COMPARATIVE EFFICIENCY OF WORKING CAPITAL MANAGEMENT IN THE INDIAN STEEL SECTOR: AN EMPIRICAL STUDY OF TATA STEEL LTD. AND STEEL AUTHORITY OF INDIA LTD.

Abstract

Working Capital Management (WCM) continues to be one of the most critical determinants of liquidity, profitability, and operational survival in capital-intensive industries. In India, the iron & steel sector forms the backbone of national infrastructure, heavy engineering, automotive production and export economy, and hence its liquidity cycle efficiency holds macro-economic relevance. However, inefficiencies in inventory conversion, slow receivable cycles, and disproportionate working capital blockage remain structural challenges—especially in public sector–owned steel corporations. This research empirically evaluates the comparative efficiency of WCM between Tata Steel Ltd. (private sector) and Steel Authority of India Ltd. (SAIL) (public sector) over an eleven-year period 2012–13 to 2022–23, using liquidity metrics, turnover ratios and Cash Conversion Cycle (CCC). A combination of descriptive analysis, CV-based volatility measures, correlation matrices, Ordinary Least Squares regression, ANOVA, Chi-Square association, and Motaal liquidity scoring was employed to statistically assess whether WCM significantly influences profitability. Results confirm that Tata Steel maintains a substantially shorter CCC (63 days) than SAIL (94 days) alongside faster inventory and debtor rotation, yielding superior ROA, ROE and NPM. Regression confirms CCC and Inventory Turnover as significant predictors of profitability, while ANOVA denotes strong inter-firm differences (p=0.019). The paper concludes that superior working capital speed—not merely liquidity availability—drives profitability in steel. However, sustainable optimization requires integration of digital inventory forecasting, ERP-based receivable controls, & PSU working-capital autonomy reforms.