1

SUMMER INTERNSHIP REPORT

ON

Portfolio Management

AT

JINDAL STAINLESS STEEL Ltd. HISAR

A Report

Submitted in Partial fulfillment of the requirements

For the Award of the degree of

POST GRADUATE DIPLOMA IN BUSINESS MANAGEMENT

From

J K Business School , Gurgaon

Academic Session 2008-2010

Project Guide:- Submitted by:-

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Mr.M.P.Gupta NARESH KUMAR

Head of Department JKBS 083077
(Accounts & Finance ) MBA IInd Sem.
Jindal Stainless Limited,
Hisar

DECLARATION

I Naresh Kumar IInd semester student of Post Graduate Diploma in Business

Management from J K Business School hare by declare that all information and

facts and figures in this report are original in nature, which is collected from various

locations. This information is true to the best of my knowledge.

Naresh Kumar

PGDBM- II
Sem.
 3

ACKNOWLEDGEMENT

The expression of words lose significance, when I turnover the pages of my

mental encyclopedia to make an appealing forward of gratitude and obligation.

I at the very onset express my gratitude to Mr.M.P.Gupta

( Accounts & Finance), Jindal Stainless Steel Ltd, Hisar who has always inspired

me and shown his keen interest for the completion of my project.

I wish to express my sincere gratitude to Mr.Abhishek my project guide

at Jindal Stainless Steel Ltd, Hisar for the conceptual guidance and encouraging

support.
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July 2009 Naresh Kumar

INDEX

CONTENT PG.NO.

 Declaration...........................................................2
 Acknowledgement………………………......….....3

 Preface…………………………………….......…...5
 Company Profile…………………………......…....6
 Objective of the Study…………………….....…..14
 Research Methodology………………….....…....16

 Suggestion……………………………….....….....75

 Bibliography…………………………………........76
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PREFACE

Summer training is one of the most vital and active part for the life of management

students. The basis idea behind this is to give the practical traning to the student and

make them acquainted with actual method and procedures.

As a part of P.G.D.B.M course, I underwent two months summer training at JINDAL

STAINLESS Ltd. HISAR

I did the work as a management trainee at JINDAL STAINLESS Ltd. HISAR at the

time company gave me project entitled “Portfolio Management” Made an extensive

research and efforts has been made for successful fulfilment of on the training

report.
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COMPANY PROFILE

The Group

Jindal Organization, set up in 1970 by the steel visionary Mr. O.P. Jindal, has grown
from an indigenous single-unit steel plant in Hisar, Haryana to the present multi-
billion, multi-national and multi-product steel conglomerate. The organization is still
expanding, integrating, amalgamating and growing.

The group places its commitment to sustainable development, of its people and the
communities in which it operates, at the heart of its strategy and aspires to be a
benchmark for players in the industry the world over.

The Jindal Organization today is a global player. It's relentless quest for excellence
has reaped rich benefits and it is today one of the world’s most admired and
respected groups within the steel fraternity.

Jindal Stainless

Jindal Stainless is in many ways very much like the material it produces. Like
stainless steel the company is versatile in its thought process, strong and
unrelenting in its operations, environment friendly in its manufacturing process,
bright, shining and beautiful in its community support activities. The list of the
properties of stainless steel is endless, just as our values are all encompassing.

Jindal Stainless has always been committed to innovation and progression, research
and development. Our innovations are admired beyond the geographical boundaries
of our country. No wonder we are the strategic partners of global leaders by choice.
Our achievements narrate a story of our determination to succeed and our passion
to win. We will continue to leverage our opportunities in creating excellence that the
world cannot even think about. Today we are the largest integrated stainless steel
producer in India, tomorrow we will rule the world.
 7

Jindal Stainless is a ISO: 9001 & ISO: 14001 company is the flagship company of
the Jindal Organization. The company today, has come a long way from a single
factory establishment, started in 1970. As the numero uno it has taken on the task of
making stainless steel a part of everybody's life by taking a 360 degrees approach
from production of raw materials to supply of architecture and lifestyle related
products.

Our Main Facilities

• Steel Making

Major equipment
Process

• Hot Rolling
Finishing (HR Product)
Processing of Hot Rolled Products

• Cold Rolling
Coil Build up line
Skin Pass Mill
Slitting Line
Strip Grinding Line
Shearing Line
Bright Annealing line

• Razor and Surgical Blade Steel

 8

• Coin Blanks

Production Process
Cupro-Nickel Complex
 9

Hisar Plant, India

At Hisar, Jindal Stainless has India's only composite stainless steel plant for the
manufacture of Stainless Steel Slabs, Blooms, Hot rolled and Cold Rolled Coils,
60% of which are exported worldwide.
The R&D division at JSL, Hisar plays a pivotal rolein retaining and consolidating
company's leadership role in stainless steel business by continuous up gradation of
quality, process and services, and innovating development strategies to come up
with new products with cost competitiveness. Cross-fertilization of knowledge
between production, quality control and commercial units in order to maintain world
class standard has been the guiding principle of R&D functions.

Major tasks of Jindal Stainless

1. Developments of high value products to serve niche market.
2. Quality up gradation of existing products enabling global acceptance.
3. Cost reduction by process development, optimization and refinement to improve
competitive edge
4. Technology enhancement to increase the quality production.
5. Market segment improvement by interacting and sharing knowledge with
customers and assisting them in trouble shooting operation.
In addition to the above, R&D division closely interacts with reputed national and
international laboratories/scientific institution/universities to avail expert services for
critical investigation

• Precision Strips
The company produces stainless steel precision strips in various grades.
These strips are produced in narrow 20-Hi mills in the precision cold rolling
unit.
• Blade Steel
The Company is the exclusive producer of stainless steel strips for making
razor and surgical blades in India.
• Coin Blanks
Besides supplying CR Strips to the Government of India, the plant at Hisar
houses a coin blanking line for supply of coin blanks to the Indian Mint and
Mints in the global markets.
 10

Vizag - India

The Ferro Alloys plant is situated at Jindal Nagar, Kothavasala, Distt. Vizianagaram,
Andhra Pradesh. The installed capacity is 40,000 metric tonnes per annum of high
Carbon Ferro Chrome. Besides supplying to the domestic market, the company also
exports Ferro Chrome to various developed countries. The plant is also equipped
with an ultra modern testing laboratory to ensure world-class quality standards.

Orissa Project - India

Jindal Stainless is setting up a Greenfield integrated Stainless Steel project in the
state of Orissa which would involve mining of Iron, Manganese & chrome ore for
production of ferroalloys and Stainless Steel in the melt shop and rolling mills. To
meet the full requirement of power, Jindal Stainless will also be setting up a 500 MW
captive power plant. This stainless steel plant will ultimately have a capacity of 1.6
million tones per annum. The operation of XX 60 MVA ferro-chrome furnace have
already started and the production has stabilised. JSL expects to start the xx125 MW
power plants soon followed up by setting up of other ferro alloys units of ferro-
manganese and silico- manganese.

Subsidiary Companies of Jindal Stainless

PT Jindal Stainless Indonesia

Jindal Stainless has acquired Stainless Steel Cold Rolling plant in Indonesia from
Maspion Stainless Steel.

Jindal Stainless Steel way Limited

Another first, another feather - Jindal Stainless Limited has taken a leading step
forward to bring convenient, customized, world class, just - in - time service in
stainless steel to doorsteps of its valued customers.

The company has partnered with a leading Italian company in business of

distribution and processing of steel, Steel way s.r.l. to service its customers with
exact slit, cut-to-size, polished stainless steel sheets, coils and blanks in different
grades with highest standards of processing tolerance.
 11

The facilities in Gurgaon (Haryana) include state of the art, high end precision
Slitting, cutting to length, blanking and polishing lines which are supplied by the
leading steel finishing equipment manufacturers, FIMI & IMEAS, Italy.

Some of the services offered are customized products, inventory management

services, technical value engineering services, warehousing and material testing.

Austenitic Creations Private Limited

Art d'inox is the exciting new form of ultimate style. The name translates into 'the art
of stainless steel'. And that's precisely what it is. Works of art in stainless steel. Set
up with the objective of creating exclusive stainless steel lifestyle products, these are
synonymous with quality, beauty and functionality. The professionally qualified in-
house design team is dedicated to exploring the frontiers of design. The product
range is a celebration of both form and function. The range encompasses tableware,
serving ware, gifts, home accessories and office accessories.

Jindal Architecture Limited

Stainless steel is a material par excellence, which now seeks to permeate through
Indian Architecture. The Architectural Division launched by Jindal Stainless Ltd has
taken the initiative to promote Stainless steel products and technology solutions to
cater to the emerging market of Stainless Steel for Architecture, Building and
Construction (ABC) in India. The Architectural Division of Jindal Stainless is capable
of providing a full range of technical support services including design, engineering
work, fabrication of quality material and finishes, and job site supervision by trained
personnel. The division has completed many projects specially that of street
furniture, cafeteria furniture, lighting and signages apart from other architectural
requirements.

Besides these other companies are as follows :

Jindal Stainless UK Limited, London

Jindal Stainless FZE, Dubai
Jindal Stainless Italy S.r.l.
 12

Corporate Social Responsibility

Shri OP Jindal, had a vision of a progressive state - a state where men and women
worked shoulder to shoulder towards a happier tomorrow. Jindal Stainless constantly
echoes those thoughts and takes its role as a responsible corporate citizen very
seriously. Giving back to the community at large has been an objective from the very
beginning.

Schools at various levels have been set up to educate the specifiers of the future.
The Vidya Devi Jindal and The Jindal Modern School, at Hisar, is fully child oriented
and ensures ‘holistic development’ of a student’s mental and physical potential.

Adopting villages and thus contributing to the development of a region has also been
part of the overall Jindal plan. Improving of medical facilities is yet another field of
endeavor. NC JIM Care, at Hisar offers the entire range of diagnostic, treatment and
surgical facilities. Immunization drives and free healthcare camps on different
medical aspects are also conducted from time to time.

