved huge amount of cost after adopting CMS. Had BSL not adopted this
system of collection it would have received the amount in not less than 4-5 days.
And for the same period it would have to avail the Cash Credit (CC) facilities
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granted to it by various banks. But in order to use the funds available through CC
account it had to pay an interest of 9-10% and in some cases up to 12%. Use of
CMS has brought down the cost considerably and BSL has been able to save the
interest amount because now it receives the fund within 24-48 hrs. For calculating
the cost saving for BSL the data set for the month of Ist quarter end (April 07-May
07) is considered for ICICI bank, Corporation Bank, HDFC Bank, UTI Bank and
HSBC Bank.
The cost incurred by BSL would include the draft charges, Postage charges and
interest forgone. While calculating the draft charges it has been assumed that BSL
bears the cost of draft sent by customers all the time, this might not hold true in all
cases but for its major customers it would have to do so because of the competition
in the industry. If BSL received cash in 4 days it had to avail the CC limit and paid
interest for the same period that would also add to the cost incurred by BSL. BSL
also would have to bear courier charge which is assumed to be Rs 35 per day per
location which is equal to what DTDC charges. Interest is calculated @ 11% p.a.
Interest Forgone = Total cash in a week * .11/365*(4- days taken in CMS)
Where 4 are the days taken by the draft to reach Delhi & gets
realized i.e. 2 days in transit & 2 days clearing
The Objective was to gather information about the collection charges charged by
different banks at different locations for the given period and find out which Bank
provides better services at minimum cost.
The scope of research is spread over the comparison of the collection charges
under the Cash Management System availed by Bhushan Steel Limited through the
above stated Banks.
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METHODOLOGY
For the research work, the data used for the project was both primary as well as
secondary in nature.
For collecting the primary data, the source was the company which provided the
necessary data which would be needed for the project .For instance, for company’s
profile the company provided its annual report through which we gathered the
necessary data and followed and prepared the company’s performance for past few
years.
Even for calculating charges for the payment received by the company, which is
being charged by the different banks for the CMS for different locations, as well as
penalty charges in case of any default payment was provided by the company.
We gathered the following subject matter from Company:
• Bank Reconciliation Statement Sheet.

• Statement of Accounts.
• Company’s Balance Sheet.
• Statement of collection charges.
• Statement of Cheque
These constituted the primary data for the project material of the research
objective.
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The Secondary Data constitutes the Bank Profile and the services provided by
them. The Steel Industry overview and the comparatives with the other steel
industry constitute the Secondary data.
The analysis is done on the basis of the various Statements of the Cash
Management Services provided by the bank to Bhushan Steel Limited. The total
collection from various locations is calculated for the respective banks. The
collection charge is sought from the provided documents. In case of default of
payments the penalty charges are taken into consideration.
AN OVERVIEW OF STEEL SECTOR
Global Scenario
"In 2005 World Crude Steel output at 1129.4 million metric tonne was 5.9% more
than the previous year. (Source: IISI)
"China remained the world's largest Crude Steel producer in 2005 also (349.4
million metric tonne) followed by Japan (112.47 million metric tons) and USA
(93.89 million metric tons). India occupied the 8th position (38.08 million metric
tons). (Source: IISI)
The International Iron & Steel Institute (IISI) in its forecast for 2006 has confirmed
the trend of recent years of an increase in steel use in-line with general economic
growth and with the fastest growth occurring in the countries with the highest GDP
growth such as India and China. Apparent world-wide Steel Demand is forecast to
grow to between 1,040 and 1,053 million tonnes in 2006 from a total of 972
million tonnes in 2004. This is a growth of 4-5% over the two year period.
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However, according to IISI the cost of raw materials and energy would continue to
represent a major challenge for the world steel industry.
Market Scenario
• After liberalization, there have been no shortages of iron and steel materials
in the country.
• Apparent consumption of finished (carbon) steel increased from 14.84
Million Tonnes in 1991-92 to 43.471 million tonnes (Provisional) in 2006-
07.
• Steel industry that was facing a recession for some time has staged a
turnaround since the beginning of 2002.
• Efforts are being made to boost demand.
• China has been an important export destination for Indian steel.
• The steel industry is buoyant due to strong growth in demand particularly by
the demand for steel in China.
Production
• Steel industry was delicensed and decontrolled in 1991 & 1992 respectively.
• Today, India is the 7th largest crude steel producer of steel in the world.
• In 2007-08(Apri-May''07), production of Finished (Carbon) Steel was 8.250
million tonnes (Prov).
• Production of Pig Iron in 2007-08(April-May'07) was 0.803 Million Tonnes
(Prov).
• The share of Main Producers (i.e. SAIL, RINL and TSL) and secondary
producers in the total production of Finished (Carbon) steel was 33% and
67% respectively during the period 2007-08 (April, 2007).
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Last 4 year's production of pig iron and finished (carbon) steel is given below:
(in million tonnes)

Category 2003- 2004- 2005-
2006-07 2007-08 (April-
04 05 06(Provisional) May'07) (Prov.
Estimated)
Pig Iron 3.764 3.228 4.695 4.960 0.803
Finished 36.957 40.055 44.544 49.391 8.250
Carbon Steel
(Source: Joint Plant Committee)
Demand - Availability Projection
• Demand – Availability of iron and steel in the country is projected by

Ministry of Steel annually.
• Gaps in Availability are met mostly through imports.
• Interface with consumers by way of a Steel Consumer Council exists, which
is conducted on regular basis.
• Interface helps in redressing availability problems, complaints related to
quality.
Pricing & Distribution
• Price regulation of iron & steel was abolished on 16.1.1992.

• Distribution controls on iron & steel removed except 5 priority sectors, viz.
Defence, Railways, Small Scale Industries Corporations, Exporters of
Engineering Goods and North Eastern Region.
• Allocation to priority sectors is made by Ministry of Steel.
• Government has no control over prices of iron & steel.
• Open market prices are generally on rise. Price increases of late have taken
place mostly in long products than flat products.
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Imports of Iron & Steel
• Iron & Steel are freely importable as per the extant policy.
• Last four years import of Finished (Carbon) Steel is given below:-
Year Qty. (In Million

Tonnes)
2003-2004 1.540
2004-2005 2.109
2005-2006 3.850
2006-07(Prov. 4.100
estimated)
2007-08 (Apr-May, 0.400
2007) (Prov.
estimated)
(Source: JPC)
Exports of Iron & Steel
• Iron & Steel are freely exportable.

• Advance Licensing Scheme allows duty free import of raw materials for
exports.
• Duty Entitlement Pass Book Scheme (DEPB) introduced to facilitate
exports. Under this scheme exporters on the basis of notified entitlement
rates, are granted due credits which would entitle them to import duty free
goods. The DEPB scheme was temporarily suspended from 27th March
2004 to 12 July, 2004 for export of steel items. The Scheme has since been
restarted. The DEPB rates have also been substantially reduced.
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• Exports of finished carbon steel and pig iron during the last four years and
the current year is as :
(Qty. in Million Tonnes)

Finished (Carbon) Pig Iron
Steel
2002-2003 4.506 0.629
2003-2004 4.835 0.518
2004-2005 4.381 0.393
2005-2006 4.478 0.440
2006- 4.750 0.350
2007(Prov.estimated)
2007-2008(April-May 0.850 0.073
07) (Prov.estimated)
(Source: Joint Plant Committee)
Duties & Levies on Iron & Steel
Customs Duty
• Peak rate for non-agricultural products reduced from 15 % to 12.5 %.

• Customs Duty on stainless steel and other alloy steel has been reduced from
10 % to 7.5 %.
• Duty on non- alloy steel remains unchanged at 5%.
• Duty for ferro alloys reduced from 10% to 7.5%
• Customs Duty on primary and secondary forms of non-ferrous metals viz.
Zinc has been reduced from 10% to 7.5%.
• Duty on steel melting scrap has been raised to 5%.
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• Duty on refractories reduced to 7.5 %. Duty most of the raw material for
manufacture of refractories has also been reduced to 7.5%.
• Duty on ores and concentrates reduced from 5 % to 2 %. In respect of
Ministry of Steel this would mean a reduction in duty of 3% on iron ore,
manganese ore and chrome ore.
• The Special Countervailing Duty (CVD) of 4 % to be imposed on all
imports with a few exceptions viz. ships for breaking, coal and coke etc.
Full credit to be allowed to manufacturers of excisable goods.
Service tax:
• Service tax rate increased from 10% to 12%.
Direct Taxes:
• No change in rates of personal income tax or corporate income tax. No new

taxes are also being imposed.
Levies on Iron & Steel:
SDF LEVY- This was a levy started for funding modernization, expansion and
development of steel sector.
The Fund, inter-alia, supports:
1) Capital expenditure for modernization, rehabilitation, diversification, renewal &

replacement of Integrated Steel Plants.
2) Research & Development
3) Rebates to SSI Corporations
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4) Expenditure on ERU of JPC
• SDF levy was abolished on 21.4.94

• Cabinet decided that corpus could be recycled for loans to Main producers
• Interest on loans to Main Producers be set aside for promotion of R&D on
steel etc.
• An Empowered Committee has been set up to guide the R&D effort in this
sector.
• EGEAF – Was a levy started for reimbursing the price differential cost of
inputs used for engineering exporters. Fund was discontinued on 19.2.96.
Opportunities for growth of Iron and Steel in Private Sector
The New Industrial Policy Regime:
The New Industrial policy has opened up the iron and steel sector for private
investment by (a) removing it from the list of industries reserved for public sector
and (b) exempting it from compulsory licensing. Imports of foreign technology as
well as foreign direct investment are freely permitted up to certain limits under an
automatic route. Ministry of Steel plays the role of facilitator, providing broad
directions and assistance to new and existing steel plants, in the liberalized
scenario.
The Growth Profile
(I) Steel
The liberalization of industrial policy and other initiatives taken by the

Government have given a definite impetus for entry, participation and growth of
the private sector in the steel industry. While the existing units are being
modernized/expanded, a large number of new/Greenfield steel plants have also
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come up in different parts of the country based on modern, cost effective, state of-
the-art technologies.
At present, total (crude) steel making capacity is over 34 million tonnes and India,
the 8th largest producer of steel in the world, has to its credit, the capability to
produce a variety of grades and that too, of international quality standards. As per
the ratings of the prestigious “World Steel Dynamics", Indian HR Products are
classified in the Tier II category quality products – a major reason behind their
acceptance in the world market. EU, Japan has qualified for the top slot, while
countries like South Korea, USA share the same class as India.
(II) Pig Iron
In pig iron also, the growth has been substantial. Prior to 1991, there was only one
unit in the secondary sector. Post liberalization, the AIFIs has sanctioned 21 new
projects with a total capacity of approx 3.9 million tonnes. Of these, 16 units have
already been commissioned. The production of pig iron has also increased from 1.6
million tonnes in 1991-92 to 5.28 million tonnes in 2002-03. During the year 2003-
04, the production of Pig Iron was 5.221 million tonnes.
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PROFILE OF THE ORGANISATION
BHUSHAN STEEL LIMITED:-
Bhushan Steel Limited, is an ISO 9002, QS 9000 certified and a company of Rs.
2868 crores ($650 million approx.). As one of the prime movers of the
Technological Revolution in the Indian Cold Rolled Steel Industry, BSL has
emerged as the country’s largest and the only CR steel plant with an independent
line for manufacturing Cold Rolled coils and sheets up to a width of 1700 mm, as
well as Galvanized Steel Coils & Sheets up to width of 1350mm. The Company
currently has capacity to produce ALMOST ONE MILLION MT/Annum of Cold
Rolled Steel at Sahibabad and Khopoli Works. The Company is a “single-point
source” for a wide variety of products such as CRCA, Galvanized and Color
coated sheets, High tensile steel trapping, hardened and tempered steel strips
(HTSS) and Precision tubes.
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Bhushan Steel Ltd. (BSL) is in the process of setting up one of the most advanced
Hot Rolling Plants of the world in Orissa. The construction of the first phase is
being carried out with speed and is nearing completion. Together with its state-of-
the-art Cold Rolling Plant at Sahibabad and another one at Khopoli, the company
is well poised in the industry. The company has recently launched Galume, zinc
and aluminium coated sheet, for the first time in India. Thereby, it is all set to
revolutionize the industry and demand patterns.
BSL is currently exporting to Europe, USA, Canada, Africa, China and

the Middle East, in addition to the Asian markets. And, is eagerly looking ahead,
steadily defining the future of steel day by day.
Cold Rolled Steel:

The Cold Rolling Mill Complex is a towering citadel the first of its kind in
the Steel sector of the country having equipments supplied by Global
leaders.
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The state-of-the-art 6 Hi 1700 mm Universal Crown Cold Rolling Mill from
Hitachi, Japan ranks as the widest CR mill in India along with additional
features of both side auto shape control with automatic spot cooling system
for better shape & flatness with the most advanced Level-II adaptive control
computerization. It is the first mill of its kind in the whole of Asia.
(6HiUCM Hitachi, Japan)
The mill is capable of maintaining extremely close thickness tolerances and

can produce ultra-thin CR Steel for inner shield of Picture Tube and Battery
application i.e. up to a thickness of 0.10mm in close tolerances.
The company has also installed Electrolytic Cleaning Line (ECL) with
technology from Nippon Denro, Japan to remove surface contaminants. The
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100% Hydrogen based (Hicon) high convection annealing furnaces from
world leader Ebner, Austria are yet another exclusive feature of our identity.
(ECL Ebner, Austria)
The Skin Pass mill from Calcim, France with tension leveler and
Electrostatic Oiling for uniform spray of rust preventive oil provides world
standard quality of material suitable to manufacture Automotive Skin panels.
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(Skin Pass Clecim, France)
The Roll Grinding machine and the Electrical Discharge Texturizing

machine (EDT) for the rolls from the world leaders Waldrich Siegen,
Germany ensures uniform Mirror finish material for Automobile Head lamp
reflectors and other Electroplated items & Matte surface finish, which in
turn improves the paintability, suitable for automobile skin
panels,respectively.
The CR Slitters from Fimi, Italy and Daehyun, Korea with most advanced
features like 3 M tension roll and computerized shim-less tooling ensure
absolute scratch-free material with a very close tolerance and width as low
as 10mm. These machines are the first other kind in the country.
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(CR Slitters FIMI, Italy)
The Cut-to-length lines from Heinrich George, Germany; Fimi, Italy

and Daehyun, Korea are milestones of precision engineering. These
machines provide a very close tolerance on length as low as +2/-0mm (even
less can be achieved). The on-line washing, oiling, electromagnetic sheet
stacker and on-line packing system attached to these lines ensure
International Quality Standards. These are the first lines of their kind in the
country where handling of sheets are completely automated during shearing
and packing.
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(CTL Daehyun, Korea)
To ensure the right quality input of HR Coils to the mill, the company has
the most modern Push-Pull Pickling line with technology back up from
Proeco, Canada.
In addition to the above the company also has one latest 6 Hi 1020mm &
one 20 Hi 1250mm wide Sendziemer mill with automatic gauge control and
8 CR Slitters and 14 Cut-to-length lines. The company enjoys uninterrupted

power supply from the UPSEB on 220KV, which is the first of its kind in the
State of Uttar Pradesh. Further to have captive and better quality of power
for the smooth operation of the complex, company has installed 24MW
Captive Power Plant imported from MAN B&W, Germany. This ensures
consistent supplies of material to our customers even in times of acute power
shortage.
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Galvanized steel:
The Galvanized sheets & coils manufactured by the company have excellent Zinc
adhesion and corrosion resistance achieved by applying a special coating of Zinc &
Zinc alloys. This is further enhanced by giving a special chemical treatment on the
zinc-coated surface to prevent the formation of white rust.
The Company has three Galvanizing lines consisting of most modern

continuous annealing furnaces based on the design of Stein Heurty, France.
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(Continuous Galvanizing Line)
One of the Galvanizing line has on line 4 Hi skin passing cum tension
leveling facility to produce Galvanized skin passed Material with zero
spangles for White Goods, Domestic appliances & Automotive applications.
The on line coating thickness control equipment from Valmet, Canada and
Radiometric, Germany attached to the galvanizing lines ensure uniform zinc
coating mass. The Galvanized skin passed sheets & coiled has an excellent
surface finish suitable for manufacturing products of aesthetic importance.
This product is widely accepted and extensively used for the manufacture of
Air Conditioners, Washing Machines, Refrigerators, Dish Washers, Visi
Coolers, Microwave Ovens, Computers, Bus body, Automobile
Components, Color coated sheets & coils. The company is the largest
supplier to these industries-in fact single source suppliers to many of the
customers. Recently, the company has also introduced Galvanneal material,
which is most suitable for Appliances and Automobiles industry.
33
The Galvanized sheets, coils and corrugated sheets manufactured by the
company are globally accepted especially in important international markets
of Europe, USA, Canada, South Africa, Kenya, Ethiopia, UAE, Qatar,
Oman, Nepal, Myanmar, Taiwan, Vietnam, China, Uganda, Singapore,
Tanzania, and Bangladesh.
Research & Development

The Company has a latest state of the art R&D Center and has many firsts to its
credit including development of High Tensile & IF Steel for passenger car skin
34
panel application. Development of panel grade material for Refrigerator. Visi
Coolers & Chest Coolers of Coca-Cola & Pepsi, ultra-thin CR Steel for picture
tube & battery application etc.
A fully equipped Quality Control laboratory has test equipments of

unmatched standards- Polyvac 2000 Emission Spectrometer from Hilger,
England, fully computerized Universal Testing machine, Micro Hardness tester
from Zwick, Germany, Drawability tester from Tinius Olsen, USA, Ionometer
from Orion, USA, surface Finish tester from innovation, product quality and
product range supported by an extensive network of branch offices, dynamic
dealers and distribution network, BHUSHAN is today a familiar name in the
country.
STRATEGIC ALLIANCE
In order to acquire the latest know-how to establish the quality requirements

of all customers in Automobile, White Goods Appliances & General
Engineering industry, the company has entered in to a technical
collaboration with the world's one of the largest steel producer Sumitomo
Metal Industries, Japan.
Products from Group Companies
Group Section / Standard

