OBJECTIVE OF STUDY

Undertake the Fundamental Analysis to acquire the deep knowledge of the

Steel Sector.

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 company’s projected
financial performance (2008-2009).

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

commercial purposes and Real Estate.

• To make projection on its business performance and to improve the

performance of company in the bad condition.

• To evaluate its management and how they make internal business

decisions.

• To study 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.

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 investor, who goes to systematic
investment, he/she would like to know, the complete scenario of the industry.
It is interesting to know how the fundamental analysis helps to forecast the
price of equity.

1
 The fundamental analysis consists of three parts; Economic, Industry and
Company. All the factors are involved in this analysis are determined and
studied carefully to identify the factors in the existing environment. The data
or information collected is based on the information published in websites of
the company.

Economic analysis is a task to be studied as it affects the company’s tax, and it

will effect on the revenue of the industry as a whole. Also other factors are
considered in the economic analysis. And they will be interpreting for the
fundamental analysis.

Industry analysis is 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 within the industry. And those
factors are related with the company. It also analyses the competitiveness of
each company’s strength, like. Quality, services, cost of Row material, etc.

Company analysis is the last factor 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
and its performance.

RESEARCH METHODOLOGY
Research methodology is a way to systematically solve the research problem.
The research methodology used for finding 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 steel sector:-
• Primary data collect by discussing with my guide and other staff
member of the company
• Observation

2
 Secondary Data:
• Company Annual Report
• Company Internal Data
• Internet-Websites

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 provide 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 by brokers, experts, analyst, etc.
♦ Types of Stock Analysis:-
The methods used to analyze securities and make investment decisions fall
into two very broad categories:
1) TECHNICAL ANALYSIS 2) FUNDAMENTAL ANALYSIS
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.

3
• 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.
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 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.

4
• 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.

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

5
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.

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

6
 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.

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

7
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.

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.

8
• Meaning of Fundamental Analysis :-
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.”

9
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 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

1
0
 generally prefer to invest in companies with robust fundamentals and ignore
near-term share price movements.

• Objectives:-

There are several possible objectives:

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

• 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.

1
1
• 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).
1
2
 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

1
3
 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.

• Steps to fundamental Analysis:

The most common way that fundamental analysis can be done is “Three
Step Process”:

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.

• 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

1
4
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.

1
5
 Economics Analysis:
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 declines, most of the
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 Foreign Exchange Reserves

Per capita income Budgetary Deficit

Industrial Production Tax Rates

Inflation Infrastructure

Interest Rates 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

1
6
economic needs were fulfilled within 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.

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 Growth

10.00% 9.20% 9.00%

9.00% 8.30% 8.40%
8.00% 7.40%
7.00%
Growth Rate

6.20%
6.00%
5.00% 4.30%
4.00%
3.00%
2.00%
1.00%
0.00%
2003 2004 2005 2006 2007 2008 2009
Source: 1
Years

1
7
Definition: This entry gives GDP growth on an annual basis adjusted for
inflation and expressed as a percent.

Equivalent Data from the International Monetary Fund:

GDP GDP
Yea Percent Yea Percent
Constant Constant
r Change r Change
Prices Prices
1980 3.626 1995 7.351 18.58%
1981 6.176 70.33% 1996 7.56 2.84%
1982 4.072 -34.07% 1997 4.619 -38.90%
1983 6.365 56.31% 1998 5.979 29.44%
1984 4.647 -26.99% 1999 6.916 15.67%
4.891
1985 5.25% 2000 5.693 -17.68%
1986 4.880 -0.22% 2001 3.885 -31.76%
1987 4.153 -14.90% 2002 4.558 17.32%
1988 8.258 98.84% 2003 6.852 50.33%
1989 6.810 -17.53% 2004 7.897 15.25%
1990 5.630 -17.33% 2005 9.211 16.64%
1991 2.136 -62.06% 2006 9.817 6.58%
1992 4.385 105.29% 2007 9.372 -4.53%
1993 4.939 12.63% 2008 7.346 -21.62%
1994 6.199 25.51% 2009 5.355 -27.10%
Variable: Gross domestic product, constant prices
Note: Annual percentages of constant price GDP are year-on-year changes; the base year is country-specific.
Units: Annual percent change
Country-specific Note: See notes for: Gross domestic product, constant prices (National currency).
Source: 2

2. Per capita income:

India's per capita income is found by the Atlas method and by employing
official exchange rates for conversion. Further, this Atlas method of
calculating the per capita income of India is not determined by using
purchasing power parity, which essentially adjusts exchange rates for
purchasing power of currencies.

1
8
 Economist have been giving considerable importance to the performance of
states vis a vis each other in terms of per capita income. It has been observed
that those states that were more open and better adapted to economic
liberalization have overall shown faster rate of growth.
• Per Capita Income of various Indian States:
The two backward states of the Indian republic Jharkhand and Orissa are
growing at a rapid rate in terms of the per capita income because of rise of
industrial activities in these two states. Karnataka is at the top of the chart with
the fastest growing per capita income (nearly 9.28%) followed by Gujarat with
8.92%.The per capita income in 17 states is below the national average of
8.4%. Per capita income shows the purchasing power of the states and so it is
very important for the states to increase the per capita income of each person.
History of India per Capita GDP:

• In 2002-03 the Per Capita Income in India was Rs 19040.

• In2003-04 the Per Capita Income in India was Rs 20989.
• In2004-05 the Per Capita Income in India was Rs 23241.
• In2008-2009 the Per Capita Income in India was37490.
• GDP at factor cost at constant (1999-2000) prices in the year 2008-2009 is
likely to attain a level of Rs 3351653.India achieved a growth rate of 7.1
per cent in 2008-2009.
• Agriculture, forestry and fishing had a combined growth rate of 2.6 per
cent during 2008-2009
• Industry had growth rate of 3.4 per cent during 2008-2009
• Service sector had a growth rate of 10.3 per cent during 2008-2009

Inspite of the global meltdown, India has performed well in comparison to the
rest of the world.

3. Inflation:
In mainstream economics, the word “inflation” refers to a general rise in
prices measured against a standard level of purchasing power. Previously the
term was used to refer to an increase in the money supply, which is now
referred to as expansionary monetary policy or monetary inflation. Inflation is

1
9
measured by comparing two sets of goods at two points in time, and
computing the increase in cost not reflected by an increase in quality. There
are, therefore, many measures of inflation depending on the specific
circumstances.
The most well known are the CPI which measures consumer prices, and the
GDP deflator, which measures inflation in the whole of the domestic
economy. The prevailing view in mainstream economics is that inflation is
caused by the interaction of the supply of money with output and interest rates.
Mainstream economist views can be broadly divided into two camps: the
"monetarists" who believe that monetary effects dominate all others in setting
the rate of inflation, and the "Keynesians" who believe that the interaction of
money, interest and output dominate over other effects. Other theories, such as
those of the Austrian school of economics, believe that an inflation of overall
prices is a result from an increase in the supply of money by central banking
authorities.
Related concepts include: deflation, a general falling level of prices;
disinflation, the reduction of the rate of inflation; hyper-inflation, an out-of-
control inflationary spiral; stagflation, a combination of inflation and poor
economic growth; and reflection, which is an attempt to raise prices to
counteract deflationary pressures. Source: 3
Inflation is no stranger to the Indian economy. In fact, science the early
nineties Indians are used to double-digit inflation and its 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.

2
0
 Needless to emphasize, 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-
liberalization era.

