Metal Industry Report

DEPARTMENT OF FINANCIAL STUDIES
(2018-20)
FINANCIAL ANALYSIS AND VALUATION

METAL INDUSTRY ANALYSIS
Presented By:
RAJAN BAA
MBA (FM) Part 1
3257
Contents
METAL INDUSTRY ANALYSIS ...................................................................................................... 3

Hindalco ...................................................................................... Error! Bookmark not defined.
Reformulated Financial Statements:....................................... Error! Bookmark not defined.
Profitability Analysis ................................................................ Error! Bookmark not defined.
Valuation ................................................................................. Error! Bookmark not defined.
Credit Analysis ......................................................................... Error! Bookmark not defined.
Nalco ........................................................................................... Error! Bookmark not defined.
HindustanZinc ............................................................................. Error! Bookmark not defined.
Sail ............................................................................................... Error! Bookmark not defined.
CONCLUSION ............................................................................... Error! Bookmark not defined.
METAL INDUSTRY ANALYSIS
Rise in infrastructure development and automotive production are driving growth in the
metals and mining sector in India. India has vast mineral potential with mining leases
granted for longer durations of 20 to 30 years. India produces 95 minerals– 4 fuel-related
minerals, 10 metallic minerals, 23 non-metallic minerals, 3 atomic minerals and 55 minor
minerals (including building and other minerals).
India holds a fair advantage in cost of production and conversion costs in steel and alumina.
The country is the 3rd largest steel producer with production of 101.4 million tonnes of
crude steel in 2017. Crude Steel and Finished Steel production during April-February 2017-
18 was 93.18 million tonnes and 95.32 million tonnes respectively. India is the largest
producer of sheet mica in the world. India has the 7th largest bauxite reserves at around
2,908.85 million tonnes in FY18.
The Government of India has allowed 100 per cent Foreign Direct Investment (FDI) in the
mining sector and exploration of metal and non-metal ores under the automatic route,
which will propel growth in the sector. Power and cement industries also aiding growth in
the metals and mining sector. Demand for iron and steel is set to grow, given the strong
growth expectations for the residential and commercial building industry.
India is the third-largest crude steel producer in the world. In FY18, India produced 111.254
million tonnes (MT) of finished steel. Total finished steel production in the country
increased at a CAGR of 8.39 per cent over FY13-18. Crude Steel and Finished Steel
production during April-February 2017-18 stood at 93.183 MT and 95.319 MT, respectively.
Driven by rising infrastructure development and growing demand for automotives, steel
consumption is expected to reach 104 MT by 2018. India’s steel production is expected to
increase from 97.42 MT in FY18 to 128.6 MT by 2021. The Government of India has allowed
100 per cent foreign direct investment (FDI) in the steel sector under the automatic route.
Nearly 301 MoUs have been signed with various states for planned capacity of about 486.7
MT.
India’s per capita consumption of steel grew at a CAGR of 4.75 per cent from 45 kgs in FY09
to 65.25 kgs in FY18. The figure stood at 68 kgs during April-February 2017-18. National
Steel Policy 2017 seeks to increase per capita steel consumption to the level of 160 kgs
 In FY18 (1), crude steel production in India was 72.35 MT, with the total crude steel
production growing at a CAGR of 4.90 per cent over the last 5 years & reached 89.79 MT in
FY17.
 During April-January 2018, crude steel production in India grew by 7 per cent YoY & stood at
39.98 MT.
 As of March 2018, the capacity utilisation of steel producers is set to increase with strong
export demand and signs of revival in domestic sales. Companies like JSW & Essar Steel have
experienced a sharp increase in steel manufacturing in the last 2 months
 Steel manufacturing output of India is expected to increase from 88.4 million tonnes (MT) in
2017 to 128.6 MT by 2021, accelerating the country’s share of global steel production from
5.4% in 2017 to 7.7% by 2021
HINDALCO
Hindalco Industries Limited, the metals Flagship Company of Aditya Birla Group (ABG), is
amongst the industry leader in aluminium and copper segments. With a consolidated
turnover of around USD 15 billion, Hindalco is the world’s largest aluminium rolling
company and one of Asia’s major integrated producers of primary aluminium. Its state-of-
the-art copper facility is one of the world’s largest custom smelters at a single location.
During the year accelerated deleveraging, supported by strong business performance,
helped significantly to improve the consolidated Net Debt to EBITDA of the Company.
Year of stable operations – achieved highest Aluminium production at 1.3 million tonnes
and Alumina production at 2.9 million tonnes.
• Consolidated Revenue stood at ` 102,631 Crore for the FY18.
• Record Consolidated EBITDA at ` 13,558 Crore up 36 percent over the previous year.
􀂙 Record EBITDA for Hindalco standalone stood at ` 5,819 Crore.
􀂙 Record Adjusted EBITDA (excluding metal price lag) up 13% to USD 1.1 billion at Novelis.
REFORMULATED BALANCE SHEET
Reformulated Balance sheet -

