INTRODUCTION

We begin our journey from the small town of Jamshedpur in Jharkhand. Where every child grows up to a dream and to a reality – both leading to one organization. An organization which defined the lives of the people of this small township. One power, One Force – The dream of One man which shapes the realities of millions world over today. We bring to you the story of one of the oldest and most successful organizations of our times and celebrate the true spirit of steel with Tata Steel Limited. The reasons for picking TSL for our study are simple – • • • • It is Asia‟s First and India‟s largest steel company in the private Sector It is India‟s 2nd largest and 2nd most profitable company in private sector It is one of the most admired companies in terms of HR Practices and Sustainable growth and Corporate Social Responsibility And the most important reason was to study the history of this glorious organization which celebrated its centenary year of foundation on the year 2007.

The Tata Group Before we discuss at length the Company, we would lie to throw some light on the Tata Group of companies in Present day India.

TSL is one of the first ventures of the Tata Group but it has many other successful companies under its umbrella. Some of the other notable Tata concerns and their lines of business are shown below:

Tata Steel Limited – An overview:
• • • • • • • • • Established in 1907 by Jamshetji N Tata in Jamshedpur Formerly known as Tata Iron and Steel Company Limited (TISCO) 28.1 million tonnes per annum of crude steel production capacity With Corus acquisition, TSL is world‟s 6th largest steel producer Ranked “ Best Steel Maker” by World Steel Dynamics in 2006, 2005 and 2001 Ranked 315th on Fortune Global 500 (post the Corus acquisition 82,700 employees (2007) Listen on BSE and NSE Headquartered in Jamshedpur, Jharkhand and registered office in Mumbai

The vision that the company has set for itself to achieve by 2012 is:

Some important financial highlights of the company over the past five years are shown below: 1. The following graph shows the rising income and expenditures of the company over the years.

2. The nest graph shows the change in the net sales and the Profits after Tax over the years

The Composition of the Board and the Board of Directors
The structure of the board was recently modified in the year 2007 post the Corus UK acquisition to suitably incorporate changes which will lead to the adequate realization of synergies from the deal within the given stipulated time fame to reap the maximum benefits from the much talked about and criticized deal.

The figure above represents the structure of the Board. The block marked in yellow represents the strategy and integration committee which was formed post the Corus

acquisition to realize the synergies from the deal. The following figure shows the organization structure in TSL.

There are two points to be highlighted from the above organization structure. 1. The organization is divided into various levels in which the management is divided into. These levels are called impact levels (IL). The structure ranges from IL1, IL2, and IL3 and so on. The new IL6 was introduced in the year 2007. 2. The presence of an Ethics Counsellor at the IL3 position must be noted. This position was introduced when the company adopted the Whistle Blower Policy in 2005. However we were unable to find any cases which were reported as an actionary response by this ethics counselor.

CORPORATE GOVERNANCE
• • • • • The Board is Trustee of its Shareholders Adopting the „best practices‟ Need for full transparency and accountability in all its transactions Responsibilities creation and safeguarding shareholders wealth Tata Steel Group vision whereby the Tata Steel Group aspires to be the global steel industry benchmark for value creation and corporate citizenship

• • •

Non executive chairman, Mr Ratan Tata 14 Directors on Board (as on 31st March 2008) – 8 independent, 6 not independent Number of independent directors is more than one third of total number of directors

Adherence to Clause 49 of Listing Agreement –
1. No. of NEDs is more than 50% of total no of directors 2. None of the board member is a member on more than 10 committees 3. None of the board member is a Chairman of more than 5 committees The age composition of the Board is given below:
80 70 70 60 50 50 40 30 20 10 0 Age Tata Hussain Robb Leng Irani Mukherjee Palia Bhargava Varin Krishna Schvaren Muthuraman Wadia Hayward Singh Average Age 63.69 61 72 64 60 54 71 66 66 65 65 64

The attendance of the members of the board at the board meetings during the year 2007-2008 was as follows:

Attendance at Board Meetings
2 3 0% 7% 4 14% 5 14% 1 7% 7 7 36% 6 5 4 3 6 22% 2 1

From the above graph we see that while 36 % of the Directors (which included Mr. Ratan Tata) attended all 7 meetings another 22% attended 6. There are various other committees in TSL which are headed by the different member of the Board. Some of them are:
Name of Committee No. of Members No. of Meetings

Audit Committee

5

11

Remuneration Committee

3

2

Investor Grievance Committee

2

1

Ethics and Compliance Committee

2

1

We look at one committee in particular which is the investor grievance committee. 1. During the period 1st April, 2007 to 31st March, 2008, complaints identified and reported under Clause 41 of the Listing Agreements : 4656 2. Complaints disposed off during the year ended 31st March, 2008 : 4265 3. Complaints unresolved to the satisfaction of shareholders as on 31st March, 2008 : 391 4. Complaints unresolved to the satisfaction of shareholders as on 24th June, 2008. : 57 Though the number of complaints received seems to be extremely high, research h shows that they were mostly over trivial matters like the receipt of the annual report and the dematerialization of shares. What we intend to highlight here is that the resolution of the grievances has been pretty consistent and on time.

