Summer Internship Project

on
“Working Capital Management of Rastriya Ispat Nigam Limited-
VSP”

Under the Guidance

of
Dr. AR Subramanian

Presented on: Presented by:

14-August-2019 Avinash Gogu
2K18BFS04
 About RINL
• Rastriya Ispat Nigam Limited ‐ Visakhapatnam Steel Plant
(RINL‐VSP) popularly known as ‘Vizag Steel’ the ‘Pride of Steel’.
• It is Central PSU under the Ministry of Steel and is the first shore
based Integrated Steel Plant in the country.
• Vizag Steel known for its ‘Quality’ & ‘Customer Service’.
• RINL has a market share of about 10%.
• It has been supplying various grades of steel for construction of
projects of National importance which include Metros, Power
Sector, Bridges, Nuclear complexes and several others.
• RINL‐VSP has exported finished products to countries like USA,
UAE, Thailand, Bangladesh, Nepal, Sri Lanka etc.
• Its products are made from 100% virgin steel, maintaining stringent
tolerances both in chemical & physical properties.
 Major consumers
Figure 3.5 Long Steel Consumption Pattern in India

The automobile and automobile components industries are also expected to

 Competitors

• Tata Steel Ltd

• SAIL Finished steel
• JSW Steel Ltd
• Jindal Steel and Power Ltd
• Ispat Industries Ltd
• Welspun-Gujarat Stahl Rohren Ltd
• Bhushan Steel Ltd
• Visa Steel Ltd
 Rastriya Ispat Nigam Limited - VSP

Rastriya Ispat Nigam Limited

Operating Subsidiary
Units Company with
51% Stake

Visakhapatnam Steel Plant

Eastern Investment Limited

OMDC BSLC
Mandharam Jaggayapet Garbham
Mines a mines mines
Dolomite Limestone Manganese
 Product Mix

S.No. Products Size(mm) Application

1 Wire Rods 5.5 - 20 Wire drawing, Bright bars,

Fasteners
2 Rounds (Straight 16 - 80 Fasteners, Forging, Railways,
& Coil) Construction

3 Rebars 8 - 36 Construction

4 Squares 65 - 90 Bright bars, Forgings, Re-rollers,

Auto Components

5 Structurals 55 - 200 Construction, Fabrication

enabled harmonious industrial relations. The organization structure of the plant is as

shown in the Figure (3.2).

Organizational Structure
Figure 3. 2 Organisation Chart
 Departments

Major Departments of RINL as follows:

1. Raw Material handling.

2. Coke oven.
3. Sinter Plant.
4. Blast furnace.
5. Steel melting shop.
6. LMMM/ WRM/ MMSM
Blast furnace
 Objective

1. To study working capital management of Rastriya Ispat Nigam

Limited- VSP.
2. To Study the liquidity position through various working capital
related ratios.
3. To study operating and cash cycle of the Rastriya Ispat Nigam
Limited.
4. To find out the difference between the theoretical and practical
aspect of working capital management.
5. Using Karl Pearson correlation method to find the type of
relationship between components of working capital management
and organization’s profitability.
 Research Methodology

Source of Data:

• Secondary source of data is used to study the working capital

management. This includes Annual Reports of past 5 years.
 Analysis and Discussion

Current Asset & Current Liability

18000

16000

14000

12000
In Crores

10000

8000

6000

4000

2000

0
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Current Asset 8492.11 9977.75 8400.66 7256.99 5772.43 6776.88 7832.38
Current Liabilities 7221.61 10184.67 10208.56 13107.61 11093.53 13400.2 16836.82
Current Ratio = Current Asset
Current Liability
 Current Asset & Inventory
12000

10000

8000
In Crores

6000

4000

2000

0
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Current Asset 8492.11 9977.75 8400.66 7256.99 5772.43 6776.88 7832.38
Inventory 3403.11 3828.6 3863.04 5179.51 3810.6 4766.85 5628.67
Working Capital= Current asset – Current liability
 SALES
20000

