INTERIM REPORT ON

Competitors analysis - JSPL’s strategic play in the Indian

steel market

By
KRITIKA JALAN
19BSPHH01C0539
ORGANISATION NAME:
TATA STEEL
(KOLKATA)
 INTERIM REPORT ON

Competitors analysis - JSPL’s strategic play in the Indian steel market

By
KRITIKA JALAN
19BSPHH01C0539
At
TATA STEEL
A report submitted in partial fulfilment of the requirements of
MBA Program of IBS Hyderabad

Distribution list:
Company guide: Faculty guide:
Mr. V Satish Mr. Dr. Samyadip Chakraborty
(Head MP&NP)

IBS Hyderabad
Date of Submission: April 24TH 2020

KRITIKA JALAN |19BSPHH01C0539 |IBS HYDERABAD 2

 AUTHORISATION

This is to certify that this report is submitted as partial fulfilment of the

requirements of MBA Program of ICFAI Business School (IBS),
Hyderabad. This report document titled: “Competitors analysis - JSPL’s
strategic play in the Indian steel market” is a submission of work done by
KRITIKA JALAN as part of the completion of the study at TATA STEEL
KOLKATA, during her Internship Program from 24th February 2020 to 22th
May 2020 under the guidance of Mr. V SATISH (Head MP&NP).
This report has been formally submitted to:

Mr. Dr. Samyadip Chakraborty

IBS Hyderabad

KRITIKA JALAN |19BSPHH01C0539 |IBS HYDERABAD 3

 ACKNOWLEDMENTS

I would like to express my profound gratitude to all those who have

been instrumental in the preparation of my project report. To start with,
I would like to thank TATA STEEL (KOLKATA) for providing me the
chance to undertake this internship study and allowing me to explore
the steel industry and its instruments which were entirely new to me
and which will surely prove to be very beneficial to me in my future
assignments, my studies and my career ahead.
I wish to place on record, my deep sense of gratitude and sincere
appreciation to my company guide Mr. V Satish (Head MP&NP) at Tata
Steel for their valuable feedback and support throughout the internship.
Their patience and faith in my abilities help me boost my confidence. I
would also like to mention the unconditional help put forth by the entire
team at Tata Steel, Kolkata.
I am deeply grateful, to my faculty guide Mr. Dr. Samyadip Chakraborty
for his valuable support throughout the internship.
Without any of the above people, this project would not have seen the
light of the day.

KRITIKA JALAN
19BSPHH01C0539

KRITIKA JALAN |19BSPHH01C0539 |IBS HYDERABAD 4

 TABLE OF CONTENT

S.NO. CONTENT PAGE NO.

Authorisation
Acknowledgment
1. Introduction 6
2. Abstract 11
3. Study 12
4. Future plan 17

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 INTRODUCTION
INDIAN STEEL INDUSTRY
Steel is crucial to the development of any modern economy and is viewed as the
backbone of human civilization. The level of per capita consumption of steel is
treated as an important index of the level of socio-economic development and
living standards of the people in any country. It is a product of a large and
mechanically complex industry having strong forward and backward linkages in
terms of material flows and income generation. All major industrial economies are
characterized by the existence of a strong steel industry and the growth of many of
these economies has been largely shaped by the strength of their steel industries
in their initial stages of development.
India’s economic growth is dependent upon the growth of the Indian steel
industry. Consumption of steel is taken to be an indicator of economic
development. While steel continues to have a stronghold in traditional sectors
such as construction, housing and ground transportation, special steels are
increasingly being used in engineering industries such as power generation,
petrochemicals and fertilizers. India possesses a central position on the global steel
map, with the establishment of new state-of-the-art steel mills, acquisition of
global scale capacities by players, continuous modernization and up gradation of
older plants, improving energy efficiency and backward integration into global raw
material sources.
Steel has contributed immensely towards India’s economic growth. This is evident
from the similar growth patterns of India’s GDP and steel production in the
country, which also highlights the economy’s dependence on steel.

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Steel industry derives its demand from other important sectors like infrastructure,
aviation, engineering, construction, automobile, pipes and tubes etc. With the
Indian economy poised for its next wave of growth under the reforms being
unleashed in the last one year, there lies tremendous opportunity for the Indian
steel industry to prosper and grow exponentially.
India is currently the world’s second largest producer of crude steel, with 110.92
MT produced in 2018–19 (up from 103.13 MT in 2017–18). The country has
strengthened its domestic steel industry considerably over the last decade. It
became a net exporter in FY 2016–17, with exports of total finished steel
reaching 8.24 MT vis-à-vis imports of 7.22 MT in the same year. It maintained
this position with a positive trade balance of 2.138 MT in the next year too. But
with rising protectionism and continuous trade war (among other factors), India
has seen a steep decrease of 33.9% in its exports, clocking only 6.36 MT in 2018–
19. In contrast, imports saw an increase of 4.7% and stood at 7.83 MT. As a
result, the country once again became a net importer in the last financial year .
India’s steel industry: Journey so far

