Industry Profile

Steel Sector

Steel is an alloy that consists mostly of iron and has a carbon content

between 0.2% and 2.1% by weight, depending on the grade. Carbon is the most
common alloying material for iron, but various other alloying elements are used,
such as manganese, chromium, vanadium, and tungsten. Carbon and other
elements act as a hardening agent, preventing dislocations in the iron atom crystal
latticefrom sliding past one another. Varying the amount of alloying elements and
the form of their presence in the steel (solute elements, precipitated phase) controls
qualities such as the hardness, ductility, and tensile strength of the resulting steel.
Steel with increased carbon content can be made harder and stronger than iron, but
is also less ductile.

Alloys with a higher carbon content are known as cast iron because of their
lower melting point and castability. Steel is also distinguishable from wrought iron,
which can contain a small amount of carbon, but it is included in the form
of slag inclusions. Two distinguishing factors are steel's increased rust resistance
and better weldability.

Though steel had been produced by various inefficient methods long before
the Renaissance, its use became more common after more-efficient production
methods were devised in the 17th century. With the invention of the Bessemer
process in the mid-19th century, steel became an inexpensive mass-
produced material. Further refinements in the process, such as basic oxygen
steelmaking, further lowered the cost of production while increasing the quality of
the metal. Today, steel is one of the most common materials in the world, with
more than 1300 million tons produced annually. It is a major component in
buildings, infrastructure, tools, ships, automobiles, machines, appliances, and
weapons. Modern steel is generally identified by various grades defined by
assorted standards organizations.

Following are the major competitors of steel sector:

 Tata Steel
 Steel Authority of India Limited (SAIL)
 Bhushan Power & Steel Ltd.
 Jindal Steel & Power Limited (JSPL)
 Essar Steel
 ISPAT Industry Ltd.

Steel Industry Trends

Steel Industry Trends are not at all static in this industry and is a very
dynamic. The country that is producing the maximum amount of steel may not be
in the first position in the coming years. Analysis of the Steel Industry Trends
show that from the period starting from 1910 till the year 1960, the first position in
terms of producing the largest amount of steel in the whole world was captured by
United States of America. During this period it was observed that almost half of
the total steel production around the globe was produced by USA. But the scenario
started to change after the countries like Japan and China came to the fore. Again,
in the recent years, India as well as Brazil has shown tremendous performance in
the steel production side. According to the recent Steel Industry Trends, China is
the largest steel producing nation. But it has also been seen that the production of
quality steel in China is very low. Thus, they have to import large quantities of the
same from the foreign countries, especially Brazil. The rising of India as a key
player in the world steel industry scenario is also evident from Steel Industry
Trends. Very recently, the Indian Steel company called TATA Steel has acquired
the fifth largest steel company of the world called Corus and consequently came up
from 65th to 5th position.
 Merger and acquisition is becoming the Steel Industry Trends in the recent
times. The biggest M&A venture that took place recently was the one where the
Rotterdam (Netherlands) based steel company called Mittal Steels bought the
erstwhile steel giant Arcelor. This acquisition has led to the formation of the
largest steel company of the recent times called Arcelor-Mittal Steel company.

Steel Industry Trends also show that a downsizing in the steel industry is a

common phenomenon all round the globe. This phenomenon has arisen due to the
fact that this industry has shifted from its earlier stance of being a labor intensive
one to a capital intensive one. The recent trend of M&A has enhanced its pace.

Steel Industry Trends in case of prices have also shown high rate of growth
and the main factor acting behind it is excess demand for steel generated by the
construction, automobile and infrastructure industries. This increase in the price of
steel can be observed along all the categories. The different categories of steel are
Hot as well as Cold Rolled Coil of steel, Hot rolled plate of steel and rod made up
of steel wire. The price of medium steel type has increased from US $ 666 to US $
815 between May 2006 and May 2007.

The Indian steel industry have entered into a new development stage from
2005-06, riding high on the resurgent economy and rising demand for steel. Rapid
rise in production has resulted in India becoming the 5th largest producer of steel.

It has been estimated by certain major investment houses, such as Credit

Suisse that, India’s steel consumption will continue to grow at nearly 16% rate
annually, till 2012, fuelled by demand for construction projects worth US$ 1
trillion. The scope for raising the total consumption of steel is huge, given that per
capita steel consumption is only 40 kg – compared to 150 kg across the world and
250 kg in China.
 The National Steel Policy has envisaged steel production to reach 110
million tonnes by 2019-20. However, based on the assessment of the current
ongoing projects, both in greenfield and brownfield, Ministry of Steel has
projected that the steel capacity in the county is likely to be 124.06 million tonnes
by 2011-12. Further, based on the status of MOUs signed by the private producers
with the various State Governments, it is expected that India’s steel capacity would
be nearly 293 million tonne by 2020.

Production

 Steel industry was delicensed and decontrolled in 1991 & 1992 respectively.
 Today, India is the 7th largest crude steel producer of steel in the world.
 In 2008-09, production of Finished (Carbon) Steel was 59.02 million tonnes.
 Production of Pig Iron in 2008-09 was 5.299 Million Tonnes .
 Last 5 year's production of pig iron and finished (carbon) steel is given
below:

(in million tonnes)

Category 2004-05 2005-06 2006-07 2007-08 2008-09
Pig Iron 3.228 4.695 4.993 5.314 5.289
Finished 40.055 44.544 55.416 58.233 59.02
Carbon Steel
 Growth of Steel Industry In India

Steel industry reforms - particularly in 1991 and 1992 - have led to

strong and sustainable growth in India’s steel industry.

