Download - Debtors Management @ Tata Steel
-
8/9/2019 Debtors Management @ Tata Steel
1/140
A STUDY ON
DEBTORS MANAGEMENT
AT
TATA STEEL&
ITS COMPARISON
WITH OTHER KEY PLAYERS
A Project Report submitted in partial fulfillment of the requirement for
BACHELOR OF BUSINESS ADMINISTRTION(Affiliated To Ch.Charan Singh University, Meerut)
2007-2010UNDER THE GUIDANCE OF
Internal Supervisior Submitted by
Mr.TUSHAR JINDAL(faculty) Rahul
IMS Ghaziabad 9351722
External Supervisior
Mr. K S M MATHEW
INSTITUTE OF MANAGEMENT STUDIES
GHAZIABAD
1
-
8/9/2019 Debtors Management @ Tata Steel
2/140
DECLARATION CERTIFICATE
This is to certify that the work presented in the project entitled
DEBTORS MANAGEMENT in partial fulfilment of the requirement
for the award of degree of BBA, INSTITUTE OF MANAGEMENT
STUDIES,GHAZIABAD, is an authentic work carried out under my
supervision and guidance.
To the best of my knowledge, the content of this project does
not form a basis for the award of any previous degree to anyone
else.
Date: (Guides
name &signature)
Department
of Management
BBA IMS,
GHAZIABAD
2
-
8/9/2019 Debtors Management @ Tata Steel
3/140
CERTIFICATE OF APPROVAL
The foregoing thesis entitled DEBTORS MANAGEMENT at TATA
STEEL AND ITS COMPARISON WITH OTHER KEY PLAYERS, is hereby
approved as a creditable study and has been presented in
satisfactory manner to warrant its acceptance as prerequisite
to the degree for which it has been submitted.
It is understood that by its approval, the undersigned do not
necessarily endorse any conclusion drawn or opinion
expressed therein, but approve the project for the purpose for
which it is submitted.
Co-ordinator- BBA Academic Co-ordinator
DirectorIMS-GZB.
3
-
8/9/2019 Debtors Management @ Tata Steel
4/140
Acknowledgement
It is my privilege to work on the project Debtors managementat Tata Steel Ltd and its comparison with other keyplayers. At the very outset, I am obliged to TATA STEEL forthe permission to undertake training program and provide mewith the basic infrastructure and facilities.
I express my sincere sentiments of gratitude to Mr. K S MMATHEW (Head Sales & EPA A/c) who guided me throughoutthis project. I would also like to thankMr. PRANAV JHA (Sr.Manager Sales & EPA A/c) for his continuous assistance withoutwhich this project would not have been a success.
It is the spirit of being associated with the Finance andAccounts department particular and Tata Steel in general whoinspired me to complete this project successfully.
I am indebted to my mentorMr. K B SINGH for extending hisuntiring guidance to me, by constantly discussing the projectmatter and helping me in clarifying my thinking in several
pertinent issues and providing a meaning full insight into thesubject.
Last but not the least; I also thank Ms.VANDANA KHEMKA(Manager Sales & EPA A/c) & Ms. PADMA MOHANTY(Accountant) who has been a source of inspiration through their
constant guidance, personal interest, encouragement and help
4
-
8/9/2019 Debtors Management @ Tata Steel
5/140
& has made my stay in the company such a pleasant memory.In spite of their busy schedule they have always found time toguide me through the project. I am also grateful to them forreposing confidence in my abilities and giving me the freedom
to work on my project.
I owe my deep sense of gratitude and sincere thanks to all ofthem
Thank you.
TABLE OF CONTENTS
EXECUTIVE SUMMARY
1
CHAPTER 1
INTRODUCTION
1.1.1 Account receivable-definition.........
5
1.1.2 Debtors management.....
6
1.1.4 Need for trade credit...
8
1.1.5 Determinants of size of receivables.9
5
-
8/9/2019 Debtors Management @ Tata Steel
6/140
1.1.6 Cost & benefits associated with receivable
management.... 11
1.1.7 Expert view ....
13
Company Profile
1.2.1 History of steel.....
14
1.2.2 Indian Steel Industries ....
16
1.2.3 Company Overview .....
19
1.2.4 Tata steel stand alone .....
45
1.2.5 Overview of the finance division of Tata steel.
. 57
1.2.6 Sundry debtors section......
58
CHAPTER 2
RESEARCH METHODOLOGY
2.1 Type of Research..
60
2.2 Objective of the study..
60
2.3 Scope of Study .
60
2.4 Sources of data collection.
60
6
-
8/9/2019 Debtors Management @ Tata Steel
7/140
2.5 Sampling..
60
CHAPTER 3
CREDIT DECISION
3.1 Tata steels credit monitoring and control
65
3.2 Operational working at Tata steel for managing
debtors.. 68
3.3 Channel financing...
70
3.4 Credit assessment modules..
72
3.5 Understanding the debtors process system.....
84
CHAPTER 4
COMPARATIVE ANALYSIS OF TATA STEEL WITH OTHER STEEL COMPANY
4.1 Tata steel vs. Steel authority of India limited (sail).....
89
4.2 Tata steel vs. Arcelor Mittal (Mittal steel)
95
4.3 . Tata steel vs. Jindal steel & power ltd ..
99
CHAPTER 5
TATA STEEL & RECESSION
7
-
8/9/2019 Debtors Management @ Tata Steel
8/140
5.1 Tata steels game plan to beat recession...
. 108
5.2 After
recession........................ 109
5.3 Articles from the
newspapers...... 111
CHAPTER 6
CONCLUSION AND SUGESSTIONS
6.1 Suggestion..
113
6.2 Limitation of the Study..
114
6.3 SWOT analysis of debtors management process at Tata
steel 115
6.5 Views of debtor management expertise... 117
6.4Conclusion.... 118
REFERENCE
ANNEXURE - Bibliography
8
-
8/9/2019 Debtors Management @ Tata Steel
9/140
Executive Summary
The project deals in DEBTORS MANAGEMENT AT TATA STEEL & ITS
COMPARISON WITH OTHER KEY PLAYERS. Receivable management is one of the
most important aspects of the organization, as it deals with the management of the
outstanding. The profit of the company mainly depends on the accounts receivables.
Therefore it needs a careful analysis and proper management.
Debtors occupy an important position in the structure of current assets of a firm. They are
the outcome of rapid growth of trade credit granted by the firms to their customers. Trade
credit is the most prominent force of modern business. It is considered as a marketing tool
acting as a bridge for the movement of goods through production and distribution stages to
customers.
Till few years back, Tata Steel had a very strict policy of selling against advance payments.
That was an era of controlled economy. However, with an increasing domestic and
international competition, Tata Steel could no longer afford this policy, in order to maintain
its premium position. Further in order to capture a greater amount of market share, it was
compelled to go by the industry norms and thus it ushered into the new era of credit sales.
This resulted in credit sales going up significantly. A credit limit was sanctioned to everycustomer. The customers were required to pay the outstanding amount on the due date.
9
-
8/9/2019 Debtors Management @ Tata Steel
10/140
INTRODUCTION
10
-
8/9/2019 Debtors Management @ Tata Steel
11/140
1.1What is an account receivable?
Accounts receivable is an accounting transaction which deals with the billing of customer
who owes money to a person, company or organization for goods and services that has been
provided to the customers. In most business entities this is typically done by generating an
invoice and mailing or electronically delivering it to the customer, who in turn must pay it
within an established timeframe called credit or payment terms.
An example of a common payment term is Net 30, meaning payment is due in the amount of
the invoice 30 days from the date of invoice. Other common payment terms include Net 45
and Net 60 but could in reality be for any time period agreed upon by the vendor and the
customer.
On a company's balance sheet, accounts receivable is the amount that customers owe to that
company. Sometimes called trade receivables, they are classified as current assets assuming
that they are due within one year. To record a journal entry for a sale on account, one must
debit a receivable and credit a revenue account. When the customer pays off their accounts,
one debits cash and credits the receivable in the journal entry. The ending balance on the trial
balance sheet for accounts receivable is always debit.
Accounts receivable departments use the sales ledger. Other types of accounting transactions
include accounts payable, payroll, and trial balance.
BOOK KEEPING FOR ACCOUNTS RECEIVABLE
Companies have two methods available to them for measuring the net value of accountreceivables, which is computed by subtracting the balance of an allowance account from the
accounts receivable account.
The first method is the allowance method, which establishes a liability account, allowance
for doubtful accounts, or bad debt provision, that has the effect of reducing the balance for
accounts receivable. The amount of the bad debt provision can be computed in two ways -
either by reviewing each individual debt and deciding whether it is doubtful (a specific
provision) or by providing for a fixed percentage, say 2%, of total debtors (a general
provision). The change in the bad debt provision from year to year is posted to the bad debt
expense account in the income statement.
11
-
8/9/2019 Debtors Management @ Tata Steel
12/140
The second method, known as the direct write-off method, is simpler than the allowance
method in that it allows for one simple entry to reduce accounts receivable to its net
realizable value. The entry would consist of debiting a bad debt expense account and
crediting the respective account receivable in the sales ledger.
