Monnet ispat


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Monnet Ispat Performance

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Monnet ispat

  1. 1. Parnamoy Dutta Roll No. 13 PGDM (IB) Page | 1 Monnet Ispat & Energy Limited 1. About Monnet Ispat & Energy Limited: Sector: Steel/Sponge Iron/Pig Iron. House: Monnet. BSE Code: 513446. NSE Symbol: MONNETISPA. Indices: BSE500, MIDCAP, CNX500, CNXMETAL. Chairman/ Managing Director: Sandeep Jajodia. Face Value: 10 Auditor: OP Bagla & Co. 2. Sector Analysis: Overview: o New era of development since liberalization. o Domestic steel industry has become market oriented and integrated with the global steel industry. o Plays an important role in Indian economy by contributing to nearly 2% of the GDP and employs over 500.000 people. o Backbone of sectors like, Auto Industry, Infrastructure. o Due to the favourable government policies and robust economic growth, Indian steel industry is presently experiencing healthy growth. o Domestic demand and consumption appear to be excellent driven by the high investment rate, growth in manufacturing industry and expansion in physical infrastructure creation. o Indian steel industry has emerged as the 4th largest steel producing country in the world.
  2. 2. Page | 2 o India’s low cost labour and ready availability of iron ore contribute significantly to the cost competitiveness of producing steel in India. o Steel industries are mainly located in the eastern region of India- Orissa, Chhattisgarh, West Bengal, etc. Regulatory Environment: o National Steel Policy, 2005:  Increase the total installed capacity to 110 million tonnes and with production capacity of 100 million tonnes by 2019-20.  Average growth to be maintained at 7% for achieving the goal.  To achieve this goal and extra amount of US$65 billion is required in addition to funds for technology up-gradation.  Focus is on domestic sector but also envisages a faster growth than domestic consumption which will enable export opportunities. o Institutional and Policy Settings:  Allowing private ownership and foreign investments have increased capital inflow, resulted in better quality. SAIL and RINL (heavyweight PSU’s) have been granted ‘NAVRATNA’ status which allow them to have greater autonomy in investments, joint venture and commercial decisions.  Improving Intellectual Property Laws has provided greater security in intellectual property ownership and will facilitate transfer of intellectual property to India and the development of indigenous technology solutions.  Deregulation of pricing and distribution of iron and steel resulted in proper reflection of production costs or product quality on prices and helped in implementing efficient logistics.  Customs Policy: The government has significantly reduced the duty payable on inputs to steel production on capital equipment and on finished steel product and has streamlined the associate approval processes. The government also supports firms that are into exporting of steel products.  Steel plants operating in Special Economic Zones are not subjected to restrictive normal laws for the purpose of export
  3. 3. Page | 3 operations and also receive some additional advantages including tax holidays, freedom to source inputs domestically or externally without approval or duty payable. SWOT Analysis: Challenges faced by India Steel Sector: o Land acquisition requires more than a nod from a centralized authority. o Judicious allocation of abundant iron ore remains a challenge. o Limited access to coking coal. o Underdeveloped infrastructures, environmental & forest clearances and availability of coal and fuel and increasing cost of dry fuel. o The environment clearance has been another major concern for the steel sector while setting up plants.
  4. 4. Page | 4 3. Sector Performance: Production for Sale trend of last five years for total finished steel: Public/Private production trend: Year Total Finished Steel(in million tonnes) 2006-07 52.52 2007-08 56.07 2008-09 57.16 2009-10 60.62 2010-11 68.62 Year 2006-07 2007-08 2008-09 2009-10 2010-11 Public Sector 17 17.9 16.37 16.71 16.99 Private Sector 33.81 36.77 42.07 49.13 52.67 Total 50.81 54.67 58.44 65.84 69.66
  5. 5. Page | 5 Imports/Exports Trend: Year Imports in million tonnes Exports in million tonnes 2006-07 4.93 5.24 2007-08 7.03 5.08 2008-09 5.84 4.44 2009-10 7.38 3.25 2010-11 6.66 3.64
  6. 6. Page | 6 Global Ranking of Indian Steel in terms of production: Consumption Trend: Rank Country Production in million tonnes 1 China 683.26 2 Japan 107.59 3 US 86.25 4 India 72.2 5 Russia 68.74 6 South Korea 68.47 7 Germany 44.29 8 Ukraine 35.33 9 Brazil 35.16 10 Turkey 34.1 Year Apparent Consumption in million tonnes Percentage Growth 2006-07 46.7 30 2007-08 52.1 11.56316916 2008-09 52.3 0.383877159 2009-10 57.6 10.13384321 2010-11 65 12.84722222
  7. 7. Page | 7 Future Outlook: o In 2011 our per capita consumption of steel was only 57 Kgs as against the world average of 214.7 Kgs which gives a clear picture of enormous potential. o The massive investment of $1 trillion has been envisaged for the 12th Five year plan in infrastructure sector is clearly to boost the demand and growth of the Indian steel sector. o In the most likely growth scenario of 8.5% to 9% GDP growth, in the next five years the demand for steel would grow at a annual average rate of 10.3%. o We can also expect the consolidation of small and mid-sized players in the domestic market as they look to compete with the large global players entering India. o R&D must be focus area as even if buying new technology is an option but developing its own technology is a better proposition. o Continuance of tax sops for housing sector will also be a positive factor for increased steel demand in the country. o According to the Ministry of Steel, India is expected to become the second largest producer of crude steel in the world by 2015-16. o Domestic Demand for 12th Five Year Plan:-
