Project report

On

Trend analysis and competitive study of

the shares of JSW Steel

By:
Anubhav Jain
MBA III(A)
01012303909
 Research Methodology
Research design: Exploratory research

Exploratory research design is used to explore the already existing facts and figures about certain real

happening of the past.

There are basically two techniques adopted for obtaining information: Primary Data & Secondary

Data.

Sources of data collection are: Secondary Sources.

www.nseindia.com
www.jsw.in
www.Moneycontrol.com
www.financialexpress.com
News paper- The Economic times

Objectives

1. Trend analysis of share prices of JSW Steel for the period 31 august 2009 to 31 august 2010

2. Understanding the reasons of fluctuations in share prices of JSW Steel over the period 31
august 2009 to 31 august 2010 and various factors behind it

3. Analyzing the financial statements of JSW Steel using the various ratios

4. Comparison of the stocks of JSW Steel and Tata steel

 Introduction to the capital market
• The capital market is the market for securities, where companies and the government can
raise long term funds. The capital market includes the stock market and the bond market.
Financial regulators ensure that investors are protected against fraud. The capital markets
consist of the primary market, where new issues are distributed to investors, and the
secondary market, where existing securities are traded.

• Capital market thus plays a vital role in channelizing the savings of individuals for Investment
in the economic development of the country. As a result the investors are not constrained by
their individual abilities, but by the abilities of the companies, which in turn enhance the
savings and investments in the country, liquidity of capital market is an important factor
affecting growth.

• Thus development of efficient market system is necessary for creating conductive climate for
investment and economic growth.
 Primary market
• The primary market is that part of the capital markets that deals with the issue of new
securities. Companies, governments or public sector institutions can obtain funding through
the sale of a new stock or bond issue.
• This is typically done through a syndicate of securities dealers.
• The process of selling new issues to investors is called underwriting. In the case of a new
stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built
into the price of the security offering, though it can be found in the prospectus.
• Primary market creates long term instruments through which corporate entities borrow from
capital market.
• Features of primary markets are:
○ This is the market for new long term equity capital. The primary market is the market where
the securities are sold for the first time. Therefore it is also called the new issue market (NIM).
○ In a primary issue, the securities are issued by the company directly to investors.
○ The company receives the money and issues new security certificates to the investors.
○ Primary issues are used by companies for the purpose of setting up new business or for
expanding or modernizing the existing business.
○ The primary market performs the crucial function of facilitating capital formation in the
economy.
○ The new issue market does not include certain other sources of new long term external
finance, such as loans from financial institutions. Borrowers in the new issue market may be
raising capital for converting private capital into public capital; this is known as "going
public."
○ The financial assets sold can only be redeemed by the original holder.
• Methods of issuing securities in the primary market are:
○ Initial public offering;
○ Rights issue (for existing companies);
○ Preferential issue.
 Secondary market
• The secondary market, also known as the aftermarket, is the financial market where
previously issued securities and financial instruments such as stock, bonds, options, and
futures are bought and sold.
• The term "secondary market" is also used to refer to the market for any used goods or assets,
or an alternative use for an existing product or asset where the customer base is the second
market
• With primary issuances of securities or financial instruments, or the primary market, investors
purchase these securities directly from issuers such as corporations issuing shares in an IPO or
private placement, or directly from the federal government in the case of treasuries. After the
initial issuance, investors can purchase from other investors in the secondary market.
• The secondary market for a variety of assets can vary from loans to stocks, from fragmented
to centralized, and from illiquid to very liquid. The major stock exchanges are the most visible
example of liquid secondary markets - in this case, for stocks of publicly traded companies.
Exchanges such as the national stock exchange and the Bombay Stock Exchange provide a
centralized, liquid secondary market for the investors who own stocks that trade on those
exchanges.

Brief About the Stock Exchanges

• Stock Exchange is a market like any other centralized market where both buyers and sellers
come and conduct their business of purchase and sale of shares & securities. In other words, it
is a market place for shares and securities where trading takes place in a controlled and
protected environment.
Meaning of stock exchange
 • A stock exchange, share market or bourse is a corporation or mutual organization which
provides "trading" facilities for stock brokers and traders, to trade stocks and other securities.
Stock exchanges also provide facilities for the issue and redemption of securities as well as
other financial instruments and capital events including the payment of income and dividends.
The securities traded on a stock exchange include: shares issued by companies, unit trusts and
other pooled investment products and bonds. To be able to trade a security on a certain stock
exchange, it has to be listed there.
• A stock exchange is often the most important component of a stock market. Supply and
demand in stock markets is driven by various factors which, as in all free markets, affect the
price of stocks.

