Tata Corus case analysis @ garg

Submitted To:

Dr.R.Sahu

By :

Jitesh Maharwal(2004 IPG 29 )

Nikhil Garg(2004 IPG 44)

Harendra Singh(2004 IPG 83)

Sunny Tyagi(2004 IPG 83)

Tata - Corus –A case of Acquisition

Contents

TATA & CORUS: A Case of Acquisition .......................................................................... 3

Steel Industry Background .............................................................................................. 6

Tata and Indian Steel Industry ........................................................................................ 9

SWOT Analysis: ....................................................................................................... 11

Global Steel Industry .................................................................................................... 12

Competition: US, Europe and Emerging Markets ........................................................ 12

Corus and Steel Production in the U.K ......................................................................... 13

Restoring Success ..................................................................................................... 14

SWOT Analysis: ....................................................................................................... 14

The Deal ........................................................................................................................ 16

Structuring and Pricing a deal ....................................................................................... 19

Demand Analysis ...................................................................................................... 20

Global Market ........................................................................................................... 21

Post Acquisition Tata .................................................................................................... 22

Appendix ....................................................................................................................... 23

Exhibit – 2 ................................................................................................................. 23

Exhibit –3 .................................................................................................................. 25

Exhibit – 4 ................................................................................................................. 27

Exhibit – 5 ................................................................................................................. 28

Exhibit – 6 ................................................................................................................. 29

Exhibit – 8 ................................................................................................................. 30

Exhibit – 9 ................................................................................................................. 31

Exhibit – 10 ............................................................................................................... 33

TATA & CORUS: A Case of Acquisition

“There are not many opportunities for producers in emerging low-cost markets to gain

access to the markets of Europe other than by acquiring a company like Corus,”

John Quigley (Editor, Industry Publication Steel week)

Finance minister P. Chidambaram offered unspecified help, if needed, to close the deal;

fellow steel magnate Lakshmi Niwas Mittal cheered the acquisition, and excited TV

newsreaders gushed. India’s first Fortune 500 MNC was born.

Tata acquired Corus, which is four times larger than its size and the largest steel producer in

the U.K. The deal, which creates the world's fifth-largest steelmaker, is India's largest ever

foreign takeover and follows Mittal Steel's $31 billion acquisition of rival Arcelor in the

same year. Over the past five years, Indian companies had made global acquisitions for

over $10 billion. The Tata bid almost equals this amount. Most of them have averaged $100

to 200 million.

"It is a two-way street now," Kamal Nath (Commerce Minister, India) said. "Not only India

is seeking foreign investment, but Indian companies are emerging investors in other

countries."

Ratan Tata has said he is confident the two companies have “a cultural fit and similar work

practices.” Nearly 30 years ago J.R.D Tata had lured away a young engineer from Corus’s

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 Steel’s

managing director until six years ago.

Until the 1990s, not many Indian companies had contemplated spreading their wings

abroad. An Indian corporate or group company acquiring a business in Europe or the U.K.

seemed possible only in the realm of fantasy. Recent reports of United Nations Conference

on Trade and Development (UNCTAD) and other organizations have recorded the fact that

nowadays Foreign Direct Investment (FDI) is more likely to flow in through cross border

mergers (and not through Greenfield Projects). Though Corus is four times bigger than

Tata but in the year 2006 the operating profit for Tata was $840 million, whereas in case of

Corus it was $860 million. There are some major inputs, which leads Tata towards this

huge profit.

On October 20 2006, the boards of Tata Steel and Corus announced their agreement on the

terms of the recommended acquisition of the entire issued and to be issued share capital of

Corus at a price of 455 pence in cash for each Corus Share, valuing Corus at £4.3 billion.

Tata Steel said its 455-pence-a-share offer for Corus represents on an enterprise value, a

price earning ratio of 7.9 times Corus’ ’06 earnings and includes a premium of

approximately 26.2% to the average closing mid-market price of 360.5 pence. Details of the

merger were likely to be decided by a strategic and integration committee that would

develop and execute the integration and growth plans for the combined entity. Corus is

much larger than Tata Steel, both in volumes and sales figures. Globally, it is ranked ninth

in terms of volume. Tata Steel, in comparison, is ranked 58.

Ratan Tata, Chairman of Tata Steel, said:

“This proposed acquisition represents a defining moment for Tata Steel and is entirely

consistent with our strategy of growth through international expansion. Corus and Tata

Steel are companies with long, proud histories. We have compatible cultures of

commitment to stakeholders and complementary strengths in technology, efficiency,

product mix and geographical spread. Together we will be even better equipped to remain at

the leading edge of the fast changing steel industry.”

Jim Leng, Chairman of Corus, said:

“This offer from Tata Steel reflects the substantial value created for Corus shareholders

since the placing and open offer and launch of our “Restoring Success” programme in 2003.

In the middle of last year, my board agreed a strategic way forward for Corus to seek access

to low cost production and high growth markets. Consistent with this, the Company held

talks with a number of parties from Brazil, Russia and India. This transaction represents the

culmination of these talks. This combination with Tata, for Corus shareholders and

employees alike, represents the right partner at the right time at the right price and on the

right terms. This creates a well balanced company, strategically well placed to compete in

an increasingly competitive global environment.”

Tata Steel offered to fund upfront the IAS 19 deficit on the Corus Engineering Steels

Pension Scheme by paying £126 million into the scheme; and to increase the contribution

rate on the British Steel Pension Scheme from 10 percent. to 12 percent until 31 March

2009. The Acquisition would be made by Tata Steel UK, a wholly-owned indirect

subsidiary of Tata Steel.

The Corus Directors unanimously recommended that Corus Shareholders vote in favor of

the Scheme after taking advice from Credit Suisse, J P Morgan Cazenove and HSBC. If the

deal sailed through, they would be fifth largest global steel producer with pro forma crude

steel production of 23.5 million tonnes in 2005. Tata Steel announced that it was keen to

retain Corus’s management, including chief executive Philippe Varin. The combination is

strategically compelling, creating a vertically integrated global steel group.

The acquisition would position the combined group as the fifth largest steel company in the

world by production, with a meaningful presence in both Europe and Asia. The powerful

combination of low cost upstream production in India with the high end downstream

processing facilities of Corus will improve the competitiveness of the European operations

of Corus significantly. The combination will also allow the cross-fertilization of research

and development capabilities in the automotive, packaging and construction sectors and

there will be a transfer, from Europe to India, of technology, best practices and expertise of

senior Corus management. In addition, Tata Steel will retain access to low cost raw

materials and slab for the enlarged group, and exposure to high growth in emerging

markets, whilst gaining price stability in developed markets.

As per the agreement, 75 per cent of Corus shareholders would have to tender their shares

for the acquisition to be complete. When complete, this would be the largest takeover by an

Indian company overseas. The deal would also catapult the combined entity to among the

world's largest steel companies with a total capacity of about 24 million tonnes per year.

The new, combined entity of Tata Steel-Corus would have a capacity of 40 million tonne by

2011-12. and a turnover of $32 billion by 2011-12 with an EBIDTA margin of 25%". The

Tata Steel has developed a six-pronged strategy in 2003 where the target was to increase

capacity from 4 million tonne then to 30 million tonne by 2015. The $8 billion Tata

Steel-Corus deal would be at No 5 among the top deals witnessed by the steel industry over

the last few years.

Tata acquired Corus on the 2nd

of April 2007 for a price of $12 billion making the Indian

company the world’s fifth largest steel producer. This acquisition process has started long

back in the year 2005. However, Corus was involved in a considerable number of Merger &

Acquisition (M&A) deals and joint ventures (JVs) before Tata. This process started in the

year 2000 and with Tata it came to an end. In a period of seven years Corus was involved in

14 deals apart from Tata. (Refer Exhibit – 1 for the details about M&A deals by Corus). In

2005, when the deal was started the price per share was 455 pence. But during the time of

acquisition held in 2007, the price per share was 608 pence, which is 33.6% higher than the

first offer. For this deal Tata has financed only $4 billion, although the total price of this

deal was $12billion. Here the important point is how Tata could manage to get such a huge

amount for this deal?

