INTRODUCTION Steel comprises one of the most important inputs in all sectors of economy.

Economy of any country depends on the strong base of the iron and steel industry. Steel is a versatile material with multitude of useful properties, making indispensable for furthering and achieving continual growth of the economy be it construction, manufacturing infrastructure or consumables. attained by country. Keeping in view the important of steel the integrated steel plant with foreign collaboration was setup in the public sector in the post independence era. The growth of any organization depends on the overall performance such as productions, marketing resources and financial performance of the organization. The financial performance of the any organization reflects the strength, weakness, opportunities and threats of the organization with respect to profits earned, investment, sales, realization, turn over return on investment, net worth of capital efficient management of financial resources and deliberate analysis of financial results are pre requisite for success of an enterprise. In that financial performance is one of the major and important areas of financial management. Every organization requires study on financial performance about business transactions, which includes managing current assets like cash, inventory, accounts receivable, loans and advances and current liabilities like sundry creditors. 1.1 Introduction to Financial Analysis Financial analysis is the process of identifying the financial strength and weakness of the firm by properly establishing between the items of the balance sheet and profit and loss account. There are various methods or techniques used in analysis financial statements such as comparative statements, trend analysis, common size statements, schedule of changes in working capital, funds flow and cash flow analysis Cost Volume Profit Analysis and Ratio Analysis. The level of the steel consumption has long been regarded as an index of industrialization and economic maturity

Meaning and Concept of Financial Analysis: The terms financial analysis also known as analysis and interpretation of financial statements refers to the process of determining financial strength and weaknesses of the firm by establishing strategic relationship between the items of the balance sheet, profit and loss account and other operative data.

1.2 NEED FOR THE STUDY: There is a special role of every industry barring up on the need essentiality where everything has to be done in accordance with standards that are regulated by the government. To understand this, conceptual idea is not only sufficient but also it needs a wide knowledge and understanding of the factors that are affecting them. Especially VISAKHAPATNAM STEEL PLANT has emerged from loss to profit making company. Now, the study is all about analyzing, how this has been possible for a company whose figures were budgeted to negative show finally ended with high positively. At most care was taken in preparing the budget relating to that period of the year. As days passed on, we could see the development in all the sectors is quite appreciable. Coming to our main topic, we need to analyze the factors of the turnaround period (20032008) to get as idea of what a major company does in upcoming the pressures from all sides.This study is also focuses on variances shown in that period.

1.3

SCOPE OF THE STUDY:

Financial analysis depends primarily on financial statements to diagnose financial performance there are three principle reasons. As longer as the accounts bases remain more or less the some overtime, meaningful mitered is can be drawn by examining trends in raw data and financial ratios. Since similar basis characterize various firms in the same industries, incur firm comparisons are useful. Experience seems to suggest the financial analysis works one is accounting basis and more adjustments for the same. Certain neither accounts nor conversions are followed while preprimary financial statement. Still personal judgment of the accountant phrases on important part.

1.4 OBJECTIVES OF THE STUDY:

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The Study is based upon the part of Financial Performance that is been taken into consideration i.e. Financial Statements and Analysis. The Study predominantly aims at the turn around period (2003-08). To know the current position of various assets, liabilities and results of operation activities

To find out Financial Strengths and weaknesses of the firm To know the Liquidity Position of a firm To know the causes of changes in the Cash Position To find out important tools of Short-term, Long-term Financial Planning To know the ability of the firm to meet its current obligations To know the overall operation efficiency and performance of the firm To find out foremost important Financial Decisions To know the detailed information about comparative and common size balance sheets To know about steel scenario in India and world.

1.5 METHODOLOGY:
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The information for the study has been obtained from two sources namely: Primary Data Secondary Data

1. Primary Data: It is the information collects directly with out any reference. In tills study it was mainly interviews with concerned officers and staff, either individually or collectively, sum of the information has been verified or supplemented with Personal observations. The data includes. 1. 2. Having a discussion with finance manager. Guidelines are taken from Asst. General Manager (F&A).

2. Secondary Data: This is taken from the annual reports, websites, company journals, magazines and other sources of information of steel plant.

1.6 LIMITATIONS OF THE STUDY:

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The period of study that is 8 weeks was not enough to go in the detailed aspects of the study.

The study is carried bearing on the information and documents provided by the organization and based on the interaction with the various employees of the respective departments.

Most of the matters related to budgets were confidential so it not possible together much information.

2. PROFILE OF INDIAN STEEL INDUSTRY

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Introduction:Indias Steel Industry is more than a century old. Before the economic reforms of the early 1990s the Indian steel industry was a predominantly regulated one with the public sector dominating the industry. Tata Steel was the only major private sector company involved the production of steel in India. Sail and Tata Steel have traditionally been the major steel producers of India. In 1992, the liberalization of the India economy led to the opening up of various industries including the steel industry. This led to the increase in the number of producers, increased investments in the steel industry and increased production capacity. Since 1990, more than Rs 19,000 crores (US$ 4470.58 million) has been invested in the steel industry of India. Indias steel industry went through a rough phase between 1997 and 2001 when the overall global steel was facing a downturn and recovered after 2002. The major factors that led to the revival of the steel industry in India after 2002 was the rise in global demand for steel and the domestic economic growth in India India has now emerged as the eighth largest producer of steel in the world with a production capacity of 35million tonnes. Almost all varieties of steel is now produced in India. India has also emerged as a net exporter of steel which shows that Indian steel is being increasingly accepted in the global market. The growth of the steel industry in India is also dependant, to a large extent, on the level of consumption of steel in the domestic market. Steel consumption is significant in housing and infrastructure. In recent years the surge in housing industry of India has led to increase in the domestic demand for steel. More than 3500 different varieties of steel are available in the steel industry of India. These can however be classified into two broad categories Flat Products Flat products include plates and hot rolled sheets such as coils and sheets. Flat products are derived from slabs. One of the major uses of steel plates is in ship building.
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Long Products Long products include bars, rods, wires, ropes and piers. These are called long products due to their shapes. Long products are made from billets and blooms. Long products are mostly used in housing and construction and also in rail tracks.

Highlights Of Present Steel Scenario: The world steel shows a low growth demand. There is a threat to steel industry from competitive products like plastics, aluminum, etc. Developed countries slowly reduced the production of steel. Developing countries like China are planning to produce steel as much large quantity then of present output of 80 Mt. per annum. India consciously and strategically decides to invest into steel production. Preference is given to superior quality products and high value item production. Customer oriented approach in view of product oriented approach.

The Major Steel and Related Companies in India Bhart Refectories Ltd. Hindustan Steel works Construction Ltd Jindal Steel and Power Ltd Manganese ore(India) Ltd Metal scrap Trade corporation Ltd Metallurgical and engineering consultants India Ltd National Mineral Development Corporation Rastriya Ispat Nigam Ltd Sponge Iron India Ltd Steel Authority of India Ltd Development of Indian Steel Industry

The development of steel industry in India should be viewed in conjunction with the type and system of government that had been ruling the country. The production of steel in
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significant quantity started after 1900. The growth of steel industry can be conveniently studied by dividing in the period into pre % & post independence era (or before 1950 & after 1950). The total installed capacity for in-got steel production in during preindependence era was 1.5 million tones / year, which has risen to about 8 million tonnes of ingot by the seventies. This is the result of the bold steps taken by the government to develop this sector. 1951-1956: First five year plan. No new steel plant came up. The Hindustan Steel Ltd. Was born on 19th January 1954 with the decision of setting up three plants each with one million tonne input steel per year in at Rourkela, Bhilai and Durgapur; TISCO started its expansion programming. 1956-1961: Second five year plan. A bold decision was taken up to increase the ingot steel output India to 6 million tonnes per year & production at Rourkela, Bhilai and Durgapur steel plant started. 1961-1966: Third five year plan. During the third five year plan the three steel plants under HSL, TISCO & HSCO were expanded as show, in January 1964 Bokaro steel plant came into existence. 1966-1969: Recession Period. The entire expansion programme was actively executed during this period. 1969-1974: Fourth five year plan. Licenses were given for setting up of many Mini-Steel plants and rolling mills. Government of India accepted setting up two more steel plants in south. One at Visakhapatnam (Andhra Pradesh) and Hospet (Karnataka).

SAIL was formed during this period on 24th January, 1973. The total installed capacity from 6 integrated plants was 106Mt.

