ispat industries -financial ratio analysis (jigar patel)
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“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
EXECUTIVE SUMMARY
The project aims at studying and understanding the business environment and
knowledge of Iron and Steel Industry as a whole and Ispat Industries Limited in
particular. It is of utmost importance to keep an eye on short as well as long term
performance of the organization. Keeping in view the financial performance, various
business strategies are formulated, communicated, implemented and monitored in an
organization. Performance of the business organization is affected by several factors,
some of which may be general to the industry and some may be specific to the
organization. There are several issues pertaining to iron and steel industry such as
raw material availability, logistics, etc. which highly impact the business. There is one
way to know the financial position of the company by financial analysis of the
company. Financial analysis is the process of identifying the financial strengths and
weaknesses of the firm by property establishing relationships between the item of the
balance sheet and the profit and loss account.
Ratios are highly important profit tools in financial analysis that help financial analysts
implement plans that improve profitability, liquidity, financial structure, leverage, and
turnover. Although ratios report mostly on past performances, they can be predictive
too, and provide lead indications of potential problem areas.
REPORT SUBMITTED BY: JIGAR PATEL ~ 1 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
Scope of the study :
When the project report is prepared it includes all the aspects of projects like
company’s product and its market, manufacturing process, operational viability, its
financial projection and various ratios. This helps the management to understand
whether the project is practically possible or not. Ratio analysis gives the idea about
the profitability of the project.
Project report gives projected financial statements and on basis of that ratios are
calculated. Ratio analysis helps in judging the operational efficiency of the
management’s ability to repay short and long term loans, doing inter-firm comparison
and to assess the future growth of the company. The ratio analysis of the company is
done before investing or providing credit to the company. This is the reason of
selecting the project.
Objectives of the study :
Ratio analysis is done for the following purposes:
1) To study the financial position of the company.
2) To analyze the financial stability and overall performance of ISPAT
INDUSTRIES LIMITED in general.
3) To analyze the profitability and solvency position of the unit with the existing
tools of financial analysis.
4) To study the changes in the assets, liabilities structure of the company during
the period of study.
REPORT SUBMITTED BY: JIGAR PATEL ~ 2 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
Research Methodology :
The global as well as Indian scenario of the Iron and Steel Industries has been
studied for better understanding of the scenario. The manufacturing plant of Ispat
Industries Limited has been visited and the important processes and operations have
been studied and understood. The annual reports of the company have been studied
along with the crucial financial statements like Income Statement, Balance Sheet and
Profit & Loss Account are being analyzed for further insights.
Data Collection : Secondary data is used for the research study.
Time Frame : The project duration is within a span of 2 months.
REPORT SUBMITTED BY: JIGAR PATEL ~ 3 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
ISPAT INDUSTRIES LIMITED
INTRODUCTION :
Ispat Industries Limited (IIL) is one of the leading integrated steel makers and the
largest private sector producer of hot rolled coils in India. Set up as Nippon Denro
Ispat Limited in May 1984 by founding Chairman Mr. M L Mittal, IIL has steadily
grown into Rs 9,400-crore Company, assuming its position as flagship of the reputed
Ispat Group. A corporate powerhouse which operates in iron, steel, mining, energy
and infrastructure, the Group today figures among the top 20 business houses in the
country.
Headquartered at Mumbai, IIL employs a total of 3000 people and is the leader in the
national specialist steel market. The company's core competency is the production of
high quality steel, for which it employs cutting edge technologies and stringent quality
standards. It produces world-class sponge iron, galvanized sheets and cold rolled
coils, in addition to hot rolled coils, through its two state-of-the art integrated steel
plants, located at Dolvi and Kalmeshwar in the state of Maharashtra.
The sprawling 1,200 acres Dolvi complex houses the 3 million tonne per annum hot
rolled coils plant, that combines the latest technologies - the Conarc process for steel
making and the Compact Strip Process (CSP) – introduced for the first time in Asia.
REPORT SUBMITTED BY: JIGAR PATEL ~ 4 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
The complex also has a 1.6 million tonne per annum sponge iron (DRI) plant, which
was commissioned in 1994 as the world's largest and most efficient gas-based single
mega module plant. Moreover, the Dolvi complex is home to a 2 million tonne blast
furnace and also boasts a mechanised multi-functional jetty situated nearby, that
facilitates the automation of raw material handling. A new 2.24 million tonnes per
annum sinter plant; a 1260 tonnes per day oxygen and a new electric arc furnace
have also been commissioned at IIL Dolvi.
Ispat is the only steel maker in India and among a few in the world to have total
flexibility in choice of steel making route, be it the conventional blast furnace route or
the electric arc furnace route. Its dual technology allows Ispat the freedom to choose
its raw material feed, be it pig iron, sponge iron, iron ore, scrap or any combination of
various feeds. It also has total flexibility in choosing its energy source, be it electricity,
coal or gas.
The Kalmeshwar complex houses Ispat's 0.4 million tonnes cold rolling complex,
which also includes the galvanized plain/ galvanized corrugated (GP/GC) lines and
India's first colour coating mill.
REPORT SUBMITTED BY: JIGAR PATEL ~ 5 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
ABOUT KALMESHWAR PLANT
Ispat Industries Limited's integrated steel plant at Kalmeshwar in the state of
Maharashtra, India, uses some of the finest steel manufacturing technology to
produce galvanized sheets and products, apart from cold rolled coils. The
Kalmeshwar complex houses a total of three advanced plants - a 0.325 million
tonnes Galvanized Plain/Galvanized Corrugated plant, a 0.33 million tonne Cold
Rolled Coils plant and a 60,000 tonne Colour Coated Sheets plant.
CAPACITY / CAPABILITIES :
The capacity of the plant is dependent on the gauges of products produced. The
capacity, as cited by the unit at certain select gauges, is around 0.33 million tonnes
per annum (MTPA). To reach its corporate objective of 1 MTPA, the Kalmeshwar unit
is undertaking various initiatives for enhancement of production.
