r electrosteel steels ltd - nse · kanke road, electrosteel steels limited is an india-based...

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STAKEHOLDERS EMPOWERMENT SERVICES

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SECTOR: STEEL REPORTING DATE: 14TH AUGUST, 2017

ELECTROSTEEL STEELS LTD www.electrosteels.com

www.electrosteels.com

Electrosteel Steels Ltd NSE Code - ESL TABLE 1 - MARKET DATA (STANDALONE) (AS ON 10TH AUGUST, 2017)

Sector - Steel NSE Market Price (`) 4.05 NSE Market Cap. (₹ Cr.) 980.56

Face Value (`) 10.00 Equity (` Cr.) 2,409.24

Business Group – N.A. 52 week High/Low (₹) 6.80/2.70 Net worth (₹ Cr.)* 3.09

Year of Incorporation - 2006 TTM P/E (TTM) N.A. Traded Volume (Shares) 26,71,879

TTM P/BV N.A. Traded Volume (lacs) 108.21

Registered Office - Source - Capitaline, TTM - Trailing Twelve Months, N.A. - Not Applicable | * As on 30th September, 2016

801, Uma Shanthi Apartments, COMPANY BACKGROUND

Kanke Road, Electrosteel Steels Limited is an India-based company, which is engaged in basic iron and

steel business. The Company is engaged in selling thermo mechanically treated (TMT) bars,

billets, ductile iron (DI) pipes, pig iron and wire rod. The Company is engaged in setting up a

2.51 million ton per annum (MTPA) capacity Greenfield Integrated Steel and DI Pipes Plant in

the district of Bokaro, Jharkhand. It produces TMT bars in Fe500, Fe500D and Fe500D

corrosion resistance steel (CRS) variants. It manufactures DI pipes in sizes ranging from 100

millimetres (mm) to 1,200 mm. Its billets offer applications, such as general engineering,

structural, rerolling and high tensile applications. Its wire rods have applications in

engineering, construction, power and automobile sectors. It consists of a sinter plant, pellet

plant, coke oven, blast furnace, basic oxygen furnace, billet caster, wire rod mill, bar mill and

power plant.

Ranchi – 834 008, Jharkhand

Company Website:


Revenue and Profit Performance

The revenue of the Company decreased from ₹593.95 crores to

₹582.93 crores from quarter ending Sep’15 to quarter ending

Sep’16. The Company made a loss of ₹485.89 crores in quarter

ending Sep’16 vis-a-vis making a loss of ₹201.49 crores in

quarter ending Sep’15.

Source - Money Control

Performance vis-à-vis Market

TABLE 2- Returns

1-m 3-m 6-m 12-m

Electrosteel Steels Ltd -7.95% -38.27% -14.74% 19.12%

Nifty -0.72% 3.82% 11.69% 13.87%

NIFTY Metal 5.56% 10.52% 8.94% 28.03%

Source – Capitaline / NSE

0.50

0.70

0.90

1.10

1.30

1.50

1.70

1.90

Aug 16 Oct 16 Dec 16 Feb 17 Apr 17 Jun 17 Aug 17

Electrosteel Steels Ltd NIFTY NIFTY METAL

582.93859.32

593.95

-485.89

284.37-201.49

-1000

-500

0

500

1000

Sep'16 Mar'16 Sep'15

Quarterly revenue and Profit (₹ CRORE)

Revenue Profit

http://www.electrosteels.com/





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www.electrosteels.com TABLE 3 - FINANCIALS

(₹ Cr.) Sep’16 Mar’16 Sep’15

% Change

Sep ’16 vs Mar’16 Mar’16 vs

Sep’15

Net Worth 3.09 766.29 703.55 -99.60% 8.92%

Current Assets 1,267.42 1,477.78 1,603.78 -14.23% -7.86%

Non-Current Assets 11,862.35 12,144.48 11,997.74 -2.32% 1.22%

Total Assets 13,129.77 13,622.25 13,601.52 -3.62% 0.15%

Investments - - - N.A. N.A.

