Financial Analysis

PRESENTED BY –:

H A R S H I T A S AWA
Company Overview

 JSW Steel is primarily engaged in the business of manufacture and sale of Iron and Steel Products.

 The company aims to expand its crude steel capacity from 18 MnTPA in FY20 to 45 MnTPA within the next decade.

 In 2021, the company completed the acquisition of BPSL and became the largest steel producer in India.

 The company is the owner of single largest steel plant in India with a capacity of 12 MnTPA.
 Solvency Ratio
Particular Nr. Dr. F.Y 2020 F.Y 2021
Debt to Equity Debt Equity
2.18times 1.83 times
Interest Coverage EBIT Interest
2.06 times 4.42 times

1 .The debt-to-equity ratio shows the percentage of company financing that comes from creditors and investors. A higher debt to equity
ratio indicates that more creditor financing (bank loans) is used than investor financing (shareholders).
The debt-to-equity ratio has decreased from 2.18 to 1.83, which means the financing has increased by the shareholders and the debts
have decreased which is a good sign.

2. The interest coverage ratio is used to determine how easily a company can pay interest on its outstanding debt. A high ratio
indicates that a company can pay for its interest expense several times over, while a low ratio is a strong indicator that a company may default
on its loan payments.
Ratio has been increased from 2.06 to 4.42 which a good sign for a company
 Liquidity Ratio
Particular Nr. Dr. F.Y 2020 F.Y 2021
Current Ratio CA CL
1.42 1.13
Quick Ratio QA CL
1.09 0.82

1. The current ratio indicates a company's ability to meet short-term debt obligations.
It is decreasing from 1.42 to 1.13 which is not major concern .

2. The quick ratio measures a company's capacity to pay its current liabilities without needing to sell its inventory or obtain
additional financing (liquidity assets). The higher the ratio result, the better a company's liquidity and financial health; the lower the
ratio, the more likely the company will struggle with paying debts.
The ratio is decreasing which from 1.09 to .82 which may be alarming sign for company.
 Profitability Ratio
Sr. Particular Nr. Dr. F.Y 2020 F.Y 2021

1. GP Margin GP Sales
19.52% 27.27%
2. PAT Margin PAT Sales
8.23% 11.86%
3. Return on Assets PAT Assets
4.30% 6.30%
4. Return on Equity PAT Equity
13.80% 17.86%

1. The gross profit margin ratio shows the percentage of sales revenue a company keeps after it covers all
direct costs associated with running the business.
There is major increase in G.P margin from 19.5% to 27.2% that is a good sign for a company It show the
company has more cash to pay for indirect and other costs such as interest and one-time expenses.

2. It is the percentage of revenue remaining after all operating expenses, interest and taxes have been
deducted from a company's total revenue. There is increase in PAT margin from pervious year about 3.5% and
 High after-tax profit margin generally indicates that a company runs efficiently, providing more value in the form
of profits to shareholders
3. Return on assets is a profitability ratio that provides how much profit a company can generate from its assets. Compare to pervious
year ROA has been increased from 4.30% to 6.30% . A ROA that rises over time indicates the company is doing a good job of increasing its
profits with each investment Rupees it spends. A falling ROA indicates the company might have over-invested in assets that have failed to
produce revenue growth, a sign the company may be in some trouble.

4. Return on equity is used chiefly to evaluate corporate strength and efficiency. It's a measure of overall profitability, and of how well the
company's leadership manages its shareholders' money. Higher the ratio more shareholder will attract towards company.
 Activity Ratio
Sr. Particular Nr. Dr. F.Y 2020 F.Y 2021

1. Total Asset Turnover Sales Total Assets

.52 times .51 times
2. Fixed Asset Turnover Sales Fixed Assets
1.27 times 1.36 times
3. Working Capital Sales CA less CL
Turnover 5.18 times 15 times
4. Collection Period Debtor Per day Sales
22 days 21 days
5. Inventory Holding Period Inventory Per day COGS
130 days 160 days
6. Supplier Payment Period Creditor Per day Purchase
77 days 77 days

1. Measures the efficiency with which a company uses its assets to produce sales.
Generally, a higher ratio is favored because there is an implication that the company is efficient in generating sales or
revenues from assets. This ratio is similar both years

2. The fixed asset turnover ratio is a metric that measures how effectively a company generates sales using its fixed
assets. A higher ratio implies that management is using its fixed assets more effectively. A declining ratio may indicate
that the business is over-invested in plant, equipment, or other fixed assets.
This ratio get negligible increase from previous year .
3. Working capital turnover measures how effective a business is at generating sales for every Rupees of working capital use. A
higher ratio indicates greater efficiency. In general, a high ratio can help your company's operations run more smoothly and limit the need
for additional funding.
This ratio has witnessed a big rise from 5.18 to 15 times which indicated company is using its working capital very effectively from
previous year .

4. The collection period has no major change in it means there no change in policy of credit sales period .

5. There was increase in sale in this year , so inventory holding period should go down , but there is increase in holding period from 130
days to 160 days .

6. There is no change in payment period for supplier that is a good sign for a company . Even in pandemic they are not taking more time
to pay their supplier .
 Profit & Loss
  FY20 FY21
Sales 1.0 1.1
Other Income 1.0 .3
Expenses 1.0 .99
Gross Profit/ EBITDA 1.0 1.5
Depreciation 1.0 1.07
EBIT 1.0 1.89

Trend Interest
PBT
Tax
1.0
1.0
1.0
.88
2.34
3.8

Analysis PAT

Balance Sheet  
1.0

 
1.58

  FY20 FY21
Fixed assets (net of depreciation) 1.0 1.02
Capital Work In Progress 1.0 1.20
Investment 1.0 2.07
Other Assets 1.0 0.96
Total Assets 1.0 1.09
 
Equity share capital 1.0 1.0
Reserve & surplus 1.0 1.22
Long-term borrowings 1.0 0.93
Current liabilities 1.0 1.21
Total Liability 1.0 1.09
 Profit & Loss
  FY20 FY21
Sales 100% 100%
Other Income -1.10 % .36%
Expenses 80.4 % 80.04%
Gross Profit/ EBITDA 18.4 % 27.0%
Depreciation 5.48 % 5.3%
EBIT 13.00 % 22.2%

Common Interest
PBT
6.25 %
6.67 %
5.04%
17.2%

Sizing
Tax 1.55 % 5.3%
PAT 8.2 % 11.8%
Balance Sheet
   

  FY20 FY21
Fixed assets (net of depreciation) 41.41% 40.0%
Capital Work In Progress 19.7% 21.7%
Investment 5.0% 9.3%
Other Assets 33.8% 30.0%
Total Assets 100% 100%
 
Equity share capital 0.24% 0.24%
Reserve & surplus 31.1% 35.0%
Long-term borrowings 44.8% 38.0%
Current liabilities 23.7% 26.3%
Total Liability 100% 100%