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FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

EXECUTIVE SUMMARY

The project aims at studying and understanding the business environment and knowledge of Iron and Steel Industry as a whole and Ispat Industries Limited in particular. It is of utmost importance to keep an eye on short as well as long term performance of the organization. Keeping in view the financial performance, various business strategies are formulated, communicated, implemented and monitored in an organization. Performance of the business organization is affected by several factors, some of which may be general to the industry and some may be specific to the organization. There are several issues pertaining to iron and steel industry such as raw material availability, logistics, etc. which highly impact the business. There is one way to know the financial position of the company by financial analysis of the company. Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by property establishing relationships between the item of the balance sheet and the profit and loss account.

Ratios are highly important profit tools in financial analysis that help financial analysts implement plans that improve profitability, liquidity, financial structure, leverage, and turnover. Although ratios report mostly on past performances, they can be predictive too, and provide lead indications of potential problem areas.

REPORT SUBMITTED BY: JIGAR PATEL ~1~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Scope of the study :


When the project report is prepared it includes all the aspects of projects like companys product and its market, manufacturing process, operational viability, its financial projection and various ratios. This helps the management to understand whether the project is practically possible or not. Ratio analysis gives the idea about the profitability of the project. Project report gives projected financial statements and on basis of that ratios are calculated. Ratio analysis helps in judging the operational efficiency of the managements ability to repay short and long term loans, doing inter-firm comparison and to assess the future growth of the company. The ratio analysis of the company is done before investing or providing credit to the company. This is the reason of selecting the project.

Objectives of the study :


Ratio analysis is done for the following purposes:
1) To study the financial position of the company. 2) To analyze the financial stability and overall performance of ISPAT

INDUSTRIES LIMITED in general.


3) To analyze the profitability and solvency position of the unit with the existing

tools of financial analysis.


4) To study the changes in the assets, liabilities structure of the company during

the period of study. REPORT SUBMITTED BY: JIGAR PATEL ~2~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Research Methodology :
The global as well as Indian scenario of the Iron and Steel Industries has been studied for better understanding of the scenario. The manufacturing plant of Ispat Industries Limited has been visited and the important processes and operations have been studied and understood. The annual reports of the company have been studied along with the crucial financial statements like Income Statement, Balance Sheet and Profit & Loss Account are being analyzed for further insights.

Data Collection : Secondary data is used for the research study. Time Frame : The project duration is within a span of 2 months.

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FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

ISPAT INDUSTRIES LIMITED

INTRODUCTION : Ispat Industries Limited (IIL) is one of the leading integrated steel makers and the largest private sector producer of hot rolled coils in India. Set up as Nippon Denro Ispat Limited in May 1984 by founding Chairman Mr. M L Mittal, IIL has steadily grown into Rs 9,400-crore Company, assuming its position as flagship of the reputed Ispat Group. A corporate powerhouse which operates in iron, steel, mining, energy and infrastructure, the Group today figures among the top 20 business houses in the country.

Headquartered at Mumbai, IIL employs a total of 3000 people and is the leader in the national specialist steel market. The company's core competency is the production of high quality steel, for which it employs cutting edge technologies and stringent quality standards. It produces world-class sponge iron, galvanized sheets and cold rolled coils, in addition to hot rolled coils, through its two state-of-the art integrated steel plants, located at Dolvi and Kalmeshwar in the state of Maharashtra.

The sprawling 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. REPORT SUBMITTED BY: JIGAR PATEL ~4~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

The complex also has a 1.6 million tonne per annum sponge iron (DRI) plant, which was commissioned in 1994 as the world's largest and most efficient gas-based single mega module plant. Moreover, the Dolvi complex is home to a 2 million tonne blast furnace and also boasts a mechanised multi-functional jetty situated nearby, that facilitates the automation of raw material handling. A new 2.24 million tonnes per annum sinter plant; a 1260 tonnes per day oxygen and a new electric arc furnace have also been commissioned at IIL Dolvi.

Ispat is the only steel maker in India and among a few in the world to have total flexibility in choice of steel making route, be it the conventional blast furnace route or the electric arc furnace route. Its dual technology allows Ispat the freedom to choose its raw material feed, be it pig iron, sponge iron, iron ore, scrap or any combination of various feeds. It also has total flexibility in choosing its energy source, be it electricity, coal or gas.

The Kalmeshwar complex houses Ispat's 0.4 million tonnes cold rolling complex, which also includes the galvanized plain/ galvanized corrugated (GP/GC) lines and India's first colour coating mill.

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FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

ABOUT KALMESHWAR PLANT

Ispat Industries Limited's integrated steel plant at Kalmeshwar in the state of Maharashtra, India, uses some of the finest steel manufacturing technology to produce galvanized sheets and products, apart from cold rolled coils. The Kalmeshwar complex houses a total of three advanced plants - a 0.325 million tonnes Galvanized Plain/Galvanized Corrugated plant, a 0.33 million tonne Cold Rolled Coils plant and a 60,000 tonne Colour Coated Sheets plant.

CAPACITY / CAPABILITIES :
The capacity of the plant is dependent on the gauges of products produced. The capacity, as cited by the unit at certain select gauges, is around 0.33 million tonnes per annum (MTPA). To reach its corporate objective of 1 MTPA, the Kalmeshwar unit is undertaking various initiatives for enhancement of production.

MANUFACTURING FACILITIES :
Cold Rolling Mill Galvanizing Line Colour Coating Line REPORT SUBMITTED BY: JIGAR PATEL ~6~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

A) Cold Rolling Mill :


Ispat Industries Limited's highly advanced cold rolling mill at Kalmeshwar was set up in 1988, in technical collaboration with Hitachi of Japan, to manufacture cold rolled carbon steel strips in a wide range of thickness and width. The mill has a capacity of 0.325 million tonnes per annum (MTPA) and comprises various processing units as mentioned below:

1) Continuous Pickling Line : The hot rolled coil, which is the basic raw material, is passed through the Continuous Pickling Line (CPL) to remove the oxides or scales from the strip surface, thereby enabling further reduction of thickness to the desired level in the Cold Rolling Mill (CRM). This processing is necessary since rust is formed on the surface of the coils at room temperature, whereas scales are formed at a high temperature during rolling in the hot strip mill. The installed production capacity of the CPL is 3.56 million tonnes per annum (MTPA).

