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

Anand Murarka 7

Anish Wadhwa 10

Chandrachur Palchaudhri 30

Khushboo Vijayvargiya 47


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TATA GROUP

It was when Jamsetji Tata gave shape to his vision of nation building by forming what was tobecome the Tata Group in 1868, he had envisaged India as an independent strengthpolitically,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 industriesof national importance. The Tata name has been respected in India for 140 years for its adherenceto strong values and business ethics.

The Tata Group of Companies has always believed strongly in the concept of collaborativegrowth, and this vision has seen it emerge as one of India's and the world's most respected andsuccessful business conglomerates. The Tata Group has traced a route of growth that spansthrough six continents and embraces diverse cultures. The total revenue of Tata companies, takentogether, was 67.4 billion USD (around Rs319, 534 crore) in 2009-10, with 57 per cent of thiscoming 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 sevenbusiness sectors in which the Tata Group Companies operate. It is the largest employer in Indiain the Private Sector and continues to lead with the same commitment towards social andcommunity responsibilities that it has shown in the past.

The Tata Group of Companies has business operations (114 companies and subsidiaries) in sevendefined sectorsMaterials, Engineering, Information Technology and Communications, Energy,Services, Consumer Products and Chemicals. Tata Steel with its acquisition of Corus has secureda place among the top ten steel manufacturers in the world and it is the Tata Groups flagshipCompany. Other Group Companies in the different sectors areTata Motors, Tata ConsultancyServices (TCS), Tata Communications, Tata Power, Indian Hotels, Tata Global Beverages andTata Chemicals.

Tata Motors is Indias largest automobile company by revenue and is among the top fivecommercial vehicle manufacturers in the world. Jaguar and Landrover are now part of TataMotors portfolio.

Tata Consultancy Services (TCS) is an integrated software solutions provider with deliverycentres in more than 18 countries. It ranked fifth overall, and topped the list for IT services.

Tata Power has 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 ofhotels 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 GoodEarth is at present the second largest global branded tea operation.

Business excellence involves a journey where the experience itself is the destination. Just 13 ofthe 100-odd Tata companies have made this journey their own and gone on to win the covetedJRD QV Award.


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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 ourcolleagues and customers around the world, and always work for the benefit of thecommunities we serve.Excellence. We must constantly strive to achieve the highest possible standards in ourday-to-day work and in the quality of the goods and services we provide.Unity. We must work cohesively with our colleagues across the group and with ourcustomers and partners around the world, building strong relationships based ontolerance, understanding and mutual cooperation.Responsibility. We must be responsible and responsive to the countries, communities andenvironments 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 and corporatecitizenship.

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 and services and creatingvalue 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 our communities and

demonstrating high ethical standards.

Goals

The Tata Steel Group is proud of its performance culture. We are committed to the pursuit ofchallenging targets, and to safety, environmental protection, continuous improvement, opennessand social responsibility in every aspect of our business around the world.

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 injuryfrequency rate (LTIF) to a maximum of 0.4 incidents per million hours workedEnvironment: 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


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The company was established in Jamshedpur, India, in 1907. Tata Steel is headquartered atJamshedpur 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 NatSteelHoldings (Singapore). With these, the company has created a manufacturing and marketingnetwork in Europe, 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, theprocurement of low-ash coal from Australia and coking coal from Mozambique, and the settingup of a deep-sea port in Orissa in India. The company is exploring opportunities in the titaniumdioxide business in Tamil Nadu, India, and will soon be producing high carbon ferrochrome fromits plant in South Africa.

The company produces crude steel and basic steel products, and makes steel for building andconstruction applications through Tata BlueScope Steel, its joint venture with Australia'sBlueScope Steel.

RECENT UPDATEMr Cyrus P Mistry has been appointed as deputy chairman of Tata sons, who will work withMr Ratan N Tata over the next year and take over from him when Mr. Tata retires in December2012.


