A REPORT ON “STUDY OF THE FUNCTIONS OF

FINANCE DEPARTMENT IN SIIL”

Submitted by
Sundara Raja Perumal.N
Register number 109631023
of
MASTER OF BUSINESS ADMINISTRATION

ANNA UNIVERSITY TIRUNELVELI

JULY 2010
 ACKNOWLEDGEMENT

I express my deep sense of gratitude to my beloved Vice

chancellor Thiru.Dr.Kaliappan for the help and advice he has shared
upon me.

I am indebted to my Head of the Department Dr.S.Nadarajan

for his unstinted support during the entire course of this project work.

I express my solemn thanks to Mr.S.Suresh GM Finance, SIIL

for having given me spontaneous and wholehearted encouragement for
completing this project.

I express my gratitude and sincere thanks to my guide

Mr.K.S.PradeepaChandran Associate Manager Finance, SIIL for his
valuable suggestions and constant encouragement for successful
completion of this project.

Finally, I thank all the staff members of the Department of

Management studies Anna university Tirunelveli, the staff members of
Sterlite Industries India limited and all others who contributed directly
and indirectly for the successful completion of my project.

ii
 TABLE OF CONTENTS

S.no. Title Page no

List of Tables iv
List of Figures iv
1 Introduction 1
2 Company Profile 2
3 Corporate Governance 7
4 Production Process 10
5 Finance operation 13
6 Payment operation 17
7 Payroll Maintenance 23
8 Financial Performance 25
9 Conclusion 28
Appendix 29

iii
 List of Tables
S.no Title Page no
1 Operation Performance 6
2 Performance of Copper Business 9
3 Consolidated Financial performance 2009-10 27

List of Figures
S.no Title Page no
1 Vedanta Share Holding 3
2 Organization Chart 15
3 Payment roll Maintenance 24
4 Graph showing net profit 26
5 Graph showing sales and gross profit 27

iv
 Chapter-1
Introduction

Objective:
The aim of the summer internship programme is to give the
opportunity to learn independently and show that can identify, define and analyse
problems and issues and integrate knowledge in a business context. It is an important
part of the programme that tests ability to understand and apply the theory, the
concepts and the tools of analysis to a specific problem situation.

The Project provides the opportunity to judge the time and self-
management skills and self ability to successfully undertake a long and in-depth study.
Hence it is not only the product that is important, but also the process itself.

The project is a practical, in-depth study of a problem, issue,

opportunity, technique or procedure or some combination of these aspects of business.
Typically, project will define an area of investigation, carve out research design,
assemble relevant data, analyse the data, draw conclusions and make
recommendations. The project should demonstrate organisational, analytical and
evaluative skills, and, where appropriate, an ability to design a suitable
implementation and review procedure.

Scope:
This summer internship programme is completely dedicated for
the study of the functions of the finance department of the Sterlite Industries India
Limited, Tuticorin. The entire structure and organisational setup of the department is
to be well studied. This programme would be helpful for gaining a practical
experience of the corporate world and understand the organizational climate that
exists in the company. The delegation of authority and work among the entire
employees is studied thoroughly during this summer project.

1
 Chapter-2
Company profile
Introduction to SIIL:
Sterlite Industries India Limited (SIIL) is the principal subsidiary
of Vedanta Resources plc, a diversified and integrated FTSE 100 metals and mining
company, with principal operations in India and Australia founded in the year 1986 by
its founder and chairman Mr.Anil Agarwal.

Sterlite’s principal operating companies comprise Hindustan Zinc

Limited (HZL) for its fully integrated zinc and lead operations; Sterlite Industries
India Limited (Sterlite) and Copper Mines of Tasmania Pty Limited (CMT) for its
copper operations in India/Australia; and Bharat Aluminium Company (BALCO), for
its aluminium and alumina operations and Sterlite Energy for its commercial power
generation business.
Sterlite is India's largest non-ferrous metals and mining company
and is one of the fastest growing private sector companies. Sterlite is listed on BSE,
NSE and NYSE. It was the first company to be listed on the NYSE.

Sterlite has continually demonstrated its ability to deliver major

value creating projects, offering unparalleled growth at lowest costs and generating
superior financial returns for its shareholders. At the same time, it ensures that its
expansion projects meet high conservative financial norms and do not place an
unwarranted burden on its balance sheet and financial resources.

A majority of company’s operations are certified to the

International Standards like ISO 9001, ISO 14001 and OHSAS 18001. SIIL
laboratories at Tuticorin and Silvassa have been recognized with ISO 17025:2005
certification from National Accreditation Board for Testing and Calibration
Laboratories (NABL). The company is LME approved copper tester. Their copper
products meet the requirement of Restriction of Hazardous Substances (RoHS
complied) and certified by Underwriters Laboratories Inc. SIIL’s Central lab at
Silvassa is a GoI approved R&D laboratory. The company has also won numerous
awards for safety and environment.

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 Sterlite develops and manages a diverse portfolio of mining and
metals businesses to provide attractive returns to its shareholders whilst carrying out
its activities in a socially and environmentally responsible manner and creating value
for the communities where it operates. As one of the largest metals and mining groups
in India, Sterlite remains continually committed to managing its business in a socially
responsible manner. The management of environment, employees, health and safety
and community issues, in respect of its operations is central to the success of
company’s business.

The Registered office is located at Sipcot industrial complex,

Tuticorin. The Corporate office is located at Mumbai. The Consolidated turnover for
the year 2010 was Rs 24410crores and the Net Profit for the year 2010 was Rs
5409crores
Vedanta share holding pattern:

Figure 1

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Company history and growth:
1. 1986-Sterlite Cables Limited, acquired the Shamsher Sterling Corporation,
changed the name to Sterlite Industries (India) Limited.
2. 1988-Sterlite Industries made an initial public offering of its shares on the
Indian stock exchange.
3. 1991-Sterlite Industries established India’s first continuous copper rod plant.
4. 1997-Commissions first privately developed copper smelter in India at
Tuticorin in Tamil Nadu.
5. 1999-Acquired Copper Mines of Tasmania Pty Ltd. Acquired Thalanga
Copper Mines Pty Ltd.
6. 2005-Sterlite Industries primary listing on NYSE in June 2007
7. 2006-Expansion on Tuticorin smelter to 400 KTPA through innovative
debottlenecking.
8. 2007-Expansion of Tuticorin Smelter to 300,000 TPA and Successful ramp up
of ISA furnace in a record period of 45 days.

