DATA ANALYSIS AND

INTERPRETATION
Based on the financial data of the two companies as collected from various sources
and given below. A detailed analysis of different financial ratios is attempted in
order to get a clear understanding of the financial performance of the two
companies over a period of last 4 years. The two companies belong to the same
industry, one company is more than a century old established in historically
different condition, while the other a relatively new company started in the post
independent India. They have a tail to tell but their tail is different. It is perhaps a
comparison of the life of well matured mother and newly blossoming lady. The
analysis to highlight the change in the financial ratio, particularly the 12 ratios, the
data of which is given above, it may not be possible to identify all the structural,
profitability and balance sheet ratios they are too many, therefore beyond the scope
of this project. The few selected ratios indicate the following trend.
 GROSS PROFIT RATIO

Company/Year 2021 2020 2019 2018

TATA Steel 69.87 63.32 64.89 68.07
JINDAL Steel 75.84 61.19 59.67 65.93

GROSS PROFIT RATIO(%)

80 75.84
69.87 68.07 65.93
70 63.32 61.19 64.89
59.67
60
50
40
30
20
10
0
2021 2020 2019 2018

TATA Steel JINDAL Steel

This is profitability ratio. Profit is one of the main objectives of any business. If
finance is the blood than profit is the breathe. It indicates the basic operational
efficiency and the future business prospects. Normally GP does not have a standard
because no-one can estimate the debt of fear and height of greed. Incase-of Tata
steel GP ratio has been fluctuating between 50% to 70%, while incase-of Jindal
steel the story is more or less the same. It is obvious that steel market in general is
not very stable. It is affected by international price, Chinese competition, local
demand, govt. policy, and supply bottlenecks. But the two companies have done
remarkably well because a GP of more than a 50% is a highly cherishable fact. It
indicates a fundamental basic strength of two companies, it shows a strong
foundation on which a future can always be built.
 NET PROFIT

Company/Year 2021 2020 2019 2018

TATA Steel 5.03 0.66 5.62 13.3
JINDAL Steel 10.94 -1.08 -6.12 -5.93

NET PROFIT
15 13.3
10.94
10

5.03 5.62
5

0.66
0
1 2 3 4
-1.08
-5
-6.12 -5.93
-10

TATA Steel JINDAL Steel

This tells a different story a high Gross Profit need not result in high Net Profit.
Between operational efficiency and commercial viabilities there can be many slips
like the burden of interest, depreciation, administrative overheads etc., therefore
the net profit margin fluctuates between negative and positive. While Tata steel has
avoided a negative NP margin. Jindal steel had to face a negative margin, but there
are hopes. In the last year NP margin has significantly change in the positive sets
therefore it can be safely assumed that a negative NP margin Is a bad temporary
past and it is over. The future looks bright.
 CURRENT RATIO

company/ year 2021 2020 2019 2018

Tata steel 0.85 0.95 0.97 1.22
Jindal steel 1.05 0.69 0.67 0.74

CURRENT RATIO
1.4
1.22
1.2
1.05
1 0.95 0.97
0.85
0.8 0.74
0.69 0.67
0.6

0.4

0.2

0
2021 2020 2019 2018

Tata steel Jindal steel

This ratio indicates the day to day living strength of a company. It is one thing to
have life-long accumulated assets to meet life-long liabilities, but it is quite
different to stabilize the finance in every current year. Steel industry is a capital-
intensive industry with huge investment in current assets and therefore the
utilization of this assets put pressure on need of working capital. The standard
current ratio is 2:1 in case of Tata steel it is less than 2:1. One can that it is almost
1:1. Therefore the company has just sufficient current assets to meet a current
liability. There is no undue financial pressure on working capital. Incase-of Jindal
it is little less than 1:1 and therefore the company has to provide working capital
which has a cost this can be one of the reasons for a negative net profit margin
despite a highly positive GP ratio.
 QUICK RATIO

Company/Year 2021 2020 2019 2018

TATA Steel 0.38 0.45 0.45 0.71
JINDAL Steel 0.75 0.41 0.36 0.48

QUICK RATIO
0.8 0.75
0.71
0.7
0.6
0.5 0.48
0.45 0.45
0.41
0.4 0.38 0.36
0.3
0.2
0.1
0
2021 2020 2019 2018

TATA Steel JINDAL Steel

It is also the acid test ratio. It indicates the strength of company’s liquidity,
therefore a company should have enough cash resources to meet its current
liabilities, unfortunately this ratio is significantly less than the standard ratio. Tata
steel has only 50 paise in his pocket to meet a cash expenditure of Rs 1. While
Jindal steel has less than 50 paise it is obvious that both the companies face acute
crash crunch.
 ASSET TURNOVER RATIO (%)

Company/Year 2021 2020 2019 2018

TATA Steel 63.66 59.48 67.5 63
JINDAL Steel 50.08 41.13 43.94 30.68

ASSET TURNOVER RATIO(%)

80
70 67.5
63.66 63
59.48
60
50.08
50 43.94
41.13
40
30.68
30
20
10
0
2021 2020 2019 2018

TATA Steel JINDAL Steel

It indicates the ability the company to utilize its assets in order to achieve higher
sales revenue. Assets should yield income otherwise they become a burden. Incase-
of Tata steel the asset turnover is between 50% and 70%, while incase-of Jindal it
is 30% to 50%. Comparatively Tata is doing better but both are performing below
the standard. Stock turnover ratio of more than a 100% is the most desirable sign
of company, unfortunately two companies have a long way to go.
 INVENTORY TURNOVER RATIO