Products Grades Applications
Companies Dimension Used
35
Bhushan
Width: 12-535 mm EDD,DD,D Automobile, white
Industries Narrow
Thickness: 0.30- High Carbon IS / JIS goods and General
Limited, Width CR
4.00 mm Steel Engg. Industry
Chandigarh
Width: 20-70 mm
Thickness:0.50-
Bhushan 0.80 mm 'Zn'
Cable Tape D IS XLPE Cables
Metallics coating: 210
Limited, gm/m* & above
Derabassi on each Side
(Punjabi) Outside Diameter:
M.S ERW IS/BS/ Water, air and gas
1/2"-4" (15 mm to Black & GI
Pipes ASTM Application
100 mm N.B.)
Outside Diameter:
8.80 - 50.80 mm
Automobile,
Bhushan Thickness: 0.35 -
IS/BS/ Bycycle, Process,
Metallics Precision 3.25 mm Length: Bright &
JIS/DIN/ Electrical &
Limited, Tubes 3.0 - 9.0 mtr in Oiled
ASTM General Engg.
Chandigarh long length. 150 -
Industry.
2500 mm in cut
length.
Bhushan Roofing,
Width:1250 mm
Industries Construction
CR/GP/ GC (max.) Thickness : EDD, DD, D IS/ JIS
Limited, &General Engg.
0.12 - 1.60 mm
Calcutta. Application
COLD ROLLED STEEL COILS/SHEETS SPECIFICATIONS
Thickness(mm) 0.10 to 4.00
36
Width (mm) 10 to 1700(Max)
Cut-to-Length (mm) Up to 4500mm with tolerance of +2/-0 mm.
+ ERW TUBES CEW TUBES
OUTER (12.70
Further close tolerance
TO 114.00MM available
09.00on TOrequest
110.00)
Coil Weight (MT)
DIAMETER(MM) Up to 30 MT ( 7 to 18 Kg/mm width )
Surface Finish
THICKNESS(MM) Super Bright, Bright, Dull & 0.80
0.40. TO6.00 Matte.TO 6.00
LENGTH (UPTO
R Value12with
MTRS.
controlled RmaxUPTO 12 MTRS.
on request).
APPLICATIONS
Grades Automotive, Boilerper & JIS/BIS/ASTM/EN
Specifications-As Automotive, Boiler, Standards
Shock
Heat Exchangers
Low Carbon,Air Absorbers, CRCATextiles, General
Grades
Heater,
Super GEN. EGG.,
EDD/EDD/DD/D Engg.
(SPCX, SPCEN, Propeller
SPCD, SPCC)Shafts,
of non-
Bicycle IF-Height
ageing, & Propeller Cylinder
Strength steel boreHigh
(IF-HSS), tubes for Low
Strength
Shaftssteel (HSLA). viz., ST-42,
Alloy special applications
ST-45, & front
ST-52, SAPH-400/410,
Steel for Porcelein Enameling, fork Corrosion
tube for two wheeler.Steel viz.
Resistant
Tin<ill Black Plate (TMBP)
Medium & High Carbon CRCA Grades
C-30,C-40, MC-11, EN-8, for spring steel application C-55, MC-
12, EN-9, C-62, C-60, C-80, HC-14, EN-42J,
ELECTRICAL Grades Elec-I, Elec-II, Elec-III, Semi Processed
Elect. Steel
OTHER CRCA Grades
case Hardening Steel -15 Cr3, SAE 1010, SAE 1012
Through Hardening Grades - SAE 1040, SAE 1045, 1055, 1065,
1080, 1541
H.R. PICKLED/ SKIN PASSED& OILED
Thickness Up to 3.00mm 3.00mm- Above 4.00mm

4.00mm
Max.Width for Cut 1500mm 1250mm 600mm
Size
Width for Coil 50mm 50mm – 50mm -
-1700mm 1700mm 1700mm
GALVANIZED STEEL COILS/ SHEETS
PLAIN SKIN CORRUGATED HLGP FGP GPC
37
PETROL/
PASSED FUEL FAN BUSES/COACH
TANK BLADE ES
Thickness(mm) 0.10 to 0.30 to 0.12 to 1.60 0.30 to 0.40 to 0.60 to 1.60
2.50 2.50 2.50 1.20
COMPANYS’ PERFORMANCE AT A GLANCE

Balance Sheet as on 31st March 2007 (In Lacs)
38
As on As on
31st Mar 31st Mar
2007 2006
SOURCES OF FUNDS:
Share Holders Funds:
Share Capital 4247.17 4127.17
Reserves & Surplus 117203.29 84839.55
121450.46 88966.72
Deferred Tax Liability (NET) 12374.12 6631.24
Loan Funds
Secured Loans 241283.74 165091.22
Unsecured Loans 82913.96 38526.59
324197.70 203617.81
TOTAL 458022.28 299575.77
39
APPLICATIONS OF FUNDS:
Fixed Assets
Gross Block 269372.64 179590.57
Less: Depreciation 97027.00 77582.98
Net Block 172345.64 102007359
Capital Work in Progress 189211.25 129522.49
361556.89 231530.08
Investments 2085.39 1916.57
Current Assets, Loans & Advances

Inventories 75634.14 47478.46
Sundry Debtors 53889.61 40447.72
Cash & Bank Balances 10013.68 8151.64
Loans & Advances 36737.48 24114.20
176274.91 120192.02
Less: Current liabilities &

provisions
Current Liabilities 80115.57 52658.74
Provisions 1779.34 1404.16
81894.91 54062.90
Net Current Assets 94380.00 66129.12
TOTAL 458022.28 299575.77
PROFIT AND LOSS FOR THE YEAR ENDED 31st Mar 2007 (In lacs)
YEAR YEAR
ENDED ENDED
31-Mar-07 31-Mar-06
INCOME
Sale of Products & Other Income 386816.15 280514.78
EXPENDITURE
Manufacturing & Other Expenses 320962.37 239670.11
40
Profit Before Interest, Depreciation
and Tax 65853.78 40844.67
Interest & Financial Charges 7725.02 8303.07
Profit Before Depreciation and

Amortization 58128.76 32541.60
Expenses Amortized - 393.21
Depreciation 20892.21 16575.77
Profit Before Tax 37236.55 15965.83

Provision for Tax-Current 5910.57 32.00
Profit After Current Tax 31325.98 15445.11
Profit After Tax 31325.98 15445.11

Profit Brought Forward From Previous
Year 3604.36 3992.52
Profit Available For Appropriation 34930.34 19437.63
APPROPRIATIONS
Proposed Dividend 1061.79 1031.79
Provision for Dividend Tax 180.45 144.71
Transferred To Debenture Redemption
Reserve 8975.00
Release from Debenture Redemption
Reserve (3036.45) 5938.55 (5354.17) (5354.17)
Transferred to General Reserve 26000.00 20000
Balance Carried Forward to Balance
Sheet 1749.55 3604.36
34930.34 19437.63
Weighted Average No. of Equity

Shares 40471662 40471662
41
Basic & Diluted EPS 74.96 37.90
Nominal Value of Share 10.00 10.00
CASH FLOW STATEMENT FOR THE YEAR ENDED 31st Mar 07( In lacs)
2006-2007 2005-2006
(A) CASH FLOW FROM OPERATING
ACTIVITIES:
Net Profit Before Tax and extraordinary
items 37236.55 15965.83
Adjustments for:
Depreciation 20892.21 16575.77
Transfer from General Reserve - -
Expenses Amortized - 393.21
Provisions 90.15 23.53
Interest and Financial Charges 7725.02 8303.07
Interest Income (28.46) (0.46)
Profit on Sale of Investment (69.88) (7.47)
Loss/(Profit) on Sale of Fixed Assets (64.41) (16.47)
Provision for Doubtful Debts 127.68 (193.31)
Bad Debts Written Off -- 254.24
(1837.57
Effects of Exchange Rate Change ) 102.54
25181.03 23856.13
Operating Profit Before Working Capital
Changes 62417.58 39821.96
42
Adjustments for:
(28155.6
Increase (-)/decrease in Inventories 8) 10688.79
(13618.1 (6564.65
Increase (-)/decrease in Other Receivables 3) )
(8503.28 (11174.5
Increase (-)/decrease in Loans & Advances ) 3)
Increase (-)/decrease in Trade Payables 27237.36 13840.30
(23039.73) 6789.91
Cash Flow From Operating Activities 39377.85 46611.87
Less: Direct Tax Paid (Net of Refund) (4068.40) (1260.79)
Net Cash Flow From Operating Activities(A) 35309.45 45351.08
(B) CASH FLOW FROM INVESTING
ACTIVITIES:
(132421.7
Purchase of Fixed Assets 6) (96090.85)
Sale of Fixed Assets 99.58 27.64
Purchase of Investments (20756.12) 10317.66
Sale of Investments 20657.18 10307.57
Interest Income on Investment 2559.33 1185.31
(129833.3
Net Cash Used in Investing Activities (B) 3) (94887.53)
(C ) CASH FLOW FROM FINANCING
ACTIVITIES:
Interest & Financial Charges Paid (10692.70) (8929.14)
Proceeds From Cash Credit From Banks 10009.84 8565.78
Proceeds From Other Borrowings 28676.45 6713.06
Dividend Paid (809.44) (202.36)
Dividend Tax Paid (104.75) (25.93)
Effects of Exchange Rate Change (166.8) 311.55
Net Cash Flow From Financing Activities
(C ) 26912.60 6432.96
Net Increase in Cash and Cash 608.89 183.15
43
Equivalents(A+B+C)
Opening Balances of Cash and Cash

Equivalents 1130.05 946.90
PERFORMANCE SPOTLIGHT
PERFORMANCE AT A GLANCE (Rs. in crores)
44
Year
2001
2002
2003
2004
2005
2006
2007
Gross Sales
1058
1139
1263
1745
2868
3070
4202
Exports
70
115
300
389
1051
1006
1527
PBDIT
177
183
202
277
410
408
659
Net Profit
46
46
61
96
45
GRAPH FOR TURNOVER VS. NET PROFIT
46
A COMPARATIVE ANALYSIS OF FINANCIAL STATEMENTS
EQUITY SHARE
DATA
BSL BSL JINDA ISPAT SAIL TATA
L IRON INDS. STEEL
31/3/20 31/3/20 31/3/20 31/3/20 31/3/20 31/3/20
07 06 07 07 07 07
High Rs 244 114 298 17 55 466
Low Rs 62.05 20.25 76 4 9 126
Sales per share Rs 662.72 389.75 511.2 59.4 59.1 323.1
Earnings per share Rs 38 22.31 54.8 0.6 6.1 47.3
Cash flow per share Rs 1.50 0.45 65.6 3.8 8.9 70.3
Dividends per share Rs 1.5 1 0 0 0 10
Book value per Rs 198.90 164.07 240.8 15.8 11.3 118.2
47
share
Shares outstanding m 40.47 40.47 44.32 692.59 4,130.4 368.98

(eoy) 0
Bonus/Rights/Conv A A 11 11 A
ersions
Price / Sales ratio x 0.77 0.4 0.2 0.6 1

0.4
Avg P/E ratio x 5.43 2.73 3.4 16.3 5.3 6.3
Price / Book Value x 1.04 0.37 0.8 0.7 2.8 2.5

ratio
Dividend payout % 26.53 42.18 0 0 0 21.1
Avg Mkt Cap Rs 8343.2 8,282 7,220 132,07 109,23

m 3 3,592.5 0 7
3
No. of employees `000 2.166 1.398 1 21 132 41
Total wages/salary Rs 202.7 144.9 312 716 47,585 13,496

m
Avg. sales/employee Rs 12382. 1 20,917. 1,761.5 1,632.1 2,597.0

Th 87 1,283.2 90 0 0 0
6
Avg. Rs 93.58 103.65 298 33.8 360.7 327.5

wages/employee Th
48
Avg. net Rs 704.33 645.89 2,318.1 20.9 190.4 423.7
profit/employee Th 0
INCOME DATA
Net Sales Rs 26821. 21,901 37,343 215,28 107,02

m 3 15,774 4 4
Other income Rs 68.1 8.8 122 910 6,027 1,592

m
Total revenues Rs 26889. 22,023 38,253 221,31 108,61

m 4 15,783 1 6
Gross profit Rs 4097.6 4,555 5,290 40,822 34,953

m 5 2,769.7
5
Depreciation Rs 1647.2 1068 479 2,197 11,226 6,251

m
Interest Rs 793.9 662.2 827 3,401 8,994 1,408

m
Profit before tax Rs 1656.5 1039.5 3,371 602 26,629 28,886

m 7
Tax Rs 131 80 944 159 1,161 9,197

m
Profit after tax Rs 1525.5 959.51 2,427 443 25,121 17,462
49
m 7
Gross profit margin % 15.28 20.8 14.2 19 32.7

17.56
Effective tax rate % 7.91 7.70 28 26.4 4.4 31.8
Net profit margin % 5.69 11.1 1.2 11.7 16.3

6.08
BALANCE SHEET
DATA
Current assets Rs 10682. 9,035 16,860 82,013 40,830
m 61 8,455.4
3
Current liabilities Rs 3970.2 6,013 7,890 89,326 39,988

m 2 3,343.5
8
Net working cap to % 25.026 13.3 21.8 -3 0.7

sales 32.41
Current ratio X 2.7 2.5 1.5 2.1 0.9 1
Inventory Turnover Days 28 42 46 38
Debtors Turnover Days 53 38 23 20
Net fixed assets Rs 10470. 9,893 74,030 135,36 78,579

m 06 8,741.4 1
1
50
Share capital Rs 404.71 404.717 443 6,926 41,304 3,696
m 7
"Free" reserves Rs 3500 5,627 4,454 2,580 33,469

m 1,399.0
6
Net worth Rs 8050 6,640 10,672 10,913 46,592 43,603

m
Long term debt Rs 13174. 9306.09 3,727 59,042 72,038 31,450

m 72
Total assets Rs 25009. 1 24,382 91,419 222,80 141,35

m 69 9,103.2 6 0
0
Interest coverage X 5.16 4.18 5.1 1.2 4 21.5
Debt to equity ratio X 1 0.92 0.3 5.4 1.5 0.7
Sales to assets ratio X 1.07 0.82 0.9 0.5 1.1 0.8
Return on assets % 6.1 10 0.5 11.3 12.4

5.03
Return on equity % 19.10 13.60 22.7 4.1 53.9 40
Return on capital % 22.73 22.6 5.5 28.8 25.1

18.77
Exports to sales % 39.19 22.29 63.8 21.2 7.8 14
Imports to sales % 25.37 24.01 0.6 9 11.3 7.5
51
RATIO ANALYSIS
A ratio is powerful tool for analyzing the financial data. Often numbers by
themselves do not convey anything until they are related. It needs a contextual and
relative reference. Several ratios, calculated from the accounting data, can be
grouped into various classes according to the financial activity or function to be
evaluated.
Financial ratios are a valuable and easy way to interpret the numbers found in
statements. It can help to answer critical questions such as whether the business is
carrying excess debt or inventory, whether customers are paying according to
terms, whether the operating expenses are too high and whether the company
assets are being used properly to generate income.
When computing financial relationships, a good indication of the company's
financial strengths and weaknesses becomes clear. Examining these ratios over
time provides some insight as to how effectively the business is being operated.
Many industries compile average industry ratios each year. Average industry ratios
offer the small business owner a means of comparing his or her company with
others within the same industry. In this manner, they provide yet another
measurement of an individual company's strengths or weaknesses. Robert Morris
& Associates is a good source of comparative financial ratios. Following are the
most critical ratios for most businesses, though there are others that may be
computed.
The following are the important categories of ratios:
Liquidity ratios
Leverage ratios
Activity/Operating ratios
Profitability ratios
LIQUIDITY RATIOS
Liquidity ratios measure the firm’s ability to meet current obligations. They
establish a relationship between cash and other current assets to current obligations
and current liabilities to provide a quick measure of liquidity. A firm should ensure
52
that it does not suffer from lack of liquidity and also that it does not have excess
liquidity. Lack of sufficient liquidity can result in poor creditworthiness, loss of
creditor’s confidence and insolvency. Contrastingly, very high liquidity is also bad
because it reflects idle and non-earning assets. Therefore, it is necessary to strike a
proper balance between high liquidity and lack of liquidity.
The ratios, which indicate the extent of liquidity or lack of it, are:
CURRENT RATIO
A liquidity ratio that measures a company's ability to pay short-term obligations.
Calculated as:
Also known as "liquidity ratio", "cash asset ratio" and "cash ratio".
The ratio is mainly used to give an idea of the company's ability to pay back its
short-term liabilities (debt and payables) with its short-term assets (cash, inventory,
receivables). The higher the current ratio, the more capable the company is of
paying its obligations
An acceptable current ratio varies by industry. Generally speaking, the more liquid
the current assets, the smaller the current ratio can be without cause for concern.
For most industrial companies, 1.5 is an acceptable current ratio. As the number
approaches or falls below 1 (which means the company has a negative working
capital), you will need to take a close look at the business and make sure there are
no liquidity issues. Companies that have ratios around or below 1 should only be
those, which have inventories that can immediately be converted into cash. If this
is not the case and a company's number is low, you should be seriously concerned.
If you're analyzing a balance sheet and find a company has a current ratio of 3 or 4,
you may want to be concerned. A number this high means that management has so
much cash on hand; they may be doing a poor job of investing it. This is one of the
reasons it is important to read the annual report of a company. Most of the
53
time, the executives will discuss their plans in these reports. If you notice a large
pile of cash building up and the debt has not increased at the same rate (meaning
the money is not borrowed), you may want to try to find out what is going on.
Although not ideal, too much cash on hand is the kind of problem a smart investor
prays for.
QUICK RATIO
An indicator of a company's short-term liquidity. The quick ratio measures a

company's ability to meet its short-term obligations with its most liquid assets. The
higher the quick ratio, the better the position of the company.
The quick ratio is calculated as:
Also known as the "acid-test ratio" or the "quick assets ratio".

