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A study on comparison on key Financial Parameters of players within an Industry with Similar Parameters in Nifty A study of Steel Companies
In the partial fulfillment of the Master of Business Administration Program 2007-2009
Department of Management Studies Shrinathji Institute of Technology and Engineering Upali Oden, Nathdwara.
Mr. mohit sharma
A study on comparison on key Financial Parameters of players within an Industry with Similar Parameters in Nifty A study of Steel Companies
Project Done At:
IDBI Capital Market Services Ltd,Rajsamand
Project Submitted By Shrinathji Institute of Technology & engg, Nathdwara (RAJASTHAN)
An increase in steel industry use with general economic growth and with the fastest growth occurring in the countries with the highest GDP growth in India.
GDP is very important for the development of the country. The demand drivers for the Indian Iron and Steel industry are increase in the activities of the automobiles industry, real estates industry, transportation system, aircraft industry, ship building industry, etc. This research aims to analsis the key financial parameters of the steel companies with the Nifty companies by using the statistical tools
There are much differences in the performance of Nifty and steel companies The Contribution of the Steel Companies is very les in the growth of the Companies. So we can say that the growth of the Nifty companies is due to the various other sectors.
I express my sincere thanks to my project guide, Mr. Mr. mohit sir, Designation- Associate Professor, Deptt_- Finance, for guiding me right form the inception till the successful completion of the project. I sincerely acknowledge him/her/them for extending their valuable guidance, support for literature, critical reviews of project and the report and above all the moral support he/she/they had provided to me with all stages of this project. I would also like to thank the supporting staff ___________________________ Department, for their help and cooperation throughout our project.
The International Iron & Steel Institute (IISI) in its forecast the trend of recent years of increase in steel use in –line with general economic growth and with the fastest growth occurring in the countries with the highest GDP growth in India. Research was carried out to find that there are any differences in performance of nifty & steel companies by the use of ratio analysis and statistical technique. Objectives of this study is To compare & analyze the financial parameters to bring out the real value in terms of these parameters as achieved by NIFTY on average and steel industry.
In this analysis we find that there are many differences in the performance of Nifty and steel companies The Contribution of the Steel Companies are very les in the growth of the Companies. So we can say that the growth of the Nifty companies is due to the various other sectors. On the basis of studying the above given conclusions, we suggested that The Steel Industry on the whole is contributing very less towards the growth companies so the need to improve their position on the basis of all key financial parameters. Companies should work to improve their stability and coverage position
CONTENTS I INTRODUCTION OF INDUSTRY Brief history History Organization structure Organization Product and Services II RESEARCH METHODOLOGY Types of Research Methods of data collection III OBJECTIVES Objective of the study Sub-Objective IV DATA ANALYSIS AND INTERPRETATIONS Ratio analysis ANOVA analysis V VI VII VIII MAJOR FINDINGS CONCLUSION RECOMMONDATIONS BIBILIOGRAPHY
Organization Product and Services
IDBI Capital Market Services Ltd., (IDBI Capital) is a wholly owned subsidiary of IDBI Bank Ltd and is a leading Investment Banking & Securities Company. IDBI Capital offers a full suite of products and services to Corporate, Institutional and Individual clients. The range of services include:
Investment Banking Capital Market Products Private Equity Corporate Advisory Services Mergers & Acquisitions Project Appraisals & Debt Syndication Stock Broking - Institutional & Retail Distribution of Financial Products Debt Placement and Underwriting Fund Management (Managing Clients' Assets-Pension/PF Fund Managers) Research Group
IDBI Capital Market Services Limited
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• • •
Stock Broking-Institutional and Retail Derivatives Trading Distribution of Mutual Funds
Financial Advisory has been considered as a strategic function requiring innovative and distinct financial solutions both long and short term focused on delivering greater shareholder value. IDBI Capital Market Services Limited occupies a leading position being a wholly owned subsidiary of IDBI Bank in the Corporate Finance Market place. We support our clients by offering those creative ideas and solutions that facilitates in enhancing the value.
We broadly advise on the following on the Financial Advisory space:
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Merchant Financial Appraisal Joint Venture & Contract Bid Process Management Disinvestments Infrastructure Advisory Financial / Debt Restructuring
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IDBI Capital as an institutional player provides the entire gamut of Capital Market services encompassing: 1. Public Offerings 2. Qualified Institutional Placements 3. Buyback 4. Takeover 5. Preferential Allotments 6. External Commercial Borrowings, FCCBs, etc The above activities entails liasioning with institutional investors such as treasury departments of Domestic Institutions, Banks and corporates, fund managers of mutual funds, private equity firms, FIIs, HNIs.
IPO / FPO / RIGHT ISSUES
Initial Public Offerings / Follow on Public Offerings / Rights Issues
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IDBI Capital helps corporate and institutional clients to carry out successful takeovers on the Exchange listed companies. IDBI Capital helps carry out the Due Diligence exercise in accordance with relevant SEBI Rules / Regulations / Guidelines followed by the preparation of legal documentation connected with Buybacks and Take-overs.
Buyback of Securities
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Qualified Institutional Placement
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We have developed strong expertise across different industries, which enable us to structure the transaction in that context. In Private Equity (PE), we focus on sectors ranging from Infrastructure, Power, Telecom, Healthcare & Life Sciences, Pharmaceuticals, Hospitality, Banking, Logistics, Media, Auto Ancillaries / Components, Cement, Steel, etc to name a few. Our strength in Private Equity advisory is on account of:
Strong relationships with PE funds and their key decision makers Strong execution team gives an edge on optimal structuring and efficient closure of transactions
Value addition on entire structure of activities
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There are several means a Corporate adopt to improve shareholder value e.g. increased revenue, market share, geographical expansion, diversification, economies of scale; or to integrate through Merger & Acquisition. Broadly speaking, M&A drivers could be customer acquisition and top line growth, new market entry or competence building. IDBI Capital’s M&A Advisory services covers right from the initial negotiation stage to the final deal conclusion. We address the following while taking up Mergers and Acquisitions;
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Several factors need to be taken into account when choosing an instrument for investment – among these being safety, liquidity & return related to the risk undertaken. Coming to the choice of instruments, we have equity, debt, money market, commodity based or even global equities. Mutual funds provide all this and more. Mutual funds offer an investment portfolio which can be either diversified in nature or specific in category with risk skewed towards debt to equity in varying proportions, all in one under one umbrella. Mutual Funds cater to the specific requirement of the Investor be it Institutional or Individual. IDBI Capital Market Services Ltd. is into Mutual Fund Distribution, Advisory and Fund Management. We address the needs of any type of investor from corporate, banks, trusts, firms, and societies to NRIs, HNIs and individual retail clients We have been recognized as among the best financial advisers in the country, and have been conferred with the CNBC TV 18 Financial Advisor Awards as the Best Performing National Financial Advisor –Institutional segment in India for the past two consecutive years. As a distributor registered with almost all the SEBI Registered Mutual Funds in India, we have also started offering Mutual funds to our retail customers, both off-line and on-line.
Mutual Fund Research
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Customized Reports are provided to specific institutional / corporate clients. The universe for every category is selected from the entire industry and rigorous analysis undertaken including peer comparison. Various tools and techniques are used, from studying the Alpha of every scheme with Standard Deviation to Beta Analysis to Tryenor and Sortino.
Retail Broking & Distribution
In addition to offering corporate, institutional clients, IDBI Capital also offers a gamut of financial products and services that cater to a varied cross section of investors. IDBI Capital also offers to financial planners, retail intermediaries and consumers to deliver lasting, innovative solutions. Looking at the opportunities in our market and the growth of our country, we believe it is high time investors are educated about the nuances of investments. The knowledge and awareness gained will empower investors and help them create wealth. We firmly believe brokers, media and regulators have a pivotal role in assisting the individuals to become wealthy. We will go extra mile to empower the investors in managing their wealth to ensure a more rewarding future.
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Investment Banking Activities
We have in the last financial year successfully lead managed public/rights issues mobilizing
more than Rs.900 crores. Some of the notable examples were the Central Bank of India ‘s IPO and Varun Industries Ltd fixed price issue. The responses to our issues have been heartening.
Mutual Fund Distribution
Several factors need to be taken into account when choosing an instrument for investment – among these being safety, liquidity & return related to the risk undertaken. Coming to the choice of instruments, we have equity, debt, money market, commodity based or even global equities. Mutual funds provide all this and more. Mutual funds offer an investment portfolio which can be either diversified in nature or specific in category with risk skewed towards debt to equity in varying proportions, all in one under one umbrella. Mutual Funds cater to the specific requirement of the Investor be it Institutional or Individual. IDBI Capital Market Services Ltd. is into Mutual Fund Distribution, Advisory and Fund Management. We address the needs of any type of investor from corporate, banks, trusts, firms, and societies to NRIs, HNIs and individual retail clients We have been recognized as among the best financial advisers in the country, and have been conferred with the CNBC TV 18 Financial Advisor Awards as the Best Performing National Financial Advisor –Institutional segment in India for the past two consecutive years. As a distributor registered with almost all the SEBI Registered Mutual Funds in India, we have also started offering Mutual funds to our retail customers, both off-line and on-line. We distribute and advise on the schemes of all the Mutual Fund Houses registered with SEBI.
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INTRODUCTION OF NIFTY
S&P CNX Nifty
S&P CNX Nifty is a well diversified 50 stock index accounting for 21 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds.
S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialised company focused upon the index as a core product. IISL has a Marketing and licensing agreement with Standard & Poor's (S&P), who are world leaders in index services.
The total traded value for the last six months of all Nifty stocks is approximately 65.68% of the traded value of all stocks on the NSE
Nifty stocks represent about 65.34% of the total market capitalization as on Mar 31, 2009.