Locations of various plants and facilities:

1. Copper smelter and refinery- Tuticorin.
2. Copper refinery – Silvassa.
3. Zinc smelter and mines- Rajasthan.
4. Aluminium refinery smelter and mines- Orissa.
5. Power plant- Jharsuguda, Orissa.
6. Captive power plant- power plant within the plant site for usage by the facility
itself located at Tuticorin, Vizag, Korba, and Lanjgarh.
7. Mines at Tasmania, Australia and Zambia.

Board of Directors:
1. Mr.Anil Agarwal, Chairman and Executive director
2. Mr.Navin Agarwal, Vice chairman
3. Mr.Gautam Bhilal Doshi, Independent non-executive director
4. Mr.Sandeep.M.Junnarkar, Independent non-executive director
5. Mr.Dindayal Jalan, Whole time director

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Chief executives:
Mr. R. Kishore Kumar - Chief Executive Officer (Copper and Zinc Business)
Mr. Ramesh Nair - Chief Operating Officer
Mr. Vinod Bhandawat - Chief Financial Officer
Departments:
1. Finance-concerned with payments to vendors and various other expenses
2. HR-deals with recruitment and maintenance of payroll and other employee
welfare activities
3. Security-deals with the security of all the plant and employees and maintains a
visitor management system for the outsiders.
4. Excise-deals with various legal taxations and provisions that has to be
maintained
5. IT-has the entire control over the network of the systems of the entire
organisation the software requirement of the various dept is being met by this
dept.
6. Stores - Inventory management and ordering of spares.
7. Plant - Main production process take place here various plants are the copper
cathode plant, phosphoric acid plant, sulphuric acid plant.
8. Purchase-various materials required are being analysed and the orders are
being made.
9. Logistics –this department is completely concerned with the transportation of
goods in and out of the company.

Awards and recognition:

1. Indian merchants’ chambers- outstanding achievement trophy 2009
2. Indian manufacturing excellence award 2009

Performance copper:
Production -24000 tonnes
Cathodes – 334000 tonnes
Rods – 197000 tonnes
Sulphuric acid – 1036000 tonnes
Phosphoric acid – 206000 tonnes

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Performance zinc:
Zinc metal – 683000 tonnes
Saleable metal – 578000 tonnes
Performance aluminium:
Production 268000 tonnes
Performance energy:
Sterlite energy limited, a 2400 MW coal based power plant coming
up at Jharsuguda, Orissa. The first plant may be commissioned by Q1 FY2011. At
Talwandi 1980MW may be start operating by Q2 FY2014.
Market status:
Stocks of the company are being listed in Bombay stock exchange
(BSE), National stock exchange (NSE), New York stock exchange (NYSE).
Market share of 33% in domestic market and 42% in refined copper market.
Products:
The various products of the company are
1. Sulphuric Acid
2. Phosphoric Acid
3. HydroFluoro silicic Acid
4. Gypsum
5. Ferro sand
6. Slime

Operational performance:
Product %ge change 2009-10 2008-09
Copper cathodes +6.8 334174MT 312833MT
Copper rods -10.9 196882MT 219879MT
Sulphuric acid +4.9 1036353MT 987512MT
Phosphoric acid +25.8 205844MT 163607MT

Table 1

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 Chapter-3
Corporate Governance
High standards of corporate governance are critical to ensure
business success. Corporate Governance is not simply a matter of creating checks and
balances; it is about creating an outperforming organization, which leads to increasing
employee and customer satisfaction and shareholders’ wealth. The primary objective
is to create and adhere to a corporate culture of conscience and consciousness,
transparency and openness; and to develop capabilities and identify opportunities that
best serve the goal of value creation.

Information presented to the board:

1. Information presented by the board.
2. Annual operating plans and budgets and any updates thereof.
3. Capital budgets and any updates thereof.
4. Annual accounts, half yearly and quarterly results for the company.
5. Updates on all projects, formation of new special purposes vehicles any new
business being undertaken.
6. Information of recruitment and remuneration of senior officials, including the
appointment or removal of Chief Financial Officer and Company Secretary.
7. Minutes of the meetings of the audit committee meetings are being discussed.
8. Details of any joint venture or collaboration are being discussed.
9. Subsidiary companies minutes, financial statements, significant investments
and other significant transactions and arrangements, if any.

Types of directors:
Executive directors:
Executive directors are those who are directly related to the
company, normally they would be the promoters of the company.
Non executive Independent directors:
These directors are not the employees of the company or directly
related to the company. They would be getting only the remuneration of the company.
The directors should not be substantial share holders, not material suppliers, service
providers, customers or lessees, not less than 21 years of age.

7
Committees of the board:
Audit committee:
Various reviewing functions are being done by this committee.
This committee reviews the company’s financial reporting process and the disclosure
of its financial information to ensure that the financial statements are correct,
sufficient and credible. This committee would be responsible for the appointment of
the statutory auditors of the company for periodic review and auditing. Once the
period of auditors has completed the same auditors could be chosen if the committee
members accept it and authorize it. The present auditors of the company are M/s
Chaturvedi and Shaw and M/s Deloitte Hasking and Sells. The company has 11
subsidiaries as on date.

Share holders and investor’s grievance committee:

This committee is focussed on review of investor complaints and its
redressal and queries received from the investors. The various queries include transfer
of shares, issue of share certificate, non receipt of annual report, non receipt of
declared dividend.