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ACHIEVEMENTS

Tata Steel has received the Thomson Reuters Innovation Awardin the hi-tech corporatecategory. Since 2007, Thomson Reuters has been presenting the Thomson Reuters InnovationAwards to recognise innovation and entrepreneurship in India. The award recognises the most

innovative academic institutions and commercial enterprises headquartered in India for theirspirit 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 Awards for the years 2008, 2009 and 2010, on twenty-one employees of TataSteel at Vigyan Bhavan, New Delhi, on October 13, 2011. The Prime Ministers Shram Awardswere instituted in the year 1985 for the public sector. Its objective is to recognise outstandingcontributions made by workmen as defined in the Industrial Dispute Act, 1947. This award wasextended to the private sector in 2004.

Tata Steel, in a move to reaffirm its commitment to its longstanding values, collaborated with theOVAL Trust to formally dedicate the Charkha to the nation, on the occasion of the birthanniversary of Mahatma Gandhi, October 2, 2011.

Tata Steel bagged the first prize in heavy industry category at Udyog Mela 2011, Ranchi. Ithas bagged this prize consecutively for the second time.

Tata steel bagged the two most prestigious awards at the MMMM exhibition 2011 (MineralsMetals Metallurgy and Materials ) held at New Delhi between February 11th to 14th 2011.

Tata Steel has been named in Fortune magazine's 2011 list of Worlds Most AdmiredCompanies for the third consecutive year. The annual survey, conducted by Fortune magazineand Hay Group, a global management consulting firm, is given to top executives, directors andfinancial analysts, to identify the companies that enjoy the strongest reputations within theirindustries and across industries. Tata Steel has been ranked sixth in the Industry-Metalscategory; the only company from India to have achieved this prestigious feat.

Tata Steel was conferred the Good Corporate Citizen Award for the year 2011 by theBombay Chamber of Commerce and Industry (BCCI) in a ceremony at Mumbai, yesterday aspart its 176th Foundation Day. The award was presented to Tata Steel for its outstanding serviceto 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 fromBCCI.


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Subsidiaries of TISCO

Tata Steel Europe: Europes second largest steel maker with majoroperations in the UKand continental Europe, Tata Steel Europe produces long and strip products for theconstruction, 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 rollsfor 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 andquantities. Tata Refractories: Produces high-alumina, basic, dolomite, silica and monolithic

refractories and offers design, procurement and re-lining services. (www.tataref.com) 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 forsteel. (www.mjunction.in)

TRF: In the business of design, manufacture, supply, installation and commissioning ofengineered-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 townservices, JUSCO provides municipal and civic services for townships.(www.juscoltd.com)

Indian Steel and Wire Products: Recently acquired by Tata Steel, ISWP has a wire unitand 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 constructionapplications. (www.tatabluescopesteel.com)

Dhamra Port Company: A joint venture between Larsen & Toubro and Tata Steel tobuild a deep-draft (18 metres) all-weather port in Orissa on the east coast of India.(www.dhamraport.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.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.tatabluescopesteel.com/http://www.dhamraport.com/http://www.dhamraport.com/http://www.tatabluescopesteel.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/http://www.tataref.com/http://www.tayo.co.in/http://www.tatatinplate.com/http://www.natsteel.com.sg/http://www.tatasteeleurope.com/en/


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Hooghly Met Coke & Power Company: A joint venture with the West Bengal IndustrialDevelopment 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 anannual production capacity of 135,000 tonnes.

Tata NYK: A 50:50 joint venture with Nippon Yusen Kabushiki Kaisha (NYK Line) toset up a shipping company to handle dry-bulk and break-bulk cargo.

Tata Steel, a company synonymous with valuestrust, transparency and total community caretoday, announced the launch of a corporate campaign 'Values stronger than steel' (VSTS).Thecampaign is aimed at reaching out to the Indian citizen to reinforce the image of the company asa 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 itsoverarching 'value system'.

The campaign presents the companys very own achievers who have paved their own way tosuccess and recognition, such as Mark Denys, chief, R&D; Bachendri Pal, head, Tata SteelAdventure Foundation; Deepika Kumari, the young talent in archery; empowered members ofthe Tejaswini project like Asha Hansda, amongst others. Everyone has a story to tell and they arethe brand ambassadors for the campaign

CAPACITY EXPANSION

TATA STEEL has set up an ambitious target to achieve a capacity of 100million tonnes by 2015.Director Balasubramanian Muthuraman stated that of the 100million tonnes, TATA Steel isplanning a 50-50 balance between greenfield facilities and acquisitions.