Eco Friendliness
At our Stainless Steel plants, the challenge faced is to make and process stainless
steel without adversely impacting the environment. Jindal Stainless has a formal
environmental protection program in place since inception. We recognize the
importance of protecting our environment, and that of our children and our
commitment is unwavering in this respect.

Jindal Stainless Ltd. complies with the requirements of the State Pollution Control
Board. Having received the ISO 14001 certification, the company has a full-fledged
environment department that manages the existing facilities for pollution control.

It has a sewage treatment plant for domestic affluent whose treated water is reused
for horticulture purposes as well as in industrial applications. With greater efforts
being made to achieve low long-term maintenance costs, less environmental impact
and greater concern with life cycle costs, the market for stainless steel continues to
improve.
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Vision

“The seed of change is condensed in one single moment that heralds tomorrow’s
hope and way into newer horizons”

Vision-2010

• To be amongst the top 10 stainless steel producers in the world

• To gain international recognition for cost leadership, Product innovation and
Customer Satisfaction
• To be admired as a socially responsible Corporate and a sustained value
creator for all its stakeholders

Jindal Stainless (JSL) was established in 1970 and is under the Jindal Group.
Jindal Stainless Ltd. has expanded since its establishment from a steel plant of a
single unit to become a multi-product and multi-national steel company.

The Jindal Stainless Company's main business is to produce stainless steel. In

India, the company is the only manufacturer of strips of stainless steel which are
used for making surgical and razor blades. Jindal Stainless Company supplies to the
Indian government CR strips. It also supplies coin blanks to the mint in India as well
as in the world. The various other services offered by the Jindal Stainless Ltd. are
services in inventory management, engineering services in technical value,
warehousing, material testing, and customized products.

Jindal Stainless Company is the biggest producer of stainless steel in the country.
The company has a 40% market share in the stainless steel sector in India. The
company has subsidiary companies which are Jindal Stainless> Steelway and PT
Jindal Stainless.

The total income of the Jindal Stainless amounted to Rs. 8,598.2 million in 2005-
2006 and the next year the figure stood at Rs. 12,014.9 million. The net profit of the
company amounted to Rs. 507.9 million in 2005- 2006 and the next year the amount
increased to Rs. 826 million. Jindal Stainless Company is planning to establish a
stainless steel plant in Orissa with the production capacity of 1.6 million tons per
year. The company will make an investment of around Rs. 56 billion in setting up this
plant.

Jindal Stainless has become the leading company in the stainless steel sector in
India. As it plans to expand in the near future, the company is sure to become one of
the leading stainless steel companies in the world.
 14

Jindal Stainless is in many ways very much like the material it produces. Like
stainless steel the company is versatile in its thought process, strong and
unrelenting in its operations, environment friendly in its manufacturing process,
bright, shining

and beautiful in its community support activities. The list of the properties of stainless
steel is endless, just as our values are all encompassing. Jindal Stainless has
always been committed to innovation and progression, research and development.
Our innovations are admired beyond the geographical boundaries of our country. No
wonder we are the strategic partners of global leaders by choice. Our achievements
narrate a story of our determination to succeed and our passion to win. We will
continue to leverage our opportunities in creating excellence that the world cannot
even think about. Today we are the largest integrated stainless steel producer in
India, tomorrow we will rule the world. Jindal Stainless, a $780 million plus ISO:
9002 & ISO: 14001 is the flagship company of the Jindal Organization. The company
today has come a long way from a single factory establishment, started in 1970. As
the numerounoit has taken on the task of making stainless steel a part of
everybody's life by taking a360 degrees approach from production of raw materials
to supply of architecture and lifestyle related products.

Research & Development activities At JSL, Hisar

The R&D division at JSL, Hisar plays a pivotal role in retaining and consolidating
company's leadership role in stainless steel business by continuous up gradation of
quality, process and services, and innovating development strategies to come up
with new products with cost competitiveness. Cross-fertilization of knowledge
between production, quality control and commercial units in order to maintain world
class standard has been the guiding principle of R&D functions.

Major tasks
1. Developments of high value products to serve niche market.

2. Quality up gradation of existing products enabling global acceptance.

3. Cost reduction by process development, optimization and refinement to improve

competitive edge

4. Technology enhancement to increase the quality production.

5. Market segment improvement by interacting and sharing knowledge with

customers and assisting them in trouble shooting operation.

In addition to the above, R&D division closely interacts with reputed national and

international laboratories/scientific institution/universities to avail expert services for

 15

critical investigation.

OBJECTIVE OF THE STUDY

I did the Project on PORTFOLIO MANAGEMENT in JINDAL STAINLESS LTD. The

main objective of the study of Portfolio Management is to suggest to the company

about the various Investment option through which company can earn more profit by

reducing risk factor.

The executives or the official responsible for the project can make use of the

portfolio management for critically reviewing the entire portfolio, appropriately

allocate and spread the available resources, and make changes in projects so as to

reap maximum department based returns

In any product development the Portfolio Management is very useful in selecting a

portfolio for the proposed new product and to maximize the portfolio value or the

profitability. Further it can also be made use for providing balance, support and the

needed strategies for the enterprise.

As the name goes the job of a project portfolio management group is to plan or

devise a strategy with which the portfolio can be managed much similar to any

investor’s managing activities involving various stocks, mutual funds, secured fixed

deposits, and bonds. The main purpose or the aim of any portfolio investment
 16

will be on the lines of increasing profits or returns with reduced risks and

within a limited period.

In the world of Information Technology, project managers can effectively use the

tools of the project portfolio management in identifying the redundancies or

superfluous processes, and to evenly distribute resources so as to keep a close

watch over the progress and to direct the progress in the right and desired direction

in case of need. Majority of the investments made in the IT scenario in the last ten

years actually are aimed to determine the nature of returns from the investments

made and the possible expected results in the future.

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RESEARCH METHODOLOGY

Portfolio Management

Portfolio

In finance, a portfolio is an appropriate mix of or collection of investments held by

an institution or a private individual.

Holding a portfolio is part of an investment and risk-limiting strategy called

diversification. By owning several assets, certain types of risk (in particular specific

risk) can be reduced. The assets in the portfolio could include stocks, bonds,

options, warrants, gold certificates, real estate, futures contracts, production

facilities, or any other item that is expected to retain its value.

In building up an investment portfolio a financial institution will typically conduct its

own investment analysis, whilst a private individual may make use of the services of

a financial advisor or a financial institution which offers portfolio management

services

Portfolio management involves deciding what assets to include in the portfolio,

given the goals of the portfolio owner and changing economic conditions. Selection

involves deciding what assets to purchase, how many to purchase, when to

 18

purchase them, and what assets to divest. These decisions always involve some

sort

of performance measurement, most typically expected return on the portfolio, and

the risk associated with this return (i.e. the standard deviation of the return). Typically

the expected return from portfolios of different asset bundles are compared.

The unique goals and circumstances of the investor must also be considered. Some

investors are more risk averse than others.

Mutual funds have developed particular techniques to optimize their portfolio

holdings. See fund management for details.

Many strategies have been developed to form a portfolio.

• equally-weighted portfolio

• capitalization-weighted portfolio

• price-weighted portfolio

• optimal portfolio (for which the Sharpe ratio is highest)

Some of the financial models used in the process of Valuation, stock

selection, and management of portfolios include:

• Maximizing return, given an acceptable level of risk.

• Modern portfolio theory—a model proposed by Harry Markowitz among others.

• The single-index model of portfolio variance.

• Capital asset pricing model.

 19

• Arbitrage pricing theory.

• The Jensen Index.

• The Treynor Index.

• The Sharpe Diagonal (or Index) model.

• Value at risk model.

There are many different methods for calculating portfolio returns. A traditional

method has been using quarterly or monthly money-weighted returns. A money-

weighted return calculated over a period such as a month or a quarter assumes that

the rate of return over that period is constant. As portfolio returns actually fluctuate

daily, money-weighted returns may only provide an approximation to a portfolio’s

actual return. These errors happen because of cash flows during the measurement

period. The size of the errors depends on three variables: the size of the cash flows,

the timing of the cash flows within the measurement period, and the volatility of the

portfolio.

A more accurate method for calculating portfolio returns is to use the true time-

weighted method. This entails revaluing the portfolio on every date where a cash

flow takes place (perhaps even every day), and then compounding together the daily

returns.

Performance Attribution explains the active performance (i.e. the benchmark-relative

performance) of a portfolio. For example, a particular portfolio might be

benchmarked against the S&P 500 index. If the benchmark return over some period
 20

was 5%, and the portfolio return was 8%, this would leave an active return of 3% to

be explained. This 3% active return represents the component of the portfolio's

return that was generated by the investment manager (rather than by the

benchmark).

There are different models for performance attribution, corresponding to

different investment processes. For example, one simple model explains the active

return in "bottom-up" terms, as the result of stock selection only. On the other hand,

sector attribution explains the active return in terms of both sector bets (for example,

an overweight position in Materials, and an underweight position in Financials), and

also stock selection within each sector (for example, choosing to hold more of the

portfolio in one bank than another).

An altogether different paradigm for performance attribution is based on using factor

models, such as the Fama-French three-factor model.

Modern portfolio theory

Modern portfolio theory (MPT) proposes how rational investors will use

diversification to optimize their portfolios, and how a risky asset should be priced.

The basic concepts of the theory are Markowitz diversification, the efficient frontier,

capital asset pricing model, the alpha and beta coefficients, the Capital Market Line

and the Securities Market Line.

 21

MPT models an asset's return as a random variable, and models a portfolio as a

weighted combination of assets so that the return of a portfolio is the weighted

combination of the assets' returns. Moreover, a portfolio's return is a random

variable, and consequently has an expected value and a variance. Risk, in this

model, is the standard deviation of return.

