Shareholder Value Creation in Steel

Industry (An empirical Study)

Submitted in partial fulfillment of the

requirements for Master in Management
Studies
(MMS)

2008-2010

SUBMITTED BY
AFTAB SHAIKH
(MMS) Roll No. 06.
Batch: Year 2008 – 2010

H K Institute of Management Studies and

Research, Jogeshwari,
Mumbai 400102
MAY 2009 - JUNE 2009
1
 Student’s Declaration

I hereby declare that this report submitted in partial fulfillment

of the requirement of the award for the Master in
Management Studies to H K Institute of Management Studies
and Research is my original work and not submitted for award
of any degree or diploma fellowship or for similar titles or
prizes.

I further certify that I have no objection and grant the rights to

H K Institute of Management Studies and Research to publish
any chapter/ project if they deem fit in Journals/Magazines and
newspapers etc. without my permission.

Class : (MMS – Sem. – IV)

Date : 20th Feb 2010
Name : Aftab Shaikh
Place : Mumbai
Roll No. : 06

2
 Certificate

This is to certify that the dissertation submitted in partial

fulfillment for the award of Master of Management Studies
of H K Institute of Management Studies and Research is a result
of the bonafide research work carried out by Mr. Aftab
Mehboob Shaikh under my supervision and guidance, no part
of this report has been submitted for award of any other
degree, diploma, fellowship or other similar titles or prizes. The
work has also not been published in any Journals/Magazines.

Date 20thFeb.2010 Project

guide : P.K Bandger
Core Faculty
HKI
MSR
Place: Mumbai

Prof. Krishna C. Pandey

Director

3
 ACKNOWLEDGEMENT

It is difficult to acknowledge precious a debt as that of

learning as it is the only debt that is difficult to repay except
through gratitude.
First and foremost I wish to express my profound gratitude
to the almighty Allah and his prophet Mohummed Sallah ale wa
salam, (Allah) the merciful & compassionate with those grace &
blessings. I have been able to complete this work.
It is my profound privilege to express my sincere thanks to
K C Pandey, Director HKIMSR, for giving me an opportunity
to work on the project and giving me full support in completing
this project.
I am very thankful to my guide P.K Bandkar for his full
support.
Last but not least, I would like to thank my parents & my
friends for their full cooperation & continuous support during
the course of this assignment.

(Aftab Shaikh)

4
 Table of Contents

Page No.

CHAPTER 1 : 1.1 Executive Summary ………….

CHAPTER 2 : 2.1 Introduction ………….

: 2.1.1 Introduction to Shareholder Value

Creation (EVA & MVA) ………….

: 2.1.2 Introduction to the Indian Steel Industry ………….

: 2.1.3 Literature Review ………….

: 2.1.4 Defining the problem

: 2.2 Objectives ………….

2.2 Methodology ………….

: 2.3 Limitations of the Report ………….

CHAPTER 3 : 3.1 Analysis & Findings ………….

CHAPTER 4 : 4.1 Conclusions

: 4.2 Suggestions ………….

ANNEXURES : A-1 All tables ………….

5
 : A-2

: B-1 Questionnaire ………….

: Bibliography …………..

CHAPTER: 1

1.1 EXECUTIVE SUMMARY

6
 CHAPTER: 2
2.1 Introduction

2.1.1 INTRODUCTION TO SHARE

HOLDERS VALUE CREATION

SHAREHOLDER VALUE CREATION: AN OVERVIEW

Creating shareholder value is the key to success in

today's marketplace. There is increasing pressure on corporate
executives to measure, manage and report the creation of
shareholder value on a regular basis. In the emerging field of
shareholder value analysis, various measures have been
developed that claim to quantify the creation of shareholder
value and wealth.

More than ever, corporate executives are under increasing

pressure to demonstrate on a regular basis that they are
creating shareholder value. This pressure has led to an
emergence of a variety of measures that claim to quantify
value-creating performance.

Creating value for shareholders is now a widely accepted

corporate objective. The interest in value creation has been
stimulated by several developments.

* Capital markets are becoming increasingly global. Investors

can readily shift investments to higher yielding, often foreign,
7
opportunities.

* Institutional investors, which traditionally were passive

investors, have begun exerting influence on corporate
managements to create value for shareholders.

* Corporate governance is shifting, with owners now demanding

accountability from corporate executives. Manifestations of the
increased assertiveness of shareholders include the necessity
for executives to justify their compensation levels, and well-
publicized lists of under performing companies and overpaid
executives.

* Business press is emphasizing shareholder value creation in

performance rating exercises.

* Greater attention is being paid to link top management

compensation to shareholder returns.

Defining Shareholder Value, and – Wealth Creation

From the economist's viewpoint, value is created when

management generates revenues over and above the economic
costs to generate these revenues. Costs come from four
sources: employee wages and benefits; material, supplies, and
economic depreciation of physical assets; taxes; and the
opportunity cost of using the capital.

Under this value-based view, value is only created when

revenues exceed all costs including a capital charge. This value
accrues mostly to shareholders because they are the residual
owners of the firm.

Shareholders expect management to generate value over and

above the costs of resources consumed, including the cost of
using capital. If suppliers of capital do not receive a fair return
to compensate them for the risk they are taking, they will
withdraw their capital in search of better returns, since value
will be lost. A company that is destroying value will always
struggle to attract further capital to finance expansion since it
8
will be hamstrung by a share price that stands at a discount to
the underlying value of its assets and by higher interest rates
on debt or bank loans demanded by creditors.

Wealth creation refers to changes in the wealth of shareholders

on a periodic (annual) basis. Applicable to exchange-listed
firms, changes in shareholder wealth are inferred mostly from
changes in stock prices, dividends paid, and equity raised
during the period. Since stock prices reflect investor
expectations about future cash flows, creating wealth for
shareholders requires that the firm undertake investment
decisions that have a positive net present value (NPV).

Although used interchangeably, there is a subtle difference

between value creation and wealth creation. The value
perspective is based on measuring value directly from
accounting-based information with some adjustments, while the
wealth perspective relies mainly on stock market information.
For a publicly traded firm these two concepts are identical when
(i) management provides all pertinent information to capital
markets, and (ii) the markets believe and have confidence in
management.

Approaches for measuring shareholder value:

1. Marakon Approach:
Marakan Associates, an international management-consulting
firm founded in1978, has done pioneering work in the area of
value-based management. This measure considers the
difference between the ROE and required return on equity (cost
of equity) as the source of value creation. This measure is a
variation of the EV measures.