31-Mar-18
Operating Assets
Tangible assets 63,916.41
Intangible assets 3,684.12
Capital work-in-progress 1,740.88
Inventories 18,291.36
Trade receivables 8,274.80

Short Term Loans and
Advances 184.66
Other Current Assets 4,685.63
OA 1,00,777.86
Operating liabilities
Deferred Tax Liablities (net) 2,866.56
Long-term provisions 6,960.15

Trade payables 17,857.60
Other current Liabilities 1.224.81
Short-term provisions 1,023.72
OL 28,708.03
Net operating assets 72,069.83
Financial obligation
Long-term borrowings 51,855.29
Other long term Liabilities 545.43
Short-term borrowings 6,595.93
FO 58,996.65
Financial Asset
Long-term loans and
advances 151.15
Current investments 8,951.76
Cash and Bank Balances 8,233.40
Non-Current Investments 4,639.46
FA 21,975.77
NFO=FO-FA 37,020.88
CSE
Share capital 222.72
Reserve and surplus 45,836.08
CSE 46,058.80
Minority Interest
NFO+CSE 83,079.68
REFORMULATED P&L:
Reformulated Income Statement
For the year ended March, 2018
Revenue from operations 1,02,631.45
EXPENSES:
Cost of Materials Consumed 58,396.63
Purchases of Stock-in-Trade 89.11

Changes in Inventories of Finished goods, Work-in-Progress and Stock-in- -
Trade 2,824.39
Employee Benefits Expense 8,546.01
Finance Costs 5,742.44
Depreciation, Amortisation and Impairment Expenses 4,457.24
Other Expenses 15,014.06
Total Expenses 89,421.10
OI from sales(before tax) 13,210.35
Current Tax 1,320.98
Deferred Tax 518.95
Total Tax 1,839.93
OI from sales(after tax) 11,370.42
Other Revenues 1,111.00
-
Less : Exceptional Items 7.64
Net OI from other than sales 1,118.64
Less: Tax -
Net OI from other than sales(after tax) 1,118.64

Total Operating Income (After tax) 12,489.06
Add: Interest Income 440.37

-
Less: Interest expense 6,075.37
-
NFE 5,635.00
-
Less: Tax 1,915.34
-
NFE after Tax 7,550.34
Less: Minority Interest -
Comprehensive Income 4,938.72
Reformulated Cash Flow Statement

For the year ended March 2018
Net cash from operating activities (CFO) 12,687.47
Add- interest income after tax 440.37

Less- investments as reported -372.8
Add- investment in financial assets
Free cash flow 12,755.04
Financing flows
Cash Used(-)/+(Generated) in Financing Activities

(C) -5552.27
Proceeds from Long Term Borrowings 30,932.55

Repayment of Long Term Borrowings -1,516.82
Short Term Borrowings [Net] 1897.945
Interest paid 440.37
Dividends paid 55.66
Investment in financial assets -5,552.27
Total financial flows 26,257.44

