1. A PROJECT REPORT ON SUMMER TRAINING
AT USHA MARTIN LTD.
TATISILWAI, RANCHI, JHARKHAND.
[Sub. –Ascertainment of Working Capital requirements for the Financial Year 2012-13]
BY: -
MANOJ KUMAR PRAMANIK.
REG. NO.:-CUJ/1/2009/MBA/14.
CENTRE FOR BUSINESS ADMINISTRATION.
CENTRAL UNIVERSITY OF JHARKHAND.
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2. A Report on
ASCERTAINMENT OF WORKING CAPITAL REQUIREMENTS FOR
THE YEAR 2012-13 OF USHA MARTIN LTD. - RANCHI UNIT
By
MANOJ KUMAR PRAMANIK
CUJ/1/2009/MBA/14
A Report submitted in partial fulfilment of
the requirements of
MBA program of
CUJ, Ranchi
Submitted to
CA Rajiv Singh
Deputy Manager (Accounts and Commercial)
Usha Martin Limited, Ranchi
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3. DECLARATION
I hereby declare that this project report entitled “A PROJECT REPORT ON
ASCERTAINMENT OF WORKING CAPITAL REQUAIREMENT OF USHA MARTIN LTD.
FOR THE FINANCIAL YEAR 2012-13” have been prepared by me in partial fulfilment of
the requirement for the award of MBA.
I also declared that the best of my knowledge, this project is a result of my
own effort and it has not been submitted to any other university or institute for the
award of any professional degree.
Date:
Place: (Signature)
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4. Certificate of Guide
This is to certify that Mr. Manoj Kumar Pramanik, Enrol No: CUJ/01/2009/MBA/14 ,
student of the Central University of Jharkhand of MBA Program has undertaken the
project titled “A Report on ASCERTAINMENT OF WORKING CAPITAL REQUIREMENTS
FOR THE YEAR 2012-13 OF USHA MARTIN LTD. - RANCHI UNIT” under my guidance.
No portion of this project report is published or submitted to any other University or
organization. This study was done for the fulfilment of the requirements of Summer
Training Project of the MBA Program.
The information in the report is genuine to the best of his knowledge and has been
collected from reliable sources, the Internet, and the annual reports of the Usha Martin.
The analysis and compilation was the original work of the student based on secondary
data.
He has completed his project satisfactorily. This certificate is being issue d for academic
purpose.
CA- Rajiv Singh
Deputy Manager (Accounts and Commercial)
Usha Martin Limited. Tatisilwai, Ranchi
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5. ACKNOWLEDGEMENT
There are times when one feels a sense of accomplishment combined with a sense of
gratitude. Writing the acknowledgement page in this project is one among them. This
project would have been a distant dream without the grace of almighty. So, first and
foremost, I, profusely thank god for his blessings and grace, without which my project
would not have seen the light of the day.
I would like to say thankful to Mr. ARVIND KUMAR HR Department, Usha Martin who has
given me opportunity to do my internship in this organization.
I would like to say thank to HOD sir, Prof. TAPOSH GHOSHAL, Dean of School of
Management Sciences, Central University of Jharkhand, who provided me a golden chance for
Summer Training and my especial thanks to Mr. RAJIV SINGH, Finance Department, Usha
Martin Ltd., for his guidance and appreciative support in spite of busy schedule at Usha
Martin Limited.
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6. PREFACE
Summer training is essential to get the practical orientation of theoretical knowledge
and analysis of the business realities at the corporate level. This 1 month training
procedure made us understand the working culture of the business organization.
The summer training in this reputed Company had been a challenging and
exciting experience which brought us closer to the business organization.
My topic is Ascertainment of Working Capital Requirement of Usha Martin Limited for the
Financial Year 2012-13(Wire Ropes and Speciality Product Division) in USHA MARTIN
LIMITED, TATISILWAI RANCHI, JHARKHAND.
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7. EXECUTIVE SUMMARY
The basic idea behind selection of this topic is mainly due to its nature and importance
in overall financial management of any organization.
One of the most important areas in the day to day management of the firm is the
ascertainment of working capital. Working capital Ascertainment is the functional area
of finance that covers all the current accounts of the firm. It is concerned with
management of the level of individual current assets as well as the management of total
working capital.
Primary function of financial management is not only procurement of fund but
also their effective use with the objective maximizing the owner’s wealth. The allocation
of funds, therefore, is an important function of financial management.
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8. TABLE OF CONTENTS
CONTENTS PAGE NUMBER
1. Company Profile 9-11
2. Board of Directors 11
3. Organizational Structure 12
4. Products 13
5. Vision, Mission and Quality Policy 14
6. Milestone 15-17
7. Manufacturing Process 17
8. Best Practices at Usha Martin 18-21
9. Corporate Social Responsibility 21
10. SWOT Analysis 22-24
11. Core Competence 24
12. Achievement 25-31
13. Financial Analysis 31-39
- Shareholding Pattern
- Cash Management
- Debtors Management
- Inventory Management
14. Ascertaining of Working Capital 39-47
- About Working Capital
- Objective of the Study
- Research Methodology
- Working Capital Cycle
- Working Capital Management
15. P/L Account & Working Capital Analysis 48-72
- Problem Formulation
- Analysis of P/L Account
- Ascertaining of Working Capital
16. Recommendation 73
17. Conclusions and My Learning 74
18. Bibliography 75
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9. 1. COMPANY PROFILE:-
Usha Martin Limited, together with its subsidiaries, engages in the manufacture and sale
of steel products in India and internationally. The company offers steel wire rods, rolled
products, billets, pig iron, and allied products; wire and wire ropes products, such as
steel wires, strands, wire ropes, cords, and bright bars; and related accessories,
including wire drawing and allied machines, as well as jelly filled telecommun ication
cables. It provides coil and bar products for wire rods and straight length applications;
ropes for aerial, crane, elevator, engineering, fishing, mining, titan oil field, shipping,
structural, and flexi and fancy fence applications; and wire and strands for power,
construction, automobile, general engineering, and binding/stationary applications. The
company also offers structural products for suspension bridges, cable stayed bridges,
tower guy strands, suspended roof structure, boom pendants, and architectural
applications, as well as track ropes for bulk material handling systems, and fine and
conveyor cords. In addition, it provides general engineering slings, sugar slings, pendant
lines, grommet slings, cable laid slings, structural slings, deco rative slings, mooring
lines, multi legged slings, stainless slings, flemish eye slings, and hand spliced slings, as
well as slings with mechanical splicing with ferrule and steel sleeves. The company was
founded in 1961 and is based in Kolkata, India. Usha Martin Limited is a part of the Usha
Martin Group.
Inception of business
Started in 1961 in Ranchi, Jharkhand as a wire rope manufacturing company, today the
Usha Martin Group is a USD 1 billion conglomerate with a global presence. The group
has set new standards in the manufacture of wire rods, bright bars, steel wires,
speciality wires, wire ropes, strand, conveyor cord, wire drawing and cable machinery.
With continuous growth in both the domestic and international markets, Usha Martin,
9

10. the Group’s flagship company has emerged as India’s largest and the world’s second
largest steel wire rope manufacturer.
For Usha Martin, the path to sustainable growth was long; the management constantly
tried out innovative business practices. With initiative to diversify the customer base
by venturing into the international markets, moving up the value chain and fully
integrating its business process to maximize stakeholder value.
Thinking global
In 1979, the company set up a steel plant with wire rod rolling mill at Jamshedpur, to
benefit from business integration. This ensured a steady supply of steel for the
manufacture of value added products. Today, the Jamshedpur unit has a truly integrated
speciality steel manufacturing facility of 700,000 MT per annum. Out of which, about
35% is consumed internally by its plant in Ranchi, Hoshiarpur & Bangkok, producing
steel wire, steel strand, steel cords, bright bar and steel wire ropes. All its
manufacturing facilities are ISO 9000 certified and the steel plant was India’s first to
receive the TPM Excellence Award from JIPM, Japan.
Going Global
With local success come global aspirations. Currently, the company has overseas
manufacturing operations in Thailand, UK and Dubai. Besides a vast network of
distribution centres and marketing offices spread across the globe to support an ever
growing worldwide customer base. The company exports over 60% of the wire rope
output and about 20% of the total wire rods produced.
Looking Forward
Usha Martin’s future plans are focused on its operation in Jharkhand – a state rich in
mineral resources. Future priorities include product mix enrichment, cost reduction and
infrastructural improvements. Already flourishing in its recent foray into mining
operations, the company is planning to invest in its iron ore and coal mines, sinter plant,
pellet plant, power plants, while also enhancing its steel making and value added
products capacity with an investment of Rs 2,100 crore.
Building Bridges
But what set Usha Martin apart is its unwavering commitment to social responsibility.
For over three decades the company has invested ample man-hours and capital on
community development projects for integrated prosperity in rural Jharkhand, through
a CSR arm, Krishi Gram Vikas Kendra (KGVK).
10

