OBJECTIVE OF STUDY

• Analysis of fundamental to acquire a deep knowledge of the Steel Sector which I am

studying.

• To find out how the judgment is taken by the analyst on the basis of fundamental
analysis of the company.

• To establish link between expected share price with the projected company’s
financial performance (2008-2009)

• To study the demand of Steel sector particularly land-building, Commercial purposes

and Real Estate.

• To calculate a company's credit risk

• To make projection on its business performance and in the bad condition to improve
the performance of company.

• To evaluate its management and make internal business decisions,

• To make the company's stock valuation and predict its probable price evolution.

• Investors may use fundamental analysis to determine future growth rates for buying
high priced growth stocks

1
 EXECUTIVE SUMMERY

Fundamental analysis is very helpful to the investor, which is reflected in the investment
purpose. Fundamental analysis consist of three parts, they are economic, industry and
company. Any investors who go to systematic investment, he/she would like to know, the
complete scenario of the industry. It is interesting to know the how the fundamental
analysis helps to forecast the price of equity.

The fundamental analysis consists of three parts; they are economic, industry and
company. All the factors are involved in this analysis were identified and studied
carefully to identify the factors in the existing environment. The data or information
collected was based on the personal interaction with the guide of the company.

Economic analysis was a task to be studied as it affected the company’s tax, and it will
effect on the revenue of the industry. Also other factors are considered in the economic
analysis. And it will interpret for the fundamental analysis.

Industry analysis was a challenging factor for the research of the fundamental analysis.
All the sub-factors of the industry analysis were taken up from the secondary source to
analyses the each factor with the industry. And was related those factors with the
company. It also analyses the competitiveness of the each company’s strength, like.
Quality, services, cost of R/m, etc.

Company analysis is last factors of the fundamental analysis and it is one of the most
important parts of the company. An approach was made to understand the existing
company and its impact on company’s market share an its performance.

2
 RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. The

research methodology using for find out the solution of the research problem is analytical
research methodology and some extend descriptive research methodology.

 Primary Data

To solve the problems on fundamental analysis on cement sector:-

• Primary data collect by discussing with my guide and other staff member of the
company
• Observation

 Secondary Data

The sources of secondary data for solve the problems are:-

• Company Annual Report

• Company Internal Data
• Internet-Websites

3
HISTORY OF ANGEL BROKING

4
 Mr. Dinesh Thakkar
Promoter and Managing Director

In a short span of 18 years since inception, The Angel Group has emerged as one of the 5
retail stock broking houses in India, having membership BSE, NSE and the two leading
commodity exchanges in the country i.e. NCDEX and MCX. Angel Broking Ltd is also
registered as a depository participant with CDSL.

The group is promoted by Mr. Dinesh Thakkar, who started this enterprise as a small sub-
broker in 1987 with staff strength of 3 personnel. As on date, the group is managed by a
team of 1589 + direct employees and a nation wide network comprising 12 Regional
Centers , 58 branches, 2014 + registered sub brokers and business associates and 5552+
active trading terminals which cater to the requirements of 162085 + retail clients.

At Angel, It habitually generate value added features without the cost burden being
passed onto the clients as we strongly believe that better understanding of clients needs
and wants is our top priority. Our e-broking facility is one such effort, which gives you a
platform to access state of art trading facility at the click of a button.

♦ MANAGEMENT

5
Professional and highly experienced people headed by Mr. Dinesh Thakkar manage the
group. He has 14 years experience in the field of stock broking. He is well supported by
Mr.Mukesh R. Gandhi , a 19 years veteran in stock markets & Mr. Lalit Thakkar with 10
years experience in the field of equities research team and dependable operation team.

♦ GROUP ACTIVITIES

Angel group has very well set research division managed by strong professional team.
They provide fundamental as well as technical analysis to clients. They have subscribed
to various software packages including cline 2000,capita Clips, Trends,
DART,VITAL,INFAC reports ,CMIE reports fundamental package form internet
securities etc.Angel Group has 165 Bolt terminals spread all over the country amongst its
branches and sub-brokers Angel has expanded their might in to institutional broking
segment also to provide the highest level of services to Indian financial institutions,
banks, mutual funds and foreign institutional investors.

♦ MISSION STATEMENT

The main mission statement of Angel broking Ltd. Is to be on the top in and around
Rajkot and SAURASTRA peninsula with the help of retail, bulk business within three
years.

For FY 2007-08 will be on Bulk business from existing sub-brokers of competitors by

giving those competitive pricing, better connectivity and Post trading Back-up software
in post centralized and direct billing era.

♦ VISION STATEMENT

6
To provide best value for money to investor through innovative products, trading or
investment strategies, state of the art technology and personalized services.

♦ BUSINESS PHILOSOPHY

• Ethical practices & transparency in all our dealings

• Customer interest above our own
• Always deliver what we promise
• Effective cost management

♦ ACHIEVEMENT

Angel Broking has once again been awarded the prestigious ‘Major Volume Driver’
award for the second consecutive year of 2005-2006 by The Bombay Stock Exchange.
This coveted title was earlier conferred upon Angel by the BSE for the year 2004-2005

♦ QUALITY ASSURANCE POLICY

We are committed to being the leader in providing world class product & services which
exceed the expectations of our customers achieved by teamwork and a process of
continuous improvement.

7
 ♦ CORE COMPETENCE

 Top quality research & portfolio advisory services for equities

 Retail focused research products
 Robust internet trading facility
 Commodities research & broking services
 Depository services through CDSL
 Web based 24 x 7 back office software
 Good understanding the sub-broker and retail customer needs
 Professional work culture with a personal touch
 Cost effective processes
 State-of-the-art technology
 Streaming quotes & real time charts for BSE/NSE [cash / derivatives]
 Single connectivity and speedy execution of trades
 Private V-sat network for remote areas
 Online technical support & help desk

♦ CRM POLICY

A Customer Is A Most Important Visitors On Our Promises He Is Not Depend On Us But

We Are Dependant On Him He Is Not Interruption In Our Work But Is The Purpose Of It
We Are Not Doing Him A Favour By Serving He Is Doing Us A Favour By Giving Us
An Pportunity To Do So.

8
 BUSINESS NETWORK

Regional Offices

(1) Ahmedabad (7) Kolkata

(2) Bangalore (8) Mumbai
(3) Chennai (9) New Delhi
(4) Hyderabad (10) Pune
(5) Indore (11) Rajkot
(6) Jaipur (12) Surat

♦ Branch Offices

Andheri(W) Gandhinagar
Bandra(W) – 2 Offices Gondal
Borivali(W) – 2 Offices Indore
Chembur Jalgaon
Fort Jamnagar
Ghatkopar(E) Jodhpur
Goregaon(W) Junagadh
Kalbadevi Mehsana
Kandivali Nadiad
Lokhandwala Nasik
Malad(W) New Delhi – 4 Offices
Malad(E) Palanpur
Mulund(W) Patan
Santacruz(W) Porbandar
Thane(W) Pune
Vile Parle(W) Rajkot - 4 Offices
Ahmedabad – 7 Offices Secunderabad
Amreli Surat
Anand Surendranagar

9
Ankaleshwar Valsad
Baroda Vapi
Bhavnagar Vijayawada
Vishakhapatnam
PRODUCT OFFERED BY ANGEL

Angel Broking Ltd. Provides its best services by its products which represent the whole
image of the mind of clients and those products are:

ANGEL

Offline Online

Angel Trade Angel Diet Angel Anywhere

♦ OFFLINE

The Off-Line account is trading account through which one can buy and sell through
his/her telephone or by personal visit at Angel shop.

This facility is for those who are not comfortable with computer and want to trade.

♦ ONLINE

10
The Online trading facilities provided by Angel is basically divided into three types i.e.
Angel Diet, Angel Anywhere, and Angel Trade.

o Angel-DIET

 Application based ideal for traders

 User friendly & simple navigation
 Robust & Speedier execution of trade
 5 segment BSE, NSE, F&O, MCX, and NCDEX

o Angel Trade

 Browser based for investors

 No installation required
 Advantage of mobility
 Trading as simple as internet surfing
 5 segment BSE, NSE, F&O, MCX, and NCDEX

o Angel Anywhere

 Application based ideal for traders using technical tools

 Intraday / Historical charts with various indicators
 3 segment BSE, NSE, Derivatives

11
 STOCK ANALYSIS

Indian Securities markets are touching new heights as it has surpassed 15,000 marks.
More and more investors are attracting towards equity investment and trading. But this is
not always the case that no one can assure you certain returns there is always essence of
uncertainty and risk in investment and that push investors on back seats. Sometimes it
becomes very difficult for investors to predict the share price of the particular company in
this very volatile market. It raises questions in investor’s mind that
At what price I should buy? When to sell it... hold?
But as trading and investments are increasing on the markets as SEBI had taken stern
steps to disclose important information to its Shareholder and investor. So they can get as
possible as information about the companies of which they are holding the shares or
going to buy. And now-a-days brokers and some analyst providing some future
predictions of stocks price movements. So now investment has become somewhat easy
for investors.
How they get it? This is done with a Stock Analysis getting the information about
company and its price movements on stock markets and try to predict how would behave
on stock markets. So, there is great importance of stock analysis among investors done
brokers, experts, analyst, etc.

♦ Types of Stock Analysis:-

The methods used to analyze securities and make investment decisions fall
into two very broad categories: fundamental analysis and technical analysis
1. TECHNICAL ANALYSIS

2. FUNDAMENTAL ANALYSIS

12
 Here we have selected a Fundamental analysis as subject of our project so
we would do it in detail with practical analysis of two companies. And we would get
only some flavor of technical analysis and then we would understand about
fundamental analysis.

13
  What Is Technical Analysis?
“Technical analysis is a method of evaluating securities by analyzing the statistics
generated by market activity, such as past prices and volume. Technical analysts do not
attempt to measure a security's intrinsic value, but instead use charts and other tools to
identify patterns that can suggest future activity.”

Just as there are many investment styles on the fundamental side, there are also many
different types of technical traders. Some rely on chart patterns; others use technical
indicators and oscillators, and most use some combination of the two. In any case,
technical analysts' exclusive use of historical price and volume data is what separates
them from their fundamental counterparts. Unlike fundamental analysts, technical
analysts don't care whether a stock is undervalued - the only thing that matters is a
security's past trading data and what information this data can provide about where the
security might move in the future.
The field of technical analysis is based on three assumptions:
1. The Market discounts everything.
2. Price moves in trends.
3. History tends to repeat itself.

The Market Discounts Everything

A major criticism of technical analysis is that it only considers price
movement, ignoring the fundamental factors of the company. However, technical analysis
assumes that, at any given time, a stock's price reflects everything that has or could affect
the company - including fundamental factors. Technical analysts believe that the
company's fundamentals, along with broader economic factors and market psychology,
are all priced into the stock, removing the need to actually consider these factors

14
separately. This only leaves the analysis of price movement, which technical theory views
as a product of the supply and demand for a particular stock in the market.

Price Moves in Trends

In technical analysis, price movements are believed to follow trends. This means that
after a trend has been established, the future price movement is more likely to be in the
same direction as the trend than to be against it. Most technical trading strategies are
based on this assumption.

History Tends To Repeat Itself

Another important idea in technical analysis is that history tends to repeat itself, mainly
in terms of price movement. The repetitive nature of price movements is attributed to
market psychology; in other words, market participants tend to provide a consistent
reaction to similar market stimuli over time. Technical analysis uses chart patterns to
analyze market movements and understand trends. Although many of these charts have
been used for more than 100 years, they are still believed to be relevant because they
illustrate patterns in price movements that often repeat themselves.

 Other Usage

Technical analysis can be used on any security with historical trading data. This includes
stocks, futures and commodities, fixed-income securities, forex, etc. In this tutorial, we'll
usually analyze stocks in our examples, but keep in mind that these concepts can be
applied to any type of security. In fact, technical analysis is more frequently associated
with commodities and forex, where the participants are predominantly traders.
Now that you understand the philosophy behind technical analysis, we'll
get into explaining how it really works. One of the best ways to understand what
technical analysis is (and is not) is to compare it to fundamental analysis. We'll do this in
the next section.

15
  Strengths of Technical Analysis

• Focus on Price
If the objective is to predict the future price, then it makes sense to focus on price
movements. Price movements usually precede fundamental developments. By focusing
on price action, technicians are automatically focusing on the future. The market is
thought of as a leading indicator and generally leads the economy by 6 to 9 months. To
keep pace with the market, it makes sense to look directly at the price movements. More
often than not, change is a subtle beast. Even though the market is prone to sudden knee-
jerk reactions, hints usually develop before significant moves. A technician will refer to
periods of accumulation as evidence of an impending advance and periods of distribution
as evidence of an impending decline.

• Supply, Demand, and Price Action

Many technicians use the open, high, low and close when analyzing the price action of a
security. There is information to be gleaned from each bit of information. Separately,
these will not be able to tell much. However, taken together, the open, high, low and close
reflect forces of supply and demand.

The annotated example above shows a stock that opened with a gap up. Before the open,
the number of buy orders exceeded the number of sell orders and the price was raised to
attract more sellers. Demand was brisk from the start. The intraday high reflects the
strength of demand (buyers). The intraday low reflects the availability of supply (sellers).
The close represents the final price agreed upon by the buyers and the sellers. In this case,
the close is well below the high and much closer to the low. This tells us that even though
demand (buyers) was strong during the day, supply (sellers) ultimately prevailed and
forced the price back down. Even after this selling pressure, the close remained above the
open. By looking at price action over an extended period of time, we can see the battle
between supply and demand unfold. In its most basic form, higher prices reflect increased
demand and lower prices reflect increased supply.

