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Finance Project

Submitted by:Kumar Shreyas

Kumar Shreyas
Enrollment Id- 10BSPHH011075 Seat no. 29

TATA STEEL

Mr Koushik Chatterjee Group CFO, Tata Steel

INTRODUCTION
Tata Steel, formerly known as TISCO; Tata Iron and Steel Company Limited, is the world's seventh largest steel company. Tata Steel is principally engaged in mining, production and distribution of steel and steel products. The company has major domestic operations in India and international operations in Ivory Coast, Mozambique, Vietnam, South Africa, Australia and Oman. The company also operates 17 distribution and commercial centers around the world. The Tata Steel operations include steel division, bearings division, ferro alloys and minerals division, agrico division, Tata growth shop (TGS), tubes division, and wire division. The other major international operations of the company include Corus Group; NatSteel, a wholly-owned subsidiary of Tata Steel; Tata Steel (Thailand); and Tata Metaliks.

BAL ANCES EET H


Mar '06 12 mths
Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities 553.67 553.67 0 0 9,201.63 0 9,755.30 2,191.74 324.41 2,516.15 12,271.45 580.67 580.67 147.06 0 13,368.42 0 14,096.15 3,758.92 5,886.41 9,645.33 23,741.48 6,203.30 730.78 0 5,472.52 21,097.43 0 27,300.73 3,520.58 14,501.11 18,021.69 45,322.42 6,203.45 730.79 0 5,472.66 23,501.15 0 29,704.60 3,913.05 23,033.13 26,946.18 56,650.78 887.41 887.41 0 0 36,281.34 0 37,168.75 2,259.32 22,979.88 25,239.20 62,407.95

Mar '07 12 mths

Mar '08 12 mths

Mar '09 12 mths

Mar '10 12 mths

Mar '06 12 mths


Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets 15,407.17 6,699.85 8,707.32 1,157.73 4,069.96 2,174.75 539.4 288.35 3,002.50 1,994.46 0.04 4,997.00 0 4,552.39 2,361.44 6,913.83 -1,916.83 253.27 12,271.45

Mar '07 12 mths


16,029.49 7,486.37 8,543.12 2,497.44 6,106.18 2,332.98 631.63 446.51 3,411.12 4,025.95 7,234.84 14,671.91 0 6,349.24 1,930.46 8,279.70 6,392.21 202.53 23,741.48

Mar '08 12 mths


16,479.59 8,223.48 8,256.11 4,367.45 4,103.19 2,604.98 543.48 465 3,613.46 34,582.84 0.04 38,196.34 0 6,842.26 2,913.52 9,755.78 28,440.56 155.11 45,322.42

Mar '09 12 mths


20,057.01 9,062.47 10,994.54 3,487.68 42,371.78 3,480.47 635.98 463.58 4,580.03 5,884.61 1,127.02 11,591.66 0 8,965.76 2,934.19 11,899.95 -308.29 105.07 56,650.78

Mar '10 12 mths


22,306.07 10,143.63 12,162.44 3,843.59 44,979.67 3,077.75 434.83 500.3 4,012.88 6,678.55 2,733.84 13,425.27 0 8,699.34 3,303.68 12,003.02 1,422.25 0 62,407.95

P OI A D O S C O N R FT N L S A C U T
y r ea p d erio
In m co e S ales T urnov er E cise D x uty N S et ales O ther Income S tock A djustments T tal In m o co e E en itu xp d re R M aw aterials P er &F C ow uel ost E ploy C m ee ost O ther M anufacturing E penses x S elling and A dmin E penses x M iscellaneous E penses x P reoperativ E p e x C apitalised T tal E en o xp ses 4,766.44 897.57 1,351.51 1,466.83 255.93 727.12 -112.62 9,352.78 5,762.42 1,027.84 1,454.83 1,561.40 244.92 805.99 -236.02 10,621.38 6,063.53 1,038.77 1,589.77 1,654.96 247.77 1,029.30 -175.5 11,448.60 8,568.71 1,222.48 2,305.81 2,127.48 400.24 1,180.08 -343.65 15,461.15 8,356.45 1,383.44 2,361.48 2,419.89 417.9 1,287.04 -326.11 15,900.09 17,136.92 2,004.83 15,132.09 252.58 104.91 15,489.58 19,756.84 2,304.18 17,452.66 362.12 82.47 17,897.25 22,191.43 2,537.02 19,654.41 586.41 38.73 20,279.55 26,843.53 2,495.21 24,348.32 603.07 289.27 25,240.66 26,757.60 1,816.95 24,940.65 1,241.08 -134.97 26,046.76