2) Cold Rolling Mill Operation : There are two types of Cold Rolling Mill (CRM) operations - 6 Hi CRM and 4 Hi CRM.

REPORT SUBMITTED BY: JIGAR PATEL ~7~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Pickled hot rolled coils of higher gauges are reduced to the necessary thinner gauges by being processed through the mills. In 6 Hi CRM, the reduction achieved is upto 0.13 mm ultra thin gauge, whereas 4 Hi CRM can reduce the thickness upto 0.25 mm. The computer-controlled rolling process ensures closure thickness tolerances and perfectly flat strips. The installed production capacity of the 6 Hi mill is 2,30,856 MT per annum and that of the 4 Hi mill is 43,502 MTPA.

3) Electrolytic Cleaning Line : The Electrolytic Cleaning Line (ECL) is necessary in case the material is rolled with a high percentage of oil while reduction in the mills. An oil-free base material is essential for the production of bright and corrosion resistant steel. Sodium orthosilicate is used as a cleaning agent in ECL. Tension is given according to thickness and width, based on customer requirements. The installed production capacity of the line is 86,102 MTPA.

4) Batch Annealing Furnace : The process of annealing of cold rolled coils is carried out to obtain the desired properties in the finished coils. For this, the material is heated to a pre-determined temperature in a protective atmosphere and soaked for a specified time, before it is cooled to room temperature. It is necessary to maintain optimum conditions in respect of the annealing atmosphere, annealing cycle, sealing and purging in order to obtain a finished REPORT SUBMITTED BY: JIGAR PATEL ~8~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

product with a bright surface, the desired micro structure and uniform properties throughout the coil. SD is used for heating the surface. Nitrogen, obtained from the PSA Unit, is purged inside the inner cover. The installed production capacity of the line is 75,881 MTPA.

5) Skin Pass Mill : In this process, the cold rolled annealed strips are given the desired surface finish. This improves the flatness and suppresses the yield point elongation. Anti-rust oil is used on the strip surface as protection from rust. The installed production capacity of the Skin Pass Mill is 82,319 MTPA.

6) Cold Roll Slitter : In the Cold Roll Slitter, coils are slitted by length and side trims are removed to obtain a uniform width throughout the coil, as per customer requirements. The installed production capacity of the cold roll slitting line is 96,006 MTPA.

7) Cut-To-Length Line :

In Cut-To-Length Line (CTL), slitted coils are sheared to the desired length as per customer requirements. There are a total of four CTL lines in operation. The installed production capacity of all CTLs is 83,289 MTPA.

B) Galvanizing Line :
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FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Ispat Industries Limited pioneered the manufacture of thin, medium and thick gauge galvanized steel sheets in India. The company currently has four galvanizing lines at the Kalmeshwar unit, with a total installed production capacity of over 0.325 million tones per annum. The unit is accredited with QS-9000 and ISO-14000 certifications and is equipped with computerised quality checks at every stage, including an x-ray thickness gauge and other contemporary systems. A noteworthy feature of the galvanizing unit at Kalmeshwar is its self-sufficiency in raw material - cold rolled (CR) coils, which facilitates versatility in its product range. Until the last quarter of 1988, CR coils were imported, as is still done by other galvanizers. However, Ispat planned its backward integration in the form of a Cold Rolling Mill to ensure its own raw material for the Galvanizing Line. The company's computer controlled 6-hi reversible combination Cold Rolling Mill began production in 1988. Quality control at the galvanizing unit is aided by up-to-date laboratories, both chemical and physical, that ensure tests of inputs and process results. In fact, quality control begins right from the selection of raw material and goes through the entire operation, ending finally with the rigorous testing of the finished products.

C) Colour Coating Line :

REPORT SUBMITTED BY: JIGAR PATEL ~ 10 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

In 1988, Ispat Industries Limited installed a Colour Coating Line at Kalmeshwar - the first of its kind in India - for the manufacture of pre-painted colour steel sheets. The Colour Coating Line has a capacity of 60,000 tonnes per annum. Galvanized coils constitute the raw material for the colour coating process. The Colour Coating Line incorporates surface preparation, service coating, heating, cooling, prime coating, top coating/printing and guard film application. Pro-gold treatment is applied for better adhesion of paint, with a substrate corrosion resistant. A drier is provided to dry the surface and attain a temperature between 100 to 120 degrees C. In the service coating process, paint is applied by a paint coating machine. The ovens for baking temperature depend on line speed and thickness of coil. A controller is provided to squeeze the water and control the sheet at centre position. Thereafter, prime coating and top coating/printing are carried out by the paint coating machine. Finally, guard film (sticking polythene) is applied to safeguard against scratches and other surface defects.

MANUFACTURING PROCESS :

The CR coils which serve as raw materials are transferred directly from the Cold Rolling Mill to the Continuous Galvanizing Lines. The coils then pass through various processes to remove defects. As the galvanizing line is a continuous line, the coils are passed through a looper. Continuous annealing takes place in an in-line annealing furnace. This cleans the REPORT SUBMITTED BY: JIGAR PATEL ~ 11 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

coils and helps achieve the desired hardness. The temperature of the strip in this preheating oxidising furnace is between 460 oC to 480 oC. After this, the coils are passed through a zinc pot where zinc coating is carried out using a technologically advanced hot-dip process. Zinc and antimony of the highest purity are used for coating the sheets. This operation is performed under precise temperature conditions, with the bath temperature maintained within a range 440 oC to 460 oC. Due care is taken for pretreatment of the substrate on which the zinc coating takes place, as this increases the life and performance of the galvanized sheets. The percentage of aluminium, antimony and tin in the batch is 2 to 3 per cent, 0.35 to 0.45 % and 0.3 to 0.4% respectively. The zinc-coated coils are then passed through a chromate solution to safeguard the coils against white rusting and other atmospheric reactions. The chromic acid concentration is 20 to 25 gm/ltr, and the temperature is kept at 40oC to 45oC. Lastly, the coils are passed through a Tension Leveller to improve the shape of the product and ensure perfect flatness.

ACHIEVEMENTS :
36 out of 40 departments have remained accident-free. 50 per cent reduction in accidents as compared to 2001-02. Accident rate reduced to 1.21 from 3.43 (2001-2002).