11. This NGO undertakes various development initiatives, following a model of Total Village
Management (TVM). Focusing on key areas like Watershed development, agricultural
productivity, better health practices, education, empowering women and encouraging
micro enterprise. In recognition to its effort Usha Martin has been awarded the
prestigious TERI Award for Corporate Social Responsibility in 2006.
2. BOARD OF DIRECTORS: -
1. Mr. Prashant jhawar (chairman)
2. B K jhawar (chairman-Emeritus)
3. Brij k jhawar (Director)
4. N J jhawar (Director)
5. A K choudhari (Director)
6. Mr Ashok basu (Director)
7. Mr Salil singhal (Director)
8. Mrs Ramni nirula (director)
9. G n bajpai (Director)
10. Mr Nripendra mishra (Director)
11. Rajiv Jhawar (MD)
12. P Bhattacharya (JT MD)
13. Dr Vijay sharma (Ex Director & CE,steel business)
14. P K Jain (Ex Director & CE, wire & Wire rope)
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12. 3. ORGANIZATIONAL STRUCTURE: -
12

13. PRESENCE: -
• Headquartered in Kolkata, India;
• Iron ore mine (Barajamda) and captive coal mines (Daltonganj) in the state of
Jharkhand, India;
• Steel manufacturing facilities located in Jamshedpur and Agra;
• Wire and wire rope manufacturing facilities located in Ranchi (Jharkhand) and
Hoshiarpur (Punjab) in India, Bangkok (Thailand), Dubai (the UAE) and
Nottinghamshire (the UK);
• High–value wire and conveyor cord manufacturing facilities at Ranchi;
• Machinery manufacturing and engineering application canters in Ranchi and
Bangalore;
• Manufacturing units for bright bars in Ranchi and Sriperumbudur (Tamil Nadu);
Rigging shops in the Netherlands and the UK.
• Telecommunication cables manufacture at Silvassa (India).
Wide global network of marketing and distribution warehouses in Singapore,
4. PRODUCTS: -
Following are the products manufactured by the company.
1. Coils and Bars.
2. Bright and Bars.
3. Ropes.
4. Wire and Strand.
5. Structural.
6. Silings.
7. Cord.
8. Machinery.
9. Telecables.
Use of Ropes:-
1. Arial rope.
2. Crane rope.
3. Elevator rope.
4. Engineering rope.
5. Fishing rope.
6. Mining rope.
7. Structural rope.
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14. Use of Wire and Strand:-
1. Power.
2. Construction.
3. Automobile.
4. General engineering.
PRODUCT QUALITY /TESTING FACILITIES:-
1. ISO-9001 ANAB.
2. ISO-9001 UKAS.
3. ISO-14001.
4. TPM certificate.
5. API-certificate.
6. ABS-manufacturing Assessment.
7. ABS-API9A.
8. DNV -certificate.
9. Lloyd’s-certificate.
10. Inmetro-certificate.
5. VISION, MISSION AND QUALITY POLICY:
Vision:-
To be a respected, world class & leadership in business, in quality, productivity,
profitability & customer satisfaction.
Mission:-
 To be a customer and shareholder observed factory.
 To enhance value to shareholders and services to all stake holders.
 To develop highly motive team with a sense of satisfaction.
 To excel as a value driven organization.
 To create the value in case of quality.
 To expand its area of its operation& utilize the raw material efficiently.
Quality policy:-
 Providing product & services that meet customer expectation.
 Continual improvement to our quality management system and process.
 Continues enrichment of the skills and knowledge through training and training.
14

15.  Compliance to all applicable statutory and regulatory.
 Fostering the professional development of our employee.
 Our suppliers and customers are our partner in progress.
6. MILESTONES:-
The Company is a part of the Usha Martin Group, which was formed in India in the early
1960s with the establishment of Usha Martin Industries Limited (UMIL), engaged in the
manufacture of steel wires, wire ropes and other related products. The group was
promoted by Mr. B. K. Jhawar, who is the Chairman of the Company. Usha Beltron
Limited was incorporated on 21 May, 1986 as a joint venture between Usha Martin
Industries Limited, Bihar State Electronics Development Corporation Limited, AEG
Kabel, Germany (now Kabelrhydt and a member of the Alcatel group) and DEG,
Germany, to manufacture Jelly Filled Telephone Cables (JFTC). Pursuant to the Orders of
the Hon'ble High Court of Kolkata and Patna( Ranchi Bench) Usha Martin Industries
Limited merged with Usha Beltron Limited with effect from 15th May, 1998. Thereafter
the registered office was shifted from Tatisilwai, Ranchi, Jharkhand to Kolkata in the
State of West Bengal in the year 2000. The name of Usha Beltron Limited was changed
to Usha Martin Limited with effect from 1st May, 2003.
Group Companies
USSIL
Usha Siam Steel Industries (“USSIL") was incorporated in
1980 as a joint venture between Usha Martin Industries, India
and Leading Industrialists in Thailand - Promoted by Board of
Investment ("BOI") for production of Steel Wires and Ropes.
USSIL became a Public Company Limited in 1997 and
subsequently become a wholly owned subsidiary of the Usha
Martin Limited, India.
USSIL is among the largest integrated Steel Wires, Industrial
Strands, Control Cables and Wire ropes Plants based in the
ASEAN region with an annual manufacturing capacity of
36,000 MT.
UM Singapore
Established in 2000, is a wholly owned subsidiary of Usha
Martin Limited, India. It has been operational as a distribution
center for Usha Martin Group’s core business of steel wire
ropes and related products in South East Asia. It also has
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16. distribution set up in Australia, Vietnam & Indonesia.
BWWR
Established in 2003, Brunton Wolf Wire Ropes FZCO is a joint
venture between Usha Martin Limited of India and Gustav
Wolf of Germany.
BWWR is the first wire rope factory set up in the middle east,
situated in Jebel Ali Free Zone Enterprise (FZE) with an annual
capacity of 12,000 MT. The product range includes general
engineering rope, elevator rope, crane rope, off-shore
application rope, etc.
UM Cables
A wholly owned subsidiary of Usha Martin Limited, located at
Silvassa, Western India, manufactures PIJF Copper Telecom
cables and Optical Fibre Cables and has an annual capacity of
2.9 MCKM and 35000 RKM respectively.
UMIL
Established in 1997, Usha Martin International Limited is a
wholly owned subsidiary of Usha Martin Limited, formed to
facilitate distribution & marketing of the group’s wire & wire
rope products in Europe. The company also acquired in 2001 a
Nottinghamshire based Wire Rope manufacturing company
“Brunton Shaw UK” with an annual capacity of 6,000 MT. It
also specialises in providing services to oil drilling and
offshore exploration activities thru its arm European
Management & Marine Corporation having offices in Aberdeen
(UK).
UM America
A wholly owned subsidiary of Usha Martin Limited, India. It
has been operational as a distribution center for Usha Martin
Group’s core business of steel wire ropes and related products
in United States of America.
16

17. 7. MANUFACTURING PROCESS: -
(Wire & Strands)
a) The wire rod is sent for surface treatment for cleaning and then for drawing.
After this it’s packed and despatched as direct drawn wire.
b) The drawn wire is patented and again drawn. Then it’s packed and despatched as
ungalvanised wire.
c) The drawn wire is galvanised and then it’s packed and despatched as galvanised
steel wire.
d) The drawn wire is stranded & then packed and despatched as galvanised steel
wire.
The drawn wire is again stranded and sent for induced heating and then it packed and
despatched as P C Strand.
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18. (Ropes)
a) First the wire rod is sent for surface treatment for cleaning of the rod.
b) Then the cleaned rod is sent for drawing.
c) The drawn rod is sent for patenting and further for galvanisation.
d) After galvanisation the rod is again drawn and strands are formed.
e) The strands are coiled to form the “wire rope”.
8. BEST PRACTICES AT USHA MARTIN
A. Business Drivers: - (PQCDSM).
1. Productivity.
2. Quality.
3. Cost-effective.
4. Delivery.
5. Safety.
6. Moral.
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19. B. 5 S Framework:-
1. Sort. (To find out necessary as per value.)
2. Set in order. (For reducing searching time.)
3. Shine. (Remove dirt and dust.)
4. Standardisation.
5. Sustain.(Self -discipline).
TPM (Total Productive Maintenance) policy:-
Productivity
5S
Speed
Framework
Cost Quality
TPM pillars
Innovation. Motivation
Deliver
y
McKinsey 7’S Framework
The model is most often used as a tool to assess and monitor changes in the internal
situation of an organization.
The model is based on the theory that, for an organization to perform well, these seven
elements need to be aligned and mutually reinforcing. So, the model can be used to help
identify what needs to be realigned to improve performance, or to maintain alignment
(and performance) during other types of change.
Whatever the type of change – restructuring, new processes, organizational merger,
new systems, change of leadership, and so on – the model can be used to understand
19

20. how the organizational elements are interrelated, and so ensure that the wider impact
of changes made in one area is taken into consideration.
When it comes to asking the right questions, the website, Mind Tools (mindtools.com),
has developed a checklist and a matrix to keep track of how the seven elements align
with each other.
OBJECTIVE OF THE MODEL (To analyze how well an organization is positioned to
achieve its intended objective
Usage
 Improve the performance of a company
 Examine the likely effects of future changes within a company
 Align departments and processes during a merger or acquisition
 Determine how best to implement a proposed strategy
The Seven Interdependent Elements
 The basic premise of the model is that there are seven internal aspects of an
organization that need to be aligned if it is to be successful
Hard Elements
 Strategy
 Structure
 Systems
Soft Elements
 Shared Values
 Skills
 Style
 Staff
WORLD’S LARGEST ARCH BRIDGE IN DUBAI
20