India Annual Inflation Rates

The following table shows the rate of India annual inflation in recent years.
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010 16.2
2
2009 10.4 9.6 8.03 8.7 8.63 9.2 11.8 11.7 11.6 11.4 13.5 14.97
5 3 0 9 9 2 4 9 1
2008 5.51 5.4 7.87 7.8 7.75 7.6 8.33 9.02 9.77 10.4 10.4 9.70
7 1 9 5 5
2007 6.72 7.5 6.72 6.6 6.61 5.6 6.45 7.26 6.40 5.51 5.51 5.51
6 7 9

4. Interest 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

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

2
1
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 are 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
The slowdown in the general index of industrial production has been quite
distinct during the first quarter of 2008-09; has fallen to 5.2 per cent almost
half to that of 10.3 per cent recorded during the comparable period of last year.
All the three sectors have witnessed slowdown in their growth during the
period.
June April-June
Variations
Major Group Weight
Over Month Over the Year Fiscal Year
2008 2007 08-09 07-08 07-08 06-07
General Index 100.00 269.10 255.30 269.10 255.30 269.70 256.40

Mining 10.50 163.20 158.60 163.20 158.60 170.20 162.60

Manufacturing 79.40 289.80 273.60 289.80 273.60 289.00 273.70

2
2
 Electricity 10.20 217.10 211.70 217.10 211.70 221.80 217.50
Note: Index for June 2008 is quick estimates. Index for the Month of March and
May 2008 incorporate updated Production Data.(Source: 4)

The manufacturing sector, which carried a large weight of 79.4 per cent in the
index of Industrial production, had recorded a lower growth of 5.6 per cent
during April-June 2008 –almost half to that recorded during April-June 2007.
Mining sector has grown by 4.7 percent during the review period as compared
to 2.7 per cent last year on the back of good performance by coal which
registered an increase of 6.2 per cent during June 2008 as against 0.9 per cent
in year ago. Electricity generation growth at 2.0 per cent during the first
quarter of 2008-09 is much lower than the 8.3 per cent growth in same period
of 2007-08.

8. Infrastructure
INDEX OF SIX CORE INFRASTRUCTURE INDUSTRIES MAY 2009
Sector-wise growth rate (%) in production
Weight Apr-
May May Apr-May
Sector in May
2008 2009 2009-10
IIP (%) 2008-09
Crude Oil 4.2 3.2 -4.3 2.1 -3.7
Petroleum Refinery
2.00 0.1 -4.3 2.1 -4.4
Products
Coal 3.2 8.8 10.2 9.5 11.8
Electricity 10.2 2.0 3.3 1.7 5.1
Cement 2.0 3.8 11.6 5.4 11.7
Finished steel (carbon) 5.1 3.3 1.4 1.4 2.1
Overall 26.7 3.1 2.8 2.7 3.9
Source:5
IIP expected to be in positive territory.

Growth in the index of six core infrastructure industries slipped to a three-

month low of 2.8 per cent in May 2009 on account of a dip in crude oil and
refinery production as well as less power generation by Hyde plants.

The Index of Industrial Production (IIP) is most likely to be in the positive

territory in May, even as the core sector performance was less than expected

2
3
because of positive indications from some components of the manufacturing
sector. The core sector has 27 per cent weight in IIP.

The core sector performance in May was lower than that of April, when it
expanded by 5 per cent, as well as the increase of 3.1 per cent a year ago.

“IIP will be in the positive territory, but the growth will be muted. Indications
from textile, auto and cement sectors are positive, which will keep IIP floating
in the positive,” said Shubhada Rao, chief economist, World Bank.

The meteorological department has forecast that the India will receive only 93
per cent of the long-term average rainfall seen during the monsoon months of
2009.

However, robust production growth in cement and coal sectors cushioned the
fall in core sector growth. Experts attribute the increase in coal production to
additional demand from the power plants. Similarly, revival in demand from
infrastructure projects have also led to increased cement production.

Finished (carbon) steel production growth continued to remain weak, possibly

due to cheap imports as from countries like China.

2
4
Industry Analyses:
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

2
5
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 structural 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.

BEGINNING:
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 tones a week. His method of iron-making needed approximately four
tones of charcoal to produce one tone 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
2
6
Bengal Government and was 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 disfavored 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) were 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

politically and economically independent unless it is highly industrialized 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 Constituent 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

2
7
made the monopoly of the Government. In the second category were six
industries which included, among others, coal, iron and steel.

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 foiling 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 up to 51% (now 74%).
Export-import regime for iron and steel has also undergone major

2
8
liberalization. The freight equalization scheme was withdrawn removing
freight disadvantage to States located near steel plants.

The new policy has already borne fruit. The finished steel production 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 neighboring countries now
that the Asian economy is looking up.

2
9
 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.

AN OVERVIEW OF STEEL SECTOR

Global Scenario

• In 2007 the World Crude Steel output reached 1343.5 million metric tons
and showed a growth of 7.5% over the previous year. It is the fifth
consecutive year that world crude steel production grew by more than 7%.
• China remained the world’s largest Crude Steel producer in 2007 also
(489.00 million metric tons) followed by Japan (112.47 million metric tons)
and USA (97.20 million metric tons). India occupied the 5th position (53.10
million metric tons) for the second consecutive year.
• The International Iron & Steel Institute (IISI) in its forecast for 2008 has
predicted that 2008 will be another strong year for the steel industry with
apparent steel use rising from 1,202 million metric tonnes in 2007 to 1,282
million metric tonnes in 2008 i.e. by 6.7%. Further, the BRIC (Brazil,
Russia, India and China) countries will continue to lead the growth with an
expected increase in production by over 11% compared to 2007.

Source:6

Domestic Scenario

• The Indian steel industry have entered into a new development stage
from 2005-06, riding high on the resurgent economy and rising demand
for steel. Rapid rise in production has resulted in India becoming the 5th
largest producer of steel.
• It has been estimated by certain major investment houses, such as
Credit Suisse that, India’s steel consumption will continue to grow at
nearly 16% rate annually, till 2012, fuelled by demand for construction
projects worth US$ 1 trillion. The scope for raising the total consumption

3
0
 of steel is huge, given that per capita steel consumption is only 40 kg –
compared to 150 kg across the world and 250 kg in China.
• The National Steel Policy has envisaged steel production to reach 110
million tonnes by 2019-20. However, based on the assessment of the
current ongoing projects, both in Greenfield and Brownfield, Ministry of
Steel has projected that the steel capacity in the county is likely to be
124.06 million tonnes by 2011-12. Further, based on the status of MOUs
signed by the private producers with the various State Governments, it is
expected that India’s steel capacity would be nearly 293 million tonne by
2020.

Production

• 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 2008-09, production of Finished (Carbon) Steel was 59.02 million
tonnes.
• Production of Pig Iron in 2008-09 was 5.299 Million Tonnes .
• Last 5 year's production of pig iron and finished (carbon) steel is given
below:

(in million tonnes)

Category 04-05 05-06 06-07 07-08 08-09
Pig Iron 3.228 4.695 4.993 5.314 5.289
Finished Carbon 40.05 44.54 55.41 58.23
59.02
Steel 5 4 6 3
Source: 7

Demand - Availability Projection

• Demand – Availability of iron and steel in the country is projected by

Ministry of Steel annually.
• 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.
3
1
 • Inte
rface
helps
in

redressing availability problems, complaints related to quality.

Steel Prices

• Price regulation of iron & steel was abolished on 16.1.1992. Since then
steel prices are determined by the interplay of market forces.
• There has been an up-trend in the domestic steel prices since 2006-07
and the trend accentuated since January this year.
• Rise in raw material prices, strong demand in the international and
domestic market and up-trend in the global steel prices have been some of
the reasons cited by the industry for increase in the steel prices in the
domestic market.
• The mismatch in demand and supply is considered to be the main
reason on the demand side for the rise in steel prices. Honorable Steel
Minister has held discussion with all major steel investors including
Arcellor-Mittal, POSCO, Tata Steel, Essar, Ispat and also SAIL, RINL to
explore the possibility of expediting the ongoing as well as envisaged steel
projects.
• The Government also took various fiscal and other measures for
stabilizing the steel prices like exempting pig iron, non alloy steel and steel
making inputs like zinc, Ferro-alloys and met coke from customs duty;
withdrawing DEPB benefits on export of various categories of steel
products and bringing back railway freight on iron ore from classification
180 to 170 for domestic steel producers.

