A Comparative Study on Working Capital Management in Steel Authority

A Comparative Study on Working Capital Management in Steel Authority

Abstract

Steel Authority of India Ltd., Tata Steel Ltd., JSW Steel Ltd., Essar Steel Ltd., and Jindal Steel & Power Ltd. are the five steel firms studied. The research was conducted to learn about the comparative situation of steel firms in working capital management by using different analyses such as size-wise analysis, ratio analysis, and operational cycle analysis on data from 2006 to 2011. According to the research, Tata Steel Ltd has the greatest increase of net working capital over the holding period, followed by Jindal Steel Ltd, while JSW Steel has the lowest growth. 

Essar Steel Ltd has the longest average gross operational cycle (92.36 days), followed by SAIL (88.38 days) and Jindal Steel (69.50 days). The net operating cycle of Jindal Steel and Tata Steel is negative each year, indicating that both businesses have excellent working capital management.

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Introduction

The Indian steel sector contributes significantly to the country's economic development. The main contribution draws attention to the fact that steel has a grip in conventional areas such as infrastructure and building, automotive, transportation, industrial uses, and so on. The liberalization of industrial policy and other measures undertaken by the government have provided a clear push for private sector entrance, involvement, and development in the steel industry. While older units are being modernized/expanded, a significant number of new steel plants have been built in various regions of the nation using contemporary, cost-effective, cutting-edge technology. 

The fast and consistent development of the demand side in recent years has also encouraged local entrepreneurs to set up shop. At the moment, crude steel manufacturing capacity is 84 mt, and India, the world's fourth biggest producer1 of crude steel, has the potential to manufacture a range of grades, all of which meet international quality requirements, via new green field projects in various parts of the country.

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Conclusion

During the holding period, Tata steel ltd had the greatest increase in NWC, followed by Jindal steel ltd, while JSW steel had the lowest growth. GOC fluctuated among all businesses throughout the research period. Essar Steel Ltd has the longest average GOC (92.36 days), followed by SAIL (88.38 days) and Jindal Steel (69.50 days). Jindal Steel and Tata Steel's NOC is negative each year, indicating that working capital is well managed. Tata Steel ranks first in inventory turnover (8.71), followed by JSW Steel (8.65), and Jindal Steel (7.54). Tata Steel has the highest debtor turnover ratio (45.26), followed by JSW Steel (37.66) and Essar Steel (23.87). 

SAIL has the longest receivable days at 23.36 days, followed by Jindal Steel at 20.77 days, and Tata Steel has the shortest at 20.77 days. Essar Steel has the longest inventory days at 75.54 days, followed by SAIL at 65.02. Except for Tata Steel, which has a current ratio of 2.06, other businesses have kept their current ratios smaller than 2:1. Tata Steel has the lowest creditor turnover, followed by Jindal Steel, at 4.35.

For More Details About a Comparative Study on Working Capital Management in Steel Authority Please Visit Our Website


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