FINANCIAL PERFORMANCE ANALYSIS OF TATA STEEL LTD.

Research Project Submitted in Partial Fulfillment of the Requirements for the

Degree of

BCOM Honours

by

SOUTICK ADHIKARY

to the

DEPARTMENT OF COMMERCE

DWIJENDRALAL COLLEGE

JUNE, 2025

Submitted by

SOUTICK ADHIKARY Guided by

 CERTIFICATE

It is certified that the work contained in the project report titled “Financial
performance analysis of Tata steel ltd,,” by “Soutick Adhikary” has been carried out
under my/our supervision and that this work has not been submitted elsewhere for a
degree*

Signature of Supervisor: …………….

Name:

Department: Commerce

Dwijendralal College

JUNE 2025
 DECLARATION

I hereby declare that this project report entitled “Financial performance analysis of
Tata steel ltd.“ was carried out by me for the degree of BCOM Honours under the
guidance and supervision of , Associate Professor of Department
of Commerce, Dwijendralal College. The interpretations put forth are based on my
reading and understanding of the original texts and they are not published anywhere
in any form. The other books, articles and websites, which I have made use of are
acknowledged at the respective place in the text.

Place: Krishnagar

Name of the Student: Soutick Adhikary

Class & Section: BCOM Honours

 CHAPTER-1

INTRODUCTION

1.1 Rationale of the study

Analysis of financial statement is a systematic process of critical evaluation of the financial

information given in financial statement so that these information may be understood
properly. For the purpose of analysis individual items are studied, their relationship with
other relevant figures is establish and the data are sometime re-arranged to have better
understanding of the information with the help of various tools for the purpose.

According to Berverd Needles “ Financial statement analysis comprises all the technique
employed by user of financial statement to show important relationship in the financial
statement”.

In short it is a technique of X- raying the financial position and the performance of the
enterprise.

“The analysis and interpretation of financial statement are an attempt to determine the
significance and meaning of financial statement data so that the forecast may be made of
the prospects for future earning, ability to pay interest and debts maturities and profitability
of a sound dividend policy”. – kennedy and mullar

ADVANTAGE OF FINANCIAL STATEMENT ANALYSIS

The advantages of financial statement analysis are listed below:

• The most important benefit if financial statement analysis is that it provides an idea to the
investors about deciding on investing their funds in a particular company.
• Another advantage of financial statement analysis is that regulatory authorities like IASB can
ensure the company following the required accounting standards.

• Financial statement analysis is helpful to the government agencies in analyzing the taxation
owed to the firm.

• Above all, the company is able to analyze its own performance over a specific time period.

LIMITATION OF FINANCIAL STATEMENT ANALYSIS

• Financial Statements Are Derived from Historical Costs - Transactions are initially recorded
at their cost. This is a concern when reviewing the balance sheet, where the values of assets
and liabilities may change over time. Some items, such as marketable securities, are altered
to match changes in their market values, but other items, such as fixed assets, do not change.
Thus, the balance sheet could be misleading if a large part of the amount presented is based
on historical costs.

• Financial Statements Only Cover a Specific Period of Time - A user of financial statements
can gain an incorrect view of the financial results or cash flows of a business by only looking
at one reporting period. Any one period may vary from the normal operating results of a
business, perhaps due to a sudden spike in sales or seasonality effects. It is better to view a
large number of consecutive financial statements to gain a better view of ongoing results.

• Financial Statements Could be Wrong Due to Fraud- The management team of a company
may deliberately skew the results presented. This situation can arise when there is undue
pressure to report excellent results, such as when a bonus plan calls for payouts only if the
reported sales level increases. One might suspect the presence of
this issue when the reported results spike to a level exceeding the industry norm, or well above
a company’s historical trend line of reported results.
 • Financial Statements Do Not Cover Non-Financial Issues-The financial statements do not
address non-financial issues, such as the environmental attentiveness of a company's
operations, or how well it works with the local community. A business reporting excellent
financial results might be a failure in these other areas.

• Financial Statements May Not Have Been Verified- If the financial statements have not been
audited, this means that no one has examined the accounting policies, practices, and controls
of the issuer to ensure that it has created accurate financial statements. An audit opinion that
accompanies the financial statements is evidence of such a review.

• Financial Statements Have No Predictive Value- The information in a set of financial

statements provides information about either historical results or the financial status of a
business as of a specific date. The statements do not necessarily provide any value in
predicting what will happen in the future. For example, a business could report excellent
results in one month, and no sales at all in the next month, because a contract on which it was
relying has ended.

Methods or tools or technique of financial statement analysis

Ratio analysis – Ratio analysis is a technique of analysis, comparison and interpretation of financial
statement. It is a process through which various ratio are calculated and on that basis conclusions
are drawn which become the base of managerial decision.

Ratio analysis is the comparison of line items in the financial statements of a business. Ratio
analysis is used to evaluate a number of issues with an entity, such as its liquidity, efficiency of
operations, and profitability. This type of analysis is particularly useful to analysts outside of a
business, since their primary source of information about an organization is its financial
statements.
Importance of ratio analysis

1. Financial Statement Analysis- Understanding financial statements are important for

stakeholders of the company. Ratio analysis helps in understanding the comparison of these
numbers; furthermore, it helps in estimating numbers from income statements and balance sheets
for the future. For e.g. Equity shareholder looks into the P/E ratio, the Dividend payout ratio, etc.
while creditors observe Debt to Equity ratio, Gross margin ratio, Debt to asset ratio, etc.