16
 • Support/Resistance
Simple chart analysis can help identify support and resistance levels. These are usually
marked by periods of congestion (trading range) where the prices move within a confined
range for an extended period, telling us that the forces of supply and demand are
deadlocked. When prices move out of the trading range, it signals that either supply or
demand has started to get the upper hand. If prices move above the upper band of the
trading range, then demand is winning. If prices move below the lower band, then supply
is winning.

• Pictorial Price History

Even if you are a tried and true fundamental analyst, a price chart can offer plenty of
valuable information. The price chart is an easy to read historical account of a security's
price movement over a period of time. Charts are much easier to read than a table of
numbers. On most stock charts, volume bars are displayed at the bottom. With this
historical picture, it is easy to identify the following:

• Reactions prior to and after important events.

• Past and present volatility.
• Historical volume or trading levels.
• Relative strength of a stock versus the overall market.

• Assist with Entry Point

Technical analysis can help with timing a proper entry point. Some analysts use
fundamental analysis to decide what to buy and technical analysis to decide when to buy.
It is no secret that timing can play an important role in performance. Technical analysis
can help spot demand (support) and supply (resistance) levels as well as breakouts.
Simply waiting for a breakout above resistance or buying near support levels can improve
returns.

17
  Weaknesses of Technical Analysis

• Analyst Bias
Just as with fundamental analysis, technical analysis is subjective and our personal biases
can be reflected in the analysis. It is important to be aware of these biases when analyzing
a chart. If the analyst is a perpetual bull, then a bullish bias will overshadow the analysis.
On the other hand, if the analyst is a disgruntled eternal bear, then the analysis will
probably have a bearish tilt.

• Open to Interpretation
Furthering the bias argument is the fact that technical analysis is open to interpretation.
Even though there are standards, many times two technicians will look at the same chart
and paint two different scenarios or see different patterns. Both will be able to come up
with logical support and resistance levels as well as key breaks to justify their position.
While this can be frustrating, it should be pointed out that technical analysis is more like
an art than a science, somewhat like economics. Is the cup half-empty or half-full? It is in
the eye of the beholder.

• Too Late
Technical analysis has been criticized for being too late. By the time the trend is
identified, a substantial portion of the move has already taken place. After such a large
move, the reward to risk ratio is not great. Lateness is a particular criticism of Dow
theory.

• Always Another Level

Even after a new trend has been identified, there is always another "important" level
close at hand. Technicians have been accused of sitting on the fence and never taking an
unqualified stance. Even if they are bullish, there is always some indicator or some level
that will qualify their opinion.

18
 • Trader's Remorse
Not all technical signals and patterns work. When you begin to study technical analysis,
you will come across an array of patterns and indicators with rules to match. For instance:
A sell signal is given when the neckline of a head and shoulders pattern is broken. Even
though this is a rule, it is not steadfast and can be subject to other factors such as volume
and momentum. In that same vein, what works for one particular stock may not work for
another. A 50-day moving average may work great to identify support and resistance for
IBM, but a 70-day moving average may work better for Yahoo.

19
20
  Meaning :-

Fundamental analysis is the examination of the underlying forces that affect the well
being of the economy, industry groups, and companies. As with most analysis, the goal is
to derive a forecast and profit from future price movements.

o At the company level, fundamental analysis may involve examination of financial

data, management, business concept and competition.

o At the industry level, there might be an examination of supply and demand forces for
the products offered.

o For the national economy, fundamental analysis might focus on economic data to
assess the present and future growth of the economy.

To forecast future stock prices, fundamental analysis combines economic, industry,

and company analysis to derive a stock's current fair value and forecast future value. If
fair value is not equal to the current stock price, fundamental analysts believe that the
stock is either over or under valued and the market price will ultimately gravitate towards
fair value. Fundamentalists do not heed the advice of the random walkers and believe that
markets are weak-form efficient. By believing that prices do not accurately reflect all
available information, fundamental analysts look to capitalize on perceived price
discrepancies.

 Overview:-

“Fundamental analysis is the study of economic, industry, and company conditions

in an effort to determine the value of a company's stock. Fundamental analysis typically
focuses on key statistics in a company's financial statements to determine if the stock
price is correctly valued.”

The main principle of fundamental analysis is to find profitable companies to

invest in by comparing revenues, sales, management, etc. Fundamentals include earnings
report, dividends, sales, inventories, profit margins, P/E ratio, market share , etc.Those
looking to invest in a company will be the most likely to use fundamental analysis. This

21
is because the research is used to not just look at the value of the company, but to look at
the company itself. This includes the results of its finances and its potential to grow. The
fundamentals can give a better picture the entire company, not just a snapshot. This
means that analysis is used to look at the long term of a company not just the short term.
The basic idea is if you put a rupee into the business (in the form of buying the
stock) how much of a return can you expect. How much yield you will likely see and / or
how much growth you will experience based on the operation, markets, competitors and
costs of the business. Obviously, not all aspects of these fundamentals can be quantified.
Fundamentals are associated with the economic health of a company, measured in terms
of revenues, earnings, assets, liabilities, Return on Equity (ROE), Return on Assets
(ROA), Return on Investments (ROI), growth prospects and cash flows, etc. The
fundamentals tell you about a company. You can say a company is having robust
fundamentals if it is growing at a nice pace, generating a profit, has limited debts and
abundant cash.

The analysis of a company's fundamentals involves getting deep into its

financials, rather than day-to-day movement in its share price. Equity researchers
normally do fundamental analysis in order to calculate the intrinsic value of a company's
stock. If a company's stock is trading above the intrinsic value or fair value, then the
stock is overvalued. If a company's stock is trading below the intrinsic value, then the
stock is undervalued. However, if you watch the stock markets very closely, the share
price of most companies never matches the fair value. Often, day traders and investors
who would prefer short term investment options invest in those stocks, regardless of the
companies' long term growth prospects. However, long term investors generally prefer to
invest in companies with robust fundamentals and ignore near-term share price
movements.

22
  Objectives:-

There are several possible objectives:

• Analysis of fundamental to acquire a depth knowledge of the Steel Sector which I am

studying.
• To find out how the judgment is taken by the analyst on the basis of fundamental
analysis of the company.
• To establish link between expected share price with the projected company’s
financial performance (2008-2009)
• To study the demand of Steel sector particularly land-building, Commercial purposes
and Real Estate.
• To calculate a company's credit risk
• To make projection on its business performance and in the bad condition to improve
the performance of company.
• To evaluate its management and make internal business decisions,
• To make the company's stock valuation and predict its probable price evolution.
• Investors may use fundamental analysis to determine future growth rates for buying
high priced growth stocks

23
 Approaches of Fundamental Analysis:

Investors can use either a top-down or bottom-up approach:

• The top-down investor starts his analysis with global economics, including both
international and national economic indicators, such as GDP growth rates,
inflation, interest rates, exchange rates, productivity, and energy prices. He
narrows his search down to regional/industry analysis of total sales, price levels,
the effects of competing products, foreign competition, and entry or exit from the
industry. Only then does he narrow his search to the best business in that area.
• The bottom-up investor starts with specific businesses, regardless of their
industry/region.

24
  Strengths of Fundamental Analysis
• Long-term Trends

Fundamental analysis is good for long-term investments based on long-term trends, very
long-term. The ability to identify and predict long-term economic, demographic,
technological or consumer trends can benefit patient investors who pick the right industry
groups or companies.

• Value Spotting

Sound fundamental analysis will help identify companies that represent a good value.
Some of the most legendary investors think long-term and value. Graham and Dodd,
Warren Buffett and John Neff are seen as the champions of value investing. Fundamental
analysis can help uncover companies with valuable assets, a strong balance sheet, stable
earnings, and staying power.

• Business Acumen

One of the most obvious, but less tangible, rewards of fundamental analysis is the
development of a thorough understanding of the business. After such painstaking research
and analysis, an investor will be familiar with the key revenue and profit drivers behind a
company. Earnings and earnings expectations can be potent drivers of equity prices. Even
some technicians will agree to that. A good understanding can help investors avoid
companies that are prone to shortfalls and identify those that continue to deliver. In
addition to understanding the business, fundamental analysis allows investors to develop
an understanding of the key value drivers and companies within an industry. A stock's
price is heavily influenced by its industry group. By studying these groups, investors can
better position themselves to identify opportunities that are high-risk (tech), low-risk
(utilities), growth oriented (computer), value driven (oil), non-cyclical (consumer
staples), cyclical (transportation) or income-oriented (high yield).

25
 • Knowing Who's Who

Stocks move as a group. By understanding a company's business, investors can better

position themselves to categorize stocks within their relevant industry group. Business
can change rapidly and with it the revenue mix of a company. This happened to many of
the pure Internet retailers, which were not really Internet companies, but plain retailers.
Knowing a company's business and being able to place it in a group can make a huge
difference in relative valuations.

 Weaknesses of Fundamental Analysis

• Time Constraints

Fundamental analysis may offer excellent insights, but it can be extraordinarily time-
consuming. Time-consuming models often produce valuations that are contradictory to
the current price prevailing on Wall Street. When this happens, the analyst basically
claims that the whole street has got it wrong. This is not to say that there are not
misunderstood companies out there, but it is quite brash to imply that the market price,
and hence Wall Street, is wrong.

• Industry/Company Specific

Valuation techniques vary depending on the industry group and specifics of each
company. For this reason, a different technique and model is required for different
industries and different companies. This can get quite time-consuming, which can limit
the amount of research that can be performed. A subscription-based model may work
great for an Internet Service Provider (ISP), but is not likely to be the best model to value
an oil company.

• Subjectivity

Fair value is based on assumptions. Any changes to growth or multiplier assumptions can
greatly alter the ultimate valuation. Fundamental analysts are generally aware of this and
use sensitivity analysis to present a base-case valuation, a best-case valuation and a

26
worst-case valuation. However, even on a worst-case valuation, most models are almost
always bullish, the only question is how much so. The chart below shows how stubbornly
bullish many fundamental analysts can be.

• Time Constraints

Fundamental analysis may offer excellent insights, but it can be extraordinarily time-
consuming. Time-consuming models often produce valuations that are contradictory to
the current price prevailing on Wall Street. When this happens, the analyst basically
claims that the whole street has got it wrong. This is not to say that there are not
misunderstood companies out there, but it is quite brash to imply that the market price,
and hence Wall Street, is wrong.

• Industry/Company Specific

Valuation techniques vary depending on the industry group and specifics of each
company. For this reason, a different technique and model is required for different
industries and different companies. This can get quite time-consuming, which can limit
the amount of research that can be performed. A subscription-based model may work
great for an Internet Service Provider (ISP), but is not likely to be the best model to value
an oil company.

• Subjectivity

Fair value is based on assumptions. Any changes to growth or multiplier assumptions can
greatly alter the ultimate valuation. Fundamental analysts are generally aware of this and
use sensitivity analysis to present a base-case valuation, a best-case valuation and a
worst-case valuation. However, even on a worst-case valuation, most models are almost
always bullish, the only question is how much so. The chart below shows how stubbornly
bullish many fundamental analysts can be.

27
  Steps to fundamental Analysis:

The most common way that fundamental analysis is done in is in three steps:

1. Economic Analysis:-
The first step to this type of analysis includes looking at the macroeconomic
situation. This includes GDP, growth rates, inflation, interest rates, exchange rates,
productivity and energy prices.

2. Industry Analysis: -
The next step taken in analysis in this category is looking at the industry as a
whole. This includes total sales, price levels, competition and their effects, foreign
competition as well as any entrances or exits from the industry.

3. Company Analysis:-
Last in this process of studying the fundamentals includes looking at the company
individually. This includes looking at unit sales, prices, new products, earnings and any
chance of debt or equity occurring.

28
 Fundamental vs. Technical Analysis

Technical analysis and fundamental analysis are the two main schools of thought
in the financial markets.
As we've mentioned, technical analysis looks at the price movement of a security
and uses this data to predict its future price movements. Fundamental analysis, on the
other hand, looks at economic factors, known as fundamentals. Let's get into the details
of how these two approaches differ, the criticisms against technical analysis and how
technical and fundamental analysis can be used together to analyze securities.
♦ The Differences

• Charts vs. Financial Statements

At the most basic level, a technical analyst approaches a security from the
charts, while a fundamental analyst starts with the financial statements.

• Time Horizon

Fundamental analysis takes a relatively long-term approach to analyzing the

market compared to technical analysis. While technical analysis can be used on a
timeframe of weeks, days or even minutes, fundamental analysis often looks at
data over a number of years.

• Trading Versus Investing

Not only is technical analysis more short term in nature that fundamental
analysis, but the goals of a purchase (or sale) of a stock are usually different for
each approach. In general, technical analysis is used for a trade, whereas
fundamental analysis is used to make an investment. Investors buy assets they
believe can increase in value, while traders buy assets they believe they can sell
to somebody else at a greater price. The line between a trade and an investment
can be blurry, but it does characterize a difference between the two schools.

29
 The purpose of analyze economic condition of the country in fundamental
analysis to asses the general economic situation both within the country and inter
nationally.

