A SUMMER PROJECT REPORT ON WORKING CAPITAL OF JINDAL STEEL & POWER LIMITED
SUBMITTED TO: DEEPAK JAIN (PGDM) JSPL RAIGARH
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SUBMITTED BY Guarav Lakani RBMI GR. NOIDA Harshal Gupta(MBA) DIMAT Raipur,C.G.
I
pay my sincere gratitude to MR. DEEPAK JAIN SIR Senior
Manager (F&A) Jindal steel & plant ltd Raigarh (C.G). For granting me this project and also for his sage guidance in every step of my project. The immense learning that I have got from him will prove as a source of inspiration throughout my professional & personal life.
I express my deep sense of gratitude to all faculty member of department of MBA, who have provided me the theoretical background, theoretical methodology, noble suggestion. Constant encouragement and brilliant guidance which made me able to present this project report for which I m grateful.
Lastly I pay my sincere regards to my parents, friends well wishers who have encouraged me to complete this project report. GUARAV LAKANI Student Pursuing PGDM from RBMI (GR. NOIDA)
HARSHAL GUPTA
Student Pursuing MBA from DIMAT (RAIPUR)
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CONTENT
Preface Acknowledgement Declaration Certificate 1. Introduction 2. Aims & objectives of the project 3. Research Methodology 4. Company Profile 5. Synopsis for project 6. Working capital management 7. Components of working capital management 8. Calculation of ratios 9. Estimation of working capital requirements 10.Analysis & conclusion 11.Suggestion & recommendation 12.Bibliography
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Jindal Steel and Power Limited (JSPL) is one of the leading power in steel industry with interest spanning across the spectrum from mining iron ore to manufacturing value added steel product. Production is required for the company but there is required to WORKING CAPITAL of the company. The steel industry is changes at a very rapid rate and changes are frequent today. There is competition getting fierce as compared to earlier days as by the help of WORKING CAPITAL every company is designing there own strategies to grow at rapid rate. The need for a better and improved system it is a must for any industry. Company strategies totally depend on WORKING CAPITAL.
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• The founder • Aims and Objective • Research Methodology
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THE FOUNDER : LATE O.P JINDAL- Babuji (The man of destiny) (1930-2005). The jindal orgination owes its brilliant growth to the dedicated endeavors of its employees with a strong emphasis on quality and on time delivery to our customer as per their specification our progresses as well as successful achievement have made the jindal org as a leading name in INDIA. Late O.P jindal, the founder of jindal org, which is now a US $4 billion conglomerate, started his industrial career with a small bucket manufacturing unit in HISSAR .the life journey of MR.Jindal from a farmer’s son to be successful industrialist, a philanthropist, a politician and a leader would sense, as a great source of inspiration for generation to come. He was the first industrialist of India to be elected as a member of parliament.
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JINDAL STEEL AND POWER (JSPL) Background •
Jindal Steel & Power Ltd. (JSPL), formed in 1998 with the transfer of the Raipur and Raigarh units of Jindal Strips Limited (JSL), is the largest coalbased steel producer with a production of 0.62 mn tpa. Under the scheme of transfer, equity capital of JSL was split between JSL and JSPL in the ratio 60:40.
•
. The Raigarh division (consisting of sponge iron, mild steel slabs and captive power consumption units), iron ore mines at Tensa (Orissa),
• Coal mines at Gare, Tamnar
(C G.) and heavy engineering equipment
unit at Raipur (C.G.) were transferred to JSPL. JSPL has added various manufacturing facility gradually during 1988 to 2007 Mainly Rail and Universal Beam mill 0.75 Million MT, Steel Making Capacity of 2.4 Million MT, Power 340 MW, Hot Metal 1.5 Million MT, Plate Mill 1 Million MT, High Carbon Ferro Chrome 36000 Mt, Sponge Iron (Coal Based which is largest in the World) 1.32 Million MT.
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Key Highlights High level of vertical integration, a sustainable competitive advantage: JSPL is a highly integrated steel producer. It has captive iron ore and coal mines. It also has a captive source of power. Its low input costs make it one of the lowest cost producers of sponge iron in the world. Its high value added products like rails and structural help it to 1earn higher margins. Diversified business model: JSPL is diversifying its business risk by transforming itself from a pure steel producer to a diversified, steel and power producer. We believe that change in revenue stream from a pure cyclical steel business to a mix of steel and power will result in rapid Growth of the company. Jindal Steel & Power (JSPL) is one of the lowest cost producers of sponge iron in the world. Besides sponge iron, the company has interests in the steel and power businesses. Riding on steel cycle upturn On the back of the upturn in the steel cycle, JSPL has shown impressive profit growth during the last three years. Due to the sharp growth in volumes and realizations, The Company has achieved
revenue CAGR at 62.4%. We
estimate EBITDA and net profit CAGR at 60.9% and 67.9%, respectively.
