Corporate Hero – Tata Steel

Submitted By:
Group 6
Ajay Patel (004/1)
Ankit Goel (006/1)
Dibyanshu Agrawal (019/1)
Suhas Harnia (044/1)
 Introduction
The growth of a company is invariably determined not just by its strategy, but on how it
responds to the challenges it encounters. Over the decades, Tata Steel has successfully
countered several challenges that have come its way with innovative responses and
continuous improvement which have enabled it to remain stable and even convert some of
these challenges into opportunities. It is this culture of endurance that has accorded Tata Steel
the insight and focus to deal with the current economic environment. Drawing from its inner
strength and beliefs, Tata Steel responded by launching several initiatives across all its
operations in various geographies that are helping the Group achieve sustainable growth
even in the current times. It is also this very culture that will propel Tata Steel to
continue on its growth trajectory in the years to come.

Tata Steel, formerly known as TISCO and Tata Iron and Steel Company Limited, is the world's
sixth largest steel company, with an annual crude steel capacity of 31 million tons. It is the
second largest private sector steel company in India in terms of domestic production. Ranked
315th on Fortune Global 500, it is based in Jamshedpur, Jharkhand, India. It is part of Tata
Group of companies. Tata Steel is also India's second-largest and second-most profitable
company in private sector with consolidated revenues of Rs 1,32,110 crore and net profit of
over Rs 12,350 crore during the year ended March 31, 2008.

Tata Steel Limited, incorporated in 1907 by Shri Dorabji Tata, is India's largest private sector
steel company belonging to the Tata Group. The company manufactures finished steel, both
long and flat products like hot and cold rolled coils and sheets, galvanized sheets, tubes, wire
rods, construction re-bars rings and bearings. The company is among the lowest cost producers
of steel in the world. Its main plant is located in Jamshedpur, Jharkhand, with its recent
acquisitions; the company has become a multinational with balanced global presence in
over 50 developed European and fast growing Asian markets, with manufacturing units in
26 countries operations in various countries. The Jamshedpur plant contains the DCS supplied
by Honeywell. The registered office of Tata Steel is in Mumbai. The company was also
recognized as the world's best steel producer by World Steel Dynamics in 2005. The company is
listed on Bombay Stock Exchange and National Stock Exchange of India, and employs
about 82,700 people.

Tata Steel`s Jamshedpur (India) Works has a crude steel production capacity of 6.8 MTPA which
is slated to increase to 10 MTPA by 2010. The Company also has proposed three Greenfield
steel projects in the states of Jharkhand, Orissa and Chhattisgarh in India with additional
capacity of 23 MTPA and a Greenfield project in Vietnam. Through investments in Corus,
Millennium Steel (renamed Tata Steel Thailand) and NatSteel Holdings, Singapore, Tata
Steel has created a manufacturing and marketing network in Europe, South East Asia and the
pacific-rim countries. Tata Steel, through its joint venture with Tata BlueScope Steel Limited,
has also entered the steel building and construction applications market. The iron ore mines
and collieries in India give the Company a distinct advantage in raw material sourcing. Tata
Steel is also striving towards raw materials security through joint ventures in Thailand,
Australia, Mozambique, Ivory Coast (West Africa) and Oman.
Tata Steel has signed an agreement with Steel Authority of India Limited to establish a
50:50 joint venture company for coal mining in India. Also, Tata Steel has bought 19.9%
stake in New Millennium Capital Corporation, Canada for iron ore mining.

On 2nd April, 2007, the Company completed the acquisition of Corus Group plc, Steel
Company headquartered at UK for an Enterprise Value of USD 14.7 billion. Post the acquisition
of Corus, Tata Steel Group is now the world’s 6th largest steel company with current steel
deliveries of 32 million tons. Set up as Asia’s first integrated steel plant and India’s largest
integrated private sector steel company, a century ago, it is now the world’s second most
geographically diversified steel producer, with operations in 24 countries and commercial
presence in over 50 countries. The Jamshedpur operations in India is increasing its
capacity from 5 mtpa to 10 mtpa by end 2010 and the Company has also signed MoUs
to set up four greenfield steel projects in the states of Jharkhand, Orissa and Chhattisgarh in
India and one in Vietnam.

The Tata Group:

Before we discuss at the length the company, we would lie to throw some light on the Tata
group of companies in present day India.

139 Years Old Strong Brand Equity

Group Revenues US$ 28.8 billion

Total Sales 3.2% of India GDP

International Income 38% of Group Revenue

India’s largest employer

in the Private Sector. Over 289,500 employees
 History
The Swadeshi Movement encouraged Jamsetji Tata to set up Asia’s first ever privately-owned
integrated iron and steel plant. His interest in iron making was triggered in 1882 when he
came across an official report on the Chanda district which identified large deposits of high-
quality iron ore but also noted a lack of suitable coal in the region. His idea of endowing
his country with its own iron and steel industry gained support within the government and
in 1907, when the Swadeshi Movement was at its height, the Tata Iron and Steel Company Ltd.
was incorporated.