REPORT SUBMITTED BY: JIGAR PATEL ~ 12 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Second lowest in accident indices as compared to similar industries in India (Steel and Power sector).

VALUES :

We respect the skills and integrity of professionals. We empower those who belong to us. We work in tandem with our environment. We listen to our stakeholders, be they customers or communities. We build value for all our shareholders and the society we coexist with.

VISION :
To be an organization that continuously achieves economic value by optimizing resources through operational excellence powered by technology innovation for creating customer delight.

MISSION :
REPORT SUBMITTED BY: JIGAR PATEL ~ 13 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

To be amongst the worlds most admired new generation steel companies: in our products, in the manner in which we service our clients, in our work ethics, and in our culture of societal integration.

BUSINESS WITH ISPAT INDUSTRIES LIMITED :


Enter into the lucrative e-Trading world of ISPAT. E-Auction Customer Portal Vendor Portal

RATIO ANALYSIS

MEANING :

Ratio Analysis is among the best tool available to analyze the financial performance of a company. It allows inter company & intra company comparison & analysis. Ratios also provide a birds eye view of the financial condition of the company.

Our study of accounting so far has been restricted to recording of business transactions on books of accounts, preparing a trial balance to check the arithmetical accuracy of accounts & preparing profit & loss account & a balance sheet with a view to ascertaining trading result of a specified period & financial position of the business on a specified date respectively. The functions of the accountant do not end at this REPORT SUBMITTED BY: JIGAR PATEL ~ 14 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

stage. He should be able to analyze & interpret the figures as disclosed by this statement to gauge accurately the financial health of the enterprise.

It is defined as the systematic use of ratio to interpret the financial statements so that the strengths & weaknesses of a firm as well as its historical performance & current financial condition can be determined. The term ratio refers to the numerical or quantitative relationship between two items/variables.

TYPES OF FINANCIAL RATIO :


1. 2. 3.
4.

Liquidity Ratios Leverage Ratios Profitability Ratios Activity Ratios

REPORT SUBMITTED BY: JIGAR PATEL ~ 15 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

A)

Liquidity Ratios :
Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year) obligations. Higher liquidity levels indicate that we can easily meet our current obligations. We can use several types of ratios to monitor liquidity. These are as follows: 1. Current Ratio 2. Quick Ratio 3. Cash Ratio

B)

Financial Leverage (debt) Ratios :


Leverage Ratios measure the use of debt and equity for financing of assets. These ratios are discussed below: 1. Debt to equity ratio 2. Debt to Total Assets Ratio
3. Interest Coverage Ratio

C)

Profitability Ratios :
These ratios help measure the profitability of a firm. A firm, which generates a substantial amount of profits per rupee of sales, can comfortably meet its operating expenses and provide more returns to its shareholders. The relationship between profit and sales is measured by profitability ratios. These ratios are discussed below: REPORT SUBMITTED BY: JIGAR PATEL ~ 16 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

1. Gross Profit Margin 2. Net Profit Margin

3. Return on Investment / Assets 4. Return on Equity / Net Worth 5. Earning Per Share 6. Price Earning Ratio

D)

Activity Ratios :
Activity Ratios measure the ability of assets to generate revenues or earnings. This ratio tells us how efficiently a company utilizes its assets for generating sales. These ratios are discussed below: 1. Inventory Turnover Ratio 2. Inventory Turnover in Days 3. Fixed Assets Turnover 4. Debtors Turnover Ratio 5. Collection Period

REPORT SUBMITTED BY: JIGAR PATEL ~ 17 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

OBJECTIVES

The objects behind selection of the subject are as follows:

To know the financial position and determine long term and short-term solvency of the company.

To analyze the financial stability and liabilities structure of the company during the study period.

To analyze the profitability and solvency position of the unit with the existing tools of financial analysis.

To know how many times the inventory and debtors are easily converted into cash.

REPORT SUBMITTED BY: JIGAR PATEL ~ 18 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

RESEARCH METHODOLOGY

INTRODUCTION:
Research is the process of a systematic and in-depth study or search of any particular topic, subject or area of investigation, backed by the collection, complication, presentation and interpretation of relevant details or data. It is a careful search or enquiry into any subject matter, which is an endeavor to discover to find out valuable facts, which would be useful for further application or utilization. It may develop a hypothesis and test it. It may also establish relationships between variables and identity the means for problem solving.

REPORT SUBMITTED BY: JIGAR PATEL ~ 19 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Research wants to make familiar, how his research work is associated with the below mentioned elements: -

1. Selection of Subject: The selection of a subject for research is a commitment of ones time and efforts in a particular direction. There should not be any haste in deciding on the topic, nor in defining any scope.

2. Selection of Title of Dissertation: Keeping in view the nature and object behind the selection of subject under research, this dissertation is title as Financial Analysis & Interpretation of Ispat Industries Limited.

3. Selection of Time Period: The three year period is chosen for the study of the above subject. The period starts from financial accounting year 2006 to financial accounting year 2008.

4. Collection of Data: REPORT SUBMITTED BY: JIGAR PATEL ~ 20 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

The data required and necessary for the research study may be obtained from the following means: (i) (ii) (iii) Documentary i.e. published and unpublished. Interview and Questionnaire

The data for the research study may be classified into two groups: (i) Documentary source:
(a) Data is collected from quantitative and theoretical form documentary

source of the company, which includes published and unpublished matter both. This documentary source is the secondary data. Data has also collected from published audited annual reports of the company and unpublished data from the books and other related papers of the company.
(b) (c)

Websites of the company and also other business websites. Also taken help from the guide.

(ii)

Interview and Questionnaire:

Research is based on secondary data only.

5. Reliability of Data: REPORT SUBMITTED BY: JIGAR PATEL ~ 21 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

The data collected for the research work is quite reliable and authentic. This is because the data has been collected from audited annual reports of the company.

6. Analysis of Data: The data collected for the research purpose is analyzed by ratio analysis. This tool for the research work will serve the best to the title of the research study.