Long-term growth plans JSPL Page 8
• JSPL is taking advantage of the present steel cycle upturn to scale up its operations. It has a definite expansion plan, which will make it one of the leading players in the steel and power sector. Future Plans • The price of sponge iron is firming up and is expected to remain stable. The benefits of the additional sponge iron capacity should now be enjoyed. • In order to further reduce the variable cost of steel production, the company is setting up a power Plant of 2x135 MW at the coalmine itself. This is also expected to reduce cost of power generation.
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INDIAN STEEL INDUSTRY Steel is one such material that has played an important role in the development of mankind in the last century. Today, it is difficult to imagine a world without steel. Steel has become vital to our everyday life. It is at the root of the quality of life that each of us enjoys today, helping to shelter us, to feed us and to facilitate both our working day and leisure activities. We depend on steel for almost everything from our houses and buildings, the cars we drive, roads, bridges, agricultural equipment, machines, the list is endless. Steel is a versatile, constantly developing material that underpins all manufacturing activity. Even if a product is not made entirely from steel, it will undoubtedly have steel as a component at some point in the manufacturing process. There are currently more than 3,500 different grades of steel with many different properties - physical, chemical, environmental, 75% of which have been developed in the last 20 years. Steel is also an environment friendly material and has the distinction of being the most recycled material in the world today. Today, consumption of steel is also regarded as an indicator of development of a nation. Per capita steel consumption is now universally accepted as an index of economic development of a nation. Given its role, steel has established itself as the backbone of any economy
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The Indian Steel industry is almost 100 years old now. Till 1990, the Indian steel industry operated under a regulated environment with insulated markets and large-scale capacities reserved for the public sector. Production and prices were determined and regulated by the Government, while SAIL and Tata Steel were the main producers, the latter being the only private player. In 1990, the Indian steel Industry had a production capacity of 23 MT. 1992 saw the onset of liberalization and the Indian economy was opened to the world. Indian steel sector also witnessed the entry of several domestic private players and large private investments flowed into the sector to add fresh capacities. With capital investments of over Rs 100,000 crores, the Indian steel industry currently provides direct/indirect employment to over 2 million people. As India moves ahead in the new millennium, the steel industry will play a critical role in transforming India into an economic superpower. INDIAN steel industry is one of the least protected one in the world. There is no restriction on cheap imports from competive nation where as there are numerous tariff and non-tariff barriers in developed countries. the industries is witnessing various merger & acquisition (M&A) and the Indian steel industry is not lagging behind. The Tata’s take over of Corus steel and the recent Essar steel acquisition of Canadian firm Algoma, Tisco take over of a Singapore based 2.5 million tone steel company natsteel and jindal steel stainless take over f an Indonesian cold roller called mapsian stainless steel .in addition to global acquisition Indian player are consolidating their position in the domestic market JISCO & JVSL have merged to form JISCO.
MAJOR STEEL PLAYER JSPL Page 11
•
Steel authority of India limited.
• Tata steel •
Steel authority of India limited.
• Rashtriya Ispat Nigam Limited. • JSW • Jindal Steel & Power Limited. • Essar steel • Ispat Industries Tata steel
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Jindal Steel & Power Limited (JSPL), part of the US $ 8 billion Jindal organization has business interests in steel production, steel products, power generation,mining, sponge iron, ferro chrome and heavy machinery.An enterprising spirit and ability to discern long-range trends have been the driving forces behind JSPL’s remarkable growth. Along the way, JSPL has consistently tapped new opportunities by increasing production capacity, diversifying investments, and leveraging the core capabilities to advance into new businesses. And that has prepared the company for growth today and tomorrow.
Steel Infrastructure: Excelling the level of steel making, JSPL has exceeded the production capacity of 2.90 MTPA with its plant at Raigarh, Chhattisgarh.Upgrading its existing facility at Raigarh and by commissioning of additional facilities in Jharkhand and Orissa, JSPL is encompassing the future production capacity of steel that will rise by 12 MTPA in coming years. JSPL’s sinter plant, blast furnaces (1681m and 351m), coke oven, state-oftheart Steel Melting Shop with electric arc furnace, ladle refining, vacuum degassing and continuous casting bears testimony to its promise of providing its customers with international quality steel.
Innovative products: JSPL continuously endeavours to increase the portfolio of the value-added products. The product mix of the company includes Hot Rolled Parallel Flange Beams and Columns, Rails, Channels, Plates, Cathode bar and Continuously Cast Products that includes Billets/Blooms, Beam Blanks, Rounds and Slabs and Metallics and Ferro Alloy. JSPL Page 13
Rails: With its unparalleled technical know-how, JSPL pioneered the world’s longest finished rails of 120 meters in India. Further, an integrated Flash Butt Welding Plant has been installed to enable the supply of 240-480 meters long welded rail panels. These rails are preferred for their economy, safety and for providing a comfortable rail journey.
