COMPANY

FINANCIALS
ANALYSIS:
STEEL AUTHORITY
OF INDIA LTD
A LOOK AT THE TRENDS IN THE FINANCIAL STATEMENTS AND RATIOS OVER THE PERIOD OF 2011 - 2014

U113019 HARSH MOHAPATRA

U113028 MANEESHA SAHOO
U113057 VASUDHA SINGH

U113020 HARSHDEEP
U113118 TARU VAID
U113098 POOJA AGRAWAL

OVERVIEW: INDIAN STEEL INDUSTRY

Total finished steel production for India (in
million ton)*

The Indian steel industry is divided into 2 sectors:

PRIMARY
The
primary
sector
comprises a few large
integrated steel providers
producing billets, slabs and
hot
rolled coils, among others

The Indian steel industry has achieved

significant milestones in terms of growth in
capacity, production and exports to become
a major player in the global steel industry.
Between FY2008 and FY2013, Indias steel
production has grown at a compound annual
growth rate (CAGR) of about 7 percent

The private sector

dominates production
accounting for almost 78
percent of the finished
steel outputwhile the
public sector has higher
capacity utilizations.

SECONDARY
The secondary sector
comprises small units focused
on the production of value
added products such as cold
rolled coils, galvanized coils,
angles, columns, beams and
other re-rollers, and sponge
iron units.

OVERVIEW: Steel Authority of India Limited

The leading steel-making company in India.

A fully integrated iron and steel maker, producing both basic and special steels for
domestic construction, engineering, power, railway, automotive and defence industries
and for sale in export markets.
Among the seven Maharatnas of the country's Central Public Sector Enterprises.
Indias second largest producer of iron ore and of having the countrys second largest
mines network. This gives SAIL a competitive edge in terms of captive availability of iron
ore, limestone, and dolomite which are inputs for steel making.
Operates and owns 5 integrated steel plants at Rourkela, Bhilai, Durgapur, Bokaro and
Burnpur and 3 special steel plants at Salem, Durgapur and Bhadravathi.

BALANCE SHEET

Mar '14
Application Of Funds
Gross Block
53,874.36

Mar '13

Mar '12

Mar '11

42,461.10

41,367.19

38,260.60

27,103.71

25,683.70

24,239.81

23,180.54

Net Block
Capital Work in
Progress
Investments

26,770.65

16,777.40

17,127.38

15,080.06

33,650.54

35,890.85

28,049.14

22,228.43

720.2

718.36

684.94

684.14

Inventories

15,200.82

16,008.21

13,742.37

11,302.79

Sundry Debtors
Cash and Bank
Balance

5,481.98

4,424.18

4,761.32

4,161.30

2,855.95

3,850.35

6,415.70

143.99

Total Current Assets

23,538.75

24,282.74

24,919.39

15,608.08

Loans and Advances

7,281.75

6,549.11

5,556.17

6,175.81

Fixed Deposits
Total CA, Loans &
Advances
Deffered Credit

17,334.87

30,820.50

30,831.85

30,475.56

39,118.76

Current Liabilities

19,105.61

14,976.39

14,606.26

13,994.33

Provisions

5,923.23

6,716.86

5,822.23

5,882.10

Total CL & Provisions 25,028.84

21,693.25

20,428.49

19,876.43

Net Current Assets

5,791.66

9,138.60

10,047.07

19,242.33

66,933.05

62,525.21

55,908.53

57,234.96

Less: Accum.
Depreciation
Mar '14
Mar '13
Sources Of Funds

Mar '12

Mar '11

Total Share Capital

4,130.53

4,130.53

4,130.53

4,130.40

Equity Share Capital

4,130.53

4,130.53

4,130.53

4,130.40

Share Application
Money

Preference Share
Capital

Reserves

38,535.82

36,894.11

35,680.79

32,939.07

Revaluation Reserves

Networth

42,666.35

41,024.64

39,811.32

37,069.47

Secured Loans

11,560.89

8,746.16

7,481.91

11,813.91

Unsecured Loans

12,705.81

12,754.41

8,615.30

8,351.58

Total Debt

24,266.70

21,500.57

16,097.21

20,165.49

Total Liabilities

66,933.05

62,525.21

55,908.53

57,234.96

Miscellaneous
Expenses
Total Assets

I
N
C
O
M
E
S
T
A
T
E
M
E
N
T

Mar '14

Mar '13

Mar '12

Mar '11

CAGR

46,698.41
1,840.53
47,644.31

44,598.26
735.12
47,349.47

46,341.79
1,500.13
49,210.43

42,534.30
2,038.97
46,044.96

2.36%
-2.53%
0.86%

Raw Materials
Power & Fuel Cost
Employee Cost

21,611.97
4,942.15
9,578.51

23,334.91
4,830.44
8,637.20

24,804.77
4,469.74
7,932.05

22,642.47
3,586.07
7,530.24

-1.16%
8.35%
6.20%

Miscellaneous Expenses

5,752.88

5,197.15

4,458.56

45.42

Total Expenses
Operating Profit
PBDIT
Interest
PBDT
Depreciation
Profit Before Tax

41,885.51
3,918.27
5,758.80
967.64
4,791.16
1,716.69
3,074.47

41,999.70
4,614.65
5,349.77
747.66
4,602.11
1,402.98
3,199.13

41,665.12
6,045.18
7,545.31
677.7
6,867.61
1,567.03
5,300.58

37,041.66
6,964.33
9,003.30
474.61
8,528.69
1,482.20
7,045.37

235.47%
3.12%
-13.39%
-10.57%
19.49%
-13.43%
3.74%
-18.72%

Extra-ordinary items

150.08

41.53

-10.54

163.71

-2.15%

PBT (Post Extra-ord Items)

