Financial Analysis of Steel Sector

PROJECT REPORT ON
FUNDAMENTAL ANALYSIS OF STEEL SECTOR
IN
ANAND RATHI SHARES AND STOCKS BROKERS LTD.
SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT OF
MASTER OF MANAGEMENT STUDIES
BY
ANKUSH TEJLAL HARINKHEDE
ROLL NO 202005
MMS-II (SEM III)
YEAR 2020- 2022
LALA LAJPATRAI INSTITUTE OF MANAGEMENT

MAHALAXMI, MUMBAI - 400034
SUMMER INTERNSHIP PROJECT
SUBMITTED BY
ANKUSH TEJLAL HARINKHEDE
ROLL NO – 2020005
MMS – II (SEM III)
YEAR 2020- 2022

Certificate
This is to certify that the project work titled “Fundamental Analysis of Steel Sector” is a
summer internship work carried out by Mr. Ankush Tejlal Harinkhede.
The project was completed for “Anand Rathi Shares And Stocks Brokers Ltd. “, under the
guidance of Mrs. Megha Bansod Madam.
I further certify that the said work has not been submitted in the part or in full, to any other
University.
Date: 5thJanuary, 2022
_____________________ __________________________
Prof. Vikas Sharma Dr V.B. Angadi
Project Mentor Director

DECLARATION
I, Mr. Ankush Tejlal Harinkhede, student of Lala Lajpatrai Institute of Management of MMS
II (Semester III) hereby declare that I have completed the summer internship project on
Fundamental Analysis of Steel sector with Anand Rathi Shares And Stocks Brokers Ltd. in the
Academic year 2020-2022. The information submitted is true & original to the best of my
knowledge.
Ankush Harinkhede
Name of the student

ACKNOWLEDGEMENT
At the outset of this project, I would like to express my profound thanks to a few people without
whose help, completion of this project would not have been possible.
First and foremost, I would like to express sincere thanks to Anand Rathi Shares And Stocks
Brokers Ltd. for giving me this opportunity to work with them.
The list is endless but to name a few special people, I would like to thank Mrs. Megha Bansod
for being extremely supportive and guiding me throughout my internship and giving me constant
motivation and expert advice.
I would also like to thank the entire Equity Research Department for providing me their precious
time and making this internship a successful learning experience.
I am very grateful to Dr.Angadi, Director of Lala Lajpat Rai Institute of Management, for giving
me the opportunity to do this project in Anand Rathi Shares And Stocks Brokers Ltd..
I would also like to thank Prof. Vikas Sharma for being an excellent mentor and helping me
whenever I approached him.
Last but not the least; I take pride in thanking my parents Mr. Tejlal Harinkhede & Mrs.
Pramila Harinkhede, siblings and friends for their much valued support.
EXECUTIVE SUMMARY
This project report is about the “fundamental analysis in Steel- Large Cap sector”. Fundamental
and Technical Analysis have been adopted as the methodologies to analyse the sector.
Valuation is done as a part of Fundamental Analysis and certain stocks are chosen as the “Value
Picks” and certain stocks as “Growth Picks”.
The Value Picks have been chosen as those stocks which are undervalued and have shown a
growth in Earnings per Share (EPS) on a Year on Year (YOY) basis.
Some overvalued stocks have been chosen as Growth Picks which have the P/E Growth ratio
(PEG Ratio) as positive and less than or equal to 1.
Further, using some financial ratios which are important to the Steel sector, the value picks and
growth picks have been ranked. According to the ranks, funds have been allocated to these
selected stocks.
Finally, a portfolio consisting of the selected Steel sector stocks is created and the Net Asset
Value (NAV) of the portfolio is calculated. Performance of the entire portfolio is analysed with
respect to the BSE index (which acts as a benchmark) on daily basis to see if the portfolio of the
Steel sector stocks beats the benchmark of BSE index. It will be helpful for investors who are
looking for an investment in Steel sector companies.
INDEX
SR. NO. CONTENT PAGE NO.
1 INTRODUCTION 1
2 OBJECTIVES OF STUDY 2
3 STOCK ANALYSIS 3
4 INDUSTRYANALYSIS 20
5 REVIEW OF LITRATURE 46
6 RESEARCH METHDOLOGY 49
7 DATA ANALYSIS 50
8 FINDINGS 62
9 SUGGESTIONS 64
10 CONCLUSION 65
11 BIBLIOGRAPHY 66
Fundamental Analysis Of Steel Sector
Introduction
This strategy is about dissecting the worth of a company’s stock value by profound
concentrating on of the fiscal information in the shares of the organization. The study
acknowledges those company’s income Furthermore expenses, stakes what's more liabilities,
management knowledge What's more industry flow. In other words it focuses on the business
and tries to work out what the stock price should be. Fundamental analysis is defined as the
cornerstone of the investment. The study fundamental analysis is too broad; however, it’s
tough to know where to start.
There are an unending number of speculation methodologies that are altogether different
from each other, yet all utilization the basics. The fundamental piece of this investigation
includes digging into the monetary articulations. Crucial investigation takes a gander at this
data to accomplish focus on an organization's future execution. Essential data that is
investigated can likewise incorporate an organization's monetary reports, and non-budgetary
data, for example, appraisals of the development of interest for items sold by the
organization, business examinations, and far reaching changes, changes in government
strategies and so on. Will An fundamentalist, he knows that On those business value of a
stock has a tendency should move towards its genuine worth or innate worth or is over those
present business sector price, the guru might buy the stock on he knows that those stock cost
might ascent Also move towards its inalienable worth or true esteem. What's more assuming
that the innate quality of a stock might have been beneath the business price, At that point the
mogul will offer those stock on account of he will knew that those stock cost is setting off
will fall and that will originate closer will its innate worth.
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Objectives of the study
1) To do fundamental analysis of a steel companies.
2) To study present scenario of steel industry.
3) To study the various elements of its financial position and performance.
4) To find whether to invest in the particular share of a company or not
To analyze the performance the Iron and Steel sector companies have been selected such as:
Tata Steel, SAIL, JSW Steel companies of their performance levels in the investor point of
view.
2
STOCK ANALYSIS
Indian Securities markets are touching new heights as it has surpassed 17,000 marks. More
and more investors are attracting towards equity investment and trading. But this is not
always the case that no one can assure you certain returns there is always essence of
uncertainty and risk in investment and that push investors on back seats. Sometimes it
becomes very difficult for investors to predict the share price of the particular company in
this very volatile market. It raises questions in investor’s mind that. At what price I should
buy? When to sell it... hold? But as trading and investments are increasing on the markets as
SEBI had taken stern steps to disclose important information to its Shareholder and investor.
So they can get as possible as information about the companies of which they are holding the
shares or going to buy and now-a-days brokers and some analyst providing some future
predictions of stocks price movements. So now investment has become somewhat easy for
investors. How they get it? This is done with a Stock Analysis getting the information about
company and its price movements on stock markets and try to predict how would behave on
stock markets. So, there is great importance of stock analysis among investors done brokers,
experts, analyst, etc.
3
Types of Stock Analysis:-
The methods used to analyze securities and make investment decisions fall into two very
broad categories: fundamental analysis and technical analysis
1. TECHNICAL ANALYSIS
2. FUNDAMENTAL ANALYSIS
Here we have selected a Fundamental analysis as subject of our project so we would do it in

detail with practical analysis of five companies. And we would get only some flavor of
technical analysis and then we would understand about fundamental analysis.
4
TECHNICAL ANALYSIS
What Is Technical Analysis?
“Technical analysis is a method of evaluating securities by analyzing the statistics generated

by market activity, such as past prices and volume. Technical analysts do not attempt to
measure a security's intrinsic value, but instead use charts and other tools to identify patterns
that can suggest future activity. Just as there are many investment styles on the fundamental
side, there are also many different types of technical traders. Some rely on chart patterns;
others use technical indicators and oscillators, and most use some combination of the two. In
any case, ‘technical analysts' exclusive use of historical price and volume data is what
separates them from their fundamental counterparts. Unlike fundamental analysts, technical
analysts don't care whether a stock is undervalued - the only thing that matters is a security's
past trading data and what information this data can provide about where the security might
move in the future.
The field of technical analysis is based on three assumptions:
1. The Market discounts everything.

