Steel Sector

Analysis
A Security Analysis Report

Submitted By:
Section X, Group 1
Abhimanyu Diwan (U109002)
Afrozy Ara (U109004)
Amiya Ranjan Das (U109005)
Amrita Sabat (U109006)
Ankit Jain (U109009)
Anshuman Shrivastava (U109010)
Arun Narayan (U109011)
Ashish Sharma (U109012)
Chandan Kumar Sahoo (U109015)
Deepak Agarwal (U109018)

Table of Contents
Steel Sector: Macro-Economic Analysis .................................................................................................. 2
TATA Steel ............................................................................................................................................... 8
Steel Authority of India Limited (SAIL) .................................................................................................. 11
JSW Steel ............................................................................................................................................... 14
ISPAT ..................................................................................................................................................... 17
VISA Steel .............................................................................................................................................. 20
Selection of Companies......................................................................................................................... 23
Appendix ................................................................................................................................................. 8
Appendix A: Macro-Economic analysis ............................................................................................. 25
Appendix B: Tata Steel ...................................................................................................................... 26
Appendix C: SAIL ............................................................................................................................... 28
Appendix D: JSW Steel ...................................................................................................................... 31
Appendix E: ISPAT ............................................................................................................................. 34
Appendix F: VISA Steel ...................................................................................................................... 35
Reference39

Steel Sector: Macro-Economic Analysis

Exhibit 1: World steel production and consumption
trend

in million tonnes

1400
1300
1200
1100
1000
900
800
700
600
200320042005200620072008200920102011
(F)

Demand

Global Steel Demand and Supply

The current forecast by World Steel Association shows
about a 10.6% rise in demand in 2010 to 1.24Bn metric
tonnes with a further 5.3% rise in 2011 that takes global
apparent steel demand to 1.31Bn tonnes. The
production has also increased by 9.6% in 2010 to
1.34Bn tonnes. Steel production and consumption has
expanded at a CAGR of 4.6% and 4.9% respectively,
during 2003-2010.

Production

Exhibit 2: Steel production

in million tonnes

3000
2500
2000
1500
1000
500
0
2008

2009

2010

Developed

Developing

Non-China Dev.

BRIC

2011 (F)

But the pattern of demand will be quite different than

before the Economic slowdown. According to
the world steel forecast, the developed world will
achieve in 2011 only about 80% of its demand in 2008.
But the developing world will have risen to 124% of its
demand in that same year. Within the developing
group, the BRICs (Brazil, Russia, India & China) will have
soared to 132% of their 2008 demand. Though demand
in the developed world will no doubt recover further
from 2011, it will continue to lose ground to
developing nations.

Exhibit 3: GDP v/s Steel Consumption (World)

Demand deterioration because of slowdown, but
recover sharply

15.00
10.00
5.00
0.00
-5.00
-10.00
Steel consumption growth

GDP

The demand has staged a comeback in 2010 and is likely

to increase by 5.9% in 2011. This is based on our
analysis of the correlation between steel demand and
GDP growth. The average steel consumption to GDP
growth multiple for the world has been 1.38 for 200310. With world GDP growth expected at 4.3% (IMF
estimates) for 2011, the consequent increase in steel
consumption should be close to 5.93% (based on
1.4xGDP growth).

Exhibit 4: Global Steel price trend

800

Global Steel price rebound

700

Globally, steel prices have seen a sharp correction

during the last two quarters due to strengthening of
global demand. Prices have increased by more than
22% since their December 2009 levels. The prices are
expected to rise because of increase in demand.

600
500
400
Dec-08 Mar-09 Jul-09 Oct-09 Jan-10 May-10

But price rise may not be the only function of demand

Hot rolled coil

Cold rolled coil

Wire rod

All products

The price erosion that took place during the year 200809 led to a similar spot raw material price correction.
However, the raw material prices are now showing
signs of rising with the steel prices and demand also
going up. The prices of key raw materials like coking
coal, iron ore, thermal coal and scrap have recovered
mildly from their lows to current levels where they
seem to have found some base finally. Prices of vital
raw materials like iron ore and coking coal in the current
quarter has almost doubled from the level of the
corresponding period a year ago.

$/tonne

Exhibit 5: Raw Material price

600
500
400
300
200
100
0
Q1
Q2
Q3
Q4
Q1
Q2
2009 2009 2009 2009 2010 2010
Thermal coal

Coking Coal

Iron ore FOB

Natural Gas

Jul-10

May-10

Mar-10

Jan-10

Nov-09

Sep-09

Jul-09

May-09

Mar-09

130
125
120
115
110
105
100
95
90
85
80
Jan-09

the

breadth

amidst

slowdownrecent

Looking at the recent trends in major steel consuming

sectors like construction and auto in the developed as
well as developing countries we find that the gloomy
scenario is still persistent in the developed world
(mainly US and EU). However, there have been signs of
a recovery in developing nations (mainly India and
China).

Exhibit 6: World Steel production

million tonnes

Catching
trends

World crude steel production for the 66 countries

reporting to the World Steel Association was 115
million mmt in July, 9.6% higher than July 2009. Chinas
demand has been slowing fast, its crude steel
production saw an increase of 2.2%, in India it
increased by 5.9%, while for US it was 32.9%. In the EU,
Germany saw an increase of 29.7% but in UK it
declined by 5.8%. However, the steel production has
declined in July 2010 as compared to June 2010. The
production of crude steel is still not at the pre-crisis
level as it was 2.1% lower in comparison to July 2008
level.

Indian Steel Industry

After stability; Growth coming in

Exhibit 7: Indian crude steel statistics

90
in millions

80

CAGR of 9%

70
60
50
40
30
2006 2007 2008 2009 2010 2011F 2012F
Production

Real Consumption

Exhibit 8: Crude Steel consumption trend

6.0
5.8
5.6
5.4
5.2
5.0
4.8
4.6
4.4
4.2
4.0

million tonnes

sign of stability

Indian steel industry is expected to register a

consumption growth of 13.7% in FY10-11F. The
Indian steel industry has witnessed a period of
strong growth with production and consumption
increasing at a CAGR of 6% and 9%, respectively,
during 2006-10. With the advent of the global
financial crisis and the ensuing liquidity crunch,
domestic steel production and consumption
remained flat in FY09 due to the sharp slide
witnessed in Q3FY09. However, with cooling
inflation and softening interest rates there has
been some stability in prices and sales volume in
2009. The Working Group on Steel Industry set up
by the Planning Commission had projected a total
demand of 70.34 million tonne for finished steel
and a total production of 80.23 million tonne of
crude steel by the end of the 11th Plan, that is,
2011-12.
Due to pick in consumption
The apparent consumption of finished steel has
picked up after seeing a trough in November and is
currently showing signs of growth with significant
demand revival from the construction and auto
sectors.

Exhibit 9: Steel Import and Export demand

But Imports also rise

1000

600
400
200

Export

Import

Apr-10

Jan-10

Oct-09

Jul-09

Apr-09

Jan-09

Oct-08

Jul-08

0
Apr-08

'000 tonnes

800

With growth in production for sale lagging behind

consumption growth, India has turned into a net
importer of finished steel in 2007-08. Exports have
also declined to ensure greater domestic
availability. Steel imports increased 116% year on
year to 973k tons in April 2010, while exports
declined 19% to 251k tons. This gives an
opportunity to domestic steel makers to replace
domestic import demand through their own
supplies.

Government initiatives have been positive for the industry

During the 11th Five Year Plan, a new scheme viz. "Scheme for promotion of Research and
Development in Iron & Steel sector" has been approved with a budgetary provision of Rs.
118 crore for implementation. The objective of the scheme is to develop path-breaking
technologies in an environment friendly manner.

National Steel Policy 2005 aims at building a modern and efficient domestic steel industry of
global standards with a capacity to cater to diversified product demands.

Promoting, developing and propagating the proper and effective use of steel and increasing
the intensity of steel usage, particularly in the construction sector in rural and semi urban
areas, through "Institute for Steel Development and Growth (INSDAG)" in Kolkata.

Export duty on all steel products has been removed and Import duty of 5% imposed on steel
products. Countervailing duty has been re-introduced on certain products.

Demand driven by Construction and Automobile

Exhibit 10: Steel Demand break up

Steel demand in India depends mainly on the

construction sector, which consumes close to 60%
of the total steel consumed in the country with
automobile contributing 11%. Core business
performance of the Auto companies has been
improving in FY2010 and visibility has been restored,
with a substantial 24% years on year growth seen in
FY2010. The construction sector outlook also looks
stable. The recent pick up in both these sectors has
helped steel demand to bounce back sharply.

17%
11%
59%

13%

Construction

Manufacturing

Automobiles

Others

Infrastructure spend to boost Construction activities

The planned infrastructure spending programme of the government during the Eleventh Plan gives a boost
to the construction sector. Even at 60% of planed spending, the demand of steel will be boosted by 6 MT
per annum. Refer Exhibit 11 & 12
Exhibit 13: Per capita steel consumption
With per capita steel consumption expected to
improve

700
600

Developed

in kgs

500

Developing
Economies

400
300
200
100
0

627
464
358

309
190

116

47

With low per capita steel consumption at present,

scope for improvement exists. Indias steel
production capacity is going to increase manifold in
the coming years. The current low per capita
consumption of steel of 47 Kg, compared to the
world average of 190 Kg, strengthens the argument
that the domestic steel industry has a huge growth
potential.

Indias demand to continue

Steel consumption growth in India has traditionally shown a direct relation to IIP and GDP growth.
Average steel consumption to GDP growth multiple has been 1.2x for 2001-10 while average steel
consumption to IIP multiple has been 1.2x for the same period. With Indias FY11 GDP growth
estimated at above 8% by various government and other agencies, steel consumption growth
could be a healthy 9.6% in FY11 (based on 1.2xGDP growth). Unlike the developed countries that
are faced with marginal or negative GDP growth, India with a positive expected GDP growth is least
vulnerable to demand erosion in steel. Please refer to Exhibit 14

Exhibit 15: Trend in Steel prices

900
800
700
600
500
400

Hot rolled coil

Cold rolled coil

Wire rod

All products

Prices stay a concern

Steel producers increased prices in April 2010 by Rs3,
000/ ton after healthy sales in the month of March.
Sales thereafter have dwindled sharply due to price
correction, arrival of cheaper imports, and
weakening of apparent demand in April and May.
Indian spot steel prices have seen a marginal increase
of around Rs200 to 500/MT to Rs 24500 levels
between July and August at various locations on
account of the firming up of the raw material prices.
The prolonged monsoon has impacted demand from
the construction and infrastructure space.

Costs to go up due to rising raw material prices

350
300
250
200
150
100
50
0
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
1QFY11

US $ per tonne

Exhibit 16: Domestic Raw material price

Coking Coal

Major steel making raw materials like iron ore and

scrap continue to be firm in the international
markets, Coking coal prices are up 56% compared to
previous year at US$200/ton for1QFY11 and expected
to rise further. Iron ore contract prices are up 90% at
US$117/ton for 1QFY11 and expected to rise further.