1979: Annual Plan

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The erstwhile Soviet Union agreed to help in setting up the Visakhapatnam steel plant. 1980-1985: Sixth five year plan. Work on Visakhapatnam steel plant was started with big bang and top priority was accorded to start the plant. Scheme for modernization of Bhilai Steel Plant, Rourkela, Durgapur, TISCO were initiated. 1985-1991: Seventh five year plan. Expansion work of Bhilai and Bokaro Steel Plants are completed Progress on Visakhapatnam steel plant picked up and rationalized concept has been introduced to commission the plant with 3.0Mt, liquid steel capacity by 1990. 1991-1996: Eight five year plan. Visakhapatnam steel plant started its production modernization of other steel plants is also duly envisaged. 1997-2002: Ninth five year plan. Visakhapatnam steel plant had foreseen a 7% growth during the entire plan period. 2002-2007: Tenth five year plan. Steel industry registers the growth of 9.9% Visakhapatnam steel plant high regime targets achieved the best of them.

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Size of the Indias Steel Industry The size of Indias steel industry has increased considerably in recent years. According to latest available estimates, India ranks eighth among the top steel producers of the world with a production capacity of 35 million tonnes. The steel industry of India has capital investments of more than Rs 100,000 crores. The total employment in the industry is more than two million (including direct and indirect employment). Global Demand for Steel and Indian Steel Industry The global demand for steel is at an all time high nowadays. Much of the tremendous demand for steel around the world may be attributed to the numerous construction projects that are going on around the world. Much of these projects are taking place in the economically developing countries of the world like India, China and Thailand . China is the place where a lot of construction is being done nowadays and much of the construction is for the purpose of India has a lot of iron ores. This implies that India has a ready base for producing sufficient amount of steel and the experts are also of the opinion that the Indian steel industry would continue to grow in the coming years. In the recent times the production of steel has gone up in the country from 17 million tones in 1990 to 36 million tones in 2003. The Indian steel industry is trying to reach the 66 million tones mark in 2011. The high levels of production would allow the Indian steel industry to establish a stronghold on a number of areas like housing, construction, and ground transportation. The special steel produced by the Indian steel industry is supposed to be used in high end engineering industries like generation of power, fertilizers and petrochemicals. The fact that India is not a voracious consumer of steel like some of the major economies like China and the United States of America means that India would be able to use the surplus steel it produces for exporting to other countries so that their demands are met. This would help the Indian steel industry to be regarded as one of the most prominent steel industries if not the leading one. Growth Potential of Indias Steel Industry
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India has set a vision to be an economically developed nation by 2020. The steel industry is expected to play a major role in Indias economic development in the coming years. The steel industry of India has a very high growth potential and is expected to register significant growth in the coming decades. India is expected to emerge as a strong force in the global steel market in coming years. The two major aspects that are expected to play a significant role in the growth of the steel industry in India are Abundant availability of iron ore in the country The country has well established facilities for steel production

Steel production in India has grown from 17 million tonnes in 1990 to 36 million tonnes in 2003. It is expected that by 2011, the steel production in India will grow to 66 million tonnes. The major sectors where consumption of steel is expected to grow in the coming years are Construction Housing Ground transportation Hi-tech engineering industries such as power generation, petrochemicals, fertilizers Conclusion on Indian Steel Industry The Indian steel industry is among the upcoming industries of the world. It has a number of iron ores, which means that it has plenty of resources from which to draw its raw material. The rate of production of steel in India has been going up at a steady rate in the last few years. In the recent times Orissa and Jharkhand have been identified as the potential steel destinations of India the ones that would provide the Indian steel industry with its necessary raw material. There are also a number of steel companies in India like Tata and
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ArcelorMittal that are either coming up or have established themselves as prominent forces in the world steel scenario. In the recent times a lot of foreign direct investment is being made in the Indian steel industry. In fact the rate of investment is being made in the last few years and, to a certain extent, this increase has been contributed to by the growth potential of the steel industry of India that is thought of as being impressive in the international steel circle.

3.PROFILE OF VISAKHAPATNAM STEEL PLANT

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Visakhapatnam Steel Plant, popularly known as vizag Steel, is one of the major steel producers in India. Visakhapatnam steel plant the first coast based steel plant of India is located 16 km south west of city of destiny i.e., Visakhapatnam Bestowed with modern technologies, VSP has an installed capacity of 7.3 million tones per annum of liquid steel and 6.773 million tonnes of saleable steel. At VSP there is emphasis on total automation, seamless integration and efficient up gradations which results in wide range of long and structural products to meet stringent demands of discerning customers with in India and abroad. VSP products meet exacting international quality standards such as JIS, DINAND BIS, and BS etc. VSP has become the first integrated steel plant in the country to be certified to all the three international standards for quality (ISO-9001) for environment management (ISO14001), for Occupational Health & Safety (OHSAS-18001). The certificate covers quality system of all operational, maintenance and service units besides purchase system, training and marketing functions spreading over 4 regional marketing offices, 24 branch offices and stock yard located all over the country. VSP successfully installing and operating efficiently Rs460 crores worth of pollution control and environment control equipments and converting the barren land scape by planting more than 3 million plants has made the steel plant, steel township and surrounding areas into a heaven of lush greenery.

Introduction Steel occupies the foremost place amongst the materials in use today and pervades all walks of life. All the key discoveries of human genius for instance steam engine,
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railway means of communication and connection, automobile, aero place and computer, are in one way or together with steel and with its sagacious and multifarious application. Steel is a versatile material with multitude of useful properties making it indispensable for furthering and achieving continual growth of the economy be it construction, manufacturing, infrastructure or consumables. The level of steel consumption has long been regarded as an index of industrialization and economic maturity attained by a country. Keeping in view the importance of steel, the following integrated steel plants with foreign collaboration were set up in the public sector in the post independence era:

Table 3.1
Sl. No 1 2 3 4 Steel plant Durgapur steel plant Bhilai steel plant Bokaro steel Plant Rourkela steel plant Collaborated by Britain Erstwhile USSR Erstwhile USSR Germany

VSP Technology: State-of-the-Art 7meter tall coke oven batteries with coke dry quenching. Biggest Blast Furnaces in the country Bell less top charging system in blast Furnace. 100% slag granulation at the BF cast house. Suppressed combustion - LD gas recovery system. 100% continuous casting of liquid steel. "Tempore" and "Stelmor" cooling process in LMMM & WRM. Extensive waste heat recovery systems. Comprehensive pollution control measures.

Table 3.2 Major Sources of Raw Materials

Raw Material Iron Ore Lumps & Fines BF Lime Stone SMS Lime Stone Source Bailadilla, MP Jaggayyapeta, AP UAE
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BF Dolomite SMS Dolomite Manganese Ore Boiler Coal Coking Coal Medium Coking Coal (MCC)

Madharam, AP Madharam, AP Chipurupalli, AP Talcher, Orissa Australia Gidi/Swang/Rajarappa/Kargali

Table 3.3 Major Units

Department Coke Ovens Sinter Plant Blast Furnace Steel Melt Shop LMMM WRM MMSM Annual Capacity (000 T) 2,261 5,256 3,400 3,000 710 850 850 Units (3.0 MT Stage) 4 Batteries of 67 Ovens & 7 Mtrs. height 2 Sinter machines of 312 Sq. Mtr. Grate area each 2 Furnaces of 3200 Cu. Mtr. Volume each 3 LD Convertors each of 133 Cu. Mtr. Volume and six 4 strand bloom casters 4 stand finishing Mill 2 x 10 stand finishing Mill 6 stand finishing Mill

Table 3.4 Main Steel Products of VSP

Steel Products Angles Billets Channels Beams Squares Flats Rounds Re-bars Wire Rods Nut Coke Coke Dust Coal Tar Anthracene Oil HP Napthalene Benzene Toulene Zylene Wash Oil Granulated Slag Lime Fines Ammonium Sulphate
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By-products

Vision, Mission & Objectives Vision To be a continuously growing world-class company We shall: Harness our growth potential and sustain profitable growth Deliver high quality and cost competitive products and be the first choice of customers Create an inspiring work environment to unleash the creative energy of people Achieve excellence in enterprise management Be a respected corporate citizen, ensure clean and green environment and develop vibrant communities around us Mission

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To attain 16 million ton liquid steel capacity through technological up-gradation, operational efficiency and expansion; augmentation of assured supply of raw materials to produce steel at international standards of cost and quality; and to meet the aspirations of the stakeholders

Objectives Expand Plant capacity to 6.3 Mt. by 2-011-12 with the mission to expand further in subsequent phases as per the corporate plan. Revamp existing Blast Furnaces to make them energy efficient to contemporary levels and in the process increase their capacity by 1.0 Mt, thus total hot metal capacity to 7.5 Mt. Be amongst top five lowest cost steel producers in the world. Achieve higher levels of customer satisfaction. Vibrant work culture in the organization. Be proactive in conserving environment, maintaining high levels of safety and addressing social concerns. Core Values
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 VSP Policies

Commitment Customer Satisfaction Continuous Improvement Concern for Environment Creativity & Innovation

VSP takes all necessary actions for the fulfillment of requlatory requirements. It has dedicated departments for this purpose. Energy conservation, environmental preservation, safety in work place, and occupational health gets highest priority in the company. Some of the policies in this regard are reproduced below.