The model assumes that investors are risk adverse, meaning that given two assets

that offer the same expected return, investors will prefer the less risky one. Thus, an investor

will take on increased risk only if compensated by higher expected returns. Conversely, an

investor who wants higher returns must accept more risk. The exact trade-off will differ by

investor based on individual risk aversion characteristics. The implication is that a rational

investor will not invest in a portfolio if a second portfolio exists with a more favorable risk-

return profile – i.e., if for that level of risk an alternative portfolio exists which has better

expected returns

It is further assumed that investor's risk / reward preference can be described via a

quadratic utility function. The effect of this assumption is that only the expected

return and the volatility (i.e., mean return and standard deviation) matter to the

investor. The investor is indifferent to other characteristics of the distribution of

returns, such as its skew (measures the level of asymmetry in the distribution) or

kurtosis (measure of the thickness or so-called "fat tail").

Note that the theory uses a parameter, volatility, as a proxy for risk, while return is an

expectation on the future. This is in line with the efficient market hypothesis and
 22

most of the classical findings in finance such as Black and Scholes European Option

Pricing (martingale measure: shortly speaking means that the best forecast for

tomorrow is the price of today). Recent innovations in portfolio theory, particularly

under the rubric of Post-Modern Portfolio Theory (PMPT), have exposed several

flaws in this reliance on variance as the investor's risk proxy:

• The theory uses a historical parameter, volatility, as a proxy for risk, while return is an

expectation on the future. (It is noted though that this is in line with the Efficiency

Hypothesis and most of the classical findings in finance such as Black and Scholes

which make use of the martingale measure, i.e. the assumption that the best forecast

for tomorrow is the price of today).

• The statement that "the investor is indifferent to other characteristics" seems not to

be true given that skewness risk appears to be priced by the market

Investment management

Investment management is the professional management of various securities

(shares, bonds etc.) and assets (e.g., real estate), to meet specified investment

goals for the benefit of the investors. Investors may be institutions (insurance

companies, pension funds, corporations etc.) or private investors (both directly via

investment contracts and more commonly via collective investment schemes e.g.

mutual funds) .
 23

The term Asset Management is often used to refer to the investment management

of collective investments, whilst the more generic Fund Management may refer to

all forms of institutional investment as well as investment management for private

investors. Investment managers who specialize in advisory or discretionary

management on behalf of (normally wealthy) private investors may often refer to

their services as Wealth Management or Portfolio Management often within the

context of so-called "private banking".

The provision of 'Investment Management Services' includes elements of financial

analysis, asset selection, stock selection, plan implementation and ongoing

monitoring of investments. Investment management is a large and important global

industry in its own right responsible for caretaking of trillions of dollars, euro, pounds

and yen. Coming under the remit of financial services many of the world's largest

companies are at least in part investment managers and employ millions of staff

and create billions in revenue.

Fund manager (or investment advisor in the U.S.) refers to both a firm that

provides investment management services and an individual(s) who directs 'fund

management' decisions

Industry Scope

The business of investment management has several facets, including the

employment of professional fund managers, research (of individual assets and asset

classes), dealing, settlement, marketing, internal auditing, and the preparation of

 24

reports for clients. The largest financial fund managers are firms that exhibit all the

complexity their size demands. Apart from the people who bring in the money

(marketers) and the people who direct investment (the fund managers), there are

compliance staff (to ensure accord with legislative and regulatory constraints),

internal auditors of various kinds (to examine internal systems and controls),

financial controllers (to account for the institutions' own money and costs), computer

experts, and "back office" employees (to track and record transactions and fund

valuations for up to thousands of clients per institution)

Philosophy, process and people

The 3-P's (Philosophy, Process and People) are often used to describe the reasons

why the manager is able to produce above average results.

• Philosophy refers to the over-arching beliefs of the investment organization. For

example: (i) Does the manager buy growth or value shares (and why)? (ii) Does he

believe in market timing (and on what evidence)? (iii) Does he rely on external

research or does he employ a team of researchers? It is helpful if any and all of such

fundamental beliefs are supported by proof-statements.

• Process refers to the way in which the overall philosophy is implemented. For

example: (i) which universe of assets is explored before particular assets are chosen

as suitable investments? (ii) How does the manager decide what to buy and when?

(iii) How does the manager decide what to sell and when? (iv) Who takes the

decisions and are they taken by committee? (v) What controls are in place to ensure
 25

that a rogue fund (one very different from others and from what is intended) cannot

arise?

• People refers to the staff, especially the fund managers. The questions are, Who are

they? How are they selected? How old are they? Who reports to whom? How deep is

the team (and do all the members understand the philosophy and process they are

supposed to be using)? And most important of all, How long has the team been

working together? This last question is vital because whatever performance record

was presented at the outset of the relationship with the client may or may not relate

to (have been produced by) a team that is still in place. If the team has changed

greatly (high staff turnover or changes to the team), then arguably the performance

record is completely unrelated to the existing team (of fund managers).

Asset Management can refer to:

• Financial Asset Management:

o Investment management - the sector of the financial services industry that

manages collective investment schemes.

o Global assets under management

o Fixed assets management - An accounting process that seeks to track fixed

assets for the purposes of financial accounting.

• Infrastructure Asset Management - the practice of managing (operating,

maintaining, repairing, replacing) physical infrastructure assets such as roading,

water supply, wastewater, storm water, power supply, flood management,

recreational and other assets.

 26

• Enterprise Asset Management - sometimes referred to as Strategic Asset

Management - the practice of managing an organization’s assets, both physical

(such as buildings) and non-physical such as:

o IT asset management - the set of business practices that join financial,

contractual and inventory functions to support life cycle management and

strategic decision making for the IT environment. This is also one of the

processes defined within IT Management Service

o Digital asset management – A form of electronic media content

management that includes digital assets

Investment managers and portfolio structures

At the heart of the investment management industry are the managers who invest

and divest client investments.

A certified company investment advisor should conduct an assessment of each

client's individual needs and risk profile. The advisor then recommends appropriate

investments.

Asset allocation

The different asset classes are stocks, bonds, real-estate and commodities. The

exercise of allocating funds among these assets (and among individual securities

within each asset class) is what investment management firms are paid for. Asset

classes exhibit different market dynamics, and different interaction effects; thus, the
 27

allocation of monies among asset classes will have a significant effect on the

performance of the fund. Some research suggests that allocation among asset

classes has more predictive power than the choice of individual holdings in

determining portfolio return. Arguably, the skill of a successful investment manager

resides in constructing the asset allocation, and separately the individual holdings,

so as to outperform certain benchmarks (e.g., the peer group of competing funds,

bond and stock indices).

Long-term returns

It is important to look at the evidence on the long-term returns to different assets,

and to holding period returns (the returns that accrue on average over different

lengths of investment). For example, over very long holding periods (eg. 10+ years)

in most countries, equities have generated higher returns than bonds, and bonds

have generated higher returns than cash. According to financial theory, this is

because equities are riskier (more volatile) than bonds which are themselves more

risky than cash.

Diversification

Against the background of the asset allocation, fund managers consider the degree

of diversification that makes sense for a given client (given its risk preferences) and

construct a list of planned holdings accordingly. The list will indicate what percentage

of the fund should be invested in each particular stock or bond. The theory of

portfolio diversification was originated by Markowitz and effective diversification

 28

requires management of the correlation between the asset returns and the liability

returns, issues internal to the portfolio (individual holdings volatility), and cross-

correlations between the returns.

Investment Styles

There are a range of different styles of fund management that the institution can

implement. For example, growth, value, market neutral, small capitalisation, indexed,

etc. Each of these approaches has its distinctive features, adherents and, in any

particular financial environment, distinctive risk characteristics. For example, there is

evidence that growth styles (buying rapidly growing earnings) are especially effective

when the companies able to generate such growth are scarce; conversely, when

such growth is plentiful, then there is evidence that value styles tend to outperform

the indices particularly successfully.

Performance measurement

Fund performance is the acid test of fund management, and in the

institutional context accurate measurement is a necessity. For that purpose,

institutions measure the performance of each fund (and usually for internal purposes

components of each fund) under their management, and performance is also

measured by external firms that specialize in performance measurement. The

leading performance measurement firms (e.g. Frank Russell in the USA) compile

aggregate industry data, e.g., showing how funds in general performed against given

indices and peer groups over various time periods.

 29

In a typical case (let us say an equity fund), then the calculation would be made (as

far as the client is concerned) every quarter and would show a percentage change

compared with the prior quarter (e.g., +4.6% total return in US dollars). This figure

would be compared with other similar funds managed within the institution (for

purposes of monitoring internal controls), with performance data for peer group

funds, and with relevant indices (where available) or tailor-made performance

benchmarks where appropriate. The specialist performance measurement firms

calculate quartile and decile data and close attention would be paid to the

(percentile) ranking of any fund.

Generally speaking, it is probably appropriate for an investment firm to persuade its

clients to assess performance over longer periods (e.g., 3 to 5 years) to smooth out

very short term fluctuations in performance and the influence of the business cycle.

This can be difficult however and, industry wide, there is a serious preoccupation

with short-term numbers and the effect on the relationship with clients (and resultant

business risks for the institutions).

An enduring problem is whether to measure before-tax or after-tax performance.

After-tax measurement represents the benefit to the investor, but investors' tax

positions may vary. Before-tax measurement can be misleading, especially in

regimens that tax realised capital gains (and not unrealised). It is thus possible that

successful active managers (measured before tax) may produce miserable after-tax

results. One possible solution is to report the after-tax position of some standard

taxpayer.
 30

Absolute versus relative performance

In the USA and the UK, two of the world's most sophisticated fund management

markets, the tradition is for institutions to manage client money relative to

benchmarks. For example, an institution believes it has done well if it has generated

a return of 5% when the average manager (usually culled from amongst its peer

class) generates a 4% return.

