Financial Statement Analysis on JSW STEEL Ltd

ABSTRACT

This study is conducted purely based on secondary data obtained through website of the
specified private industry. By using the ratio analysis tool, we can analyse the performance of
both the steel industries in India and we can easily find out the strength and weakness of the
companies and their position in the market. Different ratios are used in this study and
particularly those which are related to the financial statement for this purpose balance sheet of
year 2020 - 2022 of both the industries are used and from then ratios are calculated so according
to which we can easily compare the company performance and tell which company grows
faster and whose position is better than the other one.

INTRODUCTION
Steel Is Crucial to The Development of Any Modern Economy and It Is Considered the
Backbone of Human Civilization. At Present, Developing Countries Lead the Growth in World
Steel Demand. Steel Occupies This Position Because Of Its Versatility, Strength and
Recyclability. Steel is an alloy of iron, carbon and other elements. Because of its high tensile
strength and low cost, it is a major component used in buildings, infrastructure, tools, ships,
automobiles, machines, appliances, and weapons.
India's economic growth is contingent upon the growth of the Indian steel industry.
Consumption of steel is taken to be an indicator of economic development. While steel
continues to have a stronghold in traditional sectors such as construction, housing and ground
transportation, special steels are increasingly used in engineering industries such as power
generation, petrochemicals and fertilizers. India occupies a central position on the global steel
map, with the establishment of new state-of-the-art steel mills, acquisition of global scale
capacities by players, continuous modernization and upgradation of older plants, improving
energy efficiency and backward integration into global raw material sources. India is
considered to be a pioneer of iron and steel making and application which started as early as
three thousand years back. After independence government of India took the control and
reserved the capacity creation only for public sector. India's crude steel production was up 4.4
per cent and stood at 93.11 million tonnes (mt) for the period April 2017 to February 2018,
compared with April 2016 to February 2017, which has helped India to overtake japan and
becomes the second largest producer of crude steel in the world.
JSW Steel is the flagship company of the JSW Group, a $13 billion-worth leading Indian
conglomerate. It is the most efficient steel producer in India and has the ability to expand
capacities at lower costs. The Company has one of the lowest conversion costs in the steel
industry and is constantly striving to further improve this metric. JSW Steel is also among the
fastest-growing companies in India and has a strong track record on project execution.

About JSW STEEL Ltd

JSW STEEL Ltd. is an Indian multinational steel making company based in Mumbai,
Maharashtra. It is a subsidiary of JSW Group. Tracked back to 1982, when Jindal Group
acquired Piramal Steel Limited, which operated a mini steel mill at Tirupur in Maharashtra and
renamed it as Jindal Iron and Steel Company (JISCO), Then on 2005 JISCO and JVSL merged
and formed as JSW Steel ltd. It is one of the fastest growing companies in India with a global
footprint in over 140 countries. After the merger of ISPAT steel. JSW Steel has become India’s
second largest private sector steel company, currently capacity of the company stands at 18
MTPA.

REVIEW OF LITERATURE

Article 1-Archit Agarwal (2016), has illuminated an article "Comparative study of the
Indian metals and mining sector" is currently facing a multitude of challenges like weak
macro environment, leveraged balance sheets and heightened regulatory risks. The sector has
suffered valuation de-rating since FY12 due to various factors like environmental and
regulatory concerns, cost increases, delayed projects and high interest rates. Financial analysis
of Tata steel and Jindal Steel analysing the above ratio it is clear that the position of Tata steels
is better in comparison to Jindal steels. In above 8 ratio which we see through graph and table
it is shown that in 6 ratio Tata steel company is performing better while the position of Jindal
steels is good but in comparison to Tata steels position was not good.

Article 2-Paghadar Amala Anil Bhai (2013), has illuminated an article “A Comparative
Analysis of Financial Performance of Sail and JSW" in Indian Journal of Applied Research
in 2013-14. He would like to make an analysis of financial performance of two selected units
of steel Industry i.e., SAIL and JSW. His study covers the five-year period of both units. In the
paper, it has been tried to analyse the profitability, liquidity and management efficiency of both
units with various financial tools and techniques. The paper has been also derived findings
from the analysis. Under the study he examines profitability position of SAIL is good as
compare to JSW. Liquidity or solvency position of SAIL is quite better in comparison to JSW.
This shows sound liquidity position of SAIL. Statistically there is each significant difference
between them as revealed by T-Test. efficiency of asset utilization of SAIL is better than JSW.
T-Test revealed that there is significant difference between them.
Article 3-Islam Uddin Khan (2011), has illuminated an article "Liquidity management
efficiency of Indian Steel Companies (a Case Study)" Liquidity management is of crucial
importance in financial management decision. The optimal of liquidity management is could
be achieve by company that manage the trade-off between profitability and liquidity
management. The paper analyses the association between the liquidity management and
profitability of 230 Indian private sector steel companies obtained from CMIE database.
Liquidity management indicators and profitability indicator over the period from 2002 to 2010
are modelled as a linear regression system in multiple correlation and regression analysis.
Evidence of petite association between those variables is found.