Quality Policy Supply quality goods and services to customers delight. Use resources efficiently and reduce waste & prevent pollution. Continually improve quality, environment, occupational health and safety performance with respect to products, activities, processes, premises and services. Energy Policy Monitor closely and control consumption of various forms of energy through an effective Energy Management System Adopt appropriate energy conservation technologies Maximize the use of cheaper and easily available forms of energy

HR Policy
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Provide work environment that makes the employees committed and motivated for maximizing productivity

Establish systems for maintaining transparency, fairness and equality in dealing with employees

Empower employees for enhancing commitment, responsibility and accountability Encourage teamwork, creativity, innovativeness and high achievement orientation

Customer Policy VSP will strive to meet more thean the Customer needs and expectations pertaining to Products, Quality, Value for Money and Satisfaction VSP greatly values its relationship with Customers and would make efforts at strengthening these relations for mutual benefit IT Policy Follow best practices in Process Automation & Business Processes through IT by inhouse efforts / outsourcing and collaborative efforts with other organizations / expert groups / institutions of higher learning, etc., thus ensuring the quality of product and services at least cost. Ensure high level of date and information security across the organization

HRD Group Key Initiatives RINL believes that the employees are its assets and strives to realise their potential in full for mutual advantage. The human resource development of the employee as a whole. In-house Training Programs Nominations to External Training Programs Organisation Research, Employees Satisfaction Surveys & Voice of Employees Index
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Organisation Development

Training & Development The needs of induction training, skill up gradation, unit training, computer related training, refresher training, foreign training, faculty development etc, are attended by the Training & Development Centre while management development and attitudinal development are taken care at the Centre for HRD. Training in certain specialized areas like safety, fire prevention, occupational health etc. is also taken up by departments specializing in respective fields.

Table 3.5 Man Power at a Glance as on 31-12-2010

Particulars Executives Non Executives Works 3241 11164 Projects 327 58 Mines 104 262 Others 1591 1083 Total Total 5263 12567 17830

Production Facilities The production facilities in the RINL are most modern amongst the steel industry in the country. The know-how and the technology have been acquired from different parts of the world from the reputed/established manufacturers. Some of the production facilities in RINL are: 7 meter coke ovens of RINL are the tallest so far built in the country. Base Mix Yard for sinter plant introduced for the first time in the country helps in excellent blending of the faced material to sinter machine and production of consistent good quality sinter.
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3200 cubic meter two blast furnaces i.e., Godavari and Krishna with bell less top charging equipment and 100% cast house slag granulation, the biggest to be setup in the country have done away either the conventional bell charging system. 100% continuous costing of liquid steel into blooms resulted in lowest losses and better quality of blooms. RINL has sophisticated and latest features of automation of large polling mills consisting of Light and Medium Merchant Mill (LMMM) which include billet and bar mill Wire Road Mill (WRM) Medium Merchant and Structure Mill (MMSM) The operations of blast furnace, steel melting shop and rolling mills have been entirely computerized to ensure consistent quality and efficient performance.

Marketing Network VSP has a wide network of Regional Offices and Branch Offices spread across the country for marketing of its products. There are 5 Regional Offices and 23 Branch Offices. Stock Yards are attached to each of the Branches. These are catering to the needs and expectations of the customers in various segments. The details of Regional Offices and Branch Offices are brought out below:
Table 3.6

Region East North

Location of Regional Office Kolkata Delhi

Branches Bhubaneswar, Kolkata, Patna Agra, Chandigarh, Dehradun, Delhi, Faridabad, Ghaziabad, Jaipur, Kanpur, Ludhiana Ahmedabad, Indore, Mumbai, Nagpur, Pune Bangalore, Chennai, Kochi, Coimbatore Hyderabad, Visakhapatnam

West South Andhra

Mumbai Chennai Visakhapatnam

Pollution Control Measures adopted in VSP

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Generally, integrated steel plant is seen as a major contributor to environmental pollution as it discharges volumes of waste products. Elaborate measures have been adopted to combat air and water pollution in VSP has planted more than 3.4 million trees over an area of 35 Sq. Kms. And incorporated various technologies at a cost of Rs.460 Crores towards pollution control measures.

Sources of Funds: VSP raise its working capital from of 10 Bankers. The following are the 10 banks. Where funds for finance are raised. State Bank of India (SBI) Canara Bank UCO Bank Bank of Baroda Andhra Bank State Bank of Hyderabad Allahabad Bank. HSBC Industrial Development Bank of India (IDBI) Indian Overseas Bank (IOB) Achievements & Awards The efforts of VSP have been recognized in various fora. Some of the major awards received by VSP are in the area of energy conservation, environment protection, safety,
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quality, Quality Circles, Rajbhasha, MOU, sports related awards and a number of awards at the individual level. Some of the important awards received by VSP are indicated below:

Table 3.7 AWARDS ACHIEVED BY RINL VISAKHAPATNAM

Award Bagged the first steel minister's trophy of the year 2006-07 Capability maturity model integrated (CMMI) Level-3 India's top 50 best companies to work for by great place to work institute and Economic Times Award of 'Certificate of Merit' of Global Human Resource Development of Organization'(IFTDO) NIPM certificate of Merit Udyog Ratan Award by the Delhi Telugu Academy, Hyderabad. RINL bagged third prize in the Event Management category of the Public Relations National Awards- Public Relations National Awards2009 2009 at the 31st All India Public Relations conference held in Chandigarh on 11th December, 2009. Purpose For being the best integrated steel plant in the country (Runnerup) In the field of Information Technology Ranked 4th Large Organization; Ranked 6th in manfacuturing and production companies; Ranked among the top two PSU's 2010 Year 2009 2009

Human resources Development Best HR Practices

2010-April 2010-March 2010-March

2009

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10th National Management Quiz

VSP won this Quiz successively for 3 in a row (2007, 2008 & 2009) achieving HAT-TRICK which is aNATIONAL RECORD.

2009

RINL team won the TATACrucible Corporate Quiz on 4th October. RINL bagged the First Steel Ministers Trophy for the year 200607 for being the best integrated steel plant in the country (Runner Up) in November 2009. VSP was adjudged Energy Efficient Unit award by Confederation of Indian Industry Godrej Green Business Centre at the 10th National award for excellence in energy Management in November 2009

2009

Steel Ministers Trophy for the year 2006-07

2010-Feb

Enegy Award-CII

2009

International Convention on Quality Control Circles (ICQCC) 2009 Convention Organized By: : Productivity Improvement Circles Association, Cebu, Philippines VSP QC teams won Gold & Bronze medals at International QC convention

Two QC teams i.e Sraddha from CMM Dept. and Akash from ES&F dept consisting fourteen members and coordinator presented QC case studies during the competition. During October'2009

2009

Certification for CMMI Level 3(version 1.2) for its Information Technology

VSP has achieved a rare distinction of becoming the First Indian Steel Company to be assessed and certified for CMMI Level 3(version 1.2) for its Information Technology Department. for excellent performance of Hindi for the year 2007-08 by Hindi Salahkar Samithi of Ministry of Steel

2009

Rajbhasha Trophy for excellent performance

2009

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Recognition as one among Indias best companies to work for 2009 , Top 50 best companies to work for in India, Top 2 PSUs to work in India,4th rank in large organizations category (More than 10,000 employees), Top 6 in manufacturing and production Performance Excellence Award 2007

India's best companies to work for -Study 2009 by Great Place To Work Institute & Economic Times ( total no of participated companies were 373)

2009

Presented by Indian Institution of Industrial Engineering for Financial and Operational Strength for 2006-07

2008

Award for Exemplary usage of ICT for its e-governance by Government by PSU's of India during 11th National Conference on e-Governance QCFI-NMDC Award for Best Quality Circle Implementation PSU Category QC Implementation

2008

2008

Ispat Suraksha Puraskar Award by In group A (Scheme2) for the year JCSSI 2007 for the zones coal and coke,BF,Slag granulation plant ,SP,RMHP & Rolling mills, in which no fatal accidents occurred during the years 2006 & 2007 Best Organization Award-QCFI for promoting QCs in the organization during QCFI-Silver Jubilee celebrations

2008

2008

National Award for House journal Best house journal devoted to " by Public Relation Society of India Welfare of Employees" VSP bags Top Assessee Award for 2007-08 for paying highest central excise on the 65th Anniversary of Central Excise Day, which was celebrated at Vizag on 24th Feb09 by the Visakhapatnam Excise zone.

