WORKING CAPITAL MANAGEMENT: From the perspective of

Steel Industry in India

Submitted by:

TANISHA NEB (22021321147)

SWEEKRITI SAPRA (2202132144)
VEDANT DAWALE (22021321153)
SHASHWAT TOTADE (22021321151)

in partial fulfilment for the award of the degree of

BACHELOR OF BUSINESS ADMINISTRATION (BBA)

SYMBIOSIS CENTRE FOR MANAGEMENT STUDIES, NAGPUR

 SEPTEMBER, 2024

DECLARATION

I undersigned, hereby declare that the project titled WORKING CAPITAL MANAGEMENT: From the
perspective of Steel Industry in India submitted in partial fulfilment for the award of Degree of Bachelor of
Business Administration of Symbiosis International (Deemed University) is a bonafide record of work done
by me under the guidance of Dr. Zericho Marak, Symbiosis Centre for Management Studies - Nagpur. This
report has not previously formed the basis for the award of any degree, diploma, or similar title of any
University.

20th September 2024

TANISHA NEB (22021321147)

SWEEKRITI SAPRA (2202132144)

VEDANT DAWALE (22021321153)

SHASHWAT TOTADE (22021321151)

 CERTIFICATE

This is to certify that the report titled WORKING CAPITAL

MANAGEMENT: From the perspective of Steel Industry in India
being submitted by Tanisha Neb, Sweekriti Sapra , Vedant Dawale
and Shashwat Totade , in partial fulfilment of the requirements for
the award of the Degree of Bachelor of Business Administration, is a
bonafide record of the assessment done by Tanisha Neb, Sweekriti
Sapra , Vedant Dawale and Shashwat Totade of Symbiosis Centre
for Management Studies - Nagpur

Dr. Zericho Marak

Assistant Professor
 Acknowledgements

Through this acknowledgement I express my sincere gratitude towards all those people who
helped me in this project, which has been a learning experience.

This space wouldn’t be enough to extend my warm gratitude towards my project guide Dr.
Zericho Marak for his efforts in coordinating with my work and guiding in right direction.

I escalate a heartfelt regard to our Institution Director Dr. Sameer Pingle for giving me the
essential hand in concluding this work.

It would be injustice to proceed without acknowledging those vital supports I received from
my beloved classmates and friends, without whom I would have been half done.

I also use this space to offer my sincere love to my parents and all others who had been there,
helping me walk through this work.

Tanisha Neb
Sweekriti Sapra
Vedant Dawale
Shashwat Totade
 TABLE OF CONTENTS

Sr No. Topics Page No

1 Qualitative Analysis
2 Literature Review
3 Research Methodology
4 Comments
5 Conclusion
QUALITATIVE ANALYSIS

Inventory management or working capital management is the management of one of the

principal activities of a manufacturing industry. Inventory management has a main functional
objective that is to maintain the perfect balance of the inventory level. But while maintain this
level, it leads to a contradictory situation, first to minimize the inventory level which can
reduce cost but can increase the probability of inventory shortage and not able to meet the
demands. On the other hand, increasing the level of inventory or having excess cab increase
the cost of storage and also the opportunity cost of alternative capital investment. The three
different components of cash conversion cycle i.e. DSO,DIO and DPO can be managed to
increase the profits and stimulate the growth of the company.

