A Presentation On Comprehensive Study of Steel Industry in India In the fulfillment of MRP-I

Presented To Dr. Mahendra S. Sharma Prof. Rohit H. Trivedi Presented By Vinay Bhatia (43) Avinash Nair (11) Gautam Mevada (63)

History of steel
• In India can be traced back to 400 BC • steel industry in India was made in 1874 when the Bengal Iron • modern India’s iron and steel industry August 27, 1907 was a red-letter day when the Tata Iron and Steel Company (TISCO) • The Government’s Industrial Policy had undergone changes ____ once in 1956 and then in 1991.

Types of finished steel products
• • • • Carbon Steels Alloy Steels Tool Steels Stainless Steels

Recent Mergers and Acquisitions in the Industry.
• Tata Vs Corus • Arcellor- Mittal Deal

• Production- Steel production grew at 1.2 per cent in the January-March quarter of 2008-09 over the same period last year and saw most of the large steel companies such as SAIL, Tata Steel, Essar and JSW operating at full capacity. • Consumption- Steel consumption grew at 5.2 per cent during the first quarter of 2009-10 as against 3.8 per cent in the January-March quarter last year. • Exports-Iron ore exports increased 17 per cent to 12.6 MT in February 2009 from 10.8 MT in the same month at 2008
Source: Ministry of steel 08-09

KEY SUCCESS FACTORS DRIVING DEMAND OF STEEL INDUSTRY

Contd
• The government has reduced export duty on iron ore lumps from 15 per cent to 5 per cent, which has given a further fillip to exports from 2008-09. • The government has removed full exemption of customs duty on some industrial and agricultural commodities. • Iron and steel products like pig iron, spiegeleisen, semifinished products, flat products and long products are now subject to a basic custom duty of 5 per cent ad valorem. • Reduction of the cost: is another major factor in the survival of the Indian steel industry in the age of globalization
Source: Ministry of steel 08-09

SWOT ANALYSIS OF THE STEEL INDUSTRY
• STRENGTHS OF INDIAN STEEL INDUSTRY
1. Low labor wage rates. 2. Reduction in workforce 3. Mature production base. 4. Positive stimuli from construction industry. 5. Booming automobile industry.

STRUCTURAL WEAKNESSES OF INDIAN STEEL INDUSTRY:
1. However, nearly 6% of its crude steel is still produced using the outdated open-hearth process. 2. Labor productivity in India is still very low. 3. Steel production in India is also hampered by power shortages. 4. India is deficient in raw materials required by the steel industry. 5. Insufficient freight capacity and transport infrastructure impediments too hamper the growth of Indian steel industry. 6. The condition of the infrastructural facilities of the steel industry in India is not at all conducive to a sustainable growth and development of the steel industry of the India.
Source: Ministry of steel 08-09

OPPORTUNITIES IN THE STEEL INDUSTRY

• • •

Rural Indian today presents a challenge and the opportunity to increase usage of steel in these areas through projects such as rural housing etc. FDI in Steel Industry-India has been picking up in the recent years 222 MoUs have been signed in various states with intended capacity of around 275.70 million tonnes, with an investment of over Rs. 11 lakh crore Export duty in respect of flat steel products was reduced from previous levels to NIL Introduction of Stamp Charging and Partial Briqueting of Coal Charge (PBCC) for production of metallurgical coke: Installation of energy recovery coke ovens to meet power requirements as well as to reduce emission.
Source: Ministry of steel 08-09

Risk and Threat Analysis in the Steel Industry
1. Prolonged global recession which had drastic effects on the steel industry in 2008-09. 2. Dumping by competitors :Influx of cheap (and probably low quality) imports as neighboring countries will try to look for export market to unload their inventory surplus. 3. Bank credit facilities has be tightened putting pressure on working capital and may result in material procurement delays, longer collection periods, etc. 4. India is capable of producing steel at a good rate and also increase the volume of production but there is not enough land available to support such activities and increasing size of population .

Contd
• Export duties on bars and rods of non-alloy steel increased from 10% to 15% • An ad-valorem export duty of 15% levied on iron ore of all categories and grades.

Source: Ministry of steel 08-09

PEST Analysis
• Political Factor
• The government investments in infrastructure such as rail, highways, dams, power plants and ports are critical prime movers for steel demand. • Facilitating movement of raw materials other than coal through finalization of wagon requirements and ensuring an un-interrupted supply of raw materials to the producers. • Regular interactions with entrepreneurs proposing to set up new ventures, to review the progress of implementation and assess problems faced. • Identification of infrastructural and related facilities required by the steel industry.

