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'This document was prepared for internal use in the Bank. In makingI it available to others, the Bank assumes no responsibility to them for

'the accuracy or completeness of the information contained herein.

TEXTRNATIONAL BRAMNk PCYP RFPrNTRUTTION ANK T F.V1T.OPMF.NT

A nllA Yr. A V

OF

TATA IRON AND STEEL CO., LTD.

EXPANSION AND MODERNIZATION

PROJECT

June 19, 1956

Department of Technical Operations

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CURRENCY EQUIVALENTS

[$1 = .4.80 rupeesR.1 = 21 cents

All tons are long tons of 2,240 pounds.

The Company's fis.cal year runs fromAnril 1 to Marrh 31.

Slm,ar,- snn Cor.c''>- Si orD 1 _

.Introu-'ction ii i2

The iIarket for Indian Steei 13 - 22

T-he Companiy

Gencral 23 -25Properties 26 - 28iAodernization and .xpanslon Program 29 - 30Investments and Pai{icinations 31Eamnings Rocord and Financial Position 32 - 1ho-Management 41Labor 42 - L4

The Project

Geneeral 45 - 47Physical description 48 - 52Raw materials, Utilities and Transportation 53 - 59Construction Schedule 60 - 63Engineering and Construction Managc-ment 6l - 68Status of Engineering, Procurement -anid Construction 69 - 71Future Production Pattern 72 - 73Cost Estimcates 74 - 76Foreign Currency Thouirements 77 - 73

Financing Plan and Financial Forecasts

Proposed Financing Plan 79 - 82Financial Forecasts 83 - 84Construction Period 35 - 92Financial Situation at the

End of the Construction Period 93 - 9hOperating Period 95 - 99

Economic Benefits 100

Annex 1 - The control of the Indian Steel Industry.Annex 2 - MapAnlex 3 - Summary Balance Sheets, 1950 - 1955Annrx 4 - Tem'is of the Government Advance to TISCOAnnex 5 - Possible Additional lWorksA3nne, 6- Profit. Fo-ecastsAnnex 7 - Estimated Sources and Application of FundsAnnex 8 - Balan.ce Sheet Forecasts

.TPMViARY Amh cKrTJ7IqT()TnTN

1. The location and auality of the necessary raw materials make itpossible to produce steel in. India at a v!ery l cost. H o.-.evr, do.nes`icproduction has fallen short of demand -for many years, and both productionand i.portvs have Been cotrJolled. Resruit'onls on Imports vor, recentlyrelaxed, and imports have since risen rapidly.

2. The Government's second Five Year Plan includes the expansion of1 -c4.' -t0 -4.- , - ,-'^ j.s 1. r' .CoMestic production of. OLns UZd L stee AI ±-L '.2 to 4,5 DiL.Lion LDIon pr- year.

The higher rate will probably take longer than five years to achieve, andgroWing demrand is likely to absoru the eected lrlcr-ease ln lndian output.Any surplus production should find a ready market abroad.

3. The Taata Iron and Steel Co. Ltd. (TISCO) is the largest steel Dro-UUie, r 1 nIudia with a preUSent Capact oU abutOU 7O0U0VU tOnS OL saleauleproducts. The Conpany has a long tradition of sound management, and itsproperties, whieh are ver-y eonservatively valued, form a fully integratedsteelworks. It has a long record of satisfactory earnings, of which inrecent years less than two-thirds have been paid out in dividends. It nasvery little debt.

0. It is engaged in modernizing and expanding its facilities, andinvested in productive facilities about Rs. 240 million (,50 million equi-valent) in the five years ended March 31, 1955, nearly 80%, from cash generatedby its operations and the balanice from a special Go-vernment advance whichplaces no burden on earnings.

5. As part of the second Five Year Plan it has embarked on furtherexpansion works designed to increase its anmual ingot capacity to 2 milliontons and its capacity to produce saleable products to 1.5 million tons. Arecent labor agreement will enable it to utilize its present labor force,which is much in excess of its needs, to meet practically all its futureneeds.

6. Its expansion and modernization plans are well designed to achievetheir purpose. Engineering and supervision arrangements aro satisfactory.The cost estimates are reasonable, The requisite raw materials are available.The Government is giving a high priority in the second Five Year Plan to thenecessary expansion of railway facilities. Damodar Valley Corporation canmeet TISCOIs increased power needs, but firm arrangemients for power supplyshould be made a condition for the effectiveness of a Bank loan, The con-struction schedule is tight; the main works are due to be completed by June1958. There is however reason to believe that this target can be met.

7. The Company's total financing requirements for the live year periodending March 31, 1960 are nearly Rs. 1,300 million ($270 million equivalent).This includes about $l25 miiUion equivalent in foreign exchange. On oonserva-tive assumptions, more than half of the total should be available from cashgenerated from operations, a current issue of ordinary shares and the balanceof the Government advance. This leaves some 7Rs. `25 million (.'130 milliorecuivalent) as a maximum a'mount to be borrowed.

44.

8. The Company has asked the Bark to make a loan to meet part ofthiq re-mirement The Goverivnent ;iould zuarantee a Bank loan. The balancewould be raised in India, or to the e,.tent possible in foreign markets.Estimated earningr somilud promide ample cover for the service of debt ofthis magnitude. It is quite possible that the Company may in fact not needton r_i +.the wnnol Rs. 629 C mIlIonn qep arnin may well e e.ed th eestimates.

9. The project is a suitable basis for a Bank loan of {t75 million

10. ITP a loan is n ade, the A no.e.l, chniOrl irn,-+er1n=:

equity-debt ratio;

(b) to limit short-term borrowings against the security ofinven.tories to Rs. 100 milion;- -d

tc) tlo consuILt- lItz BJairr. t-,mII tLi o LLim. Uoncn ng s

plans and proposals to finance such of its reauirementsas cannot be met fromr so-urces already available to it.

A fnn A TC.A T YoTArona±sam vJr

THE TATA IRON & STEEL CWIAFAINY LI1IITEDEXP !ii_37C- AND MvODEPdjTZaTG ji rn'E$J-

Introduction

11. The Tata Iron and Steel Co., Ltd. (TISCO) is engaged in an expan-sion program primarily designed to increase its capacity to produce steelingots from 1.1 million tons to 2 mill-lon tons, and its capacity to producesaleable steel from 780,000 to 1.5 million tons per annum. This expansionprogram consists of four parts:

(a) A modernisation and expansion program (known as "MEP1'),which was commenced in 1951 ard is due to be completedin MIarch 1958. This program was designed to raiseannual ilngot capacity to 1.3 million tors and saleablesteel capacity to °30,000 tons;

(b) A program of further expansion (knonm as the rDwO MillionTon Program, or "TM1iTP'") designed to increase annualcapacity to 2 million tons of ingots and 1.5 milliontons of saleable products. The main part of thisprogram is being constructed under a contract withKaiser Engineers which covers engineering designand construction manr.gement. This part of theprogram was commenced early in 1956 and is due tobe completed by June 1958:

(c) Relat.ed works (incI_udei in the ThATP) to be carriedout by the Company's owm forces, which shoUlld befiniq1kr1 h-rT A.nril 1960C

(d) Ancillary T 1orkrs uml-ich are also due to 'e finishedby April 1960.

12. TISCO has applied to the Bank for a loan to meet part of the foreignexchange co-ts of its epransion progrnm. The Government of India has agreedto guarantee such a loan. The program is appraised in thiis report, which isbased on informationr. sple +-Nr the Comri and on the Ji je-t-igations in

India of two members of the Bank staff.

13. r PTQC0 e^ ar.s of sch- i a ni pn to in-

crease domestic production of finished steel from the present level of about±.~ ~U.L-tJ-UL UVIi ~.L~.±ILWJ1 ' 1 'JU'. 1 4) L.. I ~'' Q-'J /I QAl '-' 1.25 million tonss per- annrum, lo alout 4. mil-liA-or. t-ons b--y19096.mi

expansion of the steel industry, whiLch is an important part of the secondFive Year Plan, inVO1ves Uesidau L.he TISCO expanslon an i.,crease in. the annlproductive capacity of the Indian Iron and Steel Company by some 300,000 tons,and the construction of three Government-ov.rned plant.s, each to produce about750,000 tons annually.

i4. Tne question wnicn nas to 'e considered is wneUier u1tre W-Llll ube

an adeo,uate market for such a large increase in production in such a com-paratively short time.

