Professional Documents
Culture Documents
September, 2009
Presented Presented
To:- By:-
Ms. Parul Ankur
Nagar Keshari
Ashish Lal
1
Priyanka
Objectives of Research
Introduction.
The DEAL.
TATA after
Acquisition.
Loss in the 1st Quarter
2 of 2009
Indian Steel Market
Tata steel industry was the first Indian
steel industry established 1907.
4
Global Steel Market :
Overview
IISI forecasts the global steel demand
would be 1.32 billion tones by 2010.
5
Global Steel ranking
Company Capacity(in million
tonnes)
Arcelor - Mittal 110
Nippon Steel 32
Posco 30.5
JEF Steel 30
US Steel 19
6
Corus Steel Industry
Formed on 6th Oct 1999, through merger of 2
companies : British Steel and Koninklijke
Hoogovens.
Consist of four divisions : Strip products, Long
products, Aluminum and Distribution, Building
system
Operates as an International company
Core business in Manufacturing, Development
and Allocation of Aluminum and Steel products
and services
Wide variety of products and services
7Largest steel producer in UK with £10,142
Objectives of Acquisition
Higher profitability
TATA current EBITDA is 13% production
tonnes
Global No. 6 company
By 2012, EBITDA expected is 25%, production
of 40 million tonnes giving it the position of
Global number 2.
To gain access to global steel market and
expand production capacity to keep pace with
growing demand for steel
Jim Leng, Chairman of Corus“This offer from
8 Tata Steel reflects the substantial value
Objectives of Acquisition
TATA looking for mature market in Europe
for its finished products
Corus holds a number of patients and R &
D facility.
Cost of Acquisition lower than setting up a
green field plant and marketing and
distribution channel.
Corus wanted to reduce its employees cost
and TATA is well known for handling its
labours efficiently.
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Consolidation Synergy
As part of its integration process being
done at two levels, the steel makers
expects to cross the $450 million target by
the end of 2010.
10
Mr. B. Muthuraman (M.D. Tata Steel)
being financed.
After the bidding conflict with CSN, TATA
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while CORUS earned $860 million on sales of
SWOT Analysis for TATA
Strength
Lowest cost producer in world.
Experience of TATA group in doing global activity.
Stable balance sheet (Low Debt to Equity Ratio).
Weakness
Corus was triple the size of TATA steel in terms
of production.
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Swot Analysis
Opportunity
Consolidation trend in Steel Industry
CSN’s lost image after failure of 2002
negotiations
To get exposed to global steel market
Threat
Brazil company CSN
Russian company Severstal
No committed financers to support the possible
deal
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Loss in quarter 1 of 2009 -
2010
TATA Steel posted a consolidated net loss
(including Corus) of Rs 2,209 crore ($461
million).
Incurred a profit of Rs 3,901 crore ($814
million ) in the April-June quarter of FY’09.
Sales volume of Indian operations was higher by
22 percent but sales from its European
operations (Corus) fell heavily.
Group consolidated turnover was Rs.23,292
crores as compared to Rs. 43,496 crores.
17
Formulating a Research
Design
Descriptive Study
Fact finding investigation with adequate
interpretation.
Identifies various characteristics of
organization.
Prediction is used outside the boundary of
research.
18
Reasons for Failure
Global Economic downturn.
automotive sectors.
Bidding Disturbance from CSN to TATA Steel
share of Corus.
Main Competitors are CSN and SEVERSTAL
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Defining The Problem
Lower chance of success
Size of target company Corus
Other bidding companies like CSN etc.
Higher price per share
Less opportunity to build relationship with
the target’s management
Local Market reaction
Arranging funds as it was an all cash deal
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Alternates
Global Expansion
Taking the TATA trust globally
Joint Ventures with other steel manufacturers
Could have searched for reserves in India,
Singapore etc.
Profitability
Could have diversified its investment
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Alternatives
Expansion – If TATA steel were to create,
from scratch, 19 million tonnes of steel
making capacity comparable in quality to
what Corus possesses, It would end up
investing 70% to 85% more than it is
paying now.
22
Contingency Plan
The Contingency plan could have been a
joint venture with mittal steels as it is
allready into process of setting up a big
steel unit in Orrisa, TATA could have
provided them with iron ore reserves and
would have expected share in its profits
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Conclusion
- Ratan Tata
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