2. Efficiency of Company-Ratio analysis is important in understanding the company’s ability

to generate profit. Return on Asset, Returns on Equity tell us how much profit the company is able
to generate over assets of the firm and equity investments in the firm, while gross margin and
operating margin ratios tell us the company’s ability to generate profit from sales and operating
efficiency.

3. Planning and Forecasting- From a Management and investor point of view, ratio analysis
helps to understand and estimate the company’s future financials and operations. Ratios formed
from past financial statement analysis helps in estimating future financials, budgeting, and planning
for the future operations of the company.

4. Identifying Risk and Taking Corrective Actions- The company operates under various
business, market, operations related risks. Ratio analysis helps in understanding these risks and
helps management to prepare and take necessary actions. Leverage ratios help in performing
sensitivity analysis of various factors affecting the company’s profitability like sales, cost, debt.
Financial leverage ratios like Interest Coverage ratio and Debt Coverage ratio tell how much the
company is dependent on external capital sources and the company’s ability to repay debt.

5. Peers Comparison- Investor, as well as the company’s management, makes a comparison

with Competitors Company to understand efficiency, profitability and market share. Ratio analysis
is helpful for companies to perform SWOT (Strengths, Weakness, Opportunities, and Threats)
analysis in the market. It also tells whether the company is able to perform growth or not over a
period from past financials and whether the company’s financial position is improving or not.
6. Financial Solvency- The company’s ability to pay short-term debt is determined by
liquidity. Current Ratio, Acid-test ratio tells us whether a company is able to pay its short-term
obligation within a year. The company continuously runs analysis on past financial statements to
understand and prepare for payment of short-term obligations.

7. Decision Making- Ratios provide important information on the operational efficiency of the
company, and the utilization of resources by the company. It helps management to forecast and
planning for future, new goals, concentrate on the different markets, etc.

Types of Ratio

Liquidity ratios – liquidity refers to the ability of a concern to meet its current
obligations as and when they become due. Liquidity ratios measures the short term
solvency of a business and for this purpose following ratio can be computed:

a) Current ratio = current ratio is a most widely used ratio to judge short term financial
position or solvency of a firm. It can be defined as relationship between current
assets and current liabilities. Current ratio of 2:1 is considered as satisfactory.

Current Ratio= current assets / current liabilities

b) Liquid Ratio = it is also called as Quick ratio or Acid test ratio, measures the ability
of business to pay its short term liabilities by having assets that are readily converted
into cash. These assets are namely cash, marketable securities and account
receivables.

Liquid Ratio= current asset–inventory–prepaid expenses /current liabilities

c) Absolute liquid Ratio = This ratio is also known as super quick ratio and establishes
relationship between absolute liquid assets and liquid liabilities. The ideal level of
absolute liquid ratio is 0.5:1.

Absolute liquid ratio= cash and bank balance/current liabilities

d) Cash ratio = the cash ratio is a measures of the liquidity of a firm, namely the ratio
of the total assets and cash equivalents.

Cash ratio= cash and bank balance / current assets

Solvency Ratio

Solvency ratio - this ratio examines whether the total realizable amount from all
assets of a firm is enough to pay all of its external liability or not. In this context this
ratio shows the relationship between total assets and external liabilities of the firm.

Solvency means ability of a firm to pay its liability on due date. Solvency is tested
on the basis of the ability of the concern to pay its long term liability at due time.

The ratios to be used for this purpose are called as ‘ ratio of financial position’ or
stability ratio. The main ratio of this category are as follows;

a) Debt equity Ratio- this ratio reflects the long term financial position of a firm
and is calculated in the form of relationship between external equities or
outsider’s funds and internal equities or shareholders fund. Debt equity ratio
may also be called as ‘ratio long term debt to shareholders funs’.

Debt Equity Ratio= long term debts/ shareholder funds

Or debt/equity
 b) Proprietary ratio- This ratio indicates the relationship between proprietors fund
and total assets. Greater is the proprietor funds better is the position of the
creditor.

Proprietary ratio=proprietary funds or shareholders funds/Total assets

 Profitability ratio - Profitability ratio is used to evaluate the company’s ability to generate
income as compared to its expenses and other cost associated with the generation of income
during a particular period. This ratio represents the final result of the company.

The main category of this ratio are:

a) Gross profit ratio- This ratio measures the marginal profit of the company. This ratio is
also used to measure the segment revenue. A high ratio represents the greater profit margin
and it’s good for the company.

Gross profit ratio = Gross Profit /Sales × 100

Gross Profit= Sales + Closing Stock – opening stock – Purchases – Direct Expenses

b) Net profit ratio - This ratio measures the overall profitability of company considering
all direct as well as indirect cost. A high ratio represents a positive return in the company
and better the company is.

Net profit ratio = Net Profit / Sales × 100

Net Profit = Gross Profit + Indirect Income – Indirect Expenses

c) Return on equity - This ratio measures Profitability of equity fund invested the company.
It also measures how profitably owner’s funds have been utilized to generate company’s
revenues. A high ratio represents better the company is.
 Return on equity =Profit after Tax/ Net worth x 100
Where, Net worth = Equity share capital, and Reserve and Surplus

d) Return on capital employed- Return on capital employed (ROCE) is a financial ratio

that can be used in assessing a company's profitability and capital efficiency. In other words,
this ratio can help to understand how well a company is generating profits from its capital
as it is put to use.

