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Bhushan Steel - A report and complete analysis of stock price
 

Bhushan Steel - A report and complete analysis of stock price

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This report is analysis of Bhushan Steel's stock price, and its comparison with Steel Industry and Competitor Tata Steel ...

This report is analysis of Bhushan Steel's stock price, and its comparison with Steel Industry and Competitor Tata Steel
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    Bhushan Steel - A report and complete analysis of stock price Bhushan Steel - A report and complete analysis of stock price Presentation Transcript

    • By- Maneesh Garg November 2011 11jgbs-mgarg@jgu.edu.inIndustry and CompanyAnalysis- Bhushan Steel Ltd.Analysis with the help of Beta Value, Min. Variance point, and other Financial indicators
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011Table of ContentsIntroduction - Steel Industry: .............................................................................................................................................................................................................................................................2Company overview – Bhushan Steel Ltd........................................................................................................................................................................................................................................3Financial Analysis (5 years Sales and Profit) ...............................................................................................................................................................................................................................5Rate of Return ............................................................................................................................................................................................................................................................................................65 years Performance chart of Bhushan Steel stock (Source : moneycontrol.com) .....................................................................................................................................................7Quarterly and Yearly Rate of Return Analysis.............................................................................................................................................................................................................................8 Yearly Rate of Return ........................................................................................................................................................................................................................................................................8Quarterly Sales and Profit analysis ............................................................................................................................................................................................................................................... 10 Sales Turnover .................................................................................................................................................................................................................................................................................. 10 Net Profit ............................................................................................................................................................................................................................................................................................. 11Monthly Rate of Return Analysis .................................................................................................................................................................................................................................................... 