The economy is like the tide and the various industry groups and individual
companies are like boats. When economy expands most industry groups and companies
benefits and grows. When the economy decline, most sectors and companies usually
suffer. The stock market does not operate in a vacuum it is an integral part of ht whole
economy of a country, more so in a free economy that of United States and to some
extent in mixed economy like ours.

To gain an insight into the complexities of stock market. One needs to develop a
sound economic understanding and be able to interpret the impact of important economic
indicators on stock markets.

The following are some important factors which should be taken into account while
doing fundamental analysis:
• Economic Growth
• Per capita income
• Industrial Production
• Inflation
• Interest Rates
• Foreign Exchange Reserves
• Budgetary Deficit
• Domestic Savings and Investment
• Tax Rates

30
 • Infrastructure
• Political Situation

Introduction of Indian Economy:

The economic history of India since Indus Valley Civilization to 1700 AD can be
categorized under this phase. During Indus Valley Civilization Indian economy was very
well developed. It had very good trade relations with other parts of world, which is
evident from the coins of various civilizations found at the site of Indus valley.

Before the advent of East India Company, each village in India was a self sufficient
entity. Each village was economically independent as all the economic needs were
fulfilled with in the village. Then came the phase of Colonization. The arrival of East
India Company in India ruined the Indian economy. There was a two-way depletion of
resources. British used to buy raw materials from India at cheaper rates and finished
goods were sold at higher than normal price in Indian markets. During this phase India's
share of world income declined from 22.3% in 1700 AD to 3.8% in 1952. After India got
independence from this colonial rule in 1947, the process of rebuilding the economy
started. For this various policies and schemes were formulated. First five year plan for the
development of Indian economy came into implementation in 1952. These Five Year
Plans, stared by Indian government, focused on the needs of Indian economy. If on one
hand agriculture received the immediate attention on the other side industrial sector was
developed at a fast pace to provide employment opportunities to the growing population
and to keep pace with the developments in the world. Since then Indian economy has
come a long way. The Gross Domestic Product (GDP) at factor cost, which was 2.3 % in
1951-52 reached 9.4% in financial year 2006-07.

31
1. GDP:
According to some experts, the share of the US in world GDP is expected to fall (from 21
per cent to 18 per cent) and that of India GDP to rise (from 6 per cent to 11 per cent in
2025), and hence the latter will emerge as the third pole in the global economy after the
US and China.

GDP of India at factor cost (in percent)

12
GDP Groth Rate

10
8
6
9 9.6
4 8.5 7.5
6.1 5.8
2 4.4 3.8
0
1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006-
2000 01 02 03 04 05 06 07
Year

GDP of India at factor cost (in percent)

India's greater integration with the world economy was reflected by the trade openness
indicator, the trade to GDP ratio, which increased from 22.5 per cent of GDP in 2000-01
to 34.8 per cent of GDP in 2006-07. The exports and imports grew by 22.6 per cent and
24.5 per cent respectively in 2006-07, recording the lowest gap between growth rates
after 2002-03. In the first nine months of the current year, exports reached US$111
billion, nearly 70 per cent of the year's export target. Imports grew by 25.9 per cent
during April-December 2007 due to non-POL imports growth of 31.9 per cent, implying
strong industrial demand by the manufacturing sector and for export activity.

32
2. Per capita income
The 9.4 per cent GDP growth during 2006-07, fastest since 1988-89 and second-fastest
since the country achieved independence, has translated into a per capita income of Rs
29,382 a year or Rs 2,448.5 a month.

Per capita income at current prices rose by 14.3 per cent in 2006-07 against Rs 25,716 in
the previous fiscal, according to figures released by Central Statistical Organization.

Notwithstanding the rise in per capita income, it still stands much below the international
standards. A person with an annual income of Rs 29,382 ranks 50,411,696th in the world.

On the other hand, India also houses the most number of billionaires in Asia-36, ahead of
economic powerhouse Japan, according to Forbes magazine. These billionaires together
control a wealth of Rs 8,60,000 crore.

3. Inflation

Inflation is no stranger to the Indian economy. In fact, till the early nineties Indians were
used to double-digit inflation and its attendant consequences. But, since the mid-nineties
controlling inflation has become a priority for policy framers.

The natural fallout of this has been that we, as a nation, have become virtually intolerant
to inflation. While inflation till the early nineties was primarily caused by domestic
factors (supply usually was unable to meet demand, resulting in the classical definition of
inflation of too much money chasing too few goods), today the situation has changed
significantly.

Inflation today is caused more by global rather than by domestic factors. Naturally, as the
Indian economy undergoes structural changes, the causes of domestic inflation too have
undergone tectonic changes.

Needless to emphasise, causes of today's inflation are complicated. However, it is indeed

intriguing that the policy response even to this day unfortunately has been fixated on the
traditional anti-inflation instruments of the pre-liberalisation era.

33
 India Annual Inflation Rates
The following table shows the rate of India annual inflation in recent years.
Year % of change
1999-00 4.7
2000-01 4.0
2001-02 3.8
2002-03 4.3
2003-04 3.8
2004-05 3.8
2005-06 4.4
2006-07 5.5
2007-08 5.4

% of change
Inflation

6
% of change

5
4
3
2
1
0
4. 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- I
n 00 01 02 03 04 05 06 07 08 ter
e Year st

Rates

A low interest rate of is a must for economic development. the finance minister assured
the industry that interest rates would be brought down in India the target interest appears
to be the inflation rate plus 3%.thus,if inflation settles at 5%, the interest rate should be
approximately 8%.

5. Foreign Exchange Reserves

34
The level of foreign exchange reserves has steadily increased from US$ 5.8 billion as at
end-March 1991 to US$ 113.0 billion by end-March 2004 and further to US$ 151.6
billion by end- March 2006. It stood at US$ 165.3 billion as at end-September 2006
(Table). Although both US dollar and Euro are intervention currencies, the foreign
exchange reserves are denominated and expressed in US dollar only.

6. Budgetary Deficit
A budget deficit arises out of an imbalance between the receipts and payments of the
Government. Huge budget deficits have a variety of harmful consequences. Another
adverse consequence of a huge budget deficit is the build-up of the ‘national debt’.
The total revenue receipts of the Central Government is estimated to be Rs. 486,422 crore
and the revenue expenditure at Rs. 557,900 crore. The revenue deficit is estimated at Rs.
71,478 crore, which is 1.5 per cent of GDP. The fiscal deficit is estimated at Rs. 150,948
crore, which is 3.3 per cent of GDP in 2007-08.

7. Industrial production

35
With 7.3 per the manufacturing sector recorded a lower growth of 9.8 per cent during
April-November 2007 as compared with 11.8 per cent during April-November2006.
Mining sector recorded a growth of 4.9 per cent as compared with 4.2per cent, while the
electricity sector moderated to 7.0 per cent as compared cent during April-November
2006.
The moderation in manufacturing sector growth was due to decelerated/negative growth
of eleven out of the seventeen manufacturing industry groups for 49.3 per cent weight in
the IIP (Table 7). These, among others, included 'machinery and equipment', 'basic metal
and alloy industries', 'rubber, plastic, petroleum and coal products', 'cotton textiles', 'non-
metallic mineral products', and 'transport equipment and parts'. 'Metal products and parts'
group recorded a decline due to the performance of tin metal containers, welded link
chains and razor blades. The 'leather and leather and fur products' group, however, made
a turnaround to register positive growth during the period. In terms of use-based
classification, the capital and intermediate goods sectors recorded double-digit growth
during April-November 2007.

8. Infrastructure

36
Different constituents of infrastructure have shown improvement in the current financial
year. In the power sector, power generation and plant load factor are on course to achieve
their annual targets. In the transport sector, the total earnings of the railways have shown
an increase close to 11% during April-September 2007, while passenger traffic handled at
domestic air terminals grew by about 28% during April-August 2007. An ambitious
National Highway Development Programme (NHDP), involving a total investment of
Rs.220,000 crore up to 2012, has been established. In telecommunications, telephone
connections have increased by 65% while cell phone connections have grown by 53%
during April-August 2007. India Post launched its first aircraft, with a 15 tonne load
capacity, in August 2007. Needless to say, India must make enormous investments in its
social and economic infrastructure in the near future. The Planning Commission has
estimated that the total investment in infrastructure in the 11th Five Year Plan must
increase from 4.5% to around 8% of the GDP. Under the governing rules of fiscal
management in the FRBM regime, budgetary deficits are being strictly monitored,
restricting the scope for unlimited fiscal expansion. Hence, the solution to the challenge
of infrastructure is partly located in public-private partnerships, which not only bridge the
gap in resources but also bring in private sector expertise and efficiency in the operation
and maintenance of assets. During a decade of experience with PPPs in India, The
Government of India has taken several initiatives like viability gap funding, Public
Private Partnership Appraisal Committee (PPPAC) and India Infrastructure Finance
Company Ltd. (IIFCL) to promote PPPs.

37
The purpose of industry analysis is to review prevailing conditions within specific
industry and its segments. The company's industry obviously influences the outlook for
the company. Even the best stocks can post mediocre returns if they are in an industry
that is struggling.
“It is often said that a weak stock in a strong industry is preferable to a strong stock in a
weak industry.”
To assess the industry group potential, an investor would want to consider the overall
growth rate, market size, and its importance to economy. While the individual company is
still important, its industry group is likely to exert as much as, or more, influence on the
stock price. When stock move the usually move as groups; there are very few lone guns
out there. An understanding of the industry sector involved, including the maturity of the
sector and any cyclical effects that the overall economies have on it, is also necessary.
The followings are some important factors which should be considered in
Fundamental Analysis
• Growth: A growing industry gives room for profitability.
• Profitability: Average profitability of the industry should be attractive.
• Demand-Supply: the wider demand supply gap, the better is the industry’s
fortune in the future
• Entry barrier
• Competition and Market share:
• Technology trends
• Government Policy
• Capacity Utilization
• Bargaining power of buyers

BRIEF HISTORY

38
The history of steel-making in India can be traced back to 400 BC when the Greek
emperors used to recruit Indian archers for their army who used arrows tipped with steel.
Many more evidences are there of Indians’ perfect knowledge of steel-making long
before the advent of Christ. Archaeological finds in Mesopotamia and Egypt testify to the
fact that use of iron and steel was known to mankind for more than six thousand years
and that some of the best products were made in India. Among the widely-known relics is
the Iron Pillar near Qutab Minar in Delhi. The pillar, built between 350 and 380 AD, did
not rust so far -----an engineering marvel that baffles the scientists even today. Yet
another engineering feat is the famous Sun Temple at Konark in Orissa, built around 1200
AD, where steel structurals were used for the first time in the world.

These were the halcyon days when India flourished in all directions and when its
prosperity was a matter of envy for the foreigners. But as ill luck would have it, India’s
prosperity gave way to poverty after the advent of the foreign rule. India’s indigenous
industry languished because of a deliberate policy of the colonial rulers to make the
country only a supplier of raw materials.

Steel Role plays a vital role in the development of any modern economy. The per capita
consumption of steel is generally accepted as a yardstick to measure the level of socio-
economic development and living standards of the people. As such, no developing
country can afford to ignore the steel industry.

BEGINNINGS
The first notable attempt to revive steel industry in India was made in 1874 when the
Bengal Iron Works (BIW) came into being at Kulti, near Asansol in West Bengal.
However, forty-four years before that, in 1830 to be precise, a foreigner, named Joshua
Marshall Heath, had set up a small plant at Porto Novo on Madras Coast. Heath produced
in his plant pig iron at the rate of forty tonnes a week. His method of iron-making needed
approximately four tonnes of charcoal to produce one tonne of low quality pig iron which
proved to be too expensive for Heath to carry on in the face of stiff competition from the
British steel industry. The BIW made considerable improvement in the process of iron
and steel making. It used coke as the fuel instead of charcoal. But the plant fell sick as the
source of funds dried up. It was taken over by the Bengal Government and was

39
rechristened as Barakar Iron Works. In 1889 the Bengal Iron and Steel Company acquired
the plant and by the turn of the century the Kulti plant became a success story. It
produced 40,000 tonnes of pig iron in 1900 and continued to produce the metal until it
was taken over by Indian Iron and Steel Company (IISCO) in 1936.

For modern India’s iron and steel industry August 27, 1907 was a red-letter day when the
Tata Iron and Steel Company (TISCO) was formed as a Swadeshi venture to produce
120,000 tonnes of pig iron. The TISCO plant at Sakchi (renamed Jamshedpur) in Bihar,
started pig iron production in December 1908 and rolled out its first steel the following
year. TISCO had expanded its production capacity to one million tonnes ingot by the time
the country achieved freedom. The Tatas, as Gandhiji said, represented the "spirit of
adventure" and Jamsetji Tata, in the words of Jawaharlal Nehru," laid the foundation of
heavy industries in India". The British rulers disfavoured this and other attempts to start
indigenous industry. It was chiefly with the help of American experts that the Tatas
started their industry. Its childhood was precarious but the war of 1914-18 gave it a fillip.
Again it languished and was in danger of passing into the hands of British debenture
holders. But nationalist pressure saved it. In 1918, soon after the war, Indian Iron and
Steel Company (IISCO) was formed. The then Mysore government also decided to start
an iron works at Bhadravati. While IISCO started producing pig iron at Burnpur in 1922,
the Mysore Iron and Steel Works took about 18 years to start its plant. Meanwhile, the
Bengal Iron Works went into liquidation and merged with IISCO. The Steel Corporation
of Bengal (SCOB) formed in 1937, started making steel in its Asansol plant. Later in
1953, SCOB merged with IISCO.

