Analysis of Long-Term Financial Position of Selected Steel Companies in India

India was the world’s second largest steel producer in 2019. In the year 2019 the steel production was standing at 111.2 million tonnes. The growth of Indian steel sector is based on domestic availability of raw materials such as iron ore and cost-effective labour. Consequently, the steel sector has been major contributor to India’s manufacturing output. This study tries to find out the long-term financial position of selected steel companies in India. Five steel companies have been selected for the study. The period of study is taken from 2015 – 16 to 2019 – 2020. Various tools used like Mean. Standard Deviation, Coefficient of Variation, ANOVA and Correlation were used for this study.


Introduction
India is the second largest steel producing country in the world in 2019. In the year 2019 the steel production was standing at 111.2 million tonnes. Stainless steel consumption is more in our day to day life. It also plays a vital role in our countries economic development. Without steel it is highly difficult to maintain our standard of living. The Growth of all the industries in India helps to improve the economy out of which steel is one main Industry. Without steel it is highly difficult to establish industries like fertilizers, construction, transportation, power generation, housing etc. The production of steel is increased because of modernization, energy efficiency, establishment of world class steel plants, qualities etc.

Objectives of the study
To study about the long term financial strength of selected steel companies in India.

Methodology to study
All data collected for this study is secondary in nature. It is collected from C.M.I.E, for a period of 5 years ranging from 2015-2016 to 2019-2020. Based on the following Criteria, 5 Companies were selected.
➢ Availability of data (Minimum 5 Years) ➢ Total Assets value more than 13,000 crores THENMOZHI and TAMILSELVI (2015) in this study, and attempt are complete to determine the financial reliability of the selected steel companies. For this purpose, ten years data be composed with the help of secondary sources of information. This paper uses the Altman's Z-score model to forecast the financial condition of selected steel companies in India. The result undoubtedly point to that the liquidity, working capital turnover efficiency and solvency position of the companies is that the financial health of Jsw, Tata Steel and Mahindra ugine were fine and there is no scope of insolvency, whereas the financial health of other particular companies were not in healthy Zone in many years [2 ] Syed Jaffer and DrBadiuddin Ahmed (2017) this paper attempts to look into the financial health of select steel companies in India with special reference to Tata Steel Ltd., and Steel Authority of India Limited. It can be concluded from the study that both the companies are in misery zone [3] Shrabanti Pal (2018) investigates the performance of the steel industry in terms of production, consumption and foreign trade and to shows the trend of the industry for a period of twenty years since 1991-92 to 2010-11. Result of the study found that India has all possible to become top producer of steel in near future. The steady swelling of production and consumption point out that India has set a higher swelling path by the end of the decade. The CAGR of production, consumption and foreign trade shows an imposing picture of the evolution of the industry for the study period. All the major steel producers in world like Arcelor and Mittal, POSCO come to India to initiate the steel plants which facilitate the growth of Indian steel industry [4]

Long Term Ratios
To measures companies' long term financial position, the following ratios can be calculated.
Current Assets to Shareholder's Fund Ratio

Proprietary Ratio
This ratio establishes the relationship between shareholder's funds and total assets of the company. The ratio of proprietary funds to total funds is an important ratio for determining long-term solvency of a business. To find whether there is any difference in the Proprietary ratio between the companies and between the years during the study period, the following hypothesis is framed and tested with "F"test.

H1: There is no significant difference in the Proprietary ratio between the companies and between years.
Details of the calculations have been shown in Table 1(A) The 1(A) Shows that the calculated value of F (0.98036) is less than the table value of F (3.00692) which indicates null hypothesis is accepted and thereby it is concluded that there is no significant difference in the Proprietary ratio between the years. On the other hand, the calculated value of F (36.8574) is more than the critical value of F (3.00692) which indicates null hypothesis is rejected and thereby it is concluded that there is a significant difference in the Proprietary ratio between the companies.

Total Debt Ratio
Total Debt Ratio indicates what proportion of debt a company has relative to its assets.  The 2(A) Shows that the calculated value of F (0.99039) is less than the table value of F (3.00692) which indicates null hypothesis is accepted and thereby it is concluded that there is no significant difference in the Total Debt ratio between the years. On the other hand, the calculated value of F (53.5078) is more than the critical value of F (3.00692) which indicates null hypothesis is rejected and thereby it is concluded that there is a significant difference in the Total Debt ratio between the companies.