21. WIRE AND WIRE ROPE DIVISION
The Usha Martin Ltd. is produce 100,000 MT / annum manufacturing facilities at Ranchi
(Eastern India) is amongst the top four wire rope producers in the world. Since its
inception, the division has continuously developed and expanded its range of product
offerings and is considered a pioneer in certain classes of products in India. Steel wire
ropes manufactured by the division find wide applications in oil exploration, mining,
elevators, Crane, fishing, construction, load transportation and general engineering
sectors.
HOWRAH BRIDGE & INCHEON BRIDGE NEW SONGDO CITY, KOREA
9. CORPORATE SOCIAL RESPONSIBILITY:-
 Usha Martin has strongly believed in its social responsibility being an important
part of business philosophy. The company has promoted Krishi Gram Vikas
Kendra (KGVK), as its’ social arms to take appropriate initiative in various areas
which affect health, social life and economic well being of people for a period of
over 35 years. Presently, KGVK reaches out to about one lack household of tribal
people and weaker sections of society in over 700 villages across 6 districts in
the State of Jharkhand.
 KGVK has been taking on various activities in basic health, hygiene and
sanitation, education, women empowerment, community development,
agriculture, integrated watershed development, micro enterprise development,
capacity building and need based training to generate self employment and
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22. sustainable income for weaker section of society. It has successfully completed
many projects and earned and earned recognition, appr eciation and accolades
from wide section of NGOs, government and semi government agencies at state,
national and international levels.
 KGVK has been getting active support from, and through alliance and
partnerships with, reputed national and international agencies such as US-AID,
CEDPA, FUTURE, CARE, CAPART, ICICI Bank, NFI, IRH, Georgetown University,
IFC Washington, World Bank funded SWA-Shakti, CINI, JTDS, National
Foundation of Indian, Goal India, Partners in Change, BAU, ISRO, ICAR Palandu,
NABARD, SIDBI, Lac Research Institute, Govt. of Indian, Govt. of Jharkhand and
local NGO’s.
10. SWOT ANALYSIS:-
Strength:
1. Business model: The Company is extensively integrated from iron ore and coal
block mines to captive power to the manufacture of steel, wires and wire ropes.
2. Proximity: The Company’s iron ore mines and coal mines are 160 km and 250
km respectively from downstream consuming centres, saving logistic costs.
3. Geographic mix: The Company’s revenues are drawn from India (76%) and the
rest of the world (24%). Global revenues are drawn from 14 countries.
4. Product mix: The Company’s product portfolio comprises rolled products, steel
wire rods, wires, strands, wire ropes, cords and cables, among others.
5. Presence: The Company enjoys an Indian and global presence. Ten
manufacturing units are located within India and three abroad. The Company’s
customers are pan- India and pan-global, serviced by a large number of dealers,
stock points and representatives.
6. Certifications: The Company’s manufacturing units are ISO 9000- certified. The
Company was accredited with TERI award and TPM Excellence award in 2006
and 2008 respectively.
7. Financials: The Company enjoyed a gearing of 1.02, a sub-7% average cost of
debt as on 31st March, 2010 and interest cover of 3.94 times for 2009-10.
8. Customisation: The Company manufactures customised products resulting in
value-addition, repeat business and enduring client relationships.
22

23. 9. Engineering skills: The Company’s decades of engineering knowledge related to
the manufacture of wire and cable–making machines helped optimise plant,
equipment and production facilities.
10. Technology: The Company invested in cutting-edge technologies across its
manufacturing units; it deployed an advanced ERP solution for operational
support.
11. Social responsibility: The Company’s social initiative arm, an NGO namely
Krishi Gram Vikas Kendra (KGVK) earned trust and respect for undertaking
activities like education, natural resource management, health, trade facilitation,
dairy, farming and livelihood, among others, across 350 villages Technology:
Weakness:
1. Machine & tools have become old & obsolete
2. Over looked small customer.
3. Semi – Automatic planned
4. High production cost
5. Demand of elevator ropes has increased due to global infrastructure
development
6. Non effective advertising image
Opportunity:
1. UML can develop device for measuring breaking load
2. Fishing is developing in the southern coastal cities
3. Mushrooming of apartment in India & Abroad UMI can increase its profit, its
fives more emphasis on direct marketing with customer
4. Now present condition reliance has found crude oil resources in Krishna
Godavari basin in south, new opportunities present for UML to produce rope
5. UML can develop device for measuring breaking load
6. Competition are not much strong in secondary market
Threat:
1. Low price of the rivals product are a great threat for UML
2. High production cost
3. Local political instability
23

24. Competitors:-
These are the main competitors of the company in this sector.
1. Elango Industries Ltd.
2. Inducto Steel Ltd.
3. Jindal Stainless Ltd.
4. Mahindra Ugine Steel Company Ltd.
5. Mukand Ltd.
6. Panchmahal Steel Ltd.
7. Shah Alloys Ltd.
11. Core Competence: -
Cost control: The vertical integration – from natural resources to wire rope – facilitates
the adequate availability of key inputs at a significantly low cost compared with
purchases from the open market and provides a near-complete control over the entire
value chain, strengthening the Company’s competitive edge.
1. Quality products: The Company manufactures products where product quality
is of paramount importance (namely wire ropes for critical applications). The
vertically integrated model allows a stringent monitoring of product quality
across every process and ensures consistent product quality across batches – a
big competitive advantage. The Company’s wire ropes, earned the confidence of
global customers and authorities of repute including OTIS, JIPM, ABS, API,
LLOYDS and ISO, a recognition of its high quality.
2. Delivery speed. The vertically-integrated business model facilitates reducing
cycle time (from indent to product delivery) and allows the Company to meet
delivery schedules of clients owing to minimal dependence on external inputs
and factors. Besides, a complete control on the value chain allows the Company
24

25. to meet urgent client deliveries (when necessary), strengthening business
relationships
3. Product basket Integration allows the Company to create a product range which
caters to diverse applications across multiple sectors. For example, the
Company’s wire rope product basket is one of the largest globally. This enables it
to capitalise on most of the emerging opportunities in its business space. Besides,
the Company’s presence across the value chain created multiple revenue
verticals – pig iron, billets, structurals, bars, wire rods, wires, strands, cords and
wire ropes –providing diverse growth drivers.
4. Customisation. Integrated operations help customise products to suit
specialised applications for key customer requirements, enhancing customer
loyalty.
5. Profit maximisation. A footprint across the value chain allows the Company to
provide an optimum sales mix in line with the external environment helping
maximise profitability. Besides, this business model enables the Company to
protect its business profitability in adverse market conditions.
6. Capacity increase Complete control of the back-end of the value chain, namely
iron ore and coal reserves, allows the Company to expand downstream
capacities to capitalise on emerging stabilising cost opportunities
7. Cyclicality protection The Company is protected from the vagaries of price
fluctuations in key inputs, namely iron ore and coal, stabilising costs. It also
enables the Company to capture the upside in the marketplace when prices rise
(without a commensurate increase in costs).
12. ACHIEVEMENTS:-
- The company was incorporated on 22nd May, and obtained the Certificate of
Commencement of Business on 17th July, 1986. It was promoted jointly by Usha Martin
Industries Ltd. (UMI) and Bihar State Electronic Development Corporation Ltd.
(BSEDC).
- The Company undertook to set up a project for the manufacture of 5,00,000 conductor
kilometres (CKM) per annum of jelly filled cables.
- The Company entered into a technical agreement with AEG Kabel of West Germany for
technical know-how and training of Indian technicians at the collaborator'splant.
1988
- The Company had developed PCM system cable used for transmission of digital signals
and supplied higher size cables upto 1600 pairs. The Company had also developed foam
25

26. skin type cable of size 1800 x 0.4 for the first time in India.
- 70 shares subscribed for by the signatories to the Memorandum of Association.
70,99,930 shares were then issued at par out of which the following shares were
reserved and allotted on a firm basis:
- (i) 16,96,930 shares to Usha Martin Industries Ltd., its directors, their friends, etc.;
- (ii) 18,46,000 shares to BSEDC;
- (iii) 10,72,000 shares to AEG - Kabel of West Germany and
- (iv) 7,10,000 shares to DEG of West Bermany. Out of the remaining 17,75,000 shares,
3,55,000 shares were reserved for preferential allotment to employees, etc., but only
14,800 shares taken up. The balance 14,20,000 shares along with 3,40,200 shares not
taken up by employees, were offered for public subscription during April 1988 (All
were taken up).
1989
- During May/June 1989, the company offered 14,20,000 rights equity shares in the
prop. 1:5 (All were taken up). Simultaneously, 71,000 No. of equity shares were also
offered to the employees on an equitable basis. Only 5,200 shares taken up. Balance
65,800 shares allowed to lapse.
1994
- The Company issued 10,00,000 No. of equity shares of Rs 10 each at a premium of Rs
169 per share on preferential basis to promoters.
- During October, the Company issued 32,71,028 GDRs and these representing
32,71,028 No. of equity shares were issued at a price of Rs 335.66 per share.
- Usha Martin Telekom Ltd., a joint venture along with Usha Martin Industries Ltd. &
Telekom, Malaysia have been providing cellular phone services in Calcutta under the
brand name "COMMAND". 1996
- The Company was closely monitoring the development in power sector and was
evaluating various options.
- Summit Usha Martin Finance Corporation Ltd. (Formerly Usha Martin Finance
Corporation Ltd.) became a 50:50 joint venture between Usha Martin Group of
Industries & Sumitomo Corporation of Japan.
26