Return on capital employed (ROCE) = net profit before interest and tax / capital employed x
100

e) Operating profit ratio - Operating profit ratio establishes a relationship between

operating Profit earned and net revenue generated from operations (net sales). Operating
profit ratio is a type of profitability ratio which is expressed as a percentage.

Operating profit ratio = operating profit / net sales x 100

1.2 INTRODUCTION TO THE INDUSTRY

INTRODUCTION OF STEEL INDUSTY IN INDIA

India was the world’s second-largest steel producer with production standing at 111.2 million tons
(MT) in 2024. The growth in the Indian steel sector has been driven by domestic availability of raw
materials such as iron ore and cost-effective labor. Consequently, the steel sector has been a major
contributor to India’s manufacturing output.

The Indian steel industry is modern with state-of-the-art steel mills. It has always strived for
continuous modernisation of older plants and up-gradation to higher energy efficiency levels.
Indian steel industry is classified into three categories - major producers, main producers and
secondary producers.
Market Size

India’s finished steel consumption grew at a CAGR of 5.2% during FY16-FY20 to reach 100 MT.
India’s crude steel and finished steel production increased to 108.5 MT and 101.03 MT in FY20P,
respectively.

Between April 2020 and November 2020, India’s cumulative production of crude steel was
62.01 MT and finished steel was 55.68 MT.
Export and import of finished steel stood at 8.24 MT and 6.69 MT, respectively, in FY20P. Export
and import of finished steel stood at 7.70 MT and 2.70 MT, respectively, between April 2020 and
November 2020.

INVESTMENT
Steel industry and its associated mining and metallurgy sectors have seen major investments and
developments in the recent past.

According to the data released by Department for Promotion of Industry and Internal Trade
(DPIIT), the Indian metallurgical industries attracted Foreign Direct Investment (FDI) to the tune
of US$ 14.24 billion in the period April 2000-September 2020.

Some of the major investments in the Indian steel industry are as follows:

• In a move towards becoming self-reliant, Indian steel companies have started boosting steel
production capacity. To this end, SAIL announced doubling of its at 5 of its steel plants
capacity in September 2020.

• In March 2020, Arcelor Mittal Nippon Steel India (AM/NS) acquired Bhander Power plant
in Hazira, Gujarat from Edelweiss Asset Reconstruction Company.

• In February 2020, GFG Alliance acquired Adhunik Metaliks and its arm Zion Steel for Rs.
425 crore (US$ 60.81 million), marking its entry into the Indian steel market.

• For FY20, JSW Steel set a target of supplying around 1.5 lakhs tons of TMT Rebars to
metro rail projects across the country.
 • In December 2019, Arcelor Mittal completed the acquisition of Essar Steel at Rs. 42,000
cr(US$ 6.01 billion) and formed a joint venture with Nippon Steel Corporation.
• JSW Steel has planned a US$ 4.14 billion capital expenditure programme to increase its
overall steel output capacity from 18 million tons to 23 million tons by 2020.

• Ministry of Steel plans to invest US$ 70 million in the eastern region of the country through
accelerated development of the sector.

• The production capacity of SAIL is expected to increase from 13 MTPA to 50 MTPA in

2025 with total investment of US$ 24.88 billion.

• Tata Steel has decided to increase the capacity of its Kalinganagar integrated steel plant
from 3 million tons to 8 million tons at an investment of US$ 3.64 billion.

Government Initiatives
Some of the other recent Government initiatives in this sector are as follows:

• In December 2020, the Minister for Petroleum & Natural Gas and Steel, Mr. Dharmendra
Pradhan, has appealed to the scientific community to Innovate for India (I4I) and create
competitive advantages to make India ‘Aatmanirbhar’.

• In September 2020, the Ministry of Steel prepared a draft framework policy for development
of steel clusters in the country.

• On October 1, 2020, Directorate General of Foreign Trade (DGFT) announced that steel
manufacturers in the country can avail duty drawback benefits on steel supplied through
their service centres, distributors, dealers and stock yards.

• Government introduced Steel Scrap Recycling Policy to reduce import.

• An export duty of 30% has been levied on iron ore^ (lumps and fines) to ensure supply to
domestic steel industry.

• Government of India’s focus on infrastructure and restarting road projects is aiding the
demand for steel. Also, further likely acceleration in rural economy and infrastructure is
expected to lead to growth in demand for steel.
 • The Union Cabinet, Government of India approved the National Steel Policy (NSP) 2017,
as it intend to create a globally competitive steel industry in India. NSP 2017 envisage 300
million tonnes (MT) steel-making capacity and 160 kgs per capita steel consumption by
2030-31.
• The Ministry of Steel is facilitating setting up of an industry driven Steel Research and
Technology Mission of India (SRTMI) in association with the public and private sector steel
companies to spearhead research and development activities in the iron and steel industry
at an initial corpus of Rs. 200 crore (US$ 30 million).

• The Government of India raised import duty on most steel items twice, each time by 2.5%
and imposed measures including anti-dumping and safeguard duties on iron and steel items.

Road ahead

The National Steel Policy, 2017 envisage 300 million tons of production capacity by 2030-31. The
per capita consumption of steel has increased from 57.6 kg to 74.1 kg during the last five years.
The government has a fixed objective of increasing rural consumption of steel from the current
19.6 kg/per capita to 38 kg/per capita by 2030-31.