15. During and since the wqar, steel has been in chronicaiiy snort supplyin india, except for a short time in 1953 when there was a tenmporary recessionin the market. Production and import of finished steel have been contro ledboth as to quantities and types and as to prices. The main features of thiscontrol system, with special reference to TTSC0's position, are described inAnnex 1.

16. Apparent consumrtion was about 1.55 uillion tons in 1954/1955, andis estimated at about 1.8 million in the calendar year 1955, including importsof 0.3 and 0.55 million tons respectively. Import duties on steel wereabolished in October 1955. Since then unrestricted imports at world priceshave been permitted, and the rate of imports has risen considerably. Duringthe first four months of 1956, imports were running at the rate of about 1million tons per annum. The Government expects iapolts for the calendar year1956 to reach 1.9 million tons, and that this rate Till be maintained orexceeded for the rest of the second Five Year Plan.

17. The latest available Goverrnent study of stee] requirements for thisPlan indicates a demand of about 3.2 million tons in 1956/1957 (roughly corre-spondina to domestic production of about 1.25 million tons plus imports of1.9 million), increasing to 4.4 million tons in 1959/1960 and 5 million in1960/1961.

18. It is gererally recognized. howrever, thet the second Five Year Planmay take at least six years to complete, and there is reason to believe thatthe ouantities required may he somewhat over-estinated.

19. On t.'ne other hand, dome3tic prodcetion iS not likePI to reach the

planned level of 4.5 million tons per annumi as early as 1960/1961. In par-+AliilaV, +thie + -nme rew GotrnT-nr+ .t pla+n avT.o f%ctA +tr 'rnmr into fiillproduction in that year. It is doubtful whether the 4.5 million ton levelcan be reached before about 1963,/1964, and it seems 1kely that total Indi-nproduction will not have reached 4 million tons per annum by 1960/1961.

20. In the meantime, although it may not be possible to maintain importsat-t soW hig a rate as 1.9" milliorn tor.s per an4n=- they .4l,+h rea-orAly 1-exr~ -A .j n no-,...n 1 .1411

4r, *.-.n- rI..rn,w~ .4

1..in.r n

4.v b+ --nlfl -fl.l¶

1*oa,

pected to run at something like 1.5 million tons per annum. This would serveIJv U J V F&~ U.L.LV wafLX~XU .LW..L O 'JVJ. WL . UAJ.U 11'W cziv~U ~ L~1 L'-VyL U 0- L1

most if not all of the increased domestic production available in 1960/1961I vu u L9 a; s uru - T. ..x 1:r{B,X- u: uur;wfs U C --A-4 -- +-W ;Wrfbx , COU±LU ~U0 - ILJl,;U a -Li.L i-r prove i 'L-de sorue surplus P1-UUCULj.VV C~aIM-C.Uy ,

there should be no difficulty in selling 500,000 tons or more abroad, in viewo.f te -very Low ±IMI±Wl P1dUUQU.LV1 UVCU09t8

2i. aIn the circumstances, ISC0 sho-uld have no difficulty in sellin,g allthe steel they can produce from now until their expansion program is Linished.In this period every ton will replace more expensive imports. In the imLLe-diately following years, the growth in demand is not likely to fall short ofthe increased output from the Government plants, so that the market snould

continue to absorb TISCO's production. The Company would have a good prospectof an 1 4g abroad ayr r rplus which nt, develo,+ -a-+ n c4 yar n 1

lire of

production.

22. For the purpose of forecasting TISCO's financial results, it wouldb'e conseM Va.ve tV o a.ssume IaJt tu nULLe CmPa, Wu' wnLL L t cUi dUFL 1.'ing J rost

of the construction period; that thereafter sales will fall to a more normallevel of' 7V0 of capacity; and that vhere might be a temporary decliLe to °50in the years 1960/1961 and 1961/1962 on the assumption that the Governmentplants will comue into production rather earlier than seems probable.

The Company

General

23. TISCO was incorporated in 1907 with an initial share capital of23,175,Uuu rupees. Its plant was built at what is now Jamshedpur, about 150miles west of Calcutta (see map, Annex 2). The first pig iron was producedin 1911, and the steel furnaces began to operate in 1912. hroduction ofsaleable steel has grown steadily, as shown by the following figures:

1913/1914 49,000 tons1923/1924 163,0001933/1934 535,000 "1939/1940 777,000 "

24. Since 1939/1940 annual production has averaged 765,000 tons. TheCompany is by far the largest steel producer in India, being responsible inrecent years for about 65% of pig iron and 70% of ingot steel production. Itermploys some 60,000 workers, of whom nearly 40,000 are employed at Jamshedpurand most of the rest at the Comparg's cre and coal mines.

25. The present share capital is 173,875,000 rupees (a36.2 millioneouivalent). The Coapany lhas about 32,600 shareholders, of whom only 1,900hold shares with an aggregate par value exceeding Rs. 10,000.

ProDerties

26. The Jamshedpur steelworks is a fully integrated steel plant. TheCompany gets all its iron ore from its own mines within 55-80 miles ofJamshedpur, and about two-thirds of its coal from its mines in severalfields about 100 miles away (see map). The plant is served by the mainline of the South Eastern rai:lway.

27. The major installations existing at the end of the war were:

Coke Ovens: 4 Batteries (216 ovens) with by-4roduct recoverypannt. of whach thry, were istalled in 1936/1940- Presntannual capacity, 1,420,000 tons.

Blast Furnaces: 4 Blast furnaces with daily capacities

of 550 tons, used partly for the Droduction of ferro-aluj44 CG1 CiB .J,±L LJ.L1vU OSu..LLU. Stya .L O L auvu

1,400,000 tons.

Steel Furnaces: 3 Steel Melting Shops, of which one isa n o p er,--h e a-h planu, -while, the ot.hrer t -0 aret- dup_lUxIrIgplants (Bessemer-converters followed by open-hearthIuInace)j. I ne stateu annual ingot capacity is 1,100,000tons.

Rolling MKills etc.: 40" reversing blooming and slabbingmill, (annual capacity 984,000 tons), raii and structuralmill, continuous sheet bar and billet mill, 28" 3-highbillet mill, Morgan merchant mill, 96n plate mill, sheetmills with galvanizing equipment, wheel, tyre and axleplant, and sleeper press plant. lhe stated annualcapacity for finished steel is 780,000 tons.

28. The Company owns the town of Jamshedpur (present population about250,000) and provides all municipal services. Most of the workers live inthis towm in quarters constructed by the Company.

The Modernization and Expansion Program (MEP)

29. During the war, heavy production demands and inadequate maintenanceresulted in abnormal and protracted wear and tear on the Company's equipment.After the end of the war there was a period when shortage of capital preventedlarge-scale modernization and expansion, and it was not until 1951 that theCompany was able to embark upon a substantial investment program designed toreplace worn out and obsolete plant, and to expand its capacity from 780,000to 930,000 tons of saleable products. During the period 1951/1952 to 1955/1956 more than 300 million rupees ($63 million equivalent) was spent for thismodernization and expansion program and for normal replacements.

30. The PEP includes the following main items:

Replacement of one coke-oven battery (completedDecember 1953);

Increase of annual ingot capacity by about 250,000tons to 1,344,000, mainly by remodelling No. 3steel melting shop (including construction of5 open hearth furnaces each of 185 tons canacitvin place of 3 old furnaces);

Modernization of the blooming mill (including newelctial…i,r)

Construction of a new continuous skelp mill(completed March 1956); and

Steam and power plant extensions (completed).

Investments and Participations

31. TISCO owms the entire share caDital of W.Iest Bolaro Ltd., a coal

mine with annual turnover of about 5.6 million rupees (1954/1955). Withthe Ptnma Oi1 Gmpnnv; it ow-ns the Tinplete Company of India Ltd., the only

Indian producer of tinplate, with a current annual output of about 60,000tons. It holrd-s shares with a par value of 11.2 million rupees (27% of theordinary share capital) in the Tata Locomotive and Engineering Co. Ltd. It

has takenr a 9% participation. in a new tlbe-making plant contiguous to theJamshedpur works, in partnership with other Tata associates (11% participa-

tion) an +he leading Britis.h tube -prodcuer, Stei.arts & TLloyds. The first

stage of this tube plant was completed this year. Tne companies in whichTISC0 has f±nacianl nterests provide an outlet for some of its products.

