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INSTITUTE OF COMMERCE, NIRMA UNIVERSITY

B.COM (HONOURS)

SEMESTER-III, YEAR-2018-19

Group Project

On

“Analysis of the Financial Statements of TATA Steel Ltd.”

Prepared for:

Professor Dr. Udai Paliwal

Prepared By:

Group 11
Disha Sodani (IC171115)

Harsh Patwa (IC171120)

Divya Patidar (IC171116)

Harsh Gupta (IC171119)

Submitted On:

19 November, 2018
• Abstract
• Introduction
• Aims and Objectives
• Explanation/ Definition of important terms
used throughout the project
• Analysis of the Financial Statements of TATA
Steel Ltd. for the F.Y. 2015-16
• Analysis of the Financial Statements of TATA
Flow of •
Steel Ltd. for the F.Y. 2016-17
Analysis of the Financial Statements of TATA
Steel Ltd. for the F.Y. 2017-18
Presentation •

Comparative Data and Other Analysis
Conclusion
• Bibliography
ABSTRACT
 This project mainly focuses on the financial condition and financial position of TATA Steel
Ltd. in Indian market context.

 The analysis of financial statements of an Indian company in steel industry particularly has
been done in this project for the past three years, i.e., 2015-16, 2016-17 and 2017-18.

 The analysis of financial statements of TATA Steel Ltd. has been done with the help of
Balance Sheet, Profit & Loss Account, Cash Flow Statement, Statement of Changes in Equity,
Financial Ratios, Capital Structure, etc. All the data used here is on Standalone basis.

 The project with the help of certain financial data will clearly portray as how TATA Steel Ltd.
has grown from edge-to-edge in terms of profitability, cash in hand position, debt-equity
structure, etc.

 The analysis of financial statements of this company will help the reader of this project to get
a great extent of knowledge and information about the financial position of TATA Steel Ltd.,
and also some idea about the position of Steel Industry in India as TATA Steel Ltd. is one of its
most major contributors to the growth of Steel Industry in India.
INTRODUCTION
Aims & Objectives
To assess the financial strength and weaknesses of Tata Steel Ltd. with the help of various
financial statement analysis tools and techniques over the period of study, i.e., from 2015-16 to
2017-18. The following are the aims and objectives of the project:
1. To do a comparative analysis of financial statements of past 3 years using various financial
statements concepts and techniques.
2. To do analysis of the company on the basis of various parameters and factors and to know its
current financial position in the market.
3. To study the financial statements through various financial ratios of the past 3 years like
current ratio, inventory turnover ratio, etc.
4. To make the reader of the project understand the various company accounts concepts and
terminology applied to analyse the real life company’s financial statements and annual
reports.
5. To learn to read the annual reports of companies and to analyse the financial condition and
position of the company through various tools and techniques applied to financial statements
of the company.
Explanation/ Definition of important terms used throughout the
project

 Financial Statement

 Statement of changes in equity

 Consolidated Financial Statement

 Standalone Financial Statement

 Annual Report

 Capital Structure

 Financial Ratios

 Financial Year

 Notes to Financial Statements

 Independent Auditor’s Report/ Independent Audit


Analysis of the Financial Statements of TATA Steel Ltd.
For the F.Y. 2015-16

1. Dividend Statistics
ANALYSIS:

• The Ordinary Shares of Rs. 100 each have been sub-divided into Ordinary Shares of Rs. 10 each
during 1989-90 and the rate of Dividend is per Ordinary Share of Rs. 10 each.

• On the Capital as increased by shares allotted on Conversion of Convertible Debentures.

2. Standalone sources and utilisation of funds


3. Financial Ratios

ANALYSIS:

The above image compares the Tata Steel Standalone data with the Tata Steel Group. By this we
can analyse that Tata Steel Standalone is way better in performance as compared to Tata Steel
Group if we see EBITDA/ Turnover, PBT/ Turnover, etc.
4. Balance Sheet
ANALYSIS:
Significant accounting policies-

(a). Statement of compliance: The financial statements have been prepared in accordance with the Indian
Accounting Standards (referred to as “Ind AS”) prescribed under section 133 of the companies Act, 2013
read with Companies (Indian Accounting Standards) Rules, as amended from time to time.

