Type Private

Industry Steel

Headquarters India

Key people:

Chairman Brij Bhushan Singhal

Managing Director Neeraj Singhal

Products Cold rolled, galvanised, Bhushan Galume,

colour coated tiles, drawn tubes, strips, wire rods, alloy billets, sponge iron

Revenue Rs. 4202 crore

INTRODUCTION:

Bhushan Steel is the largest manufacturer of auto-grade steel in India and is spending Rs. 260 billion to expand its capacity to 12 million tonnes annually, from the present installed capacity of around one million tonnes.

Gross sales of Bhushan Steel grew from Rs. 500 crore in 2001 to Rs. 4000 crore in 2007. It earned net profits of Rs. 313 crore in 2007 and exported goods worth Rs. 1,257 crore. Its exports include steel for both the automotive and white goods industry and the list of countries it is exporting to includes several developed countries.

Brij Bhushan Singhal is chairman of board of directors of Bhushan Steel. Neeraj Singhal is the Vice Chairman and Managing Director.

The Khopoli plant in Maharashtra was commissioned in 2004 and has been producing colour coated sheets, high tensile steel strappings, hardened and tempered strips and precision tubes. In addition to these, the Khopoli plant has recently launched the Galume value added steel (aluminium and zinc coated sheet) for the first time in India.

At its Sahibabad plant in Ghaziabad, Uttar Pradesh, it has a 1700 mm mill, which produces the widest sheets in India for the automotive industry. It has highly automated systems.

At its Meramandali, Dhenkanal plant in Orissa, Bhusan Steel produces hot rolled coils and has mills for hot rolling. Construction of the first phase is being carried out.

Bhushan Power and Steel Limited has seven plants at four locations – Chandigarh, Derabassi in Punjab, Bangihatti, near Dankuni in West Bengal, and Thelkoloi in Orissa

Bhushan Steel Ltd announced that its board of directors in a meeting held on 22 January 2007 approved the following projects – (1) Setting up of an integrated steel plant in West Bengal with facilities including slab plant, coke ovens and captive power plant. (2) Setting up of a 6 million tonne per annum integrated steel plant as an expansion of its existing plant being set up at Meramandali (Distt Dhenkanal) in Orissa.

Its biggest expansion is in Orissa – it has signed an agreement with the Government of Orissa for setting up of a three million tonnes capacity steel plant at Meramandali in Dhenkanal district, and as part of its total integration of the steel value chain, Bhushan Steel is in the process of setting up a power plant and an advanced hot rolling plant on 1,618 acres (6.55 km2) at Meramandali in Dhenkanal district near Angul, at a cost of 5,200 crore and its subsequent backward integration and expansion to 4 million tonnes.

In West Bengal, Bhushan Steel has signed an agreement with the Government of West Bengal and West Bengal Industrial Development Corporation Ltd. to set up a two million tones steel plant at Salanpur in Bardhaman district. The cold rolling and galvanizing unit will be set up in North 24 Parganas district.It has also zeroed in on Kharagpur for another power and 2 million tones steel plant and is in talks with the state government for allocation of about 4,000 acres (16 km2) of land

It is also working on a 3 million tonnes steel plant in Jharkhand.