Iron ore

But Margin to contract and then expand finally

In 1QFY11, Squeezed by cost pressure, steel producers are likely to witness margin contraction.
However, Steel prices may rise in the coming months. Trend is positive. Demand is picking up.
Domestic prices primarily follow the international trend. Margins will expand in second half of FY11,
as market forces bring about an adjustment in steel and raw material prices.

Summary
We are looking for recovery in both the economy and earnings; we believe it is best to emphasize on
the economically sensitive areas, such as steel industry.
Exhibit 17: Business Cycle (Global and India GDP)
14%
12%

Expansion

10%
8%
World

6%

trough

India

4%
2%
0%
-2%1995

1997

1999

2001

2003

2005

2007

2009

The global steel consumption is expected to increase by 10.3% whereas Indian steel consumption is
expected to increase by 13.7%. Prices remain a concern because of rising raw material cost. Margin
may be squeezed in the short term; however it will start expanding once the prices adjust.
We prefer companies with high exposure to domestic markets, low balance sheet risk with less
financial leverage and efficient operations. Most of the Indian companies have shown a smart run up
recently and upside potential at current levels looks capped.

Seeing the positive trend in steel sector with increase in consumption

demand, from automobiles, construction, we suggest to invest in the
steel sector.

TATA Steel
TATA Steel: Introduction
Tata Steel, Backed by an experience of more than 100 glorious years of
steelmaking, is the worlds sixth largest steel producing company with an annual
crude steel production capacity of 30 million tons per annum (MTPA). Founded in
the year of 1907, it was the first integrated steel plant in Asia. TATA Steel Group is
now the second most geographically diversified steel producer in the world and has
made it to the Fortune 500 Company list with a global presence in over 50 markets.
Tata Steels Jamshedpur plant has a 6.8 MTPA crude steel production capacity,
which is going to increase to 10 MTPA by 2010. The company has signed MOU for
three Greenfield steel projects in Jharkhand, Orissa and Chhattisgarh with the
respective state governments, which will increase the capacity by 23 MTPA.
Through investments in Corus, Tata Steel Thailand and NatSteel Holdings,
Singapore, Tata Steel has created a producing and marketing network in Europe,
Pacific-rim countries and the South East Asia.

Company
TATA Steel
Current Price(RS)
559.00
Target Price(RS)
619.00
Potential Change
11%
Time Frame
1 year
BUY
Shareholder
Promoters
Institutional
Investors
Other Investors
Public

% holding
31.33
41.99
4.51
22.18

PRICE TRENDS
FY2010 Results: Key Highlights- TATA Steel Group
TATA Steel, reported a significant improvement in profitability in the second half
1000
i.e. Q3 FY10 and Q4 FY10, with consolidated EBITDA of Rs8, 734 crore ($1,944
million) almost 15 times higher than the Rs606 crore ($135 million) reported in H1
FY10. Group EBITDA in the fourth quarter (Q4 FY10) at Rs5, 333 crore ($1,187
500
million) rose 57 per cent over Q3 FY10 (Rs3, 401 crore, $757 million).
0
4/1/2008

FY2010 Results: Key Highlights- TATA Steel Group

Tata Steel India reported an EBITDA of RS 5,333 crore (US$ 1187 million) in Q4
FY10 which is 57% higher than the previous quarter, Q3 FY10 on account of higher
volumes and increased prices at TATA steel , India and with the help of much
improved operating efficiency at TATA steel, Europe. The fourth quarter saw an
increase of 5612 crore of EBITDA compared to a loss of 279 crore in Q4 FY09. The
deliveries increased by 3% in compared to 3rd quarter of FY10 and 10% compared
to Q4 FY09
Sustaining Growth
Seeing the opportunity for growth as the world recovers from the financial crisis,
the Tata Steel Group has taken many initiatives that will ensure its growth is
sustainable. These initiatives span the entire supply chain, from logistics to raw
materials and value-added manufacturing. Some of its measures are I blast
furnace, pellet plants, coke oven batteries etc.
Liquidity & Net Debt
The TATA Group continued to have a strong liquidity position (including undrawn
credit lines) of Rs14,185 crore ($3,158 million) as of the end of Q4 FY10, which can
be attributed to stringent working capital management across its all operations in
all geographies. The TATA groups net debt at the end of Q4 FY10 was stood at
Rs44382 crore ($9,881 million).

4/1/2009

4/1/2010

Adj Close

TP

Buy

Sell

Revenue, EPS to remain strong in FY11

TATA Steel has put up a strong performance in the FY10 increasing PAT and EPS.
According to our estimate the PAT and EPS will show an increasing trend for FY11.
The company has substantial amount of debt and depreciation is rising because of
continuous investment in FA. Hence there is a stark difference between the OPM
Margin and PAT Margin.
PAT

PAT In Crore

EPS(rs)

8000.0

80.0

6000.0

60.0

4000.0

40.0

2000.0

20.0

0.0

Increasing Trend for PAT and

EPS for FY11E

0.0
FY06

FY07

FY08

FY09

FY10

FY11E

80.0%
60.0%

20.5%

40.0%

40.9%

21.4%

21.1%

42.1%

44.6%

20.0%

38.8%
19.4%

18.9%
36.5%

20.8%
43.0%

0.0%
FY06

FY07

FY08

FY09

OPM(%)

FY10

FY11E

NPM(%)

RONW and ROCE

We have estimated that the RONW will dip marginally to 16.1% in FY11 compared
to 18.9% in FY10. Whereas we have estimated that the ROCE will increase 19.2% in
FY11 compared to 14.5% in FY10. This can be contributed to the high rate of
interest payments due to increase in debts for further expansion and for acquiring
coal mine assets.
80.0%
60.0%

43.7%
27.2%

40.0%

17.6%

15.5%
19.4%

20.0%
20.5%

21.4%

21.1%

19.2% ROCE(%)
14.5%
18.9%

RONW(%)
16.1%

0.0%
FY06

FY07

FY08

FY09

FY10

FY11E

Overall the business will perform better as compared to the last few years will
increasing Sales, owning of mines, robust balance sheet by issuing of warrants.

Increasing OPM and NPM at

43% and 20.8% for FY11E

Valuation
We have valued the company on the basis of EV/EBIDTA, P/E and P/BV and arrived
at the target price of Rs. 648.79/share assigning a Buy rating to the stock.

Valuation
EBIDTA

FY11E
13549.5

EV/EBIDTA
Expected EV
Add Cash
Less Debt
Mar Cap Expected

6.0
81193.9
3557.6
30287.0
54464.4

Number of Shares
Target Price Per
Share

8872.1

Valuation Summary
Ratios
PAT
EPS(Rs)
P/E
P/BV
EV/EBIDTA
OPM (%)
NPM (%)
RONW (%)
ROCE (%)

FY06

3506.4
63.4
8.5
3.0
4.2
0.4
0.2
0.20
0.44

FY07

4222.2
72.7
6.2
1.9
3.9
0.4
0.2
0.21
0.27

FY08

4687.0
63.9
10.8
2.3
7.4
0.4
0.2
0.21
0.18

FY09

5201.7
69.7
3.0
0.6
7.2
0.4
0.2
0.19
0.16

FY10

5046.8
56.4
11.2
1.5
7.8
0.4
0.2
0.19
0.15

FY11E
6568
79.2
8.4
1.41
6.0
0.43
0.21
0.17
0.20

EV/EBIDTA based valuation of Rs 614/share

The company has traded at a forward multiple of 7.8x and 7.2x EV/EBIDTA
in last 2 financial year. However we have used a conservative approach and
valued the company at 6.0XEV/EBIDTA which is calculated by taking the
average of last 5 financial year. Note that the company can very well
surpass the 6.0 figure as we see from the last 2 years performance.
P/BV based valuation of Rs 652/share
TATA Steel traded at 0.6x and 1.5x its FY09 BV Rs 331.68 and FY10 BV Rs
418.94
respectively. Looking at the historical data of TATA, we find that TATA has
traded on an average of 1.83x its book value. Hence we expect TATA to trade
at
a premium. We value the company 1.41x its BV of Rs 460.83.
P/E based valuation of Rs 591/share
TATA has registered decreasing EPS of 69.7 and 56.37 in FY09 and FY10
respectively. Based on our projections the EPS for FY11E turns out to be
Rs 74.04. The company ranged between P/E multiple of 6.2x and 11.2x from
the
FY06 TO FY10. We have valued the company at P/E multiple of 8.00x the
projected EPS of Rs 591.
Target Price
For calculating the Target Price we have taken the average of the price from
the three methods EV/EBIDTA, P/BV and P/E. The target price is Rs 619
and we recommend to BUY the stock

Valuation
P/E
EPS
Price
Valuation
P/BV

613.9

FY11E
8.00
74.04
591.29
FY11E
1.41

BV

460.83

Price

652.00

Methods
TP by EV/EBDITA
TP by P/E
TP by P/BV
Target Price

Target Price
613.88
591.29
652.00
619.06

Steel Authority of India Limited (SAIL)

SAIL: Introduction

Steel Authority of India Limited (SAIL) is the leading Indian steel making company.
The Company has five integrated steel plants (having a combined capacity of 12.5
million tons of crude steel and 10.74 million tons of saleable steel), one
subsidiary(MEL) and three alloy steel plants, spread over seven states of India close
to domestic sources of raw materials, including the Company's iron ore, limestone
and dolomite mines. Its plants include Bhilai Steel Plant, Durgapur Steel Plant,
Rourkela Steel Plant, Bokaro Steel Plant, and IISCO Steel Plant and among special
steel plants are Salem Steel Plant, Alloy Steel Plants (AP) and Visvesariya Iron and
Steel Plant (Karnataka). SAIL is Indias second largest producer of iron ore and has
the countrys second largest mines network, which gives SAIL a competitive edge in
terms of captive availability of vital inputs for steel making. SAILs product portfolio
includes pig iron, crude steel and saleable steel. Products exported are billets, wire
rods, plates, hot rolled (HR) coils and cold rolled non grain-oriented coils.