Remuneration committee:
This committee is responsible for recommending the fixation and
revision of remuneration. This is done after reviewing their performance based on
predetermined evaluation parameters and the company policy of rewarding
achievements and performance. The committee consists of three directors. The
amount as remuneration should be approved by the directors in the general meeting.

Share/debenture transfer committee:

The board of directors have delegated the power to approve
share/debenture transfers, transmission and consider split/consolidation requests to the
share/debenture transfer committee. It consists of three directors. They are responsible
for the appointment of share transfer agent. The present share transfer agent of the
company is Karvy computer share private ltd. The shares of the company are being
traded in the National stock exchange, Bombay stock exchange and New York stock

8
exchange. The American depository receipts are being traded in the New York stock
exchange. The company is following accounting standard-30.

Banking and authorisation committee:

The committee consider and facilitates decision making on
various matters related to operations, finance banking operations, delegation of
powers for day to day excise and sales tax matters, authorisation to specific
employees for certain contractual obligations and such other delegation as may be
required from time to time. The bankers of the company would be chosen by the
company and would be appointed in the meeting of the directors.

The performance of our copper business is given in Table.

Particulars 2007-08 2006-07 % change

Production volumes (“000 tonnes)

Mined metal content 28 28 -1
Cathode 339 313 8
Rods 225 178 26
Cash settlement prices (US$ Per 7,588 6,984 9
Tonne)
Unit costs (US$ per lb) 1.8 6.1 -71
Realised TC/RC (US cents per lb) 16 31 -50
Revenue (Rs crore) 12,658 11,727 8
EBITDA (Rs crore) 1,795 1,869 -4
EBITDA Margin (%) 14 16 -2
Operating profit (Rs crore) 998 1,420 -30

Table 2

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 Chapter-4
Production process
Production process:
Sterlite is the India's largest non-ferrous metals and mining
company based on net sales and market capitalisation. In India, one of the fastest
growing markets in the world, the production process has the following steps.
Mining:
Sterlite Industries (India) Ltd. (SIIL) operates one copper mine in
Australia through its subsidiary. Copper Mines of Tasmania operates the Mount Lyell
Mine in Western Tasmania, Australia. This is an underground mine and it has an ore
resource of approximately 14.2 million tonnes of ore at an average grade
of 1.3% Copper. The life of the mine is approximately 4 years at the current operating
rate.
Smelting:
Copper concentrates from Sterlite Industries (India) Ltd.
(SIIL)’s copper mine is blended with bought out concentrates from other sources and
treated to get optimum results. The Smelter is based on a proven energy efficient and
environment friendly technology, viz. IsaProcess from MIM, Australia world leaders
in Copper smelting technology.
The ISA furnace is a vertical shaft type furnace completely lined
with refractory into which wet copper is charged along with quartz and limestone into
the molten bath. As a result of the chemical reactions that take place in the bath, the
Copper Concentrate gets converted into two products-Matte, a mixture of sulphide
(containing copper and iron), and Slag. Matte is taken to the Rotary Holding furnace
where the slag separates out due to differential density. The Copper Matte is
converted into Blister Copper in the Pierce Smith Converter in two stages.
In the first stage, called Slag Blow, most of the iron and a small
quantity of sulphur are oxidised and removed. In the second stage, called Copper
Blow, sulphur is removed to get Blister Copper. Converter Slag is treated in a Slag
cleaning furnace for recovery of copper. Blister Copper is further refined by oxidation
and then by reduction to approximately 99.7% copper purity in the Anode Furnace,
and cast as Copper Anodes. Gases produced at various stages are fully recovered and
converted into Sulphuric Acid.

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 Latest Version of CS 3000 Distributed Control System of
Yokogawa, Japan controls the entire Copper Smelter. Advance Process Control (APC)
implementation methodology involves data collection, approximate candidate
controller design, prototype controller design, simulation, testing, and final
implementation. APC is implemented to control critical factors like Bath temperature
and Lance height control.
Sulphuric Acid Plant:
The sulphur dioxide gases generated in the smelting process is
collected and ducted to the Sulphuric Acid Plant. Set up with basic engineering from
Kvaerner Chemetics, Canada, the plant is based on the absorption process known as
DCDA, and has a designed capacity to produce 1600 tonnes of sulphuric acid per day.
Phosphoric Acid Plant
Sulphuric acid is reacted with rock phosphate in the Phosphoric
Acid Plant to produce phosphoric acid. Technology and basic engineering for this
plant has been sourced from Hydro Agri International, UK, and the process used is
known as Hemi-hydrate Di Hydrate Process. The plant has an installed capacity to
produce 180,000 tonnes of Phosphoric Acid per annum.
Refining:
The anode produced by the smelters is processed in the Silvassa
and Tuticorin refineries using IsaProcess technology sourced from MIM, Australia.
The Refineries convert Copper anodes to electrolytic grade Copper cathodes of
99.99% purity. The unique feature of ISA refineries is the use of permanent stainless
steel cathode plates and its capacity to ensure consistently high operational efficiency
and product quality. Electrolysis process deposits pure copper (99.99%) on the
stainless steel cathode plates. The impurities and precious metals contained in anodes
settle down as anode slimes. Cathodes are then automatically washed, stripped and
packed. The material handling equipment is sourced from Wenmec. Continuous
monitoring and analysis of refining process through an advanced DCS system ensures
close process control. A well-equipped laboratory to test the cathodes for purity and
structure of the deposit backs the production facility. A state-of-the-art electrolyte
purification plant supplied by Ecotech helps in keeping electrolyte clean and within
close limits to get superior quality product and to ensure high operational
efficiencies.An acid purification plant contributes to the purification of the electrolyte,
significantly enhancing the quality of the cathodes.