Whistle Blower Policy
 The Whistle Blower Policy - extension of the Tata Code of Conduct – adopted on 25th October 2005 Make protective disclosures about the unethical behaviour, actual or suspected fraud or violation of the Company‟s Code of Conduct Formal mechanism for all employees of the Company to approach the Ethics Counsellor/Chairman of the Audit Committee

SHARE HOLDING PATTERN

Ordinary Shares
501 to 1000, 4.53 1001 to or above, 0.24 10000 10000, 3.76

101 to 500, 31.06

1 to 100, 60.41

1 to 100

101 to 500

501 to 1000

1001 to 10000

10000 or above

The graph above shows that 60% of the shares belong to small retail investors who hold 1 to 100 shares followed by 31% of investors who hold 101 to 500 shares. If we look at the change in this retail shareholding pattern over 2007 and 2008 we note that there has not been any substantial change in this pattern.

70 60 50 40 30 20 10 0 1 to 100 101 to 500 501 to 1000 1001 to 10000 10000 or above

% as on 31.03.2008

% as on 31.03.2007

A look at the top 10 equity shareholder though tells us that the Tata group together holds about 32 % of the total equity of TSL followed by other financial institutions.
Name of the Shareholder Tata Sons Limited %age holding 27.9

Life Insurance Corporation of India Tata Motors Limited

10.15 4.3

Deutsche Securities Mauritius Limited

1.97

HSBC Global Investment Funds A/c HSBC Global Investment Funds Mauritius Limited

1.78

The New India Assurance Company Limited

1.23

National Insurance Company Limited

1.17

Morgan Stanley Mauritius Company Limited

1.05

The Oriental Insurance Company Limited Macquarie Bank Limited

0.91 0.75

A graphical representation of the following is as follows:
Morgan Stanley Mauritius Company Limited, 1.05

Percentage Holding
Macquarie Bank Limited, 0.75

The New India Assurance N ational Insurance Company Limited, 1.23 Company Limited, 1.17 HSBC Global Investment Funds A/c HSBC Global Investment Funds Mauritius Limited, 1.78 Deutsche Securities Mauritius Limited, 1.97

The Oriental Insurance Company Limited, 0.91

Tata Motors Limited, 4.3 Life Insurance Corporation of India, 10.15 Tata Sons Limited, 27.9

WORLD STEEL CONSUMPTION PATTERN

The above exhibit gives one very important indication – the share of developing economies to the consumption of Steel has been on the rise and is expected to rise further. This coupled with India‟s unique location as it is surrounded by Steel importing nations can have very important implications on the export and domestic consumption of steel.

This exhibit clearly shows that India is surrounded by net exporters of steel. This strategic geographical location must be utilized by all Indian steel producers. Also, a look at the global steel prices shows an interesting trend:

There are various reasons for these price fluctuations:

INTERNATIONAL COMPETITOR COMPARISON
Post the Corus acquisition, TSL has emerged as the 6th largest steel producer in the world.

But TSL‟s performance has been extremely well in the past years and it has always ranked amongst the top 4 steel makers in the world ranging over a period of 2001 to 2006.

There has been a sudden drop in its position post the Corus deal, the dynamics of which are discussed further in the report.

INDIAN STEEL MARKET
Steel is required by various industries as an important raw material constituent. Some of the major sectors are:

Indian Steel Industry
50

Quantity (in million tonnes)

45 40 35 30 25 20 15 10 5 0 2003-04 2004-05 2005-06 2006-07

YEAR
From the above graph we can see that Indian steel production has increased by 5 million tones every year. The economic reforms initiated by the Government since 1991 have added new dimensions to industrial growth in general and steel industry in particular. Licensing requirement for capacity creation has been abolished, except for certain locational restrictions. Steel industry has been removed from the list of

industries reserved for the public sector. Automatic approval of foreign equity investment upto 100% is now available. Price and distribution controls have been removed from January, 1992, with a view to make the steel industry efficient and competitive. Restrictions on external trade, both in import and export have been removed. Import duty rates have been reduced drastically. Certain other policy measures such as reduction in import duty of capital goods, convertibility of rupee on trade account, permission to mobilise resources from overseas financial markets and rationalisation of existing tax structure for a period of time have also benefited the Indian Steel Industry. The following graph shows the export vis a vis the imports of steel in the Indian market. From the graph we see that there has been a constant increase both in the export as well as the import market for steel:

5 4.5 Quantity (in million tonnes) 4 3.5 3 2.5 2 1.5 1 0.5 0 2003-04 2004-05 2005-06 2006-07 IMPORTS EXPORTS

YEAR

Production of Iron & Steel
(a)Finished Carbon Steel Production The total production of finished carbon steel in the country has been 30.11 million tonnes in 2001-02 as compared to 14.33 million tonnes in 1991-92, indicating an increase of 110.12%. Producer-wise production of finished steel. The high share of the secondary sector in finished steel production is largely due to substantial supplies of

semis, the basic feed material from the main producers for conversion to needed shapes by rolling. b) Pig Iron Production

The total production of Pig Iron was 3.946 million tonnes in 2001-02 as compared to 1.59 million tonnes in 1991-92 registering an increase of 148.18% during the considered period. Earlier Pig Iron was produced primarily by the integrated steel plant of SAIL and RINL. Of late, the share of stand-alone pig iron units has increased significantly.

