1. SECURITIES AND PORTFOLIO
MANAGEMENT
TECHNICAL ANALYSIS of TATA STEELS
LTD & STEEL AUTHORITY OF INDIA
LTD.

2. Industry Profile- Background
• Privatization of Iron & Steel Sector under New Industrial
policy
• Imports of foreign technology ,FDI were freely permitted up
to certain limits under an automatic route.
• Dominating giants Tata Steel takeover of the UK-Dutch
steel company Corus (country's biggest buyout).
• LN Mittal-owned Mittal Steel acquired French steel
company Arcelor (the world's no. 1 steel co) Arcelor Mittal;
• Korean steel giant POSCO was pumping money into mines
& steel plants in Orissa(now cancelled)

3. Current Scenario(India)
• Expected Demand (2013-14)= 7 percent.
• Total Expected Demand=75 million tonnes
• Present Demand= 5.5 percent
• Total demand in 2011-12=71 mil tonnes
• Steel prod.is expected to reach 200 million
tonnes by 2020 as compared to 71 million tonnes
recorded last year
• India is expected to leave behind USA and Japan
in a couple of years.

4. Industry Structure
Iron & Steel Industry
Integrated
producers
Secondary
producers

5. Production Scenario
• India is the 4th largest crude steel producer of steel in the
world.
• In 2011-12 (prov), production for sale of total finished steel
(alloy + non alloy) was 73.42 mt.
Consumption Scenario
• Acc.to the Ministry of Steel, domestic real steel
consumption grew 6.8 % YoY to 70.92 million tonnes.
• The growth in consumption of steel has been impacted by
lower demand from steel using industries from
automobiles and infrastructure to white goods and capital
goods.

6. Export-Import
EXPORT IMPORT

7. SWOT ANALYSIS OF
TATA STEEL AND
SAIL

8. Strength
TATA STEEL
• Mineral Reserves
• Brand Value
• Operations in various
Countries
• Excellent integration with
Corus
• Raises over 14 million tons
of ores from its captive
collieries, iron ore mines
and quarries
SAIL
• Strong employee workforce
with over 130,000
employees
• Largest producer of iron ore
and country’s second largest
mines network.
• Biggest in-house research
and development centres in
Asia. SAIL's RDCIS
(Research & Development
Centre for Iron & Steel)
• Annual production of 13.5
million metric tons

9. Weakness
TATA STEEL
• High cost of capital
• Low labor productivity
• Operational efficiency are
not as good as international
leaders
• Slightly lagging in
technological front
SAIL
• High cost of capital
• Low labor productivity
• Dependent on the market
purchase for a key input -
coking coal
• Govt. and political
intervention affects
operational efficiency

10. Opportunity
TATA STEEL
• Enormous scope for
increasing consumption of
steel in almost all sectors in
India.
• Latest Technology must be
adopted
• Export market penetration
SAIL
• Enormous scope for
increasing consumption of
steel in almost all sectors in
India.
• Latest Technology must be
adopted
• Export market penetration
• Globalization with tie-ups
with international players

11. Threat
TATA STEEL
• Government & regulatory
norms
• Domestic and International
competition
• India is plagued with violent
agitation against land
acquisition
• Global Economic
Slowdown
SAIL
• Intensification of
competition from domestic
as well as foreign steel
producers.
• Subdued domestic demand
for steel could result in
excess steel capacity in the
country.
• Adverse movement in prices
of imported coking coal.
• Global Economic
Slowdown

12. PESTELANALYSIS
The PESTEL terms include the political, economic, socio-culture, environmental and
legal aspects from by which the company influenced. These factors are important
because these factors are bound with each and every aspect of the society internally as
well as externally.
POLITICAL
• Government is launching the various schemes for the development of the
infrastructure of roads and transport.
• Steel industries in India spends a huge amount on the freight and transportation
with the launch of various schemes in infrastructure company could be able to save
some amount which company spends on the freight and transportation.
• The various liberalization schemes launched by the government is responsible for
the tremendous growth in the various sectors but the particularly in this sector.
• Apart from this the mining policies of the government and other policies helped
the industry in reduction of import duty and export duty and other things that
were responsible for the high growth of the steel industry globally.