12
-
8/9/2019 Debtors Management @ Tata Steel
13/140
1.2 Receivable management CONCEPT
The term receivable management is defined as debt owed to the firm by customer arising
from the sale of goods/ services in the ordinary course of business. The receivable
represents an important component of the current assets of the firm. Receivables may be
known as accounts receivables, trade creditors or customer receivable. When a firm its
products / services and does not receive cash for it immediately, the firm has said to be
granted trade credit to the customers. Trade credit thus creates receivable / book debts, which
the firm is expected to collect in near future. Accounts receivable are thus amounts due from
customers, which bear no interest in essence, a company is providing no cost financing to the
customer to encourage the purchase of the companys product/services.
The extension of credit can be justified only if the increase in the sales and related cash
collections (discounted for the time until collection) exceeds the amount otherwise cash
generated under a cash only policy.
These customer from whom receivable or book debt are to be collected in the future are called
as trade debtors or simply as debtor and represents the firms claim on assets. Trade
debtors are expected to be converted into cash within a short period and are included in the
current assets. Since receivables often accounts for the significance portion of total assets, it
requires careful attention and adequate management. It is skill demanding field because thecustomer has to be bestowed with trust along with a continuous vigilance.
13
-
8/9/2019 Debtors Management @ Tata Steel
14/140
OBJECTIVE OF DEBTORS MANAGEMENT
It is not always possible to sell goods on cash basis only, sometimes other firms in that line
might have establish a practice of selling goods on credit under these circumstances, it is not
possible to avoid credit sales without adversely affecting the sales. Hence the firm is required
to allow the credit sale in order to expand its sales volume. The increase in sales is also
essential to increase profitability. The sales of goods have become an essential part of the
modern competitive economic system. In fact credit sales and receivables are treated as a
marketing tool to aid the sale of goods. Credit sale is generally made in an open account in the
sense that there is no formal acknowledgement of debt obligation through a financial
instrument. As a marketing tool they are indene to promote sales and thereby profits. However
extension of credit involves risk and cost. Management should weigh the benefits as well as
the costs to determine the goals of receivable management.
Thus the objective of receivable management is:
To promote sales and profit until that point is reached where the return on investment
in further funding of receivable is less than the cost of funds raised to finance that
additional credit(i.e. cost of capital)
14
-
8/9/2019 Debtors Management @ Tata Steel
15/140
1.4 NEED FOR GRANTING TRADE CREDIT:
Trade credit is an important marketing tool. A policy of trade credit is followednearly in all capital intensive industries either for sales expansion and /or salesretention. Under any circumstances investment in receivable is growth oriented.
Various factors that favours credit
15
Market factors
CompetitionCustomersrequirement
Recessionary
economic
conditions
Marketing
Tool
-
8/9/2019 Debtors Management @ Tata Steel
16/140
MARKET FACTOR:Market factors like price, forces accompany to grant credit.For example, TATA STEEL whose price is comparatively higher is forced to grant credit inorder to maintain sale.
COMPETITION: In view of stiff competition from both domestic andinternational players, the company is left with no option then to grant credit.
Competition is another vital factor, which affects the credit policy of a firm, and
TATA STEEL is not an exception.
CUSTOMERS REQUIREMENT: As the market has changed to the
buyers market, the customers have become kings. If the customer expects credit and
is worthy of it, he gets it.
MARKETING TOOL: T o push up sales of slow moving products and
encourage bulk purchase of fast moving products, credit plays an effective role in this
context.
RESESSIONARY ECONOMIC CONDITIONS: Liquidity crunch forcesthe company to grant credit.
1.5 DETERMINANT OF SIZE OF RECIEVABLES
Beside sales, a number of factors also influence the size of receivables. The following factorsdirectly or indirectly determine the size accounts receivables.
Level of sales: The most important factor in determining the volume of
receivable is the level of firms credit sales. With an increase in the size of the sales,
it may bring about a proportional increase in the magnitude of receivable.
Credit policies: The firm with the liberal credit policy will have a higher
level of receivable than with a conservative or rigid credit policy.
16
-
8/9/2019 Debtors Management @ Tata Steel
17/140
Terms of trade: The size of receivables also depends upon the term of trade.
The period of credit allowed and rates of discounts given are linked with receivables.
If the credit period allowed is more, the receivable will also be more similarly if the
rate of discount are reasonable, then also the size of the receivable will increase.
Profit: The level of receivables increases as a result of increase in sales.
When sales increase beyond a certain level, the additional cost incurred are less than
the increase in revenue. It will be beneficial to increase sales beyond a point because
it will bring more profit. The increase in profit will be followed by an increase in the
size of the receivable.
Market: It may be necessary for the firm to explore a new market for itsproducts/services. One of the attractive way in which a firm enters a new market is by
giving incentives to the customers in the form of credit facilities. In doing so, the size
of receivable will increase.
Grant of credit: Size of the receivable depends upon the policies and
practices of the firm in determining which customer are to be granted credit.
Paying habit of the customer: The paying habits of the customers also have
a bearing on the size of receivables. The customers may be in habit of delaying
payments even though they are financially sound. In such case, the firm should
remain in constant touch with its customers.
Collection policies:The vigour with which affirm collects its dues from thecustomers also affects its receivables, for if the amounts due are not collected timely;
a firm suffers some financial difficulties, if not losses.
Operating efficiency: The degree of operating efficiency in billing, record
keeping and other function also exercise some influence on a firms credit policy
which in turn influences its receivables.
17
-
8/9/2019 Debtors Management @ Tata Steel
18/140
Credit collection: The collection of credit should be streamlined. Efficient
credit collection machinery will reduce the size of receivable. Individual firm of tern
set up their own well organised credit collection department.
18
-
8/9/2019 Debtors Management @ Tata Steel
19/140
1.6 COSTS AND BENEFITS ASSOCIATED WITH
receivable MANAGEMENT
19
COSTS
COLLECTIONCOST
CAPITAL COST
DELIQUENCY
COST
DEFAULT COST
COSTS
COLLECTIONCOST
CAPITAL COSTDELIQUENCY
COST
DEFAULT COST
-
8/9/2019 Debtors Management @ Tata Steel
20/140
COSTS:
The major categories of cost associated with extension of credit and receivable are:
Collection cost
Capital cost
Delinquency cost
Default cost
COLLECTION COST:
These costs are administrative cost incurred in collecting the receivable from the customers.
This category includes:
1. Additional expenses on the creation and maintenance of a credit department
with staff, accounting, records, stationary, postage and other related items.
2. Expenses involved in acquiring credit information either through outside
specialist agencies or by the staff of the firm itself.
CAPITAL COST:
Accounts receivables, being an investment in current assets, have to be financed involving a
cost. There is a time lag between the sale of goods to, and the payment by, the customers.
Meanwhile the firm has to pay employees and suppliers of raw material i.e. the firm should
arrange for additional funds to meet its own obligations. Thus, the cost on the use of additional
capital to support credit sales is therefore apart of the cost of extending credit.
DELINQUENCY COST:
This cost arises out of the failure of the customer to meet their obligations when payment on
credit sales becomes due after the expiry of the period of credit. Such cost includes:
Blocking up of funds for an extended period.
Cost associated with steps that have to be initiated to collect the overdue, such
as reminders and other collection efforts, legal charges, where necessary , and so on.
DEFAULT COST
20
-
8/9/2019 Debtors Management @ Tata Steel
21/140
In addition of the above cost the firm may not be able to recover the overdue because of
inability of the customers. Such debts are treated as bad debts and have to be written off, as
they cannot be realized. Though a concern may be able to reduce bad debts through efficient
collection mechanism, one cannot altogether rule out the possibility of this cost.
BENEFITS:
Apart from the cost, another factor that has a bearing on accounts receivable is the benefit
emanating from credit sales. The benefits are:
The increased sale and thereby profits
However, the benefits would depend upon the credit policy adopted by the firm, i.e., a
conservative or liberal credit policy. The impact of liberal credit policy is likely to have two
forms:-
i. Sales expansion
ii. Sales retention
In sales expansion a firm may grant credit either to increase sales or to attract new customer.
This motive is growth oriented; on the other hand the sales retention the firm may grant credit
to protect its current sales against emerging competition. No matter whatever is the motive, the
result the result of increased sales is the increase the profit of the firm.
21
-
8/9/2019 Debtors Management @ Tata Steel
22/140
SOME BASIC DEFINITION
When the buying and selling process steps forward and the customer is not able to pay the total
amount, the amount which they are not able to pay at the same time of buying the amount is
known as DEBT.
In the balance sheet of companies those customers are DEBTORS. In their balance sheet
company is a CREDITOR.
On the basis of market performance and credit rating company decides the time period of
payback of the amount. This time period is known as CREDIT PERIOD.
The total amount called as debt is called as OUTSATNDING. When this total outstanding is
not paid within the credit period the amount remained to be collected is called as OVERDUE.
The total overdue is divided in different parts such as overdue within 3months, from 3-6
months, 6-12 months, 1 to 2 yrs, 2-3 yrs, above 3yrs, and above 5 yrs.
When the customer is not able to pay back the due after five years then this amount is known
as BAD DEBTS.
Tata Steel has kept some amount for this type of time of contingencies. This amount use for
decreasing the effect of bad debts is called as PROVISION.
CURRENT ASSETS are those assets which can be converted into cash within the period of12 months starting from the companys financial year.
CURRENT LIABILITIES are those liabilities which are repaid within 12 months starting
from companys financial year.