Finance Cost 324.38 134.01 134.35 142.06% -0.25%

Long Term Liabilities 7,677.05 8,170.38 8,622.96 -6.04% -5.25%

Current Liabilities 5,449.63 4,685.58 4,275.01 16.31% 9.60%

Turnover 556.93 826.02 571.56 -32.58% 44.52%

Profit After Tax (PAT) -485.89 284.37 -201.49 -270.87% N.A.

EPS (₹) -2.02 1.18 -0.84 -271.19% N.A.

Source - Money Control/ Stock Exchange Filing

Discussion by the Company in quarterly results for the period ended on 30th September, 2016–

In view of the Company incurring losses continuously & current liabilities exceeding the current assets, there has been an

erosion of net worth by more than fifty percent. Due compliance of the sanctioned CDR package could also not be met with. The

lenders have since Invoked the 'Strategic Debt Restructuring (SOR) pursuant to RBI Circulars dated June 08, 2015 and Sept 24,

2015, and the implementation thereof is under progress. Considering the above developments, the company has presented

these financial statements on going concern basis.

AUDIT QUALIFICATIONS

Audit Qualifications in last 3 years: There are no Audit Qualifications by Statutory Auditor for the three financial years viz.

FY2015-16, FY2014-15 and FY2013-14. However, Statutory Auditors has drawn attention on the following matters:

Emphasis of Matters for FY 2015-16:

1. “Note No. 27, regarding the revenue recognized as “Exceptional Item”. The company, consequent to the delayed

execution of contracts by certain vendors/suppliers/service providers of plant, equipment’s, civil and erection

commissioning etc. has incurred “Loss of Profit” in past. The part of such claim of “Loss of Profit” as assessed by the

Company has been recovered from the available balance in the respective Supplier's Accounts and recognized as income

in the Statement of Profit and Loss for the year. The unrecovered such “Loss of Profit” will be accounted for in the year

significant certainty of recovery is established.

2. Note No. 41, regarding the preparation of these financial statements on a “going concern basis”. The Company incurred

a net loss of ₹326.55 Cr during the year ended March 31, 2016 and, as of that date, the Company's current liabilities

exceeded its current assets by ₹3,207.80 Cr, further the Company's net worth has also been substantially eroded as at

the balance sheet date. Since the full compliance of the sanctioned CDR package could not be made with, the lenders

have invoked Strategic Debt Restructuring (SDR) pursuant to RBI circulars dated 08.06.2015 & 24.09.2015, the

implementation is under progress. However, in view of the increase in the operations of the production facilities and the

Company's EBIDTA being positive also in this year, these financial statements have been prepared on a “going concern

basis” and no adjustment has been made to the carrying value of the assets and liabilities. “

Response Comment

Frequency of Qualifications Not Applicable

Have the auditors made any adverse remark in last 3 years? No

Are the material accounts audited by the Principal Auditors? As per Annual Report for FY 2015-16, the

Company do not have any Subsidiary, Holding or

Associate Company. Do the financial statements include material unaudited financial

statements?





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TABLE 4: BOARD PROFILE (AS PER ANNUAL REPORT 2015-16)

Regulatory Norms Company

% of Independent Directors on the Board 33% 44%

% of Promoter Directors on the Board - 0%

Number of Women Directors on the Board At least 1 1

Classification of Chairman of the Board - Independent Director

Is the post of Chairman and MD/CEO held by the same person? - No

Average attendance of Directors in the Board meetings (%) - 91.11%

Source - Annual Report 2015-16

Composition of Board: As per Regulation 17(1)(b) of the Listing Regulations, 2015, the Company should have at least 33%

Independent Directors as the Chairman of the Board is a Non-Executive Director. The Company has 44% of Independent

Directors and hence, it meets the regulatory requirements.

