COMPARISON BETWEEN

Index
1) 2) 3) 4) 5) 6) 7)

Jindal steel Tata Steel Ratio analysis Ratios of Jindal steel Ratios of Tata steel Comparison Conclusion

JINDAL STEEL INTRODUCTION

Jindal Steel and Power Limited (JSPL) is the most valuable private steel producer in India, with an annual turnover of over Rs. 11,000 crore, Jindal Steel & Power Limited is a part of about billion diversified O. P. Jindal Group. JSPL is a leading player in Steel, Power, Mining, Oil & Gas and Infrastructure. Mr. Naveen Jindal, the youngest son of the late Shri. O P Jindal, drives JSPL and its group companies Jindal Power Ltd, Jindal Petroleum Ltd., Jindal Cement Ltd. and Jindal Steel Bolivia. The company professes a belief in the concept

of self-sufficiency. The company produces steel and power through backward integration from its own captive coal and iron-ore mines. However, in terms of tonnage, it is the third largest steel producer in . The company manufactures and sells store iron, mild steel slabs, ferro chrome, iron ore, mild steel, structural, hot rolled plates and coils and coal based sponge iron plant. The company is also involved in power generation. Jindal Steel and Power is a part of the Jindal Group. (19302005). In 1969, he started Pipe Unit Jindal India Limited, one of the earlier incarnations of his business empire. After Jindal's death in 2005, much of his assets were transferred to his wife, Savitri Jindal. Jindal Group's management was then split among his four sons with naveen jindal as the Managing Director of Jindal Steel and Power Limited. His elder brother, sajjan jindal, is currently the head of ashocham, an influential body of the chambers of commerce, and the head of JSW Group, part of O.P. Jindal Group.

Tata steel Introduction

Tata Steel, formerly known as TISCO and Tata Iron and Steel Company Limited, is the world's seventh largest steel company,with an annual crude steel capacity of 31 million tonnes. It is the largest private sector steel company in

India in terms of domestic production. Currently ranked 410th on fortune globe, it is based in jhamshedpur.It is part of tata group of companies. Tata Steel is also India's secondlargest and second-most profitable company in private sector with consolidated revenues of 132,110 crore and net profit of over 12,350during the year ended March 31, 2008.Tata Steel is the 8th most valuable brand according to an annual survey conducted by Brand Finance and The Economic Times in 2010. The company is listed on BSE and NSE , and employs about 82,700 people (as of 2007).Tata Steel came into limelight on August 16 when it successfully won the bid for British steel maker Corus.It was, to date, India's largest ever foreign takeover. It made the Tata Group the world's fifth largest steel maker, and catapulted them to the global league.

WHAT IS RATIO ANALYSIS

A tool used by individuals to conduct a quantitative analysis of information in a company's financial statements. Ratios are calculated from current year numbers and are then

compared to previous years, other companies, the industry, or even the economy to judge the performance of the company.Ratio analysis is predominately used by proponents of fundamental analysis.

Ratios of tata steel

Revenue ratios 1)Gross profit ratio-gross profit/net sales*100 Gross profit of tata steel- 30271.87 Net sales of tata steel- 12062.75 Gross profit ratio oftata steel =62.13% 2)Operating ratio- cogs +operating expense/net sales*100 Cogs of tata steel 12062.75 Operating expense- 8631.05 Net sales- 29307.55 Operating ratio of tata steel =70.60% 3)Expense ratioa)Operating expense/netsales*100 b)Selling and distribution /netsales*100 c)Office and administration /netsales *100 d)Finance expenses/netsales*100 a)Operating expense of tata steel-831.05 Net sales of tata steel-29306.55 Expense ratio of tata steel=29.44% b) Finance expenses of tata steel-1300.49 net sales of tata steel -29307.55 Finance expenses ratio of tata steel =4.43%

