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A Final report

ON
“The Financial Analysis of Maharashtra Elektrosmelt
Ltd.”
(To understand the financial viability of the Unit)

(A Subsidiary Plant of Steel Authority of India Limited)

Internship Project
3rd SEM

Submitted towards the partial fulfillment of

MASTER DEGREE OF BUSINESS ADMINISTRATION

(2008 – 2010)

Guided By: Submitted by:-


Mr.Anirudh Gachke Gurpreet Singh Chahal
Finance Faculty 8NBCP047

ICFAI NATIONAL COLLEGE, CHANDRAPUR


CERTIFICATE

This is to certify that the project work on “The Financial


Analysis of Maharashtra Elektrosmelt Ltd.”(To understand
the financial viability of the Unit) being submitted by
Mr.Gurpreet Singh Chahal for the partial fulfillment of MBA
degree, III semester from ICFAI NATIONAL COLLEGE,
CHANDRAPUR for the academic session 2008-10 is an
original work and the work has been done by him under my
guidance and supervision.

I wish him best of luck for a bright future.

For

Mr. Anirudh Gackhe

Sd/-
DECLARATION

I hereby declare that the project report titled “The Financial


Analysis of Maharashtra Elektrosmelt Ltd.”(To understand
the financial viability of the Unit) submitted by me towards the
partial fulfillment of MBA degree during the academic year
2008-10 is a bonafide work. All collected information is authentic
to the best of my knowledge and the work done by other if
referred has been properly acknowledged.

Gurpreet Singh Chahal

MBA III Semester

ICFAI NATIONAL COLLEGE

CHANDRAPUR

MAHARASHTRA
ACKNOWLEDGEMENT

Guidance, help and encouragement are the essential


requirements for successful completion of any project. I owe my
gratitude to all those who have helped me in the preparation of
this project report.

I express my deepest gratitude to my Project Guide Mr.


Anirudh Gackhe Faculty (Finance), for his valuable guidance and
help in completion of this project.

I feel obliged to all the staff of M.E.L Plant in general for


their generous help and support.

I also feel obliged to all the respondents, friends and


others who have shared their valuable time and opinion, for
making significant contribution directly or indirectly in the
project.

Gurpreet Singh Chahal

MBA III Semester

ICFAI NATIONAL COLLEGE

CHANDRAPUR (M.S)
Preface

There’s a little bit of SAIL in everybody’s life…..

Many students may have done work on this project in different way or styles. I have also
tried to work on this project in a different way. It was for the first time I got the
opportunity to work in such a prestigious and well known organization. And things
which I have experienced in my training period are going to help me through-out my life
time. I have worked on this project with great enthusiasm & Zeal. I have experienced
and learned during the training period. To run a giant organization each & every
department has to play its role effectively. In this era of cut throat competition there is
no room for complacency every aspect of life.
The main goal of my project is the “The Financial Analysis of Maharashtra
Elektrosmelt Ltd.”(To understand the financial viability of the Unit)
This project has been undertaken to study the challenges faced by the typical
government owned organization MEL.To understand the financial viability of the Unit
(Ratio Analysis).To discuss the competitive strategic of MEL in the light of changes in
the business environment .The M.E.L Plant is divided into various sections & each
section specializes in different activities. This report is prepared on the basis of the
extensive study carried out at Finance & Account Department of M.E.L Plant.

Gurpreet Singh Chahal

ICFAI NATIONAL COLLEGE

CHANDRAPUR (M.S)
Table of Contents
                                    
 Certificate of approval

Acknowledgement

1. Global Steel Industry

2. Indian Steel Industry

3. Steel Authority of India Ltd. (SAIL)

4. History of Maharashtra Elektrosmelt Limited (M.E.L)

5. Introduction: MAHARASHTRA ELEKTROSMELT LTD

6. Powers & Duties of Officers & Employees

7. Production Review

8. Financial Review

9. Financial Statement Analysis

10. Ratio Analysis: M.E.L

11. Key Financial Ratios of M.E.L

12. Findings / Conclusion

13. Bibliography

Annexure……………………………………………………………………….
1. THE GLOBAL STEEL INDUSTRY
Steel is by far the most important and one of the most multifunctional materials
without which development of mankind would have taken on entirely new facet. The
performance of the steel industry is often considered as an indicator of economic
progress, particularly in developing countries.

Global steel production has increased by 59 per cent over a period of seven years. Rapid
growth and industrialization achieved in China and India along with an impetus to
infrastructure development after 2003 has led to a rise in steel production. China is the
largest producer of steel turning out more than 400 million tonnes followed by the EU-
27, Japan, US, Russia and India. The production of world crude steel is projected to
touch 1,410 million tonnes in 2008. This increase is due to expected rise in Chinese and
EU-27 production.
WORLD TRADE SCENARIO
The demand for steel is directly co-related with economic growth. With the world
economy entering into an expansionary phase since 2003, demand for steel has been on
the rise and so has trading in the commodity. The leader in world steel exports is China
followed by Japan, Ukraine, Germany and Russia. The US followed by Germany, South
Korea, Italy, and France are the major importers.
Steel has long remained out of the purview of futures markets. However, trading in steel
futures commenced on the London Metal Exchange on April 28. Two regional steel
billet contracts have been launched, for Mediterranean and Far East delivery. Each
contract is for 65 tonnes of billets.

INDIA
India is the sixth largest producer of steel. After India's iron and steel industry was
delicensed in 1991-92, the country has added capacity in private sector. However,
compared to world production, India's production is a mere 4 per cent (2007). Though
India produces various varieties of steel, mild steel predominates in the production
share. For the 2001-2007 period, production has increased by 94 per cent.
The major Indian companies producing steel are Tata Steel, SAIL, RINL, ESSAR, Jindal
Steel and ISPAT.
The ministry of steel has predicted a slight increase in exports to 6.58 million tonnes in
2007-08 and a decrease in imports to 7.83 million tonnes in the same period.
2. INDIAN STEEL INDUSTRY

The Indian Steel industry is almost 100 years old now. Till 1990, the Indian steel
industry operated under a regulated environment with insulated markets and large scale
capacities reserved for the public sector. Production and prices were determined and
regulated by the Government, while SAIL and Tata Steel were the main producers, the
latter being the only private player. In 1990, the Indian steel Industry had a production
capacity of 23 MT. 1992 saw the onset of liberalization and the Indian economy was
opened to the world. Indian steel sector also witnessed the entry of several domestic
private players and large private investments flowed into the sector to add fresh
capacities.

The last decade saw the Indian steel industry integrating with the global economy and
evolving considerably to adopt world-class production technology to produce high
quality steel. The total investment in the Indian steel since 1990 is over Rs 19,000 crores
mostly in plant equipments, which have been installed after 1990. The steel industry
also went through a turbulent phase between 1997 and 2001 when there was a downturn
in the global steel industry. The progress of the industry in terms of capacity additions,
production, consumption, exports and profitability plateaued off during this phase. But
the industry weathered the storm only to recover in 2002 and is beginning to get back
on its feet given the strong domestic economic growth and revival of demand in global
markets.

With a currant capacity of 35MT the Indian steel industry is today the 8th largest
producer in the world. Today India produce international standard steel of all most all
grades/ varieties and has been net exporter for the last few years, underlying the
growing acceptability of its product in the global market.

Steel is a highly capital intensive industry and cyclical in nature. Its growth is
intertwined with the growth of economy at large and in particular the steel consuming
industries such as manufacturing, housing and infrastructure. Steel given its backward
and forward linkages has its large multiplier effect.

With capital investments of over Rs 100, 000 crores, the Indian steel industry currently
provides direct/indirect employment to over 2 million people. As India moves ahead in
the new millennium, the steel industry will play a critical role in transforming India into
an economic superpower.

Factors Influencing Demand & Supply of Steel

1. The demand for steel is dependent on the overall health of the economy and the
infrastructure developmental activities being undertaken.
2. Steel prices in the Indian market primarily depend on domestic demand and supply
conditions and international prices.
3. Government and different producer and consumer associations regularly monitor
steel prices, with government intervention quite routine. Government intervention often
has a major influence on domestic prices.
4. The duty imposed on import of steel and its fractions, and on the export of iron ore
also have an impact on steel prices.

