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Page | 1
PROJECT REPORT
In
Prof. S.S.Ahmed
P.S PAL
AGM( Fi na n c e )
Bhubaneswar
Ranchi.
Swagat Vihar
Declaration
Signature
Acknowledgement
Whatever I did and whatever I achieved during the course of my limited life is
just not done only by my own efforts, but by the efforts contributed by other
people associated with me indirectly or directly. I thank all those people who
contributed to this from the very beginning till its successful end.
Sincerely thank Miss. Mannu kalia mam), Person of amiable personality, for
assigning such a challenging project work which has enriched my work
experience. For her extended guidance , encouragement, support and
reviews without whom this project would not have been a success.
Page | 4
ABSTRACT
has been a very good experience. Every manufacturing company faces the
problem of
and the profit can be increased only if it is able to manage the financial position
of its firm.
At the same time the company can provide customer satisfaction and hence can
improve
seriesan al ysis of SAIL for the years 2003 to 2009 and the second phase was
conducted on a
The experience that I gathered over the past two months has
certainly provided the orientation, which I believewill help me inshoulder ing any
responsibility in future.
Page | 5
TABLE OF CONTENTS
6-11
12-19
20-22
4. LITERATURE REVIEW
23-35
36-66
6.COMPETITOR ANALYSIS
67-70
71
8.CONCLUSION
72
9.BIBLIOGRAPHY
73
Page | 6
Company Profile
Established in January 24, 1973 with an authorized capital of Rs. 2000 crores,
Steel Authority of India Limited (SAIL) is the leading steel-making company in
India. SAIL is a fully integrated iron and steel maker company, producing both
basic and special steels for domestic construction, engineering, power, railway,
automotive and defense industries and it also produce steel for sale in export
markets.
Steel Authority of India Limited is ranked amongst the top ten companies in
public sector companies in India in terms of its turnover. 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.
Sail Today
SAIL today is one of the largest industrial entities in India. Its strength has been
the diversified range of quality steel products catering to the domestic, as well as
the export markets and a large pool of technical and professional expertise.
Today, the accent in SAIL is to continuously adapt to the competitive business
environment and excel as a business organization, both within and outside India.
Type of Organization:
Steel Authority of India' - a Government of India Enterprise and one of the largest
and profit making public sector steel products manufacturing company. Steel
Authority of India produces for both basic and special steels for construction,
engineering, power, railway, automotive and defense industries and caters to
Indian and International markets. Steel Authority of India has five steel plants,
one subsidiary, three special steel plants, multi marketing units at all regions and
nine other specialized units to support growth and development of the Steel
Industry in India. It produces Blooms, Billets, Slabs, Crane Rails, Bars, Rods & Re-
bars, Wire Rods, HR Coils, Sheets, Plates, CR Coils & Sheets, GC Sheets, GP
Sheets and Coils, Tinplates, Electrical Steel, Tubular Products, Pipes, Railway
Products, Rails, Wheels, Axles, Wheel Sets.
Semi-Finished Products.
Railway Products.
Plates.
Page | 8
Domains ±
Consultancy services.
Contract research.
Training.
y
Salem Steel Plant (SSP) in Tamil Nadu
Subsidiary
India is ranked as the 5th largest steel producing country in the world, while SAIL
is ranked as the 21st largest steel producer in the world during2008 (Source:
WSA) SAIL continues to be the largest steel producer of finished steel in India
with around 1/5th of the market share.
SWOT ANALYSIS
STRENGTHS
The diversified product mix and multi location production units are an area of
SAIL as a single source is able to cater to the entire steel requirement of any
customer. Also it has a nation wide distribution network with a presence in every
district in India. This makes quality steel available throughout the length and
breadth of the country.
SAIL has the largest captive iron ore operations in India, which takes care of its
entire requirement. With plans in place to expand the mining operations, the
company will continue to be self sufficient in iron ore after completion of the
present phase of expansion.
The company has one of the biggest in-house research and development centres
in Asia. SAIL's RDCIS (Research &Development Centre for Iron & Steel) is a
source of regular product and process innovation.
Page | 10
WEAKNESSES
SAIL is dependent on the market purchase for a key input ± coking coal. As India
does not have sufficient coking coal deposits, most of the supply is from external
sources.
At present around 20% of the products are in the form of semi -finished steel,
SAIL being a Public Sector unit has to follow set procedures in conducting its
business. On occasions, it slows down the decision making with attendant fallout.
OPPORTUNITIES
The current per capita finished steel consumption in the country is approx. 44 kg
as compared to the likely world average of around 190kg. There is a substantial
scope for increase in domestic steel consumption.
The size range and quality makes SAIL'S long products a preferred choice for
project customers.
Page | 11
THREATS
International prices of steel dropped by over 60% from their peak level in July,
2008. With import duty at 5%, and poor demand from developed countries,
cheap imports are on an increase into the country putting pressure on realization
of the domestic steel producers.
With significant excess capacity in the global steel industry during 2009 there is
a threat of dumping cheap steel to India which is likely to be the only major steel
consuming nation with a positive growth.
Clearance and renewal of mining lease, which involve multiple agencies at the
State
Delay in opening new mines, and / or expanding existing mines may constrain
raw materials availability, thereby impacting growth in saleable steel production,
and overall economics of operation.
Law and order situation in mining areas in some of the states is also a cause of
Centre for Engineering & Technology (CET) was formed in 1982 in pursuance of
decision taken by SAIL Board in its 83rd meeting held on 28th January 1982. CET
is the in-house design, engineering and consultancy unit of SAIL. It is also the
nodal agency for acquisition and lateral transfer of technologies pertaining to
Iron & Steel within SAIL plants and units. The range of services provided by CET
includes conceptualization, project reports, project evaluation & appraisal,
project consultancy, design & engineering and project management. CET has
been providing its services in all the areas of iron and steel making including in
the related areas like mine planning and development, infrastructure
development, industrial piping, industrial warehousing, material handling
system, industrial pollution control and environment management systems,
water supply and sanitation, town planning, small power projects, etc.
Besides, CET has only two unit offices at following locations to coordinate CET¶s
activities
Technology Improvement
CET-SAIL(FINANCEDEPATRMENT)
P&A.
It can be seen from the role and responsibilities of finance department that most
of the work done by the finance department involves preparation of
remuneration of employees. Even during the preparation of the budget about
85% of the costs are attributed to employee remuneration which contains both
executive pay and non executive pay. It comes under fixed costs while other
expenses like travelling expenses, stationary expenses and other miscellaneous
expenses which come under variable costs.
basis of fixed percentage of total cost of the project for which services where
rendered.
Page | 16
1. CET not being a profit center it cannot consider earning which is hypothetical
in
2. Since the value of the assignments under this method has no relation with the
expenditure, practical difficulties where experienced in restricting the valuation
to the total expenditure of the CET.
299
29
58
ED sectt,MTT's
212
are clockable
365
76
36
8. EL @3% of 253(Sl.No.5,6,7)
245
Available
1960
415520
120474
295046
Sl.no.12)
492900000
1670.050
1670
RATES
The above method is more suitable method for CET being an inhouse
consultancy
Preparation of vouchers
Total sanctioned projects 137 nos. against 135 nos. in corresponding period last
year. Quantum of sanctioned projects being handled valued at Rs. 10782 crores.
y
Highest nos. of assignment handled at 327 in a year, up by 7 nos. over previous
year.
OTHER HIGHLIGHTS
Page | 19
During the fiscal 2009-2010, a lot of emphasis was put in the RMD projects and
along with RMD new strategies where formulated for faster execution of projects.
Video conferencing facility which connects Ranchi and sub centers at Bhilai ,
Durgapur , Bokaro and Rourkela is being used extensively for quarterly projec
CET has taken measures for working in a paperless environment. All movements
o
Finance is one of the most primary requisites of a business and the modern
management obviously depends largely on the efficient management of the
finance. Financial statements are prepared primarily for decision making. They
play a dominant role in setting the frame work of managerial decisions. The
finance manager has to adhere to the five R¶s with regard to money. Whether
owned or borrowed funds. At the right time to preserve solvency from the right
sources and at the right cost of capital. The term financial analysis is also known
as µanalysis and interpretation of financial statements¶ refers to the process of
determining financial strength and weakness of the firm by establishing strategic
relationship between the items of the Balance Sheet, Profit and Loss account and
other operative data. The purpose of financial analysis is to diagnose the
information contained in financial statements so as to judge the profitability and
financial soundness of the firm.
4. To analyze the profitability and solvency position of the unit with the existing
tools of financial
analysis.
5. To study the changes in the assets, liabilities structure of the company during
the period of study.
1. The analysis and interpretation are based on secondary data contained in the
published annual
2. Due to the limited time available at the disposable of the researcher the study
has been confined
3. Ratio itself will not completely show the company¶s good or bad financial
position.
4. The study of financial performance can be only a means to know about the
financial condition of
the company and cannot show a through picture of the activities of the company.
RESEARCH METHODOLOGY
RESEARCHDESIGN
Descriptive research is used in this study because it will ensure the minimization
of bias and maximization of reliability of data collected. The researcher had to
use fact and information already available through financial statements of earlier
years and analyze these to make critical evaluation of the available material.
Hence by making the type of the research conducted to be both Descriptive and
Analytical in nature.
From the study, the type of data to be collected and the procedure to be used for
this purpose were
decided.
Page | 22
DATA COLLECTION
The required data for the study are basically secondary in nature and the data
are collected from the
SOURCES OFDATA
The sources of data are from the annual reports of the company from the year
2003 to 2009.
The data collected were edited, classified and tabulated for analysis. The
analytical tools used in this
study are:
1. Comparative statement.
2. Common Size Statement.
3. Trend Percentage.
4. Ratio Analysis.
5. Cash Flow Analysis
4.LITERATURE REVIEW
Balance Sheet
The shareholders equity comprises the total owner ship claims in a firm. This
claim includes net worth of shareholders equity and preferred stock. The
traditional company balance sheet statement of assets valued on the basis of
their original cost and the means by which they have been financed by its
shareholders, lenders, suppliers and by the retention of income.
Income statement
The results of operations of a business for a period of time are presented in the
income statement.
Financial statements are sometimes recast for facility of scrutiny. The effects of
the conductor
businesses are reflected in its balance sheet by changes in assets and liabilities
and in its net worth.
Common-size statements
The percentage balance sheet is often known as the common size balance sheet.
Such balance sheet are, in a broad sense ratio analysis general items in the
profit and loss accounts and in the balance sheet are expressed in analytical
percentages when expressed in the form, the balance sheet and profit and loss
account are referred to as a common size statement. Such statements are useful
in comparative analysis of the financial position in operating results of the
business.
A cash flow statement is the financial analysis of the net income or profit after
including book expense items which currently do not use cash; for example,
depreciation, depletion and amortization. Revenue items, which do not currently
provide funds, are to be deducted. A gross cash flow is net profit after tax plus
provision for depreciation. A net cash flow is arrived after deducting dividends
from the gross cash flow. The cash flow is very significant because it represents
the actual amount of cash available to the business.
Page | 26
Ratio Analysis
Financial ratio analysis is the calculation and comparison of ratios which are
derived from the information in a company's financial statements. The level and
historical trends of these ratios can be used to make inferences about a
company¶s financial condition, its operations and attractiveness as an
investment.
