Tata steel Acquisition of Corus

MACR PROJECT REPORT

10DCP-012: JOSEPH ABRAHM 10DCP-020: NIKHIL GARG 10DCP-030: SAURABH CHINCHOLIKAR 10DCP-032: SAURABH MATHUR
IMT Ghaziabad

10DCP-091: SHOBHIT RANJAN

12/10/2011

Table of Contents

Introduction .......................................................................... 2 Indian Steel Industry Overview as of 2007 and Future estimates ................................................................................ 3 Global Steel Industry Overview as of 2007 and Future estimates ................................................................................ 7 Tata Steel ................................................................................ 9 Corus and Steel Production in the U.K. ................................ 12 Determinants for Acquisition ............................................. 15 Rationale behind the Corus acquisition ................................ 16 Reasons for Corus to be sold ................................................ 17 About the Deal...................................................................... 18 Financing the deal................................................................. 24 Synergies between the two companies ................................. 26 Post-Acquisition Management.............................................. 27 Taskforce Teams ................................................................... 28 Calculations .......................................................................... 30 Future Expectations .............................................................. 33

INTRODUCTION
The case of Tata Steel acquiring Corus has thrown many questions at that time. What was surprising in the above acquisition was that how could a small steel maker, Tata Steel from a developing country like India buy up a large steel company, Corus PLC from the United Kingdom. Prior to the acquisition, Corus was four times bigger than Tata Steel. However, the operating profit for Tata Steel was $840 million (sale of 5.3 million tonnes), whereas in case of Corus it was $860 million (sale of 18.6 million tonnes) in the year 2006. Many questioned if the Tatas were wise in acquiring Corus that had accumulated huge debt burden, made operational losses and whose share price had drastically come down. This report tries to capture that whether Tata Steel has performed up to expectations, after the acquisition of Corus. Also it throws light on the future expected performance of the company. Valuation has been done for the company (consolidated) for the years 2008 through 2011 as would be expected in the year 2007 (i.e. before the acquisition). And this has been compared by putting actual values for the years 2008 through 2011.This will help us in determining whether company has performed as per the expectations or not. Also future forecasts have been done to gauge the performance of the company in the coming years.

Indian Steel Industry Overview as of 2007 and Future estimates

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. Key Events 1907: Tata Iron and Steel Company set up. 1913: Production of steel begins in India. 1918: The Indian Iron & Steel Co. set up by Burn & Co. to compete with Tata Iron and Steel Co. 1923: Mysore Iron and Steel Company set up 1939: Steel Corporation of Bengal set up 1948: A new Industrial Policy Statement states that new ventures in the iron and steel industry are to be undertaken only by the central government. 1954: Hindustan Steel is created to oversee the Rourkela plant. 1959: Hindustan Steel is responsible for two more plants in Bhilai and Durgapur. 1964: Bokaro Steel Ltd. is created. 1973: The Steel Authority of India Ltd. (SAIL) is created as a holding company to oversee most of India's iron and steel production. 1989: SAIL acquired Vivesvata Iron and Steel Ltd. 1993: India sets plans in motion to partially privatize SAIL. Production During the five years (2003-07) finished steel production (alloy and non-alloy) grew at the rate of 8 % (CAGR) to reach at 57.66 mt in 2006-07 from 39.22 mt in 2002-03. In 2006-07, the secondary producers alone contributed about 76 % and the rest came from the main producers. After liberalization, on the account of active participation of private sector in the steel industry, public sector share in the total production started dwindling. In 2003-04, share

of public sector in the finished steel production (alloy & non-alloy) was 28 %, which was reduced to 23 % in 2006-07. According to estimates of Ministry of Steel, Government of Indiaproduction capacity of the steel industry will be 124 mt at the end of the year 2011-12. It is mainly attributed to positive trends in the consumption. Main producers such as TISCO, SAIL and JSW are aggressively investing in expanding their plant capacities. TISCO has an installed production capacity of 7.5 to 8 mt with another 2.4 mt would be added by 2009. The TISCO is the front runner with an expansion plan of about 30 mtpa by 2020. JSW and SAIL have expansion plans of about 27 mtpa and 24 mtpa, respectively. Consumption During five years (2002-03 to 2006-07) the steel consumption grew by about 11 %, which was higher than the estimation of National Steel Policy 2005. Especially in two years (200506 and 2006-07) consumption growth was quite impressive, 13.90 percent and 12.91 percent, respectively. The consumption reached its ever highest level of 46.78 mt in 2006-07. Some estimations stated that this upturn trend in consumption will continue in the future mainly owing to healthy economic growth and promising demand from growth driving sectors such as infrastructure, construction, housing, consumer durables, etc. Indias per capita consumption of steel stood at 46 kg, whereas world average is 150 kg. Average for developed world is 450 kg. Thus, it is clear that there is much scope for the growth of consumption in India. Major sectors which contributed to steel consumption in 2005-06 are depicted in the figure below. Infrastructure and manufacturing sectors together contributed almost 50 percent of total demand for the steel in 2005-06. Trade In five years (2002-03 to 2006-07) imports have grown at much faster rate than exports. As a result net trade in steel is getting narrower. While imports have grown by CAGR of 24.49 percent, exports have grown just by a CAGR of 2.16 percent in last five years. Overall net trade in steel has managed to be in surplus till 2006-07. Bars and Rods (BR) BR is a major part of the total steel production (non-alloy) in the country. The segment recorded a growth rate of about 6.3 percent the highest in last five years prior to 2006-07 (later data are no yet available). Since the BR segment constitutes 76 percent of total non-flat steel production, it was a major contributor to the growth rate of non-flat steel production overall. The main producers accounted for 30 percent and 27 percent of total BR production in 2002-03 and 2006-07, respectively. The public sector RINL has a large share (17%) among main producers in the production of BR. However, RINLs share has recorded 2 percent decrease in last two years. Secondary producers have seen increase in their share in total BR production from 70 percent in 2002-03 to 73 percent in 2006-07.

