my graduation 3rd year project

1. 1
MAJOR PROJECT REPORT
On
Comparative study of the financial analysis of
Tata steel and Jindal Steel
Submitted in partial fulfillment of the requirement of
Bachelors of Business Administration (BBA)
Guru Gobind Singh Indraprastha University,
Delhi
Faculty Guide Submitted By:
Vipul Singh Archit Aggarwal
Assistant Professor
SESSION 2014 – 2015
Guru Gobind Singh Indraprastha University
Sector-16C, Dwarka,
New Delhi – 110075

2. 2
MAJOR PROJECT REPORT
On
Comparative study of the financial analysis of
Tata steel and Jindal Steel
Submitted in partial fulfillment of the requirement of
Bachelors of Business Administration (BBA)
Guru Gobind Singh Indraprastha University,
Delhi
Faculty Guide Submitted By:
Vipul Singh Archit Aggarwal
Assistant Professor
SESSION 2014 – 2015
Guru Gobind Singh Indraprastha University
Sector-16C, Dwarka,
New Delhi – 110075

3. 3
CERTIFICATE
This is to certify that Archit Aggarwal, 11121401712 of Jagannath International
Management school has successfully completed his major research project on Ratio
Analysis used to Comparative study of the financial
statement analysis of Tata steel and Jindal Steel under my guidence and as per
requirements of Guru Gobind Singh Indraprastha University.
This project is original and has not been submitted elsewhere.
Date
Signature of Guide
Place: Vipul Singh
(Assistant Professor)

4. 4
ACKNOWLEDGMENT
I have taken efforts in this project. However, it would not have been possible without the
kind support and help of many individuals and organizations. I would like to extend my
sincere thanks to all of them.
I am highly indebted to Mr.VIPUL SINGH (ASSISTANT PROFESSOR) for their
guidance and constant supervision as well as for providing necessary information regarding
the project & also for their support in completing the project.
I would like to express my gratitude towards my parents & member of Jagannath
International Management school for their kind co-operation and encouragement
which help me in completion of this project.
I would like to express my special gratitude and thanks to industry persons for giving me
such attention and time.
My thanks and appreciations also go to my colleague in developing the project and people
who have willingly helped me out with their abilities.
Date: 15 September 2013 Archit Aggarwal
BBA 5-B EVENING
11121401712

5. 5
DECLARATION
I hereby declare that the project work entitled Ratio Analysis used to Comparative study of
the financial statement analysis of Tata steel and Jindal Steel submitted to the
[UNIVERSITY NAME], is a record of an original work done by me under the guidance of
Mr.VIPUL SINGH (ASSISTANT PROFESSOR), Faculty Member of Jagannath
International Management school and this project work has not performed the basis for the
award of any Degree or diploma/ associate ship/fellowship andsimilar projectif any.
Archit Aggarwal
11121401712

6. 6
TABLE OF CONTENTS
S.NO. Particulars Page
No
1 INTRODUCTION 8
2 OBJECTIVE OF THE STUDY 38
34 Research Methodology 40
5 Conceptual Discussion 47
6 Analysis 54
7 Findings/ Observations 57
8 Conclusion 58
9 RECOMMENDATION 59
10 REFERENCES 60

7. 7
Introduction

8. 8
1. Introduction
1.1. Overview of Steel Industry
The steel sector is one of the most crucial sectors in the development of a nation and
is considered as the backbone of civilisation. The level of per capita consumption of
steel is an important determinant of the socio-economic development of the country.
The Indian steel industry has entered a new development stage since 2007–08 and is
riding on the resurgent economy and the growing demand for steel. India’s 33 per
cent growth in steel production in the last five years was second only to China
among the top five steel producing nations, according to data by World Steel
Association (WSA).
India is the fourth largest producer of crude steel and the largest producer of soft
iron in the world. Presently, the Indian steel industry employs around 500,000
people while the per capita consumption in 2013 stood at around 57.8 kilograms.
However, these figures are expected to rise with increased industrialisation
throughout the country.
Market Size
According to the data released by Department of Industrial Policy and Promotion
(DIPP), the Indian mining and metallurgical industries attracted foreign direct
investments (FDI) to the tune of US$ 1,467.88 million and US$ 8,267.99 million,
respectively, in the period April 2000–August 2014.
The Indian steel industry is divided into primary and secondary sectors. The primary
sector comprises a few large integrated steel providers producing billets, slabs and
hot rolled coils. The secondary sector involves small units focused on the production
of value-added products such as cold rolled coils, galvanised coils, angles, columns,
beams and other re-rollers, and sponge iron units. Both sectors cater to different
market segments.
Companies such as Steel Authority of India Ltd (SAIL), RashtriyaIspat Nigam Ltd
(RINL) and NMDC Ltd are responsible for the bulk of the production in the public
sector, while companies such as Tata Steel, JSW Steel and Essar Steel are some of
the big names in the private sector of the Indian steel industry.
Steel production in the country has increased at a compound annual growth rate
(CAGR) of 6.9 per cent over 2008–2012. The infrastructure sector accounts for close

9. 9
to 60 per cent of the country's total steel demand while the automobile industry
accounts for 15 per cent.
Investments
The steel industry and its associated mining and metallurgy has seen a number of
major investments and developments in the recent past. Some of them are as
follows:
 Adani Enterprises Ltd has planned to buy out the royalty rights of Carmichael coal
project from Linc Energy Ltd for a sum of US$ 145 million. It is estimated that this
project will provide electricity for up to 100 million people in India.
 Jindal SAW Ltd has entered into an asset purchase agreement and plans to acquire
PSL-North America Llc, a US-based steel pipe maker. Jindal SAW, a part of the OP
Jindal Group, produces SAW pipes widely used in the energy sector for the
transportation of oil and gas.
 Tata Steel Ltd has bought 100,000 tonnes of iron ore from NMDC Ltd over the last
two months and has also sought a long-term supply tie-up with the state-run miner.
It has already started sourcing small quantities of iron ore from NMDC from June
2014 by participating in the e-auctions being conducted by NMDC from time to
time.
 Tata Steel has chalked out aRs 12,000–14,000 crore (US$ 1.96–2.28 billion) capital
expenditure plan to fund expansion of its Kalinganagar plant in 2014–15. The
company’s capacity would increase from the current 9.5 million tones (MT) to 13
MT after the expansion.
 Indsur Group announced that its US arm IndsurStelcoreInc has won a Rs 500 crore
(US$ 81.71 million)order from a Mexican firm for supply of around 100,000 tonnes
of steel plates. Indsur has manufacturing plants for steel castings, auto components,
pipes, steel and steel related products strategically located in India, the UK, and the
US.
 JSW Steel Ltd plans to acquire WelspunMaxsteel Ltd (WMSL) in a deal worth over
Rs 1,000 crore (US$ 163.42 million). This move is aimed at achieving the strategic
goal to enhance its steel production to 40 million tonnes per annum (MTPA) in the
next decade from the current 14.3 MTPA. This acquisition, together with that of
Ispat made earlier, will help JSW strengthen its position in the western Indian
market.
Government Initiatives
The Government of India plans to set up a steel plant under SAIL at Bayyaram in
Khamman District of Telangana, according to MrNarendra Singh Tomar, Union

10. 10
Minister of Steel and Mines. A feasibility study is already underway and soon after
its completion, a site would be selected for plant and funds allocation.
Some of the other recent government initiatives in this sector are as follows:
 After the approval of the new mining law by the Parliament of India, the SAIL-led
Afghan Iron and Steel Consortium (AFISCO) will soon recommence negotiations
with the Afghanistan government to set up a plant with a capacity of 1.5 MTPA.
 The Ministry of Steel has proposed to set up special purpose vehicles (SPVs) with
State governments to revive investment in the steel sector. The role of the SPVs will
be to acquire land and obtain all necessary environment and forest clearances, while
NMDC Ltd will be the company creating these SPVs.
 The Ministry of Steel has also proposed Special Mining Zones, where regions with
mineral resources will be identified as strategic resources and one nodal authority
will arrange necessary green clearances for mining projects in such areas.
In addition, the Government of India has picked up pace in giving several projects
environmental clearances, as it seeks to reboot the investment flow in the country.
The clearances were given for key projects such as coal mining at Chhatrasal for
Sasan Power and Mahanadi for Coal India. This move will significantly help in
enhancing the Indian steel sector.
Road Ahead
The recently released Union Budget 2014–15 has paved the way for the
development of the Indian steel sector with proposals for the construction of 100
smart cities and changes in the MMRD Act. Also, India’s ranking in the global list
for production of crude steel is all set to improve with increasing demand for
domestic consumption in the years to follow. As per Tata Steel, India's steel sector is
anticipated to witness investment of about Rs 2 trillion (US$ 32.68 billion) in the
coming years.
Exchange Rate: INR 1 = US$ 0.0163 as on October 28, 2014
Key Points
Supply With trade barriers having been lowered over the years,
imports play an important role in the domestic markets.
Demand The demand is derived from sectors that include infrastructure,
consumer durables and automobiles.

