tata steel vibhu

7/24/2019 Tata Steel Vibhu

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A

CPP REPORT

TITLED

TATA STEEL

For Fulfilling the requirement of the award of degree of BBA

SUBJECT: CPP I!S"#$%&

UNDER THE SUPERVISION OF

!r'( Sangeeta

Submitted To :- Submitted by :-

The dire)tor *ame :" +i,hu -o.al

Cla'' :" !BA #rd'em(

/oll *o( :" 01

Registration No. :- 14UIM34

Intitute o! "#n#$ement Studie

%u&u'(et Uni)e&ity* %u&u'(et

Se2tem,er 0$34&


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AC%NO/LED,E"ENT

In thi' 2ro


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Introduction

Backed by 100 glorious years of experience in

steel making, Tata Steel is among the

top ten steel producers in the world with an

existing annual crude steel

production capacity of 30 Million Tonnes er !nnum "MT!#$ %stablished in

1&0', it is the (rst integrated steel plant in !sia and is now the world)s

second most geographically di*ersi(ed steel producer and a +ortune 00

-ompany$

Tata Steel has a balanced global presence in o*er 0 de*eloped %uropean

and fast growing !sian markets, with manufacturing units in ./ countries$

t was the *ision of the founder 2amseti

4usserwani Tata$, that on .'th +ebruary,

1&05, the (rst stake was dri*en into the soil

of Sakchi$ 6is *ision helped Tata Steel

o*ercome se*eral periods of ad*ersity and

stri*e to impro*e against all odds$

Tata Steel)s 2amshedpur "ndia# 7orks has a

crude steel production capacity of /$5 MT!

which is slated to increase to 10 MT! by

.010$

The -ompany also has proposed three

8reen(eld steel proects in the states of 2harkhand, 9rissa and -hhattisgarh

in ndia with additional capacity of .3 MT! and a 8reen(eld proect in

:ietnam$

Through in*estments in -orus, Millennium Steel "renamed Tata Steel

Thailand# and 4atSteel 6oldings, Singapore, Tata Steel has created a


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manufacturing and marketing network in %urope, South %ast !sia and the

paci(c;rim countries$ -orus, which manufactured o*er .0 MT! of steel in

.005, has operations in the


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Before we discuss at the length of the company, we would like to throw some

light on the Tata 8roup of companies in present day ndia$

Tata

Steel is one of the *entures of the Tat 8roup but it has many successful

companies under one umbrella$ Some of the other notable Tata concerns and

their lines of businesses are shown below$

VIIO! O" THE #O$PA!% &'


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(e ma)e t*e di+erence t*roug*&

OurPeople

By fostering teamwork, nurturing talent, enhancing leadership capability and

acting with pace, pride and passion$

Our O+er

By becoming the supplier of choice, deli*ering premium products and

ser*ices and creating *alue for our customers$

Our Inno,ati,e Approac*

By de*eloping leading edge solutions in technology, processes and products$

Our #onduct

By pro*iding a safe workplace, respecting the en*ironment, caring for our

communities and demonstrating high ethical standards$

$i--ion &'


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-onsistent with the *ision and *alues of the founder 2amseti Tata, Tata Steel

stri*es to strengthen ndiaCs industrial base through the eEecti*e utili?ation

of staE and materials$ The means en*isaged to achie*e this are high

technology and producti*ity, consistent with modern management practices$

Tata Steel recogni?es that while honesty and integrity are the essential

ingredients of a strong and stable enterprise, pro(tability pro*ides the main

spark for economic acti*ity$

9*erall, the -ompany seeks to scale the heights of excellence in all that it

does in an atmosphere free from fear, and thereby reaFrms its faith in

democratic *alues$


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Our strategy :-Tata Steel is stri*ing to become the global