Structurals The two public sector undertakings, SAIL and RINL, are the major producers of structurals. Both the companies constituted 36 percent of total production of structurals in the country. However, the shares of SAIL and RINL have been declining quite rapidly. In 2006-07 combined share of SAIL and RINL stood at 23 percent, which was 36 percent in 2002-03. However the share of secondary producers in total structurals has been rising from 64 to 77 percent between 2002-03 and 2006-07. This does not indicate any great advantages that these players might have, but merely that the public sector entities have not been investing as much. Imports Top six steel products were responsible for 73 percent of total imports of steel in India in 2006-07. Main contributors were HR coils/skelps/strips/sheets, Plates and CR coils/sheets, which together constituted 56 percent of total imports in 2002-03, which increased to 62 percent in 2006-07. Particularly in the last two years (2005-06 and 2006-07) imports of BR and structurals have 9 declined. Flat products such as plates, CR coils/sheets and GP/GC sheets have seen positive growth from 2004-05 to 2006-07. Imports of HR coils/skelps/strips/sheets, a single largest import item, have observed marginal decline in 2006-07. In general India is becoming net importer and expected to be so in 2007-08. Imports grew at a CAGR of about 24 percent in last five years. This is mainly due to increase in domestic demand for specific quality/size/grade of steel. Moreover, price considerations for specific quality/size/grade of products have pushed imports upwards .Imports as percentage of total consumption have grown in last five years. India imported 5.42 percent of its total steel consumption in 2002-03, which rose to 10.64 in 2006-07. Exports GP/GC sheets constituted a single largest product in total exports of steel. Share of GP/GC sheets were 30 percent in total steel export in 2002-03, which dipped by 5 percent in the following year. However, it recovered to reach at 37 percent in 2006-07. Although exports of three major segments: GP/GC sheets, HR coil/strips/skelps/sheets and CR sheets/coils have declined in the last three, these segments still formed 70 percent of total exports of steel in 2006-07. Overall moderate growth of exports during the last five years has been mainly due to the need to meet the growing domestic demand and to some extent appreciating rupee was also responsible for the slow growth in exports .During the last five years share of exports in total finished steel (alloy & non-alloy) production has declined. As can be observed from table 2.14, India exported 14.21 percent of total production in 2002-03, which reduced to 11.24 percent in 2006-07. Financials The year 2006-07 was a good year for Indian steel industry as it registered positive growth as a whole. During January-March 2007 PTA for the sector as a whole was Rs. 4109.6 crores a growth of 14 percent over previous quarter PAT as a share of Capital Employed varies

greatly, as for the big players like SAIL, TSL and JSW Steel it is around 16 percent, 15 percent and 14 percent respectively. For other secondary main producers such as Essar Steel Ltd and Ispat Industries Ltd the figures were 4.84 percent and -0.12 percent. Even if we see figures on Return on Capital Employed (ROCE), the picture remains same as Essar Steel and Ispat Industries have performed badly compared to other three big steel producers. The later sections of this report will show that the government preferences towards big steel players especially in the context of iron ore captive mining have put smaller players at disadvantageous state in the market. Big players, with full or partial captive facilities, do enjoy low cost of production and secure supply of raw material. Nevertheless, inherent nature of the steel industry, which requires huge initial investments to create production base and expand the capacities, is also responsible for the oligopolistic nature of the industry.

Global Steel Industry Overview as of 2007 and Future estimates

In global steel industry the consumption of steel was decreased drastically in 2007, in comparison to 2006. According to International Iron and Steel Institute (IISI) till 2010 the average demand for steel would be 4.9 per cent per year. But during 2010 and 2015 the growth is expected to be 4.2 per cent. In fact, IISI forecasts the global steel demand would be 1.32 billion tonnes by 2010 and 1.62 billion tonnes by 2015. Much of this demand growth is expected to be generated from countries like China and India. Among the major steel producing countries the production of steel has increased from 2005-2006 except Brazil. China is the highest steel producing country in the world with a production of 355.8 million tonnes in 2005 and 418.8 million tonnes in 2006. Global steel ranking Company Arcelor - Mittal Nippon Steel Posco JEF Steel Tata Steel Corus Bao Steel China US Steel Nucor Riva Thyssen Krupp Capacity (in million tonnnes) 110.0 32.0 30.5 30.0 27.7 23.0 19.0 18.5 17.5 16.5

The comparative cost of steel production is favourable to developing countries especially India.

Comparative cost of steel production (Figures in %) Item Energy Iron Ore Fluxes and Ferro alloys Others Total materials Labour Miscellaneous Taxes Works cost Depreciation & interest Total cost USA 24.1 15.4 5.9 25.6 71.0 40.7 1.9 113.6 9.1 122.7 UK 19.8 12.7 7.6 27.5 67.6 27.1 1.9 96.6 6.6 103.2 France 22.1 12.7 7.6 27.3 69.7 36.6 4.1 110.5 2.4 122.9 Germany 23.4 13.9 6.8 27.1 71.2 43.4 2.4 117.1 12.2 129.3 India (Base) 32.9 5.4 8.5 21.9 68.8 13.9 6.6 89.3 10.7 100.0

For 2007, S&P Steel India projects that GDP will grow by 2.4%, versus the GDP growth of 3.3% in 2006. Through April 2007, motor vehicle sales fell by 3.0% while motor vehicle production declined by 5.5%.Whereas, in 2006, motor vehicle sales fell by2.6%, while production was down by 2.8%. As predicted, lower sales for all of 2007 will lead to reduced demand from this key end market for steel. Presumably, car manufacturers will be working to reduce unsold car inventory and will be cutting production, which will reduce demand for steel. According to the numerical data, through May 2007, the S&P Steel Index increased by 35.1%, compared to that of 6.6% increase for the S&P 1500 Index and by 14.9% rise in the S&P Materials Index. In 2006, the S&P Steel Index increased by 58.2%, versus a 13.3% increase for the S & P 1500 index and a 16.6% increase in the S&P Materials Index. In the long term, there is a strong possibility for the industry to benefit from greater pricing power resulting from further expected consolidation, a lower cost structure, and a continuation of the cyclical decline of the U.S. dollar.

Tata Steel

As of 2003, Tata Steel was essentially a one-site company, centered in the pristine locales of Jamshedpur - aptly named after the great man who envisioned the place, Shri Jamshedji Nusserwanji Tata. Although an ideal township where nature is in perfect harmony with steel manufacturing, it was, admittedly, a small operation with only 4 million tonnes annual capacity. Also, even though Tata Steel had a leadership position in finished goods like automobiles and white goods, in many other aspects it lagged behind its competitors. More importantly, as regards a foreign presence, there was none. The senior management got together at this point of time to envision an inspirational target for the company, as well as brainstorm on how to achieve it. From these high-level discussions emerged a target - 15 million tonnes annual capacity by 2015, subsequently revised to 50 million tonnes - a ten-fold-plus increase in just ten-plus years. Of course, the company's jewel in the crown Jamshedpur was to be very much a part of the action. Target capacity was set at 10 million tonnes by 2010, with gradual increments over the years: 4 to 5 million tonnes in 2005 (already achieved), 5 to 6.8 million tonnes in 2008 (on schedule) and 6.8 to 10 million tonnes in 2010 (expected).