13. ECONOMICAL
The economic aspect of pestel analysis includes market trends, inflation rate, demand
and supply of the particular commodity and globalization. If these factors are in
unstable in nature the company may face the tremendous loss.
• In 2008, United States economy faces the subprime crisis which affected each and
every strong economy in a very negative way. Many foreign investments and
equities got dampened because of the reduction in the confidence in the liquidity
and the returns on the investment.
• Steel industry may got affected because of the cyclical economic condition. Many
industries like automobiles, appliances and construction depends on the steel
industry and if industries faces any kind of downturn in the economy, the steel
companies may face losses.
• Steel production process are completely dependent on the energy market which can
affect the Tata steel in the economic manner.
• With the change in the economic conditions a company should change its policy
accordingly and to sustain in the depression period a detail research and survey
should be done by the particular country.

14. SOCIO-CULTURAL
Socio-culture aspect means the achievements or the willingness of the
company to do the welfare of the people in society without the profit earning
motive. It includes the initiatives taken by the company in the form of the
skills, and attitudes towards work and other aspects which can be dealt under
the development of the society.
TECHNOLOGICAL FACTOR
Technological aspect in the pestel analysis means that how company is able to
use the present technologies in the productions process it can also state as how
company is using the technology for the maximum utilization of the resources.
• Technological aspect should be always in the nature of changing as per the
new circumstances.
• Tata steel and the sail(steel authority of India ) started the E-PORTAL
system in middle of year 2000. This technology is also known as the
METAL JUNCTION which is helpful for not only to Tata steel but also to
entire industry.
• With the help of this technology e market is the biggest market for the
purchasing and selling of the steel in the world.

15. ENVIRONMENTAL FACTOR
Environmental aspect means how the company is protecting the environment from the
pollution and other factors which are harmful for the society and nature .it includes the
pollution problem, waste disposal methods of the company, noise control and other
factors which can be included under the environmental aspect.
• In the steel industry there is a major problem of the emersion of the co2 gas during
the production process which is extremely harmful for the nature and human being
itself. Reduction of CO2 is necessary.
LEGAL FACTOR
Every company is bound with some internal and external rules and regulations which is
helpful for the smooth flow of the company. It also includes the international laws and
regulations that company is bound to follow it also include the safety and health
regulations of the employees of the company.

16. KEY RATIOS AND CHARTS

17. EBITDA RATIO
• A type of measurement assessment used in
analyzing the profitability of a company by
taking that company's revenue figures and
comparing them with the earnings of the
company. This ratio helps in determining the
percentage of revenue left over after the
company pays its operating expenses.

18. • EBITDA= EARNINGS BEFORE INTEREST , TAX
DEPRECIATION AND AMORTISATION/TOTAL
SALES.
TATA SAIL
2009 2013 2009 2013
EBITDA 18,174.64 12,321.21 11,406.
20
6,416.31
TOTAL
REVENUE
142,030.39 126,381.89 42,168.
39
49,120.70
RATIO(%) 12.79 9.74 27.04 13.06

19. Long term debt equity ratio
• It shows the relationship between long term
borrowings of the company and the equity
share capital employed.

20. • Long term debt equity= long term debt/equity
employed
TATA SAIL
2009 2013 2009 2013
Long term
debt
26,946.18 25,911.51 7,538.79 21,500.57
equity 730.79 971.41 4130.40 4,130.53
Ratio 36.87 26.67 1.82 5.20

21. Return on Capital Employed
• It explains how efficiently the company is
utilising the capital in the organization. The
more it is , the better it is .

