sail finanacial analysis final project

8/4/2019 SAIL Finanacial Analysis Final Project

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Page 1

Introduction

Chapter-1


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Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It

is a fully integrated iron and steel maker, producing both basic and special steels for

domestic construction, engineering, power, railway, automotive and defence industries

and for sale in export markets.

Ranked amongst the top ten public sector

companies in India in terms of turnover,

SAIL manufactures and sells a broad range of

steel products, including hot and cold rolled

sheets and coils, galvanized sheets, electrical

sheets, structural, railway products, plates,

bars and rods, stainless steel and other alloy

steels. SAIL produces iron and steel at five

integrated plants and three special steel plants, located principally in the eastern and

central regions of India and situated close to domestic sources of raw materials, including

the Company's iron ore, limestone and dolomite mines. The company has the distinction

of being Indias second largest producer of iron ore and of having the countrys second

largest mines network. This gives SAIL a competitive edge in terms of captive availabilityof iron ore, limestone, and dolomite which are inputs for steel making.

SAIL's wide range of long and flat steel products is much in demand in the domestic as

well as the international market. This vital responsibility is carried out by SAIL's own

Central Marketing Organization (CMO) that transacts business through its network of 37

Branch Sales Offices spread across the four regions, 25 Departmental Warehouses, 42

Consignment Agents and 27 Customer Contact Offices. CMOs domestic marketing effort

is supplemented by its ever widening network of rural dealers who meet the demands of

the smallest customers in the remotest corners of the country. With the total number of

dealers over 2000 , SAIL's wide marketing spread ensures availability of quality steel in

virtually all the districts of the country.

SAIL's International Trade Division ( ITD), in New Delhi- an ISO 9001:2000 accredited

unit of CMO, undertakes exports of Mild Steel products and Pig Iron from SAILs fiv e

integrated steel plants.


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With technical and managerial expertise and know-how in steel making gained over four

decades, SAIL's Consultancy Division (SAILCON) at New Delhi offers services and

consultancy to clients world-wide.

SAIL has a well-equipped Research and Development Centre for Iron and Steel (RDCIS)

at Ranchi which helps to produce quality steel and develop new technologies for the steel

industry. Besides, SAIL has its own in-house Centre for Engineering and Technology

(CET), Management Training Institute (MTI) and Safety Organization at Ranchi. Our

captive mines are under the control of the Raw Materials Division in Kolkata. The

Environment Management Division and Growth Division of SAIL operate from their

headquarters in Kolkata. Almost all our plants and major units are ISO Certified.

MAJOR UNITS

Integrated Steel Plants

Bhilai Steel Plant (BSP) in Chhattisgarh

Durgapur Steel Plant (DSP) in West Bengal

Rourkela Steel Plant (RSP) in Orissa

Bokaro Steel Plant (BSL) in Jharkhand

IISCO Steel Plant (ISP) in West Bengal

Special Steel Plants

Alloy Steels Plants (ASP) in West Bengal

Salem Steel Plant (SSP) in Tamil Nadu

Visvesvaraya Iron and Steel Plant (VISL) in Karnataka
http://sail.co.in/pnu.php?tag=bhilaihttp://sail.co.in/pnu.php?tag=durgapurhttp://sail.co.in/pnu.php?tag=rourkelahttp://sail.co.in/pnu.php?tag=bokarohttp://sail.co.in/pnu.php?tag=iiscohttp://www.sail.co.in/pnu.php?tag=specialhttp://www.sail.co.in/pnu.php?tag=special_salemhttp://www.sail.co.in/pnu.php?tag=special_visvesvarayahttp://www.sail.co.in/pnu.php?tag=special_visvesvarayahttp://www.sail.co.in/pnu.php?tag=special_salemhttp://www.sail.co.in/pnu.php?tag=specialhttp://sail.co.in/pnu.php?tag=iiscohttp://sail.co.in/pnu.php?tag=bokarohttp://sail.co.in/pnu.php?tag=rourkelahttp://sail.co.in/pnu.php?tag=durgapurhttp://sail.co.in/pnu.php?tag=bhilai


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Subsidiary

Maharashtra Electrosmelt Ltd. (MEL) , Maharsahtra

Joint Ventures

NTPC SAIL Power Company Pvt. Ltd (NSPCL)

A 50:50 joint venture between Steel Authority of India Ltd. (SAIL) and

National Thermal Power Corporation Ltd. (NTPC Ltd.); manages the captive

power plants at Rourkela, Durgapur and Bhilai with a combined capacity of 314megawatts (MW). It has installed additional capacity by implementation of 500

MW (2 x 250 MW Units) power plant at Bhilai. The commercial generation of

1st Unit has commenced in April2009 and the 2nd Unit in October 2009

Bokaro Power Supply Company Pvt. Limited (BPSCL)

This 50:50 joint venture between SAIL and the Damodar Valley Corporation

formed in January 2002 is managing the 302-MW power generating station and

660 tonnes per hour steam generation facilities at Bokaro Steel Plant. BPSCL

has proposed to expand its capacity by installing 2x250 MW coal based thermal

unit at Bokaro. In addition, construction activities are underway for installation

of 9th Boiler (300T/Hr) & 36 MW Back Pressure Turbo Generator (BPTG)

project at Bokaro.

Mjunction Services Limited

A 50:50 joint venture between SAIL and Tata Steel formed in 2001. This

company promotes e-commerce activities in steel and related areas. Newly

added services include e-Assets sales, Events & Conferences, Coal Sales &

Logistics, Publications etc..

SAIL-Bansal Service Center Ltd.

SAIL has formed a joint venture with BMW industries Ltd. on 40:60 basis to

promote a service centre at Bokaro with the objective of adding value to steel.
http://www.nspcl.co.in/http://www.nspcl.co.in/http://www.bpscl.in/http://www.bpscl.in/http://www.metaljunction.com/http://www.metaljunction.com/http://www.metaljunction.com/http://www.bpscl.in/http://www.nspcl.co.in/


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Bhilai JP Cement Ltd

SAIL has incorporated a joint venture company with M/s Jaiprakash Associates

Ltd to set up a 2.2 MT slag based cement plant at Bhilai. The clinker production

has started from December 2009; and the grinding unit has commenced trial

runs since April 2010.

Bokaro JP Cement Ltd

SAIL has incorporated another joint venture company with M/s Jaiprakash

Associates Ltd to set up a 2.1 MT cement plant at Bokaro utilizing slag from

BSL. The project implementation is under progress with commencement of

cement production likely by July2011.

SAIL&MOIL Ferro Alloys (Pvt.) Limited

SAIL has incorporated a joint venture company with M/s Manganese Ore

(India) Ltd on 50:50 basis to produce ferro-manganese and silico-manganese

required for production of steel..

S&T Mining Company Pvt. Ltd

SAIL has incorporated a joint venture company with TATA Steel for joint

acquisition & development of coal blocks/mines. New indigenous opportunities

for coking coal development are being explored by the Joint Venture company

for securing coking coal supplies.

International Coal Ventures Private Limited

Towards achieving the target of making steel PSUs self reliant in the area of

coking coal, a joint venture company has been incorporated comprising of five

central PSU companies i.e. SAIL, Rashtriya Ispat Nigam Limited (RINL), Coal

India Limited (CIL), NTPC Limited and National Mineral Development
http://icvl.in/http://icvl.in/http://icvl.in/


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Corporation (NMDC). .

Vision

To be a respected world-class corporation

and the leader in Indian steel business in

quality, productivity, profitability and

Customer satisfaction.

CREDO

We build lasting relationships with customers based on trust

and mutual benefit.

We uphold highest ethical standards in conduct of our

business.

We create and nurture a culture that supports flexibility,

learning and is proactive to change.We chart a challenging career for employees with

opportunities for advancement and rewards.

We value the opportunity and responsibility to make a

meaningful difference in peoples lives.


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AWARDS & ACCOLADES

The performance of SAIL has been widely recognized by all stakeholders

including leading financial institutions/ rating agencies and industry bodies,

winning several awards/ accolades in various fields. Some are :

President of India, Her Excellency, Smt. Pratibha Devisingh Patil conferred

the first prize to SAIL's in-house Rajbhashajournal Ispat Bhasha Bharti. The

award was received by Chairman SAIL, Shri S.K. Roongta .Unique honour of

securing the first prize among all PSUs under the All-India House Journal

Award Scheme of the Ministry of Home Affairs, Government of India, for the

second consecutive year.

SAIL has won six Prime Minister's Shram Awards for the year 2006 - 42% of

total awards in the country - Bhilai Steel Plant (BSP) won one PM's Shram

Bhushan, one PM's Shram Vir and one PM's Shram Shri Award. Durgapur Steel

Plant (DSP) won two PM's Shram Vir Awards and RSP won one PM's Shram

Shri Award. The break-up of awards is as under :

SAIL has won the ICWAI National Award for Excellence in Cost

Management-2007 of the Institute of Cost and Works Accountants of India

(ICWAI) in the category /Public sector manufacturing organisation with

turnover more than Rs. 1000 crore.

Commendation certificate from SCOPE under the award category SCOPE

Meritorious Award for Good Corporate Governance for the year 2006-07.

SAIL received the Best Turnaround Award from Smt. Sheila Dikshit,

Hon'ble Chief Minister of Delhi, in the first 'Dalal Street Investment Journal

PSU Awards 2009' ceremony held on March 27, 2009 at New Delhi.


