Financial Statement Analysis

Report
TATA Steel and JSW Steel

A Project Submitted in Partial Fulfilment Of

The Requirements of The Financial Accounting Course of

Term 1 (PGP 2018-20)

By

BAIBHAV KUMAR SINGH (1810016)

PARAS KUMAR (1810032)
PRIYANKA SINGH (1810036)
REMALLI AKHIL (1810038)
ROHIT KUMAR RASTOGI (1810040)

(Group 7 Section A)

Under the guidance

of
Prof. Jayanthi Iyer

INDIAN INSTITUTE OF MANAGEMENT, VISAKHAPATNAM

Acknowledgement
As our Financial Accounting Report is successfully reaching its culmination, we look back at the
entire work and find it to be well supported and blessed by many.

First of all, we would like to thank our college, Indian Institute of Management, Visakhapatnam to
give us an opportunity to enhance our skills in the arena of Financial Accounting.

We would like to express our sincere thank to Professor Jayanthi Iyer, who has always been a source
of knowledge and a form of guidance and support for carrying out the project. We consider it our
privilege to work under her supervision. We sincerely appreciate the support of our Associate
Professor Praveena Musunuru and our classmates of Indian Institute of Management,
Visakhapatnam.

Further, we would like to express our heartfelt thanks towards all the persons who have gone on to
become successful milestones in their fields and have been a source of inspiration for us to learn
something, to improvise the whole process of Financial Accounting while analysing plethora of
financial reports as future corporate managers.

TABLE OF CONTENTS PAGE NO.

MARKET TREND 1

i
TATA Steel
Chairman’s Report 2
MD’s Report 2
Director’s Report 2
JSW Steel
Chairman’s Report 3
Director’s Report 3
Auditors Report 3
ACCOUNTING POLICIES
Depreciation 3
RATIO
TATA STEEL
PROFITABILITY RATIOS
Dupont Analysis 4
Profit Margin 4
Asset Turnover Ratio 4
Return on Assets 4
Leverage 4
Return on Equity 4
Operating Profit Margin 4
LIQUIDITY RATIOS
Current Ratio 5
Quick Ratio 5
Inventory Turnover Period 5
Receivables Turnover Period 5
Operating Cycle 5
SOLVENCY RATIOS
Debt to equity ratio 5
Liabilities to Equity Ratio 5
Leverage 5
Interest Coverage ratio 6
JSW STEEL
PROFITABILITY RATIOS
Dupont Analysis 6
Profit Margin 6
Asset Turnover Ratio 6
Return on Assets 6
Leverage 6
Return on Equity 6
Operating Profit Margin 6

LIQUIDITY RATIOS
Current Ratio 7
Quick Ratio 7
Inventory Turnover Period 7
Receivables Turnover Period 7
Operating Cycle 7
SOLVENCY RATIOS
Debt to equity ratio 7
Liabilities to Equity Ratio 7
 Leverage 7
Interest Coverage ratio 8
COMPARISON OF RATIOS 8
TATA STEEL
CAPITAL MARKET RATIOS
P/E Ratio 9
Dividend Yield ratio 9
Price to Book Ratio (PB ratio) 9
TREND ANALYSIS (TATA Steel)
Total Revenue 10
Profit Before Tax (PBT) 10
Profit After Tax (PAT) 10
Total assets 10
Equity 10
TREND ANALYSIS (JSW Steel)
Total Revenue 11
Profit Before Tax (PBT) 11
Profit After Tax (PAT) 11
Total assets 11
CASH FLOW ANALYSIS
Cash flow analysis for TATA Steel 12
Cash flow analysis for JSW Steel 12
APPENDICES 14-17
REFERENCES 18
Company’s Current Operating Environment
Market Overview - India is the world’s third-largest steel producer after China and Japan. The
Indian steel industry is very modern with state-of-the-art steel mills. Steel production in India is
expected to double by 2031, with a growth rate expected to go above 10 percent in FY18. In 2017-
18, the finished steel exports of India increased 17 percent to 9.62 million tonnes (MT) while in
2016-17 it was 8.24 MT. Exports and imports of polished steel stood at 1.35 MT and 1.89 MT,
during Apr-Jun 2018.

