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8/12/2019 116341794 TISCO Ratio Analysis
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KIRLOSKAR INSTITUTE OF ADVANCED MAANGEMENT STUDIES
TATA STEEL
CORPORATE FINANCE
12/20/2011
Submitted To Submitted By:-
Prof . T Vishvanathan Akash Jain 5
AnandMurarka 7
AnishWadhwa 10
ChandrachurPalchaudhri
30
KhushbooVijayvargiya
47
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1
TATA GROUP
It was when Jamsetji Tata gave shape to his vision of nation building by
forming what was to become the Tata Group in 1868, he had envisaged India
as an independent strength politically, economically and socially. In order
to become a force that the world has to reckon with, the Tata Group has
always ventured into path breaking territory and pioneered developments in
industries of national importance. The Tata name has been respected in India
for 140 years for its adherence to strong values and business ethics.
The Tata Group of Companies has always believed strongly in the concept of
collaborative growth, and this vision has seen it emerge as one of India's and
the world's most respected and successful business conglomerates. The Tata
Group has traced a route of growth that spans through six continents and
embraces diverse cultures. The total revenue of Tata companies, taken
together, was 67.4 billion USD (around Rs319, 534 crore) in 2009-10, with
57 per cent of this coming from business outside India. In the face of trying
economic challenges in recent times, the Tata Group has steered Indias
ascent in the global map through its unwavering focus on sustainable
development. Over 395,000 people worldwide are currently employed in the
seven business sectors in which the Tata Group Companies operate. It is the
largest employer in India in the Private Sector and continues to lead with thesame commitment towards social and community responsibilities that it has
shown in the past.
The Tata Group of Companies has business operations (114 companies and
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subsidiaries) in seven defined sectors Materials, Engineering, Information
Technology and Communications, Energy, Services, Consumer Products and
Chemicals. Tata Steel with its acquisition of Corus has secured a place among
the top ten steel manufacturers in the world and it is the Tata Groups flagship
Company. Other Group Companies in the different sectors areTata Motors,
Tata Consultancy Services (TCS), Tata Communications, Tata Power, Indian
Hotels, Tata Global Beverages and Tata Chemicals.
Tata Motors is Indias largest automobile company by revenue and is among
the top five commercial vehicle manufacturers in the world. Jaguar and
Landrover are now part of Tata Motors portfolio.
Tata Consultancy Services (TCS) is an integrated software solutions
provider with delivery centres in more than 18 countries. It ranked fifth
overall, and topped the list for IT services.
Tata Powerhas pioneered hydro-power generation in India and is the largest
power generator (production capacity of 2300 MW) in India in the private
sector.
Indian Hotels Company (Taj Hotels, resorts and palaces) happens to be the
leading chain of hotels in India and one of the largest hospitality groups in
Asia. It has a presence in 12 countries in 5 continents.
Tata Global Beverages (formerly Tata Tea),with its major acquisitions like
Tetley and Good Earth is at present the second largest global branded tea
operation.
Business excellence involves a journey where the experience itself is the
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destination. Just 13 of the 100-odd Tata companies have made this journey
their own and gone on to win the coveted JRD QV Award.
Our Values
The Tata Group has always been driven by five core values:
Integrity. We must conduct our business fairly, with honesty and
transparency. Everything we do must stand the test of public scrutiny.
Understanding. We must be caring, show respect, compassion and
humanity for our colleagues and customers around the world, and
always work for the benefit of the communities we serve.
Excellence. We must constantly strive to achieve the highest possible
standards in our day-to-day work and in the quality of the goods and
services we provide.
Unity. We must work cohesively with our colleagues across the groupand with our customers and partners around the world, building strong
relationships based on tolerance, understanding and mutual
cooperation.
Responsibility. We must be responsible and responsive to the countries,
communities and environments in which we work, always ensuring that
what comes from the people goes back to the people many times over.
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TATA IRON & STEEL COMPANY LIMITED (TISCO)
VISION
Our vision is to be the global steel industry benchmark for value creation andcorporate citizenship.
We will achieve our vision through:
Our PeopleBy fostering teamwork, nurturing talent, enhancing leadership capability and
acting with pace, pride and passion.
Our OfferBy becoming the supplier of choice, delivering premium products andservices and creating value for our customers.
Our Innovative ApproachBy developing leading edge solutions in technology, processes and products.
Our ConductBy providing a safe workplace, respecting the environment, caring for ourcommunities and demonstrating high ethical standards.
Goals
The Tata Steel Group is proud of its performance culture. We are committedto the pursuit of challenging targets, and to safety, environmental protection,continuous improvement, openness and social responsibility in every aspectof our business around the world.
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TISCO has set for itself four key corporate goals to be achieved by 2012:
Value creation: Deliver a 30% return on invested capital (ROIC)
Safety: Achieve an industry leadership position by driving down our
lost time injury frequency rate (LTIF) to a maximum of 0.4 incidents
per million hours worked
Environment: Reduce carbon dioxide (CO2) emissions to less than 1.9
tonnes per tonne of crude steel (t/tls)1
People: Rank as an employer of choice in the top quartile across all
industries
The company was established in Jamshedpur, India, in 1907. Tata Steel is
headquartered at Jamshedpur in Jharkhand, India. In the past few years, Tata
Steel has invested in Corus (UK, renamed Tata Steel Europe), Millennium
Steel (renamed Tata Steel Thailand) and NatSteel Holdings (Singapore). With
these, the company has created a manufacturing and marketing network inEurope, South East Asia and the Pacific-rim countries. It has the capacity to
produce over 30 million tonnes of crude steel every year.
Tata Steel has also set up joint ventures for the development of limestone
mines in Thailand, the procurement of low-ash coal from Australia and
coking coal from Mozambique, and the setting up of a deep-sea port in Orissa
in India. The company is exploring opportunities in the titanium dioxide
business in Tamil Nadu, India, and will soon be producing high carbon
ferrochrome from its plant in South Africa.
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The company produces crude steel and basic steel products, and makes steel
for building and construction applications through Tata BlueScope Steel, its
joint venture with Australia's BlueScope Steel.
RECENT UPDATE
Mr Cyrus P Mistry has been appointed as deputy chairman of Tata sons, who
will work with Mr Ratan N Tata over the next year and take over from
him when Mr. Tata retires in December 2012.
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ACHIEVEMENTS
Tata Steel has received the Thomson Reuters Innovation Awardin the hi-
tech corporate category. Since 2007, Thomson Reuters has been presenting
the Thomson Reuters Innovation Awards to recognise innovation and
entrepreneurship in India. The award recognises the most innovative
academic institutions and commercial enterprises headquartered in India for
their spirit of innovation in R&D as it relates to all aspects of patent
publications in India.
The Ministry of Labour and Employment, Government of India, conferred
the prestigious PrimeMinisters Shram Awardsfor the years 2008, 2009
and 2010, on twenty-one employees of Tata Steel at VigyanBhavan, New
Delhi, on October 13, 2011. The Prime Ministers Shram Awards were
instituted in the year 1985 for the public sector. Its objective is to recognise
outstanding contributions made by workmen as defined in the Industrial
Dispute Act, 1947. This award was extended to the private sector in 2004.
