A STUDY OF FUNDAMENTAL ANALYSIS OF TATA METALIKS &
COMPARATIVE ANALYSIS WITH ITS PEERS IN THE STEEL
INDUSTRY USING ITS FINANCIAL STATEMENTS FOR THE
FINANCIAL YEAR 2018-2019
THE PROJECT SUBMITTED TO THE UNIVERSITY OF MUMBAI
IN PARTIAL FULFILLMENT OF THE REQUIREMENT
FOR THE AWARD OF DEGREE OF
MASTER OF MANAGEMENT STUDIES (MMS)
BY
Mr. RAJENDRA BABAN SHINDE
MMS-FINANCE (BATCH 2018-2020)
UNDER THE GUIDANCE OF
DR. (CA) AMEYA TANAWADE
PTVA’S INSTITUTE OF MANAGEMENT
VILE-PARLE (E), MUMBAI – 400057
INTERNSHIP PROJECT COMPLETION
CERTIFICATE
THIS IS TO CERTIFY THAT
Mr. RAJENDRA SHINDE
has worked with us in an
Equity Research Project on
"Metal Sector (TATA METALIKS LTD.)"
from 11th May - 29th June 2019.
We are satisfied with his work and wish him success in all future endeavors.
THIS CERTIFICATE IS DIGITALLY GENERATED
NO SIGNATURE REQUIRED.
UNIQUE CERTIFICATE CODE: ERP19029.
Parle Tilak Vidyalaya Association's
PTVA's Institute of Management
(Approved by AICTE, DTE and affiliated to University of Mumbai)
Tel.: 022-26100100/200 Email:
[email protected] Web: www.ptvaim.com
Ins-attarManage.neent
I Dr.(CA) AmeyaTanawade hereby certify that MR.RAJENDRA BABAN
SHINDE, MIMS Studentof Parle TilakVidyalaya Association's Institute of
Management, has completed a project titled "A STUDY OF FUNDAMENTAL
ANALYSIS OF TATA METALIKS & COMPARATIVE ANALYSIS WITH
ITS PEERS IN THE STEEL INDUSTRY USING ITS FINANCIAL
STATEMENTS FOR THE FINANCIAL YEAR 2018-2019" in the Academic
Year 2019.
The work of the student is original and the information included in the project is
true to the best of my knowledge.
ACKNOWLEDGEMENT
It is a matter of great satisfaction and pleasure to present this report on ‘A STUDY
OF FUNDAMENTAL ANALYSIS OF TATA METALIKS &
COMPARATIVE ANALYSIS WITH ITS PEERS IN THE STEEL
INDUSTRY USING ITS FINANCIAL STATEMENTS FOR THE
FINANCIAL YEAR 2018-2019”. I take this opportunity to owe my thanks to all
those involved in my training. Firstly, I would like to thank THE
MONEYROLLER for giving me this opportunity to complete my project in their
company. I am extremely grateful to my mentor and project guide, Dr. (CA)
Ameya Tanawade for his guidance, discussion and critical assessment of the
project.
It was a good learning experience for me to work at THE MONEYROLLER. I
am greatly obliged to Mr. JANAK SHAH (CO-FOUNDER OF THE
MONEYROLLER), who has shared his expertise and belief of the project. I
express my gratitude to the staff of THE MONEYROLLER, those who have
helped me directly and indirectly in completing my training & helped me from time
to time.
DECLARATION
I, Mr. Rajendra Baban Shinde MMS Student of Parle Tilak Vidyalaya
Association's Institute of Management, hereby declare that I have completed the
project titled "A STUDY OF FUNDAMENTAL ANALYSIS OF
TATA METALIKS & COMPARATIVE ANALYSIS WITH ITS
PEERS IN THE STEEL INDUSTRY USING ITS F INANCIAL
S TATEMENTS FOR THE FINANCIAL YEAR 2018-2019".
The report work is original and the information/data and the references included in
the report are true to the best of my knowledge. Due credit is extended on the work
of Literature/Secondary Survey by endorsing it in the Bibliography as per the
prescribed format.
Table of Contents
Sr.no Particulars Page
1 Executive Summary 7
2 Introduction 8
3 Industry Sector Overview 9
4 Company Profile 10
5 Literature Review 11-15
6 Objectives & Need for the study 16
7 Research Methodology, Analysis of 16-19
Data, Findings and Interpretations
8 Recommendations, Limitations & 20
Conclusions
9 Bibliography, References and 21-22
Websites
List of Tables and Figures
Sr.no Particulars Pages
1 Analysis of CAGR 17
2 Analysis of ROCE 18
3 Analysis of ROE 19
Executive Summary
The process of the research involved doing a thorough study of the
financial statements of Tata Metaliks and its peers to gain a better view
of the financial standing of Tata Metaliks in the market.
