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Index

1)Jindal steel

2) Tata Steel3) Ratio analysis4) Ratios of Jindal steel5) Ratios of Tata steel6) Comparison7) Conclusion

JINDAL STEEL

INTRODUCTION

Jindal Steel and Power Limited (JSPL) isthe most valuable private steel producer in

India, with an annual turnover of over Rs.11,000 crore, Jindal Steel & Power Limited is apart of about billion diversified O. P. JindalGroup. JSPL is a leading player in Steel, Power,Mining, Oil & Gas and Infrastructure. Mr.Naveen Jindal, the youngest son of the lateShri. O P Jindal, drives JSPL and its groupcompanies Jindal Power Ltd, Jindal Petroleum

Ltd., Jindal Cement Ltd. and Jindal Steel Bolivia.The company professes a belief in the concept


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of self-sufficiency. The company produces steeland power through backward integration fromits own captive coal and iron-ore mines.

However, in terms of tonnage, it is the third

largest steel producer in . The companymanufactures and sells store iron, mild steelslabs, ferro chrome, iron ore, mild steel,structural, hot rolled plates and coils and coalbased sponge iron plant. The company is alsoinvolved in power generation.

Jindal Steel and Power is a part of theJindalGroup. (19302005). In 1969, he started Pipe

Unit Jindal India Limited, one of the earlierincarnations of his business empire. After

Jindal's death in 2005, much of his assets weretransferred to his wife, Savitri Jindal. Jindal

Group's management was then split among hisfour sons with naveen jindal as the ManagingDirector of Jindal Steel and Power Limited. His

elder brother, sajjan jindal, is currently the

head of ashocham, an influential body of thechambers of commerce, and the head of JSW

Group, part of O.P. Jindal Group.

Tata steel

Introduction

Tata Steel, formerly known as TISCO and TataIron and Steel Company Limited, is the world'sseventh largest steel company,with an annual

crude steel capacity of 31 million tonnes. It isthe largest private sector steel company in


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India in terms of domestic production.Currently ranked 410th on fortune globe, it isbased in jhamshedpur.It is part of tata group ofcompanies. Tata Steel is also India's second-

largest and second-most profitable company inprivate sector with consolidated revenues of132,110 crore and net profit of over12,350during the year ended March 31,2008.Tata Steel is the 8th most valuable brandaccording to an annual survey conducted byBrand Finance and The Economic Times in2010.

The company is listed on BSE and NSE , andemploys about 82,700 people (as of 2007).TataSteel came into limelight on August 16 when itsuccessfully won the bid for British steel maker

Corus.It was, to date, India's largest everforeign takeover. It made the Tata Group the

world's fifth largest steel maker, and catapultedthem to the global league.

WHAT IS RATIO ANALYSIS

A tool used by individuals to conduct a quantitative analysis

of information in a company's financial statements. Ratiosare calculated from current year numbers and are then


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compared to previous years, other companies, the industry,or even the economy to judge the performance of the

company.Ratio analysis is predominately used by proponentsof fundamental analysis.

Ratios of tata steel

Revenue ratios1)Gross profit ratio-gross profit/net sales*100Gross profit of tata steel- 30271.87Net sales of tata steel- 12062.75Gross profit ratio oftata steel =62.13%

2)Operating ratio- cogs +operatingexpense/net sales*100

Cogs of tata steel 12062.75Operating expense- 8631.05Net sales- 29307.55Operating ratio of tata steel =70.60%

3)Expense ratio-a)Operating expense/netsales*100b)Selling and distribution /netsales*100

c)Office and administration /netsales *100d)Finance expenses/netsales*100

a)Operating expense of tata steel-831.05Net sales of tata steel-29306.55Expense ratio of tata steel=29.44%

b) Finance expenses of tata steel-1300.49

net sales of tata steel -29307.55Finance expenses ratio of tata steel =4.43%


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4) net profit ratio-a)operating net profit/netsales*100

Operating profit of tata steel-9776.85Net sales of tata steel-29307.55Operating profit ratio of tata steel=33.35%

b)net profit before tax/net sales*100net profit before tax of tata steel -9776.85net sales of tata steel-29307.55net profit before tax ratio of tata steel-33.35%

c)net profit after tax net profit after tax /netsales *100net profit after tax of tata steel=6865.69net sales of tata steel =29307.55net profit after tax ratio of tata steel=23.43%