Risk - Steel prices are now increasingly aligning to global export prices as markets strike a balance
between imports and domestic demand. China's waning demand and the resultant rise in exports pose
a risk to leveraging improving domestic demand in South Asia and Europe. Further, the movement
of currencies against the US dollar would also have a significant impact on the change of global steel
and raw material prices.

Competition - Global steel industry continued to be impacted by substantial overcapacity especially

in China, Japan, and South Korea. Though the steel production decreased in all regions except
Oceania during the year, the decline in output was slower than the drop in demand. Exports from the
steel surplus countries flooded the global markets leading to severe pressure on supply and demand
balance and steel prices. Increase in the production of steel globally is not worrying investors in steel
shares. Though there is fear of the Chinese economy slowing down and the trade wars unleashed by
the US, steel prices do not seem to be feeling the pain.

Policy - Government has put the export duty of 30% on iron ore to ensure supply to the domestic
steel industry. The New steel policy, 2017 aspires to achieve 300 MT of steel-making capacity by
2030. This would translate into the additional investment of Rs.10 trillion (US$ 156.1 billion) by
2030-31. New Steel Policy seeks to increase per capita steel consumption to the level of 160 kgs by
2030 from existing level of around 60 kg.

TATA Steel

Established in 1907, Tata Steel, the flagship company of the Tata group is the first integrated steel
plant in Asia and is now the world`s second most geographically diversified steel producer and a
Fortune 500 Company. Tata Steel is the world's 6th largest steel company with an existing annual
crude steel production capacity of 30 Million Tonnes Per Annum (MTPA). Latest investments of the
company-

 Tata Steel won the bid to acquire Bhushan Steel by offering a consideration of US$ 5,461.60
million.
 Tata Steel has decided to increase the capacity of its Kalinganagar integrated steel plant from
3 million tonnes to 8 million tonnes at an investment of US$ 3.64 billion.

JSW Steel

JSW Steel Ltd, the flagship company of the JSW Group, is an integrated steel manufacturer in India
with an installed steel-making capacity of 18 million tonnes per annum (MTPA). Latest investments
of the company-

1
  JSW Steel will be looking to further enhance the ability of its Vijayanagar plant from 13
MTPA to 18 MTPA. In June 2018, the company had announced plans to expand the plant’s
production capacity to 13 MTPA by 2020 with an investment of Rs 7,500 crore (US$ 1.12
billion).
 JSW Steel has planned a US$ 4.14 billion capital expenditure programme to increase its
overall steel output capacity from 18 million tonnes to 23 million tonnes by 2020.

Future - India is expected to overtake Japan to become the world's second largest steel producer
soon. The National Steel Policy, 2017, has envisaged 300 million tonnes of production capacity by
2030. In 2018, steel consumption of the country is expected to grow 5.7 percent year-on-year to 92.1
MT. Huge scope for growth is offered by India’s comparatively low per capita steel consumption and
the expected rise in consumption due to increased infrastructure construction and the thriving
automobile and railways sectors.

Critical analysis of the Chairman’s letter, Director’s report, Auditor’s report and
Management Discussion and Analysis
TATA Steel

Earning Quality - The basic and diluted earnings per share for Financial Year 2017-18 were at
₹38.57 and ₹38.56 respectively (previous year: ₹31.74). Basic and diluted earnings per share for the
year ended March 31, 2017, have been adjusted retrospectively for the bonus element in respect of
rights issue made during the year ended March 31, 2018.

Accounting Practice - The financial statements have been prepared in accordance with the Indian
Accounting Standards (referred to as “Ind AS”) prescribed under section 133 of the Companies Act,
2013 read with Companies (Indian Accounting Standards) Rules, as amended from time to time. The
financial statements have been prepared under the historical cost convention except for certain assets
and liabilities that are required to be carried at fair values by Ind AS. Fair value is the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.