The Tatas raised the finance to build the steel plant within India – a significant milestone in
Indian economic history. They proved a point to the then British government that an Indian
company had the vision and the wherewithal to build an industry from the ground up and had
the know-how to apply international standards to meet local needs. The setting up of the Tata
Iron and Steel Company Ltd. gave Indian industry a voice paving the way for many a future
enterprise.

Below is a chronological list of major business decisions in the history of Tata Steel Ltd.

The Beginning: The Tata Iron and Steel Company Limited was formed at Mumbai. In 1911 the
Blast Furnace Begun Operation. The first blast furnace or the ‘A’ Blast furnace went into
operation successfully. The following year first ingot of steel rolled out of the Sachi plant amidst
much rejoicing. The Bar Mills commenced rolling in the month of October, same year. In 1917,
1, 50,000 equity shares were issued at par and 26,250 deferred shares were issued at a
premium of Rs.370 per share. The city of Jamshedpur was rechristened Tatanagar. Lord
Chelmsford visited India to rename Sachi as Jamshedpur and Kalimati railway station as
Tatanagar.

1973 to 1985: With effect from 1st April 1973, the wholly owned subsidiary, West Bokaro Ltd.,
was amalgamated with the company. Three years later Tata steel was amalgamated with West
Bokaro Limited for coal Mine Operation. In 1983 during the year Indian Tube Company Limited
was amalgamated with the company. As a measure of diversification, the Company agreed to
purchase the bearings manufacturing plant of Metal Box India, Ltd. at Kharagpur as a going
concern with effect from 1st October.
During the same year, the company acquired the Barings Unit of the Metal Box Company of
India Limited and is today a leading manufacturer of Ball and Tapered Roller Bearings with an
annual installed capacity of over 5 million bearings. In 1985 with effect from 1st October, Indian
Tube Co. Ltd was amalgamated with TISCO.

1987-1997: On 2nd March 1987, 300,000 tonne capacity bar and rod mill costing about Rs.78
crore was commissioned under the second phase of modernization. On 11th August, approvals
were received for investment of Rs.16 crore in the Capital of Tata Timken Ltd., a company
promoted by Tata Steel in Collaboration with Timken Co. USA, for the manufacture of bearings
for the automotive industry, industrial machinery and for the Indian Railways.
In 1988- During the period the company, installed a new sinter plant with a capacity of 1.3
million tonne per annum, a new coke over battery with stamp charging facilities, a raw material
bedding a blending yard, a high speed bar and rod mill with a capacity of 3, 00,000 tonne per
annum and facilities to augment captive power generation by 60 MW. During the year 1993,
the company privately placed with UTI, LIC, Army Group Insurance Fund and GIC and its
subsidiaries 17.5% non-convertible debentures worth Rs.185 crore. These debentures are
redeemable at a premium of 5% at the end of 7 years from the date of allotment of the
debentures. On 19 Apr 1993- Mr. Ratan Tata took over as Chairman from J.R.D.Tata.

1999 to 2004: The year 1999 saw the dotcom boom at its peak and e-commerce was the new
buzzword doing the rounds was the time when Dr JJ Irani, managing director, Tata Steel and
Arvind Pandey, chairman, SAIL, had a spate of offers to join domestic and international e-
commerce platforms for the steel industry. During 2000 Tata Steel, the flagship company of the
Tata group had entered into an understanding with Tata International to export 30 per cent of
the production at the steel major's new 1.2 million tonne cold rolling in Jamshedpur. Tata Steel
tied up with the POSCO-Hyundai steel processing venture located in Chennai for getting its cold
rolled coils processed.

Tata Steel launched its latest branded steel product -- Tata Tiscon – specialty construction grade
steel which would be available in the retail market. By 2001 Tata SSL had become a subsidiary
of Tata Iron and Steel Company, following a successful open offer to the shareholders of TSSL.
During the period 2002-03 Tata Iron & Steel co. Ltd. entered in to a power distribution business.
Tisco had begun distributing power in Jamshedpur. On 27 April 2003- ASPIRE-the quality
journey by Tata Steel along with the one million tonne expansion project was launched. This
followed by the acquisition of The Indian Steel Wire Products Company at Jamshedpur in 2004.

Tata Steel ranked among global companies in the world’s most respected Companies’ survey-
2003 for corporate social responsibility. Tata Steel launched "Wiron", a branded galvanized
wire, aiming at a sales target of three lakh tones. Tata Steel bought Singapore's NatSteel Tata
Steel and Larsen & Toubro (L&T) signed definitive agreement to form a 50:50 joint venture for
setting up a port at Dhamra in Orissa on October 29, 2004.

