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ECONOMIC ANALYSIS
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ECONOMIC FACTORS
In this we will look into the factors which directly or indirectly influence the Steel industry. Steel industry is directly impacted by its environment. So, knowing all the factors in depth is very essential to peep into the future prospects of this Industry. Current situation of these factors are as follows 1. Gross Domestic Product – During the first quarter of 2008-09, real GDP growth was 7.9 per cent as against 9.2 per cent a year ago. The end-August 2008 release of national income aggregates by the Central Statistical Organization placed the growth of real GDP originating in agriculture, industry and services at 3.0 per cent, 5.2 per cent and 10.2 per cent, respectively, during April-June 2008 as against 4.4 per cent, 9.6 per cent and 10.6 per cent a year ago. 2. Rainfall and Monsoon – There are some distinctive features in macroeconomic developments during the second quarter of 2008-09 (July-September) in relation to the preceding quarter. According to the India Meteorological Department, cumulative south-west monsoon season rainfall for the country as a whole was two per cent below the long period average.

Key Indicators –
India
Series Name Exchange rate movements Inflation developments 2004 45.2508 2.2352 2005 43.4889 4.9513

Month of MAY
2006 45.4073 5.0328 2007 40.7814 6.6667 2008 42.1175 7.8125

Growth Rates (%) Real GDP Net profit Telephone Con(in million)

Railway revenue
Cargo - Major Ports

Jan - April'07 9.20 33.9 26 6.1 14.9

Jan - April'08 7.90 8.2 34.4 9.4 8.3

Inc./(dec) -14% -75.81% 32.31% 54.10% -44.30%

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Growth Rates (%) Agriculture Industry Services Real Pvt Final Cons. Exp.
Real Gross fixed cap. formation

April - Jun'07 4.40 9.60 10.60 7.6 13.3 April - Aug'07 10.00

April - Jun'08 3.00 5.20 10.20 8 9 April - Aug'08 4.90

Inc./(dec) -32% -46% -4% 5% -32% Inc./(dec) -51%

Growth Rates (%) Index of Industrial Prod.

Growth Rates (%) Capital Goods Cons. Non Durable Prod. Cons. Durable Prod. Basic Good Prod. Intermediate Good Prod. Total Exp. Raw Material exp. Staff Cost

2007 20.10 10.00 (2.30) 9.90 9.90

2008 9.20 8.60 5.60 3.80 7.00

Inc./(dec) -54% -14% 343% -62% -29% 34.50% 35.90% 23.20%

Growth Rates (%) Bank Credit Bank Credit (in Rs.Crores) Credits to Various Branches Services Industry Agriculture Personal Loans Housing Loans Real Estates Loans C.B. inv. In Shares, debt, bonds SLR investments(in Rs.Crores) Money Supply Reserve Money Growth Rates (%) C.G. Cash Bal.((in Rs.Crores)

Upto 10 oct 07 4.4 84,280

Upto 10 oct 08 10.4 245491

Inc./(dec) 136.36% 191.28% 35.30% 30.60% 18.50% 17.40% 16.60% 52.90% 436.54% -11.71% -7.31% -27.87% Inc./(dec) -92.02%

-5.2 90806 21.9 24.4 30-Jun-08 37194

17.5 80176 20.3 17.6 2-Aug-08 2967

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3.

Industries –

Manufacturing output growth, electricity generation and mining activity slowed to 5.2 per cent, 2.3 per cent and 4.1 per cent, respectively, from 10.6 per cent, 8.3 per cent and 4.9 per cent in the corresponding period last year. Manufacturing activity was led by chemicals and chemical products, beverages, tobacco and related products, machinery and equipments including transport equipment and parts, which together accounted for 89 per cent of the growth of industrial production during April-August 2008, despite constituting only 30 per cent of the index in terms of weight. On the other hand, production of food products, jute textiles, wood and wood products, rubber, plastic, petroleum and coal products declined and had a moderating effect on overall manufacturing sector growth. The use-based classification indicates some moderation in investment demand with the growth of capital goods production slowing to 9.2 per cent from 20.1 per cent a year ago. For the private non-financial corporate sector, sales increased by 30.0 per cent during AprilJune 2008, higher than 19.2 per cent in the corresponding quarter a year ago. There was deceleration in income from non-core activities, largely attributable to subdued conditions in the capital market. Growth in expenditure at 34.5 per cent outpaced sales growth. On a year-on-year basis, raw material expenses rose by 35.9 per cent and staff cost increased by 23.2 per cent. Due to mark-tomarket losses on foreign currency borrowings resulting from exchange rate depreciation during the quarter, a sizeable number of companies reported erosion in financial performance. Despite an increase in interest outgo, the interest burden (interest to gross profits ratio) at 16.7 per cent remained distinctly lower when compared with 50.0 per cent in the 1990s and 43.7 per cent in the first half of the current decade. At the sectoral level, manufacturing companies recorded higher sales growth when compared with information technology and non-IT service companies. Early results for the second quarter of 2008-09 for a truncated sample of companies indicate continuing moderation in profitability growth, especially for manufacturing companies. Sales growth was driven by a combination of increased volumes and higher prices but was not able to fully mitigate rising input cost and staff cost pressures. Financing costs have increased due to rising interest payments as well as the impact of losses on foreign liabilities. Income from non-core activities were lower reflecting subdued treasury incomes. Consequently, corporates' earnings growth appears to have weakened further in the second quarter of 2008-09.

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The assessment for July-September 2008 reflects a lower level of optimism than in the previous round of the survey, with the business expectations index for July-September 2008 down by 2.4 per cent from the previous quarter. There was moderation in all major parameters such as the overall business situation, the overall financial situation, production, order books, cost of raw materials and profit margins. Demand conditions appear to have weakened as reflected in the assessment of production, order books and export demand. Higher input costs are expected to compress profit margins significantly during the second and third quarters of 2008-09. For October-December 2008, working capital finance requirements are expected to remain high; there are, however, concerns about the availability of finance. Capacity utilisation is expected to remain generally stable and production capacity is expected to be adequate to meet demand. An increasing number of respondent firms expect price pressures to rise on the back of higher raw material costs and expect to pass on higher prices to endconsumers to protect profit margins. The business expectations index for October-December 2008 was 2.6 per cent lower than in the preceding quarter. Other business confidence surveys continue to reflect uncertainty on the outlook, as also noted in the First Quarter Review of July 2008. Business confidence has generally ebbed relative to its level in previous survey rounds on increases in the cost of finance and raw materials and some concerns on moderation in overall economic conditions and export demand. According to one survey, there was a decline of 19 per cent in the indicator for the overall economic conditions over the next six months in relation to its level polled in the previous quarter. Another survey reported a 28.1 per cent decline in the composite business optimism index for October-December 2008 across sales volumes, new orders and net profits, reflecting subdued demand conditions. 4. Price Level and Inflation – Seasonally adjusted purchasing managers' indices indicate that manufacturing sector activity has lost some momentum due to deterioration in both local and export market conditions and increased inflationary pressures. Forward looking indicators point towards some slowdown and margin pressures. Lead indicators of activity in the services sector suggest that the pace of expansion has picked up in the communication sector with an increase of 33.8 per cent in switching capacity in April-July 2008 as against a decline of 53.1 per cent a year ago. Railway revenue earnings from freight traffic increased by 9.4 per cent, higher than the growth of 6.1 per cent in the corresponding period last year due to higher traffic for carriage of petroleum, oil and lubricants (POL), container services and cement.
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Growth in cargo handled at major ports increased by 8.3 per cent as compared with 14.9 per cent a year ago. In the civil aviation sector, handling of import cargo and export cargo increased by 6.6 per cent and 8.1 per cent, respectively, as against 23.4 per cent and 3.6 per cent in the corresponding period of 2007-08. Growth in passengers handled at domestic and international terminals declined/decelerated to (-) 2.2 per cent and 7.9 per cent, respectively, from 27.3 per cent and 11.8 per cent a year ago. According to the CSO's end-August 2008 release, The share of PFCE in GDP at 59.8 per cent during the first quarter of 2008-09 remained stable whereas the share of GFCF increased to 32.3 per cent of GDP from 32.0 per cent a year ago. 5. Interest rate structure and credit policy – Credit extended by scheduled commercial banks (SCBs) increased by 29.4 per cent (Rs.5,91,935 crore) on a year-on-year basis up to October 10, 2008 as compared with an increase of 23.1 per cent (Rs.3,77,628 crore) a year ago. On a financial year basis, bank credit increased by 10.4 per cent (Rs.2,45,491 crore) up to October 10, 2008 as compared with the increase of 4.4 per cent (Rs.84,280 crore) in the corresponding period last year. Food credit increased by Rs.4,496 crore as against a decline of Rs.9,501 crore in the previous year. Non-food credit recorded an increase of 10.4 per cent (Rs.2,40,995 crore) as compared with an increase of 5.0 per cent (Rs.93,781 crore) in the corresponding period of the previous year. On a year-on-year basis, non-food credit growth was higher at 29.3 per cent up to October 10, 2008 than 23.3 per cent a year ago. Provisional information on the sectoral deployment of bank credit available up to August 2008 indicates that on a year-on-year basis, credit to the services sector recorded the highest growth (35.3 per cent), followed by industry (30.6 per cent), agriculture (18.5 per cent) and personal loans (17.4 per cent). Growth in housing and real estate loans decelerated to 13.9 per cent (16.6 per cent) and 46.3 per cent (52.9 per cent), respectively. Within the industrial sector, there was a sizeable credit pick-up in respect of infrastructure (35.8 per cent as against 32.0 per cent a year ago), petroleum (91.8 per cent as against 32.9 per cent), basic metals and metal products (32.2 per cent over 20.6 per cent), cement and cement products (62.8 per cent over 18.1 per cent a year ago), chemicals (27.1 per cent as against 15.3 per cent) and construction (48.3 per cent as against 42.9 per cent). There was moderation in credit growth to food processing (25.6 per cent over 29.0 per cent), textiles (23.1 per cent as against 28.7 per cent) and vehicle, vehicle parts and transport equipments (27.5 per cent as against 34.2 per cent). Credit to industry constituted 44.6 per cent of the total expansion in non-food bank credit up to August 2008, followed by services (30.3 per cent), personal loans (16.7 per cent) and agriculture (8.4 per cent).
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The share of infrastructure, petroleum, construction, cement and mining and quarrying in total credit to industry increased to 22.5 per cent, 6.7 per cent, 3.3 per cent, 1.6 per cent and 1.4 per cent, respectively from 21.6 per cent, 4.6 per cent, 2.9 per cent, 1.3 per cent and 1.0 per cent. Priority sector advances grew by 20.8 per cent with a moderation in their share in outstanding gross bank credit to 33.1 per cent in August 2008 from 34.7 per cent a year ago. While there has been a sharp increase in credit off-take by petroleum and fertliser companies in 2008-09, the annual growth rate of non-food credit, even excluding credit to petroleum and fertiliser sectors, has been significantly higher at 25.6 per cent in August 2008 as compared with 24.5 per cent a year ago. 6. Banks investment in various Sectors – Commercial banks' investments in shares, bonds/debentures and commercial papers (CPs) increased by 17.5 per cent (Rs.13,600 crore) on a year-on-year basis up to October 10, 2008 as against a decline of 5.4 per cent (Rs.4,458 crore) a year ago. On a financial year basis, such investments by banks fell by 4.6 per cent (Rs.4,386 crore) during 2008-09 so far (up to October 10), as against a decline of 7.2 per cent (Rs.6,025 crore) in the corresponding period of 2007-08. The year-on-year growth in total resource flow from SCBs to the commercial sector was 28.9 per cent up to October 10, 2008 over and above the growth of 21.9 per cent a year ago. During the current financial year, banks' investments in instruments issued by all-India financial institutions and mutual funds declined by Rs.11,411 crore as against an increase of Rs.51,656 crore in the corresponding period of the previous year. Additional resources raised by corporates in the form of external commercial borrowings (ECBs) was lower at Rs.6,494 crore (US $ 1.6 billion) during April-June 2008 as compared with Rs.28,822 crore (US $ 7.0 billion) during the corresponding period last year. An amount of Rs.4,652 crore (US $ 1.1 billion) was mobilised through issuance of American Depository Receipts/Global Depository Receipts (ADRs/GDRs) during April-September 2008 as compared with Rs.11,284 crore (US $ 2.8 billion) raised during the corresponding period last year. 7. Performance of Banks – Aggregate deposits of SCBs increased by 21.6 per cent (Rs.6,15,263 crore) on a year-on-year basis up to October 10, 2008 as compared with 24.7 per cent (Rs.5,65,124 crore) a year ago. On a financial year basis, aggregate deposits rose by 8.5 per cent (Rs.2,72,420 crore) as compared with an increase of 9.3 per cent (Rs.2,42,163 crore) in the corresponding period of the previous year. The share of savings deposits in total deposits has been declining and there appears to be some migration from small savings instruments to term deposits with banks where the rates of return

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are relatively more attractive. The incremental annual credit-deposit ratio increased to 96.2 per cent on October 10, 2008 from 66.8 per cent a year ago. SCBs' incremental investment in Government and other approved securities during 2008-09 up to October 10, 2008 was Rs.9,201 crore as against Rs.1,56,236 crore in the corresponding period last year. The ratio of such investments to aggregate deposits on an incremental basis was 3.4 per cent which was much lower than 64.5 per cent in the corresponding period last year. 8. Change in CRR and SLR – Adjusting for collateral securities under the liquidity adjustment facility (LAF) operations, however, statutory liquidity ratio (SLR) investments increased by Rs.80,176 crore during 200809 so far as against the increase of Rs.90,806 crore in the corresponding period last year. Inclusive of LAF collateral securities on an outstanding basis, SCBs' holdings of SLR securities amounted to Rs.10,72,416 crore or 28.2 per cent of net demand and time liabilities (NDTL) on October 10, 2008 implying an excess of Rs.1,20,870 crore or 3.2 per cent of NDTL over the prescribed SLR of 25 per cent of NDTL. Money supply (M3) increased by 20.3 per cent on a year-on-year basis up to October 10, 2008, lower than 21.9 per cent a year ago but above the indicative projection of 17.0 per cent set out in the Annual Policy Statement of April 2008. On a financial year basis, M3 increased by 7.7 per cent (Rs.3,07,403 crore) up to October 10, 2008 as compared with the increase of 8.1 per cent (Rs.2,68,694 crore) in the corresponding period of the previous year. Reserve money increased by 17.6 per cent on a year-on-year basis as on October 17, 2008 as compared with 24.4 per cent a year ago. On a financial year basis, reserve money declined by 2.9 per cent (Rs.27,296 crore) up to October 17, 2008 as compared with the increase of 8.1 per cent (Rs.57,189 crore) in the corresponding period of the previous year. Among the components of reserve money, currency in circulation registered a higher growth of 7.3 per cent (Rs.43,095 crore) as compared with 4.5 per cent (Rs.22,702 crore). Bankers' deposits with the Reserve Bank declined by 20.3 per cent (Rs.66,793 crore) against an increase of 18.7 per cent (Rs.36,984 crore) in the corresponding period last year. Among the sources of reserve money, the Reserve Bank's net credit to the Central Government increased by Rs.15,534 crore as against a decline of Rs.1,43,116 crore in the corresponding period last year. Adjusted for transactions under the LAF, however, the Reserve Bank's credit to the Central Government showed an increase of Rs.57,244 crore, mainly on account of securities received under special market operations (SMO) and reduction in cash balances of the Government of India with the Reserve Bank. The Reserve Bank's net foreign exchange assets (NFEA) increased by Rs.93,402 crore as compared with an increase of Rs.1,71,080 crore during the corresponding period of the previous year.
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Adjusted for revaluation of foreign currency assets, however, NFEA declined by Rs.34,556 crore as compared with an increase of Rs.2,17,201 crore during the corresponding period of the previous year. The ratio of NFEA to currency increased marginally from 209.2 per cent on March 31, 2008 to 209.7 per cent by October 17, 2008. During the second quarter of 2008-09, liquidity conditions were generally tight and, except in the first week of July, there were continuous injections of liquidity under the LAF. In addition, an amount of Rs.26,000 crore (net) was mopped up through the issuances of 91-day, 182-day and 364-day Treasury Bills during July-September, 2008. Net injections under the LAF increased from an average of Rs.8,622 crore in June 2008 to Rs.22,560 crore in August 2008. During September 2008, liquidity injections under the LAF ranged between Rs.1,025-90,075 crore, reaching a level of Rs.90,075 crore on September 29, 2008 with adverse developments in international financial markets coinciding with advance tax outflows and the half-yearly bank closing. To ease liquidity pressures, the Reserve Bank unwound the market stabilisation scheme (MSS) to the tune of Rs.3,105 crore during June 30August 21, 2008. The Reserve Bank also cut the cash reserve ratio (CRR) by 250 basis points in October 2008 and expanded liquidity support to the market through additional facilities referred to later. During October 2008, liquidity injections under the LAF rose to Rs.91,500 crore on October 10, 2008, but there was a turnaround in liquidity conditions in the subsequent period and the Reserve Bank absorbed Rs.27,745 crore under the LAF on October 22, 2008. Banks' dependence on export credit refinance (ECR) rose from a daily average of Rs.2,208 crore in June 2008 to Rs.3,110 crore in August 2008 and further to Rs.6,752 crore on September 29, 2008 before declining to Rs.91 crore on October 22, 2008. The Central Government's cash balances declined from Rs.37,194 crore on June 30, 2008 to Rs.2,967 crore on August 2, 2008 and it took recourse to ways and means advances during August 4-6 and September 2-14, 2008 with a peak level of Rs.10,903 crore on September 5, 2008. In the subsequent period, the Central Government's cash balances increased to Rs.29,753 crore on October 20, 2008. On a net basis, average daily LAF absorption, which stood at Rs.9,881 crore in the first quarter of 2008-09 changed to a net injection of Rs.30,912 crore during the second quarter and Rs.53,259 crore in October 2008 (up to October 22). The balances under the MSS increased marginally from Rs.1,76,422 crore in June 30, 2008 to Rs.1,77,817 crore on September 25, 2008 before declining to Rs.1,71,317 crore on October 22, 2008. Cash balances of the Central Government with the Reserve Bank fell from an average of Rs.30,587 crore in the first quarter of 2008-09 to Rs.17,821 crore in the second quarter and Rs.36,599 crore in October 2008 (up to October 22).
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The total overhang of liquidity as reflected in the balances under the LAF, the MSS and the Central Government's cash balances taken together declined from a daily average of Rs.1,93,726 crore in June 2008 to Rs.1,53,863 crore in September 2008 and further to Rs.1,22,182 crore on October 5, 2008. The total overhang of liquidity increased to Rs.2,17,415 crore on October 20, 2008.