27. - Other joint ventures of the company are Usha Siam Steel Industries Ltd., Usha Martin
Europe Ltd. and Usha Martin Americas Inc. 1997
- The Company decided to spin-off the Software Division into one of the subsidiaries of
the company.
- Usha Martin Industries Ltd. was merged with the company. After amalgamation
company has become a multi-divisional company, covering the manufacture of pig iron,
steel wires and wire rods, wire ropes and jelly-filed cables.
- 11,477,334 No. of equity shares issued to the shareholders of erstwhile Usha Martin
Industries Ltd. Pursuant to the Scheme of Amalgamation with the Company and
13,56,200 No. of equity shares of Rs 10 each held by erstwhile Usha Martin Industries
Ltd. were canacelled due to Amalgamation with the Company.
- Ubest a division of the Usha Beltron's Ltd. has signed an agreement with Swiss
Telecom PTT to offer Indian cellular operators natel sim card application platform
(sicap) software product for immediate implementation.
- Usha Beltron Ltd. (UBL) was promoted jointly in 1986 by Usha Martin Industries and
Bihar State Electronic development Corporation in technical collaboration with AEG
Kabel, Germany to manufacture jelly filled tele-cables (JFTC).
- The company will have three major divisions-wire and wire ropes, software and
telecom.
1998
- Crisil has downgraded the outstanding ratings of Usha Beltron Ltd. (UBL) and also
removed them from rating watch.
- The Jhawars-promoted wire rope-to-jelly filed cables firm, Usha Beltron Ltd, is set to
extend its activities into telecommunications in a big way.
- Usha Beltron's telecom foray will include extending activities to different fields of
operating, maintaining and providing telecommunications services of all types and
other value-added services and to design, instal and/or erect all types of
telecommunication network systems and enter into joint venture agreement with
Indian and foreign parties.
- Usha Beltron Ltd. of the Jhawars is all set to change its name to Usha Martin Ltd this
fiscal, according to sources in the company. This is for the second time, in a span of just
one year, that the company is going to change its name.
27

28. - The company has initiated moves to restructure its international marketing and
distribution business.
- The Company embarked on creating a new cable manufacturing facility at Silvassa
with a capacity of 27 lckm through UM Cables Ltd., a wholly owned subsidiary of the
company.
1999
- The company has introduced a voluntary retirement scheme at its cable and wire rope
factories in Ranchi from last month. The scheme has been offered to workers and
officers who are of and over forty years of age and have completed 10 years of service.
- UM Cable Ltd, a wholly-owned subsidiary of Usha Beltron Ltd. belonging to the Rs.
1,000-crore plus Usha Martin Group, is being launched in Silvassa, near Mumbai, to
manufacture jelly-filled telecommunication cables.
- Usha Beltron Ltd. (UBL), the wire and wire ropes major of the Jhawar group, is setting
up a holding company to streamline its overseas distribution network.
- Usha Communications Technology, a wholly-owned subsidiary of Usha Beltron Ltd,
and Compaq Computer Corporation singed a comprehensive worldwide solution
development marketing agreement on May 7 at Portland, Oregon, the US.
- UBL recently entered into an agreement with American Express Bank for funding
worth $15 million. "The rest of the $10 million will be through equity expansion and
bringing in a joint venture partner."
- Usha Beltron Limited, the flagship of the city-based Usha Martin Group, is setting up a
joint venture with an Australian firm to produce leaded steels.
- Usha Beltron Limited (UBL) of the Calcutta-based Jhawars have acquired 10 per cent
equity control in its Thai ropes and wire making joint venture -- Usha Siam Limited.
- Umicor, UK, a joint venture between Usha Beltron Ltd. (UBL) and Exim Bank, has
acquired EMMC UK, a firm specialising in providing services and solutio ns for the wire
rope industry, for $3.5 million.
- While software companies are making a beeline for India, Usha Beltron Ltd. of the
Jhawars is setting up a holding company - Usha Communications Technology - for
software development in the United Kingdom.
28

29. - The new company is being set up in collaboration with Entryline Holdings Ltd, a
Pentire group company of the UK.
- Usha Beltron Limited (UBL), the city-based Jhawar group's flagship, has decided to
enter into a 50:50 joint venture with Martin Bright of Australia to set up a Rs 40-crore
special steel manufacturing facility in Jamshedpur.
- The Usha Beltron Group of the Jhawars has flagged off a major restructuring exercise
for its global software activities by initiating the process to set up a new holding
company in the United States by January 2000, which is likely to be named UBEST
America.
2000
- Usha Beltron is all set to joint the big league of corporates flourishing on growth
opportunities inknowledge-based sectors such as infotech and telecom. The company
has set up technical training centres.
- The Company has approved a Scheme of Arrangement proposed to be made between
company and Usha Martin Infotech Ltd, (UMIL) and their respective shareholders.
- Usha Beltron Ltd, the flagship of the Calcutta-based Jhawars, will issue global
depository receipts (GDRs) in a couple of months.
- Calcutta-based Usha Beltron has acquired the wire rope business of Brunton Shaw of
the UK, a subsidiary of the 180-million Carclo, UK.
- The Company issued 35,00,000 Global Depository Receipts (each GDR represented by
one equity share of Rs 10 each) at a price of US$3.25 per GDR.
2001
- Mr Pradip P. Shah, Director has resigned from the board effective from 24th January.
2002
-Ties up with Gustav Wolf of Germany to manufacture steel cords in India.
-Board approves in setting up of a Direct Reduced Iron (DRI) Plant with the capacity of
100 KT per annum.
29

30. -Usha Beltron Ltd announces the change in management as follows:
1. Mr Biswajit Choudhuri appointed as a nominee of Unit Trust of India on the Board of
the Company in place of Mr S K Saha
2. Mr Dilip Mondal appointed as a nominee of Industrial Development Bank of India on
the Board of the Company.
-Board approves for the issue and allotment of securites on preferential basis: 1)
53,45,455 equity shares of Rs.5/- each of the company at a price of Rs.33/- per share
(inclusive of premium of Rs.28/- per share) being the price which is in accordance with
chapter X111 of SEBI (Disclosure and Investor Protection) Guidelines to International
Finance Corporation, Washington. 2) 53,45,455 equity shares of Rs.5/- each of the
company at a price of Rs.33/- per share (inclusive of premium of Rs.28/- per share)
being the price which is in accordance with chapter X111 (Guidelines for preferential
issues) of SEBI ( Disclosure and Investor Protection) Guidelines to Promoters, Promoter
Group, Directors, their relatives and associates. 3) The BOD have also decided to
convene an EGM on July 18, 2002 to consider the above matters.
-IFC signs agreement with UBL to invest Rs.120.5cr in the company.
-UMIL acquires 30,00,000 shares amounting to 9.45% voting rights on preferential
allotment basis.
2003
- DEG financed Rs.50cr to UBL and the debt cost stands at Libor plus 275 basis points
with 11 years time span.
-Purchases a wire rope plant in Dubai
-Acquisition of 49.55% stake in Usha Martin International Ltd, UK (UMIL)
-Ministry of coal alloted captive coal block in Jharkhand having a reserve of more than
30 MN T and contains Grade A & B coal, which would be required by the company for its
Sponge Iron (DRI Project) Plant expansion.
-Mr. T K Banerjee, Nominee of Life Insurance Corporation of India resigned from the
Board of Directors of the Company.
2005
-Usha Martin executes a Business Transfer Agreement with JCT
30

31. 2007 - Usha Martin Ltd has appointed Mr. Suresh Neotia and Mr. Ashok Basu, as
additional directors of the Company with effect from May 17, 2007.
- The Company has splits its face value from Rs5/- to Rs1/-.
2010
- Usha Martin Limited has appointed Dr. Vijay Sharma and Mr. P. K. Jain as executive
Directors on the Board of the Company.
- Usha Martin Ltd has appointed (a) Mr. G N Bajpai as Additional Director [non-
executive & independent] with effect from March 18, 2010; and (b) Mr. Nripendra Misra
as Additional Director [non-executive & independent] with effect from March 22, 2010.
- Usha Martin Ltd has appointed Mr. Jitender Balakrishnan as Additional Director (non -
executive & independent) with effect from June 10, 2010.
13. FINANCIAL ANALYSIS: -
Shareholding pattern
Shareholding pattern - Usha Martin Ltd.
No of % Share
Holder's Name
Shares Holding
Promoters 88459017 29.03%
Foreign Institutions 52943476 17.37%
National Banks Mutual Funds 50900204 16.70%
Foreign Promoter 33336135 10.94%
General Public 31008972 10.18%
Financial Institutions 23206663 7.62%
Other Companies 20157943 6.61%
The shareholding pattern says that only around 10% of the total shares are open for the
general public. The company’s shares had Face Value of INR 5.00 from 2003 to 2007;
however the year ending ’08 it has been changed to INR 1.00.
31

