KIRLOSKAR INSTITUTE OF ADVANCED MAANGEMENT STUDIES

TATA STEEL
CORPORATE FINANCE
12/20/2011

Submitted To Prof. T Vishvanathan

Submitted By:Akash Jain Anand Murarka Anish Wadhwa 5 7 10

Chandrachur Palchaudhri 30 Khushboo Vijayvargiya 47

TATA GROUP
It was when Jamsetji Tata gave shape to his vision of nation building by forming what was to become the Tata Group in 1868, he had envisaged India as an independent strength politically, economically and socially. In order to become a force that the world has to reckon with, the Tata Group has always ventured into path breaking territory and pioneered developments in industries of national importance. The Tata name has been respected in India for 140 years for its adherence to strong values and business ethics. The Tata Group of Companies has always believed strongly in the concept of collaborative growth, and this vision has seen it emerge as one of India's and the world's most respected and successful business conglomerates. The Tata Group has traced a route of growth that spans through six continents and embraces diverse cultures. The total revenue of Tata companies, taken together, was 67.4 billion USD (around Rs319, 534 crore) in 2009-10, with 57 per cent of this coming from business outside India. In the face of trying economic challenges in recent times, the Tata Group has steered Indias ascent in the global map through its unwavering focus on sustainable development. Over 395,000 people worldwide are currently employed in the seven business sectors in which the Tata Group Companies operate. It is the largest employer in India in the Private Sector and continues to lead with the same commitment towards social and community responsibilities that it has shown in the past. The Tata Group of Companies has business operations (114 companies and subsidiaries) in seven defined sectors Materials, Engineering, Information Technology and Communications, Energy, Services, Consumer Products and Chemicals. Tata Steel with its acquisition of Corus has secured a place among the top ten steel manufacturers in the world and it is the Tata Groups flagship Company. Other Group Companies in the different sectors are Tata Motors, Tata Consultancy Services (TCS), Tata Communications, Tata Power, Indian Hotels, Tata Global Beverages and Tata Chemicals. Tata Motors is Indias largest automobile company by revenue and is among the top five commercial vehicle manufacturers in the world. Jaguar and Landrover are now part of Tata Motors portfolio. Tata Consultancy Services (TCS) is an integrated software solutions provider with delivery centres in more than 18 countries. It ranked fifth overall, and topped the list for IT services. Tata Power has pioneered hydro-power generation in India and is the largest power generator (production capacity of 2300 MW) in India in the private sector. Indian Hotels Company (Taj Hotels, resorts and palaces) happens to be the leading chain of hotels in India and one of the largest hospitality groups in Asia. It has a presence in 12 countries in 5 continents. Tata Global Beverages (formerly Tata Tea), with its major acquisitions like Tetley and Good Earth is at present the second largest global branded tea operation. Business excellence involves a journey where the experience itself is the destination. Just 13 of the 100-odd Tata companies have made this journey their own and gone on to win the coveted JRD QV Award.

Our Values
The Tata Group has always been driven by five core values: Integrity. We must conduct our business fairly, with honesty and transparency. Everything we do must stand the test of public scrutiny. Understanding. We must be caring, show respect, compassion and humanity for our colleagues and customers around the world, and always work for the benefit of the communities we serve. Excellence. We must constantly strive to achieve the highest possible standards in our day-to-day work and in the quality of the goods and services we provide. Unity. We must work cohesively with our colleagues across the group and with our customers and partners around the world, building strong relationships based on tolerance, understanding and mutual cooperation. Responsibility. We must be responsible and responsive to the countries, communities and environments in which we work, always ensuring that what comes from the people goes back to the people many times over.

TATA IRON & STEEL COMPANY LIMITED (TISCO) VISION

Our vision is to be the global steel industry benchmark for value creation and corporate citizenship. We will achieve our vision through: Our People By fostering teamwork, 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. Our Conduct By providing a safe workplace, respecting the environment, caring for our communities and demonstrating high ethical standards.

Goals The Tata Steel Group is proud of its performance culture. We are committed to the pursuit of challenging targets, and to safety, environmental protection, continuous improvement, openness and social responsibility in every aspect of our business around the world. TISCO has set for itself four key corporate goals to be achieved by 2012: Value creation: Deliver a 30% return on invested capital (ROIC) Safety: Achieve an industry leadership position by driving down our lost time injury frequency rate (LTIF) to a maximum of 0.4 incidents per million hours worked Environment: Reduce carbon dioxide (CO2) emissions to less than 1.9 tonnes per tonne of crude steel (t/tls)1 People: Rank as an employer of choice in the top quartile across all industries

The company was established in Jamshedpur, India, in 1907. Tata Steel is headquartered at Jamshedpur in Jharkhand, India. In the past few years, Tata Steel has invested in Corus (UK, renamed Tata Steel Europe), Millennium Steel (renamed Tata Steel Thailand) and NatSteel Holdings (Singapore). With these, the company has created a manufacturing and marketing network in Europe, South East Asia and the Pacific-rim countries. It has the capacity to produce over 30 million tonnes of crude steel every year. Tata Steel has also set up joint ventures for the development of limestone mines in Thailand, the procurement of low-ash coal from Australia and coking coal from Mozambique, and the setting up of a deep-sea port in Orissa in India. The company is exploring opportunities in the titanium dioxide business in Tamil Nadu, India, and will soon be producing high carbon ferrochrome from its plant in South Africa. The company produces crude steel and basic steel products, and makes steel for building and construction applications through Tata BlueScope Steel, its joint venture with Australia's BlueScope Steel.

RECENT UPDATE
Mr Cyrus P Mistry has been appointed as deputy chairman of Tata sons, who will work with Mr Ratan N Tata over the next year and take over from him when Mr. Tata retires in December 2012.

ACHIEVEMENTS
Tata Steel has received the Thomson Reuters Innovation Award in the hi-tech corporate category. Since 2007, Thomson Reuters has been presenting the Thomson Reuters Innovation Awards to recognise innovation and entrepreneurship in India. The award recognises the most innovative academic institutions and commercial enterprises headquartered in India for their spirit of innovation in R&D as it relates to all aspects of patent publications in India.

The Ministry of Labour and Employment, Government of India, conferred the prestigious Prime Ministers Shram Awards for the years 2008, 2009 and 2010, on twenty-one employees of Tata Steel at Vigyan Bhavan, New Delhi, on October 13, 2011. The Prime Ministers Shram Awards were instituted in the year 1985 for the public sector. Its objective is to recognise outstanding contributions made by workmen as defined in the Industrial Dispute Act, 1947. This award was extended to the private sector in 2004.

