International Journal of Accounting and Financial Management Research (IJAFMR) ISSN 2249-6882 Vol.

3, Issue 1, Mar 2013, 11-26 TJPRC Pvt. Ltd.

A STUDY ON FINANCIAL EFFICIENCY OF STEEL INDUSTRY IN INDIA

S. SIVAKUMAR Assistant Professor in Management, Sri Krishna College of Engineering and Technology, Coimbatore, India

ABSTRACT
The back bone of any economy is its industries. It is the industrial growth of a country that contributes to the faster growth of the economy. This realization has made the economic planners and practioners to implement various policies and programmes that are highly favorable for the development of industries. The government framed and implemented National Steel Policy in 2005. The long term strategic goal of NSP is that India should have a modern and efficiency steel industry of world standards, catering to diversified steel demand. Economic and industrial growth is the result of the interaction of two prime factors: the investment capabilities, which are a function of savings and the productivity with which these capabilities are utilized. On the average, the large firms could maintain almost a similar working capital turnover ratio reflecting a lower range of coefficient of variation, while the medium and small firms maintain a higher working capital turnover which affects their short term solvency position considerable. This has got reflected in the higher coefficient of variation also. In terms of fixed assets turnover ratio, the average ratio is seen higher in the case of medium and small scale firms while it is lower in the case of large scale firms, though the coefficient of variation is higher for a majority of the firms in the case of medium and small scale firms. The compound growth rate (CGR) of output of large firms was high and positive with 8.763 per cent while it was negative at -3.729 per cent. In the case of growth in capital, large firms recorded higher growth with 4.289 per cent than the small scale firms which recorded a value of 1.511 per cent. Also an exanimation of the financial viability of the industry becomes essential to understand the strength the steel industry in the given competitive situation. These measures would go a long way in increasing the efficiency of the steel industry.

KEYWORDS: Economy, NSP, Capital Turnover, Financial Viability, Efficiency INTRODUCTION

In a developing country like India, the performance of various industries greatly determines the growth of the economy. This realization has made the economic planners to implement various policies and programmes for the development of industries. Among the various industries, Steel industry has attracted much of the attention of the policy makers as it is one of the major industry in India. The reform allowed for no licenses to be required for capacity creation, except for some locations. Yet another reform for Indias steel industry came in 1992, when every type of control over the pricing and distribution system was removed, making the modern Indian Steel Industry extremely efficient, as well as competitive. The with a huge amount of public and private investment was injected into this industry, a logical question that arises in this context is that to what extent the steel industry are financially viable. In a competitive environment, for the purpose of increasing their profitability are these industries able to increases their productivity of factors. The present study is directed towards this end. More specifically, the present study attempts to understand the performance and status of this industry as measured in terms of its financial strength.

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STATEMENT OF THE PROBLEM

It has been a long realized fact that industries are the hub of economic growth as the development of industries contributes to the faster growth of the economy. This is more so in the case of the developing countries like India where there is a cry for faster economic growth. Financial administration has been developed and restructured by changing conditions of modern methods of professional management. The share size and complexity of modern enterprises have increased the responsibility of not only controlling the finance but also analyzing and interpreting the economic situation, appraising managerial performance and setting all policies that determine the companys future. The primary problem of the present study is (1) India is deficient in raw materials required by the steel industry. Iron ore deposits are finite and there are problems in mining sufficient amounts of it. India's hard coal deposits are of low quality and (2) insufficient freight capacity and transport infrastructure impediments to hamper the growth of Indian steel industry. (3)Whether the firms are really financially viable?

OBJECTIVES OF THE STUDY

To trace out and compare the financial efficiency of the large, medium and small scale steel industries of India. To analyze the growth of trend percentages. To provide suggestions based on the issues identified.

PERIOD OF THE STUDY

The present study attempts to examine the objectives formulated with the help of the collected secondary data for a period of 10 years from 1997-98 to 2006-07.

SCOPE OF THE STUDY

The study focuses on the financial performance of large and medium and small scale Steel Industry of India. In the course of the analysis the study came out with certain striking conclusions and the resultant policy implications which would be of immense use to the planners and policy makers. These findings and the suggestions would help them re-orient their policies towards better financial performance so as to set the industry in the pace of its higher growth. The theories of Management accounting formed the base of the analysis of the financial performance of steel industries.

