Group Research Project Jindal Steel Works Ltd

9/10/2015 Group Research Project Jindal Steel Works Ltd. & Steel Authority of India Ltd.

Group 2, Section C1 Great Lakes Institute of Management, Chennai

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Section: C1

Group Number: 2

Group Members:

1. Ankita Dhar - FT163013 2. Anisha Kashyap - FT163012 3. Gunjan Kaur Jabbal - FT163026 4. Divya Ogoti - FT163020 5. Himanshu Malik - FT163031 6. Himanshu Aggarwal - FT163029 7. Gautam Gupta - FT163024 8. Abhinav Choudhary - FT163003

Executive Summary

This report provides an elaboration of the steel industry of India as well highlights the comparison parameters of the current and prospective profitability, liquidity and financial stability of two major players of the industry – Jindal Steel Works Ltd. and Steel Authority of India Ltd. The analysis of the players includes trend prevalent in the industry, horizontal and vertical analysis of the organizations as well as ratios such as Interest Coverage, Solvency, Profitability and Performance. Other calculations include Z-Score analysis, Financial Statements Case analysis and Total Assets and earnings per share to name a few. All calculations can be found in the attached excel files. Results of data analyzed show that SAIL has had a drastic downturn for the last five years whereas JSW has improved its value in the market by adoption of certain new technologies at timely intervals.

The report finds the prospects of the companies in their respective current positions are not positive. The major areas of weakness require further investigation and remedial action by management. Some challenges that are being faced by the company as discovered during the Qualitative Analysis of the organizations are,

 There have been multiple fluctuations in the market and the numerous possibilities of China's entrance into the exporting markets  Thought the domestic demand has remained untapped and unfulfilled, there is a reduced demand for steel across the world, due to the current economic scenario. Taking into consideration the above challenges and understanding the financial as well as non-financial statuses of both the companies, some of the recommendations discussed in the report are as follows:

 Both the companies have the capacity to improve their respective cost structures to improve their interest coverage ratios respectively  Jindal Steel Works needs to reduce the eternal risk levels by the acquisition of captive mines as that is one of the major weaknesses that the organization faces  There are multiple untapped rural segment demands, that the organizations are still not focusing upon  The industry looks optimistic due to the increasing demands for infrastructure and developments across the country.

Economic Analysis Current Economy Analysis of India

• India to see double digit growth around 8-10% in GDP in coming years. • Current account deficit to decline to about 1% in 2015-16 • India need to adhere to fiscal deficit of 4.1% of GDP to aim for 3% • India needs to be committed to fiscal consolidation to enhance revenue generation. • More reforms need to be created for anvil, GST to expand direct benefit transfers to be effective. • Food grains production will exceed last 5 year average by 8.5 million tons. • Niti Ayog to enhance fiscal federalism. • External sectors will be gaining strength. • Balance required between “Make in India” and “”Skilling India” • Services sector negotiations to be done at WTO which is crucial for removing market access barriers. • Manufacturing and services are sectors equally important to grow. • PPP model to be revitalized to revive reinvestment. • BSE Sensex trading more than 200 points higher as per government tables • Growth at market prices seen between 8.1-8.5 pct. in 2015/16 on basis of new GDP calculation formula • Inflation likely to be below target of central bank by 0.5 – 1 % • Gold imports into India, the world’s top consumer, jumped 55 per cent to 57.2 tons in January, ahead of an expected cut in the import duty in Saturday’s Union Budget.

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Future Trend of Economy

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Future Performance of SAIL based on Economic Trends

• March quarter performance of JSW has been negatively affected by high input costs, low demand and pricing pressure. • Impairment also seen in abroad subsidiaries. • Low demand and high input cost will lead to low production volumes. • Operating income can drop per ton of steel sold. • The sharp drop in operating income was due to lower realizations and lower operating. • Reliance securities remain optimistic on JSW’s future performance despite of last quarter low performance. • Along with domestic pressures JSW is forced to face pressure from foreign subsidiaries. • Above factors can lead to fall in consolidated revenue and consolidated operating profit decline. • Only silver lining for JSW is that it believes that if systematic demand for steel would gradually pick up, their business would stabilize.

Future Performance of JSW based on Economic Trends

• Should look forward to expansion of mines so that they do not have to procure ores from outside market to meet demand. • To avoid falling market share, SAIL should use strong marketing campaigns. • Should resolve environment and forest clearance issues, and Sail's modernization and expansion plan issues. • Should integrate and operationalize upstream and downstream production facilities in short span of time. • Depressed steel prices will put lot of pressure on NRS (Net Realized sales), therefore SAIL should increase their share of value added steels. • Should undertake cost awareness initiatives when it comes to procuring funding for expansion plans. • It is pertinent that techno-economics of production are internationally benchmarked, and the latter can't happen till the capitalization of all of the Sail's production units are balanced.

Industry Overview Background: Indian Iron and steel industry is a century old. New industrial policy adopted by government of India has opened it up for investment from private sector. Imports and FDI are other boosting factors. Huge demand is coming from automobile sector, real estate and infrastructure sector.

Current Scenario: Steel sector in India accounts for nearly 2% of country’s Gross Domestic Product and employs around 600,000 employees.

Consumption: India is second to China when it comes to consumption of iron and steel. However with rising incomes and iron being raw material in many other industries like automobile infrastructure etc., demand of Iron and steel is bound to rise. However India’s current per capita finished steel consumption is at 52 Kgs which is well below the world average of 203 Kgs.

Industry Structure: Iron and Steel industry can be divided mainly into 2 main sectors mainly public and private. However on the basis of method of production used, industry can be divided into two different producers.

 Integrated Producers: These are those who convert iron ore into steel. Big players under this category are SAIL (Steel Authority of India Limited), TISCO (Tata Iron and Steel Company Limited) and RINL (Rashtriya Ispat Nigam Limited)

 Secondary Producers: These are mini plants who make steel by melting scrap or sponge iron. Players in this category are Essar Steel and Ispat Industries.

Investments:

As per the data released by DIPP (Department of Industrial Policy and Promotion) Indian mining and metallurgical industries have got Foreign Direct Investment of US$1669.49 million US$8527.34 million respectively in period of April 2000 to February 2015.

