FINANCIAL PERFORMANCE ANALYSIS OF TATA STEEL LTD.

(With Special Reference to DHANALAKSHMI Investment Service Ltd.)

CHAPTER-1

INTRODUCTION

Analysis Of Financial Statement Is A Systematic Process Of Critical Evaluation Of The Financial Information Given In
Financial Statement So That These Information May Be Understood Properly. For The Purpose Of Analysis Individual
Items Are Studied, Their Relationship With Other Relevant Figures Is Establish And The Data Are Sometime Re-Arranged
To Have Better Understanding Of The Information With The Help Of Various Tools For The Purpose.

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

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

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

ADVANTAGE OF FINANCIAL STATEMENT ANALYSIS

 The advantages of financial statement analysis are listed below:

 The most important benefit if financial statement analysis is that it provides an idea to the investors about
deciding on investing their funds in a particular company.
 Another advantage of financial statement analysis is that regulatory authorities like IASB can ensure the company
following the required accounting standards.
 Financial statement analysis is helpful to the government agencies in analyzing the taxation owed to the firm.
 Above all, the company is able to analyze its own performance over a specific time period.

LIMITATION OF FINANCIAL STATEMENT ANALYSIS

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

Financial Statements Only Cover a Specific Period of Time - A user of financial statements can gain an incorrect view of
the financial results or cash flows of a business by only looking at one reporting period. Any one period may vary from
the normal operating results of a business, perhaps due to a sudden spike in sales or seasonality effects. It is better to
view a large number of consecutive financial statements to gain a better view of ongoing results.
Financial Statements Could be Wrong Due to Fraud- The management team of a company may deliberately skew the
results presented. This situation can arise when there is undue pressure to report excellent results, such as when a bonus
plan calls for payouts only if the reported sales level increases. One might suspect the presence of

this issue when the reported results spike to a level exceeding the industry norm, or well above a company's historical
trend line of reported results.

Financial Statements Do Not Cover Non-Financial Issues-The financial statements do not address non-financial issues,
such as the environmental attentiveness of a company's operations, or how well it works with the local community. A
business reporting excellent financial results might be a failure in these other areas.

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

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

Methods or tools or technique of financial statement analysis

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

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

Importance of ratio analysis

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

Efficiency of Company-Ratio analysis is important in understanding the company's ability to generate profit. Return on
Asset, Returns on Equity tell us how much profit the company is able to generate over assets of the firm and equity
investments in the firm, while gross margin and operating margin ratios tell us the company's ability to generate profit
from sales and operating efficiency.
Planning and Forecasting- From a Management and investor point of view, ratio analysis helps to understand and
estimate the company's future financials and operations. Ratios formed from past financial statement analysis helps in
estimating future financials, budgeting, and planning for the future operations of the company.

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

Peers Comparison- Investor, as well as the company's management, makes a comparison with Competitors Company to
understand efficiency, profitability and market share. Ratio analysis is helpful for companies to perform SWOT (Strengths,
Weakness, Opportunities, and Threats) analysis in the market. It also tells whether the company is able to perform
growth or not over a period from past financials and whether the company's financial position is improving or not.

Financial Solvency - The company's ability to pay short-term debt is determined by liquidity. Current Ratio, Acid-test ratio
tells us whether a company is able to pay its short-term obligation within a year. The company continuously runs analysis
on past financial statements to understand and prepare for payment of short-term obligations.

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

Types of Ratio

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

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

Current Ratio= current assets / current liabilities

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

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

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

Absolute liquid ratio= cash and bank balance/current liabilities

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

Cash ratio= cash and bank balance/ current assets

Solvency Ratio

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

Solvency means ability of a firm to pay its liability on due date. Solvency is tested on the basis of the ability of the
concern to pay its long term liability at due time. The ratios to be used for this purpose are called as ‘ ratio of financial
position’ or stability ratio. The main ratio of this category are as follows;

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

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

Proprietary ratio=proprietary funds or shareholders funds/Total assets

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

The main category of this ratio are :

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

Gross profit ratio = Gross Profit /Sales × 100

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

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

Net profit ratio = Net Profit / Sales × 100

Net Profit = Gross Profit + Indirect Income – Indirect Expenses

c) Return on equity - This ratio measures Profitability of equity fund invested the company. It also measures how
profitably owner’s funds have been utilized to generate company’s revenues. A high ratio represents better the company
is.