4) net profit ratioa)operating net profit/netsales*100 Operating profit of tata steel-9776.85 Net sales of tata steel-29307.55 Operating profit ratio of tata steel=33.35% b)net profit before tax/net sales*100 net profit before tax of tata steel -9776.85 net sales of tata steel-29307.55 net profit before tax ratio of tata steel-33.35% c)net profit after tax net profit after tax /net sales *100 net profit after tax of tata steel=6865.69 net sales of tata steel =29307.55 net profit after tax ratio of tata steel=23.43%

BALANSHEET RATIOS 1)current ratio-current asset /current liability Current asset of tata steel-24212.30 Current liability of tata steel-12805.95 Current ratio of tata steel=1.89:1 2)quick ratio- quick asset /quick liability Quick asset /quick liability= current asset stock prepaid expenses/current liability-bank o/d quick asset of tata steel-28166.06 quick liability of tata steel-18278.40 quick ratio of tata steel-2.19:1

3)proprietary ratio = share holders funds /total assets*100 total assets-fixed asset + investment +current asset shareholders funds of tata steel-46944.63 total assets of tata steel-70777.27 proprietary ratio of tata steel=66.33% 4) stock working capital ratioclosing stock/working capital *100 closing stock of tata steel -3953.76 working capital of tata steel-4282.62 stock working capital ratio of tata steel=92.32% 5)debt equity ratio-loan fund/share holders Loan fund of tata steel-29801.1 Shareholders funds-46944.63 Debt equity ratio of tata steel=0.63:1

COMBINED RATIO 2)Return on shareholders fund net profit after tax/shareholders fund*100 Tata steel- 6865.69/46944.63*100= 14.62% 3)Return on equity capital-net profit after tax

preference dividend/paid up equity capital*100 Tata steel-6865.69/76745.77*100= 8.94% 4)Earning per share-net profit after taxpreference dividend/no of equity shares Tata steel-6865.69/95.941=71.56rs No of equity shares=9594.1/10=95.94 5)Price earning ratio-mp per share/no of equity shares Tata steel nil 6)Dividend payout ratiodividend per share/earning per share dividend per share-total equity dividend/no of share dividend per share of tata steel120/100*95.941=115.1292 earning per share of tata steel-71.5615 dividend payout ratio=0.0011:1

4) stock working capital ratioclosing stock/working capital *100 closing stock of tata steel -3953.76 working capital of tata steel-4282.62 stock working capital ratio of tata steel=92.32% 5)debt equity ratio-loan fund/share holders Loan fund of tata steel-29801.1 Shareholders funds-46944.63 Debt equity ratio of tata steel=0.63:1

COMBINED RATIO 2)Return on shareholders fund net profit after tax/shareholders fund*100 Tata steel- 6865.69/46944.63*100= 14.62% 3)Return on equity capital-net profit after tax preference dividend/paid up equity capital*100 Tata steel-6865.69/76745.77*100= 8.94% 4)Earning per share-net profit after taxpreference dividend/no of equity shares Tata steel-6865.69/95.941=71.56rs

No of equity shares=9594.1/10=95.94 5)Price earning ratio-mp per share/no of equity shares Tata steel nil 6)Dividend payout ratiodividend per share/earning per share dividend per share-total equity dividend/no of share dividend per share of tata steel120/100*95.941=115.1292 earning per share of tata steel-71.5615 dividend payout ratio=0.0011:1

Ratios of JSW
Revenue ratios 1)Gross profit ratio-gross profit/net sales*100 Gross profit of jsw- 5445.56 Net sales of jsw- 23098.85 Gross profit ratio ofjsw =23.58% 2)Operating ratio- cogs +operating expense/net sales*100 Cogs of jsw 1554.55 Operating expense- 17653.29 Net sales- 23098.55 Operating ratio of jsw =83.16% 3)Expense ratioa)Operating expense/netsales*100

b)Selling and distribution /netsales*100 c)Office and administration /netsales *100 d)Finance expenses/netsales*100 a)Operating expense of jsw-1554.55 Net sales of jsw 23098.85 Expense ratio of jsw=6.73% b) Finance expenses of jsw-850.92 net sales of jsw-23098.85 Finance expenses ratio of jsw =3.68%