2005 to present: Tata Steel signed a MoU for setting up a five million tonne per annum
Greenfield integrated steel plant at the Jagdishpur district of Chhattisgarh. Tata Iron and Steel
Company Ltd signs Joint Venture Agreements with Iranian Mines and Mining Industries
Development and Renovation organization to join them in proposed steel-making projects and
mining operations in Iran. Tata Steel signed a memorandum of understanding with Nippon Steel
Corporation of Japan for its proposed 6 million tonne per annum steel plant in Kalinganagar, in
Jajpur district of Orissa. Hooghly Met Coke and Power Co Ltd, a joint venture between Tata
Steel and West Bengal Industrial Development Corporation, has been allotted 180 acres of land
for its proposed metallurgical coke and power plant project at Haldia. Tata Steel sets up steel
retail store Steel junction.
 Tata steel Vision & Mission statement
The vision of a company provides managers with unity of direction that transcends a well-
conceived vision of an organization comprises two main components. The first component is
Core Ideology and second is Envisioned Future. Core Ideology defines “what an organization
stands for, and why they exist” that never changes and sets forth envisioned future that defines
“what an organization aspires to become to achieve to create” that demands significant change
and progress.

Vision Statement of Tata Steel

“We aspire to be the global steel industry benchmark for Value Creation and Corporate
Citizenship”. We make the difference through:

• Our people, by fostering team work, nurturing talent, enhancing leadership

capability and acting with pace, pride and passion.
• Our offer, by becoming the supplier of choice, delivering premium products and
services, and creating value with our customers.
• Our innovative approach, by developing leading edge solutions in technology,
processes and products.
• Our conduct, by providing a safe working place, respecting the environment,
caring for our communities and demonstrating high ethical standards.

Elucidation:
A Vision of an organization should reflect the concerns of other stakeholders such as
shareholders, customers, the local community and society in order to be effective. The vision
statement of Tata Steel also stresses on people concerns. The vision statement of Tata Steel is
describing that “We aspires to become the global steel industry benchmark” which gives
the view of Tata Steel`s future direction and course of business activity.
TATA Steel lays stress on their core ideology in vision statement by taking People, Suppliers and
Ethics into account. It also emphasizes on their innovative approach for cost leadership and
differentiation in their products and process.

Mission Statement:
Consistent with the vision and values of the founder Jamsetji Tata, Tata Steel strives to
strengthen India’s industrial base through the effective utilization of staff and materials. The
means envisaged to achieve this are high technology and productivity, consistent with modern
management practices. Tata Steel recognizes that while honesty and integrity are the essential
ingredients of a strong and stable enterprise, profitability provides the main spark for economic
activity. Overall, the Company seeks to scale the heights of excellence in all that it does in an
atmosphere free from fear, and thereby reaffirms its faith in democratic values.

Mission statement of Tata Steel:

• Achieve sustainable, profitable growth in steel and related businesses.
• Create differential value for our customers through innovative offerings.
 Core Values
The TATA Group has always sought to be a value – driven organization. These values continue
to direct the Group’s growth and businesses. The five core values underpinning the way TATA
does business are:
• Integrity: They believe in conducting their business fairly, with honesty and
transparency. Everything they do must stand the test of public scrutiny.
• Respect for individuals: They show care, respect, compassion and humanity for
employees and customers around the world, and always work for the benefit of the
communities they serve.
• Excellence: Constantly striving to achieve the highest possible standards in their day to
day work and in the quality of the goods and services they provide.
• Unity: They believe in working cohesively with their employees across the group
and with customers and partners around the world, building strong relationship
based on tolerance, understanding and mutual cooperation.
• Responsibility: Their endeavor to continue to be responsible, sensitive to the
countries, communities and environments in which they operate, and always ensuring
that what comes from people goes back to the people many times over.

Indian Steel Industry

Steel industry reforms – particularly in 1991 and 1992 – have led to strong and sustainable
growth in India’s steel industry. Since its independence, India has experienced steady
growth in the steel industry, successive governments that have supported the industry and
pushed for its robust development. Further illustrating this plan is the fact that a number of
steel plants were established in India, with technological assistance and investments by foreign
countries. In 1991, a substantial number of economic reforms were introduced by the Indian
government. These reforms boosted the development process of a number of industries –
the steel industry in India in particular – which has subsequently developed quite rapidly. The
1991 reforms allowed for no licenses to be required for capacity creation, except for some
locations.

India continually posts phenomenal growth records in steel production. In 1992, India
produced 14.33 million tons of finished carbon steels and 1.59 million tons of pig iron.
In 2008, India produced nearly 46.575 million tons of finished steels and 4.393 million tons of
pig iron. Powered by an increased demand for steel from neighboring China, which has been
clocking a 15 per cent sectoral growth annually on account of construction projects in
preparation for the Olympics, the steel industry in India has grown by about 10 per cent in
the past two years, compared with the global growth rate of about 6 per cent a year.