2008

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Board of Directors Table 3.8

CHAIRMAN/MANAGING DIRECTOR DIRECTOR (PERSONNEL) DIRECTOR(FINANCE) DIRECTOR (OPERATIONS) DIRECTORS COMPANY SECRETARY REGISTRED OFFICER DIRECTOR OF COMMERCIAL

Sri P.K. BISHNOI Sri Y. R.REDDY Sri P.MADHU SUDHAN Sri UMESH CHANDRA Sri A.K. RATH Sri MACHANDRA NATHAN Sri P.MOHAN RAO Sri T.K CHAND

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SWOT Analysis Strengths: High commitment to achieve capacity levels. Areas of excellence. Economics of sales. High expansion potential. Strong commitment to conserve environment.

Weakness: High Capital related charges. Low return product mix. Productivity below international standards. Lack of ore.

Opportunities Share based. Sizeable export markets. Access to import sources. Proximity to southern markets. Increasing domestic demand due to thrust on infrastructure development.

Threats Rising input cost. Increasing competition. Sensitive to exchange rate variation. Possibility of import duties declining further. Excise duties continue to be high.
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4. THEORETICAL FRAME WORK OF FINANCIAL PERFORMANCE ANALYSIS

Introduction The Financial Statements (or) Accounting reports contained the financial information of an enterprise. These financial information is the basis for financial planning, analysis and decision making. These financial information also need to predict, compare and evaluate the firms earning ability. Definition According to John N.Myer The financial statements provide a summary of the accounts of a business enterprise, the balance sheet reflecting the assets, liabilities, and capistal as on a certain date and the income statement showing the results of operations during a certain period. The financial statements are great significance to owners, managers and investors. The basic financial statements are: The income Statement. The Balance Sheet. A Statement of Retained earring. A Statement of Changes in financial position

Income Statement The income statement also called as a Profit and Loss Account. The earning capacity and potential of a firm are reflected by its profit and loss account. The profit and loss account is a score-board of the firms performance during a period of time. The generally accepted convention is to show one years events in the profit and loss account. Profit and loss account presents the summary of revenues, expenses and net income or net loss of a firm. It serves as a measure of the firms profitability Balance Sheet Balance sheet is the most significant financial statement. It indicates the financial condition of a enterprise at particular movement of time. Balance sheet contains
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information about resources and obligations of a business entity about its owners interests in the business at a particular point of time. In the language of accounting, balance sheet communicates information about assets, liabilities and owners equity for a business firm as on a specific date. It provides a snapshot of the financial position of the firm at the close of the firms accounting period. Statement of Retained Earnings The term retained earnings means the accumulated excess earnings over losses and dividends. The balance shown by the income statement is transferred to the balance sheet through this statement after making necessary appropriations. Statement of changes in financial position The balance sheet shows the financial condition of the business at a particular movement of time while the income statement discloses the results of operations of business over a period of time for better understanding of the affairs of the business, it is essential to identify the movement of working capital or cash in the statement of changes in financial position. The terms funds flow statement and cash flow statement are popularly used for the first and 2nd type of statements while the term statement of changes in financial position used for the 3rd type of statement Nature of Financial Statements: The financial statements are prepared on the basis of recorded facts. The recorded facts are those which can be expressed in monetary terms. The statements are prepared for a particular period, generally one year. The transactions are recorded in a chronological order as and when the events happen. The financial statements by nature are summaries of the items recorded in the business and there statements are prepared periodically generally for the accounting period.

Recorded Facts:
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The term Recorded facts; refers to the data taken out from the accounting records. The records are maintained on the basis of actual cost data. The figures of various accounts such as cash in hand, cash at bank, bills receivables, Sundry debtors, fixed assets are taken as per the figure recorded in the accounting books. Accounting Conversions: Certain accounting converters are followed while preparing financial statements. The conversion of valuating inventory at cost or market price, whichever is lower, is followed. The valuing of assets at cost less depreciation principle for balance sheet purposes statements comparable, simple and realistic. Postulates: The accountants make certain assumption while making accounting records. One of these assumptions is that the enterprise is treated as a going concern. The other alternative to this postulate is that the concern is to be liquidated the concern. So the assets are shows on a going concern basis. An other important assumption is to presume that the value of money will remain in the same in different periods. Personal Judgments: Even though certain standard accounting conversions are followed in preparing financial statement but still personal judgment of the accountant plays on important part. Characteristics of financial statement: The financial statements are prepared with a view to depict financial position of a concern. The financial statements should be prepared in such a way that they are able to give a clear and orderly picture of the concern. The ideal financial statement has the following characteristics.

Depict true financial position:

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The information contained in the financial statements should be such that a true and correct idea is taken about the financial position of the concern. Attractive: The financial statements should be prepared in such a way that important information is underlined so that it attracts the eye of the reader. Comparability: The results of financial analysis should be comparable. The financial statements should be presented in such a way that they can be compared to the previous years statements. Previous years figures in the balance sheet. Brief: If possible, the financial statements must be prepared in brief. The reader will be able to form as idea about the figures. Importance of Financial Statements: Financial statements contain a lot of useful and valuable information regarding profitability financial position and future prospective of business concern. The utility of financial statement to different parties may be summarized as follows: Management: The financial statements are useful for assessing the efficiency of different cost centers. The management is able to decide the course of action to be adopted in future. Creditors: The trade creditors are to be paid in a short period. The CRS will be interested in current solvency of the concerns. The calculations of current ratio and liquid ratio will enable the creditors to assess the current financial position of the concerns in relation to their debts. Investors:
34

The investors include both short-term and long term investors. They are interested in the security of the principal amounts of loan and regular payments by the concern. The investors will not only analyze the parent financial position but will also study the future prospectus and expansion plans of the concern. Governments: The financial statements are used assess tax liability of business enterprises. The Government studies economic situation of the country from these statements. and regulations or not. Trade Associations: These associations provide service and protection to the members. They may analyze the financial statements for the purpose of providing facilities to these members. They may develop standard ratios and design uniform system of accounts. Stock Exchange: The stock exchange deal in purchase and sale of securities of different companies. The financial statements enable the stock broker to judge the financial position of different concerns. The fixation of prices for securities etc. is also based on the statements. Limitations of Financial Statements: Financial statements are relevant and useful for the concern, still they do not present a final picture of the concern, and otherwise misleading conclusions may be drawn. The financial statements suffer from following limitation: Ignoring of non-monetary aspects: These statements are prepared with the help of accounting information which mainly consider monetary aspects only. The value of business depends both on qualitative and quantitative factors. These statements enable the government to find out whether business is following various rules

35

1. Historical cost: The statements are prepared on the basis of historical cost. The values of fixed assets are at their original cost less depreciation. The balance sheet value are not shown the value of assets may be sold more over they do not reflect the market value which is as important factor in determining the solvency of an enterprise. 2. Personal Judgments: In preparing financial statements certain items are left to the personal Judgment of the accountant. If any accountant is not following accounting principles correctly his judgment will give wrong picture 3. Conversion of Conservation: Due to conversion of conservation the income statement may not disclose true income of the business. This is due to ignorance of probable incomes and accounting probable losses.

Techniques of Financial Analysis: A financial analyst can adopt one or more of the following techniques/ tools of financial analysis: 1. Comparative statement analysis 2. Common-size statement analysis 3. Trend analysis 4. Funds flow analysis 5. Cash flow analysis 6. Ratio analysis
7. C.V.P. analysis.

1. Comparative statement analysis

1.1 Comparative Financial Statement: 36

The statements which have been designed in a way so as to provide time perspective to the consideration of various elements of financial position embodied in such statements figures for two or more period side by side to facilitate comparison. Both the income statement and balance sheet can be prepared in the form of comparative financial statements 1.2 Comparative Income Statement: The income statement discloses net profit or net loss on account of operations. A comparative income statement will show the absolute figures for two or more periods, the absolute change from one period to another and if desired the change in terms of percentages. Since the figures for two or more periods are shown side by side, the reader can quickly ascertain whether sales have increased or decreased, whether cost of sales has increased or decreased etc.

2 Comparative Balance Sheet:

The balance sheet prepared on a particular date reveals the financial position of the concern on the date to study the trends of business over a period of time comparative balance sheet reveals the cause for changes in the financial position on amount of various transactions. The comparative studies throw light on financial policies adopted by management.