22
-
8/9/2019 Debtors Management @ Tata Steel
23/140
EXPERT VIEW
It is generally believed that credit policy stimulates sales as it helps in
retaining existing customers and winning clients from rivals. Trade debtors
represent amounts owed to the firm as a result of credit sale of goods or
services in the ordinary course of business.
The key function of credit management is to optimize the sales at the minimum
possible cost of credit.
According to Joseph, "The purpose of any commercial enterprise is the
earning of profit. Credit in itself is utilized to increase sales, but sales must
return a profit".
The offer of trade credit should not only optimize sales but also lead to
maximization of overall return on investment. Management of receivables,
therefore, should be based on sound credit policies and practices.
23
-
8/9/2019 Debtors Management @ Tata Steel
24/140
COMPAN
YPROFILE
24
-
8/9/2019 Debtors Management @ Tata Steel
25/140
3.1 HISTORY OF STEEL
Steel was discovered by the Chinese under the reign of Han dynasty in 202 BC till 220 AD.
Prior to steel, iron was a very popular metal and it was used all over the globe. Even the time
period of around 2 to 3 thousand years before Christ is termed as Iron Age as iron was vastly
used in that period in each and every part of life. But, with the change in time and technology,
people were able to find an even stronger and harder material than iron that was steel. Using
iron had some disadvantages but this alloy of iron and carbon fulfilled all that iron couldnt
do. The Chinese people invented steel as it was harder than iron and it could serve better if it
is used in making weapons. One legend says that the sword of the first Han emperor was
made of steel only. From China, the process of making steel from iron spread to its south and
reached India. High quality steel was being produced in southern India in as early as 300 BC.
Most of the steel then was exported from Asia only. Around 9th century AD, the smiths in the
Middle East developed techniques to produce sharp and flexible steel blades. In the 17th
century, smiths in Europe came to know about a new process of cementation to produce steel.
Also, other new and improved technologies were gradually developed and steel soon became
the key factor on which most of the economies of the world started depending.
25
-
8/9/2019 Debtors Management @ Tata Steel
26/140
FIG:Stages in Global Production of Steel
India is one of the worlds top ten steelmakers its domestic output is insufficient to
meet the demand in all segments.
Consumption of steel is very fast and as a consequence of the prospective dynamic
economic growth.
Secondly, there is demand for high-quality products which India will not be able to
supply in sufficient quantities for the foreseeable future.
3.2 THE GLOBAL STEEL INDUSTRY
The current global steel industry is in its best position in comparing to last decades. The price
has been rising continuously. The demand expectations for steel products are rapidly growing
for coming years. The shares of steel industries are also in a high pace. The steel industry is
enjoying its 6th consecutive years of growth in supply and demand. And there is many more
merger and acquisitions which overall buoyed the industry and showed some good results.
The subprime crisis has lead to the recession in economy of different countries, which may
lead to have a negative effect on whole steel industry in coming years. However steel
production and consumption will be supported by continuous economic growth.
26
-
8/9/2019 Debtors Management @ Tata Steel
27/140
CONTRIBUTION OF COUNTRIES TO GLOBAL STEEL INDUSTRY
The countries like China, Japan, India and South Korea are in the top of the above in steel
production in Asian countries. China accounts for one third of total production i.e. 419m ton,Japan accounts for 9% i.e. 118 m ton, India accounts for 53m ton and South Korea is
accounted for 49m ton, which all totally becomes more than 50% of global production. Apart
from this USA, BRAZIL, UK accounts for the major chunk of the whole growth.
3.3 INDIAN STEEL INDUSTRIES
The challenges that confront Indian steel industry in the age of globalization are complex in
nature. The secret of sustainable turnaround lies in how Indian steel industry faces the
challenges and develops combative and anticipatory prowess. Problems and solutions may
vary with organizations but there is more a commonality than initially meets the eye. A two-
step strategy is suggested for the sustainable turnaround in the industry. These stages, aimed
to ensure survival and growth have been termed survival strategy and growth strategy. The
survival strategy provides a foundation upon which a potent growth strategy could be
formulated. While the survival strategy would ensure the survival of the ailing steel industry,
the growth strategy would simultaneously take care of its total transformation towards a better
future. Both stages, to be implemented through an integrated plan, are essential to enable the
industry overcome the present imbroglio.
Indian steel industry is poised for rapid growth.
Indias share in world production of crude steel increased from 1.5% in 1981 to around
7.3% in 2008.
27
-
8/9/2019 Debtors Management @ Tata Steel
28/140
The private sector is considered engine of growth in the steel industry and
technological changes and modernization are taking place in both the public and the private
sector integrated steel plants in India.
SOME OF THE LEADING COMPANIES IN INDIAN STEEL INDUSTRY
ARE AS FOLLOWS:
Tata Steel: Producer and supplier of wire rods, bars, and steel flats
Steel Authority of India: Manufacturer of steel and iron
Ambica Steel: Producer of carbon steel, alloy, and stainless steel
Bokaro Steel Plant: Steel manufacturer
Central Steel Corporation: Producer of alloy and tool steels
Allied Ferromelt: Producer of non alloy and alloy steel
Anchor Engineers' Files: Producer of steel files for engineers
28
-
8/9/2019 Debtors Management @ Tata Steel
29/140
Essar Steel: Producer of sponge iron, steel and iron ore pellets
ColdFab: Producer of pre-fabricated buildings of steel
Hisar Metal: Producer of strips and stainless cold rolled steel coils
Buyao Info: Producer of steel products and re-rolled iron
Jindal Iron & Steel: Producer of galvanized steel products
Kanoi Group: Dealer of corrugated sheets and steel coils
Jindal Steel & Power: Manufacturer of mild steel slabs and sponge iron
Metalman Industries: Producer of tubular and flat steel items
29
-
8/9/2019 Debtors Management @ Tata Steel
30/140
3.3 Company overview
Backed by 100 glorious years of experience in steel making, Tata Steel is the worlds 6th
largest steel company with an existing annual crude steel production capacity of 30 Million
Tons Per Annum (MTPA). Established in 1907, it is the first integrated steel plant in Asia
and is now the world`s second most geographically diversified steel producer and a Fortune
500 Company Tata Steel has a balanced global presence in over 50 developed European and
fast growing Asian markets, with manufacturing units in 26 countries.
Tata Steel`s Jamshedpur (India) Works has a crude steel production capacity of 6.8 MTPA
which is slated to increase to 10 MTPA by 2010. The Company also has proposed three
Greenfield steel projects in the states of Jharkhand, Orissa and Chhattisgarh in India with
additional capacity of 23 MTPA and a Greenfield project in Vietnam.
Through investments in Corus, Millennium Steel (renamed Tata Steel Thailand) and NatSteel Holdings, Singapore, Tata Steel has created a manufacturing and marketing
network in Europe, South East Asia and the pacific-rim countries. Corus, which
manufactured over 20 MTPA of steel in 2008, has operations in the UK, the Netherlands,
Germany, France, Norway and Belgium. Tata Steel Thailand is the largest producer of long
steel products in Thailand, with a manufacturing capacity of 1.7 MTPA. Tata Steel has
proposed a 0.5 MTPA mini blast furnace project in Thailand. NatSteel Holdings produces
about 2 MTPA of steel products across its regional operations in seven countries.
Tata Steel, through its joint venture with Tata BlueScope Steel Limited, has also entered the
steel building and construction applications market.
The iron ore mines and collieries in India give the Company a distinct advantage in raw
material sourcing. Tata Steel is also striving towards raw materials security through joint
ventures in Thailand, Australia, Mozambique, Ivory Coast (West Africa) and Oman. Tata
Steel has signed an agreement with Steel Authority of India Limited to establish a 50:50 joint
30
-
8/9/2019 Debtors Management @ Tata Steel
31/140
venture company for coal mining in India. Also, Tata Steel has bought 19.9% stake in New
Millennium Capital Corporation, Canada for iron ore mining.
Exploration of opportunities in titanium dioxide business in Tamil Nadu, Ferro-chrome plant
in South Africa and setting up of a deep-sea port in coastal Orissa are integral to the Growth
and Globalisation objective of Tata Steel.
Tata Steels vision is to be the global steel industry benchmark for Value Creation and
Corporate Citizenship.
Tata Steel India is the first integrated steel company in the world, outside Japan, to be
awarded the Deming Application Prize 2008 for excellence in Total Quality Management.
MILESTONes
Jamshedji Nauserwanji TATA
started a private trading firm,
laying the foundation of the
TATA Group.
The central INDIA spinning,
weaving and manufacturing
company is set up, marking
the group entry into textiles.
The Indians hotels
company is incorporated
to set up the Taj Mahal
Palace and Tower, India's
first luxury hotel, which
opened in 1903.
The TATA Iron and Steel
Company (now TATA Steel)is
established to set up India's
first iron and steel plant in
Jamshedpur.
The first of the three TATA
Electric Companies, The Tata
Hydro-Electric Power Supply
Company, (now TATA Power)
is set up.
The Indian Institute of
Science is established in
Bangalore to serve as a
centre for advanced
learning.
31
1868 1874 1902
1907 19111910
-
8/9/2019 Debtors Management @ Tata Steel
32/140
TATA Steel introduces eight-
hour working days, well
before such a system was
implemented by law in much
of the West.
The TATAs entered the
consumer goods industry, with
the TATA Oil Mills Company
being established to make
soaps, detergents $ cooking
oils.
