This report is analysis of Bhushan Steel's stock price, and its comparison with Steel Industry and Competitor Tata Steel
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fundamentals of corporate finance 11th canadian edition test bank.docx
Bhushan Steel - A report and complete analysis of stock price
1. By-
Maneesh Garg
November 2011
11jgbs-mgarg@jgu.edu.in
Industry and Company
Analysis- Bhushan Steel Ltd.
Analysis with the help of Beta Value, Min. Variance point, and other Financial indicators
2. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
Table of Contents
Introduction - Steel Industry: .............................................................................................................................................................................................................................................................2
Company overview – Bhushan Steel Ltd........................................................................................................................................................................................................................................3
Financial Analysis (5 years Sales and Profit) ...............................................................................................................................................................................................................................5
Rate of Return ............................................................................................................................................................................................................................................................................................6
5 years Performance chart of Bhushan Steel stock (Source : moneycontrol.com) .....................................................................................................................................................7
Quarterly and Yearly Rate of Return Analysis.............................................................................................................................................................................................................................8
Yearly Rate of Return ........................................................................................................................................................................................................................................................................8
Quarterly Sales and Profit analysis ............................................................................................................................................................................................................................................... 10
Sales Turnover .................................................................................................................................................................................................................................................................................. 10
Net Profit ............................................................................................................................................................................................................................................................................................. 11
Monthly Rate of Return Analysis .................................................................................................................................................................................................................................................... 12
Volatility .................................................................................................................................................................................................................................................................................................... 14
Choice of Efficient Portfolio through Correlation:- ................................................................................................................................................................................................................ 15
Minimum Variance Point ................................................................................................................................................................................................................................................................... 15
BETA ESTIMATION FOR BHUSHAN STEEL LTD. - 2007 to 2011 .................................................................................................................................................................................... 21
Conclusion ................................................................................................................................................................................................................................................................................................ 24
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 1
3. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
Introduction - Steel Industry:
The Indian iron and steel industry is nearly a century old, with Tata Iron & Steel Co (Tata Steel) as the first integrated steel plant to be set
up in 1907. The steel industry is expanding worldwide. For a number of years it has been benefiting from the exceptionally buoyant Asian
economies (mainly India and China). The economic modernization processes in these countries are driving the sharp rise in demand for
steel.
The New Industrial policy adopted by the Government of India has opened up the iron and steel sector for private investment by
removing it from the list of industries reserved for public sector and exempting it from compulsory licensing. Imports of foreign
technology as well as foreign direct investment are freely permitted up to certain limits under an automatic route. While the existing
units are being modernized/expanded, a large number of new/greenfield steel plants have also come up in different parts of the country
based on modern, cost effective, state of-the-art technologies.
Soaring demand by sectors like infrastructure, real estate and automobiles, at home and abroad, has put India's steel industry on the
world map. India's steel production during 2009-10 was 64.88 million tons (MT), up 11% from a year ago. India has emerged as the fifth
largest producer of steel in the world and is likely to become the second largest producer of crude steel by 2015-16.
LIST OF COUNTRIES IN STEEL PRODUCTION (in Million MT) - 2009
Dominating the Indian horizon is steel giant Tata Steel, whose
takeover of the UK-Dutch steel company Corus is the
country's biggest buyout. Meanwhile, the LN Mittal-owned
Mittal Steel acquired French steel company Arcelor to create
the world’s number one steel company, Arcelor Mittal; and
Korean steel giant POSCO is pumping money into mines and
steel plants in Orissa to emerge as one of the biggest steel
plants in the state.
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 2
4. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
World's 10 Largest Steel Companies
No Company Name Country Crude Steel Output per year
1 ArcelorMittal Luxembourg 103,300,000 (
M
2 Nippon Steel Japan 37,500,000 T
)
3 Baosteel China 35,400,000
4 Posco South Korea 34,700,000
5 Hebei Iron & Steel Group China 33,300,000
6 JFE Holdings Japan 33,000,000
7 Wuhan Iron & Steel Group (Wisco) China 27,700,000
8 Tata Steel India 24,400,000
9 Jiangsu Shagang Group China 23,300,000
10 U.S. Steel USA 23,200,000
Company overview – Bhushan Steel Ltd.