Steel is used everywhere- looking around ourselves, there are around 3 to 4 things which use
steel or some other type of metal. Therefore, this manufacturing industry is of immense
importance and is used on a very large scale. From small products like semiconductors to the
tallest building the world all use steel, making the product ten times stronger. The steel
industry of India is in an upward trend. India is the second largest producer of crude steel in
the world. The output was 125.32 MT of crude steel and 121.29 MT in FY23. This growth is
driven by the availability of iron ore and therefore cost-effective production. Tata Steel is one
of the largest steel producers in the world with a presence over 50 countries including Europe
and southeast Asia. In terms of sustainability, tata steel is working towards achieving net
zero emission by 2045. For this they have undertaken certain measures like use of scrap for
steelmaking, use of alternate fuels such as natural gas and hydrogen and also the deployment
of carbon capture technologies. But a few of its business decisions are its drawback like the
acquisition of corous an UK based steel company which turned out to be a hassle for Tata
steel. JSW Steel is one of the fastest growing steel companies in India. It is also ranked
second in India behind tata steel. It functions in both upstream and downstream steel sectors.
This gives it an additional advantage and the company also has strong distribution channels
like JSW shoppe and JSW explore. JSW is also growing at exponential rate and in 2024,
JSW is set to build a steel plant in Jagatsingpur which will have a production capacity of 13.2
million tons and also create around 30,000 jobs. Lloyd steel is relatively small player in the
steel industry of indicate only problem with Llyod it faces the issue of securing raw materials
and compete with its competitors. SAIL or steel authority of India is one of the largest and
also oldest steel making company of India. While SAIL is integrated in steel making, it also
has a research and development centre. It also has a Maharatna status in India that helps it in
operational and financial autonomy. The final company for our analysis is Bharat Forge, it is
a company involved known for forging and not manufacturing. But Bharat forge does
produce steel but not in the form of above four companies. Therefore, it can be said that the
Indian steel industry is characterised by a mix of different sizes of players ranging from
Llyod to tata steel. Each company has its advantages and disadvantages on qualitative levels.
But the sector is characterised by immense growth. Like in Julym2023, union minister Mr
Jyotiraditya Scindia announced that Japan is eager to invest in many sectors including steel.
While these are the qualitative analysis, the companies are analysed financially below.

LITERATURE REVIEW

Gill, A., Biger, N., & Mathur, N. (2010Found the relationship between working capital
management and firms’ profitability with the help pf sample of 88 American manufacturing
companies listed on New York stock exchange. The findings of this paper were in line with
the previous findings referred by the author. The finding was that slow receivables and low
profitability are correlated. Further slow accounts receivable is reasoned due to how the
managers act in term of accounts receivable. Ashok, K.,Vijay, J.,(2019) Stated that they
referred 10 papers in which it was stated that profitability and working capital is inversely
related. But the paper states otherwise. After calculating they came to the inference that
company does not have to let go one to gain the other. They also concluded that there is no
universal solution to this trade-off. Thomas, 2021 did an analysis on the steel industry of
India. The author concluded that the Indian economy is growing and the steel industry is
growing along. Also, the author said that the competition is higher in steel sector
comparatively. Prashant, K., (2014) analysed on the financial health of SAIL the paper also
mentioned the importance of ratios and how the success of business depends depend largely
on effective financial management practices. The paper was focused on Altman Z score and
calculated it for SAIL. The Z score predicts if the company needs to go towards bankruptcy
in the upcoming years. In this paper, the Z score of SAIL was between 3.5 to 7.8 and
predicted that bankruptcy is unlikely to occur in next two years

RESEARCH METHODOLOGY

3.1 Source of Data

For this research, financial data has been collected for 5 major listed steel companies in India
from 2018 to 2024. Only listed companies have been chosen for the study because of the
wide and easy availability of data.

The idea to choose banking and finance related companies have been dropped as their
financial reporting requirements are significantly different from non-financial firms.
Additionally, they are governed by several statutes including the Companies Act 2013. The
idea is to keep the data analysis simple for better understanding.

The statements of financial accounting have been taken from the companies’ websites for
analysis.

3.2 Measurements

3.2.1 Liquidity Ratios

The current ratios and quick ratios have been calculated in order to find out the short-term
liquidity positions of the companies and to know it’s abilities to pay short term debts.

Current ratios = current assets/current liabilities

Quick ratios = Quick assets/ current liabilities

3.2.2 Net Working Capital

It is calculated to measure the financial wellbeing of the companies at the same time their
ability to meet short term obligations.

Net working Capital = current assets – Current liabilities

3.2.3 Altman’s Z Score

It is calculated to find the company’s probability of bankruptcy within 2 years. It is an

important measure used by investors to check the creditworthiness of companies.

