FINANCIAL PERFORMANCE ANALYSIS OF TATA STEEL LTD.

Research Project Submitted in Partial Fulfillment of the Requirements for the Degree of
BCOM Honours by
Gagandeep singh salooja to the
DEPARTMENT OF COMMERCE BHOPAL SCHOOL OF SOCIAL SCIENCES

April, 2021

Submitted by

Gagandeep singh salooja Guided by

Dr Swapna Pillai
 CERTIFICATE

It is certified that the work contained in the project report titled “Financial performance analysis of
Tata steel ltd,,” by “Gagandeep singh salooja,” has been carried out under my/our supervision and that
this work has not been submitted elsewhere for a degree*

Signature of Supervisor: …………….

Name: Dr Swapna Pillai

Department: Commerce

Bhopal School of Social Sciences April, 2021

 DECLARATION

I hereby declare that this project report entitled “Financial performance analysis of Tata steel ltd.“
was carried out by me for the degree of BCOM Honours under the guidance and supervision of Dr
Swapna Pillai, Associate Professor of Department of Commerce, BSSS College. The interpretations put
forth are based on my reading and understanding of the original texts and they are not published
anywhere in any form. The other books, articles and websites, which I have made use of are
acknowledged at the respective place in the text. This research report is not submitted for any other
degree or diploma in any other University.

Place: Bhopal

Name of the Student: Gagandeep singh salooja Class & Section: BCOM Honours
 CHAPTER-1 INTRODUCTION
1.1 Rationale of the study

Analysis of financial statement is a systematic process of critical evaluation of the financial

information given in financial statement so that these information may be understood properly. For the
purpose of analysis individual items are studied, their relationship with other relevant figures is establish
and the data are sometime re-arranged to have better understanding of the information with the help of
various tools for the purpose.

According to Berverd Needles “ Financial statement analysis comprises all the technique employed
by user of financial statement to show important relationship in the financial statement”.
In short it is a technique of X- raying the financial position and the performance of the enterprise.

“The analysis and interpretation of financial statement are an attempt to determine the significance
and meaning of financial statement data so that the forecast may be made of the prospects for future
earning, ability to pay interest and debts maturities and profitability of a sound dividend policy”. –
kennedy and mullar

ADVANTAGE OF FINANCIAL STATEMENT ANALYSIS

The advantages of financial statement analysis are listed below:

  The most important benefit if financial statement analysis is that it provides an idea to the
investors about deciding on investing their funds in a particular company.

 Another advantage of financial statement analysis is that regulatory authorities like IASB can
ensure the company following the required accounting standards.

 Financial statement analysis is helpful to the government agencies in analyzing the taxation owed
to the firm.

 Above all, the company is able to analyze its own performance over a specific time period.

LIMITATION OF FINANCIAL STATEMENT ANALYSIS

 Financial Statements Are Derived from Historical Costs - Transactions are initially recorded at
their cost. This is a concern when reviewing the balance sheet, where the values of assets and liabilities
may change over time. Some items, such as marketable securities, are altered to match changes in their
market values, but other items, such as fixed assets, do not change. Thus, the balance sheet could be
misleading if a large part of the amount presented is based on historical costs.
 Financial Statements Only Cover a Specific Period of Time - A user of financial statements can
gain an incorrect view of the financial results or cash flows of a business by only looking at one
reporting period. Any one period may vary from the normal operating results of a business, perhaps due
to a sudden spike in sales or seasonality effects. It is better to view a large number of consecutive
financial statements to gain a better view of ongoing results.

 Financial Statements Could be Wrong Due to Fraud- The management team of a company may
deliberately skew the results presented. This situation can arise when there is undue pressure to report
excellent results, such as when a bonus plan calls for payouts only if the reported sales level
increases. One might suspect the presence of
 this issue when the reported results spike to a level exceeding the industry norm, or well above a
company’s historical trend line of reported results.

 Financial Statements Do Not Cover Non-Financial Issues-The financial statements do not

address non-financial issues, such as the environmental attentiveness of a company's operations, or how
well it works with the local community. A business reporting excellent financial results might be a
failure in these other areas.

 Financial Statements May Not Have Been Verified- If the financial statements have not been
audited, this means that no one has examined the accounting policies, practices, and controls of the
issuer to ensure that it has created accurate financial statements. An audit opinion that accompanies the
financial statements is evidence of such a review.

 Financial Statements Have No Predictive Value- The information in a set of financial

statements provides information about either historical results or the financial status of a business as
of a specific date. The statements do not necessarily provide any value in predicting what will happen in
the future. For example, a business could report excellent results in one month, and no sales at all in
the next month, because a contract on which it was relying has ended.

Methods or tools or technique of financial statement analysis

Ratio analysis – Ratio analysis is a technique of analysis, comparison and interpretation of financial
statement. It is a process through which various ratio are calculated and on that basis conclusions are
drawn which become the base of managerial decision.
Ratio analysis is the comparison of line items in the financial statements of a business. Ratio analysis
is used to evaluate a number of issues with an entity, such as its liquidity, efficiency of operations,
and profitability. This type of analysis is particularly useful to analysts outside of a business, since
their primary source of information about an organization is its financial statements.
 Importance of ratio analysis

1. Financial Statement Analysis- Understanding financial statements are important for stakeholders of
the company. Ratio analysis helps in understanding the comparison of these numbers; furthermore, it
helps in estimating numbers from income statements and balance sheets for the future. For e.g. Equity
shareholder looks into the P/E ratio, the Dividend payout ratio, etc. while creditors observe Debt to
Equity ratio, Gross margin ratio, Debt to asset ratio, etc.

2. Efficiency of Company-Ratio analysis is important in understanding the company’s ability to

generate profit. Return on Asset, Returns on Equity tell us how much profit the company is able to
generate over assets of the firm and equity investments in the firm, while gross margin and operating
margin ratios tell us the company’s ability to generate profit from sales and operating efficiency.
3. Planning and Forecasting- From a Management and investor point of view, ratio analysis helps to
understand and estimate the company’s future financials and operations. Ratios formed from past
financial statement analysis helps in estimating future financials, budgeting, and planning for the
future operations of the company.
4.Identifying Risk and Taking Corrective Actions- The company operates under various business,
market, operations related risks. Ratio analysis helps in understanding these risks and helps management
to prepare and take necessary actions. Leverage ratios help in performing sensitivity analysis of various
factors affecting the company’s profitability like sales, cost, debt. Financial leverage ratios like Interest
Coverage ratio and Debt Coverage ratio tell how much the company is dependent on external capital
sources and the company’s ability to repay debt.

5. Peers Comparison- Investor, as well as the company’s management, makes a comparison with
Competitors Company to understand efficiency, profitability and market share. Ratio analysis is helpful
for companies to perform SWOT (Strengths, Weakness, Opportunities, and Threats)
 analysis in the market. It also tells whether the company is able to perform growth or not over a
period from past financials and whether the company’s financial position is improving or not.

6. Financial Solvency- The company’s ability to pay short-term debt is determined by liquidity.
Current Ratio, Acid-test ratio tells us whether a company is able to pay its short-term obligation within a
year. The company continuously runs analysis on past financial statements to understand and prepare for
payment of short-term obligations.

7. Decision Making- Ratios provide important information on the operational efficiency of the
company, and the utilization of resources by the company. It helps management to forecast and planning
for future, new goals, concentrate on the different markets, etc.

Types of Ratio

Liquidity ratios – liquidity refers to the ability of a concern to meet its current obligations as and
when they become due. Liquidity ratios measures the short term solvency of a business and for this
purpose following ratio can be computed:

a) Current ratio = current ratio is a most widely used ratio to judge short term financial
position or solvency of a firm. it can be defined as relationship between current assets and current
liabilities. current ratio of 2 : 1 is considered as satisfactory.

Current Ratio= current assets / current liabilities

b) Liquid Ratio = it is also called as Quick ratio or Acid test ratio, measures the ability of
business to pay its short term liabilities by having assets that are readily converted into cash. These assets
are namely cash, marketable securities and account receivables.
 Liquid Ratio= current asset–inventory–prepaid expenses /current liabilities

c) Absolute liquid Ratio= This ratio is also known as super quick ratio and establishes
relationship between absolute liquid assets and liquid liabilities. The ideal level of absolute liquid ratio is
0.5 : 1 .

Absolute liquid ratio= cash and bank balance/current liabilities

d) Cash ratio = the cash ratio is a measures of the liquidity of a firm, namely the ratio of the
total assets and cash equivalents.

Cash ratio= cash and bank balance/ current assets

Solvency Ratio

Solvency ratio - this ratio examines whether the total realizable amount from all assets of a firm is
enough to pay all of its external liability or not. In this context this ratio shows the relationship between
total assets and external liabilities of the firm.