E I -a. -Lris Record and Finar.cial Vosltio

32. TISCO!sgross revenues, r.et prof tbefores allocationstreserves) and dividend payments in recent years have been as follows (Rs.

milltorl): ~ ~ ~ ~ ~ ~ ~ rl e

1949-50 19-50-51 --, 1-,) -952-53 1953=54 1954-55

Revenues 20 30.3 350.7 3 373 Gross 30-3II,.u1 ' Net Profit 17.1 25.0 32.8 31.1 30.2 32.2

Dividends 15.1 16.5 -. 6 18 .6 19.1 19.1

33. The Company:s balance sheets as at the end ol these fiscal yearsare shown in summary form in Annex 3, The development of its financialposition is indicated by the comparative ratios shown below:

19L9-50 1950-51 1951-52 l9r2-53 i953-5 1954-55

Current Assets/Current Liab. 1.09 1.13 1.14 1.10 1.04 1.02

Equity/Debt 90:10 90:10 91:9 91:9 91:9 93:7

34. In calculating the current ratio, stores and spare parts have not

been included in current assets, in accordance with conservative practice in

the steel industry. Their inclusion would improve the ratio to 1.24 in thelast year. In calculating the equity/debt ratio in the year 1954/1955, the

amount of the Government advance (see para. 38 below) has been treated asequity.

35. The valuation of assets is conservative. The market value of theCompany's inventories at harch 31, 1955 exceeded the book value hy more than40 million rupees ($8.3 million equivalent). If this is added to currentassets, t-he current ratio would be about 1.18, instead of 1.02. There is

also a very substantial hidden reserve in fixed assets. Tnough it cannot be

estimated with any precision, its order of magnitude is indicated by the factthat the book value of fixed assets at Mfarch 31, 1955 was equivalent to only

O50 per ton ingot capacity, whicn is less than the amount spent on replace=ments and expansion during the previous five yezrs. Normal depreciation averagesabout lOfa on the written-down value of fixed assets, and there have beenspecial depreciation allowances for new installations.

36. The deterioration in the current ratio during the past few yearsreflects the strain on the Companyis finances arising from its exparndedinvestment program. It should be noted that current liabilities at Miarch 31,1955 included 45 million rupees in arrears of payments due to the Equalizati'onFund over and above the normal current liability in this respect. It has sincebeen arranged to pay these arrears over a three-year period.

37. Up to the end of the fiscal year ended larch 1953, the Company wasable to finance its relatively modest investment requirements almost entirelyout of retained earnings. In the following year, as the rate of investmentexpenditure increased, it drew upon its working capital to some extent; and

in the year ended March 1955, retained earnings covered only about half the

recuirements, the balance being met by the special Government advance des-cribed below. Altogether, during the five fiscal years ended March 1955, theCompary financed an increase in fixed assets of Rs. 223 million ($46.5 millionequivalent), and an increase in investments of Rs. 17 million ($3.5 millionequivalent) in the following manner:

$14illionRs. Million Eauivalent

Depreciation accruals 113.7 23.7 47Retained earnings 68.1 14.2 28Loans (mainly Government advance) 49.7 10.3 21Working capital decrease 8.L4 1.

239.9 50.0 100

38. The Government advance came aboat in the follouing wyv. The Companvhad already in 1951 represented to the Government that the margin betweencosts oa pr.OAd u4 ICn retention prices r Qes te1 ;4v a etreturn+ on- equity

capital of only about 3.5%, a level which gave no incentive for further in-vestvment. Thl,e Government recognized the tru+h of this, -ut dAd n.ot i sh at

the time to increase retention prices, or to give the Company an outright- ~L. L - -. L.- ~ . L .. TI.- *..1, m~. AAgrant 1owarud tne Cost o. ai9 i.hvestme-v program + accord,1 didAd

to make the Company an advance of up to Rs. 100 million ($20.8 million equiva-lent) to meet part oI Tvhe costs of the iAEP, on terms which were desi ged n.ot

to place any burden on the Company's earnings to meet either interest chargesor capital repayments. Tne terms are summarizeU in Annex 4. Of thip advanceRs. 48 million (X10 million equivalent) were drawn during the year endediarch 1955.

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39. The amount of this Government advance outstanding has been treatedas equity in the financial calculations in this report.

40. The Company's debt consists mainly of a loan of Rs. 20 million(4p4.2 million equivalent) from the State Bank (formerly the Imperial Bank ofIndia) which is renewed from year to year and has been outstanding for morethan 15 years. It is secured by the deposit of an equivalent amount of 4%first mortgage debenture stock. The Company is authorized to issue a furtiherRs. 10 million of similar stock. Tn addition, the Company has a cash creditwith the same bark for a maximum of Rs. 10 million, borrowings under whichare secured by hypothecation of spare parts, stocks and stores. Only aboutRs. 2 million of this credit was dramn on March 31. 1956. A further cashcredit for Rs. 30 million has recently been arranged, also with the StateBank.

Mans nimen t

/1 T In accordance with Tnrdiann practij t4 business of the Comnanv isconducted by managing agents. Tata Industries Ltd. are now serving in thatcapacity untder a twent.y-year contract ending in 1966. The management com-mission is fixed at a maximum of 7.5 per cent of net profits before taxesand inte7* nn rest o nl_+nTn lnn ongtA r-mon fs,a +.nd m rnd manyim f'' r nci' nont. inyears when dividends to ordinary shareholders are S per cent or lower. TheCompean has a long-s tanding tradition of initiative, financial integity,and sound business practices.

Labor

42. Labor productivity has fallen since the beginning of the war. Theaverage ouput of finished steel per emplo-y-ee at JmshedpuL- fell by about 20,'between 1939/1940 and 1953/1954. On reason for this was the deteriorationoI th.e plant, because oI inadequate maintenance anid renewals durLinlg the war

years. Another was the legal and social difficul-ties involved in any reduc-tion oI the Company!s labor force. As a result of these and other factors,the labor force is at present far in excess of requirements.

43. However, early this year the Company signed an agreement which isregarded as a new departure in Indian labor-management relations, anid whichgives the Company the right to establish, in consultation with the union, astandard force for each existing department, and to eliminate, change orconsolidate sobs, sections or departments. The Company is also engaged inan extensive training program for tne jobs that will become available in thenew mills. Since the present expansion program will create many new jobs,the Company should be able to undertake an efficient redeployment of itslabor force, and expects to man its expanded facilities without any appre-ciable increase in total staff.

44. The Company has been a pionieer in the development of various socialamenities for its workers, and has had no strikes since 1928.

THE PROJECT

General

45. The main capital works which TISCO plans to carry out during the

five fiscal years ending Narch 31, 1960 fall under four heads:

I. Completion of the IEP.

II. The major works of the TIMTP, which fall within thescone of the Kaiser contract (see Daras 6L and 65below;).

III. Related works to be carried out mainly by TISCO's ownforces as part nf the TATP_

IV. Ancilllary works.

In addi+ion, there will be a normal annual programi of rene-wals

and replacements.

47. The first three parts of the investment prcgram distinguished abovemay be regard~ed as a-n iJnt','e_Egr_al1 program req ired to jnncr'ac!r the* Cormrnyn'sc

production of stee'l ingots to two million tons per annum, and its productionof saleable products -o about 1.5 ifrilln tons pe.r arn-.

Payssical Description

4Q8.1 The ifllF-

The main works fallinfig under this head have already been described(para. 30 above).

49. The TITP (!Kajor lorks)

The main works under this head are:

Coke Plant. A new coke oven battery will be constructed, andexisting batteries remodelled and expanded, to increase daily capacity from3,120 to 4,400 tons. By-product recovery facilities will be expandedrppropriatelJy.

Sintering Plant. An ore crushing plant and a sintering plant witha daily capacity of 4,000 tons of sinter will be installed.