Bhushan Steel Ltd formerly known as Bhushan Steel & Strips Ltd. is a globally renowned one of the leading prominent player in Steel
Industry. Backed by more than two decades, of experience in Steel making, Bhushan Steel is now India’s 3rd largest Secondary Steel
Producer after SAIL and TISCO with an existing steel production capacity of 1.25MTPA (approx.).
The company is a source for vivid variety of products such as Cold Rolled Closed Annealed, Galvanized Coil and Sheet, High Tensile Steel
Strapping, Colour Coated Coils, Galume Sheets and Coils, Hardened & Tempered Steel Strips, Billets, Sponge Iron, Precision Tubes and
Wire Rod.
Major raw materials for company are CR/HR Coils/Strips/Skelp, Coal, Iron Ore, Zinc & Alloy Zinc, Paints and Dolomite.
As one of the prime movers of the technological revolutions in Indian Cold Rolled Steel Industry, BSL has emerged as the country’s largest
and the only Cold Rolled Steel Plant with an independent line for manufacturing Cold Rolled Coil and Sheet up to a width of 1700mm, as
well as Galvanized Coil and Sheet up to a width of 1350 mm.
Bhushan Steel Limited, is an ISO 9002, QS 9000 certified and a company of Rs. 2868 crores ($650 million approx.).
Given a vibrant Steel industry dynamics in India, BSL is on a course to become fully Integrated Steel & Power Company with market
leading offerings in value added Steel in Automotive and White Good Segment
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 3
5. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
The company has three manufacturing units in India.
(i) In Maharashtra (Khopoli Unit) established in 2004 with capacity of 425000 MT per annum
(ii) In U.P. (Sahibabad Unit) established in 1987 with capacity of 475,000 MT per annum.
(iii) In Orissa (Meramandali Unit) Company has partially installed the Phase II of the integrated steel plant at Orissa with the
production facility of Hot Roll Coil Mill (1.90 Mtpa.
Expansion Projects:
The company started its backward integration with capacity of 1.9 MTP EXPANSION PROJECT A of hot rolled steel at its integrated steel
plant at Orissa coupled with another capacity expansion (a brownfield one) which shall enhance the HR capacity to 4.40 MTPA by Oct.
201 2. Another expansion plans in future are as follows:
(ii)In West Bengal a 2 million tons per annum steel & 1000 MW thermal power plant by its subsidiary Bhushan Energy.
(iii)Chhattisgarh Govt. has signed MOU with Bhushan Energy Ltd. for setting up 1000MW Power Plant with an investment of INR
40Billion.
Customers:
BSL to be a favourite with all quality conscious users of Automobiles & White Goods/Domestic Appliances & General Engineering
Industries, Maruti Udyog, Honda Siel Cars, Telco, Hindustan Motors , General Motor, Hyundai Motors, Ford Motors, Mahindra & Mahindra,
Eicher Tractors, Ashok Leyland, LG Electronics, Whirlpool, Videocon, Daikin Shriram, National Matsushita, Samsung Electronics, Godrej,
Voltas, IFB, Fedders Lloyd, Carrier Refrigeration, Electrolux Group, Hitachi Air conditioners, SKF Bearing, Crompton Greaves, Philips India,
BHEL, Alstom Limited, L&T,BPL,GE Motors, Johnson Lift, Kone Elevator, Lucas TVS,NRB Bearing, Harsha Engineers Limited, Bundy India
Limited, Tecumesh, Bajaj Auto, Honda Motorcycle, Yamaha, Bajaj Tempo.
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 4
6. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
Financial Analysis (5 years Sales and Profit)
Financial Analysis
8000 7576
7000
6003 6349
6000 5410
5135
Value in Rs.
4673
5000 4202
4293
4000 3917
3547
3000
2000 1117 1227
655 756 868 1005
1000 846
313 424 421
0
2007 2008 2009 2010 2011
Export Sales Domestic Sales Gross Sales Net Profit
From the last five year trend of sales and profit, we see the following percentage growth of the company from year 2007 to 2011:- The
export sales of the company grown by 87% and domestic sales grown by 79%. Hence the gross sales of the company increased by 80%.
Along with all these interpretations we can easily deduce from the data that net profits of the company more than tripled during this term
2007 to 2011.
