7/28/2019 Noopur IP,2012 (1)
1/84
A STUDY OF THE
STEEL INDUSTRY
WITH SPECIAL
REFERENCE TO
TATA STEEL
Course Details
Course : Industry ProjectSemester : VI
Course Code : MGT/IP1/324070
Submitted by
Name : Noopur
Enroll No. :
CUJ/I/2009/MBA/19
1
7/28/2019 Noopur IP,2012 (1)
2/84
DECLARATION
I Noopur hereby declare that this Industry project titled A STUDY OF THE
STEEL INDUSTRY INDUSTRYWITH SPECIAL REFERENCE TO
TATA STEEL is a bona fide work out by me.
I state that no portion of this project report
is published or submitted to any other organization. This study is the work
of my own, for the fulfillment of my Semester VI Industry project. I
hereby acknowledge that the information is genuine to the best of my
knowledge and has been collected from reliable sources, the Internet, and
the annual reports and corporate sustainability reports of the TATA
STEEL.
NoopurCUJ/01/2009/MBA/19Central University of JharkhandBrambe, Ranchi
2
7/28/2019 Noopur IP,2012 (1)
3/84
Certificate of Guide
This is to certify that Miss Noopur, Enroll No: CUJ/01/2009/MBA/19, student of
Semester VI of the IMBA Program has undertaken the project titled A STUDY OF
THE STEEL INDUSTRY INDUSTRYWITH SPECIAL REFERENCE TO TATA
STEEL under my guidance.
No portion of this project report is published or submitted to any other
University or organization. This study was done for the fulfillment of the requirements
of Industry Project during the Semester VI of the IMBA Program.
The information in the report is genuine to the best of my knowledge and has been
collected been collected from reliable sources, the Internet, and the annual reports and
corporate sustainability reports of the Tata STEEL. The analysis and compilation was
the original work of the student based on secondary data.
She has completed his project satisfactorily. This certificate is being issued for academic
purpose.
DR. TAPAS GHOSAL
HEAD
Centre for Business
Administration
3
7/28/2019 Noopur IP,2012 (1)
4/84
Acknowledgement
There are times when one feels a sense of accomplishment combined with a
sense of gratitude. Writing the acknowledgement page in this project is one
among them.
I would like to thankProf. Tapas Ghoshal (Dean, School of
Management Sciences) who provided us a golden chance for working on any
industry of my choice and. He was a constant help throughout the project and
his guidance was a key reason for the success of this project. .
I am also very grateful to all the faculty members whose constant
motivation and support has helped me to complete this project. Last but not
the least I thank all my team members whose constant hard work and
brainstorming sessions has led to the successful completion of this projectwork.
My project has become a reality only because of cooperation
of these among many other people who had helped me in successfully
completing this project.
Noopur
CUJ/01/2009/MBA/19
Central University of Jharkhand
4
7/28/2019 Noopur IP,2012 (1)
5/84
Brambe, Ranchi
Table of contents
S.No. Topic Page No.
1. Executive Summary 7
2. Overview Of Steel Industry
- Introduction
- Growth Of Indian Steel Industry
- Division Of Indian Steel
- Demand And Supply
- Market Analysis
- Mergers/Acquisitions
- Subsidies and Competitiveness
- SWOT
- Drawbacks
- Growth Parameters
- Future Projections
- Summary
9
10
12
13
14
14
15
16
17
18
19
20
3. Profile Of Tata Steel
- Introduction
- Company History
- Capacity Expansion
- Acquisition
- Operations
22
23
24
25
26
5
7/28/2019 Noopur IP,2012 (1)
6/84
- Vision/Mission
- Policies
- Profile Of Founders
- Board Of Directors
- Key Enterprise Process
- Strategic Business Units
- Joint Ventures, Subsidiaries and Associates
27
28
32
34
37
37
39
4. SWOT Analysis 45
5. Environmental Analysis 50
6. Customer, Competitor and Product Analysis 54
7. Marketing Strategy And Implementation
- BCG Matrix
- Porters 5 Forces Model
59
60
8. Financial Analysis 63
9. Corporate Social Responsibility 73
10. Future Outlook 77
11. Conclusion and Findings 78
12. Bibliography 79
6
7/28/2019 Noopur IP,2012 (1)
7/84
EXECUTIVE SUMMARY
The Indian steel industry is more than 100 years old now. The first steel ingot was rolled on
16th February 1912 - a momentous day in the history of industrial India. Steel is crucial to
the development of any modern economy and is considered to be the backbone of the
human civilization. The level of per capita consumption of steel is treated as one of the
important indicators of socio-economic development and living standard of the people in
any country. It is a product of a large and technologically complex industry having strong
forward and backward linkages in terms of material flow and income generation. All major
industrial economies are characterized by the existence of a strong steel industry and the
growth of many of these economies has been largely shaped by the strength of their steel
industries in their initial stages of development
India is the 7th largest steel producer in the world, employing over 1/2 million people
directly with a cumulative capital investment of around Rs.1 lakh crore. It is a core sector
essential for economic and social development of the country and crucial for its defense.
The Indian iron and steel industry contributes about Rs.8,000 crore to the national
exchequer in the form of excise and custom duties, apart from earning foreign exchange of
approximately Rs. 3,000 crore through exports. Consumption of finished steel grew by 5.9
% and increased to 24.9 million tones. steel consumption is likely to increase at a rapid
pace in future due to large investments planned in infrastructure development, increase
urbanization and growth in key steel sectors i.e. automobile, construction and capital goods.
The Indian steel industry has emerged as one of the core sectors in the Indian economy with
a very significant impact on economic growth. India with its abundant availability of high
grade iron ore, the requisite technical base and cheap skilled labor is thus well placed for
the development of steel industry and to provide a strong manufacturing base for the
metallurgical industries.
The deregulated Indian steel industry is performing at its peak level in almost all spheres.
The total production of finished steel from April 2004 to March 2005 has been estimated to
be about 383.25 lakh tones as against the production of 369.57 lakh tones during the same
period last year showing an increase of 3.7 %. The most spectacular achievement has,
however, been recorded in export performance.
Steel has so far proved to be the single key factor responsible for industrial production and
thereby, for economic growth. And it is growing from strength to strength with newer
developments-both within steel making practice as well as engineering developments,
7
7/28/2019 Noopur IP,2012 (1)
8/84
which ask for more usage of steel. So much so, that economic development has become
almost synonymous with steel.
8
OVERVIEW OF
STEEL
INDUSTRY
7/28/2019 Noopur IP,2012 (1)
9/84
INTRODUCTION
Steel is crucial to the development of any modern economy and is
considered to be the backbone of human civilisation.
It is a product of a large and technologically complex industry having
strong forward and backward linkages in terms of material flows and
income generation.
9
7/28/2019 Noopur IP,2012 (1)
10/84
Stages in Global Production of Steel
10
7/28/2019 Noopur IP,2012 (1)
11/84
Steel industry reforms particularly in 1991 and 1992 have led to strong and
sustainable growth in Indias steel industry.
Since its independence, India has experienced steady growth in the steel industry,
thanks in part to the successive governments that have supported the industry and
pushed for its robust development.
1981 1991 2001 2012
11
1.1 1.1 1.623.23
5.056.75
9.36
12.02
14.3
24.2
26.2
36.5
0
5
10
15
20
25
30
35
40
7/28/2019 Noopur IP,2012 (1)
12/84
The graph indicating an upward movement which shows the rising demand for Steel
in the following years.
