14537439 Iron and Steel 2009 Industry Analytics
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Transcript of 14537439 Iron and Steel 2009 Industry Analytics
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Presented by:
(Group 8)Arpita Bahadur
Gaurav Kumar
Manish Gupta
Pavan Ghargi
Ranjini Ballal
Vani Vyas
Analysis of Indian Iron andSteel Industry
Analysis of Indian Iron andSteel Industry
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Acknowledgement
We are extremely thankful to our faculty Dr. R. Venkatamuni
Reddy and Dr. Gervasio S. F. L. Mendes, Alliance Business
School, who have guided us throughout the project on
analyzing the Indian Iron and Steel Industry and helped us
in all possible ways to successfully complete it.
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Table of Contents
Table of Contents...................................................................................................3
1Introduction......................................................................................................... 3
1.1Varieties of Steel...............................................................................................5
1.2Production Technology ....................................................................................6
1.3Components of the cost of production..............................................................7
2The Global Steel Industry.....................................................................................9
3The Structure of Indian Steel Industry...............................................................10
3.1Factors that attribute to the Revival of the Indian Steel Industry...................11
3.2Consumption of Steel in India.........................................................................16
3.2.1Top Five Companies.....................................................................................16
3.2.2Bottom Five Companies..............................................................................25
4Quantitative Analysis.........................................................................................32
4.1Ratio Analysis................................................................................................. 32
5Qualitative Analysis........................................................................................... 47
5.1Understanding the Steel industry using Michael Porters Five Forces Model. .47
5.2The SWOT Analysis.........................................................................................51
5.3Strategic Restructuring A Comparative Analysis........................................57
5.3.1Impediments to expansion...........................................................................57
6Current Global Scenario.....................................................................................63
6.1Current crisis in Iron and Steel Industry..........................................................63
7Suggestions....................................................................................................... 66
8Future Outlook...................................................................................................67
9Business Innovation: Steel Retailing..................................................................70
9.1Vision steel junction......................................................................................71
9.2Lessons from Nucor Steel...............................................................................71
10Identifying Key Success Factors.......................................................................73
11Conclusion....................................................................................................... 74
12References.......................................................................................................75
1 Introduction
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Iron is one of the oldest inventions in the world with its first usage
reportedly dating back to 4000 BC. Steel is crucial to the development of
any modern economy and is considered to be the backbone of the human
civilization. Today Steel (the carbon alloy of Iron) finds application in
every imaginable facet of our life. The global steel industry has been
witnessing many interesting events that have influenced market dynamics
in the last ten years.
Steel is an alloy consisting mostly of iron, with a carbon content between
0.2% and 2.14% by weight, depending on grade. Carbon is the most cost-effective alloying material for iron, but various other alloying elements are
used such as manganese, chromium, vanadium, and tungsten. Carbon
and other elements act as a hardening agent, preventing dislocations in
the iron atom crystal lattice from sliding past one another. Varying the
amount of alloying elements and form of their presence in the steel
(solute elements, precipitated phase) controls qualities such as the
hardness, ductility, and tensile strength of the resulting steel. Steel withincreased carbon content can be made harder and stronger than iron, but
is also more brittle. The maximum solubility of carbon in iron (as
austenite) is 2.14% by weight, occurring at 1149 C; higher
concentrations of carbon or lower temperatures will produce cementite.
Alloys with higher carbon content than this are known as cast iron
because of their lower melting point and castability. Steel is also to be
distinguished from wrought iron containing only a very small amount ofother elements, but containing 13% by weight of slag in the form of
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particles elongated in one direction, giving the iron a characteristic grain.
It is more rust-resistant than steel and welds more easily. It is common
today to talk about 'the iron and steel industry' as if it were a single entity,
but historically they were separate products.
Though steel had been produced by various inefficient methods long
before the Renaissance, its use became more common after more
efficient production methods were devised in the 17th century. With the
invention of the Bessemer process in the mid-19th century, steel became
a relatively inexpensive mass-produced good. Further refinements in the
process, such as basic oxygen steelmaking, further lowered the cost of
production while increasing the quality of the metal. Today, steel is one of
the most common materials in the world and is a major component in
buildings, infrastructure, tools, ships, automobiles, machines, and
appliances. Modern steel is generally identified by various grades of steel
defined by various standards organizations.
1.1 Varieties of Steel
There are more than 3500 grades of steel available today; with about 75%
of these developed in the last twenty years. Finished steel products can
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be broadly classified into flats and longs. Longs are used in construction,
infrastructure and heavy engineering. Flats are mainly used in making
automobiles, commercial vehicles and consumer durables. Hot rolled (HR)
steel and Bar & Rods are the most popular varieties of steel produced inIndia. HR coil and sheets are used in making cold rolled products, pipes
and tubes, automobile components, electronic equipment like fridges and
for construction purposes. Currently HR Coils and Sheets account for
about 26% of the total domestic production and its share has been
gradually rising over time. Bars and rods are typically used more
extensively in the construction and engineering sectors.
1.2 Production Technology
Some of the technological options for converting iron ore to steel products
is schematically shown below. Hot metal and crude steel process are also
interlinked among themselves as represented by arrows.
Source: www.sail.com
Below mentioned are few methods of producing steel:
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Blast Furnace (BF)/ Blast Oxygen Furnace (BOF) route is the most
popular way of producing steel, accounting for nearly 57% of total
production. The BF/BOF route is good for volume production, but
involves huge capital costs.
The Electric Air Furnace (EAF) is rapidly gaining popularity globally
and uses sponge iron/scrap and coke to produce steel. EAF route is
flexible to produce different grades of steel. However, EAF growth is
constrained by power and scrap supply constraints in India.
COREX, a new modern smelting technology has been recently
introduced in India. It does not require coke in producing steel and
therefore could become popular with Indian steel majors in time to
come.
1.3 Components of the cost of production
Any sustained rise in input prices usually lead to an increase in product
prices through the cascading effect. The major components of the costs of
production of finished steel are:
Raw materials - Raw material costs forms roughly about 62% of the
total cost of production. This only emphasizes on how important sharp
movements in raw material prices mean for the steel industry. The
basic raw materials that are used in producing steel are iron ore, coal
and limestone. India is fortunate to be endowed with one of the largest
iron ore deposits in the world. Limestone is also available in sufficient
quantities and as such do not pose much of a problem. India alsopossesses one of the biggest coal deposits (approximately 197 bn
tonnes) in the world. However, Indian coal is mostly unfit for coke
production because of its high ash content of 25-40%. Coal fit for coke
production comprises less than 15% of total reserves. As such, Indian
steel giants have to resort to importing coking coal from foreign
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countries. .
Power costs - The steel industry is an energy intensive industry with
power and fuel contributing as much as 10.1% of total productioncosts. It has been estimated that the global steel industry account for
nearly 4% of the total energy consumption in the world. Most steel
majors like SAIL, TSL and JSW have captive power plants but smaller
players have to depend on outside supply. As such, erratic supply
forms a major obstacle for growth of these producers.
Interest payments - Steel is a capital-intensive industry and as such
many companies resort to outside borrowings, mostly in form of long-
term loans. Interest payments always used to form on average
between 7 9% of the total costs but have recently come down to as
low as 3.2%. Interest coverage ratio has also shot up to nearly 10 after
hovering above the zero levels for a number of years. Also, it is
important to note that the recent good turn in the sector has enabled
many companies to pay off their long-term debts early and, in general
interest payments have come down industry-wide.