Financial ratios are calculated from one or more pieces of information from
company¶s financial statements. For example, the "gross margin" is the gross
profit from operations divided by the total sales or revenues of a company,
expressed in percentage terms. In isolation, a financial ratio is a useless piece of
information. In context, however, a financial ratio can give a financial analyst an
excellent picture of a company's situation band the trends that are developing.
A ratio gains utility by comparison to other data and standards. Taking our
example, a gross profit margin for a company of 25% is meaningless by itself. If
we know that this company's competitors have profit margins of 10%, we know
that it is more profitable than its industry peers which are quite favorable. If we
also know that the historical trend is upwards, for example has been increasing
steadily for the last few years, this would also be a favorable sign that
management is implementing effective Business, policies and strategies.
Classification of Ratios
Financial ratio analysis involves the calculation and comparison of ratios which
are derived from the information given in the company's financial statements.
The historical trends of these ratios can be used to make inferences about a
company¶s financial condition, its operations and its investment attractiveness.
Financial ratio analysis groups the ratios into categories that tell us about the
different facets of
solvency
Turnover Ratios show how efficient a company's operations and how well it is
using
its assets.
Liquidity Ratios
Liquidity Ratios are ratios that come off the Balance Sheet and hence measure
the Liquidity of the company as on a particular day i.e. the day that the Balance
Sheet was prepared. These ratios are important in measuring the ability of a
company to meet both its short term and long term obligations.
1. Current Ratio
2. Liquid Ratio
3. Net working capital ratio
1. Current Ratio:
2. Quick Ratio:
Liquid ratio is also known as µquick¶ or µAcid test µratio. Liquid assets refer to
assets which are quickly convertible into cash. Current Assets other stock and
prepaid expenses are considered as quick assets. The ideal liquid ratio accepted
µnorm¶ for liquid ratio µ1¶.
Working Capital is more a measure of cash flow than a ratio. The result of this
calculation must be a positive number. Companies look at Net Working Capital
over time to determine a company's ability to weather financial crises. Loans are
often tied to minimum working capital requirements.
Turnover Ratios
The turnover ratio is also known as activity or efficiency ratios. They indicates
the efficiency with which the capital employed is rotated in the business (i.e.) the
speed at which capital employed in the business rotates. Higher the rate of
rotation, the greater will be the profitability. Turnover ratios indicate the number
of times the capital has been rotated in the process of doing business.
Fixed asset turnover is the ratio of sales (on your Profit and loss account) to the
value of your
fixed assets (on your balance sheet). It indicates how well your business is usin g
its fixed
assets to generate sales.
Generally speaking, the higher the ratio, the better, because a high ratio
indicates the business
has less money tied up in fixed assets for each dollar of sales revenue. A
declining ratio may
indicate that you've over-invested in plant, equipment, or other fixed assets.
Debtor¶s turnover ratio measures the efficiency with which the debtors are
converted into cash. This ratio indicates both the quality of debtors and the
collection efforts of the business enterprise. This ratio is calculated as follows:
Page | 30I. Debtors¶ turnover ratio
The numerator of this ratio should preferably be credit sales. This is so because
the denominator is logically related to credit sales as it arises from credit sales
only. Cash sales do not generate debtors. However, as the information related to
credit sales is not separately available in corporate accounts, so total sales could
be taken in the numerator. Average debtors are calculated by dividing the sum
of beginning-of-year and end-of-year balance of debtors by 2.
The ratio indicates the extent to which the debt has been collected in time. It
gives the
average debt collection period. The ratio is very helpful to lenders because it
explains to them
whether their borrowers are collecting money within a reasonable time. An
increase in the
period will result in greater blockage of funds in debtors.
4.StockTurnoverRatio:
industry.
Profitability Ratios
1. Return on Investment
2. Return on Shareholders¶ fund
3. Return on total asset
6. Operating ratio
7. Payout ratio
1. Return on Investment:
Page | 32
The term µoperating profit µ means µprofit before interest and tax¶ and the term
µcapital employed µ means sum-total of long term funds employed in the
business. i.e. Share capital + Reserve and surplus + long term loans ± [non
business assets +fictitious assets]
In case it is desired to work out the productivity of the company from the
shareholder¶s point
The term profit here means µNet Income after the deduction of interest and
tax¶. It is different from the ³Net operating profit´ which is used for computing
the µReturn on total capital employed¶ in the business. This is because the
shareholders are interested in Total Income after tax including Net non-operating
Income (i.e. Non- Operating Income -Non-Operating expenses).
This ratio is computed to know the productivity of the total assets.The term
µTotal Assets¶ includes the fixed asset, current asset and capital work in
progress of the company. The above table clearly reveals the relationship
between the net profit and Total Assets employed in the business.
4.Earnings perShare:
In order to avoid confusion on account of the varied meanings of the term capital
employed, the overall profitability can also be judged by calculating earnings per
share with the help of the following formula:
Earning Per Equity Share = Net Profit after Tax / Number of Equity Shares X 100
The earnings per share of the company helps in determining the market price of
the equity shares of the company. A comparison of earning per share of the
company with another will also help in deciding whether the equity share capital
is being effectively used or not. It also helps in estimating the company¶s
capacity to pay dividend to its equity shareholders.
Earning Per Equity Share = Net Profit after Tax / Number of Equity Shares X 100
This ratio indicates the Net margin on a sale of Rs.100.This ratio helps in
determining the efficiency with which affairs of the business are being managed.
An increase in the ratio over the previous period indicates improvement in the
operational efficiency of the business. The ratio is thus on effective measure to
check the profitability of business. However, constant increase in the above ratio
after year is a definite indication of improving conditions of the business.
6. Operating Ratio:
This ratio is a complementary of Net Profit ratio. In case the net profit ratio
is20%. It means
The operating cost include the cost of direct materials, direct labor and other
overheads, viz.,
This ratio is the test of the operational efficiency with which the business is being
carried. The operating ratio should be low enough to leave a portion of sales to
give a fair to the investors.
7. Payout Ratio:
This ratio indicates what proportion of earning per share has been used for
paying dividend. The payout ratio is the indicator of the amount of earnings that
have been ploughed back in the business. The lower the payout ratio, the higher
will be the amount of earnings ploughed back in the business and vice versa.
This ratio is particularly useful for those investors who are interested only in
dividend income. The ratio is calculated by comparing the ratio of dividend per
share with its market value.
The term µsolvency¶ refers to the ability of a concern to meet its long term
obligations. The long term indebtedness of a firm includes debenture holders,
financial institutions providing medium and long term loans and other creditors
selling goods on installment basis. So, the long term Solvency ratios indicate a
firm¶s ability to meet the fixed interest and costs and repayment schedules
associated with its long term borrowings. Two types of ratios are there:
1. Debt-Equity Ratio
Debt ±Equity ratio also known as External- Internal Equity Ratio is calculated to
measure the
relative claims of outsiders and the owners against the firm¶s assets.
This ratio is used to test the debt servicing capacity of a firm. The ratio is
calculated as:
3. Balance Sheet
Table No.1
(Rs. in Crores)
PARTICULARS 2003
2004
2005
2006
2007
2008
2009
ASSETS
Fixed Assets
14414
13550
12851
12920
12796
13960
18813
Investment
543
543
606
293
514
538
653
Current Assets
7312
8246
14333
15630
20375
26317
34511
Mis.Expenditure
536
378
294
215
129
59
0.00
P&L a/c
2765
Total Assets
25570
22717
28084
29058
33854
40874
53977
LIABILITIES
Shareholder¶s
Funds
5290
5037
10306
12601
17313
23063
27984
Loan Funds
12969
8690
5770
4298
4180
3045
7539
Current Liabilities
& Provisions
7311
8990
10166
10675
10949
13198
17122
Deferred
Liabilities
1842
1484
1412
1568
1332
TOTAL
LIABILITIES
25570
22717
28084
29058
33854
40874
53977
Page | 37
Table No.2
( Rs. in Crores)
PARTICUL
ARS
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
Cng % cng
Cng
% cng Cng
cngCng
cng
Cng
cng
Cng
cng
ASSETS
Fixed Assets
(864)
(5.9)
(699)
(5.1)
69
0.53(1 2 4
(0.9
Investment
nt
63
11.6
(313) (51.
6)
221 75.4
24
4.66
115 21.37
Current
Assets
934
12.77
6087
73.8
1297 9.04474
Mis.
(22)
(79)
(26.
8)
(84) (39)
(70)
(54)
(59) (100)
P&L a/c
LIABILITI
ES
Shareholder¶s
Funds
(253) (4.78)
5269
471
Loan Funds
(427
9)
(32.9) (2920)
(34)
(147
2)
(25.
5)
(118
(2.7
(113
5)
(27)
4494 147.6
Current
Liabilities&
Provisions
1679 22.96
1176
13.08
(868
2)
(85.
4)
(72)(4 .8
Deff.
Liabilities
Interpretation:
The comparative Balance Sheet of the company reveals that during the financial
year 2008± 2009 there has been a large increase in fixed assets (34.76%)
compared to 2007-2008(9.09%) while the long term liabilities which contains
shareholders funds and long term loans also show growth. Long term loans show
an increase of 147.6% in 2008-09 which means that most of the fixed assets are
financed by long term loans.
There has been an increase in plant and machinery in 2009 compared to 2008
which means that it
The company has increased its current assets by increasing the level of
inventories at Rs.10121 crores in 2009 compared to Rs.6857 crores in 2008. The
current liabilities highly fluctuate and show continuous increase in 2007-08
(20.5%) and 2008-09 (29.3%).
The Net Working Capital was in peak by the continuous increase after the year
2005. The company got good liquidity position due increase in Current assets but
it may affect the profitability of the company.
5. Income Statement
Table No.3
2009
(Rs. in crores)
PARTICULARS 2003
2004
2005
2006
2007
2008
2009
Sales
EBIDTA
Less:
Depreciation
19207
2165
1147
24178
4652
1123
31805
11097
1127
32280
7381
1207
39189
10966
1211
45555
12955
1235
48681
10941
1285
EBIT
Less: Interest
Charges
1018
1334
3529
901
9970
605
6174
468
9755
322
11720
251
9656
253
PBT
Less : Tax
(316)
(12)
2628
116
9365
2548
5706
1693
9423
3221
11469
3932
9403
3229
2512
6817
4013
6202
7537
6174
Page | 40
Table No.4
( Rs.in Crores)
PARTIC
ULARS
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
change
% of
change
change
% of
change
change
% of
change
change
% of
chang
change
% of
change
change
% of
Change
Sales
EBIDT
Less:
Depreci
ation
4971
2487
(24)
25.9
114.8
(2.1)
7627
6445
31.5
138.5
0.35
475
(3716)
80
1.49
(33.4)
7.09
6909
3585
21.4
48.5
0.3
6367
1989
24
16.2
18.1
1.98
3126
(2014)
50
6.86
(15)
0.04
EBIT
Less:
Interest
Charges
2511
(433)
246.6
(32.4
6441
(296)
182.5
(32.7)
(3769)
(137)
(38)
22.64
3581
(146)
58
(31)
1965
(71)
20.1
(22)
(2064)
(17.6)
0.7
PBT
Less :
Tax
2312
104
731.6
866.6
6737
2432
256.3
2096
(3659)
(855)
(39)
(33.5)
3717
1528
65.1
90.2
2046
711
21.7
22
(2066)
(703)
(18)
(17.8)
PAT
(Net
Profit)
2208 726
(1363) (18)
Interpretation
The Net Sales figure shows an increasing trend. After the year 2003 it shows an
y
The company has sufficient control over its depreciation which shows an
increase of
The company has considerable change in Interest Charges and rather the latter
has
The company has able to attain Profit after Tax of Rs.6174 crores in the year
2009 compare to 7536 crores in 2008 which can be attributed to increase in cost
of goods sold.
