A

Presentation
On
Comprehensive Study of Steel
Industry in India
In the fulfillment of MRP-I

Presented To Presented By
Dr. Mahendra S. Vinay Bhatia (43)
Sharma Avinash Nair (11)
Prof. Rohit H. Gautam Mevada
Trivedi (63)
 History of steel
• In India can be traced back to 400 BC
• steel industry in India was made in 1874
when the Bengal Iron
• modern India’s iron and steel industry
August 27, 1907 was a red-letter day when
the Tata Iron and Steel Company (TISCO)
• The Government’s Industrial Policy had
undergone changes ____ once in 1956 and
then in 1991.
 Types of finished steel
products
• Carbon Steels
• Alloy Steels
• Tool Steels
• Stainless Steels
 Recent Mergers and
Acquisitions in the
Industry.
• Tata Vs Corus

• Arcellor- Mittal Deal

 KEY SUCCESS FACTORS
DRIVING DEMAND OF STEEL
INDUSTRY
• Production- Steel production grew at 1.2 per cent in the
January-March quarter of 2008-09 over the same period last
year and saw most of the large steel companies such as SAIL,
Tata Steel, Essar and JSW operating at full capacity.
• Consumption- Steel consumption grew at 5.2 per cent during
the first quarter of 2009-10 as against 3.8 per cent in the
January-March quarter last year.
• Exports-Iron ore exports increased 17 per cent to 12.6 MT in
February 2009 from 10.8 MT in the same month at 2008

Source: Ministry of steel 08-09

 Contd
• The government has reduced export duty on iron ore lumps
from 15 per cent to 5 per cent, which has given a further fillip
to exports from 2008-09.
• The government has removed full exemption of customs duty
on some industrial and agricultural commodities.
• Iron and steel products like pig iron, spiegeleisen, semi-
finished products, flat products and long products are now
subject to a basic custom duty of 5 per cent ad valorem.
• Reduction of the cost: is another major factor in the survival
of the Indian steel industry in the age of globalization

Source: Ministry of steel

08-09
SWOT ANALYSIS OF THE STEEL
INDUSTRY
• STRENGTHS OF INDIAN STEEL
INDUSTRY
1. Low labor wage rates.
2. Reduction in workforce
3. Mature production base.
4. Positive stimuli from construction
industry.
5. Booming automobile industry.
STRUCTURAL WEAKNESSES OF
INDIAN STEEL INDUSTRY:
1. However, nearly 6% of its crude steel is still produced using the
outdated open-hearth process.
2. Labor productivity in India is still very low.
3. Steel production in India is also hampered by power shortages.
4. India is deficient in raw materials required by the steel industry.
5. Insufficient freight capacity and transport infrastructure
impediments too hamper the growth of Indian steel industry.
6. The condition of the infrastructural facilities of the steel industry
in India is not at all conducive to a sustainable growth and
development of the steel industry of the India.
Source: Ministry of steel 08-09
 OPPORTUNITIES IN THE STEEL
INDUSTRY
• Rural Indian today presents a challenge and the opportunity to increase
usage of steel in these areas through projects such as rural housing etc.
• FDI in Steel Industry-India has been picking up in the recent years
222 MoUs have been signed in various states with intended capacity of
around 275.70 million tonnes, with an investment of over Rs. 11 lakh
crore
• Export duty in respect of flat steel products was reduced from previous
levels to NIL
• Introduction of Stamp Charging and Partial Briqueting of Coal Charge
(PBCC) for production of metallurgical coke:
• Installation of energy recovery coke ovens to meet power
requirements as well as to reduce emission.
Source: Ministry of steel 08-09
Risk and Threat Analysis in the
Steel Industry
1. Prolonged global recession which had drastic effects on the steel
industry in 2008-09.
2. Dumping by competitors :Influx of cheap (and probably
low quality) imports as neighboring countries will try to look for
export market to unload their inventory surplus.
3. Bank credit facilities has be tightened putting pressure on working
capital and may result in material procurement delays, longer
collection periods, etc.
4. India is capable of producing steel at a good rate and also increase the
volume of production but there is not enough land available to
support such activities and increasing size of population .
 Contd
• Export duties on bars and rods of non-alloy
steel increased from 10% to 15%
• An ad-valorem export duty of 15%
levied on iron ore of all categories
and grades.