Tata Steel, in a move to reaffirm its commitment to its longstanding values,
collaborated with the OVAL Trust to formally dedicate the Charkha to the
nation, on the occasion of the birth anniversary of Mahatma Gandhi, October
2, 2011.
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Tata Steel bagged the first prize in heavy industry category at UdyogMela
2011, Ranchi. It has bagged this prize consecutively for the second time.
Tata steel bagged the two most prestigious awards at theMMMM exhibition
2011(Minerals Metals Metallurgy and Materials ) held at New Delhi between
February 11thto 14th2011.
Tata Steel has been named in Fortune magazine's 2011 list of Worlds
Most Admired Companies for the third consecutive year.The annual
survey, conducted by Fortune magazine and Hay Group, a global
management consulting firm, is given to top executives, directors and
financial analysts, to identify the companies that enjoy the strongest
reputations within their industries and across industries. Tata Steel has been
ranked sixth in the Industry-Metals category; the only company from India
to have achieved this prestigious feat.
Tata Steel was conferred the Good Corporate Citizen Awardfor the year
2011 by the Bombay Chamber of Commerce and Industry (BCCI) in a
ceremony at Mumbai, yesterday as part its 176th Foundation Day. The award
was presented to Tata Steel for its outstanding service to the civic community
and contribution towards the betterment of the society in the 'large corporate'
category. This is the first time that Tata Steel has won this prestigious award
from BCCI.
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Subsidiaries of TISCO
Tata Steel Europe: Europes second largest steel maker with major
operations in the UK and continental Europe, Tata Steel Europeproduces long and strip products for the construction, automotive,
packaging, engineering and other markets
worldwide. (www.tatasteeleurope.com/en/)
NatSteel Holdings: A leading supplier of premium steel products for
the construction industry, NatSteel has operations in seven countries in
Asia. (www.natsteel.com.sg)
Tata Steel Thailand: A major steel producer in Thailand, the company
produces steel for the construction industry.
Tinplate Company of India: Industry leader in India in the
manufacture of tinning line products, including electrolytic tinplate, tin-
free steel and cold-rolled products. (www.tatatinplate.com/)
Tayo Rolls: Indias leading roll manufacturer and supplier, the
company produces rolls for integrated steel plants, power plants, the
paper, textile and food processing sectors, and the government mint.
(www.tayo.co.in/)
Tata Ryerson: Offers hot- and cold-rolled flat steel products in
customised sizes and quantities.
Tata Refractories: Produces high-alumina, basic, dolomite, silica and
monolithic refractories and offers design, procurement and re-lining
services. (www.tataref.com)
http://www.tatasteeleurope.com/en/http://www.natsteel.com.sg/http://www.tatatinplate.com/http://www.tayo.co.in/http://www.tataref.com/http://www.tataref.com/http://www.tayo.co.in/http://www.tatatinplate.com/http://www.natsteel.com.sg/http://www.tatasteeleurope.com/en/8/12/2019 116341794 TISCO Ratio Analysis
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Tata Sponge Iron: Produces sponge iron lumps and fines.
(www.tatasponge.com/)
Tata Metaliks: Manufactures and sells foundry-grade pig iron.
(www.tatametaliks.com)
Tata Pigments: Produces oxides of iron, dry cement paint, exterior
emulsion paint and distemper. Its products are used in paints,
emulsions, cement floors and plastics.
Jamshedpur Injection Powder: Manufactures carbide de-sulphurising
compounds used for the production of low-sulphur, high-quality steel.
(www.jamipol.com)
TM International Logistics: Provides material handling and port
operation services at the Haldia and Paradip ports in India; also has
freight-forwarding and chartering services. (www.tmilltd.com)
mjunction services: A 50:50 joint venture involving Steel Authority of
India and Tata Steel, it is India's largest e-commerce company and the
world's largest e-marketplace for steel. (www.mjunction.in)
TRF: In the business of design, manufacture, supply, installation and
commissioning of engineered-to-order equipment and systems in the
areas of bulk material handling, processing, reclaiming and blending.
(www.trfltd.com)
Jamshedpur Utility and Service Company: Re-engineered out of Tata
Steel's town services, JUSCO provides municipal and civic services for
townships. (www.juscoltd.com)
http://www.tatasponge.com/http://www.tatametaliks.com/http://www.jamipol.com/http://www.tmilltd.com/http://www.mjunction.in/http://www.trfltd.com/http://www.juscoltd.com/http://www.juscoltd.com/http://www.trfltd.com/http://www.mjunction.in/http://www.tmilltd.com/http://www.jamipol.com/http://www.tatametaliks.com/http://www.tatasponge.com/8/12/2019 116341794 TISCO Ratio Analysis
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Indian Steel and Wire Products: Recently acquired by Tata Steel,
ISWP has a wire unit and a steel roll manufacturing unit.
Tata BlueScope Steel: A joint venture with BlueScope Steel, Australia,
the company offers a comprehensive range of branded steel products
for building and construction applications.
(www.tatabluescopesteel.com)
Dhamra Port Company: A joint venture between Larsen & Toubro
and Tata Steel to build a deep-draft (18 metres) all-weather port in
Orissa on the east coast of India.(www.dhamraport.com)
Hooghly Met Coke & Power Company: A joint venture with the West
Bengal Industrial Development Corporation, producing met coke and
electric power.
(www.hooghlymetcoke.com)
Lanka Special Steel: A Sri Lankan unit that manufactures galvanised
wires.
Sila Eastern Company: Established to develop limestone mines in
Thailand, mainly for captive use.
Tata Steel KZN: Setting up a high carbon ferrochrome plant in South
Africa with an annual production capacity of 135,000 tonnes.
Tata NYK: A 50:50 joint venture with Nippon Yusen Kabushiki Kaisha
(NYK Line) to set up a shipping company to handle dry-bulk and
break-bulk cargo.
http://www.tatabluescopesteel.com/http://www.dhamraport.com/http://www.hooghlymetcoke.com/http://www.hooghlymetcoke.com/http://www.dhamraport.com/http://www.tatabluescopesteel.com/8/12/2019 116341794 TISCO Ratio Analysis
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Tata Steel, a company synonymous with valuestrust, transparency and
total community caretoday, announced the launch of a corporate
campaign 'Values stronger than steel' (VSTS).The campaign is aimed at
reaching out to the Indian citizen to reinforce the image of the company as a
cutting-edge, global steel major which is dedicated towards social and
economic sustainability, green technology and community empowerment.
The core of the campaign is to showcase the organisations involvement and
commitment beyond steel making, while embodying its overarching 'value
system'.
The campaign presents the companys veryown achievers who have paved
their own way to success and recognition, such as Mark Denys, chief, R&D;
Bachendri Pal, head, Tata Steel Adventure Foundation; DeepikaKumari, the
young talent in archery; empowered members of the Tejaswini project like
AshaHansda, amongst others. Everyone has a story to tell and they are thebrand ambassadors for the campaign
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CAPACITY EXPANSION
TATA STEEL has set up an ambitious target to achieve a capacity of
100million tonnes by 2015. Director BalasubramanianMuthuraman stated
that of the 100million tonnes, TATA Steel is planning a 50-50 balance
between greenfield facilities and acquisitions.