2. Price moves in trends.
3. History tends to repeat itself.
1. The Market Discounts Everything

A major criticism of technical analysis is that it only considers price movement, ignoring the
fundamental factors of the company. However, technical analysis assumes that, at any given
time, a stock's price reflects everything that has or could affect the company - including
fundamental factors. Technical analysts believe that the company's fundamentals, along with
broader economic factors and market psychology, are all priced into the stock, removing the
need to actually consider these factors separately. This only leaves the analysis of price
movement, which technical theory views as a product of the supply and demand for a
particular stock in the market.
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2. Price Moves in Trends
In technical analysis, price movements are believed to follow trends. This means that after a
trend has been established, the future price movement is more likely to be in the same
direction as the trend than to be against it. Most technical trading strategies are based on this
assumption.
3. History Tends To Repeat Itself

Another important idea in technical analysis is that history tends to repeat itself, mainly in
terms of price movement. The repetitive nature of price movements is attributed to market
psychology; in other words, market participants tend to provide a consistent reaction to
similar market stimuli over time. Technical analysis uses chart patterns to analyze market
movements and understand trends. Although many of these charts have been used for more
than 100 years, they are still believed to be relevant because they illustrate patterns in price
movements that often repeat themselves.
Other Usage
Technical analysis can be used on any security with historical trading data. This includes
stocks, futures and commodities, fixed-income securities, forex, etc. In this tutorial, we'll
usually analyze stocks in our examples, but keep in mind that these concepts can be applied
to any type of security. In fact, technical analysis is more frequently associated with
commodities and forex, where the participants are predominantly traders. Now that you
understand the philosophy behind technical analysis, we'll get into explaining how it really
works. One of the best ways to understand what technical analysis is (and is not) is to
compare it to fundamental analysis. We'll do this in the next section.
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Strengths of Technical Analysis
1. Focus on Price
If the objective is to predict the future price, then it makes sense to focus on price
movements. Price movements usually precede fundamental developments. By focusing on
price action, technicians are automatically focusing on the future. The market is thought of as
a leading indicator and generally leads the economy by 6 to 9 months. To keep pace with the
market, it makes sense to look directly at the price movements. More often than not, change
is a subtle beast. Even though the market is prone to sudden kneejerk reactions, hints usually
develop before significant moves. A technician will refer to periods of accumulation as
evidence of an impending advance and periods of distribution as evidence of an impending
decline.
2. Supply, Demand, and Price Action

Many technicians use the open, high, low and close when analyzing the price action of a
security. There is information to be gleaned from each bit of information. Separately, these
will not be able to tell much. However, taken together, the open, high, low and close reflect
forces of supply and demand.
The annotated example above shows a stock that opened with a gap up. Before the open, the
number of buy orders exceeded the number of sell orders and the price was raised to attract
more sellers. Demand was brisk from the start. The intraday high reflects the strength of
demand (buyers). The intraday low reflects the availability of supply (sellers).The close
represents the final price agreed upon by the buyers and the sellers. In this case, the close is
well below the high and much closer to the low. This tells us that even though demand
(buyers) was strong during the day, supply (sellers) ultimately prevailed and forced the price
back down. Even after this selling pressure, the close remained above the open. By looking at
price action over an extended period of time, we can see the battle between supply and
demand unfold. In its most basic form, higher prices reflect increased demand and lower
prices reflect increased supply.
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3. Support/Resistance
Simple chart analysis can help identify support and resistance levels. These are usually
marked by periods of congestion (trading range) where the prices move within a confined
range for an extended period, telling us that the forces of supply and demand are deadlocked.
When prices move out of the trading range, it signals that either supply or demand has started
to get the upper hand. If prices move above the upper band of the trading range, then demand
is winning. If prices move below the lower band, then supply is winning.
4. Pictorial Price History

Even if you are a tried and true fundamental analyst, a price chart can offer plenty of valuable
information. The price chart is an easy to read historical account of a security's price
movement over a period of time. Charts are much easier to read than a table of numbers. On
most stock charts, volume bars are displayed at the bottom. With this historical picture, it is
easy to identify the following:
· Reactions prior to and after important events.
· Past and present volatility.
· Historical volume or trading levels.
· Relative strength of a stock versus the overall market.
· Assist with Entry Point
Technical analysis can help with timing a proper entry point. Some analysts use fundamental
analysis to decide what to buy and technical analysis to decide when to buy. It is no secret
that timing can play an important role in performance. Technical analysis can help spot
demand (support) and supply (resistance) levels as well as breakouts. Simply waiting for a
breakout above resistance or buying near support levels can improve returns.
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Weaknesses of Technical Analysis
1. Analyst Bias
Just as with fundamental analysis, technical analysis is subjective and our personal biases can
be reflected in the analysis. It is important to be aware of these biases when analyzing a chart.
If the analyst is a perpetual bull, then a bullish bias will overshadow the analysis. On the
other hand, if the analyst is a disgruntled eternal bear, then the analysis will probably have a
bearish tilt.
2. Open to Interpretation
Furthering the bias argument is the fact that technical analysis is open to interpretation. Even
though there are standards, many times two technicians will look at the same chart and paint
two different scenarios or see different patterns. Both will be able to come up with logical
support and resistance levels as well as key breaks to justify their position. While this can be
frustrating, it should be pointed out that technical analysis is more like an art than a science,
somewhat like economics. Is the cup half-empty or half-full? It is in the eye of the beholder.
3. Too Late
Technical analysis has been criticized for being too late. By the time the trend is identified, a
substantial portion of the move has already taken place. After such a large move, the reward
to risk ratio is not great. Lateness is a particular criticism of Dow theory.
4. Always Another Level

Even after a new trend has been identified, there is always another "important" level close at
hand. Technicians have been accused of sitting on the fence and never taking an unqualified
stance. Even if they are bullish, there is always some indicator or some level that will qualify
their opinion.
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5. Trader's Remorse
Not all technical signals and patterns work. When you begin to study technical analysis, you
will come across an array of patterns and indicators with rules to match. For instance: A sell
signal is given when the neckline of a head and shoulders pattern is broken. Even though this
is a rule, it is not steadfast and can be subject to other factors such as volume and momentum.
In that same vein, what works for one particular stock may not work for another. A 50-day
moving average may work great to identify support and resistance for IBM, but a 70-day
moving average may work better for Yahoo.
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FUNDAMENTAL ANALYSIS
Meaning:-
Fundamental analysis is the examination of the underlying forces that affect the well being of
the economy, industry groups, and companies. As with most analysis, the goal is to derive a
forecast and profit from future price movements.
1. At the company level, fundamental analysis may involve examination of financial data,
management, business concept and competition.
2. At the industry level, there might be an examination of supply and demand forces for the
products offered.
3. For the national economy, fundamental analysis might focus on economic data to assess
the present and future growth of the economy.
To forecast future stock prices, fundamental analysis combines economic, industry, and
company analysis to derive a stock's current fair value and forecast future value. If fair value
is not equal to the current stock price, fundamental analysts believe that the stock is either
over or under valued and the market price will ultimately gravitate towards fair value.
Fundamentalists do not heed the advice of the random walkers and believe that markets are
weak-form efficient. By believing that prices do not accurately reflect all available
information, fundamental analysts look to capitalize on perceived price discrepancies.
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Overview:-
“Fundamental analysis is the study of economic, industry, and company conditions in an
effort to determine the value of a company's stock. Fundamental analysis typically focuses on
key statistics in a company's financial statements to determine if the stock price is correctly
valued.”
The main principle of fundamental analysis is to find profitable companies to invest in by
comparing revenues, sales, management, etc. Fundamentals include earnings report,
dividends, sales, inventories, profit margins, P/E ratio, market share , etc. Those looking to
invest in a company will be the most likely to use fundamental analysis. This is because the
research is used to not just look at the value of the company, but to look at the company
itself. This includes the results of its finances and its potential to grow. The fundamentals can
give a better picture the entire company, not just a snapshot. This means that analysis is used
to look at the long term of a company not just the short term. The basic idea is if you put a
rupee into the business (in the form of buying the stock) how much of a return can you
expect. How much yield you will likely see and / or how much growth you will experience
based on the operation, markets, competitors and costs of the business. Obviously, not all
aspects of these fundamentals can be quantified.
Fundamentals are associated with the economic health of a company, measured in terms of
revenues, earnings, assets, liabilities, Return on Equity (ROE), Return on Assets (ROA),
Return on Investments (ROI), growth prospects and cash flows, etc. The fundamentals tell
you about a company. You can say a company is having robust fundamentals if it is growing
at a nice pace, generating a profit, has limited debts and abundant cash. The analysis of a
company's fundamentals involves getting deep into its financials, rather than day-to-day
movement in its share price. Equity researchers normally do fundamental analysis in order to
calculate the intrinsic value of a company's stock. If a company's stock is trading above the
intrinsic value or fair value, then the stock is overvalued. If a company's stock is trading
below the intrinsic value, then the stock is undervalued. However, if you watch the stock
markets very closely, the share price of most companies never matches the fair value. Often,
day traders and investors who would prefer short term investment options invest in those
stocks, regardless of the companies' long term growth prospects. However, long term
investors generally prefer to invest in companies with robust fundamentals and ignore near-
term share price movements.
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Objectives:-
There are several possible objectives:
 Analysis of fundamental to acquire depth knowledge of the Steel Sector which I am
studying.
 To find out how the judgment is taken by the analyst on the basis of fundamental analysis
of the company.
 To establish link between expected share price with the projected company’s financial
performance.
 To study the demand of Steel sector particularly land-building, commercial purposes and
Real Estate.
 To calculate a company's credit risk.
 To make projection on its business performance and in the bad condition to improve the
performance of company.
 To evaluate its management and make internal business decisions,
 To make the company's stock valuation and predict its probable price evolution.
 Investors may use fundamental analysis to determine future growth rates for buying high
priced growth stocks
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Approaches of Fundamental Analysis:
Investors can use either a top-down or bottom-up approach:

 The top-down investor starts his analysis with global economics, including both
international and national economic indicators, such as GDP growth rates, inflation,
interest rates, exchange rates, productivity, and energy prices. He narrows his search
down to regional/industry analysis of total sales, price levels, the effects of competing
products, foreign competition, and entry or exit from the industry. Only then does he
narrow his search to the best business in that area.
 The bottom-up investor starts with specific businesses, regardless of their industry/region.
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Strengths of Fundamental Analysis
1. Long-term Trends
Fundamental analysis is good for long-term investments based on long-term trends, very
long-term. The ability to identify and predict long-term economic, demographic,
technological or consumer trends can benefit patient investors who pick the right industry
groups or companies.
2. Value Spotting
Sound fundamental analysis will help identify companies that represent a good value. Some
of the most legendary investors think long-term and value. Graham and Dodd, Warren
Buffett and John Neff are seen as the champions of value investing. Fundamental analysis
can help uncover companies with valuable assets, a strong balance sheet, stable earnings, and
staying power.
3. Business Acumen
One of the most obvious, but less tangible, rewards of fundamental analysis is the
development of a thorough understanding of the business. After such painstaking research
and analysis, an investor will be familiar with the key revenue and profit drivers behind a
company. Earnings and earnings expectations can be potent drivers of equity prices. Even
some technicians will agree to that. A good understanding can help investors avoid
companies that are prone to shortfalls and identify those that continue to deliver. In addition
to understanding the business, fundamental analysis allows investors to develop an
understanding of the key value drivers and companies within an industry. A stock's price is
heavily influenced by its industry group. By studying these groups, investors can better
position themselves to identify opportunities that are high-risk (tech), low-risk (utilities),
growth oriented (computer), value driven (oil), non-cyclical (consumer staples), cyclical
(transportation) or income-oriented (high yield).
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4. Knowing Who's Who

Stocks move as a group. By understanding a company's business, investors can better
position themselves to categorize stocks within their relevant industry group. Business can
change rapidly and with it the revenue mix of a company. This happened to many of the pure
Internet retailers, which were not really Internet companies, but plain retailers. Knowing a
company's business and being able to place it in a group can make a huge difference in
relative valuations.
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Weaknesses of Fundamental Analysis

1. Time Constraints
Fundamental analysis may offer excellent insights, but it can be extraordinarily time
consuming. Time-consuming models often produce valuations that are contradictory to the
current price prevailing on Wall Street. When this happens, the analyst basically claims that
the whole street has got it wrong. This is not to say that there are not misunderstood
companies out there, but it is quite brash to imply that the market price, and hence Wall
Street, is wrong.
2. Industry/Company Specific
Valuation techniques vary depending on the industry group and specifics of each company.
For this reason, a different technique and model is required for different industries and
different companies. This can get quite time-consuming, which can limit the amount of
research that can be performed. A subscription-based model may work great for an Internet
Service Provider (ISP), but is not likely to be the best model to value an oil company.
3. Subjectivity
Fair value is based on assumptions. Any changes to growth or multiplier assumptions can
greatly alter the ultimate valuation. Fundamental analysts are generally aware of this and use
sensitivity analysis to present a base-case valuation, a best-case valuation and a worst-case
valuation. However, even on a worst-case valuation, most models are almost always bullish,
the only question is how much so.
4. Time Constraints
Fundamental analysis may offer excellent insights, but it can be extraordinarily time
consuming. Time-consuming models often produce valuations that are contradictory to the
current price prevailing on Wall Street. When this happens, the analyst basically claims that
the whole street has got it wrong. This is not to say that there are not misunderstood
companies out there, but it is quite brash to imply that the market price, and hence Wall
Street, is wrong.
5. Industry/Company Specific
Valuation techniques vary depending on the industry group and specifics of each company.
For this reason, a different technique and model is required for different industries and
different companies. This can get quite time-consuming, which can limit the amount of
research that can be performed. A subscription-based model may work great for an Internet
Service Provider (ISP), but is not likely to be the best model to value an oil company.
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Steps to fundamental Analysis:

The most common way that fundamental analysis is done in is in three steps:
1. Economic Analysis:-
The first step to this type of analysis includes looking at the macroeconomic situation. This
includes GDP, growth rates, inflation, interest rates, exchange rates, productivity and energy
prices.
2. Industry Analysis: -
The next step taken in analysis in this category is looking at the industry as a whole. This
includes total sales, price levels, competition and their effects, foreign competition as well as
any entrances or exits from the industry.
3. Company Analysis:-
Last in this process of studying the fundamentals includes looking at the company
individually. This includes looking at unit sales, prices, new products, earnings and any
chance of debt or equity occurring.
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Fundamental vs. Technical Analysis

Technical analysis and fundamental analysis are the two main schools of thought in the
financial markets. As we've mentioned, technical analysis looks at the price movement of a
security and uses this data to predict its future price movements. Fundamental analysis, on the
other hand, looks at economic factors, known as fundamentals. Let's get into the details of
how these two approaches differ, the criticisms against technical analysis and how technical
and fundamental analysis can be used together to analyze securities.
The Differences
1. Charts vs. Financial Statements
At the most basic level, a technical analyst approaches a security from the charts, while a
fundamental analyst starts with the financial statements.
2. Time Horizon
Fundamental analysis takes a relatively long-term approach to analyzing the market
compared to technical analysis. While technical analysis can be used on a timeframe of
weeks, days or even minutes, fundamental analysis often looks at data over a number of
years.
3. Trading Versus Investing
Not only is technical analysis more short term in nature that fundamental analysis, but the
goals of a purchase (or sale) of a stock are usually different for each approach. In general,
technical analysis is used for a trade, whereas fundamental analysis is used to make an
investment. Investors buy assets they believe can increase in value, while traders buy assets
they believe they can sell to somebody else at a greater price. The line between a trade and an
investment can be blurry, but it does characterize a difference between the two schools.
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Industry Analysis
The purpose of industry analysis is to review prevailing conditions within specific industry
and its segments. The company's industry obviously influences the outlook for the company.
Even the best stocks can post mediocre returns if they are in an industry that is struggling.
“It is often said that a weak stock in a strong industry is preferable to a strong stock in a
weak industry.”
To assess the industry group potential, an investor would want to consider the overall growth
rate, market size, and its importance to economy. While the individual company is still
important, its industry group is likely to exert as much as, or more, influence on the stock
price. When stock move the usually move as groups; there are very few lone guns out there.
An understanding of the industry sector involved, including the maturity of the sector and any
cyclical effects that the overall economies have on it, is also necessary.
The followings are some important factors which should be considered in