Since its independence, India has experienced steady growth in the steel
industry, thanks in part to the successive governments that have supported the
industry and pushed for its robust development.

Further illustrating this plan is the fact that a number of steel plants were
established in India, with technological assistance and investments by foreign
countries.

In 1991, a substantial number of economic reforms were introduced by

the Indian government. These reforms boosted the development process of a
number of industries - the steel industry in India in particular - which has
subsequently developed quite rapidly.

The 1991 reforms allowed for no licenses to be required for capacity

creation, except for some locations. Also, once India’s steel industry was moved
from the listing of the industries that were reserved exclusively for the public
sector, huge foreign investments were made in this industry.

Yet another reform for India’s steel industry came in 1992, when every type
of control over the pricing and distribution system was removed, making the
modern Indian Steel Industry extremely efficient, as well as competitive.
 Additionally, a number of other government measures have stimulated the
growth of the steel industry, coming in the form of an unrestricted external trade,
low import duties, and an easy tax structure.

India continually posts phenomenal growth records in steel production. In

1992, India produced 14.33 million tones of finished carbon steels and 1.59 million
tones of pig iron. Furthermore, the steel production capacity of the country has
increased rapidly since 1991 - in 2008, India produced nearly 46.575 million tones
of finished steels and 4.393 million tones of pig iron.

Both primary and secondary producers contributed their share to this

phenomenal development, while these increases have pushed up the demand for
finished steel at a very stable rate.

In 1992, the total consumption of finished steel was 14.84 million tones. In
2008, the total amount of domestic steel consumption was 43.925 million tones.
With the increased demand in the national market, a huge part of the international
market is also served by this industry. Today, India is in seventh position among
all the crude steel producing countries.
 Investments in Steel Sector

Steel sector in India is likely to see an investment of Rs 8,70,640 crore by

2020 to reach over 290 million tonne capacity, Steel Minister Ram Vilas Paswan
said.

“The likely capacity achievable by 2019-20 will be over 290 million tonnes. Going
by estimate of Rs4,000 crore investment per million tonne of additional capacity,
the sector is likely to see an investment of Rs2,76,880 crore by 2012 and
Rs8,70,640 crore by 2020,” the minister told

The current steel production capacity is over 53 million tonnes.

The National Steel Policy had envisaged country’s total steel production to
reach 110 million tonnes (MT) by 2020. A buoyed Paswan said the production is
likely to reach 124 MT by 2012 on the back of expansion plans of the steel
companies and a few greenfield projects in the pipeline.

He said the additional capacity enhancement in the sector would generate

employment for around 40 lakh people.

As of now, both domestic and foreign steel players have signed 193
memoranda of understanding with states for setting up new units with a total
planned capacity of around 243 MT and a total proposed investment of over
Rs5,14,000 crore.
 Paswan said private and public sector steel companies have embarked on
capacity expansion. State-run SAIL’s crude steel production is expected to touch
24.84 MT by 2011-12 and 60 MT by 2020 from the present 12.84 MT, he added.
Similarly, RINL’s crude steel production capacity will be enhanced from the
present 2.90 MT to 6.80 MT by 2011-12 and 10 MT by 2020.

Private steel majors including Tata Steel, Essar Steel, JSPL, Ispat and JSW
Steel have also lined up expansion of their existing production capacities.

Government Policies

Industrial and Trade Policy Resolutions in 1991 with regards to the Steel Industry:

 Licensing requirement for capacity creation has been abolished.

 Steel Industry has been removed from the list of industries reserved for the
state sector.
 Automatic approval granted for foreign equity investment in steel has been
increased up to 74%.
 Price and distribution controls were removed from January 1992.
 Restrictions on external trade, both in import and export, have been
removed.
 Import tariff reduced from 105% in 1992-93, to 30% in 1996-97.
 Other policy measure like convertibility of rupee on trade account,
permission to mobilize resources from overseas financial markets, and
rationalization of existing tax structure.
 Company Profile

NAME: ESSAR STEEL LTD.

TYPE: Corporate

LOCATION: ESSAR STEEL LTD.

27th K.M

Hazira Road, Surat-394270

Dist.-Surat

Gujarat

India.

CORPORATE OFFICE: Essar House,

11 Keshavrao Khadye Marg,

Mahalaxmi,

Mumbai,

India.
KEY PEOPLE:

Mr. Shashi Ruia Chairman

Mr. Ravi Ruia Vice Chairman

Mr. Prashant Ruia Director

Mr. Anshuman Ruia Director

Ms. Smiti Kanodia Director

Mr. Rewant Ruia Director

INDUSTRY: Steel, Energy, Power, Communications, Shipping Ports & Logistics,

Construction and Mining & Minerals.

PRODUCTS: Steel, Oil, Power, Mobile, Engineering Procurement &

Construction Etc..

REVENUE: USD 15 billion.

 Essar Group
T

he Essar Group is a multinational conglomerate and a leading player in the sectors

of Steel, Oil & Gas, Power, Communications, Shipping Ports & Logistics,
Construction and Minerals. With operations in more than 20 countries across five
continents, the group employs 60,000 people, with revenues of about USD 15
billion.

Essar began as a construction company in 1969 and diversified into

manufacturing, services and retail. Over the last decade, it has grown through
strategic global acquisitions and partnerships, or through Greenfield and
Brownfield development projects, capturing new markets and discovering new raw
material sources.