Blast Furnace. A new blast furnace, with a daily capacity of 1,650tons gross, will be constructed. Une existing furnace will be retired to

stand-by status,

Steel Furnaces. Two 200 ton open hearth furnaces and one 32 tonconverter wTill be added. Existing plant will be remodelled and modernized.

annual capacity of about 1.75 million tons, increasing total blooming capacityt o a)O u t 2.75 ,rnil; r &.ns A new sheet --r and-1 bile4r.l --'II ua ca-i+-

460,000 tons), and a rnedium and light structural mill (320,000 tons capacity)will be installed.

Service Facilities. These include additions to the calcining p'Lantnew ladle repair facilities, expansion of the boiler plant, provision of thenecessary handling facilities, and substantial expansion of electricaldistribution, water, fuel, road and transportation systems.

50. The T1TP (Related Works)

In conjunction with the works under the Kaiser contract the Companywill undertake certain related exnansion and modernization work in connectionwith its steel plant facilities and with the development of its collieriesand ore mines. It will also add to the housing facilities in the town ofJamshedpur.

51. Arcillary Works

These include the construction of a ferro-manganese plant, arefractories plant, a ferro-sulphate washing plant, a plant for the recoveryof steel scrap from slag and various minor worls. Though these facilitiesare not part of the TIMP, they are an integral part of the ComparnytS expansionprogram. and will result in substantial cost savirgs.

52. In addition to this definite program of works, the Company intendsto undertake certain other improvements and expansion if funds become available.These works, which are listed in Anuex 5 would all increase the Company'scapacity and efficiency, but they are not essential to reach the two millionton production level, and their omission would not reduce earnings below thelevel assumed in this report.

Raw Materials, Utilities and Transportation

53. TISCO now uses about 2 million tons of iron ore per annum, allextractoed from its. on mines. The ores are riGh (about N5% Fe) and ofexcellent quality. To meet the needs of its expanded production, the Company.. i411 reqfiuie an Adrdi+trona1 I Aii milln- +.ryn- nar nnnimi- This it will obtainfrom its Joda East Mine, which it is now developing. Total proven reserves

$4. The -o.,par.y now uses abou+ 2.2 million tons Otf coking and steamcoal per annum, of wjhich some 1.4 million tons (all coking quality) comefrumn, it uwn maines. ItU wil-lne ln L-t e ab

including about 2 million tons coking coal. The Company plans to develop itsmines duui-ng the next four years so as to be able to obtin from them aboutthe same proportion of its needs as at present. Proven reserves (210 milliontons) are ampile. There should be no di1ffLc-ulty in obtainULing the l 'ance ofthe Companyts requirements from other mines, since the Government controlsthe distribution of coal, and gives top priority to the steel industr'j-s needs.

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55. The Company buys most of its limestone requirements under a recent

25 years supply contract. In addition, it owns very- substantial reserves.

56. TISCO supplies the town of Jamshedpur and the local industries with

electric power, in addition to meeting its own reauirements. The total demand

is currentlyfabout 60,000 kw, of wxhich the Company generates about h4,ooo khw

in its own thermal plants, buying the balance fromi the Damodar Valley Corp.

The load on the system is growing, and it is estkiated that by January 1959

an additional 60,000 kI Will he needed, This additional power is to be drawn

from the D.V.C. system, and the proposed Bank loan should not be nfade effective

until fir- arrangements have been made with D.V.C. for its supply.

57. TISC0 nlso supplies water to the towm of Jamshedpur and the local

industries. Present requirements including the Company's own needs) are

about 28 Mrllion gallons per day. The Company draws this water from the

Subarnareka River. Pumped storage is provided by the Dimna reservoir. When

the t is com-pleted, about 39 milion gallones per dav will be needed, and

the requirement after the completion of the Ti1TP will be only slightly higher.

This is partly because all the new Iaccl0ties -Till be on cloeQd circuits,

each containing a cooling tower, and partly because of further improvements

in the existing systeL. A rew p-p-ing plant will be installed, the capacity

of the Dimna reservoir will be increased from 5,500 to 7,200 million gallons,

and major changes -will be made in the river take works. The consul-ting

engineers have thoroughly studied the water supply problem, and it is concluded

that the supply will be auequate.

58. As far as concerns transuortation, inbound shipments to the plant

will increase from the present rate of about 12,700 tons to about 17,400 tons

per day, and outbound shipments from 2,300 tu t 300 tons. The Col-pany's

program includes facilities for handling the increased tonnage within the

plant.

59. The additional traffic arising from TISCO"Is expansion a from the

operation of the three new Government steel plants will put a very heavy

burden on the Eastern and South Eastern railways. Traffic on the South Eastern

line is expected to double (from 25 to 50 million tons per annum) when all

the plants are in full operation. The two railways will need to invest more

than 1.5 billion rupees ($312 million equivalent) in lines and rolling stock

to meet the increased steel industry traffic. The necessary works hav-e been

studied, many orders placed and construction initiated. All the works are

due to be finished by lhlarch 31, 1959. The Government has assured the Bank

that its policy is to give these works the required priority in its second

Five Year Plan.

Construction Schedule

60. The X D is scheduled for completion by 1llarch 31, 1958.

61. Work on the T1TP under the Kaiser contract began early in 1956, and

the main building construction will start later in the year. lIost of the

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major facilities are due to be finished by late 1957 or early 1958, and the

whole program should be complete by -Jay 31, 1958, wilhin 30 months after

the date when construction was authorized.

62. The timing of the related and ancillary works is rather more

flexible but they are all scheduled to be finished by March 31, 1960.

63. Although the schedule for the Kaiser program is a very tight one,

all the above estimated dates for completion are reasonable.

Engineering and Construction Management

64. In December 1955 TISCO employed Kaiser Engineers Division of Henry

J. Kaiser Company and Kaiser Engineers Overseas Corporation to perform

engineerine and other services in connection with the major works of the TI4TP.

The contracts cover complete design engineering, procurement services, and

construction management, Kaiser Enhineers being responsible for work outside

India and Kaiser Overseas for work in India.

65. The Kaiser firms guarantee that the works will be completed oy

T-rny 31, 1958, ann that the -acilities constructed will work e .ficiently at

their rated capacities. Should they fail to perform their contracts within

the time specifiedz they -wl1 be liahle (individually but not jointl.y) to

pay damages corresponding to the loss sustained by TISCO, ulp to the amount

of their respective fixed fees (see pera- 76Y.

66. TISC0 are the.Msel-ves respor.sble for the eni-neering and construction

of the rest of the program, though Kaiser's will coordinate work which ties

in closely with the items for which they are responsible.

67. These arram.;gAemets for en-nneeing ard construction are satisfact-ory

6ll prcurement has been, and will be, -ent. racticble.

based upon international competition.

Status of Engineering, Procurement and Construction

69. The IEP has been under way since 1951, and a large part of theworks are already finished (see para. 0 above). "ll major co-tracts have

been placed for the remaining works.

70. TISCO has accepted the recommendations of Kaisers on the selection

of major production eq-uipment to be purchased and On the arrangement of

facilities to be constructed under the Kaiser contracts. General specifica-

tions have been prepared, and used wor the calcU1ation of cost estimates.

As of Mlay 31, orders had been placed for items totalling about $39 million

equivalent, Additional orders for about .7 . rmillion equivalent had been

recommended to TISCO for approval, and otfers had been received or invited

- 1? -

for fuir*+her ltems total Iinc about S3 million equivalent. Orders placed to

date have not exceeded estimated costs. The estimated tota'. cost of equipmentand m aterials texclurding freight and dutv' is about $77 million equivalent.

71. Similar progress has 'beer adeT with enngineering and procurementin connection with such of the related works for which TISCO is responsibleas must be scheduled to fit in with +.h wor s for whi-ch Kaisers are responsible.The schedule for some of the other related works is more flexible, and willto so,me extet depend upon the rate at vhich fuinds become available (seepara. 90 below). Considerable progress has been made on the ancillary works,

and mnost of the contrac-ts have beern placed.

