STEEL SECTOR

PROCESS
 James Erskine started a small iron blast furnace in the jungles
of Kulti, in the year 1870. The production of iron soon began
under the name of Bengal Iron Works Company which later
changed to Burrakar Iron Work. This company, however, was

history
failing to gain the government’s backing due to its bad
quality of iron. Thus, the company was shut down for 8 years
and reopened after it was acquired by the Bengal Iron and
Steel Company.
Even though the company produced over 50,000 tons of pig
Iron per annum, it failed to make profits in steel production
due to the poor quality of ore used. This, however, changed
in 1910 when the company began using better quality Iron
ore. In the year 1926, the company changed its name to
Bengal Iron Company Ltd. The modern-day Tata Steel, earlier
known as TISCO, was established in the year 1907 by
Jamsedji Nusserwanji Tata in Jamshedpur. By 1939, TISCO was
operating the biggest steel plant in the entire British Empire.
This company is the 7th largest steel producer in the world
today and the largest steel and iron producer in India.
 post-Independence India has seen a magnificent growth in
the Steel industry. From the year 1950 to 1951 India
produced an estimate of 16.9 lakh tons of pig iron. During the
first plan, Iron and Steel in India, TISCO and IISCO were the
three main players in the private sector and Mysore State
Iron and Steel Works were in the Public sector.
The Steel Authority of India (SAIL) was launched in the year
1973. It is a government organization which manages all the
major steel plants in India like Bhilai, Bokara, Rourkela and
Burnpur. This organization started managing the Iron and
Steel in 1976.
The Maharashtra Elektrosmelt Limited and the Visweswaraya
Iron and Steel Limited were taken over by SAIL in the year
1986 and 1989 consecutively. The functioning of SAIL saw
some changes in the year 1991 owing to the Liberalized
industry policy. This organization became more tech-driven
and the manual labour cut down by 40,000 in the next 5
years.
Introduction to steel sector

• India was the world’s second-largest steel producer with production

standing at 106.5 MT in 2018. The growth in the Indian steel sector
has been driven by domestic availability of raw materials such as iron
ore and cost-effective labour.

• Consequently, the steel sector has been a major contributor to India’s

manufacturing output. India’s steel production capacity has
expanded to 137.975 million tones in FY19. As of 2018, India is the
world’s second largest producer of crude steel (up from eighth spot in
2003).

• The Indian steel industry is very modern with state-of-the-art steel

mills. It has always strived for continuous modernization and up-
gradation of older plants and higher energy efficiency levels.

• Indian steel industries are classified into three categories such as

major producers, main producers and secondary producers.
Market size of steel industry in india
Steel industry
Major companies in steel sector
• Rashtriya Ispat Nigam Limited (RINL)
• Tata Steel
•  SAIL
•  VISA Steel
• Essar Steel
• Bhushan Steel
• Jindal Steel & Power
• Facor Steel
• MESCO Steel
companies
Liquidity ratios
 Current ratio

Formula
CR = Current Assets / Current Liabilities

Year Visa steel JSW Jindal Steel Tata Steel

2016
0.217943 0.57824581 0.769444 0.95437041
2017
0.235077 0.71956443 0.624588 0.99758947
2018
0.10460455 0.80071813 0.735771 1.21762679
2019
0.05776702 0.79877642 0.66864873 0.92015687

Interpretation –
 Quick ratio

Formula
QR = Quick Assets / Current Liabilities
Quick Assets = Current Assets – Inventories – Prepaid Expenses

Year Visa steel JSW Jindal Steel Tata Steel

2016
0.13251 0.25174859 0.451954 0.53702582
2017
0.120721 0.33426928 0.451954 0.50202143
2018
0.06221122 0.3659025 0.480821 0.70863688
2019
0.02607232 0.45246144 0.36451451 0.38908563

Interpretation –
Leverage ratios
 Debt equity ratio

Formula
DER = Total Debt / Shareholders Equity

Year Visa steel JSW Jindal Steel Tata Steel

2016
5.81445 2.01439375 1.323852 2.98781223
2017
8.407904 1.66497031 1.301695 3.38962462
2018
5.47902 1.23120506 1.27166 2.39374755
2019
4.454346 1.04756723 1.0821606 2.25652641

Interpretation –
 Debt to total asset ratio

Formula
DTAR = Total Debt / Total Assets

Year Visa steel JSW Jindal Steel Tata Steel

2016
1.207708 0.4585151 0.477626 0.74934616
2017
1.134991 0.42340133 0.441164 0.77533393
2018
1.223263 0.36840618 0.439299 0.70568486
2019
1.28949 0.31318203 0.3880782 0.70112726

Interpretation –
Coverage ratio
 Interest coverage ratio

Formula
ICR = (PBIT) / Debt Interest

Year Visa steel JSW Jindal Steel Tata Steel

2016
-0.339872 0.8548448 -0.193944 2.06292298
2017
-2.243109 2.32059448 0.220929 2.02105981
2018
-3.275989 3.08213396 0.668981 1.3387638
2019
-8.515538 3.80673985 0.685997 -0.2717863

Interpretation –
 Debt service coverage ratio

Formula
DSCR = PAT + Dep +Non-Cash + Interest + Lease
Interest + Lease Rentals + Repayment on Term
Loan
Year Visa steel JSW Jindal Steel Tata Steel
2016 0 0 0 0
2017 0 0 0 0
2018 0 0 0 0
2019 0 0 0 0

