You are on page 1of 67

A SUMMER TRAINING PROJECT

REPORT
ON

FINANCIAL STATEMENT ANALYSIS OF


JINDAL STEEL
SUBMITTED IN THE PARTIAL FULFILLMENT FOR THE AWARD OF
DEGREE OF MASTER IN BUSINESS ADMINISTRATION 2012-14
UNDER THE GUIDANCE OF:
MS. SHRUTI MALIK
FACULTY, RDIAS

SUBMITTED BY:
ANKIT RELAN
ROLL NO.05380303912
BATCH NO. 2012-14
SECOND SHIFT

RUKMINI DEVI INSTITUTE OF ADVANCED STUDIES

An ISO 9001:2008 Certified Institute


NAAC Accredited Grade A
(Approved by AICTE, HRD Ministry, Govt. of India)
Affiliated to Guru Gobind Singh Indraprastha University, Delhi
2A & 2B, Madhuban Chowk, Outer Ring Road, Phase-1, Delhi-110085.

Table of Contents

Table of Contents

Student
declaration.

Certificate from Guide........


..........

Acknowledgement.................................................................................

Executive Summary...

List of Tables:

CHAPTER- 1: INTRODUCTION
a) About the Industry
b) Steel Giants in India
c) About The Company

CHAPTER 2: LITERATURE REVIEW


a) Literature Review
b) About the Topic

CHAPTER 3: RESEARCH METHODOLOGY


a) Purpose of the Study
b) Research Objectives of the Study
c) Research Methodology of the Study

Research design

Data Collection Techniques

Sample design

Sample size

Sampling method

Method of data collection

Instrument for data collection

Limitations

CHAPTER 4: ANALYSIS& INTERPRETATION


a) Analysis
b) Interpretation

CHAPTER- 5: FINDINGS & SUGGESTIONS


a) Suggestions

CHAPTER- 6: CONCLUSION
BIBLIOGRAPHY
ANNEXURES

STUDENT DECLARATION

This to certify that I have completed the project titled Financial Analysis of Jindal
Steel under the guidance of Ms. Shruti Malik in the partial fulfillment of the
requirement for the award of the degree of Master in Business Administration from
Rukmini Devi Institute of Advanced Studies, New Delhi. This is an original work
and I have not submitted it earlier elsewhere.

Name: ANKIT RELAN


Enrollment No: 05380303912

CERTIFICATE

This is to certify that the project titled Financial Analysis of Jindal Steel is an
academic work done by ANKIT RELAN submitted in the partial fulfillment of the
requirement for the award of the degree of Masters in Business Administration from
Rukmini Devi Institute of Advanced Studies, New Delhi. under my guidance and
direction. To the best of my knowledge and belief the data and information presented
by him in the project has not been submitted earlier elsewhere.

O. P. Verma
(Project Guide)
Jindal Steel

ACKNOWLEDGEMENT
I take this opportunity to acknowledge and express my gratitude towards some
of the most eminent people whose presence is noteworthy & seminal in giving me a
grand opportunity to associate myself with an esteemed organization like Jindal Steel
Limited.
I am grateful to Mr. O. P. Verma, Accounts Manager at Jindal Steel Limited
for entrusting upon me confidence and providing me a chance to get an on-the-job
experience in the various fields of Finance.
I am thankful to him for his endeavor towards providing continuous guidance
to help build an understanding of the practical aspects of the work, gain knowledge &
valuable experiences. I am grateful to him for his outreaching support and helping to
build a motivating work environment and inculcating a feeling of constantly striving
to achieve higher goals.
His enterprising, dynamic, forward-looking, radical approach provides an
opportunity to work under an accomplished mentor like him to inculcate and instill
valuable talent. I consider my nearly two months Summer Internship at Jindal Steel
Limited to be a crucial learning period. I am deeply indebted to all the supervisors for
providing all the support when necessary.
I am also thankful to Faculty Mentor Ms. Shruti Malik for her helpful nature
and valuable guidance provided time and again. Her suggestions have been
instrumental in building the foundation for the draft report.

ANKIT RELAN
Enrollment No: 05380303912

EXECUTIVE SUMMARY
The company should look in for Cutlet financial position and should now
invest the capital in production and construction rather than in funds. The company
should improve their work level and capacities in ferrochrome plant for which the
company should strictly follow TQM and JUST IN TIME. The company should soon
go in for shares to reduce the high leverage. Administrative and manufacturing
expenses should be checked thoroughly. Technology and R&D department should
always BE up to their toes in Company's restructuring Pasco has the technology
which has less construction, installation& production cost.
The financial administrator must recognize that every financial decision he makes
with influence, in a very real way. The decisions he will make subsequently even
though the decisions may appear to be in unrelated areas and separated by a period of
several months. His decisions influence the way in which creditors, potential
investors, suppliers and even prospective employees view the firm from their own
point of view. The financial administrator must equip himself with the appropriate
tools of analysis so that he can determine his firms immediate position and measure

the effect of his decision on the future positions it will occupy over time. The
company's requirement of working is high still the company has invested the loaned
high rate funds in mutual funds. It shows misappropriation of funds in the earlier
stage of project which should actually be used for the plant construction.