Risk-adjusted performance measurement

Performance measurement should not be reduced to the evaluation of fund returns

alone, but must also integrate other fund elements that would be of interest to

investors, such as the measure of risk taken. Several other aspects are also part of

performance measurement: evaluating if managers have succeeded in reaching

their objective, i.e. if their return was sufficiently high to reward the risks taken; how

they compare to their peers; and finally whether the portfolio management results

were due to luck or the manager’s skill. The need to answer all these questions has

led to

the development of more sophisticated performance measures, many of which

originate in modern portfolio theory.

Modern portfolio theory established the quantitative link that exists between portfolio

risk and return. The Capital Asset Pricing Model (CAPM) developed by Sharpe

(1964) highlighted the notion of rewarding risk and produced the first performance

indicators, be they risk-adjusted ratios (Sharpe ratio, information ratio) or differential

 31

returns compared to benchmarks (alphas). The Sharpe ratio is the simplest and best

known performance measure. It measures the return of a portfolio in excess of the

risk-free rate, compared to the total risk of the portfolio. This measure is said to be

absolute, as it does not refer to any benchmark, avoiding drawbacks related to a

poor choice of benchmark. Meanwhile, it does not allow the separation of the

performance of the market in which the portfolio is invested from that of the

manager. The information ratio is a more general form of the Sharpe ratio in which

the risk-free asset is replaced by a benchmark portfolio. This measure is relative, as

it evaluates portfolio performance in reference to a benchmark, making the result

strongly dependent on this benchmark choice.

Portfolio alpha is obtained by measuring the difference between the return of the

portfolio and that of a benchmark portfolio. This measure appears to be the only

reliable performance measure to evaluate active management. In fact, we have to

distinguish between normal returns, provided by the fair reward for portfolio

exposure to different risks, and obtained through passive management, from

abnormal performance (or outperformance) due to the manager’s skill, whether

through market timing or stock picking. The first component is related to allocation

and style

investment choices, which may not be under the sole control of the manager, and

depends on the economic context, while the second component is an evaluation of

the success of the manager’s decisions. Only the latter, measured by alpha, allows

the evaluation of the manager’s true performance.

 32

Portfolio normal return may be evaluated using factor models. The first model,

proposed by Jensen (1968), relies on the CAPM and explains portfolio normal

returns with the market index as the only factor. It quickly becomes clear, however,

that one factor is not enough to explain the returns and that other factors have to be

considered. Multi-factor models were developed as an alternative to the CAPM,

allowing a better description of portfolio risks and an accurate evaluation of

managers’ performance. For example, Fama and French (1993) have highlighted

two important factors that characterize a company's risk in addition to market risk.

These factors are the book-to-market ratio and the company's size as measured by

its market capitalisation. Fama and French therefore proposed a three-factor model

to describe portfolio normal returns. Carhart (1997) proposed to add momentum as a

fourth factor to allow the persistence of the returns to be taken into account. Also of

interest for performance measurement is Sharpe’s (1992) style analysis model, in

which factors are style indices. This model allows a custom benchmark for each

portfolio to be developed, using the linear combination of style indices that best

replicate portfolio style allocation, and leads to an accurate evaluation of portfolio

alpha.

Education or Certification

Increasingly, international business schools are incorporating the subject into

their course outlines and some have formulated the title of 'Investment Management'

conferred as specialist bachelors degrees (e.g. Cass Business School, London).

 33

Due to global cross-recognition agreements with the 2 major accrediting agencies

AACSB and ACBSP which accredit over 560 of the best business school programs,

the Certification of MFP Master Financial Planner Professional from the American

Academy of Financial Management is available to AACSB and ACBSP business

school graduates with finance or financial services-related concentrations. For

people with aspirations to become an investment manager, further education may be

needed beyond bachelors in business, finance, or economics. A graduate degree or

an investment qualification such as Chartered Financial Analyst (CFA) may help in

having a career in investment management.

There is no evidence that any particular qualification enhances the most desirable

characteristic of an investment manager, that is the ability to select investments that

result in an above average (risk weighted) long-term performance. The industry has

a tradition of seeking out, employing and generously rewarding such people without

reference to any formal qualifications

Global assets under management

Global asset allocation or Global assets under management consists of pension

funds, insurance companies and mutual funds. Other funds under management

include private wealth and alternative assets such as hedge funds and private equity.

Institutional clients generate the majority of funds.

Assets of the global fund management industry increased 15% in 2006 and

nearly doubled from 2002, to reach a record $61.9 trillion. Growth in recent

years has largely been due to rising net flow of investment and strong
 34

performance of equity markets. Part of the reason for the increase, in dollar

terms, has also been the decline in the value of the dollar against a number

of currencies.

Fixed assets management

Fixed assets management is an accounting process that seeks to track fixed

assets for the purposes of financial accounting, preventive maintenance, and theft

deterrence.

Many organizations face a significant challenge to track the location, quantity,

condition, maintenance and depreciation status of their fixed assets. A popular

approach to tracking fixed assets utilizes serial numbered Asset Tags, often with bar

codes for easy and accurate reading. Periodically, the owner of the assets can take

inventory with a mobile barcode reader and then produce a report.

Off-the-shelf software packages for fixed asset management are marketed to

businesses small and large. Some Enterprise Resource Planning systems are

available with fixed assets modules.

Some tracking methods automate the process, such as by using fixed scanners to

read bar codes on railway freight cars or by attaching a radio-frequency identification

(RFID) tag to an asset.

Fixed Asset Tracking Software

 35

Tracking assets is an important concern of every company, regardless of size. Fixed

assets are defined as any 'permanent' object that a business uses internally

including but not limited to computers, tools, software, or office equipment. While

employees may utilize a specific tool or tools, the asset ultimately belongs to the

company and must be returned. And therefore without an accurate method of

keeping track of these assets it would be very easy for a company to lose control of

them.

With advancements in technology, asset tracking software is now available that will

help any size business track valuable assets such as equipment and supplies.

According to a study issued in December, 2005 by the ARC Advisory Group, the

worldwide market for Enterprise Asset Management (EAM) was then at an estimated

$2.2 billion and was expected to grow at about 5.0 percent per year reaching $2.8

billion in 2010.

Asset tracking software allows companies to track what assets it owns, where each

is located, who has it, when it was checked out, when it is due for return, when it is

scheduled for maintenance, and the cost and depreciation of each asset.

The reporting option that is built into most asset tracking solutions provides pre-built

reports, including assets by category and department, check-in/check-out, net book

value of assets, assets past due, audit history, and transactions.

All of this information is captured in one program and can be used on PCs as well as

mobile devices. As a result, companies reduce expenses through loss prevention

and improved equipment maintenance. They reduce new and unnecessary

 36

equipment purchases, and they can more accurately calculate taxes based on

depreciation schedules.

The most commonly tracked assets are:

• Office Equipment

• Evidence

• Medical Equipment

• IT Equipment, for example laptops.

• Vehicles

• Files

• Maintenance supplies

• Educational materials

• Software licenses

• Videos

• Tools

Infrastructure Asset Management

Infrastructure Asset Management is the discipline of managing infrastructure

assets that underpin an economy, such as roading, water supply, wastewater,

stormwater, power supply, flood management, recreational and other assets. In the

past these assets have typically been owned and managed by local or central

government. Investment in these assets is made with the intention that dividends will

accrue through increased productivity, improved living conditions and greater

 37

prosperity.

A well-defined Standard of service (SOS) is the foundation of Infrastructure Asset

Management. The SOS states, in objective and measurable terms, how an asset will

perform, including a suitable minimum condition grade in line with the impact of

asset failure. There are two main objectives of Infrastructure Asset Management

relating to standard of service:

A) Sustain SOS (System Preservation): to sustain or deliver an agreed standard of

service in the most cost-effective way through the operation, maintenance,

refurbishment, and replacement of assets. Management of this objective is the focus

of Asset Management Plans.

B) Change SOS (Capacity Expansion): to make strategic changes and

improvements to the standard of service of the asset portfolio through the creation,

acquisition, improvement and disposal of assets. Changes to the SoS are usually

managed as a programme based on strategic objectives regarding the asset

portfolio.

Sustain SOS (System Preservation)

The key components of the sustain SOS objective are:

• a defined standard of service

o measurable specification of how the asset should perform

o minimum condition grade

 38

• a whole-life cost approach

• asset management plan

Defined standard of service

Without a defined standard of service (SoS) there is no means of knowing what

service level customers can expect, and no effective control on the whole-life cost.

With a clearly defined SOS, the asset manager is clear about how success or failure

will be measured, and the customer understands what to expect in return for the

expenditure on the asset system. There are two parts of a well-defined Standard of

Service: the minimum condition grade and a specified performance standard. By

managing against a defined SoS, which couples the performance specification with

the condition grade as a measure of reliability, Asset Managers avoid the

considerable complication of trying to optimise maintenance over short timeframes,

or the need to determine the outcome or benefit associated with each individual

intervention. Asset Management takes a whole-life cost approach to decisions

regarding operation, maintenance, refurbishment and replacement of assets..

Asset Management Plan

Asset Management Plans (AMP) are tactical plans for managing an organisation's

infrastructure and other assets in order to achieve strategic objectives. Usually an

Asset Management Plan will cover more than a single asset, taking a system
 39

approach - especially where a number of assets must work together in order to

deliver an agreed standard of service.

It is in the Asset Management Plan that the standard of service is recorded and

compared against current standard, along with a long-term plan that shows how an

organisation will deliver the defined standard of service for the minimum whole-life

cost.

Priority in investment decision

It is typical in an Asset Management setting that Sustain SOS (system preservation)

"comes off the top" of the available funding

Change SOS (Capacity Expansion)

Asset portfolio strategy

An Asset portfolio strategy revolves around meeting customer needs in the most

effective and efficient way.

Key asset portfolio strategy questions include:

• Is the need for the service real?

• What standard of service is required?

• Are the long-term costs of the current asset portfolio affordable?

• Have non-asset solutions been explored?

• What standard of service should new assets provide?

 40

This result of an Asset Portfolio Strategy often involves making strategic changes to

the portfolio of assets in order to achieve strategic objectives, including whether of

which some may be achievable without the use of infrastructure assets.