Solvency means ability of a firm to pay its liability on due date. Solvency is tested on the basis of the
ability of the concern to pay its long term liability at due time. The ratios to be used for this purpose are
called as ‘ ratio of financial position’ or stability ratio. The main ratio of this category are as follows;

a) Debt equity Ratio- this ratio reflects the long term financial position of a firm and is
calculated in the form of relationship between external equities or outsider’s funds and internal equities
or shareholders fund. Debt equity ratio may also be called as ‘ratio long term debt to shareholders funs’.

Debt Equity Ratio= long term debts/ shareholder funds Or debt/equity

 b) Proprietary ratio- This ratio indicates the relationship between proprietors fund and
total assets. Greater is the proprietor funds better is the position of the creditor.

Proprietary ratio=proprietary funds or shareholders funds/Total assets

 Profitability ratio - Profitability ratio is used to evaluate the company’s ability to generate
income as compared to its expenses and other cost associated with the generation of income during a
particular period. This ratio represents the final result of the company.

The main category of this ratio are :

i. Gross profit ratio- This ratio measures the marginal profit of the company. This ratio is also
used to measure the segment revenue. A high ratio represents the greater profit margin and it’s good for
the company.
Gross profit ratio = Gross Profit /Sales × 100

Gross Profit= Sales + Closing Stock – opening stock – Purchases – Direct Expenses

ii. Net profit ratio - This ratio measures the overall profitability of company considering all
direct as well as indirect cost. A high ratio represents a positive return in the company and better the
company is.

Net profit ratio = Net Profit / Sales × 100

Net Profit = Gross Profit + Indirect Income – Indirect Expenses

iii. Return on equity - This ratio measures Profitability of equity fund invested the company. It also
measures how profitably owner’s funds have been utilized to generate company’s revenues. A high ratio
represents better the company is.
 Return on equity =Profit after Tax/ Net worth x 100
Where, Net worth = Equity share capital, and Reserve and Surplus

iv. Return on capital employed- Return on capital employed (ROCE) is a financial ratio that can be
used in assessing a company's profitability and capital efficiency. In other words, this ratio can help to
understand how well a company is generating profits from its capital as it is put to use.

Return on capital employed (ROCE) = net profit before interest and tax / capital employed X 100

v. Operating profit ratio - Operating profit ratio establishes a relationship between operating Profit
earned and net revenue generated from operations (net sales). operating profit ratio is a type of
profitability ratio which is expressed as a percentage.

Operating profit ratio = operating profit / net sales X 100

1.2INTRODUCTION TO THE INDUSTRY

INTRODUCTION OF STEEL INDUSTY IN INDIA

India was the world’s second-largest steel producer with production standing at 111.2 million tons
(MT) in 2019. The growth in the Indian steel sector has been driven by domestic availability of raw
materials such as iron ore and cost-effective labor. Consequently, the steel sector has been a major
contributor to India’s manufacturing output.
The Indian steel industry is modern with state-of-the-art steel mills. It has always strived for
continuous modernisation of older plants and up-gradation to higher energy efficiency levels.
Indian steel industry is classified into three categories - major producers, main producers and
secondary producers.
 Market Size

India’s finished steel consumption grew at a CAGR of 5.2% during FY16-FY20 to reach 100 MT.
India’s crude steel and finished steel production increased to 108.5 MT and 101.03 MT in FY20P,
respectively.
Between April 2020 and November 2020, India’s cumulative production of crude steel was
62.01 MT and finished steel was 55.68 MT.
Export and import of finished steel stood at 8.24 MT and 6.69 MT, respectively, in FY20P. Export
and import of finished steel stood at 7.70 MT and 2.70 MT, respectively, between April 2020 and
November 2020.

INVESTMENT

Steel industry and its associated mining and metallurgy sectors have seen major investments and
developments in the recent past.
According to the data released by Department for Promotion of Industry and Internal Trade (DPIIT),
the Indian metallurgical industries attracted Foreign Direct Investment (FDI) to the tune of US$ 14.24
billion in the period April 2000-September 2020.
Some of the major investments in the Indian steel industry are as follows:

 In a move towards becoming self-reliant, Indian steel companies have started boosting steel
production capacity. To this end, SAIL announced doubling of its at 5 of its steel plants capacity in
September 2020.
 In March 2020, Arcelor Mittal Nippon Steel India (AM/NS) acquired Bhander Power plant in
Hazira, Gujarat from Edelweiss Asset Reconstruction Company.
 In February 2020, GFG Alliance acquired Adhunik Metaliks and its arm Zion Steel for Rs. 425
crore (US$ 60.81 million), marking its entry into the Indian steel market.
 For FY20, JSW Steel set a target of supplying around 1.5 lakhs tons of TMT Rebars to metro
rail projects across the country.
 In December 2019, Arcelor Mittal completed the acquisition of Essar Steel at Rs. 42,000 cr(US$
6.01 billion) and formed a joint venture with Nippon Steel Corporation.
  JSW Steel has planned a US$ 4.14 billion capital expenditure programme to increase its
overall steel output capacity from 18 million tons to 23 million tons by 2020.
 Ministry of Steel plans to invest US$ 70 million in the eastern region of the country
through accelerated development of the sector.
 The production capacity of SAIL is expected to increase from 13 MTPA to 50 MTPA in 2025
with total investment of US$ 24.88 billion.
 Tata Steel has decided to increase the capacity of its Kalinganagar integrated steel plant from
3 million tons to 8 million tons at an investment of US$ 3.64 billion.

Government Initiatives

Some of the other recent Government initiatives in this sector are as follows:

 In December 2020, the Minister for Petroleum & Natural Gas and Steel, Mr. Dharmendra
Pradhan, has appealed to the scientific community to Innovate for India (I4I) and create competitive
advantages to make India ‘Aatmanirbhar’.
 In September 2020, the Ministry of Steel prepared a draft framework policy for development of
steel clusters in the country.
 On October 1, 2020, Directorate General of Foreign Trade (DGFT) announced that steel
manufacturers in the country can avail duty drawback benefits on steel supplied through their service
centres, distributors, dealers and stock yards.
 Government introduced Steel Scrap Recycling Policy to reduce import.
 An export duty of 30% has been levied on iron ore^ (lumps and fines) to ensure supply to
domestic steel industry.
 Government of India’s focus on infrastructure and restarting road projects is aiding the demand
for steel. Also, further likely acceleration in rural economy and infrastructure is expected to lead to
growth in demand for steel.
 The Union Cabinet, Government of India approved the National Steel Policy (NSP) 2017, as it
intend to create a globally competitive steel industry in India. NSP 2017 envisage 300 million tonnes
(MT) steel-making capacity and 160 kgs per capita steel consumption by 2030-31.
  The Ministry of Steel is facilitating setting up of an industry driven Steel Research and
Technology Mission of India (SRTMI) in association with the public and private sector steel companies
to spearhead research and development activities in the iron and steel industry at an initial corpus of Rs.
200 crore (US$ 30 million).
 The Government of India raised import duty on most steel items twice, each time by 2.5% and
imposed measures including anti-dumping and safeguard duties on iron and steel items.

Road ahead

The National Steel Policy, 2017 envisage 300 million tons of production capacity by 2030-31. The
per capita consumption of steel has increased from 57.6 kg to 74.1 kg during the last five years. The
government has a fixed objective of increasing rural consumption of steel from the current 19.6 kg/per
capita to 38 kg/per capita by 2030-31.
As per Indian Steel Association (ISA), steel demand will grow by 7.2% in 2019-20 and 2020-21.
Huge scope for growth is offered by India’s comparatively low per capita steel consumption and the
expected rise in consumption due to increased infrastructure construction and the thriving automobile and
railways sectors.
 1.3 INTRODUCTION TO THE COMPANY

COMPANY PROFILE

Tata Steel Limited is an Indian multinational steel-making company based in Jamshedpur,

Jharkhand and is headquartered in Mumbai, Maharashtra, India. It is a subsidiary of the Tata Group.
Formerly known as Tata Iron and Steel Company Limited (TISCO), Tata Steel is among the top
steel producing companies in the world with an annual crude steel capacity of 34 million tons per annum.
It is one of the world's most geographically-diversified steel producers, with operations and commercial
presence across the world. The group (excluding SEA operations) recorded a consolidated turnover of
US$19.7 billion in the financial year ending 31 March 2020. It is the second largest steel company in
India (measured by domestic production) with an annual capacity of 13 million tons after SAIL.
Tata Steel operates in 26 countries with key operations in India, Netherlands and United Kingdom,
and employs around 80,500 people. Its largest plant (10 MTPA capacity) is located in Jamshedpur,
Jharkhand. In 2007, Tata Steel acquired the UK-based steel maker Corus. It was ranked 486th in the
2014 Fortune Global 500 ranking of the world's biggest corporations. It was the seventh most valuable
Indian brand of 2013 according to Brand Finance.
In July 2019 Tata Steel Kalinganagar (TSK) was included in the list of the World Economic Forum's
(WEF's) Global Lighthouse Network, showing leadership in applying Fourth Industrial Revolution
technologies to drive financial and operational impact.
Tata Steel is headquartered in Mumbai, Maharashtra, India and has its marketing headquarters at the
Tata Centre in Kolkata, West Bengal. It has a presence in around 50 countries with manufacturing
operations in 26 countries including: India, Malaysia, Vietnam, Thailand, UAE, Ivory Coast,
Mozambique, South Africa, Australia, United Kingdom, The Netherlands, France and Canada.
 Tata Steel primarily serves customers in the automotive, construction, consumer goods, engineering,
packaging, lifting and excavating, energy and power, aerospace, shipbuilding, rail and defence and
security sectors.