CHAPTER1
INTRODUCTION

INTRODUCTION
About the Industry:
Ancient Steel:
Steel was known in antiquity, and may have been produced by managing the
bloomer so that the bloom contained carbon. Some of the first Steel comes from East
Africa, dating back to 1400 BC. In the 4th century BC Steel weapons like the-Falcate
were produced in the Iberian Peninsula.
The Chinese of the Han Dynasty (202 BC - 220 AD) created Steel by melting
together wrought iron with cast iron, gaining ultimate product of a carbon
intermediate-Steel-by the 1st century BC.
This early Steel-making method employed the use of a wind furnace, blown by the
monsoon winds. Also known as Damascus steel, woods is famous for its durability
and ability to hold an edge. It was originally created from a number of different
materials including various trace elements.
Early modern steel
A Bessemer converter in Sheffield, England.
Blister Steel

Blister Steel, produced by the cementation process was first made in Italy in the
early 17th century AD and soon after introduced to England. It was probably
produced by Sir Basil Brooke at Coalbrookdale during the 16105. The raw material
for this was bars of wrought.

During the 17th century it was realized that the best Steel came from oreg round s
Jron from a region of Sweden, north of Stockholm.

Modern Steelmaking:
A Siemens-Martin Steel oven from the Brandenburg Museum of Industry. See
also History of the modern Steel industry. The modern era in Steel making began with
the introduction of Henry Bessemer's Bessemer process in the late 1850s.
This enabled Steel to be produced in large quantities cheaply, so that mild Steel is
now used for most purposes for which wrought iron was formerly used. This was only
the first of a number of methods of Steel production the Gilchrist. Thomas process (or
basic Bessemer process) was an improvement to the Bessemer process, lining the
converter with a basic material to remove phosphorus.
Another was the Siemens-Martin process of open hearth Steelmaking which like
the Gilchrist-Thomas process complemented, rather than replaced, the original
Bessemer process. These were rendered obsolete by the Linz Donawitz process of
basic oxygen Steelmaking, developed in the 1950s, and other oxygen Steelmaking
processes.

Steel industry/Introduction to Stainless Steel


What is Stainless Steel? The material we know as stainless Steel (also commonly
referred to as "Inox" or "Rostfrei") is such a common feature of 21st century living
that there can be few of us who have not seen or handled articles made from it. But
how many of us really know what stainless Steel is?

10

Stainless Steel is everywhere:


It is, of course, the rust-resisting characteristic, which gives stainless Steel its
name. However, soon after its discovery, it was realized that the material had many
more valuable properties, which make it suitable for a vast range of diverse uses. In
fact, the numbers of uses to which stainless Steel can be put are almost limitless, a
point which can be illustrated with just a few examples:
In the home:

Cutlery, dishes and other tableware

Kitchen sinks

Pans and cookware

Ovens and barbeques

Garden equipment and furniture

In the town:

Bus shelters, telephone booths and other street furniture

Building facades

Lifts and escalators

Subway trains and station infrastructure.

In the town:

Bus shelters, telephone booths and other street furniture

11

Building facades

Lifts and escalators

Subway trains and station infrastructure.


In industry:-

Equipment for the manufacture of food products and pharmaceuticals

Plant for the treatment of potable and waste water

Chemical and petrochemical plant

Components for automotive and aero engines

Fuel and chemical tankers, etc.

The Stainless Steel Families

While the original form of stainless Steel, (iron with around 12% Chromium) is still
in widespread use, engineers now have a wide choice of different types (grades). In
all, there are more than 100 different grades but these are usually sub-classified into
distinct metallurgical "families" such as the austenitic, ferritic, martensitic and duplex
families.
The proportions of iron to chromium may be varied and other elements such as nickel,
molybdenum, manganese and nitrogen may be added to widen the range of
capabilities. 'Each particular grade of stainless Steel has its own unique mechanical
and physical properties and will usually be produced in accordance with an
established national or international specification or standard.
Whether you are an engineer, metallurgist, designer, architect, or simply someone
who wishes to know more about this remarkable material called stainless Steel, this

12

site aims to provide you with the essential information you are likely to need. In many
cases we provide links to other sites where complementary documents and/or
publications can be found.

Steel Giants in India:

Steel Authority of India Limited (Sail)

Tata Steel (Tisco).

Rashtriya ispat Nigam Limited (Rinl).

Jindal Vijayanagar Steel Limited (Jvsl)

Essar Steel.

Ispat Industries.

Sail, Tisco and Rinl produce steel using the blast furnase/basic oxygen furnace
(BF/BOF route that uses iron ore, coal/coke as the basic input mix for producing
finished Steel.
Other major producers such as Essar Steel, Ispat Industries and JVSL use routes
other than BF/BOF for producing Steel. While Essar Steel and ispat Industries
Employ Electric Arc furnace (EAF) route that uses sponge iron, melting scrap or a
mix of both as input, JVSL uses COREX, a revolutionary technology for making
Steel using basically ironore and coal.
The major producers are vital to the industry as they account for most of the mild
steel production a in the country the group produces most of the flat steel products in

13

the country including Hot Rolled, Cold Rolled and Galvanized Steel. The majors also
produce a small proportion of long products and other special Steel being produced in
the country.

14

About The Company:


The Group:
Jindal Organization, set up in 1970 by the steel visionary Mr. O.P. Jindal, has
grown from an indigenous single-unit steel plant in Hisar, Haryana to the present
multi-billion, multinational and multi-product steel conglomerate. The organization is
still expanding, integrating, amalgamating and growing.
The group places its commitment to sustainable development, of its people and the
communities in which it operates, at the heart of its strategy and aspires to be a
benchmark for players in the industry the world over.
The Jindal Organization today is a global player. It's relentless quest for excellence
has reaped rich benefits and it is today one of the worlds most admired and respected
groups within the steel fraternity.