11. 11
Barriers to entry High capital costs, technology, economies of scale, government
policy.
Bargaining power
of suppliers
Low for fully integrated players who have their own mines for
raw materials. High, for non integrated players who have to
depend on outside suppliers for sourcing raw materials.
Bargaining power
of customers
High, presence of a large number of suppliers and access to
global markets.
Competition High, presence of a large number of players in the unorganized
sector.
Financial Analysis
The world Gross Domestic Product (GDP) is expected to grow by 3.4% in
2014. With advanced economies expected to do well in 2015, the global growth
projection for 2015 is 5%. (Source:- IMF & SAIL annual report) This is despite
the fact that there was a noticeable slowdown in the emerging market and
developing economies during 2013, a reflection of the sharp deceleration in
demand from key advanced economies. As such, we reckon that while global
prospects have improved but the road to recovery in the advanced economies is
still uncertain and volatile.
World crude steel production grew at 3% reaching 1,606 MT in 2013, as per
World Steel Association (WSA). The growth in production is coming mainly
from Asia, as the crude steel production in all other regions (except Africa)
declined in 2013. China's crude steel production increased 6.6% YoY to 779
MT in 2013. However, the EU recorded a negative growth of 1.8% compared to
2012.
prospects
The Indian metals and mining sector is currently facing a multitude of
challenges like weak macro environment, leveraged balance sheets and
heightened regulatory risks. The sector has suffered valuation de-rating since
FY12 due to various factors like environmental and regulatory concerns, cost
increases, delayed projects and high interest rates.
Government delays in allocating coal blocks for captive consumption by steel

12. 12
manufacturers seriously hurt the competitive edge of the Indian steel sector.
Same was the story with iron ore. There are delays in allocating iron ore mines
as well as approval for mining licenses. As a result, no new investment in the
steel sector is happening to add new steel capacities.
There are trends of demand recovery in the property sector and the demand for
infrastructure has also been strong since the Modi government came to power.
However, underlying demand in the EU is not expected to improve much in
2014. Overall, steel demand is expected to remain weak due to the continuing
economic crisis in the developed countries and the structural shift in the
Chinese economy. Moreover the world is reeling under the pressure of large
surplus capacity which will remain a serious cause of concern, especially in
times of subdued global demand.
GDP growth in India stood in the region of sub 5% in FY14 on account of
stalled investment against the backdrop of tightening policies, widening trade
and fiscal deficit, high inflation and weak FDI inflows. Further, FY14 was also
a year of subdued activity for steel using sectors in particular the auto segment.
It is expected that the next fiscal will continue to remain a challenging year for
the automotive sector if interest rates remain high. However, decline in fuel
expenses (which has been the case recently) may help a bit.
Steel demand in India has remained sluggish so far in 2014 amidst weak
activity and poor sentiment; however, activity is expected to accelerate
modestly in the coming years. Strengthening domestic consumption and
improving external conditions will help underpin the growth of steel using
sectors.
References: Media reports, Press Releases, Press Information Bureau, Department
of Industry Policy and Promotion, Ministry of Steel, Confederation of Indian
Industries

13. 13
1.2. Profile of the Jindal steel
O.P.JINDAL GROUP
The Jindal Group is a US$ 18 billion corporation, which has emerged as emerged as
one of India's most dynamic business organization in the past 3 years. It was
founded in 1952 by Shri O. P. Jindal, a firstgeneration entrepreneur who started an
indigenous single-unit steel plant in Hisar, Haryana.
Over the last 3 decades the Group has grown to be a multi-national and multi-
product steel corporation with business spanning across mining, power, industrial
gases, steel making and port facilities. From mining iron ore and coal, the group
produces sponge iron, wide range of hot-rolled and cold-rolled steel products, high-
grade pipes and value added items such as stainless steel, galvanized steel &
coated pipes. It is not only into power generation but it has also diversified into
petroleum, infrastructure,diamond and high value metals. Presently the group
has manufacturing outfits across India, US, UK and Indonesia and mining
concession in Chile, Indonesia & Mozambique and marketing representative's
offices across the globe.
Growth has been a part of Jindal Group with its motto 'Growth with a social
conscience.' Their commitment is sustainable development, of people and the
communities in which they operate. The group's strength is its dynamic and
aggressive leaders. These leaders are none other than the four sons of Shri O. P.
Jindal. Their hunger for growth is enormous and have a clear vision of being
recognized as best in the industry. Under their leadership companies have grown by
leaps and bounds.

14. 14
The group comprises of the founder's sons who manage
companies:
Mr Prithvi Raj Jindal
Jindal Saw Ltd.
Jindal SAW USA , LLC
Hexa Securities & Finance Company Ltd.
IUP Jindal Metals and Alloys Limited
S V Trading Limited
Jindal ITF Ltd.
Mr Sajjan Jindal
JSW Steel Ltd.
JSW Energy Ltd.
JSW Holdings Ltd.
JSW Infrastructure & Logistics Ltd.
Vijaynagar Minerals Pvt. Ltd.
Jindal Praxair Oxygen Company Ltd.
JSoft Solutions Ltd.
JSW Building Systems Ltd.
Mr Ratan Jindal
JSL Stainless Limited
PT Jindal Stainless, Indonesia
JSS Steelitalia Ltd.
Jindal Stainless Steel way Ltd.
Mr Naveen Jindal
Jindal Steel & Power Limited
Jindal Power Limited

15. 15
Jindal Petroleum Limited
Jindal Shadeed Iron & Steel
O.P JINDAL GROUP OF COMPANIES
JSW STEEL LTD.
JSW Group is a part of the O.P. Jindal Group, which is a $11 billion corporation. It
has set up business in the core sectors of India, with innovative and sustainable
avenues in steel, energy and infrastructure. The group is working for India’s
development as a global superpower.
It is leading from the front in every sector that it operates in. JSW Energy has grown ten-
fold in three years while JSW Cement created the building blocks of India with its
environment friendly product. JSW Infrastructure contributes to the nation’s development
by providing world class services to clients through ports, terminals, shipyards and other
facilities.
Expansions, up gradation and technological innovations are a way of life at JSW
and they are focused on becoming the Company that puts India on the global map.
The JSW Group is committed to create more smiles at every step of the journey.
JSW Foundation is in constant pursuit of making life better for communities with its
various initiatives in the fields of health, education, livelihood and sports along with
art and culture.
Their zero effluent plants, green townships and happy employees are changing
the course of the nation with their spirited growth. JSW Group creates opportunities
for every Indian and leads to the creation of a sustainable, dynamic and developed
nation.

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Jindal Stainless ltd
Jindal Stainless is a part of OP Jindal group and is the largest manufacturer of stainless
steel in India and is ranked as the 8th largest in the world, with a capacity of 1.8 million
tons. Excellence and Success are the characteristics similar to the metal it produces. Jindal
Stainless is innovative and versatile in its thought process, strong and unrelenting in its
operations. JSL has crafted its success story by fully integrating its operations based on a
strategy of both, backward and forward integration, starting from
mining, melting, casting, hot rolling to cold rolling and further value additions .
This has been the driving philosophy of the company from its one unit presence in the early
70’s to its present multi- location presence across the globe. JSL product range includes:
Ferro Alloys, Stainless Steel Slabs, Blooms, Hot Rolled Coils, Plates and Cold Rolled Coils/
Sheets, Stainless Steel Strips for Razor Blade Steel and Coin Blanks for mints in India &
EU.
Jindal Steel and Power LTD.
Jindal Steel and Power Limited (JSPL) is one of India's major steel producers it has setup
sectors like Mining, Power Generation and Infrastructure.
JSPL is a part of O. P. Jindal Group With an annual turnover of over US$ 3.5 billion. It is
consistently
tapping new opportunities by increasing production capacity, diversifying investments, and
leveraging its core capabilities to venture into new businesses. The company’s investments
exceed US$ 30 billion in the future and have several business initiatives running
simultaneously across continents.
Mr. Naveen Jindal, the youngest son of the legendary Shri. O. P. Jindal leads JSPL and its
group companies. The company produces economical and efficient steel and power.
JSPL today sports a product portfolio that caters to varied needs in the steel market. The
company also
has the distinction of producing the world's longest 121m rails and large size parallel flange
beams.

