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Transcript of Tata Steel Financial Report
Tata Steel Limited: Financial Analysis
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
Tata SteelF i n a n c i a l A n a l y s i s
The report gives an insight into the financial health and strength of the Tata Steel
Company (formerly known as TISCO). The company’s performance for the Fiscal
Year 2008
sources of information available on the internet. The report also compares
company’s performance on a time line and gives trend analysis for past 5 years.
Submitted to:
Prof. R. Srinivasan
Management and Financial Account
International Management Institute
2008-09Financial Analysis {Fiscal Year 2008
Tata Steel F i n a n c i a l A n a l y s i s
The report gives an insight into the financial health and strength of the Tata Steel
Company (formerly known as TISCO). The company’s performance for the Fiscal
Year 2008-09 has been reviewed by studying the Annual Report, news and other
sources of information available on the internet. The report also compares
company’s performance on a time line and gives trend analysis for past 5 years.
Submitted to:
Prof. R. Srinivasan
Management and Financial Accounting
International Management Institute
09
ANISH CHARU ASHWINI
November, 2009
{Fiscal Year 2008-09}
F i n a n c i a l A n a l y s i s
The report gives an insight into the financial health and strength of the Tata Steel
Company (formerly known as TISCO). The company’s performance for the Fiscal
the Annual Report, news and other
sources of information available on the internet. The report also compares
company’s performance on a time line and gives trend analysis for past 5 years.
SHWINI DIVAY November, 2009
Tata Steel Limited: Financial Analysis
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
INTRODUCTION
We bring to you the story of one of the oldest and most successful organizations of our times and
celebrate the true spirit of steel with Tata Steel Limited. The reasons for
simple.
• It is Asia’s First and India’s larges
Sector
• It is India’s 2nd largest and 2nd most profitable company in
private sector
• It is one of the most admired companies in terms of HR
Practices and Sustainable growth and Corporate Social Responsibility
TATA GROUP
The Tata Group is a multinational
capitalization and revenues, Tata Group is the largest private corporate group in India and has been
recognized as one of the most respected companies in the world. It has interests in
information technology, communication
The Tata Group has operations in more than 85 countries across six continents and its compa
products and services to 80 nations. The Tata Group comprises 114 companies and subsidiaries in seven
business sectors, 27 of which are publicly listed. 65.8% of the ownership of Tata Group is held in
charitable trusts. Companies which form a m
Motors, Tata Consultancy Services
Communications, Tata Teleservices
The group takes the name of its founder,
been the chairman of the group. The current chairman of the Tata group is
from J. R. D. Tata in 1991 and is currently one of the major international business figures in the age of
globality. The company is currently in its fifth generation of family stewardship.
The 2009 annual survey by the Reputation Institute ranked Tata Group as the 11th most reputable
company in the world. The survey included 600 global companies.
Financial Analysis {Fiscal Year 2008
We bring to you the story of one of the oldest and most successful organizations of our times and
celebrate the true spirit of steel with Tata Steel Limited. The reasons for choosing
• It is Asia’s First and India’s largest steel company in the private
• It is India’s 2nd largest and 2nd most profitable company in
• It is one of the most admired companies in terms of HR
Practices and Sustainable growth and Corporate Social Responsibility
multinational conglomerate based in Mumbai, India
capitalization and revenues, Tata Group is the largest private corporate group in India and has been
gnized as one of the most respected companies in the world. It has interests in
communication, power, tea and hospitality.
The Tata Group has operations in more than 85 countries across six continents and its compa
products and services to 80 nations. The Tata Group comprises 114 companies and subsidiaries in seven
business sectors, 27 of which are publicly listed. 65.8% of the ownership of Tata Group is held in
charitable trusts. Companies which form a major part of the group include Tata Steel
Tata Consultancy Services, Tata Technologies, Tata Tea, Titan Industries
Tata Teleservices, Tata AutoComp Systems Limited and the Taj Hotels
The group takes the name of its founder, Jamsetji Tata, a member of whose family has almost invariably
hairman of the group. The current chairman of the Tata group is Ratan Tata
n 1991 and is currently one of the major international business figures in the age of
. The company is currently in its fifth generation of family stewardship.
vey by the Reputation Institute ranked Tata Group as the 11th most reputable
company in the world. The survey included 600 global companies.
{Fiscal Year 2008-09}
We bring to you the story of one of the oldest and most successful organizations of our times and
choosing TSL for our study are
India. In terms of market
capitalization and revenues, Tata Group is the largest private corporate group in India and has been
gnized as one of the most respected companies in the world. It has interests in steel, automobiles,
The Tata Group has operations in more than 85 countries across six continents and its companies export
products and services to 80 nations. The Tata Group comprises 114 companies and subsidiaries in seven
business sectors, 27 of which are publicly listed. 65.8% of the ownership of Tata Group is held in
Tata Steel, Corus Steel, Tata
Titan Industries, Tata Power, Tata
Taj Hotels.
, a member of whose family has almost invariably
Ratan Tata, who took over
n 1991 and is currently one of the major international business figures in the age of
. The company is currently in its fifth generation of family stewardship.
vey by the Reputation Institute ranked Tata Group as the 11th most reputable
Tata Steel Limited: Financial Analysis
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
VISION
Guided by a powerful vision, Tata Steel strives forward to reach newer and higher milestones, every year.
TATA Steel: An Overview
• Established in 1907 by Jamshetji N Tata in Jamshedpur
• Formerly known as Tata Iron and Steel Company Limited (TISCO)
• 28.1 million tonnes per annum of crude steel
production capacity
• With Corus acquisition, TSL is world
steel producer
• Ranked “ Best Steel Maker” by World Steel
Dynamics in 2006, 2005 and 2001
• Ranked 315th on Fortune Global 500 (post the
Corus acquisition
• 82,700 employees (2007)
• Listed on BSE and NSE
• Headquartered in Jamshedpur, Jharkhand and
registered office in Mumbai
Backed by 100 glorious years of experience in steel making, Tata Steel is among the top ten steel
producers in the world with an existing annual crude steel production capacity of 30 Million Tonnes Per
Annum (MTPA). Established in 1907, it is the first integrated steel plant in Asia and is now the world`s
second most geographically diversified steel producer and a Fortune 500 Company.
Financial Analysis {Fiscal Year 2008
Guided by a powerful vision, Tata Steel strives forward to reach newer and higher milestones, every year.
Established in 1907 by Jamshetji N Tata in Jamshedpur
Formerly known as Tata Iron and Steel Company Limited (TISCO)
28.1 million tonnes per annum of crude steel
With Corus acquisition, TSL is world’s 6th largest
Ranked “ Best Steel Maker” by World Steel
Dynamics in 2006, 2005 and 2001
Ranked 315th on Fortune Global 500 (post the
82,700 employees (2007)
Headquartered in Jamshedpur, Jharkhand and
registered office in Mumbai
Backed by 100 glorious years of experience in steel making, Tata Steel is among the top ten steel
producers in the world with an existing annual crude steel production capacity of 30 Million Tonnes Per
in 1907, it is the first integrated steel plant in Asia and is now the world`s
second most geographically diversified steel producer and a Fortune 500 Company.
{Fiscal Year 2008-09}
Guided by a powerful vision, Tata Steel strives forward to reach newer and higher milestones, every year.