This can be a combination of creation or acquisition of new assets or the disposal or

improvement of existing assets. Depending on the drivers for change, this may be to

meet new demand (e.g. extending power supply to a planned development) or to

relieve bottlenecks (e.g. providing additional roading capacity), or in response to

reduced demand (e.g. disposal or abandonment of roads which are no longer in use)

or where investment policy has changed (e.g. flood defences protecting low-value

agricultural land from sea-level rise).

In managing the asset portfolio, the long-term financial sustainability is an important

boundary condition. Over-extending the asset portfolio beyond what will be

affordable for future generations to maintain and operate is not sustainable. Social

and environmental costs and benefits should also be considered carefully. To

determine long-term sustainability a good understanding of the long-term costs of

sustaining the asset portfolio is required.

.
 41

JINDAL STAINLESS STEEL LTD. Can use his Money or grow his money to invest in these

Sectors

1. To Invest In Derivatives Market

2. To invest in Mutual Funds

3. To Real Estate Business

But The Company Is Not Listed In Bombay Stock Exchange and National Stock Exchange.

So the company has only a single source to generate the money is to save the money in

production and selling of the finished products.

For Making Portfolio Of the Company the main part is of Working Capital Management.

Because Company Do not invest in Derivatives market, Mutual Fund and Real Estate

Business.

Investment management is the professional management of various securities

(shares, bonds etc.) and assets (e.g., real estate), to meet specified investment

goals for the benefit of the investors. Investors may be institutions (insurance

companies, pension funds, corporations etc.) or private investors (both directly via
 42

investment contracts and more commonly via collective investment schemes e.g.

mutual funds) .

The term Asset Management is often used to refer to the investment management

of collective investments, whilst the more generic Fund Management may refer to

all forms of institutional investment as well as investment management for private

investors. Investment managers who specialize in advisory or discretionary

management on behalf of (normally wealthy) private investors may often refer to

their services as Wealth Management or Portfolio Management often within the

context of so-called "private banking".

The provision of 'investment management services' includes elements of financial

analysis, asset selection, stock selection, plan implementation and ongoing

monitoring of investments. Investment management is a large and important global

industry in its own right responsible for caretaking of trillions of dollars, euro, pounds

and yen. Coming under the remit of financial services many of the world's largest

companies are at least in part investment managers and employ millions of staff

and create billions in revenue.

Fund manager (or investment advisor in the U.S.) refers to both a firm that

provides investment management services and an individual(s) who directs 'fund

management' decisions

DERIVATIVES
 43

Derivatives are financial instruments whose value changes in response to the

changes in underlying variables. The main types of derivatives are futures,

forwards, options, and swaps.

The main use of derivatives is to reduce risk for one party. The diverse range of

potential underlying assets and pay-off alternatives leads to a wide range of

derivatives contracts available to be traded in the market. Derivatives can be based

on different types of assets such as commodities, equities (stocks), bonds, interest

rates, exchange rates, or indexes (such as a stock market index, consumer price

index (CPI) — see inflation derivatives — or even an index of weather conditions, or

other derivatives). Their performance can determine both the amount and the timing

of the pay-offs.

One use of derivatives is to be used as a tool to transfer risk by taking the opposite position

in the underlying asset. For example, a wheat farmer and a wheat miller could enter into a

futures contract to exchange cash for wheat in the future. Both parties have reduced a future

risk: for the wheat farmer, the uncertainty of the price, and for the wheat miller, the

availability of wheat.

Over-The-Counter and Exchange-Traded

Broadly speaking there are two distinct groups of derivative contracts, which are

distinguished by the way they are traded in market:

• Over-the-counter (OTC) derivatives are contracts that are traded (and privately

negotiated) directly between two parties, without going through an exchange or other
 44

intermediary. Products such as swaps, forward rate agreements, and exotic options

are almost always traded in this way. The OTC derivatives market is huge. According

to the Bank for International Settlements, the total outstanding notional amount is

USD 516 trillion (as of June 2007)[

• Exchange-traded derivatives (ETD) are those derivatives products that are traded

via specialized derivatives exchanges or other exchanges. A derivatives exchange

acts as an intermediary to all related transactions, and takes Initial margin from both

sides of the trade to act as a guarantee. The world's largest[derivatives exchanges

(by number of transactions) are the Korea Exchange (which lists KOSPI Index

Futures & Options), Eurex (which lists a wide range of European products such as

interest rate & index products), and CME Group (made up of the 2007 merger of the

Chicago Mercantile Exchange and the Chicago Board of Trade). According to BIS,

the combined turnover in the world's derivatives exchanges totalled USD 344 trillion

during Q4 2005. Some types of derivative instruments also may trade on traditional

exchanges. For instance, hybrid instruments such as convertible bonds and/or

convertible preferred may be listed on stock or bond exchanges. Also, warrants (or

"rights") may be listed on equity exchanges. Performance Rights, Cash xPRTs and

various other instruments that essentially consist of a complex set of options bundled

into a simple package are routinely listed on equity exchanges. Like other

derivatives, these publicly traded derivatives provide investors access to risk/reward

and volatility characteristics that, while related to an underlying commodity,

nonetheless are distinctive

 45

Types

There are three major classes of derivatives:

• Futures/Forwards, which are contracts to buy or sell an asset at a specified future

date.

• Optionals, which are contracts that give a holder the right to buy or sell an asset at a

specified future date.

• Swappings, where the two parties agree to exchange cash flows.

Valuation

Two common measures of value are:

• Market price, i.e. the price at which traders are willing to buy or sell the contract

• Arbitrage-free price, meaning that no risk-free profits can be made by trading in

these contracts; see rational pricing

For exchange-traded derivatives, market price is usually transparent (often published in real

time by the exchange, based on all the current bids and offers placed on that particular

contract at any one time). Complications can arise with OTC or floor-traded contracts

though, as trading is handled manually, making it difficult to automatically broadcast prices.

In particular with OTC contracts, there is no central exchange to collate and disseminate
 46

prices. The arbitrage-free price for a derivatives contract is complex, and there are many

different variables to consider. Arbitrage-free pricing is a central topic of financial

mathematics. The stochastic process of the price of the underlying asset is often crucial. A

key equation for the theoretical valuation of options is the Black–Scholes formula, which is

based on the assumption that the cash flows from a European stock option can be

replicated by a continuous buying and selling strategy using only the stock. A simplified

version of this valuation technique is the binomial options model.

 47

Total world derivatives from 1998-2007 compared to total world wealth in the year
2000

Derivatives are often subject to the following criticisms:

• The use of derivatives can result in large losses due to the use of leverage.

Derivatives allow investors to earn large returns from small movements in the

underlying asset's price. However, investors could lose large amounts if the price of

the underlying moves against them significantly. There have been several instances

of massive losses in derivative markets, including:

• The Nick Leeson affair in 1994.

• The bankruptcy of Orange County, CA in 1994, the largest municipal

bankruptcy in U.S. history. On December 6, 1994, Orange County declared

 48

Chapter 9 bankruptcy, from which it emerged in June 1995. The county lost

about $1.6 billion through derivatives trading. Orange County was neither

bankrupt nor insolvent at the time; however, because of the strategy the

county employed it was unable to generate the cash flows needed to

maintain services. Orange County is a good example of what happens when

derivatives are used incorrectly and positions liquidated in an unplanned

manner; had they not liquidated they would not have lost any money as their

positions rebounded. Potentially problematic use of interest-rate derivatives

by US municipalities has continued in recent years. See, for example:

• The bankruptcy of Long-Term Capital Management in 2000.

• The loss of $6.4 billion in the failed fund Amaranth Advisors, which was long

natural gas in September 2006 when the price plummeted.

• The loss of $7.2 Billion by Société Générale in January 2008 through mis-use

of futures contracts.

• Derivatives (especially swaps) expose investors to counter-party risk. For example,

suppose a person wanting a fixed interest rate loan for his business, but finding that

banks only offer variable rates, swaps payments with another business who wants a

variable rate, synthetically creating a fixed rate for the person. However if the second

business goes bankrupt, it can't pay its variable rate and so the first business will

lose its fixed rate and will be paying a variable rate again. If interest rates have

increased, it is possible that the first business may be adversely affected, because it

may not be prepared to pay the higher variable rate. Different types of derivatives

have different levels of risk for this effect. For example, standardized stock options by

law require the party at risk to have a certain amount deposited with the exchange,
 49

showing that they can pay for any losses; Banks who help businesses swap variable

for fixed rates on loans may do credit checks on both parties. However in private

agreements between two companies, for example, there may not be benchmarks for

performing due diligence and risk analysis.

• Derivatives pose unsuitably high amounts of risk for small or inexperienced

investors. Because derivatives offer the possibility of large rewards, they offer an

attraction even to individual investors. However, speculation in derivatives often

assumes a great deal of risk, requiring commensurate experience and market

knowledge, especially for the small investor, a reason why some financial planners

advise against the use of these instruments. Derivatives are complex instruments

devised as a form of insurance, to transfer risk among parties based on their

willingness to assume additional risk, or hedge against it.

• Derivatives typically have a large notional value. As such, there is the danger that

their use could result in losses that the investor would be unable to compensate for.

The possibility that this could lead to a chain reaction ensuing in an economic crisis,

has been pointed out by legendary investor Warren Buffett in Berkshire Hathaway's

annual report. Buffet stated that he regarded them as ‘financial Weapons of Mass

Destruction.

The problem with derivatives is that they control an increasingly larger notional

amount of assets and this may lead to distortions in the real capital and equities

markets. Investors begin to look at the derivatives markets to make a decision to buy
 50

or sell securities and so what was originally meant to be a market to transfer risk now

becomes a leading indicator.

• Derivatives massively leverage the debt in an economy, making it ever more

difficult for the underlying real economy to service its debt obligations and curtailing

real economic activity, which can cause a recession or even depression. In the view

of Marriner S. Eccles, U.S. Federal Reserve Chairman from November, 1934 to

February, 1948, too high a level of debt was one of the primary causes of the 1920s-

30s Great Depression.

