Post on 10-Apr-2018
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ManagerialEconomics
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A PROJECT REPORT ON
SUBMITTED BY
GOMATHI THEVAR
CORE A
01092
FOR THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION
UNDER THE GUIDANCE OF
PROF. SAPNA SURI
PADMASHREE DR.D.Y.PATIL UNIVERSITY
DEPARTMENT OF BUSINESS MANAGEMENT
ACADEMIC YEAR 2010-2011
JSW STEEL LTD
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Introduction
JSW Steel, the flagship company of the JSW Group, is
the largest integrated private steel manufacturer in
India in terms of installed capacity. Jindal Steel
Limited is the most valuable private steel producer
in India, with an annual turnover of over US $2.1
billion (Rs. 10,000 crore), Jindal Steel & Power
Limited (JSPL) forms a part of the US $12 billion
(over Rs. 60,000 crore) Jindal Group. JSPL is a
leading player in Steel, Power, Mining, Oil & Gas and
Infrastructure. Mr. Naveen Jindal, the youngest son
of the legendary late Shri. O P Jindal, drives JSPL
and its group companies Jindal Power Ltd, Jindal
Petroleum Ltd., Jindal Cement Ltd. and Jindal Steel
Bolivia with a belief in the concept of self-
sufficiency. The company produces economical and
efficient steel and power through backward
integration from its own captive coal and iron-ore
mines and passes on the benefits to its customers.
However, in terms tonnage, it is the third largest
steel producer in India.
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Vision
The vision is to understand and connect with the
expectations of the stakeholders and collectively
move towards the enhancing to livelihood
opportunities, for the youth around our plant
location
Mission
To manufacture steel in an economically viable manner
and simultaneously preserving the environment and
empowering the society by utilizing the potential of
young thinking, adhering to our values, catalyzing
growth and by creating sustainable livelihoods
Company Background
JSW Steel Ltd, the flagship company of the JSW
group, is a fully integrated steel maker and is
ranked among the top 5 in India. It is the only
manufacturer in India to use corex as well as
blast furnace technology for steel production.
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The companys upstream steel-making facility is
located in Vijaynagar, Karnataka, and
downstream in Maharashtra producing products
ranging from MS slabs and hot rolled coils to
value-added products like galvanized
coils/sheets and cold rolled coils/sheets.
Jindal Steel is a part of the Jindal Group,
founded by O. P. Jindal (19302005). In 1969,
he started Pipe Unit Jindal India Limited, one
of the earlier incarnations of his business
empire. The Jindal family established Vidya
Devi Jindal School, a residential school for
girls in Hisar, India, in 1984. Although not
marketed as such, it is widely known to cater
to the wealthy through its private location and
remarkable array of activities. The school's
student body comprises girls from affluent
business and political families of India.
After Jindal's death in 2005, much of his
assets were transferred to his wife, Savitri
Jindal. Jindal Group's management was then
split among his four sons with Naveen Jindal as
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the Managing Director of Jindal Steel and Power
Limited. His elder brother, Sajjan Jindal, is
currently the head of ASSOCHAM, an influential
body of the chambers of commerce, and the head
of JSW Group, part of O.P. Jindal Group.
On June 3, 2006, Bolivia granted development
rights for one of the world's largest iron ore
reserves in the El Mutn region to Jindal
Steel. With an initial investment of US$ 1.5
billion, the company plans to invest an
additional US$ 2.1 billion over the next eight
years in the South American country. Savitri
Jindal, the widow of O. P. Jindal, is ranked as
the 19th richest Indian person according to
Forbes.
Product profile
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JSW Steel offers the entire gamut of steel
products, pellets, slabs, HR coils/ sheets, HR
plates, CR coils, Galvanized coils/ sheets,
Colour coated coils/ sheets. It is the leading
manufacturer of cold rolled, galvanized and
colour coated steel with manufacturing
facilities at Vasind & Tarapur in Maharashtra.
JSW Steel is the largest manufacturer and
exporter of galvanized steel in India with its
products exported to over 100 countries. It is
the first Indian Company, under a technology
licensing from BIEC International Inc., USA to
produce Galvalume sheets. By 2020 the company
would be producing 32 million tons of steel
annually with Greenfield integrated steel
plants coming up in West Bengal and Jharkhand.