11
Precious Metals Recovery
During the electro-refining process, precious metals like gold,
silver and platinum present in the anode settle down at the bottom of the cells along
with other impurities. This collection is known as anode slime and it is subjected to
atmospheric leaching for recovery of copper filtered, dried and bagged. The leached
slime is exported for recovery of precious metals.

Continuous Cast Rod (CCR)

Sterlite Industries is one of two custom smelters in India and set
up two continuous cast copper rods units.The Continuous Cast Copper Rod (CCR)
Plants are based on technology and equipment from Continuus Properzi, Italy. The
plants have total annual capacity of 240,000 tonnes.
Cathodes are melted in a vertical shaft furnace based on
technology from ASARCO, USA. The molten copper is transferred to the casting
Wheel through a holding Furnace. Highly accurate measurement and control systems,
intrinsic to the Properzi technology, are used to maintain optimum level of molten
metal, which is cast into the form of a continuous bar. The continuously cast copper
bar is fed into the rolling mill consisting of a unique combination of 2-roll and 3-roll
configuration designed to produce excellent quality of rods in different sizes. Online
pickling, drying and waxing ensure that the rod is free of oxide scales.

Online scanning with the highly sensitive Defectomat, sourced

from Dr Foster, Germany enables freedom from surface defects and ferrous
contamination. The process parameter data, online scanning data and results of a
battery of off-line tests are captured and processed in the central computer to monitor
and control the final quality of the rods. Extensive process control, backed by
computerized quality analysis make Sterlite CC Rods highly suitable for Telecom,
magnet wire, Transformer, housing wire and cable applications.

Copper rod is coiled in an Orbital laying form to ensure freedom

from entanglement while uncoiling by the customers. Each coil is compacted,
strapped and wrapped with polyethylene wraps, and stretch-wrapped to prevent
contamination with dust and ensure excellent arrival condition at the customer’s end.

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 Chapter-5
Finance operations
The entire operation of the organisation is related to the finance
department because all the operations are being completely dependent on money. The
above said processes of the company is completely dependent on money and hence
without which the company’s functions would be completely affected hence the
money required should be properly managed which is done by the finance department
of the company. The various functions of the finance are being assigned to various
persons on basis of the area or plant with which it is associated, For E.g. there are
various divisions such as smelter operations, phosphoric acid plant, sulphuric acid
plant, maintenance, logistics etc. the most important operation of the department is
payments made to the vendors. Foreign remittance to the foreign vendors is also being
made through this department. The requirement of funds should be informed in the
morning itself only then funds could be arranged from the corporate office. The
company follows 5s principles to increase the productivity and efficiency.

Risks and uncertainties:

The various risks which are faced by the company are
Safety health and environment:
Since the company is engaged in mining activities it is of high risk
of explosion, personal injury, loss of life.
Operational risk:
The operations of the company are subject to higher operation risk
because all the operations are out of control of the organisation. There would be
increase in material cost or increase in transportation cost. Increase in cost would be
having adverse impact in competitiveness.
Financial risks:
The company has approved policies which embrace liquidity,
currency interest rates, counter party and commodity risks. Treasury policies are
approved by the board and adherence to these policies is strictly monitored by the
committees. The conservative financial policies have enabled the company to
minimise the negative impact of the recent global recession.

13
Foreign currency:
Since most of the transaction is based on the LME commodity
prices and the dollar hence any fluctuation in the prices in the international market
would be affecting the company financials. The prices of the precious metals would
be changing every day. Foreign currency exposures are being maintained through a
group hedging policy. The policy is reviewed periodically to ensure that the risk from
fluctuating currency exchange rates is appropriately managed. Foreign exchange
exposures on imports, net of natural hedges in place are based on maturity.
Interest risks:
The company is exposed to interest rate risk on short term and long
term floating rate instruments and also the refinancing of fixed rate debt. The
company has imposed policy to maintain a balance of fixed and floating rates. The
proportion of the fixed and floating interest rates is being determined by current
market interest rates. The interest rates would be revised at frequent intervals by the
government on basis of the inflation rate.
Counter party risks:
The company is exposed to counter party credit risks in investments
and receivables. A large majority of receivables due from third parties are secured
either as advance receipt of money or by use of trade financial instruments such as
Letter of Credit.

Software Used:
SAP is used by the organisation for recording the various
transactions, the fields of sap are being specially modified to suit the operations and
various service codes are being given which could be helpful to choose the required
fields. There is no chance of loss of any transaction it could be easily tracked using
the transaction number. All the data entered are being stored in the server. There are
various fields such as A, D to represent the special functions. These special operations
would be having a separate general ledger account. Whenever there is a wrong entry
made then it could be reversed by giving the reversal entry, so the software is more
compatible and user friendly.

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Organisational chart:

CHAIRMAN

PRESIDENT

CEO CFO COO

VICE PRESIDENT

GENERAL MANAGER

ASST GENERAL
MANAGER

ASSOCIATE MANAGER

ASSOCIATE OFFICER

ASSOCIATE

ASSOCIATE TRAINEE

Figure 2

15
Functions:
Top management:
The top management includes Chairman, President, Chief
Executive officer, Chief Operating Officer, Chief Financial Officer. They would be
responsible for taking the strategic decisions and framing the policies for the company.

Senior Management:
The Senior management includes the Vice president, General
Manager and Assistant general Manager. They would be responsible for following the
strategies and policies framed by the top management. They would be the head of a
particular department. The signing authority of cheques would be held with these
persons and would be helping the top management to take the decisions.

Middle Management:
The Middle management includes the associate manager. The
associate manager has the responsibility of coordinating all the activities of the
subordinates. The various data such as void cheques, payments required for
clarification are to be maintained as separate excel sheets so that it could be used for
future use. The manager should report to the GM finance. He has the responsibility of
attending the meetings with the CFO and taking various financial decisions. The bank
payment voucher should be verified and approved by the manager and should be sent
for obtaining the sign in the cheque. The invoices can also be approved for payment.
All the parties would be contacting the manager for status of their payment. All the
problems would be reported to the associate manager.