H-Beams and Columns: JSPL has been a pioneer in producing Hot Rolled Parallel Flange Beams (H-beam) and Columns in medium and large sizes in India. The structural engineers, architects and construction companies, consider these H-Beams and columns strongest, safest and most stable.
Plates: JSPL also introduced 3.5m wide steel plates for the first time in India. Following world-class technology in its production of the finest and widest plates JSPL reaffirmed its commitment to develop state-of-the-art steel products of international standards. JSPL’s sharp focus on customer relationship management and manufacturing execution systems ensures delivery of customised solutions to the customer needs.
Power: JSPL has a 340 MW power generation facility In Raigarh based on waste heat recovery from rotary kilns, washery rejects and coal fines to meet the captive requirements as well as supply to the State Electricity Boards of Chhattisgarh. JSPL have expansion plans of expanding the power generation facility to 600 MW. Jindal Power limited (JPL): JPL a wholly owned subsidiary of JSPL, is setting up a 1000 MW O.P. Jindal Super Thermal Power Plant at Raigarh, Chhattisgarh, with an investment of over Rs. 4500 crores. The project has been accorded Mega Power Project status by the Ministry of Power, Government of India.
Coal mining: JSPL has its captive Coal Mines at Dongamahua, Chhattisgarh. Since the coal is of very poor grade and quality it has to be beneficiated. Hence a coal washery with capacity of 6 MTPA to wash 47-48% coal ash to 26% has been commissioned and is operating successfully. The company has been allotted additional Coal Block to meet increased requirement of coal for its expansion project.
Iron-ore mining: JSPL has captive Iron Ore Mines at Tensa, Orissa, to meet the part requirement of its Sponge Iron Plant. Accoutered with fully mechanized techniques, it is currently producing about 555000 MT of sponge JSPL Page 14
grade ore. An additional crusher is also being installed to ensure the availability of high-grade iron ore. The captive Iron Ore and Coalmines are the core strength of the company.
Diamond Exploration: JSPL has recently made its foray into exploration of high value minerals and metals like diamonds, precious stones, gold, platinum group of minerals, base metals, tar sands etc. Initiation has been made in exploration for diamond, gold and associated minerals in Jashpur district of Chhattisgarh, parts of Jharkhand and Democratic Republic of Congo.Sponge Iron: JSPL has worlds largest coal-based sponge iron manufacturing facility, which uses indigenously developed rotary kilns. Ferro chrome: Manufacturing of stainless and special steel requires an important component called Ferro chrome. Ferro chrome is the result of a continuous smelting of chrome ore, coke, coal and quartz at the Submerged Arc Furnace (SAF).
Machinery Division: JSPL has set up a state-of-the-art Machinery Division atRaipur, Chhattisgarh, which caters to the in-house machinery & components requirements of the Raigarh plant and other group companies. The unit is ISO9002, has machinery-manufacturing capacity of 11,500 MT and production capacity of 30,000 MT of steel ingots and castings.
CSR initiative: JSPL has from the very beginning devoted itself entirely to the cause of up liftment of backward areas of the country. The company has taken up a number of programmes to improve the lives of the underprivileged. Raigarh, a tribal district in Chhattisgarh is one such example. One of the key priority areas has been education as it has a direct impact on nation building. The 10+2 co-educational O.P. Jindal School, with an investment of over Rs. 5 crore is operational at Raigarh. The oldest girls' school has been renovated. In addition, 42 villages have been adopted, contributing to the development of the region through a more holistic effort. From providing sewage and sanitation facilities, building and maintaining roads and parks, to healthcare and education facilities, JSPL is leaving no stone unturned in serving the society. Availability of medical facilities by setting up charitable clinics and hospitals is yet another aspect of our social initiative. JSPL is constantly working towards providing world-class health facilities to the people of Raigarh at the 100-bedmulti-specialty O. P. Jindal Hospital & Research Centre. The hospital has four well-equipped Operation Theatre, Intensive care units, medical teams for various specialty including orthopedics and pediatrics. Medical camps are regularly organized which benefits more than 40,000 people in the district. Women empowerment JSPL Page 15
programmes are organized regularly which includes education, livelihood training, health check ups etc.JSPL's scope of social activities extends beyond healthcare and welfare to the cultural and sports arena, too. JSPL has also developed a unique Musical Fountain in Raigarh. The Kamla Nehru Park in the city has been developed and is being maintained by JSPL. The initiation of a social accountability system, the SA8000, is a measure towards becoming an increasingly aware and conscientious corporate member of society.