The series of acquisitions have already added upto a 21.4million tonne, which
includes Corus production at 18.2million tonne, Natsteel production at
2million tonne and Millennium Steel production at 1.2million tonne. Tata islooking to add another 29million tonnes through the acquisition route.
Tata Steel has lined up a series of greenfield projects in India and Outside
which includes:
6 million tonnes plant in Orissa (India).12 million tonnes plant in Jharkhand (India).
5 million tonnes plant in Chhattisghar (India).
3 million tonnes plant in Iran.
2.4 million tonnes plant in Bangladesh.
5 million tonnes capacity expansion in Jamshedpur (India).
4.5 million tonnes plant in Vietnam.
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STEEL SECTOR IN INDIA and its GROWTH PROSPECTS
Background
The establishment of Tata Iron and Steel Company (TISCO) in 1907 was the
starting point of modern Indian steel industry. Afterwards a few more steel
companies were established namely Mysore Iron and Steel Company, (later
renamed Vivesvaraya Iron & Steel Ltd) in 1923; Steel Corporation of Bengal
(later renamed Martin Burn Ltd and Indian Iron & Steel Ltd) in 1923; and
Steel Corporation of Bengal (later renamed Martin Burn Ltd and Indian Iron
and Steel Co) in 1939. All these companies were in the private sector.
Till early 1990s, when economic liberalization reforms were introduced, the
steel industry continued to be under controlled regime, which largely
constituted regulations such as large plant capacities were reserved only for
public sector under capacity control measures; price regulation; for additional
capacity creation producers had to take license from the government; foreigninvestment was restricted; and there were restrictions on imports as well as
exports.
Steel production in India has increased by a compounded annual growth rate
(CAGR) of 8 percent over the period 2002-03 to 2006-07. Going forward,
growth in India is projected to be higher than the world average, as the per
capita consumption of steel in India, at around 46 kg, is well below the world
average (150 kg) and that of developed countries (400 kg). Indian demand is
projected to rise to 200 million tonnes by 2015. Given the strong demand
scenario, most global steel players are into a massive capacity expansion
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mode, either through brownfield or greenfield route. By 2012, the steel
production capacity in India is expected to touch 124 million tonnes and 275
million tonnes by 2020. While greenfield projects are slated to add 28.7
million tonnes, brownfield expansions are estimated to add 40.5 million
tonnes to the existing capacity of 55 million tonnes.
Broadly there are two types of producers in India viz. integrated producers
and secondaryproducers. Integrated steel producers have traditionally
integrated steel units have captive plants for iron ore and coke, which are
main inputs to these units. Currently there are three main integrated
producers of steel namely Steel Authority of India Limited (SAIL), Tata Iron
and Steel Co Ltd (TISCO) and RashtriyaIspat Nigam Ltd (RINL). SAIL
dominates amongst the three owing to its large steel production capacity plant
size.
Secondary producers use steel scrap or sponge iron/direct reduced iron (DRI)
or hot briquetted iron (HBI). It comprises mainly of Electric Arc Furnace(EAF) and Induction Furnace (IF) units, apart from other manufacturing units
like the independent hot and cold rolling units, rerolling units, galvanizing
and tin plating units, sponge iron producers, pig iron producers, etc.
Secondary producers include Essar Steel Ltd., Ispat Industries Ltd., and JSW
Steel Ltd. There are 120 sponge iron producers; 650 mini blast furnaces,
electric arc furnaces, induction furnaces and energy optimizing furnaces; and
1,200 re-rollers in India.
India is currently the fifth largest steel-producing nation in the world with
production of over 54 million tonnes (MT). However, it has a very low
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per capita consumption of steel of around 46 kgs as against an average of
198 kgs of the world. This wide gap in relative steel consumption
indicates that the potential ahead for India to raise its steel consumption is
high.
Being a core sector, steel industry tracks the overall economic growth in
the long term. Also, steel demand, being derived from other sectors like
automobiles, consumer durables and infrastructure, its fortune is
dependent on the growth of these user industries.
The Indian steel sector enjoys advantages of domestic availability of rawmaterials and cheap labour. Iron ore is also available in abundant quantities. This
provides major cost advantage to the domestic steel industry, with companies like
Tata Steel being one of the lowest cost producers in the world
However, Indian steel companies have to bear additional costs pertaining to
capital equipment, power and inefficiencies (low per employee productivity). This
has resulted in the erosion of the edge they would have otherwise enjoyed due to
availability of cheap labour and raw materials.
The government has reinstated basic customs duty on steel imports in order to
protect India from dumping of cheap steel products. It has also provided series of
benefits to auto, housing and real estate sector in order to counter the slowdown in
the economy.
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BUSINESS RISK ANALYSIS
Strong Position In the Indian Market
Capacity expansion is a key strategy for Tata Steel in India, where it derives much of its
competitive advantage as a low cost producer from its access to raw materials and a
skilled workforce at a relatively low cost of labour.
Work is currently under way to increase steelmaking capacity at Jamshedpur to 9.7mtpa
by 2012.
Looking further into the future, the Company plans to continue to increase its capacity
significantly through greenfield developments.
Enhanced Competitiveness through Continuous Improvement.
The Company undertook a series of measures to counter recessionary pressures inFY09 and FY10 to reduce cost
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KEY INITIATIVES
One Company Operating Model
In the process of transforming its operations to directly align its marketing,sales and distribution teams with major industries and sectors
Transforming its supply chain in Europe
Product Development and Marketing
Through research and development initiatives working to capture marketshare in a number of potential high growth areas
Customer First strategy
Cost Saving Initiatives
Implemented, and plans to continue to implement, strategic cost-savingmeasures to improve the long-term competitiveness of its business.
Fit for the Future initiatives for its European operations.
Strong Retail Management
Works closely with retail and wholesale customers to ensure value byscheduling deliveries on a just-in-time basis.
Been able to reduce customers inventory stock and increase their margins.
Raw Material Security
Investments In Mineral Assets Improving Raw Material Security
India: Captive mines
_ Significant amounts of raw material requirements for FY10 sourced from leased
captive mines
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_ Iron Ore: 100%
_ Coal: 49%
_ Significant amount of ferro alloy requirements
NML (Holdco)
_ Canada
_ TS Equity Stake: 27%
NML JV (iron ore)
_ TS Equity Stake: 80%
_ Status: Initiated project development
_ Offtake rights: 100%
_ TSL has an exclusive right to negotiate and settle a proposed transaction in
respect of NMLs LabMag Project
TSCI
_ Ivory Coast
_ Partner: Sodemi
_ TS Equity Stake: 85%
_ Status: Pre-feasibility
RML (Holdco)
_ Australia
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_ TS Equity Stake: ~24%
RivMoz
_ Partner: RML
_ TS Equity Stake: 35%
_ Status: Project development commenced
_ Coking coal
_ Offtake rights: 40% of the coking
Coal
CDJV
_ Australia
_ Partners: Vale, JFE, NSC,Posco
_ TS Equity Stake: 5%_ Offtake rights: 5 to 20%
_ Coking coal
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Diversified Product Offering: Branding and Positioning
Control over Logistics
100% subsidiary of Tata Steel since July 2009.