JSW Steel - An introduction

Forging ahead, JSW Steel Ltd. is one among the largest Indian Steel Companies in India today.
India’s third largest steelmaker, JSW Steel Ltd. consists of the most modern, eco-friendly steel plants
with the latest technologies for both upstream & downstream processes. JSW Steel Ltd. has received
all the three certificates:

ISO:9001 for Quality Management System

ISO:14001 for Environment Management System

OHSAS:18001 for Occupational Health & Safety Management System

Company profile
Particulars
industry Steel
Business group OP Jindal group
Chair person Mrs. Savitri Devi Jindal
Registered office Jindal Mansion, 5A, Dr. G Deshmukh
Marg, , Mumbai, Maharashtra - 400026
Tel: 022-23513000, , ,
Fax: 022-23526400,
Email: jswsl.investor@jsw.in
Website: www.jsw.in
Bse code 500228
Nse code JSWSTEEL
Market lot 1
Face value 10
Incorporation 15/03/1994
Public issue date 10/02/1995
Trend analysis of the share prices of JSW Steel for the period 31 august
2009-31 august 2010
 Total
Prev Open High Low Last Close Average Traded Turnover
Date Close Price Price Price Price Price Price Quantity in Lacs
13-Jul-10 1082.35 1075 1107.9 1071.2 1098.55 1101.15 1093.74 1727355 18892.71
14-Jul-10 1101.15 1109.95 1125 1079.2 1081.3 1082.3 1098.04 1196697 13140.22
15-Jul-10 1082.3 1083 1101.9 1076.85 1097.95 1096.35 1090.54 1144315 12479.22
16-Jul-10 1096.35 1102 1109.65 1091.45 1100.05 1101.2 1100.7 1068911 11765.5
19-Jul-10 1101.2 1089.7 1112 1089.7 1105.85 1102.4 1103.54 822051 9071.64
20-Jul-10 1102.4 1106.25 1133.9 1102.1 1117.8 1122.3 1122.67 1948216 21872.07
21-Jul-10 1122.3 1128.5 1179 1125.3 1179 1175.4 1163.92 2587206 30112.9
22-Jul-10 1175.4 1173 1208 1161.05 1205 1200.55 1187.65 3012928 35782.98
23-Jul-10 1200.55 1220 1230.5 1191 1194.45 1197.65 1211.2 3083866 37351.89
26-Jul-10 1197.65 1205 1206.35 1162.05 1169.45 1171 1180.36 1318831 15566.94
27-Jul-10 1171 1180 1191 1154.1 1163 1162.4 1169.66 3398252 39747.87
28-Jul-10 1162.4 1165 1172.6 1150 1157.5 1156.85 1160.38 985201 11432.12
29-Jul-10 1156.85 1154 1163.9 1138 1143 1140.85 1148.13 1605021 18427.72
30-Jul-10 1140.85 1130.1 1145.45 1105.1 1118 1117.3 1132.27 867508 9822.57
02-Aug-10 1117.3 1137.5 1145 1125.5 1139.8 1137.1 1137.63 796317 9059.11
03-Aug-10 1137.1 1149.9 1149.9 1122.5 1128.35 1128.15 1132.3 726447 8225.59
04-Aug-10 1128.15 1132.45 1132.45 1100 1113 1112.6 1110.48 1183334 13140.67
05-Aug-10 1112.6 1115 1142 1112.2 1120.6 1120.7 1129.97 1392472 15734.52
06-Aug-10 1120.7 1126.85 1133.55 1108.35 1114 1112.9 1121.82 1072710 12033.9
09-Aug-10 1112.9 1113.1 1131.8 1109.45 1125 1126.45 1124.75 949776 10682.64
10-Aug-10 1126.45 1128.05 1143.5 1121.2 1137 1133.35 1134.55 1295984 14703.63
11-Aug-10 1133.35 1130.3 1141 1110 1112.1 1113 1123.38 845966 9503.41
12-Aug-10 1113 1102 1113.5 1083.6 1112 1110.3 1102 1150445 12677.87
13-Aug-10 1110.3 1115 1125.8 1105.35 1114.2 1113.85 1116.38 586470 6547.23
16-Aug-10 1113.85 1118.5 1130.4 1101.25 1103.5 1106.4 1116.88 1030568 11510.24
17-Aug-10 1106.4 1112.6 1119.65 1100.7 1114.05 1110.8 1111.47 774927 8613.09
18-Aug-10 1110.8 1111 1131 1104.35 1129.35 1127.05 1117.71 712059 7958.77
19-Aug-10 1127.05 1130 1149 1125 1130 1132.05 1137.58 1008516 11472.63
20-Aug-10 1132.05 1127 1144.9 1120.75 1137 1138.4 1136.87 635390 7223.57
23-Aug-10 1138.4 1143.4 1163.9 1138.1 1159 1160.15 1154.54 857239 9897.2
24-Aug-10 1160.15 1163.2 1169.95 1145.15 1155.3 1159.85 1156.44 730973 8453.27
25-Aug-10 1159.85 1160 1163.5 1138.5 1143.95 1148.6 1149.59 1011435 11627.31
26-Aug-10 1148.6 1152.5 1155 1119.1 1126 1125.75 1134.89 997262 11317.79
27-Aug-10 1125.75 1124 1144.9 1110 1114.25 1114.1 1128.66 579636 6542.13
30-Aug-10 1114.1 1116.35 1149.7 1116 1146 1139.85 1134.01 724755 8218.78
31-Aug-10 1139.85 1133 1145 1116.8 1129 1131.25 1129.95 670364 7574.79