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Taxes and duties - Excise duties, sales tax, other direct and indirect
taxes further push up costs in the steel sector. Total taxes contribute
more than 16% of total costs. Here, the government can play an active
role and provide structured concessions for new and old capacities.
Other expenses - Wage bills, depreciation costs and distribution
expenses are among the other major cost components
2 The Global Steel Industry
Following the collapse of Soviet Union, the low cost steel makers in the
region have been targeting the global steel market pie, creating a price
imbalances as the cost of production of steel varies drastically across
countries The 90s were crucial for Indian steel industry too. The
controlled environment has changed drastically, in the post-liberalization
scenario. The sector was opened up to the entry of private players, while
quantitative restrictions on foreign trade have been removed. The last ten
years has also seen inefficient steel mills with outdated technology
perishing, while new capacities that possess latest technology expertise
have come up.
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Source: International iron & steel institute
3 The Structure of Indian Steel Industry
India is 5th largest producer of steel with total production of 53.08 MT in
2007. The Indian steel industry can be divided into two distinct producer
groups; Integrated steel producers (ISP) with over 1 MT of capacity and
smaller stand-alone steel plants that include producers and processors ofsteel. The ISPs include the like of SAIL, Tata Steel, JSW Steel, and Ispat
Industries. They account for most of the mild steel production in the
country and produce most of the flat steel products including Hot Rolled,
Cold Rolled and Galvanised steel. The smaller stand-alone steel plants
account for a majority of long products being produced in the country.
The potential demand for steel in India is vast with the per capita steel
consumption. The level of per capita consumption of steel is treated asone of the important indicators of socio-economic development and living
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standard of the people in any country. It is a product of large and
technologically complex industry having strong forward and backward
linkages in terms of material flow and income generation. All major
industrial economies are characterized by the existence of a strong steelindustry and the growth of many of these economies has been largely
shaped by the strength of their steel industries in their initial stages of
development. This offers a huge potential to steel manufacturers, both
domestic and global.
In line with the global trend, the Indian steel industry has been passing
through tough conditions. The prices are trailing at rock-bottom levels due
to over capacity. The report gives a comprehensive analysis of the Indian
steel industry. It extensively covers structure of Indian steel industry, with
details on production, consumption, imports and exports. The report deals
with reasons for the over capacity situation prevailing in India and the
demand/price trends for various steel products in India. The report gives a
crisp analysis on the strategies and latest financial performance of the
leading players in India.
3.1 Factors that attribute to the Revival of the
Indian Steel Industry
The factors for revival of Indian steel industry are buoyant global steel
consumption, buoyant local steel consumption, lower cost of production
and adequate rise in price against hike in input costs. Apart from this,
backward integration, consolidation and branded product sales, marketing
alliances, etc., have led to the revival of the Indian steel industry.
Backward Integration
Coking coal, iron ore and scrap shortage are responsible for the increased
cost of production, coupled with low average prices of Rs.17,000-
Rs.18,000 TPA in the past. Integrated players with their own captive mines
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for iron ore and coal will find it an advantage as they will be shielded from
the fluctuating prices of raw materials.
De-integration of Process/Consolidation
Consolidation within the industry is the need of the hour as it might
generate benefits of economies of scale and improve labor productivity.
Also, a set-up of semi-finished capacities near the place of availability of
raw materials and capacities for finished products near the place of
consumption will act as a major booster for the players within the industry
due to the savings in freight cost.
Branded Products
Increased focus on branded products could allow the producers to charge
a premium for their products and improve their average per tonne
realizations.
Also, increased focus on value-added products will help improve revenues
for companies as cold rolled coils, galvanized steel and color coated steel
enjoy better per tonne realizations than HR coils.
Long Contracts/Marketing Alliance
Players within the industry enter into long contracts for their finished
products with automobile original equipment manufacturers. This will
mitigate demand risks, ensure high product off-take and better capacity
utilization.
Government Initiatives
Increased infrastructure spending by the Government of India and
development of roads could generate significant savings in freight and
transportation cost, making Indian steel companies and other industries
globally competitive.
Impact of Liberalization
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The economic reforms initiated by the government in 1991 have added
new dimensions to the industrial growth in general, and steel industry in
particular. Some of the important features due to liberalization are:
Licensing requirement for capacity creation has been abolished.
Steel industry has been removed from the list of industries reserved for
the state sector.
Automatic approval granted for foreign equity investment in steel has
been increased up to 74% [Government of India 1999].
Price and distribution controls were removed from January 1992[Report to the Ministry of Industry, Science and Tourism 1997].
Restrictions on external trade, both in import and export, have been
removed.
Import tariff reduced from 105% in 1992/93, to 30% in 1996-97.
[Report to the Ministry of Industry, Science and Tourism 1997]
Other policy measures like convertibility of rupee on trade account,
permission to mobilize resources from overseas financial markets, and
rationalization of existing tax structure.
There was expansion of the steel sector after the economic reforms. The
new entrants as well as the existing manufacturers went for technical tie-
ups with leading steel producers of the world [Nakra 1996]
Cost Competitiveness of Indian Steel Industry
The cost competitiveness of Indian steel industry can be seen in Table 5.
The cost of major raw materials like iron ore, coking coal, and other raw
materials is less in India among the countries mentioned. The labor cost is
low, but it is neutralized by its low level of productivity.
The financial cost and the cost of power, oil and some other materials are
high. Energy accounts for about 35 - 40% of the cost of steel production in
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India, whereas it is about 28% in the developed countries. All these make
the pre-tax cost of steelmaking in India higher than that of South Korea,
Australia, Mexico, and CIS countries. Considering the low wage rate and
other economic factors, the labor cost in India makes up around 15% ofthe cost of the steel as compared to around 30% in developed countries
like Japan and United States. In spite of these advantages, Indian firms
could not become cost-effective.
Source: Iron and Steel Review (1998)
Current Investments
A host of steel companies forecasted expanding consumer market and
likelihood of receiving huge domestic and foreign investments. Therefore
they invested as follows:
Bhushan Steel plans to invest US$ 5.72 billion for building 12 million
tonne-capacity in the states of West Bengal, Jharkhand and Orissa.
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Non-ferrous metals giant, Vedanta Resources, plans to invest
around US$ 4.79 billion in a 5 million tonne steel plant in Keonjhar
district of Orissa and envisages its commissioning by 201213.
Tata Steel is also planning to build a 5 million tonne plant in
Chhattisgarh with an investment of around US$ 3.59 billion. The
steel major is setting up greenfield projects in Jharkhand, Orissa and
Chhatisgarh. While in Jharkhand it is likely to invest about US$ 8.38
billion for a 12 million tonne integrated steel plant, in Orissa it plans
to pour in almost US$ 4.39 billion for a six million tonne capacity
plant.
Mesco Steel plans to invest US$ 2.20 billion for expansion of two of
its steel plants in Orissa.
Reliance Infrastructure, (part of the Reliance Anil Dhirubhai Ambani
Group) plans to build a 12-million tonne steel plant in Jharkhand,
which is likely to be completed by 2012.
Indian Railways plans to invest around US$ 437.25 million per
annum to raise its consumption of stainless steel for adding new
alloy-made wagons and coaches to its portfolio.