Prime Minister Nehru firmly believed that "no country can be jpolitically and
economically independent unless it is highly industrialised and has developed its
resources to the utmost". Nehru’s ideas about India’s development were broadly
incorporated in free India’s first Industrial Policy Resolution adopted by the Contituent
Assembly in 1948. The resolution officially accepted the principle of mixed economy.
Industries were divided into four categories. In the first category were strategic industries
which were made the monopoly of the Government. In the second category were six
industries which included, among others, coal, iron and steel.

40
It was decided that new units would be started exclusively by the government in the
public sector without disturbing the existing ones in the private sector. Eighteen
industries, including heavy castings and forings of iron and steel, ferro alloys and tool
steel were covered by the third category and the rest of the industries by the fourth. In
sum, the government committed itself to the development of basic steel industry while
the private sector was to benefit through the establishment of downstream units which
would use pig iron, billets, blooms and flat products to be made by the public sector steel
plants.

In keeping with the spirit of the resolution the Government decided to start a chain of
steel plants all over the country in the public sector. The first such plant was set up at
Rourkela in Orissa. The second came up at Bhilai in Madhya Pradesh. It was followed by
a third at Durgapur in West Bengal. Each of these three plants had an initial production
capacity of one million tonne ingot. Durgapur was followed by a steel plant at Bokaro in
Bihar. The onward march of Indian steel did not stop at Bokaro. The fifth public sector
steel plant was set up at Visakhapatnam in andhra Pradesh. As a matter of fact, the
country was dotted with steel and steel-related plants in public and private sectors, like
Alloy Steel Plant, Salem Steel Plant, Kalinga Iron Works, Malavika Steel Ltd., Jindal
Vijaynagar Steel Ltd., to name only a few. About the same time TISCO launched its two-
million-tonne expansion programme.

The Government’s Industrial Policy had undergone changes ____ once in 1956 and then
in 1991. The resolution modified in 1956 brought changes in the category pattern and
listed more industries for the public sector than did the earlier one, though it was not
harsher towards the private enterprise. In the new industrial policy announced in 1991
iron and steel industry, among others, was included in the list of industries reserved for
the public sector and exempted from the provision of compulsory licensing. With effect
from May 24, 1992 iron and steel industry was included in the list of ‘high priority’
industry for automatic approval for foreign equity upto 51% (now 74%). Export-import
regime for iron and steel has also undergone major liberalisation. The freight equalisation
scheme was withdrawn removing freight disadvantage to States located near steel plants.

41
The new policy has already borne fruit. The finished steel pdroduction in India has gone
up from mere 1.1 million tonnes in 1951 to 23.37 million tonnes in 1997-98 despite
overall economic slow-down in the country.

It has been estimated that the demand for finished steel in 2001-02 would touch 38.68
million tonnes and the projected availability of 38.01 tonnes is almost adequate to meet
the domestic demand along with export of six million tonnes. Similarly, by 2006-07, the
final year of the tenth plan, the demand for finished steel would be around 48.80 million
tonnes, providing adequate surplus for meeting the projected export potential of nine
million tonnes.

However, there is hardly any scope for complacence over the fact that India continues to
be the 10th largest steel producer in the world. In 1997 India’s per capita steel
consumption was only 22 kg which was much below the world average of about 126 kgs.
Even if the domestic demand grows up from 34.5 million tonnes to 100 million tonnes in
2025 the industry is unlikely to catch up with the production in the developed countries.

The redeeming feature is the cost competitiveness of Indian steel in the global market.
According to World Steel Dynamics, the total cost of steel production in the USA is $510
per metric tonne while in Japan it is $550, in Germany $557, in Canada $493 and in India
it is $497. This is because of high material cost due to high excise and import duties.
Reduction of cost on these accounts will make Indian steel more competitive in the world
market. Indian steel can reasonably expect a good market in the neighbouring countries
now that the Asian economy is looking up.

In conclusion, it can be said with a certain measure of confidence that India’s iron and
steel industry which had a glorious past and has an uncertain present may now look
forward to a bright future.

42
 AN OVERVIEW OF STEEL SECTOR
 Global Scenario

" In 2005 World Crude Steel output at 1129.4 million metric tonne was 5.9% more than
the previous year. (Source: IISI)

" China remained the world's largest Crude Steel producer in 2005 also (349.4 million
metric tonne) followed by Japan (112.47 million metric tons) and USA (93.89 million
metric tons). India occupied the 8th position (38.08 million metric tons). (Source: IISI)

The International Iron & Steel Institute (IISI) in its forecast for 2006 has confirmed the
trend of recent years of an increase in steel use in-line with general economic growth and
with the fastest growth occurring in the countries with the highest GDP growth such as
India and China. Apparent world-wide Steel Demand is forecast to grow to between
1,040 and 1,053 million tonnes in 2006 from a total of 972 million tonnes in 2004. This is
a growth of 4-5% over the two year period. However, according to IISI the cost of raw
materials and energy would continue to represent a major challenge for the world steel
industry.

 Market Scenario
• After liberalization, there have been no shortages of iron and steel materials in the

country.
• Apparent consumption of finished (carbon) steel increased from 14.84 Million
Tonnes in 1991-92 to 43.471 million tonnes (Provissional) in 2006-07. During
April-June, 2007, apparent consumption of finished (carbon) steel was 10.103
million tonnes(Provisionally estimated)
• Steel industry that was facing a recession for some time has staged a turnaround
since the beginning of 2002.
• Efforts are being made to boost demand.
• China has been an important export destination for Indian steel.
• The steel industry is buoyant due to strong growth in demand particularly by the
demand for steel in China.

The boom in the steel sector is being driven by growth in its user industries --
construction and automobiles.

43
Giving a huge fillip to the infrastructure sector, the Indian government has announced
plans to spend at least US$17 billion to upgrade roads, airports and ports by 2010.
The heightened activity in sectors such as roads, ports and sea-bridges is attracting
international attention. It has drawn at least two dozen foreign giants in civil engineering,
construction and infrastructure consultancy services to the country. During the last six
months, around 20 civil engineering and construction companies have entered India or
have stepped up their activity, while some big names in the infrastructure consultancy
sector are ramping up their operations here.

These trends are expected to send annual consumption rocketing from current levels of
about 36 million tonnes per year. Steel producers also hope the steel industry will become
another sunshine industry, fuelled by a rapid rise in the demand for washing machines,
fridges, TV sets and other consumer items using steel as a major ingredient.
Similarly, the automobile sector has been abuzz with activity. The total number of
passenger vehicles manufactured during 2004-05 was 1,209,654 units, an increase of 22
per cent over the previous year.

 Production

44
• Steel industry was delicensed and decontrolled in 1991 & 1992 respectively.
• Today, India is the 7th largest crude steel producer of steel in the world.
• In 2007-08(Apri-June''07), production of Finished (Carbon) Steel was 12.088
million tonnes(Prov).
• Production of Pig Iron in 2007-08(April-June'07) was 1.165 Million Tonnes
(Prov).
• The share of Main Producers (i.e SAIL, RINL and TSL) and secondary producers
in the total production of Finished (Carbon) steel was 33% and 67% respectively
during the period 2007-08 (April-June, 2007).

45
 • Last 4 year's production of pig iron and finished (carbon) steel is given below:

(in million tonnes)

Category 2003- 2004- 2005- 2006-07 2007-08 (April-June'07)
04 05 06 (Provisional (Prov.estimated)
)
Pig Iron 3.764 3.228 4.695 4.960 1.165
Finished 36.957 40.055 44.544 49.391 12.088
Carbon Steel

(Source: Joint Plant Committee)

Contribution of Different Companies in Production

 Demand - Availability Projection

• Demand – Availability of iron and steel in the country is projected by Ministry of
Steel annually.

46
 • Gaps in Availability are met mostly through imports.
• Interface with consumers by way of a Steel Consumer Council exists, which is
conducted on regular basis.
• Interface helps in redressing availability problems, complaints related to quality.
 Pricing & Distribution
• Price regulation of iron & steel was abolished on 16.1.1992.
• Distribution controls on iron & steel removed except 5 priority sectors, viz.
Defence, Railways, Small Scale Industries Corporations, Exporters of
Engineering Goods and North Eastern Region.
• Allocation to priority sectors is made by Ministry of Steel.
• Government has no control over prices of iron & steel.
• Open market prices are generally on rise.
• Price increases of late have taken place mostly in long products than flat products.
 Imports of Iron & Steel
• Iron & Steel are freely importable as per the extant policy.

• Last four years import of Finished (Carbon) Steel is given below:-

Year Qty. (In Million Tonnes)

2003-2004 1.540

2004-2005 2.109
2005-2006 3.850

2006-07(Prov. estimated) 4.100

2007-08 (Apr-June, 2007) 0.800
(Prov. estimated)
(Source: JPC)
 Exports of Iron & Steel
• Iron & Steel are freely exportable.
• Advance Licensing Scheme allows duty free import of raw materials for
exports.

47
• Duty Entitlement Pass Book Scheme (DEPB) introduced to facilitate exports.
Under this scheme exporters on the basis of notified entitlement rates, are granted
due credits which would entitle them to import duty free goods. The DEPB
scheme was temporarily suspended from 27th March 2004 to 12 July, 2004 for
export of steel items. The Scheme has since been restarted. The DEPB rates have
also been substantially reduced.
• Exports of finished carbon steel and pig iron during the last four years and the
current year is as :

(Qty. in Million Tonnes)

Finished (Carbon) Steel Pig Iron
2002-2003 4.506 0.629
2003-2004 4.835 0.518
2004-2005 4.381 0.393
2005-2006 4.478 0.440
2006-2007(Prov.estimated) 4.750 0.350
2007-2008(April-June 07)
1.310 0.120
(Prov.estimated)
(Source : Joint Plant Committee)

 Government Policy on Steel Industry

a. Steel industry : Important Policy Measures

• In the new Industrial Policy announced in July, 1991 Iron and Steel industry,
among others, was removed from the list of industries reserved for the public
sector and also exempted from the provisions of compulsory licensing under the
Industries ( Development and Regulation) Act, 1951.

48
• With effect from 24.5.92, Iron and Steel industry has been included in the list of
`high priority' industries for automatic approval for foreign equity investment
upto 51%. This limit has been recently increased to 74%.
• Price and distribution of steel were deregulated from January, 1992. At the same
time, it was ensured that priority continued to be accorded for meeting the
requirements of small scale industries, exporters of engineering goods and North
Eastern Region of the country, besides strategic sectors such as Defence and
Railways
• The trade policy has been liberalised and import and export of iron and steel is
freely allowed. There are no quantitative restrictions on import of iron and steel
items, covered under Chapter No. 72 of the ITC(HS) Code. The only mechanism
regulating the imports is the tariff mechanism. Tariffs on various items of iron and
steel have drastically come down since 1991-92 levels and the government is
committed to bring them down to the international levels.
• Freight equalisation scheme was modified in January'92, removing freight
disadvantage to states located near steel plants in the country. At the same time, it
was ensured that far-flung areas and distant states were protected by stipulating
that the main producers charge either actual freight or freight element existing
prior to withdrawal of the scheme, whichever is less.
• Levy on account of Steel Development Fund was discontinued from April'94
providing greater flexibility to main producers to respond to market forces.
• Iron & Steel are freely importable as per the Extant Policy
• To check unbridled cheap imports of steel the Government has fixed floor prices
for seven items of finished steel viz. HR coils, HR sheets, CR coils, Tinplates,
CRNO and ASBR.
• Iron & Steel are freely exportable

b. Policy on Iron Ore Exports

• The existing Export & Import Policy (Exim Policy) permits direct exports of iron
ore from Goa and Redi sector to all destinations by the iron ore producers,
irrespective of the iron content. The Kudremukh Iron Ore Company Ltd.

49
 (KIOCL) is the canalising agency for its own products (iron ore concentrates and
iron ore pellets) since it is a 100% Export-Oriented Unit (EOU). Iron ore of Fe
content upto 64% is completely decanalised. Exports of ore with iron content
exceeding 64% from other sectors of the country are canalised through a
Government agency, namely MMTC. The major buyers of Indian Iron Ore are the
Japanese Steel Mills (JSMs).
• The earlier contract for supply of iron ore by MMTC/KIOCL to the Japanese
Steel Mills (JSMs) terminated on 31.3.96. The Cabinet in its meeting held on
8.12.95 approved the proposal of Ministry of Commerce for entering into another
five year contract with Japan for export of iron ore.
• Iron ore surplus to domestic requirement may continue to be exported; and
• The export of high grade ore (run of mine Fe content above 65%) would be within
the prescribed ceilings.
• Cabinet Ceilings on export of high grade are :

The cabinet in its meeting held on 21.7.98 approved the following ceilings
proposed by Ministry of Commerce w.e.f. 1.4.1998 and which would be valid for
a period of three years.