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SAIL Quality Circle teams won highest number of awards in the country at the

International QC Meet in Bangladesh held in the last week of Oct'08; seven

Excellent, seven Extra Ordinary & one Meritorious Awards.

Indian Institute of Metals conferred awards to 4 SAIL professionals viz. OP

Jindal Award. 3 SAIL executives also declared Metallurgist of the Year-Young

Metallurgist of the Year.

SAIL is among the 'top companies' selected for National Award for

Excellence in Corporate Governance 2008 by the Institute of Company

Secretaries of India.

Institute of Chartered Accountants of India conferred ICAI Awards for

Excellence in Financial Reporting under the category of Manufacturing &

Trading Enterprises.

CII ITC Sustainability Award 2008 'Certificate for Strong Commitment'

conferred on SAIL amongst large business organisations.

Adjudged as the top Indian company under the Iron and Steel Sector in the

Dun & Bradstreet - Rolta Corporate Awards 2008.

Adjudged Best PSU and conferred with Business & Economy Leadership and

Excellence Awards 2008 by Planman Media.

Runner-up in the NIPM National Award for 'Best HR Practices 2008'

competition organised by the National Institute of Personnel Management

(NIPM) during December 2008- January 2009.

Global HR Excellence Award 2008-09 under the award category

Outstanding Contribution to the cause of Education.

Good Performance Award ICWAI National Award for Excellence in Cost


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Management -2008 of the Institute of Cost and Works Accountants of India

(ICWAI). SAIL's plants and units also won various awards/accolades. A few

are :

Bhilai Steel Plant (BSP)

CII-ITC Sustainability Award 2008 in the independent unit category.

Golden Peacock National Training Award for the year 2008 from the World

Council for Corporate Governance through the Institution of Directors (IOD),

New Delhi.

Awarded the Golden Peacock Award - 2008 in recognition of its initiatives

and efforts in the corporate social responsibility front in Portugal.

Golden Peacock Climate Change Award for the year 2008 from the World

Environmental Foundation, New Delhi, in recognition of its excellent efforts for

the preservation of environment.

Green Tech Platinum Award for the year 2008 from the Green Tech

Foundation, New Delhi, in recognition of excellent efforts in the environment

front.

"Greentech Safety Gold Award" by Greentech Foundation for outstanding

achievement in Safety Management.

Durgapur Steel Plant (DSP)

Greentech Environment Excellence Award-Gold presented on September 5-

7, 2008 from the Greentech Foundation at Goa in recognition of its excellent

efforts for environmental preservation.

Received Ispat Suraksha Puraskar Award on August 12, 2008 from the Joint

Committee on Safety, Health and Environment in the Steel Industry at Ranchi

in recognition of the fact that there was no fatal accident during 2007.


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DSP has received the Business Excellence Award on December 19, 2008

from the Indian Economic Development and Research Association (IEDRA) in

recognition of its strong commitment for Business Excellence in year 2008.

Rourkela Steel Plant (RSP)

Received the coveted Best Organisation Gold Award under the Rajiv Gandhi

Memorial National Awards-2008 for Excellence in Indian Industries. The

award was presented to RSP at a glittering function organised at the Institution

of Engineers (India) Ltd., Khairatabad, Hyderabad on July 13, 2008.

Received Business Excellence Award from the Confederation of IndianIndustry (CII) and Export - Import (Exim) Bank of India on November 8, 2008

in recognition of its strong commitment for Business Excellence during the year

2007-08.

Bokaro Steel Plant (BSL)

"Rajiv Gandhi National Quality Award - 2007" to BSL in "Best of All"

category by Bureau of Indian Standards.

Enterprise Excellence Award for the year 2007 from the Indian Institute of

Industrial Engineering in recognition of its outstanding operational and

financial achievements.

Golden Peacock Award" for Occupational Health & Safety 2008.

IISCO Steel Plant (ISP)

Received Green Tech Excellence Award (Silver) in July 2008 from the

Green Tech Consultancy Services awarding body in recognition for maintaining

specified norms for environmental protection for the year 2007-08.

Raw Materials Division (RMD)

Two iron ore mines (Kiriburu & Kalta) and one limestone mine (Kuteshwar)

of SAIL, RMD have received five National Safety Awards for their

commendable performance in maintaining the safety standard in the mines.


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Hon'ble President of India, Smt. Pratibha Devi Singh Patil, gave away the

awards in a function held at Vigyan Bhavan, New Delhi on May 5, 2008.

Salem Steel Plant (SSP)

Declared winner of Greentech Safety Award (Silver) in Metal & Mining

Sector for extra-ordinary performance and achievement in Safety Management.

Golden Peacock Occupational Health & Safety Award Special

Commendation Certificate from the Institute of Directors (IOD) New Delhi, in

recognition for effective occupational health and safety performance during theyear 2007-08.

Awarded the "CSR Award" by the Tamil Nadu government for the year 2008-

09 for its valuable contribution towards socioeconomic upliftment of neglected

sections of society through CSR initiatives.

Won the National Sustainability Award - 2007 (First Prize) amongst the

Secondary Steel Plants / Alloy Steel Plants category by Indian Institute of

Metals.

Research and Development Centre for Iron & Steel (RDCIS)

Received Golden Peacock National Quality Award- 2008 from the Institute

of Directors for the year 2008.

Environment Management Division (EMD)

Golden Peacock Finalist Certificate for the year 2008 from the Institute of

Directors (IOD) in recognition for eco-renovation.


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BOARD OF DIRECTORS

Chairman Shri C S Verma

Managing Director S N Singh

FUNCTIONAL DIRECTORS

Personnel Shri G. Ojha

Finance Shri Soiles Bhattacharya

Commercial Shri S.S. Ahmed

Technical Shri V.K. Gulhati

MANAGING DIRECTORS

Durgapur Steel Plant Shri V. Shyamsundar

Bokaro Steel Plant Shri V.K. Srivastava

Bhilai Steel Plant Shri R. Ramaraju

IISCO Steel Plant Shri S.P. Rao

Rourkela Steel Plant Shri S.N. Singh

GOVERNMENT DIRECTORS

Special Secretary & Financial

Adviser

Ministry of Steel, Government of

India

Shri B.S. Meena


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Joint Secretary

Ministry of Steel, Government of

India

Shri G. Elias

Independent Directors Prof. Javaid Akhtar

Shri P.K. Sengupta

Dr. Vinayshil Gautam

Secretary Shri Devinder Kumar

Statutory Auditors M/s. Dass Maulik Mahendra K.

Agrawala & Co.

Chartered Accountants

M/s. T.R. Chadha & Co.Chartered Accountants

M/s. Chaturvedi & Co.

Chartered Accountants

Registered Office Ispat Bhawan, Lodi Road, New

Delhi-110003

Phone: 24367481; Fax- 24367015

Gram: STEELINDA

BANKERS

Allahabad bank IDBI bank AXIS bank ltd. ING Vysys bank ltd.

Andhra bank Indian bank Syndicate bank Indusind Bank Ltd.

Bank of Borada Punjab $ Sind bank Union bank of India United bank of India

Bank of India UCO bank Karnataka bank South Indian Bank

Bank of Maharashtra Central bank of India Indian Overseas

bank

Oriental bank of

Commerce

Canara bank Jammu & Kashmir

Bank Ltd.

Kotak Mahindra

Bank Ltd.

Federal Bank Ltd.

Corporation bank HDFC bank ltd. SBI

Dena bank ICICI bank ltd. Vijaya bank


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PRODUCT MIX

Product Wise

Semis Blooms, Billets & Slabs

Long Products

Structurals

Crane Rails

Bars, Rods & Rebars

Wire Rods

Flat Products

HR Coils, Sheets & Skelp

Plates

CR Coils & Sheets

GC Sheets\ GP Sheets and Coils

Tinplates

Electrical Steel

Tubular Products Pipes

Railway ProductsRails

Wheels, Axles, Wheel Sets
http://www.sail.co.in/sales.php?tag=sales_products_semibloomhttp://www.sail.co.in/sales.php?tag=sales_products_longStructuralhttp://www.sail.co.in/sales.php?tag=sales_products_longCranehttp://www.sail.co.in/sales.php?tag=sales_products_longbarshttp://www.sail.co.in/sales.php?tag=sales_products_longwirehttp://www.sail.co.in/sales.php?tag=sales_products_flatHRhttp://www.sail.co.in/sales.php?tag=sales_products_flatplateshttp://www.sail.co.in/sales.php?tag=sales_products_flatCRhttp://www.sail.co.in/sales.php?tag=sales_products_flatGChttp://www.sail.co.in/sales.php?tag=sales_products_flattinhttp://www.sail.co.in/sales.php?tag=sales_products_flatelectricalhttp://www.sail.co.in/sales.php?tag=sales_products_tubularpipeshttp://www.sail.co.in/sales.php?tag=sales_products_tubularpipeshttp://www.sail.co.in/sales.php?tag=sales_products_railwayrailshttp://www.sail.co.in/sales.php?tag=sales_products_railwaywheelshttp://www.sail.co.in/sales.php?tag=sales_products_railwaywheelshttp://www.sail.co.in/sales.php?tag=sales_products_railwayrailshttp://www.sail.co.in/sales.php?tag=sales_products_tubularpipeshttp://www.sail.co.in/sales.php?tag=sales_products_flatelectricalhttp://www.sail.co.in/sales.php?tag=sales_products_flattinhttp://www.sail.co.in/sales.php?tag=sales_products_flatGChttp://www.sail.co.in/sales.php?tag=sales_products_flatCRhttp://www.sail.co.in/sales.php?tag=sales_products_flatplateshttp://www.sail.co.in/sales.php?tag=sales_products_flatHRhttp://www.sail.co.in/sales.php?tag=sales_products_longwirehttp://www.sail.co.in/sales.php?tag=sales_products_longbarshttp://www.sail.co.in/sales.php?tag=sales_products_longCranehttp://www.sail.co.in/sales.php?tag=sales_products_longStructuralhttp://www.sail.co.in/sales.php?tag=sales_products_semibloom