Chairman’s Letter - The Board of your Company approved the expansion of the Kalinganagar plant
in Odisha to a capacity of 8 million tonnes per annum. The acquisition of Bhushan Steel is a strategic
investment which has the potential to enhance Tata Steel’s product portfolio and market
competitiveness shortly.

Director’s Report - Provision of (3,214) crore in respect of certain statutory demands and claims,
net of liability towards district mining fund no longer required, written back and provision for
advances paid for the repurchase of equity shares in Tata Teleservices Ltd. from NTT DoCoMo Inc.
(₹27 crore) at Tata Steel India.

Auditor’s Report - The Company is maintaining proper records showing full particulars, including
quantitative details and situation, of fixed assets. The Company has granted secured/unsecured loans,
to companies covered in the register maintained under Section 189 of the Act. The Company has not

2
given any guaranteed/unsecured loans to any other party which is recorded in the document
maintained under Section 189 of the Companies Act, 2013.

Management Discussion and Analysis - After successful ramp-up, TSK has embarked upon the
second phase of expansion which will take its production capacity to 8 MnTPA. During Financial
Year 2017-18, our Steel Business Unit (‘SBU’) has achieved a growth in sales of ~11% over
previous year, outperforming the market growth. During the Financial Year 2017-18, by-product
utilization at the Plant increased substantially, and sales increased by 8% over the previous year.

JSW Steel

Earning Quality - Borrowings and other financial liabilities which were recognized at historical cost
under previous GAAP had been identified at amortized cost under IND AS with the difference been
adjusted to opening retained earnings.

Accounting Practice - The significant accounting policies used in preparing the annual standalone
financial statements in accordance with Indian Accounting Standards (IND AS) prescribed under the
section 133 of the Companies Act, 2013 read with rule 3 of the Companies (Indian Accounting
Standards) Rules, 2015 and the Companies (Accounting Standards) Amendment Rules, 2016.

Chairman’s Letter – The year was characterized by broad-based improvement in global growth,
rising, industrial production, progress on the supply side reforms in China and an uptick in global
steel pricing environment. The Indian economy too saw a strong rebound in demand, especially in
the second half, demonstrating a healthy resilience to disruptions and structural changes.

Director’s Report – The company has always been a frontrunner in continually improving its
operational performance in all areas, like production, yield, plant utilization, and others, while
reducing the consumption of fuel, power, stores, and others. This is done by adopting an approach of
continual improvement of process metrics across all energy consuming facilities.

Auditor’s Report – No fraud has been reported by the Auditors under Section 143(12) of the
Companies Act 2013requiring disclosure in the Board’s report. The company has complied with the
conditions of Corporate Governance as stipulated in the Listing Regulations, as applicable for the
year ended 31 March 2018.

Management Discussion, and Analysis – The company has grown significantly with a deep and
abiding commitment to nation-building. From a 1.6 MTPA capacity in 2002, it currently holds crude
steel production capacity of 18 MTPA; and is on track to touch 40 MTPA in next decade.

3
TATA Steel
Revenue from Operations/Sales

The revenue from operations/sales increased by 13.62% from last year [Appendix 1].

Profitability Ratios

Dupont Analysis [Appendix 2]

Profit Margin

Profit margin has improved. As from horizontal analysis, sales have grown by 13.63% and other
income has also grown by 84.25% while expense has grown by 7.69% only. Through vertical
analysis, although expense on material has increased to 29.86 as compared to 22.62 per 100 of
revenue but finance cost and other expenses has decreased to 4.64 and 36.65 respectively as
compared to 5.05 and 46.84 per 100 of revenue.

Asset Turnover Ratio

Asset turnover ratio has improved. From horizontal analysis, Sales grew 13.63% and asset
grew12.24%. In iron and steel industry global average for asset turnover ratio is 1.15 for 2017(CSI
Market.com). So, Tata steel has improved from previous year, but it is still lagging from global
standard.

Return on Assets

Return on assets has improved (3.61% to 5.39%) because of improved profit margin (7.33% to
10.53%) as asset turnover improved from 0.49 to 0.51 only. Also, strategy of business is "high
margin, low volume".