Interpretation –
Turnover ratios
 Inventory turnover ratio

Formula
ITR = Cost of Goods Sold / Average
Inventory

Year Visa steel JSW Jindal Steel Tata Steel

2016
6.081734 3.42451551 2.915863 2.58556522
2017
4.007715 3.06230803 2.679092 2.54075542
2018
13.42389 3.34651421 2.192588 2.2309887
2019
11.00588 3.14098158 2.658673 2.51260294

Interpretation –
 Average Inventory holding period

Formula
IHP = 365 Days / Debtors Turnover Ratio

Year Visa steel JSW Jindal Steel Tata Steel

2016
60.01578 106.58442 125.1773 141.168359
2017
91.07434 119.191145 136.2402 143.658062
2018
27.19034 109.068714 166.47 163.604594
2019
33.1641 116.205712 137.2865 145.26768

Interpretation –
 Debtors turnover ratios

Formula
DTR = Net Credit Sales / Average Sundry
Debtors

Year Visa steel JSW Jindal Steel Tata Steel

2016
8.185506 16.8575331 15.01955 8.81302678
2017
11.80982 14.5905037 13.5739 10.1339229
2018
31.53663 15.5635629 15.56912 10.0673021
2019
42.64649 11.8375698 13.04623 13.4696105

Interpretation –
 Average collection period

Year Visa steel JSW Jindal Steel Tata Steel

2016
44.59101 21.6520412 24.30166 41.415964
2017
30.90648 25.0162713 26.88984 36.0176415
2018
11.57384 23.4522135 23.44384 36.2559897
2019
8.558735 30.8340314 27.97744 27.0980367

Interpretation –
 Creditors turnover ratio

Year Visa steel JSW Jindal Steel Tata Steel

2016
4.53973 1.65600113 2.621636 0.5702183
2017
4.19364 2.2287234 2.242126 0.61508868
2018
11.7532802 2.4322002 2.238301 0.26328255
2019
9.10907936 2.69051303 2.925699 0.30243552

Interpretation –
 Creditors payment period

Formula
TATR = Sales / Average Total Assets

Year Visa steel JSW Jindal Steel Tata Steel

2016
80.4012 220.410478 139.2261 640.105724
2017
87.0366 163.770883 162.7919 593.410372
2018
31.05516 150.069883 163.0702 1386.34329
2019
40.069911 135.661859 124.757 1206.86884

Interpretation –
Profitability ratios
 Gross profit margin

Formula
GPM = Gross Profit / Sales

Year Visa steel JSW Jindal Steel Tata Steel

2016
20.70147 46.0870489 50.68388 51.3392807
2017
22.32671 42.4321482 56.0206 46.3290136
2018
25.67288 42.3566143 59.67879 49.4312901
2019
16.92045 38.0207988 55.83428 50.0035043

Interpretation –
 Operating profit margin

Formula
OPM = Operating Profit / Sales

Year Visa steel JSW Jindal Steel Tata Steel

2016
-1.379127 6.69566974 -2.939623 11.5156284
2017
3.480993 14.4442976 3.262317 7.67763976
2018
1.881585 15.5809914 9.096108 16.2512534
2019
-1.082565 17.5926472 7.401966 17.2703717

Interpretation –
 Net profit margin

Formula
NPM = Net Profit / Sales

Year Visa steel JSW Jindal Steel Tata Steel

2016
-47.42746 -1.0453767 -14.37763 1.92100013
2017
-7.990225 5.72717061 -10.90166 -0.2592234
2018
-4.271559 8.34983814 -5.712995 14.0520434
2019
-11.40872 8.87714289 -6.102101 5.77491661

Interpretation –
 Return on capital employed

Formula
ROCE = NOPAT / Average Total Capital
Employed

Year Visa steel JSW Jindal Steel Tata Steel

2016
-0.1113 0.05753302 0.002401 12.8872903
2017
-0.0612 0.1319846 0.014227 28.4170405
2018
-0.0817103 0.16561756 0.035143 -0.7721261
2019 -1.0954537 0.17876283 0.02985 4.58914814

Interpretation –
 Return on equity

Formula
ROE = Equity Earnings / Average Total
Shareholders Equity

Year Visa steel JSW Jindal Steel Tata Steel

2016
-0.83703 -2.56054 -9.258029 4.58914814
2017
-0.23944 15.4769876 -8.275076 -0.7721261
2018
-0.11307 22.2016416 -5.269238 28.4170405
2019
-0.169206 21.9071189 -7.50631 12.8872903

Interpretation –
Valuation ratios
 Price to earning ratios

Formula
P/E = Market Price Per Share / Earnings
Per Share

Year Visa steel JSW Jindal Steel Tata Steel

2016 0
102.142857 6.832258 0.38
2017 0
15.4769876 9.823748 0.49
2018 0
22.2016416 26.81013 0.42
2019 0
21.9071189 38.93382 0.29

Interpretation –
 Dividend yield ratio

Formula
DYR = Dividend Per Share / Market Price
Per Share*100

Year Visa steel JSW Jindal Steel Tata Steel

2016 0 0 0
-0.01
2017 0 0 0
0.06
2018 0 0 0
0.05
2019 0 0 0
0.09

Interpretation –
 Dividend payout ratio

Formula
DPR = Dividend Per Share / Earnings Per
Share

Year Visa steel JSW Jindal Steel Tata Steel

2016 0 0 0
6.51
2017 0 0 0
6.337
2018 0 0 0
72.83
2019 0 0 0
15.78

Interpretation –