TATA airlines, a division
of TATA sons, is
established to opening up
the aviation sector in
India.
TATA Chemicals, now the
largest producer of soda ash
in the country, is established.
TATA engeneering and
Locomotive (renamed as
TATA MOTORS) is
established to manufacture
locomotive and engeneering
products.
Jawahar lal Nehru Indias
first prime minster
requested the TATA
Group to manufacture
cosmetics in India,
leading to satting up the
LAKME.
TATA finlat (now
TATA tea), one of the
largest tea producers is
estblished.
TATA export is
established. Today the
company renamed as
TATA consultancy services
(TCS) Indias first software
services company is
established as a division of
TATA sons.
TATA McGraw-Hill
Publishing Company is
created to publish
educational and technical
books.
32
1912 1917 1932
1939 1945 1952
1962 1968 1970
-
8/9/2019 Debtors Management @ Tata Steel
33/140
TATA International, is
one of the leading export
houses in india.
TITAN Industries- a joint
venture between TATA Group
and Tamil Nado IndustrialDevelopment corporation is
set up to manufacture watches.
TATA Teleservices (TTSL) is
established to spearhead the
Group's foray into the telecomsector.
TATA Indica India's
first indigenously
designed andmanufactured car is
launched by TATA
MOTORS, spearheading
the Group's entry into the
passenger car segment.
The TATA Group
acquires a controlling stake in
VSNL, India's leading
international
telecommunications service
provider.
TATA Consultancy
Services (TCS) becomes the
first Indian software
company to cross one billion
dollars in revenues.
TATA MOTORS acquires
the heavy vehicles unit of
Daewoo Motors, South
Korea.
TCS goes public in July
2004 in the largest private
sector initial public offering
(IPO) in the Indian market,
raising nearly $1.2 billlion.
TATA Steel acquires
Singapore-based steel
company NatSteel by
subscribing to 100
per cent equity of its
subsidiary, NatSteel
Asia.
VSNL acquired
33
20042002 2005
1984 1996 1998
-
8/9/2019 Debtors Management @ Tata Steel
34/140
Titan launches Edge, the
slimmest watch in the world.
Idea Cellular, the cellular
service born of a tie-up
involving the TATA Group,
the Birla Group and AT&T,
is launched.
TATA Indicom, the
umbrella brand for telecom
services from the TATA
Teleservices stable, starts
operations.
TATA steel acquires CORUS
thus becoming the sixth
largest steel maker of the
world.
TATA Group acquires
JAGUAR & LAND ROVER
from FORD MOTERS.
34
2007 2008
-
8/9/2019 Debtors Management @ Tata Steel
35/140
We aspire to be the global steel industry benchmarkfor
Value Creation and Corporate Citizenship.
We make the difference through:
Ourpeople, by fostering team work, nurturing talent, enhancing leadership capability and
acting with pace, pride and passion.
Ouroffer, by becoming the supplier of choice, delivering premium products and services,
and creating value with our customers.
Ourinnovative approach, by developing leading edge solutions in technology, processes
and products.
Our conduct, by providing a safe working place, respecting the environment, caring for
our communities and demonstrating high ethical standards
.
35
-
8/9/2019 Debtors Management @ Tata Steel
36/140
GROUP VISION
We aspire to be the global steel industry benchmark for
Value Creation and
Corporate Citizenship.
We make the difference through:
OurPEOPLE, by fostering team work, nurturing talent, enhancing leadership capability and
acting with pace, pride and passion.
OurOFFER, by becoming the supplier of choice, delivering premium products and services
and creating value with our customers.
OurINNOVATIVE APPROACH, by developing leading edge solution in technology,
process and products.
OurCONDUCT, by providing a safe working place respecting the environment, caring for
our communities and demonstrating high ethical standards.
36
-
8/9/2019 Debtors Management @ Tata Steel
37/140
37
-
8/9/2019 Debtors Management @ Tata Steel
38/140
Products
Tata Steel`s Jamshedpur Works produces hot and cold rolled coils and sheets, galvanized
sheets, tubes, wire rods, construction rebars and bearings. In an attempt to 'decommoditise'
steel, Tata Steel has introduced brands like Tata Steelium (the world's first branded Cold
Rolled Steel), Tata Shaktee (Galvanized Corrugated Sheets), Tata Tiscon (re-bars), Tata
Bearings, Tata Agrico (hand tools and implements), Tata Wiron (galvanized wire products),
Tata Pipes (pipes for construction) and Tata Structura (contemporary construction
material).Apart from these product brands, the company also has in its folds a service brand
called steel junction.
Corus main operating divisions comprise Strip Products, Long Products and Distribution &
Building Systems Division.
The NatSteel group produces construction grade steel such as rebars, cut-and-bend cages for
construction, mesh, precage bore pile, PC wires and PC strand.
Tata Steel Thailand produces round bars and deformed bars for the construction industry.
38
-
8/9/2019 Debtors Management @ Tata Steel
39/140
-
8/9/2019 Debtors Management @ Tata Steel
40/140
MOZAMBIQUE
IVORY COST
OMAN
40
-
8/9/2019 Debtors Management @ Tata Steel
41/140
AWARDS AND RECOGNITIONS
41
-
8/9/2019 Debtors Management @ Tata Steel
42/140
Awards and Recognitions
Tata Steel India awarded the Deming Application Prize 2008 for excellence in Total
Quality Management. It is the first integrated steel company in the world, outside Japan to
get this award.
World Steel Dynamics has ranked Tata Steel as the world's best steel maker (for two
consecutive years) in its annual listing in February 2006.
Tata Steel has been conferred the Prime Minister of India's Trophy for the Best
Integrated Steel Plant five times.
It has been awarded Asia's Most Admired Knowledge Enterprise award five times in
2003, 2004, 2006, 2007 and 2008. Conferred the prestigious Global Business Coalition Award for Business Excellence
in the Community in recognition of its pioneering work in the field of HIV/ AIDS awareness.
Tata Steel works has been conferred the prestigious social accountability (SA) 8000
certification by social. Accountability international (SAI), USA. It is the first steel company
in the world to receive this certificate.
Corporate Sustainability Report of Tata Steel hailed by United Nations Environment
Programme (UNEP) and Standard and poor as strongest, submitted by any corporate housefrom emerging economies.
Best governed company Award 2006 for setting high standards in governance
practices.
42
-
8/9/2019 Debtors Management @ Tata Steel
43/140
(As on 7th May, 2009)
Mr. B Muthuraman Managing Director
Mr. H M Nerurkar Executive Director,India and South EastAsia Operations
Mr. A D Baijal Vice President &
Tata Steel GroupDirector, GlobalMineral Resources
Mr. R P Singh Vice President,Engineering Services& Projects
Mr. Koushik Chatterjee Group CFO, TataSteel
Mr. Anand Sen Vice President, FlatProducts & TQM
Mr. Abanindra M. Misra Vice President, RawMaterials & CSI
Mr. Varun K Jha Vice President,Chhattisgarh Project
Mr. Om Narayan Vice President,Shared Services
Mr. Radhakrishnan Nair Chief HumanResource Officer
Mr. Partha Sengupta Vice President,Corporate Services
Mr. H Jha Vice President,Safety & LongProducts
Mr. N K Misra Vice President &Tata Steel GroupHead, M&A
Mr. B K Singh Vice President,Orissa Project
Mr. J C Bham Company Secretary
43
http://www.tatasteel.com/Company/muthuraman.asphttp://www.tatasteel.com/Company/HMN.asphttp://www.tatasteel.com/Company/ADBaijal.asphttp://www.tatasteel.com/Company/RPS.asphttp://www.tatasteel.com/Company/Kchatterjee.asphttp://www.tatasteel.com/Company/Asen.asphttp://www.tatasteel.com/Company/am_mishra.asphttp://www.tatasteel.com/Company/Vkjha.asphttp://www.tatasteel.com/Company/omnarayan.asphttp://www.tatasteel.com/Company/radhakrishnan.asphttp://www.tatasteel.com/Company/partha.asphttp://www.tatasteel.com/Company/hjha.asphttp://www.tatasteel.com/Company/nkmisra.asphttp://www.tatasteel.com/Company/bk-singh.asphttp://www.tatasteel.com/Company/jcbham.asphttp://www.tatasteel.com/Company/muthuraman.asphttp://www.tatasteel.com/Company/HMN.asphttp://www.tatasteel.com/Company/ADBaijal.asphttp://www.tatasteel.com/Company/RPS.asphttp://www.tatasteel.com/Company/Kchatterjee.asphttp://www.tatasteel.com/Company/Asen.asphttp://www.tatasteel.com/Company/am_mishra.asphttp://www.tatasteel.com/Company/Vkjha.asphttp://www.tatasteel.com/Company/omnarayan.asphttp://www.tatasteel.com/Company/radhakrishnan.asphttp://www.tatasteel.com/Company/partha.asphttp://www.tatasteel.com/Company/hjha.asphttp://www.tatasteel.com/Company/nkmisra.asphttp://www.tatasteel.com/Company/bk-singh.asphttp://www.tatasteel.com/Company/jcbham.asp -
8/9/2019 Debtors Management @ Tata Steel
44/140
44
-
8/9/2019 Debtors Management @ Tata Steel
45/140
45
-
8/9/2019 Debtors Management @ Tata Steel
46/140
46
-
8/9/2019 Debtors Management @ Tata Steel
47/140
47
-
8/9/2019 Debtors Management @ Tata Steel
48/140
Strategic Business Units OF TATA STEEL
48
-
8/9/2019 Debtors Management @ Tata Steel
49/140
Corus: Europes second largest steelmaker with operations in the UK and
mainland Europe and over 40,000employees worldwide. Its long and strip
products cater to the construction,automotive, packaging, engineering andother markets worldwide. Corus isimplementing major investments at its
plants at IJmuiden, in the Netherlands andat Scunthorpe in the UK as part of its driveto strengthen product differentiation,improve operational efficiency andreinforce existing competitive position,
particularly in the construction andautomotive sectors, including thedevelopment of new advanced high strengthsteels.