REVIEW OF LITERATURE
Beaver1 has taken a trend of thirty financial ratios for 79 paired failed and non-failed US firms and has found that there was a significant difference in the ratios of both category of Firms. In 1969 he has made a comparison of predictive ability of different ratios of the same paired firms, and he has identified 3 ratios namely, cash flow to total debt, net income to total assets and total debt to total assets ratio are the best indicators. He has identified that the ratios of failed firms differed significantly from those of non-failed firms and they deteriorated sharply during the 5 years prior to failure. Altman2 took 66 firms in general and applied multiple discriminant analysis to discriminate the failed firms from the non-failed firms. On the basis of the weighted combination of 5 financial ratios, the weighted combination of working capital to total liabilities, cumulative retained earnings before interest and tax to total asset, market value of equity to book value of total debt and sales to total assets was able to predict the bankruptcy with 45% degree of accuracy. He also found that the predictive ability of the model declined very sharply when the number of years prior to the failure increased.

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Ramamurthy5 admits profitability and solvency to be the twin objective of working capital management survival and growth of the company thus depend on its ability to meet the two sets of probability and solvency. He also viewed that if liquid asserts are adequate to pay off current liabilities, a feeling of confidence in the financial strength of the company automatically created and its reputation is sustained. Bhabatosh Banerjee7 (1982) in his study on corporate liquidity and profitability in India, has analyzed the trend of liquidity position of industries of medium and large public limited companies in the corporate sector of India during 1971-78 and has identified the relationship of liquidity with their profitability. His study has evidenced that in industry groups belonging to publishing and vice versa. But in other industry groups belonging tobacco, silk and rayon textiles, a rise in liquidity has been found to have a decline in profitability Vijay Kumar and Venkatachalam9 have made an empirical analysis on working capital and profitability, taking 13 firms from sugar industry, covering a period from 1982-83 to 199192.Correlation and regression analysis have been employed to be measure the impact of working capital ratios on profitability. Liquid ratio, receivable turnover ratio has been considered to measure their impact on profitability. The study has revealed that inventory turnover ratio and receivable turnover ratio have positively influenced the profitability and liquid ratio and cash turnover ratio have negatively influenced profitability. Desai11 has made a comparative study of a few cotton mills of Ahmedabad in respect of their liquidity performance, their relationship with profitability the pattern of financing of current assets and the turnover of working capital. He has classified the selected firms into three group based on the size of the firms and its statistically tested to determine how for the observations of the study can be taken as a valid useful measure for future policy framework. It is observed that the liquidity and profitability of the firms are not influenced by the size. Desai13 has assessed the capital structure of Gujarat steel tubes ltd, for 10 years from 1980-81 to 1990-91 and found out that the real value of the equity shares has been a below their book value and also inconsistent during the entire period of study. He has found out that the companys capital structures were imbalanced and over capitalized financial plans have continued for a long period of time, preventing the company from earning profits. In his study though he has discussed various models of prediction of sickness, he has applied Altmans Z score model and has identified that from the year 1980-81, till the latest year 1990-91, Gujarat steel tubes ltd had been scoring less than the minimum cut off value of 2.675 as suggested by Altman. He has also applied Argents score system for a subjective evaluation of defects in management and accounting mistakes and symptoms. He has concluded by analyzing the reasons for the sickness of the company. Sahu15 in his study on, analysis of corporate profitability-a multivariate approach, has made an empirical study based on the secondary data from a sample of 100 non-financial, on-government public limited companies, in eastern India for a period of ten years from 1984-85 to 1993-94.He has chosen profitability ratios and interest coverage ratio for the analysis. Cross sectional spearmen rank correlation of the profitability ratios for all the companies have been calculated and applied for selecting the ratio for analysis. He has arrived at a single index to measure the composite profitability of a firm and ranked the companies based on the overall score. Sathish Andre varshney17 has made a case study on trade credit and company liquidity with special reference to steel authority of India and TATA iron and steel Co, to find out more liquid companies give relatively more net trade credit in these years. The period covered has been 1985-861996-97 and the significant variables chosen are current asset, current liabilities, liquid assets, networking capital, networking assets, cash and short term investments and cost of goods sold. Ratio analysis and multiple regression analysis have been employed. He has inferred a positive correlation of very high degree among the variables chosen. Liquidity has been taken as the dependent variable and inventory turnover and

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average collection period, debtor turnover and average collection period have been taken as independent. The impact of average change in net trade credit and change in stick in relation to liquidity has also been measured and a significant linear relationship is found to be existent. Mazumder and Ghoshal18 examined the strengths and weaknesses of Indian steel industry. They prepared a SWOT analysis and identified major strengths, weaknesses, opportunities and threats in Indian steel industry. Major strengths, according to their study, included the availability of iron ore and cheaper labour. Weaknesses included higher cost of capital, low labour productivity, and opportunities included wider domestic market, growth of allied sectors and major threats included substitutes and technological changes. The study concluded that if the threats and weaknesses are overcome, there will be a turnaround in the Indian steel industry. Elbaum19 emphasized the role of government intervention and the growth of steel industry in Japan. He concluded that without industrial policy intervention, Japan might have never become a major steel producer, for it had little source of comparative advantage apart from the technical expertise and capital investments it gradually accumulated over a long extended period. At the least, without state intervention, industry development would have been substantially delayed.