Z-score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E

Where:

A = Working Capital / Total Assets

B = Retained Earnings / Total Assets

C = Earnings Before Interest & Tax / Total Assets

D = Market Value of Equity / Total Liabilities

E = Sales / Total Assets

3.2.4 Cash Conversion Cycle

It helps to find out how companies manage cash flows and make financial decisions. It
measures the efficiency of a company’s operations and management.

CCC = DIO + DSO - DPO

DIO: Days Inventory Outstanding

DSO: Days Sales Outstanding

DPO: Days Payable Outstanding

DIO: (Average Inventory ÷ Cost of Goods Sold) × 365 Days

DSO: (Average Accounts Receivable ÷ Revenue) × 365 Days

DPO: (Average Accounts Payable ÷ Cost of Goods Sold) × 365 Days

3.2.5 Regression Analysis

It is used to analyses the relationship between a dependent and an independent variable. This
statistical tool tells us that how the independent variable affects the dependent variable using
certain metrics such as R value, Adjusted R square value etc. Regression analysis is used for
practicing trends, risk assessment and understanding the impact of one variable on another.
There are also certain types of regressions. These are linear regression, logistic regression,
polynomial regression etc.
COMMENTS ON WORKING CAPITAL METRICS

CURRENT RATIO

1. TATA STEEL

Although being one of the top names in the steel industry and overall, tata stell current
asset ratio states otherwise. reveals a company that has been finding it difficult to
maintain adequate liquidity over the recent past. The current ratio has been erratic from
2018 to 2024 only registering as high as 1.35 in the year 2018 but started on a consistent
decreasing trajectory to 0.73 in 2023 and 0.72 in 2024. This could signify that the
company will not be able to settle the current debt using the current liabilities. Some
increase of inventories and cash and cash equivalents are not matched by the current
asset’s growth. Given this trend in the current ratio measure, there are possible liquidity
pressures that Tata Steel may develop.

2. JSW Steel

The current ratio during the years 2018 to 2024 has been more than or less than 1 thus
reporting this company has more current liabilities than current assets all the time. This
implies a likelihood of default on some short-term obligations. The company's short-term
debt has however increased very significantly to ₹49,454 crore in 2024 due to increased
short term loans and trade payables. Lower current ratios in the years that followed also
indicated that there was a time when asset efficiency had to improve, or liabilities had to
contract in order to avoid liquidity risks in the coming future.

3. Llyod Steel

There is an improvement in the liquidity of the company over the years, with an emphasis
on 2024. The current assets have gone up tremendously total current assets stood at
₹448.28 crores in the year 2024 reason being increased trade receivables and cash
balances. These results indicate that over the years, Lloyds Steel has made great strides
towards improving liquidity and hence it is in a position to adequately meet its short-term
obligations without delay. There are some trends compared to the previous years that
should be paying attention in the coming periods such as the rapid growth of the current
ratio compared to its utilization.

4. Steel Authority of India

Although SAIL is one of the oldest and greatest steel manufacturers of India. But liquidity
is one of the main issues that persists. The company’s current liabilities increased
continually to stand at ₹53425.48 crore by 2024. But the company’s current ratio is below
than 0.90(2024). The ratio is increasing but at a slow rate. The industry’s average current
ratio has somewhat improved over the past couple of years as the one for 2021 stood at 0.77 on
a scale of 0 to 1 but this level is still well below what any reasonable level expected of firms in
any industry under normal conditions in addressing their short-term debts.

5. Bharat Forge

Bharat Forge has shown a significant positive growth in current assets ratio as the current
assets are showing an upward trend over the years. The company’s current asset has been
growing over the years and 2024 stands at the value of ₹7,602.87 crore, with complemented
factors such as growth in trade receivables and current investments. Another feature under
current liabilities was a surge in short-term borrowing amounting to ₹3142.50 crore in 2024, an
increase from ₹1166.60 crore recorded in 2018, and underlying factors of true increase in total
current liabilities. All the same Bharat Forge has able to maintain a healthy current ratio and
going by the current assets held as a proportion of the current liabilities. The current ratio as of
2024 is 1.58 which is lower than the peak of 1.67 recorded in 2022, but still shows healthy
liquidity levels for the company over the years.