2.) Comman Size Analysis:

a) Common Size Statements: Common-size statement is financial tool of studying key changes and trends in financial position of the company. In common-size statement, each item is stated as a percentage of the total of which that is a part, each percentage exhibits the relation of the individual item to its respective total. Therefore, the common-size percentage method represents a type of ratio analysis. b) Common Size Income Statement:

37

The common-size income statement is designed to exhibit what proportion of the net sales has been absorbed by the various costs and expenses incurred by the enterprise, and the proportion that remains as net income. total sales. c) Common Size Balance Sheet: Common-size balance sheet is prepared by setting the total assets as 100and reducing individual assets into percentages of the total. Likewise, individual liability items are expressed as percentages of the total liabilities. Thus, the common-size Balance sheet percentage shows the relation of each asset item to total assets and of each liability and owners equity item to total liabilities and owners equity. 3. Trend Analysis: Trend analysis depicts behavior of the ratios over a period of time and the trends in the operation of the enterprise. The trend figures are index figures giving a birds eye view of the comparative data by presenting it over a period of time. Under this form of analysis, generally financial ratios are studied for a specified number of years. It is a dynamic analysis depicting the changes over a stated period. 4. Cost-Volume-Profit Analysis: Cost Volume Profit analysis is an important tool of profit planning. It studies the relationship between cost, volume of production, sales and profit. It is not strictly a technique used for analysis of financial statements. 5. Ratio Analysis: This is the most important tool available to financial analysts for their work. All accounting ratios show relationship in mathematical terms between two interrelated accounting figures. The figures have to be interrelated, because no useful purpose will be For preparing common-size income statement all items in the income statement are expressed in percentage from in terms of

38

served if ratios are calculated between two figures, which are not at all related to each other. 6. Cash Flow Analysis: Cash Flow Analysis enables the management to plan and co-ordinate the financial operations of the enterprise, and furnish the basis for evaluating financing policies. It provides a barometer for ensuring the profitability of the business and makes financing problems of the business much more manageable. 7. Funds Flow Analysis: Funds flow analysis has become an important tool in the analytical kit of and financial managers. This is because the balance sheet of business reveals its financial status at a particular point of time. transactions. Funds flow analysis reveals the change in working capital positions. It tells about the sources from which the working capital was obtained and the purpose for which it was used. Working capital being the life blood of the business. Such an analysis is extremely useful. It does not sharply focus those major financial

5.DATA ANALYSIS AND INTERPRETATION

Balance Sheets of VSP Ltd. From 2004-05 to 2009-10

39

Table 5.1 Source of Funds PARTICUALRS Share Holders Fund Share Capital Reserves & Surplus 12886.00 (A) Loan Funds Secured Loans Unsecured Loans ( B) Current Liabilities Liabilities Provisions ( C) Deferred Tax Liability ( D) Total (A+B+C+D) 97.82 18523.21 124.49 17733.48 163.12 15276.51 12419.91 11481.04 31-03-10 31-03-09 31-03-08 31-03-07

(Rs in Crores) 31-03-06 31-03-05

7827.32 5057.68

7827.32 4592.59

7827.32 3653.72

7827.32 1710.88 9538.20

7827.32 346.38 8173.70

7827.32 _____ 7872.32

407.28 825.27 1232.55

907.72 100.04 1007.76

332.78 107.95 440.73

604.45 312.51 916.96

173.87 369.44 543.31

88.94 _____ 88.94

2871.95 1435.89 4307.84

2560.79 1620.53 4181.32

1610.15 1581.47 3191.62

1011.53 1092.77 2104.30

785.77 716.37 1502.14

1154.88 269.27 1424.15

291.29 12850.75

316.72 10535.87

158.49 9498.90

Table 5.2 Application of Funds

PARTICUALRS Fixed Assets Gross Block Less: Deprecation Net Block Held for Disposal Capital Work-inprog. Investments Current Assets & Advances (B) 8972.30 0.25 5874.11 0.05 3471.87 0.05 31-03-10 31-03-09 9473.90 8008.55 1465.35 0.05 7506.90 8971.80 7749.74 1222.06 0.05 4652.00 31-03-08 8900.83 7516.19 1384.64 0.04 2087.19

(Rs in Crores)
31-03-07 8875.62 7085.16 1790.46 0.00 597.19 2387.65 0.05 31-03-06 31-03-05 8832.13 6753.87 2078.26 0.01 180.73 2259.00 0.00 8763.49 6322.18 2441.31 _____ 61.07 2502.38 0.00

40

Inventories Sundry Debtors Cash & Bank Balances Other Assets Loans & Advances (C ) Miscellaneous Expenditure (D) Profit & Loss A/C (E) Total (A+B+C+D+E)

2451.52 181.18 5415.54 137.40 1365.02 9550.66

3215.28 191.27 6624.17 258.91 1569.69 11859.32

1761.15 93.41 7699.11 292.43 1958.49 11804.59

1203.24 216.80 7194.68 314.48 1518.90 10448.10

1216.45 165.65 5621.70 184.36 1063.84 8252.00

1255.31 49.30 3932.61 100.18 710.12 6047.52

0.00 0.00

0.00 0.00

0.00 0.00

14.96 0.00

24.87 0.00 10535.87

43.01 905.99 9498.90

18523. 17733.48 15276.51 12850.75 COMMON SIZE BALANCE SHEETS

Table 5.3 Common Size Balance Sheet of 2008-09 and 2009-10 PARTICULAR S A SSETS: Cash & Bank Balance Sundry Debtors Inventories (Stock) Loans & Advances Other Current Assets Investments Fixed Assets Total Assets LIABILITIES Current Liabilities Provisions Secured Loans Unsecured Loans Deferred Tax Liability 2008-09 2008-09 2009-10 2009-10 Rs. Crs. PERCENTAGE Rs. Crs. PERCENTAGE 6624.17 191.27 3215.28 1569.69 258.91 0.05 5874.11 17733.48 2560.79 1620.53 907.72 100.04 124.49 37.35 0.01 18.13 8.85 1.46 0.0002 33.12 100 14.44 9.13 5.11 0.56 0.70 5415.54 181.18 2451.52 1365.02 137.4 0.25 8972.30 18523.21 2871.95 1435.89 407.28 825.27 97.82 29.23 0.97 13.23 7.36 0.0007 0.001 48.43 100 15.50 7.75 2.19 4.45 0.52
41

Reserves & Surplus Share Capital Total Liabilities

4592.59 7827.32 17733.48

25.89 44.13 100

5057.68 7827.32 18523

27.30 42.25 100

Chart 5.1

Interpretation The fixed assets for the period of 2008-09 5874.11 i.e., 33.%12 & 2009-10 is 8972.30 i.e., 48.43 %it has been increased 12% The Total assets for the period of 2008-09 17733.48 i.e., 100 & is18523.21 i.e., is 100% The current liabilities for the period 2008-09 2560.79 i.e., 14.44%& 2009-10 is 2871.95 i.e.,15.50 this has been increased by 1.2%
42

2009-10

Table 5.4 Common Size Balance Sheet of 2007-08 and 2008-09 PARTICULAR S ASSETS: Cash & Bank Balance Sundry Debtors Inventories (Stock) Loans & Advances Other Current Assets Investments Fixed Assets Total Assets LIABILITIES Current Liabilities Provisions Secured Loans Unsecured Loans Deferred Tax Liability Reserves & Surplus Share Capital 2007-08 Rs. Crs. 7699.11 93.41 1761.15 1958.49 292.43 0.05 3471.87 15276.51 1610.15 1518.47 332.78 107.95 163.12 3653.72 7827.32 2007-08 PERCENTAGE 50.39 0.61 11.52 12.82 1.91 0.0003 22.72 100 10.54 9.93 2.17 0.70 1.06 23.91 51.23 2008-09 Rs. Crs. 6624.17 191.27 3215.28 1569.69 258.91 0.05 5874.11 17733.48 2560.79 1620.53 907.72 100.04 124.49 4592.59 7827.32 2008-09 PERCENTAGE 37.35 0.01 18.13 8.85 1.46 0.0002 33.12 100 14.44 9.13 5.11 0.56 0.70 25.89 44.13
43

Total Liabilities

15276.51

100

17733.48

100

Chart 5.2

Interpretation

The fixed assets for the period of 2007-08 3471.87 i.e., 22.27% & 2008-09 is5874. i.e., 33.12%it has been increased &%