It may conclude that there is a sufficient progress in the company and the overall
7.Trend Percentage
Table No.5
Figure in
Particulars
2003
2004
2005
2006
2007
2008
2009
SALES
100
125.88
165.59
168.06
204.03
237.17
253.45
EBIT
100
346.66
979.37
606.48
958.25
1151.27
948.52
FIXED
ASSETS
100
94.00
89.15
89.63
88.77
96.85
130.51
CURRENT
ASSETS
100
112.77
196.02
213.75
283.57
359.91
471.97
CURRENT
LIABILITIES
100
122.96
139.05
146.01
149.76
180.52
234.19
WORKING
CAPITAL
100
81.83
302.55
370.29
554.05
673.81
889.54
CAPITAL
EMPLOYED
TOTAL
100
92.00
121.29
131.65
154.01
171.99
208.88
TOTAL
ASSETS
100
88.84
109.83
113.64
132.39
159.85
211.09
Interpretation:
The sales of the product have continuously increased in all the years up to
2009.The
The EBIT grows continuously up to 2008 and decreases slightly in 2009 due to
increase
Table No.6
Common Size Balance Sheet of Steel Authority of India Limited from 2003-2009
( Rs.in Crores)
PARTICULARS 2003
2004
2005
2006
2007
2008
2009
ASSETS
Fixed Assets
56.37
59.64
45.75
44.46
37.90
34.15
34.85
Investment
21.23
2.39
2.15
1.00
1.54
1.31
1.209
Current Assets
28.59
36.29
51.06
53.78
60.18
64.51
63.93
Mis.Expenditure
2.09
1.68
1.04
0.76
0.38
0.144
0.00
P&L a/c
10.72
Total Assets
100.00
100.00
100.00
100.00
100.00
100.00
100.00
LIABILITIES
Shareholder¶s
Funds
20.60
22.17
36.69
43.36
51.14
56.42
51.84
Loan Funds
50.73
38.25
20.54
14.79
12.34
7.44
13.96
Current
Liabilities
& Provisions
28.59
39.58
36.19
5.10
4.17
32.28
31.72
Deferred
Liabilities
6.58
36.75
32.35
3.83
2.46
Total Liabilities
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Page | 44
Interpretation:
Out of the total investment the owners funds is more compare to outsider¶s fund
in the
company which shows that the company has depended more on its own funds. It
shows that the company is traditionally financed.
liabilities which serve as an evidence for good working capital position of the
company.
RATIO ANALYSIS
Liquidity ratios
1.Current Ratio:
Table No.7
(Rs. In Crores)
YEAR
CURRENT
ASSETS
CURRENT
LIABILITIES
CURRENT RATIO
2003
7282
4777
1.524
2004
8075
6025
1.340
2005
14187
6608
2.146
2006
17384
8108
2.144
2007
20379
6500
2.917
2008
26317
9439
2.788
2009
34511
12228
2.822
Interpretation:
Here, the current ratio fluctuates from year to year but has maintained the ratio
above 2 from
CHART 1
2. Quick Ratio:
Table No.8
(Rs. In Crores)
YEAR
LIQUID ASSETS
CURRENT
LIABILITIES
QUICK RATIO
2003
3537
4777
0.740
2004
4993
6025
0.828
2005
9966
6608
1.508
2006
11174
8108
1.378
2007
13728
6984
1.965
2008
19460
9439
2.061
2009
24389
12228
1.994
Interpretation:
The liquid ratio denotes the concern had achieved more than the ideal ratio of
1:1 in the years
2005 onwards.
5000
10000
15000
20000
25000
30000
35000
40000
2003
2004
2005
2006
2007
2008
2009
current assets
current liabilities
Page | 47
CHART 2
Table No.9
YEAR
Net Working
Capital
Capital Employed
Net Working
Capital Ratio
2003
2505
16541
0.151
2004
2050
15218
0.134
2005
7579
20064
0.377
2006
9276
21438
0.432
2007
13879
24992
0.535
2008
16879
28450
0.593
2009
22283
34552
0.645
5000
10000
15000
20000
25000
30000
2003
2004
2005
2006
2007
2008
2009
liquid assets
current liabilities
Page | 48
CHART 3
Interpretation:
Net Working capital measures the firm¶s potential reserve of funds. It can be
related to net assets. This ratio represents the availability of working capital in
relation with capital employed.
5000
10000
15000
20000
25000
30000
35000
40000
2003
2004
2005
2006
2007
2008
2009
networking capital
capiotal employed
Page | 49
Turnover Ratios
Table No.10
YEAR
GROSS SALES
(Rs IN
CRORES)
FIXED
ASSETS (Rs in
crores)
FIXED
TURNOVER
RATIO (In
Times)
2003
19207
14036
1.36
2004
24178
13168
1.83
2005
31805
12485
2.54
2006
32280
12162
2.65
2007
39189
11598
3.37
2008
45555
11571
3.93
2009
48681
12269
3.96
Interpretation:
Here, the value of fixed assets employed in the business shows a reducing trend
which implies that company didn¶t add any more fixed asset during the period
2003 ±2008. Only the depreciation effect had been given to fixed asset. Fixed
turnover ratio has been increasing which is a good sign because the gross sales
have increased considerably without increasing the current assets.
Page | 50
CHART4
Table No.11
Interpretation:
Here, the Working Capital ratio shows a increasing trend from 2003 to 2004 and
then slope downwards due to holding high current assets in the form of cash,
bank balances and receivables in the year 2005 to 2009.
10000
20000
30000
40000
50000
60000
2003
2004
2005
2006
2007
2008
2009
SS SALES
FIXED ASSETS
YEAR
GROSS SALES
(Rs IN
CRORES)
WORKING
CAPITAL (Rs in
Crores)
Working capital
turnover ratio
(in times)
2003
19207
2505
7.667
2004
24178
2050
11.79
2005
31805
7579
4.196
2006
32280
9276
3.479
2007
39189
13879
2.823
2008
45555
16879
2.698
2009
48681
22283
2.184
Page | 51
CHART 5
Table No.12
YEAR
CREDIT SALES
(Rs. In Crores)
DEBTORS
(Rs. In Crores)
Debtors¶ turnover
ratio
(In times)
2003
19207
1660
11.570
2004
24178
1550
15.598
2005
31805
1908
16.669
2006
32280
1882
17.151
2007
39189
2315
16.928
2008
45555
3048
14.945
2009
48681
3024
16.098
Interpretation:
There has been increase in the turnover ratio from 2003-2006 and has stabilized
thereafter .As the ratio is sufficiently high it can be concluded that efficient
management of the debtors has taken place.
10000
20000
30000
40000
50000
60000
2003
2004
2005
2006
2007
2008
2009
GROSS SALES
WORKING CAPITAL
Page | 52
CHART 6
Table No.13
(In Days)
YEAR
COLLECTION PERIOD
2003
32
2004
23
2005
22
2006
21
2007
22
2008
24
2009
23
Debtors¶ collection period measures the quality of debtors since it measures the
rapidity or
10000
20000
30000
40000
50000
60000
2003
2004
2005
2006
2007
2008
2009
CREDIT SALES
DEBTORS
Page | 53
CHART 7
INTERPRETATION;
Here, there has been decreasing trend in the debt collection period which is
favorable for the company. Because, the quicker the collection period the better
is the quality of debtors as a short collection period implies quick payment by
debtors. Then more the utilization of cash collected from debtors. It decreased
from 32 days in 2003 to 23 days in 2009.
4.StockTurnoverRatio:
Table No.14
YEAR
SALES (Rs in
crores)
AVERAGE STOCK
(Rs in crores)
STOCK
TURNOVER
RATIO ( in times)
2003
19207
3745
5.128
2004
24178
3082
7.844
2005
31805
4221
7.534
2006
32280
6210
5.198
2007
39189
6651
5.892
2008
45555
6857
6.643
2009
48681
10121
4.809
05
10
15
20
25
30
35
2003
2004
2005
2006
2007
2008
2009
COLLECTION PERIOD
COLLECTION PERIOD
Page | 54
INTERPRETATION:
Here, there has been a lot of fluctuation in the Inventory turnover ratio. There
has been an increase in the ratio in 2004 and 2005 but it shows a decreasing
trend in 2006 and 2007.In 2008 the ratio showed an increase due to a large
increase in sales. But in 2009 there was a large increase in average
stock/inventory which contributed to a lower inventory turnover ratio . This can
be attributed to uncertain economic situation and weak demand of steel in the
market. The overall situation is still good enough.
CHART 8
10000
20000
30000
40000
50000
60000
2003
2004
2005
2006
2007
2008
2009
CREDIT SALES
AVERAGE ST
£
Page | 55
Profitability Ratios
1. Return on Investment:
Table No.14
YEAR
OPERATING
PROFIT (Rs in
crores)
CAPITAL
EMPLOYED (Rs in
crores)
RETURN ON
INVESTMENT (In
%)
2003
1018
16541
6.154
2004
3530
15218
23.196
2005
9970
20064
49.690
2006
6174
21782
28.344
2007
9755
25476
38.290
2008
11720
28450
41.195
2009
9656
34552
27.946
Interpretation:
CHART 9
Table No.15
YEAR
in crores)
SHAREHOLDER¶S
RETURN IN
SHAREHOLDER¶S
FUND (IN %)
2003
-304
5290
-5.746
2004
2512
5038
49.861
2005
6817
10307
66.139
2006
4013
12601
31.846
2007
6202
17313
35.822
2008
7537
23063
32.680
2009
6174
27984
22.062
INTERPRETATION:
Here, the Net Profit (i.e.) Profit after Interest and Tax has been in negative in the
year 2003 due to a net loss in the corresponding year because of very high
interest and finance charges of the company. But there was a huge jump in net
profits in the year 2004-2005 compared the shareholders funds which were
responsible for increase in the return on investment. There has
5000
10000
15000
20000
25000
30000
35000
40000
2003
2004
2005
2006
2007
2008
2009
OPERATING PROFIT
APITAL EMPLOYE
¥
Page | 57
CHART 10
Table No.16
YEAR
in crores)
TOTAL ASSETS (
IN CRORES)
RETURN ON
TOTAL
ASSETS(IN %)
2003
-304
25570
-1.188
2004
2512
22717
11.057
2005
6817
28084
24.273
2006
4013
29058
13.810
2007
6202
33854
18.319
2008
7537
40874
18.439
2009
6174
53977
11.438
Interpretation:
There has been a considerable in increase in total assets from 2003 to 2009 but
the net profit
has fluctuated which has resulted in the fluctuations in the return on total assets.
-50000
5000
10000
15000
20000
25000
30000
2003
2004
2005
2006
2007
2008
2009
NET PROFIT
CHART 11
4.Earnings perShare:
Table No.17
YEAR
in crores)
NUMBER OF
EQUITY SHARES
( IN CRORES)
EARNING PER
SHARE (IN %)
2003
-304
413
-0.736
2004
2512
413
6.082
2005
6817
413
16.506
2006
4013
413
9.716
2007
6202
413
15.016
2008
7537
413
18.249
2009
6174
413
14.949
Interpretation:
Here the Earning per Share is the result of Net Profit after Tax. It shows the
positive correlation during the period of study. It shows an increasing trend
except in the year 2004 and 2009 due to lower net profits than previous years.
