Ratio Analysis Report

SUMMER REPORT ON FINANCIAL STATEMENT ANALYSIS & BENCHMARKING AT TATA STEEL LTD.
(WIRE DIVISION) (2011)
Prepared By: Rajdeep Asrani Amrita School of Business
FINANCIAL STATEMENT ANALYSIS & BENCHMARKING
2011
ACKNOWLEDGEMENT
I am grateful to thank TATA Steel, Wire Division for giving me this great opportunity to do my Summer Internship Project with them. I take the privilege to sincerely thank Mr. Sunil Bhaskaran, EIC, Global Wires Business, TATA steel, in creating the opportunity for a summer project in the finance department of this division. I would like to thank Mr. Sanjiv Verma, Financial Controller, Wires Division, TATA steel, for making everything possible for me during the entire course of the project. I am also thankful to my Company Guide, Mr. Pradeep Poojari, Manager Finance & Accounts Department, Wires Division, TATA Steel, for his guidance and support during the entire course of the project. I am thankful to the Core Finance Team, of the company for their guidance, support and encouragement to give my best during the Internship Programme. I also take great pleasure in thanking my faculty guide, Prof. R.K Murthy, Amrita School of Business, Amrita VishwaVidyapeetham for giving me the moral support and inspiration to perform well and make the Summer Internship Project successful. I also take this opportunity to thank Prof. Deepak Gupta, Professor, Marketing, Amrita School of Business, Amrita Vishwavidyapeetham and Placement committee, Amrita School of Business, without whose help I wouldnt have got such a wonderful corporate exposure at Wires Division, TATA Steel, Mumbai. I specially thank all the Managers, Officers and the Staff members with whom I interacted during the course of my project for their support and cooperation.
TATA STEEL WIRE DIVISION
2011
Table of Contents
1)
Introduction
1.1) 1.2) 1.3) Introduction to Tata Steel Wire Division.4 Introduction to the Project11 Introduction to Financial Statement Analysis12
2)
Horizontal Analysis................................................................................................15 Ratio Analysis and Benchmarking

3.1) TSWD- Comparison with past performance (Ratio Trend Analysis)..22
3)
3.2) Benchmarking52 a) About the Competitors53 b) Ratio Comparison77 3.3) Comparison with the Tata Steel Global Wire Entities.92 a) About the Global Wire Entities.93 b) Ratio Comparison104
4) Limitations of my Study.119 5) Conclusion120 6) References.121
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1.1) Introduction to Tata Steel Wire Division
Tata Steel Wire Division is the pioneer of steel wire industry in India and is the largest manufacturer and market leader in India. TSWD 1is the only manufacturer of steel wires in India which is present all over India catering to the needs of all four industry sectors namely Auto, Construction, Power and Retail.
Background-Tata Steel Wire Division

Steel wire manufacturing is a fragmented industry with many small and medium sized manufacturers and most of the steel wire manufacturers are privately owned and owner driven. In India only Tata Steel, Usha Martin, Rajratan Global Wires and Ramsarup industries are in public domain, rest all units are privately owned. TSWD was setup in 1958 as Special Steels Limited to manufacture steel wires for making umbrella ribs. Setting up of these manufacturing facilities was one of first steps that the company took in bringing new steel wires for the Indian markets, where after many wires were introduced which resulted in development of the markets and also growth and consolidation of the company Tata Steel Wire Division is one of the founder members of the trade association named The Steel Wire Manufacturers Association of India. SWMAI ensures that there is a platform for sharing concerns and as a single body representative with regulatory authorities and customer/supplier associations. Today around 50% of the wire manufacturing capacity is registered under the SWMAI. The wires supplied by TSWD are intermediate products which are converted or assembled into products which in turn touch the end consumers. TSWD customers in the institutional business are the original equipment manufacturers such as tyre manufacturers
1
TSWD and Global Wires India have been used interchangeably
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like MRF, JK Tyres, Apollo tyres etc. These customers have clearly defined technical specifications and thus any changes in the wires specifications require formal approvals and long drawn laboratory and field approvals. Hence new product development in steel wire industry can either be achieved by introducing newer wires in a market which has yet to develop or by making subtle changes in product specifications and making process improvements which will enhance usage for customer applications. TSWD has been constantly striving to create customer value by offering these differentiated products. TSWD made a radical change and changed the rules of Indian wire manufacturers by creating a retail segment portfolio. It launched its brand Tata Wiron in 2004 and built a channel from scratch to support its efforts.
Organizational Profile
Wire division is the market leader and pioneer in wire manufacturing in India over the past 50 years, Established in 1958 as steel wire manufacturing company it was taken over by Tata Steel in 1984. In 2002 wire division became a separate profit centre under long product division (Tata Steel). Year 2008 saw the wire division become a part of global wire business (Tata Steel). The global wires business was created to bring about integration in Tata Steel groups various businesses and also for developing the wire business globally. The global wires business of Tata steel group consists of Wire division (India), The Siam Industrial Wire Co. Ltd (Thailand), Wuxi Jinyang Metal Products Co. Ltd. (China) and Lanka Special Steel Ltd (Sri Lanka) and Indian steel & wire products (ISWP). The total revenue of Global Wires Business was more than USD 500 Mn for FY10.
GLOBAL WIRES
LANKA SPECIAL STEELS LTD., SRI LANKA
WUXI JINYANG METAL PRODUCTS, CHINA
SIAM INDUSTRIAL WIRE CO. LTD., THAILAND
INDIAN STEEL & WIRE PRODUCTS LTD.
FIG: TATA STEEL GLOBAL WIRES BUSINESS ENTITIES TATA STEEL WIRE DIVISION
2011
The wire division (India) has an annual capacity of 335,000 MT of steel wires across 4 plants (self owned), 8 plants (outsourced) and one subsidiary. WD also has a Wire Rod Mill (West) whose operations are under control of the Chief-WD and the sale of wire rods is controlled by Long Products Division of Tata Steel. WRM West has an annual capacity of 295,000 MT. The Products rolled includes Mild Steel and various grades of High Carbon Wire Rods. WD has 8 sales offices, 19 stockyards and 27 Galvanized Wire Distributors.
Table: Key differences in WD Plants
OWNERSHIP
Owned and managed by WD TWP1 TWP2
Owned by WD and managed by Managing Agency INDORE DWP
100% subsidiary ISWP Partly by ISWP and WD
Outsourced EPA EPA
ASSETS
WIRE DIVISION
RM
ARRANGED BY WD
PEOPLE
On rolls of WD and some non core activities outsourced
On rolls of Managing agency except very few key personnel from WD
On rolls of ISWP
On rolls of EPA
Products and Delivery Mechanism

The Wire Division caters to the needs of institutional as well as retail segments of the Market. The institutional segment consists of Automobile industry, Infrastructure and power. The products used by the automobile sector are Tyre Beads and springs. PC Strands and PC wires are used by the infrastructure sector whereas the power sector uses ACSR (Aluminium Conductor Steel Reinforced). The products for the retail segment of the market include Galvanized wire for Farming, Poultry and Fencing. The institutional segment contributes to the maximum part of revenues and profits of the wire division. About 96% of the sales volume is sold domestically and about 4% exported. The chart below shows the breakup of profits and revenues across various business segments.
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PRODUCTS
AUTOMOTIVE
INFRASTRUCTURE
POWER
RETAIL
(i) Tyre Bead Wire (ii) Spring Wire
(i) PC Strands WIres (ii) PC Wire
(i) Aluminium Conductor Steel Reinforced (ACSR) (ii) Cable Armour Wires
(i) GI Wires (ii) MIG Wires (iii) Mesh Wires
Fig:Wire Division-Market Segments
Business Segments by Revenue

Institutional Retail
Business Segments by Profit(FY10)

Institutional Retail
33%
30%
67%
70%
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Selfowned
Type of Wire TWP1 Tarapur TWP2 Tarapur Indore Operations Doddabalapur operations
Subsidiary
ISWP Jamshedpur
Outsourced
EPAs All India Total capacity
Motor Tyre Bead LRPC Galvanized Wire Spring Steel Wire Single PC Wire ACSR Current Production capacities(MT)
X X X X X X
86,000 84,000
X X X X X X
47,000 12,000 60,000
X X
46,000
3,35,000
Table: Mapping of Products and Plants
The Wire Division has adopted Theory of Constraints (ToC) which has led to major improvements in the delivery mechanism. Stock buffers have been introduced at plant warehouses, select stockyards, distributors and customers premises to enable Vendor Managed Inventory (VMI) for enterprise customers replenishment model for key distributors. Further simplified Drum-Buffer-Rope (SDBR) concept has been implemented to improve Supply chain reliability. As a result of these mechanisms the supply chain is reliable and is a key differentiator as compared to the competitors of WD. Wire Division has a workforce of 1037 full time employees. All three plants at Tarapur have unions and collective bargaining is done with respective unions of each plant. At Tarapur all the core operations are performed by the employees whereas support services like packing and material handling are outsourced to agencies having expertise in those areas. At Doddabalapur and Indore the operations are handled by Managing Agencies in order to manage the labour costs
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Flow of Raw Materials

The Wire business is downstream to steel and various stages in the wire making process is shown below.
Steel Making
Continuous Cast Billets
Hot Rolled Wire Rods
Wires
Fig:Wire making process
The steel billets are supplied by Long Products Division (Jamshedpur). The billets are then hot rolled to wire rods at WRM West, ISWP and ISIM and these wire rods are finally converted into wires at wire plants. The technology used by the Wire Division is highly effective and provides them a competitive edge over other wire manufacturers. WDs purchases are approximately 66% of the sales turnover. Major value in purchase is of billets from Tata Steels Long Product Division. The division has a supplier base of 1600, of which 50 suppliers account for more than 70% of the value purchases for raw materials and critical production consumables. These suppliers are known as MOU suppliers and play a key role in the supply chain at WD.
Fig: Flow of Raw Materials
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Organizational Situation
WD is a market leader in India and provides a wide range of products all over India. With a total sales of FY10 being 244,465 MT, WD is way ahead of its nearest competitor i.e. Usha Martin having sales of approximately 104,000 MT. Competition to WD in India is largely unorganized, fragmented and regional. Most units are owner driven, operating in specific sectors and catering to nearby regions only. WD competes for MTB with Rajratan in northern India, with Bedmutha for GI wires in Western India, with Bajrang for PC wires in North India, Aarti Steel for spring steel in North India etc. TSWD has been constantly striving to create customer value by offering various differentiated products and will continue its journey of shaping the wire industry by offering wire products solutions in the future.
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1.2) Introduction to the Project
Project Title
Financial Statement Analysis and Benchmarking
Objectives:
i) ii) iii) Understand the Financial Statements of the company and analyse them. Compare the performance of the company with the past performance. Carry out the Ratio analysis in order to judge the performance in a better way and draw inferences based on the calculated ratios. iv) Compare the results of the ratio analysis with that of the major competitors and find the areas of improvement if any. v) vi) Performance comparison with the Global Wires Entities. Based on the above study suggest recommendations to the company.
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1.3) Introduction to Financial Statement Analysis

Financial statement analysis is the collective name for tools and techniques that are intended to provide relevant information to decision makers. While information found in the published financial statements is often not enough to form conclusive judgements about firms performance, financial statements do provide important clues about what needs to be examined in greater detail. Analysis of financial statements is of interest to lenders, investors, security analysts, managers, corporate boards, regulators and others. The purpose of such an analysis is to assess a companys financial health and performance which may range from a simple analysis of the short term liquidity position of the firm to a comprehensive assessment of the strengths and weaknesses of the firm in various areas. It is helpful in assessing corporate excellence, judging creditworthiness, forecasting bond ratings and assessing market risk. Financial statement analysis consists of comparisons for the same company over periods of time and for different companies in the same industry or different industries. Financial statement analysis enables to evaluate past performance and financial position and also predict future performance. Various factors such as benchmark financial ratios, past performance of the company and industry standards are used as pertinent standards of comparisons to determine whether the results of financial statement analysis are favourable or unfavourable.
Techniques of Financial Statement Analysis

Very few numbers in financial statements are significant in themselves. But meaningful inferences can be drawn from their relationship to other amounts or their change from one period to another. The tools of financial statement analysis help in establishing significant relationships and changes. The most commonly used analytical techniques are: i) ii) iii) iv) Horizontal Analysis Trend Analysis Vertical Analysis Ratio Analysis
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Horizontal Analysis2 Financial statements present comparative information for the current year as well as the previous year. Horizontal analysis is a simple approach to financial statement analysis that involves calculating amount and percentage changes from the previous year to current year in order to draw inferences. Trend Analysis Trend analysis is an extension of horizontal analysis to many years and involves calculation of percentage changes in financial statement items for a number of successive years. A value of 100 is first assigned to the financial statement items in a past financial year used as a base year and then the financial statement items in the following years are expressed as a percentage of base year value. Trend analysis over longer periods helps in identifying certain basic changes in the nature of the business. Vertical Analysis Vertical analysis is the proportional expression of each item on a financial statement to the statement total. The results of vertical analysis are presented in the form of commonsize statements in which the items within each statement are expressed in percentages of some common number and always add up to 100. It is conventional to express items in the profit and loss account as percentage of sales, and balance sheet items as percentages of total shareholders funds and liabilities. Vertical analysis helps in making comparisons of companies that differ in size since the financial statements are expressed in comparable common size format. Common size statements are especially useful in presentations where the focus is on overall comparisons. Ratio Analysis3 Ratio analysis involves establishing a relevant financial relationship between components of financial statements. Two companies may have earned the same amount of profit in a year, but unless the profit is related to sales or total assets, it is not possible to
2
3
Only Horizontal analysis and Ratio analysis is used in the project for performance Appraisal of the company
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conclude which of them is more profitable. Ratio analysis helps in identifying significant relationships between financial statement items for further investigation. If used with understanding of industry factors and general economic conditions, it can be a powerful tool for recognizing a companys strengths as well as potential trouble spots.
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2) Horizontal Analysis- Wire Division

A) Financials
TATA STEEL WIRE DIVISION(TSWD) Profit & Loss Accounts INR CRORES 2011 INCOME Sales and other operating income 1296.13 1113.77 1466.55 1205.08 1200.25 Less: Excise duty 117.86 Net sales 1178.27 1028.36 1304.15 1050.98 1049.53 Other income 14.20 TOTAL INCOME 1192.47 1040.00 1305.91 1061.98 1059.69 11.64 1.76 11.00 10.16 85.41 162.40 154.10 150.72 2010 2009 2008 2007
EBITDA 46.47 Depriciation 14.66 Amortisation 0.00

EBIT
50.21 8.26 0.00 41.95
10.34 7.18 0.00 3.16
48.37 7.15 0.00 41.22
37.90 7.55 0.00 30.35
31.81
Interest 0.00 0.00 0.00 0.00 0.00
PBT
31.81
41.95
3.16
41.22
30.35
Taxes 0.00 0.00 0.00 0.00 0.00
PAT
31.81
41.95
3.16
41.22
30.35
NOPAT
31.81
41.95
3.16
41.22
30.35
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TATA STEEL WIRE DIVISION(TSWD) Balance Sheets INR CRORES SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Minority Interest Secured Loans Unsecured Loans Total Loan Funds Current Account Others(Deffered Tax) Total Liabilities APPLICATION OF FUNDS : Gross Block Less: Accumulated Depreciation Less: Impairment of Assets Net Block Investments Current Assets, Loans & Advances Inventories Sundry Debtors Other Assets Cash and Bank Loans and Advances Total Current Assets Current Liabilities and Provisions Net Current Assets Miscellaneous Expenses not written off Total Assets 84.43 37.22 0.00 -0.21 11.66 133.10 96.16 36.94 0.00 258.54 53.63 21.39 0.00 -0.86 15.26 89.42 91.88 -2.46 0.00 216.89 65.51 26.06 0.00 0.40 14.94 106.91 73.01 33.90 0.00 189.73 64.26 33.30 0.00 1.38 24.99 123.93 85.09 38.84 0.00 147.75 59.41 43.82 0.00 6.60 18.65 128.48 65.97 62.51 0.00 155.18 339.40 117.80 0.00 221.60 0.00 326.65 107.30 0.00 219.35 0.00 256.61 100.78 0.00 155.83 0.00 206.53 97.62 0.00 108.91 0.00 185.99 93.32 0.00 92.67 0.00 0.00 31.81 0.00 0.00 31.81 0.00 1.72 0.00 1.72 225.02 0.00 258.55 0.00 41.95 0.00 0.00 41.95 0.00 1.68 0.00 1.68 173.26 0.00 216.89 0.00 3.16 0.00 0.00 3.16 0.00 0.00 0.00 0.00 186.57 0.00 189.73 0.00 41.22 0.00 0.00 41.22 0.00 0.00 0.00 0.00 106.53 0.00 147.75 0.00 30.35 0.00 0.00 30.35 0.00 0.00 0.00 0.00 124.83 0.00 155.18 Mar-11 Mar-10 Mar-09 Mar-08 Mar-07
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B) Year wise Analysis4