Junior Management:
This level includes the associate officer, associate and associate
trainees. This person would be responsible for doing all the basic functions of the
department. They would be doing functions such as booking the payments etc.

16
 Chapter-6
Payment operations
This is the major function of the department which includes
payment to various expenses related to various departments which include payment to
spares, services, freight, stevedoring, raw material, logistics etc. Each department
would be sending the invoice after certifying for payment to the finance department.
The payment team in the department is completely responsible for all the activities.
The following procedures would be followed for different payments as explained in
the following paragraphs. All the transactions should be properly documented for the
reference of the auditors. There are persons called business controllers who would be
responsible for estimating the requirements and comparing it with the actual expenses.
They have the authority to take decisions on whether the payment could be made or
not. There are separate persons for each business section. The payments would be
done two times a month all the invoices would be booked for payment. There are
various sections related to each department.

Smelter operation:
All the payments related to the smelter operations are concerned in
this portion. The invoices from the vendors after checking the bill and would be sent
to the finance department along with the inter office memo. The memo would be
containing various details such as from, to, through whom it is sent, Bill no and date,
PO number, GR no etc and should be signed by the concerned person. The purchase
order number would be created by the concerned department when the service or
material is being order to the concerned vendor.

Once this memo has reached the finance department the bill is
booked for payment using SAP software. There are various modes of payment such as
advance, normal, deduction in payment. Once the payment is being booked invoice
receipt voucher could be created. Then the payment can be made through the option
available with the software. In certain cases various deductions such as for service tax
would be done and the remaining amount would be paid or else. There is also
provision for deducting the Tds amount from the amount to be paid. The service tax
collected would be helpful to determine whether the quantity and amount stated and

17
actually delivered is correct. A bank payment voucher and cheque would be printed;
the voucher would be containing various details such as the cheque number assigned
and the amount along with the bank account details. If the cheque amount is high then
it would be valid only if it is signed by two persons. This should be submitted for
authorisation from higher authority. Once it is authorised the cheque would be
dispatched to the party through courier.

Logistics:
This is a section in finance department where the payments dealing
with freight used by the organisation is being done, which may include the charges
which are concerned with the bringing in the required materials into the premises or
taking the completed materials to the buyers. This would be done when the freight is
with the scope of the organisation. There are three logistics sections in the
organisation which are related exports, material selling to local customer, acid selling
etc. The transportation is normally done by the authorised transporters by the
company. The fields in the SAP would be having separate code for each product. The
copper extracted in the plant is being sent to Mumbai and from there it is being either
exported or being sold. Whereas the by-products obtained would be sold to the local
customers. When the cargo is being sent from port to port it is called barge cargo the
expense for this would be paid by the company. Normally the invoice of the materials
would be containing the amount of purity on basis of which the cost would be
calculated.

Material handling at port:

The main material required for the production is copper
concentrate sand which is normally imported from abroad. This is normally done by
an agent who is appointed by the company; they would be responsible for the
unloading of the goods and bringing them to the work site. These agents would be
appointed by the logistics department of the company. At the beginning the supplier
would be chosen and order would be placed, there is a document called bill of lading
which would be containing the details of the contract between the supplier and
consignee, their mailing address, contact person, the quantity of material in terms of
metric tonnes at the time of loading, the vessel name etc.

18
 There are various expenses incurred in handling the material, it
starts from the duty which is paid to book the berth for the incoming vessel. Once the
duty is paid berth would be allocated for the vessel containing the material and in the
next stage the material has to be unloaded, for this to be done some amount of duty
has to be paid. The crane charges for unloading the material at the port is also to borne
by the company, these charges would be in terms of cost per hour. A special person
would be appointed by the company to verify the quantity of the material at the time
of unloading. Once this is completed the goods would be taken to the site and some
quantity would be taken to warehouse located at some other place. This cost is called
stevedoring cost. All the unexpected expenses due to natural calamities or accident
has to be borne by the company when is it in the scope of the company.
All the above said charges would be submitted in the form of
invoice to the company stating the various charges along with the quantity should be
stated in it. The charge includes the service taxes and other cess. This invoice would
be reaching the finance department after approval from the logistics department. Then
the invoice would be booked for payment, this operation is also being done in SAP
software. The payment should be done as per the payment terms in the agreement,
before the payment a certain amount should be deducted as TDS (tax deducted at
source) which should be paid to the government. All these provisions would be there
in the software for making the payment. The payment would be normally made in the
form of cheque for the actual amount.
The same person dealing with this is also dealing with another
payment section called capex, which is dealing with the assets bought for the
company. This payment is also similar to that of the payment made for service and all
other procedures are same.
The cheques which are drawn should be signed by those who are
authorised; they are GM finance, VP operations etc. The GM of commercial
department does not have the authority to sign because the order is also being placed
by them only. Payments could not be made if pan number is not available.

Payment through letter of credit:

In case of foreign payments there is a procedure of payment
through letter of credit. A letter of credit is given to the banker by the company for
making the payment. The amount of payment and the beneficiary’s name address

19
account number should be stated in the letter of credit. The party’s account would be
credited with the actual amount and once the payment is received by the party the
bank would be claiming it from the company and the amount should be settled within
the credit period stated in the letter of credit.

Making foreign payments:

Foreign payments to the parties in abroad would be done in a
procedure with various formalities. When the payment is made through directly
crediting the party’s account the swift address, party’s bank name, address, account
number should be known. The various documents to be attached are copy of actual
invoice, copy of contract signed between the company and beneficiary. Certificate
obtained from a registered chartered accountant certifying the amount in the local
currency and party currency, the taxes to be deducted etc.
The copy of tax deducted at source submitted to the government
should also be included. Only if the above said documents are present the payment
would be made by the bank. This could be done in those branches where foreign
exchange is available. If the party is requesting the payment in the form of demand
draft then a foreign draft should be drawn in favour of the party payable at the party’s
bank.
Normally the contract should be containing the type of service or
good which is going to be given by the vendor with various details such as the
passport number and validity of all the manpower included. The expenses of the
persons such as boarding, lodging and transportation would be borne by the company
if stated in the contract and payments would be made as per the payment terms. For
e.g. 20% payment after the mobilising the manpower to the site and remaining 80%
payment after completion of the job on producing the invoice. Once the terms and
conditions are not being fulfilled it would lead to breach of contract.