(b). Basis of preparation: The financial statements have been prepared under the historical cost convention
with the exception of certain assets and liabilities that are required to be carried at fair values by Ind AS.

(c). Use of estimates and critical accounting judgements: In the preparation of financial statements, the
Company makes judgements, estimates and assumptions about the carrying values of assets and liabilities
that are not readily apparent from other sources. The estimates and associated assumptions are based on
historical experience and other factors that are considered to be relevant. Actual results may differ from
these estimates.

(d). Useful lives of property, plant and equipment and intangible assets: The Company reviews the useful
life of property, plant and equipment and intangible assets at the end of each reporting period. This
reassessment may result in change in depreciation and amortisation expense in future periods.

(e). Valuation of deferred tax assets: The Company reviews the carrying amount of deferred tax assets at the
end of each reporting period.

(f). Depreciation and amortisation of property, plant and equipment and intangible assets: Depreciation or
amortisation is provided so as to write off, on a straight line basis, the cost/deemed cost of property, plant
and equipment and intangible assets, including those held under finance leases to their residual value.
5. Statement of Profit and Loss
ANALYSIS:

1. REVENUE RECOGNITION: Revenue from sale of goods is recognised net of rebates and
discounts on transfer of significant Asks and rewards of ownership to the buyer. Sale of
goods is recognised gross of excise duty but net of sales tax and value added tax.

2. EMPLOYEE BENEFITS: Short-term employee benefits are recognised as an expense at the


undiscounted amount in the Statement of Profit and Loss of the year in which the employee
has rendered services.

3. BASIS FOR ACCOUNTING

4. USE OF ESTIMATES AND JUDGEMENTS


Exceptional Items:

(a). 'Profit on sale of non-current investments' represents profit of 104.29 crore on sale of
investments held by the Company in its subsidiaries, associates and others.

(b). The previous year amount of 'Profit on sale of non-current assets' represents profit on sale
of a land at Borivali, Mumbai.

(c). During the year, the Company carried out impairment testing of its exposure in some of its
affiliate companies due to the existence of factors indicating probable impairment.

(d). 'Provision for impairment on non-current assets' of Rs. 51.51 crore represents non-cash
write down of fixed assets and inventory in certain non-performing business units.

(e). Provisions for demands and claims' of Rs. 880.05 crore represents provisions created during
the year for certain demands and claims.

(f). Employee Separation Compensation' represents the charge of Rs. 556.25 crore taken on
Employee Separation Scheme.
ANALYSIS:

Major source revenue decreased as compared to 2014-15 because of market instability and
competition.
ANALYSIS:

Income from other sources sees a major jump of almost 6 times as compared to 2014-15 in
2015-16(sale of other non-current investments were the highlights).
6. Cash Flow Statement
ANALYSIS:

Operating- working capital changes

Investing- purchase of lots of assets (investments-current as well as non-current)

Financing- interest and dividend paid, proceeds from borrowings


OTHER ANALYSIS:

1. Deferred Tax Liability(net)/ Deferred Tax Asset(net): The Deferred tax liabilities (net) at the
year end are slightly less from the beginning because DTA was very less as compared to DTL
every time. Not much of the Deferred tax liabilities were paid-off during the year using reserves
because of less cash reserves with the company and more expenses to pay off. Rest details can
be seen in below image.
2. Earnings per share data: Less Earnings per share is a risky and less profitable position for the
company as it creates a bad image among the investors about the company which can seriously
affect the company’s market share, profitability, and net income earned on per share or stock,
etc. Company was in a good position in 2014-15, and then slipped down to Rs. 48.67 crore in
2015-16.
3. Share Capital Breakdown: No change or alteration was there with regards to authorized and
issued share capital of the company (both including preference and equity shares).

• Other: No change or alteration can be seen in the holding by the major stakeholders from
F.Y.2014-15 to F.Y.2015-16.
4. Reserves and Surplus (Surplus in the Statement of Profit and Loss): Profit decreased because
of many reasons like stiff competition, low EPS, etc.

5. Provisions: Short-term provisions saw a major increase because of increase in provision for
employee separation compensation in 2015-16 and provision for taxation also in 2015-16 which
are both explained briefly in additional information in the image below.
Highlights of the F.Y. 2015-16