RESEARCH INSIGHT 3

JSW STEEL LTD.

(BSE: 500228)
(NSE: JSWSTEEL)

METALS & MINING INDUSTRY

EQUITY RESEARCH REPORT

BY
SRINIVAS NANDIKANTI

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GENERAL OVERVIEW:

Jindal Steel & Power Limited is an industrial powerhouse and one of the leaders in the
Indian steel industry with a significant global presence. It operates the largest coal-based
sponge iron plant in the world and has substantial presence in domestic power, mining and
infrastructure sectors. The Company’s geographical footprints span across Asia, Africa,
Australia and the Middle East. The Company produces economical and efficient steel and
power through backward and forward integration. The Company’s product portfolio spans
across the steel value chain from widest flat products to a whole range of long products and
rails. JSPL exports its diversified product portfolio to 22+ countries.

Q3 FY 20 FINANCIAL RESULTS SPOT PRICE AS ON 22ND MAY 2020

At 8:05 PM
BSE: 166.30
NSE: 166.15

REVENUE & NET PROFIT IN RS CRS VALUATION METRICS

Market Capitalization 40198.38
100% 7524 6113 3454 1719.7 (Rs Cr)
80% P/E 7.55
60% Industry P/E 3.98
84961 72142 55756 41726.65 53082.95
40% Book Value (Rs) 141.84
20% Dividend (%) 410
-501.45 EPS 22.02
0%
FY19 FY18 FY17 FY16 FY15 Price/Book 1.17
-20%
Dividend Yield (%) 2.47
TOTAL INCOME NET PROFIT
Face Value 1.00

52 WEEK LOW & HIGH

297.30

166.30
132.5

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SHAREHOLDING PATTERN:

Promoters pledge increased

to 39.79% of holdings in Mar
2020 qtr. Promoters holding
marginally changed to
42.71% as of Mar 2020 qtr.
FII/FPI holding marginally
changed to 17.13% as of Mar
2020 qtr. Number of FIIs/FPIs
holding stock fell by 15 to 549
in Mar 2020 qtr. Mutual
Funds holding marginally
changed to 2.07% as of Mar
2020 qtr. Number of Mutual
Funds holding stock fell by 3
to 40 in Mar 2020 qtr.

From above shareholder pattern it can

be seen that the JSW Steel is operated
professionally rather than family
operated.

