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www.ijcrt.

org © 2024 IJCRT | Volume 12, Issue 4 April 2024 | ISSN: 2320-2882

A STUDY ON FINANCIAL ANALYSIS OF


TATA STEEL

Ms. S. S. Abika. Bsc., MBA., School of Management Studies,


Sathyabama Institude of Science and Technology; Chennai

Dr. M. Lavanya MBA., M.com., M.Phil., Ph.D.,


Associate Professor,
Sathyabama Institude of Science and Technology; Chennai

ABSTRACT:
Financial is regarded as the life blood of a business enterprise. Finance statements are prepared primary
for decision-making. They play a dominant role in setting the frame work and managerial conclusion and
can be drawn from these statements is of immense use in decision-making through analysis and
interpretation of financial statement. Every business under taking needs finance for its smooth working. It
has to raise funds from the cheapest and risky source to utilize this in most effective manner. So every
company will be interested in knowing its financial performance. The project entitled “FINANCIAL
PERFORMANCE ANALYSIS OF TATA STEEL “throw light on overall financial performance of Tata steel .

1. INTRODUCTION

Finance is a broad term that describes activities associated with banking, leverage or debt, credit, capital markets,
money, and investments. Basically, finance represents money management and the process of acquiring needed
funds. Finance also encompasses the oversight, creation, and study of money, banking, credit, investments, assets,
and liabilities that make up financial systems.

FINANCIAL STATEMENT ANALYSIS:

Financial statement analysis is the process of analysing a company's financial statements for decision-
making purposes. External stakeholders use it to understand the overall health of an organization as well as to
evaluate financial performance and business value. Internal constituents use it as a monitoring tool for
managing the finances.

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PURPOSE OF FINANCIAL STATEMENT ANALYSIS:


To measure the financial standing of the business .To evaluate the profitability (earning capacity) of the business .To
make comparisons within the firm (intra-firm) and with other firms (inter-firm) . To find out the business’ capability
of paying interest, dividend, etc., To judge the performance of the management .To measure the firm’s short-term
and long-term solvency

LIMITATIONS OF FINANCIAL STATEMENT ANALYSIS:


The financial statements are expressed in monetary values, so they appear to give final and accurate position.
The value of fixed assets in the balance sheet neither represents the value for which fixed assets can be sold
nor the amount which will be required to replace these assets. The balance sheet is prepared on the
presumption of a going concern. Financial Statement Limitation.

TOOLS OF FINANCIAL STATEMENT ANALYSIS:


Different tools are used for analyzing the financial statements. The tool is selected based on the purpose of
analysis. Following are the commonly used tools of financial statement analysis:

1.Comparative statement ,2. Common-size statements, 3.Trend analysis, 4.Ratio Analysis, 5.Funds flow
analysis, 6.Cash flow analysis.

STATEMENT OF THE PROBLEM:

In this study, an attempt is made to identify the financial performance of TATA STEEL and its financial strength
and weakness by using ratio analysis and trend analysis and to establishing relationship between the items in
the balance sheet and profit and loss account. Despite the fact that TATA STEEL is producing audited financial
statement for users timely, they are not making regular financial performance analysis. But the company makes
annual performance review only to determine its profitability by comparing with its annual budget and the
previous year’s performance which is not enough.

REVIEW OF LITERATURE

Nirav.S. Chauhan (2012)2 the report shows about the financial analysis of TATA STEEL for the period 2010 to 2012.
Data is analysed through trend analysis, comparative statement analysis and cash flow method. The result suggests
that increasing provisions is the only growing concern for TATA STEEL as it is directly affecting net current assets and
its profit margin.

Dr. Vivek Singla (2013)4 the study has been conducted to compare the financial performance of two steel companies
i.e. SAIL and TATA STEEL. Analysis of working capital and analysis of profitability was also included in this study. As a
result of comparing both the companies Tata Steel is better than SAIL in net profit and in inventory management.

Megaladevi P et al. (2016)13 undertook a study to establish money performance of Tata Steel Ltd. Different
ratios are used in this study and notably those that are associated with the finances. For this purpose balance
sheet from 2005–2006 to 2014–2015 of Tata Steel Limited is employed and from them ratios are calculated.
On the whole company’s overall financial performance was satisfactory.

Abhishek Sinha et al. (2018)16 undertook a study to analyse the strengths and weaknesses of two steel
companies (Tata Steel ltd and Jindal Steel). Period of the study is from 2013 -2017 (5 years). Data is analysed
through ratio analysis. The study reveals that Tata Steel Ltd have sound solvency position than Jindal Steel but
the company have to avail on the benefit of trading on equity and has to use cheaper debt capital

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MATERIALS AND METHODS:


A. SCOPE OF THE STUDY

The scope of this study is wider in nature. This study has come up with the financial performance of TATA STEEL.
The company’s past data has been used for analysis. Data relating to ten years period (2011- 2012 to 2020-
2021) have been used. This study will help in forecasting the information for the future.

