ESSAR STEEL LTD

Essar Steel is a global producer of steel with a footprint in India, Canada, USA, the Middle East and AsiaWe are a fully integrated flat carbon steel manufacturer from iron ore to ready-tomarket products with a current capacity of 14 million tonnes per annum (MTPA). Our products find wide acceptance in highly discerning consumer sectors, such as automotive, white goods, construction, engineering and shipbuilding. Essar Steel is one of India's largest exporters of flat products, exporting to the highly demanding US and European markets, and to the growing markets of South East Asia and the Middle East. A number of major client companies have approved our steel for their use, including Caterpillar, Hyundai, Swaraj Mazda, the Konkan Railway, and Maruti Suzuki. Essar Steel has acquired extensive quality accreditations. Our lean team gives us one of the highest productivities and lowest manpower costs among steel plants internationally Type Founded Headquarters Key people Public 1998 Mumbai Mr.Ravi Ruia, Chairman Naresh Nayyar, CEO Revenue Parent Subsidiaries 35,000 crore (US$6.98 billion) Essar Group Essar Steel Algoma, Essar Hypermart, Essar Steel Minnesota LLC Website www.essar.com

Essar Steel Balance Sheet Mar '11 12 mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities 2,257.33 2,213.73 33.53 43.60

------------------- in Rs. Cr. ------------------Mar '10 Mar '09 Mar '08 Mar07 12 mths 1,184.08 1,140.48 0.00 43.60 12 mths 1,184.08 1,140.48 0.00 43.60 12 mths 1,387.00 1,140.48 0.00 246.52 12 mths 2,785.29 581.17 0.00 2,204.12

6,838.70 3,554.28 3,447.25 3,080.95 1,246.18 0.00 0.00 0.00 0.00 0.00 9,129.56 4,738.36 4,631.33 4,467.95 4,031.47 16,596.35 6,317.62 5,383.11 6,533.32 7,355.20 1,590.89 993.77 733.47 409.92 650.46 18,187.24 7,311.39 6,116.58 6,943.24 8,005.66 27,316.80 12,049.75 10,747.91 11,411.19 12,037.13 Mar '10 Mar '09 Mar '08 Mar '07 Mar '06 12 mths 12 mths 12 mths 12 mths 12 mths

Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets

16,329.22 15,367.85 14,688.87 13,554.19 10,447.54 7,045.54 6,239.03 5,414.98 4,664.60 4,049.09 9,283.68 14,492.20 492.79 2,633.23 471.24 1,771.25 4,875.72 3,094.80 0.00 7,970.52 0.00 4,488.39 434.00 4,922.39 3,048.13 9,128.82 549.61 791.31 2,157.52 411.63 17.90 2,587.05 2,387.92 490.26 5,465.23 0.00 3,709.68 175.54 3,885.22 1,580.01 9,273.89 575.12 515.22 2,108.11 360.40 103.46 2,571.97 1,961.42 296.03 4,829.42 0.00 4,309.42 136.32 4,445.74 383.68 8,889.59 1,107.78 433.43 2,328.77 546.85 43.23 2,918.85 2,284.18 389.63 5,592.66 0.00 4,576.71 35.56 4,612.27 980.39 6,398.45 2,887.36 182.97 1,485.34 540.16 15.01 2,040.51 2,478.49 710.78 5,229.78 0.00 2,652.36 9.07 2,661.43 2,568.35

Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)

0.00

0.00

0.00

0.00

0.00

27,316.80 12,049.75 10,747.91 11,411.19 12,037.13 6,045.40 40.90 2,784.46 41.19 3,541.40 40.25 3,511.85 37.04 4,335.42 31.48

Analysis o In the balance see we can see the financial stability of the company and in the Essar steel ltd it saw that the secured loan is more than unsecure loan so risk is law for debt and financial stability increase. o In the balance sheet net current assets it means that working capital more than the positive era it saw that debt payment stability and inventory positive fluctuation. o Capital working process increase year to year so it saw visibility of the compny and better effective management of the compmy.