Impact cost of the S&P CNX Nifty for a portfolio size of Rs.2 crore is 0.16% S&P CNX Nifty is professionally maintained and is ideal for derivatives tradin
Technical Analysis of Indian stock market NSE S&P CNX Nifty 50 Index
The NSE S&P CNX Nifty 50 index is a well diversified 50 stock index accounting for 24 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds. Technical Analysis of Indian stock market NSE S&P CNX Nifty 50 Index NSE S&P CNX Nifty 50 is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialised company focussed upon the index as a core product. IISL have a consulting and licensing agreement with Standard & Poor's (S&P), who are world leaders in index services. The main features of the NSE S&P CNX Nifty 50 index are:
The average total traded value for the last six months of all Nifty stocks is approximately 77% of the traded value of all stocks on the NSE
Nifty stocks represent about 61% of the total market capitalisation as on August 31, 2004.
Impact cost of the S&P CNX Nifty for a portfolio size of Rs.5 million is 0.10%
S&P CNX Nifty is professionally maintained and is ideal for derivatives trading.
What Does Nifty 50 Mean?
The 50 stocks that were most favored by institutional investors in the 1960s and 1970s. Companies in this group were usually characterized by consistent earnings growth and high P/E ratios.
Investopedia explains Nifty 50
The nifty-50 stocks got their notoriety in the bull markets of the 1960s and early 1970s. They became known as "one-decision" stocks because investors were told they could buy and hold forever. Examples of nifty-50 stocks included General Electric, Coca-Cola, and IBM. However, part of this list included companies that have been troubled in the last decade, such as Xerox and Polaroid.
About Nifty 50
The S&P CNX Nifty ( Nifty 50 or simply Nifty) is a composite of the top 50 stocks listed on the National Stock Exchange (NSE), representing 24 different sectors of the economy. It is a simplified tool that helps investors and ordinary people alike, to understand what is happening in the stock market and by extension, the economy. If the Nifty Index performs well, it is a signal that companies in India are performing well and consequently that the country is doing well. An upbeat economy is usually reflected in a strong performance of the Nifty Index. A rising index is also indicative that the investors are gung-ho about the future. The Nifty Index is based upon solid economic research. It is internationally respected and recognized as a pioneering effort in providing simpler understanding of stock market complexities. Nifty is the flagship index of NSE, the 3rd largest stock exchange in the world in terms of number of transactions (Stock Futures).
Ownership and Management
Nifty was developed by the economists Ajay Shah and Susan Thomas, then at IGIDR. Later on, it came to be owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialized company focused upon the index as a core product. IISL have a consulting and licensing agreement with Standard & Poor's ( who are world leaders in index services. CNX stands for CRISIL NSE Indices. CNX ensures common branding of indices, to reflect the identities of both the promoters, i.e. NSE and CRISIL. Thus, 'C' stands for CRISIL, 'N' stands for NSE and X stands for Exchange or Index. The S&P prefix belongs to the US-based Standard & Poor's Financial Information Services. It is calculated as a weighted average, so changes in the share price of larger companies have more effect. The base is defined as 1000 at the price level of November 3, 1995
Criteria for inclusion of Stock in Nifty50
Average market capitalization of Rs.5,000 million or more during the last six months. Liquidity: Cost of transaction (impact cost) of less than 0.75% for more than 90% of trades, over six months. At least 12% floating stock (not held by promoters of the company or their associates).
The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000.
The S&P CNX Nifty Index Futures
The NSE Nifty futures contract is a forward contract, which is traded on the National Stock Exchange (NSE) on June 12, 2000. The index futures contracts are based on the popular market benchmark S&P CNX Nifty index.
The security descriptor for the S&P CNX Nifty futures contracts is:
Market type : N Instrument Type : FUTIDX Underlying : NIFTY Expiry date : Date of contract expiry
Instrument type represents the instrument i.e. Futures on Index. Underlying symbol denotes the underlying index which is S&P CNX Nifty Expiry date identifies the date of expiry of the contract
The underlying index is S&P CNX NIFTY.
S&P CNX Nifty futures contracts have a maximum of 3-month trading cycle - the near month (one), the next month (two) and the far month (three). A new contract is introduced on the trading day following the expiry of the near month contract. The new contract will be introduced for a three month duration. This way, at any point in time, there will be 3 contracts available for trading in the market i.e., one near month, one mid month and one far month duration respectively.
S&P CNX Nifty futures contracts expire on the last Thursday of the expiry month. If the last
Thursday is a trading holiday, the contracts expire on the previous trading day.
The permitted lot size of S&P CNX Nifty futures contracts is 200 and multiples thereof.
The price step in respect of S&P CNX Nifty futures contracts is Re.0.05.
Base price of S&P CNX Nifty futures contracts on the first day of trading would be theoretical futures price.. The base price of the contracts on subsequent trading days would be the daily settlement price of the futures contracts.
There are no day minimum/maximum price ranges applicable for S&P CNX Nifty futures contracts. However, in order to prevent erroneous order entry by trading members, operating ranges are kept at + 10 %. In respect of orders which have come under price freeze, members would be required to confirm to the Exchange that there is no inadvertent error in the order entry and that the order is genuine. On such confirmation the Exchange may approve such order.
Quantity Freeze for S&P CNX Nifty futures contracts would be 20,000 units or greater. In respect of orders which have come under quantity freeze, members would be required to
confirm to the Exchange that there is no inadvertent error in the order entry and that the order is genuine. On such confirmation, the Exchange may approve such order. However, in exceptional cases, the Exchange may, at its discretion, not allow the orders that have come under quantity freeze for execution for any reason whatsoever including non-availability of turnover / exposure limits
Order type/Order book/Order attribute
· Regular lot order · Stop loss order · Immediate or cancel · Good till day · Good till cancelled* · Good till date · Spread order
*Good Till Cancelled (GTC) orders are cancelled at the end of the period of 7 calendar days from the date of entering an order
The S&P CNX NSE Nifty 50 Index
S&P CNX NSE Nifty 50 Index is a well diversified 50 stock index accounting for 23 sectors of the economy. The total traded value of all Nifty stocks is approximately 70% of the traded value of all stocks on the NSE. Nifty stocks represent about 60% of the total market capitalisation.
Why Trade the NSE Nifty Index?
You can trade the 'entire stock market' instead of individual securities.
Index Futures are: - highly liquid - large intra-day price swings - high leverage - low initial capital requirement - lower risk than buying and holding stocks - just as easy to trade the short side as the long side - only have to study one index instead of 100's of stocks
Index futures are settled in cash and therefore all problems related to bad delivery, forged, fake certificates, etc can be avoided. Since the index consists of many securities (50 securities) it is very difficult to manipulate the index. You are required to pay a small fraction of the value of the total contract as margins. This means that trading in Stock Index Futures is a leveraged activity since the investor is able to control the total value of the contract with a relatively small amount of margin.
About TradingPicks.com Futures Trading Newsletter
"We have recently created what we believe to be one of the most powerful and consistent profitable Trading Newsletter for trading the NSE Nifty Futures contract."
If you use our Futures Trading Newsletter in conjunction with our money management rules, stop loss targets you shall possess what we believe to be one of the most powerful and useful trading newsletter for trading the NSE Nifty Futures Contract. If you are a student of the markets, an individual trading or running your own capital, or a professional such as a hedge fund manager, or a financial or investment advisor who is acting on behalf of others in a fiduciary position you should definitely examine in detail what we are offering. We have a background in equity research, software development, control systems engineering, and professional trading. We have research associates who are long on experience in testing, trading system development and quantitative analysis. What our research and trading methods are..., Our research is focused on quantitative methods based on thorough examination of the movement and trend of the NSE Nifty index futures coupled with excursion expectation. Our newsletter signals are easy to use, simple to understand, and can be implemented within a few minutes of examination or instruction. Our methods of trading in all equities and financial instruments is based on our own proprietary research.
We do not sell the software that we test our methods on, we do not sell our back testing engines, we do not sell a stand alone software product. We do offer by subscription the result of our research which is a signal to go long, short, or cover through our Futures Trading Newsletter. No Software, No Data Downloads, No Data Fees, Anywhere Availability,... Our Futures Trading Newsletter will be provided to our subscribers by email. Our newsletter will save you time since there is no software to learn, no installation needed which alleviates any and all data problems resident on your PC. No Opinions, just precise entry and exit signals and trend indicators,... As you read through our site, you will notice that we are not very opinionated about the markets. We feel there are enough sites full of opinion and rhetoric on the markets and their direction. To us, relying on most all of them is akin to flipping a coin. All we want to do is be on the right side of the markets on a consistent basis
AN OVERVIEW OF STEEL SECTOR Steel Industry
1. Profile of the Steel Industry
The Indian integrated steel industry consists of nine major plants located mostly in the eastern areas rich in both iron ore deposits and coal. The location of the plants was conceived with theintention of having them close to raw material sources. In the days of supply driven market which was also hedged from external competition, the emphasis was mostly on production and not on cost cutting or energy efficiency. With the change in the business environment where market driven forces became stronger and in view of the integration of global environment concerns with the national concerns a marked shift towards incorporating energy efficiency and environment protection in the business activities has taken place. Initially focus was on production technology and it was only recently in this process that energy efficiency concerns were seeded into the thinking of the respective managements. The plants have a wide range of facilities and this reflects in the energy consumption of the individual plants as well. Overview of the plants is given below: Unit Process Installed capacity (mtcs) Production(mtcs) SEC(GJ/tcs) 1 TISCO BF-BOF-CC 3.540 3.434 32.57 2. BSP-SAIL BF-BOF/THF-IC/CC 3.925 3.743 29.49 3 BSL-SAIL BF-BOF-CC 4.360 3.353 33.96 4 DSP-SAIL BF-BOF-CC 1.802 1.500 31.39 5 RSP-SAIL BF-BOF-CC 1.900 1.190 41.77
6 IISCO-SAIL BF-OHF-IC 0.380 0.292 39.71 7 VSP-RINL BF-BOF-CC 2.900 2.576 33.22 8 JSPL DRI-EAF 0.650 0.400 26.00 9 JVSL COREX-BOF-CC 0.800 0.670 –
2. Salient features of Indian Steel Industry
nstalled capacity 34 MT of finished steel I 42% of finished steel production in integrated steel sector 58% of installed production in secondary steel sector SEC ranges from 29.5 GJ/tcs to 41.8 GJ/tcs Average SEC of Indian industry (33 GJ/tcs) is slowly approaching that of US industry(26GJ/tcs) Most efficient steel making countries are Japan (18 GJ/tcs) and South Korea (19 GJ/tcs) Over the years, a number of energy conservation measures taken by each plant.
