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Stakeholdersโ Education | Corporate Governance Research | Corporate Governance Score | Proxy Advisory
STAKEHOLDERS EMPOWERMENT SERVICES
1 | P A G E
SECTOR: STEEL REPORTING DATE: 14TH AUGUST, 2017
ELECTROSTEEL STEELS LTD www.electrosteels.com
www.electrosteels.com
Electrosteel Steels Ltd NSE Code - ESL TABLE 1 - MARKET DATA (STANDALONE) (AS ON 10TH AUGUST, 2017)
Sector - Steel NSE Market Price (`) 4.05 NSE Market Cap. (โน Cr.) 980.56
Face Value (`) 10.00 Equity (` Cr.) 2,409.24
Business Group โ N.A. 52 week High/Low (โน) 6.80/2.70 Net worth (โน Cr.)* 3.09
Year of Incorporation - 2006 TTM P/E (TTM) N.A. Traded Volume (Shares) 26,71,879
TTM P/BV N.A. Traded Volume (lacs) 108.21
Registered Office - Source - Capitaline, TTM - Trailing Twelve Months, N.A. - Not Applicable | * As on 30th September, 2016
801, Uma Shanthi Apartments, COMPANY BACKGROUND
Kanke Road, Electrosteel Steels Limited is an India-based company, which is engaged in basic iron and
steel business. The Company is engaged in selling thermo mechanically treated (TMT) bars,
billets, ductile iron (DI) pipes, pig iron and wire rod. The Company is engaged in setting up a
2.51 million ton per annum (MTPA) capacity Greenfield Integrated Steel and DI Pipes Plant in
the district of Bokaro, Jharkhand. It produces TMT bars in Fe500, Fe500D and Fe500D
corrosion resistance steel (CRS) variants. It manufactures DI pipes in sizes ranging from 100
millimetres (mm) to 1,200 mm. Its billets offer applications, such as general engineering,
structural, rerolling and high tensile applications. Its wire rods have applications in
engineering, construction, power and automobile sectors. It consists of a sinter plant, pellet
plant, coke oven, blast furnace, basic oxygen furnace, billet caster, wire rod mill, bar mill and
power plant.
Ranchi โ 834 008, Jharkhand
Company Website:
www.electrosteels.com
Revenue and Profit Performance
The revenue of the Company decreased from โน593.95 crores to
โน582.93 crores from quarter ending Sepโ15 to quarter ending
Sepโ16. The Company made a loss of โน485.89 crores in quarter
ending Sepโ16 vis-a-vis making a loss of โน201.49 crores in
quarter ending Sepโ15.
Source - Money Control
Performance vis-ร -vis Market
TABLE 2- Returns
1-m 3-m 6-m 12-m
Electrosteel Steels Ltd -7.95% -38.27% -14.74% 19.12%
Nifty -0.72% 3.82% 11.69% 13.87%
NIFTY Metal 5.56% 10.52% 8.94% 28.03%
Source โ Capitaline / NSE
0.50
0.70
0.90
1.10
1.30
1.50
1.70
1.90
Aug 16 Oct 16 Dec 16 Feb 17 Apr 17 Jun 17 Aug 17
Electrosteel Steels Ltd NIFTY NIFTY METAL
582.93859.32
593.95
-485.89
284.37-201.49
-1000
-500
0
500
1000
Sep'16 Mar'16 Sep'15
Quarterly revenue and Profit (โน CRORE)
Revenue Profit
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STAKEHOLDERS EMPOWERMENT SERVICES
2 | P A G E
SECTOR: STEEL REPORTING DATE: 14TH AUGUST, 2017
ELECTROSTEEL STEELS LTD www.electrosteels.com
www.electrosteels.com TABLE 3 - FINANCIALS
(โน Cr.) Sepโ16 Marโ16 Sepโ15
% Change
Sep โ16 vs Marโ16 Marโ16 vs
Sepโ15
Net Worth 3.09 766.29 703.55 -99.60% 8.92%
Current Assets 1,267.42 1,477.78 1,603.78 -14.23% -7.86%
Non-Current Assets 11,862.35 12,144.48 11,997.74 -2.32% 1.22%
Total Assets 13,129.77 13,622.25 13,601.52 -3.62% 0.15%
Investments - - - N.A. N.A.