Reason behind these ambitious numbers

Such an ambitious target was born out of the management's confidence in a vibrant world economy, with special emphasis on engines of growth like India, China, Russia, South-East Asia and Brazil. Indeed, many of the company's recent investments bear ample testimony to its belief in the strength of emerging economies. According to Mr Kaushik Chatterjee (CFO, Tata Steel, whenever a country's per-capita GDP had exceeded $3,000, a metal boom had been witnessed. This was because, according to Mr. Chatterjee, there is a strong co-relation between GDP and consumption of metals. With India's GDP almost at that threshold, there was no better time for Tata Steel to spread its wings and fly. For Tata Steel's growth, the management had identified that acquisition would definitely play an important part in the company's future plans. This was especially true of developed markets where the costs of establishing Greenfield projects were prohibitive. Below is the balance sheet of Tata Steel for the years 2003-2006: Tata Steel Balance sheet: Sources Of Funds Total Share Capital Equity Share Capital Mar 06 553.67 553.67 Mar 05 553.67 553.67 Mar 04 369.18 369.18 Mar 03 367.97 367.97

Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities

0.00 0.00 9,201.6 3 0.00 9,755.3 0 2,191.7 4 324.41 2,516.1 5 12,271. 45

0.00 0.00 6,506.25 0.00 7,059.92 2,468.18 271.52 2,739.70 9,799.62

0.00 0.00 4,146.68 0.00 4,515.86 3,010.16 363.12 3,373.28 7,889.14

1.21 0.00 2,816.84 0.00 3,186.02 3,667.63 557.98 4,225.61 7,411.63

Mar'06

Mar '05

Mar '04

Mar '03

Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances 15,407. 17 6,699.8 5 8,707.3 2 1,157.7 3 4,069.9 6 2,174.7 5 539.40 288.35 3,002.5 0 1,994.4 6 13,085.07 5,845.49 7,239.58 1,872.66 2,432.65 1,872.40 581.82 246.68 2,700.90 2,234.96 12,505.83 5,411.62 7,094.21 763.64 2,194.12 1,249.08 651.30 250.54 2,150.92 2,782.49 12,192.71 4,849.99 7,342.72 201.08 1,194.55 1,152.95 958.47 221.02 2,332.44 2,000.08

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Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses

0.04 4,997.0 0 0.00 4,552.3 9 2,361.4 4 6,913.8 3 1,916.8 3 253.27 12,271. 45

0.04 4,935.90 0.00 4,247.43 2,648.56 6,895.99 -1,960.09 214.82

0.20 4,933.61 0.00 3,908.93 3,343.48 7,252.41 -2,318.80 155.97

152.10 4,484.62 0.00 3,594.23 2,217.11 5,811.34 -1,326.72 0.00

Total Assets

9,799.62

7,889.14

7,411.63

Contingent Liabilities Book Value (Rs)

3,872.3 4 176.26

2,983.05 127.56

2,669.02 122.79

1,580.70 86.60 93.70

Tata Steel was Asias first and Indias largest integrated private sector steel company with 2005/06 revenues of US$ 5 billion and crude steel production of 5.3 million tonnes across India and South-East Asia. It is a vertically integrated manufacturer and is one of the worlds most profitable and value creating steel companies. In 2005, Tata Steel acquired 100% equity interest in NatSteel Asia in Singapore and in 2006 acquired majority control of Millennium Steel in Thailand, now Tata Steel Thailand.

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Corus and Steel Production in the U.K.

Corus Group plc was formed on 6th October 1999, through the merger of two companies, British Steel and Koninklijke Hoogovens, following the privatization of many steelworks companies by the U.K. government. The company consists of four divisions which include: Strip Products, Long Products, Aluminum and Distribution and Building Systems. With headquarters in London, Corus operates as an international company, satisfying the demand of many steel customers worldwide. Its core business comprises of manufacturing, development and allocation of steel and aluminum products and services. The company has a wide variety of products and services which comprise of the manufacturing of electrical steel, narrow strip, plates, packaging steel, plated steel strip, semi-finished steel, tube products, wire rod and rail products and services. However, the 7company is also engaged in providing a variety of services including design, technology and consultancy services. Corus is Europes second largest steel producer with revenues in 2005 of 9.2 billion (US$18 billion and crude steel production of 18.2 million tonnes, primarily in the UK and the Netherlands. Corus had about 42,600 employees in over 40 countries and sales offices and service centres worldwide. The number of employees in UK has been about 23,600; in Germany about 2,600; in Netherlands about 11,400 and in other countries about 5000.Combining international expertise with local customer service, the Corus brand represents quality and strength. Corus products and services are acquired by customers from diverse fields such as commercial and military aerospace ventures, the automotive, construction, engineering, defence and security, as well as the rail and shipbuilding industry. In order to sustain and run its global steelmaking, processing and distribution operations the company makes annual investments of over 6 million for the purchase of various goods and services, such as iron ore and coal, alloys, refractory, rolls and paint. The company also had huge amount of short term and long term debts. The total debt burden in the year 2006, prior to the acquisition was about 2433 million GBP. Liabilities of Corus Steel as on Year 2006 Liabilities (in GBP million) Long term debt obligations Finance Lease obligations Interest commitments Operating lease obligations Purchase obligations Other long term liabilities Total Total 1,101 159 331 462 350 30 2,433 < 1 yr 24 82 75 331 512 1-3 yrs 567 36 149 102 13 867 3-5 yrs 534 26 94 76 6 736 >5 yrs 73 6 209 30 318

But irrespective of all these factors, Corus has continued to grow through a number of acquisitions during 2000-2006. Refer Exhibit 12 for details about M&A deals by Corus. Acquisitions of Corus prior until 2004 Date of the Deal Company Name Description

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November 1, 2000

Cogifer Ltd.

50/50 joint venture with the French manufacturer of switches and crossings, Cogifer Ltd, a world leader in its field of business. The venture was expected to combine the strong market presence of Corus in the UK and the industrial competence of Cogifer.

September 27, 2000

Corus subsidiary companies, Avesta Sheffield AB and Outokumpu Steel

The newly formed company, Avest a polarit was then the second largest stainless steel producer in the world 50/50 joint venture with danieli & co. officine Meccaniche spa, an Italian equipment producer Joint venture agreement with a municipality owned company Tjanjin

January 2000

Corus Group Plc and Danieli & Co. Officine Meccaniche SpA

Year 2000

Corus Aluminum Extrusions and Tjanjin Non Ferrous Metal Group (TNMG) Non

Year 2001

Savera Group

Joint venture with a global supplier of elevator guide rails and other various components. The new entity is called Savera UK Ltd and is expected to be a major competitor in the elevator industry.