Fundamental Analysis
 Growth: A growing industry gives room for profitability.
 Profitability: Average profitability of the industry should be attractive.
 Demand-Supply: the wider demand supply gap, the better is the industry’s fortune in the
future
 Entry barrier
 Competition and Market share:
 Technology trends
 Government Policy
 Capacity Utilization
 Bargaining power of buyers
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BRIEF HISTORY
The history of steel-making in India can be traced back to 400 BC when the Greek emperors
used to recruit Indian archers for their army who used arrows tipped with steel. Many more
evidences are there of Indians’ perfect knowledge of steel-making long before the advent of
Christ. Archaeological finds in Mesopotamia and Egypt testify to the fact that use of iron and
steel was known to mankind for more than six thousand years and that some of the best
products were made in India. Among the widely-known relics is the Iron Pillar near Qutab
Minar in Delhi. The pillar, built between 350 and 380 AD, did not rust so far -----an
engineering marvel that baffles the scientists even today. Yet another engineering feat is the
famous Sun Temple at Konark in Orissa, built around 1200AD, where steel structurals were
used for the first time in the world.
These were the halcyon days when India flourished in all directions and when its prosperity
was a matter of envy for the foreigners. But as ill luck would have it, India’s prosperity gave
way to poverty after the advent of the foreign rule. India’s indigenous industry languished
because of a deliberate policy of the colonial rulers to make the country only a supplier of
raw materials. Steel Role plays a vital role in the development of any modern economy. The
per capita consumption of steel is generally accepted as a yardstick to measure the level of
socioeconomic development and living standards of the people. As such, no developing
country can afford to ignore the steel industry.
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BEGINNINGS
The first notable attempt to revive steel industry in India was made in 1874 when the Bengal
Iron Works (BIW) came into being at Kulti, near Asansol in West Bengal. However, forty-
four years before that, in 1830 to be precise, a foreigner, named Joshua Marshall Heath, had
set up a small plant at Porto Novo on Madras Coast. Heath produced in his plant pig iron at
the rate of forty tonnes a week. His method of iron-making needed approximately four tonnes
of charcoal to produce one ton of low quality pig iron which proved to be too expensive for
Heath to carry on in the face of stiff competition from the
British steel industry. The BIW made considerable improvement in the process of iron and
steel making. It used coke as the fuel instead of charcoal. But the plant fell sick as the source
of funds dried up. It was taken over by the Bengal Government and was rechristened as
Barakar Iron Works. In 1889 the Bengal Iron and Steel Company acquired the plant and by
the turn of the century the Kulti plant became a success story. It produced 40,000 tons of pig
iron in 1900 and continued to produce the metal until it was taken over by Indian Iron and
Steel Company (IISCO) in 1936. For modern India’s iron and steel industry August 27, 1907
was a red-letter day when the Tata Iron and Steel Company (TISCO) was formed as a
Swadeshi venture to produce 120,000 tons of pig iron. The TISCO plant at Sakchi (renamed
Jamshedpur) in Bihar, started pig iron production in December 1908 and rolled out its first
steel the following year. TISCO had expanded its production capacity to one million tons
ingot by the time the country achieved freedom. The Tata’s, as Gandhiji said, represented the
"spirit of adventure" and Jamsetji Tata, in the words of Jawaharlal Nehru," laid the
foundation of heavy industries in India". The British rulers disfavored this and other attempts
to start indigenous industry. It was chiefly with the help of American experts that the Tata’s
started their industry. Its childhood was precarious but the war of 1914-18 gave it a fillip.
Again it languished and was in danger of passing into the hands of British debenture holders.
But nationalist pressure saved it. In 1918, soon after the war, Indian Iron and Steel Company
(IISCO) was formed. The then Mysore government also decided to start an iron works at
Bhadravati. While IISCO started producing pig iron at Burnpur in 1922, the Mysore Iron and
Steel Works took about 18 years to start its plant. Meanwhile, the Bengal Iron Works went
into liquidation and merged with IISCO. The Steel Corporationof Bengal (SCOB) formed in
1937, started making steel in its Asansol plant. Later in
1953, SCOB merged with IISCO. Prime Minister Nehru firmly believed that "no country can
be politically and economically independent unless it is highly industrialized and has
22
developed its resources to the utmost". Nehru’s ideas about India’s development were
broadly incorporated in free India’s first Industrial Policy Resolution adopted by the
Constituent Assembly in 1948. The resolution officially accepted the principle of mixed
economy.
Industries were divided into four categories. In the first category were strategic industries
which were made the monopoly of the Government. In the second category were six
industries which included, among others, coal, iron and steel.
It was decided that new units would be started exclusively by the government in the public
sector without disturbing the existing ones in the private sector. Eighteen industries, including
heavy castings and forings of iron and steel, ferro alloys and tool steel were covered by the
third category and the rest of the industries by the fourth. In sum, the government committed
itself to the development of basic steel industry while the private sector was to benefit
through the establishment of downstream units which would use pig iron, billets, blooms and
flat products to be made by the public sector steel plants.
In keeping with the spirit of the resolution the Government decided to start a chain of steel
plants all over the country in the public sector. The first such plant was set up at Rourkela in
Orissa. The second came up at Bhilai in Madhya Pradesh. It was followed by a third at
Durgapur in West Bengal. Each of these three plants had an initial production capacity of one
million tonne ingot. Durgapur was followed by a steel plant at Bokaro in Bihar. The onward
march of Indian steel did not stop at Bokaro. The fifth public sector steel plant was set up at
Visakhapatnam in Andhra Pradesh. As a matter of fact, the country was dotted with steel and
steel-related plants in public and private sectors, like Alloy Steel Plant, Salem Steel Plant,
Kalinga Iron Works, Malavika Steel Ltd., Jindal Vijaynagar Steel Ltd., to name only a few.
About the same time TISCO launched its two million-tone expansion programme. The
Government’s Industrial Policy had undergone changes once in 1956 and then in 1991. The
resolution modified in 1956 brought changes in the category pattern and listed more
industries for the public sector than did the earlier one, though it was not harsher towards the
private enterprise. In the new industrial policy announced in 1991 iron and steel industry,
among others, was included in the list of industries reserved for the public sector and
exempted from the provision of compulsory licensing. With effect from May 24, 1992 iron
and steel industry was included in the list of ‘high priority’ industry for automatic approval
for foreign equity up to 51% (now 74%). Export-import regime for iron and steel has also
undergone major liberalization. The freight equalization scheme was withdrawn removing
freight disadvantage to States located near steel plants.
23
The new policy has already borne fruit. The finished steel production in India has gone up
from mere 1.1 million tons in 1951 to 23.37 million tons in 1997-98 despite overall economic
slow-down in the country. It has been estimated that the demand for finished steel in 2001-02
would touch 38.68 million tones and the projected availability of 38.01 tones is almost
adequate to meet the domestic demand along with export of six million tons. Similarly, by
2006-07, the final year of the tenth plan, the demand for finished steel would be around 48.80
million tones, providing adequate surplus for meeting the projected export potential of nine
million tones. However, there is hardly any scope for complacence over the fact that India
continues to be the 10th largest steel producer in the world. In 1997 India’s per capita steel
consumption was only 22 kg which was much below the world average of about 126 kgs.
Even if the domestic demand grows up from 34.5 million tons to 100 million tons in 2025 the
industry is unlikely to catch up with the production in the developed countries. The
redeeming feature is the cost competitiveness of Indian steel in the global market. According
to World Steel Dynamics, the total cost of steel production in the USA is $510 per metric
tons while in Japan it is $550, in Germany $557, in Canada $493 and in India it is $497. This
is because of high material cost due to high excise and import duties. Reduction of cost on
these accounts will make Indian steel more competitive in the world market. Indian steel can
reasonably expect a good market in the neighboring countries now that the Asian economy is
looking up. In conclusion, it can be said with a certain measure of confidence that India’s iron
and steel industry which had a glorious past and has an uncertain present may now look
forward to a bright future.
24
India’s steel industry: Journey so far
25
AN OVERVIEW OF STEEL SECTOR

Global Scenario
In 2020 World Crude Steel output at 1877.5 million metric ton. China remained the world's
largest Crude Steel producer in 2020 also (1877.5 million metric ton) followed by European
Union (139.2 million metric tons) and India (100.3 million metric tons).
Global Collaboration
From its inception, the Indian steel industry has had business tiescwith foreign countries. The
Durgapur, Rourkela and Bhilai steelcplants were established in collaboration with Britain,
Germany and Russia respectively. Indian companies have signed various MoUs with other
countries over the years, especially in the area of technology, to form joint ventures (JVs) in
steel production. From its inception, the Indian steel industry has had business ties with
foreign countries. The Durgapur, Rourkela and Bhilai steel plants were established in
collaboration with Britain, Germany and Russia respectively. Indian companies have signed
various MoUs with other countries over the years, especially in the area of technology, to
form joint ventures (JVs) in steel production.
From its inception, the Indian steel industry has had business ties with foreign countries. The
Durgapur, Rourkela and Bhilai steel plants were established in collaboration with Britain,
Germany and Russia respectively. Indian companies have signed various MoUs with other
countries over the years, especially in the area of technology, to form joint ventures (JVs) in
steel production. From its inception, the Indian steel industry has had business ties with
foreign countries. The Durgapur, Rourkela and Bhilai steel plants were established in
collaboration with Britain, Germany and Russia respectively. Indian companies have signed
various MoUs with other countries over the years, especially in the area of technology, to
form joint ventures (JVs) in steel production.
26
Market Scenario
 After liberalization, there have been no shortages of iron and steel materials in the
country.
 Apparent consumption of finished (carbon) steel increased from 14.84 Million Tons in
1991-92 to 100.3 million tons in 2019-20.
 Steel industry that was facing a recession for some time has staged a turnaround since the
beginning of 2002.
 Efforts are being made to boost demand.
 China has been an important export destination for Indian steel.
 The steel industry is buoyant due to strong growth in demand particularly by the demand
for steel in China.
The boom in the steel sector is being driven by growth in its user industries --
Construction and Automobiles

Giving a huge fillip to the infrastructure sector, the Indian government has announced plans
to spend at least US$ 1.4 trillion to upgrade roads, airports and ports by 2030. The heightened
activity in sectors such as roads, ports and sea-bridges is attracting international attention. It
has drawn at least two dozen foreign giants in civil engineering, construction and
infrastructure consultancy services to the country. During the last six months, around 20 civil
engineering and construction companies have entered India or have stepped up their activity,
while some big names in the infrastructure consultancy sector are ramping up their operations
here. . Steel producers also hope the steel industry will become another sunshine industry,
fuelled by a rapid rise in the demand for washing machines, fridges, TV sets and other
consumer items using steel as a major ingredient.
Similarly, the automobile sector has been abuzz with activity. The total number of passenger
vehicles manufactured during 2019-20 was 21768502 units.
27
Production
28
 Steel industry was decontrolled in 1991 & 1992 respectively.

