INTRODUCTION:

Backed by 100 glorious years of experience in

steel making, Tata Steel is among the top ten steel
producers in the world with an existing annual crude steel
production capacity of 30 Million Tonnes Per Annum (MTPA).
Established in 1907, it is the first integrated steel plant in
Asia and is now the world’s second most geographically
diversified private steel producer and is ranked 315th on the
Fortune 500 Company’s list. It is the world's sixth largest
steel company.

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 has a balanced global presence in over 50
developed European and fast growing Asian markets, with
manufacturing units in 26 countries.

Its main plant is located in Jamshedpur,

Jharkhand, with its recent acquisitions; the company has
become a multinational with 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

A brief history:
It was the vision of the founder; Jamsetji
Nusserwanji Tata., that on 27th February, 1908, the first
stake was driven into the soil of Sakchi. His vision helped
Tata Steel overcome several periods of adversity and strive
to improve against all odds. Tata Steel introduced an 8-hour
work day as early as in 1912 when only a 12-hour work day
was the legal requirement in Britain. It introduced leave-
with-pay in 1920, a practice that became legally binding
upon employers in India only in 1945. Similarly, Tata Steel
started a Provident Fund for its employees as early as in
1920, which became a law for all employers under the
Provident Fund Act only in 1952. Tata Steel's furnaces have
never been disrupted on account of a labour strike and this
is an enviable record.

Primary product line:

• In 1903 iron mines were discovered in Jharia since

then Tata Steel is in the business of iron mining.
• Hot and cold rolled coils and sheets, galvanized
sheets, tubes, wire rods, construction rebars and
bearings.
 • Produces Galvano plain steel offering available in
sheet & coil forms for all customer segments like
white goods, panels, bus bodies etc.
• Launched brand steel as “Steelennium” in the new
millennium.
• TATA TISCON Aimed at urban and semi-urban
sectors, the brand
Promises trusted steel for your home’.
• TATA SHAKTEE G C SHEET this product offers high
durability to consumer.
• TATA AGRICO the most sought after hand tools in the
country.
• TATA BEARINGS a leader in the auto ancillary two-
wheeler market segment. It has firm foothold in a
fiercely competitive market.
• TATA PIPES a new dimension in Steel Tube
Technology opened up in India in the early 50’s with
the establishment of the Indian Tube Company Ltd.
(ITC).

Change in Product Line:

Tata Steels were into production of steels which was

their primary product, but the product diversified into
production of wires. It is focusing on construction industry,
high carbon steel and low carbon electrodes.
Tata steel has also ventured in retail management, IT to add
profitability during the downturn.

Recent mergers & acquisitions:

• In February 2005, the company completed the
acquisition of Singapore's largest steel company,
NatSteel Asia, for an amount of 1313 crore. It has a
two-million tonne steel capacity with presence across
Singapore, Thailand, China, Malaysia, Vietnam, the
Philippines and Australia.
• Tata Steel bought out Rawmet Ferrous Industries, an
unlisted Kolkata-based ferro alloys player, for an
undisclosed amount.
• On April 2, 2007, Tata Steel Ltd. (Tata Steel)
completed its acquisition of the Corus Group (Corus),
an Indonesian firm for US$ 12.1 billion. The combined
company went on to become the fifth largest steel
producer in the world and had a crude steel
production of 27 million tonnes in 2007.
• In addition to it, is in talks with Anglo-American of
South Africa for Highveld, the largest vanadium
producer in the world, manufactures steel, vanadium
products, ferro-alloys, carbonaceous products and
metal containers and closures. Bottom of Form
Board of directors:

Mr R N Tata Not Independent, Non – Executive

(Chairman) Independent, Non - Executive
Mr Nusli N Wadia Director
Mr S M Palia Independent, Non - Executive
Mr Suresh Krishna Director
Mr Ishaat Hussain Independent, Non - Executive
Dr Jamshed J Irani Director
Not Not Independent, Non - Executive
Mr Subodh Director
Bhargava Independent, Non - Executive
Mr Jacobus Director
Schraven Independent, Non - Executive
Dr Anthony Director
Hayward Independent, Non - Executive
Mr Andrew Robb Director
Mr B Muthuraman Independent, Non - Executive
(MD) Director
Mr Philippe Varine Independent, Non - Executive
Mr T Mukherjee Director
(Resigned w.e.f 31- Not Independent, Executive
03-09) Director
Mr James Leng.
Not Independent, Non - Executive
Director

Not Independent, Executive

Director

Independent, non-executive
director.
MANAGEMENT:
Mr B Managing Director
Muthuraman Executive Director, India and South East
Mr H M Nerurkar Asia Operations
Mr A D Baijal Tata Steel Group Director, Global
Mr Koushi k Mineral Resources
Chatterjee Group CFO, Tata Steel
Mr Anand Sen Vice President, Flat Products & TQM
Mr Abanindra M. Vice President, Raw Materials & CSI
Misra Vice President, Engineering and
Mr Varun K Jha Chattisgarh Project
Mr Om Narayan Vice President, Shared Services
Mr Chief Human Resource Officer
Radhakrishnan Vice President, Corporate Services
Nair Vice President, Safety & Long Products
Mr Partha Vice President & Tata Steel Group Head,
Sengupta M&A
Mr H Jha Vice President, Orissa Project
Mr N K Misra Company Secretary
Mr B K Singh
Mr J C Bham

Domestic Market share of TATA STEEL

Sales turnover
SAIL 44,208.43
Tata steel 24,315.77
JSW Steel 14,158.42
Visa Steel 1,035.01
 Sales turnover

SAIL
Tata steel
JSW Steel
Visa Steel

Share Holding pattern of share holders:

% Holding No. of Shares

Indian Promoters 33.95 248025857
Banks Fin. Inst. And
19.84 144917005
Insurance
FII's 14.54 106209766
Private Corporate
3.5 25558918
Bodies
NRI's/OCB's/Foreign
0 6225
Others
Govt 0.02 120633

Others 0.73 5314080

General public 23.82 174002527

 % Holding Indian
Promoters

Banks Fin.
Inst. and
Insurance
FII's

Private
Corporate
Bodies
NRI's/OCB's/Fo
reign Others

Govt

Others
Quality Management:
BL reported that Series of TQM initiatives over the past few
years have helped TATA Steel reduce production cost so
much that the cost of production of a tonne of saleable steel
has dropped by an estimated 2.5%.

The initiatives, as the sources point out, were launched right

at the raw material stage. Thus, the improvement of the
working of the coal washeries has brought down ash content
in domestic coal, sourced from the company’s own West
Bokaro and Jharia collieries from 17% to 13% (West Bokaro)
and from around 18% to 15% (Jharia).