3. Quantitative Details
3.1 Installed capacity and capacity utilisation
The integrated Iron and Steel industry in India has a total installed capacity of 19.5 MT of crude steel. However the production from these plants totals 16.5 MT for the year 1999-2000. Thus we can see that there is unutilized capacity in the integrated steel industry. The unutilized capacity has a bearing on the energy efficiency and is correlated to the energy efficiency. The coefficient of correlatation was found to be –0.85. Thus one important part of the respective energy management policies of the plants should be to ensure full utilisation of capacities.
3.2 Energy from waste
The utilisation factors are inversely correlated to the SECs. However an important off-lier in the above analysis is the JSPL plant which is mostly dependent on the Scrap / DRI-EAF route for
steel making. Even though the utilisation factor for the plant is only 66% the SEC is only 26 GJ/tcs implying that the use of new routes of steel making with optimal capacities could be used to harness energy for better purposes. The plant uses the DRI off-gases for electricity production.
3.3 Technological status
Major technological improvements in production facilities have been made in many of the integrated steel plants. The effect of technological improvements is manifested best in the low SEC for the DSP which has been able to bring down the energy consumption in a short duration. Thus technological improvements in the production facilities can have far reaching consequences as far as the energy consumption scenario is concerned.
3.4 Fuel usage
All encouraging trend of declining energy consumption is evident in the integrated steel sector. The decreasing trends of coking coal usage per tonne of ore processed indicates better resource efficiency for the steel industry as a whole. The same is evident from the trends for limestone consumption per tonne of ore processed. A similar trend is also visible in the gaseous and liquid fuel consumption for the integrated steel plants. Even though there has been a trend of enhanced energy efficiency and resource efficiency in the India Steel sector, the best is yet to be achieved.
Boom in India’s iron and steel industry*
B. P. RadhakrishnaLakshmi Niwas Mittal is one of the richest men in the world today. Last year his photo appeared on the front cover of theTime magazine and the write-up which followed expressed outrage at the bid of this young tycoon for taking over Europe’s largest steel-
making company. The eyes of the world were directed towards this smiling youth hailing from a poor country, whose forefathers were cowed down and humiliated by the British, who had raised himself up to such an extent as to dare to bid, and succeed, in the purchase of Arcelor, the largest steel producer of the European continent. Closely following this event come the news that the Indian steel giant Ratan Tata has concluded a deal for the take over of Corus, the largest Anglo-Dutch steel maker, and thereby created the fifth largest steel-making company in the world. How did all this come to happen? Thereby hangs a tale of steel making, an industry which started in India several thousand years ago and had built up a name for producing high quality steel.
Early supremacy of India as a maker of quality steel
It is worthwhile to pause and take note of the stages of development of this once flourishing industry in this country. The average citizen, and even the intelligent youth receiving instruction in science and technology perhaps, does not know that the initiation of the practical production of metals originated in India. Even today the adivasi tribes of Madhya Pradesh continue to practice the ancient art of steel making. New Delhi attracts tourists from different parts of the world and most of them visit Kutub Minar where their attention is drawn to the rustless iron pillar of Chandra Gupta (400 AD) standing nearby.
In my early days of field work, I used to come across heaps and heaps of slag aroundcertain villages in Tumkur and Chitradurga districts containing broken pieces of clay crucibles which had been used in making steel. This practice of steel making continued even up to very recent times and early travellers like Buchanan and Newbold witnessed the actual process as practiced in many villages of south India. There are many stone circles nearby, relics of ancient burial grounds, pointing to the existence of some ancient tribe, specialized in this art of steel making, who roamed all over south India and practiced their trade.
The steel produced was fashioned into words which were then in great demand. It is claimed that the famous ‘wootz’ steel from which Damascus swords were made was originally from
south India, and the term ‘wootz’ itself being derived from the Kannada term ‘ukku’. Many researchers, both in India and abroad, have tried to trace the extent of the wootz making industry in ancient India andhave been able to locate a number of sites. Archaeometallurgical studies have shown that the industry thrived in many places in south India and had spread to SriLanka, Turkmenistan and Uzbekistan by 1000 AD, indicating the existence of a pan-Asian crucible steel industry. Like many other industries, steel making also declined with the advent of colonial rule, but for which India, in all probability, would have remained as a world leader in steel making since ancient times.
The making of wootz steel is a mystery even to this day, and studies continue to find the special ingredients used in its manufacture. Kodachadri, a lofty mountain peak in the Sahyadri range and a conspicuous landmark, is 1345 m high above sea level and from where a magnificen view of the coastline of Karnataka can be had. In a small area of level ground at the peak is an iron pillar, 10 m in height and 12 cm in diameter, which is perhaps the oldest iron pillar identifiedand, is ascribed to Sankaracharya (820 AD). Despite the heavy seasonal rainfall the pillar has not rusted.
A reference has already been made tothe iron pillar near Kutub Minar, South Delhi, 7 m high and weighing 6 tonneswhich is a historic relic testifying to the metallurgical art of ancient India. The 7 m long pillar is believed to have been forged from a series of disc-shaped iron blooms and the mysterious feature of the iron pillar is its freedom from corrosion.
The famous Thanjavur cannon also test to metallurgical skills of a high order which persisted till 1626–36 AD. The 300 mm bore cannon has a barrel length of 400 mm and 150 mm thickness and was made entirely by forge welding. It is generally accepted that steel making in India commenced around 300 BC, flourished up to 1856 AD and continued even after, to meet the steel requirements of the country till 1896, when Bessemer patented his process of producing large quantities of steel in specially designed converters in UK.
Sheffield became the centre of steel making and the colonial overlords began dumping steel on India in large quantities at cheaper rates, thus effectively causing the death of the
indigenous industry. A very large number of artisans were thrown out of employment as a result of this invasion of cheap steel. The big armouries and the numerous metal artifacts too were want only destroyed to remove all traces of the early metallurgical skills of the Indian craftsman.
Birth of modern steel industry
Years later, it was Jamshedji Tata who had the vision to foresee the needs of an independent India and took steps, against heavy opposition, to produce iron and steel in India. ‘Tata steel’ is now a familiar name everywhere and the credit for starting a mighty steel plant at Jamshedpur, especially at a time when the political freedom of the country was still a dream, should largely go to this visionary.
Jamshedji Tata, at the same time, had the larger vision of creating a unique University of Advanced Research – the Indian Institute of Science, Bangalore, an institute which has become the mother of all science institutes in the country. Jamshedji was a unique person who sought no honour and claimed no privilege, the advancement of India and her people being his sole goal. We have come a long way from the days of Tata steel. J. R. D. Tata in his autobiography has successfully analysed the circumstances under which the great Tata first took the almost unbeCOMMENTARY CURRENT SCIENCE, VOL. 92, NO. 9, 10 MAY 2007 1211 ievable step of making steel which set the country on the path of modern science and industrial development.
Although still under colonial rule, Tata observed that India remained in the backyard while an industrial revolution was rapidly transforming Europe and parts of Asia. He wanted to see his country in the forefront of science and technology. Jamshedji knew that before the advent of steam and electric power, India had, for a thousand years or more, been the most industrialized country in the world, a pioneer and leader in the manufacture of cloth, iron and steel, ships and many other products, not to speak of its eminence in mathematics, astronomy, architecture and philosophy. Surely, he argued, the creative and productive genius of such
people could be made to flower again if given the tools of modern science and technology.It is given to few to dream and see their dreams come true and take shape within their lifetime. Jamshedji relentlessly pursued his pet project and finally succeeded in putting up a steel plant at Sakchi (later named Jamshedpur). He was guided to this location by another patriot – Pramatha Nath Bose, a geologist of the Geological Survey of India. In spite of Jamshedji’s drive and initiative, actual production could only start in 1912, three years after his death. The plant, with a small production of 100,000 tonnes of finished steel, steadily grew to become the largest integrated steel plant in India by the end of the World War II. This was no mean achievement under the conditions prevailing in the country in those days. ‘Jamshedji became the man who helped the nation to believe in itself’ and the man who lighted the path for many entrepreneurs in India to follow his example.
The First World War resulted in a great demand for steel which Tata steel helped to meet. The famous Howrah Bridge of Kolkata was built in 1914 using 80,000 tonnes of steel produced by Tatas. After independence came the era of socialistic planning and Tatas were not allowed to expand. Instead, three new plants were allowed to grow in the public sector through massive doses of borrowed money and India began to be burdened with foreign debt.
A wrong step
The country needed foreign exchange, and that, too, quickly, to meet the growing import bill on oil and interest charges on foreign loans. Iron ore mining and export appeared the easiest way to garner the foreign exchange required as India was endowed with abundant iron ore of the highest quality lying right on surface requiring no great effort at mining. Millions and millions of tonnes of the highest grade iron ore were mined and exported in the raw state without any processing whatsoever, and a precious resource was frittered away with no thought for the future. The realization of the need to concentrate on production of steel and expand the industry came too late and the new plants had to search for iron ore supplies. The private sector, which had a
raw deal within the country, had to go elsewhere to set up steel plants. Trading in ore in the raw state at a low price and importing finished steel at enormous cost is a practice which is still continuing, with no perceptible effort at taking corrective action. Millions and millions of tonnes of valuable ore have been lost to the country by unrestricted export and the forest and agricultural land from which the resource has been extracted is laid waste. No thought was given to the rehabilitation of the local people and amelioration of their living conditions.
