TATA STEEL

CRITICAL ANALYSIS OF ORGANIZATION

BY
SAKSHI AGARWAL
PGDM 2014-2016

Report
On
CRITICAL ANALYSIS OF ORGANIZATION
For
TATA STEEL
Submitted By:SAKSHI AGARWAL
Term-3rd

Roll No. 42
Calcutta Business School (Batch 2014-2016)

Submitted In partial fulfillment of requirement of

PGDM program at Calcutta Business School (CBS)

Under Supervision of
Mrs. Bidisha Mukherjee
Calcutta Business School (CBS)
Date: 24th April 2015

ACKNOWLEDGEMENT

I take this opportunity to express my profound gratitude and deep regards to our Principle (Prof.
Dr. Tamal Dutta Chaudhuri) and teacher (Mrs.Bidisha Mukherjee) for his exemplary guidance,
monitoring and constant encouragement throughout the course of this thesis I also want to thank
our librarian, Mr. Atanu Ganguly. The blessing, help and guidance given by him time to time
shall carry me a long way in the journey of life on which I am about to embark.

INDEX
S.N
O
1.

TOPICS
INTRODUCTION

2.

VISION

3.

MISION

4.

HISTORY

5.

SHAREHOLDINGS

6.

ACQUISITIONS

7.

AWARDS AND RECOGNTIONS

8.

PRODUCTS

9.

STEP ANALYSIS

10.
11.

MAJOR PLAYERS IN STEEL

INDUSTRY
BCG MATRIX

12.

MAPPING ACTIVITY SYSTEM

13.

SWOT ANALYSIS

14.

MICHAEL PORTERS 5 FORCES

MODEL

15.

KAPLANS BALANCED SCORECARD

16.

TATA STEEL GLOBALLY

17.

LONG STRATEGIC PLAN

18.

RATIO ANALYSIS

18.1

LIQUIDITY RATIOS

18.2

LEVERAGE RATIOS

18.3

ACTIVITY RATIOS

18.4

PROFITABILITY RATIOS

19

CONCLUSION

20

BIBLIOGRAPHY

1. INTRODUCTION
Tata Steel Limited (formerly Tata Iron and Steel Company Limited (TISCO)) is
an Indian multinational steel-making company headquartered in Mumbai, Maharashtra, India,
and a subsidiary of the Tata Group. It was the 11th largest steel producing company in the
world in 2013, with an annual crude steel capacity of 25.3 million tonnes, and the second largest
private-sector steel company in India (measured by domestic production) with an annual capacity
of 9.7 million tonnes after SAIL. Tata Steel has manufacturing operations in 26 countries,
including Australia, China, India, the Netherlands, Singapore, Thailand and the United Kingdom,
and employs around 80,500 people. Its largest plant is located in Jamshedpur, Jharkhand. In 2007
Tata Steel acquired the UK-based steel maker Corus which was the largest international
acquisition by an Indian company till that date. It was ranked 486th in the 2014 Fortune Global
500 ranking of the world's biggest corporations.[5] It was the seventh most valuable Indian brand
of 2013 as per Brand Finance. On 16 February 2012 Tata Steel completed 100 years of steel
making in India.

2. VISION
To be the global steel industry benchmark for Value Creation and Corporate Citizenship

3. MISSION

Sustainable Growth
Differential value creation
Enhance employees' competencies
Continuous improvement of business processes
Being responsible corporate citizen

4. HISTORY

1907: Tata Steel was established by Indian Parsi businessman Jamsetji Tata

1935: Production of high-tensile steel commenced.

1961: Industrial license is obtained by Tata Steel for an Alloy-Steel project 1963: The
government approves in principle expansion by One-Million tons during the 4th Plan.

1965: The Steel Ministry agrees to expansion to 4-Million Ingot tons with a Strip Mill.

1974: Amalgamation with West Bokaro Limited for coal mine operations.

1979: Five-year Rural Development programme for upliftment of the villagers near
Jamshedpur taken up.

1981: In 1981, Ratan was named Chairman of Tata Industries; the Group's other holding
company.

1985: Merger with the Indian tube company

1986: Started export cell

2000: Company was recognized as the world's lowest-cost producer of steel.

2005: The company was also recognized as the world's best steel producer by World Steel
Dynamics.

2007: Won their bid for Corus .The joining of the two will create the fifth largest steel
company in the world.

