Analysis of Financial Health of Steel Authority of India Limited

Abstract

India’s economic growth is contingent upon the growth of the Indian steel industry. India’s GDP growth rate was 7.2% by 2011. The steel sector is contributing about 2% in India’s GDP. Consumption of steel is taken to be an indicator of economic development. India occupies a central position on the global steel map. Steel production in India has increased by a compounded annual growth rate (CAGR) of 8 percent over the period 2002-03 to 2006-07. But the financial progress of this sector is not satisfactory. Thus, the present paper is an attempt to review the financial performance of one of the most popular and renowned company in the field of steel sector. That is Steel Authority of India Limited (SAIL), one of the leading steel making company of the country. The study is purely based on secondary data. A period of five year from 2005-06 to 2009-10 has been selected for the study. The data have been tabulated, analyzed and interpreted with the help of various financial ratios and Multivariate Discriminate Analysis (MDA) as developed by Prof. Edward I. Altman (1968). It is observed from the analysis of various ratios that the profit earning capacity, liquidity position and long-term solvency position of SAIL is quite good during the study period and the level of bankruptcy position is also very low.

Keywords: Financial Analysis, Ratio Analysis, Steel Industry, Multivariate Discriminate Analysis (MDA).