As per Indian Steel Association (ISA), steel demand will grow by 7.2% in 2019-20 and 2020-21.
Huge scope for growth is offered by India’s comparatively low per capita steel consumption and
the expected rise in consumption due to increased infrastructure construction and the thriving
automobile and railways sectors.
 1.3 INTRODUCTION TO THE COMPANY

COMPANY PROFILE

Tata Steel Limited is an Indian multinational steel-making company based in Jamshedpur,

Jharkhand and is headquartered in Mumbai, Maharashtra, India. It is a subsidiary of the Tata Group.

Formerly known as Tata Iron and Steel Company Limited (TISCO), Tata Steel is among the top
steel producing companies in the world with an annual crude steel capacity of 34 million tons per
annum. It is one of the world's most geographically-diversified steel producers, with operations and
commercial presence across the world. The group (excluding SEA operations) recorded a
consolidated turnover of US$19.7 billion in the financial year ending 31 March 2020. It is the
second largest steel company in India (measured by domestic production) with an annual capacity
of 13 million tons after SAIL.

Tata Steel operates in 26 countries with key operations in India, Netherlands and United Kingdom,
and employs around 80,500 people. Its largest plant (10 MTPA capacity) is located in Jamshedpur,
Jharkhand. In 2007, Tata Steel acquired the UK-based steel maker Corus. It was ranked 486th in
the 2014 Fortune Global 500 ranking of the world's biggest corporations. It was the seventh most
valuable Indian brand of 2013 according to Brand Finance.

In July 2019 Tata Steel Kalinganagar (TSK) was included in the list of the World Economic
Forum's (WEF's) Global Lighthouse Network, showing leadership in applying Fourth Industrial
Revolution technologies to drive financial and operational impact.

Tata Steel is headquartered in Mumbai, Maharashtra, India and has its marketing headquarters at
the Tata Centre in Kolkata, West Bengal. It has a presence in around 50 countries with
manufacturing operations in 26 countries including: India, Malaysia, Vietnam, Thailand, UAE,
Ivory Coast, Mozambique, South Africa, Australia, United Kingdom, The Netherlands, France and
Canada.
Tata Steel primarily serves customers in the automotive, construction, consumer goods,
engineering, packaging, lifting and excavating, energy and power, aerospace, shipbuilding, rail and
defence and security sectors.

Tata Iron and Steel Company (TISCO) was founded by Jamsetji Tata and established by Dorabji
Tata on 26 August 1907. TISCO started pig iron production in 1911 and began producing steel in
1912 as a branch of Jamsetji's Tata Group. The first steel ingot was manufactured on 16 February
1912. During the First World War (1914-1918), the company made rapid progress. By 1939, it
operated the largest steel plant in the British Empire. The company launched a major modernization
and expansion program in 1951. Later, in 1958, the program was upgraded to 2 million metric
tonnes per annum (MTPA) project. By 1970, the company employed around 40,000 people at
Jamshedpur, and a further 20,000 in the neighbouring coal mines. In 1971 and 1979, there were
unsuccessful attempts to nationalise the company. In 1990, the company began to expand, and
established its subsidiary, Tata Inc., in New York. The company changed its name from TISCO to
Tata Steel Ltd. in 2005.

Tata Steel on Thursday, 12 February 2015 announced buying three strip product services centres in
Sweden, Finland and Norway from SSAB to strengthen its offering in Nordic region. The company,
however, did not disclose the value of the transactions.

In September 2017, ThyssenKrupp of Germany and Tata Steel announced

plans to combine their European steel-making businesses. The deal will
structure the European assets as Thyssenkrupp Tata Steel, an equal joint
venture. The announcement estimated that the company would be Europe's
second-largest steelmaker, and listed future headquarters in Amsterdam.
HERITAGE

Jamsetji Nusserwanji Tata (1839 – 1904)

The foundation of what would grow to become the Tata

group was laid in 1868 by

Jamsetji Nusserwanji Tata – then a 29-year-old who

had learned the ropes of business while working in his
father’s banking firm

– when he established a trading company in Bombay.

A visionary entrepreneur, an avowednationalist

and a committed philanthropist, Jamsetji Tata
helped pave the path to industrialization in India
by seeding pioneering businesses in sectors such
as steel, energy, textiles and hospitality.

Ratan Tata (1937-2024)

The beginning of the 1990s ushered in plenty of change in Indian business.

Economic reforms opened up many sectors, signalling increased competition
and the arrival of foreign companies. JRD Tata’s death, in 1993, symbolised
the end of an era in more ways than one.

Ratan Tata, who took over as chairman in 1991, guided the Tata group in a
fast-changing business environment where old rules did not apply and new
realities were taking hold. Mr Tata retired as Chairman of Tata Sons on December 28, 2012.
Natarajan Chandrasekaran (1963)

Natarajan Chandrasekaran is Chairman of the board of Tata

Sons, the holding company and promoter of more than 100
Tata operating companies with aggregate annual revenues of
more than US $100 billion. He joined the board of Tata Sons
in October 2016 and was appointed Chairman in January
2017.

Chandra also chairs the boards of several group operating

companies, including Tata Steel, Tata Motors, Tata Power,
Indian Hotels and Tata Consultancy Services (TCS) — of which he was chief executive from
2009-17.

His appointment as chairman followed a 30-year

business career at TCS, which he joined from
university. Chandra rose through the ranks at TCS
to become CEO and managing director of the
leading global IT solutions and consulting firm.