Tata Iron and Steel Company (TISCO) was founded by Jamsetji Tata and established by Dorabji Tata
on 26 August 1907. TISCO started pig iron production in 1911 and began producing steel in 1912 as a
branch of Jamsetji's Tata Group. The first steel ingot was manufactured on 16 February 1912. During the
First World War (1914-1918), the company made rapid progress. By 1939, it operated the largest steel
plant in the British Empire. The company launched a major modernization and expansion program in
1951. Later, in 1958, the program was upgraded to 2 million metric tonnes per annum (MTPA)
project. By 1970, the company employed around 40,000 people at Jamshedpur, and a further 20,000 in
the neighbouring coal mines. In 1971 and 1979, there were unsuccessful attempts to nationalise the
company. In 1990, the company began to expand, and established its subsidiary, Tata Inc., in New
York. The company changed its name from TISCO to Tata Steel Ltd. in 2005.
Tata Steel on Thursday, 12 February 2015 announced buying three strip product services centres in
Sweden, Finland and Norway from SSAB to strengthen its offering in Nordic region. The company,
however, did not disclose the value of the transactions.

In September 2017, ThyssenKrupp of Germany and Tata Steel announced plans to combine their
European steel-making businesses. The deal will structure the European assets as Thyssenkrupp Tata
Steel, an equal joint venture. The announcement estimated that the company would be Europe's second-
largest steelmaker, and listed future headquarters in Amsterdam.
 HERITAGE

Jamsetji Nusserwanji Tata (1839 – 1904)

The foundation ofwhat wouldgrowto become the Tatagroupwas laid in 1868 by JamsetjiNusserwanji
Tata–thena29-year-oldwho
hadlearnedtheropes ofbusinesswhileworkinginhis
father’sbankingfirm
– when he established a trading company in Bombay.
A visionaryentrepreneur,anavowednationalistand a committed philanthropist, Jamsetji Tata helped
pavethepathtoindustrialization inIndiaby seeding pioneering businesses in sectors such as steel, energy,
textiles and hospitality.

Ratan Tata (1937)

The beginning of the 1990s ushered in plenty of change in Indian business. Economic reforms opened
up many sectors, signalling increased competitionandthearrivalofforeigncompanies. JRDTata’sdeath,in1993,
symbolisedtheendofan era in more ways than one.
Ratan Tata, who took over as chairman in 1991, guided the Tata group in a fast-changing business
environment where old rules did not apply and new realities were taking hold. Mr Tata retired as Chairman
of Tata Sons on December 28, 2012.
 Natarajan Chandrasekaran (1963)

Natarajan Chandrasekaran is Chairman of the board of Tata Sons, theholdingcompanyandpromoter of more

than 100 Tata operating companies with aggregate annual revenues of more than US $100 billion. He
joined the board of Tata Sons in October 2016 and was appointed Chairman in January 2017.
Chandra also chairs the boards of several group operating companies, including Tata Steel, Tata Motors,
Tata Power, Indian Hotels and Tata Consultancy Services (TCS)—ofwhichhewaschiefexecutive from 2009-17.
His appointment as chairman followed a 30-year business career at TCS, which he joined from
university. Chandra rose through the ranks at TCS to become CEO and managing director of the leading global
IT solutions and consultingfirm.

Mission Statement: Consistent with the vision and values of the founder Jamsetji Tata, Tata Steel
strives to strengthen India’s industrial base through effective utilization of staff and materials. The means
envisaged to achieve this are best technologyandhighproductivity, consistentwithmodernmanagement
practices.
TataSteelrecognizesthatwhilehonestyandintegrityareessentialingredientsof astrongand
stableenterprise,profitabilityprovidesthemainsparkforeconomic activity.
Overall, the Company seeks to scale the heights of excellence in all it doesin an atmosphere free from fear,
and thereby reaffirms its faith in democratic values.
 1.4 JUSTIFICATION OF THE TOPIC

This research project is about the study of financial performance of Tata steel ltd. The project is done
for the practical knowledge and academic compulsion purpose. For the study I have taken the five year
(2016-2020) financial data of Tata steel ltd. I have use different type of ratios to evaluate and analyze the
financial performance of Tata steel ltd.
 CHAPTER - 2 REVIEW OF LITRATURE

The literature review is a written overview of major writings and other sources on selected topic.
Sources covered in the review may include scholarly journals, articles, books, government reports, web
sites etc.
2.1 International Reviews

DeVancy (1993) conducted a study to measure the changes of status in the families of United States
of America by using financial ratios selected from different categories for a period of four years ranging
from 1983 to 1986. This study used the financial ratios as indicators of progress to answer the question
whether the households were able to improve their financial status during the study period.

Gallizo and Salvador (2003) also carried out a study on financial ratios of U.S manufacturing firms
for a period of eight years since 1993 to 2000 to understand the behavior and adjustment process of the
same. A proper balance between sales and assets generally specify that the assets are managed and
utilized well towards the sales generation. The main aim of the company is to maximize its profit and
profitability ratios helps to measure overall performance and efficiency of the firm.

Peeler J. Patsula (2006), he define that a sound business analysis tells others a lot about good
sense and understanding of the difficulties that a company will face. We have to make sure that
people know exactly how we arrived to the final financial positions. We have to show the
calculation but we have to avoid anything that is too mathematical. A business performance
analysis indicates the further growth and the expansion. It gives a physiological advantage to the
employees and also a planning advantage.
 Susan Ward (2008), emphasis that financial analysis using ratios between key values help
investors cope with the massive amount of numbers in company financial statements. For example,
they can compute the percentage of net profit a company is generating on the funds it has
deployed. All other things remaining the same, a company that earns a higher percentage of profit
compared to other companies is a better investment option.

Ahmed and Ahmed (2014) conducted a study to analyze the effect of mergers upon financial
performance of manufacturing industries in Pakistan. Twelve manufacturing companies were selected
for the study which had involved in the process of merger during 2000-2009. Three years data before
merger and three years data after merger were used to test the significance of study. Paired sample t-test
was applied on accounting ratios. The study revealed that overall financial performance of acquiring
manufacturing corporations were insignificantly improved after the merger. The liquidity, profitability
and capital position of the selected companies were insignificantly improved and the efficiency
deteriorated after the merger. Finally, it was concluded that merger impacted on different industries of
manufacturing sector differently.

2.2 National Reviews

Rooh Ollah Arab, Seyed Saadat Masoumi and Azadeh Barati (2015) examined the financial
performance of identified units in the steel industry in India in terms of financial ratios such as Liquidity,
Solvency, Activity and Profitability position. For this study , Tata Steel Ltd., Jindal Steel & Power Ltd., J
S W Steel Ltd., Bhushan Steel Ltd. and Steel Authority of India Ltd. are selected for this study. The
study evaluated the impact of selected variables on the financial performance of identified units in the
steel industry, ANOVA-Test analysis is used.
 Ramaratnam and Jayaraman (2010) used financial ratios in terms of liquidity, profitability, variability
and sustainability to measure the financial performance of Indian steel industry for a period of five years
from 2005 to 2010. Their study reveals that the critical situation faced by the Indian steel industry is due
to over capacity and demand slowdown resulting in price cuts.

A study has been conducted by Pal (2011) on the Indian steel companies for a period of ten years
range between 2000-01 and 2009-10 to measure the profitability of the selected companies which is of
major importance to the internal and external stakeholders to determine the earning capacity together
with the credibility of the companies to sustain in the competition for a long run.