The research started with the analysis of financial statements,
management reports, ratios of Tata Metaliks and its competitors and
ended with a very clear decisive conclusion regarding the financial
position of Tata Metaliks in the market.
It can be safely concluded that researcher has objectively studied the
financial statements to arrive at a logical conclusion.
Introduction
The researcher’s final assignment in the company involved
“fundamental analysis” of financial statements of Tata Metaliks
compared to its peers in the steel industry.
The scope of the project has been largely restricted to the analysis of
financial statements of Tata Metaliks and its peers in the steel industry
for the financial year ending 2018-2019.
The purpose for undertaking the research project is to understand the
financial health of Tata Metaliks compared to its peers in the steel
industry through the use of financial statements.
The research project undertaken by the researcher is about fundamental
analysis of “Tata Metaliks” through analysis of its financial statements
and comparative analysis with the performance of its peers in the
industry.
It can be safely said in the conclusion part that the researcher attempts to
understand the financial viability of Tata Metaliks through fundamental
analysis and comparative analysis with its peers.
Industry/Sector Overview
Tata Metaliks is a part of the illustrious Indian conglomerate Tata group.
Tata Metaliks was incorporated in 1990 when the country opened its
doors to globalization. It is a subsidiary of Tata Steel,which itself is one
of the top 15 steel producing companies in the world.
Tata Metaliks has its state-of-the-art manufacturing plant at Kharagpur,
West Bengal, India which produces the finest quality of pig iron and
ductile pipes in India. The plant’s annual hot metal production capacity is
5,00,000 tonnes out of which 2,00,000 tonnes is converted into Ductile
Iron (DI) pipes and 3,00,000 tonnes into pig iron. Its turnover was Rs.
2155 Crores in 2018-2019 and 1894 Crores in the year 2017-2018.
The iron and steel industry contributes 2% to India’s GDP and its weight
in the Index of Industrial Production (IIP) is 6.2% as per a research paper
published in “International Journal of Commerce and Management
Research”. As per the latest report by World Steel, steel industry directly
provides employment to around 6 million people and around 42 million
people indirectly if take into account its key position as an ancillary
player for other industries like automotive, construction, transport, power
and machine goods.
It becomes utmost important to have a strong bird’s eye view of the
important factors like the one’s mentioned above while conducting a
research as it enhances the quality of the research.
Company Profile
Tata Metaliks mainly produces pig iron and ductile iron pipes in India.
The above picture is an illustration of pig iron. It is not directly used but mostly
used in steel making furnaces and to make ductile pipes as well. Traditionally they
were used for making wrought iron.
The above picture is an illustration of ductile iron pipes. It is made of ductile iron
and mainly used for potable water transmission and distribution
Tata Metaliks share in the pig iron market size as of 2017-2018 is 20%
and in the ductile iron market 12% as of financial year 2017-2018
Tata Metaliks is a leading player in the ductile pipe industry which
comprises of rivals like Jindal Saw, Jai Balaji Industries and others.
Literature Review
Efficiency in the Indian iron and steel industry – an
application of data envelopment analysis
Debnath Roma, Sebastian V.J. Journal of Advances in Management Research; 2014
A large number of studies have been done on various aspects of the Indian steel
industry. Some of them have traced and analysed the transition of the Indian steel
industry from the pre-independence era to the twenty-first century (Chatterjee,
2009), while others have examined the productivity aspect (Mohanan and
Varughese, 2009). There are also studies on foreign direct investment in steel
sector (Kumar and Chadha, 2009). Industry experts have also studied the issue of
paucity of suitably trained workforce as a constraint for the expansion of the Indian
steel sector. It has been pointed out that a situation might arise whereby it could
become a case of “steel plants, steel plants everywhere and no one to run them”
(Chatterjee, 2009). Romer (1990) suggested that the technological change is an
important factor to contribute output growth. Technological change happen
because of intentional actions taken by human beings who respond to market
incentives. Athreya and Kapur (1999) studied the linkage between the policy
towards foreign capital and its contribution to the Indian economy. In 1980s, the
policies of India were changed to attract foreign investment but there was only a
slight increase and most part, Indian industry came to rely on foreign debt capital
to meet its foreign exchange needs. Majumdar (1996) studied the pattern of
productivity growth of Indian industrial sector. The study concluded that the
positive impact of liberalization has an impact on productivity. The adoption of
technological and organizational innovations had a very large impact on
productivity at the firm level. Sahoo et al., (1999) used panel
data on inputs and output of 60 companies of the Indian steel industry during 1989-
1996. A single output (gross value added) and two inputs (labour and capital were
considered. They used both frontier translog production function and the DEA
models to the data and both models reached the same conclusion that, variable
returns to scale (VRS) operate in the industry. Sinha and Ghoshal (1999) discuss
the importance of service quality to maintain competitiveness in the changing
market, where, many suppliers have come into operation. The services in steel
sector could be twofold – people based and equipment based. Delivery and after
sales service are examples of people-based services whereas shaping pre-forming
of steel like cutting, shearing, etc., are examples for the latter. Sivakumar (2012)
estimated the growth of Indian steel industry over a period of 1997-1998 to 2006-
2007. The paper also focused on sales efficiency (PAT) and observed a declining
trend for the steel industries considered for the study.