5. SHAREHOLDINGS
As on 31 March 2013, Tata Group held 31.35% shares in Tata Steel. Over 1 million individual
shareholders hold approx. 21% of its shares. Life Insurance Corporation of India is the largest
non-promoter shareholder in the company with 14.88% shareholding.

Shareholders

Promoters: Tata Group companies

Shareholding

31.35%

Insurance Companies

21.81%

Individual shareholders

22.03%

Foreign Institutional Investors

15.35%

GDRs

02.41%

Others

07.05%

Total

100.0%

The equity shares of Tata Steel are listed on the Bombay Stock Exchange, where it is a
constituent of the BSE SENSEX index, and the National Stock Exchange of India,where it is a
constituent of the S&P CNX Nifty.
Its Global Depository Receipts (GDRs) are listed on the London Stock Exchange and
the Luxembourg Stock Exchange.

6. ACQUISITIONS

NatSteel in 2004: In August 2004, Tata Steel agreed to acquire the steelmaking
operations of the Singapore based NatSteel for $486.4 million in cash. NatSteel had
ended 2003 with turnover of $1.4 billion and a profit before tax of $47 million. The steel
businesses of NatSteel would be run by the company through a wholly owned subsidiary
called Natsteel Asia Pte Ltd. The acquisition was completed in February 2005. At the
time of acquisition, NatSteel had a capacity of about 2 million tonnes per annum of
finished steel.

Millennium Steel in 2005: Tata Steel acquired a majority stake in the Thailand-based
steelmaker Millennium Steel for a total cost of $130 million. It paid US$73 million to
Siam Cement for a 40% stake and offered to pay 1.13 baht per share for another 25% of
the shares of other shareholders. For the year 2004, Millennium Steel had revenues of
US$406 million and a profit after tax of US$29 million. At the time of acquisition,
Millennium Steel was the largest steel company in Thailand with a capacity of 1.7 million
metric tonnes per annum, producing long products for construction and engineering steel
for auto industries. Millennium Steel has now been renamed to Tata Steel Thailand and is
headquartered in Bangkok. On 31 March 2013, it held approx. 68% shares in the acquired
company.

Corus in 2007: On 20 October 2006, Tata Steel signed a deal with Anglo-Dutch
company, Corus to buy 100% stake at 4.3bn ($8.1 billion) at 455 pence per share. On 19
November 2006, the Brazilian steel company Companhia Siderrgica Nacional(CSN)
launched a counter offer for Corus at 475 pence per share, valuing it at 4.5 billion. On
11 December 2006, Tata preemptively upped its offer to 500 pence per share, which was
within hours trumped by CSN's offer of 515 pence per share, valuing the deal at 4.9
billion. The Corus board promptly recommended both the revised offers to its
shareholders. On 31 January 2007, Tata Steel won their bid for Corus after offering 608
pence per share, valuing Corus at 6.7 billion ($12 billion).
In 2005, Corus employed around 47,300 people worldwide, including 24,000 in the
UK.At the time of acquisition, Corus was four times larger than Tata Steel, in terms of
annual steel production. Corus was the world's 9th largest producer of Steel, whereas Tata
Steel was at 56th position. The acquisition made Tata Steel world's 5th largest producer
of Steel.

2 Rolling mill companies in Vietnam in 2007: Tata Steel through its wholly owned
Singapore subsidiary, NatSteel Asia Pte Ltd, acquired controlling stake in two rolling mill
companies located in Vietnam: Structure Steel Engineering Pte Ltd (100% stake) and
Vinausteel Ltd (70% stake). The enterprise value for the acquisition was $41 million.
With this acquisition, Tata Steel got hold of two rolling mills, a 250k tonnes per year
bar/wire rod mill operated by SSE Steel Ltd and a 180k tonnes per year reinforcing bar
mill operated by Vinausteel Ltd.

7. AWARDS AND RECOGNITIONS

In the year 2013, Tata Steel was ranked India's 7th most admired company by Fortune
magazine. It was India's most admired company in 2012.

In 2013, Tata Steel received the Most Admired Knowledge Enterprises (MAKE) award
for 2012 at Global and Asian level. The company has previously been recognised by the
Indian MAKE awards on six accounts since its inception in 2005.

In 2013, Tata Steel was listed as one of the "World's most ethical companies" by
the Ethisphere Institute

It won the 'Golden Peacock' award in 2009 for its corporate social responsibility (CSR)
initiative.

