10. nalco-fin1.doc

SUBMITTED BY: NILAMADHAB DAS | ROLL NO: 11MBAS21540

A PROJECT REPORT

ONINVENTORY MANAGEMENT OF

NALCO

By

A REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF MBA PROGRAM

In Guidance With

MANIK CHAND GHOSHINTERNAL GUIDE, TALCHER

Submitted By:

NILAMADHAB DASRoll No. : 11MBAS21540

DDCE, SAMBALPUR UNIVERSITY

MBA 1


DECLARATION

I hereby declare that this project report submitted by me to DDCE,

Sambalpur University Course in partial fulfillment for the award of

Degree of ‘Master of Business Administration’ is of my own and data

collected during the training shall be kept confidential and used only for

academic purposes.

Nilamadhab Das

MBA 2


CERTIFICATE

The project report of Nilamadhab Das “Inventory Management of

NALCO” is approved and is acceptable in quality and form. The candidate has not submitted this report either fully or partially any where else for publication. I recommended the thesis for the submission to DDCE, Sambalpur University for evaluation as partial fulfillment of Project Report of MBA.

The results and reports were found satisfactory

Mr. R.C.Joshi, (Manager Finance)

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EXAMINER’S CERTIFICATE

This project report is submitted by Nilamadhab Das of MBA bearing the

Roll No. 11MBAS21540 under DDCE, Sambalpur University and

forwarded for evaluation.

Internal Examiner External Examiner

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CERTIFICATE OF APPROVAL

This is to Certify that the Project Entitled:“Inventory Management of NALCO”

Submitted by Nilamadhab Das (Roll No. 11MBAS21540), Sambalpur University,

Burla towards partial fulfillment of the requirements for the award of the degree of

Master of Business Administration (MBA) is a bona fide record of the work carried

out by him under the able guidance of Manik Chand Ghosh, Faculty, RD Computer

& Management, Talcher.

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ACKNOWLEDGEMENT

The satisfaction and euphoria that accompanies the successful completion of any task

would be incomplete without the mention of the people whose consent, guidance,

support and encouragement crown all efforts with success.

I sincerely thank Mr. Asutosh Rath, MANAGER (TQM) for giving me an opportunity

to undergo the summer training at National Aluminium Company Ltd., Damanjodi.

I would like to sincerely express my deep sense of gratitude to Mr. R.C.Joshi,

MANAGER (Finance), Mr. Satyabrata Dash Dy. MANAGER (Finance) and the staff

in the Finance Department of NALCO for their valuable guidance in pursuing my

project.

I am very much obliged to Mr. U.C. Sahu, D.G.M., Mr. R.C.Dash, MANAGER, Mr.

V.H.N Murty Sr.E.A, H.R.D of NALCO, Mrs.Krishna Kumari, Sr. MANAGER

(Chemical) for providing me with the necessary information required for my project

report.

I sincerely thank my guide Manik Chand Ghosh, Faculty, NICE TALCHER for his

guidance in pursuing my project successfully.

Nilamadhab Das

MBA 6


CONTENTS

1. Introduction

2. Inventory Management

3. A Study On Financial Of Nalco

4. Ratio Analysis

5. Funds Flow & Cash Flow Statement

6. Refinery Process Overview

7. Conclusion/Summary & Suggestions

8. Annexure

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CHAPTER – I

INTRODUCTION

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COMPANY PROFILEThe back ground of the company :

Following the discovery of large reserves of bauxite ore in the east coast and

the preliminary project work done by Bharat Aluminum company limited, the

company was set by the govt. India in1981 to implement one of the largest multi-

locational integrated Aluminum projects of the world with its own captive power

plant and port facilities.

The technical collaboration of aluminum Pechiney of France, The support of

Euro Dollar loan from a consortium of international banks and the special

dispensation of the govt. of India and the govt. of Orissa helped the company to

implement the project expeditiously within the budgeted cost of Rs 2408 crore, under

very difficult logistics of project management.

Different segments of the company went into production in a phased manner

starting from November, 1985.Within a short span of time, the company has emerged

as a leader in the field of aluminum production in the country and also has made

significant impact abroad .The company has helped the company to make quantum

jump in production of aluminum and has also been earning substantial foreign

exchange through creditable export performance year after year.

ABOUT THE MANAGEMENT:The company is a Government of India enterprise under the administrative

control of the Ministry of Mines. The company is managed by a Board of Directors

appointed by the president of India. The Board consists of 10 directors including the

CMD of the company. Apart from the CMS, there are 4 functional or full time

directors heading production, Finance, Projects & Technical, Personnel,

administration discipline. There are 2 senior officials of Govt. of India. Besides, there

are non-official Directors in the board. Subject to the provisions of the Indian

Companies Act, the memorandum and Articles of Association, MOU signed with the

Govt. of India and also subject to policies formulated by the Board of Directors, from

time to time, the CMD has full power to sanction expenditures or to deal with other

matters for effective functioning of the company.

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The Management’s control system is based on delegation of authority and

individual accountability for results. The responsibility and authority to take decisions

on various matters are delegated by the CMD to different levels in the management.

THE VISION:To be a company of global repute in Aluminium.

THE MISSION:To achieve growth in business with global competitive edge providing

satisfaction to the customers, employees, share holders and community at large.

CORPARATE OBJECTIVES:- To maximize capacity utilization.

- To optimize operational efficiency and productivity.

- To maintain highest international standards of excellence in product

quality, cost efficiency and customer service.

- To provide a steady growth in business by technology up gradation,

expansion and diversification.

- To have global presence and earn Foreign Exchange.

- To maintain leadership in domestic market.

- To instill financial discipline at all levels for achieving cost and

budgetary controls, optimize utilization of working capital and

effective cash flow management.

- To maximize return on investment.

- To develop a strong R & D base and increase business development

activities.

- To promote result oriented organizational methods and work culture

that empowers employees and helps realization of individual and

organizational goals.

- To maximize internal customer satisfaction.

- To faster high standards of health, safety and environment friendly

products.

- To participate in peripheral development of the area.

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THE PROJECT FINANCE:

NALCO was started with a capital cost of Rs.2,408 Crores, out of which 1,119

Crores equivalent of Euro Dollar was financed by Consortium of International Banks

and balance Rs.1,289 Crores was financed through Equity from Government of India.

UNIT-WISE CAPITAL COST

I. Bauxite Mines 88 Crores.

II. Aluminium Refinery 754 Crores.

III. Port Facilities 31 Crores.

IV. Smelter Plant 723 Crores.

V. Captive Power Plant 812 Crores.

CAPITAL COST OF NALCO(Rs In Crores)

88

754

31723

812

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NALCO TODAY:National Aluminum Company Limited (NALCO) is considered to be a turning

point in the 50 years old history of Indian Aluminum Industry. In a major leap

forward, NALCO has not only addressed itself to the country’s need for self-

sufficiency in aluminum, but has also given the country the technology edge in

making this strategic metal on the best of the world standards.

Today, NALCO has emerged as the largest Integrated Bauxite-Aluminium-

Aluminium complex in Asia, enabling India to witness a quantum jump in alumina

and aluminum production. NALCO for the first time created exportable surplus in

alumina and helped India to focus on its massive Bauxite resources in the East Coast

estimated at 1600 million tonnes.

The integrated complex has fine segments i.e., Bauxite Mines, Alumina

Refinery, Alumina plant, captive power plant and port facilities.

The Open Cast Mines was located at Panchpatmali Hills of Koraput District in

Orissa, whereas the Alumina Refinery was located at Damanjodi, a flat land located

about 15 kms away from the Mines. Together, the unit came up to be the largest open

cast bauxite mine and the largest alumina plant in Asia.

Bauxite Mine The fully mechanized

opencast mine of 4.8 million

tpa capacity is in operation

since November, 1985,

serving feedstock to Alumina

Refinery at Damanjodi

located on the foothills..

The salient features:

Area of deposit - 16 sq. km.

Resource - 310 million tonnes

Ore quality - Alumina 45%, Silica 2%

Mineralogy - Over 90% gibbsitic

Over burden - 3 meters (average)

Ore thickness - 14 meters (average)

Transport - 14.6 km long single flight multicurve cable belt conveyor of 1800

tph

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The Performance of the Mines has been exemplary. The last ten years production

shown below:

Mines and the EnvironmentThe Panchpatmali Bauxite

Mines of NALCO has been well-

known as one of the most

Environment friendly mine today.

Salient Environmental features:

Periphery barrier of 15m

width having green cover

around mines

Garland drains and drainage control within the mines

Dust suppression at source and sprinkling of water

Total overburden excavated with top soil used for reclamation and

rehabilitation of mined out areas with vegetation cover.

Studies Conducted on environment:

Studies on effect of blasting on ground water table at Bauxite Mines

Studies on water quality and water flow to assess the impact of mining on the

perennial springs below.

Eco-genetic resources survey at Panchpatmali Mines.

The Environment Management Systems of Bauxite Mines certified to ISO-14001

standards on June 24, 1996, by M/s Aspects Moody Certification, UK.

Alumina Refinery ComplexThe 15, 75,000

tpa Alumina Refinery,

having three parallel

streams of equal capacity,

is located in the

picturesque valley of

Damanjodi in Koraput

district is in operation

since Sep 1986.

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The Refinery is designed to:

Provide about 6,90,000 tons of Alumina to the Company's Smelter at Angul

Export the balance Alumina to overseas markets through Visakhapatnam Port


Atmospheric pressure digestion process

Pre-desilication and inter-stage cooling for higher productivity

Energy efficient fluidized bed calciners

Co-generation of 3x18.5 MW power by use of back pressure turbine in steam

generation plant

Advanced red mud disposal system

Alumina Refinery has been consistently improving its performance from its

inception and has proven to be one of the best in the business today, with consistently

exceeding its capacity for the last three years, apart from producing Alumina at the

world’s lowest cost today. The production trend over the last ten years is shown

below:

The Alumina Refinery has been earning hundreds of million dollars of valuable

foreign exchange for the country

through these years through export of

its product, which consistently meets

and exceeds the Quality requirement of

the international market. Alumina from

Nalco’s Damanjodi Refinery is

globally sought after.

Environment and the Alumina RefineryThe Alumina Refinery has been both designed to be and later upgraded to be

environment friendly in all respects.

Salient environmental features

Highly efficient ESPs at Calciners and steam Generation Plant

Multistage washing of red mud and its storage in specially designed pond

Use of dust collectors at handling and transport areas of bauxite, coal, lime

and alumina

Recycling of waste water

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The Environment Management Systems of Refinery certified to ISO-14001

standards on February 10, 1997, by M/s Aspects Moody Certification, UK

Modernization/De-bottlenecking/Expansion of M&R Complex

The massive modernization/ de-bottlenecking & expansion program of M&R

Complex has been completed.

The methodology followed for the exercise was as follows:

The constraints in production, quality and cost of production were studied in detail

in-house as well by process licensors. This was followed up with identifying solutions

for each constraint and choosing the most modern and economical techniques to

achieve the objectives. Implementation of these techniques and installation/

commissioning of the new equipment on the earlier two streams rated at 800,000

MTPY enhanced the capacity to 10, 50,000 MTPY.

Further, a de-bottlenecked and modernized stream of Alumina Plant was installed

in the expansion stage, which raised the Plant Capacity to a staggering 15,75,000

MTPY.

The Changes being incorporated is primarily as follows:

Increase in speed of Cable belt to double that of the existing speed

Pre-desilication of Bauxite, before digestion

Double stage dilution, with second dilution after settling

High concentration post-desilication and settling.

Individual Kelly feed and lime dosing

Improved Heat exchangers for better exchange rate with lower surface area

Inter-stage cooling of precipitators

Cyclone Classification and Spent-liquor solids separation

Six-stage evaporation

Utilizing conveying air in Calcinations for combustion

Aluminium Smelter The 3, 45,000 tpa capacity Aluminium Smelter is

located at Angul in Orissa. Based on energy efficient state-

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of-the-art technology of smelting and pollution control, the Smelter Plant is in operation since

early 1987.

Presently, the capacity is being expanded to 4, 60,000 tpa.


Advanced 180 KA cell technology

Micro-processor based pot regulation system

Fume treatment plant with dry-scrubbing system for pollution control and fluoride salt recovery

Integrated facility for manufacturing carbon anodes, bus bars, anode stems etc.

4 x 35 tone and 4 x 45 tone furnaces and 2 x 15 tph and 2 x 20 tph ingot casting machines

4 x 45 tonne furnaces and 2 x 9.5 tph wire rod mills

2 x 45 tonne furnaces and 60/42 per drop billet casting machine

2 x 1.5 tonne induction furnace with a 4 tph alloy ingot casting machine

26,000 tpa strip casting machines

With the acquisition and subsequent merger of International Aluminium Products Limited (IAPL) with Nalco, the 50,000 tpa export-oriented Rolled Products Unit is all set to produce foil stock, fin stock, can stock, circles, coil stock, cable wraps, standard sheets and coils.