Instead of using capital as the entire base and the cost of

capital for calculating the capital charge, this measure uses
equity capital and the cost of equity to calculate the capital
(equity) charge. Correspondingly, it uses economic value to
equity holders (net of interest charges) rather than total firm
value.
9
According to Marakan model shareholder wealth creation is
measured as the difference between the market value3 and the
book value of a firm's equity. Thee book value of a firm's equity,
B, measures approximately the capital contributed by the
shareholders, whereas the market value of equity, M, reflects
how productively the firm has employed the capital contributed
by the shareholders, as assessed by the stock market. Hence,
the management creates value for shareholders if M exceeds B,
decimates value if m is less than B, and maintains value is M is
equal to B.

According to the Marakon model, the market-to-book values

ratio is function of thee return on equity, the growth rate of
dividends, and cost of equity.

For an all-equity firm, both EV and the equity-spread method

will provide identical values because there are no interest
charges and debt capital to consider. Even for a firm that relies
on some debt, the two measures will lead to identical insights
provided there are no extraordinary gains and losses, the
capital structure is stable, and a proper re-estimation of the
cost of equity and debt is conducted.

A market is attractive only if the equity spread and economic

profit earned by the average competitor is positive. If the
average competitor's equity spread and economic profit are
negative, the market is unattractive.

For an all-equity firm, both EV and the equity spread method

will provide identical values because there are no interest
charges and debt capital to consider. Even for a firm that relies
on some debt, the two measures will lead to identical insights
provided there are no extraordinary gains and losses, the
capital structure is stable, and a proper re-estimation of the
cost of equity and debt is conducted.

A market is attractive only if the equity spread and economic

profit earned by the average competitor is positive. If the
average competitor's equity spread and economic profit are
negative, the market is unattractive.
10
2. ALCAR APPROACH
The Alcar group Inc. a management and software company, has
developed an approach to value-based management which is
based on discounted cash flow analysis. In this framework, the
emphasis is not on annual performance but on valuing expected
performance. The implied value measure is akin to valuing the
firm based on its future cash flows and is the method most
closely related to the DCF/NPV framework.

With this approach, one estimates future cash flows of the firm
over a reasonable horizon, assigns a continuing (terminal) value
at the end of the horizon, estimates the cost of capital, and
then estimates the value of the firm by calculating the present
value of these estimated cash flows. This method of valuing the
firm is identical to that followed in calculating NPV in a capital-
budgeting context. Since the computation arrives at the value
of the firm, the implied value of the firm's equity can be
determined by subtracting the value of the current debt from
the estimated value of the firm. This value is the implied value
of the equity of the firm.

To estimate whether the firm's management has created

shareholder value, one subtracts the implied value at the
beginning of the year from the value estimated at the end of
the year, adjusting for any dividends paid during the year. If this
difference is positive (i.e., the estimated value of the equity has
increased during the year) management can be said to have
created shareholder value.

The Alcar approach has been well received by financial analysts

for two main reasons:

* It is conceptually sound as it employs the discounted cash

flow framework
* Alcar have made available computer software to popularize
their approach

However, the Alcar approach seems to suffer from two main

11
shortcomings: (1) In the Alcar approach, profitability is
measured in terms of profit margin on sales. It is generally
recognized that this is not a good index for comparative
purposes. (2) Essentially a verbal model, it is needlessly
cumbersome. Hence it requires a fairly involved computer
programme.

3. McKINSEY APPROACH:
McKinsey & Company a leading international consultancy firm
has developed an approach to value-based management which
has been very well articulated by Tom Copeland, Tim Koller,
and Jack Murrian of McKinsey & Company. According to them:

Properly executed, value based management is an approach to

management whereby the company's overall aspirations,
analytical techniques, and management processes are all
aligned to help the company maximize its value by focusing
decision making on the key drivers of value.

The key steps in the McKinsey approach to value-based

maximization are as follows:

* Ensure the supremacy of value maximization

* Find the value drivers
* Establish appropriate managerial processes
* Implement value-based management philosophy

4. ECONOMIC VALUE ADDED

Consulting firm Stern Steward has developed the concept of
Economic Value Added. Companies across a broad spectrum of
industries and a wide range of companies have joined the EVA
bad wagon. EVA is a useful tool to measure the wealth
generated by a company for its equity shareholders. In other
words, it is a measure of residual income after meeting the
necessary requirements for funds.
12
In corporate finance, Economic Value Added or EVA is an
estimate of economic profit, which can be determined, among
other ways, by making corrective adjustments
to GAAP accounting, including deducting the opportunity cost of
equity capital. The concept of EVA is in a sense nothing more
than the traditional, commonsense idea of "profit," however,
the utility of having a separate and more precisely defined term
such as EVA or Residual Cash Flow is that it makes a clear
separation from dubious accounting adjustments that have
enabled businesses such as Enron to report profits while in fact
being in the final approach to becoming insolvent. EVA can be
measured as Net Operating Profit After Taxes (or NOPAT) less
the money cost of capital. EVA is similar to Residual Income
(RI), although under some definitions there may be minor
technical differences between EVA and RI (for example,
adjustments that might be made to NOPAT before it is suitable
for the formula below). Another, much older term for economic
value added is Residual Cash Flow. In all three cases, money
cost of capital refers to the amount of money rather than the
proportional cost (% cost of capital). The amortization of
goodwill or capitalization of brand advertising and other similar
adjustments are the translations that can be made to Economic
Profit to make it EVA. The EVA is a registered trademark by its
developer, Stern Stewart & Co.

EVA Computations
EVA is a measure of value created/destroyed that compares the
returns from operations with the cost of financing those
operations. It is the only performance measure that links
directly with the intrinsic value of the business. Stewart defined
EVA as NOPAT subtracted with a capital charge. It represents
residual income that remains after all costs have been
recognized including the opportunity cost of the equity capital
employed.
EVA = NOPAT - Cost of Capital * (Economic Capital) ...(1)
13
Hence, EVA depends on both operating efficiency as well as
balance sheet management. Without efficiency, operating
profits will be low resulting in lower EVA and without careful
balance sheet management, too many assets and too much
capital will exist resulting in higher than necessary capital
costs, leading to a lower EVA again (Gopenski, 1996).