Tata Steel, in a move to reaffirm its commitment to its longstanding values, collaborated with the OVAL Trust to formally dedicate the Charkha to the nation, on the occasion of the birth anniversary of Mahatma Gandhi, October 2, 2011. Tata Steel bagged the first prize in heavy industry category at Udyog Mela 2011, Ranchi. It has bagged this prize consecutively for the second time. Tata steel bagged the two most prestigious awards at the MMMM exhibition 2011 (Minerals Metals Metallurgy and Materials ) held at New Delhi between February 11th to 14th 2011. Tata Steel has been named in Fortune magazine's 2011 list of Worlds Most Admired Companies for the third consecutive year. The annual survey, conducted by Fortune magazine and Hay Group, a global management consulting firm, is given to top executives, directors and financial analysts, to identify the companies that enjoy the strongest reputations within their industries and across industries. Tata Steel has been ranked sixth in the Industry-Metals category; the only company from India to have achieved this prestigious feat. Tata Steel was conferred the Good Corporate Citizen Award for the year 2011 by the Bombay Chamber of Commerce and Industry (BCCI) in a ceremony at Mumbai, yesterday as part its 176th Foundation Day. The award was presented to Tata Steel for its outstanding service to the civic community and contribution towards the betterment of the society in the 'large corporate' category. This is the first time that Tata Steel has won this prestigious award from BCCI.

Subsidiaries of TISCO
Tata Steel Europe: Europes second largest steel maker with major operations in the UK and continental Europe, Tata Steel Europe produces long and strip products for the construction, automotive, packaging, engineering and other markets worldwide. (www.tatasteeleurope.com/en/) NatSteel Holdings: A leading supplier of premium steel products for the construction industry, NatSteel has operations in seven countries in Asia. (www.natsteel.com.sg) Tata Steel Thailand: A major steel producer in Thailand, the company produces steel for the construction industry. Tinplate Company of India: Industry leader in India in the manufacture of tinning line products, including electrolytic tinplate, tin-free steel and cold-rolled products. (www.tatatinplate.com/) Tayo Rolls: Indias leading roll manufacturer and supplier, the company produces rolls for integrated steel plants, power plants, the paper, textile and food processing sectors, and the government mint. (www.tayo.co.in/) Tata Ryerson: Offers hot- and cold-rolled flat steel products in customised sizes and quantities. Tata Refractories: Produces high-alumina, basic, dolomite, silica and monolithic refractories and offers design, procurement and re-lining services. (www.tataref.com) Tata Sponge Iron: Produces sponge iron lumps and fines. (www.tatasponge.com/) Tata Metaliks: Manufactures and sells foundry-grade pig iron. (www.tatametaliks.com) Tata Pigments: Produces oxides of iron, dry cement paint, exterior emulsion paint and distemper. Its products are used in paints, emulsions, cement floors and plastics. Jamshedpur Injection Powder: Manufactures carbide de-sulphurising compounds used for the production of low-sulphur, high-quality steel. (www.jamipol.com) TM International Logistics: Provides material handling and port operation services at the Haldia and Paradip ports in India; also has freight-forwarding and chartering services. (www.tmilltd.com) mjunction services: A 50:50 joint venture involving Steel Authority of India and Tata Steel, it is India's largest e-commerce company and the world's largest e-marketplace for steel. (www.mjunction.in) TRF: 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. (www.trfltd.com) Jamshedpur Utility and Service Company: Re-engineered out of Tata Steel's town services, JUSCO provides municipal and civic services for townships. (www.juscoltd.com) Indian Steel and Wire Products: Recently acquired by Tata Steel, ISWP has a wire unit and a steel roll manufacturing unit. Tata BlueScope Steel: A joint venture with BlueScope Steel, Australia, the company offers a comprehensive range of branded steel products for building and construction applications. (www.tatabluescopesteel.com) Dhamra Port Company: A joint venture between Larsen & Toubro and Tata Steel to build a deep-draft (18 metres) all-weather port in Orissa on the east coast of India. (www.dhamraport.com)

 Hooghly Met Coke & Power Company: A joint venture with the West Bengal Industrial Development Corporation, producing met coke and electric power. (www.hooghlymetcoke.com) Lanka Special Steel: A Sri Lankan unit that manufactures galvanised wires. Sila Eastern Company: Established to develop limestone mines in Thailand, mainly for captive use. Tata Steel KZN: Setting up a high carbon ferrochrome plant in South Africa with an annual production capacity of 135,000 tonnes. Tata NYK: A 50:50 joint venture with Nippon Yusen Kabushiki Kaisha (NYK Line) to set up a shipping company to handle dry-bulk and break-bulk cargo. Tata Steel, a company synonymous with values trust, transparency and total community care today, announced the launch of a corporate campaign 'Values stronger than steel' (VSTS). The campaign is aimed at reaching out to the Indian citizen to reinforce the image of the company as a cutting-edge, global steel major which is dedicated towards social and economic sustainability, green technology and community empowerment. The core of the campaign is to showcase the organisations involvement and commitment beyond steel making, while embodying its overarching 'value system'. The campaign presents the companys very own achievers who have paved their own way to success and recognition, such as Mark Denys, chief, R&D; Bachendri Pal, head, Tata Steel Adventure Foundation; Deepika Kumari, the young talent in archery; empowered members of the Tejaswini project like Asha Hansda, amongst others. Everyone has a story to tell and they are the brand ambassadors for the campaign

CAPACITY EXPANSION
TATA STEEL has set up an ambitious target to achieve a capacity of 100million tonnes by 2015. Director Balasubramanian Muthuraman stated that of the 100million tonnes, TATA Steel is planning a 50-50 balance between greenfield facilities and acquisitions. The series of acquisitions have already added upto a 21.4million tonne, which includes Corus production at 18.2million tonne, Natsteel production at 2million tonne and Millennium Steel production at 1.2million tonne. Tata is looking to add another 29million tonnes through the acquisition route. Tata Steel has lined up a series of greenfield projects in India and Outside which includes: 6 million tonnes plant in Orissa (India). 12 million tonnes plant in Jharkhand (India). 5 million tonnes plant in Chhattisghar (India). 3 million tonnes plant in Iran. 2.4 million tonnes plant in Bangladesh. 5 million tonnes capacity expansion in Jamshedpur (India). 4.5 million tonnes plant in Vietnam.