Captive Power PlantClose to the Aluminium Smelter at Angul, a Captive Power Plant of 960 MW

capacity, comprising 8 x 120 MW clusters, has been established for firm supply of

power to the Smelter.

Presently, the capacity is being expanded to 1200 MW.


Micro-processor based burner management system for optimum thermal

efficiency

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Computer controlled data acquisition system for on-line monitoring

Automatic turbine run-up system

Specially designed barrel type high pressure turbine

Electrostatic precipitators with advanced intelligent controllers

Wet disposal of ash

The water for the Plant is drawn from River Brahmani through a 7 km long double

circuit pipeline. The coal demand is met from a mine of 3.5 million tpa capacity

opened up for Nalco at Bharatpur in Talcher by Mahanadi Coalfields Limited. The

Power Plant is inter-connected with the State Grid.

Port FacilitiesOn the Northern Arm of the Inner Harbor of Visakhapatnam Port on the Bay of

Bengal, Nalco has established mechanized storage and ship handling facilities for

exporting Alumina in bulk and importing Caustic Soda.


Maximum ship size - 35000 DWT

Alumina reception - 48 x 53 tonne pay-load wagons

Alumina storage - 3 x 25000 ton RCC Silos

Ship loading rate - 2200 tph

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These facilities are being upgraded to handle higher volumes of exports,

following expansion of production capacities.

PRODUCTS:

I. Alumina :

Calcined Alumina – Metallurgical Grade.

Hydrated Alumina.

Special Alumina.

II. Aluminium Metal :

Electrical Conductor Grade.

Commercial Grade.

High Purity Grade.

Alloy Grade.

In the forms of 20 Kg. Ingots / 650 Kg. sows and 9.5 mm and 7.5 mm dia wire

rods. Alloys available in the form of 10 Kg. Ingots and Billets in 125 to 200 mm dia

(4 sizes).

The quality assurance associated with NALCO products received international

acclaim with Nalco’s admission to London Metal Exchange (LME) in 1989.

POLLUTION CONTROL AND ENVIRONMENT :NALCO has an excellent track record in environment management. All the

units of the company are meeting the statutory norms and conditions of pollution

control. The environment management system of the M & R complex at Damanjodi

has been audited and recommended by Aspects Certification Services, U.K for

accredition under BS 7750/ISO 14001. Efforts in the similar direction are an in the

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company’s smaller & power plant at Angul which will put the company at part with

the select few in the world of Industry.

QUALITY MOVEMENT :The company has accredited the ISO 9002 for smelter plant at Angul, Captive

Power Plant at Angul, Alumina Refinery at Damanjodi and Bauxite Mines at

Panchpatmalli. With this the company has earned the unique distinction of having the

quality management system of all the production units ISO certified.

ISO 9002 Certification:

a) Alumina Refinery - Nov, 1994

b) Smelter Plant - Feb, 1995

c) Bauxite Mines - Jan, 1996

d) Captive Power Plant - Feb, 1996

The Company also got accredited to BS 7750 and ISO 14001 Certification for

Environment Management System of Mines and Refinery in 1996.

Quality circles are encouraged and motivated to participate in the competitions

organized at various levels.

MOU RATING:NALCO being a public sector signs a memorandum of understanding with the

Government of India. NALCO is rated “Excellent” in the evaluation of MOU signed

with the Government for 3 consecutive years.

EXPANSION PROGRAMMES :EXPANSION OF MINES AND REFINERY COMPLEX

Government of India had approved the proposal for expansion of the

Bauxite Mines and Alumina Refinery in 1996. The salient features of the

expansion are:

Bauxite Mines Alumina Refinery

Capacity

Existing

After expansion

24,00,000 TPY

48,00,000 TPY

8,00,000 TPY

15,75,000 TPY

Project cost Rs.120.59 Crores Rs.1331.11 Crores

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The expansion of Alumina Refinery had been completed in two phases i.e.,

Debottlenecking (from 8 Lakhs TPY to 10.50 Lakhs TPY) and Third Stream (from 10.50

Lakhs TPY to 15.75 Lakhs TPY). The third Stream will be a replica of one of the

debottlenecked streams.

Reputed consultants have been appointed for carrying out Detailed

Engineering, Tendering and Procurement Services and Construction

Management for the various project segments. The names of the consultants and

their area of work are as follows:

Project Segment Consultant

Mines and Refinery. M/s Engineers India Ltd., New Delhi.

Steam Generation Plant, Township,

Railway Facility, Port Facilities at

Vizag.

M/s MECON, Ranchi

The atmospheric pressure digestion technology of AP used in the existing plant is

being adopted for the Expansion. Some improvements developed by AP have been

incorporated in the existing processes.

EXPANSION OF SMELTER AND POWER COMPLEX

Government of India approved expansion of Aluminium and CPP at

Angul during February, 1998. The salient features of the expansion are:

SMELTER CPP

Capacity

Existing

After expansion

2,30,000 TPY

3,45,000 TPY

6 *120 MW

7 *120 MW

Project Cost Rs.1641.98 Crores Rs.420 Crores

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Reputed consultants have been appointed for carrying out Detailed

Engineering, Tendering and Procurement Services and Construction Management

for the various project segments. The names of the consultants and their area of

work are as follows:

PROJECT SEGMENT CONSULTANT

Smelter

Captive Power Plant

Township

Railway Facility

M/s Engineers India Ltd., New Delhi.

M/s MN Dastur and Co., Chennai.

M/s NIDC, New Delhi.

M/s MECON, Ranchi.

NEW PROJECTS AND EXPANSION ACTIVITIES:

As part of its business developments strategies NALCO has undertaken a number of new

projects. These projects will broaden product mix of the company and provide value addition.

NALCO has chalked out a two phase expansion plan at a total cost of Rs.3727

Crores. It has already got the approval of Government of India and work has been started

Besides management was pro-active in initiating other projects to enrich its

product profile. The projects which are expected to be completed are as detailed

below:

PROJECT CAPACITY

(TPA)

LOCATION COST

(RS. IN CRORES)

Strip Casting 26,000 Angul 49.86

SGA 20,000 Damanjodi 45.72

Zeolite ‘A’ 9,000 Damanjodi 24.10

Gallium 01 Damanjodi 9.46

The on going projects at Damanjodi which are scheduled for completion in the first

quarter of 1998 are being managed nicely without the cost overrun and time overrun. The

special projects are specially looked after by GM (projects), with direct assistance from DGM

(projects), CM (projects) and some middle level managers.

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As NALCO enters the 25th year of its existence in 2005 ,a national asset worth above Rs

10,000 Crore gets created out of an initial investment of Rs 2408 Crore, while yielding reach

dividends for the country ,for the state and for the people at large.

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NEED FOR THE STUDY:

In this context there is a need to study the efficiency with which NALCO is contributing

its part towards the economic development. For this purpose the study of major financial

activities does a long way in understanding the efficiency of NALCO.

OBJECTIVES OF THE STUDY:

The main objectives of the study are:

To study the firm’s financial position, past performance and assess its present

financial strength.

To study the theory and practice of Financial Management.

To analyze the financial ratios and Funds flow and Cash flow statement.

To get an insight into various sources available for financing working capital

and its utilization.

To study the firm’s social responsibility through value added statement.

To summarize and suggest wherever necessary.

METHODOLOGY FOR THE STUDY:

The data for the present study is drawn both from primary and secondary sources.

The primary data is collected from discussion with the executives of NALCO and a few

employees.

The Secondary data is collected from the corporations annual reports, magazines like

‘parichay’ and guide like ‘The Company you keep’. Interpretation of various statistics has

been done through analysis wherever necessary. The statistics for a period of 2 years only has

been taken for easy calculation.

EXPECTED CONTRIBUTION FROM THE STUDY:

To provide a handy reference in understanding the Nalco’s financial policies

and procedures.

To provide an insight into various sources available for financing working

capital and its utilization.

To provide an idea of optimum utilization of all material resources through a

well designed budgetary control system.

To provide economic information to the investors and to judge the

management on its stewardship of the resources of the enterprises and

achievement of corporate objectives.

To provide information about the economic activity of NALCO in particular

to several group who otherwise has no access to such information.

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To provide an idea of achieving optimum utilization of capacity with lowest

possible cost through cost reduction and cost control techniques.

To provide the sources for raising funds for the new projects.

To provide value for money to all stake holders.

To comply the various statutory requirements in a manner prescribed under

the statue.

TOOLS & TECHNIQUES TO BE USED:

Ratio Analysis.

Fund Flow Statement.

Cash Flow Statement.

Trend Analysis.

Sensitivity Analysis.

Graphs, Charts.

LIMITATIONS:

Any project is not free from limitations. Here also there may be several limitations to

the study. But the main limitations for this study are:

The study is limited to 4 years i.e., 2007-08 to 2010-11.

The data used in this study have been taken from published annual reports only,

hence grouping or sub-grouping and annualisation of data may slightly affect the result. It is

not possible to collect primary data from the company’s office.

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CHAPTER-FRAME WORK:

The entire project report is framed into NINE chapters. The details of which are

given below:

1) INTRODUCTION :

The back ground of the company, About the Management, Vision, Mission, Corporate

Objectives, Project Finance, NALCO Today, Products, Pollution Control and

Environment, Quality Movement, Expansion Programmes, New Projects and Expansion

Activities, Need for the Study, Objectives of the Study, Methodology for the Study,

Contribution from the Study, Tools & Techniques to be Used, Limitations, Chapter-

Frame Work.

2) TECHNOLOGY :

Introduction, Specific Areas in which R & D Activities carries out by NALCO,

Benefits, Technology Absorption, Adaptation and Innovation by NALCO, Technology

imported last five years, Rolled Products Unit.

3) A STUDY OF FINANCIAL MANAGEMENT OF NALCO :

Introduction, Finance Function, Financial Goal, Functions of Financial

Management, Financial Position of NALCO, Financial Management of NALCO,

Graphs.

4) EVERY DAY FUNCTION :

Cash Management in NALCO, Tenders and Contracts, Division of Work, Internal Audit

Section, Internal Audit Technique, Bill Section, Payment Mode, Establishment Section,

Raw Materials Section.

5) INVENTORY MANAGEMENT :

Introduction, Nature, Needs, Objectives, Accounting Policies, Inventory Management in

NALCO, Control System, Stock Levels, Tools & Techniques, Advantages, EOQ,

Method of Valuation, Conclusion, Inventory Levels.

6) RATIO ANALYSIS :

Introduction, Significance, Financial Ratios, Analysis, Conclusion.

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7) FUNDS FLOW AND CASH FLOW STATEMENTS :

Introduction, Comparison between, Importances, The terms used in the Cash flow

analysis of NALCO.

8) REFINERY PROCESS OVERVIEW :

Introduction, Basic Technology, Product Quality, List of Raw Materials, Bauxite

Handling Area, Grinding, Pre-Desilication, Digestion, Sand Separation & Washing,

Dilution, Post Desilication, Settling, Mud Washing, Flocculation & Causticisation,

Security Filtration, Calcinations.

9) CONCLUSION / SUMMARY & SUGGESTIONS :

Summary and Suggestion basing upon the whole study.

Bibliography.

10) ANNEXURE

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CHAPTER – II

INVENTORY MANAGEMENT

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INVENTORY MANAGEMENT

INTRODUCTIONInventories constitute the most significant part of current assets of a large majority of

companies in India. On an average inventories are approximately 60% of current assets in public limited companies in India. Because of the large size of inventories maintained by firms, a considerable amount is required to be committed to them. It is, therefore, absolutely imperative to mange inventories efficiently and effectively in order to avoid unnecessary investment. A firm neglecting its inventories will be jeopardizing its long-run profitability and may fail ultimately. It is possible for a company to reduce its levels of inventories considerably, without any adverse effect on production and sales, by using simple inventory planning and control techniques. The reduction in ‘excessive’ inventories caries a favorable impact on a company’s profitability.NATURE OF INVENTORIES

Inventories are the stock of the product a company is manufacturing for sale and components that make up the product. The various forms in which inventories exist in a manufacturing company are:

Raw Materials are those basic inputs that are converted into finished product through the manufacturing process. Raw materials inventories are those units which have been purchased and stored for future productions.

Work-in-process inventories are semi-manufactured products. They represent products that need more work before they become finished products for sale.

Finished goods inventories are those completely manufactured products which are ready for sale. Stocks of raw materials and work-in-process facilitate production. While stock of finished goods is required for smooth marketing operations. Thus, inventories serve as a link between the production and consumption of goods.

The levels of three kinds of inventories for a firm depend on the nature of its business. A manufacturing firm will have substantially high levels of all three kinds of inventories, while a retail or wholesale firm will have a high level of finished goods inventories and no raw material and work-in-process inventories.

