CIMP

STEEL AUTHORITY OF INDIA LIMITED (SAIL)

(Firm Analysis)

Presented to
Prof. Amit Parakh

By:
Ankita Sarni- PGDBA-01/06
Anurag-PGDBA-01/08

(Chandragupt Institute of Management, Patna)

Steel authority of India © Anurag and Ankita Sarni

 CIMP
INDIAN STEEL INDUSTRY:
Steel Industry in India is on an upswing because of the strong global and domestic demand in 2008, the
total amount of domestic steel consumption was 43.925 million tones. With the increased demand in the
national market, a huge part of the international market is also served by this industry.

India is the seventh largest steel producer in the world and, India's rapid economic growth and soaring
demand by sectors like infrastructure, real estate and automobiles, at home and abroad, has put Indian
steel industry on the global map. The outlook for Indian steel industry is very bright. India's lower
wages and favorable energy prices will continue to promise substantial cost advantages compared to
production facilities in (Western) Europe or the US.

OPPORTUNITIES FOR SAIL DUE TO MACROECONOMIC FACTORS:

 The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has projected
that the domestic steel industry would grow by 10 to 12%
 The scope for raising the total consumption of steel is huge in India as the per capita steel
consumption is only 35 kg (compared to 150 kg across the world and 250 kg in China) and is
estimated at 44 kg in 2008-09 and projected to reach 54 kg by the end of 2011-12.
 The government has removed full exemption of customs duty on Iron and steel products like
pig iron, spiegeleisen from 15% to 5%.
 In the Union Budget 2009-10, the government has made a 23 per cent hike in allocation for
highway development and US$ 1.034 billion increase in budgetary support to Railways which
will further promote the steel industry.
 The reduction in railway freight has also benefitted the domestic iron ore miners.

SAIL - FUTURE GROWTH PLANS:

 SAIL is going to own 65 warehouse and 2,500 strong dealership network to tap the rural
market which has very high growth perspective.
 SAIL is putting huge capital expenditure of around Rs.50,000 crore to add 10 million tonnes
of capacity and achieve operational effectiveness. The company plans to achieve entire
production through BOF steel making (currently at 78% of production) and continuous casting
route (currently at 64% of production).
 Sail is gradually implementing alternative fuel injection methods like coal dust/tar injection in
all the blast furnaces
 SAIL has been pursuing cost saving methods like implementation of modern techniques of
processing. and thus, in2008-09 they were able to save Rs 725 crore which helped in increasing
the profit margin.

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 Projects worth around Rs 28,000 crore are in various stages of implementation. This includes
ongoing 28 numbers of projects worth more than Rs 2,800 crore spread over six production
units across the country.
 SAIL is ready to own the 2,028-hectare block in the Rowghat iron ore mine deposits in
Chhattisgarh to feed its flagship unit, the Bhilai Steel Plant.
 They are developing two major mechanised iron ore mines – at Rowghat in the western
region and Chiria in the east. Both the mines will be developed with latest technology to
ensure assured supply of required quantity of quality iron ore to SAIL plants.
 They are also planning to set up a pellet plants (one at Bhilai and another near Manoharpur),
which would enable utilisation of huge iron ore fines generated during the mining operations,
apart from reducing cost of hot metal production which help in generation of revenue from the
waste materials.
 SAIL is providing customized services to its clients.

TRENDS OF SALES AND GROSS PROFIT FOR PAST 5 YEARS:

Sales and gross profit

Sales Gross profit

46,261.05 49,739.74
40,291.75
32,569.53 33,220.78

10,492.30 10,634.10 12,390.96 10,672.55

6,913.04

Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08 Mar ' 09

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COMPARATIVE ANALYSIS OF SAIL WITH ITS COMPETITORS:

SAIL TATA JSW Ispat Bhushan steel Industry

P/E 10.99 6.04 28.27 -4.07 11.58 10.56
P/BV 9.13 1.45 1.75 1.53 2.94 3.36
ROE 22.06 21.10 5.59 5.13 26.07 15.99
P/Sales 7.62 5.98 3.27 2.06 4.25 4.64
Net Profit
margin 13.40 21.09 3.23 0.41 10.09 9.64

COMPARISON OF SAIL’S STOCK GROWTH VIS -VIS SENSEX GROWTH:

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Steel Authority of India © Anurag and Ankita Sarni
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COMPARITIVE CHART SHOWING GROWTH TREND OF SAIL VS TATA STEEL:

MARKET SHARE OF SAIL AND ITS COMPETITORS IN DOMESTIC MARKET:

Bhushan
steel Market Share
6% Ispat
7% SAIL
JSW 42%
19%

TATA
26%

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Valuation of SAIL
CALCULATION OF BETA FROM HISTORICAL DATA:
We calculate the Beta by doing a regression of SAIL’s stock return with the market return.