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Financial analysis of JSW
Profit & Loss account -- in Rs. Cr. --
Mar '08 Mar '09 Mar '10
Income
Sales Turnover 12,628.91 15,179.29 19,456.64
Excise Duty 1,237.86 1,172.70 1,289.18
Net Sales 11,391.05 14,006.59 18,167.46
Other Income 309.91 -608.47 474.25
Stock Adjustments 283.56 285.22 64.74
Total Income 11,984.52 13,683.34 18,706.45
Expenditure
Raw Materials 6,560.14 9,386.47 11,415.86
Power & Fuel Cost 532.43 673.07 1,014.82
Employee Cost 273.98 288.75 365.20
Other ManufacturingExpenses
165.58 194.03 249.60
Selling and Admin
Expenses
639.26 717.74 724.63
Miscellaneous Expenses 146.99 170.58 188.53
Preoperative Exp
Capitalised0.00 0.00 0.00
Total Expenses 8,318.38 11,430.64 13,958.64
Mar '08 Mar '09 Mar '10
12 mths 12 mths 12 mths
Operating Profit 3,356.23 2,861.17 4,273.56
PBDIT 3,666.14 2,252.70 4,747.81
Interest 494.84 836.82 900.26
PBDT 3,171.30 1,415.88 3,847.55
Depreciation 687.18 827.66 1,123.41
Other Written Off 0.00 0.00 0.00
Profit Before Tax 2,484.12 588.22 2,724.14
Extra-ordinary items -33.16 176.80 96.03
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PBT (Post Extra-ord Items) 2,450.96 765.02 2,820.17
Tax 722.77 306.52 797.43
Reported Net Profit 1,728.19 458.50 2,022.74
Total Value Addition 1,758.24 2,044.17 2,542.78
Preference Dividend 29.06 28.99 28.92
Equity Dividend 261.87 18.71 177.70
Corporate Dividend Tax 49.44 8.11 34.31
Per share data (annualised)
Shares in issue (lakhs) 1,870.49 1,870.49 1,870.49
Earning Per Share (Rs) 90.84 22.96 106.59
Equity Dividend (%) 140.00 10.00 95.00
Book Value (Rs) 394.99 410.07 504.00
From the above profit and loss account of JSW steel
ltd we can say that the company is in good financial
position since last three years as there subsequent
increase in the total income of the company but at
the same time the total expenses of the company is
also subsequently increasing year after year from
last three years. This is so because there is
tremendous increase in the cost of the power and fuel
as compared to last two years, apart from these the
cost of selling and administration, employee cost,
manufacturing cost have also increased in the last
financial year. But at the sametime the net sales,
sales turnover of the company is continuously
increasing so JSW steel ltd need to worry about the
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situation since they are financially in the strong
position.
Balance Sheet ------------------- in Rs. Cr. -------------------
Mar '08 Mar '09 Mar '10
Sources of funds 12 mths 12 mths 12 mths
Total Share
Capital537.01 537.01 527.11
Equity Share
Capital248.08 248.08 248.08
Share Application
Money0.00 0.00 0.00
Preference Share
Capital288.93 288.93 279.03
Reserves 7,140.24 7,422.24 9,179.23
Revaluation
Reserves 0.00 0.00 0.00
Networth 7,677.25 7,959.25 9,706.34
Secured Loans 5,497.08 8,214.61 8,987.51
Unsecured Loans 2,049.45 3,058.02 2,597.59
Total Debt 7,546.53 11,272.6311,585.10
Total Liabilities 15,223.78 19,231.8821,291.44
Mar '08 Mar '09 Mar '10
Application of
funds
12 mths 12 mths 12 mths
Gross Block 13,952.32 16,896.7521,795.58
Less: Accum.
Depreciation2,996.83 3,810.31 4,929.44
Net Block 10,955.49 13,086.4416,866.14
Capital Work in
Progress5,612.43 9,242.06 6,684.27
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Investments 923.53 1,250.11 1,768.35
Inventories 1,549.16 2,051.42 2,585.77
Sundry Debtors 337.39 398.14 563.25
Cash and Bank
Balance205.78 207.91 117.40
Total Current
Assets2,092.33 2,657.47 3,266.42
Loans and Advances 997.26 1,980.02 2,216.05
Fixed Deposits 133.44 212.05 169.71
Total CA, Loans &
Advances3,223.03 4,849.54 5,652.18
Deffered Credit 0.00 0.00 0.00
Current
Liabilities5,054.69 9,115.34 9,415.28
Provisions 436.01 80.93 264.22
Total CL &
Provisions5,490.70 9,196.27 9,679.50
Net Current Assets -2,267.67 -4,346.73-4,027.32
Miscellaneous
Expenses0.00 0.00 0.00
Total Assets 15,223.78 19,231.8821,291.44
Contingent
Liabilities11,145.95 8,170.64 6,990.48
Book Value (Rs) 394.99 410.07 504.00
CompanyPerformance through the Recession
The unprecedented global credit crises have been
putting pressure on economic activities of all the
countries. Along with the US and Europe, where the
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recessionary signs are evident from their recent
economic data, other major countries like Japan,
China, Russia, etc are also facing the heat. The
effects on the Indian economy have also been evident
though on a relatively smaller scale. Being capital
intensive, construction projects have been worst hit
in all these countries, as banks worldwide are facing
a liquidity crunch and are reluctant to lend easily.
