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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
• 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.
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:
• Ranked “ Best Steel Maker” by World Steel Dynamics in 2006, 2005 and 2001
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.
80
70 72 71
70 64 66 66 65 65 64
61 60
60 54
50
50
40
30 Average Age
63.69
20
10
0
Age
The attendance of the members of the board at the board meetings during the year
2007-2008 was as follows:
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
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
Formal mechanism for all employees of the Company to approach the Ethics
Counsellor/Chairman of the Audit Committee
Ordinary Shares
501 to 1000, 4.53 1001 to or
10000 10000, 3.76
above, 0.24
101 to
500,
31.06 1 to 100,
60.41
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 %age holding
Deutsche Securities
Mauritius Limited, 1.97
Tata Motors
Limited, 4.3
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.
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:
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
4
Quantity (in million tonnes)
3.5
3
2.5
IMPORTS
2
1.5 EXPORTS
1
0.5
0
2003-04 2004-05 2005-06 2006-07
YEAR
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.
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.
The respective market shares of the major Indian players is shown in the graph below
SAIL
22%
SAIL
OTHERS
Tata Steel
40%
RINL
ESSAR
JSWL ISPAT 8%
8% 6%
BRAND PROFILE
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
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
The enlarged entity would have Tata Steel‟s low cost and highly efficient upstream
operations and the Corus‟ value-added downstream products.
Enhancing Competitiveness
capture growth in India and Asia - allows for technology transfer and
50000
45000
40000
35000
TATA STEEL income
30000
25000 TATA STEEL Expenses
20000 SAIL Income
15000
Sail Expenses
10000
5000
0
2003 2004 2005 2006 2007 2008
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 .
40
20
-40 SAIL
-60
-80
-100
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 .
20000
18000
16000
14000
12000
10000 TATA STEEL
8000
SAIL
6000
4000
2000
0
2002 2003 2004 2005 2006 2007 2008 2009
Loans and
Advances 2003 2004 2005 2006 2007 2008
TATA Steel 602.03 489.51 1082.44 894.09 2751.26 3012.41
SAIL 263 395.74 327.83 285.75 323.92 403.28
3500
3000
2500
2000
Tata Steel
1500
SAIL
1000
500
0
2002 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 .
25,000.00
20,000.00
5,000.00 SAIL
0.00
2003 2004 2005 2006 2007 2008 2009
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 :
7000
6000
5000
4000 Tata Steel Ltd
3000 Jindal Steel & Alloys Ltd.
2000
SAIL
1000
0
2002 2003 2004 2005 2006 2007 2008 2009
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 :
40,000.00
35,000.00
30,000.00
25,000.00 Tata Steel
20,000.00
Jindal Steel
15,000.00
SAIL
10,000.00
5,000.00
0.00
2004 2005 2006 2007 2008
TATA Steel sales been growing , but the sales of SAIL are doing much better in comparison .
Raw Materials Consumed :
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 :
Dividend Rate % :
Tata Steel Ltd Jindal Steel SAIL
1989 30 0 0
1990 30 0 0
1991 31 0 0
1992 35 0 2
1993 25 0 2
1994 30 0 4
1995 35 0 6
1996 45 0 6.6
1997 45 0 2.5
1998 40 0 1
1999 40 0 0
2000 40 0 0
2001 50 0 0
2002 40 0 0
2003 80 0 0
2004 100 0 0
2005 130 0 33
2006 130 0 20
2007 155 0 31
2008 160 0 37
180
160
140
120
100 Tata Steel Ltd
80 Jindal Steel
60 SAIL
40
20
0
1985 1990 1995 2000 2005 2010
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.
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 :
0.45000
0.40000
0.35000
0.30000
0.25000
Tata Steel
0.20000
0.15000 SAIL
0.10000
0.05000
0.00000
2002 2003 2004 2005 2006 2007 2008 2009
8000
7000
6000
5000
TATA Steel
4000
3000 Jindal
2000 SAIL
1000
0
-10002002 2003 2004 2005 2006 2007 2008 2009
20
18
16
14
12
10
8 Tata Steel
6
4
2
0
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
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 :
60
50
40
TATA Steel
30
Jindal Steel
20
10 SAIL
0
2003 2004 2005 2006 2007 2008 2009
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.
70
60
50
40 TATA Steel
30 Jindal Steel
20 SAIL
10
0
2003 2004 2005 2006 2007 2008 2009
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 .
3.5
3
2.5
2 Tata Steel
1.5 Jindal Steel
1
0.5 Sail
0
2003 2004 2005 2006 2007 2008 2009
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 :
3
Tata
2
Jindal
1
SAIL
0
2003 2004 2005 2006 2007 2008 2009
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 .
80
60
40 TATA Steel
20 SAIL
0
2004 2005 2006 2007 2008
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 .
120
100
80 Debtors (days) TATA Steel
60 Creditors (days) TATA Steel
40
Debtors (days) SAIL
20
0 Creditors (days) SAIL
2002 2003 2004 2005 2006 2007 2008 2009
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 .
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:
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:
Recruitment
• Campus recruitment
• Employee surveys
Leadership development
• IL2 IL3
Training and Development
• Faculty support
Industrial Relations
• Affiliation of employees to these unions has been on a constant decline over the
years and stood at ----------- in the year 2008.
• Inclusive growth – Sports days, social events, contests for children, education
opportunities, celebrating festivals together
Tat Steel believes that the primary purpose of the business is to improve the quality of
life of people.
The Company‟s CSR initiatives are broadly categorized into the following divisions:
• Pollution Control
• Afforestation
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:
• Handling hazardous wastes as per Hazardous Waste Management and Handling Rules
1989/2000 requirements
• Waste water from the steel making process treated with best available physio-
chemical 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.
3. TSL believes that they will truly succeed when they sustain their environmental
achievement and are valued by the communities in which they work.
• 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.
• 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
• Unscientific Mining
• Low Productivity
OPPURTUNITY
THREATS
PROPOSED STRATEGY
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!