MANUFACTURING FACILITIES :
Cold Rolling Mill
Galvanizing Line
Colour Coating Line
REPORT SUBMITTED BY: JIGAR PATEL ~ 6 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
A) Cold Rolling Mill :
Ispat Industries Limited's highly advanced cold rolling mill at Kalmeshwar was set up
in 1988, in technical collaboration with Hitachi of Japan, to manufacture cold rolled
carbon steel strips in a wide range of thickness and width. The mill has a capacity of
0.325 million tonnes per annum (MTPA) and comprises various processing units as
mentioned below:
1) Continuous Pickling Line :
The hot rolled coil, which is the basic raw material, is passed through the Continuous
Pickling Line (CPL) to remove the oxides or scales from the strip surface, thereby
enabling further reduction of thickness to the desired level in the Cold Rolling Mill
(CRM). This processing is necessary since rust is formed on the surface of the coils
at room temperature, whereas scales are formed at a high temperature during rolling
in the hot strip mill.
The installed production capacity of the CPL is 3.56 million tonnes per annum
(MTPA).
2) Cold Rolling Mill Operation :
There are two types of Cold Rolling Mill (CRM) operations - 6 Hi CRM and 4 Hi CRM.
Pickled hot rolled coils of higher gauges are reduced to the necessary thinner gauges
by being processed through the mills. In 6 Hi CRM, the reduction achieved is upto
0.13 mm ultra thin gauge, whereas 4 Hi CRM can reduce the thickness upto 0.25
REPORT SUBMITTED BY: JIGAR PATEL ~ 7 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
mm. The computer-controlled rolling process ensures closure thickness tolerances
and perfectly flat strips.
The installed production capacity of the 6 Hi mill is 2,30,856 MT per annum and that
of the 4 Hi mill is 43,502 MTPA.
3) Electrolytic Cleaning Line :
The Electrolytic Cleaning Line (ECL) is necessary in case the material is rolled with a
high percentage of oil while reduction in the mills. An oil-free base material is
essential for the production of bright and corrosion resistant steel. Sodium
orthosilicate is used as a cleaning agent in ECL. Tension is given according to
thickness and width, based on customer requirements.
The installed production capacity of the line is 86,102 MTPA.
4) Batch Annealing Furnace :
The process of annealing of cold rolled coils is carried out to obtain the desired
properties in the finished coils. For this, the material is heated to a pre-determined
temperature in a protective atmosphere and soaked for a specified time, before it is
cooled to room temperature.
It is necessary to maintain optimum conditions in respect of the annealing
atmosphere, annealing cycle, sealing and purging in order to obtain a finished
product with a bright surface, the desired micro structure and uniform properties
throughout the coil. SD is used for heating the surface. Nitrogen, obtained from the
PSA Unit, is purged inside the inner cover.
REPORT SUBMITTED BY: JIGAR PATEL ~ 8 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
The installed production capacity of the line is 75,881 MTPA.
5) Skin Pass Mill :
In this process, the cold rolled annealed strips are given the desired surface finish.
This improves the flatness and suppresses the yield point elongation. Anti-rust oil is
used on the strip surface as protection from rust.
The installed production capacity of the Skin Pass Mill is 82,319 MTPA.
6) Cold Roll Slitter :
In the Cold Roll Slitter, coils are slitted by length and side trims are removed to obtain
a uniform width throughout the coil, as per customer requirements. The installed
production capacity of the cold roll slitting line is 96,006 MTPA.
7) Cut-To-Length Line :
In Cut-To-Length Line (CTL), slitted coils are sheared to the desired length as per
customer requirements. There are a total of four CTL lines in operation. The installed
production capacity of all CTLs is 83,289 MTPA.
B) Galvanizing Line :
Ispat Industries Limited pioneered the manufacture of thin, medium and thick gauge
galvanized steel sheets in India. The company currently has four galvanizing lines at
the Kalmeshwar unit, with a total installed production capacity of over 0.325 million
tones per annum.
REPORT SUBMITTED BY: JIGAR PATEL ~ 9 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
The unit is accredited with QS-9000 and ISO-14000 certifications and is equipped
with computerised quality checks at every stage, including an x-ray thickness gauge
and other contemporary systems.
A noteworthy feature of the galvanizing unit at Kalmeshwar is its self-sufficiency in
raw material - cold rolled (CR) coils, which facilitates versatility in its product range.
Until the last quarter of 1988, CR coils were imported, as is still done by other
galvanizers. However, Ispat planned its backward integration in the form of a Cold
Rolling Mill to ensure its own raw material for the Galvanizing Line. The company's
computer controlled 6-hi reversible combination Cold Rolling Mill began production in
1988.
Quality control at the galvanizing unit is aided by up-to-date laboratories, both
chemical and physical, that ensure tests of inputs and process results. In fact, quality
control begins right from the selection of raw material and goes through the entire
operation, ending finally with the rigorous testing of the finished products.
C) Colour Coating Line :
In 1988, Ispat Industries Limited installed a Colour Coating Line at Kalmeshwar - the
first of its kind in India - for the manufacture of pre-painted colour steel sheets. The
Colour Coating Line has a capacity of 60,000 tonnes per annum.
Galvanized coils constitute the raw material for the colour coating process. The
Colour Coating Line incorporates surface preparation, service coating, heating,
cooling, prime coating, top coating/printing and guard film application. Pro-gold
treatment is applied for better adhesion of paint, with a substrate corrosion resistant.
REPORT SUBMITTED BY: JIGAR PATEL ~ 10 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
A drier is provided to dry the surface and attain a temperature between 100 to 120
degrees C.
In the service coating process, paint is applied by a paint coating machine. The
ovens for baking temperature depend on line speed and thickness of coil. A controller
is provided to squeeze the water and control the sheet at centre position. Thereafter,
prime coating and top coating/printing are carried out by the paint coating machine.
Finally, guard film (sticking polythene) is applied to safeguard against scratches and
other surface defects.
MANUFACTURING PROCESS :
The CR coils which serve as raw materials are transferred directly from the Cold
Rolling Mill to the Continuous Galvanizing Lines. The coils then pass through various
processes to remove defects.
As the galvanizing line is a continuous line, the coils are passed through a looper.
Continuous annealing takes place in an in-line annealing furnace. This cleans the
coils and helps achieve the desired hardness. The temperature of the strip in this pre-
heating oxidising furnace is between 460 oC to 480 oC.