The series of acquisitions have already added upto a 21.4million tonne, which includes Corusproduction at 18.2million tonne, Natsteel production at 2million tonne and Millennium Steelproduction at 1.2million tonne. Tata is looking to add another 29million tonnes through theacquisition 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.
http://www.hooghlymetcoke.com/http://www.hooghlymetcoke.com/


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STEEL SECTOR IN INDIA and its GROWTH PROSPECTS

BackgroundThe establishment of Tata Iron and Steel Company (TISCO) in 1907 was the starting point ofmodern Indian steel industry. Afterwards a few more steel companies were established namelyMysore Iron and Steel Company, (later renamed Vivesvaraya Iron & Steel Ltd) in 1923; SteelCorporation of Bengal (later renamed Martin Burn Ltd and Indian Iron & Steel Ltd) in 1923; andSteel Corporation of Bengal (later renamed Martin Burn Ltd and Indian Iron and Steel Co) in1939. All these companies were in the private sector.

Till early 1990s, when economic liberalization reforms were introduced, the steel industrycontinued to be under controlled regime, which largely constituted regulations such as large plantcapacities 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 8percent over the period 2002-03 to 2006-07. Going forward, growth in India is projected to behigher than the world average, as the per capita consumption of steel in India, at around 46 kg, iswell below the world average (150 kg) and that of developed countries (400 kg). Indian demandis projected to rise to 200 million tonnes by 2015. Given the strong demand scenario, most globalsteel players are into a massive capacity expansion mode, either through brownfield or greenfieldroute. By 2012, the steel production capacity in India is expected to touch 124 million tonnes and275 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 plantsfor iron ore and coke, which are main inputs to these units. Currently there are three mainintegrated producers of steel namely Steel Authority of India Limited (SAIL), Tata Iron and SteelCo Ltd (TISCO) and Rashtriya Ispat Nigam Ltd (RINL). SAIL dominates amongst the threeowing to its large steel production capacity plant size.

Secondary producers use steel scrap or sponge iron/direct reduced iron (DRI) or hot briquettediron (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. Secondaryproducers include Essar Steel Ltd., Ispat Industries Ltd., and JSW Steel Ltd. There are 120sponge iron producers; 650 mini blast furnaces, electric arc furnaces, induction furnaces andenergy optimizing furnaces; and 1,200 re-rollers in India.

India is currently the fifth largest steel-producing nation in the world with production of over54 million tonnes (MT). However, it has a very low per capita consumption of steel of around46 kgs as against an average of 198 kgs of the world. This wide gap in relative steel


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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 andinfrastructure, its fortune is dependent on the growth of these user industries.

The Indian steel sector enjoys advantages of domestic availability of raw materials and cheap labour.Iron ore is also available in abundant quantities. This provides major cost advantage to the domesticsteel 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, powerand inefficiencies (low per employee productivity). This has resulted in the erosion of the edge theywould 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 fromdumping of cheap steel products. It has also provided series of benefits to auto, housing and real estatesector 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 in FY09 and FY10 toreduce cost

KEY INITIATIVES

One Company Operating Model

In the process of transforming its operations to directly align its marketing, sales and distributionteams with major industries and sectors


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Transforming its supply chain in Europe

Product Development and Marketing

Through research and development initiatives working to capture market share in a number of

potential high growth areas Customer First strategy

Cost Saving Initiatives

Implemented, and plans to continue to implement, strategic cost-saving measures to improve thelong-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 by scheduling deliveries on ajust-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

_ Iron Ore: 100%

_ Coal: 49%

_ Significant amount offerro alloy requirements

NML (Holdco)

_ Canada

_ TS Equity Stake: 27%


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NML JV (iron ore)


_ 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


_ Status: Pre-feasibility

RML (Holdco)

_ Australia

_ TS Equity Stake: ~24%

RivMoz

_ Partner: RML


_ Status: Project development commenced

_ Coking coal

_ Offtake rights: 40% of the coking

Coal

CDJV

_ Australia


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_ Partners: Vale, JFE, NSC,Posco


_ Offtake rights: 5 to 20%

_ Coking coal

Diversified Product Offering: Branding and Positioning


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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.