-10000
10000
20000
30000
40000
50000
60000
2003
2004
2005
2006
2007
2008
2009
NET PROFIT
TOTALASSETS
Page | 59
CHART 12
Table No.18
YEAR
OPERATING
PROFIT (RS IN
CRORES)
SALES (IN
CRORES)
NET PROFIT
RATIO (IN %)
2003
1018
19207
5.300
2004
3530
24178
14.600
2005
9970
31805
31.347
2006
6174
32280
19.126
2007
9755
39189
24.892
2008
11720
45555
25.727
2009
9656
48681
19.835
-10000
1000
2000
3000
4000
5000
6000
7000
8000
NET PROFIT
Interpretation:
The operating profit and value of sales are the causes for the fluctuation in the
Net Profit ratio. While sales has constantly increased over the years operating
profit has increased but shows some fluctuations. In 2009 the ratio is lower than
in 2008 due to lower operating profits. The reason can be attributed to uncertain
economic situation and higher cost of goods sold as well as weak demand.
CHART 13
6. Operating Ratio:
Table No.19
YEAR
OPERATING
COST(RS IN
CRORES)
SALES
(Rs. In crores)
OPERATING
RATIO
(In %)
2003
17940
19207
93.403
2004
19512
24178
80.701
2005
20339
31805
63.949
2006
23675
32280
73.342
2007
26483
39189
67.577
2008
30423
45555
66.783
2009
36848
48681
75.692
Interpretation:
10000
20000
30000
40000
50000
60000
§
E
ATI
FIT
SALES
Page | 61
A comparison of operating ratio or expenses ratio will indicate whether the cost
components is high or low in the figure of sales. The operating ratio shows a
decrease in trend up to 2008 but shows a slight increase in 2009. Normally 75%
to 85% is considered to be a good ratio for manufacturing undertakings. So the
ratio is good in case for SAIL.
CHART 14
7. Payout Ratio:
Table No.20
YEAR
DIVIDENDPE R
EQUITY
EPS
ratio
2005
3.3
16.50
20
2006
2.0
9.71
20.59
2007
3.10
15.01
20.65
2008
3.7
18.25
20.27
2009
2.6
14.95
17.39
Interpretation:
10000
20000
30000
40000
50000
60000
DIRECTM ATERIAL
SALES
Page | 62
The pay out ratio for the year 2005 is 20%, 2006 is 20.59, 2007 is 20.65, 2008 is
20.27% which implies that remaining 80% of earning per share is kept as
retained earning by the company. However in 2009 lesser amount of dividend is
given so EPS is 14.95 and pay out ratio is 17.39 this implies that the company
keeps 82% of earning per share as retained earnings.
CHART 15
NOTE: Here the company had paid dividend only after 2005 in the course of
seven years
Table No.21
YEAR
DIVIDENDPE R
EQUITY
MARKET PRICE
Dividend yield
2005
3.3
62.87
5.25
2006
2.0
83.30
2.40
2007
3.10
114.30
2.71
2008
3.7
185
2009
2.6
96
2.70
02468
10
12
14
16
18
20
2005
2006
2007
2008
2009
EPS
Page | 63
Interpretation:
This percentage implies that 5.25% of market price of the share was issued as
dividend in the
year 2005 and later on it get decreases due to various economic changes in
SAIL.
CHART 16
1. Debt-Equity Ratio
TABLE NO: 21
YEAR
OUTSIDER¶S
FUND
SHAREHOLDER¶S
FUND
DEBT EQUITY
RATIO
2003
34385
5290
6.5
2004
9419
5037
1.87
2005
5977
10306
0.58
2006
4410
12601
0.35
2007
4155
17313
0.24
2008
2988
23063
0.13
2009
7555
27984
0.27
20
40
60
80
100
120
140
160
180
200
2005
2006
2007
2008
2009
MAR
ET PRI
E
Page | 64
CHART 17
Interpretation
The debt-equity ratio is calculated to measure the extent to which debt financing
has been used in a business. From 2003 onwards there has been a decrease in
outsiders fund and a corresponding increase in shareholders funds. This
indicates that the firm is traditionally financed and it is considered to be
favorable from a long term creditor¶s point of view as a high proportion of
owner¶s funds provide a larger margin of safety for them.
This ratio is used to test the debt servicing capacity of a firm The ratio is
calculated as:
TABLE NO: 22
YEAR
EBIT
FIXED INTEREST
CHARGES
INTEREST
COVERAGE
RATIO
2003
1018
1339
0.76
2004
3529
910
3.88
5000
10000
15000
20000
25000
30000
35000
40000
OUTSIDER'S FUND
2005
9970
607
16.43
2006
6174
472
13.07
2007
9755
333
29.29
2008
11720
252
46.39
2009
9656
326
29.59
Interpretation:
There has been decreasing trend in the fixed interest charges and corresponding
increase in EBIT from 2003-2008.This has led to increase in interest coverage
ratio which is a good sign for the company. There has been a decrease in EBIT in
2009 and a slight increase in fixed interest charges due to uncertainties in the
market, higher raw material costs and lower steel demand.
Page | 66
CHART 18
2000
4000
6000
8000
10000
12000
14000
2003
2004
2005
2006
2007
2008
2009
EBIT
FI
TE
EST
GES
Page | 67CALCULATION AND INTERPRETATION OF CASH FLOW
STATEMENT
PARTICULARS 2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
(315.87)
1246.70
9365.35
5705.74
9422.62
11468.73 9403.45
Operating activity
2667.74
7199.45
8899.47
3823.93
5632.91
8378.18
6124.26
investing activity
(31.61)
(235.76)
(286.54)
(337.18)
Fin. Activity
Net inc./decrease
in cash or
equivalent
118.79
1488.18
4096.30
(87.51)
3437.19
4149.61
4469.09
Cash and
equivalent at
beginning of the
year
416.37
717.31
2035.82
6260.15
6172.64
9609.83
13759.44
Cash and
equivalent at end
of the year
535.16
2205.49
6132.12
6172.64
9609.83
13759.44 18228.53
INTERPRETATION
1. Cash flow statement shows that the profit before tax increases continuously in
2004,
2005, 2006, 2007, 2008 and decreases in 2009 due to unstable economic
conditions.
2. Net cash flow from operating activities increases continuously in 2007 and
2008 due
3. Net cash outflows in investing activities have been growing in SAIL as cash is
being
used to purchase fixed assets like plants and machinery and higher development
costs.
Page | 68
4. Cash flows have been positive for financing activities in 2009 mainly due to
increase
in borrowings.
5. Cash and cash equivalents have been increasing steadily from 2003 to 2009
showing
6.COMPETITOR ANALYSIS
(in crores)
PARTICULARSSAI L
TATA
ISPAT
JINDAL
ESSAR
ASSETS
NET BLOCK
12269
10995
8888
5745
9129
CAPITAL
WORK IN
PROGRESS
6544
3488
103
2318
550
INVESTEMENT 653
42372
233
1233
791
NET CURRENT
ASSETS
17389
(308)
160
1078
1580
TOTAL
ASSETS
36855
56651
9384
10378
12050
LIABILITIES
SHARE
HOLDERS
FUND
27985
29705
2032
5415
4738
TOTAL DEBT
7539
26946
7352
4963
7312
DEFFERED
LIABILITY
1331
TOTAL
LIABILITIES
36855
56651
9384
10378
12050
Page | 69
SAIL
TATA
ISPAT
JINDAL
ESSAR
SALES
48681
26843
9181
8433
12704
EBIDTA
10941
9779
730
2693
1930
Less:
Depreciation
1285
973
647
433
828
EBIT
9656
8806
83
2260
1102
Less:Int.Charges 253
1489
1129
268
862
Extraordinary
items
24
10
55
PBT
9403
7317
(1023)
2002
240
Less: Tax
3229
2115
(335)
465
110
PAT
6174
5202
(688)
1537
185
Page | 70
COMPETITOR ANALYSIS
(as in2009)
RATIOS
SAIL
TATA
ISPAT
JINDAL
ESSAR
PROFITIBILITY
RATIO
OPERATING
PROFIT
24.31
37.68
13.58
34.35
21.44
GROSS PROFIT
44.14
33.69
5.76
28.71
14.37
NET PROFIT
19.83
21.09
-8.04
19.50
1.56
RETURN ON
CAPITAL
EMPLOYED
27.94
15.01
6.69
23.16
15.01
LIQUIDITY &
SOLVENCY
RATIOS
CURRENT
RATIO
2.82
0.91
1.04
1.04
0.71
QUICK RATIO
1.99
0.57
0.42
0.95
0.62
DEBT EQUITY
RATIO
0.27
1.34
9.04
0.92
1.57
DEBT
COVERAGE
RATIO
INTREST
COVERAGE
RATIO
29.59
5.71
0.52
10.33
3.17
MANAGEMENT
EFFICIENCY
RATIOS
INVENTORY
TURN OVER
RATIO
4.80
9.36
7.59
9.08
8.69
DEBTORS TURN
OVER RATIO
16.09
41.29
14.50
22.62
30.35
FIXED ASSETS
TURN OVER
RATIO
3.96
1.22
0.61
1.04
0.76
CASH FLOW
INDICATOR
RATIO
DIVIDEND PAY
OUT RATIO
17.39
27.15
5.55
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Page | 1
PROJECT REPORT
In
Prof. S.S.Ahmed
P.S PAL
AGM( Fi na n c e )
Bhubaneswar
Ranchi.
Swagat Vihar
Declaration
Signature
Acknowledgement
Whatever I did andwhatever I achieved during the course of my limited life is just
not done only by my own efforts, but by the efforts contributed by other people
associatedwith me indirectly or directly. I thank all those peoplewho contributed
to this from the very beginning till its successful end.
Technology (SAIL).
Last but not the least Iwould like to extend my thanks to all the employees
atCentre for
my project.
Page | 4
ABSTRACT
has been a very good experience. Every manufacturing company faces the
problem of
and the profit can be increased only if it is able to manage the financial position
of its firm.
At the same time the company can provide customer satisfaction and hence can
improve
seriesan al ysis of SAIL for the years 2003 to 2009 and the second phase was
conducted on a
The experience that I gathered over the past two months has
certainly provided the orientation, which I believewill help me inshoulder ing any
responsibility in future.
Page | 5
TABLE OF CONTENTS
6-11
12-19
20-22
4. LITERATURE REVIEW
23-35
36-66
6.COMPETITOR ANALYSIS
67-70
71
8.CONCLUSION
72
9.BIBLIOGRAPHY
73
Page | 6
Company Profile
Established in January 24, 1973 with an authorized capital of Rs. 2000 crores,
Steel Authority of India Limited (SAIL) is the leading steel-making company in
India. SAIL is a fully integrated iron and steel maker company, producing both
basic and special steels for domestic construction, engineering, power, railway,
automotive and defense industries and it also produce steel for sale in export
markets.
Steel Authority of India Limited is ranked amongst the top ten companies in
public sector companies in India in terms of its turnover. 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.
Sail Today
SAIL today is one of the largest industrial entities in India. Its strength has been
the diversified range of quality steel products catering to the domestic, as well as
the export markets and a large pool of technical and professional expertise.
Today, the accent in SAIL is to continuously adapt to the competitive business
environment and excel as a business organization, both within and outside India.