X= SAIL’s average return/ month for ten years

Y=Sensex’s average return/ month for ten years

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.586972953
R Square 0.344537248
Adjusted R
Square 0.339787518
Standard Error 15.7375221
Observations 140

ANOVA
Significance
df SS MS F F
Regression 1 17965.52674 17965.53 72.538279 2.504E-14
Residual 138 34178.40504 247.6696
Total 139 52143.93177

Standard Lower Upper

Coefficients Error t Stat P-value Lower 95% Upper 95% 95.0% 95.0%
Intercept 1.557380799 1.341696967 1.160755 0.2477458 -1.0955613 4.21032292 -1.0955613 4.2103229
X Variable 1 1.409028907 0.165438384 8.516941 2.504E-14 1.081907 1.7361508 1.08190701 1.7361508

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CALCULATION OF BOTTOM-UP BETA:

The logic behind following this approach is as follows:

1) We wanted to use another method as well for calculation of Beta to compare the difference
between the valuations done by using beta from different methods.
2) This method is helpful in a way because, it helps us figuring out the operational leverages,
financial leverage and risk implicit in the business of the company.
3) The standard deviation of this method is very low compared to the one using Regression on
Historical data. This is because the sample size used is more than 5.

Regression Effective Tax Fixed/Variable

Company Name Beta D/E Ratio Rate % Cost
Tata Steel 1.21 1.34 30 0.33
Jindal Steel 1.16 1.51 30 0.11
Kalyani Steel 1.14 0.44 30 0.22
Uttam Galva 1.23 1.48 30 0.06
National Steel 1.11 1.43 30 0.04
Bhushan Steel 0.76 3.52 30 0.05
Adhunik Metalik 0.9 2.87 30 0.16

Average (Simple) 1.072857143 1.798571429 30 0.138571429

SAIL 1.41 0.26 30 0.42

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Step 1 Unlevered Industry beta

Average regression beta 1.07

Average debt-equity ratio
Average effective tax-rate
Un-leveraged beta
Un-leveraged beta
Business Beta
Business Beta
1.79
30.00%
Regression beta/ {1+ (1-tax-
rate)*debt-equity ratio}
(Financial Leverage is being
0.474922326 eliminated)
Unlevered beta/ {1+ (fixed
to variable-ratio)}
(Operational Leverage is
0.41712124 being eliminated)

Unlevered beta of SAIL (adjusted for

Step 2 its operating leverage)

Business beta 0.41712124

Fixed/variable cost ratio 0.42

Unlevered Beta of SAIL 0.59231216 (If SAIL has no debt)

Relevered beta of SAIL (adjusted for
Step 3 its financial leverage)
Unlevered Beta of SAIL 0.59231216
Debt-equity ratio 0.26
Effective Tax rate 30.00%
Unlevered beta * {1+ (1
- effective tax rate) *
Levered beta debt-equity ratio}
Levered beta 0.700112974 β = 0.7

Note: The regression beta is of a larger sample base (7 companies in this case) which reduces the
standard error in statistical estimation. Assuming the regression beta for SAIL has a standard error of
.16. The average industry regression beta would have a much lower error. Statistically, the standard
error for the sample would be - individual error / square root of number of samples i.e. 0.16/√7 = .06
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The Bottom Up beta by this method is 0.7 only which is less than the Regression beta by almost 0.7.
The difference is primarily due to the greater financial leverage (D/E ratio) of the company.

