GICS Industry : Metals & Mining

Sub Industry : Steel

Website : www.jsw.in

JSW Steel Ltd.

Key Stock Indicators
NSE Ticker : Bloomberg Ticker : Face value per share : (%): Div.Yield JSWSTEE L JSTL:IN 10.0 0.8 CMP as on 20 May 2011Rs/share : week range up to 20 May 2011 52 (Rs)(H/L) : as on 20 May 2011 (Rs Market Cap mn) : Enterprise Value as on 20 May 2011 (Rs mn) : 919.0 1,400.0/750. 8 205,034 360,235 Shares outstanding (mn) : Free Float (%) : Average daily volumes (12 months) : Beta (2 year) : 223.1 62.3 1,345,8 67 1.4

JSW Steel Limited (JSWSL) is the flagship company of the OP Jindal group. JSWSL operates across the steel, energy, minerals, port & infrastructure, cement, aluminium and IT sectors. JSWSL offers the entire gamut of steel products such as hot rolled, cold rolled, galvanised, galvalume, prepainted galvanised, prepainted galvalume, TMT rebars, wire rods and special steel bars and rounds & blooms. The company has manufacturing facilities at Toranagallu (Karnataka), Vasind and Tarapur (Maharashtra) and Salem (Tamil Nadu). Its registered office is located at Mumbai.

Key Financial Indicators

MAR 08 MAR 09 MAR 10

Revenue (Rs mn) 190,387.5

124,651.7

160,909.1 19.6 22.0 1,503.0 15,087.2 0.9 7.9 2.6 2.1 6.1 60.8 38.4 15.1 0.9 2.8 9.9 11.2 2.2 20.4 6.8 9.1

KEY HIGHLIGHTS
Acquisition handshakes and

JSWSL acquired a controlling stake in Ispat Industries Ltd in December 2010. As of January 2011, the company has increased its stake to 45.5%. In July 2010, JSWSL and JFE Steel Corp of Japan announced a strategic collaboration for supply of certain technology and the provision of certain technical assistance to JSWSL. In May 2010, JSWSL acquired coking coal mining concessions in the USA. These mines are located in West Virginia and have total resources of 123 mn tonnes. In February 2010, JSWSL announced a scheme of amalgamation of Southern Iron and Steel Co Ltd (SISCOL) with JSWSL and their respective shareholders and creditors, sanctioned by the Bombay High Court. Expansion modernisation and

EBITDA margins (%) 28.2 PAT (Rs mn) 15,787.0 PAT margins (%) 12.7 Gearing (x) 1.9 EPS (Rs/share) 63.6 PE (x) 12.9 P/BV (x) 3.0 RoCE (%) 18.1 RoE (%) 26.4 EV/EBITDA (x) 9.0
n.m. : Not meaningful

Shareholding (As on March 31, 2011)

JSWSL's 2.8 tonnes per annum (TPA) crude steel expansion project at Vijayanagar commenced commercial production in FY10, enhancing the company's crude steel manufacturing capacity to 6.8 TPA. The company is also in the process of debottlenecking its existing furnaces to augment hot metal capacity, setup new melt shop comprising electric arc furnace and slab caster to produce special grade t hin s labs. T he ex pans ion is ex pect ed t o be c omp let ed by Jun e 2013. Dur in g FY10, t he company commissioned a coke oven plant with two batteries of capacity 1.92 tonnes per annum.

KEY RISKS
l l l l

Intense competition from foreign players can jeopardise competiveness and sustainability Cheaper imports from China and Ukraine will make steel industry vulnerable Volatility in price of raw materials coal, iron ore etc Increase in power and fuel cost puts pressure on margins

Indexed price chart Stock Performances vis vis market

YTD m

Returns 1 m

3 m

12

JSWSTEEL NIFTY
Note: 1) YTD returns are since Apr 1, 2010 to May 20, 2011. 2) 1m, 3m and 12m returns are up to May 20, 2011

27 4

5 6

0 1

14 11

CRISIL COMPANY REPORT |1

JSW Steel Ltd.

BACKGROUND
JSWSL was originally incorporated as Jindal Vijayanagar Steel Ltd in March 1994. The company changed its name to JSWSL in June 2005 and got listed on the BSE in May 2005. JSWSL is an Indian company engaged in production and distribution of iron and steel products. It products include hot rolled coils/ steel plates/ sheets, rolled products (long), cold rolled coils/ sheets, galvanized plain/ corrugated/ colour coated coils/ sheet, steel billet, and bars & rods. The company operates in two segments i.e. steel and power. In FY10, the steel segment contributed 99.34% to total revenue while remaining 0.66% was contributed by power segment. In FY10, the company produced 4.49 mn tonnes of MS slabs, 3.39 mn tonnes of hot rolled coils/ steel plates/ sheets, 309,950 tonnes of hot rolled steel plates, 1.5 mn tonnes of cold rolled coils/ sheets, 904,644 tonnes of galvanised/ galvalum coils/ sheets, 148,195 tonnes of colour coating coils/ sheets, 1,488,963 tonnes of steel billets & bloom and 957,448 tonnes of long rolled products. The company has 16 subsidiaries.