Contd

Addressing the problem of shortage of technically qualified manpower to sustain development and growth of the iron and steel industry in India. • The organization of Steel Consumer Council under the Chairmanship of the Hon’ble Steel Minister provides a forum for interaction of all producers and consumers of steel in the country. • Environmental norms imposed by the government significant impact, estimated to be around 15% of project cost. Providing linkage for raw materials, rail movement clearance etc. for new plants and expansion of existing ones.
Source: Ministry of steel 08-09

Economic Factor
• Indian steel industry suffers from low productivity of labor but high capital, energy and transportation cost. • To enhance competitiveness of the Indian steel to industry include investment towards technology up gradation. • Automation in process routes, optimum capacity utilization, improved maintenance practices, extensive mechanization. • Reduction/ dismantling of tariff barriers, partial float of the rupee on trade account, access to best-practice of global technologies and consequent reduction in costs – all these enhanced the international competitiveness of Indian steel in the world export market

Social Factor
• Quality :
Installation of energy recovery ovens to meet power requirements as well as to reduce emission. • Use of Direct Reduced Iron (DRI)/Sponge iron in steel making • Reducing coke consumption in blast furnaces and improving productivity coke rate in some of the blast furnaces is less than 500 kg/tonne hot metal and productivity exceeds 2 tonnes per cubic metre per day as that of 850 kg of coke per tonne. • steel making technologies/ practices and secondary refining technologies such as ladle metallurgy, vacuum degassing etc., it is now possible to produce steel of much lower inclusion and much lower content of oxygen, nitrogen and hydrogen.
Source: Ministry of steel 08-09

Contd
• Efforts to reduce energy consumption and emissions: The international norm of energy consumption is 4.5 to 5.5 Giga calories per tonne of crude steel. • With adoption of modern technology and equipment, beneficiation of raw materials and use of high grade imported coking coal, Indian Steel plants have been able to achieve energy consumption at the level of 6.5 to 7.0 Giga Calories only. • Steps such as afforestation, installation of pollution-control equipment are likely to abate the pollution emanating from steel industry
Source: Ministry of steel 08-09

Technological Factor
• Development in Iron & Steel sector” has been approved with a budgetary provision of Rs. 118 crores for implementation in the 11th five year plan for path-breaking technologies in an environment friendly manner. • To encourage and step up R&D investment in the steel sector, Government of India, Ministry of Steel has been extending financial assistance from the interest proceeds of Steel Development Fund (SDF) and has approved 59 R&D projects costing Rs. 408 crores, of which SDF contribution is Rs. 165 crores.

Source: Ministry of steel 08-09

Rules and Regulations framed by Government
• Action taken to control inflation in the steel sector
 Reduction in Custom Duty in respect of non-alloy steel products and Zinc, Metcoke and Ferro alloys.  The Counter Vailing Duty (CVD) on TMT rods and bars was reduced from 14% to NIL.  Export duty was imposed on the following steel categories w.e.f. May 10, 2008:

Action taken to control demand and supply of steel:
• Action taken in October-November 2008 consequent upon the global financial crisis: • Export duty on steel exports withdrawn . • Duty Entitlement Pass Book benefit restored on steel exports . • Import duty @ 5 % imposed on import of nonalloy steel . • Excise duty on steel products reduced from 14 % to 10 % . • Excise duty on steel has been further reduced to 8 %.

• • • • •

Action taken to facilitate conservation of iron ore resource   Following rates of duty were imposed on iron ore
exports in the Finance Bill 2007-08: Iron ore fines (iron content upto 62%) — Rs. 50 Per Metric Tonne (PMT) Iron ore fines (iron content 62% and above) — Rs. 300 PMT Iron ore lumps (all sorts) — Rs. 300 PMT Iron ore concentrates (all sorts) — Rs. 300 PMT

Foreign investments and private sector participation:

  signed in various 222 MoUs have been
states with intended capacity of around 275.70 million tonnes

• Role of the Ministry of Steel
• the Ministry of Steel had played an important role in taking the steel industry forward in this phase. • pre-de-regulation • the post-de-regulation period