Backed by 100 glorious years of experience in steel making, Tata Steel is among the top ten steel
producers in the world with an existing annual crude steel production capacity of 30 Million Tonnes Per
in 1907, it is the first integrated steel plant in Asia and is now the world`s
second most geographically diversified steel producer and a Fortune 500 Company.
Tata Steel Limited: Financial Analysis {Fiscal Year 2008-09}
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
Tata Steel has a balanced global presence in over 50 developed European and fast growing Asian
markets, with manufacturing units in 26 countries.
It was the vision of the founder; Jamsetji Nusserwanji Tata., that on 27th February, 1908, the first stake
was driven into the soil of Sakchi. His vision helped Tata Steel overcome several periods of adversity
and strive to improve against all odds.
Tata Steel`s Jamshedpur (India) Works has a crude steel production capacity of 6.8 MTPA which is
slated to increase to 10 MTPA by 2010. The Company also has proposed three Greenfield steel projects
in the states of Jharkhand, Orissa and Chhattisgarh in India with additional capacity of 23 MTPA and a
Greenfield project in Vietnam.
Through investments in Corus, Millennium Steel (renamed Tata Steel Thailand) and NatSteel Holdings,
Singapore, Tata Steel has created a manufacturing and marketing network in Europe, South East Asia and
the pacific-rim countries. Corus, which manufactured over 20 MTPA of steel in 2008, has operations in
the UK, the Netherlands, Germany, France, Norway and Belgium.
Tata Steel Thailand is the largest producer of long steel products in Thailand, with a manufacturing
capacity of 1.7 MTPA. Tata Steel has proposed a 0.5 MTPA mini blast furnace project in Thailand.
NatSteel Holdings produces about 2 MTPA of steel products across its regional operations in seven
countries.
Tata Steel, through its joint venture with Tata BlueScope Steel Limited, has also entered the steel
building and construction applications market.
The iron ore mines and collieries in India give the Company a distinct advantage in raw material
sourcing. Tata Steel is also striving towards raw materials security through joint ventures in Thailand,
Australia, Mozambique, Ivory Coast (West Africa) and Oman. Tata Steel has signed an agreement with
Steel Authority of India Limited to establish a 50:50 joint venture company for coal mining in India.
Also, Tata Steel has bought 19.9% stake in New Millennium Capital Corporation, Canada for iron ore
mining.
Exploration of opportunities in titanium dioxide business in Tamil Nadu, ferro-chrome plant in South
Africa and setting up of a deep-sea port in coastal Orissa are integral to the Growth and Globalisation
objective of Tata Steel.
Tata Steel’s vision is to be the global steel industry benchmark for Value Creation and Corporate
Citizenship. Tata Steel India is the first integrated steel company in the world, outside Japan, to be
awarded the Deming Application Prize 2008 for excellence in Total Quality Management.
Tata Steel Limited: Financial Analysis {Fiscal Year 2008-09}
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
Areas of business
The company produces crude steel and basic steel products, and makes steel for building and
construction applications through Tata BlueScope Steel, its joint venture with Australia's BlueScope
Steel.
Tata Steel has also set up joint ventures for the development of limestone mines in Thailand, the
procurement of low-ash coal from Australia and coking coal from Mozambique, and the setting up of a
deep-sea port in Orissa in India. The company is exploring opportunities in the titanium dioxide business
in Tamil Nadu, India, and will soon be producing high carbon ferrochrome from its plant in South Africa.
STEEL PLANT PROJECTS :
India:
The Company has embarked upon setting up three green field steel plants in eastern India:
• 12 MTPA* plant in Jharkhand
• 6 MTPA plant in Orissa
• 5 MTPA plant in Chhattisgarh
• Jamshedpur Steel Works will become a 10 MTPA unit by 2010.
*MTPA = million tonnes per annum
OTHER PROJECTS:
India:
• 1.2 MTPA Metcoke project in West Bengal
• Deep sea port in Dhamra, Orissa
• Titanium Dioxide project in Tamil Nadu
• Joint Venture with BlueScope Steel for metallic coating and painting steel unit
Overseas:
• Development of a source of low ash coal from Queensland, Australia
• Ferro Chrome production in Richards Bay, South Africa
• Coking Coal project in Mozambique
• Development of iron ore deposits in Ivory Coast (West Africa)
• Limestone mining project in Oman
• JV with Steel Authority of India Limited for coal mining in India
• Iron ore mining project with New Millennium Capital Corporation, Canada
Tata Steel Limited: Financial Analysis {Fiscal Year 2008-09}
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
Joint ventures, associates and subsidiaries:
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
• Jamshedpur Injection Powder (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
Awards and Recognitions
• Tata Steel India awarded the Deming Application Prize 2008 for excellence in Total Quality
Management. It is the first integrated steel company in the world, outside Japan to get this award.
• World Steel Dynamics has ranked Tata Steel as the world's best steel maker (for two consecutive years)
in its annual listing in February 2006.
• Tata Steel has been conferred the Prime Minister of India's Trophy for the Best Integrated Steel Plant
five times.
• It has been awarded Asia's Most Admired Knowledge Enterprise award five times in 2003, 2004, 2006,
2007 and 2008.
• Conferred the prestigious Global Business Coalition Award for Business Excellence in the Community in
recognition of its pioneering work in the field of HIV/ AIDS awareness.
• Tata Steel works has been conferred the prestigious social accountability (SA) 8000 certification by
social. Accountability international (SAI), USA. It is the first steel company in the world to receive this
certificate.
• Corporate Sustainability Report of Tata Steel hailed by United Nations Environment Programme
(UNEP) and Standard and poor as strongest, submitted by any corporate house from emerging
economies.
• Best governed company Award 2006 for setting high standards in governance practices.
• Tata Steel won "Award for Corporate Social Responsibility in Public health" by US- Indian Business
Council (USIBC), Population Services International (PSI) and the center for Strategic and International
Studies (CSIS) in 2007.
MAJOR SOURCES OF REVENUE (Both operating and other):
Tata Steel Limited: Financial Analysis
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
• According to the annual report 2008
Steel, the particulars are as follows:
• The divisional net sales of the company are shown
here:
Tata Steel Stock Price last 3 Years
Financial Analysis {Fiscal Year 2008
According to the annual report 2008-2009 of Tata
Steel, the particulars are as follows:
Figure1: Major Sources of Revenue
The divisional net sales of the company are shown
Figure2: Division-wise major sources of Revenue
Tata Steel Stock Price last 3 Years (30-10-2006 to 30-10-2009)
{Fiscal Year 2008-09}
Major Sources of Revenue
wise major sources of Revenue
Tata Steel Limited: Financial Analysis
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
RATIO ANALYSIS
a financial ratio or accounting ratio is a ratio of two selected numerical values taken from an enterprise's
financial statements. There are many standard ratios used to try to evaluate the overall financial condition of a
corporation or other organization. Financial ratios may be used b
potential shareholders (owners) of a firm, and by a firm's creditors. Security analysts use financial ratios to
compare the strengths and weaknesses in various companies.[1] If shares in a company are traded in a fi
market, the market price of the shares is used in certain financial ratios.
� OVERALL PERFORMANCE MEASURES
1. Price/earnings ratio:
P/E RATIO 2008-09 2007-08 2006
P/E RATIO = (Market price per share/Net income per share)
Net income
(Rs.)
