ANALYSIS OF THE CAPITAL STRUCTURE

OF
TATA STEEL LTD. & STEEL AUTHORITY
OF INDIA LTD.
LIVE PROJECT OF AFM
 
SUBMIITED BY:
ANJALI ASHOK (19BSP0363)
NIVEDITA GUPTA (19BSP1785)
UPASANA DAS (19BSP3413)
PRASANTH CHADARAM (19BSP0696)
ABHISHEK (19BSP0100)
AMBESH (19BSP0294)
 OBJECTIVE AND OVERVIEW OF CAPITAL STRUCTURE
OF TATA STEEL LTD. & SAIL

TATA STEEL
• EXPANSION
• SUSTAINABILITY

Capital Structure - Tata Steel Ltd.

               
Period Instrument Authorized Issued - PAI D U P -
Capital Capital
From To   (Rs. cr) (Rs. cr) Shares (nos) Face Capital
Value (Rs. Cr)
2018 2019 Equity Share 2100.0 1205.2 1126489680 10.0 1126.5

2017 2018 Equity Share 2100.0 1205.2 77636705 3 19.41

2016 2017 Equity Share 2100.0 972.13 971215439 10 971.22
 SAIL
• EXPANSION
• SUSTAINABILITY

Capital Structure - Steel Authority of India (SAIL) Ltd.

Period Instrument Authorized Issued - PAI D U P -

Capital Capital
From To   (Rs. cr) (Rs. cr) Shares (nos) Face Capital
Value (Rs. Cr)
2018 2019 Equity Share 5000.0 4130.5 4130525289 10.0 4130.5

2017 2018 Equity Share 5000.0 4130.5 4130525289 10.0 4130.5

2016 2017 Equity Share 5000.0 4130.5 4130525289 10.0 4130.5

 METHODOLOGY OPTED
Leverage Analysis: Leverage is used to describe the ability of a firm to use
fixed cost assets or funds to increase the return to its equity shareholders.

Types of Leverage:-

(i) Operating leverage

(ii) Financial leverage

Financial leverage = Percentage change in EPS / Percentage change in EBIT =

Increase in EPS / EPS / Increase in EBIT/EBIT

(iii) Combined leverage

TATA STEEL Pvt. Ltd. LEVERAGE ANALYSIS
PARTICULARS March 2019 (Rs. Crore)

Sales 73459.77
Variable Costs  
(-) Raw Materials 25688.42
(-) Miscellaneous Expenses 16749.28
Contribution 31022.07
Fixed Costs  

Power and Fuel Cost 3033.34

Employee Cost 5131.06
Depreciation 3802.96
EBIT 19054.71
(-) Interest 2823.58
EBT 16231.13
(-) Tax 5694.06
EAT 10537.07
Analysis:

Degree of Operating leverage is 1.63. So, if we increase the

sales of Tata Steel by 10%, the contribution will also increase
by 10% simultaneously, the EBIT will increase by 16.3%.

Degree of Financial Leverage is 1.174.

Degree of Combined Leverage is 1.91. So, if we increase the

sales of Tata Steel by 10%, the EBIT will increase by 19.1%
or vice-versa.
SAIL COMPANY LEVERAGE ANALYSIS
PARTICULARS March 2019 (Rs. Crore)

Sales 70041.97

Variable Cost  
(-) Raw Materials 35268.19
(-) Miscellaneous expenses 9798.77
Contribution 24974.01
Fixed Costs  
Power and Fuel Cost 6052.52
Employee Cost 8830.34
Depreciation 3384.72
EBIT 6707.43
(-) Interest 3154.92
EBT 3552.51
(-) Tax 1159.07
EAT 2393.44
Analysis:
• Degree of Operating leverage is 3.723. So, if we increase the
sales of SAIL by 10%, the contribution will also increase by
10% simultaneously this will increase EBIT by 37.23%.

• Degree of Financial leverage is 1.89.

• Degree of Combined Leverage is 7.03. So, if we increase the

sales of SAIL by 10%, the EBT will increase by 70.3% or
vice-versa.
 BREAK EVEN POINT

The point at which total fixed and variable costs equal to total
revenues is known as the break-even point. At the break-even
point, a business does not make a profit or loss. Therefore,
the break-even point is often referred to as the ‘no-profit’ or
‘no-loss point.’
The break-even analysis is important to business owners and
managers in determining how many units (or revenues) are
needed to cover fixed and variable expenses of the business.
BREAK EVEN POINT

TATA STEEL
Fixed Cost / PV Ratio = 11967.36 / (31022.07/73459.77)
= 11967.36/0.4223
= ₹ 28338.527

SAIL
Fixed Cost / PV Ratio = 18267.58 / (24974.01/70041.97)
= 18267.58/0.0356
= ₹ 513134.269
FINDINGS AND CONCLUSION
• By Leverage Analysis, if we increase the sale by 10%, the
EBT/Profit will incease by 70.3% in SAIL Company and 19.1% in
Tata Steel Company respectively. So, SAIL Company is more
profitable than Tata Steel.
• If we lower the sales by 10%, the profit also decrease by 70.3% in
SAIL Company and 19.1% in Tata Steel Company respectively. So,
SAIL Company is under more risk.
• The Break-even Point of Tata Steel is ₹ 28338.527 and SAIL is ₹
513134.269. So, Tata Steel Company will start earning their profit
earlier than SAIL Company.
THANK YOU