STEEL SECTOR IN INDIA and its GROWTH PROSPECTS Background

The establishment of Tata Iron and Steel Company (TISCO) in 1907 was the starting point of modern Indian steel industry. Afterwards a few more steel companies were established namely Mysore Iron and Steel Company, (later renamed Vivesvaraya Iron & Steel Ltd) in 1923; Steel Corporation of Bengal (later renamed Martin Burn Ltd and Indian Iron & Steel Ltd) in 1923; and Steel Corporation of Bengal (later renamed Martin Burn Ltd and Indian Iron and Steel Co) in 1939. All these companies were in the private sector. Till early 1990s, when economic liberalization reforms were introduced, the steel industry continued to be under controlled regime, which largely constituted regulations such as large plant capacities were reserved only for public sector under capacity control measures; price regulation; for additional capacity creation producers had to take license from the government; foreign investment was restricted; and there were restrictions on imports as well as exports. Steel production in India has increased by a compounded annual growth rate (CAGR) of 8 percent over the period 2002-03 to 2006-07. Going forward, growth in India is projected to be higher than the world average, as the per capita consumption of steel in India, at around 46 kg, is well below the world average (150 kg) and that of developed countries (400 kg). Indian demand is projected to rise to 200 million tonnes by 2015. Given the strong demand scenario, most global steel players are into a massive capacity expansion mode, either through brownfield or greenfield route. By 2012, the steel production capacity in India is expected to touch 124 million tonnes and 275 million tonnes by 2020. While greenfield projects are slated to add 28.7 million tonnes, brownfield expansions are estimated to add 40.5 million tonnes to the existing capacity of 55 million tonnes. Broadly there are two types of producers in India viz. integrated producers and secondary producers. Integrated steel producers have traditionally integrated steel units have captive plants for iron ore and coke, which are main inputs to these units. Currently there are three main integrated producers of steel namely Steel Authority of India Limited (SAIL), Tata Iron and Steel Co Ltd (TISCO) and Rashtriya Ispat Nigam Ltd (RINL). SAIL dominates amongst the three owing to its large steel production capacity plant size. Secondary producers use steel scrap or sponge iron/direct reduced iron (DRI) or hot briquetted iron (HBI). It comprises mainly of Electric Arc Furnace (EAF) and Induction Furnace (IF) units, apart from other manufacturing units like the independent hot and cold rolling units, rerolling units, galvanizing and tin plating units, sponge iron producers, pig iron producers, etc. Secondary producers include Essar Steel Ltd., Ispat Industries Ltd., and JSW Steel Ltd. There are 120 sponge iron producers; 650 mini blast furnaces, electric arc furnaces, induction furnaces and energy optimizing furnaces; and 1,200 re-rollers in India.
India is currently the fifth largest steel-producing nation in the world with production of over 54 million tonnes (MT). However, it has a very low per capita consumption of steel of around 46 kgs as against an average of 198 kgs of the world. This wide gap in relative steel

consumption indicates that the potential ahead for India to raise its steel consumption is high. Being a core sector, steel industry tracks the overall economic growth in the long term. Also, steel demand, being derived from other sectors like automobiles, consumer durables and infrastructure, its fortune is dependent on the growth of these user industries. The Indian steel sector enjoys advantages of domestic availability of raw materials and cheap labour. Iron ore is also available in abundant quantities. This provides major cost advantage to the domestic steel industry, with companies like Tata Steel being one of the lowest cost producers in the world However, Indian steel companies have to bear additional costs pertaining to capital equipment, power and inefficiencies (low per employee productivity). This has resulted in the erosion of the edge they would have otherwise enjoyed due to availability of cheap labour and raw materials. The government has reinstated basic customs duty on steel imports in order to protect India from dumping of cheap steel products. It has also provided series of benefits to auto, housing and real estate sector in order to counter the slowdown in the economy.

BUSINESS RISK ANALYSIS

Strong Position In the Indian Market Capacity expansion is a key strategy for Tata Steel in India, where it derives much of its competitive advantage as a low cost producer from its access to raw materials and a skilled workforce at a relatively low cost of labour. Work is currently under way to increase steelmaking capacity at Jamshedpur to 9.7mtpa by 2012. Looking further into the future, the Company plans to continue to increase its capacity significantly through greenfield developments.

Enhanced Competitiveness through Continuous Improvement. The Company undertook a series of measures to counter recessionary pressures in FY09 and FY10 to reduce cost KEY INITIATIVES One Company Operating Model In the process of transforming its operations to directly align its marketing, sales and distribution teams with major industries and sectors

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Transforming its supply chain in Europe

Product Development and Marketing Through research and development initiatives working to capture market share in a number of potential high growth areas Customer First strategy

Cost Saving Initiatives Implemented, and plans to continue to implement, strategic cost-saving measures to improve the long-term competitiveness of its business. Fit for the Future initiatives for its European operations.

Strong Retail Management Works closely with retail and wholesale customers to ensure value by scheduling deliveries on a just-in-time basis. Been able to reduce customers inventory stock and increase their margins.

Raw Material Security

Investments In Mineral Assets Improving Raw Material Security

India: Captive mines _ Significant amounts of raw material requirements for FY10 sourced from leased captive mines _ Iron Ore: 100% _ Coal: 49% _ Significant amount of ferro alloy requirements

NML (Holdco) _ Canada _ TS Equity Stake: 27%

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NML JV (iron ore) _ TS Equity Stake: 80% _ Status: Initiated project development _ Offtake rights: 100% _ TSL has an exclusive right to negotiate and settle a proposed transaction in respect of NMLs LabMag Project

TSCI _ Ivory Coast _ Partner: Sodemi _ TS Equity Stake: 85% _ Status: Pre-feasibility

RML (Holdco) _ Australia _ TS Equity Stake: ~24%

RivMoz _ Partner: RML _ TS Equity Stake: 35% _ Status: Project development commenced _ Coking coal _ Offtake rights: 40% of the coking Coal

CDJV _ Australia

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_ Partners: Vale, JFE, NSC,Posco _ TS Equity Stake: 5% _ Offtake rights: 5 to 20% _ Coking coal

Diversified Product Offering: Branding and Positioning

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Control over Logistics

100% subsidiary of Tata Steel since July 2009. Five processing units located across India with a processing capacity of ~2 million tonnes per annum. Also engaged in the business of high-end plate fabrication for major equipment manufacturers including Caterpillar and JBP Group.