FY 2008
Condensed Profit & Loss Account (Rs Crores) INCOME Net sales Other income TOTAL INCOME Expenses EBITDA
EBIT PAT
2008
2007
1050.98 11.00 1061.98 1013.61 48.37 41.22 41.22
1049.53 10.16 1059.69 1021.79 37.90 30.35 30.35
2008 Change in amount 1.45 0.84 2.29 -8.18 10.47 10.87 10.87
% change 0.14% 8.27% 0.22% -0.80% 27.63% 35.82% 35.82%
Condensed Balance Sheet Mar-08 Mar-07 (Rs. Crores) 108.91 0.00 64.26 33.30 0.00 1.38 24.99 123.93 85.09 38.84 0.00 147.75
Net Block Investments Current Assets, Loans & Advances Inventories Sundry Debtors Other Assets Cash and Bank Loans and Advances Total Current Assets Current Liabilities and Provisions Net Current Assets Miscellaneous Expenses not written off Total Assets
92.67 0.00 59.41 43.82 0.00 6.60 18.65 128.48 65.97 62.51 0.00 155.18
2008 Change in % amount Change 16.24 17.52% 0.00 0.00% 4.85 -10.52 0.00 -5.22 6.34 -4.55 19.12 -23.67 0.00 -7.43 8.16% -24.01% 0.00% -79.09% 33.99% -3.54% 28.98% -37.87% 0.00% -4.79%
In 2008 the net profit increased to 41.22 from 30.35 in 2007, an increase of approximately 36% which explains the impressive performance in the financial year. The Sales of Wire Division increased by 0.14% and it explains the 15% increase in the profit. Also the Other Income which contributed 27% of the profit increased by nearly 9% and explains another 8% increase in the net profit. Although there was an increase in the sales and other
4
Percentage Changes have been calculated wrt last year and year end balances have been used for comparison
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income, the company was able to reduce their expenditure by almost 1% and this reduction in the expenditure resulted in 75% increase in the net profit. Hence reduction in their expenditure was the major reason for the increase in profits of the company which otherwise would have increased in line with the sales growth. The total assets in 2008 decreased but still the company managed an increase in sales which is an indicator of the good performance in the financial year 2008 and also indicates better management of the assets. The fixed assets increased by almost 18% suggesting expansion of the in house capacity. FY 2009
Condensed Profit & Loss Account Figures in Rs. Crores Net sales Other income TOTAL INCOME Expenses EBITDA
EBIT PAT
2009
2008 change in amount 253.17 -9.24 243.93 281.96 -38.03 -38.06 -38.06
2009 % change 24.09% -83.98% 22.97% 27.82% -78.62% -92.33% -92.33%
1304.15 1.76 1305.91 1295.57 10.34 3.16 3.16
1050.98 11.00 1061.98 1013.61 48.37 41.22 41.22
Condensed Balance Sheet
Mar-09 (Rs. Crores) 155.83 65.51 26.06 0.00 0.40 14.94 106.91 73.01 33.90 189.73
Mar-08 change in amount 46.92 1.25 -7.24 0.00 -0.98 -10.05 -17.02 -12.08 -4.94 41.98
2009 % change
Net Block Current Assets, Loans & Advances Inventories Sundry Debtors Other Assets Cash and Bank Loans and Advances Total Current Assets Current Liabilities and Provisions Net Current Assets Total Assets
108.91 64.26 33.30 0.00 1.38 24.99 123.93 85.09 38.84 147.75
43.08% 1.95% -21.74% 0.00% -71.01% -40.22% -13.73% -14.20% -12.72% 28.41%
In the financial year 2009 the net profit went down by 92.33% with respect to the net profit in 2008. The Other Income which contributed 27% of the profit in 2008 saw a
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reduction of around 84% and thus explains 25% reduction in the profit. The sales in 2009 increased by 24% but along with the sales there was an increase in the expenses also. The expenses increased by 27% which was greater than the increase in the sales and hence contributed heavily to the reduction in profit in 2009. The fixed assets in FY 2009 increased by almost 44% which again signals the continuation of expansion of the in house capacity. The increase in total assets (i.e. 28%) was greater than the increase in the sales and indicates the deteriorated performance and poor assets management. The performance in 2009 is an indicator of the economic crisis that prevailed in the country and affected every business sector. Hence exceptionally low profits can be attributed mainly to the economic downturn. FY 2010
Condensed Profit & Loss Account 2010 2009 2010 change in amount -275.78 9.87 -265.91 -305.78 39.87 38.79 38.79
% change
Figures in Rs. Crores Net sales Other income TOTAL INCOME Expenses EBITDA
EBIT PAT
1028.36 11.64 1040.00 989.79 50.21 41.95 41.95
1304.15 1.76 1305.91 1295.57 10.34 3.16 3.16
-21.15% 560.15% -20.36% -23.60% 385.59% 1227.53% 1227.53%
Condensed Balance Sheet Mar-10 Figures in Rs. Crores Net Block Investments Current Assets, Loans & Advances Sundry Debtors Other Assets Cash and Bank Loans and Advances Total Current Assets Current Liabilities and Provisions Net Current Assets Total Assets 219.35 0.00 21.39 0.00 -0.86 15.26 89.42 91.88 -2.46 216.89
Mar-09
155.83 0.00 26.06 0.00 0.40 14.94 106.91 73.01 33.90 189.73
2010 change in amount 63.52 0.00 -4.67 0.00 -1.26 0.32 -17.49 18.87 -36.36 27.16
% change 40.76% 0.00% -17.92% 0.00% -315.00% 2.14% -16.36% 25.85% -107.26% 14.32%
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The performance in the financial year 2010 is more or less similar to that in 2008. The net profit in 2010 increased by approximately 1227% with respect to that of 2009. Although there was a drop in the sales compared to 2009 but the drop in sales was because of relocation of the Borivali plant to Tarapur. The market for steel in 2010 was good and the inventory levels in 2010 which were the lowest in the 5 years support that fact. The net profit in 2010 increased by approximately 1200% and that increase in profit is due to an exceptional increase in the other income which increased by 560% and reduction in the expenses. The fixed assets continued to increase signalling continued expansion of the in house capacity. As mentioned earlier the inventory levels were the lowest in 2010 (Reduction of 18% from 2009) and were reduced below the normal level due to excellent market conditions. The decrease in debtors by 18% can be attributed to the change in the credit policy which was strict compared to the previous years. FY 2011
Condensed Profit & Loss Account (Figures in Rs. Crores) Net sales Other income TOTAL INCOME Expenses EBITDA
EBIT PAT
2011
2010 change in amount 149.91 2.56 152.47 156.21 -3.74 -10.14 -10.14
2011 % change 14.58% 22.04% 14.66% 15.78% -7.45% -24.17% -24.17%
1178.27 14.20 1192.47 1146.00 46.47 31.81 31.81
1028.36 11.64 1040.00 989.79 50.21 41.95 41.95
Condensed Balance Sheet (Figures in Rs. Crores) Net Block Current Assets, Loans & Advances Inventories Sundry Debtors Other Assets Cash and Bank Loans and Advances Total Current Assets Current Liabilities and Provisions Net Current Assets
Mar-11
Mar-10 change in amount 2.25 30.80 15.83 0.00 0.65 -3.60 43.68 4.28 39.40
2011 % change 1.03% 57.43% 74.01% 0.00% -75.58% -23.59% 48.85% 4.66% -1601.63% 20
221.60 84.43 37.22 0.00 -0.21 11.66 133.10 96.16 36.94
219.35 53.63 21.39 0.00 -0.86 15.26 89.42 91.88 -2.46
2011
The net profit for the financial year 2011 reduced by approximately 25% with respect to the net profit in 2010. Even though there was an increase in sales and other income the profit reduced by 25% with respect to 2010 because the margins were reduced due to the market conditions and the increase in expenditure which was greater than the sales growth explains the reduced profit. The fixed assets increased only marginally which indicates that the expansion that was in process since 2008 was completed in 2011. The increase in total assets was greater than the sales growth which shows the problems in assets management.
C) Overall Performance Summary
Net Profit
50 40 30 20 10 0 2007 2008 2009 2010 2011 Net Profit
Wire Division has been profitable during most of the years except in the year 2009 when the profits of the company dipped drastically owing to adverse market conditions due to economic crisis prevailing in the country.
Net Fixed Assets

250 200 150 100 50 0 2007 2008 2009 2010 2011 Net Fixed Assets
The fixed assets has been continuously increasing since 2008 which shows that the Wire Division has been continuously increasing their in-house capacity which has been completed in 2011.
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3.1) TSWD- Comparison with past performance

Financial ratios are divided into five broad categories i) ii) iii) iv) v) Liquidity Ratios Leverage Ratios Turnover Ratios Profitability Ratios Valuation ratios
The important ratios used for the analysis are described below along with the analysis of TSWDs performance over the last five years.
Liquidity Ratios
Liquidity refers to the ability of a firm to meet its obligations in the short run, usually one year. Liquidity ratios are generally based on the relationship between current assets (the sources for meeting short term obligations) and current liabilities. The important liquidity ratios are: Current Ratio, Quick Ratio, and Cash Ratio. A) Current Ratio Current ratio is defined as the relationship between current assets and current liabilities. This ratio is also known as "working capital ratio". It is a measure of general liquidity and is most widely used to make the analysis for short term financial position or liquidity of a firm. It is a widely used indicator of a companys ability to pay its debts in the short term. It shows the amount of current assets a company has per rupee of current liabilities. Current ratio is expressed as follows:
Current Ratio = Current assets Current Liabilities
The two basic components of this ratio are current assets and current liabilities. Current assets include cash and those assets which can be easily converted into cash within a short period of time, generally, one year, such as marketable securities or readily realizable investments, bills receivables, sundry debtors, (excluding bad debts or
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provisions), inventories, work in progress, etc. Prepaid expenses should also be included in current assets because they represent payments made in advance which will not have to be paid in near future. Current liabilities are those obligations which are payable within a short period of tie generally one year and include outstanding expenses, bills payable, sundry creditors, bank overdraft, accrued expenses, short term advances, income tax payable, dividend payable, etc. This ratio is a general and quick measure of liquidity of a firm. It represents the margin of safety or cushion available to the creditors. It is an index of the firms financial stability and the strength of working capital. A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current obligations in time and when they become due. On the other hand, a relatively low current ratio represents that the liquidity position of the firm is not good and the firm shall not be able to pay its current liabilities in time without facing difficulties. An increase in the current ratio represents improvement in the liquidity position of the firm while a decrease in the current ratio represents there has been deterioration in the liquidity position of the firm. Normally a current ratio of 2:1 is considered satisfactory. The idea of having double the current assets as compared to the current liabilities is to provide a cushion for the delays and losses in the realization of current assets. However care should be taken while interpreting the current ratio because firms having less than 2:1 ratio may be having a better liquidity than even firms having more than 2:1 ratio. This is because of the reason that current ratio measures the quantity of the current assets and not the quality of current assets. If a firms current assets include debtors which are not recoverable or stocks which are slow moving or obsolete, the current ratio may be high but it does not represent a good liquidity position.
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Current Ratio
2.5 2 1.5 1 0.5 0 TSWD
2007 1.947551918
2008 1.456575391
2009 1.464456924
2010 0.973225947
2011 1.384151414
Fig: Current Ratio trend for TSWD
Over the past five years Global Wires, India has witnessed variability in the current ratio. The current ratio was as high as 1.95 in 2007 and as low as 0.97 in 2010. Global wire, Indias ratio was 1.46 in 2008 and 2009 and nearly 1.38 in the financial year 2011. The variability in the current ratio occurs mainly due to variability in the composition of current assets or the current liabilities. The graph below shows the trend of current assets and current liabilities over the period of five years, from financial year 2007 to 2011.
140 120 100 80 Current Assets 60 40 20 0 2007 2008 2009 2010 2011 Current Liabilities
Fig: Trend of current assets and current liabilities
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In the year 2007, the current assets amounted to 128.48 whereas total current liabilities in the year 2007 were nearly 65. The total current assets were almost twice the current liabilities. The current ratio for the year 2007 comes out to be 1.95 which implies that the company had current assets worth Rs. 1.95 per rupee of current liabilities and company was in a strong liquidity position and was perfectly capable of paying back its current obligations. As is the case with most manufacturing firms, inventory constituted almost 50% of the current assets and the debtors were nearly 35% of the total current assets.
Yearwise Breakup of Current Assets (TSWD) Inventory 2007 2008 2009 2010 2011 59.41 64.26 65.51 53.63 84.43 Sundry Debtors 43.82 33.30 26.06 21.39 37.22 Cash & Bank 6.60 1.39 0.40 -0.86 -0.21 Loans & Advances 18.65 24.99 14.95 15.26 11.66 Total Current Assets 128.48 123.94 106.92 89.42 133.10
Breakup Expressed as percentage(TSWD) Inventory Sundry Debtors Cash & Bank Loans & Advances Total Current Assets 100.00% 100.00% 100.00% 100.00% 100.00%
2007 2008 2009 2010 2011
46.24% 51.85% 61.27% 59.98% 63.43%
34.11% 26.87% 24.37% 23.92% 27.96%
5.14% 1.12% 0.37% -0.96% -0.16%
14.52% 20.16% 13.98% 17.07% 8.76%
In the financial year 2008 the current assets reduced to 123.94 and the current liabilities increased to 85.09 which explains the decrease in the current ratio. Even though there was a marginal increase in the inventory levels, the total assets still went down, the major reason being the decrease in the sundry debtors. Owing to better debtor
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2011
management, the debtors were reduced by approximately 25%. The increase in the inventory levels and decrease in the debtors did not mean that the company sales had gone down, instead there was an increase in the sales as is evident from the graph below. The current ratio thus came down to nearly 1.5 which meant the liquidity of the company had gone down, but was still satisfactory as the company had current assets worth Rs. 1.5 per rupee of current liability.
90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 -10.00 2007 2008 2009 2010 2011 Inventories Sundry debtors Cash & Bank Loans & Advances
Fig: Trends in the various current assets
Sales
1400 1200 1000 800 600 400 200 0 2007 2008 2009 2010 2011 Sales
Fig: Company sales from the year 2007 to 2011
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2011
In the year 2009 there was a reduction in both current assets as well as current liabilities by almost an equal amount. Thus the current ratio was unaffected from 2008. There was a reduction in the debtors and loans & advances and a marginal increase in the inventory level. The liquidity of the company was greatly affected in the year 2010 and the current ratio went down to less than 1, the lowest in the past four years. The current assets and the current liabilities reached almost the same level. This reduction in the liquidity of the company was mainly due to the plant relocation process due to which the operations were affected. The sales of the company went down, the inventory levels were reduced. There was a reduction in debtors and Loans & advances and the current liabilities were also reduced. The year 2011 was the year of recovery where the company tried to achieve the same kind of stability and liquidity which it had enjoyed in the previous years. The efforts were successful to a certain extent and the company operations were back to normal. There was an increase in the current assets as well as current liabilities and the current ratio was 1.38 which meant that the company had achieved the satisfactory liquidity position but there is still room for improvement. Global Wire, India aims for a current ratio of 1.5 when the competition is intense and a current ratio of 2 when there is less competition. The company was successful in reaching its target and was fairly stable and liquid in all the years except in 2010 wherein the company operations were affected due to the relocation process, but the company started recovering in 2011 and was only just short of its target. But now having achieved the desired stability it would like to achieve the target on a regular basis and maintain consistency in its performance and strengthen its working capital management.
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2011
B) Quick Ratio Quick ratio is calculated as a supplement to the current ratio and is an indicator of a companys short term liquidity. It measures the companys ability to meet its short term obligations with its most liquid assets. All current assets are not equally liquid. While cash is readily available to make payments to suppliers and debtors can be quickly converted into cash, inventories are two steps away from conversion into cash (sale and collection). Thus a large current ratio by itself is not a satisfactory measure of liquidity when inventories constitute a major part of the current assets. Therefore quick ratio or acid test ratio is computed as a supplement to the current ratio. This ratio relates relatively more liquid current assets, usually current assets less inventories, to current liabilities. Quick ratio is calculated as follows:
Acid-test Ratio
Quick Assets Current Liabilities
Where Quick assets = Current assets-Inventory
TSWD- Trend Analysis
TSWD
1.2 1 0.8 0.6 0.4 0.2 0 TSWD 2007 1.047 2008 0.7014 2009 0.5672 2010 0.3895 2011 0.506135607
Fig: Quick Ratio Trend
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2011
As evident from the above graph, the quick ratio of the Wire Division is on the lower side every year with the highest being 1.05 in 2007 and the lowest being 0.39 in 2010. The quick ratio is calculated to find the ability of the company to pay back its current obligations using its most liquid assets. As already shown the inventory forms the major part of the current assets owned by the wire division. So when inventory is removed from the current assets to calculate its liquidity, the quick ratio is bound to be low because the cash balance is almost negligible. The reason for such low cash balance is the handling of cash by the HO and not Wire Division. So when most liquid assets of the company are considered, only debtors and loans and advances come into the picture which form only 40 - 50% of its total current assets, hence such low values of Quick ratio. But that should not be a cause of worry because as already shown Wire Divisions current ratio is satisfactory, moreover the inventory turnover ratio of the company is very high, averaging about 18 times a year meaning its inventory is quickly converted to cash. The Quick ratio has been constantly declining majorly because of the the constant decrease in the debtors over the years owing to the strict credit and collection policy of the company. C) Cash Ratio Cash ratio is an indicator of companys ability to meet its current liabilities with its most liquid asset i.e. Cash. Cash ratio is calculated as follows:
Cash & Bank Bal. + Current Investments Current Liabilities
Cash Ratio
The cash ratio is generally a more conservative look at a companys ability to cover its liabilities than many other liquidity ratios. This is due to the fact that inventory and accounts receivable are left out of the equation. Since these two accounts are a large part of many companies, this ratio should not be used in determining company value, but simply as one factor in determining liquidity.
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Cash Ratio
0.12
0.10
0.08
0.06
0.04
0.02
0.00
-0.02 TSWD
2007 0.10
2008 0.02
2009 0.01
2010 -0.01
2011 0.00
Fig: Cash ratio trend of TSWD
The graph above shows very low values for the cash ratio from 2007 to 2009 and negative in the financial years 2010 and 2011. But as already explained above, the cash is handled centrally by the Tata Steel and not Wire Division. Hence such low value of cash ratio is not a cause of worry.
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Coverage Ratios
Coverage ratios are used to show the relationship between the debt servicing commitments and the sources for meeting these burdens. The most important coverage ratio is Interest Coverage Ratio
A) Interest Coverage Ratio The Interest Coverage Ratio is also known as debt service ratio or debt service coverage ratio and is defined as:
PBIT Interest
Interest Coverage Ratio
Interest Coverage Ratio is a measure of the protection available to the creditors for payment of interest charges by the company. It relates the fixed interest charges to the income earned by the business and indicates whether the business has earned sufficient profits to pay periodically the interest charges. A high interest coverage ratio means that the firm can easily meet its interest burden even if earnings before interest and taxes suffer a considerable decline. A low interest coverage ratio may result in financial embarrassment when earnings decline. This ratio is widely used by lenders to assess a firms debt capacity and is also a major determinant of bond rating. As a general rule of thumb, investors generally do not prefer an interest coverage ratio under 1.5. An interest coverage ratio below 1.0 indicates that the business is having difficulties generating the cash necessary to pay its interest obligations. The history and consistency of earnings is tremendously important. The more consistent a companys earnings, the lower the interest coverage ratio can be.
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2011