Besides the above-mentioned three kinds, a fourth kind of inventory, supplies (or stores and spares) are also maintained by firms. Supplies include office and plant cleaning materials such as soap, brooms, fuel lubricants, light bulb etc. These materials do not directly enter in the production process, but are very much essential for smooth running of the production process. Usually, these supplies constitute a very small part of the total inventory and do not involve any significant investment.NEED TO HOLD INVENTORIESThere are three general motives for holding inventories.

Transactions motive emphasizes the need to maintain inventories to facilitate smooth production and sales operations.

Precautionary motive necessitates holding of inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors.

Speculative motive influences the decision to increase or reduce inventory levels to take advantage of price fluctuations.

OBJECTIVES OF INVENTORY MANAGEMENTThe main objectives of inventory management are operational and financial. The

operational objectives mean that the materials and spares should be available in sufficient quantity so that work is not disrupted for want of inventory. The financial objective means

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that investment in inventories should not remain idle and minimum working capital should be locked in it. The following are the objectives of inventory management:

a) To ensure continuous supply of materials, spares and finished goods.b) To avoid both over-stocking and under-stocking of inventory.c) To maintain investments in inventories at the optimum level as required by

operational and sales activities.d) To keep material cost under control so that they contribute in reducing costs

of production and overall costs.e) To eliminate duplication in ordering. This is possible with centralizing of

purchases.f) To minimize losses through deterioration, pilferage, wastage and damages.g) To design proper organization for inventory management.h) To ensure perpetual inventory control so that material lying in stock ledgers

should be actually lying in stores.i) To ensure right quality goods at reasonable prices.j) To facilitate furnishing of data for short-term and long-term planning and

control of inventory.INVENTORY ACCOUNTING POLICIES IN NALCO:

Raw materials, Stores, Spares parts and tools are valued at weighted average cost and net of CENVAT credit wherever applicable.

Finished goods are valued at lower of cost or net realizable value. Cost is determined on the basis of current year’s average cost of production and excludes selling and distribution overheads, interest, exchange variation and depreciation on capitalized exchange variation. Cost of Finished goods inside the plant includes excise duty payable.

Intermediary product, viz. Anodes are valued at cost. Anode butts and anode rejects are valued at lower of realizable value or 45% of direct material cost (being 50% of direct material cost less 10% thereof towards reprocessing cost).

Aluminium scrap is valued at lower of cost or net realizable value. Scrap arising out of replacement of major machinery components is valued on the basis of technical estimation. Other scrap and bath tapped from pot shells are accounted for on disposal.

Stock of work-in-process is ascertained on the basis of technical estimates and is valued at lower of annual average direct material, power & fuel and proportionate conversion cost or net realisable value.

Inventory of stores and spares, other than insurance spares, not moved for more than 5 years is valued at 5% of cost.

INVENTORY MANAGEMENT IN NALCO :NALCO is a large scale manufacturing company involved in mining of bauxite and

production of Alumina and Aluminium. Therefore it has to maintain large quantities of inventories at production units, for its smooth running and functioning.

The company has set a record by mining of 48, 16,762 MT Bauxite and producing 15, 50,100 MT of Alumina and a combined sales of 2, 96,368 MT of Aluminium during the previous period 2003-04.There are generally 2 types of Inventory :

1. Process or movement inventory2. Organization inventory

MBA 29


Process or movement inventory are required because it takes time to complete process/operation and to move product from one stage to another. The quantity of such inventory could be (average output of process X time required for the process).For Example:

If the average output of the process is 500 units / day and process time is 5 days, the average process inventory will be 2500 units. If the average sales at the warehouse are 100 units a week and transit time requires to ship the goods from the plant to warehouse is 3 weeks. Then, the average movement of inventory could be 300 units.

Organisation inventory are maintained for planning and scheduling successive operation. Raw materials inventory enables a firm to decouple purchasing and production activities to some extent. It provides flexibility in purchasing and production.

In process inventory provides flexibility in production scheduling so that an efficient schedule and high capacity may be attained. Without in process inventory a bottleneck in any stage of production process can occur. This results in delay and idle facilities.

Finished goods inventory marketing activities so that desirable results can be achieved. If adequate finished goods inventory is available the marketing department can meet the needs of the customers promptly irrespective of quantity and composition of goods flowing out of the production line currently.

INVENTORY CONTROL SYSTEM :A proper inventory control not only serves the acute problem of liquidity but also

increase profits and cause substantial reduction in the working capital of the concern. In any scheme of inventory control following things have to be studied.

1) Stock level2) Determination of safety stock3) System of ordering for inventory4) Preparation of inventory report

STOCK LEVELS :Carrying of too much or too little of inventories is detrimental to the company. If the

inventory level is too the company will face frequent stock outs inventorying heavy ordering costs and if inventory level is too high it will be unnecessary tie-up of capital. Therefore, an efficient inventory management requires that a company should maintain an optimum level of inventory where inventory costs are minimum and also there is no stock out.THE VARIOUS STOCK LEVELS MAINTAINED AT NALCO :1) MINIMUM LEVEL :-

This represents the quantity which must be maintained in hand at all times. If stocks are less than the minimum level then the work will stop due to shortage of material .Following factors are taken into account while fixing minimum stock level.a) Rate of consumption:

It is the average consumption of material in the company. The rate of consumption will be decided on the basis of past experience and production plans.

b) Nature of material:- It also affects the minimum level. If a material is required only against special orders of the customer than minimum stock will not be required for such material.

2) RE-ORDING LEVEL: When the quantity of materials reaches a certain figure than fresh order is sent to

get materials again. The order is sent before the materials reaches minimum stock level. Reordering level is fixed between maximum and minimum level. Therate of consumption, number of days required to replenish the stock and maximum quantity of materials required on anyday are taken into account while fixing reordering level.

MBA 30


REORDERING LEVEL= maximum consumption X maximum reorder period.3) MAXIMUM LEVEL:-

It is the quantity of materials beyond which a company should not exceed its stock. If the quantity exceeds maximum level limit then it will be over stocking. A company should avoid over stocking because it will result in high materials cost.MAXIMUM STOCK LEVEL= Reordering level+reordering quantity (minimum consumption X minimum reordering period)

4) DANGER LEVEL:- It is the level beyond which materials should not fall in any case. If danger level

arises then immediate steps should be taken to replenish the stock even if more cost is incurred in arranging the materials. If materials are not arranged immediately there is a possibility of stoppage of work.DANGER LEVEL= Average consumption X maximum reorder period for emergency purchases.

TOOLS AND TECHNIQUES OF INVENTORY MANAGEMENT:1) ABC ANALYSIS:-

This is based on consumption. The materials are divided into a number of category for adopting a selective approach for material control. It is generally seen that in a manufacturing concern a small percentage of items contribute a large percentage of value of consumption and a large percentage of items contribute a small percentage of values.

Past experience in NALCO has shown that almost 10% of the items contribute to 70% of values of consumption and this category is called a category. Category C covers about 70% of items of materials which contribute only 10% of values of consumption.

Class Number of item(%) Value of itemA 10 70B 20 20C 70 10

Thus a highest control should be exercised on ‘Item A’ inorder to maximize profitability on its investment. In case of ‘Item C’ simple controls will be sufficient. A little more attention should be given towards ‘Item B’.The major inventory items in NALCO are composed of:

Raw Materials: That consists of CP coke, CT pitch, Aluminium Fluoride, Pig iron, Heavy fuel oil, Light Diesel oil, Alumina and anodes. As NALCO is a process industry, it always maintains sufficient stocks 45 days. The company is maintaining the stock of raw material effectively and it has not faced a situation like out of stock raw materials during the recent past.

Stores and Spares: The spares of different machines come along with the machinery at the time of their import. Highly valued spares lying with the plant and machinery are the insurance spares. The high value spare parts are produced against indents raised by user departments while recurring spare parts are purchased at regular intervals at automatic procurement (AP) spares.

Intermediary goods: Which consists of Green Anodes, Baked Anodes, Anode stem, Cast iron holders etc. of which NALCO has installed its own plant for producing the Green and Baked anodes and imports them only when there is a shortage.

Finished goods: That consists of Alumina, Aluminium Ingots, Saw Ingots, Billets, Wire bars, sheets etc. The finished products of NALCO more very fast and hence, the stock of finished goods is very less in the company.

MBA 31


The company also effectively reuses the rejected inventory. The reject inventory in NALCO comprises of anode butts & rejects and rejects of finished products. Anode rejects are recycled and reused in the process while finished stock rejects are either recycled are or sold at a lower price. The company is exercising good control to minimize the rejects.Material Cost_per_unit

142K Porpex F.C 309,844.40

Alclar - 661 169,991.25

Alclar - 662 204,936.67

Bauxite -

C.G.M 145,471.25

Caustic Soda - Vizag (Indigeneous) 18,200.09

Caustic Soda (Imp) Damanjodi 17,290.05

Caustic Soda (Ind) Dmj. 18,830.63

Caustic Soda-Vizag (Imported) 16,806.11

Charm Non Woven Filter Bag. 2,172.30

Charn Non Wovenfilter Cloth,Kelly Filter. 958.00

Coal 1,093.12

Cylindrical Filter Bag Size 130Mm X 250Mm Long 205.31

Defoamer (N-85320) 211.12

Disc Filter Bags -

Discfilter Bags In Clartex 4/N/23 S12 With Dim 2020X240X700 Mm 2,172.30

Disk Filter Nonwoven Cloth For Jack Filter 564.37

Filter Bag For Bag Filter Model 135.93

Filter Bag Made Of Woven Cloth Used Without Inner Bag For Db Filter 340.08

Filter Bag Made Of Woven Cloth Used Without Inner Bag Gf Filter 680.16

Filter Bags 21.33

Filter Bags (For Kw-302) 130X3194 Mm Long Make: Masturilal 400.40

Filter Bags 6 14.94

Filter Bags 700 Mesh Course 334.03

Filter Bags For Door Oliver Disc Filter. 351.22

Filter Bags Q.No.Pe/Ind/Pe/501/Polyster Non-Woven Needle Belt 200.31

Filter Bags Size 152X3664 Mm Make: Masturilal,Kw-301 468.00

Filter Cloth For (Fp 101 To 105) 212,959.00

Filter Cloth For 207 A/B 130,333.50

Heavy Fuel Oil 13,687.61

Hydrated Lime -

Ldo 23,272.22

Lime 2,451.87

Low Ash Calorific Coal (Imported) 2,879.34

Media Cloth 2,696.27

Media Cloth 1,600.63

Media Cloth 658.37

Nalco Synthetic Flocculant H-120 146,495.79

MBA 32


Non Oven Disc Filter Cloth For Bokela Disc Filter 514.16

Non Woven Filter Bags For Bokela Filter Make-Supreme 498.83

Non Woven Filter Bags For Db Filter Make Supreme 338.49

Non Woven Filter Bags For Gaudfrin Filter Make Supreme 551.78

Poly Propylene Thread 1,203.50

Polyster Non Woven Cloth Filter Bags 67.50

Sector Clamp For Door Oliver Disk Filter 6,397.90

Sodium Silicate 5,937.30

Superfloc Hx - 400 142,144.17

Superfloc Hx-401 165,874.46

Synthetic Flocculant Dk Set Is 1177 Sp 308 166.40

Synthetic Flocculant Dk Set Is 1177A15 182.07

Synthetic Flocculant, Nalco 85035 164.32

Under Cloth For New Drum Filter Size 6,661.04

Wash Coal 1,532.52

Wheat Bran 6,057.85

MBA 33


Trend Analysis of Ratio of Inventory to Current Assets:

(Rs.in Crores)

YEAR INVENTORY CURRENT

YEAR

RATIO

2000-01 407.20 1048.24 38.8%

2001-02 483.40 1138.45 42.5%

2002-03 489.25 1006.50 48.6%

2003-04 480.48 990.51 48.5%

2004-05 529.06 1811.04 29.2%

The level of Inventory in NALCO remains more or less around 50 percent of current

assets. The amount of inventory also remains around 400 to 550 crores.

Trend Analysis of movement of Avg. Inventory to Sales:

(Rs. in Crores)

Year Inventory Avg.Inventory

Increase/Decrease

% of Increase/Decrease

Sales Increase/Decrease

% ofIncrease/Decrease

2000-

01

407.20 423.72 -18.08 -4.10% 2408.60 266.28 12.43%

2001-

02

483.40 445.30 21.58 5.10% 2385.42 -23.18 -0.96%

2002-

03

489.25 486.33 41.03 9.21% 2739.67 354.25 14.85%

2003-

04

480.48 484.87 -1.46 -0.30% 3338.87 599.20 21.87%

2004-

05

529.06 504.77 19.90 4.10% 4439.99 1101.12 32.98%

From the above trend analysis table we can notice that except in the year 2001-02, the

amount of inventory and sales has been increasing gradually year by year. The sharp dip in

sales during 2001-02 has been due to an unprecedented crisis in 2001 summer in which

almost 40% of pots had to be shut off resulting in considerable loss of production.