Key Financial Indicators
Mar '11 Mar '10 Mar '09 Mar '08 Mar '07
Face Value 2 10 10 10 10
Dividend Per Share 0.5 2.5 2.5 2.5 2.5
Operating Profit Per Share (Rs) 95.61 342.05 257.44 196.68 147.89
Debt Equity Ratio 2.86 2.89 3.98 3.52 2.67
Earnings Per Share 47.16 199.09 99.2 99.77 73.76
Dividend Payout Ratio 1.29 1.46 2.94 2.93 3.96
Source : Dion Global Solutions Limited
Company split the shares in September 2010 from the face value of 10 to 2 Rs. That is the reason dividend per share and EPS has fall
down.
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 5
8. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
5 years Performance chart of Bhushan Steel stock (Source : moneycontrol.com)
As we can see from the graph that there is
4 times that the price of the stock went up
sharply. The potential reasons for these
sharp increases can be as follows:-
1. January 2008- Bhushan Steel
planned for new steel plant in
Orissa.
2. April 2010- The Company
expanded its production capacity
from 1.2 Mt to 2.3 Mt.
3. October 2010- The steel industry
was booming at this time. And the
steel prices headed up.
4. April 2011- The board of the
company approved for raising
USD 1 bn through issue of
securities.
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 7
10. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 9
11. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
Quarterly Sales and Profit analysis
Sales Turnover
Sum of Sales Turnover Column Labels
Row Labels 2006 2007 2008 2009 2010 2011 Grand Total
Mar 1054.66 1215.07 1119.95 1608.74 1966.16 6964.58
Jun 938.03 1319.79 1304.7 1372.65 2231.78 7166.95
Sep 994.71 1068.12 1516.96 1298.48 1718.91 6597.18
Dec 1000.81 982.73 1003.69 1429 1942.74 6358.97
Grand Total 1995.52 4043.54 5055.51 5152.13 6643.04 4197.94 27087.68
350
300
250
2006
2007
200
2008
150 2009
2010
100
2011
50
0
Mar Jun Sep Dec
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 10
12. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
Net Profit
Sum of Net Profit Column Labels
Row Labels 2006 2007 2008 2009 2010 2011 Grand Total
Mar 109.7 135 116.4 240.93 287.96 889.99
Jun 98.14 132.68 171.87 205.74 209.96 818.39
Sep 69.59 103.41 142.97 189.16 259.02 764.15
Dec 71.72 74.57 20.74 227.43 280.35 674.81
Grand Total 141.31 385.82 431.39 704.86 986.04 497.92 3147.34
350
300
250 2006
2007
200
2008
150 2009
2010
100
2011
50
0
Mar Jun Sep Dec
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 11
13. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
Monthly Rate of Return Analysis
MONTHLY RATE OF RETURN ANALYSIS Jan'2007 to Oct'2011
2007 - Rate of 2008 - Rate of 2009 - Rate of 2010 - Rate of 2011 - Rate of
Month Month Month Month Month
Return (%) Return (%) Return (%) Return (%) Return (%)
Jan 13.9 Jan -29.9 Jan -8.9 Jan -1.0 Jan -16.3
Feb -6.6 Feb -5.5 Feb 4.4 Feb 11.3 Feb -5.2
Mar 28.6 Mar -35.2 Mar 31.8 Mar 4.9 Mar 16.1
Apr 4.7 Apr 20.8 Apr 5.5 Apr 6.4 Apr 14.2
May 22.9 May 13.1 May 53.1 May -21.7 May -8.8
Jun 5.4 Jun -10.8 Jun 2.8 Jun 1.2 Jun -3.6
Jul 1.2 Jul 14.3 Jul 19.0 Jul 9.9 Jul -10.7
Aug 8.3 Aug -8.9 Aug 37.7 Aug 16.9 Aug -12.2
Sep 22.1 Sep -20.4 Sep 30.4 Sep -77.1 Sep -2.9
Oct 14.4 Oct -4.4 Oct -17.8 Oct 19.3 Oct 2.6
Nov 26.7 Nov -38.5 Nov 16.0 Nov -12.7 Nov #DIV/0!
Dec 15.2 Dec -20.2 Dec 8.6 Dec 9.4 Dec #DIV/0!