5. The price trend in steel has been a function of domestic as well as world economic
activity.
6. Prices of input materials for iron and steel such as power tariff, freight rates and coal
prices, also contribute to the rise in the input costs for steel making.

The main crisis in the steel industry is spiralling costs and availability of
coal and iron ore. High crude oil prices, besides raising prices of other
energy commodities like coal and gas, are also leading to high shipping
freight rates, pushing up steel costs.
UPCOMING STEEL PLANTS: DESTINATION INDIA

India has finally emerged as a steel making location for global players. The global
steel industry appears to be in a race to invest in high-growth zones, such as, India. The
amount of activity in the sector has picked up speed in the past few years. The sector has
received investments of US$ 5994 million lined up through 102 memorandum of
understanding (MoUs) signed by different state governments to add 103 Mt in steel
capacity4.

Much has happened ever since SAIL’s Corporate Plan was announced in 2004.
Investment plans for the three specialty steel plants have been firmed up. The company
has grown in size with the amalgamation of IISCO (now renamed as IISCO Steel Plant).
Production targets have been revised from 19 Mt of steel to about 24 Mt. Estimated
investments have increased from Rs 250 000 million to around Rs 400 000 million.
And the time period has been squeezed by two years, bringing the targeted year of
completion of major projects5 from 2012 to 2010.

Besides expanding its existing facilities at Jamshedpur, Tata Steel plans three new
Greenfield projects in Orissa, Chhattisgarh and Jharkhand. It is also investing almost
$100 million in a ferro-chrome project in South Africa.

The single biggest foreign investment proposal in India relates to steel. Posco, the
South Korean steel giant, had announced an $11.3 billion project in the eastern state of
Orissa, where it hopes to put up a 12 Mt steel plant in phase-wise manner. However, the
project has run into controversies, with some political parties raising objections to the
state government’s plans to hand over captive iron ore mines to the company. Mittal has
announced plans for an $8.7 billion, 12 Mt steel plant in the neighboring state of
Jharkhand. Japan’s Nisshin Steel Company also plans to start a unit in India, to meet
the growing demand from Japanese automobile companies. The US$ 5.25 billion
Russian major Magnitogorsk Iron and Steel Company (MMK) plans to set up a 10 Mt
Greenfield steel plant in Orissa.
3. STEEL AUTHORITY OF INDIA LIMITED

(SAIL)

INTRODUCTION:
Steel Authority of India Limited (SAIL) is the leading steel-making company in
India. It is a fully integrated iron and steel maker, producing both basic and special
steels for domestic construction, engineering, power, railway, automotive and defence
industries and for sale in export markets.

Ranked amongst the top ten public sector companies in India in terms of
turnover, SAIL manufactures and sells a broad range of steel products, including hot
and cold rolled sheets and coils, galvanized sheets, electrical sheets, structural, railway
products, plates, bars and rods, stainless steel and other alloy steels. SAIL produces iron
and steel at five integrated plants and three special steel plants, located principally in
the eastern and central regions of India and situated close to domestic sources of raw
materials, including the Company's iron ore, limestone and dolomite mines. The
company has the distinction of being India’s largest producer of iron ore and of having
the country’s second largest mines network. This gives SAIL a competitive edge in terms
of captive availability of iron ore, limestone, and dolomite which are inputs for steel
making.

SAIL's wide range of long and flat steel products are much in demand in the
domestic as well as the international market. This vital responsibility is carried out by
SAIL's own Central Marketing Organization (CMO) and the International Trade
Division. CMO encompasses a wide network of 34 branch offices and 54 stockyards
located in major cities and towns throughout India. With technical and managerial
expertise and know-how in steel making gained over four decades, SAIL's Consultancy
Division (SAILCON) at New Delhi offers services and consultancy to clients world-wide.
SAIL has a well-equipped Research and Development Centre for Iron and Steel
(RDCIS) at Ranchi which helps to produce quality steel and develop new technologies
for the steel industry. Besides, SAIL has its own in-house Centre for Engineering and
Technology (CET), Management Training Institute (MTI) and Safety Organization at
Ranchi. Our captive mines are under the control of the Raw Materials Division in
Kolkata. The Environment Management Division and Growth Division of SAIL operate
from their headquarters in Kolkata. Almost all our plants and major units are ISO
Certified.

SAIL VISION:

To be a respected word class corporation and leader in Indian Steel Business in quality,
productivity, profitability and customer satisfaction.

MAJOR UNITS

Integrated Steel Plants:


¾ Bhilai Steel Plant (BSP) in Chhattisgarh
¾ Durgapur Steel Plant (DSP) in West Bengal
¾ Rourkela Steel Plant (RSP) in Orissa
¾ Bokaro Steel Plant (BSL) in Jharkhand
¾ IISCO Steel Plant (ISP) in West Bengal

Special Steel Plants:


¾ Alloy Steels Plants (ASP) in West Bengal
¾ Salem Steel Plant (SSP) in Tamil Nadu
¾ Visvesvaraya Iron and Steel Plant (VISL) in Karnataka
Subsidiaries
¾ Maharashtra Elektrosmelt Limited (MEL) in Maharashtra
¾ Bharat Refractories Limited (From 1st April 09)

JOINT VENTUERS

SAIL has promoted joint ventures in different areas ranging from power plants to e-
commerce.

¾ NTPC SAIL Power Company Pvt. Ltd: A 50:50 joint venture between Steel
Authority of India Ltd. (SAIL) and National Thermal Power Corporation Ltd.
(NTPC Ltd.), it manages the captive power plants at Rourkela, Durgapur and
Bhilai with a combined capacity of 314 megawatts (MW)

¾ Bokaro Power Supply Company Pvt. Limited: This 50:50 joint venture
between SAIL and the Damodar Valley Corporation formed in January 2002 is
managing the 302-MW power generation and 1880 tonnes per hour steam
generation facilities at Bokaro Steel Plant.

¾ Mjunction Services Limited: A joint venture between SAIL and Tata Steel on
50:50 basis, this company promotes e-commerce activities in steel and related
areas.

¾ SAIL-Bansal Service Center Ltd.: SAIL has formed a joint venture with
BMW industries Ltd. on 40:60 basis to promote a service centre at Bokaro with
the objective of adding value to steel.

¾ Bhilai JP Cement Ltd: SAIL has also incorporated a joint venture company
with M/s Jaiprakash Associates Ltd to set up a 2.2 MT cement plant at Bhilai.

¾ SAIL has signed an MOU with Manganese Ore India Ltd (MOIL) to set up a joint
venture company to produce Ferro-manganese and silico-manganese at Bhilai.
SAIL today is one of the largest industrial entities in India. Its strength has been the
diversified range of quality steel products catering to the domestic, as well as the export
markets and a large pool of technical and professional expertise.

¾ Ownership and Management


The Government of India owns about 86% of SAIL's equity and retains voting
control of the Company. However, SAIL, by virtue of its ‘Navratna’ status, enjoys
significant operational and financial autonomy.
4. History Of M.E.L : -

Maharashtra Elektrosmelt Limited (MEL) in Maharashtra

YEAR EVENTS
1974 - The company was incorporatated on 17th April, at Maharashtra.

1. The main objectives of the company is to manufacture mild Steel and


other carbon and spring steel billets/ingots from iron ore.

2. The company entered into a technical collaboration agreement with


Elkem-Spigerverket a/s (ELKEM) of Norway for the supply of know-
how for the smelting furnace and to make available various patented
designs and process.

3. 24,50,000 shares taken up by promoters, etc. and 1,00,000 Shares


reserved and allotted to Development Corpn. of Vidarbha Ltd.(DCVL).
24,50,000 shares offered at par for public subscription during August
1975.

1985 - The company entered into a collaboration agreement with M/s.Uddeholm,


Sweden for introducing new technology in the Converter of steel making
process.

1986 - Production and turnover were higher at 41,470 tonnes and respectively
despite a hike in the cost of power and non-availability of superior grades of
manganese ore.
a) Technical know-how and engineering package were received from Uddeholm.

b) With effect from 1st January, the company was physically taken over by Steel
Authority of India Ltd. Legal transfer of 82% of the shares were finalised on
18th October, and the company became the subsidiary of SAIL from that date.