Essar Steel Cash Flow

------------------- in Rs. Cr. ------------------Mar Mar Mar Mar Mar '11 '10 '09 '08 '07 12 mths 12 mths 831.38 2401.48 -611.36 1823.49 -33.37 432.86 399.49 12 mths 683.46 2010.09 1423.02 -880.00 -292.93 725.79 432.86 12 mths 12 mths

Net Profit Before Tax Net Cash From Operating Activities Net Cash (used in)/from Investing Activities Net Cash (used in)/from Financing Activities Net (decrease)/increase In Cash and Cash Equivalents Opening Cash & Cash Equivalents Closing Cash & Cash Equivalents

300.81 1775.10 1286.26 -380.17 108.67 399.49 508.16

695.98 794.10 1150.36 1550.30 3665.97 2872.80 357.19 368.60 725.79 -551.66 -841.12 157.52 95.63 253.15

Essar Steel Key Financial Ratios Mar '11 Investment Valuation Ratios 10.00 Face Value -Dividend Per Share 22.04 Operating Profit Per Share (Rs) 102.80 Net Operating Profit Per Share (Rs) 29.29 Free Reserves Per Share (Rs) 0.34 Bonus in Equity Capital Profitability Ratios 21.44 Operating Profit Margin(%) 14.22 Profit Before Interest And Tax Margin(%) 14.37 Gross Profit Margin(%) 14.06 Cash Profit Margin(%) 14.06 Adjusted Cash Margin(%) 1.56 Net Profit Margin(%) 1.56 Adjusted Net Profit Margin(%) 15.01 Return On Capital Employed(%) 3.94 Return On Net Worth(%) 17.82 Adjusted Return on Net Worth(%) 41.19 Return on Assets Excluding Revaluations 41.19 Return on Assets Including Revaluations 18.48 Return on Long Term Funds(%) Liquidity And Solvency Ratios 0.71 Current Ratio 0.62 Quick Ratio 1.57 Debt Equity Ratio 1.08 Long Term Debt Equity Ratio Debt Coverage Ratios 3.17 Interest Cover 1.57 Total Debt to Owners Fund 3.06 Financial Charges Coverage Mar '10 Mar '09 Mar '08 Mar '07

10.00 -20.71 94.43 28.35 0.34 21.93 14.75 14.81 10.44 10.44 3.96 3.96 15.21 9.09 7.64 40.25 40.25 17.87

10.00 -17.57 70.95 26.78 0.34 24.75 16.82 17.82 13.10 12.78 5.35 5.04 12.54 9.77 9.73 37.04 37.04 14.23

10.00 -25.75 106.27 20.99 0.68 24.23 16.31 19.28 16.30 14.94 8.54 7.17 8.73 13.15 24.38 3.61 3.61 10.37

10.00 -38.42 120.21 6.57 0.78 31.96 25.49 24.52 16.13 19.27 9.67 12.81 23.81 34.22 65.43 7.11 7.11 26.28

0.67 0.41 1.34 0.99

0.77 0.45 1.70 1.38

0.85 0.90 5.59 4.55

1.23 0.83 4.47 3.96

2.64 1.34 2.70

2.35 1.70 2.67

3.12 5.59 3.49

3.42 4.47 3.42

Ratio 2.18 Financial Charges Coverage Ratio Post Tax Management Efficiency Ratios 8.69 Inventory Turnover Ratio 30.35 Debtors Turnover Ratio 8.69 Investments Turnover Ratio 0.76 Fixed Assets Turnover Ratio 0.98 Total Assets Turnover Ratio 0.76 Asset Turnover Ratio 37.97 Average Raw Material Holding 19.18 Average Finished Goods Held 48.54 Number of Days In Working Capital Profit & Loss Account Ratios 35.36 Material Cost Composition 3.28 Imported Composition of Raw Materials Consumed 2.48 Selling Distribution Cost Composition 25.29 Expenses as Composition of Total Sales Cash Flow Indicator Ratios -Dividend Payout Ratio Net Profit -Dividend Payout Ratio Cash Profit 100.00 Earning Retention Ratio 100.00 Cash Earning Retention Ratio 4.39 AdjustedCash Flow Times
Key ratios

2.34

2.38

3.30

2.73

8.94 23.73 8.94 0.73 1.00 0.73 40.63 17.41 12.83

3.50 14.88 5.19 0.84 0.71 0.60 74.55 26.54 43.64

4.18 12.20 6.96 0.94 0.51 0.59 153.25 16.03 149.89

6.54 14.10 11.33 1.63 0.93 0.88 83.22 15.37 113.84

36.60 11.94 1.99 29.96

44.44 17.43 4.16 38.45

37.92 32.69 3.80 28.76

34.39 28.49 4.01 35.65

0.46 0.16 99.45 99.83 5.42

--100.00 100.00 6.66

--100.00 100.00 8.63

--100.00 100.00 4.09

Mar-11
P/E (x) P/BV (x) RONW (%) ROCE (%) EV/ EVBIDTA (x) Dividend Yield (%) APATM(%) EPS 31.68 7.51 26.8 18.0 19.71 0.3 19.8 22.1