BALANCE SHEET OF BHUSHAN STEEL

  Mar '08 Mar '09 Mar '10  12 mths 12 mths 12 mthsSources Of Funds Total Share Capital 42.47 42.47 79.15Equity Share Capital 42.47 42.47 42.47Share Application Money 0 400.44 0Preference Share Capital 0 0 36.68Reserves 1,582.85 1,985.59 3,912.52Revaluation Reserves 0 0 0Networth 1,625.32 2,428.50 3,991.67Secured Loans 3,333.11 5,136.32 8,326.96Unsecured Loans 2,385.02 2,929.93 3,077.15Total Debt 5,718.13 8,066.25 11,404.11Total Liabilities 7,343.45 10,494.75 15,395.78  Mar '08 Mar '09 Mar '10  12 mths 12 mths 12 mthsApplication Of Funds Gross Block 2,927.09 3,281.86 3,685.89Less: Accum. Depreciation 1,168.07 1,395.89 1,606.57Net Block 1,759.02 1,885.97 2,079.32Capital Work in Progress 4,567.97 7,400.13 11,109.33Investments 58.46 107.73 370.04Inventories 1,129.63 1,230.36 1,962.67Sundry Debtors 617.38 619.82 733.92Cash and Bank Balance 21.38 124.29 120.2Total Current Assets 1,768.39 1,974.47 2,816.79Loans and Advances 645.51 771.85 953.42Fixed Deposits 6.25 0.08 0Total CA, Loans & Advances 2,420.15 2,746.40 3,770.21Deffered Credit 0 0 0Current Liabilities 1,442.82 1,617.77 1,896.67Provisions 19.31 27.71 36.45Total CL & Provisions 1,462.13 1,645.48 1,933.12Net Current Assets 958.02 1,100.92 1,837.09Miscellaneous Expenses 0 0 0Total Assets 7,343.47 10,494.75 15,395.78Contingent Liabilities 2,545.91 2,424.34 4,047.07Book Value (Rs) 382.68 477.51 931.21

INCOME STATEMENT OF BHUSHAN STEEL

Mar '08 Mar '09 Mar '10 12 mths 12 mths 12 mthsIncome

Sales Turnover 4,672.73 5,409.55 6,003.07

Excise Duty 492.5 423.83 381.3

Net Sales 4,180.23 4,985.72 5,621.77

Other Income 22.8 -180.91 117.78

Stock Adjustments 188.07 -98.17 295.46

Total Income 4,391.10 4,706.64 6,035.01Expenditure

Raw Materials 3,223.83 3,377.06 4,052.78Power & Fuel Cost 196.22 203.83 214.98

Employee Cost 73.87 100.86 140.94Other Manufacturing Expenses 12.88 13.2 0

Selling and Admin Expenses 104.06 179.06 0

Miscellaneous Expenses 26.34 60.3 55.8

Preoperative Exp Capitalised -104.26 -140.13 0

Total Expenses 3,532.94 3,794.18 4,464.50        Mar '08 Mar '09 Mar '10 12 mths 12 mths 12 mthsOperating Profit 835.36 1,093.37 1,452.73PBDIT 858.16 912.46 1,570.51Interest 107.8 117.27 210.01PBDT 750.36 795.19 1,360.50

Depreciation 211.41 234.41 209.14Other Written Off 0 0 0

Profit Before Tax 538.95 560.78 1,151.36

Extra-ordinary items 0 0 0

PBT (Post Extra-ord Items) 538.95 560.78 1,151.36Tax 115.2 139.48 305.57

Reported Net Profit 423.73 421.3 845.8

Total Value Addition 309.12 417.12 411.72

Preference Dividend 0 0 0.23

Equity Dividend 10.62 10.62 10.62

Corporate Dividend Tax 1.8 1.8 1.8

Per share data (annualised)

Shares in issue (lakhs) 424.72 424.72 424.72

Earning Per Share (Rs) 99.77 99.2 199.09

Equity Dividend (%) 25 25 25

Book Value (Rs) 382.68 477.51 931.21

RATIO ANALYSIS OF BHUSHAN STEEL

1. LIQUIDITY RATIO

A. Current Ratio = Current Asset/Current Liability

= 2816.79/1933.12 =1.45: 1

Interpretation: The thumb rule states that ratio should be 2:1 but we found that current ratio is 1.45:1 this shows that company is having more number of liabilities then the assets which shows that liquidity of the company is not strong.

B. Quick Ratio/Acid Test Ratio = Quick Ratio/Current Liability

OR Current Assets-(Inventory + Prepaid Exp.)/Current Liability

= 2816.79 – (1962.67) /1933.12

= 0.44: 1

Interpretation: The thumb rule states that ratio should be 1:1 but we found that quick ratio should be 0.44: 1 this shows that company is having less number of liabilities than the assets which shows that company is not in good position.

