CORPORATE FINANCE

ASSIGNMENT – 1

SUBMITTED BY-
ASHUTOSH SHARMA
PGFB1915
SECTION-B

SUBMITTED TO-
Dr Pratibha Wasan
 ABOUT THE STEEL INDUSTRY

“India was the largest producer of steel with production of 106.5 MT in 2018. The growth in the Indian
steel sector has been driven by the domestic availability of raw materials such as iron ore and cost
effective labour. The steel industry has been a major contributor to India’s manufacturing output. It
always strives for continuous upgradation and improvement of older plants and high energy efficiency
levels.”
“They are classified into three categories such as major producers, main producers and secondary
producers.
”
“Chairman- Mr Sajjan Jindal”

ABOUT JSW STEELS

“JSW
group is one of the fastest growing conglomerates in India, it is $14 billion company and has been a
integral part of OP Jindal group. It operates in 3 core sectors- Steel, Energy, Cement and Infrastructure. ”
 JSW STEELS

Stand alone P&L account In Rs Cr.

Mar '19 Mar '18 Mar '17 Mar '16 Mar '15 Mar '14
12 mths 12 mths 12 mths 12 mths 12 mths 12 mths
Income
Sales Turnover 76,727.00 66,234.00 56,913.00 40,858.96 50,393.31 49,295.43
Excise Duty 0 1,259.00 4,623.00 4,152.04 4,305.99 3,997.71

Net Sales 76,727.00 64,975.00 52,290.00 36,706.92 46,087.32 45,297.72

Other Income 509 -23 245 -5,542.15 70.47 -1,361.25

Stock Adjustments 188 -412 1,390.00 -1,083.56 1,666.93 244.1

Total Income 77,424.00 64,540.00 53,925.00 30,081.21 47,824.72 44,180.57

Expenditure

Raw Materials 43,645.00 39,694.00 31,709.00 21,028.46 29,921.27 29,236.47

Power & Fuel Cost 5,746.00 4,771.00 4,097.00 3,093.12 3,475.67 3,313.64

Employee Cost 1,400.00 1,260.00 1,168.00 953.29 946.83 799.58

Miscellaneous Expenses 7,721.00 5,097.00 5,162.00 4,179.64 4,538.84 3,409.54

Total Expenses 58,512.00 50,822.00 42,136.00 29,254.51 38,882.61 36,759.23

Mar '19 Mar '18 Mar '17 Mar '16 Mar '15 Mar '14

12 mths 12 mths 12 mths 12 mths 12 mths 12 mths

Operating Profit 18,403.00 13,741.00 11,544.00 6,368.85 8,871.64 8,782.59

PBDIT 18,912.00 13,718.00 11,789.00 826.7 8,942.11 7,421.34

Interest 3,708.00 3,591.00 3,643.00 3,218.73 2,908.69 2,740.13

PBDT 15,204.00 10,127.00 8,146.00 -2,392.03 6,033.42 4,681.21

Depreciation 3,397.00 3,054.00 3,025.00 2,847.24 2,784.50 2,725.88
Profit Before Tax 11,807.00 7,073.00 5,121.00 -5,239.27 3,248.92 1,955.33

PBT (Post Extra-ord Items) 11,807.00 7,073.00 5,121.00 -5,239.27 3,248.92 1,955.33

Tax 3,558.00 2,450.00 1,554.00 -1,709.60 1,082.44 620.82

Reported Net Profit 8,259.00 4,625.00 3,577.00 -3,529.67 2,166.48 1,334.51
Total Value Addition 14,867.00 11,128.00 10,427.00 8,226.05 8,961.34 7,522.76
Preference Dividend 0 0 0 0 27.9 27.9
Equity Dividend 886 655 218 320.03 265.89 287.66
Corporate Dividend Tax 0 0 0 0 59.81 49.93
Per share data (annualised)
Shares in issue (lakhs) 24,017.11 24,062.32 24,029.85 2,417.22 2,417.22 2,417.22
Earning Per Share (Rs) 34.39 19.22 14.89 -146.02 88.47 54.05
Equity Dividend (%) 410 320 225 75 110 110
Book Value (Rs) 146.4 115.98 100.28 844.37 1,032.60 973.01
 JSW Steel