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 12
14. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
Prices are
likely to go up
2007 - Rate of Return (%) by by Rs 500 to
K'taka plans
permanent ban 2008 - Rate of Return (%)
The government forced Rs 1,000, on
the corrugated on iron ore
all the manufacturers to 28.6 Increase in steel prices
galvanized exports.
30.0
reduce prices 26.7
Sheets 30.0 20.8
22.9 News for startup 22.1
of Orissa plant at 20.0 13.1 14.3
20.0 year end
14.4 15.2 10.0
13.9
8.3 0.0
10.0 4.7 5.4
-10.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
1.2 -10.8
-5.5 -8.9 -4.4
0.0 -20.0 -20.4 -20.2
-30.0
Oct
Dec
Feb
Apr
Aug
Jan
May
Jun
Jul
Mar
Sep
Nov
-29.9 Secondary steel cos to
-10.0 -6.6 -40.0 -35.2 cut prices by Rs 4K/ts
-38.5
Buy rating from SAT clears
all the Bhushan's open
brockrage offer for Orissa
2009 - Rate of Return (%) 2010 - Rate of Return (%) houses Sponge
Bhushan gets Bhushan Steel, plans
SEBI nod for $3.5bn steel plant 19.3
16.9
60.0 Orissa Sponge 53.1 20.0 11.3 9.9 9.4
open offer 6.4 1.2
4.9
37.7
40.0 31.8 0.0
30.4
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
19.0
16.0 -20.0 -1.0 -12.7
20.0 8.6
-21.7
4.4 5.5 2.8 -40.0 Stock split
from face
0.0 value 10 to 2
-60.0 I-T Dept raids
Oct
Dec
Apr
Aug
Feb
Jan
May
Jun
Jul
Mar
Sep
Nov
Bhushan Steel,
Bhushan Power
-20.0 -8.9
-17.8 -80.0 -77.1
The global steel mining
demand has 2011 - Rate of Return (%) industry is
Yearly Return (%)
gone up by 13% likely to face a
in the year 2010 loss of nearly
Rs 16000 crore
20.0 board had
from illegal
16.1 approved mining in 400.0 360.6
raising up
14.2 Karnataka. 314.4
to USD 1 350.0
15.0 billion
All brockrage
through Rupee 300.0
houses were an issue of depreciation
10.0 giving sell
securities to cause hike 250.0
rating in after in steel prices:
january 2011 200.0
October
5.0 150.0
2.6
100.0 -67.4 -27.7
-79.7
0.0 50.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct 0.0
-5.0 -50.0 2007 2008 2009 2010 2011
-5.2 -3.6 -2.9
-100.0
-10.0 -8.8
-10.7 Growth for India's steel industry has been
-12.2 hampered by regulatory and environmental
-15.0 hurdles, land acquisition delays and social
-16.3 opposition .
-20.0
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 13
15. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
Volatility
Volatility of Stock (Jan'2007 to Oct'2011) - Bhushan Steel Ltd.
36
32
28
24
20
Volatility
16
12
8
4
0
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2007 2007 1.6 1.1 1.9 1.7 2.1 1.2 1.1 3.7 4.6 3.9 8.8 3.6
2008 2008 5.3 3.8 3.5 2.5 2.8 2.0 2.0 1.5 1.7 4.8 4.5 3.3
2009 2009 2.7 4.8 5.3 2.8 8.9 4.9 5.4 3.6 4.1 2.7 3.0 1.5
2010 2010 3.1 2.7 1.7 1.7 2.5 2.3 1.0 1.8 34.9 3.9 3.0 3.0
2011 2011 2.7 2.7 1.7 1.8 1.8 2.1 1.7 2.6 2.3 1.8
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 14
16. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
Choice of Efficient Portfolio through Correlation:-
To make the efficient portfolio we are taking Tata Motors as an additional company with Bhushan Steel. As finished product of Bhushan
Steel (Steel Industry) is raw material for Tata Motors (Automobile Industry) so we chose Tata Motors for comparison.