COMPETITIVE POSITION
Peer Comparison

Revenue mn)

(Rs

Jai Balaji Hindalco Jindal JSW Steel Ltd. Steel & Industries Ltd. Industries Power Ltd. Mar 10 Mar 10 190,387.5 607,336.0 19,298.0 111,131.2 22.0 15,087.2 7.9 2.1 60.8 15.1 2.8 11.2 20.4 9.1 13.9 38,142.0 6.3 1.6 19.9 9.6 13.2 53.6 245.6 36,484.2 1.3 32.8 1.7 0.8 3.9 39.2 48.5 Key Financial Indicators

n.m: meaningful

EBITDA margins (%) PAT (Rs mn) PAT margins (%) Gearing (x) EPS (Rs/share) PE (x) P/BV (x) RoCE
Not

FINANCIAL PROFILE
Top line, margin rebounds in FY10 increase, PAT

JSWSL registered ~23.59% CAGR in revenue during FY0810, with revenue growing from Rs 124.65 bn in FY08 to Rs 190.38 bn in FY10. Top line for FY10 grew ~18.3% over FY09, as production of rolled products, both long and flat (including valueadded flat), went up significantly. The domestic sales accounted for 84% of the company's total sales in FY10, as against 72% in FY09. EBITDA margin increased 240 basis points on the back of lower input costs and decrease in production costs, as the company implemented cost reduction initiatives such as increased coal injection in blast furnace, lower usage of fluxes, higher captive power generation, increase in utilisation of corex gas, usage of coke oven gas from recovery type coke ovens etc.

Revenue EBITDA margins PAT PAT margins Revenue growth EBITDA growth PAT growth Gearing RoCE RoE

Units Rs million Per cent Rs million Per cent Per cent Per cent Per cent Times Per cent Per cent

Mar Mar Mar 08 09 10 124,651. 160,909. 190,387 7 28.2 1 19.6 .5 22. 0 15,787. 1,503. 15,087 0 12.7 0 0.9 .2 7.9 43.6 29.1 18. 3 25.9 33. 10.5 0 21.1 903. 90.5 8 2.1 1.9 2.6 18.1 9.9 11. 2 26.4 2.2 20.

PAT grew ~903.8% to Rs 15.08 bn from Rs 1.50 bn in FY09. This was on account of higher operating profit and increase in nonoperating income coupled with foreign exchange gain of ~Rs 4.07 bn in FY10, compared with forex loss of ~Rs 8 bn in FY09.

INDUSTRY PROFILE
Steel HR The flat steel industry is highly capital intensive, which acts as an entry barrier to new players. Raw materials account for 5560 per cent of the total costs. Thus, players who are backward integrated have far better profitability as compared to players without backward linkages. Also, HR players with forward integration into value added products such as CR and GP/GC have an edge over competitors due to the diversification and higher realizations. In 200910, domestic steel demand grew by 7.8 per cent over the corresponding period last year. However growth in flat steel demand was higher at 9 per cent as compared with a 6.7 per cent growth in long steel demand. High growth in domestic flat demand is mainly on account of robust demand from automobile and consumer durables sectors and continued strong demand from oil and gas segment. Steel CR, GP/GC Coldrolled (CR) and galvanised plain (GP)/ galvanised corrugated (GC) products are downstream valueadded flat steel products. CR products are consumed on a large scale in the automobile and coating sectors, which contribute around 6065 per cent of total demand for CR products. Galvanised products, on the other hand, are exported on a large scale. House roofing consumers account for around 40 per cent of the total

domestic GP and GC production. The domestic flat steel industry grew by 9 per cent in 200910 over the same period last year on account of government focus on investments in infrastructure segment and robust demand from the automobiles sector.

CRISIL COMPANY REPORT |2

JSW Steel Ltd.

ANNUAL RESULTS

Income statement
(Rs million) 10 Net Sales Operating Income EBITDA EBITDA Margin Depreciation Interest Other Income PBT PAT PAT Margin No.of shares(Mn No.) Earning per share(EPS) Mar08 123,165.9 189,221.5 124,651.7 190,387.5 35,171.9 41,901.7 28.2 22.0 7,419.4 13,015.6 5,765.6 7,636.3 417.2 255.8 23,113.2 21,559.5 15,787.0 15,087.2 12.7 7.9 248.1 248.1 63.6 60.8 Mar09 159,401.8 160,909.1 31,494.3 19.6 Mar

Balance Sheet
(Rs million) 10 Equity share capital Reserves and surplus Tangible net worth Deferred tax liablity:|asset| Longterm debt Shorttermdebt 9,877.7 Current liabilities 20,544.1 Total provisions 197.3 2,383.1 Net fixed assets 1,503.0 0.9 248.1 6.1 Investments Current assets Receivables Inventories Cash Total assets Total liabilities Gross block 49,968.6 84,367.2 3,648.3 88,266.1 800.3 2,648.7 Mar08 2,480.8 65,466.8 77,951.6 67,947.6 80,432.4 12,517.1 16,847.8 Mar09 2,480.8 64,798.5 67,279.3 12,768.2 Mar