Major Steel Producers
Some of the National players are :

Some of the leading global players:

Comparison between Indian Leading Players
Player Year of Establishment TATA Steel 1907 Construction Bars Hot Rolled Sheets and Coils Cold Rolled Sheets and Coils Wires, Tubes SAIL 1954 Rods Pipes Rails Cold Rolled Sheets and Coils Hot Rolled Sheets and Coils 9.15 22 3.5 8 JSW 2003(1984) Cold Rolled Sheets and Coils Essar 1975(as Essar Gujarat) Cold Rolled Sheets and Coils

Hot Rolled Sheets and Coils Hot Rolled Sheets and Coils Galvanized Sheets and Coils Galvanized Sheets and Coils Iron Ore Pellets

Products

Production (in mt) Percentage of Production (%)

3.8 9

3.3 8

The respective market shares of the major Indian players is shown in the graph below

SAIL 22%

SAIL OTHERS 40% Tata Steel 9% Tata Steel RINL ESSAR ISPAT JSWL RINL 7% ESSAR 8% OTHERS

JSWL 8%

ISPAT 6%

BRAND PROFILE

Strategic Business Units
Apart from the main steel division, Tata Steel's operations are grouped under the following strategic business units. • Bearings Divisions: Manufactures ball bearings, double row self-aligning bearings, clutch release bearings and tapped roller bearing for two wheelers, fans, water pumps, etc. • Ferro Alloys and Minerals Division: Operates chrome mines and has unit for making ferro chrome and ferro manganese. Its one of the largest players in the global ferro chrome market. • Rings and Agrico Division: The ring plant manufactures forged and rolled rings for bearings and automotive components. • Tata Agrico is the first organized manufacturer in India of hand tools and implements for application in agriculture. • Tata Growth Shop (TGS): Has designed, developed, manufactured, erected and commissioned thousands of tonnes of equipments ranging from overhead cranes

to high precision components, including a rocket launch pad for the Indian Space and Research Organization. • Tubes Division: The biggest steel tube manufacturer with the largest market share in the country, it aspires to strengthen its market presence by expanding and modernizing its commercial and precision tube manufacturing capacity. • Wire Division: A pioneer in the manufacture of steel wires in India, it produces coated and uncoated wires, branded as Tata Wiron. The division also operates a wholly owned subsidiary in Sri Lanka.

MARKET INITIATIVES IN INDIA
o Introduction of TISCON Fe 500 grade was highly successful o Regional Customisation : Super Ductile Tiscon launched for earthquake prone NE India o Segment Customisation : Retail Identity Programme (RIP) launched o Tata Steelium launched in Sri Lanka and Tata Agrico in Dubai & Qatar

New Initiatives 2008-09 - Product Launches
       Long Products Long Rails 120mm Rod Freecutting Steels Engineering Steels for drill collar sector Pipeplate for sour applications Interstitial free steel for safety critical EH46 plate grade for Aircraft Carrier contra

GROWTH AND GLOBALIZATION PLANS
  2.4 mtpa expansion at Jamshedpur : to be commissioned by 2008 Limestone JV in Thailand for establishing globally low cost raw material sources        1 mtpa expansion at Jamshedpur Mascons Deintegrated Production facility at Orissa : at the planning stage Ferro Chrome Project in South Africa by 2006 Coke plant at Haldia Dhamra Project Looking for Acquisitions in India and Overseas

New Ventures – Growth through Collaboration
 Vietnam Steel Project - two Memorandums of Understanding (MoU) with Vietnam Steel Corporation  Iron Ore Project in Ivory Coast – JV with SODEMI (State Owned Company for Mineral Development in Ivory Coast) in December for the development of Mount Nimba Iron ore deposits in Ivory  VN Coking Coal Project in Mozambique (Riversdale) JV with Riversdale November for coal tenements held by Riversdale in Mozambique.  Limestone Project in Oman : JV with the members of the Al Bahja Group. Tata Steel has a 70% stake in the Joint Venture.   Coal Mining Project in Australia - JV with Vale in Australia for a Coking Coal mine Tata Steel – SAIL Joint Venture for coking coal properties Tata Steel has signed an equal stakes Joint Venture agreement with Steel Authority of India (SAIL), for coal mining activities in India. in

Summary of Progress on Major Projects
Ongoing 1.8 mtpa expansion at Jamshedpur as per schedule (June 2008) o mtpa steel capacity expansion at Jamshedpur(Flat Products) Technical and commercial discussions with suppliers of LD-3 and TSCR in progress Haldia Coke Project (1.6 mtpa coke plant) as per schedule (March 2008) Kalinganagar Steel Project, Orissa Land lease deed executed Final Environmental clearance for the plant received Contracts signed for iron and steel making facilities and slab caster Dhamra Port Project, Orissa Financial closure for Rupee Term Loan achieved; financial closure for ECA funding expected by August 2007 Tata Bluescope JV Building Solutions - Pune, Bhiwadi and Chennai plants in operation Coated Steel

SALES AND DISTRIBUTION
Approximately 91% of all saleable steel from TSL are to the Indian Market. The Company has a very strong sales and distribution channel as shown below:

Since most of TSL‟s products are to the Indian market, we look at some accolades won by them from leading Auto manufacturers from India and abroad

GROWTH STRATEGY - NEW PROJECTS
   2.9 mtpa expansion at Jamshedpur 6.0 mtpa greenfield project at Orissa 0.5 MTPA Mini Blast Furnace Project in Thailand

Orissa Project – Kalinganagar  6 mtpa integrated steel making facility to be completed in two phases of 3mtpa each  Orders placed for Steel Melting Shop, Blast Furnace, Sinter Plant, Coke Plant