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Plant Wise

Bhilai Steel Plant Blooms, Billets & SlabsBeams

Channels, Angles

Crane Rails

Plates

Rails

Pig Iron, Chemicals & Fertilisers

Bokaro Steel Plant HR Coils & Sheets

PlatesCR Coils & Sheets

GP Sheets & Coils/ GC Sheets


Durgapur Steel Plant Blooms, Billets & Slabs

Joists, Channels, Angles

Bars, Rods & Rebars

Skelp

Wheels, Axles, Wheel Sets


Rourkela Steel Plant HR Coils

Plates

CR Coils & Sheets

GP Sheets/ GC Sheets

Tinplates

Electrical Steel

Pipes


Salem Steel Plant Stainless Steel
http://www.sail.co.in/sales.php?tag=sales_products_bspbloomshttp://www.sail.co.in/sales.php?tag=sales_products_bspstructuralshttp://www.sail.co.in/sales.php?tag=sales_products_bspcranehttp://www.sail.co.in/sales.php?tag=sales_products_bspplateshttp://www.sail.co.in/sales.php?tag=sales_products_bsprailshttp://www.sail.co.in/sales.php?tag=sales_products_bsppigironhttp://www.sail.co.in/sales.php?tag=sales_products_bslHRhttp://www.sail.co.in/sales.php?tag=sales_products_bslplateshttp://www.sail.co.in/sales.php?tag=sales_products_bslCRhttp://www.sail.co.in/sales.php?tag=sales_products_bslGPhttp://www.sail.co.in/sales.php?tag=sales_products_bslpigironhttp://www.sail.co.in/sales.php?tag=sales_products_dspbloomshttp://www.sail.co.in/sales.php?tag=sales_products_dspstructuralshttp://www.sail.co.in/sales.php?tag=sales_products_dspbarshttp://www.sail.co.in/sales.php?tag=sales_products_dspskelphttp://www.sail.co.in/sales.php?tag=sales_products_dspwheelshttp://www.sail.co.in/sales.php?tag=sales_products_dsppigironhttp://www.sail.co.in/sales.php?tag=sales_products_rspHRhttp://www.sail.co.in/sales.php?tag=sales_products_rspplateshttp://www.sail.co.in/sales.php?tag=sales_products_rspCRhttp://www.sail.co.in/sales.php?tag=sales_products_rspGPhttp://www.sail.co.in/sales.php?tag=sales_products_rsptinhttp://www.sail.co.in/sales.php?tag=sales_products_rspelectricalhttp://www.sail.co.in/sales.php?tag=sales_products_rsppipeshttp://www.sail.co.in/sales.php?tag=sales_products_rsppigironhttp://www.sail.co.in/Salem_Product_Catalogue.pdfhttp://www.sail.co.in/Salem_Product_Catalogue.pdfhttp://www.sail.co.in/Salem_Product_Catalogue.pdfhttp://www.sail.co.in/sales.php?tag=sales_products_rsppigironhttp://www.sail.co.in/sales.php?tag=sales_products_rsppipeshttp://www.sail.co.in/sales.php?tag=sales_products_rspelectricalhttp://www.sail.co.in/sales.php?tag=sales_products_rsptinhttp://www.sail.co.in/sales.php?tag=sales_products_rspGPhttp://www.sail.co.in/sales.php?tag=sales_products_rspCRhttp://www.sail.co.in/sales.php?tag=sales_products_rspplateshttp://www.sail.co.in/sales.php?tag=sales_products_rspHRhttp://www.sail.co.in/sales.php?tag=sales_products_dsppigironhttp://www.sail.co.in/sales.php?tag=sales_products_dspwheelshttp://www.sail.co.in/sales.php?tag=sales_products_dspskelphttp://www.sail.co.in/sales.php?tag=sales_products_dspbarshttp://www.sail.co.in/sales.php?tag=sales_products_dspstructuralshttp://www.sail.co.in/sales.php?tag=sales_products_dspbloomshttp://www.sail.co.in/sales.php?tag=sales_products_bslpigironhttp://www.sail.co.in/sales.php?tag=sales_products_bslGPhttp://www.sail.co.in/sales.php?tag=sales_products_bslCRhttp://www.sail.co.in/sales.php?tag=sales_products_bslplateshttp://www.sail.co.in/sales.php?tag=sales_products_bslHRhttp://www.sail.co.in/sales.php?tag=sales_products_bsppigironhttp://www.sail.co.in/sales.php?tag=sales_products_bsprailshttp://www.sail.co.in/sales.php?tag=sales_products_bspplateshttp://www.sail.co.in/sales.php?tag=sales_products_bspcranehttp://www.sail.co.in/sales.php?tag=sales_products_bspstructuralshttp://www.sail.co.in/sales.php?tag=sales_products_bspblooms


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Shareholding pattern

Share holding pattern as on : 30/06/2010 31/03/2010 31/12/2009

Face value 10.00 10.00 10.00

No. Of

Shares

%

Holding

No. Of

Shares

%

Holding

No. Of

Shares

%

Holding

Promoter's holding

Indian Promoters 3544690285 85.82 3544690285 85.82 3544690285 85.82

Sub total 3544690285 85.82 3544690285 85.82 3544690285 85.82

Non promoter's holding

Institutional investors

Banks Fin. Inst. and

Insurance 281283287 6.81 277526933 6.72 281124790 6.81

FII's 177444022 4.30 184852026 4.48 182106305 4.41

Sub total 484619852 11.73 493316953 11.94 495266517 11.99

Other investors

Private Corporate

Bodies 21819667 0.53 16494054 0.40 14702580 0.36

NRI's/OCB's/Foreign

Others 2195959 0.05 2112978 0.05 1971317 0.05

Others 3594941 0.09 3482691 0.08 3413819 0.08

Sub total 27610567 0.67 22089723 0.53 20087716 0.49

General public 73479841 1.78 70303584 1.70 70356027 1.70

Grand total 4130400545 100.00 4130400545 100.00 4130400545 100.00


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RECENT NEWS ARTICLES

SAIL in talks with DVC, NTPC for extra energy

Monday, September 06, 2010

In its quest to secure energy supply for its power-hungry furnaces, thestate-run maharatna behemoth Steel Authority of IndiaLimited (SAIL) hasdecided to expedite generation of an additional 1,700 MW at a cost of morethan Rs 7,000 crore. The PSUwould soon begin talks with its existing JVpartners -- National Thermal Power Corporation (NTPC) or DamodarValleyCorporation (DVC) -- or others to either set up new units or expandcapacity of the existing ones for the same.

We need a total of 2,500 MW power within the next six years as ourexpansion and modernization exercise nears completion.We are currentlygetting 800 MW, but we need 1,700 MW more to fire our furnaces in the nearfuture. Accordingly, we haveplanned an investment of Rs 7,650 crore forthe same. The investment would be in the form of 80:20 debt-equity ratiowith ourJV partners. The debt component would be sourced from a host offinancial institutions, SAIL chairman Chandra ShekharVerma told The IndianExpress. Considering that power is the key input to maintainoperationability of the steel plants, the PSUhad envisaged that its energyneeds would grow to around 1,900 MW by 2012-13 from the current level ofabout 1,180 MW andthereafter to 2,500 MW within six years.

SAIL's growth plan, currently being implemented at an expenditure of nearlyRs 70,000 crore, envisages enhancement of its hotmetal production capacityfrom the current level of around 15 MTPA to 23.5 MTPA by 2012-13 andfurther to around 60 MTpa by2020. By 2020, the average load of steelplants including the power requirement of mines is likely to grow to about4600 MW by2019-20. Tentatively, the additional capacity to be set up bySAIL by 2019-20 works out to about 4,500 MW at the generationend, Vermasaid.

Complying with Integrity Pacts strictly: SAILTuesday, September 07, 2010

SAIL Ltd said on Monday that it is strictly following the Integrity Pact toprevent corruption in execution of contract orders valuedat Rs 20 croreand above.

The Integrity Pact was adopted by SAIL on August 16, 2007, initiallyfor all contracts valued at Rs 100 crore and above, andthe threshold valuehas been progressively reduced to Rs 20 crore. SAIL was one of the pioneersin implementing Integrity Pact.In fact, the Integrity Pact of SAIL wastaken as a model pact by the Central Vigilance Commission, who advisedother PSUs tomake their Integrity Pacts based on the concept ofSAIL, said the company in a statement.