12Volatility .................................................................................................................................................................................................................................................................................................... 14Choice of Efficient Portfolio through Correlation:- ................................................................................................................................................................................................................ 15Minimum Variance Point ................................................................................................................................................................................................................................................................... 15BETA ESTIMATION FOR BHUSHAN STEEL LTD. - 2007 to 2011 .................................................................................................................................................................................... 21Conclusion ................................................................................................................................................................................................................................................................................................ 24Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 1
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011Introduction - Steel Industry:The Indian iron and steel industry is nearly a century old, with Tata Iron & Steel Co (Tata Steel) as the first integrated steel plant to be setup in 1907. The steel industry is expanding worldwide. For a number of years it has been benefiting from the exceptionally buoyant Asianeconomies (mainly India and China). The economic modernization processes in these countries are driving the sharp rise in demand forsteel.The New Industrial policy adopted by the Government of India has opened up the iron and steel sector for private investment byremoving it from the list of industries reserved for public sector and exempting it from compulsory licensing. Imports of foreigntechnology as well as foreign direct investment are freely permitted up to certain limits under an automatic route. While the existingunits are being modernized/expanded, a large number of new/greenfield steel plants have also come up in different parts of the countrybased on modern, cost effective, state of-the-art technologies.Soaring demand by sectors like infrastructure, real estate and automobiles, at home and abroad, has put Indias steel industry on theworld map. Indias steel production during 2009-10 was 64.88 million tons (MT), up 11% from a year ago. India has emerged as the fifthlargest producer of steel in the world and is likely to become the second largest producer of crude steel by 2015-16.LIST OF COUNTRIES IN STEEL PRODUCTION (in Million MT) - 2009 Dominating the Indian horizon is steel giant Tata Steel, whose takeover of the UK-Dutch steel company Corus is the countrys biggest buyout. Meanwhile, the LN Mittal-owned Mittal Steel acquired French steel company Arcelor to create the world’s number one steel company, Arcelor Mittal; and Korean steel giant POSCO is pumping money into mines and steel plants in Orissa to emerge as one of the biggest steel plants in the state.Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 2