Return on equity =Profit after Tax/ Net worth x 100

Where, Net worth = Equity share capital, and Reserve and Surplus

d) Return on capital employed- Return on capital employed (ROCE) is a financial ratio that can be used in assessing
a company's profitability and capital efficiency. In other words, this ratio can help to understand how well a company is
generating profits from its capital as it is put to use.

Return on capital employed (ROCE) = net profit before interest and tax / capital employed X 100
e) Operating profit ratio - Operating profit ratio establishes a relationship between operating Profit earned and net
revenue generated from operations (net sales). operating profit ratio is a type of profitability ratio which is expressed as a
percentage.

Operating profit ratio = operating profit / net sales X 100

INTRODUCTION TO THE INDUSTRY

INTRODUCTION OF STEEL INDUSTY IN INDIA

India was the world’s second-largest steel producer with production standing at 111.2 million tons (MT) in 2019. The
growth in the Indian steel sector has been driven by domestic availability of raw materials such as iron ore and cost-
effective labor. Consequently, the steel sector has been a major contributor to India’s manufacturing output.

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

Market Size

India’s finished steel consumption grew at a CAGR of 5.2% during FY16-FY20 to reach 100 MT. India’s
crude steel and finished steel production increased to 108.5 MT and 101.03 MT in FY20P, respectively.
Between April 2020 and November 2020, India’s cumulative production of crude steel was
62.01 MT and finished steel was 55.68 MT.
Export and import of finished steel stood at 8.24 MT and 6.69 MT, respectively, in FY20P. Export and
import of finished steel stood at 7.70 MT and 2.70 MT, respectively, between April 2020 and
November 2020.

INVESTMENT

Steel industry and its associated mining and metallurgy sectors have seen major investments and
developments in the recent past.
According to the data released by Department for Promotion of Industry and Internal Trade (DPIIT),
the Indian metallurgical industries attracted Foreign Direct Investment (FDI) to the tune of US$ 14.24
billion in the period April 2000-September 2020.
Some of the major investments in the Indian steel industry are as follows:

 In a move towards becoming self-reliant, Indian steel companies have started boosting steel
production capacity. To this end, SAIL announced doubling of its at 5 of its steel plants
capacity in September 2020.
 In March 2020, Arcelor Mittal Nippon Steel India (AM/NS) acquired Bhander Power plant in
Hazira, Gujarat from Edelweiss Asset Reconstruction Company.
 In February 2020, GFG Alliance acquired Adhunik Metaliks and its arm Zion Steel for Rs. 425
crore (US$ 60.81 million), marking its entry into the Indian steel market.
  For FY20, JSW Steel set a target of supplying around 1.5 lakhs tons of TMT Rebars to metro rail
projects across the country.
 In December 2019, Arcelor Mittal completed the acquisition of Essar Steel at Rs. 42,000 cr(US$
6.01 billion) and formed a joint venture with Nippon Steel Corporation.
• JSW Steel has planned a US$ 4.14 billion capital expenditure programme to increase its overall steel output
capacity from 18 million tons to 23 million tons by 2020.

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

• The production capacity of SAIL is expected to increase from 13 MTPA to 50 MTPA in 2025 with total investment
of US$ 24.88 billion.

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

Government Initiatives

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

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

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

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

• Government introduced Steel Scrap Recycling Policy to reduce import.

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

• Government of India’s focus on infrastructure and restarting road projects is aiding the demand for steel. Also,
further likely acceleration in rural economy and infrastructure is expected to lead to growth in demand for steel.

• The Union Cabinet, Government of India approved the National Steel Policy (NSP) 2017, as it intend to create a
globally competitive steel industry in India. NSP 2017 envisage 300 million tonnes (MT) steel-making capacity and 160
kgs per capita steel consumption by 2030-31.

• The Ministry of Steel is facilitating setting up of an industry driven Steel Research and Technology Mission of
India (SRTMI) in association with the public and private sector steel companies to spearhead research and development
activities in the iron and steel industry at an initial corpus of Rs. 200 crore (US$ 30 million).

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

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

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

INTRODUCTION TO THE COMPANY

COMPANY PROFILE

Tata Steel Limited is an Indian multinational steel-making company based in Jamshedpur, Jharkhand and is
headquartered in Mumbai, Maharashtra, India. It is a subsidiary of the Tata Group.

