Research Methodology:

Financial Ratios

There are few numbers in financial statements that are significant and provide significant insights which
helps to draw meaningful inferences from their relationships to other amounts or their change from one
period to another. These tools help in establishing significant relationships and changes. The most
commonly used financial ratios are: -

Ratio analysis of financial statements [Liquidity, Solvency, Profitability, Efficiency]

The various advantages of ratio analysis are as follows,

 It helps in the financial forecasting and planning activities.

 It helps in making strategic decisions.
 It helps in assessing firm’s progress and performance and inter-firm comparison
with industry average.

Liquidity Ratios: liquidity ratios measure a company's ability to pay off its short-term
debts as they come due using the company's current or quick assets. Liquidity ratios
include current ratio, quick ratio, and Fixed assets turnover ratio.

In simple terms it assesses whether a business has sufficient cash or equivalent current
assets to be able to pay its debts as they fall due. For evaluating Ashok Leyland liquidity,
we examine the following three ratios: -

 Current Ratio
 Quick Ratio
 Inventory Turnover Ratio

Current Ratio:-

Current ratio is the ratio of current assets to current liabilities. It is a widely used
indicator of a company’s ability to pay its obligations in the short-term, and shows the
amount of current assets a company has per rupee of current liabilities. Current assets
and current liabilities are those that are receivable or payable in the normal operating
cycle or within 12 months after the reporting period. Current ratio is calculated as
Current assets / Current liabilities.

1
 Key Ratio of JSW Steel 31-Mar-20 31-Mar-19 31-Mar-18
Current Ratio 0.81 0.79 0.98

Current Rati o
1.2

1
0.98

0.8 0.79 0.81

Current Ratio

0.6

0.4

0.2

0
Ma r' 18 Ma r' 19 Ma r' 2 0
Fiscal Year

Interpretation:

In our above case while the Jsw Steel, current ratio was better in march’18 than in Mar’20.

Generally speaking, a ratio between 1.5 and 3 is preferable and indicates strong financial
performance. A Current Ratio of less than 1 indicates that your organization would be unable to
meet all of your financial obligations if they came due at the same time. While this certainly is
not good, it's not uncommon for organizations to operate in the red for short periods of time,
especially if the business is funding growth by accumulating debt. On the other hand, a high
Current Ratio may mean that the business is sitting on a large amount of cash, instead of
investing it back into the business.
Current Ratio provides investors and financial analysts with an indication of the
efficiency of your company's operating cycle. In other words, is your business able to
generate a constant revenue stream and collect account receivables in a timely manner?
These important questions tell potential investors a lot about the financial health of your
organization.

2
Quick Ratio:-

All Current assets are not equally liquid. While cash is readily available to make payments to
suppliers and receivables can be converted into cash with some effort, inventories are two steps
away from cash (sale and collection). Thus, a large current ratio by itself is not a satisfactory
measure of liquidity when inventories constitute a major part of the current assets. Therefore, the
quick ratio or acid test ratio, is computed to supplement to the current ratio. This ratio relates
relatively more liquid current assets, usually current assets less inventories, to current liabilities.

Quick ratio is calculated as quick assets / current liabilities.

Key Ratio of JSW Steel 31-Mar-20 31-Mar-19 31-Mar-18

Quick Ratio 0.84 0.73 0.68

Quick Rati o
0.9 0.84
0.8 0.73
0.68
0.7
0.6
Quick Ratio

0.5
0.4
0.3
0.2
0.1
0
Ma r' 18 Ma r' 19 Ma r' 2 0
Fiscal Year

Interpretation:

The quick ratio is an indicator of a company’s short-term liquidity position and measures a

company’s ability to meet its short-term obligations with its most liquid assets. Since it indicates
the company’s ability to instantly use its near-cash assets (assets that can be converted quickly to
cash) to pay down its current liabilities, it is also called the acid test ratio. An acid test is a quick
test designed to produce instant results—hence, the name.
The higher the ratio result, the better a company's liquidity and financial health; the lower the ratio, the
more likely the company will struggle with paying debts.

In This case the Quick ratio of company has improved from 2018 to 2020

Inventory Turnover:-

Inventory turnover also termed as Management efficiency ratio is the number of times a company’s
inventories are turned into sales. Investment in inventory represents idle cash. The lesser the
inventory level, the greater the cash available for meeting day-to-day operating needs and
investment in productive assets.

Key Ratio of JSW Steel 31-Mar-18 31-Mar-19 31-Mar-20

Inventory turnover 6.57 7.14 6.68

Inventory Turnover Rati o

7.2 7.14
7.1
7
Inventory Turnover Ratio

6.9
6.8
6.68
6.7
6.57
6.6
6.5
6.4
6.3
6.2
Ma r' 18 Ma r' 19 Ma r' 2 0
Fiscal Year

Interpretation:

The inventory turnover ratio was high in 2019 for JSW Steel indicating better inventory

management. The reduction in 2020 implies that the sales revenue is not gearing up based on

the Inventory. The inventory turnover implies an average inventory holding period.
Solvency Ratios: Also called financial leverage ratios, solvency ratios compare a company's debt
levels with its assets, equity, and earnings to evaluate whether a company can stay afloat in the long-
term by paying its long-term debt and interest on the debt. Examples of solvency ratios include debt-
equity ratio, debt-assets ratio, and interest coverage ratio.

Debt-to Equity Ratio:- Mix of debt and equity can increase the return on equity for two key
reasons:-

a) Debt is generally cheaper than equity

b) Interest expense is tax deductible, whereas dividends are paid from after tax profits. In addition,
dividend payment attracts dividend distribution tax.

The debt-to-equity ratio for JSW Steel is computed as below

Key Ratio of JSW Steel 31-Mar-18 31-Mar-19 31-Mar-20

Debt Equity Ratio 1.14% 0.94% 1.2%

Total Debt to Owners Fund

1.4
1.2
1.14
1.2

1 0.94
Debt Equity Ratio

0.8

0.6

0.4

0.2

0
Ma r' 18 Ma r' 19 Ma r' 2 0
Fiscal Year

Interpretation

Debt-to equity ratio is fluctuating and was highest in 2020.

