Project Report

ON
Leverage Analysis
OF
TATA STEEL LTD.

Submitted by: Submitted to:

Kishan Sathwara Prof. Ankit Jain
Div. :- B
Roll No: - 1921214
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Table of Contents:-

1) INTRODUCTION OF COMPANY:- ............................................... 3

2) INTRODUCTION OF OVERALL INDUSTRY:-........................... 4
3) OBJECTIVES:- ................................................................................. 4
4) INTRODUCTION OF LEVERAGE:-.............................................. 5
5) INCOME STATEMENT OF THE COMPANY:- ........................... 6
6) OPERATING LEVERAGE:- ........................................................... 6
7) FINANCIAL LEVERAGE:- ............................................................ 7
8) COMBINED LEVERAGE:- ............................................................. 7
9) LEARNING:- .................................................................................... 8

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 1) INTRODUCTION OF COMPANY:-

Tata iron and steel company limited (TISCO) is the formerly name of
Tata Steel Limited, is multinational steel making Indian company. The
headquartered of the company in Mumbai, Maharashtra, India, and a
subsidiary of the Tata Group.

Tata steel limited is one of the top steel producing company globally
with annual crude steel deliveries of 27.5 million tonnes in the year 2017
and the second largest steel company in India with an annual capacity of
13 million tonnes after SAIL Company.
Tata Steel operates in 26 countries with key operations
in India, Netherlands and United Kingdom, and employs around 80,500
people. Its largest plant (10 MTPA capacity) is located
in Jamshedpur, Jharkhand. In 2007, Tata Steel acquired the UK-based
steel maker Corus.
It was ranked 486th in the 2014 Fortune Global 500 ranking of the
world's biggest corporations. It was the seventh most valuable Indian
brand of 2013 as per Brand Finance.

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 2) INTRODUCTION OF OVERALL INDUSTRY:-

The iron and steel ventures are among the most significant enterprises in
India. During 2014 through 2016, India was the third biggest maker of
crude steel and the biggest maker of sponge iron in the world. The
business delivered 82.68 million tons of all completed steel and 9.7
million tons of crude iron. Generally iron and steel in India is created
from iron ore.

Approach for the segment is represented by the Indian Ministry of Steel,

which frets about organizing and arranging the development and
advancement of the iron and steel industry, both in the general
population and private segments; detailing of strategies as for creation,
evaluating, appropriation, import and export of iron and steel, ferro
alloys and refractories; and the development of ventures identifying
with iron mineral, manganese metal, chrome metal and refractories and
so forth., required fundamentally by the steel business.

3) OBJECTIVES:-

1) To known and understand the Leverage of the company.

2) To known and understand the Operating Risk, Financial Risk of
the company.
3) To known and understand the Income Statement of the company.
4) To known and understand the company about its working activity.

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 4) INTRODUCTION OF LEVERAGE:-

The word Leverage means Advantage. With the help of Leverage we

can achieve more with less effort. Leverage is an investment strategy of
using borrowed money specifically, the use of various financial
instruments or borrowed capital to increase the potential return of an
investment.
There are 3 Types of leverage:-
1) Operating Leverage
2) Financial Leverage
3) Combined Leverage
How we calculate leverage:-
1) Operating Leverage:- Contribution
EBIT

When the operating leverage is high it shows the operating risk of

the company is high & vice a versa.

2) Financial leverage:- EBIT

EBT

When the Financial leverage is high it shows the Financial risk of

the company is high & vice a versa.

3) Combined Leverage:- Contribution OR DOL*DFL

EBT

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 5) INCOME STATEMENT OF THE COMPANY:-

INCOME STATEMENT ( IN RS CR.)

PARTICULARS 19-Mar 18-Mar 17-Mar 16-Mar 15-Mar
SALES 68,923.36 59,453.23 52,564.93 42,290.64 46,226.08
(-) VARIABLE COST
Cost Of Materials Consumed 19,840.29 16,877.63 12,496.78 9,700.01 11,707.83
Purchase Of Stock-In Trade 1,807.85 647.21 881.18 991.54 688.32
Other Expenses 24,622.60 21,275.47 19,681.15 16,438.06 16,109.99
CONTRIBUTION 22,652.62 20,652.92 19,505.82 15,161.03 17,719.94
(-) FIXED COST
Employee Benefit Expenses 5,131.06 4,828.85 4,605.13 4,324.90 4,601.92
Depreciation And Amortisation
Expenses 3,802.96 3,727.46 3,541.55 1,933.11 1,997.59
EBIT 13,718.60 12,096.61 11,359.14 8,903.02 11,120.43
(-) INTEREST 2,823.58 2,810.62 2,688.55 1,460.27 1,975.95
EBT 10,895.02 9,285.99 8,670.59 7,442.75 9,144.48
(-) TAX 5,694.06 2,468.70 1,912.38 1,225.57 2,069.77
EAT 5,200.96 6,817.29 6,758.21 6,217.18 7,074.71

6) OPERATING LEVERAGE:-

YEAR 19-Mar 18-Mar 17-Mar 16-Mar 15-Mar

OPERATING LEVERAGE 1.65 1.71 1.72 1.70 1.59

From the year 2015-2019, the high operating leverage is 1.72 times in
the year 2017 and the less operating leverage is 1.59 times in the year
2015 it means the operating risk of the company is high is 2017 and the
operating risk of the company is low in 2015. So if we want higher profit
in investment we have ready to take risk than we have to invest in where
the operating leverage is high otherwise vice a versa.

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 7) FINANCIAL LEVERAGE:-

YEAR 19-Mar 18-Mar 17-Mar 16-Mar 15-Mar

FINANCIAL LEVERAGE 1.26 1.30 1.31 1.20 1.22

From the year 2015-2019, the high Financial leverage is 1.31 times in
the year 2017 and the less Financial leverage is 1.20 times in the year
2016 it means the Financial risk of the company is high is 2017 and the
Financial risk of the company is low in 2016. So if we want higher profit
in investment we have ready to take risk than we have to invest in where
the financial leverage is high otherwise vice a versa.

8) COMBINED LEVERAGE:-

YEAR 19-Mar 18-Mar 17-Mar 16-Mar 15-Mar

COMBINED LEVERAGE 2.08 2.22 2.25 2.04 1.94

From the year 2015-2019, the high Combined leverage is 2.25 times in
the year 2017 and the less Combined leverage is 1.94 times in the year
2015. A high level of combined leverage shows the risk involved in the
company is high and low level of combined leverage shows that risk
involve is low.
If operating leverage & financial leverage is high it means there is high
risk but it also give higher return in an investment.
If operating leverage & financial leverage is low it means there is low
risk but it give low return in an investment.
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 9) LEARNING:-

 I learn to compute and interpret of different of leverages of the

company.
 I learn to make income statement of the company.
 I learn where and when to do investment by seeing leverages.
 I learn to know the operating & financial risk of the company by
seeing leverages.
 I learn to know how leverage of the company works for the
investment purpose.
 I know practically by computing leverages how leverages help to
the investors.

----------------------------------------Thank You----------------------------------