It has benefited the company in two ways. First, the

company’s dependence on imported coal has declined.
Earlier, the company used about 55% domestic coal, now up
to 70%. Second, it has helped improve productivity of blast
furnaces. 1% drop in clean coal ash leads to a cost saving of
about 5% in the production of hot metal and overall
productivity improvement of about 2%.

As per report, another innovation has been introduced in the

use of coal. Instead of lumpy coal, middling and coal in small
particles are being injected into blast furnaces as a result the
costlier coke route has been dispensed with wherever
possible.

In iron ore, TATA Steel is 100% self reliant. However, the

quality, particularly, the high alumina content as high as
2.5% or 2.6% has often been a matter of concern. It has
been possible to bring down the alumina content to two per
cent by introducing the jigging process. All these exercises
have been undertaken with one major objective to achieve
stability in the operations of the blast furnaces requiring
consistently good supply of raw materials.

The sources said that TATA Steel is modernizing its blast

furnaces largely with the help of in house expertise and the
H furnace is considered the most modern in India. In fact, if
the capacity of the Jamshedpur plant increased by about 1.8
million tonne in the past one and half years, it is due to
modernization of the furnaces.
The sources added that the company’s TQM initiatives are
not limited to manufacturing processes only but also extend
to selling finished products in a competitive environment.
Meanwhile, the flat products account for 70% of the
production of Jamshedpur plant and the company, it is
claimed, is the single largest supplier of skin panels for the
automobile sector, accounting for an estimated 40% of the
market.

GROWTH AND EXPANSION PLAN:

Tata Steel made two major acquisitions namely, Singapore

based NatSteel in 2004 and Thailand based Millennium Steel
in 2005. In October 2006, Tata Steel made a bid to acquire
the world's 9th largest steel company, UK-based Corus
Group. The deal has made Tata steel the world's fifth-largest
steel firm and the largest Indian takeover of a foreign
company. Besides, Tata Steel had plans of capacity
expansion in various countries through various projects. Tata
Steel also has a Joint Venture with New Millennium Capital
Corp (“NML”) in Canada, with an option to acquire 80% in
the Direct Shipping Ore (“DSO”) project. This has estimated
reserves of around 100 million tonnes of iron ore. They also
have an option in a South African iron ore mine, to enter into
a Joint Venture with the promoters. This project is currently
under evaluation. It is expected that iron ore from both the
DSO project and the South African mines will service part
requirement of the European operations starting from mid
2011. In July, Tata Steel Global Minerals Holdings Pte Ltd, a
wholly-owned subsidiary, bought additional shares in
Australia-based Riversdale Mining Ltd (RML) through market
purchases, increasing its holding to 19.38%. Undeterred by
the global economic downturn, Tata Steel today announced
expansion plans worth Rs 40,000 crore to ramp up its
production capacity to 16 million tonnes (MT) within five
years. The world’s fifth largest steel manufacturer has
decided to go full throttle on greenfield projects by pledging
to invest Rs 15,000 crore each on its proposed plants in
Chhattisgarh and Orissa, besides investing Rs 10,000 crore
to enhance its capacity in Jamshedpur plant to 10 MT by the
last quarter of the next fiscal from the current 6.8 MT.

The strategic levers of the Group have remained the same

over the last few years. The current global economic
scenario has only rephased some of these strategies in
terms of timing and speed. The four levers are

(a) Making our European operations competitive by

hastening the speed of the “Weathering the Storm” and “Fit
for the Future” programme.
(b) Quick completion of our expansion plans in India. The 3
mtpa project will be commissioned by 2011 and will add
significant value to the Group. Further expansion in India
through the Greenfield project in Orissa and Chhattisgarh
are ongoing and their commencing will depend on ground
realities and iron ore allocation.
(c) Investment in raw material assets to provide better raw
material security especially to our European operations.
(d) Vigorous pursuit of continuous improvement

Given the unprecedented scale of the global financial crisis,

the company responded very quickly on many fronts and
financing was certainly one of them. Recognising the
uncertain financing environment and the fragile state of the
global banking industry, we focused on both internal and
external levers. Internally as an organization, we placed
primary importance on conserving liquidity through reduced
spend management and sharp reduction in working capital
levels. We also focused on improvement in the productivity
levels and reduction in overheads. On capital expenditure,
we have re-prioritized on the most value creating and critical
projects and reworked the capital planning strategy. On the
external front, we raised long term capital which acted as a
liquidity buffer in the current circumstance and would be
deployed in value creating long term assets. The above
actions ensured that the Tata Steel Group had adequate
liquidity and also financial flexibility for growth and
exigencies. The liquidity position of the Group at the yearend
was approximately US$1.9 billion of cash and cash
equivalents and undrawn lines.

PROCUREMENT OF RAW MATERIAL:

The Tata Steel Group is strongly pursuing its longterm
strategy of acquiring and developing mining projects for its
raw material security for iron ore and coking coal. The Group
has been concentrating on the geographies that are
logistically favorable with respect to its plants in Europe and
Asia. Tata Steel in India is an integrated player, for the
majority of its raw material requirements. However, raw
material self-sufficiency for the consolidated entity is at 25%
post the Corus acquisition. It has been the stated objective
of the company to increase self-sufficiency of raw materials
to 50%.The move to secure supply of raw materials will help
the company lower risks from price volatility. Typically, raw
materials such as iron ore and coal, among others, account
for 40% of a steel manufacturer’s revenue from sales. While
it will make marginal difference in the price of these raw
materials when demand is sluggish, as demand picks and
raw material prices harden, the savings for the company
would be significant. Tata Steel focused not only on tapping
into new raw material opportunities in the fiscal year ended
31 March but also fortified its presence in existing ventures.
RML has acquired coal exploration tenements in the Tete-
Moatize area of Mozambique, whose combined size is now in
excess of 250,000ha.

In Tete province, the Benga coal project is being developed

as a 65:35 joint venture between RML and Tata Steel Global
Minerals Holdings. Tata Steel had secured rights over 40% of
the output to feed its Corus factories in the UK and Europe.

Ingredien %used
Raw Material % used earlier
ts now
Manganes
Manganese Ore 47.50% 47.50%
e
Iron (Fe) 6.90% 6.90%
Silica
4.93% 6.90%
(SiO2)
Coke Ash 20.70% 20.70%
Fixed
78.00% 78%
carbon
CaO 39.10% 30-32%
Limestone
MgO 13.30% 19-21%
(dolomitic)/
Dolomite SiO2 3.60% 3-4%

ANALYSIS

1. We see that raw material consumed increased by Rs

753.16 crores to Rs 3121.46 from Rs 2368.3 crores. Thus
there was an increase of 31.80% over last year.