Standalone Balance Sheet ------------------- in Rs. Cr. -------------------

  Mar 19 Mar-18 Mar-17 Mar-16 Mar-15

12 mths 12 mths 12 mths 12 mths 12 mths

 

         
EQUITIES AND LIABILITIES
SHAREHOLDER'S FUNDS          
Equity Share Capital 301 302 301 300.9 302.75

Preference Share Capital 231 0 0 638.78 764.44

Total Share Capital 532 302 301 939.68 1,067.19

27,605.0 23,797.0 20,109.3 24,657.4
Reserves and Surplus 34,861.00
0 0 5 1
27,605.0 23,797.0 20,109.3 24,657.4
Total Reserves and Surplus 34,861.00
0 0 5 1
27,907.0 24,098.0 21,049.0 25,724.6
Total Shareholders Funds 35,393.00
0 0 3 0
NON-CURRENT LIABILITIES          
29,551.0 28,358.0 29,506.0 25,496.8
Long Term Borrowings 26,517.00
0 0 3 9

Deferred Tax Liabilities [Net] 3,270.00 2,071.00 1,329.00 0 2,966.59

Other Long Term Liabilities 5,098.00 702 972 136.51 236.1

Long Term Provisions 226 115 74 1,017.42 56.78

32,439.0 30,733.0 30,659.9 28,756.3
Total Non-Current Liabilities 35,111.00
0 0 6 6
CURRENT LIABILITIES          
Short Term Borrowings 5,368.00 2,172.00 4,875.00 2,069.90 264.34
13,988.0 11,604.0 11,011.3 12,515.3
Trade Payables 13,052.00
0 0 2 9
Other Current Liabilities 15,926.00 8,934.00 9,517.00 8,611.87 7,278.11
Short Term Provisions 52 111 132 105.67 353.6
25,205.0 26,128.0 21,798.7 20,411.4
Total Current Liabilities 34,398.00
0 0 6 4
1,04,902.0 85,551.0 80,959.0 73,507.7 74,892.4
Total Capital And Liabilities
0 0 0 5 0
ASSETS          
NON-CURRENT ASSETS          
49,503.0 50,215.0 46,498.1 38,497.5
Tangible Assets 49,245.00
0 0 1 6
Intangible Assets 172 65 51 61.82 71.83
Capital Work-In-Progress 9,577.00 3,071.00 2,745.00 6,203.54 7,593.85
Intangible Assets Under
344 321 282 235.78 196.01
Development
52,960.0 53,293.0 52,999.2 46,359.2
Fixed Assets 59,338.00
0 0 5 5
Non-Current Investments 6,277.00 4,878.00 4,750.00 4,764.03 4,197.28
Deferred Tax Assets [Net] 0 0 0 479.54 0
Long Term Loans And Advances 7,674.00 5,165.00 2,771.00 241.75 5,311.91
Other Non-Current Assets 3,604.00 3,295.00 2,347.00 1,559.59 0
66,298.0 63,161.0 60,044.1 55,868.4
Total Non-Current Assets 76,893.00
0 0 6 4
CURRENT ASSETS          
Current Investments 0 0 300 0 0
10,082.0
Inventories 10,599.00 9,270.00 6,741.74 8,584.74
0
Trade Receivables 6,746.00 4,692.00 3,948.00 2,510.71 2,026.83

Cash And Cash Equivalents 5,680.00 601 1,027.00 598.54 1,795.06

Short Term Loans And Advances 136 158 121 1,325.31 6,617.33

OtherCurrentAssets 4,848.00 3,720.00 3,132.00 2,287.29 0

19,253.0 17,798.0 13,463.5 19,023.9
Total Current Assets 28,009.00
0 0 9 6
1,04,902.0 85,551.0 80,959.0 73,507.7 74,892.4
Total Assets
0 0 0 5 0
OTHER ADDITIONAL
         