7. Reporting: In this study the structure analysis is adopted for analyzing the financial statement of the company.

RATIO ANALYSIS & INTERPRETATION


A)

LIQUIDITY RATIOS :
1. CURRENT RATIO : The current ratio shows how a firm is able to cover its current liabilities with its current assets. It shows the liquidity of the company. The industry norm for current ratio is 2:1 which means that the current assets of the firm are 2 times that of the current liabilities. Current Ratio = Current Assets

REPORT SUBMITTED BY: JIGAR PATEL ~ 22 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Current Liabilities (Rs. in crores) 2296.25 2244.25 2807.71 2165.75 2874.79 2727.01 =1.05 =1.30 =1.02

CurrentRatio
2 1.5 1.02 1 0.5 0 2006 2007 Years 2008 1.3 1.05

2006 2007 2008

INTERPRETATION : According to Industry norm, it is below the standard. The ratio shows that Ispat Industries Limited has not managed to create a good combination of the current assets and liabilities to make it financially sound and liquid enough to cover its liabilities. This implies that there is possibility of insolvency problem. There is however a substantial fall in the year 2008 as compares to the year 2007.
2. ACID TEST OR QUICK RATIO :

The Acid Test Ratio or Quick Ratio measures our ability to meet current obligations based on the most liquid assets. In other words, this ratio shows how a firm is able to cover its current liabilities with the most liquid of its assets excluding the inventories which are not so easily converted into cash. A quick ratio of 1:1 is considered to be satisfactory. Quick Ratio = Current Assets - Inventories Current Liabilities

REPORT SUBMITTED BY: JIGAR PATEL ~ 23 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

(Rs. in crores) 2296.25 (-) 985.61 2244.25 2807.71 (-) 1056.19 2165.75 2874.79 (-) 1368.38 2727.01 =0.55 =0.81 =0.58
2 1.5 1 0.5 0 2006 0.58

QuickRatio

2006 2007 2008

0.81 0.55

2007 Yea rs

2008

INTERPRETATION : Here quick ratio in FY 2007 is more as compared to FY 2006 but falls gradually in FY 2008. This can be due to the fact that current liabilities have risen in year 2008 but the severity can also be attributed to the high levels of inventory held by the enterprise. Liquid ratio of Company is not favorable because the quick assets of the company are less than the quick liabilities. This indicates that the company does not have ability to meet its immediate obligations promptly. 3. CASH RATIO : This ratio considers only the absolute liquidity available with the firm. The cash and bank balance are no doubt, the most liquid assets and the marketable securities are also considered as highly liquid assets. In order to have an idea of immediate/super liquidity, therefore, the cash + bank balance + marketable securities are compared with the current liabilities.

REPORT SUBMITTED BY: JIGAR PATEL ~ 24 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Cash Ratio = (Rs. in crores) 128.86 2244.25 327.65 2165.75 92.52 2727.01

Cash + Marketable Securities Current Liabilities

=0.06

CashRatio
0.2 0.15 0.1 0.15

2006

=0.15

2007

=0.03
0.05 0

0.06 0.03

2008

2006

2007 Yea rs

2008

INTERPRETATION :

The cash ratio is below the satisfactory level throughout the study period. This shows that the company has not enough cash to fulfill their current liabilities.

B) LEVERAGE 1.

RATIOS :
DEBT TO EQUITY RATIO :

Debt to Equity ratio compares the funds provided by creditors to the funds provided by shareholders. As more debt is used, the Debt to Equity Ratio will increase. This is calculated as under: Debt - Equity Ratio = REPORT SUBMITTED BY: JIGAR PATEL ~ 25 ~ Total Debt

Total Equity (Net Worth)

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

(Rs. in crores) 8261.09 3148.32 8315.50 4047.82 7225.04 3947.61 =1.83% =2.05% =2.62%
4 3 2 1 0 2006 2007 Yea rs 2008 2.62 2.05 1.83

D to EquityRatio ebt

2006 2007 2008

INTERPRETATION :

In FY 2006 & 07 it is higher than the standard norm but it is low in FY 2008. This declining trend over the year is usually considered as a positive sign reflecting on increasing cash accrual and debt repayment. In general, the lower the debt-equity ratio, the higher the degree of protection enjoyed by the creditors.

2.

DEBT RATIO :

The Debt Ratio measures the level of debt in relation to our investment in assets. The Debt Ratio tells us the percent of funds provided by creditors and to what extent our assets protect us from creditors. The lower this proportion the better it is. As less funds would be mature for payment in short run and funds can suitably be capitalized.

REPORT SUBMITTED BY: JIGAR PATEL ~ 26 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Debt Ratio =

Total Debt Debt + Equity 0r (Capital Employed)

(Rs. in crores) 8261.09 11409.41 8315.50 12363.32 7225.04 11172.65 =0.65%


0 2006

D Ratio ebt
=0.72%
0.5 0.72 0.67 0.65

2006

=0.67%

2007

2008

2007 Yea rs

2008

INTERPRETATION :

Ispat Industries Limited exhibits a downward overall trend with the ratio is low in 2008. This would indicate that company has sufficient assets to cover our debt load. Creditors and management favour a low Debt Ratio. 3. INTEREST COVERAGE RATIO :

Interest coverage ratio shows how much revenue is being earned in relation to its finance cost. It may be observed that EBIT is the operating profit of the firm, therefore, the interest coverage measures as to how many times the interest liability of the firm is covered with the operating profits of the firm. Interest Coverage Ratio = Earning Before Interest & Tax Interest REPORT SUBMITTED BY: JIGAR PATEL ~ 27 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

(Rs. in crores) (240.02) 956.83 1000.95 997.58 964.87 849.25


0 2006 -0.5 -0.25 2007 Yea rs 2008

=(0.25) =1.01 =1.14

InterestCoverag Ratio e
2 1.5 1 0.5 1.01

2006 2007

1.14

2008

INTERPRETATION :

Ispat Industries Limited was not able to cover this cost in FY 2006 due to the loss occurred but it is gaining its position in FY 2008 which is better sign for the company and for the lender. For the company, the profitability of committing default is reduced and for the lenders, the company is considered to be less risky.