Minimum Variance Point
5 years from 2007-2011
Bhushan Steel (A) Tata Motors (B)
Correlation E(P)
E(A) σA E(B) σB
0
-0.0093 5.8719 -0.1292 5.7884 0.1325
3 3.5 4 4.5 5 5.5 6 6.5
-0.02
w1 w2 E(P) σP -0.04
Min.Var.point-
By investing
1 0 -0.01 5.87 50% in
Bhushan Steel
0.9 0.1 -0.02 5.39 -0.06 & 50% in Tata
E(p)
0.8 0.2 -0.03 4.98 Motors we can E(P)
-0.08 minnimize the
0.7 0.3 -0.05 4.67 risk in 5 years
0.6 0.4 -0.06 4.46 time. return -
-0.1 .07
0.5 0.5 -0.07 4.39
0.4 0.6 -0.08 4.44 -0.12
0.3 0.7 -0.09 4.63
0.2 0.8 -0.11 4.93 -0.14
0.1 0.9 -0.12 5.32
0 1 -0.13 5.79
Minimum Variance point is at 4.39. At this point the weights for Bhushan Steel & Tata Motors are .50 & .50 respectively. Which means by
investing 50% in Bhushan Steel & 50% in Tata Motors we can minimize the risk in 5 years’ time.
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 15
17. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
Year 2007
BHUSHAN Steel TATA MOTORS
Correlation E(P)
E(A) σA E(B) σB
0.60
0.5652 3.7110 -0.0909 2.1334 0.2362 Min.Var.point-
By investing
0.50 20% in Bhushan
As we can see Steel & 80% in
that Bhushan Tata Motors we
w1 w2 E(P) σP Steel and Tata 0.40 can minnimize
Motor have the risk.
1 0 0.57 3.71 correlation of return .040
0.30
0.9 0.1 0.50 3.40 0.2362 i.e.they
are positively
0.8 0.2 0.43 3.10
E(p)
correlated and 0.20 E(P)
0.7 0.3 0.37 2.82 thus it means
that this is an
0.6 0.4 0.30 2.57 average 0.10
0.5 0.5 0.24 2.35 portfolio to
invest in. As this
0.4 0.6 0.17 2.18 will not reduce 0.00
0.3 0.7 0.11 2.06 the risk involved 0.0 1.0 2.0 3.0 4.0
in the portfolio
0.2 0.8 0.04 2.02 to the great -0.10
0.1 0.9 -0.03 2.04 extent.
0 1 -0.09 2.13 -0.20
Minimum Variance point is at 2.02. At this point the weights for Bhushan Steel & Tata Motors are .20 & .80 respectively. This means by
investing 20% in Bhushan Steel & 80% in Tata Motors we can minimize the risk.
Correlation
As we can see that Bhushan Steel and Tata Motor have correlation of 0.2362 i.e. they are positively correlated and thus it means that this
is an average portfolio to invest in. As this will not reduce the risk involved in the portfolio to the great extent
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 16
18. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
Year 2008
BHUSHAN Steel TATA MOTORS
Correlation E(P)
E(A) σA E(B) σB
-0.634
-0.6478 3.5419 -0.6357 4.0329 0.3117 3.00 3.20 3.40 3.60 3.80 4.00 4.20
-0.636
This portfolio is less
-0.638
w1 w2 E(P) σP attractive then 2007
portfolio.
1 0 -0.65 0.00 As we can see that -0.640
0.9 0.1 -0.55 0.00 Bhushan Steel and
Tata Motor have Min.Var.point- By investing 40%
E(p)
0.8 0.2 -0.46 0.00 correlation of -0.642 in Bhushan Steel & 60% in Tata
E(P)
0.7 0.3 -0.36 0.00 0.3117 i.e.they are Motors we can minnimize the
positively -0.644 risk. return -.641
0.6 0.4 -0.26 0.00 correlated and thus
0.5 0.5 -0.17 0.00 it means that it is
not a good portfolio -0.646
0.4 0.6 -0.07 0.00 to invest in. As this
0.3 0.7 0.02 0.00 will not reduce the -0.648
0.2 0.8 0.12 0.00 risk involved in the
portfolio to the
0.1 0.9 0.22 0.00 great extent. -0.650
0 1 0.31 0.00
Minimum Variance point is at 3.16. At this point the weights for Bhushan Steel & Tata Motors are .40 & .60 respectively. This means by
investing 40% in Bhushan Steel & 60% in Tata Motors we can minimize the risk.