Tata Bluescope Steel Limited (TBSL) a 50:50 JV with Bluescope Steel Limited Engaged in the business of manufacturing building products & solutions from metal & color coated steel. Existing operations include three facilities with a total installed capacity of 136,000 TPA in Pune, Bhiwandi and Chennai, to manufactureproducts for the Indian construction industry Presently implementing a Greenfield project for setting up of a metal coating (capacity of 250,000 tpa) and color coating (150,000 tpa) facilities at Jamshedpur, to be operational by April 2011.

The project involves capacity expansion to 390,000 Tata Steel holds ~45% equity. TCIL is commissioning Cold Roll Mill in 2011.

Steelworks facility in Tarapur, Maharashtra

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Wire drawing plants at Indore and Bengaluru Caters to the Indian construction and automotive segments for products such as springs, pre-stressed concrete and conductor

Control over Logistics

A 50:50 JV between Tata Steel and Nippon Yusen Kabushiki Kaisha (NYK Line), Japan, currently operating 12 chartered and 2 owned vessels. Focused on shipping dry bulk and break bulk cargo Trial operations commenced in September 2010. Expected to be capable of handling 13 mtpa of coking coal and 6 mtpa of iron ore. Partnership between Tata Steel, NYK and Martrade. Engaged in the business of port operations, cargo handling and other related Services.

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SWOT ANALYSIS

Strengths Strong market position Tata Steel Group, an integrated steel company, is the world's tenth largest steel company with capacity of 27.2 million tonnes per annum. It is the world's second most geographically diversified steel producer, with operations in 26 countries and commercial presence in more than 50 countries. Tata Steel India is the largest producer of manganese alloys in India with a market share of approximately 14%. Tata Steel Europe is Europe's second largest steel producer with a crude steel production of more than 14 million tonnes. The group's strong market position gives it advantage of scale and increases its bargaining power.

Diversified end markets Tata Steel Group offers a diversified product portfolio comprising flat and long steel products, agricultural implements, bearings and auto assemblies, tubes, and wires.

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The steel products manufactured by them are used by companies operating in the following industries: aerospace, automotive, construction, consumer goods, energy and power, packaging, rail, security and defense, shipbuilding, and engineering. Diversified end markets avoid dependence of the company on a single segment for revenues, and shield the company from downturn in one or few segments.

Integrated steel operations in India The steel business of Tata Steel Group in India is integrated. Majority of its raw material requirements are provided through its mining operations in the country. The iron ore units owned by Tata Steel India are located in Noamundi, Joda, Katamandi, and Khondbond in the states of Jharkhand and Orissa.The company owns two collieries in West Bokaro and Jharia. These captive mines shield the group from fluctuations in raw material prices. The integrated steel operations in India made the group one of the cost-effective steel manufacturers in the country.The Indian operations being one of the most competitive assets in the groups business portfolio offer a competitive advantage with a leading market position in the country. Strong research and development (R&D) capabilities Tata Steel Group operates five research centers : the Ijmuiden Technology Centre (the Netherlands), the Swindon Technology Centre (the UK), the Teesside Technology Centre (the UK), the Automotive Engineering Group (the UK), and the Jamshedpur R&D Centre (India).they are currently working on various projects that include economic mineral beneficiation ,new generation high strength steels, advanced coatings developments, production of Ferro-chrome with less energy, hydrogen harvesting, developing state-of-the-art thin film photovoltaic systems, and development of efficient coolants and lubricants for rolling. The group is also working on reducing CO2 emissions across its operations. The company's strong R&D capabilities provide it with a competitive advantage and help it to improve the efficiency of its products and processes. Weaknesses

Dependence on third party suppliers for raw material in Europe The raw material self-sufficiency for the Tata Steel Group is currently at 25%. The group plans to increase self-sufficiency of to 50% in the medium to long term. The iron ore is imported mainly from Australia, Canada, South Africa, and South America, and the coal from Australia, Canada, and the US. The European business is susceptible to the fluctuations in the iron and coal prices. Therefore, dependence on third party suppliers for raw material in Europe increases the business risk for the group.

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Dependence on Europe Europe is the key market for Tata Steel Group. In FY2010, the company generated about 64% of its revenues from Europe. Minor changes in price levels, periodic demand growth, or currency rates in specific market areas and regions can affect their competitive position and financial performance. The companys business is also exposed to many adverse changes in the policies and regulations related to the steel sector in the region. Therefore, dependence on Europe for majority of its revenues increases business risk for the company.

Opportunities

Expansion in India Indian operations are one of the most competitive assets in the global steel industry. The group is focusing on to expand the Jamshedpur works capacity to 9.7 million tonnes per annum (mtpa) of crude steel by 201112.This additional capacity will allow the company to use its existing resources more efficiently. The expansion at Jamshedpur will enable Tata Steel Group to reduce the operating costs over a large volume of production and strengthen its market share in the flat products segment.The group's expansion of Indian operations would help it to generate incremental revenues and reduce its dependence on Europe.

Increasing raw material security The steel production in India is expected to grow to over 120 million tonnes by 2015. In January 2010, Tata Steel Group signed a memorandum of understanding with NMDC for exploring possibilities of a strategic alliance to enhance iron ore resources. The two companies will ensure smooth supply of raw materials for future capacity additions explore possibilities of entering into joint ventures for the purpose of acquisition, exploration, and development of mines, extraction and processing of minerals, setting up integrated steel plants, and any other business of mutual interest. These joint ventures will strengthen the long-term raw material security for Tata Steel India. The joint venture with Nippon Steel Corporation will address the localization needs of Indian automotive customers for high-grade coldrolled steel sheet and meet the needs of the growing Indian automotive industry.. According to the Society of Indian Automobile Manufacturers, annual car sales are projected to increase up to five million vehicles by 2015 and more than nine million by 2020. The joint venture will enable the Tata Steel Group to capitalize on this new opportunity of increased demand for automotive in India. Positive outlook for the global steel market The global steel market is expected to grow strongly over the next few years. According to Data monitor, the global steel market had total revenue of $655.6 billion in 2009, representing a compound annual growth rate (CAGR) of 3% for the period spanning 200509. The European and Asia-Pacific markets will

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grow with CAGRs of 20.4% and 13.9%, respectively, over the same period, to reach respective values of $316.7 billion and $871.3 billion in 2014. Tata Steel Group being one of the worlds largest steel company is well positioned to benefit from the growth in this market.

Threats

Intense competition The global steel industry is cyclical, highly competitive, and has historically been characterized by over capacity. The company competes with several steel manufacturers ranging from large diversified enterprises to smaller companies specializing in particular products in India and internationally. The competition is based on quality of products, services and delivery capabilities, price, manufacturing costs, and manufacturing capacity. Its major competitors include Arcelor Mittal, Nippon Steel, Steel Authority of India, United States Steel, and ThyssenKrupp. Intense competition in the industry could lead to loss of market share and put pressure on the group's margins.