OWNERSHIP OF INDIAN STEEL INDUSTRY
PUBLIC PRIVATE
SAIL
VISAKHAPATNAM STEEL
PLANT
FERRO SCRAP NIGAM
LIMITED
BIRD GROUP OF
COMPANIES
SPONGE IRON INDIA
LIMITED
MECON LIMITED
BHARAT REFRACTORIES
LIMITED
TATA-CORUS
ESSAR
ISPAT
JSW STEEL LIMITED
MUKAND LIMITED
12
7/28/2019 Noopur IP,2012 (1)
13/84
Indian steel industry is poised for rapid growth.
Indias share in world production of crude steel increased from 1.5%
in 1981 to around 7.3% in 2008.
The private sector is considered engine of growth in the steel
industry and technological changes and modernization are taking
place in both the public and the private sector integrated steel plants
in India.
DEMAND OF STEEL
Driven by a booming economy and concomitant demand levels,
demand of steel has grown by 12.5 per cent during the last three
years, well above the 6.9 percent envisaged in the National Steel
Policy.
Demand of Steel amounted to 53.10 mt in 2009-10 compared to
49.50 mt in 2007-08, recording a growth rate of 7.3 per cent, which
is higher than the world average.
SUPPLY OF STEEL
India is the worlds fifth largest steel producer and its share is 3% plus in
global steel output which is still very low.
China, the worlds biggest steelmaker, produces nearly ten times as much
as India.
Over the past ten years Indias crude steel output rose nearly 7%per year to
55.3 million tons , while global crude steel output increased by 4% .
13
7/28/2019 Noopur IP,2012 (1)
14/84
DEMAND SUPPLY MISMATCH
India is one of the worlds top ten steelmakers its domestic output is
insufficient to meet the demand in all segments.
Consumption of steel is very fast and as a consequence of the
prospective dynamic economic growth.
Secondly, there is demand for high-quality products which India will
not be able to supply in sufficient quantities for the foreseeable future.
MARKET ANALYSIS
Concentration ratio of an industry is an indicator of the relative size of
firms in relation to the industry as a whole.
The 4 firm concentration ratio of the Iron and Steel Industry is 71%.
Both homogenous product or product differentiation are possible
There is a price war and price rigidity
Price output decisions are very difficult and indeterminate.
This implies that there is oligopoly in the industry as it is dominated by
few major players.
MERGERS & ACQUISITIONS
Some important mergers and acquisition
Arcelor - Mittal
14
7/28/2019 Noopur IP,2012 (1)
15/84
o 32.2bn$ deal
o Mittal pips Severstal
Tata-Corus
o 11.3bn$ deal
o Tatas pip CSN
SUBSIDIES AND ISSUES OF COMPETITIVENESS
The income-tax benefits-related export activities are incorporated insections 80HHC, 10A and 10B of the Income Tax Act.
The reserve bank of India has accordingly issued directions to
commercial Banks to provide export credit both at pre- and post-
shipment stages.
India also administers a number of duty drawback schemes that allow
for the remission or drawback of import charges levied on inputs that
are consumed in the production of an exported product. Schemes suchas duty Entitlement pass book Scheme (DEPB) and Duty free
Replenishment certificate (DFRC) fall under this category.
The income-tax benefits-related export activities are incorporated in
sections 80HHC, 10A and 10B of the Income Tax Act.
The reserve bank of India has accordingly issued directions to
commercial Banks to provide export credit both at pre- and post-
shipment stages.
15
7/28/2019 Noopur IP,2012 (1)
16/84
India also administers a number of duty drawback schemes that allow
for the remission or drawback of import charges levied on inputs that
are consumed in the production of an exported product. Schemes such
as duty Entitlement pass book Scheme (DEPB) and Duty freeReplenishment certificate (DFRC) fall under this category.
SWOT ANALYSIS
SWOT Analysis of the Indian steel Industry:-
Strengths1. Availability of iron ore and coal
2. Low labour wage rates
3. Abundance of quality manpower
4. Mature production base
Weaknesses1. Unscientific mining
2. Coking coal import dependence
3. Low R&D investment
4. Inadequate infrastructure
Opportunities Threats
16
7/28/2019 Noopur IP,2012 (1)
17/84
1. Unexplored rural market
2. Growing domestic demand
3. Exports
4. Consolidation
1. China becoming net exporter
2. Protectionism in the West
3. Dumping by competitors
4. Global economic slowdown
FACTORS HOLDING BACK THE INDIAN STEEL
INDUSTRY
Energy supply
Problems procuring raw material inputs
Inefficient transport system
Recent financial crisis and Indian Steel Industry
17
SAIL
38%
JSW
13%
ISPAT
12%
4%
TATASTEEL
18%ESSAR
15%
7/28/2019 Noopur IP,2012 (1)
18/84
PLAYERS IN INDIAN STEEL
INDIAN STEEL INDUSTRY A BRIGHT FUTURE
RESOURCES
Abundant Iron Ore reserves
Strong Managerial skills in Iron and Steel making
Large pool of skilled Man-power
Established steel players with strong skills in steel making
OPPORTUNITIES
18
7/28/2019 Noopur IP,2012 (1)
19/84
High economic growth driven increasingly by industry
Faster Urbanization
Increased Fixed Asset Building
Automobiles and component industry growth
POLICY
Pro-active stance of Govt.
Encouragement for overseas investments
Growth in key sectors will drive the steel demand
Apparent Steel consumption
of countries
19
7/28/2019 Noopur IP,2012 (1)
20/84
Key Sectors driving growth:-
Infrastructure development.
Housing and urban development
High degree of urbanizations
High demand in the auto sector
Capacity building in steel making
These sectors in India are growing at an increasing rate.
IN SUMMARY..
Indian steel industry exudes optimism but crisis should get over as
soon as possible.
Investment in infrastructure is crucial to step up demand for steel.
Supply may have to be rationalized in line with the demand (Dom +
exports
Integrated Mills would hold the key in future growth of Indian Steel
supplies.
New technologies to use indigenous natural resources would have to be
developed
20
7/28/2019 Noopur IP,2012 (1)
21/84
Thus it is being predicted that the Indian steel would double its Steel
Production in the coming years.
21
PROFILE
OF
TATA STEEL
Steel Production
29 3134 36
50
70
110
0
25
50
75
100
125
150
2000-01 2001-02 2002-03 2003-04 2006-07 2011-12 2020
Year
7/28/2019 Noopur IP,2012 (1)
22/84
Tata Steel moves into its next target to become the worlds second largest
steel company by 2012 with the help of its most expensive between worth
$12.9 billions on Corus groups.
BUSINESS STANDRAD
INTRODUCTION
22
7/28/2019 Noopur IP,2012 (1)
23/84
Tata Steel (BSE: 500470), formerly known as TISCO and Tata Iron and
Steel Company Limited, is the world's sixth largest steel company, with an
annual crude steel capacity of 31 million tones. It is the largest private sector
steel company in India in terms of domestic production. Ranked 258th on
Fortune Global 500, it is based in it is based in Jamshedpur, Jharkhand , India.
It is part of Tata Group of companies. Tata Steel is also India's second-largest
and second-most profitable company in private sector with consolidated
revenues of Rs 1,32,110 crore and net profit of over Rs 12,350 crore during
the year ended March 31, 2008.
Its main plant is located in Jamshedpur, Jharkhand, with its recent
acquisitions; the company has become a multinational with operations in
various countries. The Jamshedpur plant contains the DCS supplied by
Honeywell .The registered office of Tata Steel is in Mumbai. The company
was also recognized as the world's best steel producer by World Steel
Dynamics in 2005. The company is listed on Bombay Stock Exchange andNational Stock Exchange of India, and employs about 82,700 people (as of
2007).
COMPANY HISTORY
Tata Iron & Steel Company Ltd. (TISCO) is the iron and steel production
company associated with the Tata group of some 80 different industrial and
other business enterprises in India, founded by members of the Tata family.