From 1.4.1998 ( in million tonne/annum )

Grade Quantity Range

Bailadila lumps Not exceeding 3.0
Bailadila fines Not exceeding 3.8
High grade lumps (Bellary-Hospet) Not exceeding 1.2
High grade fines (Bellary-Hospet) Not exceeding 2.0

c. Manganese Ore

50
 Export policy of manganese ore is decided keeping in view the need for
conserving high grade ores. Alongwith this, effort is also made to replace the
export of ores with export of value added items For the year 1999-2000 the
maximum ceilings of manganese ore allowed for export are as follows :

Ceiling for 1998-

ITEM
99 (in lakh tonnes)
Medium Grade Manganese Ore/blended ore
containing 38% to 46% manganese and more than 1.00
0.15% Phos.
Medium Grade Manganese ore/blended ore
containing 38% to 46% manganese and more than 0.50
0.10 % Phos.
Low grade manganese ore/blended ore containing
4.00
less than 38% manganese.
Manganese ore fines below 12mm in size
1.50
containing less than 44% manganese.

d. Chromite Ore

Keeping in view the limited reserve of Chromite ore in the country, only certain
grades of ore are allowed for export. Emphasis has been laid on export of
beneficiated chromite concnetrates. From the year 1997-98, a five year Export
policy has been decided upon by Government so us to enable the exporters to
establish their presence in the international market.

Steel in Budget 2008-09

Government’s increased emphasis on infrastructure coupled with the strong demand from
housing and automobile sectors will ensure that the steel consumption reaches a few
hundred million tonnes a few decades from now. Infact, if we are to bridge the gap
between the domestic per capita consumption of 39 kgs and global average of 150 kgs,
then demand will have to grow by atleast 10% to achieve the target by the year 2020.
Further, with the supply not in a position to be able to catch up with the demand atleast
until few years from now, we could see the continuation of the current robust steel cycle
in the medium term. Availability of iron ore, however, may come under threat if the
government continues to permit indiscriminate exports of the same.

51
Budget Measures
Steel melting scrap will be exempt from customs duty

Excise duty reduction in select segments of automobile manufacturing

Continuation of power sector reforms

Coal regulator to be appointed

Dividend tax paid by parent company allowed to be set off against the same paid by its
subsidiary
Budget Impact
Reduction in customs duty on scrap will help steel manufacturers that use the electric
arc furnace route for steel manufacturing lower their costs. On the other hand, it will be
a negative for manufacturers that use the blast furnace route.
If auto manufacturers pass on the reduced excise benefits in the form of lower prices, it
will help spur demand for automobiles, which in turn will drive steel demand
Increased investment in the power sector will also help boost demand for steel

The proposed coal regulator will help ease the process of allocating coal blocks, a key
raw material in the steel manufacturing process
Company Impact
Reduction in excise duties on automobiles will help companies that supply steel to
auto makers. Key beneficiary would be Tata Steel
Players that supply steel to the power equipment companies like SAIL and JSW Steel
will benefit from increased investments in the power sector
Better access to coal mines will be a positive for all the players that do not have their
own captive mines

DEVELOPMENT OF INDIAN STEEL SECTOR SINCE 1991

 Production of Iron & Steel

(a)Finished Carbon Steel Production

PRODUCTION OF FINISHED CARBON STEEL (In million tonnes)

Year Main Secondary Grand % of share of

52
 Producers Producers Total Secondary Producers
1991-92 7.96 6.37 14.33 14.5%
1992-93 8.41 6.79 15.20 44.7%
1993-94 8.77 6.43 15.20 42.3%
1994-95 9.57 8.25 17.82 46.3%
1995-96 10.59 10.81 21.40 50.6%
1996-97 10.54 12.18 22.72 53.6%
1997-98 10.44 12.93 23.37 55.32%
1998-99 9.86 13.24 23.82 57.32%
1999-2000 11.20 15.51 26.71 58.07%
2000-2001 12.51 17.19 29.7 57.88%
2001-2002 13.05 17.58 30.63 57.4 %
2002-03 14.39 19.28 33.67 57.27 %
2003-04 15.19 21.00 36.19 58.03 %
2004-05 15.61 24.44 40.05 61.02 %
2005-06 (Prov.) 16.236 26.400 42.636 61.92 %
2006-07 17.390 32.000 49.390 64.79 %
2007-08 (Apr-August 07) 6.901 15.600 20.501 76.09 %

53
(b) Pig Iron Production

PRODUCER - WISE PRODUCTION OF PIG IRON (In million tonnes)

Main Secondary Grand %age share of the
Year
producers producers total Secondary Producers
1991-92 1.49 0.10 1.59 6.3%
1992-93 1.68 0.17 1.85 9.2%
1993-94 1.98 0.27 2.25 12.0%
1994-95 2.01 0.78 2.79 28.0%
1995-96 1.74 1.06 2.80 37.9%
1996-97 1.73 1.57 3.30 47.5%
1997-98 1.70 1.68 3.39 49.5%
1998-99 1.37 1.60 2.97 53.87%
1999-2000 1.24 1.94 3.18 61.08%
2000-2001 0.96 2.15 3.11 69.13%
2001-2002 1.02 3.05 4.07 75.04 %
2002-2003 1.11 4.18 5.29 79.05 %
2003-04 0.97 4.25 5.22 81.48 %
2004-05 0.625 2.603 3.228 80.63 %
2005-06 (Prov) 1.006 2.850 3.856 73.91 %
2006-07 0.860 4.100 4.960 82.66%
2007-08 (Apr-August 07) 0.414 1.750 2.154 81.24 %

54
(c) DRI Production

PRODUCTION OF DRI (In million tonnes)

Year Production % increase
1991-92 1.31 -
1992-93 1.60 22.1%
1993-94 2.40 50 %
1994-95 3.39 41.3%
1995-96 4.34 28.02%
1996-97 5.05 16.4 %
1997-98 5.32 5.34%
1998-99 5.12 (-)3.8%
1999-2000 5.34 4.30%
2000-2001 5.44 1.90%
2001-2002 5.40 (-) 0.70 %
2002-2003 6.91 27.96 %
2003-04 8.08 16.93 %
2004-05 10.296 -
2005-06 (Apr-Dec) 12.50 21.4 %
2006-07 15.75 -
2007-08 (Apr-August
7.750
07)

55
GROWTH OF STEEL INDUSTY IN INDIA

♦ Demand Scenario Source: IISI

Steel Consumption per capita (Kg)

J apan 648.5
Germany 468.7
U.S. 382.1
France 280.2
China 268.6
U.K. 212.7
India 37.6

0 100 200 300 400 500 600 700

As demand is very less as compare to others in India so there is a huge opportunity for
the manufacturers of India to capture the more market share by increasing capacity.

56
SWOT ANALYSIS

Strengths
1. Availability of iron ore and coal
2. Low labour wage rates
3. Abundance of quality manpower
4. Mature production base
Weaknesses
1. Unscientific mining
2. Low productivity
3. Coking coal import dependence
4. Low R&D investments
5. High cost of debt
6. Inadequate infrastructure
Opportunities
1. Unexplored rural market
2. Growing domestic demand
3. Exports
4. Consolidation
Threats
1. China becoming net exporter
2. Protectionism in the West
3. Dumping by competitors

57
 Current Problems of Steel Industry
• Shortage of quality raw materials.
• Inadequate ‘enabling’ infrastructure.
• High cost of basic inputs like power and tariff.
• High cost of capital.
• High tariff/non-tariff barriers imposed by on Indian exports by Developed
Nations.

 Indian Railways : Comparatively High Tariffs

PPP * US Cents / thkm
9
7.9
8

6 5.5
5

4 3.7

3 2.6
2 2
2

0
Sweden Japan France Canada China India

 Power Costs : High in India

7PPP US Cents/ KiloWattHr
5.9
6

5
4.7
4.3
3.8 4
4

3
2.2
2

South Canada Korea Mexico USA India

Africa

58
  Tariff at Indian and Foreign Ports
500
444 450

400
325
300 Indexed at
Osaka = 100
200
187
165

100
100

0
Osaka Singapore Hongkong Tianjin Mumbai Chennai

Source: ESCAP and KMI report

 Inefficiency costs at Indian Ports

• Based on total employees,traffic, productivity/man , output per day , container
moves per hour, idle time at berth , india is incurring rs 4000 crores extra
compared to world average on exim trade

59
  Opportunities of Steel Industry:
 Low Per Capita Consumption
Per capita steel consumption in the country is a mere 29 kgs.

600 550
500 450
400
Kgs

300
200 140 150
100 29
0
World Japan USA China India

Source: JPC

 Raw Material Resources

• Iron Ore
• Coal
• Limestone
• Dolomite
• Refractory

60
 The purpose of company analysis to analyze the financial and non-financial
aspects of a company to determine whether to buy, sells, or holds onto the shares of a
particular company

After determining the economic and industry conditions, the company itself is
analyzed to determine its financial health. This is usually done by studying the company's
financial statements. From these statements a number of useful ratios can be calculated.
The ratios fall under five main categories: profitability, price, liquidity, leverage, and
efficiency. When performing ratio analysis on a company, the ratios should be compared
to other companies within the same or similar industry to get a feel for what is considered
"normal." These are quantitative factors of company analysis; there are also some
qualitative factors which should be considered also.

• Find out as much as possible about the company and their products.

• Do they have any “core competency” or “fundamental strength” that puts

them ahead of all the other competing firms?

• What advantage do they have over their competing firms?

• Do they have a strong market presence and market share? Or do they

constantly have to employ a large part of their profits and resources in
marketing and finding new customers and fighting for market share?

Following are some more important aspects about company

• Shareholding pattern
• Growth

61
• Technology
• Expansion Plan
• Profitability
• Capital History
• Marketing Capabilities
• Most important its financial statement

After you understand the company & what they do, how they relate to the
market and their customers, you will be in a much better position to decide whether
the price of the companies stock is going to go up or down.

So fundamental analysts use different tools and ratios to compare all sorts
of companies no matter what business they are in or what they do!

62
 SAIL's Background and History
The Precursor
SAIL traces its origin to the formative years of an emerging nation - India. After
independence the builders of modern India worked with a vision - to lay the infrastructure
for rapid industrialisaton of the country. The steel sector was to propel the economic
growth. Hindustan Steel Private Limited was set up on January 19, 1954. The President
of India held the shares of the company on behalf of the people of India.
Expanding Horizon (1959-1973)
Hindustan Steel (HSL) was initially designed to manage only one plant that was coming
up at Rourkela. For Bhilai and Durgapur Steel Plants, the preliminary work was done by
the Iron and Steel Ministry. From April 1957, the supervision and control of these two
steel plants were also transferred to Hindustan Steel. The registered office was originally
in New Delhi. It moved to Calcutta in July 1956, and ultimately to Ranchi in December
1959.
A new steel company, Bokaro Steel Limited, was incorporated in January 1964 to
construct and operate the steel plant at Bokaro. The 1 MT phases of Bhilai and Rourkela
Steel Plants were completed by the end of December 1961. The 1 MT phase of Durgapur
Steel Plant was completed in January 1962 after commissioning of the Wheel and Axle
plant. The crude steel production of HSL went up from .158 MT (1959-60) to 1.6 MT.
The second phase of Bhilai Steel Plant was completed in September 1967 after
commissioning of the Wire Rod Mill. The last unit of the 1.8 MT phase of Rourkela - the
Tandem Mill - was commissioned in February 1968, and the 1.6 MT stage of Durgapur

63
Steel Plant was completed in August 1969 after commissioning of the Furnace in SMS.
Thus, with the completion of the 2.5 MT stage at Bhilai, 1.8 MT at Rourkela and 1.6 MT
at Durgapur, the total crude steel production capacity of HSL was raised to 3.7 MT in
1968-69 and subsequently to 4MT in 1972-73.

Holding Company
The Ministry of Steel and Mines drafted a policy statement to evolve a new model for
managing industry. The policy statement was presented to the Parliament on December 2,
1972. On this basis the concept of creating a holding company to manage inputs and
outputs under one umbrella was mooted. This led to the formation of Steel Authority of
India Ltd. The company, incorporated on January 24, 1973 with an authorized capital of
Rs. 2000 crore, was made responsible for managing five integrated steel plants at Bhilai,
Bokaro, Durgapur, Rourkela and Burnpur, the Alloy Steel Plant and the Salem Steel
Plant. In 1978 SAIL was restructured as an operating company.
Since its inception, SAIL has been instrumental in laying a sound infrastructure for the
industrial development of the country. Besides, it has immensely contributed to the
development of technical and managerial expertise. It has triggered the secondary and
tertiary waves of economic growth by continuously providing the inputs for the
consuming industry.