Welspun Gujarat Stahl Rohren, (one of the largest steel pipe makers
in India), plans to increase the capacity of its pipe plant by 75 per
cent to 1.75 million tonnes with an investment of US$ 222.52
million.
The JSW group plans an outlay of US$ 40 billion for steel and power
projects. These projects will be completed by 2020.
Visa Steel has lined up a US$ 1.51 billion US$ 2.02 billion
integrated steel project in Chhattisgarh.
Sarralle India, a subsidiary of Sarralle Equipos of Spain and one of
the largest designers of steel plant equipment, has decided to set
up a manufacturing base in Uluberia in West Bengal.
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Interarch Building Products Private, (the largest player in pre-
engineered steel buildings space) plans to set up its greenfield
manufacturing facility in Gujarat by 200910.
Furthermore, the Confederation of Indian Industry (CII) plans to start six
new small and medium enterprises clusters for steel companies in
Visakhapatnam. It will also set up a steel task force to propel growth in
the steel clusters.
3.2 Consumption of Steel in IndiaThe companies covered in the report include
TOP FIVE COMPANIES
1. Steel Authority of
India Ltd
2. Tata Iron and Steel
Company Ltd
3. Jindal Iron and Steel
Company Ltd
4. Essar steel
5. Ispat Industries Ltd
BOTTOM FIVE
COMPANIES
1. Sunflag Iron and
Steel Industry
2. Shah Alloys Ltd
3. MUSCO
4. Surya Roshni
5. Usha Martin
3.2.1 Top Five Companies
1. Steel Authority of India Ltd
The Ministry of Steel and Mines drafted a policy
statement to evolve a new model for managing industry.The policy statement was presented to the Parliament on
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December 2, 1972. On this basis the concept of creating a
holding company to manage inputs and outputs under one
umbrella was mooted. This led to the formation of Steel
Authority of India Ltd. The Company, incorporated onJanuary 24, 1973, was made responsible for managing five
integrated steel plants at Bhilai, Bokaro, Durgapur,
Rourkela and Burnpur, the Alloy Steel Plant and the Salem
Steel Plant.
Steel Authority of India Limited (SAIL) is the leading
steel-making company in India. SAIL is a fully integrated
iron and steel maker, producing both basic and special
steels for domestic construction, engineering, power,
railway, automotive and defence industries and for sale in
export markets. The company's plants are divided as
Integrated Steel Plants and Special Steel Plants. The
Integrated Steel Plants comprised Bhilai Steel Plant (BSP)
in Chhattisgarh, Durgapur Steel Plant (DSP) in West
Bengal, Rourkela Steel Plant (RSP) in Orissa, Bokaro Steel
Plant (BSL) in Jharkhand and IISCO Steel Plant (ISP) in
West Bengal. The Special Steel Plants includes Alloy Steels
Plants (ASP) in West Bengal, Salem Steel Plant (SSP) in
Tamil Nadu and Visvesvaraya Iron and Steel Plant (VISL) in
Karnataka, totally 8 plants. SAIL, by virtue of its Navratna'
status, enjoys significant operational and financial
autonomy.
SAIL International Ltd was incorporated to
coordinate the export and import business the year 1974.
In 1976, Durgapur Mishra Ispat Ltd., Bhilai Ispat Ltd., and
Rourkela Ispat Ltd., were formed as fully owned
subsidiaries of SAIL for taking over the running business of
Alloy Steels Plants, Bhilai steel Plant and Rourkela Steel
Plant on transfer from HSL. Two major schemes viz. new
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sinter plant III and expansion of oxygen plant II were taken
up for implementation. C.O. Battery No. 10 was
commissioned during the year 1994.
The Company bagged, 'Business world-FICCI-SEDF
Corporate Social Responsibility Award - 2006'. SAIL has
undertaken a massive modernisation and expansion plan
during the year of 2006-07 with an indicative cost of over
Rs. 40,000 crore to expand capacity of hot metal to over
25 million tonnes from current level of 14.6 million tonnes.
The company introduced several new products in the
domestic market during the year 2006-07: HCR-EQR TMT
for earthquake resistant construction, rock bolt TMT for
tunnel construction, EN series HR coils for LPG cylinders,
MC 12 HR coils for chains etc. In addition, Bhilai Steel
Plant developed high strength vanadium rails; Durgapur
Steel Plant produced S-profile loco wheels for high-speed
locos and Rourkela Steel Plant rolled special plates, which
were used, in the indigenously built rocket PSLV C-7.
As on January 2008, India's two biggest steel
makers, public sector Steel Authority of India Ltd (SAIL)
and private sector Tata Steel Ltd, have formed a joint
venture company (JVC) to mine coal blocks for securing
assured coking coal supply to meet their increasing
production needs. As on June 2008, SAIL made a joint
venture with Shipping Corporation of India may own a few
bulk carriers to have continuous availability of vessels.
The Company is setting up three steel processing units
(SPU) in Madhya Pradesh for manufacturing various types
of steel items used by the construction industry.
The company's Corporate Plan, 2012 (CP12) was
formulated in 2004 for 4 integrated steel plants forincrease in Hot Metal production to 20 Mt by 2012. After
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merger of in IISCO Feb 06, the Hot Metal production Plan
was revised to 22.5 Mt by 2012. Expansion of Special
Steel Plants was also included. Hon'ble Minister of Steel
reviewed the Corporate Plan 2012 in Jul'2006, wherein itwas decided to take up the Expansion of Integrated Steel
Plants and Special Steel Plant in one go based on
Composite Project Feasibility Report (CPFR).
2. Tata Steel Ltd
Tata Steel is the world's 6th largest steel company.
It is a Asia's 1st and as well as India's largest integrated
steel company in private sector with operations in 24
countries and commercial presence in over 50 countries.
The company's history is a century old, the origins and
ascent of Tata Steel, which has culminated into the
century long history of an industrial empire, emerge from
the illustrious efforts of India's original iron man and the
remarkable people who thereafter, have kept the fire
burning. Tata Steel was founded by Jamsetji Nusserwanji
Tata in the year 1907 as Tata Iron and Steel Company
(TISCO) and later its renamed to Tata Steel Limited. It is
an ISO-14001 and also SA 8000 certified company, is this
reflected in company's pro-active measures to ensure
optimum utilization of natural resources and work
conditions.
Golden Jubilee of the company was celebrated in the
year 1958 and Jubilee Park was given as a gift to the
citizens of Jamshedpur. For symbol of self-reliance, Tata
Steel Growth Shop which was introduced in 1968. Tata
Steel introduced BOF steelmaking during the year 1984,
which could produce liquid steel in forty five minutes
when it took the old open hearth furnaces, close to fivehundred under the first phase of modernisation.
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The company received the Award for Best-
Integrated Steel Plant in 1994-95. The company also
received the Prime Minister's Trophy for the Best
Integrated Steel Plant for the year 1994-95. This awardwas subsequently conferred again in 1998-99, 1999-2000,
2000-01 and 2001-02. The World Steel Dynamics
recognised Tata Steel as India's only 'world-class steel
makers' thrice in a row.
As on January 2008, Tata Steel Limited and the
members of the Al Bahja Group, a leading business house
of Oman have entered into a Joint Venture Agreement for
the development of the Uyun Limestone deposits at
Salalah in the Sultanate of Oman .