3
2
 • In May 2008, the Government imposed 15% export duty on semi-
finished products, and hot rolled coils/sheet, 10% export duty on cold
rolled coils/sheets and pipes and tubes and 5% export duty on galvanized
steel in coil/sheet form in order to further curtail rising prices and increase
supply of steel in the domestic market.

Imports of Iron & Steel

• Iron & Steel are freely importable as per the extant policy.

• Last five years import of Finished (Carbon) Steel is given

below:-

Year Qty. (In Million Tonnes)

2004-2005 2.109
2005-2006 3.850
2006-2007 (Partly estimated) 4.436
2007-08 6.581
2008-2009 (Partly estimated) 5149

Source: 7

Exports of Iron & Steel

• Iron & Steel are freely exportable.

• Advance Licensing Scheme allows duty free import of raw
materials for exports.
• 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 benefit on export of various
categories of steel items scheme has been temporarily withdrawn from
27th March 2008, to increase availability in the domestic market.

• Exports of finished carbon steel and pig iron during the last
five years and the current year is as :

3
3
Exports (Qty. in Million Tonnes)
Year Finished (Carbon) Steel Pig Iron
2004-2005 4.381 0.393
2005-2006 4.478 0.440
2006-2007 (estimated) 4.750 0.350
2007-2008 4.627 0.560
2008-2009 (estimated) 3.482 0.350

(Source: 7)

Levies on Iron & Steel

SDF LEVY- This was a levy started for funding modernization, expansion and
development of steel sector.

The Fund, inter-alia, supports:

1. Capital expenditure for modernization, rehabilitation,

diversification, renewal & replacement of Integrated Steel Plants.
2. Research & Development
3. Rebates to SSI Corporations
4. Expenditure on ERU of JPC

o Cabinet decided that corpus could be recycled for loans to Main

producers
o Interest on loans to Main Producers be set aside for promotion
of R&D on steel etc.
o An Empowered Committee has been set up to guide the R&D
effort in this sector.
o EGEAF – Was a levy started for reimbursing the price
differential cost of inputs used for engineering exporters. Fund was
discontinued on 19.2.96.

• Opportunities for growth of Iron and Steel in Private Sector

The New Industrial Policy Regime

3
4
The New Industrial policy has opened up the iron and steel sector for private
investment by (a) removing it from the list of industries reserved for public
sector and (b) exempting it from compulsory licensing. Imports of foreign
technology as well as foreign direct investment are freely permitted up to
certain limits under an automatic route. Ministry of Steel plays the role of
facilitator, providing broad directions and assistance to new and existing steel
plants, in the liberalized scenario.

The Growth Profile

(I) Steel

The liberalization of industrial policy and other initiatives taken by the

Government have given a definite impetus for entry, participation and growth
of the private sector in the steel industry. While the existing units are being
modernized/expanded, a large number of new/Greenfield steel plants have also
come up in different parts of the country based on modern, cost effective, state
of-the-art technologies.

At present, total (crude) steel making capacity is over 34 million tonnes and
India, the 8th largest producer of steel in the world, has to its credit, the
capability to produce a variety of grades and that too, of international quality
standards. As per the ratings of the prestigious “World Steel Dynamics",
Indian HR Products are classified in the Tier II category quality products – a
major reason behind their acceptance in the world market. EU, Japan has
qualified for the top slot, while countries like South Korea, USA share the
same class as India.

(II) Pig Iron

In pig iron also, the growth has been substantial. Prior to 1991, there was only
one unit in the secondary sector. Post liberalization, the AIFIs have sanctioned
21 new projects with a total capacity of approx 3.9 million tonnes. Of these,
16 units have already been commissioned. The production of pig iron has also
increased from 1.6 million tonnes in 1991-92 to 5.28 million tonnes in 2002-

3
5
03. During the year 2003-04, the production of Pig Iron was 5.221 million
tonnes.

• 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.
• 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 up to 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.
3
6
 • 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. (KIOCL) is the canalizing 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 up to 64% is completely decimalized.
Exports of ore with iron content exceeding 64% from other sectors of the
country are canalized 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: 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
3
7
High grade lumps (Bellary-Hospet) Not exceeding 1.2
High grade fines (Bellary-Hospet) Not exceeding 2.0

c. Manganese Ore

Export policy of manganese ore is decided keeping in view the need for
conserving high grade ores. Along with 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 1998-99 (in

ITEM
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. Chromites Ore

Keeping in view the limited reserve of Chromites ore in the country, only
certain grades of ore are allowed for export. Emphasis has been laid on export
of beneficiated chromites concentrates. 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.
Infect, 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 at least 10% to achieve the target by the year 2020. Further, with

3
8
the supply not in a position to be able to catch up with the demand at least
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.

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

3
9
 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)

Secondar
Main Grand % of share of
Year y
Producers Total Secondary Producers
Producers
1991-92 7.96 6.37 14.33 14.50 %
1992-93 8.41 6.79 15.20 44.70 %
1993-94 8.77 6.43 15.20 42.30 %
1994-95 9.57 8.25 17.82 46.30 %
1995-96 10.59 10.81 21.40 50.60 %
1996-97 10.54 12.18 22.72 53.60 %
1997-98 10.44 12.93 23.37 55.32 %
1998-99 9.86 13.24 23.82 57.32 %
1999-00 11.20 15.51 26.71 58.07 %
2000-01 12.51 17.19 29.7 57.88 %
2001-02 13.05 17.58 30.63 57.40 %
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 42.63 61.92 %
6
2006-07 17.390 32.000 49.39 64.79 %
0
07-08 (Apr-Aug 07) 6.901 15.600 20.50 76.09 %
1

(b) Pig Iron Production

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

Secondar %age share of the
Main Grand
Year y Secondary
producers total
producers Producers
1991-92 1.49 0.10 1.59 6.3%
1992-93 1.68 0.17 1.85 9.2%

4
0
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 0.414 1.750 2.154 81.24 %
07)

4
1
(c) DRI Production

PRODUCTION OF DRI (In million tonnes)

Year Production % increase
1991-92 1.31 -
1992-93 1.60 22.10
1993-94 2.40 50.00
1994-95 3.39 41.30
1995-96 4.34 28.02
1996-97 5.05 16.40
1997-98 5.32 05.34
1998-99 5.12 (-)3.80
1999-2000 5.34 04.30
2000-2001 5.44 01.90
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 21.40
2006-07 15.75 -
07-08 (Apr-Aug 07) 7.750

GROWTH OF STEEL INDUSTY IN INDIA

4
2
 ♦ 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.

SWOT ANALYSIS
Strengths Opportunities

1. Availability of iron ore and coal 1. Unexplored rural market

2. Low labors wage rates 2. Growing domestic demand

3. Abundance of quality manpower 3. Exports

4. Mature production base 4. Consolidation

Weaknesses Threats

1. Unscientific mining 1. China becoming net exporter

2. Low productivity 2. Protectionism in the West

3. Coking coal import dependence 3. Dumping by competitors

4. Low R&D investments

5. High cost of debt
6. Inadequate infrastructure

4
3
 • 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
7
6 5.5
5
3.7
4
3 2.6
2 2
2
1

0
Sw eden Japan France Canada China India

  Power Costs : High in India

7
PPP US Cents/ Kilowatt
5.9
6

5
4.7
4.3
3.8 4
4

3
2.2
2 500
444 450
1
400
0
325
South Africa Canada Korea Mexico USA India
300

187
200 165
100
100

 0

Osaka Singapore Hongkong Tianjin Mumbai Chennai

Tariff at
Indian
and
Foreign Ports
• Inefficiency costs at Indian Ports

4
4
 • 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.

• 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: 7

Indian Steel Industry Projections: Understated

• Projection for steel production and consumption based on past trends

• Projected consumption probably understated by more than 35%

• 8% GDP growth coupled with changing demographic profile are likely

to drive steel consumption to about 125 mT by 2020.

• Assumption: Elasticity of steel consumption with respect to GDP is ~

1, although some studies estimate a value of 1.28 if GDP related to the
infrastructure is used.

