CORPORATE FINANCE

An Assignment On

Group 1: -
Submitted To: - Dr. Moid Ahmad Aakriti Mishra

Ankush Birla

Gaurav Khatri

Monal Dey

Surbhi Sabharwal
About the company
India's Steel Authority (SAIL) consists of several established and mostly in-kind steel plants. It
addresses the massive need of the country's rail, automobile, construction, and energy sectors. It also
fulfills the needs of its international clients as and when needed. SAIL has come out as one of the
largest companies in India. The company’s core strengths have always been extensive variety of steel
products with utmost quality

Vision

The company believes in becoming a leader and world class corporation in Indian steel business in
terms of profitability, quality, satisfaction of customers and productivity.

Ownership of SAIL
The Indian Government has about 86% of SAIL's capital and also controls SAIL’s voting power.
Though, SAIL enjoys autonomy as a result of its "Maharatan" status.

STEEL PLANTS OWNED BY SAIL

1. IISCO Steel Plant
2. Durgapur Steel Plant in West Bengal
3. Bhilai Steel Plant in Chhattisgarh
4. Bokaro Steel Plant in Jharkhand
5. Rourkela Steel Plant in Orissa

Competitors

Jindal strips ltd

TISCO

Jindal Vijaynagar Steels ltd.

Essar Steel

Director’s Report
FINANCIAL HIGHLIGHTS
It also gave the insight of financial highlights of the company as follow:

 The company achieved a revenue of 66,267 crores during the 2018-19 fiscal year, which is 16 percent
more the previous financial year.
 The company witnessed a slight growth in profit before tax which stood at 3,338 crore and profit after
tax which were at 2,179 crore'.
 SAIL’s further reported an increase in profits due to an increase in the prices of Steel.
 In order to meet the growth objectives, the organization continued its commitment of manage its funds
soundly, and also to manage the funds efficiently by planning for future in advance.
 SAIL also saw a 45,409 crore decline in the loans as of 31 March 2018 to the previous year loans which
stood at 45,170 crore.
 SAIL’s foreign currency risk has been fully covered by funding from external Commercial Borrowing and
Buyers ' Loan.
 The ratio of debt-equity also declined to 1.18:1 as of 31 March 2019 declined from 1.27:1 as at 31
March 2018 mainly because of an growth in net present value in the current fiscal year.
 A ' 0.50 per share dividend of the nominal value of ' 10/- was announced by the board of the directors.

PRODUCTION REVIEW
 It was an exceptional period for the company in terms of its performance, though it faced greater
challenges such as tough competition from the national market and certain functional setbacks.
Nevertheless, SAIL Plants continued their unwavering efforts to improve quality, product mix
and efficiency parameters.
 In this year of operation, SAIL reported its greatest output of Crude Steel of 16.3, Hot Metal of
17.5 million tons, and Steel of 15.1, with an average growth of 10%, 08%, and 07% collectively
as compared to 2017-18 (CPLY).
 The SAIL Research & Development Center has provided ground breaking technical inputs to
various plants/divisions of the company, with a special emphasis on efficiency and quality
improvement, brand development and production, energy saving and automation.
Sales & Marketing
 The Company reached its highest ever revenues of more than 14 million tons with an
improvement that is almost 0.4 per cent as compared to the last year.
 Continuing to keep its position in global markets, SAIL reported an a 9% rise its exports as
compared to the previous year.
 In order to reach into huge rural market, SAIL recently arranged ' Gaon Ki Ore ' project order to
raise awareness of the use of iron.
 The Company has scaled up its efforts to offer steel to different segments.
 As a move towards increasing the brand recognition of C Channel, structural segments known as
"NEX" have been marketed by conducting various workshops and seminars throughout the
country.
 SAIL was the largest steel supplier to various prestigious projects such as the Bogibeel Bridge,
Statue of Unity.

New Initiatives
  The company has decided to dispose the Poly Chlorinated Bi-Phenyls in an. environment
friendly manner.
 Further there would be a Bio-insulation of CO2
 The company decided use 4R’s in order to effectively utilize the wastes
 There would be a proper use of Renewable Energy in order to develop a brighter future.

Conclusion
It can be concluded that SAIL is a large corporation. Although it faced some issues due to the impending
demonetization and the GST as the entire economy had suffered. In addition, it is also able to keep its
investors happy by paying them a dividend on a regular basis. It has also invested its funds in a variety
of investment avenues that help it earn adequate returns. It has also seen a massive increase in its share
price in the current year, which is a good sign on the market and may result in higher share prices in the
future.

CALCULATIONS

PART A

PART 1

YEAR Y0 Y1 Y2 Y3 Y4 Y5
Year End Price 68.3 66.07 49.42 60.34 69.1 49.9
5

YOY Return -2.970 -25.201 22.069 14.518 -27.062

Average Annual Return -3.724
Holding period
return(FIVE years) -240.48336

Average Annual Return -48.096673

PART 2

YEARS Y0 Y1 Y2 Y3 Y4 Y5
Year End Price 68.3 66.07 49.42 60.34 69.1 49.9
 5

Dividend 0.8 1.32 0.25 0.6 1.4 0.92

YOY Return -1.405 -24.822 23.310 16.838 -26.454

Average Annual Return -2.506558
Holding period
return(FIVE years) -228.04919

Average Annual Return -45.609839

PART 3

YEARS Y0 Y1 Y2 Y3 Y4 Y5
Market Returns 9538.99 9465.65 7540.75 11804.46 13322.03 11096.08

YOY Return 0 -0.77 -20.34 56.54 12.86 -16.71

Beta 1.07
Risk Free Return 5.13
Market Return 5.264
 E(r) = Req(r) = k (e)
5.273419

PART B

PART 4

YEARS Y0 Y1 Y2 Y3 Y4 Y5
Dividend Paid 1.32 0.25 0.6 1.4 0.92 1

Yearly Growth -81.0606 140 133.3333 -34.2857 8.695652

KE =
D1/P0+g
D1=
P0*Ke-g

G 5.2734

P0 0.003082

PART 5

As on 31st March 2019

 Finance Cost 3154.92

Long term borrowings 30802.66

0.102423622
Cost of Debt (Kd)
Cost of Equity (Ke) 5.27

Cost of Capital (Ko) 5.38

x Implications:-

 It can be seen that Steel Authority of India Ltd. is a high risk and high
return company as it can be seen from its risk and return both of them are
higher than market risk and return.
Average return: -2.50%
Market return: 5.264 %
 Thus, Steel Authority of India limited company which will be preferred by
risk lover people that is who are ready to take more risk in expectations of
more returns.
 The returns in the shares of Steel Authority of INDIA is limited and market
returns have positive relation as the value of beta is 1.07 which means if
market returns increase by 1% the returns of Bajaj electrical will increase by
1.07%.
 The company has declared dividend for the year 2013, 2015 and 2018.

1
 The risk-free rate represents the interest on an investor's money that he or
she would expect from an absolutely risk-free investment over a specified
period of time. In this case the risk free return is 5.13% which when
compared with heath care industry risk free rate that is 7.3% is 2.17% less
that implies that investors may invest the more.
 Cost of equity of the company is 5.27 which implies that if the investor is
investing Rs100 in company, he will get a return of Rs 5.27 from its
investment.