3. JSW Steel Ltd
India's second largest private sector steel maker
JSW Steel Limited (JSWSL) was originally incorporated as
Jindal Vijayanagar Steel Limited on March 15, 1994.
Product portfolio of the company includes Hot Rolled
Product, Cold Rolled Product, Galvanised Product, Pre-
painted Galvanised Product and Jindal Vishwas. JSWSL
consists of the most modern, eco-friendly steel plants with
the latest technologies for both upstream & downstream
processes. The Company's four plants are situated in
Vijayanagar, Vasind, Tarapur and Salem. JSW Steel Ltd.
has received all the three certificates of ISO: 9001 for
Quality Management System, ISO: 14001 for Environment
Management System and OHSAS: 18001 for Occupational
Health & Safety Management System.
During the incorporated year itself, the MOU wasmade with KSIIDC to be provided with grid support,
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approvals for construction of railway siding etc and also
the company entered into a technical arrangement with
Voest Alpine Industrieanlagenbau (VAI), for technical
details with respect to productivity, iron ore technicaldetails etc.
CII-EXIM Bank Award was handed over to the
company, 'Commendation Certificate for Significant
Achievement' towards Business Excellence during the
year 2005 and in the same year the Prime Minister
National Award also bagged by the company for
Excellence in Urban Planning & Design for Township.
National Sustainability Award was conferred to the
company in the year 2006, Second Prize amongst the
Integrated Steel Plants Category by Indian Institute of
Metals. During January 2007, JSW Steel has executed a
Development Agreement with The Government of West
Bengal, West Bengal Industrial Development Corporation
Limited (WBIDC) West Bengal Mineral Development and
Trading Corporation Limited (WBMDTC) for setting up a 10
MTPA steel plant in suitable phases. JSW steel has
inaugurated two exclusive JSW Shoppe in Hubli, Karnataka
on December 4, 2007, At JSW Shoppe, end consumer will
also know about different application of different steel
products being manufactured by M/s JSW Steel through
actual components and pictures from Automobile, White
Goods Sectors, and Construction. During the period of
2007-08, JSWSL received Gold Award in Metal and Mining
Sector for Outstanding Achievement in Safety
Management by Greentech Foundation.
As on June 2008, JSW Steel stated that, it will set up
a green field plant in Georgia (Europe) in partnership witha UK-based company to produce rebars, the project will
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see an investment of $42 million by way of equity and
debt, where 49 per cent of equity will be held by JSW
while the balance will be held by Geo Steel LLC of the UK.
Both companies will invest $7 million towards directequity while the remaining amount will be raised by way
of debt. JSWSL inaugurated JSW Shoppe, an exclusive
steel retail outlet in Ahmedabad IN June 2008 and planed
to setup 200 exclusive JSW Shoppes across the length and
breadth of the country by 2010. Also it will invest around
Rs 550 crore in its Chilean mining concessions to ensure
50 per cent iron ore security by June 2009, up from 30 per
cent now. The Company plans to emerge as 32 million
tonnes per year capacity steel major by 2020.
4. Essar Steel Ltd
Promoted by the Bombay-based Essar group
controlled by the Ruias, Essar Steel initially commenced
operations of specialised construction in Jun.'76 as Essar
Constructions. Its name was changed to Essar Offshore &
Explorations in May '87 and later to Essar Gujarat in
Aug.'87. It became Essar Steel in 1995. The company is a
integrated producer with end-to-end control of all
operations related to steel making.
Its energy division was operating the largest fleet of
rigs in the private sector. In 1987-88, it diversified intosponge iron and set up a 8,80,000 tpa gas-based plant at
Hazira, Gujarat. The plant incorporating technology
innovated by Midrex Corporation, US, commenced
production in Aug.'90 with two 4,40,000 tpa modules. The
plant commenced production in Sep.'95. Later the
company transferred its energy and offshore divisions to
Essar Oil.
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The company has become the country's first
integrated steel plant to receive both ISO 9002 and TUV
certifications. During 1998-99, Essar Minerals Ltd
presently Hy-Grade Pellets Ltd (HGPL) has become whollyowned subsidiary of the company.
The Company has planned to increase the capacity to
4.6 Million MTPA in next 2 years. The company has
planned to increase the pellet making capacity at
Visakhapatnam from 4 to 8 Million tonnes in the current
year. The company has initiated production and sales of
HR Pickled and Oiled, Cold Rolled and Galvanised
Products. Further the company has launched shot blasted
and primer coated plates for shipbuilding and general
engineering applications.
The company has increased its installed capacity of
Hot Briquette Iron Plant by 1400000 MT during 2004-05
and with this expansion the total installed capacity of Hot
Briquette Iron Plant has increased to 3400000 MT.
5. Ispat Industries Ltd
Ispat Industries Limited (IIL) is one of the leading
integrated steel makers and the largest private sector
producer of hot rolled coils in India. It was incorporated inthe year 1984 by founding chairman M. L. Mittal, a
corporate powerhouse with operations in iron, steel,
mining, energy and infrastructure. The company's core
competency is the production of high quality steel, for
which it employs cutting edge technologies and stringent
quality standards. It produces world-class sponge iron,
galvanised sheets and cold rolled coils, in addition to hotrolled coils, through its two state-of-the art integrated
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steel plants, located at Dolvi and Kalmeshwar in the state
of Maharashtra.
To better provide steel solutions to an increasingly
sophisticated marketplace, IIL had sets up a highly
advanced cold rolling reversing mill during the year 1988,
in collaboration with Hitachi of Japan, to manufacture a
wide range of cold rolled carbon steel strips. In the same
year, the company installed a colour coating line, the first
of its kind in India for the manufacture of pre-painted
colour steel sheets. During the year 1994, Business
interests within the Ispat Group are demarcated. The
eldest son, Mr. L N Mittal continues to manage the
international operations while Mr. Pramod Mittal and Mr.
Vinod Mittal, the younger brothers focused on steel and
other businesses in India. In the identical year 1994, it
commissioned the world's largest gas-based single mega
module plant for manufacturing direct reduced iron
(sponge iron), at its Maharashtra-based Dolvi plant. Within
three months, the plant exceeds its capacity of 1 million
tonnes per annum (MTPA) of high quality DRI. The
company came out with a Euro-issue of 125-mln fully
convertible bonds in 1994 to part-finance the expansion of
its hot strip mill (HSM) capacity to 2.50 lac TPA.
The Company aims to consolidate its market
leadership in the national specialty steel market by
capitalising on the proximity of its manufacturing facilities
to major consumers of flat steel products in Maharashtra,
while increasing its presence in international markets by
using its convenient port location. In the short span of
time since its inception, Ispat Industries has steadily
raised the bar - in terms of its relentless pursuit of
technological advancement, unwavering focus on
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innovation, strident emphasis on quality products and its
constant initiatives aimed at ensuring customer
satisfaction.
3.2.2 Bottom Five Companies
1. Sunflag Iron & Steel Company Ltd
Sunflag Iron and Steel Company ltd is a prestigious
unit of Sunflag group was promoted by Sunflag UK. TheSunflag Group was founded by Satyadev Bhardwaj in
Kenya in 1937. The Company incorporated in 1984 is
engaged in the manufacture of Steel products like Rolled
products, Billets, Sponge Iron etc., with a present capacity
of 150000 MT of Direct reduced Iron, 200000 MT of Mild &
Alloy Steel Rolled Products and with captive power plant
capacity of 108 million Kwh.