M r '0 a 6 1 m s 2 th

M r '0 a 7 1 m s 2 th

M r '08 a 1 m 2 ths

M r '0 a 9 1 m s 2 th

M r '1 a 0 1 m s 2 th

M r '0 a 6
O eratin P fit p g ro P D B IT Interest P D B T D epreciation O ther W ritten O ff P rofit B efore T ax E tra-ordinaryitems x P T(P E tra-ord B ost x Items) T ax R o ep rtedN P fit et ro T otal V alue A ddition P reference D idend iv E quityD idend iv C orporate D idend iv T ax P sh er are d (an u ata n alised ) S hares in issue (lakhs) E in P S are arn g er h (R s) E quityD idend (% iv ) B ook V alue (R s) market price(R s) 719.51 100.92 5,193.26 47.5 5,240.76 1,734.38 3,506.38 4,586.34 0 5,884.22 6,136.80 168.44 5,968.36 775.1 0

M r '0 a 7
6,913.75 7,275.87 251.25 7,024.62 819.29 0 6,205.33 57.29 6,262.62 2,040.47 4,222.15 4,858.96 0 943.91 160.42

M r '08 a
8,244.54 8,830.95 929.03 7,901.92 834.61 0 7,067.31 0 7,067.31 2,380.28 4,687.03 5,385.07 22.19 1,168.93 202.43

M r '0 a 9
9,176.44 9,779.51 1,489.50 8,290.01 973.4 0 7,316.61 0 7,316.61 2,114.87 5,201.74 6,892.44 109.45 1,168.95 214.1

M r '1 a 0
8,905.59 10,146.67 1,848.19 8,298.48 1,083.18 7,215.30

0 7,215.30 2,168.50 5,046.80 7,543.64 45.88 709.77 122.8

5,534.73 63.35 130 176.26

5,804.73 72.74 155 240.31

7,305.84 63.85 160 298.78

7,305.92 69.7 160 331.68

8,872.14 56.37 418.94

80

4 1.61 4

39 9 7 .6

59 .8 6 9

14 7 8 .0

6 17

Financial Ratio Analysis

ANALYSIS JINDAL STEEL BHUSHAN STEEL JSW STEEL TATA STEEL

A.
(I)

LEVERAGE RATIOS
DEBT EQUITY RATIO: JSW STEEL has been 1.07, .84, 1.06, 1.51 and 1.26 in the past 5 yrs. BHUSHAN STEEL has been 2.29, 2.67, 3.52, 3.96, and 2.89 in the same period. Similarly JINDAL STEEL ratios were 1.49, 1.40, 1.03, .92, and 1.24. Compared to these companies we see that TATA STELL has a D/E ratio less than 1. This means that it has more of equity content in its capital structure than debt which is not normal for a steel company.

(II)

DEBT ASSET RATIO: Debt asset ratio of TATA STEEL has been less than 0.5 throughout these 5 yrs. This means that TATA STEEL has more than double assets than debt.

(III)

Interest coverage ratio= EBIT / Interest: Interest coverage ratio of TATA STEEL has drastically decreased in past 5 yrs in spite of fact that EBIT has increased in the same period. This means the interest being paid by TATA STEEL has increased tremendously.

(IV)

Fixed asset ratio=long term funds/net fixed asset: This has increased to nearly 2. This means that over the past 5 yrs long term funds have become double of its net fixed asset.