Challenges: o Un-remunerative prices o High cost of capital o Low labor productivity o High costs of basic inputs and services

Opportunities: o Unexplored rural market o Export market penetration

Production Scenario

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Imports of Iron and Steel

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Exports of Iron and Steel

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Five trends in India’s Steel Industry  Consolidation: Many mergers and acquisitions would be seen in order to get hold of land and regulatory policies. o In December, JSW Steel agreed to buy a controlling stake in loss-making rival Ispat Industries that would push its capacity to the top most position. It also agreed to buy Bellary Steel.  Doggedness of foreign firms: There have been lot of delays in success of joint venture of foreign and Indian players due to land delays in approval. However these have discouraged none. . Japan's JFE Holdings in talks with JSW for a stake buy. . Japan's Kobe Steel and SAIL in talks for a joint venture. . South Korean POSCO got an approval for its 12 million ton plant in eastern Orissa state last month after waiting since 2005, and its plans for another plant in Karnataka and a joint venture with Steel Authority of India (SAIL) in Jharkhand remain.  Relocation of Smaller Plants: Investors are looking towards the west coast that has less iron ore, but is closer to Africa from where coking coal can be imported. o JSW has chosen Karnataka state in the south for making new steel plants, away from east India that is mineral rich, but is suffering due to land-acquisition problems.  Making use of low grade raw materials: Initially blast furnaces used to take iron ore lumps and coking coal. But now technology will enable them to use cheaper iron ore fines and non-coking coal which is available in India in abundance. o SAIL's joint venture plan with POSCO is for using the Finex technology that can use iron ore fines directly in the blast furnace.  Environmental awareness: New mining bill and stricter environmental rules have made companies to 26% of their profits to companies who take care of environment and society’

Company Profile

Steel Authority of India Limited -A Maharatna

SAIL is India's largest steel producing company with a turnover of Rs 50,627 crore. Incorporated in the year 1973, the company is a Large Cap company (having a market cap of Rs 21396.12 Cr.) operating in Iron and Steel sector. The company is a fully integrated iron and steel manufacturer. It produces both basic and special steels for domestic construction, engineering, power, railway, automotive and defense industries and for sale in export markets. The business segments of the Company include five steel plants and three alloy steel plants of SAIL, two power joint venture companies: NTPC-SAIL Power Company Pvt. Ltd and Bokaro Power Supply Co. Pvt. Ltd, and one power subsidiary being SAIL-Jagdishpur Power Plant Limited (SJPPL). Vision To be a respected world-class corporation and the leader in Indian steel business in quality, productivity, profitability and customer satisfaction. Mission To value the opportunity and responsibility to make a meaningful difference in people’s lives. Organizational Structure of SAIL Strength of SAIL was 97897 in numbers (As on 31.03.2014).

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History

1960 The Alloys steel plant was installed at Durgapur in West Bengal with Japanese assistance. SAIL took over the management of Maharashtra Elektrosmelt Ltd. a small compact company, at Chandrapur, 1968 Maharashtra. 1973 SAIL was formed on 24th January, as a holding company for Steel and Associated input industries. 1974 SAIL International Ltd was incorporated to coordinate the export and import business. Durgapur Mishra Ispat Ltd., Bhilai Ispat Ltd., and Rourkela Ispat Ltd., were formed as fully owned 1976 subsidiaries of SAIL and took over the running business of Alloy Steels Plants, Bhilai steel Plant and Rourkela Steel Plant on transfer from HSL. Metallurgical & Engineering Consultants Ltd, Hindustan Steel Works Construction Ltd, National Mineral Development Corporation Ltd, Bharat Refractories Ltd, India Firebricks & Insulation Company Ltd, and 1978 Bharat Cooking Coal Ltd, were delinked from SAIL and the Indian Iron & Steel Company Ltd became a subsidiary of SAIL. 1980 27332471 shares allotted to the President of India. 1981 4439100 shares allotted to the President of India. 1982 439300 shares allotted to the President of India. 1983 2016442 shares allotted to the President of India. 1984 1605800 shares allotted to the President of India. 1985 2883360 shares allotted to the President of India. 1986 523100 shares allotted to the President of India. 1987 395200 shares allotted to the President of India. 1988 90000 shares allotted to the President of India. 1990 90000 shares allotted to the President of India. 199075400 equity shares of Rs 10 each transferred by Govt. of India (President) to Financial 1991 Institutions/Banks and Mutual Funds. 1992 4384445 shares allotted to the President of India. The Company issued bonds valuing Rs 795 crores by way of private placement to various financial 1993 institutions and banks. 1994 Two major schemes i.e. new sinter plant 3rd and expansion of oxygen plant 2nd were taken up. The Company issued non-convertible bonds valuing Rs 710 crores through private placements to various 1995 financial institutions, banks, trusts, etc. The company launched an Euro Issues of US $125 million offering 963390 Global Depository Receipts 1996 representing 144508500 equity shares (1 GDR = 15 share) at an issue price of US $12.975 per GDR. 1997 SAIL set up two finishing mills at Durgapur Steel Plant to convert huge number of semis The Company took up development of new iron ore, coal and limestone mines through joint ventures to 1998 increase steel output and fast-depleting reserves of these inputs. The management and trade unions of SAIL joined hands to make the loss-making subsidiary alloy steels plant 1999 at Durgapur in West Bengal viable. 14

Rourkela Steel Plant planned to increase its saleable steel production from 1.2 million ton to 1.7 million ton 2000 per annum by 2001-02. The Company launched a new voluntary retirement scheme for its employees with effective from 20th 2001 February. 2002 Mr. Deepak Parekh resigned from the Board of Directors of the Company. 2003 The Company’s e-business achieved Rs 100-cr business mark 2004 The Company paid back Rs 3,000 crore to FIs 2005 GAIL tied up with SAIL The Company appointed Shri. P K Sengupta, Professor Javaid Akhtar and Dr. Vinayshil Gautam as Part-time 2006 Non-official Directors on the Board of the Company. The Company appointed Shri. S S Ahmed, Executive Director, of the Company as Director (Commercial), on 2007 the Board of Directors of the Company. The Company appointed Shri. S P Rao, Executive Director as Managing Director, IISCO Steel Plant and 2008 Director on the Board of Directors of SAIL. The Company signed a Joint Venture Agreement with Coal India Ltd and NTPC Ltd to set up International 2009 Coal Ventures Pvt. Ltd for acquisition of coal mines overseas for securing coal supplies. 2010 The Company inked an agreement with Shipping Corporation of India Ltd. (SCI) for setting up a 50 Maharashtra Elektrosmelt Ltd , the 99.12% subsidiary of SAIL, merged with SAIL to manufacture steel 2011 products in India 2012 The Company signed a 50 2013 Company’s Board recommended a Final Dividend of Rs 2 per share. 2014 The Company Acquired Rio Tintos (2.6 Billion Tones coal resource) in Mozambique. Table 1 JSW Steel Ltd

JSW Steel Ltd, the flagship company of the JSW Group, is an integrated steel manufacturer with a capacity of 14.3 MTPA. Incorporated in the year 1994, the company is a Large Cap company (having a market cap of Rs 22808.89 Cr.) operating in Iron and Steel sector. The company offers the entire gamut of steel products - Hot Rolled, Cold Rolled, Galvanized, Galvalume, Pre-painted Galvanised, Pre-painted Galvalume, TMT Rebars, Wire Rods & Special Steel Bars, and Rounds & Blooms. They have manufacturing facilities at Toranagallu in Karnataka, Vasind & Tarapur in Maharashtra and Salem in Tamil Nadu. Vision Global Recognition for Quality and Efficiency while nurturing Nature and Society. Mission Supporting India’s Growth in Steel Domain with Speed and Innovation. Organization Structure of JSW Steel Limited Strength of SAIL was 11103 in numbers (As on 31.03.2014).