17. 17
JSPL operates the largest coal based sponge iron plant in the world at Raigarh in
Chhattisgarh. The company aims for a fast-paced growth so as to contribute
substantially to India's long term
prosperity. An enterprising spirit and the ability to discern future trends have been
the driving force behind the company's remarkable growth story.
The company has reached new heights with the combined force of innovation,
adaptation of new technologies and the collective skills of its 15,000 strong,
committed workforce.

18. 18
About the company
Jindal SAW Ltd is a part of O.P. Jindal Group, one of the country's topmost
industry and indigenous steel producers and exporters. It was started in 1984, when
it became the first company in India to manufacture Submerged Arc Welded
(SAW) Pipes using the internationally acclaimed U-O-E technology.
From beginning operations with a single product at a single location in 1984, Jindal
SAW today offers 'Total Pipe Solutions' to the world. As part of the $15 billion O.P.
Jindal Group, the company is firmly on its way to new markets and areas of growth.
With its subsidiary, Jindal ITF, it is powering ahead in its enterprises with respect to
water management, waterborne transportation, waste-to-energy and rail
infrastructure. Moreover, its unstinting support to Svayam, an initiative of S.J.
Charitable Trust is making a positive difference in making public infrastructure
accessible to all.
To move ahead of the competition, the need of the hour is to focus on the basics,
master it and then excel in other aspects. Jindal SAW does this all with a promise
that meets the most exacting of international standards and passes stringent quality
checks. Thus, reinforcing the company's commitment to superior levels of
excellence.
Every requirement and need of the market is addressed by Jindal SAW's exhaustive
range of products. The latest advances in technology and manufacturing processes
ensure that the product is always there when the need arises. Moreover, the
proximity of plants to ports further ascertains that there is no lag in timelines being

19. 19
met. All leading to a firm relationship with customers that surpasses commercial
transactions, and stands the test of time.
Jindal SAW Ltd. is in a commanding position in India’s tubular market, being the
leader with a turnover of Rs. 7500 Crore.
It has diversified from a single product company to a multi-product company,
manufacturing large diameter submerged arc pipes and spiral pipes for the
energy transportation sector; carbon, alloy and stainless steel seamless pipes and
tubes manufactured by conical piercing process used for industrial applications; and
Ductile iron (DI) pipes for water and wastewater transportation. Besides these, the
company also provides various value added products like pipe coatings, bends and
connector castings to
its clients.
Jindal SAW has gained the confidence and trust of its stakeholders - from
employees, associates, shareholders and people whose lives have benefitted by the
company's endeavors.
With its vision of sustainable development, Jindal SAW has played a leading role in
developing livable cities across the world - that in turn has helped transform the lives
of people staying in them.
Jindal SAW helps residents and organizations in numerous cities by ensuring timely
transportation of oil,gas and water. The pipes produced by the company are energy
efficient, reduce dependence on fossil fuels, and help conserve natural resources like
water.
Company
Secretary
Company sectary
Sh. Sunil Jain
Director
Smt. Savitri Devi Jindal Chairperson
Sh. P. R. Jindal Vice Chairman
Sh. Indresh Batra Managing Director

20. 20
Ms. Sminu Jindal Managing Director
Sh. Devi Dayal Director
Dr. S. K. Gupta Director
Sh. Kuldip Bhargava Director
Dr. Raj Kamal Agarwal Director
Sh. Ravinder Nath Leekha Director
Sh. Girish Sharma Director
Sh. H. S. Chaudhary Whole Time Director
Corporate office
Jindal Centre,
12, Bhikaiji Cama Place,
New Delhi - 110066
Rged.office Internal auditor
A1, UPSIDC Industrial Area,
Nandgaon Road, Kosi Kalan
District Mathura, 281403 (U.P.)
Internal
Auditors
Satutory auditor Internal auditor
M/s T. R. Chadha & Co.
Chartered Accountants
M/s Singhi & Co.
Chartered Accountants
Statutory
Auditors
Satutory auditor
M/s N. C. Aggarwal & Co.
Chartered Accountants
Bankers
Bankers

21. 21
State Bank of Patiala
State Bank of India
Punjab National Bank
Canara Bank
Axis Bank Ltd.
Credit Agricole & Investment Bank Ltd.
HDFC Bank Ltd.
ICICI Bank Ltd.
Ing Vysya Bank Ltd.
Standard Chartered Bank
State Bank of Mysore
State Bank of Travancore
Syndicate Bank
United Bank of India
Karnataka Bank Ltd.
Share Price Trends

22. 22
PRODUCTS
Large Diameter Pipes
Seamless Tubes & Pipes
Ductile Iron (DI) Spun Pipes
Large Diameter Pipes
This Strategic Business Unit (SBU) manufactures and markets large diameter Submerged
Arc Weldedpipes using U-O-E, J-C-O and Helical process.These pipes are mainly used for
energy transportation inoil and gas sector. The range of the LSAW pipes varies between 16
inches - 56 inches for outer diameter and up to 50.8 mm of wall thickness. The combined
installed large diameter pipe manufacturing capacity of these facilities is 1,650,000 MT per
annum.
To cater the North American market Jindal SAW Limited has set up a double jointing and
coating facility located at Baytown, Texas in the name of Jindal SAW USA, LLC which is
100% step down subsidiary. It was incorporated in United States in the year 2007. This
facility has shipping capabilities by Rail, Road and Barges within the North American
market.
Jindal SAW Ltd. is the most welded line pipe manufacturer in Asia after Japan. The
company's products are highly in demand in the markets of Gulf, Middle East, South East
Asia and Africa, North America and Latin America with a record of manufacturing and
supplying over 21,049 Kms of Line Pipes, of which more than 12,430 Kms of Line Pipes
have been exported to major oil and gas companies across the world.

23. 23
Products
LINE PIPES
Longitudinal Submerged Arc Welded Pipes Adapting (U-O-E & J-C-O Process)
Helical Seam Submerged Arc Welded Pipes (HSAW)
ANTI-CORROSION COATINGS
3 Layer Polyethylene/ 3 Layer Polypropylene
Fusion Bonded Epoxy (Fbe)/ Dual Layer Fusion Bonded Epoxy (DFBE)
Coal Tar Enamel (CTE)
Internal Flow Efficiency
Concrete Weight Coating (CWC)
Insulation Coating
SEAMLESS TUBES AND PIPES

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The Seamless division produces Tubes & Pipes at a state of the art plant at Sinnar, which is
approx. 205 Kms from Mumbai near Nasik in Maharashtra State, India, with technology &
equipments from Germany, acknowledged by world leaders in Seamless Tube & Pipe
technology. Their plant has annual installed capacity of 220,000 M Tons for Carbon &
Alloy Steel Pipes and is equipped with modern manufacturing machines and latest testing
facilities.
INDUSTRIES SERVICED
Petroleum, Refineries & Fertilizers
Oil Drilling
Boilers, Heat Exchangers & Condenser Applications
Super Heater & Low Temperature Applications
Mechanical Tubing & Structural Application
Automobile Applications
General Engineering
Fluid Conveyance Applications
Bearing Steel Tube Industry
PRODUCTS
PRODUCT OUTSIDE
DIAMETER(D)(mm)
Wall thickness(t)(mm) Annul capacity
Hot FinishedCarbon/Alloy
Steel
Seamless Tubes and Pipes.
33.40 to 177.80 3.38 to 25.00 80000 MT
Seamless Drill Pipes &
Greens
conforming to API 5D.
60.30 to 177.80 4.00 to 19.05 120000 MT
Seamless Drill Pipes &
Greens
conforming to API 5D.
60.30 to 168.30 6.45 to 12.70 120000 MT
Cold Finished Carbon/
Alloy Steel
Seamless Tubes and Pipes.
19.05 to 140.00 1.50 to 19.05 20000 MT
Anti Corrosion 3 LPE /
FBE Coating
2 to 14 as per DIN 30670 2 to 14 as per DIN 30670 1million SQM

25. 25
DUCTILE IRON (DI) SPUN PIPES
The integrated Greenfield project of Ductile Iron pipe and pig iron unit is a port
based facility situated at Samaghogha, Mundra in Gujarat, India, commissioned in
2005. The highlights of our plant are:
Port based facility of Ductile Iron pipes located on Western coast of India
State of the art facility with latest technology.
Installed capacity of 300,000 MT per annum has been enhanced to 500,000 MT
per annum by installation of a state of art Small Diameter Plant (SDP), with size
range DN 80 – DN 250 along with latest linings /coatings facilities conforming to
National/International standards
Backward Integration with own Blast Furnace & Coke Oven facility to produce
&
provide a continuous supply of pig iron & coke (main inputs in manufacturing of DI
pipes).
Spread in an area of 225 acres with a work force of more than 2,600 people.
Accredited with ISO 9001, ISO 18001 & Product certification for International
standards ISO 2531, BS EN 545, BS-EN- 598 and ISO 7186 by British Standards
Institute & Bureau Veritas.
In line with its Vision to serve the global market, Jindal SAW has also acquired a DI
pipe manufacturing plant at Sertubi, Italy having installed capacity 80,000 MT per
annum. The plant will cater to the requirements of European countries.
The plant has been conforming to various standards like ISO 2531, UNIEN 545 and
UNIEN598. It is equipped to provide various coatings such as Zn & Zn-Al Coatings
as per National & International Standards and Blue/Red Epoxy or black synthetic
paint.
Further, Jindal SAW has installed a Ductile Iron pipe manufacturing plant at Abu
Dhabi, United Arab Emirates. This facility is capable to manufacture DI pipes in
size range of DN 250 – DN 2200, with an installed capacity of 350,000 MT per
annum.