The company has set up a state of art integrated
plant at Bhandara, India to produce 200000 tonnes per
annum of high quality steel using ironore and non-coking
coal as basic inputs. The products are spring steel rounds
flats, carbon steel and alloy steel. They are used by
automobile leaf spring manufacturers, engineering goods
manufacturers and the forgings industry Spring steel
forms 70% of the total production.
The plant comprises a 1,50,000 tonnes per annum
Direct Reduction Plant, to produce sponge iron for captive
consumption in the Steel Melting Shop. This shop
comprises a 50/60 tonnes ultra high power Electric Are
Furnace with Eccentric bottom arrangement; a Ladle auto
mould level controller and electromagnetic stirrer. The
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billets produced at the steel melting shop are rolled at the
Mannesmann Demag Designed ultra modern 18 stand
Continous mill.This mill has a walking hearth reheating
furnace, quick roll-changing facilities, a 65 metres longwalk and wait type modern cooling bed and above all
computerised process control linking and controlling the
various stages.
The company came out with a rights issue in Feb 92
to part-finance the capital cost of a 15.5-MW wast heat
recovery project to gain full use of waste gases and coal
ash/fires generated in the process of making Sponge Iron.
Installation of a new Captive Power Plant of 10 MW is
under progress. The company has also started
manufacturing high value stainless steel for which
tremendous growth of domestic and international market
is expected.
2. Shah Alloys Ltd
Incorporated in Nov.'90, Shah Alloys went public in
1992. It was promoted by Rajendrabhai V Shah and
Rajiniben R Shah. The company is engaged in the
manufacture of mild steel, stainless steel, C T D bars, S S
flats and pattas, and cold-rolled sheets.
The company came out with a public issue in
Dec.'92 to part-finance an expansion scheme, and to meet
long-term working capital requirements. The company has
embarked on a Rs 6.53-cr project to manufacture stainless
steel and other alloy products, financed by GIIC. It has put
up a hot plate rolling mill at a cost of Rs 36.75 cr. The
company received the Dhatu Nayak Award for bestperformance in the stainless steel industry.
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During 1998-99, the Company implemented the
project of captive power plant having capacity of 20 MW.
The project was financed through term loans and internal
cash accruals. In 2000-01 the company has successfullycommissioned India's first 1800mm width Stainless Steel
Slab Caster. The project of H R /S S Sheet /Coil was
commissioned as per schedule. This project was financed
through internal accruals and also by term loans from
financial institutions/bankers. The company's going on
diversification project of manufacturing of HR/SS
Sheet/Coil was successfully implemented during 2001-02.
During 2001-02 Shah Steel & Industrial Gases
Limited was amalgamated with the company and
accordingly 20 equity shares of Shah alloys were issued
and allotted to Shah Steel & Industrial Gases Ltd pursuant
to the scheme which provided for the company to issue
shares in the ratio of one Equity Shares of the company
for every 35 equity shares of Shah Steel & Industrial
Gases Ltd.
3. Mahindra Ugine Steel Company Ltd
Incorporated in Dec.'62, Mahindra Ugine Steel
(MUSCO) commenced business in May '63. It was
promoted by Mahindra & Mahindra with 49% stake, along
with Ugine Aciers, France; and International FinanceCorporation, Washington.
The company manufactures tool, alloy and special
steels. It has modernised and expanded its capacity to
1,05,000 tpa. The products of the company are either in
rolled, forged, or pealed condition; and supplied as
blooms, slabs, RCS, rounds, squares, hexagonals,
octagonals or flats. Its products are used mainly by the
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automobile and general engineering industries for
crankshafts, axles, connecting rods, gears, ball and roller
bearings, shells, valves, turbine blades, etc.
The company came out with a convertible
debenture offer in Jun.'92 to meet working capital
requirements. Console Estate & Investment Ltd, Mahindra
Infrastructural Projects Ltd, Corbel Estate & Investment
Pvt Ltd are the subsidiary of MUSCO.
It has set up a new press shop at Nasik. The plant is
presently set up in a different company Pranay Shares &
Securities Ltd which will become Musco's 99% subsidiary
in Mar. 2000 on conversion of FCDs held by Musco. This
plant has capacity of 4,500 tpa in the the first phase
which will be expanded to 10,000 tpa eventually, in line
with M&M's requirements. A new special steel grade for
Crank-Shaft application was developed and marketed by
the company.
The company issued 4,00,000-12% Cumulative
Redeemable Preference Shares of 100/-each on private
placement basis in 2000-01.The company has redeemed
4,00,000 preference shares of Rs.100/- each out of the
above proceeds. It is planning to develop Ball Bearing
grade steel for Global approval by controlling inclusions,
oxygen, titanium and calcium at extreme low levels.During 2002-03 Mahindra & Mahindra Ltd transferred its
entire shareholding consisting of 1,52,41,885 equity share
representing 49.28% to its wholly owned subsidiary viz
Mahindra Holdings & Finance Ltd.
4. Surya Roshni Ltd
Formerly known as Prakash Tubes, Surya Roshni hastwo divisions -- the steel division and the lighting division.
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The steel division, which commenced operations in 1974,
manufactures electrical resistance welded (ERW) steel
pipes and tubes, and cold-rolled formed sections and
profiles, and cold-rolled (CR) strips. The lighting division,operating since 1983, manufactures fluorescent tube
lamps (FTL), general lighting systems (GLS), glass shells
for GLS lamps, tubular glass shells, FTL filaments, GLS
filaments, and sodium and mercury vapour lamps. The
lamps are sold under the Surya brand. A backward
intergration to manufacture lead glass tubings and an
expansion of capacities of the lighting division were
undertaken in 1993.
The company recently completed a project to
manufacture halogen lamps and decorative lamps. Its
backward integration project to manufacture ribbon glass
shells, FTL tube drawing lines, GLS filaments, FTL
filaments, GLS caps and GLS chains, is under
implementation, out of which two GLS lamp groups, GLS
lamp filament and automatic FTL packing machine were
completed in 1995-96. The technologies for the above
projects are from GB Glass, UK, and Falma, Switzerland.
The projects for GLS lamps, GLS filaments, lamp caps and
electrostatic coating were also completed in 1995-96,
while those for ribbon glass shells and tube drawing
projects, will get over in 1998. All the products except
ribbon shells are totally for captive consumption.
Surya Roshni has also set up a joint venture with
Osram, under the name Osram Surya Pvt Ltd to
manufacture compact fluorescent lamps.
5. Usha Martin Ltd
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Incorporated in 1986, Usha Beltron was jointly
promoted by Usha Martin Industries and the Bihar State
Electronic Development Corporation. The company
manufactures jelly-filled cables in technical collaborationwith AEG Kabel, Germany. The company has developed
PCM system cables used to transmit digital signals. It has
developed foam-skin type cables for the first time in India.
The company also provides software application services.
Later in May 2001 the two subsidiaries viz Usha Martin
Telecom Holding and UBL Industries were merged with the
company. Subsequent to this merger, the company name
was changed to Usha Martin Ltd in May,2003.