Source: Ministry of steel

08-09
 PEST Analysis
• Political Factor
• The government investments in infrastructure such as rail,
highways, dams, power plants and ports are critical prime movers
for steel demand.
• Facilitating movement of raw materials other than coal through
finalization of wagon requirements and ensuring an un-interrupted
supply of raw materials to the producers.
• Regular interactions with entrepreneurs proposing to set up new
ventures, to review the progress of implementation and assess
problems faced.
• Identification of infrastructural and related facilities required by
the steel industry.
 Contd
• Addressing the problem of shortage of technically qualified
manpower to sustain development and growth of the iron and
steel industry in India.
• The organization of Steel Consumer Council under the
Chairmanship of the Hon’ble Steel Minister provides a forum
for interaction of all producers and consumers of steel in the
country.
• Environmental norms imposed by the government significant
impact, estimated to be around 15% of project cost. Providing
linkage for raw materials, rail movement clearance etc. for new
plants and expansion of existing ones.
Source: Ministry of steel 08-09
 Economic Factor
• Indian steel industry suffers from low productivity of labor but
high capital, energy and transportation cost.
• To enhance competitiveness of the Indian steel to industry
include investment towards technology up gradation.
• Automation in process routes, optimum capacity utilization,
improved maintenance practices, extensive mechanization.
• Reduction/ dismantling of tariff barriers, partial float of the
rupee on trade account, access to best-practice of global
technologies and consequent reduction in costs – all these
enhanced the international competitiveness of Indian steel in
the world export market
 Social Factor

• Quality : Installation of energy recovery ovens to meet

power requirements as well as to reduce emission.
• Use of Direct Reduced Iron (DRI)/Sponge iron in steel making
• Reducing coke consumption in blast furnaces and improving
productivity coke rate in some of the blast furnaces is less than 500
kg/tonne hot metal and productivity exceeds 2 tonnes
per cubic metre per day as that of 850 kg of coke per tonne.
• steel making technologies/ practices and secondary refining
technologies such as ladle metallurgy, vacuum degassing etc., it is
now possible to produce steel of much lower inclusion and much
lower content of oxygen, nitrogen and hydrogen.

Source: Ministry of steel 08-09

 Contd
• Efforts to reduce energy consumption and emissions: The
international norm of energy consumption is 4.5 to 5.5 Giga
calories per tonne of crude steel.
• With adoption of modern technology and equipment,
beneficiation of raw materials and use of high grade imported
coking coal, Indian Steel plants have been able to achieve
energy consumption at the level of 6.5 to 7.0 Giga Calories
only.
• Steps such as afforestation, installation of pollution-control
equipment are likely to abate the pollution emanating from
steel industry

Source: Ministry of steel 08-09

 Technological Factor
• Development in Iron & Steel sector” has been approved with a
budgetary provision of Rs. 118 crores for implementation in
the 11th five year plan for path-breaking technologies in an
environment friendly manner.
• To encourage and step up R&D investment in the steel sector,
Government of India, Ministry of Steel has been extending
financial assistance from the interest proceeds of Steel
Development Fund (SDF) and has approved 59 R&D projects
costing Rs. 408 crores, of which SDF contribution is Rs. 165
crores.

Source: Ministry of steel 08-09

 Rules and Regulations framed
by Government
• Action taken to control inflation in the
steel sector

 Reduction in Custom Duty in respect of non-alloy

steel products and Zinc, Metcoke and Ferro alloys.
 The Counter Vailing Duty (CVD) on TMT rods and
bars was reduced from 14% to NIL.
 Export duty was imposed on the following steel
categories w.e.f. May 10, 2008:
 Action taken to control demand
and supply of steel:
• Action taken in October-November 2008
consequent upon the global financial crisis:
• Export duty on steel exports withdrawn .
• Duty Entitlement Pass Book benefit restored on
steel exports .
• Import duty @ 5 % imposed on import of non-
alloy steel .
• Excise duty on steel products reduced from 14 %
to 10 % .
• Excise duty on steel has been further reduced to
8 %.
 Action taken to facilitate
conservation of iron ore resource
 
Following rates of duty were imposed on iron ore
•
exports in the Finance Bill 2007-08:
• Iron ore fines (iron content upto 62%) — Rs. 50
Per Metric Tonne (PMT)
• Iron ore fines (iron content 62% and above) — Rs.
300 PMT
• Iron ore lumps (all sorts) — Rs. 300 PMT
• Iron ore concentrates (all sorts) — Rs. 300 PMT
 Foreign investments and private
sector participation:
•
 
222 MoUs have been signed in various
states with intended capacity of around
275.70 million tonnes
• Role of the Ministry of Steel
• the Ministry of Steel had played an
important role in taking the steel industry
forward in this phase.
• pre-de-regulation
• the post-de-regulation period
 Policy framed by Government

• Liberalisation of Industrial Licensing Policy

• Introduction of Industrial Entrepreneurs’
Memorandum(IEM)
• Liberalisation of the Locational Policy
• Policy for Small Scale Industries
• Non-Resident Indians Scheme
• Electronic Hardware Technology Park
(EHTP)/Software Technology Park (STP) scheme
• Policy for Foreign Direct Investment (FDI)
 Players in the Industry

• Steel Authority of India Limited.