benchmark in *alue creation and corporate

citi?enship in the steel industry$

n %urope we aim to de*elop long;term partnerships with customers in our

chosen markets by unlocking the potential of steel$ 7e seek to create

inno*ati*e products and ser*ices to help our customers o*ercome their

challenges and be more successful in their markets$

7e do this in a responsible way$ 4othing is more important than the safety of

the people who work on our sites$ But we also act responsibly towards the

en*ironment and the communities we operate among$

7e ha*e (*e strategic priorities in %uropeA -ustomer +ocus, nno*ation,

9perational %xcellence, Gesponsibility and eople$

Customer focus

Our sales and marketing approach focuses on some of the orld!s most

demanding markets" including automoti#e" construction" packaging" rail" lifting $

e%ca#ating" energ& $ poer" and aerospace

'e are in#esting in pro(ects to impro#e our product mi% and ser#ice offering and

e are transforming our internal suppl& chain to impro#e customer ser#ice le#els


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Our teams ork closel& ith customers to understand their needs hich dictate

our production" suppl& chains and deli#er& acti#ities

Innovation

'e are pursuing a strateg& of market differentiation" hich in#ol#es ma%imising

the proportion of differentiated products and ser#ices in our sales ) products and

ser#ices that fe or no others can offer

'e conduct research programmes aimed at de#eloping cutting-edge

manufacturing and product technolog& and at impro#ing the sustaina*ilit& of steel

products through their life c&cles

'e seek to ork as closel& as possi*le ith our customers to de#elop the ne

products and ser#ices the& need to succeed in their on markets" *elie#ing that e

succeed if our customers do

Operational excellence

'e are constantl& in#esting to upgrade our manufacturing and distri*ution

facilities in order to impro#e their performance and cost competiti#eness

'e aim to esta*lish *est practice in our production plants" suppl& chain

management and deli#er& acti#ities in order to optimise ser#ice to customers


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Responsible behaviour

'e act responsi*l& toards the en#ironment in all our acti#ities" focusing on

sustaina*le ra materials usage" ater and energ& conser#ation" aste utilisation"

emissions reduction and land reclamation

'e support the de#elopment of *reakthrough technologies to deal ith the

challenge of car*on emissions

'e support the communities e operate among *& promoting sport and

encouraging their economic" en#ironmental" educational and social de#elopment

through financial support" the pro#ision of materials and the time and enthusiasm of our

emplo&ees

People

+he safet& of our emplo&ees is our num*er one priorit&

'e are committed to the people ho are instrumental to our success" our

emplo&ees

'e engage our emplo&ees and de#elop their capa*ilit& through training

'e foster teamork" nurture talent" enhance leadership capa*ilit& and

encourage our emplo&ees to act pace" pride and passion


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#O$PETITIO!

Tata Steel is undoubtedly the best steelmaker in the wrold$ t produces the

cheapest and best @uality of steel in the world$ n the last se*en years the

position of Tata Steel has reduced drastically because of -orus ac@uisition$

The results of the ac@uistion will be pro(table after .010$

$A.OR /O#A/ TEE/ P/A%ER


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$A!AGE$E!T E""I#IE!#%

The structure of the Board was recently modi(ed in .00' post the ac@uisition

of -orus ac@uisition to suitable incorporate changes which will lead to the

ade@uate reali?ation of synergies from the deal within the gi*en stipulated

time frame to reap the bene(ts from the much talked about and critici?eddeal$

OARD O"

DIRE#TOR

1H Board of Iirectors

5 independent, / non independent

4o of independent directors is more than one third of total number of

directors$

/EGA/ E!VIRO!$E!T

8lobal operations re@uire compliance with multiple and complex laws and

regulations$ n countries where the political systems are still e*ol*ing,

fre@uent changes in economic policy are common, in*estment guarantees

and property rights are secured, any unforeseen changes can expose the

8roupCs businesses to uncertainties$ The 8roup operations are primarily in


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countries where in*estment Jows are freer and where there are established

political, business and legal frameworks in place$ There is an established due

process to independently e*aluate country risk exposures for in*estments in

emerging economies

TATA TEE/ 1 PRODU#T


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"inancing and /iuidit3 trateg3 o4 t*e Tata teel Group in

re-pon-e to t*e glo5al economic cri-i-6

They ha*e responded by increasing production post commissioning of the 1$5

mtpa programme and focusing on performance impro*ement to neutralisethe eEect of reduced realisations, whereas in South %ast !sia, the focus is on

working capital management and cost reduction$ n %urope we ha*e cut

production by idling blast furnaces at three sites in order to align production

with demand as a part of the K7eathering the StormL initiati*e which

resulted in cash sa*ings of '1. million "