Company Profile
Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It
is a fully integrated iron and steel maker, producing both basic and special steels for
domestic construction, engineering, power, railway, automotive and defence industries
and for sale in export markets.
Ranked amongst the top ten public sector companies in India in terms of turnover, SAIL
manufactures and sells a broad range of steel products, including hot and cold rolled
sheets and coils, galvanised sheets, electrical sheets, structurals, railway products, plates,
bars and rods, stainless steel and other alloy steels. SAIL produces iron and steel at five
integrated plants and three special steel plants, located principally in the eastern and
central regions of India and situated close to domestic sources of raw materials, including

64
the Company's iron ore, limestone and dolomite mines. The company has the distinction
of being India’s largest producer of iron ore and of having the country’s second largest
mines network. This gives SAIL a competitive edge in terms of captive availability of
iron ore, limestone, and dolomite which are inputs for steel making.
SAIL's wide range of long and flat steel products are much in demand in the domestic as
well as the international market. This vital responsibility is carried out by SAIL's own
Central Marketing Organisation (CMO) and the International Trade Division. CMO
encompasses a wide network of 34 branch offices and 54 stockyards located in major
cities and towns throughout India.
With technical and managerial expertise and know-how in steel making gained over four
decades, SAIL's Consultancy Division (SAILCON) at New Delhi offers services and
consultancy to clients world-wide.
SAIL has a well-equipped Research and Development Centre for Iron and Steel (RDCIS)
at Ranchi which helps to produce quality steel and develop new technologies for the steel
industry. Besides, SAIL has its own in-house Centre for Engineering and Technology
(CET), Management Training Institute (MTI) and Safety Organisation at Ranchi. Our
captive mines are under the control of the Raw Materials Division in Kolkata. The
Environment Management Division and Growth Division of SAIL operate from their
headquarters in Kolkata. Almost all our plants and major units are ISO Certified.
Incorporation Year
Ispat Bhawan, Lodi Road, New Delhi - 110003, New
Registered Office
Delhi
Telephone 91-011-24367481-86 (14 Lines)
Fax 91-011-24367015
Industry Steel - Large
House Govt of India
Chairman S K Roongta
Managing Director V Gujral
Company Secretary Devinder Kumar
S K Mittal & Co/Ray & Ray/Dass Maulik Mahenra K
Auditor
Ag
Face Value 10
Market Lot 1

65
Listing London, Mumbai, NSE
MCS Ltd
Registrar Sri Venkatesh Bhawan, W-40 Okhala Indus Ar, Phase
- II, New Delhi 110048
♦ Production Facilities:
• 5 Integrated Steel Plants
• 3 Special Steel Plants
• 1 Subsidiary - Ferro Alloy Plant (under merger)

♦ Marketing Network:
• 34 Branch Sales office
• 14 Customer Contact Office (CCO)
• 42 Warehouses (Departmental 24 & Consignment Agencies 18)

♦ Captive Mines:
• 9 Iron Ore Mines
• 5 limestone mines
• 2 Dolomite Mines
• 3 Collieries

 Major Units
 Integrated Steel Plants

♦ Bhilai Steel Plant (BSP) in Chhattisgarh

♦ Durgapur Steel Plant (DSP) in West Bengal

♦ Rourkela Steel Plant (RSP) in Orissa

♦ Bokaro Steel Plant (BSL) in Jharkhand

♦ IISCO Steel Plant (ISP) in West Bengal

66
  Special Steel Plants

• Alloy Steels Plants (ASP) in West Bengal

• Salem Steel Plant (SSP) in Tamil Nadu

• Visvesvaraya Iron and Steel Plant (VISL) in Karnataka

 Subsidiary
Maharashtra Elektrosmelt Limited (MEL) in Maharashtra

 Joint Ventures
SAIL has promoted joint ventures in different areas ranging from power plants to e-
commerce.

♦ NTPC SAIL Power Company Pvt. Ltd

A 50:50 joint venture between Steel Authority of India Ltd. (SAIL) and National Thermal
Power Corporation Ltd. (NTPC Ltd.), it manages the captive power plants at Rourkela,
Durgapur and Bhilai with a combined capacity of 314 megawatts (MW)
♦ Bokaro Power Supply Company Pvt. Limited
This 50:50 joint venture between SAIL and the Damodar Valley Corporation formed in
January 2002 is managing the 302-MW power generation and 1880 tonnes per hour
steam generation facilities at Bokaro Steel Plant.
♦ Mjunction Service Limited
A joint venture between SAIL and Tata Steel on 50:50 basis, this company promotes e-
commerce activities in steel and related areas.

67
 ♦ SAIL-Bansal Service Center Ltd.
SAIL has formed a joint venture with BMW industries Ltd. on 40:60 basis to promote a
service centre at Bokaro with the objective of adding value to steel.
♦ Bhilai JP Cement Ltd
SAIL has also incorporated a joint venture company with M/s Jaiprakash Associates Ltd
to set up a 2.2 MT cement plant at Bhilai
SAIL has signed an MOU with Manganese Ore India Ltd (MOIL) to set up a joint
venture company to produce ferro-manganese and silico-manganese at Bhilai.
♦ Ownership and Management
The Government of India owns about 86% of SAIL's equity and retains voting control of
the Company. However, SAIL, by virtue of its ‘Navratna’ status, enjoys significant
operational and financial autonomy

SAIL Today
SAIL today is one of the largest industrial entities in India. Its strength has been the
diversified range of quality steel products catering to the domestic, as well as the export
markets and a large pool of technical and professional expertise.
Today, the accent in SAIL is to continously adapt to the competitive business
environment and excel as a business organisation, both within and outside India.

SAIL - Into the Future

 SAIL’s Growth Plan 2010
Much has happened ever since SAIL’s Corporate Plan was announced in 2004.
Investment plans for the three speciality steel plants have been firmed up. Company has
grown in size with the amalgamation of IISCO (now renamed as IISCO Steel Plant).
Production targets have been revised from 19 million tonnes (MT) of steel to about 24
MT. Estimated investment has increased from Rs 25,000 crore to around Rs 40,000 crore.
And the time period has been squeezed by two years, bringing the targeted year of
completion of major projects from 2012 to 2010.

68
 Saleable Steel Capacities (MT)
PLANT 2010
Bhilai Steel Plant 6.21
Durgapur Steel Plant 2.85
Rourkela Steel Plant 2.90
Bokaro Steel Plant 6.50
IISCO Steel Plant 2.37
Alloy Steels plant 0.43
Salem Steel Plant 0.36
Visvesvaraya Iron & Steel
0.22
Plant

Growth of SAIL
Maintaining thrust on production to meet the growing demand for steel in the domestic
market, Steel Authority of India (SAIL) achieved best-ever February performance by
producing 1.1 million tons of saleable steel, a growth of 7% over February `07, with
capacity utilization of the SAIL plants going up to 122%. The company also recorded
best-ever February production of hot metal at 1.24 million tons and 1.14 million tons of
crude steel, both showing 6% growth over the corresponding period last year (CPLY).

69
Consequently, during the period April `07-February `08 of the current financial year,
SAIL produced 11.8 million tonnes of saleable steel, an increase of over 4 lakh tonnes
over CPLY, with an average capacity utilisation of 117%.
Key techno-economic parameters also improved in February`08. Coke rate at 524 kg per
tonne of hot metal was 3% lower and energy consumption at 7.05 giga calories per ton of
crude steel reduced by 1% over CPLY. Production through the energy-efficient
continuous casting route crossed 7.5 million tonnes, 9% higher than February`07. With
thrust maintained on production of value-added and special steels, the SAIL plants
produced nearly 3.6 million tonnes of such items in February`08, an increase of 49% over
CPLY.
The captive mines of SAIL produced 2.2 million tons of iron ore in February`08 and met
100% requirement of the plants. Coal production from captive collieries was increased
during the year (April `07-February`08) by 50% over CPLY.

During February `08, SAIL`s Central Marketing Organisation achieved sales of 1.03
million tonnes, 3.7% higher than CPLY.
With SAIL entering its 50th year of production, February 08 was a memorable month for
the company. The month`s other highlights included payment of Rs 6,734.9 million to the
Government by SAIL as interim dividend for the financial year 2007-08, inauguration of
Bhilai Steel Plant`s Rs 112.62 billion expansion and modernisation programme by Union
Minister for Chemicals & Fertilisers and Steel Mr Ram Vilas Paswan, presentation of the
FICCI Annual Award 2006-07 to SAIL for outstanding achievement in the category of
Rural & Community Development Initiatives.

70
Share Holding Pattern
SAIL is a public sector undertaking of the Government of India which holds 85.82% of
equity. Other major shareholders are Domestic Financial institutions with 4.73% stake
and Foreign Institutional Investor with 5.08 % individuals with 3.16% stake and others
1.21%
Category of Share Holders % Holding
Govt. of India 85.82
Domestic Financial Institute 4.73
Foreign Institutional Investor 5.08
Individuals (Incl. Employees, NRIs, GDRs) 3.16
Others 1.21

Share Holding Pattern Govt. of India

Domestic Financial
5% 3%1% Institute
5%
Foreign Institutional
Investor

Individuals (Incl.
Employees, NRIs,
GDRs)
Others

86%

Major Products Manufactured/ Traded

(03,2007)
Product Name Sales (Rs.in Crores)
Steel-Main-Saleable 34,620.81
Alloy Steel-Saleable 2,387.37
Others 1,480.51
Pig Iron 618.34

71
Finished Prod.Internally Cons. 410.00
Pig Iron(Alloy) 69.88
Steel Ingots 5.64
Middling/Rejects 5.15

Balance Sheet
(Rs. In Crore)
Year Mar 07 Mar 06 Mar 05 Mar 04 Mar 03
Share Capital 4,130.40 4,130.40 4,130.40 4,130.40 4,130.40
Reserves & Surplus 13,182.75 8,471.01 6,176.25 907.27 -1,605.16
Total Shareholders Funds 17,313.15 12,601.41 10,306.65 5,037.67 2,525.24
Secured Loans 1,556.39 1,122.16 1,603.98 3,400.78 5,511.59
Unsecured Loans 2,624.13 3,175.46 4,165.81 5,289.28 7,416.35
Total Debt 4,180.52 4,297.62 5,769.79 8,690.06 12,927.94
Total Liabilities 21,493.67 16,899.03 16,076.44 13,727.73 15,453.18
Gross Block 29,912.71 29,360.46 28,043.48 27,683.63 27,534.61
Less: Accum. Depreciation 18,315.00 17,198.32 15,558.41 14,515.73 13,498.75
Net Block 11,597.71 12,162.14 12,485.07 13,167.90 14,035.86
Capital Work in Progress 1,236.04 757.94 366.48 382.20 361.25
Investments 513.79 292.00 606.71 543.17 543.17
Inventories 6,814.10 6,371.66 4,220.69 3,057.06 3,744.37
Sundry Debtors 2,314.75 1,881.73 1,908.45 1,549.96 1,660.09
Cash and Bank Balance 9,609.83 6,172.64 6,132.12 2,035.82 512.91
Loans and Advances 3,097.70 2,771.47 3,260.11 1,603.36 1,373.33
Current Liabilities 8,105.99 8,081.23 7,812.72 4,412.32 4,492.71
Provisions 5,713.41 5,645.14 5,385.40 4,577.92 2,821.40
Net Current Assets 8,016.98 3,471.13 2,323.25 -744.04 -23.41
Miscellaneous Expenses not
129.15 215.82 294.93 378.50 536.31
w/o
Total Assets 21,493.67 16,899.03 16,076.44 13,727.73 15,453.18
Contingent Liabilities 3,635.18 3,730.45 4,056.90 3,159.22 2,853.25

72
Profit & Loss Account (Rs. In Crore)
Year Mar 07 Mar 06 Mar 05 Mar 04 Mar 03
Sales Turnover 39,481.80 32,686.89 32,023.87 24,137.02 19,262.02
Other Income 1,708.15 1,151.99 1,072.69 976.05 795.89
Stock Adjustments 289.15 1,131.31 367.72 -485.84 -433.00
Total Income 41,479.10 34,970.19 33,464.28 24,627.23 19,624.91
Raw Materials 13,276.20 12,391.12 9,358.92 6,904.25 6,234.03
Excise Duty 5,393.82 4,605.48 3,455.12 2,881.66 2,370.56
Power & Fuel Cost 2,613.94 2,526.97 2,227.62 2,187.95 2,061.32
Other Manufacturing Expenses 3,662.77 3,268.56 2,607.77 2,164.42 1,965.95
Employee Cost 5,086.81 4,156.28 3,811.91 4,757.90 3,722.87
Selling and Administration Expenses 1,417.61 1,467.62 1,167.04 1,176.07 1,176.43
Miscellaneous Expenses 484.80 525.41 613.33 741.80 737.38
Less: Preoperative Expenditure
1,423.08 1,352.05 921.71 893.07 856.21
Capitalised
Profit before Interest, Depreciation &
10,966.23 7,380.80 11,144.28 4,706.25 2,212.58
Tax
Interest & Financial Charges 332.13 467.76 651.98 955.45 1,381.79
Profit before Depreciation & Tax 10,634.10 6,913.04 10,492.30 3,750.80 830.79
Depreciation 1,211.48 1,207.30 1,126.95 1,122.59 1,146.66
Profit Before Tax 9,422.62 5,705.74 9,365.35 2,628.21 -315.87
Tax 3,220.33 1,692.77 2,548.38 116.13 -11.56
Profit After Tax 6,202.29 4,012.97 6,816.97 2,512.08 -304.31
Growth of Company

Year 2007 2006 2005 2004 2003

Sales 39,481.80 32,686.89 32,023.87 24,137.02 19,262.02
Var % 20.78% 2.07% 32.67% 25.30% --
Profit After Tax 6,202.29 4,012.97 6,816.97 2,512.08 -304.31
Var % 54.55% -41.13% 171.37% 925.50% --

73
 Sales C hart

45,000.00 39,481.80
40,000.00
35,000.00 32,023.87 32,686.89
30,000.00
24,137.02
25,000.00 19,262.02
20,000.00
15,000.00
10,000.00
5,000.00
0.00
2003 2004 2005 2006 2007

Profit C hart

8000 6,816.97
7000 6,202.29
6000
5000 4,012.97
4000
2,512.08
3000
2000
1000
0
-1000 2003
-304.31 2004 2005 2006 2007

Current Price 190.40

52 Week High 292.50

52 Week Low 106.10

Face Value 10

74
 Year end Mar 07 Mar 06 Mar 05
EPS(Rs) 14.54 9.44 16.06
Book value(Rs) 41.92 30.51 24.95
NPM(%) 15.71 12.28 21.29
ROCE(%) 51.28 38.03 68.77
ROE(%) 41.47 35.04 88.85
Debt/equity 0.28 0.44 0.94
P/E 7.85 8.82 3.92

Here from the above information I found that the Sales, EPS, Book value, Net Profit
Margin are increased continuously in 2007 as compared to 2006 and 2005 but SAIL
should concentrate on PE Ratio because it has decreased in 2007. The debt-equity ratio is
decreased which is good sign and under controlled which is good sign. The investor of
this company should take hold position of this company for the long period for good
dividends and good market price in future.