Profitability Ratios: these ratios show how well a company can generate profits from its operations.
Profit margin, return on assets, return on equity, return on capital employed, and gross margin ratio
are examples of profitability ratios.
Profitability ratios measure the degree of operating success of a company. We have used three most
commonly used ratios to evaluate profitability :-

 Profit Margin
 Asset Turnover
 Return on Assets

Profit Margin:- This ratio, also known as return on sales (ROS), measures the amount of net profit
earned from each rupee of revenue.

Key Ratio of JSW STEEL 31-Mar-18 31-Mar-19 31-Mar-20

Net Profit Margin(%) 7.11% 10.52% 8.23%

NP Margin
12
10.52
10
Net Profit Margin Ratipo

8.23
8
7.11

0
Ma r' 18 Ma r' 19 Ma r' 2 0
Fiscal year

Interpretation : Profit margin reduced in 2019-20 to 8.23% from 10.52 % in 2018-19 and was higher
than 7.11in 2017-18. Profit margin provides some indication of the cushion available to the company
in the event of an increase in costs or a drop in selling prices, because of recession or greater
competition.

The pressure on margin should be further analyzed by looking at major categories of expenses, such
as materials, salaries and wages and advertising.

Fixed Asset turnover ratio:-

This is a measure of a firm’s efficiency in utilizing its assets. It indicates how many times the assets
were turned over in a period in order to generate sales. If the assets turnover is high, we can infer that
the enterprise is managing its assets efficiently. A low assets turnover implies the presence of more
assets that the business needs for its operations.

Key Ratio of JSW Steel 31-Mar-18 31-Mar-19 31-Mar-20

Fixed Assets Turnover Ratio 1.12% 1.5% 1.01%

FA Rati o
1.6 1.5
1.4
Fixed Asset Turnover Ratio

1.12
1.2
1.01
1
0.8
0.6
0.4
0.2
0
Ma r' 18 Ma r' 19 Ma r' 2 0
Fiscal Year

In 2019-20, JSW Steel Fixed Assets Turnover reduced to 1.01 % from 1.5% in 2018-19.

Interpretation:

Increase in asset turnover could be because of capacity reduction, regular equipment maintenance,
timely availability of raw materials and power, effective management of inventories, receivables and
cash, better industrial relations and so on. The reduction is due to increase in assets in 2018
predicting more sales revenue in the next 3 years.

Return on Asset: -

Return on assets also known as return on investment, is a measure of profitability from a given level
of investment. It is an excellent indicator of a company’s overall performance. Return on asset is
calculated as Profit / Assets

The increase in ROA indicates significant improvement in the company’s overall profitability. The
ROA increased because of the improvement in both margin and turnover, the higher ROA came from
the larger investments, suggesting that the additional investment would probably bring even more
profits.

Efficiency Ratios: also called activity ratios, efficiency ratios evaluate how well a company uses its
assets and liabilities to generate sales and maximize profits. Key efficiency ratios are the asset
turnover ratio, inventory turnover, and days' sales in inventory.

The efficiency ratio is typically used to analyze how well a company uses its assets and liabilities
internally. An efficiency ratio can calculate the turnover of receivables, the repayment of liabilities,
the quantity and usage of equity, and the general use of inventory and machinery. An efficiency ratio
measures a company's ability to use its assets to generate income. For example, an efficiency ratio
often looks at various aspects of the company, such as the time it takes to collect cash from
customers or the amount of time it takes to convert inventory to cash. This makes efficiency ratios
important, because an improvement in the efficiency ratios usually translates to improved
profitability.

Some of the key ratios are:-

 Inventory turnover
 Debtors turnover ratio or Receivable turnover ratio
 Investment turnover ratio
 Fixed asset turnover ratio
 Asset turnover ratio

Each of the above different efficiency ratios focuses on a different aspect of the business. Ultimately,
when the efficiency ratios all indicate the business is being run efficiently.

Inventory turnover is a gauge of how fast a retailer sells through its inventory and needs to replace
it. This metric is vital for understanding which products attract consumers and drive sales for the
retailer. The longer items stay in a retailer's possession the bigger the hit on potential revenue and
profits they can expect. The faster you "turn" your inventory, the more inventory you will need and
hopefully sell.

The formula for assessing inventory turnover is a simple one: Sales ÷ Inventory.

The accounts receivable turnover ratio, also known as the debtor’s turnover ratio, is an efficiency
ratio that measures how efficiently a company is using its assets. The accounts receivable turnover
ratio measures the number of times over a given period that a company collects its average accounts
receivable.

The formula for assessing accounts receivable turnover ratio is Net Credit Sales / Average
Accounts Receivable.

The investment turnover ratio helps us measure the ability of a company to generate revenues
using the debt and capital that have been invested in the business. In general, the higher the
investment turnover ratio, the more efficient the company is in generating revenues from its debt
 and equity capital.

The formula for assessing investment turnover ratio = Sales Revenue / (Shareholders’ Equity +
Debt Outstanding)

Fixed Asset Turnover (FAT) is an efficiency ratio that indicates how well or efficiently the
business uses fixed assets to generate sales. This ratio divides net sales by net fixed assets, over an
annual period. The net fixed assets include the amount of property, plant, and equipment, less the
accumulated depreciation. Generally, a higher fixed asset ratio implies more effective utilization of
investments in fixed assets to generate revenue. This ratio is often analyzed alongside leverage and
profitability ratios.
The formula for Fixed Asset turnover is = Net Sales / Average Fixed Assets

The asset turnover ratio, also known as the total asset turnover ratio, measures the efficiency with which a company uses its
assets to generate sales. The asset turnover ratio formula is equal to net sales divided by the total or average assets of a
company. A company with a high asset turnover ratio operates more efficiently compared to competitors with lower ratios.