Board Diversity: The Company has 9 directors out of which 1 is Women Director.

TABLE 5 - FINANCIAL RATIOS

Ratios Sep’16 Mar’16 Sep’15

% Change

Sep ’16 vs

Mar’16

Mar’16 vs

Sep’15

Turn

ove

r

Rat

ios

Inventory Turnover 0.66 1.12 0.70 -41.45% 59.74%

Debtors Turnover 3.94 3.29 3.16 19.66% 4.32%

Fixed asset Turnover 0.05 0.07 0.05 -30.97% 42.77%

Current Asset Turnover 0.44 0.56 0.36 -21.39% 56.84%

Ret

urn

Rat

ios Operating Profit Margin -13.12% 22.20% -3.15% -159.10% N.A.

Net Profit Margin -87.24% 34.43% -35.25% -353.42% N.A.

Return on Assets (ROA) N.A. 2.09% N.A. N.A. N.A.

Return on Equity (ROE) N.A. 37.11% N.A. N.A. N.A.

Return on Capital Employed (ROCE) N.A. 3.18% N.A. N.A. N.A.

Liq

uid

ity

Rat

ios

Current Ratio 0.23 0.32 0.38 -26.26% -15.93%

Quick Ratio 0.08 0.16 0.18 -51.31% -14.36%

Cash Ratio 0.05 0.10 0.14 -51.18% -26.46%

Working Capital Turnover ratio N.A. -0.09 N.A. N.A. N.A.

Solv

ency

Rat

ios Debt to equity ratio 2,717.78 11.49 13.23 23,544.98% -13.14%

Interest Coverage Ratio N.A. 1.37 N.A. N.A. N.A.

Trad

ing

Rat

ios

Market Cap / Sales 1.23 0.98 0.91 26.18% 7.81%

Market Cap/ Net Worth 222.22 1.05 0.74 20,998.47% 43.05%

Market Cap/PAT N.A. 2.84 N.A. N.A. N.A.

Market Cap/EBITDA N.A. 4.40 N.A. N.A. N.A.

Source - Money Control

TABLE 6 - TRADING VOLUME

Jun-17 Dec-16 Jun-16

% Change

June 17 vs Dec 16 Dec 16 Vs June 16

Trading Volume (shares) (avg. of 1 qtr) 39,36,257 16,34,831 15,34,552 140.77% 6.53%

Trading Volume (shares) (high in 1 qtr) 2,90,05,994 1,44,26,674 1,40,01,421 101.06% 3.04%

Trading Volume (shares) (low in 1 qtr) 3,29,498 2,92,020 1,72,530 12.83% 69.26%

Ratio - High/low trading volume 88.03 49.40 81.15 78.19% -39.12%

Ratio - High/average trading volume 7.37 8.82 9.12 -16.50% -3.28%

Source - Capitaline





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www.electrosteels.com TABLE 7 (A): OWNERSHIP & MANAGEMENT RISKS

Jun'17 Dec'16 Jun'16 Comments

Shar

eho

ldin

g (%

)

Promoter shareholding 45.23 45.23 45.23 • No new equity shares were issued during

the period from June 2016 to June 17.

• There was no change in the promoter

shareholding during the said period.

• There was no major in shareholding of

public shareholders during the same

period.

• The promoters have pledged 79.53% of

their shareholding.

Public - Institutional shareholding

29.59 29.63 29.68

Public - Non-Institutional shareholding

25.18 25.14 25.09

Non-Promoter Non-Public Shareholding

0.00 0.00 0.00

Source - NSE

MAJOR SHAREHOLDERS (AS ON 30th JUNE, 2017)

S. No. Promoters Shareholding

S. No. Public Shareholders Shareholding

1 Electrosteel Castings Limited 45.23% 1 Sciil Steel Cast Iron Investments (Cyprus) Ltd 16.64%

2 Hypnos Fund Limited 4.01%

3 IFCI Ltd 3.82%

4 GPC Mauritius Ii LLC 3.63%

5 PGS Invest Corp 3.12%

Source - NSE

TABLE 7 (B): OWNERSHIP & MANAGEMENT RISKS

Market Activity of Promoters There was no change in the shareholding of promoters during the FY 2015-16.