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THE EI# APPROA#H

76 E#O!O$%

The steel industry has traditionally been *ery sensiti*e to the changing

economic conditions$ The recent economic meltdown has created se*eralchallenges P which when addressed appropriately, can be countered to

positi*e eE ect$ 6owe*er, unlike the pre*ious global recessions, this time

around, all the countries ha*e come together and taken action$ !dditionally,

there has been a tremendous amount of go*ernmental response to the

global depression which is helping to bring about a possible easing of the

situation$

The global downturn also had a maor eEect on *arious industries dependant

on steel$ Maor contraction in the construction proects, automobiles, white

goods demand from the third @uarter of .005;0& resulted in the globaldemand for steel dropping by .1 compared to the le*el consumed in the

same @uarter of the pre*ious year$

The demand for steel declined by ./ in the


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ndian steel

production has increased by million tones e*ery year$ The economicreforms initiated by the go*ernment since 1&&1 ha*e added new dimensions

to industrial growth in general and steel industry in particular$ Steel industry

has been remo*ed from the list of industries reser*ed for the public sector$

!utomatic appro*al of foreign e@uity in*estment up to 100 is now

a*ailable$ rice and distribution controls ha*e been remo*ed from 2anuary

1&&., with a *iew to make the steel industry eFcient and competiti*e$

#ompan3

The year .005;0& was a historical one epitomised by the acute global

(nancial imbalance which initially appeared to ha*e spared ndia only to

impact the markets ad*ersely as the year rolled on$ The global economic

slowdown has impacted the steel sector as well$ !midst the turmoil in the

global marketplace, 2amshedpur 7orks performed remarkably creating many

records on the way$

ndian operations witnessed a less pronounced drop in demand of 11 in the

third @uarter, reJecting the reduced acti*ity in infrastructure and commercial

*ehicles$ Steel is re@uired by *arious industries as an important raw materialconstituent$

Tata Steel has taken aggressi*e steps to meet the challenges of these

diFcult times through maor initiati*es in cost reduction, process

impro*ement and production rationalisation$ The highest priority is being

gi*en to expanding steel producing capacity in 2amshedpur, and ensuring

raw material security for the %uropean operations which do not ha*e capti*e


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iron ore and coal resources$The Tata Steel 8roup has de*eloped a pipeline of

high @uality proects, which will be executed, though we will re;phase the

se@uence$ roects like the 3 million tone expansion in 2amshedpur, the

proposed steel plant in 9rissa and raw material proects in Mo?ambi@ue,

South !frica and -anada are key dri*ers of our future *alue creation$

+inancial!na

lysis


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alance *eet Anal3-i-

!SS%T SI%

.00/;0' .00';05 .005; 0&0

0$.

0$H

0$/

0$5

1

Tata teel

#apital 5udgeting

The ratio re@uired to calculate capital budgeting is mainly Iebt;%@uity ratio$

Tata steel has increasing debts$ So the company has gone in for debt

(nancing and thus, the company is ha*ing a comparati*ely higher borrowing

from the market$ Basically the Iebt;%@uity ratio has to be as high as possible

so that the company has lower borrowings and has to pay less interest$

Tata steel has increasing debts$ So the company has gone in for debt

(nancing and thus, the company is ha*ing a comparati*ely higher borrowing

from the market$ Basically the Iebt;%@uity ratio has to be as low as possible

so that the company has lower borrowings and has to pay less interest$

I!VET$E!T


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.00;0/ .00/;0' .00';05 .005; 0&;10000

0

10000

.0000

30000

H0000

0000

Tata teel

t can be seen that

in*estments in the last year has increased drastically from negati*e cash

Jows to positi*e cash Jows in in*estment$ This was result of in*esting

subsidiary companies especially Tata Steel 6oldings T%$ t made an

in*estment of about Gs 3,/33 crores against Gs '. lakhs$ This has lead to

increase in in*estments$


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.00/;0' .00';05 .005; 0&0

0$0

0$1

0$1

0$.