The

Total assets for the period of 2007-08 15276.51 i.e., 100 &

2008-09

is17733.48i.e., is 100% there is an increase of 2456.97

The current liabilities for the period 2007-08 i.e 1610.15 i.e., 10.54%& 2008-9 is 2560.79i.e.,14 this has been increased by 4%
44

Table 5.5 Common Size Balance Sheet of 2006-07 and 2007-08 PARTICULARS 2006-07 2006-07 2007-08 2007-08 Rs. Crs. PERCENTAGE Rs. Crs. PERCENTAGE A SSETS: Cash & Bank 7194.68 55.98 7699.11 50.39 Balance Sundry Debtors 216.80 1.68 93.41 0.61 Inventories 1203.24 9.36 1761.15 11.52 (Stock) Loans & 1518.90 11.81 1958.49 12.82 Advances Other Current 314.48 2.44 292.43 1.91 Assets Investments 0.05 0.0003 0.05 0.0003 Fixed Assets 2387.65 18.57 3471.87 22.72 Total Assets 12850.75 100 15276.51 100 LIABILITIES Current 1011.53 7.87 1610.15 10.54 Liabilities Provisions 1092.77 8.50 1518.47 9.93 Secured Loans 604.45 4.70 332.78 2.17 Unsecured Loans 312.51 2.43 107.95 0.70 Deferred Tax 291.29 2.26 163.12 1.06 Liability Reserves & 1710.88 13.31 3653.72 23.91 Surplus Share Capital 7827.32 60.90 7827.32 51.23 Total Liabilities 12850.75 100 15276.51 100

45

Chart 5.3

Interpretation The fixed assets for the period of 2006-072387.65 i.e., 18.57 & 2007-08 is3471.87. i.e.,22.27%it has been increased &%4.3% The Total assets for the period of 2006-07 12850.75i.e., 100 & 2007-08 15276.51 i.e.,. is 100% there is an increase of 4258.23 The current liabilities for the period 2006-071011.53i.e., 11.54%& 1610.15i..e.,14 this has been increased by 3.% 2007-08

46

Table 5.6 Common Size Balance Sheet of 2005-06 and 2006-07 PARTICULAR S ASSETS: Cash & Bank Balance Sundry Debtors Inventories (Stock) Loans & Advances Other Current Assets Miscellaneous Expenditure Fixed Assets Total Assets LIABILITIES Current Liabilities Provisions Secured Loans Unsecured Loans Deferred Tax Liability Reserves & Surplus Share Capital Total Liabilities 2005-06 Rs. Crs. 5621.70 165.65 1216.45 1063.84 184.36 24.87 2259.00 10535.87 785.77 716.37 173.87 369.44 316.72 346.38 7827.32 10535.87 2005-06 PERCENTAGE 53.35 1.57 11.54 10.09 1.74 0.23 21.44 100 7.45 6.79 1.65 3.50 3.00 3.28 74.29 100 2006-07 Rs. Crs. 7194.68 216.80 1203.24 1518.90 314.48 14.95 2387.65 12850.75 1011.53 1092.77 604.45 312.51 291.29 1710.88 7827.32 12850.75 2006-07 PERCENTAGE 55.98 1.68 9.36 11.81 2.44 0.11 18.57 100 7.87 8.50 4.70 2.43 2.26 13.31 60.90 100

47

Chart 5.4

Interpretation The fixed assets for the period of 2005-062387.65 i.e., 18.57 & 2006-07 is

3471.87. i.e., 22.27%it has been increased &%4.3% The Total assets for the period of 2005-06 12850.75i.e., 100 & 15276.51 i.e.,. is 100% there is an increase of 4258.23 The current liabilities for the period 2005-061011.53i.e., 11.54%& 1610.15i..e.,14 this has been increased by 3.% 2006-07 2005-07

48

Table 5.7 Common Size Balance Sheet of 2004-05 and 2005-06 PARTICULARS ASSETS: Cash & Bank Balance Sundry Debtors Inventories (Stock) Loans & Advances Other Current Assets Miscellaneous Expenditure Fixed Assets Total Assets LIABILITIES Current Liabilities Provisions Secured Loans Unsecured Loans Deferred Tax Liability Share Capital Total Liabilities 2004-05 2004-05 Rs. Crs. PERCENTAGE 3932.61 49.30 1255.31 710.12 100.18 43.01 2502.38 9498.90 1154.88 269.27 88.94 158.49 7827.32 9498.90 41.40 0.51 13.21 7.47 1.05 0.45 26.34 100 12.15 2.83 0.93 1.66 82.40 100 2005-06 Rs. Crs. 5621.70 165.65 1216.45 1063.84 184.36 24.87 2259.00 10535.87 785.77 716.37 173.87 369.44 316.72 7827.32 10535.87 2005-06 PERCENTAGE 53.35 1.57 11.54 10.09 1.74 0.23 21.44 100 7.45 6.79 1.65 3.50 3.00 74.29 100

49

Chart 5.5

Interpretation The cash and bank balance increased from 41.40 % to 53.35% i.e 11.95% The fixed assets decreased from 26.34% to 21.44% i.e 4.90%

COMPARATIVE BALANCE SHEETS

50

Table 5.8 Comparative Balance Sheet of 2008-09 and 2009-10 PARTICULAR 2008-09 2009-10 Increase/Decrease S Rs. Crs. Rs. Crs. Rs. Crs. A SSETS: Cash & Bank 6624.17 5415.54 -1208.63 Balance Sundry Debtors 191.27 181.18 -10.09 Inventories 3215.28 2451.52 -763.76 (Stock) Loans & 1569.69 1365.02 -204.67 Advances Other Current 258.91 137.4 -121.51 Assets Investments 0.05 0.25 +0.2 Fixed Assets 5874.11 8972.30 +3098.19 Total Assets 17733.48 18523.21 +789.73 LIABILITIES Current 2560.79 2871.95 +311.16 Liabilities Provisions 1620.53 1435.89 -184.64 Secured Loans 907.72 407.28 -500.44 Unsecured 100.04 825.27 +725.23 Loans Deferred Tax 124.49 97.82 -26.67 Liability Reserves & 4592.59 5057.68 +465.09 Surplus Share Capital 7827.32 7827.32 Total Liabilities 17733.48 18523 +789.73 Increase/Decrease Percentage -18.24 -5.27 -23.75 -13.03 -46.93 +4.00 +52.74 +4.45 +12.15 -11.39 -55.13 +724.94 -21.42 +10.12 4.45

51

Chart 5.6

Interpretation The cash and bank balance were decreased from 6624.17 (crores) to 5415.54 (crores) i.e -1208.63(crores) (-18.24%).It Indicates that the VSP'S liquidity position decreasing.

52

Table 5.9 Comparative Balance Sheet of 2007-08 and 2008-09 PARTICULAR S ASSETS: Cash & Bank Balance Sundry Debtors Inventories (Stock) Loans & Advances Other Current Assets Fixed Assets Total Assets LIABILITIES Current Liabilities Provisions Secured Loans Unsecured Loans Deferred Tax Liability Reserves & Surplus Share Capital Total Liabilities 2007-08 Rs. Crs. 7699.11 93.41 1761.15 1958.49 292.43 3471.87 15276.51 1610.15 1518.47 332.78 107.95 163.12 3653.72 7827.32 15276.51 2008-09 Increase/Decrea Increase/Decrease Rs. Crs. se Percentage Rs. Crs. 6624.17 191.27 3215.28 1569.69 258.91 5874.11 17733.48 2560.79 1620.53 907.72 100.04 124.49 4592.59 7827.32 17733.48 -1074.94 +97.86 +1454.13 -388.8 -33.52 +2402.24 +2456.97 +950.64 +39.06 +574.94 -7.91 -38.63 +938.87 +2456.97 -13.96 +104.76 +82.56 -19.85 -11.46 +69.19 +16.08 +59.04 +2.46 +172.76 -7.32 -23.68 +25.69 +16.08

53

Chart 5.7

Interpretation The cash and bank balance was decreased from 7699.11(crores) to 6624.17 ((crores) i.e -1074.94 (crores) (-13.96%). It indicates that liquidity position of the VSP decreased The Fixed assets were increased from 3471.67(crores) to 5874.11 (crores) i.e +2402.24 (crores) (69.19%). It indicates that the VSPs interest on long term benefits through invest on fixed assets. Current liabilities were increased from 1610.15 (crores) to 2560.79 (crores) i.e +950.64 (crores) (+59.04%). It indicates that the working capital position becoming critical.