Changing Demographic Profile: What does it imply for India’s steel

situation?
• Young population and a declining dependency ratio

4
5
 • By 2010 there would be nearly 125 million consuming and affluent
households.

• Urban disposable incomes would shoot up.

• Likely to fuel significant demand in automobiles and housing sector à

surge in steel demand.

India’s growing steel demand- How would it be met

• Cost differential required to switch from domestic supply to imports is

about 35%

• Cost of steel production in developing countries much lower than in

developed countries

• India would find it cost competitive to meet its domestic demand

increases through creation of domestic capacity rather than through
imports – unless prices of imported steel are distorted.

India’s growing steel demand- Raw Material Constraints (Iron ore)

1000
Per capita
800 Iron Ore
600 Reserve
400
200 Steel
Consumpti
0 on
India Australia Brazil USA China World

Raw Material Constraints (Iron ore)

• India’s per capita iron ore reserve is 10 tonnes as against 120 tonnes
for Brazil and 900 tones for Australia

• Iron ore exports doubled during 2000 – 04: mainly high grade hametite

• At this level of exports, India’s entire known reserves of high grade

iron ore would be exhausted in less than 20 years

Raw Material Constraints (Chrome ore)

• India has less than 1% of the known reserves of chrome ore in the
world.
4
6
 • However, its share in global exports is 35%

• Unless additional reserves are discovered in India, the existing reserves

will not last beyond 20 years – would adversely affect alloy and
stainless steel capacity

Raw Material Constraints (coking coal)

• Currently steel industry imports around 19mT of coking coal and

procures 7.5 mT from indigenous sources annually.

• By 2020 about 70 mT coking coal would be required, 85% of which

would be imported.

Raw Material Resources

• Iron Ore
• Coal
• Limestone
• Dolomite
• Refractory

Company Analysis:

4
7
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?

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!

4
8
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 industrialization 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 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.

4
9
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 defense industries and for sale in export markets.
Ranked amongst the top ten public sector companies in India in terms of
turnover, SAIL manufactures and sells a broad range of steel products,
including hot and cold rolled sheets and coils, galvanized sheets, electrical
sheets, structural, railway products, plates, bars and rods, stainless steel and
other alloy steels. SAIL produces iron and steel at five integrated plants and
three special steel plants, located principally in the eastern and central regions
of India and situated close to domestic sources of raw materials, including the
Company's iron ore, limestone and dolomite mines. The company has the
distinction of being India’s largest producer of iron ore and of having the
country’s second largest mines network. This gives SAIL a competitive edge

5
0
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 is much in demand in the
domestic as well as the international market. This vital responsibility is carried
out by SAIL's own Central Marketing Organization (CMO) 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 Organization at Ranchi. Our captive mines are under the control of
the Raw Materials Division in Kolkata. The Environment Management
Division and Growth Division of SAIL operate from their headquarters in
Kolkata. Almost all our plants and major units are ISO Certified.

Incorporation Year
Registered Office Ispat Bhawan, Lodi Road, New Delhi -
110003, New 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
Auditor S K Mittal & Co/Ray & Ray/Dass Maulik
Mahenra K Ag
Face Value 10
Market Lot 1
Listing London, Mumbai, NSE
Registrar MCS Ltd
Sri Venkatesh Bhawan, W-40 Okhala Indus
Ar, Phase - II, New Delhi 110048

5
1
♦ 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

♦ 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

5
2
 ♦ 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.), 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 bases, this company
promotes e-commerce activities in steel and related areas.
♦ 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

5
3
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 continuously adapt to the competitive business
environment and excel as a business organization, 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 specialty 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.
♦ 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).

5
4
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 utilization
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 Organization 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 modernization programmed by Union Minister for Chemicals
& Fertilizers 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.

5
5
 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%

% %
No. Of No. Of No. Of %
Holdin Holdin
Shares Shares Shares Holding
g g
Promoter's holding
354469028 354469028 354469028
Indian Promoters 85.82 85.82 85.82
5 5 5
354469028 354469028 354469028
Sub total 85.82 85.82 85.82
5 5 5
Non promoter's holding
Institutional investors
Banks Fin. Inst. and
281124790 6.81 286690594 6.94 288187224 6.98
Insurance
FII's 182106305 4.41 172369525 4.17 158416811 3.84
Sub total 495266517 11.99 481461633 11.66 472803820 11.45
Other investors
Private Corporate
14702580 0.36 19239424 0.47 23219826 0.56
Bodies
NRI's/OCB's/Foreign
1971317 0.05 2363990 0.06 2506635 0.06
Others
Others 3413819 0.08 3417074 0.08 3377732 0.08
Sub total 20087716 0.49 25020488 0.61 29104193 0.70
General public 70356027 1.70 79228139 1.92 83802247 2.03
413040054 413040054 413040054
Grand total 100.00 100.00 100.00
5 5 5

5
6
 Balance Sheet
(Rs. In Crore)
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Sources of Fund
Owner's fund
Equity share
4,130.40 4,130.40 4,130.40 4,130.40 4,130.40
capital
Share application
- - - - -
money
Preference share
- - - - -
capital
Reserves & 23,853.7 18,933.1 13,182.7
8,471.01 6,176.25
surplus 0 7 5
Loan Fund
Secured loans 1,473.60 925.31 1,556.39 1,122.16 1,603.98
Unsecured loans 6,065.19 2,119.93 2,624.13 3,175.46 4,165.81
35,522.8 26,108.8 21,493.6 16,899.0
Total 16,076.44
9 1 7 3
Uses of Funds
Fixed assets
32,728.6 30,922.7 29,912.7 29,360.4
Gross block 28,043.48
9 3 1 6
Less : revaluation
- - - - -
reserve
Less :
20,459.8 19,351.4 18,315.0 17,198.3
accumulated 15,558.41
6 2 0 2
depreciation
12,268.8 11,571.3 11,597.7 12,162.1
Net block 12,485.07
3 1 1 4
Capital W-I-P 6,544.24 2,389.55 1,236.04 757.94 366.48
Investments 652.70 538.20 513.79 292.00 606.71
Net Current Assets
Current assets, 35,666.8 27,309.0 21,673.7 18,788.8
15,521.37
loans & advances 4 1 5 0
Less : current
19,609.7 15,758.7 13,656.7 15,317.6
liabilities & 13,198.12
2 4 7 7
provisions
Total net current 16,057.1 11,550.2
8,016.98 3,471.13 2,323.25
assets 2 7
Misc expenses
- 59.48 129.15 215.82 294.93
not written
35,522.8 26,108.8 21,493.6 16,899.0
Total 16,076.44
9 1 7 3
Notes:
B.V of unquoted
660.12 546.02 521.61 296.61 608.32
investments
Mkt value of
2.70 5.12 4.31 3.33 0.89
quoted invest
5
7
Contingent 32,193.1 17,143.5
5,605.90 5,541.62 4,566.72
liabilities 3 4
No of equity sh
41304.01 41304.01 41304.01 41304.01 41304.01
o/s (Lacs)
Profit & Loss Account
(Rs. In Crore)
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Income
Operating 43,798.5 39,958.6 34,328.7 28,200.4 28,714.30
income 8 7 7 8
Expenses
Material 22,042.5 16,821.3 15,963.1 13,903.2 11,155.33
consumed 8 9 3 3
Manufacturing 3,762.77 3,317.74 2,925.43 2,793.45 2,427.11
expenses
Personnel 8,401.73 7,919.28 5,087.76 4,156.97 3,811.75
expenses
Selling expenses 935.68 1,143.90 1,066.73 1,108.12 971.78
Administrative 1,644.78 1,321.44 1,064.29 1,035.99 780.67
expenses
Expenses -1,930.40 -1,832.22 -1,423.08 -1,352.05 -921.71
capitalized
Cost of sales 34,857.1 28,691.5 24,684.2 21,645.7 18,224.93
4 3 6 1
Operating profit 8,941.44 11,267.1 9,644.51 6,554.77 10,489.37
4
Other recurring 2,279.89 1,539.69 1,354.96 892.30 676.55
income
Adjusted PBDIT 11,221.3 12,806.8 10,999.4 7,447.07 11,165.92
3 3 7
Financial 253.24 250.94 332.13 467.76 605.05
expenses
Depreciation 1,285.12 1,235.48 1,211.48 1,207.30 1,126.95
Other write offs 128.02 75.49 128.59 181.44 184.89
Adjusted PBT 9,554.95 11,244.9 9,327.27 5,590.57 9,249.03
2
Tax charges 3,284.28 3,934.65 3,253.80 1,694.36 2,592.37
Adjusted PAT 6,270.67 7,310.27 6,073.47 3,896.21 6,656.66
Non recurring -277.12 161.90 53.75 45.64 -14.35
items
Other non cash 181.26 64.61 60.57 71.12 174.66
adjustments
Reported net 6,174.81 7,536.78 6,187.79 4,012.97 6,816.97
profit
Earnings before 22,052.4 18,348.4 12,886.6 7,861.47 6,839.66
appropriation 7 3 3
Equity dividend 1,073.90 1,528.25 1,280.42 826.08 1,363.03