After this, the coils are passed through a zinc pot where zinc coating is carried out
using a technologically advanced hot-dip process. Zinc and antimony of the highest
purity are used for coating the sheets. This operation is performed under precise
temperature conditions, with the bath temperature maintained within a range 440 oC
to 460 oC.
REPORT SUBMITTED BY: JIGAR PATEL ~ 11 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
Due care is taken for pretreatment of the substrate on which the zinc coating takes
place, as this increases the life and performance of the galvanized sheets. The
percentage of aluminium, antimony and tin in the batch is 2 to 3 per cent, 0.35 to 0.45
% and 0.3 to 0.4% respectively.
The zinc-coated coils are then passed through a chromate solution to safeguard the
coils against white rusting and other atmospheric reactions. The chromic acid
concentration is 20 to 25 gm/ltr, and the temperature is kept at 40oC to 45oC. Lastly,
the coils are passed through a Tension Leveller to improve the shape of the product
and ensure perfect flatness.
ACHIEVEMENTS :
36 out of 40 departments have remained accident-free.
50 per cent reduction in accidents as compared to 2001-02.
Accident rate reduced to 1.21 from 3.43 (2001-2002).
Second lowest in accident indices as compared to similar industries in India
(Steel and Power sector).
REPORT SUBMITTED BY: JIGAR PATEL ~ 12 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
VALUES :
We respect the skills and integrity of professionals.
We empower those who belong to us.
We work in tandem with our environment.
We listen to our stakeholders, be they customers or communities.
We build value for all our shareholders and the society we coexist with.
VISION :
To be an organization that continuously achieves economic value by optimizing
resources through operational excellence powered by technology innovation for
creating customer delight.
MISSION :
To be amongst the world’s most admired new generation steel companies: in our
products, in the manner in which we service our clients, in our work ethics, and in our
culture of societal integration.
BUSINESS WITH ISPAT INDUSTRIES LIMITED :
Enter into the lucrative e-Trading world of ISPAT.
E-Auction
Customer Portal
Vendor Portal
REPORT SUBMITTED BY: JIGAR PATEL ~ 13 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
RATIO ANALYSIS
MEANING :
Ratio Analysis is among the best tool available to analyze the financial performance
of a company. It allows inter – company & intra – company comparison & analysis.
Ratios also provide a bird’s eye view of the financial condition of the company.
Our study of accounting so far has been restricted to recording of business
transactions on books of accounts, preparing a trial balance to check the arithmetical
accuracy of accounts & preparing profit & loss account & a balance sheet with a view
to ascertaining trading result of a specified period & financial position of the business
on a specified date respectively. The functions of the accountant do not end at this
stage. He should be able to analyze & interpret the figures as disclosed by this
statement to gauge accurately the financial health of the enterprise.
It is defined as the systematic use of ratio to interpret the financial statements so that
the strengths & weaknesses of a firm as well as its historical performance & current
financial condition can be determined. The term ratio refers to the numerical or
quantitative relationship between two items/variables.
REPORT SUBMITTED BY: JIGAR PATEL ~ 14 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
TYPES OF FINANCIAL RATIO :
1. Liquidity Ratios
2. Leverage Ratios
3. Profitability Ratios
4. Activity Ratios
A) Liquidity Ratios :
Liquidity refers to the ability of a firm to meet its short-term (usually up to 1
year) obligations. Higher liquidity levels indicate that we can easily meet our
current obligations. We can use several types of ratios to monitor liquidity.
These are as follows:
1. Current Ratio
2. Quick Ratio
3. Cash Ratio
B) Financial Leverage (debt) Ratios :
REPORT SUBMITTED BY: JIGAR PATEL ~ 15 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
Leverage Ratios measure the use of debt and equity for financing of assets.
These ratios are discussed below:
1. Debt to equity ratio
2. Debt to Total Assets Ratio
3. Interest Coverage Ratio
C) Profitability Ratios :
These ratios help measure the profitability of a firm. A firm, which generates a
substantial amount of profits per rupee of sales, can comfortably meet its
operating expenses and provide more returns to its shareholders. The
relationship between profit and sales is measured by profitability ratios. These
ratios are discussed below:
1. Gross Profit Margin
2. Net Profit Margin
3. Return on Investment / Assets
4. Return on Equity / Net Worth
5. Earning Per Share
6. Price Earning Ratio
D) Activity Ratios :
REPORT SUBMITTED BY: JIGAR PATEL ~ 16 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
Activity Ratios measure the ability of assets to generate revenues or earnings.
This ratio tells us how efficiently a company utilizes its assets for generating
sales. These ratios are discussed below:
1. Inventory Turnover Ratio
2. Inventory Turnover in Days
3. Fixed Assets Turnover
4. Debtors Turnover Ratio
5. Collection Period
OBJECTIVES
REPORT SUBMITTED BY: JIGAR PATEL ~ 17 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
The objects behind selection of the subject are as follows:
To know the financial position and determine long term and short-term
solvency of the company.
To analyze the financial stability and liabilities structure of the company
during the study period.
To analyze the profitability and solvency position of the unit with the
existing tools of financial analysis.
To know how many times the inventory and debtors are easily converted
into cash.
.
RESEARCH METHODOLOGY
REPORT SUBMITTED BY: JIGAR PATEL ~ 18 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
INTRODUCTION:
Research is the process of a systematic and in-depth study or search of any
particular topic, subject or area of investigation, backed by the collection,
complication, presentation and interpretation of relevant details or data. It is a careful
search or enquiry into any subject matter, which is an endeavor to discover to find out
valuable facts, which would be useful for further application or utilization. It may
develop a hypothesis and test it. It may also establish relationships between
variables and identity the means for problem solving.
Research wants to make familiar, how his research work is associated with the below
mentioned elements: -
1. Selection of Subject:
The selection of a subject for research is a commitment of one’s time and efforts in a
particular direction. There should not be any haste in deciding on the topic, nor in
defining any scope.
2. Selection of Title of Dissertation:
REPORT SUBMITTED BY: JIGAR PATEL ~ 19 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
Keeping in view the nature and object behind the selection of subject under research,
this dissertation is title as “Financial Analysis & Interpretation of Ispat Industries
Limited.”