22. EBIT / Capital employed
TATA SAIL
2009 2013 2009 2013
EBIT 14816.14 5410.48 13141.40 7758.89
Total Capital
Ratio

23. Inventory Turnover Ratio
• It explains how fast the organization is able to
convert its inventory/stock into sales.
• It is one of the benchmark ratios for investors
to test the solvency of any entity
• Higher it is , the better it is

24. Sales / Inventory
TATA SAIL
2009 2013 2009 2013
Sales 43187.66 38199.43 24348.52 45598.26
Inventory 3480.47 5257.94 10320.31 16192.02
Ratio 12.40 7.26 2.35 2.81

25. Fixed Assets Turn over Ratio
• It explains how much investment in fixed
assets have been made in order to generate
revenues.
• Or at what extent the revenues got generated
with investing into fixed assets
• Investors check this ratio to see hoe effective
the investment in Fixed asset was

26. Sales / Total Fixed Assets
TATA SAIL
2009 2013 2009 2013
Sales 24348.52 38199.43 43187.66 44598.26
Total fixed
Assets
1099.54 2487.05 12305.39 16777.40
2.21 15.35 3.50 2.71

27. APATM RATIO
Adjusted Profit After Tax Margin ratio is calculated by
dividing net income after taxes by net sales. A company's
after-tax profit margin is important because it tells
investors the percentage of money a company actually
earns per rupee of sales.

28. TATA STEEL
RATIO 2013 2009
APATM (%) 11.96 19.38
We see a decline in adjusted profit margin ratio in the company
from 2009 to 2013. Which means that company was not able to
generate revenue from its sales in the same proportion as 2009.
The reason could be increase in company’s expenditure over the
years.
COMPONENT 2013 2009
Sales (in Rs. Crore) 42317.24 26843.53
Net profit (in Rs. Crore) 5062.97 5201.74
Source: moneycontrol.com

29. SAIL
COMPONENT
RATIO 2013 2009
APATM (%) 4.34 12.66
COMPONENT 2013 2009
Sales (in Rs. Crore) 44,598.26 49,331.47
Net profit (in Rs. Crore) 2,170.35 6,174.81
Incase of SAIL we notice a major decline in net profit of the
company. The main reason accountable for this decline was
increase in miscellaneous expenditure, which increased from
878 crore in 2009 to 5197 crore in 2013.
Source: moneycontrol.com

30. CPM RATIO
Cash Profit Margin Ratio is used to measure operating
performance. That is capability of company to generate cash
from its sales.
Formula:
(Pat+Dep)/Gross Sales

31. TATA STEEL
We see a decline in the ratio from 2009 to 2013 indicating a
decline in the company’s operating performance. This is again
due to the decline in company’s ability to generate cash/profit
from it’s sales.
RATIO 2013 2009
CPM (%) 15.84 23.00
COMPONENT 2013 2009
Sales (in Rs. Crore) 42317.24 26843.53
PAT plus Depreciation 6703.25 6175.14
Source: moneycontrol.com

32. SAIL
Here we see a sharp decline in company’s operative
performance. The sharp decline in the ratio is primarily due to
fall in profit, which can accountable to increase in company’s
expenses.
RATIO 2013 2009
CPM (%) 7.15 15.31
COMPONENT 2013 2009
Sales (in Rs. Crore) 44,598.26 49,331.47
PAT plus Depreciation 3573.33 7456.93
Source: moneycontrol.com

33. INTEREST COVERAGE RATIO
Interest Coverage Ratio is used to determine how easily a
company can pay interest on outstanding debt. The interest
coverage ratio is calculated by dividing a company's earnings
before interest and taxes (EBIT) of one period by the company's
interest expenses of the same period:
The lower the ratio, the more the company is burdened by
debt expense.