Environmental regulations The business of Tata Steel Group is subject to extensive environmental regulatory requirements relating to occupational safety and health, environmental protection, pollution prevention, industrial waste disposal, and management of potentially toxic substances. With rising awareness of the damage to the environment caused by industry, especially regarding global warming, regulatory standards have been continuously tightened in recent years. One of the most important developments in this area has been the introduction of the Kyoto Protocol for the reduction of greenhouse gases. Increasing pressures from the regulatory authorities is expected to increase the compliance cost of Tata Steel Group.

Economic or industry downturn Downturn or weakness in the economy in general or in key industries may adversely affect Tata Steel Groups customers, which may cause the demand for the companys products and services to decline Product demand in Tata Steel Groups customers end markets is based on numerous factors such as interest rates, general economic conditions, consumer confidence, and other factors beyond the companys control. Downturn in demand from industries the company serves, or a decrease in the margins that Tata Steel Group can realize from sales of its products to customers in any of these industries, could adversely affect the companys financial results.

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TATA STEEL CORPORATE SOCIAL RESPONSIBILITY POLICY

Tata Steel believes that the primary purpose of a business is to improve the quality of life of people. Tata Steel will volunteer its resources, to the extent it can reasonably afford, to sustain and improve a healthy and prosperous environment and to improve the quality of life of the people of the areas in which it operates.

Addressing gender issues

A small percentage of Tata Steels workforce is female at 5%. This rate is higher among officers. The Company does not differentiate between male and female employees in terms of remuneration: for the same work or work of similar nature, male and female employees are paid equally. Remuneration is linked to responsibility levels and performance. The Company, thus encourages its female employees to advance their careers with dedicated initiatives both to promote the personal development and career advancement of female employees and to facilitate the combination of career with family. For example, 15 days of additional leave is given to female executives with children aged under five, to enable them to take care of their children in case of sickness. The Women Empowerment Cell (WEC) was founded in 2006 in order to examine and address the issues and concerns of female employees. WEC strives to ensure that female employees in the Company do not miss out on growth opportunities available. in todays global scenario.

Tejaswini is one such programme aimed at empowering female employees and providing development opportunities to them. Women employees who were would have been declared surplus due to Automation have been trained in skills such as mobile equipment operation and maintenance, welding and gas cutting, fitting and rigging and other maintenance related jobs. Continuous support and guidance from executives and the Union has gradually brought the realisation in these women that have the power to change their lives.

Main features of Tejaswini

Today Tejaswinis are working shoulder to shoulder with their male counterparts in the areas of maintenance and mobile equipment operations; for example, locomotives are now driven by female

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operators, a women operator manages one of the heaviest bulldozers to move raw materials to the steel plant, etc. This empowerment has lifted the women from the unskilled levels of the organisation to the core working group of skilled workers. Tata Steel in the past few years is the introduction of a Female Trade Apprentice course. Selected candidates are trained in various trades such as fitter, machinist (metal cutting) and electrician. On successfully completing the course, these young women are deputed to the various departments in the Works in Cluster-C, which is equivalent to a Junior Technician post.

Educational services

A number of Tata Steels activities are designed to support these goals:

- Early Childhood Education: Interventions in early childhood education are vital preparatory grounds to formal schooling in both rural and urban areas. In the urban areas, out of about 570 students who were enrolled in 12 centres, Tata Steel successfully integrated more than 380 students into formal schools. In rural areas the Company had a 100% success rate last year with 550 children from 22 centres moving into formal education. - Camp School: To help underprivileged girls enter the mainstream, Tata Steel initiated a camp school programme with the help of Jharkhand Education Project. The nine-month intensive learning course is offered to students aged 9-14 to complete their education up to 5th standard and allow them to qualify for admission to class VI. In 2008-09, 200 girls enrolled in the two camp schools.- Schools: The Company supports many schools in its areas of operation. For example twelve primary schools have been identified for support near Dhamra Port in 2008-09. Twenty-four teachers will provide academic support to 480 students.

Customer satisfaction and building relationships

The key processes for determining customer satisfaction and building relationships for retention are undertaken through the Manage Customer Accounts and Measure Customer Satisfaction processes. The determination of customer satisfaction is established by conducting annual surveys, using a segmentwise approach, with products/service attributes as parameters. The surveys are conducted by external agencies (M/s A C Nielsen, TNS for Year 2008). The overall customer satisfaction is captured through a designed

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questionnaire - both quantitative and qualitative - during the field survey. The satisfaction index is a relative score of the Companys overall score over the nearest competitor.

In 2008, the CSI Index got impacted due to lower score in Delivery attributes. Due to the downturn, customers were more frequently revising their monthly indent and in turn the Company had to reschedule its despatch plans more often. Owing to this, the overall delivery performance took a hit. In contrast, the score was higher in earlier years when due to higher demand, availability was an issue mm. at the market place and Tata Steel held its prices. Further on, corrective action was taken by launching SFS initiative with important customers for improving the delivery compliance.

SOCIAL RESPONSIBILITY INITIATIVES IN PROCUREMENT One of the important business drivers is procurement of supplies and services from local vendors. The proportionspending on locally based vendors (ie vendors with an address in Jharkhand state) during 200809 was approximately 25% of Tata Steels domestic buy volume. benefit from the economic opportunities that its activities offer. Therefore local candidates for employment are considered favourably if they possess the required qualification, skills and talent. The Company's Affirmative Action Policy helps to ensure that scheduled castes and tribal communities are given equal opportunity in employment and supply chain opportunities. Up-skilling programmes help local communities to increase their employability.

Social responsibility in procurement

In accordance with its Affirmative Action Policy, Tata Steel encourages business entrepreneurs from socially disadvantaged communities and includes them in its supply chain on the basis of equal merit. As a social responsibility initiative, social organisations and small-scale local industries are given preference when placing orders, whenever they are able to supply the Company to a standard which otherwise would

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be serviced by larger units. For example, many items are sourced from local NGOs such as AIWC, Seva Sadan, School of Hope and Bal Vihar. In order to assist social organisations and small-scale industry units to supply the Company, raw materials are issued oun a conversion basis for the supply of finished goods, spares, and consumables. This reduces the burden of working capital management of these small units.

Only local vendors are engaged for the delivery of services, except for the tasks requiring a higher degree of specialisation and sophistication and a skill set which is not available locally.