Finance Cost 324.38 134.01 134.35 142.06% -0.25%
Long Term Liabilities 7,677.05 8,170.38 8,622.96 -6.04% -5.25%
Current Liabilities 5,449.63 4,685.58 4,275.01 16.31% 9.60%
Turnover 556.93 826.02 571.56 -32.58% 44.52%
Profit After Tax (PAT) -485.89 284.37 -201.49 -270.87% N.A.
EPS (โน) -2.02 1.18 -0.84 -271.19% N.A.
Source - Money Control/ Stock Exchange Filing
Discussion by the Company in quarterly results for the period ended on 30th September, 2016โ
In view of the Company incurring losses continuously & current liabilities exceeding the current assets, there has been an
erosion of net worth by more than fifty percent. Due compliance of the sanctioned CDR package could also not be met with. The
lenders have since Invoked the 'Strategic Debt Restructuring (SOR) pursuant to RBI Circulars dated June 08, 2015 and Sept 24,
2015, and the implementation thereof is under progress. Considering the above developments, the company has presented
these financial statements on going concern basis.
AUDIT QUALIFICATIONS
Audit Qualifications in last 3 years: There are no Audit Qualifications by Statutory Auditor for the three financial years viz.
FY2015-16, FY2014-15 and FY2013-14. However, Statutory Auditors has drawn attention on the following matters:
Emphasis of Matters for FY 2015-16:
1. โNote No. 27, regarding the revenue recognized as โExceptional Itemโ. The company, consequent to the delayed
execution of contracts by certain vendors/suppliers/service providers of plant, equipmentโs, civil and erection
commissioning etc. has incurred โLoss of Profitโ in past. The part of such claim of โLoss of Profitโ as assessed by the
Company has been recovered from the available balance in the respective Supplier's Accounts and recognized as income
in the Statement of Profit and Loss for the year. The unrecovered such โLoss of Profitโ will be accounted for in the year
significant certainty of recovery is established.
2. Note No. 41, regarding the preparation of these financial statements on a โgoing concern basisโ. The Company incurred
a net loss of โน326.55 Cr during the year ended March 31, 2016 and, as of that date, the Company's current liabilities
exceeded its current assets by โน3,207.80 Cr, further the Company's net worth has also been substantially eroded as at
the balance sheet date. Since the full compliance of the sanctioned CDR package could not be made with, the lenders
have invoked Strategic Debt Restructuring (SDR) pursuant to RBI circulars dated 08.06.2015 & 24.09.2015, the
implementation is under progress. However, in view of the increase in the operations of the production facilities and the
Company's EBIDTA being positive also in this year, these financial statements have been prepared on a โgoing concern
basisโ and no adjustment has been made to the carrying value of the assets and liabilities. โ
Response Comment
Frequency of Qualifications Not Applicable
Have the auditors made any adverse remark in last 3 years? No
Are the material accounts audited by the Principal Auditors? As per Annual Report for FY 2015-16, the
Company do not have any Subsidiary, Holding or
Associate Company. Do the financial statements include material unaudited financial
statements?
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3 | P A G E
SECTOR: STEEL REPORTING DATE: 14TH AUGUST, 2017
ELECTROSTEEL STEELS LTD www.electrosteels.com
www.electrosteels.com
TABLE 4: BOARD PROFILE (AS PER ANNUAL REPORT 2015-16)
Regulatory Norms Company
% of Independent Directors on the Board 33% 44%
% of Promoter Directors on the Board - 0%
Number of Women Directors on the Board At least 1 1
Classification of Chairman of the Board - Independent Director
Is the post of Chairman and MD/CEO held by the same person? - No
Average attendance of Directors in the Board meetings (%) - 91.11%
Source - Annual Report 2015-16
Composition of Board: As per Regulation 17(1)(b) of the Listing Regulations, 2015, the Company should have at least 33%
Independent Directors as the Chairman of the Board is a Non-Executive Director. The Company has 44% of Independent
Directors and hence, it meets the regulatory requirements.
Board Diversity: The Company has 9 directors out of which 1 is Women Director.
TABLE 5 - FINANCIAL RATIOS
Ratios Sepโ16 Marโ16 Sepโ15
% Change
Sep โ16 vs
Marโ16
Marโ16 vs
Sepโ15
Turn
ove
r
Rat
ios
Inventory Turnover 0.66 1.12 0.70 -41.45% 59.74%
Debtors Turnover 3.94 3.29 3.16 19.66% 4.32%
Fixed asset Turnover 0.05 0.07 0.05 -30.97% 42.77%
Current Asset Turnover 0.44 0.56 0.36 -21.39% 56.84%
Ret
urn
Rat
ios Operating Profit Margin -13.12% 22.20% -3.15% -159.10% N.A.