Today, the Group continues to expand its global footprint, focusing on

markets in Asia, Africa, Europe, the Americas and Australia. Essar invests
significantly in the latest technology to drive forward and backward integration in
its businesses, and on leveraging synergies between these businesses. It also
focuses on in-house research and innovation to be a low-cost manufacturer with
high quality products and innovative customer offerings.
 Alongside its ambitious business pursuits, Essar has been committed to its
social responsibility. The Group runs community outreach initiatives in all its plant
locations, with a focus on education, healthcare, environmental and agricultural
development, and self-employment. Essar is committed to sustainable business
practices. Our HSE (Health, Safety and Environment) management system is on
par with global standards. We are also taking climate change initiatives to reduce
our carbon footprint. This includes several CDM (Clean Development Mechanism)
projects that can earn the company CER (Certified Emission Reduction) credits.
_A growing number of our businesses—with new businesses joining the list every
year—are certified to international environment standards, like ISO 9001 / 14001,
and health and safety standards, like OHSAS 18001.

The Essar Group is widely regarded as a responsible and conscientious

global employer. It has experience in managing businesses in different geographies
with a culturally diverse workforce. This is why its people practices are sensitive to
cross-cultural nuances. The Group’s people strategy is focused on promoting a
learning culture that continually enhances the professional skills of its employees.
 STEEL

 A global steel producer with 14 million tonnes per annum of current capacity,
with an aim to achieve a global capacity of 20-25 million tonnes
 Presence in key markets in Asia and North America
 Fully integrated from mining to retail: Essar owns a global portfolio of coal
and iron ore mines and has access to all key raw materials, ensuring steady
supply to its plants
 Strong downstream capability with service centres and customer care centres,
as well as a global network of retail outlets branded Essar Hypermart
 Specialised plants for value-added steel products, like pipes and plates
 Leadership position in the cold rolling, galvanizing and pre-coated segments

CURRENT OPERATIONS:

 Hazira, Gujarat, India: 10-million tonne steel plant at Hazira, largest in

Western India. The plant is supported by a complete infrastructure
setup,_including a captive port, power plant, lime plant and oxygen plant.
o Downstream facilities
o Cold Rolling plant: 1.4 million tonnes
o Galvanizing plant: 0.5 million tonnes
o A 1.5-million tonne extra wide plate mill
o A 600,000-tonne pipe mill
  Visakhapatnam, Andhra Pradesh, India: 8-million tonne pellet plant
 Bailadila, Chattisgarh, India: 8-million tonne iron ore beneficiation plant
 Pune, Maharashtra, India:
o 600,000-tonne cold rolling plant
o 500,000-tonne galvanising plant
o 400,000-tonne colour coating plant
o 650,000-tonne pickling line

 Algoma, Ontario, Canada: 4-million tonne steel plant

 West Java, Jakarta, Indonesia:
o 400,000-tonne cold rolling mill and 150,000-tonne galvanising line
o Steel Service Center: 200,000 tonnes
o Essar Hypermart

 Retailing (across India): Over 450 steel retail outlets branded Essar
Hypermart and Essar Expressmart

 Services (across India): Largest Steel Service Center facilities in India with
an annual capacity of 2.5 million tonnes located in Pune (Maharashtra),
Hazira (Gujarat), Bahadurgarh (National Capital Region), and Chennai
(Tamil Nadu).

UNDER EXECUTION:

 Paradip, Orissa, India: A 12-million tonne pellet plant at Paradip close to

the port
 Jodha-Barbil area, Orissa, India: A 12-million tonne iron ore
beneficiation plant
 Bhuj, Gujarat, India: Steel Service Centre
Minnesota, USA: A 6-million tonne pellet plant, a concentration plant and a
direct-reduced iron plant

Steel Products

Sheets

Blasted & Painted

Coils

Plates
 Steelmaking

Process of Steelmaking

 First of all the iron oxide is collected from Bailadila (MP).

 Then it is sent to the pelletisation plant at Vizag through a pipeline.
 Now this iron ore is converted into pellets over here, which is in the shape of
round balls.
 These pellets from Vizag are sent to the HBI plant at Hazira. Once it reaches
Hazira, it is converted into briquetted form.
 Then it is sent to the furnace, where the impurities are removed and we get
pure form of iron.
 Then it is sent to the electric are furnace. Here we add the necessary
additions so as to strengthen steel.
 Then it is sent to caster, here we get the rectangular slab shape of steel.
 Then it is sent to Hot Strip Mill, here the slab is rolled into hot rolled coil
form.
 From HSM the coil comes into Downstream (Service Center) where
dimensional correction is done.
 After that the coil is dispatched to Logistics Department, which will dispatch
the coil to customers.
 Ratio Analysis
Ratios 2009 2008 2007
Profitability Ratios
Gross Profit Ratio 27.41% 27.59% 31.40%
Operating Ratio 79.12% 78.52% 76.37%
Expense Ratio 14.94% 14.11% 16.88%
Net Profit Ratio 1.58% 3.99% 5.33%
Profitability Ratios based on Investments
Return on Capital
11.17% 15.33% 11.86%
Employed
Return on
Shareholders’ 3.88% 9.25% 9.77%
Funds
Return on Equity
3.80% 9.23% 10.21%
Share Capital
Earning Per Share 1.58 3.71 4.38
Liquidity Ratios
Current Ratio 1.68:1 1.16:1 1.26:1
Liquid Ratio 0.89:1 0.54:1 0.59:1
Acid-test Ratio 0.19:1 0.12:1 0.12:1
Capita Gearing Ratios
Proprietary Ratio 33.49% 33.60% 31.04%
Debt-Equity Ratio 1.56 1.35 1.59
Gearing Ratio 3.82% 3.82% 8.02%
Long-Term Funds
115% 102% 110%
to Fixed Assets
Turnover Ratios
Stock Turnover 6.12=6 Times 5.07=5 Times 4.67=5 Times
Debtors Ratio 12.85=13 Days 12.24=12 Days 24.36=24 Days
Debtors Turnover
28.08=28 Times 30.42=30 Times 15.21=15 Times
Ratio
Creditors Ratio 171.99=172 Days 162.75=163 Days 235.23=235 Days
Creditors Turnover
2.12=2 Times 2.24=2 Times 1.55=2 Times
Ratio
Total Assets
0.82 0.78 0.57
Turnover
 Gross Profit (07-08)