Overall Assessment
The global steel industry has been going through major changes since 1970. China has emerged as a major producer and consumer, as has India to a lesser extent. Consolidation has been rapid in Europe. The volume of steel consumed has been the barometer for measuring development and economic progress. Whether it is construction or industrial goods, steel is the basic raw material. Lighter metals and stronger alloys have been developed, plastics and synthetics have replaced steel in many areas. Steel consumption increases when economies are growing, as governments invest in infrastructure and transport, and build new factories and houses. Economic recession meets with a dip in steel production as such investments falter. Aggregate supply conditions in the Indian economy have shown resilience in the second quarter of 2008-09 in the face of a deteriorating global macroeconomic and financial environment. There are, however, growing indications that the underlying economic cycle is turning in tune with global economic developments and that domestic economic activity is straddling a point of inflexion. While the 2008 south-west monsoon season has been near normal as anticipated, large temporal variations have resulted in some production losses on account of floods in June in some northeastern, eastern and northern States and deficient rainfall in July over the north-east, central India and Kerala. At the all-India level, the area sown under various crops is close to the normal cropping coverage but lower by about 2.6 per cent in relation to the high level a year ago. Acreage under key crops such as rice and oilseeds has increased on a year-on-year basis but there are downside risks for the prospects of crops such as sugarcane, coarse cereals, pulses and jute. First advance estimates of the production of foodgrains in 2008-09 from the Ministry of Agriculture suggest that some improvement in these key crops could occur as these early indications firm up into a clearer picture on the final level of output for the year and the overall outlook on agriculture. Industrial activity in the second quarter of 2008-09 has shown mixed developments with indications of a moderation in pace diffusing across the sector. While the pick-up in industrial production in July 2008 surprised consensus expectations, occurring as it did after an uneven trough during November 2007-June 2008, base effects weighed heavily on the growth rates
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observed in August and could continue to cast a shadow in some of the months ahead, especially in October-December 2008. Slackening of momentum is essentially located in the basic and intermediate goods sectors, weighed down by the decline in production of fertilisers, steel, aluminum products, yarns and fibre, organic pigments and the like. The rebound in capital goods production in July after a sag in the preceding two months was not sustained in August, indicative of considerable uncertainty in the evolving investment climate. On the other hand, the sustained turnaround in consumer goods output, particularly durables, indicates that the strength of consumption demand is inducing supply responses, aided by the return of pricing power in an environment of high inflation. Manufacturing activity is being driven by industries such as chemicals, machinery and transport equipment and beverages and tobacco products. In fact, excluding items such as wood and products, leather and paper products, textiles, rubber, plastic, petroleum and coal products which have recorded a decline/negligible growth in production and together have a weight of only 26 per cent in the IIP, the growth of industrial output would be 6.5 per cent, somewhat above the observed headline growth of 4.9 per cent in April-August, 2008. Surveys of corporate finances are indicating a worsening outlook with erosion of profitability due to rising expenditures relative to sales, particularly in respect of raw materials and other inputs, staff costs and exchange losses. Various surveys suggest that overall business confidence is flagging. Service sector activity appears to be moderating in several sub-sectors except in communication and freight movement in terms of lead indicators. Construction activity may pick up in the coming months on the back of some improvement in cement and steel production. Widening gaps in the physical infrastructure, markedly in power but elsewhere too except in coal production, could impose a binding constraint on growth. Capacity addition in the power sector has remained far short of tenth Plan targets, worsening the persisting large shortage in the country. Electricity output appears to have been sharply affected by the downslide in hydro power generation, with the energy content of reservoirs posting a shortfall of 27 per cent of the full reservoir level (FRL) at the all-India level up to mid-October 2008. While thermal power generation has provided support, delays in commissioning/commercial operations, high moisture content in coal due to the monsoon as well as the loss of 3.8 billion units of generation during April-August due to shortages of coal reported by utilities across the country are debilitating factors. Shortages of fuel have also resulted in a loss of 1.2 billion units in the first five months of 2008-09 under nuclear power generation.
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Aggregate demand conditions continue to be mainly investment-driven, although some slackening which set in during the first quarter of 2008-09 appears to have become broad based. So far, however, investment intentions remain strong as indicated by the memoranda/letters of intent/direct industrial licences. Private consumption, the mainstay of aggregate domestic demand in India, appears to be firming up steadily since the third quarter of 2007-08 and is expected to benefit from fiscal stimuli on account of enhanced expenditures of subsidies, the farm loan waiver and salaries consequent upon the Sixth Pay Commission award that could come into play during the second half of the year. Reflecting the aggregate demand pressures, key monetary and banking aggregates - money supply, deposit and non-food credit growth - have been expanding during the year so far at rates that are significantly elevated relative to indicative trajectories given in the Annual Policy Statement of April 2008. Money supply has continued to rise at the expansionary rates of 200308, propelled by the sustained pace of credit growth. In the July 2008 Review, concerns relating to the significantly overdrawn state of the banking system due to elevated credit growth were expressed in this context. Supervisory review processes have been initiated with selected banks with a view to putting in place appropriate adjustments in their operations. The unabated bank credit growth relative to the sources of funds and the whittling down of excess SLR investments warrants serious policy surveillance in the context of overall financial stability and the efficiency of financial intermediation. The developments in monetary conditions resulted in a tightening of liquidity conditions in domestic financial markets through the second quarter of 2008-09. The strains on market liquidity were aggravated by sizeable fluctuations in the Central Government's cash balances, advance tax payments in mid-September, higher than anticipated credit growth as well as the heightening of volatility in domestic equity and foreign exchange markets in the wake of the sudden deterioration in international financial markets. In the money market, overnight interest rates generally ruled above the upper bound of the corridor albeit in a narrow range with a peak in the second week of October 2008 as the international financial turbulence intensified. While the measures announced by the Reserve Bank in September-October 2008 alleviated these pressures, considerable uncertainty surrounds the evolution of liquidity conditions in the months ahead, given the fragile international environment. In response to the measures announced by the Reserve Bank, interest rates have moderated across the overnight market segments.

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In the Government securities market, high demand for SLR securities depressed yields across the spectrum from mid-July with intermittent spurts on liquidity concerns. Yield curve inversion became persistent through the quarter, with the yield on the benchmark 10-year security ruling consistently below those on lower maturity securities in reflection of the uncertain macroeconomic outlook and to some extent, the softening of international crude prices. In the foreign exchange market, activity picked up mainly on rising import demand induced by volatile international crude prices, portfolio outflows and uncertainties surrounding the global outlook. There was considerable volatility in the spot segment with the exchange rate slipping to multi-year lows as the extraordinary developments in international financial markets unfolded. Forward premia rose sharply at end-June and remained at elevated levels up to July 2008 after which the premia have tended to ease albeit unevenly across all maturities. The forward premia went into discount due to dollar shortages towards end-September 2008 but recovered modestly in October 2008. The equity markets have weakened sporadically on cues from global markets, and particularly those in Asia. These developments in domestic financial markets render the macroeconomic outlook unsettled and uncertain. Signs of deterioration in the fiscal situation appear to be adding to aggregate demand pressures in the economy. The revenue deficit of the Central Government has exceeded 177 per cent of the budget estimates during April-August 2008 and overshooting is also observed in the other deficit indicators. While tax revenues were buoyant and direct taxes raised their contribution to gross tax collections to 45 per cent, current expenditures on subsidies, social and other economic services eroded these gains and widened the deficits at all levels. Impending expenditures on subsidies and salary revisions could bring additional pressures to bear on the fisc and consequently, on aggregate demand. The Government will need to address the issue of providing subsidies to the public sector oil marketing and fertiliser companies directly in cash instead of the current practice of issuance of oil and fertiliser bonds. Excess demand conditions are also reflected in the merchandise trade deficit which has expanded by close to 43 per cent in April-August 2008 on a year-on-year basis, though mainly in response to the increase of 77 per cent in the average price of the Indian basket of crude. Although the outlook remains uncertain at the current juncture, the softening of international crude prices in subsequent months should have a salutary effect in terms of containing the merchandise trade deficit over the rest of the year. Non-oil import growth has remained elevated, albeit considerably moderated from the increase recorded a year ago. While exports are regaining momentum and international commodity prices, including crude, seem to be retreating, the widening of the trade deficit needs to be viewed in the context of the turmoil in international financial institutions and markets and the evolving environment
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Industry Analysis

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Industry Factors
Steel is an alloy of iron and carbon containing less than 2% carbon and 1% manganese and small amounts of silicon, phosphorus, sulphur and oxygen. Steel is the most important engineering and construction material in the world. It is used in every aspect of our lives, from automotive manufacture to construction products, from steel toecaps for protective footwear to refrigerators and washing machines and from cargo ships to the finest scalpel for hospital surgery Most steel is made via one of two basic routes: 1. Integrated (blast furnace and basic oxygen furnace). 2. Electric arc furnace (EAF). The integrated route uses raw materials (that is, iron ore, limestone and coke) and scrap to create steel. The EAF method uses scrap as its principal input. The EAF method is much easier and faster since it only requires scrap steel. Recycled steel is introduced into a furnace and re-melted along with some other additions to produce the end product. Steel can be produced by other methods such as open hearth. However, the amount of steel produced by these methods decreases every year. Of the steel produced in 2005, 65.4% was produced via the integrated route, 31.7% via EAF and 2.9% via the open hearth and other methods. (Source: World Steel in Figures 2006)

History of the Steel Industry
The Indian steel industry is more than 100 years old. The industry was highly government regulated until 1991 and large-scale capacities were mainly reserved for public sector. SAIL and TISCO (now Tata Steel Ltd.) were the main producers, TISCO being the only private player in the industry. The industry was de-licensed in 1991, paving the way for entry of several new domestic players. Furthermore, the industry was decontrolled in 1992 to enable free market interplay of demand and supply forces. The next five years saw large amounts of investment pouring in and production expanded by more than 50%. Steel industry was delicensed and
decontrolled in 1991 & 1992 respectively.

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The South East Asian crisis in 1997-98 marked the beginning of a downturn in the global industry. Demand of finished steel by these booming South East Asian economies suddenly declined by about 35-40 MT, which resulted in a glut situation globally. As a result steel prices fell to their 20- year lows. Big producers had to cut production as inventories started piling up. From 2002 onwards, the situation has improved with global demand mainly driven by huge jump in Chinese demand. However, with spiraling growth in steel production in China, there are fears of an oncoming downturn in the global industry. Indian Steel industry has shown the second highest growth rate for steel production in Asia after China in 2006. With a GDP growth of around 8% in 2005-06, Indian economy as well as the industrial development got a boost and this helped to shape the increasing steel demand and production in India.

Raw Materials
Supply of raw materials is a key issue for the world steel industry. IISI manages projects which look at the availability of raw materials such as iron ore, coking coal, freight and scrap. Scrap iron is mainly used in electric arc furnace steelmaking. As well as scrap arising in the making and using of steel, obsolete scrap from demolished structures and end-of life vehicles and machinery is recycled to make new steel. About 500 million tonnes of scrap are melted each year. Iron ore and coking coal are used mainly in the blast furnace process of ironmaking. For this process, coking coal is turned into coke, an almost pure form of carbon which is used as the main fuel and reductant in a blast furnace. Typically, it takes 1.5 tonnes of iron ore and about 450kg of coke to produce a tonne of pig iron, the raw iron that comes out of a blast furnace. Some of the coke can be replaced by injecting pulverised coal into the blast furnace. Iron is a common mineral on the earth’s surface. Most iron ore is extracted in opencast mines in Australia and Brazil, carried to dedicated ports by rail, and then shipped to steel plants in Asia and Europe. Iron ore and coking coal are primarily shipped in capesize vessels, huge bulk carriers that can hold a cargo of 140,000 tonnes or more.Sea freight is an area of major concern for steelmakers today, as the high demand for raw materials is causing backlogs at ports, with vessels delayed in queues.
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Many elements and materials go through chemical reactions with other elements. When steel comes into contact with water and oxygen there is a chemical reaction and the steel begins to change to its original form - iron oxide. In most modern steel applications this problem is easily overcome by coating. Many different coating materials can be applied to steel. Paint is used to coat automobiles, and enamel is used on refrigerators and other domestic appliances. In other cases, elements such as nickel and chromium are added to make stainless steel, which can help prevent rust.

Steel Prices
Price regulation of iron & steel was abolished on 16.1.1992. Since then steel prices are determined by the interplay of market forces. There has been an up-trend in the domestic steel prices since 2006-07 and the trend accentuated since January this year. Rise in raw material prices, strong demand in the international and domestic market and up-trend in the global steel prices have been some of the reasons cited by the industry for increase in the steel prices in the domestic market. The mismatch in demand and supply is considered to be the main reason on the demand side for the rise in steel prices. Honourable Steel Minister has held discussion with all major steel investors including Arcellor-Mittal, POSCO, Tata Steel, Essar, Ispat and also SAIL, RINL to explore the possibility of expediting the ongoing as well as envisaged steel projects. The Government also took various fiscal and other measures for stabilizing the steel prices like exempting pig iron, non alloy steel and steel making inputs like zinc, ferro-alloys and metcoke from customs duty; withdrawing DEPB benefits on export of various categories of steel products and bringing back railway freight on iron ore from classification 180 to 170 for domestic steel producers. In May 2008, the Government imposed 15% export duty on semi-finished products, and hot rolled coils/sheet, 10% export duty on cold rolled coils/sheets and pipes and tubes and 5% export duty on galvanized steel in coil/sheet form in order to further curtail rising prices and increase supply of steel in the domestic market.

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Exports and Import Position

Year – 2006 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Countries China Japan Ukraine Russia Brazil Belgium-Luxembourg Germany Slovakia South Africa Austria Finland Netherlands France Kazakhstan India

in Million Metric Tonnes Net Exports (exports-imports)

32.6 30.1 29.1 25.6 10.7 27.6 24.9 22.7 2.6 2.26 22.3 22 21.9 1.3 1.2

Current Scenario
The Indian steel industry has entered into a new phase in 2008, but it will be riding high on the resurgent economy and there will be a rising demand for steel. The domestic steel consumption has grown manifold in the last few years. The Indian steel industry has registered an average growth rate of more than 10% CAGR in output in the last five years. During the same period, steel consumption has also moved in perfect lockstep and has maintained a growth rate of 10%.
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Top 10 steel-producing countries
% 07/06 15.7 3.4 -1.4 2.0 7.3 6.0 2.8 4.7 9.3 1.2

Country China Japan United States Russia India South Korea Germany Ukraine Brazil Italy

Rank 1 2 3 4 5 6 7 8 9 10

2007 489.0 120.2 97.2 72.2 53.1 51.4 48.5 42.8 33.8 32.0

2006 422.7 116.2 98.6 70.8 49.5 48.5 47.2 40.9 30.9 31.6

World crude steel output reached 1,343.5 million metric tons (mmt) for the year 2007. This is an increase of 7.5% on 2006. The total represents the highest level of crude steel output in history and it is the fifth consecutive year that world crude steel production grew by more than 7%.

While the overall output remains high, 2007 has seen a small slowdown in the growth rate, yearon-year growth peaking at the end of the first quarter. This slowdown in growth was seen in nearly all the major producing countries and regions including China, EU, CIS and the US. The exception was in the Middle East where production growth accelerated during the second half of the year.

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World Crude Steel Production Share -

2001

2006

2007

World crude steel production for the 66 countries reporting to the World Steel Association (worldsteel) was 108.4 million metric tons (mmt) in September’08. This is 3.2% lower than the same month last year. Total world crude steel production was 1,035.8 mmt in the first nine months of 2008, a 4.6% increase over the same period in 2007. In September 2008, the world crude steel production moving annual total (MAT) growth rate further slowed to 4.7% from 5.6% last month. China’s crude steel production for September 2008 was 39.6 mmt, a decrease of -9.1% on September 2007. In the first nine months of 2008, China produced 391.0 mmt of crude steel, an increase of 6.2% compared to the same period in 2007. Overall, Asia produced 60.4 mmt of crude steel in September 2008 compared to 63.7 mmt in September 2007, a -5.1% decrease in crude steel production. South Korea showed a 12.7% increase in September producing 4.6 mmt of crude steel. In September 2008, the EU produced 17.4 mmt of crude steel, an increase of 0.9% and in the first nine months the EU produced 160.1 mmt, a 1.2% increase over the same period in 2007. Germany produced 4.0 mmt of crude steel in September, a decrease of -0.6 compared to the same month last year. Italy showed an increase of 2.4% producing 2.7 mmt in September. Russia produced 6.1 mmt, 7% higher than September 2007 and in South America, Brazil produced 3.0 mmt in September, an increase of 5% compared to the same month in 2007. Total crude steel production in North America was 10.9 mmt in September 2008, the same amount as September 2007. The North America MAT growth rate again rose, to 6.4% from 6.1% last month. This is its tenth consecutive monthly increase.

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Current & Historic pricing levels
World Steel US $/tonne Aug 2007 Sep 2007 Oct 2007 Nov 2007 Dec 2007 Jan 2008 Feb 2008 Mar 2008 Apr 2008 May 2008 Jun 2008 Jul 2008 Hot Prices Hot Rolled Rolled Steel Coil Steel Plate 603 602 611 615 630 639 699 800 915 998 1073 1099 814 810 826 833 837 847 887 978 1065 1160 1225 1307 Cold Rolled Steel Coil 686 673 680 688 705 716 772 890 985 1080 1144 1186 1179 Steel Rod 594 580 584 584 598 621 687 758 852 920 1005 1067 1062 Wire Medium Sections 825 821 844 853 859 871 905 970 1042 1105 1184 1234 1227 Steel

Aug 2008 1093 1300 All steel prices above are $/metric tonne. Current Happening (31st October 2008)–

After a spate of production cuts, it is now time for steel companies to go in for price cuts. Lack of demand and a softening global price scenario have led all large steel companies, including the largest steelmaker by capacity Tata Steel, to actively consider a price reduction in the range Rs 3,000- 4,000 per tonne.

The cut would be in the prices of the base category product such as hot rolled coils, which would subsequently be passed through in all value-added products like galvanised steel and cold rolled steel that are more widely used in consumer goods, say officials of steel companies. The current price of hot rolled coils is about Rs 37,000 per tonne, which after the reduction would come down to about Rs 34,000, narrowing the gap with international steel prices. The average price in European and US steel markets is currently in the range of $650 to $680 per tonne.
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“There is no demand in the market and this price cut is the second part of the strategy followed by steel companies who have cut production,” said a senior industry executive. Lack of credit has led customers to defer home purchases and also that of consumer goods, leading to a reduction in the usage of steel. Companies have cut production by about 20% due to the lower demand.

Tata Steel had said prices could fall by more than 10% in the October-December quarter due to slowing economic growth and cutting of requirements from users of steel. Even Sail had said that prices would fall in the coming quarters due to lower demand.

The other steel producers include the Sajjan Jindal-promoted JSW Steel, Essar Steel and the Pramod Mittal-o wned Ispat Industries. Then there are various galvanised steel and cold rolled steel companies that also buy from these primary producers and make custom made steel for cars and consumer goods.

Key Growth drivers of the Steel Industry
Construction: The construction industry has been witnessing a growth rate of 12%-14% in recent times. Steel construction is now identified with speed and since India is in need of speedy project implementation, steel is the best alternative for fast track construction. With economy surging ahead and expected increase in income levels of population, it is believed that demand for steel from this sector will continue to grow at current rates if not improve Automobile: The domestic automobile industry has also grown at more than double-digit rates in the past five years. The Indian automobile sector is the second fastest growing market after China and has emerged as a prime demand driver for alloy steel. Automobile sector which is experiencing growth and competition is likely to be one of the major drivers for steel consumption in the coming years and most likely, its contribution in the overall demand pie is likely to improve from the current levels.

