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SUMMER REPORT ONFINANCIAL STATEMENT ANALYSIS
& BENCHMARKING
ATTATA STEEL LTD. (WIRE DIVISION)
(2011)
Prepared By:
Rajdeep Asrani
Amrita School of Business
2011
ACKNOWLEDGEMENT
I am grateful to thank TATA Steel, Wire Division for giving me this great opportunity to do
my Summer Internship Project with them. I take the privilege to sincerely thank Mr. Sunil
Bhaskaran, EIC, Global Wires Business, TATA steel, in creating the opportunity for a summer
project in the finance department of this division. I would like to thank Mr. Sanjiv Verma,
Financial Controller, Wires Division, TATA steel, for making everything possible for me
during the entire course of the project. I am also thankful to my Company Guide, Mr.
Pradeep Poojari, Manager – Finance & Accounts Department, Wires Division, TATA Steel, for
his guidance and support during the entire course of the project. I am thankful to the Core
Finance Team, of the company for their guidance, support and encouragement to give my
best during the Internship Programme. I also take great pleasure in thanking my faculty
guide, Prof. R.K Murthy, Amrita School of Business, Amrita VishwaVidyapeetham for giving
me the moral support and inspiration to perform well and make the Summer Internship
Project successful. I also take this opportunity to thank Prof. Deepak Gupta, Professor,
Marketing, Amrita School of Business, Amrita Vishwavidyapeetham and Placement
committee, Amrita School of Business, without whose help I wouldn’t have got such a
wonderful corporate exposure at Wires Division, TATA Steel, Mumbai. I specially thank all
the Managers, Officers and the Staff members with whom I interacted during the course of
my project for their support and cooperation.
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Table of Contents
1) Introduction
1.1) Introduction to Tata Steel Wire Division…………………………………………….4
1.2) Introduction to the Project………………………………………………………………11
1.3) Introduction to Financial Statement Analysis……………………………………12
2) Horizontal Analysis................................................................................................15
3) Ratio Analysis and Benchmarking
3.1) TSWD- Comparison with past performance (Ratio Trend Analysis)………..22
3.2) Benchmarking………………………………………………………………………………………52
a) About the Competitors…………………………………………………………………53
b) Ratio Comparison…………………………………………………………………………77
3.3) Comparison with the Tata Steel Global Wire Entities…………………………….92
a) About the Global Wire Entities…………………………………………………….93
b) Ratio Comparison………………………………………………………………………104
4) Limitations of my Study………………………………………………………………………………………….119
5) Conclusion……………………………………………………………………………………………………………………120
6) References…………………………………………………………………………………………………………………….121
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1.1) Introduction to Tata Steel Wire Division
Tata Steel Wire Division is the pioneer of steel wire industry in India and is the
largest manufacturer and market leader in India. TSWD 1is the only manufacturer of steel
wires in India which is present all over India catering to the needs of all four industry sectors
namely Auto, Construction, Power and Retail.
Background-Tata Steel Wire Division
Steel wire manufacturing is a fragmented industry with many small and medium
sized manufacturers and most of the steel wire manufacturers are privately owned and
owner driven. In India only Tata Steel, Usha Martin, Rajratan Global Wires and Ramsarup
industries are in public domain, rest all units are privately owned.
TSWD was setup in 1958 as “Special Steels Limited” to manufacture steel wires for
making umbrella ribs. Setting up of these manufacturing facilities was one of first steps that
the company took in bringing new steel wires for the Indian markets, where after many
wires were introduced which resulted in development of the markets and also growth and
consolidation of the company
Tata Steel Wire Division is one of the founder members of the trade association
named “The Steel Wire Manufacturers Association of India”. SWMAI ensures that there is a
platform for sharing concerns and as a single body representative with regulatory
authorities and customer/supplier associations. Today around 50% of the wire
manufacturing capacity is registered under the SWMAI.
The wires supplied by TSWD are intermediate products which are converted or
assembled into products which in turn touch the end consumers. TSWD customers in the
institutional business are the original equipment manufacturers such as tyre manufacturers 1 TSWD and Global Wires India have been used interchangeably
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2011
like MRF, JK Tyres, Apollo tyres etc. These customers have clearly defined technical
specifications and thus any changes in the wires specifications require formal approvals and
long drawn laboratory and field approvals. Hence new product development in steel wire
industry can either be achieved by introducing newer wires in a market which has yet to
develop or by making subtle changes in product specifications and making process
improvements which will enhance usage for customer applications. TSWD has been
constantly striving to create customer value by offering these differentiated products. TSWD
made a radical change and changed the rules of Indian wire manufacturers by creating a
retail segment portfolio. It launched its brand “Tata Wiron” in 2004 and built a channel from
scratch to support its efforts.
Organizational Profile
Wire division is the market leader and pioneer in wire manufacturing in India over
the past 50 years, Established in 1958 as steel wire manufacturing company it was taken
over by Tata Steel in 1984. In 2002 wire division became a separate profit centre under long
product division (Tata Steel). Year 2008 saw the wire division become a part of global wire
business (Tata Steel). The global wires business was created to bring about integration in
Tata Steel group’s various businesses and also for developing the wire business globally. The
global wires business of Tata steel group consists of Wire division (India), The Siam Industrial
Wire Co. Ltd (Thailand), Wuxi Jinyang Metal Products Co. Ltd. (China) and Lanka Special
Steel Ltd (Sri Lanka) and Indian steel & wire products (ISWP). The total revenue of Global
Wires Business was more than USD 500 Mn for FY10.
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FIG: TATA STEEL GLOBAL WIRES BUSINESS ENTITIES
The wire division (India) has an annual capacity of 335,000 MT of steel wires across
4 plants (self owned), 8 plants (outsourced) and one subsidiary. WD also has a Wire Rod Mill
(West) whose operations are under control of the Chief-WD and the sale of wire rods is
controlled by Long Products Division of Tata Steel. WRM West has an annual capacity of
295,000 MT. The Products rolled includes Mild Steel and various grades of High Carbon Wire
Rods. WD has 8 sales offices, 19 stockyards and 27 Galvanized Wire Distributors.
Table: Key differences in WD Plants
OWNERSHIP
Owned and managed by
WD
Owned by WD and managed by Managing
Agency100% subsidiary Outsourced
TWP1 TWP2 INDORE DWP ISWP EPA
ASSETS WIRE DIVISION Partly by ISWP and WD
EPA
RM ARRANGED BY WD
PEOPLE
On rolls of WD and some non core
activities outsourced
On rolls of Managing agency except very few key personnel from WD
On rolls of ISWP On rolls of EPA
6
GLOBAL WIRES
TATA STEEL WIRE
DIVISION
LANKA SPECIAL STEELS LTD., SRI LANKA
WUXI JINYANG METAL
PRODUCTS, CHINA
SIAM INDUSTRIAL WIRE CO. LTD.,
THAILAND
INDIAN STEEL & WIRE
PRODUCTS LTD.
2011
Products and Delivery Mechanism
The Wire Division caters to the needs of institutional as well as retail segments of the
Market. The institutional segment consists of Automobile industry, Infrastructure and
power. The products used by the automobile sector are Tyre Beads and springs. PC Strands
and PC wires are used by the infrastructure sector whereas the power sector uses ACSR
(Aluminium Conductor Steel Reinforced). The products for the retail segment of the market
include Galvanized wire for Farming, Poultry and Fencing. The institutional segment
contributes to the maximum part of revenues and profits of the wire division. About 96% of
the sales volume is sold domestically and about 4% exported. The chart below shows the
breakup of profits and revenues across various business segments.
Fig:Wire Division-Market Segments
7
PRODUCTS
AUTOMOTIVE
(i) Tyre Bead Wire(ii) Spring
Wire
INFRASTRUCTURE
(i) PC Strands WIres
(ii) PC Wire
POWER(i)
Aluminium Conductor
Steel Reinforced
(ACSR)(ii) Cable Armour Wires
RETAIL
(i) GI Wires(ii) MIG Wires
(iii) Mesh Wires
2011
67%
33%
Business Segments by Revenue
Institutional Retail
70%
30%
Business Segments by Profit(FY10)
Institutional Retail
Selfowned Subsidiary Outsourced
Type of Wire TWP1 TWP2 Indore Operations
Doddabalapur operations
ISWP EPAs
Tarapur Tarapur Jamshedpur All India Total capacity
Motor Tyre Bead X XLRPC X X
Galvanized Wire X X XSpring Steel Wire X X
Single PC Wire X X XACSR X X
Current Production
capacities(MT)
86,000 84,000 47,000 12,000 60,000 46,000 3,35,000
Table: Mapping of Products and Plants
The Wire Division has adopted ‘Theory of Constraints (ToC) which has led to major
improvements in the delivery mechanism. Stock buffers have been introduced at plant
warehouses, select stockyards, distributors and customers’ premises to enable Vendor
Managed Inventory (VMI) for enterprise customers replenishment model for key
distributors. Further simplified Drum-Buffer-Rope (SDBR) concept has been implemented to
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2011
improve Supply chain reliability. As a result of these mechanisms the supply chain is reliable
and is a key differentiator as compared to the competitors of WD.
Wire Division has a workforce of 1037 full time employees. All three plants at
Tarapur have unions and collective bargaining is done with respective unions of each plant.
At Tarapur all the core operations are performed by the employees whereas support
services like packing and material handling are outsourced to agencies having expertise in
those areas.
At Doddabalapur and Indore the operations are handled by Managing Agencies in
order to manage the labour costs
Flow of Raw Materials
The Wire business is downstream to steel and various stages in the wire making
process is shown below.
Fig:Wire making process
The steel billets are supplied by Long Products Division (Jamshedpur). The billets are
then hot rolled to wire rods at WRM West, ISWP and ISIM and these wire rods are finally
converted into wires at wire plants. The technology used by the Wire Division is highly
effective and provides them a competitive edge over other wire manufacturers. WD’s
purchases are approximately 66% of the sales turnover. Major value in purchase is of billets
from Tata Steel’s Long Product Division. The division has a supplier base of 1600, of which
50 suppliers account for more than 70% of the value purchases for raw materials and critical
9
Steel Making
Continuous Cast
Billets
Hot Rolled Wire Rods
Wires
2011
production consumables. These suppliers are known as MOU suppliers and play a key role in
the supply chain at WD.
Fig: Flow of Raw Materials
Organizational Situation
WD is a market leader in India and provides a wide range of products all over India. With a
total sales of FY10 being 244,465 MT, WD is way ahead of its nearest competitor i.e. Usha
Martin having sales of approximately 104,000 MT. Competition to WD in India is largely
unorganized, fragmented and regional. Most units are owner driven, operating in specific
sectors and catering to nearby regions only. WD competes for MTB with Rajratan in
northern India, with Bedmutha for GI wires in Western India, with Bajrang for PC wires in
North India, Aarti Steel for spring steel in North India etc. TSWD has been constantly striving
to create customer value by offering various differentiated products and will continue its
journey of shaping the wire industry by offering wire products solutions in the future.
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1.2) Introduction to the Project
Project Title
Financial Statement Analysis and Benchmarking
Objectives:
i) Understand the Financial Statements of the company and analyse them.
ii) Compare the performance of the company with the past performance.
iii) Carry out the Ratio analysis in order to judge the performance in a better way
and draw inferences based on the calculated ratios.
iv) Compare the results of the ratio analysis with that of the major competitors
and find the areas of improvement if any.
v) Performance comparison with the Global Wires Entities.
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vi) Based on the above study suggest recommendations to the company.
1.3) Introduction to Financial Statement Analysis
Financial statement analysis is the collective name for tools and techniques that are
intended to provide relevant information to decision makers. While information found in
the published financial statements is often not enough to form conclusive judgements about
firm’s performance, financial statements do provide important clues about what needs to
be examined in greater detail. Analysis of financial statements is of interest to lenders,
investors, security analysts, managers, corporate boards, regulators and others. The
purpose of such an analysis is to assess a company’s financial health and performance which
may range from a simple analysis of the short term liquidity position of the firm to a
comprehensive assessment of the strengths and weaknesses of the firm in various areas. It
is helpful in assessing corporate excellence, judging creditworthiness, forecasting bond
ratings and assessing market risk.
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Financial statement analysis consists of comparisons for the same company over
periods of time and for different companies in the same industry or different industries.
Financial statement analysis enables to evaluate past performance and financial position
and also predict future performance. Various factors such as benchmark financial ratios,
past performance of the company and industry standards are used as pertinent standards of
comparisons to determine whether the results of financial statement analysis are favourable
or unfavourable.
Techniques of Financial Statement Analysis
Very few numbers in financial statements are significant in themselves. But
meaningful inferences can be drawn from their relationship to other amounts or their
change from one period to another. The tools of financial statement analysis help in
establishing significant relationships and changes. The most commonly used analytical
techniques are:
i) Horizontal Analysis
ii) Trend Analysis
iii) Vertical Analysis
iv) Ratio Analysis
Horizontal Analysis2
Financial statements present comparative information for the current year as well as
the previous year. Horizontal analysis is a simple approach to financial statement analysis
that involves calculating amount and percentage changes from the previous year to current
year in order to draw inferences.
Trend Analysis
Trend analysis is an extension of horizontal analysis to many years and involves
calculation of percentage changes in financial statement items for a number of successive
years. A value of 100 is first assigned to the financial statement items in a past financial year
used as a base year and then the financial statement items in the following years are
2 Only Horizontal analysis and
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expressed as a percentage of base year value. Trend analysis over longer periods helps in
identifying certain basic changes in the nature of the business.
Vertical Analysis
Vertical analysis is the proportional expression of each item on a financial statement
to the statement total. The results of vertical analysis are presented in the form of common-
size statements in which the items within each statement are expressed in percentages of
some common number and always add up to 100. It is conventional to express items in the
profit and loss account as percentage of sales, and balance sheet items as percentages of
total shareholders’ funds and liabilities. Vertical analysis helps in making comparisons of
companies that differ in size since the financial statements are expressed in comparable
common size format. Common size statements are especially useful in presentations where
the focus is on overall comparisons.
Ratio Analysis3
Ratio analysis involves establishing a relevant financial relationship between
components of financial statements. Two companies may have earned the same amount of
profit in a year, but unless the profit is related to sales or total assets, it is not possible to
conclude which of them is more profitable. Ratio analysis helps in identifying significant
relationships between financial statement items for further investigation. If used with
understanding of industry factors and general economic conditions, it can be a powerful
tool for recognizing a company’s strengths as well as potential trouble spots.
3 Ratio analysis is used in the project for performanceAppraisal of the company
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2) Horizontal Analysis- Wire Division
A) Financials
TATA STEEL WIRE DIVISION(TSWD) Profit & Loss Accounts
INR CRORES
2011 2010 2009 2008 2007INCOME
Sales and other operating income
1296.131113.7
7 1466.55 1205.08 1200.25 Less: Excise duty
117.86 85.41 162.40 154.10 150.72Net sales 1178.27 1028.3 1304.15 1050.98 1049.53
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2011
6Other income
14.20 11.64 1.76 11.00 10.16TOTAL INCOME
1192.471040.0
0 1305.91 1061.98 1059.69
EBITDA
46.47 50.21 10.34 48.37 37.90Depriciation
14.66 8.26 7.18 7.15 7.55Amortisation
0.00 0.00 0.00 0.00 0.00EBIT
31.81 41.95 3.16 41.22 30.35
Interest
0.00 0.00 0.00 0.00 0.00
PBT
31.81 41.95 3.16 41.22 30.35
Taxes
0.00 0.00 0.00 0.00 0.00
PAT
31.81 41.95 3.16 41.22 30.35
NOPAT
31.81 41.95 3.16 41.22 30.35
TATA STEEL WIRE DIVISION(TSWD) Balance Sheets
INR CRORES Mar-11 Mar-10 Mar-09 Mar-08 Mar-07
SOURCES OF FUNDS :
Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves Total 31.81 41.95 3.16 41.22 30.35
Equity Share Warrants 0.00 0.00 0.00 0.00 0.00
Equity Application Money 0.00 0.00 0.00 0.00 0.00
Total Shareholders Funds 31.81 41.95 3.16 41.22 30.35
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Minority Interest 0.00 0.00 0.00 0.00 0.00
Secured Loans 1.72 1.68 0.00 0.00 0.00
Unsecured Loans 0.00 0.00 0.00 0.00 0.00
Total Loan Funds 1.72 1.68 0.00 0.00 0.00
Current Account 225.02 173.26 186.57 106.53 124.83
Others(Deffered Tax) 0.00 0.00 0.00 0.00 0.00
Total Liabilities 258.55 216.89 189.73 147.75 155.18
APPLICATION OF FUNDS :
Gross Block 339.40 326.65 256.61 206.53 185.99
Less: Accumulated Depreciation 117.80 107.30 100.78 97.62 93.32
Less: Impairment of Assets 0.00 0.00 0.00 0.00 0.00
Net Block 221.60 219.35 155.83 108.91 92.67
Investments 0.00 0.00 0.00 0.00 0.00
Current Assets, Loans & Advances
Inventories 84.43 53.63 65.51 64.26 59.41
Sundry Debtors 37.22 21.39 26.06 33.30 43.82
Other Assets 0.00 0.00 0.00 0.00 0.00
Cash and Bank -0.21 -0.86 0.40 1.38 6.60
Loans and Advances 11.66 15.26 14.94 24.99 18.65
Total Current Assets 133.10 89.42 106.91 123.93 128.48
Current Liabilities and Provisions 96.16 91.88 73.01 85.09 65.97
Net Current Assets 36.94 -2.46 33.90 38.84 62.51
Miscellaneous Expenses not written off 0.00 0.00 0.00 0.00 0.00
Total Assets 258.54 216.89 189.73 147.75 155.18
B) Year wise Analysis4
FY 2008
Condensed Profit & Loss Account
(Rs Crores) 2008 2007 2008
INCOME Change in
amount%
changeNet sales 1050.98 1049.53 1.45 0.14%
Other income 11.00 10.16 0.84 8.27%TOTAL INCOME 1061.98 1059.69 2.29 0.22%
Expenses 1013.61 1021.79 -8.18 -0.80%
4 Percentage Changes have been calculated wrt last year and year end balances have been used for comparison
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EBITDA 48.37 37.90 10.47 27.63%EBIT 41.22 30.35 10.87 35.82%PAT 41.22 30.35 10.87 35.82%
Condensed Balance SheetMar-08 Mar-07 2008
(Rs. Crores)Change in amount
% Change
Net Block 108.91 92.67 16.24 17.52% Investments 0.00 0.00 0.00 0.00%
Current Assets, Loans & Advances Inventories 64.26 59.41 4.85 8.16%
Sundry Debtors 33.30 43.82 -10.52 -24.01%Other Assets 0.00 0.00 0.00 0.00%
Cash and Bank 1.38 6.60 -5.22 -79.09% Loans and Advances 24.99 18.65 6.34 33.99% Total Current Assets 123.93 128.48 -4.55 -3.54%
Current Liabilities and Provisions 85.09 65.97 19.12 28.98% Net Current Assets 38.84 62.51 -23.67 -37.87%
Miscellaneous Expenses not written off 0.00 0.00 0.00 0.00% Total Assets 147.75 155.18 -7.43 -4.79%
In 2008 the net profit increased to 41.22 from 30.35 in 2007, an increase of
approximately 36% which explains the impressive performance in the financial year. The
Sales of Wire Division increased by 0.14% and it explains the 15% increase in the profit. Also
the Other Income which contributed 27% of the profit increased by nearly 9% and explains
another 8% increase in the net profit. Although there was an increase in the sales and other
income, the company was able to reduce their expenditure by almost 1% and this reduction
in the expenditure resulted in 75% increase in the net profit. Hence reduction in their
expenditure was the major reason for the increase in profits of the company which
otherwise would have increased in line with the sales growth. The total assets in 2008
decreased but still the company managed an increase in sales which is an indicator of the
good performance in the financial year 2008 and also indicates better management of the
assets. The fixed assets increased by almost 18% suggesting expansion of the in house
capacity.