Net Profit Margin -87.24% 34.43% -35.25% -353.42% N.A.
Return on Assets (ROA) N.A. 2.09% N.A. N.A. N.A.
Return on Equity (ROE) N.A. 37.11% N.A. N.A. N.A.
Return on Capital Employed (ROCE) N.A. 3.18% N.A. N.A. N.A.
Liq
uid
ity
Rat
ios
Current Ratio 0.23 0.32 0.38 -26.26% -15.93%
Quick Ratio 0.08 0.16 0.18 -51.31% -14.36%
Cash Ratio 0.05 0.10 0.14 -51.18% -26.46%
Working Capital Turnover ratio N.A. -0.09 N.A. N.A. N.A.
Solv
ency
Rat
ios Debt to equity ratio 2,717.78 11.49 13.23 23,544.98% -13.14%
Interest Coverage Ratio N.A. 1.37 N.A. N.A. N.A.
Trad
ing
Rat
ios
Market Cap / Sales 1.23 0.98 0.91 26.18% 7.81%
Market Cap/ Net Worth 222.22 1.05 0.74 20,998.47% 43.05%
Market Cap/PAT N.A. 2.84 N.A. N.A. N.A.
Market Cap/EBITDA N.A. 4.40 N.A. N.A. N.A.
Source - Money Control
TABLE 6 - TRADING VOLUME
Jun-17 Dec-16 Jun-16
% Change
June 17 vs Dec 16 Dec 16 Vs June 16
Trading Volume (shares) (avg. of 1 qtr) 39,36,257 16,34,831 15,34,552 140.77% 6.53%
Trading Volume (shares) (high in 1 qtr) 2,90,05,994 1,44,26,674 1,40,01,421 101.06% 3.04%
Trading Volume (shares) (low in 1 qtr) 3,29,498 2,92,020 1,72,530 12.83% 69.26%
Ratio - High/low trading volume 88.03 49.40 81.15 78.19% -39.12%
Ratio - High/average trading volume 7.37 8.82 9.12 -16.50% -3.28%
Source - Capitaline
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STAKEHOLDERS EMPOWERMENT SERVICES
4 | P A G E
SECTOR: STEEL REPORTING DATE: 14TH AUGUST, 2017
ELECTROSTEEL STEELS LTD www.electrosteels.com
www.electrosteels.com TABLE 7 (A): OWNERSHIP & MANAGEMENT RISKS
Jun'17 Dec'16 Jun'16 Comments
Shar
eho
ldin
g (%
)
Promoter shareholding 45.23 45.23 45.23 โข No new equity shares were issued during
the period from June 2016 to June 17.
โข There was no change in the promoter
shareholding during the said period.
โข There was no major in shareholding of
public shareholders during the same
period.
โข The promoters have pledged 79.53% of
their shareholding.
Public - Institutional shareholding
29.59 29.63 29.68
Public - Non-Institutional shareholding
25.18 25.14 25.09
Non-Promoter Non-Public Shareholding
0.00 0.00 0.00
Source - NSE
MAJOR SHAREHOLDERS (AS ON 30th JUNE, 2017)
S. No. Promoters Shareholding
S. No. Public Shareholders Shareholding
1 Electrosteel Castings Limited 45.23% 1 Sciil Steel Cast Iron Investments (Cyprus) Ltd 16.64%
2 Hypnos Fund Limited 4.01%
3 IFCI Ltd 3.82%
4 GPC Mauritius Ii LLC 3.63%
5 PGS Invest Corp 3.12%
Source - NSE
TABLE 7 (B): OWNERSHIP & MANAGEMENT RISKS
Market Activity of Promoters There was no change in the shareholding of promoters during the FY 2015-16.
Preferential issue to promoters No preferential issue of shares was made to the promoters during the FY 2015-16.
Preferential issue to others No preferential issue of shares was made to other shareholders during the FY 2015-16.
GDRs issued by the Company The Company did not issue any GDRs during the FY 2015-16.