Orders for Hot Strip Mill, Raw Material Handling System, Water System, Oxygen Plant

Thailand - 0.5 mtpa Mini Blast Furnace Project    Tentative completion Sep 2009 Signed contract for machinery supply and contractor employment Entitlement of tax incentives from Board of Investments, Thailand

MERGERS AND ACQUISITIONS
 In August 2004, Tata Steel entered into definitive agreements with Singapore based NatSteel Ltd to acquire its steel business for Singapore $486.4 million (approximately Rs 1,313 crore) in an all cash transaction.  In 2005, Tata Steel acquired 40% Stake in Millennium Steel based in Thailand for $130 million (approx. Rs 600 crore)  In 2007 Tata Steel through its wholly owned Singapore subsidiary, NatSteel Asia Pte Ltd acquired controlling stake in two rolling mills: SSE Steel Ltd, Vinausteel Ltd located in Vietnam.  On 31 January 2007 Tata Steel won their bid for Corus after offering 608 pence per share, valuing Corus at £6.7 billion; as a result and pending acceptance and completion of the takeover, the joining of the two will create the fifth largest steel company in the world. Some of these acquisitions are tabulated below:
Company NatSteel Ltd Millenium Steel Location Singapore Thailand Year Aug-04 2005 % Stake 100 40 Value Rs 1313 Cr Rs 600 Cr

SSE Steel Ltd *

Vietnam

2007

Controlling Stake

----

VinauSteel Ltd *

Vietnam

2007

Controlling Stake

-----

Corus

United Kingdom

31-Jan-07

100

£ 6.7 bn

* through its wholly owned subsidiary in Singapore, NatSteel Asia Pte

Tata Steel & Corus – A Compelling Vision  Global player with a balanced presence in developed European and fast growing Asian markets Strong positions in construction, automotive and packaging market sectors Significant raw material security & greenfield / brownfield developments

 

Lowest cost position in Europe and South East Asia

Enhanced Product Portfolio The enlarged entity would have Tata Steel‟s low cost and highly efficient upstream operations and the Corus‟ value-added downstream products.

Access to New Markets

After acquiring CORUS Tata has got access to huge customer base Enhanced Customer Reach

Enhancing Competitiveness    Transfer of technology from Europe to India to develop new products capture growth in India and Asia - allows for technology transfer and cross-fertilization of R&D capabilities in the automotive, packaging and construction sectors Benefit from high growth in emerging markets and pricing stability in developed markets

Sharing of best practices

Strong Cultural Fit   Long-standing relationship between Tata Steel and Corus Tata Steel engaged Ijmuiden operations of Corus in 1992 to help it in coke making and blast furnace facilities improvement Strategic commercial relationship Management at both Tata Steel and Corus highly focused on improving operating efficiency and productivity

 

Financial Analysis

Comparison : Total Income and Total Expenditure
TATA STEEL income TATA STEEL Expenses SAIL Income Sail Expenses 2003 9956.24 8958.96 19867.58 19738.89 2004 12238.63 10572.72 24908.99 21911.07 2005 16203.61 13019 32863.42 26414.17 2006 17496.48 14095.01 33415.79 30534.13 2007 20344.09 16204.41 40822.07 34904.99 2008 23184.26 18535.96 47454.82 40354.32

50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 2003 2004 2005 2006 2007 2008

TATA STEEL income TATA STEEL Expenses SAIL Income Sail Expenses

Here we see that the sales of TATA steel has been increasing over the years , which is a good sign for the company . However , when comparing it with its nearest competitor – SAIL ; we see that SAIL has always had a much higher income .

Percentage Growth in Total Income :
% Growth in Total income

TATA Steel Ltd. Jindal Steel SAIL

2003 28.45750 -7.50478 19.36115

2004 22.92422 -21.47486 25.37506

2005 32.39725 -45.96770 31.93397

2006 7.97890 -18.72950 1.68080

2007 2008 16.27533 13.96066 -91.35347 40.93333 22.16401 16.24795

60 40 20 0 -202002 -40 -60 -80 -100 2003 2004 2005 2006 2007 2008 2009 Tata Steel Ltd. Jindal Steel SAIL

The percentage growth of Total Income of SAIL and TATA Steel's has been more or less similar . But there has been a significant growth in the Total Income of Jindal Steel .

Borrowings , Loans and Advances :
Total Borrowings TATA STEEL SAIL
20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 2002 2003 2004 2005 2006 2007 2008 2009

2003 4225.4 12387.67

2004 3382.12 8014.29

2005 2739.68 4959.11

2006 2516.15 3388.45

2007 9792.39 3291.52

2008 18021.69 2137.29

TATA STEEL SAIL

Loans and Advances TATA Steel SAIL
3500 3000 2500 2000 1500 1000 500 0 2002

2003 602.03 263

2004 489.51 395.74

2005 1082.44 327.83

2006 894.09 285.75

2007 2751.26 323.92

2008 3012.41 403.28

Tata Steel SAIL

2003

2004

2005

2006

2007

2008

2009

The sharp increase in the loans and borrowings was mainly due to the advance made against equity to Tata Steel Asia Holdings Pte. Ltd and also the acquisition of Corus .