Capital gearing ratio=equity capital/fixed cost bearing securities: This ratio is just opposite of D/E ratio. This due to the fact that TATA STEEL has not issued preference share except for 2 yrs.
(V)

Proprietors ratio=proprietors fund/total assets: in these 5 yrs the proprietors fund has decreased from 70% in 2006 to 19% this year.
(VI)

B.
(I)

Profitability Ratio

Net profit margin ratio= net profit/net sales: Net profit of TATA STEEL has always been 20% of its net sales. This is nearly equal to JINDAL STEEL which has a 19% net profit margin. Whereas BHUSHAN STEEL and JSW STEEL has a comparatively lower value of 6% to 12%. Asset turnover =sales/average asset: From nearly 109% asset turnover of TATA STEEL it has decreased to a mere of 44%. This compare to other steel companies which are having an average turnover of 70% to more than 100%.
(II)

Earning per share (EPS) =net income (PAT)/no. of share: The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability. EPS of BHUSHAN STEEL and JINDAL STELL has always been more than Rs90. Whereas of JSW STEEL has also have EPS more than Rs85. Compare to these companies TATA STELL has a low EPS of an average of Rs 65.
(III)

P/E ratio= market price of share/EPS: There is a cyclic change in TATA STEEL price over the years. In 2006 the P/E ration was nearly Rs 7, which became Rs 5 in 2007; it was Rs 9 in 2008 and Rs 2 in 2009. Now the P/E ratio is Rs 10 which proves a cyclic trend in the pricing of TATA STEEL shares.
(IV)

C.
(I)

Liquidity Ratio

Current ratio= current asset / current liability: looking at current ratio of 2010 we see that at present the current assets covers entire current liabilities. This is at par with other steel companies except JSW STEEL which has a very low current ratio of 0.31. Quick ratio: TATA STEEL quick ratio of 0.83 is less than of JINDAL STEEL AND BHUSHAN STEEL but more than JSW STEEL.
(II) (III) (IV)

Cash ratio: Cash ratio of TATA STEEL is low but it has always been near to 6% of its current liabilities.

Debtors turnover ratio: it has is increased drastically over the years. TATA STEEL Debtor turnover ratio was 30 days which has now increased to 45 days. This value is much higher than that of JINDAL STEEL and BHUSHAN STEEL. It is slightly higher than JSW STEEL too. Average collection period: it has come down from 10 in 2006 to 7 this year which is less than other steel companies.
(V)

Inventory turnover: it is 8 days for TATA STEEL which is nearly equal to JINDAL STEEL and JSW STEEL but higher than BHUSHAN STEEL. This means that it has an optimal level of inventory turnover; neither high nor low.
(VI)

Fixed Asset turnover ratios: it has become nearly 2 for TATA STEEL. JINDAL STEEL has fixed Asset turnover ratios of 0.83 and has never gone more than 2 in past 5yrs. Fixed Asset turnover ratios of JSW STEEL has never gone above 1 in past 5 yrs. BHUSHAN STEEL too have an average of 1.5 Fixed Asset turnover ratios in past 5 yrs. This means that TATA STEEL net sales are low compared to its assets.
(VII)

(VIII) Working Capital turnover Ratio:

Net sales of TATA STEEL as compared to working capital have decreased drastically in 2008 due to recession. But in recent years it is again increasing and in 2010 it has become 6.5. Total Capital Turnover Ratio: During recession the Total Capital Turnover Ratio of TATA STEEL had drastically decreased to 3 which continued in 2009 but in 2010 it made a drastic recovery and its Total Capital Turnover Ratio become 28 which is nearly equal to pre recession period.
(IX)

D.

DEGREE OF FINANCIAL LEVERAGE:

In 2010 the financial leverage of TATA STEEL was negative -6.5. This could only happen in a situation in which the fixed return to a company's creditors and preferred stockholders is greater than the return on total assets. In this situation, the return on common stockholders' equity will be less than the return on total assets.

E.

DEGREE OF OPERATING LEVERAGE:

The operating leverage is a measure of how revenue growth translates into growth in operating income. It shows the vitality in companys operating income. DOL has decreased over the years which show the increase in companys stability in operating income.

MARKET PRICE COMPARISON