Jindal Stainless:
Jindal Stainless is in many ways very much like the material it produces. Like
stainless steel the company is versatile in its thought process, strong and unrelenting
in its operations, environment friendly in its manufacturing process, bright, shining
and beautiful in its community support activities. The list of the properties of stainless
steel is endless, just as our values are all encompassing.
Jindal Stainless has always been committed to innovation and progression,
research and development. Our innovations are admired beyond the geographical
boundaries of our country. No wonder we are the strategic partners of global leaders
by choice. Our achievements narrate a story of our determination to succeed and our
passion to win. We will continue to leverage our opportunities in creating excellence

15

that the world cannot even think about. Today we are the largest integrated stainless
steel producer in India, tomorrow we will rule the world.
Jindal Stainless is a ISO: 9001 & ISO: 14001 company is the flagship
company of the Jindal Organization. The company today has come a long way from a
single factory establishment, started in 1970. As the numerousness it has taken on the
task of making stainless steel a part of everybody's life by taking a 360 degrees
approach from production of raw materials to supply of architecture and lifestyle
related products.

Hisar Plant, India


At Hisar, Jindal Stainless has India's only composite stainless steel plant for
the manufacture of Stainless Steel Slabs, Blooms, Hot rolled and Cold Rolled Coils,
60% of which are exported worldwide.

SUBSIDIARY COMPANIES OF JINDAL GROUP:


The company has six subsidiaries namely:
Jindal Stainless UK LTD, Jindal stainless FZE, Dubai,
PT. Jindal stainless Indonesia,
Jindal stainless steel way Ltd,
Jindal Architecture ltd. and
Austenitic Creations private ltd.

JINDAL STAINLESS UK LIMITED:


Globally steel is experiencing growth over last 2-3 yrs after a long period of
global demand stagnancy .in order to diversify its business risk expands its global

16

presence and develop new market for its products, a subsidiary company was set up in
UK. Jindal stainless UK ltd would act as anodal point and would help in servicing
markets like Italy, Russia and other European countries.
Presence in this region would enable the company to take advantage of emerging
business opportunities in the entire European region. This subsidiary company would
also act as a holding company, which may further extend its arms to other markets
like Italy and Russia.

JINDAL STAINLESS FZE, DUBAI:


Jindal stainless fez would act as a trading hub and would service markets like
Africa, Singapore and- Middle East. Other than being a major global trading center,
Middle East is fast emerging as a financial hub and is also poised for extensive
growth in manufacturing sector due to its significant financial resources.
A presence in this region would enable the company to tae advantage of emerging
business opportunities. This subsidiary company would also act as a holding
company, which may further extent its arms to other markets like Singapore.

PT. JINDAL STAINLESS INDONESIA:


PTJSI continues to produce cold roll material in three grades namely 304,JSL
AUS and J4 in line with product availability and customer requirement in the target
market.
The company was able to increase penetration in the domestic Indonesian market
with sales volume increasing by more than 500/0 from about 800 tons per month level
at the beginning of the year to about 12tons per month towards the end of the year. Its

17

major export lies in markets of china, Vietnam, Philippines and Korea. During the
year 05-06, the sales volume was 45594 MT amounting to sales of IDR 626.8 billion

JINDAL STAINLESS STELWAY LTD:


Jindal stainless Steelwayltd (Jssl) the first service centre for stainless steel in India
which was commissioned on 1st July, 2005 exactly as per project schedule
Established as a strategic interface between the largest integrated stainless steel
manufacturer in the country and the ever growing stainless steel consumers, the
objective

Stainless Innovation Awards:


Jindal Stainless has been striving to make stainless steel a part of everybody's
life by taking a 360 degrees approach from
Production of raw materials to supply of architecture and lifestyle related
products Meeting this very objective, are arc and art d' in ox promoted by Jindal
Stainless, uniquely supporting & promoting applications of Stainless Steel in every
conceivable creative possibilities are focuses on application of Stainless Steel
products and technology solutions across architecture.
Building and construction segments are involved in urban development and
making versatile use of Stainless Steel art d' in ox has proved to be a pioneer in the
manufacture of premium lifestyle products in stainless steel, breaking new grounds
with its innovations .
Jindal Stainless has also instituted the 0 P Jindal Stainless Chair for research
and product innovation in stainless steel at the prestigious National Institute of
18

Design, Ahmedabad, to encourage innovation and creative applications of stainless


steel, in design led products.
Stainless Steel is an established material in international design. It's contemporary,
stylish yet its neutral look is gaining immense popularity among all kinds of users and
tops as a material of choice for its excellent blending ability with any other material,
viz. glass, ceramics, wood or leather.
The material has been providing great opportunities and inspiration to generations of
designers. Today its use is being taken to new levels of expression and technical
sophistication.
Stainless Innovation Awards is a testament of our continued support to the design
fraternity.
To keep encouraging creativity in the usage of the material, Jindal Stainless organized
the fourth edition of "The Stainless Innovation Awards" to reward excellence in use
of stainless steel. The Awards were held on 10th March, 2007 in New Delhi.