In 1996, the Tata Bearings division was awarded the "Best of all" Rajiv Gandhi National
Quality Award.

In 2008, Tata Steel was awarded Deming Application Prize for excellence in Total
Quality Management.

In 2012, Tata Steel became the first integrated steel company in the world to be awarded
the Deming Grand Prize.

The company is part of the composite Dow Jones Sustainability World Index (DJSI
World) since 2008. DJSI World comprises leaders in sustainability (the top 10% in terms of
performance), selected on the basis of long-term economic, environmental and social criteria,
from the largest 2500 companies in the world.

Tata Steel was ranked 110th among India's most trusted brands according to the Brand
Trust Report 2012, a study conducted by Trust Research Advisory. In the Brand Trust
Report 2013, Tata Steel was ranked 364th among India's most trusted brands while according
to the Brand Trust Report 2014, Tata Steel was ranked 264th among India's most trusted
brands. It was among 16 of Tata Groups subsidiary brands to feature in the report apart from
the parent brand. Ratan Tata also featured in the report among India's most trusted
'Personality' brands

8. PRODUCTS

TATA SHAKTEE- Tata Shaktee is the premium brand of Galvanised Corrugated (GC)
Sheet from Tata Steel Ltd. Tata Shaktee G C Sheets is available in a wide range of
thickness, width and lengths to suit every requirement.
TATA TISCON-the new generation high strength ribbed reinforcement bar, is a product
from Tata Steel. It is different from traditional bars in its method of manufacture and
consequently, in its combination of properties.
TATA STEELIUM-Tata Steelium is the first branded cold rolled (CR) product of Tata
Steel. Apart from providing a certain level of quality, it assures you of the genuineness of
the product. It is ideally suited for the manufacture of furniture; panels etc.Tata Steelium
conveys "both strength and the feel of being an international class brand".
TATA WIRON-Binding / black wires and hot dipped galvanized wire are manufactured
in Tata Steels Wire Division the largest manufacturer of wire in India and one of the
largest in Asia, are the most superior quality products in its segment.
TATA AGRICO-Tata Agrico is the oldest brand of Tata Steel. Since 1923, superior
quality agricultural implements are manufactured from Tata High Carbon Steel at Tata
Agrico, which happens to be pioneer in this segment in the country.

9. INDIAN STEEL INDUSTRY-STEP ANALYSIS

Social Factors:

Rehabilitation of people in mining areas.

Impact on economy and climate change.

Technological Factors:

Popularity of Steel Portals.

Application of SML (Steel Markup Language).

Economic Factors:

GDP Growth Rate.

Reduction in Customs Duty.

Political Factors:

10.

Recommendations on Captive Mines.

Mining Scams. Eg: Goa

MAJOR PLAYERS N STEEL INDUSTRY

Main Producers (SAIL plants, Tata Steel and Vizag Steel/RINL),

Major Producers (Essar Steel, Jindal Steel & Power and Ispat Industries)
Other Producers
Total production value :

11.

BCG MATRIX

STAR:
The Ferro alloys and minerals division in TATA in the TATA STEEL LTD would fall into the
category of stars of the BCG Matrix. The production in this division is 1.302millions tones and
the overall sales has exceeded to 1.508 million tones. Infrastructural investment in Asia resulted
in improvement in the demand for stainless steel. Chrome Alloys exports (including charge
chrome from TATA Steel KZN PTE LTD) touched an all-time high and the division recorded its
highest ever global market share of 6% inFY10. The first oversees hub of TSL was established in
South Korea. In India our Ferroalloys and minerals division is the market leader in Ferro
Chrome Business with a market share of around 27%. Manganese Alloys sales recorded an alltime high in the financial year 2009-2010 and TATA Steel attained the status of being the
largest producer of Manganese Alloys in India.

CASH COW:
The steel division of the company falls into the category of cash cow of the BCG Matrix. The
production is 6.439 million tones but the overall sales are 6.170 million tones. Despite sales
being lower than the production in the FY 10. The overall sales grew by18% over last year
(5.232 million tons in the FY09).

QUESTION MARK:
The bearing division and the tubes division fall into the category of question mark in the BCG
Matrix. They are growing rapidly but have low market product share. They have the potential to
gain market share and become a star. It can also become cash cow when the market growth
slows.
DOG:
None of the divisions of the TATA Steel can be classified into dogs. All of them have good
market share and good market growth.

12.