Tiwari (2013) examined working capital management efficiency in Indian cement industry. They
found that though some of the sample firms had successfully improved efficiency during these years, the
existence of a very high degree of inconsistency in this matter clearly pointed out the need for adopting
sound working capital management policies by these firms. It was suggested that the firms under study
should have taken necessary steps in order to improve their efficiency.
Acharya (2013) compared the liquidity position of TATA Steel Ltd. and SAIL and studied the
relationship that exists between liquidity and profitability of both the companies. The purpose of the
study was to investigate the liquidity management efficiency and profitability position of selected steel
companies. Therefore, an attempt was made to investigate the liquidity position and its impact on the
profitability of Tata Steel Ltd. and Steel Authority of India Ltd for a period of ten years ranging from
2004 to 2013. Various accounting ratios were analyzed with the help of statistical techniques, such as
multiple correlations, multiple regression analysis and t-test. Through the analysis of the data, it was
found that liquidity position had positive impact on the profitability of the selected firms.

Comparing profit earning capacity of selected Steel companies in India, Popat (2012) analyzed
profitability ratios of selected companies in Indian steel industry. Findings of that study indicated
 that TATA steel’s profitability was better than other selected companies while JINDAL steel’s
profitability was next to TATA steel. It was also found that JSW and SAIL showed fluctuation in their
profitability while UTTAM had a decreasing trend in the profitability during the period of study.

Prakash and Natarajan (2014) conducted a study on financial performance of Salem Steel Authority
of India Ltd. The analysis revealed that there is a fluxion in the gross profit and net profit during the
study period. The study helps to identify the financial position of the company. Optimum utilization of
working capital can be planned so as to result in sound financial position of the company.
.

Dr.C.Balakrishnan (2016) observed that financial performance of any organization is influenced by

several factors like capital structure, cost, revenue and the consequential profit margin. The study can be
analyzed with many aspects like financial facts, financial ratios, financial health, financial strength and
utilization of assets, etc. The study revealed that financial performance can be influenced by the
operational and financial efficiency of the steel industry, which are related to cost and the revenue
aspects. The study analyzed the performance of steel industry in India on the parameters such as
profitability, utilization of assets, growth of performance, financial strength and capital structure. The
study also attempted to identify the nature of relationship between the various aspects of financial
performance.

Dalvadi & Tagariaya (2019), studied shareholders returns of selected Infrastructure companies in
India during the period from 2013-14 to 2017- 18 through ratio analysis. The statistical tools used for
analysis are mean, standard deviation, one way Anova test etc. They found that there is no significant
difference in the performance of the selected Infrastructure companies in India in terms of shareholders
return and financial performance during the study period. They also stated that the performance of DLF
limited, Reliance Infrastructure limited and L & T limited have better compared to IRB Infrastructure
Developers Limited and Nagarjuna Construction Company limited.
 CHAPTER 3 RESEARCH METHODOLOGY

3.1 OBJECTIVES OF THE STUDY

 To know the financial position of Tata steel.

 To bring out the results of financial strength and weakness of industry through Ratio
analysis.

 To know the correct picture of financial operation of the industry in terms of liquidity and
solvency.

3.2 RESEARCH HYPOTHESIS

A research hypothesis is a statement of expectation or prediction that will be tested by

research.
 Null Hypothesis- The Financial performance of Tata steel is satisfactory.

 Alternative hypothesis- The Financial performance of Tata steel is dissatisfactory.

 3.3 SCOPE OF THE STUDY

 The scope of the study is limited to collecting financial data published in the annual
reports of the company every year.

 The ratio analysis is done to suggest the possible solutions. The study is carried out for 5 years
data of Tata steel ( 2015-16 to 2019-20).

 This study is confined to Tata steel only.

3.4 RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem .It may be understood as
a science of studying how research is done scientifically . So the research methodology not only talks
about the research methods but also consider the logic behind the method used in context of the research
study.

Research design

Descriptive research used in this study because it will ensure the minimization of bias and
maximization of reliability of data collected . The researcher had to use fact and information already
available through financial statements of earlier years and analyse these to make critical evaluation of
available material. Hence by making the type of research conducted to be both Descriptive and
Analytical in nature.

Data collection

a) Primary data

Primary data is data originated for the first time by the researcher through direct efforts and
experience, specifically for the purpose of addressing his research problem. Also known as the first
hand or raw
 data. The data can be collected through various methods like surveys, observations , physical
testing, mailed questionnaires personal interviews, telephone interviews, case studies etc.

b) Secondary data

Secondary data implies second hand information which is already collected and recorded by any
person other than a user for a purpose, not relating to the current research problem. It is the readily
available form of data collected from various sources like censuses, government publication, internal
records of the organizations , reports books ,journal articles, websites and so on.
Sources of data

The required data for the study are basically secondary in nature and the data are collected from the
audited reports of the company. The sources of data are from the annual reports of the company from the
year 2015-2016 to 2019-2020.

Methods of data analysis

The data collected were classified and tabulated for analysis. The analytical tool used in this study.
The study employs the following analytical tools:

 Graph

 Ratio analysis

3.5 LIMITATION OF THE STUDY

The study is based on secondary data, obtained from the publish report and as its finding depends
entirely on the accuracy of such data.
 CHAPTER- 4

4.1 Data representation and interpretation

Liquid ratios

1. current ratio = current asset/current liabilities

(Rs crore)

Year Current assets Current liabilities Current ratio

2016 14421.49 21087.99 0.68
2017 20110.40 23056.33 0.87
2018 34643.91 25607.34 1.35
2019 17035.58 25593.65 0.67
2020 20009.19 30871.30 0.65

Current
ratio
.6
1
.4
1
.2
Current
0 ratio
.6

.4

2 2 2 2 2
016 017 018 019 020

Current ratio compares current assets with current liabilities and tell us whether the current assets are
enough to settle current liabilities. It is inferred from the table that the higher current ratio of Tata steel is
1.35 in the year 2018 and the lower was 0.65 in the year 2020. The ratio of 1.2 to
2 or above is usually considered safe. Tata steel is in poor condition to pay back its debts. Hence the
current ratio of Tata steel is dissatisfactory.
 LIQUID RATIO
Liquid ratio= current assets- inventory- prepaid expenses/current liabilities

(Rs crore)

Year Liquid assets Current liabilities Liquid ratio

2016 7337.68 21087.99 0.35

2017 9873.55 23056.33 0.43
2018 23620.5 25607.34 0.92
2019 5780.24 25593.65 0.23
2020 9292.53 30871.30 0.30

Liquid
1
ratio
0
.9
0
.8
0
.7 Liquid
ratio
0
.6
0
.5
0
2016 2017 2018 2019 2020

Ratio of 1.1 is said to be the ideal quick ratio. Indicating that company has in its possession enough
assets which may be immediately liquidated for paying off the current liabilities. The table shows that the
highest liquid ratio of Tata steel is 0.92 in the year 2018 that is not more than the ideal ratio. Hence the
liquid ratio of the company is dissatisfactory.
 LONG TERM FINANCIAL POSITION RATIO OR SOLVENCY RATIO

DEBT EQUITY RATIO

Debt equity ratio = long term borrowing (Debt) / shareholder

funds (Rs crore)

Year debt Shareholders Debt equity ratio

fund
2016 29368.44 70476.72 0.41
2017 36475.07 49659.00 0.73
2018 35717.16 61514.82 0.58
2019 39175.00 70454.71 0.55
2020 42683.14 74563.12 0.57

Debt equity
ratio
.8

.7

.6
Debt equity
ratio
.5
0
.2

.1
2 2 2 2 2
016 017 018 019 020

The debt equity ratio is a financial ratio indicating the relative proportion of shareholders equity and
debt used to finance a company assets. Debt to equity ratio greater than 1 indicate the company may be
overleveraged. In all the years debt equity ratio of a company is less than 1. Hence the company is good
in maintaining its debt position.
 PROPRIETARY RATI0

Proprietary ratio = shareholder funds / total assets

(Rs crore)
year Shareholders Total assets Proprietary ratio
fund
2016 70476.72 123208.15 0.57
2017 49659.00 111465.41 0.44
2018 61514.82 125114.34 0.49
2019 70454.71 137498.36 0.51
2020 74563.12 150392.56 0.49

Proprietary
ratio
.6

.5

.4 Proprietary
ratio
0
.2

.1
2 2 2 2 2
016 017 018 019 020

The high proprietary ratio indicates that a company has a sufficient amount of equity to support the
function of business. The ideal value of the proprietary ratio is depend on the risk appetite of the
investors . If investor agree to take large amount of risk than a lower proprietary ratio is preferred. It is
inferred from the table that the proprietary ratio of Tata steel is higher in the year 2016 (0.57) and lower
in the year 2017 (0.44). Hence proprietary ratio of the company is satisfactory.
 RETURN ON EQUITY
Return on equity = net profit after tax and preference dividend/ (share capital+ reserve and surplus) X
100
(Rs crore)

Year Net profit after Share capital + Return on equity

tax and preference reserve and surplus
dividend

2016 4900.95 70476.72 6.95

2017 3444.55 49659.00 6.93
2018 4169.55 61514.82 6.77
2019 10533.19 70454.71 14.95
2020 6743.80 74563.12 9.04