BALANSHEET RATIOS1)current ratio-current asset /current liabilityCurrent asset of tata steel-24212.30Current liability of tata steel-12805.95

Current ratio of tata steel=1.89:1

2)quick ratio- quick asset /quick liabilityQuick asset /quick liability=current asset stock prepaidexpenses/current liability-bank o/dquick asset of tata steel-28166.06quick liability of tata steel-18278.40

quick ratio of tata steel-2.19:1


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3)proprietary ratio =share holders funds /total assets*100total assets-fixed asset + investment +currentasset

shareholders funds of tata steel-46944.63total assets of tata steel-70777.27proprietary ratio of tata steel=66.33%

4) stock working capital ratio-closing stock/working capital *100closing stock of tata steel -3953.76working capital of tata steel-4282.62

stock working capital ratio of tatasteel=92.32%

5)debt equity ratio-loan fund/share holdersLoan fund of tata steel-29801.1Shareholders funds-46944.63Debt equity ratio of tata steel=0.63:1

COMBINED RATIO

2)Return on shareholders fund net profit aftertax/shareholders fund*100

Tata steel- 6865.69/46944.63*100= 14.62%

3)Return on equity capital-net profit after tax


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preference dividend/paid up equity capital*100Tata steel-6865.69/76745.77*100= 8.94%

4)Earning per share-net profit after tax-

preference dividend/no of equity sharesTata steel-6865.69/95.941=71.56rsNo of equity shares=9594.1/10=95.94

5)Price earning ratio-mp per share/no of equityshares

Tata steel nil

6)Dividend payout ratio-dividend per share/earning per sharedividend per share-total equity dividend/no ofsharedividend per share of tata steel-120/100*95.941=115.1292earning per share of tata steel-71.5615dividend payout ratio=0.0011:1


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4) stock working capital ratio-closing stock/working capital *100

closing stock of tata steel -3953.76working capital of tata steel-4282.62stock working capital ratio of tatasteel=92.32%

5)debt equity ratio-loan fund/share holdersLoan fund of tata steel-29801.1Shareholders funds-46944.63

Debt equity ratio of tata steel=0.63:1

COMBINED RATIO


Tata steel- 6865.69/46944.63*100= 14.62%

3)Return on equity capital-net profit after tax preference dividend/paid up equity capital*100

Tata steel-6865.69/76745.77*100= 8.94%

4)Earning per share-net profit after tax-preference dividend/no of equity shares

Tata steel-6865.69/95.941=71.56rs


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No of equity shares=9594.1/10=95.94


Tata steel nil

6)Dividend payout ratio-dividend per share/earning per sharedividend per share-total equity dividend/no ofsharedividend per share of tata steel-120/100*95.941=115.1292

earning per share of tata steel-71.5615dividend payout ratio=0.0011:1

Ratios of JSW

Revenue ratios1)Gross profit ratio-gross profit/net sales*100Gross profit of jsw- 5445.56Net sales of jsw- 23098.85

Gross profit ratio ofjsw =23.58%

2)Operating ratio- cogs +operatingexpense/net sales*100Cogs of jsw 1554.55Operating expense- 17653.29Net sales- 23098.55Operating ratio of jsw =83.16%

3)Expense ratio-a)Operating expense/netsales*100


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b)Selling and distribution /netsales*100c)Office and administration /netsales *100d)Finance expenses/netsales*100

a)Operating expense of jsw-1554.55Net sales of jsw 23098.85Expense ratio of jsw=6.73%

b) Finance expenses of jsw-850.92net sales of jsw-23098.85

Finance expenses ratio of jsw =3.68%

4) net profit ratio-a)operating net profit/netsales*100Operating profit of jsw-4638.38Net sales of jsw-23098.85Operating profit ratio of jsw=20.08%

b)net profit before tax/net sales*100net profit before tax of jsw -2607.80net sales of jsw-23098.85net profit before tax ratio of jsw-11.29%

c)net profit after tax net profit after tax /netsales *100net profit after tax of jsw=2010.67

net sales of jsw =23098.85net profit after tax ratio of jsw=8.70%

BALANSHEET RATIOS1)current ratio-current asset /current liabilityCurrent asset of jsw-10188.37


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Current liability of jsw-12381.95Current ratio of jsw=0.82:1