32.00%
31.00%
30.00%
29.00% 31.40%
28.00%
27.00%
26.00% 27.59%

25.00%
2007
2008

Gross Profit (08-09)

27.60%

27.55%

27.50%
27.59%
27.45%

27.40%

27.35% 27.41%

27.30%
2008
2009

Year Ratio Graph Shows that the Gross Profit Ratio of 2007 is high
2007 31.40 than other two years. It means that the Cost of Sales is
% lower for year 2007. And the Cost of Sales for the year
2008 27.59 2008 & 2009 are higher.
%
2009 27.41
%
 Operating Ratio (07-08)

79.00%
78.50%
78.00%
77.50%
77.00%
78.52%
76.50%
76.00% 76.37%
75.50%
75.00%

2007
2008

Operating Ratio (08-09)

79.20%
79.10%
79.00%
78.90%
78.80%
78.70%
79.12%
78.60%
78.50%
78.52%
78.40%
78.30%
78.20%

2008
2009

Year Ratio Graph Shows that the ratio for the year 2008 & 2009 are
2007 76.37% higher than 2007. Its shows that year-by-year the profit is
2008 78.52% getting lesser.
2009 79.12%
 Expenses Ratio (07-08)

17.00%
16.50%
16.00%
15.50%
15.00% 16.88%
14.50%
14.00% 14.11%
13.50%
13.00%
12.50%

2007
2008

Expenses Ratio (08-09)

15.00%
14.80%
14.60%
14.40%
14.20% 14.94%

14.00% 14.11%
13.80%
13.60%

2008
2009

Year Ratio In this graph we can see that the expense ratio is high for
2007 16.88% the year 2007. It shows that in the year 2007 the
2008 14.11% company had a high than last two year
2009 14.94%
 Net Profit (07-08)

6.00%

5.00%

4.00%

3.00% 5.33%

2.00% 3.99%
1.00%

0.00%

2007
2008

Net Profit (08-09)

4.00%
3.50%
3.00%
2.50% 3.99%
2.00%
1.50%
1.00%
1.58%
0.50%
0.00%

2008
2009

In 2007, the company gets a nice

profit. But in 2008 it was less, and
Year Ratio in 2009 it was much less. It shows
2007 5.33% that the net profit is declining and it
2008 3.99% indicates that administrative
2009 1.58%
expenses are slowly rising
 Return on Capital Employed (07-08)

16.00%
14.00%
12.00%
10.00%
8.00%
11.86% 15.33%
6.00%
4.00%
2.00%
0.00%

2007
2008

Return on Capital Employed (08-09)

16.00%
14.00%
12.00%
10.00%
15.33%
8.00%
6.00%
11.17%
4.00%
2.00%
0.00%

2008
2009

Year Ratio
2007 11.86% It shows that how much you get return of your capital
2008 15.33% employed. And 2008 is much better than 2007 &
2009 11.17% 2009. Means in 2008 company got a good return.
 Return on Shareholder's Funds (07-08)

9.80%
9.70%
9.60%
9.50%
9.40% 9.77%
9.30%
9.20%
9.10%
9.25%
9.00%
8.90%

2007
2008

Return on Shareholder's Funds (08-09)

10.00%
9.00%
8.00%
7.00%
6.00%
9.25%
5.00%
4.00%
3.00%
2.00% 3.88%
1.00%
0.00%

2008
2009

Year Ratio The profitability is decreased for the last year(2009),

2007 9.77% from the viewpoint of equity shareholders, which is not
2008 9.25% satisfying for shareholders. But 2007 & 2008 are
2009 3.88% constant and they are satisfying shareholders
 Return on Equity Share Capital (07-08)

10.40%
10.20%
10.00%
9.80%
9.60% 10.21%
9.40%
9.20%
9.00%
9.23%
8.80%
8.60%

2007
2008

Return on Equity Share Capital (08-09)

10.00%
9.00%
8.00%
7.00%
6.00%
9.23%
5.00%
4.00%
3.00%
2.00% 3.80%
1.00%
0.00%

2008
2009

Year Ratio
The profitability is decreased for the last year(2009),
2007 10.21%
from the viewpoint of equity shareholders, which is not
2008 9.23%
satisfying for shareholders. But 2007 & 2008 are
2009 3.80%
constant and they are satisfying shareholders
 Earning Per Share (07-08)

4.4

4.2

4
4.38
3.8

3.6

3.4 3.71

3.2

2007
2008

Earning Per Share (08-09)