Company
Current Price

SAIL
Rs 197

Target Price

Rs 212

Potential Change

8%

Time Frame

1 year

Buy
Shareholder
Government
FIs/Banks/MFs/
FIIs/GDRs
Companies/Trusts
Public

% holding
85.82
11.96
0.47
1.75

FY2009 & 2010 Results: Key Highlights

For FY10, the company registered PAT of Rs. 6754 cr.(an increase of 9% over CPLY)
due to increase in Sales Volume (in spite of recession) being the primary reason.
Domestic Sales continued to increase that contributed nearly 98% of the total sales
PRICE TRENDS
in 2008-09. Even though raw material prices were at unprecedented peak in 2008400
09 SAIL responded by reducing dependence on imported coking coal. During the
fiscal year ended March 31, 2009, it produced 14.4 million tons of hot metal, 13.4
200
million tons of crude steel and 12.5 million tons of saleable steel.
0

4/1/2008

4/1/2009

4/1/2010

Adj. close

TP

Buy

Sell

CPP= CAPTIVE POWER PLANT

Q1 FY2011 Results: Key Highlights
SAIL has shown great performance for the Apr-Jun10 due to increased demand
and reduced cost of raw materials. SAIL has numerous JVs the latest being with
Tata Steel Ltd.; namely "S&T Mining Company Pvt. Ltd." for joint acquisition &
development of coal blocks/mines. Expansion plans will increase capacity by 2012
for production of hot steel (14.5 to 23.5 MT), crude steel (13.5 to 21.4 MT), and
saleable steel (12.5 to 20.2 MT). TE parameters are improving each year.

10000.00

30.00
20.00
10.00
0.00

5000.00
0.00
FY10 FY11E

EPS(rs)

OPM(%)
40.0%
30.0%

31.8%

35.8%
28.9%

FY11E

NPM(%)

32.7%
28.9%

23.7%

22.1%
17.4%

20.0%

24.9%
20.3%
13.6%

16.5%

10.0%
0.0%
FY06

FY10

RONW and ROCE

SAIL will expand further this year, by raising money by issuing FPO and may even
take further debt as its DER is only 0.5. So overall we assume a slight increase in the
Long term debt component as well as retained earnings component of about 10%.
ROCE and RONW will increase marginally to 16.5% and 24.9% in FY11E as
compared to 17.4% and 22.1% in FY09.

40.0%
30.0%
20.0%
10.0%
0.0%

FY09

PAT

FY09

FY08

FY08

FY07

FY07

Increasing Trend for PAT and

EPS for FY11E

FY06

FY06

EPS

PAT in crores

Revenue, EPS to remain strong in FY11

SAIL in the FY10 shows increasing PAT and EPS. According to our estimate the PAT
and EPS will increase only slightly for FY11. The company is going for huge Capex
and it has increasing depreciation because of continuous investment in FA through
modernization of plants. Hence the OPM and NPM vary substantially.

FY07 RONW(%)
FY08

ROCE(%)
FY09

FY10

FY11E

Overall the business will perform better as compared to the last few years with
increasing Sales (owing to strong domestic demand), higher efficiency (reduction in
dependence on imported raw material & better TE), robust balance sheet by
issuing of FPO, continuing increasing sales to Railways and heavy capex for capacity
expansion.

Increasing OPM and decreasing

NPM at 29.5% and 18% for
FY11E.

Valuation
We have valued the company on the basis of Constant Dividend Growth Model, P/E
and P/BV and arrived at the target price of Rs. 212/share assigning a BUY rating to
the stock
Valuation Summary
RATIOS

FY06

FY07

FY08

FY09

FY10

FY11E

4012.97

6202.29

7536.78

6174.81

6754.37

8883.06

EPS(Rs)

9.72

15.02

18.25

14.95

16.35

21.51

P/E

8.54

7.52

10.14

6.42

15.40

10.14

P/BV

2.72

2.70

3.31

1.42

3.11

2.65

OPM (%)

0.27

0.34

0.34

0.23

0.24

0.30

NPM (%)

0.12

0.16

0.16

0.13

0.16

0.18

RONW (%)

0.32

0.36

0.33

0.22

0.20

0.25

ROCE (%)

0.24

0.29

0.29

0.17

0.14

0.17

PAT

Valuation
E1/K=
PVGO=
CGDDM=
Price

Valuation

FY11E
96.08
93.68
190.56
190.56

FY11E

CGDM based valuation of Rs 190/share

P/E

Dividend per share

Mar' 05
Mar' 06
Mar' 07
Mar' 08
Mar' 09
Mar' 10

3.30
2.00
3.10
3.70
2.60
3.30

ROE
0.66
0.32
0.36
0.33
0.22
0.20

Retention Ratio
0.800
0.794
0.794
0.797
0.826
0.798

10.14

EPS
16.5
9.72
15.02
18.25
14.95
16.35

EPS

21.51

Price

218.08

Valuation

FY11E

Here we have found the forecasted ROE. Average Retention ratio

for 6 years has been taken as FY11E Retention ratio and g=ROE*RR has been
found to be 18% and Ke is calculated as 22.2%. Thus we have arrived at
CGDDM of 218 Rs per share with PVGO of 93 and E1/K of 96.

P/BV

P/E based valuation of Rs 218/share

This method gives a valuation similar to CGDDM method. P/E for 2011 is
assumed as the average P/E between FY06 and FY10 and thus the estimated
share price for FY11 is Rs 218/share.

Methods
TP by CGDDM
TP by P/E

218.08

P/BV based valuation of Rs 228/share

The average P/BV for the years FY06 to FY10 has been assumed as projected
P/BV for SAIL for 11. Taking this assumption, and also assuming that Net
Worth or BV will increase by 10% in FY11, we get estimated share price of Rs
228/share.

TP by P/BV

228.97

Target Price

212.50

Target Price
To arrive at target price for SAIL share for FY11, we have taken the average of
prices found by above three methods that is P/BV, P/E and CGDDM. The
average has come out to be Rs 212/share for one year from today (7 Sept
2010).

BV

Price

2.65
86.32

228.97
Target Price
190.56

Company
Current Price
Target Price
Potential Change
Time Frame
BUY

JSW Steel

JSW Steel: Introduction

JSW Steel Limited, belonging to the JSW Group, is the largest private sector steel
producer in India with an expanded capacity of 7.8 MT on a standalone basis
producing flat and long products. It is one of the few companies in the world to use
the Corex process along with Blast furnace route to manufacture steel. The
company has an expansion plan to 10 MY by 2011 through Brownfield route. The
company upstream facility for steel making is located in Karnataka and
Shareholder
downstream in Karnataka. The companys products
produc ranges from MS Slabs, value
Promoters
added products like galvanized steel, Hot Rolled & Cold Rolled Coils and Sheets to
Institutional
long products, like bars and wire rods.
Investors
Q4 FY2010 Results: Key Highlights
Other Investors
JSW Steel, shown great performance for the Jan-Mar10.
Jan
Because of increased
Public
demand and reduced cost
ost of raw materials, it reported a great show
sh
for Q4FY10.
For FY10, the company registered PAT of Rs. 3681cr. Increase in Sales Volume had
been the primary reason
son for the good show. Domestic Sales continued to increase
that contributed nearly 88% of the total sales. The plate and the pipe mill raised Price Trend
some hopes for the company for the years ahead with EBDITA of US $2.25 million.

JSW Steel
Rs 1159
Rs 1335
15.2 %
1 year

% holding
45.00
35.80
9.30
9.80

1500
1000

Sales Volume in 000's MT

2000

83

88

17

12

Q4FY09

Q4FY10

500

1500
1000
500

Q4FY10

Q3FY10

Q2FY10

Q1FY10

Q4FY09

Q3FY09

Q2FY09

Q1FY09

Q4FY08

Q3FY08

Q2FY08

Q1FY08

Export

Domestic

Surge in domestic demand

Domestic demand jumped to 11-12%
12% in Q1FY11 YOY led by demand surge from
automobiles and consumer durable sector. We see a continuous demand surge in
the next 2 years led by strong infrastructure spending by the government. With the
recent expansion, JSW is all set to register increasing volume sales of nearly 15%.
Acquisition of mines
JSW Steel do not share the same advantage as its counterparts SAIL and Tata Steel
that have their own captive mines, JSW acquired coking coal mines in USA.
It has estimated resource
esource of 120mt. The company expects to mines at least 1mt in
the first year i.e. FY11 and at least 5mt in the 3rd year.
Strong Balance Sheet
JSW Board of directors recently came out with a proposal to issue nearly 17.5
warrants to the promoters at a price
ce of 1200. The promoters holding after issuing
will increase to 49.7%. The management have some debt lying on its balance sheet
and with further expansion plans; the company is planning to repay the debt and
streamline the Balance sheet with the proceed from the issuance of warrants.

0
4/3/2008

4/3/2009

4/3/2010

Adj Close

Buy

Sell

TP

3000.00

150.00

2000.00

100.00

1000.00

50.00

0.00

0.00
FY06

FY07

FY08
PAT

40.0%
30.0%
20.0%
10.0%
0.0%

EPS

PAT in crores

Revenue, EPS to remain strong in FY11

JSW Steel has put up a strong performance in the FY10 increasing PAT and EPS.
According to our estimate the PAT and EPS will show an increasing trend for FY11.
The company substantial amount of debt and rising depreciation because of
continuous investment in FA, Hence there is a stark difference between the OPM
Margin and PAT Margin.

26.1%
12.9%

33.5%
13.8%

FY09

FY10

FY11E

EPS(rs)

28.7%
13.7%

19.2%

18.2%
10.4%

24.2%
11.0%

3.0%
FY06

FY07

FY08
OPM(%)

FY09

Increasing OPM and NPM at

24.2% and 11.0% for FY11E
FY10

FY11E

NPM(%)

RONW and ROCE

We should note here that JSW has planned to take huge debt this year for further
expansion, as well raise money by issuing warrants and repay the existing debt. So
overall we are assuming a slight increase in the Long term debt component of just
10%.
ROCE and RONW will decline marginally to 10.2% and 22.4% in FY11E as compared
to 11.4% and 22.5% FY08.
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%

27.6%

23.1%
19.8%

12.5%

10.2%

13.2%

22.5%

22.4%

11.4%

10.2%
5.8%
2.4%

FY06

FY07

FY08
RONW(%)

Increasing Trend for PAT and

EPS for FY11E

FY09

FY10

FY11E

ROCE(%)

Overall the business will perform better as compared to the last few years will
increasing Sales, owning of mines, robust balance sheet by issuing of warrants.

Valuation
We have valued the company on the basis of EV/EBIDTA, P/E and P/BV and arrived
at the target price of Rs. 1260/share assigning a HOLD rating to the stock.
Valuation Summary
Ratios
PAT
EPS(Rs)

FY06

FY07

FY08

864.29

1292.00

1728.19

FY09

FY10

FY11E

458.50

2022.00

2384.59

53.28

77.09

90.84

22.96

106.35

127.48

P/E

6.39

7.46

9.51

14.63

11.57

10.67

P/BV

1.31

1.78

2.19

0.82

2.44

2.60

EV/EBIDTA

4.57

4.59

6.41

7.70

7.23

6.5

OPM (%)

0.26

0.34

0.29

0.19

0.18

0.24

NPM (%)

0.13

0.14

0.14

0.03

0.10

0.1

RONW (%)

0.28

0.20

0.23

0.23

0.06

0.22

ROCE (%)

0.12

0.10

0.13

0.11

0.02

0.10

EV/EBIDTA based valuation of Rs 1320.25/share

The company has traded at a forward multiple of 7.7x and 7.23x EV/EBIDTA in
last 2 financial year. However we have used a conservative approach and valued
the company at 6.5XEV/EBIDTA which is calculated by taking the average of last
5 financial year. Note that the company can very well surpass the 6.5 figure as
we see from the last 2 years performance.

