final main project

8/3/2019 Final Main Project

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1.ABOUT THE COMPANY

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 have a Central Marketing Organization (CMO) whose job is to transact business through

its network of 37 Branch Sales Offices spread across the four regions, 25

Departmental Warehouses, 42 Consignment Agents and 27 Customer Contact Offices all over

India. CMOs domestic marketing job is to meet the demands of the smallest customers in the

remotest corners of the country. SAIL has a Consultancy Division (SAILCON) located at New

Delhi whose job is to offer services and consultancy to clients world-wide. SAIL has a well-

equipped Research and Development Centre for Iron and Steel (RDCIS) at Ranchi which helps

the industries of SAIL to produce quality steel and it also give ideas to develop new technologies

for the steel industry. SAIL has its own in-house Centre for Engineering and Technology (CET),


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Management Training Institute (MTI) and Safety Organization at Ranchi. SAIL captive mines

are control by the Raw Materials Division in Kolkata. Almost all of the plants and major units of

SAIL are ISO Certified.

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.

Activities: Steel Authority of India production lines are

Hot Rolled Coils, Sheets Cold Rolled Products. Bars and Rods.


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Semi-Finished Products. Railway Products. Plates.

Moreover, Steel Authority of India offers technological services in the following

Domains

Know-how transfer of technologies developed by its R&D wing. Consultancy services. Specialized testing services. Contract research. Training.

Integrated Steel Plants

Bhilai Steel Plant (BSP) in Chhattisgarh

Durgapur Steel Plant (DSP) in West Bengal Rourkela Steel Plant (RSP) in Orissa Bokaro Steel Plant (BSL) in Jharkhand IISCO Steel Plant (ISP) in West Bengal

Special Steel Plants

Alloy Steels P in West Bengal plants (ASP) Salem Steel Plant (SSP) in Tamil Nadu


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Visvesvaraya Iron and Steel Plant (VISL) in Karnataka

Subsidiary

Maharashtra Elektrosmelt Limited (MEL) in Maharashtra

Position of Steel Authority of India Limited (SAIL)

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 ofstrength for the company.

SAIL as a single source is able to cater to the entire steel requirement of anycustomer. 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 itsentire 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


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present phase of expansion.

SAIL's large skilled manpower base is a source of strength. There is emphasis onskill based training in the company.

The company has one of the biggest in-house research and development centres inAsia. SAIL's RDCIS (Research &Development Centre for Iron & Steel) is a source

of regular product and process innovation.

WEAKNESSES

SAIL is dependent on the market purchase for a key input coking coal. As Indiadoes not have sufficient coking coal deposits, most of the supply is from external

sources.

A large manpower base results in higher manpower cost as a proportion of turnoverfor the company. Although there has been significant reduction in manpower

through natural and voluntary separations, the manpower strength in SAIL is still

higher than the industry average.

At present around 20% of the products are in the form of semi -finished steel,resulting in lower value addition.

SAIL being a Public Sector unit has to follow set procedures in conducting itsbusiness. 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 ascompared to the likely world average of around 190kg. There is a substantial scope

for increase in domestic steel consumption.

Although during 2008-09, steel consumption contracted by 1.2% in the country,


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steel demand in India is poised to grow at a modest pace with thrust on

infrastructure in the 11th Plan period.

Approval to 37 infrastructure projects worth Rs.70, 000 crores between August 2008and January 2009 is likely to trigger steel demand.

The size range and quality makes SAIL'S long products a preferred choice forproject customers.

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 athreat 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 Stateand Central levels, are an area of concern.

Delay in opening new mines, and / or expanding existing mines may constrain rawmaterials 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 ofconcern for smooth operations in remote areas.


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2.INTRODUCTION OF CET SAILCentre 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.

PURPOSE OF FORMING THE CET

CET was formed in 1982 as an in-house consultancy organization of SAIL.

Previously all the consultancy work was outsourced to various organizations which

could be either govt. organizations like MECON or private organizations. This led

to huge expenditures for SAIL in payment of fees and other expenditures. So it was

decided that an in-house consultancy should be developed to save costs for SAIL.

Thus CET was formed with headquarters in Ranchi and sub centers in various steel

plants across India for better


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Co-ordination. Though CET was formed for the purpose of providing consultancy services only

to the plants of SAIL but it also provides consultancy services to the other organizations but only

on specific requests to earn additional revenues.

CET has six sub centers at following locations:

1. CET Sub centre Bhilai

2. CET Sub centre Bokaro

3. CET Sub centre Durgapur

4. CET Sub centre Rourkela

5. CET Sub centre Burnpur

6. CET Sub centre Bhadrawati

Besides, CET has only two unit offices at following locations to coordinate CETs activities

1. CET, Delhi Unit Office

2. CET, Kolkata Unit Office

It is an ISO 9001:2000 certified organization. It is planning to get certified against ISO

9001:2008. The objectives and functions of CET are mainly categorized under following

headings as under:

Consultancy for Design, Engineering and Techno-economics

Technology improvement


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Other Services

Technology Improvement

Identification of technology improvement measures in consultation with R&D Centre in the

various processes and plan for adoption of the same in the various plants by acquiring design and

know-how capability.Assisting R&D center in identification of various process routes, production facilities, indicating

the order of investment involved to match with the corporate production targets on short

term/long term basis.