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.

Steelworks facility in Tarapur, Maharashtra


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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 September2010.

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 diversified steel

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 production of more

than 14 million tonnes. The group's strong market position gives it advantage of scale and increases its

bargaining power.

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.


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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 requirements are

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.The company 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

operationsbeing one of the most competitive assets in the groups business portfolio offer a competitive

advantage with a leading market position in the country.

Strong research and development (R&D) capabilities

Tata Steel Group operates five research centers : the Ijmuiden Technology Centre (the Netherlands), the

Swindon Technology 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 working on

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 CO2 emissions 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 to

increase 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 additional capacity 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.

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 the growing 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


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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 from the growth in this market.

Threats

Intense competition

The global steel industry is cyclical, highly competitive, and has historically been characterized by over

capacity. 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 ofmarket 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 of greenhouse gases. Increasing pressures from the

regulatory authorities is expected to increase the compliance cost of Tata Steel Group.

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.


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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.

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.

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


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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 Apprentice course. 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 equivalent to 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.

- 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 foradmission to class VI. In 2008-09, 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 2008-09. 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 customer satisfaction 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


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questionnaire - both quantitative and qualitative - during the field survey. The satisfaction index is a

relative score of the Companys overall score over the nearest competitor.

In 2008, the CSI Index got impacted due to lower score in Delivery attributes. Due to the downturn,

customers were more frequently revising their monthly indent and in turn the Company had to re-

schedule its despatch plans more often. Owing to this, the overall delivery 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 important customers for improving the delivery compliance.

SOCIAL 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 2008-

09 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 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 which otherwise would


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be serviced by larger units. For example, many items are sourced from local NGOs such as AIWC, Seva

Sadan, School of Hope and Bal Vihar. 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 of 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.

TATA STEEL ENVIRONMENTAL POLICY

Tata Steels Environmental responsibilities are driven by our commitment to preserve the environment

and are integral 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 &

preserve the biodiversity in the areas of our operations.

We will enhance awareness, skill and competence of our employees and contractors so as to enable

them to demonstrate 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 go beyond 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 rawmaterial prices.

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.


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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.

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 commercial production 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


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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 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 net Worth 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 profitmargin even though it is evident that there is an increase in sales. This isbecause of a significant increase in total expenses. In the year 08-09 thetotal expenses amounted to Rs. 15182.34 Cr whereas in the year 09-10 thesame thing amounted to Rs.16069.89 Cr, a sale of Rs.24315.77 Cr andRs.25021.98 Cr respectively. The increase in expenditure isproportionately more than sales. The increase in the operating expenses isbasically 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 itwas in 08-09. the expense incurred by the company in operations did notincrease much as compared to the sales. The increase in raw material costand other manufacturing expenses was not as evident as the increase insales and thus the operating profit increased.

The operating cost includes the cost of direct material, direct labor, andother overheads, viz, factory, office or selling, etc.

2. Gross Profit MarginFormula: Gross Profit/ Sales

Significance: Indicator of basic profitability


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Analysis: In the financial year 09-10, the contribution towards gross profit wasmainly due to a phenomenal increase in the other incomes, from theprevious financial year. Even though it was evident that sales increased butthe total expenses increase was more than increase in sales. This lead to adecrease in the gross profit margin.

In the financial year 10-11 the main contributor towards gross profit wassales. The other incomes decreased but the decrease was not by aconsiderable 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 indetermining the efficiency with which affairs of the business are beingmanaged. An increase in the ratio over the previous period indicatesimprovement in the operational efficiency of the business. The ratio is thuson effective measure to check the profitability of business. However,constant increase in the above ratio after year is a definite indication ofimproving conditions of the business.

Analysis: Decrease in the net profit of the company was due to an increase inInterest and Depreciation. It was seen that even after a fall in EBT ascompared to the previous financial year(08-09) the company had to makemore payment towards Income Tax. The increase in depreciation can beattributed to an increase in the gross block of assets, whereas the interest

increase may be due to pre-payment of loans.In the next financial year 10-11 the, unsecured loans have risen whereasthe secured loans have fallen, which have attributed to a fall in interestpayments, from the previous financial year.