Mar Mar Mar Mar Mar

  '20 '19 '18 '17 '16
Management Efficiency Ratios

Inventory Turnover Ratio 6.68 7.14 6.57 6.14 6.06

Debtors Turnover Ratio 12.94 13.47 15.04 16.19 16.18
Investments Turnover Ratio 0.76 1.14 6.57 6.14 6.06
Fixed Assets Turnover Ratio 1.01 1.5 1.12 0.93 0.74
Total Assets Turnover Ratio 0.76 1.14 1.09 0.91 0.7
Asset Turnover Ratio 0.84 1.21 1.11 0.95 0.71
Average Raw Material Holding -- -- -- -- --
Average Finished Goods Held -- -- -- -- --
Number of Days In Working Capital -17.52 -23.4 -17.7 -36.03 -94.1
 Management Efficiency Ratios

20 Mar '16
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Mar '20 Mar '19 Mar '18 Mar '17 Mar '16

Financial performance

There are few facts in financial statements that are significant and provide significant insights
which helps to draw meaningful inferences from their relationships to other amounts or their
change from one period to another. These tools help in establishing significant relationships and
changes. The most commonly used analytical techniques are:-

1. Horizontal Analysis
2. Vertical Analysis
3. Trend Analysis and
4. Ratio Analysis

Horizontal Analysis

Horizontal analysis looks at amounts on the financial statements over the past years and present
comparative information for at least two years. Horizontal analysis calculates the amount and
percentage changes from the previous year to the current year. While the amount is useful,
converting it to percentage is more useful in appreciating the order of magnitude.

(Summary of Profit and Loss account is given below)

JSW Steel
Profit & Loss account ------------------- in Rs. Cr. -------------------
  Mar 20 Mar-19 Mar-18 Mar-17 Mar-16

  12 mths 12 mths 12 mths 12 mths 12 mths

INCOME
Revenue From Operations 62,565.0 75,210.0 65,046.0 56,244.0 40,354.4
[Gross] 0 0 0 0 8
Less: Excise/Sevice Tax/Other
Levies 0 0 1,259.00 4,623.00 4,152.04
Revenue From Operations 62,565.0 75,210.0 63,787.0 51,621.0 36,202.4
[Net] 0 0 0 0 4
Other Operating Revenues 1,697.00 1,977.00 1,188.00 669 504.48
64,262.0 77,187.0 64,975.0 52,290.0 36,706.9
Total Operating Revenues 0 0 0 0 2
Other Income 628 405 213 255 318.3
64,890.0 77,592.0 65,188.0 52,545.0 37,025.2
Total Revenue 0 0 0 0 2
EXPENSES
33,073.0 39,179.0 35,995.0 28,400.0 18,763.3
Cost Of Materials Consumed 0 0 0 0 2
Purchase Of Stock-In Trade 420 499 1,063.00 945 152.72
Changes In Inventories Of -
FG,WIP And Stock-In Trade -27 -180 412 1,390.00 1,083.56
Employee Benefit Expenses 1,496.00 1,435.00 1,260.00 1,168.00 953.29
Finance Costs 4,022.00 3,789.00 3,591.00 3,643.00 3,218.73
Depreciation And Amortisation
Expenses 3,522.00 3,421.00 3,054.00 3,025.00 2,847.24
16,783.0 17,742.0 12,504.0 11,623.0
Other Expenses 0 0 0 0 9,385.18
59,289.0 65,885.0 57,879.0 47,414.0 36,404.0
Total Expenses 0 0 0 0 4

Profit/Loss Before Exceptional, 11,707.0

ExtraOrdinary Items And Tax 5,601.00 0 7,309.00 5,131.00 621.18
- -
Exceptional Items 1,309.00 0 -234 0 5,860.45
11,707.0 -
Profit/Loss Before Tax 4,292.00 0 7,075.00 5,131.00 5,239.27
Tax Expenses-Continued Operations
Current Tax 789 2,356.00 1,578.00 -53 6.71
- -
Deferred Tax 1,788.00 1,230.00 872 1,607.00 1,716.31
 -
Total Tax Expenses -999 3,586.00 2,450.00 1,554.00 1,709.60
Profit/Loss After Tax And -
Before ExtraOrdinary Items 5,291.00 8,121.00 4,625.00 3,577.00 3,529.67

Growth Over Previous period

JSW Steel
Profit & Loss account - Growth over last year
  Mar 20 Mar-19 Mar-18 Mar-17

INCOME

Revenue From Operations [Gross] -16.81% 15.63% 15.65% 39.37%

Revenue From Operations [Net] -16.81% 17.91% 23.57% 42.59%
Other Operating Revenues -14.16% 66.41% 77.58% 32.61%
Total Operating Revenues -16.75% 18.79% 24.26% 42.45%
Other Income 55.06% 90.14% -16.47% -19.89%
Total Revenue -16.37% 19.03% 24.06% 41.92%
EXPENSES
Cost Of Materials Consumed -15.58% 8.85% 26.74% 51.36%
Purchase Of Stock-In Trade -15.83% -53.06% 12.49% 518.78%
Employee Benefit Expenses 4.25% 13.89% 7.88% 22.52%
Finance Costs 6.15% 5.51% -1.43% 13.18%
Depreciation And Amortisation
Expenses 2.95% 12.02% 0.96% 6.24%
Other Expenses -5.41% 41.89% 7.58% 23.84%
Total Expenses -10.01% 13.83% 22.07% 30.24%

Profit/Loss Before Exceptional,

ExtraOrdinary Items And Tax -52.16% 60.17% 42.45% 726.01%
Tax Expenses-Continued Operations
- -
Total Tax Expenses 127.86% 46.37% 57.66% 190.90%
Profit/Loss After Tax And Before -
ExtraOrdinary Items -34.85% 75.59% 29.30% 201.34%

Interpretation: -

The above information is revealing. In 2019-20, the sales were down by 16.81% % and profit after tax
also down by 34.85%. Other income and exceptional items consist mostly of non-operating items and are
highly volatile and while Other income shot up by 55.06%, exceptional items was -1309 crore in 2019-20
which was not occurring in 2018-19 as per the P&L statement attached in the annexures. Because of the
same, the profit after tax was down Rs. 4292 crore. Without Exceptional items, the Gross Profit was 5601
crore.

Vertical Analysis:

Vertical analysis reports each amount on a financial statement as a percentage of another item. For
example, the vertical analysis of the balance sheet means every amount on the balance sheet is restated to
be a percentage of total assets. The results of vertical analysis are presented in the form of common size
statements in which the items within each statement are expressed in percentages of some common
number and always add up to 100.