Type of Organization:
Steel Authority of India' - a Government of India Enterprise and one of the largest
and profit making public sector steel products manufacturing company. Steel
Authority of India produces for both basic and special steels for construction,
engineering, power, railway, automotive and defense industries and caters to
Indian and International markets. Steel Authority of India has five steel plants,
one subsidiary, three special steel plants, multi marketing units at all regions and
nine other specialized units to support growth and development of the Steel
Industry in India. It produces Blooms, Billets, Slabs, Crane Rails, Bars, Rods & Re-
bars, Wire Rods, HR Coils, Sheets, Plates, CR Coils & Sheets, GC Sheets, GP
Sheets and Coils, Tinplates, Electrical Steel, Tubular Products, Pipes, Railway
Products, Rails, Wheels, Axles, Wheel Sets.
Semi-Finished Products.
Railway Products.
Plates.
Page | 8
Domains ±
Consultancy services.
Contract research.
Training.
y
Salem Steel Plant (SSP) in Tamil Nadu
Subsidiary
India is ranked as the 5th largest steel producing country in the world, while SAIL
is ranked as the 21st largest steel producer in the world during2008 (Source:
WSA) SAIL continues to be the largest steel producer of finished steel in India
with around 1/5th of the market share.
SWOT ANALYSIS
STRENGTHS
The diversified product mix and multi location production units are an area of
SAIL as a single source is able to cater to the entire steel requirement of any
customer. Also it has a nation wide distribution network with a presence in every
district in India. This makes quality steel available throughout the length and
breadth of the country.
SAIL has the largest captive iron ore operations in India, which takes care of its
entire requirement. With plans in place to expand the mining operations, the
company will continue to be self sufficient in iron ore after completion of the
present phase of expansion.
The company has one of the biggest in-house research and development centres
in Asia. SAIL's RDCIS (Research &Development Centre for Iron & Steel) is a
source of regular product and process innovation.
Page | 10
WEAKNESSES
SAIL is dependent on the market purchase for a key input ± coking coal. As India
does not have sufficient coking coal deposits, most of the supply is from external
sources.
At present around 20% of the products are in the form of semi -finished steel,
SAIL being a Public Sector unit has to follow set procedures in conducting its
business. On occasions, it slows down the decision making with attendant fallout.
OPPORTUNITIES
The current per capita finished steel consumption in the country is approx. 44 kg
as compared to the likely world average of around 190kg. There is a substantial
scope for increase in domestic steel consumption.
The size range and quality makes SAIL'S long products a preferred choice for
project customers.
Page | 11
THREATS
International prices of steel dropped by over 60% from their peak level in July,
2008. With import duty at 5%, and poor demand from developed countries,
cheap imports are on an increase into the country putting pressure on realization
of the domestic steel producers.
With significant excess capacity in the global steel industry during 2009 there is
a threat of dumping cheap steel to India which is likely to be the only major steel
consuming nation with a positive growth.
Clearance and renewal of mining lease, which involve multiple agencies at the
State
Delay in opening new mines, and / or expanding existing mines may constrain
raw materials availability, thereby impacting growth in saleable steel production,
and overall economics of operation.
Law and order situation in mining areas in some of the states is also a cause of
Centre for Engineering & Technology (CET) was formed in 1982 in pursuance of
decision taken by SAIL Board in its 83rd meeting held on 28th January 1982. CET
is the in-house design, engineering and consultancy unit of SAIL. It is also the
nodal agency for acquisition and lateral transfer of technologies pertaining to
Iron & Steel within SAIL plants and units. The range of services provided by CET
includes conceptualization, project reports, project evaluation & appraisal,
project consultancy, design & engineering and project management. CET has
been providing its services in all the areas of iron and steel making including in
the related areas like mine planning and development, infrastructure
development, industrial piping, industrial warehousing, material handling
system, industrial pollution control and environment management systems,
water supply and sanitation, town planning, small power projects, etc.
Besides, CET has only two unit offices at following locations to coordinate CET¶s
activities
Technology Improvement
CET-SAIL(FINANCEDEPATRMENT)
P&A.
It can be seen from the role and responsibilities of finance department that most
of the work done by the finance department involves preparation of
remuneration of employees. Even during the preparation of the budget about
85% of the costs are attributed to employee remuneration which contains both
executive pay and non executive pay. It comes under fixed costs while other
expenses like travelling expenses, stationary expenses and other miscellaneous
expenses which come under variable costs.
basis of fixed percentage of total cost of the project for which services where
rendered.
Page | 16
1. CET not being a profit center it cannot consider earning which is hypothetical
in
2. Since the value of the assignments under this method has no relation with the
expenditure, practical difficulties where experienced in restricting the valuation
to the total expenditure of the CET.
299
29
58
ED sectt,MTT's
212
are clockable
365
76
36
8. EL @3% of 253(Sl.No.5,6,7)
245
Available
1960
415520
120474
295046
Sl.no.12)
492900000
1670.050
1670
RATES
The above method is more suitable method for CET being an inhouse
consultancy
Preparation of vouchers
Total sanctioned projects 137 nos. against 135 nos. in corresponding period last
year. Quantum of sanctioned projects being handled valued at Rs. 10782 crores.
y
Highest nos. of assignment handled at 327 in a year, up by 7 nos. over previous
year.
OTHER HIGHLIGHTS
Page | 19
During the fiscal 2009-2010, a lot of emphasis was put in the RMD projects and
along with RMD new strategies where formulated for faster execution of projects.
Video conferencing facility which connects Ranchi and sub centers at Bhilai ,
Durgapur , Bokaro and Rourkela is being used extensively for quarterly projec
CET has taken measures for working in a paperless environment. All movements
o
Finance is one of the most primary requisites of a business and the modern
management obviously depends largely on the efficient management of the
finance. Financial statements are prepared primarily for decision making. They
play a dominant role in setting the frame work of managerial decisions. The
finance manager has to adhere to the five R¶s with regard to money. Whether
owned or borrowed funds. At the right time to preserve solvency from the right
sources and at the right cost of capital. The term financial analysis is also known
as µanalysis and interpretation of financial statements¶ refers to the process of
determining financial strength and weakness of the firm by establishing strategic
relationship between the items of the Balance Sheet, Profit and Loss account and
other operative data. The purpose of financial analysis is to diagnose the
information contained in financial statements so as to judge the profitability and
financial soundness of the firm.
4. To analyze the profitability and solvency position of the unit with the existing
tools of financial
analysis.
5. To study the changes in the assets, liabilities structure of the company during
the period of study.
1. The analysis and interpretation are based on secondary data contained in the
published annual
2. Due to the limited time available at the disposable of the researcher the study
has been confined
3. Ratio itself will not completely show the company¶s good or bad financial
position.
4. The study of financial performance can be only a means to know about the
financial condition of
the company and cannot show a through picture of the activities of the company.
RESEARCH METHODOLOGY
RESEARCHDESIGN
Descriptive research is used in this study because it will ensure the minimization
of bias and maximization of reliability of data collected. The researcher had to
use fact and information already available through financial statements of earlier
years and analyze these to make critical evaluation of the available material.
Hence by making the type of the research conducted to be both Descriptive and
Analytical in nature.
From the study, the type of data to be collected and the procedure to be used for
this purpose were
decided.
Page | 22
DATA COLLECTION
The required data for the study are basically secondary in nature and the data
are collected from the
SOURCES OFDATA
The sources of data are from the annual reports of the company from the year
2003 to 2009.
The data collected were edited, classified and tabulated for analysis. The
analytical tools used in this
study are:
1. Comparative statement.
2. Common Size Statement.
3. Trend Percentage.
4. Ratio Analysis.
5. Cash Flow Analysis
4.LITERATURE REVIEW
Balance Sheet
The shareholders equity comprises the total owner ship claims in a firm. This
claim includes net worth of shareholders equity and preferred stock. The
traditional company balance sheet statement of assets valued on the basis of
their original cost and the means by which they have been financed by its
shareholders, lenders, suppliers and by the retention of income.
Income statement
The results of operations of a business for a period of time are presented in the
income statement.
Financial statements are sometimes recast for facility of scrutiny. The effects of
the conductor
businesses are reflected in its balance sheet by changes in assets and liabilities
and in its net worth.
Common-size statements
The percentage balance sheet is often known as the common size balance sheet.
Such balance sheet are, in a broad sense ratio analysis general items in the
profit and loss accounts and in the balance sheet are expressed in analytical
percentages when expressed in the form, the balance sheet and profit and loss
account are referred to as a common size statement. Such statements are useful
in comparative analysis of the financial position in operating results of the
business.
A cash flow statement is the financial analysis of the net income or profit after
including book expense items which currently do not use cash; for example,
depreciation, depletion and amortization. Revenue items, which do not currently
provide funds, are to be deducted. A gross cash flow is net profit after tax plus
provision for depreciation. A net cash flow is arrived after deducting dividends
from the gross cash flow. The cash flow is very significant because it represents
the actual amount of cash available to the business.
Page | 26
Ratio Analysis
Financial ratio analysis is the calculation and comparison of ratios which are
derived from the information in a company's financial statements. The level and
historical trends of these ratios can be used to make inferences about a
company¶s financial condition, its operations and attractiveness as an
investment.
Financial ratios are calculated from one or more pieces of information from
company¶s financial statements. For example, the "gross margin" is the gross
profit from operations divided by the total sales or revenues of a company,
expressed in percentage terms. In isolation, a financial ratio is a useless piece of
information. In context, however, a financial ratio can give a financial analyst an
excellent picture of a company's situation band the trends that are developing.
A ratio gains utility by comparison to other data and standards. Taking our
example, a gross profit margin for a company of 25% is meaningless by itself. If
we know that this company's competitors have profit margins of 10%, we know
that it is more profitable than its industry peers which are quite favorable. If we
also know that the historical trend is upwards, for example has been increasing
steadily for the last few years, this would also be a favorable sign that
management is implementing effective Business, policies and strategies.
Classification of Ratios
Financial ratio analysis involves the calculation and comparison of ratios which
are derived from the information given in the company's financial statements.
The historical trends of these ratios can be used to make inferences about a
company¶s financial condition, its operations and its investment attractiveness.
Financial ratio analysis groups the ratios into categories that tell us about the
different facets of
solvency
Turnover Ratios show how efficient a company's operations and how well it is
using
its assets.
Liquidity Ratios
Liquidity Ratios are ratios that come off the Balance Sheet and hence measure
the Liquidity of the company as on a particular day i.e. the day that the Balance
Sheet was prepared. These ratios are important in measuring the ability of a
company to meet both its short term and long term obligations.
1. Current Ratio
2. Liquid Ratio
3. Net working capital ratio
1. Current Ratio:
2. Quick Ratio:
Liquid ratio is also known as µquick¶ or µAcid test µratio. Liquid assets refer to
assets which are quickly convertible into cash. Current Assets other stock and
prepaid expenses are considered as quick assets. The ideal liquid ratio accepted
µnorm¶ for liquid ratio µ1¶.
Working Capital is more a measure of cash flow than a ratio. The result of this
calculation must be a positive number. Companies look at Net Working Capital
over time to determine a company's ability to weather financial crises. Loans are
often tied to minimum working capital requirements.
Turnover Ratios
The turnover ratio is also known as activity or efficiency ratios. They indicates
the efficiency with which the capital employed is rotated in the business (i.e.) the
speed at which capital employed in the business rotates. Higher the rate of
rotation, the greater will be the profitability. Turnover ratios indicate the number
of times the capital has been rotated in the process of doing business.