An Integrity Pact is an agreement between the principal and the vendor notto resort to corrupt practices and is aimed at

ensuring transparency,equity and fairness and preventing corruption in public contracting.

Entire SAIL FPO will happen this financial year'Thursday, September 09, 2010

The entire follow-on public offer (FPO) of Steel Authority of India (SAIL)might take place this financial year and not in twotranches if the marketconditions are ripe, says Steel Secretary Pradeep Kumar Misra. In aninteraction with Nayanima Basu,he also says the steel ministry'srecommendations should be addressed in the proposed Mines and MineralsDevelopment andRegulations Act. Excerpts:What are your views on the proposed Mines and Minerals Development andRegulations Act andwhen do you think it will see the light of the day?We have raised certain issues which we think should be addressed bytheMinistry of Mines. The ministry should have a look at it and ultimately thecompetent forum is the empowered group ofministers, to take a final viewand see that the concerns of all stakeholders are taken care of. They willonly decide on this whenthis Act will see the light of the day. As we seeit, the issues that need to be addressed are amendments to be put inplaceunder the new Act which will safeguard the interests of the steel industry.This is because we are going to see a majorrise in the demand for steel inthe coming years. Thus, unless we are geared to supply the required amountof steel, it will comein the way of the country's development. There hasto be a balance between the producers and the people who are going tobedisplaced as a result of mining.

When is SAIL's FPO likely to hit the market? Is it not too late already?The SAIL FPO will definitely happen this financial year.It depends on themarket conditions at that point of time. Before hitting the market with theFPO, some due diligence needs tobe done which would get completedhopefully by December. The FPO will hit the market as soon as the necessarynorms arefollowed as per the guidelines of the Securities and ExchangeBoard of India. We are on schedule and depending on themarket conditionthen both tranches (of the divestment) can happen this year.

What are your views on banning exports of iron ore from the country? Areyou still pursuing the finance ministry on theissue?The finance ministry is likely to look into the matter during the time ofthe next Budget. This is a dynamic situation and soit has to be reviewedfrom time to time every year. We have to look at the long-term requirementof our country before we takea view on how much needs to be exported andif there is feeling that we need to conserve our resources, then we need totakea call on that. Resources keep increasing or decreasing as bothprospecting and exploitation continues. We need to take along-term view onthis issue.

What about the stalled projects of Posco, ArcelorMittal and others? What isthe ministry doing in this regard?For the projectsto take off, the issue of mining leases needs to be sortedout, which is not really under our purview. It is very much under


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thedomain of the state government and the ministries of mines and environment.The steel ministry is not directly concerned.We would definitely like tosee a robust steel industry, looking at future demand. But the decisionshave to be taken by theministries concerned. We hope they will take theright decision.

Do you think India is lagging in the production ofvalue-added steel? Compared to 2009-10, how much steel production areyouexpecting in this financial year?Yes, India needs to increase its presence in value-added steel. It alsoinvolves highefficiency in production, leading to lower power consumptionand better input utilisation. All this is currently underway. In termsoffinished steel, we are looking at a production of 62 million tonnes from59.7 million tonnes last financial year.

SAIL key job up for grabsSaturday, September 04, 2010

JAYANTA ROY CHOWDHURYNew Delhi, Sept. 3: SAILs director (commercial) Shoeb Ahmed will retire onOctober31, and the Public Enterprises Selection Board is expected toselect his replacement from among 15 candidates,including 10 from withinthe organisation.

Sources said D. Ranjan, executive director (transport & shipping), is afavourite, while two other recently-promotedexecutive directors SumanMukherjee of the flats marketing division and Anil Dhawan of warehousingare also in thefray.

Ranjan has considerable experience in marketing and is considered thefrontrunner. However, the actual selection willdepend upon a number offactors, including the steel ministers preference.

The PESB will select two candidates after consulting the SAIL chairman. Theministry of steel will then give itscomments on the candidates and pass iton to the appointments committee of the cabinet.

Sources said Ahmed did not get along with former SAIL chairman S.K.Roongta, who is a marketing man himself.

Current SAIL chairman C.S. Verma, who is new to the organisation, will wantto have a say in the selection and bringin a man with whom he can workwithout friction.

Sources said steel minister Virbhadra Singh would not like to interfere inthe selection and will go by the advice of thePESB and his ministryofficials.

The PESB is an independent body set up by the government to selectcandidates for top jobs in state-run enterprises.

Since the late 1990s, market conditions have determined how a steel firmfares in the Indian market, and the post ofcommercial director in SAIL,which has a turnover of Rs 44,000 crore, has assumed importance.

PESB members said the two most crucial posts in the years ahead would bethe heads of the marketing and rawmaterials divisions.

SAIL is also planning to recruit managing directors for its key plantsBhilai, Bokaro, Durgapur and IISCO.

Interviews for these jobs are likely to be held over the next few weeks.

SAIL, which has been recently accorded the status of maharatna, iscurrently preparing for the divestment of 10 percent of its equity in twotranches. The public sector steel giant is implementing a Rs 60,000-croremodernisation andexpansion plan.

Meanwhile, the company has increased the price of its flat products by Rs1,000 a tonne on account of a pick-up indemand.

There is a Rs 1,000 rollback on discount given on our flat steel products.Long steel prices remain unchanged, a SAILspokesperson said.

SAIL follow-on issue likely in JanuaryWednesday, September 01, 2010

The Steel Authority of India Ltd (SAIL) follow-on public offer (FPO) islikely to hit the market only in January, accordingto Steel Ministryofficials. With a number of modalities yet to be completed, the FPO issuecould be postponed toJanuary instead of the target date of November.

The company does not immediately require funding so even if the FPOis postponed to January there should not beany problem. We are not lookingto rush the share sale process and we will do it when the market conditionsare right, aministry official told Business Line.

Share sale process

SAIL needs to trim the size of its board and induct two independentdirectors before the share sale process. This wouldrequire clearances fromthe Prime Minister's Office and the Appointments Committee of Cabinet. Ifthis process is notcompleted by the end of November, the Ministry willpush back the share sale of the company to January.

Western countries go on a Christmas break so if we aren't able tocomplete all necessary requirements before that we


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would start the sharesale process in January, the Ministry official added.

Evaluation

Meanwhile, SAIL began evaluating presentations from the 17 merchant bankersin the fray to manage the share saleprocess. The presentations frombankers including the likes of Goldman Sachs, Credit Suisse Securities, SBICapital Ltdand others will be held over August 31 and September 1. SAILwill then select a team of six merchant bankers to handlethe first trancheof the share sale process.

The two-phase FPO of SAIL is expected to raise a total of Rs 16,000 crore.In each phase, the Government will sell 5per cent of its equity in thecompany while an additional 5 per cent of fresh equity will be issued.

SAIL wants to part-fund its Rs 70,000-crore expansion programme with theproceeds from the share sale, while theGovernment wants to meet itsdisinvestment target of Rs 40,000 crore for the current fiscal.


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Operating

Performance

Analysis

Chapter-2


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Raw Materials Division

SAIL has the second largest mining outfit in the country. The mines of SAIL started their

operations as captive sources of raw materials for its integrated steel plants. Major portion

of its mining activities is managed by Raw Materials Division (RMD). Other mines are the

Bhilai group of mines and the mines of VISL.

Raw Materials Division

The Raw Materials Division (RMD) was formed in

1989 with the avowed purpose of creating synergy of

all the SAIL mines in the eastern sector, to rationalise

supply of basic raw materials to the steel plants so as to

achieve self sufficiency in quality iron ore.

Presently RMD, with its headquarters at Kolkata,

manages 7 Iron Ore Mines and 3 operating flux mines,

salient features of which are given below :

SL.

NOMINES STATE

YEAR OF

COMMISSIONING

RATED

CAPACITY

( IN MT)

Iron ore

1. KIRIBURU JHARKHAND 1964 4.25

2. MEGHAHATUBURU JHARKHAND 1985 4.30

3. BOLANI ORISSA 1960 4.20

4. BARSUA ORISSA 1960 2.01

5. KALTA ORISSA 1966 1.10

6. GUA JHARKHAND 1919 2.4

7.MANOHARPUR

(Chiria)JHARKHAND 1907 0.7

Flux

6. Kuteshwar (Limestone)MADHYA

PRADESH1974 1.10

7.Bhawanathpur

(Limestone)JHARKHAND 1979 0.80

8. Tulsidamar (Dolomite) JHARKHAND 1970 0.34

In tune with the corporate plan 2012 of SAIL, various capacity expansion projects have


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been taken up at the RMD mines so as to cope up with the enhanced requirement of iron

ore and limes stone of desired quality. The major projects cover the Expansion of capacity

of Bolani Ore Mines, Development of Central Block at Meghahatuburu Iron Ore Mine,

Development of South Block at Kiriburu Iron Ore Mine, Mechanisation and developmentof Chiria Mines, Development of Taldih Block, and Opening a new mine at Thakurani.

RMD also has a centralized workshop at Bolani for repair/overhauling of engines &

transmission of heavy earthmoving machinery operating at the mines. Besides the above,

RMD has three Customer Services Offices (CSO) at Rourkela, Durgapur & Bokaro and

three Liaison offices at New Delhi, Bhubaneswar, and Ranchi for liaison and better

coordination with various government agencies as well as different statutory agencies.