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Auto components Industry: During the last five years, auto components market has grown at 19% CAGR, led by both robust domestic demand as well as exports. India is fast emerging as hub for auto components. International companies such as General Motors, Ford, Daimler Chrysler, Toyota and Volkswagen are outsourcing auto parts from India as it has cost advantage with regard to forgings and castings. Also, the growing domestic automobile industry, which relies on steel industry for its parts manufacturing, will enhance the demand for steel in India. Infrastructure: Infrastructure sector comprises of roads, railways, airports and power. The 11th Five-year plan has lined up huge investments in all the above related sectors of infrastructure. The sector wise anticipated investment are $200bn in power, $80bn in railways, $48bn in roads, $13bn in ports and $9bn in airports. Because of surge in the above activities, the demand for long products of steel will be increasing in years ahead. Consumer Durables: The consumer durables sector has also been witnessing robust growth. It has grown at an average of 10% per annum and is expected to grow at double-digit rates for coming years. The share of white goods and utensils is predominant in India. The domestic appliances market which includes spin driers of washing machine, almirahs, thermo ware, water filters, dishwashers, microwave ovens, catering equipments, cutlery, furniture etc have opened new opportunities for steel consumption, thus ensuring a steadily growing trend of steel off take. Oil & Gas Industry: Oil & gas sector is the major consumer of steel tubes and pipes. The pipe consumption in oil & gas sector is expected to grow at a rate of 25% CAGR as this sector is set to witness massive capital investment. Apart from laying cross-country pipelines, exploration and production activities are also experiencing strong growth in both international as well as domestic markets. Thus, in view of the robust growth expected in all the above mentioned sectors, there is no reason to believe that demand will slowdown in the coming future. Infact, if one were to go by government projections, then the demand is likely to increase at a CAGR of 11% until 2020. What gives us further conviction is the low per capita consumption of steel in India, which at 40 kgs currently is way below the world average of 150 kgs. Thus, the next few years are likely to be very good for the Indian steel manufacturers as far as demand is concerned.
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Mergers and Acquisitions
Both globally and domestically, the steel industry is undergoing consolidation. Pace of M&A activity has picked up in recent years. The recent merger between the global giants Arcelor and Mittal Steel makes them the largest producer in the world with production capacity of nearly 10% of total world output. It would be three times the size of the entire Indian steel industry. India is an attractive destination for these steel majors with its vast resources. The government can safeguard the interests of the public sector units, but the private players are under substantial threat of hostile take-over bids from these foreign companies. Indian steel companies have been looking to expand capacities to take advantage of the growing domestic demand. SAIL, India’s largest producer has embarked on an INR 350 bn capex plan. Orissa has become an important destination with POSCO, Mittal Steel, TSL and SAIL all setting up plants there.

Business Cycle
Steel, as any other major industry is cyclical in nature. As demand exceed supply, prices start to increase. As a result, producers start building up capacities which when become operational lead to a situation of over-supply. Competition between producers leads to price-cutting, the installed capacities go out of operation and the balance between demand and supply is restored. Today, capacity utilisation in India has been rising over the last few years and currently stands at 91%. Steel prices have been falling in recent times and there are fears that we are on the verge of slowdown in the industry. However, with the huge domestic market fundamentals, it can be expected that Indian steel industry is going to withstand a global slowdown, if it happens. Moreover, the major increase in steel prices in the last two years was mainly due to escalating international prices of coke. Coke prices had risen by nearly 450% in the period 2002-04. It is expected that the ongoing consolidation in the global industry will help steel majors influence input prices and also control volatility in steel prices.

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Looking ahead
The Indian steel industry is probably not enjoying one of the best phases and indications are that this phase is on the verge to end. The Ministry of Iron and Steel also shares this positive view on the industry and have projected the production capacity in India to be around 66MT in 2011-12 and 110 MT in 2020. They also expect domestic demand to be around 60 MT (2011-12) and 100 MT (2020). Various domestic companies have put in action capacity expansion plans and also major foreign steel majors like Arcelor-Mittal and Posco are setting up plants in India. Because of its strong domestic demand fundamental which are expected to strengthen even further and the vast Indian rural market, India doesn’t need to worry too much regarding its steel sector. There are considerable risks like China becoming net exporter and downturn in global steel industry. But these would not affect India much as our external exposure is very limited so far. If steel prices crash more globally, the Indian government may be required to step in and restrict imports. We expect the Indian steel industry to recuperate over all these downside risks and grow stronger in the coming years.

Fun Facts about the Steel Industry
1. The amount of energy needed to produce a ton of steel has been reduced by 34 percent since 1972. 2. $10 billion has been invested to create a New Steel that is better for the environment. 3. Steel parts are more dent-resistant and are up to 30 percent stronger than they were a decade ago. 4. The first steel-made automobile was introduced in 1918. 5. Over half of all the types of steels present in today’s automobiles did not even exist 10 years ago. 6. 24. One scrapped car produces more than four steel utility poles. 7. Steel comprises approximately 75 percent of all major appliances. 8. Indian Industry is the Largest producer of Sponge Iron - 12.8 mT in 2005-06 (a growth of 25%). 9. India’s exports of Finished Steel in 2005-06, 4.4 mT, Imports 3.7 mT. 10. The first steel plant in India was set-up by Bengal Iron and Steel Works Company in 1870. 11. India accounts for nearly 3.45% of total world production (as on 2006).
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Key Indicators of Steel Industry Scenario
Industry Scenario - Key Indicators
Steel - 66 Companies(Aggregate)

Particulars Net Sales OPM OP OI PBIDT Interest PBDT Depreciation PBT Tax PAT

1/6/07 30939 24.2 7499 751 8250 918 7332 1325 6007 1983 4024

1/6/08 Var.(%) 42581 23.6 10066 662 10728 1629 9099 1454 7645 2501 5144 38 -2.5 34 -12 30 77 24 10 27 26 28

Figures in Rs Crore Source: Capitaline Corporate Database

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Steel - Large 26 Companies

Sales 133,272.22

NP 16,949.71

Mkt. Cap. 110,090.95

B.V Rs

CPS Rs. EPS Rs. P/C P/E 6.5

SAIL Tata Steel JSW Steel
Essar Steel Ispat Inds. Rashtriya Ispat JSL Ltd Bhushan Steel Uttam Galva Bhushan Lloyd Steel Inds Natl. Steel&Agro Mukand Ajmera Realty Usha Martin Ramsarup Inds Surya Roshni ISMT Ltd Saraswati Indl. Tata Ryerson Sunflag Iron Indian Iron & St MUSCO Shah Alloys Avery Cycle Inds Visvesva. Iron

39,768.18 7,297.25 52,869.12 19,654.78 4,514.30 31,093.48 11,391.05 1,729.35
10,635.24 8,323.09 7,938.27 5,050.73 4,152.30 3,155.84 2,634.49 2,204.64 2,154.22 1,919.34 1,842.14 1,639.26 1,581.85 1,259.12 1,193.19 1,134.07 1,033.36 989.48 952.62 920.44 900.04 653.3 191.18 429.54 34.08 1,365.71 264.43 422.39 123.95 201 -79.5 25.23 51.25 245.55 140.9 59.42 13.09 100.05 69.77 34.93 43.62 32.05 28.45 -120.48 8.08 -84.7

55.8 298.8 391.7
40.2 5.5 1,349.90 115.1 382.7 62.3 150.8 -33.6 64.2 87.8 51.7 34.6 135.2 69.1 36.6 367.9 31.8 18.1 -14.5 57.8 65.6 991.8 6.8

20 70.4 126.6
10.5 5.5 351.2 31.5 148.8 16.6 37.9 1.8 14 14.8 23.9 8.5 42.8 14.6 10.3 111.3 9.2 5 1.4 16.5 0 155.1 0

17 6.4 58.7 6 88.3 3.8
3.7 0.3 279.3 16 99 10.9 24.9 0 7 6.8 20.6 5.5 34 4.8 6.7 93 7 2.6 0.8 8.2 0 81.6 0 4.9 3.4 0 3.5 4.5 2.1 0 4.5 1.5 4.3 2.7 6.1 1.9 3.7 3.2 0 0 2.8 0 2.4 0 0 0

7.5 7.3 5.4
14 0 0 6.8 6.7 3.2 0 0 3 9.4 3.2 9.5 2.4 11.2 4.9 0 0 5.4 0 4.9 0 0 0

8,982.14
5,904.22 2,316.52 0 1,769.06 2,818.31 397.76 0 153.5 69.11 467.54 768.82 1,304.79 145.43 139.75 477.59 0 0 228.7 0 131.06 54.05 0 0

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Michael Porters Five Forces

Suppliers’ Power High Raw Material Prices Lack of Captive Source Hurting Steel Producers Lack of Transportation Backward Integration Buyers’ Power

Intensity of Competition Competition Players from Foreign

Spurt in Merger and Acquisition Activities

Increasing Demand for Steel Fragmented Suppliers Coke

Threat of New Entrants High Cost of Basic Inputs and Services

Threat of Substitutes Use of Aluminum/Plastic

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SWOT Analysis –

Strengths
1. 2. 3. 4. Availability of iron ore and coal Low labour wage rates Abundance of quality manpower Mature production base 1. 2. 3. 4. 5.

Weaknesses
Low Productivity High dependence on imported coke High cost of debt Inadequate infrastructure Low research and Development investment. 6. Unscientific mining

Michael Porters Five Forces –

Opportunities

Threats
1. China becoming net exporter 2. Protectionist policies followed by

1. Buyers’ Power 1. Largely untapped rural market Increasing Demand for Steel 2. Per capita consumption way below world average Fragmented Coke Suppliers 3. Growing domestic market 4. Exports 5. Consolidation

foreign countries
3. Dumping by competitors 4. Hostile takeover by foreign

companies

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Key Findings
• •

Indian steel industry is closely linked with domestic economic growth. India housing and construction industry is likely to grow in India, which is one of the major steel consuming industries.



Growing Indian automobile industry, which depends on steel industry for parts manufacturing, will lead to a strong steel demand in future.

• •

The high cost of electricity in India may hamper the steel industry' s production level. Recent increase in production capacity and foreign investment in India is pushing the Indian steel production.



Demand is expected to rise in future with economic and industrial growth.

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INTER INDUSTRY ANALYSIS
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Inter-Industry Scenario
Key indicators of SAIL, TATA &JSW
Key Indicators Years Market Capitalization Market Capitalization Market Capitalization Net Worth Net Worth Net Worth Enterprise Value Enterprise Value Enterprise Value EBDIT EBDIT EBDIT EBIT EBIT EBIT EBT EBT EBT Dividends Dividends Dividends Non operating income Non operating income Non operating income (Rs in Crs)
2004 13,341.19 14,150.38 1,058.70 5,037.67 4,515.86 1,220.15 19,995.43 17,281.85 5,767.57 4,706.25 3,518.19 1,412.32 3,583.66 2,893.08 1,099.44 2,628.21 2,665.96 690.16 368.98 1320.97 259.24 60.04 2005 26,000.87 22,188.61 4,652.54 10,306.65 7,059.92 2,870.69 25,638.54 24,681.59 8,366.46 11,144.28 6,144.86 2,306.85 10,017.33 5,526.08 1,947.31 9,365.35 5,297.28 1,472.61 1,363.03 719.51 103.23 969.54 485.62 10.2 2006 34,406.23 29,688.13 4,751.48 12,601.41 9,755.30 4,077.19 32,531.21 31,915.89 8,748.66 7,380.80 6,189.57 2,075.61 6,173.50 5,414.47 1,669.79 5,705.74 5,239.96 1,301.14 826.08 719.51 125.58 624.29 314.53 374.5 2007 47,127.86 26,097.93 8,091.10 17,313.15 13,949.09 5,293.26 41,698.55 28,061.91 11,926.33 10,966.23 7,332.19 2,819.87 9,754.75 6,512.90 2,321.64 9,422.62 6,261.65 1,914.83 1,280.42 943.91 204.98 558.25 299.38 15.58 2008 76,309.14 50,640.15 15,321.27 23,063.57 21,828.21 7,388.32 65,594.94 68,196.80 22,528.58 12,954.48 8,830.00 3,665.79 11,719.00 7,995.39 2,978.61 11,468.06 7,066.36 2,483.77 1,528.25 1,168.93 261.87 233.57 292.83 16.66 32

Comp. SAIL TATA JSW SAIL TATA JSW SAIL TATA JSW SAIL TATA JSW SAIL TATA JSW SAIL TATA JSW SAIL TATA JSW SAIL TATA JSW

1. Market Capitalization
The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determining a company's size, as opposed to sales or total asset figures. It has been increasing for all the three companies in the last five years indicating the importance of steel industry in the growing economy. The market capitalization of SAIL is the highest a Government enterprise followed by TATA Steel which acquired Corus. JSW has also seen a rising market capitalization.

2. Net Worth
For a company, total assets minus total liabilities. Net worth is an important determinant of the value of a company, considering it is composed primarily of all the money that has been invested since its inception, as well as the retained earnings for the duration of its operation. Net worth can be used to determine creditworthiness because it gives a snapshot of the company's investment history. also called owner's equity, shareholders' equity, or net assets. The net worth for all the three companies has been increasing for the last five years.

3. Enterprise Value
A measure of what the market believes a company's ongoing operations are worth. Enterprise value is equal to (company's market capitalization - cash and cash equivalents + preferred stock + debt). The number is of importance both to individual investors and potential acquirers considering a takeover attempt. Although it has been increasing consistently for all the three companies Tata Steel’s enterprise value is more. One of the reasons are the number of merger & acquisitions that Tata Steel had done including the Corus Steel in 2007 which has increased its enterprise value.

4. Operating Profit
A measure of a company's earning power from ongoing operations, equal to earnings before deduction of interest payments and income taxes. also called EBIT (earnings before interest and taxes) or operating income. The operating profit for all the three companies has gone up due to the growth in industrial production. The steel industry
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plays a major role in the growth of the industry which directly reflects in the increasing operating profit. One more reason for the increase besides the volume is also the cutting down of cost by the steel industry. Infact Tata Steel is one of the lowest cost of production in the world for steel.

5. Earning Before Interest Tax
The difference between EBDIT & EBIT represents the depreciation component. In other words it represents the fixed cost that the companies incur towards plant & machinery. In the steel industry it forms a major component. SAIL has the highest depreciation in comparison to the other two. The reason is that it is a government enterprise with huge investments in plant & machinery.

6. Earning Before Tax
The EBT has been decreasing for all the three companies in the last five years. This indicates that the debt portion of the capital employed has been decreasing for all the three companies. This also means higher profit available to share holders for distribution as profit.

7. Dividend
The increase in EBT also reflects in the increase in the dividend distributed over the five year period. The increase has been most in SAIL followed by TATA. The increase in TATA has been phenomenal as it had many mergers and acquisitions which has contributed to the increasing profit & its distribution. 8. Non Operating Income It is the profit and revenue of a savings association that are nonrecurring in nature and that do not result from the ordinary savings and lending operations of the institution. These include profit on the sale of real estate owned or other nonmortgage investment. Non operating income of SAIL has reduced considerably over the years.But for TATA it has remained almost constant over the years. And for JSW it is very volatile showing wide ups and downs in the five years.

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Cost in Percentage to Sales
Cost in % to Sales Years Raw Materials Raw Materials Raw Materials Power & Fuel Cost Power & Fuel Cost Power & Fuel Cost Employee Cost Employee Cost Employee Cost Other Man. Exp. Other Man. Exp. Other Man. Exp. Selling & Adm. Exp. Selling & Adm. Exp. Selling & Adm. Exp. (Rs in Crs)
2004 32% 21% 43% 10% 7% 14% 22% 15% 1% 10% 14% 7% 6% 10% 2% 2005 33% 21% 45% 8% 5% 9% 13% 10% 2% 9% 13% 8% 4% 9% 5% 2006 44% 20% 50% 9% 6% 7% 15% 9% 2% 12% 14% 12% 5% 9% 1% 2007 39% 20% 46% 8% 6% 5% 15% 9% 2% 11% 14% 12% 4% 9% 1% 2008 35% 20% 52% 7% 5% 5% 20% 9% 2% 11% 13% 12% 4% 7% 1%

Comp. SAIL TATA JSW SAIL TATA JSW SAIL TATA JSW SAIL TATA JSW SAIL TATA JSW

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1. Raw Materials
Raw material cost forms the major part in the steel sector, that’s why all the three companies have highly spent on their Raw material in percentage to its Revenue. SAIL is decreasing from 2006 to 2008 that is 44% to 35%. Tata steel is almost same at 20% and in case of JSW Steel it is increasing from 46% to 52%. It shows that JSW is heavily expending on Raw Material that’s why their end product is also very costly as compared to TATA whose end product is very cheap.

2. Power & Fuel Cost
Power and fuel cost forms very miniscule part of the overall cost. The power & fuel for all the three companies are decreasing. Power and fuel cost is again very less in TATA as compared to the other two.

3. Employee Cost
Employee cost structure in all the three companies differs widely. JSW is least to spend on its employee. In JSW, employee cost forms very miniscule part of the overall cost. Employee cost is very high in SAIL, as it is a government undertaking. And over the years Employees in all the three companies is in a decreasing mode which shows that they are becoming to highly depend on machines so their employee cost is reducing in percentage to their sales.

4. Other Manufacturing Expenses
Other manufacturing expense is on an increasing mode in all the three companies accept TATA, which has reduced marginally. It is highest in TATA in their percentage to sales. But in all three companies it almost similar.

5. Selling & Administration Expenses
Selling and Administration Expense is also high in TATA compared to SAIL and JSW. JSW is a very miniscule spender on its selling and distribution expense this shows that do not spend much on its advertisements and promotional expenses. TATA spends a lot to make its product quite familiar with each and every class. That’s its product is the most popular. But over the uears it has reduced as their product is becoming popular with the public.

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Compounded Annual Growth Rate Net Sales –

Net Sales Five Years CAGR SAIL – 17% TATA – 16% JSW – 37%

Five Years Compounded Annual Growth Rate of Net Sales of JSW is very high. This shows that in these five years JSW has shown tremendous Growth in terms of Net Sales, followed by SAIL and then TATA.

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Adjusted Net Profit

Adjusted Net Profit Five Years CAGR SAIL – 31% TATA – 25% JSW – 66%

Five Years Compounded Annual Growth Rate of Adjusted Net Profit of JSW is at its highest among the three Companies. This shows that in these five years JSW has shown tremendous Growth in terms of Adjusted Net Profit, followed by SAIL and then TATA.

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Gross Profit

Gross Profit Five Years CAGR SAIL – 36% TATA – 24% JSW – 33%

Five Years Compounded Annual Growth Rate of Gross Profit of SAIL is high among the three Companies. All the three Companies are very close to each other in terms of Gross Profit CAGR. This shows that in these five years they have shown tremendous Growth in terms of Gross Profit.