However as stated by Muthuraman (the Managing Director of Tata Steel), the bid made to

Corus was unanimously supported by the management of the company and recommended

to its shareholders.

In an interview to CNBC India, B Muthuraman also said that they are acquiring Corus for

synergy and not for tonnage. "There are synergies in operations, manufacturing, marketing

etc."

Steel Industry Background

Steel is an alloy of iron and carbon containing less than 2% carbon and 1% manganese and

small amounts of silicon, phosphorus, sulphur and oxygen. Steel is the most important

engineering and construction material in the world. It is used in every aspect of our lives,

from automotive manufacture to construction products, from steel toecaps for protective

footwear to refrigerators and washing machines and from cargo ships to the finest scalpel

for hospital surgery.

Most steel is made via one of two basic routes:

Integrated (blast furnace and basic oxygen furnace).

Electric arc furnace (EAF).

The integrated route uses raw materials (that is, iron ore, limestone and coke) and scrap to

create steel. The EAF method uses scrap as its principal input.

The EAF method is much easier and faster since it only requires scrap steel. Recycled steel

is introduced into a furnace and re-melted along with some other additions to produce the

end product.

Steel can be produced by other methods such as open hearth. However, the amount of steel

produced by these methods decreases every year.

Of the steel produced in 2005, 65.4% was produced via the integrated route, 31.7% via

EAF and 2.9% via the open hearth and other methods.

At a steel mill, the crude steel production process turns molten steel into ingots, blooms,

billets or slabs. These are called semi-finished products. Semi-finished products are solid

blocks of steel, usually with a square or rectangular cross section.

Finished steel products are forged from semi-finished products. They are classified as

follows:

Cold-finished bars and flats (bright bars)

Cold-finished sections including forged and cold-formed sections

Cold-rolled narrow strip

Cold-rolled plate and sheet in coil and lengths

Deformed reinforcing bars

Drawn wire

Forged bars

Forgings (unworked)

Heavy sections, piling and welded structural sections

Hot-rolled bars and flats in lengths

Hot-rolled light sections

Hot-rolled narrow strip including universal plates

Hot-rolled rod in a coil (including reinforcement bar in a coil)

Hot-rolled wide strip, plate and sheet

Points, switches, crossings, tyres, wheels and axles

Rails and rolled accessories

Silicon electrical sheet and strip

Steel castings (unworked)

Steel tubes (seamless and welded, and steel tube fittings)

Tinmill products

Zinc- and other-coated sheet and strip

A flat steel product is typically made by rolling steel through sets of rollers to produce the

final thickness. There are two types of flat steel products:

Plate products. Vary in thickness from 10 mm to 200 mm. Plate products are used for ship

building, construction, large diameter welded pipes and boiler applications.

Strip products. Can be hot or cold rolled and vary in thickness from 1 mm to 10 mm. Thin

flat products are used in automotive body panels, domestic white goods (for example,

refrigerators and washing machines), steel (or tin) cans, and a number of other products

from office furniture to heart pacemakers.

A long product is a rod, a bar or a section. Typical rod products are the reinforcing rods

used in concrete, engineering products, gears, tools etc. are typical of bar products and.

Sections are the large rolled steel joists (RSJ) that are used in building projects. Wiredrawn

products and seamless pipes are also part of the long products group. Supply of raw

materials is a key issue for the world steel industry. IISI manages projects which look at the

availability of raw materials such as iron ore, coking coal, freight and scrap.

Scrap iron is mainly used in electric arc furnace steelmaking. As well as scrap arising in the

making and using of steel, obsolete scrap from demolished structures and end-of life

vehicles and machinery is recycled to make new steel. About 500 million tons of scrap are

melted each year.

Iron ore and coking coal are used mainly in the blast furnace process of iron making. For

this process, coking coal is turned into coke, an almost pure form of carbon which is used as

the main fuel and reductant in a blast furnace.

Typically, it takes 1.5 tons of iron ore and about 450kg of coke to produce a ton of pig iron,

the raw iron that comes out of a blast furnace. Some of the coke can be replaced by

injecting pulverized coal into the blast furnace.

Iron is a common mineral on the earth’s surface. Most iron ore is extracted in opencast

mines in Australia and Brazil, carried to dedicated ports by rail, and then shipped to steel

plants in Asia and Europe.

Iron ore and coking coal are primarily shipped in capesize vessels, huge bulk carriers that

can hold a cargo of 140,000 ton or more. Sea freight is an area of major concern for

steelmakers today, as the high demand for raw materials is causing backlogs at ports, with

vessels delayed in queues.

Since the World War II, the steel industry has experienced three distinct phases- growth

(1950-73), stagnation (1974-2001) and boom (2002-2006). The demand for steel grew at

an annual rate of 5.8% during 1950-73 as the industrializing nations were building their

civil infrastructure. The oil shocks of 1973 through 1979 slowed consumption in the

second phase. The production of crude steel grew at 0.6% p.a. over the entire period. Steel

prices declined by 2-3 % p.a. During 1999-2001 the industry’s overcapacity hovered near

25% globally. Only a few companies were able to sustain.

Since 2002 the annual steel production has grown at 7-8% driven almost entirely by the

double digit growth in China. The huge demand from china has caused a commensurate

leap in steel prices.

The industry has experienced a drop in the over capacity from 23% in 2001 to about 17%

from 2003-2005. But the demand from China has also witnessed a structural change. From

2002-2004 China’s capacity for producing crude steel increased on average by 55%. By

2005 China became a net exporter of steel. In the first half of 2006 China overtook Japan,

Russia and the EU 25 to become the world’s largest steel exporting country.

Exhibit 3 provides a list of Global Steel Manufacturers and a brief description of top five

steel companies. Exhibit 4 provides a comparison of financial indicators of major steel

firms.

Tata and Indian Steel Industry

Tata Steel has established by Indian Parsi Businessman Jamsetji Tata in 1907, exactly in

the year when British American Tobacco (BAT) has started its first factory in India. But

it started operating in the year 1912. Tata Steel holds a very vital place in Indian business

history, because it has introduced some of the unique concepts like 8-hour working days,

leave with pay and pension system for the first time in India and the first player to start

rapid industrialization process. In the later part the concepts invented and implemented by

Tata became lawful and compulsory practice for the Indian employees. From Tata Steel,

Tata has started investing in various other businesses like; Oil mills, Airlines, Publishing,

Motors, Consultancy services etc in a short span of 30 years. In the year 1945 Tata entered

into tea business by the name of Tata Tea, which was called as Tata Finlay earlier. Tata

also entered into exports as Tata Exports, which is the most successful and the largest

export house in India. During the entire business in India Tata has seen many ups and

downs, in different fields of business. If we will look at the company’s financial

status/condition, it will give some idea about the condition and performance of the

company across the years. (Refer Exhibit – 2, 3 & 4 for the detail about the company’s

performance from 1997-2006)

Tata Steel is the largest, flagship company of the Tata Group of companies, headquartered

in Mumbai, India2. The Tata Group is the oldest, largest, most respected industrial house in

India. At last count, it had 96 operating companies categorized into 7 businesses, and

include India’s largest companies in the fields of steel, automobiles, chemicals, hotels,

software,

Established in 1907, Tata Steel is Asia's first and India's largest private sector steel

company. Tata Steel is among the lowest cost producers of steel in the world and one of the

few select steel companies in the world that is EVA-positive (Economic Value Added).