15000

10000

5000

0
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

-5000

-10000

-15000

Current Asset Current Liabilities Working Capital Total sales

 Chart Title
16000 40

14000 35

12000 30

10000 25

8000 20

6000 15

4000 10

2000 5

0 0
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Total sales Average Collection Period Average Payable Period

 Inventory Turnover Ratio
5

4.5

3.5

2.5
Inventory Turnover Ratio
2

1.5

0.5

0
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
 Quantitative Analysis

1. Negative Correlation between Profitability and collection

period. It is -0.632.

1. Negative Correlation between Profitability and Payment

period . It is -0.8.
 Hypothesis testing

1. T test on average collection period to find out its affect on working capital.

• H0 = Decrease in Average collection period will improve working capital.

• H1 = Increase in Average collection period will improve working capital.

2. T test on average payment period to find out its affect on working capital.

• H0 = Increase in Average payment period will improve working capital.

• H1 = Decrease in Average payment period will improve working capital.
3. ANOVA test to verify if there is any variation among Receivable
turnover, Credit turnover and Inventory turnover means.

4. Paired t test
•H0 = Working capital improves if there is large positive difference.
•H1 = Not H0.
 Result of Testing

• The testing shows that decreasing the collection period will

improve the working capital. Also boost up the production
process.
• Having more payment period also improve the working capital of
RINL, but proper policies is to be formulated, and discretion is
needed for taking the advantages of the opportunity.
• Through ANOVA test, determining whether there are any
statistically significant differences between the means of three
independent (unrelated) groups namely, Receivable turnover
ratio, Credit turnover ratio and Inventory turnover ratio. It is
found out that the means are not equal to each other.
• Paired t test infers that if there is large positive difference,
working capital improves.
 Conclusion

• The overall performance of the company during the period of study

is much satisfactory.
• It should continue in the same way so that it will have bright future
with increase in sales and profitability.
• The way it is managing its funds is also good.
• Working capital of the firm is in satisfactory position so RINL
should try to increase its Current assets and decrease its Current
liabilities to continue in same manner.
• Excess amount of cash inflow is to be used for working capital to
increase current ratio.
• To recover RINL has planned to go for bonds in place of loans.
 Recommendations

• Maintenance of Optimum level of inventory effectively and

efficiently, rather than optimistic level.
• The company must take steps to decrease the working capital cycle.
• RINL is suggested to maintain a balance in capacities,
synchronization of various inputs availability of some materials or
parts that are not easily available.
• Short-term credit period availed must be reduced as much as
possible, and sundry creditors should be paid faster to avoid
containment of supply chain.
• Reducing Lead-time.
• Increasing payment period.
• Focus on Current Asset.
 Limitation

• The study duration is short.

• Limited interaction with the concerned heads due to their busy
schedule.
• The findings of the study are based on the information retrieved by
the selected unit.
• Difficulty in comparison.
• Impact of GST.
• Lack of complete information.
• Inadequacy of data.
 References

• https://www.researchgate.net/publication/254093175_Effect_of_Working_
Capital_Manageent_on_Firm_ProfitabilityEmpirical_Evidence_from_India
• https://su-plus.strathmore.edu/handle/11071/3382
• https://www.academia.edu/31439903/Analysis_of_Effects_of_Working_
Capital_Management_on_Profitability_of_Manufacturing_Companies_A_
Case_Study_of_Listed_Manufacturing_Companies_on_Nairobi_Security_
Exchange
• https://www.worldsteel.org/
• https://www.ibef.org
• www.Vizagsteel.com
• https://dipam.gov.in/sites/default/files/RINL%20Presentation.pdf?downlo
ad=1
• http://www.greenbusinesscentre.com/energyawards/enepresent/Metals_
489_Rashtriya_Ispat_Nigam_Ltd._0.pdf
• Class notes.