FY 2009
Condensed Profit & Loss Account 2009 2008 2009
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2011
Figures in Rs. Crores change in amount
% change
Net sales 1304.15
1050.98 253.17 24.09%
Other income 1.76 11.00 -9.24 -83.98%TOTAL INCOME 1305.9
11061.98 243.93 22.97%
Expenses 1295.5
71013.61 281.96 27.82%
EBITDA 10.34 48.37 -38.03 -78.62%EBIT 3.16 41.22 -38.06 -92.33%PAT 3.16 41.22 -38.06 -92.33%
Condensed Balance Sheet Mar-09 Mar-08 2009
(Rs. Crores)
change in
amount
% change
Net Block 155.83 108.91 46.92 43.08% Current Assets, Loans & Advances
Inventories 65.51 64.26 1.25 1.95% Sundry Debtors 26.06 33.30 -7.24 -21.74%
Other Assets 0.00 0.00 0.00 0.00% Cash and Bank 0.40 1.38 -0.98 -71.01%
Loans and Advances 14.94 24.99 -10.05 -40.22% Total Current Assets 106.91 123.93 -17.02 -13.73%
Current Liabilities and Provisions 73.01 85.09 -12.08 -14.20% Net Current Assets 33.90 38.84 -4.94 -12.72%
Total Assets 189.73 147.75 41.98 28.41%In the financial year 2009 the net profit went down by 92.33% with respect to the
net profit in 2008. The Other Income which contributed 27% of the profit in 2008 saw a
reduction of around 84% and thus explains 25% reduction in the profit. The sales in 2009
increased by 24% but along with the sales there was an increase in the expenses also. The
expenses increased by 27% which was greater than the increase in the sales and hence
contributed heavily to the reduction in profit in 2009. The fixed assets in FY 2009 increased
by almost 44% which again signals the continuation of expansion of the in house capacity.
The increase in total assets (i.e. 28%) was greater than the increase in the sales and
indicates the deteriorated performance and poor assets management. The performance in
2009 is an indicator of the economic crisis that prevailed in the country and affected every
business sector. Hence exceptionally low profits can be attributed mainly to the economic
downturn. 19
2011
FY 2010
Condensed Profit & Loss Account 2010 2009 2010
Figures in Rs. Croreschange
in amount
% change
Net sales 1028.36 1304.15 -275.78 -21.15%Other income 11.64 1.76 9.87 560.15%
TOTAL INCOME 1040.00 1305.91 -265.91 -20.36%
Expenses 989.79 1295.57 -305.78 -23.60%EBITDA 50.21 10.34 39.87 385.59%EBIT 41.95 3.16 38.79 1227.53%PAT 41.95 3.16 38.79 1227.53%
Condensed Balance Sheet Mar-10 Mar-09 2010Figures in Rs. Crores change in
amount% change
Net Block 219.35 155.83 63.52 40.76% Investments 0.00 0.00 0.00 0.00%
Current Assets, Loans & Advances Sundry Debtors 21.39 26.06 -4.67 -17.92%
Other Assets 0.00 0.00 0.00 0.00% Cash and Bank -0.86 0.40 -1.26 -315.00%
Loans and Advances 15.26 14.94 0.32 2.14% Total Current Assets 89.42 106.91 -17.49 -16.36%
Current Liabilities and Provisions 91.88 73.01 18.87 25.85% Net Current Assets -2.46 33.90 -36.36 -107.26%
Total Assets 216.89 189.73 27.16 14.32%
The performance in the financial year 2010 is more or less similar to that in 2008.
The net profit in 2010 increased by approximately 1227% with respect to that of 2009.
Although there was a drop in the sales compared to 2009 but the drop in sales was because
of relocation of the Borivali plant to Tarapur. The market for steel in 2010 was good and the
inventory levels in 2010 which were the lowest in the 5 years support that fact. The net
profit in 2010 increased by approximately 1200% and that increase in profit is due to an
exceptional increase in the other income which increased by 560% and reduction in the
expenses. The fixed assets continued to increase signalling continued expansion of the in
house capacity. As mentioned earlier the inventory levels were the lowest in 2010
(Reduction of 18% from 2009) and were reduced below the normal level due to excellent
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2011
market conditions. The decrease in debtors by 18% can be attributed to the change in the
credit policy which was strict compared to the previous years.
FY 2011
Condensed Profit & Loss Account 2011 2010 2011(Figures in Rs. Crores) change in
amount% change
Net sales 1178.27 1028.36 149.91 14.58%Other income 14.20 11.64 2.56 22.04%
TOTAL INCOME 1192.47 1040.00 152.47 14.66%
Expenses 1146.00 989.79 156.21 15.78%EBITDA 46.47 50.21 -3.74 -7.45%
EBIT 31.81 41.95 -10.14 -24.17%PAT 31.81 41.95 -10.14 -24.17%
Condensed Balance Sheet Mar-11 Mar-10 2011(Figures in Rs. Crores) change in
amount% change
Net Block 221.60 219.35 2.25 1.03% Current Assets, Loans & Advances
Inventories 84.43 53.63 30.80 57.43% Sundry Debtors 37.22 21.39 15.83 74.01%
Other Assets 0.00 0.00 0.00 0.00% Cash and Bank -0.21 -0.86 0.65 -75.58%
Loans and Advances 11.66 15.26 -3.60 -23.59% Total Current Assets 133.10 89.42 43.68 48.85%
Current Liabilities and Provisions 96.16 91.88 4.28 4.66% Net Current Assets 36.94 -2.46 39.40 -1601.63%
The net profit for the financial year 2011 reduced by approximately 25% with respect
to the net profit in 2010. Even though there was an increase in sales and other income the
profit reduced by 25% with respect to 2010 because the margins were reduced due to the
market conditions and the increase in expenditure which was greater than the sales growth
explains the reduced profit. The fixed assets increased only marginally which indicates that
the expansion that was in process since 2008 was completed in 2011. The increase in total
assets was greater than the sales growth which shows the problems in assets management.
C) Overall Performance Summary
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2011
2007 2008 2009 2010 20110
5
10
15
20
25
30
35
40
45
Net Profit
Net Profit
Wire Division has been profitable during most of the years except in the year 2009
when the profits of the company dipped drastically owing to adverse market conditions due
to economic crisis prevailing in the country.
2007 2008 2009 2010 20110
50
100
150
200
250
Net Fixed Assets
Net Fixed Assets
The fixed assets has been continuously increasing since 2008 which shows that the
Wire Division has been continuously increasing their in-house capacity which has been
completed in 2011.
3.1) TSWD- Comparison with past performance
Financial ratios are divided into five broad categories
i) Liquidity Ratios
ii) Leverage Ratios
iii) Turnover Ratios
iv) Profitability Ratios
v) Valuation ratios
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2011
The important ratios used for the analysis are described below along with the analysis of
TSWD’s performance over the last five years.
Liquidity Ratios
Liquidity refers to the ability of a firm to meet its obligations in the short run, usually
one year. Liquidity ratios are generally based on the relationship between current assets
(the sources for meeting short term obligations) and current liabilities. The important
liquidity ratios are: Current Ratio, Quick Ratio, and Cash Ratio.
A) Current Ratio
Current ratio is defined as the relationship between current assets and current
liabilities. This ratio is also known as "working capital ratio". It is a measure of general
liquidity and is most widely used to make the analysis for short term financial position or
liquidity of a firm. It is a widely used indicator of a company’s ability to pay its debts in the
short term. It shows the amount of current assets a company has per rupee of current
liabilities. Current ratio is expressed as follows:
Current Ratio =Current assetsCurrent Liabilities
The two basic components of this ratio are current assets and current liabilities.
Current assets include cash and those assets which can be easily converted into cash within
a short period of time, generally, one year, such as marketable securities or
readily realizable investments, bills receivables, sundry debtors, (excluding bad debts or
provisions), inventories, work in progress, etc. Prepaid expenses should also be included in
current assets because they represent payments made in advance which will not have to be
paid in near future.
Current liabilities are those obligations which are payable within a short period of tie
generally one year and include outstanding expenses, bills payable, sundry creditors, bank
overdraft, accrued expenses, short term advances, income tax payable, dividend payable,
etc.
23
2011
This ratio is a general and quick measure of liquidity of a firm. It represents the
margin of safety or cushion available to the creditors. It is an index of the firm’s financial
stability and the strength of working capital. A relatively high current ratio is an indication
that the firm is liquid and has the ability to pay its current obligations in time and when they
become due. On the other hand, a relatively low current ratio represents that the liquidity
position of the firm is not good and the firm shall not be able to pay its current liabilities in
time without facing difficulties. An increase in the current ratio represents improvement in
the liquidity position of the firm while a decrease in the current ratio represents there has
been deterioration in the liquidity position of the firm. Normally a current ratio of 2:1 is
considered satisfactory. The idea of having double the current assets as compared to the
current liabilities is to provide a cushion for the delays and losses in the realization of
current assets. However care should be taken while interpreting the current ratio because
firms having less than 2:1 ratio may be having a better liquidity than even firms having more
than 2:1 ratio. This is because of the reason that current ratio measures the quantity of the
current assets and not the quality of current assets. If a firm’s current assets include debtors
which are not recoverable or stocks which are slow moving or obsolete, the current ratio
may be high but it does not represent a good liquidity position.
24
2011
2007 2008 2009 2010 2011
TSWD 1.94755191753828
1.45657539076272
1.46445692370908
0.973225946887244
1.38415141430948
0.25
0.75
1.25
1.75
2.25
Current Ratio
Fig: Current Ratio trend for TSWD
Over the past five years Global Wires, India has witnessed variability in the current
ratio. The current ratio was as high as 1.95 in 2007 and as low as 0.97 in 2010. Global wire,
India’s ratio was 1.46 in 2008 and 2009 and nearly 1.38 in the financial year 2011.
The variability in the current ratio occurs mainly due to variability in the composition
of current assets or the current liabilities. The graph below shows the trend of current
assets and current liabilities over the period of five years, from financial year 2007 to 2011.
2007 2008 2009 2010 20110
20
40
60
80
100
120
140
Current AssetsCurrent Liabilities
Fig: Trend of current assets and current liabilities
25
2011
In the year 2007, the current assets amounted to 128.48 whereas total current
liabilities in the year 2007 were nearly 65. The total current assets were almost twice the
current liabilities. The current ratio for the year 2007 comes out to be 1.95 which implies
that the company had current assets worth Rs. 1.95 per rupee of current liabilities and
company was in a strong liquidity position and was perfectly capable of paying back its
current obligations. As is the case with most manufacturing firms, inventory constituted
almost 50% of the current assets and the debtors were nearly 35% of the total current
assets.
Yearwise Breakup of Current Assets (TSWD)
Inventory Sundry Debtors Cash & Bank Loans & Advances Total Current Assets
2007 59.41 43.82 6.60 18.65 128.48
2008 64.26 33.30 1.39 24.99 123.94
2009 65.51 26.06 0.40 14.95 106.92
2010 53.63 21.39 -0.86 15.26 89.42
2011 84.43 37.22 -0.21 11.66 133.10
Breakup Expressed as percentage(TSWD)
Inventory Sundry Debtors Cash & Bank Loans & Advances Total Current Assets
2007 46.24% 34.11% 5.14% 14.52% 100.00%
2008 51.85% 26.87% 1.12% 20.16% 100.00%
2009 61.27% 24.37% 0.37% 13.98% 100.00%
2010 59.98% 23.92% -0.96% 17.07% 100.00%
2011 63.43% 27.96% -0.16% 8.76% 100.00%
In the financial year 2008 the current assets reduced to 123.94 and the current
liabilities increased to 85.09 which explains the decrease in the current ratio. Even though
there was a marginal increase in the inventory levels, the total assets still went down, the
major reason being the decrease in the sundry debtors. Owing to better debtor
26
2011
management, the debtors were reduced by approximately 25%. The increase in the
inventory levels and decrease in the debtors did not mean that the company sales had gone
down, instead there was an increase in the sales as is evident from the graph below. The
current ratio thus came down to nearly 1.5 which meant the liquidity of the company had
gone down, but was still satisfactory as the company had current assets worth Rs. 1.5 per
rupee of current liability.
2007 2008 2009 2010 2011-10.00
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
InventoriesSundry debtorsCash & BankLoans & Advances
Fig: Trends in the various current assets
2007 2008 2009 2010 20110
200
400
600
800
1000
1200
1400
Sales
Sales
Fig: Company sales from the year 2007 to 2011
27
2011
In the year 2009 there was a reduction in both current assets as well as current
liabilities by almost an equal amount. Thus the current ratio was unaffected from 2008.
There was a reduction in the debtors and loans & advances and a marginal increase in the
inventory level.
The liquidity of the company was greatly affected in the year 2010 and the current
ratio went down to less than 1, the lowest in the past four years. The current assets and the
current liabilities reached almost the same level. This reduction in the liquidity of the
company was mainly due to the plant relocation process due to which the operations were
affected. The sales of the company went down, the inventory levels were reduced. There
was a reduction in debtors and Loans & advances and the current liabilities were also
reduced.
The year 2011 was the year of recovery where the company tried to achieve the
same kind of stability and liquidity which it had enjoyed in the previous years. The efforts
were successful to a certain extent and the company operations were back to normal. There
was an increase in the current assets as well as current liabilities and the current ratio was
1.38 which meant that the company had achieved the satisfactory liquidity position but
there is still room for improvement.
Global Wire, India aims for a current ratio of 1.5 when the competition is intense and
a current ratio of 2 when there is less competition. The company was successful in reaching
its target and was fairly stable and liquid in all the years except in 2010 wherein the
company operations were affected due to the relocation process, but the company started
recovering in 2011 and was only just short of its target. But now having achieved the
desired stability it would like to achieve the target on a regular basis and maintain
consistency in its performance and strengthen its working capital management.
28
2011
B) Quick Ratio
Quick ratio is calculated as a supplement to the current ratio and is an indicator of a
company’s short term liquidity. It measures the company’s ability to meet its short term
obligations with its most liquid assets. All current assets are not equally liquid. While cash is
readily available to make payments to suppliers and debtors can be quickly converted into
cash, inventories are two steps away from conversion into cash (sale and collection). Thus a
large current ratio by itself is not a satisfactory measure of liquidity when inventories
constitute a major part of the current assets. Therefore “quick ratio” or “acid test ratio” is
computed as a supplement to the current ratio. This ratio relates relatively more liquid
current assets, usually current assets less inventories, to current liabilities. Quick ratio is
calculated as follows:
TSWD- Trend Analysis
2007 2008 2009 2010 2011
TSWD 1.047 0.7014 0.5672 0.389500000000001
0.506135607321132
0.1
0.3
0.5
0.7
0.9
1.1
TSWD
Fig: Quick Ratio Trend
29
Acid-test Ratio =Quick Assets
Current Liabilities
Where Quick assets = Current assets-Inventory
2011
As evident from the above graph, the quick ratio of the Wire Division is on the lower
side every year with the highest being 1.05 in 2007 and the lowest being 0.39 in 2010. The
quick ratio is calculated to find the ability of the company to pay back its current obligations
using its most liquid assets. As already shown the inventory forms the major part of the
current assets owned by the wire division. So when inventory is removed from the current
assets to calculate its liquidity, the quick ratio is bound to be low because the cash balance
is almost negligible. The reason for such low cash balance is the handling of cash by the HO
and not Wire Division. So when most liquid assets of the company are considered, only
debtors and loans and advances come into the picture which form only 40 - 50% of its total
current assets, hence such low values of Quick ratio. But that should not be a cause of worry
because as already shown Wire Division’s current ratio is satisfactory, moreover the
inventory turnover ratio of the company is very high, averaging about 18 times a year
meaning its inventory is quickly converted to cash.