Since construction contributes to more than 60% of
steel usage, globally demand for steel also has been
facing a significant blow. Also, automakers worldwide
are facing falling sales due to lower disposable
income of the people and, thus, have also been
cutting down their production. This, in turn, has
proved to be another setback for the steel sector
like JSW steel ltd.
It is expected that this challenging scenario to
continue for some more time. Thus, the steel sector,
as a whole, would remain under pressure in the near
future. In this context, the real threat for the
sector might be Chinas policy. Due to their lower
cost of production, resulting from the easy
availability of coking coal and coke, the domestic
selling price is also lower compared to the prices in
other countries. In this situation, the worst problem
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for the global steel industry would be if China
starts offloading their products in these markets.
Fig: Relative Price Performance
Q2 FY09
JSW Steel witnessed a satisfactory performance in
Q2FY09 despite mounting pressure of raw material
prices and other impediments. On a consolidated
basis, the topline of the company came at Rs 4684.10
crore whereas, PAT stood at Rs 252.44 crore
On a standalone basis, the companys core EBIDTA rose
in Q2FY09 by more than 22% to Rs 1130.20 crore as
against Rs 928.46 crore in the corresponding quarter
of the previous year. The forex loss stood at Rs
264.32 crore on a consolidated basis.
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Source: JSWSteel
The kind of performance the company saw in Q2FY09 can
be attributed to the following reasons.
Steep rise in cost of production: - The blended cost
of production rose 86% YoY on a standalone basis.
Prices ofimported coke for the Vijaynagar plant saw
an unprecedented rise of 91% YoY. Iron ore prices
also surged by 62% YoY for the same plant. The effect
of higher coking coal contract prices from $98 per
tonne to more than $300 per tonnealso had its effect
felt during this quarter. Also, during this quarter,
China hiked its export duty on coke by 15% to 40%.
Since JSW imports its coke requirement from China,
this added to further cost pressure.
Depreciation in INR: - The continuation of sharp
depreciation in the INR against the USD and other
major global currencies during this quarter again
forced the company to incur a substantial though
marked to market (MTM) forex loss.
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Hurricane effect :- The pipe and plate mill
facilities in US were hit because of the damage
caused by the hurricanes. The company had to halt
production temporarily during September 08.
Demand slowdown :- The global credit crisis almost
paralysed most of the economies in recent times.This
led to a slowdown in most developed countries like
the US and Europe.The emerging markets were also not
spared. As a result of this, the whole metal sector
has been facing the problem of a significant demand
slowdown, which resulted in a sharp fall in steel
prices. A comparatively less fall in the most
important raw material i.e. coking coal/coke, on the
other hand, has beenputting pressure on margins. JSW
is also no exception and its falling margins are
testimony to that. During this quarter, inventory
rose by 15% of the total production and it expects
another 7-8% addition to that in October 08.
Q3 FY09
JSW Steel reported a very disappointing set of
numbers for Q3FY09. The company posted a net loss
for the first time since 2001-02. Net loss for the
quarter, on a consolidated basis, stood at Rs 187.83
crore (down 167% YoY and down 174% QoQ). The company
faced severe margin pressure due to higher raw
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material costs and lower sales realisations. A
significant drop in sales volume in this quarter also
affected negatively. Consolidated numbers , on a QoQ
basis, the topline showed de-growth of 29%. The
EBITDA and EBITDA margin fell sharply by 58% and 1146
bps, respectively, over the previous quarter.
Saleable steel production fell 18% YoY and 1% QoQ.
Source: JSWSteel
AWARDS AND RECOGNITION
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2010-11
JSW Energy Wins Business Leadership Award:
JSW Energy has received the NDTV Profit Business
Leadership Awards 2010 under the 'Power 'Industry
vertical Vice chairman of JSW Energy N K Jain
received the award from the Union Finance Minister
Pranab Mukherjee on September 1, 2010 at the Trident
Hotel in Mumbai.
2009-10
Greentech Environment Excellence Award 2009:
Gold award in metal and mining sector for outstanding
achievement in Environment Management (10th Oct 2009,
Kovalam).