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011 Worlds 10 Largest Steel Companies No Company Name Country Crude Steel Output per year 1 ArcelorMittal Luxembourg 103,300,000 ( M 2 Nippon Steel Japan 37,500,000 T ) 3 Baosteel China 35,400,000 4 Posco South Korea 34,700,000 5 Hebei Iron & Steel Group China 33,300,000 6 JFE Holdings Japan 33,000,000 7 Wuhan Iron & Steel Group (Wisco) China 27,700,000 8 Tata Steel India 24,400,000 9 Jiangsu Shagang Group China 23,300,000 10 U.S. Steel USA 23,200,000Company overview – Bhushan Steel Ltd.Bhushan Steel Ltd formerly known as Bhushan Steel & Strips Ltd. is a globally renowned one of the leading prominent player in SteelIndustry. Backed by more than two decades, of experience in Steel making, Bhushan Steel is now India’s 3rd largest Secondary SteelProducer after SAIL and TISCO with an existing steel production capacity of 1.25MTPA (approx.).The company is a source for vivid variety of products such as Cold Rolled Closed Annealed, Galvanized Coil and Sheet, High Tensile SteelStrapping, Colour Coated Coils, Galume Sheets and Coils, Hardened & Tempered Steel Strips, Billets, Sponge Iron, Precision Tubes andWire Rod.Major raw materials for company are CR/HR Coils/Strips/Skelp, Coal, Iron Ore, Zinc & Alloy Zinc, Paints and Dolomite.As one of the prime movers of the technological revolutions in Indian Cold Rolled Steel Industry, BSL has emerged as the country’s largestand the only Cold Rolled Steel Plant with an independent line for manufacturing Cold Rolled Coil and Sheet up to a width of 1700mm, aswell as Galvanized Coil and Sheet up to a width of 1350 mm.Bhushan Steel Limited, is an ISO 9002, QS 9000 certified and a company of Rs. 2868 crores ($650 million approx.).Given a vibrant Steel industry dynamics in India, BSL is on a course to become fully Integrated Steel & Power Company with marketleading offerings in value added Steel in Automotive and White Good SegmentSubmitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 3
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011The company has three manufacturing units in India. (i) In Maharashtra (Khopoli Unit) established in 2004 with capacity of 425000 MT per annum (ii) In U.P. (Sahibabad Unit) established in 1987 with capacity of 475,000 MT per annum. (iii) In Orissa (Meramandali Unit) Company has partially installed the Phase II of the integrated steel plant at Orissa with the production facility of Hot Roll Coil Mill (1.90 Mtpa.Expansion Projects:The company started its backward integration with capacity of 1.9 MTP EXPANSION PROJECT A of hot rolled steel at its integrated steelplant at Orissa coupled with another capacity expansion (a brownfield one) which shall enhance the HR capacity to 4.40 MTPA by Oct.201 2. Another expansion plans in future are as follows:(ii)In West Bengal a 2 million tons per annum steel & 1000 MW thermal power plant by its subsidiary Bhushan Energy.(iii)Chhattisgarh Govt. has signed MOU with Bhushan Energy Ltd. for setting up 1000MW Power Plant with an investment of INR40Billion.Customers:BSL to be a favourite with all quality conscious users of Automobiles & White Goods/Domestic Appliances & General EngineeringIndustries, Maruti Udyog, Honda Siel Cars, Telco, Hindustan Motors , General Motor, Hyundai Motors, Ford Motors, Mahindra & Mahindra,Eicher Tractors, Ashok Leyland, LG Electronics, Whirlpool, Videocon, Daikin Shriram, National Matsushita, Samsung Electronics, Godrej,Voltas, IFB, Fedders Lloyd, Carrier Refrigeration, Electrolux Group, Hitachi Air conditioners, SKF Bearing, Crompton Greaves, Philips India,BHEL, Alstom Limited, L&T,BPL,GE Motors, Johnson Lift, Kone Elevator, Lucas TVS,NRB Bearing, Harsha Engineers Limited, Bundy IndiaLimited, Tecumesh, Bajaj Auto, Honda Motorcycle, Yamaha, Bajaj Tempo.Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 4
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011Financial Analysis (5 years Sales and Profit) Financial Analysis 8000 7576 7000 6003 6349 6000 5410 5135 Value in Rs. 4673 5000 4202 4293 4000 3917 3547 3000 2000 1117 1227 655 756 868 1005 1000 846 313 424 421 0 2007 2008 2009 2010 2011 Export Sales Domestic Sales Gross Sales Net ProfitFrom the last five year trend of sales and profit, we see the following percentage growth of the company from year 2007 to 2011:- Theexport sales of the company grown by 87% and domestic sales grown by 79%. Hence the gross sales of the company increased by 80%.Along with all these interpretations we can