The latest figures which the Indian Bureau of Mines has released relating to the year 2005– 06 show more than 60% out of a production of 140 million tonnes of ore has been exported. Raw iron ore export is expanding instead of diminishing! The changes in mineral policy – liberalization, deregulation and amendments to Mineral Concession Rules announced more than ten years ago have not made any dent in this export trade and highest grade iron ore continues to be exported. In recent years, however, there is a sudden realization on the part of government of the necessity to promote steel production in a big way with foreign equity participationand Mittals and Tatas have been entrusted with the task of achieving a large and rapid expansion of steel productionin the iron ore belt of Jharkhand and Orissa.
Present production is 40 million tonnes of steel according to the National Steel Policy; it is proposed to be increased to 80 million tonnes by 2010. There is however, no sign of concrete steps being taken to achieve these targets. Meanwhile, China has forged ahead and is emerging as the single largest producer of steel with a peak production of 250 million tonnes, overtaking all other countriesincluding Japan and USA. Highprices for iron ore are being offered tempting countries like India to export their ore. Iron ore producers in India have fallen into the trap and continue to export larger and larger quantities of ore, a practice which is detrimental to the developmentof the indigenous steel industry in the long run.
Luckily for our country iron ore resources are adequate (over 15 billion tonnes) but this does not mean that we should continue to fritter away our resources which are needed for buildingindigenous steel capacity. There can be no excuse for continuing export of ironore. In spite of fairly perceptible industrial development, India is yet to realize that just extracting and
transporting raw or without any processing whatsoever betray a primitive, simplistic approach to country’s economy. A mountain of income will grow if only the raw ore is converted in India to steel and ferro-alloys, which will return a thousand times more revenue than the meagre earnings from the export of ore in the raw state.
Conversion of ore into steel and its alloys will also give scope for the flowering of new talent and contribute in no small measure to the overall prosperity of the State. For all this to happen steps have to be initiated, mining areas to be located and planned for large-scale production. Procuring of mining lease after crossing numerous hurdles in the way by government and courts and transfer of ownership of land pose grave problems. If real progress has to be achieved, action has to be initiated with the least possible delay.The more serious problem is about the transfer of land.
Corporate social responsibility lacking
The government and the corporate sector, which are serious about development areeager to acquire land belonging to the tribal and poorer people, which aboundin ore at minimum cost. The corporate sector wants these people to be evicted and the land handed over to them. Neither the government nor the industry has given serious thought about the rehabilitation of the displaced people. It is the primary duty of the government of the people, by the people, for the people to ensure regular income to the displaced owners by COMMENTARY CURRENT SCIENCE, VOL. 92, NO. 9, 10 MAY 1212 2007 making them co-sharers in the prosperity which will accrue from the utilization of minerals found in their land.
We expect the government and corporate sector as a whole to take note of their societal obligations and take perceptible steps to usher in a better standard of living for the rural poor who have been deprived of their land. The picture of the tribal people of Karnataka, Jharkhand,
Bengal and Orissa, driven out of their land to make room for giant steel plants does notseem to have disturbed either the government or the masters of steel making.This insensitivity of the corporate sector in discharging its social responsibilities, turning a blind eye to rehabilitation, education, health, housing, sanitation and several other aspects of the workers’ lives, who are the owners of the land rich in ore, is disturbing. This is the worst aspect of industrial growth and unless a proper solution is found and the welfare of the rural poor is given due attention, the wealth generated by the mineral willhave no meaning for the people.
Archaic mining laws of the colonial era still continue to operate and rights to the mineral wealth below ground is denied to the owners of the land. In the prevailing practice governments forcefully take over the land rich in mineral resources for the industry, without imposing on them any conditionto rehabitate the displaced persons and earmark a certain percentage of the profit for displaced rightful owners of the mineral wealth. The equitable way would be to consider the landowner as a partner in the business and assure him of an annual return.The present discontent found in many parts of India will disappear when the people are convinced that the developmentof the industry is to their advantage by improving their living conditions and assuring them of a share in the profit.
In the present organizational set up prevailing in the country every organization,either in the public or private sector,is only robbing the poor of his only resource – his land, without at the same time taking any steps to make him also a co-sharer in the prosperity which the industry will assuredly bring. As the late Anil Agarwal, the eminent environmentalist said both nationally and internationally, participation, equity and community-based national resource management system alone will lead the nations of the world towards a durable peace and development. Governments at State and Centre cannotremain blind to the conditions of the poor who are being brazenly robbed of their only sustenance and must take steps without further delay in setting right these wrongs. If we do not do this, instead of India being a shining economy it will continue to remain poor and discontent and long supressed anger bursting forth in different parts of the country, taking it back to the dark ages of repression and blind submission to authority.
Wise statemanshipis called for.
Drafting mineral policies without a real indepth study of how the industry will affect the populationof the region will not enable us to reach any of the goals we have set for ourselves.There are now new opportunities opening up for the development of steel industry. Metal glasses are being produced heralding a revolution in steel making. These glasses are stated to be 7 mm thickness and are stronger and resistant to corrosion. In all these developments, the Indians who pioneered in the production of wootz steel are nowhere to be seen. Modern research should branch out into new ways and produce materials which can revolutionize the art of steel making. For this to happen the Indian scientists and artisans must first gain a better understanding of the ancient art of steel making and help establish a continuity in metallurgical skills.
Our tradition compares knowledge to an ancient aswatha (peepal) tree with its roots above and branches below, never dying and remaining imperishable. The old trunk is ever alive but can give rise to newer branches in perpetuity. Grafted branches from outside can flourish for a while but soon wither for lack of sustenance as they are not part of the tree and cannot draw sustenance from the deep rooted old tree which never dies. Knowledgeshould grow from its own inherent strength. Borrowed knowledge will never have this spontaneous, unbroken, imperishable and inherent power. By analogy, Indian metallurgical science should gain in strength by delving deep into history and tracing step by step development of the art. Then they will have the ability and confidence to branch out into newer ways and not be camp followers of the West for ever. They can then plan for the manufacture of newer types of steel and alloys with their myriad properties. Borrowed knowledge is like an artificial flower which cannot be compared to the real flower, which blooms and radiates its splendour year after year.
The moral of the aswatha tree is clear.We must not squander the mineral wealth which nature has lavished on us by merely digging up and exporting it but, instead, become masters in the production of various varieties of steel and alloys and developing all the tools required for our growing industry. A vast income will grow and the world will knock at our door seeking our quality products, as they did three thousand years ago. The steel industry has a great future. That future is assured provided we make that knowledge our own, delving deep into the history of our nation which for many centuries had specialized in the art of steel making.The wealth generated should not enrich just the fortunate few to live in luxury, but should be equally shared among the people who have parted with the land. India will shine only when all sections of society prosper, and not merely a few. A new contract will have to be forged between industry and the people to usher in a new era of prosperity.
Different Steel manufacturing plants in India
The India steel industry is one of the major industries in India and the Indian government plays a very important role in the development of the steel industry in India. The India steel industry is experiencing a slow but steady growth. The steel industry in India has huge scopes in the future with massive scale of infrastructural development happening all across the country. The India steel industry caters to many other industrial sectors such as construction industry, mining industry, transportation industry, automobile industry, engineering industry, chemical industry, etc.
The India steel industry has further plans of development. Plans are being chalked out for setting up of 3 pig iron manufacturing units of a combined capacity of 6 lakh tons per year and a steel manufacturing unit of the capacity of producing 1 million tons yearly in West Bengal, with the technical and financial support of China. With all these developments, India steel industry is all set to become one of the most reputed industries not only in India but also in the international market. The different steel manufacturing plants under the India steel industry:
Integrated steel plants
Durgapur steel plant (DSP) in West Bengal Bhilai steel plant (BSP) in Chhattisgarh Bokaro steel plant (BSL) in Jharkhand Rourkela steel plant (RSP) in Orissa
Special steel plants
Alloy steels plants (ASP) in West Bengal Visvesvaraya iron and steel plant (VISL) in Karnataka Salem steel plant (SSP) in Tamil Nadu
Indian iron and steel company (IISCO) in West Bengal Bhilai oxygen limited (BOL) in New Delhi Maharashtra Elektrosmelt limited (MEL) in Maharashtra
Others major steel producers
Tata iron and steel corporation ltd (TISCO) Essar steel Jindal Vijaynagar steels ltd Ispat industries ltd Jindal strips ltd Mahindra Ugine steel company ltd JISCO Lloyds steel industries ltd Electro steel castings ltd Saw Pipes Uttam steels ltd Mukand ltd Tata SSL ltd Usha Ispat ltd Kalyani steel ltd Sesa Goa ltd NMDC
Steel industry reforms
Steel industry reforms – particularly in 1991 and 1992 – have led to strong and sustainable growth in India’s steel industry. Since its independence, India has experienced steady growth in the steel industry, thanks in part to the successive governments that have supported the industry and pushed for robust. development its
Further illustrating this plan is the fact that a number of steel plants were established in India, with technological assistance and investments by foreign countries.
In 1991, a substantial number of economic reforms were introduced by the Indian government. These reforms boosted the development process of a number of industries – the steel industry in India in particular – which has subsequently developed quite rapidly.
The 1991 reforms allowed for no licenses to be required for capacity creation, except for some locations. Also, once India’s steel industry was moved from the listing of the industries that were reserved exclusively for the public sector, huge foreign investments were made in this industry.
Yet another reform for India’s steel industry came in 1992, when every type of control over the pricing and distribution system was removed, making the modern Indian Steel Industry extremely efficient, as well as competitive.
Additionally, a number of other government measures have stimulated the growth of the steel industry, coming in the form of an unrestricted external trade, low import duties, and an easy tax structure. India continually posts phenomenal growth records in steel production. In 1992, India produced 14.33 million tones of finished carbon steels and 1.59 million tones of pig iron. Furthermore, the steel production capacity of the country has increased rapidly since 1991 – in 2008, India produced nearly 46.575 million tones of finished steels and 4.393 million tones of pig iron.
Both primary and secondary producers contributed their share to this phenomenal
development, while these increases have pushed up the demand for finished steel at a very stable rate.