MAPPING ACTIVITY SYSTEM

ACTIVELY RESPONDED TO

NETWORK OF
WORLD CLASS
WAREHOUSES

EXPANDED
DISTRIBUTION
NETWORKS

CHANGING DEMANDS

QUALITY PRODUCTS
AND BRANDS

EFFICIENT SUPPLY
CHAIN AND
LOGISTICS

STRENGHTENE
D EXISTING
PRODUCTS

BEST IN CLASS
FACILITIES

WON SEVERAL
AWARD S

DELIIVERY OF
SUPERIOR
QUALITY
PRODUCTS

RESEARCH AND
INNOVATION

DEVELOPMENT
OF NEW HIGH
TECH STEEL
GRADE

EFFICIENT MINING
ACTIVITES
MODERN
TECHNOLOGIES

REDUCE
BLASTING
COSTS

ADOPTATION OF
BEST PRACTICES
LEADING TO
SOCIAL
DEVELOPMENT

13.

SWOT ANALYSIS

Strengths

Mineral Reserves-Tata Steel has two collieries in West Bokaro and Jharia, in the state of
Jharkhand. The iron ore units are located in Noamundi, Joda andKatamandi in the states
of Jharkhand and Orissa. Tata Steel Limited also has manganese mines and dolomite
quarries in Orissa. These mines are located at an approximate distance of 150 kms
from Jamshedpur, home to the steel companys manufacturing facility. The Steel
Company's iron ore units produce 9 million tons per annum of various grades of
high quality iron ore including rich blue dust ore. The company in India is having mines
of 281 million tones reserves in its mines in Jharkhand and thus having minerals to cater
its needs for more than 20 years. The company has also been acquiring stake overseas in
Canada, Mozambique, Australiaet to boast its reserves for clean coking coal which is
rarely available in India.
Management Team-Tata Steel has a highly credible management team who has
displayed their skills in expanding the company through inorganic route. The company
has successfully acquired Nat Steel of Indonesia, Millennium Steel of Thailand and more
importantly Corus. The companys virtuosos of finance have been able to find innovative
ways to tackle the companys bulgeoning debt and keep the bottom line in the green zone
despite lowering demand and huge debts accumulated.
Information Technology-The entire mining operation of the Company is safeguarded
against accident occurrence. Proactive measures are undertaken to ensure the employee's
health and productivity through ergonomically designed work stations and by protecting
them from occupational hazards. All its mines are ISO-14001 -Environmental
Management System Certified. Tata Steel's collieries use 'Surpac', a state-of-the-art mine
planning software that estimates the volume of coal in every seam. This software is
coupled with qualitative detailing that focuses on output consistency. To maximize
productivity and utilization, a voice and data equipped Global Positioning System is used,
which helps to supervise mining activity for machine movement and engine status.
Innovativeness of TATA Steel with respect to its competitors-Tata Steel has the lowest
operating cost for steel manufacture in the world.
Weakness

Huge debt burden- Tata Steel is having a total debt of 10.2 billion USD in its books. It has
a debt equity ratio 0f 1.6 which means that the assets of the company is largely financed
through debt. With the inflation on a rise the central banks of most all the countries are
intending to tighten in the liquidity in the money markets. As a result of which the
interest rates are on a rise. Thus it would add to the interest burden of the company which
would further increase the liabilities of the company and thus degrade the quality of its
balance sheet.
High attrition rate-Tata Steel has traditionally faced the brunt of high attrition rate. In its
Jamshedpur plant many engineers constantly change their jobs to SAIL in Bokaro and

vice-versa. Thus the formation of a core team of capable individuals across all
departments is very difficult as the size of the team is ever changing.
Products in the portfolio lacking demand-The Companys certain products in its portfolio
like aerospace steel which lacked demand in the recent past. Primarily due to
the slowdown of the aviation sector which led to delay in the delivery of aircrafts as a
result of cutting of capacity by airlines. The company also had certain Cast products
largely marketing in the UK which has been witnessing slowdown in demand since 2001.
Hence the company had to close down its Tee Side plant.
Degradation in brand value owing to job losses-TATA group has made its name security of
it employees. But the shutdown of its plants in the UK and The Netherlands will dent its
image to a certain extent. As a result of which around 1600 employees would lose their
daily livelihood.
Opportunities

Competitive position of the company-Tata Steel is the second largest producer of steel in
India and the sixth largest producer in the world.
Newer technologies
Opportunities in the field-India have geared up for rapid expansion in the field
of infrastructure. The Government of India (GoI) has earmarked Rs.1, 70,000 crore for
infrastructural spending for the fiscal year 2010- 2011 and the trend is set to escalate up
to the fiscal year 2025 when India is slated to become the third largest economy in the
world.
Acquisition opportunities -In the aftermath of the financial tsunami various mineral
assets are available globally at a price which is just a shade of their prime valuations. The
government of various countries has been putting up coal blocks under the hammer. Tata
Steel has been very active in the asset acquisition space and has bagged various coal
blocks in Asia, Africaet which is essential for its security of raw materials.