3,224.55

3,240.66

5,290.04

7,209.08

Tax

608.07

1,070.31

1,608.15

2,304.34

-18.22%
-28.33%

Reported Net Profit

2,616.48

2,170.35

3,681.89

4,904.74

826.1

826.1

991.3

Income
Net Sales
Other Income
Total Income
Expenditure

Equity Dividend
834.35
Per share data (annualised)

-14.54%
-4.22%

Shares in issue (lakhs)

41,305.25

41,305.25

41,305.25

41,304.01

0.00%

Earning Per Share (Rs)

6.33

5.25

8.91

11.87

-14.54%

RATIO ANALYSIS: PROFITABILITY

Consistent decline in profitability ratios. Could be attributed to high increase in

Miscellaneous Expenses from 45cr in FY10-11 to 5752 cr in FY13-14.

RATIO ANALYSIS: LIQUIDITY & DEBT

Observations:

Quick ratio has declined to under

1.
D/E has improved as debt portion
has increased to arrange funds for
available opportunities (capex
increase).
Although the Interest Coverage
ratio is still safe, we see a sharp
decline due to fall in companys
profit generating ability.

RATIO ANALYSIS: OTHER KEY

RATIOS

Observations:
Management efficiency ratios
show a gradual decline over
the years.
EPS shows a sharp decline due
to decline in profitability.

INTER-FIRM COMPARISON
SAIL
Tata Steel
(FY13-14) (FY13-14)
Gross Profit Margin(%)

4.71

26.1

Net Profit Margin(%)

5.49

15.08

ROCE(%)

4.6

13.37

RONW(%)

6.13

10.48

D/E

0.57

0.43

Interest Coverge Ratio

3.19

6.41

Asset Turnover Ratio

0.72

0.5

EPS

6.33

66.02

Observations:
Tata Steel has better
profitability ratios.
Reserves of Tata Steel
have doubled in 4 years
whereas not much
change in SAIL reserves.
D/E for both is around
the industry average.
Tata Steel improved
their debt equity
position over the years.

FINANCIAL RISK INDICATORS

Leverage
Delays in the Rollout of New
Capacity strained the
Companys Operating
Performance.
CAPEX is partly Debt funded
and has increased from
11,000 Cr to 53,000 Cr under
the modernization and
expansion plans.
These have increased its
leverage but the investments
made did not contribute to
higher cash flows.

LEVERAGE
14000

13632.22
0.6

13485.55
0.54

0.57

13000

0.52

12000

0.5
0.4

0.4
11586.66

11000

0.3

10000

0.2

9000

9052.56

0.1

8000

0
2011

2012
Long Term Debt(INR Cr)

2013
Debt/Equity Ratio

2014

LIQUIDITY and SOLVENCY

Liquidity
The Cash and Equivalents decreased from 17480 Crs
in 2011 to 2855 Cr in 2014 with a CAGR of -36.43% due
to the Diversion of Cash Flow into CAPEX and
Expansion plans.

20000

15000
10000

17480

5000

0.82

2011

1
0.68

0.62

6415

3850

2855

2012

2013

2014

The Future credit-worthiness seems to have no

improvement till Cash Flows increase again.

EBIT has decreased consistently and interest expenses

has increased consistently due to increase in
leverage.

1.5

1.35

Cash ( INR Cr)

Quick Ratio

Interest Cover
20
15

15.86

10

9
5.59

3.19

0
Mar '11

Mar '12

Mar '13

Mar '14

0.5
0

CONTINGENTS & LIABILITIES AND

INVESTMENTS
C&L(INR Cr)
o Pending decision on Levy of Entry Tax in states of
Chhattisgarh, Odisha and UP.

36000
35000
34000

o Pending decision in determination of Electricity

Tariff by DVC.

o Future Cash Flows have a chance to be affected

adversely.

33000
32000

31000
30000
29000
28000
2011

2012

2013

C&L(INR Cr)

Investment were made to acquire extra Equity Shares in its JVs like NSPCL. Hence such an
investment cannot be seen as contributing to Finance risk but more to Market Risk.

2014

PROFIT vs CASH FLOW

PROFIT vs CASH FLOW (INR Cr)
20000
18000

17479.26

CAGR

16000

PBT

CASH FLOWS

-18%

-66%

14000
12000
10000
8000

7194.31

6000

6416.1
5150.87

4000
2000

3240.66

3224.55

277.23

214.91

2013

2014

0
2011

2012
PBT

Cash Flow

So we can conclude here that the

drop in profitability does not actually
show the severity of the Financial Risk
as the Cash Flow over the years has
shown a more intense decline.

COMPANY PROFILE
Company
Name

Industry

Instrument

Rating

Outlook

S&P BBB-

Negative

IND A1+

Strong

ST debt/CP programme IND A1+

Strong

Long-term corporate
credit rating

Non-FB WC limits
SAIL

Iron and Steel

Manufacturer

Medium-term debt
programme

IND TAAA

Strong

THE
END
Thank you for your time.

ADDITIONAL INFORMATION
Market Value of Equity= 35,687.69 Cr.

Dividend Yield= 2.34%

Average Payout Ratio for the last Four years= 0.282
Cost-of-equity (COE) as per the DDM (dividend discount model) is
6.605%

DDM-COE (6.605%) obtained is lower than the earnings-yield (7.33%)

Beta of SAIL= 1.68((Source: Reuters)
CAPM-Cost Of Equity is 13.76%
CAPM-COE is higher as compared to DDM-COE. The difference is 7.16
Percentage points