Article 4-Prof. Ketan Poppet (2012), has illuminated an article "A Comparative Study of
Profitability Analysis of Selected Steel Industries" The profitability ratios are calculated to
measure the operating efficiency of the business enterprise. Besides management of the
company, creditors and owners are interested in the profitability of the firm. Investor wants to
get reasonable return on their investments. This is only possible when the company is having
satisfactory profit. For this purpose, researcher would like to evaluate the profitability analysis
with reference to various ratios like, PBDT to Gross Sales, PAT to Gross Sales, PAT to Net
Sales, PAT to Shareholders fund and PAT to Total Assets to examined the financial result of
selected steel industries in India. This research gives us result of profitability with reference to
study period from 2006-07 to 2010-11. JINDAL steel shows next to Tata Steel while major
fluctuation in profitability shown in JSW and SAIL but Utama shows decrease trend in
profitability.

METHODOLOGY
This research is aim to compare the financial performance for JSW STEEL and both the
competitor TATA STEEL and JINDAL STEEL over three years period from 2020 to 2022.
This comparison will be based on Ratio Analysis and corporate valuation that includes
Profitability, Liquidity and Valuation Ratios then to compare them against a peer group. The
peers are carefully chosen to consist of firms that are mostly similar to JINDAL STEEL
Operations.
BALANCE SHEET

BALANCE SHEET OF JSW STEEL (in Rs. MAR 22 MAR 21 MAR 20

Cr.)

12 mths 12 mths 12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 301.00 302.00 301.00

TOTAL SHARE CAPITAL 301.00 302.00 301.00

Reserves and Surplus 63,200.00 46,675.00 38,061.00

TOTAL RESERVES AND SURPLUS 63,200.00 46,675.00 38,061.00

TOTAL SHAREHOLDERS FUNDS 63,501.00 46,977.00 38,362.00

NON-CURRENT LIABILITIES

Long Term Borrowings 41,176.00 39,551.00 39,247.00

Deferred Tax Liabilities [Net] 6,935.00 3,095.00 1,315.00

Other Long-Term Liabilities 3,832.00 5,816.00 7,202.00

Long Term Provisions 1,292.00 753.00 322.00

TOTAL NON-CURRENT LIABILITIES 53,235.00 49,215.00 48,086.00

CURRENT LIABILITIES

Short Term Borrowings 9,259.00 1,285.00 6,813.00

Trade Payables 24,328.00 12,150.00 13,354.00

Other Current Liabilities 12,320.00 23,362.00 15,363.00

Short Term Provisions 227.00 243.00 64.00

TOTAL CURRENT LIABILITIES 46,134.00 37,040.00 35,594.00

TOTAL CAPITAL AND LIABILITIES 162,870.00 133,232.00 122,042.00

ASSETS

NON-CURRENT ASSETS

Tangible Assets 69,767.00 50,328.00 50,219.00

Intangible Assets 1,879.00 1,614.00 323.00

Capital Work-In-Progress 12,459.00 28,914.00 23,810.00

Other Assets 0.00 0.00 0.00

FIXED ASSETS 84,245.00 80,984.00 74,683.00

Non-Current Investments 18,028.00 12,458.00 5,999.00

Deferred Tax Assets [Net] 0.00 0.00 0.00

Long Term Loans And Advances 5,763.00 5,382.00 8,705.00

Other Non-Current Assets 7,349.00 4,705.00 3,280.00

TOTAL NON-CURRENT ASSETS 115,385.00 103,529.00 92,667.00

CURRENT ASSETS

Current Investments 0.00 0.00 0.00

Inventories 21,028.00 10,692.00 9,623.00

Trade Receivables 6,146.00 3,333.00 3,166.00

Cash And Cash Equivalents 15,527.00 11,746.00 11,401.00

Short Term Loans and Advances 265.00 733.00 321.00

Other Current Assets 4,519.00 3,199.00 4,864.00

TOTAL CURRENT ASSETS 47,485.00 29,703.00 29,375.00

TOTAL ASSETS 162,870.00 133,232.00 122,042.00

OTHER ADDITIONAL INFORMATION

CONTINGENT LIABILITIES,
COMMITMENTS

Contingent Liabilities 31,640.00 51,081.00 37,064.00

Profitability ratios
The profitability ratio indicates of the business ability to generate earning
compare to the expenses accrued having a higher value than the competitor and
industry averages in an indicator that the firm is doing well.