5073690
0000.00
4687030000
0.00
4222150000
Weighted
Average No.
of Ordinary
Shares for
Basic EPS
(Nos.)
7305848
34.00
697748601.0
0
572409842.0
EPS = Net
Income / No.
of Ordinary
Shares for
Basic EPS
(Rs.)
69.44696
583
67.17362089
Market
Share Price
(Rs.)
360.18 379.00 242.72
P/E RATIO 5.19 5.64
Financial Analysis {Fiscal Year 2008
ratio is a ratio of two selected numerical values taken from an enterprise's
financial statements. There are many standard ratios used to try to evaluate the overall financial condition of a
corporation or other organization. Financial ratios may be used by managers within a firm, by current and
potential shareholders (owners) of a firm, and by a firm's creditors. Security analysts use financial ratios to
compare the strengths and weaknesses in various companies.[1] If shares in a company are traded in a fi
market, the market price of the shares is used in certain financial ratios.
OVERALL PERFORMANCE MEASURES
2006-07 2004-05 2003-04
(Market price per share/Net income per share)
4222150000
0.00
3506380000
0.00
34741600
000
572409842.0
0
553472856.0
0
55347285
6
73.76 63.35 62.77
242.72 171.68 123.68
3.29 2.71 1.97
Analysis: The P/E gives
you an idea of what the
market is willing
for the company’s
earnings. Here in this
case Price/earnings ratio
in FY2008
increased almost 3 times
from the value in
FY2003-04. However,
due to the recent turmoil
in the financial market,
this ratio is reduced to
5.19 from 5.64 last. This
means that the market has
lower confidence in the
shares of Tata Steel
compared to last year.
{Fiscal Year 2008-09}
ratio is a ratio of two selected numerical values taken from an enterprise's
financial statements. There are many standard ratios used to try to evaluate the overall financial condition of a
y managers within a firm, by current and
potential shareholders (owners) of a firm, and by a firm's creditors. Security analysts use financial ratios to
compare the strengths and weaknesses in various companies.[1] If shares in a company are traded in a financial
The P/E gives
you an idea of what the
market is willing to pay
for the company’s
earnings. Here in this
case Price/earnings ratio
in FY2008-09 had
increased almost 3 times
from the value in
04. However,
due to the recent turmoil
in the financial market,
this ratio is reduced to
5.19 from 5.64 last. This
means that the market has
lower confidence in the
shares of Tata Steel
compared to last year.
Tata Steel Limited: Financial Analysis
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
2. Return on assets:
2008-09 2007-08 2006-07
Net
Income
5073.69 4687.03 4222.15
Interest 1152.69 786.50 173.90
Tax 2113.87 2379.33 2039.50
Tax
rate
41.66 50.76 58.17
Total
Assets
67715.82 53844.30 31051.16
Return
on
Assets
(Net Income + Interest (1-tax rate))/Total Assets*100
ROA 8.49 9.42 13.83
3. Return on Shareholders’ equity:
2008-09 2007-08 2006-07
Net Income 5073.69 4687.03 4222.15
Shareholders'
equity
30176.26 27300.73 14096.15
Return on
shareholders'
equity
(Net Income/shareholders' equity)*100
16.81 17.17 29.95
Financial Analysis {Fiscal Year 2008
2005-06 2004-05
3506.38 3474.16
118.44 186.80
1733.58 1833.66
49.90 43.43
18425.88 15843.29
tax rate))/Total Assets*100
19.35 22.60
Return on Shareholders’ equity:
07 2005-
06
2004-
05
4222.15 3506.38 3474.16
14096.15 9755.30 7059.92
(Net Income/shareholders' equity)*100
29.95 35.94 49.21
Analysis: The ROA is a very
important tool from the investment
point of view. The ROA tells an
investor how much profit a company
generated for each Re.1 in
figure of 22.60% in FY 2004
8.49% in FY 2008-2009 indicates that
the company is steadfastly moving
from being an asset light company to
an asset heavy one. This ratio also
helps the company decide whether or
not to initiate a new projec
of this ratio is that if a company is
going to start a project they expect to
earn a return on it.
Analysis: The ROE is defined as
the amount of net income
returned as a percentage of
shareholders equity. Return on
equity measures a corporation's
profitability by revealing how
much profit a company
with the money shareholders
have invested. Over the years,
Tata steel has been witnessing a
downfall in its ROE, a fact
which is also witnessed in the
S/E ratio. ROE also acts as a
useful tool to compare the
profitability of Tata steel with its
competitors.
{Fiscal Year 2008-09}
The ROA is a very
important tool from the investment
point of view. The ROA tells an
investor how much profit a company
1 in assets. The
figure of 22.60% in FY 2004-2005 to
2009 indicates that
the company is steadfastly moving
from being an asset light company to
an asset heavy one. This ratio also
helps the company decide whether or
not to initiate a new project. The basis
of this ratio is that if a company is
going to start a project they expect to
The ROE is defined as
the amount of net income
returned as a percentage of
shareholders equity. Return on
equity measures a corporation's
profitability by revealing how
much profit a company generates
with the money shareholders
have invested. Over the years,
Tata steel has been witnessing a
downfall in its ROE, a fact
which is also witnessed in the
S/E ratio. ROE also acts as a
useful tool to compare the
profitability of Tata steel with its
Tata Steel Limited: Financial Analysis
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
� PROFITABILITY MEASURES
Every firm is most concerned with its profitability. One of the most frequently used tools of
financial ratio analysis is profitability ratios which are used to determine the company's bottom
line. Profitability ratios show a company’s overall efficiency and performance. We can divide
profitability ratios into two types: margins and returns. Ratios that show margins represent the
firm’s ability to translate sales dollars into profits at various stage
show returns represent the firm’s ability to measure the overall efficiency of the firm in generating
returns for its shareholders.
4. Gross margin percentage:
2008-09 2007-08 2006-07
Net sales
revenue
24315.77 20028.28 17985.69
Cost of
goods
sold
17308.43 13183.05 11571.94
Gross
margin
Net sales revenue - cost of goods sold
7007.34 6845.23 6413.75
Gross
margin
percenta
ge
Gross margin/Net sales revenues*100
28.82 34.18 35.66
Financial Analysis {Fiscal Year 2008
PROFITABILITY MEASURES
Every firm is most concerned with its profitability. One of the most frequently used tools of
financial ratio analysis is profitability ratios which are used to determine the company's bottom
Profitability ratios show a company’s overall efficiency and performance. We can divide
profitability ratios into two types: margins and returns. Ratios that show margins represent the
firm’s ability to translate sales dollars into profits at various stages of measurement. Ratios that
show returns represent the firm’s ability to measure the overall efficiency of the firm in generating
2005-06 2004-05
17985.69 15394.15 14646.98
11571.94 10101.42 9259.17
cost of goods sold
5292.73 5387.81
Gross margin/Net sales revenues*100
34.38 36.78
Analysis: This number represents
the proportion of each unit of
revenue that the company retains as
gross profit. The Gross margin
percentage of 34.18 percent in
2007-2008 and 28.82 percent in
2008-2009 indicates that
100 paisa that the company
generates in revenue, 34 paisa and
now 29 paisa respectively, can be
put towards paying off selling,
general and administrative
expenses, interest expenses and
distributions to shareholders. Also,
since there has been a 15%
reduction in GMP, it clearly means
that the asset base has reduced.