Concerns over the availability of iron ore and coal, and the resultant volatility in prices,

meant that most Indian steel producers had to integrate backwards in order to have greater

access and pricing power over these commodities. Tata Steel has its own iron ore, coal and

chrome mines and reserves (on long term leases from the Government of India), and hence

is largely self-sufficient in most critical raw materials. However, it does not have the right

to export the ores and coal outside India.

Its captive raw material resources and the state-of-the-art 5 MTPA (million tonne per

annum) plant at Jamshedpur, in Jharkhand State, India gives it a competitive edge.

Determined to be a major global steel player, Tata Steel has recently included in its fold

NatSteel, Asia (2 MTPA) and Millennium Steel (1.7 MTPA) creating a manufacturing

network in eight markets in South East Asia and Pacific Rim countries. The Jamshedpur

plant is expected to expand its capacity from 5 MTPA to 7 MTPA by 2008. The Company

plans to enhance its capacity, manifold through organic growth and investments. The

Company's wire manufacturing unit in Sri Lanka is known as Lanka Special Steel, while

the joint venture in Thailand for limestone mining is known as Sila Eastern. Tata Steel's

products are targeted at the quality conscious auto sector and the burgeoning construction

industry. With wire manufacturing facilities in India, Sri Lanka and Thailand, the

Company plans to emerge as a major global player in the wire business. Tata Steel's

products include hot and cold rolled coils and sheets, galvanised sheets, tubes, wire rods,

construction rebars, rings and bearings. In an attempt to 'decommoditise' steel, the

company has introduced brands like Tata Steelium (the world's first branded Cold Rolled

Steel), Tata Shaktee (Galvanised Corrugated Sheets), Tata Tiscon (re-bars), Tata Bearings,

Tata Agrico (hand tools and implements), Tata Wiron (galvanised wire products), Tata

Pipes (pipes for construction) and Tata Structura (contemporary construction material).

The company has launched the Customer Value Management initiative with the objective

of creating complete understanding of customer problems and finding solutions jointly.

The company's Retail Value Management addresses the needs of distributors, retailers and

end consumers. The company has also launched India's first steel retail store – steel

junction - for making steel shopping a happy and memorable experience.

Tata Steel’s profitability ranks among the best in the industry. It posted comparatively

good results for the year ended March ’06. Consolidated sales grew at 26% to Rs 20,244

crore. Operating margins were a robust 31% in fiscal 2006. Consolidated profits for the

year stood at Rs 3,721 crore, an increase of 4%. It bought NatSteel in 2004 for Rs 1,313

crore and Millennium Steel for Rs 675 crore in 2005.

In 2006 Tata Steel was ranked once again the best steel making company in the world by

World Steel Dynamics Inc. USA (WSD) based on a study of 22 world class steel makers

-consecutively for the second time. The WSD report of February 2006 covered the study of

all the leading steel manufacturing companies across the globe including POSCO, Arcelor,

Nippon Steel, Bao Steel, Thyssen Krupp on 20 different parameters. Emerging out of the

study, Tata Steel was ranked first with a weighted average score of 8.51 as against a score

of 8.11 in 2005. POSCO of South Korea followed in the second place with 8.41. Tata Steel

has been continuously marching towards becoming a global steel enterprise and aspires to

become a 15 MT steel producer by 2010. It is also developing a deep-sea port in Orissa

along with Larsen & Toubro to facilitate the flow of inbound and outbound commodities.

Apart from the main steel division, Tata Steel's operations are grouped under strategic

profit centres like tubes, growth shop (for its steel plant and material handling equipment),

bearings, ferro alloys and minerals, rings, agrico and wires.

Tata Steel's products include hot and cold rolled coils and sheets, tubes, wire rods,

construction bars, structurals, forging quality steel, rings and bearings. In an attempt to

'decommoditise' steel, the company has recently introduced brands like Tata Steelium

(India's first branded cold rolled steel), Tata Shaktee (galvanised corrugated sheets), Tata

Tiscon (re-rolled bars), Tata pipes, Tata bearings, Tata Wiron (galvanised wire products)

and Tata Agrico (hand tools and implements). Tata Steel is also exploring opportunities in

the ferro-chrome and titanium businesses.

Tata Steel has numerous joint ventures and subsidiaries. Among them are:

Tinplate Company of India

Tayo Rolls

Tata Ryerson

Tata Refactories

Tata Sponge Iron

Tata Metaliks

Tata Pigments

Jamipol

TM International Logistics

mjunction services

TRF

Jamshedpur Utility and Service Company (JUSCO)

The Indian Steel and Wire Products(ISWP)

Lanka Special Steel

Sila Eastern Company

The Indian Steel industry is regarded as the most important component for the

development of nation, because steel industry (heavy industry) is considered as a very

important and influential parameter for the development of any modern economy. The

finished steel production in India has grown from 1.1 million tones in 1951 to 31.63

million tones in 2001-02, which can be regarded as a remarkable example of India’s

development in economic activities. Tata played a vital role in the improvement of steel

production also. For that reason in the development of India’s economy, Tata played a

significant role. As a result the consumption level of steel from 1990 to 2002 was

continuously in an increasing order, but in 2003 it was not like earlier. In respect to the per

capita income and consumption of steel it is very less in India with compare to other

countries. (Refer Exhibit – 5 for the details about steel consumption level)

India’s major market for steel and steel items include USA, Canada, Indonesia, Italy, West

Asia, Nepal, Taiwan, Thailand, Japan, Sri Lanka and Belgium. The major steel items of

export include HR coils, plates, CR and galvanized products, pipes, stainless steel, wire

rods and wires. With the fall in prices along with depressed domestic demand, India has

been increasing exports to overcome the excess supply situation. This has resulted in

antidumping actions being taken by developed countries like USA, EU and Canada. The

trade action by some countries against Indian steel industry has, to some extent, affected

India’s exports to these countries. The Government of India and the Indian steel producers

are trying to combat such actions despite such efforts being very expensive and involving

time-consuming procedures. (Refer Exhibit – 6 for the detailed about steel production by

Tata in India)

SWOT Analysis:

Strengths

•Lowest Cost Producer in

world

•Experience of TATA group in

doing global acquisitions

•Stable balance sheet( Low

debt to equity ratio)

Opportunities

•Consolidation trend in Steel

Industry

•CSN’s tarnished image after

failure of 2002 negotiations

•To get exposed to the global

steel market ( will save time

and learning space for them)

Weaknesses

•Corus was triple the size of

TATA steels in terms of

production

Threats

•Brazilian player CSN

•Russian player Severstal

•No committed financers to

support the possible deal

Global Steel Industry

In global steel industry the consumption of steel has been 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 tones by 2010 and 1.62 billion tones 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

tones in 2005 and 418.8 million tones in 2006. And for this increasing demand of steel

market it is not possible for a single company to capture the market alone. (Refer Exhibit –

7 for the details about the steel production by different companies of the world) In that

production process Tata may play a vital role. For that reason IISI is giving its opinion in

favor of Tata.

For 2007, S&P projects GDP growth of 2.4%, versus GDP growth of 3.3% in 2006.

Through April 2007, motor vehicle sales fell 3.0% while motor vehicle production

declined 5.5%. In 2006, motor vehicle sales fell 2.6%, while production was down 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 35.1%, compared to

a 6.6% increase for the S&P 1500 Index and a 14.9% rise in the S&P

Materials Index. In 2006, the S&P Steel Index increased 58.2%, versus a 13.3% increase

for the 1500 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. (Refer Exhibit – 8 for the detailed about the production of steel by

different countries of the world)

Competition: US, Europe and Emerging Markets

In the past, industry consolidation contributed to reduced cyclicality. The top 10 steel

makers represent about 28% of global production. Besides Arcelor Mittal, four of the top

10 are in Asia, three in Europe and two in the U.S. In addition to China’s plan for

consolidation many of the leading steel producers have ambitious growth plans that will

entail further consolidation. Lakshmi Mittal, the CEO of Arcelor Mittal stated in June 2006

that winning companies in the steel industry will have somewhere between 150m-200m

tons of annual capacity by 2015 and that scale is crucial in the pursuit of value.