Trend line of the share prices of JSW Steel for the period 31 august 2009-31
august 2010
 • The share prices have risen from 702 on 31 august 2009 to 1130 by 31 august 2010

• The share prices have seen a low of 702 and a high of 1301.2 over the above mentioned
period

• The above diagram represents a positive trend indicating a continuous growth in the share
prices of JSW Steel with minor fluctuations here and there.

Major news affecting the share prices and volumes of the stock traded in the
aforesaid period

1. JFE Steel’s equity participation in JSW Steel (28 July 2010)

• JFE Steel will acquire a stake in JSW Steel by subscribing to a preferential allotment at a cost
of 48 billion Indian rupees.
• The company plans to acquire 14.99% voting rights, so it will make additional investments if
the forthcoming acquisition does not reach this figure due to reasons including but not limited
to possible fluctuations in JSW Steel’s share price.
• Agreements have been newly executed, as follows.

1. Production of automotive steel

a. JFE Steel will provide JSW Steel with technology for the production of hot-rolled
coils and cold-rolled coils for automotive use
b. JFE Steel will supply JSW Steel with substrates, and
the two companies will jointly provide automotive customers with services including
application engineering and product development.
c. Increased production of automobiles in India is creating greater needs for local
procurement of materials. With the execution of these technical cooperation
agreements, JFE Steel will position JSW Steel as a strategic base for the production of
automotive steel, ultimately to increase sales in India
 2. Operational improvements at JSW Steel’s Vijayanagar Works

a. JFE Steel will provide technical assistance for operational improvements at JSW
Steel’s Vijayanagar Works. Agreements have been executed for work involving
energy efficiency, environmental management, improvement of production process
quality and yield, production capacity analysis and indices benchmarking

Through these newly announced agreements, JFE Steel looks forward to deepening its collaboration
with JSW Steel to establish a solid base for production and sales and thereby grow its market in India

1. JSW Steel Q4 profit rs 6.11 bln vs rs 399 mln loss a year ago(3 may 2010)

• JSW Steel Ltd has posted Jan-Mar consolidated net profit of Rs 6.11 billion as against loss of
Rs 399.3 million in the previous year, driven by strong growth in volumes, better sales
realization, reduced costs and foreign exchange.
• The company's net sales for the quarter were up 52% from a year ago at Rs 54.41 billion.
In Jan-Mar, crude steel production reached 1.6 million tonnes, up 66% from a year ago and
saleable steel was at 1.5 million tonnes, up 43% from a year ago.
• "The increase of 12% in blended sales realizations coupled with reduction in blended cost of
production has led to significant improvement in earnings before interest, depreciation, taxes
and amortisation margins for the quarter to 27.4% against 15.1% in the corresponding quarter
previous year," said Seshagiri Rao, joint managing director and chief financial officer, at a
post earnings conference.

1. JSW Steel, India's second biggest steel manufacturer, announced that its crude
steel production surged 14%
• JSW Steel, India's second biggest steel manufacturer, announced that its crude steel
production surged 14% at 1.574 million tonnes (mt) in the three month period ended June
2010 (April-June) as against the same period of last year.
• The production of flat rolled products increased 26% at 1.093 mt and production of long
rolled products grew 71% to 0.309 mt in the first quarter.
• The company said, ''The commissioning of 6.6 million tonne per annum (mtpa) expansion
project with 3.5 mtpa new hot strip mill at Vijayanagar works in the last financial year
enabled the company to achieve higher production.''
1. JSW Steel to commence work on west Bengal project(10-02-2010)
• JSW Steel's unit, JSW Bengal Steel will begin work at its Salboni plant in West Bengal within
six months, indicated the group Vice-Chairman and Managing Director Sajjan Jindal on
Monday.
• The first phase of the project is to be competed within 30 months with an estimated
investment of about Rs. 12,000 crore. In this phase the project will have a capacity of 3
million tones. The company will also begin work on the 800-Mw power plant at Ichhapur
simultaneously with an additional investment of Rs. 800-1,000 crore

