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Index

Topics Page No.

1. Abstract 22. Introduction 4

2.1 Purpose 52.2 Description Of The Project 52.3 Objective2.4 Methodology2.5 Literature Survey

666

3. Overview Of Indian Steel Industry 74. Profile of Tata Steel 11

4.1 Brief Profile 124.2 Tata Steel: Bearings Division 13

5. Credit Monitoring Assessment 145.1 Theoretical Study 15

5.1.1 Credit Monitoring Assessment 156. Schedule 16

7. Limitations of the Study 18

8. References 20


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CreditMonitoring Assessment

1.

Abstract

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Abstract

The project titled Credit Monitoring Assessment is about understanding what Credit

Monitoring Assessment is all about. Why do companies do it & how they do it? Categories and

types of credits and the overall process of credit. Thus it can also be said that Credit Monitoring

Assessment is a process to ascertain the risks associated with the extension of the credit facility.

The project deals with understanding the process of making a credit appraisal note which is used

for credit analysis. It is the method by which one calculates the creditworthiness of a business or

organization. The audited financial statements such as profit and loss accounts, balance sheet,

auditors report, annual reports etc are analyzed which helps in making credit monitoring

arrangement (CMA) which comprises of five forms which contains different aspects like

operating statement, particulars of existing credit, complete analysis of various items of last

years balance sheet, current years estimates and following years projections. On the basis of

details of current assets and current liabilities the calculation of the maximum limit of credit is

done. CMA is a part of the credit appraisal note. Different types of ratios such as current ratio,

liquidity ratio, Debt-Service Coverage Ratio (DSCR), performance ratios etc are calculated andconsidered and are very important for taking important funding decisions.

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2. Introduction

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2.1 Purpose

The project is on Credit Monitoring Assessment at Tata Steel for the Bearings Division. The

project deals with analyzing the credit worthiness of the clients and a detailed credit monitoring

analysis will be done for the same. A detailed credit appraisal note will help the company for

future assessments for the current financial year and a forecasting would be done for the next

financial year.

2.2 Description of the project

(1) To Understand the current corporate clients & working of

Tata Steel Company

Existing client details can be collected through the Tata Steel Company database which

will help to know them. Once that is known a detailed understanding of the products

supplied to them, the market share, the supply year-wise can be easily known which will

help in making the credit appraisal note.

(2) Collecting Data of Corporate Clients & Tata Steel

Data is collected mostly from the Tata Steel Database and the internet which helps to

know the clients that are targeted and particular aspects such as turnover/revenue,

quantity of different products supplied, profits generated & Demand of the Company.

(3) Preparing Credit Monitoring assessment(CMA)

After gathering information about the clients through various means such as annual report,

data available through other public domain a credit monitoring assessment will be done.

Following are some of the terms/concepts that would be implemented/ learnt:

Profit and Loss Account analysis

Balance Sheet Analysis

Various CMA Forms

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Assessments of Limits

Assumptions of Profitability

Projected Financials(Includes Various Financial Ratios)

(4) SWOT Analysis:

Analysis of Tata Steel Clients would be done-strengths, weaknesses, opportunities and

threats.

2.3 Objective of the project

Understanding the working of Tata Steel (Bearings Division).

Carrying out financial analysis

Understanding how to do credit analysis and applying the same.

2.4 Methodology

The research problem solutions are done firstly by finding relevant data from secondary researchfor data and the methodology carried is financial data analysis and credit risk analysis fromwhich assessment can be done and necessary financial ratios can be extracted which will help the

company to know the credit worthiness

SOURCE OF DATA COLLECTION:The secondary data from the following modes:

Annual reports

Data through internet sources

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2.5 Literature Survey

A large number of research is done from secondary sources such as internet. Various books are

referred to understand the working of corporate organizations, necessary methods of

understanding audited financial data, how to carry out credit monitoring arrangement etc.

Details of all the referred data is mentioned in references.

3. Overview of

Indian SteelIndustry

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The establishment of Tata Iron & Steel Company (TISCO) in 1907 was the starting point of

modern Indian steel industry. Afterwards a few more steel companies were established namely

Mysore Iron & Steel Company, (later renamed Vivesvaraya Iron & Steel Ltd.) in 1923; Steel

Corporation of Bengal (later renamed Martin Burn Ltd and Indian Iron & Steel Ltd) in 1923. All

these companies were in the private sector.

At the time of independence, India had a small Iron & Steel industry with production of about a

million tonnes (mt). In due course, the government was mainly focusing on developing basic

steel industry, where crude steel constituted a major part of the total steel production. Many

public sector units were established and thus public sector had a dominant share in steel

production till early 1990s.