The quick ratio is more conservative than the current ratio, a more well-known
liquidity measure, because it excludes inventory from current assets. Inventory
is excluded because some companies have difficulty turning their inventory into
cash. In the event that short-term obligations need to be paid off immediately, there
are situations in which the current ratio would overestimate a company's short-term
financial strength
If the ratio is 1 or higher, it says that the company has enough cash and liquid
assets to cover its short-term debt obligations.
NET WORKING CAPITAL RATIO
Net Working Capital = Working Capital/ Total Assets Ratio
This liquidity ratio, which records net liquid assets relative to total capitalization, is
the most valuable indicator of a looming business disaster. Consistent operating
losses will cause current assets to shrink relative to total assets.
Note: A negative ratio, resulting from negative net working capital, presages
serious problems.
A measure of both a company's efficiency and its short-term financial health. The
working capital ratio is calculated as:
54
Positive working capital means that the company is able to pay off its short-term
liabilities. Negative working capital means that a company currently is unable
to meet its short-term liabilities with its current assets (cash, accounts receivable
and inventory).
Also known as "net working capital".

If a company's current assets do not exceed its current liabilities, then it may run
into trouble paying back creditors in the short term. The worst-case scenario is
bankruptcy. A declining working capital ratio over a longer time period could also
be a red flag that warrants further analysis. For example, it could be that the
company's sales volumes are decreasing and, as a result, its accounts receivables
number continues to get smaller and smaller.
Working capital also gives investors an idea of the company's underlying

operational efficiency. Money that is tied up in inventory or money that customers
still owe to the company cannot be used to pay off any of the
company's obligations. So, if a company is not operating in the most efficient
manner (slow collection), it will show up as an increase in the working capital.
Comparing the working capital from one period to another can see this; slow
collection may signal an underlying problem in the company's operations.
CASH RATIO
This ratio establishes the relationship between cash (also includes marketable
securities) and current liabilities. It means that higher the ratio, the larger is the
liquidity position of the company and it can be easily used when any amount is
due. These ratio measures the most efficient current asset i.e. cash which can be
easily used for the payment purpose. It is the most liquid ratio in comparison to
other liquidity ratios.
Cash ratio = marketable securities + cash

________________________
Current liabilities
SOLVENCY RATIOS
55
Long-term creditors like debenture holders, financial institutions etc. are more
concerned with the firm’s long-term financial strength. In fact, a firm should have
both a strong short-term and a strong long-term financial position. The long-term
financial position can be assessed through financial leverage and capital structure
ratios. They measure financial strength and reflect the firm’s ability of using debt
to shareholder’s advantage.
DEBT-EQUITY RATIO
Debt to equity is also called debt to net worth. It quantifies the relationship
between the capital invested by owners and investors and the funds provided by
creditors. The higher the ratio, the greater the risk to a current or future creditor. A
lower ratio means your client's company is more financially stable and is probably
in a better position to borrow now and in the future. However, an extremely low
ratio may indicate that your client is too conservative and is not letting the business
realize its potential.
The formula is:
Total Liabilities (or Debt)

_____________________
Net Worth (or Total Equity)
INTEREST COVERAGE RATIO
A ratio used to determine how easily a company can pay interest on outstanding
debt. The interest coverage ratio is calculated by dividing a company's earnings
before interest and taxes (EBIT) of one period by the company's interest
expenses of the same period:
56
The lower the ratio, the more the company is burdened by debt expense. When a
company's interest coverage ratio is 1.5 or lower, its ability to meet interest
expenses may be questionable. An interest coverage ratio below 1 indicates the
company is not generating sufficient revenues to satisfy interest expenses.
DEBT RATIO
A ratio that indicates what proportion of debt a company has relative to its assets.
The measure gives an idea to the leverage of the company along with the potential
risks the company faces in terms of its debt-load.
A debt ratio of greater than 1 indicates that a company has more debt than assets,
meanwhile, a debt ratio of less than 1 indicates that a company has more assets
than debt. Used in conjunction with other measures of financial health, the debt
ratio can help investors determine a company's level of risk.
ACTIVITY OPERATING RATIOS
These ratios are employed to evaluate the efficiency with which firms manage and
utilize their assets. These ratios are also called turnover ratios because they indicate
the speed with which assets are being converted or turned over into sales; thus,
these ratios usually reflect a relationship between sales and assets. A proper
balance between sales and assets reflects that assets are managed well.
These are :
ASSET TURNOVER RATIO
The amount of sales generated for every dollar's worth of assets. It is calculated by
dividing sales in dollars by assets in dollars. Asset turnover is a financial ratio that
measures the efficiency of a company's use of its assets in generating sales revenue
or sales income to the company.
57
"Sales" is the value of "Net Sales" or "Sales" from the company's income statement
"Average Total Assets" is the value of "Total assets" from the company's balance
sheet in the beginning and the end of the fiscal period divided by 2.
Formula:-
Asset Turnover Ratio = net sales

------------------------------
Average Total Asset
Or
Asset Turnover Ratio = net sales

--------------------------------
Total capital Employed
Asset turnover measures a firm's efficiency at using its assets or total capital
employed in generating sales or revenue - the higher the number the better. It also
indicates pricing strategy: companies with low profit margins tend to have high
asset turnover, while those with high profit margins have low asset turnover.
STOCK TURNOVER RATIO

A ratio showing how many times a company's inventory is sold and replaced over a
period.
Generally, calculated as:
= sales/ Inventory
However, it may also be calculated as:
= cost of goods sold/ Average Inventory
Although the first calculation is more frequently used, COGS (cost of goods sold)
may be substituted because sales are recorded at market value, while inventories
are usually recorded at cost. Also, average inventory may be used instead of the
ending levell to minimize seasonal factors.
This ratio should be compared against industry averages. A low turnover implies
poor sales and, therefore, excess inventory. A high ratio implies either strong sales
58
or ineffective buying.
High inventory levels are unhealthy because they represent an investment with a
rate of return of zero. It also opens the company up to trouble should prices begin
to fall.
INVENTORY COLLECTION PERIOD
Formula to calculate number of day’s inventory:
Number of Days Inventory = 365 days / inventory turnover ratio.
Number of day’s inventory ratio definition and explanation:
The number of day’s inventory is also known as average inventory period and
inventory holding period.
A high number of days inventory indicates that their is a lack of demand for the
product being sold.
A low days inventory ratio (inventory holding period) may indicate that the
company is not keeping enough stock on hand to meet demands.
DEBTORS TURNOVER RATIO
Debtor’s turnover ratio indicates the relation between net credit sales and average
accounts receivables of the year. This ratio is also known as Debtors’ Velocity.
Net Credit Sales

Debtors Turnover Ratio =
Average Accounts Receivables
Where Average Accounts Receivables = [Opening Debtors and B/R + Closing

Debtors and B/R]/2
Credit Sales = Total Sales – Cash Sales
Objective and Significance: This ratio indicates the efficiency of the concern to
collect the amount due from debtors. It determines the efficiency with which the
trade debtors are managed. Higher the ratio, better it is as it proves that the debts
are being collected very quickly.
DEBTORS COLLECTION PERIOD
59
It Indicates the average time taken to collect trade debts. In other words, a reducing
period of time is an indicator of increasing efficiency.
Debtors Collection Period = (Average Debtors / Credit Sales) * 360 (= No. of
days)
Credit Sales are all sales made on credit (i.e. excluding cash sales)
You can change the multiplier to 12 (for months) or 52 (for weeks) if appropriate.
In the calculation of Debtors turnover Ratio of Bhushan steel Ltd., I have taken
only 360 days.
FIXED ASSET TURNOVER RATIO
Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the
value of fixed assets (on the balance sheet). It indicates how well the business is
using its fixed assets to generate sales.
= sales/average fixed assets
Generally speaking, the higher the ratio, the better, because a high ratio indicates
the business has less money tied up in fixed assets for each dollar of sales revenue.
A declining ratio may indicate that the business is over-invested in plant,
equipment, or other fixed assets
CURRENT ASSET TURNOVER RATIO
It establishes the relationship between current assets and sales.
sales
= __________________
Net current Assets
It shows how the current assets are efficiently used in converting itself into sales.
Generally speaking, the higher the ratio, the better, because a high ratio indicates
the less money has been invested on the current assets for each dollar of sales
revenue. A declining ratio indicates that the business is over-invested in current
assets.
PROFITABILITY RATIOS:
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Profit is the difference between revenues & expenses over a period of time
(usually one year). The financial manager should continuously evaluate the
company in terms of profits because profit maximization is the ultimate goal of all
profit-seeking companies. The Profitability Ratios are calculated to measure the
relationships between profit and its constituents such as sales and investments.
Generally, two types of profitability ratios are calculated:
Profitability in relation to sales
Profitability in relation to investment
Profitability in relation to investment
RETURN ON ASSETS
An indicator of how profitable a company is relative to its total assets. ROA gives
an idea as to how efficient management is at using its assets to generate
earnings. Calculated by dividing a company's annual earnings by its total assets,
ROA is displayed as a percentage. Sometimes this is referred to as "return on
investment”.
Note: Some investors add interest expense back into net income when performing
this calculation because they'd like to use operating returns before cost of
borrowing.
RETURN ON ASSETS = EBIT AND DEPRECIATION

_____________________________
Average total assets
(FA+CA+Investment)
ROA tells you what earnings were generated from invested capital (assets). ROA
for public companies can vary substantially and will be highly dependent on the
industry. This is why when using ROA as a comparative measure, it is best to
compare it against a company's previous ROA numbers or the ROA of a similar
company.
The assets of the company are comprised of both debt and equity. Both of these
types of financing are used to fund the operations of the company. The ROA figure
gives investors an idea of how effectively the company is converting the money it
has to invest into net income. The higher the ROA number, the better, because the
company is earning more money on less investment. For example, if one company
has a net income of $1 million and total assets of $5 million, its ROA is 20%;
however, if another company earns the same amount but has total assets of $10
million, it has an ROA of 10%. Based on this example, the first company is better
at converting its investment into profit. When you really think about
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it, management's most important job is to make wise choices in allocating its
resources. Anybody can make a profit by throwing a ton of money at a problem,
but very few managers excel at making large profits with little investment.
RETURN ON EQUITY
Return on equity is a measure that most investors are greatly concerned about as it
is a measure of what return the company is able to generate on the shareholder’s
money. While there is no doubt as to its relevance, the return can in itself be broken
down into three components to further analyze how these returns were earned and
what mainly helped in generating the same. It is calculated as follows:
Return on Equity = Net income/Average Shareholders fund
Net income/Average stockholder’s fund
The return on equity ratio measures the company’s profitability by showing profit
margins generated by the company. It is indicative in a limited sense of its pricing
ability and cost control when compared with its own performance and with the
performance of other companies.
Any decision affecting the product prices, per unit costs, volume or efficiency has
an impact on the profit margin or turnover ratios. Similarly, any decision affecting
the amount and ratio of debt or equity used will affect the financial structure and
the overall cost of capital of a company. Therefore, these financial concepts are
very important to evaluate as every business is competing for limited capital
resources. Additionally, people should not be swayed by high Return on Equity
without breaking it down to these components and then comparing it to other
companies in similar industries as companies can inflate the ROE by simply
tweaking one of the components of this ratio. Thus, to truly understand the
profitability and productivity of a company and its resources it is vital to divide the
ratio and compare it to the ratios of other companies belonging to similar
industries. Also, understanding the inter-relationships among the various ratios
such as turnover ratios, leverage, and profitability ratios helps companies in
utilizing their money in areas where the risk adjusted return is the maximum.
RETURN ON INVESTMENT
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A performance measure used to evaluate the efficiency of an investment or to
compare the efficiency of a number of different investments. To calculate ROI, the
benefit (return) of an investment is divided by the cost of the investment; the result
is expressed as a percentage or a ratio.
Return on investment is a very popular metric because of its versatility and

simplicity. That is, if an investment does not have a positive ROI, or if there are
other opportunities with a higher ROI, then the investment should be not be
undertaken Keep in mind that the calculation for return on investment can be
modified to suit the situation -it all depends on what you include as returns and
costs. The term in the broadest sense just attempts to measure the profitability of an
investment and, as such, there is no one "right" calculation. For example, a
marketer may compare two different products by dividing the revenue that each
product has generated by its respective expenses. A financial analyst, however,
may compare the same two products using an entirely different ROI calculation,
perhaps by dividing the net income of an investment by the total value of all
resources that have been employed to make and sell the product.
This flexibility has a downside, as ROI calculations can be easily manipulated to
suit the user's purposes, and the result can be expressed in many different ways.
When using this metric, make sure you understand what inputs are being used
Roce = profit before tax / capital employed * 100
ROCE compares earnings with capital invested in the company. It is similar to

Return on Assets (ROA), but takes into account sources of financing.
Operating Income
In the numerator we have Pretax operating profit or operating income. In the
absence of non-operating income, operating income agrees with EBIT; otherwise,
it can be derived from EBIT by subtracting non-operating income.
Capital Employed
In the denominator we have net assets or capital employed instead of total assets
(which is the case of Return on Assets). Capital Employed has many definitions. In
general it is the capital investment necessary for a business to function. It is
commonly represented as total assets less current liabilities or fixed assets plus
working capital.
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ROCE uses the reported (period end) capital numbers; if one instead uses the
average of the opening and closing capital for the period, one obtains Return on
Average Capital Employed (ROACE).
ROCE is used to prove the value the business gains from its assets and liabilities, a
business which owns lots of land but has little profit will have a smaller ROCE to a
business which owns little land but makes the same profit.
It basically can be used to show how much a business is gaining for its assets, or
how much it is losing for its liabilities.
Drawbacks of ROCE
The main drawback of ROCE is that it measures return against the book value of
assets in the business. As these are depreciated the ROCE will increase even
though cash flow has remained the same. Thus, older businesses with depreciated
assets will tend to have higher ROCE than newer, possibly better businesses. In
addition, while cash flow is affected by inflation, the book value of assets is not.
Consequently revenues increase with inflation while capital employed generally
does not (as the book value of assets is not affected by inflation).
DIVIDEND PER SHARE
The part of the earnings not paid to investors is left for investment to provide for
future earnings growth. Investors seeking high current income and limited capital
growth prefer companies with high Dividend payout ratio. However investors
seeking capital growth may prefer lower payout ratio because capital gains are
taxed at a lower rate. High growth firms in early life generally have low or zero
payout ratios. As they mature, they tend to return more of the earnings back to
investors.
Dividend per share = Earnings paid to shareholders (equity dividends)

___________________________________________
Number of equity shares
Dividends over the entire year (not including any special dividends) must be added
together for a proper calculation of DPS, including interim dividends. Special
dividends are dividends which are only expected to be issued once. The total
number of ordinary shares outstanding is sometimes calculated using the weighted
average over the reporting period.
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DIVIDEND PAYOUT RATIO
The percentage of earnings paid to shareholders in dividends.