Future Production Pattern

72. The follo-wl.ng table shoows TISCO's pa+tern" of production at the

commencement of the expansion program presently under way (I1EP) and the plannedpatterns of productiorn at the end of the IV6P ard at the end of the Two Million

Ton Program:

After CompletionCommencement After Completion of Two Nvillion

Product of DEP of N15P Ton Program-Thousand TGns Per Year - - - - - -

Steel Ingots 1,067 10300 2,000

Rails and Fish Plates 80 100 135

Heavy Struct,urals 67 80 1iO

Bars & Structurals(mediun & light) 185 165 244

Plates 66 100 100

Sheets 156 150 150Skelp and Strip - 72 148

Sleepers and Sleeper Bars 21 33 80Wheels, Tyres and Axles 23 224 30

Total Finished Steel 598 724 1,194Semis for Sale 1a2 207 306

Total Saleable Steel 780 931 1,500

73. The above production of 2 million tons of ingots is the designcapacity of the steel furnaces available at the completion of the program, and

the coke ovens and blast furnaces would also be alrmost fully utilized. in

contrast, the new blooming mill would be operating at crly 53 per cent of

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capacity and the old modernized blooming mill and the new sheet bar and billetmill at 80 percent of capacity. These latter facilities have been designedwith a view to further expansion. In the Linishing mills, on the other hand,

there would not be much surplus capacity.

Cost Estimiates

74. The cost of the modernization and expansion works to be carried out

d-Lring the five year construction period ending March 31. 1960, is estimated

as follows:

$ MillionRs. rl_lonn Equivalent

7D ~~~~~ ~~139.3 29.0TIMTP (Kaiser Works) 622.3 129.6Trdr-nt (relat+ed4 wor-cs) I12°.9 97-1

Anciliary works 58.5 12.2Interest during construction 50.8 1r.6

75. These esti.mates are for the most part based on detailed constructionplans, and in many cases on quotations for major equipment items. Adequatecontingency allowances have been included.

76. Under the Kaiser contracts, TISCG will pay the actual cost of

construction and equipment. The esti-iated cost of engineering, procurementand construction services to be carried out by the two Kaiser firms is about$5.9 million, with a ceiling price of about $6.8 million. To this must beadded about $1.1 million in costs (Indian clerical staff, transport of Kaiser

employees and their families, etc.) for which no cel ing has been fixed.Finally, the contracts Drovide for fixed fees amounting to $3 rmillion. Inview of the scope of the services to be performed under these contracts, and

of the guarantees of completion within 30 months and of efficient operation,

the estimated total of $l0/ll million may be considered reasonable.

Foreign Currency Requirements

77. For its whole program, including interest during construction, theCompany will require something like $125 million equivalent in foreigncurrency. It is proposed that the proceeds of a Bank loan should be used to

meet part of the foreign exchange expenditures in connection with the workscovered by the Kaiser contracts, which are estimated to ainount to about$83.4 million equivalent. plus interest during construction. It seems probable

that about half of these expenditures will be made in the United States, about

one-third in Germany; and the balance in the United Kingdom and Japan.

78. If the Bank ma-keS a loan of $75 million equivalent, it is likely that

all or most of the loan could be disbursed before the end of June 1958.

FINh1FCINIG PLAN ANPj F THADCIAL FOFECASTS

Froposed Financing Plan

79. The Company's total financir.g requirements during the five yearperiod ending Maarch 31, 3.960 are as follows:

Rs. Miillion $ MillionEquivalent

llodernization and expansion v:orks.including interest during construc-tion (see para. 7)4 above) 100r.3 208.5

Yo=al ren-.e.^als ar.d re.'n-ceruents 167.5 3.

In.vestm.. ent in T nla (ber,. 31*......... 2.7

.Working Capital (n.et) 5.3 1.1

Debt Rep-e4ment 106.< _22.1 -

1,292.9 269.3

80. About 10', of the planned expenditures are esti-mated to havebeen, made during the year e,nded M.iarch 31, 1956; about 72% are sched-aledfor the following tv:o years and most of the balance for the fouirth year.

l'he sralL aiountU L left t o 'e spent in the fifth year ml&akes it possi.ble tobegin repayment of long tern borrowings in th?t -- ear, and to liquidate

some short terma borrowings. Tne fig,ure for debt repayment also inclUdesRs.45 millior oayments in reduction of arrears due to the Equalization

F-und (see para 36 above).

8i . Thie proposed sources o ft financing are:

Rs. 11illion Z i.lillionEquivalent

Retained earnings L82.3 l00.h)

Issue of ordran2ry shares 135.0 23.1Balance of Go-vernment advance 52.0 10.8

(see para 38 aoove)

IBRD Loan 360.0 7. -0

Other borrowings in India or elsewhere 263.6 5).01,992,9 q 0

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82. The figure given for other borrowings in India or elsewhere is amaximum esti..ate. If the rate of sales, or the profit margin, or both,prove to be higher than has been assumed, the amount to be borrowedunder this head wrrill be correspondingly reduced (see pa.ra 86 below).

Financial Forecasts

83. Forecasts are attached sho-,ing estimated profits (Arnex 6),and estinrated sournces and application of funds (Annex 7). These fore-casts cover the five year construction period and the follovwing five yearsof operations. A4 sumMr, Y"T balance sheet as r.t inrcnh 31- 1955, together ^withpro forTma balance sheets as at Larch 31, 1960 and March 31, 1965 is sho,nin Anr i rc.x C.

8P4 For the purpose or calculating these fore2sts; it, has heenassumed that:

(a) the company-'s capacity will be utilized at the ratesm4en e' -n par,a . abiove.

( b) productvion cos bs wi'-..l cor espon v-t ths ,re e-tv'een the companyN and the Tariff Commission Jior therecent study of retention prices (2adjjusted to 'ake accountof the capacity utilization. assumed).

(c) the industriy will continue to 'be controlled after 1959/60,and tnat the compa.rf s averacre retentlion price will remainat the present level of Rs.393 per ton until 1957/8, fallingin 1958/19 to Rs.388, anid in the follov,ing year to Ps.385,at which level 4 t would then remain. This corresoonds withthe cox.ipany1 s own assumptions.

(d) the company vwill borrow . million frome the IBR%D at 4 3/4`on a 15 year tem, , with 322 years grace, and will use theloan to finance pa-;rt of -the foreign exchange costs of thev!orks covered by the Kaiser contracts.

(e) other borrowings (Rs.263.6 million) will be halaf in theform of 3-1% renevable bank credits, to be repaid out cfearnings available after prior charges, and half in thefor'm of 5,I 10 year debentures (to be repaid out of asinking fund which begins to accumulate in 1959/60).This pattern of borrow;ings corresponds with the kind ofplan contemplated by the com-parxr.

(f) the current ratio ili, inmprove during the constructionperiod to 1.14:1, and will be maintained at about thislevel thereafter. This is the highest leJel reaclned inrecent years (see para 33 above). Taking into accountthe hidden reserve ir,n '--e.tories (para 35 abov-e), the

ratio would be about 1.27:1.

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(g) depreciation wviLl be charged at an average rate of10% on written down value, and the special develcp-ment rebate, by which the company is exempt fronitax on 25< of the value of new plant in the yearin which it comes into production, will continue.

Construction Period

85. The forecasts sho,;i that on the,e assumptions net prol'its wouldexceed the amount required to pay dividents during, the construction periodby Rs. 166' million ($34.5 million equivalent), and total depreciationaceruals during the npriod (including Ps.L.7 million charged as an oper-ating cost for the "Sinking Fund'l for mining properties, which is reallya free reserve) would 'e Ts.316 millon (->6'.8 million ecuivalent).Total cash generated from operations available to meet financing needscould thus be Rs 482 nil7lion ($10GC.4 mil'li±or eqlulivalent)-

86. These estimates are conse.-ative. and t±he am.oints avaiab1le mnir,ell prove to be larger. Thle ccmnany is conifident that -s the new plantcomr.es .:to use, costs of produ-ctiol-n- fall' belo:. the es-ti"',mtes agreed

with the Tariff Cormission, and believes that its "realistic" costs in the12st tlVC years of the priod may be about Rs. 20 per ton lower than thoseassumed. If these cost reductiuns can be achieved, profits after taxeswould be increased by a total of some Rs.25 miilion in these tw:o years.This would correspondingly reduce 'he company's net borrovjing require.m.entsfor the five year period. They wouid also be reduced if sales exceed theassumed levels.