The Quick ratio has been constantly declining majorly because of the the constant
decrease in the debtors over the years owing to the strict credit and collection policy of the
company.
C) Cash Ratio
Cash ratio is an indicator of company’s ability to meet its current liabilities with it’s
most liquid asset i.e. Cash. Cash ratio is calculated as follows:
Cash Ratio =Cash & Bank Bal. + Current Investments
Current Liabilities
The cash ratio is generally a more conservative look at a company’s ability to cover
its liabilities than many other liquidity ratios. This is due to the fact that inventory and
accounts receivable are left out of the equation. Since these two accounts are a large part of
many companies, this ratio should not be used in determining company value, but simply as
one factor in determining liquidity.
30
2011
TSWD- Trend Analysis
2007 2008 2009 2010 2011
TSWD 0.1 0.0163 0.0055 -0.009400000000
00003
-0.002183860232
9451
-0.01
0.01
0.03
0.05
0.07
0.09
0.11
Cash Ratio
Fig: Cash ratio trend of TSWD
The graph above shows very low values for the cash ratio from 2007 to 2009 and
negative in the financial years 2010 and 2011. But as already explained above, the cash is
handled centrally by the Tata Steel and not Wire Division. Hence such low value of cash ratio
is not a cause of worry.
31
2011
Coverage Ratios
Coverage ratios are used to show the relationship between the debt servicing
commitments and the sources for meeting these burdens. The most important coverage
ratio is Interest Coverage Ratio
A) Interest Coverage Ratio
The Interest Coverage Ratio is also known as debt service ratio or debt service
coverage ratio and is defined as:
Interest Coverage Ratio =PBIT
Interest
Interest Coverage Ratio is a measure of the protection available to the creditors for
payment of interest charges by the company. It relates the fixed interest charges to the
income earned by the business and indicates whether the business has earned sufficient
profits to pay periodically the interest charges. A high interest coverage ratio means that the
firm can easily meet its interest burden even if earnings before interest and taxes suffer a
considerable decline. A low interest coverage ratio may result in financial embarrassment
when earnings decline. This ratio is widely used by lenders to assess a firm’s debt capacity
and is also a major determinant of bond rating.
As a general rule of thumb, investors generally do not prefer an interest coverage
ratio under 1.5. An interest coverage ratio below 1.0 indicates that the business is having
difficulties generating the cash necessary to pay its interest obligations. The history and
consistency of earnings is tremendously important. The more consistent a company’s
earnings, the lower the interest coverage ratio can be.
32
2011
TSWD- Trend Analysis
2007 2008 2009 2010 2011
TSWD 2.9755 4.0412 0.3101 5.399 4.50566572237966
0.50
1.50
2.50
3.50
4.50
5.50
Interest Coverage Ratio
Fig: Interest Coverage Ratio Trend
As evident from the above graph, Global Wire, India’s interest coverage ratio has
been on the higher side every year with 2009 being an exception when the ratio came down
to 0.31 which was far below the desired level. The graphs below show the trends in the
Profit before interest and tax and the interest charges of Global Wires, India.
2007 2008 2009 2010 20110
5
10
15
20
25
30
35
40
45
Interest ChargesPBIT
33
GOODGood
2011
Fig: Variations in PBIT and Interest Charges
The above graph shows that the variation in the interest coverage ratio is mainly due
to the variations in PBIT, Interest charges being fairly constant over the years. The dip in the
PBIT in 2009 explains the low interest coverage ratio that year. The reason for such low PBIT
was the economic crisis that prevailed in the country that year.
Thus the company was more than capable of meeting its debt servicing
commitments in all the years except in 2009 where the company faced difficulties in paying
the debt charges due to the low profits earned that year.
Turnover Ratios
Turnover ratios, also referred to as activity ratios or asset management ratios,
measure how efficiently the assets are employed by a firm. These ratios are besed on the
relationship between the level of activity, represented by sales or cost of goods sold, and
levels of various assets. The important turnover ratios are: Inventory turnover, average
collection period, debtors’ turnover, fixed assets turnover and total assets turnover.
Generally averages are used to calculate these ratios.
A) Inventory Turnover Ratio5
Inventory turnover ratio or stock turnover ratio is the relationship between cost of
goods sold during a particular period of time and the cost of average inventory during a
particular period. It measures how fast the inventory is moving through the firm and
generating sales. It is defined as:
Inventory Turnover Ratio =Cost of goods soldAverage Inventory
Inventory turnover ratio measures the velocity of conversion of stock into sales.
Usually a high inventory turnover ratio indicates efficient management of inventory because
5 Net sales instead of COGS has been used for the calculation of Inventory turnover ratio
34
2011
more frequently the stocks are sold, the lesser amount of money is required to finance the
inventory, A low inventory turnover ratio indicates inefficient management of inventory. A
low inventory turnover implies over-investment in inventories, dull business, poor quality of
goods, stock accumulation, accumulation of obsolete and slow moving goods and low
profits as compared to total investment. However this interpretation may not be always
true as a high inventory turnover may be caused by a low level of inventory which may
result in frequent stock outs and loss of sales and customer goodwill.
The norms for interpreting the inventory turnover ratio are different for different
firms depending upon the nature of industry and business conditions.
TSWD- Trend Analysis
2007 2008 2009 2010 2011
TSWD 17.6659 16.9964999999999
20.0994 17.2630999999999
17.0689555265827
15.5
16.5
17.5
18.5
19.5
20.5
Inventory Turnover Ratio
Fig: Inventory turnover ratio trend for TSWD
The Inventory turnover ratio has been very high every year with the highest being
approximately 20 in the year 2009 and the lowest being approximately 17 in 2008. On an
average the inventory turnover ratio hovers around 17 which implies that the TSWD’s
inventory is fast moving and converted into sales approximately 17 times in an year. The
high inventory turnover ratio also signifies the high efficiency of TSWD’s inventory
35
GOODGood
2011
management. The graph below shows the variation in the inventory levels and the average
inventory over the years.
2007 2008 2009 2010 20110
200
400
600
800
1000
1200
1400
SalesAverage Inventory
Fig: Sales and average inventory trends
The above graph shows that the average inventory levels throughout the year ranges
between 60 and 70 with only marginal variations. Hence major changes in the inventory
turnover ratio can be attributed to changes in the sales of the company. The high turnover
ratio also confirms the conclusion made for the current ratio i.e. even though inventory
forms the major portion of the current assets but still the company is liquid due its fast
moving inventory.
B) Inventory Holding Period
Inventory holding period is also referred to as days inventory and is used to calculate
the average time that inventory is held. It is defined as:
Inventory holding period =365
Inventory Turnover Ratio
36
2011
A high inventory holding period indicates that there is a lack of demand for the
product being sold.
TSWD- Trend analysis
The efficiency of the inventory management leads to a high inventory turnover ratio
which in turns leads to a very low inventory holding period. TSWD’s inventory holding
period is low for all the years and the average holding period is approximately 20 days. The
graph below shows the inventory holding period for the period of five years from the year
2007 to 2011.
2007 2008 2009 2010 2011
TSWD 20.6613 21.475 18.1598000000001
21.1433 21.3838509000484
16.50
17.50
18.50
19.50
20.50
21.50
Inventory Holding Period
As shown in the graph, the inventory holding period was the lowest for the year
2009 i.e. 18.16 days and the highest for the year 2008. Such low inventory holding period
indicates that the demand for TSWD’s products is very high and they manage their inventory
quite efficiently and thus are able to reduce their interest, storage and other expenses.
37
GOODGood
2011
C) Debtors’ Turnover Ratio6
A firm may sell goods on cash as well as on credit. Credit is one of the important
elements of sales promotion. The volume of sales can be increased by following a liberal
credit policy but a liberal credit policy may result in tying up substantial funds of a firm in
the form of trade debtors. Trade debtors are expected to be converted into cash within a
short period of time and are included in current assets. Hence the liquidity position of the
firm to pay its short term obligations in time depends upon the quality of its trade debtors.
Debtors’ turnover ratio indicates the velocity of debt collection of a firm i.e. the
number of times average debtors are turned over during a year. Debtors turnover ratio is
defined as:
Debtors' Turnover Ratio =Sales
Average Sundry Debtors
The debtor turnover ratio reflects the efficacy of firm’s credit and collection policy. A
high turnover ratio implies that the credit and collection policies are efficient and that the
debtors are being converted rapidly into cash. Similarly a low turnover ratio implies
inefficient management of debtors or less liquid debtors.
TSWD- Trend Analysis
6 Due to unavailability of credit sales, total net sales has been used for calculation
38
2011
2007 2008 2009 2010 2011
TSWD 23.9509 27.2556999999999
43.9402 43.3451 40.2071318887562
2.50
7.50
12.50
17.50
22.50
27.50
32.50
37.50
42.50
47.50
Debtors Turnover Ratio
The graph shows that the debtor turnover ratio for 2007 and 2008 was on the lower
side with 23.95 and 27.26 times respectively. The reason for the low debtor turnover ratio
being, the liberal credit and collection policy followed by the company. Due to the liberal
policy followed the company had difficulties in converting their debtors to cash on time and
there were many customers who were on the list of regular defaulters especially the
government agencies TSWD dealt with. But in the following years there was an enormous
increase in the debtor turnover ratio owing to the changes in the credit and collection
policy. The increase debtor turnover ratio shows efforts made by the company to improve
their debtors portfolio and collection policies. The debtors turnover ratio from 2009 to 2011
averaged between 41 to 45 times. As per the new policy TSWD decided not to deal with any
new government agencies but they still fulfil their prior commitments and still deal with
some government agencies.
The graphs below show the variation in the debtors and the sales from the year 2007
to 2011 which shows the reason for increase in the ratio and again confirms the efficacy of
the company’s credit and collection policy.
39
GOODGood
2011
2007 2008 2009 2010 20110
200
400
600
800
1000
1200
1400
Sales
Sales
Fig: Sales trend of TSWD
2007 2008 2009 2010 20110
5
10
15
20
25
30
35
40
45
50
Average Debtors
Average Debtors
Fig: Average Debtors trend of TSWD
D) Average Collection Period
The average collection period is the number of days, on average, that it takes a
company to collect its credit accounts or its accounts receivables. In other words it is the
average number of days required to convert receivables into cash. It is defined as:
Average Collection Period(Days) =365
Debtors' Turnover Ratio
The average collection period is generally compared with the firm’s credit terms to
judge the efficiency of credit management. As a general rule of thumb, Outstanding
receivables should not exceed credit terms by more than 10-15 days. An average collection
period which is shorter than the credit period allowed by the firm should be interpreted
40
2011
with care because it either mean efficiency of credit management or excessive conservatism
in credit granting that may result in the loss of some desirable sales.
TSWD- Trend Analysis
2007 2008 2009 2010 2011
TSWD 15.239 13.3916 8.30670000000001
8.4207 9.07799146205877
1.00
3.00
5.00
7.00
9.00
11.00
13.00
15.00
17.00
Average Collection Period
Calculated as a supplement to the debtor turnover ratio, average collection period
confirms the efficacy of the credit and collection policy followed by TSWD. The collection
period was nearly 15 days in 2007 and 13 days in 2008 showing some improvement. But
since 2011, The collection period has been continuously hovering between 8 to 9 days
showing the drastic improvement in the collection policy.
E) Fixed Assets Turnover Ratio
Fixed assets turnover ratio measures sales per rupee of investment in fixed assets i.e.
it measures a company’s ability to generate net sales from fixed asset investments
specifically property, plant and equipment- net of depreciation. Fixed assets turnover ratio
is expressed as follows:
Fixed Assets Turnover Ratio = Sales
Average Net Fixed Assets
If the turnover ratio is high it implies that the company is managing its fixed assets
efficiently whereas a low turnover ratio implies that the company has more assets than it
41
GOODGood
2011
requires for its operations. This ratio is used as an important measure in manufacturing
industries where major purchases are made for property, plant and equipment(PP&E) to
help increase output.
TSWD- Trend Analysis
2007 2008 2009 2010 2011
TSWD 11.3254 10.4274 9.85220000000003
5.4819 5.34423404014061
1.00
3.00
5.00
7.00
9.00
11.00
Fixed Assets Turnover Ratio
The fixed assets turnover ratio for TSWD was 11.33 in 2007, 10.43 in 2008 and 9.85
in 2009. There is a continuous decline in the fixed assets turnover ratio. The decline was
only marginal in 2008 and 2009. In 2010 there was a major decline and the turnover ratio
decreased to 5.48 in 2010 and 5.34 in 2011. The graphs below explain the reason for the
decline the fixed assets turnover ratio.
2007 2008 2009 2010 20110
200
400
600
800
1000
1200
1400
Sales
Sales
42
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2011
2007 2008 2009 2010 20110
50
100
150
200
250
Average Net Fixed Assets
Average Net Fixed Assets
As seen in the graph there has been a continuous increase in the fixed assets
indicating the expansion of the in-house capacity since 2007. While the capacity has been
increasing at a fixed rate, the sales of the company have not been increasing at the same
rate.
In 2008 there was a marginal increase in both the fixed assets as well as the sales,
but the increase in the fixed assets was greater than the increase in the sales and hence a
minor decline in the fixed assets turnover ratio.
In 2009 there was a considerable increase in both the fixed assets and the sales.
While there was an increase of 31% in the fixed assets, the sales increase only by 24% and
hence a decline in the fixed assets turnover ratio.
In the year 2010 there was a considerable decline in the fixed assets turnover ratio.
The fixed assets increased by 41% but in turn the sales dropped by approximately 21%
leading to a decline in the turnover ratio which meant that all the assets were not fully
utilized. The main reason for the underutilization of the assets was the plant relocation
process due to which there was a considerable decrease in the sales also. Similarly in the
year 2011 the plant was not yet completely stabilized and thus the assets were not utilized
to its fullest. Although there was an increase in the sales but that increase was not
considerable enough to affect the turnover ratio. Since the stabilization of the plant takes at
least 2 years to stabilize, the effect of the relocation is expected in the year 2012 also.
43
2011
F) Total Assets Turnover Ratio
Total assets turnover ratio measures how efficiently assets are employed, overall. It
measures the ability of a company to use its assets to generate sales. The total asset
turnover ratio considers all assets including fixed assets, like plant and equipment, as well as
the current assets. Total asset turnover ratio is expressed as follows:
Total Assets Turnover Ratio = Sales
Average Total Assets
A high turnover ratio implies that the assets are being managed efficiently whereas a
low ratio indicates inefficient management. The problem might be due to one or more asset
categories comprising total assets.
TSWD- Trend Analysis
The graph below shows the trend of the total assets turnover ratio and is almost in
line with the fixed assets turnover ratio for the same reasons as explained above. The total
asset turnover ratio was continuously increasing till 2009 indicating that the total assets
were being managed efficiently.
2007 2008 2009 2010 2011
TSWD 6.7633 6.9385 7.7283 5.05799999999999
4.95664976968221
0.50
1.50
2.50
3.50
4.50
5.50
6.50
7.50
8.50
Total Assets Turnover Ratio
44
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2011
The total assets turnover ratio was as high as 7.73 in 2009 but in 2010 there was
adecline in the total assets turnover ratio and the ratio dropped to 5.06. The graph below
explains the factors responsible for the decline of the total assets turnover ratio.
2007 2008 2009 2010 20110
200
400
600
800
1000
1200
1400
Sales
Sales
2007 2008 2009 2010 20110
50
100
150
200
250
300
Total Assets
Total Assets
The graph explains the decline of total assets turnover ratio in 2010. The sales
dropped considerably and the fixed assets increased leading to an increase in the total
assets and thus the turnover dropped indicating the instability due to the relocation
process. Similarly in 2011 the turnover ratio was almost the same as 2010 again indicating
the instability in the business and showing that the assets are not being utilized to their
fullest.
Profitability Ratios
Profitability ratios measure the degree of operating success of a company and reflect
the final result of business operations. There are two types of profitability ratios: profit
45
2011
margin ratios and rate of return ratios. Profit margin ratios show the relationship between
profit and sales. Since profit can be measured at different stages, there are several
measures of profit margin. Some important profit margins used for analysis are EBITDA
Margin and Net Profit Margin. Rate of return ratios reflect the relationship between profit
and investment. Some important rate of return ratios used for analysis are: Return on
Assets, Earning Power and Return on Invested Capital (ROIC).
A) EBITDA Margin
EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortisation.