Mission Statement: Consistent with the vision and values of the

founder Jamsetji Tata, Tata Steel strives to strengthen India’s industrial base through
effective utilization of staff and materials. The means envisaged to achieve this are
best technology and high productivity, consistent with modern management
practices. Tata Steel recognizes that while honesty and integrity are essential
ingredients of a strong and stable enterprise, profitability provides the main spark for
economic activity.

Overall, the Company seeks to scale the heights of excellence in all it does in an
atmosphere free from fear, and thereby reaffirms its faith in democratic values.
 1.4 JUSTIFICATION OF THE TOPIC

This research project is about the study of financial performance of Tata steel ltd. The project is
done for the practical knowledge and academic compulsion purpose. For the study I have taken the
five year (2016-2020) financial data of Tata steel ltd. I have use different type of ratios to evaluate
and analyze the financial performance of Tata steel ltd.
 CHAPTER - 2

REVIEW OF LITRATURE

The literature review is a written overview of major writings and other sources on selected topic.
Sources covered in the review may include scholarly journals, articles, books, government reports,
web sites etc.

2.1 International Reviews

DeVancy (1993) conducted a study to measure the changes of status in the families of United States
of America by using financial ratios selected from different categories for a period of four years
ranging from 1983 to 1986. This study used the financial ratios as indicators of progress to answer
the question whether the households were able to improve their financial status during the study
period.

Gallizo and Salvador (2003) also carried out a study on financial ratios of U.S manufacturing firms
for a period of eight years since 1993 to 2000 to understand the behavior and adjustment process
of the same. A proper balance between sales and assets generally specify that the assets are managed
and utilized well towards the sales generation. The main aim of the company is to maximize its
profit and profitability ratios helps to measure overall performance and efficiency of the firm.

Peeler J. Patsula (2006), he define that a sound business analysis tells others a lot about good
sense and understanding of the difficulties that a company will face. We have to make sure
that people know exactly how we arrived to the final financial positions. We have to show the
calculation but we have to avoid anything that is too mathematical. A business performance
analysis indicates the further growth and the expansion. It gives a physiological advantage to
the employees and also a planning advantage.
Susan Ward (2008), emphasis that financial analysis using ratios between key values help
investors cope with the massive amount of numbers in company financial statements. For
example, they can compute the percentage of net profit a company is generating on the funds
it has deployed. All other things remaining the same, a company that earns a higher
percentage of profit compared to other companies is a better investment option.

Ahmed and Ahmed (2014) conducted a study to analyze the effect of mergers upon financial
performance of manufacturing industries in Pakistan. Twelve manufacturing companies were
selected for the study which had involved in the process of merger during 2000-2009. Three years
data before merger and three years data after merger were used to test the significance of study.
Paired sample t-test was applied on accounting ratios. The study revealed that overall financial
performance of acquiring manufacturing corporations were insignificantly improved after the
merger. The liquidity, profitability and capital position of the selected companies were
insignificantly improved and the efficiency deteriorated after the merger. Finally, it was concluded
that merger impacted on different industries of manufacturing sector differently.

2.2 National Reviews

Rooh Ollah Arab, Seyed Saadat Masoumi and Azadeh Barati (2015) examined the financial
performance of identified units in the steel industry in India in terms of financial ratios such as
Liquidity, Solvency, Activity and Profitability position. For this study , Tata Steel Ltd., Jindal Steel
& Power Ltd., J S W Steel Ltd., Bhushan Steel Ltd. and Steel Authority of India Ltd. are selected
for this study. The study evaluated the impact of selected variables on the financial performance of
identified units in the steel industry, ANOVA-Test analysis is used.
Ramaratnam and Jayaraman (2010) used financial ratios in terms of liquidity, profitability,
variability and sustainability to measure the financial performance of Indian steel industry for a
period of five years from 2005 to 2010. Their study reveals that the critical situation faced by the
Indian steel industry is due to over capacity and demand slowdown resulting in price cuts.

A study has been conducted by Pal (2011) on the Indian steel companies for a period of ten years
range between 2000-01 and 2009-10 to measure the profitability of the selected companies which
is of major importance to the internal and external stakeholders to determine the earning capacity
together with the credibility of the companies to sustain in the competition for a long run.

Tiwari (2013) examined working capital management efficiency in Indian cement industry. They
found that though some of the sample firms had successfully improved efficiency during these
years, the existence of a very high degree of inconsistency in this matter clearly pointed out the
need for adopting sound working capital management policies by these firms. It was suggested that
the firms under study should have taken necessary steps in order to improve their efficiency.

Acharya (2013) compared the liquidity position of TATA Steel Ltd. and SAIL and studied the
relationship that exists between liquidity and profitability of both the companies. The purpose of
the study was to investigate the liquidity management efficiency and profitability position of
selected steel companies. Therefore, an attempt was made to investigate the liquidity position and
its impact on the profitability of Tata Steel Ltd. and Steel Authority of India Ltd for a period of ten
years ranging from 2004 to 2013. Various accounting ratios were analyzed with the help of
statistical techniques, such as multiple correlations, multiple regression analysis and t-test. Through
the analysis of the data, it was found that liquidity position had positive impact on the profitability
of the selected firms.