6.00 5.00 4.00 3.00 2.00 1.00 0.00 TSWD 2007 2.98 2008 4.04 2009 0.31 2010 5.40
GOOD Good
2011 4.51
Fig: Interest Coverage Ratio Trend
As evident from the above graph, Global Wire, Indias interest coverage ratio has been on the higher side every year with 2009 being an exception when the ratio came down to 0.31 which was far below the desired level. The graphs below show the trends in the Profit before interest and tax and the interest charges of Global Wires, India.
45 40 35 30 25 20 15 10 5 0 2007 2008 2009 2010 2011 Interest Charges PBIT
Fig: Variations in PBIT and Interest Charges
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2011
The above graph shows that the variation in the interest coverage ratio is mainly due to the variations in PBIT, Interest charges being fairly constant over the years. The dip in the PBIT in 2009 explains the low interest coverage ratio that year. The reason for such low PBIT was the economic crisis that prevailed in the country that year. Thus the company was more than capable of meeting its debt servicing commitments in all the years except in 2009 where the company faced difficulties in paying the debt charges due to the low profits earned that year.
Turnover Ratios
Turnover ratios, also referred to as activity ratios or asset management ratios, measure how efficiently the assets are employed by a firm. These ratios are besed on the relationship between the level of activity, represented by sales or cost of goods sold, and levels of various assets. The important turnover ratios are: Inventory turnover, average collection period, debtors turnover, fixed assets turnover and total assets turnover. Generally averages are used to calculate these ratios. A) Inventory Turnover Ratio5 Inventory turnover ratio or stock turnover ratio is the relationship between cost of goods sold during a particular period of time and the cost of average inventory during a particular period. It measures how fast the inventory is moving through the firm and generating sales. It is defined as:
Inventory Turnover Ratio
Cost of goods sold Average Inventory
Inventory turnover ratio measures the velocity of conversion of stock into sales. Usually a high inventory turnover ratio indicates efficient management of inventory because more frequently the stocks are sold, the lesser amount of money is required to finance the inventory, A low inventory turnover ratio indicates inefficient management of inventory. A low inventory turnover implies over-investment in inventories, dull business, poor quality of
Net sales instead of COGS has been used for the calculation of Inventory turnover ratio
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2011
goods, stock accumulation, accumulation of obsolete and slow moving goods and low profits as compared to total investment. However this interpretation may not be always true as a high inventory turnover may be caused by a low level of inventory which may result in frequent stock outs and loss of sales and customer goodwill. The norms for interpreting the inventory turnover ratio are different for different firms depending upon the nature of industry and business conditions. TSWD- Trend Analysis
Inventory Turnover Ratio

20.5 20 19.5 19 18.5 18 17.5 17 16.5 16 15.5 15 TSWD 2007 17.6659 2008 16.9965 2009 20.0994 2010 17.2631
GOOD Good
2011 17.06895553
Fig: Inventory turnover ratio trend for TSWD
The Inventory turnover ratio has been very high every year with the highest being approximately 20 in the year 2009 and the lowest being approximately 17 in 2008. On an average the inventory turnover ratio hovers around 17 which implies that the TSWDs inventory is fast moving and converted into sales approximately 17 times in an year. The high inventory turnover ratio also signifies the high efficiency of TSWDs inventory management. The graph below shows the variation in the inventory levels and the average inventory over the years.
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2011
1400 1200 1000 800 Sales 600 400 200 0 2007 2008 2009 2010 2011 Average Inventory
Fig: Sales and average inventory trends
The above graph shows that the average inventory levels throughout the year ranges between 60 and 70 with only marginal variations. Hence major changes in the inventory turnover ratio can be attributed to changes in the sales of the company. The high turnover ratio also confirms the conclusion made for the current ratio i.e. even though inventory forms the major portion of the current assets but still the company is liquid due its fast moving inventory.
B) Inventory Holding Period Inventory holding period is also referred to as days inventory and is used to calculate the average time that inventory is held. It is defined as:
Inventory holding period = 365 Inventory Turnover Ratio
A high inventory holding period indicates that there is a lack of demand for the product being sold.
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TSWD- Trend analysis The efficiency of the inventory management leads to a high inventory turnover ratio which in turns leads to a very low inventory holding period. TSWDs inventory holding period is low for all the years and the average holding period is approximately 20 days. The graph below shows the inventory holding period for the period of five years from the year 2007 to 2011.
GOOD Good
Inventory Holding Period

22.00 21.00 20.00 19.00 18.00 17.00 16.00 TSWD
2007 20.66
2008 21.48
2009 18.16
2010 21.14
2011 21.38
As shown in the graph, the inventory holding period was the lowest for the year 2009 i.e. 18.16 days and the highest for the year 2008. Such low inventory holding period indicates that the demand for TSWDs products is very high and they manage their inventory quite efficiently and thus are able to reduce their interest, storage and other expenses.
C) Debtors Turnover Ratio6 A firm may sell goods on cash as well as on credit. Credit is one of the important elements of sales promotion. The volume of sales can be increased by following a liberal credit policy but a liberal credit policy may result in tying up substantial funds of a firm in the form of trade debtors. Trade debtors are expected to be converted into cash within a
6
Due to unavailability of credit sales, total net sales has been used for calculation
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2011
short period of time and are included in current assets. Hence the liquidity position of the firm to pay its short term obligations in time depends upon the quality of its trade debtors. Debtors turnover ratio indicates the velocity of debt collection of a firm i.e. the number of times average debtors are turned over during a year. Debtors turnover ratio is defined as:
Debtors' Turnover Ratio = Sales Average Sundry Debtors
The debtor turnover ratio reflects the efficacy of firms credit and collection policy. A high turnover ratio implies that the credit and collection policies are efficient and that the debtors are being converted rapidly into cash. Similarly a low turnover ratio implies inefficient management of debtors or less liquid debtors. TSWD- Trend Analysis
Debtors Turnover Ratio

50.00 45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 TSWD 2007 23.95 2008 27.26 2009 43.94 2010 43.35
GOOD Good
2011 40.21
The graph shows that the debtor turnover ratio for 2007 and 2008 was on the lower side with 23.95 and 27.26 times respectively. The reason for the low debtor turnover ratio being, the liberal credit and collection policy followed by the company. Due to the liberal policy followed the company had difficulties in converting their debtors to cash on time and
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there were many customers who were on the list of regular defaulters especially the government agencies TSWD dealt with. But in the following years there was an enormous increase in the debtor turnover ratio owing to the changes in the credit and collection policy. The increase debtor turnover ratio shows efforts made by the company to improve their debtors portfolio and collection policies. The debtors turnover ratio from 2009 to 2011 averaged between 41 to 45 times. As per the new policy TSWD decided not to deal with any new government agencies but they still fulfil their prior commitments and still deal with some government agencies. The graphs below show the variation in the debtors and the sales from the year 2007 to 2011 which shows the reason for increase in the ratio and again confirms the efficacy of the companys credit and collection policy.
Sales
1500 1000 500 0 2007 2008 2009 2010 2011 Sales
Fig: Sales trend of TSWD
Average Debtors
50 40 30 20 10 0 2007 2008 2009 2010 2011 Average Debtors
Fig: Average Debtors trend of TSWD
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D) Average Collection Period The average collection period is the number of days, on average, that it takes a company to collect its credit accounts or its accounts receivables. In other words it is the average number of days required to convert receivables into cash. It is defined as:
Average Collection Period(Days) = 365 Debtors' Turnover Ratio
The average collection period is generally compared with the firms credit terms to judge the efficiency of credit management. As a general rule of thumb, Outstanding receivables should not exceed credit terms by more than 10-15 days. An average collection period which is shorter than the credit period allowed by the firm should be interpreted with care because it either mean efficiency of credit management or excessive conservatism in credit granting that may result in the loss of some desirable sales. TSWD- Trend Analysis
Average Collection Period

18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 TSWD 2007 15.24 2008 13.39 2009 8.31 2010 8.42
GOOD Good
2011 9.08
Calculated as a supplement to the debtor turnover ratio, average collection period confirms the efficacy of the credit and collection policy followed by TSWD. The collection period was nearly 15 days in 2007 and 13 days in 2008 showing some improvement. But since 2011, The collection period has been continuously hovering between 8 to 9 days showing the drastic improvement in the collection policy.
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E) Fixed Assets Turnover Ratio Fixed assets turnover ratio measures sales per rupee of investment in fixed assets i.e. it measures a companys ability to generate net sales from fixed asset investments specifically property, plant and equipment- net of depreciation. Fixed assets turnover ratio is expressed as follows:
Fixed Assets Turnover Ratio = Sales Average Net Fixed Assets
If the turnover ratio is high it implies that the company is managing its fixed assets efficiently whereas a low turnover ratio implies that the company has more assets than it requires for its operations. This ratio is used as an important measure in manufacturing industries where major purchases are made for property, plant and equipment(PP&E) to help increase output. TSWD- Trend Analysis
Fixed Assets Turnover Ratio

12.00 10.00 8.00 6.00 4.00 2.00 0.00 TSWD 2007 11.33 2008 10.43 2009 9.85 2010 5.48
GOOD Good
2011 5.34
The fixed assets turnover ratio for TSWD was 11.33 in 2007, 10.43 in 2008 and 9.85 in 2009. There is a continuous decline in the fixed assets turnover ratio. The decline was only marginal in 2008 and 2009. In 2010 there was a major decline and the turnover ratio decreased to 5.48 in 2010 and 5.34 in 2011. The graphs below explain the reason for the decline the fixed assets turnover ratio.
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2011
Sales
1400 1200 1000 800 600 400 200 0 2007 2008 2009 2010 2011
Sales
Average Net Fixed Assets

250 200 150 100 50 0 2007 2008 2009 2010 2011 Average Net Fixed Assets
As seen in the graph there has been a continuous increase in the fixed assets indicating the expansion of the in-house capacity since 2007. While the capacity has been increasing at a fixed rate, the sales of the company have not been increasing at the same rate. In 2008 there was a marginal increase in both the fixed assets as well as the sales, but the increase in the fixed assets was greater than the increase in the sales and hence a minor decline in the fixed assets turnover ratio. In 2009 there was a considerable increase in both the fixed assets and the sales. While there was an increase of 31% in the fixed assets, the sales increase only by 24% and hence a decline in the fixed assets turnover ratio.
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2011
In the year 2010 there was a considerable decline in the fixed assets turnover ratio. The fixed assets increased by 41% but in turn the sales dropped by approximately 21% leading to a decline in the turnover ratio which meant that all the assets were not fully utilized. The main reason for the underutilization of the assets was the plant relocation process due to which there was a considerable decrease in the sales also. Similarly in the year 2011 the plant was not yet completely stabilized and thus the assets were not utilized to its fullest. Although there was an increase in the sales but that increase was not considerable enough to affect the turnover ratio. Since the stabilization of the plant takes at least 2 years to stabilize, the effect of the relocation is expected in the year 2012 also.
F) Total Assets Turnover Ratio Total assets turnover ratio measures how efficiently assets are employed, overall. It measures the ability of a company to use its assets to generate sales. The total asset turnover ratio considers all assets including fixed assets, like plant and equipment, as well as the current assets. Total asset turnover ratio is expressed as follows:
Total Assets Turnover Ratio = Sales Average Total Assets
A high turnover ratio implies that the assets are being managed efficiently whereas a low ratio indicates inefficient management. The problem might be due to one or more asset categories comprising total assets. TSWD- Trend Analysis The graph below shows the trend of the total assets turnover ratio and is almost in line with the fixed assets turnover ratio for the same reasons as explained above. The total asset turnover ratio was continuously increasing till 2009 indicating that the total assets were being managed efficiently.
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2011
Total Assets Turnover Ratio