0$.

0$3

Tata teel

#a-* management

This re@uires cash ratio, which includes cash and cash e@ui*alent Q current

liabilities$ 9*er years this company has managed to keep up their cash

management at par with other companies$ n recent times this company has

raised their cash ratio as compared to pre*ious years$De5tor- $anagement

.00/;0' .00';05 .005; 0&0

10

.0

30

H0

Tata teel

This re@uires IebtorCs turno*er ratio

which is calculated by, IebtorsQSales$ This ratio has to be as low as possible

so as to gain maximum li@uidity for the company$ This means that the

debtors will return money in these many days$

Tata steel took o*er -orus in recent past and had taken a loan for that

purpose and due to this loan their IebtorCs turno*er ratio ust shot up from.&$51 to 33$H$


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.00/;0' .00';05 .005; 0&0

.

H

/

5

10

1.

Tata teel

In,entor3 $anagement

7e get in*entory turno*er ratio by, -ost of 8oods SoldQ!*erage or -urrent

eriod n*entory$ 6igh turno*er ratio is usually bene(cial for any company as

products tend to deteriorate as they are kept in a warehouse$

Tata steel has managed to keep their in*entory management *ery eFcient

during these years as we can see below that it keeps on increasing and that

is what e*ery company needs, a *ery eFcient in*entory management

system$

>!B>T%S

76HARE #APITA/

EUIT% #APITA/


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REERVE A!D URP/U

There was a steep increase in reser*es in .005;0& due to increase

in foreign currency translation reser*e, but in .005;0&, the company

gained Gs H0 crores in foreign exchange Juctuation reser*e$ 9n the

other side the company faced losses of Gs H&/ crores as actual loss$

.00H .00 .00/ .00' .0050

000

10000

1000

.0000

.000

Re-er,e- 9 urplu-

9*er the years the company has been increasing its income in share

premium account, through con*ersion of warrants and preference

shares$

E#URED /OA!

De5enture-


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Tata Steel placed 4on;-on*ertible Iebentures totaling upto Gs$ .,000crore in May .005 comprising of 3 series ha*ing phased maturities$ The-ompany further raised a .;year term loan of Gs$ .,000 crore in May.005$ n 4o*ember .005, the -ompany raised Gs$ 1,.0 crore through4on;-on*ertible Iebentures pri*ately placed with the >ife nsurance

-orporation of ndia, repayable in e@ual installments at the end of the/th, 'th and 5thyears$

n !pril .00&, the -ompany further raised Gs$ .,000 crore from a termloan and in May .00&, it pri*ately placed Gs$ .,10 crore of 4on;-on*ertible Iebentures repayable after 10 years$ Thus the -ompanyraised Gs$ &,H00 crore in a year marked by tight li@uidity$One important t*ing to note i- t*at t*e intere-t on de5enture-

i- increa-ing e,er3 3ear e,en t*oug* t*e amount o4

de5enture- *a- reduced con-idera5l36

/OA! and ADVA!#E

.003 .00H .00 .00/ .00' .0050

.000

H000

/0005000

10000

1.000

1H000

1/000

15000

.0000

ORRO(I!G

The

debt in the -ompanyCs consolidated balance sheet has increased

considerably after the -orus ac@uisition$ The gross debt in the Tata Steel

8roup was


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The increase was primarily on account of raising of new loans to the tune of


