ALLIANCE BUSINESS SCHOOL

FINANCIAL ACCOUNTS

JINDAL STEEL AND POWER

LTD.

KAUSTUBH TIWARY
09PG145 - SECTION C
 INTRODUCTION
Jindal Steel and Power Limited is the third largest steel manufacturing company
in India. The company manufactures and sells sponge iron, mild steel slabs, ferro
chrome, iron ore, mild steel, structural, hot rolled plates & coils and coal based
sponge iron plant. The company is also involved in power generation.

Jindal Steel and Power is a part of the Jindal Group, founded by O. P. Jindal (1930-
2005). In 1969, he started Pipe Unit Jindal India Limited, one of the earlier
incarnations of his business empire. After Jindal's death in 2005, much of his
assets were transferred to his wife, Savitri Jindal. Jindal Group's management
was then split among his four sons with Naveen Jindal as the Managing Director
of Jindal Steel and Power Limited. His elder brother, Sajjan Jindal, is currently the
head of ASSOCHAM, an influential body of the chambers of commerce, and the
head of JSW Group, part of O.P. Jindal Group.

On June 3, 2006, Bolivia granted development rights for one of the world's
largest iron ore reserves in the El Mutún region to Jindal Steel. With an initial
investment of US$ 1.5 billion, the company plans to invest an additional US$ 2.1
billion over the next eight years in the South American country.

Savitri Jindal, the widow of O. P. Jindal, is ranked as the 19th richest Indian
person according to Forbes.

The Jindal family established Vidya Devi Jindal School, a residential school for
girls in Hisar, India, in 1984. Although not marketed as such, it is widely known to
cater to the wealthy through its private location and remarkable array of
activities. The school's student body comprises girls from affluent business and
political families of India.

With an annual turnover of over US $2.00 billion (Rs. 10,000 crore), Jindal Steel &
Power Limited (JSPL) forms a part of the US $12 billion (over Rs. 60,000 crore)
Jindal Group. JSPL is a leading player in Steel, Power, Mining, Oil & Gas and
Infrastructure.

Mr. Naveen Jindal, the youngest son of the legendry late Shri. O P Jindal, drives
JSPL and its group companies Jindal Power Ltd, Jindal Petroleum Ltd., Jindal
Cement Ltd. and Jindal Steel Bolivia with a belief in the concept of self-
sufficiency. The company produces economical and efficient steel and power
through backward integration from its own captive coal and iron-ore mines and
passes on the benefits to its customers.

An enterprising spirit and ability to discern future trends have been the driving
force behind the company's remarkable growth. The company has scaled new
heights with the combined force of innovation, adaptation of new technology and
the collective skills of its 15,000 strong, committed workforce. It has won wide
acclaim for its efficient operations and commitment to environment & society.

JSPL has consistently tapped new opportunities by increasing production

capacity, diversifying investments, and leveraging its core capabilities to venture
into new businesses. JSPL’s investment commitments in steel, power, oil & gas
and mining have touched more than US $ 30 billion (Rs. 1,50,000 crore). The
company, today, is the largest private sector investor in the state of Chhattisgarh
with a total investment commitment of over US$ 6.25 billion (Rs. 31,250 crore).

SALIENT FINANCIAL PERFORMANCE OF THE FIRM

9- 8-
Mar Mar 7-Mar
Key
Ratios
Debt-
Equity
Ratio 0.97 1.19 1.45
Long
Term
Debt-
Equity
Ratio 0.91 1.06 1.23
Current
Ratio 1.24 1.11 0.88

Turnov
er
Ratios
Fixed
Assets 1.27 1.13 0.95
Invento
ry 7.69 7.54 6.44
Debtor
s 24.83 20.13 12.58
Interest
Cover
Ratio 8.47 7.18 6.45
PBIDTM
(%) 32.07 35.92 37.29
PBITM
(%) 26.93 28.54 28.66
PBDTM
(%) 28.89 31.95 32.85
CPM
(%) 23.37 27.61 26.65
APATM
(%) 18.23 20.23 18.03
ROCE
(%) 25.31 25.72 21.15
RONW 33.73 39.89 32.58
 (%)

1. Debtors/Receivables as a Percentage of
Sales

Sl. Referen 2005- 2006- 2007- 2008-

No. ce 06 07 08 09
Sales 2590.2 3519.8 5410.7 7653.1
5 1 5 9
Sundry 299.54 320.31 287.68 391.46
Debtors
1(A) Debtors 11.56 9.10% 5.32% 5.11%
as a % of %
Sales

1(B) Receivab 42 33 19 18
les Day’s

 Debtors as a percentage of sales have been calculated using

the formula :

(Sundry Debtors/Sales)*100.

 Receivables Days are calculated by formula :

(360/Debtors Turnover Ratio)

where Debtors Turnover Ratio = Sales/Sundry Debtors

 and considering that company works for 360 days.

 Debtors as a percentage of sales have decreased

considerably. It has decreased by more than 6% in 4 years
which shows that Company’s Sales Department is working
very efficiently.