EOU (export oriented unit) operations:

Payment for spares:
The department which is in need of changing a part or equipment
would be placing the purchase requisition slip to the purchase department. Once the
requisition is placed the purchase department would be conducting survey for the
vendors and a bid would be conducted, the vendor with the least bid high quality

20
would be chosen. Once the terms and conditions are satisfied the order would be
placed. These materials should be brought inside the site; the payment for the
expenses incurred in this operation would be paid in this section. The vehicles which
bring the spares into the company should get the gate pass seal in the invoice with the
entry time and vehicle number.
Once it has entered the company the goods would be unloaded in
the stores department. The stores department would be verifying the quantity and the
condition of the goods as stated in the invoice. After this step the goods would be
checked for quality by the user department and would be certifying the quality. Once
the quality is satisfied the invoice would be certified for payment. The invoice would
be sent to the excise department where the VAT amount would be credited. The VAT
percentage would be either 4% or 12.5% based on the type of material.
After the above said operations are being completed the invoice
would be reaching the finance department. The invoice would be containing the goods
receipt number generated by the stores department, which would be provided only
after the certification of quality. The payment for the spares is similar to the payment
made for service. The freight charge for bringing the spares is in the scope of the
company if mentioned in the invoice.

Payment for export freight:

There are two types of freights, domestic and export freight. In
case of domestic freight the approved transport agent would be used to carry the
finished goods to the required destination. The charges would be varying in
accordance with the distance and quantity. The invoice would be containing the name
and address of the consigner and consignee. A copy of the invoice should be send by
the consignee to the consigner to certify the reception of goods in good condition and
the date of reception. Only if the sign of the consignee is present it would be
processed for payment.
In case of export of goods there would be liner who would be acting
as an intermediate between the exporter and the customer. There are various
procedures such as customs duty would be done by the liner in favour of the company
and would be submitting the invoice to the company stating the various charges and
expenses. There are two such agents appointed by the company to transport the
finished goods from the plant to port. The charges would be including all the expenses

21
till the goods are being loaded in the vessel and reaching the destination. All this
would be based on bill of lading. There would be an agent who would be helping in
clearing the customs duty and clearing it from the port. These agents are called as
customs licensed agents. Bill of lading is a document with all the details of the
consigner, consignee, quantity of material etc.

Corporate office payments:

Corporate office payments are also made though this department
only. There is no PO number for this type of payments. The expenses would be
booked using the vendor code only. The invoice would be sent to the finance
department through courier. Here the bill would be processed and the payments would
be made. A separate account is available in sap for this purpose through which the
payments would be made with the invoice number. The various expenses of the
corporate office may include hospitality charges, transportation charges, arrangements
for various meetings of the board members, booking of halls for meetings, food
expenses. It would be including all the payments that include the expenses of the top
management. Rest of the payment procedures are same as other payments. This type
of payments could be tracked only with the vendor code only. This is done to
centralize the functions of the company. The code for booking payments is corp in sap.
This will also be including the expenses of the top management also.

In certain cases there would be situation when there is no

possible of obtaining the signature in the cheque; such a situation arises for very
urgent payments it would be done through demand draft. In such a situation only the
bank payment voucher would be done and the amount would be credited directly to
the party’s account when they have it in the same bank.

22
 Chapter-7
Pay roll maintenance
Human resource accounting and auditing is the main function
of this section. The various details should be audited at frequent intervals. All the
transactions should be properly accounted. Pay roll refers to the list of employees and
their salary that has to be paid to them. The calculation of the payroll in the company
is outsourced to a BPO where the calculations are being made and they are returned to
the finance department. Two persons are involved in this job. They would be just
collecting the input information regarding the attendance and the various deductions
and additions that has to be made, are verified and they are provided it to the
outsourced company. The salary scale would be framed by the company on basis of
the economic situation and the inflation rate and also taking the company norms and
policies into account. The salary has been calculated the amount would be credited
into the employee’s bank account. The SAP software is used for this purpose separate
GL accounts are available for this purpose. This GL account would be debited and the
employees account would be credited.

The various provisions which have to be made on basis of the

company’s HR policy are also being maintained by these persons responsible for this.
The provisions may include medical reimbursement for the expenses made by the
employees and their dependents. The amount that could be claimed would be based
on the grade of the employee and the number of family members. A ceiling is being
obtained by calculations and taking various factors into account. When the claimed
amount exceeds the ceiling amount the person would be eligible for the ceiling
amount. When the claimed amount is lesser than the ceiling amount the claimed
amount would be provided as such. These additional amounts would be credited in
groups to the employees based on their department.

There are 2000 employees in the company, out of which 1000

employees have been deputed to various group companies and other facilities of the
company. The entire payroll of them is being maintained here. The input data such as
attendance would be obtained from the human resource department of the company.
They are also responsible for calculation of provident fund and income tax for each

23
employee based on their salary. These deductions would be based on the norms and
policies proposed by the government and the company. This data has also been
provided as input to the outsourced company. When all the above steps have been
completed, the salary would be disbursed at the end of the month. All the employees
would be identified by the unique employee number given to them. The income tax if
applicable would be deducted from the salary and would be paid to the government
directly. They would also be assisting for filing the IT return also. All the increments
and incentives given would be accounted.