Threats

Resources to cushion the from business environmental change-Tata Steel is a company floated
by Tata Sons whose assets are valued at around 108 billion USD and thus the company
has enough reserves to cushion itself from market fluctuations.
International competition-Companies like the Indian Steel magnate Lakshmi Mittals
Arcelor Mittal, Posco has landed in the shores of India and have proposed to set up 8 MT
and 12 MT respectively. These are amongst the largest steel producers in the world and
have a high chance of eating into the market share of Tata Steel. Indian market is also
plagued with cheaper Chinese made steel which is ubiquitously available and is
significantly munching through the pie of all Indian steel makers including Tata Steel.
Financial Crises -Tata Steel is having a huge debt of 10.2 billion USD in its books and
hence a huge interest burden. With the volatility of the financial markets and the

tightening of the liquidity by the central banks this rate is slated to go up and
hence would further increase the interest burden of the company.
Adoptability of the company to technological changes Tata Steel has shown immense
integration abilities in the past. With the acquisition of it has been able to imbibe the high
end technological knowledge to its production facilities and hence has been able to
produce high quality steel at least prices and significantly bettered its operating margins.

14.

Michael Porters Five Forces Model

Buyers Power (low)

Increasing Demand for Steel.

Low customer preference.

Suppliers Power (high)

High Raw Material Prices.

Lack of Transportation.

Fragmented Coke Suppliers.

Competitive Rivalry (very high)

Competition from Foreign Players.

Spurt in Merger and Acquisition Activities.

Threat of New Entrants (moderate)

High Cost of Basic Inputs and Services.

Industry is Capital Intensive.

Threat of Substitutes (moderate)

Use of Aluminium, Plastic, Carbon Fibre

15.

Kaplans Balanced Scorecard

Financial

Turnover at 1,34,712 crores by 2013

EBITDA is at 12,654 crores by 2013

PAT is at -7058 crores by 2013.

India leads in geographical distribution of revenue at 29% and in capital

employed by geographies by 46% for Tata Steel.

Customer

Diversified customer base.

Automotive, Construction, Engineering, Consumer goods industries etc are major

customers.

Internal business processes

Kar Vijay Har Shikhar ,a Continuous improvement programme, a well-defined

six step process involving TQM and statistical tools for improving quality.

Some of the key themes through which process improvements are taken up are
Throughput, Value-in-use, Energy Efficiency, Opportunistic Plays, Logistics &
Supply Chain

Adoption of National Voluntary Guidelines to enforce transparency , ethics and

care for the community.

Learning and Growth

16.

Presence of four research centers supporting cutting edge R&D in steel.

Tata Steel Group Process Improvement Teams deployment for continuous

process improvements.

Growth of the company as a whole has been affected by weak global economy in
2013.

Tata Steel Globally

17.

Long Term Strategic Plan

18. RATIO ANALYSIS

18.1 LIQUIDITY RATIOS
18.1.1 CURRENT RATIO

The ratio between all current assets and all current liabilities; another way of expressing
liquidity. It is a measure of the firms short-term solvency. It indicates the availability of current
assets in rupees for every one rupee of current liability. A ratio of greater than one means that the
firm has more current assets than current claims against them.
Current Assets
Current ratio = ----------------------------------------Current Liabilities

S.NO

YEAR

CURRENT
ASSETS(CRORES
)

CURRENT
LIABILITIES(CRORES
)

RATIO

2014-2013

7,739.78

19,957.78

0.57

2013-2012

8,272.97

17,098.06

0.86

2012-2011

9,710.06

15,958.34

0.93

2011-2010

8,516.56

12,037.59

1.53

2010-2009

4,012.88

8,699.34

1.12

RATIO
RATIO
2010-2009

13.45

2011-2010

14.68

2012-2011
2013-2012
2014-2013

INTERPRETATION:

12.72
9.17
10.48

The standard norm for current ratio is 2:1.During the year 2009-2010 is 1.12 and it has increased
to 1.53 during the year 2010-2011 and then decreased to 0.83 in the year 2011-2012.In the 2014
the ratio is 0.57 which is the lowest in the last 5 years. The current ratio is decreasing which is
not good.