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f the performance of pre*ious years is compared it can be seen that the

loans and ad*ances reduced substantially as the ad*ance against e@uity was

con*erted into in*estments during the (nancial year and accordingly there

was an increase in the in*estments$

The

-ompany entered into a loan agreement with the State Bank of ndia and

other banks for Gs$ &,00 crores$ n 2anuary .005 Gs$ &,000 crores was repaid

with proceeds from the -ompanyCs Gights ssue and Gs$ 00 crores was

repaid on .5th +ebruary, .005$R n 4o*ember .00', the -ompany made a

rights issue oEering to shareholders in ndia, "i# 1 ordinary share for e*ery

(*e ordinary shares at a price of Gs$ 300 per share and "ii# & cumulati*e

compulsorily con*ertible preference shares "K--SL# for e*ery 10 ordinary

shares at a price of Gs$ 100 each$


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-!B>T%S

.005 .00' .00/ .00 .00H

0

1000

.000

3000

H000

000

/000

'000

#URRE!T /IAI/ITIE

In crore-

The current liabilities increased by Gs$ '' crores from a le*el of Gs$ 3,.3

crores as on 31st March, .00' to Gs, 5 crores as on 31st March, .005$ The

increase was mainly due to increase in the *alue of purchasesQser*ices on

account of expansion proects$


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$ G9+T !4I >9SS !Q-

Increa-e in Pro:t ; 4rom 200< to 20086

2003 2004 2005 2006 2007 20080

=

707=

20

2=

=

=0

0

H.$03

H&$'H

0$&1

1/$&&$&.

Increase in Profts

Tata steel showed steady rate in pro(t$

ts pro(t increased by 101.$31 to H/5'$03 from .003 to .005 i$e$ by

Gs 3/'H$'. crores$

+rom the abo*e table T!T! ST%%> has gi*en good pro(ts in the year

.00H and .00$

Iue to deal with -9G companyCs pro(ts declined

sharply but after .00/ the pro(t rate increased gradually$

Iecline in pro(ts in year .00' to .005 is because of Gecession hit

the market$


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The 8 Margin for .00/;0' was '$5 followed by 3&$'& in .00';05 and

3/$H3 in .005;0&$

.005;0& .005;0' .00';0/

/H00

//00

/500

'000

'.00

'H00

'/00

'500

5000

5.00

5H005.5&$01

'&00$&'

'050$&H!mount "Gs in -rs#

Depreciation&

-apital !ssets whose ownership does not west in the company is depreciated

o*er the estimated useful life or (*e years whiche*er is less$

n respect of other assets depreciation is pro*ided on a straight line basis

applying the rate speci(ed in Schedule 1H to the -ompanies !ct 1&/ or

based on estimated useful life whiche*er is higher$ 6owe*er, asset *alue up

to Gs .000 is fully depreciated in the year of ac@uisition$ The details of

estimated life of each category of assets are as underA Building 30 P /0 years$


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lant Machinery / P .1 years$

Gailway Sidings .1 years$

:ehicles and !ircrafts P 15 years$

+urniture, +ixture 9Fce %@uipments years$

ntangibles "computer software# P 10 years$

Ie*elopment of property for de*elopment of mines and collieries

are depreciated o*er the useful life of the mine or lease period

whiche*er is less, subect to a maximum of 10 years$ Blast furnace relining is depreciated o*er a period of 10 years

"a*erage expected >ife#$

Total depreciation for the +inancial ear .00/;0' accounted to Gs$ 51&$.& crs

followed by Gs$ 53H$/1 crs in .00';05 and Gs$ &'3$H0 crs in .005;0&$


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$ +4!4-!> GS=

TA A!D I!TERET RATE A!%A/I

+rom the abo*e balance sheet nterest charged in .005 is H1,H&3 "Gs

mn# and in .00& it decrease to 35,.53 "Gs mn# i$e$ -hange of ;5$H$

Tax charged in .005 was H0,H&3 "Gs mn# and in .00& it decrease to

3&,'1 "Gs mn# due to decrease in gross pro(t$

+inance for the -orus ac@uisition was raised through bridge loans and

later re(nanced by Tata Steel which has led to a dramatic increase in

the interest outJow in the !pril;2une @uarter the interest outJow was

Gs.H1$' crore compared to GsH1$/ crore for the same @uarter last year$


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Ii*idend olicy

Tata Steel has been continuously pro*iding di*idend to its shareholders to

maximi?e its wealth$ n the year .005;0& the company paid a di*idend of Gs

11/5$& crores$ The payment of di*idend is always (xed by the company

irrespecti*e of pro(ts or losses$

Tata Steel is gi*ing a signi(cant higher rate of di*idend year after year in

comparison to its nearest competitorCs$

n .00/;0' the year the company completed 100 years a di*idend of .