Liberalisation of Indian Steel Industry:

The important policy measures, which have been taken for the growth anddevelopment of the Indian iron and steel sector are as under:

In the new industrial policy announced in July, 1991, iron and steel industry amongothers, was removed from the list of industries reserved for the public sector and alsoexempted from the provisions of compulsory licensing under the Industries(Development and Regulation) Act, 1951.

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therefore has likelihood of recording growth in the days to come and may very well spruce upglobal steel demand in a world reliant on China to show the way.

World crude steel production for the 62 countries reporting to the International

Iron and Steel Institute stands at 763.0 million tonnes for the first nine months of 2004 (i.e. Janto Sept). This is 8.7% higher than the corresponding period of 2003. The world production ofcrude steel in 2003 was 965 million metric tonnes, which was almost 7% higher than that of theprevious year. China continued to remain the largest consumer (262.48 million metric tonnes) aswell as the largest producer (220.1 million metric tonnes) of crude steel. India was the 8th largestproducer of crude steel in 2003 with a production of 31.8 million metric tonnes.

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4. Profile

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4.1 Brief Profile of Tata Steel

Tata Steel, formerly known as TISCO and Tata Iron and Steel Company Limited, is the world's

seventh largest steel company, with an annual crude steel capacity of 31 million tonnes. It is the

largest private sector steel company in India in terms of domestic production. Currently ranked

410th on Fortune Global 500, it is based in Jamshedpur, Jharkhand, India. It is part of Tata

Group of companies. Tata Steel is also India's second-largest and second-most profitable

company in private sector with consolidated revenues of 132,110 crore (US$29.33 billion) and

net profit of over 12,350 crore (US$2.74 billion) during the year ended March 31, 2008. Tata

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steel is the 8th most valuable brand according to an annual survey conducted by Brand Finance

and The Economic Times in 2010.

The Tata Steel Group has always believed that mutual benefit of countries, corporations and

communities is the most effective route to growth. Tata Steel has not limited its operations and

businesses within India but has built an imposing presence around the globe as well. With the

acquisition of Corus (now Tata Steel Europe) in 2007 leading to commencement of Tata Steel's

European operations, the Company today is the tenth largest steel producer in the world with an

employee strength of above 81,000 across five continents. During the financial year 2009-10, the

Group recorded deliveries of 24 million tonnes against 28 million tonnes in the previous year, the

decline being a reflection of the global economic slowdown mainly in the UK and European

operations. The Company has always had significant impact on the economic development in

India and now seeks to strengthen its position of pre-eminence in international domain by

continuing to lead by example of responsibility and trust.

4.2 Tata Steel: Bearings Division

Over the years, a highly performance-driven approach has helped Tata Bearings achieve an

influential and crucial position in its target industry segment. Tata Bearings Division of Tata

Steel Limited is one of India's largest quality bearing manufacturers, with a production capacity

of 30 million bearing numbers. It is the only bearings manufacturer in India to win the TPM

Award (2004) from Japan Institute of Plant Maintenance, Tokyo.

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The company is foremost in the manufacturing of a wide variety of bearings and auto assemblies

and the product range includes:

Ball Bearings

Tapered Roller Bearings

Magneto Bearings

Double Row Angular Contact Bearings

Clutch Release Assemblies

Fan Support Assemblies

Cylindrical Roller Bearings (under development)

Tata Bearings was one of the first to start the concepts of ship to line and JIT delivery and it is

presently extending such facilities to customers in different segments.

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5. Credit Monitoring

Assessment

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5.1 Theoretical Study

A detailed study /knowledge of various aspects was required before actually starting the project

which have helped in understanding and executing each and every step in the project, thus a few

of the things that were learnt in the introductory stage are mentioned below

5.1.1 Credit Monitoring Assessment

The Credit Monitoring Assessment is carried out on customers by banks, other companies credit

rating agencies and credit reference agencies. The purpose of the analysis is same in each case to

judge the liquidity of the company. This involves a study of business, its markets and market

position, its management and its financial situation.

Source: Glenlake/Fitroy, Credit Risk Management, The Fitzrov Dearborn publications

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Business

Environme

nt

Nature Of

Customer

s Business

Cash Flow Profits Assets

and

Existing

Business

Strength

Liquidity

&

financial

Financial

security

Ability to repay


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6. Schedule

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Schedule

March 4th , 2011

Submission of Initial information Report

March 10th, 2011

Submission of Project Proposal

April 8th, 2011

Submission of Interim Report

May 6th, 2011

Submission of Project Report

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7. Limitations Of TheStudy

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LIMITATIONS

The research is confined to State of Karnataka only.

Limited data resources because of company confidentiality.

Data collected through Company Profile may be inadequate.

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8. References

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www.tatasteel.com

Tata Steel Database

Annual reports

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