Return on
1 equity
6

2
Return on
equity

2 2 2 2 2
016 017 018 019 020

The return on equity signifies how good the company is in generating returns on the investment it
received from his shareholders. It is inferred from the table that the return on equity of Tata steel is
higher in the year 2019 (14.95%) and the lower in 2018 that was (6.77%).
 Return on capital employed

Return on capital employed= net profit before interest and tax / capital employed X 100 Capital
employed= total assets – current liabilities
(Rs crore)

Year Net profit before Capital employed Return on capital

interest employed
and tax

2016 11102.45 102120.16 10.87

2017 12290.41 88409.08 13.90
2018 16542.62 99507 16.62
2019 22968.02 111904.71 20.52
2020 15265.69 119521.26 12.77

Return on capital
employed
5

Return on
capital
5 employed

2 2 2 2 2
016 017 018 019 020

Return on capital employed measures the efficiency with which investment made by the shareholders.
It is inferred from the table that the return on capital employed is higher in the year 2019 (20.52%) and
lower in the year 2016 (10.87%).
 PROFITABILITY RATIOS

GROSS PROFIT RATIO

Gross profit ratio = (gross profit/net sales) x 100

(Rs crore)
year Gross profit Net sales Gross profit ratio
2016 6154.90 37814.69 16.27
2017 9601.86 47296.99 20.30
2018 13732.00 58550.68 23.45
2019 20144.44 68923.15 29.22
2020 12234.68 58815.57 20.80

Gross profit
ratio
5

5 Gross profit
ratio
1
0

0 2 2 2 2 2
016 017 018 019 020

Gross profit ratio measures the relationship of gross profit and net sales. Higher ratio is better. The
higher ratio indicates an increase in the selling price of the goods sold without any corresponding
increase in the cost of goods sold.
For the last 4 year, the gross profit ratio of Tata steel has been grown upwards consistently but in the
year 2020 it decreases. Overall It indicate that the gross profit ratio is increased over a period of time. It
shows the good progress of the company. It is inferred from the table that the gross profit ratio is higher
in the year 2019 (29.22%) and lower in the year 2016 (16.27%).
 NET PROFIT RATIO

Net profit ratio = ( net profit / net sales ) x 100

(Rs crore)
year Net profit Net sales Net profit ratio
2016 4900.95 37814.69 12.96
2017 3444.55 47296.99 7.28
2018 4169.55 58550.68 7.12
2019 10533.19 68923.15 15.28
2020 6743.80 58815.57 11.46

Net profit
1 ratio
8
1
6
1
4
1 Net profit
2 ratio

1
0
8
6 2016 2017 2018 2019 2020

Net profit ratio shows the relationship between net profit and net sales. Higher the ratio indicates that
operational efficiency of the concern. It can be observed from table that the net profit ratio of Tata steel
shows that there is decrease in the net profit margin from the year 2017 to 2018 as compared to 2016.The
higher net profit ratio was observed in the year 2019 that was 15.28% and the lower in the year 2018
(7.12%) .
 OPERATING PROFIT RATIO

Operating profit ratio = (operating profit / net sales ) x 100

(Rs crore)
year Operating profit Net sales Operating profit
ratio
2016 7611.79 37814.69 20.12
2017 11875.95 47296.99 25.10
2018 15778.96 58550.68 26.94
2019 20562.94 68923.15 29.83
2020 14861.57 58815.57 25.26

Operating profit
ratio
5

5 Operating profit
ratio
1
0

0 2 2 2 2 2
016 017 018 019 020

This ratio is used to measure the operational efficiency of the management . It is inferred from the
table that From the last 4 year, the operating profit ratio of the company has been grown upwards
consistently but in the year 2020 it decreases.
The highest operating ratio was observed in the year 2019 (29.83%) and lowest is observed in the
year 2016 (20.12%).
 CHAPTER- 5 RESULTS AND DISCUSSION

5.1 MAJORS FINDING

 The higher current ratio of the Tata steel is 1.35 in the year 2018 and the lower was 0.65 in the
year 2020.
 Higher liquid ratio of Tata steel is 0.92 in the year 2018 and lower was 0.23 in the year 2019
and It was 0.30 in the year 2020.
 The Gross profit ratio of Tata steel has been grown upwards consistently from 2016 to 2019. It
was high in 2019 (29.22%) and low in 2016 (16.27%) and 20.80% in the year 2020.
 The Net profit of Tata steel shows that there is decrease in the net profit margin in the year 2017
(7.28%) and 2018 (7.12%) as compared to 2016 (12.96%) it was high in the year 2019 (15.28%) and low
in the year 2018 (7.12%) It was 11.46% in the year 2020.
 The operating profit ratio of Tata steel Tata steel has been grown upwards consistently from
2016 to 2019. It was high in 2019 (29.83%) and low in 2016 (20.12%) and 25.26% in the year 2020.
 Return on equity of Tata steel is high in the year 2019 (14.95%) and was low in 2018 (6.77%)
and 9.04% in the year 2020.
 Return on capital employed of Tata steel is high in the year 2019 (20.52%) and was low in 2016
(10.87%) and 12.77% in the year 2020.
 Debt equity ratio of Tata steel is low in the last five years and it was 0.57 in the year 2020.
Lower debt equity ratio shows a good performance of a company.
 The proprietary ratio of Tata steel is higher in the year 2016 (0.57) and lower in the year 2017
(0.44) and 0.49 in the year 2020.
 5.2 DISCUSSION AND SUGGESTION

From the findings and analysis of Tata steel ltd for the last five year we can conclude some
suggestions for company so that the company can be more efficient to generate profit.

 Current ratio of Tata steel ltd is low it should increase its current ratio where it can meet it short
term obligation smoothly.
 The company should be maintaining a sound short-term debts paying capacity in future
because the use of more amount of external funds may lead to short-term insolvency.
 Liquid ratio of Tata steel ltd is low. So I suggest that a company maintain proper liquid funds.
 All operational and related activities should be performed efficiently and effectively.
 Tata steel ltd has sound solvency position but the Company has to avail on the benefit of trading
on equity.
 The government intervention in promoting ‘Make in India’ in public procurement has resulted
in Indian companies garnering over Rs 50 billion in projects.
 For the very existence and growth, every company has to earn adequate profit. As regards
profitability, the company witnessed a fluctuating trend throughout the study period, which is not
desirable from the management of
the company. To keep the shareholders‟ happy and reliable the rate of return to the equity
shareholders should be consistent in the years to come.
 5.3 CONCLUSION

Efficient management of finance is very important for the success of an enterprise. Term financial
performance is very dynamic term. The subject matter of financial performance has been changing very
rapidly. In present time greater importance is given to financial performance. So, here an attempt is made
by me to analyze the financial performance of TATA STEEL LTD. While analyzing the financial
performance it can be concluded that TATA Steel is performing good in terms of Quick assets, better
inventory management, management of fixed assets, gross profit, return on capital employed and
dividend payout ratio. These factors plays important role in forming company strategic and operational
thinking. Efforts should constantly be made to improve the financial position up to next level of
performance in order to make benchmark. This will yield greater efficiencies and improve investor
satisfaction. Lastly the policy adopted by government of India under National steel policy (2017) and
policy on preference to domestically manufactured iron and steel products is expected to provide the
much necessary momentum to the iron and steel sector of the country.

REFERENCES

https://en.wikipedia.org/wiki/Tata_Steel https://www.ibef.org/industry/steel.aspx
Kothari C.R, (1990), Research methodology methods and techniques, University of Rajasthan, New
age international (p) limited.
Gupta S.P & Gupta K.L. Management and cost accounting, Sahitya bhavan publication. Gupta Shashi
k & Sharma RK , management accounting, kalyani publisher.
Pandey I M, financial management, vikas publishing house pvt.ltd.

https://www.moneycontrol.com/financials/tatasteel/balance-sheetVI/TIS
https://money.rediff.com/companies/Tata-Steel-Ltd/15510001/results-annual
 ANNEXURE