9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 TSWD
GOOD Good
2007 6.76
2008 6.94
2009 7.73
2010 5.06
2011 4.96
The total assets turnover ratio was as high as 7.73 in 2009 but in 2010 there was adecline in the total assets turnover ratio and the ratio dropped to 5.06. The graph below explains the factors responsible for the decline of the total assets turnover ratio.
Sales
1500 1000 500 0 2007 2008 2009 2010 2011 Sales
Total Assets
300 200 100 0 2007 2008 2009 2010 2011 Total Assets
The graph explains the decline of total assets turnover ratio in 2010. The sales dropped considerably and the fixed assets increased leading to an increase in the total
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2011
assets and thus the turnover dropped indicating the instability due to the relocation process. Similarly in 2011 the turnover ratio was almost the same as 2010 again indicating the instability in the business and showing that the assets are not being utilized to their fullest.
Profitability Ratios
Profitability ratios measure the degree of operating success of a company and reflect the final result of business operations. There are two types of profitability ratios: profit margin ratios and rate of return ratios. Profit margin ratios show the relationship between profit and sales. Since profit can be measured at different stages, there are several measures of profit margin. Some important profit margins used for analysis are EBITDA Margin and Net Profit Margin. Rate of return ratios reflect the relationship between profit and investment. Some important rate of return ratios used for analysis are: Return on Assets, Earning Power and Return on Invested Capital (ROIC). A) EBITDA Margin EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortisation. EBITDA margin shows the margin left after meeting manufacturing expenses, selling, general and administration expenses. This earnings measure is of particular interest in cases where companies have large amounts of fixed assets which are subject to heavy depreciation charges or in case where a company has a large amount of acquired intangible assets and is thus subject to large amortisation charges. EBITDA Margin for a company is calculated as follows:
EBITDA Margin = Earnings before interest, taxes, depreciation and amortisation Sales
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2011
EBITDA Margin
6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% TSWD 2007 3.61% 2008 4.60% 2009 0.79% 2010 4.88% 2011 3.94%
The profit margins for TSWD have been consistently on the lower side with the lowest being a meagre 0.79% in2009 and the highest being 4.88% in 2010.
EBITDA
60 50 40 30 20 10 0 2007 2008 2009 2010 2011 EBITDA
The EBITDA margin increased to 4.60% in 2008 from 3.61% in 2007 indicating the improved profitability and performance compared to 2007. The year 2009 saw the lowest profits with the EBITDA margin dropping to just 0.79%. The drastic decline in the Earnings can be owed to the economic crisis at that time. The year 2010 was the best financial year from 2007 to 2011 in terms of profit. Due to excellent market conditions even after relocation and declined sales the company was
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2011
able to make profits which were higher compared to the past years. The EBITDA margin rose to almost 5%. But in 2011 again there was a decline in the profits owing to the competitive market and the EBITDA margin dropped to 3.94%.
B) Net Profit Margin This ratio also known as Return on Sales (ROS), measures the amount of net profit earned by each rupee of revenue. It measures the overall efficiency of production, administration, selling, financing, pricing and tax management. Net profit margin is calculated as follows:
Net Profit Margin
Net Profit Sales
Net Profit Margin

4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% TSWD
2007 2.89%
2008 3.92%
2009 0.24%
2010 4.08%
2011 2.70%
The only reduction from EBITDA is the Depreciation charges. The taxes are centrally paid and hence not deducted from the profits earned. The graph below shows the EBITDA and the depreciation charges each year.
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2011
60 50 40 30 20 10 0 2007 2008 2009 2010 2011 EBITDA Depriciation
The depreciation is fairly constant with marginal changes. But there is almost 77% increase in the depreciation charges and hence the net profit margin is greatly affected in 2011. The trends are in line with the EBITDA margin except in 2011. In 2011 even though the EBITDA margin was higher compared to that in 2007 but the net profit margin is lower in 2011 because of the difference in the depreciation charges. The net profit margin is the highest for 2010 owing to the excellent market conditions and is lowest in 2009 owing to the economic crisis that prevailed at that time.
C) Return on Assets Return on Assets, also known as Return on Investment, is a measure of profitability from a given level of investment. It can be calculated as follows:
Profit After Tax Average Total Assets
Return on Assets
Return on Asset measure the profit per rupee invested on the assets. This figure is also used to gauge the asset intensity of the business.
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Return on Assets
30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% TSWD 2007 19.56% 2008 27.21% 2009 1.87% 2010 20.63% 2011 13.38%
The Return on Asset exhibits a lot of variability. The return was highest in 2008 i.e. 27.21% and the lowest in 2009 i.e. 1.87%. The graphs below explain the variability in the return on assets.
Net Profit
60 40 20 0 2007 2008 2009 2010 2011 Net Profit
Total Assets
300 200 100 0 2007 2008 2009 2010 2011 TATA STEEL WIRE DIVISION Total Assets
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2011
In 2007 the return on assets was 19.56% which implies that the company earned a profit of Rs.19.56 for each rupee invested in the assets. In 2008 there was a reduction in the total assets owing to the decrease in the current assets but the net profit increased and hence there was an increase in the return on the investment. In 2008 TSWD earned Rs. 27.21 for each rupee invested in the assets and indicates the high performance. In 2009 the profits declined considerably owing to the economic crisis but the average total assets increases thus the company earned only Rs. 1.87 for each rupee invested in the assets. In 2010 the companys profits increased and also the total assets making the return equal to 20.63%. In 2011 the profits reduced compared to 2010 owing to the competitive market conditions but the total assets increased reducing the return on assets to only 13.38%.
D) Earning Power The Earning Power is defined as:

Earning Power = Profit Before Interest and Tax Average Total Assets
Earning power is a measure of business performance which is not affected by interest charges and tax burden. It abstracts away the effect of capital structure and tax factor and focuses on operating performance. Hence it is eminently suited for inter-firm comparision. Further, it is internally consistent. The numerator represents a measure of pretax earnings belonging to all sources of finance and the denominator represents total financing.
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2011
Earning Power
30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% TSWD 2007 19.56% 2008 27.21% 2009 1.87% 2010 20.63% 2011 13.38%
The graph above shows the earning power for the financial years 2007 to 2011. The earning power is high for all the years except in 2009 and follows the same trend as the return on assets. E) Return On Invested Capital Return On Invested Capital (ROIC) is the amount of profit that a company earns for every rupee invested into the business. It is used to judge how well the company generate earnings from capital invested in the business. ROIC of a company is calculated as follows:
Return On Invested Capital = NOPBIT YEAR END AVERAGE INVESTED CAPITAL
ROIC
35% 30% 25% 20% 15% 10% 5% 0% TSWD 2007 22% 2008 29% 2009 10% 2010 30% 2011 15%
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The Return on invested capital is constantly increasing except for the sudden dip in 2009 owing to the recession in the country. In 2010, despite of the relocation process, the company earned high profits compared to the previous years, owing to the excellent market conditions. In 2011 again the ROIC of TSWD declined because of the instability in the business due to the relocation process which affected the profits of the company.
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3.2) Cross Sectional Analysis or Benchmarking