SAMPLE DESIGN AND SELECTION OF FIRMS

To carry out the objectives, the present study has relied exclusively on the secondary data collected from large, medium and small scale industries. The first step is the selection of sample large, medium and small scale industries. For this purpose, the records of BSE and NSE were referred to. It was identified from the records that there are totally 48 large scale firms of which only from 15 companies the required data were available. Hence, these 15 firms were selected, similarly, out of 231 medium and small scale firms, which are listed in BSE and NSE, the data were available only in 19 companies which were selected for the study. The list of firms selected can be given as: Table 1: List of Firms Selected for the Study Sl.No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. Name of the Firm LARGE SCALE FIRMS Ajmera Realty Infra India Ltd. (ARI) Bhushan Steel Ltd. (BSL) Essar Steel Ltd. (ESL) Ispat Industries Ltd. (ISI) JSW Steel Ltd. (JSW) Lloyds Steel Industreis Ltd. (LSI) Man Industries Ltd. (MIL) Mukand Ltd. (MUK) Nationakl Steel Agro Industries Ltd. (NSA) Steel Authority of India Ltd. (SAI) Sunflag Iron Steel company Ltd. (SIS) Surya Roshni LTD. (SRL) Tata Steel Ltd. (TSL) Uttam Galva Steels Ltd. (UGS) Welspun Gujarat Stahi Robren Ltd. (WGS)

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Table 1:Contd., Sl.No. Name of the Firm MEDIUM AND SMALL SCALE FIRMS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. Anil Special Steel Industries Ltd. (ASI) Bilpower Ltd. (BPL) East Coast Steel Ltd. (ECS) Gandhi Special Tubes Ltd. (GSL) Garg Furnace Ltd. (GFL) Goodluck Steel Tunes Lt.d (GST) Graham Firth Steel Product (India) Ltd. (GFS) Grand Foundary Ltd. (GFO) India Steel Works LTd. (ISW) Jai Corp Ltd. (JCL) Mahindra Ugine Steel Company Ltd. (MUS) Majestic Industries Ltd. (MIC) Panchmahal Steel Ltd. (PAN) Pennar Industries Ltd. (PIL) Ratnamani Metals Tubes Ltd. (RMI) Ruchi Strips Alloys Ltd. (RSA) Steel Tubes of India Ltd. (STI) Super Forgings Steel Ltd. (SFS) Surana Industries LTd. (SUI)

Source: Compiled from Capital Line Database

SOURCE OF DATA
From the official sources it is found that there are totally 279 steel industries with a distribution of 48 large and 231 medium and small scale industries are getting operated in India. However, for the purpose of collecting a reliable secondary data, the researcher could identify that there are only 15 large scale industries and 19 medium and small scale industries listed in Bombay Stock Exchange and National Stock Exchange. Hence, the study is confined to these 15 large scale and 19 medium and small scale industries. The required secondary data were collected from Capital Line Database and the Annual Reports of BSE, the Annual Reports of Steel, Ministry of Steel, the annual Reports of Corporate Sector, Capital Markets and Market Shares and Size of Industrial Product published by Centre for Monitoring Indian Economy (CMIE), Annual Survey of Industries, published by Ministry of Industries, Economic survey and the Annual Reports of respective industries under study.

TOOLS AND TECHNIQUES

The relevant statistical tools and techniques were selected on the basis of the objectives framed. The trends in the financial performance of the selected to two broad categories, Apart from this, the summary statistics such as mean, standard deviation, regression analysis and coefficient of variation were used.

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SUMMARY STATISTICS OF SELECTED LARGE, MEDIUM AND SMALL SCALE FIRMS

Table 2: Summary Statistics of Networth Companies Large Medium & Small Min. Val 609.20 11.76 Max.Val 3224.45 53.94 Mean 1402.18 28.26 C.V (%) 59.48 49.91 C.G.R (%) 10.12 -4.49

Source: Annual Reports, 1998 To 2007

The net worth in large companies ranges between Rs.609.20 to 3224.45 crores with a mean of Rs.1402.18 crores and a coefficient of variation 59.48 % during the period of study. The net worth on an average annually had a growth at 10.12 per cent. The net worth in medium & small companies ranges between Rs.11.76 to 53.94 crores with a mean of Rs.28.26 crores and a coefficient of variation 49.91 % during the period of study. The networth on an average annually had a negative growth at 4.49 per cent. Table 3: Summary Statistics of Sales Companies Large Medium & Small Min. Val 1746.63 78.78 Max.Val 6299.40 239.94 Mean 3185.06 125.23 C.V(%) 52.06 43.01 C.G.R(%) 16.57 10.08