Leverage

leverage has decreased from 2.15 to 2.04. It means increase in assets are more due to equity as
compared to net borrowings [Appendix 3].

Return on Equity

It is measure of profitability from shareholders stand point. It is product of ROA and leverage. ROE
has improved because of improved ROA while leverage has decreased from 2.15 to 2.04. It means
increase in assets are more due to equity as compared to net borrowings [Appendix 4].

Operating Profit

Operating profit has improved from 10.12% to 12.74% because of decrease in other expenses
[Appendix 5].

4
Liquidity Ratios
Current Ratio

In 2016-17, it is less than 1 and Ratio less than one is very risky as it might not be able to short term
liabilities and it will also erode working capital and it leads to larger problem for company. In 2017-
18, this ratio has improved but still not in a good condition. current ration should be at least 2:1 as it
contains inventory and trade receivable which will not be converted very soon [Appendix 6].

Quick Test Ratio

It should be at least 1:1 so company can pay for current liability confidently as it doesn’t count for
inventory. Although it still contains trade receivable part, but company also gets some time for trade
payable. In 2016-17, it was very bad while in 2017-18, company is in better position [Appendix 7].

Inventory Holding Period

Inventory holding period has increased from last year, 62.57 to 64.11 days. Also, this period is on
higher side [Appendix 8].

Receivables Collection Period

It tests the quality of current assets. Collection period has increased from last year still 10 to 11 days
are decently good for trade receivables collection period [Appendix 9].

Operating Cycle

Operating cycle has increased (73 to 75 days) from last year as receivables collection period and
inventory holding period, both has increased [Appendix 10].

Solvency Ratios
Debt to equity ratio

This is a financial leverage. Higher leverage indicates aggressive use of financial leverage, but it is
also riskier for creditors. As steel market is not stable and depends on global demand and supply and
global policy, Debt/equity ratio should be lower.

Ratio has decreased from last year (from 0.54 to 0.40) and its good for creditors [Appendix 11].

Liabilities to Equity Ratio

Ratio has improved from last year, from 1.15 to 0.96. This is because of increase liability is only
3.01 % while increase in equity is 22.83 % [Appendix 12].

Leverage

Ratio has improved from last year, from 2.15 to 1.96. Now, contribution of equity in asset is higher
than previous year [Appendix 13].

5
Interest Coverage Ratio

This is ability to pay interest. This ratio has increased from last year (3.25 times to 4.56 times) and it
is very good for company, it shows that company can easily pay its interest obligation [Appendix
14].

JSW Steel
Revenue from Operations/Sales

The revenue from operations/sales increased by 16% [Appendix 15].

Profitability Ratios

Dupont Analysis [Appendix 16]

Profit Margin

Profit margin has improved. As from horizontal analysis, sales have grown by 16% while expense
has grown by 14% only. Through vertical analysis, although expense on material has increased to
56.57% as compared to 49.12% of revenue but finance cost and other expenses has decreased to 5.42
and 18.86 respectively as compared to 6.40 and 20.42 per 100 of revenue.

Asset Turnover Ratio

Asset turnover ratio has improved. From horizontal analysis, Sales grew 16% and asset grew 5.67%.
In iron and steel industry global average for asset turnover ratio is 1.15 for 2017(CSI Market.com).
So, Jindal Steel has improved from previous year, but it is still somewhat less than global standard.

Return on Assets

Return on assets has improved (4.63% to 5.74%) because of improved profit margin (6.29% to
7.21%) and slightly improvement in asset turnover (0.80 to 0.74). Also, strategy of business is "high
margin, low volume".

Leverage

leverage has decreased from 3.47 to 3.20. It means increase in assets are more due to equity as
compared to net borrowings. But still leverage is on higher side for steel industry. Given volatility in
steel industry, leverage should be lower [Appendix 17].