Development and Potential of the Steel Industry in India
Bharti.Anusandhanika;2015
Steel is crucial to the development of any modern economy and is considered to be
the backbone of human civilization. The level of per capita consumption of steel is
treated as an important index of the level of socioeconomic development and living
standards of the people in any country. It is a product of a large and technologically
complex industry having strong forward and backward linkages in terms of
material flows and income generation. All major industrial economies are
characterized by the existence of a strong steel industry and the growth of many of
these economies has been largely shaped by the strength of their steel industries in
their initial stages of development. Steel industry was in the vanguard in the
liberalization of the industrial Sector and has made rapid strides since then. The
new Greenfield plants represent the latest in technology. Output has increased, the
industry has moved up in the value chain and exports have raised consequent to a
greater integration with the global economy. The new plants have also brought
about a greater regional dispersion easing the domestic supply position notably in
the western region. At the same time, the domestic steel industry faces new
challenges. Some of these relate to the trade barriers in developed markets and
certain structural problems of the domestic industry notably due to the high cost of
commissioning of new projects. The litmus test of the steel industry will be to
surmount these difficulties and remain globally competitive.
Why Was Indian Steel Not Exported in the Colonial Period?
—The influence of the British Standard Specification in
limiting the potential export of Indian steel in the 1930s
Nomura Chikayoshi.Modern Asian Studies; 2012
While various scholars of Indian economic history have focused on the progress of
import substitution in India after the 1920s, few have studied why this led to hardly
any export of industrial products during the colonial period. One of the most
probable reasons for the lesser popularity of this issue could be attributed to a
commonly shared view that there was less hope for the export of industrial
products in colonial India since import substitution had progressed only so far.
Although it is accepted that the industrial development of colonial India was
generally stagnant, this does not necessarily apply to specific products in specific
industries. For instance, the iron and steel industry achieved almost a full
selfsufficiency rate for some of its steel products during the 1920s, although the
industry hardly exported the products afterward. This paper aims to clarify why
hardly any steel of the Tata Iron and Steel Company (TISCO), the only steel
producing company with modern technology until the mid-1930s, was exported. A
detailed study of the company’s archives will show that the steel export of the
company was fundamentally hindered by a fact which had its origin in British
imperial policy: the strict quality specifications in the production of steel.
Analysis of Inventory Turnover Ratio of Indian Steel
Industry
Kumari Meenakshi.Anusandhanika;2015
Abstract Among the basic industries in India, steel industry plays a constructive
role in the industrial development which accelerates economic development of a
country. Prosperous development of an industry depends upon an efficient
inventory management of that industry as a whole. The paper evaluates the
inventory turnover ratio of Indian steel industry. Inventory turnover ratio is a very
important parameter to analyze the position of inventory management of a firm.
Here steel industry is concerned, so five major steel companies namely TATA
Steel, SAIL, JINDAL, Bhushan steels and JSW are considered to evaluate their
respective inventory turnover ratios and inventory holding period. Anova (one way
analysis) test are applied to test the hypothesis. In this paper we have used 10 years
inventory turnover ratios of the respective companies and try to interpret inventory
management of Indian steel industry.
Objectives & Need for the study
The objective of this research is to know the performance of Tata Metaliks in
the financial year ending 2018-2019.
The research also deals with comparative analysis of the financial statements of
Tata Metaliks with its peers in the industry for the financial year ending 2018-
2019.