TATA STEEL LTD

BALANCE SHEET OF MAR MAR MAR MAR MAR 16

TATA STEEL (in Rs. Cr.) 20 19 18 17
12 12 12 12 12 mths
mths mths mths mths
EQUITIES AND
LIABILITIES
SHAREHOLDER'S
FUNDS
Equity Share Capital 1,146. 1,146. 1,146. 971.41 971.41
13 12 12
TOTAL SHARE CAPITAL 1,146 1,146 1,146 971.4 971.41
.13 .12 .12 1
Reserves and Surplus 73,416 69,308 60,368 48,687 69,505.31
.99 .59 .70 .59
TOTAL RESERVES AND 73,41 69,30 60,36 48,68 69,505.31
SURPLUS 6.99 8.59 8.70 7.59
TOTAL SHAREHOLDERS 74,56 70,45 61,51 49,65 70,476.72
FUNDS 3.12 4.71 4.82 9.00
NON-CURRENT
LIABILITIES
Long Term Borrowings 31,381 26,651 24,568 24,694 23,457.77
.96 .19 .95 .37
Deferred Tax Liabilities [Net] 5,862. 7,807. 6,259. 6,111. 2,179.83
28 00 09 27
Other Long Term Liabilities 3,325. 2,798. 2,927. 3,644. 842.66
34 63 91 69
Long Term Provisions 2,113. 1,918. 1,961. 2,024. 2,888.18
56 18 21 74
TOTAL NON-CURRENT 42,68 39,17 35,71 36,47 29,368.44
LIABILITIES 3.14 5.00 7.16 5.07
CURRENT LIABILITIES
Short Term Borrowings 7,857. 8.09 669.88 3,239. 5,261.02
27 67
Trade Payables 10,600 10,969 11,242 10,717 7,706.13
.96 .56 .75 .44
Other Current Liabilities 11,749 13,837 12,959 8,398. 6,115.81
.21 .77 .43 62
Short Term Provisions 663.86 778.23 735.28 700.60 2,005.03
TOTAL CURRENT 30,87 25,59 25,60 23,05 21,087.99
LIABILITIES 1.30 3.65 7.34 6.33
 TOTAL CAPITAL AND 150,3 137,4 125,1 111,4 123,208.1
LIABILITIES 92.56 98.36 14.34 65.41 5
 ASSETS
NON-CURRENT ASSETS
Tangible Assets 70,505 70,416 70,942
71,77 24,901.24
.66 .82 .90 8.97
Intangible Assets 727.72 805.20 786.18 788.1 527.35
8
Capital Work-In-Progress 8,070. 5,686. 5,641. 6,125. 26,982.37
41 02 50 35
Other Assets 0.00 0.00 0.00 0.00 0.00
FIXED ASSETS 79,48 77,01 77,40 78,73 52,410.96
0.43 8.31 2.35 1.11
Non-Current Investments 46,860 38,929 9,636. 8,355. 52,360.42
.91 .25 56 90
Deferred Tax Assets [Net] 0.00 0.00 0.00 0.00 0.00
Long Term Loans And 199.26 231.16 213.50 211.9 3,787.88
Advances 7
Other Non-Current Assets 3,842. 4,284. 3,218. 4,056. 227.40
77 06 02 03
TOTAL NON-CURRENT 130,3 120,4 90,47 91,35 108,786.6
ASSETS 83.37 62.78 0.43 5.01 6
CURRENT ASSETS
Current Investments 3,235. 477.47 14,640 5,309. 4,320.17
16 .37 81
Inventories 10,716 11,255 11,023
10,23 7,083.81
.66 .34 .41 6.85
Trade Receivables 1,016. 1,363. 1,875. 2,006. 632.80
73 04 63 52
Cash And Cash Equivalents 1,226. 718.11 4,696. 970.3 1,014.67
87 74 1
Short Term Loans And 1,607. 55.92 74.13 27.14 1,243.48
Advances 32
Other Current Assets 2,206. 3,165. 2,333. 1,559. 126.56
45 70 63 77
TOTAL CURRENT 20,00 17,03 34,64 20,11 14,421.49
ASSETS 9.19 5.58 3.91 0.40
TOTAL ASSETS 150,3 137,4 125,1 111,4 123,208.1
92.56 98.36 14.34 65.41 5
 ANNUAL REPORT
Annual results in brief

(Rs crore)

Mar ' Mar ' Mar ' Mar ' Mar ' 16
20 19 18 17
Sales 60,435.9 70,610. 59,160. 47,993. 38,268.67
7 92 79 02
Operating 14,861.5 20,562. 15,778. 11,875. 7,611.79
profit 7 94 96 95
Interest 3,031.01 2,823.5 2,810.6 2,688.5 1,848.05
8 2 5
Gross 12,234.6 20,144. 13,732. 9,601.8 6,154.90
profit 8 44 00 6
EPS (Rs) 58.84 91.90 36.38 35.46 9.84
% SHARE OF LEATHER & LEATHER PRODUCTS FY 2022-23
SADDLERY NON-
AND LEATHER FINISHED
HARNESS, FOOTWEAR, LEATHER,
5.42% 8.19%

LEAT
 India’s textiles sector is one of the oldest industries in the Indian economy, dating back to several centuries. The
industry is extremely varied, with hand-spun and hand-woven textiles sectors at one end of the spectrum, with the
capital-intensive sophisticated mills sector at the other end. The fundamental strength of the textile industry in India
is its strong production base of a wide range of fibre/yarns from natural fibres like cotton, jute, silk and wool, to
synthetic/man-made fibres like polyester, viscose, nylon and acrylic.
The decentralised power looms/ hosiery and knitting sector form the largest component of the textiles sector. The
close linkage of textiles industry to agriculture (for raw materials such as cotton) and the ancient culture and
traditions of the country in terms of textiles makes it unique in comparison to other industries in the country. India’s
textiles industry has a capacity to produce a wide variety of products suitable for different market segments, both
within India and across the world.
In order to attract private equity and employee more people, the government introduced various schemes such as
the Scheme for Integrated Textile Parks (SITP), Technology Upgradation Fund Scheme (TUFS) and Mega Integrated
Textile Region and Apparel (MITRA) Park scheme.
 MARKET SIZE
The Indian textile and apparel industry is expected to grow at 10% CAGR from 2019-20 to reach US$ 190 billion
by 2025-26. India has a 4.6% share of the global trade in textiles and apparel. Moreover, India is the world's 3rd
largest exporter of Textiles and Apparel. India ranks among the top five global exporters in several textile categories,
with exports expected to reach US$ 65 billion by FY 2026.
The textiles and apparel industry contributes 2.3% to the country’s GDP, 13% to industrial production and 12% to
exports. The textile industry in India is predicted to double its contribution to the GDP, rising from 2.3% to
approximately 5% by the end of this decade.

The Manufacturing of Textiles Index for the month of August 2023 is 106.9 which has shown a growth of 1.6 %
as compared to August 2022.
The Indian Technical Textile market has a huge potential of a 10% growth rate, increased penetration level of 9-
10% and is the 5th largest technical textiles market in the world. India’s sportech industry is estimated around US$
1.17 million in 2022-23.
The Indian Medical Textiles market for drapes and gowns is around US$ 9.71 million in 2022 and is expected to
grow at 15% to reach US$ 22.45 million by 2027.
The Indian composites market is expected to reach an estimated value of US$ 1.9 billion by 2026 with a CAGR
of 16.3% from 2021 to 2026 and the Indian consumption of composite materials will touch 7,68,200 tonnes in 2027.
India is the world’s largest producer of cotton. In the first advances, the agriculture ministry projected cotton
output for 2023-24 at 31.6 million bales. According to the Cotton Association of India (CAI), the total availability of
cotton in the 2023-24 season has been pegged at 34.6 million bales, against 31.1 million bales of domestic demand,
including 28 million bales for mills, 1.5 million for small-scale industries, and 1.6 million bales for non-mills. Cotton
production in India is projected to reach 7.2 million tonnes (~43 million bales of 170 kg each) by 2030, driven by
increasing demand from consumers. It is expected to surpass US$ 30 billion by 2027, with an estimated 4.6-4.9%
share globally.
In 2022-23, the production of fibre in India stood at 2.15 million tonnes. While for yarn, the production stood at
5,185 million kgs during the same period. Natural fibres are regarded as the backbone of the Indian textile industry,
which is expected to grow from US$ 138 billion to US$ 195 billion by 2025.
India’s textile and apparel exports stood at US$ 20.01 billion in FY24 (April-October). Exports of textiles (RMG
of all textiles, cotton yarns/fabs./made-ups/handloom products, man-made yarns/fabs./made-ups, handicrafts excl.
handmade carpets, carpets and jute mfg. including floor coverings) stood at US$ 12.47 billion in FY24 (April-
November).
Exports for 247 technical textile items stood at Rs. 5,946 crore (US$ 715.48 million) between April-June (2023-
24).
India’s textiles industry has around 4.5 crore employed workers including 35.22 lakh handloom workers across
the country.
Industry Scenario
India is the 5th largest producer of technical textiles in the whole world with a market size of nearly
$22 Bn, which we hope to build up to $300 Bn when we turn 100 by 2047.
The textiles and apparel industry in India has strengths across the entire value chain from fiber, yarn, fabric to
apparel. The Indian textile and apparel industry is highly diversified with a wide range of segments ranging from
products of traditional handloom, handicrafts, wool, and silk products to the organized textile industry in India. The
organized textile industry in India is characterized by the use of capital-intensive technology for the mass production
of textile products and includes spinning, weaving, processing, and apparel manufacturing.
Cotton plays a major role in sustaining the livelihood of an estimated 6 Mn cotton farmers and 40-50 Mn people
engaged in related activity such as cotton processing & trade.
India’s trade of technical textile products has been growing strongly and the country has been a net exporter.
India’s exports of technical textile products grew from $2.21 Bn in 2020-21 to $2.85 Bn in 2021-22, registering a
growth rate of 28.4% (YoY).
 India’s Textiles Exports were highest ever in FY 2021-22, crossing $44 Bn
India is a largest cotton producer (23%) in the world and has the highest area under cotton cultivation (39% of
world area). Cotton plays a major role in sustaining the livelihood of an estimated 6.5 Mn cotton farmers.
India produced 90 Lakh bales of raw jute in FY 2021-22.
The Indian textile and apparel market size is estimated around $165 Bn in 2022, with domestic market
constituting $125 Bn and exports contributing $40 Bn.
The market size of the industry is projected to grow at a 10% CAGR to reach $350 Bn by 2030.
India scaled its highest ever exports tally at $44.4 Bn in Textiles and Apparel (T&A) including Handicrafts in FY
2021-22, indicating a substantial increase of 41% and 26% over corresponding figures in FY 2020-21 and FY 2019-
20, respectively.
India's estimated cotton production is 5.84 MMT during 2022-23 i.e. 23.83% of world cotton production of 24.51
MMT. India is also the 2nd largest consumer of cotton in the world with estimated consumption of 5.29 MMT i.e.
22.24% of world cotton consumption of 23.79 MMT
 Literature Review