Guiding principles of CET working:

Following guiding principles are followed for working of CET:

For Technical Matters: Guidelines/Procedure described in Quality Manual.

For Personnel Matters: Personnel Manual issued by SAIL Corporate Office

For Contract Commercial Matters: Guidelines described in Purchase Procedure 2009.

For Financial Matters: Guidelines given in Accounts Manuals

CET-SAIL (FINANCE DEPATRMENT)

Duties of Officers and employees in Finance Section:

Preparation of employees remunerations & benefits and payments thereof.

Statutory recoveries from employees salary like income tax, PF, SCSBF, EPF etc and their

remittances to the respective funds.

Assessment of Income Tax of employees. Provisional estimate for recoveries & final

calculations for issuing certificates.

Passing of contractors / parties bills and payments thereof including recoveries of income tax

from their bills.

Passing of employees bills and advances and payment thereof.

Accounting of all transactions, maintenance and scrutiny thereof.

Closing of accounts and audit thereof.

Dealing with Govt. and Internal Audits


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Preparation of budgets Revenue and Capital after considering the requirement of various

departments/ Sub-centres/ Unit Offices.

Preparation of employees HBA, Conveyance Advance budget in consultation with P&A.

Periodic monitoring and control of all types of budgets

Issue of TDS certificates to employees and contractors.

Filing of ETDS return

CALCULATION OF ENGINEERING HOURS RATE

.In accounts booking of expenditure should be done accordance with their accruals. When CET

is renewing services to companies, plants and units it is necessary to allocate the expenditure

incurred by SAIL among the plants and units to whom services where rendered consultancy wise

or project wise. This is an accounting requirement. In this way the projects of the plants of the

units gets the share of expenditure incurred by CET which in turn are accumulated in the capital

cost of the project

During 1994-95, 1995-96 CET adopted valuation of its assignment of the project, on the basis of

fixed percentage of total cost of the project for which services where rendered.

This system could not be continued because of the following reasons:

1. CET not being a profit center it cannot consider earning which is hypothetical in anycase, as a basis for allocation of its expenditure on assignments / projects.

2. Since the value of the assignments under this method has no relation with theexpenditure, practical difficulties where experienced in restricting the valuation to the

total expenditure of the CET.

Therefore in 96 -97 engineering hours was found to be more appropriate basis for the allocation

expenditure of CET over the assignment/projects. Engineers working in assignment record their

hours in the assignment they work. In this way all the assignment of CET in execution get

engineering hours spent on them. Engineering hours rate is calculated every year on an estimated


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basis in march every year (detail calculation given below). Rate is applied hours of the individual

assignment/project to find or to determine the value of CET services for the assignment/projects.

Plants and units are being debited on the value of the assignment.

INTRODUCTION TO THE STUDY

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 Rs with regard to money. This right quantity of money for liquidity consideration of right

quality. 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 analysis 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.


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OBJECTIVES OF THE STUDY

To study the financial position of the company. To analyse the financial stability and overall performance of SAIL in general. To analyse and interpret the trends as revealed by various ratios of the company in

particular.

To analyse the profitability and solvency position of the unit with the existing tools offinancial analysis.

To study the changes in the assets, liabilities structure of the company during the periodof study.

IMPROTANCE OF THE STUDY

By FINANCIAL PERFORMANCE ANALYSIS OF SAIL we would be able to get afair picture of the financial position of SAIL.

By showing the financial performance to various lenders and creditors it is possible to getcredit in easy terms if good financial condition is maintained in the company with assets

outweighing the liabilities.

Protecting the property of the business. Compliances with legal requirement.


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LIMITATIONS OF THE STUDY

The analysis and interpretation are based on secondary data contained in the publishedannual reports of SAIL for the study period.

Due to the limited time available at the disposable of the researcher the study has beenconfined for a period of 7 years (2003-2010).

Ratio itself will not completely show the companys good or bad financial position. Inter firm comparison was not possible due to the non availability of competitors data. 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.


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3.RESEARCH METHODOLOGYResearch methodology is a way to systematically solve the research problem. it may be

understood as a science of studying how research is done scientifically. So, the research

methodology not only talks about the research methods but also considers the logic behind the

method used in the context of the research study.

RESEARCH DESIGN:

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 analyse 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.


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DATA COLLECTION:

The required data for the study are basically secondary in nature and the data are

collected from the audited reports of the company.

SOURCES OF DATA:

The sources of data are from the annual reports of the company from the year 2002-2003

to 2009-2010.

METHODS OF DATA ANALYSIS:

The data collected were edited, classified and tabulated for analysis. The analytical tools

used in this study are:

ANALYTICAL TOOLS APPLIED:

The study employs the following analytical tools:

1.Comparative statement.

2.Common Size Statement.3.Trend Percentage.4.Ratio Analysis.


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4.DATA ANALYSIS AND INTERPRETATIONFinancial statement is an organized collection of data according to logical and consistent

accounting procedures. It purposes is to convey an understanding of some financial aspects of a

business firm. It may show a position at a moment of time as in the case of a balance sheet, or may

reveal a series of activities over a given period of time, as in the case of an Income Statement. Thus

the term Financial Statement generally refers to two basic statements: (i) the Income Statement and

(ii) the Balance sheet.

ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENT:

The financial statements are indicators of the two significant factors:

1. Profitability and2. Financial soundness

Analysis and interpretation of financial statement therefore, refers to such a treatment of the

information contained in the Income Statement and Balance Sheet so as to afford full diagnosis of the

profitability and financial soundness of the business.


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TABLE NO. 1

Classification of Balance Sheet of Steel Authority of India Limited from 2003-2004 to 2009 2010

( Rs.in Cro

PARTICULARS 2004 2005 2006 2007 2008 2009 2010

ASSETS

Fixed Assets

Investment

Current Assets

Mis.Expenditure

P&L a/c

13550

543

8246

378

-

12851

606

14333

294

-

12920

293

15630

215

-

12834

514

20375

131

-

13960

538

26317

59

-

18813

653

34511

000

-

30

39

Total Assets 22717 28084 29058 33854 40874 53977 52

LIABILITIES

Shareholders Fun

Loan Funds

Current Liabilities

& Provisions

Deferred Liabilitie

5037

8690

8990

-

10306

5770

10166

1842

12601

4298

1484

10675

17313

4180

1412

10949

23063

3045

13198

1568

27984

7539

17122

1332

33

17

17

14

TOTAL LIABILITIE 22717 28084 29058 33854 40874 53977 52


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TABLE NO. 2

Comparative Balance Sheet of Steel Authority of India Limited from 2004-2005 to 20092010

( Rs. in Cro

PARTICUL

ARS2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-20

Cng%

cngCng % cng Cng

%

cngCng

%

cngCng % cng Cng %

ASSETS

Fixed Assets(699) (5.1) 69 0.53 (124) (0.9) 1164 9.09 4853 34.76 11678 6

Investment 63 11.6 (313) (51.6) 221 75.4 24 4.66 115 21.37 (207) (3

Current

Assets

6087 73.8 1297 9.04 4745 30.3 5942 29.16 8194 31.13 5441 1

Mis.

Expenditure(184) (22) (79) (26.8) (84) (39) (70) (54) (59) (100) -

P&L a/c - - - - - - - - - - -

LIABILITI

ES

Shareholders

Funds

5269 104.6 2295 22.26 4712 37.35750 33.21 4921 21.33 5755 2

Loan Funds(2920

)(34) (1472) (25.5) (118) (2.7) (1135) (27) 4494 147.6 10099 13

Current

Liabilities&

Provisions

1176 13.08 (8682) (85.4) (72) (4.8) 2249 20.5 3924 29.73 558 3

Deff.

Liabilities- - 8833 479 274 2.56 156 11.04 (236) (15) 98 7


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INTERPRETATION:

Long Term Financial Position:

The comparative Balance Sheet of the company reveals that during the financial year 2009 2010there has been a large increase in fixed assets (62.07%) compared to 2008-2009 (34.76%) while the

long term liabilities which contains shareholders funds and long term loans also show growth. Long

term loans show change of 133.96% in 2009-10 which means that most of the fixed assets are

financed by long term loans.

There has been an increase in plant and machinery in 2010 compared to 2009 which means that it willincrease production capacity of the concern.

Current Financial position and liquidity position:

The company has increased its current assets by increasing the level of inventories at Rs.10121 croresin 2009 compared to Rs.6857 crores in 2008. The current liabilities highly fluctuate and show

continuous increase in 2007-08 (20.5%), 2008-09 (29.3%) and 20009-2010 (3.26%).

The Net Working Capital was in peak by the continuous increase after the year 2005. The companygot good liquidity position due increase in Current assets but it may affect the profitability of the

company.

The overall financial position of the company is very good.


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TABLE NO. 3

Classification of Income Statement of Steel Authority of India Limited from 2004 to 2010

(Rs. in crores )

PARTICULARS 2004 2005 2006 2007 2008 2009 2010

Sales

EBIDTA

Less:

Depreciation

24178

4652

1123

31805

11097

1127

32280

7381

1207

39189

10966

1211

45555

12955

1235

48681

10941

1285

43935

11858

1337

EBIT

Less: InterestCharges

3529

901

9970

605

6174

468

9755

322

11720

251

9656

253

10521

314

PBT

Less : Tax

2628

116

9365

2548

5706

1693

9423

3221

11469

3932

9403

3229

10207

3453

PAT (Net Profit) 2512 6817 4013 6202 7537 6174 6754


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TABLE NO. 4

Comparative Income Statement of Steel Authority of India Limited from 2004-2005 to 2009 2010

( Rs.in Crores)

PARTICULARS 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Absolute

Change

% of

Change

Absolut

Change

% of

Change

Absolu

Chang

% of

Chang

Absolu

Chang

% of

Chang

Absolut

Chang

% of

Change

Absolute

Chang

%

C

Sales

EBIDT

Less:Depreciation

7627

6445

4

31.54

138.54

0.35

475

(3716)

80

1.49

(33.4)

7.09

6909

3585

4

21.40

48.57

0.33

6367

1989

24

16.2

18.1

1.98

3126

(2014)

50

6.86

(15)

4.04

(4746)

917

52

EBIT

Less: Interest

6441

(296)

182.51

(32.70)

(3769)

(137)

(38)

22.64

3581

(146)

58.00

(31.1)

1965

(71)

20.1

(22)

(2064)

2

(17.6)

0.7

865

61

PBT

Less : Tax

6737

2432

256.3

2096

(3659)

(855)

(39)

(33.5)

3717

1528

65.1

90.25

2046

711

21.7

22

(2066)

(703)

(18)

(17.8)

804

224

PAT

(Net Profit)

4305 171.3 (2804) (41.1) 2189 54.54 1335 21.5 (1363) (18) 580


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INTERPRETATION:

The Net Sales figure shows an increasing trend. After the year 2004 it shows anincreasing trend which will help to increase in Net Profit.