Year 2001

Corus Building Systems and Redrow Plc.

50/50 joint venture with british suburban and Commercial property developer , redrow plc 21

17 July 2002

Brazilian steel producer CSN

Agreement for a potential merger between the two companies. An acquisition of a Swedish based metal producer , which will allow the company to

Year 2002

Corus Building Systems (CBS) and a Swedish

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based metal producer

expand and strengthen its presence in the Swedish market.

Year 2002

Precoat

100% acquisition of the equity of one of the principal independent precoated steel service centers in Britain, Precoat.

Year 2003

Arcelor S.A. Sollac Mditerrane ('Sollac')

Purchase of Sollacs 50% share in a Portuguese base company called Lusosider projectos. An acquisition of Corus Aluminum Service Centers Inc. which positioned the new enlarged entity as the leading national distributor of non- ferrous metal products in the whole U.S.market.

Year 2003

Clayton Metals Inc

Year 2004

Corus Staal B.V. and Segal

Acquisition of Belgian hot dipped galvanizing 22 S.A. line , Segal S.A. for 50 % Corus made an announcement that I will purchase the remaining 50 % of shares in Segal S.A. UK hot-rolled steel sheet piling business was acquired by Arcelor. Even though Arcelor acquired the assets from Corus, they did not include the companys manufacturing facilities where Corus decided to terminate the production due to the implementation of its UK Restructuring Programme initiative.

Year 2004

Corus Staal B.V. and Segal S.A

April 2004

Arcelor Corus

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Determinants for Acquisition

Tata Steel had devised a set of determinants based on size, markets, technology and R&D and management compatibility for different steel producers around the world. Additionally, associated risks such as operations and pension liabilities (a big concern in Western companies) as well as engagement with the target ('no shopping' or exclusivity clause) were also considered. Finally, seven or eight likely candidates emerged. Singapore-based NatSteel Ltd was the first of these to be successfully acquired for $486.4 million in 2004. This buyout gave Tata Steel access to seven different markets, countries in which the company was interested to consolidate further. This again led to the acquisition of Millennium Steel of Thailand for $167 million. Of course, this brings us to the most keenly awaited Indian corporate deal of recent times the Corus takeover. The $12.11-billion Corus deal remains by far the largest foreign acquisition by an Indian firm.

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Rationale behind the Corus acquisition

Following are the reasons as rationale behind the Corus acquisition: Consistent with Tata Steel's objective of growth and globalization. To tap European Mature Market. Cost of acquisition was lower than setting up of Green field plant and marketing and distribution channel. Tata manufactures Low value, long and flat steel products, while Corus produce High Value Stripped products. Creates the 6th largest steel producer in the world. Corus holds a number of patents and R&D facilities. Tata will be able to achieve Economies of Scale. Corus is an ideal combination of high-quality developed and low-cost high-growth markets. There were opportunities for significant synergies between Tata Steel and Corus. There was a considerable culture fit. This was attributed to the Anglo-Saxon background of Corus and India's colonial past.

The target acquisition was also beneficial in monetary terms. The following factors played a key role in the valuation of Corus by Tata Steel: Market cap and premium in 'that market'. The premium varied from market to market, often within the same broader region. Comparable transactions in the recent past. Discounted Cash Flow approach - 'As is' valuation - Potential value with synergies Competitive situation and 'walk-away' price

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Reasons for Corus to be sold

Corus had a chance to get bailed out of debt and financial stress. Corus would get access to cheap high quality iron ore from India. Corus had high cost of production and they were looking for a partner that has low cost of production. Though Corus had revenues of US $18 bn, its profit was just US $626 mn, while Tatas revenue was US $4.84 bn and profit was US $824 mn.

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About the Deal

The acquisition process started on September 20, 2006 and completed on July 2, 2007. In the process both the companies have faced many ups and downs. After the final round of bidding and when the results were awaited Ratan Tata seemed to have asked Muthuraman to prepare two speeches viz., (a) on conceding defeat and (b) on winning the bid. A group of executives from Tata Steel described on what Muthuraman had to say about his writing the two speeches. When Mr. Muthuraman tried to write the speech on conceding defeat; he could not write anything for long; his hand writing which is usually neat and beautiful was illegible with number of overwriting. After a lot of attempts he was able to write one. Whereas, he could smoothly and in beautiful hand writing wrote the winning speech. During the final rounds of bidding, the top management team of the Tata s including Ratan Tata, Muthuraman, Kaushik Chaterjee and their key support staff were in a secluded location that was inaccessible to others. Further, all their communication devices were changed in order that the competitors of the bidding or the rivals had any access to the discussion of the negotiating team of the Tatas. The official declaration of the completed transaction between the two companies was announced to be effective by Court of Justice in England and Wales and consistent with the Scheme of Arrangement of the Tata Steel Scheme on April 2, 2007. The total value of this acquisition amounted to 6.2 billion (US$12 billion). Tata Steel the winner of the auction for Corus declares a bid of 608 pence per share surpassed the final bid from Brazilian Steel maker Companhia Siderurgica Nacional (CSN) of 603 pence per share. According the Scheme regulations, Tata Steel was required to deliver a consideration not later than 2 weeks following the official date of the completion of the transaction. Refer Exhibit 14 for details in corporate communication note of Tata Steel. Prior to the beginning of the deal negotiations, both Tata Steel and Corus were interested in entering into an M&A deal due to several reasons. The official press release issued by both the company states that the combined entity will have a proforma crude steel production of 27 million tonnes in 2007, with 84,000 employees across four continents and a joint presence in 45 countries, which makes it a serious rival to other steel giants. The deal between Tata & Corus was officially announced on April 2nd, 2007 at a price of 608 pence per ordinary share in cash. This deal is a 100% acquisition and the new entity will be run by one of Tata steel subsidiaries. As stated by Tata, the initial motive behind the completion of the deal was not Corus revenue size, but rather its market value. Even though Corus is larger in size as compared to the Tatas, the company was valued less than Tata (at approximately $6.2 billion) at the time when the deal negotiations started. But from Corus point of view, as the management has stated that the basic reason for supporting this deal were the expected synergies between the two entities. What were the various motivations for Corus to have supported the acquisition by the Tata s? Was it because of better price offered by the Tatas? Was this deal the best way for the shareholders of Corus to exit from the loss making steel business? First of all, the general assumption is that the acquisition was not cheap for Tata. The price that they paid represents a very high 49% premium over the closing mid-market share price of Corus on 4 October, 2006 and a premium of over 68% over the average closing market share price over the twelve month

