SAIL: Increasing shareholder value - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

SAIL: Increasing shareholder value

Jun 24, 2008

In last article , we saw the balance sheet analysis of SAIL between the period 1999 and 2003. Now let us see the period between 2003 and 2007, which resulted in a turnaround of fortunes of a lot of steel companies, SAIL included and how the latter’s balance sheet was strengthened.Let us see how has the balance sheet changed between 2003 and 2007.

Considering the assets side of the balance sheet first, the net fixed asset declined at a modest CAGR of 2.9% as compared to last period (1999 to 2003) where it declined by 8.9%. This can be attributed to increased capex. The working capital grew at a CAGR of 51.6% but if we exclude cash at bank and interest receivable from the current assets, it grew at a CAGR of 23.9% during the period under consideration. The working capital as a percentage of sales increased from 13.1% in 2003 to 15.4% in 2007. This indicates that the increase in working capital was more a function of increased sales rather than reduced efficiency. This is also evident from the trend in inventory and debtor days, which were reduced to 72 and 25 respectively by FY07.

On the liabilities side, the company’s performance was even more remarkable. It continued to reduce its debt but this time, at a higher CAGR of 24.7% (11.4% CAGR in the previous four year period). There was also a significant increase in the company’s net worth. It grew 9 times from Rs 19 bn in 2003 to Rs. 171 bn in 2007. The debt to equity ratio was also reduced drastically from 6.5 in 2003 to 0.2 in 2007. All of this can be attributed to the windfall profits it generated during the period under consideration.

In total, if we look at this period, there was a tremendous shareholder value addition. An investor who would have invested in SAIL in 2003 would have seen his investment grow 9 times, handily beating the index returns. This is the sort of upside one can have by entering and exiting a commodity business at the right times. However, for this to happen, one has to have an intricate understanding of the industry and the business. In other words, it has to fall within one’s circle of competence. If it doesn’t, then investment in such businesses could lead to a lot of uncertainties.

Equitymaster requests your view! Post a comment on "SAIL: Increasing shareholder value". Click here!

  

More Views on News

TINPLATE 2020-21 Annual Report Analysis (Annual Result Update)

Nov 16, 2021 | Updated on Nov 16, 2021

Here's an analysis of the annual report of TINPLATE for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of TINPLATE. Also includes updates on the valuation of TINPLATE.

SUNFLAG IRON & STEEL 2020-21 Annual Report Analysis (Annual Result Update)

Nov 15, 2021 | Updated on Nov 15, 2021

Here's an analysis of the annual report of SUNFLAG IRON & STEEL for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of SUNFLAG IRON & STEEL. Also includes updates on the valuation of SUNFLAG IRON & STEEL.

A Peek into Tata Steel's Stellar June Quarter Performance (Views On News)

Aug 13, 2021

Tata Steel's June quarter profits were higher than the full-year profits reported for fiscal 2021.

Shyam Metalics IPO: Key Points to Consider (Views On News)

Jun 12, 2021

Shyam Metalics is commanding a strong grey market premium ahead of its IPO next week.

Tata Metaliks Share Price Jumps 8% After Turning Profitable (Views On News)

Jul 14, 2021

A peek into Tata Metaliks' stellar June quarter performance.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.

5 Indian Companies Embracing Blockchain Technology (Views On News)

Nov 23, 2021

Blockchain adoption in India was slow in the past. Now, the technology is being well received.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE METAL


Dec 3, 2021 (Close)

S&P BSE METAL 5-YR ANALYSIS

COMPARE COMPANY

MARKET STATS