EBITDA margin shows the margin left after meeting manufacturing expenses, selling, general
and administration expenses. This earnings measure is of particular interest in cases where
companies have large amounts of fixed assets which are subject to heavy depreciation
charges or in case where a company has a large amount of acquired intangible assets and is
thus subject to large amortisation charges. EBITDA Margin for a company is calculated as
follows:
EBITDA Margin =Earnings before interest, taxes, depreciation and amortisation
Sales
TSWD- Trend Analysis
46
2011
2007 2008 2009 2010 2011
TSWD 0.0361114022467201
0.0460237112028775
0.00793085200204248
0.0488251116674905
0.0394391777775896
0.50%
1.50%
2.50%
3.50%
4.50%
5.50%
EBITDA Margin
The profit margins for TSWD have been consistently on the lower side with the
lowest being a meagre 0.79% in2009 and the highest being 4.88% in 2010.
2007 2008 2009 2010 20110
10
20
30
40
50
60
EBITDA
EBITDA
The EBITDA margin increased to 4.60% in 2008 from 3.61% in 2007 indicating the
improved profitability and performance compared to 2007. The year 2009 saw the lowest
profits with the EBITDA margin dropping to just 0.79%. The drastic decline in the Earnings
can be owed to the economic crisis at that time.
The year 2010 was the best financial year from 2007 to 2011 in terms of profit. Due
to excellent market conditions even after relocation and declined sales the company was
able to make profits which were higher compared to the past years. The EBITDA margin rose
47
2011
to almost 5%. But in 2011 again there was a decline in the profits owing to the competitive
market and the EBITDA margin dropped to 3.94%.
B) Net Profit Margin
This ratio also known as Return on Sales (ROS), measures the amount of net profit
earned by each rupee of revenue. It measures the overall efficiency of production,
administration, selling, financing, pricing and tax management. Net profit margin is
calculated as follows:
TSWD- Trend Analysis
2007 2008 2009 2010 2011
TSWD 0.0289177060207904
0.0392205370225886
0.00242533934858919
0.0407929383479635
0.0269972077707151
0.25%
0.75%
1.25%
1.75%
2.25%
2.75%
3.25%
3.75%
4.25%
Net Profit Margin
The only reduction from EBITDA is the Depreciation charges. The taxes are centrally
paid and hence not deducted from the profits earned. The graph below shows the EBITDA
and the depreciation charges each year.
48
Net Profit Margin =Net Profit
Sales
2011
2007 2008 2009 2010 20110
10
20
30
40
50
60
EBITDADepriciation
The depreciation is fairly constant with marginal changes. But there is almost 77%
increase in the depreciation charges and hence the net profit margin is greatly affected in
2011. The trends are in line with the EBITDA margin except in 2011. In 2011 even though
the EBITDA margin was higher compared to that in 2007 but the net profit margin is lower in
2011 because of the difference in the depreciation charges.
The net profit margin is the highest for 2010 owing to the excellent market
conditions and is lowest in 2009 owing to the economic crisis that prevailed at that time.
C) Return on Assets
Return on Assets, also known as Return on Investment, is a measure of profitability
from a given level of investment. It can be calculated as follows:
Return on Asset measure the profit per rupee invested on the assets. This figure is
also used to gauge the asset intensity of the business.
49
Return on Assets =Profit After Tax
Average Total Assets
2011
TSWD- Trend Analysis
2007 2008 2009 2010 2011
TSWD 0.195579327232892
0.272133095662508
0.0187437037037011
0.206330078941544
0.133815703678776
2.50%
7.50%
12.50%
17.50%
22.50%
27.50%
Return on Assets
The Return on Asset exhibits a lot of variability. The return was highest in 2008 i.e.
27.21% and the lowest in 2009 i.e. 1.87%. The graphs below explain the variability in the
return on assets.
2007 2008 2009 2010 20110
5
10
15
20
25
30
35
40
45
Net Profit
Net Profit
50
2011
2007 2008 2009 2010 20110
50
100
150
200
250
300
Total Assets
Total Assets
In 2007 the return on assets was 19.56% which implies that the company earned a
profit of Rs.19.56 for each rupee invested in the assets.
In 2008 there was a reduction in the total assets owing to the decrease in the current
assets but the net profit increased and hence there was an increase in the return on the
investment. In 2008 TSWD earned Rs. 27.21 for each rupee invested in the assets and
indicates the high performance.
In 2009 the profits declined considerably owing to the economic crisis but the
average total assets increases thus the company earned only Rs. 1.87 for each rupee
invested in the assets.
In 2010 the company’s profits increased and also the total assets making the return
equal to 20.63%. In 2011 the profits reduced compared to 2010 owing to the competitive
market conditions but the total assets increased reducing the return on assets to only
13.38%.
D) Earning Power
The Earning Power is defined as:
Earning Power =Profit Before Interest and Tax
Average Total Assets
Earning power is a measure of business performance which is not affected by
interest charges and tax burden. It abstracts away the effect of capital structure and tax
51
2011
factor and focuses on operating performance. Hence it is eminently suited for inter-firm
comparision. Further, it is internally consistent. The numerator represents a measure of pre-
tax earnings belonging to all sources of finance and the denominator represents total
financing.
2007 2008 2009 2010 2011
TSWD 0.195579327232892
0.272133095662508
0.0187437037037011
0.206330078941544
0.133815703678776
2.50%
7.50%
12.50%
17.50%
22.50%
27.50%
Earning Power
The graph above shows the earning power for the financial years 2007 to 2011. The
earning power is high for all the years except in 2009 and follows the same trend as the
return on assets.
E) Return On Invested Capital
Return On Invested Capital (ROIC) is the amount of profit that a company earns for
every rupee invested into the business. It is used to judge how well the company generate
earnings from capital invested in the business. ROIC of a company is calculated as follows:
52
Return On Invested Capital =NOPBIT
YEAR END AVERAGE INVESTED CAPITAL
2011
2007 2008 2009 2010 2011
TSWD 0.22 0.29 0.1 0.3 0.15
3%
8%
13%
18%
23%
28%
33%
ROIC
The Return on invested capital is constantly increasing except for the sudden dip in
2009 owing to the recession in the country. In 2010, despite of the relocation process, the
company earned high profits compared to the previous years, owing to the excellent market
conditions. In 2011 again the ROIC of TSWD declined because of the instability in the
business due to the relocation process which affected the profits of the company.
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2011
3.2) Cross Sectional Analysis or Benchmarking
Benchmarking is the process of comparing one’s business processes and
performance metrics to the industry or the industry bests. The process of benchmarking
involves identifying the best firms in the industry and comparing their results with their own
results.
The process of benchmarking thus enables to learn how well the competitors are
doing and the reasons for their success. Thus Benchmarking allows organisations to develop
plans on how to make improvements or adopt specific best practices, usually with the aim
of increasing some aspect of performance.
Steel wire manufacturing is a fragmented industry with many small and medium
sized manufacturers and most of the steel wire manufacturers are privately owned and
owner driven.
Tata Steel Wire Division is a market leader in India and provides a wide range of
products all over India. Competition to WD in India is largely unorganized, fragmented and
regional. Most units are owner driven, operating in specific sectors and catering to nearby
regions only. WD competes for MTB with Rajratan in northern India, with Bedmutha for GI
wires in Western India, Aarti Steel for spring steel in North India etc.
54
2011
Thus Ratio analysis is has been carried out for all the major competitors to compare
their performance with that of the Wire Division. The major competitors for whom the ratio
analysis has been carried out are Rajratan Global Wires Limited, Usha Martin Limited,
Ramsarup Industries Limited, Aarti Steels Limited and Bedmutha Industries Ltd.
The information and the products profile of all the competitors has been given
below.
3.2.A) About The Competitors
Background
55
2011
A) About
Rajratan Global Wires Ltd
56
Rajratan Global Wire Ltd
Industry :Steel - WiresIncorporation Year 1988Chairman -Managing Director Sunil Chordia Company Secretary Vineet ChopraAuditor Fadnis & Gupte
Registered Office
Rajratan House, 11/2 Meera Path Dhenu Market, Indore, 452003, Madhya Pradesh
Telephone 91-0731-2533716/2546401Fax 91-0731-2542534E-mail [email protected] Website http://www.rgwl.co.inFace Value (Rs) 10BSE Code 517522BSE Group BNSE Code -Bloomberg RGW INReuters RAJR.BOISIN Demat INE451D01011Market Lot -Listing MumbaiFinancial Year End 3Book Closure Month JulAGM Month Aug
Registrar's Name & Address
Link Intime India Pvt Ltd, C-13 Pannalal Silk, Mills Cmpd LBS Marg, Bhandup West, Mumbai - 400 078.
91-022-25963838 91-022-25946969
2011
Rajratan Global Wire Limited (RGWL) is one of the leading manufacturers of High
Carbon Steel Wire in India, specializing in Automotive Tyre Bead Wire. High quality spring
and Rope Wires are other speciality products of the company.
RGWL has most modern factory at Pithampur which is 25 km from Indore, a
prominent industrial city in Central India. The quest for quality, excellence and progress
driven by the total dedication of a competent and professional team is the hallmark of
RGWL. With its “state of art” plant RGWL is equipped to produce high value steel wires with
precise product characteristics.
RGWL’s Tyre Bead Wire business in India has a global scale of operation and to take
the tradition of quality and excellence further, RGWL has formed a 100% subsidiary
company Rajratan Thai Wire Co. Ltd. (RTWL) and started an ultra modern facility to produce
Automotive Tyre Bead Wire in Thailand. This is a true step towards globalization efforts of
RGWL.
RGWL is an ISI TS 16949 (2002) certified company for its entire range of automotive
tyre bead wires.
B) Products
The major products manufactured by RGWL are as follows:
i) Tyre Bead
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2011
Tyre Bead Wire is a high carbon bronze coated steel wire used in all tyres. The main
function of bead wire is to hold the tyre on the rim and to resist the action the inflated
pressure, which constantly tries to force it off. The bead is the crucial link through which the
vehicle load is transferred from rim to the tyre. It significantly affects the safety, strength
and durability of tyres. Various standard sizes of Bead Wire are regularly manufactured by
RGWL. In addition Bead Wires in other sizes and higher tensile grades are also supplied as
per the specific customer requirement.
ii) PC Wires and Strands
The use of high tensile steel in prestressing concrete results in considerable saving of
cement and steel. Prestressed concrete wires and strands have found applications in
construction of bridges, silos, buildings, dams etc and in manufacture of mass produced
components like railway sleepers, water pipes, electricity poles, beams, hollow and solid
slabs etc.
58
2011
C) Financials
The balance sheet and profit and loss account for FY 2007 to FY 2010 are as follows:
RAJRATAN GLOBAL WIRES Ltd.(Profit & Loss Account)
Figures in Rs. Crores 2010 2009 2008 2007
INCOME
Sales and other operating income 195.33 175.50 118.88 109.20
Less: Excise duty 11.07 16.97 14.90 13.98
Net sales 184.26 158.53 103.98 95.22
Other income 0.82 0.36 1.71 1.65
TOTAL INCOME 185.08 158.89 105.69 96.87
EXPENDITURE
Raw Materials 123.33 111.41 77.25 60.45
Other Manufacturing expenses 37.19 31.17 19.50 26.33
Depreciation 6.01 4.93 3.00 2.76Less: Expenditure (other than interest) trnfd to
capital acc 0.00 0.00 0.00 0.00
Net Finance charges 7.12 8.43 4.45 2.64
TOTAL EXPENDITURE 173.65 155.94 104.20 92.18
Profit before tax and exceptional items 11.43 2.95 1.49 4.69
Extraordinary items -0.08 0.00 0.02 0.20
Profit before Tax(PBT) 11.51 2.95 1.47 4.49
Taxes 4.96 3.07 0.62 1.69
Current Tax 4.93 2.97 0.21 0.65
Deferred Tax 0.03 0.10 0.41 1.04
Fringe Benefit Tax 0.00 0.00 0.00 0.00
Profit After Tax 6.55 -0.12 0.85 2.80
adjustment below net profit -0.39 0.00 0.00 0.00
P&L balance brought forward -5.55 0.10 0.26 0.30
Amount available for appropriations 0.61 -0.02 1.11 3.10
Appropriations 5.76 5.53 1.03 3.21
Balance carried to B/S -5.23 -5.55 0.10 0.09
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2011
RAJRATAN GLOBAL WIRES Ltd.(Balance Sheet)Figures in Rs. Crores Mar-10 Mar-09 Mar-08 Mar-07
SOURCES OF FUNDS :Share Capital 4.35 4.35 4.35 4.35
Reserves Total 39.37 33.83 33.01 32.71Equity Share Warrants 0.00 0.00 0.00 0.00
Equity Application Money 0.00 0.00 0.00 0.00Total Shareholders Funds 43.72 38.18 37.36 37.06
Minority Interest 0.00 0.00 0.00 0.00Secured Loans 83.84 85.92 69.30 41.88
Unsecured Loans 4.89 3.90 4.74 2.01Total Loan Funds 88.73 89.82 74.04 43.89Current Account 0.00 0.00 0.00 0.00Total Liabilities 132.45 128.00 111.40 80.95
APPLICATION OF FUNDS :Gross Block 110.96 109.33 66.28 56.51
Less: Accumulated Depreciation 25.16 19.50 14.67 12.10Less: Impairment of Assets 0.00 0.00 0.00 0.00
Net Block 85.80 89.83 51.61 44.41Lease Adjustment 0.00 0.00 0.00 0.00
Capital Work in Progress 3.27 0.40 29.34 2.89Investments 0.20 0.20 0.20 0.20
Current Assets, Loans & AdvancesInventories 14.25 9.73 9.85 10.13
Sundry Debtors 37.01 29.88 25.64 24.31Cash and Bank 0.65 5.72 2.61 0.23
Loans and Advances 7.95 5.80 5.54 10.25Total Current Assets 59.86 51.13 43.64 44.92
Less : Current Liabilities and ProvisionsCurrent Liabilities 6.93 4.29 4.64 2.48
Provisions 1.36 0.91 0.51 1.19Total Current Liabilities 8.29 5.20 5.15 3.67
Net Current Assets 51.57 45.93 38.49 41.25Miscellaneous Expenses not written off 0.00 0.00 0.03 0.06
Deferred Tax Assets 0.00 0.00 0.00 0.00Deferred Tax Liability 8.39 8.36 8.27 7.86
Net Deferred Tax -8.39 -8.36 -8.27 -7.86Total Assets 132.45 128.00 111.40 80.95
Contingent Liabilities 0.01 0.89 2.29 0.73
60
2011
A) Background
Ramsarup Industries Ltd
Industry :Steel - WiresIncorporation Year 1979
Chairman Ashish JhunjhunwalaManaging DirectorCompany Secretary Gajendra Kumar Singh
Auditor P K Lilha & CoRegistered Office Hastings Chambers 1&2 Floor,
7C Kiran Shankar Roy Road,Kolkata, 700001, West Bengal
Telephone 91-33-22421200Fax 91-33-22421888
E-mail [email protected] Website http://www.ramsarup.com
Face Value (Rs) 10BSE Code 532690
BSE Group BNSE Code RAMSARUP
Bloomberg RAMI INReuters RASW.BO
ISIN Demat INE005D01015Market Lot 1
Listing Kolkata, Mumbai, NSEFinancial Year End 3
Book Closure Month SepAGM Month Sep
Registrar's Name & Address
Link Intime India Pvt Ltd, 59C Chowinghee Road, 3rd Flr, Kolkata-
700020.
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2011
B) About Ramsarup Industries Ltd.
Ramsarup group was founded in 1966 and has grown substantially in last four
decades. It is one of the largest manufacturers of Steel wires in Eastern India. Ramsarup
Industries Limited was incorporated in 1979 and is a profit making and dividend paying
company. The company is listed at National Stock Exchange, Bombay Stock Exchange and
Calcutta Stock Exchange. The company is engaged in manufacturing of wires, TMT bars and
Steel. The company has six units namely Ramsarup Industrial Corporation, Ramsarup
Nirmaan Wires, Ramsarup Lohh Udyog, Ramsarup Infrastructure, Ramsarup Utpadak and
Ramsarup Vidyut. Power is their major thrust area with almost 40% of the top line coming
from power sector.
Defence5%
Water Man-
agement10%
Railways5%
Roads and Bridges10%
Housing and con-struction
20%
Power40%
Other inc retail10%
C) Products
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2011
The major products produced at the Ramsarup Industrial Corporation unit include:
i) Galvanised Iron(Hot Dipped and Electroplated)
ii) Galvanised Steel Strand
iii) H.B. Wires for nails
iv) Cable Armour Wires
v) ACSR Core Wire Single
vi) ACSR Core Wire Stranded
vii) P.C. Wires
viii) P.C. Strands
ix) Spring Steel Wire
x) Telegraph wire
xi) Chain Rivet/Link wire and
xii) Cotton Bailing Wires
Other wire products manufactured at Ramsarup Nirmaan Wires Unit includes LRPC Wires
and Strands.