TATA STEEL LIMITED

75
 Background
Tata Steel (earlier known as Tata Iron & Steel Company or Tisco) was established in
1907. It represents the country's single largest, integrated steel plant in the private sector.
The company has a wide product portfolio, which includes flat and long steel, tubes,
bearings, ferro-alloys and minerals as well as cargo handling services. While in terms of
size,Tata Steel ranks 34th in the world; it was ranked first (for the second time) among 23
world class steel companies by World Steel Dynamics in June 2005. With its plant
located in Jamshedpur (Jharkhand) and captive iron ore mines and collieries in the
vicinity,Tata Steel enjoys a distinct competitive advantage. The main plant at Jamshedpur
manufactures 5 MTPA of flat and long products, while its recently acquired Singapore-
based company, NatSteel Asia, manufactures 2 MTPA of steel across Singapore, China,
Philippines, Malaysia and Vietnam.Apart from the main steel division, Tata Steel's
operations are grouped under strategic profit centres like tubes, growth shop, bearings,
ferro alloys and minerals, rings, agrico and wires.

Incorporation Year 1907

Bombay House, 24 Homi Mody Street Fort, Mumbai
Registered Office
- 400001, Maharashtra
Telephone 91-22-66658282
Fax 91-22-66658113/66657725
Industry Steel - Large
House Tata
Chairman Ratan N Tata
Managing Director B Muthuraman
Company Secretary J C Bham
Auditor Deloitte Haskins & Sells
Face Value 10
Market Lot 1
Listing Kolkata, Luxembourg, Mumbai, NSE

76
 TSR Darashaw Ltd
Registrar 6-10 Haji Moosa, Patrawala Ind.Estate, DrEMoses
Rd Mahalaxm, Mumbai - 400 011

Production Highlights

• Major Products Manufactured/ Traded

(03,2007)
Product Name Sales (Rs.in Crores)
Steel-Saleable 14,511.03
Other Raw Mtls. 1,471.86
Tubes-Welded-Steel 999.45
Charge/Ferro Chrome 596.98
Power & Water-Sales 513.96
Steel & Scrap-Semi finished 486.29
Other Products 260.61
Services 230.41
Bearings 162.78
Ferro Manganese 129.76
By Products 111.85
Metallurgial Machinery 95.52
Agricultural Products 84.65
Ball Bearing Rings-Alloy Steel 75.59
Bearing Rings-Cast & Alloy St. 20.48
Scrap/Othr Mtls/Raw Mat.- Sale 6.16
Steel-Saleable-Finished/Conver 5.19

Business Results
The Company achieved the best ever sales turnover and profitability during the year
under review. A robust Indian economy, firm steel prices, higher volumes and several
improvement initiatives contributed to the record performance. Finished steel sales were
higher by 11.33% at 4.51 million tones over the previous year. Export turnover was lower
by about 5% due to lower volumes. Average price realization improved mainly due to
higher prices of hot rolled coils/sheets. Operating profit was higher by over Rs.1,000
crores at Rs. 6,973 cores (2005-06: Rs. 5,938 crores), an increase of 17% over the
previous year. Net interest charges were higher at Rs. 174 crores (2005-06: Rs.

77
125crores),due to additional borrowings for the Company’s domestic expansion programs
and funding Company’s contribution for financing the acquisition of Corus Group plc.
After providing for Rs. 819 crores for depreciation (2005-06: Rs. 775 crores) and Rs. 152
crores towards employee separation scheme (2005 06: Rs. 53 crores), the profi t before
tax rose by 20% to Rs. 6,262 crores (2005-06: Rs. 5,240 crores). Net Profit after taxes
was higher at Rs. 4,222 crores (2005-06: Rs. 3,506 crores), an increase of 20% compared
to the previous year. The record financial results would not have been possible without a
matching performance by the operating departments including the raw materials division.
The year witnessed the best ever crude steel production by the Company at 5.05 million
tonnes, an increase of 6.7% over the previous year. Jamshedpur Plant became the fi rst
plant in India to produce more than 5 million tonnes of crude steel in a year. The
upgraded “G” Blast Furnace produced over 2 million tonnes of hot metal, as against its
rated capacity of 1.8 million tonnes. Among the Finishing Mills, the output at the Cold
Rolling Mill and the Hot Strip Mill exceeded their rated capacities. The all-round
increase in production was backed by improvements in operating practices and
productivity resulting in a reduction in consumption of raw materials, energy,
refractoriness etc. The Company’s Collieries, for the first time, produced 1.9 million
tonnes of clean coal at a reduced level of ash content, which has contributed significantly
in substituting the more expensive imported low ash coal. A modern beneficiation plant
for iron ore fines has been set up to reduce the aluminum content in iron ore.

BALANCE SHEET (in crore)

Year Mar 07 Mar 06 Mar 05 Mar 04 Mar 03

Share Capital 580.67 553.67 553.67 369.18 369.18
Reserves & Surplus 13,368.42 9,201.63 6,506.25 4,146.68 2,816.84
Total Shareholders Funds 13,949.09 9,755.30 7,059.92 4,515.86 3,186.02
Secured Loans 3,758.92 2,191.74 2,468.18 3,010.16 3,667.63
Unsecured Loans 5,886.41 324.41 271.52 372.05 557.98
Total Debt 9,645.33 2,516.15 2,739.70 3,382.21 4,225.61
Total Liabilities 23,594.42 12,271.45 9,799.62 7,898.07 7,411.63
Gross Block 16,029.49 15,407.17 13,179.26 12,505.83 12,192.71
Less: Accum. Depreciation 7,486.37 6,699.85 5,939.68 5,411.62 4,849.99

78
Net Block 8,543.12 8,707.32 7,239.58 7,094.21 7,342.72
Capital Work in Progress 2,497.44 1,157.73 1,872.66 763.64 201.08
Investments 6,106.18 4,069.96 2,432.65 2,194.12 1,194.55
Inventories 2,332.98 2,174.75 1,872.40 1,249.08 1,152.95
Sundry Debtors 631.63 539.40 581.82 651.30 958.47
Cash and Bank Balance 7,681.35 288.39 246.72 250.74 373.12
Loans and Advances 4,025.95 2,006.21 2,160.63 1,508.00 2,000.08
Current Liabilities 5,389.22 4,564.14 4,297.24 3,900.00 3,594.23
Provisions 3,037.54 2,361.44 2,524.42 2,068.99 2,217.11
Net Current Assets 6,245.15 -1,916.83 -1,960.09 -2,309.87 -1,326.72
Miscellaneous Expenses not w/o 202.53 253.27 214.82 155.97 0.00
Total Assets 23,594.42 12,271.45 9,799.62 7,898.07 7,411.63
Contingent Liabilities 5,072.96 2,209.45 1,911.12 1,508.01 1,316.22

Turnover

The company said that excluding the turnover of Tata Steel UK of Rs 23,867 crore for the
quarter, the group turnover registered an increase of Rs 2,157 crore. This was mainly due
to increases in Tata Steel’s Indian operations (Rs 472 crore), Natsteel (Rs 1,135 crore)
and Tata Steel Thailand (Rs 554 crore). The increase in Tata Steel’s India operations was
primarily due to increase in prices, whereas the rise in Natsteel and Tata Steel Thailand
was attributed to increase in price and volume.

Total Expenditure

Total expenditure for the quarter ended December 31, 2007 was Rs 28,967 crore,
(including a total expenditure of Rs 22,808 crore of Tata Steel UK), against Rs 4,325
crore during the previous year.

The material cost, excluding that of Tata Steel UK of Rs 11,253 crore, rose to Rs 3,003
crore from Rs 1,919 crore.

The other expenditure, excluding that of Tata Steel UK (Rs 5,053 crore) was Rs 1,395
crore in Q3 FY08 against Rs 1,133 crore in Q3 FY07.

79
Due to rupee appreciation against major foreign currencies in Q3 FY08, the company had
a net exchange gain of Rs 45 crore.

The actuarial gain on funds for employee benefits amounted to Rs 145 crore for the
quarter ended December 31, 2007. The gain represents reduction in pension liability
arising out of higher discount rate, reflecting improved yields on bonds.

On Wednesday, the company stock closed at Rs 766.45, down 6.42 per cent over previous
close.

Profit & Loss Account (in crore)

Year Mar 07 Mar 06 Mar 05 Mar 04 Mar 03

Sales Turnover 19,757.80 17,140.24 15,871.08 11,920.96 9,793.27
Other Income 573.08 356.24 305.19 293.38 134.18
Stock Adjustments 82.47 104.91 289.55 80.31 15.03
Total Income 20,413.35 17,601.39 16,465.82 12,294.65 9,942.48
Raw Materials 3,572.06 3,024.38 3,020.42 2,245.42 1,749.97
Excise Duty 2,304.18 2,004.83 1,377.92 1,218.57 1,071.95
Power & Fuel Cost 1,027.84 897.57 778.30 724.62 787.75
Other Manufacturing Expenses 2,500.00 2,090.67 1,948.00 1,549.92 1,317.36
Employee Cost 1,598.96 1,397.39 1,403.84 1,575.71 1,444.96
Selling and Administration Expenses 1,491.57 1,373.71 1,304.05 1,055.47 972.29
Miscellaneous Expenses 822.57 735.89 693.25 558.59 498.60
Less: Preoperative Expenditure 236.02 112.62 204.82 151.84 60.79

80
Capitalised
Profit before Interest, Depreciation &
7,332.19 6,189.57 6,144.86 3,518.19 2,160.39
Tax
Interest & Financial Charges 251.25 174.51 228.80 227.12 342.41
Profit before Depreciation & Tax 7,080.94 6,015.06 5,916.06 3,291.07 1,817.98
Depreciation 819.29 775.10 618.78 625.11 555.48
Profit Before Tax 6,261.65 5,239.96 5,297.28 2,665.96 1,262.50
Tax 2,039.50 1,733.58 1,823.12 919.74 250.19
Profit After Tax 4,222.15 3,506.38 3,474.16 1,746.22 1,012.31

How fast is the company growing?

Companies are judged by their sales and earnings growth rates than on the absolute value
of their sales and earnings. Look for companies that consistently grow faster than there
peers.
Year 2007 2006 2005 2004 2003
Sales 19,757.80 17,140.24 15,871.08 11,920.96 9,793.27
Var % 15.27% 8.00% 33.13% 21.72% --
Profit After Tax 4,222.15 3,506.38 3,474.16 1,746.22 1,012.31
Var % 20.41% 0.93% 98.95% 72.50% --

81
 Profit

4,222.15
4,500.00
4,000.00 3,474.16 3,506.38
3,500.00
3,000.00
2,500.00
2,000.00 1,746.22
1,500.00 1,012.31
1,000.00
500.00
0.00
2003 2004 2005 2006 2007

Sales Chart

25,000.00
19,757.80
20,000.00 15,871.08 17,140.24
15,000.00 11,920.96
9,793.27
10,000.00
5,000.00
0.00
2003 2004 2005 2006 2007
Y ear

Current Price 698.00

52 Week High 969.80

52 Week Low 399.21

Face Value 10

82
Share Holding Pattern

%
Foreign Holdings 17.42
Govt. / Financial Institutions 21.85
Corporate Bodies(not covered above) 3.98
Directors and their Relatives 30.52
Other including Indian Public 25.32

Share Holding

18% Foreign Holdings

26%
Govt. / Financial
Institutions
Corporate Bodies(not
covered above)
22%
Directors and their
Relatives
Other including Indian
30% 4% Public

Year end Mar 07 Mar 06 Mar 05

EPS(Rs) 69.95 61.51 60.91
Book value(Rs) 240.22 176.19 127.51
NPM(%) 21.37 20.46 21.89
ROCE(%) 36.79 50.13 63.79
ROE(%) 35.62 41.70 60.02
Debt/equity 0.51 0.31 0.53
P/E 6.43 8.72 6.58

Here from the above information I found that the Sales, EPS, Book value, Net Profit
Ratio are increased continuously in 2007 as compared to 2006 and 2005 but TATA should
concentrate on PE Ratio because it has decreased in 2007. The debt-equity ratio is
decreased which is good sign and under controlled which is good sign. The investor of

83
this company should buy and hold the shares of this company for long period because
this company can give good dividend and investor can get arbitrage profit for short period
of time. This shares are for long term investmentpurpose.