Profitability JSW STEEL TATA STEEL JINDAL STEEL

2022 2021 2020 2022 2021 2020 2022 2021 2020

PBDIT 25.25 28.17 20.45 40.35 33.13 26.25 30.62 41.19 22.02
MARGIN
PBIT MARGIN 24.64 22.83 14.97 36.51 26.63 18.77 26.11 34.35 13.30

PBT MARGIN 20.80 17.24 6.67 34.17 22.11 10.93 22.59 27.37 3.35
NET PROFIT 14.05 11.86 8.23 25.58 20.29 11.15 16.75 21.47 2.35
MARGIN
ROE (%) 26.30 17.86 13.79 26.31 18.08 9.04 20.52 21.91 2.60

ROCE (%) 25.08 16.78 11.13 27.99 14.89 9.49 21.74 20.22 8.06
ROA (%) 10.25 6.29 4.33 14.87 9.46 4.48 11.04 10.34 1.04
TOTAL DEBT/ 0.79 0.87 1.20 0.26 0.34 0.53 0.33 0.51 0.64
EQUITY (X)
ASSET 0.80 53.08 52.65 0.64 0.51 40.18 0.69 48.18 44.54
TURNOVER
RATIO

Interpretation Looking at the basic indicator of the three company’s financial

performance EBIT (Earnings before interest tax) we can notice that TATA
STEEL is one of the leaders, with a significantly higher ratio than the JINDAL
STEEL and JSW STEEL. This indicates that the company is more profitable and
thus competitive than its peers.
LIQUIDITY RATIOS
These ratios determine the company’s financial strength and its ability to pay the
short-term debt obligations. The higher the ratios are, the bigger is the margin of
safety the company have to cover its short-term debts.

Profitability JSW STEEL TATA STEEL JINDAL STEEL

2022 2021 2020 2022 2021 2020 2022 2021 2020

CURRENT 1.03 0.80 0.83 0.58 0.97 0.65 1.12 1.33 0.74
RATIO (X)
QUICK RATIO 0.57 0.51 0.55 0.21 0.55 0.30 0.68 0.96 0.49
(X)
INVENTORY 3.24 6.61 6.68 2.15 1.76 5.64 3.27 7.25 6.75
TURNOVER
RATIO (X)
DIVIDEND 9.40 5.75 22.49 9.10 6.70 22.08 1.23 0.00 0.00
PAYOUT
RATIO (NP X)
DIVIDEND 7.40 3.96 13.50 7.81 5.08 13.96 0.97 0.00 0.00
PAYOUT
RATIO (CP X)
EARNING 90.60 94.25 77.51 90.90 93.03 77.92 98.77 0.00 0.00
RETENTIO
RATIO (%)
CASH 92.60 96.04 86.50 92.19 94.92 86.04 99.03 0.00 0.00
EARNINGS
RETENTION
RATIO (%)

Interpretation
Based on current ratio we can see that in the year 2022, JSW STEEL and JINDAL
STEEL has the leading values rather than TATA STEEL but still the three
companies doing well as their current ratio values are greater than 1 and TATA
STEEL is in less than 1
VALUATION RATIOS

This is the financial process of determining what a company is worth. Valuation

ratios put that insight into the context of the company’s share price, where they
serve as useful tools for evaluating investment potential.

Profitability JSW STEEL TATA STEEL JINDAL STEEL

2022 2021 2020 2022 2021 2020 2022 2021 2020

ENTERPRISE 255420 170380 78740 189190 127468 68929 64.165 46085 23073
VTALUE (cr.)
EV/NET 2.15 2.41 1.23 1.47 1.52 1.14 1.30 1.38 0.88
OPERATING
REVENUE (X)
EV/EBITDA 7.56 8.55 5.99 3.60 4.57 4.52 4.24 3.36 3.99
(X)
MARKET 1.86 2.00 0.69 1.24 1.16 0.51 1.09 0.32 0.32
CAP/NET
OPERATING
REVENUE (X)
RETENTION 90.59 98.24 77.50 90.89 93.29 77.91 98.76 0.00 0.00
RATIOS (%)
PRICE/BV 3.47 3.01 1.15 1.27 1.03 0.41 1.34 1.07 0.35
(X)
PRICE/NET 1.86 2.00 0.69 1.24 1.16 0.51 1.09 1.05 0.32
OPERATING
REVENUE
EARNINGS 0.08 0.06 0.12 0.21 0.18 0.22 0.15 0.20 0.07
YEILD

Interpretation
Based on we can see valuation ratio that in the year 2022, JSW STEEL and TATA
STEEL has the leading values rather than JINDAL STEEL but still the three
companies doing well.
Conclusion

Ratio analysis is a useful tool for evaluating the financial health and performance
of a company. It involves calculating and analysing various financial ratios that
provide insights into a company's liquidity, profitability, efficiency, and
solvency. The ratios typically used in ratio analysis include liquidity ratios, such
as the current ratio and quick ratio, profitability ratios, such as return on assets
and return on equity, efficiency ratios, such as inventory turnover and accounts
receivable turnover, and solvency ratios, such as debt-to-equity and interest
coverage ratio.

REFERENCES

https://www.slideshare.net/kshah19995/a-study-of-jsw-an-indian-steel-manufacturing-
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https://www.moneycontrol.com/financials/jswsteel/balance-sheetVI/JSW01
https://www.jswsteel.in/sites/default/files/assets/downloads/steel/IR/Financial%20Perfor
mance/Annual%20Reports%20Steel/20-
21/JSW%20Steel%20Annual%20Report%202021-22%20(1).pdf
https://www.jsw.in/sites/default/files/assets/downloads/steel/IR/Financial%20Performan
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