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 MANAGEMENT OF THE COMPANY:
Mr. Haigreve Khaitan
• Independent Non Executive Director
• Value added: Rich experience in all
aspects of M&As, creditor restructuring,
foreign investment, joint ventures and
foreign collaborations
• Appointment date: 30 September 2015
Mr. Jayant Acharya
• Director (Commercial and Marketing), Non-
Independent Executive Director
• Value added: With industry experience
spanning over three decades, he has led
several key transformations in the areas of
organized steel retailing, development of
critical and advanced grade of steels for
automotive, long term supply
contracting etc.
• Appointment date: 07 May 2009
Mr. Seturaman Mahalingam
• Independent Non-Executive Director
• Value added: Awarded the "Best CFO" on
multiple occasions, he has experience
in building and managing the global
operations of TCS in its early days
• Appointment date: 27 July 2016
Mrs. Nirupama Rao
• Independent Non-Executive Director
• Value added: India’s first woman
spokesperson in the Ministry of External Affairs
and has a four-decade-long diplomatic career
Mr. Seshagiri Rao M.V.S.
• Joint Managing Director and Group CFO,
Non-Independent Executive Director
• Value added: Strategy formulations related
to business development, expansion of
existing businesses, joint ventures, M&As and
cost management
• Appointment date: 06 April 1999
Dr. Vinod Nowal
• Deputy Managing Director, Non-
Independent Executive Director
• Value added: Associated with the Group for
over three decades, he has held various
positions and led strategic growth projects. He
spearheaded JSW Steel’s expansion from 4
MTPA to 12 MTPA
in a record time.
• Appointment date: 30 April 2007
Mr. Sajjan Jindal
• Chairman and Managing Director, Non-
Independent Executive Director
• Value added: Council member of the Indian
Institute of Metals, member of the Executive
Committee and Chairman of the Sustainability
Committee of World Steel Association, as well
as the former President of Institute of Steel
Development and Growth
• Appointment date: 15 March 1994
Mr. Gangaram Baderiya
• Nominee Director, KSIIDC
• Value added: He has rich experience of
working with the State Government and
various Corporate Bodies. He is responsible for
spearheading implementation of
infrastructure projects including projects on
Public Private Partnership [PPP] basis
Mr. Hiroyuki Ogawa
• Nominee Director, JFE Steel Corp., Japan
• Value added: With over 30 years of
experience in the steel industry across various
countries, he brings unmatched international
expertise
• Appointment date: 17 May 2017
Mr. Malay Mukherjee
• Independent Non-Executive Director
• Value added: Over 40 years of experience in
a range of technical, commercial and
managerial roles in the mining and steel
industry
• Appointment date: 29 July 2015
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STRENGTHS, WEAKNESSES, OPPORTUNITIES, THREATS (SWOT) ANALYSIS:
STRENGTHS
Large number of outlets in almost every state,
supported by a strong distribution network.
Low cost structure helps it produce at a low cost and
sell its products at a low price,
A strong relationship with its dealers that not only
provide them with supplies but also focus on
promoting the company's products and training
A strong financial position with consecutive profits in
the past 5 years, along with accumulated profit
reserves.
It has a large asset base, which provides it with better
solvency.
It has been successfully able to generate positive
returns on the capital expenditure it has incurred on
various projects in the past.
It has invested extensively in the training of its
employees that has resulted in it employing a large
number of skilled and motivated employees.
It has innovative teams have allowed it to come up
with new products and enter new markets.
A strong presence on social media with more than
millions of followers on the three most famous social
media platforms:
OPPORTUNITIES
A growth in sales of the e-commerce industry means
that a lot of people are now making purchases online.
Technology comes with numerous benefits.
Operations can be automated to reduce costs.
Lower interest rates provide to undergo expansion
projects that are financed at a cheaper interest rate.
Green government drive: this provides an
opportunity to federal and state government
contractors.
Transport Industry: the transport industry has been
flourishing in the past few years, and shows growth
potential in the future. This has reduced the costs of
transportation,
Tax policy: the governments’ reduction in tax rate is
beneficial for JSW Steel Ltd as a lower amount would
be expensed out as a tax.
The government has also announced a subsidy on the
sale of environmentally friendly goods in this sector.
JSW Steel Ltd can focus on these environmentally
friendly products and make use of this opportunity
potential customers that it can target in order to gain
market share.
WEAKNESSES
It is spending more than the average research and
development expenditure within the industry,
It is spending way less than a few players within the
industry that have had a significant advantage as a
result of their innovative products.
High Day Sales Inventory: The time it takes for
products to be purchased and sold are higher than
the industry average
Rented Property: A significant proportion of the
property that it owns is rented rather than
purchased
The current ratio that shows the company’s ability
to meet its short-term financial obligations, is lower
than the industry average
The company has low levels of current assets
compared to current liabilities, and this can create
liquidity problems for it in operations.
There is a lack of proper financial planning regarding
cash flows, leading to certain circumstances where
there isn’t enough cash flow as required leading to
unnecessary unplanned borrowing.
current structure and culture have resulted in the
failure of various mergers aimed at vertical
integration.
THREATS
Technological developments by competitors; New
technological developments by a few competitors
within the industry pose a threat to JSW Steel Ltd.
Suppliers: The bargaining power of suppliers has
increased over the years with the decrease in the
number of suppliers.
there have been numerous players that have
entered the market and are gaining market share
by gaining existing companies’ market share.
Increasing competition: there has been an increase
in competition within the industry putting
downward pressure on prices.
Exchange rate keeps fluctuating and this affects a
company like JSW Steel Ltd that has sales
internationally, while its suppliers are local.
Political uncertainties in the country prove to be a
barrier in business, hindering performance at times
and making the business incur unnecessary costs.
The fluctuating interest rates in the country do not
provide a stable financial and economic
environment.
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 COMPETITOR ANALYSIS:

Under mining & metal sector, we can see that

JSW Steel Ltd. holds third position after CIL &
HZL in terms of market capitalization in large
cap segment.
Under steel sector, its major competitor is
Tata Steel. Tata Steel is one of the world's
largest steel companies with a steel
production capacity. The company has
manufacturing units in 26 countries and a
commercial presence in over 50 countries.
Tata Steel is the second largest steel
producer in Europe with a crude steel
production capacity of over 12.1 million
tonnes per annum. The company together
with its subsidiaries is engaged in the
manufacture and sale of steel products in
India and internationally. They offer hot and
cold rolled coils and sheets galvanized sheets
tubes wire rods construction rebars and
bearings. Tata Steel is one of the few steel
companies that are fully integrated - from
mining to the manufacturing and marketing
of finished products.

CONCLUSION:
From above analysis, demand for high-tensile, high-strength steel in India is expected to grow
with the trends such as recyclability, light weighting and better design are on the horizon.
Moving forward, the company should use its strengths and opportunities to focus on
maximizing value per tonne in steel, driven by technology and R&D, and drive portfolio mix
shift towards 50%+ of VASP. Expansion projects should focus on value accretion and
profitability while catering to the nation’s growing appetite for steel for developing
infrastructure and catapulting itself to a global economic superpower over the next decade.
SOURCES:

➢ JSW Investors presentation ➢ Money control

➢ Annual Reports ➢ Business Standard

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