TISCO operates as India's largest integrated steel works in the private sector
with a market share of nearly 13 percent and is the second largest steel
company in the entire industry.
23
http://en.wikipedia.org/wiki/Fortune_Global_500http://en.wikipedia.org/wiki/Fortune_Global_5007/28/2019 Noopur IP,2012 (1)
24/84
Its products and services include hot and cold rolled coils and sheets,
tubes, construction bars, forging quality steel, rods, structural, strips and
bearings, steel plant and material handling equipment, Ferro alloys and other
minerals, software for process controls, and cargo handling services. Through
its subsidiaries, TISCO also offers tinplate, wires, rolls, refractorys, and
project management services.
Tata's Early Beginnings in the 1800s
Jamsetji Nusserwanji Tata was born into a well-to-do family of Bombay
Parsees in 1839. Tata Steel was established by Indian Parse businessman
Jamsetji Nusserwanji Tata in 1907 (he died in 1904, before the project was
completed). Tata Steel introduced an 8-hour work day as early as in 1912
when only a 12-hour work day was the legal requirement in Britain. It
introduced leave-with-pay in 1920, a practice that became legally binding
upon employers in India only in 1945. Similarly, Tata Steel started a Provident
Fund for its employees as early as in 1920, which became a law for all
employers under the Provident Fund Act only in 1952. Tata Steel's furnaces
have never been disrupted on account of a labor strike and this is an enviable
record.
Capacity Expansion
24
7/28/2019 Noopur IP,2012 (1)
25/84
Tata Steel has set an ambitious target to achieve a capacity of 100 million tone
by 2015. Former Managing Director B. Muthuraman stated that of the
100 million tone,
Tata Steel has lined up a series of Greenfield projects in India and outside
which includes-
1. 6 million tone plant in Orissa (India)
2. 12 million tone in Jharkhand (India)
3. 5 million tone in Chhattisgarh (India)
4. 3-million tone plant in Iran
5. 2.4-million tone plant in Bangladesh
6. 5 million tone capacity expansion at Jamshedpur (India)
7. 4.5 million tone plant in Vietnam (feasibility studies underway)
Acquisitions
Some of the major acquisitions in rcent years.
25
7/28/2019 Noopur IP,2012 (1)
26/84
Corus is Europes second largest steel producer. With main
steelmaking operations in the UK and the Netherlands, Corus supplies steel
and related services to the construction, automotive, packaging, mechanical
engineering and other markets worldwide. (www.corusgroup.com)
NatSteel Holdings is headquartered in Singapore and is a leading
supplier of premium steel products for the construction industry. It became a
100% subsidiary of Tata Steel in February 2004. NSH produces about 2 MT
of steel products annually across its regional operations.
(www.natsteel.com.sg)
Headquartered in Bangkok, Tata Steel Thailand is a major steel
producer in Thailand and is the largest producer of long steel products with a
manufacturing capacity of 1.7 mtpa. ( www.tatasteelthailand.com)
OPERATIONS OF TATA STEEL
26
http://www.corusgroup.com/http://www.natsteel.com.sg/http://www.natsteel.com.sg/http://www.natsteel.com.sg/http://www.tatasteelthailand.com/http://www.corusgroup.com/http://www.natsteel.com.sg/http://www.tatasteelthailand.com/7/28/2019 Noopur IP,2012 (1)
27/84
Tata Steel is one of the ventures of the Tata Group but it has many successful
companies under one umbrella. Some of the other notable Tata concerns and
their line of business is as follows:-
VISION AND MISSION
Vision
27
7/28/2019 Noopur IP,2012 (1)
28/84
We aspire to be the global steel industry benchmark for Value Creation
and Corporate Citizenship
We make the difference through:-
Our people, by fostering team work, nurturing talent, enhancing
leadership capability and acting with pace, pride and passion.
Our offer, by becoming the supplier of choice, delivering premium
products and services, and creating value for our customers.
Our innovative approach, by developing leading edge solutions in
technology, processes and products.
Mission
Consistent with the vision and values of the founder Jamsetji Tata, Tata
Steel strives to strengthen Indias industrial base through the effective
utilization of staff and materials.
Tata Steel recognizes that while honesty and integrity are the essential
ingredients of a strong and stable enterprise, profitability provides the
main spark for economic activity.
Overall, the Company seeks to scale the heights of excellence in all that it
does in an atmosphere free from fear, and thereby reaffirms its faith in
democratic values.
28
7/28/2019 Noopur IP,2012 (1)
29/84
POLICY OF TATA STEEL
Overall, the Company seeks to scale the heights of excellence in all that it
does in an atmosphere free from fear, and thereby reaffirms its faith in
democratic values.
Corporate social responsibility
Tata Steel believes that the primary purpose of a business is to improve
the quality of life of people. Tata Steel shall conduct its business ever mindful of its social
accountability, respecting applicable laws and with regard for human
dignity.
Tata Steel shall positively impact and influence its partners in fostering
a sense of social commitment for their stakeholders.
Date:1stOctober2011
HM Nerurkar
( Managing Director)
Quality policy
Consistent with the group purpose, Tata Steel constantly strives to improve
the quality of life of the communities it serves through excellence in all facets
of its activities.
We are committed to create value for all our customers and key stakeholders
by continually standardizing, improving and innovating our offerings,
systems and processes involving all our employees.
29
7/28/2019 Noopur IP,2012 (1)
30/84
This policy shall form the basis of establishing and reviewing the Business
Objectives and Strategies and shall be communicated across the organization.
The policy will be reviewed to align with business direction and to comply
with all the requirements of TQM Principles.
Date: 1st October 2011 HM Nerurkar( Managing Director)
Human Resource Policy
Tata Steel is an equal opportunity employer.
Tata Steel recognizes that its people are the primary source of its
competitiveness.
It will pursue management practices designed to enrich the quality of life of
its employees, develop their potential and maximize their productivity.
It will aim at ensuring transparency, fairness and equality in all its dealings
with its employees.
Tata Steel shall strive continuously to foster a climate of openness, mutual
trust and teamwork.
In the process Tata Steel shall strive to be the employer of choice by
attracting the best available talent and ensuring a cosmopolitan workforce.
30
Date: 1st October 2011
HM Nerurkar
( Managing Director)
7/28/2019 Noopur IP,2012 (1)
31/84
Safety Policy
Tata Steels safety and occupational responsibilities are driven by our
commitment to ensure zero harm to people we work with and society at large
and are integral to the way we do business.
Safety Principles
Safety is a line management responsibility.
All injuries can be prevented.
Felt concern and care for the employee on 24 hours safety shall be
demonstrated by Leaders.
Employees shall be trained to work safely.
Working safely shall be condition of employment.
Every job shall be assessed for the risk involved and shall be carried out as
per authorized procedures/checklist/necessary work permit and using
necessary work permit and using necessary personal protective equipment.
We are committed to continual improvement in our S&OH performance.
We shall set objective-targets, develop, implement and maintain management
standards and systems, and go beyond compliance of the relevant industry
standards, legal and other requirements.
31
7/28/2019 Noopur IP,2012 (1)
32/84
Date: 1st October 2011
HM Nerurkar
( Managing Director)
.
Environment policy
Well shall develop & rehabilitate abandoned sites through a forestation
and landscaping and shall protect and preserve the bio-diversity in theareas of our operations.
We shall enhance awareness, skill and competence of our employees
and contractors so as to enable them to demonstrate their involvement,
responsibility and accountability for sound environmental performance.
We are committed to continual improvement in our environmental
performance.