2)quick ratio- quick asset /quick liability

Quick asset /quick liability=current asset stock prepaidexpenses/current liability-bank o/dquick asset of jsw-6049.96quick liability of jsw-12381.77quick ratio of jsw-0.49:1

3)proprietary ratio =share holders funds /total assets*100total assets-fixed asset + investment +currentassetshareholders funds of jsw-17225.27total assets of jsw 291761proprietary ratio of jsw=59.04%

4) stock working capital ratio-closing stock/working capital *100closing stock of jsw-4138.41working capital of jsw-2193.40stock working capital ratio of jsw=188.68%

5)debt equity ratio-loan fund/share holdersLoan fund of jsw 11951.34Shareholders funds-17225.27Debt equity ratio of jsw=0.69:1


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COMBINED RATIO


jsw- 2010.67/17225.27*100= 14.62%

3)Return on equity capital-net profit after tax preference dividend/paid up equity capital*100

jsw-2010.67-27.60/284.15*100= 697.79%

4)Earning per share-net profit after tax-preference dividend/no of equity shares

jsw-2010.67-27.90/22.31=88.87rs


jsw nil

6)Dividend payout ratio-dividend per share/earning per sharedividend per share-total equity dividend/no ofshare12.25/88.87dividend payout ratio=0.14


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Balance Sheet of JSW Steel ------------------- in Rs. Cr. -------------------

Mar '11

12 mths

Sources Of FundsTotal Share Capital 563.18

Equity Share Capital 284.15

Share Application Money 529.38

Preference Share Capital 279.03

Reserves 16,132.71

Revaluation Reserves 0.00

Networth 17,225.27

Secured Loans 7,675.82

Unsecured Loans 4,275.52

Total Debt 11,951.34

Total Liabilities 29,176.61

Mar '11

12 mths

Application Of Funds

Gross Block 27,407.35

Less: Accum. Depreciation 6,305.20

Net Block 21,102.15

Capital Work in Progress 6,169.05

Investments 4,098.81

Inventories 4,138.41

Sundry Debtors 838.65

Cash and Bank Balance 136.26

Total Current Assets 5,113.32

Loans and Advances 3,324.43

Fixed Deposits 1,750.62

Total CA, Loans & Advances 10,188.37

Deffered Credit 0.00

Current Liabilities 11,984.37

Provisions 397.40

Total CL & Provisions 12,381.77Net Current Assets -2,193.40

Miscellaneous Expenses 0.00


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Total Assets 29,176.61

Contingent Liabilities 8,870.90

Book Value (Rs) 735.80

JWS PNL Statement.

Mar '11

12 mths

IncomeSales Turnover 25,130.76Excise Duty 2,031.91Net Sales 23,098.85Other Income 199.05Stock Adjustments 747.37

Total Income 24,045.27ExpenditureRaw Materials 15,995.19Power & Fuel Cost 1,181.52Employee Cost 534.47Other Manufacturing Expenses 476.58Selling and Admin Expenses 819.68Miscellaneous Expenses 200.40Preoperative Exp Capitalised 0.00Total Expenses 19,207.84

Mar '11

12 mths

Operating Profit 4,638.38PBDIT 4,837.43Interest 850.92PBDT 3,986.51Depreciation 1,378.71Other Written Off 0.00Profit Before Tax 2,607.80Extra-ordinary items 161.89PBT (Post Extra-ord Items) 2,769.69Tax 759.02Reported Net Profit 2,010.67Total Value Addition 3,212.65Preference Dividend 27.90Equity Dividend 273.32Corporate Dividend Tax 48.87Per share data (annualised)Shares in issue (lakhs) 2,231.17Earning Per Share (Rs) 88.87Equity Dividend (%) 122.50Book Value (Rs) 735.80


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ComparisionsRevenue ratios

ross profit ratio 1)used for analyzing trading results2)higher ratio means greater profitabilityattained byincreasing sales

perating ratio 1)indicates profitability and managerialefficiency in controlling costs2)higher ratio means lower margin of profit3)lower ratio means greater margin ofprofit4)comparision with previous year wouldindicate saving or increase in cost

xpenses ratio 1)shows portion of sales consumed byvarious by various items of expenses2)high ratio means lower profitability andinefficiency of management in controllingexpenses

et profit ratio 1)it measures overall profitability andoperating efficiency

2)higher ratio indicates higher profitabilityand lower ratio indicates lower profitability

tock turnover ratio 1)shows efficiency in inventorymanagement2)higher ratio indicates favourable tradingsituation, no loss due to obsolescence as

stock is turned into sales regularly, noexcessive blocking of funds in inventory,overtrading


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3)lower ratio indicates stock ismoveable,blocking of funds, wrong buyingor excessive productiory undertaking

Balance sheet ratioCurrent ratio 1) measures short term financial strength.