The company has sufficient control over its depreciation which shows an increase of only4.05 % in 2010.

The company has considerable change in Interest Charges and rather the latter hasdecreased in recent years.

The company has able to attain Profit after Tax of Rs.6754 crores in the year 2010compare to 6174 crores in 2009 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 overallprofitability of the concern is very good.


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TABLE NO. 5

Common Size Balance Sheet

Common Size Balance Sheet of Steel Authority of India Limited from 2004-2010

( Rs.in Crores)

PARTICULARS 2004 2005 2006 2007 2008 2009 2010

ASSETS

Fixed Assets 59.64 45.75 44.46 37.90 34.15 34.85 57.74

Investment 2.39 2.15 1.00 1.54 1.31 1.209 0.86

Current Assets 36.29 51.06 53.78 60.18 64.51 63.93 75.66

Mis.Expenditure 1.68 1.04 0.76 0.38 0.144 0.00 0.00

P&L a/c - - - - - - -

Total Assets 100.00 100.00 100.00 100.00 100.00 100.00 100.00

LIABILITIES

ShareholdersFunds

22.17 36.69 43.36 51.14 56.42 51.84 63.89

Loan Funds 38.25 20.54 14.79 12.34 7.44 13.96 33.40

Current

Liabilities

& Provisions

39.58 36.19 5.10 4.17 32.28 31.72 33.48

Deferred

Liabilities

- 6.58 36.75 32.35 3.83 2.46 2.71

Total Liabilities 100.00 100.00 100.00 100.00 100.00 100.00 100.00


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INTERPRETATION:

Out of the total investment the owners funds is more compare to outsiders fund in thecompany which shows that the company has depended more on its own funds. It shows

that the company is traditionally financed.

The proportion of current assets to total assets has increased comparing to currentliabilities which serve as an evidence for good working capital position of the company.

Investments, Miscellaneous expenditure and deferred liabilities have their own limitedcontribution to their respective side totals.


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Trend Percentage

TABLE NO. 6

Trend Percentage of Steel Authority of India Limited from 2003-2004 to 20092010

Base Year 2003 Figure in %

Particulars 2003 2004 2005 2006 2007 2008 2009 2010

SALES 100 125.88 165.59 168.06 204.03 237.17 253.45 228.74

EBIT 100 346.66 979.37 606.48 958.25 1151.27 948.52 858.53

FIXEDASSETS

100 94.00 89.15 89.63 88.77 96.85 130.51 97.00

CURRENT

ASSETS

100 112.77 196.02 213.75 283.57 359.91 471.97 536.68

CURRENT

LIABILITIES

100 122.96 139.05 146.01 149.76 180.52 234.19 232.20

WORKING

CAPITAL

100 81.83 302.55 370.29 554.05 673.81 889.54 1117.33

CAPITAL

EMPLOYED

TOTAL

100 92.00 121.29 131.65 154.01 171.99 208.88 251.52

TOTAL

ASSETS

100 88.84 109.83 113.64 132.39 159.85 211.09 233.36

Interpretation:

The sales of the product have continuously increased in all the years up to 2009.The increasein sales is quite satisfactory.

The EBIT grows continuously up to 2008 and decreases slightly in 2009 due to increase inthe cost of goods sold.


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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 a

company's financial state of affairs. Some of the categories of ratios are described below:

Liquidity Ratios gives a picture of a company's short term financial situation or solvency Turnover Ratios shows how efficient a company's operations and how well it is using its assets. Profitability Ratios shows the quantum of debt in a company's capital structure.


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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


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1. CURRENT RATIO:

An indication of a company's ability to meet short-term debt obligations; the higher the

ratio, the more liquid the company is. Current ratio is equal to current assets divided by current

liabilities. If the current assets of a company are more than twice the current liabilities, then that

company is generally considered to have good short-term financial strength. If current liabilities

exceed current assets, then the company may have problems meeting its short-term obligations.

CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITY

Table No. 7

Table showing Current ratio

(Rs. In Crores)

YEAR

CURRENT ASSETS CURRENT

LIABILITIES

CURRENT RATIO

2005 14187 6608 2.15

2006 17384 8108 2.14

2007 20379 6984 2.91

2008 26317 9439 2.788

2009 34676 12227 2.835

2010 39081 11092 3.523


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An ideal solvency ratio is 2. The ratio of 2 is considered as a safe margin of solvency due to the

fact that if current assets are reduced to half (i.e.) 1 instead of 2, then also the creditors will be

able to get their payments in full.

INTERPRETATION:

Here, the current ratio fluctuates from year to year above the ideal ratio of 2 and in the

year 2010 it reaches to 3. It means the company is able to meet its short term debt obligation.

