Title: Relationship OF JSW STEEL with Nifty 50 and to calculate Beta.
Author: Jugnum Parimal
Introduction: JSW Steel Limited is a leading integrated steel manufacturer in India and part of the JSW Group, one of the country’s largest business conglomerates. Established in 1982, JSW Steel has grown to become a major player in the global steel industry. The company is known for its commitment to innovation, quality, and sustainability in steel production. Over the years, it has undergone significant growth and expansion.
Objective: To calculate Beta of JSW STEEL and see its significance.
Literature Review:
- Kumar et.al.,(2008) states that JSW Steel Limited is an integrated steel plant with a 3.8 mtpa capacity, utilizing both Corex and blast furnace (BF) ironmaking technologies. Corex, a smelting reduction process, uses non-coking coal, while BF is a conventional counter-current ironmaking process. The comparison highlights the unique advantages of each technology, and the synergistic combination of Corex and BF at JSW maximizes solid waste utilization, reducing hot metal production costs. This approach offers operational flexibility, cost-effectiveness, and efficient raw material usage.
- Sahoo and P. K. (2012), states that JSW Steel’s acquisition of Ispat Industries in 2010 aimed to turn around the financially troubled company within two years and make it a major player in the Indian steel industry. However, by mid-2012, JSW Ispat Ltd’s performance was disappointing. The acquisition faced challenges such as the Bellary Illegal Mining Case, gas supply issues from Reliance KG D6 Basin, and the inability to service a significant debt burden. Strategies included debt restructuring, capital expenditure plans, and improving raw material sourcing. Despite these efforts, Ispat continued to incur losses, raising questions about the effectiveness of JSW’s strategies. The paper analyzes the reasons behind the failure of the JSW Steel-Ispat deal, considering factors like debt restructuring, raw material supply challenges, and external issues affecting the steel industry. Despite initial optimism, the acquisition faced unforeseen obstacles, impacting JSW’s expected turnaround of Ispat Industries.
Data Collection:
The data for Nifty and Equity of JSW STEEL has been downloaded from http://nseindia.com/ and http://yahoofinance.com/ from 1st November, 2022 to 31st October, 2023. Data was manipulated to calculate the Friday closing price.
Data analysis: JSW steel shares 0.221+ 0.100 nifty
n=48, Rsquare=0.010, F=0.492
The above equation shows the relationship of JSW steel with Nifty.
If the nifty rises by 1 unit, JSW steel will rise by 0.100 units.
t-stat for b is 0.701 and the p value is 0.486 which is more than 0.05. So, b=0, meaning Nifty does not impact JSW steel shares
Rsquare is 0.010, meaning 1% of JSW steel explained by Nifty meaning 99% of JSW steel depends upon other things like fundamentals.
F= 0.492 & p value is greater than 0.05, So the model is not statistically significant at 5% level.
Conclusion:
As beta is (0.100) is less than 1, So good for long term investment.
References:
- Kumar, P. P., Gupta, P. K., & Ranjan, M. (2008). Operating experiences with corex and blast furnace at JSW steel ltd. Ironmaking & Steelmaking, 35(4), 260-263. Retrieved from https://www.proquest.com/scholarly-journals/operating-experiences-with-corex-blast-furnace-at/docview/236443082/se-2
2. Sahoo, P. K. (2012). Strategy failure: Post acquisition performance of JSW steel – ispat deal. Kushagra International Management Review, 2(2), 109-116. Retrieved from https://www.proquest.com/scholarly-journals/strategy-failure-post-acquisition-performance-jsw/docview/1436876589/se-2