19

CHAPTER2
LITERATUREREVIEW

20

LITERATURE REVIEW
A literature review is the effective evaluation of selected documents on a
research topic. A review may form an essential part of the research process or may
constitute a research project in itself.
A literature review is an account of what has been published on a topic by
accredited scholars and researchers. Occasionally you will be asked to write one as a
separate assignment but more often it is part of the introduction to an essay, research
report, or thesis. In writing the literature review, your purpose is to convey to your
reader what knowledge and ideas have been established on a topic, and what their
strengths and weaknesses are. As a piece of writing, the literature review must be
defined by a guiding concept (e.g., your research objective, the problem or issue you
are discussing, or your argumentative thesis). It is not just a descriptive list of the
material available, or a set of summaries
In the context of a research paper or thesis the literature review is a critical synthesis
of previous research. The evaluation of the literature leads logically to the research
question.

*PURPOSES OF A LITERATURE REVIEW:

Distinguishing what has been done from what needs to be done


21

Discovering important variables relevant to the topic

Identifying relationships between ideas and practice

Establishing the context of the topic or problem

Enhancing and acquiring the subject vocabulary

Relating ideas and theory to applications

Identifying methodologies and techniques that have been used

Placing the research in a historical context to show familiarity with state-ofthe-art developments.

*HOW TO REVIEW:

The whole process of reviewing includes:


a. Searching for literature
b. Sorting and prioritizing the retrieved literature
c. Analytical reading of papers
d. Evaluative reading of papers
e. Comparison across studies
f. Organizing the content
g. Writing the review

22

CHAPTER3
RESEARCHMETHODOLOGY

23

OBJECTIVES OF THE STUDY:


PRIMARY OBJECTIVE

To analyze the financial statements of Jindal Steel.

SECONDARY OBJECTIVES

To know the real worth of JINDAL STEEL.

To know the financial position of JINDAL STEEL.

To know the financial strength & weaknesses of JINDAL STEEL.

To know the role of financial statements in any organization.

RESEARCH METHODOLOGY
Research Methodology is the systematic, theoretical analysis of the methods
applied to a field of study, or the theoretical analysis of the body of methods and
principles associated with a branch of knowledge. It, typically, encompasses concepts
such as paradigm, theoretical model, phases and quantitative or qualitative techniques.
A Methodology does not set out to provide solutions but offers the theoretical
underpinning for understanding which method, set of methods or so called best
practices can be applied to a specific case.
It is the analysis of the principles of methods, rules, and postulates employed by a
discipline.
Research methodology is a way to systematically solve & study the research problem.
Research methodology involves:

Meaning of research

Research process

Research problem

Research design

Sampling design

Collection of data

24

MEANING OF RESEARCH:
Research is defined as the creation of new knowledge and/or the use of
existing knowledge in a new and creative way so as to generate new concepts,
methodologies and understandings. This could include synthesis and analysis of
previous research to the extent that it leads to new and creative outcomes.
This definition of research is consistent with a broad notion of research and
experimental development (R&D) as comprising of creative work undertaken on a
systematic basis in order to increase the stock of knowledge, including knowledge of
humanity, culture and society, and the use of this stock of knowledge to devise new
applications.
This definition of research encompasses pure and strategic basic research,
applied research and experimental development. Applied research is original
investigation undertaken to acquire new knowledge but directed towards a specific,
practical aim or objective (including a client-driven purpose).

RESEARCH PROCESS:
Research process consists of series of actions or steps necessary carry out
research & the desired sequencing of these steps.
The steps of research process are:

Define research problem

Extensive literature survey

Development of working hypothesis

Preparing the research design

Determining sample design

Collecting the data

Execution of the project

Analysis of data

Hypothesis- testing

Generalizations & interpretation

Preparation of the report


25

RESEARCH PROBLEM:
In research process, the first & foremost step is that of selecting and properly
defining a research problem.
A research problem is an issue or a concern that an investigator presents and
justifies in a research study. A research must find the problem and formulate it so that
it becomes susceptible to research. The present project has been undertaken to do the
financial analysis

RESEARCH DESIGN:
A research design is purely & simply the framework or plan for a study that
guides the collection & analysis of data.
Research design is a statement or specification of procedures for collecting and
analyzing the information required for solution specific problem. It provides a
scientific framework for conducting some research investigation. Research design is
the conceptual structure with in research is conducted. Research design includes an
outline of what the researcher will do from writing hypothesis & its operational
implications to final analysis of the data.
A research design is the arrangement for collection & analysis of data in a manner
that aims to combine relevance to the research purpose with economy in procedure.
Research design can be of following types:
Exploratory research

It generally emphasizes on discovery of ideas & insights and helps to think


beyond limitation.
Descriptive research

It is concerned with determining the frequency of occurrence or extent


relationship between two variables.
Experimental research

It is concerned with determining the cause & effect relationship.


In this research I have used exploratory research design.

26

DATA COLLECTION METHOD:


Once the sample has been chosen, the type of information to be sought is decided
thereupon. The next step is to collect the data, as the data collected is the base of what
we plan to find out, however the relevant care should be taken in methods of
collection of data involved; so that the errors are minimized. The factors of
availability of time, cost & human involvement may affect the reliability of the data
collected.
Broadly there are two types of data:

Primary data

Secondary data

Primary data
Primary data is data that is original and has never been published before. It is obtained
through means of surveys, observation or experimentation and research.
Primary data is the raw information before the processing is done. It mainly consists
of numerical collections of raw information to be analysed and evaluated. The term
primary data may sometimes be used to refer to first-hand information.
In this project report the researcher used primary data collection by using observation
method.
Secondary data:
Secondary data is data collected by someone other than the user. Common sources of
secondary data for social science include censuses, organizational records and data
collected through qualitative methodologies or qualitative research. Primary data, by
contrast, are collected by the investigator conducting the research.
Secondary data analysis saves time that would otherwise be spent collecting data and,
particularly in the case of quantitative data, provides larger and higherquality databases that would be unfeasible for any individual researcher to collect on
their own. In addition, analysts of social and economic change consider secondary
data essential, since it is impossible to conduct a new survey that can adequately
capture past change and/or developments.