In inter-firm comparison, the firm with higher current ratio has better liquidity/ short term

solvency.

CHART 1

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

2005 2006 2007 2008 2009 2010

CURRENT ASSETS

CIRRENT LIABILITIES


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2. LIQUID RATIO:

Liquid ratio is also known as quick or Acid test ratio. 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 norm for liquid ratio 1.

Quick Ratio = Total Quick Assets/ Total Current Liabilities

Quick Assets = Total Current Assets (minus) Inventory

Table No. 8

Table showing Quick ratio

(SRs. In Crores)

YEAR

LIQUID ASSETS CURRENT

LIABILITIES

QUICK RATIO

2004 4993 6025 0.82

2005 9966 6608 1.50

2006 11174 8108 1.37

2007 13728 6984 1.96

2008 19460 9439 2.061

2009 24514 12228 1.994

2010 30054 11092 2.709


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INTREPRETATION:

The liquid ratio denotes the concern had achieved more than the ideal ratio of 1:1

in the years 2005 to 2010 and lower liquid ratio in the year 2004. If inventories do not sell and

the company has to meet its current obligations.

CHART 2

.

0

5000

10000

15000

20000

25000

30000

35000

2004 2005 2006 2007 2008 2009 2010

LIQUID ASSETS

CURRENT LIABILITIES


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3. NET WORKING CAPITAL RATIO:

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.

NET WORKING CAPITAL RATIO = Net Working Capital / Capital Employed

Table No. 9

Table showing Net Working Capital Ratio

(Rs. In Crores)

YEAR

Net Working

Capital

Capital Employed Net Working

Capital Ratio

2004 2050 15218 0.13

2005 7579 20064 0.37

2006 9276 21438 0.43

2007 13395 24992 0.53

2008 16879 28450 0.593

2009 22398 34703 0.645

2010 27989 41604 0.672


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INTERPRETATION:

Net Working capital measures the firms potential reserve of funds. It can be related to net assets.

This ratio represents the availability of working capital in relation with capital employed.

CHART 3

.

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

2004 2005 2006 2007 2008 2009 2010

NET WORKING CAPITAL

WORKING CAPITAL


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TURNOVER RATIO:

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 Ratio

Working Capital Turnover Ratio

Debtor Turnover Ratio Stock Turnover Ratio


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FIXED ASSETS TURNOVER RATIO:

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 using its fixed

assets to generate sales.

FIXED ASSETS TURNOVER RATIO = NET SALES / NET FIXED ASSETS

Generally speaking, the higher the ratio, the better, because a high ratio indicates your

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.

Table No. 10

Table showing fixed asset turnover ratio

YEAR

NET SALES

(Rs. In Crores)

FIXED ASSETS

(Rs. In Crores)

FIXED ASSET

TURNOVERRATIO

2004 24178 13168 1.84

2005 31805 12485 2.55

2006 32280 12162 1.65

2007 39189 11598 3.37

2008 45555 11571 3.93

2009 48738 12305 3.96

2010 43935 13615 3.22


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INTERPRETATION:

Here, the value of fixed assets employed in the business shows a reducing trend which

implies that company didnt occur any more fixed asset during the period 20042008. Only the

depreciation effect had been given to fixed asset.

There has been a decline in the year 2006 but rising there onwards favorably till 2010

which indicates that the net fixed assets is used more effectively to increase the sales without

additional investment in the period of study.

CHART 4

WORKING CAPITAL TURNOVER RATIO:

Working capital refers to investment in current assets. This is also known as gross concept of

working capital. There is another concept of working capital known as net working capital. Net

working capital is the difference between cur-rent assets and current liabilities. Analysts intend to

0

10000

20000

30000

40000

50000

60000

2004 2005 2006 2007 2008 2009 2010

NET SALES

FIXED ASSETS


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establish a relationship between working capital and salsas the two are closely related. Through this

ratio we are attempting to see that one rupee blocked by the organization in net working capital is

generating how much sales. Higher the ratio better it is.

WORKING CAPITAL TURNOVER RATIO = NET SALES / NET WORKING CAPITAL

In recent years, for operating an industry have not only become scarce, but also costly in the

wake of macro level policies on credit squeeze an increase in Interest rate. So, the working capital

can be defined either as a gross working capital, which include funds invested in all current assets, or

as net working capital, which denotes the difference between the current assets current liabilities of

an organization.

Table No. 11

Table showing Working capital turnover ratio

YEAR

NET SALES

(Rs. In Crores)

WORKING

CAPITAL

(Rs. In Crores)

WORKING CAPITAL

TURNOVER RATIO

(In times)

2004 24178 2050 11.79

2005 31805 7579 4.19

2006 32280 9276 3.47

2007 39189 13879 2.96

2008 45555 16879 2.69

2009 48738 22398 2.17

2010 43935 27989 1.56


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INTERPRETATION:

Here, the Working Capital ratio shows an decreasing trend from 2004 to 2007 and then slope

downwards due to holding high current assets in the form of cash, bank balances and receivables in

the year 2008 to 2010.