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History

The Company was incorporated on March 15, and the Certificate of Commencement of Business was 1994 received on July 8. 1995 The Company issued 3175, 00,000-14% secured redeemable partly convertible debentures of Rs 40. 1996 The Company slated first Corex unit for commissioning by October '97. The Company entered into a Joint venture with M/s Mysore Minerals Limited (A Government of Karnataka 1997 Undertaking) the Lease-holder of Thimmappanagudi deposits, to form Jindal Mysore Minerals Mining Company Private Ltd. Jindal Vijayanagar Steel Ltd formed a joint venture company, Vijayanagar Minerals Ltd, with Mysore 1998 Minerals, to explore mines in the region. 1999 The Company entered into an agreement with the Steel Authority of India for procuring slab. The Company has deferred its plans to float a $125-million global depository receipt issue to retire high cost 2000 debt. 2002 Krishna Deshika appointed as Company Secretary of Jindal Vijayanagar Steel. 2003 JVSL delisted equity shares from the Cochin Stock Exchange Ltd & Mangalore Stock Exchange. 2005 Company changed its name from Jindal Vijayanagar Steel Ltd. to JSW Steel Ltd. 2006 JSW gets new CEO. 2007 JSW Steel bought Jindal Saw's US plant. 2008 JSW Steel acquired Mining Concessions in Chile 2009 JSW Steel planned huge investments in India projects. 2010 JSW Steel won additional carbon credits. JSW Steel started a 50 joint venture with Japan-based Marubeni Itochu Steel Inc. (MISI) to set up a steel 2011 processing centre in North India. 2012 JSW Steel joined Top League in Indian Steel Sector. 2013 JSW acquired Heidelberg Cement India's grinding facility at Raigad, Maharashtra. 2014 JSW Steel acquired sponge iron maker Welspun Maxsteel Ltd in a deal worth more than Rs 1,000 crore. Table 2 16

Analysis of Operations

Steel Authority of India Ltd. SAIL majorly owns and operates in 5 Integrated Steel plants at Rourkela, Bhilai, Durgapur, Bokaro and Burnpur. It also has 3 special steel plants at Salem, Durgapur and Bhadravathi. At Chandrapur it owns a Ferro Alloy plant as well. The company is also planning to upgrade its facilities by expanding and modernizing programmers that will an emphasis of having a greener approach. The raw materials that are required by the plants are the iron ore. These requirements are met by the existing and new iron ore deposits that are there in Rajasthan, Chhattisgarh , Madhya Pradesh, Maharashtra, Odisha and Karnataka. Only 24 % of the requirements of iron ore are met by these domestic deposits, rest of the raw material are imported. Production Overview The Annual report of 2014-15 shows that Company achieved its highest ever Hot Metal production of 15.4 Million Tone (MT) surpassing its previous best of 15.2 MT achieved in 2007-08. Each and every Integrated Steel Plant of SAIL has achieved a breakthrough in operationalizing new units as stated below:

 Bhilai Steel Plant (BSP) has stabilized performance of the new Sinter Machine in SP-3 and new Coke Oven Battery-11 and has started trials in the new Rail Welding Plant which is a part of Universal Rail Mill.  At Durgapur Steel Plant (DSP), the new Bloom cum Round Caster has started trial production from Feb 2015 and is expected to stabilize soon.  At Rourkela Steel Plant (RSP), new Converter-C was commissioned and has been stabilized with maximum of 21 heats. Similarly, the new Caster has also been ramped up achieving a production level of 28 casts in a single day on 19/09/2014.  At Bokaro Steel Plant (BSP), new CRM-III has begun trials and will ramp up production after commissioning of auxiliaries.  At IISCO Steel Plant (ISP), Burnpur, new BF-5, new SMS (currently operating with 2 Converters and 2 Casters) and new Bar Mill have been commissioned and operation of Wire Rod Mill has been stabilized.

A growth of 2% was achieved in its Crude Steel production volume as compared to last year. The Company has also taken initiatives to reduce environmental footprint and enhance operational efficiency which have further led to a significant improvement in environmental parameters as well as in Techno-economic efficiency.

Power Average power requirement of SAIL Plants during the year was 1140 MW. This had increased by 60 MW from the previous year due to commissioning of expansion facilities at RSP and ISP. Captive Power Plants supplied about 61% of the total power requirement and balance 39% was purchased from outside, mainly grid utilities. The Company is in the process of upgrading Transmission & Distribution (T&D) facilities inside its Plants to facilitate handling of higher quantum of power requirement after on-going expansion and improve the reliability of power supply. The Company also plans to augment its power generation capacity by installing new Captive Power Plants and also by going into a joint venture with NTPC namely NTPC SAIL Power Company Private Limited (NSPCL). Jindal Steel Works Ltd. JSW owns and operates its steel plants at Vijayanagar, Salem, Dolvi, Vasind, Tarapur and Kalmeshwar. The company also operates internationally. It has tied up with JEF Steel Corporation Japan where it produces high quality automotive steel. In Republic of Chile, United States and Mozambique it has acquired mining assets and has also joined venture for setting up a steel plant at Georgia. Production Overview Annual reports of 2014-15 show that the Company has scaled its highest ever net production of 7MT as compared to 3.5 MT the previous year which enabled Raj West Power Limited (RWPL) plant to operate above its normative capacity at Barmer. Certain production highlights of the year are: • Vijayanagar Works has a capacity of 10 MTPA, is India’s first steel plant to use Corex technology to manufacture steel. Produced 9.7 MnT of hot metal, an increase of 7.2% over FY 2013-14. • The Dolvi Integrated Steel Plant with a capacity of 3.3 MTPA at a close proximity to a port beside the complex which can handle cargo of up to 10 MTPA. Highest ever annual production volumes were recorded during the year at the Sinter plant (~ 2.50 MnT) and Lime calcination plant (~ 0.32 MnT). • The Salem Works manufactures customized special steel long products for use in the automobile and energy sectors. It is India’s largest special steel manufacturing facility with a capacity of 1 MTPA. The cast production grew by 6% and the product production by 22% over the previous year. Power The company saw a significant increase in power generation of 8.4% i.e. of 1,048.4 billion units (BU). The thermal based power generation had fastest growth in generation at the rate of 10.83% while hydro based power generation was 129 BU during the period. Transmission Lines Transmission lines of 22201 ckm were added during the previous year in 440 kV and 765 kV segment. During the first three years of the plan period 55,956 ckm of (AC+HVDC) transmission lines have been added. Sector Outlook On a per capita basis India Consumes less than a fourth of what is consumed by China and less than a tenth of the amount consumed by US. But due to a weak demand environment, that was led by the slowing down of manufacturing sector the last few years, witnessed a tepid growth in power consumption.