We shall set objectives, targets, develop, implement and maintainmanagement standards and system, and go beyond compliance of the
relevant industry standards legal and other requirements.
We will truly succeed when we sustain our environmental achievement
and are valued by the communities in which we work.
Date: 1st October 2011
HM Nerurkar( Managing Director )
32
7/28/2019 Noopur IP,2012 (1)
33/84
33
PROFILE
OF
FOUNDERS
7/28/2019 Noopur IP,2012 (1)
34/84
Jamsetji Nusserji Tata(1839-1904) ranks among the greatest
visionaries enterprises of All time. Gifted with the most
extraordinary imagination and
Prescience, he laid the foundations of Indian industry, contributed to
Its consolidation, and became a key figure in Indias industrial
renaissance.
Sir Dorabji Tata (1859-1933)
J N Tata had exhorted to his sons to pursue and develop his lifes work;
His elder son, Dorabji Tata carried out the bequest with scrupulous zeal, and
distinction.
Jehangir Ratanji Dadabhai Tata (1904-1993)
34
7/28/2019 Noopur IP,2012 (1)
35/84
JRD Tata has been one of the greatest builders and personalities of modern India in
the twentieth century. He assumed Chairmanship of Tata Sons Limited at the young age of
34, but his charismatic, disciplined and forward-looking leadership over the next 50 years
and more, led the Tata Group to new heights of achievement, expansion and
modernization.
35
Board of Director
7/28/2019 Noopur IP,2012 (1)
36/84
Senior Management People
36
7/28/2019 Noopur IP,2012 (1)
37/84
Ratan Naval Tata
Ratan Naval Tata, the chairman of the Tata Group, India's most respectedconglomerate. He was born in Mumbai on December 28, 1937. Ratan
Tata holds a degree in Architecture and Structural Engineering from
Cornell University. He has also done the Advanced Management Program
from Harvard Business School in 1974-1975. He is also chairman of other
Tata companies of other Tata companies, including Tata Motors, Tata
Consultancy Services, Tata Power, Tata Tea, Tata Chemicals, Indian hotels and Tata
Teleservices.
37
7/28/2019 Noopur IP,2012 (1)
38/84
Mr. Tata joined Tata Steel in December 1962. After serving in various other
Tata companies, he was appointed director-in-charge of National Radio & Electronics
Company Limited (NELCO) in 1971. In 1981, he was named chairman of Tata
Industries, the second Tata promoter company. Mr. Tata is also the chairman of two of the
largest philanthropic trust in the private sector in India.
Mr. Tata is associated with various organizations in India and abroad. He
is chairman of the Government of Indians Investment Commission and a member of
the prime ministers Council on Trade and industry, the National Hydrogen Energy
Board and the National Manufacturing Competitiveness Council.
The Government of India honored Mr. Tata with its second highest civilian
award, the Padma Vibhushan, in 2008.Earlier, in 2000; he had been awarded the Padma
Bhushan. He has also been conferred an honorary doctorate in Business administration by
the Ohio State University, an honorary doctorate in technology by the Asian Institute of
Technology, Bangkok, an honorary doctorate in science by the university of Warwick, and
an honorary fellowship by the London School of Economics.
KEY ENTERPRISE PROCESS
Leadership
Strategic planning and risk management
38
7/28/2019 Noopur IP,2012 (1)
39/84
Market Development
Investment Management
Human Resource
Improvement & change management
Order Generation
Operation and fulfillment
Supply Management
Research & Development
Information Management
Strategic Business Units of Tata Steel
A part from main steel division, Tata Steel operation is grouped under the
following strategic Business Units:
Bearing division: manufactures ball bearing, double row self-aligning
bearing, magneto, bearing, clutch release bearing and tapered roller bearing
for two wheelers, fans, water, and pumps.
39
7/28/2019 Noopur IP,2012 (1)
40/84
Ferro alloys and Minerals Division: operates chrome mines and has units for
making Ferro chrome and Ferro- manganese. It is one of the largest players in
the global Ferro chrome market.
Agrico Division: Tata Agrico is the first organized manufacturer in the India
of hand tools and implements for application in agriculture.
Tube Division: The biggest steel tube manufacturer with the largest market
share in India, it aspires to strengthen it market presences by expending and
modernizing its commercial and precision tube manufacturing capacity.
Wire Division: A pioneer in the manufacture of steel wire in India, it
produces coated and uncoated wires, branded as Tata wiring. The division alsooperates a wholly owned subsidiary in Sri Lanka.
40
7/28/2019 Noopur IP,2012 (1)
41/84
Joint venture, Associates and Subsidiaries
Tata steel has numerous joint ventures and subsidiaries. Among them are:
Jamshedpur injection powder ltd.
JAMIPOL manufactures carbide de-sulphurising compounds
which are used for de-sulphurising hot metal for the production
of low-sulphur, high-quality steel.
Website:- www.jamipol.com
Jamshedpur utility and service company
Re-engineered out of Tata Steel's town services, JUSCO is a
wholly owned subsidiary of Tata Steel and is the country's first
enterprise that provides municipal and civic services for
townships. JUSCO is the only EMS 14001 civic services provider in the
country.
Website:- www.juscoltd.com
Lanka Special Steel Ltd.
The only unit in Sri Lanka manufacturing galvanized wires.
41
http://www.jamipol.com/http://www.juscoltd.com/http://www.jamipol.com/http://www.juscoltd.com/7/28/2019 Noopur IP,2012 (1)
42/84
Sila Eastern Company Limited
Established to develop limestone mines in Thailand, mainly forthe captive use of Tata Steel
Tata Steel KZN
Proposes to set up high carbon ferrochrome plant in South Africa. The plant is
slated to be commissioned by October 2007 with an annual production
capacity of 135,000 tons .
Tata Metallics Limited
Tata Metallics is recognized as Indias number one pig iron
manufacturing and selling company. Promoted by Tata Steel Limited and
assisted by The West Bengal Industrial
Tata Pigments Limited
TPL's range of products includes oxides of iron, dry cement
paint, exterior emulsion paint and distemper. Its products are used in
paints, emulsion, cement floors, plastic etc
42
http://animatedcollapse.toggle%28%27cont9%27%29/http://animatedcollapse.toggle%28%27cont11%27%29/http://animatedcollapse.toggle%28%27cont12%27%29/http://animatedcollapse.toggle%28%27cont12%27%29/http://animatedcollapse.toggle%28%27cont13%27%29/http://animatedcollapse.toggle%28%27cont9%27%29/http://animatedcollapse.toggle%28%27cont11%27%29/http://animatedcollapse.toggle%28%27cont12%27%29/http://animatedcollapse.toggle%28%27cont13%27%29/7/28/2019 Noopur IP,2012 (1)
43/84
Tata Refractorys Limited (TRL)
It produces High Alumina, Basic, Dolomite, Silica and Monolithic
Refractorys and offers design, procurement and re-lining applications
services. It is one of the few companies worldwide to produce silica refractory
for coke
ovens and the glass industry. The Company has a basic bricks manufacturing
unit in China.
Tata Steel Processing and Distribution Limited (TSPDL)
Tata Steel Processing and Distribution Limited is wholly owned
subsidiary of Tata Steel. With 8 large processing units, 17 sales locations and
a host of partners like external processing agencies, suppliers, retailers and
other stakeholders, today TSPDL is Indias largest steel service organization
Tata Sponge Iron Limited (TSIL)
TSIL is the first Indian sponge iron plant based on Tata Steel's
Direct Reduction Technology. Its major product lines are sponge iron lumps
and fines.