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Operating Profit

Gross Profit Five Years CAGR SAIL – 29% TATA – 26% JSW – 27%

Five Years Compounded Annual Growth Rate of Operating Profit of SAIL is high among the three Companies. All the three Companies are very close to each other in terms of Operating Profit CAGR. This shows that in these five years they have shown tremendous Growth in terms of Operating Profit.

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Ratio Analysis
Liquidity Ratios SAIL TATA JSW SAIL TATA JSW Years Current Ratio Current Ratio
Current Ratio 2004 0.75 0.67 1.29 0.5 0.41 0.55 2005 0.99 0.65 1.06 0.68 0.31 0.28 2006 1.18 0.71 0.87 0.75 0.29 0.18 2007 1.36 1.26 0.78 0.81 0.56 0.26 2008 1.6 2.86 0.62 0.93 0.71 0.18

Quick Ratio Quick Ratio
Quick Ratio

Current ratio for all the three companies as of 2008 is in a good position except for JSW which is decreasing as the years are increasing. It shows that they are more and more becoming dependent on Creditors for the funding of their operations.

Quick Ratio also for TATA and SAIL is good. But JSW is lacking in this factor. So, if the need arises then this company will not have the enough money to pay off debts.

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Solvency Ratios SAIL TATA JSW SAIL TATA JSW SAIL TATA JSW
Years Debt to Equity ratio Debt to Equity ratio Debt to Equity ratio Long Term D/E ratio Long Term D/E ratio Long Term D/E ratio Interest coverage ratio Interest coverage ratio Interest coverage ratio 2004 2.86 0.99 4.9 2.28 0.95 4.84 3.75 12.74 1.73 2005 0.94 0.53 1.85 0.83 0.51 1.81 15.36 24.15 4.1 2006 0.44 0.31 1.06 0.4 0.3 1.01 13.2 31.03 3.53 2007 0.28 0.51 0.83 0.24 0.5 0.8 29.37 25.92 5.71 2008 0.18 0.67 0.88 0.15 0.66 0.85 46.7 8.61 6.02

In all the three Companies Debt component has been reduced and they are becoming more dependent upon owners funds. In SAIL it is very less it means most of its funding is done by the govt., who is the owner of the Company.

This ratio shows that all the Companies debt is long term debt to equity ratio and that’s why showing same trend as debt to equity ratio.

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Interest Coverage Ratio is very high in SAIL which shows its ability to pay off its interest obligation. Then TATA is also having its ability to pay and JSW interest coverage ratio is the lowest of all the three companies.

SAIL TATA JSW SAIL TATA JSW SAIL TATA JSW SAIL TATA JSW

Years Inventory Turnover ratio Inventory Turnover ratio Inventory Turnover ratio Debtors Velocity Debtors Velocity Debtors Velocity Creditors Velocity Creditors Velocity Creditors Velocity Asset turnover ratio Asset turnover ratio Asset turnover ratio

Turnover Ratios 2004 7.1 9.93 12.83 19 12 9 28 80 36 0.75 0.97 0.57

2005 8.8 10.17 13.02 18 10 11 28 82 34 0.99 1.24 0.98

2006 6.17 8.47 8.16 20 9 9 31 89 35 1.18 1.2 0.86

2007 5.99 8.77 9.61 20 9 8 32 93 40 1.36 1.26 0.98

2008 6.65 8.99 9.86 21 10 8 33 103 35 1.6 1.37 1.03

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It is high in JSW it means it is very efficient in managing its inventory to convert it into sales. Over the years it has reduced which shows they are becoming inefficient in utilizing their inventory.

It is very less in JSW which shows that customers clear their bills very quickly in just 8 days. In TATA also it is good but in SAIL it is little more.

Creditors velocity is high in all the Companies when compared with the debtors velocity it means their operations are also funded by their creditors. It is very high in TATA which might reflect a bad position to the public at large. It might hamper their credibility.

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Asset turnover ratio in all the three Companies is almost on the same plane. There is only a slight difference. TATA has the highest asset turnover ratio. It means they are very good in utilizing their assets to convert it into sales.

SAIL TATA JSW SAIL TATA JSW SAIL TATA JSW SAIL TATA JSW SAIL TATA JSW

Years Gross profit margin Gross profit margin Gross profit margin Net profit margin Net profit margin Net profit margin Return On Equity Return On Equity Return On Equity Return on Capital Employed Return on Capital Employed Return on Capital Employed Return On Net Worth Return On Net Worth Return On Net Worth

Profitability Ratios 2004 19.5 29.51 28.73 10.41 14.65 6.45 0.6 5.06 0.17 25.36 38.18 11.65 66.43 45.36 22.46

2005 34.8 38.72 34.37 21.29 21.89 12.96 1.65 6.34 4.44 68.77 63.79 30.8 88.85 60.02 39.89

2006 22.58 36.11 25.09 12.28 20.46 9.3 0.96 6.34 2.77 38.03 50.13 17.59 35.04 41.7 17.41

2007 27.78 37.1 30.33 15.71 21.36 13.9 1.41 7.42 5.62 51.28 36.79 26.24 41.47 35.62 26.98

2008 28.17 39.79 29.03 16.39 21.12 13.68 1.77 6.15 6.85 49.43 23.32 24.05 37.33 26.08 26.8

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Gross profit margin is high in case of TATA as their cost in percentage to sales is also very less. It implies TATA uses cost effective techniques to generate revenue. JSW GPM has remained stable where as for SAIL its growth rate is remarkable.

Net Profit Margin has also shown the similar trend accept that for JSW it has been on a increasing trend unlike a Gross profit margin.

It is high in JSW as compared to the other two companies. It shows the earning available to

the persons at the last resort. So this company will be in good prospects of the investors. TATA’s ROE is also good. But SAIL’s ROE is not great.

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It tells that the returns that the Company has earned from its total capital it has employed. It is very high in SAIL, which is a good sign for this govt. undertaking.

It is the 'final measure' of profitability to evaluate overall return. It is also very high in SAIL, which is a very good sign. For both TATA and JSW it is almost same. The difference is negligible.

SAIL TATA JSW SAIL TATA JSW SAIL TATA JSW

Years Dividend Per Share Dividend Per Share Dividend Per Share Earning Per Share Earning Per Share Earning Per Share Price Earning Ratio Price Earning Ratio Price Earning Ratio

Valuation Ratios 2004 10 6.08 46.02 3.91 5.31 8.33 2.1

2005 3.3 13 8 16.06 60.91 43.22 3.92 6.58 8.34

2006 2 13 8 9.44 61.51 37.02 8.82 8.72 8.18

2007 3.1 15.5 12.5 14.54 69.95 54.69 7.85 6.43 9.02

2008 3.7 16 14 17.62 61.06 66.5 10.49 11.35 12.32 47

DPS is the amount of the dividend that shareholders will receive, over an year, for each share they own. It is very high in TATA which will put good reflection in the minds of the investors. JSW is also giving handsome dividends to its shareholders. Only SAIL is not showing interest in paying to its shareholders despite of fetching good returns.

Earning per share is very good in JSW and then in TATA but SAIL’s EPS is very poor. It shows that SAIL will not be popular with the investors in the future as they are providing very less earnings.

P/E ratio is a reflection of the market's opinion of the earnings capacity and future business prospects of a company. It is almost on a similar pace in all the three companies. And all these three companies hold good future ahead. In JSW it is marginally high, followed by TATA and then in the end SAIL.

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SAIL ANALYSIS

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STEEL AUTHORITY OF INDIA LIMITED
Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a fully integrated iron and steel maker, producing both basic and special steels for domestic construction, engineering, power, railway, automotive and defence industries and for sale in export markets. Ranked amongst the top ten public sector companies in India in terms of turnover. The company has the distinction of being India’s largest producer of iron ore and of having the country’s second largest mines network. This gives SAIL a competitive edge in terms of captive availability of iron ore, limestone, and dolomite which are inputs for steel making. SAIL's wide range of long and flat steel products are much in demand in the domestic as well as the international market. This vital responsibility is carried out by SAIL's own Central Marketing Organisation (CMO) and the International Trade Division. CMO encompasses a wide network of 34 branch offices and 54 stockyards located in major cities and towns throughout India. With technical and managerial expertise and know-how in steel making gained over four decades, SAIL's Consultancy Division (SAILCON) at New Delhi offers services and consultancy to clients world-wide. SAIL has a well-equipped Research and Development Centre for Iron and Steel (RDCIS) at Ranchi which helps to produce quality steel and develop new technologies for the steel industry. Besides, SAIL has its own in-house Centre for Engineering and Technology (CET), Management Training Institute (MTI) and Safety Organisation at Ranchi. Our captive mines are under the control of the Raw Materials Division in Kolkata. The Environment Management Division and Growth Division of SAIL operate from their headquarters in Kolkata. Almost all our plants and major units are ISO Certified. Steel Authority of India Limited (SAIL). The Group's principal activities are to manufacture and market iron and steel. The Group produces both basic and special steels for domestic construction, engineering, power, railway, automotive and defence industries and for sale in export markets. The Group's steel plants are located at Bhilai, Bokaro and Salem and iron ore mines are located at Dalli, Kiriburu, Megahataburu and Bolani. It has distribution network across the country with 56 warehouses and network of dealers in all the districts of India. Major projects implemented during 2002-03 includes upgradation of BF-3 with increase in useful volume and installation of INBA Cast House Slag Granulation Plant at BF-3 at DSP, installation of De-scaling Unit before 950 mm Roughing Stand of Rail & Structural Mill of BSP
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and installation of Combined Blowing Technology in Converter No. 2 at SMS-II of BSL. Efforts were also made in nonsteel sectors and consultancy orders were procured from petroleum, chemicals and power sectors besides steel sector. In addition to executing consultancy projects in India, projects were executed during 2003-04 by SAILCON in Iran, Egypt and Georgia. During the period of 2004-05, SAIL has wide use of e-commerce, e-procurements worth Rs. 298 crore and e-selling worth Rs. 1,156 crore and during the same year the company earned the enviable status of a virtual zero debt company. SAIL entered into an agreement with GAIL for supply of natural gas for its integrated steel plants. A MoU was also signed with KIOCL for joint development of some iron ore mines of the company. SAIL received the prestigious SCOPE Gold Trophy for Excellence and Outstanding Contribution to the Public Sector ManagementInstitutional category for the year 2004-05. The Company bagged, 'Business world-FICCI-SEDF Corporate Social Responsibility Award 2006'. SAIL has undertaken a massive modernisation and expansion plan during the year of 2006-07 with an indicative cost of over Rs. 40,000 crore to expand capacity of hot metal to over 25 million tonnes from current level of 14.6 million tonnes. The company introduced several new products in the domestic market during the year 2006-07: HCR-EQR TMT for earthquake resistant construction, rock bolt TMT for tunnel construction, EN series HR coils for LPG cylinders, MC 12 HR coils for chains etc. In addition, Bhilai Steel Plant developed high strength vanadium rails; Durgapur Steel Plant produced S-profile loco wheels for high-speed locos and Rourkela Steel Plant rolled special plates, which were used, in the indigenously built rocket PSLVC-7. As on January 2008, India's two biggest steel makers, public sector Steel Authority of India Ltd (SAIL) and private sector Tata Steel Ltd, have formed a joint venture company (JVC) to mine coal blocks for securing assured coking coal supply to meet their increasing production needs. As on June 2008, SAIL made a joint venture with Shipping Corporation of India may own a few bulk carriers to have continuous availability of vessels. The Company is setting up three steel processing units (SPU) in Madhya Pradesh for manufacturing various types of steel items used by the construction industry. The company's Corporate Plan, 2012 (CP12) was formulated in 2004 for 4 integrated steel plants for increase in Hot Metal production to 20 Mt by 2012. After merger of in IISCO Feb 06, the Hot Metal production Plan was revised to 22.5 Mt by 2012. Expansion of Special Steel Plants was also included. Hon'ble Minister of Steel reviewed the Corporate Plan 2012 in Jul'2006, wherein it was decided to take up the Expansion of Integrated Steel Plants and Special Steel Plant in one go based on Composite Project Feasibility Report (CPFR).

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VISION To be a respected world-class corporation and the leader in Indian steel business in quality, productivity, profitability and customer satisfaction. CREDO • • • • • We build lasting relationships with customers based on trust and mutual benefit. We uphold highest ethical standards in conduct of our business. We create and nurture a culture that supports flexibility, learning and is proactive to change. We chart a challenging career for employees with opportunities for advancement and rewards. We value the opportunity and responsibility to make a meaningful difference in people’s lives. Steel Authority of India Limited Key Data: Country: INDIA Exchanges: BOM Currency: Indian rupee. Fiscal year end: March Share type: equity Major industry: Metal Producers & Products Manufacturers Sub Industry: Steel Producers - Non-integrated. Employees: 132973 Shares Outstanding: 4,130,400,545 Closely Held Shares: 3,544,690,285 Type: Public Company Stock Exchanges: Mumbai Ticker Symbol: SAIL Incorporated: 1973 NAIC: 331221 Rolled Steel Shape Manufacturing; 331111 Iron and Steel Mills Address: Ispat Bhavan, Lodi Road, New Delhi 110 003, India Telephone: (91) 24367481 Fax: (91) 24367015 Web: http://www.sail.co.in
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Top Management S.No 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. NAME S K Roongta G Ojha Soiles Bhattacharya Shoeb S Ahmed V K Gulhati V Shyamsundar B N Singh V K Srivastava R Ramaraju S P Rao B S Meena G Elias S C Jain R P Sengupta Velu Annamalai DESIGNATION Chairman Director (Personnel) Director (Finance) Director (Commercial) Director (Technical) Managing Director Managing Director Managing Director Managing Director Managing Director Director Director Director Director Director

Bankers SNo. 1 2 3 4 5 6 7 8 9 10 11 12 13 State Bank of India Bank of Baroda State Bank of Patiala State Bank of Hyderabad Punjab and Sind Bank Punjab National Bank Syndicate Bank Oriental Bank of Commerce Bank of India United Bank of India Bank of Maharashtra Canara Bank State Bank of Saurashtra Bankers 14 Jammu & Kashmir Bank Ltd 15 State Bank of B J 16 Central Bank of India 17 State Bank of Indore 18 Allahabad Bank 19 UCO Bank 20 State Bank of Mysore 21 IDBI Bank 22 Yes Bank Ltd 23 HDFC Bank Ltd 24 Corporation Bank 25 Indian Overseas Bank

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Equity shares for last Five Years Share Capital and its Break Up Year Share Capital Equity Authorised Equity Issued Equity Subscribed Equity Called Up Equity Paid Up

Mar-08 4130.4 5000 4130.4 4130.4 4130.4 4130.4

Mar-07 4130.4 5000 4130.4 4130.4 4130.4 4130.4

Mar-06 4130.4 5000 4130.4 4130.4 4130.4 4130.4

Mar-05 4130.4 5000 4130.4 4130.4 4130.4 4130.4

Mar-04 4130.4 5000 4130.4 4130.4 4130.4 4130.4

Share holding pattern including promoter and general public
Steel Authority OF India Limited Ownership Pattern as on 30-06-2008 No of Shares % Share 3544690285 85.8195 Indian (Promoter & Group) 3544690285 85.8195 Total of Promoter 467051637 11.3077 Non Promoter (Institution) 117882973 2.854 Non Promoter (Non-Institution) 584934610 14.1617 Total Non Promoter 4129624895 99.9812 Total Promoter & Non Promoter 775650 0.0188 Custodians(Against Depository Receipts) 4130400545 100 Grand Total

Share Holder
1 1 426 341676 342102 342103 2 342105

Reserves and surplus for the last five years
Industry :Steel Reserves Total and its Break Up Year Reserves Total Capital Reserves General Reserves Share Premium Debenture Redemption Reserve Profit & Loss Account Balance
Mar-08 18933.17 15.27 2542.51 235.29 262.44 15877.66 Mar-07 13182.75 14.47 1772.51 235.29 348.83 10811.65 Mar-06 8471.01 12.12 1137.51 235.29 387.25 6698.84 Mar-05 6176.25 10.21 700 235.29 471.98 4758.77 Mar-04 907.27 9.93 0 235.29 639.36 22.69

Cause of Increase and Decrease in Reserve and Surplus Reserves and surplus has gone up from 13182.75 to 18933.17, which can be mainly attributed to the following factors –

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1. Profit and Loss Account Balance has also gone up from 10811.65 to 15877.66. It is mainly accounted due to the fact that Sales has gone up. So, the overall Revenue has increased. 2. General Reserves has also gone up due to the fact that Profit and Loss Account Balance has gone up. It is always some percentage of P&L a/c which is given to G/R. 3. Debenture Redemption Reserve has gone down due to the fact that they have decreased their debt proportion in the fund mix. So, now they are required to keep less reserve for the debenture redemption.

Product profile of the company
As Per 2008
Product Name Capacity Utilised -% 114.02 112.23 0 23.58 0 50.72 0 0 0 0 0 89.46 105.1 0 Production 12531293 512891 0 410303 0 29418 0 0 0 0 0 314894 13648705 0 Sales Quantity 11871956 442575 0 307719 0 24292 131472 653 2921 0 0 0 0 0 Sales 40770.1 9 2534.32 1558.32 622.82 490.81 49.95 10.5 2.47 6.77 0 0 0 0 -60.79

Steel-Main-Saleable Alloy Steel-Saleable Others Pig Iron Finished Prod.Internally Cons. Pig Iron(Alloy) Middling/Rejects Steel-Indigenous Steel Ingots Cinders Calcium Ammonium Nitrate(CAN) Crude Steel Crude Steel (Main) Export Benefits

Market share of the company sales
The company has a market share of the Company Sales of 29.8%. Market conditions for SAIL are fairly buoyant, as SAIL still ranks first among the 26 Large Steel Producing Companies. Although, prices showed a downward trend as compared to other Companies of this Industry. But still it has a largest market share with a Sales of Rs. 39768.18crores in Indian Steel Industry.

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Key Indicators
Years Market Net Worth Enterprise Value Operating Profit EBDIT EBIT EBT Dividends Non operating income Working NotesNon Operating income NON OPERATING INCOME Years Dividend Income Interest Income Profit on sale of Fixed Assets Fee Income Provision Written Back Total non operating income
2008 14.45 1,184.7 49.78 11.36 60.62 1320.97 2007 17.34 752.6 13.93 10.14 175.53 969.5 4 2006 13.66 461.49 58.24 10.72 80.18 624.29 2005 13.38 262.76 11.09 31.52 239.5 558.25 2004 8.22 128.9 52.42 0 44.03 233.57 2008 13,341.19 5,037.67 19,995.43 4,706.25 4,706.25 3,583.66 2,628.21 1320.97 2007 26,000.87 10,306.65 25,638.54 11,144.28 11,144.28 10,017.33 9,365.35 1,363.03 969.54 2006 34,406.23 12,601.41 32,531.21 7,380.80 7,380.80 6,173.50 5,705.74 826.08 624.29 2005 47,127.86 17,313.15 41,698.55 10,966.23 10,966.23 9,754.75 9,422.62 1,280.42 558.25 2004 76,309.14 23,063.57 65,594.94 12,954.48 12,954.48 11,719.00 11,468.06 1,528.25 233.57

Trends in various costs over a period off 5 years as a % of net sales Cost in Percentage to Sales (Rs in Crs) Years Sales Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses

2004 100 32% 10% 22% 10% 6%

2005 100 33% 8% 13% 9% 4%

2006 100 44% 9% 15% 12% 5%

2007 100 39% 8% 15% 11% 4%

2008 100 35% 7% 20% 11% 4%

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Ratios Analysis
Ratios can be an invaluable tool for making an investment decision. Even so, many new investors would rather leave their decisions to fate than try to deal with the intimidation of financial ratios. The truth is that ratios aren't that intimidating, even if you don't have a degree in business or finance. Using ratios to make informed decisions about an investment makes a lot of sense, once you know how use them.