In 1992, the total consumption of finished steel was 14.84 million tones. In 2008, the total amount of domestic steel consumption was 43.925 million tones. With the increased demand in the national market, a huge part of the international market is also served by this industry. Today, India is in seventh position among all the crude steel producing countries.
The following are the premier steel plants operating in India:
Salem Steel Plant at Tamil Nadu Bhilai Steel Plant at Chattisgarh Durgapur Steel Plant at West Bengal Alloy Steel Plants at West Bengal Visvesvaraya Iron and Steel Plant in Karnataka Rourkela Steel Plant at Orissa Bokaro Steel Plant at Jharkhand
Role of Iron and Steel Industry in India GDP
The Role of Iron and Steel Industry in India GDP is very important for the development of the country. In India the visionary Shri Jamshedji Tata set up the first Iron and Steel manufacturing unit called Tata Iron and Steel Company, at Jamshedpur in Jharkhand. Iron and steel are among the most important components required for the infrastructure development in the country.
Role of Iron and Steel Industry in India GDP-Facts
The Iron and Steel Industry in India is one of the fastest growing sectors The demand drivers for the Indian Iron and Steel industry are increase in the activities of the automobiles industry, real estates industry, transportation system, aircraft industry, ship building industry, etc.
• • • •
India ranks 5th in the world in terms of production of steel The amount of crude steel produced in 2006-07 was 50.71 million tonnes The amount of finished steel produced in 2006-07 was 51.9 million tonnes The production of finished steel was increased by 16.52%
The production of finished carbon steel was 24.8 million tonnes in the year 2006-07 It is expected that India would become the second biggest producer of steel within the year 2016 and the production per year would be 137 million tonnes
The exports pertaining to the steel industry was 6.26 % during the period 2006-07
Role of Iron and Steel Industry in India GDP-Consumption
• • • • •
The domestic consumption of steel has grown by12.5% in the past three years The domestic steel consumption in the year 2006-07 was 41.14 million tonnes The average growth rate of the Indian Iron and Steel Industry is 11.36% The construction projects all over India are major consumer of steel The per capita consumption of steel in India is 35kgs As the per capita consumption of steel is lower than other countries, so the steel industry has huge opportunities in the future
Role of Iron and Steel Industry in India GDP-Growth in Future
The Arcelor Mittal, which is the largest steelmaker in the world, has plans of establishing two Greenfield steel projects with capacity of 12 million tonnes annually, in India
Acerinox SA, one of the important stainless steel manufacturers in collaboration with Nisshin Steel, Japan is setting up a steel plant in India
The Tata Steel ranks 5th in the world steel production and the company have plans of expanding its capacity by the year 2015
SAIL, India's biggest producer of steel has plans of increasing the production to 24.98 million tonnes annually
Sinosteel Corp, China are planning to invest US$ 4 billion to set up a 5 million tonnes capacity Greenfield steel plant
The acquisition of the Corus, the Anglo-Dutch steel manufacturer by the Tata Steel The Algoma Steel, Canada was acquired by Essar Global for US$ 1.63 billion
Sector structure/Market size
The Indian steel industry entered into a new development stage from 2005–06, resulting in India becoming the 5th largest producer of steel globally. Producing about 53 million tonnes (MT) of steel a year, today India accounts for a little over 7 per cent of the world's total production.
India is the only country worldover to post a positive overall growth in crude steel production at 1.01 per cent for the January-March period of 2009. The recovery in steel production has been aided by the improved sales performance of steel companies.
According to a report from Barclays Capital, China and India are going to provide the impetus for steel demand for the next few years.Production
Steel production grew at 1.2 per cent in the January-March quarter of 2008-09 over the same period last year. The fourth quarter saw most of the large steel companies such as SAIL, Tata Steel, Essar and JSW operating at full capacity.
The National Steel Policy has a target for taking steel production up to 110 MT by 2019–20. Nonetheless, with the current rate of ongoing greenfield and brownfield projects, the Ministry of Steel has projected India's steel capacity is expected to touch 124.06 MT by 2011–12. In fact, based on the status of Memoranda of Understanding (MOUs) signed by the private producers with the various state governments, India's steel capacity is likely to be 293 MT by 2020.
Steel Minister, Ram Vilas Paswan, has said that an investment worth US$ 176.49 billion is likely to go into the steel sector by 2020.
In the first 10 months of 2008-09, India's steel production went up to 46.8 MT up by 1.1 per cent from last year.
India is the fifth-largest consumer of steel in the world. It consumes about 1.5 MT of stainless steel a year with around 70 per cent accounting for kitchenware. However, its use in railway coaches, wagons, airports, hotels and retail stores is growing immensely. Demand for steel in India is likely to grow at around 12 per cent against the global average of 5–6 per cent. Steel consumption grew at 3.8 per cent in the January-March quarter of 2008-09 over the same period last year.
A Credit Suisse Group study states that India's steel consumption will continue to grow by 16 per cent annually till 2012, fuelled by demand for construction projects worth US$ 1 trillion. The scope for raising the total consumption of steel is huge, given that per capita steel consumption is only 35 kg – compared to 150 kg across the world and 250 kg in China.
Out of India’s annual iron ore production of more than 200 MT, about 50 per cent is exported. Iron ore exports increased 17 per cent to 12.6 MT in February 2009 from 10.8 MT in the same month a year ago, owing to a moderate revival in demand from Chinese steel producers, as per the latest data compiled by a group of top Indian mining firms.
Earlier, according to a study, with the rise in demand for steel in China, India’s iron ore exports went up by 38 per cent to reach 13.6 MT in December 2008 against 9.8 MT in December 2007. Around 50-60 per cent of India’s iron ore is exported to China.
India’s exports during April-December 2008 were 64.4 MT. The government has reduced export duty on iron ore lumps from 15 per cent to 5 per cent, which has given a further fillip to exports. Further, the reduction in railway freight has also benefitted the domestic iron ore miners.
A host of steel companies have lined up major investment proposals. Furthermore, with an expanding consumer market, the Indian steel industry is likely to receive huge domestic and foreign investments. • According to the Investment Commission of India investments of over US$ 30 billion in steel are in the pipeline over the next 5 years. • Japan's Sumitomo Metal Industries is planning to build a blast furnace steel plant in India with mid-tier producer Bhushan Steel, investing as much as US$ 3 billion. • Arcelor-Mittal, the largest steel maker of the world, is planning to set up a captive port near Paradip in Orissa. The port will be used to serve two mega integrated steel plants of the company proposed in Orissa and Jharkhand.
Subsequent to the recent fall in international prices of commodities and to protect Indian producers, the Indian government has announced some changes in customs duty rates, which were effective from November 2008. The government has removed full exemption of customs duty on some industrial and agricultural commodities. Iron and steel products like pig iron, spiegeleisen, semi-finished products, flat products and long products are now subject to a basic custom duty of 5 per cent ad valorem. The Indian government plans to invest over US$ 350 billion in industries related to infrastructure and construction which will give a fillip to the steel sector.
While the demand for steel will continue to grow in traditional sectors such as infrastructure, construction, housing automotive, steel tubes and pipes, consumer durables, packaging, and ground transportation, specialised steel will be increasingly used in hi-tech engineering industries such as power generation, petrochemicals, fertilizers, etc. The new airports and railway metro projects will require a large amount of stainless steel.
According to an estimate, with the growing need for oil and gas transportation infrastructure, a US$ 118 billion opportunity is waiting to be tapped by steel manufacturers in the next five years. Indian steelmakers are set to make the most of booming global demand for steel pipes and tubes with the government withdrawing the 10 per cent duty on the exports of these products. According to a study by ICICI Direct, Indian steel companies are likely to get 19 per cent of the total global demand in the years to come.
Steel Industry India
Steel Industry: Position of India in World Scenario
High demands of steel by sectors like infrastructure, automobiles, home and real estate has given a boost to steel industry in India. India is the world's fifth largest producer of steel which produces 50 MT of crude steel and 52 MT of finished steel. It is believed that
by 2016, India is going to be the second largest producer of steel and its production is going to be around 137 MT. Combined with huge production, the exports of steel has also increased to 6.26 %. During the last 3 years the consumption of steel has also grown by 12.5%. But even then the per capita consumption of steel is only 35 kilograms compared to 250 kilograms in China.
Achievements of Indian Steel Companies
Due to its rapid progress, many domestic and foreign companies are ready to invest in the Indian steel market. Arcelor Mittal and Posco have promised to invest $32 million and the steel industry is likely to attract an investment of $220 million by 2020. Many of the investments are directed to expand the present steel capacity or setting new steel plants. Many big (Tata Steel) and small companies (Bhusan Steel) are planning to increase their production in the coming few years.
Indian steel companies are also making a mark for themselves in the world. Tata Steel has acquired Anglo - Dutch Company Corus to become the world's fifth largest steel maker. Naveen Jindal of Jindal Steel and Power Ltd has got a contract of $2.1 million for developing one of the world's largest iron ore deposit, El Matun. Similarly JSW Steel has acquired Jindal United Steel Corporation, Saw Pipes USA and Jindal Enterprises LLC at Baytown, Texas, for a staggering $ 940 million.
In 2007 the World Crude Steel output reached 1343.5 million metric tons and showed a growth of 7.5% over the previous year. It is the fifth consecutive year that world crude steel production grew by more than 7%. (Source: IISI)
China remained the world’s largest Crude Steel producer in 2007 also (489.00 million metric tons) followed by Japan (112.47 million metric tons) and USA (97.20 million metric tons). India occupied the 5 th position (53.10 million metric tons) for the second consecutive year. (Source: IISI)
The International Iron & Steel Institute (IISI) in its forecast for 2008 has predicted that 2008 will be another strong year for the steel industry with apparent steel use rising
from 1,202 million metric tonnes in 2007 to 1,282 million metric tonnes in 2008 i.e. by 6.7%. Further, the BRIC ( Brazil, Russia, India and China) countries will continue to lead the growth with an expected increase in production by over 11% compared to 2007.