32. % Share Holding
6.61%
7.62%
Promoters
29.03% Foreign Institutions
10.18% National Banks Mutual Funds
Foreign Promoter
10.94% General Public
Financial Institutions
17.37%
Other Companies
16.70%
CASH MANAGEMENT: -
Meaning and Importance of cash
Cash, the most liquid asset and also referred to as the life blood of a business enterprise
is of vital importance to the daily operations of business firms. Its efficient management
is crucial to the solvency of the business because cash is the focal po int of the funds flow
in a business. Cash plays a very important role in the entire economic life of an
organization. A firm needs cash to make payments to its suppliers, to incur day to day
expenses and to pay salaries, wages, interest and dividend etc. Cash is money that is
easily accessible either in the bank or any business.
It is very essential for a business to maintain an adequate balance of cash. But many a
times a concern operates profitably and yet it becomes very difficult to pay taxes and
dividends. This may be because:
Although huge profit have been earned yet cash may not have been
received because of large credit sale was made.
 Even if cash has been received, it may have drained out (used for some
other purposes).
This movement of cash is of vital importance to the management, so proper
management of cash is very important.
32

33. Cash/fund management
Cash/Fund, the most liquid assets is the vital importance to the daily operations of the
business firms. The proportion of corporate assets held in the form of cash is very small,
often between 1 and 3 percent, its efficient management is crucial to the solvency of the
business enterprise because in a very important sense cash is the focal point of fund
flows in business. It is generally referred to as the “life blood of a business enterprise”.
There are three possible motives for holding cash:
i. Transaction motive
ii. Precautionary motive
iii. Speculative motive
The need for holding cash arises from a variety of reasons which are briefly summarized
below.
Transaction motive
A company is always entering into transactions with other entities. While some of these
transactions may not result in an immediate inflow/outflow of cash (e.g. credit
purchases and sales), other transactions cause immediate cash inflows and outflows. So
firms always keep a certain amount as cash to deal with routine transactions where
immediate cash payment is required.
Precautionary motive
Contingencies have a habit of cropping up when least expected. A sudden fire may break
out, accidents may happen, employees may go on strike, creditors may present bills
earlier than expected or debtors may make payments later than warranted. The
company has to be prepared to meet these contingencies to minimize its losses. For this
purpose companies generally maintain some amount in the form of cash.
Speculative motive
Firms would like to tap profit making opportunities arising from fluctuation in
commodity price, security price, interest rate, and foreign exchange rates. A cash rich
firm is better prepared to exploit such bargains. Firms which have such speculative
leanings may carry additional liquidity. Most firms their reserve borrowing capacity and
marketable securities would suffice to meet their speculative needs.
33

34. Cash Management Cycle
Cash management is concerned with the managing of:
 Cash flows into and out of the firm.
 Cash flows within the firm.
 Cash balances held by the firm at a point of time by financing deficit or
investing surplus cash.
It can be represented by a cash management cycle as shown below. Sales generate cash
which has to be disbursed out. The surplus cash has to be invested while deficit has to
be borrowed. Cash management seeks to accomplish this cycle at a minimum cost. At
the same time, it also seeks to achieve liquidity and control. The management of cash is
important because it is difficult to predict cash flows accurately, particularly the inflows
and there is no perfect coincidence between the inflows and outflows of cash. During
some periods, cash outflows exceed cash inflow, because payment for taxes, dividends
or seasonal inventory builds up. At other times, cash inflow can be more than cash
payment because there may be large cash sales and debtors may be realized in large
sums promptly.
Cash management is also important because cash constitutes the smallest portion of the
total current assets, yet management’s considerable time is devoted in managing it. An
obvious aim of the firm now-a-days is to manage its cash affairs in such a way as to keep
cash balance at a minimum level and to invest the surplus cash in profitable investment
opportunities.
Cash
Collectio
Business Deficit
ns
Operation Surplus
s
s
Information Borrow
And control Invest
Cash
Payments
34

35. DEBTORS MANAGEMENT: -
The basic objectives of the debtor’s management are to optimize the return on
investment on the assets. Its main aim is to promote sales and profit until that point is
reached where the return on investment is further funding of debtors is less than the
cost of funds raised to finance that additional credit.
When a firm makes sale of goods and services and does not receive payment, it grants
trade credit and creates Debtors accounts, which would be collected in the future. These
represent the extension of credit on an open A/c by the firm to its customers, as the
substantial amount is tied up in trade debtors; it needs careful analysis and proper
management.
 Size of Investment in Debtors:
Investment in debtors A/c is a major part of their assets in most of business
enterprises. Debtors A/c is one of the major components of working capital. The
financial executives should pay due attention to the management of debtors, so
that each rupee invested in debtors may contribute to the net worth o f the
organization.
 The Basic Problem of Debtors Management:
The basic problem of debtor’s management is the balancing of profitability &
liquidity. Soft credit terms attract sales and so the longer the time a company
allows to pay to its customers the greater the sales and higher the profits.
The longer the period of credit the greater the risk, the greater the level of debt and
greater the strain on the liquidity of the company.
INVENTORY MANAGEMENT: -
Inventory consists of raw material, semi-manufactured products and completely
manufactured products. It has been defined by the Accounting Principles Board as “The
aggregate of those items of tangible personal property which (a) are held for sale in the
ordinary course of business, (b) are in the process of production for such sales, or (c)
are to be currently consumed in the production of goods or services to be available for
sale”.
Every firm invests a huge amount to maintain a certain level of inventory, or say stocks.
Thus a large portion of working capital is involved in stock. On an average, inventories
are approximately 60% of the total current assets in public limited companies in India.
35

36. The level of inventories for a firm depends upon the nature of its business. A
manufacturing firm will have high level of all three types of inventories, while a retail or
wholesale firm will have a very high level of finished goods, no raw material and no
work in progress inventories.
Firm also maintain a fourth kind of inventory suppliers OR store s and spares. It
includes office and plant cleaning materials like soap, brooms, oil, bulb etc. These
materials do not directly enter in production but are necessary for production process.
Because of the large size of inventory and the considerable fund engaged in Inventories
it is become necessary to manage it in an effective and efficient manner. Material is as
much cash as cash as cash itself and any theft, waste and excessive use of materials
leads to immediate and direct financial loss. The process of managing inventory is
called INVENTORY MANAGEMENT.
PURPOSE FOR HOLDNG INVENTORY
As we all know that huge fund is required to maintain a certain level of inventory, so the
question is if it is expensive to maintain inventory, why do firms hold invento ries? A
company should maintain adequate stock of material for a continuous supply to the
factory for an uninterrupted production. Sometime it is not possible for the company to
procure raw material whenever it is needed. Also there exists uncertainty in procuring
raw material in time in many occasions. The procurement of material may be delayed
because of such factors as, transport, disruption, short supply, strike etc. Therefore, the
firm should maintain sufficient stock of raw materials at a given time to streamline
production.
Other factors which may necessitate purchasing and holding of raw material inventories
are quantity discount and anticipate price increase. The firm may purchase large
quantities of raw material than needed for the desired production and sales levels to
obtain quantity discount of bulk purchasing. At times the firm would like to accumulate
raw material in anticipation of price rise.
Thus there are three general purposes for holding inventories:
 Transaction motive
 Precautionary motive
 Speculative motive
1. TRANSACTIONS MOTIVE: It emphasizes the need to maintain inventories to
facilitate smooth production and sales operation.
36

37. 2. PRECAUTIONARY MOTIVE: It necessitates holding of inventories to guard against
the risk of unpredictable change in demand and supply forces and factors.
3. SPECULATIVE MOTIVE: It influences the decision to increase or deduce inventory
level to take advantage of price fluctuations.
OBJECTIVES OF INVENTORY MANAGEMENT
The objective of inventory management is to maintain sufficient inventory for the
smooth production and sales operations and to avoid excessive and inadequate levels of
inventory. Some other objectives are as below;
 Ensure a continuous supply of raw material to facilitate uninterrupted
production.
 Maintained sufficient stock of raw material in period of short supply and
anticipate price changes.
 Maintain sufficient finished goods inventory for smooth sales operation
and efficient customer service.
 Minimize the carrying cost and time and
 Control investment in inventories and keep it at an optimum level.
INVENTORIES MANAGEMENT TECHNIQUES
Various techniques commonly used for inventory control are listed below:
 ABC technique
 Stock level – minimum, maximum and re-order level
 Economic order quantity (EOQ)
 Inventory turnover ratio to review slow and non – moving
material
 Perpetual inventory system
 Methods of pricing of material
ABC TECHNIQUE
ABC Technique is a value based system of material control. In this technique material
are analyzed according to their value so that costly and more valuable materials are
given greater attention and care. All items are classified according to their value ie,
high, medium and low values, which are known as A, B and C items respectively.
37