D) Financials
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2011
RAMSARUP INDUSTRIES Ltd. Profit and loss accounts
(All Figures in Rs. Crores) 2010 2009 2008 2007
INCOME
Sales and other operating income 2,056.95 1,948.85 1,824.13 1,304.73
Less: Excise duty 0.00 0.00 0.00 0.00
Net sales 2,056.95 1,948.85 1,824.13 1,304.73
Other income 0.27 11.89 1.10 1.34
TOTAL INCOME 2,057.22 1,960.74 1,825.23 1,306.07
EXPENDITURE
Raw Materials 1,765.99 1,615.62 1,560.00 1,198.93
Other Manufacturing expenses 84.45 337.56 97.41 9.10
Depreciation 37.12 29.45 22.43 11.34
Less: Expenditure (other than interest) trnfd to capital acc
0.00 0.00 0.00 0.00
Net Finance charges 107.01 90.50 49.23 25.14
TOTAL EXPENDITURE 1,994.57 2,073.13 1,729.07 1,244.51
Profit before tax and exceptional items 62.65 -112.39 96.16 61.56
Extraordinary items 0.00 0.00 0.00 0.00
Profit before Tax(PBT) 62.65 -112.39 96.16 61.56
Taxes 18.27 -37.38 34.18 18.00
Current Tax 0.38 0.00 14.66 19.55
Deferred Tax 17.89 -37.63 19.26 -1.63
Fringe Benefit Tax 0.00 0.25 0.26 0.08
Profit After Tax 44.38 -75.01 61.98 43.56
adjustment below net profit 0.00 0.00 0.00 0.00
P&L balance brought forward 0.39 10.40 0.46 0.14
Amount available for appropriations 44.77 -64.61 62.44 43.70
Appropriations 44.00 -65.00 52.04 43.24
Balance carried to B/S 0.77 0.39 10.40 0.46
RAMSARUP INDUSTRIES Ltd.(Balance Sheet)(All Figures in Rs. Crores) Mar-10 Mar-09 Mar-08 Mar-07
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2011
SOURCES OF FUNDS : Share Capital 62.04 39.54 39.53 21.96 Reserves Total 536.52 289.64 364.65 164.12 Equity Share Warrants 0.00 0.00 0.00 0.00 Equity Application Money 0.00 0.00 0.00 0.00 Total Shareholders Funds 598.56 329.18 404.18 186.08 Minority Interest 0.00 0.00 0.00 0.00 Secured Loans 1,613.93 1,521.59 696.64 165.50 Unsecured Loans 171.68 204.05 210.26 73.73 Total Loan Funds 1,785.61 1,725.64 906.90 239.23Current Account 0.00 0.00 0.00 0.00 Total Liabilities 2,384.17 2,054.82 1,311.08 425.31 APPLICATION OF FUNDS : Gross Block 709.41 425.61 406.42 151.60 Less: Accumulated Depreciation 132.66 106.73 77.14 53.80 Less: Impairment of Assets 0.00 0.00 0.00 0.00 Net Block 576.75 318.88 329.28 97.80 Lease Adjustment 0.00 0.00 0.00 0.00 Capital Work in Progress 961.25 1,124.31 433.66 6.87 Investments 0.00 0.00 0.00 0.00 Current Assets, Loans & Advances Inventories 440.84 269.18 516.18 278.02 Sundry Debtors 555.12 556.47 388.71 248.85 Cash and Bank 29.17 35.64 36.16 20.23 Loans and Advances 122.34 129.55 139.69 43.80 Total Current Assets 1,147.47 990.84 1,080.74 590.90 Less : Current Liabilities and Provisions Current Liabilities 289.31 386.28 499.37 257.61 Provisions 4.86 3.76 6.60 5.25 Total Current Liabilities 294.17 390.04 505.97 262.86 Net Current Assets 853.30 600.80 574.77 328.04 Miscellaneous Expenses not written off 0.15 0.23 0.39 0.36 Deferred Tax Assets 67.26 44.49 0.58 0.27 Deferred Tax Liability 74.54 33.89 27.60 8.03 Net Deferred Tax -7.28 10.60 -27.02 -7.76 Total Assets 2,384.17 2,054.82 1,311.08 425.31 Contingent Liabilities 145.83 96.19 46.08 33.17
65
2011
A) Background
Usha Martin Ltd
Industry :Steel – Wires Incorporation Year 1986 Chairman Prashant Jhawar Managing Director Rajeev Jhawar Company Secretary A K Somani Auditor Price Waterhouse Registered Office 2A Shakespeare Sarani,
Kolkata, 700071, West Bengal Telephone 91-33-22825816/39800300 Fax 91-33-22821660/39800400 E-mail [email protected] Website http://www.ushamartin.com Face Value (Rs) 1 BSE Code 517146 BSE Group B NSE Code USHAMART Bloomberg USM IN Reuters USBL.BO ISIN Demat INE228A01035 Market Lot 1 Listing Luxembourg, Mumbai, NSE Financial Year End - Book Closure Month Jul AGM Month Jul Registrar's Name & Address MCS Ltd, 77/2A Hazra Road, 3rd &
5th Floor, Kolkata - 700029.
91-33-24767350/54 91-33-24541961/24747
B) About Usha Martin Ltd.
Started in 1961 in Ranchi, Jharkhand as a wire rope manufacturing company, today
the Usha Martin Group is a Rs. 3000 crore conglomerate with a global presence. The group
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2011
has set new standards in the manufacture of wire rods, bright bars, steel wires, speciality
wires, wire ropes, strand, conveyor cord, wire drawing and cable machinery.
For Usha Martin, the path to sustainable growth was long; the management
constantly tried out innovative business practices. With initiative to diversify the customer
base by venturing into the international markets, moving up the value chain and fully
integrating its business process to maximize stakeholder value.
In 1979, the company set up a steel plant with wire rod rolling mill at Jamshedpur, to
benefit from business integration. This ensured a steady supply of steel for the manufacture
of value added products. Today, the Jamshedpur unit has a truly integrated speciality steel
manufacturing facility of 400,000 MT per annum. Out of which, about 50% is consumed
internally by its plant in Ranchi, Hoshiarpur & Bangkok, producing steel wire, steel strand,
steel cords, bright bar and steel wire ropes. All its manufacturing facilities are ISO 9000
certified and the steel plant was India’s first to receive the TPM Excellence Award from
JIPM, Japan.
With local success come global aspirations. Currently, the company has overseas
manufacturing operations in Thailand, UK, USA and Dubai. Besides a vast network of
distribution centres and marketing offices spread across the globe to support an ever
growing worldwide customer base. The company exports over 60% of the wire rope output
and about 20% of the total wire rods produced.
Usha Martin’s future plans are focused on its operation in Jharkhand – a state rich in
mineral resources. Future priorities include product mix enrichment, cost reduction and
infrastructural improvements. Already flourishing in its recent foray into mining operations,
the company is planning to invest in its iron ore and coal mines, sinter plant, pellet plant,
power plants, while also enhancing its steel making and value added products capacity with
an investment of Rs 2,100 Crores.
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2011
C) Products
Some important products manufacture by Usha Martin Ltd. Include
i) Coil and Bar
ii) Bright Bar
iii) Ropes
iv) Wires and Strands
v) Structural
vi) Sling
vii) Cord
viii) Tele Cables and
ix) Machinery
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2011
D) Financials
The Profit and loss account and Balance sheets for FY 2007 to FY 2010 are as follows:
Usha Martin Ltd.(Profit and loss Account)
All Figures in Rs. Crores 2010 2009 2008 2007
INCOME
Sales and other operating income 1,941.55 2,287.96 1,836.68 1,564.16
Less: Excise duty 109.64 179.98 197.42 169.45
Net sales 1,831.91 2,107.98 1,639.26 1,394.71
Other income 90.28 32.78 52.06 25.90
TOTAL INCOME 1,922.19 2,140.76 1,691.32 1,420.61
EXPENDITURE
Raw Materials 836.58 948.40 762.98 605.46
Other Manufacturing expenses 740.63 780.84 579.57 531.23
Depreciation 107.25 85.04 75.92 76.28
Less: Expenditure (other than interest) trnfd to capital acc
16.46 12.98 9.36 2.43
Net Finance charges 114.98 125.42 81.50 71.67
TOTAL EXPENDITURE 1,782.98 1,926.72 1,490.61 1,282.21
Profit before tax and exceptional items 139.21 214.04 200.71 138.40
Extraordinary items 0.03 0.14 3.93 6.49
Profit before Tax(PBT) 139.18 213.90 196.78 131.91
Taxes 47.00 67.49 55.88 36.92
Current Tax 0.00 91.00 51.03 25.86
Deferred Tax 47.00 -24.66 3.67 9.93
Fringe Benefit Tax 0.00 1.15 1.18 1.13
Profit After Tax 92.18 146.41 140.90 94.99
adjustment below net profit 0.00 0.00 0.00 0.00
P&L balance brought forward 34.36 42.08 20.92 41.40
Amount available for appropriations 126.54 188.49 161.82 136.39
Appropriations 85.45 154.27 123.67 121.96
Balance carried to B/S 41.12 34.36 42.08 20.92
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2011
USHA MARTIN Ltd.(Balance Sheet)
Mar-10 Mar-09 Mar-08 Mar-07 SOURCES OF FUNDS :
Share Capital 30.54 25.09 25.09 24.00 Reserves Total 1,469.15 991.18 840.41 693.67
Equity Share Warrants 0.00 0.00 0.00 0.00 Equity Application Money 0.00 0.00 33.50 0.00 Total Shareholders Funds 1,499.69 1,016.27 899.00 717.67
Minority Interest 0.00 0.00 0.00 0.00 Secured Loans 840.12 1,466.15 867.06 744.14
Unsecured Loans 0.00 0.00 76.14 5.23 Total Loan Funds 840.12 1,466.15 943.20 749.37Current Account 0.00 0.00 0.00 0.00 Total Liabilities 2,339.81 2,482.42 1,842.20 1,467.04
APPLICATION OF FUNDS :
Gross Block 3,170.72 1,938.34 1,680.72 1,573.93 Less: Accumulated Depreciation 907.49 801.83 720.94 655.17
Less: Impairment of Assets 14.08 14.08 14.08 18.75 Net Block 2,249.15 1,122.43 945.70 900.01
Lease Adjustment 0.00 0.00 0.00 0.00 Capital Work in Progress 608.39 1,208.64 503.38 197.06
Investments 186.95 186.35 165.80 160.08 Current Assets, Loans & Advances
Inventories 672.10 403.71 532.42 339.06 Sundry Debtors 167.49 322.85 256.35 226.91 Cash and Bank 10.30 76.47 46.36 37.08
Loans and Advances 284.46 301.98 436.47 238.08 Total Current Assets 1,134.35 1,105.01 1,271.60 841.13
Less : Current Liabilities and Provisions
Current Liabilities 1,625.76 981.30 860.96 464.59 Provisions 44.17 37.33 38.16 26.25
Total Current Liabilities 1,669.93 1,018.63 899.12 490.84 Net Current Assets -535.58 86.38 372.48 350.29
Miscellaneous Expenses not written off 0.00 0.73 1.61 3.04 Deferred Tax Assets 36.20 30.04 6.71 7.07
Deferred Tax Liability 205.30 152.15 153.48 150.51 Net Deferred Tax -169.10 -122.11 -146.77 -143.44
Total Assets 2,339.81 2,482.42 1,842.20 1,467.04 Contingent Liabilities 236.15 187.94 120.44 102.03
70
2011
A) Background
Aarti Steels Ltd
Industry :Steel - Medium / Small Incorporation Year 1979 Chairman - Managing Director Sohan Lal Mittal Company Secretary - Auditor N K Bector & Co Registered Office G T Road,
Miller Ganj, Ludhiana, 141003, Punjab
Telephone 91-161-2530408 Fax - E-mail [email protected] Website http://www.aartisteels.com Face Value (Rs) 100 BSE Code - BSE Group - NSE Code - Bloomberg - Reuters - ISIN Demat - Market Lot - Listing Not Listed Financial Year End 3 Book Closure Month AGM Month Sep
71
2011
B) About Aarti Steels Ltd.
Aarti group, which was incorporated in the year 1977, in the name of Aarti Steels
Limited, has taken rapid strides to emerge as one of North India’s leading manufacturers
and processors of steel. The company manufactures all grades of Carbon Steel and Alloy
Steels conforming to National and International specifications. The company’s customers
include OEM’s through their ancillaries or component supplies, reputed replacement market
vendors and government institutions like Railways, State Transport etc.
C) Products
The major products produced by the company include Billets, Roll Products, Wire
Products, Sponge Iron, Power and Ferro alloys.
The important wire products produced by the company are:
i) Auto Tyre Bead Wire
ii) H.C. Wire
iii) Steel Rope Wire
iv) Cycle Spoke Wire
v) Spring Steel Wire
vi) Rolling Quality Wire Galvanised
vii) H.T.G.S. Wire
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2011
D) Financials
Aarti Steels Limited (Profit and Loss Accounts)
All Figures in Rs. Crores 2010 2009 2008 2007
INCOME
Sales and other operating income721.81 863.08 782.99 688.45
Less: Excise duty47.81 80.55 92.95 94.51
Net sales674.00 782.53 690.04 593.94
Other income0.70 5.40 22.15 2.46
TOTAL INCOME674.70 787.93 712.19 596.40
EXPENDITURE
Raw Materials290.39 416.25 348.03 310.03
Other Manufacturing expenses244.91 258.94 243.43 204.49
Depreciation37.93 33.29 32.52 28.97
Less: Expenditure (other than interest) trnfd to capital acc 0.00 0.00 0.00 0.00
Net Finance charges29.74 36.00 32.83 27.67
TOTAL EXPENDITURE602.97 744.48 656.81 571.16
Profit before tax and exceptional items71.73 43.45 55.38 25.24
Extraordinary items0.03 -0.01 0.32 1.33
Profit before Tax(PBT)71.70 43.46 55.06 23.91
Taxes32.75 17.24 18.10 -2.13
Current Tax12.66 16.88 9.76 1.51
Deffered Tax20.09 0.20 8.21 -3.75
Fringe Benefit Tax0.00 0.16 0.13 0.11
Profit After Tax38.95 26.22 36.96 26.04
adjustment below net profit0.00 0.00 0.02 0.07
P&L balance brought forward0.05 0.09 0.24 0.05
Amount available for appropriations39.00 26.31 37.22 26.16
Appropriations39.00 26.25 37.45 27.25
Balance carried to B/S0.03 0.05 0.09 0.24
73
2011
AARTI STEELS Ltd. (Balance Sheets)All Figures in Rs. Crores Mar-10 Mar-09 Mar-08 Mar-07 SOURCES OF FUNDS :
Share Capital 10.81 11.16 11.16 11.07 Reserves Total 263.92 229.52 203.31 189.89
Equity Share Warrants 0.00 0.00 0.00 0.00 Equity Application Money 0.00 0.00 0.00 0.00 Total Shareholders Funds 274.73 240.68 214.47 200.96
Minority Interest 0.00 0.00 0.00 0.00 Secured Loans 391.95 246.73 306.32 310.23
Unsecured Loans 23.24 43.37 26.45 31.49 Total Loan Funds 415.19 290.10 332.77 341.72Current Account 0.00 0.00 0.00 0.00 Total Liabilities 689.92 530.78 547.24 542.68
APPLICATION OF FUNDS : Gross Block 650.03 482.13 433.80 390.49
Less: Accumulated Depreciation 203.67 166.63 134.06 101.75 Less: Impairment of Assets 0.00 0.00 0.00 0.00
Net Block 446.36 315.50 299.74 288.74 Lease Adjustment 0.00 0.00 0.00 0.00
Capital Work in Progress 52.29 71.18 21.43 27.74 Investments 2.30 2.30 1.43 17.08
Current Assets, Loans & Advances Inventories 131.84 89.12 116.40 113.55
Sundry Debtors 130.84 87.55 131.18 126.28 Cash and Bank 5.13 6.69 9.85 11.48
Loans and Advances 50.59 38.21 46.62 30.61 Total Current Assets 318.40 221.57 304.05 281.92
Less : Current Liabilities and Provisions Current Liabilities 66.09 36.49 38.12 41.18
Provisions 3.77 3.80 2.01 0.02 Total Current Liabilities 69.86 40.29 40.13 41.20
Net Current Assets 248.54 181.28 263.92 240.72 Miscellaneous Expenses not written off 0.01 0.01 0.01 0.00
Deferred Tax Assets 0.00 0.00 0.53 0.00 Deferred Tax Liability 59.58 39.49 39.82 31.60
Net Deferred Tax -59.58 -39.49 -39.29 -31.60 Total Assets 689.92 530.78 547.24 542.68
74
2011
Contingent Liabilities 19.71 35.89 7.78 17.34
A) Background
Industry :Steel - Wires Incorporation Year 1990 Chairman Kachardas R Bedmutha Managing Director Vijay K Vedmutha Company Secretary Nilesh Amrutkar Auditor Patil Hiran Jajoo & Co Registered Office A-32 STICE,
Sinnar, Nashik, 422103, Maharashtra
Telephone 91-2551-240481/631/068/069 Fax 91-2551-240482 E-mail [email protected] Website http://www.bedmutha.com Face Value (Rs) 10 BSE Code 533270 BSE Group B NSE Code BEDMUTHA Bloomberg BEDM IN Reuters BMIL.BO ISIN Demat INE844K01012 Market Lot 1 Listing Mumbai,NSE Financial Year End 3 Book Closure Month AGM Month - Registrar's Name & Address
Universal Capital Sec. Pvt Ltd, 21 Shakil Niwas, Mahakali Caves Road, Andheri (E), Mumbai - 400 093.
91-22-28207203 91-22-28207207
75
2011
B) About Bedmutha Industries Ltd.
Bedmutha Wires is a trusted name in wire/wire product Manufacturing having
established manufacturing capacity of 5000 mt/ month. The Manufacturing Plants are
equipped with the latest technology and resources to produce the best quality wire/wire
products as per Indian and International standards.
The company has their four manufacturing facility at Sinnar, Nasik. Two of their
plants namely Plant 1 manufacturing galvanized wires and Plant 2 manufacturing Binding
wire, PC Wire and Spring Steel Wire are certified under ISO 9001 from Bureau Veritas
Certification (India) Private Limited. The company has been a leading supplier to a large
number of leading corporate houses, Railway, Defence and other Government undertakings.