1987 - A large number of high pressure sintering trials on manganese Ore were
conducted by the R & D division in the high pressure iron ore sintering pilot
plant which helped to establish basic process parameters for installation of a
demonstration plant with a capacity of 100 tonnes per day for high pressure
sintering of manganese ore.

1988 - Authentic grades of stainless steel using cupola-LD CLU Process was
produced after the successful commission of stainless steel plant on 20th
February.

1990 - Performance of the company improved mainly due to Diversification into


value added products like medium carbon ferro manganese in addition to
existing products.

1992 - With the support of RICIS, SAIL the company carried out dephosphorisation
of molten high carbon ferro manganese using various reagents on laboratory
scale.
- As on 31st March, SAIL holds 47,87,935 No. of equity shares of the company.

1994 - During the year, low carbon silico manganese with carbon content less than
0.5% was successfully produced.

1995 - All round improvement was achieved by the company in terms of highest
production, sales volume and productivity inspite of escalation in input
prices and highest provision for salaries and wages.

1996 - 50,00,000 No. of equity shares issued to SAIL.


5.Introduction:MAHARASHTRA ELEKTROSMELT LTD.

Maharashtra Elektrosmelt Ltd (MEL) is a Subsidiary of Steel Authority of India Ltd, a


Government of India Enterprise and the largest Manganese based Ferro Alloy producer
in the country.

MEL has an installed capacity of 1,00,000 TPY equivalent Ferro Manganese. The
product range of MEL includes High Carbon Ferro Manganese, Silico Manganese and
Medium/Low Carbon Ferro Manganese. It is accredited with Quality Assurance
Certificate ISO 9001:2000.

MEL's major infrastructure facilities include two nos. of 33 MVA Submerged Electric
Arc Furnaces for the production of ferro alloys, Manganese Ore Sintering Plants,
Furnace gas based Power Plant and one small Electric Arc Furnace for the production of
MC/LC Ferro Manganese with Lime Calcination and Manganese Ore Roasting Unit.

Maharashtra Elektrosmelt Ltd (MEL) is a Government Company U/s 617 of the


Companies Act, 1956. Steel Authority of India Ltd (SAIL), a Government Company, is
holding 99.12% in shares of MEL and that is why MEL falls under the category of
Government Company. The Company is managed by the Board of Directors appointed
by the Holding Company (SAIL). Being a Government Company, it is subjected to the
control of Government of India through the respective Ministry viz Ministry of Steel.

The Board of Directors consists of Chairman, Directors from SAIL and Independent
Director appointed by the Holding Company and one Nominee Director appointed by
the Govt of Maharashtra.

The Company has its Registered Office at SAIL, International Building, 3rd Floor, Off:
MK Road, Churchgate, Mumbai 400 020 and One Unit Office each at Nagpur and
Bhilai. The major production / service units of the Plant have ISO-9001-2000
accreditation.
The Plant is located at Chandrapur in Maharashtra State. Executive Director appointed
by the Holding Company stationed at Chandrapur is the CEO of the organization. He is
assisted by the Head of Departments of Works, Finance, Personnel & Administration,
Commercial, Marketing, Vigilance, Board & Company Affairs, Law, Internal Audit and
Public Relations.

The Production facilities in the Plant consist of two Submerged Arc Furnaces (annual
production rated capacity – 1,00,000 tonnes of equivalent Ferro Manganese) for
production of Manganese based ferro alloys; one Electric Arc Furnace for production of
medium carbon Ferro Manganese (annual production capacity – 2,500 tonnes); one
Power Plant of 4.2 MW capacity producing electric power; two Sinter Plants (annual
production capacity – 30,000 tonnes) for producing Manganese ore sinter from
Manganese ore fines.

Other Service Departments include Raw Material Yard, finished Product Handling Yard,
Maintenance Departments, Environment Management Dept, Energy Management
Dept, QMS Dept, Safety Engineering Dept, Commercial Dept, Personnel &
Administration Dept, Finance & Accounts Dept etc.

The main functions of MEL are:

a. Production and selling of High Carbon Ferro Manganese, Medium / low Carbon
Ferro Manganese and Silico Manganese to the integrated steel plants of SAIL and
others in private sector.
b. To help SAIL plants in formulating policies with respect to procurement of ferro
alloys, a major raw material, for their steel plants.
c. To help SAIL in conducting R&D activities with respect to ferro alloys and
developing new grades of ferro alloys

To ensure uninterrupted supply of ferro alloys to SAIL plants


Technology Development:-

Over the years, MEL has emerged as a leader in ferroalloy technology with
technological developments in many areas like raw material preparation, raw material
substitution, furnace operation, ferroalloy casting and processing etc.

Cost Reduction through utilization of wastes has been the area of prime concern at
MEL. Utilisation of Ferro Manganese Slag in the production of Silico Manganese,
Sintering of Manganese Ore Fines and its use in production process, Utilisation of
furnace gas as fuel for power generation, lime calcinations and manganese ore roasting
are some of the major areas of waste utilization.
Technology Development in the field of Ferro alloys and raw material preparation has
been made as follows.

• Production of low and medium carbon Ferro manganese through silico-thermic


route.
• Lime is produced for the use in the paper industries as the part of diversification.
• Predesting of raw materials in binges with the use of Furnace gases.
• In order to censer energy automation of the plant operations is done which all
reduced the power cost substantially.
• All the product and process of MEL are ISO standards because of ISO-9002
Certification to the whole company.
• A 100 TDP high-pressure sinter plant was installed with the active association of
R&D centre for Iron & Steel SAIL, Ranchi for the gainful utilization of manganese
ore. It is the first Plant of its kind in the world.

Total Quality Management:


Total Quality Management is an integral part of the day to day activities of the
company. The ISO 9001:2000 Quality Assurance System is being maintained since
its accreditation, which covers all the sections of the plant.
Environment & Pollution Control:
Environment Management and pollution control gets top priority in the company's
activities. To keep environment clean for ecological protection, thrust is given in the
areas of green belt development in and around the plant premises, solid waste
management, monitoring of liquid and air effluent for various environmental
parameters etc.

Human Resource Management :


Effectiveness of the Human resource is considered and identified as a major factor
for sustained high level of performance at MEL. The company takes number of steps
to motivate and fully involve the workforce to improve the overall performance of the
company. The creative ideas put up by the employees are recognized through a
Suggestion Scheme. Under company wide training programs the employees are
trained in various disciplines.

Safety :
The company has gained a prestigious position in the area of safety and
environment. It has been awarded with various international and national awards
from British Safety Council, London, National Safety Council USA, Govt. of India etc.
MEL has also made great strides in establishing industrial safety consciousness in
the industrial belt of Vidarbha.

Community :
Under the Corporate Social Responsibility, MEL has taken up several schemes and
projects in and around the villages of its Plant. Some of them are donation of
stationery items and bags to the school children, providing street light fittings,
organizing medical check up camps for women and children, training the youth in
the villages for getting self-employment and beautification of Chandrapur city etc. In
addition, plans are made to provide a mobile Ambulance with medical staff and
medicine and also constructing a market yard for small vendors in the villages in the
vicinity of the plant for the benefit of the villagers.
 

Figure 1: Ferro Alloy Process Flow Chart

 
Figure 2 : Flow Chart of Ferro-Manganese/Silicon Manganese Manufacturing Process

 
Figure 3: Utilization Of Waste Furnace Gas
Figure 4 : Pollution Control Measures at MEL
6.Powers & Duties of Officers & Employees
INTRODUCTION:

Maharashtra Elektrosmelt Ltd, being a Subsidiary Company of Steel Authority of India


Ltd., a Public Sector Undertaking, is governed by the Board of Directors of the Company
and according to the guidelines issued by Ministry of Steel from time to time. The Board
of Directors has delegated powers to the Chairman, Executive Director and CEO. The
CEO has sub-delegated the power to the Heads of Departments.

The executives in different departments/sections have to work according to the powers


delegated to them as per the Delegation of Powers and perform the following general
functions -

- Achieving clarity and organizational commitment on objectives, goals and plans of


action.
- Developing norms of performance in every functional area and securing commitment
for improved norms

- Ensuring smooth and efficient operation and achievement of optimal performance of


different departments.