Return on Equity

It is measure of profitability from shareholders stand point. It is product of ROA and leverage. ROE
has improved because of improved ROA (4.63% 5.74%) while leverage has decreased from 3.47 to
3.20. It means increase in assets are more due to equity as compared to net borrowings [Appendix
18].

Operating Profit
Operating profit has improved because of decrease in other expenses (18.88% from 20.42%, vertical
analysis) [Appendix 19].

Liquidity Ratios
6
Current Ratio

Ratio less than one is very risky as it might not be able to pay short term liabilities and it will also
erode working capital and it leads to larger problem for company. In 2017-18, this ratio has
improved to 0.76 from 0.68 but still not in a good condition. current ration should be at least 2:1 as it
contains inventory and trade receivables which will not be converted very soon [Appendix 20].

Quick Test Ratio

It should be at least 1:1 so company can pay for current liability confidently as it does not count for
inventory. Although it still contains trade receivables part, but company gets some time for trade
payable. Company is performing poor in this regard and condition of company is not good. From
2016-17 to 2017- 18, there is very meagre improvement in the ratio of the company [Appendix 21].

Inventory Holding Period

Inventory holding period has increased from last year, from 51 days to 53 days. As market demand
got improved for steel industry so company produced more in hope of selling. Also, this holding
period is still better than Indian steel industry [Appendix 22].

Receivables Collection Period

It tests the quality of current asset. Collection period has increased from last year (24 days from 21
days). Also, collection period is higher than the industry average [Appendix 23].

Operating cycle

Operating cycle has increased from last year, 77 days from 72 days. This is because receivables
collection period and inventory holding period, both has increased [Appendix 24].

Solvency Ratios
Debt to equity ratio

This is a financial leverage. Higher leverage indicates aggressive use of financial leverage, but it is
also riskier for creditors. As steel market is not stable and depends on global demand and supply and
global policy, Debt/equity ratio should be lower. Although Ratio has decreased from last year (1.14
from 1.38) but still it is very high, and business is in risk [Appendix 25].

Liabilities to Equity Ratio

Ratio has improved from last year because of increase in liability is only 1.38 % while increase in
equity is 15.81 % [Appendix 26].

Leverage
 Leverage has decreased. Ratio has improved from last year (3.07 from 3.36) Now, contribution of
equity in asset is higher than previous year [Appendix 27].

Interest Coverage Ratio

7
This is ability to pay interest for borrowings. All credit ratings depend on ability to pay interest and
hence this ratio is very important for the company to acquire future loan at low interest rate. This
ratio has increased from last year (3.04 times from 2.41 times), but it should be at least 4 to 5
[Appendix 28].

Comparison of Ratios between TATA Steel and JSW Steel (2017-18)

Ratios/Percentage TATA Steel JSW Steel Remarks
Profitability Ratios

Profit Margin 10.53% 7.21% Tata Steel is performing better.

Asset turnover ratio 0.51 0.80 JSW Steel is performing better.
Return on asset 5.39% 5.74% JSW is performing slightly better.
Leverage 2.04 3.20 Business is risky for JSW steel as
leverage is high.
Return on equity 11.01% 18.38% Since Leverage for JSW Steel is high
that’s why ROE is better for JSW Steel.
Liquidity Ratios
Current ratio 1.35 0.76 Tata Steel is more capable of paying its
current liability. JSW won’t be able to
pay its current liability.
Quick test ratio 0.92 0.36 Quality of paying current liability is
much better for Tata Steel.
Inventory holding period 64.11 Days 53.32 Days JSW has lower inventory holding period
as compare to Tata Steel.
Receivables collection period 11.71 Days 23.81 Days Receivables collection period for Tata
Steel is much better than JSW Steel.
Operating cycle 75.82 Days 77.13 Days Operating cycle for Tata steel is slightly
better than JSW steel.
Solvency Ratios
Debt to equity ratio 0.40 1.14 JSW steel has higher debt than Tata Steel.
Liabilities to equity ratio 0.96 2.07 JSW has higher liability per equity than
Tata Steel.
Leverage 1.96 3.07 JSW has higher leverage than Tata steel
and it’s not safe for future operation as
steel industry is not consistent.
Interest coverage ratio 4.56 3.04 Credit Rating for Tata Steel much be
better than JSW steel as Tata Steel has
better interest paying capabilities.