3. Selection of Time Period:
The three year period is chosen for the study of the above subject. The period starts
from financial accounting year 2006 to financial accounting year 2008.
4. Collection of Data:
The data required and necessary for the research study may be obtained from the
following means:
(i) Documentary i.e. published and unpublished.
(ii) Interview and
(iii) Questionnaire
The data for the research study may be classified into two groups: -
(i) Documentary source:
(a) Data is collected from quantitative and theoretical form documentary source of the
company, which includes published and unpublished matter both. This documentary
source is the secondary data. Data has also collected from published audited annual
REPORT SUBMITTED BY: JIGAR PATEL ~ 20 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
reports of the company and unpublished data from the books and other related
papers of the company.
(b) Websites of the company and also other business websites.
(c) Also taken help from the guide.
(ii) Interview and Questionnaire:
Research is based on secondary data only.
5. Reliability of Data:
The data collected for the research work is quite reliable and authentic. This is
because the data has been collected from audited annual reports of the company.
6. Analysis of Data:
The data collected for the research purpose is analyzed by ratio analysis. This tool
for the research work will serve the best to the title of the research study.
7. Reporting:
In this study the structure analysis is adopted for analyzing the financial statement of
the company.
REPORT SUBMITTED BY: JIGAR PATEL ~ 21 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
RATIO ANALYSIS & INTERPRETATION
A) LIQUIDITY RATIOS :
1. CURRENT RATIO :
The current ratio shows how a firm is able to cover its current liabilities with its
current assets. It shows the liquidity of the company. The industry norm for
current ratio is 2:1 which means that the current assets of the firm are 2 times
that of the current liabilities.
Current Ratio = Current Assets
Current Liabilities
(Rs. in crores)
20062296.25
2244.25
=1.02
20072807.71
2165.75
=1.30
20082874.79
2727.01
=1.05
INTERPRETATION :
According to Industry norm, it is below the standard. The ratio shows that Ispat
Industries Limited has not managed to create a good combination of the current
assets and liabilities to make it financially sound and liquid enough to cover its
liabilities. This implies that there is possibility of insolvency problem. There is
however a substantial fall in the year 2008 as compares to the year 2007.
REPORT SUBMITTED BY: JIGAR PATEL ~ 22 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
2. ACID TEST OR QUICK RATIO :
The Acid Test Ratio or Quick Ratio measures our ability to meet current
obligations based on the most liquid assets. In other words, this ratio shows how
a firm is able to cover its current liabilities with the most liquid of its assets
excluding the inventories which are not so easily converted into cash. A quick
ratio of 1:1 is considered to be satisfactory.
Quick Ratio = Current Assets - Inventories
Current Liabilities
(Rs. in crores)
INTERPRETATION :
Here quick ratio in FY 2007 is more as compared to FY 2006 but falls gradually in FY
2008.
This can be due to the fact that current liabilities have risen in year 2008 but the
severity can also be attributed to the high levels of inventory held by the enterprise.
Liquid ratio of Company is not favorable because the quick assets of the company
are less than the quick liabilities. This indicates that the company does not have
ability to meet its immediate obligations promptly.
REPORT SUBMITTED BY: JIGAR PATEL ~ 23 ~
20062296.25 (-) 985.61
2244.25
=0.58
20072807.71 (-) 1056.19
2165.75
=0.81
20082874.79 (-) 1368.38
2727.01
=0.55
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
3. CASH RATIO :
This ratio considers only the absolute liquidity available with the firm. The cash
and bank balance are no doubt, the most liquid assets and the marketable
securities are also considered as highly liquid assets. In order to have an idea of
immediate/super liquidity, therefore, the cash + bank balance + marketable
securities are compared with the current liabilities.
Cash Ratio = Cash + Marketable Securities
Current Liabilities
(Rs. in crores)
2006 128.86
2244.25
=0.06
2007 327.65
2165.75
=0.15
2008 92.52
2727.01
=0.03
INTERPRETATION :
The cash ratio is below the satisfactory level throughout the study period. This shows
that the company has not enough cash to fulfill their current liabilities.
REPORT SUBMITTED BY: JIGAR PATEL ~ 24 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
B) LEVERAGE RATIOS :
1. DEBT TO EQUITY RATIO :
Debt to Equity ratio compares the funds provided by creditors to the funds
provided by shareholders. As more debt is used, the Debt to Equity Ratio will
increase. This is calculated as under:
Debt - Equity Ratio = Total Debt
Total Equity (Net Worth)
(Rs. in crores)
2006 8261.09
3148.32
=2.62%
2007 8315.50
4047.82
=2.05%
2008 7225.04
3947.61
=1.83%
INTERPRETATION :
In FY 2006 & 07 it is higher than the standard norm but it is low in FY 2008. This
declining trend over the year is usually considered as a positive sign reflecting on
increasing cash accrual and debt repayment. In general, the lower the debt-equity
ratio, the higher the degree of protection enjoyed by the creditors.
REPORT SUBMITTED BY: JIGAR PATEL ~ 25 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
2. DEBT RATIO :
The Debt Ratio measures the level of debt in relation to our investment in assets.
The Debt Ratio tells us the percent of funds provided by creditors and to what
extent our assets protect us from creditors. The lower this proportion the better it
is. As less funds would be mature for payment in short run and funds can suitably
be capitalized.
Debt Ratio = Total Debt
Debt + Equity 0r (Capital Employed)
(Rs. in crores)
2006 8261.09
11409.41
=0.72%
2007 8315.50
12363.32
=0.67%
2008 7225.04
11172.65
=0.65%
INTERPRETATION :
Ispat Industries Limited exhibits a downward overall trend with the ratio is low in
2008. This would indicate that company has sufficient assets to cover our debt load.
Creditors and management favour a low Debt Ratio.
REPORT SUBMITTED BY: JIGAR PATEL ~ 26 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
3. INTEREST COVERAGE RATIO :
Interest coverage ratio shows how much revenue is being earned in relation to its
finance cost. It may be observed that EBIT is the operating profit of the firm,
therefore, the interest coverage measures as to how many times the interest
liability of the firm is covered with the operating profits of the firm.