NALCO
National Aluminium Company Limited (NALCO) is a Navratna CPSE under Ministry of Mines.
It was established on 7th January, 1981 in the Public Sector, with its registered office at
Bhubaneswar. The Company is a group ‘A’ CPSE having integrated and diversified operations
in mining, metal and power with sales turnover of Rs 7,933 crore in financial year 2017-18.
Presently, Government of India holds 60.20% equity of NALCO.
NALCO is one of the largest integrated Bauxite-Alumina-Aluminium- Power Complex in the

Country. The Company has a 68.25 lakh TPA Bauxite Mine &21.00 lakh TPA(normative
capacity) Alumina Refinery located at Damanjodi in Koraput dist. of Odisha, and 4.60 lakh
TPA Aluminium Smelter & 1200MW Captive Power Plant located at Angul, Odisha. NALCO
has bulk shipment facilities at Vizag port for export of Alumina/Aluminium and import of
caustic soda and also utilises the facilities at Kolkata and Paradeep ports. The company has
registered sales offices in Delhi, Kolkata, Mumbai, Chennai and Bangalore and 11(eleven)
stockyards at various locations in the Country to facilitate domestic marketing.
Reformulated Balance sheet-

31-Mar-
18
Operating Assets
Intangible assets 51.35
Capital work-in-progress 514.65
Trade receivables 184.25

Advances 36.70
Other Current Assets 579.94
OA 9,541.45
Deferred Tax Liablities (net) 1,245.58
Long-term provisions 328.11

Trade payables 844.46
Other current Liabilities 1,170.21
Short-term provisions 117.07
OL 3,705.43
Long-term borrowings -
Short-term borrowings 51.09
FO 53.45
Financial Asset
Long-term loans and
advances 80.60
Cash and Bank Balances 24.83
Non-Current Investments 38.91
FA 1,365.47
-
NFO=FO-FA 1,312.02
CSE
CSE 10,205.15
Minority Interest
NFO+CSE 8,893.13
Revenue from operations 8,050.02
EXPENSES:
Purchases of Stock-in-Trade -
Changes in Inventories of Finished goods, Work-in-Progress and Stock-in-
Trade -
Finance Costs 2.69
Depreciation, Amortisation and Impairment Expenses 480.36
Current Tax 219.52
Deferred Tax 76.67
Total Tax 296.19
Other Revenues 408.27
Net OI from other than sales 368.12
Less: Tax -
Net OI from other than sales(after tax) 368.12

-
Less: Interest expense 0.39
NFE 292.25
Less: Tax 99.34
NFE after Tax 391.59

Add- interest income after tax 292.64

Financing flows

(C) (3.615.87)
Proceeds from Long Term Borrowings 0.00

Repayment of Long Term Borrowings 0.00
Short Term Borrowings [Net] 51.09
Dividends paid 8.78
Investment in financial assets (3.615.87)
Total financial flows 352.51

HINDUSTAN ZINC
Hindustan Zinc Limited was incorporated from the erstwhile Metal Corporation of India on
10 January 1966 as a Public Sector Undertaking.
In 2001, as part of the Government's disinvestment program of loss-making PSUs, the
company was put up for sale.
In April 2002, Sterlite Opportunities and Ventures Limited (SOVL) made an open offer for
acquisition of shares of the company; consequent to the disinvestment of Government of
India's (GOI) stake of 26% including management control to SOVL and acquired additional
20% of shares from public, pursuant to the SEBI Regulations 1997. In August 2003, SOVL
acquired additional shares to the extent of 18.92% of the paid up capital from GOI in
exercise of call option clause in the shareholder’s agreement between GOI and SOVL.
With the above additional acquisition, SOVL's stake in the company went up to 64.92%.
Thus GOI's stake in the company now stands at 29.54%. SOVL was merged with Sterlite
Industries India Ltd in April 2011. Sterlite Industries merged with Sesa Goa Ltd to form Sesa
Sterlite Limited in August 2013. Sesa Sterlite was renamed to Vedanta Limited in April
2015. Hindustan Zinc is now a direct subsidiary of Vedanta Limited.