Nevertheless, the use of Derivatives has its benefits:

• Derivatives facilitate the buying and selling of risk, and thus have a positive

impact on the economic system. Although someone loses money while someone

else gains money with a derivative, under normal circumstances, trading in

derivatives should not adversely affect the economic system because it is not zero

sum in utility.

• Former Federal Reserve Board chairman Alan Greenspan commented in 2003 that

he believed that the use of derivatives has softened the impact of the economic

downturn at the beginning of the 21st century.

• Bilateral Netting: A legally enforceable arrangement between a bank and a counter-

party that creates a single legal obligation covering all included individual contracts.

This means that a bank’s obligation, in the event of the default or insolvency of one

of the parties, would be the net sum of all positive and negative fair values of

contracts included in the bilateral netting arrangement.

 51

• Credit derivative: A contract that transfers credit risk from a protection buyer to a

credit protection seller. Credit derivative products can take many forms, such as

credit default swaps, credit linked notes and total return swaps.

• Derivative: A financial contract whose value is derived from the performance of

assets, interest rates, currency exchange rates, or indexes. Derivative transactions

include a wide assortment of financial contracts including structured debt obligations

and deposits, swaps, futures, options, caps, floors, collars, forwards and various

combinations thereof.

• Exchange-traded derivative contracts: Standardized derivative contracts (e.g.

futures contracts and options) that are transacted on an organized futures exchange.

• Gross negative fair value: The sum of the fair values of contracts where the bank

owes money to its counter-parties, without taking into account netting. This

represents the maximum losses the bank’s counter-parties would incur if the bank

defaults and there is no netting of contracts, and no bank collateral was held by the

counter-parties.

• Gross positive fair value: The sum total of the fair values of contracts where the

bank is owed money by its counter-parties, without taking into account netting. This

represents the maximum losses a bank could incur if all its counter-parties default

and there is no netting of contracts, and the bank holds no counter-party collateral.
 52

• High-risk mortgage securities: Securities where the price or expected average life

is highly sensitive to interest rate changes, as determined by the FFIEC policy

statement on high-risk mortgage securities.

• Notional amount: The nominal or face amount that is used to calculate payments

made on swaps and other risk management products. This amount generally does

not change hands and is thus referred to as notional.

• Over-the-counter (OTC) derivative contracts: Privately negotiated derivative

contracts that are transacted off organized futures exchanges.

• Structured notes: Non-mortgage-backed debt securities, whose cash flow

characteristics depend on one or more indices and/or have embedded forwards or

options.

• Total risk-based capital: The sum of tier 1 plus tier 2 capital. Tier 1 capital consists

of common shareholders equity, perpetual preferred shareholders equity with non-

cumulative dividends, retained earnings, and minority interests in the equity accounts

of consolidated subsidiaries. Tier 2 capital consists of subordinated debt,

intermediate-term preferred stock, cumulative and long-term preferred stock, and a

portion of a bank’s allowance for loan and lease losses.

MUTUAL FUND
 53

To protect the interest of the investors, SEBI formulates policies and regulates the

mutual funds. It notified regulations in 1993 (fully revised in 1996) and issues

guidelines from time to time. MF either promoted by public or by private sector

entities including one promoted by foreign entities is governed by these Regulations.

SEBI approved Asset Management Company (AMC) manages the funds by

making investments in various types of securities. Custodian, registered with SEBI,

holds the securities of various schemes of the fund in its custody.

According to SEBI Regulations, two thirds of the directors of Trustee Company or

board of trustees must be independent.

The Association of Mutual Funds in India (AMFI) reassures the investors in units

of mutual funds that the mutual funds function within the strict regulatory framework.

Its objective is to increase public awareness of the mutual fund industry.

AMFI also is engaged in upgrading professional standards and in promoting best

industry practices in diverse areas such as valuation, disclosure, transparency etc.

 54

Working of Mutual Fund

A mutual fund is a professionally managed firm of collective investments that

collects money from many investors and puts it in stocks, bonds, short-term money

market instruments, and/or other securities. The fund manager, also known as

portfolio manager, invests and trades the fund's underlying securities, realizing

capital gains or losses and passing any proceeds to the individual investors.

Currently, the worldwide value of all mutual funds totals more than $26 trillion.

Since 1940, there have been three basic types of investment companies in the

United States: open-end funds, also known in the US as mutual funds; unit

investment trusts (UITs); and closed-end funds. Similar funds also operate in

Canada. However, in the rest of the world, mutual fund is used as a generic term for

various types of collective investment vehicles, such as unit trusts, open-ended

 55

investment companies (OEICs), unitized insurance funds, and undertakings for

collective investments in transferable securities (UCITS).

Usage

Since the Investment Company Act of 1940, a mutual fund is one of three basic

types of investment companies available in the United States.

Mutual funds can invest in many kinds of securities. The most common are cash

instruments, stock, and bonds, but there are hundreds of sub-categories. Stock

funds, for instance, can invest primarily in the shares of a particular industry, such as

technology or utilities. These are known as sector funds. Bond funds can vary

according to risk (e.g., high-yield junk bonds or investment-grade corporate bonds),

type of issuers (e.g., government agencies, corporations, or municipalities), or

maturity of the bonds (short- or long-term). Both stock and bond funds can invest in

primarily U.S. securities (domestic funds), both U.S. and foreign securities (global

funds), or primarily foreign securities (international funds).

Most mutual funds' investment portfolios are continually adjusted under the

supervision of a professional manager, who forecasts cash flows into and out of the

fund by investors, as well as the future performance of investments appropriate for

the fund and chooses those which he or she believes will most closely match the

fund's stated investment objective. A mutual fund is administered under an advisory

contract with a management company, which may hire or fire fund managers.

Mutual funds are subject to a special set of regulatory, accounting, and tax rules. In

the U.S., unlike most other types of business entities, they are not taxed on their
 56

income as long as they distribute 90% of it to their shareholders and the funds meet

certain diversification requirements in the Internal Revenue Code. Also, the type of

income they earn is often unchanged as it passes through to the shareholders.

Mutual fund distributions of tax-free municipal bond income are tax-free to the

shareholder. Taxable distributions can be either ordinary income or capital gains,

depending on how the fund earned those distributions. Net losses are not distributed

or passed through to fund investors

Net asset value

The net asset value, or NAV, is the current market value of a fund's holdings, less

the fund's liabilities, usually expressed as a per-share amount. For most funds, the

NAV is determined daily, after the close of trading on some specified financial

exchange, but some funds update their NAV multiple times during the trading day.

The public offering price, or POP, is the NAV plus a sales charge. Open-end

funds sell shares at the POP and redeem shares at the NAV, and so a process order

only after the NAV is determined. Closed-end funds (the shares of which are traded

by investors) may trade at a higher or lower price than their NAV; this is known as a

premium or discount, respectively. If a fund is divided into multiple classes of

shares, each class will typically have its own NAV, reflecting differences in fees and

expenses paid by the different classes.

Some mutual funds own securities which are not regularly traded on any formal

exchange. These may be shares in very small or bankrupt companies; they may be
 57

derivatives; or they may be private investments in unregistered financial instruments

(such as stock in a non-public company). In the absence of a public market for these

securities, it is the responsibility of the fund manager to form an estimate of their

value when computing the NAV. How much of a fund's assets may be invested in

such securities is stated in the fund's prospectus

Types of mutual funds

Open-End Fund

The term mutual fund is the common name for what is classified as an open-end

investment company by the SEC. Being open-ended means that, at the end of every

day, the fund issues new shares to investors and buys back shares from investors

wishing to leave the fund.

Mutual funds must be structured as corporations or trusts, such as business trusts,

and any corporation or trust will be classified by the SEC as an investment company

if it issues securities and primarily invests in non-government securities. An

investment company will be classified by the SEC as an open-end investment

company if they do not issue undivided interests in specified securities (the defining

characteristic of unit investment trusts or UITs) and if they issue redeemable

securities. Registered investment companies that are not UITs or open-end

investment companies are closed-end funds. Neither UITs nor closed-end funds are

mutual funds (as that term is used in the US).

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Exchange-traded funds

A relatively recent innovation, the exchange-traded fund or ETF, is often structured

as an open-end investment company. ETFs combine characteristics of both mutual

funds and closed-end funds. ETFs are traded throughout the day on a stock

exchange, just like closed-end funds, but at prices generally approximating the

ETF's net asset value. Most ETFs are index funds and track stock market indexes.

Shares are issued or redeemed by institutional investors in large blocks (typically of

50,000). Most investors purchase and sell shares through brokers in market

transactions. Because the institutional investors normally purchase and redeem in in

kind transactions, ETFs are more efficient than traditional mutual funds (which are

continuously issuing and redeeming securities and, to effect such transactions,

continually buying and selling securities and maintaining liquidity positions) and

therefore tend to have lower expenses.

Exchange-traded funds are also valuable for foreign investors who are often able to

buy and sell securities traded on a stock market, but who, for regulatory reasons, are

limited in their ability to participate in traditional U.S. mutual funds.

Equity funds

Equity funds, which consist mainly of stock investments, are the most common type

of mutual fund. Equity funds hold 50 percent of all amounts invested in mutual funds

in the United States. Often equity funds focus investments on particular strategies

and certain types of issuers.