The Indian steel industry have entered into a new development stage from 2005-06, riding high on the resurgent economy and rising demand for steel. Rapid rise in production has resulted in India becoming the 5 th largest producer of steel. • It has been estimated by certain major investment houses, such as Credit Suisse that, India’s steel consumption will continue to grow at nearly 16% rate annually, till 2012, fuelled by demand for construction projects worth US$ 1 trillion. The scope for
raising the total consumption of steel is huge, given that per capita steel consumption is only 40 kg – compared to 150 kg across the world and 250 kg in China. • The National Steel Policy has envisaged steel production to reach 110 million tonnes by 2019-20. However, based on the assessment of the current ongoing projects, both in greenfield and brownfield, Ministry of Steel has projected that the steel capacity in the county is likely to be 124.06 million tonnes by 2011-12. Further, based on the status of MOUs signed by the private producers with the various State Governments, it is expected that India’s steel capacity would be nearly 293 million tonne by 2020.
• • •
Steel industry was delicensed and decontrolled in 1991 & 1992 respectively. Today, India is the 7th largest crude steel producer of steel in the world. In 2007-08(Apri-June''07), production of Finished (Carbon) Steel was 12.088 million tonnes(Prov).
Production of Pig Iron in 2007-08(April-June'07) was 1.165 Million Tonnes (Prov). • The share of Main Producers (i.e SAIL, RINL and TSL) and secondary producers in the total production of Finished (Carbon) steel was 33% and 67% respectively during the period 2007-08 (April-June, 2007). • Last 4 year's production of pig iron and finished (carbon) steel is given below:
(in million tonnes) Category Pig Iron Finished Steel (Source: Joint Plant Committee) 200304
2007-08 1.165 12.088
Carbon 36.957 40.055 44.544 49.391
Demand - Availability Projection
Demand – Availability of iron and steel in the country is projected by Ministry of Steel annually.
Gaps in Availability are met mostly through imports. Interface with consumers by way of a Steel Consumer Council exists, which is conducted on regular basis.
Interface helps in redressing availability problems, complaints related to quality.
Price regulation of iron & steel was abolished on 16.1.1992. Since then steel prices are determined by the interplay of market forces.
There has been an up-trend in the domestic steel prices since 2006-07 and the trend accentuated since January this year.
Rise in raw material prices, strong demand in the international and domestic market and up-trend in the global steel prices have been some of the reasons cited by the industry for increase in the steel prices in the domestic market.
The mismatch in demand and supply is considered to be the main reason on the demand side for the rise in steel prices. Honourable Steel Minister has held discussion with all major steel investors including Arcellor-Mittal, POSCO, Tata Steel, Essar, Ispat and also SAIL, RINL to explore the possibility of expediting the ongoing as well as envisaged steel projects.
The Government also took various fiscal and other measures for stabilizing the steel prices like exempting pig iron, non alloy steel and steel making inputs like zinc, ferro-
alloys and metcoke from customs duty; withdrawing DEPB benefits on export of various categories of steel products and bringing back railway freight on iron ore from classification 180 to 170 for domestic steel producers.
In May 2008, the Government imposed 15% export duty on semi-finished products, and hot rolled coils/sheet, 10% export duty on cold rolled coils/sheets and pipes and tubes and 5% export duty on galvanized steel in coil/sheet form in order to further curtail rising prices and increase supply of steel in the domestic market.
Imports of Iron & Steel
Iron & Steel are freely importable as per the extant policy. Last four years import of Finished (Carbon) Steel is given below:-
Year 2003-2004 2004-2005 2005-2006
Qty. (In Million Tonnes) 1.540 2.109
2006-07(Prov. estimated) 2007-08 (Apr-June, 207) (Prov. 0.800 estimated) (Source: JPC)
Exports of Iron & Steel
Iron & Steel are freely exportable.
Advance Licensing Scheme allows duty free import of raw materials for exports. Duty Entitlement Pass Book Scheme (DEPB) introduced to facilitate exports. Under this scheme exporters on the basis of notified entitlement rates, are granted due credits which would entitle them to import duty free goods. The DEPB benefit on export of various categories of steel items scheme has been temporarily withdrawn from 27th March 2008, to increase availability in the domestic market.
Exports of finished carbon steel and pig iron during the last four years and the current year is as :
(Qty. in Million Tonnes) Finished (Carbon) Steel 2002-2003 2003-2004 2004-2005 2005-2006 2007-2008(April-June (Prov.estimated) 07) 4.506 4.835 4.381 4.478 Pig Iron 0.629 0.518 0.393 0.440 0.350 0.120
2006-2007(Prov.estimated) 4.750 1.310
(Source: Joint Plant Committee)
Levies on Iron & Steel
SDF LEVY- This was a levy started for funding modernisation, expansion and development of steel sector.
The Fund, inter-alia, supports :
1. Capital expenditure for modernisation, rehabilitation, diversification, renewal & replacement of Integrated Steel Plants. 2. Research & Development 3. Rebates to SSI Corporations 4. Expenditure on ERU of JPC 5. SDF levy was abolished on 21.4.94 Cabinet decided that corpus could be recycled for loans to Main producers Interest on loans to Main Producers be set aside for promotion of R&D on steel etc.
An Empowered Committee has been set up to guide the R&D effort in this sector. EGEAF – Was a levy started for reimbursing the price differential cost of inputs used for engineering exporters. Fund was discontinued on 19.2.96.
Opportunities for growth of Iron and Steel in Private Sector
The New Industrial Policy Regime
The Growth Profile
The liberalization of industrial policy and other initiatives taken by the Government have given a definite impetus for entry, participation and growth of the private sector in the steel industry. While the existing units are being modernized/expanded, a large number of new/greenfield steel plants have also come up in different parts of the country based on modern, cost effective, state of-the-art technologies.
At present, total (crude) steel making capacity is over 34 million tonnes and India, the 8 th largest producer of steel in the world, has to its credit, the capability to produce a variety of grades and that too, of international quality standards. As per the ratings of the prestigious " World Steel Dynamics", Indian HR Products are classified in the Tier II category quality products – a major reason behind their acceptance in the world market. EU, Japan have qualified for the top slot, while countries like South Korea, USA share the same class as India.
(ii) Pig Iron
In pig iron also, the growth has been substantial. Prior to 1991, there was only one unit in the secondary sector. Post liberalization, the AIFIs have sanctioned 21 new projects with a total capacity of approx 3.9 million tonnes. Of these, 16 units have already been commissioned. The production of pig iron has also increased from 1.6 million tonnes in 1991-92 to 5.28 million tonnes in 2002-03. During the year 2003-04, the production of Pig Iron was 5.221 million tonnes.
Growth of steel industry
• India is currently the fifth largest steel-producing nation in the world with production of over 53 million tonnes (MT). However, it has a very low per capita consumption of steel of around 46 kgs as against an average of 200 kgs of the world. This wide gap in
relative steel consumption indicates that the potential ahead for India to raise its steel consumption is high. • Being a core sector, steel industry tracks the overall economic growth in the long term. Also, steel demand, being derived from other sectors like automobiles, consumer durables and infrastructure, its fortune is dependent on the growth of these user industries. • The Indian steel sector enjoys advantages of domestic availability of raw materials and cheap labour. Iron ore is also available in abundant quantities. This provides major cost advantage to the domestic steel industry, with companies like Tata Steel being one of the lowest cost producers in the world.
However, Indian steel companies have to bear additional costs pertaining to capital equipment, power and inefficiencies (low per employee productivity). This has resulted in the erosion of the edge they would have otherwise enjoyed due to availability of cheap labour and raw materials.
The basic import duty on steel has been consistently brought down and is nil currently while the government has levied exports duty on steel products. The global prices of steel are rising continuously due to increasing prices of raw materials while the domestic prices of steel are held back and are lower than the global prices.
Demand- Availability Projection
Demand- Availability of iron and steel in the country is projected by Ministry of Steel annually.
Gaps in Availability are met mostly through imports. Interface with consumers by way of Steel Consumer Council exists, which is conducted on a regular basis.
Interface helps in redressing availability problems, complaints related to quality.
Pricing & Distribution
• • Price regulation of iron & steel was abolished on 16.1.1992. Distribution controls on iron & steel removed expect five priority sectors, viz. Defence, Railways, Small Scale Industries, Corporations, Exporters of Engineering Goods and North Eastern Region. • • • • Allocation to priority sectors is made by Ministry of Steel. Government has no control over prices of iron & steel. Open market prices are generally on rise. Price increases of late have taken place mostly in long products than flat products.
Meaning of Research
“A Research is a careful investigation or inquiry, especially through search for new facts in any branch of knowledge. It is a systemized effort to gain more knowledge.”
Research methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically. We study the various steps that are generally adopted by a researcher in studying his research problem along with the logic behind them. It is necessary for the researcher to know not only the research methods or techniques but also the methodology. Researcher always needs to understand the assumptions underline various technique and they need to know the criteria by which they can decide that certain technique and procedures will be applicable to certain problems and other will not.
Objectives of Research
The purpose of research is to discover answer to questions through the application of scientific procedures. Through each research study has its own specific purpose, we may think of research objectives as falling into a number of following groups: To gain familiarity with a phenomenon or archive new insights into it. To portray accurately the characteristics of a particular individual or a group To determine the frequency with which something occurs or with which it is associated with something else. To test a hypothesis of a casual relationship between variables.
Type of Research
Personal interview approach was adopted for the project. In this type of research, the researcher has to contact the person directly to know the available information and analyze these to make a critical evaluation. The facts or information required to analyze the data was available in interviewer’s statements. This was one of the main sources for the project. The other approach was Personnel Research. It is based on the personal knowledge. It is applicable to phenomenon that can be expressed in terms of words.
Before embarking on the details of research methodology and techniques, it seems appropriate to present a brief overview of research process. Research Process consists of a series of action or steps necessary to effectively carry out the research and the desired sequencing of these steps. The various steps, which provided guidelines to the research process pertaining to the project, are as follows:
Formulating the research problem
Formulation of research problem involves understanding the problem thoroughly and rephrasing the same into meaningful terms from an analytical point of view.