Source: Annual Reports, 1998 To 2007

The sales in large companies ranges between Rs.1746.63 to 6299.40 crores with a mean of Rs.3185.06 crores and a coefficient of variation 52.06 per cent during the period of study. The Sales on an average annually had a growth at 16.57 per cent. . The sales in medium and small companies ranges between Rs.78.78 to 239.94 crores with a mean of Rs.125.23 crores and a coefficient of variation 43.01 per cent during the period of study. The sales on an average annually had a growth at 10.08 per cent. Table 4: Summary Statistics of Net Profit Companies Large Medium & Small Min.Val -258.12 -13.92 Max.Val 876.56 22.44 Mean 209.07 .42 C.V (%) 205.10 2420 C.G.R (%) * *

Source: Annual Reports, 1998 To 2007

*some of the values are non-positives; CGR not estimated The net profit in large companies ranges between Rs.-258.12 to 876.56 crores with a mean of Rs.209.07 and a coefficient of variation 205.10 % during the period of study. The net profit in medium and small companies ranges between Rs.-13.92 to 22.44 crores with a mean of Rs.0.42 and a coefficient of variation 2420 % during the period of study. Table 5: Summary Statistics of Fixed Assets Companies Large Medium & Small Min. Val 1842.93 30.02 Max.Val 3573.69 59.89 Mean 2583.28 42.72 C.V(%) 19.42 22.13 C.G.R(%) 6.11 7.01

Source: Annual Reports, 1998 To 2007

The fixed assets range in large companies between Rs.1842.93 to 3573.69 crores with a mean of Rs.2583.28 and a coefficient of variation 19.42 % during the period of study. The fixed assets on an average annually had a growth at 6.11 per cent. The fixed assets ranges in medium & small companies between Rs.30.02 to 59.89 crores with a mean of Rs.42.72

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and a coefficient of variation 22.13 % during the period of study. The fixed assets on an average annually had a growth at 7.01 per cent. Table 6: Summary Statistics of Administrative Expenses Companies Min.Val Max.Val Mean C.V(%) C.G.R(%) Large 127.33 317.92 200.24 34.82 11.16 Medium & Small 3.61 7.49 5.03 28.02 6.81
Source: Annual Reports, , 1998 To 2007

As seen in the table 1.5, in the case of large scale firms, the administrative expenses range from Rs.127.33 crores to 317.92 crores with a mean of Rs.200.24 crores and a coefficient of variation of 34.82 per cent during the period of study. The administrative expenses on an average annually had a growth at 11.16 per cent. Similarly, in the case of medium and small scale firms, the administrative expenses ranges from Rs.3.61 crores to 7.49 crores with a mean of Rs.5.03 crores and a coefficient of variation 28.02 per cent during the period of study. The administrative expenses on an average annually had a growth at 6.81 per cent. Table 7: Summary Statistics of Labour Cost Companies Large Medium & Small Min. Val 228.16 3.82 Max.Val 501.80 6.44 Mean 347.33 4.31 C.V(%) 25.94 19.45 C.G.R(%) 8.74 11.09

Source: Annual Reports, , 1998 To 2007

The labour cost in large companies ranges from Rs.228.16 to 501.80 with a mean of Rs.347.33 and a coefficient of variation 25.94 per cent during the period of study. The labour cost on an average annually had a growth at 8.74 per cent. The labour cost in small companies ranges between Rs.3.82 to 6.44 with a mean of Rs.4.31 and a coefficient of variation 19.45 per cent during the period of study. The labour cost on an average annually had a growth at 11.09 per cent. Table 8: Summary Statistics of Power and Fuel Companies Large Medium & Small Min. Val 198.33 6.78 Max.Val 576.78 13.30 Mean 329.26 9.11 C.V (%) 38.78 22.1 C.G.R (%) 12.83 6.56

Source: Annual Reports, 1998 To 2007

The expenditure on power and fuel ranges in large companies between Rs.198.33 to 576.78 crores with a mean of 329.26 and a coefficient of variation 38.78 per cent during the period of study. On an average it had a growth at 12.83 per cent annually. The expenditure on power and fuel in medium & small companies ranges between Rs.6.78 to 13.30 crores with a mean of 9.11 and a coefficient of variation 22.1 % during the period of study. On an average it had a growth at 6.56 per cent annually. Table 9: Summary Statistics of Raw Material Companies Large Medium & Small Min. Val 674.87 53.57 Max.Val 2708.16 180.23 Mean 1300.09 89.77 C.V(%) 57.04 46.87 C.G.R(%) 17.89 11.09