 Receivables Days is also showing a decreasing trend which is

a good indicator and shows that Sales Department is very
efficient when it comes to collection of receipts.

2. Trend Change in Quantities and Value of the

Product Mix

2.1.1
Sl. No. Product 2005- 2006- 2007- 2008-
Sold 06 07 08 09
(In MT) (In (In (In
MT) MT) MT)
 1.) Sponge 62032 69890 40544 38558
Iron 7.4 7 6 3
2.) M.S.Rou 11961 23121 29426 15206
nd 5.8 5 3 9
3.) H.C. 32277 29591 17774 9841
Ferro 3.5
Crome
4.) Power 1105 1231 892.5 1124.
1 48
5.) Pig Iron 48682. 12898 34726 28041
31 2 1 9
6.) Parallel 20497 20377 40157 37977
Flange 0 2 8 0
Beams

Sl. Product 2005- 2006- 2007- 2008-

No. Sold 06 07 08 09
(In (In (In (In
%age %age) %age) %age)
)
1.) Sponge 1.34 1.12 0.58 0.95
Iron
2.) M.S.Rou 1.27 1.93 1.272 0.51
nd
3.) H.C. 0.95 0.09 0.6 0.55
Ferro
Crome
4.) Power 0.98 1.11 0.72 1.26
5.) Pig Iron 3.78 2.64 2.69 0.8
6.) Parallel 1.08 0.993 1.97 0.945
Flange
Beams

INFERENCE

 Tables above shows Change in Quantities of Product mix sold and

percentage change on Year on Year basis.
 Sales of some products have decreased but if one looks at overall
picture Sales has increased considerably from 2005-06 to 2006-07,
2006-07 to 2007-08 and 2007-08 to 2008-09 which shows that
Marketing Department of the company is working very efficiently.

 Company started producing Universal plates/coil from 2007-08 and

its sales has increased considerably from then on.

 Above is a graph showing capturing percentage change in sales of

product mix during the three year period that is under study.

2.1.1 Value

Sl. Product 2005- 2006- 2007- 2008-

No. Sold 06 07 08 09
(In Rs. (In Rs. (In Rs. (In Rs.
Crore) Crore) Crore) Crore)
1.) Sponge 682.7 794.5 577.2 637.6
Iron 9 4 2 7
2.) M.S.Rou 328.7 574.7 862.1 551.3
nd 3 2 5 4
3.) H.C. 112.1 123.4 89.93 71.83
Ferro 1 4
Crome
4.) Power 268.2 285.6 246.7 274.4
1 9 3 4
5.) Pig Iron 70.5 218.9 674.6 701.7
6 3 7
6.) Parallel 627.7 624.1 1446. 1666.
Flange 1 9 62 74
Beams

Sl. Product 2005- 2006- 2007- 2008-

No. Sold 06 07 08 09
(In (In (In (In
%age %age) %age) %age)
)
 1.) Sponge 1.21
Iron 1.403 0.72 1.1
2.) M.S.Rou 1.33
nd 2.31 1.57 0.61
3.) H.C. 0.86
Ferro
Crome
1.94 0.72 0.79
4.) Power 1.1 1.17 0.86 1.11
5.) Pig Iron 2.64 0.12 3.08 1.04
6.) Parallel 1.17
Flange
Beams
1.16 2.31 1.15

INFERENCE

 Tables above shows the Change in Value of the Product Mix sold
and Percentage Change in the Value.

 Analysis of the data shows that Value of most of the products being
sold has increased over the years and thus the Total value of the
Products being sold.

 In Total value, percentage change has increased from 2005 – 2006

to 2006 – 2007.

 In Total value, percentage change is more from 2007 to 2008 where

as it is less from 2008 to 2009 which shows that Marketing
department has not performed that well

2.2 Export Sales as a Percentage of Total Sales

Refere 2005- 2006- 2007- 2008-

nce 06 07 08 09
Sales 2590. 3519. 5410. 7653.
25 81 75 19
Export 371.8 592.8 653.0 1021.
sales 5 4 1 37
 Export 14.36 16.84 12.07 13.34
Sales
as a
%age
of
Sales

 Export Sales as a percentage of increased by close to 2% from

2005-06 to 2006-07

 Export Sales as a percentage of decreased by more than 4% from

2006-07 to 2007-08 but increased by a just about 1% in the period
from 2007-08 to 2008-09.

 Total Sales has decreased from 2005-06 to 2006-07

 Total Sales have been increasing consecutively since 2006-07 but

Exports as a percentage of Sales has declined. This decline in
Export Sales may be attributed to the economic environment
prevailing in the world market.
3 Bad Debts and Bad Debts written off each Year as a
Percentage of Sales

Referen 2005- 2006- 2007- 2008-

ces 06 07 08 09
Sales 2590. 3519. 5410. 7653.
25 81 75 19
 Bad 0.28 4.03 4.23 2.72
Debts
Written
Off
Bad 1.01 0.11% 0.08% 0.04%
Debts
Written
Off as
%age of
Sales

Bad - 9.22 9.39 9.88

Debts
Bad - 0.26% 0.17% 0.13%
Debts
as a
%age of
Sales

 Bad Debts are calculated by formula :

Provisions + Bad Debts Written Off

 Bad Debts Written Off as a percentage of Sales is calculated as :

(Bad Debts Written Off/Sales)*100

 Bad Debts as a percentage of Sales is calculated as :

(Bad Debts/Sales)*100

 Initially Bad Debts and Bad Debts Written Off as a percentage of

Sales have increased for 2005-06 to 2006-07 which is not a good
sign.