WACC Calculation using Historical Beta:

Return on Market, rM 15.67%

Return On Debt, rD 10%
Corporate Tax Rate, TC 30%
Beta of SAIL, β 1.42
Risk Free Rate, rF 6.50%
Return on Equity, rE 19.52%
D/E Ratio of SAIL 0.26
D/V Ratio of SAIL 0.206349
E/V Ratio of SAIL 0.793651

After Tax WACC 16.94%

WACC Calculation using Bottom - Up Beta:

Return on Market, rM 15.67%

Return On Debt, rD 10%

Corporate Tax Rate, TC 30%

Beta of SAIL, β 0.70

Risk Free Rate, rF 6.50%

Return on Equity, rE 12.92%

D/E Ratio of SAIL 0.26
D/V Ratio of SAIL 0.206349
E/V Ratio of SAIL 0.793651

After Tax WACC 11.70%

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Steel Authority of India © Anurag and Ankita Sarni
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Steel Authority of India © Anurag and Ankita Sarni
 FORCASTED CASH FLOW ON THE BASIS OF HISTORICAL BETA (1.42)

CIMP
PV Free cash flow, years 1-10 46214.8 (Horizon value in ye ar 10)
PV Horizon value 37179.1 176658

PV of company 83393.8
Buy
Fair Price 201.9
Current Price 162.0
Year 0 Year 1 Year 2 Year 3 Year 4 Ye ar 5 Ye ar 6 Ye ar 7 Ye ar 8 Ye ar 9 Ye ar 10 Ye ar 11
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
1 Sales T urnover 32569.53 33221 40292 46261 49740 53719 58016 62658 67670 73084 78931 85245 92065 99430 107384 109532
2 Cost of goods sold 18224.93 21646 24684 28692 34857 44062 40612 43860 47369 51159 55252 55409 59842 64629 69799.8 71195.8
3 EBITDA (1-2) 14344.6 11575 15607 17570 14883 9656.8 17405 18797 20301 21925 23679 29836 32223 34800 37584.5 38336.2
4 Depreciation 1126.95 1207.3 1211.5 1235.5 1285.1 1692.1 1827.5 1973.7 2131.6 2302.1 2486.3 2685.2 2900 3132 3382.61 3450.26
5 Profit before tax (EBIT) (3 - 4) 13217.65 10368 14396 16334 13597 7964.6 15577 16824 18169 19623 21193 27151 29323 31668 34201.9 34886
6 Tax 2592.37 1694.4 3253.8 3934.7 3284.3 2389.4 4673.2 5047.1 5450.8 5886.9 6357.9 8145.2 8796.8 9500.5 10260.6 10465.8
7 Profit after tax (5 - 6) 10625.28 8673.4 11142 12399 10313 5575.2 10904 11777 12719 13736 14835 19005 20526 22168 23941.3 24420.2

-
8 Investment in fixed assets 12485.07 322.93 -564.43 -26.4 697.52 6532.8 1504.1 1624.5 1754.4 1894.8 2046.4 2210.1 2386.9 2577.8 2784.04 751.691
9 Investment in working capital 2323.25 1147.9 4545.9 3533.3 4506.9 5430.4 1719 1856.5 2005 2165.5 2338.7 2525.8 2727.8 2946.1 3181.76 859.075
-
10 Free cash flow (7 + 4 - 8 - 9) -3056.09 9055.8 8372.3 10128 6394 4695.9 9508.6 10269 11091 11978 12936 16955 18311 19776 21358.2 26259.7
Assumptions:
Sales growth (percent) Base Year 2.0 21.3 14.8 7.5 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 2.0
Costs (percent of sales) 67.8 80.3 76.1 75.6 82.0 70.0 70.0 70.0 70.0 70.0 65.0 65.0 65.0 65.0 65.0 65.0
Working capital (percent of sales) 7.1 10.4 19.9 25.0 32.3 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0
Net fixed assets (percent of sales) 38.3 36.6 28.8 25.0 24.7 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0
Depreciation (percent of net fixed
assets) 9.0 9.9 10.4 10.7 10.5 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0

Tax rate, percent 30.0%

Cost of debt, percent (rD) 10.0%
Cost of equity, percent (rE) 19.4%
Debt ratio (D/V) 0.2
WACC, percent 16.9%
Long-term growth forecast, percent 2.0%

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Steel Authority of India © Anurag and Ankita Sarni
 FORCASTED CASH FLOW ON THE BASIS OF BOTTOM UP BETA (0.7)
CIMP

PV Free cash flow, years 1-10 61204.4 (Horizon value in ye ar 10)