Valuation
EBIDTA
EV/EBIDTA
Expected EV
Add Cash
Less Debt
Mar Cap Expected

FY11E
5560.63
6.50
33909.46
300.00
11640.00
22569.46

Number of Shares

1870.49

Target Price Per Share

1320.25

Valuation
P/E
EPS
Price

Valuation
P/BV based valuation of Rs 1375.69/share
JSW Steel traded at 0.82x and 2.44x its FY09 BV Rs 410 and FY10 BV Rs 504
respectively. Looking at the historical data of JSW, we find that JSW has traded at
above 2x its book value. Hence we expect JSW to trade at a premium. We value
the company 2.60x its BV of Rs 504.

P/BV

P/E based valuation of Rs 1263.3/share

JSW has registered increasing EPS of 24.5 and 108.1 in FY09 and FY10
respectively. Based on our projections the EPS for FY11E turns out to be Rs
127.5. The company ranged between P/E multiple of 6x and 14x from the FY05
TO FY10. We have valued the company at P/E multiple of 10.67x the projected
EPS of Rs 127.5.
Free cash flow and divividend growth model has not been used because of their
inconsistent trend.

Methods
TP by EV/EBDITA
TP by P/E
TP by P/BV

Target Price
For calculating the Target Price we have taken the average of the price from the
three methods EV/EBIDTA, P/BV and P/E. The target price is Rs 1192.2 and we
strongly recommend to BUY the stock

BV
Price

Target Price

FY11E
10.67
127.48
1375.69

FY11E
2.60
504.00
1310.40

Target Price
1206.61
1263.37
1230.15
1233.38

ISPAT
ISPAT Steel: Introduction
Ispat Industries Limited was set up as Nippon Denro Ispat Limited in May 1984 by
Mr M L Mittal. It is one of the leading integrated steel makers today. It has
successfully grown to a Rs 9,400 crore company with operations in iron, steel,
mining, energy and infrastructure. It has two integrated steel plants one located

Company
Ispat Steel
Current Price
Rs 19.7
Target Price
Rs 18.81
Potential Change
-8%
Time Frame
1 year
SELL

at Dolvi and other at Kalmeshwar in the state of Maharashtra. It established an

advanced cold rolling reversing mill in association with Hitachi Ltd. of Japan to offer
better steel solutions to the market. In 1988 it installed a colour coating line and
was given Industrial License for Cold Rolled Sheets. Business interests within the
Group were identified and separated for proper steps towards development of each

Shareholder
Promoters
Institutional Investors
Other Investors
Public

% holding
41.14
10.99
15.38
32.49

interest in 1994. In the same year it partnered with the worlds largest gas-based
single mega module plant for manufacturing sponge iron at its Dolvi plant. Next Price Trend
year a hot strip mill with Continuous Strip Processing technology was established at
Dolvi. In 1998, integrated steel plant was launched using technologies such as the
Conarc Process for steel making in addition to Compact Strip Process for the
production of hot rolled coils. In 2000 a 2 MTPA blast furnace was installed at the
Dolvi steel complex. In 2004 Hot rolled coil capacity was raised from 1.5 MTPA to

40
30
20
10
0
4/1/2008

2.4 MTPA and Sponge iron from 1.4 MTPA to 1.6 MTPA.

4/1/2009

4/1/2010

Close

TP

Buy

Sell

Q1 Results: Key Highlights

Ispat has put a below the average performance this time in the year 2010. As the

throughout the year 2009. The PAT has shown a improvement over the previous
year though it is still negative, it has come down to -213 cr in FY2009 compared to
the last year.

Jun 08
Sep 08
Dec 08
Mar 09
Jun 09
Sep 09
Dec 09
Mar 10
Jun 10

revenue has come down marginally during the last quarter but has been rising

Sales Crores

3500
3000
2500
2000
1500
1000
500
0

Revenue, EPS not to improve in FY11

ISPAT has tried to come back in FY10 by posting less of negative PAT and EPS
compared to the last year.. According to our estimate the PAT and EPS will show an
increasing trend for FY11 but will remain negative. The company will still continue
to make loss. The company substantial amount of debt and rising depreciation
because of continuous investment in FA and as the result the NPM is nearly flat.
Hence there is a stark difference between the OPM Margin and PAT Margin.

PAT
500

35

0
-500

FY06

-20
FY07

FY08

-1000
-1500

FY09

FY10

-686

-727

FY11E
-375

PAT

Decreasing trend for

PAT and EPS for FY11E

-1313

0.40
0.22

0.20

0.21
0.09

0.00
-0.20

-0.03
FY06
FY07

FY08

FY09

0.09
FY10

0.12
FY11E

OPM(%)
NPM(%)

Increasing OPM and

NPM

-0.40

RONW and ROCE

Since the cost of inputs was high, exposure to spot markets was high; the earnings were
reported to be in negative. Though it will show some correction following the trend of PAT
which is increasing but still negative, we feel that the companys ROCE and RONW shall also
take the same route. But the business is expected to perform better with some of the
strategies taken to reduce the exposure to spot markets , make long term contracts to
minimize the price fluctuations in the raw material price.

0.20
0.00
-0.20

0.12
0.09
0.05
0.01
0.01
0.00
-0.01
-0.07
FY06
FY07
FY08
FY09
FY10
FY11E
-0.20
-0.34

-0.40
-0.60
-0.80

-0.64

-0.37

RONW(%)
ROCE(%)

Valuation
We have valued the company on the basis of EV/EBIDTA, P/E and P/BV and arrived
at the target price of Rs. 13.51/share assigning a HOLD rating to the stock.
Valuation Summary
Ratios
FY06
FY07
FY08
FY09
FY10
FY11E
PAT
-1313
-20
35
-686
-727
-375
EPS(Rs)
-10.74
-0.16
0.28
-5.61
-5.94
-3.06
P/E
0.00
0.00
0.00
-2.93
0.00
0.00
P/BV
2.45
5.01
4.62
-15.78
2.28
-0.28
EV/EBIDTA
-65.00
6.69
5.60
13.11
14.21
0.00
OPM (%)
-0.03
0.22
0.21
0.09
0.09
0.12
NPM (%)
-0.28
0.00
0.00
-0.09
-0.09
-0.04
RONW (%)
-0.64
-0.01
0.01
-0.34
-0.37
-0.20
ROCE (%)
-0.07
0.09
0.12
0.01
0.00
0.05

EV/EBIDTA Method
Valuation
EBIDTA
EV/EBIDTA
Expected EV
Add Cash
Less Debt
Mar Cap Expected

FY11E
1032.48
9.90
10222
0.00
8000.00
2222.72

Number of Shares

12224.42

TP Per Share
EV/EBIDTA based valuation of Rs 18.18/share
The company has traded at a forward multiple of 14.21x and 13.11x EV/EBIDTA in
last 2 financial year. However we have used a conservative approach and valued
the company at 9.90xEV/EBIDTA which is calculated by taking the average of last
5 financial year. Note that the company may surpass the 9.90 figure as we see
from the last 2 years performance.
Others methods have not been used for valuation as the EPS for the company is
expected to be negative.

18.18

VISA Steel
VISA Steel: Introduction
VISA Steel, located at Kalinganagar in Orissa, is a fully integrated 2.5 Tonnes per
annum Stainless Steel plant. The company was founded by Mr Vishambhar Saran
and Ms Saroj Agarwal in 1994. The company is registered in Bhubaneswar while has
its corporate office in Kolkata. VISA Steel is planning to setup another 2.5 Million
Tonnes per annum capacity Steel plant along with 500MW captive power plant at
Raigarh in Chattisgarh. Companys product category includes LAM Coke, Pig Iron,
Sponge Iron, Ferro Chrome, Power and Steel.
FY2010 Results: Key Highlights
In FY10, the company registered PAT of `47.3
47.3 crores (against negative PAT of -` 66.7
crores in FY09). This is accounted because of the higher sales and less extraordinary
items. Companys EBITDA margin is 17.31%
.31% as against 8.25% in FY09. This is mainly
because of high utilization rate and low raw material cost. Companys production
increased substantially by 47% in FY10 as compared to that in FY09. EPS stands at
4.31 as against -6.07
6.07 in FY09. Company achieved better operating efficiency owing
to lower cost of raw material.

50.0
6.6

FY06 FY07 FY08 FY09 FY10

400000
300000
200000
100000
0

4.80%
5.44%
16.76%

100

-100.0

FY10

FY08

FY07

FY09

-66.7

139300
47649
28370
24815

50
0
4/1/2008

FY09
FY10

Hot Metal LAM Coke

73%

Price trends

353601
331128
150423
85437

Promoter and Promoter

Group
Public Shareholding Institutions
Public Shareholding Bodies Corporate
Public Shareholding Individuals

0.0
-50.0

% Holding

47.3

43.2
20.2
12.7
FY06

1198.3
1057.1
1
1
700.22
1000
561.82
411.63
500
1500

Shareholder

PAT (Rs. In Crores)

FY05

Sales Turnover (Rs. In Crores)

Company
VISA Steel
Current Price
` 41
Target Price
` 39.92
Potential Change
2.64%
Time Frame
1 year
HOLD

Ferro Sponge Iron

Chrome

Production Figures (in MT)

Q1 FY2011 Results: Key Highlights
Performance of VISA Steel was disappointing in Q1FY2011. Topline of the company
was reported at 220.5 crores which was 45% down QoQ basis. This happened due to
Shut down of the companys pig iron plant. This was because of the disrupted supply
of the iron ore on account of the closure of one of the mines in Orissa. The demand
also decreased due to the European Debt crisis and Chinese property suppression.
Coke sales volume also decreased by 15% on account of the shutdown of many blast
furnaces in the eastern
rn region. EBIDTA margin also declined QoQ by 280 bps.
However reduction of expenses by 42% provided some sort of damage control. PAT
also declined by 54% on YoY basis to Rs. 7.6 Crores.