The country's production of crude steel in 2005-06 stood at 42.1 million tons, reflecting an
increase of 7.1 per cent over the previous fiscal. On the other hand, the consumption of steel
during the year was pegged at 41.43 million tons, a massive growth of 13.88 per cent
when compared with the 2004-05 figures. Currently, India is the largest sponge iron
producer in the world and ranks seventh among steel-producing countries.
 Company Strategy
With the global increase in opportunities & demand of steel, TATA steel has planned to become
2nd largest by 2012, by expanding the production. Financial prudence remains the hallmark of
any strategy that Tata Steel adopts that’s why it reduces the capital expenditure plan by 40%.
By keeping stiff control on financial risk TATA steal remain committed to its long-term strategy
and will continue to allocate capital towards its existing operations and new projects that are of
strategic importance.

In February 2008, the Tata Steel Group launched a new Vision with the aim of setting a world
benchmark in Value Creation and Corporate Citizenship. With regard to Value Creation, the
Tata Steel Group set itself a target of increasing the return on invested capital of its existing
assets to 30% by 2012-13 and to generate selective growth. In order to meet this target, the
Group has developed a two-fold strategy:
• In order to increase the quality of earnings of its existing assets, the Group will
pursue the optimisation of its European assets, restructure low profitability
assets and continue to derive benefits through continuous improvement and
synergies across the Group.
• In order to generate selective growth, the Group will pursue capacity expansions
and securing access to raw materials. The Group is increasing its capacity in
India, through expansion of its current operations in Jamshedpur and through the
construction of a greenfield site in Orissa, and assessment of raw material investment
opportunities as and when they arise.

Corporate citizenship involves providing a safe working place, respecting the

environment, caring for its communities and demonstrating high ethical standards. The Group
wants to be a part of the climate change solution and has set a target to reduce its CO2
emission from the current 2.07 tonnes of CO2 per tonne of liquid steel to 1.5 tonnes of CO2
per tonne of liquid steel by 2012 through process improvements, breakthrough
technologies and development of new products and services. More specifically, the emission
target is planned to be achieved through:
• Large investments including BOS gas recovery and back pressure valves at Port Talbot
and a new ladle furnace at IJmuiden.
• Burden optimisation, e.g. through switching to pellet feed, increased scrap ratio,
reduced slag volume and increased coal injection.
• Smaller investments and housekeeping actions e.g. yield improvements, lighting
efficiency and variable speed drives across all entities.

During the year, the Group has continued to execute its long-term strategy and the
tactical planning for development of new markets is well underway. South East Asia is one of
the key growth regions and the Group is focused on developing a greenfield expansion in
Vietnam and optimising operations in both NatSteel and Tata Steel Thailand. In the
construction sector, the Group is exploring options to develop strong positions in India and
in South East Asia through leveraging its European expertise.
 Joint Ventures, Mergers & Acquisitions
1. Corus: Europe’s second largest steel maker with operations in the UK and mainland
Europe and over 40,000 employees worldwide. It’s long and strip products cater to the
construction, automotive, packaging, and engineering and other markets worldwide.
Corus’s takeover was the one of the biggest merger in steel industry for which TATA was
paying 608 pence per share which is seven times of is original value.
2. Tinplate Company of India Limited (TCIL): With a market share of over 35%, it is the
industry leader in India.
3. Tayo Rolls Limited: India's leading roll manufacturer and supplier, the company
produces rolls which find application in integrated steel plants.
4. Tata Ryerson Limited (TRYL): TRYL Is in the business of steel processing and distribution.
5. Tata Refractories Limited (TRL): It produces High Alumina, Basic, Dolomite, Silica and
Monolithic Refractories and offers design, procurement and re-lining applications
services.
6. Tata Sponge Iron Limited (TSIL): TSIL is the first Indian sponge iron plant based on Tata
Steel's Direct Reduction Technology.
7. Tata Metaliks: Amongst the top wealth creating companies (EVA+) in the country, Tata
Metaliks is engaged in the business of manufacturing and selling foundry grade pig iron.
8. Tata Steel Thailand: The Company is the dominant steel producer in Thailand. The
company has the capacity to produce 1.7 million tons of steel for the construction
industry per year.
9. Tata Steel KZN: Proposes to set up high carbon ferrochrome plant in South Africa.

More about the TATA-CORUS Deal

• Tata acquired Corus which is 3 times larger than its size and largest Steel
producer in UK.
• The deal which creates world’s 5th largest steel maker is India’s largest foreign
takeover worth US $ 12.11 billion. Previous best being US $ 1 bn by ONGC.

