INTERVIEW OF TATA CFO

8/7/2019 INTERVIEW OF TATA CFO

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OCTOBER 2009 Richard Dobbs and Rajat GuptaSource: Corporate Finance Practice

Presented by:-GAGANDEEP SINGH.

AABIR AHMED.NU-MBA.



TATA STEEL

y Tata Steel , formerly known as TISCO and Tata Ironand Steel Company Limited , is the world's seventh

largest steel company.y An annual crude steel capacity of 31 million tonnes.y Ranked 258th on Fortune Global 500 , it is based

in Jamshedpur , Jharkhand , India.



TATA STEELTYPE PUBLIC

INDUSTRY STEELFOUNDED 1907

Headquarters MUMBAI,INDIA

KEY PEOPLE RATTAN TATA (CHAIRMAN)



Koushik Chatterjee

y Born in 1968 , Mr. Chatterjee is an Honours Graduatein Commerce from Calcutta University and a FellowMember of the Institute of Chartered Accountants of India.

y Mr. Kousik Chatterjee joined Tata Steel in 1995. Duringhis stint in the Company , he worked in the areas of Corporate Finance and Planning.



Fast facts

y Member of board of several Tata Steel Group companiesincluding Tata Steel Europe , NatSteel Asia , Tata SteelThailand , Southern Steel Berhad.

y Named one of India s best CFOs by Business Today (2005and 2006) and by CNBC (2007 and 2008) Is a frequentspeaker in various conferences in India and abroadincluding the McKinsey Global CFO Forum and theConfederation of Indian Industry (CII) conferences.



TOPIC OF DISCUSSIONy Chatterjee discussed this approach with McKinsey

directors Richard Dobbs and Rajat Gupta.y During the conversation , he explained the impetusbehind the group s acquisitions abroad , the effects of

the global financial crisis on the steel industry andTata Steel , and the company s efforts to improve the

efficiency of its operations.y The crisis , Chatterjee notes , makes opportunities

more apparent and restructuring more critical forthe company s long-term health.



Globalization of TATA STEELy Koushik Chatterjee: India is clearly a very large country

with a significant population and a big market , and theTata Group s companies in a number of sectors have apretty significant market share. India remains themain base for future growth for Tata Steel Group , andwe have substantial investment plans in India , whichare currently being pursued.

y

But he says nor are there many opportunities forgrowth through acquisitions in India , particularly insectors like steel , where the value to be captured islimited.



Globalization of TATA STEELy So to pursue our overall growth strategy , they needed

to go beyond India.y

Acquired NatSteel Asia,

headquartered out of Singapore , in 2004 , it gave them immediate access tosix markets in the region , including Vietnam , thePhilippines , and Malaysia.

y These first regional acquisitions also let them test thewaters of M&A and taught us how to run atransnational business , to understand the culturalissues , and to integrate larger organizations.

y Corus deal.



CORUS DEALy Corus:one part of the company had very efficient

operations , and the other part had lots of potential for

improvement.y He compares it with TATA STEEL saying:Tata Steel

itself went through a phase , in the 1990s , when ittransformed itself into the most globally competitive

company in its sector from a not-so-competitive one.y They feel that there is a similar transformational

journey ahead for Corus.



CORUSy Corus is a subsidiary of Tata Steel , part of India's Tata

Group , one of the world's largest steel producers , with

headquarters in London , England.y The Company was formed from the merger

of Koninklijke Hoogovens.N.V. with British Steel PLCon 6 October 1999. It was once a constituent of

the FTSE 100 Index , but was taken over by Tata in2007.



CORUS DEALy British Steel was a major British steel producer. It

originated as a nationalized industry , the BritishSteel Corporation (BSC), formed in 1967. This wasconverted to a limited company , British Steel PLC , andprivatized in 1988. It was once a constituent of the FTSE 100 Index but following mergers , thebusiness is now owned by Corus , a Tata Steel company.

y

The FTSE 100 Index also called FTSE 100, FTSE, or, informally , the ' footsie is a share index of the100 most highly capitalized UK companies listed onthe London Stock Exchange.



APPROACH TO ACQUISITIONSy Tend to look at an acquisition as a partnership rather

than an acquisition.y

They don t send planeloads of people into a newcompany. Instead , we only send in a few integrators.That s been the key interface.

y For example , after they closed the transaction for

Corus , on April 2 , 2007, they worked together for thenext six months on co creating a vision for the enlargedenterprise.



CULTURAL BARRIERS IN ACQUIRIN G

EUROPEAN COMPANIESy There will be differences in cultures one cannot make a

single-culture organization. But it is critical to build a

uniform performance culture. By that , he mean howwe think as one enterprise and set targets for the largerorganization.

y Setting of benchmark performance and and setting

group vision.y These things are especially relevant now because thereare no standard operating procedures for overcoming aglobal financial crisis.



Plans adopted for acquisitions by TATA s

y Acquisition requires a lot of maturity from the senior leadership on allsides , as it depends on a great deal of adaptability to new situations , cultures , and sensitivities. Hence a concrete action plan is required.

y Lot of time is required to positively influence a large organization oreven to establish trust in the sincerity of the shared vision.

y TATA s shared and adopted good practices across the organizationthrough performance improvement teams , lending credibility to theconcept of shared change. Hence this provided the employees in theorganization a sense of confidence.



Wh at are t h e effects of t h e financial crisesy The crisis had different effect on different regions(i.e. Europe , Asia & India).

y Europe has been affected the worst , as the size and impact of the contraction hasbeen severe. At Tata Steel Europe , the production cuts have been significant.

y Southeast Asia is kind of a mixed bag . Thailand , for example , had been affected by the crisis much earlier than elsewhere in the region because of the political andgeneral economic situation there whereas Singapore market was stable in the crises .

y In India , TATA s are actually increasing their production base for steel , even as the

rest of the world is contracting.y For the entire Southeast Asian business , TATA s are focusing more on cost

competitiveness through improved operating practices and tight working-capitalmanagement.



M anagement tactics during recessiony Lot of time is spend focusing on performance management , capital allocation ,

and liquidity management.

y

Raised equity , which will be deployed in some very attractive capital projects , especially the growth projects in India.

y Extremely focused on generating cash savings in the organization.Improvements to ensure further reductions in working capital and spendingmanagement.

y Pipeline of capital projects especially the Indian expansion projects and themining projects , which are value creating under any economic conditions andtherefore have to prioritize their capital needs.



Align organization wit h a complex agenday Communication has played an important part in ensuring

that the organization is geared up to the challenges.

y The key is to make finance and to do this , we use the fiveCs: costs, contribution , capital expenditure , capitalpreservation , and cash flows.

y Alert the Union Leaders in India to the forthcomingchallenges , so that they could in turn communicate thesame to the wider workforce.



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INTERVIEW OF TATA CFO

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