JSW Steel
Balance Sheet ------------------- in Rs. Cr. -------------------

  Mar 20 Mar-19 Mar-18 Mar-17 Mar-16

  12 mths 12 mths 12 mths 12 mths 12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS        
Equity Share Capital 301 301 302 301 300.9
Preference Share Capital 0 231 0 0 638.78
Total Share Capital 301 532 302 301 939.68
27,605.0 23,797.0 20,109.3
Reserves and Surplus 38,061.00 34,592.00 0 0 5
27,605.0 23,797.0 20,109.3
Total Reserves and Surplus 38,061.00 34,592.00 0 0 5
27,907.0 24,098.0 21,049.0
Total Shareholders Funds 38,362.00 35,124.00 0 0 3
NON-CURRENT LIABILITIES
29,551.0 28,358.0 29,506.0
Long Term Borrowings 39,247.00 27,435.00 0 0 3
Deferred Tax Liabilities [Net] 1,315.00 3,331.00 2,071.00 1,329.00 0
Other Long Term Liabilities 7,202.00 5,113.00 702 972 136.51
Long Term Provisions 322 235 115 74 1,017.42
32,439.0 30,733.0 30,659.9
Total Non-Current Liabilities 48,086.00 36,114.00 0 0 6
CURRENT LIABILITIES
Short Term Borrowings 6,813.00 5,371.00 2,172.00 4,875.00 2,069.90
13,988.0 11,604.0 11,011.3
Trade Payables 13,354.00 13,128.00 0 0 2
Other Current Liabilities 15,363.00 17,635.00 8,934.00 9,517.00 8,611.87
Short Term Provisions 64 53 111 132 105.67
25,205.0 26,128.0 21,798.7
Total Current Liabilities 35,594.00 36,187.00 0 0 6
1,22,042.0 1,07,425.0 85,551.0 80,959.0 73,507.7
Total Capital And Liabilities 0 0 0 0 5
ASSETS
NON-CURRENT ASSETS
49,503.0 50,215.0 46,498.1
Tangible Assets 50,219.00 51,600.00 0 0 1
Intangible Assets 323 172 65 51 61.82
Capital Work-In-Progress 23,810.00 10,099.00 3,071.00 2,745.00 6,203.54
Intangible Assets Under
Development 331 344 321 282 235.78
52,960.0 53,293.0 52,999.2
Fixed Assets 74,683.00 62,215.00 0 0 5
Non-Current Investments 5,999.00 5,397.00 4,878.00 4,750.00 4,764.03
Deferred Tax Assets [Net] 0 0 0 0 479.54
Long Term Loans And Advances 8,705.00 7,675.00 5,165.00 2,771.00 241.75
Other Non-Current Assets 3,280.00 3,740.00 3,295.00 2,347.00 1,559.59
66,298.0 63,161.0 60,044.1
Total Non-Current Assets 92,667.00 79,027.00 0 0 6
CURRENT ASSETS
Current Investments 0 0 0 300 0
10,082.0
Inventories 9,623.00 10,815.00 0 9,270.00 6,741.74
Trade Receivables 3,166.00 6,770.00 4,692.00 3,948.00 2,510.71
Cash And Cash Equivalents 11,401.00 5,813.00 601 1,027.00 598.54
Short Term Loans And Advances 321 136 158 121 1,325.31
OtherCurrentAssets 4,864.00 4,864.00 3,720.00 3,132.00 2,287.29
19,253.0 17,798.0 13,463.5
Total Current Assets 29,375.00 28,398.00 0 0 9
1,22,042.0 1,07,425.0 85,551.0 80,959.0 73,507.7
Total Assets 0 0 0 0 5
OTHER ADDITIONAL INFORMATION
CONTINGENT LIABILITIES, COMMITMENTS
20,744.0 14,927.0 12,341.6
Contingent Liabilities 30,488.00 28,317.00 0 0 5
CIF VALUE OF IMPORTS        
Raw Materials 0 21,937.00 0 0 8,609.76
Stores, Spares And Loose Tools 0 1,321.00 0 0 583.43
Capital Goods 0 3,121.00 0 0 1,531.72
EXPENDITURE IN FOREIGN EXCHANGE
Expenditure In Foreign Currency 22,680.00 1,636.00 22,617.0 17,595.0 872.4
 0 0
REMITTANCES IN FOREIGN CURRENCIES FOR DIVIDENDS
Dividend Remittance In Foreign
Currency - - - - 8.64
EARNINGS IN FOREIGN EXCHANGE
10,938.0 10,149.0
FOB Value Of Goods 9,677.00 7,604.00 0 0 2,485.17
Other Earnings - - - - 212.8
BONUS DETAILS
Bonus Equity Share Capital - - - - -
NON-CURRENT INVESTMENTS
Non-Current Investments Quoted
Market Value 364 619 - - 636.2
Non-Current Investments
Unquoted Book Value 878 798 1,030.00 978 4,127.83
CURRENT INVESTMENTS
Current Investments Quoted
Market Value - - - - -
Current Investments Unquoted
Book Value - - - 300 -