Benchmarking is the process of comparing ones business processes and performance metrics to the industry or the industry bests. The process of benchmarking involves identifying the best firms in the industry and comparing their results with their own results. The process of benchmarking thus enables to learn how well the competitors are doing and the reasons for their success. Thus Benchmarking allows organisations to develop plans on how to make improvements or adopt specific best practices, usually with the aim of increasing some aspect of performance. Steel wire manufacturing is a fragmented industry with many small and medium sized manufacturers and most of the steel wire manufacturers are privately owned and owner driven. Tata Steel Wire Division is a market leader in India and provides a wide range of products all over India. Competition to WD in India is largely unorganized, fragmented and regional. Most units are owner driven, operating in specific sectors and catering to nearby regions only. WD competes for MTB with Rajratan in northern India, with Bedmutha for GI wires in Western India, Aarti Steel for spring steel in North India etc. Thus Ratio analysis is has been carried out for all the major competitors to compare their performance with that of the Wire Division. The major competitors for whom the ratio analysis has been carried out are Rajratan Global Wires Limited, Usha Martin Limited, Ramsarup Industries Limited, Aarti Steels Limited and Bedmutha Industries Ltd. The information and the products profile of all the competitors has been given below.
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3.2.A) About The Competitors
Background
Rajratan Global Wire Ltd
Industry :Steel - Wires Incorporation Year Chairman Managing Director Company Secretary Auditor 1988 Sunil Chordia Vineet Chopra Fadnis & Gupte Rajratan House, Registered Office Telephone Fax E-mail Website Face Value (Rs) BSE Code BSE Group NSE Code Bloomberg Reuters ISIN Demat Market Lot Listing Financial Year End Book Closure Month AGM Month 11/2 Meera Path Dhenu Market, Indore, 452003, Madhya Pradesh 91-0731-2533716/2546401 91-0731-2542534 investor-cell@rgwl.co.in http://www.rgwl.co.in 10 517522 B RGW IN RAJR.BO INE451D01011 Mumbai 3 Jul Aug Link Intime India Pvt Ltd, C-13 Pannalal Silk, Mills Cmpd LBS Marg, Bhandup West, Mumbai - 400 078. Registrar's Name & Address 91-022-25963838 91-022-25946969
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A) About Rajratan Global Wires Ltd Rajratan Global Wire Limited (RGWL) is one of the leading manufacturers of High Carbon Steel Wire in India, specializing in Automotive Tyre Bead Wire. High quality spring and Rope Wires are other speciality products of the company. RGWL has most modern factory at Pithampur which is 25 km from Indore, a prominent industrial city in Central India. The quest for quality, excellence and progress driven by the total dedication of a competent and professional team is the hallmark of RGWL. With its state of art plant RGWL is equipped to produce high value steel wires with precise product characteristics. RGWLs Tyre Bead Wire business in India has a global scale of operation and to take the tradition of quality and excellence further, RGWL has formed a 100% subsidiary company Rajratan Thai Wire Co. Ltd. (RTWL) and started an ultra modern facility to produce Automotive Tyre Bead Wire in Thailand. This is a true step towards globalization efforts of RGWL. RGWL is an ISI TS 16949 (2002) certified company for its entire range of automotive tyre bead wires. B) Products
The major products manufactured by RGWL are as follows: i) Tyre Bead
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Tyre Bead Wire is a high carbon bronze coated steel wire used in all tyres. The main function of bead wire is to hold the tyre on the rim and to resist the action the inflated pressure, which constantly tries to force it off. The bead is the crucial link through which the vehicle load is transferred from rim to the tyre. It significantly affects the safety, strength and durability of tyres. Various standard sizes of Bead Wire are regularly manufactured by RGWL. In addition Bead Wires in other sizes and higher tensile grades are also supplied as per the specific customer requirement.
ii)
PC Wires and Strands
The use of high tensile steel in prestressing concrete results in considerable saving of cement and steel. Prestressed concrete wires and strands have found applications in construction of bridges, silos, buildings, dams etc and in manufacture of mass produced components like railway sleepers, water pipes, electricity poles, beams, hollow and solid slabs etc.
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C) Financials The balance sheet and profit and loss account for FY 2007 to FY 2010 are as follows:
RAJRATAN GLOBAL WIRES Ltd.(Profit & Loss Account) Figures in Rs. Crores INCOME Sales and other operating income Less: Excise duty Net sales Other income TOTAL INCOME EXPENDITURE Raw Materials Other Manufacturing expenses Depreciation Less: Expenditure (other than interest) trnfd to capital acc Net Finance charges TOTAL EXPENDITURE Profit before tax and exceptional items 123.33 37.19 6.01 0.00 7.12 173.65 11.43 111.41 31.17 4.93 0.00 8.43 155.94 2.95 77.25 19.50 3.00 0.00 4.45 104.20 1.49 60.45 26.33 2.76 0.00 2.64 92.18 4.69 195.33 11.07 184.26 0.82 185.08 175.50 16.97 158.53 0.36 158.89 118.88 14.90 103.98 1.71 105.69 109.20 13.98 95.22 1.65 96.87 2010 2009 2008 2007
Extraordinary items Profit before Tax(PBT) Taxes Current Tax Deferred Tax Fringe Benefit Tax Profit After Tax adjustment below net profit P&L balance brought forward Amount available for appropriations Appropriations Balance carried to B/S
-0.08 11.51 4.96 4.93 0.03 0.00 6.55 -0.39 -5.55 0.61 5.76 -5.23
0.00 2.95 3.07 2.97 0.10 0.00 -0.12 0.00 0.10 -0.02 5.53 -5.55
0.02 1.47 0.62 0.21 0.41 0.00 0.85 0.00 0.26 1.11 1.03 0.10
0.20 4.49 1.69 0.65 1.04 0.00 2.80 0.00 0.30 3.10 3.21 0.09 56
2011
RAJRATAN GLOBAL WIRES Ltd.(Balance Sheet) Figures in Rs. Crores Mar-10 Mar-09 Mar-08 SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Minority Interest Secured Loans Unsecured Loans Total Loan Funds Current Account Total Liabilities APPLICATION OF FUNDS : Gross Block Less: Accumulated Depreciation Less: Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Total Assets Contingent Liabilities 6.93 1.36 8.29 51.57 0.00 0.00 8.39 -8.39 132.45 0.01 4.29 0.91 5.20 45.93 0.00 0.00 8.36 -8.36 128.00 0.89 4.64 0.51 5.15 38.49 0.03 0.00 8.27 -8.27 111.40 2.29 14.25 37.01 0.65 7.95 59.86 9.73 29.88 5.72 5.80 51.13 9.85 25.64 2.61 5.54 43.64 4.35 39.37 0.00 0.00 43.72 0.00 83.84 4.89 88.73 0.00 132.45 110.96 25.16 0.00 85.80 0.00 3.27 0.20 4.35 33.83 0.00 0.00 38.18 0.00 85.92 3.90 89.82 0.00 128.00 109.33 19.50 0.00 89.83 0.00 0.40 0.20 4.35 33.01 0.00 0.00 37.36 0.00 69.30 4.74 74.04 0.00 111.40 66.28 14.67 0.00 51.61 0.00 29.34 0.20
Mar-07 4.35 32.71 0.00 0.00 37.06 0.00 41.88 2.01 43.89 0.00 80.95 56.51 12.10 0.00 44.41 0.00 2.89 0.20 10.13 24.31 0.23 10.25 44.92 2.48 1.19 3.67 41.25 0.06 0.00 7.86 -7.86 80.95 0.73
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2011
A) Background
Ramsarup Industries Ltd Industry :Steel - Wires Incorporation Year Chairman Managing Director Company Secretary Auditor Registered Office
1979 Ashish Jhunjhunwala Gajendra Kumar Singh P K Lilha & Co Hastings Chambers 1&2 Floor, 7C Kiran Shankar Roy Road, Kolkata, 700001, West Bengal 91-33-22421200 91-33-22421888 company@ramsarup.com http://www.ramsarup.com 10 532690 B RAMSARUP RAMI IN RASW.BO INE005D01015 1 Kolkata, Mumbai, NSE 3 Sep Sep Link Intime India Pvt Ltd, 59C Chowinghee Road, 3rd Flr, Kolkata700020.
Telephone Fax E-mail Website Face Value (Rs) BSE Code BSE Group NSE Code Bloomberg Reuters ISIN Demat Market Lot Listing Financial Year End Book Closure Month AGM Month Registrar's Name & Address
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B) About Ramsarup Industries Ltd. Ramsarup group was founded in 1966 and has grown substantially in last four decades. It is one of the largest manufacturers of Steel wires in Eastern India. Ramsarup Industries Limited was incorporated in 1979 and is a profit making and dividend paying company. The company is listed at National Stock Exchange, Bombay Stock Exchange and Calcutta Stock Exchange. The company is engaged in manufacturing of wires, TMT bars and Steel. The company has six units namely Ramsarup Industrial Corporation, Ramsarup Nirmaan Wires, Ramsarup Lohh Udyog, Ramsarup Infrastructure, Ramsarup Utpadak and Ramsarup Vidyut. Power is their major thrust area with almost 40% of the top line coming from power sector.
Other inc retail 10%
Defence 5%
Water Management 10% Railways 5% Roads and Bridges 10%
Power 40%
Housing and construction 20%
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C) Products
The major products produced at the Ramsarup Industrial Corporation unit include: i) ii) iii) iv) v) vi) vii) viii) ix) x) xi) xii) Galvanised Iron(Hot Dipped and Electroplated) Galvanised Steel Strand H.B. Wires for nails Cable Armour Wires ACSR Core Wire Single ACSR Core Wire Stranded P.C. Wires P.C. Strands Spring Steel Wire Telegraph wire Chain Rivet/Link wire and Cotton Bailing Wires
Other wire products manufactured at Ramsarup Nirmaan Wires Unit includes LRPC Wires and Strands.
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2011
D) Financials
RAMSARUP INDUSTRIES Ltd. Profit and loss accounts (All Figures in Rs. Crores) 2010 2009 2008 2007
INCOME Sales and other operating income Less: Excise duty Net sales Other income TOTAL INCOME 2,056.95 0.00 2,056.95 0.27 2,057.22 1,948.85 0.00 1,948.85 11.89 1,960.74 1,824.13 0.00 1,824.13 1.10 1,825.23 1,304.73 0.00 1,304.73 1.34 1,306.07
EXPENDITURE Raw Materials Other Manufacturing expenses Depreciation Less: Expenditure (other than interest) trnfd to capital acc Net Finance charges TOTAL EXPENDITURE 1,765.99 84.45 37.12 0.00 107.01 1,994.57 1,615.62 337.56 29.45 0.00 90.50 2,073.13 1,560.00 97.41 22.43 0.00 49.23 1,729.07 1,198.93 9.10 11.34 0.00 25.14 1,244.51
Profit before tax and exceptional items Extraordinary items Profit before Tax(PBT) Taxes Current Tax Deferred Tax Fringe Benefit Tax Profit After Tax adjustment below net profit P&L balance brought forward Amount available for appropriations Appropriations
62.65 0.00 62.65 18.27 0.38 17.89 0.00 44.38 0.00 0.39 44.77 44.00
-112.39 0.00 -112.39 -37.38 0.00 -37.63 0.25 -75.01 0.00 10.40 -64.61 -65.00
96.16 0.00 96.16 34.18 14.66 19.26 0.26 61.98 0.00 0.46 62.44 52.04
61.56 0.00 61.56 18.00 19.55 -1.63 0.08 43.56 0.00 0.14 43.70 43.24
Balance carried to B/S
0.77
0.39
10.40
0.46 61
2011
RAMSARUP INDUSTRIES Ltd.(Balance Sheet) (All Figures in Rs. Crores) SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Minority Interest Secured Loans Unsecured Loans Total Loan Funds Current Account Total Liabilities APPLICATION OF FUNDS : Gross Block Less: Accumulated Depreciation Less: Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Total Assets Contingent Liabilities 289.31 4.86 294.17 853.30 0.15 67.26 74.54 -7.28 2,384.17 145.83 386.28 3.76 390.04 600.80 0.23 44.49 33.89 10.60 96.19 499.37 6.60 505.97 574.77 0.39 0.58 27.60 -27.02 46.08 257.61 5.25 262.86 328.04 0.36 0.27 8.03 -7.76 33.17 440.84 555.12 29.17 122.34 1,147.47 269.18 556.47 35.64 129.55 990.84 516.18 388.71 36.16 139.69 278.02 248.85 20.23 43.80 709.41 132.66 0.00 576.75 0.00 961.25 0.00 425.61 106.73 0.00 318.88 0.00 1,124.31 0.00 406.42 77.14 0.00 329.28 0.00 433.66 0.00 151.60 53.80 0.00 97.80 0.00 6.87 0.00 62.04 536.52 0.00 0.00 598.56 0.00 1,613.93 171.68 1,785.61 0.00 2,384.17 39.54 289.64 0.00 0.00 329.18 0.00 1,521.59 204.05 0.00 39.53 364.65 0.00 0.00 404.18 0.00 696.64 210.26 0.00 21.96 164.12 0.00 0.00 186.08 0.00 165.50 73.73 239.23 0.00 Mar-10 Mar-09 Mar-08 Mar-07
1,725.64 906.90
2,054.82 1,311.08 425.31
1,080.74 590.90
2,054.82 1,311.08 425.31
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2011
A) Background
Usha Martin Ltd Industry :Steel Wires Incorporation Year Chairman Managing Director Company Secretary Auditor Registered Office Telephone Fax E-mail Website Face Value (Rs) BSE Code BSE Group NSE Code Bloomberg Reuters ISIN Demat Market Lot Listing Financial Year End Book Closure Month AGM Month Registrar's Name & Address 1986 Prashant Jhawar Rajeev Jhawar A K Somani Price Waterhouse 2A Shakespeare Sarani, Kolkata, 700071, West Bengal 91-33-22825816/39800300 91-33-22821660/39800400 investor_relations@ushamartin.co.in http://www.ushamartin.com 1 517146 B USHAMART USM IN USBL.BO INE228A01035 1 Luxembourg, Mumbai, NSE Jul Jul MCS Ltd, 77/2A Hazra Road, 3rd & 5th Floor, Kolkata - 700029. 91-33-24767350/54 91-33-24541961/24747
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2011
B) About Usha Martin Ltd. Started in 1961 in Ranchi, Jharkhand as a wire rope manufacturing company, today the Usha Martin Group is a Rs. 3000 crore conglomerate with a global presence. The group has set new standards in the manufacture of wire rods, bright bars, steel wires, speciality wires, wire ropes, strand, conveyor cord, wire drawing and cable machinery. For Usha Martin, the path to sustainable growth was long; the management constantly tried out innovative business practices. With initiative to diversify the customer base by venturing into the international markets, moving up the value chain and fully integrating its business process to maximize stakeholder value. In 1979, the company set up a steel plant with wire rod rolling mill at Jamshedpur, to benefit from business integration. This ensured a steady supply of steel for the manufacture of value added products. Today, the Jamshedpur unit has a truly integrated speciality steel manufacturing facility of 400,000 MT per annum. Out of which, about 50% is consumed internally by its plant in Ranchi, Hoshiarpur & Bangkok, producing steel wire, steel strand, steel cords, bright bar and steel wire ropes. All its manufacturing facilities are ISO 9000 certified and the steel plant was Indias first to receive the TPM Excellence Award from JIPM, Japan. With local success come global aspirations. Currently, the company has overseas manufacturing operations in Thailand, UK, USA and Dubai. Besides a vast network of distribution centres and marketing offices spread across the globe to support an ever growing worldwide customer base. The company exports over 60% of the wire rope output and about 20% of the total wire rods produced. Usha Martins future plans are focused on its operation in Jharkhand a state rich in mineral resources. Future priorities include product mix enrichment, cost reduction and infrastructural improvements. Already flourishing in its recent foray into mining operations, the company is planning to invest in its iron ore and coal mines, sinter plant, pellet plant, power plants, while also enhancing its steel making and value added products capacity with an investment of Rs 2,100 Crores.
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C) Products Some important products manufacture by Usha Martin Ltd. Include i) ii) iii) iv) v) vi) vii) viii) ix) Coil and Bar Bright Bar Ropes Wires and Strands Structural Sling Cord Tele Cables and Machinery
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2011
D) Financials The Profit and loss account and Balance sheets for FY 2007 to FY 2010 are as follows:
Usha Martin Ltd.(Profit and loss Account) All Figures in Rs. Crores INCOME Sales and other operating income Less: Excise duty Net sales Other income TOTAL INCOME EXPENDITURE Raw Materials Other Manufacturing expenses Depreciation Less: Expenditure (other than interest) trnfd to capital acc Net Finance charges TOTAL EXPENDITURE Profit before tax and exceptional items 836.58 740.63 107.25 16.46 114.98 948.40 780.84 85.04 12.98 125.42 762.98 579.57 75.92 9.36 81.50 605.46 531.23 76.28 2.43 71.67 1,282.21 138.40 1,941.55 109.64 1,831.91 90.28 2,287.96 179.98 2,107.98 32.78 1,836.68 197.42 1,639.26 52.06 1,564.16 169.45 1,394.71 25.90 1,420.61 2010 2009 2008 2007
1,922.19 2,140.76 1,691.32
1,782.98 1,926.72 1,490.61 139.21 214.04 200.71
Extraordinary items Profit before Tax(PBT) Taxes Current Tax Deferred Tax Fringe Benefit Tax Profit After Tax adjustment below net profit P&L balance brought forward Amount available for appropriations Appropriations Balance carried to B/S
0.03 139.18 47.00 0.00 47.00 0.00 92.18 0.00 34.36 126.54 85.45 41.12
0.14 213.90 67.49 91.00 -24.66 1.15 146.41 0.00 42.08 188.49 154.27 34.36
3.93 196.78 55.88 51.03 3.67 1.18 140.90 0.00 20.92 161.82 123.67 42.08
6.49 131.91 36.92 25.86 9.93 1.13 94.99 0.00 41.40 136.39 121.96 20.92
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2011
USHA MARTIN Ltd.(Balance Sheet) Mar-10 SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Minority Interest Secured Loans Unsecured Loans Total Loan Funds Current Account Total Liabilities APPLICATION OF FUNDS : Gross Block Less: Accumulated Depreciation Less: Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Total Assets Contingent Liabilities 1,625.76 44.17 1,669.93 -535.58 0.00 36.20 205.30 -169.10 2,339.81 236.15 981.30 37.33 1,018.63 86.38 0.73 30.04 152.15 -122.11 2,482.42 187.94 860.96 38.16 899.12 372.48 1.61 6.71 153.48 -146.77 1,842.20 120.44 464.59 26.25 490.84 350.29 3.04 7.07 150.51 -143.44 1,467.04 102.03 672.10 167.49 10.30 284.46 1,134.35 403.71 322.85 76.47 301.98 1,105.01 532.42 256.35 46.36 436.47 1,271.60 339.06 226.91 37.08 238.08 841.13 3,170.72 907.49 14.08 2,249.15 0.00 608.39 186.95 1,938.34 801.83 14.08 1,122.43 0.00 1,208.64 186.35 1,680.72 720.94 14.08 945.70 0.00 503.38 165.80 1,573.93 655.17 18.75 900.01 0.00 197.06 160.08 30.54 1,469.15 0.00 0.00 1,499.69 0.00 840.12 0.00 840.12 0.00 2,339.81 25.09 991.18 0.00 0.00 1,016.27 0.00 1,466.15 0.00 1,466.15 0.00 2,482.42 25.09 840.41 0.00 33.50 899.00 0.00 867.06 76.14 943.20 0.00 1,842.20 24.00 693.67 0.00 0.00 717.67 0.00 744.14 5.23 749.37 0.00 1,467.04 Mar-09 Mar-08 Mar-07
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2011
A) Background
Aarti Steels Ltd Industry :Steel - Medium / Small Incorporation Year Chairman Managing Director Company Secretary Auditor Registered Office
Telephone Fax E-mail Website Face Value (Rs) BSE Code BSE Group NSE Code Bloomberg Reuters ISIN Demat Market Lot Listing Financial Year End Book Closure Month AGM Month
1979 Sohan Lal Mittal N K Bector & Co G T Road, Miller Ganj, Ludhiana, 141003, Punjab 91-161-2530408 aarti@jla.vsnl.net.in http://www.aartisteels.com 100 Not Listed 3 Sep
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B) About Aarti Steels Ltd. Aarti group, which was incorporated in the year 1977, in the name of Aarti Steels Limited, has taken rapid strides to emerge as one of North Indias leading manufacturers and processors of steel. The company manufactures all grades of Carbon Steel and Alloy Steels conforming to National and International specifications. The companys customers include OEMs through their ancillaries or component supplies, reputed replacement market vendors and government institutions like Railways, State Transport etc.
C) Products The major products produced by the company include Billets, Roll Products, Wire Products, Sponge Iron, Power and Ferro alloys. The important wire products produced by the company are: i) ii) iii) iv) v) vi) vii) Auto Tyre Bead Wire H.C. Wire Steel Rope Wire Cycle Spoke Wire Spring Steel Wire Rolling Quality Wire Galvanised H.T.G.S. Wire
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2011
D) Financials
Aarti Steels Limited (Profit and Loss Accounts) All Figures in Rs. Crores INCOME Sales and other operating income Less: Excise duty Net sales Other income TOTAL INCOME 721.81 47.81 674.00 0.70 674.70 863.08 80.55 782.53 5.40 787.93 782.99 92.95 690.04 22.15 712.19 688.45 94.51 593.94 2.46 596.40 2010 2009 2008 2007
EXPENDITURE Raw Materials Other Manufacturing expenses Depreciation Less: Expenditure (other than interest) trnfd to capital acc Net Finance charges TOTAL EXPENDITURE 290.39 244.91 37.93 0.00 29.74 602.97 416.25 258.94 33.29 0.00 36.00 744.48 348.03 243.43 32.52 0.00 32.83 656.81 310.03 204.49 28.97 0.00 27.67 571.16
Profit before tax and exceptional items Extraordinary items Profit before Tax(PBT) Taxes Current Tax Deffered Tax Fringe Benefit Tax Profit After Tax adjustment below net profit P&L balance brought forward Amount available for appropriations Appropriations Balance carried to B/S
71.73 0.03 71.70 32.75 12.66 20.09 0.00 38.95 0.00 0.05 39.00 39.00 0.03
43.45 -0.01 43.46 17.24 16.88 0.20 0.16 26.22 0.00 0.09 26.31 26.25 0.05
55.38 0.32 55.06 18.10 9.76 8.21 0.13 36.96 0.02 0.24 37.22 37.45 0.09
25.24 1.33 23.91 -2.13 1.51 -3.75 0.11 26.04 0.07 0.05 26.16 27.25 0.24
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2011
AARTI STEELS Ltd. (Balance Sheets) All Figures in Rs. Crores SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Minority Interest Secured Loans Unsecured Loans Total Loan Funds Current Account Total Liabilities APPLICATION OF FUNDS : Gross Block Less: Accumulated Depreciation Less: Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Total Assets Contingent Liabilities 66.09 3.77 69.86 248.54 0.01 0.00 59.58 -59.58 689.92 19.71 36.49 3.80 40.29 181.28 0.01 0.00 39.49 -39.49 530.78 35.89 38.12 2.01 40.13 263.92 0.01 0.53 39.82 -39.29 547.24 7.78 41.18 0.02 41.20 240.72 0.00 0.00 31.60 -31.60 542.68 17.34 71 131.84 130.84 5.13 50.59 318.40 89.12 87.55 6.69 38.21 221.57 116.40 131.18 9.85 46.62 304.05 113.55 126.28 11.48 30.61 281.92 650.03 203.67 0.00 446.36 0.00 52.29 2.30 482.13 166.63 0.00 315.50 0.00 71.18 2.30 433.80 134.06 0.00 299.74 0.00 21.43 1.43 390.49 101.75 0.00 288.74 0.00 27.74 17.08 10.81 263.92 0.00 0.00 274.73 0.00 391.95 23.24 415.19 0.00 689.92 11.16 229.52 0.00 0.00 240.68 0.00 246.73 43.37 290.10 0.00 530.78 11.16 203.31 0.00 0.00 214.47 0.00 306.32 26.45 332.77 0.00 547.24 11.07 189.89 0.00 0.00 200.96 0.00 310.23 31.49 341.72 0.00 542.68 Mar-10 Mar-09 Mar-08 Mar-07
2011
A) Background
Industry :Steel - Wires Incorporation Year Chairman Managing Director Company Secretary Auditor Registered Office 1990 Kachardas R Bedmutha Vijay K Vedmutha Nilesh Amrutkar Patil Hiran Jajoo & Co A-32 STICE, Sinnar, Nashik, 422103, Maharashtra Telephone Fax E-mail Website Face Value (Rs) BSE Code BSE Group NSE Code Bloomberg Reuters ISIN Demat Market Lot Listing Financial Year End Book Closure Month AGM Month Registrar's Name & Address Universal Capital Sec. Pvt Ltd, 21 Shakil Niwas, Mahakali Caves Road, Andheri (E), Mumbai - 400 093. 91-22-28207203 91-22-28207207 91-2551-240481/631/068/069 91-2551-240482 ipo@bedmutha.com http://www.bedmutha.com 10 533270 B BEDMUTHA BEDM IN BMIL.BO INE844K01012 1 Mumbai,NSE 3
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B) About Bedmutha Industries Ltd. Bedmutha Wires is a trusted name in wire/wire product Manufacturing having established manufacturing capacity of 5000 mt/ month. The Manufacturing Plants are equipped with the latest technology and resources to produce the best quality wire/wire products as per Indian and International standards. The company has their four manufacturing facility at Sinnar, Nasik. Two of their plants namely Plant 1 manufacturing galvanized wires and Plant 2 manufacturing Binding wire, PC Wire and Spring Steel Wire are certified under ISO 9001 from Bureau Veritas Certification (India) Private Limited. The company has been a leading supplier to a large number of leading corporate houses, Railway, Defence and other Government undertakings. The products are approved by State Electricity boards, Power grid Corporation of India. The companys expedient delivery process is supported by its spacious warehouses strategically located to cover the entire nation. Bedmutha Industries Ltd was incorporated on August 23, 1990 as a private limited company with the name Bedmutha Wire Company Pvt Ltd. In the year 1992, the company started commercial production by setting up their first Galvanized Wire plant at Nasik with an installed capacity of 3,600 MTPA. In the year 1994, they increased their installed capacity from 3,600 MTPA to 6,100 MTPA by de-bottling of galvanized plant. In the year 1997, the company set up their second galvanizing plant with an installed capacity of 5,400 MTPA which increased their total installed capacity from 6,100 MTPA to 11,500 MTPA. In September 23, 1997, the company was converted into a public limited company and the name of the company was changed to Bedmutha Wire Company Ltd. In the year 2008, the company expanded the Wire & Wire Products Capacity from 18,000 MTPA to 42,100 MTPA. They also installed Wire Nails Capacity of 1800 MTPA and stranding Capacity of 2400 MTPA. The company set up a Wind Mill in Karnataka with power generation Capacity of 225 KW. Also, they increased the production capacity of Wire Drawing from 42,100 to 60,000 MTPA.
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2011
During the year, the company invested 49% in Ashoka Pre-con Pvt Ltd along with Ashoka Buildcon Ltd, to manufacture pre stress concrete products such as cement poles, RCC pipes, Cement Piles, railway sleepers etc. In July 01, 2008, the Consultancy Division, K.R. Bedmutha & Techno Associates was spinned off into a separate entity named as 'K.R. Bedmutha Techno Associates Pvt Ltd'. In August 2008, Ajay Wire Products Pvt Ltd, Kamdhenu Wire Pvt Ltd and Shriram Wire Pvt Ltd were amalgamated with the company. In the year 2009, the company acquired 51% stake in Kamlasha infrastructure and Engineering Pvt. Ltd for implementation of turnkey contract of electrification. In November 18, 2009, the name of the company was changed from Bedmutha Wire Company Ltd to Bedmutha Industries Ltd. In May 2010, the company entered into an MoU with Maharashtra Government for the manufacturing of LRPC wires, Spring steel wires, GI wires and SS wires. The cost of investment is estimated to be Rs 152.90 crore. The company plans to set up a 36,000 tonnes per annum (tpa) manufacturing facility for low relaxation pre-stress concrete (LRPC) wire and spring steel wire with installed capacity of 18,000 tpa on 12 acres at Nasik in Maharashtra. They also plan to set up a hitech galvanizing plant of 48,000 tpa and manufacturing of aluminium rods and conductors with capacity of about 42,000 tpa. C) Products The major products manufactured by the company are: i) ii) iii) iv) v) vi) vii) viii) Galvanised Steel & M.S. Wire Cable Armour Wire A.C.S.R Core Wire Stay and Earth Wire Spring Steel Wire Binding Wire Barbed Wire and Wire nails
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2011
D) Financials Bedmutha Industries Ltd. (Profit & Loss Accounts) All Figures in Rs. Crores INCOME Sales and other operating income Less: Excise duty Net sales Other income TOTAL INCOME 149.50 0.00 149.50 0.32 149.82 146.79 0.00 146.79 0.06 146.85 114.54 0.00 114.54 0.72 115.26 72.51 0.00 72.51 0.01 72.52 2010 2009 2008 2007
EXPENDITURE Raw Materials Othet Manufacturing expenses Depriciation Less: Expenditure (other than interest) trnfd to capital acc Net Finance charges TOTAL EXPENDITURE Profit before tax and exceptional items Extraordinary items Profit before Tax(PBT) Taxes Current Tax Deffered Tax Fringe Benefit Tax Profit After Tax adjustment below net profit P&L balance brought forward Amount available for appropriations Appropriations Balance carried to B/S 116.42 7.75 3.70 0.00 6.69 134.56 15.26 0.00 15.26 5.30 4.35 0.95 0.00 9.96 0.00 9.77 19.73 3.71 16.02 112.50 16.66 2.64 0.00 4.28 136.08 10.77 -0.07 10.84 3.74 2.72 0.98 0.04 7.10 0.00 3.79 10.89 1.05 9.77 86.89 17.00 2.16 0.00 4.38 110.43 4.83 0.00 4.83 1.22 0.52 0.64 0.06 3.61 0.00 1.49 5.10 1.31 3.79 54.13 14.47 0.85 0.00 2.48 71.93 0.59 0.00 0.59 0.32 0.25 0.04 0.03 0.27 0.00 1.60 1.87 0.38 1.49 75
2011
BEDMUTHA INDUSTRIES Ltd. All Figures in Rs. Crores SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Minority Interest Secured Loans Unsecured Loans Total Loan Funds Current Account Total Liabilities APPLICATION OF FUNDS : Gross Block Less: Accumulated Depreciation Less: Impairment of Assets Net Block Lease Adjustment Capital Work in Progress Investments Current Assets, Loans & Advances Inventories Sundry Debtors Cash and Bank Loans and Advances Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Total Assets Contingent Liabilities 34.70 5.08 39.78 73.69 2.14 0.30 3.46 -3.16 110.44 57.13 10.48 3.82 14.30 44.36 0.64 0.00 2.20 -2.20 66.41 10.56 9.79 1.15 10.94 41.10 0.11 0.52 1.74 -1.22 57.61 7.08 1.94 0.25 2.19 30.48 0.06 0.00 0.65 -0.65 36.07 8.53 76 41.25 33.69 4.63 33.90 113.47 16.12 21.66 6.83 14.05 58.66 19.19 17.55 4.78 10.52 52.04 11.99 11.53 3.51 5.64 32.67 53.28 20.14 0.00 33.14 0.00 2.52 2.11 39.87 16.45 0.00 23.42 0.00 0.00 0.19 31.36 14.25 0.00 17.11 0.00 0.34 0.17 12.79 7.13 0.00 5.66 0.00 0.41 0.11 12.03 16.35 0.00 0.00 28.38 0.00 71.49 10.57 82.06 0.00 110.44 9.00 10.06 0.00 0.00 19.06 0.00 38.16 9.19 47.35 0.00 66.41 9.00 4.09 0.00 0.00 13.09 0.00 36.46 8.06 44.52 0.00 57.61 3.35 4.12 0.00 0.00 7.47 0.00 23.90 4.70 28.60 0.00 36.07 Mar-10 Mar-09 Mar-08 Mar-07
2011
3.2. B) Competitors Comparison with TSWD