43
http://animatedcollapse.toggle%28%27cont17%27%29/http://animatedcollapse.toggle%28%27cont17%27%29/http://animatedcollapse.toggle%28%27cont17%27%29/http://animatedcollapse.toggle%28%27cont18%27%29/http://animatedcollapse.toggle%28%27cont19%27%29/http://animatedcollapse.toggle%28%27cont17%27%29/http://animatedcollapse.toggle%28%27cont18%27%29/http://animatedcollapse.toggle%28%27cont19%27%29/7/28/2019 Noopur IP,2012 (1)
44/84
Tayo Rolls Limited
India's leading roll manufacturer and supplier, the company
produces rolls which find application in integrated steel plants, power plants,
the paper, textile and food processing sectors, and the government mint
Tinplate Company of India Limited (TCIL)
With a market share of over 35%, it is the industry leader in
India. It has the capability to supply all tinning line products including
electrolytic tinplate / tin-free steel and cold-rolled products.
TRF Limited
TRF, one of India's leading companies in the business of design,
manufacture, supply, installation and commissioning of engineered-to-order
equipment and systems in the areas of bulk material handling, processing,
reclaiming and blending.
44
http://animatedcollapse.toggle%28%27cont20%27%29/http://animatedcollapse.toggle%28%27cont21%27%29/http://animatedcollapse.toggle%28%27cont22%27%29/http://animatedcollapse.toggle%28%27cont20%27%29/http://animatedcollapse.toggle%28%27cont21%27%29/http://animatedcollapse.toggle%28%27cont22%27%29/7/28/2019 Noopur IP,2012 (1)
45/84
Joint Ventures
A JV between Larsen & Toubro Ltd. and Tata Steel Ltd., the company will
build a deep draft (18 meters) all weather port on the east coast of India. The
port will handle 80 million tons per annum of cargo.
www.dhamraport.com
mjunction services limited
mjunction, operating at the cutting edge of Information
Technology, is a 50:50 venture of SAIL and Tata Steel. It is India's largest e-
Commerce company and the world's largest e-marketplace for steel. mjunction
offers a wide range of selling, sourcing and knowledge services that empower
businesses with greater process efficiencies
Tata BlueScope Steel Limited
A joint venture with BlueScope Steel Limited, Australia, Tata
BlueScope Steel Limited offers a comprehensive range of branded steel
products for building and construction applications. The Company is
constructing a state-of-the-art metallic coating and painting facility at
Jamshedpur
45
http://www.dhamraport.com/http://animatedcollapse.toggle%28%27cont7%27%29/http://animatedcollapse.toggle%28%27cont7%27%29/http://animatedcollapse.toggle%28%27cont10%27%29/http://www.dhamraport.com/http://animatedcollapse.toggle%28%27cont7%27%29/http://animatedcollapse.toggle%28%27cont10%27%29/7/28/2019 Noopur IP,2012 (1)
46/84
Some of the major sectors for the Steel requirement are:
Fuelling Economic Growth
Huge Demand potential Over 1 bn. Population.
Booming middle class. 100mn. population earning more than US$ 3000 per annum
Increasing consumerism
Urbanization on fast track
Housing demand boom
Strong Banking & Judicial System
Large English speaking population 150 mn, powering Services sector
Skilled labor and managerial work force
Growing IT sector
46
7/28/2019 Noopur IP,2012 (1)
47/84
Large pool of skilled Technical work force
47
SWOTANALYSIS
7/28/2019 Noopur IP,2012 (1)
48/84
SWOT analysis is done for a company to find out its overall Strengths,Weaknesses, threats and opportunities leading to gauging to gauging the
competitive potential of the company. The SWOT analysis enables a company
to recognize its market standing and adopt strategies accordingly.
STRENGHTS
Tata Steel Indian operations are self sufficient in the case of its major
raw material iron ore through its captive mines advanced.
Very advanced research and development wing which is carrying out
researches and experiments in the areas of raw materials, blast furnace
productivity ,steel making, product development, process improvement
etc.
Tata had a strong retail and distribution network in India and south east
asia.Tata was a major supplier to the Indian auto industry and the
demand for value added steel products was growing in this market.
The company is on its way to reach a crude steel capacity of 10 million
tons per annum by FY 2011 .The first phase of reaching the crude steel
capacity of 6.8 million tons per annum ,Brown field projects.
The company has in place adequate internal control systems and
procedure commensurate with the size and nature of its business. The
effectiveness of the internal controls is continuously monitored by the
Corporate Audit Division of the company.
48
7/28/2019 Noopur IP,2012 (1)
49/84
Tata Steel has been on a path of accelerated growth with foray into
several geographies and markets through aggressive mergers and
acquisitions.
Tata Steel now is in the process of implementing a structured approach
in risk management called Enterprise Risk Management (ERM).
Tata Steel addresses the risk of cyclicality of the Steel industry by
maintaining rich product mix and higher value added products whose
vitality is lower .Moreover the industry itself has been undergoing some
structural changes with consolidations. These changes are expected to
bring in greater stability to prices.
Tata Steel with its modernization plans has ensured that it deploys the
best technologies to ensure quality, cost efficiency and environment-
friendly processes. Through acquisition of Corus and with new
Greenfield ventures
Tata Steel has ensured that it has diversified the concentration risk in
single technology of Iron and Steel making.
WEAKNESSES
Endemic deficiencies, these are inherent in the quality and availability
of some of the essential raw materials available in India, eg, high ash
content.
India is deficient in raw materials required by the steel industry .Iron ore
deposits are finite and there are problems in mining sufficient amounts
of it.
49
7/28/2019 Noopur IP,2012 (1)
50/84
Raw materials for steel industry are depleting fast which are non
renewable, so company has to come up with sustainable methods in
steel production.
Steel production in India is also hampered by power shortages.
Insufficient freight capacity and transport infrastructure impediments to
hamper the growth of Indian steel industry.
Low Labor Productivity, in India the advantages of cheap labor get
offset by low labor productivity.
High cost of basic inputs and services high administered price of
essential inputs like electricity puts in Indian steel industry in a
disadvantage.
OPPORUNITIES
The biggest opportunity before Indian steel sector is that there is
enormous scope for increasing consumption of steel in almost all
sectors in India.
Unexplored rural market .The Indian rural sector remains fairly
unexposed to their multifaceted use of steel.
Excellent potential exist for enhancing steel consumption in other
sectors such as automobiles, packaging, engineering industries,
irrigation and water supply in India.
50
7/28/2019 Noopur IP,2012 (1)
51/84
It is estimated that world steel consumption will double in next 25
years. Quality improvement of Indian steel combined with its low cost
advantages will definitely help in substantial gain in export market.
Corus acquisition brings in a tremendous technological advantage by
access to best practices in global steel industry.
Booming infrastructure has opened up high demand for steel
worldwide.
THREATS
In the developed world, industries have been facing rising
environmental costs due to the increased concerns in global warming.
It is recognized that the steel and aluminum industries are significant
contributors to manmade green house gas emissions.
High raw material input cost and scarcity of nonrenewable raw
materials are a threat to the industry.
Threat of substitutes; plastics and composites pose a threat to Indian
steel is one of its biggest markets automotive manufacture.
51
7/28/2019 Noopur IP,2012 (1)
52/84
52
ENVIRONMENTAL
ANALYSIS
7/28/2019 Noopur IP,2012 (1)
53/84
ENVIRONMENTAL ANALYSIS
We can also call it as SLEPT ANALYSIS of TATA STEEL
ECONOMIC
Tata Steel became 6 Th biggest steel producers in the world after
acquiring Corus, but the cost of the integration goes much more beyond
the financial aspect. There are other factors which will add to overallintegration costs such as:
- Cross Cultural integration
- Employer-employee relationship
Steel production processes are energy dependant and price movements
in the energy market would accordingly affect Tata Steels bottom line.