As a departure from conventional accounting, where accounting

profit is derived after deducting interest charges, EVA is derived
after subtracting cost of all capital that includes debt,
preference and equity capital. Charging for capital is just the
beginning; EVA also eliminates the potential distortions present
in the Generally Accepted Accounting Practices (GAAP) based
accounting. Actually, GAAP is ridden with anomalies that
misrepresent the true economies of a business (Ehrbar, 1999).
So, Stewart recommended a series of 164 adjustments to be
made in GAAP-based accounts to convert the accounting
numbers into economic numbers. Many researchers and EVA
proponents generally use between 5-15 adjustments. Hence,
the present study considers the adjustments for non-recurring
income and expenditure, Research and Development (R&D)
costs, goodwill amortization, interest, Non-interest Bearing
Current Liabilities (NIBCL), investments in marketable
securities, cash operating taxes, revaluation reserve. Finally,
NOPAT and economic capital have been defined as:

NOPAT = (PAT + non-recurring expenses + revenue

expenditure on R&D + interest expense + goodwill written-off +
provision for taxes) - non-recurring income - R&D amortization -
cash operating taxes

Economic Capital = net fixed assets + investments + current

assets - (NIBCLs + miscellaneous expenditure not written-off +
intangible assets) + (cumulative non-recurring losses +
capitalized expenditure on R&D + gross goodwill) - revaluation
reserve - cumulative non-recurring gains

The most difficult component of EVA calculations (as per

Equation 1) is to estimate the total cost of capital, which is
denoted as the combined rate of return expected by both
14
lenders and shareholders. It is the minimum acceptable return
on economic investment or the cut-off rate required for value
creation. This cost of capital has three primary applications and
can be used as:

• A capital charge rate for computing EVA (i.e., value

creation);
• A hurdle rate for assessing return on capital employed;
and
• A minimum target rate for accepting new projects.

The cost of capital has four drivers namely, after-tax cost of

debt, cost of preferred stock, cost of equity capital and cost of
retained earnings. These drivers are all about the trade-off
between risk and return. The greater the risk, the higher will be
the required rate of return, resulting in higher cost of capital
and vice versa.

The overall cost of capital also known as WACC, equals the sum
of the cost of each of the component of capital, i.e., equity, debt
and preferred stock, weighted for their relative proportion in the
company's capital structure. The after-tax cost of debt is simply
the bond's yield to maturity times one minus the firm's marginal
tax rate (Abdeen and Haight, 2002). For example, if a
company's yield to maturity is 12% and marginal tax rate is
35%, then its after-tax cost of debt will be 7.8%, i.e., 12% (1 to
0.35). Since interest on debt is tax deductible, this adjustment
must be made to properly reflect the true cost of debt
component. Further, cost of preferred stock is calculated by
dividing the annual dividend paid to preference shareholders
with the average preference capital. As dividend is not tax
deductible but subject to the appropriation from profits of a
company, no tax adjustment is required in this case. The most
critical component in WACC calculation, i.e., cost of equity is
usually defined with CAPM. The CAPM assumes that equity
shareholders require return equal to the return on a risk-free
asset (e.g., government securities) plus a premium to
compensate them for additional market risk. The equation for
the cost of equity is as follows:

15
where,

Rj = Expected return on security j

Rf = Risk-free rate

Rm = Market rate of return

= Beta, i.e., sensitivity of the return on scrip j to the changes

in market index

The risk-free rate (Rf) is the theoretical rate of return attributed

to an investment with zero risk. It represents the interest that
an investor would expect from an absolutely risk-free
investment over a specified period of time. In practice,
however, no investment is risk-free, as even the safest
investments carry a very small amount of risk. In the present
study, weighted average of annual yield on 364 days treasury
bills, as issued by Reserve Bank of India, has been taken as a
surrogate of the risk-free rate.

The risk premium for a given company equals the market risk
premium the return equity shareholders expect over and above
the risk free rate denoted as(Rm - Rf) times a beta coefficient
that represents the volatility of that company's stock relative to
the volatility of the market index (Young, 1997), such as BSE
Sensex in this case.

After estimating the individual costs of all the components of

capital structure, the final step is to calculate the WACC by the
formula:

WACC = ke × we + kd(1 - t) × wd + kp × wp

where,

16
ke = Cost of equity shareholders' funds

kd = Cost of debt

kp = Cost of preference capital

t = Tax rate

E = Book value proportion of average shareholders' funds

D = Book value proportion of average total borrowings

P = Book value proportion of average preference capital

WACC, hence, uses the financing side of the balance sheet in

the form of the targeted debt to capital ratio and provides a
basis for weighing the total cost of capital for the purpose of
EVA calculation.

5 MVA Computation
MVA measures the value added by the management over and
above the capital invested in the company by its shareholders
and lenders. It is the cumulative amount by which a company
has enhanced or diminished shareholder wealth. It is the
perfect summary assessment of corporate performance that
shows how successful a company has been in allocating and
managing resources to maximize the value of the enterprise
and the wealth of its shareholders. While the EVA of a company
is a historical figure based on the efficiency with which it used
the resources at its disposal in a particular year, its MVA is the
market assessment of its ability to create wealth in future. MVA
is obtained by subtracting the economic capital of a corporation
(book value after adjusting for economic anomalies) from its
17
total market value, i.e., what investors can take out of the
company.

MVA = Market Value of the firm - Economic Capital

Hence, the way in which the shareholder wealth is maximized is

by increasing the difference between the company's market
value and its economic capital.
The market value of a firm as represented by market value of
its equity is arrived at by multiplying stock price by the number
of outstanding shares of the firm. Taking share price at the end
of the financial year for calculation of the market capitalization
can be biased. Hence, in the present study, a 364 day average
market cap has been taken as proxy for the market value of
equity. Market value of the firm has been taken as the sum of
book value of debt and 364 days average market capitalization.
The book value of debt is assumed to be equal to its market
value. The reasons behind this assumption are:

• Determining the market value of most corporate debt

issues is difficult, as they are not actively traded;
• Debt market values are usually relatively close to book
values;
• Such assumption is made to assess the additions to
shareholder's wealth; and
• The market value of an organization's debt is more closely
related to interest rates' movements than to managerial
actions that influence shareholder wealth (Gapenski,
1996).

The economic capital as already mentioned above is arrived at

after adjusting for equity equivalents. In addition to the above,
the financial statement users must also recognize that
maximizing wealth (MVA) is not the same as maximizing market
value. A firm can increase its market value just by raising and
investing as much capital as possible, which actually increases
the size of the company and therefore benefits managers. Such
strategy will benefit if capital raised is invested in the projects
that earn positive EVA.