Quantitative Analysis Ratio Analysis

Liquidity Ratio

Year COMPANY Mar'15 Mar'14 Mar'13 Mar'12 Mar'11 JSW 1.02 0.82 0.88 0.76 0.78 Current Ratio SAIL 0.68 0.79 1.01 1.22 1.21

Quick Ratio/acid JSW 0.67 0.71 0.69 0.54 0.49 ratio SAIL 0.55 0.62 0.68 0.82 1.35 Table 3  The liquidity ratio gives info about the ability of the company to feet its financial obligations  JSW seems to be in a better state when compared to SAIL  JSW’s current ratio has improved over the 5 years where as SAIL does not looks to be in a comfortable state

On the whole both the companies need to improve this ratio. Profitability Ratio

COMPANY RATIO Mar'15 Mar'14 Mar'13 Mar'12 Mar'11 Operating JSW Profit 17.74 17.89 17.02 17.75 19.56 Margin(% Operating SAIL Profit 10.18 8.39 10.34 13.04 16.37 Margin(%) Figure 23

 Operating margins have remained steady for JSW but they have fallen considerably for SAIL  This is a matter of concern for sail.

Profit Before JSW Interest 11.24 11.66 11.14 12.1 12.95 And Tax Margin(%) Profit Before SAIL Interest 6.16 4.62 7.04 9.33 12.33 And Tax Margin(%) Figure 24

 JSW’s profits are steadily rising whereas SAIL’s profits have dropped down drastically.

Gross JSW Profit 11.26 11.68 11.16 12.12 13.02 Margin(%) Gross SAIL Profit 6.3 4.71 7.2 9.66 12.88 Margin(%) Figure 25

 JSW’s profit has dropped by a little margin. Falling steel prices is the reason for it.  SAIL’s gross profit has dropped by a high percentage.

Return On Capital JSW 10.49 11.33 11.91 13.68 9.94 Employed( %) Return On Capital SAIL 5.43 4.6 6.67 10.91 12.88 Employed( %) Figure 26

 JSW is using both equity and debt well for profitable operations.  SAIL’s performance is poor here as well. SAIL’s market prices are subjected to fluctuations.  Acquiring of new projects is need of the hour for SAIL

Return on Assets JSW Excluding 922.12 875.96 764.83 738.2 -- Revaluatio ns Return on Assets SAIL Excluding 105.33 103.3 99.32 96.38 89.75 Revaluatio ns Figure 27

 JSW is utilizing its capacity to the maximum an thus has a higher net income as well  SAIL’s is on a downward journey. The news that SAIL is planning to modernize equipment is a ray of hope.

Return on Long JSW 10.71 12.47 12.48 14.32 -- Term Funds(%) Return on Long SAIL 6.78 5.47 7.66 11.87 15.1 Term Funds(%) Figure 28

Performance Ratio

COMPANY RATIO Mar'15 Mar'14 Mar'13 Mar'12 Mar'11 Dividend Payout 39.47 31.88 38.06 22.43 20.21 Ratio Net Profit SAIL Earnings Per Share 5.07 6.33 5.25 8.91 11.87 Book Value 105.33 103.3 99.32 96.38 89.75 Dividend Payout 12.43 22.01 12.58 10.47 13.78 Ratio Net Profit

Earnings Per Share 88.47 54.05 79.48 71.62 88.87

JSW Book Value 1,032.60 973.01 881.08 816.54 735.8 Figure 29

 In 2015, JSW has recorded the highest book value of shares over the past 5 years.  JSW is performing extremely well in a difficult economical environment  It has recorded highest sales and highest steel production over past a few years  SAIL’s market price has remained stable even though its performance is not very appealing. It is an opportunity for SAIL to turn things around

Solvency Ratio

JSW 1.06 1.09 0.86 0.69 0.74 Debt Equity Ratio

SAIL 0.65 0.57 0.52 0.4 0.54 Figure 30

Total Debt to Total Asset Ratio

Total Debt 25,761.23 24,974.98 16,543.79 12,302.22 10,747.33 Total Assets 51485.83 49,259.16 36,481.16 30,799.71 27,972.60 Ratio JSW 0.500355729 0.50701189 0.453488595 0.399426488 0.38420919

Total Debt 28,220.72 24,266.70 21,500.57 16,097.21 19,055.80 Total Assets 71,725.50 66,933.05 62,525.21 55,908.53 56,125.27 Ratio SAIL 0.39345449 0.36255183 0.343870416 0.287920466 0.339522643 Figure 31

 JSW has higher debt/equity ratio when compared to SAIL. This is an area of improvement for JSW. It is risky to have a ratio above 1  Solvency ratio is an issue with both the companies. Debts have considerably over past 5 years

Interest Coverage Ratio

EBIT 6553.91 6387.76 4595.81 4101.93 3477.46 Annual Interest Expense 2908.69 2740.13 1724.48 1186.41 695.18 JSW 2.253217084 2.33118867 2.665041056 3.457430399 5.002244023 EBIT 32325000 25650000 34739000 47708000 Annual Interest Expense 3901.37 3082.99 4176.11 6101.13 7374.67 SAIL 1454.23 967.64 747.66 677.7 474.61 2.682773702 3.18609194 5.585573656 9.00270031 15.53837888 Figure 32

 Interest coverage ratio is declining for both JSW and SAIL, giving impression of inability to pay the interest on debts  Caution needs to be exercised to see that it does not fall below 1.5 Attached below is the Excel Sheet for reference.