The steel industry is highly cyclical receptive to general economic
conditions including the automotive, appliance, and energy industries.If
these industries face a downturn Tata Steel would definitely take a hit.
POLITICAL
53
7/28/2019 Noopur IP,2012 (1)
54/84
Tata invested a huge amount in politically unstable countries like
Bangladesh, Iran, Thailand, and Mozambique. The entire process of
setting plan is getting delayed in gas supply in Bangladesh; Iron oremine lease is escalating the project cost in Iran.
Increased infrastructure spending by the Government of India and
development of roads could generate significant savings in freight and
transportation cost making steel companies globally competitive.
SOCIAL
Tata Steel was awarded the Golden Peacock Award for Corporate
Social Responsibility for the year 2009.
From policies on corporate accountability, drugs and alcohol and HIV
prevention, to a Code of Conduct extends to its share holders, ethics and
responsibility are interwoven in the daily course.
Hundreds of people born with cleft lips or cleft palates are operated on
free through a project operation muskan.
Tata being socially responsible in the deployment of companys mobile
medical unit and treating more than 1456660 urban slum and remote
rural areas.
LEGAL
Tata Steel requires huge chunk of land. Sudden spree of big corporate
houses for grabbing the land makes the situation even more
competitive.
54
7/28/2019 Noopur IP,2012 (1)
55/84
Police firing in Kalinganagar and sudden death of protestors makes the
situation more complex.
Unstable Jharkhand government and the local tribals at an increase is
worsening the situation.
Representatives of environmental activitist group Greenpeace stormed
into the AGM in the guise of share holders of Tata Steel got on the
podium and alleged that the proposed port at dharma on the Orissa coast
will kill the migratory Olive Ridley turtles.
TECHNOLOGICAL
A technological analysis is based on the companys approach towards the
development and use of the technology. This strategy plays an important key
role in overall developing a competitive strategy and hence needs to be
consistent with the other value activities of the organization.
So in the same way Tata Steel made a technological strategy by
making use of E-Portal with the collaboration of SAIL. So Tata Steel forgednew business strategies using the web i.e. metal.junction.com, a 50:50 joint
venture of Tata Steel and Steel Authority of India Limited.
This is a dotcom story with a difference. Tata Steel made a
transformational change through process innovation www.metaljunction.com,
which accounts for about 14 million tones of saleable steel annually.
55
http://www.metaljunction.com/http://www.metaljunction.com/7/28/2019 Noopur IP,2012 (1)
56/84
56
CUSTOMERS,
COMPETITORS
AND
PRODUCTS
COMPETITORS
7/28/2019 Noopur IP,2012 (1)
57/84
COMPETITORS OF TATA STEEL
Name Last Price Market Cap.(Rs. cr.)
SalesTurnover
Net Profit TotalAssets
Tata Steel 465.50 45,210.03 29,073.50 6,865.69 76,745.77
SAIL 99.40 41,057.42 42,720.19 4,881.25 57,234.96
JSW Steel 687.85 15,347.12 23,368.86 2,010.67 29,176.61
Visa Steel 53.05 583.55 1,332.88 51.38 1,761.41
57
http://www.moneycontrol.com/india/stockpricequote/steellarge/tatasteel/TIShttp://www.moneycontrol.com/india/stockpricequote/steellarge/steelauthorityindia/SAIhttp://www.moneycontrol.com/india/stockpricequote/steellarge/jswsteel/JSW01http://www.moneycontrol.com/india/stockpricequote/steellarge/visasteel/VS15http://www.moneycontrol.com/india/stockpricequote/steellarge/tatasteel/TIShttp://www.moneycontrol.com/india/stockpricequote/steellarge/steelauthorityindia/SAIhttp://www.moneycontrol.com/india/stockpricequote/steellarge/jswsteel/JSW01http://www.moneycontrol.com/india/stockpricequote/steellarge/visasteel/VS157/28/2019 Noopur IP,2012 (1)
58/84
Balance Sheet ------------------- in Rs. Cr. -------------------
Tata Steel SAIL JSW Steel Visa Steel SteelExchange
Mar '11 Mar '11 Mar '11 Mar '11 Mar '11
Sources Of Funds
Total Share Capital 959.41 4,130.40 563.18 110.00 43.40
Equity Share Capital 959.41 4,130.40 284.15 110.00 42.85
Share Application Money 178.20 0.00 529.38 0.00 38.15Preference Share Capital 0.00 0.00 279.03 0.00 0.55
Reserves 47,307.02 32,939.07 16,132.71 243.29 118.06
Revaluation Reserves 0.00 0.00 0.00 0.00 0.00
Net worth 48,444.63 37,069.47 17,225.27 353.29 199.61
Secured Loans 2,009.20 11,813.91 7,675.82 1,373.24 333.38
Unsecured Loans 26,291.94 8,351.58 4,275.52 34.88 5.62
Total Debt 28,301.14 20,165.49 11,951.34 1,408.12 339.00
Total Liabilities 76,745.77 57,234.96 29,176.61 1,761.41 538.61
Tata Steel SAIL JSW Steel Visa Steel SteelExchange
Mar '11 Mar '11 Mar '11 Mar '11 Mar '11
Application Of Funds
Gross Block 22,846.26 38,260.60 27,407.35 931.99 211.41
Less: Acumen. Depreciation 11,041.16 23,180.54 6,305.20 161.08 28.74
Net Block 11,805.10 15,080.06 21,102.15 770.91 182.67
Capital Work in Progress 6,969.38 22,228.43 6,169.05 1,390.54 116.36
Investments 46,564.94 684.14 4,098.81 61.04 16.69
Inventories 3,953.76 11,302.79 4,138.41 395.68 208.51
Sundry Debtors 428.03 4,161.30 838.65 47.99 169.88
Cash and Bank Balance 512.76 143.99 136.26 2.01 6.46
Total Current Assets 4,894.55 15,608.08 5,113.32 445.68 384.85
Loans and Advances 16,814.04 6,175.81 3,324.43 180.02 131.34
Fixed Deposits 3,628.78 17,334.87 1,750.62 86.50 20.29
Total CA, Loans & Advances 25,337.37 39,118.76 10,188.37 712.20 536.48
Deferred Credit 0.00 0.00 0.00 0.00 0.00
Current Liabilities 10,383.04 13,994.33 11,984.37 1,159.16 308.37
58
7/28/2019 Noopur IP,2012 (1)
59/84
MAJOR LOCAL STEEL PLAYERS
CUSTOMERS OF TATA STEEL
Tata steel serves Customers in these market sectors globally;
Automotive Construction
Consumer goods
Engineering
Packaging
Lifting and Excavation
Energy and Power
Aerospace
Shipbuilding
Rail
59
7/28/2019 Noopur IP,2012 (1)
60/84
Defense and Security
TATA STEEL PRODUCTS
60
MARKETING
STRATEGY AND
IMPLEMENTATIO
N
7/28/2019 Noopur IP,2012 (1)
61/84
MARKETING STRATEGY AND IMPLEMENTATION
BCG PRODUCT PORTFOLIO MATRIX
Tata Steel has stable market growth but has a relatively high market share
so it comes under cash cow. This implies that it is generating enough
revenue that can be pooled into stars and question marks.
HIGH
61
7/28/2019 Noopur IP,2012 (1)
62/84
LOW HIGH LOW
The relative market share and the relative market growth of TATA STEEL.