2) ability to pay current obligation

3) Higher ratio: sound financial position, idle funds.

4) lower ratio: inadequate working capital, short term

solvency in danger, overtrading.

Quick ratio 1)stringent(tough) test to solvency

2)measures ability to meet the immediate liabilities3)qualitative test to measure liquidity


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4)higher ratio: sound financial position, idle funds

5)lower ratio: dangerous financial position inability to

meet immediate obligations

Proprietary

ratio

1)shows percentage of total assets financed by the

proprietor

2)all fixed assets and part of current assets should be

financed our of proprietors fund in order to build a soli

foundation of the company

3)higher ratio: lesser dependence on outside funds- sou

financial position but over capitalization and low returns

4)lower ratio: more dependence on outside funds undecapitalization over trading unsound financial position

Stock to

working

capital

1)extent of working capital blocked in stock

2)higher ratio: unsound working capital position if stock

not saleable, situation becomes becomes dangerous.

3)lower ratio: sound working capital position and effecti

inventory management.

Debt equity

ratio

1)test of long term financial policy or capital structure

the company

2)higher ratio indicates greater dependence on loans,

higher amount of interest payable.

Such trading on equity affects adversely during recessi

3)lower ratio indicates low owed funds

Capital

Gearing Ratio

or Leverage

ratio

1) If fixed interest, dividend bearing capital exceeds th

equity capital and reserves, the company is said to be

highly geared.

2) High gearing is favorable only when rate of earning o

the greater than fixed interest.

3) It may amount to under capitalization.

4) Equity shareholders except higher dividend and sharbecome speculative.


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Last gearing

1)majority interest lies with equity shareholders

2)over capitalization

3)low rate of return on equity shares

Combined ratios

eturn on

apital

mployed

1)this is the broadest measure of performance

2)higher ratio is regarded as favorable and lower ratio is

unfavorable

eturn on

hareholders

und

1)it shows earning power of proprietors funds. Minimum

return should be earned to keep proprietors happy

2)the ratio is helpful for future investors3)high rate of return means growing and prosperous

company. Lower is unfavorable

eturn on

quity capital

1)it shows the profitability of the company in terms of

earning available for equity shareholders

2)higher ratio means effective use of equity capital and

advantage of trading on equity

3)lower ratio indicates low profitability

arnings per 1)higher ratio signifies that the company may pay dividend


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hare at a higher rate in future

2)it indicates the possibility of issue of bonus share in

future

3)higher ratio shows higher profitability

4)this ratio also shows effective utilization of equity capital

ebtors

urnover

atio

1)this ratio is calculated to indicate turnover of debtors i.e.

on an average within how much time debtors are received in

cash

ividend

ayout ratio

1)the purpose of this ratio is to find out earning used for

payment of dividend and the proportion of earning retained

CONCLUSION


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Gross Profit Ratio : Higher the profit,betterit is. TATA steel has a better Profit Percentage(62.13%)

Expenses Ratio : Lower the ratio, better it

is. Tata steel has a lower Ratio (19.5%).

Net Profit Ratio : Higher the ratio,

better is the business. TATA has a better Netprofit Ratio. (33.35%0

Thus It indicates leTATA steel is preferred forinvestment as:

It has financial sound position as compared to

JSW.

1.Current ratio

.Quick rsser dependance on outside funds

1.Proprietory Ratio

It indicates low owed funds

1. Debt Equity ratio

It indicates growing and prosperous company

1.Return on proprietors funds


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It is profitable

1.Gross Profit

2.Net profit

Better profit for investors

1.. earning per share

Thus we conclude that tata steel is a bettercomapany to invest in.

It indicates low owed funds

Debt Equity ratio

It indicates growing and prosperous company

Return on proprietors funds

It is profitable

Gross Profit

Net profit

Better profit for investors

a. earning per share

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