5
8
Preference - - - - -
dividend
Dividend tax 181.26 258.91 197.98 115.86 185.24
Retained 20,797.3 16,561.2 11,408.2 6,919.53 5,291.39
earnings 1 7 3

Growth of Company

Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Sales 49,739.7 46,261.0 40,291.7 33,220.7 32,569.53
4 5 5 8
Operating 9,023.47 11,339.0 10,127.0 6,847.41 10,810.12
profit 2 2
Interest 253.24 250.94 332.13 467.76 605.05
Gross profit 10,672.5 12,390.9 10,634.1 6,913.04 10,492.30
5 6 0
EPS (Rs) 14.95 18.24 14.94 9.71 16.40

Sales Chart

60,000.00
49,739.74
50,000.00 46,261.05
40,291.75
40,000.00 33,220.78 32,569.53
30,000.00
`
20,000.00

10,000.00

0.00
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Years

Sales Chart

8,000.00 7,536.78
6,816.97
7,000.00 6,174.81 6,187.79
6,000.00
5,000.00 4,012.97
4,000.00
`
3,000.00
2,000.00
1,000.00
0.00
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Years

5
9
 Year end Mar 09 Mar 08 Mar 07 Mar 06 Mar 05
EPS(Rs) 14.95 18.24 14.54 9.44 16.06
Book value(Rs) 67.75 55.84 41.92 30.51 24.95
NPM(%) 13.40 18.116 15.71 12.28 21.29
ROCE(%) 27.61 44.03 51.28 38.03 68.77
RONW(%) 22.06 32.76 41.47 35.04 88.85
Debt/equity 0.26 0.13 0.28 0.44 0.94
P/E 6.45 10.13 7.85 8.82 3.92

Here from the above information it can be seen that the EPS, Book value, Net
Profit Margin are increased continuously till 2008 as compared to 2006 and
2005 but it decreased in 2009. SAIL should concentrate on PE Ratio because it
has decreased in 2007. The debt-equity ratio is increased which is not good
sign. The investor of this company should take hold position for the long
period to get good dividends and good market price in future.

6
0
 TATA STEEL LIMITED

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

Registered Office Bombay House, 24 Homi Mody Street Fort,
Mumbai - 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

6
1
Auditor Deloitte Haskins & Sells
Face Value 10
Market Lot 1
Listing Kolkata, Luxembourg, Mumbai, NSE
Registrar TSR Darashaw Ltd
6-10 Haji Moosa, Patrawala Ind.Estate,
DrEMoses Rd Mahalaxm, Mumbai - 400 011

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.
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
6
2
 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.

Share Holding Pattern

% %
No. Of No. Of No. Of %
Holdin Holdin
Shares Shares Shares Holding
g g
Promoter's holding
27724885 27664687 24802585
Indian Promoters 31.25 31.18 33.95
7 7 7
27724885 27664687 24802585
Sub total 31.25 31.18 33.95
7 7 7
Non promoter's holding
Institutional investors
Banks Fin. Inst. and 18352544 17249930 14491700
20.69 19.44 19.84
Insurance 4 1 5
16833881 16524994 10620976
FII's 18.97 18.63 14.54
3 7 6
38829696 36995644 27756423
Sub total 43.77 41.70 37.99
4 6 1
Other investors
Private Corporate
30170481 3.40 27840082 3.14 25558918 3.50
Bodies
NRI's/OCB's/Foreign
1537949 0.17 1628600 0.18 6225 -
Others
Government 121659 0.01 121659 0.01 120633 0.02
Others 5249830 0.59 18313512 2.06 5314080 0.73
Sub total 37079919 4.18 47903853 5.40 30999856 4.24
18458832 19270688 17400252
General public 20.81 21.72 23.82
1 5 7
88721406 88721406 73059247
Grand total 100.00 100.00 100.00
1 1 1

6
3
 BALANCE SHEET
(Rs. in crore)
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Sources of Funds
Owner's fund
Equity share 730.79 730.78 580.67 553.67 553.67
capital
Share application - - 147.06 - -
money
Preference share 5,472.66 5,472.52 - - -
capital
Reserves & 23,501.1 21,097.4 13,368.4 9,201.63 6,506.25
surplus 5 3 2
Loan Fund
Secured loans 3,913.05 3,520.58 3,758.92 2,191.74 2,468.18
Unsecured loans 23,033.1 14,501.1 5,886.41 324.41 271.52
3 1
Total 56,650.7 45,322.4 23,741.4 12,271.4 9,799.62
8 2 8 5
Uses of Fund
Fixed assets
Gross block 20,057.0 16,479.5 16,029.4 15,407.1 13,085.07
1 9 9 7
Less : revaluation - - - - -
reserve
Less : 9,062.47 8,223.48 7,486.37 6,699.85 5,845.49
accumulated
depreciation
Net block 10,994.5 8,256.11 8,543.12 8,707.32 7,239.58
4
Capital w-i-p 3,487.68 4,367.45 2,497.44 1,157.73 1,872.66
Investments 42,371.7 4,103.19 6,106.18 4,069.96 2,432.65
8
Net Current Assets
Current assets, 11,591.6 38,196.3 14,671.9 4,997.00 4,935.90
loans & advances 6 4 1

6
4
Less : current 11,899.9 9,755.78 8,279.70 6,913.83 6,895.99
liabilities & 5
provisions
Total net current -308.29 28,440.5 6,392.21 -1,916.83 -1,960.09
assets 6
Misc. ex not 105.07 155.11 202.53 253.27 214.82
written
Total 56,650.7 45,322.4 23,741.4 12,271.4 9,799.62
8 2 8 5
Notes:
B.V of unquoted 41,665.6 3,790.47 5,793.46 3,477.38 2,119.75
investments 3
M.V of quoted 1,491.89 3,260.65 2,979.00 4,079.52 1,952.43
investments
Contingent 12,188.5 9,250.08 7,185.93 3,872.34 2,983.05
liabilities 5
No of Eq. sh o/s 7305.92 7305.84 5804.73 5534.73 5534.73
(Lacs)

Profit & Loss Account

(Rs. in crore)

Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Income
Operating 24,348.3 19,654.4 17,452.6 15,132.0 14,489.70
income 2 1 6 9
Expenses
Material 8,279.44 6,024.80 5,679.95 4,661.53 4,288.88
consumed
Manufacturing 3,349.96 2,693.73 2,589.24 2,364.40 2,219.02
expenses
Personnel 2,305.81 1,589.77 1,454.83 1,351.51 1,291.00
expenses
Selling expenses 61.49 52.53 64.71 80.75 86.18
Administrative 1,518.83 1,224.54 986.20 902.30 853.42
expenses
Expenses -343.65 -175.50 -236.02 -112.62 -204.82
capitalized
Cost of sales 15,171.8 11,409.8 10,538.9 9,247.87 8,533.68
8 7 1
Operating profit 9,176.44 8,244.54 6,913.75 5,884.22 5,956.02
Other recurring 305.36 347.28 485.14 256.95 156.55
income
Adjusted PBDIT 9,481.80 8,591.82 7,398.89 6,141.17 6,112.57
Financial 1,489.50 929.03 251.25 168.44 228.80
expenses
Depreciation 973.40 834.61 819.29 775.10 618.78
Other write offs - - - - -