Fixed asset turnover is the ratio of sales (on your Profit and loss account) to the
value of your
fixed assets (on your balance sheet). It indicates how well your business is usin g
its fixed
assets to generate sales.
Generally speaking, the higher the ratio, the better, because a high ratio
indicates the business
has less money tied up in fixed assets for each dollar of sales revenue. A
declining ratio may
indicate that you've over-invested in plant, equipment, or other fixed assets.
Debtor¶s turnover ratio measures the efficiency with which the debtors are
converted into cash. This ratio indicates both the quality of debtors and the
collection efforts of the business enterprise. This ratio is calculated as follows:
Page | 30I. Debtors¶ turnover ratio
The numerator of this ratio should preferably be credit sales. This is so because
the denominator is logically related to credit sales as it arises from credit sales
only. Cash sales do not generate debtors. However, as the information related to
credit sales is not separately available in corporate accounts, so total sales could
be taken in the numerator. Average debtors are calculated by dividing the sum
of beginning-of-year and end-of-year balance of debtors by 2.
The ratio indicates the extent to which the debt has been collected in time. It
gives the
average debt collection period. The ratio is very helpful to lenders because it
explains to them
whether their borrowers are collecting money within a reasonable time. An
increase in the
period will result in greater blockage of funds in debtors.
4.StockTurnoverRatio:
industry.
Profitability Ratios
1. Return on Investment
2. Return on Shareholders¶ fund
3. Return on total asset
6. Operating ratio
7. Payout ratio
1. Return on Investment:
Page | 32
The term µoperating profit µ means µprofit before interest and tax¶ and the term
µcapital employed µ means sum-total of long term funds employed in the
business. i.e. Share capital + Reserve and surplus + long term loans ± [non
business assets +fictitious assets]
In case it is desired to work out the productivity of the company from the
shareholder¶s point
The term profit here means µNet Income after the deduction of interest and
tax¶. It is different from the ³Net operating profit´ which is used for computing
the µReturn on total capital employed¶ in the business. This is because the
shareholders are interested in Total Income after tax including Net non-operating
Income (i.e. Non- Operating Income -Non-Operating expenses).
This ratio is computed to know the productivity of the total assets.The term
µTotal Assets¶ includes the fixed asset, current asset and capital work in
progress of the company. The above table clearly reveals the relationship
between the net profit and Total Assets employed in the business.
4.Earnings perShare:
In order to avoid confusion on account of the varied meanings of the term capital
employed, the overall profitability can also be judged by calculating earnings per
share with the help of the following formula:
Earning Per Equity Share = Net Profit after Tax / Number of Equity Shares X 100
The earnings per share of the company helps in determining the market price of
the equity shares of the company. A comparison of earning per share of the
company with another will also help in deciding whether the equity share capital
is being effectively used or not. It also helps in estimating the company¶s
capacity to pay dividend to its equity shareholders.
Earning Per Equity Share = Net Profit after Tax / Number of Equity Shares X 100
This ratio indicates the Net margin on a sale of Rs.100.This ratio helps in
determining the efficiency with which affairs of the business are being managed.
An increase in the ratio over the previous period indicates improvement in the
operational efficiency of the business. The ratio is thus on effective measure to
check the profitability of business. However, constant increase in the above ratio
after year is a definite indication of improving conditions of the business.
6. Operating Ratio:
This ratio is a complementary of Net Profit ratio. In case the net profit ratio
is20%. It means
The operating cost include the cost of direct materials, direct labor and other
overheads, viz.,
This ratio is the test of the operational efficiency with which the business is being
carried. The operating ratio should be low enough to leave a portion of sales to
give a fair to the investors.
7. Payout Ratio:
This ratio indicates what proportion of earning per share has been used for
paying dividend. The payout ratio is the indicator of the amount of earnings that
have been ploughed back in the business. The lower the payout ratio, the higher
will be the amount of earnings ploughed back in the business and vice versa.
This ratio is particularly useful for those investors who are interested only in
dividend income. The ratio is calculated by comparing the ratio of dividend per
share with its market value.
The term µsolvency¶ refers to the ability of a concern to meet its long term
obligations. The long term indebtedness of a firm includes debenture holders,
financial institutions providing medium and long term loans and other creditors
selling goods on installment basis. So, the long term Solvency ratios indicate a
firm¶s ability to meet the fixed interest and costs and repayment schedules
associated with its long term borrowings. Two types of ratios are there:
1. Debt-Equity Ratio
Debt ±Equity ratio also known as External- Internal Equity Ratio is calculated to
measure the
relative claims of outsiders and the owners against the firm¶s assets.
This ratio is used to test the debt servicing capacity of a firm. The ratio is
calculated as:
3. Balance Sheet
Table No.1
(Rs. in Crores)
PARTICULARS 2003
2004
2005
2006
2007
2008
2009
ASSETS
Fixed Assets
14414
13550
12851
12920
12796
13960
18813
Investment
543
543
606
293
514
538
653
Current Assets
7312
8246
14333
15630
20375
26317
34511
Mis.Expenditure
536
378
294
215
129
59
0.00
P&L a/c
2765
Total Assets
25570
22717
28084
29058
33854
40874
53977
LIABILITIES
Shareholder¶s
Funds
5290
5037
10306
12601
17313
23063
27984
Loan Funds
12969
8690
5770
4298
4180
3045
7539
Current Liabilities
& Provisions
7311
8990
10166
10675
10949
13198
17122
Deferred
Liabilities
1842
1484
1412
1568
1332
TOTAL
LIABILITIES
25570
22717
28084
29058
33854
40874
53977
Page | 37
Table No.2
( Rs. in Crores)
PARTICUL
ARS
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
Cng % cng
Cng
% cng Cng
cngCng
cng
Cng
cng
Cng
cng
ASSETS
Fixed Assets
(864)
(5.9)
(699)
(5.1)
69
0.53(1 2 4
(0.9
Investment
nt
63
11.6
(313) (51.
6)
221 75.4
24
4.66
115 21.37
Current
Assets
934
12.77
6087
73.8
1297 9.04474
Mis.
(22)
(79)
(26.
8)
(84) (39)
(70)
(54)
(59) (100)
P&L a/c
LIABILITI
ES
Shareholder¶s
Funds
(253) (4.78)
5269
471
Loan Funds
(427
9)
(32.9) (2920)
(34)
(147
2)
(25.
5)
(118
(2.7
(113
5)
(27)
4494 147.6
Current
Liabilities&
Provisions
1679 22.96
1176
13.08
(868
2)
(85.
4)
(72)(4 .8
Deff.
Liabilities
Interpretation:
The comparative Balance Sheet of the company reveals that during the financial
year 2008± 2009 there has been a large increase in fixed assets (34.76%)
compared to 2007-2008(9.09%) while the long term liabilities which contains
shareholders funds and long term loans also show growth. Long term loans show
an increase of 147.6% in 2008-09 which means that most of the fixed assets are
financed by long term loans.
There has been an increase in plant and machinery in 2009 compared to 2008
which means that it
The company has increased its current assets by increasing the level of
inventories at Rs.10121 crores in 2009 compared to Rs.6857 crores in 2008. The
current liabilities highly fluctuate and show continuous increase in 2007-08
(20.5%) and 2008-09 (29.3%).
The Net Working Capital was in peak by the continuous increase after the year
2005. The company got good liquidity position due increase in Current assets but
it may affect the profitability of the company.
5. Income Statement
Table No.3
2009
(Rs. in crores)
PARTICULARS 2003
2004
2005
2006
2007
2008
2009
Sales
EBIDTA
Less:
Depreciation
19207
2165
1147
24178
4652
1123
31805
11097
1127
32280
7381
1207
39189
10966
1211
45555
12955
1235
48681
10941
1285
EBIT
Less: Interest
Charges
1018
1334
3529
901
9970
605
6174
468
9755
322
11720
251
9656
253
PBT
Less : Tax
(316)
(12)
2628
116
9365
2548
5706
1693
9423
3221
11469
3932
9403
3229
2512
6817
4013
6202
7537
6174
Page | 40
Table No.4
( Rs.in Crores)
PARTIC
ULARS
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
change
% of
change
change
% of
change
change
% of
change
change
% of
chang
change
% of
change
change
% of
Change
Sales
EBIDT
Less:
Depreci
ation
4971
2487
(24)
25.9
114.8
(2.1)
7627
6445
31.5
138.5
0.35
475
(3716)
80
1.49
(33.4)
7.09
6909
3585
21.4
48.5
0.3
6367
1989
24
16.2
18.1
1.98
3126
(2014)
50
6.86
(15)
0.04
EBIT
Less:
Interest
Charges
2511
(433)
246.6
(32.4
6441
(296)
182.5
(32.7)
(3769)
(137)
(38)
22.64
3581
(146)
58
(31)
1965
(71)
20.1
(22)
(2064)
(17.6)
0.7
PBT
Less :
Tax
2312
104
731.6
866.6
6737
2432
256.3
2096
(3659)
(855)
(39)
(33.5)
3717
1528
65.1
90.2
2046
711
21.7
22
(2066)
(703)
(18)
(17.8)
PAT
(Net
Profit)
2208 726
(1363) (18)
Interpretation
The Net Sales figure shows an increasing trend. After the year 2003 it shows an
y
The company has sufficient control over its depreciation which shows an
increase of
The company has considerable change in Interest Charges and rather the latter
has
The company has able to attain Profit after Tax of Rs.6174 crores in the year
2009 compare to 7536 crores in 2008 which can be attributed to increase in cost
of goods sold.
It may conclude that there is a sufficient progress in the company and the overall
7.Trend Percentage
Table No.5
Figure in
Particulars
2003
2004
2005
2006
2007
2008
2009
SALES
100
125.88
165.59
168.06
204.03
237.17
253.45
EBIT
100
346.66
979.37
606.48
958.25
1151.27
948.52
FIXED
ASSETS
100
94.00
89.15
89.63
88.77
96.85
130.51
CURRENT
ASSETS
100
112.77
196.02
213.75
283.57
359.91
471.97
CURRENT
LIABILITIES
100
122.96
139.05
146.01
149.76
180.52
234.19
WORKING
CAPITAL
100
81.83
302.55
370.29
554.05
673.81
889.54
CAPITAL
EMPLOYED
TOTAL
100
92.00
121.29
131.65
154.01
171.99
208.88
TOTAL
ASSETS
100
88.84
109.83
113.64
132.39
159.85
211.09
Interpretation:
The sales of the product have continuously increased in all the years up to
2009.The
The EBIT grows continuously up to 2008 and decreases slightly in 2009 due to
increase
Table No.6
Common Size Balance Sheet of Steel Authority of India Limited from 2003-2009
( Rs.in Crores)
PARTICULARS 2003
2004
2005
2006
2007
2008
2009
ASSETS
Fixed Assets
56.37
59.64
45.75
44.46
37.90
34.15
34.85
Investment
21.23
2.39
2.15
1.00
1.54
1.31
1.209
Current Assets
28.59
36.29
51.06
53.78
60.18
64.51
63.93
Mis.Expenditure
2.09
1.68
1.04
0.76
0.38
0.144
0.00
P&L a/c
10.72
Total Assets
100.00
100.00
100.00
100.00
100.00
100.00
100.00
LIABILITIES
Shareholder¶s
Funds
20.60
22.17
36.69
43.36
51.14
56.42
51.84
Loan Funds
50.73
38.25
20.54
14.79
12.34
7.44
13.96
Current
Liabilities
& Provisions
28.59
39.58
36.19
5.10
4.17
32.28
31.72
Deferred
Liabilities
6.58
36.75
32.35
3.83
2.46
Total Liabilities
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Page | 44
Interpretation:
Out of the total investment the owners funds is more compare to outsider¶s fund
in the
company which shows that the company has depended more on its own funds. It
shows that the company is traditionally financed.
liabilities which serve as an evidence for good working capital position of the
company.