Calculated as:
The payout ratio provides an idea of how well earnings support the dividend
payments. More mature companies tend to have a higher payout ratio.
A reduction in dividends paid is looked poorly upon by investors, and the stock
price usually depreciates as investors seek other dividend paying stocks.
A stable dividend payout ratio indicates a solid dividend policy by the company's
board of directors.
investors.
EARNING YIELD RATIO
The earnings per share for the most recent 12-month period divided by the current
market price per share. The earnings yield (which is the inverse of the P/E ratio)
shows the percentage of each dollar invested in the stock that was earned by the
company.
The earnings yield is used by many investment managers to determine optimal
asset allocations.
Earnings yield is the quotient of earnings per share divided by the share price. It
is the reciprocal of the P/E ratio—the E/P or the EPS.
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The earnings yield is quoted as a percentage, allowing an easy comparison to going
bond rates.
The earnings yield can be used to compare the earnings of a stock, sector or the
whole market against bond yields. Generally, the earnings yields of equities are
higher than the yield of risk-free treasury bonds reflecting the additional risk
involved in equity investments. The average P/E ratio for U.S. stocks from 1900 to
2005 is 14, which equates to an earnings yield of over 7%.
The earnings yield is also the cost to a publicly traded company of raising
expansion capital through the issuance of stock
Money managers often compare the earnings yield of a broad market index (such
as the S&P 500) to prevailing interest rates, such as the current 10-year Treasury
yield. If the earnings yield is less than the rate of the 10-year Treasury yield, stocks
as a whole may be considered overvalued. If the earnings yield is higher, stocks
may consider undervalued relative to bonds.
Classical theory suggests that investors in equities should demand an extra risk
premium of several percentage points above prevailing risk-free rates (such as T-
bills) in their earnings yield to compensate them for the higher risk of owning
stocks over bonds and other asset classes.
DIVIDEND YIELD RATIO
investors.
DIVIDEND YIELD RATIO = DPS

_______________________
MARKET VALUE PER SHARE
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investors.
EARNING PER SHARE:-
The portion of a company's profit allocated to each outstanding share of common

stock. EPS serves as an indicator of a company's profitability.
Calculated as:
In the EPS calculation, it is more accurate to use a weighted average number of

shares outstanding over the reporting term, because the number of shares
outstanding can change over time. However, data sources sometimes simplify the
calculation by using the number of shares outstanding at the end of the period.
Diluted EPS expands on basic EPS by including the shares of convertibles or
warrants outstanding in the outstanding shares number.
Earnings per share is generally considered to be the single most important variable
in determining a share's price. It is also a major component of the price-to-earnings
valuation ratio.
An important aspect of EPS that's often ignored is the capital that is required to
generate the earnings (net income) in the calculation. Two companies could
generate the same EPS number, but one could do so with less equity (investment) -
that company would be more efficient at using its capital to generate income and,
all other things being equal, would be a "better" company. Investors also need to be
aware of earnings manipulation that will affect the quality of the earnings number.
It is important not to rely on any one financial measure, but to use it in conjunction
with statement analysis and other measures.
When you analyze a company, you have to do it on two levels, the “whole
company” and the “per share”. If you decide ABC, Inc. is worth $5 billion as a
whole, you should be able to break it down by simply dividing the $5 billion price
tag by the number of shares outstanding. Unfortunately, it isn’t always that simple.
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Diluted Earnings Per Share (diluted EPS) is a company's earnings per share
(EPS) calculated using fully diluted shares outstanding (i.e. including the impact of
stock option grants and convertible bonds). Diluted EPS indicates a "worst case"
scenario, one in which everyone who could have received stock without
purchasing it directly for the full market value did so.
To find diluted EPS, basic EPS is calculated for each of the categories on the
income statement first. Then each of the dilutive securities are ranked based on
their effects, from most dilutive to least dilutive and antidilutive. Then the basic
EPS number is diluted one by one by applying each one, skipping any instruments
that have an antidilutive effect.
PRICE – EARNING RATIO
The PE (price-earnings) ratio is among the basic tools used to measure how cheap
or expensive a stock is. The P/E looks at the relationship between the stock price
and the company’s earnings. The P/E is the most popular stock analysis ratio,
although it is not the only one you should consider. It is a valuation ratio of a
company's current share price compared to its per-share earnings. Also sometimes
known as "price multiple" or "earnings multiple". The P/E is calculated by taking
the share price and dividing it by the company’s EPS (Earnings Per Share that we
saw above)
Market Value per share

= -----------------------------------
Earnings per Share (EPS)
In general, a high P/E suggests that investors are expecting higher earnings growth
in the future compared to companies with a lower P/E. However, the P/E ratio is
usually more useful to compare the P/E ratios of one company to other companies
in the same industry, to the market in general or against the company's own
historical P/E. It would not be useful for investors using the P/E ratio as a basis for
their investment to compare the P/E of a technology company (high P/E) to a
utility company (low P/E) as each industry has much different growth prospect.
Importance of PRICE EARNING RATIO
68
This ratio is used by traders to get a basic assessment of what the market will pay
for the earnings of a company. The higher the price earnings ratio is, the more
money the market is willing to pay for earnings from a company. Some investors
stay away from stocks that have a high price earnings ratio, and this may be
because they think the stock is overpriced. But a high price earnings ratio may also
mean that there are high hopes for the company on the market.
A low price earnings ratio may mean that there is no confidence in the
company on the market, but that does not make this stock a loser. Some
stocks, called sleepers, are good stocks that get overlooked by the market.
These sleeper stocks are also known as value stocks, and many traders have
made a killing by recognizing these stocks when the market does not. There is
no right or good price earnings ratio. One investor may see a value stock while
another investor disagrees and sees junk stock. The right price earnings ratio
is determined by the individual investor.
The price earnings ratio is one of the most frequently used stock analysis tools. The
price earnings ratio can mean different things to different traders, depending on
their trading strategies. One trader may see a stock with a low price earnings ratio
and think of the stock as a loss, and another trader may see the same stock and
same low price earnings ratio as a sleeper or value stock that is worth investing in.
Calculating the price earnings ratio is an important financial tool used by market
traders to help them predict the market.
It must also be noted that average P/E ratios tend to vary from industry to industry.
Typically, P/E ratios of companies in very stable, mature industries which have
more moderate growth potential have lower P/E ratios than companies in relatively
young, quick growing industries with more robust future potential. Thus, when an
investor is comparing P/E ratios from two companies as potential investments, it is
important to compare companies from the same industry with similar
characteristics. Otherwise, if an investor simply purchased stocks with the lowest
P/E ratios, they would likely end up with a portfolio full of utilities stocks and
similar companies, which would leave them poorly diversified and exposed to
more risk than if they had diversified into other industries with higher-than-average
P/E ratios.
However, this doesn't mean that stocks with high P/E ratios cannot turn out to be
good investments. Suppose the same company mentioned earlier with a 40-P/E
ratio (stock at Rs. 40, earned Rs. 1/share last year) was widely expected to earn Rs.
4/share in the coming year. This would mean (if the stock price didn't change) the
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company would have a P/E ratio of only 10 in one year's time (40/4), making it
appear very inexpensive.
The important thing to remember when looking at P/E ratios as part of your stock
analysis is to consider what premium you are paying for a company's earnings
today, and determine if the expected growth warrants the premium. Also compare
it to its industry peers to see its relative valuation to determine whether the
premium is the worth the cost of the investment.
Can a stock have a negative price-to-earnings (P/E) ratio?
Yes, a stock can have a negative price-to-earnings ratio (P/E), but it is very
unlikely that you will ever see it reported. Although negative P/E ratios are
mathematically possible, they generally aren't accepted in the financial community
and are considered to be invalid or just not applicable. We'll explain why this is.
The price-earnings ratio is arguably the most popular fundamental factor used by
investors who try to determine the attractiveness of an asset's current value and,
more importantly, whether the current price level makes for a good buying
opportunity. Generally speaking, a low P/E value suggests that an investor needs to
pay a low amount for each Rs of earnings made by the company. This could be
used by investors as a sign that the given asset is undervalued and a potentially
good investment at current levels. Conversely, a relatively
high P/E value is used to suggest that investors will need to pay a high amount for
the company's earnings, which can then be used to suggest that the asset is
relatively expensive and that it may be a good idea to wait for a better entry.
Mathematically, there are only two ways for a ratio of this form to have
a negative value:
1. The numerator falls below zero
2. The denominator falls below zero.
In the case of the P/E ratio, it is impossible for the numerator to fall below zero
because this represents the price of the asset. However, the denominator, which is
equal to the earnings of the company, can become negative. EPS values below zero
mean that the company is losing money and is the reason why it is possible to have
a negative P/E ratio.
BOOK VALUE TO MARKET VALUE RATIO
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A ratio used to find the value of a company by comparing the book value of a firm
to its market value. Book value is calculated by looking at the firm's historical cost,
or accounting value. Market value is determined in the stock market through its
capitalization.
The book-to-market (or book-to-price) ratio categorizes firms into value or growth
groups. Book value is the value of the firm from an accounting perspective.
Market value is a firm’s stock price multiplied by shares outstanding. It signifies
the market’s valuation of a company’s equity. Value firms have higher book-to-
market ratios than growth firms. Value firms (high book-to-market ratio) reliably
have higher returns than growth firms (low book-to-market ratio).
Formula:
The book-to-market ratio attempts to identify undervalued or overvalued securities

by taking the book value and dividing it by market value.
In basic terms, if the ratio is above 1 then the stock is undervalued; if it is less than
1, the stock is overvalued.
PROFITABILITY BASED ON SALES:-
GROSS PROFIT RATIO
The gross profit ratio indicates how much of each sales dollar is available to meet
expenses and profits after merely paying for the goods that were sold. This
interactive tutorial explains the gross profit ratio by walking you through the steps,
including where Sales and Cost of Goods Sold are on the Income Statement. It lets
you use your own numbers -- great for checking homework answers!
Gross profit divided by net sales. High ratios are favorable in that they indicate the
business is earning a good return on the sale of its merchandise, although that may
also invite competition.
NET PROFIT RATIO
The ratio of an organization's net profit to its total net sales. Comparing the net
profit ratios of companies in the same sector shows which are the most efficient.
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NET PROFIT MARGIN
The profit margin tells you how much profit a company makes for every $1 it
generates in revenue. Profit margins vary by industry, but all else being equal, the
higher a company’s profit margin compared to its competitors, the better. Several
financial books, sites, and resources tell an investor to take the after-tax net profit
divided by sales. While this is standard and generally accepted, some analysts
prefer to add minority interest back into the equation, to give an idea of how much
money the company made before paying out to minority “owners”. Either way is
acceptable, although you must be consistent in your calculations. All companies
must be compared on the same basis.
Net income after taxes
---------------------------------------------------
Revenue
Or
Net income + minority interest + tax-adjusted interest

---------------------------------------------------
Revenue
In some cases, lower profit margins represent a pricing strategy. Some businesses,
especially retailers, may be known for their low-cost, high-volume approach. In
other cases, a low net profit margin may represent a price war which is lowering
profits, as was the case in the computer industry in 2000.
OPERATING EXPENSES RATIO
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The operating expense ratio also known as the OER is the ratio between the
total operating expenses and the effective gross income for an income
producing property. Operating expenses are costs associated with the
operation and maintenance of income producing properties. They include
such items as property taxes, property management fees, insurance, wages,
utilities, repairs and maintenance, supplies, advertising, attorney fees,
accounting fees, trash removal, pest control, etc. The following are not
operating expenses; loan payments, personal property and capital
improvements.
The effective gross income for a property is the actual yearly income from
all sources. It is equal to the yearly gross rents possible plus other income
such as laundry receipts, vending machines, parking fees, etc. less the yearly
vacancy amount.
The operating expense ratio shows the percentage of a property's income that
is being used to pay maintenance and operational expenses The operating
expense ratio is calculated like this.
OPERATING EXPENSES RATIO = OPERATING EXPENSES

______________________________
NET SALES
The operating expense ratio is an indicator of how efficiently a property is being

managed. The lower the operating expense ratio, the greater the profit for the
investor or investors. As the owner or manager of an income producing property,
you should be assessing what steps you can take to reduce vacancies, reduce
operating expense items and increase income. Which operating expenses are out
of line and why? You can learn a lot about an income property by examining the
individual operating expense items.
Many factors can impact the operating expense ratio for income properties. Poor
management will result in higher than normal vacancies. The cause might be
ineffective advertising, poor maintenance, etc. Older income properties will have
larger maintenance and utility expenses than newer income properties since newer
income properties are usually insulated better and require less maintenance. An
income property with rents below market value will have a higher operating
expense ratio than one that is managed effectively. Office buildings will generally
have higher OER's then apartment buildings because they require more intensive
management and maintenance.
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OPERATING MARGIN
In business, operating margin is the ratio of operating income (operating profit in

the UK) divided by net sales, usually presented in percent.
OPERATING MARGIN = INCOME FROM OPERATIONS

_____________________________________
NET REVENUES
Operating margin is a measurement of what proportion of a company's revenue is

left over after paying for variable costs of production such as wages, raw materials,
etc. A healthy operating margin is required for a company to be able to pay for its
fixed costs, such as interest on debt. Also known as "operating profit margin" or
"net profit margin.
Operating margin gives analysts an idea of how much a company makes (before
interest and taxes) on each dollar of sales. When looking at operating margin to
determine the quality of a company, it is best to look at the change in operating
margin over time and to compare the company's yearly or quarterly figures to those
of its competitors. If a company's margin is increasing, it is earning more per dollar
For example, if a company has an operating margin of 12%, this means that it
makes $0.12 (before interest and taxes) for every dollar of sales. Often,
nonrecurring cash flows, such as cash paid out in a lawsuit settlement, are excluded
from the operating margin calculation because they don't represent a company's
true operating performance.
GROSS MARGIN RATIO (Gross Margin Ratio)
Formula to calculate gross margin ratio: Gross Profit Margin Ratio = gross
profit / sales. Gross margin ratio definition and explanation:
Gross profit margin ratio is also called gross margin ratio
To calculate gross profit subtract cost of sales (variable costs) from sales. (i.e.
gross profit = sales - cost of sales)
A low gross profit margin ratio (or gross margin ratio) indicates that low amount
of earnings, required to pay fixed costs and profits, and are generated from
revenues.
A low gross profit margin ratio (or gross margin ratio) indicates that the business
is unable to control its production costs.
The gross profit margin ratio (or gross margin ratio) provides clues to the
company's pricing, cost structure and production efficiency.
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The gross profit margin ratio (or gross margin ratio) is a good ratio to benchmark
against competitors
On Analyzing the Balance Sheet Data we find that the company has raised loans
through both secure and insecure means. Application of loans is also reflected in
the Balance Sheet. The company has gone in for the modernization of its plant and
hence for importing sophisticated machinery the funds are raised. Also the
company is going ahead with a backward integration project in Orissa for which
the requirement of funds is huge. There is a huge rise in the inventory level of the
company but that could be mainly because there has been a shortage of HR coils in
the market and thus the prices are going up so such high level of inventory is
justified also the demand for CR sheets and coils have also gone up so in order to
fulfill the demand the company needs to pump up its production.
The ratio analysis is done and the performance is compared with the major players
in the industry. However, one must keep in mind that Bhushan Steel and Strips Ltd
has its presence only in the secondary sector and has to depend upon other
companies for raw material supply ( basically Hot rolled(HR) coils). The
company has been constantly declaring dividend which indicates growth of the
company. In fact the dividend payout ratio is the highest in the industry. In fact the
average sale per employee is very high as compared to the major player Sail, Tisco
and Ispat. However it’s still behind Jisco in this respect. Net profit per employee is
also high as compared to all major players but Jisco is still leading the industry in
this respect as well. It would be unfair to compare the Income data as BSL has its
presence only in the secondary sector as already mentioned above. Current ratio is
the best as compared to the industry standards. The inventory turnover and the
debtors turnover ratio are very high as compared to the industry standards that
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could be because of the fact that the company has started its operation in Khopoli
late in the financial year and the sales of Khopoli are only for the 3 months so in
order to have a better view for the turnover ratios the Khopoli figures should be
annualized. The same could not be done as the separate figures were unavailable.
Interest coverage ratio is also good as compared to the other companies in the
industry and has even improved this year. This is a good indicator for investors
especially when the company is in the expansion mode as it insures the company’s
sound financial health and ability to pay back the interest on the loans taken from
the market. Debt to equity ratio is 0.92 in previous year but has improved this year.
ROA is less as compared to the industry that my be because there is still expansion
going on as can be seen from the balance sheet the figure of Capital work in
progress is high and so all the assets employed are not generating revenue at the
moment hence such a level is acceptable. ROE on the other hand has been good as
compared to the industry standards which suggest that the company has been able
to generate wealth for its shareholders. The company has been able to boost up its
exports and thus is earning foreign exchange as well. Over all the company holds
good prospects for all its stakeholders as is evident from its income statements.
Activities Engaged In
Sahibabad Plant
Bhushan Steel Ltd. has recently successfully implemented SAP system at its
Sahibabad works along with its sales outlets with the help of Siemens Information
Systems ltd. (SISL) in first phase.
76
Finished Product List of Sahibabad Plant
1. Cold Rolled Coil

2. Cold Rolled Sheet
3. Galvanized Plane Coil
4. Galvanized Plane Sheet
5. Galvanized Corrugated Sheet
77
Current Capacities
(tonnes per annum)
Products
Sahibabad
Cold Rolling
1.
Widest (up to 1700 mm)
350,000
2.
Wider (up to 1200 mm)
100,000
3.
Narrow (up to 550 mm)
25,000
Total Cold Rolling

475,000
Galvanized Sheets
225,000
Hardened & Tempered Strips

-
Color Coated Sheets

-
Drawn/Precision Tubes
15,000
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High Tensile Steel Strapping
-
Dhenkanal Plant
The most brilliant milestone in BSL's journey of excellence is the setting up of a

state-of-the-art Hot Rolling Steel & Power Plant in Orissa. This Integrated tool and
Power Plant will, no doubt, put BSL firmly on the fast track of progress.
Products Range
1. DRI
a. Sponge Iron Fines
b. Sponge Iron Lumps
c. Char
2. SMS
a. Billets MS
b. Billets HSf
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c. Billets CS
3 HR Coils
2. Oxyge
3. Power Generation
4. Pig Iron
Khopoli Plant
The Khopoli plant, commissioned in 2004 has been playing a remarkable

role not only in the growth of exports, but in the production of a much wider
variety of value added steel like Color Coated Sheets, High Tensile Steel
Strapping, Hardened and Tempered Strips and Precision Tubes. In addition
to these, the Khopoli plant has recently launched Galume value added steel
(Aluminium & Zinc Coated Sheet) for the first time in the country.
Operating with the most advanced technology, expressed through a large
fleet of latest equipment, machinery and systems, the Khopoli plant has
given a tremendous boost of 425000 MT per annum to BSL's total
production capacity Including 240000 MT of galvanized steel, which are
further forward integrated into Color Coated Sheet, Galume and other value
added products.
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Product Khopoli
Cold Rolling
Widest (up to 1700 mm)