27

As is the case in primary research, secondary data can be obtained from two different
research strands:

Quantitative: Census, housing, social security as well as electoral statistics


and other related databases.

Qualitative: Semi-structured and structured

interviews,

focus

groups transcripts, field notes, observation records and other personal, researchrelated documents.

A clear benefit of using secondary data is that much of the background work
needed has already been carried out, for example: literature reviews, case
studies might have been carried out, published texts and statistics could have been
already used elsewhere, media promotion and personal contacts have also been
utilized.

This wealth of background work means that secondary data generally have a preestablished degree of validity and reliability which need not be re-examined by the
researcher who is re-using such data.
Furthermore, secondary data can also be helpful in the research design of subsequent
primary research and can provide a baseline with which the collected primary data
results can be compared to. Therefore, it is always wise to begin any research activity
with a review of the secondary data.
In this project report the researcher used secondary data. For the analysis and
Interpretation, data are collected through internal sources from the financial
statements and annual reports of the financial institution.

28

LIMITATIONS OF THE PROJECT:


No study can be a perfect one, so is mine. Yet there always use to present some
limitations under which researcher have to work, so still there may be some inherent
limitations in the study. Following are some of the major limitations of this study that
I observed:
The major problem in my research study is validation of data based on the
perception/knowledge of employees, as this was a new thing for some of
them.
There may be casual approach of employees in responding.

Current year data was not available for the analysis.


Difficulty in comparison.
Impact of inflation.
Conceptual diversity.
Lack of knowledge and experience.
Problem of window dressing.
Difficult to understand information provided in annual reports.
Time constraint.

29

CHAPTER4
ANALYSIS
&
INTERPRETATION

30

ANALYSIS & INTERPRETATION


The financial administrator must recognize that every financial decision he
makes with influence, in a very real way. The decisions he will make subsequently
even though the decisions may appear to be in unrelated areas and separated by a
period of several months.
His decisions influence the way in which creditors, potential investors,
suppliers and even prospective employees view the firm from their own point of view.
The financial administrator must equip himself with the appropriate tools of
analysis so that he can determine his firms immediate position and measure the effect
of his decision on the future positions it will occupy over time.
Every finance manager is involved in financial decision-making and financial
planning. In order to take right decisions at right time, he should be equipped with
sufficient past and present information about the firm and its operation and how it is
changing over time.
Much of this information that is used by finance manager is known as Financial
Information derived from financial statements. It helps in planning for future. An
understanding of the basic financial statements and analysis of this statement is
therefore a necessary step in corporate financial management.
This project report focuses attention on what these financial statements are and how
they can be used for financial analysis of the firm.

31

FINANCIAL STATEMENTS:
The financial statements are the end product of financial accounting process. The
financial statements are nothing but the financial information presented in a concise
and capsule form, and the financial information is the information relating to the
financial position of the firm.
The financial statements are the depiction of the financial position of the firm. The
financial statements are prepared by the firm due to the following reasons:
To communicate with different parties about the financial position of the firm
To analyze the operations and performance of the firm for future planning.
Every firm big or small, prepare the following financial statements:
To know a firms financial position
To check the Profits and Losses of the firm
Other two key financial statements which are usually prepared by corporate firms
are:
Statement of Appropriation of Profit.
Statement of changes in financial position.

32

BALANCE SHEET:
The balance sheet is regarded as the most significant and basic financial
statement of any firm. The balance sheet is prepared by a firm to present a summary
of financial position at a given point of time, usually at the end of the financial year. It
presents the- Assets of the firm (i.e. the resource of the firm), -------the Liabilities of
the firm (i .e. the obligations of the firm towards outsiders) and the Contribution of
the owners of the firm (i.e.capital).
PROFORMA BALANCE SHEET AS PER COMPANIES ACT 1956

Balance Sheet of ..
as on.
Liabilities

Amount

Assets

Amount

Share capital:

********

Fixed Assets

********

Reserves & surplus

********

Less: depreciation

********

Secured loans

********

investments

********

Unsecured loans

********

Current assets

********

Current Liabilities

********

Loans & Advances

********

Provision

********

Misc. Expenditure

********

33

INCOME STATEMENT
The income statement, also known as the profit & loss a/c, summarizes the revenues
and expenses of the firm for an accounting period. It gives a detail of source of
income and expenses and thus it provides the summary of the operating results of the
firm for a specific period. If matches the revenue, and shows the difference between
the two as the net profit and net loss incurred during the period. The income statement
depicts the. Earning capacity of the firm in terms of net profit.

PRO FORMA INCOME STATEMENT


Income statement for year ending.
Particulars

Amount

Particulars

Amount

To cost of goods sold

*******

By sales

*******

To General expanse

*******

By Other income

*******

To depreciation

*******

To financial charge

*******

*******
by set loss (bal.
figure)

To non operating expense

*******

To provision for tax

*******

*******

To net profit (bal. Figure)

34

ANALYSIS OF FINANCIAL STATEMENTS (AFS)


AFS refers to the process of critical examination of financial information
contained in the financial statements in order to understand and make decisions
regarding the operations of the firm. The AFS is basically a study of relationship
among various financial facts and figures as given in the set of financial statements.
This process of dissection, establishing relationship and interpretation thereof to
understand the working and financial position of the firm is called Analysis of
Financial Statements. Thus, AFS is the process of establishing and identifying the
financial strengths and weaknesses of the firm.