“I believe this will be the first step in showing that Indian industry can step outside
the shores of India in an international market place and acquit itself as a global
player” -Ratan Tata

Reasons For The Bid:

• To tap European Mature Market.
• Cost of acquisition is lower than setting up of Green field plant & marketing and
distribution channel.
• TATA manufactures Low Value ,long and flat steel products ,while Corus
produce High Value Stripped products.
• Helped TATA to feature in Top 10 players in world.
• Technology Benefit and economic of scale.
• Corus holds number of patents and R&D facilities.
Reasons for Corus Accepting the Bid:
• To extend its Global reach through TATA.
• To get access to Indian Ore reserves, as well as virgin market for steel.
• To get access to low cost materials.
• Saturated market of Europe and decline in market share and profit.

The Deal:
• TATA Acquired CORUS on 2nd April 2007.
• The deal price was US $ 12.11 Billion.
• On 17 Oct, 2006 TATA’s bided at 455 pence per share and price per share was
390 pence at that time.
• Tata Steel, the winner of the auction for CORUS declare a bid of 608pence/share
• TATA Surpassed the final bid from Brazilian steel maker ‘Companhia Siderurgica
Nacional’ (CSN) of 603 pence per share.

Financing Of the Deal:

• Total Tata – Corus deal - US $13.7 billion
• Equity component – US $ 7.56 billion & Debt Component - US $ 6.14 billion.
• Acquisition was completed through Tata Steel’s UK Special Purpose vehicle
(SPV) named Tata Steel UK.
• This SPV raised US $ 6.14 billion through a mix of high yield mezzanine and long
term debt funding.
• For immediate financing Tata Steel UK raised US $ 2.66 bn through bridge loans.
 SWOT Analysis of Tata Steel

Strengths
1. Tata Steel’s Indian operations are self-sufficient in the case of its major raw material
iron ore through its captive mines.
2. Very advanced Research and Development wing which is carrying out researches and
experiments in the areas of raw materials, blast furnace productivity, steel making,
product development, process improvement etc. Several thrust area projects were
taken up.
3. Tata had a strong retail and distribution network in India and SE Asia. Tata was a major
supplier to the Indian auto industry and the demand for value added steel products
was growing in this market.
4. The Company is on its way to reach a crude steel capacity of 10 million tonnes per
annum by FY 2011. The first phase of reaching the crude steel capacity of 6.8 million
tonnes per annum, Brown field projects, is nearing completion.
5. Low Debt/Equity ratio in comparison to its peers is helping them.

Weaknesses
1. Endemic Deficiencies: These are inherent in the quality and availability of some of the
essential raw materials available in India, eg, high ash content of indigenous
coking coal adversely affecting the productive efficiency of iron-making and is
generally imported.
2. India is deficient in raw materials required by the steel industry. Iron ore deposits are
finite and there are problems in mining sufficient amounts of it. India's hard coal
deposits are of low quality and the prices of coking and non-coking coal are ever
increasing.
3. Raw materials for steel production are rapidly depleting and are nonrenewable;
company has to come up with sustainable methods in steel production.
4. Steel production in India is also hampered by power shortages and low labour
productivity.
5. Insufficient freight capacity and transport infrastructure impediments to hamper the
growth of Indian steel industry.

Opportunities

1. The biggest opportunity before Indian steel sector is that there is enormous
scope for increasing consumption of steel in almost all sectors in India.
2. Unexplored Rural Market: The Indian rural sector remains fairly unexposed to their
multi-faceted use of steel. The rural market was identified as a potential area of
significant steel consumption way back in the year 1976 itself. However, forceful steps
were not taken to penetrate this segment.
3. Excellent potential exist for enhancing steel consumption in other sectors such
as automobiles, packaging, engineering industries, irrigation and water supply in
 India. New steel products developed to improve performance simplify
manufacturing/installation and reliability is needed to enhance steel consumption in
these sectors.
4. It is estimated that world steel consumption will double in next 25 years. Quality
improvement of Indian steel combined with its low cost advantages will definitely help
in substantial gain in export market.
5. Corus acquisition bring in a tremendous technological advantage by access to best
practices in global steel industry

Threats

1. In the developed world, industries have been facing rising environmental costs due to
the increased concerns on Global Warming. It is, therefore, a challenge and
responsibility for the Steel industry to be the trustee in conservation of nature for
future generations.
2. It is recognised that the steel and aluminium industries are significant
contributors to man-made greenhouse gas emissions as the manufacture of steel
produces carbon dioxide (CO2), and the manufacture of primary aluminium
generates both CO2 and perfluorocarbons (PFCs).
3. High raw material input cost and scarcity of nonrenewable raw materials are a threat
to the industry.( eg: Coal, limestone etc)
4. Threat of Substitutes: Plastics and composites pose a threat to Indian steel in
one of its biggest markets automotive manufacture. For the automobile industry, the
other material at present with the potential to upstage steel is aluminium. Steel has
already been replaced in some large volume applications large diameter water
pipes (RCC pipes), small diameter pipes (PVC pipes).
 Financial Analysis of Tata Steel (Profit & Loss Account)