TATA STEEL ENVIRONMENTAL POLICY

Tata Steels Environmental responsibilities are driven by our commitment to preserve the environment and are integral to the way we do business. 1. We are committed to the efficient use of natural resources & energy; reducing and preventing pollution; promoting waste avoidance and recycling measures and product stewardship. We will identify, assess and manage our environmental impact. We will regularly monitor, review & report publicly our environmental performance. We shall develop & rehabilitate abandoned sites through afforestation, landscaping and shall protect & preserve the biodiversity in the areas of our operations. We will enhance awareness, skill and competence of our employees and contractors so as to enable them to demonstrate their involvement, responsibilityl and accountability for sound environmental performance. 2. We are committed to continual improvement in our environmental performance. We will set objectives-targets, develop, implement and maintain management standards and systems, and go beyond compliance with relevant industry standards, legal and othecc7vb.'.pr requirements. 3. We will truly succeed when we sustain our environmental achievement and are valued by the communities in which we work.

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FINANCIAL OVERVIEW

Quarterly Performance

Indian Operations Third-quarter deliveries at 1.637 million tonnes were nearly 3% higher compared to the corresponding period of last year and about 1% lower than the second (September) quarter of FY11. The pricing environment in India in the third quarter was mixed, with prices for flat products being marginally lower compared to the second quarter, while prices for some long products increased European Operations Production and deliveries in the third quarter of FY11 were in line with the first half of FY11 Higher raw material prices and reduced apparent demand due to seasonal slowdown, amongst other factors, adversely affected margins Group-wide performance Volume of steel products sold declined marginally, and net sales expected to be flat compared to the second quarter. Operating results expected to decline somewhat in comparison to the second quarter due to increased raw material prices.

Accounting quality:

1.1 Basis of preparation of Financial Statements The Financial Statements have been prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis, except where specified otherwise and in case of significant uncertainties. GAAP comprises mandatory accounting standards prescribed by Companies (Accounting Standards) Amendment Rules, 2006, provisions of the Companies Act, 1956 and the guidelines issued by Securities and Exchange Board of India.

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1.2 Use of Estimates Estimates and Assumptions used in the preparation of the financial statements are based on managements evaluation of the relevant facts and circumstances as of date of the financial Statements, which may differ from the actual results at a subsequent date.

1.3 Fixed Assets

a. Fixed assets, except leasehold land, are stated at cost of acquisition or construction less accumulated depreciation. Cost includes the purchase price and all other attributable costs incurred for bringing the asset to its working condition for intended use. Leasehold land is valued at cost less amount written off.

b. Expenditure on New Projects and Expenditure during Construction: In case of new projects, expenditure incurred including interest on borrowings and financing costs of specific loans, prior to commencement of commercial production is being capitalized to the cost of assets.

1.4 Depreciation and Amortisation a. Freehold land is not depreciated.

b. Leasehold land is amortised over the period of lease.

c. Depreciation on Electrical Installation and Aircraft has been provided on written down value basis at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956 from the beginning of the month in which addition is made.

1.5 Investments a. Long term investments are stated at cost less permanent diminution in value, if any. b. Current investments mainly comprising investments in mutual funds are stated at cost, adjusted for diminution, if any.

1.6 Inventories

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a. Stores and spares, raw materials and components are valued at cost or net realizable value whichever is lower. Cost includes all cost of purchase and incidental expenses incurred in bringing the inventories to their present location and condition. Cost is ascertained using weighted average method.

b. Work-in-process including finished components and finished goods are valued at cost or realizable value whichever is lower. Cost includes direct materials, labour costs and a proportion of manufacturing overheads based on the normal operating capacity. Finished goods lying in the factory premises, branches and depots are valued inclusive of excise duty.

c. Materials-in-transit and materials in bonded warehouse is valued at actual cost upto the date of balance sheet. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

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PROFTABILITY RATIOS March11 38.11 33.82 34.2 23.16 13.48 14.22 13.54 March10 35.7 30.95 31.36 19.96 13.06 13.45 13.06 March09 37.68 33.27 33.69 21.09 15.01 21.10 15.21

Operating profit margin Profit before Interest and Tax Margin Gross profit Margin Net profit Margin Return On Capital Employed Return On net Worth Return On Long Term funds

1. Operating profit margin Formula: Significance: Analysis: Operating Profit/Sales Indicators of operating performance of business In the financial year 2009-10 , there is a decrease in operating profit margin even though it is evident that there is an increase in sales. This is because of a significant increase in total expenses. In the year 08-09 the total expenses amounted to Rs. 15182.34 Cr whereas in the year 09-10 the same thing amounted to Rs.16069.89 Cr, a sale of Rs.24315.77 Cr and Rs.25021.98 Cr respectively. The increase in expenditure is proportionately more than sales. The increase in the operating expenses is basically contributed by an increase in power and fuel cost, employee cost, manufacturing expenses. In the financial year 10-11 the sales grew with a considerate amount, pushing the operating profit margin upto an amount greater than what it was in 08-09. the expense incurred by the company in operations did not increase much as compared to the sales. The increase in raw material cost and other manufacturing expenses was not as evident as the increase in sales and thus the operating profit increased. The operating cost includes the cost of direct material, direct labor, and other overheads, viz, factory, office or selling, etc.

2. Gross Profit Margin Formula: Significance: Gross Profit/ Sales Indicator of basic profitability

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Analysis:

In the financial year 09-10, the contribution towards gross profit was mainly due to a phenomenal increase in the other incomes, from the previous financial year. Even though it was evident that sales increased but the total expenses increase was more than increase in sales. This lead to a decrease in the gross profit margin. In the financial year 10-11 the main contributor towards gross profit was sales. The other incomes decreased but the decrease was not by a considerable amount, so there was an increase in gross profit.