(www.corusgroup.com)
Tinplate Company of India
Limited (TCIL): With a market share ofover 35%, it is the industry leader in India.It has the capability to supply all tinningline products including electrolytictinplate / tin-free steel and cold-rolled
products.
(www.tatatinplate.com)
Tayo Rolls Limited: India's leading rollmanufacturer and supplier, the company
produces rolls which find application inintegrated steel plants, power plants, the
paper, textile and food processing sectors,and the government mint.
(www.tayo.co.in)
Tata Ryerson Limited (TRYL):TRYL Is in the business of steel processingand distribution. It offers hot and coldrolled flat steel products in customised sizesand quantities through processing servicesand materials management services.
(www.tataryerson.com)
49
http://www.corusgroup.com/http://www.tatatinplate.com/http://www.tayo.co.in/http://www.tataryerson.com/http://www.corusgroup.com/http://www.tatatinplate.com/http://www.tayo.co.in/http://www.tataryerson.com/ -
8/9/2019 Debtors Management @ Tata Steel
50/140
Tata Refractories Limited (TRL): It produces High Alumina, Basic, Dolomite,Silica and Monolithic Refractories andoffers design, procurement and re-lining
applications services. It is one of the fewcompanies worldwide to produce silicarefractories for coke ovens and the glassindustry. The Company has a basic bricksmanufacturing unit in China.
(www.tataref.com)
Tata Sponge Iron Limited (TSIL):TSIL is the first Indian sponge iron plant
based on Tata Steel's Direct Reduction
Technology. Its major product lines aresponge iron lumps and fines.
(www.tatasponge.com)
Tata Metaliks: Amongst the top wealthcreating companies (EVA+) in the country,Tata Metaliks is engaged in the business ofmanufacturing and selling foundry grade
pig iron.
(www.tatametaliks.com)
Tata Pigments Limited: TPL's rangeof products includes oxides of iron, drycement paint, exterior emulsion paint anddistemper. Its products are used in paints,emulsion, cement floors, plastic etc.
(www.tatapigments.com)
Jamshedpur Injection Powder
Limited (Jamipol): JAMIPOLmanufactures carbide de-sulphurisingcompounds which are used for de-sulphurising hot metal for the production oflow-sulphur, high-quality steel.
(www.jamipol.com)
50
http://www.tataref.com/http://www.tatasponge.com/http://www.tatametaliks.com/http://www.tatapigments.com/http://www.jamipol.com/http://www.tataref.com/http://www.tatasponge.com/http://www.tatametaliks.com/http://www.tatapigments.com/http://www.jamipol.com/ -
8/9/2019 Debtors Management @ Tata Steel
51/140
TM International Logistics Limited
(TMILL):TMILL provides materialhandling and port operation services atHaldia and Paradip Ports in addition to
providing freight forwarding and charteringservices.
(www.tmilltd.com)
mjunction services limited :mjunction, operating at the cutting edge ofInformation Technology, is a 50:50 ventureof SAIL and Tata Steel. It is India's largesteCommerce company and the world'slargest eMarketplace for steel. Mjunction
offers a wide range of selling, sourcing andknowledge services that empowerbusinesses with greater process efficiencies.
(www.mjunction.in)
TRF Limited : TRF, one of India'sleading companies in the business ofdesign, manufacture, supply, installationand commissioning of engineered-to-orderequipment and systems in the areas of bulk
material handling, processing, reclaimingand blending. TRF has also made its markin the fields of coke oven equipment, coaldust injection systems for blast furnaces andcoal beneficiation systems.
(www.trfltd.com)
Jamshedpur Utility andService Company Limited(JUSCO) : Re-engineered out of TataSteel's town services, JUSCO is a whollyowned subsidiary of Tata Steel and is thecountry's first enterprise that providesmunicipal and civic services for townships.JUSCO is the only EMS 14001 civicservices provider in the country.
(www.juscoltd.com)
51
http://www.tmilltd.com/http://www.mjunction.in/http://www.trfltd.com/http://www.juscoltd.com/http://www.tmilltd.com/http://www.mjunction.in/http://www.trfltd.com/http://www.juscoltd.com/ -
8/9/2019 Debtors Management @ Tata Steel
52/140
The Indian Steel and Wire Products
Limited (ISWP) : Recently acquired byTata Steel, ISWP has two units - a wire unitcomprising wire drawing mills, wire rod
mills and a fastener division and a steel rollmanufacturing unit named JamshedpurEngineering and Machining Company -JEMCO.
Tata BlueScope Steel Limited:A jointventure with BlueScope Steel Limited,Australia, Tata BlueScope Steel Limitedoffers a comprehensive range of branded
steel products for building and constructionapplications. The Company is constructinga state-of-the-art metallic coating and
painting facility at Jamshedpur.
(www.tatabluescopesteel.com)
Dhamra Port Company, Orissa:A JV between Larsen & Toubro Ltd. and TataSteel Ltd., the company will build a deep-draft (18 metres) all weather port on the
east coast of India. The port will handle 80million tonnes per annum of cargo.
(www.dhamraport.com)
Hooghly Met Coke & Power
Company: A joint venture with WestBengal Industrial DevelopmentCorporation Ltd., HMC&PCenvisages an annual met coke
production capacity of 1.2 milliontonnes and 90 MW of electric power.
(www.hooghlymetcoke.com)
Lanka Special Steel Limited:The onlyunit in Sri Lanka manufacturing galvanisedwires.
52
http://www.tatabluescopesteel.com/http://www.dhamraport.com/http://www.dhamraport.com/http://www.hooghlymetcoke.com/http://www.tatabluescopesteel.com/http://www.dhamraport.com/http://www.hooghlymetcoke.com/ -
8/9/2019 Debtors Management @ Tata Steel
53/140
Sila Eastern Company Limited:Established to develop limestone mines inThailand, mainly for the captive use of TataSteel.
NatSteel Holdings (NSH) : A leadingsupplier of premium steel products for theconstruction industry. NatSteel Holdings
became a 100% subsidiary of Tata Steel inFebruary 2004. NSH produces about 2 MTof steel products annually across itsregional operations in seven countries.
(www.natsteel.com.sg)
Tata Steel Thailand: The company isthe dominant steel producer in Thailand.The company has the capacity to produce1.7 million tonnes of steel for theconstruction industry per year.
(www.tatasteelthailand.com)
Tata Steel KZN:Proposes to set up highcarbon ferrochrome plant in South Africa.The plant is slated to be commissioned byOctober 2007 with an annual productioncapacity of 135,000 tonnes during Phase 1.
Tata NYK: A joint venture with NipponYusen Kabushiki Kaisha (NYK Line) forsetting up a shipping company to cater todry bulk and break bulk cargo. Tata Steeland NYK will each hold 50% stake in the
joint venture company.
53
http://www.natsteel.com.sg/http://www.tatasteelthailand.com/http://www.natsteel.com.sg/http://www.tatasteelthailand.com/ -
8/9/2019 Debtors Management @ Tata Steel
54/140
The Company has set itself the objective of expanding its capacities and becoming globally
competitive in its business. as a part of its growth strategy, the Company believes in adoptingthe best practices that are followed in the area of Corporate Governance across various
54
National International
Jharkhand
Chhattisgarh
Orissa -Kalinganagar
- Dhamra
Port
Tamil Nadu
Vietnam
South Africa
Australia
Mozambique
Ivory Coast (West
Africa)
Oman
http://www.tatasteel.com/Company/investments_jharkhand_article.asphttp://www.tatasteel.com/Company/investments_chhattisgarh_article.asphttp://www.tatasteel.com/company/investments_kalinganagar_article.asphttp://www.tatasteel.com/company/investments_kalinganagar_article.asphttp://www.tatasteel.com/Company/investments_Dhamra_article.asphttp://www.tatasteel.com/Company/investments_Dhamra_article.asphttp://www.tatasteel.com/company/investments_TamilNadu_article.asphttp://www.tatasteel.com/company/vietnam.asphttp://www.tatasteel.com/company/investments_SAfrica_article.asphttp://www.tatasteel.com/company/investments_australia_article.asphttp://www.tatasteel.com/company/mozambique.asphttp://www.tatasteel.com/company/ivorycoast.asphttp://www.tatasteel.com/company/ivorycoast.asphttp://www.tatasteel.com/company/oman.asphttp://www.tatasteel.com/Company/investments_jharkhand_article.asphttp://www.tatasteel.com/Company/investments_chhattisgarh_article.asphttp://www.tatasteel.com/company/investments_kalinganagar_article.asphttp://www.tatasteel.com/company/investments_kalinganagar_article.asphttp://www.tatasteel.com/Company/investments_Dhamra_article.asphttp://www.tatasteel.com/Company/investments_Dhamra_article.asphttp://www.tatasteel.com/company/investments_TamilNadu_article.asphttp://www.tatasteel.com/company/vietnam.asphttp://www.tatasteel.com/company/investments_SAfrica_article.asphttp://www.tatasteel.com/company/investments_australia_article.asphttp://www.tatasteel.com/company/mozambique.asphttp://www.tatasteel.com/company/ivorycoast.asphttp://www.tatasteel.com/company/ivorycoast.asphttp://www.tatasteel.com/company/oman.asp -
8/9/2019 Debtors Management @ Tata Steel
55/140
geographies. The Company emphasises the need for full transparency and accountability in
all its transactions, in order to protect the interests of its stakeholders. The Board considers
itself as a Trustee of its Shareholders and acknowledges its responsibilities towards them for
creation and safeguarding their wealth.