18
The proposed study aims to achieve the following objectives:

• To define and discuss the measurement of EVA and MVA;

• To calculate EVA and MVA of sample companies after
adjusting for the required equity equivalents;
• To rank sample companies on the basis of EVA and MVA
generated or lost;
• To statistically examine the variations in EVA and MVA
figures of sample companies; and
• To empirically test the strength of the relationship
between EVA and MVA.

19
 2.2 INTRODUCTION TO STEEL INDUSTRY IN
INDIA

CONTENTS

THE GLOBAL STEEL INDUSTRY

THE STRUCTURE OF INDIAN STEEL INDUSTRY
CONSUMPTION OF STEEL INDIA
SUPPLY OF STEEL IN INDIAN MARKET

THE GLOBAL STEEL INDUSTRY

The current global steel industry is in its best position in

comparing to last decades. The price has been rising
continuously. The demand expectations for steel products are
rapidly growing for coming years. The shares of steel industries
are also in a high pace. The steel industry is enjoying its
6thconsecutive years of growth in supply and demand. And
there is many more merger and acquisitions which overall
buoyed the industry and showed some good results. The
subprime crisis has lead to the recession in economy of
different countries, which may lead to have a negative effect on
whole steel industry in coming years. However steel production
and consumption will be supported by continuous economic
growth.

20
CONTRIBUTION OF COUNTRIES TO GLOBAL STEEL

INDUSTRY

The countries like China, Japan, India and South Korea are in the
top of the above in steel production in Asian countries. China
accounts for one third of total production i.e. 419m ton, Japan
accounts for 9% i.e. 118m ton, India accounts for 53m ton and
South Korea is accounted for 49m ton, which all totally becomes
more than 50% of global production. Apart from this USA,
BRAZIL, UK accounts for the major chunk of the whole growth.

STRUCTURE OF INDIAN STEEL INDUSTRY

The steel industry in India is concentrated in the east, south and

west of the country. The integrated foundries are located in the
east, while electric steel is produced predominantly in the south
and west. In the future the east will see rapid expansion as
more integrated capacities are being built in Orissa and other
eastern states due to its raw materials.
21
Although India is now one of the worlds top ten steel producers,
its domestic output is insufficient to meet the demand in all
segments. Imports increased in 2005 by 8% and it is likely that
India will continue to import in many segments over the
medium term. According to Deutsche Bank Research,1 the
three biggest steelmakers in India have a combined output of
almost 20 million tons and have a domestic market share of
51%. Their domestic competitors are numerous medium-sized
and smallish companies and more mergers can be expected
between these companies as these firms need to improve their
position with regard to the powerful suppliers of raw materials.

CONSUMPSION OF STEEL IN INDIA

Driven a booming economy and concomitant demand levels,

consumption of steel has grown by 12.5 per cent during the last
three years, well above the 6.9 percent envisaged in the
National Steel Policy.

Steel consumption amounted to 58.45 mt in 2006-07 compared

to 50.27 mt in 2005-06, recording a growth rate of 16.3 per
cent, which is higher than the world average. During the first
half of the current year, steel consumption has grown by 16 per
cent. A study done by the Credit Suisse Group says that India's
steel consumption will continue to grow by 17 per cent annually
till 2012, fuelled by demand for construction projects worth US$
1 trillion.
The scope for raising the total consumption of steel in the
country is huge, as the per capita steel consumption is only 35
kgs compared to 150 kg in the world and 250 kg in China.
With this surge in demand level, steel producers have been
reporting encouraging results. For example, the top six
companies, which account for 70 per cent of the total
production capacity, have recorded a year-on-year growth rate
of 13.4 per cent, 15.7 per cent and 11.7 per cent in net sales,
operating profit and net profit, respectively, during the second
quarter of 2007-08.
We expect strong demand growth in India over the next five
years, driven by a boom in construction (43%-plus of steel
22
demand in India). Soaring demand by sectors like
infrastructure, real estate and automobiles, at home and
abroad, has put India's steel industry on the world steel map.

YEAR WISE DEMAND OF INDIAN STEEL INDUSTRY

YEAR DEMAND (in GROWTH

m t) IN %
2000-2001 34.444
2001-2002 36.037 4.625
2002-2003 40.471 12.32
2003-2004 43.062 6.4
2004-2005 45.387 5.4
2005-2006 50.257 10.73
2006-2007 58.45 16.3

GRAPHICAL REPRESENTATION OF GROWTH AND

DEMAND OF INDIAN STEEL INDUSTRY

23
MAJOR CONSUMERS OF INDIAN STEEL INDUSTRY

Support from dynamic economy

India is the economic region that has enjoyed the world’s most
sustained boom. The Deutsche Bank Research Formel-G
econometric model forecasts average real GDP growth of 5.5%
p.a. for India between 2006 and 2020 O followed by Malaysia
(5.4%) and China (5.2%). In all, the analysis covered 34
economies that generate some 85% of global GDP. The growth
drivers are population growth, human capital, opening of the
economy and rising investment. Despite the sharp increase in
India’s population, per-capita GDP – in purchasing power parity
terms – should rise by nearly 4% per year until 2020. Since the
model does not take sufficient account of the country’s major
initiatives in the infrastructure area, average growth until 2020
might turn out to be even closer to 6%. In fact, by the end of
the decade India could replace Japan as the world’s third
biggest economy after the US and China

24
Positive stimuli from construction industry

The steel companies are pinning their hopes largely on the

expanding construction industry. The industry is one of the key
drivers of India’s economic growth. Up to 10 million new homes
need to be built each year until 2030. Strong population growth,
rising incomes and decreasing household sizes are forcing
comprehensive measures to be taken in the housing sector. The
pent-up demand for housing is estimated at around 20 million
units by the Indian Construction Association; the Ministry for
Urban Development and Poverty Alleviation claims that no less
than 31 million dwellings are needed. The hosting of the
Commonwealth Games in New Delhi in 2010 should generate
additional stimulus for the construction industry and thus boost
demand for steel. In addition to the sports facilities,
accommodation for competitors and visitors is planned. The
government has announced that some 40 hotels with a total of
15,000 beds are to be built. The Indian office market is
benefiting from the ongoing off shoring activities of industrial
nations. Indian insurers are concentrated in the software
development and software product segments. Their second
main business area is assuming the responsibility for entire
support processes, or business process outsourcing (BPO).
These segments still look set for growth.6 Furthermore, the
construction sector is benefiting from major infrastructure
projects. Capital expenditure is to be focused on road building
and the rail network, as well as on the construction and
expansion of ports and airports.