Shanghai Baosteel, which, although founded in 1998, is already the world’s fifth largest

steel maker producing 22.7 m tons in 2005. The potential acquisition of Corus by Tata

Steel would create a new entity with a production volume close to Baosteel’s.

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 company is also engaged in

providing a variety of services including design, technology and consultancy services.

Corus’ products and services are acquired by customers from diverse fields such as

commercial and military aerospace ventures, the automotive, construction, engineering,

defense and security, as well as the rail and shipbuilding industry. In terms of performance,

the company is regarded as the largest steel producer in the UK with £10,142 million of

annual revenue (for 2005) and a work force of 50 000 employees. 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. Looking at the financial status of the

company from 1996-2005, a degree of fluctuation between the years can be seen. But

irrespective of all these factors Corus continue the business as it was continuing. (Refer

Exhibit – 9 & 10 for the details of financial performance of the company across the years)

In 1990, the Hoogovens group had five divisions; Steel, Aluminum, Technical Services,

Subcontracting, and the newly formed Steel Processing and trading. In 1999, the trend

towards greater rationalization in the European steel industry led to the merger discussions

with British Steel. At that time Hoogovens had 17 business units with a turnover of 4.9 b

Euro.

The British Steel Corporation was formed from the UK’s 14 main steel producing

companies. In 1987, the UK government formally announced its intention to privatize the

British Steel Corporation. The British Steel Act 1988 transferred the assets of the

corporation to British Steel, a company registered under the Companies Act. The early

1990s saw reduced demand and it was not until 1993 that growth in the UK economy

gradually gathered pace and was reflected in a partial recovery in steel demand and prices.

The trend continued into 1994 and helped by continuing efficiency and productivity gains,

British Steel returned to profit. On October 6, 1999, the merger of Hoogovens with British

steel to form Corus came into effect.

Corus has manufacturing operations in many countries with major plants located in the

UK, The Netherlands, Germany, France, Norway and Belgium. The company produced

around 18 million tonnes of crude steel in 2005, which represented approximately 10% of

total EU production and positioned the company as the 9th largest steel producer in the

world and the 2nd largest producer in Europe. Corus produces carbon steel by the basic

oxygen steelmaking method in the UK at Port Talbot, Teesside and Scunthorpe and in The

Netherlands at IJ muiden. In addition, carbon steel is produced by the electric arc furnace

method in the UK at Rotherham. Corus has approximately 50% of the UK carbon steels

market and around 11% of the European (including UK) carbon steels market.

In 2005 Corus generated turnover of £9.1 billion and produced 19 million tonnes of steel

and delivered over 0.6mt of aluminum. At the end of December 2005 Corus had 47,300

employees. From October 2003 Corus has been structured into four main divisions: Strip

Products, Long Products, Aluminium and Distribution and Building Systems.Corus has a

strategy focused around carbon steel, with the intention of: Ensuring that upstream

steelmaking facilities are optimized and that the leading position of its I J muiden site is

maintained. Pursuing selective growth of downstream businesses seeking opportunities to

participate in the ongoing consolidation of the world's steel industry. Following his

appointment as Chief Executive of Corus with effect from 1 May 2003, Philippe Varin

carried out an intensive and detailed review of the Group's activities. As a result a number

of key initiatives were launched, known as the 'Restoring Success' initiatives. These focus

on introducing new leadership and instilling a new corporate culture across the Group,

aligning the financial resources available to the Group with its future strategic needs, and

returning all parts of the Group to acceptable levels of profitability. The latter will be done

by building on our 'Restoring Success' initiatives -existing cost reduction programmes,

implementing restructuring proposals for the UK asset base and initiating Group-wide

efficiency measures.

Restoring Success

The Restoring Success programme, launched in June 2003, was designed to deliver a

£680m improvement in earnings before interest, tax and amortization by the end of 2006.

During 2005 the company continued to make good progress and achieved approximately

80% of the overall target.

As well as savings through cost reduction and improved operational efficiency, action

plans are also focused on improving our safety record and achieving best in class customer

service.

Safety During 2005, Corus saw a further 24% reduction in the frequency of lost time

injuries, a good lead indicator of performance. Service As part of its Restoring Success

programme, Corus set out to improve the percentage of deliveries made on time, from 74%

in 2003, to 90% by the end of 2006. Significant and sustainable progress was made in this

area, with 85% of deliveries having met this target during 2005.

Savings By the end of December 2005 Corus had achieved nearly 80% (£555m) of the

£680m per annum savings that it had committed to deliver by the end of 2006.

The Group's aim is to close the competitive gap that currently exists between Corus and its

European peer group. Corus estimates that this gap in 2003 was some 6% at the EBITDA

margin level (i.e. EBITDA to turnover) when measured against the average of its European

competitors.

Full implementation of the 'Restoring Success' initiatives above is designed to close the

current competitive gap by the end of 2006.

SWOT Analysis:

Strengths:

•World’s ninth largest and

Europe’s second largest steel

producer

•Wide range of products

•Presence of operating

facilities spread in whole EU

Opportunities:

•Consolidation trend in Steel

Industry

•To get right price at a time

when market is less volatile

Weaknesses: Threats:

•Corus was bleeding because of

high operational costs

•Section 201 tariff imposed by

Bush in 2002 led to loss in Corus

clientele

•Huge pension liability might have

led to collapse of the deal

•Disagreement of Labor and

government due to possibility of

job cut

The Deal

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’s 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 compared to Tata, the company was valued less than Tata (at

approximately $6 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. 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 ₤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. 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 pro forma crude

steel production of 27 million tones 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 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 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 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

has described below

September 20, 2006 : Corus Steel has decided to

acquire a strategic partnership

with a Company that is a low cost

producer

October 5, 2006

: The Indian steel giant, Tata Steel

wants to fulfill its ambition to

expand its business further.

October 6, 2006

: The initial offer from Tata Steel

is considered to be too low both

by Corus and analysts.

October 17, 2006

: Tata Steel has kept its offer to

455p per share.

October 18, 2006

: Tata still doesn’t react to Corus

and its bid price remains the

same.

October 20, 2006

: Corus accepts terms of ₤ 4.3

billion takeover bid from Tata

Steel

October 23, 2006

: The Brazilian Steel Group CSN

recruits a leading investment

bank to offer advice on possible

counter-offer to Tata Steel’s bid.

October 27, 2006

: Corus is criticized by the

chairman of JCB, Sir Anthony

Bamford, for its decision to

accept an offer from Tata.

November 3, 2006

: The Russian steel giant Severstal

announces officially that it will

not make a bid for Corus

November 18, 2006

: The battle over Corus intensifies

when Brazilian group CSN

approached the board of the

company with a bid of 475p per

share

November 27, 2006

: The board of Corus decides that

it is in the best interest of its will

shareholders to give more time to

CSN to satisfy the preconditions

and decide whether it issue

forward a formal offer

December 18, 2006 : Within hours of Tata Steel

increasing its original bid for

Corus to

500 pence per share, Brazil's CSN

made its formal counter bid for

Corus at 515 pence per share in

cash, 3% more than Tata Steel's

Offer

January 31, 2007 : Britain's 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

April 2, 2007 : Tata Steel manages to win the

acquisition to CSN and has the

full

voting support form Corus’

shareholders

Structuring and Pricing a deal

Financing Structure Financing India's largest leveraged buyout comprised of a $3.88 billion equity

contribution from Tata Steel, a fully underwritten non-recourse debt package of $5.63 billion, and a

revolving credit facility of $669 million.