Preferential issue to promoters No preferential issue of shares was made to the promoters during the FY 2015-16.

Preferential issue to others No preferential issue of shares was made to other shareholders during the FY 2015-16.

GDRs issued by the Company The Company did not issue any GDRs during the FY 2015-16.

Issue of ESOPs/Issue of shares other

than Preferential allotment

The Company does not have any ESOP Scheme


TABLE 8: PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY

Sr. No. Name and Description of main products / services % to Total turnover of the Company

1 Basic Iron & Steel 88.69%

2 Ductile Iron Pipe 11.31%






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Glossary

Equity: The equity shares capital of the Company

Net Worth: The amount by which the Assets exceeds the liabilities excluding shareholders’ funds of the Company

Turnover: The revenue earned from the operations of the Company

EPS: Earning Per Share is net profit earned by the Company per share

𝐸𝑃𝑆 =Profit After Tax

Number of outstanding shares

P/E ratio: It is the ratio of the Company’s share price to earnings per share of the Company

𝑃/𝐸 𝑟𝑎𝑡𝑖𝑜 =Price of each share

Earnings per share

Current Assets: Cash and other assets that are expected to be converted to cash in one year

Fixed Assets: assets which are purchased for long-term use and are not likely to be converted quickly into cash, such as land,

buildings, and equipment

Total Assets: Current Assets + Fixed Assets

Investments: An investment is an asset or item that is purchased with the hope that it will generate income or appreciate in

the future.

Finance Cost: The Financing Cost (FC), also known as the Cost of Finances (COF), is the cost and interest and other charges

incurred during the year in relation to borrowed money.

Long Term Liabilities: Long-term liabilities are liabilities with a maturity period of over one year.

Current Liabilities: A company's debts or obligations that are due within one year.

Inventory Turnover ratio: Inventory Turnover is a ratio showing how many times a company's inventory is sold and replaced

over a period.

𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =Sales Turnover

Inventory

Debtors Turnover: Accounts receivable turnover is an efficiency ratio or activity ratio that measures how many times a business

can turn its accounts receivable into cash during a period

𝐷𝑒𝑏𝑡𝑜𝑟𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =Sales Turnover

Accounts recievables

Fixed Asset Turnover: The fixed-asset turnover ratio is a financial ratio of net sales to fixed assets

𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =Sales Turnover

Fixed Assets

Current Asset Turnover: The current-asset turnover ratio is a financial ratio of net sales to fixed assets

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =Sales Turnover

Current Assets

Operating Profit Margin: Operating margin is a measurement of what proportion of a Company’s revenue is left over after

paying for variable costs of production such as wages, raw materials etc. It can be calculated by dividing a Company’s operating

income (also known as “operating profit”) during a given period by its sales during the same period.

𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =Operating profit

Sales Turnover

Net Profit Margin: Net profit margin is the percentage of revenue left after all expenses have been deducted from sales





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www.electrosteels.com 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =

Net profit

Sales Turnover

Return on Assets: ROA tells you what earnings were generated from invested capital (assets)

𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐴𝑠𝑠𝑒𝑡𝑠 =Net profit

Total Assets

Return on equity/net worth: return on equity (ROE) is the amount of net income returned as a percentage of shareholders’

equity.

𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐸𝑞𝑢𝑖𝑡𝑦 =Net profit

Net worth

Return on Capital Employed: Return on capital employed (ROCE) is a financial ratio that measures a company's profitability

and the efficiency with which its capital is employed.

𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑 =Net profit

Total Debt + Equity share capital

Current ratio: The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts

over the next 12 months. It compares a firm's current assets to its current liabilities.