3. Net Profit margin Formula: Significance: Net Profit/Sales Indicator of overall profitability This ratio indicates the Net margin on a sale of Rs.100.This ratio helps in determining the efficiency with which affairs of the business are being managed. An increase in the ratio over the previous period indicates improvement in the operational efficiency of the business. The ratio is thus on effective measure to check the profitability of business. However, constant increase in the above ratio after year is a definite indication of improving conditions of the business. Analysis: Decrease in the net profit of the company was due to an increase in Interest and Depreciation. It was seen that even after a fall in EBT as compared to the previous financial year(08-09) the company had to make more payment towards Income Tax. The increase in depreciation can be attributed to an increase in the gross block of assets, whereas the interest increase may be due to pre-payment of loans. In the next financial year 10-11 the, unsecured loans have risen whereas the secured loans have fallen, which have attributed to a fall in interest payments, from the previous financial year.
TATA Steel 23.16

RATIO Net Profit Margin

Industry 11.09

SAIL 11.03

JSW 8.64

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Net Profit Margin

25 20 15 10 5 0 Industry TATA Steel SAIL JSW Net Profit Margin

4. Return On Capital Employed Formula: Operating Profit/capital Employed

Significance:

Overall profitability of the business on the total funds employed. If ROCE>Interest Rate, use of debt funds is justified. It is also called as Return on Capital Employed. It indicates the percentage of return on the total capital employed in the business. The term operating profit means profit before interest and tax and the term capital employed means sum-total of long term funds employed in the business. i.e. Share capital +Reserve and surplus + long term loans [non business assets +fictitious assets]

Analysis:

In the financial year 09-10 there was a significant drop in the Earning per share as compared to the previous year, whereas in the next financial year there was a jump in the earnings per share. The company's equity share capital increased in both the financial years, which lead to a fall in return on net worth in 09-10 and then an increase in return on net worth in the next financial year.

RATIO Return on Capital Employed

Industry 13.35

TATA Steel 13.48

SAIL 13.21

JSW 11.73

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Return on Capital Employed

14 13.5 13 12.5 12 11.5 11 10.5 Industry TATA Steel SAIL JSW Return on Capital Employed

5. Return On net Worth Formula: Significance: Analysis: Equity Earnings/Shareholders funds Indicatives profitability of Equity Funds/ Owner funds invested in the business In the financial year 09-10 there was a significant drop in the Earning per share as compared to the previous year, whereas in the next financial year there was a jump in the earnings per share. The company's equity share capital increased in both the financial years, which lead to a fall in return on net worth in 09-10 and then an increase in return on net worth in the next financial year.

LIQUITDITY AND SOLVENCY RATIO March11 1.78 1.45 .59 .58 March10 1.12 .76 .68 .68 March09 .91 .57 1.34 1.31

Current ratio Quick ratio Debt Equity ratio Long Term debt Equity Ratio

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6. Current ratio Formula: Significance: Current Assets/Current Liabilities Ability to repay short term commitments promptly. (i.e. Ideal Ratio 2:1). High ratio indicates existence of idle current assets. An indication of a company's ability to meet short-term debt obligations; the higher the ratio, the more liquid the company is. Current ratio is equal to current assets divided by current liabilities. If the current assets of a company are more than twice the current liabilities, then that company is generally considered to have good short-term financial strength. If current liabilities exceed current assets, then the company may have problems meeting its short-term obligations. Analysis: There is a constant increase in the current ratio, which can be attributed to a constant increase in current assets. Although the current liabilities have also been increasing but the amount is not that considerable as compared to an increase in current assets. The bases for the increase in current assets have been formed by an increase in loans and advances made by the company and the fixed deposits by the company. In the financial year 0910 we have noticed a fall in the inventory level, whereas in the year 10-11 inventory level has increased, in comparison to the financial year 08-09.

RATIO Current ratio

Industry 1.12

TATA Steel 1.78

SAIL 1.21

JSW 0.78

Current ratio
2 1.5 1 0.5 0 Industry TATA Steel SAIL JSW Current ratio

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INDUSTRY, TISCO AND COMPETITOR ANALYSIS:

The current ratio of industry is 1.12 i.e. more than 1, thus current assets are more than the current liabilities , however the TISCO current ratio is 1.78 which is more than the industry ratio .TISCO current ratio is highest among its competitors .Thus TISCO is in a better position than all its competitors in current scenario.

7. Quick ratio Formula: Significance: Quick assets/quick liabilities Ability to meet immediate liabilities. Ideal ratio is 1.33:1 Liquid ratio is also known as quick or Acid test ratio. Liquid assets refer to assets which are quickly convertible into cash. Current Assets other stock and prepaid expenses are considered as quick assets. The ideal liquid ratio accepted norm for liquid ratio 1. Analysis: The pattern shown by quick ratio is same as that shown by the Current ratio. This is because of a constant increase in all the current assets other than Inventories. This further signifies that the assets are as good as cash and can be converted into the same in a very short span of time.

8. Debt Equity ratio Formula: Significance: Debt/Equity Indicates the relationship between debt and equity. Ideal ratio is 2:1. Debt Equity ratio also known as External- Internal Equity Ratio is calculated to measure the relative claims of outsiders and the owners against the firms assets. Outsiders fund includes all debts/liabilities to outsiders, whether long term or short term or whatever in the form of debentures bonds, mortgages or bills. The shareholders fund consist of equity share capital, preference share capital , capital reserves, revenue reserves, and reserves representing accumulated profits and surpluses. Analysis: There is a constant decrease in the debt equity ratio. This is basically attributed because of an increase in the equity. Too much of debt was ruled out and therefore the debt equity ratio kept falling. There was also a marginal increase in equity.

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RATIO Debt Equity Ratio

Industry 0.86

TATA Steel 0.59

SAIL 0.54

JSW 0.74

Debt Equity Ratio

1 0.8 0.6 0.4 0.2 0 Industry TATA Steel SAIL JSW Debt Equity Ratio

Industry:

0.86

The trend in industry says that ratio should be approximately 86% or debts should be 86% of the equity. The ratio for TISCO is 59% which is safe as compared to that of the industry .

DEBT COVERAGE RATIO March11 8.52 March10 5.78 March09 7.35

Interest Coverage ratio

9. Interest Coverage ratio Formula: Significance: PBIT/ Interest Indicates ability to meet interest obligation of the current year, should generally be greater than 1. This ratio is used to test the debt servicing capacity of a firm.

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RATIO Industry Interest Coverage Ratio 7.42

TATA Steel 6.14

SAIL 15.93

JSW 4.44

Interest Coverage Ratio

20 15 10 5 0 Industry TATA Steel SAIL JSW Interest Coverage Ratio

1. Interest coverage Ratio (TISCO)

6.14

The TISCO is in position to give interest as much as 6.14 times. It does not mean the company is given the interest 6.14 times, but the profitability is so high that TISCO can give interest 6.14 times than they what actual interest is.