4/1/2009

4/1/2010

Adj Close

TP

Buy

Sell

Valuation for FY2011

On account of decreased demand due to European debt crisis and disrupted supply
of raw material, the results were disappointing for Q1 FY11. Better supply of raw
materials and its forward integration, better power Generation, Company is
expected to perform better in long run. However in the near future i.e. for Fiscal
year 2011, performance of the company is a matter of concern.
PAT and EPS to increase in FY11
VISA Steel in the FY10 shows increasing PAT and EPS. According to our estimate the
PAT and EPS will also increase in FY11. The production volume is going to decrease
slightly due to the disruption of BF grade iron ore, which straightaway is projected to
decrease the Revenue to around 1125 Crore from Rs. 1172 Crores in FY10 thereby
providing check on the growth of PAT.
80.00
60.00
40.00
20.00

8.00
59.69
47.29
5.436.00
4.31
4.00

43.16
3.92

20.15
12.66
1.87
1.62

2.00

0.00
-20.00

PAT

0.00
FY-06

FY-07

FY-08

FY-09

FY-10 FY-11E

-40.00

-2.00

EPS

Increasing Trend for PAT and

EPS for FY11E

-4.00

-60.00

-6.00

-6.07

-80.00

-8.00

-66.67

RONW and ROCE will increase slightly

20.00%
10.00%
0.00%
-10.00%

ROCE(%)
FY-06

FY-07

FY-08

FY-09

FY-10

FY - 11

ROE(%)

-20.00%
-30.00%

RONW is projected to increase slightly from 15.03% in FY10 to 16.89% in FY11. This
is on account of the low projection of the growth of the PAT due to the decreased
projected sales. ROCE is also increasing slightly form 3.24% to 3.50%. One reason is
low growth of PAT as explained above. This is also due to the higher projected debt
level as the company is expected to increase its debt level to Rs. 1350 Crores
because it plans to build power plant in the parent company.
Share Price Forecasting
We have valued the company on the basis of P/E ,P/BV & EV/EBIDTA method. We
arrived at a target price of Rs. 39.93 and assign a HOLD rating to the stock because
the investors are poised to get better gains in the long run as its long run prospects
are quite good.

RONW and ROCE to increase

slightly in FY11E to 16.89% and
3.50%

Valuation Summary
Ratios

FY06

FY07

FY08

FY09

FY10

FY11E

PAT

12.66

20.15

43.16

-66.67

47.29

59.69

EV/EBDITA

EPS(Rs)

1.62

1.87

3.92

-6.07

4.31

5.43

EBDITA

225.00

P/E

31.99

13.88

11.10

-3.04

9.77

7.93

EV

1689.42

EV/EBIDTA

19.46

14.66

11.80

12.71

7.51

7.51

Add: Cash

83.34

P/BV

1.92

0.90

1.38

0.72

1.47

1.19

Less: Debt

1350.00

EV

748.31

773.80

1147.62

1092.77

1522.50

1689.42

Expected Market Cap

422.76

EBIDTA

38.46

52.79

97.24

85.98

202.77

225.00

Number of Shares (Lakhs)

1100.00

OPM (%)

14.01%

11.91%

13.76%

6.80%

15.25%

12.96%

Expected Price of Shares

38.43

NPM ( %)

3.27%

3.75%

6.32%

-6.41%

4.04%

5.31%

ROE (%)

4.28%

6.36%

12.44%

-23.80%

15.03%

16.89%

ROCE (%)

2.63%

2.47%

4.13%

-5.68%

3.24%

3.50%

P/BV based valuation of Rs. 38.30/share

The company has traded at 0.72x and 1.47x P/BV in the last two financial years. For
FY2011, we have taken the conservative approach and found the average of last
three years and valued to the company at 1.19x P/BV.
P/E based valuation of Rs 43.02/share
VISA Steel has experiences decreasing P/E for past four years with an exception of
negative EPS in FY09. Following the trend we have valued the company at 7.93x P/E
Based on the projections, EPS for FY11 turn out to be Rs. 5.43.
EV/EBIDTA based valuation of Rs 38.43/share
The company has traded at a forward multiple of 12.7x and 7.51x EV/EBIDTA in last
2 financial year. However we have used a conservative approach and valued the
company at 7.51x EV/EBIDTA which is nearly the same as that of last year.
Final Estimated price of the share
Final projected price of the share is taken as average of the share price projected
from each of the method given above. We finally came out with the projected price
of Rs. 39.92 and assigned a HOL.

Valuation by EV/EBDITA Method

7.51

Valuation by P/E Method

P/E

7.93

EPS

5.43

Price

43.02

Valuation by P/BV
Method
P/BV
1.19
BV

32.14

Price

38.30

Method

Target Price

Price by
EV/EBIDTA
Price by P/E

38.43

Price by P/BV

38.30

Target Price

39.92

43.02

Selection of Companies
The steel environment remains positive and we have suggested earlier investing in steel sector. We
have done a comparative analysis of various companies in the industries to select the best company
to invest in. The criteria for ranking and the actuals ranks is shown below.
Rat
ing
Sca
le

Future
OPM

Future
NPM

Future
ROE

Debt/
Equity

Financia
l
leverag
e

<= 15%
>15% &
<=20%
>20% &
<=25%
>25% &
<=30%

<= 10%
>10% &
<=15%
>15% &
<=20%
>20% &
<=25%

<= 10%
>10% &
<=15%
>15% &
<=20%
>20% &
<=25%

>3
>2.50&
<=3
>2.0&
<=2.50
>1.75&
<=2.0

>1.35
>1.30&
<=1.35
>1.25&
<=1.30
>1.2&
<=1.25

>1.35
>1.30&
<=1.35
>1.25&
<=1.30
>1.2&
<=1.25

<= 10%
>10% &
<=15%
>15% &
<=20%
>20% &
<=25%

<= 15%
>15% &
<=20%
>20% &
<=25%
>25% &
<=30%

>30%

>25%

>25%

<=1.75

<= 1.2

<= 1.2

>25%

>30%

Debt/
Equity

Financial
leverage

Operating
Leverage

1
2
3

Company

Future
OPM

Future
NPM

Future
ROE

Operati
ng
Leverag
e

ROCE

CFO/Tot
al
Assets

ROCE

Debto
r
Days
>60
days
>45&
<=60
>30&
<=45
>15&
<=30
<=15
days

Current
Ratio
<1.10
>=1.10
& <1.25
>=1.25
& <1.33
>=1.33
& <1.5
>=1.50

CFO/Total
Assets

Debtor
Days

Current
Ratio

Total

Tata Steel

39

SAIL

42

JSW steel

33

Visa Steel

18

Ispat Industries

17

Debtor
Days

Current
Ratio

Expected
return
on stock

0.23

5.93

1.12

11.00%

0.50

23.00

1.82

8.00%

0.09

0.23

10.60

0.70

15.30%

1.22

0.03

0.10

19.76

0.77

-2.64%

0.02

0.00

0.09

23.00

0.85

-8.00%

Company

Future
OPM

Future
NPM

Future
ROE

Debt/
Equity

Financial
leverage

Operating
Leverage

ROCE

CFO/Total
Assets

Tata Steel

43.00

21.00

16.00

0.68

5.90

1.05

0.15

SAIL

27.00

16.00

25.00

0.50

1.02

1.14

0.14

JSW steel

24.20

11.00

22.00

1.19

1.19

1.22

Visa Steel

12.90

5.31

16.89

3.63

3.39

Ispat Industries

12.00

4.00

-0.20

3.57

14.00

Visa Steel and Ispat Industries will give negative returns if we purchase the stocks today, hence we
recommend not to invest in these companies.
SAIL being a very stable company, doing well, but the returns expected of SAIL is lesser than that of
Tata Steel and JSW Steel. We can invest in SAIL , but having an option we recommend to go for
Tata/JSW stocks.
Tata Steel has a very high Financial Leverage of 5.90 which may not be good for the company going
forward. Corus profitability is a big concern for Tata and is overshadowing Tata Steels performance.
There is a continuous production cuts in Corus. Hence going forward Tata Steel may face some

trouble and hence we recommend not invest in this stock as well, even though its Technical
Analysis looks strong.
We highly recommend to Invest in JSW Steel, because of strong FY10Q4 performance, acquisition
of mines, capacity expansion and strong balance sheet with proposal to issue nearly 7.5 millions
warrants and the proceed to be used to reduce debt.

We recommend to Invest in JSW Steel.

Conclusion
Industry/Companies
Steel Industry
Tata Steel
Visa Steel
Ispat Industries
SAIL
JSW Steel

Invest/Not Invest
Invest
Dont Invest
Dont Invest
Dont Invest
Dont Invest
Invest

Appendix

Appendix A: Macro-Economic analysis

Exhibit 11: Estimated steel demand from infrastructure sector (Rs Bn)
Roads/ Railway
Bridges s

11th Five year plan

Investment expected for 11th plan
Assuming that 60% spent
Steel Component (%) (average estimate)
Total steel (Rs Bn)
Steel prices Rs/Tonne
Total Steel Required (MN Tonnes)
Total Steel for 11th five year plan
Average annual steel consumption

Urban
Infra

3142
2618
1829
1885
1571
1097
14%
10% 10.80%
264
157
119
32500
32500
32500
8
5
4
28 MN tonnes
6 MN tonnes

Irrigati
on
2533
1520
7.50%
114
32500
4

Airports
/Ports

Telecom

Power

1190
714
10%
71
32500
2

2548
1529
3%
46
32500
1

6665
3999
3.75%
150
32500
5

Exhibit 12: Year wise planned infrastructure investment

700

10%

600

9%

500

8%

400

7%

Investment in Infrastructure

300

6%

Investment as a % of GDP

200

5%

100

4%
FY08

FY09

FY10

FY11

FY12

Exhibit 14: Steel consumption growth relation to GDP & IIP

Growth

GDP
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Average

4.4
5.5
3.8
8.5
7.5
9.5
9.4
9
6.7
7.4
7.17

IIP
5
2.7
5.7
7
8.4
8.2
11.6
8.5
2.7
7
6.7

Steel
Consumption
Consumption to GDP
Consumption
growth
multiple
to IIP multiple
7.4
1.7
1.5
1.8
0.3
0.7
5.7
1.5
1.0
7.9
0.9
1.1
10.3
1.4
1.2
10.9
1.1
1.3
30.5
3.2
2.6
9.7
1.1
1.1
1.0
0.1
0.4
5.6
0.8
0.8
9.1
1.2
1.2

Appendix B: Tata Steel

Net Sales

FY01
7755.37

FY02
7604.27

FY03
9788.49

FY04
11917.88

FY05
15867.62

FY06
17136.92

FY 07
19756.84

FY 08
22191.43

FY 09
26843.53

FY 10
26757.60

EBDITA

1773.38

1172.4

2159.17

3482.56

6064.77

6136.8

7275.87

8830.95

9779.51

10146.67

23%
492.25

15%
524.75

22%
555.48

29%
625.11

38%
618.78

36%
775.1

37%
819.29

40%
834.61

36%
973.4

38%
1083.18

481.9

403.15

342.41

230.56

228.8

168.44

251.25

929.03

1489.5

1848.19

553.44

189.19

1012.31

1746.22

3474.16

3506.38

4222.15

4687.03

5201.74

5046.8

15.05

5.09

27.53

47.48

62.77

63.35

72.74

63.85

69.7

56.37

EBIDTA Margin(%)
Depreciation
Interest
Reported PAT
EPS

Revenue
Change (%)
Total Expenses
Change (%)
EBDITA

FY05
FY06
FY07
FY08
FY09
FY10
FY11E
14888.0
15489.6 17897.3 20279.6 25240.7 26046.8 31516.6
4.0
15.5
13.3
24.5
3.2
12.1
8823.2
9352.8 10621.4 11448.6 15461.2 15900.1 17967.1
6.0
13.6
7.8
35.0
2.8
13.0
6064.8
618.8