- Capital investment decisions within powers of ED and Board of Directors.

- Co-ordination with all external agencies, Central & State Govt. offices, etc. in order to
improve overall operations of the Company.

- Projection of image of the Company through various media to the public in general.

The functions of the different departments are detailed in the subsequent pages.

Finance & Accounts:

• General
• Budgeting
• Control of Cost
• Financial Accounting : Taxation & Audit / Others
• Financial concurrence
• Expenditure monitoring
• Quarterly / Annual Accounts
• Compliance of various rules, regulations and Acts relating to direct & indirect
taxes, etc.
Works & Projects:

• Achieve APP targets of Maintenance of equipment and machinery in good health,


Production of Ferro Alloys, Specific Consumption norms and productivity.
• Industrial Safety and Pollution Control.
• Despatch of ferro alloys to SAIL Steel Plants and other consumers in open
market.
• Prepare, monitor and implement Corporate plan for the organization.
• Conceive, plan and implement various projects sanctioned from time to time.

Personnel & Administration:

• Promote and maintain cordial industrial relations


• Human Resource Development
• Recruitment/Training and Development
• Welfare & Health Services
• Establishment matters
• Security and Fire Services
• Rajbhasha / Hindi Section
• Hospitality and Horticulture
• Implementation of sanctioned Compensation Schemes.

Materials Management & Contracts:

• Procure right quality and quantity of materials and services in time.


• Make all out efforts to procure materials/services at competitive prices.
• Maintain Minimum stock levels as per norms fixed and improve from time to
time.
• Maintain all weighing equipment/Machinery.
• Provide and maintain different contracts and agreements for services throughout
the year at minimum cost and best service to the organization.Vendor
development

Marketing:

• Evolve and implement Marketing Plan for sale of prime products and by-
products of the Company under Conversion Agreement to SAIL plants and other
consumers in open market including export as per APP.
• Develop and improve customer base on regular basis.
• Study market and regularize pricing of products periodically and as & when
required.
• Co-ordinate between SAIL Plant, Buyers and Production and Despatch Depts.

Board, Company Affairs & Law:

• Hold Board meetings, Audit Committee meetings, AGM as required under the
Act.
• Advise the Board of Directors on various issues provided under Company Law.
• Comply with Corporate governance and Secretarial standards.
• Comply with all legal requirements of the Company.

Communication/PR Dept :

• Prepare PR Budget and implement


• Take steps for publicity, and effective co-ordination with local, regional and
national press and electronic media for building up and maintaining good image
of the organization.
• Publication of House Magazines, press releases and press conferences, etc. as and
when required.

Internal Audit Dept :

• Conducting, monitoring and reporting various audit observations carried out


regularly as periodically.
• Co-ordinate with Statutory, Govt. and CAG Auditors
• Co-ordinate between different depts. in the organization and Auditors for
satisfying various audit queries, preparation of suitable replies.
• Submission of Internal Audit Observations periodically to the Audit Committee
of Directors.
Procedure followed in the decision making process
including channels of supervision and accountability
Maharashtra Elektrosmelt Ltd, being a Public Sector Undertaking, is governed by the
Board of Directors of the Company and according to the guidelines issued by Ministry of
Steel from time to time. The Board of Directors has delegated powers to the Chairman,
Executive Director and CEO. The CEO has sub-delegated the power to the Heads of
Departments.

All the Executives to work according to the powers delegated to them as per the
Delegation of Powers.

Concerned Executive in the Departments supervises the implementation of the


decisions taken as per the laid down procedures and he will be accountable to the extent
of powers delegated to him as per the hierarchy in the department.

The norms set by it for the discharge of its functions

Maharashtra Elektrosmelt Ltd, being a Public Sector Undertaking, is governed by the


Board of Directors of the Company and according to the guidelines issued by Ministry of
Steel from time to time. The Board of Directors has delegated power to the Chairman,
Executive Director and CEO. The CEO has sub-delegated the power to the Heads of
Departments

All the Executives to work according to the powers delegated to them under the
Delegation of Powers.

The norms set in the various Procedures, Rules, Manuals, Acts and Laws are followed to
discharge the functions.
List of Rules,Regulations,Instructions,Manuals &Records,held
by it or under its control or used by its employess for discharging
its functions:

a) Personnel & Training Manual of SAIL


b) MEL Conduct, Discipline & Appeal Rules
c) LTC / LLTC Rules
d) Pay Fixation Rules
e) Executive Salary Structure
f) Non-Executive Wage Structure
g) TA Rules (Executives & Non-executives)
h) Employees Standing Orders
i) Purchase/Contract Procedure – 2000
j) MEL Leave rules
k) PF & Gratuity Rules
l) Vigilance Manual

Statement of the categories of documents that are held by


MEL or under its control:
1)Memorandum of Association and Articles of Association: The document sets
out the structure, purpose and operation of MEL in accordance with Companies Act,
1956.

2) Annual Report:
The Report contains Director’s Report on the Company’s overall performance during the
preceding financial year, including production and financial performances. The Report
also contains the Company’s audited financial accounts, expenditure and profit / loss
statement.

Maharashtra Elektrosmelt Ltd is a subsidiary of Steel Authority of India Ltd, a


Central Public Sector Undertaking, under the Ministry of Steel. All its policies are
evolved and implemented as per the guidelines issued by the Holding Company (SAIL)
and Ministry from time to time.

The basic function of Maharashtra Elektrosmelt Ltd is to produce Manganese based


ferro alloys to mainly cater to the needs of steel plants of Steel Authority of India Ltd.
Thus, it does not necessitate consultation with public for formulation of its policies.
As such, no arrangement exists in Maharashtra Elektrosmelt Ltd for consultation with,
or representation by, the members of the public in relation to the formulation of its
policy or implementation, thereof.

Statement of the Boards, Councils, Committees and other bodies consisting


of two or more persons constituted as its part or for the purpose of its
advice, and as to whether meetings of those boards, councils, committees
and other bodies are open to the public, or the minutes of such meetings are
accessible for public;

A) BOARD OF DIRECTORS

Shri R Ramaraju Chairman


Managing Director
Bhilai Steel Plant

Shri SDM Nagpal Non-Functional


(Independent) Director
Shri PK Bajaj Non-Functional Director
Executive Director
(Operations)
Steel Authority of India
Ltd

Shri SA Rode Non-Functional


Jt Director of Industries (Independent) Director
Nagpur Region, Udyog
Bhawan

B) SUB-COMMITTEE (FOR AUDIT COMMITTEE)

Shri SDM Nagpal Chairman

Shri PK Bajaj Member


Executive Director
(Operations)
Steel Authority of India Ltd

Shri SA Rode Member


Jt Director of Industries
Nagpur Region, Udyog
Bhawan
C) SHAREHOLDERS GRIEVANCE COMMITTEE

Shri PK Bajaj Chairman


Executive Director
(Operations)
Steel Authority of India Ltd

Shri SA Rode Member


Jt Director of Industries
Nagpur Region, Udyog
Bhawan

Minutes of the Board Meeting and its Sub-Committee Meeting are confidential in nature and it is
not open for public access.