{Fiscal Year 2008-09}
Every firm is most concerned with its profitability. One of the most frequently used tools of
financial ratio analysis is profitability ratios which are used to determine the company's bottom
Profitability ratios show a company’s overall efficiency and performance. We can divide
profitability ratios into two types: margins and returns. Ratios that show margins represent the
s of measurement. Ratios that
show returns represent the firm’s ability to measure the overall efficiency of the firm in generating
This number represents
the proportion of each unit of
revenue that the company retains as
gross profit. The Gross margin
percentage of 34.18 percent in
2008 and 28.82 percent in
2009 indicates that for every
100 paisa that the company
generates in revenue, 34 paisa and
now 29 paisa respectively, can be
put towards paying off selling,
general and administrative
expenses, interest expenses and
distributions to shareholders. Also,
a 15%
reduction in GMP, it clearly means
that the asset base has reduced.
Tata Steel Limited: Financial Analysis
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
5. Profit Margin Percentage:
2008-09 2007-08 2006-07
Net
Income 5073.69 4687.03 4222.15
Net sales
revenue 24315.77 20028.28 17985.69
Profit
Margin
Percentage
Net income / net sales revenue*100
20.87 23.40 23.48
6. Earnings per share:
2008-09 2007-08 2006-07
Net
income
(Rs.)
5073690
0000.00
4687030
0000.00
4222150
0000.00
Weighte
d
Average
No. of
Ordinary
Shares
for Basic
EPS
(Nos.)
7305848
34.00
6977486
01.00
5724098
42.00
Earnings
per share
Net income/ No. of shares outstanding
69.45 67.17 73.76
Financial Analysis {Fiscal Year 2008
2005-06 2004-05
3506.38 3474.16
17985.69 15394.15 14646.98
Net income / net sales revenue*100
22.78 23.72
2005-06 2004-05
3506380
0000.00
3474160
0000
5534728
56.00
5534728
56
Net income/ No. of shares outstanding
63.35 62.77
Analysis: Indicates what portion
of sales contributes to the
income of a company.
Profit Margin is 20.65 percent in
2008-2009 and 23.8 percent in
2007-2008, respectively, are the
contributions to the income of
the company.
Analysis: Since Tata Steel is a
publically traded company,
Earnings per share becomes
one of the most widely used
and important ratios. EPS
refers to the portion of a
company's profit allocated to
each outstanding share of
common stock. Simply put
Earnings per share serves as an
indicator of a company's
profitability. If we compare
the EPS of Tata steel for the
last two years, we see an
increase of 2 percent. This
means that the there is a 2
percent growth rate in the
company’s earnings.
{Fiscal Year 2008-09}
Indicates what portion
of sales contributes to the
income of a company. Thus the
Profit Margin is 20.65 percent in
2009 and 23.8 percent in
2008, respectively, are the
contributions to the income of
Since Tata Steel is a
publically traded company,
becomes
one of the most widely used
and important ratios. EPS
refers to the portion of a
company's profit allocated to
each outstanding share of
common stock. Simply put
Earnings per share serves as an
indicator of a company's
profitability. If we compare
the EPS of Tata steel for the
last two years, we see an
increase of 2 percent. This
means that the there is a 2
percent growth rate in the
Tata Steel Limited: Financial Analysis
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
7. Cash Realization:
2008-09 2007-08 2006-07
Cash
generated
by
operations
7397.22 6254.20 5118.10
Net
income
(Rs.)
5073.69 4687.03 4222.15
Cash
realization
(times)
Cash generated by operations / Net income
1.46 1.33 1.21
8. Asset Turnover:
2008-09 2007-08 2006-07
Net sales
revenue 24315.77 20028.28 17985.69
Total
Assets 67715.82 53844.30 31051.16
Asset
turnover
(times)
Sales revenue/total assets
0.36 0.37 0.58
Financial Analysis {Fiscal Year 2008
2005-06 2004-05
3631.39 3174.8
3506.38 3474.16
Cash generated by operations / Net income
1.04 0.91
2005-06 2004-05
15394.15 14646.98
18425.88 15843.29
Sales revenue/total assets
0.84 0.92
Analysis: It measures how
close a company’s net income
is to being realized in cash.
Companies such as Tata Steel
that are less risky have cash
realization ratios that exceed
1.0, indicating that income
may not be dependent on non
cash sources such as mark
market accounting valuations,
which can be affected by
aggressive valuation decisions
by management.
Analysis: This ratio is useful to
determine the amount of sales
that are generated from each
dollar of assets. In the case of
Tata steel, it has a low asset
turnover which indicates that it
makes high profit margin on its
products. This ratio is also
indicative of the pricing
strategy employed by the
company.
{Fiscal Year 2008-09}
It measures how
close a company’s net income
is to being realized in cash.
Companies such as Tata Steel
that are less risky have cash
realization ratios that exceed
1.0, indicating that income
dependent on non-
cash sources such as mark-to-
market accounting valuations,
which can be affected by
aggressive valuation decisions
This ratio is useful to
determine the amount of sales
that are generated from each
dollar of assets. In the case of
Tata steel, it has a low asset
turnover which indicates that it
makes high profit margin on its
products. This ratio is also
indicative of the pricing
strategy employed by the
Tata Steel Limited: Financial Analysis
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
9. Invested capital turnover
2008-09 2007-08 2006-07
Net sales
revenue 24315.77 20028.28 17985.69
Long-term
liabilities +
Shareholders'
equity
58741.77 47075.52 25597.50
Invested
capital
turnover
(times)
Sales revenues/Long term liabilities + shareholders'
0.41 0.43 0.70
11. Day's cash
2008-09 2007-08 2006-07
Total
Expenses
17308.43 13183.05 11571.94
Total non-
cash
expenses
973.40 834.61 819.29
Total Cash
Expenses
Total expenses - Total non
16335.03 12348.44 10752.65
Cash cost
per day
Total cash expenses/365
44.75 33.83 29.46
Cash 1590.60 465.04 7681.35
Day's cash
(days)
Cash/cash cost per day
35.54 13.75 260.74
Analysis: Equity turnover is used to
calculate the rate of return on common
equity, and is a measure of how well a
company uses its stockholders' equity
to generate revenue. The higher the
ratio is, the more efficiently a company
is using its capital. w.r.t Tata Steel's
invested capital turnover, this again
shows a downturn over last 5 years
and gives the impression that the
company is not able to grow its
revenue from stockholder's equity.
Financial Analysis {Fiscal Year 2008
. Invested capital turnover
07 2005-06 2004-05
17985.69 15394.15 14646.98
25597.50 14617.16 12143.30
Sales revenues/Long term liabilities + shareholders'
equity
0.70 1.05 1.21
10. Equity turnover
2008-09 2007-08 2006-
Net sales
revenue 24315.77 20028.28 17985.69
Shareholders'
equity 30176.26 27300.73 14096.15
Equity
turnover
(times)
Sales revenues/shareholder's equity
0.81 0.73 1.28
07 2005-06 2004-05
11571.94 10101.42 9259.17
819.29 775.10 618.78
Total non-cash expenses
10752.65 9326.32 8640.39
expenses/365
29.46 25.55 23.67
7681.35 288.39 246.72
Cash/cash cost per day
260.74 11.29 10.42
Analysis: The figures indicate that
there has been a increase in invested
capital, however the increase in return
has not matched the growth in capital
investment. This indicates that Tata
Steel’s overall profitability has not
been healthy for the studied period.