Analysis

JSW Steel
Balance Sheet - Vertical Analysis
  Mar 20 Mar-19 Mar-18 Mar-17 Mar-16

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS        
Equity Share Capital to total
share capital 100.00% 56.58% 100.00% 100.00% 32.02%
Preference Share Capital to total
share capital 0.00% 43.42% 0.00% 0.00% 67.98%
Total Share Capital Total
Reserves and Surplus 0.79% 1.54% 1.09% 1.26% 4.67%
Reserves and Surplus to Total
Reserves and Surplus 99.22% 98.49% 98.92% 98.75% 95.54%
Total Reserves and Surplus 38,061.00 34,592.00 27,605.00 23,797.00 20,109.35
Total Shareholders Funds of
Total Capital And Liabilities 31.19% 32.20% 32.27% 29.39% 27.36%
NON-CURRENT LIABILITIES
Long Term Borrowings 81.62% 75.97% 91.10% 92.27% 96.24%
Deferred Tax Liabilities [Net] 2.73% 9.22% 6.38% 4.32% 0.00%
Other Long Term Liabilities 14.98% 14.16% 2.16% 3.16% 0.45%
Long Term Provisions 0.67% 0.65% 0.35% 0.24% 3.32%
Total Non-Current Liabilities
out of Total Capital And
Liabilities 39.40% 33.62% 37.92% 37.96% 41.71%
CURRENT LIABILITIES
Short Term Borrowings 19.14% 14.84% 8.62% 18.66% 9.50%
Trade Payables 37.52% 36.28% 55.50% 44.41% 50.51%
Other Current Liabilities 43.16% 48.73% 35.45% 36.42% 39.51%
Short Term Provisions 0.18% 0.15% 0.44% 0.51% 0.48%
Total Current Liabilities out
of Total Capital And
Liabilities 29.17% 33.69% 29.46% 32.27% 29.66%
Total Capital And Liabilities 1,22,042.00 1,07,425.00 85,551.00 80,959.00 73,507.75
ASSETS
NON-CURRENT ASSETS
Tangible Assets 54.19% 65.29% 74.67% 79.50% 77.44%
Intangible Assets 0.35% 0.22% 0.10% 0.08% 0.10%
Capital Work-In-Progress 25.69% 12.78% 4.63% 4.35% 10.33%
Intangible Assets Under
Development 0.36% 0.44% 0.48% 0.45% 0.39%

Fixed Assets 80.59% 78.73% 79.88% 84.38% 88.27%

Non-Current Investments 6.47% 6.83% 7.36% 7.52% 7.93%
Deferred Tax Assets [Net] 0.00% 0.00% 0.00% 0.00% 0.80%
Long Term Loans And
Advances 9.39% 9.71% 7.79% 4.39% 0.40%
Other Non-Current Assets 3.54% 4.73% 4.97% 3.72% 2.60%
Total Non-Current Assets to
total asset 0.76 79,027.00 66,298.00 63,161.00 60,044.16
CURRENT ASSETS
Current Investments 0.00% 0.00% 0.00% 1.69% 0.00%
Inventories 32.76% 38.08% 52.37% 52.08% 50.07%
Trade Receivables 10.78% 23.84% 24.37% 22.18% 18.65%
Cash And Cash Equivalents 38.81% 20.47% 3.12% 5.77% 4.45%
Short Term Loans And
Advances 1.09% 0.48% 0.82% 0.68% 9.84%
OtherCurrentAssets 16.56% 17.13% 19.32% 17.60% 16.99%
Total Current Assets to total
asset 24.07% 26.44% 22.50% 21.98% 18.32%
Total Assets 1,22,042.00 1,07,425.00 85,551.00 80,959.00 73,507.75
Trend
Analysis: -

Trend analysis involves studying changes in financial statement items for many years. It is an extension
of horizontal analysis. We first assign a value of 100 to the financial statements in a past financial year
used as the base year and then express the amounts in the following years as a percentage of the base year
value.

Comparative ratio analysis of with competitors:

India is one of the few bright spots for the world’s steel industry in what is predicted to be a lower growth
era. India has become the second-largest steel producer in the world, overtaking Japan, with a growth rate
of 4.9%. According to the short-term projections given by Worldsteel, India is also expected to become
the world number two in steel consumption by end of 2019.

What is driving the steel demand in India?

A study conducted by Worldsteel in collaboration with the Indian Steel Association notes that the
construction sector is going to be a pan-India driver of steel demand in the country. This would be driven
by strong government thrust for infrastructure development and housing for all. Government initiatives
such as ‘Smart Cities’ and ‘Affordable Housing’ as well as building of industrial corridors will boost
India’s steel demand definitively. For the country, it means enhanced connectivity, reduced logistical
costs and well-distributed development spanning all Indian states.

Further support to development of the steel industry is expected to come through the ‘Make in
India’ initiative, which aims to transform India into a global design and manufacturing hub, with sectors
along the industrial and freight corridors. To that end, a number of Indian states are expected to set up
automotive and ancillary industries to become global hubs for manufacturing export-oriented small cars

All these factors, along with favourable demographics, point to a high scope for improved
macroeconomic fundamentals and sustained growth in steel demand in the near future. In fact, steel
demand is expected to grow by 7.3% in India. Even so, in 2017, the apparent per capita steel consumption
in India for finished steel was much below the world average of 212.3 kg. This suggests that the steel
demand in India remains largely untapped as of now.

What are the challenges ahead?

In order to unleash the demand-led growth of steel industry in India, the government is pushing through
extensive reforms to strengthen infrastructure to enhance productivity. It would be intriguing to see how
effectively India implements its reform agenda and infrastructure plans to pave the way for optimal
growth and expansion of the steel industry.

In parallel with this, there are certain international trends such as the looming trade wars and economic
slowdown which are going to test the mettle of Indian steel industry. Amidst this backdrop, there have
been some concerns as the government is inching closer to signing the Regional Comprehensive
Economic Partnership (RCEP) deal which would clear the way for duty-free steel imports.

It is worth noting here that the cost of steel production in India is higher compared to other countries by
about US$40 a tonne because of creaking infrastructure, high taxes and expensive cost of capital. In
consideration of this, the Indian steel industry has urged its government to provide an export incentive of
equal value to put both the domestic and global companies on an equal footing before opening up the
steel markets for global competitors.

We have considered three competitors of JSW Steel and comparison of their key ratios are mentioned in
the tabular and graphical representation.

Jindal Steel
Key Ratios for 2020 JSW Steel Tata Steel SAIL
and Power
Current Ratio 0.81 0.42 0.45 0.68
Quick Ratio 0.84 0.29 0.4 0.58
Inventory Turnover 6.68 5.64 6.75 2.6
Net Profit Margin 8.23 11.15 2.35 3.27
 Comparative ratio analysis -
JSW Steel vs Tata Steel vs Jindal Steel and Power vs SAIL
12

10

8
Ratio Values

0
Current Ratio Quick Ratio Inventory Turnover Net Profit Margin
Key Ratios

JSW Steel Tata Steel

Jindal Steel and Power SAIL

Interpretation:

Current Ratio:- Current ratio shows the proportion of current assets of a business in relation to its current
liabilities. Current ratio expresses the extent to which the current liabilities of a business (i.e. liabilities
due to be settled within 12 months) are covered by its current assets (i.e. assets expected to be realized
within 12 months). A current ratio of 2 would mean that current assets are sufficient to cover for twice the
amount of a company's short-term liabilities.
 Comparative Current ratio analysis
0.9
0.8
0.7
0.6
0.5
Values

0.4 0.81
0.68
0.3
0.2 0.42 0.45

0.1
0
JSW Steel Tata Steel Jindal Steel and Power SAIL
Competitors

Current Ratio

Current ratio of all the companies are below 1 which implies that they don’t have sufficient funds to fund
their short-term liabilities. Amongst the lot JSW Steel has better current ratio at 0.81. The current ratio is
also sacrosanct to the investment required in the industry.