2. In comparison to increase in raw material consumed

(31.8%) sale of products has increased just by 15.11%
over last year. Thus raw material consumed has increased
much more than increase in sales of products. We can
thus come to conclusion that either there wasn’t effective
utilization of raw materials (may be due to carelessness)
 or there is an increase in price of raw materials purchased
in market.

BALANCE SHEET AS AT 31st MARCH, 2009

2008-09 2007-08
FUNDS EMPLOYED :

SHARE CAPITAL 6,203.45 6,203.30

RESERVES AND SURPLUS 23,972.81 21,097.43
TOTAL SHAREHOLDERS'
30,176.26 27,300.73
FUNDS
LOANS
Secured 3,913.05 3,520.58
Unsecured 23,033.13 14,501.11
Total Loans 26,946.18 18,021.69
DEFERRED TAX LIABILITY
585.73 681.8
(NET)
PROVISION FOR
EMPLOYEE SEPARATION 1,033.60 1,071.30
COMPENSATION

TOTAL FUNDS EMPLOYED 58,741.77 47,075.52

APPLICATION OF
FUNDS :

FIXED ASSETS
Gross Block 23,544.69 20,847.04
Less — Impairment 100.47 100.47
 Less — Depreciation 8,962.00 8,123.01
Net Block 14,482.22 12,623.56
INVESTMENTS 14,482.22 12,623.56
FOREIGN CURRENCY
MONETARY ITEM
471.66 0
TRANSLATION
DIFFERENCE ACCOUNT
CURRENT ASSETS
Stores and spare parts 612.19 557.67
Stock-in-trade 2,868.28 2,047.31
Sundry debtors 635.98 543.48
Interest accrued on
0.2
investments
Cash and Bank balances 1,590.60 465.04
Total 5,707.05 3,613.70

LOANS AND ADVANCES 4,578.04 33,348.74

Total 10,285.09 36,962.44

Less : CURRENT
LIABILITIES AND
PROVISIONS
Current Liabilities 6,039.86 3,855.26

Provisions 2,934.19 2,913.52

Total 8,974.05 6,768.78

NET CURRENT ASSETS 1,311.04 30,193.66

TOTAL ASSETS (Net) 58,741.77 47,075.52

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED
31st MARCH, 2009

2008-09 2007-08

INCOME :

SALES AND OTHER OPERATING

26,843.73 22,189.55
INCOME
Less — Excise Duty 2,527.96 2,498.52
TOTAL 24,315.77 19,691.03
OTHER INCOME 308.27 242.8
TOTAL 24,624.04 19,933.83

EXPENDITURE :

MANUFACTURING AND OTHER

15,525.99 11,852.75
EXPENSES
DEPRECIATION 973.4 834.61
Less — EXPENDITURE (OTHER
16,499.39 12,687.36
THAN INTEREST)
NET FINANCE CHARGES 1,152.69 786.5
TOTAL EXPENDITURE 17,308.43 13,298.36

PROFIT BEFORE TAXES AND

EXCEPTIONAL ITEMS
CONTRIBUTION FOR SPORTS
(150.00)
INFRASTRUCTURE
EXCHANGE GAIN/(LOSS) 580.89
 PROFIT BEFORE TAXES 7,315.61 7,066.36
TAXES
CURRENT TAX 2,173.00 2,252.00

DEFERRED TAX (75.13) 108.33

FRINGE BENEFIT TAX 16 19

TOTAL 2,113.87 2,379.33
PROFIT AFTER TAXES 5,201.74 4,687.03
BALANCE BROUGHT FORWARD
6,387.46 4,593.98
FROM LAST YEAR
AMOUNT AVAILABLE FOR
11,589.20 9,281.01
APPROPRIATIONS
APPROPRIATIONS :
PROPOSED DIVIDENDS 1,168.95 1,168.93
DIVIDEND ON CUMULATIVE
CONVERTIBLE PREFERENCE 109.45 22.19
SHARES
TAX ON DIVIDENDS 214.1 202.43
TOTAL 1,492.50 1,393.55
GENERAL RESERVE 600 1,500.00
TOTAL 2,092.50 2,893.55
BALANCE CARRIED TO
9,496.70 6,387.46
BALANCE SHEET
Basic Earnings per Share Rs. 69.45 66.8
Diluted Earnings per Share Rs. 61.78 61.29

SALES MIX AND TREND ANALYSIS

Trend in overall sales

 Year Sales (in Rs Crore)
2004-2005 14499
2005-2006 15215
2006-2007 17552
2007-2008 19691
2008-2009 24316
Steel Division

year Sales(million tonnes)

2004-2005 3.7
2005-2006 4.05
2006-2007 4.79
2007-2008 4.78
2008-2009 5.23

Tubes Division

year Sales (million tonnes)

2004-2005 0.22
 2005-2006 0.26
2006-2007 0.303
2007-2008 0.323
2008-2009 0.318

Bearings division

Sales (million
year tonnes)
2004-2005 25.3
2005-2006 27.38
2006-2007 28.97
2007-2008 27.61
2008-2009 26.34
 TRENDS IN SALES:
➢ Steel division: Increased due to new machineries
being commissioned.

➢ Tubes division: Increased due to an acquiring of a

new mill with newly commissioned hydroforming
facility. Also, sales went up because parts were being
supplied for Tata Nano cars and other new orders.

➢ Bearings division: Performance of the division is

strongly linked to performance of the automobile
sector. As the automobile sector saw a decline, it led to
a decline in sales for bearings.

2005- 2006- 2007- 2008-

Division 2006 2007 2008 2009
Steel 11648 14997 16539 20456
Tubes 1006 1272 1217 1410
Famd 2309 2380 1808 2324
Bearings 154 163 127 127

In Percentage Terms:

Division 2005-06 2006-07 2007-08 2008-09

Steel 77.05 79.72 83.99 84.12

Tubes 6.65 6.76 6.18 5.8

 FAMD 15.27 12.65 9.18 9.56

Bearings 1.02 0.87 0.65 0.52

SALES AND SALES MIX:

Steel continues to be the greatest revenue generator for the
company and seems to comprise more or less a constant
proportion to the sales. Though there are divisions that have
witnessed a declining contribution to sales over a period of 4
years. The reasons for the declining sales for those divisions
are as stated in the trend analysis. Also, why their overall
contribution is declining is due to superior performance of
the steel division. Thus, there is a twofold impact on the
contribution:

➢ Declining sales of the particular division

➢ Growth of the steel division that is making their

contribution look even smaller.
Raw Material Consumption

Year Consumption(in Rs. Crore)

2004-2005 1715
2005-2006 2368
2006-2007 3121
2007-2008 3355
2008-2009 5710

Raw material sourcing pattern:

2004- 2005- 2006- 2007- 2008-

2005 2006 2007 2008 2009

Direct imports 925 1067 1673 1950 4267

Indigenously
obtained 1000 1572 1746 1817 1930

In percentage terms:

Year 200 2005- 2006- 2007- 2008-

4- 2006 2007 2008 2009
200
5
Directly 48.0 40.43 48.94 51.76 68.85
imports 5
Indigenously 51.9 59.57 51.06 48.24 31.15
obtained 5

CONSUMPTION AND SOURCING OF RAW MATERIALS:

Raw Materials consumption showed significant increase over
the previous year mainly due to higher prices of Coal and
Coke and also due to higher production resulting from the
commissioning of ‘H’ Blast Furnace as well as other facilities
and operational improvements. Increase in the prices of
Ferroalloys also contributed to the increase in raw materials
consumed.
Again, the imports this year are higher due to prices being
high. The imports account for 69% this year as compared to
52% last year. The reason is that that prices of coal and coke
have gone up and 48% of total coal consumed was imported.
Thus due high dependence on imports for an important raw
material, which saw an increase in prices, is responsible for
such a large increase in imports figure.
 TIME SERIES ANALYSIS

Balance Sheet

* Rs in Crores

2007- 2006- 2005- 2004-

2008-09 08 07 06 05
10007.4 6560.7 5197.4 5214.2
Total Current 7834.43
1 3 3 5
Liabilities
3391.6 1672.7
Total term Liabilities
3781.22 3305.45 6 4 1792.7
30176.2 27300.7 13949. 7059.9
Total Net Worth
6 3 09 9755.3 2
58,741.7 45322.4 23594. 12271. 9799.6
Total Liabilities
7 2 42 45 2
 10756.7 36962.4 13701. 4083.5
4237.6
Total Current Assets 5 4 89 8

20057.0 16479.5 16029. 15407. 13179.

Total Fixed Assets 1 9 49 17 26

10994.5 8543.1 8707.3 7239.5

8256.11
Net Block 4 2 2 8

45328.0 23741. 12271. 9799.6

58,741.7
Total Assets 7 49 45 2
7

➢ Tata Steel has been showing similar trend in both Total

Assets and Total Liabilities.

➢ The Net Block increased during the year primarily on

account of the 1.8 million tonne steel expansion
programme and the 3 million tonne steel expansion
programme (commenced in the last quarter of FY 09) at
Jamshedpur.

➢ The Significant change in 75% increase in the current

asset which is in turn due to almost 90% increase in
Loans & Advances during the year 2006-07 and 2007-
08.
➢ But in the year 2008-09 Loans and Advances has
decreased significantly from 33348.94 crores by 84.8%
to 5049.7 crores this year. The loans and advances
reduced substantially as the advance against equity
was converted into investments during the financial
year and accordingly there was an increase in the
investments.

➢ There is a 48.6% increase in “Balance From Profit and

Loss account”. This signifies the increase profitability of
the company.

➢ In the year 2007-08 Tata Steel completes its acquisition

of Corus for US $12.1 billion. Probably this has led to

the following :

○ During the years 2007-08, 2008-09 it has issued a

Preference Share capital of Rs 5472.66 crores
which was NIL in the previous year. This signifies
the requirement of capital of TATA STEEL due to
the acquisition of CORUS.

○ There is almost 300% increased in Unsecured

Loans from year 2006-07 to 2008-09
 ○ There is a 950% increase in Share Capital from
year 2006-07 to 2008-09.

○ There is a 1376% increase in Unquoted Equity

share from 2590.43 crores to 38229.63 crores.

This is because Tata Steel Holdings Pte. Ltd has
increased its holding of share from .72 crores to
35663.38 crore.

Profit & Loss Account

* Rs in Crores

2008- 2007
09 -08 2006-07 2005-06 2004-05
24,31 1965 17458.3 15135.4
Net Sales 14493.16
5.77 2.53 9 1

15510 1182 10776.9

Cost of Production 9406.99 8943.04
.79 7.48 8
9778.
Operating Profit 8830 7332.19 6189.57 6144.86
51
Before Interest
8289. 7900.
Operating Profit After 7080.94 6015.06 5916.06
01 97
Interest
7315. 7066.
6261.65 5239.96 5297.28
Profit Before Tax 61 36

5201. 4687.
4222.15 3506.38 3474.16
Profit After Tax 74 03

1168. 1168.
943.91 719.51 719.51
Dividend payout 95 93
 4032. 3518.
Retained Profit 3278.24 2786.87 2754.65
79 1

➢ The net sales increased by 23% during FY 09 over FY 08

mainly due to higher prices realized on Steel as well as
other products during the first half of the financial year.

➢ Operating Profit has been increased continuously with

an increasing rate. This is a good sign for the financial
health.

➢ Net Profit has been increased over the year but as

compare to the Operating Profit, the trend is lower.
Receivable Period

2007- 2006- 2005- 2004-

2008-09 08 07 06 05
24348.5 19652.5 17458. 15135. 14493.
Credit Sales 2 3 39 41 16

Sales per day 66.71 53.84 47.83 41.47 39.71

635.98 543.48 631.63 539.4 581.82
Debtors
Debtors
outstanding days 9.53 10.09 13.21 13.01 14.65
 ➢ Receivable period has been brought down continuously
over the year which shows efficiency of debtors’
management.

Payables Period

2007- 2006-
2005- 2004-
2008-09 08 0706 05
3128.2 3331.
Credit Purchase 6600.48 3924.18 3585.04 2 3

Purchase per Day

18.08 10.75 9.82 8.57 9.13
778.7
Creditors 2230.41 2182.52 1093.1 814.88 6

Creditors 123.34 203.00 111.29 95.08 85.33

outstanding days

➢ There is a increasing trend in the payables period

except during year 2007-08. This signifies increasing
confidence of the creditors.

Raw Material Holding Period

 2008 2007 2006 2005 2004
-09 -08 -07 -06 -05
Raw Materials 6068. 3743. 3572. 3024. 3020.
Consumption 78 14 06 38 42
Raw Materials
Consumption per 16.63 10.26 9.79 8.29 8.28
Day
Raw Materials 1433. 901.5 720.5 707.5
603.7
Inventory 26 6 2 4
Raw Material
Inventory Holding 86.20 87.91 73.62 85.39 72.95
Days

➢ The raw materials inventory was higher than last year

for the steel works and at the Ferro Alloys and Minerals
Division due to a significant increase in the prices of
imported coal and coke as on 31st March, 2009 as
compared to prices as on 31st March, 2008. The
increase was also partly due to increase in the stock
level to support higher volume of operations.

➢ Raw material holding days has been almost constant

throughout these years.