MBA 34


Trend Analysis of Inventory Turnover Ratio of NALCO:

(Rs. In Crores)

YEAR SALES INVENTORY INVENTOY

TURNOVER

RATIO

STORAGE

PERIOD

(in days)

2000-01 2408.60 407.20 5.92 62

2001-02 2385.42 483.40 4.93 74

2002-03 2739.67 489.25 5.60 65

2003-04 3338.87 480.25 6.95 53

2004-05 4439.99 529.06 8.40 44

From the above trend analysis table, we can notice that the inventory turnover ratio of

NALCO hovers around 4 - 8.50 times in a year and the storage period of inventory is

between 40 and 75 days. NALCO had a better Inventory Management Methods and it is the

last stage of moving inventories.

Trend Analysis of Finished Goods Turnover Ratio of NALCO:

(Rs. In Crores)

Year Sales Avg. stock of

Finished

Goods

Finished

Goods Turnover

Ratio

Holding period

(in days)

2001-02 2385.42 154.61 15.4 24

2002-03 2739.67 150.97 18.2 20

2003-04 3338.87 143.23 23.3 16

2004-05 4439.99 162.13 27.4 13

From the above trend analysis table we can notice that the finished goods turnover ratio

of NALCO is gradually increases at 27.4 times in the current year. The storage period of

finished goods is between 10 and 25 days, which is very good and reflects the huge demand

of the finished products of NALCO.

2) XYZ ANALYSIS:

This is based on inventory and all the calculations and making categories are some as

that of ABC analysis.

X = 70% of inventory.Y = 20% of inventory.Z = 10% of inventory.

3) FSN ANALYSIS

MBA 35


‘F’ stands for fast moving items which includes items having 3 or more times

movement in a year. ‘S’ stand for slow moving items which includes items having less than 3

times movement since 5 years. ‘N’ stands for non-moving items which includes items-

a) Not moved since 5 years.

b) Received before 5 years. It mainly includes insurance items.

The FSN Analysis is done by NALCO to identify the fast moving, slow moving , non-

moving items and as per the requirement of accounting standard a provision of 20% if the

value of non-moving itemsare made on the books of account and charged to profit and loss

account.

4) PERPETUAL INVENTORY;

NALCO follows the perpetual inventory system which is a system of maintaining bin

cards and stores ledger along with continuous stock verfication . This is a method of

ascertaining balance after every issue and receipts of material through stock records to

facilitate regular checking and to avoid closing down for stock.

In order to ensure accuracy of perpetual inventory records NALCO checks the physical

stock by a program of continuous stock checking through an outside agency of continuous

stock checking through an outside agency who are the practicing chartered accountants. Any

difference noted between the physical stock and stock records are investigated and

rectifications are made the and there. Perpetual inventory system is used as an aid to material

control because balance of stock shown by in cards or the stores ledger should agree with the

balnce ascertained by physical checking. If the physical verfication reveal that the physical

balance is more than the balance shown by the bin or stores ledger, a debit note is prepared

and stock records are adjusted accordingly. Similarly if there is a shortage of stock , credit not

is prepared and stock records are adjusted accordingly. So that, it shows the actual balance.

Stock adjustment account is prepared and debited with shortage of stock and credited wit

surplus. At the end of the year the balance of the adjustment account is transferred to profit &

loss account.

ADVANTAGES:

The following are the are the advantagesof perpetual inventory system.

1) it obviates the necessity of the physical checking of all items of stores at the end of

the year and thereby avoids dislocation of production.

2) A system if interval check in operation all the time because bin cards and stores

ledger acts on the cross check on each other.

3) The capital invested in stores are kept under control because actual stock can be

compared with minimum and maximum stock level

MBA 36


4) Shortage of stocks are readily discovered and efforts are made to avoid shortage of

stock in future.

EOQ: (ECONOMIC ORDERING QUANTITY)

A decision about how much order has great significance in inventory management. The

quantity to be purchased should be neither too small nor too big because costs of buying and

carrying materials are very high. EOQ is the size of the lot to be purchased which is

economically viable. It is the point at which inventory carrying costs are equal to the ordering

costs. It is assumed at costs of managing inventory is made of solely of two parts that means

ordering cost & carrying costs.

Assumptions of EOQ :

The following assumptions are made;

1) The goods can be purchased whenever these are needed.

2) The quantity to be purchased by the concern is certain.

3) The prices of goods are stable. It results to stabilize carrying costs.

EOQ can be calculated with the help of following formula:

EOQ = 2AS / I Where,

A = Annual Consumption in rupees

S = Cost of placing an order

I = Inventory carrying costs of one unit.

METHOD OF VALUATION OF MATERIALS:

The value of materials have a direct bearing on the income of a concern, so it is necessary

that a method of pricing materials should be such that it gives a realistic values of stock. The

traditional method of valuing materials ‘Cost price or Market Price’ whichever is less is no

longer the only method.

If management is interested in showing more profits then it can choose such a

method, which will show more stock or vice-versa. So, to safeguard the public interest the

Government of India had instituted statutory controls to prevent frequent change of materials

valuation methods. A concern will have to use a particular valuation method for at least 3

years and any change thereafter must be approved by the board.

NALCO has adopted the weighted average method for valuation of its materials. In this

method, the total number of items in stock divides the total cost of all the materials. The price

calculated in this manner will be used for issue of materials upto the time a fresh purchase has

not been made. After a fresh purchase the quantity will be added to the earlier balance

quantity and material cost will be added to the earlier costs. A fresh price is calculated by

dividing the changed total cost by the number of units in stock after the purchase. A new price

is calculated whenever a fresh purchase is made.

MBA 37


CONCLUSION :

The Inventory Management in NALCO is very systematic and the fact is confirmed

by the following comparative inventory analysis of last 3 years.

INVENTORY LEVELS :

Inventory levels at the close of the last 3 years are given below:

(Rs. In Crores)

2002-03 2003-04 2004-05

Raw Materials 71.61 48.08 56.17

Stores, Spares & Others 280.74 283.55 297.48

Finished Goods 137.60 148.85 175.41

Percentage (%) of finished

goods to sales

5% 4.5% 4%

NALCO has nicely accepted the fact that a most rigid control over cash is required so

also it is desirable to have an efficient as well as equipped stores department to exercise an

effective material control because materials become cash on the sale of finished products

which represents an equivalent amount of cash.

MBA 38


CHAPTER – III

A STUDY OF FINANCIAL MANAGEMENT OF NALCO

MBA 39


A STUDY OF FINANCIAL MANAGEMENT OF NALCOINTRODUCTION:

As of the late 1970’s the financial manager had transcended the traditional role in preparing reports and raising external funds. As business became larger and more complex, finance assumed the responsibilities of dealing with the problems and decisions associated with managing the firm’s assets. The Financial Manager is presently involved with the allocation of funds to different projects and activities with the measurement of results of each allocation.

Today’s financial manager deals with variety of development that effects the firms liquidity and profitability including:

High finance cost identified with risk bearing investment in a capital intensive environment.

Diversification by firms into different business, markets and product lines. High rate of inflation that significantly effect planning and forecasting of the firms

operation. Emphasis on growth, with its requirement for new sources of fund and improve use of

existing funds. High rate of change in technology with an accompany need for expenditure on

resources and development. Speedy dissemination of information, employing high speed computers and nation

wide and world wide net work for transmitting financial and operating data.FINANCE FUNCTION:There are four important Management Financial Functions:

Investment or long term asset mixed decisions. Financing or capital mixed decision. Dividend or profit allocation decisions. Liquidity or short term asset mixed decisions.

FINANCIAL GOAL:The starting point for developing goal oriented financial structure is the defining of

workable goals for the firm as a whole. Two primary goals are commonly encounter i.e., maximization of wealth.1. MAXIMISATION OF PROFITS :

Profit maximization has the benefit of being simple and straight forward statement of purpose. It is easily understood as a rational goal for a business and it focuses the firms efforts towards making money. But, the precise meaning of the profit maximization objective is unclear. The definition of the profit is ambiguous.2. MAXIMISATION OF WEALTH :

The second frequently encountered objective of the firm is to maximize the value of the firm over the long run. This goal may also be stated as the maximization of wealth with wealth defined as the net present worth of the firm. Maximization of wealth implies other factors in addition to profit. As a general guideline the firm that is maximizing wealth must do the following:

Avoid high levels of risk. Pay dividends. Seek growth. Maintain market price of stock.

MBA 40


Maximization of wealth is more useful than maximization of profits as it balances the profit factor with related goals such as growth, stability, risk avoidance and the market price of the firms stock.FUNCTIONS OF FINANCIAL MANAGEMENT:

In the context of achieving the goals, the Financial Manager performs tasks in several areas. Each task is linked with the goal of liquidity, profitability or both. The second classification method focuses on what is being managed-Assets or funds.FUNCTIONS LEADING TO LIQUIDITY:

In seeking sufficient liquidity to carry out the firm’s activities the Financial Manager performs tasks such as:

a. Forecasting Cash Flow.b. Raising Funds.c. Managing the flow of internal funds.

FUNCTIONS LEADING TO PROFITABILITY:

In seeking profit for the firm the Financial Manager will provide specific input

into the division making process based on his financial training and actions with

respect to profitability. Some of the specific functions are:

a. Cost Control.

b. Pricing.

c. Forecasting future profits.

d. Measuring cost of capital.

FINANCIAL POSITION OF NALCO Following is the financial position of Nalco for last 3 years.

(Rs. In Crores)

Liabilities 2007-08 2008-09 2009-10

(a) Paid up capital

(i) Government

(ii) Others

(b) Reserves & Surplus

Free reserves & surplus

Capital reserves

Debenture redemption reserve

(c) Borrowing from

(i) Non-convertible Redeemable

Debenture

(ii) Bonds

561.50

82.81

2147.94

1.22

431.77

643.54

440.00

561.50

82.81

2340.40

1.17

324.16

428.33

440.00

561.50

82.81

2894.05

1.12

217.19

214.39

440.00

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(iii) Foreign currency loan

(iv) Commercial paper

(v) Export packing credit

(vi) Other loan

(d) Current liability & provision

(e) Deferred tax liability

145.67

196.37

137.87

---

719.20

492.13

---

---

253.34

199.77

1011.60

573.17

---

---

---

---

864.28

609.99

TOTAL 6000.02 6219.25 5885.33

Assets 2007-08 2008-09 2009-10

(f) Gross Block

(g) Less cumulative Depreciation

(h) Net Block

(i) Capital Work in progress

(j) Investment

(k) Current Assets, Loans & Advances

(l) Miscellaneous Expenditure not written off

6277.75

3388.13

7459.96

3747.01

8092.87

4189.39

2889.62

1920.81

50.00

1138.45

1.14

3712.95

1298.66

200.00

1006.50

1.14

3903.48

791.34

200.00

990.51

---

TOTAL 6000.02 6219.25 5885.33

(m) Working Capital (k)-(d)

(n) Capital Employed (h)+(m)

(o) Net Worth (a)+{(b)(i)+(ii)}-(l)

(p) Net Worth per rupee of paid up capital (Rs.)

419.25

3308.87

3222.88

5.00

(-) 5.10

3707.85

3307.73

5.13

126.23

4029.71

3755.55

5.83

FINANCIAL MANAGEMENT OF NALCO:Under extremely difficult logistics of implementing a Multi-National Green Field

Project, NALCO successfully constructed and commissioned each of its units on schedule, within estimated cost, a feat which has few parallels in Indian Public Sector.

A significant achievement in the Financial Management of NALCO has been the prepayment of overseas loans amounting to Rs. 978/- Crores during March’95 to March’97 period. This proactive measure has not only brought down the interest liability from Rs. 184.03 Crores in 1994-95 to Rs.64.83 in 1995-96 to Rs. 9.08 Crores in 1996-97 but also helped to achieve around Rs.45 Crores saving on adverse exchange rate variations as on 31 st

March’98. At this point of time the debt liability of NALCO is limited to Rs.580 Crores in form of a 20 Billion Japanese Yen loan repayable in full by end of Sept’98.

Because of Nalco’s efficient financial Management strict fiscal discipline endeavor to increase targeted production, which are the essential ingredients for the success of NALCO which has made the company a Zero debt company as on 30th September,1998.

MBA 42


CHAPTER – IV

RATIO ANALYSIS

MBA 43


RATIO ANALYSIS

INTRODUCTION

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as “the

relationship between two or more things”. In financial analysis, a ratio is used as a bench

mark for evaluating the financial position and performance of a firm. The relationship

between two accounting figures, expressed mathematically, is known as a financial ratio.

Ratios help to summarize the large quantities of financial data and to make qualitative

judgment about the firm’s financial performance.

SIGNIFICANCE OF RATIO ANALYSIS :

The ratio analysis is one of the most powerful tools of the financial analysis.