18.1.2 QUICK RATIO

Quick ratio establishes a relationship between quick, or liquid, assets and current liabilities. An
asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of
value.
Current Assets Inventories
Quick Ratio = _______________
Current liabilities

S.NO

YEAR

RATIO

2014-2013

0.32

2013-2012

0.61

2012-2011

0.69

2011-2010

1.31

2010-2009

0.76

RATIO
RATIO
2010-2009

13.45

2011-2010

14.68

2012-2011

12.72

2013-2012

9.17

2014-2013

10.48

INTERPRETATION:
The standard norm for current ratio is 1:1.During the year 2009-2010 is 0.76 and it has increased
to 1.31 during the year 2010-2011 and then decreased to 0.69 in the year 2011-2012.In the 2014
the ratio is 0.32 which is the lowest in the last 5 years. The current ratio is decreasing which is
not good.

18.2 LEVERAGE RATIOS

18.2.1 Debt Ratio
If the firm may be Interested in knowing the proportion of the interest bearing debt
in the capital structure.
Total Debt
Debt ratio = ----------------------------------------Total Debt + Net Worth
S.NO

YEAR

TOTAL

TOTAL

RATIO

DEBT(CRORES
)

DEBT+NET
WORTH(CRORES)

2014-2013

26,126.78

87274.77

0.30

2013-2012

25,911.51

81121.19

0.32

2012-2011

23,693.82

76315.18

0.31

2011-2010

26,148.18

73092.81

0.36

2010-2009

25,239.20

62407.95

0.41

RATIO
RATIO
2010-2009

13.45

2011-2010

14.68

2012-2011
2013-2012
2014-2013

12.72
9.17
10.48

INTERPRETATION:
This ratio results relating to the capital structure of a firm. Debt ratio is 0.41 in the year 20092010 and is also stable in the next five years. This shows that the companys dependence on debt
is stable.

18.2.2 Debt equity ratio

Debt equity ratio indicates the relationship describing the lenders contribution for each
rupee of the owners contribution is called debt- equity ratio. Debt equity ratio is computed by
dividing Long term Liabilities divided by Equity. Lower debt equity ratio higher the degree of
protection. A debt-equity ratio of 2:1 is considered ideal.

LONG TERM LIABILITIES

Debt equity ratio = ----------------------------------------EQUITY

S.NO

YEAR

TOTAL
DEBT(CRORES
)

2014-2013

26,126.78

61,147.99

0.43

2013-2012

25,911.51

55,209.68

0.47

2012-2011

23,693.82

52,621.36

0.45

2011-2010

26,148.18

46,944.63

0.56

2010-2009

25,239.20

37,168.75

0.68

NET
WORTH(CRORES)

RATIO

RATIO
RATIO
2010-2009

0.68

2011-2010
2012-2011
2013-2012
2014-2013

0.56
0.45
0.47
0.43

INTERPRETATION:
This ratio results relating to the capital structure of a firm. Debt ratio is 0.68 in the year 20092010 and 0.56 and 0.45 in the next two years. In the year 2014 the debt equity ratuio is 0.43.The
debt equity ratio is decreasing his shows that the companys dependence on debt is decreasing.

18.2.3 INTEREST COVERAGE RATIO

The ratio shows the number of times the interest charges are covered by funds that are ordinarily
available for their payment.
EBIT
Interest coverage ratio = ----------------------------------------INTEREST
S.NO

YEAR

EBIT(CRORES
)

INTEREST(CRORES
)

RATIO

2014-2013

11675.84

1820.58

6.41

2013-2012

10387.90

1876.77

5.53

2012-2011

11271.76

1925.42

5.85

2011-2010

10864.46

1735.70

6.26

2010-2009

8154.00

1848.19

4.41

RATIO
RATIO
2010-2009

13.45

2011-2010

14.68

2012-2011
2013-2012
2014-2013

12.72
9.17
10.48

INTERPRETATION:
Interest coverage ratio is 4.41 in the year 2009-2010 and increased to 6.26 in the year 2010-2011
and then decreased to 5.85 in the year 2012. In the year 2014 the interest coverage ratio is 6.41
which is the highest in the five years. This shows that outside investors are investing their
money in the company.