55
-
8/9/2019 Debtors Management @ Tata Steel
56/140
Tata groups Diversified area of business
Information systems and communications: The Tata group has well-established
enterprises in the fields of software and other information systems, telecommunications and
industrial automation.
Engineering: The Tata group has a robust presence in engineering, with operations in
automobiles and auto components and a variety of other engineering products and services.
Materials: The Tata group is among the global leaders in this business sector, with
operations in steel and composites.
Services: The Tata group has widespread interests in the hospitality business, as also ininsurance, realty and financial and other services.
Energy: The Tata group is a significant player in power generation and is also involved in
the oil and gas segment.
SOME OF WHICH ARE:
Tata Tele Services
Tata Power
Tata Consultancy Services
Tata Chemicals
Tata Assets Management
Tata Motors
Tata Capital
Titan Industries
Tanishq
Taj Group of Hotels
56
-
8/9/2019 Debtors Management @ Tata Steel
57/140
Products of Tata group
57
-
8/9/2019 Debtors Management @ Tata Steel
58/140
TATA
STEEL
STAND
ALONE 58
-
8/9/2019 Debtors Management @ Tata Steel
59/140
TREND OF SALES
YEARS FY 2003-04 FY2004-05 FY 2005-06 FY 2006-07 FY 2007-08
SALES 11920.96 15876.87 17144.22 19762.57 22191.8
59
-
8/9/2019 Debtors Management @ Tata Steel
60/140
PRODUCT WISE NET SALES ARE ASFOLLOWS
Figures in Rs (crs)
FY 2006-07
FY 2007-08
STEEL 14858 16541
TUBES 1099 1217
FERRO ALLOYS AND MINERALS 1454 1808
BEARINGS 140 127
Analysis:
60
-
8/9/2019 Debtors Management @ Tata Steel
61/140
The increase in the net sales of Tubes division was due to the increase in both the volume
as well as prices. The Ferro Alloys and Minerals division of the company registered a
growth of 24% in terms of value though there was a decline in terms of quantity due to the
companys decision during the year to stop the sale of ores. There was a decline in the net
sales of the Bearings division of the company mainly due to lower off -take by the
automotive sector, which is a major customer sector of the division.
61
-
8/9/2019 Debtors Management @ Tata Steel
62/140
TREND OF DEBTORS
YEARS
FY 2003-
04
FY2004-
05
FY 2005-
06
FY 2006-
07
FY 2007-
08DEBTORS 756.06 581.82 539.4 631.63 543.48
Analysis:There has been decrease in the trend of debtors in last five years, from Rs.756.6crores to
Rs.543.48 crores. This decrease in debtors shows a more profit to the company. The increasein the debtors during 2006-07year might be due to the acquisition ofCORUS.
62
-
8/9/2019 Debtors Management @ Tata Steel
63/140
DIVISION/PROFIT CENTRE WISE DEBTORS IN TATASTEEL FOR FY 07-08
PROFIT CENTERS For the FY 06-07 For the FY 07-08
STEEL 509.09 397.84WIRE DIVISION 43.82 33.30
TUBES 37.01 31.13
BEARINGS 7.01 7.29
F.A.M.D 70.44 107.59
TOTAL DEBTORS 667.37 577.15
63
-
8/9/2019 Debtors Management @ Tata Steel
64/140
TRENDS OF DEBTORS IN TATA STEEL
Debtors Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
FY 06-07 614 688 756 663 658 753 680 670 731 709 774 667
FY 07-08 694 687 662 683 669 767 733 636 677 691 716 577
64
-
8/9/2019 Debtors Management @ Tata Steel
65/140
TREND OF CURRENT RATIO
YEARS FY 2003-04 FY2004-05 FY 2005-06 FY 2006-07 FY 2007-08
CURRENT RATIO 1.03 1.1 1.1 2.18 0.9
ANALYSIS:
The ratio is constant. An ideal current ratio is 1:1. In the year 2006-07 the ratio is very high
which is not desirable since it means there was less efficient use of funds which was lowering
down the profitability of the concern. In year 2007-08, the ratio has quite improved to 0.9
from 1.03 in the year 2003-04 and is coming closer to the ideal ratio.
65
-
8/9/2019 Debtors Management @ Tata Steel
66/140
TREND OF DEBTORS TURNOVER RATIO
YEARS FY 2003-04 FY2004-05 FY 2005-06 FY 2006-07 FY 2007-08
Debtors Turnover Ratio 13.38 23.81 28.73 31.9 35.66
ANALYSIS:
Debtors' turnover rate indicates how quickly receivables or debtors are converted into cash.
The liquidity of debtors, therefore, is measured through the debtors' turnover rate. A higher
debtors turnover coupled with quick average collection of debtors enables the firm to transact
a larger volume of business without corresponding rise in the investment in debtors . From the
above chart it is clear that the debtors turnover has been kept on increasing from 2003-04,
where it was 13.38times to 35.66 times in the year 2007-08.
66
-
8/9/2019 Debtors Management @ Tata Steel
67/140
TREND OF AVERAGE COLLECTION PERIOD
YEARSFY2003-04
FY2004-05
FY2005-06
FY2006-07
FY2007-08
AVERAGE COLLECTIONPERIOD 27.27 15.33 12.7 11.44 10.23
ANALYSIS:
The turnover rate converted into average collection period is a significant measure of the
collection activity of debtors.An average collection period is a measure of how long it takes
from the time the sales is made to the time the cash is collected from the customers.Lesser the period better the situation for the company. In case of TATA STEEL there is a
continuous fall in average collection period from 27.7 days in 2003-04 to 10.23 days in 2007-
08, which is a good sign for the company.
67
-
8/9/2019 Debtors Management @ Tata Steel
68/140
TREND OF AVERAGE DEBTORS TO TURNOVER RATIO
YEARS
FY 2003-04 FY2004-05 FY 2005-06 FY 2006-07 FY 2007-08
Debtors Turnover Ratio 13.38 23.81 28.73 31.9 35.66
ANALYSIS:
The analysis of the trends in sales and trade debtors shows the effectiveness of the credit policyin activating sales. An uninterrupted upward trend in sales accompanied by downward trend indebtors indicates that the credit policy implemented by the company is very effective instimulating more sales. This can be easily seen in case of TATA STEEL where the averagedebtors to turnover has been decreased from 6.75% in 2003-04 to 2.65% in 2007-08.Further, ifthe pace of increase in sales is more than the pace of increase in debtors, it is also a symptom offairly favorable credit policy.
68
-
8/9/2019 Debtors Management @ Tata Steel
69/140
PROVISION OF BAD DEBTS TO NET DEBTORS IN LASTFIVE YEARS
year 03-04 04-05 05-06 06-07 07-08
Debtors 651 582 539 632 543
Provision
for
doubtful
debt
61
39
32
36
34
69
-
8/9/2019 Debtors Management @ Tata Steel
70/140
ASSET TURNOVER RATIO IN LAST FIVE YEARS
YEARS FY 2003-04 FY2004-05 FY 2005-06 FY 2006-07 FY 2007-08ASSET TURNOVER
RATIO (%) 100.78 110.41 108.76 77.02 106.25
ANALYSIS:
This ratio indicates the extent to which the investments in fixed assets contribute towardssales. When compared with a previous period, asset turnover ratio indicates whether theinvestment in fixed assets has been judicious or not. There has been an increase in the Fixed
Assets Turnover Ratio; this might be due to increase in net sales or due to the acquisition ofCORUS during the year2007.
70
-
8/9/2019 Debtors Management @ Tata Steel
71/140
1.2.5 OVERVIEW OF THE FINANCE DIVISION OF TATA
STEEL
Thewhole finance and accounts department of Jamshedpur is divided in different groups and
sections. These were:
1. CASH OFFICE
2. FINANCE AND COSTS
3. PAYROLL ACCOUNTS
4. PURCHASE AND CAPITAL GROUP
5. SALES AND INDIRECT TAXATION
This project is related to DEBTORS MANAGEMNET, which is dealt by sales and indirect
taxation group. Everything related to debtors is termed as sundry debtors work.