Extensive literature survey
It is necessary for the researcher to conduct an extensive survey connected with the problem. For the purpose manual, company records, journals, published data can be used.
Development of working hypotheses
Working hypotheses is a tentative assumption made in order to draw out and rest its logical or empirical consequences.
Preparing the research design
The researcher will be required to prepare a research. He will have to state the conceptual structure within which research would be conducted. The function of research design is to provide the collection of relevant evidence with minimum expenditure of efforts, time and money.
Determining the sample design
The researcher must decide a way of selecting a sample or what is popularly known as sample design. The types of sample design are: Personal Interview Simple Sampling Random sampling Systematic Random Sampling Stratified Sampling Quota Sampling Cluster and Area sampling Multistage Sampling Sequential Sampling Census For this project, Random Sampling was used among the above mentioned types. Since the time period was limited to 2 months, the sampling size was limited to 390.
Collection of data
While deciding the methods of data collection to be used for study the researcher should keep in mind two types of data viz.
The Primary data are those, which are collected afresh and for happen to be original in character. the first time and thus
Secondary data means data that re already available i.e. they refer to the data which have already been collected and segregated by someone else. The researcher has to determine the various sources of obtaining secondary data. Secondary data may be published or unpublished in nature.
Published data are available in:
1. Publications of central, state and local newspapers 2. Publication of foreign government or of international bodies 3. Technical or trade journals 4. Books, magazines and newspapers and Internet 5. Public record, statistics, historical documents and sources 6. Of public information.
Data used for the project was the secondary and primary data.
Methods of Data Collection
Personal Interview Questionnaire & Telephonic Interview.
Analysis of data
Quantitative analysis Qualitative analysis
Thus analysis of data require a number of closely related operations such as establishment of categories, the application of these categories into raw data through tabulation, chart and then draw inferences. Analysis work is generally based on the computation of various percentage, co-efficient etc. by applying various statistical formulae.
METHODOLOGY OF STUDY
To compare the key financial parameters of players within an industry with similar parameters in NIFTY, the exploratory and analytical research design used for the calculation of ratios with the help of balance sheet and profit & loss account during sept 2007 to march 2008 of the companies with the following parameters: 1. Interest Coverage Ratio 2. Debt-Equity Ratio 3. Return on Assets 4. Current Ratio 5. Price-Earning Ratio 6. Net Profit Ratio
On judgmental basis (Non probability), the companies from Steel sector & Nifty have been selected for study.
In analytical research, the researcher has to use facts or information already available & analyze to make critical evaluation of the material.
Exploratory research can be used to obtain necessary information and develop a proper foundation or conducting detailed research latter exploratory research help in understanding and assessing critical issues of problems. Exploratory studies are conducted for three main reasons: To analyze a problem situation. To evaluate alternatives. To discover new ideas.
Size of Sample:
• • 20 Companies of NIFTY have been taken for the study. 10 Steel Companies have been taken for the study.
The Data have been collected with the help of internet , Books , journals, and business newspapers. The statistical tools use in the study: • • Average One way ANOVA
Preparation of Reports
After analysis, the next step is in the preparation of the report. The report has been prepared according to the report writing principles. The Objective, clarity in presentation of ideas and the uses of charts have been maintained throughout the report. Once the data has been collected, the researcher has to process, analyze and interpret the same. It was emphasized that the researcher should exercise good care to ensure that reliable data are not only properly processed and analyzed but sufficient attention should also be given to aspects like: Editing, Coding and Tabulation with the data so that the quality of the report would not suffers.
OBJECTIVE OF THE STUDY:
To compare & analyze the financial parameters to bring out the real value in terms of these parameters as achieved by NIFTY on average and steel industry.
1. To calculate and analyze the profitability parameter. 2. To calculate and analyze the coverage power of the companies. 3. To calculate and analyze the financial strength of the company on the basis of stability and liquidity ratios.
DATA ANALYSIS AND INTERPRETATIONS
Analysis and interpretation are the central steps in the research process. The goal of analysis is to summaries the collected data in such a way that they provide answer to questions that triggered while research. finding. Interpretation is the research for border, meaning of research
Hence, questionnaire was analyzed separately and interpretation was done to bring meaning and implication of the study. Hence analysis could not be completed without interpretation and interpretation cannot proceed without analysis.
Ratio Analysis term refers to the numerical relationship between twovariable. Different types of ratios which we conduct in this study are as follows:
1) Current Ratios:
It shows relationship between current assets or current liabilities. Formula is following: Current Ratio= Total Current Assets / Total Current Liabilities Its ideal ratio is 2:1. More then 2 is show that company has the ability to meet its current obligations but less then 2 is show that company has difficulty to meeting current obligations. Low current ratio reveals that firm has insufficient cash to pay its liabilities and shortage of working capital in business.
2) Dept Equity Ratios:
The dept equity ratio is one of the common measure of estimating indebtedness of the firm. This ratio establishes relationship between long term dept and shareholders fund. It is expressed as follows: Dept Equity Ratio= Dept / Net Worth OR Total Long Term Depts. / Total Shareholders Fund In this case, 1:1 ratio is said to be reasonable. In this case, very high ratio is not good for the owner. This leads to increased interference of creditors in the management of the firm. Whereas, low dept equity ratio leads to sufficient safety margin to creditors, due to high stake of owners in the capita of an enterprise. Both low and high dept equity ratios are not desirable.
2)Net Profit Ratios:This ratio establishes relationship between net profit (after tax) of the firm and net sales, and computed as follows: Net Profit (After Tax) / Net Sales * 100 It indicates the proportion of sales revenue available to owner of the firm and extent to which it can decrease or cost can increase without inflating loss on owners. So, this ratio shows firm’s capacity to face adverse economic situation. Higher ratio is favorable for the business. Lower ratio revel decline in profit and inefficiency of the management.
Return on Total Assets:
This ratio computed by dividing net profit after tax by total funds invested or total assets. The formula of return on total assets is following: Return on Total Assets= Net Profit After Tax / Total Assets * 100 The higher the ratio better is profit earning capacity of an enterprise and vice-versa. The main objective of this is to measure effectiveness of funds.
4) Interest Coverage Ratio:
This ratio indicates the relationship between net profit before interest and taxes on long-term debt. The formula of interest coverage ratio is following:
Interest coverage Ratio=Net income before charging Interest and Income Tax/Interest payable on Long- term debt
The higher the ratio the more beneficial for the lenders, because this ratio measures the margin of safety for the lenders.
5) Price-Earning Ratio:
This ratio is helpful in predicting the market price of equity share at some future date in determining whether the share of a particular firm is undervalued /overvalued. This ratio is determined as:
P/E Ratio=Market Price Per Equity Share/Earning Per Share
Table 1: Ratio Chart of NIFTY Companies
Return Interest Name of the Coverag e 17.17 17.28 87.3 73.4 58.17 1.53 91.55 2.67 245.39 DebtEquity 0.247 0.464 0.01 0.038 0.0014 10.3333 0.0668 1.95 0.19 0.36 0.46 0.092 0.627 0.684 1.352 0.243 0.63 0.0255 0.1312 0.117 0.90111 Company Ambuja Cement Bharti Airtel BHEL Cipla HCL HDFC Hero Honda Idea Cellular ITC on Assets (%) 49.6 43.66 39.93 24.46 27.03 8.98 45.61 22.78 37.81 26.03 21.89 30.14 3.27 29.12 11.4 36.17 14.97 34.06 9.89 23.45 27.0125 Current Price Ratio 0.72 0.173 1.336 3.205 0.815 0.19 0.551 0.924 1.315 1.136 0.932 0.688 0.995 0.537 2.025 0.293 1.958 1.55 1.198 1.007 1.0774 Earning 10.41 27.3 38.13 24.91 15.9 35.82 17.66 45.52 25.08 53.9 15.22 13.31 35.52 10.38 26.96 12.9 59.96 20.85 39.51 16.1 23.6245 Net profit (%) 24.14 22.52 13.9 18.75 29.23 26.72 8.66 11.49 21.92 7.59 10.76 10.54 13.93 24.19 9.13 27.48 6.63 20.76 19.15 14.88 17.1185
Larsen & Turbo 7.06 Mahindra & Mahindra 73.61
Maruti Suzuki 61.77 Reliance Energy 3.97 TATA Steel Ranbaxy ONGC Sterlite India Wipro Zee Gail Average 25.69 8.5 7.54 5.99 442.13
Enterentainment 14.08 0.117 62.24585
Table 2: Ratio Chart of Steel Companies
Name of the Company Bhushan Steel Ispat Industeries SAIL Tata Steel Jindal Stainless Usha MARTIN Kalyani Steel Jindal Steel Jindal saw PSL
Interest Coverag e 5.33 0.95 29.24 25.69 4.53 2.75 20.14 6.44 101.76 2.53
DebtEquity 2.66 2.82 0.24 0.68 1.87 1.03 0.17 1.4 0.12 1.99
Return on Assets (%) 14.09 14.2 44.87 29.12 20.7 18.6 27.6 23.4 33.1 16
Current Ratio 1.41 0.91 1.16 0.54 0.79 0.92 0.83 0.83 4.27 1.66
Price NetProfit(%) Earning 8.66 54.5 11.74 10.38 8.06 13.09 12.65 28.58 8.9 16.78 8.11 -0.12 18.1 24.2 7.35 7.22 9.89 20 16.8 4.35
20.469 29.24 25.69 101.76
1.298 2.66 2.82 1.87 1.4 1.99
24.168 44.87 29.12 27.6 33.1
1.332 1.41 4.27 1.66
17.334 54.5 28.58
11.59 18.1 24.2 20 16.8
Analysis of different steel companies on a different parameter
After calculating the selected ratio of NIFTY companies and selected steel companies, we have calculated average of all ratios of all nifty companies and steel companies because the average will be the best representative of all the Nifty and Steel companies. With the help of the data, we prepared the following Table.