2,480.8

114,589.8 141,449.9 143,616.9 3,095.3 14,614.9 20,474.3

251,766.7 331,038.1 342,527.9 177,615.2 219,757.2 263,662.9 205,877.7 276,171.8 281,546.3 4,803.2 6,414.7 41,085.8 54,566.9 5,390.6 21,817.4 28,667.4 4,714.8 3,987.2 50,879.1 3,990.5 29,245.6 5,093.0 3,030.4 6,963.9

251,766.7 331,038.1 342,527.9

Cash flow
(Rs million) 10 Pretax Profit Total tax paid 2,392.7 Depreciation Change in working capital 7,800.9 Cash flow from operating activities Capital expenditure 80,804.4 Investments and others 2,427.5 Cash flow from investing activities 79,988.4 Equity raised/(repaid) 556.2 Debt raised/(repaid) 3,692.4 Dividend (incl. tax) 2,409.3 Others (incl extraordinaries) Cash flow from financing activities 4,640.2 Change in cash position 2,062.6 Opening cash Mar08 Mar09 Mar

Rati os

Mar08 Mar09 Mar 10 5,093.0

22,404.1 21,505.6 4,934.4

1,269.8 629.0 Closing cash

n.m.: Not meaningful

4,714.8 3,030.4

5,093.0

7,419.4 9,877.7 13,015.6 10,455.8 26,034.4 35,344.9 36,552.9 24,327.6 121,209.0 19,322.5 2,197.8 123,407.0 21,750.0 1,774.2 763.4 816.0

QUARTERLY RESULTS
Profit and loss account

78,389.6 44,239.1 3,404.6 12,622.6 2,017.7 558.1 896.1

89,381.8 43,813.7 1,320.2 3,394.6 378.2 4,714.8

Revenue growth(%) EBITDA growth(%) PAT growth(%) EBITDA margins(%) Tax Rate(%) PAT margins(%) Dividend payout(%) Dividend per share(Rs)

43.6 25.9 21.1 28.2 12.9 12.7 16.6 9.4

29.1 10.5 90.5 19.6 3.8 0.9 12.4 n.m.

18.3 33.0 903.8 22.0 10.6 7.9 11.8 6.0

BV(Rs) Return on Equity(%) Return on Capital employed(%) Gearing(x) Interest coverage(x) Debt/EBITDA(x) Asset turnover(x) Current ratio(x) Gross current assets(days)

273.9 26.4 18.1 1.9 5.8 3.3 0.9 0.8 119

271.2 2.2 9.9 2.6 1.5 5.1 0.8 0.5 108

324.2 20.4 11.2 2.1 5.3 3.8 0.8 0.6 94

(Rs million) No of Months Revenue EBITDA Interest Depreciation PBT PAT

Dec10 Dec10 3 60,064.5 10,202.4 1,968.2 3,906.3 4,357.3 2,856.8

100.0 17 3.3 6.5 7.3 4.8

% of Rev Dec09 % of Rev Dec09 3 3 49,262.1 100.0 61,355.7 11,821.9 24 11,860.5 2,583.2 5.2 2,614.0 3,298.0 6.7 3,790.6 5,969.9 12.1 5,487.5 4,247.3 8.6 3,672.0

% of Rev Sep10 % of Rev % of Rev 9 9 100.0 169,028.0 100.0 139,160.7 100.0 19.3 32,847.8 19.4 31,868.8 22.9 4.3 7,282.1 4.3 8,585.9 6.2 6.2 11,309.1 6.7 9,719.3 7 8.9 14,351.2 8.5 13,651.0 9.8 6 9,448.6 5.6 9,591.6 6.9

CRISIL COMPANY REPORT |3

JSW Steel Ltd.

FOCUS CHARTS AND TABLES

Shareholding pattern (Per cent)

Jun 2010 2011 Promoters Fll Dll Others 45.0 37.7 28.8 24.5 6.8 19.5 32.3 Sep 2010 45.0 29.6 7.1 18.3 Dec 2010 37.7 26.1 5.2 31.0 5.4 Mar

Board of Directors
Directors Name Savitri Devi Jindal Sajjan Jindal Designation NonExecutive Chairperson, Promoter Vice Chairman & Managing Director, PromoterDirector

Sheshagiri Rao Venkatasathya Metlapalli

Jt.Managing Director, Wholetime Director

Jayant Acharya Director Uday Madhav Chitale NonExecutive Director Zarin Bomi Daruwala Nominee DirectorIcici Bank Ltd. Saibal Kanti Gupta NonExecutive Director Vijayaraghavan Kannan Non Executive Director Vijay Laxman Kelkar NonExecutive Director Vinod Kumar Nowal Director Shigeru Ogura Nominee DirectorJfe Steel Corp. Anthony Paul Pedder NonExecutive Director Mahabalarao Maheshwar Rao Nominee Director Ksiidc Sudipto Sarkar NonExecutive Director

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CRISIL COMPANY REPORT |4