87. A new issue of 1,285,000 ordinar7 shares of Rs. 75 each hasbeen app-ro-vad ard is being offered to shareholders on a 1:1 basis atRs.105 per share. There is reason to believe that the issue will besuccessful, but evidence of its success should be subomitted before aBarn loan is made efi'ective.

88. The estimrate of sources anc appllcation of funds shovs that thecompany might need to borrowi Rs.263.6 million (5)5 million equivalent)in addition to the assumed Bank loan, as follows:

R.se 'rj lli on QvMlloEquiva'ent

1956/7 79.1 16.515,7/8 I3, f. 28.01958/9 50. 10.5

89. No firm arrangements have been made for such borro,wings. Cashcredits tfor interim financing from the State Bank are available for nearlyRs.40 million ($8.3 million equivalent), and if necessar. the com- nv cou7dmeet its needs in the current year by drawiLng on these credits and reducingits cash balances. It does not wish to go to the mar'et fcr loans in ithe

- 17 -

it does not believe that it will have to borrow as much os is indicatedcabove n a.r cae b i+ ' ieves th -IC .it1. hav . e aval-la'ole f-investment considerably more cash generated from opeiat ons then has

^e ssured4.L

90 ti~~~o-Jver, vhese possib 'le nc___ -4-e ea. .3are not ex.pceOn ~~~~L -,, ,r,' +ia, 4 ~ Iu ' o to materialize before 1958/9, and the critical year from the financial

j uJJ.L LJJ V L~ - .LJ LIV .L7~)I/Q U L UdJU±fciY L.r t~d.Lotu uy t>Prv,au.Lxi1point of1- ,4e r U_ he C197 /Q. nThe --4tuat4or- -a-- loe eaed>isp-aiexpenditure on some of the related and ancillary works over a longer

91. In the circumrstnces, the company has suggested that durng theconstruction period it should consult with the Bank at appropriate intervalsconce±ngl its £izIazIca.ng plan5s, anld urat the first suchi consultation snouldtake place arcund the end of 1956, when it vwould submit its plan for finarn-cing i ts requirements for the six or twelve months followitig the enfd of tilecurrent fiscal year ("Iarch 31, 1957).

92. In view of the fact that the company's credit standing is as goodas that of any other company in Inc.ia, this suggresticn is reasonable, and itis recomnrended that the absence of firm arrangements for other borrowingshould not stand in the ray of the Bank's making a loan to the company.There is, of course, a risk that an exceptional and unforeseen stringencyin the Indian inarket night nmake it very difficult for the company to raisefunds there; but it is felt that this risk should be accepted.

Financial Situation at the End of the Construction Period

93. By MAarch 31, 1060 the compcny should have been able, in additionto commwencing full service on -its long termn debt, to reduce it.s short terr,mborrowings t nearly rEs.40 rmillion. Its eouity +b'h _ti^ l ThC + bh-1 L- abuOt54:46. The current ratio vvould be about 1.14: 1. Since the market situa-tion is suchl that acute fluctuations in derlarird are CikelL1, andl sincethe comparny has available cashi credits on -which it can drawv to meet wuusualrequirements, the prospective current ration may tp regarded as a'equa+e.

94. It is interesting to note th-at at- this time the cnm.i-taliat-on perannual ton of ingot capacity would be only about $11.5 equivalent, which is aver-r low figure for an interrated s+eel plan+t equpped with modern facilities.

Operating Period

95. Annex 6 shows thnit net profits after txes, hich average abo-utRs.70 million ($14.6 mil].ion equivalent) a year in the last two years of the

Gs op od, fal ujy n ly _uJ;s to an average of onrj Pbout Rs.38million a year in 1960/61 and 1961/62. This is partly because of theconseative assxUmption I that saies fall to d5% of capacity in these twoyears, and partly because the company must pay much heavier taxes afterth-e special ccncessions on new fixed assets have been exhausted. In thefollo-wing three years, with sales at 90% of plant capacity, net vrofitsfwouuLd average Rs. 52.2 million ($10.9 million equivalent) with a graduallyrising trend reflecting falling depreciation and interest . -spartly offset by heavier tax paymel-nts.

- 18 -

96 Nlet pro-it>s (afte-r -payil-ent, of irLtee taAe v.,peer

dividend) correspond to the following:

Percentage Return on:B; qu- Par value a I f

ordinarr shares

1955/6 (estimated) 19.7 41.51960/61 and 1961/62

(8-5' capacity) 6.1 16.61962/63 and thereafter

(90%0 capacity) 8.1 2h.6

97. It should be remiiembered in this connection that the ordinaryshare capital in 1955./6 is onlly- half whit it is in the later years. Itshould also be borne in mind that i.f the com.pany can achieve a costreduction of about Rs.20 per toln, the increased revenues (afbI-:taes)would raise the return on equity by about 3.2%' and the return on thepar value of the ordinary shares by aolut 8.5;o

98. Debt service coverar;e duriLg the operating period would besatisfactorv. Earnings befncrP deprenintion and intest, but after taxes,would cover the service on the Bank loan, interest and sinking fund ondebentures and interest onb ank loans about 25 times.

99. The Lan loa.ns, wn n' hae rea^hed a maxmin of abuoit Rs.132million ($27.5 maillion equivalent) in 1958/9, and could be reduced by someP.s.40 million in 19Q9/60, could be further reduced y Rs.L4 million dluringfirst five years of tlhe operating period. .Pt this time (OVarch 31, 196")t.he equity-debt ratio would ha.ve .mpoved to 68:32. It vsould be possibleto liquidate tihe balance of' the bank loans within another five or six years.If the cost savingr;s eD-pected by thue company materialize, all the bank loanscould be repaid br 1963 or 1c64.

ECOIb7CC 1.PtLJ'!IITS. ... _-T

100. Economicall-y, the project is of highl priority, ar. the potentialbenefits are vexy great. The increase in output wiill provride an importantadditi.on to the amount of domestic steel availa7ble to meet the needs of thesecond Five Year Plan, at a cost grec tly below thcat of imported steel.TISCO's estimated average cost of production -or finisihed steel is equiva-lent to less tian $50 per ton, which makces the companyr one of the lolwestcost producers in the w^Jorld. Anr quantities of steel which ..a becomeavailable for export will provide a valuable addition to India's foreignexchange receipts.

THE CONOR0L OF THE hNDAN SIESL INiDUS¶IRY

Durng an.d after the T.r+the~T~A* I,d- ovr--n has trexercn se acomprehensive system of control over the steel indu.stry. Domestic producers114ave beoen insturucte'd -what 4opo- c and at .wha. -prices t1o sell"' 2i pro-~~ V ~ ~~ u~ ~ V L U VW %A U ,U II V - Ult .LV Y±

ducts, Part of the sales price (the e.cess over what is lmown as the"retentiosn price") has to be paid over byv the p,rodu;cers to th'e Irvn adSteel Controller to form an Equalization F'ud, which is used .-.lainly to srb-sid4z -1e pri-ce ofP -:-rorted steel ud als tvLt Fro_d f.d.tor th % eU ws;4 e t UL ~ .L.. '.JJ ±_IJ'L u'~ u u d4U stLs AJ LL..UJ ~± .- ~

sion of the industry. Until recently, the retention prices were calculated4- pr A-^4 ̂t. A-, A-_ L 41-. &A_ --. _ .P I.' a .-10J . -. __ - 'V = 41-. -* I9s v~ v .1.'..~ j.,.. .VUUF V. W UiV4 *.. U VI. U .V .L u c i . LU i s l ll I z u LL U-U I I.l UIVUL.'.

investment.

To facilitate the current e.x oanlsion Of' the industryr, the Governmentrecei7t'U.-J-UZ decided that inuw -ELitooU-:rt reter:-tUo-U price Io bc~U LUI'e Uollte

two major producers (T.ISC and the IncUL;an Iron and ,tcel Co. Ltd.), to runr_ r '- . _ - - I J%I r. . . 1_ -\ - - .-- r- .. _ *..n1 - L-

allowance", to be earmarked for current epansion prograi,is. In T13COts casethi.s developenet allowance 'aunts to AS. * :U per -ton out Of a total estimateuaverage retention price of 3.s. 393 per ton.