ACID TEST RATIO

1. TATA steel

Over the years, the acid test ratio, has not being near the ideal ratio of 1:1. The Acid Test
Ratio has persisted below one over the years because of an underperformance in the
ability of the company to own assets that are highly liquid, particularly in the short run. In
2024 the Acid Test Ratio value is an incredibly low value of 0.24; which seems to follow
a bullying strategy of 2023 (0.28) and 2022 (0.21). . This means that Tata Steel can
encounter considerable problems to meet its short-term obligations unless it manages to
sell its inventorial stock or other non-liquid assets. The firm could have to review its
liquidity management policy in order to maximize financial stability.

2. JSW Steel

JSW Steel's most recent financial records paint a somewhat unsettling picture of the
company's liquidity situation over time, particularly when it comes to the liquid asset’s
ratio. The acquisition or replacement of the most liquid assets, which include cash and
trade receivables but exclude inventory, has consistently been below 1.0, suggesting that
the company may struggle to pay down its short-term obligations with the available
funds. Furthermore, the ratio dropped to concerning levels—it was 40% in 2024
compared to 60% in 2023—so that the company's current liquid assets could only cover
40% of its current obligations. Even while cash and trade debtors have not risen
proportionately, such backwardness indicates a trend towards higher dependency on
inventory and maybe other non-cash assets.

3. Lloyds Steel

The ability of the acid test ratio to analyse the company's financial urgency shows that
Lloyds Steel's liquidity situation has improved recently. The acid test ratio has exhibited a
positive skew throughout, with 2022 (3.61) and 2021 (3.71) showing especially high
values. The firm was able to sustain these high numbers, for example, because it had
relatively liquid assets ,that is, more current assets than current liabilities which led to
fulfil all of its short-term obligations without having to liquidate any inventory. The acid
test ratio for the year under review is 2.48, which is quite modest given that the acid test
reached its peak.

4. SAIL

As mentioned in the above ratio, SAIL still proven to have liquidity issues. Cash and cash
equivalent along with accounts receivables are further defined as non-inventoried assets
in the context of the working capital’s acid test ratio which has remained below 1.1 over
the period considered making SAIL unable to meet its short-term liabilities. For instance,
in 2024, the ratio is 0.29, better than that of 2023 (0.20) but still rather inadequate. The
only ‘solution’ to be applied in such a crisis is liquid assets where only 29% of SAILs
current liabilities are liquid assets in this case. It has been on the increase throughout the
years but has not grown to 0.4 since the year 2018. This indicates that SAIL is likely to
have a hard time paying off its current liabilities without the use of stock sales or other
non-current assets.

5. Bharat Forge
 Bharat Forge has shown a positive liquidity with an acid test ratio of more than 1.0
indicating a positive ability to satisfy short term liquidity. It peaked in 2022 at 1.38,
implying that there were healthy liquid assets to noncurrent liabilities, even so, the figure
declined slightly to 1.31 in 2024. Even then, the company makes sure at least trade
receivables, cash, or current investments make up for significant amounts of the weight
that needs to be satisfied immediately, and this has been evident across time reasonably.

CURRENT ASSETS TO FIXED ASSET RATIO

1. TATA Steel

Evaluating the financial performance of Tata Steel over the years, one sees a persistently
low CA to FA ratio. This means that in comparison to that the current assets, the company
has invested a large share of its assets towards fixed assets. The highest ratio was seen in
2018 at 0.45 and as at 2024 it is at 0.29. This indicates that Tata Steel is very much capital
oriented introducing such business practices and production orientation which drives
investing in fixed assets to a large extent in both tangible and intangible facilities
including machines and infrastructure.

