Financial Performance Appraisal and Budgeting

1.1 Executive Summary

 This study was to evaluate the financial soundness and financial positioning of a public sector company namely Rastriya Ispat Nigam Limited [RINL] in the Steel Industry in India and also comparing its financial soundness with other company of same industry which is also a public sector company namely Steel Authority of India Limited [SAIL] and a private sector manufacturer TATA Steel. The information collected for this study was secondary data. Data used to assess RINL performance was provided by RINL authorities and all other information were collected from CMIE ProwessIQ and various articles published by various scholars. The annual reports used in this study were for 5 years from 2012-13 to 2016-17. Many descriptive statistical trials like Mean (Avg), minimum (Min), maximum (Max), and standard deviation (S.D) were applied.

KEYWORDS: Financial Performance of RINL, Liquidity Analysis, Profitability Analysis, Ratio Analysis of RINL, Budgeting of financial statements, Balance sheet, Income statements, comparative financial statements.

1.2 Introduction

Steel is vital for the growth and expansion of contemporary economies and is measured as the strength of human development. The normal level of use of steel is seen as a major pointer of the level of livelihood, social, economic growth of people in India. The steel manufacturing industry has been chief since liberalization of industrial sector and has been altering quickly meanwhile then, industry has grown, the business has increased manufacture lines, and distributes have grown by more development with industry. Financial health of any company decides its sustainability in long run. Financial ratio is useful measure to provide a snapshot of a company’s financial position at any certain point of time or to provide a inclusive idea about the financial performance of the company.

1.3 Need for the study

The main goals of each company are to increase profits. This is depended on successful sales. To create sales it is essential to invest sufficient funds in current assets.

This study aims to analyse RINL Financial Reports to study financial results and to appraise how they keep their financial statements and take action when losses occur.

1.4 Objectives

The independent study is based upon the part of Financial appraisal that is been taken into consideration i.e. Financial Statements and Analysis. The Study is mainly financial performance of RINL.

•        To study the financial position of the corporation.

•        To analyse the financial steadiness and overall performance RINL.

•        To find out Financial Strengths of the firm.

•        To know the Liquidity Position of a firm.

•        To evaluate financial profitability.

1.5 Data collection:

The data collected are all secondary data.

The secondary data are collected from following:

•        Companies annual report

•        Companies website

•        Manual

•        Financial hand book

1.6 Research methodology:

The data analysis using the following tools

•        Ratio analysis

•        Graphical Representation

•        Descriptive statistics

Ratio analysis is used in the study to analyse the financial performance of the selected companies in terms of liquidity, solvency, efficiency and profitability.

1.7 Data and source of data

The study is evaluated based on secondary data. The important data are collected from secondary sources like CMIE ProwessIQ, audited annual reports of particular corporations, economic study and annual study of Industries.

2.1 Industry Profile

Steel is one of the most important materials in the world. It is important for all aspects of our life, from infrastructure and transport to a small can of metal, which keeps food. With steel, we can build large buildings or spare parts for specific equipment. It is strong and can be recycled forever.

        The rise of steel began with the 19th-century industrial revolution in Europe and North America. But steel production is not a new thing. Senior craftsmen in ancient China and India specialize in production.

There are traces of major events in steel history that showcase many creators, contractors and companies that have developed their development.

2.2 Steel sectors in India - an Overview

India is the fifth-largest producer of stainless steel in the world in 2009 and is expected to be the second-largest producer in 2016-2017, according to the Indian Ministry of Industry still a steel producer, the direct reduction of sponge iron. India's steel sector benefits from the discovery of domestic raw materials and cheap labour force. Iron ore is also abundant. This has benefited the domestic steel industry by companies such as Tata Steel, the world's smallest scrap company.

2.3 Company Profile

        Rashtriya Ispat Nigam Limited (RINL), the commercial unit of Visakhapatnam Steel Plant (VSP), is a Navratna Company under the Ministry of Steel, Govt. of India.

        Visakhapatnam Steel Plant is the first shore-based United Steel Plant in India. It is a producer of long steel goods and provides to the necessities of the Building Organization, and Industrial & Automobile segments.

        RINL has one minor company viz. Eastern Investment Limited (EIL) with 51% shareholding, which in turn has two subsidiaries, viz. M/s Orissa Mineral Development Company Ltd (OMDC) and M/s Bisra Stone Lime Company Ltd (BSLC).

3.1 Literature review

Not only starting a business or an organisation and performing in the industry should be focused but also financial appraisal of the company also plays an important part in the long run survival of the organisation. In that case analysing, evaluating the financial statements using financial ratios measures the change in financial status of the organisation as stated by DeVancy(1993) based on the study conducted for the period of 4 years from 1983-1986 stating these financial ratios acts as a pointer of answers attained during the study for the question “Whether the selected families are developing or not?” In the same way the financial ratios help to appraise the financial status of the industry, organisations are evaluated and provide a report to the head of the organisation that is in a position of decision making. And in the process of running of the organisation the management decisions over the utilization of resources and its impact over the sales generation is also to be analysed on a study conducted by Gallizo and Salvador (2003) during a period of 8 years from 1993-2000 in process of understanding on the balance between assets are managed and utilised to generate sales.