 59

Capitalization

Fund managers and other investment professionals have varying definitions of mid-

cap, and large-cap ranges. The following ranges are used by Russell Indexes:

• Russell Microcap Index - micro-cap ($54.8 - 539.5 million)

• Russell 2000 Index - small-cap ($182.6 million - 1.8 billion)

• Russell Midcap Index - mid-cap ($1.8 - 13.7 billion)

• Russell 1000 Index - large-cap ($1.8 - 386.9 billion)

Growth vs. Value

Another distinction is made between growth funds, which invest in stocks of

companies that have the potential for large capital gains, and value funds, which

concentrate on stocks that are undervalued. Value stocks have historically produced

higher returns; however, financial theory states this is compensation for their greater

risk. Growth funds tend not to pay regular dividends. Income funds tend to be more

conservative investments, with a focus on stocks that pay dividends. A balanced

fund may use a combination of strategies, typically including some level of

investment in bonds, to stay more conservative when it comes to risk, yet aim for

some growth.
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Index funds versus active management

An index fund maintains investments in companies that are part of major stock (or

bond) indices, such as the S&P 500, while an actively managed fund attempts to

outperform a relevant index through superior stock-picking techniques. The assets of

an index fund are managed to closely approximate the performance of a particular

published index. Since the composition of an index changes infrequently, an index

fund manager makes fewer trades, on average, than does an active fund manager.

For this reason, index funds generally have lower trading expenses than actively

managed funds, and typically incur fewer short-term capital gains which must be

passed on to shareholders. Additionally, index funds do not incur expenses to pay for

selection of individual stocks (proprietary selection techniques, research, etc.) and

deciding when to buy, hold or sell individual holdings. Instead, a fairly simple

computer model can identify whatever changes are needed to bring the fund back

into agreement with its target index.

Certain empirical evidence seems to illustrate that mutual funds do not beat the

market and actively managed mutual funds under-perform other broad-based

portfolios with similar characteristics. One study found that nearly 1,500 U.S. mutual

funds under-performed the market in approximately half of the years between 1962

and 1992. Moreover, funds that performed well in the past are not able to beat the
 61

market again in the future (shown by Jensen, 1968; Grimblatt and Sheridan Titman,

1989).

Bond funds

Bond funds account for 18% of mutual fund assets. Types of bond funds include

term funds, which have a fixed set of time (short-, medium-, or long-term) before

they mature. Municipal bond funds generally have lower returns, but have tax

advantages and lower risk. High-yield bond funds invest in corporate bonds,

including high-yield or junk bonds. With the potential for high yield, these bonds also

come with greater risk.

Money market funds

Money market funds hold 26% of mutual fund assets in the United States. Money

market funds entail the least risk, as well as lower rates of return. Unlike certificates

of deposit (CDs), money market shares are liquid and redeemable at any time.

Funds of funds

Funds of funds (FoF) are mutual funds which invest in other underlying mutual funds

(i.e., they are funds comprised of other funds). The funds at the underlying level are

typically funds which an investor can invest in individually. A fund of funds will

typically charge a management fee which is smaller than that of a normal fund

because it is considered a fee charged for asset allocation services. The fees

charged at the underlying fund level do not pass through the statement of

operations, but are usually disclosed in the fund's annual report, prospectus, or
 62

statement of additional information. The fund should be evaluated on the

combination of the fund-level expenses and underlying fund expenses, as these

both reduce the return to the investor.

Most FoFs invest in affiliated funds (i.e., mutual funds managed by the same

advisor), although some invest in funds managed by other (unaffiliated) advisors.

The cost associated with investing in an unaffiliated underlying fund is most often

higher than investing in an affiliated underlying because of the investment

management research involved in investing in fund advised by a different advisor.

Recently, FoFs have been classified into those that are actively managed (in which

the investment advisor reallocates frequently among the underlying funds in order to

adjust to changing market conditions) and those that are passively managed (the

investment advisor allocates assets on the basis of on an allocation model which is

rebalanced on a regular basis).

The design of FoFs is structured in such a way as to provide a ready mix of mutual

funds for investors who are unable to or unwilling to determine their own asset

allocation model. Fund companies such as TIAA-CREF, American Century

Investments, Vanguard, and Fidelity have also entered this market to provide

investors with these options and take the "guess work" out of selecting funds. The

allocation mixes usually vary by the time the investor would like to retire: 2020, 2030,

2050, etc. The more distant the target retirement date, the more aggressive the

asset mix.
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Hedge funds

Hedge funds in the United States are pooled investment funds with loose SEC

regulation and should not be confused with mutual funds. Some hedge fund

managers are required to register with SEC as investment advisers under the

Investment Advisers Act.The Act does not require an adviser to follow or avoid any

particular investment strategies, nor does it require or prohibit specific investments.

Hedge funds typically charge a management fee of 1% or more, plus a "performance

fee" of 20% of the hedge fund's profits. There may be a "lock-up" period, during

which an investor cannot cash in shares. A variation of the hedge strategy is the

130-30 fund for individual investors.

Mutual funds vs. other investments

Mutual funds offer several advantages over investing in individual stocks. For

example, the transaction costs are divided among all the mutual fund shareholders,

which allows for cost-effective diversification. Investors may also benefit by having a

third party (professional fund managers) apply expertise and dedicate time to

manage and research investment options, although there is dispute over whether

professional fund managers can, on average, outperform simple index funds that

mimic public indexes. Whether actively managed or passively indexed, mutual funds

are not immune to risks. They share the same risks associated with the investments

made. If the fund invests primarily in stocks, it is usually subject to the same ups and

downs and risks as the stock market.

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WORKING CAPITAL MANAGEMENT

Introduction

Capital required for a business can be classified under two main categories i.e.

1. Fixed Capital

2. Working Capital

Every business needs funds for two purposes-for its establishment and to carry out day to

day operation. Long term funds are required to create production facilities through purchase

of fixed assets such as plant and machinery, land building, furniture etc. investment in these

assets represent that part of firm’s capital, which is blocked on a permanent or fixed basis is

called fixed capital.

Funds are also needed for short-term purpose of raw materials, payment of wages

and other day to day expenses etc. these funds are known as working capital.

MEANING OF WORKING CAPITAL

Working capital refers to that part of firm’s capital, which is required for financing short

term or current assets such as cash, marketable securities, debtors and inventories.

DEFINITIONS OF WORKING CAPITAL

In the words of Shubin, “working capital is the amount of funds necessary to cover the cost

of operating the enterprise.”

 65

According to Genestenberg, “Circulating capital means current

assets of a company that are changed in ordinary course of business from one form to

another, as from example, from cash to inventories, inventories to receivables, receivables

into cash.”

NATURE OF WORKING CAPITAL

Working capital management is concerned with the problems that arise in attempting to

manage the current assets, the current liabilities and the inter-relationship that exists

between them. The term current assets refers to these assets which in the ordinary course

of business can be, or will be, Converted into Cash within one year without undergoing the

diminution in value and without disrupting the operating of the firm, whereas the current

liabilities are those liabilities which are intended, at there inception, to be paid in the ordinary

course of business, within a year out of current assets or earning of the concern. Thus the

goal of working capital management is to manage the firm’s assets and liabilities in such a

way that a satisfactory level of working capital is maintained. The interaction between

current assets and liabilities in such a way that optimum level of current assets, the trade off

between profitability and risk which is associated with the level of current liabilities and

assets, better financing mix strategies and other short term goals are attained.

There are two concepts of working capital: Gross and Net

1. The term gross working capital, also referred to as working capital, means the total

current assets.

2. The term net working capital can be defined in two ways.

Difference between current assets and current liabilities.

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The task of the financial manager in managing working capital efficiency is to ensure

efficiency liquidity in the operation of the enterprise. The basic three measures of a firm’s

overall liquidity are: Current ratios, Acid test ratio, Net working Capital. For the purpose of

working capital management therefore, NWC can be said to measure the liquidity of the firm.

In other words, the goal of working capital management is to manage the current assets and

liabilities in such a way that an acceptable level of NWC is maintained.

IMPORTANCE OF ADEQUATE WORKING CAPITAL

Working capital is very essential to maintain the smooth running of the business. It is

lifeblood and nerve centre of a business. No business can run successfully with out

adequate amounts of working capital.

1. Adequate of working capital helps in maintaining solvency of the business by

providing uninterrupted flow of production.

2. it also enables a concern to avail each discount on the purchases and hence it

reduces casts

3. Sufficient working capital enables a business to makes prompt payments and helps

in creating and maintaining goodwill.

4. A concern having adequate working capital enables and high solvency can average

loans from banks and others on easy and favorable terms.

5. Adequate working capital ensures regular supply of raw materials.

6. A concern can also pay quick and regular dividends to its investors, as there may not

be much pressure to plough back profits because of adequacy of working capital.

7. Sufficiency of working capital creates an environment of security, confidence, and

high morale and creates overall efficiency of a business.

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8. Adequacy of working capital also enables a firm to make regular payments of

salaries, wages and other day-to-day commitments, which raises the morale of its

employees, increase their efficiency reduces wastages and costs and enhances

production and profit.

Working capital requirements

“WORKING CAPITAL IS THE LIFE BLOOD AND CONTROLLING

NERVE CENTRE OF a BUSINESS,” No business can be successfully run without

an adequate amount of working capital. To avoid the shortage of working capital at once, an

estimate of working capital requirements is not an easy task and a large number of factors

have to be considered before starting this exercise. The following factors have to be

considered for this:-

1. The length of sales cycle during which inventory is to be kept waiting for sales.

2. The average period of credit allowed to customers.

3. The amount of cash required paying day-to-day expenses.

4. The average amount of cash required making advance payments, if any.

5. The average credit period expected to be allowed by suppliers.

6. Time lag in payment in wages and in other expenses.

From the total amount blocked in current assets estimated on the basis of first for

items given above, the total current liability i.e. the last two items is deducted. In

order to provide for contingencies, some extra amount calculated as a fixed

percentage of WC may be added as safety margin.

NEED OF WORKING CAPITAL

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The need for the working capital (gross) or current assets cannot be overemphasized.

Given the objective of financial decision making to maximize the shareholder’s wealth, it

is necessary to generate profits. The extent to which profits can be earned will naturally

depend, among other things, open the magnitude of sales. A successful sales program is

necessary for earnings profits by any business enterprise. There is a need of working

capital in firm of current assets to deal with the problem arising out of the lack of

immediate of cash against goods sold. Thus sufficient working capital is necessary to

sustain sales activity. Technically, this is referred to as the operating or cash cycle.