Analysis of financial statements of JSW Steel using ratio analysis

Mar’ 10 Mar’ 09 M Mar ' 07 Mar ' 06

ar' 08
Ratios
Adjusted E P S (Rs.) 79.36 55.96 86.07 70.85 26.17
Reported EPS (Rs.) 106.59 22.96 90.84 77.09 53.28
Dividend Per Share 9.50 1.00 14.00 12.50 8.00
Operating Profit Per
Share (Rs.) 228.47 152.96 179.43 171.89 107.86
Book Value (Excl
Rev Res) Per Share
(Rs.) 391.26 320.83 309.47 248.61 199.80
Book Value (Incl
Rev Res) Per Share
(Rs.) 391.26 320.83 309.47 248.61 199.80

PROFITABILITY
RATIOS

Gross Profit Margin

(%) 17.33 14.51 23.43 26.99 21.12
Net Profit Margin
(%) 11.09 3.23 14.92 14.98 14.14
Return On long
Term Funds (%) 15.50 12.35 19.22 23.60 15.47

LEVERAGE
RATIOS

Long Term Debt /

Equity 1.20 1.34 1.01 0.78 0.96
Total Debt/Equity 1.26 1.51 1.06 0.84 1.07
Owners fund as % of
total Source 44.27 39.88 48.53 54.31 48.23
Assets Turnover
Ratio 0.83 0.82 0.81 0.81 0.72

LIQUIDITY Fixed
RATIOS

Current Ratio 0.58 0.52 0.58 0.76 0.89

Current Ratio (Inc.
ST Loans) 0.54 0.44 0.51 0.64 0.68
Quick Ratio 0.30 0.28 0.27 0.43 0.59
Inventory Turnover
Ratio 8.95 8.75 9.26 11.04 8.55

PAYOUT RATIOS

Dividend payout
Ratio (Net Profit) 10.63 6.24 18.32 18.86 17.58
Earning Retention
Ratio 85.72 97.44 80.67 79.48 64.20

COVERAGE
RATIOS

Financial Charges
Coverage Ratio 4.81 3.64 7.16 6.99 4.68
Fin. Charges
Cov.Ratio (Post Tax) 4.49 2.54 5.88 5.67 4.65

COMPONENT
RATIOS

Exports as percent of
Total Sales 15.25 29.94 28.95 38.58 33.64
Import Comp. in
Raw Mat. Consumed 66.75 65.12 64.89 74.12 71.98
Long term assets /
Total Assets 0.81 0.82 0.84 0.79 0.75

Comparison of stock prices of JSW Steel and Tata steel

• The share of JSW Steel is almost 50% costlier then the share of Tata steel
 • Both the shares have seen similar fluctuations over the above mentioned period which
indicates the homogeneity of the steel industry

• While the share of JSW Steel has seen a constant growth the share of Tata steel has been
constant and in fact has seen a decline over the period

Particulars (31 march JSW Steel Tata steel

2010)
Face value (rupees) 10 10
Dividend per share 9.5 8
Earning per share 79.36 46.12
Net profit margins 11.09 19.96
Debt equity ratio 1.20 0.67
Current ratio 0.58 1.12
Stock turnover ratio 8.95 10.90
Profit after tax (crore of 2022.74 5046.80
rupees)
Sales (crore of rupees) 18314 25021.98

Analysis

• Tata steel has a greater power to pay off its current liabilities because of its higher current
ratio in comparison to JSW Steel

• Tata steel which is the no’ 2 steel manufacturing company in India after steel authority of
India has a high sale in comparison to JSW Steel which is the no’ 3

• Though the profits available with Tata steel are more than double the profits earned by JSW
Steel still the earning per share for the share holders of JSW Steel is much higher then it.

• JSW Steel retains a large part of its profits for further growth and development in comparison
to Tata steel.

Interpretation
• In terms of sales and profit and also a high current ratio Tata steel is a much bigger company
then JSW Steel and the share holders while not expecting very high returns are secured about
their investment.

• leaving this traditional criteria to judge a company if we focus on growth prospects and
returns an investor can earn a good sum by investing in the shares of JSW Steel which have
shown a constant rise in the past one year.