Payroll Maintenance operation

Inputs
FINANCE
HUMAN DEPARTMENT
RESOURCE DEPT

CONSULTANT

Figure 3

24
 Chapter-8
Financial Performance

Sterlite is the leading copper producer in India. In 2009-10, the

company produced 334000 tonnes of copper. The copper business comprises smelting
and processing of copper and production of its byproducts. In addition, we own the
Mt. Lyell copper mine at Tasmania in Australia, which produces a clean concentrate
that is valuable in the smelting process, to meet around 8% of our copper concentrate
requirements at Sterlite. The Tuticorin smelter was in lowest cost quartile among all
copper smelting operations in the world; and the refineries at Tuticorin and Silvassa
were globally ranked seventh-lowest and eighth-lowest in production costs.

Unit Costs

Unit conversion costs, which consist of costs of smelting and

refining, have reduced significantly to 1.8 cents per lb in 2007-08, compared to 6.1
cents per lb last year. Higher energy prices and fixed cost have been offset by better
byproduct realization and substantial operational recoveries. The sharp reduction in
unit cost of production reflects our relentless focus on this area. We have taken up
various TQM programmes which should result to further improvements in process
and technical efficiency. The growing output of byproducts, especially sulphuric acid,
and skills in selling these at best possible prices, we hope to achieve a state where the
revenue obtained from by-product sales will exceed the total cost of production thus
achieving negative unit cost of production in the coming years.

Treatment Charges and Refining Charges (TC/RC)

2007-08 witnessed a tightening in the global concentrate market,

mainly due to cutback in production of the second largest mine in the world combined
with increased refining capacities and aggressive buying of concentrates in China.
Spot markets were extremely firm. During fourth quarter of 2007-08, TC ruled at
around US$ 20 per tonne of concentrate, and RC at 2 cents per lb of copper (i.e.
around US$ 110 per tonne). This resulted in a reduction in TC/RC compared to 2006-
07. Negotiations for the 2008 Annual Frame Contracts for concentrates have been
completed and the benchmark TC/RC has been established at 45/4.5 (i.e. US$ 45 per

25
tonne of concentrate for TC and US cent 4.5 per lb of copper for RC) with various
improvements in the side terms such as quotation period, payment terms and
gold/silver refining charges. Sterlite has concluded all its annual negotiations around
similar levels with substantial improvements on side terms. Even so, the concentrate
market is expected to be in a state of deficit for next couple of years. This may result
in further softening of the TC/RC terms for the Company in the near term.

Sales: Copper

The Company’s efforts towards market development in India have

paid dividends. Our domestic sale has increased by 35% to 157,071 tonnes in 2007-08
compared to previous year, and we accounted for 29% of the market in India. We also
exported 180,035 tonnes of copper cathodes and copper rods, to our key overseas
markets – the Middle East, China, Japan, Philippines and Thailand. We continue to
develop a sizeable customer base for the export of copper rods.

Financial Performance

Revenues from the copper business rose by 8% to Rs. 12,658 crore in

2007- 08. However, despite major reductions in the cost of production, the combined
effect of a 50% fall in TC/RCs, over 11% appreciation in the rupee against the US
dollar and increasing fuel prices led to a 30% reduction in operating profits (EBIT) to
Rs. 998 crore.
Graph showing net profit:

Figure 4

26
Graph showing the sales and gross profit:

Figure 5

Consolidated financial performance for the year 2009-10

Table 3

27
 Chapter-9
Conclusion
The study made on the operations of the finance department concludes
that all the operations of the company are being related to the department. The
department is also responsible for maintaining the accounts and audit reports of the
company. The department plays a vital role in managing the money in an efficient
manner to obtain higher productivity. It helped in obtaining a practical experience of a
corporate environment and the various functions of the department could be studied.
All the areas related to the finance operations were studied individually and
understood well.

28
Appendix-I

29
30
Unaudited consolidated financial performance for the period ended 30th June 2010
(Rs.in crore except as stated)
Previous
Quarter ended Quarter ended accounting Year
S.
Particulars 30.06.2010 30.06.2009 ended
No.
(Unaudited) (Unaudited) 31.03.2010
(Audited)
1 a) Net Sales/Income from Operations 5,924.50 4,580.16 24,500.60
b) Other Operating Income 45.75 20.95 181.85

Total Income 5,970.25 4,601.11 24,682.45

2 Expenditure

a) (Increase)/decrease in stock in trade and work in progress (246.34) (335.13) (198.16)

b) Consumption of raw materials # 2,923.57 2,410.86 12,244.34

c) Purchases of traded goods 1.72 43.53 93.22

d) Employees Cost 283.69 173.09 853.96

e) Depreciation 217.04 173.64 749.79

f) Power, Fuel & Water 558.42 467.10 1,953.38

g) Other expenditure 951.84 730.81 3,260.71

Total Expenditure 4,689.94 3,663.90 18,957.24

Profit from Operations before Other Income, Interest &
3 1,280.31 937.21 5,725.21
Exceptional Items
4 Other Income 691.49 378.33 1,703.55
5 Profit before Interest & Exceptional Items 1,971.80 1,315.54 7,428.76
6 Interest & Finance Charges @ 140.85 161.19 489.78
7 Profit after Interest but before Exceptional Items 1,830.95 1,154.35 6,938.98
8 Exceptional expenses - - 296.96
Profit from Ordinary Activities before tax after Exceptional
9 1,830.95 1,154.35 6,642.02
Items
10 Tax expenses including Current & Deferred 368.46 230.48 1,232.97
11 Net Profit from Ordinary activities after Tax 1,462.49 923.87 5,409.05
12 Extraordinary Items (net of tax) - - -
13 Net Profit for the period after Exceptional Items 1,462.49 923.87 5,409.05
14 Minority Interest 375.58 321.93 1,724.08
15 Consolidated share in the Profit/(Loss) of Associate (78.48) 70.72 58.77
Net Profit after tax attributable to Consolidated Group after
16 1,008.43 672.66 3,743.74
Exceptional Items
Paid-up equity share capital (Face value of Re. 1 each)
17 (Corresponding quarter and previous year Rs. 2 per share) 336.12 141.70 168.08
(refer Note 3)
Reserves excluding Revaluation Reserves (As per previous
18 36,843.92
year's Balance Sheet)
19 Earnings Per Share (Rs.) (Not annualised)* (refer Note 3)