Interest Coverage Ratio = Earning Before Interest & Tax
Interest
(Rs. in crores)
2006 (240.02)
956.83
=(0.25)
2007 1000.95
997.58
=1.01
2008 964.87
849.25
=1.14
INTERPRETATION :
Ispat Industries Limited was not able to cover this cost in FY 2006 due to the loss
occurred but it is gaining its position in FY 2008 which is better sign for the company
and for the lender. For the company, the profitability of committing default is reduced
and for the lenders, the company is considered to be less risky.
REPORT SUBMITTED BY: JIGAR PATEL ~ 27 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
C) PROFITABILITY RATIOS :
1. GROSS PROFIT RATIO :
The gross profit margin gives an estimate of the revenues earned by the entity
considering the direct cause incurred while earning them. The gross profit ratio
reflects the efficiency with which the firm produces/purchases the goods
Gross Profit Ratio = Gross Profit x 100
Sales
(Rs. in crores)
2006 (546.45) x 100
4958.74
=(11.02)%
2007 595.93 x 100
7486.57
=7.96%
2008 620.17 x 100
8214.14
=7.55%
INTERPRETATION:
The company shows a negative decline in FY 2006 but has shown a growth in FY
2007. In FY 2008, it is again declining and that did not leave Ispat Industries Limited
unaffected.
Here, it can be seen that the gross profit is going higher & sales is also going higher,
but ratio is going down so company have to think about minimize the sales price, for
maximize the gross profit ratio.
REPORT SUBMITTED BY: JIGAR PATEL ~ 28 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
2. NET PROFIT RATIO :
This ratio shows the net contributions made by every 1 rupee of sales to the
owner funds. The Net Profit Ratio reflects the ability to control costs and make a
return on sales. Management is interested in having high profit margins. So, the
Net Profit Ratio shows the firm’s capacity to face the adverse economic
situations.
Net Profit Ratio = Net Profit x 100
Sales
(Rs. in crores)
2006 (812.67) x 100
4958.74
=(16.39)%
2007 (9.53) x 100
7486.57
=(0.13)%
2008 34.80 x 100
8284.14
=0.42%
INTERPRETATION :
In FY 2006 - 07, it shows net loss which indicates that there is no improvement in the
operational efficiency of the business. However in FY 2008 it has come out from its
worst period and shows a growth in net profit by 4.23%.
This indicates that company’s profit margin is increasing and the management is
overcoming its adverse economic situations.
REPORT SUBMITTED BY: JIGAR PATEL ~ 29 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
3. EARNING PER SHARE (EPS) :
Growth in earning is often monitored with Earning per share (EPS). The EPS
expresses the earnings of a company on a “per share” basis. A high EPS in
comparison to other competing firms is desirable. Generally 10-20 times of EPS
are considered as a justified market price of a share. The EPS is calculated as:
Earning Per Share = Total Earnings (PAT)
Total No. of Equity Shares
(Rs. in crores)
2006 (812.67)
1222442218
=Rs. (6.65)
2007 (9.53)
1222442218
=Rs.(0.078)
2008 34.80
1222442218
=Rs. 0.285
INTERPRETATION :
The EPS of the company is low in FY 06-07 but shows positive sign in FY 08. This
increase is due to the increase in net profit as compared to number of equity shares.
The Earning per share in FY 08 is 0.285 means shareholder is earning Rs. 0.285 for
each share of Rs. 10/- they owned.
REPORT SUBMITTED BY: JIGAR PATEL ~ 30 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
4. RETURN ON INVESTMENT :
The ROI measures the profitability of the firm in terms of assets employed in the
firm. Usually the profit of the firm is measured in terms of the net profit after tax
and the assets are measured in terms of total assets or total tangible assets or
total fixed assets. The ROI shows as to how much is the profit earned by the firm
per rupee of assets used.
Return on Investment = Earning Before Interest & Tax x 100
(ROI) Net Assets
(Rs. in crores)
2006 (1196.85) x 100
11409.41
=(10.5)%
2007 3.37 x 100
12363.32
=1.02%
2008 115.62 x 100
11172.62
=1.03%
INTERPRETATION :
This ratio has shown decrease in FY 06 but increase from FY 07 - 08. This shows
that the company has purchased new assets or the profit is decreasing as compared
to sales.
REPORT SUBMITTED BY: JIGAR PATEL ~ 31 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
5. RETURN ON EQUITY / NET WORTH :
The return from the point of view of equity shareholders may be calculated by
comparing the net profit less preference dividend with their total contribution in
the firm. The ROE indicates as to how well the funds of the owner have been
used by the firm. It also examines whether the firm has been able to earn
satisfactory return for the owners or not.
Return on Equity/ = Earning After Tax x 100
Net Worth Equity (Net Worth)
(Rs. in crores)
2006 (812.67) x 100
3148.32
=(25.81)%
2007 (9.53) x 100
4047.82
=(0.24)%
2008 34.80 x 100
3947.61
=0.88%
INTERPRETATION :
This ratio has shown increase from FY 06 - 08 where the ratio plunges of 0.88%. This
shows a positive sign which reflects the productivity of the ownership (risk) capital
employed in the firm.
REPORT SUBMITTED BY: JIGAR PATEL ~ 32 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
6. PRICE TO EARNINGS RATIO (P/E RATIO) :
The relationship of the price of the stock in the relation to EPS is expressed as
the Price to Earnings Ratio or P/E Ratio. Investors often refer to the P/E Ratio as
a rough indicator of value for a company. The P/E Ratio is calculated as follows:
Price to Earning Ratio = Market Value per Share
Earning Per Share
(Rs. in crores)
2006 15
(7.93)
=Rs. (1.89)
2007 13.34
(0.81)
=Rs.(16.46)
2008 33.58
0.285
=Rs.117.82
INTERPRETATION :
This ratio is very low in FY 2006-08 i.e. it is negative which implies that investors view
the company’s future as poor and thus, the price the company sells for is relatively
low when compared to its earnings.
But in FY 2008, this ratio is high which implies that investors are becoming optimistic
(bullish) about the future of the company since the price (which reflects market value)
is selling for well above current earnings.
D) ACTIVITY RATIOS :
REPORT SUBMITTED BY: JIGAR PATEL ~ 33 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
1. INVENTORY TURNOVER RATIO :
Inventory Turnover measures how many times the inventory turned during the
year. Higher turnover rates are desirable. This ratio is similar to Debtors Turnover
Ratio.