Comparing profit earning capacity of selected Steel companies in India, Popat (2012) analyzed
profitability ratios of selected companies in Indian steel industry. Findings of that study indicated
that TATA steel’s profitability was better than other selected companies while JINDAL steel’s
profitability was next to TATA steel. It was also found that JSW and SAIL showed fluctuation in
their profitability while UTTAM had a decreasing trend in the profitability during the period of
study.

Prakash and Natarajan (2014) conducted a study on financial performance of Salem Steel Authority
of India Ltd. The analysis revealed that there is a fluxion in the gross profit and net profit during
the study period. The study helps to identify the financial position of the company. Optimum
utilization of working capital can be planned so as to result in sound financial position of the
company.

Dr.C.Balakrishnan (2016) observed that financial performance of any organization is influenced by

several factors like capital structure, cost, revenue and the consequential profit margin. The study
can be analyzed with many aspects like financial facts, financial ratios, financial health, financial
strength and utilization of assets, etc. The study revealed that financial performance can be
influenced by the operational and financial efficiency of the steel industry, which are related to cost
and the revenue aspects. The study analyzed the performance of steel industry in India on the
parameters such as profitability, utilization of assets, growth of performance, financial strength and
capital structure. The study also attempted to identify the nature of relationship between the various
aspects of financial performance.

Dalvadi & Tagariaya (2019), studied shareholders returns of selected Infrastructure companies in
India during the period from 2013-14 to 2017- 18 through ratio analysis. The statistical tools used
for analysis are mean, standard deviation, one way Anova test etc. They found that there is no
significant difference in the performance of the selected Infrastructure companies in India in terms
of shareholders return and financial performance during the study period. They also stated that the
performance of DLF limited, Reliance Infrastructure limited and L & T limited have better
compared to IRB Infrastructure Developers Limited and Nagarjuna Construction Company limited.
 CHAPTER 3

RESEARCH METHODOLOGY

3.1 OBJECTIVES OF THE STUDY

• To know the financial position of Tata steel.

• To bring out the results of financial strength and weakness of industry through Ratio
analysis.

• To know the correct picture of financial operation of the industry in terms of liquidity and
solvency.

3.2 RESEARCH HYPOTHESIS

A research hypothesis is a statement of expectation or prediction that will be tested by research.

• Null Hypothesis- The Financial performance of Tata steel is satisfactory.

• Alternative hypothesis- The Financial performance of Tata steel is dissatisfactory.

3.3 SCOPE OF THE STUDY

• The scope of the study is limited to collecting financial data published in the annual reports
of the company every year.
 • The ratio analysis is done to suggest the possible solutions. The study is carried out for 5
years data of Tata steel ( 2015-16 to 2019-20).

• This study is confined to Tata steel only.

3.4 RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem .It may be understood
as a science of studying how research is done scientifically . So the research methodology not only
talks about the research methods but also consider the logic behind the method used in context of
the research study.

Research design

Descriptive research used in this study because it will ensure the minimization of bias and
maximization of reliability of data collected . The researcher had to use fact and information
already available through financial statements of earlier years and analyse these to make critical
evaluation of available material. Hence by making the type of research conducted to be both
Descriptive and Analytical in nature.

Data collection

a) Primary data

Primary data is data originated for the first time by the researcher through direct efforts and experience,
specifically for the purpose of addressing his research problem. Also known as the first hand or raw
data. The data can be collected through various methods like surveys, observations, physical testing,
mailed questionnaires personal interviews, telephone interviews, case studies etc.
 b) Secondary data

Secondary data implies second hand information which is already collected and recorded by any
person other than a user for a purpose, not relating to the current research problem. It is the readily
available form of data collected from various sources like censuses, government publication,
internal records of the organizations , reports books ,journal articles, websites and so on.

Sources of data

The required data for the study are basically secondary in nature and the data are collected from the
audited reports of the company. The sources of data are from the annual reports of the company
from the year 2015-2016 to 2019-2020.

Methods of data analysis

The data collected were classified and tabulated for analysis. The analytical tool used in this study.

The study employs the following analytical tools:

• Graph

• Ratio analysis

3.5 LIMITATION OF THE STUDY

The study is based on secondary data, obtained from the publish report and as its finding depends
entirely on the accuracy of such data.
 CHAPTER- 4

4.1 Data representation and interpretation

Liquid ratios
1. current ratio = current asset/current liabilities
(Rs crore)

Year Current assets Current liabilities Current ratio

2016 14421.49 21087.99 0.68
2017 20110.40 23056.33 0.87
2018 34643.91 25607.34 1.35
2019 17035.58 25593.65 0.67
2020 20009.19 30871.30 0.65

Current ratio
1.6
1.4
1.2
1
0.8
Current ratio
0.6
0.4
0.2
0
2016 2017 2018 2019 2020

Current ratio compares current assets with current liabilities and tell us whether the current assets
are enough to settle current liabilities. It is inferred from the table that the higher current ratio of
Tata steel is 1.35 in the year 2018 and the lower was 0.65 in the year 2020. The ratio of 1.2 to 2
or above is usually considered safe. Tata steel is in poor condition to pay back its debts. Hence the
current ratio of Tata steel is dissatisfactory.