Work-In-Progress Holding Period

2008- 2007- 2006- 2005- 2004-

 09 08 07 06 05
15510.7 11827. 10776. 9406.9 8943.0
Cost Of Production
9 48 98 9 4
Cost Of Production
42.50 32.40 29.53 25.77 24.50
per day
Work In Progress
73.17 71.48 28.94 23.93 32.42
Inventory

Work In Progress
1.72 2.21 0.98 0.93 1.32
Holding Days

Contribution to Current Assets

2008- 2007- 2006- 2005- 2004-

09 08 07 06 05
Raw Materials to
0.13 0.02 0.05 0.17 0.15
Current Assets

Work-in Progress to
0.01 0.001 0.002 0.01 0.01
Current Assets

Finished Goods to
0.13 0.03 0.08 0.24 0.22
Current Assets

Stores and Spares to

0.06 0.02 0.04 0.10 0.09
Current Assets

Sundry Debtors to
0.06 0.01 0.05 0.13 0.14
Current Assets

Total Inventory to
0.32 0.07 0.17 0.51 0.46
Current Assets
 ➢ Debtors have decreased over the year.
➢ Raw Materials consumption showed significant increase
over the previous year mainly due to higher prices of
Coal and Coke and also due to higher production
resulting from the commissioning of ‘H’ Blast Furnace
as well as other facilities and operational
improvements. Increase in the prices of Ferroalloys also
contributed to the increase in raw materials consumed.

Percentage Analysis of Different Cost Components

Vis-à-vis Net Sales

2008- 2007- 2006- 2005- 2004-

09 08 07 06 05
Raw Materials 24.92 19.05 20.46 19.98 20.84

Power & Fuel Cost 5.02 5.33 5.89 5.93 5.37

Other Manufacturing
13.13 13.29 14.32 13.81 13.44
Expenses
Depreciation for the
4.00 4.25 4.69 5.12 4.27
current year
Selling and Administration
7.51 8.14 8.54 9.08 9.00
Expenses

Interest 6.12 4.73 1.44 1.15 1.58

 ➢ There is not much changes in the various cost
components other than Interest.
➢ This is because there is a almost 60% increase in
Debenture Interest during the year 2007-08 and 2008-
09.
Profitability Analysis (as % of Net Sales)

2006- 2005 2004-

2008-09 2007-08
07 -06 05
PBDIT 40.16 44.93 42.00 40.89 42.40

PBDT 34.04 40.20 40.56 39.74 40.82

PBT 30.05 35.96 35.87 34.62 36.55

PAT 21.36 23.85 24.18 23.17 23.97

➢ There has been an increasing trend up to the year

2007-08, but in the year 2008-09 there is slight
downward trend.

➢ The downward trend is mainly due to the worldwide

economic slowdown. This reflected in a sharp downturn

in private construction projects, as well as large falls in
automotive and mechanical engineering, amplified by
severe destocking by both end users and service
centers. Indian operations
witnessed a drop in demand of 11% in the third quarter,
reflecting the reduced activity in infrastructure and
commercial vehicles.

COMPARATIVE ANALYSIS
Profit & Loss A/C

*For year 2008

* Rs in Crores

TATA JSW SAIL

14006.5
Net Sales 24,315.77 43700.80
9
12249.2
Cost of Production 15510.79 37181.87
3
Operating Profit Before
9778.51 2341.71 10941.81
Interest
Operating Profit After
8289.01 1504.89 10688.57
Interest

Profit Before Tax 7315.61 677.23 9403.45

Profit After Tax 5201.74 458.5 6174.81

Dividend payout 1168.95 47.71 1073.90

Retained Profit 4032.79 410.94 5100.91

➢ Although Net Sales of SAIL is almost double that of

TATA Steel, PAT of these two companies does not show
significant difference. This implies the operating
efficiencies of TATA Steel.
 ➢ Also the TATA Steel has paid more dividend than SAIL.

Balance Sheet
*For year 2008-09
* Rs in Crores

TATA JSW SAIL

7713.3
Total Current Liabilities 10007.41 7476.28
9
Total term Liabilities 3781.22 7163.91 800
27984.
Total Net Worth 30176.26 7959.25
1
19231.8 35522.
Total Liabilities 58,741.77
8 89
34663.
Total Current Assets 10756.75 4631.64
16
13086.4 12268.
Net Block 10994.54
4 83
19231.8 35522.
Total Assets 58,741.77
8 89
 ➢ Total assets of Tata Steel is almost double to that of
SAIL this signifies the robustness of the company.

Percentage Analysis of Different Cost Components

Vis-à-vis Net Sales

TATA JSW SAIL

Raw Materials 24.92 45.6 62.4

Power & Fuel Cost 5.02 7.25 4.81

Other Manufacturing
13.13 11.05 10.29
Expenses
Depreciation for the current
4 2.94 9.18
year

Selling and Administration

7.51 3.64 11.46
Expenses

Interest 6.12 0.58 5.97

➢ Raw material consumption of TATA STEEL is much less

than the other two companies.
➢ Interest is higher than other two showing high
borrowing from outside.
➢ Depreciation of TATA STEEL higher than JSW but lower
than SAIL because of high fixed assets.
CASH FLOW STATEMENT FOR THE YEAR ENDED 31st
MARCH, 2009

2008-09 2007-08
Cash Flow from Operating
Activities
Net Profit before tax 7315.61 7066.36
Adjustments for :
Depreciation 973.40 834.61
(Profi t)/Loss on sale of
6.43 (28.26)
Assets/Discarded Assets written off
(Profi t)/Loss on sale of other
(186.46) (0.03)
investments
Impairment of Assets 0.06
(Gain)/Loss on cancellation of forward
(26.62) (124.30)
covers/options
Provision for diminution in value of
0.10
investments
Interest and income from current
(336.81) (142.53)
investment
Income from other investments (101.62) (88.42)
Interest charged to Profit and Loss
1489.50 929.03
Account
Amortisation of employee separation
222.34 226.18
compensation
Provision for Wealth Tax 1.00 0.95
Contribution for sports infrastructure
150.00
written off
Exchange (Gain)/Loss on revaluation of
67.91 (743.60)
foreign currency loans
 Amortisation of long term loan
32.71 57.99
expenses
TOTAL 2141.88 1071.68
Operating Profit before Working
9457.49 8138.04
Capital Changes

Adjustments for :
Trade and Other Receivables (159.25) (143.44)
Inventories (875.49) (272.00)
Trade Payables and Other Liabilities 1772.03 591.80
TOTAL 737.29 176.36
Cash Generated from Operations 10194.78 8314.40
(2797.56 (2060.2
Direct Taxes paid
) 0)
Net Cash from Operating Activities 7397.22 6254.20

Cash Flow from Investing Activities :