Five processing units located across India with a processing
capacity of ~2 million tonnes per annum.
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Also engaged in the business of high-end plate fabrication for major equipment
manufacturers including Caterpillar and JBP Group.
Tata Bluescope Steel Limited (TBSL) a 50:50 JV with
Bluescope Steel Limited
Engaged in the business of manufacturing building products
& solutions from metal & color coated steel.
Existing operations include three facilities with a total
installed capacity of 136,000 TPA in Pune, Bhiwandi
and Chennai, to manufactureproducts for the Indian
construction industry
Presently implementing a Greenfield project for setting up of a
metal coating (capacity of 250,000 tpa) and color coating
(150,000 tpa) facilities at Jamshedpur, to be operational by
April 2011.
The project involves capacity expansion to 390,000
Tata Steel holds ~45% equity.
TCIL is commissioning Cold Roll Mill in 2011.
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Steelworks facility in Tarapur, Maharashtra
Wire drawing plants at Indore and Bengaluru
Caters to the Indian construction and automotive segments for
products such as springs, pre-stressed concrete and conductor
Control over Logistics
A 50:50 JV between Tata Steel and Nippon Yusen Kabushiki Kaisha (NYK
Line), Japan, currently operating 12 chartered and 2 owned vessels.
Focused on shipping dry bulk and break bulk cargo Trial operations
commenced in September 2010.
Expected to be capable of handling 13 mtpa of coking coal and 6 mtpa of
iron ore.
Partnership between Tata Steel, NYK and Martrade.
Engaged in the business of port operations, cargo handling and other related
Services.
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SWOT ANALYSIS
Strengths
Strong market position
Tata Steel Group, an integrated steel company, is the world's tenth largest steel
company with
capacity of 27.2 million tonnes per annum. It is the world's second most
geographically diversifiedsteel producer, with operations in 26 countries and
commercial presence in more than 50 countries.
Tata Steel India is the largest producer of manganese alloys in India with a market
share of approximately 14%. Tata Steel Europe is Europe's second largest steel
producer with a crude steel productionof more than 14 million tonnes. The group'sstrong market position gives it advantage of scale and increases its bargaining
power.
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Diversified end markets
Tata Steel Group offers a diversified product portfolio comprising flat and long
steel products, agricultural implements, bearings and auto assemblies, tubes, and
wires.
The steel products manufactured by them are used by companies operating in the
following industries: aerospace, automotive, construction, consumer goods, energy
and power, packaging, rail, security and defense, shipbuilding, and engineering.
Diversified end markets avoid dependence of the company on a single segment for
revenues, and shield the company from downturn in one or few segments.
Integrated steel operations in India
The steel business of Tata Steel Group in India is integrated. Majority of its raw
material requirementsare provided through its mining operations in the country.
The iron ore units owned by Tata Steel India are located in Noamundi, Joda,
Katamandi, and
Khondbond in the states of Jharkhand and Orissa.Thecompany owns two collieries
in West Bokaro and Jharia.
These captive mines shield the group from fluctuations in raw material prices. The
integrated steel
operations in India made the group one of the cost-effective steel manufacturers in
the country.The Indian operations being one of the most competitive assets in the
groups business portfolio offer a competitive advantage with a leading market
position in the country.
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Strong research and development (R&D) capabilities
Tata Steel Group operates five research centers : the Ijmuiden Technology Centre(the Netherlands), the SwindonTechnology Centre (the UK), the Teesside
Technology Centre (the UK), the Automotive Engineering Group (the UK), and
the Jamshedpur R&D Centre (India).they are currently workingon various projects
that include economic mineral beneficiation ,new generation high strength steels,
advanced coatings developments, production of Ferro-chrome with less energy,
hydrogen harvesting, developing state-of-the-art thin film photovoltaic systems,
and development of efficient coolants and lubricants for rolling. The group is also
working on reducing CO2emissions across its operations. The company's strong
R&D capabilities provide it with a competitive advantage and help it to improve
the efficiency of its products and processes.
Weaknesses
Dependence on third party suppliers for raw material in Europe
The raw material self-sufficiency for the Tata Steel Group is currently at 25%. The
group plans toincrease self-sufficiency of to 50% in the medium to long term. The
iron ore is imported mainly from Australia, Canada, South Africa, and South
America, and the coal from Australia, Canada, and the US. The European business
is susceptible to the fluctuations in the iron and coal prices.Therefore, dependence
on third party suppliers for raw material in Europe increases the business risk for
the group.
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Dependence on Europe
Europe is the key market for Tata Steel Group. In FY2010, the company generated
about 64% of its revenues from Europe. Minor changes in price levels, periodic
demand growth, or currency rates in specific market areas and regions can affect
their competitive position and financial performance. The companys business is
also exposed to many adverse changes in the policies and regulations related to the
steel sector in the region. Therefore, dependence on Europe for majority of its
revenues increases business risk for the company.
Opportunities
Expansion in India
Indian operations are one of the most competitive assets in the global steel
industry. The group is focusing on to expand the Jamshedpur works capacity to
9.7 million tonnes per annum (mtpa) of crude steel by 201112.This additionalcapacity will allow the company to use its existing resources more efficiently. The
expansion at Jamshedpur will enable Tata Steel Group to reduce the operating
costs over a large volume of production and strengthen its market share in the flat
products segment.The group's expansion of Indian operations would help it to
generate incremental revenues and reduce its dependence on Europe.
Increasing raw material security
The steel production in India is expected to grow to over 120 million tonnes by
2015.
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In January 2010, Tata Steel Group signed a memorandum of understanding with
NMDC for exploring possibilities of a strategic alliance to enhance iron ore
resources. The two companies will ensure smooth supply of raw materials for
future capacity additions explore possibilities of entering into joint ventures for the
purpose of acquisition, exploration, and development of mines, extraction and
processing of minerals, setting up integrated steel plants, and any other business of
mutual interest. These joint ventures will strengthen the long-term raw material
security for Tata Steel India. The joint venture with Nippon Steel Corporation will
address the localization needs of Indian automotive customers for high-grade cold-
rolled steel sheet and meet the needs of thegrowing Indian automotive industry..
According to the Society of Indian Automobile Manufacturers, annual car sales are
projected to increase up to five million vehicles by 2015 and more than nine
million by 2020. The joint venture will enable the Tata Steel Group to capitalize on
this new opportunity of increased demand for automotive in India.
Positive outlook for the global steel market
The global steel market is expected to grow strongly over the next few years.
According to Data monitor, the global steel market had total revenue of $655.6
billion in 2009, representing a compound annual growth rate (CAGR) of 3% for
the period spanning 200509. The European and Asia-Pacific markets will grow
with CAGRs of 20.4% and 13.9%, respectively, over the same period, to reach
respective values of $316.7 billion and $871.3 billion in 2014. Tata Steel Group
being one of the worlds largest steel company is well positioned to benefit fromthe growth in this market.