Future Plans of action: ➢ Modification of the existing 351 Cu.M mini blast furnace to 418 Cu.M
➢ Establishment of cold briquetting of sponge iron. ➢ Production of sponge iron through coal gasification. ➢ Installation of servo hydraulic universal testing machine for fatigue , sub zero frecture toughness and high temperature testing . ➢ Installation of electron probe micro analyzer ➢ Study to minimize accretion in coal base DRI kilns. ➢ Study to reduce rusting problems in structurals. ➢ Blending of non coking to produce desired coke . ➢ Process optimization for casting of SAE 52100 in round section. ➢ Laboratory scale induction furnance and forging press to develop new grade.
CURRENT CAPACITIES: At Raigarh Sponge Iron 1.37 million tonnes per annum Mild Steel 2.4 million tonnes per annum Ferro Alloys 36,000 tonnes per annum Power 333 MW Hot Metal / Pig Iron 1.5 million tonnes per annum RUBM 75,000 tonnes per annum Coal Washery 6 million tonnes per annum At Raipur Machinery and Castings 11,500 tonnes per annum Ingots 30,000 tonnes per annum CF Castings 3,000 tonnes per annum JSPL has proved its JSPL Page 16
mettle to take on the new challenges of growth scenarios. By giving the best to the customers, employees, stakeholders and to the community at large, JSPL is setting its goals of tomorrow for a new flourishing India.
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JSPL IN I NDIA
The following map shows the spread of JSPL which is in all corners of India. The map shows all the registered, corporate, branch and marketing offices,minesworksandproposedprojects
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OBJECTIVES OF THE STUDY ➢ To study the need and importance of working capital. ➢ Analysis of important Ratio for the management of the company, ➢ To study the various sources of working capital. ➢ To maintain the optimum balance of working capital components. ➢ To study the various techniques used in managing the working capital effectively such as ratio analysis
Collection of Data: 1. Primary Data: Data collected from financial statements of the company; Profit & Loss A/c, Balance Sheet, Annual Report, etc.
2. Secondary Data: Discussions with managers Referring books, journals and magazines Information collected from Internet.
RATIO ANALYSIS Chart Showing Various ratios Of JSPL for last three years JSPL Page 19
Ratio
2006
2007
2008
1.7:1 1:1
1.5:1 1:1
2.03:1 1.4:1
.67:1 9.3:1 2.5:1
.71:1 7.2:1 2.4:1
1.02:1 8.2:1 2.03:1
52.42% 39.96% 22.86% 9.93%
52.38% 40.67% 19.9% 9.25%
53.56% 39.93% 22.10% 12.70%
Return on Equity Earning per Share
31.17% Rs. 186.07
33.23% Rs.80.34
Dividend Per Share Dividend Payout
Rs. 10 5.37%
28.39% Rs. 45.66/186.07 Rs. 12 6.44%
6.27 53.18% 44.9% 4.37 Times
5.81 54.8% 46.31% 5.66 Times
6.66 66.6 % 55.57% 3.22Times
Liquidity Ratios Current Quick Leverage Ratios Debt-Equity Interest Coverage* Capital Employed to Net worth Profitability Ratios Gross Profit Margin Operating Profit Margin Net Profit Ratio Return on Investment Equity Related Ratios
Rs. 2.50 3.11%
Activity Ratios Inventory Turn Over Net Asset Turn Over Total Asset Turnover Ratio Working Capital Turnover
Current ratio The current ratio of the firm measures its short term solvency. Higher the ratio better is firm,s ability to meet its obligation. On observing JSPL current ratio it is found that JSPL Page 20
company has good current ratio. The company has increased its current ratio from 1.5:1 in 2007 to 2.03:1 in 2008. There is no hard and fast rule ,convientionally, a current ratio 2:1 is considered satisfactory but there is also under lying object that 50% drop in ratio is also acceptable. From creditors and bankers point of view , in short term, there investment is safe in the hands of JSPL.JSPL is capable to meet its current obligation.
Current Ratio = Current asset/Current Liability Particular Current Asset Current liability Current Ratio
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2008(in cr.) 3299.57 1620.81 2.03:1
2007(in cr.) 1801.66 1180.35 1.53:1
2006 (in cr.) 1490.45 898.11 1.7:1
Quick Ratio Its is a rigorous measure of firm,s ability to serive short term liability.convientionally it is found that acid test /quick ratio is 1:1 is considered the best ratio. In JSPL in 2007 it was 1:1 and it increased to 1.4:1 in 2008. It show that its working capital is less blocked in inventories and the better ability to meet its current liability.As per the information there are less debtor and good cash balance. Conpany is able to meet its operating expense without any current obligation.