Debt To Equity Ratio
Debt to Equity Ratio indicates the relationship between the external Equities (or) outsiders funds and the internal equities (or) Shareholder's funds.  The 3(A) Shows that the calculated value of F (0.96819) is less than the table value of F (3.00692) which indicates null hypothesis is accepted and thereby it is concluded that there is no significant difference in the Debt Equity ratio between the years. On the other hand, the calculated value of F (3.11505) is more than the critical value of F (3.00692) which indicates null hypothesis is rejected and thereby it is concluded that there is a significant difference in the Debt Equity ratio between the companies. To find whether there is any difference in the Current Assets to Proprietary Fund ratio between the companies and between the years during the study period, the following hypothesis is framed and tested with "F"test. The 4(A) Shows that the calculated value of F (0.9937) is less than the table value of F (3.00692) which indicates null hypothesis is accepted and thereby it is concluded that there is no significant difference in the Current Assets to Proprietary Fund ratio between the years. On the other hand, the calculated value of F(1.06779) is less than the critical value of F(3.00692), which indicates null hypothesis is accepted and thereby it is concluded that there is no significant difference in the Current Assets to Proprietary Fund ratio between the companies.

Return On Assets Ratio
Return on Assets =

Interpretation
The above table 5 shows that the Mean, SD and CV of Return on Assets Ratio of selected steel companies in India, the higher mean value 2.74 for JSW Steel and the lowest mean value 0.33 for Jindal Steel and Power and also SD value is high 0.38 for JSW Steel and low 0.07 for SAIL and TATA Steel. CV value is high 0.35 for Bhushan Steel and Jindal steel and Power and low 0.14 for SAIL and JSW Steel.
To find whether there is any difference in the Return on Assets ratio between the companies and between the years during the study period, the following hypothesis is framed and tested with "F"test. The 5(A) Shows that the calculated value of F (1.18424) is less than the table value of F (3.006917) which indicates null hypothesis is accepted and thereby it is concluded that there is no significant difference in the Return on Assets ratio between the years. On the other hand, the calculated value of F (123.6518) is more than the critical value of F (3.006917) which indicates null hypothesis is rejected and thereby it is concluded that there is a significant difference in the Return on Assets ratio between the companies.

Regression Analysis -Long Term Ratios
The study considered the following regression model. Y = a+ 1 1 + 2 2 + 3 3 Where Y = Dependent Variable (Return on Assets) a = constant 1 … 3 Regression Coefficients 1 = Proprietary Ratio 2 = Total Debt Ratio 3 = Debt Equity Ratio A details calculation of correlation matrix of Long term Ratios

Debt Equity Ratio
Among the selected steel companies the highest average value (6.35) was for Bhushan, 1.24 for JSW, 0.94 for SAIL, 0.93 for JSP and the lowest average value was 0.57 for TATA and also the SD was highest (6.15) for Bhushan and the lowest (0.10) for JSP and TATA.

Current Assets To Proprietary Fund Ratio
Among the selected steel companies the highest average value (2.05) was for Bhushan, 0.91 for SAIL, 0.73 for JSW, 0.43 for JSP and the lowest average value was 0.34 for TATA and also the SD was highest (2.96) for Bhushan and the lowest (0.03) for JSP.

Suggestions Long Term Ratios Long Term Ratios
Debt to equity ratio of selected steel companies is not satisfactory because the ratio of SAIL and TATA 0.28, Bhushan 0.40, JSP 0.35 which is much below than the accepted standard norm of 1:1 and JSW is much higher than the standard norm of 1:1. A lower debt equity ratio results in low profit to equity share holder, which also affects long term as well as short term solvency position of companies. So companies should increase their borrowing with minimum interest. But a very high ratio may be unfavourable from the business perspective.
Proprietary Ratio seems to have Progressive increase and decrease in all selected steel companies Position. The proprietary ratio shows the contribution of stockholders" in total capital of the company. A high proprietary ratio, therefore, indicates a strong financial position of the company and greater security for creditors. A low ratio indicates that the company is already heavily depending on debts for its operations. A large portion of debts in the total capital may reduce creditor"s interest, increase interest expenses and also the risk of bankruptcy.

Conclusion
JSW Steel has been inSound position in proprietary level from other selected steel companies. Debt equity ratio of Bhushan is more than 2:1 ratio it shows that restriction to borrowing funds and total debt ratio of SAIL, TATA, BHUSHAN and JSP is much lower than the accepted standard norm 1:1 so it clearly indicates that claims of the owners are higher than those of outsiders.