-Basic EPS 3.00 * 2.37 * 11.70

-Diluted EPS 2.83 * 2.37 * 11.46

Public Shareholding (Excluding shares against which ADRs
20
are issued)
Number of Shares 1,103,272,266 204,514,699 277,785,648

Percentage of Shareholding 32.82% 28.87% 33.05%

Promoters & promoter group Shareholding (Excluding shares
21
against which ADRs are issued)
(a) Pledged/Encumbered - Number of Shares - - -
- Percentage of shares - - -
(as a % of the total shareholding of promoter and promoter
group)
(b) Non-encumbered

- Number of Shares 1,774,568,852 437,177,498 437,622,694

- Percentage of shares 100.00% 100.00% 100.00%

(as a % of the total shareholding of promoter and promoter
group)
- Percentage of shares 52.80% 61.71% 52.07%

(as a % of the total share capital of the Company)

# Comprises (net) of exchange (gain)/loss - Rs. 81.34 crore in Q1 FY 2011, Rs. (6.85) crore in Q1 FY 2010 & Rs.
(295.06) crore in FY 2009-10.
@ Comprises (net) of exchange loss - Rs. 68.98 crore in Q1 FY 2011, Rs. 89.97crore in Q1 FY 2010 & Rs.153.81
crore in FY 2009-10.

31
 STERLITE INDUSTRIES (INDIA) LIMITED
Regd. Office: SIPCOT Industrial Complex, Madurai Bye Pass Road, TV Pooram P.O., Tuticorin. Tamilnadu-
628002
AUDITED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 31ST MARCH 2010
(Rs.in crore except as stated)
Previous
Accounting
Quarter ended Quarter ended accounting
S. Year ended
Particulars 31.03.2010 31.03.2009 Year ended
No. 31.03.2010
(Unaudited) (Unaudited) 31.03.2009
(Audited)
(Audited)
1 a) Net Sales/Income from Operations 7,110.80 4,336.13 24,410.33 21,144.22
b) Other Operating Income 116.99 69.91 272.12 304.18

Total Income 7,227.79 4,406.04 24,682.45 21,448.40

2 Expenditure
a) (Increase)/decrease in stock in trade and work in
409.31 (51.25) (198.16) 280.21
progress
b) Consumption of raw materials# 3,063.90 2,222.98 12,273.56 10,278.42

c) Purchases of traded goods - 47.20 93.22 75.70

d) Employees Cost 235.33 179.13 853.96 756.08

e) Depreciation 224.55 203.17 749.79 700.67

f) Power, Fuel & Water 492.84 474.90 1,953.38 2,131.83

g) Other expenditure 840.93 693.92 3,362.60 2,917.85

Total Expenditure 5,266.86 3,770.05 19,088.35 17,140.76

Profit from Operations before Other Income,
3 1,960.93 635.99 5,594.10 4,307.64
Interest & Exceptional Items
4 Other Income 548.63 393.96 1,687.23 1,850.08
5 Profit before Interest & Exceptional Items 2,509.56 1,029.95 7,281.33 6,157.72
6 Interest & Finance Charges 120.61 131.17 342.35 397.28
7 Profit after Interest but before Exceptional Items 2,388.95 898.78 6,938.98 5,760.44
8 Exceptional expenses/(income) - (79.85) 296.96 (55.31)
Profit from Ordinary Activities before tax after
9 2,388.95 978.63 6,642.02 5,815.75
Exceptional Items
10 Tax expenses including Current & Deferred 452.82 66.42 1,232.97 855.03
11 Net Profit from Ordinary activities after Tax 1,936.13 912.21 5,409.05 4,960.72
12 Extraordinary Items (net of tax) - - - -
13 Net Profit for the period after Exceptional Items 1,936.13 912.21 5,409.05 4,960.72
14 Minority Interest 554.12 205.72 1,724.08 1,267.14
15 Consolidated share in the Profit/(Loss) of Associate (1.11) (108.24) 58.77 (153.59)
Net Profit after tax attributable to Consolidated
16 1,380.90 598.25 3,743.74 3,539.99
Group after Exceptional Items
17 Paid-up equity share capital (Face value of Rs. 2 each) 168.08 141.70 168.08 141.70
18 Reserves excluding Revaluation Reserves 36,843.92 25,471.69

19 Earning Per Share (EPS) (Rs.) (Not Annualised)*

-Basic EPS 16.43 * 8.44 * 46.79 49.96

-Diluted EPS 15.34 * 8.44 * 45.84 49.96

Public Shareholding (Excluding shares against which ADRs
20
are issued)
Number of Shares 277,785,648 199,278,574 277,785,648 199,278,574

Percentage of Shareholding 33.05% 28.13% 33.05% 28.13%

Promoters & promoter group Shareholding (Excluding
21
shares against which ADRs are issued)
(a) Pledged/Encumbered

- Number of Shares - - - -
- Percentage of shares (as a % of the total shareholding
of promoter and promoter group) - - - -
(b) Non-encumbered

- Number of Shares 437,622,694 433,537,358 437,622,694 433,537,358

- Percentage of shares 100.00% 100.00% 100.00% 100.00%

(as a % of the total shareholding of promoter and
promoter group)
- Percentage of shares 52.07% 61.19% 52.07% 61.19%

(as a % of the total share capital of the Company)

# Comprises (net) of exchange (gain)/loss - Rs. (79.84) crore in Q4 FY 2010, Rs. 84.66 crore in Q4 FY 2009, Rs. (265.84) crore in FY 2009-
10 & Rs. 567.84 crore in FY 2008-09.

32