26. 26
The plant has been conforming to ISO 2531, BSEN 545, BSEN598 and ISO 7186. It
also offers various coating facilities like Zn & Zn-Al Coatings as per National &
International Standards; Blue/Red Epoxy or Black Bitumen and External and
Internal Polyurethane Coatings as per BS EN 15189 and BS EN 15655 respectively
for DN 250 to 2200 mm.
A) Technical Specifications
Product Name-Ductile Iron Pipe with Socket & Spigot ends suitable for Push on-
Jointing
Class of Pipe - C20, C25, C30, C40, C50, C64, C100 & Class K9
Size Range - DN 80mm to DN 1000mm
Standard Length - 5.5m / 6.0m
Internal Linings -
Cement Mortar Lining
Cement Mortar Lining with Bituminous Seal Coat
Cement Mortar Lining with Epoxy Seal Coat
Cement Type: OPC/ Sulphate Resistant Cement/ Blast Furnace Slag
Cement / High Alumina Cement
Outside Coatings -
Zinc Coating (130 gm/m2 or 200 gm/m2 or 400 gm/m2) with
finishing layer of Bitumen/ Blue Epoxy/ Red Epoxy
Polyethylene Sleeving
Alloy of Zinc and Aluminum with or without other metals having a
minimum mass of 400 gm/m2 with finishing layer of Bitumen/Blue
Epoxy/Red Epoxy
Coating of Joint Area Bitumen; Epoxy; Polyurethane.
Conforming Specifications IS 8329 ; ISO 2531 : ISO 7186 ; BS EN 545 ; BS EN
598
Quality Certifications –British Standards Institute and DNV
Product - British Standards Institute and Bureau Veritas
B) Lining /Coating on Ductile Iron Pipes
Internal Lining
Ductile Iron Pipes installed in water systems today are normally provided with
cement mortar lining. Use of cement lining of the pipe avoids tuberculation by

27. 27
creating a high pH at the pipe wall, and ultimately by providing a physical barrier to
the flow water to contact with the pipe wall. Further, linings are also smooth, which
results in high coefficients with Haizen Willams C as 140 (Colebrook coefficient k =
0.1). In case of sewerage application, suitable lining will provide corrosive
resistance to septic transformation (cycle of Sulphate, sulphuric acid) to avoid severe
carrion to pipe wall. The advantages of internal cement mortar lining are:
Internal protection of pipe wall against fluid aggressiveness
Improvement and performance of pipe flow characteristics
For potable water pipelines, assurance of keeping water quality within
specified limits.
Withstand against corrosion due to septic transformations.
Types of Lining & Service Conditions
TYPES OF LINING
MATERIAL
SERVICE CONDITION REFERENCE
STANDARDS
Ordinary Portland Cement Drinking water ISO 4179BS EN 197-1
Blast Furnace Slag
Cement
Drinking water
ISO 4179BS EN 197-1
Portland Slag Cement Drinking water ISO 4179BS EN 197-1
Sulphate resistance
Cement
Raw water/Drinking
Water/ Sea water/Non-
septic Sewers
ISO 4179BS 4027
High Alumina Cement Septic Sewers/ Drinking
Water/Acids/
Alkali waters/ Pickling
Brine/ Sea water
ISO 4179BS EN 14647
Cement Mortar Lining
with
Bituminous/epoxy Seal
Coat
Drinking water/ Sewers ISO 4179BS EN 14901
Outer Coating

28. 28
Intrinsic corrosion resistance of Ductile Iron in various corrosive soils is as least as
good as and even somewhat better than that of Cast Iron, as there is not much
variation chemically between the two materials. When subjected to corrosion, the
nodular graphite of ductile iron pipes forms corrosion by products that adhere firmly
to the unattached metal, which provides a barrier against further corrosion. In
addition, uniform spreading of spheroidal graphite of ductile iron results in less
susceptible to deep localized pitting than that of grey iron pipe, which is important in
evaluating its relative resistance to failure by perforation. Due to rubber gasket
jointing, ductile pipes are electrically discontinuous. As a result, long line corrosion
current, which is dependent on exposure of a single electrical unit to varying soil
conditions, can not develop. Additionally, any accumulation of stray current is
limited to short electrical units and usually is of little significance in developing
corrosion.
Additional external protection to ductile iron pipe provides long service
performance, especially for smaller diameter pipes where wall thickness is
comparatively less.
Following external protection is normally being provided: -
Types of Coating
S.NO TYPE OF COATING REFERENCE
STANDARDS
1 Zinc coating with finishing layer of Bitumen/ Epoxy ISO 8179 -1
2 Zinc coating with finishing layer with additional protection by
polyethylene sleeving
ISO 8180
3 Alloy of Zinc and Aluminum with or without other metals having
minimum mass of 400 gm/m with finishing layer.
ISO : 14713
Pricing Strategy
Pricing of welded steel pipes are very volatile. Pricing of steel depends on several
factors. Some of these factors are:
1. Cost factors:
Majorly cost based pricing is adopted in JSL. The method determines the price of a
product or service that uses direct costs, indirect costs, and fixed costs whether
related to the production and sale of the product or service or not. These costs are

29. 29
converted to per unit costs for the product and then a predetermined percentage of
these costs are added to provide a profit margin. Cost
based pricing is done by two means. First, present costs of raw material, operational
costs incurred and several indirect costs are involved, by calculating these costs the
pricing is done. Second, by considering the economic factors and objectives the
mark up price is decided.
2. Demand factor:
Steel market is very volatile. The pricing is highly dependent on the demand in
international market. Since the product is welded steel pipes and is used for
conveyance of oil and natural gas,therefore the demand of oil and gas is a major
driver of prices. Oil and gas demand and prices are major drivers of prices. When oil
and gas companies hold the projects, demand of commodity fluctuates which in turn
affects the prices of steel pipes.
3. Competitive factors:
Company has to keep an eye on competitor’s price. India In steel pipe sector is
facing major competition from many countries like China, Japan, and Korea etc.
Dealing in international market with potential competitors is not an easy task.
Competition in international market is intense and major business comes from
foreign clients. Pricing strategy of competitors plays an important role in such
condition.
Marketing strategies
Marketing in JSL is well defined. JSL is market leader in SAW pipes. Marketing
department in JSL works mainly on two marketing strategies:
Personal selling
Personal selling is one of the oldest forms of promotion. It involves the use of a sales
force to support a push strategy (encouraging intermediaries to buy the product) or a
pull strategy (where the role of the sales force may be limited to supporting retailers
and providing after-sales service). It is the personal selling process that allows JSL
the greatest freedom to adjust a message to satisfy customers' information needs.
Sales force allows the marketer or seller to
communicate directly with the prospect or customer and listen to his or her concerns,
answer specific questions, provide additional information, inform, persuade, and

30. 30
possibly even recommend other products or services. Personal selling in JSL is used
to meet some objectives of promotion in the following ways:
Salespeople, especially when selling in steel pipe markets, are to educate customers
on new product offerings. In fact, salespeople serve a major role in discussing
products with clients. Building awareness using personal selling is very important in
business markets. As discussed, the advent of controlled word-of-mouth marketing
is leading to personal selling becoming a useful mechanism for introducing
customers to new products.
2. Creating Interest
The fact that personal selling involves person-to-person communication makes it a
natural method for getting customers to experience product for the first time. In fact,
creating interest goes hand-in-hand with building product awareness as sales
professionals can often accomplish both objectives during the first encounter with a
potential customer.
3. Providing Information
When salespeople engage customers a large part of the conversation focuses on
product information. Marketing organizations provide their sales staff with large
amounts of sales support including brochures, research reports, computer programs
and many other forms of informational material.
4. Stimulating Demand
By far, the most important objective of personal selling is to convince customers to
make a purchase. In The Selling Process salespeople accomplish this when offer has
detail coverage of the selling process used to gain customer orders.
5. Reinforcing the Brand
Most personal selling is intended to build long-term relationships with customers. A
strong relationship can only be built over time and requires regular communication