PnL Account Mar '02 Mar '03 Mar '04 Mar '05 Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
Income(in crore)
Sales Turnover 7,604.27 9,788.49 11,917.88 15,867.62 17,136.92 19,756.84 22,191.43 26,843.53 26,757.60
Excise Duty 899.58 1,071.95 1,218.57 1,377.92 2,004.83 2,304.18 2,537.02 2,495.21 1,816.95
Net Sales 6,704.69 8,716.54 10,699.31 14,489.70 15,132.09 17,452.66 19,654.41 24,348.32 24,940.65
Other Income 120.13 92.33 7.63 108.75 252.58 362.12 586.41 603.07 1,241.08
Stock Adjustments -11.38 15.03 64.46 289.55 104.91 82.47 38.73 289.27 -134.97
Total Income 6,813.44 8,823.90 10,771.40 14,888.00 15,489.58 17,897.25 20,279.55 25,240.66 26,046.76
Expenditure
Raw Materials 1,756.52 2,261.09 3,456.28 4,578.43 4,766.44 5,762.42 6,063.53 8,568.71 8,356.45
Power & Fuel Cost 719.18 787.75 724.62 778.3 897.57 1,027.84 1,038.77 1,222.48 1,383.44
Employee Cost 1,097.60 1,217.72 1,349.59 1,291.00 1,351.51 1,454.83 1,589.77 2,305.81 2,361.48

Other Manufacturing
Expenses 815.86 905.22 1,130.30 1,440.72 1,466.83 1,561.40 1,654.96 2,127.48 2,419.89
Selling and Admin
Expenses 752.83 963.13 273.55 259.74 255.93 244.92 247.77 400.24 417.9
Miscellaneous
Expenses 543.1 590.61 509.78 679.86 727.12 805.99 1,029.30 1,180.08 1,287.04
Preoperative Exp
Capitalised -44.05 -60.79 -155.28 -204.82 -112.62 -236.02 -175.5 -343.65 -326.11
Total Expenses 5,641.04 6,664.73 7,288.84 8,823.23 9,352.78 10,621.38 11,448.60 15,461.15 15,900.09
Operating Profit 1,052.27 2,066.84 3,474.93 5,956.02 5,884.22 6,913.75 8,244.54 9,176.44 8,905.59
PBDIT 1,172.40 2,159.17 3,482.56 6,064.77 6,136.80 7,275.87 8,830.95 9,779.51 10,146.67
Interest 403.15 342.41 230.56 228.8 168.44 251.25 929.03 1,489.50 1,848.19
PBDT 769.25 1,816.76 3,252.00 5,835.97 5,968.36 7,024.62 7,901.92 8,290.01 8,298.48
Depreciation 524.75 555.48 625.11 618.78 775.1 819.29 834.61 973.4 1,083.18
Other Written Off 0 44.38 0 0 0 0 0 0 0
Profit Before Tax 244.5 1,216.90 2,626.89 5,217.19 5,193.26 6,205.33 7,067.31 7,316.61 7,215.30

Extra-ordinary items 7.1 46.2 39.77 80.79 47.5 57.29 0 0 0

PBT (Post Extra-ord
Items) 251.6 1,263.10 2,666.66 5,297.98 5,240.76 6,262.62 7,067.31 7,316.61 7,215.30
Tax 46.7 250.79 920.44 1,823.82 1,734.38 2,040.47 2,380.28 2,114.87 2,168.50

Reported Net Profit 189.19 1,012.31 1,746.22 3,474.16 3,506.38 4,222.15 4,687.03 5,201.74 5,046.80

Total Value Addition 3,884.52 4,403.64 3,832.56 4,244.80 4,586.34 4,858.96 5,385.07 6,892.44 7,543.64

Preference Dividend 2.07 0 0 0 0 0 22.19 109.45 45.88

Equity Dividend 147.11 295.19 368.98 719.51 719.51 943.91 1,168.93 1,168.95 709.77
Corporate Dividend
Tax 0.21 37.82 47.27 101.86 100.92 160.42 202.43 214.1 122.8
Shares in issue
(lakhs) 3,677.72 3,677.72 3,677.72 5,534.73 5,534.73 5,804.73 7,305.84 7,305.92 8,872.14
Earning Per Share
(Rs) 5.09 27.53 47.48 62.77 63.35 72.74 63.85 69.7 56.37
 Profitability Analysis (in Rs.crore)