The manufacturing operation of the company cover
Ranchi, Jamshedpur, Agra & Bangalore, also distribution
centre are spread across India, Europe, Africa & USA. The
company is among the largest telecom cables
manufacturer in India, with an annual capacity of 55 LCKM
- rising to 64 LCKM recently. The company's other
operation includes a specialised machinery division
catering to the wire, ropes and cable industry & also has a
rolling mill in Agra & division to make mechanical splicing
equipment and fitting for wire ropes in Ranchi.
Among the other industrial interest managed by the
promoters of Usha Beltron are Usha Telekom - a cellular
service company in collaboration with Telekom Malaysia.
Usha Breco - designs, manufacturer and operates
ropeways & Summit Usha Martin Finance - Joint Venture
with Sumitomo Corporation of Japan. During the year
2000, Usha Beltron demerged its software division into a
separate company - Usha Martin Infotech. The company
also acquired the wire rope business of Brunton Shaw, UK,
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a division of Carclo Plc of the UK in an all cash deal for
around Rs 8.50 cr.
The company entered into financial tie-up with
IFC,Washington and DEG,Germany for funding of new
projects at Jamdshedpur and Ranchi which are under
implementation stage. IFC has awarded loan of USD 21 Mn
and also has acquired 5264727 equity shares at a
premium of Rs.28 per share,and DEG-Deutsche
Investitions-und Entwicklungsgesellschaft mbH-
Germany,is funding the project by way of loan Euro 10 Mn
and in addition it has also invested Rs.17.64 crores
consisting 5345455 equity shares at a premium of Rs.28
per share.
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4 Quantitative Analysis
4.1 Ratio Analysis
Definitions
Asset turnover ratio-This is a measure of firms
efficiency in utilizing its assets. It indicates how many
times the assets were turnover in a period and thereby
generated sales. If assets turnover is high, the company is
managing its assets efficiently.
Inventory turnover ratio-This ratio shows the number
of times a companys inventory is turned into sales. High
inventory turnover is a sign of efficient inventory
management.
Debtor turnover ratio-The debtor turnover ratio
measures the efficacy of a firms credit and collection
policy and shows the number of times each year the
debtors and turn into cash. Higher turnover ratios shoes
that that debtors are being converted rapidly into cash
and the quality of companys portfolio of debtor is good.
Debt equity ratio-The debt to equity ratio measures
the relationship of the capital provided by creditors to the
amount provided by shareholders. A high debt to equity
ratio indicates aggressive use of leverage and a highly
leveraged company is more risky for creditors. A low ratio,
on the other hand, suggests that company is making little
use of leverage and is too conservative.
Current ratio-This is the ratio of current assets to current
liabilities. It is widely used indicator of a companys ability
to pay its debts in the short term.
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RATIO ANALYSIS (Top five)
Company / YearAggreg
ate
EssarSteel
200803
IspatInds.
200803
JSW
Steel
20080
3
S A I
L
2008
03
TataSteel
200803
Key Ratios
Debt-Equity Ratio 1.02 1.47 4.50 0.88 0.18 0.67
Long Term Debt-
Equity Ratio0.88 1.17 4.20 0.85 0.15 0.66
Current Ratio 1.21 0.91 1.11 0.62 1.60 2.86
Turnover Ratios
Fixed Assets 1.28 0.83 0.79 1.03 1.51 1.37
Inventory 6.59 5.31 7.79 9.86 6.65 8.99
Debtors 12.49 25.97 15.41 43.36 17.15 37.77
Interest Cover Ratio 4.83 1.96 1.10 6.02 46.70 8.61
Asset turnover ratio -In 2008 aggregate fixed turnover
is 1.28 which is higher than ESSAR, ISPST &JSW steel. But
SIAL &TATA steels ratio is much higher than overall
industry. It means these companies utilizing their assets
efficiently.
Inventory turnover ratio- In 2008 average inventory
ratio of industry is 6.59that is greater than only Essar
steel. All other companies are above average and JSW
steel has highest turnover among all these companies.
Debtor turnover ratio- In 2008 average Debtor turnover
ratio of industry is 12.49that is lesser than all companysaverage. In 2008 all companies are performing very well.
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Debt equity ratio -Average ratio of industry is 1.02
.Ispat company is showing higher ratio i.e. 4.88 which
shows that company is having higher risk and has
borrowed more from creditors than shareholders. All othercompanies are performing average.
Current ratio- All companies are performing well except
Jsw steel and Tata is having excess current assets it
should utilize its assets in other Manufacturing activities.
Company / Year
Aggreg
ate
Essar
Steel200703
Ispat
Inds.200703
JSW
Steel
200703
S A I
L
200703
Tata
Steel200703
Key Ratios
Debt-Equity Ratio 0.90 1.69 4.84 0.83 0.28 0.51
Long Term Debt-
Equity Ratio0.79 1.45 4.53 0.80 0.24 0.50
Current Ratio 1.22 1.09 1.11 0.78 1.36 1.26
Turnover Ratios
Fixed Assets 0.16 0.74 0.73 0.98 1.33 1.26
Inventory 0.87 4.68 8.19 9.61 5.99 8.77
Debtors 1.97 16.43 13.50 38.23 18.82 33.75
Interest Cover Ratio 5.71 1.92 1.02 5.71 29.37 25.92
Asset turnover ratio -In 2007 aggregate fixed turnover
is 0.16 which is lower than all steel companies. But SAIL
&TATA steels ratio is much higher than overall industry; it
means these companies utilizing their assets efficiently.
Inventory turnover ratio -In 2007 average inventory
ratio of industry is 0.89 that is much lower than other
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companies .All companies are above average and JSW
steel has highest turnover among all these companies.
Debtor turnover ratio -In 2007 average Debtor turnover
ratio of industry is 1.97 that is lesser than all companys
average. In 2007 all companies are performing very well
and JSW steel has highest turnover among all these
companies.
Debt equity ratio -Average ratio of industry is 0.90
.Ispat Company is showing higher ratio i.e. 4.84 which
shoes that company is having higher risk and has
borrowed more from creditors than shareholders. All other
companies are performing well. SAIL is having ratio of
0.28 that is lowest among all these and still it can take
loan from creditors without any hazard.
Current ratio -All companies are performing well except
Jsw steel because they are above average level i.e.1.
Company / YearAggreg
ate
Essar
Steel
200603
Ispat
Inds.
200603
JSW
Steel
20060
3
S A I
L
2006
03
Tata
Steel
200603
Key Ratios
Debt-Equity Ratio 0.97 2.10 3.91 1.06 0.44 0.31
Long Term Debt-
Equity Ratio0.85 1.89 3.76 1.01 0.40 0.30
Current Ratio 1.24 1.38 1.17 0.87 1.18 0.71
Turnover Ratios
Fixed Assets 1.21 0.79 0.60 0.86 1.14 1.20
Inventory 6.35 5.66 7.00 8.16 6.17 8.47
Debtors 12.87 13.55 6.80 26.79 17.25 30.57
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Interest Cover Ratio 5.01 2.06 -0.19 3.53 13.20 31.03
Asset turnover ratio -In 2006 aggregate fixed turnover
is 1.21 which is higher than all other companies. But ISPAT
is having lowest ratio it means its not utilizing assets
properly.
Inventory turnover ratio -In 2006 average inventory
ratio of industry is 6.35that is greater than only Essar and
SAIL steel company. All other companies are above
average and JSW steel has highest turnover among allthese companies .This ratio shows the number of times a
companys inventory is turned into sales.