Source: Annual Reports, ,1998 To 2007

The cost of raw material in large companies ranges between Rs.674.87 to 2708.16 crores with a mean of Rs.1300.09 crores and a coefficient of variation 57.04 % during the period of study. On an average annually, it had a growth at 17.89 per cent. The cost of raw material in medium and small companies ranges between Rs.53.57 to 180.23

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crores with a mean of Rs.89.77 crores and a coefficient of variation 46.87 % during the period of study. On an average it had a growth at 11.09 per cent annually. Table 10: Summary Statistics of Operating Expenses Companies Large Medium & Small Min. Val 1563.76 85.13 Max.Val 4796.14 215.40 Mean 2591.16 123.13 C.V (%) 44.75 36.43 C.G.R (%) 14.27 9.29

Source: Annual Reports, 1998 To 2007

The operating expenses in large companies ranges between Rs.1563.76 to 4796.14 crores with a mean of Rs.2591.16 crores and a coefficient of variation 44.75 % during the period of study. On an average it had a growth at 14.27 per cent annually. The operating expenses in medium & small companies ranges between Rs.85.13 to 215.40 crores with a mean of Rs.123.13 crores and a coefficient of variation 36.43 % during the period of study. On an average annually, it had a growth at 9.29 per cent. Table 11: Summary Statistics of Operating Profit Companies Large Medium & Small Min. Val 166.89 -2.03 Max.Val 1808.46 39.07 Mean 731.74 11.68 C.V (%) 86.20 103.2 C.G.R (%) 27.52 *

Source: Annual Reports, 1998 To 2007

The operating profit in large companies ranges between Rs.166.89 to 1808.46 crores with a mean of Rs.731.74 and a coefficient of variation 86.20 % during the period of study. On an average it had a growth at 27.52 % annually. The operating profit in small companies ranges between Rs.-2.03 to 39.07 crores with a mean of Rs.11.68 and a coefficient of variation 103.2 % during the period of study. Table 12: Summary Statistics of Investment Companies Large Medium & Small Min. Val 111.23 .61 Max.Val 504.09 12.04 Mean 228.94 4.43 C.V(%) 52.47 78.52 C.G.R(%) 16.58 32.24

Source: Annual Reports, 1998 To 2007

The investment in large companies ranges between Rs.111.23 to 504.09 crores with a mean of Rs.228.94 and a coefficient of variation 52.47 % during the period of study. The investment on an average annually had a growth at 16.58 per cent. The investment in medium and small companies ranges between Rs.0.61 to 12.04 crores with a mean of Rs.4.43 and a coefficient of variation 78.52 % during the period of study. The investment on an average annually had a growth at 32.24 %. Table 13: Summary Statistics of Secured Loan Companies Large Medium & Small Min. Val 1545.49 39.50 Max.Val 2130.04 68.59 Mean 1912.21 55.77 C.V(%) 9.89 18.30 C.G.R(%) 0.41 6.39

Source: Annual Reports, 1998 To 2007

The secured loan in large companies ranges between Rs.1545.49 to 2130.49 crores with a mean of Rs.1912.21 crores and a coefficient of variation 9.89 % during the period of study. The secured loan on an average annually had a growth at 0.41 %. The secured loan in medium and small companies ranges between Rs.39.50 to 68.59 crores with a mean

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of Rs.55.77 crores and a coefficient of variation 18.30 % during the period of study. The secured loan on an average annually had a growth at 6.39 %. Table 14: Summary Statistics of Reserve Fund Companies Large Medium & Small Min. Val 84.70 -1.49 Max.Val 2557.67 38.89 Mean 847.02 15.84 C.V (%) 91.08 90.48 C.G.R (%) 12.95 *

Source: Annual Reports, 1998 To 2007

The reserve fund in large companies ranges between Rs.84.70 to 2557.67 with a mean of Rs.847.02 and a coefficient of variation 91.08 % during the period of study. The reserve fund on an average annually had a growth at 12.95 per cent. The reserve fund in medium and small companies ranges between Rs.-1.49 to 38.89 crores with a mean of Rs.15.84 crores and a coefficient of variation 90.48 % during the period of study. Table 15: Summary Statistics of Share Capital Companies Large Medium & Small Min. Val 453.15 10.15 Max.Val 617.82 14.66 Mean 540.38 12.42 C.V (%) 9.47 11.35 C.G.R (%) 2.64 3.71

Source: Annual Reports, , 1998 To 2007

The share capital in large companies ranges between Rs.453.15 to 617.82 crores with a mean of 540.38 and a coefficient of variation 9.47 % during the period of study. The share capital on an average annually had a growth at 2.64 %. The share capital in medium and small companies ranges between Rs.10.15 to 14.66 crores with a mean of Rs.12.42 crores and a coefficient of variation 11.35 % during the period of study. The share capital on an average annually had a growth at 3.17 %.