Objectives of the AFS


The objectives of AFS can be identified as: To access the present profitability and operating efficiency of the firm as a whole
as well as different departments.
To find out the relative importance of different components of the financial
position of the firm.
To identify the reasons for the changes in profitability of the firm, and
To access the short term as well as long term liquidity position of the firm.

Steps to prepare Financial Statement Analysis


Collection of as much financial information as available and required keeping in
view the objectives of AFS.
Processing of the information by suitable technique.
Comparing the processed information with the pre- determined standards
35

Drawing conclusions.
To suggest actions as a remedy to rectify the situation or to be helpful in future
financial planning.

Techniques or tools of AFS


As already said that different persons can undertake the AFS for different purpose.
The common techniques of AFS are:a) Comparative financial statements.
b) Common-size financial statements.
c) Trend Percentage analysis.
d) Ratio Analysis.

Types of AFS
AFS can be classified as: Internal AFS: It is conducted for measuring the operational and managerial
efficiency at different hierarchy levels of the firm.
External AFS: It is conducted by an outsider from the published financial data
which has only limited use.
Dynamic AFS: The AFS is said to -be dynamic if it covers a period of several
year's financial data to access the progress of the firm. It is used for long-term
trend analysis and plan.
Static AFS: The AFS is said to be static if it covers financial data of single
period.
36

Financial Ratio Analysis


Financial ratio analysis is the calculation and comparison of ratios, which are
derived from the information in a companys financial statements. The level and
historical trends of these ratios can be used to make inferences about a company's
financial condition, its operations and attractiveness as an investment.
Financial ratios are calculated from one or more pieces of information from a
company's financial statements. For example, the "gross margin" is the gross profit
from operations divided by the total sales or revenues of a company, expressed in
percentage terms. In isolation, a financial ratio is a useless piece of information. In
context, however, a financial ratio can give a financial analyst an excellent picture of
a company's situation and the trends that are developing.
A ratio gains utility by comparison to other data and standards. Taking our
example, a gross profit margin for a company of 25% is meaningless by itself. If we
know that this company's competitors have profit margins of 100/0, we know that it is
more profitable than its industry peers, which is quite favorable. If we also know that
the historical trend is upwards, for example has been increasing steadily for the last
few years, this would also be a favorable sign that management is implementing
effective business policies and strategies.
It is imperative to note the importance of the proper context for ratio analysis.
Like computer programming, financial ratio is governed by the GIGO law of
"Garbage In ... Garbage Out!" A cross industry comparison of the leverage of stable
utility companies and cyclical mining companies would be worse than useless.

37

Examining a cyclical company's profitability ratios over less than a full


commodity or business cycle would fail to give an accurate long-term measure of
profitability. Using historical data independent of fundamental changes in company's
situation or prospects would predict very little about future trends. For example, the
historical ratios of a company that-has undergone a merger or had a substantive
change in its technology or market position would tell very little about the prospects
for this company.
Credit analysts, those interpreting the financial ratios from the prospects of a
lender, focus on the "downside" risk since they gain none of the upside from an
improvement in operations. They pay great attention to liquidity and leverage ratios to
ascertain a company's financial risk. Equity analysts look more to the operational and
profitability ratios, to determine the future profits that will accrue to the shareholder.
Although financial ratio analysis is well developed and the actual ratios are
well known, practicing financial analysts often develop their own measures for
particular industries and even individual companies. Analysts will often differ
drastically in their conclusions from the same ratio analysis.
As in all things financial, beauty is often in the eye of the beholder. It pays to do your
own work!

38

Types of financial Ratios:

Leverage Ratios

Investment Valuation Ratios

Debt Coverage Ratios

Profitability Ratios

Solvency Ratios

Management Efficiency Ratios

Cash Flow Indicator Ratios

39

DATA ANALYSIS
Was to provide highly customized product and services in order to reach out a large
number of customers with diverse requirements in terms of quantity, quality and
services
Starting with a humble production and dispatch figure of about 1100mt in July
200SSix sigma has also been introduced for continuous improvement through
problem solving.

JINDAL ARCHITECTURE LTD


Architecture division, which was an integrated design, engineering and construction
unit has been hived of as a subsidiary company and is now known as Jindal
architecture ltd.
Not only will it continue to contribute towards the development and uses of stainless
steel in architecture, building construction sector, but will also provide comprehensive
services towards execution of large turnkey project.

AUSTENITIC CREATIONS PRIVATE LTD


Art d'inox, the life style product division has been hived off as a subsidiary company
and is now known as austenitic creations private ltd.
With an aim to take stainless steel beyond its traditional uses patterns in the kitchen,
Art d'nox, a brand of the life style product division has created a lifestyle statement.
Art d'nox has evolved several stages to its current avatar in creating an asp rational
value for the well -heeled urban Indian and international consumer.
Art d'inox is India's only 150-9001: 200 1,150-1400 1, 1800 1 Life style brand

40

CURRENT RATIO:
(In Crores.)