D) OTHER COMMITTEES

ƒ ƒ MEL Employees’
Pricing Committee
Welfare Committee
ƒ Capital Investment ƒ
Canteen Committee
Committee
ƒ Indent Screening ƒ Quarter Allotment
Committee Committee
ƒ House Building Advance ƒ Shops Allotment
Committee Committee
Committee for Telephone
ƒ ƒ
Management of Idle Allotment
Assets Committee
ƒ Rajbhasha Karyanwayan ƒ Vendor Registration
Samiti Committee
 
Directory of Total Numbers Officers & Employees of MAHARASHTRA
ELEKTROSMELT LTD :

Non-
S. No Name of Department Executives Total
Executives
1 Board, Co. Affairs & Legal 1 1 2
2 Civil Maintenance 3 11 14
3 Contract Cell 3 2 5
4 Computer & IT Cell 2 - 2
5 Cost Control 1 - 1
6 Electric Arc Furnace 1 14 15
7 Electrical Maintenance 9 35 44
Energy Management & Internal
8 2 - 2
Audit
9 Environment Management 1 2 3
10 Executive Director’s Office 3 1 4
11 Ferro Alloy Division 9 139 149
12 Finance & Accounts 11 9 20
Dy General Manager (Works)
13 1 1 2
Office
14 Hindi Cell 1 0 1
15 HRD & Training 1 1 2
16 Instrumentation 2 5 7
17 Laboratory 5 19 24
18 Marketing 2 3 5
19 Material Management 6 6 12
20 Mechanical Maintenance 6 30 36
21 Medical & Health Services 2 10 12
22 Personnel & Administration 5 16 21
23 Power Plant 7 18 25
24 Product Handling 7 13 20
25 Production Planning & Control 1 4 5
26 Projects 3 2 5
27 Public Relations 2 1 3
28 Quality Management System 1 1 2
29 Raw Material Yard 4 17 21
30 Registered Office at Mumbai 2 4 6
31 Right to Information Cell 2 - 2
32 Sinter Plant – I 2 23 25
33 Sinter Plant – II & SP Maintenance 1 26 27
34 Safety Engineering 1 1 2
35 Security & Fire Services 6 32 38
36 Stores 2 19 21
37 Time Office 2 7 9
38 Transport 4 83 87
39 Utilities 2 29 31
40 Unit Office at Nagpur 1 3 4
41 Unit Office at Bhilai 1 2 3
42 Vigilance 3 1 4
43 Workshop & Yard Maintenance 1 32 33

Total 132 623 756


 

PRODUCTS OFFERED BY MEL

Chemical specification
Product Size in mm
Manganese Carbon Silicon Phosphorous
High Carbon 10-150
70-74 % and 74-
Ferro 40-100 6-8 % 1.5 % max 0.43 % max
78 %
Manganese 12-25
Low Carbon
10-150 70-74 % and 74-
Ferro 1.5 % max 2 % max 0.4 % max
40-100 78 %
Manganese
Medium
10-150 70-74 % and 74-
Carbon Ferro 1-3% 2 % max 0.4 % max
25-50 78 %
Manganese
10-150
Silico 60-65 % and 65
40-100 2 % max 15-20 % 0.35 % max
Manganese % Min
12-25

Location :

The plant is situated amongst picturesque surroundings at Chandrapur (Maharashtra). It is


located 166 km away from Nagpur on Delhi-Chennai rail route and is well connected by road to
the major cities of India.
 
 

7. Production Review : 2008-2009


The Company‘s production of the different grades of the Ferro alloys was as under :

Production Review (Total)   
        
 
Material  2008‐09 (MT) 2007‐08 (MT) 
          
High carbon Ferro Managanese  68789 64584 
Silico Managanese  35640 37640   
Medium / Low Carbon Ferro Managanese  1763 1941 
 

Sales & Marketing Review


A. SAIL Steel Plants
During the Financial year 2008-09 the company continued conversion arrangement
with the Sail Steel Plant in order to have secured market. Vigorous efforts were made by
the company to find market outside SAIL. Despatches of Ferro alloys to SAIL steel
plants under conversion arrangements during the year were as under:

Sales & Marketing Review to SAIL Steel Plants 
        
Material  2008‐09 (MT) 2007‐08 (MT)
        
High carbon Ferro Managanese  61015 59129
Silico Managanese  29662 32197  
Medium / Low Carbon Ferro Managanese  1448 1554
 

 
B. Other Customers
The Company continued to achieve a growth in terms of sales realization through sale of
ferro alloys to the customers other than the sail plants. The details of sales performance
in 2007-09 / 2008-09 are as under :

Sales & Marketing Review to Other Customers 
                    
Material  2008‐09 (MT)  2007‐08 (MT) 
Value  Value 
Quantity  Value  per  Quantity  Value  per 
   (MT)  (RS./Lacs) Tonn  (MT)  (RS./Lacs) Tonn 
High carbon Ferro Managanese  3127 2123 67891 8504  4918.45 57836.9
Silico Managanese  4710 2785 59139 7525  3795.68 50440.9
Medium / Low Carbon Ferro 
Managanese  16 22.88 1E+05 237  218.62 92244.7
Others (Slags/others)  N.A  257.8    N.A  185.15   
                    
 

SPECIAL PROJECTS AT MEL

1. Iron Ore Mines

Application for ‘prospecting License’ for Iron ore has been submitted to the office of
District Mining Officer, Chandrapur.

2. Manganese Ore mines

Application for ‘prospecting License’ for Manganese ore has been submitted to the office
of District Mining Officer, Chandrapur. Mel is pursuing the matter with District mining
officier & Directors, Geology & Mining, Nagpur , for both the cases.

3. Installation of 2 x 67.5 MW Power Plant

Pre-feasibility report (Techno-economic) for Installation of 2 x 67.5 MW Power Plant


has been sent for approval & is under examination prepared by MECON, Ranchi

 
8.Financial Review
The Financial year started with uptrend in demand for Iron & Steel products and
buoyancy in the steel prices during the 1st half. However, the unprecedented global
economic slow down & the financial crisis in the second half forced the steel industries
to curtail production in line with market demand. Since ferro alloys are exclusively
utilized as raw material in steel industry , the Ferro alloys industry witnessed uptrend
in the demand & better prices for Ferro alloys during the first half, had to curtail the
production in the second half in line with market demand & to take various measures to
improve the performance.

MEL has achieved a turnover of Rs.425.06 crores (including conversion income


of Rs. 353.02 crores) as compared to Rs.396.41 crores (including conversion income of
Rs.290.79 crores) in the previous year. The company has achieved an improved
performance in terms of financial results and earned a net profit (before tax) of
Rs.62.08 crores due to strategic measures taken by the Management viz. increase in
production and sales, better product mix, improved techno –economic parameters,
optimization in prudent funds management, etc The financial results are as summarized
below:
Summarised Financial Performance 
2008‐2009 (Rs.  2008‐2009 (Rs. 
         In Crores)  In Crores) 

   Turnover (Gross)     425.06  396.41 


              
   Operating Profit (Gross Profit)     64.53  57.89 
(‐)  Interest     0.26  0.11 
   Depreciation     2.19  1.91 
   Net Profit  Before Tax     62.08  55.87 
(‐)  Income Tax Provision     21.19  19.55 
   Net Profit After Tax     40.89  36.32 
              

(‐)  Proposed Dividend     8.4  7.44 


   Tax On Proposed Dividend     1.43  1.26 
   Transferred to General Reserve     4.1  3.65 
   Balance carried to Balance Sheet     26.96  23.97 

Earning Per Share 
Profit After Tax  40.89  36.32 
Average Number of Equity shares  24000000  24000000 
Basic & Diluted Earning Per Share  17.04  15.13 

NOTE :  

Proposed Dividend @ 3.50 per Share for 
A.  240,00,000 Shares  
9. Financial Statement Analysis
Financial statement analysis involves the application of analytical tools and techniques
to the financial data to get information that is useful in decision making. The foundation
of any good analysis is a thorough understanding of the objectives to be achieved and
the uses to which it is going to be put. Such understanding leads to economy of effort as
well as to a useful and most relevant focus on the points that need to be clarified and the
estimates and projections that are required.