Liquidity Ratios
Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year) obligations. The ratios which indicate the liquidity of a company are Current ratio, Quick/Acid-Test ratio. These ratios are discussed below Liquidity Ratios Years 1. Current Ratio 2. Quick Ratio 1. Current Ratio The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. While this shows the company is not in good financial health, it does not necessarily mean that it will go bankrupt - as there are many ways to access financing - but it is definitely not a good sign. The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. Companies that have trouble getting paid on their receivables or have long inventory turnover can run into liquidity problems because they are unable to alleviate their obligations. Here, we can clearly depict that as per passage of time Company’s Current Ratio has improved significantly being from less than 1 in 2004(i.e. .75) to 1.6 in 2008 (i.e. 2.86). But still it is yet to reach the ideal ratio. The ideal current ratio is 2:1. 2. Quick Ratio/Acid test Ratio – A stringent test that indicates whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. Companies with ratios of less than 1 cannot pay their current liabilities and should be looked at with caution.
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2004 0.75 0.50

2005 0.99 .68

2006 1.18 .75

2007 1.36 .81

2008 1.60 .93

The term comes from the way gold miners would test whether their findings were real gold nuggets. Unlike other metals, gold does not corrode in acid; if the nugget didn't dissolve when submerged in acid, it was said to have passed the acid test. If a company's financial statements pass the figurative acid test, this indicates its financial integrity. The ideal current ratio is 1:1. It is more rigorous and penetrating test of the liquidity position of a firm. Here it shows that SAIL’s quick ratio over the years (in the year 2008) has increased to 0.93 compared to .50 in the year 2004. It almost equal to 1:1(the ideal ratio) which is good.

Solvency Ratios
Solvency ratios are used by investors to get a picture of how well a company can deal with its long-term financial obligations and develop future assets. As you might expect, a company weighed down with debt is probably a less favourable investment than one with a minimal amount of debt on its books. Solvency Ratios Sno. Years 1. Debt to Equity ratio 2. Long Term D/E ratio 3. Interest coverage ratio 1. Debt To Equity Ratio Debt to Equity ratio shows the relative proportions of debt and equity in financing the assets of a Company. The debt includes short-term and long-term borrowings. The equity includes the Networth (paid-up equity capital and reserves and surplus) and preference capital. If the debt to equity ratio is high, it means that the company is using the help of external resources or debt to finance its operations. This means that whatever the company earns, a fixed proportion of that earnings would go towards interest. The capacity of the company to generate earnings will be more without this outside financing and thereby increasing the shareholder’s wealth.
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2004 2.86 2.28 3.75

2005 0.94 0.83 15.36

2006 0.44 0.40 13.20

2007 0.28 0.24 29.37

2008 0.18 0.15 46.70

The company would go bankrupt leaving shareholders with nothing if the company fails to generate returns which are low than the amount invested. Debt to Equity ratio has drastically gone down in the year 2005(.94) as compared to 2004(2.86). After that it has shown a marginal decline every year. This shows that the company has reduced its external resources or debt to finance its operations. This means that whatever the company earns, less portion is bestowed towards debt in the year 2008 as compared to 2004. It means Company will hamper its tax advantage but at the same time Company will saved from paying a fixed obligation whatever the profit is, as Equity holders will only be paid from the residual income. 2. Long Term Debt to Equity ratio Long term Debt to Equity is also called Gearing Ratio. A high gearing ratio is unfavorable because it indicates possible difficulty in meeting long term debt obligations. SAIL has shown decreasing trend of Long Term Debt to Equity which is a good sign. In the year 2004 it was 2.28 where as in 2008 it was only .15. 3. Interest coverage ratio Interest coverage ratio indicates how efficiently a company can pay interest on outstanding debt. The ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the same period. The lower the ratio, the more the company is burdened by debt expense. Interest coverage ratio in the year 2004 was 3.75, but as years passed it started shooting up in the sky, such that in the year 2008 it is 46.7. This shows that the company is now generating enhanced revenues to satisfy its interest expenses.

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Turnover Ratio
Turnover Ratio reflects the efficiency of the Company. The higher the ratio, the more efficient is the management and vice versa. Turnover Ratios Years 1. Inventory Turnover ratio 2. Debtors Turnover ratio 3. Debtors Velocity 4. Creditors Velocity 5. Asset turnover ratio

2004 7.10 15.04 19.00 28.00 0.75

2005 8.80 18.52 18.00 28.00 0.99

2006 6.17 17.25 20.00 31.00 1.18

2007 5.99 18.82 20.00 32.00 1.36

2008 6.65 17.15 21.00 33.00 1.60

1. Inventory Turnover ratio Inventory Turnover Ratio refers to the number of times the inventory is sold and replaced during the accounting period. Inventory Turnover Ratio reflects the efficiency of inventory management. The higher the ratio, the more efficient is the management of inventories, and vice versa. A low Inventory turnover ratio is not desirable because it reveals the accumulation of obsolete stock. The company has shown a decreasing trend in inventory turnover ratio since 2005. This reveals the accumulation of obsolete stocks. Then in the year 2008 it has gone up to 6.65 as compared to 5.99 in 2007, which is good sign. 2. Debtors Turnover ratio Debtors Turnover Ratio is calculated by dividing the net credit sales by average debtors outstanding during the year. There is not much variation over these five years it is being lying in the range of 15 to 18. In the 2008 it has decreased by 1.67. which shows that now debtors are taking much longer time to pay their balances, which is not good for a Company. 3. Debtors Velocity Debtors velocity or ACP (Avg collection Period) is calculated by dividing the days in a year by the debtors' turnover. The average collection period represents the number of day's worth of credit sales that is blocked with the debtors (accounts receivable). Higher the debtors velocity the more the funds are blocked and chances of bad debt increase. Also there is a loss in interest in the blocked funds. Debtors velocity shows in how many days rapidly the debts are collected.
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Debtors velocity over the years has shown an increasing trend which is not a good sign. It implies that now more funds are being blocked up with debtors which otherwise have been utilised to generate income. 4. Creditors Velocity The Creditors Velocity that is the average payment period has increased from 28 in 2004 to 33 in 2008. It is not a good sign for the company as it helps a potential creditor to decide whether to maintain any relation or not, it will encourage them to carry their business with the company’s competitors. 5. Asset turnover ratio Asset turnover measures a firm's efficiency at using its assets in generating sales or revenue - the higher the number the better. The lower the ratio, the more the company is burdened by debt expense. Fixed Asset Turnover Ratio has increased to 1.6(2008) compared to .75 (2004) last 5 years. This shows that the assets have been used efficiently to generate sales.

Profitability Ratios
Profitability is a key piece of information that should be analyzed when you're considering investing in a company. This is because high revenues alone don't necessarily translate into dividends for investors (or increased stock prices, for that matter) unless a company is able to clear all of its expenses and costs. Profitability ratios are used to give us an idea of how likely it is that a company will turn a profit, as well as how that profit relates to other important information about the company.

Profitability Ratios Sno. Years 1. Gross profit margin 2. Net profit margin 3. Return On Equity 4. Return on Capital Employed 5. Return On Net Worth

2004 19.50 10.41 0.60 25.36 66.43

2005 34.80 21.29 1.65 68.77 88.85

2006 22.58 12.28 0.96 38.03 35.04

2007 27.78 15.71 1.41 51.28 41.47

2008 28.17 16.39 1.77 49.43 37.33

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1. Gross profit margin
The gross profit margin ratio tells us the profit a business makes on its cost of sales, or cost of goods sold. Gross profit ratio measures the efficiency of production as well as pricing. A high gross profit margin indicates that a business can make a reasonable profit on sales, as long as it keeps overhead costs in control. Here in this case we can clearly see that the GPM has decreased in 2008 (28.17) when compared with 2005(34.80). It shows that this year company is unable to make reasonable profit on sales. Here in this case we can clearly see that the GPM increased marginally (28.17) in 2008 when compared to (27.78) 2007. Which depicts its good prospects in the future. 2. Net profit margin Net Profit margin measures the overall efficiency of production, administration, selling, financing, pricing and tax management. The net profit margin ratio tells us the amount of net profit per Rupee 1 of turnover a business has earned. Net profit ratio provides an understanding of profit structure of a firm. The Company is showing a positive trend in its NPM. In 2005 it has shown a steep inclination followed by a sudden decline in 2006 after that it has increased marginally. So, company is making considerable profit on its sales.

3. Return On Equity Return on Equity is very essential as it tell the earning available to the persons at the last resort. Equity Share holders are paid only in the end (after preference shareholders) if the earnings are available. So if this ratio is high then the company will come in good prospects of investors. Here, the ratio is increasing marginally every year. There’s not much variation a slight increase each year is there. But still 1.77 in 2008 is very low return for the equity holders. 4. Return on Capital Employed The Return on Capital Employed ratio (ROCE) tells us how much profit the company earns from the investments the shareholders have made in the company.

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Return on capital employed has been volatile over the years. After a steep incline in the year 2005 then there was a steep decline in the year 2006 followed by a gradual incline decline in the consecutive years. In 2008 ROCE is 49.43 which is a very good return for a company. 5. Return On Net Worth It is the 'final measure' of profitability to evaluate overall return. This ratio measures return relative to investment in the company. Return on Net Worth indicates how well a company leverages the investment in it. In the years 2004 and 2005 it has shown a good return on NW after that it has declined. It shows that Company is not leveraging its investments that well as before it use to.

Valuation Ratio
Valuation ratios are used to analyze the attractiveness of an investment in a company. The idea is that by using these ratios investors can gain an understanding of how cheap or expensive a company's current stock price is compared to several different measures. In general, the less expensive a company is, the more attractive an investment in that company becomes. Valuation Ratios Sno. Years 1. Dividend Per Share 2. Earning Per Share 3. Price Earning Ratio 1. Dividend Per Share Dividend per share (DPS) is the amount of the dividend that shareholders will receive, over an year, for each share they own. Few investors’ primary concern is with the amount that a company gives as dividends -- capital appreciation being only a secondary consideration. For such investors, this ratio obviously plays a crucial role in their investment calculations. SAIL’s DPS has increased from 2004 (0) to 2008 (3.7). DPS shows how much the shareholders were actually paid by way of dividends. Here due to increase in profits the company is paying slightly higher dividends.
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2004 6.08 5.31

2005 3.30 16.06 3.92

2006 2.00 9.44 8.82

2007 3.10 14.54 7.85

2008 3.70 17.62 10.49

2. Earning Per Share EPS is a well-known and widely used investment ratio. The performance and prospects of the company are affected by EPS. If EPS increases, there is a possibility that the company may pay more dividend or issue bonus shares. In short the market price of the share of a company will be affected by all these factors. EPS has been in an increasing trend over the years, it has only shown a slight decrease by 6.62 in the year 2006. But still it is not a good EPS to be taken into consideration. 3. Price Earning Ratio P/E ratio is a reflection of the market's opinion of the earnings capacity and future business prospects of a company. Companies which enjoy the confidence of investors and have a higher market standing usually command high P/E ratios. It would seem that companies with low P/E ratios would offer the most attractive investment opportunities. On the face of it P/E ratios that are as high as 20 to 60 will not provide that attractive avenues. Mostly in India Companies have P/E ratios ranging between 5 and 20. In these years it can be seen that P/E ratio has been a fluctuating ratios which switches off and on every year. In 2008 it has increased to a great level (i.e. 10.49). It should be consider as a positive remark.

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SWOT Analysis of SAIL Strengths
Largest Steel producer in the country and ranked among the top in the world The single largest rail manufacturer in the world An integrated player with good product mix All its plants are a profit centers.

Weakness
Heavily dependent on import of raw materials It has high cost structure when compared to its peers like Tata Steel, Jindal Steel and Power.

Opportunities
Has an opportunity to become self-sufficient in procuring raw materials by acquiring local and global mines

Threat
SAIL might face threat from TISCO in terms of capacity match. Presently SAIL’s capacity is 12.63 MT and TISCO’s capacity is 4.9 MT. According to their projected capacity expansions, by 2012 TISCO will have capacity of 15 MT and SAIL 19.7 MT. The gap between these capacities will reduce if their projected plans get executed. SAIL should reduce their cost especially their input cost by owning mines for inputs, which would help, in effective cost management even during bad times.

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TATA ANALYSIS
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TATA STEEL LIMITED
Tata Steel is the world's 6th largest steel company. It is a Asia's 1st and as well as India's largest integrated steel company in private sector with operations in 24 countries and commercial presence in over 50 countries. Tata was established by an Indian parsi business man in 1907. It started its operations in 1912. From Tata Steel, Tata has started investing in various other businesses like; Oil mills, Airlines Publishing, Motors, Consultancy services etc in a short span of 30 years. In the year 1945 Tata entered into tea business by the name of Tata Tea, which was called as Tata Finlay. Tata also entered into exports as Tata Exports, which is the most successful and the largest export house in India. Tata played a vital role in the improvement of steel production as steel production in India has grown from 1.1 million tones in 1951 to 31.63 million tones in 2001-02. The company's history is a century old, the origins and ascent of Tata Steel, which has culminated into the century long history of an industrial empire, emerge from the illustrious efforts of India's original iron man and the remarkable people who thereafter, have kept the fire burning. Tata Steel was founded by Jamsetji Nusserwanji Tata in the year 1907 as Tata Iron and Steel Company (TISCO) and later its renamed to Tata Steel Limited. It is an ISO-14001 and also SA 8000 certified company, is this reflected in company's pro-active measures to ensure optimum utilization of natural resources and work conditions. The company received the Award for Best-Integrated Steel Plant in 1994-95. The company also received the Prime Minister's Trophy for the Best Integrated Steel Plant for the year 1994-95. This award was subsequently conferred again in 1998-99, 1999-2000, 2000-01 and 2001-02. The World Steel Dynamics recognised Tata Steel as India's only 'world-class steel makers' thrice in a row. Cold Rolling Mill Complex in 2000. The final phase of modernisation was to bring about productivity enhancement through the expansion of the Hot Strip Mill from one million tonnes per annum to a two million capacity. The company's 75 years of industrial harmony was celebrated on 2004 with His Excellency, Dr. A P J Abdul Kalam,Former President of India. It signed Memorandums of Understanding (MoUs) with the Sate Governments for its Green field Projects in Kalinganagar (Orissa) and in Bastar District (Chhattisgarh) on 2004. Tata Steel Limited signed four MoU's with the Government of Jharkhand not only for the Greenfield Project but also the enhancement of capacity of Jamshedpur Works. The current capacity of Works in Jamshedpur is 5 Million Tonne. Tata Steel's first step in the Global Market was when it acquired the steel business of NatSteel Limited, Singapore. It also signed a joint venture BlueScope Steel Limited, Australia in 2005, for setting up a metallic coating and painting unit. To boost the economy of South Africa and also add significantly to the Indian economy, Tata Steel commenced the work on Ferro Chrome Plant in 2006 by acquired Rawnet Ferrous Industries Pvt Ltd, in Orissa, a Ferro Alloys plant with a
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capacity of 50,000 tpa of high carbon chrome. The company has set up a Joint Venture Company with Larsen and Toubro Ltd for developing an all weather modern deep water port in the state of Orissa on the Eastern Coast of India Tata NYK Shipping Pte. Ltd, a joint venture shipping company between the company and Nippon Yusen Kabushiki Kaisha (NYK Line) has been set up to cater to dry and break bulk cargo and also the shipping activities. Tata Steel is one of the few steel companies in the world that is Economic Value Added (EVA) positive. It was ranked the 'World's Best Steel Maker', for the third time by World Steel Dynamics in its annual listing in February, 2006. Tata Steel has been conferred the Prime Minister of India's Trophy for the Best Integrated Steel Plant five times. On 2nd April '07, Tata Steel acquired Corus Europe's second largest steel producer for consideration of US$ 12 Billion, which made Tata Steel the sixth largest steel producer globally and the second-most geographically diversified steel producer in the world. It also entered into an agreement to acquire controlling equity stake in two rolling mills located in Haiphorg, Vietnam. It signed MoU & MoC for an investment in a 4.5 million tonnes per annum plant in Vietnam. The company and SODEMI (state owned company for mineral development) entered into Joint Venture agreement for the development of Mount Nimba Iron ore deposits in Ivory Coast (West Africa) on December 2007. As on January 2008, Tata Steel Limited and the members of the Al Bahja Group, a leading business house of Oman have entered into a Joint Venture Agreement for the development of the Uyun Limestone deposits at Salalah in the Sultanate of Oman and also in same month and in the same year the company came to agreement with Steel Authority of India Limited (SAIL) to establish a 50:50 joint venture company for coal mining in India. The fourth retail outlet, 'steeljunction', at Behala was opened on February 2008 by the company. As of Septeber 2008, the company have 42.3% satke in Australia based Riversdale Mining, resulted the bought of 7.29% in Septeber 2008 for $120.7 million through its Singapore subsidiary. The company plans to expand its of Jamshedpur plant's crude steel making capacity from 5 million tonnes to 6.8 million tonnes with cost of Rs.4550 crores and also the company plans to set up a 6 million tonne integrated steel project at Kalinganagar in the state of Orissa under two phases of 3 million each.