YEAR
C.A.
C.L.
Current Ratio

CURRENT RATIO
2010-11
2011-12
2512.52
1762.73
3791.27
5868.89
0.79
0.69

2012-13
4878.16
4988.13
0.76

CURRENT RATIO
5868.89

6000

4988.13
4878.16

5000
4000
3000

3791.27
C.A.
C.L.

2512.52

2000

1762.73

1000
0
2010-11

2011-12

2012-13

INTERPRETATION:
Generally 2: 1 is considered as the best figure but the company over the years of have
ratio less than standard, 0.66, 0.30, 0.97. Hence the liquid position of the company is
shifting itself to be satisfactory.

Cash ratio:

41

(in crores)
year
Cash
C.L.
Cash Ratio

2010-11
37.45
3791.27
0.009:1

Cash Ratio
2011-12
30.94
5868.89
0.005:1

2012-13
36.77
4988.13
0.007:1

6000
5000
4000
3000

Cash
C.L.

2000
1000
0
2010-11

2011-12

2012-13

Cash Ratio

INTERPRETATION: Generally a cash ratio of medium nature is considered


good. But the company had shown poor cash ratio in 2011 which has improved in
2012. Hence the company could have problems in paying current liability.

Debt Asset ratio:


(in crores)
Year

LEVERAGE RATIO
2010-11
2011-12

42

2012-13

Total Debt
Total Assets
Debt. Ratio

12114.67
20804.01
1.39

14372.46
25217.87
1.33

19500.94
31849.01
1.58

0.62
0.61
0.6
0.59
0.58
0.57
0.56
0.55
0.54
2012-13

2011-12

2010-11

Debt Asset Ratio

INTERPRETATION:
The Company has a very high debt ratio which says that the company has high
financial risk, which is ultimately, beard by the investors and thus could the image be
seen from the current statistics.

43

GROSS PROFIT RATIO:


(in crores)
GROSS PROFIT RATIO
2011-12
4246.97
13286.49
24.04

YEAR
GROSS PROFIT
NET SALES
G.P. RATIO

2012-13
4097.73
14954.70
19.32%

16000
14000
12000
10000
8000
6000
4000
2000
0
2011-12

2012-13

GROSS PROFIT

NET SALES

INTERPRETATION:
The percentage of Profits of the company has decreased as compared to the
year 2011-12, but the Sales have also been increased.

EXPENSES RATIO:
(in crores)
44

EXPENSES RATIO
YEAR

2011-12

2012-13

Total Expenses

11164.45

9650.70

NET SALES

13286.49

14954.70

EXP. RATIO

10.75

10.84

16000

14954.7
13286.49

14000
12000

11164.45
9650.7

10000
8000
6000
4000
2000
0
2011-12

2012-13
Total expenses

NET SALES

INTERPRETATION: the company over the last two years has shown a decline
in administrative expenses due to high turn over and sales. This has helped the
company to earn some gross profit.

45

COMPARITIBE BALANCE SHEET

46

47

COMPARITIBE PROFIT & LOSS A/C

48

SWOT ANALYSIS OF JINDAL STEEL PLANT (ORISSA)

STRENGTH
Largest among the integrated steel player in India, thus providing high brand
name and easy marketing.
Cost efficiencies:
Captive power generation
Economies of scale due to melting capacity
Low lab our cost
High demand of steel in international market.
Facilitates to provide various shapes & qualities of steel
High facilities of material. (Iron ore, coal etc).
Production of international grade stainless steel facilitating exports.
Easy transportation facilities of water, rail and road (Para deep port, N. H 243).
Easy funding policies of govt. and financial institution.

Weakness:Endemic deficiencies:
Low quality of raw material (coal, Ferro molybdenum, etc).
Systematic deficiencies.
High cost of capital as compared to Japan and U.S.A where cost of capital is
between 2.4% to 4%).

49

Low labour productivity:


Indian labour productivity =75 to100
T/man t years. (SAIL,TISCO)
International labour productivity = 1000 to1365 t/many years.(POSCO, NIPPON)
Lack of expenditure in R&D dept.
Delay in absorption of new technologies.
High level of taxation.
High transportation charges.
High capital block in construction phase. High gearing.

Opportunities
High market of stainless steel in international market
Operations can greatly enhance its suite.
Present low import duty structure.
Increasing per capita consumption of stainless steel in India.
Scope of volume growth in 300/400 series of stainless steel.
International quality steel production, CRSS (COLD ROLL STAINLESS
STEEL).

50

Threats
Big global players like TATA, SAIL and introduction of POSCO and ARCELOR
MITTAL in Indian steel industry.
Operational prices sensitive to global prices of NICKEL, ALLUMINIUM &other
steel industry.
Change in govt. policy in duty protection for CRSS, which will have adverse
effect on pricing policy of cross.
High technological changes.
Changing strategies for turn around.

51

CHAPTER5
FINDINGS&SUGGESTIONS

52

RATIO FINDINGS:
The cash position of the company has improved in current ratio.
The leverage ratio of the company is not at all good.
The profit ratio is also poor.
The ADM& selling exp ratio & turnover ratio is improving.

