ASSIGNMENT

ON
Corporate Finance
(4529202)
“Jindal Steel Company”

-: Submitted By :-
Enrollment No. Name
198050592023 Hunny Gaiwala
198050592037 Hasti Koticha
198050592048 Zeel Naik
198050592050 Vaibhavi Pachchigar
198050592055 Mansi George
198050592056 Nidhi Parekh

-: Submitted to :-
Mrs. Drashti Shah
Assistant Professor
S. R. Luthra Institute of Management
Surat
 Jindal Steel Company

Jindal Steel and Power Limited (JSPL)is an Indian steel and energy company based in Hisar With
turnover of approx. US$ 3.3 billion, JSPL is a part of about US$18 billion diversified Group
conglomerate. JSPL is a leading player in steel, power, mining, oil and gas and infrastructure in India.
The company produces steel and power through backward integration from its own captive coal and
iron-ore mines.

In terms of tonnage, it is the third largest steel producer in India. The company manufactures
and sells sponge iron, mild steel slabs, Ferro chrome, iron ore, mild steel, structural, hot rolled plates
and coils and coal-based sponge iron plant.

With its timeless business philosophy, JSPL is primed to not merely survive but win in a
marketplace marked by frenetic change. Indeed, the company’s scorching success story has been
scripted essentially by its resolve to innovate, set new standards, enhance capabilities, enrich lives
and to ensure that it stays true to its haloed value system. Not surprisingly, the company is very much
a future corporation, poised to become the most preferred steel manufacturer in the country.

JSPL is an industrial powerhouse with a dominant presence in steel, power, mining and
infrastructure sectors. Part of the US $ 18 billion OP Jindal Group this young, agile and responsive
company is constantly expanding its capabilities to fuel its fairy tale journey that has seen it grow to a
US $ 3.3 billion business conglomerate. The company has committed investments exceeding US $ 30
billion in the future and has several business initiatives running simultaneously across continents.

Led by Mr. Naveen Jindal, the youngest son of the legendary Shri O.P. Jindal, the company
produces economical and efficient steel and power through backward and forward integration.
 From the widest flat products to a whole range of long products, JSPL today sports a product
portfolio that caters to markets across the steel value chain. The company produces the world's
longest (121-meter) rails and it is the first in the country to manufacture large-size parallel flange
beams.

JSPL operates the largest coal-based sponge iron plant in the world and has an installed capacity
of 3 MTPA (million tons per annum) of steel at Raigarh in Chhattisgarh. Also, it has set up a 0.6 MTPA
wire rod mill and a 1 MTPA capacity bar mill at Patratu, Jharkhand, a medium and light structural mill
at Raigarh, Chhattisgarh and a 2.5 MTPA steel melting shop and a plate mill to produce up to 5.00-
meter-wide plates at Angul, Odessa.

Capital Structure of the Company

Capital structure refers to a company's outstanding debt and equity. It allows a firm to

understand what kind of funding the company uses to finance its overall activities and growth. In
other words, it shows the proportions of senior debt, subordinated debt and equity (common or
preferred) in the funding.

1. Debt/Equity ratio for last 3 Years & its impact on EPS & ROE:

I. Debt/Equity ratio:
 Debt equity ratio is a capital structure ratio, which evaluates the long term financial stability of
business using balance sheet data.
 D/E ratio = Total liabilities (debt) /Total shareholders fund.
 The ratio is used to evaluate a company's financial advantage. The D/E ratio is an important
metric used in corporate finance.
 It is a measure of the degree to which a company is financing its operations through debt
versus wholly owned funds.
 The debt-to-equity ratio is a particular type of gearing ratio.

 Important Point:
i. D/E < 1 comfortable position and > 1 not comfortable position.
ii. Tougher time — D/E Company survives better.
iii. Compare company in same sector.