RatioAnalysis.xlsx

Z-Score Analysis

Edward I. Altman‘s basic Z score model for bankruptcy is used to calculate the Z scores. As one company is a private firm and another public, to keep simpler basic model is employed. Z score bankruptcy model: Z = 1.2T1 + 1.4T2 + 3.3T3 + 0.6T4 + .999T5 T1 (Working Capital/Total Assets) T2 (Retained Earnings / Total Sales) T3 (Earnings before Interest and Taxes / Total Assets) T4 (Market Value of Equity / Book Value of Total liabilities)

T5 (Sales / Total Assets)

YEAR JSW SAIL 2015 1.256570322 1.84510959 2014 1.246181637 1.89531524 2013 1.232528509 2.10681451 2012 1.306421572 2.34243697 2011 1.389941423 2.49760678 Table 4 Z-SCORE ANALYSIS

JSW SAIL

3 2.5 2 1.5 1 0.5 0 2015 2014 2013 2012 2011

Chart 2

 JSW’s Z score is in distress zone indicating a high probability of bankruptcy. To maintain its reputation and continue its production activities drastic steps are to be taken to improve it.  SAIL’s Z score falls in grey area, so it is acceptable

Attached below is the Excel Sheet for reference.

Z-ScoreAnalysis.xlsx

Common-Size Financial Statement Analysis Income Statement: JSW 2015 2014 2013 2012 2011 Sales 100% 100% 100% 100% 100% Expenses 81% 81% 82% 82% 80% EBITDA 20% 20% 19% 18% 21% Tax Expenses 2% 1% 2% 1% 3% Net Profit / (Loss) after Tax 6% 7% 6% 8% 9% Table 5 23

Income Statement: SAIL 2015 2014 2013 2012 2011 Sales 100% 100% 100% 100% 100% Expenses 80% 90% 88% 84% 80% EBITDA 11% 10% 12% 16% 20% Tax Expenses 1% 1% 2% 3% 5% Net Profit / (Loss) after Tax 4% 3% 5% 8% 10% Table 6

Balance Sheet JSW 2015 2014 2013 2012 2011 Shareholder's Funds 50% 49% 55% 60% 59% Debt 50% 51% 45% 40% 41% Fixed Assets 75% 76% 76% 88% 72% Current Assets 47% 40% 47% 52% 35% Table 7

Balance Sheet SAIL 2015 2014 2013 2012 2011 Shareholder's Funds 61% 64% 66% 71% 65% Debt 39% 36% 34% 29% 35% Fixed Assets 50% 40% 27% 31% 26% Current Assets 46% 46% 49% 55% 68% Table 8  JSW has recorded high EBITDAs past 5 years whereas the performance of SAIL has deteriorated over couple of years  JSW’s operational efficiency has improved and the recorded high net sales as well  JSW’s performance is good in spite of hostile economic conditions.  SAIL has low sales, its net income has not grown in last 5 years.  SAIL is affected by falling steel prices and low demand.

Attached below is the Excel Sheet for reference.

CommonSizeFinancial StatementAnalysis.xlsx

Financial Analysis Jindal Steel Works Ltd.

Capital Structure  The total number of shares increased from 187048682 to 241722044  The authorized capital has increased from Rs. 2000 crore to Rs 6015  Face value has remained at Rs 10  Issued capital is at Rs 241.72 crore Rs (Crore)

From To Class Of Authorized Issued Paid Up Shares Paid Up Face Paid Up Year Year Share Capital Capital (No’s) Value Capital 2014 2015 Equity Share 6,015.00 241.72 241722044 10 241.72 2013 2014 Equity Share 6,015.00 241.72 241722044 10 241.72 2012 2013 Equity Share 2,000.00 223.12 223117200 10 223.12 2011 2012 Equity Share 2,000.00 223.12 223117200 10 223.12 2010 2011 Equity Share 2,000.00 223.12 223117200 10 223.12 2009 2010 Equity Share 2,000.00 187.05 187048682 10 187.05 Table 9 Payout Policy  JSW steel has paid Dividends for last 5 years.  JSW had declared an Interim Dividend of 30% on the paid up equity capital of the Co. to be arrived at after giving effect to the Scheme of Arrangement & Amalgamation between the Co., Jindal Iron & Steel Co. Ltd. (JISCO) & Jindal South West Holdings Ltd. (JSWHL).  In 2015, the status is Rs.11.0000 per share, 110% of Dividend was paid.  The current share price is Rs 975.65 at a dividend yield of 1.13%  The company’s latest EPS is an Rs.57.75/per share. The P/E ratio is 16.9.The latest book value of share is Rs 1030.07 per share  The overall track record of JSW steel is good .It has consistently paid dividends

JSW STEEL 2011 2012 2013 2014 2015 Dividend % 1.2 1 1.4 1.5 1 Yield (EON) Dividend % 17 31.1 23.2 58.8 14.8 Payout Table 10 Investment Strategy  JSW is looking forward to invest around Rs 5000 crore on capital expenditure by the end of March 2016.  It is planning to shut down the plants in Kenya and UK which are nonoperational subsidiaries.  The ongoing projects include modernizing he plants at Vidyanagar and Dolvi. These projects are going on well and will be completed on schedule.  The company is targeting to increase its production capacity to 18.6MT by adding 4 MT so as to maintain market share of 13-14%  It has acquired Welspun Maxsteel to ensure that Dolvi plant has continuous supply of raw materials

Conclusion The investment strategy of the company looks very promising. With right acquisitions and modernizing the plants JSW steel will easily be able to reach its target Steel Authority of India Ltd.

Capital Structure  The total number of shares increased from 4130400545 to 4130525289.The increase is not significant  The authorized capital has remained stable at RS 5000 crore  Face value has remained at Rs 10  Issued capital is at Rs 4130.53 crore. It has remained constant over last 5 years

Authorized Issued Period - P A I D U P - Capital Capital Instrument Face From To (Rs. cr) (Rs. cr) Shares (no’s) Capital Value 2013 2014 Equity Share 5000 4130.53 4130525289 10 4130.53 2012 2013 Equity Share 5000 4130.53 4130525289 10 4130.53 2011 2012 Equity Share 5000 4130.53 4130525289 10 4130.53 2010 2011 Equity Share 5000 4130.4 4130400545 10 4130.4 2009 2010 Equity Share 5000 4130.4 4130400545 10 4130.4 Table 11 Payout Policy  SAIL has paid Dividends for last 5 years consistently though the financial conditions were not so promising.  In 2015, SAIL has value ofRs.0.2500 per share at 2.5% final Dividend  It also paid interim dividend at Rs.1.7500 per share (17.5%)  SAIL will pay 700 crore to government as Dividends

Year Mar ' 15 Mar ' 14 Mar ' 13 Mar ' 12 Mar ' 11 Dividend per share 2 2.02 2 2 2.4 Dividend payout ratio (net profit) 39.47 31.88 38.06 22.43 20.21 Dividend payout ratio (cash profit) 21.36 19.25 23.11 15.73 15.51 Dividend yield (EOY) 3.60% 2.50% 1.60% 1.20% 1.90% Dividend payout 31.5 35.5 23 19.8 19.8 Table 12 Investment Strategy  SAIL is planning to invest around 1.5lakhs to ramp up its production to 50M by 2025  It is planning to invest around 40000 crore in Wes Bengal, 17000 crore in Durgapur plant.  Iron ore nugget factory will be coming up in Durgapur.  It is setting up an IISCO plant in 950 acres plant. This would involve around 16000 crore investment. Conclusion The SAIL has realized the folly of exporting iron ore and importing steel. It wants focus on building up the steel manufacturing capacity of India. All the investments are in sync with made in India campaign and meeting the growing demand of steel.