Inventory Turnover Ratio = Sales
Average Inventory
(Rs. in crores)
2006 4958.74
985.61
=5.03
2007 7486.57
1056.19
=7.09
2008 8284.14
1368.38
=6.05
INTERPRETATION :
Ispat Industries Limited has been able to significantly mobilize inventory through the
year. This implies that management does not hold onto excess inventories and
inventories are highly marketable.
2. DAYS IN INVENTORY :
REPORT SUBMITTED BY: JIGAR PATEL ~ 34 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
A day in Inventory is the average number of days inventory is held before a sale.
A low number of inventory days are desirable.
Inventory Turnover in Days / = No. of days in the year
Days of Holding Inventory Inventory Turnover
(Rs. in crores)
2006365
5.03
=75
days
2007365
7.09
=51
days
2008365
6.05
=60
days
INTERPRETATION :
Ispat Industries Limited has been able to do so quite efficiently, as the increase to
high levels throughout the years show.
This ratio shows decline which implies that management is able to sell existing
inventory stocks.
3. FIXED ASSETS TURNOVER RATIO :
REPORT SUBMITTED BY: JIGAR PATEL ~ 35 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
This Ratio shows how well the fixed assets are being utilized. In computing Fixed
Assets Turnover Ratio, the fixed assets are generally taken at written-down value
at the end of the year. However, there is to rigidity about it. It may be taken at
original cost or at present market value depending on the object of the
comparison. In fact, the ratio will have automatic improvements if the written-
down value is used.
Fixed Assets Turnover Ratio = Sales
Fixed Assets
(Rs. in crores)
2006 4958.74
9517.28
=0.52
2007 7486.57
9878.01
=0.76
2008 8284.14
9314.26
=0.89
INTERPRETATION :
This ratio in general is satisfactory & increasing every year. This increase is due to
the replacement of an asset at an increased price or due to the purchase of an
additional asset intended to increase production capacity. In FY 06 the ratio is low
due to increase in sales of fixed assets. The latter transaction might be expected to
result in increased sales whereas the former would more probably be reflected in
reduced operating costs.
4. DEBTORS TURNOVER RATIO :
REPORT SUBMITTED BY: JIGAR PATEL ~ 36 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
Debtors Turnover Ratio measures the ability to convert the receivables over into
cash. In case the firm sells goods on credit, the realization of sells revenue is
delayed and the receivables (both debtors and/or bills) are created. The cash is
realized from these receivables at later stage. The speed with which these
receivables are collected affects the liquidity position of the firm.
Debtors Turnover Ratio = Sales
Average Debtors
(Rs. in crores)
2006 4958.74
594.13
=8.35
2007 7486.57
645.02
=11.61
2008 8284.14
579.83
=14.29
INTERPRETATION :
This ratio is increases from FY 06 - 08. This shows that the company’s fund is not
blocked for a long time in debtors. The company has been efficient in converting
debtors into cash.
5. COLLECTION PERIOD :
REPORT SUBMITTED BY: JIGAR PATEL ~ 37 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
Collection period indicates the duration of the credit cycle of the debtors. It is the
average length of time required to collect our receivables. A low number of days
are desirable. It is calculated as follows:
Collection Period = No. of days in the year
Debtors Turnover
(Rs. in crores)
2006365
8.35
=44
days
2007365
11.61
=31
days
2008365
14.29
=26
days
INTERPRETATION :
From the above ratios, it can be said that from FY 2006 – 08, Ispat Industries Limited
has been able to receive their payment in a very short span of time. This is a positive
sign for the company as they are able to use the amount in purchasing the raw
materials as well as for the day to day activities.
The operating cycle of the debtors is short. In other words the debts collection period
is short which result into less chance of bad debts.
INDUSTRIAL RATIOS V/S COMPANY RATIOS
REPORT SUBMITTED BY: JIGAR PATEL ~ 38 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
RATIOSINDUSTRIAL
RATIOS
COMPANY RATIOS
2006 2007 2008
Current Ratio 2 : 1 1.02 : 1 1.30 : 1 1.05 : 1
Quick Ratio 1 : 1 0.58 : 1 0.81 : 1 0.55 : 1
Debt-Equity
Ratio2 : 1 2.62 : 1 2.05 : 1 1.83 : 1
OVERALL ANALYSIS OF RATIOS
REPORT SUBMITTED BY: JIGAR PATEL ~ 39 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
No. RATIOS 2006 2007 2008
(A) LIQUIDITY RATIOS :
1 Current Ratio 1.02 : 1 1.30 : 1 1.05 : 1
2 Quick Ratio 0.58 : 1 0.81 : 1 0.55 : 1
3 Cash Ratio 0.06 : 1 0.15 : 1 0.03 : 1
(B) LEVERAGE RATIOS :
1 Debt - Equity Ratio 2.62 : 1 2.05 : 1 1.83 : 1
2 Debt Ratio 0.72 0.67 0.65
3 Interest Coverage Ratio (0.25) 1.01 1.14
(C) PROFITABILITY RATIOS :
1 Gross Profit Ratio (11.02)% 7.96% 7.55%
2 Net Profit Ratio (16.39)% (0.13)% 0.42%
3 Earning Per Share Rs. (6.65) Rs. (0.078) Rs. 0.285
4 Return on Investment (10.5)% 1.02% 1.03%
5 Return on Equity (25.81)% (0.24)% 0.88%
6 Price Earning Ratio Rs. (1.89) Rs. (16.46) Rs. 117.82
(D) ACTIVITY RATIOS :
1 Inventory Turnover Ratio 5.03 7.09 6.05
2 Days in Inventory 75 days 51 days 60 days
3 Fixed Assets Turnover Ratio 0.52 0.76 0.89
4 Debtors Turnover Ratio 8.35 11.61 14.29
5 Collection Period 44 days 31 days 26 days
CASE STUDY
REPORT SUBMITTED BY: JIGAR PATEL ~ 40 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
HOW A LOSS MAKING FIRM BECOME A PROFIT MAKING
FIRM
Ispat Industries has recorded a loss after tax of Rs 9.53 crore in the quarter
ended December 31, 2007 but make a profit in the quarter ended December
31, 2008.