38. A items: High in value and low in quantity. These items engage 70% of funds and 10%
of space in the inventory.
B items: Medium in value and medium in quantity. These items engage 20% of funds
and 20% of space in the inventory.
C items: Low in value and high in quantity. These items engage only 10% of fund and
70% of space in the inventory.
Thus the ratio between A, B and C is as follows:-
1. PRICE WISE – 7:2:1
2. QUANTITY WISE – 1:2:7
STOCK LEVELS
In order to check under stocking and over stocking most of the large
companies adopt a scientific approach of fixing stock levels.
These levels are:
 Maximum level = Re – order level + Re – order quantity – (Max.
consumption* Max. re-order period)
 Minimum level = Re-order level-(Normal consumption* Maximum Re-order
period)
 Re-order level=Maximum consumption * Maximum re-order period
 Average stock level = ½ (Maximum level + Minimum level)
 Danger level = Normal consumption *Maximum re – order period under
emergency condition.
ECONOMIC ORDER QUANTITY (EOQ)
Economic order quantity is that size of order which gives maximum
economy in purchasing any material and ultimate contribution towards maintaining the
material at the optimum level and at minimum cost. It is also called RE-ORDER
QUANTITY.
EOQ=√ (2*O.C.*A.D./C.C)
Where,
O.C. = Ordering cost, the cost of placing an order.
38

39. A.D. = Annual demand, annual consumption of material in units.
C.C. = Carrying cost, this is the cost of holding the stock in storage.
INVENTORY TRUNOVER RATIO TO REVIEW SLOW AND NON-MOVING MATERIAL
Inventory turnover ratio tells us how many times in a year stock are used
up and replaced. The greater the stock turnover, the more efficient is the stock policy.
 Stock turnover ratio= Cost of material consumed during the period/ Average
stock of materials during the period
 Stock turnover in terms of days= days of period / stock turnover rate
In order to detect the slow and non-moving materials, a standard stock
turnover rate should be computed for each item of material with the help of
following formula:
Turnover rate of an item = Budgeted consumption/Average stock level
PERPETUAL INVENTORY SYSTEM
A perpetual inventory system is defined as “The method of recording
stores balance after each receipt and issue to facilitate regular checking and obviate
closing down for stock taking.”
METHOD OF PRICNING OF MATERIALS
Some important methods of pricing are as follows:
 LIFO (Last in fast out)
 FIFO (First in first out)
 Simple Average Price
 Weighted Average Price
14. ASCERTAINING OF WORKING CAPITAL: -
About Working Capital
One of the most important areas in the day-to-day management of the firm deals with
the management of Working Capital, which is defined as the short-term assets used in
daily operation.
Funds are needed for short term purposes for the purchase of raw materials,
payment of wages and other day to day expenses etc. These funds are known as
39

40. WORKING CAPITAL. In simple words working capital refers to that part of firm’s capital
which is required for financing short term or current assets such as cash, marketable
securities, debtors and inventories. Funds, thus invested in current assets keep
revolving fast and are being constantly converted into cash and this cash flows out again
in exchange for other current assets. Hence it is also known as revolving or circulating
capital so working capital is the amount of funds necessary to cover the cost of
operating the enterprise.
Long term funds are required to create production facilities through purch ase of fixed
assets such as plant and machinery, land, building, furniture, etc. Investments in these
assets represent that capital which is fixed.
Kinds of
Working Capital
On the On the
Basis of basis of
Concept time
Gross Working Net Working Variable Fixed
Capital Capital working working
Capital Capital
Special Seasonal Reserve Regular
Working Working Working Working
Capital Capital Capital Capital
40

41. Classification of working capital:
 On the basis of concept:
 Gross working capital
 Net working capital
 On the basis of periodicity of requirement:
 Fixed and permanent working capital
 Variable working capital
 On the basis of concept
There are two interpretations of working capital under basis of concept:
a) GROSS WORKING CAPITAL
b) NET WORKING CAPITAL
a) Gross working capital: Gross working capital is the capital invested in total
current assets of the enterprise. Current assets are those assets which in the
ordinary course of business can be converted into cash within a short period of
normally one accounting year such as:
Cash
Short term securities
Debtors
Bills receivable
Inventory
Temporary investment of surplus funds
The concept of gross working capital focuses attention on two aspects of current assets
management:
 Optimum investment in current assets
 Financing of current assets
b) Net working capital:
Net working capital is the difference between current assets and current
liabilities.
According to this concept working capital refers to the difference between
current assets and current liabilities. It is the excess of current assets over
current liabilities. Current liabilities refers to the claims of outside which are
expected to the mature payment within an accounting year.
41

42. It includes –
Creditors for goods
Bills payable
Bank overdraft
Short term bank loans and advances
Prepaid expenses
Net working capital can be “positive” or “negative”.
 Positive net working capital: it arises when current assets exceed current
liabilities.
 Negative net working capital: it occurs when current liabilities are in excess of
current assets.
The net working capital concept indicates the liquidity position of the firm and
suggests the extent to which working capital need may be financed by
permanent sources of funds.
Thus gross working capital concept is financing or going concern concept whereas net
working capital is an accounting concept of working capital. Both concepts have go t
their own merit, but in general practice net working capital is given more priority.
 On the basis of periodicity of requirement -
 Fixed & permanent working capital: It represents the part of capital
permanently locked up in the current assets to carry out the business smoothly
this investment in current assets is of the permanent nature. It increases as the
size of the business expands. Such as investment required the maintenance of
minimum quantity of raw material, work-in-progress, finished products etc.
The permanent working capital can again be sub divided into two parts:
 Regular working capital
 Reserve margin working capital
 Regular working capital: It is the minimum amount of liquid working capital
required to keep up the circulation of the capital from cash to inventories to
receivable and again to cash. This includes minimum bank balance to discount all
bills to maintain adequate supply of raw material etc.
 Reserve margin of working capital: It is the excess capital over the need or
regular working capital that should kept in reserve for contingencies that may
arise at any time. These contingencies include rising price. Business depression,
strikes, special operations such as experiments with new product etc.
42

43.  Variable working capital:
Variable working capital change with the increase or decrease in the value of
business. It may also be sub divided into seasonal and special working capital.
o Seasonal variable working capital: The working capital to meet the seasonal
liquidity of the business is seasonal variable working capital.
o Special variable working capital: It is the part of variable working capital
which is required for financing special operations such as extensive marketing
campaigns, experiments with product or model of production.
OBJECTIVES OF THE STUDY
 TO study and analyze the working capital policy of the USHA MARTIN LTD.
 TO study the affairs of the company with reference to the working capital
ascertainment and methods of its estimation used in the company.
 To understand the general performance of the company.
 To use quantities data for defining company’s financial performance.
 To know the profitability, production and efficiency of the firm.
 To study the methods of financing working capital.
 To analyses the performance effectiveness of the company.
RESEARCH METHODOLOGY
Research Design: The study is based on descriptive and applied research.
Data Source: Both primary and secondary data are used for the collection of the
information required for the report.
Primary data:
1. Interview schedules with officers of account department.
2. Interview schedules with officers of inventory department.
3. Interview schedules with officers of cash department.
4. Interview schedules with officers of purchase department.
43

44. Secondary Data:
1. Annual report of the company.
2. Company’s data records.
3. Company’s website.
WORKING CAPITAL CYCLE
The working capital cycle refers to the length of time between the firms paying cash for
materials etc., entering into the production process/stock and the inflow of cash from
debtors (sales).
It indicates the length of time between a company’s paying for materials, entering into
stock and receiving the cash from sale of finished goods. It can be determined by adding
the number of days required for each stage in the cycle. For example, a company holds
raw materials on an average for 60 days, it gets credit from the supplier for 15 days,
production process needs 15 days, finished goods are held for 30 days and 30 days
credit is extended to debtors.
DEBTORS CASH
RAW
SALES
MATERIALS
FINISHED WORK IN
GOODS PROGRESS
Fig. Operating cycle
The totals of all these, 120 days is the total working capital cycle. The duration of the
operating cycle for the purpose of estimating working capital is equal to the sum of the
durations of each of the above said events, less the credit period allowed by the
suppliers.
44

45. Thus there is a complete cycle from cash to cash wherein cash gets converted into raw
materials, work in progress, finished goods, debtors and finally into cash again. Short
term funds are required to meet the requirements of funds during this time period. This
time period is dependent upon the length of time within which the original cash gets
converted into cash again. This cycle is also known as operating cycle or cash cycle.
Working capital management:
A managerial accounting strategy maintaining efficient level of both
components of working capital, current assets & current liabilities in respect to each
other. Working capital management ensures a company has sufficient cash flow in order
to meet its short term debt obligations and operating expenses.
Working capital management or short term financial management which is
concerned with decision relating to current assets & current liabilities; short term
financial decision typically involve cash flow within a year or within the operating cycle
of the firm.
Definition: Working capital management is concerned with the problem that arises in
attempting to manage the current assets & current liabilities and the interrelationship
that exists between them.
Working capital management refers to all aspects of the administration of both current
assets & current liabilities.
Working capital management is divided into six parts, these are as follows:
1. Working capital policy
2. Cash and liquidity management
3. Credit management
4. Inventory management
5. Working capital financing
6. Working capital management: extensions
1. Working capital policy:
Working capital management is a significant fact of financial management its important
stems policy is two reasons:
1. Investment is current assets represents substantial portion of total
investment.
2. Investment is current assets and the level of current liabilities has to be
geared quickly to changes in sales.
45