Issue of ESOPs/Issue of shares other
than Preferential allotment
The Company does not have any ESOP Scheme
Source - Annual Report 2015-16
TABLE 8: PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY
Sr. No. Name and Description of main products / services % to Total turnover of the Company
1 Basic Iron & Steel 88.69%
2 Ductile Iron Pipe 11.31%
Source - Annual Report 2015-16
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5 | P A G E
SECTOR: STEEL REPORTING DATE: 14TH AUGUST, 2017
ELECTROSTEEL STEELS LTD www.electrosteels.com
www.electrosteels.com
Glossary
Equity: The equity shares capital of the Company
Net Worth: The amount by which the Assets exceeds the liabilities excluding shareholdersโ funds of the Company
Turnover: The revenue earned from the operations of the Company
EPS: Earning Per Share is net profit earned by the Company per share
๐ธ๐๐ =Profit After Tax
Number of outstanding shares
P/E ratio: It is the ratio of the Companyโs share price to earnings per share of the Company
๐/๐ธ ๐๐๐ก๐๐ =Price of each share
Earnings per share
Current Assets: Cash and other assets that are expected to be converted to cash in one year
Fixed Assets: assets which are purchased for long-term use and are not likely to be converted quickly into cash, such as land,
buildings, and equipment
Total Assets: Current Assets + Fixed Assets
Investments: An investment is an asset or item that is purchased with the hope that it will generate income or appreciate in
the future.
Finance Cost: The Financing Cost (FC), also known as the Cost of Finances (COF), is the cost and interest and other charges
incurred during the year in relation to borrowed money.
Long Term Liabilities: Long-term liabilities are liabilities with a maturity period of over one year.
Current Liabilities: A company's debts or obligations that are due within one year.
Inventory Turnover ratio: Inventory Turnover is a ratio showing how many times a company's inventory is sold and replaced
over a period.
๐ผ๐๐ฃ๐๐๐ก๐๐๐ฆ ๐๐ข๐๐๐๐ฃ๐๐ ๐๐๐ก๐๐ =Sales Turnover
Inventory
Debtors Turnover: Accounts receivable turnover is an efficiency ratio or activity ratio that measures how many times a business
can turn its accounts receivable into cash during a period
๐ท๐๐๐ก๐๐๐ ๐๐ข๐๐๐๐ฃ๐๐ ๐๐๐ก๐๐ =Sales Turnover
Accounts recievables
Fixed Asset Turnover: The fixed-asset turnover ratio is a financial ratio of net sales to fixed assets
๐น๐๐ฅ๐๐ ๐ด๐ ๐ ๐๐ก ๐๐ข๐๐๐๐ฃ๐๐ ๐๐๐ก๐๐ =Sales Turnover
Fixed Assets
Current Asset Turnover: The current-asset turnover ratio is a financial ratio of net sales to fixed assets
๐ถ๐ข๐๐๐๐๐ก ๐ด๐ ๐ ๐๐ก ๐๐ข๐๐๐๐ฃ๐๐ ๐๐๐ก๐๐ =Sales Turnover
Current Assets
Operating Profit Margin: Operating margin is a measurement of what proportion of a Companyโs revenue is left over after
paying for variable costs of production such as wages, raw materials etc. It can be calculated by dividing a Companyโs operating
income (also known as โoperating profitโ) during a given period by its sales during the same period.
๐๐๐๐๐๐ก๐๐๐ ๐๐๐๐๐๐ก ๐๐๐๐๐๐ =Operating profit
Sales Turnover
Net Profit Margin: Net profit margin is the percentage of revenue left after all expenses have been deducted from sales
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6 | P A G E
SECTOR: STEEL REPORTING DATE: 14TH AUGUST, 2017
ELECTROSTEEL STEELS LTD www.electrosteels.com
www.electrosteels.com ๐๐๐ก ๐๐๐๐๐๐ก ๐๐๐๐๐๐ =
Net profit
Sales Turnover
Return on Assets: ROA tells you what earnings were generated from invested capital (assets)
๐ ๐๐ก๐ข๐๐ ๐๐ ๐ด๐ ๐ ๐๐ก๐ =Net profit
Total Assets
Return on equity/net worth: return on equity (ROE) is the amount of net income returned as a percentage of shareholdersโ
equity.
๐ ๐๐ก๐ข๐๐ ๐๐ ๐ธ๐๐ข๐๐ก๐ฆ =Net profit
Net worth
Return on Capital Employed: Return on capital employed (ROCE) is a financial ratio that measures a company's profitability
and the efficiency with which its capital is employed.
๐ ๐๐ก๐ข๐๐ ๐๐ ๐ถ๐๐๐๐ก๐๐ ๐ธ๐๐๐๐๐ฆ๐๐ =Net profit
Total Debt + Equity share capital
Current ratio: The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts
over the next 12 months. It compares a firm's current assets to its current liabilities.