Research Methodology, Analysis of
data, Findings and Interpretations
Research Methodology - The research methodology adopted for the research
project is basically “secondary research” wherein the company’s financial
statements have been relied upon extensively.
Analysis of Data
Company Sales (in cr) CAGR (2014-2019)
Tata Metaliks 2155.11 36.27
Tata Sponge 1049.78 -9.42
KIOCL ltd 1535 62.28
Jindal Steel & Power 39372.82 -18.81
SAIL 66267 -15.28
Findings and Interpretations
The above sales figures have been gathered from financial statements year
ending 2018-2019 and for the calculation of CAGR the share price of the last 5
years of all the companies have been taken into account.
Though the above sales figures indicate that Tata Metaliks is lagging behind in
terms of sales when compared to Jindal Steel & SAIL but CAGR is a better
indicator when it comes to evaluation of better investment options.
When compared in terms of CAGR, Tata Metaliks has given a return of 36.27%
whereas the CAGR of Jindal and SAIL are in negative. Clearly indicating that
Tata Metaliks is a better option. KIOCL ltd has the highest CAGR of 62.28%
clearly reflecting that sales figures are not a reliable factor for evaluation of
better investment options.
Analysis of Data
Companies Capex in Cr ROCE in %
Tata Metaliks 101.7 22
Tata Sponge 475.93 16
KIOCL ltd 843.9 3
Jindal Steel & Power 7859.12 -3
SAIL 4000 0.29
Findings and Interpretations
The above sales figures have been gathered from financial statements year
ending 2018-2019. It can be clearly understood from the above table that
though the capital expenditure of Jindal and STEEL is much higher thatn Tata
Metaliks but the returns generated on such capital assets are insignificant or in
negative when compared to Tata Metaliks which generated an ROCE of 22% in
the financial year ending 2019.
One of the prominent reasons for the capital assets not generating enough assets
could be their under-utilization or improper planning when it comes to
allocation of funds for capital assets.
Tata Sponge has also generated return of 16% which is the 2nd best after Tata
Metaliks. Tata Metaliks has certainly employed its capital better than its peers
because of which it is able to generate a return of more than 20%.
Analysis of Data
Companies ROE in %
Tata Metaliks 23
Tata Sponge 16
KIOCL ltd 3
Jindal Steel & Power -7
SAIL 5
Findings and Interpretations
The above sales figures have been gathered from financial statements year
ending 2018-2019. ROE is especially used for comparing the performance of
companies in the same industry. As with return on capital, a ROE is a measure
of management's ability to generate income from the equity available to it.
ROEs of 15-20% are generally considered good.
It can be observed from the above table that Tata Metaliks is performing much
better than its peer with an ROE of 23%. Tata Sponge has the next best ROE
but falls just short of the industry benchmark.
Jindal Steel has given negative ROE of -7% whereas SAIL has managed an
ROE of just 5% which is well below the industry benchmark of 15-20%
Recommendations & Suggestions
Though Tata Metaliks is a better investment option compared to its peers it
meets the industry benchmark by a bare margin e.g the industry expectation
for ROCE is 20-25% and Tata Metaliks manages an ROCE of 22%. Hence
Tata Metaliks needs to push for more sales so that it could improve on its
ROCE.
Limitations of the Project
The researcher has relied on past data for fundamental analysis of financial
statements for the financial year ending 2018-2019.
Conclusions
From the above findings, it can be safely concluded that Tata Metaliks is a
better investment option compared to its peers in the industry because it is
more financially sound.
Bibliography
Research Papers
Efficiency in the Indian iron and steel industry – an application of data
envelopment analysis
Debnath Roma, Sebastian V.J
Development and Potential of the Steel Industry in India
Bharti
Why Was Indian Steel Not Exported in the Colonial Period?—The influence
of the British Standard Specification in limiting the potential export of Indian
steel in the 1930s
Nomura Chikayoshi
Analysis of Inventory Turnover Ratio of Indian Steel Industry
KumariMeenakshi
Web Links
https://www.tatametaliks.com/corporate/company-profile.aspx
https://www.worldsteel.org/steel-by-topic/statistics/top-producers.html
https://www.worldsteel.org/en/dam/jcr:597ab555-3b9e-4177-bcd3-
604e4d6e5a2b/fact_Employment_2019.pdf
https://economictimes.indiatimes.com/markets/stocks/news/tata-metaliks-has-a-lot-
going-for-it-earnings-to-surge/articleshow/57016959.cms
https://www.tatametaliks.com/static-files/pdf/annual-report/annual-report-2017-
18.pdf