6136.8
775.1
25.3

7275.9
819.3
5.7

8831.0
834.6
1.9

9779.5
973.4
16.6

10146.7
1083.2
11.3

13549.5
1332.3
12.1

5446.0
228.8

5361.7
168.4
-26.4

6456.6
251.3
49.2

7996.3
929.0
269.8

8806.1
1489.5
60.3

9063.5
1848.2
24.1

12217.2
2033.0
10.0

EBT before EO
EO Items

5217.2
80.8

5193.3
47.5

6205.3
57.3

7067.3
0.0

7316.6
0.0

7215.3
0.0

10184.2

EBT after EO

5298.0
1823.8
34.4

5240.8
1734.4
33.1

6262.6
2040.5
32.6

7067.3
2380.3
33.7

7316.6
2114.9
28.9

7215.3
2168.5
30.1

10184.2
3615.4
32.1

3474.2

3506.4

4222.2

4687.0

5201.7

5046.8

6568.8

5534.7
63.35
536.5
29693.8
31921.6
5.2

5804.7
72.74
449.7
26101.0
35299.8
4.9

7305.8
64.15
689.1
50340.9
67897.6
7.7

7305.9
71.20
206.9
15116.0
41598.6
4.3

8872.1
56.88
632.3
56094.1
80833.0
8.0

8872.1
74.0

Depreciation
Change (%)
EBIT
Net Interest
Change (%)

Tax
Tax Rate
PAT
Shares in
Issue(Lakhs)
EPS
Price per Share
Marcap
EV
EV/EBDITA

Average EV/EBIDTA

Income Statement
Sales
Gross Profit
Operating expenses
Other income
PBIT
Net Profit
EPS
ROCE
RONW

Mar' 01
7755.37
3600.81
5502.04
5.37
1281.13
553.44
15.05
13.4%
0.07

6.0

Mar' 02
7604.27
3215.11
6165.79
120.13
647.65
189.19
5.09
7.9%
0.02

Cash Flow Ratios

CFO
CFI
CFF
FCFF

Mar' 01
1455.5
-597.6
-812.0

DuPont Analysis
PAT/PBT
PBT/EBIT
EBIT/Sales
Sales/Assets
Assets/Equity
RONW

Mar' 01
0.92
0.47
0.17
1.10
1.44
0.07

Mar' 03
9788.49
4616.71
7220.21
92.33
1603.69
1012.31
27.53
21.6%
0.10

Mar' 02
1154.1
-499.7
-674.5
1507.7

Mar' 02
0.75
0.39
0.09
1.05
2.09
0.02

Mar' 04
11917.88
5257.09
7913.95
7.63
2857.45
1746.22
47.48
36.2%
0.15

Mar' 03
2093.2
-790.2
-1149.9
2519.5

Mar' 03
0.80
0.79
0.16
1.33
2.30
0.10

Mar' 05
15867.62
7779.17
9442.01
108.75
5445.99
3474.16
62.77
55.6%
0.22

Mar' 04
2914.4
-1882.6
-1154.2
3788.1

Mar' 04
0.65
0.93
0.24
1.68
1.57
0.15

Mar' 06
17136.92
8654.57
10127.88
252.58
5361.70
3506.38
63.35
43.7%
0.20

Mar' 05
3816.8
-2604.1
-1216.7
4290.2

Mar' 05
0.66
0.97
0.34
2.19
1.03
0.22

Mar' 07
19756.84
9950.35
11440.67
362.12
6456.58
4222.15
72.74
27.2%
0.21

Mar' 06
3631.4
-2464.6
-1125.1
2938.8

Mar' 06
0.67
0.98
0.31
1.97
0.89
0.20

Mar' 07
5118.1
-5427.6
7702.5
6101.6

Mar' 07
0.67
0.97
0.33
2.31
0.61
0.21

Mar' 08
22191.43
11844.40
12283.21
586.41
7996.34
4687.03
63.85
17.6%
0.21

Mar' 09
26843.53
12619.05
16434.55
603.07
8806.11
5201.74
69.70
15.5%
0.19

Mar'10
26757.60
12236.34
16983.27
1241.08
9063.49
5046.80
56.37
14.5%
0.19

Mar' 08
6254.2
-29318.6
15848.1
7375.8

Mar' 09
7397.2
-9428.1
3156.4
5632.2

Mar'10
8369.2
-5254.8
-1473.1
8284.5

Mar' 08
0.66
0.88
0.36
2.69
0.30
0.21

Mar' 09
0.71
0.83
0.33
2.44
0.37
0.19

Mar'10
0.70
0.80
0.34
2.20
0.33
0.19

Ratios
Operating
Expenses/Sales

Mar' 01

Mar' 02

Mar' 03

Mar' 04

Mar' 05

Mar' 06

Mar' 07

Mar' 08

Mar' 09

Mar'10

0.71

0.81

0.74

0.66

0.60

0.59

0.58

0.55

0.61

0.63

Gross Profit Margin

0.46

0.42

0.47

0.44

0.49

0.51

0.50

0.53

0.47

0.46

Operating Profit Margin

0.29

0.19

0.26

0.34

0.40

0.41

0.42

0.45

0.39

0.37

Net Profit Margin

0.07

0.02

0.10

0.15

0.22

0.20

0.21

0.21

0.19

0.19

ROE

0.07

0.02

0.10

0.15

0.22

0.20

0.21

0.21

0.19

0.19

DER

0.96

1.37

1.33

0.75

0.39

0.26

0.68

0.66

0.91

0.68

Current Ratio

1.09

0.72

0.77

0.68

0.72

0.72

1.77

3.92

0.97

1.12

ICR

2.66

1.61

4.68

12.39

23.80

31.83

25.70

8.61

5.91

4.90

Operating Leverage

1.59

2.16

1.60

1.10

1.05

1.05

1.04

1.03

1.05

1.05

Financial Leverage

3.66

2.61

5.68

13.39

24.80

32.83

26.70

9.61

6.91

5.90

Dividend Paid

5.00

4.00

8.00

10.00

13.00

13.00

15.50

16.00

16.00

8.00

Price of the Share

72.09

57.54

133.70

383.65

401.05

536.50

449.65

689.05

206.90

632.25

P/E

4.79

11.30

4.86

8.08

6.39

8.47

6.18

10.79

2.97

11.22

BV per Share
P/BV
Debtor days

129.11
0.56
60.21

93.70
0.61
51.53

86.60
1.54
35.74

122.79
3.12
19.95

127.56
3.14
13.38

176.26
3.04
11.49

240.31
1.87
11.67

298.78
2.31
8.94

331.68
0.62
8.65

418.94
1.51
5.93

Appendix C: SAIL
FY01
14294.64

FY02
13742.94

FY03
17138.02

FY04
21669.54

FY05
28714.3

FY06
28200.48

FY 07
34328.77

FY 08
39958.67

FY 09
43798.58

2323.98

1197.44

2509.83

5005.02

11151.57

7492.71

11053.22

12968.73

10944.21

0.16

0.09

0.15

0.23

0.39

0.27

0.32

0.32

0.25

1143.62

1155.89

1146.66

1122.59

1126.95

1207.3

1211.48

1235.48

1285.12

1751.68

1588.27

1381.79

953.57

605.05

467.76

332.13

250.94

253.24

-728.66

-1696.37

-304.31

2512.08

6816.97

4012.97

6202.29

7536.78

6174.81

-1.76

-4.11

-0.74

6.08

16.5

9.72

15.02

18.25

14.95

Net Sales
EBDITA
EBIDTA Margin (%)
Depreciation
Interest
Reported PAT
EPS

Revenue
Import
Export
Change (%)
Total Expenses
Change (%)
EBDITA
Depreciation
Other written off
Change (%)

FY05
FY06
FY07
FY08
FY09
FY10
FY11E
29744.2
30269.7 36026.6 42096.5 47674.2 42934.0 49374.9

18592.7

11151.6
1127.0
184.9

1.8
22777.0
22.5

19.0
24973.4
9.6

16.8
29127.8
16.6

13.2
36730.0
26.1

-9.9
31362.0
-14.6

15.0
34790.4
12.1

7492.7
1207.3
181.4
7.1

11053.2
1211.5
128.6
0.3

12968.7
1235.5
75.5
2.0

10944.2
1285.1
128.0
4.0

11572.0
1337.2

14584.5
1685.3

4.1

26.0

EBIT

9839.7
605.1

6104.0
467.8
3.7

9713.2
332.1
1.9

11657.8
250.9
1.1

9531.1
253.2
0.9

10234.8
402.0
1.2

12899.2
409.1
1.8

EBT before EO
EO Items

9234.7
174.7

5636.2
71.1

9381.0
60.6

11406.8
64.6

9277.8
181.3

9832.8
166.0

12490.1
200.0

EBT after EO

9409.3
2592.4

5707.3
1694.4

9441.6
3253.8

11471.4
3934.7

9459.1
3284.3

9998.8
3377.8

12690.1
3807.0

6817.0

4013.0

6187.8

7536.8

6174.8

6621.0

8883.1

Net Interest
Change (%)