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period. Moreover, since the deal was paid for in cash automatically makes it more expensive, implying a cash outflow from Tata Steel in the amount of 1.84 billion. Tata has reportedly financed only $4 billion of the Corus purchase from internal company resources, meaning that more than two-thirds of the deal has had to be financed through loans from major banks. The day after the acquisition was officially announced, Tata Steels share fell by 10.7 percent on the Bombay stock market. Tatas new debt amounting to $8 billion due to the acquisition, financed with Corus cash flows, is expected to generate up to $640 million in annual interest charges (8% annual interest cost). This amount combined with Corus existing interest debt charges of $400 million on an annual basis implies that the combined entitys interest obligation will amount to approximately $725 million after the acquisition. The complexity of the deal especially from the financial implications of the acquisition has gripped many. The debate whether Tata Steel has overpaid for acquiring Corus is most likely to be certain, since just based on the numbers alone it turns out that at the end of the bidding 10conflict with CSN Tata ended up paying approximately 68% above the average price of Corus shares. Another pressing issue resulting for this deal has created a dilemma between experts and analysts opinion is whether this acquisition was the right move for Tata Steel in the first place. The fact that Tata has managed to acquire a British steel maker that has been a symbol of Britains industrial power and at the same time its dominion over India has been perceived as quite ironic. Only time will show whether Tata will be able to truly benefit from the many expected synergies for the deal and not make the typical mistakes made in many large M&A deal during this beginning period. Statements from the top management however show the grit in the decision of the acquisition. The decision to acquire and the ability to have done so has been lauded and encouraged by the top Government officials of the Government of India.

I believe this will be the first step in showing that Indian industry can in fact step outside the shores of India in an international marketplace and acquit itself as a global player. Ratan Tata How did the Tata Steel manage to acquire a company that was four times large than its own size? What were the sources of its fund? Who were the key stakeholders to this deal? Were the resources and network of the Tata Group play a significant role in raising the funds for the acquisition? The total acquisition cost was 6882 million GBP including cost of equity and the debt amount. Tata Steel raised the funds from various sources, viz., long term loans, internal generation from the Tata Group, Rights Issue, Debenture, Euro Currency Bonds, etc. The deal between Tata and Corus was officially announced on April 2nd, 2007, at a price of 608 pence per ordinary share in cash. This deal is a 100% acquisition and the new entity will be run by one of Tatas steel subsidiaries. As stated by Tata, the initial motive behind the completion of the deal was not Corus revenue size, but rather its market value. Even though

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Corus is larger in size as compared to Tata, the company was valued less than Tata at the time when deal negotiations started. But from Corus point of view, as the management has stated that the basic reason for supporting this deal were the expected synergies between the two entities. Corus has supported the Tata acquisition due to different motives. However, with the Tata acquisition Corus has gained a great and profitable opportunity to make an exit as the company has been looking out for a potential buyer for quite some time. The total value of this acquisition amounted to US $12 billion. Tata Steel, the winner of the auction for Corus declares a bid of 608 pence per share surpassed the final bid from Brazilian Steel maker Companhia Siderurgica Nacional (CSN) of 603 pence per share. Prior to the beginning of the deal negotiations, both Tata Steel and Corus were interested in entering into M&A deal due to several reasons. The official press release issued by both the company states that the combined entity would have a pro forma crude steel production of 27 million tones in 2007, with 84,000 employees across 4 continents and a joint presence in 45 countries, which makes it a serious rival to other steel giants. The official declaration of the completed transaction between the two companies was announced to be effective by Court of Justice in England and Wales and consistent with the Scheme of Arrangement of the Tata Steel Scheme on April 2, 2007. According to the Scheme Regulations, Tata Steel is required to deliver a consideration not later than 2 weeks following the official date of the completion of the transaction. The general assumption is that the acquisition was not cheap for Tata. The price that they paid represents a very high 49% premium over the closing mid market share price of Corus on 4 October, 2006 and a premium of over 68% over the average closing market share price over the twelve month period. Moreover, since the deal was paid for in cash automatically makes it more expensive, implying a cash outflow from Tata Steel in the amount of 1.84 billion. Tata has reportedly financed only $4 billion of the Corus purchase from internal company resources, meaning that more than two-thirds of the deal has had to be financed through loans from major banks. The day after the acquisition was officially announced, Tata Steels share fell by 10.7 percent on the Bombay stock market. Tatas new debt amounting to $8 billion due to the acquisition, financed with Corus cash flows, is expected to generate up to $640 million in annual interest charges (8% annual interest cost). This amount combined with Corus existing interest debt charges of $400 million on an annual basis implies that the combined entitys interest obligation will amount to approximately $725 million after the acquisition. The complexity of the deal especially from the financial implications of the acquisition has gripped many. At the end of the bidding conflict with CSN Tata ended up paying approximately 68% above the average price of Corus shares. Another pressing issue resulting for this deal has created a dilemma between experts and analysts opinion is whether this acquisition was the right move

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for Tata Steel in the first place. The fact that Tata has managed to acquire a British steel maker that has been a symbol of Britains industrial power and at the same time its dominion over India has been perceived as quite ironic. The decision to acquire and the ability to have done so has been lauded and encouraged by the top Government officials of the Government of India.

I believe this will be the first step in showing that Indian industry can in fact step outside the shores of India in an international marketplace and acquit itself as a global player.

Ratan Tata The process has started on September 20, 2006 and completed on July 2, 2007. In the process both the companies have faced many ups and downs. The details of this process are described below: September 20,2006: Corus Steel decided to acquire a strategic partnership with a Company that is a low cost producer : The Indian steel giant, Tata Steel wants to fulfill its ambition to expand its business further. : The initial offer from Tata Steel is considered to be too low both by Corus and analysts.

October 5,2006

October 6,2006

October 17, 2006 October 18, 2006 October 20, 2006

: Tata Steel has kept its offer to 455 pence per share. : Tata Steel doesnt react to Corus and its bid price remains the same. : Corus accepts the terms of 4.3 billion pounds takeover bid from Tata Steel. : The Brazilian Steel Group CSN recruits a leading investment bank to offer advice on possible counter-offer to Tata Steels bid. : Corus is criticized by the chairman of JCB, Sir Anthony Bamford, for its decision to accept an offer from Tata. : The Russian Steel giant Severstal announces officially that it will not make a bid for Corus.

October 23, 2006

October 27, 2006

November 3, 2006

November 18, 2006 : The battle over Corus intensifies when Brazilian group CSN approached the board of the company with a bid of 475 pence per share.