LIQUID RATIO
Liquid ratio= current assets- inventory- prepaid expenses/current liabilities

(Rs crore)

Year Liquid assets Current Liquid ratio

liabilities
2016 7337.68 21087.99 0.35
2017 9873.55 23056.33 0.43
2018 23620.5 25607.34 0.92
2019 5780.24 25593.65 0.23
2020 9292.53 30871.30 0.30

Liquid ratio
1
0.9
0.8
0.7
0.6
0.5
Liquid ratio
0.4
0.3
0.2
0.1
0
2016 2017 2018 2019 2020
Ratio of 1.1 is said to be the ideal quick ratio. Indicating that company has in its possession enough
assets which may be immediately liquidated for paying off the current liabilities. The table shows
that the highest liquid ratio of Tata steel is 0.92 in the year 2018 that is not more than the ideal ratio.
Hence the liquid ratio of the company is dissatisfactory.
LONG TERM FINANCIAL POSITION RATIO OR SOLVENCY RATIO

DEBT EQUITY RATIO

Debt equity ratio = long term borrowing (Debt) / shareholder funds

( Rs crore)

Year debt Shareholders Debt equity

fund ratio
2016 29368.44 70476.72 0.41
2017 36475.07 49659.00 0.73
2018 35717.16 61514.82 0.58
2019 39175.00 70454.71 0.55
2020 42683.14 74563.12 0.57

Debt equity ratio

0.8
0.7
0.6
0.5
0.4
Debt equity ratio
0.3
0.2
0.1
0
2016 2017 2018 2019 2020
The debt equity ratio is a financial ratio indicating the relative proportion of shareholders equity
and debt used to finance a company assets. Debt to equity ratio greater than 1 indicate the company
may be overleveraged. In all the years debt equity ratio of a company is less than 1.

Hence the company is good in maintaining its debt position.

PROPRIETARY RATI0

Proprietary ratio = shareholder funds / total assets

(Rs crore)
year Shareholders Total assets Proprietary
fund ratio
2016 70476.72 123208.15 0.57
2017 49659.00 111465.41 0.44
2018 61514.82 125114.34 0.49
2019 70454.71 137498.36 0.51
2020 74563.12 150392.56 0.49

Proprietary ratio
0.6

0.5

0.4

0.3
Proprietary ratio
0.2

0.1

0
2016 2017 2018 2019 2020
The high proprietary ratio indicates that a company has a sufficient amount of equity to support the
function of business. The ideal value of the proprietary ratio is depend on the risk appetite of the
investors . If investor agree to take large amount of risk than a lower proprietary ratio is preferred.
It is inferred from the table that the proprietary ratio of Tata steel is higher in the year 2016 (0.57)
and lower in the year 2017 (0.44). Hence proprietary ratio of the company is satisfactory.

RETURN ON EQUITY
Return on equity = net profit after tax and preference dividend/ (share capital+ reserve and surplus)
X 100

(Rs crore)

Year Net profit after Share capital + Return on

tax and reserve and equity
preference surplus
dividend
2016 4900.95 70476.72 6.95
2017 3444.55 49659.00 6.93
2018 4169.55 61514.82 6.77
2019 10533.19 70454.71 14.95
2020 6743.80 74563.12 9.04
 Return on equity
16
14
12
10
8
Return on equity
6
4
2
0
2016 2017 2018 2019 2020

The return on equity signifies how good the company is in generating returns on the investment it
received from his shareholders. It is inferred from the table that the return on equity of Tata steel
is higher in the year 2019 (14.95%) and the lower in 2018 that was (6.77%).
Return on capital employed

Return on capital employed= net profit before interest and tax / capital employed X 100

Capital employed= total assets – current liabilities

(Rs crore)

Year Net profit Capital Return on

before interest employed capital
and tax employed
2016 11102.45 102120.16 10.87
2017 12290.41 88409.08 13.90
2018 16542.62 99507 16.62
2019 22968.02 111904.71 20.52
 2020 15265.69 119521.26 12.77

Return on capital employed

25

20

15
Return on capital
10 employed

0
2016 2017 2018 2019 2020

Return on capital employed measures the efficiency with which investment made by the
shareholders. It is inferred from the table that the return on capital employed is higher in the year
2019 (20.52%) and lower in the year 2016 (10.87%).
PROFITABILITY RATIOS

GROSS PROFIT RATIO

Gross profit ratio = (gross profit/net sales) x 100

(Rs crore)
year Gross profit Net sales Gross profit ratio
2016 6154.90 37814.69 16.27

2017 9601.86 47296.99 20.30

2018 13732.00 58550.68 23.45

2019 20144.44 68923.15 29.22

2020 12234.68 58815.57 20.80

 Gross profit ratio
35

30

25

20

15 Gross profit ratio

10

0
2016 2017 2018 2019 2020

Gross profit ratio measures the relationship of gross profit and net sales. Higher ratio is better. The
higher ratio indicates an increase in the selling price of the goods sold without any corresponding
increase in the cost of goods sold.

For the last 4 year, the gross profit ratio of Tata steel has been grown upwards consistently but in
the year 2020 it decreases. Overall It indicate that the gross profit ratio is increased over a period
of time. It shows the good progress of the company. It is inferred from the table that the gross profit
ratio is higher in the year 2019 (29.22%) and lower in the year 2016 (16.27%).
NET PROFIT RATIO

Net profit ratio = ( net profit / net sales ) x 100

(Rs crore)
year Net profit Net sales Net profit ratio
2016 4900.95 37814.69 12.96
2017 3444.55 47296.99 7.28
2018 4169.55 58550.68 7.12
2019 10533.19 68923.15 15.28
 2020 6743.80 58815.57 11.46

Net profit ratio

18
16
14
12
10
8 Net profit ratio
6
4
2
0
2016 2017 2018 2019 2020

Net profit ratio shows the relationship between net profit and net sales. Higher the ratio indicates
that operational efficiency of the concern. It can be observed from table that the net profit ratio of
Tata steel shows that there is decrease in the net profit margin from the year 2017 to 2018 as
compared to 2016.The higher net profit ratio was observed in the year 2019 that was 15.28% and
the lower in the year 2018 (7.12%) .