18.3 ACTIVITY RATIOS

18.3.1 INVENTORY TURNOVER RATIO
It indicates the firm efficiency of the firm in producing and selling its product. It is calculated
by dividing the cost of goods sold by the average inventory.
COST OF GOOD SOLD
Inventory turnover ratio = ----------------------------------------AVERAGE INVENTORY
Cost of goods sold = Raw materials consumed +payments &benefits to employees +mfr, selling
&admin expenses +duties & taxes

S.NO

YEAR

RATIO

2014-2013

2013-2012

7.27

2012-2011

6.98

2011-2010

7.44

2010-2009

10.90

6.94

RATIO
RATIO
2010-2009

13.45

2011-2010

14.68

2012-2011
2013-2012
2014-2013

12.72
9.17
10.48

INTERPRETATION:
Inventory turnover ratio is 10.9 times in the year 2009-2010.In the year 2010-2011 it has
decreased to 7.44 times and more decreased to 6.98 times in the year 2011-2012.It has increased
to 7.27 times in the year 2012-2013 and again decreases to 6.94 times in the year 2014.Inventory
turnover ratio is fluctuating.

18.3.2 DEBTORS TURNOVER RATIO

It is found out by dividing the credit sales by average debtors. Debtors turnover indicates the
number of times debtors turnover each year.
SALES
Inventory turnover ratio = ----------------------------------------AVERAGE DEBTORS
S.NO

YEAR

RATIO

2014-2013

53.21

2013-2012

44.91

2012-2011

51.10

2011-2010

68.46

2010-2009

46.58

RATIO
RATIO
2010-2009

13.45

2011-2010

14.68

2012-2011
2013-2012
2014-2013

12.72
9.17
10.48

INTERPRETATION:
Debtors turnover ratio is 46.58 times in the year 2009-2010.In the year 2010-2011 it has
increased to 688.46 times and decreased to 51.1 times in the year 2011-2012.It has decreased to
44.91 times in the year 2012-2013 and again increases to 553.21 times in the year 2014.Debtors
turnover ratio is fluctuating.

18.3.3 TOTAL ASSET TURNOVER RATIO

This ratio ensures whether the capital employed has been effectively used or not.This is also test
of managerial efficiency and business performance.
SALES
Total asset turnover ratio = ----------------------------------------CAPITAL EMPLOYED
S.NO

YEAR

RATIO

2014-2013

0.48

2013-2012

0.47

2012-2011

0.45

2011-2010

0.40

2010-2009

0.40

RATIO
RATIO
2010-2009

13.45

2011-2010

14.68

2012-2011
2013-2012
2014-2013

12.72
9.17
10.48

INTERPRETATION:
Total asst turnover ratio is 0.4 in the year 2009-2010.In the year 2013-2014 it has reached to
0.48.Asset turnover ratio has been increasing.

18.3.4 FIXED ASSET TURNOVER RATIO

The ratio is supposed to measure the efficiency with which fixed assets are employed a high ratio
indicates a high degree of efficiency in asset utilization and a low ratio reflects inefficient use of
assets.However, in interpreting this ratio, one caution should be borne in mind. When the fixed
assets of the firm are old and substantially depreciated, the fixed assets turnover ratio tends to be
high because the denominator of the ratio is very low.
NET SALES
Fixed asset turnover ratio = ----------------------------------------NET FIXED ASSET
S.NO

YEAR

RATIO

2014-2013

1.07

2013-2012

1.01

2012-2011

1.48

2011-2010

1.32

2010-2009

1.12

RATIO
RATIO
2010-2009

13.45

2011-2010

14.68

2012-2011

12.72

2013-2012

9.17

2014-2013

10.48

INTERPRETATION:
Fixed asset turnover ratio is 1.12 in the year 2009-2010.It increased in the next two years to 1.32
and 1.48. In the year 2013-2014 it has decreasd to 1.07.