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Threats
Intense competition
The global steel industry is cyclical, highly competitive, and has historically been
characterized by overcapacity. The company competes with several steel
manufacturers ranging from large diversified enterprises to smaller companies
specializing in particular products in India and internationally. The competition is
based on quality of products, services and delivery capabilities, price,
manufacturing costs, and manufacturing capacity. Its major competitors include
Arcelor Mittal, Nippon Steel, Steel Authority of India, United States Steel, and
ThyssenKrupp. Intense competition in the industry could lead to loss of market
share and put pressure on the group's margins.
Environmental regulations
The business of Tata Steel Group is subject to extensive environmental regulatory
requirements relating to occupational safety and health, environmental protection,
pollution prevention, industrial waste disposal, and management of potentially
toxic substances. With rising awareness of the damage to the environment caused
by industry, especially regarding global warming, regulatory standards have been
continuously tightened in recent years. One of the most important developments in
this area has been the introduction of the Kyoto Protocol for the reduction ofgreenhouse gases. Increasing pressures from the regulatory authorities is expected
to increase the compliance cost of Tata Steel Group.
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Economic or industry downturn
Downturn or weakness in the economy in general or in key industries may
adversely affect Tata Steel Groups customers, which may cause the demand for
the companys products and services to decline Product demand in Tata Steel
Groups customers end markets is based on numerous factors such as interest
rates, general economic conditions, consumer confidence, and other factors beyond
the companys control. Downturn in demand from industries the company serves,
or a decrease in the margins that Tata Steel Group can realize from sales of its
products to customers in any of these industries, could adversely affect the
companys financial results.
TATA STEEL CORPORATE SOCIAL RESPONSIBILITY POLICY
Tata Steel believes that the primary purpose of a business is to improve the
quality of life of people.
Tata Steel will volunteer its resources, to the extent it can reasonably afford, to
sustain and improve a healthy and
prosperous environment and to improve the quality of life of the people of the
areas in which it operates.
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Addressing gender issues
A small percentage of Tata Steels workforce is female at 5%. This rate is higher
among officers. The Company does not differentiate between male and female
employees in terms of remuneration: for the same work or work of similar nature,
male and female employees are paid equally. Remuneration is linked to
responsibility levels and performance. The Company, thus encourages its female
employees to advance their careers with dedicated initiatives both to promote the
personal development and career advancement of female employees and to
facilitate the combination of career with family. For example, 15 days of additional
leave is given to female executives with children aged under five, to enable them to
take care of their children in case of sickness. The Women Empowerment Cell
(WEC) was founded in 2006 in order to examine and address the issues and
concerns of female employees. WEC strives to ensure that female employees in the
Company do not miss out on growth opportunities available. in todays global
scenario.
Tejaswini is one such programme aimed at empowering female employees and
providing development opportunities to them. Women employees who were would
have been declared surplus due to Automation have been trained in skills such as
mobile equipment operation and maintenance, welding and gas cutting, fitting and
rigging and other maintenance related jobs. Continuous support and guidance
from executives and the Union has gradually brought the realisation in these
women that have the power to change their lives.
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Main features of Tejaswini
Today Tejaswinis are working shoulder to shoulder with their male counterparts in
the areas of maintenance and mobile equipment operations; for example,
locomotives are now driven by female operators, a women operator manages one
of the heaviest bulldozers to move raw materials to the steel plant, etc.
This empowerment has lifted the women from the unskilled levels of the
organisation to the core working group of skilled workers.
Tata Steel in the past few years is the introduction of a Female Trade Apprenticecourse. Selected candidates are trained in various trades such as fitter, machinist
(metal cutting) and electrician. On successfully completing the course, these young
women are deputed to the various departments in the Works in Cluster-C, which is
equivalentto a Junior Technician post.
Educational services
A number of Tata Steels activities are designed to support these goals:
- Early Childhood Education: Interventions in early childhood education are vital
preparatory grounds to formal schooling in both rural and urban areas. In the urban
areas, out of about 570 students who were enrolled in 12 centres, Tata Steel
successfully integrated more than 380 students into formal schools. In rural areas
the Company had a 100% success rate last year with 550 children from 22 centres
moving into formal education.
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- Camp School: To help underprivileged girls enter the mainstream, Tata Steel
initiated a camp school programme with the help of Jharkhand Education Project.
The nine-month intensive learning course is offered to students aged 9-14 to
complete their education up to 5th standard and allow them to qualify for
admission to class VI. In 2012-13, 200 girls enrolled in the two camp schools.-
Schools: The Company supports many schools in its areas of operation. For
example twelve primary schools have been identified
for support near Dhamra Port in 2012-13. Twenty-four teachers will provide
academic support to 480 students.
Customer satisfaction and building relationships
The key processes for determining customer satisfaction and building relationships
for retention are undertaken through the Manage Customer Accounts and
Measure Customer Satisfaction processes. The determination of customersatisfaction is established by conducting annual surveys, using a segment-wise
approach, with
products/service attributes as parameters. The surveys are conducted by external
agencies (M/s A C Nielsen, TNS for Year 2008). The overall customer satisfaction
is captured through a designed questionnaire - both quantitative and qualitative -
during the field survey. The satisfaction index is a relative score of the Companysoverall score over the nearest competitor.
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In 2008, the CSI Index got impacted due to lower score in Delivery attributes. Due
to the downturn, customers were more frequentlyrevising their monthly indent and
in turn the Company had to re-schedule its despatch plans more often. Owing to
this, the overalldelivery performance took a hit. In contrast, the score was higher in
earlier years when due to higher demand, availability was an issue mm. at the
market place and Tata Steel held its prices. Further on, corrective action was taken
by launching SFS initiative with importantcustomers for improving the delivery
compliance.
OCIAL RESPONSIBILITY INITIATIVES IN PROCUREMENT
One of the important business drivers is procurement of supplies and services from
local vendors. The proportionspending on locally based vendors (ie vendors with
an address in Jharkhand state) during 2012-13 was approximately 25% of Tata
Steels domestic buy volume. benefit from the economic opportunities that its
activities offer. Therefore local candidates for employment are considered
favourably if they possess the required qualification, skills and talent. The
Company's Affirmative Action Policy helps to ensure that scheduled castes and
tribal communities are given equal opportunity in employment and supply chain
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opportunities. Up-skilling programmes help local communities to increase their
employability.
Social responsibility in procurement
In accordance with its Affirmative Action Policy, Tata Steel encourages business
entrepreneurs from socially disadvantaged communities and includes them in its
supply chain on the basis of equal merit. As a social responsibility initiative, social
organisations and small-scale local industries are given preference when placing
orders, whenever they are able to supply the Company to a standard whichotherwise would be serviced by larger units. For example, many items are sourced
from local NGOs such as AIWC, SevaSadan, School of Hope and BalVihar. In
order to assist social organisations and small-scale industry units to supply the
Company, raw materials are issued oun a conversion basis for the supply o f
finished goods, spares, and consumables. This reduces the burden of working
capital management of these small units.
Only local vendors are engaged for the delivery of services, except for the tasks
requiring a higher degree of specialisation and sophistication and a skill set which
is not available locally.
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TATA STEEL ENVIRONMENTAL POLICY
Tata Steels Environmental responsibilities are driven by our commitment topreserve the environment and areintegral to the way we do business.