RAW MATERIAL CONSUMED

RAW MATERIALS Year ended

31st

march , 2009

Quantity Value

Tonnes Rs./crores

Year ended

31st

march, 2008

Quantity Value

Tonnes Rs./crores

Iron ore 23281716 1791.95 25443849 1725.38

Coal 13837735 14087.48 13953945 8242.98

Coke 247880 500.79 638572 819.28

Limestone 3152643 595.69 4048296 627.08

Dolomite 2930822 263.11 2637143 206.94

Ferro Manganese 71746 578.53 67562 349.30

Ferro Silicon 22336 136.46 21329 96.67


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Silico Manganese 119593 703.99 122174 510.15

Hot Rolled Stainless steel

coils

16210 121.07 20061 96.06

Intermediary Products 28079 371.31 22543 293.19

Zinc 7286 71.10 7005 112.62

Aluminum 15363 189.89 17185 206.03

Others 665.55 645.96

Further, it can be seen that the company is able to get the supplies of

raw material from within the country itself. Hence, the company

doesnt have to assume much risk in times of changing global

business scenario and exchange rate fluctuations.

COMPARISION WITH COMPITITORS

Last Price Market Cap.(Rs. cr.)

SalesTurnover

Net Profit Total Assets

SAIL 197.70 81,658.02 41,307.21 6,754.37 35,522.89

Tata Steel 576.40 51,150.31 24,315.77 5,201.74 62,407.95JSW Steel 1,219.20 22,804.98 18,314.00 2,022.74 21,291.44

Visa Steel 41.80 459.80 1,171.48 47.42 1,457.44


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SALES


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Sales Growth in terms of Quantity

Sales through dealer network which were merely 16,100 tonnes in the year 2004-05 stood at

5,15,200 tonnes during 2008-09. Order fulfilment was maximized against products/sectors

from which sufficient orders could be booked like Railways. Record sales of Long Rails

(130/260 m) were affected to Railways. Total supplies of rails to Railways (including RVNL)

reached a record level of about 7.9 lakh tonnes registering 5.5% growth over

previous year.

Suitable marketing strategies were employed to service strategic segments and growth

achieved in such segments like Tube segment (2.4%), Heavy Machinery (113%), Cycle

(42%), Containers (40%) and Boiler and Pressure Vessels (7%).

Record supplies of steel to projects of national importance: 38% growth in sales toBHEL in Power sector, 58% growth to BSNL in Telecom sector and 49% growth to DMRC

achieved over previous year supplies. Order of 86000 tonnes of PM Plates bagged from

Bangalore Water Supply and Sewage Board in Feb 09 to be executed in 12 months, supplies

commenced in March 09. Sales of TMT registered 13.8% growth over previous year.

Dealer network was further expanded. As on 1stApril, 2009 SAIL has 2406dealers

spread over 625 districts in the country. Sales through dealers were also increased and

registered 56% growth during '08-09 over previous year sales. This measure was taken with a

view to reach steel of mass consumption near the consuming centers at competitive rates

fixed by SAIL to benefit the common man.


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Financial

Performance

Analysis

Chapter-3


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Mar'05

Mar '06 Mar '07 Mar '08 Mar '09

Investment Valuation Ratios

Face Value 10.00 10.00 10.00 10.00 10.00

Dividend Per Share 3.30 2.00 3.10 3.70 2.60

Operating Profit Per Share (Rs) 25.40 15.87 23.35 27.28 21.65

Net Operating Profit Per Share (Rs) 69.52 68.28 83.11 96.74 106.04Free Reserves Per Share (Rs) 13.07 19.02 30.72 45.02 57.16

Bonus in Equity Capital -- -- -- -- --Profitability Ratios

Operating Profit Margin(%) 36.53 23.24 28.09 28.19 20.41

Profit Before Interest And Tax Margin(%) 31.85 18.38 23.63 24.17 16.61

Gross Profit Margin(%) 36.09 24.12 29.94 25.10 17.48

Cash Profit Margin(%) 27.02 17.94 20.77 20.77 16.67

Adjusted Cash Margin(%) 27.11 18.16 20.77 20.77 16.67

Net Profit Margin(%) 23.19 13.79 17.38 18.16 13.40

Adjusted Net Profit Margin(%) 22.64 13.39 17.02 18.16 13.40

Return On Capital Employed(%) 61.29 35.85 44.94 44.03 27.61Return On Net Worth(%) 66.14 31.85 35.82 32.76 22.06

Adjusted Return on Net Worth(%) 66.48 31.45 35.34 31.77 22.40

Return on Assets Excluding Revaluations 23.29 12.46 17.65 55.69 67.75

Return on Assets Including Revaluations 23.29 12.46 17.65 55.69 67.75

Return on Long Term Funds(%) 63.24 36.75 45.55 44.47 28.31Liquidity And Solvency Ratios

Current Ratio 1.13 1.17 1.52 1.68 1.74

Quick Ratio 0.77 0.73 1.01 1.23 1.24

Debt Equity Ratio 0.56 0.34 0.24 0.13 0.27

Long Term Debt Equity Ratio 0.51 0.31 0.22 0.12 0.24

Debt Coverage RatiosInterest Cover 17.64 14.10 30.64 48.48 40.02

Total Debt to Owners Fund 0.56 0.34 0.24 0.13 0.27

Financial Charges Coverage Ratio 18.45 15.92 33.12 51.04 44.31

Financial Charges Coverage Ratio Post Tax 14.43 12.55 23.71 36.26 30.96Management Efficiency Ratios

Inventory Turnover Ratio 6.96 4.68 5.36 8.62 5.86

Debtors Turnover Ratio 16.61 14.88 16.36 14.90 14.43

Investments Turnover Ratio 9.69 6.57 7.50 8.62 5.86

Fixed Assets Turnover Ratio 2.19 2.21 2.71 1.31 1.35

Total Assets Turnover Ratio 1.79 1.69 1.61 1.55 1.25

Asset Turnover Ratio 1.03 0.97 1.16 1.31 1.35Average Raw Material Holding 52.74 51.70 48.29 36.42 45.86

Average Finished Goods Held 36.43 51.73 49.97 48.69 58.76

Number of Days In Working Capital 29.13 44.31 84.07 104.06 131.98

Profit & Loss Account Ratios

Material Cost Composition 40.13 53.31 47.34 43.18 54.60

Imported Composition of Raw MaterialsConsumed 43.11 50.57 54.52 50.93 63.36

Selling Distribution Cost Composition 3.38 3.92 3.10 2.86 2.13

Expenses as Composition of Total Sales 4.65 3.87 3.40 3.08 1.84Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit 22.71 23.47 23.83 23.71 20.32Dividend Payout Ratio Cash Profit 19.04 17.43 19.60 20.19 16.54


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Earning Retention Ratio 76.75 75.83 75.66 75.56 79.99

Cash Earning Retention Ratio 80.58 82.18 80.06 79.28 83.67

AdjustedCash Flow Times 0.72 0.81 0.56 0.35 0.98

Mar

'05

Mar '06 Mar '07 Mar '08 Mar '09

Earnings Per Share 16.50 9.72 15.02 18.25 14.95

Book Value 24.95 30.51 41.92 55.84 67.75

Source : Religare Technova


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Analysis of Comparative Balance Sheet

Long Term Financial Position

1. The comparative Balance Sheet of the company reveals that during the financial year

2008- 2009 there has been a large increase in fixed assets (34.76%) compared to

2007-2008(9.09%) while the long term liabilities which contains shareholders funds

and long term loans also show growth. Long term loans show an increase of 147.6%

in 2008-09 which means that most of the fixed assets are financed by long term

loans.

2. There has been an increase in plant and machinery in 2009 compared to 2008 which

means that it will increase production capacity of the concern.

Current Financial position and liquidity position

1. The company has increased its current assets by increasing the level of inventories at

Rs.10121 crores in 2009 compared to Rs.6857 crores in 2008. The current liabilities

highly fluctuate and show continuous increase in 2007-08 (20.5%) and 2008-09

(29.3%).

2. The Net Working Capital was in peak by the continuous increase after the year 2005.

The company got good liquidity position due increase in Current assets but it may

affect the profitability of the company.

3. The overall financial position of the company is very good.


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Interpretation of Comparative Income Statement

1. The Net Sales figure shows an increasing trend. After the year 2003 it shows anincreasing trend which will help to increase in Net Profit.

2. The company has sufficient control over its depreciation which shows an increase ofonly 0.04% in 2009 over 2008

3. The company has considerable change in Interest Charges and rather the latter hasdecreased in recent years.

4. The company has able to attain Profit after Tax of Rs.6174 crores in the year 2009compare to 7536 crores in 2008 which can be attributed to increase in cost of goods sold.

5. It may conclude that there is a sufficient progress in the company and the overall

profitability of the concern is very good.

Trend Analysis Percentage

Interpretation

1. The sales of the product have continuously increased in all the years up to 2009.Theincrease in sales is quite satisfactory.

2. The EBIT grows continuously up to 2008 and decreases slightly in 2009 due toincrease in the cost of goods sold.

Common Size Balance Sheet Analysis 2003-2009

1. Out of the total investment the owners funds is more compare to outsiders fund in

the company which shows that the company has depended more on its own funds. It

shows that the company is traditionally financed.

2. The proportion of current assets to total assets has increased comparing to currentliabilities which serve as an evidence for good working capital position of the company.