Qualitative Analysis

Jindal Steel Works Ltd.

Strengths: - Operations in both upstream and downstream sectors. - Presence of fully integrated steel plants (which provide end to end solutions like extraction of minerals, refinement and production of finished goods) such as the Vijaynagar Works. - First steel producer of the world to use Corex Technology, used for producing hot metals. - India's largest private steel maker. Thereby, gaining competitive advantage in terms of bargaining power with suppliers and customers. - Launched a revolutionary product in the steel industry, GALVALUME - Lowest labor and conversion costs in the industry. (Conversion costs include, labor, energy and other manufacturing costs) - Productivity comparative to international standards.

Weaknesses: - Does not own mines, important requirement for raw materials - Unable to utilize the plants at 100% capacity - Low visibility among stakeholders about the capabilities of the management to sustain the growth of the company - Low investments in the research and development divisions, as comparative to international markets

Opportunities: - Located in an emerging market - India, which has a huge potential for growth despite having a low per capita steel consumption - Access to top talent of the country at relatively low prices than those offered by the competitors. - Capacity to improve the cost structure and reduce the eternal risk levels by the acquisition of captive mines.

Threats: - Entry of world's biggest steel corporations (Arcelor Mittal) into the domestic market - Reduced demand for steel across the world, due to the current economic scenario - Aggressive expansion of domestic competitors such as Tata Steel - Dependence on government based fiscal incentives, that can be withdrawn anytime - Critical control over cost and production processes due to cyclic nature of the industry - Management of rapid growth in an effective manner, to sustain faith among stakeholders.

Steel Authority of India Ltd.

Strengths: - Indefinite availability of Iron ore mines - Availability of low cost labor force, which is efficient as well - Personnel with strong managerial capabilities - Globalized industry and emergence in a globally competitive market - Focus on building new plants with modern technology and modernizing existing/old plants - Strong 'Direct Reduced Iron' production base

Weaknesses: - Costing of energy being used for running the plants. - Incremental changes in the tax rates and associated duties - Infrastructure/Implementation costs - Maintenance of quality of coking coal being used - Fluctuating labor laws - Unavailability of advanced technologies for steel manufacturing and increasing dependence on imports of the same.

Opportunities: - Rapidly growing urbanization levels. - Untapped rural segment demands. - Increasing demand for durables due to high levels of consumer disposable incomes. - Increasing infrastructure demand and requirements. - Interest of international(Arcelor-Mittal) players in the steel manufacturing industry

Threats: - Reduced demand for steel across the world, due to the current economic scenario - Multiple fluctuations in the market and the possibilities of China's entrance into the exporting markets - Decrementing growth in the Infrastructure development

Business Strategy Steel Authority of India Ltd.

Value Chain Activities of the Company (How is it adding value to its customers)? SAIL besides supplying its wide range of products to its buyers or customers like Defense and Railways, it is now successfully servicing the requirements and targeting various customer segments like Construction, Heavy Engineering, Fabrication, Tube, Auto Segment,Agricultural,Tube-manufactures,Transportation,Container,White goods, and cycles etc. SAIL is creating value to its customers by catering to their requirements and even customizing the Steel as and when required. It has the most penetrative market reach .It maintains its branch office and Stockyard network at 44 locations and have multiple sales and customer contact offices spread across the country that provide SAIL a competitive advantage in delivering STEEL to its customers on Just-In-Time basis. There are authorized dealers that ensure the supply of its products in places where the Stockyards do not exist. In an effort to bolster its Customer Relations and enhance its quality service, SAIL has lately introduced new process like KAM (Key Account Management) .Each and every requirements of its customers from various segments is fulfilled by an integration of the Technology with its people on the front end and Backend (marketing and Plant personnel) who streamlines the operations from processing to fulfilment. Product Line of SAIL Product Line of Sail Bars, Hot Galvanized Pet Pig Semis Structural Rods & Rolled Railway Products Special Steels Products Products Iron Rebar’s Products Plain/Corruga Wire Coils And Alloy Steels Blooms Beams/Joists ted Sheets & Pipes Rails Rods Sheets Plant Coils Visvesvaraya Electrica Wheels, Axles & Billets Channels Iron & Steel l Steels Wheel Sets Plant Slabs Angles Salem Steel Plant Crane Rails Z-Type Sheet-Piling

Section Table 13 Have any new products been introduced lately? Various new products and Initiatives have been introduced by SAIL. Through its modernization and expansion projects it has developed new products like 130 mm size long rails and head hardened rails for high speed tracks, universal sections up to 750 mm size. Extremely high strength API grades - API X100, Cold Rolled Grain oriented (CRGO) electrical steels and various high strength steels - are derived from thermo- mechanical rolling and controlled cooling especially for applications in the nuclear industry and super- critical power plants. Recently on 30th July 2015, SAIL dispatched its first consignment of 45 wagons of Steel blooms. Hon’ble PM Narendra Modi dedicated the IISCO steel plant to the nation and the plant has tripled its hot metal capacity and has ventured into the new era of green and high quality steelmaking.

If so, have the new products been successful? The products have been extremely successful as the consignment was of used for Nepal’s rehabilitation work after the massive earth quake. Blooms are used for rolling out of quake resistant TMT bars. These new products are being used in the ‘Make in India’ initiative to develop the infrastructure of our economy, thereby creating employment opportunities for millions of people in our country. SAIL is involved in providing irrigation facilities to the fields and connecting villages by building pucca roads under the Gramin Sadak Yojana Program. Is this company innovative? Steel Authority of India Limited is an innovative company as the products are made using the cutting-edge technologies and under the stringent quality control. It has adopted a strategy for constantly producing new products to have competitive advantage over new entrants. These high value added steel produced by SAIL are used for making modern earthquake and fire-resistant building. The share of these products have been increasing in its products mix and it carries a high profit margin. It has been using IT tools for major customers to offer smooth connectivity. Just-in Time deliveries are facilitated to most of the customers. Its Research and Development Centre of Iron and Steel is been given paramount importance for developing new products. There are 207 research executives and 15 major laboratories. SAIL caters to the need of all the major sectors of economy, be it in the development of infrastructure, golden quadrilateral for railways, roads and manufacturing. SAIL aims to increase spends on R&D as a percentage of gross sales. It offers a diverse product portfolio enriched with the current modernization and expansion projects. Jindal Steel Works Ltd.