The Indian government has always supported the steel industry and introduced the
National Steel Policy in 2017, which envisions the growth trajectory of the Indian
steel industry till 2030–31. The broad contours of the policy are as follows:

KRITIKA JALAN |19BSPHH01C0539 |IBS HYDERABAD 7

• Steel-making capacity is expected to reach 300 million tonnes per annum by
2030–31.
• Crude steel production is expected to reach 255 million tonnes by 2030–31, at
85% capacity utilisation
• Production of finished steel to reach 230 million tonnes, assuming a yield loss of
10% for conversion of crude steel to finished steel – that is, a conversion ratio of
90%.
• With 24 million tonnes of net exports, consumption is expected to reach 206 MT
by 2030–31
• As a result, per capita steel consumption is anticipated to rise to 160 kg
• An additional investment of INR 10 lakh crore is envisaged

Sector wise demand for steel

6.00%
5.00%

15.00%

9.00% 62.00%
Construction Railways Automobiles Capital goods Consumer durables
3.00%
Intermediate products

KRITIKA JALAN |19BSPHH01C0539 |IBS HYDERABAD 8

A large share of challenges is being faced by the steel industry since 2014 it is
traced to have extremely high finance costs or cost of borrowed capital. Although
India’s Reserve Bank has lowered the policy repo rate five times and by 135 basis
points in 2019 alone, the cost of capital in India still remains significantly high and
Indian steel makers continue to face a relative disadvantage vis-à-vis their
competitors from the developed world.

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 INDUSTRY PERFORMANCE
SWOT analysis
 STRENGTHS:
 Abundant resources of iron ore
 Low cost and efficient labour force
 Strong managerial capability

 WEEKNESS:
 High cost of capital
 Quality of coking coal
 Dependence on imports for steel manufacturing equipment’s &
technology

 OPPORTUNITIES:
 Huge Infrastructure demand
 Rapid urbanization
 Increasing demand for consumer durables
 Increasing interest of foreign steel producers in India

 THREATS:
 Slow growth in infrastructure development
 Global economic slow down

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KRITIKA JALAN |19BSPHH01C0539 |IBS HYDERABAD 11
 INTRODUCTION
TATA STEEL

Tata Steel was established in India as Asia’s first integrated private steel
company in 1907. With this, it also developed India’s first industrial city at
Jamshedpur. Today, Tata is amongst the leading global steel companies.
The annual crude steel capacity across Indian operations is nearly 13 MTPA and
has registered a turnover of US $7889 Mn in FY 2017. Tata has also set up its
second greenfield steel plant in the eastern state of Odisha; commissioning the
first phase (3 MTPA) of 8 MT of steel capacity in 2016. It possesses and operate
captive mines that help them maintain cost-competitiveness and production
efficiencies through an uninterrupted supply of raw material. This is Tata ensure
to remain the lowest cost producer of steel in Asia.
Tata is one of the world's most geographically-diversified steel producers with
operations and commercial presence across the world. Tata Steel group is
spread across five continents with an employee base of over 65,000.
Focusing on Innovation, Technology, Sustainability & People, the Company
strives to be the global steel industry benchmark for value creation and
corporate citizenship and become the most admired brand in metals and
minerals space. Tata has its manufacturing facilities in Jamshedpur in Jharkhand,
Kalinganagar and Dhenkanal in Odisha, Sahibabad in Uttar Pradesh and Khopoli
in Maharashtra.
Major acquisition of TATA STEEL:
 NatSteel in 2004
 Millennium Steel in 2005
 Corus in 2007
 Steel Engineering and Vinausteel in 2007:

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  Bhushan Steel in 2018

ABSTRACT

For my Summer internship Program 2020, I’m interning with TATA STEEL (Kolkata).
The aim the internship is to do a competitor’s analysis of Tata steel, of one its
major competitor Jindal Steel and Power Limited (JSPL). The areas to be covered in
the project are-
 Understanding the steel industry
 Detailed study on JSPL including:
 Process flow
 Product basket
 Plant wise production capacity
 Sales and distribution channel
 Hold in the share market
 Area of operation
 Managerial survey of JSPL which included:
 SWOT analysis
 Michael porters 5 forces model
 PESTEL analysis
 Financial analysis of JSPL over last 5 years
 Production and sales capacity
 Revenue and EBIDTA
 Various ratios
 Comparison of JSPL with its competitors mainly Tata steel