 Today, India is the 3rd largest crude steel producer of steel in the world.
 In 2019-20, production of Finished (Carbon) Steel was 100.3 million metric tons.
 Production of Pig Iron in 2019-20 was 4.5 Million Tons.
 Last 4 year's production of pig iron and finished (carbon) steel is given below:
Table 1
(in million metric tons)

Category 2016-17 2017-18 2018-19 2019-20
Pig Iron 6.89 6.25 5.89 4.5
Finished 101.455
Carbon Steel 109.25 111.34 99.57
Demand - Availability Projection

 Demand – Availability of iron and steel in the country is projected by Ministry of Steel
annually.
 Gaps in Availability are met mostly through imports.
 Interface with consumers by way of a Steel Consumer Council exists, which is conducted
on regular basis.
 Interface helps in redressing availability problems, complaints related to quality.
29
Pricing & Distribution

 Price regulation of iron & steel was abolished on 16/01/1992.
 Distribution controls on iron & steel removed except 5 priority sectors, viz. Defense,
Railways, Small Scale Industries Corporations, Exporters of Engineering Goods and
North Eastern Region.
 Allocation to priority sectors is made by Ministry of Steel.
 Government has no control over prices of iron & steel.
 Open market prices are generally on rise.
 Price increases of late have taken place mostly in long products than flat products.
30
World crude steel production (MT)
Production
1800
1690
1600 1627
1560
1400
1200 1251 1239
1000 970
800 799 848 Production
734 734 725
600 Linear (Production)
400
200
0
Fig1
31
Indian crude steel production (MT)
Production
120
111
100 103
98
80 78
66
60
51 Production
40 39
25 27
20 17 20
Fig 2
32
Imports of Iron & Steel

 Iron & Steel are freely importable as per the extant policy.
 Last four years import of Finished (Carbon) Steel is given below:-
Table 2:
Year Qty.(million metric tons)
2017 7.828
2018 7.295
2019 7.440
2020 4.463
33
Exports of Iron & Steel

 Iron & Steel are freely exportable.
 Advance Licensing Scheme allows duty free import of raw materials for exports.
 Exports of finished carbon steel and during the last four years and the current year is as :
Table 3:
Year Qty.(million metric tons)
2017 10.871
2018 6.692
2019 8.205
2020 10.150
34
Contribution of Steel in GDP of India

Steel has contributed immensely towards India’s economic growth. This is evident from the
similar growth patterns of India’s GDP and steel production in the country, which also
highlights the economy’s dependence on steel. National consumption of finished steel rose
from 6.5 MT in 1968 to 98.71 MT in 2018, while GDP (at constant price, 2010) grew from
USD 0.25 trillion in 1968 to USD 2.7 trillion today
Comparison of GDP growth rates and crude steel production rates (1968–2018)
Fig 3
Today, the steel industry contributes slightly more than 2% to the GDP of the country. This
percentage accounts for direct contribution. The indirect contribution of steel is much larger,
owing to the dependence of other sectors. The steel industry employs nearly half a million
people directly and two million people indirectly. The output effect of steel on Indian
economy is approximately 1.4x with an employment multiplier of 6.8x. As per the World
Steel Association, globally, for every two jobs created in the steel industry, 13 more jobs are
created across the supply chain.
India is currently the world’s second largest producer of crude steel, with 110.92 MT
produced in 2018–19 (up from 103.13 MT in 2017–18). The country has strengthened its
domestic steel industry considerably over the last decade. It became anet exporter in FY
2016–17, with exports of total finished steel reaching 8.24 MT vis-à-vis imports of 7.22 MT
in the same year. It maintained this position with a positive trade balance of 2.138 MT in the
35
next year too. But with rising protectionism and an ongoing trade war (among other factors),
India has seen a steep decrease of 33.9% in its exports, clocking only 6.36 MT in 2018–19. In
contrast, imports saw an increase of 4.7% and stood at 7.83 MT.As a result, the country once
again became a net importer in the last financial year.3 Though small in scale, a positive trade
balance from finished steel production was remarkable for a country like India, which missed
the opportunity to build a mature secondary sector in its hurry to strengthen the
tertiary/services sector. However, the current global economic downturn and structural
changes in many related industries have arrested this upward trend, at least for now.
Growth prospects of the Indian steel industry

On the back of sustained domestic demand, India’s steel industry witnessed robust growth in
the last 10–12 years. Since 2008, production has gone up by 75% while domestic steel
demand has grown by around 80%. Steel-making capacity has also increased in tandem, and
the growth has been fairly organic. The Indian government has always supported the steel
industry and introduced the National Steel Policy in 2017, which envisions the growth
trajectory of the Indian steel industry till 2030–31. The broad contours of the policy are as
follows:
• Steel-making capacity is expected to reach 300 million tons per annum by 2030–31.
• Crude steel production is expected to reach 255 million tones by 2030–31, at 85% capacity
utilisation.
• Production of finished steel to reach 230 million tons, assuming a yield loss of 10% for
conversion of crude steel to finished steel – that is, a conversion ratio of 90%.
• With 24 million tons of net exports, consumption is expected to reach 206 million tons by
2030–31.
• As a result, per capita steel consumption is anticipated to rise to 160 kg.
• An additional investment of INR 10 lakh crore is envisaged. While the National Steel
Policy, 2017, is a vision document of the Indian government, it nevertheless emphasises the
growth potential of the Indian steel industry.
As per data from the Joint Plant Committee, at the end of 2018–19, India produced 110.9
million tons of crude steel. In order to reach 255 million tons of crude steel production by
2030–31, production needs to grow at a CAGR of about 7.2%. This is easily achievable given
that in 2018–19, crude steel production grew by 7.6%. Therefore, the growth potential that
the government has charted out in the National Steel Policy, 2017, is in sync with the
36
industry’s growth trajectory. Naturally, the next question that arises is where the demand that
can sustain the production levels envisaged in the policy will come from. This requires a
sectorial approach. The approximate sector-wise demand for steel is shown below:
Deemand
6%
15% Construction
Consumer Durables
3% Automobiles
RailWays
9%
62% Capital Goods
5% Indtemediate Products
Fig 4
Construction sector: The sector includes physical infrastructure (excluding railways) and
real estate, and contributes roughly 62% of India’s steel use or steel demand. The sector grew
by 8.6% in 2018. Although growth is expected to slow down to 5.4% in 2019, the sector is
again expected to pick up in 2020 and beyond, growing by around 7% till 2024.12
The construction sector was estimated to be worth around USD 500 billion in 2018. India will
become the world’s third largest construction market by 2025. The infrastructure sector,
currently a huge focus area of the government, will drive growth in this sector as well as
overall steel demand. The real estate sector is growing at a CAGR of over 4% and the
affordable housing and smart cities initiatives will drive growth in this sub-segment. A few of
the major government initiatives, both ongoing or planned, are as follows:
• Road connectivity through the Bharatmala programme envisages the development of 34,800
km of road under the National Highways Development Project. Moreover, under the
Bharatmala programme, 24 logistics parks have been identified along the national corridors
37
that will cater to key production and consumption centres accounting for 45% of total road
freight.
• Port connectivity through the Sagarmala programme envisages port-led industrial
development covering all major maritime zones in India.
• In the oil and gas sector, the Urja Ganga Gas Pipeline Project aims to develop a 15,000-km
gas pipeline network.
• Under urban infrastructure, 100 smart cities will be developed further. Besides the on-going
metro railway projects in cities like Delhi, Mumbai, Kochi and Bengaluru, 10 more cities will
be covered. Under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT),
basic facilities are being upgraded.
• National Investment and Manufacturing Zones (NIMZs) are being developed across the
country, with 14 NIMZs already receiving in-principle approval. In addition, eight investment
regions along the Delhi–Mumbai Industrial Corridor Project (DMIC)have also been
announced as NIMZs.
India’s total construction investment is likely to increase by 50% over the next 5 years.
Overall, the infrastructure segment is likely to grow by 9–10% per year, mainly driven by
road projects and urban infrastructure. All these are expected to significantly boost steel
demand directly and indirectly. For example, enhanced road construction leads to enhanced
demand for steel crash barriers. Further, the real estate sector, which has been suffering from
inventory overhang in the last few years, is expected to pick up pace in the coming years,
especially from the affordable housing segment. The urbanisation rate in India is currently
around 33% and is expected to rise to 40% by 2030–31. This translates to 90 million people
(or twice the population of Argentina) moving from rural to urban areas. Consequently, the
demand for housing and, therefore, growth in real estate in urban and semi-urban areas is
expected to rise in the medium to long term.
Railways
This sector, which contributes 3% of steel demand, is growing at a fast pace. It grew by
13.4% in 201814 and is expected to grow by more than 20% in 2019.15 Projects like 100%
track electrification (electrification of 16,540 track km by 2021–22), dedicated freight
corridors (of over 3350 km) connecting industrial hubs in western and eastern India and high-
speed rail corridors are expected to boost steel demand significantly.
38
Automobiles
The Indian automotive industry is the fourthlargest in the world. It contributes to around 9%
of steel demand in India. India is the largest manufacturer of two-wheelers, three wheelers
and tractors, the fourth largest producer of passenger vehicles, and the seventh largest in
commercial vehicles in the world. Two-wheelers occupy a dominant position with an 81%
market share and overall passenger vehicles compose 13% of the market. India’s automobile
sector is domestic market oriented, with domestic sales accounting for over 80% of sales.16
After rapid growth in the last few years, the sector is currently undergoing a slowdown. All
the sub-segments have witnessed de-growth in 2019. However, growth normalisation is
expected in 2020. The automobile sector, including component parts, is expected to cross
USD 250 billion by 2026. India’s auto and auto component export markets are also expected
to grow at a CAGR of 3% until 2026. The Government of India announced the Automotive
Mission Plan 2016-26 (AMP 2026) in 2015. The plan outlines the vision for all sub-segments
in terms of size, global footprint and technological maturity, etc. It aims at sustained
automotive growth and bringing India at par with the global auto giants. Therefore, steel
demand from the automotive sector is expected to be sustained, despite the temporary blip in
growth this year. However, the Indian government is putting a significant thrust on electric
vehicles, which will require less steel as these vehicles have fewer auto components.
Capital goods
The sector contributes about 15% of steel demand. It has several sub-segments, of which
machinery and equipment are the most prominent. The machinery and equipment segment
can be further divided into construction and earth-moving machinery, plant machinery, heavy
electrical machinery and machine tools. Therefore, the sector is obviously dependent on
construction, mining, and heavy and light industries. In other words, the capital goods sector
is dependent on economic growth in general and the secondary sector’s performance in
particular. Machinery and equipment, a subset of the capital goods sector, accounts for
roughly 23% of total manufacturing and about 4% of India’s total gross value added (GVA).
However, the sector’s growth has been uneven in the past and it is hugely dependent on
imports, especially for the large machinery segment. Significant gaps exist in technology
capabilities due to low acceptance of domestically manufactured products, leading to a lower
capacity utilisation ratio, weak support infrastructure and inadequate R&D spending. Since
the beginning of 2018, both economic growth and industrial growth in India have consistently
39
slowed down. As a result, the capital goods sector growth was strong in 2018 at 6.4%, but is
expected to fall below 1.5% in 2019. Since late 2018, manufacturing growth fell significantly
due to liquidity concerns, especially in the SME segment, coupled with slowing new
investments. Falling tariffs in solar and wind energy have impacted the implementation of
announced projects. However, the sector is expected to recover in 2020.
40
Challenges before the Indian steel industry