Reserves and Surplus :
Reserves TATA Steel Jindal Steel SAIL
25,000.00 20,000.00 15,000.00 10,000.00 5,000.00 0.00 2003 2004 2005 2006 2007 2008 2009 TATA Steel Jindal Steel SAIL

2004 4,146.68 839.8 907.27

2005 6,506.25 1,302.98 6,176.25

2006 9,201.63 1,828.31 8,471.01

2007 13,368.42 2,480.33 13,182.75

2008 21,097.43 3,739.98 18,933.17

The graph shows that TATA steel’s Reserves & surplus is increasing. This will be of use to the company in future in time of need.

Investments :
Investments TATA Steel Ltd Jindal Steel SAIL
7000 6000 5000 4000 3000 2000 1000 0 2002 2003 2004 2005 2006 2007 2008 2009

2003 1201.56 41.12 543.17

2004 2201.42 41.09 543.17

2005 2463.25 41.09 606.71

2006 4069.96 41.09 292

2007 6106.18 38.84 513.79

2008 4103.19 38.84 557.13

Tata Steel Ltd Jindal Steel & Alloys Ltd. SAIL

The investments of the company reduced by Rs. 2,003 crores from Rs. 6,106 crores as on 31st March, 2007 to Rs. 4,103 crores as on 31st March, 2008. The main reason for such decrease was use of the liquid funds for funding the acquisition of Corus.

Net Sales :
TATA Steel Jindal Steel SAIL 2004 10,699.31 1,419.17 21,669.54 2005 14,489.70 2,253.60 28,714.30 2006 15,132.09 2,565.04 28,200.48 2007 17,551.66 3,523.08 34,328.77 2008 19,693.41 5,368.14 39,958.67

40,000.00 35,000.00 30,000.00 25,000.00 20,000.00 15,000.00 10,000.00 5,000.00 0.00 2004 2005 2006 2007 2008

Tata Steel Jindal Steel SAIL

TATA Steel sales been growing , but the sales of SAIL are doing much better in comparison .

Raw Materials Consumed :
TATA Steel Raw Materials Consumed 2008 3430 2007 3121 Change 308 Change % 10%

The raw materials consumption of the company increased by 10% from Rs. 3,121 crores in FY 2006-07 to Rs. 3,430 crores in FY 2007-08. The increases were primarily due to higher use of coke imported at high prices during FY 2007-08, mainly to make up for shortfall during refurbishment of the Coke Plant of the company.

Current Liabilities :
TATA Steel 2008 2007 Change Change % 3855 3523 332 9 Current Liabilities The current liabilities increased by Rs. 577 crores from a level of Rs. 3,523 crores as on 31st March, 2007 to Rs. 3,855 crores as on 31st March, 2008. The increase was mainly due to increase in the value of purchases/services on account of expansion projects.

Dividend Rate % :
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Tata Steel Ltd 30 30 31 35 25 30 35 45 45 40 40 40 50 40 80 100 130 130 155 160 Jindal Steel 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 SAIL 0 0 0 2 2 4 6 6.6 2.5 1 0 0 0 0 0 0 33 20 31 37

180 160 140 120 100 80 60 40 20 0 1985 1990 1995 2000 2005 2010 Tata Steel Ltd Jindal Steel SAIL

TATA Steel is giving a significantly higher rate of dividend year after year in comparison to its nearest competitors. In 2006-07 centenary year dividend of 25% was issued to the shareholders, hence the sharp rise.

Percentage change in dividends issued compared to Percentage change in PAT :

PAT/Dividend TATA Steel Jindal Steel SAIL

2003 2004 2005 2006 2007 0.07902718 0.057266553 0.03741912 0.03707527 0.03671115 0 0 0 0 0 0 0 0.00484086 0.00498384 0.00499815 2004 -0.2754 0.0000 0.0000 2005 -0.3466 0.0000 0.0000 2006 -0.0092 0.0000 0.0295 2007 -0.0098 0.0000 0.0029

2008 0.034136756 0 0.004909258

Change % TATA Steel Jindal Steel SAIL

2008 -0.0701 0.0000 -0.0178

0.05 0 -0.052003 -0.1 -0.15 -0.2 -0.25 -0.3 -0.35 -0.4 2004 2005 2006 2007 2008 2009 TATA Steel Jindal Steel SAIL

This shows that TATA Steel was initially giving higher amount of dividend initially on its PAT . But over a period of time , it decided to change its strategy and is putting back all its earnings on development of the company . So for short term investment , TATA Steel is a good company .

Profitability :
PBDITA/Sales Tata Steel SAIL
0.45000 0.40000 0.35000 0.30000 0.25000 0.20000 0.15000 0.10000 0.05000 0.00000 2002 2003 2004 2005 2006 2007 2008 2009 Tata Steel SAIL

2003 0.22484 0.11786

2004 0.29681 0.20438

2005 0.38718 0.35412

2006 0.35913 0.22722

2007 0.37094 0.27950

2008 0.39845 0.28337

The profitability of TATA Steel is more than that of SAIL .

PAT :
PAT TATA Steel Jindal Steel SAIL
8000 7000 6000 5000 4000 3000 2000 1000 0 -10002002

2003 1012.31 1.1 -304.31

2004 1746.22 0.54 2512.08

2005 3474.16 0.71 6816.97

2006 3506.38 0.67 4012.97

2007 4222.15 1.69 6202.29

2008 4687.03 4.76 7536.78

TATA Steel Jindal SAIL

2003

2004

2005

2006

2007

2008

2009

TATA Steel is showing a steady growth in its Profit After Tax .