C) PROFITABILITY

RATIOS :

1. GROSS PROFIT RATIO : The gross profit margin gives an estimate of the revenues earned by the entity considering the direct cause incurred while earning them. The gross profit ratio reflects the efficiency with which the firm produces/purchases the goods Gross Profit Ratio = Gross Profit x 100

REPORT SUBMITTED BY: JIGAR PATEL ~ 28 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Sales (Rs. in crores) (546.45) x 100 4958.74 595.93 x 100 7486.57 620.17 x 100 8214.14
-15.00%

GrossProfitRatio
=(11.02)% =7.96%
15.00% 7.96% 5.00% 7.55%

2006 2007

=7.55%

-5.00%

2006

2007

2008

2008

-11.02% Yea rs

INTERPRETATION: The company shows a negative decline in FY 2006 but has shown a growth in FY 2007. In FY 2008, it is again declining and that did not leave Ispat Industries Limited unaffected.

Here, it can be seen that the gross profit is going higher & sales is also going higher, but ratio is going down so company have to think about minimize the sales price, for maximize the gross profit ratio. 2. NET PROFIT RATIO : This ratio shows the net contributions made by every 1 rupee of sales to the owner funds. The Net Profit Ratio reflects the ability to control costs and make a return on sales. Management is interested in having high profit margins. So, the Net Profit Ratio shows the firms capacity to face the adverse economic situations. REPORT SUBMITTED BY: JIGAR PATEL ~ 29 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Net Profit Ratio = (Rs. in crores) (812.67) x 100 4958.74 (9.53) x 100 7486.57 34.80 x 100 8284.14 =(16.39)% =(0.13)% =0.42%

Net Profit Sales

x 100

NetProfit Ratio
2.00% 2006 2007 -0.13% -8.00% 0.42% 2008

2006 2007 2008

-18.00%

-16.39% Y rs ea

INTERPRETATION :

In FY 2006 - 07, it shows net loss which indicates that there is no improvement in the operational efficiency of the business. However in FY 2008 it has come out from its worst period and shows a growth in net profit by 4.23%. This indicates that companys profit margin is increasing and the management is overcoming its adverse economic situations.
3. EARNING PER SHARE (EPS) :

Growth in earning is often monitored with Earning per share (EPS). The EPS expresses the earnings of a company on a per share basis. A high EPS in comparison to other competing firms is desirable. Generally 10-20 times of EPS are considered as a justified market price of a share. The EPS is calculated as:

Earning Per Share = Total Earnings (PAT) REPORT SUBMITTED BY: JIGAR PATEL ~ 30 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Total No. of Equity Shares (Rs. in crores) (812.67) 1222442218 (9.53) 1222442218 34.80 1222442218 =Rs. 0.285 =Rs.(0.078) =Rs. (6.65)
2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 -6.65 Yea rs 2006 2007 -0.078 2008

EarningPer S hare
0.285

2006 2007 2008

INTERPRETATION :

The EPS of the company is low in FY 06-07 but shows positive sign in FY 08. This increase is due to the increase in net profit as compared to number of equity shares.

The Earning per share in FY 08 is 0.285 means shareholder is earning Rs. 0.285 for each share of Rs. 10/- they owned. 4. RETURN ON INVESTMENT : The ROI measures the profitability of the firm in terms of assets employed in the firm. Usually the profit of the firm is measured in terms of the net profit after tax and the assets are measured in terms of total assets or total tangible assets or total fixed assets. The ROI shows as to how much is the profit earned by the firm per rupee of assets used.

REPORT SUBMITTED BY: JIGAR PATEL ~ 31 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Return on Investment = Earning Before Interest & Tax (ROI) Net Assets

x 100

(Rs. in crores)
15.00%

Returnon Investm ent


=(10.5)%
5.00%

2006 2007 2008

(1196.85) x 100 11409.41 3.37 x 100 12363.32 115.62 x 100 11172.62

=1.02%
-5.00% 2006

1.02% 2007

1.03% 2008

=1.03%
-15.00% -10.50% Yea rs

INTERPRETATION :

This ratio has shown decrease in FY 06 but increase from FY 07 - 08. This shows that the company has purchased new assets or the profit is decreasing as compared to sales. 5. RETURN ON EQUITY / NET WORTH : The return from the point of view of equity shareholders may be calculated by comparing the net profit less preference dividend with their total contribution in the firm. The ROE indicates as to how well the funds of the owner have been used by the firm. It also examines whether the firm has been able to earn satisfactory return for the owners or not. REPORT SUBMITTED BY: JIGAR PATEL ~ 32 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Return on Equity/ = Earning After Tax Net Worth Equity (Net Worth)

x 100

(Rs. in crores)
10.00%

2006

(812.67) x 100 3148.32 (9.53) x 100 4047.82 34.80 x 100 3947.61

=(25.81)%
0.00%

Returnon Equity/ Net W orth 0.88%


2006 2007 -0.24% 2008

=(0.24)%

-10.00% -20.00%

2007

=0.88%
-30.00% -25.81% Y rs ea

2008

INTERPRETATION :

This ratio has shown increase from FY 06 - 08 where the ratio plunges of 0.88%. This shows a positive sign which reflects the productivity of the ownership (risk) capital employed in the firm.
6. PRICE TO EARNINGS RATIO (P/E RATIO) :

The relationship of the price of the stock in the relation to EPS is expressed as the Price to Earnings Ratio or P/E Ratio. Investors often refer to the P/E Ratio as a rough indicator of value for a company. The P/E Ratio is calculated as follows:

Price to Earning Ratio = REPORT SUBMITTED BY: JIGAR PATEL ~ 33 ~

Market Value per Share

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Earning Per Share (Rs. in crores) 15 (7.93) 13.34 (0.81) 33.58 0.285 =Rs.117.82 =Rs.(16.46) =Rs. (1.89)
118 98 78 58 38 18 -2 -22 -42 2006 -1.89 2007 -16.46 Yea rs 2008

Priceto EarningRatio 117.82

2006 2007 2008

INTERPRETATION : This ratio is very low in FY 2006-08 i.e. it is negative which implies that investors view the companys future as poor and thus, the price the company sells for is relatively low when compared to its earnings.