1. It is used as a device to analyze and interpret the financial health of

an enterprise.

2. With the use of ratio analysis one can measure the financial condition

of a firm and can point out whether the condition is strong, good,

questionable or poor. The conclusions can also be drawn as to

whether the performance of the firm is improving or deteriorating.

Thus, ratios have wide applications and are of immense use today.

MBA 44


Financial Ratios :

Sl.No. Ratios Formula’s 2010-11 2009-101. Current Ratio CA/CL 2.25 1.142. Liquid Ratio LA/CL 1.59 0.593. Stock Turnover Ratio Sales/inventory 8.40 6.954. Debtors Turnover Ratio Sales/Debtors 47.84 32.665. Avg. Collection Period No. of Working days

Debtors Turnover Ratio8 days 11 days

6. Creditor Turnover Ratio Purchases/Creditors 1.90 1.817. Avg. Payment Period No. of Working days

Cr. Turnover Ratio192 days 202 days

8. W.C Turnover Ratio Sales/Net W.C 4.42 26.509. Proprietary Ratio Share Holders Fund

Total Assets0.87 0.75

10. G.P Ratio (G.P/Net Sales) X 100 58.10 51.5011. Debt-equity Ratio Outsiders Fund

Sh. Holders Fund0.17 0.40

12. F.A Turnover Ratio Sales/Fixed Assets 1.02 0.7113. Net Profit Ratio (N.P/Sales) X 100 27.81 22.1014. EPS Profit available for Eq.Sh.Holders

No. of Eq. Shares19.17 11.44

15. Dividend Yield Ratio Dividend Per ShareMarket Value Per Share

0.06 0.08

16. Market Value Per Share Sh. Holders FundsNo. of Eq, Shares

72.91 58.31

17. Dividend Per Share Div. Rate + Div. TaxNo. of Eq. Shares

4.55 4.51

18. Dividend Payout Ratio Div. Per Eq. SharesEarning Per Share

0.24 0.39

19. Price earning Ratio Market Value Per ShareEarning Per Share

3.80 5.1

20. Capital Gearing Ratio Eq. Sh. Capital+R&SPref. Capital+Long-term debt

- 5.74

21. Return on Sh. Holders Investment

N.P(after Int & Tax)Sh. Holders Funds

0.31 0.23

22. Ratio of Reserves to Eq. Capital

ReservesEq. Sh..Capital

6.29 4.83

MBA 45


ANALYSIS OF RATIO :1. SHORT-TERM SOLVENCY POSITION :

Short-term solvency position of the company is very sound. The current ratio in

2009-10 was 114% and in 2204-05 it is 225% which is well above the norms of 195% to

200%.

The liquid ratio which was 59% in 2009-10 and 159% in 2010-11 is also well above

the general accepted principles of 250%.

The Inventory turnover ratio is increasing constantly over the years which shows the

qualitative output of the company and thereby the constant increase in demand.

The company generally sells against advance payments, against 60 days usuance L/C

and against 60 days stand by L/C. Thus, on an average the credit terms are 2 months. The

average collection period for 2009-10 was 11 days and for 2010-11 it is 8 days which shows

the efficiency of receivables management.

The working capital turnover ratio was 265% in 2009-10 and is 442% in 2010-11

which shows the defficiency with which the working capital is being used by the company.

2. LONGTERM SOLVENCY POSITION

The long term solvency position of the company is very encouraging. The debt-equity

ratio in 2009-10 was 40% and in 2010-11 is 17% which shows efficiency of servicing loans

by the company. Though the debt-equity ratio is considered to be a satisfactory ratio, a low

ratio is considered as favorable from the long-term creditors point of view because a high

proportion of owners fund provides a larger margin of safety for them.

The proprietory ratios also supports the view strongly as the shareholders fund 75%

in 2009-10 and 87% in 2010-11 of the total assets. This proves that the company is not self-

sufficient in financing its affairs.

3. ANALYSIS OF PROFITABILITY

The profitability of the company is showing a very encouraging trend. Every year it is

touching a new height.

The net profit ratio of the company in 2009-10 was 22% and in 2010-11 it is 28% of

turn over which indicates a satisfactory return on its investment and also indicates the

company’s capacity to face adverse economic conditions such as price competition, low

demand etc.

4. OVERALL PROFITABILITY RATIO

The return on shareholders on investment in 2009-10 was 23% and 31% in 2010-11

which shows the trend of growth and prosperity in the company’s profitability and efficiency.

The earnings per share(EPS) was 11.44 in 2009-10 and 19.17 in 2010-11 which

shows the constant increase in EPS over the years. The EPS looks to be low even through the

company have earned huge profits in both the years because of the high equity base of the

company.

MBA 46


The price earning ratio (P/E ration) in 2009-10 was 5.1 and in 2010-11 it is 3.80

which is showing the week fundamentals of the company’s sales.

5. ANALYSIS OF CAPITAL STRUCTURE

The capital gearing ratio for the year 2009-10 and 2010-11 are 5.74 and NILL

respectively which shows the defficient debt servicing of the company.

The reserve to equity-capital ratio of 2009-10 and 2010-11 are 4.83 and 6.29

respectively which shows that high margin of profit are retained by the company for future

growth.

CONCLUSION:

The financial results over the year reflect the company’s robust performance in

production & marketing. The sales turnover grow by 32.49% over the previous year to reach

4439.99 Crores.

Net profit grew by 77.65% over the previous year to reach 1870.27 Crore. The export

earning of 2200.25crores including a foreign exchange component of 2150.75crores is yet

another landmark achievements of the year.

The gross margin has gone up by 48.39% over the previous year to reach at 2393.84

Crores.

The company pursued over the year its policy of proactive servicing of the overseas

debt. This has resulted in a total payback of RS. 670.05 Crores including short term

borrowing Rs. 456.11 Crores.These measures have brought down the outstanding commercial

borrowing to Rs.214.39 Crores.

The debt. equity ratio has decreased from 40% to 17% as compared to previous year.

The EPS has almost improved from Rs. 11.44 in 2009-10 to Rs.19.17 in 2010-11.The current

ratio improved from 114% in 2009-10 to 225% in 2010-11. Despite high equity base the

market has been taking keen interest in the company’s scrip because of consistent

performance and strong fundamentals.

MBA 47


CHAPTER – V

FUNDS FLOW AND CASH FLOW

STATEMENT

MBA 48


FUNDS FLOW STATEMENT

The statement of changes in financial position, prepared to determine only the sources and uses of working capital between dates of two balance sheets, is known as the funds flow statements. Working capital is defined as the difference between current assets and current liabilities. It indicates the various means by which funds are obtained during a particular period and the ways in which these funds were employed. It is a statement of sources and applications of funds.

CASH FLOW STATEMENT:An analysis of cash flows is useful for short-run planning. A firm needs sufficient

cash to pay debts maturing in the near future, to pay interest and other expenses and to pay dividends to share holders. The firms can make projection of cash inflows and outflows for the near future to determine the availability of cash. This cast balance can be matched with the firm’s need for cash during the period, and accordingly, arrangement can be made to meet the deficit or invest the surplus cash temporarily. A historical analysis of cash flows provides insight to prepare reliable cash flow projections for the immediate future.

“A statement of changes in financial position on cash basis, commonly known as the cash flow statement, summarizes the causes of changes in cash position between dates of two balance sheets”. It indicates the sources and uses of cash. The cash flow statement similar to the funds flow statement except that it focuses attention on cash instead of working capital (funds). COMPARISON BETWEEN FUNDS FLOW STATEMENT AND CASH FLOW STATEMENT:

A cash flow statement is much similar to a funds flow statement as both are prepared to summaries the cases of changes in the financial position of a business. However, following are the main difference between a funds flow and a cash flow statement.1) Funds flow statement is based on a wider concept of funds i.e. working capital while cash

flow statement is based on the narrower concept of funds i.e. cash only, which is only one element of working capital, the others being debtors, stock, temporary investment, bills receivable etc.

2) Funds flow statement is based on accrual basis of accounting while cash flow statement is based on cash basis of accounting. In each flow statement while calculating operating profits, adjustments for prepaid and outstanding expenses and incomes are made to convert the data from accrual basis to cash basis; but no such adjustments are required to be made while preparing a funds flow statements.

3) A funds flow statement s does not reveal changes in current assets and current liabilities, rather theses appear separately in a schedule of changes in working capital. No such schedule of changes in working capital is prepared for a cash flow statement and changes in all assets and liabilities fixed as well as current are summarized in the cash flow statements.

4) Cash flow statements is prepared by taking the opening balance of cash adding to this all the inflows of cash and deducting the outflows of cash from the total. The balance i.e. opening balances of cash, is reconciled with the closing balance of cash. No such opening or closing balances appear in a funds flow statements. The net difference between sources and applications of funds does not represent cash rather it reveals the net increase or decrease in working capital.

MBA 49


5) Funds flow statements is useful in planning intermediate and long-term financing while a cash flow statement is more useful for short-term analysis and cash planning of the business.

IMPORTANCE OF FUNDS FLOW STATEMENT:A funds flows statement is an essential tool for the financial analysis and is of primary

importance to the financial management. The importance’s of funds flow statement are as follows:1) With the help of funds flow statement, a firm can plan the deployment of its resources

and allocate them among various application.2) A projected funds flow statement acts as a guide for future to the management. The firm’s

future needs of funds can be projected well in advance and also the timing of these needs.3) A funds flow statement helps in explaining low efficiently the management has used its

working capital and also suggests ways to improve working capital position of the firm.

IMPORTANCE OF CASH FLOW STATEMENT:Cash flow statement is of vital importance to the financial management. It is an essential

tool of financial analysis for short-term planning.1) Since a cash flow statement is based on the cash basis of accounting, it is very useful in

the evaluation of cash position of a firm.2) A Series of intra-firm and inter- firm cash flow statement reveal whether the firm’s

liquidity is improving or deteriorating over a period of time and in comparison to other firms over a given period of time.

3) Cash flow statement helps in planning the repayment of loans, replacement of fixed assets and other similar long- term planning of cash. It is also significant for capital budgeting decisions.

DEFINITIONS:For the cash flow analysis of NALCO the following terms have been used with meaning

specified.CASH:

It comprises of cash in hand, cash at bank and demand deposits.CASH EQUIVALENTS:

These are short-term highly liquid investments that are readily converted into cash which are subject to insignificant risk of changes of values.OPERATING ACTIVITIES: These are principal revenue producing activities of the enterprise and other activities that are not investing or financing activities.INVESTING ACTIVITIES: These are acquisition of long- term assets and other investment not included in cash equivalent.

MBA 50


FINANCING ACTIVITIES: These are activities that result in changes in size and composition of owner’s capital

(including preference share capital in case of a company) and borrowing of an enterprise.

I. CASH AND CASH EQUIVALENT :Cash equivalent are held for the purpose of meeting short- term cash commitment rather

than for investment purpose. For an investment to quality as a cash equivalent it must be readily convertible to a known amount of cash therefore, an investment normally quality as a cash equivalent only when it has a short maturity of say, 3 months or less from the date of acquisition. Investments in shares are in substance cash equivalents. E.g. in case of preference share acquired within a short period of maturity and with specified redemptions date.

Bank borrowings are considered to be financing activities however bank overdrafts which are repayable cash management. In theses cases bank overdrafts are included as cash equivalent. Cash flows exclude movement between items that constitute cash or cash equivalent because these components are the parts of the cash management of the enterprise rather than part of its operating, investing and financing activities. Cash management includes investment of excess cash in cash equivalents. II. OPERATING ACTIVITIES :

The amount of cash flows arising from operating activities is a key indicator of the extent to which the operations capability cash to repay loans, maintain the operating capability enterprise, pay dividends and make new investment without recourse to external sources of financing.

Cash flows from operating activity are primarily derived from principal revenue producing activities of the firms. Therefore, they generally result from the transaction and other events that are taken into account for the determination of net profit or loss.

Examples of cash flow from operation activities are:1. Cash receipts from sale of goods and rendering of services.2. Cash receipts from royalties, fees, commissions and other revenues.3. Cash payment to suppliers of goods and services.4. Cash payment to and on behalf of the employees.5. Cash payments or refunds of Income Tax unless they are specifically identified with

financing and investing activities.6. Cash receipts and payments from contracts held for dealing and trading purposes.

Some transactions such as sale of a part of land may give rise to a gain or loss which is included in determination of net profit or loss. However, cash flows relating to such transactions are cash flows investing activities. An enterprise may hold securities and loans for dealing or trading purposes in which they are similar to inventory acquired specifically for asset. Therefore, cash flows arise from purchase or sale of dealing or trading securities classified as operating activities. Since, they relate to main revenue producing activity of enterprise.