(2786.29 (2458.9
Purchase of fixed assets
) 7)
Sale of fixed assets 15.18 63.88
(59903.2(31605.
Purchase of investments
5) 12)
(4439.80(29587.
Purchase of investments in Subsidiaries
) 40)
34110.4
Sale of investments 57181.61
6
Inter-corporate deposits 90.73 (85.80)
Interest and income from current
312.12 155.95
investments received
Dividend received 101.62 88.42
 (9428.08 (29318.
Net Cash used in Investing Activities
) 58)

Cash Flow from Financing Activities

:
Issue of Equity Capital 0.25 4881.45
Issue of Cumulative Convertible
0.14 5472.52
Preference Shares
17632.7
Proceeds from borrowings 6494.43
0
(10386.
Repayment of borrowings (894.39)
61)
Amount received on cancellation of
(10.17) 134.41
forward covers/options
Long term loan expenses (32.51) (202.38)
(1213.96
Interest paid (746.07)
)
(1187.37
Dividends paid (937.95)
)
15848.0
Net Cash from Financing Activities 3156.42
7
Net increase/(decrease) in Cash or (7216.3
1125.56
Cash equivalents (A+B+C) 1)
Opening Cash and Cash equivalents 465.04 7681.35
Closing Cash and Cash equivalents 1590.60 465.04

➢ There is a significant increase in Net Cash/cash

Equivalent as compare to previous year. Mainly

because there is a decrease in Purchase of Investment
specially Purchase of Investment in Subsidiaries. And
 also there is increase (67.63%) in cash inflow from
selling of investment this year.
➢ Also there is less payment of borrowing and also
decrease in Long Term Loan Expense than previous
year.
➢ But there is 63.16% decrease in Proceeds From

Borrowing, increase in Interest Paid and Dividend Paid.

This reflected in almost 80% decrease in Net Cash
From Financing Activities.

RATIO ANALYSIS
Liquidity ratios

They provide a measure of a company’s ability to generate

cash to meet its immediate needs. There are three
commonly used liquidity ratios current ratio, quick ratio and
net working capital to sales ratio. Generally, the larger these
liquidity ratios the better the ability of the company to
satisfy its immediate obligations.

COMPARATIVE ANALYSIS:
Ideally the CR of a company should have been to around
1.5-2.0 : 1. For tata steel the current ratio is increasing over
the years. Which is not a healthy sign. Good amount of cash
is locked in the form of debtors, inventory and loans and
advances. Its competitor SAIL and Jindal steel maintains
healthy current ratio.

Quick ratio = Current assets – Inventory / Current liabilities

The quick ratio is the ratio of quick assets (generally current

assets less inventory) to current liabilities. Indicates a
company's ability to satisfy current liabilities with its most
liquid assets

COMPARATIVE ANALYSIS:
Ideally the quick ratio should have been to around 1: 1. Tata
steel QR for FY08 was 3.52 which was again very high.

Net working capital to sales ratio :

The net working capital to sales ratio is the ratio of net
working capital (current assets minus current liabilities) to
sales. Indicates a company's liquid assets (after meeting
short−term obligations) relative to its need for liquidity
(represented by sales). Bankers look at Net Working Capital
over time to determine a company's ability to weather
financial crises. Loans are often tied to minimum working
capital requirements.

COMPARATIVE ANALYSIS:
For Mar08 the ratio comes out to be -0.16. Current liabilities
for the Tata Steel is more than its current assets. The
company should re examine its credit policy.

Profitability ratios:

Gross profit margin = Gross income / Sales

The gross profit margin is the ratio of gross income or profit
to sales. This ratio indicates how much of every rupee of
sales is left after costs of goods sold.

COMPARATIVE ANALYSIS:
For Tata Steel the gross profit margin ratio for the year 08
was 37.7%. For SAIL it is 25.10 and for Jindal steel it is 34.35.
Hence Tata Steel enjoys high gross profit margin ratio over
its competitor.

Operating profit margin = Operating income/ Sales

The operating profit margin is the ratio of operating profit
(a.k.a. EBIT, operating income, income before interest and
taxes) to sales. This is a ratio that indicates how much of
each rupee of sales is left over after operating expenses:

COMPARATIVE ANALYSIS:

For the FY08, Operating profit margin ratio for Tata Steel is
41.94%, for SAIL it is 28.19% and for Jindal it is 42.76 %.

Net profit margin = Net income/ Sales

The net profit margin is the ratio of net income (a.k.a. net
profit) to sales, and indicates how much of each rupee of
sales is left over after all expenses

COMPARATIVE ANALYSIS:
For the FY08, net profit margin ratio for Tata Steel is 23.43
%, for SAIL it is 18.16% and for Jindal it is 22.79 %.

Activity ratios
Activity ratios are measures of how well assets are used.
Activity ratios which are, for the most part, turnover ratios,
can be used to evaluate the benefits produced by specific
assets, such as inventory or accounts receivable. Or they
can be use to evaluate the benefits produced by all a
company's assets collectively. These measures help us
gauge how effectively the company is at putting its
investment to work. A company will invest in assets – e.g.,
inventory or plant and equipment – and then use these
assets to generate revenues. The greater the turnover, the
more effectively the company is at producing a benefit from
its investment in assets.
The most common turnover ratios are the following:

Inventory turnover ratio = Cost of goods sold/ Inventory

This ratio reveals how well inventory is being managed. It is
important because the more times inventory can be turned
in a given operating cycle, the greater the profit.

COMPARATIVE ANALYSIS:

For the FY08, net inventory turnover ratio for Tata Steel is
10.84, for SAIL it is 8.62 and for Jindal it is 7.01. Here also
Tata steel manages its inventory better than its competitor.

Total asset turnover ratio:

Total asset turnover is the ratio of sales to total assets. This
ratio indicates the extent that the investment in total assets
results in sales. The higher the number the better it is for the
company.
Total asset turnover = Sales / Total assets

COMPARATIVE ANALYSIS:

For the FY08, total assets turnover ratio for Tata Steel is
0.43, for SAIL it is 1.55 and for Jindal it is 0.70.This indicates
Tata steel have more nonperforming assets than its
competitors.

Fixed asset turnover is the ratio of sales to fixed assets. This

ratio indicates the ability of the company’s management to
put the fixed assets to work to generate sales Fixed asset
turnover = Sales/Fixed assets
Financial leverage ratios
A company can finance its assets either with equity or debt.
Financing through debt involves risk because debt legally
obligates the company to pay interest and to repay the
principal as promised. Equity financing does not obligate the
company to pay anything -- dividends are paid at the
discretion of the board of directors. There is always some
risk, which we refer to as business risk, inherent in any
operating segment of a business. But how a company
chooses to finance its operations -- the particular mix of debt
and equity -- may add financial risk on top of business risk.
Financial risk is the extent that debt financing is used
relative to equity.
Financial leverage ratios are used to assess how much
financial risk the company has taken on.
The total debt to assets ratio indicates the proportion of
assets that are financed with debt (both short−term and
long−term debt).