4
3.5
3
2.5
3.71
2
1.5
1
1.58
0.5
0

2008
2009

Year EPS
In this graph we can see that the overall financial
2007 4.38
position of the company is not satisfactory and shows a
2008 3.71
considerable from its position of the last three years.
2009 1.58
 Current Ratio (07-08)

1.26
1.24
1.22
1.2 1.26
1.18
1.16
1.14
1.16
1.12
1.1

2007
2008

Current Ratio (08-09)

1.8
1.6
1.4
1.2
1
0.8 1.16 1.68
0.6
0.4
0.2
0

2008
2009

Year Ratio
Current ratio is nearly constant for last three year. And
2007 1.26
it indicates that the liquid position of the company is
2008 1.16
very satisfactory.
2009 1.68
 Liquid Ratio (07-08)

0.59
0.58
0.57
0.56 0.59
0.55
0.54
0.53
0.54
0.52
0.51

2007
2008

Liquid Ratio (08-09)

0.9
0.8
0.7
0.6
0.5
0.4 0.89
0.54
0.3
0.2
0.1
0

2008
2009

Year Ratio For the first two year the liquid ratio is constant, but in
2007 0.59 2009 it has resin. Therefore, the firm is able to pay its
2008 0.54 liquid liabilities immediately out of its cash and bank
2009 0.89 balance itself.
 Acid-Test Ratio (07-08)

0.12

0.1

0.08
0.12
0.06 0.12
0.04

0.02

2007
2008

Acid-Test Ratio (08-09)

0.2
0.18
0.16
0.14
0.12
0.1
0.19
0.08 0.12
0.06
0.04
0.02
0

2008
2009

Year Ratio For the first two year the acid-test ratio is same, but for
2007 0.12 2009 it has been raised a little bit. So nothing to do with
2008 0.12 it, it’s good that it’s not fallen down.
2009 0.19
 Proprietary Ratio (07-08)

34.00%
33.50%
33.00%
32.50%
32.00%
31.50% 33.60%
31.00%
31.04%
30.50%
30.00%
29.50%

2007
2008

Proprietary Ratio (08-09)

33.60%
33.58%
33.56%
33.54%
33.52% 33.60%
33.50%
33.48%
33.46%
33.49%
33.44%
33.42%

2008
2009

Year Ratio
2007 31.04%
2008 33.60%
2009 33.49%

The ratio indicates that how stronger is the financial position of the company. The
higher the ratio, the stronger is the financial position of business. 2008 & 2009 is
constant and 2007 is 2% down. Means the financial position of the company was
much better in last two years.
 Debt-Equity Ratio (07-08)

1.6
1.55
1.5
1.45
1.59
1.4
1.35
1.3
1.35
1.25
1.2

2007
2008

Debt-Equity Ratio (08-09)

1.6
1.55
1.5
1.45
1.4
1.56
1.35
1.35
1.3
1.25
1.2

2008
2009

Year Ratio Graph shows that the ratio of 2008 was down and that
2007 1.59 was good sign for 2008, because in that year the company
2008 1.35 have depended less upon the outside funds. But 2007 &
2009 1.56 2008 were up.
 Gearing Ratio (07-08)

9.00%
8.00%
7.00%
6.00%
5.00% 8.02%
4.00%
3.00%
2.00% 3.82%
1.00%
0.00%

2007
2008

Gearing Ratio (08-09)

4.00%
3.50%
3.00%
2.50%
3.82%
2.00%
3.82%
1.50%
1.00%
0.50%
0.00%

2008
2009

Year Ratio
This ratio shows the capital structure of the
2007 8.02%
company. In 2007, the ratio was at high, but in
2008 3.82%
2008 & 2009 they fell down.
2009 3.82%
 Long Term Fund to Fixed Assets (07-08)

110%

108%

106%
110%
104%

102%

100% 102%
98%

2007
2008

Long Term Fund to Fixed Assets (08-09)

115%

110%

105% 115%

100% 102%

95%

2008
2009

Year Ratio
This ratio should not be less than 100%. We can see
2007 110%
that the ratio for the last three years it is more than
2008 102%
100%. So, it indicates that the company is at the
2009 115% satisfactory position.
 Stock Turnover Ratio (07-08)

5
4.5
4
3.5
3 5
2.5 5
2
1.5
1
0.5
0

2007
2008

Stock Turnover Ratio (08-09)

6
5.8
5.6
5.4
5.2 6
5
5
4.8
4.6
4.4

2008
2009

Year Ratio The stock turnover for the year 2007 & 2008 are the
2007 5 same that means the stock turnover speed is constant.
2008 5 But in 2009 it raises to 1 times.
2009 6
 Debtors Ratio (07-08)

25

20

15 24

10

5 12

2007
2008

Debtors Ratio (08-09)

13
12.8
12.6
12.4
12.2 13
12
12
11.8
11.6
11.4

2008
2009

Year Ratio This ratio helps us to know that how many days
2007 24 are required to collect credit or the amount of
2008 12 credit sales. In 2007 the credit limit was give more
2009 13 as per the graph.
 Debtors Turnover Ratio (07-08)

30

25

20

15 30
10 15

2007
2008

Debtors Turnover Ratio (08-09)

30

29.5

29
30
28.5

28

27.5 28
27

2008
2009

Year Ratio In this ratio 2008 & 2009 are constant, and debtors
2007 15 turnover ratio for 2007 is too low than last two years,
2008 30 almost half than last two years.
2009 28
 Creditors Ratio (07-08)