6
5
Adjusted PBT 7,018.90 6,828.18 6,328.35 5,197.63 5,264.99
Tax charges 2,114.87 2,380.28 2,040.47 1,734.38 1,823.82
Adjusted PAT 4,904.03 4,447.90 4,287.88 3,463.25 3,441.17
Non recurring 297.71 239.13 -123.02 -4.37 -47.80
items
Other non cash - - 57.29 47.50 80.79
adjustments
Reported net 5,201.74 4,687.03 4,222.15 3,506.38 3,474.16
profit
Earnings before 11,589.2 9,281.01 7,198.31 5,296.59 4,111.58
appropriation 0
Equity dividend 1,168.95 1,168.93 943.91 719.51 719.51
Preference 109.45 22.19 - - -
dividend
Dividend tax 214.10 202.43 160.42 100.92 101.86
Retained 10,096.7 7,887.46 6,093.98 4,476.16 3,290.21
earnings 0

Growth of company
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Sales 24,315.77 19,693.28 19,762.57 17,144.22 15,876.87
Operating profit 9,133.43 8,223.54 6,973.27 5,931.51 6,045.36
Interest 1,152.69 878.70 173.90 118.44 186.80
Gross profit 8,289.01 7,679.84 7,233.04 6,067.83 6,006.59
EPS (Rs) 71.18 64.14 72.71 63.33 62.75

6
6
 Reported Net Profit

6,000.00
5,201.74
5,000.00 4,687.03
4,222.15
4,000.00 3,506.38 3,474.16

3,000.00
`
2,000.00

1,000.00

0.00
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Years

Sales Chart

30,000.00
24,315.77
25,000.00
19,693.28 19,762.57
20,000.00 17,144.22 15,876.87
15,000.00
`
10,000.00

5,000.00

0.00
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Years

Year end Mar 09 Mar 08 Mar 07 Mar 06 Mar 05

EPS(Rs) 71.18 64.14 69.95 61.51 60.91
Book value(Rs) 331.68 298.78 240.22 176.19 127.51
NPM(%) 21.09 23.43 21.37 20.46 21.89
ROCE(%) 15.01 17.11 36.79 50.13 63.79
RONW(%) 21.10 21.52 35.62 41.70 60.02
Debt/equity 1.34 1.08 0.51 0.31 0.53
P/E 2.89 10.81 6.43 8.72 6.58

6
7
Here from the above information it can be found that the Sales, EPS, Book
value, Net Profit Ratio are increased continuously in 2009 as compared to
2006 and 2005 but TATA should concentrate on PE Ratio because it has
decreased in 2009 tremendously. The investor of 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.
These shares are for long term investment purpose.

6
8
 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 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).
6
9
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.

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

7
0
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 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
Registrar Alankit Assignments Ltd
2E/21 Alankit House, Anarkali Market,
Jhandewalan Extn, New Delhi - 110055

7
1
 Share Holding Pattern
% %
No. Of No. Of No. Of %
Holdin Holdin
Shares Shares Shares Holding
g g
Promoter's holding
47276159 47276149
Indian Promoters 50.79 50.79 78793534 50.93
2 2
Foreign Promoters 72525000 7.79 72525000 7.79 12087500 7.81
54528659 54528649
Sub total 58.58 58.58 90881034 58.74
2 2
Non promoter's holding
Institutional investors
Banks Fin. Inst. and
1218533 0.13 877142 0.09 222516 0.14
Insurance
21219594 20039650
FII's 22.80 21.53 31763531 20.53
8 7
24195054 23450997
Sub total 25.99 25.19 38772800 25.06
7 4
Other investors
Private Corporate
46169092 4.96 50774817 5.46 9366843 6.05
Bodies
NRI's/OCB's/Foreign
10944574 1.18 11145792 1.20 1884821 1.22
Others
Others 153732 0.02 135531 0.01 902 -
Sub total 57267176 6.15 62055918 6.67 11252529 7.27
General public 86277299 9.27 88929230 9.55 13803419 8.92
93078161 93078161 15470978
Grand total 100.00 100.00 100.00
4 4 2

7
2
 Balance Sheet
(Rs. in Crore)
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Loan Funds
Owner's fund
Equity share capital 15.47 15.40 15.40 15.40 15.40
Share application money - - - - -
Preference share capital - - - - 1.00
Reserves & surplus 5,399.85 3,740.98 2,481.33 1,829.31 1,302.98
Loan Funds
Secured loans 2,105.49 1,783.39 2,115.61 1,780.77 1,159.51
Unsecured loans 2,857.16 2,079.96 1,392.11 964.60 336.35
Total 10,377.9 7,619.73 6,004.45 4,590.08 2,815.24
7
Uses of Assets
Fixed assets
Gross block 7,362.90 5,918.94 4,929.03 3,243.05 2,530.28
Less : revaluation reserve - - - - -
Less : accumulated depreciation 1,617.00 1,183.11 781.75 542.33 361.76
Net block 5,745.90 4,735.83 4,147.28 2,700.72 2,168.53
Capital work-in-progress 2,318.01 660.48 937.84 1,146.27 345.70
Investments 1,233.40 1,036.19 709.82 430.30 33.38
Net Current Assets:
Current assets, loans & 5,189.28 3,299.57 1,801.66 1,490.50 1,036.30
advances
Less : current liabilities & 4,111.64 2,115.48 1,595.39 1,178.45 769.67
provisions
Total net current assets 1,077.64 1,184.09 206.27 312.05 266.62
Miscellaneous expenses not 3.02 3.14 3.24 0.74 1.01
written
Total 10,377.9 7,619.73 6,004.45 4,590.08 2,815.24
7
Notes:
Book value of unquoted 1,233.40 1,036.19 709.82 430.30 30.55
investments
Market value of quoted - - - - -
investments
Contingent liabilities 4,967.08 5,476.85 3,029.51 1,008.24 899.21
Number of equity shares 1546.53 1539.61 307.92 307.92 307.92
outstanding (Lakhs)

7
3
 Profit & Loss Account
(Rs. in Crore)
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Income
Operating income 7,677.83 5,368.14 3,523.08 2,565.04 2,253.60
Expenses
Material consumed 3,419.42 1,727.40 1,068.50 536.71 528.20
Manufacturing 773.84 670.87 510.96 545.44 514.13
expenses
Personnel expenses 181.46 132.20 90.14 79.74 50.85
Selling expenses 327.76 264.73 276.47 222.18 171.87
Administrative 337.49 277.03 167.20 148.16 72.42
expenses
Expenses capitalized - - - - -
Cost of sales 5,039.97 3,072.23 2,113.27 1,532.23 1,337.46
Operating profit 2,637.86 2,295.91 1,409.81 1,032.81 916.15
Other recurring income 199.46 57.31 36.08 26.02 19.34
Adjusted PBDIT 2,837.32 2,353.22 1,445.89 1,058.83 935.49
Financial expenses 267.89 243.02 173.19 108.02 92.51
Depreciation 433.03 451.51 336.47 219.17 152.48
Other write offs 0.20 0.27 0.27 0.27 0.31
Adjusted PBT 2,136.20 1,658.42 935.96 731.37 690.18
Tax charges 465.40 265.55 241.85 154.91 158.11
Adjusted PAT 1,670.80 1,392.87 694.11 576.46 532.08
Non recurring items -144.78 -144.57 7.78 -12.00 -12.48
Other non cash 10.46 -11.34 1.10 8.48 -3.90
adjustments
Reported net profit 1,536.48 1,236.96 702.99 572.94 515.70
Earnigs before 4,584.28 3,239.54 2,136.05 1,528.77 1,057.60
appropriation
Equity dividend 85.33 62.02 55.43 46.19 46.19
Preference dividend - - - - -
Dividend tax - 10.55 8.87 6.48 6.33
Retained earnings 4,498.95 3,166.97 2,071.75 1,476.10 1,005.08