III. INVESTING ACTIVITIES: The separate disclosure of cash flows arising from investing activity is important

because the cash flow represents the extent to which expenditures have been made for resources intended to generate future income and cash flows.Examples of cash flows arising from investing activities are :

1. Cash payments to acquire fixed assets. These payments include those relating to capitalized R & D costs and self constructed fixed assets.

2. Cash receipts for disposal of fixed assets.

MBA 51


3. Cash payments to acquire shares, warrants or debt instruments of other enterprise and interest in joint ventures.

4. Cash receipts from disposal of shares, warrants or debt instruments of other enterprise and interest in joint ventures.

5. Cash advances and loans made to the other party.6. Cash receipts from repayment of loan made to other party.7. Cash payments from future contracts, forward contracts, option contracts and swap

contracts except when contracts are held for dealing or trading purpose or payments are classified as Financing Activities.

IV. FINANCING ACTIVITIES: The separate disclosure of cash flows arising from financing activities are important

because it is useful in predicting claims on future cash flows by providers of loan to the enterprise.Examples of cash flows from financing Activities are:

1. Cash proceeds from issuing shares of similar instruments.2. Cash payments to owners to acquire or redeem the enterprises shares.3. Cash payments for issuing debentures, loans, notes, bonds and other short-term and

long-term borrowings.4. Cash payments for the amount borrowed.

MBA 52


FUNDS FLOW STATEMENT FOR 2009-10(Rs. In Crores)

Sources of Fund Application of Fund

Funds From

Operation

Decrease in

Working Capital

1217.71

14.05

Increase in Fixed Asset & Capital Work in

Progress

Increase in Investment

Dividend Paid

Decrease in Borrowing

125.59

----

436.12

670.05

1231.76 1231.76

STATEMENT OF CHANGES IN WORKING CAPITALRs. in Crores)

Particulars 2004(Rs.)

2003(Rs.)

Effect on Working CapitalIncrease Decrease

Current Assets:InventoriesSundry DebtorCash & Bank BalanceOther Current AssetsLoans & Advances

Current Liability:Sundry CreditorOther Current LiabilitySecurity DepositsBank OverdraftsProvision for TaxProvision for leave post retirement medical benefitsInterest Outstanding

Working Capital (CA-CL)Net Decrease in Working Capital

480.48 102.24 98.36 86.51 222.92

489.25 101.83 49.56 89.80 276.06

0.41 48.80

67.34

11.44 24.90

0.54

14.05

8.77

3.29 53.14

98.51

0.99 2.78

990.51 1006.50

226.29 243.15 61.75 8.09 1.96 23.70

8.60

293.63 144.64 73.19 32.99 0.97 20.92

9.14 573.54 575.48 416.97 14.05

431.02

431.02 431.02 167.48 167.48

MBA 53


CASH FLOW STATEMENT (For the year 2009-10)

Rs. in Crores)Inflow Out flowOpening balance of cash & cash equivalent.Cash from operationSale of fixed assetsInterest receivedIncome from forward contractsGain from exchange rate variation

49.56

1388.94 0.06 30.22 0.90 7.76

Purchase of fixed assetsRedemption of debenturesPayment of short-term borrowingsInterest & financing chargesDividend paidClosing balance of cash & cash equivalent

187.92 213.94 456.11

85.11 436.12 98.34

1477.44 1477.44

CALCULATION OF CASH FROM OPERATION

Net profit for the year Add: non cash items already debited Depreciation Interest and financing charges ProvisionsClaims/recoverable written of Stores & spares written off Deferred revenue expenditures Loss on sale of fixed assets

Less: non cash items already credited Interest income Income from forward contracts Gain from exchange rate variation

Operating profit before working capital changesAdd: adjustments for Inventories Trade & other receivables Trade payables

Less: Direct Tax paid net of TDS

445.13 84.57 0.83 0.02 3.28 1.14 0.29

1052.76

535.26

23.96 0.90 7.78 42.64

5.75 56.95 53.96

1555.38

116.66 1672.04

283.10Net cash from operation 1388.94

MBA 54


CHAPTER – VI

REFINERY PROCESS OVERVIEW

MBA 55


REFINERY PROCESS OVERVIEW

INTRODUCTIONo NALCO’s Alumna Refinery was set up with the technical collaboration of Aluminium

Pechiney, Franceo Installed Capacity

Original 0.8 million MT PADebottlenecking 1.05 million MT PAExpansion 1.575 million MT PA

o CommissioningOriginal 1987 FebruaryDebottlenecking 2000 JuneExpansion 2001 December

BASIC TECHNOLOGYo Predesilication before digestion

o Atmospheric digestion process as bauxite is primarily Gibbsitic

o Removal of coarse sand particles & Post-desilication

o Settling in Flat bottom settlers

o European high solid,nucleation based precipitation

o Interstage coolers for enhanced productivity

o Circulating Fluid Bed Calciners

o 6-effect backward feed falling film type Evaporation

o Coal based Steam Generation Plant

o Back pressure type Turbo Generator for co-generation of powerBASIC REACTIONS Digestion reaction :

Al(OH)3 + NaOH NaAl(OH)4

Silica Dissolution :Al2O3, 2SiO2, 2H2O + 6NaOH 2NaAl(OH)4 + 2Na2SiO3 + H2O

Desilication Reaction :6NaAl(OH)4 + 6 Na2SiO3 3(Na2O,Al2O3,2SiO2,2H2O),Na2X + 12NaOHWhere X = CO3

-2, 2AlO2-, 2OH-, 2Cl-, SO3

-2 etc. or a mixture of these anions Precipitation reaction :

NaAl(OH)4 Al(OH)3 + NaOH Carbonation reaction :

2NaOH + CO2 Na2CO3 + H2O Causticisation reaction :

Na2CO3 + Ca(OH)2 CaCO3 + 2 NaOHBAUXITE QUALITY (%) – Original designedo Al2O3 (t) - 44.60

o ATH - 40.80

MBA 56


o SiO2 (t) - 2.30

o SiO2 (r) - 1.65

o Fe2O3 - 25.40

o LOI - 23.40PRODUCT QUALITYCalcined Alumna - Metallurgical grade Sandy Alumnao Physical Properties

BET - 60 – 80 m2/gm LOI (300-1000oC) - 0.5 – 1.0 % Bulk Density - 0.95 – 1.05 T/m3

Alpha Content - 10 % (max) Grain Size Typical Max

-45 mic 10% 12 %+125 mic 15 %

o Chemical Properties P2O5 - 0.002 % (max) Na2O - 0.50 % (max) Fe2O3 - 0.015 % (max) SiO2 - 0.02 % (max) ZnO - 0.0008 % (max) CaO - 0.05 % (max) TiO2 - 0.004 % (max) V2O5 - 0.002 % (max) K2O - 0.002 % (max) Ga2O3 - 0.012 % (max) Alumina - 98.5 % (min)

LIST OF RAW MATERIALSo Bauxite - Own Captive Mines

o Caustic Soda - Imported and Indigenous

o Lime - VSP/ RST/ Katni Area

o Wheat Bran - Local Flour Mills

o Coal - MCL Talchet, IB Valley

o Fuel Oil (HFO / LDO) - IOCL / HPCL

o Cytec - Cytec, Australia

o CGM - Ondeo Nalco Chemicals, Kolkota

o Alclar 661 - CIBA Speciality Chemicals

BAUXITE HANDLING AREA:o ROM (Run-off Mines) Bauxite, primary crushing done at Mines to d80=150 mm

o Received at Angle Station for (i) Stacking or (ii) Direct feeding

o Stacking of Bauxite done by a Stacker in any of the 4 piles.

o Pile capacity - 1,65,000 MT each

o Bucket wheel Reclaimers

MBA 57


o Two lines of Reclaiming Old - 700 T/HrNew - 1000 T/Hr

o Screening and secondary Crushing to d80=30 mm

o 4 day Silos - 2200 MT capacity eachGRINDING:o Total 4 Ball Mills 3 old and 1 New

o Old MillsOriginal design New Working condition

Capacity 155 TPH 207 TPH-63 mic, % > 80 > 78Bond Index 12.3 7.30KW 1600 KWBall Load 120 MT

o New MillCapacity 225 TPH-63 mic, % > 78KW 2000 KWBall Load 120 MT

o Wet Grinding with SL at feed end / discharge end

o Speed - 14.73 rpm (72% of critical speed)

o Hydocyclone - 3 cyclones per cluster

o Output slurry to predesilicationPRE-DESILICATIONo Silica dissolves in heating tank, mechanically agitated

o Direct Steam injection

o 4 predesilication tanks per stream, mechanically agitated

o Slurry transfer by VFD pumps with level control

o Residence time of 6 – 8 Hrs, 93 % silica removed

o Injection of Green liquor at outlet of predesilication

o Dilution for Hydrocyclone : Classification and raising of concentration (Na2O) for digestion

o Output : H/c underflow to Ball Mill and Overflow to digestion.DIGESTION:o 6 nos of tanks per stream, 5 working and one standby, mechanically agitated

o First 4 tanks with steam heating coil for indirect heating

o Temperature control in 2nd / 3rd tank in operation with two steam c/v and flow meters (105 – 107oC )

o Condensate collected and returned to boiler house ensuring quality ie conductivity

o Slurry transfer from tank to tank by gravity flow and plunger system.

o From last operating tank slurry pumping to sand separation by hydraulic coupling pump.

MBA 58


o Online RP measurement at the outlet of digesters.

o Every 2 hour RP analysis at lab for control of GL flow/ Bauxite

o Secondary GL addition in 1st digester

o Target RP : 1.1

o Steam – 6 ata in Stream II and 9 ata in Stream I and IIISAND SEPARATION & WASHING:o 5 cyclones for separation of sand/stream, 4 working and 1 standby

o Sand is coarse undigested Bauxite

o Sand washing in 3 stages in Cyclone system and counter current flow

o Sand wash using RMP water or Sodic Condensate

o Final washed sand (3rd stage u/f) to mud disposal tank and 1st stage o/f to dilution tankDILUTION:o Dilution is to reduce the soda concentration from 183 gpl to 167 gpl.

o Reduction in concentration to facilitate desilication in post desilication.

o Dilution by a part of W1 o/f

o Slurry transfer to post desilication by Hydraulic coupling pumpsPOST DESILICATION:o 5 mechanically agitated tanks, 3-4 working, 2-1 stand by

o Heating arrangement in 1st or 2nd tanks

o Temperature 105oC

o Steam Condensate collected and Send to Power plant ensuring quality

o Residence time 6-8 hrs

o Post desilicated slurry to settlersSETTLING:o 7 nos Flat Botom Settlers

o 40 m dia and 6.25m height

o 2 nos operating in each stream and one standby for all three streams

o Fitted with rake mechanism for outward pushing the mud

o Single point mud evacuation

o Fitted with rake drive system ( 3 drives)

o Torque rating 2,02,500 Kgm

o Collection of SOF by gravity in SOF tank

o Solid gpl in O/F – 1 gpl max

o Sellter U/f solid gpl - 500 – 600 gpl

o Settling aid - Flocculant Cytec HX-401 or 400

o Flocculant concentration - 0.2 % solution

o Settler O/F to Kelly Filter feed tank with Hydraulic coupling pumps

o Settler u/f to 1st washer with VFD pumps

o Motorised s/v and discharge v/v for SOF pumps and SUF pumps

MBA 59


MUD WASHING:o 6 stages of washing before TTD in each stream, hydro mixer in each stream

o Rake mechanism like settler, 2 drive system, torque rating 60000 kgm

o Counter current washing

o Mud wash water at TTD Hydro mixer

o 1st washer o/f to Dilution (primary) after sand separation

o Dilution (secondary) at SOF tank

o Flocculant- Bran, facilities of HX-401 in W1 only.

o U/f pumps are having VFD

o Overflow pumps are having VFD or Hydraulic couplings

o U/f of 6th washers of stream- I/II to mud disposal tank of stream 1/II

o Mud along with sand of stream I and II from mud disposal tank to mud disposal tank of stream III

o 6th washer mud of stream III to mud disposal tank of stream III.

o 3 streams mud and sand slurry fed to TTD

o TTD Thickener – 20m dia x 20 m height (approx), conic bottom, cylindrical height 8 m (approx)

o Cone bottom, mud discharge with VFD pumps from compaction zone.

o Mud supply to Geho pump suction

o Geho pump - 82 Kg / 78 Kg discharge, 264 – 312 m3/ hr52 – 58 % solid discharge to RMP through 6.4 km piping.

o Flocculant - Powder flocculent ( Alclar 661/662) prepared with sodic condensate – 0.2 % solution.