31. 31
with a customer. Meeting with customers on a regular basis allows salespeople to
repeatedly discuss JSL’s products and by doing so helps strengthen customers’
knowledge of what the company has to offer.
Sales department is divided into two divisions:
1. Export team 2. Domestic team
Export team:
This team deals with only foreign clients. The main work of these teams is to fulfill
the objectives (given above). In export division, 3 export teams are available. These
teams deal geographically. Globe is divided into three sections and each team is
given an area and team is responsible for the given territory only. Inmost of the
countries where presently the company is dealing, JSL has its representatives. These
representatives find the lead. This lead is given to
sales force of respective territory. The respective export team deals with the client.
The three territories defined are:(A) Latin America, Gulf and Middle East. (B)
Africa and CIS (commonwealth of independent states). (C) Rest of the countries.
Domestic team
Sales
Export
team
1 23 1
2
Domestic
team

32. 32
These teams deal with domestic clients. In domestic division, 2 teams are available.
Working of marketing department
Orders confirmation process is done in two ways. First, through bidding, in this
process tenders are floated by clients. Bidding is done by suppliers and lowest price
quoted supplier is selected. Mostly, government agencies and institutions go for
tender process. Government institutions before finalizing orders check the credibility
of the company. This process includes several checks comprising study of annual
report, quality standards being followed and present and past
clients etc. Client interaction with management is also a part of building relations
with clients. Clients are allowed to visit the manufacturing unit to be aware of the
processes.
Public Relations
Along with being a successful business entity Jindal SAW Limited has an active
sense of social responsibility. As a leading trans-national, the Company is
committed to being a good corporate citizen wherever the company is engaged in
business activities and interests. The company’s Corporate Social Responsibility
Programme voluntarily integrates social and environmental concerns into their
operations. As a responsible corporate entity, JSL shoulders many responsibilities.
The organization attempts to give its workforce a quality life, a hazard-free working
environment, and drive them to a higher standard of living by providing them access
to amenities like housing, transportation, medical facilities, schools, and other civic
infrastructure. As part of community service, JSL has adopted many villages
surrounding the plants. Active volunteers from the organization undertake regular
literacy drives, organize free health camps, mobile eye-care units and continuously
strive to make these villages independent and progressive.
Svayam
JSL has also undertaken project Svayam under its CSR. The aim of the project is to
create “Barrier Free” environment for physically challenged people, who continue to
face barriers that prevent them from enjoying full civil, political and developmental
rights. This is largely due to ignorance in our society.

33. 33
Vidya Devi Jindal School
At VDJS, a Residential School for Girls, the medium of teaching is the English
language. The school provides education that nurtures the traditions of our culture
and also absorbs the finer influences of the west. It focuses on all round
development of personality and thorough education of girls in order to make them
conscientious and responsible citizens. More importantly, the school imparts the
right values and norms of behavior, thus helping the girl students enhance their
confidence and poise. The school is set in restful and calm surroundings
Distribution Channels
Mr. Jindal said JSL aimed to provide a unique experience of buying steel products
through branded distribution channels. There are two types of distribution channel
through traders and through clients. Traders act as an indirect channel between the
buyer and the seller. Mostly cash transactions take place where traders are involved
and accounts to almost 90%-95% of the total
transactions taking place. There is no direct dealing with the company as such.
Traders either hoard a certain amount as inventory, whereas there can be other
situations where they keep zero inventory. The amount kept as inventory is meant
for meeting uncertain demand and the trader delivers the product to the end user. In
case of zero inventory, the trader regulates the material flow only after receiving
from the manufacturer. Inventory can be of standard/fixed size or
customized size. Standard size is generally meant for traders whereas clients are
provided with customized inventory, suiting their particular demand/s. Traders
usually order small amounts, whereas clients purchase in bulk. Direct transaction
takes place between the company and the
client. Transaction can be in the form of credit or cash basis. Clients of Jindal Saw
Ltd. Are domestic as well as international. Domestic clients include companies such
as Bharat Petroleum, Indian Oil, ONGC, Reliance Petroleum, Reliance Industries,
Cairn, etc. International clients include GASCO, PEDEC, PETROCHINA,
PETRONAS, Saipan, etc. The company also uses 3 Rd party logistics.
Transportation cost depends on the contract made between the parties.

34. 34
The diagram below shows a direct distribution. There are more number of
transactions taking place in a direct distribution which also leads to increase in
cost& time. Moreover, it does not offer a customized solution. In case of indirect
distribution, through traders, there is less number of transaction staking place, which
also results in decrease in cost and time. If the trader acts as an assembler, it can
offer customized solution to its end-user which is not possible incase of direct
distribution.
International Competitors
SeAH Steel Corporation
SeAh Steel Corporation (former Pusan steel pipe ind. Co. Ltd.) was founded in Pusan,
Korea in 1960. SeAh is a leading manufacturer of steel pipes in Korea, gave birth to SeAh
group. Presently the production capacity is 876000 MT of steelpipes. Presently, SeAH Steel
has Pohang Factory and Changwon Factory having the largest manufacturing capacity of
pipes in Korea. In addition, our company has been able to produce and supply the best
quality of steel plates through continuous investment into manufacturing facilities
and via efforts of quality innovation since 1998.Now, SeAH Steel with the solid
foundation of accumulated reputation and trust, will surely become a blue-chip
company by continuous effort toward change and innovation based on eco-friendly
operation and administration with integrity.
Products:
Carbon, stainless steel pipes, Pre-coated metal, galvanized steel sheets, High quality
anticorrosive oil transmission steel pipe, Chromium-Molybdenum boiler tubes
Production capacity:
876000 MT
SUMITOMO
Sumitomo foundry began producing cast-steel in 1901 in present Konohana ward,
Osaka city. One hundred years since then, Sumitomo metals is producing steel pipes
for oil and natural gas, wheels and axels for railway cars, steel sheets for automobile

35. 35
bodies and other high-grade steel products. Aside from seamless pipes, the Company
also produces wide-bore welded pipes and
electric-resistance welded pipes as well as other tubes and pipes and regards its
operations in this sector as one of its flagship businesses. Electric-resistance welded
pipe sector has been integrated with the operations of Sumitomo Pipe & Tube Co.,
Ltd., which commenced operations in July 1999.Sumitomo Metals has almost all
kinds of steel pipe manufacturing facilities which produce a wide range of welded
steel pipe and tubes. These works are able to produce approximately
three million metric tons of steel pipe and tubes annually. The company also
possesses facilities in affiliated companies in Sakai, Kashimaand Koga.
Production capacity: 1674000 MT
Nippon Steel Corporation
was formed as Yawata Steel and Fuji Steel merged to form Nippon Steel
Corporation in 1970. Nippon Steel Corporation is the world’s second-largest steel
producer in volume and the second most profitable steel company in the world. Oita
Works began operation in 1971 in the capital city of Oita Prefecture, Japan. All
operations of Nippon Steel's Urban Development Division were integrated in 2002
into Nippon Steel City Produce, Inc. Thereafter, stainless steel business
of Sumitomo Metal Industries and Nippon Steel amalgamated to form Nippon Steel
& Sumikin Stainless Steel Corporation. Nippon steel production system begins with
advanced metallurgy and clean BOF steel making process. Among the company’s
advanced production facilities, is the Kimitsu work UO pipe mill, which is capable
of manufacturing large diameter pipes.
Cutting-edge
High strength Products:
Line pipe High toughness line pageant-Sour line pipe OCTG pipe
Production capacity:
11000000 MT
NKK
NKK is a major Japanese industrial company and one of the country’s largest
steelmakers having Headquarters is in Tokyo. Nippon Kōkan KK was founded in
1912 to make products using the steel from Japan’s first steel mills. The company’s
innovative superior to conventional welded pipes and Nippon Kōkan eventually also
began producing raw steel from iron ore. Nippon