Price Earning Ratio :
P/E Ratio TATA Steel 1998-99 13.51
20 18 16 14 12 10 8 6 4 2 0 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

1999-00 10.3

2000-01 8.36

2001-02 17.72

2002-03 4.88

2003-04 12.16

2004-05 6.39

2005-06 8.47

2006-07 6.89

2007-08 10.32

Tata Steel

The P/E ratio is a measure of the profit earned by the firm per share. A higher P/E ratio means that investors are paying more for each unit of income. In the case of TATA Steel, the P/E ratio is very unstable.

Interest Cover :
Interest Cover TATA Steel Jindal Steel SAIL
60 50 40 30 20 10 0 2003 2004 2005 2006 2007 2008 2009 TATA Steel Jindal Steel SAIL

2004 22.82 7.37 3.73

2005 29.36 11.35 17.64

2006 43.08 8.87 14.1

2007 37.01 6.97 30.64

2008 9.04 8.45 48.48

Tata Steel has had a steep fall in Gross Profit over the last 3 years .For the last 3 years , SAIL can pay much efficiently the interest amount . The steep fall in Tata Steel’s Interest cover is mainly due to the acquisition of Corus.

Return on Capital Employed :
Return On Capital Employed(%) TATA Steel Jindal Steel SAIL
70 60 50 40 30 20 10 0 2003 2004 2005 2006 2007 2008 2009 TATA Steel Jindal Steel SAIL

2004 28.1 23.7 24.98

2005 49.69 27.8 61.29

2006 40.81 18.28 35.85

2007 32.37 18.47 44.94

2008 21.97 24.95 44.03

Return on Capital Employed is generally used as a measure for assessing whether a business generates enough returns to pay for its cost of capital. For every rupee of capital employed by TATA Steel, you are generating 43.22% return on average , whereas for SAIL the figure is

52.77% and for Jindal it is 28.3% . From the graph it is evident that for TATA Steel , the Return on Capital Employed is decreasing , whereas for SAIL it is rising , and same is the case for Jindal Steel . TATA Steel is thus not using its capital in ventures to earn sufficient return .

Debt Equity Ratio :
Debt Equity Ratio TATA Steel Jindal Steel SAIL
3.5 3 2.5 2 1.5 1 0.5 0 2003 2004 2005 2006 2007 2008 2009

2004 0.99 1.33 2.86

2005 0.53 1.16 0.94

2006 0.31 1.34 0.44

2007 0.51 1.45 0.28

2008 0.67 1.19 0.18

Tata Steel Jindal Steel Sail

Equity : Shares , Debt : Loan borrowed from the market . SAIL over the years is having lower debts. The company has basically repaid off its debts . Whereas TATA steel has increasing debts. So the company has gone in for debt financing and thus , as discussed earlier the company is comparatively having a higher borrowing from the market, They had to take 8 billion$ from the bank to acquire corus, hence their debt equity ratio has increased. Jindal here has a mixed trend .

Current Ratio :
Current Ratio TATA Steel Jindal Steel SAIL
4 3 2 1 0 2003 2004 2005 2006 2007 2008 2009 Tata Jindal SAIL

2004 0.67 1.03 0.75

2005 0.65 1.1 0.99

2006 0.71 1.03 1.18

2007 1.26 0.88 1.36

2008 2.86 1.11 1.6

The Current Ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities. TATA steel has a high amount of un-utilized current assets . The company has high level of inventory or WIP . But Through the Investments graph , we can see that Investments has decreased substantially . Also the liquidity ratio is low for Tata Steel . Thus we can say that the company is having more inventory left as the demand in the domestic market is falling now as this is the recession period .

Earnings Per Share :
TATA Steel SAIL 2004 47.48 6.08 2005 62.77 16.5 2006 63.35 9.72 2007 72.74 15.02 2008 63.85 18.25

80 60 40 20 0 2004 2005 2006 2007 2008 TATA Steel SAIL

Tata Steel is giving much higher return per share compared to SAIL, However, we should also note that SAIL has much fewer shares compared to Tata Steel .

Debtors Turnover Ratio / Creditors Turnover Ratio :
Debtors (days) TATA Steel Creditors (days) TATA Steel Debtors (days) SAIL Creditors (days) SAIL
120 100 80 60 40 20 0 2002 2003 2004 2005 2006 2007 2008 2009

2003 42.4357 88.1444 32.0525 75.9398

2004 27.2843 89.1041 26.9191 67.7849

2005 15.3417 90.7097 22.0337 71.1949

2006 12.7105 88.6083 23.6186 63.2105

2007 11.4391 95.4208 21.3893 61.3324

2008 10.2358 92.1872 23.0970 63.2890

Debtors (days) TATA Steel Creditors (days) TATA Steel Debtors (days) SAIL Creditors (days) SAIL

The stakeholders like distributors & suppliers of TATA steel have a lot of confidence on the liquidity of the Company . This also shows the credit worthiness and brand value of the company. Since debtors are paying back in comparatively lesser number of days shows faster movement of goods in the market. SAIL has got relatively less time to pay back to its suppliers .