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Vision
We aspire to be the global steel industry benchmark for Value Creation and Corporate Citizenship. We make the difference through: a) Our People, by fostering team work, nurturing talent, enhancing leadership capability and acting with pace, pride and passion. b) Our Offer, by becoming the supplier of choice, delivering premium products and services and creating value for our customers. c) Our Innovative approach, by developing leading edge solutions in technology, processes and products. d) Our Conduct, by providing a safe working place, respecting the environment, caring for our communities and demonstrating high ethical standards. “We think we started on sound and straightforward business principles, considering the interests of the shareholders our own and the health and welfare of the employees, the sure foundation of our success.” - Jamsetji N Tata, Founder

Registered Office
Bombay House,24 Homi Mody Street Fort, Mumbai Maharashtra, 400001 Tel: 91-22-66658282 Fax: 91-22-66657724/66657725

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Top Management
S.No 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. NAME Ratan N Tata James Leng B Muthuraman Nusli N Wadia S M Palia Suresh Krishna Ishaat Hussain Jamshed J Irani Subodh Bhargava Jacobus Schraven Anthony Hayward Andrew Robb T Mukherjee Philippe Varin J C Bham DESIGNATION Chairman Deputy Chairman Managing Director Director Director Director Director Director Director Director Director Additional Director Additional Director Director Company Secretary

Bankers
1. State Bank of India

Equity shares for last Five Years
Share Capital and its Break Up Year Share Capital Equity Authorised Preference Capital Authorised Equity Issued Equity Subscribed Equity Called Up Equity Forfeited Equity Paid Up Preference Capital Paid Up Convertible Preference Share Paid
Mar-08 Mar-07 Mar-06 Mar-05 Mar-04

6203.3 1750 6250 731.37 730.78 730.58 0.2 730.78 5472.52 5472.52

580.67 1750 250 581.07 580.67 580.47 0.2 580.67 0 0

553.67 600 250 554.07 553.67 553.47 0.2 553.67 0 0

553.67 600 250 554.07 553.47 553.47 0.2 553.67 0 0

369.18 440 250 369.58 368.98 368.98 0.2 369.18 0 0

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Share holding pattern including promoter and general public
TATA steel No of Shares
247993096 247993096 305928799 176658558 482587357 730580453 3867 730584320

Ownership Pattern as on 30-06-2008 Indian (Promoter & Group) Total of Promoter Non Promoter (Institution) Non Promoter (Non-Institution) Total Non Promoter Total Promoter & Non Promoter Custodians(Against Depository Receipts) Grand Total

% Share
33.9445 33.9445 41.8745 24.1804 66.0549 99.9994 0.0005 100

Share Holder
26 26 1205 654042 655247 655273 1 655274

Reserves and surplus for the last five years
TATA Steel Reserves Total and its Break Up Year
Reserves Total Capital Reserves General Reserves Share Premium Debenture Redemption Reserve Capital Redemption Reserve Amalgamation Reserve Exchange Fluctuation Reserve Exchange Profit / Allowance Contingency Reserve Profit & Loss Account Balance Other Reserves

Mar-08 21097.43 1.49 7484.96 6391.92 646 0.83 1.12 39.71 1.25 100 6387.46 42.69

Mar-07 13368.42 1.49 5784.82 2201.46 646 0.83 1.12 -5.22 1.25 100 4593.98 42.69

Mar-06 9201.63 1.49 4591.46 835.26 646 0.83 1.12 10.96 1.25 100 2976.16 37.1

Mar-05 6506.25 1.49 3091.46 835.26 646 0.83 1.12 1.53 1.25 100 1790.21 37.1

Mar-04 4146.68 1.49 1688.94 1019.75 646 0.83 1.12 14 1.25 100 637.42 35.88

Cause of Increase and Decrease in Reserve and Surplus
Reserve total has gone up from 13368.42 to 21097.43, which is mainly accounted due to following reasons: 1. Share Premium has gone up from 2201.46 to 6391.92. It is clear that the debt equity ratio has also decreased so the premium for Equity holders has increased (Equity Share Capital has increased).

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2. Profit and Loss Account Balance has also gone up from 4593.98 to 6387.46. It is mainly accounted due to the fact that Sales has gone up. So, the overall Revenue has increased. 3. General Reserves has also gone up due to the fact that Profit and Loss Account Balance has gone up. It is always some percentage of P&L a/c which is given to G/R.

Product profile of the company
As Per 2008 Product Name Steel-Saleable Other Raw Mtls. Tubes-Welded-Steel Charge/Ferro Chrome Steel & Scrap-Semi finished Power & Water-Sales Other Products Services Ferro Manganese Metallurgial Machinery Bearings Agricultural Products By Products Ball Bearing Rings-Alloy Scrap/Othr Mtls/Raw Mat.Steel-SaleableBearing Rings-Cast & Alloy Exchange Fluctuation Wire Rods Billets Wires Cold Rolled Strips Cold Rolled Profiles Cold Rolled Coils Capacity Utilised 101.05 %
0 87.24 110.5 0 0 0 0 164.69 0 105.42 0 0 0 0 0 0 0 92.59 0 88.51 0 0 153.49

Productio 4858401 n
0 268698 55251 0 0 0 0 50230 12994 26355460 0 0 0 0 0 0 0 245370 0 211001 0 0 153488

Sales Quantity 4475886
0 233413 186384 254959 0 0 0 40631 12994 27612220 0 0 1377379 0 1516 417 0 0 0 0 0 0 0

Sales
16012.1 1661.38 1018.42 978.7 571.68 546.33 379.69 250.66 219.29 172.7 149.88 111.23 95.25 8.56 7 6.91 1.99 0 0 0 0 0 0 0

Market share of the company sales
The company has a market share of 14.7 per cent. Market conditions for TATA can be considered to be fine tuned, as TATA ranks second among the 26 Large Steel Producing Companies. It has a Second largest market share with a Sales of Rs. 19,654.78 crores in Indian Steel Industry.
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General View
Years Market Capitalization Net Worth Enterprise Value Operating Profit EBDIT EBIT EBT Dividends Non operating income 2008
14,150.38 4,515.86 17,281.85 3,518.19 3,518.19 2,893.08 2,665.96 368.98 259.24

2007
22,188.61 7,059.92 24,681.59 6,144.86 6,144.86 5,526.08 5,297.28 719.51 485.62

2006
29,688.13 9,755.30 31,915.89 6,189.57 6,189.57 5,414.47 5,239.96 719.51 314.53

2005
26,097.93 13,949.09 28,061.91 7,332.19 7,332.19 6,512.90 6,261.65 943.91 299.38

2004
50,640.15 21,828.21 68,196.80 8,830.00 8,830.00 7,995.39 7,066.36 1,168.93 292.83

Working NotesNon Operating income NON OPERATING INCOME Years Dividend Income Interest Income Profit on sale of Fixed Assets Profit on sale of investments Fee Income Provision Written Back Total non operating income
2008 170.67 50.33 28.26 9.98 0 0 259.24 2007 324.16 77.35 11.19 15.63 0 57.29 485.62 2006 166.08 50 41 9.95 0 47.5 314.53 2005 111.4 42 32.42 32.77 0 80.79 299.38 2004 101.01 104.95 32.17 14.93 0 39.77 292.83

Trends in various costs over a period off 5 years as a % of net sales
Cost in Percentage to Sales (Rs in Crs) Years Sales Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses 2004
100% 21% 7% 15% 14% 10%

2005
100% 21% 5% 10% 13% 9%

2006
100% 20% 6% 9% 14% 9%

2007
100% 20% 6% 9% 14% 9%

2008
100% 20% 5% 9% 13% 7%

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Ratios Analysis
Ratios can be an invaluable tool for making an investment decision. Even so, many new investors would rather leave their decisions to fate than try to deal with the intimidation of financial ratios. The truth is that ratios aren't that intimidating, even if you don't have a degree in business or finance. Using ratios to make informed decisions about an investment makes a lot of sense, once you know how use them.

Liquidity Ratios
Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year) obligations. The ratios which indicate the liquidity of a company are Current ratio, Quick/Acid-Test ratio. These ratios are discussed below Liquidity Ratios Years 1. Current Ratio 2. Quick Ratio

2004 0.67 0.41

2005 0.65 0.31

2006 0.71 0.29

2007 1.26 .56

2008 2.86 .71

1. Current Ratio The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. While this shows the company is not in good financial health, it does not necessarily mean that it will go bankrupt - as there are many ways to access financing - but it is definitely not a good sign. The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. Companies that have trouble getting paid on their receivables or have long inventory turnover can run into liquidity problems because they are unable to alleviate their obligations. Here, we can clearly depict that as per passage of time Company’s Current Ratio has improved significantly being from less than 1 in 2004(i.e. .61) to more than even 2 in 2008 (i.e. 2.86). But keeping more than required current assets will also mean unnecessary blockage of funds in these assets which otherwise would have been utilised to generate income. So, this situation should also have to be avoided. The ideal current ratio is 2:1.
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2. Quick Ratio/Acid test Ratio A stringent test that indicates whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. Companies with ratios of less than 1 cannot pay their current liabilities and should be looked at with caution. The term comes from the way gold miners would test whether their findings were real gold nuggets. Unlike other metals, gold does not corrode in acid; if the nugget didn't dissolve when submerged in acid, it was said to have passed the acid test. If a company's financial statements pass the figurative acid test, this indicates its financial integrity. The ideal current ratio is 1:1. It is more rigorous and penetrating test of the liquidity position of a firm. Here it shows that TATA Steel has large part of current assets being tied up in slow moving and un-saleable inventories and slow paying debts. TATA’s quick ratio over the years (2008) has increased to 0.71 compared to previous years. But still it is below 1. It also depicts that company is utilising its funds very efficiently but sudden liability may arise in front of them making them loose their credibility in front of creditors.

Solvency Ratios
Solvency ratios are used by investors to get a picture of how well a company can deal with its long-term financial obligations and develop future assets. As you might expect, a company weighed down with debt is probably a less favourable investment than one with a minimal amount of debt on its books.

Solvency Ratios Sno. Years 1. Debt to Equity ratio 2. Long Term D/E ratio 3. Interest coverage ratio

2004 0.99 0.95 12.74

2005 0.53 0.51 24.15

2006 0.31 0.30 31.03

2007 0.51 0.50 25.92

2008 0.67 0.66 8.61

1. Debt To Equity Ratio Debt to Equity ratio shows the relative proportions of debt and equity in financing the assets of a Company. The debt includes short-term and long-term borrowings. The equity includes the Networth (paid-up equity capital and reserves and surplus) and preference capital.
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Debt to Equity ratio has gone down as compared to the year 2004. This shows that the company has reduced its external resources or debt to finance its operations. This means that whatever the company earns, less portion is bestowed towards debt in the year 2008 as compared to 2004. It means Company will hamper its tax advantage but at the same time Company will be saved from paying a fixed obligation whatever the profit is, as Equity holders will only be paid from the residual income. But when compared from 2007 in 2008 debt equity ratio has marginally increased. This shows that the company is using the help of external resources or debt to finance its operations. This means that whatever the company earns, a fixed proportion of that earnings would go towards interest which will affect the earning capacity of the business. 2. Long Term Debt to Equity ratio Long term Debt to Equity is also called Gearing Ratio. A high gearing ratio is unfavorable because it indicates possible difficulty in meeting long term debt obligations. TATA has shown decreasing trend of Long Term Debt to Equity from 2004 to 2007 which is a good sign but in 2008 it has marginally increased. 3. Interest coverage ratio Interest coverage ratio indicates how efficiently a company can pay interest on outstanding debt. The ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the same period. The lower the ratio, the more the company is burdened by debt expense. Interest coverage ratio in the year 2004 was good at 12.74, but as years passed started showing an increasing trend, but in the year 2008 it declined drastically from 25.92(2007) to 8.61 (2008) which is not a good sign. This shows that the company is not generating sufficient revenues to satisfy its interest expenses.

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Turnover Ratio
Turnover Ratio reflects the efficiency of the Company. The higher the ratio, the more efficient is the management and vice versa. Turnover Ratios Years 1. Inventory Turnover ratio 2. Debtors Turnover ratio 3. Debtors Velocity 4. Creditors Velocity 5. Asset turnover ratio

2004 9.93 14.81 12.00 80.00 0.97

2005 10.17 25.74 10.00 82.00 1.24

2006 8.47 30.57 9.00 89.00 1.20

2007 8.77 33.75 9.00 93.00 1.26

2008 8.99 37.77 10.00 103.00 1.37

1. Inventory Turnover ratio Inventory Turnover Ratio refers to the number of times the inventory is sold and replaced during the accounting period. Inventory Turnover Ratio reflects the efficiency of inventory management. The higher the ratio, the more efficient is the management of inventories, and vice versa. A low Inventory turnover ratio is not desirable because it reveals the accumulation of obsolete stock. The company has been showing an increasing trend in inventory turnover ratio from 2006. This shows that the company is managing its inventories efficiently. 2. Debtors Turnover ratio Debtors Turnover Ratio is calculated by dividing the net credit sales by average debtors outstanding during the year. The company has drastically increased its debtors turnover ratio. High DTR is good sign for a company as funds are not blocked for a long time. The company follows good credit collection policy. The company enjoys good liquidity in debts. 3. Debtors Velocity Debtors velocity or ACP (Avg collection Period) is calculated by dividing the days in a year by the debtors' turnover. The average collection period represents the number of day's worth of credit sales that is blocked with the debtors (accounts receivable). Higher the debtors velocity the more the funds are blocked and chances of bad debt increase. Also there is a loss in interest in the blocked funds. Debtors velocity shows in how many days rapidly the debts are collected.

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Debtors velocity for the year 2008 has increased when compared to 2007 but initially its shown a decreasing trend. So, it is not a good sign when compared to 2007 but over the years it indicates a positive trend. 4. Creditors Velocity The Creditors Velocity that is the average payment period has increased from 80 in 2004 to 103 in 2008. It is not a good sign for the company as it helps a potential creditor to decide whether to maintain any relation or not, it will encourage them to carry their business with the company’s competitors. 5. Asset turnover ratio Asset turnover measures a firm's efficiency at using its assets in generating sales or revenue - the higher the number the better. The lower the ratio, the more the company is burdened by debt expense. Fixed Asset Turnover Ratio has increased to 1.37(2008) compared to .97 (2004) last 5 years. This shows that the assets have been used efficiently to generate sales.

Profitability Ratios
Profitability is a key piece of information that should be analyzed when you're considering investing in a company. This is because high revenues alone don't necessarily translate into dividends for investors (or increased stock prices, for that matter) unless a company is able to clear all of its expenses and costs. Profitability ratios are used to give us an idea of how likely it is that a company will turn a profit, as well as how that profit relates to other important information about the company. Profitability Ratios Sno. Years 1. Gross profit margin 2. Net profit margin 3. Return On Equity 4. Return on Capital Employed 5. Return On Net Worth

2004 29.51 14.65 5.06 38.18 45.36

2005 38.72 21.89 6.34 63.79 60.02

2006 36.11 20.46 6.34 50.13 41.70

2007 37.10 21.36 7.42 36.79 35.62

2008 39.79 21.12 6.15 23.32 26.08

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1. Gross profit margin
The gross profit margin ratio tells us the profit a business makes on its cost of sales, or cost of goods sold. Gross profit ratio measures the efficiency of production as well as pricing. A high gross profit margin indicates that a business can make a reasonable profit on sales, as long as it keeps overhead costs in control. Here in this case we can clearly see that the GPM increased to a considerable level (38.72) in 2005 when compared to (29.51) 2004, after that it has shown only marginal increment every year. But still it is a good sign. 2. Net

profit margin

Net Profit margin measures the overall efficiency of production, administration, selling, financing, pricing and tax management. The net profit margin ratio tells us the amount of net profit per Rupee 1 of turnover a business has earned. Net profit ratio provides an understanding of profit structure of a firm. The Company is showing the similar trend as of Gross Profit Margin for Net Profit Margin. In 2005 it is 21.89 as compared to 14.65 in 2004. Then it has a slight decline in 2006 (20.46) then the increasing trend. It can be contributed to the increase in sales as per the passage of time.

3. Return On Equity Return on Equity is very essential as it tell the earning available to the persons at the last resort. Equity Share holders are paid only in the end (after preference shareholders) if the earnings are available. So if this ratio is high then the company will come in good prospects of investors. Here, the ratio is increasing till 2007 and has shown a slight fall in 2008. But still 6.15 is good return for the equity holders. 4. Return on Capital Employed The Return on Capital Employed ratio (ROCE) tells us how much profit the company earns from the investments the shareholders have made in the company. Return on capital employed has been volatile over the years. After a steep incline in the year 2005 then there was a steep decline in the year 2006 followed by a gradual decline in the
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consecutive years. This shows that the company is not efficiently utilising the investments made by the shareholders to generate returns. 5. Return on Net Worth It is the 'final measure' of profitability to evaluate overall return. This ratio measures return relative to investment in the company. Return on Net Worth indicates how well a company leverages the investment in it. After a considerable increment of 14.66 in the year 2005 (60.02) it has shown a declining trend to such a level that in 2008 it is only 26.08.

Valuation Ratio
Valuation ratios are used to analyze the attractiveness of an investment in a company. The idea is that by using these ratios investors can gain an understanding of how cheap or expensive a company's current stock price is compared to several different measures. In general, the less expensive a company is, the more attractive an investment in that company becomes.

Valuation Ratio Sno. Years 1. Dividend Per Share 2. Earning Per Share 3. Price Earning Ratio 1. Dividend Per Share

2004 10 46.02 8.33

2005 13 60.91 6.58

2006 13 61.51 8.72

2007 15.5 69.95 6.43

2008 16 61.06 11.35

Dividend per share (DPS) is the amount of the dividend that shareholders will receive, over an year, for each share they own. Few investors’ primary concern is with the amount that a company gives as dividends -- capital appreciation being only a secondary consideration. For such investors, this ratio obviously plays a crucial role in their investment calculations. TATA’s DPS has increased from 2004-10 to 2008-16. DPS shows how much the shareholders were actually paid by way of dividends. Here due to increase in profits the company is paying higher dividends.

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2. Earning Per Share EPS is a well-known and widely used investment ratio. The performance and prospects of the company are affected by EPS. If EPS increases, there is a possibility that the company may pay more dividend or issue bonus shares. In short the market price of the share of a company will be affected by all these factors. EPS has been in an increasing trend over the years, it has only shown a slight decrease by 8.89 in the year 2008. But still it can be considered to be a good return for the share holders.

3. Price Earning Ratio P/E ratio is a reflection of the market's opinion of the earnings capacity and future business prospects of a company. Companies which enjoy the confidence of investors and have a higher market standing usually command high P/E ratios. In these years it can be seen that P/E ratio has been the most fluctuating ratios which switches off and on every year. In 2008 it has increased to a great level (i.e. 11.35). It should be consider as a positive remark.

