Analyze Risk Management Derivatives of TATA STEEL

-A. Vamsi Krishna

-pg21021

Analyze the risk management process in the company. 

 Tata Steel has implemented a structured enterprise risk management process that is deeply
ingrained in its divisional business units. Tata Steel's risk management process incorporates
global standards such as COSO and ISO 31000:2009. Adopting this approach goes beyond
regulatory compliance and provides a framework for responding to a constantly changing
business landscape.
 The company views enterprise risk management as an important management tool for
developing a risk-aware culture that supports decision-making and thus improves
performance. The integrated ERM approach, with the framework aligned across geographies
for Tata Steel Group Companies, promotes insights into risks across the portfolio of all
business activities. Risk management at Tata Steel is a two-pronged (top-down, bottom-up),
iterative, and dynamic process. Risk Oversight, Risk Infrastructure & Management, and Risk
Ownership are the three levels of risk management responsibilities assigned to the function.
The Risk Infrastructure is managed by the Central ERM team, which assists in the design,
implementation, and monitoring of the organization's common ERM framework.
 Risk Owners lead divisions and profit centers, assisting in the identification, measurement,
monitoring, review, and reporting of risks in accordance with a defined common framework.
The ERM team assists by providing an outside-in perspective to the Business Units (BU) for
holistic risk identification, flagging exceptions, highlighting implementation progress, and
highlighting the status of key risks. Interactions with CROs from organizations across the
country and participation in benchmarking ERM processes and procedures are used.
 The ERM process is a powerful enabler for responding to rapidly changing business
scenarios. The unprecedhavee emphasis on increased economic uncertainty has emphasized
the importance capitalize Ture the ERM process. Tata Steel was able to capitalize on its risk
intelligence by recalibrating its operations in response to the changing business environment.
Through scenario planning exercises, the risk management process has enabled prioritizes to
evaluate of a variety of outcomes and prioritize mitigation plans accordingly.
 To mitigate its exposure to business cycles and pandemic-induced slowdowns, Tata Steel is
expanding its footprint across the country by cultivating a diverse portfolio of customers from
a variety of industries. It has also increased exports in the interim and continues to focus on
the de-commoditization agenda by entering into value-added services and new materials
businesses, among other things. It is constantly working to diversify its sourcing and vendor
base from other geographies, as well as developing internal supply chains to manage supply
chain disruptions.
 The corporate agenda is still being driven by digital and climate change. Several measures are
being pursued to accelerate the transition to a low-carbon regime, including increased scrap
usage, focusing on scrap recycling as a distinct business area, carbon capture, and so on.
While the organization quick fixes to ongoing operations, the organization has maintained its
focus on developing long-term risk management strategies to ensure business continuity and
build immunity to potential future black swan events.
  Analyse different derivatives like Futures, Options etc available on
the share. Analyse the price fluctuations and other available
relevant information related to the subject.

Date Price Open High Low Volume Chg%

Dec 2022 113.25 111.50 116.80 111.15 87.40M 4.52%

Nov 2022 108.35 101.70 110.45 100.40 34.65M 7.01%

Oct 2022 101.25 99.85 104.80 98.10 227.91M 1.61%

Sep 2022 99.65 107.65 110.95 94.60 1.46B -8.62%

Aug 2022 109.05 102.40 113.75 102.40 1.28B 1.44%

Jul 2022 107.50 864.10 978.00 95.60 507.85M -87.55%

Jun 2022 863.20 1,011.25 1,044.00 827.70 239.66M -14.12%

May 2022 1,005.10 1,256.95 1,325.00 982.75 269.93M -20.84%

Apr 2022 1,269.65 1,313.95 1,393.80 1,211.20 177.74M -3.04%

Mar 2022 1,309.40 1,221.00 1,369.00 1,221.00 274.35M 7.36%

Feb 2022 1,219.60 1,105.95 1,268.60 1,065.00 282.04M 12.15%

Jan 2022 1,087.50 1,122.30 1,245.50 1,059.40 236.71M -2.61%

 Above the chart last one year derivates futures price chart , Strong Annual EPS Growth
 Effectively using its capital to generate profit - RoCE improving in last 2 years
 Effectively using Shareholders fund - Return on equity (ROE) improving since last 2 year
 Revenue of Rs 177.7 crore with 32% YoY growth

 EBITDA of Rs 29.7 crore with an EBITDA margin of 16.4%

 PAT grows to Rs. 13.6 crores in Q2FY23 vs Rs. 2.7 crore in Q2FY22

 The company continued to show excellent growth on quarterly EBITDA & PAT in Q2FY23
on the back of robust demand and focused marketing initiatives
 Strong revenue growth across offline and online channels

 The higher share of in-house brand sales continues to aid margin expansion

 EBITDA margin continues to expand on the back of cost optimization initiatives and
operating leverage benefits

 Consolidated Revenues stood at Rs 59,878 crore and consolidated EBITDA at Rs 6,271 crore,
with an EBITDA margin of ~10%.

 Consolidated Profit after tax stood at Rs.1,297 crore.

 Net debt of Rs.71,753 crore, Net Debt to EBITDA at 1.37x and Net Debt to Equity at 0.63x.

 The 6 MTPA Pellet plant will be commissioned in 3QFY23 and will be followed by the Cold
Roll Mill complex in phases. The 5 MTPA expansion at Kalinganagar is on track for
commissioning by the end of FY24.

 Tata Steel Board has approved the amalgamation proposal of seven listed and unlisted entities
into Tata Steel, a value-accretive merger with multiple benefits.

 Work has commenced on setting up a 0.75 MTPA Electric Arc Furnace (EAF) in Punjab,
which will leverage the growth in the construction segment and is an essential milestone in
our transition to net zero