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 =Current Assets

Current Liabilities

Quick ratio: The quick ratio is a measure of how well a Company can meet its short term financial liabilities.

𝑄𝑢𝑖𝑐𝑘 𝑟𝑎𝑡𝑖𝑜 =Current Assets − Inventories

Current Liabilities

Cash ratio: The ratio of the liquid assets of a Company to its current liabilities.

𝑄𝑢𝑖𝑐𝑘 𝑟𝑎𝑡𝑖𝑜 =Current Assets − Inventories − Account Recievables

Current Liabilities

Working Capital Turnover ratio: The working capital turnover ratio is also referred to as net sales to working capital. It indicates

a Company's effectiveness in using its working capital.

𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =𝑆𝑎𝑙𝑒𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟

Current Assets − Current Liabilities

Debt to Equity ratio: The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of

shareholders' equity and debt used to finance a company's assets.

𝐷𝑒𝑏𝑡 𝑡𝑜 𝐸𝑞𝑢𝑖𝑡𝑦 𝑟𝑎𝑡𝑖𝑜 =𝑆ℎ𝑜𝑟𝑡 𝑇𝑒𝑟𝑚 𝐷𝑒𝑏𝑡 + 𝐿𝑜𝑛𝑔 𝑇𝑒𝑟𝑚 𝐷𝑒𝑏𝑡

𝑁𝑒𝑡 𝑊𝑜𝑟𝑡ℎ

Interest Coverage ratio: The Interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a

Company can pay interest on outstanding debt.

𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐶𝑜𝑣𝑒𝑟𝑎𝑔𝑒 𝑅𝑎𝑡𝑖𝑜 =𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝐵𝑒𝑓𝑜𝑟𝑒 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝑇𝑎𝑥

𝐹𝑖𝑛𝑎𝑛𝑐𝑒 𝐶𝑜𝑠𝑡

Market Cap/Sales ratio: Market Cap/sales ratio, Price–sales ratio, P/S ratio, or PSR, is a valuation metric for stocks. It is

calculated by dividing the company's market cap by the revenue in the most recent year; or, equivalently, divide the per-

share stock price by the per-share revenue.

𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝/𝑆𝑎𝑙𝑒𝑠 𝑟𝑎𝑡𝑖𝑜 =𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝

𝑆𝑎𝑙𝑒𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟

Market Cap/ Net Worth ratio: It is a valuation ratio calculated by dividing Company’s market cap to net worth.

𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝/𝑁𝑒𝑡𝑤𝑜𝑟𝑡ℎ 𝑟𝑎𝑡𝑖𝑜 =𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝

𝑁𝑒𝑡𝑤𝑜𝑟𝑡ℎ

Market Cap/ PAT ratio: It is a valuation ratio calculated by dividing Company’s market cap to net profit.

𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝/𝑃𝐴𝑇 𝑟𝑎𝑡𝑖𝑜 =𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝

𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡



http://www.investopedia.com/terms/i/invested-capital.asp

http://www.investopedia.com/articles/stocks/05/04405.asp

https://en.wikipedia.org/wiki/Stock

https://en.wikipedia.org/wiki/Market_cap

https://en.wikipedia.org/wiki/Stock



7 | P A G E



www.electrosteels.com Market Cap/ EBITDA ratio: It is a valuation ratio calculated by dividing Company’s market cap to EBITDA.

𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝/𝐸𝐵𝐼𝑇𝐷𝐴 𝑟𝑎𝑡𝑖𝑜 =𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝

𝐸𝐵𝐼𝑇𝐷𝐴

Trading Volume (shares) (avg. of 1 year): Average number of shares/day traded in 1 year

Trading volume (shares) (high in 1 year): Highest number of shares/day traded in 1 year

Trading volume (shares) (minimum in 1 year): Lowest number of shares traded on any one day in 1 year





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