2. JSW Steel

the financial performance of JSW Steel appears to be relatively low and almost in the
same trend. The CA to FA ratio has been below 1.0 throughout the years with the highest
being 0.57 in 2023 and the lowest being 0.47 in 2024. This ratio implies that JSW Steel has
more fixed assets than current assets, thus being a capital-heavy company as it is dependent
on long term investments for carrying out its day-to-day activities and future expansion. This
leaves a low ratio of CA to FA suggesting that the company would have less extent of
liquidity for servicing short term obligations. This is as a lot of its assets would be engaged in
non-liquid fixed assets.

3. Llyod Steel
Over the years, Lloyds Steel has maintained a very high CA to FA ratio with the
maximum in 2018 being 42.93 which has gradually decreased to 5.09 by 2024. This steep
reduction in CA/FA ratio speaks volumes as to the fact that current assets of the
organization may still yet be far above those in fixed assets although this is no longer the
case. When a ratio is high, there will be a massive liquidity but on the contrary such
excessive time especially in the old ratios It is logical that when a ratio is high, there will
be a massive liquidity but on the contrary such excessive time especially in the old ratios.

4. SAIL

The SAIL's financial data provides an indication that the ratios of current assets to fixed
assets have been on an upward crawl over the years. This ratio rose from 0.38 in 2018 to
0.61 in 2024, which means that the company has been increasing its current assets relative
to fixed assets in order to improve its liquidity. SAIL is still a capital-intensive space with
a lot of investments going into tangible and fixed assets. However, the rising ratio
indicates that there is an improvement in the operational liquidity of the company without
compromising on the economic investments.

5. Bharat Forge

The financial data of Bharat Forge shows that there has been steady growth in the CA to
FA ratio of the company over the years. It gives the relationship of current assets with
fixed assets, and measures liquidity as well as asset productivity. Thus, the ratio then
Climbed up sharply to 2.15 in 2024 when compared with past years including 2020 with
1.15 and 2018 1.21. This means that Bharat Forge was increasing its liquid assets faster
than its long-term assets or fixed assets that permitted the company to generate more cash
quickly to meet short term requirements or carry out short term operations with less
dependency on long term commercial properties. The increased ratio of the company in
the year 2024 also suggests that there could have been policy changes that necessitated
holding more liquid assets or greater efficiency in working capital management.

CHANGES IN CURRENT ASSET TO FIXED ASSET

1. TATA STEEL
 CA/FA (Current Assets to Fixed Assets) ratio for the Tata steel has depicted downward
trend from 2018 to 2024, starting a little high level than shown in the above table with 0. 448
in 2018 and sliding down to 0. 294 in 2024. This trend portrays a negative sign since it is a
clear declining trend of current assets as a percentage of fixed assets showing that the
complexity of the company’s ability to sell off or liquidate current assets to meet short term
obligations has been heightened. For the given year, the ratio has been always below 0. 3 in
the last three years, meaning that for the company in question, which is Tata Steel, has been
operating in suboptimal level of operational efficiency, specifically with regard to its ability
to meet the short-term assets with short-term liabilities. This has posed a major issue, given
that a sound CA/FA ratio is important in maintaining operational agility within an industry
that is capital intensive more so in steel production. To avoid the problems with the financial
stability of the company, investors should pay attention to other financial ratios and the
tendency of decreasing the given ratio might signal some possible problems with the liquidity
of the company that can influence its further work and profitability.

2. JSW Steel

It is observed that the CA/FA (Current Assets to Fixed Assets) ratio of JSW Steel has
volatility at 0. 364 in 2018 and of 0. I 574 in the year 2023 and then decrease to 0. 476 in
2024. This performance shows a gradual increase in the overall combined liquidity and
operating versatility until the recent downside raises the doubt on the company’s short-
term solvency. A ratio of below 1 is normally observed where companies invest heavily
in fixed assets, such as in steel manufacturing industry, and the decline in 2024 may point
to some solvency problems that investors need to have in their radar. All in all, both
higher and lower ratios of CA/FA will be detrimental for JSW Steel’s financial condition
and lead to instability in the future.