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JSW ANALYSIS
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JINDAL SOUTH WEST STEEL LIMITED
India's second largest private sector steel maker JSW Steel Limited (JSWSL) was originally incorporated as Jindal Vijayanagar Steel Limited on March 15, 1994. Product portfolio of the company includes Hot Rolled Product, Cold Rolled Product, Galvanised Product, Pre-painted Galvanised Product and Jindal Vishwas. JSWSL consists of the most modern, eco-friendly steel plants with the latest technologies for both upstream & downstream processes. The Company's four plants are situated in Vijayanagar, Vasind, Tarapur and Salem. JSW Steel Ltd. has received all the three certificates of ISO: 9001 for Quality Management System, ISO: 14001 for Environment Management System and OHSAS: 18001 for Occupational Health & Safety Management System. During the incorporated year itself, the MOU was made with KSIIDC to be provided with grid support, approvals for construction of railway siding etc and also the company entered into a technical arrangement with Voest Alpine Industrieanlagenbau (VAI), for technical details with respect to productivity, iron ore technical details etc. Two joint venture companies were sets up namely Jindal Tractebel Power Company Ltd and Jindal Praxair Oxygen Co. (P) Ltd for supply of power of 2 x 130 MW of power and supply of Oxygen respectively. A year after, in 1995, Praxair had entered into a Joint venture with the company to build and operate world's largest cryogenic air separation plants for supply of oxygen, nitrogen and argon to Jindal's integrated steel facility in Bellary in Karnataka. The BOF & CCP Units were to be commissioned in the year 1997 to synchronize with the commissioning of the first unit of Corex. During the same year the Company has entered into a Joint venture with M/s. Mysore Minerals Limited (A Government of Karnataka Undertaking) the Leaseholder of Thimmappanagudi deposits, to form Jindal Mysore Minerals Mining Company Private Ltd. JVSL had commissioned the first phase of the roughing mill of its hot strip mill in March of the year 1997. The company has entered into an agreement with the Steel Authority of India (SAIL) in the year 1999 for procuring slab. JSWSL acquired 60 per cent stake in a city-based joint venture company, Chemicon and also the company made an agreement with Saint-Gobain Glass India to install an air separation plant for the supply of nitrogen and hydrogen to Saint-Gobain's float glass unit at Chennai. During the year 2000, the company implemented a total integrated resource planning solution for its business process, which was the first of its kind in India. The Company has signed a Memorandum of Understanding (MoU) with miners in and around the company's captive mines located in the Bellary Hospet region in Karnataka. The MoU has been signed for supplying iron ore fines for the company's pelletisation plant. JSWSL has made step to compel in the highly lucrative liquefied petroleum gas sheets segment after extending its focus in hot-rolled coils (HRC) from south to western India. JSW group acquired the Company and took over the Management from November 2004. Salem Works is the only integrated steel plant
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in Tamil Nadu and is located at Pottaneri/M. Kalipatti villages and at about 35 kms from Salem. In 2005, JSWSL approved the merger of Euro Ikon Iron & Steel Pvt Ltd, Euro Coke & Energy Pvt Ltd, and JSW Power Ltd. The Company's name was changed to JSW Steel Limited on June 16, 2005. CII-EXIM Bank Award was handed over to the company, 'Commendation Certificate for Significant Achievement' towards Business Excellence during the year 2005 and in the same year the Prime Minister National Award also bagged by the company for Excellence in Urban Planning & Design for Township. National Sustainability Award was conferred to the company in the year 2006, Second Prize amongst the Integrated Steel Plants Category by Indian Institute of Metals. During January 2007, JSW Steel has executed a Development Agreement with The Government of West Bengal, West Bengal Industrial Development Corporation Limited (WBIDC) West Bengal Mineral Development and Trading Corporation Limited (WBMDTC) for setting up a 10 MTPA steel plant in suitable phases. JSW steel has inaugurated two exclusive JSW Shoppe in Hubli, Karnataka on December 4, 2007, At JSW Shoppe, end consumer will also know about different application of different steel products being manufactured by M/s JSW Steel through actual components and pictures from Automobile, White Goods Sectors, and Construction. During the period of 2007-08, JSWSL received Gold Award in Metal and Mining Sector for Outstanding Achievement in Safety Management by Greentech Foundation. CII-ITC Sustainability Award: Commendation Certificate for Significant Achievement in Economic, Environment and Social Performance. (On 12th Dec 2007 at New Delhi) and IMC Ramkrishna Bajaj National Quality Award: Special Award for Performance Excellence in the Manufacturing Category. (On 21st Mar 2008, at Mumbai). As on June 2008, JSW Steel stated that, it will set up a green field plant in Georgia (Europe) in partnership with a UK-based company to produce rebars, the project will see an investment of $42 million by way of equity and debt, where 49 per cent of equity will be held by JSW while the balance will be held by Geo Steel LLC of the UK. Both companies will invest $7 million towards direct equity while the remaining amount will be raised by way of debt. JSWSL inaugurated JSW Shoppe, an exclusive steel retail outlet in Ahmedabad IN June 2008 and planed to setup 200 exclusive JSW Shoppes across the length and breadth of the country by 2010. Also it will invest around Rs 550 crore in its Chilean mining concessions to ensure 50 per cent iron ore security by June 2009, up from 30 per cent now. The Company plans to emerge as 32 million tonnes per year capacity steel major by 2020.

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VISION “It is said that in the journey of life, more important than where you are, is where you are heading to..” - Sajjan Jindal, Vice Chairman & MD, JSW Steel Ltd.,

OUR VISION

• • •

Preparation and grooming of the next generation of young thinkers. Continuous improvement of cost stewardship in the value chain. Ability to nurture lasting customer relationships, by anticipating needs and delivering beyond expectations. Catalyst for growth amongst the nation’s steel industries. Marketing of value added branded products for both domestic and global markets.

• •

Registered Office

Jindal Mansion,5A Dr G Deshmukh Marg, Mumbai Maharashtra, 400026 Tel: 91-022-23513000 Fax: 91-022-23526400

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Top Management
S.No 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. NAME Savitri Devi Jindal Sajjan Jindal Y Siva Sagar Rao Seshagiri Rao M V S Vinod Nowal Biswadip Gupta Nagesh Dinkar Pinge Zarin Daruwala V Madhu S Jambunathan S K Gupta Anthony Paul Pedder Uday M Chitale Sudipto Sarkar Lancy Varghese K Vijayaraghavan Ajay Shah G R Sundaravadivel DESIGNATION Chairperson Vice Chairman & M.D. Joint Managing Director & CEO Director (Finance) Director (Commercial) Director Director Nominee (ICICI) Nominee (KSIIDC) Nominee (UTI) Director Director Director Director Company Secretary Additional Director Additional Director Nominee

Bankers
SNo. 1 2 3 4 5 6 7 State Bank of India Punjab National Bank Vijaya Bank Allahabad Bank State Bank of Mysore State Bank of Indore ICICI Bank Ltd Bankers 8 State Bank of Patiala 9 Bank of Baroda 10 Indian Bank 11 Indian Overseas Bank 12 Syndicate Bank 13 South Indian Bank Ltd 14 Union Bank of India

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Equity shares for last Five Years
Share Capital and its Break Up
Year Mar-08 537.01 2000 1000 248.08 248.08 187.05 61.03 248.08 288.93 288.93 Mar-07 504.04 2000 1000 225.01 225.01 163.98 61.03 225.01 279.03 279.03 Mar-06 497.06 2000 1000 218.03 218.03 156.98 61.05 218.03 279.03 279.03 Mar-05 Mar-04 469.13 1631.08 2000 2000 1000 1000 190.1 1352.05 190.1 1352.05 129.04 1291.02 61.06 61.03 190.1 1352.05 279.03 279.03 279.03 0

Share Capital Equity Authorised Preference Capital Authorised Equity Issued Equity Subscribed Equity Called Up Equity Forfeited Equity Paid Up Preference Capital Paid Up Non-convertible Preference Share Paid UP

Share holding pattern including promoter and general public
Share Holding Pattern Ownership Pattern as on 30-06-2008 No of Shares 5704612 Foreign (Promoter & Group) 82188593 Indian (Promoter & Group) 87893205 Total of Promoter 64806159 Non Promoter (Institution) 34349271 Non Promoter (Non-Institution) 99155430 Total Non Promoter 187048635 Total Promoter & Non Promoter 187048635 Grand Total % Share
3.0498 43.9397 46.9895 34.6467 18.3638 53.0105 100 100

Share Holder
10 105 115 291 574461 574752 574867 574867

Reserves and surplus for the last five years
Reserves Total and its Break Up Year Reserves Total General Reserves Share Premium Debenture Redemption Reserve Profit & Loss Account Balance Other Reserves
Mar-08 7140.24 3105.95 500.85 24.49 3505.86 3.09 Mar-07 5068.25 2411.48 346.5 42.71 2267.56 0 Mar-06 3859.16 2282.22 163.09 82.19 1331.66 0 Mar-05 2680.59 1847.89 13.94 99.19 719.57 0 Mar-04 -131.9 0 0 0 -131.9 0

Cause of Increase and Decrease in Reserve and Surplus
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Reserve total has gone up from 5068.25 to 7140.24, which is mainly accounted due to following reasons: 1. Share Premium has gone up from 346.5 to 500.85. It is clear that the debt equity ratio has also decreased so the premium for Equity holders has increased (Equity Share Capital has increased). 2. Debenture Redemption Reserve has gone down due to the fact that they have decreased their debt proportion in the fund mix. So, now they are required to keep less reserve for the debenture redemption. 3. Profit and Loss Account Balance has also gone up from 2267.56 to 3505.86. It is mainly accounted due to the fact that Sales has gone up. So, the overall Revenue has increased. 4. General Reserves has also gone up due to the fact that Profit and Loss Account Balance has gone up. It is always some percentage of P&L a/c which is given to G/R.

Product profile of the company
As Per 2008
Product Name Capacity Utilised -% 108.69 84.93 73.14 0 70.74 83.45 90.02 47.22 45.55 0 0 Production 2717134 764401 329128 0 226355 3171228 90016 861818 455522 0 0 Sales Quantity 1747603 663875 291137 0 214883 187341 84650 112122 103876 0 0 Sales 5655.7 2816.3 945.41 806.27 760.36 510.6 437.87 412.13 284.27 0 0

Hot Rolled Steel Galvanised Coils/Sheets Rolled Products Others Hot Rolled Steel Plates M S Slabs Colour Coating Coils / Cold Rolled Coils/Sheets Steel Billets & Blooms Adjustment Export incentives

Market share of the company sales
The company has a market share of 8.5 per cent. Market conditions for JSW can be considered to be on its track to grow further in near future, as JSW has been ranked third among the 26 Large Steel Producing Companies. It has a Third largest market share with a Sales of Rs. 19,654.78 crores in Indian Steel Industry.
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Competitive Strengths
Location: Our Upstream facility is located in the Iron Ore rich belt of Bellary- Hospet region of Karnataka. The strategic location of the manufacturing units with respect to established ports and well connected rail and road networks ensures reliable and cost efficient receipt of raw materials and dispatch of finished steel. Technology: In order to maintain leadership in quality and cost of products we have adopted technologies such as Vibro-compacting non-recovery Coke Ovens, the novel Corex Process as well as the conventional Blast Furnace route of Iron Making Integrated operations: We are a vertically integrated company with operations spanning across iron ore mining to manufacture of value added galvanized and colour coated products. Marketing: Having one of the largest galvanising capacities in the country, we are one of the largest exporters of galvanized products to over 50 countries in five continents. We are one of the largest integrated steel producing companies in India with a customer pool comprising leading domestic as well as international companies. Professional Management: As part of our corporate governance practices, we have a qualified and experienced management in addition to a diversified independent board. Business/Financial Strategy Capacity enhancement: We intend to leverage our proximity to iron ore reserves and the existing infrastructure created by us to expand capacities at low specific investment cost per ton. Increase vertical integration: Our impetus has been to increase the vertical integration through strategic tie-up, longterm linkages and acquisitions aimed at ensuring availability of critical raw materials at low cost. Improve product profile: We intend to improve the value added products in our product mix to withstand the vagaries of price volatilities besides being able to offer suite of products to meet the growing requirements of the customers. Improve financial profile: Being part of a capital-intensive industry with high volatility in the product prices, we need to maintain a healthy financial profile and put in place a robust capital structure. Investing in technology to improve productivity and reduce wastage: We have invested in latest technologies for efficient operations and are continuing to improve to ensure that best operating practices are followed.
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Qualitative Factors
Company is one of the leading private sector integrated steel manufacturer in India and the major flat steel producer in Southern India with focus on entire value chain from iron ore to galvanized products. Company has one of the largest galvanizing capacities in the country and its galvanised products are exported to more than 50 countries across five continents Company is vertically integrated with operations spanning from pellet to manufacturing of value added galvanized and colour coated products. Company is having captive power plant and coke oven plant. Company has come out of CDR framework by prepaying/refinancing of out standing debt Company has improved its financial position by prepaying debt and replacing it with low cost debt. For details please refer section on “Financial Statements” and “Management Discussion and Analysis” The low per capita consumption of steel in India coupled with increasing investment in infrastructure, housing, construction and urbanization provide significant growth opportunities for the domestic steel industry. Management team consists of experienced professionals with diverse skills in manufacturing, sales, marketing, finance and supply chain management.

General View
Years Market Net Worth Enterprise Value Operating Profit EBDIT EBIT EBT Dividends Non operating
2008 1,058.70 1,220.15 5,767.57 1,412.32 1,412.32 1,099.44 690.16 60.04 2007 4,652.54 2,870.69 8,366.46 2,306.85 2,306.85 1,947.31 1,472.61 103.23 10.20 2006 4,751.48 4,077.19 8,748.66 2,075.61 2,075.61 1,669.79 1,301.14 125.58 374.50 2005 8,091.10 5,293.26 11,926.33 2,819.87 2,819.87 2,321.64 1,914.83 204.98 15.58 2004 15,321.27 7,388.32 22,528.58 3,665.79 3,665.79 2,978.61 2,483.77 261.87 16.66

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Working NotesNon Operating income NON OPERATING INCOME Years Dividend Income Interest Income Profit on sale of Fixed Assets Profit on sale of investments Provision Written Back Total non operating income
2008 5.64 54.4 0 0 0 60.04 2007 0.34 7.27 2.59 0 0 10.20 2006 0.03 4.69 0.58 369.2 0 374.50 2005 0.03 4.83 1.15 0 9.57 15.58 2004 0.02 2.14 0 0.05 14.45 16.66

Trends in various costs over a period off 5 years as a % of net sales

Cost in Percentage to Sales (Rs in Crs) Years Sales Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses

2004 100% 43% 14% 1% 7% 2%

2005 100% 45% 9% 2% 8% 5%

2006 100% 50% 7% 2% 12% 1%

2007 100% 46% 5% 2% 12% 1%

2008 100% 52% 5% 2% 12% 1%

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Ratios Analysis
Ratios can be an invaluable tool for making an investment decision. Even so, many new investors would rather leave their decisions to fate than try to deal with the intimidation of financial ratios. The truth is that ratios aren't that intimidating, even if you don't have a degree in business or finance. Using ratios to make informed decisions about an investment makes a lot of sense, once you know how use them.

Liquidity Ratios
Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year) obligations. The ratios which indicate the liquidity of a company are Current ratio, Quick/Acid-Test ratio. These ratios are discussed below Liquidity Ratios Years 1. Current Ratio 2. Quick Ratio

2004 1.29 0.55

2005 1.06 0.28

2006 0.87 0.18

2007 0.78 0.26

2008 0.62 0.18

1. Current Ratio The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. Companies that have trouble getting paid on their receivables or have long inventory turnover can run into liquidity problems because they are unable to alleviate their obligations. Here, we can clearly depict that as per the passage of time, Company’s Current Ratio has reduced siginficantly being from 1.29 in 2004 to .62 in 2008. This does not depict a good picture. The company would be unable to pay off its obligations if they came due at that point. While this shows the company is not in good financial health, it does not necessarily mean that it will go bankrupt - as there are many ways to access financing - but it is definitely not a good sign. The ideal current ratio is 2:1. 2. Quick Ratio/Acid test Ratio A stringent test that indicates whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. Companies with ratios of less than 1 cannot pay their current liabilities and should be looked at with caution.

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The term comes from the way gold miners would test whether their findings were real gold nuggets. Unlike other metals, gold does not corrode in acid; if the nugget didn't dissolve when submerged in acid, it was said to have passed the acid test. If a company's financial statements pass the figurative acid test, this indicates its financial integrity. The ideal current ratio is 1:1. It is more rigorous and penetrating test of the liquidity position of a firm. Here it shows that JSW Steel has large part of current assets than the rest two firms tied up in slow moving and unsaleable inventories and slow paying debts. JSW’s quick ratio over the years (2008) has increased to 0.18 compared to previous years. But still it is below 1. It also depicts that company is utilising its funds very efficiently but sudden liability may arise in front of them making them loose their credibility in front of creditors.

Solvency Ratios
Solvency ratios are used by investors to get a picture of how well a company can deal with its long-term financial obligations and develop future assets. As you might expect, a company weighed down with debt is probably a less favourable investment than one with a minimal amount of debt on its books. Solvency Ratios Sno. Years 1. Debt to Equity ratio 2. Long Term D/E ratio 3. Interest coverage ratio

2004 4.90 4.84 1.73

2005 1.85 1.81 4.10

2006 1.06 1.01 3.53

2007 0.83 0.80 5.71

2008 0.88 0.85 6.02

1. Debt To Equity Ratio
Debt to Equity ratio shows the relative proportions of debt and equity in financing the assets of a Company. The debt includes short-term and long-term borrowings. The equity includes the Networth (paid-up equity capital and reserves and surplus) and preference capital. Debt to Equity ratio has drastically gone down in the year 2005(1.85) as compared to 2004(4.9). After that it has shown a marginal decline every year till 2007 and then a slight increase in the year 2008. This shows that the company is using the help of external resources or debt to finance its operations. This means that whatever the company earns, a fixed proportion of that earnings would go towards interest which will affect the earning capacity of the business.

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Overall it gives a view that the company has reduced its external resources or debt to finance its operations. This means that whatever the company earns, less portion is bestowed towards debt in the year 2008 as compared to 2004. It means Company will hamper its tax advantage but at the same time Company will be saved from paying a fixed obligation whatever the profit is, as Equity holders will only be paid from the residual income. 2. Long Term Debt to Equity ratio Long term Debt to Equity is also called Gearing Ratio. A high gearing ratio is unfavorable because it indicates possible difficulty in meeting long term debt obligations. JSW has shown decreasing trend of Long Term Debt to Equity from 2004 to 2007 which is a good sign but in 2008 it has marginally increased. 3. Interest coverage ratio Interest coverage ratio indicates how efficiently a company can pay interest on outstanding debt. The ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the same period. The lower the ratio, the more the company is burdened by debt expense. Interest coverage ratio in the year 2004 was 1.73, but as years passed it started showing an increasing trend, such that in the year 2008 it is 6.02. This shows that the company is now generating enhanced revenues to satisfy its interest expenses.

Turnover Ratio
Turnover Ratio reflects the efficiency of the Company. The higher the ratio, the more efficient is the management and vice versa. Turnover Ratios Years 1. Inventory Turnover ratio 2. Debtors Turnover ratio 3. Debtors Velocity 4. Creditors Velocity 5. Asset turnover ratio

2004 12.83 10.36 9.00 36.00 0.57

2005 13.02 19.94 11.00 34.00 0.98

2006 8.16 26.79 9.00 35.00 0.86

2007 9.61 38.23 8.00 40.00 0.98

2008 9.86 43.36 8.00 35.00 1.03

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1. Inventory Turnover ratio Inventory Turnover Ratio refers to the number of times the inventory is sold and replaced during the accounting period. Inventory Turnover Ratio reflects the efficiency of inventory management. The higher the ratio, the more efficient is the management of inventories, and vice versa. The company has shown a decreasing trend in inventory turnover ratio in the year 2006. This reveals the accumulation of obsolete stock in this year. Then in the year 2008 it has marginally gone up by .25 as compared to the year 2007, which is good sign. 2. Debtors Turnover ratio Debtors Turnover Ratio is calculated by dividing the net credit sales by average debtors outstanding during the year. The company has drastically increased its debtors turnover ratio from 10.36 in 2004 to 43.36 in 2008. High DTR is good sign for a company as funds are not blocked for a long time. The company follows good credit collection policy. The company enjoys good liquidity in debts. 3. Debtors Velocity Debtors velocity or ACP (Avg. collection Period) is calculated by dividing the days in a year by the debtors' turnover. The average collection period represents the number of day's worth of credit sales that is blocked with the debtors (accounts receivable). Higher the debtors velocity the more the funds are blocked and chances of bad debt increase. Also there is a loss in interest in the blocked funds. Debtors velocity shows in how many days rapidly the debts are collected. Debtors velocity has shown a decreasing trend after a steep rise in the year 2005. So, it is a good sign. Over the years it indicates a positive trend. Now, the funds are collected much fater than before from customers. 4. Creditors Velocity The Creditors Velocity that is the average payment period has been lying in the range of 34 to 36 except in the year 2007 when it was 40. They have maintained a stable period to pay to their creditors which shows good repute of the company. 5. Asset turnover ratio Asset turnover measures a firm's efficiency at using its assets in generating sales or revenue - the higher the number the better. The lower the ratio, the more the company is burdened by debt expense.
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Fixed Asset Turnover Ratio has increased to 1.03(2008) compared to .57 (2004) last 5 years. This shows that the assets have been used efficiently to generate sales.