Company/Year 2021 2020 2019 2018

TATA Steel 4.7 4.79 4.98 4.66
JINDAL Steel 6.56 5.8 6.05 5.52

INVENTORY TURNOVER RATIO

7 6.56
6.05
6 5.8
5.52
4.79 4.98
5 4.7 4.66

0
2021 2020 2019 2018

TATA Steel JINDAL Steel

This ratio indicates ability of the company to roll over its stock. Inventory
management is a crucial part of production mgt as it affects the efficiency in
production and stability in financial mgt. In business money has to be rolled over
goods have to be rolled over and the frequency of rolling indicates the efficiency in
performance. The standard shows that it should be 5 to 10 times. In a simple sense
it shows that sales must be 5 to 10 times the average stock. Incase-of Tata’s it is 4
to 5 times and incase-of Jindal it is little more than 5. Both the companies have to
improve the inventory mgt. but the prevailing market conditions violent change in
demand do not help in very efficient inventory mgt.
 INTEREST COVERAGE RATIO

Company/Year 2021 2020 2019 2018

TATA Steel 2.91 1.44% 3.06 3.06
JINDAL steel 3.73 0.97 0.69 0.67

INTEREST COVERAGE RATIO(in %)

4 3.73
3.5
306.00% 306.00%
3 291.00%

2.5
2
1.5
0.97
1 0.69 0.67
0.5
1.44%
0
2021 2020 2019 2018

TATA Steel JINDAL steel

This indicates the financial ability of the company to raise finance, bare the cost
and manage the debt. The company should have enough operational profit to pay
financial cost of interest. Standard is more than 3, incase-of Tata’s it is almost 3
while incase-of Jindal it has improved from a very low level to 3 in the last year. It
is obvious from the data that with improvement in GP & NP ratio there will be
always positive impact in interest coverage. This is reflected in terms of both the
companies. One can safely assume that this ratio will further improve in the future.
 BASIC EPS

Company/Year 2021 2020 2019 2018

TATA Steel 63.78 11.86 87.75 128.12
JINDAL Steel 35.63 -1.08 -17 -15.38

BASIC EPS
140 128.12
120
100 87.75
80
63.78
60
40 35.63

20 11.86
0
2021 2020
-1.08 2019 2018
-20 -15.38
-17
-40

TATA Steel JINDAL Steel

EPS in terms of existing equity capital structure without being affected by

conversion of debenture or preference share is indicated by basic EPS. It has been
fluctuating incase-of both the companies. Incase-of Tata’s it has fluctuated
between 130 to 62. While incase-of Jindal from a negative range it has become
positive. Basic EPS can be of some interest to shareholders and speculators and to
some extent the financial lenders. But it does not directly affect the business
prospect. A good company should have a good EPS which is continuously
increasing.
 Return on Net Worth/Equity (%)

Company/Year 2021 2020 2019 2018

TATA Steel 10.19 2.18 15.33 22.92
JINDAL Steel 11.42 -0.33 -5.08 -4.64

RETURN ON NET WORTH/SHARE(%)

25 22.92

20
15.33
15
11.42
10.19
10

5 2.18
0
2021 2020
-0.33 2019 2018
-5
-5.08 -4.64
-10

TATA Steel JINDAL Steel

This is basically of interest to shareholders. Their stake in the company is the Net
Worth in this sense the performance in last 4 years cannot be very pleasant to
shareholders. Incase-of Tata’s it has fluctuated between 20% and 10%. While
incase-of Jindal it has just turned around in last year to achieve a positive return
there is a need to improve more so for Jindal steel.
 RETURN ON CAPITAL EMPLOYED (%)

Company/Year 2021 2020 2019 2018

TATA Steel 12.69 5.79 13.59 10.92
JINDAL Steel 19.68 6.03 4.31 3.71

RETURN ON CAPITAL EMPLOYED(%)

25

19.68
20

15 13.59
12.69
10.92
10
5.79 6.03
5 4.31 3.71

0
2021 2020 2019 2018

TATA Steel JINDAL Steel

It is generally believed that return on capital employed should be twice the current
rate of interest. One can safely assumed current interest rate of 10% and therefore
there must be 20% return on capital employed. Incase-of tata’s it is average of 9%.
While incase-of Jindal the average is less than 8%. It is obvious that given other
unhealthy financial parameters one can’t expect a very healthy rate of return on
capital employed.
 RETURN ON ASSETS (%)

Company/Year 2021 2020 2019 2018

TATA Steel 3.05 0.62 4.37 6.4
JINDAL Steel 4.66 -0.12 -1.83 -1.57

RETURN ON ASSET(%)
7 6.4
6
5 4.66 4.37
4
3.05
3
2
1 0.62
0
2021 2020
-0.12 2019 2018
-1
-2 -1.57
-1.83
-3

TATA Steel JINDAL Steel

It also tells more or less the same story as return in capital the standard is 5 incase-
of Tata’s it has just reach in the last year while incase-of Jindal from being
negative it has achieved 5 last year. This is encouraging and one can hope for a
better future.

DEBT EQITY RATIO

 Company/Year 2021 2020 2019 2018
TATA Steel 1.11 1.59 1.37 1.51
JINDAL Steel 0.68 0.95 1.07 1.29

DEBT EQUITY RATIO

1.8
1.59
1.6 1.51
1.37
1.4 1.29
1.2 1.11 1.07
1 0.95

0.8 0.68
0.6
0.4
0.2
0
2021 2020 2019 2018

TATA Steel JINDAL Steel

It sets a standard of 2.5:1. Both the companies have maintained a desirable a debt
equity ratio. Both have borrowed but both have borrowed less than what they could
have borrowed. Incase-of Tata’s it is between 1 and 1.5. while incase-of Jindal it is
1. It shows that both the companies have enough scope to borrow if the need arises.
There-is no adverse indication on the solvency of the two companies