Correlation
This portfolio is less attractive then 2007 portfolio.
As we can see that Bhushan Steel and Tata Motor have correlation of 0.3117 i.e. they are positively correlated and thus it means that it is
not a good portfolio to invest in. As this will not reduce the risk involved in the portfolio to the great extent.
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 17
19. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
Year 2009
BHUSHAN Steel TATA MOTORS
Correlation Min.Var.point-
E(P)
E(A) σA E(B) σB By investing
60% in
0.670 Bhushan Steel
0.6255 4.6430 0.6676 4.2030 0.4529
& 40% in Tata
0.665 Motors we can
minnimize the
0.660 risk. return
w1 w2 E(P) σP This portfolio is less 0.655
.651
attractive then 2007 &
1 0 0.63 4.64 2008 both. 0.650
0.9 0.1 0.63 4.39 As we can see that
E(p)
Bhushan Steel and 0.645
0.8 0.2 0.63 4.16 Tata Motor have E(P)
0.7 0.3 0.64 3.98 correlation of 0.4529 0.640
i.e.they are positively
0.6 0.4 0.64 3.85 correlated and thus it 0.635
means that it is not a
0.5 0.5 0.65 3.77 good portfolio to 0.630
0.4 0.6 0.65 3.75 invest in. As this will
not reduce the risk
0.3 0.7 0.65 3.78 involved in the
0.625
0.2 0.8 0.66 3.87 portfolio to the great
extent. 0.620
0.1 0.9 0.66 4.01 3.0 3.5 4.0 4.5 5.0
0 1 0.67 4.20
Minimum Variance point is at 3.85. At this point the weights for Bhushan Steel & Tata Motors are .60 & .40 respectively. This means by
investing 60% in Bhushan Steel & 40% in Tata Motors we can minimize the risk.
Correlation
This portfolio is less attractive then 2007 & 2008 both.
As we can see that Bhushan Steel and Tata Motor have correlation of 0.4529 i.e.they are positively correlated and thus it means that it is
not a good portfolio to invest in. As this will not reduce the risk involved in the portfolio to the great extent.
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 18
20. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
Year 2010
BHUSHAN Steel TATA MOTORS Min.Var.point- By investing
E(A) σA E(B) σB
Correlation 0% in Bhushan Steel & 100%
in Tata Motors we can
E(P)
minimize the risk. Return
0.30 .199
-0.4447 10.5881 0.1994 0.0648
2.3500 0.20
0.10
w1 w2 E(P) σP This portfolio is
1 0 -0.44 10.59 attractive than
previous years. 0.00
0.9 0.1 -0.38 9.55 As we can see that 0.0 2.0 4.0 6.0 8.0 10.0 12.0
Bhushan Steel and
E(p)
0.8 0.2 -0.32 8.51 -0.10 E(P)
Tata Motor have
0.7 0.3 -0.25 7.49 correlation of 0.068
0.6 0.4 -0.19 6.48 i.e.they are less -0.20
positively correlated
0.5 0.5 -0.12 5.50 and thus it means
that it is a good -0.30
0.4 0.6 -0.06 4.55
portfolio to invest in.
0.3 0.7 0.01 3.67 As this will reduce
-0.40
0.2 0.8 0.07 2.92 the risk involved in
the portfolio.
0.1 0.9 0.14 2.43 -0.50
0 1 0.20 2.35
Minimum Variance point is at 10.59. At this point the weights for Bhushan Steel & Tata Motors are 0.00 & 1.00 respectively. This means by
investing 0% in Bhushan Steel & 100% in Tata Motors we can minimize the risk.
Correlation
This portfolio is attractive than previous years. As we can see that Bhushan Steel and Tata Motor have correlation of 0.068 i.e.they are less
positively correlated and thus it means that it is comparatively a good portfolio to invest in. As this will reduce the risk involved in the
portfolio.
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 19
21. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
Year 2011
BHUSHAN Steel TATA MOTORS
Correlation E(P)
E(A) σA E(B) σB
0.000
-0.1577 2.2231 -0.9155 0.2016 1.0 3.0 5.0 7.0 9.0 11.0 13.0
11.8753 -0.100
-0.200
Min.Var.point- By investing 100% in
w1 w2 E(P) σP As we can see that Bhushan Steel & 0% in Tata Motors
Bhushan Steel and -0.300 we can minimize the risk.