  8. 8. Page | 8 o Demand Drivers: Infrastructure, Auto, Manufacturing have the potential to grow in the future thereby boosting the growth of Indian Steel sector. 4. Gist of Chairman Speech: Company registered consistent growth steered by its diversified and de-risked business model thereby enabling it to power growth and empower people. Financial Performance: o The Company’s de-risked business model insulated it from the challenges that prevailed in the year and helped its steady performance. o Merchant power segment remained challenging but higher sales realization from sponge iron improved overall profitability. Year GDP @ 8% GDP @ 8.5% GDP @ 9% GDP @ 9.5% 2012-13 72.6 72.9 73.3 73.7 2013-14 79.2 80 80.8 81.7 2014-15 86.4 87.7 89.1 90.5 2015-16 94.3 96.3 98.3 100.3 2016-17 102.9 105.6 108.3 111.2
  9. 9. Page | 9 o The steel business also witnessed some price volatilities in the middle of the financial year but soon stabilized in the later part thus reporting a healthy top-line and bottom line growth. Operational Performance: o Operationalized its iron ore washery plant at Raigarh and beneficiated low grade iron ore and blended it with sized iron ore to achieve a better cost. o Availability of captive coal mines helps the company to produce lowest cost power which helped it to take a rapid stride in enhancing power generation for merchant selling. o Coal business also saw a major development with the acquisition of Indonesian Coal Company PT Sarwa Sembada Karya Bumi for US $24 billion. The excellent logistic of the mine along with low shipping cost and transit time will make coal extremely cost effective. o Further, it will also provide low-cost fuel for planned coal-based power projects. o Excess coal mined can be used for the selling in the open market thereby can be a source of revenue. CSR Activities: o Proud sponsors of the Indian Boxing team (senior, junior, sub-junior). o Only company to promote amateur boxing in India. Initiatives for the future: o Expanding coal beneficiation operation to achieve up to 50 MTPA capacity. o Augmenting capacities in steel through implementation of ongoing 1.5 MTPA integrated steel plant at Raigarh. 5. Reports and their meanings: Corporate Information: o Contains the name of board of directors, auditors, company addresses, etc. Managing Directors’ Message: o Consists of the views of the managing director and his outlook about the company to the shareholders.
  10. 10. Page | 10 CSR Initiatives: o In the health sector the company has set up hospital and arranged free health check-ups for the unprivileged. o Took initiatives to replace traditional chulhas with smoke-less stoves to reduce the spread of diseases through contaminated air. o Various Women empowerment programs like poultry farming, phenyl making, etc. has been taken up. o Schools have been set up with the view to impart education. o Focus has also been on developing income generation skills to attain sustainable livelihood. o Proud sponsors of the Indian Boxing team (senior, junior, sub-junior). Directors’ Report: o No capacity addition to the existing facilities. o More emphasis given on production of power and Ferro alloys which were more profitable. o Net sales and profit increased though the production of sponge iron, power, steel, coal decreased as the price of merchant power increased and prices of coal stabilized. o Steel expansion is on schedule and power expansion is on-track after a delay due to environment clearances. o A new joint venture with Ecomaister Co. Ltd of Korea for a slag handling plant (environmentally favourable and commercially profitable) has been formed. o The report also states the directors’ responsibility as per Section 217 (2AA) and also statutory disclosures. o It also states about the risk management policy, internal audits, and note on subsidiaries. Annexure to the Directors’ Report: o It states the measures taken for energy conservation, investments for reduction of energy consumption, optimization of resources. o The impact of above measures on the cost of goods has been kept under control.
  11. 11. Page | 11 o The company did not spend on technology absorption, innovation, and research and developments. Corporate Governance Report: o States the company’s philosophy towards ethical corporate citizenship by following healthy governance practices and discharging societal responsibilities towards all associates, capital providers, and stakeholders. o Provides us with the dates of the board meetings and whether it complied with clause 49 of the Listing Agreement. o Presents the structure of board of directors, their remuneration, and their attendance in board meetings. o Information on various committees like audit committee, remuneration committee, grievance committee etc. are also given. o It also has data related to status of complaints, shareholding pattern, distribution of shareholding, stock price data, dividend history, and general share holder information. Auditors’ Report: o Balance Sheet: Consists of the sources of funds from shareholders and loans and the application of these funds for business functions. For a good firm the source and application should be same as in the case of Monnet. o Profit and Loss Account: Give details of the income from sales minus the inter division transfers and excise duty, expenditure in the form of material, manufacturing, increase/decrease of stocks, repair, maintenance, administrative expenses, depreciation, profit before tax, and profit after tax calculation. Rising profit gives a positive indication about the company. o Schedules: Detailed calculations about the entries in Balance sheet, Profit and Loss account and the accounting policies followed for calculating them are described in the schedules. o Cash Flow Statements: Describes the cash flow in and out of the business. The cash flow denotes the financial flexibility, profitability, and company’s liquidity. Increased cash flow denotes that the firm is financially strong and flexible.