PV Horizon value 89561.5 270763
PV of co
mpany 150765.9
Buy
Fair Price 365.0
Current Price 162.0
Year 0 Year 1 Year 2 Year 3 Year 4 Ye ar 5 Ye ar 6 Ye ar 7 Ye ar 8 Ye ar 9 Ye ar 10 Ye ar 11
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
1 Sales T urnover 32569.53 33221 40292 46261 49740 53719 58016 62658 67670 73084 78931 85245 92065 99430 107384 109532
2 Cost of goods sold 18224.93 21646 24684 28692 34857 44062 40612 43860 47369 51159 55252 55409 59842 64629 69799.8 71195.8
3 EBITDA (1-2) 14344.6 11575 15607 17570 14883 9656.8 17405 18797 20301 21925 23679 29836 32223 34800 37584.5 38336.2
4 Depreciation 1126.95 1207.3 1211.5 1235.5 1285.1 1692.1 1827.5 1973.7 2131.6 2302.1 2486.3 2685.2 2900 3132 3382.61 3450.26
5 Profit before tax (EBIT) (3 - 4) 13217.65 10368 14396 16334 13597 7964.6 15577 16824 18169 19623 21193 27151 29323 31668 34201.9 34886
6 Tax 2592.37 1694.4 3253.8 3934.7 3284.3 2389.4 4673.2 5047.1 5450.8 5886.9 6357.9 8145.2 8796.8 9500.5 10260.6 10465.8
7 Profit after tax (5 - 6) 10625.28 8673.4 11142 12399 10313 5575.2 10904 11777 12719 13736 14835 19005 20526 22168 23941.3 24420.2

-
8 Investment in fixed assets 12485.07 322.93 -564.43 -26.4 697.52 6532.8 1504.1 1624.5 1754.4 1894.8 2046.4 2210.1 2386.9 2577.8 2784.04 751.691
9 Investment in working capital 2323.25 1147.9 4545.9 3533.3 4506.9 5430.4 1719 1856.5 2005 2165.5 2338.7 2525.8 2727.8 2946.1 3181.76 859.075
-
10 Free cash flow (7 + 4 - 8 - 9) -3056.09 9055.8 8372.3 10128 6394 4695.9 9508.6 10269 11091 11978 12936 16955 18311 19776 21358.2 26259.7
Assumptions:
Sales growth (percent) Base Year 2.0 21.3 14.8 7.5 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 2.0
Costs (percent of sales) 67.8 80.3 76.1 75.6 82.0 70.0 70.0 70.0 70.0 70.0 65.0 65.0 65.0 65.0 65.0 65.0
Working capital (percent of sales) 7.1 10.4 19.9 25.0 32.3 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0 40.0
Net fixed assets (percent of sales) 38.3 36.6 28.8 25.0 24.7 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0
Depreciation (percent of net fixed
assets) 9.0 9.9 10.4 10.7 10.5 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0

Tax rate, percent 30.0%

Cost of debt, percent (rD) 10.0%
Cost of equity, percent (rE) 12.9%
Debt ratio (D/V) 0.2
WACC, percent 11.7%
Long-term growth forecast, percent 2.0%

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Steel Authority of India © Anurag and Ankita Sarni
 Consolidated Profit and Loss Account
CIMP
Mar ' 09 Mar ' 10 Mar ' 11 Mar ' 12 Mar ' 13 Mar ' 14 Mar ' 15 Mar ' 16 Mar ' 17 Mar ' 18 Mar ' 19 Mar ' 20

Income
Operating income 13597.48 7964.609 15577.41 16823.61 18169.49 19623.05 21192.9 27150.59 29322.63 31668.45 34201.92 34885.96