But in FY 2008, this ratio is high which implies that investors are becoming optimistic (bullish) about the future of the company since the price (which reflects market value) is selling for well above current earnings.
D) ACTIVITY

RATIOS:

1. INVENTORY TURNOVER RATIO : Inventory Turnover measures how many times the inventory turned during the year. Higher turnover rates are desirable. This ratio is similar to Debtors Turnover Ratio. REPORT SUBMITTED BY: JIGAR PATEL ~ 34 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Inventory Turnover Ratio =

Sales Average Inventory

(Rs. in crores) 4958.74 985.61 7486.57 1056.19 8284.14 1368.38 =6.05 =7.09 =5.03

2006 2007 2008

10 8 6 4 2 0

InventoryTurnover Ratio
7.09 5.03 6.05

2006

2007 Years

2008

INTERPRETATION :

Ispat Industries Limited has been able to significantly mobilize inventory through the year. This implies that management does not hold onto excess inventories and inventories are highly marketable.

2. DAYS IN INVENTORY :

A day in Inventory is the average number of days inventory is held before a sale. A low number of inventory days are desirable.

Inventory Turnover in Days / = No. of days in the year Days of Holding Inventory REPORT SUBMITTED BY: JIGAR PATEL ~ 35 ~ Inventory Turnover

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

(Rs. in crores) 365 5.03 365 7.09 365 6.05 =75 days =51 days =60 days
80 60 s y 40 a D 20 0

2006

InventoryT urnover in 75 Days


60 51

2007

2008

2006

2007 Yea rs

2008

INTERPRETATION :

Ispat Industries Limited has been able to do so quite efficiently, as the increase to high levels throughout the years show.

This ratio shows decline which implies that management is able to sell existing inventory stocks. 3. FIXED ASSETS TURNOVER RATIO : This Ratio shows how well the fixed assets are being utilized. In computing Fixed Assets Turnover Ratio, the fixed assets are generally taken at written-down value at the end of the year. However, there is to rigidity about it. It may be taken at original cost or at present market value depending on the object of the REPORT SUBMITTED BY: JIGAR PATEL ~ 36 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

comparison. In fact, the ratio will have automatic improvements if the writtendown value is used. Fixed Assets Turnover Ratio = (Rs. in crores) 4958.74 9517.28 7486.57 9878.01 8284.14 9314.26 =0.89
0 2006 2007 Years 2008

Sales Fixed Assets

=0.52 =0.76

2006 2007

Fixed AssetsTurnover Ratio


0.76 0.52 0.89

2008

INTERPRETATION : This ratio in general is satisfactory & increasing every year. This increase is due to the replacement of an asset at an increased price or due to the purchase of an additional asset intended to increase production capacity. In FY 06 the ratio is low due to increase in sales of fixed assets. The latter transaction might be expected to result in increased sales whereas the former would more probably be reflected in reduced operating costs. 4. DEBTORS TURNOVER RATIO : Debtors Turnover Ratio measures the ability to convert the receivables over into cash. In case the firm sells goods on credit, the realization of sells revenue is delayed and the receivables (both debtors and/or bills) are created. The cash is

REPORT SUBMITTED BY: JIGAR PATEL ~ 37 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

realized from these receivables at later stage. The speed with which these receivables are collected affects the liquidity position of the firm.

Debtors Turnover Ratio = (Rs. in crores) 4958.74 594.13 7486.57 645.02 8284.14 579.83 =14.29 =11.61 =8.35
15

Sales Average Debtors

DebtorsTurnover Ratio
14.29 11.61 10 5 0 2006 2007 Years 2008 8.35

2006 2007 2008

INTERPRETATION :

This ratio is increases from FY 06 - 08. This shows that the companys fund is not blocked for a long time in debtors. The company has been efficient in converting debtors into cash.

5. COLLECTION PERIOD : Collection period indicates the duration of the credit cycle of the debtors. It is the average length of time required to collect our receivables. A low number of days are desirable. It is calculated as follows: REPORT SUBMITTED BY: JIGAR PATEL ~ 38 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Collection Period =

No. of days in the year Debtors Turnover

(Rs. in crores) 365 8.35 365 11.61 365 14.29 =44 days =31 days =26 days
50 40 30 s y a D 20 10 0

CollectionPeriod
44 31

2006 2007 2008

26

2006

2007 Years

2008

INTERPRETATION : From the above ratios, it can be said that from FY 2006 08, Ispat Industries Limited has been able to receive their payment in a very short span of time. This is a positive sign for the company as they are able to use the amount in purchasing the raw materials as well as for the day to day activities.

The operating cycle of the debtors is short. In other words the debts collection period is short which result into less chance of bad debts.

INDUSTRIAL RATIOS V/S COMPANY RATIOS

REPORT SUBMITTED BY: JIGAR PATEL ~ 39 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

INDUSTRIAL RATIOS RATIOS


Current Ratio Quick Ratio Debt-Equity Ratio 2:1 1:1 2:1

COMPANY RATIOS 2006


1.02 : 1 0.58 : 1 2.62 : 1

2007
1.30 : 1 0.81 : 1 2.05 : 1

2008
1.05 : 1 0.55 : 1 1.83 : 1

OVERALL ANALYSIS OF RATIOS

No.
(A) 1 2 3

RATIOS
LIQUIDITY RATIOS : Current Ratio Quick Ratio Cash Ratio

2006
1.02 : 1 0.58 : 1 0.06 : 1

2007
1.30 : 1 0.81 : 1 0.15 : 1

2008
1.05 : 1 0.55 : 1 0.03 : 1

REPORT SUBMITTED BY: JIGAR PATEL ~ 40 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

(B) 1 2 3 (C) 1 2 3 4 5 6 (D) 1 2 3 4 5

LEVERAGE RATIOS : Debt - Equity Ratio Debt Ratio Interest Coverage Ratio PROFITABILITY RATIOS : Gross Profit Ratio Net Profit Ratio Earning Per Share Return on Investment Return on Equity Price Earning Ratio ACTIVITY RATIOS : Inventory Turnover Ratio Days in Inventory Fixed Assets Turnover Ratio Debtors Turnover Ratio Collection Period

2.62 : 1 0.72 (0.25) (11.02)% (16.39)% Rs. (6.65) (10.5)% (25.81)% Rs. (1.89) 5.03 75 days 0.52 8.35 44 days

2.05 : 1 0.67 1.01 7.96% (0.13)% Rs. (0.078) 1.02% (0.24)% Rs. (16.46) 7.09 51 days 0.76 11.61 31 days

1.83 : 1 0.65 1.14 7.55% 0.42% Rs. 0.285 1.03% 0.88% Rs. 117.82 6.05 60 days 0.89 14.29 26 days

CASE STUDY HOW A LOSS MAKING FIRM BECOME A PROFIT MAKING FIRM
Ispat Industries has recorded a loss after tax of Rs 9.53 crore in the quarter

ended December 31, 2007 but make a profit in the quarter ended December 31, 2008.