Year Operating P.B.D.I.T P.B.D.T P.B.T P.A.T

Profit
2001 1769 1773 1291 602 553
2002 1052 1172 769 251 189
2003 2066 2159 1816 1263 1012
2004 3474 3482 3252 2666 1746
2005 5956 6064 5835 5297 3474
2006 5884 6136 5968 5240 3506
2007 6913 7257 7024 6262 4222
2008 8244 8830 7901 7067 4687
2009 9176 9779 8290 7316 5201
2010 8905 10146 8298 7215 5046

Time Series - Profitability

12000
10000
8000
6000
4000
2000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Operating Profit P.B.D.I.T P.B.D.T P.B.T P.A.T

Profitability Analysis:

PAT has increased 5 fold over the last decade, but there is a slight decrease in the last year.
This is because operating cost has gone up proportionately higher than net sales over the year
2009-2010.
Full benefit of investment to increase capacity was utilized in the last decade to show
tremendous growth.
Also the liquidity ratio implies that there has been a considerable decrease in the net current
asset level depicting the risk of solvency.
 Dividend Analysis

Year Prov.for Tax/PBT Dividend Rate Dividend/PAT Retained

Profit/PAT
2006 7.49 39.98 76.84 23.16
2007 20.26 79.96 28.64 71.36
2008 36.91 99.95 23.46 76.54
2009 36.01 129.95 22.08 77.92
2010 31.32 129.95 20.48 79.57

Time Series - Dividend

140
120
100
80
60
40
20
0
2006 2007 2008 2009 2010

Prov.for Tax/PBT Dividend Rate

Dividend/PAT Retained Profit/PAT

Over the years the company has highly succeeded in satisfying the investors by increasing the
dividend payout ratio, at the same time retaining a considerable amount of profit. This is due to
the following reasons:

• Share capital has remained constant.

• Company has financed growth projects through internal accruals.
• There is substantial increase in PAT since 2006. Since dividend amount is constant or
there is a minor increase in dividend, dividend payout ratio has come down.
Profitability (as % of sales)
TATA STEEL SAIL JSW ESSAR ISPAT
P.B.D.I.T 40.11 21.98 32.81 28.27 7.53
P.B.I.T 34.99 17.68 27.01 20.46 -4.1
P.B.D.T 39 20.32 28.08 19.22 -12.53
P.B.T 33.88 16.02 22.28 11.41 -24.14
P.A.T 23.27 9.12 18.18 11.19 -24.23
 Comparative analysis - Profitability
50

40

30
TATA STEEL
20 SAIL
10 JSW

0 ESSAR

P.B.D.I.T P.B.I.T P.B.D.T P.B.T P.A.T ISPAT

-10

-20

-30

As seen from the above chart profitability of TATA STEEL is far better then others.

Dividend Analysis (%)

TATA STEEL SAIL JSW ESSAR ISPAT
Prov.tax/PBT 31.32 43.09 18.39 1.91 -0.38
Dividend Rate 129.95 20 40.67 0 0
Dividend /PAT 20.43 32.27 13.12 0 0
Retained Profit/PAT 79.57 67.73 86.88 100 100

Comparative analysis - Dividend

140
120
100
TATA STEEL
80
SAIL
60
JSW
40
ESSAR
20
ISPAT
0
-20 Prov.tax/PBT Dividend Rate Dividend /PAT Retained
Profit/PAT

The Dividend payout of TATA’s is really good. Also a substantial amount of their earnings is
retained in their business.
 Corporate Social Responsibility
The CSR initiatives of TSL are much talked about and even in this field TSL has been one of the
pioneers in setting standards. Their CSR policy is as follows:

Tata Steel believes that the primary purpose of the business is

to improve the quality of life of people. Tata Steel will volunteer
its resources to the extent it can reasonable afford, to sustain
and improve healthy and prosperous environment and to
improve the quality of life of the people of the area in which it
operates.

TSL improves the economic and social status of the community in over 800 villages in
Jharkhand, Orissa, and Chhattisgarh and affects lives of over 8 lakh people.

The Company’s CSR initiatives are broadly categorized into the following divisions:

• Health Care Initiatives

• HIV/AIDS Prevention camps
• Responding to the challenge of Global warming– Corus Climate Task Force
• Pollution Control
• Afforestation
• Energy Saving Solutions
• Literacy and Education

Some of its notable CSR initiatives are:

• The Tata Steel Rural Development Society was set up in 1979
with the objective of taking affirmative action in area
surrounding the works, mines and collieries. A Critical Care
Unit, in the 850-bed Tata Main Hospital, was inaugurated in
2002.
• Tata Steel was conferred the prestigious Global Business
Coalition Award for Business Excellence in the Community in
recognition of its pioneering work in the field of HIV/ AIDS awareness in 2003.
• The first batch of 30 professionals completed their training in welding technology in
2006. This initiative is part of the Tata Steel Parivar programme for the displaced
families in Greenfield steel plant site.
• In 1916, Social Welfare Scheme was formed by Tata Steel to provide assistance in the
fields of education, vocational training, self-employment and family welfare.
• The JRD Sports Complex, an international stadium with an 8-
lane polyurethane track, was inaugurated in 1991. The
complex also houses facilities for handball, tennis, volleyball,
hockey, basketball, boxing, table tennis and a modern
gymnasium

Environment Management
Tata Steel is also aware that it is involved in an industry that heavily
pollutes the environment and uses up immense amount of natural
resources in the form of coal and coke. It therefore takes various
initiatives for Environment Management.