3. Investments, Miscellaneous expenditure and deferred liabilities have their own limitedcontribution to their respective side totals.


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RATIO ANALYSIS

Financial ratio analysis is the calculation and comparison of ratios which are derived from the

information in a company's financial statements. The level and historical trends of these

ratios can be used to make inferences about a company's financial condition, its operations

and attractiveness as an investment.

Financial ratios are calculated from one or more pieces of information from a company's

financial statements. For example, the "gross margin" is the gross profit from operations

divided by the total sales or revenues of a company, expressed in percentage terms. In

isolation, a financial ratio is a useless piece of information. In context, however, a financial

ratio can give a financial analyst an excellent picture of a company's situation and the trends

that are developing.

A ratio gains utility by comparison to other data and standards. Taking our example, a gross

profit margin for a company of 25% is meaningless by itself. If we know that this company's

competitors have profit margins of 10%, we know that it is more profitable than its industry

peers which are quite favorable. If we also know that the historical trend is upwards, for

example has been increasing steadily for the last few years, this would also be a favorable

sign that management is implementing effective business policies and strategies.

There are mainly three types of ratios:

I. Liquidity Ratios give a picture of a company's short term financial situation or

solvency

II. Turnover Ratios show how efficient a company's operations and how well it is

using

its assets.

III. Solvency Ratios show the long term profitability of the company.


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Liquidity Ratios

Liquidity Ratios are ratios that come off the Balance Sheet and hence measure the Liquidity

of the company as on a particular day i.e. the day that the Balance Sheet was prepared. These

ratios are important in measuring the ability of a company to meet both its short term and

long term obligations.

1. Current Ratio

2. Liquid Ratio

3. Net working capital ratio

1. Current Ratio: An indication of a company's ability to meet short-term debtobligations; the

higher the ratio, the more liquid the company is. Current ratio is equal to current assets

divided by current liabilities. If the current assets of a company are more than twice the

current liabilities, then that company is generally considered to have good short-term

financial strength. If current liabilities exceed current assets, then the company may have

problems meeting its short-term obligations.

CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITY


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An ideal current ratio is 2. The ratio of 2 is considered as a safe margin of solvency due to the

fact that if current assets are reduced to half (i.e.) 1 instead of 2, then also the creditors will be

able to get their payments in full.

Interpretation

Here, the current ratio fluctuates from year to year but has maintained the ratio above 2 from

2005ards which is positive consideration.

2. Quick Ratio: Liquid ratio is also known as quick or Acid testratio. Liquid assets

refer to assets which are quickly convertible into cash. Current Assets other stock and

prepaid expenses are considered as quick assets. The ideal liquid ratio accepted

norm for liquid ratio 1.

Quick Ratio = Total Quick Assets/ Total Current Liabilities

Quick Assets = Total Current Assets (minus) Inventory

The liquid ratio denotes the concern had achieved more than the ideal ratio of 1:1 in

the years 2005 onwards

3. Net working capital ratio: Working Capital is more a measure of cash flow than a

ratio. The result of this calculation must be a positive number. Companies look at Net

Working Capital over time to determine a company's ability to weather financial

crises. Loans are often tied to minimum working capital requirements.

NET WORKING CAPITAL RATIO = Net Working Capital / Capital Employed

Net Working capital measures the firms potential reserve of funds. It can be related

to net assets. This ratio represents the availability of working capital in relation with

capital employed.


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TURNOVER RATIOS

The turnover ratio is also known as activity or efficiency ratios. They indicates the

efficiency with which the capital employed is rotated in the business (i.e.) the speed at whichcapital employed in the business rotates. Higher the rate of rotation, the greater will be the

profitability. Turnover ratios indicate the number of times the capital has been rotated in the

process of doing business.

Fixed Asset Turnover Ratio

Working Capital Turnover Ratio

Debtor Turnover Ratio

Stock Turnover Ratio

1. Fixed Assets Turnover Ratio Fixed asset turnover is the ratio of sales (on your Profit

and loss account) to the value of your fixed assets (on your balance sheet). It indicates

how well your business is using its fixed assets to generate sales.

FIXED ASSETS TURNOVER RATIO = NET SALES / NET FIXED ASSETS

Generally speaking, the higher the ratio, the better, because a high ratio indicates your

business has less money tied up in fixed assets for each dollar of sales revenue. A declining

ratio may indicate that you've over-invested in plant, equipment, or other fixed assets.

Here, the value of fixed assets employed in the business shows a reducing trend which implies that

company didnt add any more fixed asset during the period 2003 2008. Only the depreciation

effect had been given to fixed asset. Fixed turnover ratio has been increasing which is a good sign

because the gross sales have increased considerably without increasing the current assets.

2. Working Capital Turnover Ratio Working capital refers to investment in current

assets. This is also known as gross concept of working capital. There is another concept

of working capital known as net working capital. Net working capital is the difference

between cur-rent assets and current liabilities. Analysts intend to establish a relationship

between working capital and salsas the two are closely related. Through this ratio we are

attempting to see that one rupee blocked by the organization in net working capital is

generating how much sales. Higher the ratio better it is.


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WORKING CAPITAL TURNOVER RATIO = NET SALES / NET WORKING CAPITAL

In recent years for operating an industry have not only become scarce, but also costly in the

wake of macro level policies on credit squeeze an increase in Interest rate. So, the working

capital can be defined either as a gross working capital, which include funds invested in all

current assets, or as net working capital, which denotes the difference between the current

assets current liabilities of an organization.

Here, the Working Capital ratio shows a increasing trend from 2003 to 2004 and then slope

downwards due to holding high current assets in the form of cash, bank balances and

receivables in the year 2005 to 2009.

3. Debtors Turnover Ratio

DEBTORS TURNOVER RATIO = CREDIT SALES / AVERAGE ACCOUNTS

RECEIVABLES

The numerator of this ratio should preferably be credit sales. This is so because the

denominator is logically related to credit sales as it arises from credit sales only. Cash sales

do not generate debtors. However, as the information related to credit sales is not separately

available in corporate accounts, so total sales could be taken in the numerator. Average

debtors are calculated by dividing the sum of beginning-of-year and end-of-year balance of

debtors by 2. There has been increase in the turnover ratio from 2003-2006 and has stabilized

thereafter .As the ratio is sufficiently high it can be concluded that efficient management of the

debtors has taken place.

4. Debtors collection period: The ratio indicates the extent to which the debt has beencollected in time. It gives the average debt collection period. The ratio is very helpful

to lenders because it explains to them whether their borrowers are collecting money

within a reasonable time. An increase in the period will result in greater blockage of

funds in debtors. Debtors collection period measures the quality of debtors since it

measures the rapidity or slowness with which money is collected from them.


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Here, there has been decreasing trend in the debt collection period which is favorable for the

company. Because, the quicker the collection period, more is the utilization of cash collected

from debtors.

5. Stock Turnover Ratio : This ratio indicates whether investment in inventory is

efficiently used or not. It is therefore explains whether investment in inventories is

within proper limits or not. This ratio is calculated as follows.

Stock Turnover Ratio = Net Sales / Average Inventory

The Inventory turnover ratio signifies the liquidity of the Inventory. A high

inventory turnover ratio indicates brisk sales. The ratio is, therefore a measure to discover

the possible trouble in the form of over stocking or over valuation.

It is difficult to establish a standard ratio of inventory because it will differ from

industry to industry.

INTERPRETATION: Here, there has been a rising trend in the Inventory turnover ratio

which implies that the inventories are efficiently managed and utilized which directly

contributes to companies productivity. The stock position is known as the graveyard of the

balance sheet. A low inventory turnover ratio results in blocking of funds in Inventory whichmay ultimately result in losses because of deterioration of stocks.

PROFITABILITY RATIOS

Profitability is an indication of the efficiency with which the operation of the business is

carried on. Poor operational performance may indicate poor sales and hence poor profits. A

lower profitability may arise due to lack of control over the expenses.

Bankers, financial institutions and other creditors look at the profitability ratios as an

indicator whether or not the firm earns substantially more than it pays interest for the use of

borrowed funds.

1. Return on Shareholders funds: The term return here means Net Income after the

deduction of interest and tax. Itis different from the Net operating profit which is

used for computing the Return on total capital employed in the business. This is


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because the shareholders are interested in Total Income after tax including Net non-

operating Income (i.e. Non- Operating Income - Non-Operating expenses).

Here, the Net Profit (i.e.) the Repayment of loan Funds and

increase in the sales value has contributed for the rise in the return on shareholders fund

from the year 2004 onwards, but after 2005 companys RoE has again come down because

the company is now not able to trade on equity.

2. Return on assets: Return on assets expresses the total net profit as a percentage of total

assets employed in the business.

Here the RoA has been quite good in the past year. But in the year 2005, it has been even higher

than the other previous year which may be because of more assets brought to business, while

total profit not expanding to that extent.

3. Earnings per share (EPS): In order to avoid confusion on account of the varied

meanings of the term capital employed, the overall profitability can also be judged by

calculating earning per share with the help of the following formula:

Earning Per Equity Share = Net Profit after Tax / Number of Equity Shares X 100

The earning per share of the company helps in determining the market price of the equity

shares of the company. A comparison of earning per share of the company with another will

also help in deciding whether the equity share capital is being effectively used or not. It also

helps in estimating the companys capacity to pay dividend to its equity shareholders. Here

the Earning per Share is the result of Net Profit after tax, i.e., profit for equity shareholders.