1. We are committed to the efficient use of natural resources & energy; reducing
and preventing pollution;promoting waste avoidance and recycling measures and
product stewardship.
We will identify, assess and manage our environmental impact.
We will regularly monitor, review & report publicly our environmental
performance.
We shall develop & rehabilitate abandoned sites through afforestation,
landscaping and shall protect & preservethe biodiversity in the areas of our
operations.
We will enhance awareness, skill and competence of our employees and
contractors so as to enable them todemonstrate their involvement, responsibilityl
and accountability for sound environmental performance.
2. We are committed to continual improvement in our environmental performance.
We will set objectives-targets, develop, implement and maintain management
standards and systems, and gobeyond compliance with relevant industry standards,
legal and othecc7vb.'.pr requirements.
3. We will truly succeed when we sustain our environmental achievement and are
valued by the communities in which we work.
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FINANCIAL OVERVIEW
Quarterly Performance
Indian Operations
Third-quarter deliveries at 1.637 million tonnes were nearly 3% higher compared
to the corresponding period of last year and about 1% lower than the second
(September) quarter of FY11.
The pricing environment in India in the third quarter was mixed, with prices for
flat products being marginally lower compared to the second quarter, while prices
for some long products increased European Operations Production and deliveries
in the third quarter of FY11 were in line with the first half of FY11 Higher raw
material prices and reduced apparent demand due to seasonal slowdown, amongst
other factors, adversely affected margins
Group-wide performance
Volume of steel products sold declined marginally, and net sales expected to be
flat compared to the second quarter. Operating results expected to decline
somewhat in comparison to the second quarter due to increased raw material
prices.
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Accounting quality:
1.1 Basis of preparation of Financial Statements
The Financial Statements have been prepared in accordance with Indian Generally
Accepted Accounting Principles (GAAP) under the historical cost convention on
the accrual basis, except where specified otherwise and in case of significant
uncertainties. GAAP comprises mandatory accounting standards prescribed by
Companies (Accounting Standards) Amendment Rules, 2006, provisions of the
Companies Act, 1956 and the guidelines issued by Securities and Exchange Board
of India.
1.2 Use of Estimates
Estimates and Assumptions used in the preparation of the financial statements are
based on managements evaluation of the relevant facts and circumstances as of
date of the financial Statements, which may differ from the actual results at a
subsequent date.
1.3 Fixed Assets
a. Fixed assets, except leasehold land, are stated at cost of acquisition or
construction less accumulated depreciation. Cost includes the purchase price and
all other attributable costs incurred for bringing the asset to its working condition
for intended use. Leasehold land is valued at cost less amount written off.
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b. Expenditure on New Projects and Expenditure during Construction:
In case of new projects, expenditure incurred including interest on borrowings and
financing costs of specific loans, prior to commencement of commercialproduction is being capitalized to the cost of assets.
1.4 Depreciation and Amortisation
a. Freehold land is not depreciated.
b. Leasehold land is amortised over the period of lease.
c. Depreciation on Electrical Installation and Aircraft has been provided on
written down value basis at the rates and in the manner specified in Schedule
XIV to the Companies Act, 1956 from the beginning of the month in which
addition is made.
1.5 Investments
a. Long term investments are stated at cost less permanent diminution in value,
if any.
b. Current investments mainly comprising investments in mutual funds are
stated at cost, adjusted for diminution, if any.
1.6 Inventories
a. Stores and spares, raw materials and components are valued at cost or net
realizable value whichever is lower. Cost includes all cost of purchase and
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incidental expenses incurred in bringing the inventories to their present
location and condition. Cost is ascertained using weighted average method.
b. Work-in-process including finished components and finished goods are
valued at cost or realizable value whichever is lower. Cost includes direct
materials, labour costs and a proportion of manufacturing overheads based
on the normal operating capacity. Finished goods lying in the factory
premises, branches and depots are valued inclusive of excise duty.
c. Materials-in-transit and materials in bonded warehouse is valued at actual
cost upto the date of balance sheet. Net realizable value is the estimated
selling price in the ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make the sale.
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PROFTABILITY RATIOS
March11 March10 March09
Operating profit
margin
38.11 35.7 37.68
Profit before
Interest and Tax
Margin
33.82 30.95 33.27
Gross profit
Margin
34.2 31.36 33.69
Net profit Margin 23.16 19.96 21.09
Return On Capital
Employed
13.48 13.06 15.01
Return On netWorth
14.22 13.45 21.10
Return On Long
Term funds
13.54 13.06 15.21
1. Operating profit marginFormula: Operating Profit/Sales
Significance: Indicators of operating performance of business
Analysis: In the financial year 2009-10 , there is a decrease in
operating profit margin even though it is evident that there
is an increase in sales. This is because of a significant
increase in total expenses. In the year 08-09 the total
expenses amounted to Rs. 15182.34 Cr whereas in the year09-10 the same thing amounted to Rs.16069.89 Cr, a sale of
Rs.24315.77 Cr and Rs.25021.98 Cr respectively. The
increase in expenditure is proportionately more than sales.
The increase in the operating expenses is basically
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contributed by an increase in power and fuel cost,
employee cost, manufacturing expenses.
In the financial year 10-11 the sales grew with a
considerate amount, pushing the operating profit margin
upto an amount greater than what it was in 08-09. the
expense incurred by the company in operations did not
increase much as compared to the sales. The increase in
raw material cost and other manufacturing expenses was
not as evident as the increase in sales and thus the operating
profit increased.
The operating cost includes the cost of direct material,
direct labor, and other overheads, viz, factory, office or
selling, etc.
2. Gross Profit MarginFormula: Gross Profit/ Sales
Significance: Indicator of basic profitability
Analysis: In the financial year 09-10, the contribution towards gross
profit was mainly due to a phenomenal increase in the other
incomes, from the previous financial year. Even though it
was evident that sales increased but the total expenses
increase was more than increase in sales. This lead to a
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decrease in the gross profit margin.
In the financial year 10-11 the main contributor towards
gross profit was sales. The other incomes decreased but
the decrease was not by a considerable amount, so there
was an increase in gross profit.
3. Net Profit margin
Formula: Net Profit/Sales
Significance: Indicator of overall profitability
This ratio indicates the Net margin on a sale of Rs.100.This
ratio helps in determining theefficiency with which affairs
of the business are being managed. An increase in the ratio
over the previous period indicates improvement in the
operational efficiency of the business. Theratio is thus on
effective measure to check the profitability of business.
However, constantincrease in the above ratio after year is a
definite indication of improving conditions of the business.
Analysis: Decrease in the net profit of the company was due to an
increase in Interest and Depreciation. It was seen that even
after a fall in EBT as compared to the previous financialyear(08-09) the company had to make more payment
towards Income Tax. The increase in depreciation can be
attributed to an increase in the gross block of assets,
whereas the interest increase may be due to pre-payment of
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loans.
In the next financial year 10-11 the, unsecured loans have
risen whereas the secured loans have fallen, which have
attributed to a fall in interest payments, from the previous
financial year.