31-Mar-18
Operating Assets
Intangible assets -
Trade receivables 136.00

Advances 1.00
Other Current Assets 408.00
OA 15,417.00
Deferred Tax Liablities (net) -
Long-term provisions 111.00

Short-term provisions 17.00
OL 3,660.00
Long-term borrowings -
FO 8,001.00
Financial Asset
Long-term loans and
advances 19.00
Non-Current Investments -
FA 23,991.00
-
NFO=FO-FA 15,990.00
CSE
CSE 30,805.00
Minority Interest
NFO+CSE 14,815.00

EXPENSES:
Cost of Materials Consumed 26.00
Purchases of Stock-in-Trade 336.00

Changes in Inventories of Finished goods, Work-in-Progress and Stock-in- -
Trade 676.00
Employee Benefits Expense 722.00
Finance Costs 202.00
Current Tax 2,196.00

-
Deferred Tax 312.00
Total Tax 1,884.00
Other Revenues 2,474.00
Less : Exceptional Items -
Net OI from other than sales 2,474.00

Less: Tax -
Net OI from other than sales(after tax) 2,474.00

-
Less: Interest expense 262.29
NFE 64.71
Less: Tax 21.99
NFE after Tax 86.70

Add- interest income after tax 327

Less- investments as reported 13216.96
Financing flows

(C) -11255
Proceeds from Long Term Borrowings 0.00

Repayment of Long Term Borrowings -7,872.00
Short Term Borrowings [Net] 15772
Dividends paid 0.17
Investment in financial assets -11,255.00
Total financial flows -3,027.83

SAIL
Steel Authority of India Limited (SAIL) is the largest steel-making company in India and one
of the seven Maharatna’s of the country’s Central Public Sector Enterprises.
SAIL produces iron and steel at five integrated plants and three special steel plants, located
principally in the eastern and central regions of India and situated close to domestic sources
of raw materials. SAIL manufactures and sells a broad range of steel products
Steel Authority of India Limited (SAIL) is an Indian state-owned steel making company based
in New Delhi, India. It is a public sector undertaking, owned and operated by the
Government of India with an annual turnover of INR 44,452 Crore (US$ 6.83 Billion) for fiscal
year 2016-17. Incorporated on 24 January 1973, SAIL has 78,333 employees (as of 01-Jan-
2018). With an annual production of 14.38 million metric tons, SAIL is the largest steel
producer in India and one of the largest steel producers in the world .The Hot Metal
production capacity of the Company will further increase and is expected to reach a level of
50 million tonnes per annum by 2025. Shri P.K Singh is the current Chairman of SAIL.
SAIL operates and owns 5 integrated steel plants at Bhilai, Rourkela, Durgapur, Bokaro and
Burnpur(Asansol) and 3 special steel plants at Salem, Durgapur and Bhadravathi. It also
owns a Ferro Alloy plant at Chandrapur. As a part of its global ambition, the company is
undergoing a massive expansion and modernisation programme involving upgrading and
building new facilities with emphasis on state of the art green technology. According to a
recent survey, SAIL is one of India's fastest growing Public Sector Units. Besides, it has R&D
centre for Iron & Steel (RDCIS), Centre for Engineering and Technology (CET), Management
Training Institute (MTI) and SAIL Safety Organisation (SSO) located at Ranchi capital of
Jharkhand.