easily deduce from the data that net profits of the company more than tripled during this term2007 to 2011.Key Financial Indicators Mar 11 Mar 10 Mar 09 Mar 08 Mar 07Face Value 2 10 10 10 10Dividend Per Share 0.5 2.5 2.5 2.5 2.5Operating Profit Per Share (Rs) 95.61 342.05 257.44 196.68 147.89Debt Equity Ratio 2.86 2.89 3.98 3.52 2.67Earnings Per Share 47.16 199.09 99.2 99.77 73.76Dividend Payout Ratio 1.29 1.46 2.94 2.93 3.96Source : Dion Global Solutions LimitedCompany split the shares in September 2010 from the face value of 10 to 2 Rs. That is the reason dividend per share and EPS has falldown.Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 5
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011Rate of Return BHUSHAN STEEL AND LTD. RATE OF RETURN ANALYSIS Jan2007 to Oct2011 2007 2008 2009 2010 2011 Rate of Rate of Rate of Rate of Rate of Openning Closing Openning Closing Openning Closing Openning Closing Openning Closing Return (%) Return (%) Return (%) Return (%) Return (%) Jan 375.1 427.3 13.9 1554.3 1089.0 -29.9 315.5 287.6 -8.9 1453.2 1438.3 -1.0 473.9 396.9 -16.3 Feb 427.3 399.3 -6.6 1089.0 1028.6 -5.5 287.6 300.3 4.4 1438.3 1601.3 11.3 396.9 376.2 -5.2 Mar 399.3 513.5 28.6 1028.6 666.1 -35.2 300.3 395.7 31.8 1601.3 1679.8 4.9 376.2 436.7 16.1 1st Qtr 36.9 -57.1 25.4 15.6 -7.9 Apr 513.5 537.5 4.7 666.1 804.4 20.8 395.7 417.3 5.5 1679.8 1786.9 6.4 436.7 498.7 14.2 May 537.5 660.5 22.9 804.4 909.7 13.1 417.3 639.1 53.1 1786.9 1398.9 -21.7 498.7 454.9 -8.8 Jun 660.5 695.9 5.4 909.7 811.3 -10.8 639.1 656.9 2.8 1398.9 1415.2 1.2 454.9 438.4 -3.6 2nd Qtr 35.5 21.8 66.0 -15.7 0.41st Half 85.5 -47.8 108.2 -2.6 -7.5 Jul 695.9 704.5 1.2 811.3 927.2 14.3 656.9 781.6 19.0 1415.2 1555.1 9.9 438.4 391.5 -10.7 Aug 704.5 763.0 8.3 927.2 844.2 -8.9 781.6 1076.6 37.7 1555.1 1817.5 16.9 391.5 343.9 -12.2 Sep 763.0 931.7 22.1 844.2 672.4 -20.4 1076.6 1404.2 30.4 1817.5 415.5 -77.1 343.9 333.9 -2.9 3rd Qtr 33.9 -17.1 113.8 -70.6 -23.8 Oct 931.7 1065.7 14.4 672.4 642.9 -4.4 1404.2 1153.7 -17.8 415.5 495.8 19.3 333.9 342.5 2.6 Nov 1065.7 1349.8 26.7 642.9 395.2 -38.5 1153.7 1337.9 16.0 495.8 433.1 -12.7 Dec 1349.8 1554.3 15.2 395.2 315.5 -20.2 1337.9 1453.2 8.6 433.1 473.9 9.4 4th Qtr 66.8 -53.1 3.5 14.1 -100.02nd Half 123.3 -61.1 121.2 -66.5 -100.0 Yearly 314.4 -79.7 360.6 -67.4 -27.7Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 6
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-20115 years Performance chart of Bhushan Steel stock (Source : moneycontrol.com)As we can see from the graph that there is4 times that the price of the stock went upsharply. The potential reasons for thesesharp increases can be as follows:- 1. January 2008- Bhushan Steel planned for new steel plant in Orissa. 2. April 2010- The Company expanded its production capacity from 1.2 Mt to 2.3 Mt. 3. October 2010- The steel industry was booming at this time. And the steel prices headed up. 4. April 2011- The board of the company approved for raising USD 1 bn through issue of securities.Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 7
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011Quarterly and Yearly Rate of Return Analysis QUATERLY & YEARLY RATE OF RETURN ANALYSIS Jan2007 to Oct2011 2007 - Rate of 2008 - Rate of 2009 - Rate of 2010 - Rate of 2011 - Rate of Month Month Month Month Month Return (%) Return (%) Return (%) Return (%) Return (%) 1st Qtr 36.9 1st Qtr -57.1 1st Qtr 25.4 1st Qtr 15.6 1st Qtr -7.9 2nd Qtr 35.5 2nd Qtr 21.8 2nd Qtr 66.0 2nd Qtr -15.7 2nd Qtr 0.4 1st Half 85.5 1st Half -47.8 1st Half 108.2 1st Half -2.6 1st Half -7.5 3rd Qtr 33.9 3rd Qtr -17.1 3rd Qtr 113.8 3rd Qtr -70.6 3rd Qtr -23.8 4th Qtr 66.8 4th Qtr -53.1 4th Qtr 3.5 4th Qtr 14.1 4th Qtr 2nd Half 123.3 2nd Half -61.1 2nd Half 121.2 2nd Half -66.5 2nd Half Yearly 314.4 Yearly -79.7 Yearly 360.6 Yearly -67.4 Yearly -27.7Yearly Rate of ReturnSubmitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 8
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 9