Sales and indirect taxation group is responsible for accounting for activities such as:
FREIGHT- OUTWARD & INWARD (ROAD AND RAIL)
INVOICE
INDIRECT TAXATION MATTERS (EXCISE AND SALES)
It is also related to post sales activities like debtors and town accounting. It comprises of the
following sections:
EXCISE SECTION
FREIGHT SECTION
TOWN DEBTORS SECTION
OUTWARD INVOICE SECTION
71
-
8/9/2019 Debtors Management @ Tata Steel
72/140
SUNDRY DEBTORS SECTION
72
-
8/9/2019 Debtors Management @ Tata Steel
73/140
SUNDRY DEBTORS SECTION
As the name suggests, this section is responsible for the consolidated reporting of all the
debts due to the company and related information to the management. The section plays a
major role in monitoring the movements of debts & advising recoveries from the bills of
those vendors who are also the defaulting customer of the company. Notes are often put up
to the concerned profit centres to highlight probable cases of default.
ACTIVITIES OF SUNDRY DEBTORS SECTION:
73
-
8/9/2019 Debtors Management @ Tata Steel
74/140
Inter office collection (on behalf of other divisions/ profit centres /sales offices).
Updating of debtors ledger and preparation of reviews for reconciliation of debtors
ledger balances with the corresponding balances as per financial accounts
Updating of advance ledger maintained for tender sales and for preparation of
reviews of advance ledger
Updating of auction ledger and preparation of monthly review foe auction ledger
Maintenance of security deposit ledger for the purpose of refund of security deposits
and for payments of interest on security deposits.
Preparation of reports:
Board note on debtors (Tata steel debtors)
Associated companys outstanding debtors report.
VP (F) Report (Gives the detailed outstanding of all major parties).
Preparation of the outstanding report for secondary products, Rings, Agrico & town.
Annual Business Plan Report
The Memorandum of understanding of sundry debtors section and continuous monitoring of
the performance against targets set.
OTHER ACTIVITIES:
Inputs for the credit control meeting
Preparation of the minutes of the CCCM.
Updating the status of the minutes of the CCCM
74
-
8/9/2019 Debtors Management @ Tata Steel
75/140
RESEARCH METHODOLOGY
2.1 Type of Research
The study is descriptive in nature in the sense that it focuses basically on analyzing the
debtors management at TATA STEEL.
2.2 OBJECTIVE OF THE STUDY
The process of debtors management in TATA STEEL how the outstanding debtors are
accounted & what steps and actions are taken and should be taken to recover these
dues on time.
Comparison of Tata Steel with other key players with respect to the debtors.
Position of debtors in different industries.
2.3 SCOPE OF THE STUDYThe scope of this study is limited to the study of Debtors Management at TATA STEEL. The
scope encompassed with the debtors section of the company which is a part of finance and
accounting department.
75
-
8/9/2019 Debtors Management @ Tata Steel
76/140
2.4 sources of data Collection
Primary data are collected by interviewing customers and employees of TATA
STEEL.
Secondary data are collected by using internet, magazines and text books.
2.5 Sampling
The study was done by using the age wise analysis of debtors.
CREDIT DECISION
PROCEDURE OF CREDIT DECISION
76
-
8/9/2019 Debtors Management @ Tata Steel
77/140
WHAT IS CREDIT POLICY?
The credit policy provides the yardstick for measurement of credit level of receivables and is
the indentified and compared monthly, as per the requirements. The policy is influenced by the
77
-
8/9/2019 Debtors Management @ Tata Steel
78/140
nature of market and strength of the competition. The policy clearly defines the standard for
target debtor level, which in turn is a significant influence both ion payment terms and on the
whole of the credit control operation, since it determines how much tolerance, if any, is to be
shown to slow paying customer.
CREDIT POLICY OF TATA STEEL
TATA STEEL has a body known as credit control committee, which formulates and gives the
final approval for many credit policy matters. The credit guidelines as they have emerged today
are combined efforts of finance and marketing department.
The credit control committee is headed by Sr.V.P & E.D (F&A) and consists of all product
and sales manager from various divisions along with G.M (F&A) and other concernedexecutives as its members. The committee meets at least in two months.
The annual limit of credit sale is provided by Sr.V.P (F&A) in consultation with other
management officials. The committee then discusses in detail about the breakup of the above
lump into the credit limits for different sales offices and also for various customers i.e. both
regional and party wise credit limit is set by the body.
Hence the basic purpose this committee is to set the standard and also have the overall control
of the credit situation, thereby keeping the financing of the working capital cost effective and
preventing any liquidity problems from arising.
As a general rule, credit is allowed to customer who takes large and repeated orders. One time
customers are not entertained for credit.
CREDIT TERMS
Credit terms refer to the terms and conditions on which the trade credit will be made available.
Thus the stipulations under which the goods are sold on credit are referred to as credit terms.
These relate to the repayment of the amount under the credit sale. These terms can befinalalized after the scrutiny of number of factors. The various factors which must be taken into
account are:
The seller companys place in the market and the credit terms on which it is buying from
its own suppliers.
The availability of the capital it needs to finance its own credit sales and whether this is
to be borrowed and if so at what cost; also the availability of capital to finance the
payment of other overheads.
78
-
8/9/2019 Debtors Management @ Tata Steel
79/140
The existence of buyer and sellers market
The volume of sales planned and how these will be spread over the range of customers.
The profit margin to be obtained.
The competitive factors.
The character of the market
A. The period the buyer will have the goods i.e. the buying companys inventory turnover
and average collection period will ultimately decide the selling companys credit terms.
B. The condition of the customer finances and the degree of the credit risk, which the credit
sale will involve.
CREDIT TERMS HAS THREE COMPONENTS
i. Credit period
ii. Credit limit
iii. Cash discount
CREDIT PERIOD: is the duration of time for which trade credit is extended. During this
period the customers must pay the overdue amount.
CREDIT LIMIT: is decided by the top management and varies according to the market
condition. This total amount is broken up into regional limits, which is further segregated into
monthly limits within which the different parties have to accommodate. This function isperformed by the credit control committee as discussed above.
CASH DISCOUNT: is offered to induce the customers to make prompt payments. The
customers can take advantage of discount if they pay the amount within the stipulated time.
These credit terms usually written in abbreviation for e.g. 2/10net 30 where:
2 signifies the rate of cash discounts (2%)
79
-
8/9/2019 Debtors Management @ Tata Steel
80/140
10 represent the time duration (10days)within which a customer must pay to be
entitled to the discount
30 represent the credit period.
Credit terms of Tata steel
The credit terms, i.e. the credit period and cash discount, followed by TATA STEEL are as
follows:
CREDIT PERIOD: the credit period is decided on the basis of the type of the product
and is generally of fixed nature. However, special customer may be allowed a variance in the
set credit period depending upon the volume of sales and customer relationships.
INTEREST CHARGED: interest free credit is allowed for 30 days in most cases. A
every 30 days extension there is a 1% rise in interest rate for secured credits. The rate of
interest for unsecured credit is1% more than the corresponding rate under secured credit .
there is a penal interest of 3% over the applicable rate of interest.
Time period Secured credit Unsecured credit
After 30 days 18.5% 19.5%
After 60 days 19.5% 20.5%
After 90 days 20.5% 21.5%
CASH DISCOUNT:
Cash discount of 2% has also been allowed for certain products in different division. The
discounts had a positive response from certain customers who had working capital problems
i.e. whose inventory turnover have also ignored the discounts and debtors turnover is low or
whose operating cycle is long
80
-
8/9/2019 Debtors Management @ Tata Steel
81/140
COLLECTION EFFORT:
A constant touch with the customers is the best way of reminding him about his payment
schedule in a polite but firm manner. A daily, weekly and monthly report regarding the total
sale is done to keep a track on debtors and cash position. Tata steel s collection efforts were
not up to the mark that is the reason why outstanding of greater than six months were
increasing continuously which has now improved to a great extent.
4.1TATA STEELS CREDIT MONITORING AND CONTROL
As the most of the credit is unsecured, keeping a timely vigilance on the debtors is important
from the safety and the liquidity position of the firm. This primarily requires an efficient
collection process because slackness in the collection efforts lengthens the average collection
period, and increase the % of bad debt, for monitoring the debtors TATA STEEL is using
some steps. These steps are:
Preparation of a ageing schedule
Calculation of days sales o/s
Calculation of ACP
With the help of these, monthly reports are generated and are sent for review to credit control
committee chaired by V.P (F&A).
In case of secured credit where Tata Steel is also a debtor of its customers, it uses its
accounts payable as tool to realize its accounts receivables. In cases, which have the
symptoms of becoming the bad, a reconciliation statement is prepared and the mutual
agreement arrived at. However in the worst case legal action is pursued and bad debts are not
written off before five year.