The products are approved by State Electricity boards, Power grid Corporation of India. The
company’s expedient delivery process is supported by its spacious warehouses strategically
located to cover the entire nation.
Bedmutha Industries Ltd was incorporated on August 23, 1990 as a private limited
company with the name Bedmutha Wire Company Pvt Ltd. In the year 1992, the company
started commercial production by setting up their first Galvanized Wire plant at Nasik with
an installed capacity of 3,600 MTPA. In the year 1994, they increased their installed capacity
from 3,600 MTPA to 6,100 MTPA by de-bottling of galvanized plant.
In the year 1997, the company set up their second galvanizing plant with an installed
capacity of 5,400 MTPA which increased their total installed capacity from 6,100 MTPA to
11,500 MTPA. In September 23, 1997, the company was converted into a public limited
company and the name of the company was changed to Bedmutha Wire Company Ltd.
In the year 2008, the company expanded the Wire & Wire Products Capacity from
18,000 MTPA to 42,100 MTPA. They also installed Wire Nails Capacity of 1800 MTPA and
stranding Capacity of 2400 MTPA. The company set up a Wind Mill in Karnataka with power
generation Capacity of 225 KW. Also, they increased the production capacity of Wire
Drawing from 42,100 to 60,000 MTPA.
During the year, the company invested 49% in Ashoka Pre-con Pvt Ltd along with
Ashoka Buildcon Ltd, to manufacture pre stress concrete products such as cement poles,
76
2011
RCC pipes, Cement Piles, railway sleepers etc. In July 01, 2008, the Consultancy Division, K.R.
Bedmutha & Techno Associates was spinned off into a separate entity named as 'K.R.
Bedmutha Techno Associates Pvt Ltd'. In August 2008, Ajay Wire Products Pvt Ltd,
Kamdhenu Wire Pvt Ltd and Shriram Wire Pvt Ltd were amalgamated with the company.
In the year 2009, the company acquired 51% stake in Kamlasha infrastructure and
Engineering Pvt. Ltd for implementation of turnkey contract of electrification. In November
18, 2009, the name of the company was changed from Bedmutha Wire Company Ltd to
Bedmutha Industries Ltd. In May 2010, the company entered into an MoU with Maharashtra
Government for the manufacturing of LRPC wires, Spring steel wires, GI wires and SS wires.
The cost of investment is estimated to be Rs 152.90 crore.
The company plans to set up a 36,000 tonnes per annum (tpa) manufacturing facility
for low relaxation pre-stress concrete (LRPC) wire and spring steel wire with installed
capacity of 18,000 tpa on 12 acres at Nasik in Maharashtra. They also plan to set up a hi-
tech galvanizing plant of 48,000 tpa and manufacturing of aluminium rods and conductors
with capacity of about 42,000 tpa.
C) Products
The major products manufactured by the company are:
i) Galvanised Steel & M.S. Wire
ii) Cable Armour Wire
iii) A.C.S.R Core Wire
iv) Stay and Earth Wire
v) Spring Steel Wire
vi) Binding Wire
vii) Barbed Wire and
viii) Wire nails
D) Financials
77
2011
Bedmutha Industries Ltd. (Profit & Loss Accounts)
All Figures in Rs. Crores 2010 2009 2008 2007
INCOME
Sales and other operating income149.50 146.79 114.54 72.51
Less: Excise duty0.00 0.00 0.00 0.00
Net sales149.50 146.79 114.54 72.51
Other income0.32 0.06 0.72 0.01
TOTAL INCOME149.82 146.85 115.26 72.52
EXPENDITURE
Raw Materials116.42 112.50 86.89 54.13
Othet Manufacturing expenses7.75 16.66 17.00 14.47
Depriciation3.70 2.64 2.16 0.85
Less: Expenditure (other than interest) trnfd to capital acc 0.00 0.00 0.00 0.00
Net Finance charges6.69 4.28 4.38 2.48
TOTAL EXPENDITURE134.56 136.08 110.43 71.93
Profit before tax and exceptional items15.26 10.77 4.83 0.59
Extraordinary items0.00 -0.07 0.00 0.00
Profit before Tax(PBT)15.26 10.84 4.83 0.59
Taxes5.30 3.74 1.22 0.32
Current Tax4.35 2.72 0.52 0.25
Deffered Tax0.95 0.98 0.64 0.04
Fringe Benefit Tax0.00 0.04 0.06 0.03
Profit After Tax9.96 7.10 3.61 0.27
adjustment below net profit0.00 0.00 0.00 0.00
P&L balance brought forward9.77 3.79 1.49 1.60
Amount available for appropriations19.73 10.89 5.10 1.87
Appropriations3.71 1.05 1.31 0.38
Balance carried to B/S16.02 9.77 3.79 1.49
BEDMUTHA INDUSTRIES Ltd.
78
2011
All Figures in Rs. Crores Mar-10 Mar-09 Mar-08 Mar-07 SOURCES OF FUNDS :
Share Capital 12.03 9.00 9.00 3.35 Reserves Total 16.35 10.06 4.09 4.12
Equity Share Warrants 0.00 0.00 0.00 0.00 Equity Application Money 0.00 0.00 0.00 0.00 Total Shareholders Funds 28.38 19.06 13.09 7.47
Minority Interest 0.00 0.00 0.00 0.00 Secured Loans 71.49 38.16 36.46 23.90
Unsecured Loans 10.57 9.19 8.06 4.70 Total Loan Funds 82.06 47.35 44.52 28.60Current Account 0.00 0.00 0.00 0.00 Total Liabilities 110.44 66.41 57.61 36.07
APPLICATION OF FUNDS :
Gross Block 53.28 39.87 31.36 12.79 Less: Accumulated Depreciation 20.14 16.45 14.25 7.13
Less: Impairment of Assets 0.00 0.00 0.00 0.00 Net Block 33.14 23.42 17.11 5.66
Lease Adjustment 0.00 0.00 0.00 0.00 Capital Work in Progress 2.52 0.00 0.34 0.41
Investments 2.11 0.19 0.17 0.11 Current Assets, Loans & Advances
Inventories 41.25 16.12 19.19 11.99 Sundry Debtors 33.69 21.66 17.55 11.53 Cash and Bank 4.63 6.83 4.78 3.51
Loans and Advances 33.90 14.05 10.52 5.64 Total Current Assets 113.47 58.66 52.04 32.67
Less : Current Liabilities and Provisions
Current Liabilities 34.70 10.48 9.79 1.94 Provisions 5.08 3.82 1.15 0.25
Total Current Liabilities 39.78 14.30 10.94 2.19 Net Current Assets 73.69 44.36 41.10 30.48
Miscellaneous Expenses not written off 2.14 0.64 0.11 0.06 Deferred Tax Assets 0.30 0.00 0.52 0.00
Deferred Tax Liability 3.46 2.20 1.74 0.65 Net Deferred Tax -3.16 -2.20 -1.22 -0.65
Total Assets 110.44 66.41 57.61 36.07 Contingent Liabilities 57.13 10.56 7.08 8.53
79
2011
3.2. B) Competitors’ Comparison with TSWD
Liquidity Ratios
A) Current Ratio
Mar/10Mar/09Mar/08Mar/070
0.5
1
1.5
2
2.5CURRENT RATIO
RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIESUSHA MARTIN Ltd. AARTI STEELS Ltd.BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISIONINDUSTRY AVERAGE
Current Ratio
Mar-07 Mar-08 Mar-09 Mar-10RAJRATAN GLOBAL WIRES 2.15 1.50 1.61 1.41
RAMSARUP INDUSTRIES 1.46 1.45 1.04 1.26
USHA MARTIN Ltd. 1.36 1.20 0.85 0.68
AARTI STEELS Ltd. 1.54 1.48 2.09 1.33
BEDMUTHA INDUSTRIES LTD. 1.49 1.33 1.36 1.20
TATA STEEL WIRE DIVISION 1.95 1.46 1.46 0.97
INDUSTRY AVERAGE 1.17 1.08 1.07 1.42
B) Quick Ratio7
7 Due to unavailability of the Industry average, the average of the companies considered is used
80
2011
Mar/10Mar/09Mar/08Mar/0700.511.522.533.544.55
ACID TEST RATIO
RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIESUSHA MARTIN Ltd. AARTI STEELS Ltd.BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISIONAVERAGE OF THE COMPANIES
Quick RatioMar-07 Mar-08 Mar-09 Mar-10
RAJRATAN GLOBAL WIRES 1.66 1.16 1.30 1.08RAMSARUP INDUSTRIES 0.77 0.76 0.76 0.77
USHA MARTIN Ltd. 0.81 0.70 0.54 0.28AARTI STEELS Ltd. 4.09 4.68 1.25 0.78
BEDMUTHA INDUSTRIES LTD. 0.94 0.84 0.99 0.76TATA STEEL WIRE DIVISION 1.05 0.70 0.57 0.39
AVERAGE OF THE COMPANIES 1.55 1.47 0.90 0.68
C) Cash Ratio8
8 Due to unavailability of the Industry average, the average of the companies considered is used
81
2011
Mar/10Mar/09Mar/08Mar/07-0.05
0
0.05
0.1
0.15
0.2
0.25
0.3
CASH RATIO
RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIESUSHA MARTIN Ltd. AARTI STEELS Ltd.BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISIONAVERAGE OF THE COMPANIES
Cash RatioMar-07 Mar-08 Mar-09 Mar-10
RAJRATAN GLOBAL WIRES 0.01 0.09 0.18 0.02RAMSARUP INDUSTRIES 0.05 0.05 0.04 0.03
USHA MARTIN Ltd. 0.06 0.04 0.06 0.01AARTI STEELS Ltd. 0.28 0.25 0.06 0.02
BEDMUTHA INDUSTRIES LTD. 0.16 0.12 0.16 0.05TATA STEEL WIRE DIVISION 0.10 0.02 0.01 -0.01
AVERAGE OF THE COMPANIES 0.11 0.09 0.08 0.02
Coverage Ratios
82
2011
A) Interest Coverage Ratio
Mar/10Mar/09Mar/08Mar/07-1
0
1
2
3
4
5
6INTEREST COVERAGE RATIO
RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIES USHA MARTIN Ltd.AARTI STEELS Ltd. BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISIONINDUSTRY AVERAGE
Interest Coverage RatioMar-07 Mar-08 Mar-09 Mar-10
RAJRATAN GLOBAL WIRES 2.70 1.33 1.35 2.62RAMSARUP INDUSTRIES 3.45 2.95 -0.24 1.59
USHA MARTIN Ltd. 2.84 3.41 2.71 2.21AARTI STEELS Ltd. 1.86 2.68 2.21 3.41
BEDMUTHA INDUSTRIES LTD. 1.24 2.10 3.53 3.28TATA STEEL WIRE DIVISION 2.98 4.04 0.31 5.40
INDUSTRY AVERAGE 3.33 2.01 2.26 1.67
Turnover Ratios
83
2011
A) Inventory Turnover Ratio9
Mar/10Mar/09Mar/08Mar/070
5
10
15
20
25INVENTORY TURNOVER RATIO
RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIES USHA MARTIN Ltd.AARTI STEELS Ltd. BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISIONINDUSTRY AVERAGE
Inventory Turnover Ratio
Mar-07 Mar-08 Mar-09 Mar-10
RAJRATAN GLOBAL WIRES 9.53 10.41 16.19 15.37
RAMSARUP INDUSTRIES 4.69 4.59 4.96 5.79
USHA MARTIN Ltd. 4.11 3.76 4.50 3.41
AARTI STEELS Ltd. 5.23 6.00 7.62 6.10
BEDMUTHA INDUSTRIES LTD.
6.05 7.35 8.31 5.21
TATA STEEL WIRE DIVISION
17.67 17.00 20.10 17.26
INDUSTRY AVERAGE 8.72 4.24 8.25 7.48
9 Net sales instead of COGS is used for the calculation of ratio
84
2011
B) Inventory Holding Period
Mar/10Mar/09Mar/08Mar/070
20
40
60
80
100
120
INVENTORY HOLDING PERIOD
RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIES USHA MARTIN Ltd.AARTI STEELS Ltd. BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISIONINDUSTRY AVERAGE
Inventory Holding PeriodMar-07 Mar-08 Mar-09 Mar-10
RAJRATAN GLOBAL WIRES 38.29 35.07 22.54 23.75RAMSARUP INDUSTRIES 77.78 79.46 73.55 63.00
USHA MARTIN Ltd. 88.73 97.02 81.05 107.18AARTI STEELS Ltd. 69.78 60.82 47.93 59.83
BEDMUTHA INDUSTRIES LTD.
60.36 49.68 43.90 70.03
TATA STEEL WIRE DIVISION 20.66 21.47 18.16 21.14INDUSTRY AVERAGE 41.86 86.08 44.24 48.80
C) Debtors’ Turnover Ratio10
10 Net sales is used due to unavailability of the credit sales
85
2011
Mar/10Mar/09Mar/08Mar/0705101520253035404550
DEBTOR TURNOVER RATIO
RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIES USHA MARTIN Ltd.AARTI STEELS Ltd. BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISION#REF! INDUSTRY AVERAGE
Debtors Turnover RatioMar-07 Mar-08 Mar-09 Mar-10
RAJRATAN GLOBAL WIRES 3.92 4.16 5.71 5.51RAMSARUP INDUSTRIES 6.04 5.72 4.12 3.70
USHA MARTIN Ltd. 6.56 6.78 7.28 7.47AARTI STEELS Ltd. 5.43 5.36 7.16 6.17
BEDMUTHA INDUSTRIES LTD.