• Tata Iron and Steel Company Ltd.
• Jindal Iron and Steel Company Limited.
• Essar Steel
• Ispat Industries Limited
• Sunflag Iron and Steel Industry
• Shah Alloys Limited
• MUSCO
• VIZAG
• Indian Iron and Steel
• Rashtriya Ispat Nigam Limited (RINL)
• JSW Steel Limited
Cont…
 Steel Authority of India Limited
 leading steel-making company in India.
 Production Capacity of SAIL is 3.5 MT.
 Company incorporated on January 24, 1973.
Tata Steel Limited
 World's 6th largest steel company.
 Production Capacity of SAIL is 5.37MT.
 Founded by Jamsetji Nusserwanji Tata in the year 1907 as Tata
Iron and Steel Company (TISCO) and later its renamed to Tata
Steel Limited.
Cont…
JSW Steel Limited
 India's second largest private sector steel maker.
 Incorporated as Jindal Vijayanagar Steel Limited on March 15,
1994.
 Production Capacity of JSW Steel Ltd is 3.5 MT.
Essar Steel Limited
 Bombay-based Essar group controlled by the Ruias.
 Commenced operations of specialised construction in Jun.'76 as
Essar Constructions.
 Production Capacity of EssarSteel Ltd is 3.3 MT.
 Market Share of Various Players in Industry

Source: Ministry of Steel

 Position of India with other Countries
Country Rank
China 1
Japan 2
United States 3
Russia 4
India 5
South Korea 6
Germany 7
Ukraine 8
Brazil 9
Italy 10

Source: Ministry of Steel

Industry Performance
(Financial)
 RATIO ANALYSIS: “Ratio represents the quotient
relationships between two relevant variables of the financial
statements & individual item to group item or a group item to
group item, which develop the meaningful relationships
between these two set of variables.”

 IMPORTANCE:
 Comparison with ideal ratio
 Comparison with past ratios
 Help of some related ratios
 Comparison with ratios of other firms
 Earning per share

COMPANY Earning per share

year 2009 2008 2007 2006 2005

Essar steel 7.34 3.08 3.6 7.67 -

Ispat Ltd. 1.95 -4.36 -0.86 -6.49 4.20

Rinl - 3.95 2.96 2.55 5.22

Steel Authority Of India Ltd. 15.18 17.7 14.70 9.43 16.11

Tata Steel Ltd. 65.61 60.56 73.84 62.56 62.15

 Debt equity Ratio

COMPANY Debt equity Ratio

Year 2009 2008 2007 2006 2005

Essar steel 1.08 0.99 1.38 4.55

Ispat Ltd. 9.04 11.65 13.88 13.66 4.33

Rinl 0.39 0.58 0.64 0.75 1.51

Steel Authority Of India Ltd. 0.26 0.13 0.21 0.34 0.55

Tata Steel Ltd. 1.31 1.07 0.67 0.26 0.38

 Gross profit Ratio

COMPANY Gross profit Ratio

Year 2009 2008 2007 2006 2005

Essar steel 14.37 14.81 16.95 16.42

Ispat Ltd. 5.76 7.55 12.95 -4.25 17.41

Rinl 23.35 20.31 20.20 30.30

Steel Authority Of India Ltd. 17.48 25.10 24.56 18.96 32.60

Tata Steel Ltd. 33.69 37.70 34.91 33.76 36.83

 Fixed assets turnover Ratio

COMPANY Fixed assets turnover Ratio

Year 2009 2008 2007 2006 2005

Essar steel 0.76 0.73 0.59 0.59

Ispat Ltd. 0.60 0.63 0.57 0.44 0.75

Rinl 1.02 0.89 0.82 0.84

Steel Authority Of India Ltd. 1.35 1.31 1.16 0.96 1.03

Tata Steel Ltd. 1.22 1.20 1.09 0.98 1.11

 Current Ratio

COMPANY Current Ratio

Year 2009 2008 2007 2006 2005
Essar steel 1.41 1.09 1.21 1.97

Ispat Ltd. 1.04 1.25 1.58 1.30 2.16

Rinl 3.52 4.36 4.33 3.82 3.52

Steel Authority Of India Ltd. 1.82 1.73 1.59 1.23 1.18

Tata Steel Ltd. 0.97 3.92 1.77 0.72 0.71

Thank you