FOLLOW UP
Proper follow up is done for the timely collection of debts. A daily, weekly, monthly report
regarding the sales is done to keep track on debtors and the cash position. Efficient and
capable Customers Accounts Managers are appointed for this purpose. Customers Accounts
81
-
8/9/2019 Debtors Management @ Tata Steel
82/140
Managers is responsible for the collection of debts and follow up of the customers. Now
TATA STEEL has adopted many ways to follow-ups:
Phone
Fax
E-mail
Letters
Personal visit
TATA STEEL PROVISION POLICY
DEBTORS STATUS AS ON SUMMARY AS ON
DEBTORS PROVISION
GUIDELINE %Age
Provisions
required
Amount of
outstanding
Provision
required
1) BIFR CASES
a) Above three years
I. Recoverable
II. Non Recoverable
Total
b) Below three years
I. Recoverable
II. Non Recoverable
Total
100%
100%
100%
100%
TOTAL
2) LEGAL CASE
c) Above three years
I. Recoverable
100%
82
-
8/9/2019 Debtors Management @ Tata Steel
83/140
II. Non Recoverable
Totald) Below three years
I. Recoverable
II. Non Recoverable
Total
100%
100%
100%
TOTAL
3) GOVT./TOWN DUES
e) 6 month-1 year
I. RecoverableII. Non Recoverable
Totalf) 1-2 Years
I. Recoverable
II. Non Recoverable
Totalg) Above 2 years
I. Recoverable
II. Non Recoverable
Total
0%
100%
50%
100%
100%
100%
TOTAL
4)SUBSIDUARY COMPANIES
h) 6 months-2 years
I. Recoverable
II. Non Recoverable
Totali) Above 2 years
I. Recoverable
II. Non Recoverable
Total
0%
100%
100%
100%
TOTAL
83
-
8/9/2019 Debtors Management @ Tata Steel
84/140
5)OTHERS
j) 6 months-three years
I. RecoverableII. Non Recoverable
Totalk) 3 years-5 years
I. Recoverable
II. Non Recoverable
Total
l) Above 5 years
I. Recoverable
II. Non RecoverableTotal
0%
100%
100%
100%
100%
100%
TOTAL
GRAND TOTAL
4.3 OPERATIONAL WORKING AT TATA STEEL FOR
MANAGING DEBTORS
OVERVIEW
Managing the debtors forTata steel is an important and chief function of the sales accounts
division of finance and accounts. All the transactions of commercial nature are dealt with by
this department in a detailed outline frame of working. The debtors arise each month out of
the sales made on credit and suitable feeding of the required figures has to be made once in a
month. This function is very much a difficult task owing to the various subsidiaries and
associate companies being controlled by TISCO itself.
84
-
8/9/2019 Debtors Management @ Tata Steel
85/140
The activities of each of the companies are diverse in operations and require different policy
formulations and strategies for complying with the existing market requirements. But they
are controlled in a centralized manner so that they give an actual overview of the standing of
the company. The profitability of each of the above is equally important to arrive at a
consensus for finding out the actual earnings and future prospects. As such each of the
company under subsidiary and associate is incorporated under distinct centres as Profit
Centre.
To flatten the organizational structure and developed authority and responsibility for the
quicker responsiveness to changing market conditions and greater initiative in dealing with
different target markets, Tata steel has brought in the concept of profit centre. For all
practical purpose, each profit centre functions as a separate company within the hold of Tata
steel. From the debtors management point of view also each profit centre has the
responsibility of appraising and dealing with its customers. However the overall control is
centralized and is in the hands of the finance department. The main function which lies at the
hands of Tata steel, Jamshedpur is to report such standings of the actual debtors as on a
particular date to the MD in the form of a monthly report. The figures thus arrived at give an
overview of which profit centres contribute the most to the debtors standing and the specific
reasons for the same.
Being a steel manufacturing concern, Tata steel is mainly concerned with the actual debtors
arising for the following profit centres:
STEEL
WIRE DIVISIONS
FERRO ALLOYS AND MINERALS DIVISION
TUBES DIVISION
BEARINGS
Each of the above profit centers have debtors of their own which are handled and managed in
a centralized manner. For an example, tubes division is one of the most important divisionwhich has the maximum contribution to the total sales taking together all the profit centers at
85
-
8/9/2019 Debtors Management @ Tata Steel
86/140
a point of time. It has various parties of its own as debtors such as ESSAR STEEL
LIMITED, BLUE STAR LIMITED, TATA CHEMICALS LIMITED,
MECHATRONICS and many debtors. A database relating to the different parties is
maintained in a pre specified format which helps in understanding the actual standing of the
debtor from the point of view of the actual sale being made to the party on credit till date.
This format helps in maintaining the records in a form which helps in judging the actual
ageing of the debtors and the amount being recovered from the total debt. By ageing we
mean to give an actual definition to the debtors in terms of how old has the debt been to him
and thereby categorizing him for the purpose. A same prescribed format is used by all the
profit centers for managing their respective debtors.
EXPLANATION
Through this preparation we get to know the actual total debtors figures and the major parties
that have contributed to the increase and decrease in the debtors as when compared with the
previous financial period. It mainly emphasizes upon the total debtors figures and the
overdue debtors and their major contributors in the form of party names and figures. It also
gives all list of indications for the debtors whose standing are for periods beyond six months.
This reporting is crucial for the reason that it gives the management the indicative areas for
focus, the reasons for a rise in debtors and suitable control for future standing which is
profitable to the company as a whole.
4.3 CHANNEL FINANCING
The core objective of channel financing is to provide integrated commercial and financial
solutions to the supply and distribution channels of a given industry. Channel finance gives
support to the commercial relationship between our clients and their suppliers and customers.
The commercial aim of the channel finance is to add value supply and distribution channels
by providing unique solutions that meet our customers demand.
86
-
8/9/2019 Debtors Management @ Tata Steel
87/140
By providing short term lending to clients utilizing qualified receivables as collateral, value
is added to the client by way of working capital support, reduced account receivables and
improved control of the sales/ distribution channels. In addition, payables discounting serves
to add value by improving supplier relationships and enhancing cash flow management.
Forward and backward linkages in a business organisation play a significant role in the
success or failure of the business entity. For,(say) a manufacturing or trading firm, while the
suppliers of the raw material are important as they provide input for production, equally
important is the role of its distributors which sell products manufactured by the firm through
retailers to the ultimate consumers. Channel financing relates to ensuring that integrated
financial and commercial solutions are available to the entire chain of supply and distribution
that could ensure health of the firm, financed by the bank.
How channel financing is different from conventional lending?
Channel financing is different from the conventional lending since in conventional lending
the financing banks are generally not concerned as how the suppliers of the firm and dealers
of teh product of the firm are financing their activity. The weak financials of the
supplier(leading to delay in supply and non availability of market credit)or the dealers of the
product (delay in receipt of payments leading to higher book debts) could adversely impact
the top line sales and bottom line profits of the financed firms. In the channel financing, the
financing bank may have to find the ways and means as to how the suppliers and the
buyers(dealers of the product) can be financed through various instruments/facilities. Hence,
the channel financing adds value to the transaction for all the parties concerned, be it the
manufacturer/trader , the supplier of the inputs or the dealer/ buyer or the financing bank.
METHODOLOGY
Through channel financing the business firms can outsource a major part of their working
capital needs thereby reducing their dependence on bank finance. For instance, it need not
avail of credit from the bank to pay off the supplier, if the supplier gets the finance in his own
name from the bank for raw materials supplied on credit in the form of say, drawee bills
financing. The bank can also allow loan to the dealer for credit term that has been fixed
87
-
8/9/2019 Debtors Management @ Tata Steel
88/140
between the firm and the dealer in the form of receivable finance or finance against book
debts or factoring of receivables. This enables the manufacturing firm to get the cash
immediately for the finished goods supplied. This firm functions as the principal customer
which suggests the names of its suppliers and dealers to the bank. Thereafter the bank makes
the a due diligence assessment of the suppliers/dealers standing credit worthiness and decides
to provide finance on merit.
BENEFITS TO THE FINANCED CONCERN, THE SUPPLIER
AND THE DEALERS/BUYERS
The pre and post sale of working capital requirement of the manufacturing concern would be
scaled down. Such firms can concentrate more on their core competence area of production
and marketing their products besides saving time and costs involved in arranging creditors
and monitoring recovery. As regards the suppliers and the dealers, the major benefit is that
they get payments promptly, which improve their liquidity position and cost. This also helps
them as well as bank to cut level of counter party risks.
GAINS TO BANKS
The bank also gain substantially from the process of channel financing which include
increased customer base, effective due diligence and smoothness of lending activity and loan
origination process. Besides, the banks will be able to ensure better credit discipline. Since
the risk is diversified through finance to supplier, manufacturer and the dealers, the credit
exposure norms are better observed. Hence the channel financing is a very convenient tool in
managing their assets portfolio.
88
-
8/9/2019 Debtors Management @ Tata Steel
89/140
Credit assessment
modules
Cam-1(solvency)
Cam-2(financials)Cam-3(technology
and commercial)
Cam-4(quality andcredibility)
4.4 Credit assessment policy
Credit management module (based on lotus notes)
Behind every credit decision there is an inherent potential for loss informed credit decision
will minimize the risk, enhance the profitability and lead to better structuring of credit. For
89
-
8/9/2019 Debtors Management @ Tata Steel
90/140
credit appraisal and risk assessment customers are broadly classified into three groups
namely
ORGANISED SECTOR (public and private ltd, companies including govt.
undertakings)
UNORGANISED SECTOR (traders, partnership firms, SIS units etc)
GOVERNMENT DEPARTMENT (defence , irrigation, power , railways, PWD,
CPWD)
Credit risk assessment of the customer is assessed
based on the following parameters:
ABILITY TO PAY- It is easy to assess the ability of the customer to pay and is
applicable to the organized sector
Solvency
Financial viability
Technological soundness
Commercial feasibility
WILLINGNESS TO PAY- it is based on the judgement and is applicable to both
organised and unorganised sectors. This is the only criterion adopted for assessing the
customers in the unorganised sectors.
The assessment criteria are:
Quality of management
Credibility
Past performance
Health of group companies
CREDIT DECISION:
Risk classification of the entry i.e. low/medium/ high
Should