3. Llyod Steel

the CA/FA ratio for Lloyds, which gives the ratio of relative volume of the companies'
current assets to fixed assets, precipitously declined from 42.93 in 2018 to 5.09 in 2024,
meaning liquidity for the company has dropped by a large percentage. This current
implication is that the reduction in the company's liquidity over the years demonstrates
that even though the company was once in a good liquidity position, it has developed the
reverse trend over the last few years, where it depends increasingly on fixed assets
compared to the current assets. Generally, anything above 5 is positive; however, based
on the trend, there is emerging risk because the ratio has diminished sharply, and this
could also cause alarm over its ability to service short-term obligations with the current
assets. The trend in this scenario should be viewed alongside other ratios in ascertaining
the health of the company's financials and the running of the operations since a low
CA/FA ratio might indicate the future onset of potential liquidity problems.

4. SAIL

The CA/FA ratio for SAIL has shown an upward trend over the years from 2018 to 2024,
increasing from 0.385 in 2018 to 0.610 in 2024. This signifies an improvement in
covering short-term liabilities by current assets that translates into better liquidity and
operational flexibility. The steady increase in the ratio throughout the years reflects how
SAIL has been able to manage its asset structure quite well which is important for any
firm operating in a capital-intensive steel industry like SAIL. A ratio above 0.6 is
typically considered good since it indicates that the company is relatively more capable of
meeting its short terms obligations. Hence this trend gives hope to investors and other
stakeholders because it shows that there is a stronger financial position and lower chances
of liquidity related problems.

5. Bharat Forge

CA/FA Ratio of Bharat Forge has moved sharply up between the years 2018 and 2024.
This was a period between when CA/FA stood at 1.22 in the year 2018 to 2.15 in the year
2024. Such an enormous upward jump speaks volumes about the liquidity situation of the
company and is indicative that Bharat Forge, more than ever, is capable of liquidating its
current assets to meet its short-term debts. Given that the manufacturing industry, like
most industries in general, remains capital-intensive, a ratio above 2 is very healthy for
capital-intensive sectors, reflects effective asset management, and the operational
flexibility. The growth from year to year may also, at times, reflect better stability in
financial terms and reduced risks of potential liquidity problems that may further make
Bharat Forge a very attractive prospect for investors and stakeholders seeking a robust
sound performance in the area of finance in the manufacturing sector.

CASH CONVERSION CYCLE

1. TATA Steel

From 2018 to 2019: The trend of the CCC is improved and becomes positive from
negative value in 2018. This makes it clear that the company has improved on its ability
to manage working capital in its operation; a fact that probably has affected Tata Steel.

2019 to 2020: The CCC is again lower showing that the company enhanced the
management of working capital.

2020 to 2021: The working capital requirement increases by a larger amount and this
may indicate a reversal in the position of the efficiency of CCC. This could be as a result
of occurrence of factors such as the COVID-19 pandemic or alterations in the business
strategies.

2021 to 2022: The ratio of the CCC declined meaning that working capital management
has improved again.

2022 to 2023: The reduction in CCC show that there is an improvement in the working
capital efficiency.

2023/2024: The overall Performance of the CCC was relatively high, however indicating
a slight blip in the efficiency of working capital management. Though it has risen slightly,
it is still lower than the previous year’s rate, or more so this index shows that the menace
is still low compared to previous years.

Overall Assessment:
However, over the period, the CCC has revealed an increasing trend in case of Tata Steel
though here and there sometimes variation has been observed. This goes a long way to
indicate that the company has well been in a position to enhance the working capital
management. Nonetheless, the CCC has only gone up slightly in the year 2024, which
needs to explore further so that possible grounds to amend or improve are founded.
2. JSW Steel

From 2018 to 2019: The decline in CCC indicates a marked degree of improvement in
working capital management.

In 2019 to 2020: There was a small increase in CCC, which denotes a slight deterioration
in working capital efficiency.

In 2020 to 2021: An increase in CCC again indicates a deterioration in working capital

efficiency. In 2021 to 2022: A significant reduction in CCC indicates an increase in
working capital management efficiency.

In 2022 to 2023: A substantial decrease in CCC indicated an increase in working capital

efficiency.