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December 18, 2006 : Within hours of Tata Steel increasing its original bid for Corus to 500 pence per share, Brazils CSN made its formal counter bid for Corus at 515 pence per share in cash, 3% more than Tata Steels offer. January 31, 2007 : Britains Takeover Panel announces in an e-mailed statement that after an auction, Tata Steel had agreed to offer Corus investors 608 pence per share in cash. : Tata Steel manages to win the acquisition to CSN and has the full voting support from Corus shareholders.

April 2, 2007

Tata Steel (the Company) is happy to announce that the Company has completed its 6.2 billion (US$12 billion) acquisition of Corus Group plc (Corus) at a price of 608 pence per ordinary share in cash. The enlarged company will have a proforma crude steel production of 27 million tonnes in 2007 and will be the worlds fifth largest steel producer with 84,000 employees across four continents. The combination of Tata Steel, a vertically integrated steel producer and one of the worlds most profitable steel companies, with an established and growing presence in India, South East Asia and the Pacific-rim countries, and Corus, Europes second largest steel producer, with a high value added product range and strong positions in automotive, construction and packaging, will create the worlds second most global steel producer with a combined presence in 45 countries. Commenting, Mr Ratan Tata, Chairman of Tata Steel and Corus, said: "The completion of this acquisition of Corus by Tata Steel is a major step forward in the Companys global strategy and represents an exciting future for both businesses. I firmly believe that both Tata Steel and Corus, two companies with long, proud histories, share a common business culture and a global vision for the business. Corus top management will remain with the enlarged Group and the bringing together of both management teams is an expression of the strong confidence and trust that exists between the two organisations, which will ensure the successful integration of the combined business. Together we are a well balanced company, strategically well placed to compete at the leading edge of a rapidly changing global steel industry. Jim Leng, Retiring Chairman of Corus, said: "Corus had twin objectives from the outset. One was to secure the best value for our shareholders and the other was to ensure the best strategic future for the business. With Tata Steel, we have delivered both and the directors, senior management and other employees of Corus will see today as the beginning of an exciting new era. The Corus and Tata Steel combination will enable us to build on complementary skills in global markets. I am very much looking forward to working with Mr. Ratan Tata and the Boards and directors in both companies. The completion of the transaction is pursuant to the Scheme of Arrangement of the Tata Steel Scheme being declared effective by the High Court of Justice in England and Wales (the

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Court) today April 2, 2007. Tata Steel had announced on 7 February 2007 that it intends to despatch the consideration pursuant to the Scheme as soon as practicable following the Effective Date and, if practicable, on the Effective Date. Tata Steel is, under the terms of the Scheme required to despatch the consideration pursuant to the Scheme not more than 14 days after the effective date.

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Financing the deal

There were various limitations faced by the company in financing the deal. Not only did Tata Steel have to deal with the sheer size of financing, it was also beset by certain limitations like: Unknown (for itself) nature of the European market. Confidentiality restrictions to test market, since both Tata Steel and Corus were listed entities. Indian corporate regulations that limited foreign investment by an Indian firm to 200 per cent of its net worth. The restrictive nature of the financing.

How did the Tata Steel manage to acquire a company that was four times large than its own size? What were the sources of its fund? Who were the key stakeholders to this deal? Were the resources and network of the Tata Group play a significant role in raising the funds for the acquisition? The total acquisition cost was 6882 million GBP including cost of equity and the debt amount. Tata Steel raised the funds from various sources, viz., long-term loans, internal generation from the Tata Group, Rights Issue, Debenture, Euro Currency Bonds, etc. Tata surprised the credit default swap segment of the derivative markets by deciding to raise $6.17bn of debt for the deal through a new subsidiary of Corus called 'Tata Steel UK', rather than by raising the debt itself. Tata's security credit rating is investment grade, whereas the new subsidiary may not be. The higher risk associated with raising debt through a subsidiary with a lower credit rating prompted Fitch Ratings to downgrade its rating of the credit swap risks in the takeover to 'negative'. Fitch also stated that Corus' responsibility for the debt may lead to Corus' own unsecured debt rating being downgraded. This does not affect the rating of bonds issued by Corus, which are secured debt. Tata steel announced that the refinancing of its GBP 3,620 million-acquisition bridge facility and revolving credit facility that had been provided by Credit Suisse, ABN AMRO and Deutsche Bank to fund its acquisition of Corus Group plc that was completed on April 2, 2007 has been done. The refinancing is by way of Non Recourse Facilities totaling GBP 3,170 million (the Refinancing Facilities) that are being arranged by a syndicate led by Citigroup, ABN AMRO and Standard Chartered Bank. This refinancing provides significant benefits and flexibility over the term of financing to the group. The Refinancing Facility comprises a five year GBP 1670 million amortizing loan which will be syndicated by the joint book runners to relationship banks of Tata steel and Corus and a seven year minimally amortizing term loan of GBP 1500 million that will be syndicated to institutional investors and banks in the USA, Europe and Asia. The balance amount of the acquisition bridge is being repaid by an additional equity contribution by Tata Steel/ Tata Steel Asia, which had been previously disclosed on April 17, 2007.

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Tata Steel is one of Indias largest companies and is amongst the worlds lowest cost steel producers and most profitable steel companies. Corus Group plc is Europes second largest steel producer and the combined entity is the fifth largest steel producer in the world with an installed capacity of 28 million tons p.a. The details of the cost of acquisition and the financing of the acquisition are as follows:

GBP m Equity contribution in Tata Steel UK 3,732

US$ m

INR Remark Bn

7,308 292 6,168 247 13,447 539 6,168 247

Debt raised by Tata Steel 3,150 UK (non recourse) Total Acquisition cost Long term loan through Tata Steel UK (non recourse) Internal generation (includes pref. issue to Tata Sons) ECB Funds 6,882 3,150

594 842

1,163 47 1,649 66 875 913 35 37

Of this amount Rs. 27.7bn was raised by pref. allotment to Tata Sons Loans from IFC, etc 1% coupon, Rs 876.62/share conversion price

Conv. Alternative Ref Sec 420 CARS Rights issue equity (1:5) 466 @ Rs 300/share Rights issue conv. Pref sh 700 @ Rs. 600/share Unsecured debentures Equity related instruments- yet to be raised 255 455

1,370 55 500 887 20 36

2% coupon, 6 CCPS will automatically convert to 1 equity share on 1 Sept 09

Total Acquisition funding 6,882

13,526 541

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Synergies between the two companies

There were a lot of apparent synergies between Tata Steel which was a low cost steel producer in fast developing region of the world and Corus which was a high value product manufacturer in the region of the world demanding value products. Some of the prominent synergies that could arise from the deal were as follows : Tata was one of the lowest cost steel producers in the world and had self sufficiency in raw material. Corus was fighting to keep its productions costs under control and was on the look out for sources of iron ore. Tata had a strong retail and distribution network in India and SE Asia. This would give the European manufacturer ain-road into the emerging Asian markets. Tata was a major supplier to the Indian auto industry and the demand for value added steel products was growing in this market. Hence there would be a powerful combination of high quality developed and low cost high growth markets There would be technology transfer and cross-fertilization of R&D capabilities between the two companies that specialized in different areas of the value chain. There was a strong culture fit between the two organizations both of which highly emphasized on continuous improvement and ethics. Tata steel's Continuous Improvement Program Aspire with the core values: Trusteeship, integrity, respect for individual, credibility and excellence. Corus's Continuous Improvement Program The Corus Way with the core values: code of ethics, integrity, creating value in steel, customer focus, selective growth and respect for our people.