Table 5.10 Comparative Balance Sheet of 2006-07 and 2007-08

54

PARTICULAR S ASSETS: Cash & Bank Balance Sundry Debtors Inventories (Stock) Loans & Advances Other Current Assets Miscellaneous Expenditure Profit & Loss Account Investments Fixed Assets Total Assets LIABILITIES Current Liabilities Provisions Secured Loans Unsecured Loans Deferred Tax Liability Reserves & Surplus Share Capital Total Liabilities

2006-07 2007-08 Increase/Decrease Increase/Decrease Rs. Crs. Rs. Crs. Rs. Crs. Percentage 7194.68 216.80 1203.24 1518.90 314.48 14.95 ____ _____ 7699.11 93.41 1761.15 1958.49 292.43 +504.43 -123.39 +557.91 +439.59 -22.05 -14.95 ______ _____ +1084.22 +2425.76 +598.62 +488.7 -271.67 -204.56 -128.17 +1942.84 _______ +2425.76 +7.01 -56.91 +46.36 +28.94 -7.01 -100 _______ ______ +45.40 +18.87 +59.17 +44.72 -44.94 -65.45 -44.00 +113.55 _____ +18.87

0.05 0.05 2387.65 3471.87 12850.75 15276.51 1011.53 1092.77 604.45 312.51 291.29 1710.88 1610.15 1518.47 332.78 107.95 163.12 3653.72

7827.32 7827.32 12850.75 15276.51

55

Chart 5.8

Interpretation The cash and bank balance was increased from 7194.68(crores) to 7699.11 (crores) i.e +504.43(crores) (+7.01%). It indicates that the VSPs liquidity position was better than previous year. The Investments are constant last two years and also the investments are very low. It indicates the firms disinterest on invest on other sectors. The secured and unsecured loans were decreased from 2006-07 to 2007-08 i.e 476.23 (crores). It shows the VSPs financial position becoming healthy

56

Table 5.11 Comparative Balance Sheet of 2005-06 and 2006-07 PARTICULAR S ASSETS: Cash & Bank Balance Sundry Debtors Inventories (Stock) Loans & Advances Other Current Assets Miscellaneous Expenditure Fixed Assets Total Assets LIABILITIES Current Liabilities Provisions Secured Loans Unsecured Loans Deferred Tax Liability Reserves & Surplus Share Capital Total Liabilities 2005-06 2006-07 Increase/Decrease Increase/Decrease Rs. Crs. Rs. Crs. Rs. Crs. Percentage 5621.70 165.65 1216.45 1063.84 184.36 24.87 7194.68 216.80 1203.24 1518.90 314.48 14.95 +1572.98 +51.15 -13.21 +455.06 +130.12 -9.91 +128.65 +2314.88 +225.76 +381.4 +430.58 -56.93 -25.43 +1364.5 _____ +2341.88 +27.98 +30.87 -1.08 +42.77 +70.57 -39.84 +5.69 +21.97 +28.73 +53.24 +247.64 -15.4 -8.02 +393.93 _____ +21.97

2259.00 2387.65 10535.87 12850.75 785.77 716.37 173.87 369.44 316.72 346.38 1011.53 1092.77 604.45 312.51 291.29 1710.88

7827.32 7827.32 10535.87 12850.75

57

Chart 5.9

Interpretation The secured loans were increased from 173.87 (crores) to 604.45(crores) i.e 430.58(crores)(247.4%) as well as the unsecured loans were decreased from 369.44(crores) to312.51(crores) i.e -56.93(crores) (15.40%). It indicates that the VSPs interest on getting funds through secured loans. Reserves and surplus of firm increased from 346.38(crores) to 1710.88 (crores) i.e 1364.5 (crores) (393.93%). It indicates the VSPs profitability.

58

Table 5.12 Comparative Balance Sheet of 2004-05 and 2005-06 PARTICULAR S A SSETS: Cash & Bank Balance Sundry Debtors Inventories (Stock) Loans & Advances Other Current Assets Miscellaneous Expenditure Profit & Loss Account Investments Fixed Assets Total Assets LIABILITIES Current Liabilities Provisions Secured Loans Unsecured Loans Deferred Tax Liability Reserves & Surplus Share Capital Total Liabilities 2004-05 Rs. Crs. 3932.61 49.30 1255.31 710.12 100.18 43.01 905.99 _____ 2502.38 9498.90 1154.88 269.27 88.94 ____ 158.49 ____ 7827.32 9498.90 2005-06 Increase/Decr Increase/Decrease Rs. Crs. ease Percentage Rs. Crs. 5621.70 165.65 1216.45 1063.84 184.36 24.87 _____ _____ 2259.00 10535.87 785.77 716.37 173.87 369.44 316.72 346.38 7827.32 10535.87 +1889.09 +116.35 -38.86 +353.72 +84.18 -18.14 -905.99 ____ -2433.8 +1036.97 -369.11 +447.1 +84.93 +369.44 +158.23 +346.38 _____ +1036.97 +48.03 +236.00 -3.09 +49.81 +84.02 -42.17 -100 _____ -9.76 +10.91 -31.96 +166.04 +95.49 +100 +99.83 +100 _____ +10.91

59

Chart 5.10

Interpretation The cash and bank balance of the firm increased from 3932.61(crores) to 5821.70(crores) i.e +1889.09 (crores) (+48.03%). It indicates the VSPs liquidity position increased than previous year. The VSP getting funds through secured loans, those loans increased from 88.94 (crores) to 173.87 (crores) i.e +84.93 (crores) (95.49%) and also the VSP getting funds through unsecured loans also. In 2004-05 the firm doesnt have the Reserves & Surplus at that time the VSP in losses but in 2005-06 the firms Reserves & Surplus are 346.38 (crores). It indicates that the firm crossed its loss position.

RATIO ANALYSIS
60

Current Ratio : Current Ratio = Current Assets / Current Liabilities Year wise Current Assets & Current Liabilities Table 5.13 YEAR 2005-06 2006-07 2007-08 2008-09 2009-10 Chart 5.11 CURRENT ASSETS 8252.00 10448.59 11804.59 11859.32 9550.66 CURRENT LIABILITIES 1502.14 2104.30 3191.62 4181.32 4307.84 RATIO 5.49 4.96 3.69 2.83 2.21 (Rs in Crores)

Interpretation The current ratio for the year 2009-10 was 2.217.that is for every rupee of current liability the firm is holding 2.217 of Current Assets. It shows that the firm was able to meet its obligations. The current ratio of the year 2005-06 was highest current ratio 5.16 compare the all years, but coming to years it was falling down to 2.217in the year 2009-10

Quick Ratio = Quick Assets / Current Liabilities

61

Year wise Current Assets & Current Liabilities Table 5.14 YEAR 2005-06 2006-07 2007-08 2008-09 2009-10 Chart 5.12 QUICK ASSETS 5971.71 7725.96 8084.95 7074.35 5732.12

(Rs in Crores)

CURRENT LIABILITIES 1502.14 2104.30 3191.62 4181.32 4307.84

RATIO 3.97 3.67 2.53 1.69 1.33

Interpretation The quick ratio for the year 2009-10 was 1.33. That is, for every one rupee of quick liabilities the firm holding 1.33 of quick assets. Quick ratio was highest in the year 2005-06 was 3.76, but now was falling down to 1.33

Debt Equity Ratio = Outsiders Fund / Shareholders Fund Year wise Outsiders Fund & Shareholders Fund (Rs in Crores)
62

Table 5.15 YEAR 2005-06 2006-07 2007-08 2008-09 2009-10 Chart 5.13 OUTSIDERS FUND 2045.45 3021.26 3632.35 5189.08 5540.39 SHAREHOLDERS FUND 8173.70 9638.20 11481.04 12419.91 12885.00 RATIO 0.25 0.31 0.31 0.41 0.42

Interpretation The Debt-Equity ratio for the year 2009-10 was 0.708. It is clear that from debtequity ratio that VSP`s lenders have contributed fewer funds than owners have. Lenders contribution is times of owners contribution for 2008-09. This relationship describes the lenders contribution for each rupee of the owners contribution. Public sector companies are expected to maintain 1:1 ratio. debt is of the equity. This less debt indicates less risk to shareholders. Under unfavorable conditions, firms desire to use a low debt-equity ratio. This ratio shows that

Working Capital Turnover Ratio = Sales / Net Current Assets

Table 5.16 Year wise Sales & Net Current Assets

(Rs in Crores)
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YEAR 2005-06 2006-07 2007-08 2008-09 2009-10 Chart 5.14

SALES 8490.88 9150.57 10433.07 10410.63 10634.63

NET CURRENT ASSETS 6749.86 8343.80 8612.97 7678.00 5242.82

RATIO 1.25 1.09 1.21 1.35 2.02

Interpretation The ratio for the year 2009-10 was 1.65 times. Interpreting the reciprocal for the year 2007-08 only 1.06 of net current assets is used to generate 1 rupee of sales.