18.4 PROFITABILITY RATIOS

18.4.1 GROSS PROFIT RATIO
This ratio shows that the margin left after meeting manufacturing costs. It measures the
efficiency of production as well as pricing.
Gross profit= Net sales-Cost of goods sold
Cost of goods sold= Opening stock+ material consumed+ mfg .exp- closing stock
GROSS PROFIT
Gross profit ratio = ----------------------------------------- X 100
NET SALES

S.NO

YEAR

RATIO

2014-2013

26.10

2013-2012

24.83

2012-2011

30.60

2011-2010

35.16

2010-2009

31.36

RATIO
RATIO
2010-2009

13.45

2011-2010

14.68

2012-2011
2013-2012
2014-2013

12.72
9.17
10.48

INTERPRETATION:
From the above we can say that the gross profit ratio in 2010-2009 is 31.36% and in 2011 it has
increased to 35.16% and 30.6% in 2012. In 2014 it is 26.1.We can say that the company is
maintaining proper control on its trade activities.

18.4.2 NET PROFIT RATIO

The net profit percentage is the ratio of after-tax profits to net sales. It reveals the remaining
profit after all costs of production, administration, and financing have been deducted from sales,
and income taxes recognized.

NET PROFIT
Gross profit ratio = ----------------------------------------- X 100

NET SALES

S.NO

YEAR

RATIO

2014-2013

15.08

2013-2012

12.94

2012-2011

19.23

2011-2010

22.94

2010-2009

19.96

RATIO
RATIO
2010-2009

13.45

2011-2010

14.68

2012-2011
2013-2012
2014-2013

12.72
9.17
10.48

INTERPRETATION:
From the above we can say that the gross profit ratio in 2010-2009 is 19.96% and in 2011 it has
increased to 22.94% and 19.23% in 2012. In 2014 it is 15.08%

18.4.3 OPERATING EXPENSES RATIO

The Operating expenses ratio explains the changes in the profit margin ratio. A higher operating
expense is unfavorable since it will leave a small amount of operating income to meet interest,
dividends.
OPERATING EXPENSES
Operating expenses ratio = ----------------------------------------- X 100
NET SALES

S.NO

YEAR

RATIO

2014-2013

30.72

2013-2012

29.12

2012-2011

33.99

2011-2010

39.06

2010-2009

35.70

RATIO
RATIO
2010-2009

13.45

2011-2010

14.68

2012-2011
2013-2012
2014-2013

INTERPRETATION:

12.72
9.17
10.48

The operating expense ratio is 35.7% sales of the sales in the year 2010-2009 and then increased
to 39.06% of sales a d subsequently decreased to 29.12% and 30.72% in the last two years.

18.4.4 RETURN ON INVESTMENT

The conventional approach of calculated ROI is to divide PAT by investment
EBIT
Operating expenses ratio = ----------------------------------------CAPITAL EMPLOYED

S.NO

YEAR

RATIO

2014-2013

13.37

2013-2012

12.80

2012-2011

14.77

2011-2010

14.86

2010-2009

13.06

RATIO
RATIO
2010-2009

13.45

2011-2010

14.68

2012-2011
2013-2012
2014-2013

12.72
9.17
10.48

INTERPRETATION:
Return on Investment is very low in all years. But, in the year 2010-2011, it reached to
14.86 due to less earnings.

18.4.5 RETURN ON NET WORTH

The return on net worth explains about the return of shareholders with they
get on their investment.
NET PROFIT
Operating expenses ratio = ----------------------------------------NET WORTH

S.NO

YEAR

RATIO

2014-2013

10.48

2013-2012

9.17

2012-2011

12.72

2011-2010

14.68

2010-2009

13.45

RATIO
RATIO
2010-2009

13.45

2011-2010

14.68

2012-2011
2013-2012
2014-2013

INTERPRETATION:

12.72
9.17
10.48

Return on net worth ratio is 13.4 in the year 2010-2009 and then increased to 14.68 and
subsequently decreased 9.17 and 10.48 in the last two years.

19. CONCLUSION

After conducting an in depth study of Tata steel, we find that the company has many
strengths and opportunities which it may capitalize on to truly become a world leader in
steel making along with setting high standards for corporate citizenship and social
responsibility towards a long term sustainable growth.
Even though SAIL has much more total share capital amount than that of Tata steel the
strength and progress of Tata steel is much healthier than later.
Increasing provisions is the only growing concern for Tata steel as it is directly affecting
NET CURRENT ASSETS and its profit margins.
Inner strength and basics of Tata steel is much more profit generating than that of others.

20. BIBLIOGRAPHY

http://www.moneycontrol.com/financials/tatasteel/ratios/TIS
http://www.tatasteel.com/
http://en.wikipedia.org/wiki/Tata_Steel