B. OBJECTIVES OF THE STUDY


1. To study the financial performance of TATA STEEL using ratio analysis (Liquidity, Solvency,
Profitability, Efficiency and Capital structure ratios).

2. To forecast the financial performance of TATA STEEL on the basis of past performance using trend
analysis.

C. SOURCE OF DATA COLLECTION


Secondary Data

The Secondary data are those which have already been collected by someone else and which have already
been passed through the statistical process. Thus the data was collected from company document reports and
books.

D. Period of Study

The present study focuses on a decade financial statement of Tata Steel Ltd from the year 2011-2012 to 2020-2021.

E. Tools for Analysis

The tools and techniques which have used in this study

1. Ratio analysis
2. Trend analysis

F. LIMITATIONS OF THE STUDY


The data are secondary in nature. The study is limited to the period of ten years from 2011-12 to 2020-21. The
changes taken place before and after this period have not been taken into consideration

ANALYSIS AND INTERPRETATION

RATIO ANALYSIS

Ratio analysis is mainly performed by external analysts as financial statements are the primary source of
information for external analysts. The analysts very much rely on the current and past financial statements
in order to obtain important data for analyzing financial performance of the company. The data or
information thus obtained during the analysis is helpful in determining whether the financial position of a
company is improving or deteriorating.
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ANALYSIS OF LIQUIDITY RATIO -CURRENT RATIO

CURRENT CURRENT
YEAR CURRENT RATIO
ASSETS LIABILITIES
2011-2012 56808.33 47,482.83 1.20
2012-2013 54,244.15 52,279.05 1.04
2013-2014 57,989.41 64,123.14 0.90
2014-2015 53,594.74 45,826.13 1.17
2015-2016 45,791.96 47,953.97 0.95
2016-2017 50,935.03 50,341.05 1.01
2017-2018 67,877.16 55,661.41 1.22
2018-2019 58,990.98 61,034.13 0.97
2019-2020 58,732.72 61,660.91 0.95
2020-2021 60,211.90 70,867.13 0.85

INTERPRETATION

Table 4.1 shows the Current ratio of Tata Steel Limited for the period of 10 years from 2011-2012 to 2020-
2021

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ANALYSIS OF SOLVENCY RATIOS

PROPRIETARY RATIO

SHAREHOLDER’S PROPRIETARY
YEAR TOTAL ASSETS
FUNDS RATIO
2011-2012 42,616.22 1,46,852.09 0.29
2012-2013 34,172.24 1,46,906.42 0.23
2013-2014 40,531.96 1,71,644.45 0.24
2014-2015 31,349.41 1,58,945.53 0.20
2015-2016 41,457.55 1,77,511.44 0.23
2016-2017 35,544.31 1,73,333.24 0.21
2017-2018 58,595.60 2,09,757.94 0.28
2018-2019 66,650.08 2,33,582.39 0.29
2019-2020 71,301.30 2,50,419.45 0.28
2020-2021 73,459.99 2,45,487.21 0.30

INTERPREATATION

Table 4.4 shows the Proprietary ratio of Tata Steel Limited for the period of 10 years from 2011-2012 to
2020-2021.

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ANALYSIS OF EFFICIENCY RATIOS

INVENTORY TURNOVER RATIO

INVENTORY TURNOVER
YEAR NET SALES AVERAGE STOCK
RATIO

2011-2012 1,32,257.36 25,598.00 5.17


2012-2013 1,33,416.60 24,091.19 5.54
2013-2014 1,47,347.28 26,880.00 5.48
2014-2015 1,38,318.91 25,149.91 5.50
2015-2016 1,05,683.18 20,013.33 5.28
2016-2017 1,11,562.05 24,803.82 4.50
2017-2018 1,30,880.87 28,331.04 4.62
2018-2019 1,54,691.63 31,656.10 4.89
2019-2020 1,46,106.00 31,068.72 4.70
2020-2021 1,53,308.39 33,276.38 4.61

INTERPRETATION

shows the Inventory turnover ratio of Tata Steel Limited for the period of 10 years from 2011-2012 to 2020-
2021

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TREND ANALYSIS

Trend analysis is an analysis of the trend of the company by comparing its financial statements to analyse
the trend of the market or analysis of the future based on past performance results, and it’s an attempt to
make the best decisions based on the results of the analysis done. In Finance, Trend Analysis is used for
Technical analysis and Accounting analysis of stocks.