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011Quarterly Sales and Profit analysisSales TurnoverSum of Sales Turnover Column LabelsRow Labels 2006 2007 2008 2009 2010 2011 Grand TotalMar 1054.66 1215.07 1119.95 1608.74 1966.16 6964.58Jun 938.03 1319.79 1304.7 1372.65 2231.78 7166.95Sep 994.71 1068.12 1516.96 1298.48 1718.91 6597.18Dec 1000.81 982.73 1003.69 1429 1942.74 6358.97Grand Total 1995.52 4043.54 5055.51 5152.13 6643.04 4197.94 27087.68 350 300 250 2006 2007 200 2008 150 2009 2010 100 2011 50 0 Mar Jun Sep DecSubmitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 10
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011Net ProfitSum of Net Profit Column LabelsRow Labels 2006 2007 2008 2009 2010 2011 Grand TotalMar 109.7 135 116.4 240.93 287.96 889.99Jun 98.14 132.68 171.87 205.74 209.96 818.39Sep 69.59 103.41 142.97 189.16 259.02 764.15Dec 71.72 74.57 20.74 227.43 280.35 674.81Grand Total 141.31 385.82 431.39 704.86 986.04 497.92 3147.34 350 300 250 2006 2007 200 2008 150 2009 2010 100 2011 50 0 Mar Jun Sep DecSubmitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 11
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011Monthly Rate of Return Analysis MONTHLY RATE OF RETURN ANALYSIS Jan2007 to Oct2011 2007 - Rate of 2008 - Rate of 2009 - Rate of 2010 - Rate of 2011 - Rate of Month Month Month Month Month Return (%) Return (%) Return (%) Return (%) Return (%) Jan 13.9 Jan -29.9 Jan -8.9 Jan -1.0 Jan -16.3 Feb -6.6 Feb -5.5 Feb 4.4 Feb 11.3 Feb -5.2 Mar 28.6 Mar -35.2 Mar 31.8 Mar 4.9 Mar 16.1 Apr 4.7 Apr 20.8 Apr 5.5 Apr 6.4 Apr 14.2 May 22.9 May 13.1 May 53.1 May -21.7 May -8.8 Jun 5.4 Jun -10.8 Jun 2.8 Jun 1.2 Jun -3.6 Jul 1.2 Jul 14.3 Jul 19.0 Jul 9.9 Jul -10.7 Aug 8.3 Aug -8.9 Aug 37.7 Aug 16.9 Aug -12.2 Sep 22.1 Sep -20.4 Sep 30.4 Sep -77.1 Sep -2.9 Oct 14.4 Oct -4.4 Oct -17.8 Oct 19.3 Oct 2.6 Nov 26.7 Nov -38.5 Nov 16.0 Nov -12.7 Nov #DIV/0! Dec 15.2 Dec -20.2 Dec 8.6 Dec 9.4 Dec #DIV/0!Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 12
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011 Prices are likely to go up 2007 - Rate of Return (%) by by Rs 500 to Ktaka plans permanent ban 2008 - Rate of Return (%) The government forced Rs 1,000, on the corrugated on iron ore all the manufacturers to 28.6 Increase in steel prices galvanized exports. 30.0 reduce prices 26.7 Sheets 30.0 20.8 22.9 News for startup 22.1 of Orissa plant at 20.0 13.1 14.3 20.0 year end 14.4 15.2 10.0 13.9 8.3 0.0 10.0 4.7 5.4 -10.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1.2 -10.8 -5.5 -8.9 -4.4 0.0 -20.0 -20.4 -20.2 -30.0 Oct Dec Feb Apr Aug Jan May Jun Jul Mar Sep Nov -29.9 Secondary steel cos to -10.0 -6.6 -40.0 -35.2 cut prices by Rs 4K/ts -38.5 Buy rating from SAT clears all the Bhushans open brockrage offer for Orissa 2009 - Rate of Return (%) 2010 - Rate of Return (%) houses Sponge Bhushan gets Bhushan Steel, plans SEBI nod for $3.5bn steel plant 19.3 16.9 60.0 Orissa Sponge 53.1 20.0 11.3 9.9 9.4 open offer 6.4 1.2 4.9 37.7 40.0 31.8 0.0 30.4 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 19.0 16.0 -20.0 -1.0 -12.7 20.0 8.6 -21.7 4.4 5.5 2.8 -40.0 Stock split from face 0.0 value 10 to 2 -60.0 I-T Dept raids Oct Dec Apr Aug Feb Jan May Jun Jul Mar Sep Nov Bhushan Steel, Bhushan Power -20.0 -8.9 -17.8 -80.0 -77.1 The global steel mining demand has 2011 - Rate of Return (%) industry is Yearly Return (%) gone up by 13% likely to face a in the year 2010 loss of nearly Rs 16000 crore 20.0 board had from illegal 16.1 approved mining in 400.0 360.6 raising up 14.2 Karnataka. 314.4 to USD 1 350.0 15.0 billion All brockrage through Rupee 300.0 houses were an issue of depreciation 10.0 giving sell securities to cause hike 250.0 rating in after in steel prices: january 2011 200.0 October 5.0 150.0 2.6 100.0 -67.4 -27.7 -79.7 0.0 50.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct 0.0 -5.0 -50.0 2007 2008 2009 2010 2011 -5.2 -3.6 -2.9 -100.0 -10.0 -8.8 -10.7 Growth for Indias steel industry has been -12.2 hampered by regulatory and environmental -15.0 hurdles, land acquisition delays and social -16.3 opposition . -20.0Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 13