46. Working capital policy is divided into seven heads, these are as follows:
1. Characteristic of current assets
2. Factors influencing working capital requirements
3. Level of current assets
4. Current assets financing policy
5. Profit creation for working capital
(A)Characteristic of current assets: In the management of working capital two
characteristic of current assets must be borne in mind: (i) short life span and (ii)
swift transformation in other assets form.
Current assets have a short life span. Cash balance may be held idle for a week or
two; account receivable may have a life span of 30 to 60 days, and inventories
may be held for 30 to 100 days. It depends upon the time requir ement.
(B)Factors influencing working capital requirements:
The working capital need of a firm is influenced by numerous factors. The
important ones are:
a) Nature of business
b) Seasonality of operation
c) Production policy
d) Market conditions
e) Condition of supply
a) Nature of business: The working capital requirement of a firm is closely
related to the nature of its business. A service firm, like electricity
undertaking, it has a short operating cycle and its sales predominantly on
cash basis, has a modest working capital requirement. On the other hand a
manufacturing concern likes a machine tools unit, which has a long operating
cycle and which sales largely on credit have a very substantial working
capital requirement.
b) Seasonality of operation: Firms which have marked seasonality in their
operations usually has highly fluctuating working capital requirements. To
consider firm manufacturing ceiling fans, the sale of ceiling fan reaches a
peak during the summer months and drop sharply during the winter period.
c) Production policy: A firm marked by pronounced seasonal fluctuation in its
sales may pursue a production policy which may reduce the sharp variation
in working capital requirements.
d) Market condition: The degree of competition prevailing in the market place
has an important bearing on working capital need.
46

47. e) Condition of supply: The inventory of raw material spares and stores depend
on the condition of supply. If the supply is prompt and adequate, the firm can
manage with small inventory. A similar policy may have to be followed when the
raw material is available only seasonally and operation is carried out around the
year.
(C) Level of current assets:
An important working capital policy decision is concerned with the
level of investment in current assets. Under a flexible policy, the investment in current
assets is high and under a restrictive policy the investment in current assets is low.
(D) Current assets financing policy:
After establishing the level of current assets, the firm must deter mine how these
should be financed and what mix of long term capital and short term debit should the
firm employee to support its current assets.
Several strategies are available to a firm for financing its capital requirements.
 Strategy A: Long term financing is used to meet the fixed assets requirements as
well as peak working capital requirement. When the working capital
requirement is less than its peak level, the surplus is invested in liquid assets.
 Strategy B: Long term financing is used to meet fixed assets requirement,
permanent working capital requirement and a portion of fluctuating working
capital requirement during seasonal up wings, short term financing is used
during seasonal down swing, surplus is invested in liquid assets.
 Strategy C: Long term financing is used to meet fixed assets requirement and
permanent working capital requirement. Short term financing is used to meet
fluctuating working capital requirement.
(E) Profit creation for working capital:
Current assets can be easily liquidated and value realized on liquidation would
be more or less equal to the amount invested initially put differently investment in
current assets is reversible. For reversible investment the certain of net profit per
period is equivalent to the certain of net present value.
47

48. 15. PROFIT & LOSS ACCOUNT AND WORKING CAPITAL ANALYSIS
Working capital level
The consideration of the level investment in current assets should avoid two
danger points excessive and inadequate investment in current assets. Investment in
current assets should be just adequate, not more or less, to the need of th e business
firms. Excessive investment in current assets should be avoided because it impairs the
firms’ profitability, as idle investment earns nothing. On the other hand inadequate
amount of working capital can be threatened solvency of the firms because of it s
inability to meet it s current obligation. It should be realized that the working capital
need of the firms may be fluctuating with changing business activity. This may cause
excess or shortage of working capital frequently. The management should be prompt to
initiate an action and correct imbalance.
Expected value of the P/L Account of the Ranchi unit.
Usha Martin Limited
Projected Profitability of Ranchi unit for FY 2012-13
Rs./lacs
Q1 FY 2012-13 Q2 FY 2012-13 Q3 FY 2012-13 Q4 FY 2012-13 Total FY 2012-
13
Produc
tions
(M/T)
Wire
Rope & 15, 15, 17, 16, 65,9
Convey 975 881 327 732 15
er Cord
Wire &
Strand 19, 19, 19, 19, 79,2
s 648 798 898 898 40
Bright
Bars 4,0 4,1 4,2 4,4 16,8
00 50 50 00 00
39, 39, 41, 41, 1,61,
623 829 475 030 955
Particu N Qt Rat Rs./ Qt Rat Rs./ Qt Rat Rs./ Qt Rat Rs./ Qty Ra Rs./l
lars or y e lacs y e lacs y e lacs y e lacs te acs
m
s
Sales
Domes 8, 1,0 8,7 8, 1,0 8,8 8, 1,0 8,9 8, 1,0 8,9 33, 35,4
tic - 30 5,3 47. 35 6,1 69. 42 5,9 23. 47 5,5 46. 55 87.0
Wire 0 93 65 6 45 51 2 49 00 7 43 92 5 8
Rope &
C cord
- Wire 16 52, 8,8 16 52, 8,9 16 52, 8,9 16 52, 8,9 67, 35,7
& ,7 768 63. ,9 83 54. ,9 83 54. ,9 83 54. 64 26.8
Strand 98 78 48 6 37 48 6 37 48 6 37 0 9
- 3, 67, 2,5 3, 67, 2,6 4, 67, 2,7 4, 67, 2,7 15, 10,7
Bright 80 788 75. 90 78 43. 00 78 11. 10 78 79. 80 10.5
48

49. Bars 0 .17 95 0 8 74 0 8 53 0 8 32 0 3
Export 7, 84, 6,4 7, 84, 6,3 8, 85, 7,5 8, 84, 7,0 32, 27,3
- Wire 67 237 65. 52 08 27. 90 34 99. 25 83 03. 36 95.4
Rope 5 20 5 7 58 5 0 53 5 5 15 0 6
- Wire 2, 56, 1,6 2, 56, 1,6 2, 56, 1,6 2, 56, 1,6 11, 6,58
& 85 876 20. 85 87 20. 95 62 70. 95 62 70. 60 2.86
Strand 0 96 0 6 96 0 6 46 0 6 46 0
s
- 20 55, 110 25 55, 138 25 55, 138 30 55, 165 1,0 553.
Bright 0 320 .64 0 32 .30 0 32 .30 0 32 .96 00 20
Bars 0 0 0
ISMAL/
M.Divis 970 895 1,8 1,8
ion .08 .76 76. 09.
02 09
Scrap 538 540 566 558
.78 .41 .61 .51
39 75, 29, 39 75, 29, 41 78, 32, 41 77, 31, 1,6 71 1,16,
,6 445 893 ,8 29 990 ,4 21 439 ,0 71 887 1,9 ,9 456.
23 .06 29 9 .62 75 6 .81 30 9 .77 55 06 02
Less :
Excise 1,9 1,9 2,0 2,0
duty 73. 95. 20. 24.
52 52 15 63
NET
SALES 27, 27, 30, 29,
919 995 419 863
.53 .10 .66 .15
Expens
es
Wire 386 38 38 38
Rods 41 43 15, 41 67 16, 43 65 16, 42 70 16, 1,6 65,2
,2 948 ,4 6 045 ,1 7 690 ,7 1 537 8,6 21.6
70 .16 87 .45 76 .57 32 .51 65 8
Zinc 116 11 11 11
56 000 650 56 60 655 60 60 703 58 60 680 2,3 2,68
1 .61 5 00 .11 7 00 .89 6 00 .24 19 9.86
Lubric 31 105 31 10 34 10 32 10
ant 5 656 332 2 62 331 1 59 361 9 61 349 1,2 1,37
.66 91 .67 82 .36 03 .14 97 4.83
Fibre 22 114 22 11 23 11 22 11
4 488 256 4 44 256 5 44 268 9 44 261 91 1,04
.09 88 .92 88 .59 88 .72 1 3.32
Other
Raw 1,6 1,6 2,3 2,2
materi 55. 17. 38. 65.
als 11 18 50 57
Power 4.7 20 4.7 21 4.7 20 4.7
20 0 957 1 0 961 2 0 1,0 8 0 996 82 3,93
0 .21 .94 15. .75 0.6 1.21
30 8
Fuel
49