๐ถ๐ข๐๐๐๐๐ก ๐๐๐ก๐๐ =Current Assets
Current Liabilities
Quick ratio: The quick ratio is a measure of how well a Company can meet its short term financial liabilities.
๐๐ข๐๐๐ ๐๐๐ก๐๐ =Current Assets โ Inventories
Current Liabilities
Cash ratio: The ratio of the liquid assets of a Company to its current liabilities.
๐๐ข๐๐๐ ๐๐๐ก๐๐ =Current Assets โ Inventories โ Account Recievables
Current Liabilities
Working Capital Turnover ratio: The working capital turnover ratio is also referred to as net sales to working capital. It indicates
a Company's effectiveness in using its working capital.
๐๐๐๐๐๐๐ ๐ถ๐๐๐๐ก๐๐ ๐๐ข๐๐๐๐ฃ๐๐ ๐๐๐ก๐๐ =๐๐๐๐๐ ๐๐ข๐๐๐๐ฃ๐๐
Current Assets โ Current Liabilities
Debt to Equity ratio: The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of
shareholders' equity and debt used to finance a company's assets.
๐ท๐๐๐ก ๐ก๐ ๐ธ๐๐ข๐๐ก๐ฆ ๐๐๐ก๐๐ =๐โ๐๐๐ก ๐๐๐๐ ๐ท๐๐๐ก + ๐ฟ๐๐๐ ๐๐๐๐ ๐ท๐๐๐ก
๐๐๐ก ๐๐๐๐กโ
Interest Coverage ratio: The Interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a
Company can pay interest on outstanding debt.
๐ผ๐๐ก๐๐๐๐ ๐ก ๐ถ๐๐ฃ๐๐๐๐๐ ๐ ๐๐ก๐๐ =๐ธ๐๐๐๐๐๐ ๐ต๐๐๐๐๐ ๐ผ๐๐ก๐๐๐๐ ๐ก ๐๐๐ ๐๐๐ฅ
๐น๐๐๐๐๐๐ ๐ถ๐๐ ๐ก
Market Cap/Sales ratio: Market Cap/sales ratio, Priceโsales ratio, P/S ratio, or PSR, is a valuation metric for stocks. It is
calculated by dividing the company's market cap by the revenue in the most recent year; or, equivalently, divide the per-
share stock price by the per-share revenue.
๐๐๐๐๐๐ก ๐ถ๐๐/๐๐๐๐๐ ๐๐๐ก๐๐ =๐๐๐๐๐๐ก ๐ถ๐๐
๐๐๐๐๐ ๐๐ข๐๐๐๐ฃ๐๐
Market Cap/ Net Worth ratio: It is a valuation ratio calculated by dividing Companyโs market cap to net worth.
๐๐๐๐๐๐ก ๐ถ๐๐/๐๐๐ก๐ค๐๐๐กโ ๐๐๐ก๐๐ =๐๐๐๐๐๐ก ๐ถ๐๐
๐๐๐ก๐ค๐๐๐กโ
Market Cap/ PAT ratio: It is a valuation ratio calculated by dividing Companyโs market cap to net profit.
๐๐๐๐๐๐ก ๐ถ๐๐/๐๐ด๐ ๐๐๐ก๐๐ =๐๐๐๐๐๐ก ๐ถ๐๐
๐๐๐ก ๐๐๐๐๐๐ก
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SECTOR: STEEL REPORTING DATE: 14TH AUGUST, 2017
ELECTROSTEEL STEELS LTD www.electrosteels.com
www.electrosteels.com Market Cap/ EBITDA ratio: It is a valuation ratio calculated by dividing Companyโs market cap to EBITDA.
๐๐๐๐๐๐ก ๐ถ๐๐/๐ธ๐ต๐ผ๐๐ท๐ด ๐๐๐ก๐๐ =๐๐๐๐๐๐ก ๐ถ๐๐
๐ธ๐ต๐ผ๐๐ท๐ด
Trading Volume (shares) (avg. of 1 year): Average number of shares/day traded in 1 year
Trading volume (shares) (high in 1 year): Highest number of shares/day traded in 1 year
Trading volume (shares) (minimum in 1 year): Lowest number of shares traded on any one day in 1 year
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www.electrosteels.com DISCLAIMER
Sources Company Information
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Research Analyst: Mukesh Solanki