250

200

150 235

100
163
50

2007
2008

Creditors Ratio (08-09)

172
170
168
166
172
164
162 163
160
158

2008
2009

Year Ratio
2007 235 This ratio helps us to know the average period within
which we make payment for credit purchase. Here 2007
2008 163
got more time to pay their credit purchase.
2009 172
 Creditors Turnover Ratio (07-08)

2
1.8
1.6
1.4
1.2 2
1 2
0.8
0.6
0.4
0.2
0

2007
2008

Creditors Turnover Ratio (08-09)

2
1.8
1.6
1.4
1.2 2
1 2
0.8
0.6
0.4
0.2
0

2008
2009

Year Ratio
2007 2 This ratio helps us to know the average period within
2008 2 which we make payment for credit purchase. Here
2009 2 2007,08&09 are constant.
 Total Assets Turnover (07-08)

0.8
0.7
0.6
0.5
0.4 0.78
0.57
0.3
0.2
0.1
0

2007
2008

Total Assets Turnover (08-09)

0.82
0.81
0.8
0.79
0.82
0.78
0.77 0.78

0.76
0.75

2008
2009

Year Ratio
2007 0.57 Total assets turnover are nearly the same for all the
2008 0.78 last three years.
2009 0.82
 Sources of Long – Term Finance

2007 2008 2009

Rs. In Crores
Shares:
Equity Share 1,140.48 1,140.48 1,140.48
Pref. Share 43.60 43.60 43.60
Debentures 18.41 4.18 -
Terms loans from Banks 4,451.42 3,686.87 4,031.55
Loan from Financial Institutions 666.09 541.41 695.57

Sources of Short – Term Finance

2007 2008 2009

Rs. In Crores
Loans
Secured Loans 6,533.32 5,383.11 6,317.62
Unsecured Loan 409.92 733.47 993.77
Discounting of Bill 48.69 59.66 14.29
Customer’s Advances 282.88 131.05 791.31
 Changes in Working Capital

Schedule of Changes in Working Capital

2007

2006 2007 Increase Decrease

Rs. In Crores Rs. In Crores
Current Assets
Interest accrued on
4.51 4.51 - -
Investment
Inventories 1,485.34 2,328.77 843.43 -
Sundry Debtors 540.16 546.85 6.69 -
Cash and Bank
725.79 432.86 - 292.93
Balance
Loans and Advances 1,117.71 1,084.42 - 33.29
3,873.51 4,397.41

Less: Current Liabilities

Liabilities 2,487.69 3,453.27 - 965.58
Provisions 9.07 35.56 - 26.49
2,496.76 3,488.83
Working Capital 1,376.75 908.58

Decrease in Working
468.17 468.17
Capital
1,376.75 1,376.75 1,318.29 1,318.29
 Schedule of Changes in Working Capital
2008

2007 2008 Increase Decrease

Rs. In Crores Rs. In Crores
Current Assets
Interest accrued on
4.51 4.51 - -
Investment
Inventories 2,328.77 2,108.11 - 220.66
Sundry Debtors 546.85 360.40 - 186.45
Cash and Bank
432.86 399.49 - 33.37
Balance
Loans and Advances 1,084.42 1062.68 - 21.74
4,397.41 3,935.19

Less: Current Liabilities

Liabilities 3,453.27 3,240.89 212.38 -
Provisions 35.56 136.32 - 100.76
3,488.83 3,377.21
Working Capital 908.58 557.98

Decrease in Working
350.60 350.60
Capital
908.58 908.58 562.98 562.98
 Schedule of Changes in Working Capital
2009

2008 2009 Increase Decrease

Rs. In Crores Rs. In Crores
Current Assets
Interest accrued on
4.51 - - 4.51
Investment
Inventories 2,108.11 2,157.52 49.41 -
Sundry Debtors 360.40 411.63 51.23 -
Cash and Bank
399.49 508.16 108.67 -
Balance
Other Current Assets - 121.62 121.62 -
Loans and Advances 1062.68 1,381.19 318.51 -
3,935.19 4,580.12

Less: Current Liabilities

Liabilities 3,240.89 2,545.82 695.07 -
Provisions 136.32 175.54 - 39.22
3,377.21 2,721.36
Working Capital 557.98 1,858.76