Policy framed by Government
• Liberalisation of Industrial Licensing Policy • Introduction of Industrial Entrepreneurs’ Memorandum(IEM) • Liberalisation of the Locational Policy • Policy for Small Scale Industries • Non-Resident Indians Scheme • Electronic Hardware Technology Park (EHTP)/Software Technology Park (STP) scheme • Policy for Foreign Direct Investment (FDI)

Players in the Industry
• • • • • • • • • • • • Steel Authority of India Limited. Tata Iron and Steel Company Ltd. Jindal Iron and Steel Company Limited. Essar Steel Ispat Industries Limited Sunflag Iron and Steel Industry Shah Alloys Limited MUSCO VIZAG Indian Iron and Steel Rashtriya Ispat Nigam Limited (RINL) JSW Steel Limited

Cont…
 Steel Authority of India Limited
 leading steel-making company in India.  Production Capacity of SAIL is 3.5 MT.  Company incorporated on January 24, 1973. Tata Steel Limited  World's 6th largest steel company.  Production Capacity of SAIL is 5.37MT.  Founded by Jamsetji Nusserwanji Tata in the year 1907 as Tata Iron and Steel Company (TISCO) and later its renamed to Tata Steel Limited.

Cont…
JSW Steel Limited  India's second largest private sector steel maker.  Incorporated as Jindal Vijayanagar Steel Limited on March 15, 1994.  Production Capacity of JSW Steel Ltd is 3.5 MT. Essar Steel Limited  Bombay-based Essar group controlled by the Ruias.  Commenced operations of specialised construction in Jun.'76 as Essar Constructions.  Production Capacity of EssarSteel Ltd is 3.3 MT.

Market Share of Various Players in Industry

Source: Ministry of Steel

Position of India with other Countries
Country China Japan United States Russia India South Korea Germany Ukraine Brazil Italy Source: Ministry of Steel Rank 1 2 3 4 5 6 7 8 9 10

Industry Performance (Financial)
 RATIO ANALYSIS: “Ratio represents the quotient relationships between two relevant variables of the financial statements & individual item to group item or a group item to group item, which develop the meaningful relationships between these two set of variables.”
 IMPORTANCE:

 Comparison with ideal ratio
 Comparison with past ratios  Help of some related ratios  Comparison with ratios of other firms

Earning per share

COMPANY year Essar steel Ispat Ltd. Rinl Steel Authority Of India Ltd. Tata Steel Ltd.

Earning per share 2009 7.34 1.95 15.18 65.61 2008 3.08 -4.36 3.95 17.7 60.56 2007 3.6 -0.86 2.96 14.70 73.84 2006 7.67 -6.49 2.55 9.43 62.56 2005 4.20 5.22 16.11 62.15

Debt equity Ratio

COMPANY

Debt equity Ratio 2009 2008 2007 2006 2005

Year

Essar steel

1.08

0.99

1.38

4.55

Ispat Ltd. Rinl Steel Authority Of India Ltd. Tata Steel Ltd.

9.04 0.39 0.26 1.31

11.65 0.58 0.13 1.07

13.88 0.64 0.21 0.67

13.66 0.75 0.34 0.26

4.33 1.51 0.55 0.38

Gross profit Ratio

COMPANY

Gross profit Ratio 2009
14.37

Year Essar steel

2008
14.81

2007
16.95

2006
16.42

2005

Ispat Ltd. Rinl

5.76

7.55 23.35

12.95 20.31

-4.25 20.20

17.41 30.30

Steel Authority Of India Ltd. Tata Steel Ltd.

17.48 33.69

25.10 37.70

24.56 34.91

18.96 33.76

32.60 36.83

Fixed assets turnover Ratio

COMPANY

Fixed assets turnover Ratio

Year Essar steel

2009
0.76

2008
0.73

2007
0.59

2006
0.59

2005

Ispat Ltd. Rinl

0.60

0.63 1.02

0.57 0.89

0.44 0.82

0.75 0.84

Steel Authority Of India Ltd. Tata Steel Ltd.

1.35 1.22

1.31 1.20

1.16 1.09

0.96 0.98

1.03 1.11

Current Ratio

COMPANY

Current Ratio 2009 2008
1.41

Year Essar steel Ispat Ltd. Rinl Steel Authority Of India Ltd. Tata Steel Ltd.

2007
1.09

2006
1.21

2005
1.97

1.04 3.52 1.82 0.97

1.25 4.36 1.73 3.92

1.58 4.33 1.59 1.77

1.30 3.82 1.23 0.72

2.16 3.52 1.18 0.71

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