4) net profit ratioa)operating net profit/netsales*100 Operating profit of jsw-4638.38 Net sales of jsw-23098.85 Operating profit ratio of jsw=20.08% b)net profit before tax/net sales*100 net profit before tax of jsw -2607.80 net sales of jsw-23098.85 net profit before tax ratio of jsw-11.29% c)net profit after tax net profit after tax /net sales *100 net profit after tax of jsw=2010.67 net sales of jsw =23098.85 net profit after tax ratio of jsw=8.70%

BALANSHEET RATIOS 1)current ratio-current asset /current liability Current asset of jsw-10188.37

Current liability of jsw-12381.95 Current ratio of jsw=0.82:1 2)quick ratio- quick asset /quick liability Quick asset /quick liability= current asset stock prepaid expenses/current liability-bank o/d quick asset of jsw-6049.96 quick liability of jsw-12381.77 quick ratio of jsw-0.49:1 3)proprietary ratio = share holders funds /total assets*100 total assets-fixed asset + investment +current asset shareholders funds of jsw-17225.27 total assets of jsw 291761 proprietary ratio of jsw=59.04%

4) stock working capital ratioclosing stock/working capital *100 closing stock of jsw-4138.41 working capital of jsw-2193.40 stock working capital ratio of jsw=188.68% 5)debt equity ratio-loan fund/share holders Loan fund of jsw 11951.34 Shareholders funds-17225.27 Debt equity ratio of jsw=0.69:1

COMBINED RATIO 2)Return on shareholders fund net profit after tax/shareholders fund*100 jsw- 2010.67/17225.27*100= 14.62% 3)Return on equity capital-net profit after tax preference dividend/paid up equity capital*100 jsw-2010.67-27.60/284.15*100= 697.79% 4)Earning per share-net profit after taxpreference dividend/no of equity shares jsw-2010.67-27.90/22.31=88.87rs 5)Price earning ratio-mp per share/no of equity shares jsw nil 6)Dividend payout ratiodividend per share/earning per share dividend per share-total equity dividend/no of share 12.25/88.87 dividend payout ratio=0.14

Balance Sheet of JSW Steel

------------------- in Rs. Cr. ------------------Mar '11 12 mths

Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities

563.18 284.15 529.38 279.03 16,132.71 0.00 17,225.27 7,675.82 4,275.52 11,951.34 29,176.61 Mar '11 12 mths

Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses

27,407.35 6,305.20 21,102.15 6,169.05 4,098.81 4,138.41 838.65 136.26 5,113.32 3,324.43 1,750.62 10,188.37 0.00 11,984.37 397.40 12,381.77 -2,193.40 0.00

Total Assets Contingent Liabilities Book Value (Rs)

29,176.61 8,870.90 735.80

JWS PNL Statement.

Mar '11 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses

25,130.76 2,031.91 23,098.85 199.05 747.37 24,045.27 15,995.19 1,181.52 534.47 476.58 819.68 200.40 0.00 19,207.84 Mar '11 12 mths

Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)

4,638.38 4,837.43 850.92 3,986.51 1,378.71 0.00 2,607.80 161.89 2,769.69 759.02 2,010.67 3,212.65 27.90 273.32 48.87 2,231.17 88.87 122.50 735.80

Comparisions
Revenue ratios
Gross profit ratio 1)used for analyzing trading results 2)higher ratio means greater profitability attained by increasing sales 1)indicates profitability and managerial efficiency in controlling costs 2)higher ratio means lower margin of profit 3)lower ratio means greater margin of profit 4)comparision with previous year would indicate saving or increase in cost 1)shows portion of sales consumed by various by various items of expenses 2)high ratio means lower profitability and inefficiency of management in controlling expenses 1)it measures overall profitability and operating efficiency 2)higher ratio indicates higher profitability and lower ratio indicates lower profitability 1)shows efficiency in inventory management 2)higher ratio indicates favourable trading situation, no loss due to obsolescence as stock is turned into sales regularly, no excessive blocking of funds in inventory, overtrading