300,000
Wider (up to 1200 mm)
125,000
Narrow (up to 550 mm)
Total Cold Rolling 425,000
Galvanized Sheets 240,000
Hardened & Tempered Strips 10,000
Color Coated Sheets 80,000
Drawn/Precision Tubes 45,000
High Tensile Steel Strapping 20,000
Alloy Steel/Wire Rods
Service Centre
Captive Power 24 MW
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BUSINESS GOALS AND STRATEGIES
VISION
The vision of evolving into a totally integrated steel producer, committed to

achieving the highest standards of quality through cutting-edge technology, is
being realized at Bhushan Steel Ltd. If you can anchor your organization with a
single-mindedness of purpose, for providing-the best service, technology and
quality to customers and stakeholders, then you can deliver higher value for money
within schedule and budget, and continue to thrive even in the face of rapid change
and other challenges besotting the Indian economy and especially the steel
industry.
This is, precisely, what BSL has been doing since its inception: Acquiring the latest
technology sourced from the global leaders and maintaining global quality
standards; continually upgrading the steel plants and efficiently implementing
projects within schedule and budget always meeting financial obligations on time
and yes, these are the hallmarks of BSL's Saga of Excellence.
BSL's vision of total integration is a lot closer to realization today. Through
seamless backward integration, BSL is consolidating its position on the entire steel
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value chain - from iron ore to specialized, value-added steel, the company is
surging ahead.
Strategies:
Integrated Quality, Environment, Occupational Health & Safety Management
System Policy.
Bhushan Steel Ltd. commits to produce cold rolled and galvanized steel sheets of
world class quality in a safe, healthy and clean environment by involving
employees with continual improvements in system implementation, technological
advancement, operational integration, prevention of pollution & hazards
maintaining.
Legal compliance and satisfying needs & expectations of Customers.
• For Environmental Management System we have ISO 14001:2001

Certification
• For Quality System we have ISO/TS 16949:2002 Certification
• For Safety Management System we have OHSAS 18001:1999 Certification
GOAL
Bhushan Steel Ltd. (BSL) is in the process of setting up one of the most advanced
Hot Rolling Plants of the world in Orissa. The construction of the first phase is
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being carried out with speed and is nearing completion. Together with its state-of-
the-art Cold Rolling Plant at Sahibabad and another one at Khopoli, the company
is well poised in the industry. The company has recently launched Galume, zinc
and aluminum coated sheet, for the first time in India. Thereby, it is all set to
revolutionize the industry and demand patterns.
Be it is specialized steel for the automotive and white goods industry, or steel for
highly discerning international clients, BSL's advanced manufacturing facilities
and stringent quality standards have earned appreciation and acceptance in
international markets.
S.W.O.T ANALYSIS OF BSL
STRENGTHS:
• BSL has earned recognition in the form of ISO 9002 and QS 9000
certification. It has also achieved the rare distinction of being appointed
Global Resource Centre for Ford, General Motors and Honda. Its steel plant
was the first Cold Rolling plant recommended for QS 9000-1998 edition
conducted by DET NORSKE VERITAS, Netherlands. Presently, to further
its commitment to quality BSL is upgrading its quality system by obtaining
TS 16949-2002 Certification from DET NORSKE VERITAS, Netherlands.
This makes the products of the company acceptable internationally.
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• Bhushan Steel Ltd. Is one of the major companies in Secondary sector in
India. The original equipment manufactures share in the total sale is more
than 60% and the major customers are automobile majors like Maruti, Ford,
General Motors, Bajaj Auto, Hyundai, Fiat (Polio), Hindustan Motors,
TELCO, Honda SIEL car, Mahindra and Mahindra, Ashok Leyland and the
leading white goods manufactures like LG, BPL, Godrej, Electrolux,
Whirlpool, Videocon, Samsung. Apart from them BHEL is also one of the
major customers of BSL. Thus the customer base is not only huge but is
diversified as well.
• The exports this year have risen by almost 170% suggesting that the
company is making its presence felt in the international market as well.
Thus a downtrend in the domestic market would not affect the company
adversely if its exports rise with such a pace.
• The company has diversified its product range in line with the global
demand e.g. it has added a product Color coated sheets have been
recognized in the European Countries and almost all of the production is
being exported. The company has successfully penetrated into Spain,
Portugal, Philippines, South Korea, Australia, New Zealand, Mexico, and
Chili etc.
• BSL is heading towards a backward integration in order to become self-

reliant and to have control on raw material in terms of pricing and
availability of right quality. This would make the company a major player in
the industry and increase its profitability substantially as it would no longer
85
be subject to the vagaries if HR availability and price hikes ( The company
is currently into Cold rolling and HR coil is the basic raw material that the
company either imports or purchase from the domestic market)
• The Fitch Rating India Pvt, Ltd has reassigned short term rating of F1+ for
Rs 100 Crs Commercial Paper Program of the company. This makes the
short-term borrowings easy for the company from the market at much
cheaper rates bringing down the weighted average cost of capital.
WEAKNESS:
• The major raw material for the company is HR coil, which it has to procure
from either domestic or international market, and thus is subject to price
fluctuations. It thus becomes difficult to make cost estimates. The company
has also realized the same and is in a process of backward integration.
• The purchases made by the company are in cash whereas the sales are in
cash and credit both this makes the working capital requirement of the
company very high.
• The competitors of BSL are major players; though its products are
competitive still the company has not been able to capture the market
convincingly despite the stringent quality control.
• The company has a conservative approach towards hedging exchange rate

risks, which at times lead to loss of revenue.
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OPPORTUNITIES:
• The company has exposed itself to Automobile and white goods segment
there is still scope for the company to increase its customer base.
• The percentage of exports to Gross sales has been somewhere around

36.33% the company can further strengthen its exports so as to hedge itself
against the low sale in the lean period in the domestic economy.
• The liberalization of industrial policy and other initiatives taken by the

Government have given a definite impetus for entry, participation and
growth of the private sector in the steel industry. While the existing units are
being modernized/expanded, a large number of new/Greenfield steel plants
have also come up in different parts of the country based on modern, cost
effective, state of-the-art technologies.
At present, total (crude) steel making capacity is over 34 million tonnes and India,
the 8th largest producer of steel in the world, has to its credit, the capability to
produce a variety of grades and that too, of international quality standards. As per
the ratings of the prestigious “World Steel Dynamics", Indian HR Products are
classified in the Tier II category quality products – a major reason behind their
acceptance in the world market. EU, Japan has qualified for the top slot, while
countries like South Korea, USA share the same class as India.
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THREATS:
• The threats to the company are the rising input costs in the industry the raw
materials as coking coal, non ferrous materials, scrap steel, Iron ore have
seen an increasing trend and are further expected to rise.
• China is world’s largest steel producer. A slowdown in the Chinese economy

would have an adverse effect on the global steel industry.
• All the major steel companies in India have gone for a capacity expansion
plan which makes would place a serious threat to small players like BSL.
• High debt has also reduced the profit margins though the company has gone
for a debt restructuring when the global steel prices were soaring but if the
prices do not stabilize at that level the operating margins would go down
affecting the overall growth of the company.
IMPORTANCE OF CASH MANAGEMENT FOR A COMPANY
Cash is ready money in the bank or in the business. It is not inventory, it is not
accounts receivable (what you are owed), and it is not property. These might be
converted to cash at some point in time, but it takes cash on hand or in the bank to
pay suppliers, to pay the rent, and to meet the payroll.
88
A Cash Flow Statement is typically divided into three components so that you can
see and understand the sources and uses of cash. These components include
internal and external sources:
Operating Cash Flow:-

Operating cash flow, often referred to as working capital, is the cash flow
generated from internal operations. It is the cash generated from sales of the
product or service of your business. It is the real lifeblood of your business, and
because it is generated internally, it is under a manager’s control.
Investing Cash Flow:-

Investing cash flow is generated internally from non-operating activities.
This component would include investments in plant and equipment or other fixed
assets, nonrecurring gains or losses, or other sources and uses of cash outside of
normal operations.
Financing Cash Flow:-

Financing cash flow is the cash to and from external sources, such as
lenders,Realization
investors of
and shareholders. A new loan, the repayment
SalesofinaCash
loan, the
Payment
issuance of stock and the payment of dividend are some of the activities that would
be included in this section of the cash flow statement.
Payment by Draft or
Cheque
Locking time 3-7
days
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CASH FLOW UNDER CMS:
90
Realization
on day 1 or
day 2 Sales in
Cash
Collection by
banker
locking
period 1-
2days
CASH MANAGEMENT AT BSL
91
Bhushan Steels Ltd. has been efficiently and effectively using modern
cash management techniques to maintain cash inflow for its day to day operations.
The most important of these have been the cash management services (CMS)
rendered to it by the ICICI and Corporation banks. The company has a huge
customer base and is into business with customers from all over India so it
becomes very important for the company to mobilize funds to carry out its day to
operations. Before adopting CMS the company had a locking period of 6-7 days as
it used to realize payment through TPO (Transfer Pay Order). For TPO money
collected by banks over a week from Customers of BSL was transferred every
Saturday to the central pool in Delhi. Such a lock in period is not acceptable to any
company specially manufacturing firms as it has a huge requirement of working
capital in addition to that the company sells goods at credit for a period of 30-60 or
90 days, In this industry there is always a mismatch of funds as the raw material
needed is usually available only on cash payment because of demand and supply
mismatch. Also, the cost incurred by BSL was on a very high side. Cost involved
an interest loss of 6 days along with the service charges of the banker. BSL is
availing CC facilities at 11% p.a. so if there is a huge locking period it had to pay
an interest for using the funds. The other system of collection adopted was
payment through drafts. The customers paid through Drafts the problem with this
system of accepting payments has been that the company had to bear the draft and
postage charges to remain competitive in the industry. The bankers acted as agents
of BSL and accepted drafts. The drafts collected over the day were sent through
courier to the Head Office. This not only was expensive but the company was
losing the interest amount for time taken in transit and realization of draft amount.
Steel industry these days is facing a pressure of rising input cost thus in order to
maintain the profit margins it becomes all the more important for the company to
92
cut costs and manage their funds effectively and efficiently. CMS thus offers an
effective solution to manage funds.
BSL is availing CMS provided by ICICI, Corporation banks, HSBC, HDFC and
UTI. The banks collect the cheque of customers through their various branches
spread over different location all over the country and transfer the funds in the
central pool at Delhi. BSL then disburses the cash thus collected. The company has
entered into a contract with the banks for the same and banks charges it for the
same.
ICICI BANK
ICICI Bank is India's second-largest bank with total assets of about Rs.3, 446.58
billion at March 31, 2007 and profit after tax of Rs. 31.10 billion for the year ended
March 31, 2007. ICICI Bank has a network of about 560 branches and extension
counters. ICICI Bank offers a wide range of banking products and financial
services to corporate and retail customers through a variety of delivery channels
and through its specialized subsidiaries and affiliates in the areas of investment
banking, life and non-life insurance, venture capital and asset management. ICICI
Bank set up its international banking group in fiscal 2002 to cater to the cross
border needs of clients and leverage on its domestic banking strengths to offer
products internationally. ICICI Bank currently has subsidiaries in the United
Kingdom and Canada, branches in Singapore and Bahrain and representative
offices in the United States, China, United Arab Emirates, Bangladesh and South
Africa.
93
ICICI Bank's equity shares are listed in India on the Stock Exchange, Mumbai and
the National Stock Exchange of India Limited and its American Depositary
Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).
Cash management products cover both collections and payments.
Collection Products
Local Cheque Collections
• One of the largest network spanning over 488 locations

• Courier pick-up can be provided
• Process flow can be structured to suit the company’s
requirements
Upcountry Cheque Collections
• Coverage of over 3919 locations with tie-ups with correspondent

banks
• Capability to process cheques drawn on any location in India.
• Assured credit given with funds pooled at any ICICI Bank
location. Instrument level tracking of instruments to ensure faster
realization
Cash Collections
94
• Cash Collection from dealers and business associates on behalf
of companies
• Cash pick-up facility in 28 locations
• Customized MIS for cash collection
Payment
Anywhere Banking
• Cheques issued payable at par at various ICICI Bank locations

• Single account to be operated at any ICICI Bank branch for this
facility
• Ideal for small value, large volume payments
Fund Transfers
• Online transfer of funds between accounts maintained with any

branch of ICICI Bank
Issue of Bulk Demand Drafts/ Pay orders
• Capability to issue Bulk Demand Drafts/Pay Orders on various

ICICI Bank and correspondent bank locations
• Capability to accept online requests from the customers
• Capability to print beneficiary advice and dispatch
• Remote printing facility
• Simple process with a low turnaround time and delivery
Cheque Writing
95
• Cheques can be issued on behalf of companies
• Capability of processing large volumes of cheques in a short
turnaround time
• Capability of printing facsimile signatures
• Capability to print beneficiary advice and dispatch
• Ideal for bulk payments such as pension payments, gratuity
payments.
Location Days Rate
Ahmadabad 1 0.3
Amritsar 2 0.2
Aurangabad 2 0.2
Bangalore 1 0.15
Baroda 2 0.3
Calcutta 1 0.15
Chandigarh 1 0.15
Chennai 1 0.15
Dindigul 2 0.3
Gwalior 2 0.3
Hubli 2 0.3
Hyderabad 1 0.15
Indore 2 0.3
Jaipur 1 0.15
Jallandhar 2 0.3
Kanpur 1 .05
Ludhiana 2 0.2
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Mumbai 1 0.15
Nagpur 2 0.3
Nasik 2 0.3
Pune 1 0.2
**Rates above are Rupees per thousand
97
HDFC
Cash Management is the stewardship or proper use of an entity’s cash resources. It
serves as the means to keep an organization functioning by making the best use of
cash or liquid resources of the organization. At the same time the organizations
have the responsibility to use timely, reliable and comprehensive financial
information systems.
Cash Management Services (CMS) is one of our thrust areas. Today, it has a
large number of satisfied CMS customers, many of whom are in the top segment of
the Indian Corporate and Public Sectors. This has been a result of a robust, end to
end cash management product which offers innovative and reliable solutions by
combining an efficient collections and disbursements product, backed by state of
the art systems to ensure customized delivery. The Bank has constructed a wide
range of CMS products covering collections and disbursements of operating flows,
as well as specialized cash flow streams such as rights/public issue collections,
dividends, interest/principal repayments, excise and sales tax payments etc. We
operate out of a large and expanding network of over 175 outlets across the
country. This is the largest network of online, electronically linked branches in the
country. This provides us with a clear competitive advantage, which naturally
translates into a lower cost and faster credit to corporate. In addition to our
98
network, we have an extensive correspondent banking arrangement, which allows
us to offer you Cash Management Services a/c over 1100 locations covered for
collections and over 650 locations for Payments.
Cash Management helps the organization in:
Eliminating idle cash balances.
Monitoring exposure and reducing risks.

Ensuring timely deposit of collections.
Properly timing the disbursements.
99
100
Headquartered in London .HSBC Holdings plc is one of the largest banking and
financial services organization in the world. The HSBC Group’s international
network comprises over 9500 offices in 79 countries and territories in Europe, the
Asia-Pacific region, the America, the Middle East and Africa. The Group has over
110 million customers worldwide, the more than 223000 employees. With listing
on the London, Hong Kong, New York and Paris stock exchange, around 200000
shareholders in some 100 Countries and territories hold shares in HSBC Holdings
plc. The shares are also traded on the new York stock exchange in the form of
American Depository receipts. Through a global network linked by advanced
technology, including a rapidly growing e-commerce capability, HSBC provides a
comprehensive range of financial services; personal , commercial ,corporate,
investment and private banking; trade services ; cash management; treasury and
capital markets services; insurance; consumers and business finance; pension and
investment fund management; trustee services; and securities and custodial
services.
The name of HSBC is derived from the initials of Hong Kong and Shanghai
banking Corporation, the founding member of the modern group. The Group’s
Hexagon symbol was introduced as part of the new corporate identity of the Hong
Kong and Shanghai Banking Corporation in 1983.
CASH MANAGEMENT EXPERTISE
101
HSBC has extensive experience in cash and treasury management across all
geographies. HSBC’s approach to cash management is customer focused and
consultative as opposed to concentrating in selling products. HSBC is
technologically advanced, utilizing automation and straight-through processing
wherever possible. HSBC places high emphasis on implementation and ongoing
support via highly skilled executives and client services staff. In summary, HSBC
focuses on the relationship, not the transaction or sale.
HSBC offers a full array of receivables solution to meet BSL’s requirement
.HSBC’s solution is based on nature of BSL’s business and the geographic
distribution of payer location.
HSBC’s collection solution will speed up BSL’s overall collection cycle and thus
reduce internal processing work, while at the same time deliver the receivables
report to support working capital management.
Apart from a considerable cost advantage, key benefits of HSBC’s integrated
Receivables Solution will be as follow.
Improved availability of funds- acceleration of receivables for BSL’s by reduction
in collection cycle.
Reduced administrative burden- automation of receivables reconciliation would
result in cost effectiveness and free-up time for other operational issues.
Improved management of information- availability of various collection reports for
flexible and efficient information management for BSL.
INTEGRATED RECIEVABLE MANAGEMENT