RATIO Industry

TATA

Steel SAIL JSW

Net Profit Margin 11.09 23.16 11.03 8.64


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4. Return On Capital Employed

Formula: Operating Profit/capital Employed

Significance: Overall profitability of the business on the total funds employed. IfROCE>Interest Rate, use of debt funds is justified.

It is also called as Return on Capital Employed. It indicates thepercentage of return on the total capital employed in the business. Theterm operating profit means profit before interest and tax and the termcapital employed means sum-total of long term funds employed in thebusiness. 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 in the Earning pershare as compared to the previous year, whereas in the next financial yearthere was a jump in the earnings per share. The company's equity sharecapital increased in both the financial years, which lead to a fall in returnon net worth in 09-10 and then an increase in return on net worth in thenext financial year.

RATIO Industry

TATA

Steel SAIL JSW

Return on Capital Employed 13.35 13.48 13.21 11.73

0

5

10

15

20

25

Industry TATA Steel SAIL JSW

Net Profit Margin

Net Profit Margin


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5. Return On net Worth

Formula: Equity Earnings/Shareholders funds

Significance: Indicatives profitability of Equity Funds/ Owner funds invested in thebusiness

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 yearthere was a jump in the earnings per share. The company's equity sharecapital increased in both the financial years, which lead to a fall in returnon net worth in 09-10 and then an increase in return on net worth in thenext financial year.

LIQUITDITY AND SOLVENCY RATIO


Current ratio 1.78 1.12 .91Quick ratio 1.45 .76 .57

Debt Equity ratio .59 .68 1.34

Long Term debt Equity

Ratio

.58 .68 1.31

10.5

11

11.5

12

12.5

13

13.5

14


Return on Capital Employed

Return on Capital

Employed


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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 equalto current assets divided by current liabilities. If the current assets of acompany are more than twice the current liabilities, then that company isgenerally considered to have good short-term financial strength. If currentliabilities exceed current assets, then the company may have problemsmeeting its short-term obligations.

Analysis: There is a constant increase in the current ratio, which can be attributed toa constant increase in current assets. Although the current liabilities havealso been increasing but the amount is not that considerable as comparedto an increase in current assets. The bases for the increase in current assetshave been formed by an increase in loans and advances made by thecompany 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 10-11inventory 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


Current ratio

Current ratio


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INDUSTRY, 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 industryratio .TISCO current ratio is highest among its competitors .Thus TISCO is in a better positionthan 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 assetsrefer to assets which are quickly convertible into cash. Current Assetsother stock and prepaid expenses are considered as quick assets. The idealliquid ratio accepted norm for liquid ratio 1.

Analysis: The pattern shown by quick ratio is same as that shown by the Currentratio. This is because of a constant increase in all the current assets otherthan Inventories. This further signifies that the assets are as good as cashand can be converted into the same in a very short span of time.

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 iscalculated to measure the relative claims of outsiders and the ownersagainst the firms assets.

Outsiders fund includes all debts/liabilities to outsiders, whether long termor short term or whatever in the form of debentures bonds, mortgages orbills. The shareholders fund consist of equity share capital, preference

share capital , capital reserves, revenue reserves, and reserves representingaccumulated profits and surpluses.

Analysis: There is a constant decrease in the debt equity ratio. This is basicallyattributed because of an increase in the equity. Too much of debt was ruledout and therefore the debt equity ratio kept falling. There was also amarginal increase in equity.


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RATIO Industry

TATA

Steel SAIL JSW

Debt Equity

Ratio 0.86 0.59 0.54 0.74

Industry: 0.86The trend in industry says that ratio should be approximately 86% or debts should be86% of the equity. The ratio for TISCO is 59% which is safe as compared to that of theindustry .

DEBT COVERAGE RATIO


Interest Coverage ratio 8.52 5.78 7.35

9. Interest Coverage ratio

Formula: PBIT/ InterestSignificance: Indicates ability to meet interest obligation of the current year, should

generally be greater than 1.

This ratio is used to test the debt servicing capacity of a firm.

0

0.2

0.4

0.6

0.8

1


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.Interest coverage Ratio (TISCO) 6.14The TISCO is in position to give interest as much as 6.14 times. It does not mean thecompany is given the interest 6.14 times, but the profitability is so high that TISCO cangive interest 6.14 times than they what actual interest is.