As per the acquisition plan a special purpose vehicle, a wholly owned subsidiary, called Tata Steel UK

would be set up by Tata Steel. The acquisition was proposed to be effected under section 425 of the

English Companies Act 1985 and upon approval from the Corus shareholders. Tata Steel UK would

offer a price of 455 pence per Corus share valuing Corus at £4.3b ($8.04b). This price represented a

multiple of 7.9 times the EBITDA of Corus from continuing operations for the twelve months to July 1,

2006. The acquisition was to be structured as a 100 percent leveraged buy out funded through cash

resources and loans raised by Tata Steel and the SPV. Under the plan Tata Steel UK would arrange a

loan of £1.6 b ($3056m), a revolving credit facility and a bridge loan and the rest would come from Tata

Steel (to the SPV).

Tata Steel appointed Credit Suisse, ABN Amro and Deutsche Bank to arrange financing. Of the £3.3

billion of financing being raised at the SPV level, Credit Suisse would provide 45% and ABN AMRO

and Deutsche 27.5% each. The $1.8 billion bridge debt being raised at the Tata Steel level in India

would be shared between Standard Chartered and ABN AMRO.

The financing structure and the break up of sources are shown in Exhibits 13 and 14.

Operational Structure One of the biggest concerns Tata executives had was whether the inevitable

cultural conflicts between the organizations would pose significant operating problems. Integrating a

large company that operated on a different continent with diverse cultures and operating environments

was going to be no small task. Exacerbating this problem was the fact that Corus itself was formed by

the merger of an English and a Dutch company that had different cultures and profitability.

In line with the Tata Group’s approach to acquisitions, Tata Steel announced its intention to continue

with the senior management of Corus. Appointments to the Tata Steel and Corus were to provide

common platform for strategy and integration. According to the plan Ratan Tata would be the chairman

of both Tata Steel and Corus and Jim Leng would serve as deputy chairman of Tata Steel and Corus.

Three board members (including the CEOs) of each company would serve on the other company’s

board. A strategic and integration committee comprising of Ratan Tata, the CEOs and senior

management professionals of both companies was formed to develop and execute the integration plan

and further growth plans. Appropriate cross functional teams were to be formed to execute the

integration plan.

Strategy Muthuraman, the Managing Director of Tata Steel had a number of things to consider in

negotiating a deal for Corus. First of all, Tata Steel could not make an all cash offer and assume the

assets and liabilities of Corus on its balance sheet because of the sheer size. Second, both companies

had to convince their shareholders about the strategic and financial benefits to the companies.

Shareholders would be concerned about the size of the premium and the potential dilution in earnings

per share. Muthuraman explained in a conference:

While we have been talking about strategy in this world of consolidation and growing in size, both in

geography and in size, Tata Steel has been planning its long-term strategy. Tata Steel’s strategy, in

terms of what it wanted to do over a period of time of 10 years, between 2002-03 and 2015, was to grow

from four million tonnes per annum, which we were at that time, to about 30 million tonnes plus,

beyond the shores of India, multinational, and continuing to be in a low-cost position and continuing to

be EVA positive. That strategy had six elements. One of them was that we would build a strong base in

India, which is why we’re expanding Jamshedpur from five to 10 million, and we’re building three

greenfield projects.

The second part of the strategy was that we’d adopt a de-integrated strategy where we believed that the

world steel industry, over the last 150 years or so, had adopted a certain model of making from iron to

finished steel in one location, irrespective of where the raw materials were. We always believed that this

model will change, because steel has to compete with other materials and, for the sustainable

competitiveness of steel, it is necessary that this business model will undergo a change. We wanted to be

at the forefront of that change in business model, so we said we would look for private steelmaking in

countries which are rich in iron ore and coal or gas. So we thought of plants in India, we thought of

plants in Bangladesh, we thought of plants in Iran.

The third part of the strategy was raw material security. It’s important that we have raw material

security to be competitive and sustainable in this world. We have raw material security on a 100% basis

for our existing operations in Jamshedpur. We have a large extent of self-sufficiency for coal. Each of

our three greenfield projects in India will carry with it raw material iron ore security. We have some

strategic types and some strategic positions in terms of coal and limestone beyond the shores of India.

We said we should continue to look for raw material security, both in India and overseas.

The next part of our strategy was getting more out of steel, which is by branding, by going downstream,

by positioning the products, getting into construction solutions and so on. It is with that aim we formed

the joint venture with BlueScope. It is with that strategy that we started having a joint venture with

Ryerson of the US, for going downstream into processed materials.

The next part of the strategy was control over logistics. No large company – no large steel company –

can be sustainably competitive over a period of time without some control on the efficiency and costs of

logistics, so we decided to build a port in Orissa to connect Indian operations with our overseas

operations. We decided to start a shipping company with NYK of Japan, and these are all in progress.

Our acquisition of Corus and our partner in Corus to form a joint entity is part of this strategy, and it is

part of this strategy that we have been talking about for the last few years. Just like Mr Leng mentioned,

Corus had a strategy, and the partnership with Tata Steel was part of that strategy. We have looked at it

exactly in the same manner, and we believe that this entity, which will become, in terms of scale,

number five in the world, has the potential to consolidate the steel industry even further.

Indeed there was very little shared territory in the markets the companies served. Tata Steel has a strong

position in India, Singapore, Thailand and other parts of Asia whereas Corus has a strong presence in

Europe.

Exhibit 15 presents a summary of production and distribution facilities of the combined entity.

Synergy The merger of Tata Steel with Corus was expected to lead to a saving of $130 million savings

in 2007 till March 2008 and $400 million to the company every year after three years. The Corus group

has developed a breakthrough technology to reduce cost of steel production and Tata Steel was

planning to adopt the technology in the near future.

Demand Analysis

Domestic Market To establish a base case analysts and investment bankers made use of base case

forecasts of production and demand for steel in India and the rest of the world as well as the outlook for

steel prices. According to government estimates, domestic consumption of steel in India was expected

to go up to 60 mt by 2010 from the prevailing 35 mt, and to 100 mt by 2020. The planned capacity

expansions would lead to a capacity of 70 mt by 2020. Assuming a CAGR growth of 6 per cent in steel

demand, the domestic demand should be around 90 million tonnes by 2020. Also most steel companies

in India have strong balance-sheets, which will help them carry on with their expansion plans. For

example, companies like Steel Authority of India Ltd are almost debt free.

India has a per capita consumption of steel of around 30 kgs against 180 kgs in China and an average of

over 400 kgs in the developed countries. Analysts point out that India's steel consumption has stagnated

at around 30 kgs, despite increasing steel production, mainly because of an increasing population.

According to a report by Organisation for Economic Co-operation and Development, world steel

supply was likely to expand dramatically over the next two to four years. According to the report, much

of this unprecedented investment is occurring as a result of decisions by governments to support the

expansion of domestic steel-making capability. The report warned that these state-supported

expansions would lead to growing steel trade disputes and a return of overcapacity conditions within

the next few years. It also noted that the planned capacity expansions would represent a structural

problem for the global steel industry to the extent that production exceeds the projected increase in

demand for steel between 2005 and 2008. The OECD report projects Indian steel consumption to grow

by only 3.5 per cent in 2005 from the levels a year ago. It says the gap between demand and supply

would mean that the vast majority of India's new production capacity will be for export.

According to some analysts, demand from the US, Japan and China is expected to slow down, which,

coupled with the tightening availability of raw materials, will lead to softer prices in the short to

medium term. Further, new capacities were expected to come into play only around 2008. So analysts

expected a drop in prices around that time. But in the short-term they expected HRC (hot rolled coil)

prices to hover around $480-500 range in the short term. But there were worries about the long term.

Global Market

Global apparent consumption of steel increased at an average pace of more than 7 percent per annum

since 2002 to reach a record level of 1.113 billion tonnes in 2006. To meet this rise in demand, steel

production growth has accelerated sharply, reaching 1.24 billion tonnes in 2006, up by as much as 393

million tonnes (or 46%) compared to its level of 850 million tonnes in 2001. This growth in demand for

steel is creating a favorable situation for many steelmakers. Steel prices and the prices of some raw

materials in some markets are two times higher or more compared to levels prevailing in 2001.

