Constructing a corporate bankruptcy prediction model for the Indian steel industry
by Selvarani Mariappan; Jebanandhini Masilamani; S. Sakthivel Rani
International Journal of Public Sector Performance Management (IJPSPM), Vol. 8, No. 3, 2021

Abstract: The steel industry is undergoing its hardest time in India. The reports of IBBI 2017-18 revealed that out of 525 cases were admitted under Insolvency and Bankruptcy Code (IBC), 45 cases were from the steel sector with the default worth of Rs. 57,001 crores and 39 corporates are in the Corporate Insolvency Resolution Process (CIRP). The steel industry in India is at present experiencing a consolidation phase and debt-ridden bankrupt companies now become attractive buys. Identifying the reasons for bankruptcy is the foremost step to revive the Indian steel industry. In this paper, the monetary condition of the Indian steel industry is analysed by taking 15 companies as a sample. Financial data from 2008 to 2017 is taken for this study. Traditional Altman's Z score and logistics regression are applied to derive the financial distress model for the steel industry. Factor analysis is applied to 44 ratios and 22 ratios were identified as relevant for the study. This study found that the financially indebted steel companies which made a substantial investment during the last three years with soaring profit and high financial cost lead to bankruptcy within a short period of time.

Online publication date: Wed, 03-Nov-2021

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