Industry: 7.42The 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 timeswhereas the capacity of the industry is 7.42 times.

MANAGEMENT EFFICIENY RATIO


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 Asset Turnover

Ratio

.38 .40 .43

0

5

10

15

20


Interest Coverage Ratio

Interest Coverage Ratio


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10. Inventory Turnover Ratio

Formula: Cost of Goods Sold/ Average Stock

Significance: Indicates how fast inventory is used/sold. High T/O Ratio indicates fastmoving material while low ratio may mean dead or excessive stock.

INVENTORY TURNOVER RATIO

TATA IRON AND STEEL COMPANY Ltd. 9.85%The latest data shows the current inventory turnover ratio to be 9.85 which means that theinventory is replaced with new supply about 9.85 times in a year.

Industry 7.45%The inventory turnover ratio for the whole of engine producing industry is 7.45. So we can seethat in comparison to TISCO the ratio is low and the inventory 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.

0

5

10

15


Inventory Turnover Ratio

Inventory Turnover Ratio

RATIO Industry

TATA

Steel SAIL JSW

Inventory Turnover Ratio 7.45 9.85 4.16 7.1


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RATIO Industry

TATA

Steel SAIL JSW

Debtors Turnover

Ratio 35.58 67.93 11.13 32.95

TISCOThe 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.

IndustryThe debtors turnover ratio for the industry producing engines is pegged at 35.58 which meanthat to recover a debt the company takes nearly 10 days. If we compare this to TISCO, TISCOtakes 5 days to do so.

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 theprofitability of the company in a negative way. The sharp increase in the ratio inthe financial year 10-11 has contributed to the jump in the profit of the company.

0

10

20

30

40

50

60

70

80


Debtors Turnover Ratio

Debtors Turnover Ratio


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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 thecompany is not able to utilize its assets to the best possible manner.

CASH FLOW INDICATOR RATIO


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

14. Dividend yield ratio

Formula: Total Equity Dividend/No. of equity Shares

Significance: Amount of profits distributed per share.

Analysis: This ratio is particularly useful for those investors who are interested only individend income. The ratio is calculated by comparing the ratio of dividend pershare with its market value.

15. Price Earnings Ratio

Formula: Market Price per Share/Earning per Share

Significance: Indicates the relationship between Market Price and EPS and theshareholders perception of the company.

Analysis: It actually denotes the companys future prospect. As here we can seethere is a prenominal increase followed not a huge decrease this shows apositive growth of the company in the future.

16. Earnings Per Share

Formula: PAFESH/No. of Equity Shares

Significance: Return or income per share, whether or not distributed as dividend.

The earnings per share of the company helps in determining the marketprice of the equity shares of the company. A comparison of earning pershare of the company with another will also help in deciding whether the


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equity share capital is being effectively used or not. It also helps inestimating the companys capacity to pay dividend to its equityshareholders.

RATIO Industry

TATA

Steel SAIL JSW

Earnings Per Share 43.09 71.58 11.87 88.87

EPS of TISCO: 71.58EPS 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 peergroup company, SAIL provided much lower earnings per share this annual year.

EPS of INDUSTRY: 43.09The earning per share of the industry as a whole is Rs43.09 per share and we can say,that TISCO is giving high earnings per share.

0

20

40

60

80

100


Earning Per Share

Earning Per Share


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COST OF CAPITAL

There are 3 kinds of capital in the TISCO1. Equity Shares2. Debts3. Retained Earnings

1. COST OF EQUITYThe paid up capital is 959.41crores. And the formula for finding this is

Cost of Equity by Dividend approach

+ Growth Rate

Expected Dividend per share: 13.5

Growth Rate :12.5%

Face Value: 344.20

Cost Of Equity Ke: 16. 45%

COST OF EQUITY BY CAPM APPROACH

Ke= Risk Free return+ (Beta(Market Return-Risk Free

Return))

Risk free return is 8.33%1

1www.rbi.org.in


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Beta 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%

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%

2www.tatasteel.com

3Drawn from the data of 5last years


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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 KR is 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%


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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=profit5. 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://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=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

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