RATIO ANALYSIS
Liquidity ratios
1.Current Ratio:
Table No.7
(Rs. In Crores)
YEAR
CURRENT
ASSETS
CURRENT
LIABILITIES
CURRENT RATIO
2003
7282
4777
1.524
2004
8075
6025
1.340
2005
14187
6608
2.146
2006
17384
8108
2.144
2007
20379
6500
2.917
2008
26317
9439
2.788
2009
34511
12228
2.822
Interpretation:
Here, the current ratio fluctuates from year to year but has maintained the ratio
above 2 from
CHART 1
2. Quick Ratio:
Table No.8
(Rs. In Crores)
YEAR
LIQUID ASSETS
CURRENT
LIABILITIES
QUICK RATIO
2003
3537
4777
0.740
2004
4993
6025
0.828
2005
9966
6608
1.508
2006
11174
8108
1.378
2007
13728
6984
1.965
2008
19460
9439
2.061
2009
24389
12228
1.994
Interpretation:
The liquid ratio denotes the concern had achieved more than the ideal ratio of
1:1 in the years
2005 onwards.
5000
10000
15000
20000
25000
30000
35000
40000
2003
2004
2005
2006
2007
2008
2009
current assets
current liabilities
Page | 47
CHART 2
Table No.9
YEAR
Net Working
Capital
Capital Employed
Net Working
Capital Ratio
2003
2505
16541
0.151
2004
2050
15218
0.134
2005
7579
20064
0.377
2006
9276
21438
0.432
2007
13879
24992
0.535
2008
16879
28450
0.593
2009
22283
34552
0.645
5000
10000
15000
20000
25000
30000
2003
2004
2005
2006
2007
2008
2009
liquid assets
current liabilities
Page | 48
CHART 3
Interpretation:
Net Working capital measures the firm¶s potential reserve of funds. It can be
related to net assets. This ratio represents the availability of working capital in
relation with capital employed.
5000
10000
15000
20000
25000
30000
35000
40000
2003
2004
2005
2006
2007
2008
2009
networking capital
capiotal employed
Page | 49
Turnover Ratios
Table No.10
YEAR
GROSS SALES
(Rs IN
CRORES)
FIXED
ASSETS (Rs in
crores)
FIXED
TURNOVER
RATIO (In
Times)
2003
19207
14036
1.36
2004
24178
13168
1.83
2005
31805
12485
2.54
2006
32280
12162
2.65
2007
39189
11598
3.37
2008
45555
11571
3.93
2009
48681
12269
3.96
Interpretation:
Here, the value of fixed assets employed in the business shows a reducing trend
which implies that company didn¶t add any more fixed asset during the period
2003 ±2008. Only the depreciation effect had been given to fixed asset. Fixed
turnover ratio has been increasing which is a good sign because the gross sales
have increased considerably without increasing the current assets.
Page | 50
CHART4
Table No.11
Interpretation:
Here, the Working Capital ratio shows a increasing trend from 2003 to 2004 and
then slope downwards due to holding high current assets in the form of cash,
bank balances and receivables in the year 2005 to 2009.
10000
20000
30000
40000
50000
60000
2003
2004
2005
2006
2007
2008
2009
SS SALES
FIXED ASSETS
YEAR
GROSS SALES
(Rs IN
CRORES)
WORKING
CAPITAL (Rs in
Crores)
Working capital
turnover ratio
(in times)
2003
19207
2505
7.667
2004
24178
2050
11.79
2005
31805
7579
4.196
2006
32280
9276
3.479
2007
39189
13879
2.823
2008
45555
16879
2.698
2009
48681
22283
2.184
Page | 51
CHART 5
Table No.12
YEAR
CREDIT SALES
(Rs. In Crores)
DEBTORS
(Rs. In Crores)
Debtors¶ turnover
ratio
(In times)
2003
19207
1660
11.570
2004
24178
1550
15.598
2005
31805
1908
16.669
2006
32280
1882
17.151
2007
39189
2315
16.928
2008
45555
3048
14.945
2009
48681
3024
16.098
Interpretation:
There has been increase in the turnover ratio from 2003-2006 and has stabilized
thereafter .As the ratio is sufficiently high it can be concluded that efficient
management of the debtors has taken place.
10000
20000
30000
40000
50000
60000
2003
2004
2005
2006
2007
2008
2009
GROSS SALES
WORKING CAPITAL
Page | 52
CHART 6
Table No.13
(In Days)
YEAR
COLLECTION PERIOD
2003
32
2004
23
2005
22
2006
21
2007
22
2008
24
2009
23
Debtors¶ collection period measures the quality of debtors since it measures the
rapidity or
10000
20000
30000
40000
50000
60000
2003
2004
2005
2006
2007
2008
2009
CREDIT SALES
DEBTORS
Page | 53
CHART 7
INTERPRETATION;
Here, there has been decreasing trend in the debt collection period which is
favorable for the company. Because, the quicker the collection period the better
is the quality of debtors as a short collection period implies quick payment by
debtors. Then more the utilization of cash collected from debtors. It decreased
from 32 days in 2003 to 23 days in 2009.
4.StockTurnoverRatio:
Table No.14
YEAR
SALES (Rs in
crores)
AVERAGE STOCK
(Rs in crores)
STOCK
TURNOVER
RATIO ( in times)
2003
19207
3745
5.128
2004
24178
3082
7.844
2005
31805
4221
7.534
2006
32280
6210
5.198
2007
39189
6651
5.892
2008
45555
6857
6.643
2009
48681
10121
4.809
05
10
15
20
25
30
35
2003
2004
2005
2006
2007
2008
2009
COLLECTION PERIOD
COLLECTION PERIOD
Page | 54
INTERPRETATION:
Here, there has been a lot of fluctuation in the Inventory turnover ratio. There
has been an increase in the ratio in 2004 and 2005 but it shows a decreasing
trend in 2006 and 2007.In 2008 the ratio showed an increase due to a large
increase in sales. But in 2009 there was a large increase in average
stock/inventory which contributed to a lower inventory turnover ratio . This can
be attributed to uncertain economic situation and weak demand of steel in the
market. The overall situation is still good enough.
CHART 8
10000
20000
30000
40000
50000
60000
2003
2004
2005
2006
2007
2008
2009
CREDIT SALES
AVERAGE ST
£
Page | 55
Profitability Ratios
1. Return on Investment:
Table No.14
YEAR
OPERATING
PROFIT (Rs in
crores)
CAPITAL
EMPLOYED (Rs in
crores)
RETURN ON
INVESTMENT (In
%)
2003
1018
16541
6.154
2004
3530
15218
23.196
2005
9970
20064
49.690
2006
6174
21782
28.344
2007
9755
25476
38.290
2008
11720
28450
41.195
2009
9656
34552
27.946
Interpretation:
CHART 9
Table No.15
YEAR
in crores)
SHAREHOLDER¶S
RETURN IN
SHAREHOLDER¶S
FUND (IN %)
2003
-304
5290
-5.746
2004
2512
5038
49.861
2005
6817
10307
66.139
2006
4013
12601
31.846
2007
6202
17313
35.822
2008
7537
23063
32.680
2009
6174
27984
22.062
INTERPRETATION:
Here, the Net Profit (i.e.) Profit after Interest and Tax has been in negative in the
year 2003 due to a net loss in the corresponding year because of very high
interest and finance charges of the company. But there was a huge jump in net
profits in the year 2004-2005 compared the shareholders funds which were
responsible for increase in the return on investment. There has
5000
10000
15000
20000
25000
30000
35000
40000
2003
2004
2005
2006
2007
2008
2009
OPERATING PROFIT
APITAL EMPLOYE
¥
Page | 57
CHART 10
Table No.16
YEAR
in crores)
TOTAL ASSETS (
IN CRORES)
RETURN ON
TOTAL
ASSETS(IN %)
2003
-304
25570
-1.188
2004
2512
22717
11.057
2005
6817
28084
24.273
2006
4013
29058
13.810
2007
6202
33854
18.319
2008
7537
40874
18.439
2009
6174
53977
11.438
Interpretation:
There has been a considerable in increase in total assets from 2003 to 2009 but
the net profit
has fluctuated which has resulted in the fluctuations in the return on total assets.
-50000
5000
10000
15000
20000
25000
30000
2003
2004
2005
2006
2007
2008
2009
NET PROFIT
CHART 11
4.Earnings perShare:
Table No.17
YEAR
in crores)
NUMBER OF
EQUITY SHARES
( IN CRORES)
EARNING PER
SHARE (IN %)
2003
-304
413
-0.736
2004
2512
413
6.082
2005
6817
413
16.506
2006
4013
413
9.716
2007
6202
413
15.016
2008
7537
413
18.249
2009
6174
413
14.949
Interpretation:
Here the Earning per Share is the result of Net Profit after Tax. It shows the
positive correlation during the period of study. It shows an increasing trend
except in the year 2004 and 2009 due to lower net profits than previous years.
-10000
10000
20000
30000
40000
50000
60000
2003
2004
2005
2006
2007
2008
2009
NET PROFIT
TOTALASSETS
Page | 59
CHART 12
Table No.18
YEAR
OPERATING
PROFIT (RS IN
CRORES)
SALES (IN
CRORES)
NET PROFIT
RATIO (IN %)
2003
1018
19207
5.300
2004
3530
24178
14.600
2005
9970
31805
31.347
2006
6174
32280
19.126
2007
9755
39189
24.892
2008
11720
45555
25.727
2009
9656
48681
19.835
-10000
1000
2000
3000
4000
5000
6000
7000
8000
NET PROFIT
Interpretation:
The operating profit and value of sales are the causes for the fluctuation in the
Net Profit ratio. While sales has constantly increased over the years operating
profit has increased but shows some fluctuations. In 2009 the ratio is lower than
in 2008 due to lower operating profits. The reason can be attributed to uncertain
economic situation and higher cost of goods sold as well as weak demand.
CHART 13
6. Operating Ratio:
Table No.19
YEAR
OPERATING
COST(RS IN
CRORES)
SALES
(Rs. In crores)
OPERATING
RATIO
(In %)
2003
17940
19207
93.403
2004
19512
24178
80.701
2005
20339
31805
63.949
2006
23675
32280
73.342
2007
26483
39189
67.577
2008
30423
45555
66.783
2009
36848
48681
75.692
Interpretation:
10000
20000
30000
40000
50000
60000
§
E
ATI
FIT
SALES
Page | 61
A comparison of operating ratio or expenses ratio will indicate whether the cost
components is high or low in the figure of sales. The operating ratio shows a
decrease in trend up to 2008 but shows a slight increase in 2009. Normally 75%
to 85% is considered to be a good ratio for manufacturing undertakings. So the
ratio is good in case for SAIL.