 Formula for Debt/Equity Ratio:

Debt/Equity Ratio = Short term debt + Long-term debt + Other Fixed payments
Shareholder's Equity

Particular 2019-2018 2018-2017 2017-2016

16157.04 +
15588.37 + 21695.67 14364.92 + 23962.73
Formula 18966.64
22792.56 21766.20
22548.56
Debt/
equity 1.558 1.636 1.761
ratio

Interpretation:
 Debt to equity ratio of Jindal Steel Company is > 1 of last three year.
 It is comfortable position of Jindal Steel Company.
 In case of debt equity ratio of company is >1 , so in tougher time of company is survive
better other than company.
II. Earning per share:
 Earnings per share or EPS are an important financial measure, which indicates the profitability
of a company.
 Earning per share = Net profit/ Total number of outstanding share.
 Total number of outstanding shares = market capitalization/ market price of share.
  It is a tool that market participants use frequently to gauge the profitability of a company
before buying its shares.
 EPS is the portion of a company’s profit that is allocated to every individual share of the stock. It
is a term that is of much importance to investors and people who trade in the stock market.
 The higher the earnings per share of a company, the better is its profitability. While calculating
the EPS, it is advisable to use the weighted ratio, as the number of shares outstanding can
change over time.

 Formula for Debt/Equity Ratio:

Earning per share = Profit after tax
No. of shares

Particular 2019-2018 2018-2017 2017-2016

Formula -262.90 / 96.79 -361.61 / 91.50 -986.45 /91.49

Debt
/equity -2.72 -3.95 -10.78
ratio

Interpretation:
 Earning per share is continuously decreased of last three years; it is not good or poor for
company.
 The EPS Rating takes into account the decline and instability of a company's earnings over the
past three years.

III. Rate on equity:

 Return on equity ratio, or ROE, is a profitability ratio that helps measure the efficiency of a firm
and its management in handling shareholders' money. The ratio gives an insight into the ability
of the firm to generate profits from shareholders’ investment.
 Return on Equity = Profit after tax ( PAT)/ Total share holders fund.
 In simpler words, the return on equity ratio shows how much profit each rupee of stockholder
money generates.
 For instance, an ROE of 1 means that every rupee of shareholder investment in the business
would generates Re 1 net income.
 It is a measure of how effective the management is in using equity financing to fund its
operations. Thus, the higher the ROE, the more efficient is the management in generating
income and growth from its equity financing.
 ROE is an important indicator for potential investors, since they want to see how efficiently a
company will use their money to generate profit.

 Formula for Debt/Equity Ratio:

Return on Equity = Profit after tax

Value of equity
 Particular 2019-2018 2018-2017 2017-2016

-262.90 / -361.61 / -986.45 /

Formula
122.92*100 74.87*100 63.66*100

Debt
/equity -213.88% -482.98% -1549.56%
ratio

Interpretation:
 In simple words, return on equity is in percentage and Jindal Steel Company does not make any
profit from last many years.
 Therefore, from the table of last three-year ratio; we can say that Jindal Steel company don’t
give any profit and benefit to their employee or investors, Which is very bad for the company.

Impact on EPS and ROE:

 Debt is an effective tool to raise funds for expansion and development without diluting
ownership control. Over exposure to equity for financing capax could lead to a fall in earnings
per share (EPS).
 Debt, on the other hand, helps a firm enjoy the benefits of financial leverage, which can also
help improve the return on equity (ROE) for shareholders.
 Financial leverage entails use of borrowed funds to carry out expansions with the expectation
that the benefits in form of additional income will exceed the cost of borrowing.
 The leverage is beneficial if the return on investment (ROI) is greater than the cost of debt. If
ROI is less than the cost of debt, the financial leverage is unfavourable.
 If ROI equals the cost of debt, the effects are neutral.
 2. Weighted average cost of capital (WACC):
 The weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which
each category of capital is proportionately weighted. All sources of capital, including common
stock, preferred stock, bonds, and any other long-term debt, are included in a WACC
calculation.
 A firm’s Weighted Average Cost of Capital (WACC) represents its blended cost of capital across
all sources, including common shares, preferred shares, and debt.
 WACC = Wd*Kd + We*Ke Or
 WACC = (E/V x Re) + ((D/V x Rd) x (1 – T))
o E = Market Value of The Firm’s Equity (Market Cap)
o D = Market Value of The Firm’s Debt
o V = Total Value of Capital (Equity Plus Debt)
o E/V = Percentage of Capital That Is Equity
o D/V = Percentage of Capital That Is Debt
o Re = Cost of Equity (Required Rate Of Return)
o Rd = Cost of Debt (Yield To Maturity On Existing Debt)
o T = Tax Rate

WACC=
Debt Equity Wd Kd We Ke (Wd*Kd) +
Year
(We*Ke)
2019 3512 22548. 0.9 0.0
0.019 122.9 48.108
3.68 56 80 82
3728 22792. 0.9 0.0
2018 0.022 74.67 28.444
4.04 56 78 64
3832 21766. 0.9 0.0
2017 0.023 63.66 23.096
7.65 20 77 59