% Change in Stock Compared to % Change in Index :

RESEARCH AND DEVELOPMENT
1. 1937 - R & D laboratory set up 2. 1952 – Applied Statistical Quality Control 3. 2003 – RD Tata Educational Centre established 4. 1st in India to develop gal annealed skin panels 5. Only Indian supplier of bake hardening steel for body panels The R & D laboratory was set up in 1937. Today, Tata Steel is the first in India to develop gal annealed skin panels. It is the only Indian supplier of bake hardening steel for body panels. In 1952, Tata Steel applied Statistical Quality Control to improve its products to suit customers‟ requirements more effectively. The R.D. Tata Educational Centre was established in 2003 to improve the quality of technical education in India and to fulfill the industry need for trained professionals. Though TSL‟s R&D has often been criticized and is considered to be one of the major weaknesses of the company, it has shown significant contributions towards the steel industry which is visible through the number of patents that have been filed by TSL over the years and they sound Intellectual Property Claims. Some of the highlights of the TSL IP are: 1947 - First patent filled 2001 – Creation of Patent Cell 2008 – 70th year of Inception of R&D 493 patents as of date – 133 granted, rest in different stages of approval For these efforts, TSL was awarded the Deming Award in Total quality Management in 2008.

HUMAN RESOURCES MANAGEMENT
Tata Steel recognizes that its people are the primary source of its competitiveness and is committed to equal employment opportunities for attracting the best available talent and ensuring a cosmopolitan workforce. TSL aims to pursue management practices designed to enrich the quality of life of its employees, develop their potential and maximize their productivity. It also aims at ensuring transparency, fairness and equity in all its dealing with its employees. TSL has been in pioneer in its HR Policy over the years with the basic underlying principle of Sharing and Caring and a Sense of Belonging amongst all employees who are considered to be a part of the TSL family. The company has been known as a leader in introducing various HR practices and setting benchmarks in the global as well as Indian industry. Some of these initiatives include: • 1920: Tata Steel introduced initiatives like leave with pay (enforced by law in 1948), Workers‟ Provident Fund Scheme (enforced by law in 1952) and Workmens‟ Accident Compensation Scheme (enforced by law in 1924). • Tata Steel introduced eight-hour working days in 1912, much before such a system was implemented by law even in most western countries. • • Free medical aid was introduced in 1915 (enforced by law in 1948). Maternity benefits were introduced by Tata Steel in 1928 (implemented by law in 1946) • Profit Sharing Bonus was granted for the fi rst time in India by Tata Steel as early as in 1934 (enforced by law in 1965). • A scheme of retiring gratuity was introduced by Tata Steel in 1937 (enforced by law in 1972). •

Tejaswini, launched in 2003, is a women empowerment programme – the first of
its kind - that trains women to take up unconventional jobs in the steel works.

Shabash – a weekly scheme launched in 2002 – offers instant rewards and
recognition to employees for exemplary behaviour.

Some of these initiatives which were introduced way before enforced upon by the legislation are tabulated below: Initiative
8 hour Working Day

TSL
1912

Government
not known (but not implemented even in western coutries at that time) 1948 1948 1952 1924 1946 1965 1972

Free Medical Aid Leave without Pay Workers' Provident Fund Scheme Workmens' Accident compensation Maternity Benefits Profit Sharing Bonus Retiring Gratuity

1915 1920 1920 1920 1928 1934 1937

Sub Department Human Resources Policy
Recruitment • • Campus recruitment Tata Steel‟s Management Trainee programme - one year development programme Employee surveys

Leadership development • • Formal programmes, coaching and on the job training Leadership Appreciation Process and subsequently conduct „Development Centres‟ IL2 IL3

Training and Development • • • e-learning facilities available on the Company‟s Intranet which was facilitated by Computer Literacy training Computer Based Training Multimedia training materials packages and

Safety training received special attention based on the DuPont Guidelines identification of skill gaps, there is a plan in place to introduce a technical competency assessment system Faculty support Up-skilling employees through process based, on the job training and diploma courses through premium engineering institutes Directed Learning - strengthening the leadership pipeline coupled with emerging needs of growth projects across geographies

• •

Industrial Relations

“The welfare of the labouring class must be one of the first cares of the employer.”
– Sir Dorab Tata • • • IL6 formed in 2008 Only one recognized union – INTUC Affiliation of employees to these unions has been on a constant decline over the years and stood at ----------- in the year 2008. A market based benchmarking of compensation is undertaken Inclusive growth – Sports days, social events, contests for children, education opportunities, celebrating festivals together

• •

Talent Planning and Management • International exposure and exchange learning missions.

• •

High Potential officers and Research and Development professionals are selected for short-term assignments in Corus, UK Performance Improvement Teams, focused on technical best practice transfer, have continued to show the value of knowledge networks within the company to drive performance improvement

CORPORATE SOCIAL RESPONSIBILITY
The CSR initiatives of TSL are much talked about and even in this field TSL has been one of the pioneers in setting standards. Their CSR policy is as follows: Tat Steel believes that the primary purpose of the business is to improve the quality of life of people. Tata Steel will volunteer its resources to the extent it can reasonable afford, to sustain and improve healthy and prosperous environment and to improve the quality of life of the people of the area in which it operates. TSL improves the economic and social status of the community in over 800 villages in Jharkhand, Orissa, Chattisgarh and affects lives of over 8 lakh people. The Company‟s CSR initiatives are broadly categorized into the following divisions: • • • Health Care Initiatives HIV/AIDS Prevention camps Responding to the challenge of Global warming – Corus Climate Task Force Pollution Control Afforestation Energy Saving Solutions Literacy and Education