EXPANSION AND NEW PROJECTS :
In line with its vision for the future, IIL is expanding its HRC capacity to 3.6
million. With investments of over $ 2 billion, IIL is the seventh largest Indian
private sector company in terms of fixed assets. With this view, it is proposed
to undertake creation of certain additional cost-saving and capacity-enhancing
capital projects as under:
1) 1 million tonnes per annum Coke Oven plant at Dolvi by mid 2009 . The
facility would reduce the risk of restricted coke availability, ensure consistency
in coke quality and also reduce the cost substantially.
2) 4.5 million tonnes per annum Pellet Plant at Vishakhapatnam by third
quarter of 2009. The facility shall not only reduce the risk of availability of
pellets but would also ensure consistent quality in addition to cost savings.
3) Enhancement of the existing Hot Rolled Coil plant capacity from 3.0
million tonnes to 3.6 million tonnes per annum along with auxiliary
REPORT SUBMITTED BY: JIGAR PATEL ~ 41 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
facilities, enhancing capacity of existing Sponge Iron and Sinter Plants and
addition of a Blast Furnace by third quarter of 2008.
4) The installation of an additional Blast Furnace would provide adequate
quantities of Hot Metal to meet the enhanced requirements of the HRC Plant.
The company also proposes to enhance its Sinter plant and Sponge Iron plant
capacities to 2.5 million tonnes per annum and 1.80 million tonnes per annum,
respectively.
5) These projects will have an impact of Rs 600 crore to Rs 1000 crore from
2010 onwards. The financial tie-up for the Captive Power Plant (combined
capacity 110 mw) of Ispat Energy Ltd has been achieved. Project activities
have commenced and it is expected to be operational by early 2009.
Ispat is increasing the capacity of its existing hot rolled coil plant from three
million tonnes to 3.6 million tonne, with an additional blast furnace with an
annual capacity of 1.25 million tonnes.
To cope with the shortage of natural gas, the company has tied up with the
state-owned Oil and Natural Gas Corp, and would source gas from Bombay
High that would meet 30 percent of its requirement.
Ispat Industries is set to pick up 40 per cent stake in iron ore and coking coal
mining companies in Brazil, Columbia and Mozambique through the joint
venture route. The Brazilian mines have iron ore reserves of 300-500 million
tonnes, while the Columbia and Mozambique mines have coking coal deposits
in the range of 60-70 million tonne.
REPORT SUBMITTED BY: JIGAR PATEL ~ 42 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
Apart from mining assets, Ispat would invest Rs 3,200 crore for setting up a
coke plant, pellet plant and power plant. The projects would be completed in
two years. The company has achieved financial closure for Rs 800 crore
power plant.
PLAN OF ACTION :
The company's internal mechanism is robust enough to adjust strategies to meet
its diverse market challenges. The strategies are:
1. Increase vertical integration by reducing dependence on third parties for supplies
of key raw materials.
2. Reduce exposure to volatility in prices of raw materials and risks of shortages by
producing pellets and coke.
3. Acquiring mining and prospecting leases for iron-ore, non-coking, coking coal
and fluxes.
4. Develop value added grades of steel through continuous research and
developmental activities.
5. Install and operate a dedicated power plant to meet energy needs and ensure
availability of cost-effective power supply.
6. Enhance operational efficiencies at all stages of production, by using advanced
technologies and processes and implementing best practices through knowledge
integration programme.
CONCLUSION
REPORT SUBMITTED BY: JIGAR PATEL ~ 43 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
After analyzing and interpreting the whole financial statement of Ispat Industries
Limited for three years starting from 2005-06 to 2007-08 and on the basis of annual
reports, the researcher have arrived at inferences which are shown at the end of
analysis.
On the basis of inferences the researcher has arrived on final conclusions. They are
as follows:
A) Liquidity Position:
The Liquidity position of the company is not good during the year. It can be
judged by the unsatisfactory result of Current Ratio, Quick Ratio and Cash Ratio
during the period, when these ratios are not less than the ideal ratios. The
Current Ratio is lower than the ideal ratio. It shows the company does not have
the ability to meet its current requirements.
In overall the liquidity position of the company is not satisfactory which shows
the management is not efficient in utilizing current assets in the business.
B) Leverage Position:
REPORT SUBMITTED BY: JIGAR PATEL ~ 44 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
The Leverage position of the company is good in long term position of the
company due to higher Interest Coverage Ratio and Debt to Equity Ratio;
whereas it is also good in short term position as Debt Ratio shows the
decreasing trend.
C) Profitability Position:
The Gross Profit of the company is declining, which has affected the profitability
of the company. Beside this ratio, the overall profitability of the company is
satisfactory during the study period, which is the positive sign for the company.
The profitability has also affected due to low Earning per Share, which indicates
that the shareholders are not gaining much out of every share they own.
Therefore the overall financial position of the company is good, on the basis of
determinants of ratio analysis i.e. Liquidity, Leverage, Activity and Profitability
Ratios. The financial position of the company can be said sound in short term
and long term, which indicates that there may be no financial crisis in future.
D) Activity Position:
The business activity of the company is efficient and effective during the period,
which is beneficial to the Liquidity, Leverage and Profitability Position of the
company. The increasing Inventory Turnover Ratio and Assets Turnover Ratio
highlights the overall effective and efficiency of the business activities and
REPORT SUBMITTED BY: JIGAR PATEL ~ 45 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
management in making productive utilization of the assets and capital of the
company so that there is better profitability during the period.
The Debtor’s Turnover Ratio as well as collection period is also increasing
which shows that the company is efficient in converting debtors into cash and
able to use the cash in purchasing raw materials.
REPORT SUBMITTED BY: JIGAR PATEL ~ 46 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
LIMITATIONS
The analysis and interpretation are based on secondary data contained in the
published annual reports of ISPAT INDUSTRIES LIMITED for the study period.
Due to the limited time available at the disposable of the researcher, the study
has been confined for a period of 3 years (FY 2006-2008).
Ratio itself will not completely show the company’s good or bad financial
position.
Inter firm comparison was not possible due to the non availability of
competitors data.
The study of financial performance can be only a means to know about the
financial condition of the company and cannot show a thorough picture of the
activities of the company.