FY % Inves
2005-06
2006-07
2007-08
2008-09
Analysis: The Day's cash or cash
balance ratio indicates the number of
days that a company can pay its
debts, as they become due, out of
current cash. The increase in the
ratio over last few years indicate
better company image in the market.
The abnormal value in 2006
due to the Tata Steel acquiring
Corus.
{Fiscal Year 2008-09}
. Equity turnover
-07 2005-06 2004-05
17985.69 15394.15 14646.98
14096.15 9755.30 7059.92
Sales revenues/shareholder's equity
1.28 1.58 2.07
: The figures indicate that
there has been a increase in invested
capital, however the increase in return
has not matched the growth in capital
investment. This indicates that Tata
Steel’s overall profitability has not
been healthy for the studied period.
FY % Investment %Return
24.78 5.10
83.91 16.83
75.12 11.36
20.37 21.41
: The Day's cash or cash
balance ratio indicates the number of
that a company can pay its
debts, as they become due, out of
current cash. The increase in the
ratio over last few years indicate
better company image in the market.
The abnormal value in 2006-07 is
due to the Tata Steel acquiring
Tata Steel Limited: Financial Analysis
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
12. Day's receivables (or collection period)
2008-09 2007-08 2006-
Accounts
receivables 159.25 143.44 NA
Net sales
revenue 24315.77 19691.00 17985.69
Current
ratio
Accounts Receivables/ (Sales/365)
2.39 2.66 NA
14. Inventory turnover
2008-09 2007-08 2006-07
Cost of
goods
sold
17308.43 13183.05 11571.94
Inventory 2,868.28 2,047.31 1827.54
Inventory
turnover
Cost of sales/inventory
6.03 6.44 6.33
Analysis: A measure of performance,
calculated by average inventory
divided by average daily cost of sales.
This returns a figure equivalent to the
number of days an item is held as
inventory before it is sold. The lower
the days inventory, the more efficient
the company is, all other things being
equal. This again has been almost
constant over the last 5 years with last
year indicating best performance in
this aspect.
Financial Analysis {Fiscal Year 2008
. Day's receivables (or collection period)
-07 2005-06 2004-05
NA NA NA
17985.69 15394.15 14646.98
Accounts Receivables/ (Sales/365)
NA NA NA
13. Day's inventory
2008-09 2007-08 2006
Inventory 2,868.28 2,047.31 1827.54
Cost of
goods sold 17308.43 13183.05 11571.94
Day's
inventory
Inventory/(cost of sales/365)
60.49 56.68 57.64
. Inventory turnover
07 2005-06 2004-05
11571.94 10101.42 9259.17
1827.54 1732.09 1523.34
Cost of sales/inventory
5.83 6.08
Analysis: A measure of the average time
a company's customers take to pay for
purchases, equal to accounts receivable
divided by annual sales on credit times
365. The lower, the better. The analysis
couldn't be made as the necessary figures
could be found only for last two years
which display a slight slump. This means
that the number of day in which a sale is
realised has extended by a little margin.
Analysis: The ratio of a company's annual
sales to its inventory; or equivalently, the
fraction of a year that an average item
remains in inventory. Low turnover is a
sign of inefficiency, since inventory
usually has a rate of return of zero.
Inventory turnover has been almost same
over the years which implies
Steel has been successfully in controlling
Inventory (intake of ra
conversion into semi
goods).
{Fiscal Year 2008-09}
. Day's inventory
2006-07 2005-06 2004-05
1827.54 1732.09 1523.34
11571.94 10101.42 9259.17
Inventory/(cost of sales/365)
57.64 62.59 60.05
A measure of the average time
a company's customers take to pay for
purchases, equal to accounts receivable
divided by annual sales on credit times
the better. The analysis
couldn't be made as the necessary figures
could be found only for last two years
which display a slight slump. This means
that the number of day in which a sale is
realised has extended by a little margin.
he ratio of a company's annual
inventory; or equivalently, the
fraction of a year that an average item
remains in inventory. Low turnover is a
sign of inefficiency, since inventory
usually has a rate of return of zero.
Inventory turnover has been almost same
over the years which implies that Tata
Steel has been successfully in controlling
Inventory (intake of raw materials and it's
conversion into semi-finished or finished
Tata Steel Limited: Financial Analysis
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
15. Working capital turnover
2008-09 2007-08 2006
Net sales
revenue 24315.77 20028.28 17985.69
Current
assets 10285.09 36962.44 13701.89
Current
liabilities 8974.05 6768.78 5453.66
Working
capital
Current assets - current liabilities
1311.04 30193.66 8248.23
Working
capital
turnover
Sales revenue / working capital
18.55 0.66 2.18
17. Acid-test ratio
2008-09 2007-08 2006-07
Monetary
current
assets
6804.62 2211.18 34357.46
Current
liabilities 8974.05 6768.78 5453.66
Current
ratio
Monetary current assets/current liabilities
0.76 0.33 6.30
Analysis: An indication of a company's
ability to meet short-term debt obligations;
the higher the ratio, the more liquid the
company is. If the current assets of a
company are more than twice the current
liabilities, then that company is generally
considered to have good short-term
financial strength. Tata steel's ratio has
always been healthy in last 5 years though
relative to 2007-08, the current ratio has
decreased but still it is still higher than the
first two years of study. This indicates that
Tata Steel is in relatively good short-term
financial standing.
Financial Analysis {Fiscal Year 2008
. Working capital turnover
2006-07 2005-06 2004-05
17985.69 15394.15 14646.98
13701.89 4237.60 4083.58
5453.66 3808.72 3699.99
current liabilities
8248.23 428.88 383.59
Sales revenue / working capital
2.18 35.89 38.18
test ratio
07 2005-06 2004-05
34357.46 11368.91 2062.85
5453.66 3808.72 3699.99
Monetary current assets/current liabilities
2.98 0.56
16. Current ratio
2008-09 2007-08 2006-
Current
assets 10285.09 36962.44 13701.89
Current
liabilities 8974.05 6768.78 5453.66
Current
ratio
current assets/current liabilities
1.15 5.46 2.51
Analysis: Current assets minus
current liabilities. Working capital
measures how
a company has available to build its
business. The number can be
positive or negative, depending on
how much debt the company is
carrying. This ratio indicates that
Tata steel has been able to improve
its working capital considerably
this can be used to expand and
improve their operations.
An indication of a company's
term debt obligations;
company are more than twice the current
liabilities, then that company is generally
financial strength. Tata steel's ratio has
always been healthy in last 5 years though
08, the current ratio has
decreased but still it is still higher than the
first two years of study. This indicates that
term
Analysis: This ratio is the most stringent
measure of how well the company is
covering its short-
the ratio only considers that part of current
assets which can be turned into cash
immediately (thus the exclusion of
inventories). The ratio tells creditors how
much of the company's short term debt can
be met by selling all the company's liquid
assets at very short notice. Tata Steel
acquired Corus in the
the ratio has spiked in FY 2005
does justify the fairness of low ration in the
next two Fiscal Years.