EXPANSION AND NEW PROJECTS :


REPORT SUBMITTED BY: JIGAR PATEL ~ 41 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

In line with its vision for the future, IIL is expanding its HRC capacity to 3.6

million. With investments of over $ 2 billion, IIL is the seventh largest Indian private sector company in terms of fixed assets. With this view, it is proposed to undertake creation of certain additional cost-saving and capacity-enhancing capital projects as under:

1)

1 million tonnes per annum Coke Oven plant at Dolvi by mid 2009.

The facility would reduce the risk of restricted coke availability, ensure consistency in coke quality and also reduce the cost substantially.
2)

4.5 million tonnes per annum Pellet Plant at Vishakhapatnam by

third quarter of 2009. The facility shall not only reduce the risk of availability of pellets but would also ensure consistent quality in addition to cost savings.
3)

Enhancement of the existing Hot Rolled Coil plant capacity from

3.0 million tonnes to 3.6 million tonnes per annum along with auxiliary facilities, enhancing capacity of existing Sponge Iron and Sinter Plants and addition of a Blast Furnace by third quarter of 2008.
4)

The installation of an additional Blast Furnace would provide

adequate quantities of Hot Metal to meet the enhanced requirements of the HRC Plant. The company also proposes to enhance its Sinter plant and Sponge Iron plant capacities to 2.5 million tonnes per annum and 1.80 million tonnes per annum, respectively.
5)

These projects will have an impact of Rs 600 crore to Rs 1000

crore from 2010 onwards. The financial tie-up for the Captive Power Plant REPORT SUBMITTED BY: JIGAR PATEL ~ 42 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

(combined capacity 110 mw) of Ispat Energy Ltd has been achieved. Project activities have commenced and it is expected to be operational by early 2009.

Ispat is increasing the capacity of its existing hot rolled coil plant from

three million tonnes to 3.6 million tonne, with an additional blast furnace with an annual capacity of 1.25 million tonnes.
To cope with the shortage of natural gas, the company has tied up with

the state-owned Oil and Natural Gas Corp, and would source gas from Bombay High that would meet 30 percent of its requirement.
Ispat Industries is set to pick up 40 per cent stake in iron ore and coking

coal mining companies in Brazil, Columbia and Mozambique through the joint venture route. The Brazilian mines have iron ore reserves of 300-500 million tonnes, while the Columbia and Mozambique mines have coking coal deposits in the range of 60-70 million tonne.
Apart from mining assets, Ispat would invest Rs 3,200 crore for setting up a

coke plant, pellet plant and power plant. The projects would be completed in two years. The company has achieved financial closure for Rs 800 crore power plant.

PLAN OF ACTION :
The company's internal mechanism is robust enough to adjust strategies to meet its diverse market challenges. The strategies are:

REPORT SUBMITTED BY: JIGAR PATEL ~ 43 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

1. Increase vertical integration by reducing dependence on third parties for supplies of key raw materials. 2. Reduce exposure to volatility in prices of raw materials and risks of shortages by producing pellets and coke. 3. Acquiring mining and prospecting leases for iron-ore, non-coking, coking coal and fluxes. 4. Develop value added grades of steel through continuous research and developmental activities. 5. Install and operate a dedicated power plant to meet energy needs and ensure availability of cost-effective power supply.
6. Enhance operational efficiencies at all stages of production, by using

advanced technologies and processes and implementing best practices through knowledge integration programme.

CONCLUSION

After analyzing and interpreting the whole financial statement of Ispat Industries Limited for three years starting from 2005-06 to 2007-08 and on the basis of annual reports, the researcher have arrived at inferences which are shown at the end of analysis.

On the basis of inferences the researcher has arrived on final conclusions. They are as follows: REPORT SUBMITTED BY: JIGAR PATEL ~ 44 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

A)

Liquidity Position:
The Liquidity position of the company is not good during the year. It can be judged by the unsatisfactory result of Current Ratio, Quick Ratio and Cash Ratio during the period, when these ratios are not less than the ideal ratios. The Current Ratio is lower than the ideal ratio. It shows the company does not have the ability to meet its current requirements.

In overall the liquidity position of the company is not satisfactory which shows the management is not efficient in utilizing current assets in the business.

B)

Leverage Position:
The Leverage position of the company is good in long term position of the company due to higher Interest Coverage Ratio and Debt to Equity Ratio; whereas it is also good in short term position as Debt Ratio shows the decreasing trend.

C)

Profitability Position:
The Gross Profit of the company is declining, which has affected the profitability of the company. Beside this ratio, the overall profitability of the company is

REPORT SUBMITTED BY: JIGAR PATEL ~ 45 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

satisfactory during the study period, which is the positive sign for the company. The profitability has also affected due to low Earning per Share, which indicates that the shareholders are not gaining much out of every share they own.

Therefore the overall financial position of the company is good, on the basis of determinants of ratio analysis i.e. Liquidity, Leverage, Activity and Profitability Ratios. The financial position of the company can be said sound in short term and long term, which indicates that there may be no financial crisis in future.

D)

Activity Position:
The business activity of the company is efficient and effective during the period, which is beneficial to the Liquidity, Leverage and Profitability Position of the company. The increasing Inventory Turnover Ratio and Assets Turnover Ratio highlights the overall effective and efficiency of the business activities and management in making productive utilization of the assets and capital of the company so that there is better profitability during the period.

The Debtors Turnover Ratio as well as collection period is also increasing which shows that the company is efficient in converting debtors into cash and able to use the cash in purchasing raw materials.

REPORT SUBMITTED BY: JIGAR PATEL ~ 46 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

LIMITATIONS

The analysis and interpretation are based on secondary data contained in the

published annual reports of ISPAT INDUSTRIES LIMITED for the study period.
Due to the limited time available at the disposable of the researcher, the study

has been confined for a period of 3 years (FY 2006-2008).


Ratio itself will not completely show the companys good or bad financial

position. REPORT SUBMITTED BY: JIGAR PATEL ~ 47 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Inter firm comparison was not possible due to the non availability of

competitors data.
The study of financial performance can be only a means to know about the

financial condition of the company and cannot show a thorough picture of the activities of the company.