31-Mar-
18
Operating Assets
Intangible assets -
Trade receivables 2,934.69

Advances 72.73
Other Current Assets 4,302.91
OA 95,098.64
Deferred Tax Liablities (net) -
Long-term provisions 3,596.40
Short-term provisions 2,924.87
OL 17,349.24
Long-term borrowings 19,087.48
Other long term Liabilities 1,365.93
FO 40,266.45
Financial Asset
Long-term loans and
advances 453.52
Current investments -
Non-Current Investments 65.05
FA 659.21
NFO=FO-FA 39,607.24
CSE
Share capital 4,130.53
CSE 37,042.26
Minority Interest
NFO+CSE 76,649.50

EXPENSES:

Purchases of Stock-in-Trade -
Changes in Inventories of Finished goods, Work-in-Progress and Stock-in-
Trade 117.34
Finance Costs 2,527.82
OI from sales(before tax) 184.83
Current Tax 30.64

-
Deferred Tax 2,005.30
-
Total Tax 1,974.66
Other Revenues 449.48
Net OI from other than sales 255.56

Less: Tax -
Net OI from other than sales(after tax) 255.56
-
-
Less: Interest expense 2,527.82
-
NFE 2,532.67
-
Less: Tax 860.85
-
NFE after Tax 3,393.52
-
Comprehensive Income 978.47

Add- interest income after tax -4.85

Financing flows

(C) 3302.13
Proceeds from Long Term Borrowings 1,591.77

Repayment of Long Term Borrowings 4,238.18
Short Term Borrowings [Net] 0
Interest paid -4.85
Dividends paid 1.05
Investment in financial assets 3,302.13
Total financial flows 9,128.28

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DEPARTMENT OF FINANCIAL STUDIES

FINANCIAL ANALYSIS AND VALUATION

METAL INDUSTRY ANALYSIS ...................................................................................................... 3

REFORMULATED BALANCE SHEET

Reformulated Balance sheet -

Tangible assets 63,916.41

Intangible assets 3,684.12

Capital work-in-progress 1,740.88

Trade receivables 8,274.80

Other Current Assets 4,685.63

Deferred Tax Liablities (net) 2,866.56

Long-term provisions 6,960.15

Short-term provisions 1,023.72

Net operating assets 72,069.83

Long-term borrowings 51,855.29

Other long term Liabilities 545.43

Short-term borrowings 6,595.93

Current investments 8,951.76

Cash and Bank Balances 8,233.40

Non-Current Investments 4,639.46

Share capital 222.72

Reserve and surplus 45,836.08

Revenue from operations 1,02,631.45

Cost of Materials Consumed 58,396.63

Purchases of Stock-in-Trade 89.11

Employee Benefits Expense 8,546.01

Finance Costs 5,742.44

Depreciation, Amortisation and Impairment Expenses 4,457.24

Other Expenses 15,014.06

Total Expenses 89,421.10

OI from sales(before tax) 13,210.35

Current Tax 1,320.98

Deferred Tax 518.95

Total Tax 1,839.93

OI from sales(after tax) 11,370.42

Other Revenues 1,111.00

Net OI from other than sales 1,118.64

Net OI from other than sales(after tax) 1,118.64

Add: Interest Income 440.37

Less: Minority Interest -

Comprehensive Income 4,938.72

Reformulated Cash Flow Statement

Add- interest income after tax 440.37

Free cash flow 12,755.04

Cash Used(-)/+(Generated) in Financing Activities

Proceeds from Long Term Borrowings 30,932.55

Investment in financial assets -5,552.27

Total financial flows 26,257.44

NALCO is one of the largest integrated Bauxite-Alumina-Aluminium- Power Complex in the

Reformulated Balance sheet-

Reformulated Balance sheet -

Tangible assets 7,018.63

Intangible assets 51.35

Capital work-in-progress 514.65

Trade receivables 184.25

Other Current Assets 579.94

Deferred Tax Liablities (net) 1,245.58

Long-term provisions 328.11

Other current Liabilities 1,170.21

Short-term provisions 117.07

Net operating assets 5,836.02

Other long term Liabilities 2.36

Short-term borrowings 51.09