1 0 -0.16 2.22 Tata Motor have Return -.916
0.9 0.1 -0.23 2.52 correlation of 0.2016 -0.400
i.e.they are positively
0.8 0.2 -0.31 3.24 correlated and thus it
E(p)
-0.500 E(P)
0.7 0.3 -0.39 4.17 means that this is an
0.6 0.4 -0.46 5.19 average portfolio to
invest in. As this will
-0.600
0.5 0.5 -0.54 6.26 not reduce the risk
0.4 0.6 -0.61 7.36 involved in the -0.700
portfolio to the great
0.3 0.7 -0.69 8.47 extent. -0.800
0.2 0.8 -0.76 9.60
0.1 0.9 -0.84 10.73 -0.900
0 1 -0.92 11.88
-1.000
Minimum Variance point is at 2.22. At this point the weights for Bhushan Steel & Tata Motors are 1.00 & 0.00 respectively. This means by
investing 100% in Bhushan Steel & 0% in Tata Motors we can minimize the risk.
Correlation
As we can see that Bhushan Steel and Tata Motor have correlation of 0.2016 i.e.they are positively correlated and thus it means that this is
an average portfolio to invest in. As this will not reduce the risk involved in the portfolio to the great extent.
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 20
22. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
BETA ESTIMATION FOR BHUSHAN STEEL LTD. - 2007 to 2011
As we can see from the graph that beta value is 0.7581. This
shows that Bhushan stock is less risky than Market. This is also
evident from that the graph that returns from Bhushan Steel is
less then market return.
As we can see from the graph that beta value is 0.6038. This
shows that Bhushan stock is less risky than Market. This is also
evident from graph that the graph that returns from Bhushan
Steel is less then market return.
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 21
23. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
As we can see from the graph that beta value is 1.0465. This
shows that Bhushan stock is as much risky as Market. This is
also evident from the graph that return from Bhushan Steel is
almost equal to market return.
As we can see from the graph that beta value is 1.2971. Which
shows that Bhushan stock is more risky then Market. This is also
evident from that the graph that returns from Bhushan Steel is
more than market return. Because as the risk increases the
return also increases.
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 22
24. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
As we can see from the graph that beta value is 1.0465. Which
shows that Bhushan stock is slightly more risky as compared to
Market. This is also evident from the graph that return from
Bhushan Steel is slightly more than market return.
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 23
25. Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011
Conclusion
Risk & Return Table 2007-2011
Year w1 w2 E(P) σA σB σP Correlation Expected Return Beta Value
2007 0.2 0.8 0.040 3.7110 2.133 2.015 0.24 0.040 0.758
2008 0.4 0.6 -0.641 3.542 4.033 3.162 0.31 -0.641 0.604
2009 0.6 0.4 0.642 4.643 4.203 3.851 0.45 0.651 1.047
2010 0 1 -0.445 10.588 2.350 10.588 0.06 0.199 1.297
2011 1 0 -0.158 2.223 11.875 2.223 0.20 -0.916 1.056
Market Return v/s Bhushan Yearly Return(%) Trend (2007 to 2011) Min. Varience Portfolio
345.7 1 1
350.0 306.2 1
300.0 0.9 0.8
Yearly Return-Bhushan 0.8
250.0 0.7 0.6 0.6
200.0 Yearly Return-Nifty 0.6
W
0.5 0.4 0.4
Return %
150.0 0.4
100.0 53.2 71.5 0.3 0.2
0.2
50.0 17.2
-30.3 -13.5 0.1 0 0
0.0 0
2007 2008 2009 2010 2011 2007 2008 2009 2010 2011
-50.0 -51.8
Year -67.9
-100.0 -79.8 Bhushan Steel Tata Motors
Above minimum variance portfolio chart is showing that in year 2007 risk optimum investment would be 20% in Bhushan and 80% in Tata
Motors. Similarly in 2008 40% investment in Bhushan Steel and 60% in Tata Motors would reduce the risk to minimum level. In year 2009 this
ratio would be 60% and 40%. In 2010 it would be 0% and 100% and in year 2011 investing 100% in Bhushan and 0% in Tata Motors will
minimize the risk.
Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 24