50. 561 561 584 577 2,28
.23 .23 .97 .05 4.47
Stores
& 419 419 480 473 1,79
Spares .13 .34 .48 .81 2.76
Contra
ctor & 445 446 473 470
Proces .97 .29 .76 .81
sing
charge
s
Freight
& 1,9 1,9 2,1 2,0 8,16
other 53. 63. 71. 79. 8.17
selling 74 86 01 56
expens
e
Other
Expens 1,4 1,4 1,4 1,4
es - P 25. 25. 55. 55.
&A 00 00 00 00
Expens
e total : 24, 24, 26, 26, 86,5
604 683 543 147 06.2
.91 .99 .41 .17 9
PBIDT
3,3 3,3 3,8 3,7 29,9
14. 11. 76. 15. 49.7
62 10 25 97 4
3,3 3,3 3,8 3,7
14. 11. 76. 15.
62 10 25 97
3,3 3,3 3,8 3,7
14. 11. 76. 15.
62 10 25 97
0.0 - 0.0 0.0
0 0 0
Problem formulation: -
The company is trying to find out how much working capital is being required for
smooth functioning and operations of wire and wire rope manufacturing during the
financial year 2012-13.
Why? -
As per the business plan and sales forecasting of previous year the company has given
the target to the marketing department for the future projection/forecasting of sales and
how much working capital will be required for the manufacturing process of its
products. According to that the marketing department does the market survey. That
survey report they submit to the company. According to that market survey the company
estimate that how much working capital is needed to the production department for the
production of wire and wire rope product.
50

51. What? -
According to the forecasted figure, which is given by the marketing department, the
company execute that how much working capital is required and how much of raw
materials should keep in hand for the operation of business. According to that we have to
make P/L account and working capital of different department and consolidate it that
what are the expenses that company incur in the production and what types of working
capital is required.
First of all company has given the estimated target to the marketing department
that these much amount of products should be produced during the financial year 2012 -
13. According to the estimation of marketing department the production department of
the company is functioning that how much raw materials will be required for the
production of these goods and what are the expenses that the company has to incur for
manufacturing of wire, rope, conveyer cord, strands and bright bars.
According to this company manages fund that keeps as inventory, which is
needed in production so that the production process does not stop. The company also
keep watch on holding period, because if the holding period increases, then company
has to incur additional capital and probably the chance of bad debt increases. At last the
most important thing is that to keep cash in hand for their day to day expenses and for
running the production process conveniently.
After the management of working capital the company procures the raw
materials i.e. used in production process. Company brings its main raw materials i.e.
wire rode from its Jamshedpur Unit. The company Usha Martin basically produces wire
and wire rope. These are the main products i.e. manufactured by its Usha Martin Ltd.
Ranchi unit. For proper running of the machine different kind of fuels are being
required, that the company has to keep in advance any time.
Project Stages: -
Stage 1: -
First of all the Business Plan sheet (as a primary data) is given to me on behalf of the
company where following are the things are mentioned: -
1. Highlights of the Business Plan
2. Business Plan Norms
3. Contribution Summery
4. Wire and Wire Rope Contribution
5. SPD Contribution
6. P&L Overall Ranchi
7. Expenses Overall
8. P&L WWR
9. Expenses of WWR
10. P/L Machinery Division
11. Expenses of Machinery Division
12. P/L ISMAL
51

52. 13. Expenses of ISMAL
14. P/L Power Project
15. Expenses of Power Project
16. Consumption
17. Power Plant Working
18. FC Data
After getting the Business Plan we have analyzed all the data that are mentioned in the
Business Plan and according to that we have prepared P/L account and Working Capital
of the company Usha Martin Ltd., Ranchi unit.
Stage 2: -
After getting the Business Plan Sheet, we carefully understand and analyzed that what is
happening actually in the company. We analyzed on the following question: -
1. How the company is performing its day to day activities?
2. How the funds are raising by the company?
3. From where the company is getting raw materials for its production?
4. What are the consumption norms?
5. How much inventory is company maintaining for the uninterrupted production
process?
6. How much amount of money is expensing on any kind of project like-
- WWR
- Machinery Division
- Power Project
- ISMAL etc.
Stage 3: -
After the carefully analyzing of Business Plan, I prepared a consolidated P/L account of
Ranchi unit.
Analysis of P/L account quarter wise of Ranchi unit.-
1st Quarter of the FY 2012-13
Productions (MT)
Wire Rope & Conveyer Cord 15,975
Wire & Strands 19,648
Bright Bars 4,000
39,623
Interpretation- The total production of the Wire Rope & Conveyer Cord for the first
quarter would be 15975 MT in the 1 st quarter of the FY 2012-13. Here it is calculated as
Wire production 15,475 MT + 500 MT Conveyor Cord productions. Wire and Strands
52

53. included total production of strand + LRPC strand + Ply strand +wire , [
535+8400+1500+9213] MT, that equals 19,648 MT. The third component is bright bars.
The expected production is 4000 MT.
Particulars Norms Qty Rate Rs./lacs
Sales
Domestic - Wire Rope & C cord 8,300 105,393 8,747.65
- Wire & Strand 16,798 52768 8863.78
- Bright Bars 3,800 67788.17 2,575.95
Export - Wire Rope 7,675 84,237 6,465.20
- Wire & Strands 2,850 56,876 1,620.96
- Bright Bars 200 55,320 110.64
ISMAL/M. Division 970.08
Scrap 538.78
39,623 75,445 29,893.06
Less : Excise duty 1,973.52
NET SALES 27,919.53
Interpretation- the company sales its products in domestic market as well as in foreign
market (i.e. exports). In each market company sales the three main product groupings-
wire ropes and cord; wire and strand; and bright bars. The sales figure for each is
calculated by multiplying quantity sold to its rate.
DOMESTIC-
Wire Ropes and Cord- the estimated sales of Wire Rope and C Cord would be total
8300 MT quantities at the rate of INR 105393 per MT. The items included are from Wire
and Wire Ropes sheet. These include Total Home Rope+ Total LCWR (Lock Coil Wire
Ropes) +Slings +Anchor Mooring Ropes+ Roof Stitching Wires. Calculates as
6975+365+340+120+0. Also, as per the division total Conveyor Cord domestic sales of
500 is also added (all units in MT).
Methods which is used-
Weighted average rate method = Quantity * Rate * Excise Duty/ Total Quantity
e.g. - Weighted average rate =
{(6975*89876)+(365*163699)+(340*140000)+(120*82000)+(0)+(500*98000)}/8300
(total quantity) *1.1236(12.36% excise duty)
=105,393
The final sales amount = 8300* 105,393
53

54. =INR 87476.1900 in lacs (rounded off).
Wire and Strand – the expected sales of these products would be 16798 MT in the first
quarter of the FY 2012-13. Here two items are included for quantity calculation. These
are Total Domestic Strand + Wire + Fine Wire i.e. 9415 + 7383 + 0 = 16798 MT.
Calculation by Weighted Average Rate method - {(9415*44837)+(7383*51671)+(0)}/
16798(total weights) * 1.1236(12.36% excise duty)
=52,768.
The final sales amount = 16798* 52768
= INR 8863.78 in lacs
Bright Bars- the total sales of Bright Bar in the domestic market would be 3800 MT
quantity at the rate of INR 67788.17 MT. There is just one item included in bright bars.
Quantity taken directly from the total sales provided= 3800 MT.
Rate calculation - = (3800* 61458) / 3800 * 1.1236(12.36% excise duty provided)
Total Sales = INR 2575.95 in lacs (rounded off).
EXPORT –
Wire Ropes and Cord- the company would export Wire Rope in foreign market is 7675
MT at the rate of Rs. 84237 per MT.
Rate calculations -
= {(7675* 84237) + (0)} / 7675
= INR 84,237.
The sales amount = 7,675 * 84,237
= INR 6,465.20 in lacs.
Wire and Strands- the expected value of the products that company will export in the
1st quarter of the financial year 2012-13 is 2850 MT at the rate of Rs. 56876 per MT. The
total quantity is taken as the summation of PC Strands + LRPC Strands + Galv. Strands +
Fine Wire. 900+120+1800+30= 2850.
Rate calculations -
= {(900*47397) + (120*64176) + (1800*60793) + (30*77000)} / 2850
= INR 56,876
The total amount would be INR 1620.96 lacs.
54

55. Bright Bars- this has just one major product under it. Hence rate and quantity are
directly taken as per the financial statements given. Quantity-200 MT and rate as INR
55,320 Hence total sale would be the product = INR 110.64 lacs. There is no increment
in costs to be provided.
MACHINERY DIVISION AND SCRAP-
The total sales value of the scrap would be Rs. 538.78 lacs. The M. Division amount is
ascertained as deduction of scrap and total sales (both domestic and export) from the
Total Gross Sales.
= 29,893 – 539 -28,383.92 (amount in lacs)
= INR 970.08 lacs
Scrap= 539 lacs
EXCISE DUTY-
This is taken on the market sales. The amount is directly taken from the financial
statement. Total Gross Sales less Excise Duty (as it is the amount paid as per
Government requirement on production) gives the Net Sales INR 27,919.53 lacs.
Expenses
Wire Rods 41,270 38643 15,948.16
Zinc 561 116000 650.61
Lubricant 315 105656 332.66
Fibre 224 114488 256.09
Other Raw materials 1,655.11
Power 200 4.70 957.21
Fuel 561.23
Stores & Spares 419.13
Contractor & Processing charges 445.97
Freight & other selling expenses 1,953.74
Other Expenses - P & A 1,425.00
Expense total : 24,604.91
As earlier it is mentioned that the company so much amount of capital expenses in the
production process. As company produces different types of products so the capital
55