Quick Ratio = Current Asset – Inventories/Current Liability particular Current Asset Current liability Inventory Quick Ratio
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2008(in cr.) 3299.57 1620.81 980.56 1.4:1
2007(in cr.) 1801.66 1180.35 642.44 1:1
2006(in cr.) 1490.45 898.11 568.65 1:1
Leverage Ratio/Capital Structure Ratio The long term creditors are interested in knowing the soundness of the firm on the basis of long term strength measured in the terms of its ability to pay the interest regularly as well as repay the installment of the their principal on due date or in lump-sum at the time of maturity. It can be examined by leverage ratio. There are different types of leverage ratio. • Debt-Equity Ratio • Interest Coverage Ratio • Capital employed to Net Worth
Debt-Equity Ratio It shows the relationship between borrowed fund and owner’s equity in measuring long term financial solvency of the firm. It reflect the relative claim of the creditors and shareholder against the asset of the firm. Alternatively, it also indicates the relative proportion of the debt and equity in the financing the asset of the firm. It has been found that JSPl has increased its debt in debt/equity in financing the asset of the firm. Due to its good earning capacity JSPL is able to raise its debt compare to equity. Its increased D/E ratio 43.6% from 2007. D/E Ratio = Debt / Equity particular Debt Equity D/E Ratio JSPL Page 23
2008(in cr.) 3863.35 3756.38 1.02:1
2007(in cr.) 2496.73 3507.72 .71:1
2006(in cr.) 1844.71 2745.37 .67:1
Interest Coverage Ratio This ratio measures the debt servicing capacity of the firm insofar as fixed interest on long-term long is concerned. As the name suggest ,show how many times the interest charged are covered by EBIT out of which they will be paid. The ratio of 8.20 times is high and hence the company has very sound financial position. It has no tension of paying interests over its loans as it creates much more wealth from the debts than the interest to be paid. It has increased 13.8% since last year.
Interest coverage Ratio= EBIT/Interest Particular Interest EBIT (EBT+Interest) Interest coverage Ratio
2008(in cr.) 208.59 1711.10 8.2:1
2007(in cr.) 150.26 1095.10 7.2:1
2006(in cr.) 87.31 815.16 9.3:1
Capital Employed to Net Worth Ratio There is yet another alternative way of expressing the basic relationship between debt and equity. One may want to now: How much funds are being contributed together by lenders and owners for each rupee of the owners contribution? The ratio of 2.03 times Shows that the total net worth of the company is approximate half of the total investment made by the company’s promoters and hence the company has very sound financial position. We can also derive that the promoters finance around 50% of the total net worth of the company. JSPL Page 24
C\N Ratio = Capital Employed/Net Worth Particular 2008(in cr.) 2007(in cr.) 2006(in cr.) Capital Employed 7585.45 5982.89 4583.29 (Debt +Net Worth)
Net Worth C\NRatio
3722.12 2.03:1
2475.17 2.4:1
1837.92 2.5:1
Profitability Ratio A company should earn profits to survive and grow over a long period of time. The profitability ratio are calculated to measure the operating efficiency of the company. Besides management of the company, creditors and owners are also interested in the profitability of the firm. There are different type of profitability ratio:
• Gross Profit Ratio
• Operating Profit Ratio • Net Profit Ratio • Return on Investment
Gross Profit Ratio Gross Profit is the result of the relationship between prices, sales, volume and cost.A high GP ratio is sign of good management as it implies that the cost of production of the firm is relatively low and vice versa. In JSPL, company has shown rising trend in its GP ratio, which show that JSPL has increasing its efficiency with period of time.there was certain foreign fluctuating ,shut down in 2007 which decreased its GP ratio in 2007 there by its again recovered its position in 2008 and 2009.
G\P Ratio =Gross Profit \Net Sales Particular JSPL Page 25
2008(in cr.) 2007(in cr.) 2006(in cr.)
Gross Profit 2848.55 Net Sales 5410.75 G\P Ratio 52.42%
1859.22
1393.59
3519.81 52.38%
2590.25 53.56%
Operating Profit Ratio Operating Profit ensures adequate coverage for operating expense of the firm and sufficient return to the owners of the business. Comparing various factors of operating profit it found that from 2006 to 2007 their was tremous change in depreciation, interest and tax as compare to 2007 to 2008. O/P Ratio=Operating Profit/Net Sales Particular 2008(in cr.) Operating Profit 2162.61 (PBIDT) Net Sales 5410.75 O\P Ratio 39.96%
2007(in cr.) 2006(in cr.) 1431.58 1034.33
Th e 3519.81 2590.25 net 40.67% 39.93% ma rgi n of 22. 64 Net Profit Ratio % is qui The net profit margin is indiactive of “management`s ability to operate the business et with sufficient success not only to recover from revenues of the period, the cost of im merchandise or services, the expenses of operating the business (including pre depreciation) and the cost of borrowed funds, but also to leave a margin of ssi reasonable compensation to the owners for providing their capital at risk. The ratio of ve, net profit (after interest and taxes) to essentially expresses the cost price effectiveness an of the operation.” d the PAT for JSPL Limited, like PBIT, has shown an upward trend. co mp N\ P Ratio = Net Profit\net sales an Particular 2008(in cr.) 2007(in cr.) 2006(in cr.) y 1236.96 702.99 572.94 PAT is per JSPL for Page 26 mi ng we ll.