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 STUDY
COMPANY PERFORMANCE (JSPL)
 SWOT ANALYSIS
i. STRENGTHS:
 India’s only private manufacturer of Rails and Long Rails, 1.5
MTPA rebar mill
 India’s first and only manufacturer of Head Hardened Rail
 India's largest 2.75 MTPA New Electric Oxygen Furnace
(NEOF)
 India’s most advanced Plate Mill capable of producing up to
5-meter wide plates–the widest ever built in India

ii. WEEKNESS:
 High level dependence suppliers for raw materials
 Low presence in flat products
 Low presence in the South India

iii. OPPORTUNITIES:
 Increase the capacity of its Angul plant to 20MTPA by 2030
 Industrial park plan in Odisha
 Increase production capacity to meet the global steel
demand
 Huge investment in the railway sector (50 lakh crore by
2030)

iv. THREATS:

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 Generating cash for sustainable operations

Slowdown in construction industry

High debt

Fluctuation in the economy (as huge investment to

increase capacity is planned)
 Michael porters 5 forces model
1. Threat to substitutes
 Availability of substitutes like carbon fiber, aluminum
etc. at a cheaper price
 Psychological switching cost is low
 Utility provided from the substitute is same or even
better
2. Threat of new entrants
 Low entry barriers
 Low product differentiation
 No restriction in the distribution channel
 Threat will be low if the psychological switching cost
for consumer is high and customer loyalty is high
3. Competitive rivalry
 Large no. of players in the unorganized sector
 Top 4 players control 71% of market share
 Low entry barriers
 Imports from foreign market
4. Bargaining power of suppliers
 High raw material prices
 Lack of transportation
 Many small buyers
 Concentration into specific region
 Power in the railways segment
5. Bargaining power of buyers
 Presence of large no. of suppliers

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  Access to global markets
 Not much differences in the prices between
competitors
 Better knowledge amongst the buyers

 PESTEL ANALYSIS
1) POLITICAL
 Indian steel industry, the government directly or
indirectly controls the finance and many of the inputs
- both raw material and services.
 Government introduced the National Steel Policy.
The main aim of the policy is to fill in the gap
between the demand and supply of the steel.
 The government is a very important buyer for the
steel industry. The government investments in
infrastructure such as rail, highways, dams, power
plants and ports are critical prime movers for steel
demand.
 Special Incentives like the cut in the duty, zero duty
on imports, provision of the land and other
infrastructural facilities are provided for the steel
sector.

2) ECONOMICAL
 Current economic crisis has a major impact on the
steel industry. Provisional figures says that exports
stood at highest level, against last five years.
 Indian economy become the strongest than it is
comparing since last many years, it is absolutely good

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 time for Indian steel industry. The analysis shows
that the Indian steel industry suffers from low
productivity of labor but high capital, energy and
transportation cost.

3) SOCIO-CULTURE
 The impact of the particular industry on the society
 Steel industry is responsible for the development in
the rural sector which leads to the rise in the
standard of the living of the people
 In JSPL importance is given to continuous training for
promoting safety consciousness among all
employees. Joint communities of executives and
employees' representatives will supervise the
Company's safety measures.

4) TECHNOLIGICAL
 The traditional technologies are being used from
many years in the industry. There is no innovation in
the use of the technique in the production process.
 Electric furnace is being used now days in the
production process but because of the fluctuations in
the energy there is wastage in the raw material.

5) ENVIRONMENTAL

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  Steel Industry companies are commitment to
minimize the adverse impact of its operations on the
environment
 Set sound environmental objectives and targets, and
integrate a process of review, as essential elements
of corporate management.
 Minimize process waste, and promote the recovery
and recycling of materials

6) LEGAL
 Government is introducing the various rules and
regulations in this particular industry
 Paying more attention to the health policies of the
employees who are working with the steel industry
 Special health incentives and rules are being
introduced

 FINANCIAL HIGHLIGHTS
 Last 5 years revenue and EBIDTA analysis of JSPL: revenue rose from
13687 cr. in FY15 to 27730 cr. in FY19, EBIDTA rose from 3722 cr. in
FY15 to 6017 cr. in FY19 (standalone).
 JSPL recorded its highest ever-annual revenue consolidated of
Rs.39,388 cr. 41% higher than the previous year and standalone
revenue growth of 58%.
 JSPL’s consolidated EBITDA rose by 30% compared to previous year
FY18 and stood at Rs.8,406 cr. vs. Rs. 6,469 cr. for FY18.

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  FY 2017-18 reported the highest ever production and sales
 In FY 2017-18 JSPL attained the first ever global tender for supply of
rails to Indian railways

WORKING
In the further project we plan to do the following:
 Comparative analysis of the financial ratios of JSPL with its competitor
 Financial highlights of the company for the last 5 years
 Position of the company in the share market
 Do a comparative study of JSPL with its competitors like SAIL, JSW, and
mainly TATA STEEL on managerial as well as financial grounds.
 Pre-during-post analysis of the company performance
 Detailed industry analysis

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