CHART 14
7. Payout Ratio:
Table No.20
YEAR
DIVIDENDPE R
EQUITY
EPS
ratio
2005
3.3
16.50
20
2006
2.0
9.71
20.59
2007
3.10
15.01
20.65
2008
3.7
18.25
20.27
2009
2.6
14.95
17.39
Interpretation:
10000
20000
30000
40000
50000
60000
DIRECTM ATERIAL
SALES
Page | 62
The pay out ratio for the year 2005 is 20%, 2006 is 20.59, 2007 is 20.65, 2008 is
20.27% which implies that remaining 80% of earning per share is kept as
retained earning by the company. However in 2009 lesser amount of dividend is
given so EPS is 14.95 and pay out ratio is 17.39 this implies that the company
keeps 82% of earning per share as retained earnings.
CHART 15
NOTE: Here the company had paid dividend only after 2005 in the course of
seven years
Table No.21
YEAR
DIVIDENDPE R
EQUITY
MARKET PRICE
Dividend yield
2005
3.3
62.87
5.25
2006
2.0
83.30
2.40
2007
3.10
114.30
2.71
2008
3.7
185
2009
2.6
96
2.70
02468
10
12
14
16
18
20
2005
2006
2007
2008
2009
EPS
Page | 63
Interpretation:
This percentage implies that 5.25% of market price of the share was issued as
dividend in the
year 2005 and later on it get decreases due to various economic changes in
SAIL.
CHART 16
1. Debt-Equity Ratio
TABLE NO: 21
YEAR
OUTSIDER¶S
FUND
SHAREHOLDER¶S
FUND
DEBT EQUITY
RATIO
2003
34385
5290
6.5
2004
9419
5037
1.87
2005
5977
10306
0.58
2006
4410
12601
0.35
2007
4155
17313
0.24
2008
2988
23063
0.13
2009
7555
27984
0.27
20
40
60
80
100
120
140
160
180
200
2005
2006
2007
2008
2009
MAR
ET PRI
E
Page | 64
CHART 17
Interpretation
The debt-equity ratio is calculated to measure the extent to which debt financing
has been used in a business. From 2003 onwards there has been a decrease in
outsiders fund and a corresponding increase in shareholders funds. This
indicates that the firm is traditionally financed and it is considered to be
favorable from a long term creditor¶s point of view as a high proportion of
owner¶s funds provide a larger margin of safety for them.
This ratio is used to test the debt servicing capacity of a firm The ratio is
calculated as:
TABLE NO: 22
YEAR
EBIT
FIXED INTEREST
CHARGES
INTEREST
COVERAGE
RATIO
2003
1018
1339
0.76
2004
3529
910
3.88
5000
10000
15000
20000
25000
30000
35000
40000
OUTSIDER'S FUND
2005
9970
607
16.43
2006
6174
472
13.07
2007
9755
333
29.29
2008
11720
252
46.39
2009
9656
326
29.59
Interpretation:
There has been decreasing trend in the fixed interest charges and corresponding
increase in EBIT from 2003-2008.This has led to increase in interest coverage
ratio which is a good sign for the company. There has been a decrease in EBIT in
2009 and a slight increase in fixed interest charges due to uncertainties in the
market, higher raw material costs and lower steel demand.
Page | 66
CHART 18
2000
4000
6000
8000
10000
12000
14000
2003
2004
2005
2006
2007
2008
2009
EBIT
FI
TE
EST
GES
Page | 67CALCULATION AND INTERPRETATION OF CASH FLOW
STATEMENT
PARTICULARS 2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
(315.87)
1246.70
9365.35
5705.74
9422.62
11468.73 9403.45
Operating activity
2667.74
7199.45
8899.47
3823.93
5632.91
8378.18
6124.26
investing activity
(31.61)
(235.76)
(286.54)
(337.18)
Fin. Activity
Net inc./decrease
in cash or
equivalent
118.79
1488.18
4096.30
(87.51)
3437.19
4149.61
4469.09
Cash and
equivalent at
beginning of the
year
416.37
717.31
2035.82
6260.15
6172.64
9609.83
13759.44
Cash and
equivalent at end
of the year
535.16
2205.49
6132.12
6172.64
9609.83
13759.44 18228.53
INTERPRETATION
1. Cash flow statement shows that the profit before tax increases continuously in
2004,
2005, 2006, 2007, 2008 and decreases in 2009 due to unstable economic
conditions.
2. Net cash flow from operating activities increases continuously in 2007 and
2008 due
3. Net cash outflows in investing activities have been growing in SAIL as cash is
being
used to purchase fixed assets like plants and machinery and higher development
costs.
Page | 68
4. Cash flows have been positive for financing activities in 2009 mainly due to
increase
in borrowings.
5. Cash and cash equivalents have been increasing steadily from 2003 to 2009
showing
6.COMPETITOR ANALYSIS
(in crores)
PARTICULARSSAI L
TATA
ISPAT
JINDAL
ESSAR
ASSETS
NET BLOCK
12269
10995
8888
5745
9129
CAPITAL
WORK IN
PROGRESS
6544
3488
103
2318
550
INVESTEMENT 653
42372
233
1233
791
NET CURRENT
ASSETS
17389
(308)
160
1078
1580
TOTAL
ASSETS
36855
56651
9384
10378
12050
LIABILITIES
SHARE
HOLDERS
FUND
27985
29705
2032
5415
4738
TOTAL DEBT
7539
26946
7352
4963
7312
DEFFERED
LIABILITY
1331
TOTAL
LIABILITIES
36855
56651
9384
10378
12050
Page | 69
SAIL
TATA
ISPAT
JINDAL
ESSAR
SALES
48681
26843
9181
8433
12704
EBIDTA
10941
9779
730
2693
1930
Less:
Depreciation
1285
973
647
433
828
EBIT
9656
8806
83
2260
1102
Less:Int.Charges 253
1489
1129
268
862
Extraordinary
items
24
10
55
PBT
9403
7317
(1023)
2002
240
Less: Tax
3229
2115
(335)
465
110
PAT
6174
5202
(688)
1537
185
Page | 70
COMPETITOR ANALYSIS
(as in2009)
RATIOS
SAIL
TATA
ISPAT
JINDAL
ESSAR
PROFITIBILITY
RATIO
OPERATING
PROFIT
24.31
37.68
13.58
34.35
21.44
GROSS PROFIT
44.14
33.69
5.76
28.71
14.37
NET PROFIT
19.83
21.09
-8.04
19.50
1.56
RETURN ON
CAPITAL
EMPLOYED
27.94
15.01
6.69
23.16
15.01
LIQUIDITY &
SOLVENCY
RATIOS
CURRENT
RATIO
2.82
0.91
1.04
1.04
0.71
QUICK RATIO
1.99
0.57
0.42
0.95
0.62
DEBT EQUITY
RATIO
0.27
1.34
9.04
0.92
1.57
DEBT
COVERAGE
RATIO
INTREST
COVERAGE
RATIO
29.59
5.71
0.52
10.33
3.17
MANAGEMENT
EFFICIENCY
RATIOS
INVENTORY
TURN OVER
RATIO
4.80
9.36
7.59
9.08
8.69
DEBTORS TURN
OVER RATIO
16.09
41.29
14.50
22.62
30.35
FIXED ASSETS
TURN OVER
RATIO
3.96
1.22
0.61
1.04
0.76
CASH FLOW
INDICATOR
RATIO
DIVIDEND PAY
OUT RATIO
17.39
27.15
5.55
-
Page | 71
Interpretation
Net Profit ratio of SAIL is better than most of the competitors except TATA Steel.
Return on Capital employed is highest for SAIL which shows that overall
profitability
The current ratio for SAIL is more than other competitors which shows that it has
The debt equity ratio is 0.27 which is lower than the competitors. This means
that it is more traditionally financed in comparison to other competitors. It has
lower debt so it can easily raise debt in future
Interest coverage ratio is too high for SAIL which shows that debt is not being
used as
The debtors turnover ratio is lower for SAIL compared to its competitors which
shows that the debtors are less liquid implying inefficient management of
debtors/sales.
Page | 72
2. The company should tighten the debt collection efforts and should reduce the
amount tied up in debtors. In order to improve the quality of debtors and also to
bring down the amount tied-up in debtors, a periodical report of the overdue
may be prepared and effective action may be taken by the management time to
time to expedite the collections.
4. The company is more traditionally financed with low debt and more of equity
financing, so in future debt should be preferred for financing to bring the ratio
close to the ideal ratio of 1:1.
8. CONCLUSION
On the basis of analysis of financial statements of SAIL we may conclude that the
overall working stability ± soundness have improved over the years. Sales
turnover of SAIL increased by 6.86% i.e. Rs. 48681 crores in the FY 2008-09 from
Rs. 45555 crores in the FY 2007-08 whereas profit before tax has decreased by
18% i.e. Rs. 2064 crores in the FY 2008-09 from Rs. 11469 crores in the FY 2007
-08 indicating increase in cost of goods sold.
The debtors¶ turnover ratio is lower for SAIL compared to its competitors which
shows that
which serve as an evidence for good working capital position of the company.
The current ratio for SAIL is more than other competitors which shows that it has
enough
The debt equity ratio is 0.27 which is lower than the competitors. This means
that it is more traditionally financed in comparison to other competitors. It has
lower debt so it can easily raise debt in future.
9. BLIOGRAPHY
BOOKS:
GUPTA
yMagazines of SAIL
ywww.google.co.in
ywww. sail.co.in
ywww.i spat.com
ywww.jindal.com
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Page | 71
Interpretation
Net Profit ratio of SAIL is better than most of the competitors except TATA Steel.
Return on Capital employed is highest for SAIL which shows that overall
profitability
The current ratio for SAIL is more than other competitors which shows that it has
The debt equity ratio is 0.27 which is lower than the competitors. This means
that it is more traditionally financed in comparison to other competitors. It has
lower debt so it can easily raise debt in future
Interest coverage ratio is too high for SAIL which shows that debt is not being
used as
The debtors turnover ratio is lower for SAIL compared to its competitors which
shows that the debtors are less liquid implying inefficient management of
debtors/sales.
Page | 72
SAIL should always try to maintain an adequate quantum of net current assets in
relation
The company should tighten the debt collection efforts and should reduce the
amount tied up in debtors. In order to improve the quality of debtors and also to
bring down the amount tied-up in debtors, a periodical report of the overdue
may be prepared and effective action may be taken by the management time to
time to expedite the collections.
The company is more traditionally financed with low debt and more of equity
financing, so in future debt should be preferred for financing to bring the ratio
close to the ideal ratio of 1:1.
The management of SAIL should also try to maintain a definite proportion among
various components of working capital in relation to overall current assets to
keep an adequate quantum of liquidity all the times.
Page | 73
8. CONCLUSION
On the basis of analysis of financial statements of SAIL we may conclude that the
overall working stability ± soundness have improved over the years. Sales
turnover of SAIL increased by 6.86% i.e. Rs. 48681 crores in the FY 2008-09 from
Rs. 45555 crores in the FY 2007-08 whereas profit before tax has decreased by
18% i.e. Rs. 2064 crores in the FY 2008-09 from Rs. 11469 crores in the FY 2007
-08 indicating increase in cost of goods sold.
The debtors¶ turnover ratio is lower for SAIL compared to its competitors which
shows that
which serve as an evidence for good working capital position of the company.
The current ratio for SAIL is more than other competitors which shows that it has
enough
The debt equity ratio is 0.27 which is lower than the competitors. This means
that it is more traditionally financed in comparison to other competitors. It has
lower debt so it can easily raise debt in future.
9. BLIOGRAPHY
BOOKS:
GUPTA
yMagazines of SAIL
ywww.google.co.in
ywww. sail.co.in
ywww.i spat.com
ywww.jindal.com
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