26

Post-Acquisition Management
There has been a great deal of suspicion on how well the two entities, viz., Tata Steel and Corus plc integrate in the post acquisition situation. This concern has been expressed since the culture and perspectives of the two companies and the people are seemingly very different from each other. Ratan Tata however, has been confident that the post acquisition management will not be too difficult as the two organizational cultures will be effectively integrated. Ratan Tata has said he is confident the two companies will have a cultural fit and similar work practices. Nearly 30 years ago J.R.D Tata had lured away a young engineer from Coruss predecessor company, British Steel, to work at Tata Steel. That young Sheffield-educated engineer Sir Jamshed J. Irani (knighted by the Queen 10 years ago) was Tata Steels Managing Director until six years ago. Tata Corus has made developed some management structure to deal with the smooth operation of the two entities. It has also adopted several system integrations in both the entities to smoothen the transactions between the two entities. Tata Steel has formed a seven- member integration committee to spearhead its union with Corus group. While Ratan Tata, chairman of Tata froup, heads the committee, three of the members are from Tata Steel and the other three are from Corus group. Members of the integration committee from Tata Steel include: Managing Director - B Muthuraman, Deputy Managing Director (Steel) T Mukherjee, Chief Financial Officer Kaushik Chatterjee.

The Corus group is represented in the committee by: CEO Phillipe Varia Executive Director (Finance) David Lloyd Division Director (Strip Products) Rauke Henstra.

27

Taskforce Teams
The company has also created several Taskforce Teams to ensure integration specific set of activities in the two entities for smoother transaction. For instance, the company has created a task force to integrate the UK/EU model in construction to the Indian market. Post Tata Corus merger, Tata Steel has access to considerable IP and expertise in Construction from UK/EU based models. The key driver is to find ways to utilize this knowledge and assist the capture of value for Tata Steel in the construction market in India. To achieve, a taskforce comprising of following executives from both the entities is being formed with immediate effects. Members from Corus : Mr. Matthew Poole (Director Strategy Long Products Corus) Mr. Colin Ostler (GM Corus Construction Centre) Mr. Darayus Shroff (Corus International)

Members from Tata Steel: Mr. Sangeeta Prasad (CSM South, Flat Products) Mr. Pritish Kumar Sen (Market Research Group) Mr. Rajeev Sahay (Head Planning & Scheduling, TGS)

The scope of the taskforce will be to: 1. Ensure smooth market knowledge exchange between Tata Corus and Tata BlueScope and identify Knowledge gaps. 2. Complete mapping of construction sector for Indian market using external resource if necessary. 3. Understand key drivers for construction through knowledge gained from stakeholders of the construction community. 4. Map key competencies of Tata Corus against market drivers/ requirements. 5. Develop a five- year strategy. Organizational Structure for Group Strategy The company has also created an organizational structure for Group Strategy Function. There will be three groups in this function to undertake three activities viz., Strategy Development, Strategic Modeling, and Industry Group. The Tata Steel Group has the ambition to become a bench mark in the global steel industry in terms of value creation and corporate citizenship. The group strategy function will be organized to support the delivery of the group ambition. The main responsibilities of the group strategy function are as follows:

28

To originate the group strategy i.e. portfolio management, market sector positioning, industrial foot print, partnerships and alliances, and translate the Group strategy into strategy action plans. To organize and support the strategic planning process across the group. To originate and assess corporate business development initiatives i.e. corporate partnerships/alliances. To monitor the steel industry which includes macro economic trends, steel market dynamics, competitive arena, technology, standards and regulations.

The group strategy team will be organized into three groups based in several locations, reporting to Jean- Sebastien Jacques, Group Director, Strategy: The strategy /business development group will be responsible for developing the group strategy and supporting corporate development initiatives. This group will be based out of London and composed of Mrs Leonie Greenfield, Ms Susanne Rosengren, Mr Fillip Vrabel and Mr Matthew Poole (Joint role with lo ng product division Corus). The strategic Modeling group will be responsible for developing and maintaining the central strategic models and benchmarking analysis. Dr.Paul Butterworth, as group chief (Strategic Modelling), will head this group with the support of Mr. Santosh Agarwal and will be based out of kolkata. The industry group will be responsible for industry monitoring, market intelligence and for issuing assumptions required to support the strategic and forecasting processes across the group. This group bases out of Kolkata will also handle interfaces with industry trade associations i.e. IISI, Eurofer, etc and will be headed by Mr. Ashok Kumar Pandey, Group chief (Industry).The existing Tata steel market research group (MRG) will be merged into the industry group. The main industry group will work very closely with Mr.Ben Carstein, the Group Economist based in London.

29

Calculations
Actual (RS. Crores) Sales(Less excise duty) Other Income Total Expenses EBITD (Rev. less exp.) Less Depreciation Exceptional Items EBIT Taxes EBIAT Depreciation (add back) Operating Cash Flow Less CAPEX Less Investment in (changes in) NWC Free Cash Flow Unlevered Terminal Value at 2011 Unlevered Cost of Capital PV of Forecast period FCFs rA PV of Terminal Value Unlevered Present Value of FCFs Unlevered NPV Planned Level of Debt Financing Financial Charges Tax Shields Terminal Value of Tax Shields Cost of Debt Capital PV of Tax Shields - rB PV of Terminal Value of Tax Shields Total Present Value of Tax Shields Total Net Present Value APV FY08 FY09 FY10 FY11 FY12(E) 131533.00 147329.26 102393.12 118753.12 122315.71 475.86 265.67 1185.85 980.98 980.98 113751.20 129201.59 94350.46 102757.50 107895.38 18257.66 18393.34 9228.51 16976.60 15401.32 4136.95 4265.39 4491.73 4414.82 4414.82 6335.13 (4094.53) (1683.72) 2310.21 716.77 20455.84 10033.42 3053.06 14871.99 11703.27 4049.30 1894.00 2151.84 3245.90 3245.90 16406.54 8139.42 901.22 11626.09 8457.37 4136.95 4265.39 4491.73 4414.82 4414.82 20543.49 12404.81 5392.95 16040.91 12872.19 2448.35 2846.79 2726.07 3968.54 3968.54 21945.00 (28882.62) (3849.86) 38440.64 1936.04 730.84 9969.41 2102.96 59,602.64 0.10 5952.73 2950.93