Strong growth in mechanical engineering

Mechanical engineering output has increased some 10% p.a.

over the past five years. Thanks to the march of technological
progress the prospects for domestic suppliers should improve
going forward, while import growth is slightly crimped. Demand
is greatest for building machinery and plastic-moulding
machines as well as machine tools and textile machinery. Since
the domestic textile and apparel industry, for example, is
25
focusing further up the value chain, firms have to make
numerous investments in modernising and expanding their
machinery portfolios Makers of building machinery are
benefiting from the large-scale infrastructure projects planned
by the Indian government, while machine-tool makers are being
buoyed by the upturn in the automobile and auto parts
industries for example. Exports by the Indian mechanical
engineering industry rose recently by nearly 30% to USD 10 bn.
By comparison, German mechanical engineering firms exported
products worth close to USD 117 bn, including machinery to the
value of about USD 1 bn to India. Germany claims a particularly
large share of Indian imports of Woodworking machinery and
machine tools as well as pumps and compressors. The demand
for foreign machinery comes from customers requiring
especially high standards of performance and precision. The
Engineering Exports Promotion Council (EEPC) forecasts that
Indian exports will be worth USD 30 bn (+32% p.a.) by 2008;
nevertheless the volume is still very low by international
standards.

Booming automobile industry

The automotive industry may consume a relatively small

proportion of steel output, but its growth rate is the highest of
the most important clients for the steel industry. In India a small
but flourishing automobile industry has now developed that
sees its future primarily in the budget price segment and views
the domestic market and other emerging nations as potential
markets.7 Vehicle ownership (cars and trucks) in India at 11 per
1,000 inhabitants are even less widespread than in China with
its very low figure of 21. The growth of the Indian automobile
industry is being driven by healthy domestic demand. The
consumption minded, fast-growing middle class is a major
factor. The continuing increase in incomes and low-cost
financing facilities are boosting sales. However, it is not
uncommon for cars to be used for 20 years (Western Europe: 12
years), with vehicles that have been taken off urban roads often
being driven for longer in rural areas. The population’s steadily
growing demand for mobility and sharply rising traffic volumes
26
will continue to generate strong demand for cars in the future.
At the same time India’s automobile sector is establishing itself
as an exporter to international markets. Hyundai, for example,
uses the country as an export base for small cars, and Ford
manufactures vehicles there for South Africa and other markets.
However, competition between automakers has intensified
markedly. Whereas in 1995 there were just five carmakers in
India the figure has now reached 10. The biggest are Maruti
Udyog Ltd., Hyundai Motor India and Tata Engineering (Telco).
The Tata group is even trying to gain a foothold in the European
market with new models. India currently produces a total of
711,000 cars each year (Germany: 5.4 million).

27
SUPPLY OF STEEL IN THE INDIAN MARKET

Over the past ten years India’s crude steel output rose nearly
7%per year to 55.3 million tons , while global crude steel output
increased by 4% (Germany managed an increase of just under
1%p.a.) Although India is the world’s eighth largest steel
producer, its3%-plus share of global steel output is still very
low; it is roughly the same as Ukraine’s share of world steel
production. China, the world’s biggest steelmaker, produces
nearly ten times as much as India.In 2005 India’s crude steel
output of 46.5 million tons was 8%higher than in 2004; only in
China was the growth rate considerably higher at 15%. By
contrast, production volumes fell in the US and the EU-25 by
nearly 5% and roughly 4% respectively. In the first five months
of 2006 Indian steel production continued to expand unabated,
rising 10% yoy.

YEAR SUPPLY ( in m GROWTH IN

t) %
2000-2001 32.81
2001-2002 34.7 5.76
2002-2003 38.96 12.23
2003-2004 41.41 6.29
2004-2005 43.278 4.51
2005-2006 46.492 7.42
2006-2007 54.35 16.91

28
GRA

GRAPHICAL REPRESENTATION OF SUPPLY OF INDIAN STEEL

INDUSTRY

29
We forecast a significant increase in output by the Indian steel
industry over the medium term. The entire industry’s
contribution to gross domestic product should rise in the
coming years to more than 30% – compared to just under27%
at present. The growth drivers are the expanding client
industries Automotive engineering (production up 16% p.a.
between 2000 and 2005), mechanical engineering (up 10%
p.a.) and construction (up 6% p.a.).

Company Profile
Tata Steel

Tata Steel (BSE: 500470), formerly known as TISCO and Tata Iron and Steel
Company Limited, is the world's sixth largest steel company, with an annual
crude steel capacity of 31 million tonnes. It is the largest private sector steel
company in India in terms of domestic production. Ranked 258th on Fortune
Global 500, it is based in Jamshedpur, Jharkhand, India. It is part of Tata
Group of companies. Tata Steel is also India's second-largest and second-
most profitable company in private sector with consolidated revenues of Rs
1,32,110 crore and net profit of over Rs 12,350 crore during the year ended
March 31, 2008.
Its main plant is located in Jamshedpur, Jharkhand, with its recent
acquisitions; the company has become a multinational with operations in
various countries. The Jamshedpur plant contains the DCS supplied
by Honeywell. The registered office of Tata Steel is in Mumbai. The company
was also recognized as the world's best steel producer by World Steel
Dynamics in 2005. The company is listed on Bombay Stock

30
Exchange and National Stock Exchange of India, and employs about 82,700
people (as of 2007).

Bhushan Steel

Bhushan Steel is the largest manufacturer of auto-grade steel in India and is

spending Rs. 260 billion to expand its capacity to 12 million tonnes annually,
from the present installed capacity of around one million tonnes.
Financials and management
Gross sales of Bhushan Steel grew from Rs. 500 crore in 2001 to Rs. 4000
crore in 2007. It earned net profits of Rs. 313 crore in 2007 and exported
goods worth Rs. 1,257 crore. Its exports include steel for both the automotive
and white goods industry and the list of countries it is exporting to includes
several developed countries.
Existing plants
The Khopoli plant in Maharashtra was commissioned in 2004 and has been
producing colour coated sheets, high tensile steel strappings, hardened and
tempered strips and precision tubes. In addition to these, the Khopoli plant has
recently launched the Galume value added steel (aluminium and zinc coated
sheet) for the first time in India.
At its Sahibabad plant in Ghaziabad, Uttar Pradesh, it has a 1700 mm mill,
which produces the widest sheets in India for the automotive industry. It has
highly automated systems.
At its Meramandali, Dhenkanal plant in Orissa, Bhusan Steel produces hot
rolled coils and has mills for hot rolling. Construction of the first phase is being
carried out.
Bhushan Power and Steel Limited has seven plants at four locations
– Chandigarh, Derabassi in Punjab, Bangihatti, near Dankuni in West Bengal,
and Thelkoloi in Orissa.