Quick Ratio - also known as Acid Test Ratio, shows the ratio of cash and other liquid resources of an
organization in comparison to its current liabilities. Quick ratio shows the extent of cash and other current
assets that are readily convertible into cash in comparison to the short-term obligations of an organization.
A quick ratio of 0.5 would suggest that a company is able to settle half of its current liabilities
instantaneously.
 Comparative quick ratio analysis
0.9
0.8
0.7
0.6
0.5
0.84
Values

0.4
0.3 0.58
0.2 0.4
0.29
0.1
0
JSW Steel Tata Steel Jindal Steel and SAIL
Power

Competitors

Quick Ratio

The above graph shows the comparative quick ratio of four competitors. JSW Steel has better quick
ratio at 0.84 amongst the lot that means against current liability of Re. 1 they have liquid asset of 0.84.
The other three companies have liquid asset of less than 0.6 against liability of Re. 1.

Inventory Turnover:-

Inventory turnover ratio or Stock turnover ratio indicates the velocity with which stock of finished goods is sold
i.e. replaced. Generally it is expressed as number of times the average stock has been "turned over" or rotate of
during the year.

Comparative inventory turn over ratio analysis

8
7
6
5
4
Values

6.68 6.75
3 5.64
2
1 2.6
0
JSW Steel Tata Steel Jindal Steel and SAIL
Power

Competitors

Inventory Turnover
 Amongst the competitors JSW steel has best inventory turnover ratio at 6.68 times followed
closely by Jindal steel and power at 6.75 times this implies that the inventory movement is fastest
for JSW Steel as compared to its peers. SAIL has the lowest inventory turnover ratio of 2.6.

Net Profit margin:-

Net Profit Margin (also known as “Profit Margin” or “Net Profit Margin Ratio”) is a ratio used to calculate
the percentage of profit a company produces from its total revenue. It measures the amount of net profit a
company obtains per dollar of revenue gained.

Comparative net profit margin ratio analysis

12

10

8
Values

6
11.15

4 8.23

2
3.27
2.35
0
JSW Steel Tata Steel Jindal Steel and Power SAIL
Competitors

Net Profit Margin

As indicated by the graph the net profit margin is highest for tata steel at 11.5% of the revenue
generated followed by JSW Steel at 8.23%. Jindal steel and power has the lowest net profit margin
amongst the lot at 2.35%. Companies with high profit margin have room to beat the competition by
decreasing the price of increasing the expenditure on advertisement etc.
Key Financial Ratios:

JSW Steel
Key Financial Ratios ------------------- in Rs. Cr. -------------------
Mar Mar Mar Mar
  '20 '19 '18 '17 Mar '16

Investment Valuation Ratios

Face Value 1 1 1 1 10
Dividend Per Share 2 4.1 3.2 2.25 7.5
Operating Profit Per Share (Rs) 52.12 77.08 57.11 48.04 263.48
Net Operating Profit Per Share (Rs) 267.57 321.38 270.03 217.6 1,518.56
Free Reserves Per Share (Rs) -- -- -- -- --
Bonus in Equity Capital -- -- -- -- --
Profitability Ratios
Operating Profit Margin(%) 19.47 23.98 21.14 22.07 17.35
Profit Before Interest And Tax
Margin(%) 13.86 19.44 16.39 16.21 9.51
Gross Profit Margin(%) 13.99 19.55 16.44 16.29 9.59
Cash Profit Margin(%) 15.59 14.87 12.13 12.56 13.98
Adjusted Cash Margin(%) 15.59 14.87 12.13 12.56 13.98
Net Profit Margin(%) 8.23 10.52 7.11 6.84 -9.61
Adjusted Net Profit Margin(%) 8.15 10.46 7.09 6.8 -9.53
Return On Capital Employed(%) 11.39 22.81 18.27 15.3 7.29
Return On Net Worth(%) 13.79 23.27 16.57 14.84 -17.29
Adjusted Return on Net Worth(%) 17.2 23.27 17.41 14.84 11.41
Return on Assets Excluding
Revaluations 159.73 145.28 115.98 100.28 844.37
Return on Assets Including
Revaluations 159.73 145.28 115.98 100.28 844.37
Return on Long Term Funds(%) 12.39 24.77 18.97 16.72 7.59
Liquidity And Solvency Ratios
Current Ratio 0.81 0.79 0.98 0.79 0.67
Quick Ratio 0.84 0.73 0.68 0.56 0.41
Debt Equity Ratio 1.2 0.95 1.14 1.38 1.58
Long Term Debt Equity Ratio 1.02 0.79 1.06 1.18 1.48
Debt Coverage Ratios
Interest Cover 2.39 4.09 3.04 2.41 1.19
Total Debt to Owners Fund 1.2 0.94 1.14 1.38 1.55
Financial Charges Coverage Ratio 3.27 4.99 3.89 3.24 2.08
Financial Charges Coverage Ratio Post
Tax 3.19 4.05 3.14 2.81 0.79
Management Efficiency Ratios

Inventory Turnover Ratio 6.68 7.14 6.57 6.14 6.06

Debtors Turnover Ratio 12.94 13.47 15.04 16.19 16.18
Investments Turnover Ratio 0.76 1.14 6.57 6.14 6.06
Fixed Assets Turnover Ratio 1.01 1.5 1.12 0.93 0.74
Total Assets Turnover Ratio 0.76 1.14 1.09 0.91 0.7
Asset Turnover Ratio 0.84 1.21 1.11 0.95 0.71
Average Raw Material Holding -- -- -- -- --
Average Finished Goods Held -- -- -- -- --
Number of Days In Working Capital -17.52 -23.4 -17.7 -36.03 -94.1
Profit & Loss Account Ratios
Material Cost Composition 56.94 56.05 61.09 60.64 57.28