Net Sales 5410.75 N\P Ratio 22.86%
3519.81 19.9%
2590.25 22.10%
Return on Investment The return on investment is another measure of the returns that the business generates. This is expressed as the ratio between the profit before interest and taxes (PBIT) to the Total Assets (Loans and Owner’s Fund) in the business. The ROI of 15.29% signifies that the company is getting good return out of its investment decisions. The graph below shows a consistent growth in JSPL’s return on investment which shows that the company’s key decision maker are doing a great job.
ROI = PBT\Total Asset Particular PAT Net Assets ROI Ratio
2008(in cr.) 2007(in cr.) 2006(in cr.) 1236.96
702.99
572.94
8114.40 15.24%
6419.49 10.95%
4870.37 11.76%
Equity Related Ratio Main ratio which are directly shows shareholders return and their individual earning on their shares. They are as follows:
• Return on Equity JSPL Page 27
• Earning per Share • Dividend Per Share •
Dividend Payout Ratio
Return on Equity Return on Total Shareholders` Equity Accorrding to this ratio, profitability is measured by dividing the net profit after taxes (but before preferance dividend) by the average total shareholders` equity. The ratio of 33 % is quiet good and the company is utilizing the shareholders funds in a better way to create more profit for its shareholders. Its has increased 17% approx from last year.
R\E Ratio = PAT/Net Worth Particular PAT Net Worth R\E Ratio
2008(in cr.) 2007(in cr.) 2006(in cr.) 1236.96
702.99
572.94
3722.12 33.23%
2475.17 28.39%
1837.92 31.17%
Earning Per Share
It measures the profit available to the equityholders on a per share basis, i.e. the amount that they can get on every shere held. It is calculated by dividing the profits available to the shareholders by the number of outstanding shares. It is to be noted that there was a stock split in the year 2006-07 due to which the face value of the shares changes from Rs. 5/- per share to Re. 1/- per share
EPS = PAT\No. of Share Particular 2008(in cr.) 1236.96 PAT No. of Share 153,961,34 0 R\E Ratio 80.34 Rs JSPL Page 28
2007(in cr.) 2006(in cr.) 702.99
572.94
153,961,34 0 45.66 Rs
30,792,268 186.07 Rs
Dividend Per Share The EPS represents whats the owners are theoritically entitled to receive from the firm. A part of the net profits belonging to them is retained in the business and balance is paid to them as dividends. DPS is the net distributed profit belonging to the shareholders divided by the number of ordinary shares outstanding. In compared to the face value of the shares, i.e. Re.1.00/share. DPS of Rs. 2.59 is quiet good.
DPS = Dividend Declared\No. of Share Particular 2008(in cr.) Dividend Declared 39.93 No. of Share 153,961,34 0 R\E Ratio 2.50Rs
2007(in cr.) 2006(in cr.) 36.95
30.79
153,961,34 0 12 Rs
30,792,268 10 Rs
Activity Ratio Activity ratios are employed to evauate the effiency with which the firm manage to utilize its assets this ratio is also called turn over ratio because they indicates the speed with which assets are converted into sales. Different types of activity ratios are mentioned below:
• Inventory Turn Over • Net Asset Turn Over • Total Asset Turnover Ratio • Working Capital Turnover
Inventory Turnover Ratio JSPL Page 29
Th e Inv ent ory tur no ver Ra Indicates the number of times inventory is replaced the year. The inventor/stock tio turnover ratio measures how quickly inventory sold. It is a test of efficient inventory sh management. In general, a high inventory turnover ratio is better than a low ratio. A ow high ratio implies good management. s ho The ratio of 6.6 times signifies that the company is efficient in selling its stocks. w Being a manufacturing sector company, the company is able to convert its inventory rap into receivables 6.6 times a year, which can be considered moderate depending on the idl nature of manufacturing sector. y the I/T Ratio = Net Sales\ Average Inventory inv ent Particular 2008(in cr.) 2007(in cr.) 2006(in cr.) ory 5410.75 3519.81 2590.25 Net Sales is Avg. Inventory 811.50 605.55 413.10 tur nin I\T Ratio 6.66 5.81 6.27 g No. of Days 55 Days 63 days 58 Days int (365/IT Ratio) o rec eiv abl es. Hi gh Net Asset Turnover Ratio er the It is based on the relationship between the cost of the good sold and inv assets/investments of a firm. A reference to this was made while working out the ent over-all profitability of a firm as reflected in its earning power. The assets turnover ory ratio howsoever defined, measures the efficiency of a firm in managing and utilizing tur its assets. The higher the turnover ratio, the more efficient the management and no utilisation of the assets. ver The Return of 66.6% is very good and company is performing well. The Net Assets rati of the company are managed very well. o, bet ter the inv Net Asset Turnover Ratio =Net Sales/ Net Asset ent ory ma Particular 2008(in cr.) 2007(in cr.) 2006(in cr.) na 3519.81 2590.25 Net Sales 5410.75 ge me JSPL nt Page 30 an d int urn
Net Asset Ratio
8114.40 66.6%
6419.49 54.8%
4870.37 53.18%
Total Asset Turnover Ratio The Return of 55.5% is very good and company is performing well. The Total Assets of the company are managed very well.