China’s apparent crude steel consumption has doubled between 2000 and 2005 to reach 398 million

tonnes in 2006. The economy now accounts for around 32 percent of the world’s apparent steel

consumption. The rapid expansion of China’s industrial production and its strong urbanization trend

will ensure that steel consumption continues to rise, though growth should moderate slightly in coming

years from the double-digit rates observed in recent years.

In India, there is enormous potential for growth in steel consumption. Heavy investment in developing

the country’s infrastructure, such as railways, ports, and roads will fuel growth in the steel-intensive

construction sector. In Russia, steel consumption prospects are favorable, supported by the consumer

boom, which is now spreading to automobiles and housing, as well as the replacement of ageing

infrastructure. Brazilian demand for steel will continue to be supported in the future by the country’s

automotive and construction sectors.

Steel consumption in the Middle East is expanding rapidly from a relatively low level of 37 million

tonnes. Massive infrastructure and other building activity are driving this development.

In NAFTA, housing market problems and a slowdown in manufacturing activity in the U.S. could

contribute to a reduction in steel consumption this year from around 155 million tonnes in 2006, while a

recovery in demand could take place in 2008 as economic growth reaccelerates. Steel consumption in

the EU-27 is expected to stay on a gradual growth path in 2007 and 2008, thanks to the relatively

healthy outlook for domestic as well as external demand for products manufactured in steel-using

industries.

Post Acquisition Tata

Tata Steel has formed a seven-member integration committee to spearhead its union with Corus group.

While Ratan Tata, chairman of the Tata group, 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, and

chief financial officer Kaushik Chatterjee. The Corus group is represented in the committee by CEO

Phillipe Varin, executive director (finance) David Lloyd, and division director (strip products) Rauke

Henstra.

The acquisition by Tata amounted to a total of 608 pence per ordinary share or ₤6.2 billion (US $12

billion) which was paid in cash. 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 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 Steel’s share fell by 10.7 percent on the

Bombay stock market. Despite its four times smaller size and smaller capacity, Tata Steel’s operating

profit for 2006, earning $840 million on sales of 5.3 million tones, were very close in amount to those

generated by Corus ($860 million in profits on sales of 18.6 million tons).

Tata’s 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 entity’s interest obligation will amount to approximately $725 million after the

acquisition.

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 conflict with CSN Tata ended up

paying approximately 68% above the average price of Corus’shares. Another pressing issue resulting

for this deal that has created a dilemma between experts and analysts opinions is whether this

acquisition for 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 Britain’s 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.

“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

Appendix

Exhibit – 2 Financial 10 Yr. Balance Sheet Report

Tata Steel Limited Symbol: (C000009156)

http://www.tatasteel.com CUSIP: Price 3/22/2007 Shrs Out (th) Mkt Cap (th)

Exchang

e:

Country:

BOM

IND DCN: T080399284

ISIN:

INE081A01012

442.00 580,000 249,690

DJ Sector: PE Ratio Tot Ret 1Yr Beta

DJ Industry: IRON AND STEEL FORGINGS 6.54 6.01 #N/A

Company Status: Active Source: Thomson Financial

Scaling Factor : 1000000 INR

BALANCE SHEET 3/31/2006 - 3/31/2002 Currency:

INR

ASSETS 03/31/06 03/31/05 03/31/04 03/31/03 03/31/02

Cash And ST Investments 7,767.50 4,657.30 2,778.70 4,103.00 2,473.10 Receivables (Net) 21,983.80 20,209.30 13,873.80 16,510.10 17,538.20

Total Inventories 27,733.10 24,899.00 13,740.40 12,134.70 11,809.80 Other Current Assets 11 6.6 2.9 1698 1801.9

Current Assets - Total 59,080.60 50,719.70 43,701.60 38,781.50 35,623.30 Property Plant & Equipment - Net 107340.8 96807.1 80172.3 76600.8 77722.6

Total Investments #N/A #N/A #N/A #N/A #N/A

Other Assets 4,240.30 3,564.50 1,565.10 106.60 10,134.40 Total Assets 205,450.70 177,033.10 147,988.70 127,600.80 131,372.60

LIABILITIES & SHAREHOLDERS' EQUITY 03/31/06 03/31/05 03/31/04 03/31/03 03/31/02

Accounts Payable 30,278.20 32,051.30 21,513.50 18,364.20 4,917.40 ST Debt & Current Portion of LT Debt 3,752.60 3,362.90 2,433.30 4,325.30 5,617.60

Income Taxes Payable 3369.3 3434.9 14252.3 4855.6 1803.6 Other Current Liabilities 4,771.00 4,824.80 3,976.10 1,531.40 8,848.20

Current Liabilities - Total 49,573.00 51,006.00 45,998.80 32,147.60 27,254.90

Long Term Debt 27,876.20 27,902.60 30,598.80 38,953.20 44,338.10

Other Liabilities 0.00 0.00 0.00 0.00 0.00

Total Liabilities 101,396.60 102,726.30 100,935.30 94,347.10 95,950.80

Shareholders' Equity

Minority Interest 1,235.70 935.20 486.60 309.70 236.30

Preferred Stock 0.00 0.00 0.00 0.00 0.00

Common Equity 102,818.40 73,371.60 46,566.80 32,944.00 35,185.50

Retained Earnings 11.20 11.20 #N/A #N/A #N/A

Total Liabilities & Shareholders' Equity 205,450.70 177,033.10 147,988.70 127,600.80 131,372.60

http://www.tatasteel.com/

Rate Used to Translate From INR to INR 1.00 1.00 1.00 1.00 1.00

BALANCE SHEET 3/31/2001 -

3/31/1997 ASSETS

03/31/01 03/31/00 03/31/99 03/31/98 03/31/97

Cash And ST Investments 2,392.30 4,089.00 3,361.90 4,294.10 2,513.80 Receivables (Net) 19,186.50 12,727.13 13,449.78 14,244.30 17,566.42 Total Inventories 8,955.70 9,226.60 9,936.50 10,397.00 10,211.10 Other Current Assets 262.90 4,990.87 3,929.72 3,921.20 3,336.68 Current Assets - Total 32,256.10 32,406.30 32,302.80 34,201.40 34,512.50 Property Plant & Equipment - Net 75380.9 74240.6 70585.8 63000.4 55264

Total Investments #N/A #N/A #N/A #N/A #N/A

Other Assets

Total Assets

LIABILITIES & SHAREHOLDERS' EQUITY

9,202.90

125,309.10

03/31/01

8,281.20

120,803.90

03/31/00

5,540.00

114,283.00

03/31/99

2,970.70

106,407.00

03/31/98

2,783.20

99,208.70

03/31/97

Accounts Payable 3,100.40 3,155.30 3,874.00 3,405.40 3,529.00 ST Debt & Current Portion of LT Debt 787.40 6,997.20 9,404.40 6,120.10 782.80 Income Taxes Payable 1,802.00 1,670.40 1,855.30 1,505.80 1,114.00 Other Current Liabilities 9,803.00 7,843.40 6,827.60 7,084.30 7,414.30 Current Liabilities - Total 49,573.00 25,195.20 27,364.30 23,245.00 17,407.10 Long Term Debt 45,932.70 42,073.10 39,982.90 39,669.70 40,043.10 Other Liabilities 0.00 0.00 0.00 0.00 0.00 Total Liabilities