CHART 5

DEBTORS TURNOVER RATIO:

Debtors 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:

I. Debtors turnover ratioII. Debt collection period.

0

10000

20000

30000

40000

50000

60000

2004 2005 2006 2007 2008 2009 2010

NET SALES

WORKING CAPITAL


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DEBTORS TURNOVER RATIO = CREDIT SALES / AVERAGE ACCOUNTS

RECEIVABLES

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.

Table No. 12

Table showing Debtors turnover ratio

YEAR CREDIT SALES

(Rs. In Crores)

DEBTORS

(Rs. In Crores)

Debtors turnover

ratio

(In times)

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 48738 3028 16.095

2010 43935 3494 12.574


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INTERPRETATION:

There has been increase in the turnover ratio from 2004-2006 and has stabilized thereafter. But in

2010 the ratio has been reduced due to reduction in sales. As the ratio is sufficiently high it can

be concluded that efficient management of the debtors has taken place.

CHART 6

.

Debt collection period:

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.

Debt collection period = Months/Days in a year/ Debtors turnover ratio

0

10000

20000

30000

40000

50000

60000

2004 2005 2006 2007 2008 2009 2010

CREDIT SALES

DEBTORS


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Table No. 13

Table showing Debt collection period

(In Days)

YEAR COLLECTION PERIOD

2003 32

2004 23

2005 22

2006 21

2007 22

2008 24

2009 23

2010 24

Debtors collection period measures the quality of debtors since it measures the rapidity or

slowness with which money is collected from them.

CHART 7

.

0

5

10

15

20

25

30

35

2003 2004 2005 2006 2007 2008 2009 2010

COLLECTION PERIOD

COLLECTION PERIOD


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INTERPRETATION:

Here, there has been decreasing trend in the debt collection period which is unfavorable 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. It decreased from 32 days in 2003 to 22

days in 2007 and thereafter increased to 24 days in 2010.

STOCK TURNOVER RATIO:

This ratio indicates whether investment in inventory is efficiently used or not. It is

therefore explains whether investment in inventories is within proper limits or not. This ratio is

calculated as follows.

Stock Turnover Ratio = Net Sales / Average Inventory

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 48738 10121 4.815

2010 43935 9027 4.867


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The Inventory turnover ratio signifies the liquidity of the Inventory. A high inventory turnover

ratio indicates brisk sales. The ratio is, therefore a measure to discover the possible trouble in the

form of over stocking or over valuation.

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 and 2010 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

.

0

10000

20000

30000

40000

50000

60000

2003 2004 2005 2006 2007 2008 2009 2010

CREDIT SALES

AVERAGE STOCK


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PROFITABILITY RATIO:

Profitability is an indication of the efficiency with which the operation of the business is

carried on. Poor operational performance may indicate poor sales and hence poor profits. A

lower profitability may arise due to lack of control over the expenses. Bankers, financial

institutions and other creditors look at the profitability ratios as an indicator whether or not the

firm earns substantially more than it pays interest for the use of borrowed funds.

Return on Investment Return on Shareholders fund Return on total asset Earning per Share Net profit Ratio Operating ratio Payout ratio Dividend yield ratio


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RETURN ON INVESTMENT:

It is also called as Return on Capital Employed. It indicates the percentage of return on

the total capital employed in the business.

Operating profit

RETURN ON INVESTMENT = ------------------------------- X 100

Capital employed

The term operating profit means profit before interest and tax and the term capital

employed means sum-total of long term funds employed in the business.

It measures overall effectiveness of management in generating profits with its available assets

i.e.

Share capital + Reserve and surplus + long term loans[non business assets + fictitious assets]


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Table No. 15

Table showing Return on Investment

YEAR OPERATING

PROFIT (Rs incrores)

CAPITAL

EMPLOYED (Rs incrores)

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

2010 10132 41604 24.353

INTERPRETATION:

Return on investment shows an increasing trend from 2003 to 2008. However there are small

fluctuations in 2006 and 2009 due to lower operating profits. Average Capital employed shows

regular increase from 2004 to 2010.


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CHART 9

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

2003 2004 2005 2006 2007 2008 2009 2010

OPERATING PROFIT

CAPITAL EMPLOYED


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RETURN ON SHAREHOLDERS FUND:

In case it is desired to work out the productivity of the company from the shareholders

point of view, it should be computed as follows:

Net profit after Interest and Tax

Return on shareholders fund = ------------------------------------------------------ X 100

Shareholders fund

The term profit here means Net Income after the deduction of interest and tax. 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)

Table No.16

Table showing return on Shareholders Fund

YEAR NET PROFIT (Rs in

crores)

SHAREHOLDERS

FUND (Rs in crores)

RETURN IN

SHAREHOLDERS

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

2010 6754 33739 20.018


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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

been a considerable increase in shareholders funds from 2005 to 2010 which has resulted in

stabilizing return on investment.

CHART 10

.-5000

0

5000

10000

15000

20000

25000

30000

35000

40000

2003 2004 2005 2006 2007 2008 2009 2010

NET PROFIT

SHARE HOLDERS FUND


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RETURN ON TOTAL ASSETS:

This ratio is computed to know the productivity of the total assets.

Net profit after Tax

Return on Total Assets = --------------------------------- X 100

Total Assets

Table No.17

Table showing return on Total Assets


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

2010 6754 68391 9.875

INTERPRETATION:

Here the Return on Total Assets shows the Negative points due to net loss on the corresponding

year. But the Return on Total Assets turns into positive as soon as Net Profit occurs.