Total debt to assets ratio =Total debt/Total assets

A ratio under 1 means a majority of assets are financed
through equity, above 1 means they are financed more by
debt. Furthermore we can interpret a high ratio as a "highly
debt leveraged firm.

Total debt to equity ratio = Total debt/ Total shareholders'

equity
The debt to equity ratio (a.k.a. debt-equity ratio) indicates
the relative uses of debt and equity as sources of capital to
finance the company's assets, evaluated using book values
of the capital sources Ideally it should be around 1.5-2.0 to 1

COMPARATIVE ANALYSIS:
For the FY08, D/E ratio for Tata Steel is 1.08, for SAIL it is
0.13 and for Jindal it is 1.03.This indicates Tata steel have
more nonperforming assets than its competitors.
With low D/E ratio the company can go for more debt to
raise funds in future.

Earnings per share = Net income available to shareholders/

Number of shares outstanding
Earnings per share (EPS) is the amount of income earned
during a period per share of common stock.

COMPARATIVE ANALYSIS:
For the FY08, EPS for Tata Steel is 63.85, for SAIL it is 18.25
and for Jindal it is 80.34.

KEY RISKS FOR THE INDUSTRY

➢ A slower-than-expected recovery of the global
economy. Steel demand has increased after falling to
record levels, as dealers restock steel, which may be a
short term phenomenon. Steel demand and prices are
expected to remain subdued in the existing global
scenario. Continued depression in global steel prices
and higher raw material costs will affect profitability
further.
➢ Any delay in the commissioning of new capacities and
further downgrade of company’s debt ratings will lead
to rating downgrade.
➢ Company has USD 875 million of FCCB convertible at
Rs.785. Rupee depreciation is hurting the company in
terms of interest and debt payment and in MTM losses
as well. However we expect limited loss as the debt
matures in 2012. Recent downgrades by Moody’s for
the group will make raising fresh debt more difficult.
➢ Increase in Raw Material Costs: Captive iron ore
provides only 20% and captive coal mines provides for
only 14% of total steel production for Tata Steel( Group)
on a consolidated basis. Raw material costs are 50% of
net sales for the group, in case raw material prices
increase or do not drop in line with steel price. It could
lead to further pressure on company’s profitability.
 INDUSTRY TREND
According to recent report on steel sector 'Indian Steel
Industry 2009: squeezed, but strong' by Ernst and Young
India has the potential to grow at double digit rates and
should target a production of 125 mn tonnes in the medium
term. Report mentions, China example from 1998-2003,
when world steel production grew by 1.6%, china doubled its
steel production growing by 18%. According to the report,
the near-term outlook for the industry is challenging as the
growth in key end-user industries such as construction,
automobiles and manufacturing has taken a backseat.
The downturn has also led to a decline in the prices for raw
materials such as iron ore and coking coal, albeit at a lower
rate than the dip in steel prices. Further, prices are expected
to decline in 2009 as consumption levels are projected to
continue plummeting. To avoid large-scale dumping and
protect domestic players, the government, has taken
following steps:
1. Removal of export duty
2. Restored DEPB (Duty exemption pass book) to promote
exports.
3. Imposed 5% import duty on steel to check cheap imports
from china
4. Cut in excise duty from 14% to 10%
5. Customs duty of 5%
International steel prices rose sharply by 50-60% in the first
half of 2008 but prices in the domestic market was reigned
in by the government in an attempt to check inflationary
pressures and ensure adequate supply. As a result, domestic
steel prices went up by around 25% only in the
corresponding period. Therefore, as we witness steep
correction in international steel prices by 25% (from $1200
to $900), we do not expect similar declines in domestic
prices that have fallen by 16% to $750 but rather stabilize in
the coming quarters.
It is expected that the Q3FY09E and Q4FY09E results will be
better as raw material prices will come down further and
long term contracts will be re-negotiated at lower rates in
December. While rupee depreciation in Q2FY09 has resulted
in increasing import cost and negative MTM provisioning on
un hedged foreign currency exposures, falling freight rates
and expected rupee appreciation will positively impact the
bottom line in the coming quarters.
 SWOT ANALYSIS
Strengths
1. Financials:

Domestic sales growth: 20.97%, operating profits:

23.52%, profit before tax: 3.53%, profit after tax:
10.98%, best financial performance in its industry
group. Improvement in both net profit margin as well
as RONW turnover. A very strong financial health. A
reasonably high NAV despite a liberal dividend policy.
Absolutely no solvency or default risks. No short term
liquidity risks. Suppliers preferred choice. High &
improved fixed assets efficiency. High quality of
debtors & advances. Clean audit report.
Implementation of key accounting standards in
advance. Very high quality of earnings.
2. Sixth largest steel manufacturer in the world
3. Tata Steel is the lowest cost steel producer in the
world.

4. Tata Steel enhanced its presence on the international

steel scene with the acquisition of the U.K. based
company, Corus Group plc. Corus acquisition brings
Tata Steel 19 million tonne of capacity at once and at
a cost, which is roughly little more than half the cost
of the Greenfield site.

5. Jamshedpur Plant became the first plant in India to

produce more than 5 million tonnes of crude steel in
a year.

6. The Company has continued to scale up its safety

performance at all locations with the help from M/s.
Dupont Safety Resources.

7. A matching performance by the operating

departments including the raw materials division.

8. The Company is relatively protected from increases

in the prices of key raw materials since it meets
100% of iron ore and around 70% of coal
requirements from its captive mines.

9. . 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
 10.The Company has in place adequate internal control
systems and procedures commensurate with the size
and nature of its business. The effectiveness of the
internal controls is continuously monitored by the
Corporate Audit Division of the Company. Corporate
Audit‘s main objective is to provide to the Audit
Committee and the Board of Directors, an
independent, objective and reasonable assurance of
the adequacy and effectiveness of the organisation‘s
risk management, control and governance processes.

11.Tata Steel now is in the process of implementing a

structured approach in risk management called
Enterprise Risk Management (ERM).

Weaknesses
1. Financials: Tata is following very liberal dividend policy

as it has proposed dividend @160% this year and last

year it was @ 155%. We see that 29% of current profits
are distributed as dividend. This is the wrong policy
chosen by the management as it is giving away much of
the funds available which could be used for further
investment in the business and thus would lead to much
higher growth in future.