Minority Interest

76,424.80

0.00

75,219.90

0.00

72,638.80

0.00

65,758.20

0.00

59,468.50

0.00

Preferred Stock 1,400.00 1,500.00 0.00 0.00 0.00 Common Equity 47,484.30 44,084.00 41,644.20 40,648.80 39,740.20 Retained Earnings #N/A #N/A #N/A #N/A #N/A Total Liabilities & Shareholders' Equity 125,309.10 120,803.90 114,283.00 106,407.00 99,208.70 Rate Used to Translate From INR to INR 1.00 1.00 1.00 1.00 1.00

Exhibit –3 Financial 10 Yr. Income Statement

Indu

Symbol

:

strial Template

Tata Steel Limited (C000009156) http://www.tatasteel.com CUSIP: Price 3/22/2007 Shrs Out (th) Mkt Cap (th)

Exchange

: Country:

DJ

Sector:

BOM DCN:

T080399284 IND

ISIN: INE081A01012

442.00

PE Ratio

580,000

Tot Ret 1Yr

249,690

Beta

DJ Industry: IRON AND STEEL FORGINGS 6.54 6.01 #N/A

Company Status: Active Source: ThomsonFinancial

Currency: INR

03/31/03 03/31/02

03/31/05

Net Sales or Revenues 202,444.30 159,986.10 111,294.40 91,368.20 74,279.10

Cost of Goods Sold 128,736.00 90,227.60 70,419.40 63,572.20 56,950.00

Depreciation, Depletion & Amortization 8,603.70 6,454.60 6,405.50 5,696.90 5,473.20

Gross Income 65,104.60 63,303.90 34,469.50 22,099.10 11,855.90

Selling, General & Admin Expenses #N/A #N/A #N/A #N/A #N/A

Operating Expenses - Total 147,701.00 104,427.80 82,010.60 74,016.30 66,473.10

Operating Income 54,743.30 55,558.30 29,283.80 17,351.90 7,806.00

Non-Operating Interest Income 459.60 404.70 191.30 381.80 307.50

Earnings Before Interest And Taxes (EBIT) 56,874.80 56,810.40 28,633.00 16,325.30 6,761.70

Interest Expense On Debt 2,064.10 2,386.00 1,519.20 3,633.30 4,499.10

Pretax Income 54,859.90 54,424.40 27,148.70 12,789.60 2,422.70

IncomeTaxes 17,649.20 18,712.40 9,362.50 2,566.80 487.00

Minority Interest 186.40 259.60 192.80 67.60 11.50

Equity In Earnings 321.90 580.20 294.40 151.30 0.00

Net Income Before Extra Items/Preferred Div 37,346.20 36,032.60 17,887.80 10,306.50 1,924.20

Extr Items & Gain(Loss) Sale of Assets 0.00 0.00 0.00 0.00 0.00

Net Income Before Preferred Dividends 37,346.20 36,032.60 17,887.80 10,306.50 1,924.20

Preferred Dividend Requirements 0.00 0.00 0.00 0.00 22.80

Net Income Available to Common 37,346.20 36,032.60 17,887.80 10,306.50 1,901.40 Rate Used to Translate From INR to INR

10 YR INCOME STATEMENT

1.00

03/31/01

1.00

03/31/00

1.00

03/31/99

1.00

03/31/98

1.00

03/31/97

Net Sales or Revenues

Cost of Goods Sold

Depreciation, Depletion & Amortization

61,019.60 55,737.60 51,067.60 51,992.30 51,206.20

38,372.70 38,584.68 37,517.45 38,090.89 35,994.73

6,937.70 5,840.40 4,971.50 4,551.00 4,108.20

Scaling Factor : 1000000 INR


03/31/06 03/31/04


Gross Income 15,709.20 11,312.52 8,578.65 9,350.41 11,103.27

Selling, General & Admin Expenses #N/A #N/A #N/A #N/A #N/A


Operating Income 12,035.10 8,043.40 5,565.70 6,525.10 8,458.60

Non-Operating Interest Income 357.80 390.10 967.30 1,188.80 1,614.90

Earnings Before Interest And Taxes (EBIT)

10,148.30 8,654.40 6,760.80 6,871.50 9,320.40

Interest Expense On Debt 4,819.00 5,290.00 5,229.40 4,651.40 4,639.50

Pretax Income 6,024.40 4,770.90 3,157.30 3,637.30 5,429.60

IncomeTaxes 490.00 540.00 330.00 412.50 730.00

Minority Interest 0.00 0.00 0.00 0.00 0.00


Net Income Before Extra Items/Preferred Div

5,534.40 4,225.90 2,822.30 3,220.80 4,692.10

Extr Items & Gain(Loss) Sale of Assets

0.00 0.00 0.00 0.00 0.00

Net Income Before Preferred Dividends

5,534.40 4,225.90 2,822.30 3,220.80 4,692.10


Net Income Available to Common 5,412.40 4,139.80 2,822.30 3,220.80 4,692.10

Rate Used to Translate From INR to INR 1.00 1.00 1.00 1.00 1.00

Exhibit – 4 Financial Trend & Growth Rate Report

Tata Steel Limited

http://www.tatasteel.com CUSIP:

Exchange: BOM DCN:

Country: IND ISIN:

DJ Sector: Basic Materials

DJ Industry: Steel

Company Status: Active

Scaling Factor : 1000000 INR 03/31/06 TREND

Sales

Operating Income After Depreciation

NetIncome

Net Cash Flow From Operating Activities 36,996.20 30,751.90

Net Cash Flow From Investing Activities 27,285.90 21,191.30

Net Cash Flow From Financing Activities -6,808.60 -8,906.80

T080399284

INE081A01012

03/31/04

111,294.40

29,283.80

17,887.80

29,713.60

20,825.90

-10,215.80

Symbol: (C000009156)

Shrs Out (th)

580,000

Tot Ret 1Yr

6.01

Source:

ThomsonFina

ncial

Currency: INR

03/31/01

03/31/02

74,279.10 61,019.60

7,806.00 12,035.10

1,901.40 5,412.40

#N/A 11,223.30

#N/A 6,763.60

#N/A -4,001.20

TotalAssets

TotalLiabilities

205,450.70 177,033.10 147,988.70 127,600.80

101,396.60 102,726.30 100,935.30 94,347.10 131,372.60

125,309.10 95,950.80

76,424.80

5 Yr GROWTH RATES 03/31/06 03/31/05 03/31/04 03/31/03 03/31/02 03/31/01

Sales 231.77% 187.03% 117.94% 75.73% 45.06% 27.97%

NetIncome 590.01% 770.39% 533.80% 220.00% -59.48% -4.34%

Net Cash Flow From Operating Activities 381.05% 259.59% 223.04% 132.41% #N/A 92.02%

TotalAssets 63.96% 46.55% 29.49% 19.92% 32.42% 36.06%

Rate Used to Translate From INR to INR

Financials are not restated.

Price 3/22/2007

442.00

PE Ratio

6.05

03/31/03

91,368.20

17,351.90

10,306.50

18,416.90

8,689.00

-8,131.30

03/31/05

202,444.30

159,986.10

54,743.30 55,558.30

37,346.20 36,032.60

Mkt Cap (th)

249,690,000

Beta

#N/A

1.00 1.00 1.00 1.00 1.00 1.00


Exhibit – 5

Year (In

million tones)

Consumption Levels

1990-91 14.37

1991-92 14.83 (3.2%)

1992-93 15.00 (1.2%)

1993-94 15.32 (2.0%)

1994-95 18.66 (21.8%)

1995-96 21.65 (16.0%)

1996-97 22.13 (2.2%)

1997-98 22.63 (2.6%)

1998-99 23.54(4.02%)

1999-2000 25.01(6.24%)

2000-2001 26.53(6.08%)

2001-2002 27.44(3.39%)

2002-2003 20.65 (5.0%)

Source: The Indian Ministry of Steel (the number in brackets indicate the percentage increase from

the previous year).