• • • •

Some of its notable CSR initiatives are: • The Tata Steel Rural Development Society was set up in 1979 with the objective of taking collieries. • A Critical Care Unit, in the 850-bed Tata Main Hospital, was inaugurated in 2002. • Tata Steel was conferred the prestigious Global Business Coalition Award for affirmative the action works, in mines areas and surrounding

Business Excellence in the Community in recognition of its pioneering work in the
field of HIV/ AIDS awareness in 2003. • The Tribal Culture Society endeavours to find sustainable solutions to the concerns of the indigenous people and preserve as well as promote tribal art and culture. • The first batch of 30 professionals completed their training in welding technology in 2006. This initiative is part of the Tata Steel Parivar programme for the displaced families in greenfield steel plant site. • A night school was started at Golmuri in 1936 with the objective of imparting literacy. • In 1916, Social Welfare Scheme was formed by Tata Steel to provide assistance in the fields of education, vocational training, welfare. • The JRD Sports Complex, an international stadium with an 8-lane polyurethane track, was inaugurated in 1991. The complex also houses facilities for handball, tennis, volleyball, hockey, basketball, boxing, table tennis and a modern gymnasium. self-employment and family

ENVIRONMENT MANAGEMENT
TSL is also aware that it is involved in an industry that heavily pollutes the environment and uses up immense amount of natural resources in the form of coal and coke. It therefore takes various initiatives for Environment Management. Some of them are: • Low specific energy consumption • Reduced carbon dioxide emission rate • Use of alternative energy sources • Decreased use of refrigerants • Handling hazardous wastes as per Hazardous Waste Management and Handling Rules 1989/2000 requirements • Stack emissions well below the Indian and international standards • Solid waste recycled or reused • Waste water from the steel making process treated with best available physiochemical methods The team at Corus has also been involved in the development of the ULCOS (Ultra Low CO2 Steel Making) technology for steel making which also reduces the amount of CO2 resulting from the production units. TSL is investing heavily in this technology. The environment management policy taken up by the Company is summarized as given below: Tata Steel environmental responsibilities are driven by their commitment to preservation the environment and are integral to the way business is conducted. The following policies of the Company guide its environmental management policy:

1. TSL is committed to the efficient use of natural resources and energy; reducing and preventing pollution; promoting waste avoidance and recycling measures and product stewardship. The Company identifies, assesses and manages their environmental impact. They regularly monitor review and report publicity their environmental performance. They develop & rehabilitate abandoned sites through afforestation and landscaping and protect & preserve the biodiversity in the areas of our operations. They enhance awareness, skill and competence of all employees and contactors so as to enable them to demonstrate their involvement, responsibility and accountability for sound environmental performance. 2. TSL is committed to continual improvement in their environmental performance. They set objectives targets, develop, implement and maintain management standards and system, and go beyond compliance of the relevant industry standards legal and other requirements. 3. TSL believes that they will truly succeed when they sustain their environmental achievement and are valued by the communities in which they work.

AWARDS AND RECOGNITION
• • Prime Minister of India's Trophy for the Best Integrated Steel Plant five times Asia's Most Admired Knowledge Enterprise award five times in 2003, 2004, 2006, 2007 and 2008

Global Business Coalition Award for Business Excellence in the Community in recognition of its pioneering work in the field of HIV/ AIDS awareness.

Social Accountability (SA) 8000 certification by Social Accountability International (SAI), USA

Corporate Sustainability Report of Tata Steel hailed by United Nation's Environment Programme (UNEP)

Best governed company Award 2006 for setting high standards in governance practices

Tata Steel won "Award for Corporate Social Responsibility in Public health" by US- Indian Business Council (USIBC), Population Services International (PSI) and the center for Strategic and International Studies (CSIS) in 2007

Tata

Steel

wins

the

ET

Award

for

the

Company

of

the

Year

Jamshedpur, January 20, 2009 • Tata Steel wins Golden Peacock Award for Corporate Social Responsibility Jamshedpur, March 4, 2009

SWOT ANALYSIS
STRENGTH • • • • • Strong Brand name of TSL and Tata Group India operations capable of meeting its own iron ore requirements Raw material security building through global operations Leading Sales and Distribution capability Low wage labor availability

WEAKNESS • • • Low R&D Investment Unscientific Mining Low Productivity

OPPURTUNITY 1. Unexplored rural markets 2. Growing domestic markets 3. Growing global demands 4. Developing countries not restrained under the Kyoto Protocol 5. Carbon credits trading on the rise 6. High investment in infrastructure development

THREATS 1. World‟s big producers entering Indian markets 2. China set to becoming a net exporter 3. High duties and taxes by the Government 4. Global laws relating to pollution control and high energy cost

5.

Global economic slowdown

PROPOSED STRATEGY
  Strengthen Indian Operation Realize Synergies from the Corus Acquisition

 

Seek and Maintain control over Raw Material Focus on High Growth in Emerging Markets and Pricing Stability in Developed Markets

 

Increasing Focus on High Value Added Steel Products Encourage cashing on the carbon market/ CDM projects

CONCLUSION
After conducting an in depth study of one of India‟s most admired companies, we find that the company has many strengths and opportunities which it may capitalize on to truly become a world leader in steel making along with setting high standards for Corporate Citizenship and Social Responsibility towards a long term sustainable growth. Though some of its projects and acquisitions have met with widespread criticism, it is up to the Company to realize the synergies from the deals to raise the bar for its own performance. Because as the saying goes – the leader can not achieve any benchmarks, it sets them!

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