REPORT SUBMITTED BY: JIGAR PATEL ~ 47 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
RECOMMENDATION
After analysis & interpretation of the financial statements of Larsen & Toubro
Limited, the following are the suggestions for the betterment of the company:
It is emphasized here that one has to keep in mind; there will be always scope for
future development in any concern and in any department.
1. Liquidity Position:
The company should try to improve its Current Ratio, as some margin is required to
protect the interest of the creditors and to provide cushion to the firm in adverse
circumstances. It should try to maintain its current assets by proper inventory
management because even a slight decline in the value of current assets will
adversely affects its ability to meet its working requirements and therefore, from the
viewpoint of creditors, it is more risky venture. The company could raise funds by the
source of banks etc.
2. Leverage Position:
The company should minimize external financing to lower the interest burden which
will help to enhance the shareholders ability to earn and will lower the risk for them.
REPORT SUBMITTED BY: JIGAR PATEL ~ 48 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
3. Profitability Position:
The management needs to increase in its production line, expansion capacity and
more exports, which push the bottom line and in turn shows a positive sign in the
growth of the company.
Another area where the management needs to draw its attention as far as working
capital management is concerned is to manage its debtors. Although the company
demands an open letter of credit from all its customers, the credit policy needs to be
tightened especially with the increase number of plants, which would lead to the
substantial amount of investment in debtors.
The company should try to improve its Earning Per Share which enables the existing
and new investors to invest more so that liquidity will be increases.
The company should also try to improve its P/E Ratio, so that investors are very
optimistic about the future of the company since the price, which reflects market
value, is selling for well above current earnings.
4. Activity Position:
REPORT SUBMITTED BY: JIGAR PATEL ~ 49 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
The company should try to maintain its Inventory Turnover Ratio and Debtors
Turnover Ratio so that business activity will run efficiently and effectively as inventory
and debtors are converting into cash in less time.
BIBLIOGRAPHY
REFERENCE BOOKS :
A) FINANCIAL MANAGEMENT BY : R.P.RUSTAGI
(Theory, Concepts & problems)
B) FINANCIAL MANAGEMENT BY : M.Y. KHAN AND P. K. JAIN
(Text and problems)
C) ANALYSIS OF FINANCIAL STATEMENT BY : VIVEK SHARMA
ANAUAL REPORTS OF ISPAT INDUSTRIES LIMITED :
2005-2006
2006-2007
2007-2008
WEBSIDES :
www.ispatind.com
www.wikipedia.com
REPORT SUBMITTED BY: JIGAR PATEL ~ 50 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
www.zeromillion.com.business/financial
PROFIT & LOSS ACCOUNT
REPORT SUBMITTED BY: JIGAR PATEL ~ 51 ~
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
BALANCE SHEET
REPORT SUBMITTED BY: JIGAR PATEL ~ 52 ~
(Rs. In crores)2008 2007 2006
INCOMESales (Gross) 9401.67 8378.44 5580.02Less: Excise Duty 1117.53 891.87 621.28Sales (Net) 8284.14 7486.57 4958.74Other Income 426.86 115.63 51.99TOTAL (A) 8711.00 7602.20 5010.73EXPENDITUREDecrease/(Increase) in stocks 159.16 (28.13) (84.68)Excise Duty & Cess on stocks (0.97) (2.07) 11.15Raw Material Consumed 4535.83 3711.93 2910.12Purchase of Finished Goods 10.71 58.58 --Personnel Cost 202.60 165.34 131.55Manufacturing , Selling & Distribution and Administrative Expenses
2200.68 2071.77 1711.18
Interest & Finance Charges 849.25 997.58 956.83
Depreciation 723.06 724.54 594.05Less: Transferred from Revaluation Reserve 84.94 100.71 22.62
638.12 623.83 571.43TOTAL (B) 8595.38 7598.83 6207.58Profit/Loss Before Tax (A-B) 115.62 3.37 (1196.85)Less:Provision for Wealth Tax 0.04 0.03 0.03Deferred Tax Charge 77.04 9.87 388.67Fringe Benefit Tax 3.74 3.00 4.46Profit/Loss After Tax 34.80 (9.53) 812.67Add: Debenture Redemption Reserve written back
25.35 12.10 --
Less: Loss brought forward from Previous Year
1106.15 1098.51 214.47
Less: Adjustment towards additional Employee Benefit Liability
-- 10.21 (500.31)
Loss Carried To Balance Sheet (1046.00) (1106.15) (1098.51)Basic and Diluted Earning per Share (Rs.)
(0.36) (0.81) (7.93)
“FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED”
(Rs. In crores)2008 2007 2006
SOURCES OF FUNDS1. Shareholders’ Fund Share Capital 2294.03 2288.74 2288.7 Reserves and Surplus 1653.58 1759.08 859.62
3947.61 4047.82 3148.322. Loan Funds Secured 6940.05 7849.07 8241.06 Unsecured 284.99 466.43 20.03
7225.04 8315.5 8261.09 TOTAL 11172.7 12363.3 11409.4APPLICATION OF FUNDS1. Fixed Assets Gross Block 13167.9 13067.4 11455.7 Less: Depreciation 3961.93 3244.04 2554.27 Net Block 9206.01 9823.33 8901.44 Capital Work-in-Progress 108.25 54.68 398.19 Pre-operative & Trial Run
Expenses0 0 9517.28
9314.26 9878.01 113.322. Investment 118.04 113.59 628.33. Deferred Tax Asset (Net) 546.57 623.61 628.304. Current Assets, Loans &
Advances Inventories 1368.38 1056.19 985.61 Sundry Debtors 579.83 645.02 594.13 Cash & Bank Balances 92.52 327.65 128.86 Loans, Advances & Deposits 834.06 778.85 587.65
2874.79 2807.7 2296.25 Less: Current Liabilities &
Provisions Current liabilities 2693.67 2136.94 2231.83 Provisions 33.34 28.81 12.42
2727.01 2165.75 2244.25 Net Current Assets 147.78 641.96 525. P & L A/C Debit balance 1046 1106.15 1098.51 TOTAL 11172.7 12363.3 11409.4
REPORT SUBMITTED BY: JIGAR PATEL ~ 53 ~
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