Value Chain activities of the company (How is it adding value to its customers?) JSW Steel Ltd. is owned by Jindal Group which is based in Mumbai, Maharashtra. Post its merger with ISPAT Steel, it has become the largest steel company in private sector. It aims to create and deliver value to its targeted customers in an effective manner. It has come up with a concept JSW Shoppe which aims to reach JSW’s end users and at the same time helping Small and medium enterprises. Currently there are 400 JSW’s shoppers in India. However its aim to have one in every district of India to cater to the requirements of the customers. The main purpose of this to target and help rural and semi urban areas by providing quality Steel and penetrate the market gradually with these JSW’s shoppers. It has aided buyers by providing details about the products they offer, their brands, application area information and the bundles of services which also includes Finance. SW through their processing facilities offer value addition to their customers. JSW has zero effluent plants and green townships and it is charting a course to excellence creating opportunities for citizens of India which would eventually lead to a sustainable, dynamic and a developed nation. Is this an innovative Company? Why or why not? JSW is an innovative company as it has always aimed to deliver products that are at par with the world to its customers. It has analysed and redesigned the entire product development process of its global Client in pharmaceuticals industry in US, Germany, and China.

It has introduced simple tools to focus on the development pipeline quickly on various projects which has led to successful development projects.

It has helped its clients in the re-evaluation of its product roadmap by systematically monitoring industry trends, its strength and weaknesses as well as its position to have an edge over its competitors. It has pioneered the waste management process through its innovation management that has resulted in the zero effluent plants.

Assessment of Growth Strategy

Steel Authority of India Ltd.

Growth Strategy  SAIL strategizes to use technologies that : o Have synergy with the natural resource endowments of the company. o Are conducive to production of high-end and special steel required for sophisticated industrial and scientific applications. o Minimize damage to the environment at various stages of process. o Utilizes optimum resources. o Facilitate modernization of the steel industry so as to achieve global standards of productivity and efficiency. o To undertake Research & Development activities aimed at introducing new technologies and setting up center of Excellence. o Sustainable Development  The Company is currently implementing plan to enhance its Hot Metal production from the capacity of 14.4 million tons during the Financial Year 2013-14 to 23.5 million tons after expansion.  The growth plan not only targets higher production but also addresses the need for eliminating technological obsolescence, to achieve high energy savings, enrich product-mix, reducing pollution, and develop mines, introducing customer centered process and to develop matching infrastructure facilities.  The Company is working on a long term strategy of 'Vision 2025', which will take the Company towards a target of 50 million tons of Hot Metal production, to meet the strategic objective to achieve leadership position in Indian Steel sector and to create a niche amongst the top Steel companies globally.  SAIL is focusing on implementing Modernization and Expansion Plan of its five Integrated Steel Plants at Bhilai, Bokaro, Rourkela, and Durgapur & Burnpur.  During FY’14, production commenced from several new facilities such as New Ore Bedding & Blending Plant, New Coke rd. Oven Battery Complex including Coal Handling Plant, 3 ND Single Strand Caster at RSP; Coke Oven Battery, 2 Sinter Machine at DSP. A major achievement was achieved with the new 4060m blast furnace (which is one of largest in the country) at RSP operationalized from Aug 13.  SAIL Board approved during the year to incur around 7862cr for various new Projects with an estimated total outlay. A capital expenditure of 9,890 cr was expend during the Financial Year 2013-14 on this account and capex planned during 2014-15 is 9,000 crore. Mergers & Acquisitions  In 2009, Bharat Refractories Ltd. Merged with SAIL.s  Successful acquisition of the assets of Malvika Steel Ltd. Based in Jagdishpur, Uttar Pradesh  A joint venture company promoted by SAIL, CIL, RINL, NMDC and NTPC, called International Coal Ventures Private Ltd., has been formed to acquire coal assets overseas.  A joint venture with Shipping Corporation of India for transportation of imported coking coal and other dry bulk cargos has been formed.  Merger of Maharashtra Elektrosmelt Limited (MEL) abiding sections 391-394 of the Companies Act, 1956 took place.  SAIL acquired Refractory Unit of Burn Standard Company Limited.

 SAIL signed a Joint Venture Agreement for setting up a wagon manufacturing unit with RITES Ltd. at Kulti, West Bengal, which has a capacity to handle 1,500 wagons per year.  Incorporation of a joint venture with company "SAIL RITES Bengal Wagon Industry Pvt. Ltd." Took place in 2010.  SAIL and BSCL agreed to a MOU to setup facilities to manufacture cast steel bogies, couplers and other related products at Jellingham, West Bengal.  ICRON International Ltd. Signed a MOU to jointly work on Rail Infrastructure Projects, in India as well as in abroad.  Another MOU is signed with M/s. Hindustan Prefab Ltd., for carrying out business of pre-fabricated structures in steel & cement.  Signed the Deed of Transfer on 16th December, 2011 with Burn Standard and Co. Ltd. (BSCL). New Refractory Unit at Salem, named SAIL Refractory Company Limited (SRCL) came up.  Kobe Iron India Private Limited has been acquired in 2012.  SAIL is investing in ITmK3 technology, considered environment friendly and which utilizes low grade iron-ore and non-coking coal.  ICVL would be looking over Rio Tinto’s currently operating coal mine and coal assets in Mozambique which has an estimated resources of 2.6bn tons of coal in 2014.