4. PE Ratio: PE ratio expresses the quoted price of a companys share as a multiple ofthe earnings per share. Higher the PE multiple, higher is the market quoted price of

the share, which also gives a good indication of companys soundness in the market.

As on June,2010 it stands at 12.06 which is a good PE multiple but it is still far below

the ideal figure of 20 in such kind of industries.

5. Earnings Yield: Earnings yield is the ratio of earnings per share to market price per

share. It offers a good measure to assess the suitability of investment before an

investor actually makes the investment in companys shares.


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6. Dividend Yield: Dividend yield expresses relationship between dividend per share

and the market price of the share as a ratio. This also serves as an effective tool for the

investor to decide about making the investment in the companys shares.

7. Operating Ratio: Operating profit margin shows the operating profit as a percentage

of sales. It is good indicating that the operating profits are high may be because of a

reduction in operational costs.

8. Net Profit Margin: It indicates the net profit earned as a percentage of total sales. It

has been good in case of SAIL and also increasing over the years. This may be

attributed to decreasing costs which give rise to increased profit margin.

SOLVENCY RATIOS

These are the ratios which indicate a firms ability to remain solvent in the short term as well

as in the long term, i.e., the ability to pay back its interest and principal repayment obligationsin time. Following are the main ratios to be calculated:

1. Debt-equity Ratio:

Debt- equity ratio gives the proportion of debt funds being used in the business in

comparison to shareholders own funds. In this case, in the past three years, it has been

hovering around 0.20:1.

It shows that the company still has a lot more cushion against the ideal D-E ratio of 2:1. It

means that the company can easily be able to increase this ratio by assuming more debt. Also,

the lenders will be more than willing to lend something to the company as it is sitting on a

huge pile of own equity.

2. Interest Coverage Ratio

This ratio discusses the companys ability to pay back its loan interests out of the profit

generated for shareholders. In this case, it has been on the rise from last 3 years. This gives us


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the idea that how many times is the companys income generated to finance the interest

payment requirement of the company.

DU PONT ANALYSIS

It is a method of Performance measurement started in 1920 by Du Pont Corporation.

Also Known as Du Pont identity.

Method to breakdown ROE into:

ROA and Equity Multiplier

ROA is further broken down as:

Profit Margin and Asset Turnover

DuPont analysis tells us that ROE is affected by three things

We need to calculate the following ratios for the purpose of Du Pont Analysis:

(1)Net Profit Margin = Net Profit/Sales = 12.54%

Net Profit Margin is declining Low profitability

Assests are almost consistent over the years

Sales has been increasing but profit has been declining


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(2) Assets Turnover Ratio

assets. As noted above, companies with low profit margins tend to have high asset turnover,

those with high profit margins have low asset turnover.

- Net Sales/ Total Assets = 1.39

Higher turnover ratio signifies that company is able to utilize its assets well, in order to

generate Sales revenue.

(3) Equity Multiplier

Equity Multiplier = Total Assets/ Shareholders Funds

= 1.21 For FY 2008-09

CALCULATION OF RoA and RoE

RoA = NP Margin*Assets Turnover = 17.43%

RoE = RoA*Equity Multiplier = 24.19%

Analysis

1. There is a decrease in ROA, means Company is generating less return on asset as

compared to previous years.

2. There is a marginal decrease in ROE,

3. This is due to net profit not increased that much as compared to Equity Fund.


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1.SWOT Analysis

2.Management Discussion and

Analysis

Chapter-4


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SWOT Analysis

Strengths

The diversified product mix and multi location production units are an area of strength for the

company. SAIL as a single source is able to cater to the entire steel requirement of any

customer. Also it has a nation wide distribution network with a presence in every district in

India. This makes quality steel available throughout the length and breadth of the country.

SAIL has the largest captive iron ore operations in India, which takes care of its entire

requirement. With plans in place to expand the mining operations, the company will continue

to be self sufficient in iron ore after completion of the present phase of expansion. SAIL's

captive power plants take care of about 60% of its total power need. With augmentation ofcapacities of power plants operated under Joint Venture, the company will continue to have

security in this key input in future as well. SAIL's large skilled manpower base is a source of

strength. There is emphasis on skill based training in the company. The expanded capacity

will be operated with more or less similar number of employees in future. In fact, with

selective recruitment and regular attrition on account of superannuation, the number of

employees is likely to come down over time; while there will be improvement in overall skill

set. The company has one of the biggest in-house research and development centres in Asia.

SAIL's RDCIS (Research & Development Centre for Iron & Steel) is a source of regular

product and process innovation. Low overall borrowings lend strength to the company's

balance sheet as it can mobilize resources while keeping the leveraging at manageable levels.

Weakness

SAIL is dependent on the market purchase for a key input coking coal. As India does not

have sufficient coking coal deposits, most of the supply is from external sources. As

international practice in purchase of coking coal is through annual price contract it exposes

the company to market risk if the steel prices crash but input prices remain unchanged. A

large manpower base results in higher manpower cost as a proportion of turnover for the

company. Although there has been significant reduction in manpower through natural and

voluntary separations, the manpower strength in SAIL is still higher than the industry

average. A part of the operations in the company continue to be from energy inefficient

processes viz. open hearth and ingot route of production, which will be eliminated only after


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the completion of the current expansion program. At present around 20% of the products are

in the form of semi - finished steel, resulting in lower value addition. New rolling mills

planned under expansion plan will contribute to value addition as almost all semis will be

converted to finished steel. SAIL being a Public Sector unit has to follow set procedures in

conducting its business. On occasions, it slows down the decision making with attendant

fallout.

Opportunities

SAIL has five main integrated Steel Plants which have a combined capacity of 12.5 million

tonnes of crude steel and 10.74 million tonnes of saleable steel with modernized facilities

available to meet diverse customized requirements in terms of quality, size, grade, delivery

etc. The current per capita finished steel consumption in the country is approx. 44 kg as

compared to the likely world average of around 190 kg. There is a substantial scope for

increase in domestic steel consumption. Although during 2008-09, steel consumption

contracted by 1.2% in the country, steel demand in India is poised to grow at a modest pace

with thrust on infrastructure in the 11th Plan period. Approval to 37 infrastructure projects

worth Rs.70,000 crore between August 2008 and January 2009 is likely to trigger steel

demand. Expectations of 6%-7% growth in GDP in 2008-09 with possibility of its returning

to higher growth trajectory in 2009-10, higher elasticity of steel demand with respect to

growth in GDP due to investment in plant and machinery and push to construction activities

are expected to boost steel demand.

The size range and quality makes SAIL'S long products a preferred choice for project

customers. In case of flat products, SAIL remains a major supplier of HR Coils to the tube

making sector and is slowly increasing its presence in cold reducing segment. The Plates

from SAIL are rated amongst the best and are in good demand from project customers. India

is emerging as a major hub, both for the automobile and for the auto components sector. The

water supply and oil & gas sectors are the other segments where there is a large growth

potential. The modernized ERW Pipe Mill at Rourkela Steel Plant is able to cater to the

requirement of these sectors. Bokaro Steel Plant and Bhilai Steel Plant are also producing

small quantities of API grade HR Coil and Plates for servicing these sectors. SAIL has

undertaken its expansion plan keeping these opportunities in mind. The recessionary business

environment while imposing a great challenge has also led to new pockets of opportunity. All

the companies that are in the midst of expansion plan can take up capital projects at much


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more competitive rates than feasible earlier. With a number of companies deferring their

projects in the wake of uncertain demand, the competition in the equipment supplying

industry has , leading to reduction in project cost. Lowering of commodity and metals prices

is also going to bring down the cost of capital projects. SAIL is in the midst of its expansion

plan which after completion will add 10 million tonnes to its saleable steel capacity. The

expansion plan will enable the company to increase the proportion of high value steel to more

than 50% from the existing level of slightly more than 30%. Induction of rolling mills will

eliminate the proportion of semis in SAIL's product-mix, around 20% as of now, and enable

enhancement in value realization. Also, new products being introduced will help in supplying

state of art products to railways, construction, auto, and oil & gas segments. Slowdown in

general economic activity has also made the cost of acquisition of coking coal and other

mines abroad more affordable. This is likely to give a sustained advantage in the long run.

Threats

International prices of steel dropped by over 60% from their peak level in July, 2008. With

import duty at 5%, and poor demand from developed countries, cheap imports are on an

increase into thecountry putting pressure on realisation of the domestic steel producers.

Although green field expansion plans have suffered a setback due to implosion of demand,

brown field capacities are coming up in the country. Some of the steel majors have added

capacities during 2008- 09 and some new capacities are likely to come on-line by 2009-10.

Greenfield capacity expansions will re-emerge sooner in India compared to other countries

due to positive signs of demand prospects. There is substantial excess capacity for galvanised

products in the country, which necessitates its exports in good volumes. Due to setback in

export, the domestic market is suffering a negative impact and which has also had a

cascading effect on Cold Rolled & Hot Rolled coils. With significant excess capacity in the

global steel industry during 2009 there is a threat of dumping cheap steel to India which is

likely to be the only major steel consuming nation with a positive growth. Clearance and

renewal of mining lease, which involve multiple agencies at the State and Central levels, are

an area of concern. Delay in opening new mines, and / or expanding existing mines may

constrain raw materials availability, thereby impacting growth in saleable steel production,

and overall economics of operation. Law and order situation in mining areas in some of the

states is also a cause of concern for smooth operations in remote areas.