RECOMMENDATION

After analysis & interpretation of the financial statements of Larsen & Toubro Limited, the following are the suggestions for the betterment of the company:

REPORT SUBMITTED BY: JIGAR PATEL ~ 48 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

It is emphasized here that one has to keep in mind; there will be always scope for future development in any concern and in any department.

1. Liquidity Position:
The company should try to improve its Current Ratio, as some margin is required to protect the interest of the creditors and to provide cushion to the firm in adverse circumstances. It should try to maintain its current assets by proper inventory management because even a slight decline in the value of current assets will adversely affects its ability to meet its working requirements and therefore, from the viewpoint of creditors, it is more risky venture. The company could raise funds by the source of banks etc.

2.

Leverage Position:

The company should minimize external financing to lower the interest burden which will help to enhance the shareholders ability to earn and will lower the risk for them.

3. Profitability Position:
The management needs to increase in its production line, expansion capacity and more exports, which push the bottom line and in turn shows a positive sign in the growth of the company.

REPORT SUBMITTED BY: JIGAR PATEL ~ 49 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

Another area where the management needs to draw its attention as far as working capital management is concerned is to manage its debtors. Although the company demands an open letter of credit from all its customers, the credit policy needs to be tightened especially with the increase number of plants, which would lead to the substantial amount of investment in debtors.

The company should try to improve its Earning Per Share which enables the existing and new investors to invest more so that liquidity will be increases.

The company should also try to improve its P/E Ratio, so that investors are very optimistic about the future of the company since the price, which reflects market value, is selling for well above current earnings.

4.

Activity Position:

The company should try to maintain its Inventory Turnover Ratio and Debtors Turnover Ratio so that business activity will run efficiently and effectively as inventory and debtors are converting into cash in less time.

BIBLIOGRAPHY

REFERENCE BOOKS :
A)

FINANCIAL MANAGEMENT

BY : R.P.RUSTAGI

REPORT SUBMITTED BY: JIGAR PATEL ~ 50 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

(Theory, Concepts & problems)

B)

FINANCIAL MANAGEMENT (Text and problems)

BY : M.Y. KHAN AND P. K.

JAIN

C)

ANALYSIS OF FINANCIAL STATEMENT BY : VIVEK SHARMA

ANAUAL REPORTS OF ISPAT INDUSTRIES LIMITED :


2005-2006 2006-2007 2007-2008

WEBSIDES :
www.ispatind.com

www.wikipedia.com www.zeromillion.com.business/financial

PROFIT & LOSS ACCOUNT

REPORT SUBMITTED BY: JIGAR PATEL ~ 51 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

2008 INCOME Sales (Gross) Less: Excise Duty Sales (Net) Other Income TOTAL (A) EXPENDITURE Decrease/(Increase) in stocks Excise Duty & Cess on stocks Raw Material Consumed Purchase of Finished Goods Personnel Cost Manufacturing , Selling & Distribution and Administrative Expenses Interest & Finance Charges Depreciation Less: Transferred from Revaluation Reserve TOTAL (B) Profit/Loss Before Tax (A-B) Less: Provision for Wealth Tax Deferred Tax Charge Fringe Benefit Tax Profit/Loss After Tax Add: Debenture Redemption Reserve written back Less: Loss brought forward from Previous Year Less: Adjustment towards additional Employee Benefit Liability Loss Carried To Balance Sheet Basic and Diluted Earning per Share (Rs.) 9401.67 1117.53 8284.14 426.86 8711.00 159.16 (0.97) 4535.83 10.71 202.60 2200.68 849.25 723.06 84.94 638.12 8595.38 115.62 0.04 77.04 3.74 34.80 25.35 1106.15 -(1046.00) (0.36)

2007

(Rs. In crores) 2006 5580.02 621.28 4958.74 51.99 5010.73 (84.68) 11.15 2910.12 -131.55 1711.18 956.83 594.05 22.62 571.43 6207.58 (1196.85) 0.03 388.67 4.46 812.67 -214.47 (500.31) (1098.51) (7.93)

8378.44 891.87 7486.57 115.63 7602.20 (28.13) (2.07) 3711.93 58.58 165.34 2071.77 997.58 724.54 100.71 623.83 7598.83 3.37 0.03 9.87 3.00 (9.53) 12.10 1098.51 10.21 (1106.15) (0.81)

BALANCE SHEET
REPORT SUBMITTED BY: JIGAR PATEL ~ 52 ~

FINANCIAL ANALYSIS & INTERPRETATION OF ISPAT INDUSTRIES LIMITED

2008 SOURCES OF FUNDS 1. Shareholders Fund Share Capital Reserves and Surplus
2. Loan Funds

(Rs. In crores) 2007 2006

2294.03 1653.58 3947.61 6940.05 284.99 7225.04 11172.7

2288.74 1759.08 4047.82 7849.07 466.43 8315.5 12363.3

2288.7 859.62 3148.32 8241.06 20.03 8261.09 11409.4

Secured Unsecured TOTAL APPLICATION OF FUNDS 1. Fixed Assets Gross Block Less: Depreciation Net Block Capital Work-in-Progress Pre-operative & Trial Run Expenses 2. Investment 3. Deferred Tax Asset (Net) 4. Current Assets, Loans & Advances Inventories Sundry Debtors Cash & Bank Balances Loans, Advances & Deposits Less: Current Liabilities & Provisions Current liabilities Provisions Net Current Assets 5. P & L A/C Debit balance TOTAL

13167.9 3961.93 9206.01 108.25 0 9314.26 118.04 546.57

13067.4 3244.04 9823.33 54.68 0 9878.01 113.59 623.61

11455.7 2554.27 8901.44 398.19 9517.28 113.32 628.3 628.30

1368.38 579.83 92.52 834.06 2874.79

1056.19 645.02 327.65 778.85 2807.7

985.61 594.13 128.86 587.65 2296.25

2693.67 33.34 2727.01 147.78 1046 11172.7

2136.94 28.81 2165.75 641.96 1106.15 12363.3

2231.83 12.42 2244.25 52 1098.51 11409.4

REPORT SUBMITTED BY: JIGAR PATEL ~ 53 ~

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