Bhushan Steel Ltd.

Company profile: Bhushan Steel (BSL) was incorporated in 1983, erstwhile known as Bhushan Steel & Strips. It is a Rs. 2868 crores ($650 million approx.) company. It has three manufacturing facilities located in Sahibabad, Dhenakanal and Khopoli. It manufactures wide range of steel products such as cold rolled, galvanised steel, colour coated coil, colour coated tiles, drawn tubes, hardened and tempered strip, high tensile steel stripping, wire rods, sponge iron and alloy billets. It manufactures various steel products catering to the needs of several industries such as automobile industry for four/three/two wheelers, clutch-chain manufacturers, home appliances such as refrigerators, air conditioners, washing machine, television, bearing manufacturer and electrical motor segments. BSL is the 3 largest secondary steel producer after SAIL and TISCO. It is the only producer in India that has widest width of cold rolled sheet. BSL clientele includes automobile and home appliances majors like General Motor, Hyundai Motors, Ford Motors, Mahindra & Mahindra, Eicher Tractors, Ashok Leyland, LG Electronics, Whirlpool, Videocon, Daikin, Samsung Electronics, Godrej, Voltas, IFB, Carrier Refrigeration, Electrolux Group amongst others Recognition BSL has received ISO 14001:2004 certification for Environmental Management System. BSL has received ISO/TS 16949:2002 certification for Quality Systems. It has also received OHSAS 18001:1999 certification for health and safety management system. Outlook BSL is setting up an integrated steel plant in West Bengal that will include slab plant, coke ovens and captive power plant. BSL has signed a joint venture agreement with Australian Bowen Energy for exploration and mining.
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Business profile: Bhushan Steel Limited has a strong presence in value added segments which are extensively used in manufacture of Automobile & white goods. These contribute more than 60 per cent to the company's total revenue. The company is having technical tie-up with Sumitomo Metals, Japan, for providing know-how for the manufacture of automotive steel sheets. BSL supplies automotive steel sheets to leading auto manufacturers including Maruti Suzuki, Ford, Mahindra & Mahindra, Ashok Leyland, Bajaj Auto and Hindustan Motors. Its white goods sector clients are major companies such as LG, Godrej and Videocon. Being a secondary sector player, BSL's margins depend on the differential of HR coil prices and CR/GP/GC prices, resulting in fairly stable margins. However, the company is moving towards full backward integration with the manufacturing of steel intermediates and HR coils, and thus moving from stable margins to higher and a more flexible margin business model, with the EBITDA margins being higher than that of players engaged only in the secondary steel sector. The Company has already begun manufacturing sponge iron and billets along with generation of Power. But the positive effects of cost reduction due to backward integration will yield complete benefits only in the later half of F.Y. 2010, after the HR Mill under the Company's Phase II project begins commercial operations. The company has been allotted an iron ore and a coal mine by the Orissa government. The coal mine has approximately 300 million tonnes of reserves. The work on these has begun and the mines are likely to be operational by 2011. Also, it has taken a significant stake in Bowen Energy Ltd, Australia, which has the license for exploring coking coal mines in Queensland, Australia. Thus going forward, the company is expected to improve its profitability.

CAPEX Capex Plans and Funding pattern company expects no further dilution The company has a total capex of Rs115.28bn spread over the next 3-4yrs. The facilities targeted in the capex will be commissioned in modular fashion thereby reducing the requirement of debt component.

Existing Capacity

Final Capacity

Share Holding Pattern

Description as on Foreign (Promoter & Group) Indian (Promoter & Group) Total of Promoter Non Promoter (Institution) Non Promoter (Non-Institution) Total Non Promoter Total Promoter & Non Promoter Custodians(Against Depository Receipts) Grand Total

No of Shares 30/09/2009 0 29371099 29371099 1498132 11602431 13100563 42471662 0 42471662

% of Holding 0 69.15 69.15 3.53 27.32 30.85 100 0 100

Q2FY10-Product Mix
Others 15% Value Added Products 52%

Galva 33%

Financials Valuation Summary Net Sales % Growth EBIDTA ebidta margin % Net Profit npm % EPS % Growth PE @Rs. 1249 EV/EBIDTA P/BV ROCE ROE DY % FY08 41,523 9.1% 8,074 19% 4,237 10.2 98.7 0 12.68 14.1 3.5 8.3% 29.4% 10 FY09 49,715 19.7% 10,791 22% 4,213 8.47 110.4 11.85 11.28 12.6 2.8 7.4% 25.5% 10 FY10e 55,809 12.3% 14,684 26% 8,166 14.63 192.3 74 6.53 5.6 2.0 9.7% 33.4% 9.6 FY11e 81,869 46.7% 25,265 31% 12,417 15.16 292.2 52 4.29 3.1 1.4 15.5% 35.9% 9.6

Peers SAIL, Tata Steel, JSW Steel Concerns Highly leveraged company with D/E of 3.76 Delay in Project execution Fall in finished steel prices