6.43 7.88 7.49 5.40
TATA STEEL WIRE DIVISION 23.95 27.26 43.94 43.35INDUSTRY AVERAGE 5.81 2.56 4.74 4.94
D) Average Collection Period
86
2011
Mar/10Mar/09Mar/08Mar/070
20
40
60
80
100
120
140
160AVERAGE COLLECTION PERIOD(DAYS)
RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIES USHA MARTIN Ltd.AARTI STEELS Ltd. BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISIONINDUSTRY AVERAGE
Average Collection PeriodMar-07 Mar-08 Mar-09 Mar-10
RAJRATAN GLOBAL WIRES 93.19 87.67 63.91 66.25RAMSARUP INDUSTRIES 60.48 63.79 88.51 98.62
USHA MARTIN Ltd. 55.63 53.80 50.14 48.85AARTI STEELS Ltd. 67.26 68.09 51.01 59.13
BEDMUTHA INDUSTRIES LTD. 56.76 46.33 48.75 67.57TATA STEEL WIRE DIVISION 15.24 13.39 8.31 8.42
INDUSTRY AVERAGE 62.82 142.58 77.00 73.89
E) Fixed Assets Turnover Ratio
87
2011
Mar/10Mar/09Mar/08Mar/070
2
4
6
8
10
12
14
16FIXED ASSETS TURNOVER RATIO
RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIES USHA MARTIN Ltd.AARTI STEELS Ltd. BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISIONINDUSTRY AVERAGE
Fixed Assets Turnover RatioMar-07 Mar-08 Mar-09 Mar-10
RAJRATAN GLOBAL WIRES 2.14 2.17 2.24 2.10RAMSARUP INDUSTRIES 13.34 8.54 6.01 4.59
USHA MARTIN Ltd. 1.55 1.78 2.04 1.09AARTI STEELS Ltd. 2.06 2.35 2.54 1.77
BEDMUTHA INDUSTRIES LTD. 12.81 10.06 7.24 5.29TATA STEEL WIRE DIVISION 11.33 10.43 9.85 5.48
INDUSTRY AVERAGE 2.36 1.12 1.70 1.56
F) Total Assets Turnover Ratio11
11 Average of the companies is used due to unavailability of the industry average
88
2011
Mar/10Mar/09Mar/08Mar/070
1
2
3
4
5
6
7
8
9TOTAL ASSETS TURNOVER RATIO
RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIESUSHA MARTIN Ltd. AARTI STEELS Ltd.BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISIONAVERAGE OF THE COMPANIES
Total Assets Turnover Ratio
Mar-07 Mar-08 Mar-09 Mar-10
RAJRATAN GLOBAL WIRES 1.18 1.08 1.32 1.41
RAMSARUP INDUSTRIES 3.60 2.10 1.16 0.93
USHA MARTIN Ltd. 1.02 0.99 0.97 0.76
AARTI STEELS Ltd. 1.09 1.27 1.45 1.10
BEDMUTHA INDUSTRIES LTD. 2.01 2.45 2.37 1.69
TATA STEEL WIRE DIVISION 6.76 6.94 7.73 5.06
AVERAGE OF THE COMPANIES 2.61 2.47 2.50 1.83
Profitability Ratios12
12 Profit margins for TSWD are low because the raw material is supplied at the transfer price
89
2011
A) EBITDA Margin
Mar/10Mar/09Mar/08Mar/070.000%
5.000%
10.000%
15.000%
20.000%
25.000%EBITDA MARGIN
RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIES USHA MARTIN Ltd.AARTI STEELS Ltd. BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISIONINDUSTRY AVERAGE
EBITDA Margin Mar-07 Mar-08 Mar-09 Mar-10
RAJRATAN GLOBAL WIRES 10.39% 8.58% 10.29% 13.37%RAMSARUP INDUSTRIES 7.51% 9.20% 0.39% 10.05%
USHA MARTIN Ltd. 20.07% 21.61% 20.13% 19.73%AARTI STEELS Ltd. 13.56% 17.45% 14.41% 20.68%
BEDMUTHA INDUSTRIES LTD. 5.41% 9.93% 12.10% 17.16%TATA STEEL WIRE DIVISION 3.61% 4.60% 0.79% 4.88%
INDUSTRY AVERAGE 9.15% 9.95% 10.98% 7.43%
B) Net Profit Margin13
13 Average of the companies is used due to unavailability of the industry average
90
2011
Mar/10Mar/09Mar/08Mar/07
-6.000%
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
8.000%
10.000%NET PROFIT MARGIN
RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIESUSHA MARTIN Ltd. AARTI STEELS Ltd.BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISIONAVERAGE OF THE COMPANIES
Net Profit MarginMar-07 Mar-08 Mar-09 Mar-10
RAJRATAN GLOBAL WIRES 2.94% 0.82% -0.08% 3.55%RAMSARUP INDUSTRIES 3.34% 3.40% -3.85% 2.16%
USHA MARTIN Ltd. 6.81% 8.60% 6.95% 5.03%AARTI STEELS Ltd. 4.38% 5.36% 3.35% 5.78%
BEDMUTHA INDUSTRIES LTD. 0.37% 3.15% 4.84% 6.66%TATA STEEL WIRE DIVISION 2.89% 3.92% 0.24% 4.08%
AVERAGE OF THE COMPANIES 3.46% 4.21% 1.91% 4.54%
C) Return on Assets14
14 Average of the companies is used due to unavailability of the industry average
91
2011
Mar/10Mar/09Mar/08Mar/07
-10.000%
-5.000%
0.000%
5.000%
10.000%
15.000%
20.000%
25.000%
30.000%RETURN ON ASSETS
RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIESUSHA MARTIN Ltd. AARTI STEELS Ltd.BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISIONAVERAGE OF THE COMPANIES
Return on AssetsMar-07 Mar-08 Mar-09 Mar-10
RAJRATAN GLOBAL WIRES 3.46% 0.88% -0.10% 5.03%RAMSARUP INDUSTRIES 12.03% 7.14% -4.46% 2.00%
USHA MARTIN Ltd. 6.94% 8.52% 6.77% 3.82%AARTI STEELS Ltd. 4.80% 6.78% 4.86% 6.38%
BEDMUTHA INDUSTRIES LTD. 0.75% 7.71% 11.45% 11.26%TATA STEEL WIRE DIVISION 19.56% 27.21% 1.87% 20.63%
AVERAGE OF THE COMPANIES 7.92% 9.71% 3.40% 8.19%
D) Earning Power
92
2011
Mar/10Mar/09Mar/08Mar/07
-5.000%
0.000%
5.000%
10.000%
15.000%
20.000%
25.000%
30.000%EARNING POWER
RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIESUSHA MARTIN Ltd. AARTI STEELS Ltd.BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISIONAVERAGE OF THE COMPANIES
Note: Earning Power for the Wires industry was not available
Earning PowerMar-07 Mar-08 Mar-09 Mar-10
RAJRATAN GLOBAL WIRES 8.81% 6.16% 9.51% 14.31%RAMSARUP INDUSTRIES 23.94% 16.75% -1.30% 7.64%
USHA MARTIN Ltd. 14.87% 16.82% 15.69% 10.54%AARTI STEELS Ltd. 10.00% 16.13% 14.74% 16.62%
BEDMUTHA INDUSTRIES LTD. 9.42% 19.66% 24.38% 24.82%TATA STEEL WIRE DIVISION 19.56% 27.21% 1.87% 20.63%
AVERAGE OF THE COMPANIES 14.43% 17.12% 10.82% 15.76%
E) Return On Invested Capital (ROIC)
93
2011
Mar/10Mar/09Mar/08Mar/07
-40.00%
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
140.00%ROIC
RAJRATAN GLOBAL WIRES RAMSARUP INDUSTRIESUSHA MARTIN Ltd. AARTI STEELS Ltd.BEDMUTHA INDUSTRIES LTD. TATA STEEL WIRE DIVISIONAVERAGE OF THE COMPANIES
Note: ROIC for the Wires industry was not available
Return on Invested CapitalMar-07 Mar-08 Mar-09 Mar-10
RAJRATAN GLOBAL WIRES 6.85% 5.88% 11.22% 13.14%RAMSARUP INDUSTRIES 20.37% 32.45% -25.42% 128.24%
USHA MARTIN Ltd. 15.18% 20.98% 52.55% 22.17%AARTI STEELS Ltd. 9.72% 12.44% 15.24% 18.79%
BEDMUTHA INDUSTRIES LTD. 8.54% 18.09% 23.79% 24.81%TATA STEEL WIRE DIVISION 22.00% 29.00% 10.00% 30.00%
AVERAGE OF THE COMPANIES 13.78% 19.80% 14.56% 39.52%
3.3 Comparison With The Global Wires Entities
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2011
Wire division is the market leader and pioneer in wire manufacturing in India over
the past 50 years, Established in 1958 as steel wire manufacturing company it was taken
over by Tata Steel in 1984. In 2002 wire division became a separate profit centre under long
product division (Tata Steel). Year 2008 saw the wire division become a part of global wire
business (Tata Steel). The global wires business was created to bring about integration in
Tata Steel group’s various businesses and also for developing the wire business globally.
Tata Steel Global Wires comprises of
i) Tata Steel Wire Division (India)
ii) Siam Industrial Wires (Thailand)
iii) Lanka Special Steels Limited (Sri Lanka)
iv) Wuxi Jinyang Metal Products Co. Limited (China)
v) Indian Steel and Wire Products (ISWP)
Given below is brief information on Tata Steel’s Global Wires entities and
comparison of their performance with Tata Steel Wire Division.
3.3. A) About the Global Wires Entities 95
2011
A) About Lanka Special Steels Limited
Lanka Special Steels Limited, located in Sri Lanka is part of Tata Steel’s Global Wires
Business. It was incorporated in November 2003 out of Tata Steel’s first overseas
acquisition.
Lanka SSL is the sole manufacturer of GI wires in Sri Lanka and caters to the
commercial galvanised wires market for end uses like barbed wires, wire meshes and chain
links. LSSL’s current product mix of GI wires range from 1.6mm to 4.0mm in thickness and
zinc coating of 40 - 100 gsm.
The Company enjoys a market leadership position in the segments that it serves and
its future plans include getting into value added wires of medium and heavy coating. It also
plans to get into downstream products like barbed wires.
As a part of Global Wires, LSSL is committed to improve its business processes, learn
and adopt business practices from the Tata Steel Group and instill and practice the group’s
culture of safety.
Lanka Special Steels Limited is well poised to reap the benefits of the expected
economic growth in Sri Lanka, and therefore will be in a position to consolidate its market
share in Sri Lanka and significantly contribute to the Global Wires Business.
B) Products
GI Wires is the major product manufactured by Lanka Special Steels Limited.
Galvanised Iron (GI) Wire is used in a host of applications which include vineyards, welded
mesh for poultry farms, gabions for soil protection, chain link, barbed wire and concertina
96
2011
wire for fencing, stay wire and earth wire in the power industry, pail handles, wire mesh,
stitching wire, Bale Tie Wire etc.
C) Financials
The financial statements of LSSL from the Financial Year 2008 to 2011 are as follows:
LANKA SPECIAL STEELS LTD.(LSSL) Profit and Loss Accounts
SLR MILLIONMar-11 Mar-10 Mar-09 Mar-08
INCOME
Sales and other operating income 1388.29
1120.55
1102.13 1225.41
Less: Excise duty174.38 144.64 124.77 144.13
Net sales 1213.91 975.91 977.36 1081.28
Other income6.88 13.29 8.54 0.00
TOTAL INCOME 1220.79 989.20 985.90 1081.28
EBITDA151.88 102.73 52.18 82.14
Depreciation8.97 6.89 6.87 6.40
Amortisation0.00 0.00 0.00 0.00
EBIT142.91 95.84 45.31 75.74
Interest2.06 5.21 11.25 19.70
PBT140.85 90.63 34.06 56.04
Taxes23.57 10.43 6.74 0.00
PAT117.28 80.20 27.32 56.04
NOPAT119.34 85.41 38.57 75.74
97
2011
LANKA SPECIAL STEELS LTD.(LSSL) Balance Sheets
SLR MILLION Mar-11 Mar-10 Mar-09 Mar-08 SOURCES OF FUNDS :
Share Capital 25.00 25.00 25.00 25.00 Reserves Total 250.20 132.31 52.39 46.74
Equity Share Warrants 0.00 0.00 0.00 0.00 Equity Application Money 0.00 0.00 0.00 0.00 Total Shareholders Funds 275.20 157.31 77.39 71.74
Minority Interest 0.00 0.00 0.00 0.00 Secured Loans 10.12 22.26 34.40 74.90
Unsecured Loans 0.00 0.00 0.00 0.00 Total Loan Funds 10.12 22.26 34.40 74.90Current Account 0.00 0.00 0.00 0.00
Others(Deffered Tax) 18.46 20.18 19.78 0.00 Total Liabilities 303.78 199.75 131.57 146.64
APPLICATION OF FUNDS :
Gross Block 200.86 164.64 141.50 135.24 Less: Accumulated Depreciation 48.10 39.15 32.30 25.36
Less: Impairment of Assets 0.00 0.00 0.00 0.00 Net Block 152.76 125.49 109.20 109.88
Investments 0.00 0.00 0.00 0.00 Current Assets, Loans & Advances
Inventories 147.32 194.14 98.26 159.54 Sundry Debtors 74.31 24.89 36.42 61.40
Other Assets 0.00 0.00 0.00 0.00 Cash and Bank 198.77 127.73 43.05 7.11
Loans and Advances 31.14 38.83 23.75 44.70 Total Current Assets 451.54 385.59 201.48 272.75
Current Liabilities and Provisions 300.51 311.33 179.11 235.99 Net Current Assets 151.03 74.26 22.37 36.76
Miscellaneous Expenses not written off 0.00 0.00 0.00 0.00 Total Assets 303.79 199.75 131.57 146.64
98
2011
A) About SIW
Established in 1974, The Siam Industrial Wire Co. Ltd. (SIW) is today a part of Tata
Steel Global Wires Business and one of the world’s leading manufacturers of steel wire.
Located on a 25-acre site in Rayong, Thailand with an annual production of 200,000 metric
tonnes, SIW is one of Asia’s largest manufacturers of pre-stressed concrete products and is a
member of both NatSteel Holdings and The Tata Steel Group. Its sophisticated wire
manufacturing technology allows SIW to create high-quality steel wire products for a large
customer base. SIW combines strength and skill leading to creation of high standards that
have been recognised by leading international quality accreditation agencies. SIW
manufactures pre-stressed concrete stands, pre-stressed concrete wires, cold drawn wires,
hard drawn wires and welded wire meshes and distributes these quality products
throughout Europe, Oceania, Middle East, America, Africa and Asia.
SIW products are manufactured in accordance with international standards and are
tested and approved by international accreditation institutes and laboratories. All of its
products can be manufactured in special grade production to meet customer’s
specifications. Siam Industrial Wire is a vital strand in the overall strength of many
construction masterworks.
Through its Corporate Social Responsibility programme, Siam Industrial Wire
commits substantial resources to improving and sustaining a healthy community
environment. Involvement, education, safety and the three R’s of environmentalism –
reduce, reuse and recycle – are all vital elements in community and social development. The
involvement and commitment to improving the quality of life in the community is evidenced
in a variety of projects and programs, creating a benchmark in corporate citizenship.
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2011
In 2009, SIW has been the proud recipient of 5 national awards for outstanding
performance - Award for Labour Relation & Welfare, Good Governance Award for
Environment, CSR-DIW : Corporate Social Responsibility - Department of Industrial Work,
Thai Labour Standard - TLS: 8001-2003 and the Thai Chamber of Commerce Business Ethics
Standard Test Award 2009 - TCC BEST Award 2009.
B) Products
Pre compressed Strands and Wires are the major products manufactured by The
Siam Industrial Wire Co. Ltd.
i) PC Strands
Pre-stressed Concrete (PC) Stranded wires are used in Pre-stressed concrete girders
for road, river & railway bridges and flyovers, pre-stressed atomic reactor domes, slabs,
silos, hangars, aquaducts, high rise buildings, viaducts and railway sleepers.
ii) PC Wires
Pre-stressed concrete wires find applications in Electric Pole reinforcement, as
reinforcement in pre-stressed Concrete and in Pipes Railway Sleepers.
100
2011
C) Financials
SIAM INDUSTRIAL WIRE, THAILAND(SIW) Profit and Loss Accounts
USD MILLIONMar-11 Mar-10 Mar-09 Mar-08
INCOME
Sales and other operating income163.07 128.67 135.27 143.47
Less: Excise duty0.00 0.00 0.00 0.00
Net sales163.07 128.67 135.27 143.47
Other income0.00 0.14 -0.64 0.41
TOTAL INCOME163.07 128.81 134.63 143.88
EBITDA13.30 12.11 7.67 16.37
Depriciation3.00 2.78 2.07 2.10
Amortisation0.14 0.14 0.11 0.11
EBIT10.16 9.19 5.49 14.16
Interest-0.34 -0.20 -0.19 0.09
PBT10.50 9.39 5.68 14.07
Taxes2.40 2.16 0.93 2.02
101
2011
PAT8.10 7.23 4.75 12.05
NOPAT7.76 7.03 4.56 12.14
SIAM INDUSTRIAL WIRE, THAILAND(SIW) Balance Sheets
USD MILLION Mar-11 Mar-10 Mar-09 Mar-08 SOURCES OF FUNDS :
Share Capital 8.50 8.00 7.30 8.20 Reserves Total 75.80 63.50 51.20 52.40
Equity Share Warrants 0.00 0.00 0.00 0.00 Equity Application Money 0.00 0.00 0.00 0.00 Total Shareholders Funds 84.30 71.50 58.50 60.60
Minority Interest 0.00 0.00 0.00 0.00 Secured Loans 0.00 0.00 0.00 0.00
Unsecured Loans 0.00 0.00 0.00 0.00 Total Loan Funds 0.00 0.00 0.00 0.00Current Account 0.00 0.00 0.00 0.00
Others(Deffered Tax) 0.00 0.00 0.00 0.00 Total Liabilities 84.30 71.50 58.50 60.60
APPLICATION OF FUNDS :
Gross Block 49.60 44.90 40.60 38.40 Less: Accumulated Depreciation 31.20 26.70 22.40 23.30
Less: Impairment of Assets 0.00 0.00 0.00 0.00 Net Block 18.40 18.20 18.20 15.10
Investments 0.00 0.00 0.00 0.00 Current Assets, Loans & Advances
Inventories 20.70 15.00 13.50 26.70 Sundry Debtors 26.00 38.20 11.00 29.10
Other Assets 0.00 0.00 2.00 2.80 Cash and Bank 34.50 3.80 21.10 1.40
102
2011
Loans and Advances 0.00 1.60 0.00 0.00 Total Current Assets 81.20 58.60 47.60 60.00
Current Liabilities and Provisions 15.30 5.30 7.30 14.40 Net Current Assets 65.90 53.30 40.30 45.60
Miscellaneous Expenses not written off 0.00 0.00 0.00 0.00 Total Assets 84.30 71.50 58.50 60.70
A) About WJMP
Wuxi Jinyang Metal Products (WJMP) is a proud member of the Global Wires
Business of the Tata Steel Group. Established in 1992, the company became a part of the
Tata Steel family as a NatSteel Asia subsidiary company in 2005.
Situated in Wuxi, in the Jiangsu province in China, the Company has a total capacity
to manufacture 120,000 tonnes of wire products annually. The product repertoire at WJMP
consists of Pre-stressed Concrete Strands, Pre-stressed Concrete Wires and Pre-stressed
Concrete Bars. The company is a leading exporter out of China with products being exported
to more than 20 countries across five continents. WJMP caters to the customers in the
infrastructure construction segments of municipal projects, high-rise buildings, overpass and
bridges, highways, tunnels, LNG terminals and nuclear power stations.
WJMP currently has a turnover of RMB 574 million and employs 285 people at its
premises in Wuxi. The Company prides itself on its quality practices and is recognised by
International Quality certification bodies like CARES (UK), ACRS (Australia), TUV (Germany),
DCL (Dubai), PSI Homologation (Israel) and CQC and CNAS (China). It has also been
recognised by ISO9000 (Quality System), ISO 14001 (Environment system) and JIS (Japan).
The Company is also in the process for BIS (India) certification.
103
2011
WJMP has been involved in a number of prestigious projects in China as well as
internationally. Internationally it has supplied wires for the Redevelopment of Eden Park
Stadium (New Zealand), Bellagio Hotel and Marriott Grand Chateau Hotel (USA), Kallang
Leisure Park (Singapore) and LRT project (Dubai). Domestically it has been supplying to a
number of bridge and highway projects throughout China. This year, due to the slowdown in
the export demand, the Company concentrated on the domestic market to sustain sales
performance.
WJMP has initiated and implemented numerous systems and processes to integrate
itself with the Tata Steel Group. The Company began on the Safety Excellence journey
earlier this year. The Company has actively imbibed the Tata Code of Conduct in its
functioning, by appointing an ethics counsellor and initiating ethics trainings. WJMP has also
progressively adopted the Tata Business Excellence Model and has applied for the JNT
assessment in the year 2010. The Company has also trained its employees on Daily
management practices and is in the process of implementing the model.