Debtor turnover ratio- In 2006 average Debtor turnover
ratio of industry is 12.87that is lesser than all companys
average except ISPAT.TATA steel has highest turnover
ratios which shows that debtors are being converted
rapidly into cash and the quality of companys portfolio of
debtor is good.
Debt equity ratio -Average ratio of industry is
0.97.Ispat and Essar Company is showing higher ratio i.e.
2.10 and 3.91which shows that company is having higher
risk and has borrowed more from creditors than
shareholders. All other companies are having lesser ratio
which means they have taken lesser loan from creditors
than shareholders.
Current ratio -All companies are performing well except
Jsw steel and Tata. All other companies have enough
liquid assets to meet current liabilities.
Company / Year Aggreg
ate
Essar
Steel
Ispat
Inds.
JSW
Steel
S A I
L
Tata
Steel
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200503 20050320050
3
2005
03200503
Key Ratios
Debt-Equity Ratio 1.50 4.41 4.35 1.85 0.94 0.53
Long Term Debt-
Equity Ratio1.31 3.89 4.26 1.81 0.83 0.51
Current Ratio 1.10 1.41 1.37 1.06 0.99 0.65
Turnover Ratios
Fixed Assets 1.34 0.95 0.82 0.98 1.15 1.24
Inventory 8.39 8.03 11.32 13.02 8.80 10.17
Debtors 13.56 15.11 8.33 19.94 18.52 25.74
Interest Cover Ratio 6.96 2.65 1.77 4.10 15.36 24.15
Asset turnover ratio- In 2005 aggregate fixed turnover
is 1.34 which is higher than all other companies. It means
these companies utilizing their assets efficiently.
Inventory turnover ratio -In 2005 average inventory
ratio of industry is 8.39that is greater than only Essar
steel. All other companies are above average and JSW
steel has highest turnover among all these companies. It
means that it is converting its inventory into sales very
frequently.
Debtor turnover ratio- In 2005 average Debtor turnover
ratio of industry is 13.56that is lesser than all companys
average except ISPAT. In 2005 TATA steel has highest
turnover ratio which means it is realizing cash frequently
from its debtors and company has good collection policy.
Debt equity ratio - Average ratio of industry is 1.50.Ispat and Essar Company is showing higher ratio i.e. 4.35
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and 4.41 which shows those companies are having higher
risk and has borrowed more from creditors than
shareholders.
Current ratio -All companies are performing well except
SAIL and Tata they are having lesser current assets to
meet current obligation.
Company / YearAggreg
ate
Essar
Steel
200403
Ispat
Inds.
200403
JSW
Steel
20040
3
S A I
L
2004
03
Tata
Steel
200403
Key Ratios
Debt-Equity Ratio 2.92 10.80 6.62 4.90 2.86 0.99
Long Term Debt-
Equity Ratio2.48 9.76 6.43 4.84 2.28 0.95
Current Ratio 0.93 1.35 1.40 1.29 0.75 0.67
Turnover Ratios
Fixed Assets 0.98 0.60 0.71 0.57 0.87 0.97
Inventory 7.35 6.31 10.07 12.83 7.10 9.93
Debtors 10.36 11.86 9.05 10.36 15.04 14.81
Interest Cover Ratio 3.01 1.13 1.17 1.73 3.75 12.74
Asset turnover ratio -In 2004 aggregate fixed turnoveris 0.98 which is higher than all other companies. It means
these companies utilizing their assets efficiently. But Essar
has lowest ratio it means it is not utilizing its assts fullest.
Inventory turnover ratio - In 2004 average inventory
ratio of industry is 7.35that is greater than only Essar
steel and SAIL. All other companies are above average
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and JSW steel has highest turnover among all these
companies.
Debtor turnover ratio -In 2004 average Debtor turnover
ratio of industry is 10.36 that is lesser than all companys
average except ISPATsteel. In 2004 all companies are
performing very well and realizing money at faster rate.
Debt equity ratio -Average ratio of industry is 2.92
.Essar Company is showing higher ratio i.e. 10.80 which
shows that company is having higher risk and has
borrowed more from creditors than shareholders. All other
companies are performing average .here. TATA steel has
lowest ratio which shows company has more shareholders
money than creditor.
Current ratio -All companies are performing average
here Tata has lowest ratio; it means it does not have
sufficient current assets to meet current obligation.
RATIO ANALYSIS (Bottom five)
Company / YearAggreg
ate
M U S C
O
200803
Shah
Alloys
20080
3
Sunflag
Iron
200803
Surya
Roshni
200803
Usha
Martin
200803
Key Ratios
Debt-Equity Ratio 1.02 1.47 2.72 0.94 2.28 1.07
Long Term Debt-
Equity Ratio0.88 0.92 2.24 0.87 1.30 0.84
Current Ratio 1.21 1.26 1.47 1.75 1.30 1.02
Turnover Ratios
Fixed Assets 1.28 3.02 2.36 1.57 2.30 1.13
Inventory 6.59 8.20 5.52 5.52 7.98 4.22
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Debtors 12.49 5.95 18.32 17.26 10.83 7.60
Interest Cover
Ratio4.83 2.54 -2.06 3.59 1.47 3.32
Asset turnover ratio -In 2008 aggregate fixed turnover
is 1.28 which is lower than Usha martin. It means these
companies utilizing their assets efficiently and MUSCO has
highest turnover ratio.
Inventory turnover ratio -In 2008 average inventory
ratio of industry is 6.59that is greater than Shah alloysand Usha martin. All other companies are above average
and MUSCO steel has highest turnover among all these
companies.
Debtor turnover ratio -In 2008 average Debtor turnover
ratio of industry is 12.49that is lesser than SHAH ALLOYS
and SUNFLAG iron. In 2008 all companies are performing
very well and getting money at good rate.
Debt equity ratio -Average ratio of industry is 1.02.
Shah alloys Company is showing higher ratio i.e. 2.72
which shoes that company is having higher risk and has
borrowed more from creditors than shareholders. All other
companies are performing average.
Current ratio -All companies are performing well and all
have higher ratio than the average i.e.1.
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Asset turnover ratio -In 2007aggregate fixed turnover is
0.16 which is lower than all the above mentioned
companies and Shah alloys has highest turnover.
Inventory turnover ratio -In 2007 average inventory
ratio of industry is 0.87that is lesser than all the
companies. All other companies are above average and
Shah alloys has highest turnover among all these
companies.
Debtor turnover ratio -In 2007 average Debtor turnover
ratio of industry is 1.97 that is lesser than all companys
average. In 2007 all companies are performing very well
and Shah alloys has highest turnover among all these
companies.
Debt equity ratio -Average ratio of industry is 0.90
.Surya roshini is showing higher ratio i.e. 2.27 which shoes
Company / YearAggreg
ate
M U S
C O
200703
Shah
Alloys
200703
Sunflag
Iron
200703
Surya
Roshni
200703
Usha
Martin
200703
Key Ratios
Debt-Equity Ratio 0.90 0.96 1.75 0.83 2.27 1.11
Long Term Debt-
Equity Ratio0.79 0.61 1.36 0.78 1.31 0.96
Current Ratio 1.22 1.33 1.30 1.56 1.26 1.13
Turnover Ratios
Fixed Assets 0.16 2.93 3.77 1.48 2.06 1.02
Inventory 0.87 7.66 6.96 6.04 7.71 5.20
Debtors 1.97 5.55 15.83 15.94 10.49 7.36
Interest Cover Ratio 5.71 6.76 2.16 5.09 1.73 2.79
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that company is having higher risk and has borrowed
more from creditors than shareholders. All other
companies are performing well. Sun flag is having ratio
of0.83 that is lowest among all these and still it can takeloan from creditors without any hazard.