RATIO Industry
TATA
Steel SAIL JSW
Net Profit
Margin 11.09 23.16 11.03 8.64
4. Return On Capital Employed
Formula: Operating Profit/capital Employed
Significance: Overall profitability of the business on the total funds
employed. If ROCE>Interest Rate, use of debt funds is
justified.
0
5
10
15
20
25
Industry TATA Steel SAIL JSW
Net Profit Margin
Net Profit Margin
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It is also called as Return on Capital Employed. It
indicates the percentage of return on thetotal capital
employed in the business. The term operating profit
means profit before interest and tax and the term capital
employed means sum-total of long term funds employed
in the business. i.e. Share capital +Reserve and surplus +
long term loans[non business assets +fictitious assets]
Analysis: In the financial year 09-10 there was a significant drop inthe Earning per share as compared to the previous year,
whereas in the next financial year there was a jump in the
earnings per share. The company's equity share capital
increased in both the financial years, which lead to a fall in
return on net worth in 09-10 and then an increase in return
on net worth in the next financial year.
RATIO Industry
TATA
Steel SAIL JSW
Return on Capital
Employed 13.35 13.48 13.21 11.73
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5. Return On net Worth
Formula: Equity Earnings/Shareholders funds
Significance: Indicatives profitability of Equity Funds/ Owner funds
invested in the business
Analysis: In the financial year 09-10 there was a significant drop in
the Earning per share as compared to the previous year,
whereas in the next financial year there was a jump in the
earnings per share. The company's equity share capital
increased in both the financial years, which lead to a fall in
return on net worth in 09-10 and then an increase in returnon net worth in the next financial year.
10.5
11
11.5
12
12.5
13
13.5
14
Industry TATA Steel SAIL JSW
Return on Capital Employed
Return on Capital Employed
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LIQUITDITY AND SOLVENCY RATIO
March13 March12 March11
Current ratio 1.78 1.12 .91
Quick ratio 1.45 .76 .57Debt Equity ratio .59 .68 1.34
Long Term debt
Equity Ratio
.58 .68 1.31
6. Current ratio
Formula: Current Assets/Current Liabilities
Significance: Ability to repay short term commitments promptly. (i.e.
Ideal Ratio 2:1). High ratio indicates existence of idle
current assets.
An indication of a company's ability to meet short-term
debt obligations; the higher the ratio, the more liquid the
company is. Current ratio is equal to current assets divided
by current liabilities. If the current assets of a company are
more than twice the current liabilities, then that company is
generally considered to have good short-term financial
strength. If current liabilities exceed current assets, then the
company may have problems meeting its short-termobligations.
Analysis: There is a constant increase in the current ratio, which can
be attributed to a constant increase in current assets.
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Although the current liabilities have also been increasing
but the amount is not that considerable as compared to an
increase in current assets. The bases for the increase in
current assets have been formed by an increase in loans and
advances made by the company and the fixed deposits by
the company. In the financial year 09-10 we have noticed a
fall in the inventory level, whereas in the year 10-11
inventory level has increased, in comparison to the
financial year 08-09.
RATIO Industry
TATA
Steel SAIL JSW
Current
ratio 1.12 1.78 1.21 0.78
0
0.5
1
1.5
2
Industry TATA Steel SAIL JSW
Current ratio
Current ratio
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I NDUSTRY, TISCO AND COMPETITOR ANALYSIS:
The current ratio of industry is 1.12 i.e. more than 1, thus current assets are
more than the current liabilities , however the TISCO current ratio is 1.78
which is more than the industry ratio .TISCO current ratio is highest among
its competitors.Thus TISCO is in a better position than all its competitors in
current scenario.
7. Quick ratio
Formula: Quick assets/quick liabilities
Significance: Ability to meet immediate liabilities. Ideal ratio is 1.33:1
Liquid ratio is also known as quick or Acid test ratio.
Liquid assets refer to assets which are quickly convertible
into cash. Current Assets other stock and prepaid expenses
are considered as quick assets. The ideal liquid ratio
accepted norm for liquid ratio 1.
Analysis: The pattern shown by quick ratio is same as that shown by
the Current ratio. This is because of a constant increase in
all the current assets other than Inventories. This further
signifies that the assets are as good as cash and can be
converted into the same in a very short span of time.
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8. Debt Equity ratio
Formula: Debt/Equity
Significance: Indicates the relationship between debt and equity. Ideal
ratio is 2:1.
DebtEquity ratio also known as External- Internal Equity
Ratio is calculated to measure the relative claims of
outsiders and the owners against the firms assets.
Outsiders fund includes all debts/liabilities to outsiders,
whether long term or short term or whatever in the form of
debentures bonds, mortgages or bills. The shareholders
fund consist of equity share capital, preference share capital
, capital reserves, revenue reserves, and reserves
representing accumulated profits and surpluses.
Analysis: There is a constant decrease in the debt equity ratio. This is
basically attributed because of an increase in the equity.
Too much of debt was ruled out and therefore the debt
equity ratio kept falling. There was also a marginal increase
in equity.
RATIO Industry
TATA
Steel SAIL JSW
Debt
Equity
Ratio 0.86 0.59 0.54 0.74
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Industry: 0.86The trend in industry says that ratio should be approximately 86% or
debts should be 86% of the equity. The ratio for TISCO is 59% which
is safe as compared to that of the industry .
DEBT COVERAGE RATIO
March11 March10 March09
Interest Coverage
ratio
8.52 5.78 7.35
9. Interest Coverage ratio
Formula: PBIT/ Interest
Significance: Indicates ability to meet interest obligation of the currentyear, should generally be greater than 1.
This ratio is used to test the debt servicing capacity of afirm.
0
0.2
0.4
0.6
0.8
1
Industry TATA Steel SAIL JSW
Debt Equity Ratio
Debt Equity Ratio
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RATIO Industry
TATA
Steel SAIL JSW
Interest Coverage
Ratio 7.42 6.14 15.93 4.44
1.I nterest MANAGEMENT coverage Ratio (TISCO) 6.14The TISCO is in position to give interest as much as 6.14 times. It does
not mean the company is given the interest 6.14 times, but the
profitability is so high that TISCO can give interest 6.14 times than
they what actual interest is.
Industry: 7.42
The trend of the industry is about 7.42 times, whereas the position of
company is 17.25% less than the capacity of the industry. The TISCO
is having capacity of 6.14 times whereas the capacity of the industry is
7.42 times.
0
5
10
15
20
Industry TATA Steel SAIL JSW
Interest Coverage Ratio
Interest Coverage Ratio
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2. EFFICIENY RATIO
March11 March10 March09
Inventory
Turnover Ratio
9.85 10.90 9.36
Debtor Turnover
Ratio
67.93 46.58 41.29
Investments
Turnover Ratio
9.85 10.90 9.36
Fixed Assets
Turnover Ratio
1.29 1.12 1.22
Total AssetTurnover Ratio .38 .40 .43
10. Inventory Turnover Ratio
Formula: Cost of Goods Sold/ Average Stock
Significance: Indicates how fast inventory is used/sold. High T/O Ratio
indicates fast moving material while low ratio may mean
dead or excessive stock.