Jindal Steel and Power Limited

31
Jindal Steel and Power Limited is the most valuable private steel producer in
India, with a market cap of $11.8 billion. However, in terms tonnage, it is the
third largest steel producer in India. The company manufactures and
sells sponge iron, mild steel slabs, Ferro chrome, iron ore, mild steel,
structural, hot rolled plates & coils and coal based sponge iron plant. The
company is also involved in power generation.
Jindal Steel and Power is a part of the Jindal Group, founded by O. P.
Jindal (1930-2005). In 1969, he started Pipe Unit Jindal India Limited, one of
the earlier incarnations of his business empire. After Jindal's death in 2005,
much of his assets were transferred to his wife, Savitri Jindal. Jindal Group's
management was then split among his four sons with Naveen Jindal as the
Managing Director of Jindal Steel and Power Limited. His elder brother, Sajjan
Jindal, is currently the head of ASSOCHAM, an influential body of the
chambers of commerce, and the head of JSW Group, part of O.P. Jindal
Group.
On June 3, 2006, Bolivia granted development rights for one of the world's
largest iron ore reserves in the El Mutún region to Jindal Steel. With an initial
investment of US$ 1.5 billion, the company plans to invest an additional US$
2.1 billion over the next eight years in the South American country.[1]
Savitri Jindal, the widow of O. P. Jindal, is ranked as the 19th richest Indian
person according to Forbes.
The Jindal family established Vidya Devi Jindal School, a residential school for
girls in Hisar, India, in 1984. Although not marketed as such, it is widely known
to cater to the wealthy through its private location and remarkable array of
activities. The school's student body comprises girls from affluent business
and political families of India.

Ispat Industries Limited

Ispat Industries Limited (IIL) (BSE: 500305), set up as Nippon Denro Ispat
Limited in May 1984 by founding chairman Mr M L Mittal, is one of the leading
integrated steel makers. It has steadily grown into a Rs 9,400-crore company
having operations in iron, steel, mining, energy and infrastructure. It has two
32
integrated steel plants, located at Dolvi and Kalmeshwar in the state of
Maharashtra. The 1,200 acres Dolvi complex houses the 3 million tonne per
annum hot rolled coils plant., that combines the latest technologies - the
Conarc process for steel making and the compact strip process (CSP) -
introduced for the first time in Asia. The company is listed on Bombay Stock
Exchange and National Stock Exchange of India. It is headquartered
at Mumbai and employs about 3000 people. Ispat Industries was ranked 5th
among major steel companies in India for the year 2008 by Business World.

Hindustan Zinc Limited

Hindustan Zinc Limited (HZL) (NSE: HINDZINC, BSE: 500188) is an
integrated mining and resources producer
of zinc, lead, silver and cadmium. It is a subsidiary of Vedanta
Resources PLC. HZL is the world's second largest zinc producer. It's
FY2008 revenues were Rs. 85.47 billion per year.
History: HZL was established in 1966 as a government-owned
corporation.
Operations: Mining
HZL operates the world's third largest open-pit mine in Rampura
Agucha, Rajasthan. Other mines it operates are located in Sindesar
Khurd, Rajpura Dariba and Zawar, also in Rajasthan.
HZL may also the world's lowest cost zinc producer.
Smelting: HZL operates Zinc and Lead smelters and refineries at
Chanderiya and Debari in Rajasthan, and at Vishakhapatnam in Andhra
Pradesh.

ISMT limited
33
ISMT limited: It is largest integrated specialized seamless tube
manufacturer in India. One of the most diversified manufacturers of
specialized seamless tubes in the world, producing tubes in the range of
6 to 273 mm OD. One of the most modern alloy Steel plants in India that
produces a wide range of alloy steels from 20 to 225 mm diameter.
Specialized teams provide end to end solutions to industry-specific
customers.

The Indian Seamless Metal Tubes Limited was promoted in 1977 by a

group of technocrats to produce specialized seamless tubes in India.
Beginning with an installed capacity of 15,000 metric tons per annum,
ISMT commenced production in 1980 with the installation and
commissioning of an Assel mill in technical collaboration with
Mannesman Demag Meer of Germany.

Subsequently, in 1990 the production capacity was raised to 50,000

metric tons per annum with the addition of a second Assel Mill. In 1995
The Indian Seamless Metal Tubes limited promoted another company,
Indian Seamless Steels and Alloys Ltd. (ISSAL), to produce alloy Steel,
the raw material used in the manufacture of seamless tubes, giving ISMT
better control over product quality as well as deliveries. In 2008 ISMT
added a brand new PQF Mill. With this addition, ISMT’s tube making
capacity increased from 150,000 MT/ annum to 450,000 MT/annum.
Simultaneously, steel making capacity has also increased from 250,000
MT/annum to 350,000 MT/annum with the addition of a second Ladle
refining furnace.

ADHUNIK METALIKS
Adhunik Metaliks was incorporated on November 20, 2001 as Neepaz
Metaliks Private Limited under the provisions of the Companies.
Act,1956 with its registered office at 14, N.S. Road, Kolkata 700001.
Subsequently, the Company converted into a public company pursuant
to a special resolution passed on February 18, 2004 and filed the
statement in lieu of prospectus as required under the section 44(2) (b)
of the Companies Act , 1956. The name of the Company was changed
from Neepaz Metaliks Limited to Adhunik Metaliks Limited pursuant toa
special resolution passed by the shareholders of the Company at a
meeting held on July 22, 2005.

34
 As on the date of filing this Draft Red Herring Prospectus, our
Promoters hold 5,16,85,642 Equity Shares of our Company
representing 80.51 of our pre - Issue issued equity capital and the
Promoter Group holds 46,83,770 Equity Shares of our Company
representing 7.29 of our pre - Issue issued equity capital. As on the date
of filing this Draft Red Herring Prospectus, six of the Directors on our
Board represent the Promoters, 1 of the Directors is an executive director
and 3 of the Directors are independent directors.
In 2007-Adhunik Metaliks Ltd has informed that the Company has
acquired Orissa Manganese & Minerals Pvt Ltd as 100% subsidiary.