The analysis of a ratio gives the relationship between two variables at a point of time and
over a period of time. There are three kinds of ratios and they are liquidity ratios,
profitability ratios, ownership ratios. Liquidity ratios measure the short-term liquidity
of the firm with the help of ratios like current ratio, quick ratio and turnover ratios.
Profitability ratios measure the operational efficiency of the firm. They give the details of
how efficient the firm is in applying its resources to get the maximum returns.
Ownership ratios help the present or future stockholder in assessing the value of his
investment. Earning ratios, leverage ratios (capital structure and coverage ratios) and
dividend ratios fall into the category of ownership ratios. Leverage ratios measure the
long-term solvency of the firm. They are further divided into capital structure ratios and
coverage ratios.
Balance Sheet of Maharashtra Elektrosmelt Ltd

Balance Sheet of Maharashtra


Mar '05 Mar '06 Mar '07 Mar '08 Mar '09
Elektrosmelt Ltd

Sources Of Funds
------------------- in Rs. Cr. -------------------

Total Share Capital 24.00 24.00 24.00 24.00 24.00

Equity Share Capital 24.00 24.00 24.00 24.00 24.00

Share Application Money 0.00 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves 11.37 30.95 43.74 71.36 102.42

Revaluation Reserves 0.00 0.00 0.00 0.00 0.00

Networth 35.37 54.95 67.74 95.36 126.42

Secured Loans 0.02 0.01 0.00 0.00 0.79

Unsecured Loans 7.96 2.06 0.98 0.39 0.22

Total Debt 7.98 2.07 0.98 0.39 1.01

Total Liabilities 43.35 57.02 68.72 95.75 127.43

Application Of Funds

Gross Block 58.71 60.18 61.07 63.62 70.83

Less: Accum. Depreciation 32.86 34.90 36.11 37.77 39.66

Net Block 25.85 25.28 24.96 25.85 31.17

Capital Work in Progress 0.97 0.87 2.21 2.88 5.61

Investments 0.00 0.00 0.00 0.00 0.00

Inventories 44.96 68.29 65.03 42.19 60.52

Sundry Debtors 19.74 1.31 17.21 33.89 27.01

Cash and Bank Balance 3.49 9.56 2.98 7.47 0.25

Total Current Assets 68.19 79.16 85.22 83.55 87.78

Loans and Advances 27.19 35.74 31.60 32.17 68.64

Fixed Deposits 2.08 12.23 4.22 78.64 59.65


Total CA, Loans & Advances 97.46 127.13 121.04 194.36 216.07

Deferred Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 48.99 57.47 50.61 71.47 49.78

Provisions 33.37 39.78 29.36 56.00 75.65

Total CL & Provisions 82.36 97.25 79.97 127.47 125.43

Net Current Assets 15.10 29.88 41.07 66.89 90.64

Miscellaneous Expenses 1.45 0.99 0.49 0.13 0.00

Total Assets 43.37 57.02 68.73 95.75 127.42

Contingent Liabilities 9.20 12.02 14.73 18.25 16.01

Book Value (Rs) 14.74 22.90 28.23 39.73 52.68


Profit & Loss account of Maharashtra Elektrosmelt Ltd

Profit & Loss account of Maharashtra  Mar '05  Mar '06 Mar '07  Mar '08 Mar '09


Elektrosmelt Ltd  ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ in Rs. Cr. ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ 

Income         

Sales Turnover  262.88  247.85  291.99  398.04 425.84

Excise Duty  39.44  54.44  57.47  77.38 100.77

Net Sales  223.44  193.41  234.52  320.66 325.07

Other Income  ‐0.60  1.63  2.18  3.28  14.98

Stock Adjustments  24.59  20.34  ‐15.97  ‐14.93 14.47

Total Income  247.43  215.38  220.73  309.01 354.52

Expenditure         

Raw Materials  46.10  53.64  32.36  70.49 93.22

Power & Fuel Cost  87.94  93.01  120.95  113.91 131.74

Employee Cost  31.65  23.60  27.64  55.04 51.40

Other Manufacturing Expenses  4.40  1.68  0.18  0.53  0.38 

Selling and Admin Expenses  6.74  7.56  8.21  8.98  11.33

Miscellaneous Expenses  3.85  1.17  1.50  1.83  2.26 

Preoperative Exp Capitalized  0.00  0.00  0.00  0.00  0.00 

Total Expenses  180.68  180.66  190.84  250.78 290.33


  Mar '05  Mar '06 Mar '07  Mar '08 Mar '09

Operating Profit  67.35  33.09  27.71  54.95 49.21

PBDIT  66.75  34.72  29.89  58.23 64.19

Interest  2.26  0.36  0.16  0.11  0.26 

PBDT  64.49  34.36  29.73  58.12 63.93

Depreciation  1.95  1.97  1.70  1.91  2.19 

Other Written Off  0.49  0.49  0.49  0.51  0.13 

Profit Before Tax  62.05  31.90  27.54  55.70 61.61

Extra‐ordinary items  3.09  4.10  0.31  0.16  0.46 

PBT (Post Extra‐ord Items)  65.14  36.00  27.85  55.86 62.07

Tax  12.90  10.93  9.45  19.55 21.19

Reported Net Profit  52.23  20.97  18.50  36.32 40.89

Total Value Addition  134.59  127.03  158.48  180.28 197.11

Preference Dividend  0.00  0.00  0.00  0.00  0.00 

Equity Dividend  0.00  4.80  4.80  7.44  8.40 

Corporate Dividend Tax  0.00  0.67  0.82  1.26  1.43 

Per share data (Annualized)         

Shares in issue (lakhs)  240.00  240.00  240.00  240.00 240.00

Earning Per Share (Rs)  21.76  8.74  7.71  15.13 17.04

Equity Dividend (%)  0.00  20.00  20.00  31.00 35.00

Book Value (Rs)  14.74  22.90  28.23  39.73 52.68


Cash Flow of Maharashtra Elektrosmelt Ltd

Cash Flow of Maharashtra  Mar '05 Mar '06 Mar '07 Mar '08  Mar '09


Elektrosmelt Ltd  ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ in Rs. Cr. ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐

Net Profit Before Tax  65.13 31.93 28.25 55.87  62.08

Net Cash From Operating 
37.01  23.70  ‐10.73  87.60  ‐16.37 
Activities 

Net Cash (used in)/from 
5.61  ‐1.21  ‐2.62  ‐2.40  ‐1.54 
Investing Activities 

Net Cash (used in)/from 
‐41.41  ‐6.26  ‐1.25  ‐6.30  ‐8.29 
Financing Activities 

Net (decrease)/increase In 
1.21  16.22  ‐14.60  78.91  ‐26.20 
Cash and Cash Equivalents 

Opening Cash & Cash 
4.36  5.57  21.79  7.19  86.10 
Equivalents 

Closing Cash & Cash 
5.57  21.79  7.19  86.10  59.90 
Equivalents 
Accounting Policy Year : Mar '09
1.1 BASIS OF ACCOUNTING:

The financial statements are prepared under the historical cost


convention on accrual basis of accounting, in accordance with the
generally accepted accounting principles, Accounting Standards issued
by the Institute of Chartered Accountants of India, as applicable, and
the relevant provisions of the Companies Act, 1956 including Accounting
Standards notified thereunder.

1.2 Use of estimates

In preparing the financial statements in conformity with accounting


principles generally accepted in India, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent liabilities as at the
date of financial statements and the amounts of revenue and expenses
during the reported period. Actual results could differ from those
estimates. Any revision to such estimates is recognised in the period
the same is determined.

1.3 FIXED ASSETS:


Fixed Assets are stated at cost of acquisition less depreciation.

Expenditure on development of land, including lease hold land, is


capitalised as part of cost of land.

Cost includes all identifiable expenditure including trial run


expenses, net of revenue.

Assets retired from active use are shown separately under fixed assets
at lower of net book value and estimated realizable value.
Software which is not an integral part of related hardware, is treated
as intangible asset and amortized over a period of five years or its
licence period, whichever is less

1.4 BORROWING COSTS:

Borrowing costs attributable to the acquisition or construction of a


qualifying asset are capitalised as part of the cost of that asset.
Other borrowing costs are recognised as expense in the period in which
these are incurred.

1.5 DEPRECIATION:

Depreciation is provided on straight-line method at the rates specified


in Schedule XIV to the Companies Act, 1956.

However, where the historical cost of a depreciable asset undergoes a


change, the depreciation on the revised unamortized depreciable amount
is provided over the residual useful life of the asset.

Classification of plant and machinery into continuous and


non-continuous is made on the basis of technical opinion and
depreciation provided accordingly.

Depreciation on addition / deletion during the year is provided on


pro-rata basis with reference to the month of addition / deletion.
1.6 INVENTORY

Raw Materials, Stores & spares and finished/semi- finished products are
valued at lower of cost and net realisable value. In case of identified
obsolete / surplus/ non-moving items, necessary provision is made and
charged to revenue.

Residue products in the nature of coke rejects valued at estimated net


realisable value. Other residue products and scrap of various nature
are not readily usable / saleable, are recognised on disposal.

The basis of determining cost is :

Raw materials and Stores

- Weighted average & Spares cost

Materials in-transit - At Cost

Finished/Semi-finished Products

- Material cost plus appropriate share of labour, related overheads and


duties.