Note: The consumption of steel is arrived at by subtracting export of steel from the total of domestic

production and adding the import of steel in the country

Exhibit – 6

Tata Steel - Corus : Projected capacity (in million tones per annum)

Corus Group (in UK and The Netherlands)

19

Tata Steel - Jamshedpur 10

Tata Steel - Jharkhand 12

Tata Steel - Orissa 6

Tata Steel - Chattisgarh 5

NatSteel – Singapore 2

Millennium Steel – Thailand 1.7

Aggregate projected capacity 55.7

Source: International Iron and Steel Institute

Exhibit – 7

Exhibit – 8

Exhibit – 9

Corus Group PLC

Balance Sheet (1996- 2005)

ASSETS 12/31/05 12/31/04 12/31/03 12/31/02 12/31/01

Cash And ST Investments 956.00 600.00 380.00 270.00 184.00 Receivables (Net) 1,533.00 1,393.00 1,133.00 1,241.00 1,396.00

Total Inventories 1,954.00 1,732.00 1,404.00 1,337.00 1,320.00 Other Current Assets 3 0 0 0 0

Current Assets - Total 4,446.00 3,725.00 2,917.00 2,848.00 2,900.00 Property Plant & Equipment - Net 2820 2811 2729 2871 3064 Total Investments #N/A #N/A #N/A #N/A #N/A Other Assets

Total Assets

296.00

7,770.00

408.00

7,119.00

432.00

6,237.00

425.00

6,294.00

426.00

6,941.00


Accounts Payable 1,271.00 1,188.00 986.00 1,047.00 1,052.00 ST Debt & Current Portion of LT Debt 384.00 47.00 113.00 78.00 132.00

Income Taxes Payable 79 117 94 121 108 Other Current Liabilities 733.00 531.00 390.00 390.00 437.00

Current Liabilities - Total 2,467.00 1,883.00 1,583.00 1,636.00 1,729.00

Long Term Debt 1,308.00 1,407.00 1,280.00 1,428.00 1,612.00

Other Liabilities 46.00 26.00 28.00 36.00 34.00

Total Liabilities


Minority Interest

4,392.00

26.00

3,786.00

42.00

3,353.00

47.00

3,485.00

47.00

3,774.00

60.00

Preferred Stock 0.00 0.00 0.00 0.00 0.00 Common Equity 3,352.00 3,258.00 2,797.00 2,722.00 3,061.00

Retained Earnings 1,199.00 -1,145.00 -1,605.00 -1,389.00 -1,047.00

Total Liabilities & Shareholders' Equity

ASSETS

7,770.00

12/31/00

7,119.00

03/31/99

6,237.00

03/31/98

6,294.00

03/31/97

6,941.0

0

03/31/9

6

Cash And ST Investments 273.00 1,369.00 1,206.00 1,477.00 1,350.00 Receivables (Net) 1,794.00 1,231.00 1,526.00 1,494.00 1,717.00 Total Inventories 1,719.00 1,007.00 1,222.00 1,224.00 1,391.00 Other Current Assets 0.00 0.00 0.00 0.00 0.00 Current Assets - Total 3,877.00 3,607.00 3,954.00 4,195.00 4,458.00 Property Plant & Equipment - Net 3763 3240 3335 3259 3265 Total Investments #N/A #N/A #N/A #N/A #N/A Other Assets 375.00 84.00 117.00 116.00 107.00

21

Total Assets 8,243.00 7,171.00 7,700.00 7,876.00 8,143.00


Accounts Payable 1,086.00 733.00 853.00 836.00 928.00 ST Debt & Current Portion of LT Debt 183.00 81.00 73.00 74.00 126.00 Income Taxes Payable 1.00 18.00 83.00 155.00 305.00 Other Current Liabilities 564.00 387.00 526.00 496.00 523.00 Current Liabilities - Total 2,467.00 1,359.00 1,672.00 1,705.00 2,025.00 Long Term Debt 1,766.00 825.00 687.00 618.00 534.00 Other Liabilities 71.00 27.00 36.00 19.00 17.00 Total Liabilities


Minority Interest

4,344.00

402.00

2,464.00

311.00

2,687.00

351.00

2,683.00

367.00

2,898.00

442.00

Preferred Stock 0.00 0.00 0.00 0.00 0.00 Common Equity 3,440.00 4,346.00 4,604.00 4,757.00 4,723.00 Retained Earnings -665.00 919.00 1,195.00 1,383.00 1,350.00 Total Liabilities & Shareholders' Equity 8,243.00 7,171.00 7,700.00 7,876.00 8,143.00 Currency: GBP; Source: Thomson Financial

Exhibit – 10 Financial 10 Yr. Income Statement

Industrial Template

Corus Group PLC

http://www.corusgroup.com

Exchange:

Country: DJ

Sector:

DJ Industry:

Company Status:


CUSIP:

DCN: C793773750

ISIN:

GB00B127GF29

STEEL WORKS & BLAST FURNACES

Active

12/31/05

Price 3/22/2007

605.00

PE Ratio

11.90

12/31/03

Symbol: (C000087290)

Shrs Out (th)

946,200

Tot Ret 1Yr

70.98

Source: ThomsonFinancial

12/31/02 12/31/01

Net Sales or Revenues 10,140.00 9,332.00 7,953.00 7,188.00 7,699.00

Cost of Goods Sold 8,343.00 7,658.00 7,124.00 6,575.00 6,941.00

Depreciation, Depletion & Amortization 312.00 294.00 323.00 350.00 386.00

Gross Income 1,485.00 1,380.00 506.00 263.00 372.00

Selling, General & Admin Expenses 765.00 759.00 565.00 649.00 749.00


Operating Income 720.00 621.00 -59.00 -386.00 -377.00


Earnings Before Interest And Taxes (EBIT) 707.00 663.00 -150.00 -314.00 -351.00

Interest Expense On Debt 128.00 131.00 111.00 109.00 118.00

Pretax Income 579.00 532.00 -261.00 -423.00 -469.00

IncomeTaxes 129.00 113.00 52.00 55.00 -48.00

Minority Interest -1.00 -6.00 -3.00 -7.00 0.00


Net Income Before Extra Items/Preferred Div 452.00 446.00 -305.00 -458.00 -419.00


0.00 0.00 0.00 0.00 0.00


452.00 446.00 -305.00 -458.00 -419.00


Net Income Available to Common 452.00 446.00 -305.00 -458.00 -419.00

Currency: GBP; Source: Thomson Financial

LON

GBR

12/31/04

Mkt Cap (th)

5,729

Beta

2.17

http://www.corusgroup.com/

10 YR INCOME STATEMENT 12/31/00 03/31/99 03/31/98 03/31/97 03/31/96

Net Sales or Revenues

Cost of Goods Sold

Depreciation, Depletion & Amortization

9,358.40 6,259.00 6,947.00 7,224.00 7,048.00

7,711.20 5,280.00 5,443.00 5,606.00 4,999.00

939.20 313.00 306.00 298.00 281.00

Gross Income 708.00 666.00 1,198.00 1,320.00 1,768.00

Selling, General & Admin Expenses 803.20 408.00 457.00 424.00 508.00


Operating Income -95.20 -118.00 307.00 437.00 941.00


Earnings Before Interest And Taxes (EBIT)

-885.60 -70.00 369.00 486.00 1,019.00

Interest Expense On Debt 126.40 66.00 52.00 48.00 45.00

Pretax Income -1,012.00 -136.00 317.00 438.00 974.00

IncomeTaxes 4.80 -23.00 77.00 140.00 243.00

Minority Interest 56.00 -42.00 7.00 -3.00 49.00

Equity In Earnings -6.40 -10.00 -7.00 9.00 95.00

Net Income Before Extra Items/Preferred Div

-1,079.20 -81.00 226.00 310.00 777.00


#N/A 0.00 0.00 0.00 0.00


-1,079.20 -81.00 226.00 310.00 777.00


Net Income Available to Common -1,079.20 -81.00 226.00 310.00 777.00

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