CONCEPT OF WORKING CAPITAL

There are two concepts of working capital:

1. Gross Working Capital: In the broad sense, the term working capital refers to the

gross working capital and represents the amount of funds invested in current assets.

Thus, gross working capital is the capital invested in the total current assets of the

enterprise. Current assets are those assets, which in the ordinary course of business

can be converted in to cash with in a short period of normally one accounting year.

Constitutes of current assets are:

1. Cash in Hand

2. Cash at Bank

3. Bills Receivables

4. Sundry Debtors
 69

5. Short term loans & advances

6. Inventories (Stocks)

7. Raw Materials

8. Work in Progress

9. Stores & Spares

10. Finished Goods

11. Temporary investments of surplus funds

12. Prepaid Exp.

13. Accrued Income.

2. Net working Capital: In a narrow sense, the term working capital refers to the net

working capital. Net working capital is the excess of current assets over current liabilities.

So,

Net working capital = Current assets – Current liabilities

Net working capital may be positive or negative. When the current assets exceed the current

liabilities the working capital is positive and the negative working capital results when the

current liabilities are more than current assets. Current liabilities are those liabilities, which

are intended to be paid in the ordinary course of business with in a short period of normally

one accounting year out of the current assets or the incomes of the business.
 70

Constitutes of current liabilities are:

1. Bills Payable

2. Sundry Creditors or accounts payable

3. Accrued or outstanding exp.

4. Short term loans, advances and deposits

5. Dividend payable

6. Bank overdraft

7. Provision for taxation

Classification of working capital:-

KINDS OF WORKING CAPITAL

ON THE BASIS OF CONCEPT ON THE BASIS OF TIME

GROSS NET FIXED VARIABLE

WORKING WORKING WORKING WORKING

CAPITAL CAPITAL CAPITAL CAPITAL
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SEASONAL W.C s PECIAL W.C

.

Concept: - On the basis of concept Working Capital may be divided into two parts i.e.

A) Gross Working Capital: - G.W.C. is the capital invested in total current assets of the

enterprise.

B) Net Working capital:- N.W.C. is the excess of current assets over current liabilities

so,

Net Working capital = Current Assets - Current Liabilities

1. On the Basis Of Time:- it may be classified as:

A) Fixed Working Capital: - it is the minimum amount, which is required to ensure

effective utilization of fixed facilities and for maintaining the circulation of current

assets. There is always a minimum level of current assets, which is continuously

required by the enterprise to carryout its normal business operations. For example-

Every Firm has to maintain a minimum level of raw material, work-in-process,

finished goods and cash balance. This minimum level of current assets is called fixed

working capital as this part of capital is permanently blocked in current assets. As a

 72

business grows the requirements of permanent working capital also increase due to

the increase in current assets.

It can be further divided into two parts:

Regular Working Capital: it is that part of the working capital which is

required to ensure the circulation of current assets from cash to inventories, from

inventories to receivables and from receivable to Cash and so on.

Reserve Working Capital: it is the excess amount over the requirement for regular

working capital, which may be provided for contingencies that may arise at unstated

periods such as strikes, rise in prices, depression.

B) Temporary or Variable Working Capital: it is the amount of working capital which is

required to meet the seasonal demands and some special exigencies. Variable

Working capital can be further divide into two:

Seasonal Working Capital: It is that part of working capital which is

required to meet the seasonal needs of the enterprise.

Special Working Capital: It is that part of the working capital which is

required to meet special exigencies such as launching of extensive marketing

campaigns for conducting research.

Importance or advantages of adequate working capital

1. Solvency of Business

2. Goodwill

3. Easy Loans
 73

4. Cash Discounts

5. Regular Supply of Raw Materials

6. Regular Payment Of Salaries and Wages and Other Day-to-Day

Commitments

7. Exploitation of favorable market condition

8. Ability to face crisis

9. Quick and regular return on investment

10. High Morale

Financing of temporary variable or short term working capital

1. Indigenous

2. Trade Credit

3. Installment Credit

4. Advances

5. Factoring or Account Receivable Credit

6. Accrued Expenses

7. Differed Incomes

8. Commercial paper

9. Working capital Financed by Commercial banks

a) loans

b) Cash Credits

c) Overdrafts

d) Purchasing and Discounting of Bills

How to Finance Fixed Assets or Working Capital.?

There are Three Approaches for this:

 74

1. Matching Approach: -

The Firm can adopt a financial plan, which matches the expected life of assets with

the expected life of the sources of funds raised to finance assets. Thus a ten year loan

may be raised to finance a plant with an expected life of ten years. The justification for

the exact matching is that, since the purpose of financing is to pay for assets, the source

of financing and the assets should be relinquished simultaneously.

When the firm follows matching approach (also known as Hedging Approach),

long term Financing will be needed to finance fixed assets and permanent current

assets and short term financing to finance temporary current assets. It is shown in

the diagram:-

2) Conservative Approach:-

A Firm in practice may adopt a conservative approach in financing its currents and fixed

assets. The financing policy of the firm is said to be conservative, when it depends more

on long term funds for financing needs. Under this policy, the firm finances its permanent

assets and also a part of temporary current assets with long term financing. In the

periods when the firm has no need for temporary current

Assets, the idle long term funds can be invested in the tradable securities to conserve

liquidity. This is shown in the following figure:-

3) Aggressive Approach:-
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Under this approach the firm finances a part of its permanent current assets with short

term financing. It means under this approach rely more on short term financing.

Short Term Financing may be preferred over Long Term Financing for two reasons:-

1. The Cost Advantage

2. Flexibility

But Short term financing is more risky than long term financing.

Thus there is conflict between long term and short term financing. Short Term Financing

is less expensive then Long Term Financing, but at the same time Short term Financing

involves greater risk then long Term Financing. The choice between Long Term and

Short Term Financing involves a tradeoff between risk and return.

JINDAL STAINLESS LTD.

O.P.Jindal Marg,Hisar-125005(Haryana)

Financial Result For The Year Ended 31st March 2007

Income from Operations :

Gross Sales - Domestic 2962.35

- Export 2405.56

Total Sales 5367.91

Less: Excise Duty on Sales 389.93

Net Sales 4977.98

Other Income 18.47

Total Income 4996.45

Total Expenditure

(a) (Increase)/Decrease in Stock-in-Trade (207.72)

(b) Consumption of Raw Materials 3110.30

 76

(c) Goods purchased for sale 130.74

(d) Stores & Spares 225.92

(e) Power & Fuel 453.69

(f) Staff Cost 90.06

(g) Other Expenditure 327.85

Operating Profit before Interest, Depreciation & Tax 865.61

Less: Interest Expense(Net) 81.66

Cash profit 783.95

Depreciation /Amortisation 230.26

Loss on transfer of Divisions ------

Profit Before Tax 553.69

Provision for Current Tax 89.81

Fringe Benefit Tax 1.06

Provision for Deferred Tax 119.58

Previous Year Taxation Adjustment 5.31

Profit After Tax 337.11

Minority Interest 0.82

Net Profit 337.11

Paid-up Equity Share Capital

- Face value Rs.2/- each 27.64

Reserves excluding revaluation reserve 1355.17

Earning Per Share (EPS)

- Basic (Rs.) 25.56

- Diluted (Rs.) 22.30

Aggregate of Non-promoter Shareholding

- Number of Shares 61706212

- Percentage of Shareholding 44.64

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JINDAL STAINLESS LTD.

O.P.Jindal Marg,Hisar-125005(Haryana)

Financial Result For The Year Ended 31st March 2008

Income from Operations :

Gross Sales - Domestic 400890

- Export 186675

Total Sales 587565

Less: Excise Duty on Sales 53985

Net Sales 533580

Other Income 2945

Total Income 536525

Total Expenditure

(a) (Increase)/Decrease in Stock-in-Trade (78137)

(b) Consumption of Raw Materials 389403

 78

(c) Goods purchased for sale 2041

(d) Stores & Spares 23526

(e) Power & Fuel 57958

(f) Staff Cost 13021

(g) Depreciation/Amortisation 26750

(g) Other Expenditure 32133

475695

Interest Expense(Net) 17371

Profit from Ordinary Activities before Tax 43459

Tax Expense

Provision for Taxation –Current Tax 4747

Fringe Benefit Tax 132

Deferred Tax 9426

MAT Credit Entitiement (1089)

Previouw year Taxation Adjustments ----

Net Profit from Ordinary Activites after tax 30243

Extraordinary Items (net of tax expense) 3613

Profit After Tax 26631

Minority Interest (24)

Net Profit 26654

Paid-up Equity Share Capital

- Face value Rs.2/- each 3092

Reserves excluding revaluation reserve

and balancesheet of previous accouting year 176130

Earning Per Share (EPS) before Extraordinary item

- Basic (Rs.) 20.96

- Diluted (Rs.) 18.46

 79

Earning Per Share (EPS) after Extraordinary item

- Basic (Rs.) 18.82

- Diluted (Rs.) 16.57

EPS for the quarter (not annualized)

Public Shareholding

- Number of Shares 70063663

- Percentage of Shareholding 45.32

SUGGESTION

a. Company Should Advertise the Product.

b. Company Should Arrange Warehousing Facility In Delhi NCR Regions.

c. Working Capital Management Should properly Utilize

i. Control On the Wastage

ii. Use Japanese Total Quality Management Techniques

d. Search More Supplier (Who Provide Same Quality of Material in

Lesser Cost).
 80

BIBLIOGRAPHY

1. FINANCIAL MANAGEMENT (I M PANDEY)

2. CORPORATE FINANCE (DAMODARAN ASWATH)

3.PORTFOLIO MANAGEMENT(BARUA K SAMIR, VERMA J R, RAGHUNATHAN

V)
 81

4 JINDAL STAINLESS STEEL LTD. ANNUAL REPORT.

5. WIKIPEDIA