 Both Bad Debts and Bad Debts Written Off as a percentage of Sales
have decreased during the years under study which shows that
sales department is very good at recovering money from the
debtors. It is good for the Company’s future.
4 Debtors/Receivables as a Percentage of Tangible Net
Worth (Exceeding 6 Months)

References 2005- 2006- 2007- 2008

06 07 08 -09
Tangible Net 1838. 2493. 3753. 5412
Worth 92 49 24 .3

Debtors/Receiv 2.8 320.3 287.6 391.

ables 1 8 46

Debtors as a 0.15% 12.84 7.66% 7.23

%age of % %
Tangible Net
Worth

INFERENCE

 Tangible Net Worth is calculated as :

Shareholders’ Funds – Miscellaneous Expenditure

 Debtors exceeding 6 months as a percentage of Sales has increased

from 2005-06 to 2006-07 which is not a good sign.

 Debtors exceeding 6 months as a percentage of Sales has

decreased considerably during the period under study. But
compared to the decrease from 2006-07 to 2007-08, the
percentage decrease is less from 2007-08 to 2008-09. But overall
Company’s Sales department is working very efficiently and it’s
good for Company.
 5 Debtors/Receivables excluding Advances from
Customers as a Percentage of Sales and Receivables
Day’s

Sl. Referen 2005 2006 2007 2008

No. ces -06 -07 -08 -09
Debtors 279.5 290.3 162.5 287
excludin 1 4 9
g
Advance
s

5(B) Days 39 30 11 14
Receivab days days days days
les

 Debtors excluding advances taken from the customers have

decreased steeply from financial year 2005-06 to 2006-07 & 2006-
07 to 2007-08 but it has increased slightly from financial year 2007-
08 to 2008-09. Overall Debtor excluding advances as a percentage
of sales have decreased and is very low at less than 4% despite the
recession period during last financial year which speaks volumes
about the efficiency of sales department of Company.

 Receivables Days has also showed same trend as the Debtors as a

percentage of sales but still 14 days is more than acceptable during
recession period.
Director’s Report

 Financial Year 2005-06

Debtors as a percentage of sales have decreased

considerably. It has decreased by more than 6% in 4 years which
shows that Company’s Sales Department is working very efficiently.
PBDIT has increased by 15.4% when compared to 2004-05. The PAT
has increased from 515.7 crores in 2004-05 to 572.94 crores in
2005-06. Reserves and Surplus have increased to Rs. 1,823.26
crores.

 Financial Year 2006-07

During the year, the Company has achieved an aggregate

income of Rs.3,548.78 crores registering an increase of 36% over
the previous year. Profit before tax has increased to Rs.944.84
crores from previous year’s Rs.727.85 crores registering an increase
of 30%. Profit after tax has increased by 23% to Rs.702.99 crores
from previous year’s Rs.572.94crores. Reserves and Surplus have
increased to Rs.2462 crores.

 Financial Year 2007-08

During the year, the Company has achieved an aggregate
income of Rs.5459.87 crores registering an increase of 54% over
the previous year. Profit before tax has increased to Rs.1502.51
crores from previous year’s Rs.944.84 crores registering an increase
of 59%. Profit after tax has increased by 76% to Rs.1236.96 crores
from previous year’s Rs.702.99 crores. Reserves and Surplus now
stand increased to Rs.3754.40 crores.

 Financial Year 2008-09

 During the year, the Company has achieved an aggregate
income of Rs.7,799.43 crores registering an increase of 43% over
the previous year’s Rs.5,459.87 crores. Profit before tax has
increased to Rs.2,001.88 crores from previous year’s Rs.1,502.51
crores registering an increase of 33% Profit after tax has increased
by 24% to Rs.1,536.48 crores from previous year’s Rs.1,236.96
crores. Reserves and Surplus have increased to Rs.5,371.66 crores.
 CONCLUSION

 Company’s performance is improving over the 4 years despite

being a recessionary conditions prevailing in almost half of the
period.

 The Customer base (sales) is getting stronger over the period,

which indicates that the efficiency of marketing is worth
appreciating.

 The general trend which is seen is that the Company’s debtors as

a percentage of sales are decreasing, also bad-debts and bad-
debts written-off as a percentage of sales are showing a
decreasing trend. This indicates that the company’s short-term
solvency and short-term liquidity is improving.

 Sales are constantly increasing but its exports as a

percentage of sales have come down. This could be due to the
fact of recession, this loss of export sales the company might have
diverted its focus towards the domestic market.

 Even in this recession the company has proved to be successful in

maintaining and improving its customer base, and this reflects
towards company’s overall performance. Therefore I conclude it to
be a reliable company.