INFORMATION
CONTINGENT LIABILITIES,
         
COMMITMENTS
20,744.0 14,927.0 12,341.6 14,565.3
Contingent Liabilities 27,109.00
0 0 5 1
CIF VALUE OF IMPORTS          
14,517.7
Raw Materials 21,937.00 0 0 8,609.76
4

Stores, Spares And Loose Tools 1,321.00 0 0 583.43 643.33

Capital Goods 3,121.00 0 0 1,531.72 2,133.89

EXPENDITURE IN FOREIGN
         
EXCHANGE
22,617.0 17,595.0
Expenditure In Foreign Currency 1,636.00 872.4 1,009.56
0 0
REMITTANCES IN FOREIGN
         
CURRENCIES FOR DIVIDENDS

Dividend Remittance In Foreign

- - - 8.64 14.52
Currency

EARNINGS IN FOREIGN EXCHANGE          

FOB Value Of Goods 7,604.00 10,938.0 10,149.0 2,485.17 7,881.73
 0 0
Other Earnings - - - 212.8 211.86
BONUS DETAILS          

Bonus Equity Share Capital - - - - -

NON-CURRENT INVESTMENTS          

Non-Current Investments Quoted

620 - - 636.2 1,090.37
Market Value

Non-Current Investments
804 1,030.00 978 4,127.83 3,976.67
Unquoted Book Value

CURRENT INVESTMENTS          

Current Investments Quoted

- - - - -
Market Value

Current Investments Unquoted

- - 300 - -
Book Value
 1. Is the firm more levered than industry?

Net Sales 76,727.00 64,975.00 52,290.00 36,706.92 46,087.32 45,297.72

Percentage Change in net
Sales 18.08696 24.25894 42.4527 -20.3535 1.743134 0
PBDIT 18,912.00 13,718.00 11,789.00 826.7 8,942.11 7,421.34
EBIT 15515 10664 8764 -2020.54 6157.61 4695.46
Percentage Change in EBIT 45.4895 21.6796 -533.745 -132.814 31.13965 0
Percentage change in EPS 78.9282 29.07992 -110.197 -265.05 63.68178 0
DOL 2.515044 0.893675 -12.5727 6.525338 17.86418 0
DFL 1.735086 1.34135 0.20646 1.995655 2.045038 0
DCL 4.363819 1.19873 -2.59576 13.02232 36.53292 0

Below is the table for Industry leverage

Particulars Tata Steel Narayani Steel Jindal Steel SAIL Industry

Average
DOL -2.643539 0.518674 8.986 3.945044 2.7015448
DFL 1.313971 6.502415 2.61 1.076925 2.8758278
DCL -3.279304 -11.9985 15.642 9.411843 2.4440098

Particulars Mar 19 Mar 18 Mar 17 Mar 16 Mar 15 Firm avg

DOL 2.515044 0.893765 -12.57271 6.25338 17.86418 3.045105
DFL 1.735086 1.34135 0.20646 1.995655 2.045038 1.464718
DCL 4.363819 1.9873 -2.595765 13.02232 36.53292 10.5044

“As per above tables, we can see that Operating Leverage of firm is greater than the industry average, so
it can be inferred that the Firm (JSW) is more leveraged than the industry.”
“DOL of steel industry is 2.701% which means that the company sales by 1% , industry EBIT will increase
by 2.701%. The firm’s DOL average is 3.045 which means if the firm’s sales rise by 1% then the firm EBIT
will also rise by 3.045%”

“As Financial leverage of the firm is lesser than the industry that means the firm has lower fixed cost
investment as compared to industry”.
“DFL of industry is 2.875, so, if EBIT changes by 1% then the industry EPS will change by 2.875. The firm
DFL is 1.464 which is lower than industry average which means the firm has lowered risk involved as DFL
is lesser in comparison to industry.”
DCL – The combined leverage of industry is lower than firm, it means firm is more levered than industry.