Current ratio -All companies are performing well
because they are above average level i.e.1 and have
enough cash to meet all current liabilities.
Company / YearAggreg
ate
M U S
C O
200603
Shah
Alloys
200603
Sunflag
Iron
200603
Surya
Roshni
200603
Usha
Martin
200603
Key Ratios
Debt-Equity Ratio 0.97 0.68 1.67 0.73 2.27 1.46
Long Term Debt-
Equity Ratio0.85 0.40 1.16 0.64 1.35 1.26
Current Ratio 1.24 1.40 1.25 1.72 1.27 1.14
Turnover Ratios
Fixed Assets 1.21 3.15 3.35 1.71 2.07 0.93
Inventory 6.35 7.47 5.67 6.98 7.28 4.89
Debtors 12.87 5.95 13.67 16.34 11.55 5.95
Interest Cover Ratio 5.01 9.55 2.60 5.65 2.04 2.22
Asset turnover ratio -In 2006 aggregate fixed turnover
is 1.21 which is lower than all other companies except
Usha martin. But Shah alloys is having highest ratio it
means its utilizing assets properly.
Inventory turnover ratio -In 2006 average inventory
ratio of industry is 6.35that is greater than only Shah
alloys and Usha martin. All other companies are above
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average and Surya roshini has highest turnover among all
these companies. This ratio shows the number of times a
companys inventory is turned into sales.
Debtor turnover ratio- In 2006 average Debtor turnover
ratio of industry is 12.87that is lesser than Shah alloys and
Sun flag iron . Sun flag iron has highest turnover ratio
which shows that debtors are being converted rapidly into
cash and the quality of companys portfolio of debtor is
good.
Debt equity ratio -Average ratio of industry is
0.97.Surya roshini is showing highest ratio i.e. 2.27.which
shows that company is having higher risk and has
borrowed more from creditors than shareholders.
Current ratio -All companies are performing well. All
companies have enough liquid assets to meet current
liabilities.
Company / YearAggreg
ate
M U S
C O
200503
Shah
Alloys
200503
Sunflag
Iron
200503
Surya
Roshni
200503
Usha
Martin
200503
Key Ratios
Debt-Equity Ratio 1.50 1.06 1.47 0.69 2.40 1.94
Long Term Debt-
Equity Ratio1.31 0.61 0.91 0.56 1.44 1.58
Current Ratio 1.10 1.28 1.24 1.87 1.23 1.13
Turnover Ratios
Fixed Assets 1.34 2.93 5.99 1.70 2.10 0.95
Inventory 8.39 6.92 9.44 8.27 7.41 4.89
Debtors 13.56 6.45 18.16 18.07 11.83 5.83
Interest Cover Ratio 6.96 6.75 2.67 3.27 1.71 1.69
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Asset turnover ratio- In 2005 aggregate fixed turnover
is 1.34 which is lesser than all other companies. It means
these companies utilizing their assets efficiently. Shah
alloys has highest turnover ratio.
Inventory turnover ratio -In 2005 average inventory
ratio of industry is 8.39 that is lesser than only Shah
alloys. All other companies are below average and Shah
alloys has highest turnover among all these companies. It
means that it is converting its inventory into sales very
frequently.
Debtor turnover ratio -In 2005 average Debtor turnover
ratio of industry is 13.56that is greater than all companys
average except Shah alloy Sun flag iron s. In 2005 Shah
alloys steel has highest turnover ratio which means it is
realizing cash frequently from its debtors and company
has good collection policy.
Debt equity ratio -Average ratio of industry is 1.50.
Surya Roshini is showing higher ratio i.e. 2.40 and which
shows this company is having higher risk and has
borrowed more from creditors than shareholders. Sun flag
iron has lowest ratio that is good for company.
Current ratio Average ratio of the industry is 1.20. All
companies are performing well and have sufficient current
assets to meet current obligation.
Company / YearAggreg
ate
M U S C
O
200403
Shah
Alloys
200403
Sunflag
Iron
200403
Surya
Roshni
200403
Usha
Martin
200403
Key Ratios
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Debt-Equity
Ratio2.92 1.64 1.77 0.80 2.57 2.03
Long Term
Debt-Equity
Ratio
2.48 0.69 1.10 0.64 1.58 1.70
Current Ratio 0.93 1.05 1.28 1.62 1.19 1.19
Turnover Ratios
Fixed Assets 0.98 2.05 5.18 1.00 1.70 0.67
Inventory 7.35 7.02 9.99 6.92 6.22 4.15
Debtors 10.36 6.26 11.00 9.15 9.85 4.80
Interest CoverRatio
3.01 1.43 2.86 1.45 1.54 1.18
Asset turnover ratio -In 2004 aggregate fixed turnover
is 0.98 which is lower than all other companies. It means
these companies utilizing their assets efficiently. But Shah
alloys has highest ratio it means it is utilizing its assts
fullest.
Inventory turnover ratio -In 2004 average inventory
ratio of industry is 7.35that is lesser than only Shah alloys.
All other companies are below average and it means shah
alloys converting goods into sales at faster rate.
Debtor turnover ratio -In 2004 average Debtor turnover
ratio of industry is 10.36 that is greater than all
companys average except Shah alloys. In 2004 all
companies are performing very well and realizing money
at faster rate.
Debt equity ratio -Average ratio of industry is 2.92
.that itself shows that industry is under huge pressure of
debts in this scenario only Sunflag was doing better
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because it is having ratio of 0.80 which shows company
has more shareholders money than creditor.
Current ratio -Average ratio of industry is 0.93.All
companies are performing well here and have sufficient
current assets to meet current obligation.
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5 Qualitative Analysis
5.1 Understanding the Steel industry using
Michael Porters Five Forces Model
Backed by robust volumes as well as realizations, steel
Industry has registered a phenomenal growth across the
world over the past few years. The situation in the
domestic industry was no exception. In fact, it enjoyed a
double digit growth rate backed by a robust growing
economy. However, the current liquidity crisis seems to
have created medium term hiccups. In this article, we
have analyzed the domestic steel sector through Michael
Porters five force model so as to understand the
competitiveness of the sector.
Entry barriers: High
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Capital Requirement: Steel industry is a capital
intensive business. It is estimated that to set up 1
mtpa capacity of integrated steel plant, it requires
between Rs 25 bn to Rs 30 bn depending upon thelocation of the plant and technology used.
Economies of scale: As far as the sector forces go,
scale of operation does matter. Benefits of
economies of scale are derived in the form of lower
costs, R& D expenses and better bargaining power
while sourcing raw materials. It may be noted that
those steel companies, which are integrated, have
their own mines for key raw materials such as iron
ore and coal and this protects them for the potential
threat for new entrants to a significant extent.
Government Policy: The government has a
favorable policy for steel manufacturers. However,
there are certain discrepancies involved in allocation
of iron ore mines and land acquisitions. Furthermore,
the regulatory clearances and other issues are some
of the major probl