GENERAL FINDINGS:
Starting from the first section of balance sheet of Jindal Stainless, Jajpur (Orissa
project) the company has not issued any share "capital or debenture which shows that
the company is highly levered.
All the ratios of the company shows negative figure or below standard figure as there
are high. Expenses incurred on manufacturing and construction part of plant

CAUSES:
High labour turnover.
Low wage rate
Less labour oriented benefits
No security on job platform as the workers working are still temporary (2or more
yrs of job).
High cost of raw material, semi finished material due to high purchase from near by
plants and from mines at high rates. High amount of finished goods in closing stock
so the capital block of funds is high and shows low amount of inventory turnover.
Currently high amount of cost is incurred in power and fuel, as it constitutes about

53

27% of power used in Ferro chrome production as the power plant of SOOMW is not
fully operational.
Lam coke constitutes high amount of raw material required for production of Ferro
chrome, the coke is imported from vizag as the coke oven plant is not fully functional
as the construction is not completed. The company's requirement of working is high
still the company has invested the loaned high rate funds in mutual funds. It shows
misappropriation of funds in the earlier stage of project which should actually be used
for the plant construction. Raw material used is not in standard form set by company,
the briquette has been used above the actual format set. Capacity utilization of the
plant in production in year 06-07 has been below level. The company's requirement of
working is high still the company has invested the loaned high rate funds in mutual
funds. It shows misappropriation of funds in the earlier stage of project which should
actually be used for the plant construction. Raw material used is not in standard form
set by company, the briquette has been used above the actual format set. Capacity
utilization of the plant in production in year 06-07 has been below level.

54

FUTURE CHALLENGES
Raw materials:
Costs for raw materials have risen sharply in 2006 and are said to rise in 2007-08,
too.
Shortage of quality raw materials
Inadequate 'enabling' infrastructure
High cost of basic inputs like power and tariff
High cost of capital
High tariff/non-tariff barriers imposed by on Indian exports by developed nation.
Storms like Katrina cutted steel mill capacity and delivery of hydrogen, but affect
the situation is only short term.
Prices are going to stay high.
China
Production increases by 15% in 2007 and leads to further oversupply of several
steel products.
Demand is still growing but will not keep up with supply. China will remain a net
exporter
Consolidation is going to start and might reduce capacities from 2008.
Competitors
Strategy of production cuts might not be enough to counter Chinese oversupply.
Consolidation is taking place with expansion and acquisition strategies of biggest
companies like POSCO; MITTAL Strategic pricing will become easier.

55

In the long run


Demand from china is going to remain high and grow steadily.
Concentration in the sector and high price levels
Steel and raw materials will stay expensive for the next few years.
Technology is going to be a major factor.

56

SUGGESTIONS
The company should look in for Cutlet financial position and should now invest the
capital in production and construction rather than in funds. The company should
improve their work level and capacities in ferrochrome plant for which the company
should strictly follow TQM and JUST IN TIME.
The company should soon go in for shares to reduce the high leverage.
Administrative and manufacturing expenses should be checked thoroughly.
Technology and R&D department should always BE up to their toes in Company's
restructuring Pasco has the technology which has less construction, installation&
production cost. (I.e. no blast furnace &no coke oven) Training & development
department should be installed as quickly as possible. Which could improve
production and reduce personnel cost per unit and make them aware of the
organizational culture.
Proper management of working capital in plant operation than in deposits, Material
standards in production of Ferro chrome not maintained in use of briquette and coke
has increased price, so the standard should be maintained to make goods price
effective.
Develop raw material resources to ensure adequate supply of good quality raw
materials. Make available cheaper capital to fund capacity additions, Power plant
should be operated soon at full level to reduce very high cost incurred in power
purchased. The company should look in to the improvement of corporate social
responsibility in the area close to the plant, Improve infrastructure support to the
industry, Some areas of strategies to be looked under.

57

CHAPTER6
CONCLUSION

58

CONCLUSION
The company has high growth prospects as the demand of steel is rising at a level of
above 15%
Thus the key success factors for the steel company would be:
Proximity and access to raw materials.
Value addition and product range.
Proximity to markets
Financial costs
Proper strategies at every level of organization structuring.
Starting from the first section of balance sheet of Jindal Stainless, Jajpur (Orissa
project) the company has not issued any share "capital or debenture which shows that
the company is highly levered.
All the ratios of the company shows negative figure or below standard figure as there
are high. Expenses incurred on manufacturing and construction part of plant
High cost of raw material, semi finished material due to high purchase from near by
plants and from mines at high rates. High amount of finished goods in closing stock,
so the capital block of funds is high and shows low amount of inventory turnover.
Currently high amount of cost is incurred in power and fuel, as it constitutes about
27% of power used in Ferro chrome production as the power plant of SOOMW is not
fully operational.
Lam coke constitutes high amount of raw material required for production of Ferro
chrome, the coke is imported from vizag as the coke oven plant is not fully functional
as the construction is not completed. The company's requirement of working is high
59

still the company has invested the loaned high rate funds in mutual funds. It shows
misappropriation of funds in the earlier stage of project which should actually be used
for the plant construction. Raw material used is not in standard form set by company,
the briquette has been used above the actual format set. Capacity utilization of the
plant in production in year 06-07 has been below level. The company's requirement of
working is high still the company has invested the loaned high rate funds in mutual
funds. It shows misappropriation of funds in the earlier stage of project which should
actually be used for the plant construction. Raw material used is not in standard form
set by company, the briquette has been used above the actual format set. Capacity
utilization of the plant in production in year 06-07 has been below level.

60

BIBLIOGRAPHY

61

BIBLIOGRAPHY

INTERNET WEBSITE LINKS


www.jsl.com
www.worldstainless steel.com
www.steel.nic.in

BOOK AND NEWSPAPER


Annual Reports w.e.f. 2009
Jain & Khan, financial management
Pandey I.M, Financial management
Business World

62

APPENDIX
BALANCE SHEET

63

64

PROFIT & LOSS A/C

65

66