Monnet Ispat Performance

1. Parnamoy Dutta
Roll No. 13
PGDM (IB)
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Monnet Ispat & Energy Limited
1. About Monnet Ispat & Energy Limited:
Sector: Steel/Sponge Iron/Pig Iron.
House: Monnet.
BSE Code: 513446.
NSE Symbol: MONNETISPA.
Indices: BSE500, MIDCAP, CNX500, CNXMETAL.
Chairman/ Managing Director: Sandeep Jajodia.
Face Value: 10
Auditor: OP Bagla & Co.
2. Sector Analysis:
Overview:
o New era of development since liberalization.
o Domestic steel industry has become market oriented and integrated
with the global steel industry.
o Plays an important role in Indian economy by contributing to nearly
2% of the GDP and employs over 500.000 people.
o Backbone of sectors like, Auto Industry, Infrastructure.
o Due to the favourable government policies and robust economic
growth, Indian steel industry is presently experiencing healthy growth.
o Domestic demand and consumption appear to be excellent driven by
the high investment rate, growth in manufacturing industry and
expansion in physical infrastructure creation.
o Indian steel industry has emerged as the 4th largest steel producing
country in the world.

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o India’s low cost labour and ready availability of iron ore contribute
significantly to the cost competitiveness of producing steel in India.
o Steel industries are mainly located in the eastern region of India-
Orissa, Chhattisgarh, West Bengal, etc.
Regulatory Environment:
o National Steel Policy, 2005:
 Increase the total installed capacity to 110 million tonnes and
with production capacity of 100 million tonnes by 2019-20.
 Average growth to be maintained at 7% for achieving the goal.
 To achieve this goal and extra amount of US$65 billion is
required in addition to funds for technology up-gradation.
 Focus is on domestic sector but also envisages a faster growth
than domestic consumption which will enable export
opportunities.
o Institutional and Policy Settings:
 Allowing private ownership and foreign investments have
increased capital inflow, resulted in better quality. SAIL and
RINL (heavyweight PSU’s) have been granted ‘NAVRATNA’
status which allow them to have greater autonomy in
investments, joint venture and commercial decisions.
 Improving Intellectual Property Laws has provided greater
security in intellectual property ownership and will facilitate
transfer of intellectual property to India and the development of
indigenous technology solutions.
 Deregulation of pricing and distribution of iron and steel
resulted in proper reflection of production costs or product
quality on prices and helped in implementing efficient logistics.
 Customs Policy: The government has significantly reduced the
duty payable on inputs to steel production on capital equipment
and on finished steel product and has streamlined the associate
approval processes. The government also supports firms that
are into exporting of steel products.
 Steel plants operating in Special Economic Zones are not
subjected to restrictive normal laws for the purpose of export

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operations and also receive some additional advantages
including tax holidays, freedom to source inputs domestically
or externally without approval or duty payable.
SWOT Analysis:
Challenges faced by India Steel Sector:
o Land acquisition requires more than a nod from a centralized authority.
o Judicious allocation of abundant iron ore remains a challenge.
o Limited access to coking coal.
o Underdeveloped infrastructures, environmental & forest clearances and
availability of coal and fuel and increasing cost of dry fuel.
o The environment clearance has been another major concern for the
steel sector while setting up plants.

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3. Sector Performance:
Production for Sale trend of last five years for total finished steel:
Public/Private production trend:
Year Total Finished Steel(in million tonnes)
2006-07 52.52
2007-08 56.07
2008-09 57.16
2009-10 60.62
2010-11 68.62
Year 2006-07 2007-08 2008-09 2009-10 2010-11
Public Sector 17 17.9 16.37 16.71 16.99
Private Sector 33.81 36.77 42.07 49.13 52.67
Total 50.81 54.67 58.44 65.84 69.66

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Imports/Exports Trend:
Year Imports in million tonnes Exports in million tonnes
2006-07 4.93 5.24
2007-08 7.03 5.08
2008-09 5.84 4.44
2009-10 7.38 3.25
2010-11 6.66 3.64

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Global Ranking of Indian Steel in terms of production:
Consumption Trend:
Rank Country Production in million tonnes
1 China 683.26
2 Japan 107.59
3 US 86.25
4 India 72.2
5 Russia 68.74
6 South Korea 68.47
7 Germany 44.29
8 Ukraine 35.33
9 Brazil 35.16
10 Turkey 34.1
Year Apparent Consumption in million tonnes Percentage Growth
2006-07 46.7 30
2007-08 52.1 11.56316916
2008-09 52.3 0.383877159
2009-10 57.6 10.13384321
2010-11 65 12.84722222

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Future Outlook:
o In 2011 our per capita consumption of steel was only 57 Kgs as against
the world average of 214.7 Kgs which gives a clear picture of
enormous potential.
o The massive investment of $1 trillion has been envisaged for the 12th
Five year plan in infrastructure sector is clearly to boost the demand
and growth of the Indian steel sector.
o In the most likely growth scenario of 8.5% to 9% GDP growth, in the
next five years the demand for steel would grow at a annual average
rate of 10.3%.
o We can also expect the consolidation of small and mid-sized players in
the domestic market as they look to compete with the large global
players entering India.
o R&D must be focus area as even if buying new technology is an option
but developing its own technology is a better proposition.
o Continuance of tax sops for housing sector will also be a positive factor
for increased steel demand in the country.
o According to the Ministry of Steel, India is expected to become the
second largest producer of crude steel in the world by 2015-16.
o Domestic Demand for 12th
Five Year Plan:-