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011Volatility Volatility of Stock (Jan2007 to Oct2011) - Bhushan Steel Ltd. 36 32 28 24 20 Volatility 16 12 8 4 0 Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2007 2007 1.6 1.1 1.9 1.7 2.1 1.2 1.1 3.7 4.6 3.9 8.8 3.6 2008 2008 5.3 3.8 3.5 2.5 2.8 2.0 2.0 1.5 1.7 4.8 4.5 3.3 2009 2009 2.7 4.8 5.3 2.8 8.9 4.9 5.4 3.6 4.1 2.7 3.0 1.5 2010 2010 3.1 2.7 1.7 1.7 2.5 2.3 1.0 1.8 34.9 3.9 3.0 3.0 2011 2011 2.7 2.7 1.7 1.8 1.8 2.1 1.7 2.6 2.3 1.8Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 14
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011Choice of Efficient Portfolio through Correlation:-To make the efficient portfolio we are taking Tata Motors as an additional company with Bhushan Steel. As finished product of BhushanSteel (Steel Industry) is raw material for Tata Motors (Automobile Industry) so we chose Tata Motors for comparison.Minimum Variance Point 5 years from 2007-2011 Bhushan Steel (A) Tata Motors (B) Correlation E(P) E(A) σA E(B) σB 0 -0.0093 5.8719 -0.1292 5.7884 0.1325 3 3.5 4 4.5 5 5.5 6 6.5 -0.02 w1 w2 E(P) σP -0.04 Min.Var.point- By investing 1 0 -0.01 5.87 50% in Bhushan Steel 0.9 0.1 -0.02 5.39 -0.06 & 50% in Tata E(p) 0.8 0.2 -0.03 4.98 Motors we can E(P) -0.08 minnimize the 0.7 0.3 -0.05 4.67 risk in 5 years 0.6 0.4 -0.06 4.46 time. return - -0.1 .07 0.5 0.5 -0.07 4.39 0.4 0.6 -0.08 4.44 -0.12 0.3 0.7 -0.09 4.63 0.2 0.8 -0.11 4.93 -0.14 0.1 0.9 -0.12 5.32 0 1 -0.13 5.79Minimum Variance point is at 4.39. At this point the weights for Bhushan Steel & Tata Motors are .50 & .50 respectively. Which means byinvesting 50% in Bhushan Steel & 50% in Tata Motors we can minimize the risk in 5 years’ time.Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 15
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011 Year 2007 BHUSHAN Steel TATA MOTORS Correlation E(P) E(A) σA E(B) σB 0.60 0.5652 3.7110 -0.0909 2.1334 0.2362 Min.Var.point- By investing 0.50 20% in Bhushan As we can see Steel & 80% in that Bhushan Tata Motors we w1 w2 E(P) σP Steel and Tata 0.40 can minnimize Motor have the risk. 1 0 0.57 3.71 correlation of return .040 0.30 0.9 0.1 0.50 3.40 0.2362 i.e.they are positively 0.8 0.2 0.43 3.10 E(p) correlated and 0.20 E(P) 0.7 0.3 0.37 2.82 thus it means that this is an 0.6 0.4 0.30 2.57 average 0.10 0.5 0.5 0.24 2.35 portfolio to invest in. As this 0.4 0.6 0.17 2.18 will not reduce 0.00 0.3 0.7 0.11 2.06 the risk involved 0.0 1.0 2.0 3.0 4.0 in the portfolio 0.2 0.8 0.04 2.02 to the great -0.10 0.1 0.9 -0.03 2.04 extent. 0 1 -0.09 2.13 -0.20Minimum Variance point is at 2.02. At this point the weights for Bhushan Steel & Tata Motors are .20 & .80 respectively. This means byinvesting 20% in Bhushan Steel & 80% in Tata Motors we can minimize the risk.CorrelationAs we can see that Bhushan Steel and Tata Motor have correlation of 0.2362 i.e. they are positively correlated and thus it means that thisis an average portfolio to invest in. As this will not reduce the risk involved in the portfolio to the great extentSubmitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 16
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011 Year 2008 BHUSHAN Steel TATA MOTORS Correlation E(P) E(A) σA E(B) σB -0.634 -0.6478 3.5419 -0.6357 4.0329 0.3117 3.00 3.20 3.40 3.60 3.80 4.00 4.20 -0.636 This portfolio is less -0.638 w1 w2 E(P) σP attractive then 2007 portfolio. 