2. Is the firm risky in comparison to Industry average?

Overall industry
Particular average JSW Average
Debt Equity Ratio 1.016866602 1.184
Industry coverage ratio 1.736124306 2.2097564
Total asset to debt 1.626038906 1.4683134
Proprietary ratio 0.347130874 0.3182178

Debt to Equity Ratio- This ratio shows that industry finances 101.6% from debt and JSW finances
118.4% from debt which means that firm is more levered than industry. It has more risk

Interest coverage ratio- The average ICR of JSW steel is 2.20 greater than the industry ICR average. It
means JSW Steel can make its interest payment by 2.20 times. It means that the company is paying its
interest timely as there is a decrease in long term borrowings of the company over the years, this means
that the company will be able to pay its interest regularly in future as well.

Total asset to debt ratio- Since the industry average ratio is 1.62 which is more than the firm’s average
of 1.46, this implies that the industry has more assets in comparison to the firm(JSW Steels).

Proprietary ratio- Industry’s proprietary ratio is more than the firm’s which means that industry more
equity than the firm to run the business.

3. Correlation between debt level in the company and its profitability.

CORRELATION

EPS(Rs) 34.39 19.22 14.89 -146.02 88.47

31575.9
Debt 31885 31723.00 33233 25761.23
3
 Correlation
  EPS(Rs) Debt
EPS(Rs) 1  
Debt -0.4572343 1

The above table shows negative correlation between EPS and debt level which implies that further rise
in debt will lead to fall in EPS. As the firm is highly levered it means it has more risks associated with it.

4. Is company more profitable(ROE) than industry?

ROE 0.023213322 0.094

Here overall industry ROE is
0.023213322 and JSW’s ROE is 0.094. This means that the firm is more profitable than the industry, for

Chart Title
0.3
0.25
0.2
0.15
0.1
0.05
0
2018-19 2017-18 2016-17 2015-16 2014-15
-0.05
-0.1
-0.15
-0.2

Industry company

5. Interrelationship-

The proportion of debt and equity is called capital structure used by the company to finance its
operations and growth.
 The Power and fuel cost of the company has been increasing over the years, but the debt level of
the company is high, which means the company can’t finance its operations as the debts are
high.
They can’t afford more debts.
The company has more ROE than the industry.

IMPORTANT GRAPHS OF SOLVENCY RATIOS

Debt equity ratio 2018-19 2017-18 2016-17 2015-16 2014-15

0.71765 0.76147 0.82336 0.71567 0.94451
Industry 2 8 1 8 6
Company 0.9 1.14 1.38 1.5 1

1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2018-19 2017-18 2016-17 2015-16 2014-15

Proprietary ratio 2018-19 2017-18 2016-17 2015-16 2014-15

0.34334 0.33604 0.32610 0.37329
Industry 4 3 1 6 0.35687
0.33739 0.32620 0.29765 0.28635 0.34348
Company 1 3 7 1 7
 Proprietary ratio
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2018-19 2017-18 2016-17 2015-16 2014-15

Industry Company

2016-
Interest Coverage ratio 2018-19 2017-18 17 2015-16 2014-15
1.51885645 0.8771 1.09664 2.46463
Industry 2.72336943 4 1 6 9
2.4057
Company 4.184196 2.969646 1 -0.62774 2.11697

ICR Ratio
5
4
3
2
1
0
2018-19 2017-18 2016-17 2015-16 2014-15
-1

Industry Company

Total asset to debt ratio 2018-19 2017-18 2016-17 2015-16 2014-15

1.5743987 1.53486 1.71843 1.69796
Industry 1.604534753 5 7 4 1
1.42380 1.40124
Company 1.509186 1.484127 5 9 1.5232
 Total asset to debt ratio
2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2018-19 2017-18 2016-17 2015-16 2014-15

Industry Company