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Jindal

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Khyaan Shah
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29 views4 pages

Jindal

Uploaded by

Khyaan Shah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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SLIDE 1

Current Ratio
A current ratio above 1 typically indicates that a company can meet its short-term obligations
using its short-term assets. In 2020, the current ratio was 0.7, which raised concerns.
However, the company improved its performance, maintaining a ratio around 1 or 0.9 from
2021 to 2024, nearing the ideal level.

Quick/Liquidity Ratio
The quick ratio offers a stricter assessment of liquidity by excluding inventory and bank
overdrafts. The company’s quick ratio was 0.6 in 2020, a worrying indicator. It improved to
over 1 in 2021 and 2022 but fell below 1 again in 2023 and 2024, signalling that the company
is not maintaining sufficient quick assets in recent years.

Defensive Interval Ratio


The defensive interval ratio shows how long the company can sustain operations using liquid
assets without needing cash inflows. This ratio fluctuated between 65 and 189 times over the
five years, but a declining trend from 2021 to 2024 may raise concerns about the company’s
ability to withstand short-term disruptions.

SLIDE 2
Average Inventory Holding Period
A shorter holding period is typically better, reflecting faster inventory turnover. The
company’s holding period reduced from 20 days in 2020 to 17 days in 2022, demonstrating
better inventory management.

Average Collection Period/Debtors Velocity


Jindal Steel’s average debtor collection period has been volatile, with fluctuations averaging
8 days each year. The jump from 9 days to 17 days in 2024 may raise red flags for investors.

Creditors Payment Period


A shorter creditors payment period means the company is paying creditors faster, which can
benefit relationships but reduce cash flow flexibility. With an average payment period of 80
days, the company has maintained a high level of payment flexibility.

Net Operating Cycle


A negative net operating cycle means the company collects cash from customers before
paying suppliers, indicating strong cash flow flexibility. This is a positive indicator for both
the company and investors.

SLIDE 3

Fixed Asset Turnover Ratio


This ratio measures how effectively a company uses its fixed assets to generate revenue.
Jindal Steel has shown significant improvement, with the ratio increasing from 0.14 times to
2.27 times, a positive indicator for the company and investors.

Total Assets Turnover Ratio


This ratio reflects how efficiently the company utilizes its total assets to generate revenue.
While the upward trend shows progress, the ratio remains below 1, indicating the company
still has room for improvement in asset utilization.

Net Worth Turnover Ratio


The net worth turnover ratio, which shows how effectively the company uses its equity to
generate sales, has been stable, remaining above 1. With a median of 1.09, it suggests
efficient use of shareholder funds but remains close to the threshold.

Capital Employed Turnover Ratio


This ratio measures how effectively capital employed is used to generate revenue. Although
the trend is improving, the ratio has consistently stayed below 1, indicating the company
could use its overall capital more efficiently.

SLIDE 4
Cost of Goods Sold Ratio
The Cost of Goods Sold (COGS) ratio represents the percentage of revenue consumed by
production costs. A lower ratio signifies better gross margins. The sharp decline in 2021
suggests improved efficiency, while the increase in 2023 reflects rising costs or pricing
pressures. Despite fluctuations, the consistently high ratio indicates that a large portion of
revenue is allocated to production costs.

Admin Expense Ratio


The Admin Expense Ratio reflects the portion of revenue spent on administrative costs. A
steady decline from 2020 to 2022 suggests improved control over administrative expenses.
The subsequent rise in 2023 and 2024 could indicate increased spending or investments, but
the ratio remains low, which is positive for investors.

Selling and Distribution Expense Ratio


This ratio shows the proportion of revenue spent on selling and distributing products. Initial
increases reflect higher costs in these areas, but the company reduced these expenses in the
last two years, which is favourable for investors as the overall ratio remained low.

Finance Expense Ratio


The Finance Expense Ratio reflects the cost of financing relative to revenue. Negative values
in 2022 and 2024 indicate that the company earned more from financial activities than it
spent on financing costs, which is a positive sign. However, fluctuations in finance expenses
could raise concerns about changes in interest and other financial incomes.