The growth trajectory of the steel industry has its own set of challenges. We outline the five
major challenges to the growth prospects discussed in the previous section.
The Indian steel industry is often regarded as uncompetitive globally. In 2016, World Steel
Dynamics ranked India second in terms of cost of conversion of iron ore to steel, after
Ukraine. Indian mills were found to be more cost efficient in converting iron ore to steel than
their counterparts in China, Japan or Korea. Most Indian integrated steel producers ranked
within the top 35 steel mills globally. The answer to the dichotomy can be found in a report
by the National Institution for Transforming India (NITI Aayog). The report explains a USD
80–100 cost difference in the table below:
Table 4
(USD/tone)
Logistics And Infrastructure 25-30
Power 8-12
Import Duty on Coal 5-7
Clean Energy Cess 2-4
Taxes And Duties on Iron Ore 8-12
Finance 30-35
Total Cost Disadvantage 80-100
41
Government Policy on Steel Industry
a. Steel industry : Important Policy Measures

 In the new Industrial Policy announced in July, 1991 Iron and Steel industry, among
others, was removed from the list of industries reserved for the public sector and also
exempted from the provisions of compulsory licensing under the Industries (
Development and Regulation) Act, 1951.
 With effect from 24.5.92, Iron and Steel industry has been included in the list of `high
priority' industries for automatic approval for foreign equity investment up to 51%. This
limit has been recently increased to 74%.
 Price and distribution of steel were deregulated from January, 1992. At the same time, it
was ensured that priority continued to be accorded for meeting the requirements of small
scale industries, exporters of engineering goods and North Eastern Region of the country,
besides strategic sectors such as Defense and Railways
 The trade policy has been liberalized and import and export of iron and steel is freely
allowed. There are no quantitative restrictions on import of iron and steel items, covered
under Chapter No. 72 of the ITC(HS) Code. The only mechanism regulating the imports
is the tariff mechanism. Tariffs on various items of iron and steel have drastically come
down since 1991-92 levels and the government is committed to bring them down to the
international levels.
 Freight equalization scheme was modified in January'92, removing freight disadvantage
to states located near steel plants in the country. At the same time, it was ensured that far-
flung areas and distant states were protected by stipulating that the main producers charge
either actual freight or freight element existing prior to withdrawal of the scheme,
whichever is less.
 Levy on account of Steel Development Fund was discontinued from April'94 providing
greater flexibility to main producers to respond to market forces.
 Iron & Steel are freely importable as per the Extant Policy.
 To check unbridled cheap imports of steel the Government has fixed floor prices for
seven items of finished steel viz. HR coils, HR sheets, CR coils, Tinplates, CRNO and
ASBR.
 Iron & Steel are freely exportable.
42
b. Policy on Iron Ore Exports

 The existing Export & Import Policy (Exim Policy) permits direct exports of iron ore
from Goa and Redi sector to all destinations by the iron ore producers, irrespective of the
iron content. The Kudremukh Iron Ore Company Ltd. (KIOCL) is the canalizing agency
for its own products (iron ore concentrates and iron ore pellets) since it is a 100% Export-
Oriented Unit (EOU). Iron ore of Fe content upto 64% is completely decanalised. Exports
of ore with iron content exceeding 64% from other sectors of the country are canalised
through a Government agency, namely MMTC. The major buyers of Indian Iron Ore are
the Japanese Steel Mills (JSMs).
 The earlier contract for supply of iron ore by MMTC/KIOCL to the Japanese Steel Mills
(JSMs) terminated on 31/03/96. The Cabinet in its meeting held on 8/12/95 approved the
proposal of Ministry of Commerce for entering into another five year contract with Japan
for export of iron ore.
 Iron ore surplus to domestic requirement may continue to be exported; and the export of
high grade ore (run of mine Fe content above 65%) would be within the prescribed
ceilings.
 Cabinet Ceilings on export of high grade are: The cabinet in its meeting held on 21/07/98
approved the following ceilings proposed by Ministry of Commerce w.e.f. 1/04/1998 and
which would be valid fora period of three years.
c. Manganese Ore
Export policy of manganese ore is decided keeping in view the need for conserving high
grade ores. Along with this, effort is also made to replace the export of ores with export of
value added items for the year 1999-2000 the maximum ceilings of manganese ore.
d. Chromite Ore
Keeping in view the limited reserve of Chromite ore in the country, only certain grades of ore
are allowed for export. Emphasis has been laid on export of beneficiated chromite
concnetrates. From the year 1997-98, a five year Export policy has been decided upon by
Government so us to enable the exporters to establish their presence in the international
market.
43
Steel in Budget 2020-21
After facing weak demand in Q1 FY2021 due to the pandemic-induced lockdown, the
domestic steel sector witnessed a rebound in recent months on the back of a healthy rural
consumption and strong sales in the auto and white goods sectors. However, demand from the
infrastructure and the construction sectors are yet to pick up appreciably. Hence, a higher
budgetary allocation towards these sectors remains a key expectation, especially of the
secondary steel players, which have taken longer to recover from COVID-19 than the
primary steel producers and have a lion’s share in long steel production in India.
National infrastructure pipeline (NIP), which entails an investment of Rs 111 lakh crore over
FY2020-2025, remains an expected key driver for the construction sector. While the state
governments were projected to finance a major part of the NIP (40 percent), the pace of
revenue revival post-COVID, and the recommendations on tax sharing as well as deficit
levels made by the Fifteenth Finance Commission, will influence the space that the state
governments have available over the medium term to finance infrastructure. Hence, the
Central government and the PSUs may have to pitch in with higher spending in this period by
way of higher budgetary allocation to the NIP projects. Apart from infrastructure, real estate
is also a key end-use sector for long-steel products, where a demand slowdown was
witnessed even before the pandemic. Any budgetary measure that could accelerate the
recovery of the real estate sector would therefore be welcomed by the steel industry.
Measures announced by a few states including Maharashtra and Karnataka in this regard are
encouraging for steel players.
Cost of input materials