National Award for Excellence in Energy Management
2009:
Excellent Energy Efficient Unit Award 2009 for Best
Energy Management Practices (19, 20 Nov 2009,
Chennai), by CII-Godrej Green Business Centre.
PMs Trophy 2007-08:
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Runner-Up of the best performing Integrated Steel
Plant in the country, known as Steel Ministers
Trophy (declared on 13-Nov-2009).
CII-EXIM Award 2009:
Commendation Certificate for Significant
Achievement for Business Excellence by Confederation
of Indian Industries, on 17-Dec-2009 at New Delhi.
2008-09
National Sustainability Award 2008 :
First prize for excellent performance in integrated
steel plant operations (14 November 2008, New Delhi).
CII-ITCSustainability Awards 2008:
Commendation Certificate for Significant Achievement
on the journey towards sustainable development (on 12
December 2008 at New Delhi).
National Award for Excellence in Water Management
2008:
JSW Steel was adjudged as Water Efficient Unit by
CII during National Competition for Excellence in
Water Management held on 16 and 17 December 2008 at
Hyderabad.
Golden Peacock Award for Corporate Social
Responsibility 2008 :
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JSW Steel Ltd. bagged the prestigious Golden
Peacock Award for Corporate Social Responsibility for
the year 2008' in February 2009
Greentech Safety Award 2008:
Gold award in metal and mining sector for Outstanding
Achievement in Safety Management by Greentech
Foundation (10 April 2008, Mumbai).
FUTURE OFJSW STEEL LTD
JSW Steel, one of the fastest growing steel
companies in the world is going to expand its
production capacity to 11 million mt per year
by 2011 from the current levels of 7.8 million
mt per annum and is the largest private
integrated steel manufacturer in India based on
installed capacity. The company achieved a
significant volume growth of 54 percent in
crude steel production and 74 percent in
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saleable steel during the second quarter of FY
2009-10. JSW is poised to become a major player
in the value-added segment of products in the
future. Its extra wide state-of-the-art hot
strip mill will be ready by March 2010. The
company has plans to expand its capacity to 32
million mt per annum by 2020 by setting up
greenfield projects of 10 million mt per annum
each in Jharkhand and West Bengal.
ARTICLES ON JSW STEEL LTD
JSW Steel posts 8% growth in crude steel
production
Capital Market / 14:27 , Oct 08, 2010
In H1 FY 2011
JSW Steel has reported a growth of 8% in crude steel
production in the first half of FY 2011 compared to
that of corresponding period of last fiscal year.
Crude steel production rose to 3.14 million tonnes in
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H1 FY 2011. Rolled products (flat) production rose to
2.36 million tonnes in H1 FY 2011. Rolled products
(long) production rose to 0.57 million tonnes in H1 FY
2011.
Crude steel production for Q2 FY 2011 stood at 1.57
million tonnes, flat rolled products were 1.27 million
tonnes and long rolled products were 0.26 million
tonnes.
The company has started generation of power at its 300
MW captive power plant and heating of two blocks of
coke oven-4, as part of 10 MTPA expansion project at
Vijayanagar works.
The company made this announcement during the trading
hours today, 08 October 2010.
JSW Steel shines on expansion buzz
Capital Market / 10:10 , Sep 24, 2010
JSW Steel rose 1.16% to Rs. 1269 at 10:12 IST on BSE
on reports the company in consortium with Japan-based
JFE Holdings Inc plans to set up a high-valve
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electric steel plant in India.
Meanwhile, the BSE Sensex was up 66.81 points, or
0.34% at 19,927.82. On BSE, 36,543 shares were trade
in the counter as against an average daily volume of
3.03 lakh shares in the past one quarter.
The stock hit a high of Rs. 1273 and a low of Rs. 1260
so far during the day. The stock had hit a 52-week
high of Rs. 1350.05 on 26 March 2010 and a 52-week low
of Rs. 652 on 4 November 2009.
The mid-cap stock had outperformed the market over the
past one month till 23 September 2010, rising 8.16%
compared with the Sensex's return of 7.89%. It ha
also outperformed the market in past one quarter,
gaining 17.32% as against 11.86% rise in the Sensex.
The company has an equity capital of Rs. 187.05 crore.
Face value per share is Rs. 10. As per reports, the
plant may be located in the western Indian state of
Maharashtra. Steel from the factory would be used to
make transformers, reports added.
JSW Steel's consolidated net profit rose 26.2% to Rs.
295.37 crore on 20.7% increase in net sales to Rs.
4818 crore in Q1 June 2010 over Q1 June 2009.
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