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o Demand Drivers: Infrastructure, Auto, Manufacturing have the
potential to grow in the future thereby boosting the growth of Indian
Steel sector.
4. Gist of Chairman Speech:
Company registered consistent growth steered by its diversified
and de-risked business model thereby enabling it to power growth
and empower people.
Financial Performance:
o The Company’s de-risked business model insulated it from the
challenges that prevailed in the year and helped its steady performance.
o Merchant power segment remained challenging but higher sales
realization from sponge iron improved overall profitability.
Year GDP @ 8% GDP @ 8.5% GDP @ 9% GDP @ 9.5%
2012-13 72.6 72.9 73.3 73.7
2013-14 79.2 80 80.8 81.7
2014-15 86.4 87.7 89.1 90.5
2015-16 94.3 96.3 98.3 100.3
2016-17 102.9 105.6 108.3 111.2

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o The steel business also witnessed some price volatilities in the middle
of the financial year but soon stabilized in the later part thus reporting
a healthy top-line and bottom line growth.
Operational Performance:
o Operationalized its iron ore washery plant at Raigarh and beneficiated
low grade iron ore and blended it with sized iron ore to achieve a better
cost.
o Availability of captive coal mines helps the company to produce lowest
cost power which helped it to take a rapid stride in enhancing power
generation for merchant selling.
o Coal business also saw a major development with the acquisition of
Indonesian Coal Company PT Sarwa Sembada Karya Bumi for US $24
billion. The excellent logistic of the mine along with low shipping cost
and transit time will make coal extremely cost effective.
o Further, it will also provide low-cost fuel for planned coal-based power
projects.
o Excess coal mined can be used for the selling in the open market
thereby can be a source of revenue.
CSR Activities:
o Proud sponsors of the Indian Boxing team (senior, junior, sub-junior).
o Only company to promote amateur boxing in India.
Initiatives for the future:
o Expanding coal beneficiation operation to achieve up to 50 MTPA
capacity.
o Augmenting capacities in steel through implementation of ongoing 1.5
MTPA integrated steel plant at Raigarh.
5. Reports and their meanings:
Corporate Information:
o Contains the name of board of directors, auditors, company addresses,
etc.
Managing Directors’ Message:
o Consists of the views of the managing director and his outlook about
the company to the shareholders.

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CSR Initiatives:
o In the health sector the company has set up hospital and arranged free
health check-ups for the unprivileged.
o Took initiatives to replace traditional chulhas with smoke-less stoves to
reduce the spread of diseases through contaminated air.
o Various Women empowerment programs like poultry farming, phenyl
making, etc. has been taken up.
o Schools have been set up with the view to impart education.
o Focus has also been on developing income generation skills to attain
sustainable livelihood.
o Proud sponsors of the Indian Boxing team (senior, junior, sub-junior).
Directors’ Report:
o No capacity addition to the existing facilities.
o More emphasis given on production of power and Ferro alloys which
were more profitable.
o Net sales and profit increased though the production of sponge iron,
power, steel, coal decreased as the price of merchant power increased
and prices of coal stabilized.
o Steel expansion is on schedule and power expansion is on-track after a
delay due to environment clearances.
o A new joint venture with Ecomaister Co. Ltd of Korea for a slag
handling plant (environmentally favourable and commercially
profitable) has been formed.
o The report also states the directors’ responsibility as per Section 217
(2AA) and also statutory disclosures.
o It also states about the risk management policy, internal audits, and note
on subsidiaries.
Annexure to the Directors’ Report:
o It states the measures taken for energy conservation, investments for
reduction of energy consumption, optimization of resources.
o The impact of above measures on the cost of goods has been kept under
control.

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o The company did not spend on technology absorption, innovation, and
research and developments.
Corporate Governance Report:
o States the company’s philosophy towards ethical corporate citizenship
by following healthy governance practices and discharging societal
responsibilities towards all associates, capital providers, and
stakeholders.
o Provides us with the dates of the board meetings and whether it
complied with clause 49 of the Listing Agreement.
o Presents the structure of board of directors, their remuneration, and
their attendance in board meetings.
o Information on various committees like audit committee, remuneration
committee, grievance committee etc. are also given.
o It also has data related to status of complaints, shareholding pattern,
distribution of shareholding, stock price data, dividend history, and
general share holder information.
Auditors’ Report:
o Balance Sheet: Consists of the sources of funds from shareholders and
loans and the application of these funds for business functions. For a
good firm the source and application should be same as in the case of
Monnet.
o Profit and Loss Account: Give details of the income from sales minus
the inter division transfers and excise duty, expenditure in the form of
material, manufacturing, increase/decrease of stocks, repair,
maintenance, administrative expenses, depreciation, profit before tax,
and profit after tax calculation. Rising profit gives a positive indication
about the company.
o Schedules: Detailed calculations about the entries in Balance sheet,
Profit and Loss account and the accounting policies followed for
calculating them are described in the schedules.
o Cash Flow Statements: Describes the cash flow in and out of the
business. The cash flow denotes the financial flexibility, profitability,
and company’s liquidity. Increased cash flow denotes that the firm is
financially strong and flexible.