Jindal Steel Works Ltd

Growth Strategy  JSW continuously evaluates various organic (Greenfield or brownfield) and inorganic opportunities with the motive to create a diversified and balanced portfolio, both in terms of fuel mixture as also off-take arrangements.  Focused expansion plans in India  Optimized capital structure through deleveraging.  Access to cutting edge technologies  Continue to evaluate raw material assets in India and abroad to secure key raw material supplies and to reduce cost of production by targeting strategic tie-ups and investments  Maintain market share of about 13-14% by selective organic/inorganic growth  Increase proportion of high margin value-added products  To have a Diversity of customer base is also a strategy of JSW, both within India and abroad  Continue to focus on rural markets in India  Commitment towards sustainable and eco-friendly technologies driven growth  Focus on cost reduction and energy efficiency  Manage capacity expansion and debt for capturing market opportunities without excessive risk Mergers & Acquisitions  JSW steel acquired 90% stake in US plate and pipe mill at a cost of $810mn of capacity 1.2 Net MTPA Plates and 0.55 Net MPTA Pipes  JSW steel acquired 70% in Chile iron ore mines in FY11 at a cost of $252mn.  JSW Steel acquired Mozambique coal mines- Early stage development  In 2010, it had struck a strategic alliance with debt-ridden Ispat Industries. It acquired a 41% stake in Ispat Industries, which had a 3.3-million-tonne capacity 33

 JSW Steel acquired a 50 per cent stake in Punjab-based Vallabh Tinplate for Rs 46 crore.  In 2004, JSW Steel acquired loss-making Southern Iron & Steel Company (SISCOL), which makes long- products used in the automobile sector.  The company had, in August 2015, entered into an agreement with Welspun Enterprises for acquisition of its entire stake in sponge iron maker Welspun Maxsteel incurring more than 1,000cr.

Management Evaluation

Steel Authority of India Ltd. Demonstrated Capability

Managing Change Identification of priority areas in case changes in the industry requirement of products. Project Implementation Customized product development. Innovation Since, it is a core industry so not much of innovation is here. Strategy Formulation It works on two stage corporate strategy: Manufacturing based competitive strategy. Table 14 Top Management The top management of SAIL is a mix of company employees, government representatives and politicians, following eight persons make the top management at present:

Name Designation Anil Kumar Chaudhary Director - Finance Anutosh Maitra Chief Executive Officer Ms. Bharathi Sivaswami Sihag AS &FA and Director, SAIL, Shri SS Mohanty Director (Technical) Shri Kalyan Maity Director (Raw Material & Logistics) Shri Binod Kumar Director (Commercial) Atmanand Independent Director Shri Sunil Barthwal Joint Secretary to the Government of India Table 15 Amongst these almost all are a part of SAIL for more than 15 years. Each member of the top management comes from a very descent work experience in steel industry and have contributed large amount of their life, serving for this company hence the top management is highly stable. Track Record of CEO  Mr. Anutosh Maitrahas is a metallurgical engineer from REC, Rourkela.  He had joined SAIL on April 18, 1980 as a graduate engineer in Rourkela Steel Plant (RSP).  He was posted as executive director in the chairman's secretariat at Steel Authority of India Limited (SAIL).  Having served the company for more than 22 years, he was promoted to be Chief Executive Officer (CEO) of Bokaro Steel Plant (BSL) of Steel Authority of India Limited (SAIL) in 2012.

Jindal Steel Works Ltd

Demonstrated Capability

Managing Change Indian Steel Industry is expected to grow manifolds in years to come to sustain Growth in infrastructure, Automotive, Capital goods. Looking at this potential of sector JSW acquired significant stake in Ispat Industries to be the largest producer of Steel in the country. Project Implementation Stage wise adaptation of latest technologies in production. Process automation. Eco-friendliness as key parameter. Innovation Since, it is a core industry so not much of innovation is here. Strategy Formulation It works on two stage corporate strategy: Minimizing potential manufacturing negative and Achieve parity with competitors. Table 16 Top Management The top management of JSW is highly competitive and stable and consists of following nine persons:

Name Designation Mr. Sajjan Jindal Chairman and Managing Director JSW Mrs. Sangita Jindal Chairperson JSW Foundation Mr. Seshagiri Rao MVS Jt. Managing Director & Group CFO JSW Steel Dr. Vinod Nowal Deputy Managing Director JSW Steel Mr. Sanjay Sagar Jt. Managing Director & CEO JSW Energy Capt. BVJK Sharma JMD & CEO JSW Infrastructure Mr. Jayant Acharya Director - Commercial & Marketing JSW Steel Mr. Prashant Jain Head Corporate Strategy JSW Dr. S Majumdar Chief Sustainability Officer JSW Table 17 Amongst these two top notch positions are held by Jindals’ who are part of business since its inception. The rest seven members association with the firm ranges from 10 years to 20 years. Each member of the top management is a wizard of his/her domain, hence the top management is highly stable. Track Record of CEO  The CEO of JSW is Mr. Sanjay Sagar.  Mr. Sagar is an alumnus of Sri Ram College of Commerce, Delhi and holds a Management Degree from the University of Delhi.  His leadership brought up the RWPL project back on the road and directed it towards the goal of completion.  He was the back hand behind the Kapurdi Lignite mine, which was a source of fuel for the Barmer Project and made sure that the project completed in time.  He was also the Managing Director on the Board of Barmer Lignite Mining Company Limited (BLMCL), which is the joint venture of Raj West Power Limited with Rajasthan State Mines and Minerals Limited.

Overall Assessment and Conclusion

Steel Authority of India Ltd. has an indefinite availability of iron ore mines. It has an abundance of efficient low cost labor force. The managerial personnel of SAIL is also equipped with strong managerial capabilities, which enables SAIL to emergence successfully in a globally competitive market. SAIL has a pretty strong ‘Direct Reduced Iron’ production base and to harvest the same, it should focus on building new plants with modern technology and modernizing existing/old plants. To avoid falling market share, SAIL should use strong marketing campaigns. SAIL should focus on resolving its various environment and forest clearance issues, and also its modernization and expansion plan issues. It should strategize to integrate and operationalize upstream and downstream production facilities in short span of time. Since, depressed steel prices will put lot of pressure on NRS (Net Realized sales), therefore SAIL should increase their share of value added steels. SAIL should undertake cost awareness initiatives especially when it comes to procuring funding for expansion plans. It is pertinent that techno-economics of production are internationally benchmarked, and the latter can't happen till the capitalization of all of the SAIL’s production units are balanced. JSW has indefinite availability of iron ore mines combined with low cost labor force which is efficient as well. The personnel have strong managerial capabilities. JSW is a globalized industry emerging in a globally competitive market with focus on building new plants with modern technology and revamping existing/old plants. It has the advantage of strong ‘Direct reduced iron’ production base. The March quarter performance of JSW has been negatively affected by high input costs, low demand and pricing pressure. Also impairment seen in the abroad subsidiaries. Operating income dropped due to lower realization which can drop per ton of steel sold. Reliance securities remain optimistic on JSW’s future performance despite of last quarter low performance along with domestic pressures it is forced to face pressure from foreign subsidiaries. Above factors can lead to fall in consolidated revenue and consolidated operating profit decline

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