PORTERS FIVE FORCES MODEL
62
STAR
Automobile, Tea , Chemicals
QUESTION MARK
Technology Consultancy
Engineering Services Composites
CASH COWSPower, Steel, Oil
And Gas
DOGS
Information Systems
And Communication
THREAT OF NEW
ENTRANTS
BARGAINING
POWER OF
BUYERS
RIVALRY AMONG
EXISTING
COMPETITORS
7/28/2019 Noopur IP,2012 (1)
63/84
ENTRY BARRIERS: High
Capital Requirement: Steel industry is a capital intensive business. Tata Steel has
made sufficient efforts in this regard.
Economies of Scale: Tata Steel being an integrated steel plant has its own mines for
key raw materials such as iron ore,coal and this protects them from the potential
threat for new entrants to a significant extent.
Government Policy: the govt has favorable policy for steel manufacturers and Tata
Steel being a century old company under the flagship of Tata Sons famous for its
Corporate Social Responsibility enjoys a respectable position in front of the Indian
Govt.
Product Differentiation: Steel doesnt fall in luxury or specialty good thus does not
have price difference. Steel does enjoys a premium for its products because of its
quality and its brand value.
Currently two majors Steel players Arcelor-Mittal and POSCO are the biggest threat
for Tata Steel.
COMPETITION: High
The Steel industry is truly global in terms of competition with large producing
countries like China significantly influencing global prices through aggressive
exports.
Steel being a commodity, its branding is not common as there is little differentiation
between competing products.
63
BARGAINING
POWER OF
SUPPLIERS
THREAT OF
SUBSTITUTE
7/28/2019 Noopur IP,2012 (1)
64/84
The four major domestic steel rivals SAIL, JSW, ISPAT And ESSAR STEEL. Rest
are all smallish mills which together accounts for 30% of the total market share.
BARGAINING POWER OF SUPPLIERS: High
The bargaining power of suppliers is low as Tata Steel plant is fully integrated.
Since domestic raw material sources are insufficient to supply the Indian steel
industry, a considerable amount of raw materials has to be imported.
Tata Steel in order to safeguard itself from the high bargaining power, Tata Steelhas forayed itself into the concept of BACKWARD INTEGRATION.
It is also evaluating several other mineral projects in Australia and Brazil.
To achieve coal security by way of imports, the company has formed a joint venture
with an Australian company for producing coal in Mozambique.
For limestone Tata Steel has entered into a joint venture with the AL Bahja Group
of Oman.
THREATS OF SUBSTITUTES: LOW
Plastics and Composites pose a threat to Indian steel is one of its biggest markets-
automotive manufacture.
Steel has already been replaced in some large volume applications, Railway
sleepers(RCC sleepers),large diameter water pipes(RCC pipes)etc.The substitution
is more prevalent in the manufacture of automobiles and consumer goods industry.
BARGAINING POWER OF CONSUMER: MIXED
64
7/28/2019 Noopur IP,2012 (1)
65/84
Some of the major steel consumption sectors like automobiles, oil and gas, shipping,
consumer durables and power generation enjoy high bargaining power ang get
favorable deals.
65
FINANCIAL
ANALYSIS
7/28/2019 Noopur IP,2012 (1)
66/84
FINANCIAL ANALYSIS
The principal contents of the modern approach to financial managementcan be said to be. How large should an enterprise be, and how fast shouldit grow? In what form should it hold assets?
What should be the composition of its liabilities?
This financial management in the modern sense of the term can becategories into three major decisions as function of finance.
66
7/28/2019 Noopur IP,2012 (1)
67/84
The investment decision
The finance decision
The dividend policy decision
Financial analysis follows a comprehensive framework Oflooking at various parameters, the ratios play a verydominant role:-
Current Ratio
Interest Coverage Ratio
Earnings Per Share
Profit after paying Tax
Per Share Earning
Total/ Debt Net Worth Ratio
67
7/28/2019 Noopur IP,2012 (1)
68/84
An indication of a company's ability to meet short-term debt obligations
CURRENT RATIO= current assets/current liabilities
If current liabilities exceed current assets, then the company may have problems
meeting its short-term obligations
higher the ratio-more liquid the company
In case of TATA Steel , CR was very high as their inventory was high.
A calculation of a company's ability to meet its interest payments on outstanding
debt.
Interest coverage ratio is equal to earnings before interest and taxes for a time
period.
68
7/28/2019 Noopur IP,2012 (1)
69/84
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.
A financial performance ratio, calculated by dividing net income after taxes by net
sales. A company's after-tax profit margin is important because it tells investors the
percentage of money a company actually earns per dollar of sales.
69
7/28/2019 Noopur IP,2012 (1)
70/84
A valuation ratio of a company's current share price compared to its per-share earnings.
In general, a high P/E suggests that investors are expecting higher earnings growth in the
future compared to companies with a lower P/E.
This ratio shows the extent to which the company is dependent on Outside Interest bearingfunds compared to shareholders funds.
The ratio should ideally be less than 1 i.e. the amt of funds contributed by outside loansshould be less than the shareholders funds.
70
7/28/2019 Noopur IP,2012 (1)
71/84
ANALYSIS OF THE CAPITAL STRUCTURE:
Seeing the trend in the change of capital structure of tata steel for the last ten
years, we can say that the share of institutional (non promoters) are increasing
and the holding of promoters (non institutional are decreasing. This is because
the foreign money flowing in the Indian market.
The cost ofcapital is a term used in the field of financial investment to refer
to the cost of a company's funds (both debt and equity), or, from an investor's
point of view "the shareholder's required return on a portfolio of all the
company's existing securities.
The cost of debt is relatively simple to calculate, as it is composed of the rate
of interest paid. In practice, the interest-rate paid by the company can be
modeled as the risk-free rate plus a risk component (risk premium), which
itself incorporates a probable rate of default (and amount of recovery given
default).
The cost of equity is the minimum rate of return a firm must offer
shareholders to compensate for waiting for their returns, and for bearing some
71
http://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Equity_(finance)http://en.wikipedia.org/wiki/Risk_premiumhttp://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Equity_(finance)http://en.wikipedia.org/wiki/Risk_premium7/28/2019 Noopur IP,2012 (1)
72/84
risk. The return consists both of dividend and capital gains, e.g. increases in
the share price.
Under the Capital Asset Pricing Model Approach, the cost of equity
is defined as,
re = rf + (rm rf)*
Where,
rf = Risk free return (Obtained from 364 days Treasury bills of
Government)
rm = Average return of market
= Risk Factor
The risk factor is calculated by using the Sensex as the standard and
calculating the slope of the company price with that of the Sensex.
Risk free rate of return is the government security Treasury bill rate and is
obtained from the site of government of India.
Market risk rate is calculated from the change in the sensex price.
The obtained values are shown below:
Year 2010 2009 2008 2007 2006
Beta1.51 1.71 1.92 1.39 1.25
risk free rate (Rf) 7.81 6.74 8.12 7.91 7.77
market return rate
(Rm)
14.32 81.03 -52.44 47.14 46.7
72
7/28/2019 Noopur IP,2012 (1)
73/84
cost of equity (Re) 24.2803 198.4082 -136.0128 91.8622 90.3016
Cost of Preference Shares
Preference capital, payment of dividends is not legally binding on the firm &
even if the dividends are paid, it is not a charge on earnings, rather it is a
distribution or appropriation of earnings to preference share holders. Cost of
Preference share is not adjusted for taxes because preference dividend is paid
after corporate taxes have been paid. Preference dividends do not save any
taxes.