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CHART 11

.

EARNING PER SHARE:

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 earning per share with the

help of the following formula:

Earning Per Equity Share = Net Profit after Tax / Number of Equity Shares X 100

The earning 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 companys capacity to pay dividend to its equity shareholders.

-10000

0

10000

20000

30000

40000

50000

60000

70000

80000

2003 2004 2005 2006 2007 2008 2009 2010

NET PROFIT

TOTAL ASSETS


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Table No.18

Table showing Earning per Share


crores)

NUMBER OF

EQUITY SHARES( IN CRORES)

EARNING PER

SHARE (%)

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

2010 6754 413 16.353

INTRPRETATION:

Here the Earning per Share is the result of Net Profit after Tax. It shows the positive correlation

during the period of study.

Earning Per share for the year 2005 and for the year 2010 is 150% higher than 2004 due to more

Net Profit as the consequence of high sales value and low interest charges. In the year 2006 and

2007 earning per share is comparatively less with compare to 2005 due to economic conditions.


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CHART 12

.

NET PROFIT RATIO:

This ratio indicates the Net margin on a sale of Rs.100. It is calculated as follows:

Net Operating Profit

Net Profit Ratio = ----------------------------------------- X 100

Net Sales

-1000

0

1000

2000

3000

4000

5000

6000

7000

8000

2003 2004 2005 2006 2007 2008 2009 2010

NET PROFIT

NUMBER OF EQUITY SHARES


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Table No.19

Table showing Net Profit Ratio

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

2010 10132 43935 23.061

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 2010 the ratio is lower than in 2009 due to higher operating profits. The

reason can be attributed to uncertain economic situation and higher cost of goods sold as well as

weak demand.


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CHART 13

.

OPERATING RATIO:

This ratio is a complementary of Net Profit ratio. In case the net profit ratio is 20%. It

means that the operating profit ratio is 80%. It is calculated as follows:

Operating Cost

Operating Ratio = ----------------------------------------- X 100

Net Sales

The operating cost include the cost of direct materials, direct labour and other overheads,

viz., factory, office or selling.

0

10000

20000

30000

40000

50000

60000

2003 2004 2005 2006 2007 2008 2009 2010

NET OPERATING PROFIT

SALES


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Direct Material

Direct Material cost to sales = ----------------------------------- X 100

Net Sales

Table No.20

Table showing Operating Ratio

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 36280 48681 74.525

2010 33083 43935 75.299

INTERPRETATION:

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


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shows a slight increase thereafter till 2010. 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

.

DIVIDEND YIELD/PAYOUT RATIO:

This ratio indicates what proportion of earning per share has been used for paying

dividend.

Dividend per equity share

Pay Out Ratio = --------------------------------------- X 100

Earning per equity share

0

10000

20000

30000

40000

50000

60000

2003 2004 2005 2006 2007 2008 2009 2010

OPERATING COST

SALES


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Table No.21

Table showing Payout Ratio

YEAR DIVIDEND PER

EQUITY

EPS Dividend payout

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

2010 3.3 16.35 20.18

INTERPRETATION:

The payout ratio for the year 2007 is 20.65%, 2008 is 20.27%, 2010 is 20.18% 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 payout ratio is 17.39 this implies

that the company keeps 82% of earning per share as retained earnings


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CHART 15

.

DIVIDEND YIELD RATIO:

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.

Dividend per Share

Dividend yield = ----------------------------------- X 100

Market price per share

Since, company had issued dividend only after 2005 in last seven years period. We can

calculate this ratio only for that period as follows:

0

2

4

6

8

10

12

14

16

18

20

2005 2006 2007 2008 2009 2010

DIVIDENT PER EQUITY

EPS


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Table No.22

Table showing Dividend yield

YEAR DIVIDEND PER

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 2

2009 2.6 96 2.70

2010 3.3 253 1.30

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

.

0

50

100

150

200

250

300

2005 2006 2007 2008 2009 2010

DIVIDEND PER EQUITY

MARKET PRICE


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Long Term Financial Position or Solvency Ratios

DEBT EQUITY RATIO:

TABLE NO: 23

Table showing Debt-Equity ratio

YEAR OUTSIDERS

FUND

SHAREHOLDERS

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

2010 16511 33317 0.49


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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 creditors point of view as a high proportion of

owners funds provide a larger margin of safety for them.

INTEREST COVERAGE RATIO:

This ratio is used to test the debt servicing capacity of a firm.

The ratio is calculated as:

Interest coverage ratio = EBIT /Fixed interest charge

0

5000

10000

15000

20000

25000

30000

35000

40000

2003 2004 2005 2006 2007 2008 2009 2010

OUTSIDER'S FUND

SHARE HOLDER'S FUND


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Page | 63

TABLE NO: 24

YEAR EBIT FIXED INTEREST

CHARGES

INTEREST

COVERAGE

RATIO

2003 1018 1339 0.76

2004 3529 910 3.88

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

2010 10534 402 26.20

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.


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CHART 18

.