{Fiscal Year 2008-09}
. Current ratio
-07 2005-06 2004-05
13701.89 4237.60 4083.58
5453.66 3808.72 3699.99
current assets/current liabilities
2.51 1.11 1.10
Current assets minus
current liabilities. Working capital
measures how much in liquid assets
a company has available to build its
business. The number can be
positive or negative, depending on
how much debt the company is
carrying. This ratio indicates that
Tata steel has been able to improve
its working capital considerably and
this can be used to expand and
improve their operations.
This ratio is the most stringent
measure of how well the company is
-term obligations, since
the ratio only considers that part of current
which can be turned into cash
immediately (thus the exclusion of
inventories). The ratio tells creditors how
much of the company's short term debt can
be met by selling all the company's liquid
assets at very short notice. Tata Steel
acquired Corus in the year 2006 and hence
the ratio has spiked in FY 2005-07 and this
does justify the fairness of low ration in the
next two Fiscal Years.
Tata Steel Limited: Financial Analysis
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
18. Capital intensity
2008-09 2007-08 2006-07
Net sales
revenue 24315.77 20028.28 17985.69
Property,
plant and
equipment
14482.22 12623.56 11040.56
Capital
intensity
(times)
Sales revenue/property, plant and
1.68 1.59 1.63
20. Debt/equity ratio(using long term liabilities)
2008-09 2007-08 2006-
Long-term
liabilities
28565.51 19774.79 11501.35
Shareholders'
equity
30176.26 27300.73 14096.15
Debt/equity
ratio (per
cent)
Long-term liabilities/shareholders' equity*100
94.66 72.43 81.59
Analysis: Financial leverage ratios provide
an indication of the long-term solvency of
the firm i.e. the extent to which the firm is
using long term debt. An increase in this
ratio to 2.24 from 1.97 in FY 2007-08
indicates that Tata steel would find it more
challenging to pay interest and principal
while obtaining further funding.
Financial Analysis {Fiscal Year 2008
intensity
07 2005-06 2004-05
17985.69 15394.15 14646.98
11040.56 9865.05 9112.24
, plant and equipment
1.56 1.61
. Debt/equity ratio(using long term liabilities)
-07 2005-06 2004-05
11501.35 4861.86 5083.38
14096.15 9755.30 7059.92
term liabilities/shareholders' equity*100
81.59 49.84 72.00
19. Financial Leverage Ratio
2008-09 2007-08 2006
Total Assets 67715.82 53844.20 31051.16
Shareholders'
equity
30176.26 27300.73 14096.15
Financial
leverage
ratio (times)
Assets/shareholders' equity
2.24 1.97 2.20
Analysis: The capital intensity ratio
indicates the relation of sales to that of
current assets. Tata Steel has to use a
majority of its capital to buy expensive
machines instead of more labour and
hence Tata Steel is a capital intensive
industry with its investment increasing
in every fiscal year by a considerable
margin.
Financial leverage ratios provide
term solvency of
the firm i.e. the extent to which the firm is
An increase in this
indicates that Tata steel would find it more
challenging to pay interest and principal
Analysis: The D/E ratio is a financial ratio
indicating the relative proportion of equity and
debt used to finance a company's assets. A high
debt/equity ratio, as is the case with Tata Steel
at 94.66 percent in FY2008
means that a company has been agg
financing its growth with debt. If a lot of debt is
used to finance increased operations (high debt
to equity), the company could potentially
generate more earnings than it would have
without this outside financing.
If this were to increase ear
amount than the debt cost (interest), then the
shareholders benefit as more earnings are being
spread among the same amount of shareholders.
However, the cost of this debt financing may
outweigh the return that the company generates
on the debt through investment and business
activities and become too much for the
company to handle.
{Fiscal Year 2008-09}
19. Financial Leverage Ratio
2006-07 2005-06 2004-05
31051.16 18425.88 15843.29
14096.15 9755.30 7059.92
Assets/shareholders' equity
2.20 1.89 2.24
The capital intensity ratio
indicates the relation of sales to that of
current assets. Tata Steel has to use a
majority of its capital to buy expensive
machines instead of more labour and
hence Tata Steel is a capital intensive
industry with its investment increasing
in every fiscal year by a considerable
The D/E ratio is a financial ratio
indicating the relative proportion of equity and
debt used to finance a company's assets. A high
debt/equity ratio, as is the case with Tata Steel
at 94.66 percent in FY2008-09, generally
means that a company has been aggressive in
financing its growth with debt. If a lot of debt is
used to finance increased operations (high debt
to equity), the company could potentially
generate more earnings than it would have
without this outside financing.
If this were to increase earnings by a greater
amount than the debt cost (interest), then the
shareholders benefit as more earnings are being
spread among the same amount of shareholders.
However, the cost of this debt financing may
outweigh the return that the company generates
he debt through investment and business
activities and become too much for the
Tata Steel Limited: Financial Analysis
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
21. Debt/equity ratio(using Total liabilities)
2008-09 2007-08 2006-
Total
liabilities
37539.56 26543.57 16955.01
Shareholders'
equity
30176.26 27300.73 14096.15
Debt/equity
ratio (per
cent)
Long-term liabilities/shareholders' equity*100
124.40 97.23 120.28
23. Times interest earned(TIE
2008-09 2007-08 2006-07
Pre-tax
operating
profit
7315.61 7066.36 6261.65
Interest 1152.69 878.70 173.90
Times
interest
earned
(times)
(Pretax operating profit+interest)/interest
7.35 9.04 37.01
Debt/capitalization
Analysis: This ratio is a variation of the
traditional debt-to-equity ratio; this value
computes the proportion of a company's
long-term debt compared to its available
capital. By using this ratio, investors can
identify the amount of leverage utilized
by a specific company and compare it to
others to help analyze the company's risk
exposure. The higher the debt-to-capital
ratio, the more debt the company has
compared to its equity. This tells
investors whether a company is more
prone to using debt financing or equity
financing. This ratio in case of Tata steel
is evenly poised at 48.63 percent for
FY2008-09 thereby meaning that the
company has the flexibility of using
either of the two financing schemes.
Financial Analysis {Fiscal Year 2008
bt/equity ratio(using Total liabilities)
-07 2005-06 2004-05
16955.01 16955.01 8783.37
14096.15 9755.30 7059.92
liabilities/shareholders' equity*100
120.28 88.88 124.41
. Times interest earned(TIE)
2005-06 2004-05
5239.96 5297.28
118.44 186.80
(Pretax operating profit+interest)/interest
45.24 25.36
22. Debt/capitalization
2008-09 2007-08 2006-07
Long-term
liabilities
28565.51 19774.79 11501.35
Long-term
liabilities +
Shareholders'
equity
58741.77 47075.52 25597.50 14617.16
Debt/capitalization
(per cent)
Long-term liabilities/ (long-term liabilities + shareholders'
equity)*100
2.24 1.97 2.20
Analysis: This D/E ratio is an
alternative which is not used as
commonly as the previous one, but
is nonetheless an important
financial aid. This ratio also takes
into consideration the current
liabilities since such liabilities are
short-term and involve day to day
operations such as payroll and
interest payment.