Mar-10 44.33 9.73 24.3 17.6 26.79 0.3 18.8 15.8

Mar-09 12.10 3.45 33.6 25.3 8.60 0.3 18.2 99.3

 Analysis
o Profitability Ratio o Gross profit ratio as much as growth in the Essar steel ltd it some year increase and some year decrease but the fluctuation of the decrease is high in the year 2010 o The net profit ratio also fluctuate in all the year it fluctuation high decrease in the year 2011 o Adjusted cash margin ratio is the increase in year to year so it help to fluctuation of the gross profit and net profit margin o Liquidity ratio o Current ratio saw the current assets and current liability and in the Essar ratio analysis the current ratio increase year to year and maintain slandered ratio of the 2:1 o Quick ratio saw the liquidity of the firm how easily the cash convert and payment of debt speed to payment in the quick ratio increase all the five year o Debt equity saw the proportion of the debt and equity and it law in every year so it good for the company o Management Efficiency Ratio o Inventory turnover ratio reflect the how many time the inventory covert in to cash as per the sale of inventory in every year the inventory turnover ratio is high it reflect the positive sign of the company that easily covert inventory in to cash o Total assets turnover ratio reflect that assets covert in to cash and in the essar total asstes turnover ratio fluctuate in five year some year it increase that positive and some year it decrease so negative but finally it increase in year 2011. o ROCE ratio that increase every year it saw the financial ability to earning power in the Essar it increase so it help to positive way to growth of the company o Earning per share it increase in last three so it help to positive that increase the trading of the company and increase earning power and earn the trust and wealth of the shareholder.

 Technical Analysis
The growth of the company in the last 5 years has been to the tune of 325%. The company has consolidated its sales position from 2006-07 and has further strengthened it in 20010-11. The company is striving hard and is committed to being the Market leader for steel in the coming years. With every success the company is one step closer to attaining its aim and lofty ambition to reach a higher goal, which the company collectively strives to reach in the years to come.

Shareholding Pattern
Particulars No. of % Shares(Mn) Holdings Total Promoter Holdings Total Govt Holding (Promoter + Non Promoter) Total Domestic Institutions (Banks/ FI + MF / UTI) Total Foreign Holdings (FII+NRI holdings) Total Non Promoter Corporate Holdings Total Public & Others (Individuals + HUF + Clearing members) Total 934.83 100 547.62 0.01 72.89 208.60 30.48 75.24 58.6 0.0 7.8 22.3 3.3 8.0

LTP 526.05

Change -9.85 (-1.84 %)

Open 540.00

High Low 548.85 520.25 Value 11,788.06

52 Week 52 Week Low Volume High 723.90 (06 435.90 (29 Dec) 2,240,863.00 Apr)

Analysis IIFL is optimistic on the perormance of Essar Steel as it feels that it has been investing heavily in its business in the past two years. The standalone power capacities are expected to be operational by Q1 FY13, followed by the 1.6mtpa steel plant at Angul in H2 FY13. In FY13, earnings growth for the consolidated entity is expected to be 11.3 per cent led by a jump in contribution from steels standalone power plants and superior product mix. The companys earnings would surge 54.8 per cent in FY14, led by contribution from the 1.6mtpa Angul steel plant, higher PLFs for the standalone power capacities and higher consumption of sponge iron. IIFL has used Sum-of-The-Parts (SoTP) valuation method to value the company.

Reason of the Fluctuation

o Essar steel financial performance fluctuation the share price and trading of the share is increase or decrease and low or high o Essar steel have a new project with the international market so the FII enter with partnership in market so trading and price fluctuation o Essar market position and based on the competitive market situation effect of the share fluctuation o Essar issue new schema and launch a new product in the market o Essar future growth is high based on future expectation the share fluctuation in the market

New projects Essar Steel Minnesota LLC plans to set up an integrated pelletization plant in northeast Minnesota Essar Steel Minnesota LLC Essar Steel Minnesota LLC has access to iron ore resources of over 1.4 billion tons. The company plans to set up an integrated pelletization plant on the Mesabi iron range in northeast Minnesota. The estimated cost of the project is US$1.60 billion; the plant will have an annual capacity of 4.1 million tonnes per annum (MTPA) of pellets, when completed.

Paradeep facility Our 12.0 MTPA integrated pelletization facility coming up at Paradeep is located in the iron orerich state of Orissa in India. In addition, the site is just 3 km from Paradeep port, giving us strategic advantages for importing coal and other raw materials, and exporting pellets. The Paradeep project is being implemented in two phases. The first phase comprises An 8.0 MTPA iron ore beneficiation plant at Dabuna in Orissa, close to iron ore mines A 6.0 MTPA pellet plant at Paradeep A 253 km underground slurry pipeline for transporting concentrates to the pellet plant