Profitability Ratios
Profitability is a key piece of information that should be analyzed when you're considering investing in a company. This is because high revenues alone don't necessarily translate into dividends for investors (or increased stock prices, for that matter) unless a company is able to clear all of its expenses and costs. Profitability ratios are used to give us an idea of how likely it is that a company will turn a profit, as well as how that profit relates to other important information about the company. Profitability Ratios Sno. Years 1. Gross profit margin 2. Net profit margin 3. Return On Equity 4. Return on Capital Employed 5. Return On Net Worth 1. Gross profit margin
The gross profit margin ratio tells us the profit a business makes on its cost of sales, or cost of goods sold. Gross profit ratio measures the efficiency of production as well as pricing. Here in this case we can clearly see that the GPM has decreased in 2008 (29.03) when compared with 2007(30.33). It shows that this year company is unable to make reasonable profit on sales. 2. Net profit margin Net Profit margin measures the overall efficiency of production, administration, selling, financing, pricing and tax management. The net profit margin ratio tells us the amount of net profit per Rupee 1 of turnover a business has earned. Net profit ratio provides an understanding of profit structure of a firm. The Company is showing a positive trend in its NPM. In 2005 it has shown a steep inclination followed by a sudden decline in 2006 after that it has increased marginally. So, company is making considerable profit on its sales.

2004 28.73 6.45 0.17 11.65 22.46

2005 34.37 12.96 4.44 30.80 39.89

2006 25.09 9.30 2.77 17.59 17.41

2007 30.33 13.90 5.62 26.24 26.98

2008 29.03 13.68 6.85 24.05 26.80

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3. Return On Equity Return on Equity is very essential as it tell the earning available to the persons at the last resort. Equity Share holders are paid only in the end (after preference shareholders) if the earnings are available. Here, the ratio is increasing till 2005 and has shown a slight fall in 2006 followed by a sudden rise in 2007 and 2008. As the ratio is high, this company will come in good prospects of investors. 4. Return on Capital Employed The Return on Capital Employed ratio (ROCE) tells us how much profit the company earns from the investments the shareholders have made in the company. Return on capital employed has been volatile over the years. After a steep incline in the year 2005 there was a steep decline in the year 2006 followed by a gradual rise in the consecutive years. But still this shows that the company is not efficiently utilising the investments made by the shareholders to generate returns.

5. Return On Net Worth
It is the 'final measure' of profitability to evaluate overall return. This ratio measures return relative to investment in the company. Return on Net Worth indicates how well a company leverages the investment in it. After a considerable increment of 17.43 in the year 2005 (39.89) it has shown a declining trend that in 2008 it is only 26.80.

Valuation Ratio
Valuation ratios are used to analyze the attractiveness of an investment in a company. The idea is that by using these ratios investors can gain an understanding of how cheap or expensive a company's current stock price is compared to several different measures. In general, the less expensive a company is, the more attractive an investment in that company becomes.

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Valuation Ratios Sno. Years 1. Dividend Per Share 2. Earning Per Share 3. Price Earning Ratio

2004 3.91 2.10

2005 8.00 43.22 8.34

2006 8.00 37.02 8.18

2007 12.50 54.69 9.02

2008 14.00 66.50 12.32

1. Dividend Per Share
Dividend per share (DPS) is the amount of the dividend that shareholders will receive, over an year, for each share they own. Few investors’ primary concern is with the amount that a company gives as dividends -- capital appreciation being only a secondary consideration. For such investors, this ratio obviously plays a crucial role in their investment calculations. JSW’s DPS has increased from 2004 (0) to 2008 (14). DPS shows how much the shareholders were actually paid by way of dividends. Here due to increase in profits the company is paying higher dividends.

2. Earning Per Share
EPS is a well-known and widely used investment ratio. The performance and prospects of the company are affected by EPS. If EPS increases, there is a possibility that the company may pay more dividend or issue bonus shares. In short the market price of the share of a company will be affected by all these factors. EPS has been in an increasing trend over the years, it has only shown a steep incline by 39.29 in the year 2005. So, Company has good earning per share to pay dividend to its shareholders and there by increasing its credibility with them. 3. Price Earning Ratio P/E ratio is a reflection of the market's opinion of the earnings capacity and future business prospects of a company. In these years it can be seen that P/E ratio has been on an increasing trend. So, it shows that this company enjoys confidence of investors and have high market standing.

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MOVING AVERAGE
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Moving Average
Moving average is the average price of a security at a given time. When calculating a moving average, you specify the time span to calculate the average price (in our case it is 180 days) Since the moving average is the average price of the security over the last 180 days, it represents the consensus of investor expectations over the last 180 days. If the security's price is above its moving average, it means that investor's current expectations (i.e., the current price) are higher than their average expectations over the last 180 days, and that investors are becoming increasingly bullish on the security. Conversely, if today's price is below its moving average, it shows that current expectations are below average expectations over the last 180 days. Short term Investors typically would buy when security’s price rises above its moving average and sell when the price falls below its moving average.

SAIL’s security price in most of the time for first 5 years has shown bullish trend as the security price is above the moving average, but in last few months there is bearish trend as security price drops below its moving average so it’s better to wait and buy when the price rises above its moving average.

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TATA’s security price in most of the time for first 5 years has shown bullish trend as the security price is above the moving average, but in last few months there is bearish trend as security price drops much below its moving average so it’s better to wait and buy when the price rises above its moving average.

JSW’s security price for first two years is on a same plane. Then after that for other 2 and a half years it has shown bullish trend but in last few months there is bearish trend as security price drops much below its moving average so it’s better to wait and buy when the price rises above its moving average.
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RELATIVE STRENGTH INDEX
102

Relative Strength Index
Relative strength index is used to interpret the strength of a stock. It shows the days stock finished up Vs finished down. RSI = 100 – [100/(1+RS)] RS = (AV of n - days up closes)/(AV of n - days down closes) n = days (21 Days used) RSI ranges from 0 -100. At RSI = 70 the stock is regarded as in the over bought territory and when RSI = 30 the stock is regarded as in the over sold territory. In Bull market the over bought territory is raised the 80. In a bear market the oversold territory is brought down to 20.

In SAIL, the maximum RSI is 53.34 and lowest is 47.17. The Company’s RSI is moving in a stable trend. This means that these stocks are moving in a continuous trend of buying and selling. At the last point RSI is at 50.65

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In TATA, the maximum RSI is 52.6 and lowest is 48.07. The Company’s RSI is moving in a stable trend. This means that these stocks are moving in a continuous trend of buying and selling. At the last point RSI is at 50.30.

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In JSW, the maximum RSI is 53.15 and lowest is 48.91. The Company’s RSI is moving in a stable trend. This means that these stocks are moving in a continuous trend of buying and selling. Company is at its highest point in the end i.e. RSI= 53.15

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BETA & RISK ANALYSIS
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Security Analysis
Security Analysis Beta Alpha ROW Beta square SAIL TATA JSW

(0.01640) 0.19219 0.00032 0.00027

(0.71365) 0.04452 0.08766 0.50930

2.34292 0.09020 0.05013 5.48928

Beta value is the index. It is actually an indicator of the systematic risk. TATA and SAIL are having negative Beta whereas JSW has a Beta Greater than one. This indicates that JSW is an aggressive company. It means that the company will earn more than the market when market increases and will lose more than the market when market decreases. For TATA and SAIL negative Beta indicates that these two companies are the real indicator of the future prospects of the market. So, these two Companies will reflect the market position in advance. Coefficient of Correlation (COC) shows the degree to which the stocks are directly correlated with the market.

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% to Total Risk SR USR TSR Systematic Risk (COD) Unsystematic Risk

SAIL

TATA

JSW

0.00000 2.77424 2.77424
0.00% 100.00% 0.77% 99.23%

0.00053 0.06779 0.06832

0.00567 2.25191 2.25759
0.25% 99.75%

The above chart shows the percentage of systematic risk and unsystematic risk to total risk. Systematic risk shows the percentage of risk that cannot be diversified. Systematic risk is very low for all the three companies. SAIL is having 0% systematic risk which is very good. . Unsystematic risk is a percentage to total risk (coefficient of determination) which can be always diversified that means it can be brought down. Unsystematic risks for all the companies are above 99% which is a very good sign. So, these Companies can diversify their risk almost fully.

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PORTFOLIO

109

PORTFOLIO Containing 35 Companies
Sectors IT Steel Refinery Refinery Aluminum Auto Aluminum Auto Banking Pharma Steel Banking Pharma Banking Pharma Cement FMCG Refinery IT FMCG FMCG Sugar Cement Steel Ancillary Batteries IT Sugar Aluminum Sugar Tyre Tyre Tyre Auto Ancillary Batteries Ancillary Batteries Companies Wipro SAIL BPCL RIL MALCO TVS HINDALCO Hero Honda ICICI Glenmark JSW HDFC Sun pharma SBI Cipla Ambuja HUL IOCL TCS GILLETE P&G EID Acc TATA EXIDE Infosys BCML NALCO BHSIL J K Tyre CEAT MRF Bajaj TUDOR PAE Beta 0.56 0.016 1.04 1.26 0.6 0.06 -0.6 -0.13 0.0142 -0.11 -0.71 0.0123 -0.086 -0.25 -0.2 0.85 0.7 1.59 0.73 0.3 0.3 0.69 0.39 2.3 0.04 0.74 1.17 -0.2 1.21 0.92 1.06 0.93 1.16 0.06 0.11 Total Risk Sys Risk Unsys Risk 0.05 0.00% 100.00% 2.77 0.00% 100.00% 5.5373 0.02% 99.98% 7.9986 0.02% 99.98% 0.04166 0.02% 99.98% 57.568 0.07% 99.93% 0.03958 0.08% 99.92% 88.56 0.20% 99.80% 0.00451 0.22% 99.78% 0.00451 0.22% 99.78% 2.2553 0.24% 99.76% 0.00301 0.33% 99.67% 0.00301 0.33% 99.67% 0.0167 0.36% 99.64% 0.01666 0.36% 99.64% 0.231 0.43% 99.57% 0.0999 0.50% 99.50% 0.302 0.83% 99.17% 0.0306 1.96% 98.04% 0.00272 5.51% 94.49% 0.0033 6.06% 93.94% 0.00769 6.24% 93.76% 0.032 6.25% 93.75% 0.07337 7.73% 92.27% 0.0327 8.26% 91.74% 0.045 11.11% 88.89% 0.01069 12.72% 87.28% 0.0023 13.48% 86.52% 0.00978 14.93% 85.07% 0.0048 16.67% 83.33% 0.0059 18.64% 81.36% 0.00386 22.28% 77.72% 82.55 31.91% 68.09% 0.0092 56.52% 43.48% 0.0136 114.71% -14.71%

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1. This table has been According to the highest to lowest USR followed by Beta from
highest to lowest. USR signifies that risk which can be diversified. So the Companies which can diversify their risk will have minimal chances of seeing the bad situation. Then it is being sort according to the Beta as the risk can be diversified by these Companies then if the Beta is high will mean when the market will rise it will rise more than the market and when the market will decrease it will decrease more but they can diversify their risk at that point of time.

111

P/E Companies Ratio 4.01 Tyre MRF 9.48 Refinery RIL 10.45 Banking SBI 14.4 IT Infosys 2.5 Steel TATA 6.69 Cement Acc 4.03 Steel JSW 2.4 Sugar EID 7.04 Refinery IOCL 13.06 Auto Hero Honda 20.98 Pharma Sun pharma 8.57 Auto Bajaj 11 IT TCS 16.38 FMCG P&G 24.45 Banking HDFC 34.7 Refinery BPCL 11.65 Banking ICICI 26.23 FMCG GILLETE 6.25 Aluminum NALCO 12.58 IT Wipro 4.3 Steel SAIL 2.43 Tyre CEAT 19.13 Pharma Glenmark 4.25 Aluminum HINDALCO 25.65 FMCG HUL 21.02 Pharma Cipla 6.29 Cement Ambuja 5.86 Sugar BHSIL 6.16 Tyre J K Tyre 2.54 Batteries PAE 14.31 Batteries EXIDE 17.65 Batteries TUDOR 20.54 Aluminum MALCO 22.93 Sugar BCML 22.4 Auto TVS Sectors

BV 2325.2 502.07 772.37 235.64 191.27 221.28 391.73 56.72 344.58 149.55 203.15 10 111.43 106.79 272.17 322.97 417.93 181.77 137.74 78.97 55.84 145.96 41.1 112.98 6.6 48.2 30.61 101.43 151.29 38.03 12.37 9.13 32.87 33.84 34.59

Cur. 52wk 52wk FV EPS MP High Low P/BV 2022 8299.5 1790 10 504.13 0.87 1217.85 3252.1 930 10 128.5 2.43 1249.35 2396.49 991.1 10 119.59 1.62 1262.5 2017 1040 5 87.69 5.36 190.1 952 150 10 75.95 0.99 478.7 1155 369 10 71.6 2.16 310.95 1389 188 10 70.89 0.73 168.95 267 125 2 70.5 2.98 367.35 809.9 299 10 57.75 1.07 753.7 894.8 561 2 57.73 5.04 1193 1557.8 890 5 56.86 5.87 411.3 945 395 10 47.99 41.13 524.55 1124.95 418 1 47.67 4.71 737.1 844.95 645.3 10 45 6.90 1088.55 3257 1382 10 44.53 4.00 332.15 560 206 10 43.46 1.03 431.25 1465 282.15 10 37.03 1.03 764.65 1525 520 10 29.15 4.21 165.75 565.9 108.35 10 26.51 1.20 260.45 552 181.7 2 20.71 3.30 84.45 292.5 62 10 19.66 1.51 40.15 244 35 10 16.54 0.28 306.15 730 211.05 1 16 7.45 60.45 202.75 38.05 1 14.24 0.54 249.3 265 170 1 9.72 37.77 184.35 243.55 146.4 2 8.77 3.82 56.4 160.9 43 2 8.69 1.84 50.75 399.5 38.6 1 8.66 0.50 49 195 40.5 10 7.95 0.32 15.25 52 12.5 10 6.61 0.40 49.8 90.9 46.15 1 3.48 4.03 45 102.7 26.15 10 2.55 4.93 43.95 224.8 41 2 2.14 1.34 43.8 127.9 35.7 1 1.91 1.29 28 78.9 23.05 1 1.25 0.81

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2. It has been sort according to the EPS from highest to the lowest followed by P/BV lowest
to highest. If the Companies are ready to give earnings to its investrs then rest of the things secondary. But still other factors will also need to be considered.

3. Portfolio (Cut Off Point Calculations)
According to the Cut off point calculated of these stocks one must include five Companies which are as follows – SAIL, ICICI, Hero Honda, SBI and Nalco Bar Rp σp= So, range= 0.02 0.06 -0.04 0.02 0.06 0.08

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Portfolio made Containing 9 Stocks of the Companies

Sectors Companies P/E Ratio BV MP 52wk High 52wk Low MP in % to 52 wk High FV EPS P/BV Beta TR SR

Steel TATA 2.50 191.27 190.1 952.0 150.0

Banking SBI 10.45 772.37 1,249.35 2,396.49 991.10

Steel JSW 4.03 391.73 310.95 1389.7 188

Tyre MRF 4.01 2,325.2 2,022.0 8,299.5 1,790.0

Refinery RIL 9.48 502.07 1,217.85 3,252.10 930.00

Auto Hero Honda 13.06 149.55 753.70 894.80 561.00

Cement Acc 6.69 221.28 478.70 1,155.00 369.00

Aluminum NALCO 6.25 137.74 165.75 565.90 108.35

IT
Infosys

14.40 235.64 1,262.5 2,017.0 1,040.0

20%

52%

22%

24%

37%

84%

41%

29%

63%

10.00 75.95 0.99 2.30 0.07 8% 92%

10.00 119.59 1.62 (0.25) 0.02 0% 100%

10.00 70.89 0.73 (0.71) 2.26 0% 100%

10.00 504.13 0.87 0.93 0.00 22% 78%

10.00 128.50 2.43 1.26 8.00 0% 100%

2.00 57.73 5.04 (0.13) 88.56 0% 100%

10.00 71.60 2.16 0.39 0.03 6% 94%

10.00 26.51 1.20 (0.20) 0.00 13% 87%

5.00 87.69 5.36 0.74 0.05 11% 89%

USR

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Reasons for selecting these Blue Chip Companies
1. TATA a) It can diversify most of its risk (USR – 92.27%) b) Very low P/E ratio (2.5) c) Very low Market Price in % to 52 week high. d) MP very close to its 52 week low e) Fairly good EPS (75.95) f) Beta is 2.3, so that company goes up or down nearly in same trend. 2. SBI a) b) c) d) e) 3. JSW a) b) c) d) 4. MRF a) b) c) d) 5. RIL a) b) c) d) e) It can diversify almost all its risk (USR – 99.64%) Moderately low PE ratio (10.45) MP is almost half of its 52 week high High EPS (119.59) Present in the cut off point list

It can diversify almost all its risk (USR- 99.76%) Very low P/E ratio of 4.03 Very low Market Price in % 52 week high Fairly good EPS(70.89)

Low PE ratio (4.01) Very High EPS (504.13) Very low Market Price in % to 52 week high. Beta is .93, so that company goes up or down nearly in same trend

It can diversify almost all its risk (USR - 99.98%) Moderately Low PE ratio (9.48) very good 52 week high of 3252.1 Beta value of 1.26, so that company goes up or down nearly in same trend High EPS (128.5)

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6. Hero Honda a) Beta value of 1.59, so that company goes up or down nearly in same trend b) Very low Face Value of Rs. 2 c) Moderately good EPS (57.73) d) Moderate P/BV ratio (5.04), in this Company it implies it is fundamentally fine and the future is bright. e) Included in the Cut off point 7. ACC a) b) c) d) e)

It can diversify almost all its risk (USR – 94%) Low PE ratio (6.69) Quite low MP in % to 52 week high Beta value of 0.39, so that company goes up or down nearly in same trend Good EPS (71.6)

8. NALCO a) Low PE ratio (6.25) b) Very low MP in % to 52 week high c) MP very close to its 52 week low d) Low P/BV ratio e) Included in the cut off point list 9. INFOSYS a) Very low Face Value (5) b) High EPS (87.69) c) MP Very close to its 52 week low d) Low MP in % to 52 week high

Bibliography
www.capitaline.com www.sail.co.in www.tatasteel.com
www.jsw.com www.sebi.gov.in www.worldsteel.org www.worldbank.org www.moneycontrol.com

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