ANALYSIS OF FINANCIAL PARAMETERS: 1998 TO 2007

To study the pattern of trend of the financial parameters during the study period, the polynomial trend equation namely, cubic trend equation of the form, Y= bo + b1 ti + b2 t i2 + b3 t i3 has been employed. Where, bi (i=1,2 & 3) are trend coefficients and bo = constant, ti = ith year (i=1,2,.,10) and ti, t i2 and t i3 are the linear, square and cubes of the time periods considered. The F-values indicate the overall significance of the trend equation fitted. The R2 the coefficient of determination indicates to what extent the trend coefficients are able to explain the variations of the dependent variables under study. Table 16: Trends Results of Networth COMPANY Large R2 D.F. 6 6 F Val 66* 287* Trend Coefficients b1 b2 -91.43 -49.62 18.48 -6.14

.971 Medium & small .993 * Significant at 1% level

b0 1471.12 24.33

b3 7.75 .46

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The above cubic trend equation forecasts positive trends in networth in the future years in large companies whereas it forecasts negative trends in medium & small companies in the future years. Table 17: Trend Results of Sales R2 .973 .984 Trend Coefficients b0 2189.95 124.72 b1 -436.51 -17.34 b2 99.90 .89 b3 -1.48 .20

COMPANY Large Medium & small

D. F 6 6

F Val 72* 120**

** Significant at 1% level

The above cubic trend equation forecasts positive trends in sales in the future years both in large companies as well as in medium & small companies in the future years. Table 18: Trend Results of Net Profit COMPANY Large Medium & Small R2 .881 .933 D. F 6 6 F Val 14.8 27.98 Trend Coefficients b1 b2 -531.71 110.46 -3.29 -.13

b0 507.61 3.77

b3 -5.38 .07

** Significant at 1% level

The above cubic trend equation forecasts negative trends in net profit in the future years both in large companies as well as in medium and small companies. Table 19: Trends Results of Fixed Assets COMPANY Large Medium & small R2 .967 .880 D. F 6 6 F Val 58.6 14.6 Trend Coefficients b1 b2 1489.56 479.92 88.52 b0 24.65 6.01 -.87

b3 6.16 .06

** Significant at 1% level

The above cubic trend equation forecasts positive trends in fixed assets in the future years both in large companies as well as in medium and small companies. Table 20: Trend Results of Administrative Expenses COMPANY R2 D. F 6 6 F Val 86 20.9 Trend Coefficients b1 b2 -26.03 6.73 -1.23 .21

Large .977 Medium & .913 small ** Significant at 1% level

b0 159.66 5.79

b3 -.25 -.007

The above cubic trend equation forecasts positive trends in administrative expenses in the future years both in large companies as well as in medium and small companies.

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Table 21: Trend Results of Labour Cost COMPANY Large R2 D. F 6 6 F Val 20.5 99 Trend Coefficients b1 b2 29.32 -.47 .49 -.17

.911 Medium & .980 small ** Significant at 1% level

b0 191.96 3.68

b3 .04 .014

The above cubic trend equation forecasts positive trends in labour costs in the future years both in large companies as well as in medium and small companies. Table 22: Trend Results of Power and Fuel R2 .998 Trend Coefficients b0 183.38 5.68 b1 12.16 1.42 b2 -.31 -.29 b3 .30 .02

COMPANY Large

D. F 6 6

F Val 1048 46

Medium & .958 small ** Significant at 1% level

The above cubic trend equation forecasts positive trends in power & fuel in the future years both in large companies as well as in medium and small companies. Table 23: Trend Results of Raw Material COMPANY Large R2 .987 D. F 6 F Val 153 Trend Coefficients b1 b2 -193.44 38.28

b0 900.99

b3 -.03

Medium & .987 6 147 95.21 -18.81 1.83 .09 small ** Significant at 1% level The above cubic trend equation forecasts positive trends in raw material in the future years both in large companies as well as in medium & small companies . Table 24: Trend Results of Operating Expenses COMPANY R2 D. F F Val Trend Coefficients b1 b2 -195.97 48.12

b3 Large .994 6 350 .24 Medium & .979 6 92 123.76 -20.45 2.62 .036 small ** Significant at 1% level The above cubic trend equation forecasts positive trends in operative expenses in the future years both in large companies as well as in medium and small companies. Table 25: Trend Results of Operating Profit COMPANY R2 D. F F Val 17 62 Trend Coefficients b0 b1 760.86 -452.82 10.48 -.41

b0 1744.21

Large .896 6 Medium & .969 6 small ** Significant at 1% level

b2 94.22 -.80

b3 -3.85 .11

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The above cubic trend equation forecasts positive trends in administrative expenses in the future years both in large companies. Table 26: Trend Results of Investment COMPANY R2 D. F F Val 61 19 Trend Coefficients b1 b2 50.66 -10.55 4.77 -.98