1 0 -0.65 0.00 As we can see that -0.640 0.9 0.1 -0.55 0.00 Bhushan Steel and Tata Motor have Min.Var.point- By investing 40% E(p) 0.8 0.2 -0.46 0.00 correlation of -0.642 in Bhushan Steel & 60% in Tata E(P) 0.7 0.3 -0.36 0.00 0.3117 i.e.they are Motors we can minnimize the positively -0.644 risk. return -.641 0.6 0.4 -0.26 0.00 correlated and thus 0.5 0.5 -0.17 0.00 it means that it is not a good portfolio -0.646 0.4 0.6 -0.07 0.00 to invest in. As this 0.3 0.7 0.02 0.00 will not reduce the -0.648 0.2 0.8 0.12 0.00 risk involved in the portfolio to the 0.1 0.9 0.22 0.00 great extent. -0.650 0 1 0.31 0.00Minimum Variance point is at 3.16. At this point the weights for Bhushan Steel & Tata Motors are .40 & .60 respectively. This means byinvesting 40% in Bhushan Steel & 60% in Tata Motors we can minimize the risk.CorrelationThis portfolio is less attractive then 2007 portfolio.As we can see that Bhushan Steel and Tata Motor have correlation of 0.3117 i.e. they are positively correlated and thus it means that it isnot a good portfolio to invest in. As this will not reduce the risk involved in the portfolio to the great extent.Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 17
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011 Year 2009 BHUSHAN Steel TATA MOTORS Correlation Min.Var.point- E(P) E(A) σA E(B) σB By investing 60% in 0.670 Bhushan Steel 0.6255 4.6430 0.6676 4.2030 0.4529 & 40% in Tata 0.665 Motors we can minnimize the 0.660 risk. return w1 w2 E(P) σP This portfolio is less 0.655 .651 attractive then 2007 & 1 0 0.63 4.64 2008 both. 0.650 0.9 0.1 0.63 4.39 As we can see that E(p) Bhushan Steel and 0.645 0.8 0.2 0.63 4.16 Tata Motor have E(P) 0.7 0.3 0.64 3.98 correlation of 0.4529 0.640 i.e.they are positively 0.6 0.4 0.64 3.85 correlated and thus it 0.635 means that it is not a 0.5 0.5 0.65 3.77 good portfolio to 0.630 0.4 0.6 0.65 3.75 invest in. As this will not reduce the risk 0.3 0.7 0.65 3.78 involved in the 0.625 0.2 0.8 0.66 3.87 portfolio to the great extent. 0.620 0.1 0.9 0.66 4.01 3.0 3.5 4.0 4.5 5.0 0 1 0.67 4.20Minimum Variance point is at 3.85. At this point the weights for Bhushan Steel & Tata Motors are .60 & .40 respectively. This means byinvesting 60% in Bhushan Steel & 40% in Tata Motors we can minimize the risk.CorrelationThis portfolio is less attractive then 2007 & 2008 both.As we can see that Bhushan Steel and Tata Motor have correlation of 0.4529 i.e.they are positively correlated and thus it means that it isnot a good portfolio to invest in. As this will not reduce the risk involved in the portfolio to the great extent.Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 18
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011 Year 2010 BHUSHAN Steel TATA MOTORS Min.Var.point- By investing E(A) σA E(B) σB Correlation 0% in Bhushan Steel & 100% in Tata Motors we can E(P) minimize the risk. Return 0.30 .199 -0.4447 10.5881 0.1994 0.0648 2.3500 0.20 0.10 w1 w2 E(P) σP This portfolio is 1 0 -0.44 10.59 attractive than previous years. 0.00 0.9 0.1 -0.38 9.55 As we can see that 0.0 2.0 4.0 6.0 8.0 10.0 12.0 Bhushan Steel and E(p) 0.8 0.2 -0.32 8.51 -0.10 E(P) Tata Motor have 0.7 0.3 -0.25 7.49 correlation of 0.068 0.6 0.4 -0.19 6.48 i.e.they are less -0.20 positively correlated 0.5 0.5 -0.12 5.50 and thus it means that it is a good -0.30 0.4 0.6 -0.06 4.55 portfolio to invest in. 0.3 0.7 0.01 3.67 As this will reduce -0.40 0.2 0.8 0.07 2.92 the risk involved in the portfolio. 0.1 0.9 0.14 2.43 -0.50 0 1 0.20 2.35Minimum Variance point is at 10.59. At this point the weights for Bhushan Steel & Tata Motors are 0.00 & 1.00 respectively. This means byinvesting 0% in Bhushan Steel & 100% in Tata Motors we can minimize the risk.CorrelationThis portfolio is attractive than previous years. As we can see that Bhushan Steel and Tata Motor have correlation of 0.068 i.e.they are lesspositively correlated and thus it means that it is comparatively a good portfolio to invest in. As this will reduce the risk involved in theportfolio.Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 19