Some of them are:

• Low specific energy consumption
• Reduced carbon dioxide emission rate
• Use of alternative energy sources
• Decreased use of refrigerants
• Handling hazardous wastes as per Hazardous Waste Management
and Handling Rules 1989/2000 requirements
• Waste water from the steel making process treated with best available physio-chemical
methods

The team at Corus has also been involved in the development of the ULCOS (Ultra LowCO2
Steel Making) technology for steel making which also reduces the amount of CO2resulting from
the production units. TSL is investing heavily in this technology.
Tata Steel environmental responsibilities are driven by their commitment to preservation the
environment and are integral to the way business is conducted. They regularly monitor review
and report publicity their environmental performance. They develop & rehabilitate abandoned
sites through afforestation and landscaping and protect & preserve the biodiversity in the areas
of our operations. They enhance awareness, skill and competence of all employees and
contactors so as to enable them to demonstrate their involvement, responsibility and
accountability for sound environmental performance.
 Future Outlook

Currently, the global steel industry is going through unprecedented times. The steel demand is
strong with over 6% growth year on year over the last seven years – unseen in the last
several decades, primarily driven by robust growth in China, India, South East Asia, Middle
East, Russia and Brazil. The iron ore and coking coal prices are at a record high both due to
insufficient capacity creation for these and the heavy consolidation of minerals companies. Oil
prices and ocean freight rates are at an all-time high. The combined effect of all these
have driven steel prices to a level higher than ever before – though there is increasing pressure
on margins of steel companies due to very high input costs.

The new scenario – both external, due to high raw material and freight costs and internal,
called for a new Vision, strategies and action plans. The Company has co-created a shared
Vision with its employees of becoming a global benchmark in Value Creation and
Corporate Citizenship. Company has set goals for 2012 in terms of Returns on Invested
Capital, Safety, Carbon dioxide emissions and of becoming the employer of choice in the
industry. The integration with Corus is proceeding smoothly and is yielding better than the
predicted results. Continuous improvement projects are being given focus in all companies’
sites and businesses. Greenfield projects in India are progressing, though somewhat
slower than planned.

Company’s effort to enhance their raw material security has yielded positive results in Ivory
Coast for iron ore, in Mozambique for coal and in Oman for limestone. There is greater
emphasis on safety. They have well laid out plans to reduce CO2 emissions to benchmark levels.
The Tata Steel Group will pursue strategic growth through capacity expansions and securing
access to raw materials. The Group is expanding its capacity in India through the
expansion of its operations in Jamshedpur to 10 million tons per annum and through the
construction of a 6 million tons per annum ‘greenfield’ site in Orissa. Other Greenfield
opportunities in India and across Asia are being assessed. The Group is also looking at further
integration upstream in raw materials with an ambition to achieve 100% self-sufficiency
in India and around 50% self-sufficiency in Europe over time. Agreements for the
exploration of iron ore in the Ivory Coast, coal in Mozambique and limestone in Oman have
already been signed and opportunities are under review in India to support the Indian
Greenfield projects; and in Africa and South America, primarily to support its European
steelmaking assets

Climate change is probably the biggest challenge ever to confront the steel industry. In
response to this challenge, the Tata Steel Group will be part of the solution and is
committed to minimizing the environmental impact of its operations and its products. It has a
goal to reduce its CO2 footprint by at least 20% by 2020 compared to 1990. To meet this
objective, the Group will, for example, continue to improve its current processes, invest in
breakthrough technologies and develop new products and services that reduce the
environmental impact over the product lifecycle. To improve its processes, priority is given to
energy conservation schemes; in technology break-through such as Ultra Low Carbon Steel
making and in other innovative projects where the Group has proprietary technology.
 Conclusion:
After conducting an in depth study of one of India’s most admired companies, 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. Though some of its projects and
acquisitions have met with widespread criticism, it is up to the company to realize the synergies
from the deals to raise the bar for its own performance. Because as the saying goes – the leader
cannot achieve any benchmarks, it sets them!!!
 Bibliography

http://en.wikipedia.org/wiki/Tata_Steel

http://www.tatasteel.com

http://www.moneycontrol.com/financials/tatasteel/balance-sheet/TIS

www.google.com

http://www.nseindia.com

www.businessworld.in/