Operating ratio

Expenses ratio

Net profit ratio

Stock turnover ratio

3)lower ratio indicates stock is moveable,blocking of funds, wrong buying or excessive productiory undertaking

Balance sheet ratio

Current ratio 1) measures short term financial strength. 2) ability to pay current obligation 3) Higher ratio: sound financial position, idle funds. 4) lower ratio: inadequate working capital, short term solvency in danger, overtrading. Quick ratio 1)stringent(tough) test to solvency 2)measures ability to meet the immediate liabilities 3)qualitative test to measure liquidity

Proprietary ratio

Stock to working capital

4)higher ratio: sound financial position, idle funds 5)lower ratio: dangerous financial position inability to meet immediate obligations 1)shows percentage of total assets financed by the proprietor 2)all fixed assets and part of current assets should be financed our of proprietors fund in order to build a solid foundation of the company 3)higher ratio: lesser dependence on outside funds- soun financial position but over capitalization and low returns 4)lower ratio: more dependence on outside funds under capitalization over trading unsound financial position 1)extent of working capital blocked in stock 2)higher ratio: unsound working capital position if stock i not saleable, situation becomes becomes dangerous. 3)lower ratio: sound working capital position and effectiv inventory management.

Debt equity ratio

1)test of long term financial policy or capital structure o the company 2)higher ratio indicates greater dependence on loans, higher amount of interest payable. Such trading on equity affects adversely during recessio 3)lower ratio indicates low owed funds Capital 1) If fixed interest, dividend bearing capital exceeds the Gearing Ratio equity capital and reserves, the company is said to be or Leverage highly geared. ratio 2) High gearing is favorable only when rate of earning of the greater than fixed interest. 3) It may amount to under capitalization. 4) Equity shareholders except higher dividend and share become speculative.

Last gearing 1)majority interest lies with equity shareholders 2)over capitalization 3)low rate of return on equity shares

Combined ratios
Return on capital employed Return on shareholders fund 1)this is the broadest measure of performance 2)higher ratio is regarded as favorable and lower ratio is unfavorable 1)it shows earning power of proprietors funds. Minimum return should be earned to keep proprietors happy 2)the ratio is helpful for future investors 3)high rate of return means growing and prosperous company. Lower is unfavorable Return on 1)it shows the profitability of the company in terms of equity capital earning available for equity shareholders 2)higher ratio means effective use of equity capital and advantage of trading on equity 3)lower ratio indicates low profitability Earnings per 1)higher ratio signifies that the company may pay dividend

share

Debtors turnover ratio Dividend payout ratio

at a higher rate in future 2)it indicates the possibility of issue of bonus share in future 3)higher ratio shows higher profitability 4)this ratio also shows effective utilization of equity capital 1)this ratio is calculated to indicate turnover of debtors i.e. on an average within how much time debtors are received in cash 1)the purpose of this ratio is to find out earning used for payment of dividend and the proportion of earning retained

CONCLUSION

 Gross Profit Ratio : Higher the profit,better it is. TATA steel has a better Profit Percentage (62.13%)

Expenses Ratio : Lower the ratio, better it is. Tata steel has a lower Ratio (19.5%).

Net Profit Ratio : Higher the ratio, better is the business. TATA has a better Net profit Ratio. (33.35%0 Thus It indicates leTATA steel is preferred for investment as: It has financial sound position as compared to JSW. 1.Current ratio .Quick rsser dependance on outside funds 1.Proprietory Ratio It indicates low owed funds 1. Debt Equity ratio It indicates growing and prosperous company 1.Return on proprietors funds

It is profitable 1.Gross Profit 2.Net profit Better profit for investors 1.. earning per share Thus we conclude that tata steel is a better comapany to invest in. It indicates low owed funds Debt Equity ratio It indicates growing and prosperous company Return on proprietors funds It is profitable Gross Profit Net profit Better profit for investors a. earning per share