Tax
PAT

Income
Statement
Ratios

Mar' 01

Mar' 02

Mar' 03

Mar' 04

Mar' 05

Mar' 06

Mar' 07

Mar' 08

Mar' 09

16417.55

15725.56

19508.58

24551.2

32169.42

32805.96

39722.59

46175.85

49331.47

4354.56

3289.48

5581.03

8600.97

14407.51

10821

15457.12

17681.16

13251.52

13691.55

14243.25

15818.79

17817.23

19719.6

23984.32

26184.89

30363.29

38015.13

473.34

964.24

476.94

515.96

662.2

937.94

1408.71

1701.59

2002.77

1180.36

41.55

1363.17

3882.43

10024.62

6285.41

9841.74

11733.25

9659.09

-728.66

-1696.37

-304.31

2512.08

6816.97

4012.97

6202.29

7536.78

6174.81

-1.76

-4.11

-0.74

6.08

16.5

9.72

15.02

18.25

14.95

-0.04

-0.10

-0.02

0.18

0.42

0.24

0.29

0.29

0.17

-0.16

-0.60

-0.12

0.50

0.66

0.32

0.36

0.33

0.22

Mar' 01

Mar' 02

Mar' 03

Mar' 04

Mar' 05

Mar' 06

Mar' 07

Mar' 08

Mar' 09

3045.08

1086.94

2667.74

7185.2

8899.47

3823.93

5632.91

8378.18

6124.26

-133.12

-660.33

-31.61

-186.45

-286.54

-337.18

-587.53

-1139.9

-4406.47

-2903.45

-1998.33

-2539.59

-5494.5

-4516.63

-3574.26

-1608.19

-3088.7

2751.3

Sales
Gross Profit
Operating
expenses
Other
income
PBIT
Net Profit
EPS
ROCE
RONW

Cash
Flow
Ratios
CFO
CFI
CFF

4884.09
FCFF
DuPont Analysis

2622.08

4576.69

9189.8

10695.2

5354.16

7408.82

9640.06

Mar' 01
1.06

Mar' 02
0.99

Mar' 03
1.00

Mar' 04
0.95

Mar' 05
0.72

Mar' 06
0.70

Mar' 07
0.66

Mar' 08
0.66

Mar' 09
0.65

-0.58

-41.08

-0.22

0.68

0.94

0.91

0.96

0.98

0.98

0.07

0.00

0.07

0.16

0.31

0.19

0.25

0.25

0.20

1.08

1.06

1.39

1.87

2.58

2.70

3.43

3.99

4.02

3.35

5.23

5.56

2.61

1.21

0.97

0.67

0.50

0.44

-0.16

-0.60

-0.12

0.50

0.66

0.32

0.36

0.33

0.22

Mar' 01

Mar' 02

Mar' 03

Mar' 04

Mar' 05

Mar' 06

Mar' 07

Mar' 08

Mar' 09

0.83

0.91

0.81

0.73

0.61

0.73

0.66

0.66

0.77

Gross Profit Margin

0.27

0.21

0.29

0.35

0.45

0.33

0.39

0.38

0.27

Operating Profit Margin

0.17

0.09

0.19

0.27

0.39

0.27

0.34

0.34

0.23

ROE

-0.16

-0.60

-0.12

0.50

0.66

0.32

0.36

0.33

0.22

BV per Share

10.98

6.85

6.11

12.20

24.95

30.51

41.92

55.84

67.75

DER

3.14

4.95

5.14

1.72

0.56

0.34

0.24

0.13

0.27

Current Ratio

1.23

1.05

1.00

0.92

1.18

1.23

1.59

1.73

1.82

ICR

0.67

0.03

0.99

4.07

16.57

13.44

29.63

46.76

38.14

670.13

-12.96

-23.59

5.46

2.67

-36.01

2.03

1.27

-3.45

-1.89

-0.02

-4.70

1.73

1.03

1.17

0.98

1.10

1.03

0.00

0.00

0.00

0.00

3.30

2.00

3.10

3.70

2.60

32

63

83

113

185

96

0.17

0.15

0.22

0.61

0.91

1.22

1.36

1.91

0.91

-3.41

-1.22

-12.16

5.26

3.82

8.54

7.52

10.14

6.42

10.98

6.85

6.11

12.2

24.95

30.51

41.92

55.84

67.75

0.55

0.73

1.47

2.62

2.53

2.72

2.70

3.31

1.42

37.52

32.25

31.06

23.04

21.65

20.94

21.27

24.09

22.38

PAT/PBT
PBT/EBIT
EBIT/Sales
Sales/Assets
Assets/Equity
ROE

Ratios
Operating
Expenses/Sales

Operating Leverage
Financial Leverage
Dividend Paid Per Share
Price of the Share
Price/Sales
P/E
BV per Share
P/BV
Debtor days

Appendix D: JSW Steel

Net Sales
EBDITA

FY01

FY02

FY03

FY04

FY05

FY06

FY 07

FY 08

FY 09

FY 10

1345.8

2000.3

2786.0

3596.3

7035.9

6686.8

9337.3

12628.9

15179.3

19456.4

228.3

280.6

504.1

1462.1

2358.4

2053.2

2929.2

3666.1

2252.7

3681.0

EBIDTA Margin(%)

17.0

14.0

18.1

40.7

33.5

30.7

31.4

29.0

14.8

18.9

Depreciation

76.9

202.7

280.6

312.9

359.5

405.8

498.2

687.2

827.7

1123.4

Interest

194.3

444.4

563.5

409.3

474.7

365.0

406.8

494.8

836.8

900.3

Reported PAT

-49.6

-351.1

-110.7

528.7

870.1

864.3

1292.0

1728.2

458.5

2022.0

-0.4

-2.7

-0.9

4.1

65.3

53.3

77.1

90.8

23.0

106.4

EPS

FY05
FY06
FY07
FY08
FY09
FY10
FY11E
6751.5
6591.8
8639.1 11984.5 13683.3 18706.5 23008.9

Revenue
Import
Export
Change (%)
Total Expenses
Change (%)

-2.4
4538.6
3.3

31.1
5709.9
25.8

38.7
8318.4
45.7

14.2
11430.6
37.4

36.7
13958.6
22.1

23.7
17448.3
26.9

2358.4
359.5

2053.2
405.8
12.9

2929.2
498.2
22.8

3666.1
687.2
37.9

2252.7
827.7
20.4

4747.8
1123.4
35.7

5560.6
1381.8
25.9

Net Interest
Change (%)