Imported Composition of Raw

Materials Consumed -- -- -- -- --
Selling Distribution Cost Composition -- -- -- -- --
Expenses as Composition of Total Sales 15.05 9.85 16.83 19.4 7.35
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit 22.49 11.18 14.16 6.09 --
Dividend Payout Ratio Cash Profit 13.5 7.86 8.52 3.3 -46.89
Earning Retention Ratio 81.97 88.82 86.52 93.91 86.27
Cash Earning Retention Ratio 88.25 92.14 91.73 96.7 93.82
AdjustedCash Flow Times 4.55 2.84 4.01 5.03 6.1

Tata Steel
Key Financial Ratios ------------------- in Rs. Cr. -------------------
Mar Mar Mar Mar Mar
  '20 '19 '18 '17 '16

Investment Valuation Ratios

Face Value 10 10 10 10 10
Dividend Per Share 10 13 10 10 8
Operating Profit Per Share (Rs) 123.42 170.77 131.04 122.28 74.25
Net Operating Profit Per Share (Rs) 501.91 586.41 495.11 494.15 393.43
Free Reserves Per Share (Rs) -- -- -- -- --
Bonus in Equity Capital 22.07 22.07 22.07 26.04 26.04
Profitability Ratios
Operating Profit Margin(%) 24.59 29.12 26.46 24.74 18.87
Profit Before Interest And Tax
Margin(%) 17.98 22.95 19.95 17.21 12.53
Gross Profit Margin(%) 18.1 23.73 20.21 17.36 13.81
Cash Profit Margin(%) 20.32 19.79 18.65 15.88 19.99
Adjusted Cash Margin(%) 20.32 19.79 18.65 15.88 19.99
Net Profit Margin(%) 11.15 14.91 6.99 7.17 12.82
Adjusted Net Profit Margin(%) 11.08 14.42 6.9 7.11 11.64
Return On Capital Employed(%) 9.77 19.28 14.39 10.95 9.03
Return On Net Worth(%) 9.04 14.95 6.77 6.93 6.95
Adjusted Return on Net Worth(%) 11.32 15.11 12.25 8.35 9.19
Return on Assets Excluding
Revaluations 619.23 585.11 510.87 511.31 725.65
Return on Assets Including
Revaluations 619.23 585.11 510.87 511.31 725.65
Return on Long Term Funds(%) 10.48 19.28 14.5 11.41 9.53
Liquidity And Solvency Ratios
Current Ratio 0.42 0.55 0.64 0.55 0.52
Quick Ratio 0.29 0.26 0.34 0.28 0.32
Debt Equity Ratio 0.56 0.41 0.45 0.61 0.44
Long Term Debt Equity Ratio 0.45 0.41 0.44 0.54 0.37
Debt Coverage Ratios        
Interest Cover 3.74 6.79 4.56 3.25 6.28
Total Debt to Owners Fund 0.56 0.41 0.45 0.61 0.44
Financial Charges Coverage Ratio 5.04 8.13 5.89 4.57 7.6
Financial Charges Coverage Ratio
Post Tax 4.52 6.08 3.81 3.6 5.68
Management Efficiency Ratios
Inventory Turnover Ratio 5.64 6.27 5.49 5.2 6.03
Debtors Turnover Ratio 50.79 43.6 30.71 36.37 67.97
Investments Turnover Ratio 0.52 0.71 5.49 5.2 6.03
Fixed Assets Turnover Ratio 0.67 0.82 0.72 0.6 0.88
Total Assets Turnover Ratio 0.52 0.72 0.68 0.61 0.38
Asset Turnover Ratio 0.56 0.75 0.71 0.53 0.39
           
Average Raw Material Holding -- -- -- -- --
Average Finished Goods Held -- -- -- -- --
Number of Days In Working Capital -82.64 -86.21 -73.11 -91.51 -55.33
Profit & Loss Account Ratios
Material Cost Composition 39.02 36.38 34.94 33.6 34.32
Imported Composition of Raw
Materials Consumed -- -- -- -- 56.77
Selling Distribution Cost
Composition -- -- -- -- --
Expenses as Composition of Total
Sales 10.44 9.2 9.89 8.32 2.85
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit 22.08 10.87 29.67 30.28 15.85
Dividend Payout Ratio Cash Profit 13.96 7.99 15.66 14.93 11.36
Earning Retention Ratio 82.37 89.24 83.59 74.86 88.02
Cash Earning Retention Ratio 87.96 92.07 89.02 86.44 90.77
AdjustedCash Flow Times 3.36 2 2.44 3.93 3.68