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011 Year 2011 BHUSHAN Steel TATA MOTORS Correlation E(P) E(A) σA E(B) σB 0.000 -0.1577 2.2231 -0.9155 0.2016 1.0 3.0 5.0 7.0 9.0 11.0 13.0 11.8753 -0.100 -0.200 Min.Var.point- By investing 100% in w1 w2 E(P) σP As we can see that Bhushan Steel & 0% in Tata Motors Bhushan Steel and -0.300 we can minimize the risk. 1 0 -0.16 2.22 Tata Motor have Return -.916 0.9 0.1 -0.23 2.52 correlation of 0.2016 -0.400 i.e.they are positively 0.8 0.2 -0.31 3.24 correlated and thus it E(p) -0.500 E(P) 0.7 0.3 -0.39 4.17 means that this is an 0.6 0.4 -0.46 5.19 average portfolio to invest in. As this will -0.600 0.5 0.5 -0.54 6.26 not reduce the risk 0.4 0.6 -0.61 7.36 involved in the -0.700 portfolio to the great 0.3 0.7 -0.69 8.47 extent. -0.800 0.2 0.8 -0.76 9.60 0.1 0.9 -0.84 10.73 -0.900 0 1 -0.92 11.88 -1.000Minimum Variance point is at 2.22. At this point the weights for Bhushan Steel & Tata Motors are 1.00 & 0.00 respectively. This means byinvesting 100% in Bhushan Steel & 0% in Tata Motors we can minimize the risk.CorrelationAs we can see that Bhushan Steel and Tata Motor have correlation of 0.2016 i.e.they are positively correlated and thus it means that this isan average portfolio to invest in. As this will not reduce the risk involved in the portfolio to the great extent.Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 20
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011BETA ESTIMATION FOR BHUSHAN STEEL LTD. - 2007 to 2011 As we can see from the graph that beta value is 0.7581. This shows that Bhushan stock is less risky than Market. This is also evident from that the graph that returns from Bhushan Steel is less then market return. As we can see from the graph that beta value is 0.6038. This shows that Bhushan stock is less risky than Market. This is also evident from graph that the graph that returns from Bhushan Steel is less then market return.Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 21
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011 As we can see from the graph that beta value is 1.0465. This shows that Bhushan stock is as much risky as Market. This is also evident from the graph that return from Bhushan Steel is almost equal to market return. As we can see from the graph that beta value is 1.2971. Which shows that Bhushan stock is more risky then Market. This is also evident from that the graph that returns from Bhushan Steel is more than market return. Because as the risk increases the return also increases.Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 22
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011 As we can see from the graph that beta value is 1.0465. Which shows that Bhushan stock is slightly more risky as compared to Market. This is also evident from the graph that return from Bhushan Steel is slightly more than market return.Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 23
    • Industry and Company Analysis- Bhushan Steel Ltd. 2007-2011Conclusion Risk & Return Table 2007-2011 Year w1 w2 E(P) σA σB σP Correlation Expected Return Beta Value 2007 0.2 0.8 0.040 3.7110 2.133 2.015 0.24 0.040 0.758 2008 0.4 0.6 -0.641 3.542 4.033 3.162 0.31 -0.641 0.604 2009 0.6 0.4 0.642 4.643 4.203 3.851 0.45 0.651 1.047 2010 0 1 -0.445 10.588 2.350 10.588 0.06 0.199 1.297 2011 1 0 -0.158 2.223 11.875 2.223 0.20 -0.916 1.056 Market Return v/s Bhushan Yearly Return(%) Trend (2007 to 2011) Min. Varience Portfolio 345.7 1 1 350.0 306.2 1 300.0 0.9 0.8 Yearly Return-Bhushan 0.8 250.0 0.7 0.6 0.6 200.0 Yearly Return-Nifty 0.6 W 0.5 0.4 0.4Return % 150.0 0.4 100.0 53.2 71.5 0.3 0.2 0.2 50.0 17.2 -30.3 -13.5 0.1 0 0 0.0 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 -50.0 -51.8 Year -67.9 -100.0 -79.8 Bhushan Steel Tata MotorsAbove minimum variance portfolio chart is showing that in year 2007 risk optimum investment would be 20% in Bhushan and 80% in TataMotors. Similarly in 2008 40% investment in Bhushan Steel and 60% in Tata Motors would reduce the risk to minimum level. In year 2009 thisratio would be 60% and 40%. In 2010 it would be 0% and 100% and in year 2011 investing 100% in Bhushan and 0% in Tata Motors willminimize the risk.Submitted by- Maneesh Garg …. 11jgbs-mgarg@jgu.edu.in ….Jindal global Business School 24