Growth of Company
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Sales 7,653.19 5,410.75 3,919.79 2,877.95 2,449.87
Operating profit 2,492.67 2,131.39 1,402.40 1,027.64 900.35
Interest 204.00 226.49 150.06 108.13 87.54
Gross profit 2,434.91 1,954.02 1,281.31 947.02 830.24
EPS (Rs) 99.38 80.32 45.65 37.20 33.49

7
4
 Sales Chart

9,000.00
7,653.19
8,000.00
7,000.00
6,000.00 5,410.75
5,000.00 3,919.79
4,000.00 ` 2,877.95
3,000.00 2,449.87
2,000.00
1,000.00
0.00
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Years

Reported Net Profit

1,800.00
1,536.48
1,600.00
1,400.00 1,236.96
1,200.00
1,000.00
800.00 702.99
` 572.94 515.7
600.00
400.00
200.00
0.00
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Years

Year end Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
EPS (Rs) 99.38 80.32 225.36 183.92 165.38
Book value (Rs) 350.16 243.98 804.35 596.97 428.05
N.P Margin (%) 19.50 22.79 18.03 19.91 21.07
P/E 2.02 4.29 10.55 10.32 6.33
ROCE (%) 23.16 24.95 21.15 22.43 32.51
RONW (%) 28.38 32.95 32.58 36.30 47.45
Debt/equity 0.91 1.03 1.45 1.34 1.16

Here from the above information I found that the Sales, EPS, Book value, PE
Ratio has decreased in 2008 as compared to 2006 and 2005 but Net Profit
margin of Jindal has increased in 2008 and 2009. The debt-equity ratio is
decreased which is a good sign. Hence, this company is under control which is
good sign. The current position shows company is becoming fundamentally
strong. Investment in Jindal would give good result.

7
5
 Essar Steel Ltd
We are a fully integrated flat carbon steel manufacturer — from iron ore to
ready-to-market products with a current capacity of 14 million tons per annum
(MTPA). With our aggressive expansion plans in India, as well as Asia and
the Americas, we aim to achieve a capacity of 20 to 25 MTPA. Our products
find wide acceptance in highly discerning consumer sectors, such as
automotive, white goods, construction, engineering and shipbuilding.

Essar Steel is one of India's largest exporters of flat products, exporting to the
highly demanding US and European markets, and to the growing markets of
South East Asia and the Middle East.

A number of major client companies have approved our steel for their use,
including Caterpillar, Hyundai, Swaraj Mazda, the Konkan Railway, and
Maruti Suzuki. Essar Steel has acquired extensive quality accreditations. Our
lean team gives us one of the highest productivities and lowest manpower
costs among steel plants internationally.

Seamless integration

A major strategic advantage is our high level of forward and backward

integration. We are totally integrated - from raw material to finished products,
adding value at every stage of the manufacturing process.

Bailadilla facility: Iron ore beneficiation

At Bailadilla, where some of the world's richest and finest ore is available, we
have set up a beneficiation plant of 8 MTPA capacities, which ensures the
highest quality iron ore. The iron ore slurry is pumped through a 267 km
pipeline (the second longest in the world) to the pellet plant, yielding
advantages in quality, cost and real time inventory management.

Visakhapatnam facility: Pelletization

The slurry is received at our pellet plant at Visakhapatnam, which has a

capacity of 8 MTPA, providing vital raw material for the steel plant at Hazira.

Hazira facility

Our steel complex at Hazira, Gujarat, houses a 5.5 MTPA sponge iron plant,
the world's largest gas-based sponge iron plant in single location. The plant

7
6
provides raw materials for our state-of-the-art 4.6 MTPA hot rolled coil
(HRC) plant, the first and largest of India's new generation steel mills. This
plant is fed with inputs from four electric arc furnaces and three casters. The
complex's sophisticated infrastructure includes independent water supply and
power, oxygen and lime plants, a township and a captive port capable of
handling up to 8 MTPA of cargo with modern handling equipment like barges
and floating cranes.

Hazira Pipe Mill

Hazira Pipe Mill is located at Hazira, Gujarat has a combined capacity of

600,000-ton of helical submerged arc welded (HSAW) and longitudinal
submerged arc welded (LSAW) steel pipes along with internal and external
coating facilities of up to 2mn square meters annually. This pipe making
facility is backed by external and internal anti corrosion coating facilities.

Cold rolling complex

At the other end of the value chain, our downstream facilities include a 1.4
MTPA cold rolling complex, which adds further muscle to our steel making
facilities. The complex comprises two pickling lines of 1.4 MTPA capacities,
a reversing mill and a 1.2 MTPA tandem mill, two galvanizing lines of 0.5
MTPA, a batch annealing furnace of 0.5 MTPA, and a skin pass mill of 1.0
MTPA. This enables us to get into the genre of products that are tailor-made
for the automotive, white goods, shipbuilding, and agriculture and
construction industries - segments that had been the exclusive domain of a few
international manufacturers. Essar now holds the leadership position in the
cold rolling, galvanizing and pre-coated segments.

Pune, Maharashtra

We have 600,000-ton cold rolling plant, a 500,000-ton galvanizing plant, a

400,000-ton colors coating plant, and a 650,000-ton pickling line.

Retail initiatives

Essar Steel is the first steel company to set up the only retail chain for steel
products under the brand name Essar Hyper mart. It has a strong network of
over 230 steel retail outlets. These outlets are conveniently located across the

7
7
length and breadth of the country to cater to the customized requirements of
small and medium enterprises.

The hyper marts offer a comprehensive range of flat steel products for a
variety of applications. Other product lines, like longs, structural, and tubular,
are also being developed to make Essar Hyper mart a one-stop-shop for steel
products.

Services (across India)

Largest Steel Service Center facilities in India with an annual capacity of 2.5
million ton located in Pune (Maharashtra), Hazira (Gujarat), Bahadurgarh
(National Capital Region), and Chennai (Tamil Nadu).

TRANSFER AGENTS
Name: Data Software Research Co. Pvt. Ltd.
Address: Sree Sovereign Complex No. 22,
IV Cross Street Trustpuram,
Kodambakkam,
Chennai - 600 024, India.
Telephone: +91 44 2483 4487
Fax: +91 44 2483 4636
Email: mailto:eolinvestors@dfssl.com

CORPORATE OFFICE

Name: Essar Steel Limited

Address: Post Hazira,
Surat district,
Gujarat - 394 270, India.
Telephone: +91 0261 840 2400
Fax: +91 0261 840 2465

REGISTERED OFFICE
Name: Essar Oil Limited
Address: Khambhalia post,
Post Box No. 24,
Jamnagar district,
Gujarat - 361 305, India.
Telephone: +91 2833 241 444
Fax: +91 2833 241 666 / 241 818

7
8
 Share Holding Pattern
% %
No. Of No. Of No. Of %
Holdin Holdin
Shares Shares Shares Holding
g g
Promoter's holding
47276159 47276149
Indian Promoters 50.79 50.79 78793534 50.93
2 2
Foreign Promoters 72525000 7.79 72525000 7.79 12087500 7.81
54528659 54528649
Sub total 58.58 58.58 90881034 58.74
2 2
Non promoter's holding
Institutional investors
Banks Fin. Inst. and
1218533 0.13 877142 0.09 222516 0.14
Insurance
21219594 20039650
FII's 22.80 21.53 31763531 20.53
8 7
24195054 23450997
Sub total 25.99 25.19 38772800 25.06
7 4
Other investors
Private Corporate
46169092 4.96 50774817 5.46 9366843 6.05
Bodies
NRI's/OCB's/Foreign
10944574 1.18 11145792 1.20 1884821 1.22
Others
Others 153732 0.02 135531 0.01 902 -
Sub total 57267176 6.15 62055918 6.67 11252529 7.27
General public 86277299 9.27 88929230 9.55 13803419 8.92
93078161 93078161 15470978
Grand total 100.00 100.00 100.00
4 4 2