0

2000

4000

6000

8000

10000

12000

14000

2003 2004 2005 2006 2007 2008 2009 2010

EBIT

FIXED INTEREST CHARGES


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5.COMPETITOR ANALYSISTable no. 25

BALANCE SHEET FOR 2010

(in crores)PARTICULARS SAIL TATA ISPAT JINDAL ESSAR

ASSETS

NET BLOCK 13615 12162 7927 6704 9129

CAPITAL

WORK INPROGRESS

15026 3844 64 6435 550

INVESTEMENT 669 44980 229 1067 791

NET CURRENT

ASSETS

20518 1422 540 920 1580

TOTAL

ASSETS

49828 62408 8760 15129 12050

LIABILITIES

SHARE

HOLDERS

FUND

33317 37169 1579 6746 4738

TOTAL DEBT 16511 25239 7181 8383 7312

DEFFERED

LIABILITY

- - - - -

TOTAL

LIABILITIES

49828 62408 8760 15129 12050

Table No. 26

PROFIT AND LOSS ACCOUNT FOR 2010 (in crores)

SAIL TATA ISPAT JINDAL ESSAR

SALES 43935 26843 11079 7896 8194

EBIDTA 11858 9779 1556 2612 1955

Less:Depreciation

1337 973 774 512 631

EBIT 10521 8806 782 2100 1324

Less:Int.Charges 402 1489 1370 192 618Extraordinary

items

88 - 7 (0.04) (21)

PBT 10207 7317 (581) 1907.96 683

Less: Tax 3453 2115 (259) 427 248

PAT 6754 5202 (322) 1480.96 435


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COMPETITOR ANALYSIS OF RATIO

Table No. 27 (as in 2010)

RATIOS SAIL TATA ISPAT JINDAL ESSAR OIL

PROFITIBILITYRATIO

OPERATING

PROFIT

22.69 35.70 13.47 34.78 2.85

GROSS PROFIT 19.40 31.36 5.88 27.80 0.90

NET PROFIT 15.73 19.96 (3.14) 19.50 0.07

RETURN ONCAPITAL

EMPLOYED

20.46 13.06 8.27 14.86 3.64

LIQUIDITY &

SOLVENCY

RATIOSCURRENT

RATIO

1.60 1.12 1.01 1.19 0.61

QUICK RATIO 1.53 0.76 0.43 0.92 0.40

DEBT EQUITY

RATIO

0.50 0.68 14.69 1.24 2.94

DEBT

COVERAGE

RATIO

INTRESTCOVERAGE

RATIO

26.26 4.41 0.50 7.91 0.63

MANAGEMENT

EFFICIENCY

RATIOS

INVENTORY

TURN OVERRATIO

6.02 10.90 6.39 8.05 11.30

DEBTORS TURNOVER RATIO

12.46 46.58 15.46 14.49 23.33

FIXED ASSETS

TURN OVER

RATIO

1.20 1.12 0.76 0.83 2.71

CASH FLOW

INDICATOR

RATIO

DIVIDEND PAY

OUT RATIO

19.63 13.68 - 8.16 -


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INTERPRETATION:

Net Profit ratio of SAIL is better than most of the competitors except TATA Steel. Thiscan be attributed to lower earnings of SAIL in comparison to their earnings.

Return on Capital employed is highest for SAIL which shows that overall profitabilityand efficiency of the business is good.

The current ratio for SAIL is more than other competitors which shows that it has enoughliquidity in comparison to other competitors.

The debt equity ratio is 0.50 which is lower than the competitors. This means that it ismore 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 asource of finance to increase earnings per share.

Inventory turnover ratio is lesser in SAIL compared to other competitors which indicatesinefficient management of inventories.

The debtors turnover ratio is lower for SAIL compared to its competitors which showsthat the debtors are less liquid implying inefficient management of debtors/sales.


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6.RECOMMENDATION AND SUGGESTION SAIL should always try to maintain an adequate quantum of net current assets in relation of

current liabilities as to keep a good amount of liquidity throughout the year.

The company should tighten the debt collection efforts and should reduce the amount tied upin 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.

Inventory turnover ratio is lesser in SAIL compared to other competitors which indicatesinefficient management of inventories. So it is advisable to keep less inventories to minimize

costs and improve efficiency.

The company is more traditionally financed with low debt and more of equity financing, soin 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 variouscomponents of working capital in relation to overall current assets to keep an adequate

quantum of liquidity all the times.


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7.CONCLUSIONOn the basis of analysis of financial statements of SAIL we may conclude that the overall

working stabilitysoundness have improved over the years. Sales turnover of SAIL decreased

by 9.75% i.e. Rs.43935 crores in the FY 2009-10 from Rs. 48681 crores in the FY 2008-09

whereas profit before tax has increased by 9.46% i.e. Rs. 6754 crores in the FY 2009-10 from

Rs.6170 crores in the FY 2008-09 indicating increase in cost of goods sold.

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.

The proportion of current assets to total assets has increased comparing to current liabilities

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

liquidity in comparison to other competitors.

The debt equity ratio is 0.50 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.

SAIL is more efficient and effective to utilize its fund.


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8.BIBLIOGRAPHYBOOKS:

Financial management by R.K. SHARMA & SHASHI K GUPTA Annual Report of SAIL Magazines of SAIL

INTERNET WEB SITES:

www.google.co.in www.sail.co.in www.money control.com www.tata steel.co.in www.essar.com www.ispat.com www.jindal.com

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