Table 3: Combines Ratio Chart of Nifty & Steel Companies
All Steel Ratio Interest Coverage Debt-equity Return on Assets (%) Current Ratio P/E Ratio Net Profit Ratio Nifty 62.24585 0.90111 27.0125 1.0774 23.6245 17.1185 Companies 20.469 1.298 24.168 1.332 17.334 11.59 Above average steel Companies 52.23 2.712 33.6725 2.4467 41.54 19.775
• Interest Coverage Ratio in Steel Industry is considerably lower the average achieved by growth companies as represented by NIFTY. The position is better in respect of the above average companies but still way behind NIFTY. • • Debt-Equity Ratio of the steel companies is quite less as compared to NIFTY. There for we can say Debt-Equity condition is not good enough for Steel Companies. Return On Assets of Steel Companies is considerably lower than the NIFTY Companies. But the condition of the above average companies quite better and comparable with NIFTY. • The Current Ratio of steel companies comparable with NIFTY growth companies. But the performance of the above average companies is contributing a lot.
The P/E Ratio of Steel Companies is lower than NIFTY. But P/E Ratio of the above average companies is quite good. Net Profit Ratio of Steel Companies is lower than NIFTY. But the performance of the above average companies is quite same as compared to NIFTY growth companies.
Analysis through testing the hypothesis using one way ANOVA:
Test on NIFTY and Steel Companies
Hypothesis formulated for the study
H1: There is no significant difference between the key financial parameters of NIFTY and All Steel Companies. H2: There is no significant difference between the key financial parameters of Nifty and Above Average Steel Companies.
One-way (or single factor) ANOVA: Under the one-way ANOVA, we consider only one factor & then observe that the reason for said factor to be important is that several possible types of samples can occur within the factor. We then determine if there are differences within the factor. The technique involves the following steps:
The ANalysis Of VAriance (or ANOVA) is a powerful and common statistical procedure in the social sciences. It can handle a variety of situations. We will talk about the case of one between groups factor here and two between groups factors in the next section.
The example that follows is based on a study by Darley and Latané (1969). The authors were interested in whether the presence of other people has an influence on whether a person will help someone in distress. In this classic study, the experimenter (a female graduate student) had the subject wait in a room with either 0, 2, or 4 confederates. The experimenter announces that the study will begin shortly and walks into an adjacent room. In a few moments the person(s) in the waiting room hear her fall and complain of ankle pain. The dependent measure is the number of seconds it takes the subject to help the experimenter. How do we analyze this data? We could do a bunch of between groups t tests. However, this is not a good idea for three reasons. 1. The amount of computational labor increases rapidly with the number of groups in the study. 2. We are interested in one thing -- is the number of people present related to helping behavior? -- thus it would be nice to be able to do one test that would answer this question. 3. The type I error rate rises with the number of tests we perform
The reason this analysis is called ANOVA rather than multi-group means analysis (or something like that) is because it compares group means by analyzing comparisons of variance estimates. Consider: We draw three samples. Why might these means differ? There are two reasons: 1. Group Membership (i.e., the treatment effect or IV). 2. Differences not due to group membership (i.e., chance or sampling error).
The ANOVA is based on the fact that two independent estimates of the population variance can be obtained from the sample data. A ratio is formed for the two estimates, where: one is sensitive to treatment and the other to error error effect & between estimate within groups estimate groups
Given the null hypothesis (in this case HO: 1=2=3), the two variance estimates should be equal. That is, since the null assumes no treatment effect, both variance estimates reflect error and their ratio will equal 1. To the extent that this ratio is larger than 1, it suggests a treatment effect (i.e., differences between the groups).
It turns out that the ratio of these two variance estimates is distributed as F when the null hypothesis is true.
1. F is a family of distributions, which varies as a function of a pair of degrees of freedom (one for each variance estimate). 2. F is positively skewed. 3. F ratios, like the variance estimates from which they are derived, cannot have a value less than zero.
Using the F, we can compute the probability of the obtained result occurring due to chance. If this probability is low (p we will reject the null hypothesis. ),
We already knew that: i = any score n = the last score (or the number of scores) What is new here is that: j = any group p = the last group (or the number of groups) Thus:
1 2 J P X11 X12 X1j X1p X21 X22 X2j X2p Xi1 T1 n1 Xi2 T2 n2 Xij Xip Tj nj Tp np Xn1 Xn2 Xnj Xnp
Since we are talking about the analysis of the variance, let's review what we know about it.
So the variance is the mean of the squared deviations about the mean (MS) or the sum of the squared deviations about the mean (SS) divided by the degrees of freedom.
V. Partitioning the Variance
As noted above, two independent estimates of the population variance can be obtained. Expressed in terms of the Sum of Squares:
To make this more concrete, consider a data set with 3 groups and 4 subjects in each. Thus, the possible deviations for the score X13 are as follows: As you can see, there are three deviations and:
within groups #1
between groups #2
To obtain the Sum of the Squared Deviations about the Mean (the SS), we can square these deviations and sum them over all the scores.
Thus we have:
Note: nj in formula for the SSBetween means do it once for each deviation.
VI. The F Test
It is simply the ratio of the two variance estimates:
As usual, the critical values are given by a table. Going into the table, one needs to know the degrees of freedom for both the between and within groups variance estimates, as well as the alpha level.
Table 4: Combines Ratio Chart of Nifty & Steel Companies
All Ratio Interest Nifty
Companies 52.23 2.712 33.6725 2.4467 41.54 19.775
Coverage 62.24585 20.469 Debt-equity 0.90111 1.298 Return on Assets (%) Current Ratio P/E Ratio Net Profit Ratio 27.0125 1.0774 23.6245 17.1185 24.168 1.332 17.334 11.59
Testing of the following Hypothesis:
Ho: There is no significant difference between the key financial parameters of NIFTY and All Steel Companies. Ha: There is significant difference between the key financial parameters of NIFTY and All Steel Companies.
Table 5: ANOVA Ratio of Nifty & Steel Companies
SUM SQUARES Between Groups Within Groups Total 259.188 3026.702 3285.89
OF DF SQUARE (2-1)=1 (12-2)=10 (12-1)=11 MEAN F 5%F-limit F(1,10)=4.9 6
259.188 0.856 302.6702
Tabulated value: 4.96 at 1, 10 degree of freedom.
Calculated value of F ratio (0.856) is less than the Tabulated value (4.96). Therefore the Null Hypothesis is true which there is no significant difference between the NIFTY and Steel Companies on the basis of key financial parametersTest
on NIFTY and Above
Average Steel Companies
Table 6: Combine Ratio Chart of Nifty & Steel Companies
All Ratio Interest Nifty Steel Above averege steel
Companies 52.23 2.712 33.6725 2.4467 41.54 19.775
Coverage 62.24585 20.469 Debt-equity 0.90111 1.298 Return on Assets (%) Current Ratio P/E Ratio Net Profit Ratio 27.0125 1.0774 23.6245 17.1185 24.168 1.332 17.334 11.59
Testing of the following Hypothesis:
Ho: There is no significant difference between the key financial parameters of NIFTY and Above Average Steel Companies.
Ha: There is significant difference between the key financial parameters of NIFTY and Above Average Steel Companies.
Table 7: ANOVA Ratio of Nifty & Steel Companies
SUM SQUARES Between Groups Within Groups Total 0.03195 4753.1545 4753.186
OF DF SQUARE (2-1)=1 (12-2)=10 (12-1)=11 MEAN F 5%F-limit F(1,10)=4.9 6
0.03195 0.0000672 475.315
Tabulated value: 4.96 at 1, 10 degree of freedom.
Calculated value of F ratio (0.0000672) is less than the Tabulated value (4.96). Therefore the Null Hypothesis is true which there is no significant difference between the NIFTY and Steel Companies on the basis of key financial parameters.
On the basis of the analysis of the data collected with the help of the Statistical tools, following are the findings of the study.
Interest Coverage Ratio of NIFTY is quite greater than Steel Companies and Above Average Steel Companies.
Debt-Equity Ratio for NIFTY is quite less than Steel Companies and Above Average Steel Companies.
Return On Assets of the NIFTY and Above Average Steel Companies is quite good but for All Steel Companies it is less than them.
The Current Ratio of NIFTY is quite good and the position of the Above Average Steel Companies is comparative. But All Steel Companies is little less.
The P/E Ratio Above Average Steel Companies is very good. But the NIFTY Companies and All Steel Companies are still behind.
Net Profit Ratio Above Average Steel Companies and NIFTY Companies is quite comparative, but for All Steel Companies is little less.
The finding from the ANOVA Test is that there are no significant difference between the NIFTY and Steel Companies and Null Hypothesis is Accepted.
• • • CONCLUSION
In this study after analyzing key financial parameters of the steel companies with the Nifty companies by using the statistical tools average and ANOVA, we came to following conclusion: • The performance of All Steel Companies is not comparative with the Nifty. There are much differences in the performance of Nifty and steel companies on the whole. • The performance of Above Average Steel Companies is quite comparative with the Nifty.
The Net Profit Ratio, P/E Ratio, Current Ratio, Return On Assets Ratio are showing the good picture. But the interest Coverage Ratio and the Debt-Equity Ratio of the Above Average Steel Companies are showing the adverse situation.
The Contribution of the Steel Companies is very les in the growth of the Companies. So we can say that the growth of the Nifty companies is due to the various other sectors.
On the basis of studying the above given conclusions, we are suggesting some recommendations so that the Steel Companies can improve their performance and contribute more towards the Steel Companies. Following are some suggestions. • The Above Average Steel Companies should work on their Interest Coverage Ratio and Debt-Equity Ratio because they are not according to Nifty’s performance. • The Steel Industry on the whole is contributing very less towards the growth companies so the need to improve their position on the basis of all key financial parameters.
Companies should work to improve their stability and coverage position
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• • • •
www.en. wikipedia.org/wiki www.economicstimes.com www.nifty.com www.idbipaisabuilder.in
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