JSW Steel :

DuPont of ROIC 2016 2017 2018 2019 2020

NOPAT Margin 4.73% 9.90% 12.36% 11.96% 7.76%
IC Turnover (times) 0.72 0.87 1.03 0.96 0.78
ROIC 3.41% 8.62% 12.76% 11.46% 6.04%

 The NOPAT Margin of JSW Steel fell in the year 2019-20 due to the fall in Domestic
Revenue by 22%. The year 2019-20 was divided into two halves – the first part saw
weakened demand and subdue pricing, in the second half business started to
improve but was deflated by corona virus pandemic. But the company was able to
increase its exports by 43%.
 Cost of material fell by 15%, due to lower raw material prices but this drop was
offset by unfavourable local currency movement.
 The company kept cash balance of around 16%, which according to the Covid
situation was the right decision.
 The invested capital turnover decreased in the year 2019-20 as the company took
loan and invest in PP&E.
 Under the New Steel Policy, government targets to increase steel production
capacity and JSW has laid out expansion plans to be a part of the India growth story.

TATA STEEL
DuPont of ROIC 2020 2019 2018 2017 2016
NOPAT Margin 4% 8% 17% 5% 5%
IC Turnover 0.69338 0.83142 0.85675 0.83280 0.75871
(times) 7 3 9 2 4
ROIC 2% 7% 14% 4% 4%

 The NOPAT margin has seen a sharp decline in the past two years due to the fall in
revenue and around a 25% increase in the cost of raw materials that have been
consumed in the process of production.
 Being in a labour-intensive industry, the company has definitely suffered from the
pandemic times and this is reflected in the return on invested capital. The company
does have a great reputation as the most integrated steel industry in the country and
hence has a good cushion to fall back on and hence the loss made during the current
times isn’t going to be a massive hit for the company but the investors’ confidence
definitely has taken a small hit. (with the market share going down reflecting the
same)
 There has been a huge investment in the digital side and the carefully laid out plans
are ready to be executed thanks to the new steel policy. The ROIC will be seeing a
possible turn around in the coming future.

HINDALCO INDUSTRIES LTD

DuPont of ROIC 2020 2019 2018 2017 2016
NOPAT Margin 5.39% 6.12% 7.86% 5.12% 16.38%
Invested Capital Turnover (times) 0.91 1.14 1.05 0.98 0.92
ROIC 5.93% 5.37% 7.51% 5.23% 17.80%

 The NOPAT margin has been declining because the cost of raw material has been
increasing till March 19 and the revenue from operations had significantly
decreased from March 19 to March 20.
 The invested capital turnover decreased in 2020 because of the increase in the
borrowings by the company.
 The pandemic has impacted the company as there is lack of new orders and the
situation is expected to not improve much till the early 2021 but the hopes are
high with the new steel policy announced by the government. Hindalco is one of
the companies that is expected to benefit largely from the new steel policy and
significant changes are expected to be seen in the ROIC of the company in the
future.

JINDAL STEEL AND POWER LIMITED

DuPont of ROIC 2020 2019 2018 2017 2016

NOPAT Margin 7.4% 2.6% 5.03% 1.07% -2.42%
IC Turnover
(times) 0.0721 0.5241 0.3571 0.4416 0.4005
ROIC 0.5% 1.4% 1.8% 0.5% -0.9%

 The NOPAT margin has been increasing consistently from 2016 to 2020 because
revenue from operations had significantly increased. From being a Rs. 450-plus crore
enterprise in 2001, JSPL have now emerged as a Rs. 20,000-crore Company.
 Due to fresh borrowings by the company, the invested capital by the company
decreased from 2019 to 2020. The borrowings will be used for ambitious plan to
enhance steel production to 15 MTPA (from 3 MTPA) and power generation capacity
to 10,000 MW (from around 2,500 MW) by 2020. This would be backed by their own
coal and iron ore mines nationally and internationally. Although the Invested Capital
stayed almost stable from 2016 to 2019.
 Steel demand is expected to increase by 8-9% annually in the years to come. Jindal
Steel has done capacity expansion and introduced value-added products in their
portfolio. Their proactive backward integration into coal and iron ore, and forward
integration into value-added products like beams, rails, plates, rebars and wire rods,
 among others have propelled their business growth. Due to these factors, the ROIC
will improve in the coming future.

ESG ANALYSIS
JSW
2019 Jindal Steel Hindalco SAIL TATA Steel Steel
45.8
ESG Disclosure Score 53.31 32.64 48.76 33.88 7
34.8
Environmental Disclosure Score 45.74 20.93 36.43 24.03 8
49.1
Social Disclosure Score 59.65 28.07 66.67 28.07 2
64.2
Governance Disclosure Score 64.29 64.29 58.93 62.50 9

To measure the longevity and societal impact of an investment the Environment, social and
corporate governance are the fundamental factors which must be taken into account.
Briefly, the environment criteria include conservation of animals, waste management,
pollution and the risks associated with the same for the companies. The social aspect looks
at the company’s business relationships. Does it work with suppliers that hold the same
values as it claims to hold? Does the company donate a percentage of its profits to the local
community or encourage employees to perform volunteer work there? Governance deals
with the transparency at the top.
 The ESG Disclosure Scores rate companies annually based on their disclosure of
quantitative and policy related. With the above the data Jindal steel is doing
comparatively well with how transparent they are and policies they have declared.
The company in relation to the others is more open to scrutiny and this is a great
advantage for a going concern. The score of 54.31 is higher than the industry
average which gives the company an edge.
 The main folly of this industry happens in the realm of the environmental score for
the companies. GHG emissions which is a very important factor for the score is very
high in steel industry and the score in retrospect becomes lower. TATA and Hindalco
being bottom scorers in early 20’s shows the level of pollution that the companies
deal with. However, policies to regulate the risk of the same is possible and may pull
the score higher.
 The social disclosure score tells the same story. Employee satisfaction and risks
associated for them reflects the score given. SAIL has an immense advantage in
terms of employable people with its huge score of 66.67.
 With the increased need for transparency and new board rules thanks to the
introduction of an updated companies act the governance scores have a high
average and the BOD also are liable for the decisions that are taken.