JINDAL STEEL

Companies of Jindal Group

Jindal Stainless Ltd.:

Jindal Stainless is the largest integrated stainless steel producer in India and the flagship
company of the Jindal Group. It is an ISO: 9001 & ISO: 14001 company. Jindal Stainless
Ltd. has plants at Hisar and Vizag and is setting up a Greenfield integrated Stainless Steel
project in Orissa with capacity of 1.6 million tones per annum. Jindal's plant at Hisar is
India's only composite stainless steel plant for the manufacture of Stainless Steel Slabs,
Blooms, Hot rolled and Cold Rolled Coils, 60% of which are exported worldwide. At
Vizag, Jindal has a Ferro Alloy Plant with an installed capacity of 40,000 metric tones per
annum.

Jindal Steel & Power Ltd:

JSPL is one of the leaders in Steel Manufacturing and Power Generation in India. JSPL
is the largest private sector investor in the State of Chhattisgarh with a total investment
commitment of more than Rs. 10,000 crores. It is also setting up a 6 million tonne steel
plant in Orissa with an investment of Rs. 13,500 crores and a 6 million tonne steel plant
in Jharkhand with an investment of Rs. 15,000 crores. Jindal Power Limited, wholly
owned subsidiary of JSPL, is setting up a 1000 MW O P Jindal Super Thermal Power
Plant at Raigarh, with an investment of over Rs. 4500 crores. JSPL has also ventured into

84
exploration and mining of high value minerals and metals, like diamond, precious stones,
gold, platinum group of minerals, base metals, tar sands etc.

JSW Steel Limited:

JSW Steel Ltd is a fully integrated steel plant having units across Karnataka and
Maharashtra producing from pellets to colour coated steel. JSW was founded in1982,
when the Jindal Group acquired Piramal Steel Ltd which operated a mini steel mill at
Tarapur in Maharashtra. The Jindals, renamed it as Jindal Iron and Steel Co Ltd (JISCO)
now known as JSW Steel Limited (Downstream). In 1994, to achieve the vision of
moving up the value chain and building a strong, resilient company, JISCO promoted
Jindal Vijayanagar Steel Ltd (JVSL) now known as JSW Steel Limited (Upstream).

Jindal Steel
Jindal Steel is amongst the largest corporate groups in India. Jindal Group is presently a
US $5 billion conglomerate and ranks fourth amongst the top Indian Business Houses in
terms of assets. Jindal Steel is one of the largest steel producers in India with 12 plants in
India and 2 in USA.
O.P. Jindal is the founder of Jindal Group. He started by trading in steel pipes in Nalwa, a
village in the present-day Haryana. In 1952, O.P. Jindal set up the group's first factory at
Liluah, near Calcutta for the manufacturing of steel pipes, bends and sockets. Soon
thereafter, he set up a similar manufacturing unit at Hisar. In the early 1960s Jindal Steel
achieved a breakthrough when it developed India's first 100% indigenous pipe mill at
Hisar. In 1970, O.P. Jindal established Jindal Strips Limited and set up a mini steel plant
at Hisar to manufacture coils and plates through the electric and furnace route. Since
then, Jindal Steel has not looked back and has gone from strength to strength. Today, the
group has developed into a multi-faceted organization with revenues in excess of US $5
billion.

85
Background

Jindal Steel and Power Limited (JSPL), part of the O P Jindal group was formed in April,
1998 by hiving off the Raigarh and Raipur manufacturing facilities of Jindal Strips
Limited (JSL) into a separate company. Currently the company is engaged in
manufacture of sponge iron, steel, pig iron, ferro-chrome and power. JSPL is largest, and
amongst the lowest cost, coal based producer of sponge iron in India with an installed
capacity of 1,370,000 MTPA. JSPL’s operations are headed by Mr. Naveen Jindal,
Executive Vice Chairman and Managing Director of the company.

Operations of the company

JSPL is engaged in manufacturing of iron & steel products and power. JSPL’s product
mix includes sponge iron, power and value added steel products, such as rounds, billets,
beams, blooms and slabs. During FY’06, JSPL undertook capacity expansions across
various divisions at Raigarh. Post expansions, the installed capacities of various products
include 1,370,000 tpa of sponge iron, 24,00,000 tpa of mild steel, 36,000 tpa of ferro
Alloy, hot metal capacity of 250,000 tpa, power generation of 295 MW, coal washery
with capacity of 60 lakh tpa and a Rail and Universal Beam Mill (RUBM) of 750,000 tpa
capacity. The company has mining rights for coal in Gare area in Raigarh with estimated
reserves of 62 mn tonnes and iron ore at Tensa mines Orissa (estimated reserves 20 mn
tonnes). Sales of the company registered an 18% rise to Rs 2877 cr in FY’06 over
previous year. Capacity augmentation coupled with improved realizations, on account of
increase in sales of value added products, helped the company achieve the growth.
Sponge iron had been the major contributor to the total sales (23%) followed by beams
and columns (22%) and iron ore/fines (18%).

Export sales registered 14% rise and stood at Rs 371 cr in FY’06, mainly made to UAE,
China & Korea. JSPL’s coal requirement is met through company’s own mines. JSPL’s
requirement of iron ore is partially sourced from captive iron ore mine in Tensa and

86
balance through term contract from external source. Currently, company imports its entire
requirement of coke from China and is setting up an in-house coke oven plant to reduce
its costs. Captive power generation plant is based on the utilization of waste heat of the
flue gases from the sponge iron kilns as well as steam from coal fired FBC boilers, which
in turn utilizes the ejects from the coal washery and char generated from the sponge iron
plants. The power generation apacity as on December 31, 2006 stood at 315 MW. Apart
from captive use, JSPL sells power to hattisgarh State Electricity Board, through a firm
PPA, and neighboring industrial units.
Registered Office O P Jindal Marg, Hisar - 125005, Haryana
Telephone 91-01662-222471-75
Fax 91-01662-222476
Industry Steel - Sponge Iron
House Jindal Om Prakas
Chairman Savitri Jindal
Managing Director
Company Secretary T K Sadhu
Auditor S S Kothari Mehta & Co
Face Value 1
Market Lot 1
Listing Mumbai, NSE
Alankit Assignments Ltd
Registrar 2E/21 Alankit House, Anarkali Market, Jhandewalan
Extn, New Delhi - 110055
Major Products Manufactured/ Traded (03,2007)
Product Name Sales (Rs.in Crores)
Sponge Iron 794.54
Other Semi Steel Products 685.21
Parallel Flange/Beam/Columns 624.19
Rounds 574.72
Iron Ore-Fines 443.25
Power 285.69
Pig Iron 218.96
Ferro Chrome 123.44
Others 58.48
Other Finished Steel Products 57.08
Machinery 33.95

87
Share Holding Pattern
%
Foreign Holdings 24.49
Govt. / Financial Institutions 4.55
Corporate Bodies(not covered above) 1.88
Directors and their Relatives 59.05
Other including Indian Public 9.93

Share Holding Pattern

Foreign Holdings

10% Govt. / Financial

25% Institutions

Corporate
Bodies(not covered
5% above)
2% Directors and their
Relatives
58%
Other including
Indian Public

88
Balance Sheet ( in Crore)

Year Mar 07 Mar 06 Mar 05 Mar 04 Mar 03

Share Capital 16.40 16.40 16.40 16.40 25.63
Reserves & Surplus 2,462.01 1,823.26 1,302.98 839.80 558.18
Total Shareholders Funds 2,478.41 1,839.66 1,319.38 856.20 583.81
Secured Loans 2,115.61 1,780.77 1,159.51 988.53 813.96
Unsecured Loans 1,392.11 964.60 336.35 37.43 71.29
Total Debt 3,507.72 2,745.37 1,495.86 1,025.96 885.25
Total Liabilities 5,986.13 4,585.03 2,815.24 1,882.16 1,469.06
Gross Block 4,929.03 3,243.05 2,530.28 1,677.94 1,011.22
Less: Accum. Depreciation 781.75 542.33 361.76 247.00 179.31
Net Block 4,147.28 2,700.72 2,168.52 1,430.94 831.91
Capital Work in Progress 937.84 1,146.27 345.70 289.03 492.78
Investments 709.82 430.30 33.38 49.66 42.23
Inventories 642.44 568.65 257.55 196.51 101.95
Sundry Debtors 320.31 299.54 172.91 211.16 165.12
Cash and Bank Balance 52.97 31.30 33.29 21.90 18.64
Loans and Advances 819.59 606.32 575.09 218.64 150.67
Current Liabilities 1,261.88 926.67 592.22 448.45 276.88
Provisions 385.48 272.14 180.00 88.56 59.00
Net Current Assets 187.95 307.00 266.62 111.20 100.50
Miscellaneous Expenses not w/o 3.24 0.74 1.02 1.33 1.64
Total Assets 5,986.13 4,585.03 2,815.24 1,882.16 1,469.06
Contingent Liabilities 1,578.03 679.59 597.68 273.85 130.85

Profit & Loss Account ( in Crore)

89
 Year Mar 07 Mar 06 Mar 05 Mar 04 Mar 03
Sales Turnover 3,899.81 2,877.46 2,448.17 1,390.20 993.18
Other Income 72.34 37.25 23.10 24.84 13.75
Stock Adjustments 56.86 183.98 13.85 42.38 17.92
Total Income 4,029.01 3,098.69 2,485.12 1,457.42 1,024.85
Raw Materials 783.38 450.35 341.67 233.37 164.47
Excise Duty 396.71 312.91 196.26 131.08 112.58
Power & Fuel Cost 341.27 428.89 429.07 233.00 159.55
Other Manufacturing Expenses 502.98 394.59 280.19 155.12 107.26
Employee Cost 93.70 72.81 48.45 31.04 24.67
Selling and Administration Expenses 378.36 323.99 212.76 99.84 75.67
Miscellaneous Expenses 78.41 66.09 60.99 29.63 61.04
Less: Preoperative Expenditure Capitalised 0.00 0.00 0.00 0.00 0.00
Profit before Interest, Depreciation & Tax 1,454.20 1,049.06 915.73 544.34 319.61
Interest & Financial Charges 173.19 102.24 85.63 83.01 82.95
Profit before Depreciation & Tax 1,281.01 946.82 830.10 461.33 236.66
Depreciation 336.47 219.17 152.48 106.23 57.64
Profit Before Tax 944.54 727.65 677.62 355.10 179.02
Tax 241.55 154.71 161.91 49.64 33.94
Profit After Tax 702.99 572.94 515.71 305.46 145.08

Current Price 828.50

52 Week High 1389.70

52 Week Low 470.10

Face Value 10

Growth of Company
Year 2007 2006 2005 2004 2003
Sales 3,899.81 2,877.46 2,448.17 1,390.20 993.18
Var % 35.52% 17.53% 76.10% 39.97% --
Profit After Tax 702.99 572.94 515.71 305.46 145.08
Var % 22.68% 11.10% 47.74% 110.55% --

Sales Chart

6000
Sales

4000
2000
0
2003 2004 90 2005 2006 2007
Year
 Profit Cha rt
Year end Mar ' 07 Mar ' 06 Mar ' 05
EPS (Rs) 800 225.36 183.92 165.38
Profit

Book value (Rs) 600 804.35 596.97 428.05

400
Net Profit Margin (%) 18.03 19.91 21.07
P/E 200 10.55 10.32 6.33
0
ROCE (%) 21.15 22.43 32.51
2003 2004 2005 2006 2007
ROE (%) 32.58 36.30 47.45
Debt/equity Year 1.45 1.34 1.16

Here from the above information I found that the Sales, EPS, Book value, PE Ratio are
increased continuously in 2007 as compared to 2006 and 2005 but jindal should
concentrate on Net Profit margin because it has decreased in 2007. The debt-equity ration
is increased which is not good sign but in this company in is under controlled which is
good sign. The investor of this company should take some preventive step before invest
in this company for longer period of time. Investor can hold this share but should not buy.

FINDINGS
Comparative Profitability Ratio of Three Companies
TATA Jindal
Year Steel SAIL Steel
2003 10.33 0 14.6
2004 14.64 10.4 21.97
2005 21.88 21.23 21.06
2006 20.45 16.94 19.91
2007 21.37 15.7 18.03

91
 Comparative Ratio

25

20

15
Ratio

10

0
2003 2004 2005 2006 2007
Year

TATA Steel SAIL Jindal Steel

As we can see above graph of three companies as the initial stage of the SAIL it were met
the very low ratio due to loses and the Jindal steel was quite in struggle stage and its gone
towards the down size as year ahead, and the most profitable company as we can say is
that the Tata steel because of its highly increasing mode of the ratio. And we compare the
all three company the Tata steel company is quite preferable for the selection of the
investment.

CONCLUSION

Comp Share Adjusted EPS PE Targ Ratin

any price et g

FY FY FY FY FY FY (Rs)
06 07 08 06 07 08
SAIL 174.50 14.70 9.43 16.12 7.85 8.82 3.92 182 Hold
Tata 667.40 14.70 9.43 16.12 6.43 8.72 6.58 687 Buy
Steel
Jindal 825.70 14.70 9.43 16.12 10.34 10.18 6.26 637 Hold

92
 Steel

Valuation

We retain our HOLD rating for Tata Steel and BUY rating on SAIL and Jindal Steel to
HOLD from BUY as we feel the share price of the company reflect possible upside in
cement prices and gains from fuel price reductions.

BIBLIOGRAPHY

Reference book: -

- Avdhani
- Fisher & Jordan

Web-sites: -

93
- www.google.com
- www.angeltrade.com
- www.moneycontrol.com
- www.cmlinks.com
- www.rediff.com

94