1998.8
474.7
12.4

1647.4
365.0
8.9

2431.0
406.8
9.7

2979.0
494.8
6.6

1425.0
836.8
7.4

3624.4
900.3
7.8

4178.8
972.3
8.1

EBT before EO
EO Items

1524.1
-10.1

1282.4
73.5

2024.2
16.2

2484.1
-33.2

588.2
176.8

2724.1
96.0

3206.6
200.0

EBT after EO

1514.0
603.0

1355.9
437.6

2040.4
639.3

2451.0
722.8

765.0
306.5

2820.1
797.4

3406.6
1022.0

911.0

918.3

1401.0

1728.2

458.5

2022.7

2384.6

EBDITA
Depreciation
Change (%)
EBIT

Tax
PAT

4393.1

Shares in
Issue(Lakhs)
EPS
Price per Share
Marcap
EV
EV/EBDITA

1569.8
58.5
340.2
5341.0
9381.2
4.6

1639.8
85.4
574.9
9426.5
13433.6
4.6

1870.5
92.4
863.5
16151.1
23491.9
6.4

Mar' 05

Mar' 06

1870.5
24.5
336.0
6285.0
17349.8
7.7

Mar' 01

Mar' 02

Mar' 03

Mar' 04

Share Capital

1351.9

1352.0

1352.0

1631.1

469.1

497.1

504.0

537.0

537.0

527.1

Reserves and Surplus

-262.5

-549.9

-660.6

-131.9

2680.6

3859.2

5068.3

7140.2

7422.2

9179.2

Net worth

1102.7

803.9

764.4

1499.2

3149.7

4356.2

5594.1

7677.3

7959.3

9706.3

Long term debt

4974.6

5612.3

5940.6

4787.0

3836.4

4096.1

4173.0

7546.5

11272.6

11585.1

Working Capital

-270.0

-33.9

358.1

401.4

-19.8

-316.7

-812.8

-2267.7

-4346.7

-2052.0

8.0

17.7

28.9

53.6

44.8

55.8

166.0

205.8

207.9

287.0

1525.2

3927.8

5589.7

5194.8

6076.4

6518.0

8189.1

10955.5

13086.4

16866.0

4042.5

1763.9

61.4

51.2

349.3

1861.9

2002.9

5612.4

9242.1

6684.3

Net Fixed Asset

Capital work in
progress

Income Statement
Ratios
Sales

Mar' 08

1870.5
127.5

Balance Sheet

Cash

Mar' 07

1870.5
108.1
1230.2
23009.8
34307.9
7.2

Mar' 09

Mar'10

Mar' 01

Mar' 02

Mar' 03

Mar' 04

Mar' 05

Mar' 06

Mar' 07

Mar' 08

Mar' 09

Mar'10

1345.8

2000.3

2786.0

3596.3

7035.9

6686.8

9337.3

12628.9

15179.3

19456.4

Gross Profit

477.0

585.2

1093.0

1471.3

3051.3

2559.4

4303.7

5096.8

4637.0

4805.4

Operating expenses

982.5

1650.3

2090.2

2542.2

4752.6

4944.4

6208.1

9005.6

12258.3

15915.7

-2.6

-5.6

-200.3

422.1

33.0

360.1

110.6

309.9

-608.5

474.3

Other income
PBIT

151.4

77.9

223.6

1149.2

1998.8

1647.4

2431.0

2979.0

1425.0

3681.0

Net Profit

-49.6

-351.1

-110.7

528.7

870.1

864.3

1292.0

1728.2

458.5

2022.0

EPS

-0.4

-2.7

-0.9

4.1

65.3

53.3

77.1

90.8

23.0

106.4

ROCE

0.0

-0.1

0.0

0.1

0.1

0.1

0.1

0.1

0.0

0.1

RONW

0.0

-0.4

-0.1

0.4

0.3

0.2

0.2

0.2

0.1

0.2

Cash Flow Ratios

CFO
CFI
CFF
FCFF

Mar' 01
202.8
-573.6
352.3

Mar' 02
285.1
-203.3
-71.1
-1914.7

Mar' 03
564.5
-114.9
-455.3
-816.9

Mar' 04
890.7
-91.3
-767.1
1598.5

Mar' 05
1998.4
-409.5
-1594.6
1476.3

Mar' 06
1575.0
-1304.1
-265.0
1539.2

Mar' 07
2822.3
-2244.6
-384.4
1649.4

Mar' 08
3552.7
-5636.4
2124.9
1473.5

Mar' 09
4056.1
-5834.9
1848.5
2752.8

Mar'10
3937.3
-3147.5
-259.8
7618.5

DuPont Analysis
PAT/PBT
PBT/EBIT
EBIT/Sales
Sales/Assets
Assets/Equity
ROE

Mar' 01
1.0
-0.3
0.1
0.9
1.4
0.0

Mar' 02
1.0
-4.7
0.0
0.5
4.9
-0.2

Mar' 03
0.3
-1.8
0.1
0.5
7.3
0.0

Mar' 04
0.8
0.6
0.3
0.7
3.5
0.1

Mar' 05
0.6
0.7
0.3
1.2
1.9
0.1

Mar' 06
0.7
0.8
0.2
1.0
1.5
0.1

Mar' 07
0.7
0.8
0.3
1.1
1.5
0.1

Mar' 08
0.7
0.8
0.2
1.2
1.4
0.1

Mar' 09
0.6
0.5
0.1
1.2
1.6
0.0

Mar'10
0.7
0.8
0.2
1.2
1.7
0.1

Ratios
Operating
Expenses/Sales

Mar' 01

Mar' 02

Mar' 03

Mar' 04

Mar' 05

Mar' 06

Mar' 07

Mar' 08

Mar' 09

Mar'10

0.7

0.8

0.8

0.7

0.7

0.7

0.7

0.7

0.8

0.8

Gross Profit Margin

0.4

0.3

0.4

0.4

0.4

0.4

0.5

0.4

0.3

0.2

Operating Profit Margin

0.3

0.2

0.2

0.3

0.3

0.3

0.3

0.3

0.2

0.2

Net Profit Margin

0.0

-0.2

0.0

0.1

0.1

0.1

0.1

0.1

0.0

0.1

ROE

0.0

-0.2

0.0

0.1

0.1

0.1

0.1

0.1

0.0

0.1

DER

4.5

7.0

7.8

3.2

1.2

0.9

0.7

1.0

1.4

1.2

Current Ratio

0.7

1.0

1.4

1.4

1.0

0.9

0.8

0.6

0.5

0.7

ICR

0.8

0.2

0.4

2.8

4.2

4.5

6.0

6.0

1.7

4.3

Operating Leverage

1.2

1.3

1.4

1.1

1.2

1.2

1.2

1.2

1.5

1.22

Financial Leverage

1.9

2.6

2.1

1.3

1.2

1.2

1.1

1.1

1.4

1.19

Dividend Paid

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

14.0

1.0

Price of the Share

4.5

10.0

83.1

168.4

311.6

340.2

574.9

863.5

336.0

1230.2

P/E

0.0

0.0

0.0

41.1

4.8

6.4

7.5

9.5

14.6

11.6

8.4
0.5
75.5

6.2
1.6
46.9

5.4
15.5
36.6

9.5
17.8
41.3

222.5
1.4
13.8

259.7
1.3
12.5

322.8
1.8
9.6

395.0
2.2
9.8

410.1
0.8
9.6

504.0
2.4
10.6

BV per Share
P/BV
Debtor days

Appendix E: ISPAT
FY05
FY06
FY07
FY08
FY09
FY10
FY11E
6573.4
4631.3
7635.1
8783.3
7767.2
7782.9
8389.7
Change (%)
-29.5
64.9
15.0
-11.6
0.2
7.8
Total Expenses
4572.6
4782.3
5957.1
6933.1
7036.3
7113.9
7357.2
Change (%)
4.6
24.6
16.4
1.5
1.1
9.6

Revenue

EBDITA
Depreciation
Change (%)
EBIT
Net Interest
Change (%)
EBT before EO
EO Items
EBT after EO
Tax
Tax %
PAT
Shares in
Issue(Lakhs)
EPS
Price per Share
Mar cap
EV
EV/EBDITA
Average EV/EBIDTA

2000.8
436.0

-151.0
571.4
31.1

1678.1
623.8
9.2

1850.2
638.1
2.3

731.0
646.6
1.3

669.0
634.8
-1.8

1032.5
603.1
2.7

1564.8
643.9
11.0
921.0
10.9

-722.4
985.1
11.9
-1707.5
10.3

1054.2
1099.6
13.2
-45.4
38.6

1212.1
1108.1
15.3
104.0
11.7

84.3
1129.7
15.4
-1045.4
24.0

34.2
900.3
14.0
-866.1
26.0

429.4
972.3
14.0
-542.9
20.2

931.9
200.1
0.2

-1697.2
-384.2
0.2

-6.8
12.9
0.0

115.6
80.8
0.7

-1021.4
-335.8
0.3

-840.1
-113.5
0.1

-522.6
-148.0
0.3

731.7

-1313.0

-19.7

34.8

-685.6

-726.6

-374.7

12224.4
-10.7
13.1
1596.5
9814.7
-65.0

12224.4
-0.2
25.9
3162.5
11225.5
6.7

12224.4
0.3
25.6
3130.7
10352.4
5.6

12224.4
-5.6
18.3
2237.1
9585.1
13.1

12224.4
-5.9
20.7
2534.1
9503.7
14.2

12224.4
-3.1
20.7
2532.2
9651.7

9.9

Appendix F: VISA Steel

(In Rs. Crores)

FY06

FY07

FY08

FY09

Revenue

387.46

388.46

389.46

390.46

391.46

392.46

EBITDA

38.46

52.79

97.24

85.98

202.77

225.00

EBITDA Margin

9.93%

13.59%

24.97%

22.02%

51.80%

57.33%

Depreciation

4.96

9.77

18.26

30.79

46.82

79.22

Interest

11.75

6.39

8.54

32.15

65.14

47.35

Reported PAT

12.66

20.15

43.16

-66.67

47.29

59.69

EPS

1.62

1.87

3.92

-6.07

4.31

5.43

Revenue
Change (%)
Total Expenses
Change (%)

EBDITA
Depreciation

FY10

FY11E

FY06

FY07

FY08

FY09

FY10

FY11E

387.5

537.9

682.8

1040.5

1171.5

1125.0

46.54%

38.84%

26.93%

52.38%

12.59%

3.97%

349.0

485.1

585.6

954.5

968.7

900.0

40.61%

39.01%

20.70%

63.00%

1.49%

28.40%

FY06

FY07

FY08

FY09

FY10

FY11E

38.46

52.79

97.24

85.98

202.77

225.00

5.0

9.8

18.3

30.8

46.8

79.22

96.98%

86.90%

68.62%

52.06%

69.19%

FY07

FY08

FY09

FY10

FY11E

Change (%)
FY06
EBIT

33.5

43.0

79.0

55.2

155.9

145.8

Net Interest

11.8

6.4

8.5

32.2

65.1

47.4

1.22%

3.60%

5.70%

3.51%

Interest as a percentage of Debt

FY06

FY07

FY08

FY09

FY10

FY11E

EBT before EO

21.8

36.6

70.4

23.0

90.8

98.4

Other Written off

0.2

2.7

3.3

4.3

5.3

EO Items

1.4

0.0

0.0

118.5

0.0

FY06

FY07

FY08

FY09

FY10

FY11E

EBT after EO

20.2

33.9

67.1

-99.7

85.5

98.4

Tax

7.5

13.8

24.0

-33.1

38.3

38.74

37.26%

40.61%

35.72%

33.14%

44.72%

39.36%

FY06

FY07

FY08

FY09

FY10

FY11E

12.7

20.2

43.2

-66.7

47.3

59.69

Tax Rate

PAT (Rs. In Crores)

Mar' 06

Mar' 07

Mar' 08

Mar' 09

Mar' 10

12 Months

12 Months

12 Months

12 Months

12 Months

Sales Turnover (Rs. In Crores)

411.63

561.82

700.22

1057.11

1198.31

Excise Duty

27.85

30.63

19.45

22.11

41.36

Net Sales

383.78

531.19

680.77

1035

1156.95

3.68

6.75

2.04

5.45

14.54

387.46

537.94

682.81

1040.45

1171.49

Raw Materials

304.39

443.52

484.69

810.24

813.66

Power & Fuel Cost

5.127

5.486

23.369

32.267

16.115

Employee Cost

4.236

4.91

14.016

21.041

33.396

Other Manufacturing Expenses

9.544

9.329

35.163

37.864

56.558

Selling and Admin Expenses

18.97

10.442

17.852

39.159

34.84

Miscellaneous Expenses

6.731

11.462

10.485

13.894

14.152

348.998

485.149

585.575

954.465

968.721

PBDIT

38.462

52.791

97.235

85.985

202.769

Interest

11.75

6.39

8.54

32.154

65.14

PBDT

26.712

46.401

88.695

53.831

137.629

Depreciation

4.96

9.77

18.26

30.79

46.82

Other Written Off

0.15

2.7

3.3

4.289

5.263

Profit Before Tax

21.602

33.931

67.135

18.752

85.546

1.42

118.47

20.182

33.931

67.135

-99.718

85.546

7.52

13.78

23.98

-33.05

38.26

12.662

20.151

43.155

-66.668

47.286

P & L Statement

Income

Other Income
Stock Adjustments
Total Income
Expenditure

Preoperative Exp. Capitalized

Total Expenses
Operating Profit

Extra-ordinary items
PBT (Post Extra-ord Items)
Tax
Reported Net Profit

Cash Flow Statement

Mar '05

Mar '06

Mar '07

Mar '08

Mar '09

Mar '10

Net Profit Before Tax

11.87

20

34.31

67.14

18.6

85.68

Net Cash From Operating Activities

Net Cash (used in)/from Investing Activities
Net Cash (used in)/from Financing Activities

-7.75
-92.51
102.2

82.21
-142.45
292.88

-15.84
-339.23
279.17

104.17
-356.23
164.93

231.52
-321.92
75.15

174.16
-325.29
164.02

Net (decrease)/increase In Cash and Cash

Equivalents
Opening Cash & Cash Equivalents

1.95

232.64

-75.91

-87.13

-15.24

12.89

14.15

16.1

248.74

172.83

85.7

70.46

Closing Cash & Cash Equivalents

16.1

248.74

172.83

85.7

70.46

83.34

Mar' 06

Mar' 07

Mar' 08

Mar' 09

Mar' 10

12 Months

12 Months

12 Months

12 Months

12 Months

Operating Expenses/Sales

0.860

0.881

0.862

0.932

0.847

Gross Profit Margin/Sales

0.147

0.121

0.176

0.126

0.198

Operating Profit Margin

0.14

0.12

0.14

0.07

0.15

Return on Equity

0.043

0.064

0.124

-0.238

0.150

Book Value per Share

26.92

28.78

31.54

25.47

28.61

Debt Equity Ratio

0.63

1.57

2.01

3.19

3.63

Current Ratio

1.98

1.89

1.08

0.79

0.77

Interest Coverage Ratio

2.85

6.73

9.25

1.72

2.39

Operating Leverage (1+FC/PBIT)

1.57

1.24

1.23

1.71

1.22

Financial Leverage

3.85

7.73

10.25

2.72

3.39

Price of the Share

51.82

25.96

43.51

18.45

42.10

P/E

31.99

13.88

11.10

-3.04

9.77

1100.00

1100.00

1100.00

1100.00

1100.00

26.92

28.78

31.54

25.47

28.61

Ratios

Number of Shares
BV per Share
P/BV

1.92

0.90

1.38

0.72

1.47

Debtor days

38.53

26.88

50.22

28.44

19.76

ROE

4.28%

6.36%

12.44%

-23.80%

15.03%

ROCE

2.63%

2.47%

4.13%

-5.68%

3.24%

Reference
1. http://www.reuters.com/finance/stocks/financialHighlights?rpc=66&symbol=TISC.BO
2. http://steel.nic.in/Annual%20Report%20(2009-10)/English/Annual%20Report%20(200910).pdf
3. http://www.worldsteel.org/?action=stats&type=steel&period=latest&month=13&year=200
9
4. http://www.indiastat.com/marketforecast/10143/stats.aspx
5. http://www.imf.org/external/pubs/ft/weo/2010/01/weodata/download.aspx
6. http://nextbigfuture.com/2010/08/india-gdp-forecast-to-2015.html
7. http://www.meps.co.uk/world-price.htm
8. http://www.steelonthenet.com/commodity_prices.html
9. http://www.jpcindiansteel.nic.in/flash.asp
10. http://planningcommission.nic.in/sectors/infra.html
11. http://www.moneycontrol.com/
12. http://finance.yahoo.com/