Analysis
We can conclude that both Tata Steel and JSW steel is performing well and they are very much
competitor to each other. On certain parameters Tata Steel is performing better than JSW steel while
in some other parameters JSW steel is performing better than Tata Steel. Profitability of Tata Steel is
better than JSW Steel. While asset utilization of JSW steel is much better than Tata Steel. The most
significant point is that JSW steel is aggressive in terms of leverage, although return on equity for
JSW steel is better because of these but given uncertainty in steel industry, business of JSW steel is
not safe for JSW steel. As we can see through liquidity ratios, JSW steel is not in a position to pay its
current liability properly. Also, JSW has very high borrowing and it been reflecting in solvency ratio.
In a long run it is not safe for JSW steel.

We can conclude that JSW is performing well for shareholders as ROE is high (because of leverage
only) but business of Tata Steel is more robust and reliable and safer than JSW steel.

Stock Market Assessment

Analysis
1. P/E ratio for JSW steel has improved very much from last year. While P/E ratio for Tata Steel
has decreased from last year.
2. Price to book ratio for Tata Steel is very bad as market price is almost equal to book value
and this is very bad for the company. It means company is undervalued. From the last year
JSW steel has performed very well.
 3. Book value for JSW steel is less than Tata Steel as number of shares for JSW steel is higher
than Tata Steel.
4. Return percentage per share for JSW Steel is much better than Tata Steel. As return
percentage is 54.76% for Jindal Steel and it is really outstanding for a large cap company.
Although Return percentage for Tata Steel is decent enough but less than JSW Steel.
5. As return per share for Jindal Steel (54.76%) is much better than Tata Steel (20.36%), In a
short-term Investor should invest in JSW Steel. But as Price to book ratio for Tata steel is
closed to one and also Tata steel has less borrowings than JSW Steel, In a long run, investor
should invest in Tata Steel. 9

Trend Analysis: TATA Steel

Trend Analysis
Revenue from Operation Operating Expense(Total expense-finance cost)
Operating Profit (Before Tax) PAT(Excluding exceptional items)
NOPAT
70,000.00
60,000.00
50,000.00
40,000.00
30,000.00
20,000.00
10,000.00
0.00
2014 2015 2016 2017 2018

The Revenue from operations takes a dip in year 2016 and then gradually increases to Rs 60519.37
Cr in 2017-18. Similarly, the operating expenses, operating profit (Before Tax) and NOPAT fell in
2016 and then eventually took a rise in 2017-18. This could be attributable to fall in exports to China
in 2016. Also, all the above-mentioned parameters show a very steady or negative growth in the
period 2015-2017. For instance, NOPAT fell from Rs. 7180.35 Cr. to 6,113.68 Cr., in 2015, to the
lowest Rs. 4,346.50 Cr in 2016 and rose to Rs.7,709 Cr in 2017-18.
 trend Analysis
Total Assets Total Equity
140,000.00
Total Debt (Borrowings) Interest
120,000.00

100,000.00

80,000.00

60,000.00

40,000.00

20,000.00

0.00
2014 2015 2016 2017 2018

The value of total assets kept falling over the year 2015-17. However, it rose to Rs.1,25,114.34 Cr. in
2017-18. Same was the case for total equity (from Rs. 51,934.01 Cr in 2016-17 to Rs. 63,759 Cr in
2017-18). Total borrowings decreased in the year 2017-18 from 2016-17. The overall market for the10
company was extremely stagnant for the period 2015-17. However, eventually increased in 2017-18.