0.15 66,472.56 34,554.34 101026.89 101026.89

(0.25)

0.17

4085.41 808.72

3290.18 621.08

3022.06 2129.99

2770.04 604.58 15979.30 0.06

1118.55

0.08 3526.50 12685.70 16212.20 117239.09 117239.09

0.07

0.07

30

Expected (RS. Crore) Sales(Less excise duty) Other Income Total Expenses EBITD (Rev. less exp.) Less Depreciation Exceptional Items EBIT Taxes EBIAT Depreciation (add back) Operating Cash Flow Less CAPEX Less Investment in (changes in) NWC Free Cash Flow Unlevered Terminal Value at 2011 Unlevered Cost of Capital PV of Forecast period FCFs rA 24,691.81 PV of Terminal Value 100,132.21 Unlevered Present Value of FCFs till 2011 124824.02 Unlevered NPV 124824.02 Planned Level of Debt Financing Financial Charges Tax Shields Terminal Value of Tax Shields Cost of Debt Capital PV of Tax Shields - rB 3165.93 PV of Terminal Value of Tax Shields 10130.81 Total Present Value of Tax Shields 13296.74 Total Net Present Value 138120.75 APV of Tata Steel 138120.75 FY08(E) FY09(E) FY10(E) FY11(E) FY12(E) 117619.40 122190.45 125549.45 129021.39 132610.83 481.88 530.06 556.57 584.40 613.62 101514.79 103471.34 105503.94 107616.73 109814.12 16586.48 19249.17 20602.08 21989.06 23410.32 3631.78 3714.83 3799.85 3886.90 3976.01 0.00 0.00 0.00 0.00 0.00 12954.70 15534.34 16802.23 18102.16 19434.31 3886.41 4660.30 5040.67 5430.65 5830.29 9068.29 10874.04 11761.56 12671.51 13604.02 3631.78 3714.83 3799.85 3886.90 3976.01 12700.07 14588.87 15561.41 16558.41 17580.03 1618.49 1783.03 1734.19 1785.85 1730.39 4820.45 6261.14 4820.45 7985.40 4820.45 9006.78 4820.45 9952.12 4820.45 11029.20

0.12

0.12

157559.96 0.12 0.12

26000.00 3120.00 936.00

26900.00 3228.00 968.40

25200.00 3024.00 907.20

28300.00 3396.00 1018.80 13782.86 0.08

964.80

0.08

0.08

0.08

31

The graph below shows the comparison of expected and actual EBITDA of Tata Steel for FY08 to FY11.

25000

EBITDA in Rs. Crore

20602.08 20000 18257.66 16586.48 15000 19249.17 18393.34

21989.06

16976.60

Expected 10000 9228.51 Actual

5000

0 FY08 FY09 FY10 FY11

It can be seen from the graph above that there was huge difference between expected and actual EBITDA in FY10. The main reason for this was the economic depression. European steel market was severely hit by global recession.

We have seen from the above that EBITDA of the company dropped severely in 2010. Some of the reasons can be found below. Reasons for the deviation in performance: Global Recession was the major reason for the decrease in performance of the company. Increase in raw material costs. Decrease in demand for automobiles in the Europe lead to less demand of steel.

32

Future Expectations
The company aims an EBITDA of $100/tonne for Tata Steel Europe (Corus) in the coming 3-4 years. Tata Steel has target production of 9MT in India for FY13. Internal target of Tata Steel India for 2020 is to have a capacity of 20MT and to have 20000 employees. Tata Steel aims for Capex of $2.1 billion to $2.3 billion each year for the next three years (i.e. FY12, FY13 and FY14).

EBITDA (Rs. Cr.)

25,000 21,074 20,000 18,394 16,977 15,000 9,229 18,886 2009 2010 2011 10,000 2012(E) 2013(E) 5,000 2014(E) 20,301

2009 2010 2011 2012(E) 2013(E) 2014(E)

Below is the P&L account forecasts for Tata Steel (Consolidated) 2012(E) INR Cr Revenues 1,21,632 Raw Mat 49,400 Gross Profit 72,232 Electricity 2,978 3,502 3,709 4,171 4,370 77,018 77,955 82,237 84,414 50,322 44,200 44,080 43,750 1,27,340 1,22,155 1,26,318 1,28,163 2013(E) INR Cr 2014(E) INR Cr 2015(E) INR Cr 2016(E) INR Cr

33

Freight 6,449 Labour 26,201 Others 17,718 EBITDA 18,886 21,074 20,301 19,228 19,688 18,400 18,786 20,441 20,953 26,983 27,820 30,339 31,074 7,059 7,340 8,058 8,328

Depriciation 4,642 Interest 3,000 Other Income 1,000 1,000 1,000 1,000 1,000 3,000 3,000 3,000 3,000 4,400 4,400 4,400 4,400

PBT 12,245 Tax 4,163 ETR % PAT 8,082 No. of Shares 95,94,10,000 95,94,10,000 95,94,10,000 95,94,10,000 95,94,10,000 Dividend/Share Given 12 Total Dividend 1,151 Tax on 17% 1,151 17% 1,151 17% 1,151 17% 1,151 17% 9,685 9,175 8,467 8,770 34% 4,989 34% 4,726 34% 4,362 34% 4,518 34% 14,674 13,901 12,828 13,288

12

12

12

12

34

Dividend Tax Paid on Dividend 196 Total Dividend Paid 1,347 Net Retained Earnings 6,735

196

196

196

196

1,347

1,347

1,347

1,347

8,338

7,828

7,120

7,423

35

Reference

http://www.wikipedia.org http://www.moneycontrol.com/stocksmarketsindia http://www.bseindia.com/ http://www.nseindia.com/ http://www.tatasteel.com/ http://en.wikipedia.org/wiki/Tata_Corus_acquisition http://www.icmrindia.org/casestudies/catalogue/Finance/FINC049.htm http://www.steelworld.com/focusfeb07.pdf http://hbswk.hbs.edu/item/5634.html http://www.thehindubusinessline.in/2006/10/19/stories/2006101902770800.htm http://www.tatasteeleurope.com/file_source/StaticFiles/Functions/Financial/Scheme_of_Ar rangement_10Nov06.pdf

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