Analysis: TIE is a metric used to
measure a company's ability to meet its
debt obligations. Ensuring interest
payments to debt holders and preventing
bankruptcy depends mainly on a
company's ability to sustain earnings.
However, a high ratio can indicate that a
company has an undesirable lack of debt
or is paying down too much debt with
earnings that could be used for other
projects.
The rationale is that a company would
yield greater returns by investing its
earnings into other projects and borrowing
at a lower cost of capital than what it is
currently paying for its current debt to
meet its debt obligations. Thus for the
FY2008-09, Tata steel has earned 7.35
times its interest charges.
{Fiscal Year 2008-09}
2005-06 2004-05
4861.86 5083.38
14617.16 14617.16
term liabilities + shareholders'
1.89 2.24
This D/E ratio is an
alternative which is not used as
monly as the previous one, but
is nonetheless an important
financial aid. This ratio also takes
into consideration the current
liabilities since such liabilities are
term and involve day to day
operations such as payroll and
TIE is a metric used to
measure a company's ability to meet its
debt obligations. Ensuring interest
payments to debt holders and preventing
bankruptcy depends mainly on a
company's ability to sustain earnings.
However, a high ratio can indicate that a
any has an undesirable lack of debt
or is paying down too much debt with
earnings that could be used for other
The rationale is that a company would
yield greater returns by investing its
earnings into other projects and borrowing
t of capital than what it is
currently paying for its current debt to
meet its debt obligations. Thus for the
09, Tata steel has earned 7.35
times its interest charges.
Tata Steel Limited: Financial Analysis
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
Are the sales supported by corresponding
volumes sold in each of its segments The net sales increased by 23% during FY09 over FY08
mainly due to higher prices realised on Steel as well as other
producst during the first half of the year of the financial
year. While realisation declined following the global
economic slowdown, Steel volumes improved significantly in the second half as can be seen from
The divisional net sales of the Company are
shown here:
As explained above net sales in the Steel
division increased by 23% due to increase in
prices in the first half of FY 09 and increase in
volume in the second half of FY 09. Similarly
sales of Tubes and Ferroalloys improved mainly
due to higher realisations experienced during the year on account of increase in prices with lower volumes as
compared to the last year.
24. Dividend yield
2008-09 2007-08
Weighted
Average No. of
Ordinary
Shares for
Basic EPS
(Nos.)
7305848
34.00 697748601.00
Dividend 1168950
0000.00
11689300000.
00
Dividend per
share 16.00 16.75
Market Share
Price (Rs.) 360.18 379.00
Dividend yield
(per cent)
Dividends per share/ Market price per share*100
4.44 4.42
Analysis: Dividend payout ratio is the
percentage of earnings paid to
shareholders in dividends. It provides an
idea of how well earnings support the
dividend payments. Though the FY
2008-09 net income has increased, the
Dividend payout has decreased since
total Dividends paid has been the same
as the previous year.
Financial Analysis {Fiscal Year 2008
25. Dividend payout
2008-09 2007-08 2006-07 2005
Dividend 1168.95 1168.93 943.91
Net
income 4849.24 4687.03 4222.15 3506.38
Dividend
payout
(per cent)
Total Dividends / Net income *100
24.11 24.94 22.36
by corresponding increase in
sold in each of its segments
The net sales increased by 23% during FY09 over FY08
mainly due to higher prices realised on Steel as well as other
producst during the first half of the year of the financial
year. While realisation declined following the global
olumes improved significantly in the second half as can be seen from
The divisional net sales of the Company are
As explained above net sales in the Steel
division increased by 23% due to increase in
prices in the first half of FY 09 and increase in
FY 09. Similarly
sales of Tubes and Ferroalloys improved mainly
due to higher realisations experienced during the year on account of increase in prices with lower volumes as
. Dividend yield
2006-07 2005-06 2004-05
572409842.00 553472856.00 553472856
9439100000.0
0
7195100000.0
0
719510000
0
16.49 13.00 13.00
242.72 171.68 123.68
Dividends per share/ Market price per share*100
6.79 7.57 10.51
Steel volume H1
FY 09 2.38
FY 08 2.26
Net Sales FY 09 FY 08
Steel 20,456 16,539
Tubes 1,410 1,217
Ferroalloys
and Minerals 2,324 1,808
Bearings 127 127
Total 24,316 19,691
Analysis
shows how
company pays out in
dividends each year
relative to its share
price. In the absence of
any capital gains, the
dividend yield is the
return on investment for
a stock. Tata Steel has
given an excellent
dividend yield by
announcing a dividend
of Rs. 16
shareholders in dividends. It provides an
09 net income has increased, the
total Dividends paid has been the same
{Fiscal Year 2008-09}
2005-06 2004-05
719.51 719.51
3506.38 3474.16
Net income *100
20.52 20.71
olumes improved significantly in the second half as can be seen from in the table.
due to higher realisations experienced during the year on account of increase in prices with lower volumes as
H2 Change%
2.38 2.85 20%
2.26 2.52 12%
FY 08 Change Change %
16,539 3,917 24%
1,217 193 16%
1,808 516 29%
127 0 0%
19,691 4,625 23%
Analysis: Dividend
shows how much a
company pays out in
dividends each year
relative to its share
price. In the absence of
any capital gains, the
dividend yield is the
return on investment for
a stock. Tata Steel has
given an excellent
dividend yield by
announcing a dividend
of Rs. 16 on each share.
Tata Steel Limited: Financial Analysis {Fiscal Year 2008-09}
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
Company management
Organizational Structure (Top Management)
Tata Steel Limited: Financial Analysis {Fiscal Year 2008-09}
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
Corporate Governance
The Company’s Corporate Governance Philosophy
The Company has set itself the objective of expanding its capacities and becoming globally competitive
in its business. As a part of its growth strategy, the Company believes in adopting the ‘best practices’ that
are followed in the area of Corporate Governance across various geographies. The Company emphasises
the need for full transparency and accountability in all its transactions, in order to protect the interests of
its stakeholders. The Board considers itself as a Trustee of its Shareholders and acknowledges its
responsibilities towards them for creation and safeguarding their wealth.
In accordance with the Tata Steel Group Vision, Tata Steel Group (‘the Group’) aspires to be the global
steel industry benchmark for value creation and corporate citizenship. The Group expects to realise its
Vision by taking such actions as may be necessary in order to achieve its goals of value creation, safety,
environment and people.
Board of Directors
The Company has a non-executive Chairman and the number of Independent Directors is more than one-
third of the total number of Directors. As on 31st March, 2009, the Company has 14 Directors on its
Board, of which 8 Directors are independent. The number of Non-Executive Directors (NEDs) is more
than 50% of the total number of Directors. The Company is in compliance with of clause 49 the Listing
Agreement pertaining to compositions of directors.
None of the Directors on the Board is a Member on more than 10 Committees and Chairman of more
than 5 Committees (as specified in Clause 49), across all the companies in which he is a Director. The
necessary disclosures regarding Committee positions have been made by the Directors.
The names and categories of the Directors on the Board, their attendance at Board Meetings during the
year and at the last Annual General Meeting, as also the number of Directorships and Committee
Memberships held by them in other companies are given below:
Tata Steel Limited: Financial Analysis {Fiscal Year 2008-09}
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
* Excludes Directorships in associations, private, foreign and Section 25 companies
** Represents Chairmanships/Memberships of Audit Committee and Shareholders’/Investors’
Grievance Committee.