36. 36
Kōkan expanded greatly in the decades after World War II, with large steelmaking
complexes at Fukuyama (in Hiroshima prefecture) and at Kawasaki and Yokohama
(the Keihin Steel Works, near Tokyo). In the late 1970s the company expanded its
Keihin complex by building an ultramodern steelworks on man-made Ogi Island in
Tokyo Bay. The NKK Corporation is the second largest steelmaker in Japan (after
the Nippon Steel Corporation).
Production capacity:
1120000 MT
Domestic Competitors
Welspun
Incorporated in 1995, Welspun Gujarat Stahl Rohren Ltd (WGSR) is a part of the
welldiversified Welspun Group. The company is a leading manufacturer of
submerged arc welded (SAW) pipes, mainly catering to the Oil and Gas exploration
companies for transporting their products. Currently it has the capacity of producing
pipes of total length of 1000 km per annum. With the demand for the SAW pipes
industry expected to be robust in the coming years, the company has chalked out an
expansion plan for increasing the existing capacity and also develop facilities for the
manufacture of ERW pipes. WGSR is one of the leading manufacturers of SAW
pipes in India, mainly catering to the Oil and Gas exploration companies. WGSR
caters to the global requirement of high grade Submerged Arc Welded pipes both
Spiral and Longitudinal. The company has technology support from Mannesmann
Demag, Germany, an API approved pipe maker and the Capello Group, Italy. The
company’s plant is located on the Western Coast of India Near Dahej in the state of
Gujarat. The location is ideal in terms of proximity to the National Highway and
Seaports like Dahej,Kandla, Mumbai and Mundra.
Production capacity: 1500000 MT
Man Industries
The MAN GROUP established in 1970, has diversified business interests in India,
USA, UK and UAE, having present market capitalization is above USD
300million.Man Group consists of following major companies: Man Industries
(India) Ltd. Man Aluminum Limited. Man Infraprojects Ltd. Man USA Inc. The
LSAW Line Pipes are manufactured in strict conformance

37. 37
to the general and customized specifications of clients of various sectors such as Oil,
Gas, Petrochemicals, Fertilizers and Dredging.
The company’s SSAW Line Pipe Facility at Anjar comprise of 2 (Two) Production
Lines and is equipped with all NDT and laboratory facilities to cater to the
requirements of its world-wide clientele of high pressure/critical application
segment.
Production capacity:
1175000 MT
Competitive advantage
U-O-E & J-C-O forming processes
This is a special type of process of forming the steel pipes, which is only followed
by JSL. No other company follows this process. This is a method how the pipes are
formed, which give the company an advantage over its competitors.
Pricing
JSL is believed in giving Value pricing to its customers. Prices for pipes are lowest
when compared to its competitors, whereas the products are of very good standards.
It is considered a value for money.
Location advantage
Location has a very prominent role in pricing. Manufacturing plant of JSL is located
in Mundra in Gujarat, which is close to the port. This gives easy access for shipping
of material to customers.
Quality Standards
JSL believes in keeping good quality standards. It follows ISO 9001, ISO14001, ISO
18001 etc, which are very high quality standards and internationally recognized.
These are few factors that give JSL a competitive edge over other competitors.

38. 38
STP
Segment
Mining, Power Generation and Infrastructure, Ferro chrome, Silico manganese, Sponge iron,
Petroleum, Cement
Target Group
Construction, oil & gas, transportation, refining, telecom, ship building, power, automobiles,
capital goods, consumer durables and infrastructure sector
Positioning One of the most prestigious and dynamic business groups in the World
SWOT Analysis
Strength
1. Produces economical and efficient steel and power through backward and forward
integration
2. Sports a product portfolio that caters to varied needs in the steel market
3. Operates the largest coal - based sponge iron plant in the world
4. Has force of innovation, adaptation of new technologies and the collective skills of its
15,000 strong, committed workforce
5. Has an enterprising spirit and the ability to discern future trends
6. Has operations in Steel, iron, electricity generation and distribution
Weakness
1. Shortage of coking coal and is largely dependent upon its import
2. Weak performance on the back of the higher raw material cost and the power & fuel cost
Opportunity
1. Venture into new businesses by leveraging its core capabilities
2. Increase production capacity to meet the global steel demand
3. Diversify investments to distribute risk in business
Threats
1. Hike in the export duty on iron ore fines and lumps
2. Project implementation and raw material security
3. Issues related to land acquisition, raw material linkages and environmental clearances

39. 39
Research Methodology

40. 40
4 Research Methodology
Ratio analysis is such a significant technique for financial analysis. It indicates
relation of two mathematical expressions and the relationship between two or more
things. Financial ratio is a ratio of selected values on an enterprise's financial
statement. There are many standard ratios used to evaluate the overall financial
condition of a corporation or other organization. Financial ratios are used by
managers within a firm, by current and potential stockholders of a firm, and by a
firm‘s creditor. Financial analysts use financial ratios to compare the strengths and
weaknesses in various companies. Essence of ratio analysis: Financial ratio
analysis helps us to understand how profitable a business is, if it has enough money
to pay debts and we can even tell whether its shareholders could be happy or not.
Financial ratios allow for comparisons:
1. between companies
2. between industries
3. between different time periods for one company
4. between a single company and its industry average
To evaluate the performance of one firm, its current ratios will be compared with its
past ratios. When financial ratios over a period of time are compared, it is called
time series or trend analysis. It gives an indication of changes and reflects whether
the firm‘s financial performance has improved or deteriorated or remained the same
over that period of time. It is not the simply changes that has to be determined, but
more importantly it must be recognized that why those ratios have changed. Because
those changes might be result of changes in the accounting polices without material
change in the firm‘s performances.
Another method is to compare ratios of one firm with another firm in the same
industry at the same point in time. This comparison is known as the cross sectional
analysis. It might be more useful to select some competitors which have similar
operations and compare their ratios with the firm‘s. This comparison shows the
relative financial position and performance of the firm. Since it is so easy to find the
financial statements of similar firms through publications or Medias this type of
analysis can be performed so easily. To determine the financial condition and
performance of a firm, its ratios may be compared with average ratios of the industry

41. 41
to which the firm belongs. This method is known as the industry analysis that helps
to ascertain the financial standing and capability of the firm in the industry to which
it belongs.
Industry ratios are important standards in view of the fact that each industry has its
own characteristics, which influence the financial and operating relationships. But
there are certain practical difficulties for this method. First finding average ratios for
the industries is such a headache and difficult. Second, industries include companies
of weak and strong so the averages include them also. Sometimes spread may be so
wide that the average may be little utility. Third, the average may be meaningless
and the comparison not possible if the firms with in the same industry widely differ
in their accounting policies and practices. However if it can
standardized and extremely strong and extremely weak firms be eliminated then the
industry ratios will be very useful. Objectives of the study
1. To study the financial performance of Tata steel and Jindal steel.
2. To compare the financial performance of Tata steel and Jindal steel.
Data Sources
In this present study, an attempt has been made to evaluate and compare the
financial performance of Tata steel and Jindal steel and both of the companies are
related with the private sector. The study is based on secondary data and the details
are collected through websites, magazines and journals. The time period of study is
four years 2009 to 2013. Ratio analysis was applied to analyse the performance of
these companies.

42. 42
Profitability Ratio Definition
Profitability index (PI), also known as profit investment ratio (PIR) and value
investment ratio (VIR), is the ratio of payoff to investment of a proposed project. It
is a useful tool for ranking projects because it allows you to quantify the amount of
value created per unit of investment.
The ratio is calculated as follows:

Assuming that the cash flow calculated does not include the investment made in the
project, a profitability index of 1 indicates breakeven. Any value lower than one
would indicate that the project's PV is less than the initial investment. As the value
of the profitability index increases, so does the financial attractiveness of the
proposed project.
Rules for selection or rejection of a project:
 If PI > 1 then accept the project
 If PI < 1 then reject the project
A profitability ratio is a measure of profitability, which is a way to measure a
company's performance. Profitability is simply the capacity to make a profit, and a profit
is what is left over from income earned after you have deducted all costs and expenses
related to earning the income. The formulas you are about to learn can be used to judge a
company's performance and to compare its performance against other similarly-situated
companies.
Types Of Profitability Ratios
Common profitability ratios used in analyzing a company's performance include gross
profit margin (GPM), operating margin (OM), return on assets (ROA) , return on
equity (ROE), return on sales (ROS) and return on investment (ROI). Let's take a
look at these in some detail.
Gross Margin
Gross margin tells you about the profitability of your goods and services. It tells you
how much it costs you to produce the product. It is calculated by dividing your gross
profit (GP) by your net sales (NS) and multiplying the quotient by 100:

43. 43
 Gross Margin = Gross Profit/Net Sales * 100
 GM = GP / NS * 100
Example: Imagine that you run a company that sold $50,000,000 in running shoes last
year and had a gross profit of $7,000,000. What was your company's gross margin for the
year?
1. GM = $7,000,000 / $50,000,000 * 100
2. GM = .14 * 100
3. GM = 14%
For every dollar in shoe sales, you earned 14 cents in profit but spent 86 cents to make it.
Operating Margin
Operating margin takes into account the costs of producing the product or services that
are unrelated to the direct production of the product or services, such as overhead and
administrative expenses. It is calculated by dividing your operating profit (OP) by your
net sales (NS) and multiplying the quotient by 100:
 Operating Margin = Operating Profit / Net Sales * 100
 OM = OP / NS * 100
Example: Let's say you make and sell computers. Last year, you generated net sales of
$12,000,000, and your operating income was $100,000,000. What was your operating
margin?
1. OM = OI / NS * 100
2. OM = $12,000,000 / $100,000,000 * 100
3. OM = 0.12 * 100
4. OM = 12%
Out of every dollar you made in sales, you spent twelve cents in expenses unrelated to
the direct production of the computers.
Return on Assets
Return on Assets measures how effectively the company produces income from its
assets. You calculate it by dividing net income (NI) for the current year by the value of
all the company's assets (A) and multiplying the quotient by 100:
 Return on Assets = Net Income / Assets * 100
 ROA = NI/A * 100

44. 44
Example: Imagine that you are the president of a large company that manufactures steel.
Last year, your company had net income of $25,000,000, and the total value of its assets,
such as plant, equipment and machinery, totaled $135,000,000. What was your return on
assets last year?
1. ROA = $25,000,000 / $135,000,000 * 100
2. ROA = 0.185 * 100
3. ROA = 18.5%
This means that you generate 18.5 cents of income for every dollar your company holds
in assets.
Return on Equity
Return on equity measures how much a company makes for each dollar that investors
put into it. You calculate it by taking the net income earned (NI) by the amount of money
invested by shareholders (SI) and multiplying the quotient by 100:
 Return on Equity = Net Income / Shareholder Investment * 100
 ROE = NI / SI * 100
Example: Imagine that your social media company just went public last year, resulting in
a total investment of $100,000,000. Your company's net income for the year was
$10,000,000. What is the return on equity?
1. ROE = $10,000,000 / 100,000,000 * 100
2. ROE = 0.10 * 100
3. ROE = 10%
Your company is generating a dime in profit for every dollar invested.

45. 45
Liquidity ratios:
Liquidity Ratio may refer to:
 Reserve requirement, a bank regulation that sets the minimum reserves each
bank must hold.
 Acid Test (Liquidity Ratio), a ratio used to determine the liquidity of a business
entity
Liquidity ratio, expresses a company's ability to repay short-term creditors out of its
total cash. The liquidity ratio is the result of dividing the total cash by short-term
borrowings. It shows the number of times short-term liabilities are covered by cash.
If the value is greater than 1.00, it means fully covered.
The formula is the following:
LR = liquid assets / short-term liabilities
Liquidity ratios are the ratios that measure the ability of a company to meet its short
term debt obligations. These ratios measure the ability of a company to pay off its
short-term liabilities when they fall due.
The liquidity ratios are a result of dividing cash and other liquid assets by the short
term borrowings and current liabilities. They show the number of times the short
term debt obligations are covered by the cash and liquid assets. If the value is greater
than 1, it means the short term obligations are fully covered.
Generally, the higher the liquidity ratios are, the higher the margin of safety that the
company posses to meet its current liabilities. Liquidity ratios greater than 1 indicate
that the company is in good financial health and it is less likely fall into financial
difficulties.
Most common examples of liquidity ratios include current ratio, acid test ratio (also
known as quick ratio), cash ratio and working capital ratio. Different assets are
considered to be relevant by different analysts. Some analysts consider only the cash
and cash equivalents as relevant assets because they are most likely to be used to meet
short term liabilities in an emergency. Some analysts consider the debtors and trade
receivables as relevant assets in addition to cash and cash equivalents. The value of

46. 46
inventory is also considered relevant asset for calculations of liquidity ratios by
some analysts.
The concept of cash cycle is also important for better understanding of liquidity
ratios. The cash continuously cycles through the operations of a company. A
company’s cash is usually tied up in the finished goods, the raw materials, and trade
debtors. It is not until the inventory is sold, sales invoices raised, and the debtors’
make payments that the company receives cash. The cash tied up in the cash cycle is
known as working capital, and liquidity ratios try to measure the balance between
current assets and current liabilities.
A company must posses the ability to release cash from cash cycle to meet its
financial obligations when the creditors seek payment. In other words, a company
should posses the ability to translate its short term assets into cash. The liquidity
ratios attempt to measure this ability of a company.
Acid-Test Ratio
The term “Acid-test ratio” is also known as quick ratio. The most basic definition
of acid-test ratio is that, “it measures current (short term) liquidity and position of
the company”. To do the analysis accountants weight current assets of the company
against the current liabilities which result in the ratio that highlights the liquidity of
the company.
Liquidity ratios
 — Acid-Test Ratio
 — Cash Ratio
 — Current Ratio
 — Net Working Capital
 — Quick Ratio
 — Working Capital
 — Working Capital Ratio
Cash Ratio
Cash ratio (also called cash asset ratio) isthe ratio of a company's cash and cash
equivalent assets to its total liabilities. Cash ratio is a refinement of quick ratio and
indicates the extent to which readily available funds can pay off current liabilities.
Potential creditors use this ratio as a measure of a company's liquidity and how
easily it can service debt and cover short-term liabilities.

47. 47
Current Ratio
Current ratio is balance-sheet financial performance measure of company liquidity.
Current ratio indicates a company's ability to meet short-term debt obligations. The
current ratio measures whether or not a firm has enough resources to pay its debts
over the next 12 months.
Net Working Capital
Net working capital (NWC) = current assets minus current liabilities.
Quick Ratio
The quick ratio is a measure of a company's ability to meet its short-term obligations
using its most liquid assets (near cash or quick assets). Quick assets include those
current assets that presumably can be quickly converted to cash at close to their book
values. Quick ratio is viewed as a sign of a company's financial strength or
weakness; it gives information about a company’s short term liquidity. The ratio
tells creditors how much of the company's short term debt can be met by selling all
the company's liquid assets at very short notice.
Working Capital
Working capital is the amount by which the value of a company's current assets
exceeds its current liabilities. Also called net working capital. Sometimes the term
"working capital" is used as synonym for "current assets" but more frequently as
"net working capital", i.e. the amount of current assets that is in excess of current
liabilities. Working capital is frequently used to measure a firm's ability to meet
current obligations. It measures how much in liquid assets a company has available
to build its business.
Working Capital Ratio
Working capital ratio is the alternative term for the term "current ratio".

48. 48
Following Ratios are used for this Study.
1. Current Ratio.
2. Debt equity ratio.
3. Inventory turnover ratio.
4. Fixed asset turnover ratio.
5. Net operating profit per share.
6. Return on capital employed.
7. Dividend payout ratio.
8. Earnings per share.
DATA ANLYSIS
1. Current ratio
The current ratio is a financial ratio that measures whether or not a firm has enough
resources to pay its debts over the next 12 months. It compares a firm's current
assets to itscurrent liabilities. It is expressed as follows:
The current ratio is an indication of a firm's market liquidity and ability to meet
creditor's demands. Acceptable current ratios vary from industry to industry and are
generally between 1.5 and 3 for healthy businesses. If a company's current ratio is in
this range, then it generally indicates good short-term financial strength. If current
liabilities exceed current assets (the current ratio is below 1), then the company may
have problems meeting its short-term obligations. If the current ratio is too high,
then the company may not be efficiently using its current assets or its short-term
financing facilities. This may also indicate problems in working
capital management.
Low values for the current or quick ratios (values less than 1) indicate that a firm
may have difficulty meeting current obligations. Low values, however, do not
indicate a critical problem. If an organization has good long-term prospects, it may
be able to borrow against those prospects to meet current obligations. Some types of
businesses usually operate with a current ratio less than one. For example, if
inventory turns over much more rapidly than the accounts payable become due, then