Increase in Working
1,300.78 1,300.78
Capital
1,858.76 1,858.76 1,344.51 1.344.51
 Investments(2007-2008)
2008 (Rs. In 2007 (Rs. In
Investments
Crores) Crores)
Long term Investments
Trade-Quoted
1,64,000 Equity Share of Rs. 10 each of
Remi Metal Guj. Ltd. 0.16 0.16
0.16 0.16
Trade-Unquoted
2,50,000 Equity Shares of Rs. 10 each
Frontline Roll Forms Pvt. Ltd. 0.25 0.25
21,70,00,000 Equity Shares of Rs 10 each
of Essar Power Limited 217 217
9,65,00,000 Equity Share of Rs 10 each of
Bhander Power Ltd. 100.19 100.19
14,69,42,500 (Prev. Yr. 9,81,80,500)
Equity Shares of Rs 10 each of Essar Steel
(Hazira) Ltd. 146.95 98.18
13,002 Equity Shares of Rs 10 Each of
Essar Bulk Terminal Ltd. 0.01 ---
1,15,70,000 0.01% Optionally Convertible
Redeemable Cumulative Pref. Share of Rs.
10 each of Essar Bulk Terminal Ltd. 11.57 ---
2,13,24,000 0.01% fully convertible
cumulative pref. shares of Rs. 10 each of
Essar Bulk Terminal Ltd. 21.32 ---
497.29 415.62
Other than Trade-Quoted
2,11,000 Equity shares of Rs. 10 each of
Essar Oil Ltd. 0.90 0.90
0.90 0.90
Other than Trade-Unquoted
12,26,300 fully paid 14% Secured
Redeemable Non Convertible Deb. of Rs.
105 each of Essar Oil Ltd. 12.88 12.88
Nil fully paid equity shares of Rs. 10 each @ @
of Essar Telecom Tower & Infrastructure
 Pvt. Ltd.(@Rs. 26,000)
50,000 equity shares of Rs. 10 each of
Steelscape Consultancy Pvt. Ltd. 0.05 ---
20 equity shares of Rs. 10 each of Essar
Commvision Ltd. (# Rs. 200) # #
12.93 12.88
Investment in Subsidiary Companies-
Unquoted
49,940 equity shares of Rs. 10 each of
Essar Steel (Jharkhand) Ltd. 0.05 0.05
49,940 equity shares of Rs. 10 each of
Essar Steel (Orissa) Ltd. 0.05 0.05
1 equity shares of AED 3 million of Essar
Steel Trading FZE Dubai 3.77 3.77
3.87 3.87
Current Investments
Quoted
54,076.21 units of LICMF floating rate
fund of Rs. 13.04 each 0.07 -
Unquoted
643 units of US 1964 Scheme of Rs. 10
each of Unit Trust of India (* Rs. 8,314) * *
0.07 -
515.22 432.37

After comparing year 2008 with 2007, we found that in 2008 the company had
invested their more money in Essar Steel(Hazira) Ltd., and they also bought 50,000
Equity Shares of 10 each of Steelscape Consultancy Pvt. Ltd., and 54,076.21 units
in LICMF.
 Investments(2008-2009)
2009 (Rs. In 2008 (Rs. In
Investments
Crores) Crores)
Long Term Investments
Trade-Quoted
1,64,000 Equity Shares of Rs. 10 each of
Remi Metal Guj. Ltd. 0.16 0.16
Trade-Unquoted
2,50,000 Equity Shares of Rs.10 each of
Frontline Roll Forms Pvt. Ltd. 0.25 0.25
21,70,00,000 Equity Shares of Rs. 4(Prev.
Yr. Rs. 10) each of Essar Power Ltd. 163.36 217
9,65,00,000 Equity Share of Rs 10 each of
Bhander Power Ltd. 100.19 100.19
41,91,52,500 (Prev. Yr. 14,69,42,500)
Equity Shares of Rs 10 each of Essar Steel
(Hazira) Ltd. 419.16 146.95
13,002 Equity Shares of Rs 10 Each of
Essar Bulk Terminal Ltd. 0.01 0.01
1,15,70,000 0.01% Optionally Convertible
Redeemable Cumulative Pref. Share of Rs.
10 each of Essar Bulk Terminal Ltd. 11.57 11.57
2,13,24,000 0.01% fully convertible
cumulative pref. shares of Rs. 10 each of
Essar Bulk Terminal Ltd. 21.32 21.32
715.86 497.29
Other than Trade-Quoted
2,11,000 Equity Shares of Rs. 10 each of
Essar Oil Ltd. 0.90 0.90
Other than Trade-Unquoted
12,26,300 fully paid 14% Secured
Redeemable Non Convertible of Rs. 105
each of Essar Oil Ltd. 12.88 12.88
86,80,001(Prev. Yr. Nill) Equity Shares of
Rs. 10 each of Teletech Investment Ltd. 53.64 ---
50,000 Equity Shares of Rs. 10 each of
Steelscape Consultancy Pvt. Ltd. 0.05 0.05
 20 Equity Shares of Rs. 10 each of Essar
Commvision Ltd. (# Rs. 200) # #
66.57 12.93
Trade Investment in Subsidiary Companies
Unquoted
49,940 equity shares of Rs. 10 each of
Essar Steel (Jharkhand) Ltd. 0.5 0.5
49,940 equity shares of Rs. 10 each of
Essar Steel (Orissa) Ltd. 0.5 0.5
1 equity shares of AED 6 million (Prev.
Yr. AED 3 million) of Essar Steel Trading
FZE Dubai 7.72 3.77
7.82 3.87
Current Investments
Quoted
Nil (Prev. Yr. 54,076.21) units of LICMF
floating rate fund of Rs. 13.04 each --- 0.07
Unquoted
643 Units of US 1964 Scheme of Rs. 10
each of Unit Trust of India (@Rs. 8,314) @ @
--- 0.07
791.31 515.22

After comparing 2009 with 2008, we assumed that in 2009 the company had
invested their more money in Essar Steel (Hazira), Teletech Investment Ltd., and
they also bought 1 Equity share of AED 6 Million, previous year(2008) it was of
AED 3 Million.
 Proprietary Funds Information
Proprietary Funds (2007-2008)

2008 (Rs. In 2007 (Rs.