OPERATING PROFIT RATIO

Operating profit ratio = (operating profit / net sales) x 100

(Rs crore)
year Operating profit Net sales Operating profit
ratio
2016 7611.79 37814.69 20.12
2017 11875.95 47296.99 25.10
2018 15778.96 58550.68 26.94
 2019 20562.94 68923.15 29.83
2020 14861.57 58815.57 25.26

Operating profit ratio

35

30

25

20

15 Operating profit ratio

10

0
2016 2017 2018 2019 2020

This ratio is used to measure the operational efficiency of the management . It is inferred from the
table that From the last 4 year, the operating profit ratio of the company has been grown upwards
consistently but in the year 2020 it decreases.

The highest operating ratio was observed in the year 2019 (29.83%) and lowest is observed in the
year 2016 (20.12%).
 CHAPTER- 5
RESULTS AND DISCUSSION

5.1 MAJORS FINDING

• The higher current ratio of the Tata steel is 1.35 in the year 2018 and the lower was 0.65 in
the year 2020.

• Higher liquid ratio of Tata steel is 0.92 in the year 2018 and lower was 0.23 in the year 2019
and It was 0.30 in the year 2020.

• The Gross profit ratio of Tata steel has been grown upwards consistently from 2016 to 2019.
It was high in 2019 (29.22%) and low in 2016 (16.27%) and 20.80% in the year 2020.

• The Net profit of Tata steel shows that there is decrease in the net profit margin in the year
2017 (7.28%) and 2018 (7.12%) as compared to 2016 (12.96%) it was high in the year 2019
(15.28%) and low in the year 2018 (7.12%) It was 11.46% in the year 2020.

• The operating profit ratio of Tata steel Tata steel has been grown upwards consistently from
2016 to 2019. It was high in 2019 (29.83%) and low in 2016 (20.12%) and 25.26% in the
year 2020.

• Return on equity of Tata steel is high in the year 2019 (14.95%) and was low in 2018
(6.77%) and 9.04% in the year 2020.

• Return on capital employed of Tata steel is high in the year 2019 (20.52%) and was low in
2016 (10.87%) and 12.77% in the year 2020.

• Debt equity ratio of Tata steel is low in the last five years and it was 0.57 in the year 2020.
Lower debt equity ratio shows a good performance of a company.

• The proprietary ratio of Tata steel is higher in the year 2016 (0.57) and lower in the year
2017 (0.44) and 0.49 in the year 2020.
5.2 DISCUSSION AND SUGGESTION

From the findings and analysis of Tata steel ltd for the last five year we can conclude some
suggestions for company so that the company can be more efficient to generate profit.

• Current ratio of Tata steel ltd is low it should increase its current ratio where it can meet it
short term obligation smoothly.

• The company should be maintaining a sound short-term debts paying capacity in future
because the use of more amount of external funds may lead to short-term insolvency.

• Liquid ratio of Tata steel ltd is low. So I suggest that a company maintain proper liquid
funds.

• All operational and related activities should be performed efficiently and effectively.

• Tata steel ltd has sound solvency position but the Company has to avail on the benefit of
trading on equity.

• The government intervention in promoting ‘Make in India’ in public procurement has

resulted in Indian companies garnering over Rs. 50 billion in projects.

• For the very existence and growth, every company has to earn adequate profit. As regards
profitability, the company witnessed a fluctuating trend throughout the study period, which
is not desirable from the management of the company. To keep the shareholders‟ happy and
reliable the rate of return to the equity shareholders should be consistent in the years to
come.
5.3 CONCLUSION

Efficient management of finance is very important for the success of an enterprise. Term financial
performance is very dynamic term. The subject matter of financial performance has been changing
very rapidly. In present time greater importance is given to financial performance. So, here an
attempt is made by me to analyze the financial performance of TATA STEEL LTD. While
analyzing the financial performance it can be concluded that TATA Steel is performing good in
terms of Quick assets, better inventory management, management of fixed assets, gross profit,
return on capital employed and dividend payout ratio. These factors plays important role in forming
company strategic and operational thinking. Efforts should constantly be made to improve the
financial position up to next level of performance in order to make benchmark. This will yield
greater efficiencies and improve investor satisfaction. Lastly the policy adopted by government of
India under National Steel Policy (2017) and policy on preference to domestically manufactured
iron and steel products is expected to provide the much necessary momentum to the iron and steel
sector of the country.

REFERENCES

https://en.wikipedia.org/wiki/Tata_Steel https://www.ibef.org/industry/steel.aspx

Kothari C.R, (1990), Research methodology methods and techniques, University of Rajasthan,
New age international (p) limited.

Gupta S.P & Gupta K.L. Management and cost accounting, Sahitya bhavan publication.

Gupta Shashi k & Sharma RK , management accounting, kalyani publisher.

https://www.moneycontrol.com/financials/tatasteel/balance-sheetVI/TIS
https://money.rediff.com/companies/Tata-Steel-Ltd/15510001/results-annual