Inventory Turnover Ratio = Sales / Inventory

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Table 5.17 Year wise Sales & Inventory

(Rs in Crores) INVENTORY 1216.45 1203.24 1761.15 3215.28 2451.52 RATIO 6.98 7.60 5.92 3.23 4.33

YEAR 2005-06 2006-07 2007-08 2008-09 2009-10

SALES 8490.88 9150.57 10433.07 10410.63 10634.63

Chart 5.15

The Inventory turnover ratio for the year 2009-10 was 4.33 times. That is, the firm is able to convert its inventory for nearly 6 times within a year. Normally, higher the ratio indicates the better inventory management. Though the ratio is not so high it is reasonably high. It shows that there is a rapid turning of the inventory into receivables through sales. Hence, it is evident that the increase in the ratio is obtained due to increase in its turnover

Debtors Turnover Ratio = Sales / Debtors

Table 5.18 Year wise Sales & Debtors

(Rs in Crores) DEBTORS 165.65 RATIO 51.25

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YEAR 2005-06

SALES 8490.88

2006-07 2007-08 2008-09 2009-10

9150.57 10433.07 10410.63 10634.63

216.80 93.41 191.27 181.18

42.20 111.69 54.42 58.69

Chart 5.16

Interpretation The Debtors turnover ratio for the year 2009-10 was 58.7 times. That is, the firm is able to convert Credit Sales (Debtors) into Cash.

Debtors Collection Period Ratio = 365 Days / Debtors Turnover Ratio Table 5.19 YEAR DAYS DEBTORS TURN OVER RATIO RATIO
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2005-06 2006-07 2007-08 2008-09 2009-10

365 365 365 365 365

51.25 42.20 111.69 54.42 58.69

7.12 8.64 3.26 6.70 6.21

Chart 5.17

Interpretation The firm is able to turnover its Debtors for 8.64 times in a year. This shows that the debt from the debtors is collected very soon. Debtors Collection Period Ratio was highest in 2006-07, but it was falling next years.

Return on Capital = Net Profit after Interest before Tax / Fixed Assets
Table 5.20 Year wise NPAIBT& Share Capital

(Rs in Crores) SHARE CAPITAL RATIO

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YEAR

NPAIBT

2005-06 2006-07 2007-08 2008-09 2009-10 Chart 5.18

1889.51 2222.34 2995.36 2026.59 1247.65

7827.32 7827.32 7827.32 7827.32 7827.32

4.08 5.11 7.53 8.51 7.25

Interpretation The Return on capital in the year 2008-09 was 25.89%. This ratio indicates that the firm is able to generate 25.89% of return earned on the book value of share capital.

Proprietary Ratio = Shareholders Fund/ Total Assets *100

Table 5.21 Year wise Shareholders Fund Total Assets

(Rs in Crores)
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YEAR 2005-06 2006-07 2007-08 2008-09 2009-10

SHAREHOLDERS FUND 8173.70 *100 9638.20 * 100 11481.04 * 100 12419.91 * 100 12885 * 100

TOTAL ASSETS 10535.87 12850.75 15276.51 17733.48 18523.21

RATIO 69.56 70.03 75.15 75 77.57

Chart 5.19

Interpretation The Proprietary ratio for the year 2009-2010 was 42.26. This relation describes shareholders contribution for each rupee of the total net assets. This ratio reflects that the shareholders contribution was 42.26 of the total net assets. This shows that the firm has increased its contribute to the assets.

Fixed Assets Ratio = Fixed Assets / Shareholders Fund*100

Table 5.22 Year wise Fixed Assets & Shareholders Fund

(Rs in Crores) RATIO

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YEAR

FIXED ASSETS

SHAREHOLDERS FUND

2005-06 2006-07 2007-08 2008-09 2009-10

2078.26*100 1790.46*100 1384.64*100 1222.06*100 1465.35*100

8173.70 9538.20 11481.04 12419.91 12885.00

25.42 18.77 12.06 9.83 11.37

Chart 5.20

Interpretation: The ratio for the year 2007-08 was 7.53. times. Interpreting the reciprocal of this ratio, one may say that for generating a sale of one rupee, the company needs 0.43 times investment in fixed assets.

Current Assets to Fixed Assets Ratio = Current Assets / Fixed Assets Table 5.23 Year wise Current Assets & Fixed Assets YEAR CURRENT ASSETS (Rs in Crores) RATIO
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FIXED ASSETS

2005-06 2006-07 2007-08 2008-09 2009-10 Chart 5.21

8252.00 10448.59 11804.59 11859.32 9550.66

2078.26 1790.46 1384.64 1222.06 1465.35

3.97 5.83 8.52 9.70 6.51

Interpretation The current assets for the period of 05-068252.00 The ratio is 3.97% For the period of 2009-10 the ratio is 6.51%.

Return on Capital Employed Ratio = Net Profit / Capital Employed*100 Table 5.24 Year wise Net Profit & Capital Employed YEAR 2005-06 NET PROFIT 1252.37 (Rs in Crores) RATIO 14.18
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CAPITAL EMPLOYED 8828.12

2006-07 2007-08 2008-09 2009-10 Chart 5.22

1363.43 1942.74 1335.57 796.67

10134.75 9997.61 8900.06 6708.12

13.45 19.43 15.00 11.87

Interpretation The return on capital employed ratio decreased from 14.18 (Year 2005-06) to 11.87 (Year 2009-10)

Return on Total Assets Ratio = Net Profit / Total Assets*100 Table 5.25 Year wise Net Profit & Total Assets YEAR 2005-06 2006-07 2007-08 2008-09 NET PROFIT 1252.37 1363.43 1942.74 1335.57 (Rs in Crores) TOTAL ASSETS 10535.87 12850.75 15276.51 17733.48 RATIO 11.88 10.60 12.71 7.53
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2009-10 Chart 5.23

796.67

18523.21

4.30

Interpretation The net profit ratioof the VSP is decreased from 11.88 (Year 2005-06) to 4.30 (Year 2009-10)

7. FINDINGS & SUGGESTIONS

Findings

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The debt capital is less than the share capital so, it reveals that the company in the high liquidity position. Working capital position of the company is in satisfactory position. Debt capital is less than the equity and it shows the economical strength of the company. The analysis for the purpose of the investing in shares generally concentrates on the return on equity of vsp, which is increasing; therefore it is a good bet for investment subjected to availability of shares.

Finally total assets of the company increased by 16% as whole the financial position is satisfied.

Suggestions: High profit realization by selling the products at higher margins will eventually result in higher cash accrual and hence higher credit rating.
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Since the firm performance is largely dependent on availability of raw materials. In order to avoid the uncertainties in acquiring the raw materials, new and innovative steps has to be taken to effectively utilize the surplus funds.

The present level of the cash is Rs.5415.54 crores, this can be used in expansion II in order to maintain the current ratio i.e., between current assets and current liabilities at the optimum level.

The other main area where RINL has tremendous scope for improvement in manufacturing value added products. This will result in better sales realization and higher profits.

Standardization of general stores material and spares will reduce the number of items. The company should take proper steps to reduce the expenses and thoroughly seek for maximum gains.

GLOSSARY
Financial Management Financial management is the operation activity of a business that is responsible for the obtaining and effectively utilizing the funds necessary for efficient operations.
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Scenario: Synthetic Description of an Event or Series of Actions. Proximity: Nearness to something Financial Statements: It provides a summary of the accounts of a business enterprise, the balance sheet reflecting the assets liabilities, and capital as on a certain date and the income statement showing the results of operations during a certain period. Financial Analysis: It is the process of identifying financial strengths and weakness of the firm by properly establishing between items of the balance sheet and profit and loss account.

ABBREVITAIONS
RINL HRD LMMM WRM MMSM BF Rashtriya Ispat Nigam limited. Human Resource Development Light & Medium Merchant Mill Wire Rod Mill Medium Merchant & Structure Mill Blast Furnace
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SP RM MT SMS RMHP

Sinter Plant Rolling Mills Management Trainee Steel Melting Shop Raw Material Handling Plant

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BOOKS REFERED:

Financial management---------Financial management---------Cost management accounting----------

I. M.pandey Prasanna Chandra I.M. Pandey

JOURNALS & MAGAZINES: Annual Reports Of Rashtriya Ispat Nigam Limited General Articles And Magazines Of Rashtriya Ispat Nigam Limited Newspapers: Deccan Chronicle, The Hindu.

WEBSITES:Website: www.vizagsteel.com, www.indianinfoline.com,

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