Trend Analysis: JSW Steel

TREND ANALYSIS
Revenue from Operation Operating Expense(Total expense-finance cost)
Operating Profit (Before Tax) PAT(Excluding exceptional items)
NOPAT
70000

60000

50000

40000

30000

20000

10000

0
2014 2015 2016 2017 2018

The Revenue from operations fell to the lowest in year 2016 and then steadily increases to Rs 56,
913 Cr in 2017 to Rs. 66,234 Cr in 2018. Similarly, the operating expenses and operating profit
(Before Tax) and took a steep dip 2016 and then eventually took a rise in 2017-18. This could be
attributable to fall in exports to China in 2016 which made the steel industry sluggish. Also, all the
above-mentioned parameters show a very steady or negative growth in the period 2015-2017. But,
NOPAT has been decreasing from the year 2016. It fell from Rs. 10,096.86 Cr. In 2016 to 5,792.48
Cr. in 2017, and then took a slight rise to Rs.6,986.96 Cr in 2018.
 Trend Analysis
Total Assets Total Equity Total Debt (Borrowings) Interest
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
2014 2015 2016 2017 2018

The value of total assets fell to a low, Rs. 71,766.44 Cr in 2016. However, it rose to Rs.1,25,114.34
Cr. In 2017-18. Same was the case for total equity (rose from Rs. 51,934.01 Cr in 2016-17 to Rs. 11
85,551 Cr in 2017-18). Total borrowings decreased in the year 2017-18 from 2016-17. The overall
market for the company was extremely stagnant for the period 2015-2016. However, it eventually
increased in 2017-18.

Cash Flow Analysis

Key Points
1. Cash flow from operation for JSW Steel (12,174 cr.) is greater than Tata Steel (11791 Cr).
2. Quality of earning for TATA Steel (19.48%) is better than JSW Steel (18.385).
3. Revenue from operation for JSW Steel (66234 Cr.) is more than Tata Steel (60,519 Cr).

Quality of Earning

For Tata Steel, Profit margin is 10.53% while operating cash margin is 19.48%. Although cash flow
contains exceptional items and depreciation of assets, still quality of earning is very good for Tata
Steel. Similarly, for JSW steel, profit margin is 7.21% and operating cash margin is 18.38% and for
Jindal steel too, quality of earning is good. Although operating cash margin of Tata Steel is slightly
better than JSW steel.

Current liability cover

12
Although current liability cover for JSW Steel is slightly better than Tata Steel but both the ratios are
not so good. This ratio should be about 2:1. The company could default on its current obligation if
this ratio is less.

Capital Expenditure Cover

Capital Expenditure Cover for TATA Steel (4.69) is better than JSW steel (3.23). It means funds
required for expansion of plant for tata steel is coming from its own cash and also it can further
expand its plant capacity without creating much stress on its working capital. While for JSW steel, it
is also self-sufficient for expansion for its plant but still it is lower than Tata Steel. Tata steel can
spend more on plant capacity expansion than JSW steel.

Long Term Debt Cover

Long term debt cover for both the companies are in good condition. For Tata Steel it is 0.48 and for
JSW it is 0.42. It means both the companies are in a good position to pay its long-term financial
liabilities through its cash, if required. This ratio is more for Tata Steel as it has less long-term
liability than JSW Steel.

Cash Interest Cover

Cash Interest Cover for Tata Steel is much better than JSW Steel as Tata Steel has lower taxable
borrowing hence, lower interest liability than JSW Steel.
Appendices
1. 13

2.

3.

4.
5.

6.

7.

14

8.

9.

10.

11.

12.
13.

14.

15.
15

16.

17.

18.
19.

20.

21.

22.
16

23.

24.

25.

26.
27.

28.

References
https://www.ibef.org/industry/steel.aspx 17

https://www.equitymaster.com/research-it/sector-info/steel/Steel-Sector-Analysis-Report.asp

https://www.livemint.com/Money/4OJl6hqGXjrRkH5gwK7EwL/The-steel-industry-is-on-top-but-
China-is-a-risk-in-waiting.html

https://www.moneycontrol.com/india/stockpricequote/steel-large/jswsteel/JSW01

https://in.finance.yahoo.com/quote/TATASTEEL.NS/history/

https://www.moneycontrol.com/financials/tatasteel/balance-sheet/TIS

https://www.jsw.in/investors/investor-relations-steel