Electrosteel Castings Limited

Electrosteel Castings Limited

Ductile Iron – THE NATURAL CHOICE

Electrosteel Castings (UK) Ltd a wholly owned subsidiary of Electrosteel

Castings Ltd, India offers a comprehensive range of Ductile Iron
pipes and fittings for use in the water and sewerage industry.

Offering the end user total versality Ductile Iron provides a broad range
of solutions to specific pipeline application or installation demands in
both above and below ground applications.

The product range covers the diameters 80mm to 1000mm with a choice
of jointing types , fitting types and protection systems for use in most
applications.

Operating under BS EN ISO 9001 Quality Management System and ISO

14001 Environmental Management System products are manufactured
in a state of the art facility in Kolkata, India. Quality is viewed as an
essential aspect of the product supply and all pipes and fittings are
manufactured and tested in accordance with the requirements of both BS
35
EN 545 for potable water and BS EN 598 for sewerage.

In addition as a part of the supply package we recognise that

occasionally on site unexpected requirements occur that need either a
‘special’ or ‘short lead time’ solution. Electrosteel Castings (UK) Ltd offer
both Fabricated Flanged Pipe and Steel Fabrication facilities geared to
responding to these demands and assisting our customers in resolving
problems.

2.3 Literature Review

Most studies dealing with shareholders’ value

creation have focused on comparison of traditional measures
(earning, cash flow, productivity parameters, net present value,
etc.) and value based measures (EVA, MVA as percentage of
capital employed, etc.). The purpose of such an exercise was to
identify the most significant explanatory variable that best
measures the shareholder value ; but, the existing literature on
the underpinnings of the share holder value creations is not well
developed. Most companies in India still are in dark about what
exactly they are supposed to do for managing the shareholder
but virtually all of them say the are doing it. The real key to
create message a business enterprise has to earn economic
return to its owners for its economic survival. In market-driven
economy, there are number of firms that create wealth whereas
other destroy it. EVA as well as MVA being a value based
measure assist investors in wealth discovery & company
selection process. IN the present study& attempt has being
made to explain the application of EVA principles for the
evaluation of companies. It highlights and explains all the
elements that finds in EVA computation like calculation on net

36
operating debt cost of equity , Cost of preference capital and
finally ,EVA.

Thus, the proposed study make an original contribution towards

literature since it is pioneering and comprehensive effort to
calculate EVA & MVA of India’s valuable companies, exactly as
per the methodology developed by Stern Steward & CO.
(founders of EVA concept) for a long period . I t helps strategic
investor, academic, researcher, portfolio managers and
corporate decision maker to dig below the surface to interpret
the economic realities of these big business houses. The
present study defines and discusses the EVA computations &
outlines the measurement of MVA. It, then, explains the
research design & methodology, and presents the results with
discussions, followed by summary of the findings.

2.4Defining the problem

Corporate management has been placed under

growing pressure to implement financial strategies that
create value for its shareholders. Although maximizing
shareholder wealth has become a paramount corporate
mission, how this mission is to be achieved is much less
certain. For many years, company executives and
shareholders have relied to standard accounting
measures are not reliably linked to increasing the value
of a company’s shares. This occurs because earnings do
not reflect changes in risk factor, nor do they take
account of the cost of equity capital. So, the conclusions
drawn on the basis of such measures create value is to
earn sufficient economic returns to its shareholders.
37
Two measures of financial performance that account
properly for all ways in which value can be added or lost
are Economic Value Added (EVA) and Market Value
Added (MVA).

2.2 Objectives

To Study the Shareholders’ value creation in Steel and

allied Industries.

38
 2.3 Methodology
The Study is based on secondary data and covers the period of
5 years ranging from 2005-2009. A sample of 10 steel and
allied companies selected on random basis among the top steel
companies.

EVA techniques are used.

MVA techniques are used.

Further, Regression Analysis has been used to study linkages

between EVA and MVA.

39
 2.4 Limitations of report

• The project is based only on secondary

data.
• Data was available for 5 years only.

40
 Chapter 3
3.1 Analysis of Data
41
 Nowadays, investor and portfolio managers are keen to
find the ‘best companies’ in terms of value creation. The
purpose behind this is to take decisions regarding stock
selection, portfolio construction and risk management. The
shareholders are always the residual claimants who need to be
satisfied with suitable returns. Without this Business entity is no
longer viable and is not likely to continue as a going concern.

In India, Business Today took an initiative in April 1999 and

commissioned Stern Stewart & Company (Financial consulting
workshop that created the concept of EVA and MVA), to asses
the value addition of the companies followed by many
researchers who did many research on Shareholder value
creation. The objective was to look beyond the façade of
traditional measures, like market cap, earning per share and
price to earning ratio so as to investigate weather a company
management was really adding value to its shareholders.

In present study, a similar attempt has been made to identify

the financial performance of selected Indian Steel and related
companies based on their ability to create wealth as indicated
by to unique metrics: EVA and MVA.

42
 TABLE 1

TABLE: 1 Year-wise EVA and EVA based ranking of sample companies for the period
2009 through 2005 (in crores)

Company
Names 2009 2008 2007 2006 2005

Ran Ran Ran Ran

EVA Rank EVA k EVA k EVA k EVA k

ADHUNIK
METALIKS 34.32 7 12.38 6 2.23 8 2.56 8 1.04 7

AJMERA
REALTY -0.21 8 22.59 5 13.12 7 11.33 7 15.68 6

BHUSHAN 291.8
STEEL 1 3 148.31 4 142.93 5 155.62 3 140.18 3

ELECTROSTEE
L -15.57 9 7.16 8 -12.28 9 0.62 9 -14.71 8

-
HINDUSTAN 545.7 -
ZINC 2 10 500.20 10 -56.30 10 16.63 6 -40.88 9

ISMT LTD 95.43 6 11.08 7 48.42 6 31.84 5 34.06 5

597.2 1058.5 -
ISPAT INDS. 6 2 -33.37 9 2 1 327.83 1 216.84 10

282.5
JINDAL STEEL 2 4 453.11 1 217.09 4 155.02 4 103.41 4

725.7
JSW STEEL 7 1 260.34 2 289.98 2 -13.17 10 184.83 2

263.2
TATA STEEL 9 5 164.61 3 242.22 3 317.82 2 242.28 1

1728. 546.0 1945.9 1006.1 449.0

Total EVA 88 0 3 0 4

43
Table 1 depicts the year-wise EVA created by sample of
companies for period of 5 years and their respected ranking for
the said period. It is evident from the table that in year 2009, 7
out of 10 companies reported positive EVA. The companies
gained top three positions were JSW Steel, ISPAT INDS and
Bhushan Steel, respectively where as Hindustan Zinc, Electro
Steel and Ajmera Realty were the worst performer and got the
last three position in EVA ranking. Hindustan Zinc reported
negative EVA for four years except 2006. Tata Steel lost it
ranking position from no1 to no5 from year 2005 to 2009.