C. Absolute Liquid Ratio = Absolute Liquid Assets/Current Liability

ALA = Cash in hand + Cash at bank + Debtors – Inventories – Prepaid Exp/Current Liability

=120.20 /1933.12

= 0.062: 1

Interpretation: Acc. To thumb rule the absolute liquid ratio should be 0.5: 1 but it is found AQR is 0.062: 1 which shows that liquid position of the company is not good.

2. PROFITABILITY RATIO

A. Gross Profit Ratio = Gross Profit / Net Sale * 100 GP = Net Sale – Cost of Goods Sold =985 /5621.77*100 = 17.52%Interpretation: The extent to which selling prices of goods per unit may decline without resulting in losses on operations of firm. In this if higher the gross ratios then better the result. It shows that the company is not much in good position.

B. Net Profit Ratio = Net Profit / Net Sale * 100 Net Profit = Gross Profit – Indirect Exp. = 845 /8621 * 100

=15.03%Interpretation: this ratio indicates the firm’s capacity to face adverse economic conditions higher the ratio better is the profitability. In this, the company has to progress for higher profit.

C. Operating Ratio = Operating Cost / Net Sale * 100 = Operating Cost = COGS + Operating Exp.

=4721+ 55 /5621 * 100 = 84.96 %Interpretation: higher the operating ratio, less favorable it is because it would have a small margin to cover interest, income tax etc. However the ratio is more than the desired ratio.

D. Return On Investment = Ne t Profit ( After Interest + Taxes) / Share Holder Fund * 100 ROI = 845 /3991.67 * 100 = 21.16%Interpretation: the primary objective of business is to maximize its earning. As this ratio reveal how well the resource of a firm are being used, higher the ratio, better are the results.

E. Return On Equity = Net Profit – Prefers Dividend / Equity Share Holder Fund *100 ROE = 845 – 0 /3991.67*100

= 21.16%Interpretation: our shareholders are satisfied with our company as they get good dividend.

3. TURNOVER / ACTIVITY / EFFICIENCY RATIO

A. Inventory Turnover Ratio = COGS / Average Stock ITR = 4721/1962.67 = 2.40%Interpretation: the level of inventory should neither be too high nor too low. It is harmful to earn more inventories. Too low inventories mean loss of the company. In this

the company has the very low ratio which the company has to increase the level of the company.

a. Inventory Conversion Period = 365 / ITR = 365 / 2.40 = 152.08

= 152 days

B. Debtor Turnover Ratio = Net Credit Annual Sale / Average Debtors DTR = 5621/733.92 = 7.65%Interpretation: It indicates the number of times the debtors are turned over during a period.

a. Average Collection Period = 365 / DTR = 365 /7.65 = 47.71 = 48 days

C. Creditors Turnover Ratio = Net Credit Annual Purchases / Average Creditors Nothing to calculate

4. SOLVENCY RATIO

A. Debt To Equity Ratio = Debt / Equity = 1404 /42.47-25 = 80.36Interpretation: This ratio shows that the debts are less so company position is not good.

5. COVERAGE RATIO

A. Interest Coverage Ratio = Earnings Before Interest & Tax / Interest Charges = 1570 /210 = 7.4%Interpretation: company’s position is not good. They paid interest in right manner.

FUND FLOW ANALYSIS2008 2009 CHANGE

Equity Share Capital 42.47 42.47 0

Fixed Assets 1885.97 2079.32 193.35

Net Current Assets 1100.92 1837.09 736.17

Net Profit 421.30 845 423.88

The equity share capital is the same in both years. The company is utilizing its profit for its expenses. The net profit of the company in year 2008 was 421.30 but it was decreased by 423.88 which show that the financial condition of the company is sound. In case of Net current Assets, there is increase of 736.17(cr) which tells that the financial position is sound and the company is utilizing their current assets in a good way with contributing towards capital.

Hence, the position of the company is quite sound in terms of their working capital and Share capital as well. The working capital increases with the increase in current assets so the company is able to meet its daily expenses with any other funds.