TREND ANALYSIS OF NET SALES

TREND PERCENTAGE
YEAR NET SALES

2022 145309.61 109.87


2023 147119.14 111.24
2024 148928.66 112.61
2025 150738.19 113.97
2026 152547.71 115.34
2027 154357.24 116.71
2028 156166.76 118.08
2029 157976.29 119.45
2030 159785.81 120.81
2031 161595.33 122.18

INTERPRETATION

From the above table 4.21, Net Sales has been forecasted from 2022 – 2031 for the period of 10 years.

TREND ANALYSIS OF NET SALES


124 122,18
122 120,81
119,45
120 118,08
118 116,71
115,34
116 113,97
114 112,61
111,24
112 109,87
110
108
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032

YEAR
SALES FORCAST

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TREND ANALYSIS OF STOCK

TREND PERCENTAGE
YEAR STOCK

2022 32,292.27 126.15


2023 33,238.71 129.85
2024 34,185.14 133.55
2025 35,131.58 137.24
2026 36,078.02 140.94
2027 37,024.46 144.64
2028 37,970.90 148.34
2029 38,917.34 152.03
2030 39,863.78 155.73
2031 40,810.22 159.43

INTERPRETATION

Stock has been forecasted from 2022 – 2031 for the period of 10 years.

TREND ANALYSIS OF STOCK


180,00 159,43
152,03 155,73
160,00 144,64 148,34
133,55 137,24 140,94
140,00 126,15 129,85
120,00
100,00
80,00
60,00
40,00
20,00
0,00
2020 2022 2024 2026 2028 2030 2032

YEAR

STOCK FORECAST

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www.ijcrt.org © 2024 IJCRT | Volume 12, Issue 4 April 2024 | ISSN: 2320-2882

SUGGESSTIONS

In the present study, the following suggestions are given, on findings to improve the financial position of
TATA STEEL LIMITED.

 The firm has to increases it current assets to meets its short-term obligations, and to improve it
liquidity position.

 The company should try to decrease its operating expenses so that it can improve its net profit
position.

CONCLUSION

Efficient management of finance is very important for the success of an enterprise.The present study was
conducted on “FINANCIAL STATEMENT ANALYSIS OF TATA STEEL LIMITED” by using ratio analysis and
trend analysis as financial tools. Based on the tools used analysis and interpretation have been made giving
way for useful and constructive suggestions. It reveals that the short-term solvency of the company has to
improve its liquidity position. On long-term solvency of the company, the management is expected to make
changes so as to maintain a steady solvency position. In future, the expenses of the company should be
curtailed to increase the profit. TATA STEEL LIMITED should take efforts constantly to improve the financial
position up to next level of performance in order to make benchmark. This will yield greater efficiencies
and improve investor’s satisfaction.

ANNEXURE

A. FINANCIAL STATEMENT OF TATA STEEL

Profit and loss and Balance Sheet of TATA STEEL LIMITED from 2012-2013 to 2020-2021 has been
mentioned below