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

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

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

Tata Steel is headquartered in Mumbai, Maharashtra, India and has its marketing headquarters at the Tata Centre in
Kolkata, West Bengal. It has a presence in around 50 countries with manufacturing operations in 26 countries including:
India, Malaysia, Vietnam, Thailand, UAE, Ivory Coast, Mozambique, South Africa, Australia, United Kingdom, The
Netherlands, France and Canada.

Tata Steel primarily serves customers in the automotive, construction, consumer goods, engineering, packaging, lifting
and excavating, energy and power, aerospace, shipbuilding, rail and defence and security sectors.

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

Tata Steel on Thursday, 12 February 2015 announced buying three strip product services centres in Sweden, Finland and
Norway from SSAB to strengthen its offering in Nordic region. The company, however, did not disclose the value of the
transactions.
In September 2017, ThyssenKrupp of Germany and Tata Steel announced plans to combine their European steel-making
businesses. The deal will structure the European assets as Thyssenkrupp Tata Steel, an equal joint venture. The
announcement estimated that the company would be Europe's second-largest steelmaker, and listed future
headquarters in Amsterdam.

HERITAGE

Jamsetji Nusserwanji Tata (1839 – 1904)

The foundation ofwhat wouldgrowto become the Tatagroupwas laid in 1868 by JamsetjiNusserwanji Tata–thena29-year-
oldwho

hadlearnedtheropes ofbusinesswhileworkinginhis

father’sbankingfirm

– when he established a trading company in Bombay.

A visionaryentrepreneur,anavowednationalistand a committed philanthropist, Jamsetji Tata helped

pavethepathtoindustrialization inIndiaby seeding pioneering businesses in sectors such as steel, energy, textiles and
hospitality.

Ratan Tata (1937)

The beginning of the 1990s ushered in plenty of change in Indian business. Economic reforms opened up many sectors,
signalling increased competitionandthearrivalofforeigncompanies. JRDTata’sdeath,in1993, symbolisedtheendofan era in
more ways than one.

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

Natarajan Chandrasekaran (1963)

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

Chandra also chairs the boards of several group operating companies, including Tata Steel, Tata Motors, Tata Power,
Indian Hotels and Tata Consultancy Services (TCS)—ofwhichhewaschiefexecutive from 2009-17.His appointment as
chairman followed a 30-year business career at TCS, which he joined from university. Chandra rose through the ranks at
TCS to become CEO and managing director of the leading global IT solutions and consultingfirm. Mission Statement:
Consistent with the vision and values of the founder Jamsetji Tata, Tata Steel strives to strengthen India’s industrial base
through effective utilization of staff and materials.
 REVIEW OF LITRATURE

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

2.1 International Reviews

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

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

Peeler J. Patsula (2006), he define that a sound business analysis tells others a lot about good sense and understanding
of the difficulties that a company will face. We have to make sure that people know exactly how we arrived to the final
financial positions. We have to show the calculation but we have to avoid anything that is too mathematical. A business
performance analysis indicates the further growth and the expansion. It gives a physiological advantage to the
employees and also a planning advantage.

Susan Ward (2008), emphasis that financial analysis using ratios between key values help investors cope with the
massive amount of numbers in company financial statements. For example, they can compute the percentage of net
profit a company is generating on the funds it has deployed. All other things remaining the same, a company that earns a
higher percentage of profit compared to other companies is a better investment option.

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

Rooh Ollah Arab, Seyed Saadat Masoumi and Azadeh Barati (2015) examined the financial performance of identified
units in the steel industry in India in terms of financial ratios such as Liquidity, Solvency, Activity and Profitability position.
For this study , Tata Steel Ltd., Jindal Steel & Power Ltd., J S W Steel Ltd., Bhushan Steel Ltd. and Steel Authority of India
Ltd. are selected for this study. The study evaluated the impact of selected variables on the financial performance of
identified units in the steel industry, ANOVA-Test analysis is used.

Ramaratnam and Jayaraman (2010) used financial ratios in terms of liquidity, profitability, variability and sustainability to
measure the financial performance of Indian steel industry for a period of five years from 2005 to 2010. Their study
reveals that the critical situation faced by the Indian steel industry is due to over capacity and demand slowdown
resulting in price cuts.