Liquidity Ratios
A) Current Ratio
CURRENT RATIO
2.5
1.5
0.5
0 Mar/07 Mar/08 Mar/09 Mar/10
RAJRATAN GLOBAL WIRES USHA MARTIN Ltd. BEDMUTHA INDUSTRIES LTD. INDUSTRY AVERAGE
RAMSARUP INDUSTRIES AARTI STEELS Ltd. TATA STEEL WIRE DIVISION
Current Ratio Mar-07 RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIES USHA MARTIN Ltd. AARTI STEELS Ltd. BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISION INDUSTRY AVERAGE 2.15 1.46 1.36 1.54 1.49 1.95 1.17 Mar-08 1.50 1.45 1.20 1.48 1.33 1.46 1.08 Mar-09 1.61 1.04 0.85 2.09 1.36 1.46 1.07 Mar-10 1.41 1.26 0.68 1.33 1.20 0.97 1.42 77
2011
B) Quick Ratio7
ACID TEST RATIO

5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Mar/07 Mar/08 Mar/09 Mar/10
RAJRATAN GLOBAL WIRES USHA MARTIN Ltd. BEDMUTHA INDUSTRIES LTD. AVERAGE OF THE COMPANIES
RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIES USHA MARTIN Ltd. AARTI STEELS Ltd. BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISION AVERAGE OF THE COMPANIES
Quick Ratio Mar-07 Mar-08 1.66 1.16 0.77 0.76 0.81 0.70 4.09 4.68 0.94 0.84 1.05 0.70 1.55 1.47
Mar-09 1.30 0.76 0.54 1.25 0.99 0.57 0.90
Mar-10 1.08 0.77 0.28 0.78 0.76 0.39 0.68
Due to unavailability of the Industry average, the average of the companies considered is used
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2011
C) Cash Ratio8
CASH RATIO
0.3
0.25
0.2
0.15
0.1
0.05
0 Mar/07 Mar/08 Mar/09 Mar/10 -0.05 RAJRATAN GLOBAL WIRES USHA MARTIN Ltd. BEDMUTHA INDUSTRIES LTD. AVERAGE OF THE COMPANIES RAMSARUP INDUSTRIES AARTI STEELS Ltd. TATA STEEL WIRE DIVISION
Cash Ratio Mar-07 Mar-08 0.01 0.09 0.05 0.05 0.06 0.04 0.28 0.25 0.16 0.12 0.10 0.02 0.11 0.09
Mar-09 0.18 0.04 0.06 0.06 0.16 0.01 0.08
Mar-10 0.02 0.03 0.01 0.02 0.05 -0.01 0.02
Due to unavailability of the Industry average, the average of the companies considered is used
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2011
Coverage Ratios
A) Interest Coverage Ratio
INTEREST COVERAGE RATIO

6
0 Mar/07 Mar/08 Mar/09 Mar/10 -1
RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIES USHA MARTIN Ltd. AARTI STEELS Ltd. BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISION INDUSTRY AVERAGE
Interest Coverage Ratio Mar-07 Mar-08 2.70 1.33 3.45 2.95 2.84 3.41 1.86 2.68 1.24 2.10 2.98 4.04 3.33 2.01
Mar-09 1.35 -0.24 2.71 2.21 3.53 0.31 2.26
Mar-10 2.62 1.59 2.21 3.41 3.28 5.40 1.67 80
2011
Turnover Ratios
A) Inventory Turnover Ratio9
INVENTORY TURNOVER RATIO

25
20
15
10
0 Mar/07 Mar/08 RAJRATAN GLOBAL WIRES USHA MARTIN Ltd. BEDMUTHA INDUSTRIES LTD. INDUSTRY AVERAGE Mar/09 RAMSARUP INDUSTRIES AARTI STEELS Ltd. TATA STEEL WIRE DIVISION Mar/10
Inventory Turnover Ratio Mar-07 RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIES USHA MARTIN Ltd. AARTI STEELS Ltd. BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISION INDUSTRY AVERAGE
9
Mar-08 10.41 4.59 3.76 6.00 7.35 17.00 4.24
Mar-09 16.19 4.96 4.50 7.62 8.31 20.10 8.25
Mar-10 15.37 5.79 3.41 6.10 5.21 17.26 7.48
9.53 4.69 4.11 5.23 6.05 17.67 8.72
Net sales instead of COGS is used for the calculation of ratio
81
2011
B) Inventory Holding Period
INVENTORY HOLDING PERIOD

120
100
80
60
40
20
0 Mar/07 Mar/08 RAJRATAN GLOBAL WIRES USHA MARTIN Ltd. BEDMUTHA INDUSTRIES LTD. INDUSTRY AVERAGE Mar/09 RAMSARUP INDUSTRIES AARTI STEELS Ltd. TATA STEEL WIRE DIVISION Mar/10
Inventory Holding Period Mar-07 Mar-08 38.29 35.07 77.78 79.46 88.73 97.02 69.78 60.82 60.36 49.68 20.66 41.86 21.47 86.08
Mar-09 22.54 73.55 81.05 47.93 43.90 18.16 44.24
Mar-10 23.75 63.00 107.18 59.83 70.03 21.14 48.80
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2011
C) Debtors Turnover Ratio10
DEBTOR TURNOVER RATIO

50 45 40 35 30 25 20 15 10 5 0 Mar/07 Mar/08 RAJRATAN GLOBAL WIRES USHA MARTIN Ltd. BEDMUTHA INDUSTRIES LTD. #REF! Mar/09 RAMSARUP INDUSTRIES AARTI STEELS Ltd. TATA STEEL WIRE DIVISION INDUSTRY AVERAGE Mar/10
Debtors Turnover Ratio Mar-07 Mar-08 3.92 4.16 6.04 5.72 6.56 6.78 5.43 5.36 6.43 7.88 23.95 5.81 27.26 2.56
Mar-09 5.71 4.12 7.28 7.16 7.49 43.94 4.74
Mar-10 5.51 3.70 7.47 6.17 5.40 43.35 4.94
10
Net sales is used due to unavailability of the credit sales
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2011
D) Average Collection Period
AVERAGE COLLECTION PERIOD(DAYS)

160 140 120 100 80 60 40 20 0 Mar/07 Mar/08 Mar/09 Mar/10
Average Collection Period Mar-07 Mar-08 93.19 87.67 60.48 63.79 55.63 53.80 67.26 68.09 56.76 46.33 15.24 13.39 62.82 142.58
Mar-09 63.91 88.51 50.14 51.01 48.75 8.31 77.00
Mar-10 66.25 98.62 48.85 59.13 67.57 8.42 73.89
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2011
E) Fixed Assets Turnover Ratio
FIXED ASSETS TURNOVER RATIO

16 14 12 10 8 6 4 2 0 Mar/07 Mar/08 Mar/09 Mar/10
Fixed Assets Turnover Ratio Mar-07 Mar-08 2.14 2.17 13.34 8.54 1.55 1.78 2.06 2.35 12.81 10.06 11.33 10.43 2.36 1.12
Mar-09 2.24 6.01 2.04 2.54 7.24 9.85 1.70
Mar-10 2.10 4.59 1.09 1.77 5.29 5.48 1.56
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2011
F) Total Assets Turnover Ratio11
TOTAL ASSETS TURNOVER RATIO