PROFIT & LOSS ACCOUNT OF TATA STEEL LIMITED

PARTICULARS Mar-21 Mar-20 Mar-19 Mar-18 Mar-17 Mar-16 Mar-15 Mar-14 Mar-13 Mar-12
INCOME
REVENUE FROM 1,53,308.39 1,46,106.00 1,54,691.84 1,31,741.49 1,16,682.57 1,05,683.18 1,43,113.54 1,51,946.52 1,37,526.20 1,35,333.22
OPERATIONS
[GROSS]
Less: Excise/Sevice 0 0 0.21 860.62 5,120.52 0 4,794.63 4,599.24 4,109.60 3,075.86
Tax/Other Levies
REVENUE FROM 1,53,308.39 1,46,106.00 1,54,691.63 1,30,880.87 1,11,562.05 1,05,683.18 1,38,318.91 1,47,347.28 1,33,416.60 1,32,257.36
OPERATIONS [NET]
TOTAL OPERATING 1,56,294.18 1,48,971.71 1,57,668.78 1,32,155.75 1,12,299.42 1,06,339.92 1,39,503.73 1,48,613.55 1,34,711.54 1,32,899.70
REVENUES
Other Income 895.6 1,821.99 1,420.58 909.45 527.47 412.22 796.18 516.81 479.15 1,573.03
TOTAL REVENUE 1,57,189.78 1,50,793.70 1,59,089.36 1,33,065.20 1,12,826.89 1,06,752.14 1,40,299.91 1,49,130.36 1,35,190.69 1,34,472.73
EXPENSES
Cost Of Materials 46,187.96 53,592.83 54,309.07 41,205.43 32,418.09 28,114.90 40,770.27 46,242.98 40,643.46 45,457.54
Consumed
Purchase Of Stock-In 9,235.42 10,504.20 6,567.98 11,002.82 11,424.94 10,581.37 13,804.22 17,008.21 18,473.87 21,073.43
Trade
Changes In I 1,516.77 -490.05 -96.71 -43.68 -4,538.13 1,925.19 1,092.95 -514.67 1,418.93 -785.93
Inventories Of
FGWIP And Stock
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Employee Benefit 19,908.81 19,152.23 18,758.87 17,606.19 17,252.22 17,587.63 21,407.64 20,303.41 18,918.25 17,228.64
Expenses
Finance Costs 7,606.71 7,580.72 7,660.10 5,501.79 5,072.20 4,221.41 4,847.75 4,336.83 3,968.11 4,250.11
Depreciation And 9,233.64 8,707.67 7,341.83 5,961.66 5,672.88 5,306.35 5,943.60 5,841.22 5,575.32 4,516.65
Amortisation
Expenses
Other Expenses 50,706.65 50,702.93 50,410.51 41,495.32 39,499.19 41,255.47 51,061.09 50,689.40 44,252.81 38,366.86
TOTAL EXPENSES 1,42,630.27 1,47,432.53 1,43,287.37 1,21,728.67 1,06,036.68 1,07,899.35 1,37,759.33 1,42,380.59 1,31,933.76 1,29,249.67
PROFIT/LOSS
BEFORE
EXCEPTIONAL,
EXTRAORDINARY 14,559.51 3,361.17 15,801.99 11,336.53 6,790.21 -1,147.21 2,540.58 6,749.77 3,256.93 5,223.06
ITEMS AND TAX
Exceptional Items -1,043.16 -4,929.58 -120.97 9,599.12 -4,324.23 3,990.38 -3,928.67 -27.64 -7,389.88 3,361.92
PROFIT/LOSS 13,516.35 -1,568.41 15,681.02 20,935.65 2,465.98 2,843.17 -1,388.09 6,722.13 -4,132.95 8,584.98
BEFORE TAX
TAX EXPENSES-
CONTINUED
OPERATIONS
Current Tax 4,288.27 2,113.63 6,728.14 2,002.77 1,741.70 1,321.02 2,214.71 3,381.29 2,325.40 3,517.65
Less: MAT Credit 0 0 0 0 0 0 117.32 0.21 410.12 5.41
Entitlement
Deferred Tax 1,365.63 -4,666.53 -9.71 1,402.62 1,036.31 -631.06 470.02 -424.27 1,314.16 124.22
TOTAL TAX 5,653.90 -2,552.90 6,718.43 3,405.39 2,778.01 689.96 2,567.41 3,058.16 3,229.44 3,636.46
EXPENSES
PROFIT/LOSS FOR 7,862.45 984.49 8,873.63 17,588.71 -4,176.22 -386.67 -3,955.50 3,663.97 -7,362.39 4,948.52
THE PERIOD
Minority Interest -699.57 384.08 1,120.00 -4,328.48 -72.23 114.31 13.29 -69.92 214.46 173.14
CONSOLIDATED
PROFIT/LOSS AFTER
MI
AND ASSOCIATES 7,490.22 1,556.54 10,218.33 13,434.33 -4,240.80 -382.78 -3,925.52 3,594.89 -7,057.62 5,389.77
OTHER ADDITIONAL
INFORMATION
EARNINGS PER
SHARE
Basic EPS (Rs.) 64 12 88 128 -43 -7 -42 35 -75 54
Diluted EPS (Rs.) 64 12 88 128 -43 -7 -42 35 -75 54
DIVIDEND AND
DIVIDEND
PERCENTAGE
Equity Share 1,144.75 1,488.13 1,144.76 1,236.18 1,043.07 776.97 776.97 971.21 776.97 1,165.46
Dividend
Tax On Dividend 242.34 297.4 224.61 95.47 55.65 149.3 164.2 80.22 226.41 185.71

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BIBLIOGRAPHY

JOURNALS

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9. Varun Kesavan, 2015, IJLTEMAS, Volume IV, Issue V,” A Comparative Study on Financial Performance Of Tata
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WEBSITES

 https://www.tatasteel.com/
 https://www.moneycontrol.com/india/stockpricequote/ironsteel/tatasteel/TIS
 https://www.investopedia.com/terms/f/financial-statement-analysis.asp
 https://accountlearning.com/tools-techniques-financial-statement-analysis/

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