For two years after ilarch 1960, in accordance wsith an agreer,:entbetween TISC0 and the Government riiade in June 19J55, the retention prices forcategories of steel made by TiSCO mus,t be the sane as those for all othermajor produicers of steel (whether privrately or put,bicly oined). For cate-gories not made bxy other producers, TSC:)Is retention -prices ,ust be fixedoxi a comparable basis. After Inarcia 1962 thie wlhole system of steel pricingis to be reviewed in the light of developments.

The June 1955 agneem,.ent contains the followiing escalation clause:

"The retention prices so fi:xed for the various cate-gories of steel will 'be adjusted from time to time to theextent that the Government o4 India is satisfied that manu-facturing costs have a_tered from the L954/55 level as aresult of changes in railway freighits, changes in statutoryprices of coal and other fuel, rawz Imataerials, stores ormachinery, and changes in labor costs caused by labor legis-lation or adjudicatuon or conciliation awards."

ANNEX 2

LOCATION OF MAIN INDIAN STEEL PLANTSIN RELATION TO COAL 8 IRON DEPOSITS

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I

L KANPUR/

~~ I7 NKXSINDRX f I&OKAR014 5 2 NA-

I,! D0U14 RGAPUR

tJBULPORE u o 'Nw JAMSHEDPU A )CALCUTTA

-*,VAROURKEL !~A AISL/AI4f X fVNMUNVDIA BOADM/PAH4

BILHAI 50 ,0 100 150 M.

5ADHALL/-RAJHA.A RAr AI

STEEL PLANTS U fN< r' / 4! T!SCO- JAMSHEDPU R J2 IISCO-BURNPUR f I ,.,_DELHI"_ _._i I3 DURGAPUR) Proposed a II *.4. ROURKELA Government i I .

O Plants I /1 )17; rzt AI

COAL DEPOSITS / DEPOSITS Y!AGvA^ rp o bo\

@, W\\\L y~~~~~~~~~~~~izagopotom

oe regrding ocation of seeoo wih respect to morket: I \X zg o 1According too report yv the. nd/ion Uin/-c #rv of PDrndnctAoofiorcn4am°, ia /iodra I__ ~ ~~**J -, \\A m Orasthe overoge cost of moving finished steel to the morket would be obout65 rupees nper .on f-r o/! he fi;e mo ,,-/or st/eep,h,ts. p1_____4_ ,1

NE, 1956-26I

IBRD-267

AMsw' 3

TISCO - B Tii4Y EALAWiNCE S1i. ,TS -_ c:So/19 5

Year Ended March 31: 1950 1951 1952 1953 1954 1255…M o- - -- ion Rupees … - - - - ---

ASSETS

CGirrent Assets:Cash 36.60 62.53 19.26 52.18 34.50 53.78rovernmpnt Secuarities 1( .0° 10.09 10 .09 10.05 11.54 11.54Peceivables (net) 59.06 56.15 52.46 56.22 65.05 59.25Tax Prepament. 11.60 10.71 21.42 26.27 26.31 52.46

Inventories 49.01 59.03 79.1.5 74.07 74.22 73.11

Total Current Assets 166.43 193.51 182.38 2138.79 211.62 250.14

Stores and Spare Parts 49.72 55.07 62.23 66.78 59.38 54.29

Investaents 14.25 17.37 27.19 27.23 27.26 37.26

Fixed Assets 415.27 427.55 4/46.41 477.21 523.58 612.52

wIe Depreciation O8C 76.08 29 313.62 32.3.00 353.8

14e '.1ed ASSets 156 62 Zl1.z 1 50 . 97 163. 9 15.592 58.6

Total Assets =70- i-4 77 L2 9 AONl

LiAB±Ll lai ANL EQUITY

Current Liabilities 152.63 176.12 159.35 198.33 202.49 24Z.63

Loans 24.60 25.01 25.37 25.10 25.19 26.26

Goverrnment Advance - - - - - 48.00

Capital Paid-in 104.72 104.72 104.72 104.72 173.39 173.39Surplus 105-3.0 117.l27 13333 3.1 77 308.05

Capital and Surplus 209,80 221.79 238.05 252.91 266.16 281.:L

Total Liabilitiesand Eiuity 3-8703 42,9 2 L22.77 k.±32. 93.81 600.33

The items have been classified in accordance with Bank. oractice.This classificationr differs in some resn.ects from that ased in TISCOtspub'Lished balance sheets.

ANXEX 4.

TEF&US OF THE GOVERI'TUT ADVAiCE TO IISCO

The advance has no fixed maturity and will bear no interest beforeJuly 1, 1958. After that date the Govenrment will set repayment terr:;s andinterest, iP anyr. The advance (with in-terest, if any) will be repayableonly from a special addition to the Conipany's retention priJce, or if controlof steel prices has been lifted, froxn the su,rp3.us of the Comipany's sales

returns over theoretical retention prices. The Government may call uponthe Company any time after April 1, 1963, to issue additionral share capitalfor repayment of any outstanding balance subjact to a"ree.ment on the terms,conditions and timing of anmr such issue. If by 1iarch 1, 1969, the advanceis not entirely repaid and if it cannot be fully liquidated by any of themethods stated above, the Government and the Company wil.l mutually agree onthe mode of its repaymrent.

A.XrT:v r .

pOSSarEBLE ADDI 1I

These works, to be iindertaken only if funds become available,include (in the order of thei.r relative priority):

A new pig casting machine;Sleeper plant facilities (unless the Government arranges

to include such facilities in one of the other steel corppanies}*pAn additionial open-Aearth furnace;'Itio additional soaking pits;Tar distillation facilities;A finished products warehouse; andWaste heat boilers.

The total cost of these works is estimated at about 42 millionrupees 48.7 million equivalent).

* Since this report was written, the Government has advised

TISCO that the Company should install these facilities.

ANThI 6

-S} - PBWIT FORWASTS

Iota i &WFC lToin. VtIV.............. A~~~~~~~_1L 5 S 19065tA2 10SX5 lj,i 13i-,v6 lea? .-e.i:e4 J:X U / ;f26i . ] 5 S rtdPstfodiielSo C4qp tty th.. wasc 100 8C0 ,r 17.') 1.f S1XO L50 1W liO SXS 15x, 75;00proWel4on * * 178 798 e93 11L6 1363 .020 i2a6 1288 1363 1363 1363 4665pra,cti-n for 'waro 'J" ' 28 381 63 3s il iCC 1) 13 13 .1 13 65Solo' ? 750 760 ac 11 :O 1350 &2127 5 1217S 1350 1350 1350 66m,kvgei 13etent1on r ice Hi4wces per tmc f 393 33 393 d 36• 390 3bS 365 38• 3e% 365 385Wk*. ,:rks Cawt.sI. Zl4 2S0 2 24 2;!2 9 230 _j?h 23 tll 230 20 r l ! -

os ?rfitt ' * 13 152 158 iS9 1•; 155 152 1-2 155 153 155 litg

(bless V oolo lk93. 115.5 128.0 x6v.s Ž.a 2 7i0. ffl.T 1sjC 13.t 2¢9.5! t2*.2 209.2 ILCaWjIt an ft L to _ _ ,_.!424 3..3) 4->X_ 16-5 .34 § 44 4- 2 4-0 2>1.0 ,4-

11otal is.4 Pirit ' 117.1B 1±fhS 131.0 11A84 213^.2 7x.9 t-15 4!) 17.5 I)T.4 213. 2 213.2 2±3.2 103S.2 (21S.1r

Dmspztiafoa ' ' 25.l 3.8 16.2 Wi2.0 Itt.?7 3.5 J 6 ) S. 83.6 73.2 72.9 72.5 jfl) I 82.ijflag1ng Aceoa. Cnams1 U V 4-. 3.4 3.3 2.o 3.,2 bo.0 ( 3-3j 3.7 l.S 6.k 6.2 6.2 26.8 5. )