HSBC is present 22cities with 43 branches across India and we cover over 2000
collection locations through our arrangements with associate banks. Under its cash
management offering, HSBC provide you the convenience of daily Cheque pick-
102
up from your offices. We can pick up Cheques at more than 230 locations across
the country and provide you credit if collection proceeds in your account held with
HSBC.
Collection product overview:-
Cheque Mate: This comprises of local Cheques deposited at locations where
HSBC has branches across the country. A courier arrangement can be made
available at each of the centers to facilitate daily pickup of Cheques from your
offices.
Lock box: This comprises of local Cheques deposited at over 200 locations where
the Cheques are cleared through our correspondence banks. A courier arrangement
can be made available at each of these centers to facilitate daily pickup Cheques
from BSL’s offices.
Quick Encash : this comprises of outstation Cheques payable at over 2000
location across India where the Cheque are deposited with HSBC at centers other
than where they are drawn. The credits for these will be provided into BSL’s
account maintained with HSBC as per arrangement.
Quick collect; this comprises of Cheques, which are not covered by any of the
arrangements specified above. The credits for these will be provided into BSL’s
account maintained with HSBC on realization basis.
AXIS BANK
103
In today's competitive market place, effectively managing cash flow can make the
difference between success and failure. UTI Bank offers a wide range of collection
and payment services to meet your complex cash management needs. Payments
received from your buyers and made to your suppliers are efficiently processed to
optimize your cash flow position and to ensure the effective management of your
business' operating funds. The flow of receivables and payables can also be seen
through our web solution Above all our quick adaptation of the latest technology
differentiates us from the other competing banks. Our Power Pay products are
designed to take maximum benefit of the Anywhere Banking through our large
network of branches with centralised database.
UTI Bank not only provides a clearing platform to process your payments but also
has taken a step ahead by enabling you to outsource your Cheque writing and other
time-consuming and routine manual payment processes. The Centralised Payment
system, connecting our entire branch network, is capable to process any type of
payment - physical instrument (with or without facsimile signature) as well as
electronic payment, bulk DD payment to vendors, salary payment or dividend/
interest payments of large corporate houses.
• At Par Payment
We issue At Par payable cheque book to our Current Account customers. Par
facility enables you to maintain only one Account and issue cheques that would be
payable at any UTI Bank location as a local cheque. Further each cheque, if
needed, can be validated against an issue file before clearing the instrument to
avoid fraudulent payment.
• Dividend/Interest Payment
We undertake Bulk dividend and interest payment of corporate houses through an
At Par facility. A central account maintained by you. Our Bank needs to be funded
and we would ensure that the dividend/interest warrant presented at any UTI Bank
104
location is cleared under respective local clearing. A validation process ensures that
each warrant matches with the issue file before it is cleared and thereby avoids
fraudulent payment.
• Power Remote-Remote DD Printing

To cater to your need for issuing bulk demand draft (DD) at various locations, we
offer our remote printing services wherein you fund a central account and we
would print the DD at different UTI Bank locations and arrange for the dispatch of
the same. Validation against the issue file keeps a check on fraudulent payment.
• Power Cheque-Customer Cheque Printing

Payment by Cheque still remains a popular payment method but involves time-
consuming and laborious manual processes. Payments outsourcing to our Bank
would enable you to get the Cheques and the cover note printed as per the payment
file with the facsimile signatures of the authorized signatories of your company.
Power Pay The Cheques can be printed centrally various remote locations as per
your requirement.
• Electronic Clearing Service (ECS Credit)

ECS Credit is an electronic clearing system that facilitates paperless transaction
through an offline system. UTI Bank facilitates ECS Credit at 46 locations. We
accept the electronic file and then arrange it to be uploaded at the RBI site for
clearing. The funds get debited from a centralized account and a detailed MIS
about the transactions is provided to the customer.
• Electronic Fund Transfer

EFT is an expeditious system of funds transfer across around 13000 branches of
designated EFT bank at various locations. The bank offers this facility at all
designated EFT Centers that are activated by the clearinghouses. Further, the bank
has recently launched the EFT under Internet Banking known as "Power Transfer"
which facilitates execution of fund transfer from anywhere through Internet.
105
• NEFT
To establish an Electronic Funds Transfer System to facilitate an efficient, secure,

economical, reliable and expeditious system of funds transfer and clearing in the
banking sector throughout India. The customer willing to avail the NEFT facility
offered by us shall submit an "NEFT Application Form" authorising the sending
bank to debit the sender's account and transfer funds to the beneficiary specified in
the NEFT Application Form. The Beneficiary's account will be credited on the
same day by crediting the specified account of the beneficiary or otherwise placing
funds at the disposal of the beneficiary.
Collection Solutions - Power Collect

Our Power Collect products are designed and developed to meet all of your
Collection needs Cheques, Cash and Electronic Transfer. Whether you do business
locally or throughout India, we can provide you with innovative, integrated cash
management solutions customised to your specific needs.
UTI Bank's Cash Management Services is based on an extremely robust

technology capable to cater to collection or payment requirements of:
• Large Corporate
• Small and Medium Segment
• Banks
• NBFCs
• Mutual Funds
Corporation Bank:
Established in the year 1906, The Bank has a unique history of 98 years of
successful Banking and has stood the test of time by growing steadily, offering
vast, varied and versatile services. Today, its good customer service, pre-eminent
track record in House Keeping, adherence to Prudential Accounting norms,
consistent profitability and adoption of modern technology for betterment of
106
customer service have earned the Bank a place of pride in the Banking Community
The Bank is a Public Sector Unit with 57.17% of Share Capital held by the
Government of India. The Bank came out with its Initial Public Offer (IPO) in
October 1997 and 37.87% of Share Capital is presently held by the Public and
Financial Institutions. The Bank’s Net Worth stood at Rs.2, 755 crore as on
31.12.2003.
Corporation Bank is the first Public Sector Bank to publish the results under US
GAAP. The Bank has been publishing the results under the US GAAP since 1998-
99. The net profit of the Bank and its subsidiaries under US GAAP for the year
2002-03 stood at Rs. 382.12 crore against consolidated net profit of Rs. 415.99
crore registered under Indian GAAP method
As on 31.03.04, the Bank has a highly dedicated team of 10,176 fulltime
employees who have made the encouraging performance of the Bank possible by
extending exemplary services to its customers. The Bank has better productivity
levels than many of its peers in the Public Sector.
Products Offered By Corporation Banks:

Collection and Payment Services (CAPS)
The PRODUCT RANGE under the umbrella of CAPS, provide one point solution
to corporate cash management requirements in the area of receivables and payables
management of the corporates.
The essence of CAPS is Speed, Accuracy, and Efficiency . Features of CAPS, -
evolved in response to corporates' needs - aim at providing significant TANGIBLE
BENEFITS to corporates.
Collection And Payment Services are offered and managed by specialised
exclusive Special Business Units in the form of CAPS BRANCHES, Payment
Processing Centre and FCS HUB using the state of the art TECHNOLOGY.
107
Fast Collection Service
Fast Collection Service (FCS) is the premier product of the Bank under CAPS
range of products. FCS envisages elimination of one leg of movement of cheques
from drawer to beneficiary’s place and travel back to speed up the process. The
corporates can access the collections effected at 212 LOCATIONS (OPERATING
CENTRES) across the country covered under the arrangement within 24 to 48
hours at a location of corporate’s choice.
Corp Clear Services [ CCS ]
CCS ensures quick collection of outstation cheques. The product enables assured
credit on pre-determined day of corporate’s choice, in respect of upcountry
cheques deposited with specialised CAPS branches irrespective of the day of
realisation. The need-based product range under this segment includes
Corp Clear Services - CCS 8th Day*
Corp Express Services - CES 4th Day*
Corp Instant Services - CIS Next Day
(* for cheques drawn on locations where CorpBank has branches)
Corp Collect Service [ CCT ]

Corporates apprehensive of cheque realisations may use our Corp Collect Service
that operates on “Realise and Pay” basis. The Service is extended for both within
and outside network locations. All the benefits of other corp clear services do come
along with Corp Collect Service.
Corp comfort services
108
Waiting unduly and without certainty as to realisation of outstation cheque would
hamper the business cycles. With an assured credit on 8th day in respect of
outstation cheques falling outside network, Corp Comfort Service proves an
effective blend of Corp Clear Service and Corp Instant Service.
Corp Remit Services
CorpRemit Service meets the corporates’ wholesale payment requirements such as
statutory payments, payments to vendors/suppliers, banking requirements, inter
branch transfers etc., Corporates need just to hand over the payout instructions file
along with funding cheque to CAPS branch. Further Servicing will be taken over
by the CAPS outfit. One of the salient features of CorpRemit is that corporates get
confirmation on payout effected.
Corp Pay Services

CorpPay Service facilitates corporates’ to make retail payments very effectively.
Some of the payouts that can be very effectively and conveniently handled includes
disbursal of incentives, equity and debt servicing to the satisfaction of investors,
salary and wages payouts etc. All that corporates need to do is to furnish the payout
details in magnetic media/mail and the funding therefore. Rest is only client
satisfaction. Value added service such as dispatch of payout instrument to
beneficiary is also made available. All these are available at a very competitive
price exclusively for corporates.
Payment Processing Centre
Continuing the initiatives in re-engineering the Cash Management Process,
Payment Processing Centre was set up to replicate the success achieved in
collections in payments too. At PPC, capabilities are built to print exceptionally
large number of Demand Drafts with advice. Value added service such as dispatch
of payout instruments to beneficiaries is being undertaken.
109
CorpNet - an Internet banking facility
Symbolizing the commitment to deliver value added services to clients using
CAPS with continuous improvements year after year; the Bank has made the use of
the state of the art technology.
CorpNet an Internet banking facility is now available to all corporates using CAPS
for their cash management needs. CorpNet optimizes the efficiency of corporates
cash management.
CorpNet provides for a host of advantages to corporates using CAPS.

Convenience, information on line, data modulation, cash inflow forecast,
outstanding position of instruments sent for collection are some of these distinct
advantages coming without any extra cost. A very high level of security features
are incorporated to afford greater degree of client comfort using this technology
driven value addition. What the corporates need to do is to simply register with any
of the CAPS branches.
CAPS Dial - a telebanking facility
CAPS Dial, yet another delivery channel, provides information round the clock
over telephone. Fax on demand option provides required reports at client’s desk.
The Interactive Voice Response system provides for required information
pertaining to collections, returns including fate of the instrument. Corporation
Bank offers the services to BSL under FAST COLLECTION SYSTEM.
BSSL avails CMS from Corporation bank in the following locations. The table below shows
the rates charged by the Corporation bank and the days taken to transfer the funds to the
central pool.
Location Days Rate

Agra 2 0.08
Aligarh 2 0.08
Allahabad 2 0.08
Bangalore 2 0.08
Bareilly 2 0.08
110
Belgaum 1 0.08
Bhopal 2 0.05
Coimbatore 2 0.08
Dehradun 2 0.08
Dindigul 2 0.08
Ernakulam 2 0.08
Gorakhput 2 0.08
Guwahati 2 0.08
Hubli 2 0.08
Jammu 2 0.08
Jamshedpur 2 0.08
Jodhpur 2 0.08
Kanpur 2 0.05
Lucknow 1 0.04
Madurai 2 0.08
Muzf. Nagar 2 0.08
Pondicherry 2 0.08
Rewari 2 0.08
Rohtak 2 0.08
Saharanpur 2 0.08
Salem 2 0.08
Tiruchirapally 2 0.08
Tirupati 2 0.08
Tumkur 1 0.04
Varanasi 2 0.08
Corporation Bank charges @ 18 paisa per thousand and 5 paisa per thousand. In
addition to it the interest is charged @13.5% on the cheques that are returned.
RELEVANCE OF LETTER OF CREDIT IN CASH

MANAGEMENT
111
The Cash Management Services are availed by BSL so that the payment under
cash sales can be realized early at low cost. However, a company’s sale includes
both cash and credit sales. What does a company do to realize the payment early in
case of credit sales? The answer is it gets the bill of exchange discounted and
realizes the payment much before the expiry of the credit period which is anywhere
between 30-180 days. The procedure is simple. The buyer (party) of goods opens
an LC with his bank and sends it to the seller (beneficiary). The beneficiary
presents the documents as mentioned in the LC to the beneficiary’s bank which in
turn credits the payment to the beneficiary’s account after discounting. The party
pays to its banker the amount written in the Bills of exchange at the expiry date of
LC and Party’s bank in turn makes the payment to the beneficiary’s bank. BSL
makes uses of Inland letter of credit in case of credit sales in India and Foreign
Letter of credit in case of exports. Another advantage of LC is that it ensures the
credit worthiness of the party (buyer of goods) because the transactions are through
banks hence the chances of default are negligible. Thus it becomes an important
method to realize funds. However, the procedures involved in the realizing
payments through this mode is rather complex. All the terms mentioned in the LC
are to be strictly adhered to. The next part of the project is about the LCs and the
procedures involved in there negotiations.
Introduction of Letter of Credit
112
The Letter of Credit is one of the most convenient methods of settling payment
in trade. It provides financial security to the seller of goods up to a certain
extent
Letters of credit became necessary when trade between countries made it

impossible to simply do business by handshake.
A letter of credit is basically a document issued by a bank guaranteeing a

client's ability to pay for goods or services. A bank or finance company issues a
letter of credit on behalf of an importer or buyer, authorizing the exporter or
seller to obtain payment within a specified timeframe once the terms and
conditions outlined in the letter of credit are met. The letter of credit acts like an
insurance contract for both the buyer and seller and practically eliminates the
credit risk for both parties, while at the same time reducing payment delays. A
letter of credit provides the exporter or seller with the greatest degree of safety
when extending credit. It is useful when the importer or buyer is not well
known and when exchange restrictions exist or are possible.
Definition of Letter of Credit
A documentary letter of credit may be defined as an arrangement by means of

which a bank at the request of customer (applicant), undertakes to pay to a
third party (beneficiary) a predetermined amount by a given date according
to agreed stipulations and against presentation of stipulated documents.
It may be defined as an arrangement where payment is made against

documents. Under documentary credits all the parties concerned deal with
113
documents not with goods, services and performances to which the document may
relate.
The Uniform Custom and Practice for Documentary Credits (UCPDC)

guidelines which governs the operations of letter of credit defines documentary
credit as “any arrangement, however named named or described, whereby a
bank (the “issuing bank”) acting at the request and on the instructions of a
customer (“the applicant”) or on its own behalf
i. Is to make a payment to or to the order of a third party.
OR
ii. Authorizes another bank to effect such payment, or to accept such bill
of exchange.
OR
iii. Authorize another bank to negotiate against stipulated documents,

provided that the terms and conditions of the credit are compiled with.
Parties to Letter of Credit
114
From the definition given above it can be deducted that the principal parties to a
letter of credit are:
 The applicant
 The issuing bank
 The beneficiary
 The advising bank
 Confirming bank
 Nominated bank
 Reimbursement bank
The applicant:
The applicant of an LC is normally the buyer of the goods who is to make payment
to the seller. It is at his request and instructions that the issuing bank opens the LC.
The issuing bank:

The issuing bank is the bank which opens the LC in favor of the beneficiary. By
opening the LC the issuing bank undertakes the responsibility to make payment to
the seller on compliance of required terms and conditions.
The beneficiary:
The beneficiary is the seller of the goods who is to receive payment from the
buyer. The LC is opened in his favor to enable him to receive payment on
submission of the stipulated documents.
115
The advising bank:
The advising bank advises the credit to the beneficiary. Advising of credit is done
only after verifying the authenticity of the credit.
Confirming bank:
The advising bank or any other bank so authorized by the issuing bank may
assume the role of a confirming bank and adds its confirmation to the LC opened
by an issuing bank. The bank which has been asked to confirm an LC is under no
obligation to confirm it.
Nominated bank:
Nominated bank is the bank that is nominated and authorized by the issuing bank
to:
- Pay if the LC is a payment LC
- Incur a deferred payment undertaking
- Accept drafts, if the credit stipulates so
- Negotiate.
Reimbursement bank:
Reimbursement bank is the bank which is authorized to honor the reimbursement
claim in settlement of negotiation/acceptance/payment lodged with it by the
paying, negotiating or accepting bank. It is normally the bank with which the
issuing bank has an account from which payment is made.
116
RIGHTS AND RESPONSBILITIES OF PARTIES OF LC
The right and responsibilities of every party associated with an LC have been
defined in the UCPDC 500. It is necessary that every party dealing with the LC
keep himself informed about these responsibilities. A brief summary of these rights
is as under:
• All parties dealing with an LC are dealing with documents and not with
goods/services, or performances to which the documents may relate.
• Exporters/beneficiary of LC has a right to receive payment against

submission of prescribed documents under the LC. It is exporter’s duty to
ship the goods as per the LC and submit the documents within the stipulated
time for negotiation.
• Negotiating bank: once documents under LC is submitted the negotiating

bank has to ascertain that they appear on their face to be an accordance with
the terms and conditions of the credit and if found agreeable, should effect
payment as per the LC terms and dispatch documents to the opening bank as
instructed.
• Opening bank: once the documents under the LC are received from the
negotiating bank, it should scrutinize them within 7 days from the date of
receipt. If it finds any discrepancy in the documents, it must convey the
same to the negotiating bank through the fastest mean available.
117
• Advising bank: once LC opening instructions are received from the opening
bank, the advising bank should, if it so desire to act as advising bank, verify
the veracity of the LC and advice the beneficiary about the LC and its terms.
• Confirming bank: at the request of the issuing bank the advising bank
chooses to add its conformity to the LC. It is taken upon itself, the
responsibility of paying the beneficiary against presentation of stipulated
documents.
• Applicant of the LC: the importer is responsible for making payment under
the LC, against release of stipulate documents to the opening bank.
TYPES OF CREDIT
BASED ON THE SCOPE FOR CANCELATION:
• Irrevocable letter of credit: cancellation or any amendment to such an LC
cannot be made without the prior acceptance of all the parties to the said LC.
• Confirmed letter of credit: here, in addition to the issuing bank another

bank will add its confirmation to the LC. In other words, a confirmed letter
of credit will have the guarantee of not only the issuing bank but also of the
confirming bank.
BASED ON MODE OF PAYMENT:

• Payment credit: under this credit, payment will be made to the beneficiary
on submission of the required documents provided they are in compliance
with the LC terms. Payment credits do not usually call for drawing of bills.
118
• Deferred payment credit: this type of credit is a usance credit, where
payment is made on the due date specified in the credit. Under this credit the
maturity dates at which payment has to be made and how such maturity
should be determined should be clearly indicated.
• Acceptance credit: this credit is a usance credit, where it is mandatory for

the beneficiary to draw a draft on the drawee /specified bank for a specified
tenor. the drawee bank will accept such drafts & make payment on the
respective due dates on presentation of the relevant bill of exchange
• Negotiation credit: this credit may be a sight credit or a usance credit.