Cost of Irredeemable Preference Shares
The preference share may be treated as a perpetual security if it is
irredeemable Thus, its cost is given by following equation:-
Kp = Dp/P0(1-f)
Where ;
kp = Cost of Preference Capital
d = Constant Annual Dividend Payment
P0 = Expected Sales Price of Preference Shares
F = Flotation Costs as a percentage of Sales Price
Redeemable Preference Share
The cost of redeemable preference shares is given as follows:
P0(1-f) = n
t=1 Dpt/(1+kp)t + Pn/(1+kp)
Where;
P0 = Expected Sales Price of Preference Shares
73
7/28/2019 Noopur IP,2012 (1)
74/84
F = Floatation Cost a percentage of Preference Shares
D = Dividends paid on Preference Shares
P n = Repayment of Preference Capital Amount
A GRAPHICAL PRESENTATION OF THE SHARE CAPITAL
RESERVES AND SURPLUS AT AN INCREASING
RATE
74
7/28/2019 Noopur IP,2012 (1)
75/84
Financial Data of TATA Steel:
75
0
5000
10000
15000
20000
25000
20072008 2009 2010
2011
Reserves and surplus
Reserves and surplus
7/28/2019 Noopur IP,2012 (1)
76/84
CORPORATE SOCIAL RESPONSIBILITY
76
TATA STEEL
Year 2010 2009 2008 2007 2006
Owner's fund
Equity share capital 887.41 730.79 730.78 580.67 553.67
Share application money - - - 147.06 -
Preference share capital - 5,472.66 5,472.52 - -
Reserves & surplus 36,281.34 23,501.15 21,097.43 13,368.42 9,201.63
Loan funds
Secured loans 2,259.32 3,913.05 3,520.58 3,758.92 2,191.74
Unsecured loans 22,979.88 23,033.13 14,501.11 5,886.41 324.41
Total 62,407.95 56,650.78 45,322.42 23,741.48 12,271.45
total debt25,239.
2026,946.
18 18,021.699,645.
332,516.1
5
total equity37168.
7529704.
6 27300.7314096.
15 9755.3
d/v0.4044
230.4756
540.397633
0040.4062
650.2050
41
e/v0.5955
770.5243
460.602366
9960.5937
350.7949
59
Interest 1,848.19 1,489.50 929.03 251.25 168.44
Rate of Interest(Rd) 7.32 5.53 5.16 2.60 6.69
Beta 1.7 1.65 1.44 1.49 1.57
risk free rate (Rf) 7.81 6.74 8.12 7.91 7.77
market return rate (Rm) 14.32 81.03 -52.44 47.14 46.7
cost of equity (Re) 18.877129.31
85 -79.086466.362
768.890
1
Assuming Tax Rate to be 33%
WACC 13.22689 69.56922
-
46.2656549 40.11091 55.68446
7/28/2019 Noopur IP,2012 (1)
77/84
A Century of Trust
77
7/28/2019 Noopur IP,2012 (1)
78/84
In a free enterprise, the community is not just another stake
holder in the business but in fact the very purpose of its
existence.
- JAMSETJI TATA
At the Tata Group our purpose is to improve the quality of life of the
communities we serve. We do this through leadership in sectors of
national economic significance, to which the group brings a unique set
of capabilities. This requires us to grow aggressively in focused area of
business.
Our heritage of returning to society what we earn evokes trust among
consumers, employees, shareholders and the community. This heritage
will be continuously enriched by formalizing the high standards of
behaviors expected from employees and companies.
The Tata name is a unique asset representing leadership with trust.
Leveraging this asset to enhance group synergy and becoming globally
competitive is the route to sustained growth and long-term success.
Empowering Communities
78
7/28/2019 Noopur IP,2012 (1)
79/84
Inclusive Growth
the touchstone of sustainability
Land & Water Management
Rural Livelihood
Health & Sanitation
Education & Skill Development
Sports
Infrastructure Development
Advocacy Right To Information, Training of PRI members
79
7/28/2019 Noopur IP,2012 (1)
80/84
DISASTER RELIEF
Tata Relief Committee - has sent immediate relief in times of natural
calamities 1 Million Families
Long-term assistance offered
- Tata Relief Committee is serving in 15 districts
- 435 houses and 31 school-cum-cyclone shelter
80
7/28/2019 Noopur IP,2012 (1)
81/84
FUTURE OUTLOOK OF TATA STEEL
Currently the global steel industry is going through unprecedented times. The steel industry
is growing at the rate of 6% for the last seven years. The iron ore and coking coal pieces are
at a record high both due to insufficient capacity creation for these and the heavy
consolidation of minerals companies. Oil prices and freight rates are at an all time high. The
combined effect of all these have driven steel prices at a level higher than ever before.
The new scenario both external due to high raw material and freight cost called for a new
vision, strategies and action plans. The company has co-created a shared vision with its
employees of becoming a global framework in value creation and corporate citizenship.
Company has set goals for 2012 in terms of Returns on Capital Invested, Safety, Carbon
dioxide emissions and of becoming the employer of choice in the industry. The integration
with Corus is proceeding smoothly and is yielding better than the predicted results.
Continues improvement projects are being given focus in all companies sites and
businesses. There is greater emphasis on safety. They have well laid out plans to reduce
CO2 emissions to benchmark levels atleast down by 20% by 2020 as compared to 1999.
The Tata Steel group will pursue strategic growth through capacity expansion and access to
raw materials.
The group is expanding its capacity in India through expansion of its operations in
Jamshedpur to 10 million tones per annum and through the construction of a 6 million tones
per annum Greenfield site in Orissa.Tata group will be a part of the solution and is
committed to minimize the environmental impact of its operations and its products.
81
7/28/2019 Noopur IP,2012 (1)
82/84
CONCLUSION AND FINDINGS
Backed by 100 glorious years of experience in steel making, Tata Steel is among the top tensteel producers in the world with an existing annual crude steel production capacity of 30Million Tonnes Per Annum (MTPA). Tata Steel has a balanced global presence in over 50developed European and fast growing Asian markets, with manufacturing units in 26countries.
Through investments in Corus, Millennium Steel (renamed Tata Steel Thailand) andNatSteel Holdings, Singapore, Tata Steel has created a manufacturing and marketingnetwork in Europe, South East Asia and the pacific-rim countries. The term focus is on theimplementation of the Fit for Future restructuring in Europe, to continue with the 3 mtpa
expansion project in Jamshedpur and overseas raw material projects, to increase productionvolume in India and optimise working capital management across the Group to preserveliquidity
Globalization is very relevant to Tata Steels growth trajectory because the steel market isincreasingly becoming global. "A global market is one where a single price holds and allcustomers can buy that product at this price excluding the transaction and transportationcosts. In the steel industry, in every region the regional prices are increasingly being set byglobal trends.Tata Steels Purpose: To add economic value Tata steels product
Improve the quality of life for its employees and communities the company serves
BIBLIOGRAPHY
82
7/28/2019 Noopur IP,2012 (1)
83/84
Journal & publications :-Available from Tata steel BD & S department.
Marketing Management by Philip Kotler (Eleventh edition)
Research Methodology by C R Kothari (Second edition)
Websites:
(1) http://steel.nic.in/Perfomance%20budget%20(2005-06)Englishchap2.pdf
(2) http://www.ieIndia.orgpdf8989MM104.pdf
(3) http://article.wn.com
(4) http://steel.nic.in/
(5) http://www.tatasteel.com
83
http://steel.nic.in/Perfomance%20budget%20(2005-06)Englishchap2.pdfhttp://www.ieindia.orgpdf8989mm104.pdf/http://article.wn.com/http://steel.nic.in/http://www.tatasteel.com/http://steel.nic.in/Perfomance%20budget%20(2005-06)Englishchap2.pdfhttp://www.ieindia.orgpdf8989mm104.pdf/http://article.wn.com/http://steel.nic.in/http://www.tatasteel.com/7/28/2019 Noopur IP,2012 (1)
84/84
THANK YOU!!!!!