Indian steel sector is witnessing widespread financial distress with several companies, reporting net losses for the year ended 2017. Many companies are on the verge of bankruptcy. This has also put the bankers under tremendous pressure of bad loans (both existing and impending).Such a state of affairs calls for an urgent examination of factors which signal distress. Identification of early warning signal can help the stakeholders adopt timely pre-emptive measures to minimise losses. Working capital management is a critical factor affecting the profitability of companies. This paper is an attempt to compare working capital management between distressed and non-distressed companies in Indian steel sector. The objective is to identify important ratios that can discriminate a distressed company from a non-distressed one using Multivariate Discriminant Analysis. It is observed that Debtors Turnover ratio, Current ratio and Quick ratio are significant discriminators.