Raw material availability is critical for the steel industry and the government has taken
various steps to ensure smooth raw material availability for the steel sector such as (1)
auction of several iron ore mines in Odisha in Q4 FY2020 (2) amendment in the Mines and
Minerals (Development and Regulation) Act (MMDRA) in January 2020 allowing the
transfer of existing forest and environment clearances of expiring mining leases to new lease
holders for a period of two years (3) permission to SAIL to sell 25 percent of its captive iron
ore production and 70 mt of iron ore dumps in the open market and (4) approval for
commercial coal mining to private companies in June 2020. However, recent iron ore supply
disruption in Odisha and the resultant spike in input costs for steel mills remain a concern.
Any budgetary announcement to alleviate these concerns would be welcomed by the steel
44
industry. In this context, given the shortage in domestic iron ore supplies, removal of the 2.5
percent import duty on heavy metal ferrous scrap could help secondary steel producers bring
down the cost of input materials by increasing the sourcing of ferrous scrap over sponge iron
in the steel-making process. Moreover, policy decisions to encourage more private sector
participation in mineral exploration, increase rake availability, and a higher budgetary
allocation to strengthen logistics infrastructure in mineral-rich belts can go a long way in
addressing such concerns of the entire metals industry, including steel, in the long run. This
will also be consistent with the government’s strategies as reflected in the Atmanirbhar
Bharat scheme for the mining sector.
Moreover, domestic blast furnace operators suffer from the structural disadvantage of being
largely dependent on imports for procuring coking coal. Till date, government policies have
not been able to incentivise the setting up of adequate coal-washing capacities to partly
substitute imported coking coal with up to 10-15 percent of the domestic washed coking coal.
This has led to India’s 35 billion tonne of low-grade coking coal reserves being largely
untapped. Any incentives in the upcoming budget for setting up of coking coal washeries
could help domestic blast furnace operators to partly reduce their import dependence over the
medium to long term.
45
Review of Literature
According to Cristina Abad, Sten A. Thore, Joaquina Laffarga (1998) the study revealed a
Predictive majority of the data connection tying that the present money related information
will future earnings, Also An valuation connection tying future income. to a firm value.
These issues will also include its financial position, industry sector, and the current economic
environment, Kotrappa
(2000) studied that “the success of a corporation greatly depends upon sound financing.
When the original financing has been sound, a co-operation has less fear for the future,
provided it is given by a competent management”. Ben
McClure (2004) reveled that “each industry will need contrasts As far as its client base,
showcase stake Around firms, industry-wide growth, competition, regulation and benefits of
the business cycles”. Ou and penman (1989) contemplated that the utilization about monetary
articulation Investigation of wage proclamation Furthermore monetary record proportions
may be mostly to conjecture future profit. Pascal Nguyen, (2003) develops a "straightforward
monetary score intended to catch here and now changes in firm working effectiveness,
gainfulness and budgetary approach."Lev and Thiagarajan (1993) he defined the theoretical
contentions to investigation the proportions.
They showed that those income prediction signs needed to variables such as development
previously, accounts receivables relative will deals Growth and terrible edge rate need aid
incrementally connected with contemporaneous stock returns What's more need aid critical
for foreseeing future income. Jim berg (1999) directed an investigation – “Fundamental
dissection utilizing internet”. This consider mostly inspected that key examination takes a
gander
In those key issues that drive the quality of the specific shares of the organization. These
issues incorporated its budgetary position, its business sector, and the current investment
nature's domain. The objective of the study was to identify companies that may be considered
undervalued in the market with a view to investing when right time comes to us. In this study,
Jim berg illustrated that “around the thing that key dissection may be what's more entryway it
Might be used”. Vanstone b. Finnieg. Also tan c's. (2004) directed
An investigation entitled- “Enhancing security determination in the Australian securities
exchange utilizing basic Investigation Furthermore neural networks”. This paper mostly
inspects monetary exchanging from the perspective from claiming security Choice. On
practice, it will be unreasonable for a monetary merchant to take part in the fill market for
46
tradable securities contending for financing capital. Dr. Maria nevis Soris Also v.
Sornaganesh (2012) led An investigation entitled- “Fundamental Investigation for NBFC
done India” “This consider directed should inspect those investment supportability of the five
significant NBFC in Indian NBFC division Also its International Journal of Pure and Applied
Mathematics Special Issue monetary execution. Fama and french (1992) after An more
terrific examine the relative stake valuation approach picked up around Notoriety indicating
that the B/M proportion may be a standout amongst the best logical variables of recorded
stock returns. In this method, investigators need will conjecture EPS for those quite a while
ahead What's more focus a proper price-to-earnings (P/E ratio). ” Abardanell Also Bushee
(1997) said that investigator needs monetary support with trust On a lot of people (not all)
basic indicators. Ultimately, their work shows that the macroeconomic variables such as
inflation, GDP, etc. And the condition that the relationship between fundamentals and future
earnings.
47
Significance of the study

There are many investment avenues for an investor to invest in, of them Share
Market Industry is the one. Key examination may be a system for finding out what's to come
cost of a stock which a mogul wishes to purchase. It tries with figure what's to come
development of the money business utilizing signs starting with those economy business.
Also agency Furthermore also those genuine worth of a stock may be made Eventually Tom's
perusing recognizing those procuring possibility of the agency which relies ahead investment
surroundings Furthermore factors identifying with particular industry, competitiveness,
caliber about management, operational efficiency, profitability, capital structure Also profit
arrangement.
Research Gap
In the current changing environment investment avenues has been changing continuously, of
them Share Market industry is the one. With the changes in the Economic Environment,
Industry, and company will impact on the future earnings of the share market. The investor
will know when to invest and where to invest only after the fundamental analysis
48
Research Methodology
This study is used to assess days gone by execution and the required future execution about
organizations. On examine the profitability position of the organizations Furthermore should
examine the Different proportions of the previous five a considerable length of time from
claiming select organizations
In light of market underwriting..
Population: As per the Stock Exchange 7800 Companies are listed in the BSE and in NSE
4000 companies are trading.
Sample size: There are 3 companies taken as sample such as: Tata Steel, SAIL, JSW Steel.
Sampling Method: Random sampling method is used based on the research.
Data source: Study is based on secondary data
49
Data Analysis
1. Analysis of Return on Earning Per Share
Table 5: Table shows the earning per share
TATA STEEL JSW STEEL SAIL

2016-17 -42.89 14.58 -6.67
2017-18 128.10 25.71 -0.68
2018-19 87.74 31.60 5.69
2019-20 11.86 16.67 5.13
2020-21 63.78 32.73 10.04
AVERAGE 49.71 24.26 2.70
This table clearly shows the values of EPS of different years for different companies that are
used in analyzing of earnings per share.
50
Fig 5: Figure shows the Analysis of the Earning per share. The graphs show that the x –axis
has shown the years from 2016-2021 and the y-axis has shown the values. Profit for every
allotment or EPS are a critical monetary measure, which demonstrates the productivity of
shares of the organization. It may be computed Eventually Tom's perusing isolating the
organization's net pay with its aggregate amount about remarkable greater part. It is an
instrument that market member’s use every now and again should gage those productivity of
a particular organization preceding purchasing its allotments. The higher the profit for every
offer of a company, the superior is its benefit.
140
120
100
80
2016-17
60
2017-18
40 2018-19
2019-20
20
2020-21
0
Tata Steel JSW Steel SAIL
-20
-40
-60
Fig: 5
51
2. Analysis of Return on Net Profit Margin
Table 6: Table shows the analysis of net profit margin
Net Profit Margin

Tata steel JSW Steel SAIL
2016-17 -3.71 6.21 -6.62
2017-18 13.30 8.64 -0.98
2018-19 5.62 8.91 3.17
2019-20 0.66 5.46 3.12
2020-21 5.03 9.85 5.32
Average 4.18 7.85 4.01
This table clearly shows the values of Net Profit Margin of different years for different
companies that are used in the analysis.
52
15
10
5 2016-17
2017-18
2018-19
2019-20
0 2020-21
-5
-10
Fig 6
The graphs show that the x –axis has shown the years from 2016-2021 and the y-axis has
shown the values.
The net profit margin is intended to be a measure of the overall success of a business. A high
net revenue shows that a business is estimating its items accurately and is practicing great
cost control. The proportion is intended to concentrate consideration on the net revenue
emerging from business activities before intrigue and assessment is deducted.
53
3. Analysis on Dividend per Share
Table 7: Table shows the Dividend per share
Dividend Per Share

2016-17 10.00 2.25 00
2017-18 10.00 3.20 00
2018-19 13.00 4.10 00
2019-20 10.00 2.00 0.5
2020-21 25.00 6.50 01
Average 13.6 3.61 0.3
This table clearly shows the values of Dividend per share of different years for different
companies that are going to be used in analyzing of Dividend per share.
54
Fig 7: Figure shows the analysis of dividend per share
30
25
20
2016-1
2017-18
15
2018-19
2019-20
10
2020-21
0
Fig: 7
The graph shows that the x –axis has shown the years from 2016-2021and the
y-axis has shown the values.
Dividend per share is a measure of the dividend payout per share of common stock. The
measure is utilized to assess the measure of profits that a salary financial specialist may hope
to get in the event that he or she was to purchase an organization's stock. The measure is
particularly powerful that the sum per share shows administration's readiness to make steady
payouts to speculators.
55
Analysis of Return on Investment