Ten Board Meetings were held during the year 2008-09 and the gap between two meetings did not
exceed four months. The dates on which the Board Meetings were held were as follows:
• 8th April 2008, 26th June 2008, 31st July 2008, 28th August 2008, 24th October 2008, 2nd
December 2008, 18th December 2008, 8th January 2009, 28th January 2009 and 27th February
2009.
• Dates for the Board Meetings in the ensuing year are decided well in advance and communicated
to the Directors.
• Board Meetings are held at the Registered Office of the Company. The Agenda along with the
explanatory notes are sent in advance to the Directors. Additional meetings of the Board are held
when deemed necessary by the Board.
• The information as required under Annexure IA to Clause 49 is being made available to the
Board.
• The Board periodically reviews compliance reports of all laws applicable to the Company. Steps
are taken by the Company to rectify instances of non-compliance, if any.
• During 2008-09, the Company did not have any material pecuniary relationship or transactions
with Non-Executive Directors, other than Dr. J. J. Irani and Dr. T. Mukherjee, to whom the
Company paid retiring benefits aggregating to Rs. 35.68 lakhs and Rs. 28.86 lakhs respectively.
• The Company has adopted the Tata Code of Conduct for Executive Directors, Senior
Management Personnel and other Executives of the Company. The Company has received
confirmations from the Executive Director as well as Senior Management Personnel regarding
compliance of the Code during the year under review. It has also adopted the Tata Code of
Conduct for Non-Executive Directors of the Company. The Company has received confirmations
from the Non-Executive Directors regarding compliance of the Code for the year under review.
Both the Codes are posted on the website of the Company.
Tata Steel Limited: Financial Analysis {Fiscal Year 2008-09}
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
Audit Committee
The Company had constituted an Audit Committee in the year 1986. The scope of the activities of the
Audit Committee is as set out in Clause 49 of the Listing Agreements with the Stock Exchanges read
with Section 292A of the Companies Act, 1956. The terms of reference of the Audit Committee are
broadly as follows:
• To review compliance with internal control systems;
• To review the findings of the Internal Auditor relating to various functions of the Company;
• To hold periodic discussions with the Statutory Auditors and Internal Auditors of the Company
concerning the accounts of the Company, internal control systems, scope of audit and
observations of the Auditors/Internal Auditors;
• To review the quarterly, half-yearly and annual financial results of the Company before
submission to the Board;
• To make recommendations to the Board on any matter relating to the financial management of the
Company, including Statutory & Internal Audit Reports;
• Recommending the appointment of statutory auditors and branch auditors and fixation of their
remuneration.
Mr. Subodh Bhargava, Chairman of the Audit Committee was present at the Annual General Meeting
held on 28th August, 2008.
The composition of the Audit Committee and the details of meetings attended by the Directors are given
below:
Ethical Practices
Since Tata Motors is a part of a large conglomerate company it needs to have a strong corporate
governance to ensure that its employees act ethically and the business continues to run smoothly
especially during the ever changing and dynamic global economy. “Tata Group’s corporate governance is
founded upon a rich legacy of fair, ethical, and transparent governance practices”
(tatacarsworldwide.com). One of the more important parts of this is the transparency of the company
people have a right to know what the company is doing not only to ensure ethical practices, but for the
insurance of their many shareholders whom have a right to know the inner workings of the company.
Tata has created some models for employees to guide themselves through everyday business practices to
ensure that the corporate governance is continuously being upheld. The Tata business excellence model is
upheld by Tata quality management services. Quality management is an in-house group dedicated to
helping the various Tata companies achieve their business objectives through specific processes. The two
Tata Steel Limited: Financial Analysis {Fiscal Year 2008-09}
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
main processes that the quality management services employees focus on are business excellence and
business ethics. These two objectives have helped build Tata into the strong, Business Policy &
Competitive Strategy dynamic company it is today. These models are entrenched in the company’s
ethnical standards and Tata feels strongly about enforcing both throughout the company. “Tata quality
management services plays the role of supporter and facilitator in the journey that Tata enterprises
undertake to reach the peaks of business eminence while, at the same time, adhering to the highest ethical
standards” (Tata.com).
To further prove their commitment to quality and ethical practices Tata has introduced annual quality
awards for those companies conducting business with the utmost quality. These awards are called the
JRD quality value awards named after the late chairmen JRD Tata. These awards are presented annually
on July 29th birthday of JRD Tata. Tata has committed to ensuring quality and ethical standards not only
within Tata Motors, but throughout their many other branches and sectors of the Tata Group. They have
done so by benchmarking quality standards through the Tata business excellence model as well as
providing incentives for companies to strive to improve the quality of their service, by awarding JRD
quality management awards.
SWOT analysis of the company
Strengths
• strong brand name of TSL and Tata Group
• India Operations capable of meeting its own iron ore requirements
• raw material security building through global operations
• leading sales and distribution capability
• low ware labor availability
• EVA+ Company
Weakness
• Low R&D investment
• Unscientific Mining
• Low Productivity
Opportunites
• Unexplored rural markets
• Growing domestic markets
• Growing global markets
• Developin countries not restrained under the kyoto protocol
• carbon credit traing on the rise
• high investment in infrastructure development
Threats
• World's big producers entering Indian Markets
• China set to becoming a net exporter
• High duties relating to pollution control and high energy cost
• Global economin slowdown
Tata Steel Limited: Financial Analysis
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
Comparison with Tata Steel’s major competitors
Major Domestic Steel Producers
• ISPAT
• SAIL
• JSW
• BHUSHAN
• TATA
• ESSAR
Leading Global players
• Arcellor Mittal
• Posco
P/E Comparison of Tata Steel, Arcelor Mittal and Sail (for investment purpose)
Company
Tata Steel
Arcelor Mittal
SAIL
Last Price Market Cap
(Rs. cr.)
SAIL 164.55 67,965.74
Tata Steel 471.55 41,836.58
JSW Steel 755.5 14,131.53
Visa Steel 36.4 400.4
Financial Analysis {Fiscal Year 2008
major competitors
Major Domestic Steel Producers
Comparison between major Indian Steel Players
Arcelor Mittal and Sail (for investment purpose)
P/E ratio Debt Equity Ratio
4.0
6.8
8.4
Market Cap. Sales Net Profit Total
(Rs. cr.) Turnover
67,965.74 44,208.43 6,174.81
41,836.58 24,315.77 5,201.74
14,131.53 14,158.42 458.5
400.4 1,035.01 -66.81
{Fiscal Year 2008-09}
Comparison between major Indian Steel Players
Debt Equity Ratio
0.68
0.47
0.24
Total Assets
35,522.89
56,650.78
19,231.88
1,173.12
Tata Steel Limited: Financial Analysis
TEAM ACAD
ANISH CHARU ASHWINI DIVAY
*HRC - Rockwell C Hardness
Sources have been mentioned wherever applicable
the necessary credentials.
Financial Analysis {Fiscal Year 2008
wherever applicable to the best of our knowledge, however, in case any source is missing, we intend to mention
{Fiscal Year 2008-09}
in case any source is missing, we intend to mention