In 2023 to 2024: CCC increased, but was still below several years of readings.

Overall Assessment
There were variations in the working capital management over the span of the years, but
Bharat Forge has shown a general positive trend in performance of its CCC. This
indicates that Bharat Forge was relatively successful in improving working capital
management in terms of working capital relative to sales over these years. The increase
in CCC in 2020 and 2021 would need to be studied further to determine underlying
reasons and identify opportunities for improvement in working capital management.

3. Llyod Steel

From 2018 to 2019, the CCC shows a notable decrease, displaying clearly better
management of working capital.

From 2019 to 2020, the CCC line sees a slight increase, indicating a very small setback
regarding working capital efficiency.
Its value continues to increase from 2020 to 2021, signifying that the company’s working
capital efficiency has continued to decline.

From 2021 to 2022, we see a large increase in the line for CCC, which suggests that the
efficiency regarding working capital management was severely set back. The increase
could also be due to the COVID-19 pandemic or changes in business operations.

From 2022 to 2023, we see a significant decrease in CCC again, suggesting that whatever
happened may have been addressed and we can recover working capital efficiency.
Last, from 2023 to 2024, the CCC increases slightly, however remains relatively low
compared to years past.

Overall Assessment
Lloyds has demonstrated historically that its CCC has headed in a generally positive
direction, though the dramatic increase in CCC in 2022 raises a red flag that should be
explored further to understand and identify potential areas for improvement.
4. SAIL

From 2018 to 2019, the CCC figure is slightly higher, thereby pointing to a slight poor
efficiency in the management of working capital.

2019 to 2020: There was a reduction in the CCC implying that working capital was well
managed in the periods.

2020 to 2021: This is an indication that there is a reduction in the level of CCC which
indicates that there is better efficiency on working capital.

2021 to 2022: The CCC rose, which shows that there is poor management of working
capital in terms of minor setback.

2022 to 2023: Here the trend of decrease becomes little broader which indicates that
working capital efficiency is improving.
 2023-2024: The CCC was hiked a notch though it’s considerably low than in the
previous years.

Overall Assessment:
From the analysis made, there has been small oscillation in some period of time, but on
the average SAIL seems to be improving in its CCC. Thus, it can be seen that the firm has
done a good job in respect of working capital management. Nonetheless, the CCC was
significantly higher in 2024 and this phenomenon needs to be researched in details to
identify the causes for such growth and, specifically, to define the possible directions for
further enhanced.

5. Bharat Forge

2018 to 2019: CCC is highly decreased indicating high scale improvement in WC

management.

2019 to 2020: CCC increased. This indicates that there is a downward trend in the
working capital.

2020 to 2021: CCC increased once more strongly. It indicates that the deterioration pace
in WC efficiency continues.

2021 to 2022: CCC decreased significantly. It indicates a turnaround in the performance.

2022 to 2023: CCC moves upward, which indicates that the management was quite
minorly failing at working capital efficiency.

2023 to 2024: CCC lowered, meaning once again the management improved working
capital.

Overall Assessment
Though displaying fluctuation, Bharat Forge has been consistent and in the trend with a
positive trend in its CCC over all the years. Its performance would suggest that the
company has improved working-capital management. The increase in CCC in 2020 and
2021 requires further study of reasons and sources of improvement.

REGRESSION ANALYSIS

This regression analysis examines how various factors affect the Return on Assets of 15
Indian steel manufacturing companies over 20 years. The aim was to understand what
affects the profitability in the steel industry, with an emphasis on asset turnover ratio,
inventory turnover ratio, and current ratio as independent variables. Certain control
variables were also considered to understand the impact of independent variable on the
dependent variables. The control variable included were debt to equity ratio, company
growth and size calculated using sales.

Key Findings:

1. R Square (0.25): This means that 25% of the changes or variance in profitability
(ROA) can be explained by the factors considered in this model. While not very high, it
gives enough insights in the steel industry.