9 8 7 6 5 4 3 2 1 0 Mar/07 Mar/08 Mar/09 Mar/10
Total Assets Turnover Ratio Mar-07 RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIES USHA MARTIN Ltd. AARTI STEELS Ltd. BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISION AVERAGE OF THE COMPANIES 1.18 3.60 1.02 1.09 2.01 6.76 2.61 Mar-08 1.08 2.10 0.99 1.27 2.45 6.94 2.47 Mar-09 1.32 1.16 0.97 1.45 2.37 7.73 2.50 Mar-10 1.41 0.93 0.76 1.10 1.69 5.06 1.83
11
Average of the companies is used due to unavailability of the industry average
86
2011
Profitability Ratios12
A) EBITDA Margin
EBITDA MARGIN
25.000%
20.000%
15.000%
10.000%
5.000%
0.000% Mar/07 Mar/08 Mar/09 Mar/10
EBITDA Margin Mar-07 Mar-08 10.39% 8.58% 7.51% 9.20% 20.07% 21.61% 13.56% 17.45% 5.41% 9.93% 3.61% 4.60% 9.15% 9.95%
Mar-09 10.29% 0.39% 20.13% 14.41% 12.10% 0.79% 10.98%
Mar-10 13.37% 10.05% 19.73% 20.68% 17.16% 4.88% 7.43%
12
Profit margins for TSWD are low because the raw material is supplied at the transfer price
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2011
B) Net Profit Margin13
NET PROFIT MARGIN

10.000% 8.000% 6.000% 4.000% 2.000% 0.000% Mar/07 Mar/08 Mar/09 Mar/10 -2.000% -4.000% -6.000%
Net Profit Margin Mar-07 Mar-08 2.94% 0.82% 3.34% 3.40% 6.81% 8.60% 4.38% 5.36% 0.37% 3.15% 2.89% 3.92% 3.46% 4.21%
Mar-09 -0.08% -3.85% 6.95% 3.35% 4.84% 0.24% 1.91%
Mar-10 3.55% 2.16% 5.03% 5.78% 6.66% 4.08% 4.54%
13
88
2011
C) Return on Assets14
RETURN ON ASSETS
30.000% 25.000% 20.000% 15.000% 10.000% 5.000% 0.000% Mar/07 Mar/08 Mar/09 Mar/10 -5.000% -10.000% RAJRATAN GLOBAL WIRES USHA MARTIN Ltd. BEDMUTHA INDUSTRIES LTD. AVERAGE OF THE COMPANIES RAMSARUP INDUSTRIES AARTI STEELS Ltd. TATA STEEL WIRE DIVISION
Return on Assets Mar-07 Mar-08 3.46% 0.88% 12.03% 7.14% 6.94% 8.52% 4.80% 6.78% 0.75% 7.71% 19.56% 27.21% 7.92% 9.71%
Mar-09 -0.10% -4.46% 6.77% 4.86% 11.45% 1.87% 3.40%
Mar-10 5.03% 2.00% 3.82% 6.38% 11.26% 20.63% 8.19%
14
89
2011
D) Earning Power
EARNING POWER
30.000%
25.000%
20.000%
15.000%
10.000%
5.000%
0.000% Mar/07 Mar/08 Mar/09 Mar/10 -5.000%
Note: Earning Power for the Wires industry was not available
Earning Power Mar-07 Mar-08 8.81% 6.16% 23.94% 16.75% 14.87% 16.82% 10.00% 16.13% 9.42% 19.66% 19.56% 27.21% 14.43% 17.12%
Mar-09 9.51% -1.30% 15.69% 14.74% 24.38% 1.87% 10.82%
Mar-10 14.31% 7.64% 10.54% 16.62% 24.82% 20.63% 15.76% 90
2011
E) Return On Invested Capital (ROIC)
ROIC
140.00% 120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% Mar/07 Mar/08 Mar/09 Mar/10 -20.00% -40.00% RAJRATAN GLOBAL WIRES USHA MARTIN Ltd. BEDMUTHA INDUSTRIES LTD. AVERAGE OF THE COMPANIES RAMSARUP INDUSTRIES AARTI STEELS Ltd. TATA STEEL WIRE DIVISION
Note: ROIC for the Wires industry was not available
Return on Invested Capital Mar-07 Mar-08 6.85% 5.88% 20.37% 32.45% 15.18% 20.98% 9.72% 12.44% 8.54% 18.09% 22.00% 29.00% 13.78% 19.80%
Mar-09 11.22% -25.42% 52.55% 15.24% 23.79% 10.00% 14.56%
Mar-10 13.14% 128.24% 22.17% 18.79% 24.81% 30.00% 39.52%
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2011
3.3 Comparison With The Global Wires Entities

Wire division is the market leader and pioneer in wire manufacturing in India over the past 50 years, Established in 1958 as steel wire manufacturing company it was taken over by Tata Steel in 1984. In 2002 wire division became a separate profit centre under long product division (Tata Steel). Year 2008 saw the wire division become a part of global wire business (Tata Steel). The global wires business was created to bring about integration in Tata Steel groups various businesses and also for developing the wire business globally. Tata Steel Global Wires comprises of i) ii) iii) iv) v) Tata Steel Wire Division (India) Siam Industrial Wires (Thailand) Lanka Special Steels Limited (Sri Lanka) Wuxi Jinyang Metal Products Co. Limited (China) Indian Steel and Wire Products (ISWP)
Given below is brief information on Tata Steels Global Wires entities and comparison of their performance with Tata Steel Wire Division.
92
2011
3.3. A) About the Global Wires Entities
A) About Lanka Special Steels Limited Lanka Special Steels Limited, located in Sri Lanka is part of Tata Steels Global Wires Business. It was incorporated in November 2003 out of Tata Steels first overseas acquisition. Lanka SSL is the sole manufacturer of GI wires in Sri Lanka and caters to the commercial galvanised wires market for end uses like barbed wires, wire meshes and chain links. LSSLs current product mix of GI wires range from 1.6mm to 4.0mm in thickness and zinc coating of 40 - 100 gsm. The Company enjoys a market leadership position in the segments that it serves and its future plans include getting into value added wires of medium and heavy coating. It also plans to get into downstream products like barbed wires. As a part of Global Wires, LSSL is committed to improve its business processes, learn and adopt business practices from the Tata Steel Group and instill and practice the groups culture of safety. Lanka Special Steels Limited is well poised to reap the benefits of the expected economic growth in Sri Lanka, and therefore will be in a position to consolidate its market share in Sri Lanka and significantly contribute to the Global Wires Business. B) Products GI Wires is the major product manufactured by Lanka Special Steels Limited. Galvanised Iron (GI) Wire is used in a host of applications which include vineyards, welded mesh for poultry farms, gabions for soil protection, chain link, barbed wire and concertina
93
2011
wire for fencing, stay wire and earth wire in the power industry, pail handles, wire mesh, stitching wire, Bale Tie Wire etc. C) Financials The financial statements of LSSL from the Financial Year 2008 to 2011 are as follows:
LANKA SPECIAL STEELS LTD.(LSSL) Profit and Loss Accounts SLR MILLION INCOME Sales and other operating income Less: Excise duty Net sales Other income TOTAL INCOME 1388.29 1120.55 1102.13 1225.41 174.38 1213.91 6.88 1220.79 144.64 975.91 13.29 989.20 124.77 977.36 8.54 985.90 144.13 1081.28 0.00 1081.28 Mar-11 Mar-10 Mar-09 Mar-08
EBITDA Depreciation Amortisation

EBIT
151.88 8.97 0.00 142.91
102.73 6.89 0.00 95.84
52.18 6.87 0.00 45.31
82.14 6.40 0.00 75.74
Interest
2.06
5.21
11.25
19.70
PBT
140.85
90.63
34.06
56.04
Taxes
23.57
10.43
6.74
0.00
PAT
117.28
80.20
27.32
56.04
NOPAT
119.34
85.41
38.57
75.74
94
2011
LANKA SPECIAL STEELS LTD.(LSSL) Balance Sheets SLR MILLION SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Minority Interest Secured Loans Unsecured Loans Total Loan Funds Current Account Others(Deffered Tax) Total Liabilities 25.00 250.20 0.00 0.00 275.20 0.00 10.12 0.00 10.12 0.00 18.46 303.78 25.00 132.31 0.00 0.00 157.31 0.00 22.26 0.00 22.26 0.00 20.18 199.75 25.00 52.39 0.00 0.00 77.39 0.00 34.40 0.00 34.40 0.00 19.78 131.57 25.00 46.74 0.00 0.00 71.74 0.00 74.90 0.00 74.90 0.00 0.00 146.64 Mar-11 Mar-10 Mar-09 Mar-08
APPLICATION OF FUNDS : Gross Block Less: Accumulated Depreciation Less: Impairment of Assets Net Block Investments Current Assets, Loans & Advances Inventories Sundry Debtors Other Assets Cash and Bank Loans and Advances Total Current Assets Current Liabilities and Provisions Net Current Assets Miscellaneous Expenses not written off Total Assets 147.32 74.31 0.00 198.77 31.14 451.54 300.51 151.03 0.00 303.79 194.14 24.89 0.00 127.73 38.83 385.59 311.33 74.26 0.00 199.75 98.26 36.42 0.00 43.05 23.75 201.48 179.11 22.37 0.00 131.57 159.54 61.40 0.00 7.11 44.70 272.75 235.99 36.76 0.00 146.64 200.86 48.10 0.00 152.76 0.00 164.64 39.15 0.00 125.49 0.00 141.50 32.30 0.00 109.20 0.00 135.24 25.36 0.00 109.88 0.00
95
2011
A) About SIW
Established in 1974, The Siam Industrial Wire Co. Ltd. (SIW) is today a part of Tata Steel Global Wires Business and one of the worlds leading manufacturers of steel wire. Located on a 25-acre site in Rayong, Thailand with an annual production of 200,000 metric tonnes, SIW is one of Asias largest manufacturers of pre-stressed concrete products and is a member of both NatSteel Holdings and The Tata Steel Group. Its sophisticated wire manufacturing technology allows SIW to create high-quality steel wire products for a large customer base. SIW combines strength and skill leading to creation of high standards that have been recognised by leading international quality accreditation agencies. SIW manufactures pre-stressed concrete stands, pre-stressed concrete wires, cold drawn wires, hard drawn wires and welded wire meshes and distributes these quality products throughout Europe, Oceania, Middle East, America, Africa and Asia. SIW products are manufactured in accordance with international standards and are tested and approved by international accreditation institutes and laboratories. All of its products can be manufactured in special grade production to meet customers specifications. Siam Industrial Wire is a vital strand in the overall strength of many construction masterworks. Through its Corporate Social Responsibility programme, Siam Industrial Wire commits substantial resources to improving and sustaining a healthy community environment. Involvement, education, safety and the three Rs of environmentalism reduce, reuse and recycle are all vital elements in community and social development. The involvement and commitment to improving the quality of life in the community is evidenced in a variety of projects and programs, creating a benchmark in corporate citizenship.
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2011
In 2009, SIW has been the proud recipient of 5 national awards for outstanding performance - Award for Labour Relation & Welfare, Good Governance Award for Environment, CSR-DIW : Corporate Social Responsibility - Department of Industrial Work, Thai Labour Standard - TLS: 8001-2003 and the Thai Chamber of Commerce Business Ethics Standard Test Award 2009 - TCC BEST Award 2009. B) Products Pre compressed Strands and Wires are the major products manufactured by The Siam Industrial Wire Co. Ltd. i) PC Strands
Pre-stressed Concrete (PC) Stranded wires are used in Pre-stressed concrete girders for road, river & railway bridges and flyovers, pre-stressed atomic reactor domes, slabs, silos, hangars, aquaducts, high rise buildings, viaducts and railway sleepers.
ii)
PC Wires
Pre-stressed concrete wires find applications in Electric Pole reinforcement, as reinforcement in pre-stressed Concrete and in Pipes Railway Sleepers.
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2011
C) Financials
SIAM INDUSTRIAL WIRE, THAILAND(SIW) Profit and Loss Accounts USD MILLION Mar-11 Mar-10 Mar-09 Mar-08
INCOME Sales and other operating income Less: Excise duty Net sales Other income TOTAL INCOME 163.07 0.00 163.07 0.00 163.07 128.67 0.00 128.67 0.14 128.81 135.27 0.00 135.27 -0.64 134.63 143.47 0.00 143.47 0.41 143.88
EBITDA Depriciation Amortisation

EBIT
13.30 3.00 0.14 10.16
12.11 2.78 0.14 9.19
7.67 2.07 0.11 5.49
16.37 2.10 0.11 14.16
Interest
-0.34
-0.20
-0.19
0.09
PBT
10.50 Taxes
9.39
5.68
14.07
2.40
2.16
0.93
2.02
PAT
8.10
NOPAT
7.23
4.75
12.05
7.76
7.03
4.56
12.14
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2011
SIAM INDUSTRIAL WIRE, THAILAND(SIW) Balance Sheets USD MILLION SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Minority Interest Secured Loans Unsecured Loans Total Loan Funds Current Account Others(Deffered Tax) Total Liabilities Mar-11 Mar-10 Mar-09 Mar-08
8.50 75.80 0.00 0.00 84.30 0.00 0.00 0.00 0.00 0.00 0.00 84.30
8.00 63.50 0.00 0.00 71.50 0.00 0.00 0.00 0.00 0.00 0.00 71.50
7.30 51.20 0.00 0.00 58.50 0.00 0.00 0.00 0.00 0.00 0.00 58.50
8.20 52.40 0.00 0.00 60.60 0.00 0.00 0.00 0.00 0.00 0.00 60.60
APPLICATION OF FUNDS : Gross Block Less: Accumulated Depreciation Less: Impairment of Assets Net Block Investments Current Assets, Loans & Advances Inventories Sundry Debtors Other Assets Cash and Bank Loans and Advances Total Current Assets Current Liabilities and Provisions Net Current Assets Miscellaneous Expenses not written off Total Assets 20.70 26.00 0.00 34.50 0.00 81.20 15.30 65.90 0.00 84.30 15.00 38.20 0.00 3.80 1.60 58.60 5.30 53.30 0.00 71.50 13.50 11.00 2.00 21.10 0.00 47.60 7.30 40.30 0.00 58.50 26.70 29.10 2.80 1.40 0.00 60.00 14.40 45.60 0.00 60.70 49.60 31.20 0.00 18.40 0.00 44.90 26.70 0.00 18.20 0.00 40.60 22.40 0.00 18.20 0.00 38.40 23.30 0.00 15.10 0.00
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2011
A) About WJMP Wuxi Jinyang Metal Products (WJMP) is a proud member of the Global Wires Business of the Tata Steel Group. Established in 1992, the company became a part of the Tata Steel family as a NatSteel Asia subsidiary company in 2005. Situated in Wuxi, in the Jiangsu province in China, the Company has a total capacity to manufacture 120,000 tonnes of wire products annually. The product repertoire at WJMP consists of Pre-stressed Concrete Strands, Pre-stressed Concrete Wires and Pre-stressed Concrete Bars. The company is a leading exporter out of China with products being exported to more than 20 countries across five continents. WJMP caters to the customers in the infrastructure construction segments of municipal projects, high-rise buildings, overpass and bridges, highways, tunnels, LNG terminals and nuclear power stations. WJMP currently has a turnover of RMB 574 million and employs 285 people at its premises in Wuxi. The Company prides itself on its quality practices and is recognised by International Quality certification bodies like CARES (UK), ACRS (Australia), TUV (Germany), DCL (Dubai), PSI Homologation (Israel) and CQC and CNAS (China). It has also been recognised by ISO9000 (Quality System), ISO 14001 (Environment system) and JIS (Japan). The Company is also in the process for BIS (India) certification. WJMP has been involved in a number of prestigious projects in China as well as internationally. Internationally it has supplied wires for the Redevelopment of Eden Park Stadium (New Zealand), Bellagio Hotel and Marriott Grand Chateau Hotel (USA), Kallang Leisure Park (Singapore) and LRT project (Dubai). Domestically it has been supplying to a number of bridge and highway projects throughout China. This year, due to the slowdown in the export demand, the Company concentrated on the domestic market to sustain sales performance. WJMP has initiated and implemented numerous systems and processes to integrate itself with the Tata Steel Group. The Company began on the Safety Excellence journey
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2011
earlier this year. The Company has actively imbibed the Tata Code of Conduct in its functioning, by appointing an ethics counsellor and initiating ethics trainings. WJMP has also progressively adopted the Tata Business Excellence Model and has applied for the JNT assessment in the year 2010. The Company has also trained its employees on Daily management practices and is in the process of implementing the model. The Company aspires to be a world-class quality manufacturer of PC products and have leadership position in exports from China. The Company contributes to assist and is constantly guided by and the Global Wires Business and the Tata Steel Group to achieve their goals. B) Products The products manufactured by WJMP are i) ii) iii) Pre-stressed Concrete Strands Pre-stressed Concrete Wires and Pre-stressed Concrete Bars
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2011
C) Financials
WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) Profit & Loss Accounts USD MILLION INCOME Sales and other operating income Less: Excise duty Net sales Other income TOTAL INCOME Mar-11 Mar-10 Mar-09 Mar-08
57.55 0.00 57.55 1.33 58.88
59.26 0.00 59.26 0.96 60.22
83.11 0.00 83.11 2.21 85.32
64.69 0.00 64.69 1.21 65.90
EBITDA Depreciation Amortisation