2. Endemic Deficiencies:
These are inherent in the quality and availability of some
of the essential raw materials available in India, ex., high
ash content of indigenous coking coal adversely affects
the productive efficiency of iron-making and is generally
imported. Advantages of high Fe content in indigenous ore
are often neutralized by high basicity index. Besides,
certain key ingredients of steel making, ex., nickel, Ferro-
molybdenum are also unavailable indigenously.

3. Raw materials for steel production are rapidly depleting

and are non renewable, company has to come up with
sustainable methods in steel production.

4. Steel production in India is also hampered by power

shortages.

5. Low Labour Productivity:

In India the advantages of cheap labour get offset by low
labour productivity; ex., at comparable capacities labour
productivity of SAIL and TISCO are 75 t/manyear and 100
t/manyear, for POSCO, Korea and NIPPON, Japan the
values are 1345 t/man year and 980 t/manyear.

6. High Cost of Basic Inputs and Services:

High administered price of essential inputs like electricity
puts Indian steel industry at a disadvantage; about 45% of
the input costs can be attributed to the administered costs
of coal, fuel and electricity, eg, cost of electricity is 3 cents
in the USA as compared to 10 cents in India; and freight
 cost from Jamshedpur to Mumbai is $50/tonne compared
to only $34 from Rotterdam to Mumbai.

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. The Tata Steel Group is leveraging the Group‘s

collective Research and Development experience in
the Group‘s various geographies to further enhance
the Group‘s performance and also the integration
process.

3. Corus acquisition brings in a tremendous

technological advantage by access to best practices in
global steel industry.

4. The main drivers of this growth are the expected large

investments in infrastructure, large-scale construction

activities and the sustained rise in demand for auto
and white goods from a burgeoning middle class in
the country.

5. The planned Brownfield expansion in Jamshedpur and

the long-term Greenfield projects in Orissa,
Chhattisgarh and Jharkhand.

6. 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. Enhancing applications in rural areas
assumes a much greater significance now for
increasing per capital consumption of steel.

7. 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.

8. 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

Threats
1. Tata Steel has huge resources in form of unsecured
loans. Though their financial position is strong it is not
 advisable to have such a big amount of 23,033.13
crores as unsecured.

2. 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

3. 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 per fluorocarbons
(PFCs).

4. High raw material input cost and scarcity of non

renewable raw materials are a threat to the industry.
( e.g. Coal, limestone etc)

5. 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.
However, at present the high cost of electricity for
extraction and purification of aluminium in India weighs
 against viable use of aluminium for the automobile
industry. Steel has already been replaced in some large
volume applications large diameter water pipes (RCC
pipes), small diameter pipes (PVC pipes).

6. There has been significant pressure on margins from

increased raw material prices on non-integrated steel
players.

7. The steel industry is still highly fragmented and cyclical

in nature as well as demand for steel products is

generally affected by macroeconomic fluctuations in
the global markets.

8. Important factors that could make a difference to the

Company’s operations include economic

9. Conditions affecting demand/supply and price

conditions in the domestic and overseas markets in
which the Company operates, changes in the
Government regulations, tax laws and other statutes
and incidental factors.
 FUTURE PROSPECTS OF TATA STEEL

Tata Iron & Steel Co, the largest and oldest private sector
steel company in the country, is aiming to become a major
player in the domestic steel industry. It also wants to be a
global player while keeping its roots deep in domestic soil.
According to the managing director of the company, B
Muthuraman, Tata Steel plans to increase hot metal
production from 4.47 million tonnes (MT) in 2003-04 to 15MT
by 2010. "It would be done through capacity expansion at
the Jamshedpur plant, acquisition of other plants, and setting
up of new plants," he said.

Why this growth plan by Tata Steel, which reported over

Rs1,746 crore net profit in 2003-04, on a turnover of
Rs10,843 crore? Observes Tata group chairman Ratan Tata,
who is also the chairman of Tata Steel: India presently is
going through an economic up-turn, and at this particular
time in the nation's development, considerable attention is
being paid to the creation of adequate infrastructure to meet
the country's development needs.

Industry is also experiencing robust growth in several

sectors and India's agricultural sector has continued to show
growth with improved productivity and product quality. It
can therefore be assumed that if these trends continue, India
will continue to enjoy healthy economic growth for some
years to come.

The Centre for Policy Research (CPR) released in November

2002 a report dealing with the perspectives up to 2025. It
indicated that the construction, cold-reducing and
transportation of oil and gas segments are poised for major
growth in India. Thermo-mechanically treated (TMT) bars and
rods, structurals, hot rolled (HR) and cold rolled (CR) coils,
plates and pipes have been identified as the key growth
products. So, Mr Tata believes that the demand for steel in
India should continue to rise, both in construction steel and
in flat products used in automotive and consumer product
sectors.

India also has a specific advantage in that as its iron ore and
related mineral resources are plentiful, which will provide the
Indian steel industry with a particular global advantage. Mr
Tata has laid a clear vision for the Tata Steel management in
this change scenario: It must explore ways of enhancing its
capacity domestically, as also establishing finishing facilities
in strategic locations internationally, leveraging its low cost
Indian base and the availability of domestic iron ore.
As estimated by the Union Steel Ministry, the country will
require 60MT of steel against the present capacity of 36MT.
And Tisco wants to contribute as much as possible. So, it has
drawn up a five-pronged strategy:

• Maximise the potential at Jamshedpur

• Move up the value chain with strong brands

• Establish alternative locations in India

• Establish global presence

• Connect domestic and global operations

Mr Tata believes that the company needs to evaluate and

invest in new emerging steel making technologies, so as to
enable it to be state-of-the-art steel making facility. The
company has framed a growth and globalisation plan. This
includes:

• 2.4MT expansion at Jamshedpur. It has entered into a

limestone joint venture in Thailand for establishing low
cost material sources globally. It is making a plan to set
up a disintegrated production facility in Orissa

• It is setting up a coke plant at Haldia in West Bengal

• It has taken up the Dhamra port project in Orissa

• It is looking for acquisitions in India and overseas.

• It has already signed an agreement with NatSteel in

Singapore to acquire steel business interests in
 Singapore, China, Malaysia, Thailand, Australia,
Vietnam and the Philippines.

India is now going to be a country where the demand for

steel is going to be very high. India is at the trigger point in
terms of potential for growth in steel consumption in
comparison with China being at the point of inflection,
Singapore being at peak point and USA being at point of
saturation.

The industries which are on a growing trend are Construction

and Automobile. These industries definitely need steel for
development and so prospects are very high.

Many countries including India are going into faster

urbanisation and with Tata Steel being one of the top Steel
manufacturing units in the country also elsewhere where it
has its subsidiary units that include 359 units inside and
outside the country.

Tata Steel has huge amounts in their pockets in terms of

Reserves & Surplus. This is good for the company in the
future as it can use these funds to invest in other projects
and gain more market share.