Share Capital
Crores) In Crores)
Authorised
3,52,00,00,000 Equity Shares of Rs. 10 each 3,520.00 3,520.00
6,00,00,000 0.01% Cumulative Convertible Preference
Shares of Rs. 90 each 540.00 540.00
6,00,00,000 1% Cumulative Redeemable Preference
Shares of Rs. 90 each 540.00 540.00
10,00,00,000 10% Cumulative Redeemable Preference
Shares of Rs. 10 each 100.00 100.00
30,00,00,000 0.01% Cumulative Redeemable
Preference Shares of Rs. 10 each 300.00 300.00
6,50,00,000 7% Compulsory Convertible Preference
Shares of Rs. 350 each 2,275.00 2,275.00
7,275.00 7,275.00
Issued, Subscribed and Paid-up
1,13,98,10,888 (Previous year 1,13,98,10,888) Equity
Shares of Rs. 10 each 1,139.81 1,139.81
Add : 45,20,703 (Previous year 45,20,703) share
Forfeited 0.67 0.67
1,140.48 1,140.48
Nil (Prev. Yr. 20,29,24,832) 0.01% Cumulative
Redeemable Preference shares of Rs.10 each — 202.92
4,35,98,951 10% Cumulative Redeemable Preference
Shares 43.60 43.60
1,184.08 1,184.08
 2008 (Rs. In 2007 (Rs. In
Reserves and Surplus
Crores) Crores)
Capital Reserve 12.73 12.73
Securities Premium Account
Balance as per last Balance Sheet 1,490.05 91.77
Less: Premium on redemption of
Preference Shares (50.73) ---
Add: Additions during the year — 1,398.28
1,439.32 1,490.05
Debenture Redemption Reserve
Balance as per last Balance Sheet 15.50 15.00
Less: Transferred to Profit and
Loss Account (15.50) (7.25)
Add: Transferred from Profit and
Loss Account — 7.75
---- 15.50
Capital Redemption Reserve
Balance as per last Balance Sheet — ---
Add: Transferred from Profit and
Loss Account 202.92 ---
202.92 ---
General Reserve
Balance as per last Balance Sheet 118.38 118.38

Profit and Loss Account 1,673.90 1,444.29

3,447.25 3,080.95
 Proprietary Funds (2008-2009)

2009 (Rs. In 2008 (Rs. In

Share Capital
Crores) Crores)
Authorised
3,52,00,00,000 Equity Shares of Rs. 10 each 3,520.00 3,520.00
6,00,00,000 0.01% Cumulative Convertible 540.00 540.00
Preference Shares of Rs. 90 each
6,00,00,000 1% Cumulative Redeemable 540.00 540.00
Preference Shares of Rs. 90 each
10,00,00,000 10% Cumulative Redeemable 100.00 100.00
Preference Shares of Rs. 10 each
30,00,00,000 0.01% Cumulative Redeemable 300.00 300.00
Preference Shares of Rs. 10 each
6,50,00,000 7% Compulsory Convertible 2,275.00 2,275.00
Preference Shares of Rs. 350 each
7,275.00 7,275.00
Issued, Subscribed and Paid-up
1,13,98,10,888 (Previous Year 1,13,98,10,888) 1,139.81 1,139.81
Equity Shares of Rs. 10 each
Add: 45,20,703 (Previous Year 45,20,703) 0.67 0.67
shares Forfeited
1,140.48 1,140.48
4,35,98,951 (Previous Year 4,35,98,951) 10% 43.60 43.60
Cumulative Redeemable Preference
Shares (CRPS) of Rs. 10 each (Refer Note 28 of
schedule 25)
1,184.08 1,184.08
 2009 (Rs. In 2008 (Rs. In
Reserves and Surplus
Crores) Crores)
Capital Reserve 12.73 12.73
Securities Premium Account
Balance as per last Balance
Sheet 1,439.32 1,490.05
Less: Premium on redemption of
Preference Shares --- (50.73)
1,439.32 1,439.32
Debenture Redemption Reserve
Balance as per last Balance
Sheet --- 15.50
Less: Transferred to Profi t and
Loss Account --- (15.50)
--- ---
Capital Redemption Reserve
Balance as per last Balance
Sheet 202.92 ---
Add: Transferred from Profi t
and Loss Account --- 202.2
202.92 202.92
General Reserve
Balance as per last Balance
Sheet 118.38 118.38
Less: Exchange difference Gain
of earlier year capitalised to fi
xed assets (38.68) ---
Less: Exchange difference Gain
of earlier year transferred to the
Foreign Currency Monetary
Items Translation difference
account (2.19) ---
77.51 118.38
Profi t and Loss Account 1,859.10 1,673.90
3,591.58 3,447.25
 Essar Share Information
Essar Steel Stock Chart

ESSAR
60

51.8 51.8 51.8

50

40 38.9 40.15
34.55
30
25.6
20

12.6
10 9.45
6.65
2.95
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

ESSAR

Share Price for the Year 2000 to 2010

Yea 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
r
Rs. 12.6 6.65 2.95 9.45 25.6 38.9 40.15 34.55 51.8 51.8 51.8

Industry: Steel Highest Price: 78.20

Business Group: Essar Lowest Price: 2.10
Chairman: Mr. S N Ruia
BSE Code: 500627
Essar Steel took their
ISIN No.: INE127A01021 share out of BSE on
Market Lot: 1 the 13th-dec-2007
Face Value: 10.00
Book Closure: 28-09-2007
Essar Steel Share Holding Pattern

4%
13% 5%
37%

41%

Ruia's Public Institutions Others NRI OCBs

Share Holders
Ruia’s 36.69%
Public 40.58%
Institutions 13.28%
Others 3.98%
NRI OCB’s 5.47%