Interpretation:
 From the above table, we can say that WACC of the Jindal Steel Company is 48.108 in 2019,
which is very good for the company.
 We can also say that the company’s performance is continuing increase from last three-years.
 3. Compare the dividend policy for the last past 3 years by estimating
DPS, Dividend Payout Ratio, and Dividend Yield Ratio:

I. Dividend per Share: Total dividend paid / Number of shares:

 Dividend per Share (DPS) is the total amount of dividends attributed to each individual share
outstanding of a company.
 DPS = Dividend percentage × face value
 Calculating the dividend per share allows an investor to determine how much income from the
company he or she will receive on a per-share basis.
 Dividends are usually a cash payment paid to the investors in a company, although there are
other types of payment that can be received.

Particular 2019-2018 2018-2017 2017-2016

Formula 0.00 / 96.79 0.00 / 91.50 0.00 / 91.49

Debt /equity
0.00 Rs. 0.00 Rs. 0.00 Rs.
ratio

II. Dividend Payout Ratio (NP) = DPS / EPS * 100

 The Dividend Yield is a financial ratio that measures the annual value of dividends received
relative to the market value per share of a security.
 Dividend Yield = Dividend per share / Market value per share
 In other words, the dividend yield formula calculates the percentage of a company’s market
price of a share that is paid to shareholders in the form of dividends.

Particular 2019-2018 2018-2017 2017-2016

0.00 / 2.72 * 0.00 / 3.95 * 0.00 / 10.78*

Formula
100 100 100

Debt /equity
0.00 0.00 0.00
ratio
III. Dividend yield ratio = DPS / MPS*100
 The Dividend Payout Ratio (DPR) is the amount of dividends paid to shareholders in relation to
the total amount of net income the company generates.
 DPR = Total dividends / Net income
 In other words, the dividend payout ratio measures the percentage of net income that is
distributed to shareholders in the form of dividends.

Particular 2019-2018 2018-2017 2017-2016

0.00/ 0.00 / 0.00 /

Formula
232.90*100 235.42*100 237.88*100
Debt
/equity 0.00 0.00 0.00
ratio

Interpretation:
 From the above table, we can say that the Jindal Steel Company gives no dividend to their
investors.
 The main reason of not paying the dividend is that from last many years, the company cannot
earn the profit and they cannot give any benefit to the employees and inventors.
 Balance Sheet of Jindal Steel Company

Consolidated Balance
------------------- in Rs. Cr. -------------------
Sheet

Mar 19 Mar-18 Mar-17

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS
Equity Share Capital 96.79 96.79 91.5
Total Share Capital 96.79 96.79 91.5
Reserves and Surplus 32,279.35 30,261.16 29,951.13
Total Reserves and
32,279.35 30,261.16 29,951.13
Surplus

Money Received
4.8 4.8 0
Against Share Warrants

Total Shareholders
32,380.94 30,362.75 30,042.63
Funds
Hybrid/Debt/Other
46.71 21.86 7.9
Securities
Minority Interest -301.07 440.34 646.71
NON-CURRENT LIABILITIES

Long Term Borrowings 29,940.22 32,955.91 32,598.34

Deferred Tax Liabilities

5,364.30 5,028.36 5,358.63
[Net]
Other Long Term
436.03 689.98 764.36
Liabilities
Long Term Provisions 314.69 278.16 307.21
Total Non-Current
36,055.24 38,952.41 39,028.54
Liabilities
CURRENT LIABILITIES

