Presentation

A Comparative Study of Financial Performance And Growth Of TATA Steel Ltd

and JSW Steel Ltd.

BY

Abdulzahra slmanUnder guidence

Mrs.Madhura Bhagwat

IntroductionFinancial performance analysis refers to the process of determine financial strength and weakness of the firm by establishing strategic relationship between the items of the balance sheet, profit and loss account and other operative data.

Objectives of research To analysis the financial statement of JSW Steel Ltd and TATA Steel Ltd.To make a comparative analysis of financial performance of companies under study To explain the different financial analysis ratios and apply it to companies under studyTo identify similarities and variations in performance of companies under study.To study the percentage of company’s growth and compare between themTo give suggestions for improvement in performance of the companies under study.

Research Methodology Chapter 1- Nature and scope of the study.

Chapter 2- Concept of financial performance.

Chapter 3- Ratios analysis as a technique of measuring financial performance.

Chapter 4- Profile of the companies under study. Chapter 5 - Analysis and interpretation of data.

Chapter 6- findings and suggestion.

Concept of financial performance Financial performance refers to the degree to which financial objectives are being or have been accomplished.It is the process of measuring the result of a firm’s policies and operation in monetary term.Positive of financial performance in business activities of an entity will lead to high profit, increase reserve and goodwill is the stockmarket.

Ratio analysis as a technique of measuring financial performance

Ratio is a mathematical relationship between any two inter-related variables.

. Ratio is designed to show how one number is related to another. Ratio analysis is an instrument for diagnosis of the financial health of an enterprise.

. In financial analysis, a ratio is used as an index for evaluating the financial position of the concern

Types of ratio

Profitability ratios Liquidity ratios Leverage ratios Turnover ration/activity ratios or

efficiency ratios

Analysis And Inerpretation Of Data

PROFITABILITY RATIO

2010 2011 2012 2013 20140

5

10

15

20

25

JSWTATA

×100Net profit ratio

Operation profit ratio

2010 2011 2012 2013 20140

5

10

15

20

25

30

35

40

JSWTATA

×100

Return on Capital Employed

=

JSW 31-Mar-10 31-Mar-11 31-Mar-12 31-Mar-13 31-Mar-14

EAT+Interest 2881.66 2705.85 2812.27 3525.7 4074.63

capital employed 30878.28 41558.38 50591.11 54615.35 68425.68

RCE Ratio % 9.332320324 6.510961207 5.55882249 6.45551113 5.95482573

TATA 2010 2011 2012 2013 2014

EAT+Interest 6554.48 8166.18 8621.84 4650.4 6939.74

capital employed 73232.39 89551.7 96191.06 101876.93 111040.41

RCE Ratio % 8.950247288 9.118955866 8.96324461 6.91004332 6.24974277

Return on Equity (ROE)

×100

JSW 31-Mar-10 31-Mar-11 31-Mar-12 31-Mar-13 31-Mar-14

Profit after tax 2022.74 2010.67 1625.86 1801.22 1334.51

net worth 9709.23 16695.89 18497.49 19937.37 24284.18

ROE % 20.83316597 12.04290397 8.78962497 9.0343912 5.49538836

TATA 2010 2011 2012 2013 2014

Profit after tax 5046.8 6868.69 9857.35 5062.97 6412.19

net worth 36961.8 46766.43 52621.36 55209.68 61147.99

ROE % 13.65409693 14.68722329 18.7326021 9.17043895 10.4863463

Earnings Per Share

2010 2011 2012 2013 20140

20

40

60

80

100

120

JSWTATA

×100

Earnings yield

=

2010 2011 2012 2013 20140

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

JSWTATA

LIQUIDITY RATIO

Current ratio

JSW Steel Ltd. 2009-10 2010-11 2011-12 2012-13 2013-14

Current assets 10188.37 8934.27 14346.61 14322.34 14998.81

current liabilities 10064.73 12676.45 17437.82 15559.92 20671.6

current ratio 1.012284483 0.704792746 0.822729561 0.920463601 0.725575669

TATA Steel Ltd. 2010 2011 2012 2013 2014

Current assets 12246.69 18113.02 12864.5 11530.6 11564.6

current liabilities 8999.61 13095.89 16903.64 16488.65 18881.78

current ratio

1.3608023

01

1.3831072

19

0.76104909

9 0.69930528

0.6124740

36

Quick Ratio

JSW Steel Ltd. 2010 2011 2012 2013 2014

quick assets 2973.75 6049.96 9167.53 9523.24 8802.24

current liabilities 10064.73 12676.45 17437.82 15559.92 20671.6

quick ratio 0.295462471 0.477259801 0.52572684 0.612036566 0.425813193

TATA Steel Ltd. 2010 2011 2012 2013 2014

quick assets 2453.99 3953.76 4858.99 5257.94 6007.81

current liabilities 8999.61 13095.89 16903.64 16488.65 18881.78

quick ratio 0.272677372 0.301908461 0.287452288 0.318882383 0.318180277

Cash ratio

2010 2011 2012 2013 20140

0.1

0.2

0.3

0.4

0.5

0.6

0.7

JSWTATA

Leverage Ratios

Debt ratio

2010 2011 2012 2013 20140

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

JSWTATA

Debt Equity Ratio

2010 2011 2012 2013 20140

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

JSWTATA

Total outside liabilities to total assets ratio

JSW 31-Mar-10 31-Mar-11 31-Mar-12 31-Mar-13 31-Mar-14total liabilities 21171.94 24333.11 32093.62 34677.98 44141.5total assets 30878.8 41558.38 50591.11 54615.35 68425.68TL To TA 0.6856465 0.585516 0.634373 0.6349493 0.645101371TATA 2010 2011 2012 2013 2014total liabilities 36270.59 41107.09 41294.7 44392.25 44392.25total assets 73232.39 89551.72 96191.06 101876.93 111040.41TL To TA 0.4952807 0.459032 0.429299 0.4357439 0.399784637