Overall Expense Ratios Analysis


Jindal Steel's high COGS ratio significantly impacts its margins. However, the company is
efficient in managing other operational expenses, reflected in lower administrative, selling,
distribution, and finance expenses. The negative finance expense ratio in 2022 and 2024 is
particularly favourable for investors.

Part 2
Gross Profit Margin Ratio
The Gross Profit Margin Ratio shows the percentage of revenue exceeding the cost of goods
sold. Jindal Steel consistently has a low gross profit margin, which is unfavorable for
investors.

Operating Profit Margin Ratio


The Operating Profit Margin Ratio measures the portion of revenue left after covering
operating expenses. Jindal's operating profit margin is low, with a median of 16.5%, which is
not ideal for investors.

Net Profit Margin Ratio


The Net Profit Margin Ratio represents the percentage of revenue that remains as profit after
all expenses are deducted. Jindal has improved its net profit margin over the past five years,
although there was a dip after a notable increase in 2021.

SLIDE 5
Earnings Per Share (EPS)
EPS showed significant growth from 2020 to 2022, reflecting strong profitability and
operational efficiency. However, the decline in 2023 raises concerns about operational
challenges or reduced sales. The recovery in 2024 indicates improved earnings.

Price Earning (PE) Ratio


The PE ratio reflects how much investors are willing to pay for each unit of earnings. The
low PE in 2022 suggests the stock was undervalued, likely due to a drop in EPS. The rise in
2023 could be due to market optimism, but the subsequent drop in 2024 hints at market re-
evaluation.

SLIDE 6
Return on Capital Employed (ROCE)
ROCE shows a positive trend, rising from 6.18% in 2020 to a peak of 21.40% in 2022,
followed by a decline to 7.68% in 2023 and a recovery to 14.34% in 2024. This indicates an
overall improvement in capital utilization, though recent volatility raises concerns.

Return on Net Worth (RONW)


RONW started at 2.67% in 2020, peaked at 25.39% in 2021, then dropped to 5.99% in 2023
before rising again to 12.26% in 2024. This reflects the company's fluctuating ability to
generate profits relative to shareholder equity, with the 2021 peak demonstrating strong
profitability.

The company experienced a strong recovery from 2020 to 2021, but ROE has been
inconsistent, dropping sharply in 2023.
The volatility in ROE indicates fluctuations in profitability or operational efficiency.
The upward trend in 2024 suggests the company may be on a recovery path, but it remains to
be seen if this improvement is sustainable.

SLIDE 7
Du Pont Analysis - 5 Factor

- Tax Burden:
Jindal Steel's tax burden fluctuated, starting at 70.22% in 2020, peaking at 84.50% in 2023,
and decreasing to 73.75% in 2024. A higher tax burden implies that more earnings are
directed toward taxes, limiting the profit available for shareholders. These fluctuations
indicate varying impacts of tax on profitability.

- Interest Burden:
The interest burden, representing the share of earnings consumed by interest payments,
increased from 32.88% in 2020 to 87.95% in 2022, before dropping to 70.93% in 2023 and
rising again to 85.73% in 2024. High interest burdens in certain years suggest a large portion
of earnings is being used to cover interest obligations, which may put pressure on net profits
and cash flow.

-Earnings Before Interest and Tax (EBIT) Margin:


This margin reflects operational efficiency. It rose from 10.27% in 2020 to 32.64% in 2021,
then declined to 8.00% in 2023, before recovering to 16.95% in 2024. The peak in 2021
demonstrates strong operations, while the 2023 decline could indicate higher costs or
operational issues.

Total Assets Turnover Ratio:


This ratio continues to show an upward trend, pointing to better asset utilization. However,
it remains below 1, suggesting that the company still has room to improve asset efficiency.

Equity Multiplier
The equity multiplier decreased from 2.55 in 2020 to 1.62 in 2024, indicating reduced
reliance on debt, which lowers financial risk and signifies a more cautious approach to capital
structure.

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