Large .969 6 Medium & .905 6 small ** Significant at 1% level

b0 65.08 -4.15

b3 .96 .065

The above cubic trend equation forecasts positive trends in investment in the future years both in large companies as well as in medium and small companies. Table 27: Trend Results of Secured Loan COMPANY Large R2 D. F. 6 6 F Val 2.84 ns 160 Trend Coefficients b1 b2 626.24 5.11 -122.93 -.11

b0 1092.92 33.57

b3 6.97 -.006

.58 7 Medium & small .98 8 ** Significant at 1% level

The above cubic trend equation forecasts positive trends in secured loan in the future years both in large companies as well as in medium and small companies. Table 28: Trend Results of Reserve Fund COMPANY R2 D. F 6 6 F Val 58 236 Trend Coefficients b1 b2 -148.71 -39.29 17.17 -5.97

Large .967 Medium & .992 small ** Significant at 1% level

b0 1065.22 15.42

b3 6.98 .45

The above cubic trend equation forecasts positive trends in administrative expenses in the future years, in large companies. Table 29: Trend Results of Share Capital Trend Coefficients R D . F F Val b0 b1 b2 .823 6 9.29 370.69 93.27 -16.72
2

b3 Large .99 Medium & .942 6 32.4 8.90 1.30 -.17 .01 small ** Significant at 1% level The above cubic trend equation forecasts positive trends in administrative expenses in the future years both in large companies as well as in medium and small companies.

COMPANY

REGRESSION ANALYSIS
Step wise Multiple regression analysis of X3/X10 was performed with variables X1-NW, X2- Sales, X3-NP, X4 FA , X5 -AE, X6 -LC, X7- P & F, X8-RM, X9-OE, X10- OP, X11-INV, X12-SL, X13-RF and X14-SC, the following regression model is fitted for performance :

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X3 = bo + b1X1 + b2 X2 +b3 X3 + . and the results are presented in the following table.

LARGE COMPANIES
Regression Results of Net Profit (X3) of Large Companies The multiple regression model indicated that out of the 13 explanatory variables, 2 variables namely, X11 and X4 have significantly contributing to X3. The analysis of variance of multiple regression model for X3 indicates the overall significance of the model fitted. The coefficient of determination R2 value showed that these variables put together explained the variations of X3 to the extent of 99.2 per cent. Table 30: Linear Regression Results of Large Companies- Dependent Variable: Net Profit (X3) Variables Constant X11-INV X4-FA *- :Significant at 5 % Regression Standard Coefficient Error 194.472 158.806 .661 .024 -.245 .080 ** : significant at 1% level t- value (d.f = 6) 27.312** -3.077* R2 .992

Table: 31: Analysis of Variance for Regression Source DF SS Regression 2 1641855 Residual 7 132300 **- Significant at 1 % level Regression Results of Operating Profit (X10) of Large Companies MS 820927 1900 F 432**

The multiple regression models indicated that out of the 13 explanatory variables, 3 variables namely, X3, X2 and X9 have significantly contributing to X10. The analysis of variance of multiple regression models for X10 indicates the overall significance of the model fitted. The coefficient of determination R2 value showed that these variables put together explained the variations of x10 to the extent of 99.8 %. Table 32: Linear Regression Results of Large Companies- Dependent Variable: Operating Profit (X10) Rgression Standard t- value Coefficient Error (d.f = 6) Constant 59.879 50.959 X3-NP .577 .127 4.561** X2-SAL .539 .122 4.434** X9-OE -.450 .137 -3.276 *- :Significant at 5 % ** : significant at 1% level Table: 33: Analysis of Variance for Regression Variables Source DF Regression 3 Residual 6 **- Significant at 1 % level SS 3492676 5846 MS 1164225 974 F 1195** R2 .998