Expenses
Material consumed 22,042.58 23805.99 25710.47 27767.3 29988.69 32387.78 34978.8 37777.11 40799.28 44063.22 47588.28 51395.34
Manufacturing
expenses 3,762.77 4063.792 4388.895 4740.007 5119.207 5528.744 5971.043 6448.727 6964.625 7521.795 8123.538 8773.421
Personnel expenses 8,401.73 8821.817 9262.907 9726.053 10212.36 10722.97 11259.12 11822.08 12413.18 13033.84 13685.53 14369.81
Selling expenses 935.68 982.464 1031.587 1083.167 1137.325 1194.191 1253.901 1316.596 1382.426 1451.547 1524.124 1600.33
Adminstrative expenses 1,644.78 1694.123 1744.947 1797.296 1851.214 1906.751 1963.953 2022.872 2083.558 2146.065 2210.447 2276.76
Expenses capitalised -1,930.40 -2,026.92 -2,128.27 -2,234.68 -2,346.41 -2,463.73 -2,586.92 -2,716.27 -2,852.08 -2,994.68 -3,144.42 -3,301.64
Cost of sales 34,857.14 37645.71 40657.37 43909.96 47422.75 51216.57 55313.9 59739.01 64518.13 69679.58 75253.95 81274.27
Operating profit 8,941.44 9,656.76 10,429.30 11,263.64 12,164.73 13,137.91 14,188.94 15,324.06 16,549.98 17,873.98 19,303.90 20,848.21
Other recurring income 2,279.89 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000
Adjusted PBDIT 11,221.33 11,656.76 12,429.30 13,263.64 14,164.73 15,137.91 16,188.94 17,324.06 18,549.98 19,873.98 21,303.90 22,848.21
Financial expenses 253.24 258.3048 263.4709 268.7403 274.1151 279.5974 285.1894 290.8932 296.711 302.6452 308.6981 314.8721
Depreciation 1,285.12 1,285.12 1,285.12 1,285.12 1,285.12 1,285.12 1,285.12 1,285.12 1,285.12 1,285.12 1,285.12 1,285.12
Other write offs 128.02 100 100 100 100 100 100 100 100 100 100 100
Adjusted PBT 9,554.95 10,013.33 10,780.70 11,609.78 12,505.50 13,473.19 14,518.63 15,648.04 16,868.15 18,186.21 19,610.08 21,148.22
Tax charges 3,284.28 3003.999 3234.211 3482.934 3751.649 4041.957 4355.59 4694.413 5060.445 5455.864 5883.024 6344.465
Adjusted PAT 6,270.67 7,009.33 7,546.49 8,126.85 8,753.85 9,431.23 10,163.04 10,953.63 11,807.71 12,730.35 13,727.06 14,803.75
Non recurring items -277.12 50 50 50 50 50 50 50 50 50 50 50
Other non cash
adjustments 181.26 200 200 200 200 200 200 200 200 200 200 200
Reported net profit 6,174.81 6,759.33 7,296.49 7,876.85 8,503.85 9,181.23 9,913.04 10,703.63 11,557.71 12,480.35 13,477.06 14,553.75
Equity dividend 1,073.90 1175.558 1268.979 1369.912 1478.957 1596.766 1724.04 1861.536 2010.073 2170.536 2343.879 2531.135
Preference dividend -
Dividend tax 181.26 198.4185 214.1867 231.2228 249.6283 269.5128 290.9949 314.2024 339.2735 366.3576 395.6156 427.2218
Per share data
(annualised)
Shares in issue (lakhs) 41,304.01 41,304.01 41,304.01 41,304.01 41,304.01 41,304.01 41,304.01 41,304.01 41,304.01 41,304.01 41,304.01 41,304.01
Earning Per Share (Rs) 14.95 16.36 17.67 19.07 20.59 22.23 24.00 25.91 27.98 30.22 32.63 35.24

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Steel Authority of India © Anurag and Ankita Sarni
 Consolidated Balance Sheet
CIMP

Mar ' 09 Mar ' 10 Mar ' 11 Mar ' 12 Mar ' 13 Mar ' 14 Mar ' 15 Mar ' 16 Mar ' 17 Mar ' 18 Mar ' 19 Mar ' 20

Sources of funds
Owner's fund
Equity share capital 4,130.40 4,130.40 4,130.40 4,130.40 4,130.40 4,130.40 4,130.40 4,130.40 4,130.40 4,130.40 4,130.40 4,130.40
Share application
money -
Preference share capital -
Reserves & surplus 23,853.70 28,954.61 34,538.38 40,565.90 47,072.83 54,097.72 61,682.19 69,871.19 78,713.29 88,260.92 98,570.73 109,703.91

Loan funds
Secured loans 1,473.60 1742.2061 2036.2391 2353.6388 2696.284 3066.204 3465.5905 3896.8109 4362.4221 4865.1858 5408.0849 5994.341
Unsecured loans 6,065.19 8,183.30 9,564.40 11,055.25 12,664.69 14,402.23 16,278.19 18,303.67 20,490.68 22,852.21 25,402.25 28,155.95
Total 35,522.89 43,010.51 50,269.42 58,105.19 66,564.20 75,696.56 85,556.37 96,202.07 107,696.79 120,108.71 133,511.47 147,984.60