1.7 GRANTS

Grants relating to the acquisition of a specific asset are adjusted


against the cost of the concerned asset. Grants relating to the revenue
expenditure are adjusted against the related expenses.

1.8 VOLUNTARYRETIREMENT COMPENSATION


Expenditure on voluntary retirement compensation, is charged off in the
year, in which it is incurred.
1.9 FOREIGN CURRENCYTRANSACTIONS:

Monetary assets and liabilities related to foreign currency


transactions remaining unsettled are translated at year- end rates.

The difference in translation of monetary assets and liabilities and


realised gains and losses on foreign exchange transactions other than
those relating to fixed assets, are recognized in the profit and loss
account. In respect of transactions covered by forward exchange
contracts, the difference between the contract rate and spot rate on
the date of the transaction is recognised in the profit and loss
account over the period of contract.

Exchange differences (including arising out of forward exchange


contracts) in respect of liabilities relating to fixed assets are
adjusted in the carrying amount of such assets.

1.10 EMPLOYEES BENEFITS :

The provisions/liabilities towards gratuity, accrued leave, long term


service awards, post-retirement medical and settlement benefits, future
payments to the disabled employees / legal heirs of deceased employees
under the Employees Family Benefit Scheme, are made based on the
actuarial valuation as at the end of the year and charged to the profit
and loss account along with actuarial gains / losses.

1.11 ADJUSTMENTS PERTAINING TO EARLIER YEARS AND PREPAID


EXPENSES:
Income / expenditure relating to prior period and prepaid expenses,
which do not exceed Rs.5 Lacs in each case, are treated as income /
expenditure of current year.
1.12 REVENUE RECOGNITION:

Sales* include excise duty, packing charges and are net of rebates.
Sales are recognised at the time of despatch of materials to the buyers
including the cases where delivery documents are endorsed in favour of
the buyers. Marine Export sales are recognized on :

i) the issue of bill of lading, or

ii) negotiation of export bills upon expiry of laycan period, in cases


where realization of material value without shipment is provided in
the letters of credit of respective contracts, whichever is earlier.

Export incentives under various schemes are recognised as income in the


year of actual shipment at estimated realizable value / actual credit
earned.

* Sales include conversion income.

1.13 CLAIMS FOR LIQUIDATED DAMAGES/ PRICE ESCALATION:

Claims for liquidated damages are accounted for as and when these are
deducted and / or considered recoverable by the company. These are
adjusted to the capital cost or recognised in profit and loss account,
as the case may be, on final settlement.

Suppliers/Contractors claims for price escalation are accounted for,


to the extent such claims are accepted by the company.
1.14 DEFERRED TAX

The deferred tax on timing differences between book profit and taxable
profit for the year is accounted for applying the tax rates and laws
that have been enacted or substantively enacted as on the balance sheet
date. Deferred tax assets arising from timing differences are
recognised to the extent there is a reasonable certainty that the
assets can be realised in future.
10. Maharashtra Elektrosmelt Ltd.
Ratio Analysis
Ratios are quantities that establish relationship between two variables. Ratio analysis
helps in studying various aspects like liquidity, efficiency, profitability and solvency of
the firm.

Financial ratios can be broadly classified into four categories:

 
1. Liquidity ratios: Liquidity ratios measure the ability of the firm to meet
its current obligations.

 
 
The ratios that come under this category are:
a. Current ratio: Current ratio measures the short-term solvency of the
firm.

b. Quick ratio: While computing current ratio, inventory is included as a


part of current assets. But inventory normally requires some time for being
converted into cash, because of which the true picture of liquidity is not given
by current ratio. Quick ratio provides a better measure of liquidity unlike
current ratio; it does not take inventories into account.

2. Activity Ratios/Turnover Ratios: They are also referred to as activity ratios


and they indicate the efficiency of the firm in dealing with the current assets.
They indicate the pace at which the assets are turned into sales.

 
a. Average receivables turnover ratio: Accounts receivables indicate
the credit sales of the company. The debtors turnover ratio or the
receivables turnover ratio gives the number of times receivables are
generated and collected during the year.

b. Inventory Turnover Ratio: It indicates the efficiency of the firm in


producing and selling its product.
3. Profitability ratios: Profitability ratios help in measuring the operating
efficiency of the firm. Besides the management of the company, creditors, owners
and shareholders are also interested in the profitability of the firm. There are two
categories of profitability ratios: gross profit margin and b) net profit margin.

 
 

a. Profit in relation to sales:

i. Gross Profit Margin: It indicates the efficiency with which the firm
produces each unit of the product.

ii. Net Profit margin: It indicates the overall efficiency of the firm in
manufacturing, administering and selling the product.

b. Profit in relation to assets:


a. Asset Turnover Ratio: This ratio indicates the firm’s ability in
generating sales from all financial resources committed to total assets.

b. Earning Power: It is a measure of a firm’s operating performance.

c. Return on Equity (ROE): ROE indicates how well the firm has used the
resources of the owners.

c. Ownership Ratios: Ownership ratios help in analyzing the value of the


shareholders’ investments in the firm. They help in evaluating the firm’s value
with respect to different aspects like earnings of the firm, dividends declared,
debt employed by the firm, market price of the firm, etc. Ownership ratios can
be divided into three different categories:

• Earnings Ratios
• Leverage Ratios
• Dividend Ratios
4.Earnings ratios: These ratios help in indicating the earnings of the firm and its
effect on the price of the share.

a. Earnings per Share (EPS): EPS helps in computing the profitability


of shareholder’s investments in the firm.
b. Price-Earnings Ratio (P/E ratio): P/E ratio helps in studying the
affect of the earnings of the firm on the market price of the share.

c. Capitalization rate: It is the reciprocal of P/E ratio. It indicates the


rate of return expected by the investors.

5.Leverage ratios: Leverage ratios help in analyzing the long-term solvency of


the firm. They are divided into two categories: Capital structure ratios and
coverage ratios.
a. Capital Structure Ratios: These ratios indicate the proportions of
debt and equity in the capital structure of the firm. Debt-Equity ratio and Debt-
Assets ratio fall under this category.

1. Debt-Equity Ratio: It describes the lender’s contribution in the capital


structure in relation to that of the owner.
2. Debt-Assets Ratio: It helps in finding the extent to which the assets of
the firm are funded by borrowed funds.

6.Dividend Ratios: The equity holders of a firm are interested in the dividend policy
of the firm. The two dividend ratios i.e. Dividend Payout ratio (D/P ratio) and the
Dividend Yield ratio help the shareholders in evaluating the dividend policy of the firm.

1. Dividend Pay-out Ratio: It indicates the proportion of total earnings


that are declared as dividends to shareholders.

2. Dividend Yield: This ratio helps in analyzing dividends with respect to


the market price of the share. It indicates the current return earned by the
shareholder on his investment.

 
 

 
11. KEY FINANCIAL RATIOS OF MAHARASHTRA
ELEKTROSMELT LTD

A. Investment Valuation Ratios :


 

Investment Valuation Ratios

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Face Value 10.00 10.00 10.00 10.00 10.00

Dividend Per Share -- 2.00 2.00 3.10 3.50

Operating Profit Per Share (Rs) 28.06 13.78 11.55 22.90 20.51

Net Operating Profit Per Share


93.10 80.59 97.72 133.61 135.45
(Rs)

Free Reserves Per Share (Rs) 4.07 12.42 17.96 29.62 42.61

Bonus in Equity Capital -- -- -- -- --

 
B. Profitability Ratios : 

Profitability Ratios

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Operating Profit Margin(%) 30.13 17.10 11.81 17.13 15.14

Profit Before Interest And Tax


29.14 15.94 10.99 16.37 13.77
Margin(%)

Gross Profit Margin(%) 29.47 17.68 12.54 16.54 14.46

Cash Profit Margin(%) 24.14 11.76 8.53 11.90 12.88

Adjusted Cash Margin(%) 23.66 12.02 8.48 11.90 12.88

Net Profit Margin(%) 23.28 10.75 7.82 11.21 11.98

Adjusted Net Profit Margin(%) 22.58 10.76 7.56 11.21 11.98

Return On Capital Employed(%) 151.85 56.60 40.00 58.30 49.51

Return On Net Worth(%) 147.68 38.17 27.31 38.14 32.34

Adjusted Return on Net Worth(%) 149.36 38.91 26.59 37.97 32.94

Return on Assets Excluding


41.55 13.59 12.44 16.27 16.17
Revaluations

Return on Assets Including


41.55 13.59 12.44 16.27 16.17
Revaluations

Return on Long Term Funds(%) 151.91 56.61 40.00 58.30 49.82


C. Liquidity And Solvency Ratios :  

Liquidity And Solvency Ratios

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Current Ratio 1.18 1.31 1.51 1.52 1.70