Total Assets Turnover Ratio = Net Sales / Total Asset Particular Net Sales Total Asset Ratio
2008(in cr.) 2007(in cr.) 2006(in cr.) 5410.75
3519.81
2590.25
9735.21 55.57%
7599.84 46.31%
5768.48 44.90%
Working Capital Turnover Ratio WC/T Ratio = Net Sales/Working capital The Net Working Capital ratio is basically measure of firm’s liquidity. The Return of 3.23 times is very good and company is performing well. The Net Assets of the company are managed very well and 3.23 times of turnover is generated from the net working capital of the company annually. This also means that the company manages its working capital very efficiently.
Particular Net Sales Working Capital Ratio JSPL Page 31
2008(in cr.) 2007(in cr.) 2006(in cr.) 5410.75
3519.81
2590.25
1678.76 3.22:1
621.31 5.66:1
592.34 4.37:1
Schedule of Changes in Working Capital
Particulars Current Assets: Inventories Sundry Debtors Cash & Bank Balances Loans & advances
Amounts in cores Effects on Working Capital 31-03-2006 31-03-2007 Increase Decrease 568.66 299.54 31.30 590.96
642.44 320.31 52.97 785.94
73.78 20.77 21.67 194.98
-
Total Current Assets
1490.46
1801.66
-
-
Current Liabilities Liabilities Provisions Working Cap. Borrowings from Banks Total Current Liabilities Increase in working Capital
625.96 272.14 118.81 1016.91 377.03
794.87 385.48 213.59 1393.94 -
377.03
168.9 113.34 94.78
Working Capital
473.55
407.72
JSPL Page 32
Schedule of Changes in Working Capital Amounts in cores Effects on Working Capital Increase Decrease
Particulars Current Assets: Inventories Sundry Debtors Cash & Bank Balances Loans & advances
31-03-2007
31-03-2008
642.44 320.31 52.97 785.94
980.56 287.38 577.91 1453.72
338.12 524.94 667.78
32.93 -
Total Current Assets
1801.66
3299.57
-
-
794.87 385.48
1038.87 581.94
-
244 196.46
213.59
44.25
169.34
-
1393.94 271.12
1665.06 -
271.12
-
407.72
1634.51
Current Liabilities Liabilities Provisions Working Cap. Borrowings from Banks Total Current Liabilities Increase in Working Capital Working Capital
JSPL Page 33
Ratio Analysis Comparison of JSPL, Tata Steel & Sail for the year 2008
JSPL Page 34
Ratio
JSPL
TATA
SAIL
2.03:1 1.4:1
5.46:1 5.07:1
2.9:1 1.4:1
Debt-Equity 1.03:1 Interest Coverage Ratio 8.2:1 Capital Employed to Net worth 2.03:1
.66:1 9.04:1 1.66:1
.13:1 47.73:1 1.13:1
52.42% 22.86% 39.96% 15.24%
40.86% 31.84% 32.77% 9.95%
37.91% 16.54% 39.97% 27.23%
33.23% Rs. 80.34 2.50 Rs 3.11%
17.27% Rs. 67.17 16 Rs 23.8%
32.67% Rs.18.24 Rs.3.70 20.28%
6.66 Times 55 Days 66.6% 55.57% 3.22Times
10.16 Times 36 Days 41.83% 41.21% .65Times
5.84 Times 63 Days 142.74% 107.73% 3.01 Times
Liquidity Ratios Current Quick Leverage Ratios
Profitability Ratios Gross Profit Margin Net Profit Margin(before tax) Operating Ratio Return On Investment Equity Related Ratios Return on Equity Earning per Share Dividend Per Share Dividend Payout Activity Ratios Inventory Turn Over No. of Days Net Asset Turnover Ratio Total Asset Turnover Ratio Working Capital Turnover
Liquidity Ratio
• Current Ratio • Quick Ratio
JSPL Page 35
Current Ratio Particlar
JSPL
TATA
SAIL
Current Assets
3299.57
36962.44
26762.76
Current Liablity CR Ratio
1620.81
6768.78
13544.50
2.03:1
5.46:1
1.97:1
Particlar
JSPL
TATA
SAIL
Current Assets(in cr.)