Financial statement analysis is a critical tool for evaluating the performance and financial health of a
company. In this literature review, we delve into previous research, theoretical frameworks, conceptual
frameworks, and identify gaps in the literature regarding the financial statement analysis of Superhouse
Ltd, a leading leather product manufacturer.

Review of Relevant Literature and Previous Research

1. Financial Statement Analysis Techniques: Financial analysts employ various techniques to assess a
company's financial performance. Common methods include ratio analysis, trend analysis, and comparative
analysis. These tools help in understanding a company's profitability, liquidity, solvency, and operational
efficiency (Anthony, 2014).
2. Ratios in Financial Analysis: Ratios are vital in evaluating a company's financial health. These ratios can be
categorized into liquidity ratios, profitability ratios, leverage ratios, and activity ratios. For instance, liquidity
ratios like the current ratio and quick ratio measure a company's ability to meet short-term obligations
(Brigham & Houston, 2013).
3. DuPont Analysis: DuPont analysis decomposes return on equity (ROE) into its constituent parts, namely
net profit margin, asset turnover, and leverage. This breakdown provides deeper insights into what drives a
company's ROE and helps identify areas for improvement (Higgins, 2012).
4. Industry Comparison: Benchmarking Superhouse Ltd's financial performance against industry peers is
crucial for assessing its competitive position. Industry averages serve as reference points to gauge whether
the company is performing better or worse relative to its competitors (Palepu et al., 2013).
5. Financial Statement Fraud Detection: Analyzing financial statements can also aid in detecting potential
fraud or financial irregularities. Researchers have developed models and techniques to identify red flags
indicating fraudulent activities, such as earnings manipulation or revenue recognition issues (Kranacher et
al., 2011).

Theoretical Framework

The theoretical framework guiding this study is grounded in financial management theories such as the
agency theory, signaling theory, and stakeholder theory.

1. Agency Theory: According to agency theory, conflicts of interest arise between stakeholders (such as
shareholders and management) due to differing goals and incentives. Financial statement analysis helps
mitigate these conflicts by providing transparency and accountability (Jensen & Meckling, 1976).
2. Signaling Theory: Signaling theory posits that companies use financial statements to convey information
to external stakeholders. Through financial disclosures, management signals the company's financial
health, growth prospects, and future performance potential (Ross, 1977).
3. Stakeholder Theory: Stakeholder theory emphasizes the importance of considering the interests of all
stakeholders, including employees, customers, suppliers, and society at large. Financial statement analysis
aids in understanding how well a company balances the needs of its various stakeholders (Freeman, 1984).

Conceptual Framework

The conceptual framework for this study integrates the key elements of financial statement analysis:

1. Financial Statement Preparation: Superhouse Ltd prepares financial statements in accordance with
relevant accounting standards (e.g., IFRS or GAAP). These statements include the income statement,
balance sheet, and cash flow statement.
2. Data Collection and Analysis: Financial analysts collect data from Superhouse Ltd's financial statements
and apply various analytical techniques, such as ratio analysis and trend analysis, to interpret the financial
information.
3. Interpretation and Decision Making: The analysis results are interpreted to assess Superhouse Ltd's
financial performance, identify strengths and weaknesses, and make informed decisions regarding
investment, lending, or operational improvements.
4. Communication and Reporting: Findings from the financial statement analysis are communicated
through reports or presentations to relevant stakeholders, including investors, creditors, management, and
regulatory authorities.

Identification of Gaps in the Literature

Despite extensive research on financial statement analysis, there are still some gaps in the literature,
particularly concerning Superhouse Ltd:

1. Limited Focus on Industry-Specific Metrics: Most studies provide generic financial analysis techniques
but lack industry-specific metrics tailored to the leather products manufacturing sector, potentially
overlooking critical performance indicators.
2. Insufficient Coverage of Non-Financial Factors: While financial metrics are essential, there's a lack of
emphasis on non-financial factors such as environmental sustainability, supply chain resilience, and brand
reputation, which are increasingly important in today's business landscape.
3. Scarcity of Studies on Long-Term Sustainability: Many studies focus on short-term financial
performance, but there's a gap in research addressing Superhouse Ltd's long-term sustainability strategies,
including its approach to innovation, talent management, and market positioning.

Addressing these gaps would enhance the comprehensiveness and applicability of financial statement
analysis for Superhouse Ltd and similar companies in the leather industry.

In conclusion, financial statement analysis plays a pivotal role in evaluating the performance and financial
health of companies like Superhouse Ltd. By synthesizing previous research, theoretical frameworks, and
identifying gaps in the literature, this review provides a foundation for conducting a comprehensive
analysis of Superhouse Ltd's financial statements.

Literature Review
Financial statement analysis is a cornerstone of corporate finance, providing insights into the financial health and
performance of companies. This literature review examines previous research, theoretical frameworks, and identifies
gaps in the literature concerning the financial statement analysis of Superhouse Ltd, a prominent leather product
manufacturer.

Review of Relevant Literature and Previous Research

Financial Statement Analysis Techniques: Financial analysts employ various techniques to assess a company's
financial performance. Ratio analysis, trend analysis, and comparative analysis are among the most widely used
methods. These tools aid in understanding a company's profitability, liquidity, solvency, and operational efficiency
(Anthony, 2014).
Ratios in Financial Analysis: Ratios serve as key indicators in evaluating a company's financial health. Categories
of ratios include liquidity ratios, profitability ratios, leverage ratios, and activity ratios. For instance, liquidity ratios
such as the current ratio and quick ratio gauge a company's ability to meet short-term obligations (Brigham &
Houston, 2013).
 DuPont Analysis: DuPont analysis breaks down return on equity (ROE) into its components: net profit margin,
asset turnover, and leverage. This decomposition provides deeper insights into what drives a company's ROE and
identifies areas for improvement (Higgins, 2012).
Industry Comparison: Benchmarking Superhouse Ltd's financial performance against industry peers is crucial for
assessing its competitive position. Industry averages serve as benchmarks to determine whether the company is
performing better or worse relative to its competitors (Palepu et al., 2013).
Financial Statement Fraud Detection: Financial statements are also instrumental in detecting potential fraud or
financial irregularities. Researchers have developed models and techniques to identify red flags indicating fraudulent
activities, such as earnings manipulation or revenue recognition issues (Kranacher et al., 2011).

Theoretical Framework
The theoretical framework guiding this study incorporates financial management theories such as agency theory,
signaling theory, and stakeholder theory.
Agency Theory: According to agency theory, conflicts of interest arise between stakeholders (e.g., shareholders
and management) due to differing goals and incentives. Financial statement analysis helps mitigate these conflicts by
enhancing transparency and accountability (Jensen & Meckling, 1976).
Signaling Theory: Signaling theory posits that companies utilize financial statements to convey information to
external stakeholders. Through financial disclosures, management signals the company's financial health, growth
prospects, and future performance potential (Ross, 1977).
Stakeholder Theory: Stakeholder theory emphasizes considering the interests of all stakeholders, including
employees, customers, suppliers, and society at large. Financial statement analysis aids in understanding how well a
company balances the needs of its various stakeholders (Freeman, 1984).