3 at -im i ____ 13.1 .11.2 10.P S.o 146 522.9 j31 __ 12,2 i4.z 20.4 20.o 20.6 68.9 ( 3

lIst Opr4 nt5lt S 74 3 fi9.1 10.6 ?s.d 2 b., 3t6.5 1 .5sj 87.0 94.6 -13.5 u3. 113.9 5,23.2 10± 0)k- __a _ . _ .J * .ifl 3mo - J-.? -6.e) 26. 1. 15.6 z6.3 .22. D 1.L .a *3 2 -3i

lIs prn'lt :a af isa 734.I 68.2 .? h.5P c74. 3)53.8 L 7).7) 60.9 60.2 69.1. 90A 92.6 1i2.9 I 83.19iOfx ee.4 17 6 1.0 10-7 * , 1.a .27, tO 7h 3G 3 30. 7 ;-8 12_ 23

list Prfit a tuw 45.7 44.8 52.1 i'3.: 6.6 245.1 1 5w.:; 35.7 6.0.0 51.9 .2.1 53.2 21t2.2 1.0.3)

lIt ?,cfts ttUr ta'r ant beet, d41s-atq1wcc: 2 sharotaldir's tq4.tY 1 1Y .7 6.1 Is. ] -j. -1 1,E B.¢

Set FrtAta (tar trn .s p:rf. df-6doA/PaP nFi vt' ccs e *% 1. 41.5 16.6 (av. 19Sc/iu-li le) 24o6

ANANEX 7

TISCO Estimated Sources & Application of Funds

Total Total

51W ending Uazu 31 1, 195861559 19i 4) vie Yea "9e1 19c2 19 3 19S F'er

LIOJI sa- -.--- - - - - - Cl _ - - ---.- - million a - - - - - Yill. '-. 41,1l L

liomu or rjws

Not operating inem at dr depWjalMae, beforeintareat md taxes 74.3 69.1 70.6 7-9.[ 9.7 UI8'.5 6 87.8 9b.8 113.2 1L3.> 1l3.} 523.2 £09.0

Dep.L"tL= 25.8 4.8 0:.2 102.0 102.7 Ul.s ' 9 9 , 63.6 73.2 72.S 72.5 39o.3 o2.65

Tnc:rease in sinicLng furtds for mines (pre-profit) _. 1.1 1.4 ,.7 L 1i4 IA 1-4 i: > -l.o

Total Cash generated from operations 100.6 104.6 117.b 17b.9 2?Q.8 7Q2.7 1.46.L 183.3 179.6 187.8 187.8 187.8 920.5 193.1

New Shbm Capital 90.0 45.10 135.0 if 20.1OYvornmeaL adya4e 43-i 8.7 •2.0 10,,

Other loans0 7. 134. :,0.0 263.6 ,5.0

Propoed .IM le 159.2 20...8 3tAv 77.0 - -

hot, ds.ei La worin cait _ __ __ 1 3/ 6. 1. I. _ L. ,

_ _ __2_ ____6, 16w6 _6 2 l8u.8 6ee.8 1865.8 18 8 .0 " 2.

9 P..IC,T1GR OF i W108

rho ml1100 Ton lrorg,. 27-.4 371.6 o3.9 a2.6 752.2 156.7

Other er ptaemt 92.-; 95.2 85.9 56.7 35.0 365.3 76.1 50.0 50.0 50.0 50.0 50.0 250.0 52.1

laitapet d1a 2i cg eonatatLa - 5.1 18.4 27.3 50.8 10.6

I"40twa a 14 .a %uDe Co. kL 1 5 -0 _ _ _ 13.1 2.7 10.0 ___ _ _ 10.0 2

Tota1 CSpital Invetment U8..1 381.7 475.9 107.9 57.,6 1,11.4 246.1 60.0 5CI.O S0.0 50.0 50.0 260.0 54.2

17 ,0 17.0 3.5 16.2 14.0 13.9 12.6 11.8 69.1 14.4

104.1 .9 .9 .9 .9 12.1 15.7 3.3 1-.7 1c..6 10.2 103.0 9.7 51.2 10.7

AaltlWaatlBBli 11,2 11.2 2.3 23.2 214.4 25.5 26.8 28.0 127.9 26.6

^ *iz i .fud -.. 5 10.5 2.2 10.5 10.5 10.5 103.5 10.S 52.5 10.9

-- ; 2" 39 5 38 5 .2 5.3 13.0 5.o 13.0 1;.0 45.0 9.4Pla3mt t o EqusgiiaftIo Fugi 15.0 15.0 15.0 45.0 9.4

T.14. 27.7 23.l 17.6 1.0 i,,s 70.7 14.7 25.2 22.2 37.9 38.8 3Y.0 170.7 35.6

D111end 17*6 20.0 24.7 24a.7 30,0 117.0 24.4 30.0 30.0 3G.0 30.0 30.0 150.0 31.2

lnw saa. As wor lag eapitsl Loajudimg otw*sindnz.aai _, _3.8 °d 86.w ,j -w _- -9 -- _ __ __-_

179.5 h4L.3 543.5 2 06-3 18247 1$53.3 323.5 180.6 1750.7 183.0 1de.7 194.2 926.4 193.0

CAMH EtLUiCE'-I3 Tsh *r%g.) fr oa rewr 4.7 (3.7) (41-6) 22.6 18,X1 0.1 0.1 4.0 1.1 5.8 0.1 (5.4) 5.6 1.2

AuLliahbg at beixLag of yor 53.7 58.4 54.7 13.1 35.7 53.7 11.2 53.8 57.8 56.9 64.7 64.8 5;3.S 11..2ALudjble at sad of year .. ¢a2 .. 1k-7 1 ._Z *7 53.8 . .8 gj9 .7 t 59± 1

y i;3.6 1 ' on nev share i.sueF s1. 39.2 al.. p1L43 a. 2.0 .J11. increase AA RW%Jr±nUrl t t bitvsass lo As. 52.3 mllL:n less -a. 7.0 :ilJion inerase in 7etIri, .rntuity 0oviaiocis

le" .is 1.1 mill. Izesn aeot in A? rA Moztai S*iur it

,/ iialudes cM. e. inloun laYest_mat a artoes and ayare ,; rtWUAOA La 8*t.riag ira4,itv broviaic,

AIWEX 8.IISCO - BIAPL4iTE SI-CET FOPICASTS

As at M!Iarch 31, 9.5 and (Pro Forria) as at March 31, 1960 and 1965

Fiscal Year End-ng 1955 _ QA10_ 1965

MIkarch 31: Till. Rs. Millo RS Mill e $ Ii ill0 Rs. Mill. $

ASSETS

Current Assets 25O0l 52.1 283.0 59.0 238.6 60.1

Stores and Spare Parts 5i4,3 11.3 81.3 16.9 81.3 17.0

Investments 37.3 7.7 43.8 9.1 53.8 11.2

Si nki na Pinr._ - 10.5 2.2 63.0 13,1

Fixed Assets 612 5 127.6 l1781.G 371.0 2,031.0 h23.1

Less Depreciation (353.9) (73.6) (665.4) (138.6) (1,061.7) (221.2)Fixed Assets 24et 258.6 5J.fl 1A1166 232.4 969.3 201.9

600.3 g2Yyg l--$ T53I.. 319.6 T1,;§7 303.3

TTAT TTT T'3 TMTTT TE'.YrTTM *

Current Liabilities 1/ 24h.6 51.0 247.8 51.7 253.3 52.8

Proposed IBfl Lo,-n - - 34.8.3 72.7 220.9 4j6.

Local Loans 26.3 5.5 250,., 52.1 205.4 o2.826.3 .7 59.2 8 16-. 3 46

Government Advance 48.0 10.0 lOG.0 20.8 100.0 20.8

Capital 173.4 36.1 269.8 56.2 269.8 56.2

Surplus 108.0 22.5 317.4 66.1 4606.6 B4i7

Capital and Surplus _2___1 3giE 7d7.T 122.3 675.4 14]29

600.3 125.1 1,534.2 319.6 15 456.0 303.3

Currenit Assets/C-Ouure-.-t biJtulites 10 s J. 1L ..14 .1L4 :1

Equity //De bDt 3/ 93 :7 5 4.6 68 :32

1/ Including 'oalance ac-ed to Equalization Fiund.v/ Equity including Government Advance.3/ Net amount of debt after deduction of Sinking Fwud.