49. 49
the current ratio will be less than one. This can allow a firm to operate with a low
current ratio.
If all other things were equal, a creditor, who is expecting to be paid in the next 12
months, would consider a high current ratio to be better than a low current ratio,
because a high current ratio means that the company is more likely to meet its
liabilities which fall due in the next 12 months. You should view the relation
between the operation cycle period and the current ratio.
Particulars 2009 2010 2011 2012 2013
Tata steels .91 1.12 1.78 .79 0.99
Jindal steels 1.04 .65 .79 .69 0.76
From the above graph and table it is clear that Current ratio of Tata steel increasing
from 2009 to 2011 but fall down in 2012 and it is highest in the year 2011 on the
other hand the current ratio of Jindal steels fluctuating from 2009 to 2012. It
indicates the company’s ability to meet the short term debts.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
2009 2010 2011 2012 2013
Sata Steel
Jindal steel

50. 50
2. Debt Equity ratio.
Debtors turnover ratio or accounts receivable turnover ratio indicates the
velocity of debt collection of a firm. In simple words it indicates the number of times
average debtors (receivable) are turned over during a year.
DEBTORS TURNOVER RATIO FORMULA:
Debtors Turnover Ratio = Net Credit Sales / Average Trade Debtors
The two basic components of accounts receivable turnover ratio are net credit annual
sales and average trade debtors. The trade debtors for the purpose of this ratio
include the amount of Trade Debtors & Bills Receivables. The average receivables
are found by adding the opening receivables and closing balance of receivables and
dividing the total by two. It should be noted that provision for bad and doubtful
debts should not be deducted since this may give an impression that some amount of
receivables has been collected. But when the information about opening and closing
balances of trade debtors and credit sales is not available, then the debtors turnover
ratio can be calculated by dividing the total sales by the balance of debtors (inclusive
of bills receivables) given. and formula can be written as follows.
Debtors Turnover Ratio = Total Sales / Debtors
Particulars 2009 2010 2011 2012 2013
Tata steels 1.34 .68 .59 .45 1.74
Jindal steels .92 1.24 1.39 1.33 1.58

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From the above table it is clear that the debt equity ratio of Tata steels goes
downward from 2009 to 2012 while the Jindal steels debt equity ratio increase in
two year and then slightly reduced in 2012. Debt-to-equity ratio (D/E) indicating the
relative proportion of shareholders' equity and debt used to finance a company's
assets.
3. Inventory Turnover ratio.
A ratio showing how many times a company's inventory is sold and replaced
over a period. The days in the period can then be divided by the inventory
turnover formula to calculate the days it takes to sell the inventory on hand or
"inventory turnover days."
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
2009 2010 2011 2012 2013
tata steel
jindal steel

52. 52
Particulars 2009 2010 2011 2012 2013
Tata steels 9.36 10.90 9.85 9.40 6.94
Jindal steels 9.08 8.05 5.81 4.83 4.16
From the above graph and table it is clear that Inventory turnover ratio of Tata steels
is high in comparison to Jindal steels it shows the company’s efficiency in turning
its inventory into sales. A low turnover rate indicates poor liquidity. Here Jindal
steel performance is not good in comparison to Tata steels.
0
2
4
6
8
10
12
2009 2010 2011 2012 2013
Jindal Steel
Tata Steel

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4. Fixed asset turnover ratio.
A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio
measures a company's ability to generate net sales from fixed-asset
investments - specifically property, plant and equipment (PP&E) - net of
depreciation. A higher fixed-asset turnover ratio shows that the company has
been more effective in using the investment in fixed assets to generate
revenues.
The fixed-asset turnover ratio is calculated as:
Particulars 2009 2010 2011 2012 2013
Tata steels 1.22 1.12 1.29 1.48 1.07
Jindal steels 1.04 .83 .75 .88 0.80
From the above table and graph it is clear that the ratio of Tata steels were high in
the year 2009, 2011 and 2012. Jindal steels ratio was high in the year 2009 and
0
0.5
1
1.5
2
2.5
2009 2010 2011 2012 2013
Jindal Steel
Tata Steel

54. 54
2012.it shows that Tata steels has been more effective in using the investment in
fixed assets to generate revenues.
5. Net operating profit per share.
A calculation used to analyze real estate investments that generate income.
Net operating income equals all revenue from the property minus all
reasonably necessary operating expenses. Aside from rent, a property might
also generate revenue from parking and service fees, like vending and laundry
machines. Operating expenses are those required to run and maintain the
building and its grounds, such as insurance, property management fees,
utilities, property taxes, repairs and janitorial fees. NOI is a before-tax figure;
it also excludes principal and interest payments on loans, capital expenditures,
depreciation and amortization.
Particulars 2009 2010 2011 2012 2013
Tata steels 333.27 281.11 305.53 348.41 429.18
Jindal steels 496.46 78.90 102.15 142.13 159.94
From the above table and graph it is clear that net operating profit per share of Tata
steels is consistently good in 2009-2012 while Jindal steels net operating profit was
high in 2009.
0
100
200
300
400
500
600
2009 2010 2011 2012 2013
Tata steel
Jindal Steel

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6. Return on capital employed
A financial ratio that measures a company's profitability and the efficiency with
which its capital is employed. Return on Capital Employed (ROCE) is calculated as:
ROCE = Earnings Before Interest and Tax (EBIT) / Capital Employed
“Capital Employed” as shown in the denominator is the sum of shareholders' equity
and debt liabilities; it can be simplified as (Total Assets – Current Liabilities).
Instead of using capital employed at an arbitrary point in time, analysts and investors
often calculate ROCE based on “Average Capital Employed,” which takes the
average of opening and closing capital employed for the time period.
A higher ROCE indicates more efficient use of capital. ROCE should be higher than
the company’s capital cost; otherwise it indicates that the company is not employing
its capital effectively and is not generating shareholder value.
Particulars 2009 2010 2011 2012 2013
Tata steels 15.01 13.06 13.48 15.03 13.37
Jindal steels 23.16 14.86 15.67 13.40 9.57

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From the above table and graph we are able to tell that which companies return on
investment is better in 2009 Jindal steels return on capital is better in 2010 it goes
down while in Tata steels return on capital employed fluctuates in these four years it
were high in 2009 and 2012 while low in 2010 and 2011.
7. Dividend payout ratio net profit.
Dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends:
The part of the earnings not paid to investors is left for investment to provide for
future earnings growth. Investors seeking high current income and limited capital
growth prefer companies with high Dividend payout ratio. However investors
seeking capital growth may prefer lower payout ratio because capital gains are taxed
at a lower rate. High growth firms in early life generally have low or zero payout
ratios. As they mature, they tend to return more of the earnings back to investors.
Note that dividend payout ratio is calculated as DPS/EPS.
According to Financial Accounting by Walter T. Harrison, the calculation for the
payout ratio is as follows:
0
5
10
15
20
25
30
35
2009 2010 2011 2012 2013
Tata Steel
Jindal Steel

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Payout Ratio = (Dividends - Preferred Stock Dividends)/Net Income
Particulars 2009 2010 2011 2012 2013
Tata steels 27.15 16.64 19.04 20.11 15.14
Jindal steels 5.55 8.16 6.97 7.23 8.69
This ratio identifies the percentage of earnings (net income) per common share
allocated to paying cash dividends to shareholders. From the above table it is clear
that Dividend payout ratio of Tata steels were high in all the years in comparison to
Jindal steels which has low dividend payout ratio.
8. Earnings per share.
The portion of a company's profit allocated to each outstanding share of common
stock. Earnings per share serves as an indicator of a company's profitability.
Calculated as:
0
5
10
15
20
25
30
35
2009 2010 2011 2012 2013
Tata Steel
Jindal Steel

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When calculating, it is more accurate to use a weighted average number of shares
outstanding over the reporting term, because the number of shares outstanding can
change over time. However, data sources sometimes simplify the calculation by
using the number of shares outstanding at the end of the period.
Particulars 2009 2010 2011 2012 2013
Tata steels 69.70 56.37 71.58 68.95 66.02
Jindal steels 99.35 15.89 22.09 22.58 14.12
From the above table and graph it is clear that earnings per share of Tata steels were
better in all these years 2009-2012. While in Jindal steels it performance was good
in 2009 but in 2010,2011 and 2012 it goes down.
0
20
40
60
80
100
120
2009 2010 2011 2012 2013
Tata Steel
Jindal Steel

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6 Conclusion
After analysing the above ratio it is clear that the position of Tata steels is better in
comparison to Jindal steels. In above 8 ratio which we see through graph and table it
is shown that in 6 ratio Tata steel company is performing better while the position of
Jindal steels is good but in comparison to Tata steels position was not good.

60. 60
BIBLIOGRAPHY
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[3]. Eurostat (2011) Key figures on European business with a special feature on
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11- 001/EN/KSET-11-001-EN.PDF (10-01-2012)
[4]. www.moneycontrol.com
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