EBIT
-0.47 1.18 0.00 -1.65
0.07 1.30 0.00 -1.23
6.20 1.30 0.04 4.86
2.30 1.31 0.04 0.95
Interest
0.41
0.27
0.85
0.43
PBT
-2.06
-1.50
4.01
0.52
Taxes
-0.37
-0.51
0.97
-0.07
PAT
-1.69
-0.99
3.04
0.59
NOPAT
-1.28
-0.72
3.89
1.02
102
2011
WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) Balance Sheets USD MILLION SOURCES OF FUNDS : Share Capital Reserves Total Equity Share Warrants Equity Application Money Total Shareholders Funds Minority Interest Secured Loans Unsecured Loans Total Loan Funds Current Account Others(Deffered Tax) Total Liabilities 15.67 11.86 0.00 0.00 27.53 0.00 0.00 0.00 0.00 0.00 0.00 27.53 15.67 12.42 0.00 0.00 28.09 0.00 0.00 0.00 0.00 0.00 0.00 28.09 15.67 14.31 0.00 0.00 29.98 0.00 0.00 0.00 0.00 0.00 -0.93 29.05 15.67 9.04 0.00 0.00 24.71 0.00 0.00 0.00 0.00 0.00 0.58 25.29 Mar-11 Mar-10 Mar-09 Mar-08
APPLICATION OF FUNDS : Gross Block Less: Accumulated Depreciation Less: Impairment of Assets Net Block Investments Current Assets, Loans & Advances Inventories Sundry Debtors Other Assets Cash and Bank Loans and Advances Total Current Assets Current Liabilities and Provisions Net Current Assets Miscellaneous Expenses not written off Total Assets 9.20 12.06 0.00 7.99 0.99 30.24 12.94 17.30 0.00 27.53 11.07 11.79 0.00 4.66 4.03 31.55 14.08 17.47 0.00 28.09 6.31 9.85 0.00 12.73 0.52 29.41 12.10 17.31 0.00 29.05 11.89 12.67 0.00 3.01 1.75 29.32 15.76 13.56 0.00 25.29 103 33.20 22.97 0.00 10.23 0.00 31.48 20.86 0.00 10.62 0.00 31.28 19.54 0.00 11.74 0.00 29.46 17.73 0.00 11.73 0.00
2011
3.3 B) Ratio Comparisons

Liquidity Ratios A) Current Ratio
Current Ratio
12
10
0 2008 2009 2010 2011 LANKA SPECIAL STEELS LTD.(LSSL) WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD)
Current Ratio 2008 LANKA SPECIAL STEELS LTD.(LSSL) WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD) 1.46 1.46 0.97 1.38 104 4.17 6.52 11.06 5.31 1.16 1.86 2009 1.12 2.43 2010 1.24 2.24 2011 1.50 2.34
2011
B) Quick Ratio
Quick Ratio
9 8
Quick Ratio 2008 LANKA SPECIAL STEELS LTD.(LSSL) WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD) 0.48 1.11 2.31 0.70 2009 0.58 1.91 4.67 0.57 2010 0.61 1.45 8.23 0.39 2011 1.01 1.63 3.95 0.51
105
2011
C) Cash Ratio
Cash Ratio
3.5
2.5
1.5
0.5
0 2008 2009 2010 2011 -0.5 LANKA SPECIAL STEELS LTD.(LSSL) WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD)
LANKA SPECIAL STEELS LTD.(LSSL) WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD)
Cash Ratio 2008 0.03 0.19 0.10 0.02
2009 0.24 1.05 2.89 0.01
2010 0.41 0.33 0.72 -0.01

2011 0.66 0.62 2.25 0.00 106
2011
Coverage Ratios
A) Interest Coverage Ratio

200
150
100
50
0 2008 2009 2010 2011 -50
-100

LANKA SPECIAL STEELS LTD.(LSSL) WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD) 2008 3.84 2.21 157.33 4.04 2009 4.03 5.72 -28.89 0.31 2010 18.40 -4.56 -45.95 5.40 2011 69.37 -4.02 -29.88 4.51
107
2011
Turnover Ratios
A) Inventory Turnover Ratio
Inventory Turnover ratio
25
20
15
10
0 2008 2009 2010 2011
Inventory Turnover Ratio 2008 LANKA SPECIAL STEELS LTD.(LSSL) WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD) 6.78 5.44 5.37 16.36 2009 7.58 9.13 6.73 20.10 2010 6.68 6.82 9.03 17.26 2011 7.11 5.68 9.14 17.07
108
2011
B) Inventory Holding Period
Inventory Holding Period

80 70
60
50
40
30
20
10
Inventory Holding Period 2008 LANKA SPECIAL STEELS LTD.(LSSL) WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD) 53.85 67.09 67.93 22.32 2009 48.14 39.97 54.24 18.16 2010 54.68 53.52 40.42 21.14 2011 51.34 64.28 39.95 21.38
109
2011
C) Debtors Turnover Ratio
Debtors Turnover Ratio

50 45 40 35 30 25 20 15 10 5 0 2008 2009 2010 2011 LANKA SPECIAL STEELS LTD.(LSSL) WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD)
Debtors Turnover Ratio 2008 2009 LANKA SPECIAL STEELS LTD.(LSSL) 17.61 19.98 WUXI JINYANG METAL 5.11 7.38 PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, 9.86 6.75 THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD) 31.56 43.94
2010 31.84 5.48 5.23 43.35
2011 24.47 4.83 5.08 40.21
110
2011
D) Average Collection Period
Average Collection period

80
70
60
50
40
30
20
10
Average Collection Period 2008 2009 LANKA SPECIAL STEELS LTD.(LSSL) 20.73 18.27 WUXI JINYANG METAL 71.49 49.45 PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, 37.02 54.10 THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD) 11.56 8.31
2010 11.47 66.64 69.78 8.42
2011 14.91 75.63 71.85 9.08
111
2011
E) Fixed Assets Turnover Ratio
Fixed Assets Turnover Ratio

12
10
Fixed Assets Turnover Ratio 2008 2009 LANKA SPECIAL STEELS LTD.(LSSL) 9.84 8.92 WUXI JINYANG METAL 5.51 7.08 PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, 9.50 8.12 THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD) 9.65 9.85
2010 8.32 5.30 7.07 5.48
2011 8.73 5.52 8.91 5.34
112
2011
F) Total Assets Turnover Ratio
Total Assets Turnover Ratio

9
Total Assets Turnover Ratio 2008 LANKA SPECIAL STEELS LTD.(LSSL) WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD) 7.37 2.56 2.36 7.11 2009 7.03 3.06 2.27 7.73 2010 5.89 2.07 1.98 5.06 2011 4.82 2.07 2.09 4.96
113
2011
Profitability Ratios
A) EBITDA Margin
EBITDA Margin
14.000%
12.000%
10.000%
8.000%
6.000%
4.000%
2.000%
0.000% 2008 2009 2010 2011 -2.000% LANKA SPECIAL STEELS LTD.(LSSL) WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD)
EBITDA Margin 2008 LANKA SPECIAL STEELS LTD.(LSSL) WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD) 7.60% 3.56% 11.41% 4.60% 2009 5.34% 7.46% 5.67% 0.79% 2010 10.53% 0.12% 9.41% 4.88%
2011 12.51% -0.82% 8.16% 3.94% 114
2011
B) Net Profit Margin
Net Profit Margin

12.000%
10.000%
8.000%
6.000%
4.000%
2.000%
0.000% 2008 2009 2010 2011 -2.000%
-4.000% LANKA SPECIAL STEELS LTD.(LSSL) WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD)
Net Profit Margin 2008 2009 5.183% 2.795% 0.912% 3.658% 8.399% 3.922% 3.511% 0.242%
2010 8.218% -1.671% 5.619% 4.079%
2011 9.661% -2.937% 4.967% 2.700%
115
2011
C) Return On Assets
Return On Assets
60.000%
50.000%
40.000%
30.000%
20.000%
10.000%
0.000% 2008 2009 2010 2011
-10.000% LANKA SPECIAL STEELS LTD.(LSSL) WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD)
Return on Assets 2008 2009 38.216% 19.640% 2.333% 11.189% 39.703% 27.898% 7.970% 1.873%
2010 48.412% -3.465% 11.123% 20.634%
2011 46.582% -6.077% 10.398% 13.382%
116
2011
D) Earning Power
Earning Power
70.000%
60.000%
50.000%
40.000%
30.000%
20.000%
10.000%
0.000% 2008 2009 2010 2011 -10.000% LANKA SPECIAL STEELS LTD.(LSSL) WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD)
Return on Assets 2008 2009 51.650% 32.573% 3.756% 17.887% 23.328% 27.898% 9.211% 1.873%
2010 57.853% -4.305% 14.138% 20.634%
2011 56.762% -5.933% 13.042% 13.382%
117
2011
E) Return on Invested Capital (ROIC)
ROIC
80% 70% 60% 50% 40% 30% 20% 10% 0% 2008 2009 2010 2011 -10% LANKA SPECIAL STEELS LTD.(LSSL) WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD)
ROIC 2008 LANKA SPECIAL STEELS LTD.(LSSL) WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) SIAM INDUSTRIAL WIRE, THAILAND(SIW) TATA STEEL WIRE DIVISION(TSWD) 71% 17% 23% 29% 2009 38% 43% 11% 10% 2010 65% 1% 18% 30% 2011 49% -3% 16% 15%
118
2011
4) Limitations of the Study

I. Unavailability of the financial statements of the competitors for the year ended March 2011: Although the Financials of the Wire Division for the financial year 2011 were available the comparison for the year 2011 could not be done due to unavailability of the financial statements of the competitors for the year 2011.
II.
Consolidated Statements: The statements of the competitors available are consolidated i.e. many competitors are into many other steel products and not just wires and the results of all other products are also included in the statements due to which exact analysis was not possible.
119
2011
5) Conclusion
The analysis of the financial statements of TSWD gave some important insights. The study was helpful in assessing the strength and the financial stability of the company. The trend analysis which was carried out to analyse the trends in the performance of Wire Division showed that the companys performance is satisfactory and they manage their working capital, inventories and debtors very efficiently. The performance of the Wire Division had been improving continuously till the year 2009. During the economic slowdown the companys performance was somewhat affected but even during those challenging times the company was able to manage its operations well. The year 2010 saw the relocation of the Borivali plant to Tarapur due to which the daily operations were affected, but the company is slowly moving towards stabilization and is soon expected to completely recover and achieve the same level of performance as in the past. The Benchmarking analysis showed the reasons why Tata Steel Wire Division has acquired the position of market leader. Wire Divisions performance is better than almost all the competitors in almost all the aspects, be it liquidity, coverage or turnover. The company is able to manage its inventories and debtors very efficiently and also has high turnover ratios compared to all the competitors. Thus, we can conclude that the performance of Wire Division is way better than the industry average and all the competitors and it is the benchmark to be followed. Although the company has been performing well but there is always a scope for improvement. Some recommendations to the company based on my study are I. Fixed Assets of the company are not being optimally utilized since the production lines are under stabilization and there is a scope for improvement in the Fixed Assets turnover. The production has not been in line with the increase in the fixed assets. But in the near future when the lines are stabilized. Wire Division should aim for the optimal utilization of its assets.
II.
Steps need to be taken to increase their sales in the more profitable segments.
120
2011
6) References:
Websites: www.tatawire.com www.rgwl.co.in www.ramsarup.com www.ushamartin.com www.aartisteelsltd.com www.bedmutha.com www.capitaline.com www.investopedia.com Financial Statements Financials for the year ended March 2008 Financials for the year ended March 2010 Books Financial Accounting: A managerial perspective by R. Narayanaswamy Financial Management by Prasanna Chandra
121

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SUMMER REPORT ON FINANCIAL STATEMENT ANALYSIS & BENCHMARKING AT TATA STEEL LTD.

(WIRE DIVISION) (2011)

Prepared By: Rajdeep Asrani Amrita School of Business

FINANCIAL STATEMENT ANALYSIS & BENCHMARKING

TATA STEEL WIRE DIVISION

FINANCIAL STATEMENT ANALYSIS & BENCHMARKING

Horizontal Analysis................................................................................................15 Ratio Analysis and Benchmarking

TATA STEEL WIRE DIVISION

FINANCIAL STATEMENT ANALYSIS & BENCHMARKING

1.1) Introduction to Tata Steel Wire Division

Background-Tata Steel Wire Division

TSWD and Global Wires India have been used interchangeably

TATA STEEL WIRE DIVISION

FINANCIAL STATEMENT ANALYSIS & BENCHMARKING

TATA STEEL WIRE DIVISION

LANKA SPECIAL STEELS LTD., SRI LANKA

WUXI JINYANG METAL PRODUCTS, CHINA

SIAM INDUSTRIAL WIRE CO. LTD., THAILAND

INDIAN STEEL & WIRE PRODUCTS LTD.

FINANCIAL STATEMENT ANALYSIS & BENCHMARKING

Table: Key differences in WD Plants

Owned and managed by WD TWP1 TWP2

Owned by WD and managed by Managing Agency INDORE DWP

100% subsidiary ISWP Partly by ISWP and WD

Outsourced EPA EPA

On rolls of WD and some non core activities outsourced

On rolls of Managing agency except very few key personnel from WD

Products and Delivery Mechanism

FINANCIAL STATEMENT ANALYSIS & BENCHMARKING

(i) Tyre Bead Wire (ii) Spring Wire

(i) PC Strands WIres (ii) PC Wire

(i) GI Wires (ii) MIG Wires (iii) Mesh Wires

Fig:Wire Division-Market Segments

Business Segments by Revenue

Business Segments by Profit(FY10)

TATA STEEL WIRE DIVISION

FINANCIAL STATEMENT ANALYSIS & BENCHMARKING

Table: Mapping of Products and Plants

TATA STEEL WIRE DIVISION

FINANCIAL STATEMENT ANALYSIS & BENCHMARKING

Flow of Raw Materials

Continuous Cast Billets

Hot Rolled Wire Rods

Fig:Wire making process

Fig: Flow of Raw Materials

TATA STEEL WIRE DIVISION

FINANCIAL STATEMENT ANALYSIS & BENCHMARKING

TATA STEEL WIRE DIVISION

FINANCIAL STATEMENT ANALYSIS & BENCHMARKING

1.2) Introduction to the Project

TATA STEEL WIRE DIVISION

FINANCIAL STATEMENT ANALYSIS & BENCHMARKING

1.3) Introduction to Financial Statement Analysis

Techniques of Financial Statement Analysis

FINANCIAL STATEMENT ANALYSIS & BENCHMARKING

TATA STEEL WIRE DIVISION

FINANCIAL STATEMENT ANALYSIS & BENCHMARKING

TATA STEEL WIRE DIVISION

FINANCIAL STATEMENT ANALYSIS & BENCHMARKING

2) Horizontal Analysis- Wire Division

EBITDA 46.47 Depriciation 14.66 Amortisation 0.00

50.21 8.26 0.00 41.95

10.34 7.18 0.00 3.16

48.37 7.15 0.00 41.22