Data Envelopment Analysis to Compare & Analyze the Efficiency of Top 5 Steel Companies in India

Abstract

The growth of Indian Steel Industry has a direct effect on the growth of the Indian economy by means of contribution to infrastructure development. Thus it becomes important to examine and compare the competency of various companies in this sector, and find ways to improve their efficiency. Performing Data Envelopment Analysis (DEA) on the Indian steel industry achieves this goal by considering the companies as different decision making units (DMUs). The data collected is for the top 5 publicly listed companies in the Indian steel industry for five years from FY 2015 to FY 2019. The input variables for DEA analysis are the cost of material consumed, manufacturing expenses, and personal expenses, whereas the output variables are net sales and earnings before taxes. The DEA method is carried out by implementing CCR-O method and considering constant returns to scale. The study finds that 3 out of the 5 companies selected are efficient in their production. For the other 2 companies, it also suggests parameters to work on to improve their efficiency. This is achieved by showing the projections to reach efficient working levels and studying the slack levels.