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MEDIUM AND SMALL COMPANIES

Regression Results of Net Profit(X3) of Medium and Small Companies The multiple regression models indicated that out of the 13 explanatory variables, 2 variables namely, X11 and X4 have significantly contributing to X3. The analysis of variance of multiple regression models for X3-NP indicates the overall significance of the model fitted. The coefficient of determination R2 value showed that these variables put together explained the variations of Y to the extent of 99.7 %. Table 34: Linear Regression Results of Medium and Small Companies- Dependent Variable- Net Profit(X3) Rgression Coefficient -8.531 .947 -.477 Standard Error .355 .029 .101 32.57** -4.741** t- value (d.f = 7)

Variables Constant X11-OP X4-FA *- :Significant at 5 %

R2 .997

** : significant at 1% level

Table 35: Analysis of Variance for Regression Source DF SS Regression 2 934.99 Residual 7 3.143 **- Significant at 1 % level MS 467.495 .449 F 1041**

Regression Results of Operating Profit (X10) of Medium and Small Companies The multiple regression models indicated that out of the 13 explanatory variables, 2 variables namely, X3 and X11 have significantly contributing to X10. The analysis of variance of multiple regression models for Y indicates the overall significance of the model fitted. The coefficient of determination R2 value showed that these variables put together explained the variations of Y to the extent of 99.7 %.

Table 36: Linear Regression Results of Medium and Small Companies- Dependent Variable Operating Profit (X10) Variables Constant X3-NP X11-INV *- : Significant at 5 % Rgression Coefficient 8.944 1.049 Standard Error .466 .032 32.57** 5.49** t- value (d.f = 7) R2 .997

.517 .094 **: significant at 1% level

Table 37: Analysis of Variance for Regression Source Regression Residual DF 2 7 SS 1303.658 3.478 MS 651.829 .497 F 1311**

**-Significant at 1 % level

A Study on Financial Efficiency of Steel Industry in India

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FINDINGS
The financial ratio analysis on the trends in the various types of expenditure indicated the higher cost of production. This is said to depress the profitability of the steel industry. Hence, attempt can be made to reduce the cost production. Wastage in expenditure can be identified to increase the profitability. The trend in the share of steel output of India to total global output during the study period is almost constant, indicating the poor growth in relative output. Hence, in the competitive environment, it is necessary to increase the level of output of the economy. The pricing pattern of steel industry indicated that due to poor efficiency of the factors of production, the average cost of production is estimated to be high which results in poor competitive price. Hence, for a competitive pricing, increasing the efficiency of the factors of production is necessary. Since there is a greater demand for the steel produce at the global level, increasing the level of output and the productivity is essential. This can be done through increasing the level of investment in steel industry particularly, the small scale units. Government can extend financial help liberally, extend the required inputs at subsidized or affordable price, and provide tax exemptions and tax holidays for the new or infant industries. These measures would go a long way in increasing the efficiency of the steel industry

CONCLUSIONS
Industries play a pivotal role in the growth of any economy. This is more so in the case of developing countries like India where there is a cry and need for faster economic growth. This realization has made the planners and policy makers to take various measures to improve the industrial base of the economy. Among the various industries that gained importance in the Indian context, the iron and steel industry is one. This is one of the traditional industries in India. Since 1991, the introduction of new economic reforms, the steel industry of India has gained momentum. India is probably the seventh country in the world in the production of steel. However, the severe competition faced in the international market has posed a threat to the growth of the steel industry. Also an exanimation of the financial viability of the industry becomes essential to understand the strength the steel industry in the given competitive situation. The present research was devoted towards this end.

REFERENCES
1. Beaver, W.H. Financial Ratios as Prediction of Failure Empirical Research in AccountingSelected Studies, Journal of Accounting Research, Vol.4, Pp. 71-77, 1966. 2. Edward I. Altman, Financial Ratios, Discriminant Analysis and Prediction of Corporate Bankruptcy, Journal of Finance, Vol. 23, Pp. 589-609 Sept., 1968. 3. V.E Ramamurthy, Working Capital Management. Institute of Financial Management and Research. Madras, 1978. 4. Bhabatosh Banerjee, Corporate Liquidity and Profitability in India. Research Bulletin, Institute of Cost and Works Accountants of India, July 1982, Pp. 224-234. 5. Vijay Kumar.A and Venkatachalam.A, Responsiveness of Working Capital Management A Case Study of Tamil Nadu Sugar Corporation, Financial India, Vol.X(3), Sept 1995, Pp. 647-655.

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10. Mazumder, S. Mitra and T.Ghshal (2003), Strategies for Sustainable Turnaround of Indian Steel Industry, Institution of Engineers (India) Journal, Metallurgy and Material Science, Vol.84, October 2003, Pp. 64-78. 11. Elbaum, Bernard, A Long, Contingent Path of Comparative Advantage: Industrial Policy and the Japanese Iron and Steel Industry, 1900-1973, Department of Economics, University of California, November, 2006.