Under a sight credit payment is made immediately, while under a usance
credit payment is made after a specified tenor.
BASED ON TENOR:
• Sight credit: where payment is made on sight (either on demand or

presentation), such credit is called a sight credit. Drawing of drafts is not
compulsory under sight credit. If drawing a draft is not required payment can
be made against submission of stipulated documents.
• Usance credit: also referred to as term credit, this credit requires drafts to be
drawn on the drawee / specified bank indicating the tenor. Such draft will be
accepted by the drawee and paid for at the end of the usance period.
BASED ON AVAILIBILITY STYLE:
119
• Revolving credit: a LC whereby the credit available to the beneficiary
gets reinstated by the original amount, once a drawing is made called
revolving credit.
• Installment credit: it stipulates that shipment may be made in

installment at specified periods of time. It differs from simple credit
which permits partial shipment.
• Deferred credit: this credit mostly used in those trades where a position
of goods is paid for by the buyer after verification of goods or after
assessing the value of the goods taking into account of quantity, shortage
etc.
• Transit credit: in a transit credit the service of a bank stipulated in a

third country will be used.
• Reimbursement credit: when a credit is denominated in a currency of a

third country, such credit is termed as reimbursement credit.
• Anticipatory credit: payment under LC is usually made at the post

shipment stage (i.e. on submission of documents). However, under this
credit payment is made to the exporter at the pre-shipment stage in
anticipation of export of goods and submission of bills at later stage.
Documents Required:
• Invoice: a commercial invoice is prima facie evidence of the contract of sale

and purchase. It is the document made by the exporter on the importer
indicating details like description of the goods consigned, consigner’s name,
120
name of the steamer, number and date of bill of lading, country of origin,
term of payment, amount of freight etc.
• Bill of lading: a bill of lading is the document issued by the shipping

company or its agent, acknowledging the receipts for good for carriage
which are delivered to the consignee or his assignee in the same condition as
they were received.
• Insurance documents: in international trade, when goods are in transit they

are exposed to marine perils. Insurance is affected to protect the insured
against risk of loss or damage to goods due to marine perils.
• Other documents: An addition to the above mention documents, a L/C may

call for additional documents like bill of change, health certificate,
preshipment inspection certificate, packing list, shipping companies
profile, beneficiary’s declaration/undertaking etc.
• Certificate of origin: many countries require a certificate from the supplier

of goods stating the origin of the goods and certified by the Chamber of
Commerce or any other recognized authority in the exporter’s country.
121
Sample Procedure for Administration of Irrevocable
Documentary Letters of Credit:-
Step 1
The Sales and Credit Departments agree that an irrevocable letter of credit is
necessary prior to communicating financial terms to the customer. Sales and Credit
must also agree whether to require an irrevocable confirmed or unconfirmed letter
of credit.
Step 2
The Credit Department will communicate the letter of credit terms to the customer,
forward a letter of credit checklist to the customer and try to select the issuing
bank. Selecting the issuing bank is not always possible.
The Credit Department will also request that the customer forward a copy of the
letter of credit on receipt. The customer generally receives its copy before our
advising bank. Getting an early copy allows all parties at (your company) to begin
the review process.
Step 3
The customer arranges with its bank for the issuance of the letter of credit.
Step 4
The issuing bank sends copies of the letter of credit to the customer and to seller’s
advising bank. Both, the customer and seller’s advising bank will send a copy to
the Credit Department.
Step 5
122
Once the Credit Department receives a copy of the letter of credit, it will send
copies to Customer Service Representatives, Sales, and Traffic within one business
day of receipt. Traffic personnel will forward the letter of credit to the forwarder. In
addition, the Credit Department will log the letter of credit in the Letter of Credit
Database.
Step 6
Credit, Sales, and Traffic will review the letter of credit looking for necessary
amendments within one day of receipt. Reviewing parties will forward all
amendments to the Credit Department via Fax or E-mail. A Fax or E-mail is still
necessary should Sales or Traffic require no amendments.
Step 7
If amendments are necessary, the Credit Department will forward all required
changes to the customer. Should the necessary amendments lie outside Credit's
realm of expertise; it will seek the needed assistance from other areas within the
Company. If the customer agrees, it will forward requests to its issuing bank,
which in turn will forward an amended letter of credit to seller’s advising bank.
Seller’s advising bank will fax a copy of the amended letter of credit to Credit, who
in turn will send it to Sales and Traffic. Credit, Sales, and Traffic will review the
amended letter of credit to ensure no additional changes are necessary.
When making amendments and reviewing an amended letter of credit, it is
important to keep the letter of credit's expiration date in mind. Credit should
approximate the number of days taken up by the amendment process and amend
the expiration date by the same number of days.
123
Step 8
If no changes are necessary, all the affected parties approve the amended letter of
credit by notifying the Credit Department of the approval via Fax or E-mail within
one day of receiving the amended letter of credit. If changes are necessary, go back
to Step 6. Once the Credit
Department receives the approval notifications from all parties, it will immediately
advise all parties affected that the letter of credit has been approved.
Step 9
Sales send a copy of the amended letter of credit to the plant with instructions to
ship the product to the customer. Sales will do this on the same day it receives the
notification from the Credit Department confirming that the amended letter of
credit is acceptable.
Step 10
The Freight forwarder and Traffic Department ship the material and send all the
documentation required in the letter of credit along with a draft for payment to
seller’s advising bank via overnight express courier.
Step 11
Our advising bank reviews all documentation to ensure that it complies with the
letter of credit's requirements. If there are any correctable discrepancies, the
advising bank will correct them. It is important to note that your advising bank
may charge you for each discrepancy found and corrected. If there are non-
correctable discrepancies, our advising bank will try to get the customer to waive
them.
However, getting the customer to waive non-correctable discrepancies is no
guarantee that the issuing bank will agree to the changes. This is especially true if
124
the financial condition of the customer deteriorates. The advising bank's review
process should take three days or less.
Step 12
Seller’s advising bank forwards all the documents to the location specified in the
letter of credit, which is usually the address of the issuing bank.
Step 13
The issuing bank honors the letter of credit and forwards the funds to seller’s
advising bank. Should the issuing bank not honor the letter of credit, it must tell
seller’s advising bank why.
Step 14
Seller’s advising bank will credit his account minus applicable fees. All advising
fees are absorbed by the division making the sale. The advising bank will contact
the Credit Department stating whether or not payment has been received.
Should the issuing bank refuse to honor the letter of credit, Seller Company is still
responsible for associated fees.
The issue of who will pay for the associated fees should be resolved prior to
accepting the letter of credit. The Buyer and the Seller should all be in accord.
Although the seller typically pays for advising fees, all fees are negotiable
Some special terms of Letter of credit
Latest Negotiation Date :
125
The latest negotiation date is the last day of the period of time allowed by the
letter of credit (L/C) for the presentation of documents and/or draft(s) to the bank.
The latest negotiation date is not necessarily the L/C expiry date. For example in
the letter of credit the latest negotiation date can be May 25, 2006 or 15 days
after the date of shipment, whichever comes first.
In case the L/C does not stipulate the latest negotiation, it is within 21 days after
the date of issuance of the transport documents, but on or before the L/C expiry
date.
Expiry Date and Place :

The expiry date and place is the last day of validity of the credit and the place
allowed by the letter of credit (L/C) for the presentation of documents and/or
draft(s) for payment, acceptance or negotiation. In the sample letter of credit the expiry
date is May 25, 2006 and the place for presentation of document is Export-City,
which is the beneficiary's city.
In case the validity of an L/C is stated in a period of time, for example "this credit
is valid for three months" or "this credit is available for two months" or "this credit
is good for one month", but does not specify the date from which the time is to run,
its validity starts from the issuance date of L/C by the issuing bank. The bank
normally discourages stating the L/C validity in a period of time.
In case the expiry date and/or the latest negotiation date falls on a day on which the
bank is closed for reasons not including the acts of God, strikes, riots, civil
commotions, lockouts, insurrections, wars or any other causes beyond the bank's
control, the expiry date and/or the latest negotiation date is extended to the
126
succeeding first day on which the bank is opened. Such extension, however, does
not extend the latest date of shipment.
Draft(s) Drawn On
The draft(s) drawn on answers the question "Which bank or who is the drawee
(the payer) of the draft?" L\C should specify on which bank it could be drawn.
Mostly it is any bank. The draft is most often drawn on the confirming bank or the
issuing bank. In some cases, the draft is drawn on the applicant.
Draft(s) Drawn At
The draft(s) drawn at answers the question "The draft is drawn at what terms?" It
can be a sight draft (i.e., payment on demand or on presentation) or a term draft (i.e.,
payment at a fixed or determinable future time).
Draft(s) Drawn Under
The draft(s) drawn under answers the question "The draft is drawn under which
credit and the credit is of which bank?"
Latest Shipment
The latest shipment---latest date of shipment or last date for shipment---is

the last day of the period of time allowed by the letter of credit (L/C) for
shipment, dispatch or taking in charge.
127
Payment of Letter Of Credit
The Uniform Rules for Collections, ICC Publication No. 322, describes the
conditions governing collections (including those for the presentation, payment
and acceptance terms), is issued by the International Chamber of Commerce
(ICC) in Paris, France.
In the documents against payment (D/P) ---documents on payment (DOP or

D/P) --- The conditions under which the documents attached to a Bill of
Exchange (BOE) will be given to the buyer, provided that he accepts the BOE.
Only then can the goods be released to the buyer.
In the documents against acceptance (D/A) ---documents on acceptance

(DOA or D/A) --- The conditions under which the documents attached to a Bill
of Exchange (BOE) will be given to the buyer, provided that he pays the BOE
immediately. Only then can the goods be released to the buyer.
AMENDMENT OF LETTER OF CREDITS
Many times, it becomes necessary for the contracting parties to make certain
amendments to the terms and conditions originally stipulated. In such cases,
Applicant approaches his Bank, which opened the credit requesting it to convey the
desired amendments to the Beneficiary. Accordingly, Opening Bank sends a
message advising the Bank through whom they had advised the Letter of Credit
originally conveying the desired amendments.
128
While advising the amendments normally the Issuing Bank serializes the
amendment numbers. Before advising the amendment, Bank has to ensure that no
previous amendment is missing. Normally, whenever an amendment is effected,
there is a likelihood of inconsistencies creeping into the Letter of Credits because
of not amending the connected clause of Letter of Credit. The Advising Bank must
go through the provisions of Letter of Credit and the amendments to ensure that on
account of such amendments no inconsistency arises in the Letter of Credit. If the
amendment is not clear, preliminary information can be given to the Beneficiary
and necessary clarifications sought for from the Issuing Bank (Article 8 & 12).
In an Irrevocable Letter of Credit, no amendment to the terms and conditions

originally conveyed can be made unless all parties to the credit agree thereto. In
case, Opening Bank requires information of acceptance of amendments by the
beneficiary, while communicating the amendment, the beneficiary is to be
requested to convey his acceptances to the Opening Bank.
Amendments are to be advised in the manner as done while advising the Letter of
Credit.
All charges connected to amendment as per rules in force either from the
Beneficiary or from the Opening Bank (Article 18).
Cancellation of Letter of Credit
1. If the issuing bank requisites that their irrevocable letter credit be cancelled
before expiry date and that the original letter of credit be returned to them. Bank
immediately should write to the beneficiary to that effect inquiring whether they
are agreeable and if so to return the credit.
129
2. Bank should follow up to get the original letter of credits for cancellation at their
end for onward transmission if need arises. If beneficiary is not agreeable for
cancellation the advising bank should inform the opener accordingly.
3. If transferable credit is to be cancelled at the request of the opener, then the
advising bank should inform all the concerned parties, and if agreeable should get
back all the advised letter of credit before communicating the acceptance to the
opener. Unless all the parties agree for cancellation.
UCPDC Provisions Uniform Customs and Practice for Documentary Credits

(UCPDC) is a set of standard rules governing letters of credit clarified by
International Chamber of Commerce (ICC). The current set of rules has been
published by ICC in its brochure no.500 and w.e.f. 01-01-1994. UCPDC is a
document of world wide importance which is universally recognized by over 165
countries. India also accepted to adhere the rule of UCPDC. Hence all banks in
India have to issue and operate the credits subject to the rules of UCPDC-500 and
have to incorporate the clause in their credit that the same are subject to the
provisions of UCPDC-500 rules.
UCPDC-500 has only 7 chapters containing in all 49 articles and deals in all aspect
of letter of credit, viz opening handling of documents there under and its operation.
Advantages to the Buyer
• The buyer is assured that his/her bank will refuse payment to the seller
unless
130
• the seller’s documents comply with the terms and conditions of the Letter of
Credit
• If the seller is willing to grant extended terms to the buyer, the buyer may
arrange for a Letter of Credit which is payable at a future date (i.e. 60 or 90
days after presentation of complying documents).
• Through the use of Banker’s Acceptances, a buyer who has purchased goods
under a Letter of Credit may finance the goods until they are marketed.
• By the documents called for, the Buyer can seek to minimize the risks in not
receiving the goods ordered. The Buyer may also impose conditions on the
manner and dates in which the goods are to be shipped.
Risk to the Buyer
• In Letters of Credit, banks deal only with documents, not with goods.
• The merchandise may not be as it is represented in the documents.
Advantages to the Seller
• The seller may rely on a bank’s credit worthiness rather than the buyers. The
seller is more confident when he has a bank’s commitment to pay upon
presentation of complying documents.
131
• The seller can reduce the risk that payment for the goods might be delayed
or otherwise jeopardized by political or foreign exchange problems in the
buyer’s country.
• The seller may be able to obtain financing for the purchase or manufacture
of goods that will be shipped under the Letter of Credit.
• Under Banker’s Acceptance financing the seller may receive funds shortly
after shipment despite having granted credit terms to the buyer, or the seller
may receive funds prior to export. The decision is typically based on the
seller’s cash flow position.
Risk to the Seller
• The seller’s documents must comply strictly with the terms and conditions
of the Letter of Credit to entitle the seller to payment.
• The seller is exposed to the commercial risk that the bank providing its
undertaking is willing and able to perform.
• The seller assumes any political and foreign exchange risk affecting the
issuing bank’s obligation.
132
ANALYSIS AND FINDINGS:
HDFC-28
HDFC-28-CMS BANK COLLECTION CHARGES FOR THE M/O
APRIL-2008
COLL.
LOCATION COLLECTION RATE CHGS. TOTAL
0.00
AGRA 1116726.00 005 55.84 55.84
0.00
ALIGARH 435526.00 005 21.78 21.78
0.00
PHAGWARA 299278.00 005 14.96 14.96
0.00
BANGLORE 1132710.00 004 45.31 45.31
0.00
LUDHIANA 44147509.00 005 2207.38 2207.38
0.00005 195
INDORE 3907211.00 .36 195.36
0.00
LUCKNOW 1661721.00 005 83.09 83.09
0.00
MADRAS 1829425.00 002 36.59 36.59
0.00
KANPUR 1064183.00 004 42.57 42.57
0.00 10 1
MEERUT 2197046.00 005 9.85 09.85
0.00
HALDWANI 801092.00 005 40.05 40.05
MANDI 2647023.00 0.00 132.35 132.35
133
GOBINDGARH 005
0.00
ROORKEE 1231844.00 005 61.59 61.59
0.00
VARANSI 500000.00 005 25.00 25.00
0.00
JAIPUR 12059585.00 004 482.38 482.38
0.00
PANAPAT 1656609.00 005 82.83 82.83
TOTAL 76687488.00 3636.93 3636.93
HDFC-28-CMS BANK – CH.RETURNS FOR THE M/O APRIL-2008

LOCATION AMOUNT PER.CH INTEREST TOTAL
DELHI 70965.00 100.00 0.00 100.00
DELHI 74121.19 100.00 21.32 121.32
DELHI 5249.00 100.00 0.00 100.00
DELHI 46373.00 100.00 0.00 100.00
LUDHIANA 127008.00 100.00 0.00 100.00
DELHI 800000.00 100.00 0.00 100.00
INDORE 505995.00 100.00 0.00 100.00
DELHI 350000.00 100.00 0.00 100.00
DELHI 236420.00 100.00 0.00 100.00
DELHI 500000.00 100.00 0.00 100.00
LUDHIANA 265761.00 100.00 0.00 100.00
DELHI 200000.00 100.00 0.00 100.00
DELHI 50000.00 100.00 0.00 100.00
DELHI 250000.00 100.00 0.00 100.00
DELHI 550913.00 100.00 0.00 100.00
DELHI 457706.00 100.00 0.00 100.00
DELHI 350000.00 100.00 0.00 100.00
LUDHIANA 38289.00 100.00 0.00 100.00
DELHI 400000.00 100.00 0.00 100.00
DELHI 479584.00 100.00 0.00 100.00
DELHI 589224.00 100.00 0.00 100.00
DELHI 20000.00 100.00 0.00 100.00
DELHI 362752.00 100.00 0.00 100.00
134
DELHI 481672.00 100.00 0.00 100.00
DELHI 150000.00 100.00 0.00 100.00
DELHI 186049.00 100.00 0.00 100.00
DELHI 300000.00 100.00 0.00 100.00
DELHI 474144.00 143.54 0.00 143.54
DELHI 442210.00 135.55 0.00 135.55
COURIER(DELHI) 0.00 400.00 0.00 400.00
COURIER(SBD) 0.00 400.00 0.00 400.00
COURIER(SBD) 0.00 400.00 0.00 400.00
COURIER(GURGAON) 0.00 1200.00 0.00 1200.00
COURIER(MADRAS) 0.00 400.00 0.00 400.00
COURIER(KANPUR) 0.00 400.00 0.00 400.00
8764435.1
TOTAL 9 6179.09 21.32 6200.41
PARTICULARS AMOUNT
Collection+Ret.Chargs 9837.34
SERVICE-TAX
12.36% 1215.90
TOTAL 11053.23
CHARGED BY
BANK 11053.30
HDFC-23
HDFC-23-CMS BANK COLLECTION CHARGES FOR