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MANAGEMENT DISCUSSION AND ANALYSIS

The Management of Steel Authority of India Limited presents its Analysis Report covering

the performance and outlook of the Company.

Management discussion and Analysis Report:

A) Industry Structure & Developments:

General Economic Environment:

The first half of 2008 saw unprecedented rise in commodity prices all over the world. The

global output also registered a significant rise. However, the second half of 2008-09

signalled a sharp slowdown in the economic activity world over. In the quarter ending

December 2008, the world output of products and services was virtually stagnant at 0.2%,

with the advanced countries registering a negative growth.

The stresses in U.S. financial markets that first emerged in the summer of 2007 transformed

themselves into a full-blown global financial crisis in the fall of 2008. The worsening

financial environment reached a climax in September 2008, with the sudden collapse of

several major financial institutions in the United States, raising fears that escalating

financial pressures could pose a systemic risk to the international financial system.

Global output slowed down to 3.2 percent in 2008 from a peak growth of 5.2 percent in

2007. While growth in emerging and developing economies was moderate at 6.0 percent,

growth of advanced economies decelerated to 0.8 percent.

GDP growth in the developing world will slow to a projected 1.5 percent in 2009 from 5.8

percent in 2008, according to IMF. The bank has projected a contraction of 1.4 percent for

world GDP for the year 2009. This would be the first decline in world output since World

War II.


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India -Economy:

The Indian economy, which was on a robust growth path up to 200708, averaging at 8.9

per cent during the period 2003-04 to 2007-08, could not escape the global slowdown in

2008-09, with the deceleration turning out to be somewhat sharper in the third and fourth

quarters. While the growth deceleration was primarily driven by the global economic crisis,

it also reflected to some extent the slowdown associated with cyclical factors. Industrial

growth experienced a significant downturn and the loss of growth momentum was evident in

all categories, viz., the basic, capital, intermediate and consumer goods. In 2008-09, GDP

registered a growth of 6.7 percent and industrial sector clocked 2.4 percent growth. The

major impact of slowdown was felt in manufacturing sector which fell to a growth rate of

2.3 percent as compared to 8.2 percent in 2007-08.

Inflation declined from its intro-year peak of 12.9 per cent recorded on August 2, 208 to -

1.17 per cent as on July 11th, 2009 led by the reductions in the administered prices of

petroleum products and electricity as well as decline in the prices of freely priced

petroleum products, oilseeds/edible oils/oil cakes, raw cotton and cotton textiles. Iron &

Steel products witnessed a fall of 21 percent in the week ending 11th July, 2009 as compared

to same period last year.

The Index of Six core industries having a combined weight of 26.7% in the Index of

Industrial Production (IIP) with base 1993-94 registered a growth of 2.7% as against 5.9%

during the corresponding period of the previous Year.

World Steel Scenario:

The progression of the US financial crisis into a global economic crisis brought about a

massive and regionally synchronised global decline of steel demand in late 2008. As per

World Steel Association (WSA), cumulative production during the year 2008 declined

to 1327 million tonnes, registering a negative growth of 1.8 percent over 2007 production.

Steel production declined in all the major steel producing countries and regions including the

EU, North America, South America and the CIS. However, Asia and the Middle East showed

a positive growth in 2008.


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China became the first country ever to produce more than 500 million tonnes of crude steel in

one year. It produced 502 million tonnes of crude steel, an increase of 2.6% over CPLY.

Production volume in China has more than doubled in last 5 years, from 222 million tonnes

in 2002. China's share of world production in 2008 grew to 38%. Asia produced 770 million

tonnes of crude steel, 58% of world steel production a 1.9% growth over last year. South

Korea recorded increases of 3.8%. Japan produced 119 million tonnes in 2008, a decrease of

1.2% over 2007. Crude steel production in India was 55.2 million tonnes, 4% higher than the

Jan-Dec'07 production. Among other BRIC countries Brazil ended the year at almost last

year's level, while in Russia production fell by 5.4%.

Production vis-a-vis Demand of Steel in India:

As per provisional estimates of JPC. India produced 53.5 million tonnes of

finished steel in fiscal 2008-09, a growth of 0.4% over previous year's

production. The apparent domestic consumption of finished mild steel during

the year FY'08-09 was 48.7 million tonnes as compared to 49.4 million

tonnes during the previous year, a decline of 1.5%. Imports and exports of

steel declined by 21% and 24% respectively. Crude steel production at 54

million tonnes in 2008-09 was only marginally higherthan 2007-08.

Position of Steel Authority of India Limited (SAIL):

India is ranked as the 5th largest steel producing country in the world,

while SAIL is ranked as the 21st largest steel producer in the world during

2008 (Source: WSA) SAIL continues to be the largest steel producer of

finished steel in India with around 1/5th of the market share.


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Indian Steel Industry:

Steel industry in India reflected the global trend. Prices which had firmed

up in the first half of the fiscal 2008-09, plunged down sharply from

October 2008. There was a sharp reduction in the off take as consuming

segments resorted to destocking and deferring purchases in anticipation of

best prices from customer's perspective.

RISKS AND CONCERN:

General economic slowdown is anticipated to be long drawn with earliest recovery

anticipated around October, 2009. The recovery in steel sector may also take a longer time.

Excess capacity during this period will put pressure on the margins in the steel business.

The process of clearance of mining leases, in the country needs to be streamlined. As

development of mines takes place over a number of years, delayed clearances may impact

the overall economics of operations for the company.

Steel making is a raw materials intensive process. Each tonne of finished steel involves

transportation of 4 tonnes of materials. Infrastructure cost in India is higher than international

benchmarks. To have internationally competitive steel industry it is essential that

infrastructure cost comes down in future.

In the current scenario, slowdown in demand from Automotive and construction

sector is posing a big concern for the Indian steel industry. Steel capacity developments in

India and China, production dynamics in China and the possible slowdown in China's steel

consumption leading to a surge of steel into the country are other concerns. Proposals of

various countries specially China with respect to steel export tariffs and safeguard

measures initiated in key importing countries might have serious implications for the Indian

steel producers.


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SAIL has had the advantage of low operating cost but with the implementation of the

National Mineral Policy, which contains provision of clearance of proposal to shift royalty

rates of iron ore from the present specific duty to ad valorem rates at 10% of the sale price,

the production cost is likely to increase. Other infrastructure problems like availability

of railway wagons, port congestion etc would also affect operations at SAIL Plants and will

have direct impact on operating margins.

OUTLOOK:

India is the only major economy expected to show positive growth in steel use in 2009.

Indian consumption is forecast to grow about 2% (WSA).

The first signs of recovery in the steel industry were evident in the production and sales trend

during Jan-March'09. Encouraged by the buoyant demand from the infrastructure sector

and slight revival in the auto industry, the steel sector raised production in January'09 by

1.6% as compared to declines recorded in the previous two months. The improved

demand scenario is expected to continue in 2009-10. Production of finished steel for April-

June 2009 was 3.06 million tonnes a growth of 4% over same period last year, while

consumption of steel recorded a growth of 5.2% over April-June 2008.

SAIL took several measures to counter slowdown during the year 2008-09.

Some of them are as given below:

1) Product mix was adjusted by increasing sales of value added and customized

products where SAIL could maximize returns due to better realization. Sales of special

steel registered a growth of 8% over CPLY.

2) Sales of TMT bars used for construction where slowdown was not so severe were

augmented with the help of conversion/wet leasing. Sales of TMT registered 13.8%

growth over previous year.

3) Dealer network was further expanded. As on 1st April, 2009 SAIL has 2406 dealers spread

over 625 districts in the country. Sales through dealers were also increased and registered


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56% growth during '08-09 over previous year sales. This measure was taken with a view to

reach steel of mass consumption near the consuming centres at competitive rates fixed by

SAIL to benefit the year 2004-05 stood at 5,15,200 tonnes during 2008-09.

4) Order fulfilment was maximized against products/sectors from which sufficient orders

could be booked like Railways. Record sales of Long Rails (130/260 m) were effected to

Railways. Total supplies of rails to Railways (including RVNL) reached a record level of

about 7.9 lakh tonnes registering 5.50/o growth over previous year.

5) Suitable marketing strategies were employed to service strategic segments and

growth achieved in such segments like Tube segment (2.4%), Heavy Machinery (113%),

Cycle (42%), Containers (40%) and Boiler and Pressure Vessels (7%).

6) Record supplies of steel to projects of national importance: 38% growth in sales to BHEL

in Power sector, 58% growth to BSNL in Telecom sector and 49% growth to DMRC

achieved over previous year supplies. Order of 86000 tonnes of PM Plates bagged from

Bangalore Water Supply and Sewage Board in Feb 09 to be executed in 12 months, supplies

commenced in March 09.

7) Door delivery was increased as a measure of customer service. Delivery at customers'

(including projects) doorstep during '08-09 was highest ever at 1.0 million tonnes registering

a growth of 61over previous year.

8) New products were introduced

sail finanacial analysis final project

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