Short Term Borrowings 4,825.89 6,242.94 7,360.10

Trade Payables 5,220.76 4,189.91 2,914.85

Other Current
11,235.09 8,958.71 10,511.80
Liabilities

Short Term Provisions 121.76 61.5 62.43

Total Current Liabilities 21,403.50 19,453.06 20,849.18

Total Capital And

89,585.32 89,230.42 90,574.96
Liabilities

ASSETS
 NON-CURRENT ASSETS
Tangible Assets 67,003.67 64,624.99 62,221.41
Intangible Assets 2,002.18 3,232.34 3,143.23
Capital Work-In-
2,905.51 3,876.97 8,713.98
Progress
Intangible Assets Under
1,121.69 1,100.53 1,002.19
Development
Other Assets 0.45 0.45 0.45
Fixed Assets 73,033.50 72,835.28 75,081.26
Non-Current
145.22 145.76 367.66
Investments
Long Term Loans And
348.18 326.07 168.84
Advances
Other Non-Current
1,130.63 1,018.13 1,368.07
Assets
Total Non-Current
75,273.90 74,917.42 77,552.82
Assets
CURRENT ASSETS
Current Investments 4.96 0.21 0.38
Inventories 6,509.53 4,959.56 3,599.26
Trade Receivables 3,029.19 1,826.09 1,716.62
Cash And Cash
421.62 467.88 477.22
Equivalents
Short Term Loans And
257.08 470.52 387.43
Advances
Other Current Assets 4,089.04 6,588.74 6,841.23
Total Current Assets 14,311.42 14,313.00 13,022.14
Total Assets 89,585.32 89,230.42 90,574.96
OTHER ADDITIONAL INFORMATION
BONUS DETAILS
Bonus Equity Share
77.57 77.57 77.57
Capital
NON-CURRENT INVESTMENTS
Non-Current
Investments Quoted 3.38 4.23 3.46
Market Value
Non-Current
Investments Unquoted 141.84 141.53 364.2
Book Value
CURRENT INVESTMENTS
Current Investments
4.96 0.21 0
Quoted Market Value
Current Investments
0 0 0
Unquoted Book Value

Profit & Loss A/C of Jindal Steel Company

Consolidated Profit &
------------------- in Rs. Cr. -------------------
Loss account
Mar 19 Mar-18 Mar-17
INCOME
Revenue From
38,990.58 27,526.88 22,054.87
Operations [Gross]
Less: Excise/Service
0 457.89 1,645.73
Tax/Other Levies
Revenue From
38,990.58 27,068.99 20,409.14
Operations [Net]
Other Operating
381.56 314.44 641.37
Revenues
Total Operating
39,372.14 27,383.43 21,050.51
Revenues
Other Income 15.68 2.93 9.99

Total Revenue 39,387.82 27,386.36 21,060.50

EXPENSES
Cost Of Materials
15,274.37 9,378.28 6,535.46
Consumed
Purchase Of Stock-In
1,186.46 324.29 265.39
Trade
Operating And Direct
0 0 0
Expenses
Changes In
Inventories Of FG,WIP -225.97 -241.85 282.62
And Stock-In Trade
Employee Benefit
1,071.85 955.66 913.55
Expenses
Finance Costs 4,264.19 3,865.70 3,440.74
Depreciation And
Amortisation 5,480.35 3,883.03 3,949.02
Expenses
Other Expenses 13,807.22 11,087.24 8,949.30
Less: Inter Unit /
Segment / Division 0 0 0
Transfer
Less: Amounts
Transfer To Capital 147.36 589.3 604.99
Accounts
Total Expenses 40,711.11 28,663.05 23,731.09
Profit/Loss Before -1,323.29 -1,276.69 -2,670.59
Exceptional, Extra
 Ordinary Items And
Tax
Exceptional Items -1,478.40 -587.36 -372.31
Profit/Loss Before Tax -2,801.69 -1,864.05 -3,042.90
Tax Expenses-Continued Operations
Current Tax 51.58 33.14 0.72
Less: MAT Credit
0 0 0
Entitlement
Deferred Tax -441.75 -272.95 -503.4
Tax For Earlier Years 0 0 0
Total Tax Expenses -390.17 -239.81 -502.68
Profit/Loss After Tax
And Before -2,411.52 -1,624.24 -2,540.22
ExtraOrdinary Items
Profit/Loss From
-2,411.52 -1,624.24 -2,540.22
Continuing Operations
Profit/Loss For The
-2,411.52 -1,624.24 -2,540.22
Period
Minority Interest 766.18 206.39 256.24
Share Of Profit/Loss
0 8.74 2.7
Of Associates
Consolidated
Profit/Loss After MI -1,645.34 -1,409.11 -2,281.28
And Associates
OTHER ADDITIONAL INFORMATION
EARNINGS PER SHARE
Basic EPS (Rs.) -17 -15 -28
Diluted EPS (Rs.) -17 -15 -28
DIVIDEND AND DIVIDEND PERCENTAGE
Equity Share Dividend 0 0 0
Tax On Dividend 0 0 0