44
 TABLE 2

Above data can be presented in diagram as

follow: (Daigram1)

45
Table: 2 Shows the EVA based frequency Distribution of sample
of companies. The highest wealth destroyer companies were 3
in year 2005and 2009. In 2006 there was only one EVA negative
company. On an average about 22% of companies stated
negative EVA through out the study period. Around 34% of
companies generated EVA upto 100 crores, 38% succeeded into
generate EVA between 100 to 499 crores, 6% hand EVA above
500 crore.

46
 Table 3
TABLE: 3 Year wise MVA and MVA based ranking of sample companies for the period 2009
through 2005 (in crores)

Company Names 2009 2008 2007 2006 2005

Ra Ra Ra Ra Ra
MVA nk MVA nk MVA nk MVA nk MVA nk

ADHUNIK METALIKS -33.12 4 921.80 8 56.29 9 191.40 8 160.98 6

AJMERA REALTY -204.18 6 1517.22 6 2130.84 5 1839.86 4 128.61 8

BHUSHAN STEEL -336.42 7 1019.84 7 967.04 7 -129.02 10 106.36 9

ELECTROSTEEL -834.90 8 101.83 10 -21.80 10 3.95 9 138.86 7

10398.0 16176.2 18677.1

HINDUSTAN ZINC 4546.44 2 9 3 1 1 8 2 5105.45 2

ISMT LTD -192.50 5 278.65 9 533.20 8 1083.30 6 105.24 10

ISPAT INDS. 403.41 3 3155.12 5 995.07 6 1182.10 5 542.30 5

47
 13167.0 28150.5
JINDAL STEEL 0 1 4 2 4821.32 3 3997.02 3 1906.18 3

-
JSW STEEL 3312.08 9 7968.47 4 2790.92 4 676.88 7 1806.93 4

- 28512.5 12151.6 19938.3 15136.9

TATA STEEL 9116.33 10 1 1 2 2 1 1 3 1

4087.3 82024. 40600. 47460. 25137.

Total MVA 2 06 72 97 85

The above table can be presented in

diagram as follow: (Diagram 3)

48
Table 3 represent the year wise MVA and MVA-based ranking of
sample companies. It is observed that wealth is destroyed in
2009 showing negative MVA around 70 % of companies were
negative. Top three gainers in 2009 are Jindal Steel, Hindustan
Zinc and ISPAT INDS and top three losers were Tata Steel, JSW
Steel and Electro Steel. There was consistent growth in MVA
which tremendously dropped in year 2008-09 to 4087.32 crore
as compared to year 2007-08 from 82024.06 crore. The MVA
fall in year 2008-09 was basically because of Global Meltdown
and recession in the global economy which crashed the share
market more than 50% globally.

49
 Table: 2 MVA-Based frequency distribution of sample of
companiesNumber of Companies

Year
200
MVA 9 2008 2007 2006 2005 Total Average %

Negative 7 0 1 1 0 9 1.8 18

0-999 1 3 4 3 6 17 3.4 34

1000-2499 0 2 1 3 2 8 1.6 16

2500-4999 1 1 2 1 0 5 1 10

5000-9999 0 1 0 0 1 2 0.4 4

10000-14999 1 1 1 0 0 3 0.6 6

15000-19999 0 0 1 2 1 4 0.8 8

Above 20000 0 2 0 0 0 2 0.4 4

10
Total 10 10 10 10 10 50 10 0

50
 Average of 5 years MVA

Table :2 Shows the MVA based frequency Distribution of

sample of companies. The highest wealth destroyer company
was observed to be 7 in year 2008-09. In 2006 there was only
one EVA negative company. On an average about 18% of
companies stated negative EVA through out the study period.
Around 34% of companies generated MVA upto 1000 crores,
30% succeeded into generate EVA between 1000 to 9999
crores, 18% hand MVA above 10000 crore.

51
 Chapter 4
4.1 Conclusion
The EVA-MVA framework provides a new lens through which the
underlying economies of a business and its contribution to
wealth creation can be viewed. Unless the companies focus on
EVA as a metric that can realistically assess its economic
contributions, shorn of accounting anomalies, they may find it
difficult to survive in the long run. The present study found that
almost 50% of the sampled companies representing India's
wealth club undoubtedly destroyed the wealth of its
shareholders. It raises a question on how the paucity of positive
EVA in Indian companies can be declined? In the short run,
factors like reduction in the companies' cost of capital, increase
in its return on capital employed, an improved operational
efficiency, hiving off unproductive assets and optimizing the
debt to equity ratio will all contribute to an upswing in its EVA.
Thus, the short-term solution for a high EVA lies in the choice of
positive Net Present Value (NPV) projects and products that are
not capital intensive. Moreover, a consistent high EVA from year
to year also results in an increase in the company's MVA. For
this, companies need to focus on growth and financial
jurisprudence simultaneously (BT-2000). The advisors and
managers should seek to link the business strategies to values
and values to performance for the achievement of the objective
of value creation. Though in the last four years, it seems as if
Indian companies have paid a greater deal of attention in
improving EVA, yet the metric has not found any legal backing.
It is not mandatory for the companies to calculate their
economic profitability methodically and disclose the same in the
audited annual reports. Ehrbar (1999) rightly claims that
corporations will continue to use a variety of measures to gauge
their financial performance, but none will provide a more
accurate measure of wealth creation than EVA. As companies
begin to understand the power of EVA and incorporate it as the
basis for various capital budgeting decisions, performance

52
evaluations and bonus determination will be on the road to
achieve outstanding success.

Bibliography:
* Pandey I. M. "Financial Management", Vikas publishing
house New Delhi
* Chandra Prasanna "Financial Management Theory and
Practice, Tata McGraw-Hill, New Delhi
Fifth Edition.
* www.Valuebasedmanagement.com

53
54