Interest Coverage Ratio

2010 2011 2012 2013 20140

1

2

3

4

5

6

7

8

9

JSWTATA

Turnover ratio / Activity ratio / Efficiency ratio

Inventory turnover ratio

JSW 31-Mar-10 31-Mar-11 31-Mar-12 31-Mar-13 31-Mar-14Cost of GS 13929.58 18889.71 21365.67 23098.37 27756.11average stook 2585.77 3362.09 4658.75 4989.09 5497.84inventory TR 5.3870143 5.618443 4.586138 4.6297762 5.048548157TATA 2010 2011 2012 2013 2014Cost of GS 16396 18162.27 11050.43 13534.39 13548.24average stook 2661.14 3515.76 4406.38 5058.47 5632.88inventory TR 6.1612692 5.165958 2.507825 2.6755897 2.405206573

Debtors turnover ratio

2010 2011 2012 2013 20140

10

20

30

40

50

60

70

80

JSWTATA

Analysis for result of financial performance for the companies

It in net sales’valume

2010 2011 2012 2013 20140

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

JSWTATA

Growth analysis of the companies under study

increase of capital employed

2010 2011 2012 2013 20140

20000

40000

60000

80000

100000

120000

JSWTATA

There is increase in JSW’s debt at 102%. It automatically led to an increase of the interest at 219%, this finally led to reduction of the net profit at (-34%), and earnings per share.While TATA’s net profit increased at 27% during the last five years , and interest at 50.6%, JSW had an increase in the current liabilities at 171.2% during the periodWhile TATA had an increase in current liabilities at 109.8% during the periodJSW had increasing in company’s debt at 108%,There was an increase in share capital of JSW last year at 89.5%, and increase of capital reserve i.e. 44%.For TATA ,there is increase in debt of company at 74.6% for last 5 years.

Findings

TATA’s share capital increased at 9.5%, and capital reserve increased at 66.8% in first 2 years of periodDebtor turnover ratio for JSW decreased from 44.5 times to 22.1 times during the periodTATA’s debt turnover ratio was fine till 2010-11which reached 68.1 times yearly, and reduced to 53.2 in last 3 yearsJSW was in an expansion phase in its sales which increased at 148.8% during the periodTATA got marginal expansion at 66.7% in its sales during the period

Findings

•JSW had expanded its capital employed at 121% ((from 30878.28 to 68425.68 crores)). This growth came from an increase of equity at 150%, and liabilities at 64.5% •TATA had growth in capital employed at 98.2%.•TATA’s growth was in slower index, but the company maintained the good financial position, while JSW had faster index growth, but it has come with increase in financial risk.•There was a reduction in global demand for iron steel in last 4 years, which affected upon JSW’s financial position more than TATA’s financial position.

Findings

Suggestion

JSW steel should try to repay a large part of the debt, at the earliest. This will lead to reduced interest burden and enhanced profitability.

. JSW must only expand to an extent where the increased production can be sold in local and global markets

JSW must try to increase its market share, so that the increased production can be sold and generate profits.

Suggestions

JSW should review its debtor’s policy to control its debt and avoid high bad debt in future.

JSW should maintain more cash and marketable securities which will enable the company to face any unexpected problem or contingencies in future.

Tata has been adversely effected by adverse macro-economic condition, it has to look for alternative market whether than domestic or global market,

SUGGESTIONS

Tata Steel should continue its good performance and try to increase its market share

Tata should get high profit and high dividend as compared to competitors to improve its share price in security’s market.

Tata should make better utilization of its inventory and have proper inventory management system in place. This will lead to increase in efficiency

SUGGESTIONS

Both of Tata steel and JSW steel are in global market level, these led the company’s sales to influence in any crisis happened in any market of its production. Moreover, in any developed countries, the infrastructure is at a top level. Hence, the demand on iron steel is very less, so both companies should look up to alternative market in developing countries

Conclusions Cyclical natural effects all players in steel industry, but it is in the management’s hands to make efforts to maintain profitability, liquidity and insolvency possession. This well lead to enhanced performance of the company and will ensure the sustainable growth of the company

Reference “financial reporting & analysis” by Lawrence, Daniel and Johnson, Pearson publications, 2008“Interpreting and analysis financial statement” by Karen &Mark Holtzman, Pearson Publications,2012“Determination of financial performance” A Meta-analysis, by Neol capon, John Farley, Scott Hoeing “financial performance analysis” by Pawan Kumar, 2012