Table 8: Table shows the Return on Investment
Return On Investment
2016-17 -0.63 9.38 -1.41
2017-18 13.10 13.38 1.87
2018-19 9.41 13.28 5.17
2019-20 3.14 7.14 4.64
2020-21 7.05 9.70 6.61
Average 6.41 10.58 3.38
This table clearly shows the values of Return on Investment of different years for different
companies that are going to be used in analyzing of Return on investment.
56
Figure 8: Figure shows the Analysis of Return on Investment
16
14
12
10
2016-17
8 2017-18
6 2018-19
4 2019-20
2020-21
2
0
-2
-4
Fig: 4
The graph shows that the x –axis has shown the years from 201617 to 2020-21 and the y-axis
has shown the values.
Return on Investment (ROI) is the benefit to an investor resulting from an investment of
some resource. A high ROI means the investment's gains compare favorably to its cost. As an
execution measure, ROI is utilized to assess the effectiveness of a venture or to look at the
efficiencies of a few unique speculations.
57
Analysis of Return on Assets
Table 9: Table shows the Return on Assets
2016-17 -2.48 4.14 -2.65
2017-18 6.92 6.90 -0.25
2018-19 4.53 7.38 2.01
2019-20 0.56 3.27 1.73
2020-21 2.95 5.65 3.37
Average 2.49 5.47 0.84
This table clearly shows the values of Return on Assets of different years for different
58
Figure 9: Figure shows the Analysis of Return on Assets
4
2016-17
2017-18
2 2018-19
2019-20
2020-21
0
-2
-4
Fig 9
The graph shows that the x –axis has shown the years from 2016-17 to 2020-21 and the y-
axis has shown the values.
Return on Assets (ROA) is the benefit to an investor resulting from an investment of some
resource. A high ROA means the investment's gains compare favorably to its cost. As an
execution measure, ROA is utilized to assess the effectiveness of a venture or to look at the
59
Analysis of Return on Equity
Table 10: Table shows the Return on Equity

2016-17 -12.16 16.19 -7.16
2017-18 26.87 24.54 -0.76
2018-19 15.48 24.33 6.13
2019-20 1.91 11.29 5.23
2020-2021 9.89 18.98 9.55
Average 8.40 19.07 2.60
This table clearly shows the values of Return on Assets of different years for different
60
Figure 10: Figure shows the Analysis of Return on Equity
30
25
20
15 2016-17
2017-18
10
2018-19
5
2019-20
0 2020-21
-5
-10
-15
Fig 10
The graph shows that the x –axis has shown the years from 2016-17 to 2020-21 and the y-
axis has shown the values.
Return on Assets (ROE) is the benefit to an investor resulting from an investment of some
resource. A high ROE means the investment's gains compare favorably to its cost. As an
execution measure, ROE is utilized to assess the effectiveness of a venture or to look at the
61
Findings
1. The five year Earnings per Share of the Tata steel company has greater than all the other
companies during the study period. On an average the Tata steel company earned
Earnings per Share of 49.71 followed by JSW Steel 24.26, and SAIL Steel 2.70.Over the
study period from 2016-17 to 2020-21 the Earnings per Share of the Tata Steel Company
did better in the share market value and the SAIL Steel Company least.
2. The five year Net Profit Margin of the JSW steel company has greater than all the other
companies during the study period. On an average the JSW steel company earned Net
Profit Margin of 7.85 followed by Tata Steel 4.18, and SAIL Steel 4.01. Over the study
period from 2016-17 to 2020-21 the Net Profit Margin of the JSW Steel Company did
better in the share market value and the SAIL Steel Company least value.
3. The five year Dividend per Share of the Tata steel company has greater than all the other
companies during the study period. On an average the Tata steel company earned
Dividend per Share of 13.9 followed by JSW Steel 3.61, and SAIL Steel 0.30. Over the
study period from 2016-17 to 2020-21 the Dividend per Share of the Tata Steel Company
did better in the share market value and the SAIL Steel Company least dividends.
4. The five year Return on Investment of the JSW steel company has greater than all the
other companies during the study period. On an average the JSW steel company earned
Return on Investment of 10.58 followed by TATA Steel 6.41, and SAIL Steel 3.38.Over
the study period from 2016-17 to 2020-21 the Return on Investment of the JSW Steel
Company did better in the share market value and the SAIL Steel Company least value.
5. The five year Return on Assets of the JSW steel company has greater than all the other
companies during the study period. On an average the JSW steel company earned Return
on Assets of 5.47 followed by TATA Steel 2.49, and SAIL Steel 0.84.Over the study
period from 2016-17 to 2020-21 the Return on Investment of the JSW Steel Company did
62
6. The five year Return on Equity of the JSW steel company has greater than all the other
companies during the study period. On an average the JSW steel company earned Return
on Equity of 19.07 followed by TATA Steel 8.40, and SAIL Steel 2.60.Over the study
period from 2016-17 to 2020-21 the Return on Investment of the JSW Steel Company did
63
Suggestions
On the basis of the findings of the study that the JSW steel Company have a positive ratio in
the Earnings per Share, Operating Profit Margin, Net Profit
Margin, Debt Equity Ratio, Return on Asset, Dividend per Share, Dividend
Pay Out, Current Ratio, and Return On Investment. And also that the share price of the
company is increasing from the March 2020 to March 2021(it means that on March 2020 the
share price Rs 150 and it increased to Rs 407 on 7th March
2021).And it is suggested buy for the medium term.
64
Conclusion
Survival of the companies largely depends on satisfaction of their investor and consumers for
whom they are in business. Satisfied investor will take risk in future and would like to invest
in the companies from whom they are in advantage. Companies with positive ratio have to
develop more efficiency in their approach and companies who are average and below average
have to explore their effort with optimum utilization of their available resources. The
Tata steel, and JSW Steel companies are strongly suggested to buy for the medium term.
SAIL Steel companies are suggested to buy for the short term.
65
BIBLIOGRAPHY
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Journal of Accounting Research, 35(1), 1-24.
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investigation strategy.The Accounting Review 73 (1): 19– 45.
[3] Adamsetal August (2009), "A Comparison of Alternative Approaches to Equity Valuation
of Privately held Entrepreneurial firms", Journal of Finance and Accountancy, volume 1, pp
2-15.
[4] Ahmed, A. S., R. M. Morton, and T. F. Schaefer (2000), "Bookkeeping conservatism and
the valuation of bookkeeping numbers": Evidence of the Feltham-Ohlson (1996) display,
Journal of Accounting, Auditing and Finance 15, 271-292 (2000).
[5] Charles Savage and Ken Stand field (2006),‖ Intangible Finance Standards: Advances in
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[6] Cristina Abad, Sten A. Thore, Joaquina Laffarga (1998), ―Fundamental Analysis of
Stocks by Two- Stage DEA‖.
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―Conducted Market-Moving Fundamental Research on the Global Wireless
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[10] Enhancing Security Selection in the Australian Stock Market Using Fundamental
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67

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Financial Analysis of Steel Sector

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PROJECT REPORT ON

FUNDAMENTAL ANALYSIS OF STEEL SECTOR

ANAND RATHI SHARES AND STOCKS BROKERS LTD.

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT OF

MASTER OF MANAGEMENT STUDIES

ANKUSH TEJLAL HARINKHEDE

MMS-II (SEM III)

YEAR 2020- 2022

LALA LAJPATRAI INSTITUTE OF MANAGEMENT

ANKUSH TEJLAL HARINKHEDE

MMS – II (SEM III)

YEAR 2020- 2022

Date: 5thJanuary, 2022

Prof. Vikas Sharma Dr V.B. Angadi

Project Mentor Director

Name of the student

SR. NO. CONTENT PAGE NO.

Objectives of the study

1) To do fundamental analysis of a steel companies.

2) To study present scenario of steel industry.

3) To study the various elements of its financial position and performance.

4) To find whether to invest in the particular share of a company or not

Types of Stock Analysis:-

Here we have selected a Fundamental analysis as subject of our project so we would do it in

What Is Technical Analysis?

“Technical analysis is a method of evaluating securities by analyzing the statistics generated

The field of technical analysis is based on three assumptions:

1. The Market discounts everything.

1. The Market Discounts Everything

2. Price Moves in Trends

3. History Tends To Repeat Itself

Strengths of Technical Analysis

2. Supply, Demand, and Price Action

4. Pictorial Price History

Weaknesses of Technical Analysis

4. Always Another Level

Approaches of Fundamental Analysis:

Investors can use either a top-down or bottom-up approach:

Strengths of Fundamental Analysis

4. Knowing Who's Who

Weaknesses of Fundamental Analysis

Steps to fundamental Analysis:

Fundamental vs. Technical Analysis

The followings are some important factors which should be considered in

India’s steel industry: Journey so far

AN OVERVIEW OF STEEL SECTOR

Construction and Automobiles

 Steel industry was decontrolled in 1991 & 1992 respectively.

(in million metric tons)

Demand - Availability Projection

Pricing & Distribution

World crude steel production (MT)

Indian crude steel production (MT)

Imports of Iron & Steel

Year Qty.(million metric tons)

Exports of Iron & Steel

Year Qty.(million metric tons)

Contribution of Steel in GDP of India

Growth prospects of the Indian steel industry

Challenges before the Indian steel industry

Government Policy on Steel Industry

a. Steel industry : Important Policy Measures

b. Policy on Iron Ore Exports