FLOCCULATION & CAUSTICISATIONo Flocculants - Cytec HX 401, Wheat Bran , Alclar 661

Cytec HX 401 - In Settler and washer-1 Preparation Unit, storage of 2% solution, dosing of

0.2 % solution Bran - In Washers

Preparation with W1O/f, screening, storing,dosing Alclar 661 - Preparation using Sodic condensate/ TTD o/f /

Treated water , storage of 2% solution, dosing of 0.2% solution

o Causticisation W3 O/F or W4 O/F To PHE for raising the temperature Back to 1st causticiser 4 tanks per stream (no causticisation in stream III) Direct steam heating Lime slurry dosing in 1st causticiser Temperature 96oC, Residence time 45 minutes – 1 hour Slurry flow by gravity to settler Causticised mud to 5th washer

MBA 60


Causticised settler O/f to W3 or W2

MBA 61


SECURITY FILTRATION:o Settler O/f input to filter feed tank

o Lime slurry or filter aid addition in filter feed tank

o Individual Kelly filter feed with VFD pump with flow / pressure control

o 6 filters per stream

o Filtration area 400 m2, 21 leaves

o Polypropylene cloth, stitched to bags for fitting into frame

o Filtration cycle – 8 hrs (approx)

o Filter washing with RMP water

o Turbid liquor to settler

o Dump mud to 5th washer

o Filtrate quality – solid less than 30 mgpl

o Filtrate to aluminate liquor tank

o Aluminate liquor pumps – Hydraulic pump

o 3 Aluminate liquor tank having facility to bypass one or two tanks

o Storage facility for lime and was water

o Individual lime dosing facility is not put into regular operation due to too many problems.

PLATE HEAT EXCHANGER:o Aluminate liquor temperature – 100oC (approx)

o Heat recovery by W3 O/f, spent liquor and cooling water if required.

o Target cooling is dependant on precipitation head temperature desired which is fixed observing nucleation.

o Ne(1.83) is Number of particles of 1.83 micron size in one gram

o Temperature target increases with rise in nucleation

o For stream I and II- 3 lines of PHE, 2 lines in operation and 1 standby

o For stream III – 2 lines of PHE, 1 line in operation, 1 stand by

o Each line- 5 batteries of PHE

o 1st PHE- heat exchange between Aluminate and W3 O/f

o 2nd-4th PHE – heat exchange between Aluminate liquor and SL

o 5th PHE – heat exchange between Aluminate liquor and W3 o/f

o By pass facility of W3 O/F and SL

o For heating up W3 O/F one separate PHE (Causticisation PHE)for heat exchange with Steam.

o CGM dosing to Aluminate liquor at the outlet of PHE

o CGM - 2nd tool to control nucleation.

o Variation of precipitation Head temperature and CGM dosing are the controlling parameters for nucleation.

o CGM helps in agglomeration and cleaning the hydrate surface.

MBA 62


SEEDING AND HYDRATE FILTRATION;o Seeding in Seed tank - Aluminate liquor and hydrate from seed filter.

o Seed ratio 9.8

o Seed slurry to 1st precipitator with hydraulic coupling pump.

o Feed to seed filters from last but one precipitator by gravity flow.

o Seed filters are rotary vacuum disc filters.

o Liquor filtrate, Spent liquor to SL (unpolished) Tank

o 5 seed filters per stream in Stream I and II–114 m2 filtration area : 3 discs ( original 4 filters and 1 added in the Debottlenecking)

o 4 seed filters of higher capacity in stream III-120 m2 filtration area : 3 discs

o 2 seed slurry pumps in each stream and 3 seed slurry pumps for DB filters of stream I and II.

o Filter O/f slurry to O/f tank and recycling to precipitator

o Each filter is associated with one vacuum pump and one blower.

o Filtration rate – 3.0 m3/m2/hr (GF) ; 4.0 m3/m2/hr(DO) and 4.5m3/m2/hr (Bokela)

o Filter cloth – Non-woven polypropylene clothSL POLISHING:o Unpolished SL - 3 to 4 gpl solid

o Solid separation by cyclone

o 7 cluster of cyclones in each stream, 5 operating and 2 standby

o Each cluster 12 cyclones

o Cyclone O/f – 0.5 gpl solid

o Cyclone O/F to polished spent liquor tank

o SL to PHE from polished SL tank

o Cyclone U/f to O/f and drainage tank and recycled to last but one precipitator by O/F and drainage pump.

PRECIPITATION & INTER STAGE COOLING:o 16 nos of precipitator in each stream, 14 nos working and 2 standby

o 14 m dia x 30 mtr height , Mechanically agitated

o Flow by gravity with plunger and launder gate arrangement

o From last precipitator slurry is recycled to last but one precipitator.

o For production / drawl of hydrate slurry to production side – part of slurry from last but two precipitator.

o For recirculation of precipitated slurry, drainage pump facility is available.

o Same drainage pump is used for emptying out precipitators.

o 5 nos of Inter state coolers in each stream, 4 working, 1 standby

o coolers are associated with 5th to 9th precipitator.

o 1/3rd of total slurry is cooled in each stage, with a temperature drop of 6- 8 oC.

o Cooling media is cooling water

o Overall impact on end temperature of precipitator to 52 – 54 oC.

MBA 63


o Interstage cooling is to enhance productivity.HYDRATE CLASSIFICATION:o Slurry drawn from last but two precipitator

o Feed dilution with spent liquor

o Feed pump – VFD drive for cyclone feed pressure control and feed density control

o Facilities for two stage classification in each stream for fine granulometry situation

o Normal classification with 1st stage only

o 1st stage cyclone – 1 cluster with 80 nos of cyclones.

o 2nd stage cyclone – 1 cluster with 40 nos of cyclones

o U/f dilution with spent liquor

o During two stage operation, u/f dilution is more for controlling feed density of 2nd

stage.o O/f is recycled back to last but one precuipitator, directly by gravity

o O/f of 2nd stage recycled back to last but one precipitator via O/f and drainage tank.

o Classification is to take coarser hydrate to product side

o U/f of classification to classifier u/f tank.1 ST STAGE PRODUCT FILTRATION: o Classified hydrate slurry is filtered to get 1st stage product hydrate

o 2 disc, rotary vacuum disc filters are used for filtration

o One filter per stream

o Each filter is able to handle slightly less than 2 streams slurry

o Wash filtrate of 2nd stage filtration is used for re pulping 1st stage hydrate

o Filtrate from 1st stage product filter get mixed with spent liquor.

o Filter o/f to classified slurry u/f tank

o Filtration area is 76 m2/ 80 m2

o Re pulped slurry is fed to 2nd stage filtration unit.2 nd STAGE FILTRATION UNIT o Filtration of 1st stage product slurry, washing of hydrate to get product hydrate for

storing or Calcination.o Rotary vacuum drum filters are used.

o 4 nos of drum filter, each associated with vacuum pump, blower , feed pump and conveying system.

o Normally 3 in operation and 1 standby.

o Filter 22 - Cal- A or storage

o Filter 23 - Cal- A or B or storage

o Filter 24 - Cal- B or C or storage

o Filter 713 (25) - Cal- C or storage

o Hydrate washing by hot sodic condensate

o Main filtrate is known as 2nd stage filtrate

o Filtrate generated during washing and drying is known as wash filtrate.

MBA 64


o Wash filtrate is used for re-pulping 1st stage product.

o Hydrate produced will have moisture less than 8% (max) and Na2O(s) less than 0.03 %.STABILISATION LIQUOR CYCLONE:o 2nd stage filtrate is having 2-3 gpl soild.

o Solid separation by cyclones.

o One cluster of 20 cyclones.

o Cyclones u/f to filter feed tank.

o Cyclones o/f is having less than 0.5 gpl solid.

o This is known as stabilization liquor . this is rich in impurities (oxalate).

o Stabilization liquor to W3 o/f receptacle , which is used for causticisation.HYDRATE STORAGE AND MIXING:o Hydrate storage for storing hydrate during annual S/D of Calciners or any problem

with calciners.o Sale of hydrate is from stored hydrate .

o Storage capacity is 35,000 MT as Al2O3 each.

o Reclaiming facility by pay loader and mixing in a agitated tank with wash filtrate.

o Hydrate slurry to 2nd stage filtration unit for using after filtration at calciners.

o 2 storage and 2 nos of mixing line is provided.CALCINATION:o calcination is to remove all moistures associated with hydrate and to get product

suitable for smelting.o Removal of surface moisture & bound moisture.

o Calcinations to maintain LOI, BET and -Alumina .

o Calcinations temperatures 950-1000 deg C

o Fluidized bed static calciner

o Supplied by M/s Lurgi, GMBH.

o Original 2 calciners –1400 MTPD

o Debottlenecking –upgradation to 1700 MTPD

o Expansion –1 no. 2000 MTPD

o Fuel –heavy fuel oil

o Energy efficient –735 Kcal/Kg, reduction of 5% , with PTS at full capacity. –695 Kcal/Kg for new calciners.

o Major component –Blowers, Feed screw, ESP Screw Conveyor, ESP, Furnace, Material feed cyclone, Recycling cyclone, Seal pot, Cooling Cyclone, Fluid Bed cooler, Air slide, Air lift, Conveying Cyclone, PA Coils, Bubble caps etc.

ALUMINA HANDLING SYSTEM:o Receiving fresh alumna from Calciners, Conveying, Storing in Silos, Loading Wagons,

Bagging.o 2 main conveyors - 260 TPH Capacity

MBA 65


o Air Slides for filling alumna silos.

o 3 silos, 12000 MT capacity each.

o Diversion facilities for bagging plant hopper.

o Fluidization facilities for silo.

o Automatic spotting & loading of specially designed wagons.

o 13 rakes of BTAP wagons, 48 wagons in each rake on run.

o All wagons are captive.CAUSTIC SODA HANDLING & STORAGE:o Procurement of indigenous & imported both.

o Receipt of caustic soda lye (min. 47% NaOH).

o Receipt of tankers from nearby suppliers, unloading by gravity to storage tank.

o Transportation from Vizag by 3 28 No.s captive wagons.

o Unloading facility- by vacuum system and siphoning from top of wagons.

o Transfer from unloading station to storage tank by pumps.

o 3 No.s storage tanks 21 m dia 14 m height, capacity 3000 MT NaOH (100%) approx.

o Caustic transfer pumps for different points (08/05/06/07/09).

o Fuel oil handling & storage.

o Supplier IOCL, HPCL.

o Normally from Vizag.

o Transportation by Railway wagon & Nalco’s captive wagon (28 nos).

o Unloading facility – with bottom unloading

o Unloading header – transportation to storage by multiple units.

o 3 nos of storage tanks – 2 Nos old tank 14 m dia 14 m ht , 2000KL Cap–1 no. new tk., 24 m dia 14 m height , 6000KL.

o Oil transfer to SPP & Calcination day tanks by pumpLIME HANDLING & STORAGE AND SLAKING:o Truck unloading station available.

o Receipt of lime in 50 Kg bags.

o No facility for wagon unloading.

o Alumna bagging plant and cement godowns are used for lime bag stockyard for wagon unloading.

o Transportation by truck to unloading station.

o Lime bunkers, conveyors for feeding to crushers and bucket elevators for filling to silos through a shuttle conveyor.

o 2 silos of 1000 T capacity each.

o Lime drawl from silo bottom through table feeder to slacker.

o Slaking – formation of Ca(OH)2, Slaker capacity 8 TPH.

o Rake classifier at the outlet of slakers.

o Slaked lime slurry storage tank & transfer to mini 04 & 05 area by pumps.

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o Density of lime slurry is measured online.OXALATE REMOVAL UNIT:o Oxalate is separated out from green liquor.

o Green liquor cooling in PHE & cooling water.

o Lime drawn form silo of lime handling unit crushed and added to cold green liquor.

o Oxalate get precipitated on the surface of lime.

o Oxalate mud is separated in (AMA Filter).

o De-oxalated liquor is heated up with heat of incoming GL.

o Hot de-oxalated liquor to evaporation.EVAPORATION:o Evaporation of spent liquor to get concentrated green liquor required for digestion.

o 6 nos of batteries, each with 6 effects.

o All are backward flow, falling film type evaporators.

o Facilities to bypass any one of first 3 effects.

o SL fed in the 5th & 6th effect.

o Steam in 1st or 1st and 2nd effect or 2nd effect.

o Possible combination- 6 effects 6 bodies- 5 effects 6 bodies- 5 effects 5 bodies

o To take advantage of steam economy/ capacity and maintenance requirement.

o Capacity / Economy- 135, 3.25- 175, 3.15- 155, 2.95

o 1st effect condensate – pure steam condensate

o 2nd effect condensate –Vapour condensate Capacity – 10/7mic

o 5th effect condensate –sodic condensate

o Vacuum by steam ejector.

o 4 SL tanks, 4 GL tanks for storage (2 nos for Stream I/II and 2 nos for Stream III)

o 2 nos Sodic condensate tank.

o 1 no mud wash water tank and 1 no Wash water tank.

o Facilities for transfer of SL/ GL from Stream-I/II to stream-III or vice versa.

o SL pumps for each battery feed, each Ball Mill(one standby in stream-III)

o Primary GL pumps 3 nos for Stream –I/II and 2 nos for Stream –III.

o Secondary GL pumps 3 nos for Stream – I/II and 2 nos for Stream-III.

o 2 nos Sodic Condensate Pump.(1 operating + 1 standby) for Drum filter.

o 2 nos Sodic Condensate Pump(Sand separation, Lime slaking, CT-1) –1 W+1 SB

o 2 nos Sodic Condensate Pump(Cytec, Seed Filters, CT-4, CT-2)–1W+ 1 SB.

o 3 No.s mud wash water Pump to supply mud wash water to TTD (2 W+ 1 SB).