Industry:

7.42

The trend of the industry is about 7.42 times, whereas the position of company is 17.25% less than the capacity of the industry. The TISCO is having capacity of 6.14 times whereas the capacity of the industry is 7.42 times.
MANAGEMENT EFFICIENY RATIO March11 9.85 67.93 9.85 1.29 .38 March10 10.90 46.58 10.90 1.12 .40 March09 9.36 41.29 9.36 1.22 .43

Inventory Turnover Ratio Debtor Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio Total Asset Turnover Ratio

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10. Inventory Turnover Ratio Formula: Significance: Cost of Goods Sold/ Average Stock Indicates how fast inventory is used/sold. High T/O Ratio indicates fast moving material while low ratio may mean dead or excessive stock.

RATIO Industry Inventory Turnover Ratio 7.45

TATA Steel 9.85

SAIL 4.16

JSW 7.1

Inventory Turnover Ratio

15 10 5 0 Industry TATA Steel SAIL JSW Inventory Turnover Ratio

INVENTORY TURNOVER RATIO TATA IRON AND STEEL COMPANY Ltd. 9.85%

The latest data shows the current inventory turnover ratio to be 9.85 which means that the inventory is replaced with new supply about 9.85 times in a year.

Industry

7.45%

The inventory turnover ratio for the whole of engine producing industry is 7.45. So we can see that in comparison to TISCO the ratio is low and the inventory is replaced 7.45 times a year.

11. Debtor Turnover Ratio Formula: Significance: Credit Sales/average accounts receivable. Indicates the speed of collection of credit sales/debtors.

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RATIO

Industry

TATA Steel

SAIL

JSW

Debtors Turnover Ratio

35.58

67.93

11.13

32.95

Debtors Turnover Ratio

80 70 60 50 40 30 20 10 0 Industry TATA Steel SAIL JSW

Debtors Turnover Ratio

TISCO
The data for TISCO shows the debtors turnover ratio to be 67.93. This shows that whatever debt the company gives is recovered in nearly 5 days.

Industry
The debtors turnover ratio for the industry producing engines is pegged at 35.58 which mean that to recover a debt the company takes nearly 10 days. If we compare this to TISCO, TISCO takes 5 days to do so. 12. Fixed assets Turnover Ratio Formula: Significance:
Analysis:

Turnover/Net Fixed Assets Ability to generate sales per rupee of Fixed Assets.
In the financial year 09-10 there was a fall in the ratio which affects the profitability of the company in a negative way. The sharp increase in the ratio in the financial year 10-11 has contributed to the jump in the profit of the company.

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13. Total Asset Turnover Ratio Formula: Significance:

Analysis:

Turnover/Total Assets Ability to generate sales per rupee of Total Assets.

There is a constant decrease, this effects the profitability of the company as the company is not able to utilize its assets to the best possible manner.

CASH FLOW INDICATOR RATIO March11 19.04 81.05 8.2 March10 16.64 83.92 10.5 March09 27.15 76.03 2.97

Dividend yield ratio Cash Earning Retention ratio Price Earnings Ratio

14. Dividend yield ratio Formula: Significance:

Analysis:

Total Equity Dividend/No. of equity Shares Amount of profits distributed per share.
This ratio is particularly useful for those investors who are interested only in dividend income. The ratio is calculated by comparing the ratio of dividend per share with its market value.

15. Price Earnings Ratio Formula: Significance: Analysis: Market Price per Share/Earning per Share Indicates the relationship between Market Price and EPS and the shareholders perception of the company. It actually denotes the companys future prospect. As here we can see there is a prenominal increase followed not a huge decrease this shows a positive growth of the company in the future.

16. Earnings Per Share Formula: Significance: PAFESH/No. of Equity Shares Return or income per share, whether or not distributed as dividend. The earnings per share of the company helps in determining the market price of the equity shares of the company. A comparison of earning per share of the company with another will also help in deciding whether the

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equity share capital is being effectively used or not. It also helps in estimating the companys capacity to pay dividend to its equity shareholders.

RATIO Earnings Per Share

Industry 43.09

TATA Steel 71.58

SAIL 11.87

JSW 88.87

Earning Per Share

100 80 60 40 20 0 Industry TATA Steel SAIL JSW Earning Per Share

EPS of TISCO: 71.58 EPS of a company represents that

how much profit was generated on a per share basis which is 71 .58. this can be interpreted as comparatively higher return on per share. As the peer group company, SAIL provided much lower earnings per share this annual year.

EPS of INDUSTRY: 43.09

The earning per share of the industry as a whole is Rs43.09 per share and we can say, that TISCO is giving high earnings per share.

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COST OF CAPITAL

There are 3 kinds of capital in the TISCO 1. Equity Shares 2. Debts 3. Retained Earnings

1. COST OF EQUITY
The paid up capital is 959.41crores. And the formula for finding this is

Cost of Equity by Dividend approach

+ Growth Rate
Expected Dividend per share: 13.5 Growth Rate :12.5% Face Value: 344.20 Cost Of Equity Ke: 16. 45%

COST OF EQUITY BY CAPM APPROACH

Ke= Risk Free return+ (Beta(Market Return-Risk Free Return))

Risk free return is

1

8.33%1

www.rbi.org.in

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Beta And return of the company

0.72%2 30.89%3

So ke = 8.33 + (0.72(30.89-8.33)) The cost of capital is = 24.57% Book value of the company is crores

2. COST OF DEBTS

Total Debt = Rs. 30674.48 (in Crores) Total Interest Payment = Rs. 1686.27 (in Crores) Tax Rate= 30%

Total Interest Payment = Rs. 1686.27 (in Crores) Total Debt = Rs. 30674.48 (in Crores) Therefore, Ki = 5.50%

Tax Rate= 30% Kd = 3.85%

www.tatasteel.com Drawn from the data of 5last years

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COST OF RETAINED EARNING

The cost of retained earnings is same as of cost of equity. This is 16.5% Retained earnings is equal to Rs. 47307.02crore So KR is 47307.02* 0.1645 = 7782.03

TOTAL COST OF CAPITAL

Cost of equity Cost of Debt Cost of Retained Total = 11.55% = = = 16.45 3.85 16.45

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BIBLIOGRAPHY
1. http://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=balan ce 2. http://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=cashfl ow 3. http://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=yearl y 4. http://indiaearnings.moneycontrol.com/sub_india/financialreports.php?sc_did=TIS&type=profit 5. http://finance.yahoo.com/q?s=TATASTEEL.NS 6. http://www.moneycontrol.com/news/results/tata-steel-q1-net-triplesriversdale-stakesale_576029.html 7. http://www.moneycontrol.com/financials/jswsteel/ratios/JSW01 8. http://www.moneycontrol.com/financials/steelauthorityindia/ratios/SAI 9. http://www.moneycontrol.com/competition/tatasteel/comparison/TIS

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