Quick Ratio 0.64 0.51 0.58 1.06 1.07

Debt Equity Ratio 0.23 0.04 0.01 -- 0.01

Long Term Debt Equity Ratio 0.23 0.04 0.01 -- --

D. Debt Coverage Ratios: 


 

Debt Coverage Ratios

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Interest Cover 30.98 134.17 1,922.52 5,029.26 764.79

Total Debt to Owners Fund 0.23 0.04 0.01 0.00 0.01

Financial Charges Coverage Ratio 30.17 97.68 191.01 517.67 253.97

Financial Charges Coverage Ratio


25.16 66.89 134.14 345.33 168.75
Post Tax
E. Management Efficiency Ratios:  

Management Efficiency Ratios

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Inventory Turnover Ratio 4.99 2.86 3.64 10.81 7.82

Debtors Turnover Ratio 13.73 18.38 25.33 12.55 10.68

Investments Turnover Ratio 6.23 3.80 4.84 10.81 7.82

Fixed Assets Turnover Ratio 8.31 7.30 8.80 5.04 4.59

Total Assets Turnover Ratio 5.15 3.39 3.41 3.35 2.55

Asset Turnover Ratio 3.81 3.21 3.84 5.04 4.59

(In Days) (In Days) (In Days) (In Days) (In Days)

Average Raw Material Holding 51.22 64.66 256.86 62.63 60.60

Average Finished Goods Held 83.15 128.86 71.39 35.27 53.48

Number of Days In Working Capital 24.31 55.62 63.02 75.09 100.39


F. Profit & Loss Account Ratios :

Profit & Loss Account Ratios

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Material Cost Composition 20.63 27.73 13.79 21.98 28.67

Imported Composition of Raw


-- -- -- -- --
Materials Consumed

Selling Distribution Cost Composition 1.64 2.51 1.98 1.60 2.35

Expenses as Composition of Total


-- -- -- -- --
Sales

G. Cash Flow Indicator Ratios:


Cash Flow Indicator Ratios

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Dividend Payout Ratio Net Profit -- 26.09 30.35 23.96 24.03

Dividend Payout Ratio Cash Profit -- 23.35 27.14 22.47 22.74

Earning Retention Ratio 100.00 73.94 68.60 75.93 76.41

Cash Earning Retention Ratio 100.00 76.68 72.03 77.44 77.65

Adjusted Cash Flow Times 0.15 0.09 0.05 0.01 0.02

H. Risk Ratios:

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Earnings Per Share 21.76 8.74 7.71 15.13 17.04

Book Value 14.74 22.90 28.23 39.73 52.68


 

12. Conclusion/ Finidings:

a. Sales Growth: Sales of M.E.L had a growth rate of 7.2% over the last
financial year & an increasing trend of +0.6 % from the prior period.
This shows the ability of the management to control the sales through
efficient marketing & product mix strategies and good control over
the Human resource & timely production, as there was an economic
slowdown during the second half.

b. Income Growth: Income of M.E.L had a growth rate of 11.1% over the
last financial year & a decreasing trend of -1.4% from the prior period.
This may be due to the changes in the product mix & during the 2nd
half much of the concentration was put to fulfill the SAIL Plants
demand which only pays the conversion rate & difference in the raw
material prices may also be the another factor.

c. Asset Growth : Assets of M.E.L had a growth rate of 12.5% over the last
financial year & a decreasing trend of -1.8% from the prior period.
This may be due to the decision of control over the funds outgo of the
management. As the company has purchased all the necessary asset
during the year.

d. Gross Profit Margin : Gross Profit Margin of M.E.L had a growth rate
of 14.46% over the last financial year & a decreasing trend of -2.08%
from the prior period. This is due the increase in the direct expenses
such as prices of the raw material and power & Fuel.

e. Net Profit Margin : Net Profit Margin of M.E.L had a growth rate of
11.98% over the last financial year & an increasing trend of +0.77 %
from the prior period. This is due to the income from other source in
excess as compared to last year i.e from Term Deposits (587.06
Lakhs) & from sale of Sundries Items / Miscellaneous items(695.58
Lakhs)

f. Return On Capital Employed: Return On Capital Employed of M.E.L


had a growth rate of 49.51% over the last financial year & a decreasing
trend of -8.79 % from the prior period. This may be due to the capital
expenditure on the Ferro Alloy plant (324.16 Lakhs) which was an
additional or replacement of the assest expenditure (Transformer).

g. Current Ratio: Current Ratio of M.E.L had a growth rate of 1.70 over
the last financial year & a increasing trend of +0.18 from the prior
period. This shows the short term solvency & liquidity position of the
company. As MEL is the subsidiary of the SAIL unit and its major
customer is also SAIL so any diversion in it is consider to be the Low
fear factor.
h. Quick Ratio :Quick Ratio of M.E.L had a growth rate of 1.07 over the
last financial year & a increasing trend of +0.01 from the prior period.
This shows that the liquidity position is maintained as per the
Budgeted expenses all over the year. Also the comparision of both the
current ratios & Quick ratios tell us that the increasing trend of +0.18
in the current ratio consist of increase in inventories value and not
the liquid cash. So the actual liquid cash asset is less as per the
standard ratio.
i. Debt Equity Ratio: Debt Equity Ratio of M.E.L is 0.01 .This shows that
in the capital structure of the company the proportion of the debt is
negligible as compared to the Equity. Also 41% of the equity share is
allocated with SAIL (up till 1996).
j. Inventory Turnover Ratio: Inventory Turnover Ratio of M.E.L had a
growth rate of 7.82 over the last financial year & a decreasing trend of
-2.99 from the prior period. It indicates the efficiency of the firm in
producing and selling its product. This shows that the inventory
holding of MEL is more as compared to last year and this may be due
of the market volatility in the second half of the year.
k. Debtors Turnover Ratio : Debtors Turnover Ratio of M.E.L had a
growth rate of 10.68 over the last financial year & a decreasing trend
of -1.87 from the prior period. This may be due of the market volatility
in the second half of the year.

 
BIBLIOGRAPHY 
 

A. Websites :
• www.sail.co.in
• www.indiansteelindurties/review/report.com

B. Books :
• Financial Management (ICFAI University Study material)

C. References :
• Departmental Journals
• Balance Sheet Statement
• Directors Report
• Steel Industry Report (Steel Ministry)
Annexure

InPlant Training Programme 
Sr 
No.  Department  Days Report To 

1  RM Yard  2  Shri. PK Sharma AGM(RM) 

2  SP‐I & II  2  Shri. KM DEO AGM(SP‐I &II) 

3  Furnance Operation & Control  2  Shri. SS Bhondhkar AGM(FAD) 

4  ARC Furnance/Refactory/Lime Kiln  2  Shri.PB Fating Sr Mgr (FAD) 

5  PH Yard  2  Shri.PM Phophali AGM (PH) 

6  Maintance  2  Shri. SD Warbhle AGM (MM) 

7  Instrumental/Electrical  2  Shri.NL Sharma AGM (E&I) 

8  Auto Daepartment/Workshop  2  Shri.P.M Prasad SM (YM,T&W) 

9  Marketing  2  Shri.R.N Kancharlawar AGM (Marketing) 

10  General Store & Weigh Bridge  2  Shri.D.H Patil Sr.Mgr (Stores) 

11  Safty  2  Shri.PP Nistane Sr.M (S&F) 

12  Laboratory  2  Shri.MV Zode DGM (P&Q) 

13  PPC  2  Shri.S.K Kawale Agm (PPC,QA &MR) 

14  Power Plant  2  Shri.J.P Mehto AGM (PP) 

15  Personnel  2  Shri.PP Chakrabarty Agm (P&A) 

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