The Company aspires to be a world-class quality manufacturer of PC products and
have leadership position in exports from China. The Company contributes to assist and is
constantly guided by and the Global Wires Business and the Tata Steel Group to achieve
their goals.
B) Products
The products manufactured by WJMP are
i) Pre-stressed Concrete Strands
ii) Pre-stressed Concrete Wires and
iii) Pre-stressed Concrete Bars
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2011
C) Financials
WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) Profit & Loss Accounts
USD MILLION Mar-11 Mar-10 Mar-09 Mar-08INCOME
Sales and other operating income
57.55 59.26 83.11 64.69 Less: Excise duty
0.00 0.00 0.00 0.00Net sales
57.55 59.26 83.11 64.69Other income
1.33 0.96 2.21 1.21TOTAL INCOME
58.88 60.22 85.32 65.90
EBITDA
-0.47 0.07 6.20 2.30Depreciation
1.18 1.30 1.30 1.31Amortisation
0.00 0.00 0.04 0.04
105
2011
EBIT-1.65 -1.23 4.86 0.95
Interest0.41 0.27 0.85 0.43
PBT-2.06 -1.50 4.01 0.52
Taxes-0.37 -0.51 0.97 -0.07
PAT-1.69 -0.99 3.04 0.59
NOPAT-1.28 -0.72 3.89 1.02
WUXI JINYANG METAL PRODUCTS,CHINA(WJMP) Balance Sheets
USD MILLION Mar-11 Mar-10 Mar-09 Mar-08 SOURCES OF FUNDS :
Share Capital 15.67 15.67 15.67 15.67 Reserves Total 11.86 12.42 14.31 9.04
Equity Share Warrants 0.00 0.00 0.00 0.00 Equity Application Money 0.00 0.00 0.00 0.00 Total Shareholders Funds 27.53 28.09 29.98 24.71
Minority Interest 0.00 0.00 0.00 0.00 Secured Loans 0.00 0.00 0.00 0.00
Unsecured Loans 0.00 0.00 0.00 0.00 Total Loan Funds 0.00 0.00 0.00 0.00Current Account 0.00 0.00 0.00 0.00
Others(Deffered Tax) 0.00 0.00 -0.93 0.58 Total Liabilities 27.53 28.09 29.05 25.29
APPLICATION OF FUNDS :
Gross Block 33.20 31.48 31.28 29.46
106
2011
Less: Accumulated Depreciation 22.97 20.86 19.54 17.73 Less: Impairment of Assets 0.00 0.00 0.00 0.00
Net Block 10.23 10.62 11.74 11.73 Investments 0.00 0.00 0.00 0.00
Current Assets, Loans & Advances Inventories 9.20 11.07 6.31 11.89
Sundry Debtors 12.06 11.79 9.85 12.67Other Assets 0.00 0.00 0.00 0.00
Cash and Bank 7.99 4.66 12.73 3.01 Loans and Advances 0.99 4.03 0.52 1.75 Total Current Assets 30.24 31.55 29.41 29.32
Current Liabilities and Provisions 12.94 14.08 12.10 15.76 Net Current Assets 17.30 17.47 17.31 13.56
Miscellaneous Expenses not written off 0.00 0.00 0.00 0.00 Total Assets 27.53 28.09 29.05 25.29
3.3 B) Ratio Comparisons
Liquidity Ratios
A) Current Ratio
107
2011
20112010200920080
2
4
6
8
10
12
Current Ratio
LANKA SPECIAL STEELS LTD.(LSSL)WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)SIAM INDUSTRIAL WIRE, THAILAND(SIW)TATA STEEL WIRE DIVISION(TSWD)
Current Ratio
2008 2009 2010 2011
LANKA SPECIAL STEELS LTD.(LSSL) 1.16 1.12 1.24 1.50
WUXI JINYANG METAL
PRODUCTS,CHINA(WJMP)
1.86 2.43 2.24 2.34
SIAM INDUSTRIAL WIRE,
THAILAND(SIW)
4.17 6.52 11.06 5.31
TATA STEEL WIRE DIVISION(TSWD) 1.46 1.46 0.97 1.38
B) Quick Ratio
108
2011
20112010200920080123456789
Quick Ratio
LANKA SPECIAL STEELS LTD.(LSSL)WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)SIAM INDUSTRIAL WIRE, THAILAND(SIW)TATA STEEL WIRE DIVISION(TSWD)
Quick Ratio
2008 2009 2010 2011LANKA SPECIAL STEELS LTD.(LSSL) 0.48 0.58 0.61 1.01
WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)
1.11 1.91 1.45 1.63
SIAM INDUSTRIAL WIRE, THAILAND(SIW)
2.31 4.67 8.23 3.95
TATA STEEL WIRE DIVISION(TSWD) 0.70 0.57 0.39 0.51
C) Cash Ratio
109
2011
2011201020092008-0.5
0
0.5
1
1.5
2
2.5
3
3.5Cash Ratio
LANKA SPECIAL STEELS LTD.(LSSL)WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)SIAM INDUSTRIAL WIRE, THAILAND(SIW)TATA STEEL WIRE DIVISION(TSWD)
Cash Ratio2008 2009 2010 2011
LANKA SPECIAL STEELS LTD.(LSSL) 0.03 0.24 0.41 0.66WUXI JINYANG METAL
PRODUCTS,CHINA(WJMP)0.19 1.05 0.33 0.62
SIAM INDUSTRIAL WIRE, THAILAND(SIW)
0.10 2.89 0.72 2.25
TATA STEEL WIRE DIVISION(TSWD) 0.02 0.01 -0.01 0.00
Coverage Ratios
A) Interest Coverage Ratio
110
2011
2011201020092008
-100
-50
0
50
100
150
200
Interest Coverage Ratio
LANKA SPECIAL STEELS LTD.(LSSL)WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)SIAM INDUSTRIAL WIRE, THAILAND(SIW)TATA STEEL WIRE DIVISION(TSWD)
Interest Coverage Ratio2008 2009 2010 2011
LANKA SPECIAL STEELS LTD.(LSSL) 3.84 4.03 18.40 69.37WUXI JINYANG METAL
PRODUCTS,CHINA(WJMP)2.21 5.72 -4.56 -4.02
SIAM INDUSTRIAL WIRE, THAILAND(SIW)
157.33 -28.89 -45.95 -29.88
TATA STEEL WIRE DIVISION(TSWD) 4.04 0.31 5.40 4.51
Turnover Ratios
A) Inventory Turnover Ratio
111
2011
20112010200920080
5
10
15
20
25
Inventory Turnover ratio
LANKA SPECIAL STEELS LTD.(LSSL)WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)SIAM INDUSTRIAL WIRE, THAILAND(SIW)TATA STEEL WIRE DIVISION(TSWD)
Inventory Turnover Ratio
2008 2009 2010 2011
LANKA SPECIAL STEELS LTD.(LSSL) 6.78 7.58 6.68 7.11
WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)
5.44 9.13 6.82 5.68
SIAM INDUSTRIAL WIRE, THAILAND(SIW)
5.37 6.73 9.03 9.14
TATA STEEL WIRE DIVISION(TSWD) 16.36 20.10 17.26 17.07
B) Inventory Holding Period
112
2011
20112010200920080
10
20
30
40
50
60
70
80
Inventory Holding Period
LANKA SPECIAL STEELS LTD.(LSSL)WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)SIAM INDUSTRIAL WIRE, THAILAND(SIW)TATA STEEL WIRE DIVISION(TSWD)
Inventory Holding Period
2008 2009 2010 2011
LANKA SPECIAL STEELS LTD.(LSSL) 53.85 48.14 54.68 51.34
WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)
67.09 39.97 53.52 64.28
SIAM INDUSTRIAL WIRE, THAILAND(SIW)
67.93 54.24 40.42 39.95
TATA STEEL WIRE DIVISION(TSWD) 22.32 18.16 21.14 21.38
C) Debtors Turnover Ratio
113
2011
201120102009200805101520253035404550
Debtors Turnover Ratio
LANKA SPECIAL STEELS LTD.(LSSL)WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)SIAM INDUSTRIAL WIRE, THAILAND(SIW)TATA STEEL WIRE DIVISION(TSWD)
Debtors Turnover Ratio2008 2009 2010 2011
LANKA SPECIAL STEELS LTD.(LSSL) 17.61 19.98 31.84 24.47WUXI JINYANG METAL
PRODUCTS,CHINA(WJMP)5.11 7.38 5.48 4.83
SIAM INDUSTRIAL WIRE, THAILAND(SIW)
9.86 6.75 5.23 5.08
TATA STEEL WIRE DIVISION(TSWD) 31.56 43.94 43.35 40.21
D) Average Collection Period
114
2011
20112010200920080
10
20
30
40
50
60
70
80
Average Collection period
LANKA SPECIAL STEELS LTD.(LSSL)WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)SIAM INDUSTRIAL WIRE, THAILAND(SIW)TATA STEEL WIRE DIVISION(TSWD)
Average Collection Period2008 2009 2010 2011
LANKA SPECIAL STEELS LTD.(LSSL) 20.73 18.27 11.47 14.91WUXI JINYANG METAL
PRODUCTS,CHINA(WJMP)71.49 49.45 66.64 75.63
SIAM INDUSTRIAL WIRE, THAILAND(SIW)
37.02 54.10 69.78 71.85
TATA STEEL WIRE DIVISION(TSWD) 11.56 8.31 8.42 9.08
E) Fixed Assets Turnover Ratio
115
2011
20112010200920080
2
4
6
8
10
12
Fixed Assets Turnover Ratio
LANKA SPECIAL STEELS LTD.(LSSL)WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)SIAM INDUSTRIAL WIRE, THAILAND(SIW)TATA STEEL WIRE DIVISION(TSWD)
Fixed Assets Turnover Ratio2008 2009 2010 2011
LANKA SPECIAL STEELS LTD.(LSSL) 9.84 8.92 8.32 8.73WUXI JINYANG METAL
PRODUCTS,CHINA(WJMP)5.51 7.08 5.30 5.52
SIAM INDUSTRIAL WIRE, THAILAND(SIW)
9.50 8.12 7.07 8.91
TATA STEEL WIRE DIVISION(TSWD) 9.65 9.85 5.48 5.34
F) Total Assets Turnover Ratio
116
2011
20112010200920080123456789
Total Assets Turnover Ratio
LANKA SPECIAL STEELS LTD.(LSSL)WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)SIAM INDUSTRIAL WIRE, THAILAND(SIW)TATA STEEL WIRE DIVISION(TSWD)
Total Assets Turnover Ratio
2008 2009 2010 2011
LANKA SPECIAL STEELS LTD.(LSSL) 7.37 7.03 5.89 4.82
WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)
2.56 3.06 2.07 2.07
SIAM INDUSTRIAL WIRE, THAILAND(SIW)
2.36 2.27 1.98 2.09
TATA STEEL WIRE DIVISION(TSWD) 7.11 7.73 5.06 4.96
Profitability Ratios
117
2011
A) EBITDA Margin
2011201020092008-2.000%
0.000%
2.000%
4.000%
6.000%
8.000%
10.000%
12.000%
14.000%
EBITDA Margin
LANKA SPECIAL STEELS LTD.(LSSL)WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)SIAM INDUSTRIAL WIRE, THAILAND(SIW)TATA STEEL WIRE DIVISION(TSWD)
EBITDA Margin2008 2009 2010 2011
LANKA SPECIAL STEELS LTD.(LSSL) 7.60% 5.34% 10.53% 12.51%WUXI JINYANG METAL
PRODUCTS,CHINA(WJMP)3.56% 7.46% 0.12% -0.82%
SIAM INDUSTRIAL WIRE, THAILAND(SIW)
11.41% 5.67% 9.41% 8.16%
TATA STEEL WIRE DIVISION(TSWD) 4.60% 0.79% 4.88% 3.94%
B) Net Profit Margin
118
2011
2011201020092008
-4.000%
-2.000%
0.000%
2.000%
4.000%
6.000%
8.000%
10.000%
12.000%
Net Profit Margin
LANKA SPECIAL STEELS LTD.(LSSL)WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)SIAM INDUSTRIAL WIRE, THAILAND(SIW)TATA STEEL WIRE DIVISION(TSWD)
Net Profit Margin2008 2009 2010 2011
LANKA SPECIAL STEELS LTD.(LSSL) 5.183% 2.795% 8.218% 9.661%WUXI JINYANG METAL
PRODUCTS,CHINA(WJMP)0.912% 3.658% -1.671% -2.937%
SIAM INDUSTRIAL WIRE, THAILAND(SIW)
8.399% 3.511% 5.619% 4.967%
TATA STEEL WIRE DIVISION(TSWD) 3.922% 0.242% 4.079% 2.700%
C) Return On Assets
119
2011
2011201020092008-10.000%
0.000%
10.000%
20.000%
30.000%
40.000%
50.000%
60.000%
Return On Assets
LANKA SPECIAL STEELS LTD.(LSSL)WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)SIAM INDUSTRIAL WIRE, THAILAND(SIW)TATA STEEL WIRE DIVISION(TSWD)
Return on Assets 2008 2009 2010 2011
LANKA SPECIAL STEELS LTD.(LSSL) 38.216% 19.640% 48.412% 46.582%WUXI JINYANG METAL
PRODUCTS,CHINA(WJMP) 2.333% 11.189% -3.465% -6.077%
SIAM INDUSTRIAL WIRE, THAILAND(SIW)
39.703% 7.970% 11.123% 10.398%
TATA STEEL WIRE DIVISION(TSWD) 27.898% 1.873% 20.634% 13.382%
D) Earning Power
120
2011
2011201020092008-10.000%
0.000%
10.000%
20.000%
30.000%
40.000%
50.000%
60.000%
70.000%
Earning Power
LANKA SPECIAL STEELS LTD.(LSSL)WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)SIAM INDUSTRIAL WIRE, THAILAND(SIW)TATA STEEL WIRE DIVISION(TSWD)
Return on Assets 2008 2009 2010 2011
LANKA SPECIAL STEELS LTD.(LSSL) 51.650% 32.573% 57.853% 56.762%WUXI JINYANG METAL
PRODUCTS,CHINA(WJMP)3.756% 17.887% -4.305% -5.933%
SIAM INDUSTRIAL WIRE, THAILAND(SIW)
23.328% 9.211% 14.138% 13.042%
TATA STEEL WIRE DIVISION(TSWD) 27.898% 1.873% 20.634% 13.382%
E) Return on Invested Capital (ROIC)
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2011
2011201020092008-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
ROIC
LANKA SPECIAL STEELS LTD.(LSSL)WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)SIAM INDUSTRIAL WIRE, THAILAND(SIW)TATA STEEL WIRE DIVISION(TSWD)
ROIC
2008 2009 2010 2011
LANKA SPECIAL STEELS LTD.(LSSL) 71% 38% 65% 49%
WUXI JINYANG METAL PRODUCTS,CHINA(WJMP)
17% 43% 1% -3%
SIAM INDUSTRIAL WIRE, THAILAND(SIW)
23% 11% 18% 16%
TATA STEEL WIRE DIVISION(TSWD) 29% 10% 30% 15%
4) Limitations of the Study 122
2011
I. Unavailability of the financial statements of the competitors for the year
ended March 2011: Although the Financials of the Wire Division for the
financial year 2011 were available the comparison for the year 2011 could not
be done due to unavailability of the financial statements of the competitors for
the year 2011.
II. Consolidated Statements: The statements of the competitors available are
consolidated i.e. many competitors are into many other steel products and not
just wires and the results of all other products are also included in the
statements due to which exact analysis was not possible.
5) Conclusion
123
2011
The analysis of the financial statements of TSWD gave some important insights. The
study was helpful in assessing the strength and the financial stability of the company. The
trend analysis which was carried out to analyse the trends in the performance of Wire
Division showed that the company’s performance is satisfactory and they manage their
working capital, inventories and debtors very efficiently. The performance of the Wire
Division had been improving continuously till the year 2009. During the economic slowdown
the company’s performance was somewhat affected but even during those challenging
times the company was able to manage its operations well. The year 2010 saw the
relocation of the Borivali plant to Tarapur due to which the daily operations were affected,
but the company is slowly moving towards stabilization and is soon expected to completely
recover and achieve the same level of performance as in the past.
The Benchmarking analysis showed the reasons why Tata Steel Wire Division has
acquired the position of market leader. Wire Division’s performance is better than almost all
the competitors in almost all the aspects, be it liquidity, coverage or turnover. The company
is able to manage its inventories and debtors very efficiently and also has high turnover
ratios compared to all the competitors.
Thus, we can conclude that the performance of Wire Division is way better than the
industry average and all the competitors and it is the benchmark to be followed.
Although the company has been performing well but there is always a scope for
improvement.
Some recommendations to the company based on my study are
I. Fixed Assets of the company are not being optimally utilized since the production
lines are under stabilization and there is a scope for improvement in the Fixed
Assets turnover. The production has not been in line with the increase in the
fixed assets. But in the near future when the lines are stabilized. Wire Division
should aim for the optimal utilization of its assets.
II. Steps need to be taken to increase their sales in the more profitable segments.
124
2011
6) References:
Websites:
www.tatawire.com
www.rgwl.co.in
www.ramsarup.com
www.ushamartin.com
www.aartisteelsltd.com
www.bedmutha.com
www.capitaline.com
www.investopedia.com
Financial Statements
Financials for the year ended March 2008
Financials for the year ended March 2010
Books
Financial Accounting: A managerial perspective by R. Narayanaswamy
Financial Management by Prasanna Chandra
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