7
9
 Balance Sheet
(Rs. In Crore)
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Sources of Funds
Owner's fund
Equity share capital 15.47 15.40 15.40 15.40 15.40
Share appl. money - - - - -
Pref. share capital - - - - 1.00
Reserves & surplus 5,399.85 3,740.98 2,481.33 1,829.31 1,302.98
Loan Funds
Secured loans 2,105.49 1,783.39 2,115.61 1,780.77 1,159.51
Unsecured loans 2,857.16 2,079.96 1,392.11 964.60 336.35
Total 10,377.97 7,619.73 6,004.45 4,590.08 2,815.24
Uses of Fund
Fixed assets
Gross block 7,362.90 5,918.94 4,929.03 3,243.05 2,530.28
Less : revaluation
- - - - -
reserve
Less : accumulated
1,617.00 1,183.11 781.75 542.33 361.76
depreciation
Net block 5,745.90 4,735.83 4,147.28 2,700.72 2,168.53
Capital w-i-p 2,318.01 660.48 937.84 1,146.27 345.70
Investments 1,233.40 1,036.19 709.82 430.30 33.38
Net Current Assets
Current assets, loans
5,189.28 3,299.57 1,801.66 1,490.50 1,036.30
& advances
Less : current
liabilities & 4,111.64 2,115.48 1,595.39 1,178.45 769.67
provisions
Total net current
1,077.64 1,184.09 206.27 312.05 266.62
assets
Misc. Ex. not written 3.02 3.14 3.24 0.74 1.01
Total 10,377.97 7,619.73 6,004.45 4,590.08 2,815.24
Notes:
B.V of unquoted
1,233.40 1,036.19 709.82 430.30 30.55
investments
M.V of quoted invest. - - - - -
Contingent liabilities 4,967.08 5,476.85 3,029.51 1,008.24 899.21
No. of Eq. Sh. o/s
1546.53 1539.61 307.92 307.92 307.92
(Lacs)

8
0
 Profit & Loss Account
(Rs. In Crore)
Mar ' Mar ' Mar ' Mar ' Mar '
09 08 07 06 05
Income
Operating income 7,677.8 5,368.1 3,523.0 2,565.0 2,253.60
3 4 8 4
Expenses
Material consumed 3,419.4 1,727.4 1,068.5 536.71 528.20
2 0 0
Manufacturing 773.84 670.87 510.96 545.44 514.13
expenses
Personnel expenses 181.46 132.20 90.14 79.74 50.85
Selling expenses 327.76 264.73 276.47 222.18 171.87
Administrative 337.49 277.03 167.20 148.16 72.42
expenses
Expenses capitalised - - - - -
Cost of sales 5,039.9 3,072.2 2,113.2 1,532.2 1,337.46
7 3 7 3
Operating profit 2,637.8 2,295.9 1,409.8 1,032.8 916.15
6 1 1 1
Other recurring income 199.46 57.31 36.08 26.02 19.34
Adjusted PBDIT 2,837.3 2,353.2 1,445.8 1,058.8 935.49
2 2 9 3
Financial expenses 267.89 243.02 173.19 108.02 92.51
Depreciation 433.03 451.51 336.47 219.17 152.48
Other write offs 0.20 0.27 0.27 0.27 0.31
Adjusted PBT 2,136.2 1,658.4 935.96 731.37 690.18
0 2
Tax charges 465.40 265.55 241.85 154.91 158.11
Adjusted PAT 1,670.8 1,392.8 694.11 576.46 532.08
0 7
Non recurring items -144.78 -144.57 7.78 -12.00 -12.48
Other non cash 10.46 -11.34 1.10 8.48 -3.90
adjustments
Reported net profit 1,536.4 1,236.9 702.99 572.94 515.70
8 6
Earnings before 4,584.2 3,239.5 2,136.0 1,528.7 1,057.60
appropriation 8 4 5 7
Equity dividend 85.33 62.02 55.43 46.19 46.19
Preference dividend - - - - -
Dividend tax - 10.55 8.87 6.48 6.33
Retained earnings 4,498.9 3,166.9 2,071.7 1,476.1 1,005.08
5 7 5 0

Growth of company
Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04 Mar ' 03
Sales 9,000.46 6,839.09 6,533.25 4,024.60 1,764.78
8
1
Operating profit 1,936.03 1,397.19 2,199.52 858.82 380.18
Interest 617.94 407.55 550.73 397.68 304.10
Gross profit 1,337.31 1,192.89 1,653.35 477.84 82.67
EPS (Rs) 3.82 9.20 11.63 1.18 -3.10
Sales

10,000.00 9,000.46
9,000.00
8,000.00
6,839.09 6,533.25
7,000.00
6,000.00
5,000.00 4,024.60
4,000.00
3,000.00
1,764.78
2,000.00
1,000.00
0.00
Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04 Mar ' 03

Reported net profit

1,536.48
1,600.00
1,400.00 1,236.96
1,200.00
1,000.00
800.00 702.99
572.94
600.00 515.7

400.00
200.00
0.00
Mar ' 07 Mar ' 06 Mar ' 05 Mar ' 04 Mar ' 03

8
2
 FINDINGS
Comparative Ratio of Three Companies
Attribute Date JSW SAIL TATA
PE ratio 12/3/2010 6.81 15.66 8.55
EPS (Rs) Mar, 09 99.38 14.95 71.18
Sales (Rs crore) Dec, 09 1,769.38 9,878.68 6,374.88
Face Value (Rs) 1.00 10.00 10.00
Net profit margin (%) Mar, 09 19.50 13.40 21.09
Last bonus 29/07/09 5:01 1:02
Last dividend (%) 27/05/09 550 16 160
Return on average equity Mar, 09 28.38 22.06 21.10

As we can see from the graphs 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 but now-a-
days it is the most profitable company as it is growing very rapidly, and The
Tata steel has maintained its productivity and performance consistently.
Comparative study of all the three companies shows that Jindal Saw Ltd. is
quite preferable for the selection of the investment.

PE ratio
Return on average equity

EPS15.66
(Rs) Last dividend (%)
16 28.38
14 30
12 99.38 22.06 21.10
10 100 8.55 600
20 550
6.81
8
80 71.18
6 10
60 400
4
2
40 0 160
0 200
JSW SAIL14.95 TATA JSW SAIL TATA
20 16
0 0
JSW SAIL TATA JSW SAIL TATA

Net profit
Last bonus
margin (%) Sales Value
Face (Rs crore)
(Rs)

10.00
9,878.68 10.00
25.00
6:00 5:01 21.09 10,000.00
10.00
19.50
20.00
4:48 8,000.00
8.00 6,374.88
13.40
15.00
3:36 6,000.00
6.00
10.00
2:24 4,000.00
4.00 8
1:02 1,769.38 3
1:12
5.00 2,000.00
2.00 1.00
0:00
0.00 0.00
0.00
JSW
JSW SA
SAILIL TA
TATA
TA JSW
JSW SASA
IL IL TATA
TATA
CONCLUSION

The stock of TATA Steel should be at HOLD rating as its P/E has decreased
and earning per share had increased significantly.

BUY rating for the stock of Jindal as its EPS shows increase, Debt/Equity
shows decrease and Book Value had also increased.

The stock of SAIL should be kept at HOLD position as its Book value had
increased but the other ratios had not shown any significant movement.

BIBLIOGRAPHY
Reference book: -

- Avdhani
- Fisher & Jordan
-Investments, Bodie

Sources: -

Source 1: CIA World Fact book - Unless otherwise noted, information in this
page is accurate as of September 17, 2009
Source 2: International Monetary Fund - 2009 World Economic Outlook
Source: 3 Wikipedia
Source: 4 CSO, Ministry of Statistics and Program Implementation
Source: 5 Ministries of Commerce and Industry
Source: 6 IISI
Source: 7 Joint Plant Committee

8
4
Web-sites: -

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

8
5