Jindal Steel & Power

Key Financial Ratios ------------------- in Rs. Cr. -------------------

Mar Mar Mar Mar Mar
  '20 '19 '18 '17 '16
Investment Valuation Ratios        
Face Value 1 1 1 1 1
Dividend Per Share -- -- -- -- --
Operating Profit Per Share (Rs) 56.64 62.16 41.05 31.71 26.68
Net Operating Profit Per Share (Rs) 257.14 286.34 176.3 151.34 138.77
Free Reserves Per Share (Rs) -- -- -- -- --
Bonus in Equity Capital 76.04 80.14 80.14 84.77 84.78
Profitability Ratios        
Operating Profit Margin(%) 22.02 21.7 23.28 20.95 19.22
Profit Before Interest And Tax
Margin(%) 13.3 13.37 12.09 6.19 2.3
Gross Profit Margin(%) 13.3 13.38 12.09 6.19 2.3
Cash Profit Margin(%) 11.07 12.41 11.08 7.62 5.73
Adjusted Cash Margin(%) 11.07 12.41 11.08 7.62 5.73
Net Profit Margin(%) 2.35 -0.94 -2.11 -7.12 -11.17
Adjusted Net Profit Margin(%) 2.35 -0.94 -2.11 -7.11 -11.15
Return On Capital Employed(%) 8.96 9.27 4.67 1.88 0.67
Return On Net Worth(%) 2.6 -1.16 -1.58 -4.53 -6.14
Adjusted Return on Net Worth(%) 2.6 5.03 -0.07 -4.53 -6.14
Return on Assets Excluding
Revaluations 232.44 232.9 235.42 237.88 252.11
Return on Assets Including
Revaluations 232.44 232.9 235.42 237.88 252.11
Return on Long Term Funds(%) 9.76 10.67 5.54 2.27 0.8
Liquidity And Solvency Ratios
Current Ratio 0.45 0.39 0.38 0.32 0.36
Quick Ratio 0.4 0.35 0.45 0.54 0.59
Debt Equity Ratio 0.64 0.78 0.94 1.11 1.04
Long Term Debt Equity Ratio 0.51 0.55 0.63 0.75 0.71
Debt Coverage Ratios
Interest Cover 1.34 1.29 0.86 0.37 0.12
Total Debt to Owners Fund 0.64 0.78 0.94 1.11 1.04
Financial Charges Coverage Ratio 2.21 2.08 1.66 1.25 0.93
Financial Charges Coverage Ratio
Post Tax 2.11 1.71 1.65 1.45 1.28
Management Efficiency Ratios
Inventory Turnover Ratio 6.75 7.12 5.65 8.21 6.02
Debtors Turnover Ratio 28.1 32.65 21.45 17.01 11.8
Investments Turnover Ratio 0.67 0.69 0.39 8.21 6.02
Fixed Assets Turnover Ratio 0.48 0.53 0.33 0.3 0.28
Total Assets Turnover Ratio 0.68 0.69 0.39 0.3 0.27
Asset Turnover Ratio 0.66 0.66 0.38 0.3 0.3
Average Raw Material Holding -- -- -- -- --
Average Finished Goods Held -- -- -- -- --
Number of Days In Working Capital -118.19 -99.28 -151.26 -170.93 -136.77
Profit & Loss Account Ratios        
Material Cost Composition 52.26 56.09 50.54 47.02 52.21
Imported Composition of Raw
Materials Consumed -- -- -- -- --
Selling Distribution Cost
Composition -- -- -- -- --
Expenses as Composition of Total
Sales 19.88 10.44 17.13 16.89 5.18
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit -- -- -- -- --
Dividend Payout Ratio Cash Profit -- -- -- -- --
Earning Retention Ratio 100 100 100 100 100
Cash Earning Retention Ratio 100 100 100 100 100
AdjustedCash Flow Times 5.23 5.11 11.27 22.86 32.78

Steel Authority of India

Key Financial Ratios ------------------- in Rs. Cr. -------------------
Mar '20 Mar '19 Mar '18 Mar '17 Mar '16
 
Investment Valuation Ratios
Face Value 10 10 10 10 10
Dividend Per Share -- 0.5 -- -- --
Operating Profit Per Share (Rs) 24.69 23.57 11.18 0.09 -7.02
Net Operating Profit Per Share
149.28 162.13 139.35 107.62 94.54
(Rs)
Free Reserves Per Share (Rs) -- -- -- -- --
Bonus in Equity Capital -- -- -- -- --
Profitability Ratios
Operating Profit Margin(%) 16.54 14.53 8.02 0.08 -7.42
Profit Before Interest And Tax
10.28 9.4 2.67 -5.87 -13.37
Margin(%)
Gross Profit Margin(%) 10.45 9.48 2.69 -5.94 -13.57
Cash Profit Margin(%) 10.45 8.81 4.4 0.14 -4.08
Adjusted Cash Margin(%) 10.45 8.81 4.4 0.14 -4.08
Net Profit Margin(%) 3.27 3.25 -0.83 -6.37 -10.29
Adjusted Net Profit Margin(%) 3.22 3.22 -0.82 -6.29 -10.14
Return On Capital Employed(%) 8.16 8.64 2.62 -2.81 -6.51
Return On Net Worth(%) 5.08 5.71 -1.34 -7.86 -10.25
Adjusted Return on Net
7.02 6.73 -1.42 -7.26 -10.25
Worth(%)
Return on Assets Excluding
96.3 92.36 86.46 87.18 94.89
Revaluations
Return on Assets Including
96.3 92.36 86.46 87.18 94.89
Revaluations
Return on Long Term Funds(%) 9.99 9.98 3.11 -3.82 -8.3
Liquidity And Solvency Ratios
Current Ratio 0.68 0.64 0.7 0.6 0.61
Quick Ratio 0.58 0.41 0.4 0.38 0.42
Debt Equity Ratio 1.29 1.09 1.18 1.08 0.84
Long Term Debt Equity Ratio 0.87 0.81 0.83 0.53 0.45
Debt Coverage Ratios
Interest Cover 2.13 2.18 0.72 -0.83 -2.05
Total Debt to Owners Fund 1.29 1.09 1.18 1.08 0.84
Financial Charges Coverage
3.21 3.25 1.81 0.23 -1
Ratio
Financial Charges Coverage
2.66 2.76 1.92 0.94 0.3
Ratio Post Tax
Management Efficiency Ratios
Inventory Turnover Ratio 2.6 3.44 3.47 3.17 2.99
Debtors Turnover Ratio 9.27 16.01 16.95 14.66 12.33
Investments Turnover Ratio 0.68 0.84 0.74 0.59 0.54
Fixed Assets Turnover Ratio 0.56 0.67 0.61 0.54 0.51
Total Assets Turnover Ratio 0.69 0.86 0.75 0.61 0.55
Asset Turnover Ratio 0.72 0.85 0.75 0.6 0.54
           
Average Raw Material Holding -- -- -- -- --
Average Finished Goods Held -- -- -- -- --
Number of Days In Working
-2.85 -65.81 -93.95 -100.08 -88.18
Capital
Profit & Loss Account Ratios
Material Cost Composition 53.41 52.66 50.53 52.7 49.87
Imported Composition of Raw
-- -- -- -- 54.88
Materials Consumed
Selling Distribution Cost
-- -- -- -- --
Composition
Expenses as Composition of Total
5.87 4.28 3.89 -- 4.01
Sales
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit -- -- -- -- --
Dividend Payout Ratio Cash
-- -- -- -- --
Profit
Earning Retention Ratio 100 100 100 100 102.56
Cash Earning Retention Ratio 100 100 100 100 --
AdjustedCash Flow Times 7.82 6.96 16.44 613.09 --