THE M/O MAY-2008
LOCATION COLLECTION RATE COLL.CHGS. TOTAL

0.0000
LUDHIANA 32880735.00 5 1644.04 1644.04
0.0000
ALIGARH 19097493.00 5 954.87 954.87
ALLAHABAD 630966.00 0.0000 31.55 31.55
135
5
0.0000
BELGAUM 212010.00 5 10.60 10.60
0.0000
MADRAS 17472980.00 2 349.46 349.46
0.0000
CHANDIGARH 1175267.00 4 47.01 47.01
0.0000
HALDWANI 15922961.00 5 796.15 796.15
0.0000
SRINAGAR 15108290.00 5 755.41 755.41
0.0000
TRIUPATHI 7900614.00 5 395.03 395.03
0.0000
PUNE 23178328.00 4 927.13 927.13
MUZAFAR 0.0000
NAGAR 630604.00 5 31.53 31.53
0.0000
JAIPUR 16331886.00 4 653.28 653.28
0.0000
KANPUR 59843066.00 4 2393.72 2393.72
0.0000
GUWAHATI 48774975.00 4 1951.00 1951.00
TOTAL 259160175.00 10940.78 10940.78
HDFC-23-CMS BANK -CH.RETURNS FOR THE M/O MAY-2008
PER.C
LOCATION AMOUNT H INTEREST TOTAL
1000000.0
GUWAHATI 0 100.00 0.00 100.00
HALDWANI 6183.00 100.00 0.00 100.00
MADRAS 629254.00 100.00 0.00 100.00
HALDWANI 45174 100.00 0.00 100.00
GUWAHATI 400000 100.00 0.00 100.00
GUWAHATI 400000 100.00 0.00 100.00
136
GUWAHATI 100000 100.00 57.53 157.53
GUWAHATI 106966.23 100.00 61.54 161.54
KANPUR 611164 100.00 0.00 100.00
HALDWANI 67801 100.00 0.00 100.00
HALDWANI 40000 100.00 0.00 100.00
GUWAHATI 2500000 100.00 0.00 100.00
JAIPUR 727992 100.00 0.00 100.00
LUDHIANA 247173 25.00 61.79 86.79
LUDHIANA 287005 25.00 71.25 96.25
LUDHIANA 197765.00 25.00 49.44 74.44
7366477.2
TOTAL 3 1375.00 301.56 1676.56
PARTICULARS AMOUNT
COLLECTION-
CHARGES 12617.34
SERVICE-TAX
12.36% 1559.50
TOTAL 14176.84
CHARGED BY
BANK 14177.46
ICICI-CMS BANK SERVICE CHARGES FOR THE M/O MAY-2008
LOCATION COLLECTION RATE TOTAL

AHMEDABAD 2976522.89 0.0000411 1500.00
NAGPUR 4538620.00 0.0003 1500.00
MUMBAI 15429925.40 0.00004 1500.00
137
JALLANDHAR 157665.00 0.0003 1500.00
LUDHIANA 2945197.00 0.0002 1500.00
TOTAL 26047930.29 7500.00
PARTICULARS AMOUNT
Collection-Charges 7500.00
SERVICE TAX 12.36% 927.00
TOTAL 8427.00
HSBC-23-CMS BANK SERVICE CHARGES FOR THE M/O APRIL-2008
LOCATION COLLECTION RATE COLL.CHGS.

0.0000
BANGALORE 58362398.92 2 1167.25
0.0000
HYDERABAD 8820059.25 2 176.40
0.0000
INDORE 16467361.45 4 658.69
0.0000
MUMBAI 16544468 1 165.44
TOTAL 100194287.62 2167.79
HSBC-23-CH.RETURNS CHRGS M/O

APRIL-2008
LOCATION AMOUNT CHARGE TOTAL
INDORE 500000.00 100.00 100.00
INDORE 416827.00 100.00 100.00
TOTAL 916827.00 200.00 200.00
COLLECTION- 2367.7
CHARGES 9
S.TAX 12.36% 292.60
TOTAL 2660.3
138
9
DEBITED BY 2660.4
BANK 8
HSBC-23-CMS BANK SERVICE CHARGES FOR THE M/O MAY-2008
LOCATION COLLECTION RATE COLL.CHGS.

0.0000
BANGALORE 53650087.03 2 1073.00
0.0000
HYDERABAD 5386036.00 2 107.72
0.0000
INDORE 22167964.00 4 886.72
0.0000
MUMBAI 48271198.00 1 482.71
TOTAL 129475285.03 2550.15
TOTAL 2550.15
CHARGED BY BANK 2550.17
12167734.00
139
CORP-CMS BANK SERVICE CHARGES FOR THE M/O APRIL-2008

ALLAHABAD 799094.00 0.00008 63.93
SAHARANPUR 4182373.00 0.00008 334.59
ROHTAK 832254.00 0.00008 66.58
LUCKNOW 5218092.90 0.00008 417.45
GORAKHPUR 37576078.41 0.00008 3006.09
AGRA 7598339.00 0.00008 607.87
BHOPAL 449904.00 0.00003 13.50
JODHPUR 112253.00 0.00008 8.98
KANPUR 1321586.00 0.00003 39.65
TIRUCHIRAP 5000000.00 0.00008 400.00
DEHRADUN 2418623.00 0.00008 193.49
JAMMU 7242179.00 0.00008 579.37
REWARI 2827137.00 0.00008 226.17
TOTAL 75577913.31 5957.66
CORP-CMS CH.RTURNS CHARGES FOR THE M/O APRIL-2008
LOCATION AMOUNT RET.CHGS INTEREST TOTAL

JODHPUR 112253.00 100.00 0.00 100.00
GORAKHPUR 79349.00 100.00 32.61 132.61
GORAKHPUR 381124.25 100.00 156.63 256.63
GORAKHPUR 550161.00 100.00 226.09 326.09
GORAKHPUR 591139.00 100.00 242.93 342.93
GORAKHPUR 229057.00 100.00 188.27 288.27
TOTAL 600.00 846.53 1446.53
140
PARTICULARS AMOUNT
Collection-
Charges 6557.66
SERVICE-TAX 12.36% 810.53
INTEREST 846.53
TOTAL 8214.72
CORP-CMS BANK SERVICE CHARGES FOR THE M/O MAY-2008

ALLAHABAD 3,197,572.00 0.00008 255.81
SAHARANPUR 2,707,873.00 0.00008 216.63
ROHTAK 1,491,609.00 0.00008 119.33
LUCKNOW 7,422,077.00 0.00008 593.77
GORAKHPUR 42,341,734.50 0.00008 3387.34
AGRA 6,865,833.95 0.00008 549.27
KANPUR 5,512,395.00 0.00003 165.37
TIRUCHIRAP 5,000,000.00 0.00008 400.00
DEHRADUN 3,215,656.60 0.00008 257.25
JAMMU 3,544,052.00 0.00008 283.52
REWARI 1,790,950.00 0.00008 143.28
TOTAL 83089753.05 6371.56
PARTICULARS AMOUNT
Collection-
Charges 6371.56
TOTAL 7159.09
UTI-CMS BANK SERVICE CHARGES FOR THE M/O April-2008
141
LOCATION COLLECTION RATE COLL.CHGS. COURIER TOTAL
COIMBATORE 4352706.98 0.00004 174.11 0.00 174.11
HYDERABAD 693661.99 0.00003 20.81 0.00 20.81
RUDDRAPUR 1349564.43 0.00004 53.98 0.00 53.98
KOCHI/ERNAK. 1994495.00 0.00004 79.78 0.00 79.78
VARANASI 28771059.35 0.00004 1150.84 400.00 1550.84
TOTAL 37161487.75 1479.52 400.00 1879.52
TOTAL 2111.83
UTI-CMS BANK SERVICE CHARGES FOR THE M/O MAY-2008
LOCATION COLLECTION RATE COLL.CHGS. COURIER TOTAL

COIMBATORE 4197182.09 0.00004 167.89 0.00 167.89
RUDDRAPUR 248364.00 0.00004 9.93 0.00 9.93
VARANASI 35555173.18 0.00004 1422.21 400.00 1822.21
TOTAL 40000719.27 1600.03 400.00 2000.03
TOTAL 2247.23
SHORT COMINGS IN THE PRESENT SYSTEM
The above calculations show that the total saving has been to the tune of Rs.
4800000(approx) each year since BSL has started using CMS. However BSL have
been facing certain problem with the existing banks. Both the banks are charging at
a much higher rate according to the prevailing rates in the market. It is because
142
when BSL entered into the contract with the banks in June 1999 these were the
cheapest rates but there have been no major revision of the contract. hence BSL
ended paying higher rates. So we invited quotations from some other banks and I
did analysis as to which bank should they opt for so that the cost can be further
reduced. In the same context rates were invited AXIS, IDBI and HDFC Bank.
BSL intendeds to take back its business from ICICI and corporation bank, because
in spite of repeated reminders there has been no positive response from the above
banks. Also the contracts have certain clause that is no more acceptable to BSL.
They are as follows:
• ICICI charges minimum of Rs.1500 per month in respective of collection.
• Both of the bank charge an interest @15.5% and13.5% p.a per instrument
returned for the period of which the bank has remained out of fund which is
quite high.
• The bank however pays at much lesser rate in the case of delayed credit.
In order to select bank, service charge charged paid by BSL over the year 07-08
was compared with the service charges BSL had to pay, if it had entered into a
contract with UTI, IDBI or HDFC. Service Charges are calculated by
multiplying the rates quoted by the banks with the total collection of the month.
In calculating the total charges payable to each these banks the service tax and
instruments returned charges neglected because instrument returned cases are
very few and rates below 13.5% would be acceptable to BSL. Also in the
collection charges are less than the service tax would automatically come down.
COMPARING HDFC, ICICI, UTI, CORPORATION AND HSBC BANKS:
143
• ICICI is providing to be an expensive option as compared to any of the
above bank.
• HDFC is the most suitable bank it is not charging any amount for collection.
However, the location Chandigarh, Jaipur, Kanpur, Nagpur, is the location
on which HDFC is crediting the amount in two days which would not suit
BSL.
• In the location such as Coimbatore, Rudrapur Aurangabad UTI is charging a

flat rates, BSL should look for other option, since BSL is getting huge
amount.
• Corporation Bank has also flat rate for all the locations of BSL.
• HSBC provides a inexpensive service but in few places such as Mumbai,

Bangalore, Hyderabad and Indore.
CONCLUSION
Cash Management Services has saved huge amount of cost which BSL had to pay
to procure funds from its customers. The savings have been nearly to the tune of Rs
4800000. CMS has not only saved cost but have also ensured fast realization of
144
cash. Earlier it used to take BSL at least 4-5 days to realize the payments made by
its customers whereas now it takes 24-48 hrs. The cost to BSL under conventional
method of collection (through drafts) is estimated by taking the cash inflow
through sale in cash only and current rates in the market is used for the calculation
e.g. BBSL has been availing the CC facility from Punjab national bank and paying
an interest @ 11% p.a. Also, the return charges are ignored while doing all the
calculations because there are very few cases of return each month and most of the
time the banks adjust the amount the very same days so no interest is levied upon
it. In such cases BSL has to pay Rs 100 flat as return charges. It would be in best
interest of BSL to change the banks from which it is availing CMS as the cost can
be further reduced. The above study leads us to the conclusion that HDFC and UTI
are best suited for BSL. The conclusion has not been made only on the grounds of
financial charges, while finalizing the banks the return interest rate, MIS report by
banks have also been taken into consideration. Any rate below 13.5% should be
acceptable to BSL. The MIS reports of all the banks are at par. Also, the banks
have ruled out the possibility of delayed credit as they have sophisticated
software’s to insure timely credit. Still BSL should insist on writing a clause in the
agreement stating that in case of delayed credit BSL is entitled to claim an interest
equivalent to the interest charged by the bank in case of instrument return. Thus
fresh negotiations with banks could save up to 70% of the cost.
Where as, Letter of Credit has been an important source of funds for BSL and
huge amount of transactions are carried out by way of Letter of credit in both
domestic and international market. It not only hedges the company against the
default risk but also ensures that the cash is realized much earlier than the due date
of payment. However, In many cases I have noticed that the party does not default
but delays the payment to the bank which in turn charges interest to BSL for the
145
period for which it has remained out of funds. This increases the cost of financing.
Provisions should be made while entering into agreement with the party so as to
avoid such costs. Also, at times it has been observed that the party makes payment
to its banker on the due date only and hence the transfer of funds are delayed, again
BSL ends up paying an interest for the same. This does not make much of a
difference if the credit period is anywhere between 60-180 days. But in case the
credit period is less than 60 say 30-45 the cost of financing becomes high. Thus,
while entering into agreement with the party such costs must also be taken into
consideration.
BSL has been managing the funds very well by employing latest management
techniques and have also ensured timely realization of funds.
RECOMMENDATION
146
• I would like to recommend BSL to negotiate with HDFC for
location such as Ludhiana, Aligarh, Allahabad, Mandi-
Gobindgarh, Kanpur, Pune, Guhawati as from these location BSL
is receiving a huge amount, so if negotiated at lower rates, then
the saving would increase at higher rates.
• As regard business with UTI but not a large, furthermore BSL

should negotiate with UTI for the rates which suit the dealing.
• As regard business with Corporation Bank, Corporation Bank is

having very high rate as compared to HDFC and UTI.
• ICICI Bank is another option but it charges high in case of

delayed payment
147
BIBLIOGRAPHY
I M Pandey “ Financial Management” Vikas Publishers

Agrawal J. D, “Education Finance: Facts & Fancies”, Finance India Vol II
No.3, Sept 1998, pp 321-338
Brigham F. Eugene, “Fundamentals of Financial Management,” Dryden Press
Brigham F. Eugene, Ehrhadt c. Michael, “Financial Theory and Practice”;
Thomson South Western
Bryant James W, “Financial Modeling in Corporate Management”, Wiley-
Interscience
Clark, John J., el, al, “Financial Management: A Capital Market Approach”,
Allyn Publications
Khan and Jain, “Financial Management”, Tata Mc Graw Hill Publications
Kuchhal S.C, “Financial Management: An Analytical & Conceptual
Approach, “Chaitanya Allagabad, 1980
Kulkarni, PV, Financial Management,” Himalaya, Bombay, 1983.
I.m pandey.Financial Managemaent.
148

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PROJECT REPORT ON

CASH MANAGEMENT SYSTEM

BHUSHAN STEEL LIMITED, SAHIBABAD

Submitted to:- Submitted by:-

General Manager (Finance) Student of college

BHUSHAN STEEL LIMITED,

4. OBJECTIVE AND SCOPE OF RESEARCH………

6. OVERVIEW OF STEEL SECTOR…………………

7. PROFILE OF THE ORGANIZATION……………..

- About the Company…………………………..

- Research and Development…………………..

- Products from group Companies……………..

- Company’s Performance at a glance…………

- Cash Flow Statement…………………………

- Comparitive Analysis of Financial Statement

9. BUSINESS GOALS AND STRATEGIES…………

10. S.W.O.T. ANALYSIS………………………………

11. CASH MANAGEMENT……………………………

- Importance of Cash for Company……………

- Cash Management at BHUSHAN STEEL LIMITED

12.LETTER OF CREDIT(INLAND DISCOUNTING….

13.TYPES OF CREDIT & IMPORTANCE

14. ANALYSIS AND FINDINGS………………………

I am also indebted to him for sharing vital information critical

Again, I sincerely thank all of them.

As a part of PGDM Programme, a student has to pursue a project duly approved

CASH MANAGEMENT SYSTEM:-

1. Saves a huge amount in form of DD commission and clearing charges.

1. Collection would have meant collection either through outstation cheque or

HOW DOES CMS WORKS:

A letter of credit is a document issued mostly by a financial institution which

OBJECTIVE AND SCOPE OF RESEARCH

We gathered the following subject matter from Company:

• Bank Reconciliation Statement Sheet.

AN OVERVIEW OF STEEL SECTOR

(in million tonnes)

Demand - Availability Projection

• Demand – Availability of iron and steel in the country is projected by

Pricing & Distribution

• Price regulation of iron & steel was abolished on 16.1.1992.

• Last four years import of Finished (Carbon) Steel is given below:-

Year Qty. (In Million

Exports of Iron & Steel

• Iron & Steel are freely exportable.

(Qty. in Million Tonnes)

(Source: Joint Plant Committee)

Duties & Levies on Iron & Steel

• Peak rate for non-agricultural products reduced from 15 % to 12.5 %.

• Service tax rate increased from 10% to 12%.

• No change in rates of personal income tax or corporate income tax. No new

Levies on Iron & Steel:

The Fund, inter-alia, supports:

1) Capital expenditure for modernization, rehabilitation, diversification, renewal &

2) Research & Development

3) Rebates to SSI Corporations

• SDF levy was abolished on 21.4.94

Opportunities for growth of Iron and Steel in Private Sector

The New Industrial Policy Regime:

The Growth Profile

The liberalization of industrial policy and other initiatives taken by the

(II) Pig Iron

BHUSHAN STEEL LIMITED:-

BSL is currently exporting to Europe, USA, Canada, Africa, China and