Uses of funds
Fixed assets
Gross block 32,728.69 40,561.48 43,365.61 46,290.07 49,344.49 52,539.26 55,885.61 59,395.67 63,082.54 66,960.35 71,044.39 73,096.08
Less : revaluation
reserve -
Less : accumulated
depreciation 20,459.86 21,759.86 23,059.86 24,359.86 25,659.86 26,959.86 28,259.86 29,559.86 30,859.86 32,159.86 33,459.86 34,759.86
Net block 12,268.83 18,801.62 20,305.75 21,930.21 23,684.63 25,579.40 27,625.75 29,835.81 32,222.68 34,800.49 37,584.53 38,336.22
Capital work-in-progress 6,544.24 4,056.15 4,336.56 4,629.01 4,934.45 5,253.93 5,588.56 5,939.57 6,308.25 6,696.03 7,104.44 7,309.61
Investments 652.7 808.90739 864.82944 923.15121 984.06467 1047.7772 1114.5126 1184.5129 1258.0391 1335.3733 1416.8203 1457.7367

Net current assets

Current assets, loans &
advances 35,666.84 41,097.29 42,816.29 44,672.82 46,677.87 48,843.32 51,182.01 53,707.79 56,435.63 59,381.71 62,563.47 63,422.54
Less : current liabilities
& provisions 19,609.72 20,786.30 22,033.48 23,355.49 24,756.82 26,242.23 27,816.76 29,485.77 31,254.91 33,130.21 35,118.02 37,225.10
Total net current assets 16,057.12 21,487.57 23,206.57 25,063.10 27,068.15 29,233.60 31,572.29 34,098.07 36,825.91 39,771.99 42,953.75 43,812.82
Miscellaneous expenses
not written -
Total 35,522.89 43,010.51 50,269.42 58,105.19 66,564.20 75,696.56 85,556.37 96,202.07 107,696.79 120,108.71 133,511.47 147,984.60

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 CIMP

Forecasted Current ratio and ROI:

Mar' Mar' Mar ' Mar ' Mar ' Mar ' Mar ' Mar ' Mar ' Mar ' Mar ' Mar '
Mar'05 Mar'06 Mar'07 Mar'08
09 10 11 12 13 14 15 16 17 18 19 20
Current
ratio 1.18 1.23 1.59 1.73 1.82 1.98 1.94 1.91 1.89 1.86 1.84 1.82 1.81 1.79 1.78 1.70
ROI 3.98 1.61 1.16 0.97 0.60 0.47 0.46 0.46 0.46 0.46 0.46 0.46 0.46 0.46 0.46 0.48

Some Facts & Assumptions:

1) While calculating the Bottom - Up Beta, we have assumed that a group of 7 steel companies is
a good sample for the reflection of Steel Industry in India.
2) Effective Corporate Tax rate has been taken as 30% for SAIL as it is an old company.
3) Return on Debt has been taken as 10%.
4) Risk Free rate has been taken as the return on G-Sec in the past Ten years which is 6.5%.
5) Stable Sales Growth rate for SAIL has been assumed as 8% because of the fact that there will
be high demand of Steel both in India and Overseas in the next 10 years.
6) Terminal growth of SAIL has been taken as 2%.
7) Working Capital has been taken as 40% of Sales because of the high capital requirements of the
industry.
8) Depreciation has been taken as 9%.
9) In the forecasted P & L account of the company, we have assumed the Variable Cost Growth
Rate of 8% because the Sales Turnover is growing 8% year on.
10) Fixed Cost Growth Rate has been assumed to be 5% and Admin Expenses to be 3% because of
the further scalability of operations.

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 CIMP

References:
1. “Principles of Corporate Finance” by Brealy, Myers, Allen, Mohanty
2. “Security analysis for Investment and Corporate Finance” by Damodran
3. www.wikipedia.com
4. www.bseindia.com
5. www.nseindia.com
6. www.worldsteel.org
7. http://indiabudget.nic.in/
8. http://finmin.nic.in/
9. http://www.worldsteel.org/
10. http://www.worldsteeldynamics.com/
11. www.yahoofinance.com
12. www.rediffmail.com
13. www.moneycontrol.com
14. www.economictimes.com
15. www.buisnessstandard.com

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Steel Authority of India © Anurag and Ankita Sarni