RATIO IndustryTATASteel SAIL JSW
Inventory Turnover
Ratio 7.45 9.85 4.16 7.1
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I NVENTORY TURNOVER RATIO
TATA IRON AND STEEL COMPANY Ltd. 9.85%The latest data shows the current inventory turnover ratio to be 9.85 whichmeans that the inventory is replaced with new supply about 9.85 times in ayear.
I ndustry 7.45%
The inventory turnover ratio for the whole of engine producing industry is7.45. So we can see that in comparison to TISCO the ratio is low and theinventory is replaced 7.45 times a year.
11. Debtor Turnover Ratio
Formula: Credit Sales/average accounts receivable.
Significance: Indicates the speed of collection of credit sales/debtors.
RATIO Industry
TATA
Steel SAIL JSW
Debtors
Turnover 35.58 67.93 11.13 32.95
0
5
10
15
Industry TATA Steel SAIL JSW
Inventory Turnover Ratio
Inventory Turnover Ratio
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Ratio
TISCO
The data for TISCO shows the debtors turnover ratio to be 67.93. This shows
that whatever debt the company gives is recovered in nearly 5 days.
Industry
The debtors turnover ratio for the industry producing engines is pegged at
35.58 which mean that to recover a debt the company takes nearly 10 days. If
we compare this to TISCO, TISCO takes 5 days to do so.
0
10
20
30
40
50
60
70
80
Industry TATA Steel SAIL JSW
Debtors Turnover Ratio
Debtors Turnover Ratio
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12. Fixed assets Turnover Ratio
Formula: Turnover/Net Fixed Assets
Significance: Ability to generate sales per rupee of Fixed Assets.
Analysis: In the financial year 09-10 there was a fall in the ratio which
affects the profitability of the company in a negative way. The
sharp increase in the ratio in the financial year 10-11 has
contributed to the jump in the profit of the company.
13. Total Asset Turnover Ratio
Formula: Turnover/Total Assets
Significance: Ability to generate sales per rupee of Total Assets.
Analysis: There is a constant decrease, this effects the profitability of the
company as the company is not able to utilize its assets to the
best possible manner.
CASH FLOW INDICATOR RATIO
March11 March10 March09
Dividend yield
ratio
19.04 16.64 27.15
Cash Earning
Retention ratio
81.05 83.92 76.03
Price Earnings
Ratio
8.2 10.5 2.97
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company. A comparison of earning per share of the
company with another will also help in deciding whether
the equity share capital is being effectively used or not. It
also helps in estimating the companys capacity to pay
dividend to its equity shareholders.
RATIO Industry
TATA
Steel SAIL JSW
Earnings Per
Share 43.09 71.58 11.87 88.87
EPS of TISCO: 71.58
EPS of a company represents that how much profit was generated on a
per share basis which is 71 .58. this can be interpreted as comparatively
higher return on per share. As the peer group company, SAIL provided
much lower earnings per share this annual year.
0
20
40
60
80
100
Industry TATA Steel SAIL JSW
Earning Per Share
Earning Per Share
8/12/2019 116341794 TISCO Ratio Analysis
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60
COST OF EQUITY BY CAPM APPROACH
Ke= Risk Free return+ (Beta(Market Return-Risk
Free Return))
Risk free return is 8.33%1Beta 0.72%2And return of the company 30.89%3
So ke= 8.33 + (0.72(30.89-8.33))The cost of capital is = 24.57%Book value of the company is crores
2.COST OF DEBTS
Total Debt= Rs. 30674.48 (in Crores)
Total Interest Payment = Rs. 1686.27 (in Crores)
Tax Rate= 30%
1www.rbi.org.in
2www.tatasteel.com
3Drawn from the data of 5last years
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Total Interest Payment = Rs. 1686.27 (in Crores)
Total Debt= Rs.30674.48 (in Crores)
Therefore, Ki = 5.50%
Tax Rate= 30%
Kd = 3.85%
COST OF RETAINED EARNING
The cost of retained earnings is same as of cost of equity.
This is 16.5%
Retained earnings is equal to Rs. 47307.02crore
So KRis 47307.02* 0.1645 = 7782.03
TOTAL COST OF CAPITAL
Cost of equity = 16.45Cost of Debt = 3.85Cost of Retained = 16.45
Total = 11.55%
8/12/2019 116341794 TISCO Ratio Analysis
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BIBLIOGRAPHY
1. http://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=balance
2. http://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=cashflow
3. http://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=yearly
4. http://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=profit
5. http://finance.yahoo.com/q?s=TATASTEEL.NS6. http://www.moneycontrol.com/news/results/tata-steel-q1-net-
triplesriversdale-stake-sale_576029.html
7. http://www.moneycontrol.com/financials/jswsteel/ratios/JSW018. http://www.moneycontrol.com/financials/steelauthorityindia/ratios/SAI9. http://www.moneycontrol.com/competition/tatasteel/comparison/TIS
http://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=balancehttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=balancehttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=balancehttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=balancehttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=balancehttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=cashflowhttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=cashflowhttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=cashflowhttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=cashflowhttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=cashflowhttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=yearlyhttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=yearlyhttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=yearlyhttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=yearlyhttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=yearlyhttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=profithttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=profithttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=profithttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=profithttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=profithttp://finance.yahoo.com/q?s=TATASTEEL.NShttp://finance.yahoo.com/q?s=TATASTEEL.NShttp://www.moneycontrol.com/news/results/tata-steel-q1-net-triplesriversdale-stake-sale_576029.htmlhttp://www.moneycontrol.com/news/results/tata-steel-q1-net-triplesriversdale-stake-sale_576029.htmlhttp://www.moneycontrol.com/news/results/tata-steel-q1-net-triplesriversdale-stake-sale_576029.htmlhttp://www.moneycontrol.com/news/results/tata-steel-q1-net-triplesriversdale-stake-sale_576029.htmlhttp://www.moneycontrol.com/news/results/tata-steel-q1-net-triplesriversdale-stake-sale_576029.htmlhttp://www.moneycontrol.com/financials/jswsteel/ratios/JSW01http://www.moneycontrol.com/financials/jswsteel/ratios/JSW01http://www.moneycontrol.com/financials/steelauthorityindia/ratios/SAIhttp://www.moneycontrol.com/financials/steelauthorityindia/ratios/SAIhttp://www.moneycontrol.com/competition/tatasteel/comparison/TIShttp://www.moneycontrol.com/competition/tatasteel/comparison/TIShttp://www.moneycontrol.com/competition/tatasteel/comparison/TIShttp://www.moneycontrol.com/financials/steelauthorityindia/ratios/SAIhttp://www.moneycontrol.com/financials/jswsteel/ratios/JSW01http://www.moneycontrol.com/news/results/tata-steel-q1-net-triplesriversdale-stake-sale_576029.htmlhttp://www.moneycontrol.com/news/results/tata-steel-q1-net-triplesriversdale-stake-sale_576029.htmlhttp://finance.yahoo.com/q?s=TATASTEEL.NShttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=profithttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=profithttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=yearlyhttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=yearlyhttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=cashflowhttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=cashflowhttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=balancehttp://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=balance