34. TATA STEEL
Although there has been a slight decline in interest coverage
ratio, it still very healthy and shows that company has enough
liquidity to cover it’s interest obligations.
RATIO 2013 2009
Interest Coverage 5.18 5.91
COMPONENT 2013 2009
EBIT (In Rs. Cr.) 11,126.24 9,176.44
Interest Expense (In Rs. Cr.) 1,876.77 1,489.50
Source: moneycontrol.com

35. SAIL
Although company’s interest coverage ratio is still safe, but we
notice a sharp decline in the ratio from 2009 to 2013. This is
again due to fall in company’s profit generating ability.
RATIO 2013 2009
Interest Coverage 5.33 37.23
COMPONENT 2013 2009
EBIT (In Rs. Cr.) 3,333.68 8,941.44
Interest Expense (In Rs. Cr.) 747.66 253.24
Source: moneycontrol.com

36. Profit before depreciation, interest and
tax margin (%)
• PBDITM (%) =operating income before
depreciation,interest and tax/net sales
• Operating margin gives analysts an idea of
how much a company makes (before interest
and taxes) on each dollar of sales.
• The higher the margin, the better.

37. TATA STEEL (cr)
• 2013=11,353.75/38,199.43
=29.72%
• 2009=9,779.51/24,348.32
=40.16%
SAIL (cr)
• 2013=3,333.68/44,598.26
=7.48%
• 2009=10,944.21/43,798.58
=24.99%
The ratios for both the Companies has dropped from 2013 to 2009
The drop for SAIL has been more than for TATA STEEL.

38. Return on Net Worth (%)
• ROE= NET INCOME/NET WORTH
• Net Worth=Share Capital + Reserves & Surplus
• It reveals how much profit a company generates with
the money that the shareholders have invested
• ROE is useful for comparing the profitability of a
company with that of other firms in the same industry.
• The higher the ratio, the better it is.

39. TATA STEEL
• 2013=5062.97 /55,209.68
=9.17%
• 2009=5,201.74/29,704.60
=17.51%
SAIL
• 2013=2,170.35/41,024.64
=5.29%
• 2009=6,174.81/27,984.10
=22.065%
The ratios for both the Companies has dropped from 2013 to 2009
The reserves have increased considerably for TATA STEEL whereas for SAIL, reserves have
not increased much.
The drop for SAIL has been more than for TATA STEEL.

40. CURRENT RATIO
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
SAIL TATA STEEL
2009
2013

41. INTERPRETATION
• The current ratio of SAIL shows
improvement, it has increased by 60% over
the four year period which is a good sign as it
shows that they are increasing their current
assets.
• The current ratio of TATA Steel decreased
marginally over the period which is not good
as their current ratio is already quite low as
compared to other competitors and industry
benchmark.

42. DEBT EQUITY RATIO
0
0.2
0.4
0.6
0.8
1
1.2
1.4
SAIL TATA STEEL
2009
2013

43. INTERPRETATION
• The DER of SAIL increases because they have
increased the debt portion by many folds to
arrange funds for the available opportunities.
• The TATA Steel has improved their debt equity
position by decreasing the debt and at the
same time by increasing the equity capital to
make their firm less leveraged.

44. DEBTORS TURNOVER RATIO
0
5
10
15
20
25
30
35
40
45
50
SAIL TATA STEEL
2009
2013

45. INTERPRETATION
• SAIL DTR is quite low in comparison to TATA
Steel. It is favourable to have higher DTR
because it shows that how many times
company is collecting debts from its debtors.
• On the other hand TATA Steel’s DTR is good
and also matching to industry benchmark.

46. Types of Charts
Line Chart
• Represents
only the
closing prices
over a set
period of
time

47. Types of Charts
Bar Chart
• Vertical line
represents the
high and low
for the trading
period, along
with the
closing price

48. Types of Charts
Candlestick
Chart
• Combination of a
line-chart and a
bar-chart;
represents the
range of price
movement over a
given time interval

49. Moving Averages
Simple
Moving
Average
(SMA)

50. Moving Averages
Exponential
Moving
Average
(EMA)

53. TATASteel –
Open high low close chart (OHLC) bar chart

57. THANK YOU