2. F-value (14.26)(p-value = 5.27,E-14): The model as a whole is statistically significant.

The independent as well as control factors jointly affect the independent variable.

Individual Factors:

1. Asset Turnover Ratio (positive impact, p-value = 0.000018):

The higher the asset turnover, the better as it signifies higher profitability. This means
that when steel companies use their efficiently, they earn more profits.

2. Current Ratio (negative impact, p-value = 0.000124):

A high current ratio actually reduces profitability as mentioned above in qualitative
analysis. This suggests that having too much liquidity or stock may hurt the company’s
financial performance, as this can increase holding cost.

3. Inventory Turnover Ratio (negative impact, p-value = 0.000685):

 Lower inventory turnover meaning holding too much stock for too long hurts
profitability. In the steel industry, managing stock should be done so that the capital is not
tie up too much money in inventory, which lowers overall profits.

Control Variables:

1. Debt to Equity Ratio (not significant):

The amount of debt relative to equity does not have an important effect on profitability in
this model.

2. Growth (positive impact, p-value = 0.015346):

Companies that grow more see higher profits. This could be due to expanding production
or sales, which leads to better financial performance.

3. Size (positive impact, p-value = 0.001003):

Larger organisations are more profitable because they can take advantage of economies of
scale, which means they can cut costs as they grow.

Altman Z Score

1. TATA Steel

The financial data for Tata Steel, with an Altman Z-score of 1.32, places the company in
the "distress zone," signalling a higher risk of financial distress or potential bankruptcy if
corrective actions are not taken. Despite strong revenue from operations of ₹1,39,197.60
crore and substantial retained earnings of ₹90,788.32 crore, the low Z-score is primarily
driven by the company’s weak market value of equity. To improve its financial health,
Tata Steel may need to focus on reducing its liabilities and improving its equity position.

2. JSW Steel
The financial data for JSW Steel, with an Altman Z-score of 1.48, indicates that the
company is in a zone of heightened financial risk. . Despite strong revenue from
operations of ₹1,33,609 crore and substantial retained earnings of ₹77,364 crore, the
company’s low market value of equity at ₹950 crore, compared to its significant total
liabilities and current liabilities of ₹49,454 crore, contributes to the low Z-score.

3. Llyod Steel

The financial data for Lloyds, with an Altman Z-score of 10.06, indicates a highly
favourable financial position and suggests that the company is at very low risk of
financial distress. A Z-score above 3 generally signifies strong financial health, and
Lloyds' score of 10.06 is far beyond that threshold, reflecting excellent liquidity,
solvency, and overall financial stability.

4. SAIL

The financial data for Steel Authority of India (SAIL) reflects a company in a financially
vulnerable position, as indicated by its Altman Z-score of 1.37. This score places SAIL in
the negative zone suggesting an elevated risk of financial instability or potential
bankruptcy if improvements are not made. The company must focus on reducing
liabilities, improving liquidity, and increasing its equity value to enhance its Z-score and
reduce financial risks. While SAIL has a solid asset base, the financial pressure from
liabilities needs to be addressed to avoid further distress.

5. Bharat Forge

Bharat Forge's financial data, particularly its Altman Z-score of 1.91, indicates a
somewhat vulnerable financial position. The Z-score, which measures the likelihood of
bankruptcy, suggests that while scores below 1.8 signal high risk, those between 1.8 and 3
reflect potential but not immediate danger. With a score of 1.91, Bharat Forge is in the
"grey zone," meaning it isn’t facing immediate financial distress but should monitor its
financial health closely.
CONCLUSION

This study focuses on the steel industry of India. The five major players of the steel
industry were analysed. This analysis was done using working capital metrics such as
ratios including current asset ratio, acid test ratio and fixed asset to current asset ratio.
Cash conserving cycle and Net operating cycle are also two important metrics which were
used as well as regression analysis were used. The companies were thoroughly analyses
on these metrics and each company performed well in different sectors and had drawback
in other. For example, TATA steel has liquidity issues but also underperformed in Altman
Z score. On the other hand, Llyod steel is doing well in Z score as well as liquidity.

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