3299.57
36962.44
26762.76
Current 1620.81 Liablity(in cr.) Inventory(in 980.56 cr) CR Ratio 1.43:1
6768.78
13544.50
2047.31
6954.08
5.15:1
1.46:1
Quick Ratio
JSPL Page 36
Leverage Ratio/Capital Structure Ratio • Debt-Equity Ratio
• Interest Coverage Ratio • Capital employed to Net Worth
Debt-Equity Ratio particular Debt (in cr.) Equity(in cr.) D/E Ratio
JSPL 3863.3 5 3756.3 8 1.02:1
TATA 18,021.6 9 27,300.7 3 .66:1
SAIL 3887.64 23287.2 7 .17:1
Interest Coverage Ratio Particular Interest (in cr.) EBIT (EBT+Interest) (in cr.) JSPL Page 37
JSPL 208.59 1711.1 0
TATA 878.70 7945.0 6
SAIL 245.41 11714.1 4
Interest coverage Ratio
8.2:1
9.04:1
47.73:1
Capital Employed to Net Worth Particular Capital Employed (Debt +Net Worth)
Net Worth C\NRatio
JSPL 7585.4 5 3722.1 2 2.03:1
Profitability Ratio
TATA 45322.4 2 27300.7 3 1.66:1
SAIL 26108.81 23063.57 1.13:1
• Gross Profit Ratio
• Operating Profit Ratio • Net Profit Ratio Gross Profit Ratio Particular JSPL Gross Profit(in cr.) 2848.55 Net Sales(in cr.) 5410.7 5 G\P Ratio 52.42%
JSPL Page 38
TATA
SAIL
8048.04
14978.37 19,693.2 39508.45 8 40.86%
37.91%
Operating Profit Ratio Particular Operating Profit (PBIDT) (in cr.) Net Sales(in cr.) O\P Ratio
JSPL 2162.61
TATA 7872.54
SAIL 12949.62
5410.75 39.96%
19,693.28 39.97%
39508.45 32.77%
Net Profit Ratio Particular PAT(in cr.) Net Sales(in cr.) N\P Ratio
JSPL
TATA
SAIL
1236.96
4,687.0 3
7536.78
5410.7 5 22.86%
19,693.2 8 23.80%
39508.4 5 19.07%
Return on Investment Particular PAT (in cr.) Net Assets (in cr.) JSPL Page 39
JSPL
TATA
SAIL
1236.96
4,687.0 7536.78 3
8114.4 0
47,075.5 2
27677.41
ROI Ratio
15.24%
9.95%
27.23%
Equity Related Ratio Return on Equity Particular PAT(in cr.)
JSPL
TATA
SAIL
1236.96
4,687.0 3
7536.78
Net Worth(in cr.) 3722.1 27,145.6 2 2 R\E Ratio 33.23% 17.26%
23063.5 7 32.67%
Earning Per Share Particular PAT(in cr.) No. of Share R\E Ratio
JSPL
TATA
SAIL
1236.96
4,687.03
7536.78
153,961,34 0 80.34 Rs
697,748,60 1 67.17 Rs
4,130,400,54 5 18.25 Rs
Dividend Per Share Particular Dividend Declared(in cr.) JSPL Page 40
JSPL
TATA
SAIL
39.93
1167.86
1528.25
No. of Share DPS Dividend Payout Ratio
153,961,34 0 2.50Rs 3.11%
697,748,60 1 16 Rs 23.8%
4,130,400,545 3.70 Rs 20.27%
Activity Ratio • Inventory Turn Over • Net Asset Turn Over • Total Asset Turnover Ratio • Working Capital Turnover
Inventory Turnover Ratio Particular Net Sales(in cr.)
JSPL Page 41
JSPL
TATA
SAIL
5410.75
19,693. 28
39508.45
Avg. Inventory(in cr.) 811.50 I\T Ratio 6.66 No. of Days 55 Days (365/IT Ratio)
1937.43 10.16 36 Days
6754.35 5.84 63 Days
Net Asset Turnover Ratio Particular JSPL Net Sales(in cr.) 5410.75 Net Asset(in cr.) Ratio
8114.4 0 66.6%
TATA
SAIL
19,693. 28 47,075. 52
39508.45
41.83%
142.74%
27677.41
Total Asset Turnover Ratio Particular Net Sales(in cr.) Total Asset(in cr.) Ratio
JSPL
TATA
SAIL
5410.75
19,693. 28
39508.45
9735.2 1 55.57%
53844.3
40876.16
36.57%
96.65%
Working Capital Turnover Ratio Particular Net Sales(in cr.) JSPL Page 42
JSPL
TATA
SAIL
5410.75
19,693.
39508.45
Working Capital(in cr.) Ratio
JSPL Page 43
1678.7 6 3.22:1
28 30,193. 66
13118.87
.65:1
3.01:1
