RATIO ANALYSIS OF

JSW STEELS
GROUP-3

ABOUT COMPANY
JSW is part of US $10 billion O.P.Jindal Group JSW Steel is the largest private sector steel manufacturer in terms of installed capacity JISCO and JVSL merged to form JSW Steel Ltd. JSW Steel is one of the lowest cost steel producers in the world. JSW Steel offers the entire gamut of steel products Hot Rolled, Cold Rolled, Galvanized, Galvalume, Pre-painted Galvanized, Pre-painted Galvalume, TMT Rebars, Wire Rods & Special Steel Bars, Rounds & Blooms. JSW Steel has manufacturing facilities at Toranagallu in Karnataka, Vasind & Tarapur in Maharashtra and Salem in Tamil Nadu.

PROFITABILITY RATIOS
GROSS PROFIT MARGIN: (Revenue- cost of goods sold) / Revenue The gross profit margin in the current year is 2.82% higher than the previous year. This shows that the companys selling has increased. However, in the year 2009 there is an decrease in the revenue because of decrease in sales due to economic recession and the company is recovering.
2010 Gross profit margin (%) 17.33 2009 14.51 2008 23.43 2007 26.99 2006 21.12

Year

GROSS PROFIT MARGIN:

JSW Steels 17.33 14.51 31.36 33.69

Tata Steels

2010 2009

2008
2007 2006

23.43
26.99 21.12

37.70
39.84 38.81

The gross profit margin of JSW steel is almost half of the Tata steels this means that gross profit of JSW steels is very less.
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NET PROFIT MARGIN

(Net income / Total revenue)

The net profit ratio, also known as net margin, indicates how much net income a company makes with total sales achieved. A higher net profit margin means that a company is more efficient at converting sales into actual profit.
Net profit margin (%)

2010 11.09

2009 3.23

2008 14.92

2007 14.98

2006 14.14

JSW net profit margin has increased tremendously from 3.23% in the previous year to 11.09% in the current year.
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NET PROFIT MARGIN

Year 2010 2009 2008 2007 2006 JSW Steels 11.09 3.23 14.92 14.98 14.14 Tata Steels 19.96 21.09 23.43 23.53 22.78

The net profit margin of JSW steel is less than Tata steels but JSW steels reached 11.09 from 3.23 in 2009 where as Tata steels net profit margin had fallen from 21.09 in 2009 to 19.96 in 2010. The company had performed well and it turned sales into profits efficiently.

TURN OVER RATIOS

Inventory turnover ratio: A ratio showing how many times a company's inventory is sold and replaced over a period. Inventory turnover ratio=cost of goods sold/average inventory Average inventory = (opening stock + closing stock)/2
2010 2009 2008 2007 2006

Inventory 8.95 turnover ratio

8.75

9.26

11.04

8.55

Inventory turnover ratio is low it is good for the company. As it allows cash flow in to the company but it has been increased from 8.75 in 2009 but it is significantly low and it does not affects the cash flow. The inventory turnover ratio is maintained in between 8 10 days.
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INVENTORY TURNOVER RATIO

Year 2010 2009 2008 2007 2006 JSW Steels 8.95 8.75 9.26 11.04 8.55 Tata Steels 10.90 9.36 10.84 10.81 9.89

The inventory turnover ratio of JSW steel is low as compared to Tata steels so cash flow is more in JSW steels as compared to Tata steels while the JSW steels is managed to have a low inventory ratio on the other side inventory ratio of Tata steels is increased because of its wide expansion across the globe with acquisition of Corus steels

TOTAL ASSET TURNOVER RATIO

2010 2009 0.83 2008 0.82 2007 0.82 Asset 0.83 turnover ratio

2006 0.73

The total asset turnover ratio measures the ability of a company to use its assets to generate sales. It considers all assets including fixed assets, like plant and equipment, as well as inventory and accounts receivable. In case of JSW, it has increased from 0.73% to 0.85% in the current year.
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This shows the company is using its assets efficiently to generate sales.

Year

TOTAL ASSETS TURNOVER RATIO

JSW Steels 0.85 0.73 0.75 0.88 0.72 Tata Steels 0.40 0.43 0.43 0.74 1.24

2010 2009 2008 2007 2006

The total asset ratio of JSW steels is almost double to Tata steels this means that JSW steels is using total assets more efficiently to generate sales than Tata steels.

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SOLVENCY RATIOS
Current ratio A liquidity ratio that measures a company's ability to pay short-term obligations. Current ratio=current assets/current liabilities Idle ratio=1.33
2010 2009 2008 2007 2006

Current ratio

0.58

0.52

0.58

0.76

0.89

The current assets are half of the liabilities this is a problem for short term solvency. Negative working capital. It is good to work with negative working capital in the raising markets but it is a problem in falling market. The current ratio is increased to 0.58(2010) from 0.51(2009) this means that current assets are increased. Working capital increased.

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CURRENT RATIO
Year 2010 2009 2008 2007 2006 JSW Steels 0.58 0.52 0.58 0.76 0.89 Tata Steels 1.12 0.97 3.92 1.77 0.72

The current ratio of JSW steels is almost half the Tata steels it shows that working capital of Tata steels is positive and working capital of JSW steels is negative. This means JSW steels not doing good when compare to Tata steels.
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LONG TERM DEBT EQUITY RATIO

Long term debt equity ratio= long term debt/shareholders fund Idle=2
2010 Long term debt/equity 1.20 2009 1.34 2008 1.01 2007 0.78 2006 0.96

Debt is more than shareholders fund it is an acceptable up to 2 because of low long term debt equity ratio debt EPS will be more company can pay more EPS because of less commitments of long term debt and it is decreased from 1.51 in 2009 company paid off some long term debt
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LONG TERM DEBT EQUITY RATIO

Year 2010 JSW Steels 1.20 1.34 1.01 0.78 0.96 Tata Steels 0.67 1.31 1.07 0.67 0.25 2009 2008 2007 2006

The long term debt equity ratio of JSW steels is almost double to the Tata steels. JSW steel is depending more than Tata on debts for financing activities.
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FUTURE ANALYSIS

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THANK YOU
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