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o Concentrated H2SO4 tank, dilute tank, transfer pump for acid cleaning of evaporators.COMPRESSOR & COOLING TOWER:o 4 nos of KG Khosla Compressor –55Nm3/min cap.

o 2nos of Atlas Copco Screw Compressor –80 Nm3/min cap.

o 2nos of ELLIOT Centrifugal Compressor – 80 Nm3/min cap.

o 2nos old air driers of 30 Nm3/min capacity (air purge type) – for instrumentation air.

o 1no. old air drier of 15 Nm3/min capacity (air purge type) for dry process air.

o 1no. of rotary air drier associated with Atlas Copco for instrument air of 80 Nm3/min cap.

o 1 no. Sahara drier (air purge type ) 80 Nm3/min cap. For instrument air associated with centrifugal Compressor.

o Plant Air, Instrument air (- 400C ), Dry Process Air(-50C)

o CT-1 – 4 cells 2200 m3/h - for 6 batteries.

o CT-2 – 3 cells 2000 m3/h (2 W+ 1 SB) – for compressors, hydraulic Coupling pumps and Air conditioners.

o CT-4 – 5 cells 1400 m3/h (2 nos for ISC , 2 for Vacuum Pumps, Blowers, PHEs and one common std-by).

WASTE WATER TREATMENT PLANT:o Alkali Effluent Pond (From all process areas).

o Acid Waste Water Treatment Plant(acid waste from 06/08, Laboratory Waste, Cooling tower blow down).

o Sanitary Waste water Treatment Plant.

o Oily Waste water Treatment Plant(not operated since inception)

o Environmental clearance – Ash Pond overflow 100 m3/h.

o Presently acid waste water / sanitary waste water to alkali pond via guard pond and recycled back to mud washing circuit.

RED MUD POND:o Hazardous Water as per earlier rules, Caustic Soda Presence.

o Expected life upto 2012 with TTD discharge.

o Water reclamation facility.

o Dam Height – 945 m , Present water level 942.8 m

o Free board level permitted 943.5 m.STEAM & POWER PLANT:o Co-generation

o 4 Boilers , 200 TPH capacity, 68 ata ( 3W+1 SB).

o 3 TGs , 18.5 MW Capacity, 1 no. dump condenser (120 TPH)

o 1 Cooling tower.

o DM plant 3 90 m3/h Capacity

o Coal Handling Plant

o Ash Disposal System

o Ash Pond

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o Supply steam to Process – 9 ata & 6 ata, 180 – 1200CLocation 6 ata

Per T9 ataPer T

Per hr. for normal load (195 TPH)

Remarks

Predesilication 183 Kg - 35.685 TPH

2.285 T/T

Digestion 454 Kg 466 Kg 90.090 TPHPost desilication 154 Kg 106 Kg 20.540 TPHEvaporation 1141 Kg - 222.495 TPHCausticisation - 210 Kg 40.950 TPHPrecipitation Cleaning - 69 Kg 13.455 TPHCCL - 38 Kg 7.410 TPHMisc. + Loss - 77 Kg 15.015 TPHTotal 415.64 TPHThis excludes dumped steam and internal consumption at SPP.

LOCATION 2008-09 2009-10(till Sept.)T/T TPH T/T TPH

Evapoartion 1.304 245.245 1.342 248.797Predesilication 0.216 40.632 0.216 40.045Digestion 0.354 66.577 0.370 68.595Post desilication 0.134 25.202 0.159 29.477Steam through 105 (Causticisation , CCL) 0.070 13.165 0.071 13.163Steam through 110 (Causticisation PHE , Precipitation)

0.095 17.866 0.094 17.427

Total Accounted 2.194 408.678 2.252 417.504Dumped steam 0.030 5.642 0.111 20.579SPP internal 0.370 69.587 0.373 69.151Unaccounted 0.291 54.729 0.300 55.618Total 2.864 538.636 3.035 562.852

ENERGY CONSUMPTION IN ALUMINA PLANT:

For Hydrate Circuit, design Power consumption is 188 KWH/T

As per MOU, Total Power Consumption is 355 KWH/T

Actual figures achieved for 2008-09 and 2009-10 (Till September) is given

here below.

Year/Area2008-09 2009-10 (Till Sept)

MW KWH/T MW KWH/T

Hydrate Circuit 32.04 187.54 30.45 180.87

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Calciner Circuit 4.56 26.98 4.47 26.75

SPP 14.15 82.93 14.57 86.56

Utilities(Including Township)

7.83 45.82 9.08 53.93

TOTAL 58.58 343.27 58.57 348.11

CHAPTER –VII

CONCLUSION / SUMMARY & SUGGESTIONS

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CONCLUSION

The company registered a highly satisfactory performance during the year as

well as during the last year under review. The project is done based on the annual

reports of 2008-09, 2009-10 and the unaudited partial data of profit & loss account

and balance sheet of 2010-11, because so far the annual report of 2010-11 is not yet

published. The demand and price scenario in the international market for aluminium

and alumina is highly volatile. The company is registered with the London Metal

Exchange (LME). NALCO being the first company in India who has decided to link

its domestic prices of aluminium and alumina to that of LME prices since

November/December 1994. This has facilitated better average realization per tonne

besides helped in reducing inventory carrying costs.

NALCO has also closed the financial year 2010-11 with a record sales

turnover of Rs. 4439.99 Crores, registering an increase of 32.49% over the previous

year. As per the unaudited statement of accounts taken as record by Board of

Directors the Profit Before Tax (PBT) has increased by 77% in 2010-11. The net

profit turnover has been Rs. 1234.84 Crores after providing Rs. 635.43 crore for tax

compared to the net profit of Rs. 737.34 Crores in the previous year. The company

has achieved a significant reduction in its interest burden from Rs. 103.41 Crores in

2009-10 to Rs. 60.61 Crores in 2010-11 due to substantial repayment of overseas

loans. It is noteworthy that the company has succeeded in prepaying Rs. 627.64

Crores overseas loan between March’04 to March’05. The book value per share has

also improved to Rs. 72.91 from Rs. 58.31 in the previous year, while the Earning per

share (EPS) has been Rs. 19.17. On the export front the company has boosted an all

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time record earning of Rs. 2200.25 crore compared to Rs. 1717.27 crore in the

previous year which is 49% of the total turnover.

On the production, NALCO has achieved remarkable success by exceeding all

the annual targets. At mines the company exceeded its rated capacity of 48 lakh

tonnes with record production of 48.51 lakh tonnes of Bauxite beating the previous

best of 48.16 lakh tonnes achieved in 2009-10. Alumina production at the refinery has

record crossing the rated capacity of 15.75 lakh tonnes whereas 15.50 lakh tonnes

could be produced last year. This year it has gone up to 15.66 lakh tonnes. Also the

15.755 lakh tonne aluminium production at the smelter plant this year is on all time

high achievement registering an increase of 1% over the previous year. At the Captive

Power Plant (CPP) a net generation of 5613 million units of power has surpassed the

previous best of 5122 million units achieved last year.

MBA 72


CHAPTER –VIII

ANNEXURE

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BIBLIOGRAPHY

Sharma and Gupta, Management Accounting, Kalyani Publisher.

Pandey.I.M, Financial Management, Vikas Publishing.

Kahn.M.Y and Jain.P.K, Financial Management, Tata McGraw.

HILL Publishing.

http://www.Nalco-india.com .

http://www.google.com .

23rd and 24th Annual report of Nalco.

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http://www.google.com/

http://www.Nalco-india.com/


PROFIT AND LOSS ACCOUNT(for the year ended March 31, 2013)

(Rs. In Crores)Particulars ParticularsTo Raw material consumedTo Power and fuelTo Repair and MaintenanceTo Other Manufacturing ExpensesTo Employee Remuneration BenefitsTo Gross Profit c/d

408.92 642.63 166.47 95.12 258.42

1558.43

By Gross Sales Less Excise DutyNet SalesBy Stock of Finished internally consumedBy Accretion to stock

3338.87 224.50

3114.37

5.97 9.65

3129.99 3129.99To Administrative ExpensesTo Other ExpensesTo Selling & Distribution ExpensesTo DepreciationTo Deferred Revenue ExpenditureTo Net Profit c/d (EBIT)

67.50 14.10 71.14

445.13 1.14

1156.17

By Gross Profit b/dBy Other IncomeBy Old Provision Less New Provision

2.65 0.70

1558.43 194.80

1.95

1755.18 1755.18

Earning Before Interest & Taxes (EBIT)Less InterestProfit Before Tax (PBT)Less TaxProfit After Tax (PAT)(Profit available to Equity Share Holders)

1156.17 103.411052.70 315.39 737.37

Profit After Tax (PAT)Add Previous year profit brought forwardAdd Profit transferred to Capital Reserve brought backAdd Profit transferred to Debenture Redemption Fund brought back

737.37 3.15 0.05 106.97

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Amount available for appropriations Less Appropriations:Proposed Final DividendTax on DividendTransfer to General Reserve

Profit Transfer to Balance Sheet

847.54

257.72 33.02 550.00 6.08

Earning Per Share (EPS) (737.37 Crores/64,43,09,628 shares)(PAT/Number of shares)

11.44

BALANCE SHEET OF NALCO(as on March 31, 2013)

(Rs. In Crores)Liability Assets

Shareholder’s Fund:Share CapitalReserve & SurplusLoan Fund:Secured FundDeferred Tax Liability Current Liability & Provisions:LiabilitiesProvisions

547.88316.40

644.313112.36

654.39 609.99

864.28

Fixed Assets:Gross BlockLess DepreciationNet BlockCapital Work in ProgressInvestmentsCurrent Assets, Loans & Advances:InventoriesSundry DebtorCash & Bank BalanceOther Current AssetsLoans & Advances

8092.874189.39

4694.82 200.00

990.51

3903.48 791.34

480.48 102.24 98.36 86.51 222.92

5885.33 5885.33

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PROFIT AND LOSS ACCOUNT(for the year ended March 31, 2013)

(Rs. In Crores)Particulars Particulars

To Raw material consumedTo Power and fuelTo Repair and MantenanceTo Other Manufacturing ExpensesTo Employee Remuneration BenefitsTo Gross Profit c/d

444.24 760.46 164.34 113.00 289.42

2393.84

By Gross Sales Less Excise DutyNet SalesBy Stock of Finished internally consumedBy Accretion to stock

4439.99 316.03

4123.96

15.43 25.91

4165.30 4165.30To Administrative ExpensesTo Other ExpensesTo Selling & Distribution ExpensesTo DepreciationTo Old Provision Less New Provision

To Deferred Revenue ExpenditureTo Net Profit c/d (EBIT)

5.493.30

79.10 57.32 100.85

58.24

2.19 461.08

1870.27

By Gross Profit b/dBy Other Income 2393.84

235.21

2629.05 2629.05

Earning Before Interest & Taxes (EBIT)Less InterestProfit Before Tax (PBT)Less TaxProfit After Tax (PAT)(Profit available to Equity Share Holders)

1870.27 ------1870.27 635.431234.84

Profit After Tax (PAT)Add Previous year profit brought forwardAdd Profit transferred to Capital Reserve brought backAdd Profit transferred to Debenture Redemption Fund brought back

1234.84 6.80 0.05 217.19

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Amount available for appropriations Less Appropriations:Interim DividendProposed Final DividendTax on DividendTransfer to General ReserveProfit Transfer to Balance Sheet

1458.88

128.86 128.86 35.581150.00 15.58

Earning Per Share (EPS) (1234.84 Crores/64,43,09,628 shares)(PAT/Number of shares)

19.17

BALANCE SHEET OF NALCO(as on March 31, 2013)

(Rs. In Crores)Liability Assets

Shareholder’s Fund:Share CapitalReserve & SurplusLoan Fund:Secured FundDeferred Tax Liability Current Liability & Provisions:LiabilitiesProvisions

616.25190.14

644.314053.50

----- 652.45

806.39

Fixed Assets:Gross BlockLess DepreciationNet BlockCapital Work in ProgressInvestmentsCurrent Assets, Loans & Advances:InventoriesSundry DebtorCash & Bank BalanceOther Current AssetsLoans & Advances

8784.554645.55

4345.61 ------

1811.04

4139.00 206.61

529.06 92.81 755.21 82.01 351.95

6156.65 6156.65

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10. nalco-fin1.doc

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