was issued to the shareholders$

.003 .00H .00 .00/ .00' .0050

.0

H0

/0

50

100

1.0

1H0

1/0150

Tata teel


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Tata Steel was initially gi*ing higher amount of di*idend initially on its !T$

But o*er a period of time, it decided to change its strategy and putting back

all its earnings on de*elopment of the company$


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"und "loF 9 #a-* "loF tatement-


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!nalysis of +unds +low and -ash +low Statements

S9


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n*entory "with reduction in (nished and semi;(nished in*entory and

increase in raw materials in*entory# and Iebtors$


45/49

+4!4-!> G!T9S

Gatio !nalysis

9perating expenses are expected to increase marginally resulting in increaseof %BTI! margin of 35$'$But compared to pre*ious year the

%BTI!QTurno*er has reduced because the pro(ts were higher than last

years$

G9-% o*er the years has reduced because of slowdown as well as huge

in*entories of stock and new plants introduced in 2amshedpur$

!sset Turno*er is *ery good n last four years the assets were utili?ed to the

fullest but in the last year due to less demand, it reduced by 1, but in

o*erall terms it is optimally used all resources$


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.00H .00 .00/ .00' .0050

10

.0

30

H0

0

#urrent Ratio

Tata teel

The current ratio is a (nancial ratio that measures whether or not the

(rm has enough resources to pay its debts o*er the next 1. months$ tcompares a (rmCs current assets to its current liabilities$ Tata Steel has

a high amount of unutili?ed current assets$ The company has high le*el

of in*entory or 7$ Since the demand for steel has reduced drastically

the company is ha*ing huge in*entory and because of this the li@uid

ratio is low$

Iebtors Turno*er Gatio

Sear .003 .00H .00, .00/ .00' .0050

.0

H0

/0

50

100

1.0

DE0TORG#REDITOR TUR!OVER Ratio

The stakeholders of the company like distributors and suppliers ha*e a

lot of con(dence in the company$ This shows the creditworthiness and

brand *alue of the company$ Since debtors are paying back in

comparati*ely less number of days shows faster mo*ement of goods in

the market$


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%BTI!QT


49/49

"uture Pro-pect-

The -ompany has embarked upon setting up three green (eld steel plants in

eastern ndiaA

1. MT!U plant in 2harkhand

/ MT! plant in 9rissa

MT! plant in -hhattisgarh

2amshedpur Steel 7orks will become a 10 MT! unit by .010$

UMT! V million tonnes per annum

Solution for Sales "S+S# oEers based on the Theory of -onstraints "T9-#concept saw stabilisation in the steel di*ision$ The replenishment module

was extended to co*er 100 of the retail channel of T!T! TS-94, achie*ed

&0 co*erage in T!T! S6!=T%% and /0 in T!T! Steelium$ This resulted in a

reduction of stock outs in retail shops and more signi(cantly, a reduction in

channel stocks$ Geliability solutions were extended to direct customers in

the Steelium distribution$ +or the -onstruction roects segment, an S;IBG

"Simpli(ed Irum BuE er Gope# mechanism was implemented under the

Theory of strains supply chain impro*ement initiati*e which impro*ed the

a*ailability of rebars at the warehouses, thereby reducing instances of

delays and loss of orders$

The term focus is on the implementation of the K+it for +utureL restructuringin %urope, to continue with the 3 mtpa expansion proect in 2amshedpur ando*erseas raw material proects, to increase production *olume in ndia andoptimise working capital management across the 8roup to preser*e li@uidity

>ooking towards the future, the steel industryCs main contribution to thereduction of -9. emissions should be to further de*elop the use of by;products and to work with its customers to help design well, long lasting,more energy and material eFcient products$ !dditionally, impro*ements in

areas other than primary steel production may oEer further opportunities for-9. reduction

tata steel vibhu

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