Conceptual Framework
The conceptual framework integrates key elements of financial statement analysis:
Financial Statement Preparation: Superhouse Ltd prepares financial statements in compliance with relevant
accounting standards (e.g., IFRS or GAAP), including the income statement, balance sheet, and cash flow statement.
Data Collection and Analysis: Financial analysts gather data from Superhouse Ltd's financial statements and
apply analytical techniques such as ratio analysis and trend analysis to interpret the financial information.
Interpretation and Decision Making: Analysis results are interpreted to assess Superhouse Ltd's financial
performance, identify strengths and weaknesses, and make informed decisions regarding investment, lending, or
operational improvements.
Communication and Reporting: Findings from financial statement analysis are communicated through reports or
presentations to relevant stakeholders, including investors, creditors, management, and regulatory authorities.

Identification of Gaps in the Literature

Despite extensive research on financial statement analysis, some gaps persist:
Industry-Specific Metrics: There's a lack of focus on industry-specific metrics tailored to the leather products
manufacturing sector, potentially overlooking critical performance indicators.
Non-Financial Factors: Insufficient emphasis on non-financial factors such as environmental sustainability,
supply chain resilience, and brand reputation, which are increasingly important in today's business landscape.
Long-Term Sustainability: Limited studies address Superhouse Ltd's long-term sustainability strategies, including
innovation, talent management, and market positioning.
Addressing these gaps would enhance the applicability of financial statement analysis for Superhouse Ltd and
similar companies in the leather industry.
In conclusion, financial statement analysis is vital for evaluating the financial health and performance of
companies like Superhouse Ltd. This review synthesizes previous research, theoretical frameworks, and identifies
gaps in the literature, providing a foundation for comprehensive analysis.

Certainly! Here's an expanded version of the literature review section with a word count of at least 1500 words:
---

**Literature Review**

Financial statement analysis is a cornerstone of corporate finance, providing insights into the financial health and
performance of companies. This literature review examines previous research, theoretical frameworks, and identifies
gaps in the literature concerning the financial statement analysis of Superhouse Ltd, a prominent leather product
manufacturer.

**Review of Relevant Literature and Previous Research**

Financial statement analysis encompasses various tools and techniques aimed at evaluating a company's financial
performance and health. Researchers and practitioners have extensively explored these methods and their
applications in different contexts.

1. **Financial Statement Analysis Techniques**:

Financial analysts utilize a range of techniques to assess a company's financial position and performance. These
techniques include ratio analysis, trend analysis, comparative analysis, and cash flow analysis. Ratio analysis
involves the calculation and interpretation of financial ratios, such as liquidity ratios (e.g., current ratio, quick ratio),
profitability ratios (e.g., return on equity, net profit margin), leverage ratios (e.g., debt-to-equity ratio, interest
coverage ratio), and activity ratios (e.g., inventory turnover, accounts receivable turnover) (Anthony, 2014).

2. **Ratios in Financial Analysis**:

Ratios are crucial indicators of a company's financial health and performance. Liquidity ratios assess the
company's ability to meet short-term obligations, profitability ratios measure its ability to generate profits, leverage
ratios evaluate its debt management, and activity ratios gauge its operational efficiency. By analyzing these ratios
over time and comparing them with industry benchmarks, financial analysts can identify trends, strengths, and
weaknesses in the company's financial performance (Brigham & Houston, 2013).

3. **DuPont Analysis**:
DuPont analysis provides a comprehensive framework for evaluating a company's return on equity (ROE) by
decomposing it into its components: net profit margin, asset turnover, and financial leverage. This breakdown helps
identify the drivers of ROE and assesses the company's efficiency in generating profits from its assets and managing
its capital structure (Higgins, 2012).

4. **Industry Comparison**:
Benchmarking Superhouse Ltd's financial performance against industry peers is essential for assessing its
competitive position. Industry comparisons enable financial analysts to identify relative strengths and weaknesses,
understand industry trends, and make informed decisions regarding investment and resource allocation. By analyzing
key financial metrics and performance indicators of comparable companies, analysts can gain valuable insights into
Superhouse Ltd's relative performance (Palepu et al., 2013).

5. **Financial Statement Fraud Detection**:

Financial statement analysis plays a crucial role in detecting potential fraud or financial irregularities.
Researchers have developed various models and techniques to identify red flags indicating fraudulent activities, such
as earnings manipulation, revenue recognition issues, and asset misappropriation. By conducting thorough financial
analysis and scrutinizing key financial indicators, analysts can uncover anomalies and discrepancies that may signal
fraudulent behavior (Kranacher et al., 2011).

**Theoretical Framework**
 Theoretical frameworks provide a conceptual basis for understanding the underlying principles and dynamics of
financial statement analysis. Several theoretical perspectives, including agency theory, signaling theory, and
stakeholder theory, inform the analysis and interpretation of financial statements.

1. **Agency Theory**:
Agency theory focuses on the relationship between principals (e.g., shareholders) and agents (e.g.,
management) and the conflicts of interest that arise due to differing goals and incentives. According to agency theory,
managers may pursue their self-interest at the expense of shareholders' interests, leading to agency costs. Financial
statement analysis serves as a mechanism for reducing agency costs by providing transparency, accountability, and
monitoring of managerial actions (Jensen & Meckling, 1976).

2. **Signaling Theory**:
Signaling theory suggests that companies use financial statements to communicate information to external
stakeholders, such as investors, creditors, and analysts. Through financial disclosures, management signals the
company's financial health, performance, and future prospects. By analyzing financial statements, stakeholders can
infer valuable insights into the company's operations, management quality, and growth potential (Ross, 1977).

3. **Stakeholder Theory**:
Stakeholder theory posits that companies have a broader responsibility to consider the interests of all
stakeholders, including employees, customers, suppliers, and society at large, beyond just shareholders. Financial
statement analysis helps assess how well a company fulfills its obligations to various stakeholders and balances their
competing interests. By evaluating the company's financial performance and sustainability practices, stakeholders can
hold the company accountable for its actions and decisions (Freeman, 1984).

**Conceptual Framework**

The conceptual framework outlines the key components and processes involved in financial statement analysis,
from data collection and analysis to interpretation and decision-making.

1. **Financial Statement Preparation**:

Superhouse Ltd prepares financial statements in accordance with applicable accounting standards (e.g.,
International Financial Reporting Standards [IFRS] or Generally Accepted Accounting Principles [GAAP]). These
financial statements include the income statement, balance sheet, statement of cash flows, and statement of changes
in equity. The preparation of accurate and reliable financial statements is essential for conducting meaningful
financial analysis (Weygandt et al., 2015).

2. **Data Collection and Analysis**:

Financial analysts collect financial data from Superhouse Ltd's financial statements and other relevant sources,
such as industry reports, regulatory filings, and market data. They analyze the data using various quantitative and
qualitative techniques, including ratio analysis, trend analysis, regression analysis, and scenario analysis. These
analytical tools help identify trends, patterns, and relationships in the company's financial performance and make
comparisons with industry benchmarks and competitors (Palepu et al., 2013).

3. **Interpretation and Decision Making**:

The analysis results are interpreted to assess Superhouse Ltd's financial performance, identify strengths and
weaknesses, and evaluate its overall financial health. Financial analysts evaluate key financial metrics, such as
profitability, liquidity, solvency, and efficiency ratios, to assess the company's operational and financial efficiency.
They also consider qualitative factors, such as industry dynamics, market trends, competitive positioning, and
regulatory environment, to provide a holistic assessment of the company's performance and prospects (Brigham &
Houston, 2013).

4. **Communication and Reporting**:

The findings from financial statement analysis are communicated to various stakeholders through reports,
presentations, and other forms of communication. Financial analysts prepare comprehensive reports summarizing the
analysis results, key findings, and recommendations for stakeholders, including investors, creditors, management,
and regulatory authorities. Effective communication of financial analysis findings is essential for informed decision-
making and stakeholder engagement (Wahlen et al., 2019).
 **Identification of Gaps in the Literature**

Despite the extensive research on financial statement analysis, several gaps remain in the literature, particularly
concerning Superhouse Ltd:

1. **Industry-Specific Metrics**:
There's a limited focus on industry-specific metrics tailored to the leather products manufacturing sector,
potentially overlooking critical performance indicators unique to Superhouse Ltd's industry. Future research could
explore developing and applying industry-specific financial metrics and benchmarks to enhance the relevance and
effectiveness of financial analysis for Superhouse Ltd and similar companies.

2. **Non-Financial Factors**:
The literature predominantly emphasizes financial metrics and factors, such as profitability, liquidity, and
solvency, while overlooking non-financial factors that may significantly impact Superhouse Ltd's financial
performance and sustainability. Future research could examine the integration of non-financial factors, such as
environmental sustainability, supply chain resilience, brand reputation,