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

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

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

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

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

Dr.C.Balakrishnan (2016) observed that financial performance of any organization is influenced by several factors like
capital structure, cost, revenue and the consequential profit margin. The study can be analyzed with many aspects like
financial facts, financial ratios, financial health, financial strength and utilization of assets, etc. The study revealed that
financial performance can be influenced by the operational and financial efficiency of the steel industry, which are
related to cost and the revenue aspects. The study analyzed the performance of steel industry in India on the parameters
such as profitability, utilization of assets, growth of performance, financial strength and capital structure. The study also
attempted to identify the nature of relationship between the various aspects of financial performance.

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

OBJECTIVES OF THE STUDY

• To know the financial position of Tata steel.

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

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

RESEARCH HYPOTHESIS

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

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

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

SCOPE OF THE STUDY

• The scope of the study is limited to collecting financial data published in the annual reports of the company
every year.

• The ratio analysis is done to suggest the possible solutions. The study is carried out for 5 years data of Tata steel
( 2015-16 to 2019-20).

• This study is confined to Tata steel only.

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

Research design

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

Data collection

a) Primary data

Primary data is data originated for the first time by the researcher through direct efforts and experience, specifically for
the purpose of addressing his research problem. Also known as the first hand or raw

data. The data can be collected through various methods like surveys, observations , physical testing, mailed
questionnaires personal interviews, telephone interviews, case studies etc.

b) Secondary data

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

Sources of data

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

Methods of data analysis

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

The study employs the following analytical tools:

• Graph
• Ratio analysis

LIMITATION OF THE STUDY

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

Data representation and interpretation

Liquid ratios

1. current ratio = current asset/current liabilities

(Rs crore)
Year Current assets Current liabilities Current ratio
2016 14421.49 21087.99 0.68
2017 20110.4 23056.33 0.87
2018 34643.91 25607.34 1.35
2019 17035.58 25593.65 0.67
2020 20009.19 30871.3 0.65
2021 23674.29 31874.5 0.766
2022 24484.35 34084.9 0.74
2023 25294.4 36295.29 0.714

Current ratio compares current assets with current liabilities and tell us whether the current assets are enough to settle
current liabilities. It is inferred from the table that the higher current ratio of Tata steel is 1.35 in the year 2018 and the
lower was 0.65 in the year 2020. The ratio of 1.2 to

2 or above is usually considered safe. Tata steel is in poor condition to pay back its debts. Hence the current ratio of Tata
steel is dissatisfactory.
LIQUID RATIO
Liquid ratio= current assets- inventory- prepaid expenses/current liabilities

(Rs crore)
Current
Year Liquid assets Liquid ratio
liabilities

2016 7337.68 21087.99 0.35

2017 9873.55 23056.33 0.43

2018 23620.5 25607.34 0.92

2019 5780.24 25593.65 0.23

2020 9292.53 30871.3 0.3

2021 11125.82 31874.5 0.356

2022 11107.46 34084.9 0.326

2023 11089.1 36295.29 0.296

Ratio of 1.1 is said to be the ideal quick ratio. Indicating that company has in its possession enough assets which may be
immediately liquidated for paying off the current liabilities. The table shows that the highest liquid ratio of Tata steel is
0.92 in the year 2018 that is not more than the ideal ratio. Hence the liquid ratio of the company is dissatisfactory.
LONG TERM FINANCIAL POSITION RATIO OR SOLVENCY RATIO

DEBT EQUITY RATIO

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

funds

(Rs crore)
Year debt Shareholders Debt equity ratio
fund
2016 29368.4 70476.7 0.41
2017 4 2 0.73
2018 36475.0 49659 0.58
2019 7 61514.8 0.55
2020 35717.1 2 0.57
2021 6 70454.7 0.61
2022 39175 1
0.624
2023 42683.1 74563.1
0.638
4 2
45482.5 74024.2
6 3
48415.4 76921.0
9 8
51348.4 79817.9
3 3

PROPRIETARY RATI0

Proprietary ratio = shareholder funds / total assets

year Shareholders Total Proprietary ratio

fund assets
2016 70476.72 123208.2 0.57
2017 49659 111465.4 0.44
2018 61514.82 125114.3 0.49
2019 70454.71 137498.4 0.51
2020 74563.12 150392.6 0.49
2021 74024.23 153656.3 0.473
2022 76921.08 161696.5 0.464
2023 79817.93 169736.6 0.455