MANAC-1

GROUP
ASSIGNMENT
COMPANY
TATA STEEL LIMITED
SUBMITTED BY
PRATEEK GIRIA

B14100

PRATYUSH PANKAJ

B14101

SHRIYA SUKALIKAR

B14112

SUDEEPTI SRIVASTAVA

B14116

SUMEDHA SAHANI

B14118

VATSAL GUPTA

B14120

STATEMENT OF PROFIT/ LOSS

(All amounts are in Crores)
REVENUE
(a) Revenue from operations
Less: Excise duty
(b)

(a)
(b)
(c)
(d)
(e)
(f)
(g)

Other income
TOTAL REVENUE
EXPENSES
Raw materials consumed
Purchase of finished, semi-finished and other products
Changes in inventories of finished goods, work-in-progress
and stock-in-trade
Employee benefits expense
Depreciation and amortisation expense
Finance costs
Other expenses

(h)

Less: Expenditure (other than interest) transferred to capital and

other accounts
TOTAL EXPENSES
PROFIT BEFORE EXCEPTIONAL ITEMS AND TAX
EXCEPTIONAL ITEMS
(a) Provision for diminution in the value of investments/
doubtful advances
(b) Profit on sale of non-current investments
PROFIT BEFORE TAX
TAX EXPENSE
(a) Current tax
(b) MAT credit
(c) Deferred tax
PROFIT AFTER TAX
NOMINAL VALUE PER SHARE (`)
BASIC EARNINGS PER SHARE (`)

FOR YEAR
ENDED
31.03.2014

FOR YEAR
ENDED
31.03.2013

46,309.34
4,598.31
41,711.03
787.64
42,498.67

42,317.24
4,117.81
38,199.43
902.04
39,101.47

9,677.71
352.63
(155.18)

9,877.40
453.34
(404.60)

3,673.08
1,928.70
1,820.58
16,375.81
33,673.33
1,029.92

3,602.27
1,640.38
1,876.77
14,420.91
31,466.47
876.13

32643.41
9,855.26
(141.76)

30,590.34
8,511.13
(686.86)

(141.76)
9,713.50

12.33
(674.53)
7,836.60

3,098.02

1,770.54

203.29
3,301.31
6,412.19
10.00
64.21

(399.84)
1,402.93
2,773.63
5,062.97
10.00
50.28

Balance Sheet as at 31st March, 2014

(All amounts are in Crores)
EQUITY AND LIABILITIES
SHAREHOLDERS' FUNDS
(a) Share capital
(b) Reserves and surplus
HYBRID PERPETUAL SECURITIES
NON-CURRENT LIABILITIES
(a) Long-term borrowings
(b) Deferred tax liabilities (net)
(c) Other long-term liabilities
(d) Long-term provisions
CURRENT LIABILITIES
(a) Short-term borrowings
(b) Trade payables
(c) Other current liabilities
(d) Short-term provisions

ASSETS
NON CURRENT ASSETS
(a) Fixed assets
(i) Tangible assets
(ii) Intangible assets
(iii) Capital work-in-progress
(b) Non-current investments
(c) Long-term loans and advances
(d) Other non-current assets
CURRENT ASSETS
(a) Current investments
(b) Inventories
(c) Trade receivables
(d) Cash and bank balances
(e) Short-term loans and advances
(f) Other current assets

AS ON
30.03.2014

AS ON
30.03.2013

971.41
60,176.58
61,147.99
2,275.00

971.41
54,238.27
55,209.68
2,275.00

23,808.09
2,038.98
983.52
1,905.05
28,735.64

23,565.57
1,843.74
380.87
2,113.42
27,903.60

43.69
70.94
8,263.61
6,363.66
8,671.67
8,509.79
1,902.81
1,544.26
18,881.78
16,488.65
1,11,040.41 1,01,876.93

24,064.43

24,650.54

201.32
18,509.40
42,775.15
52,318.56
4,080.07
302.03
99,475.81

224.51
8,722.29
33,597.34
49,984.80
6,574.15
215.79
90,372.08

2,343.24
434
6,007.81
5,257.94
770.81
796.92
961.16
2,192.36
1,299.20
2,207.83
182.38
615.8
11,564.60
11,504.85
1,11,040.41 1,01,876.93

Cash Flow Statement for the year ended 31st March, 2014
(All amounts are in Crores)
A. Cash Flow from Operating Activities: Profit before tax
Adjustments for:
Depreciation and amortisation expense
Impairment of fixed assets
(Profit)/Loss on assets sold/discarded
Provision for diminution in the value of investments
Provision for doubtful advances in the nature of loans
Profit on sale of non-current investments
(Gain)/Loss on cancellation of forwards, swaps and options
Interest and income from current investments
Income from non-current investments
Finance costs
Provision for wealth tax
Exchange (gain)/loss on revaluation of foreign currency loans and
swaps
Operating Profit before Working Capital Changes
Adjustments for:
Trade and other receivables
Inventories
Trade payables and other liabilities
Cash Generated from Operations
Direct tax paid
Net Cash Flow from/(used in) Operating Activities
B. Cash Flow from Investing Activities:
Purchase of fixed assets(1)
Sale of fixed assets
Advance received against sale of asset
Purchase of investments in subsidiaries(2)
Purchase of other non-current investments
Sale of non-current investments
Sale/Redemption of investments in subsidiaries
(Purchase)/Sale of current investments (net)
Inter-corporate deposits/Shareholders' loan given
Repayment of inter-corporate deposits/shareholders' loan
Interest received
Dividend received
Net Cash Flow from/(used in) Investing Activities

2014

` 2013

9,713.50

7,836.60

1,928.70

1,640.38

0.33
48.61
141.76
56.69
(24.78)
18.01
(348.46)
(481.02)
1,820.58
2
360.51

4.01
3
90.13
610.63
(12.33)
127.93
(330.62)
(702.35)
1,876.77
2
440.75

3,522.93
13,236.43
752.32

3,750.30
11,586.90
873.33

(749.87)
1,641.16
1,643.61
14,880.04
(2,447.24)
12,432.80
(9,549.13)

(398.95)
987.33
1,461.71
13,048.61
(1,979.94)
11,068.67
(7,508.55)

24.5
135.5
(94.35)
(451.37)
1,241.52
54.95
(1,697.44)
(131.40)
45
93.02
491.78
(9,837.42)

14.51

(2,123.81)
(255.41)
0.87
231.32
991.7
(127.30)
50
59.09
145.18
(8,522.40)

Cash Flow from Financing Activities:

Issue of Equity Shares
Capital contributions received
Proceeds from borrowings
Repayment of borrowings
Amount received/(paid) on cancellation of forwards, swaps and
options
Expenses (incurred)/reimbursed on issue of equity instruments
Distribution on Hybrid Perpetual Securities
Interest paid(1)
Dividend paid
Tax on dividend paid
Net Cash Flow from/(used in) Financing Activities
Net increase/(decrease) in Cash and Cash Equivalents
Opening Cash and Cash Equivalents
[Note 19, Page 163]
Closing Cash and Cash Equivalents
[Note 19, Page 163]

0.01

0.02

2.74
5,325.46
(6,469.94)
(18.04)

5.58
6,087.61
(7,181.00)
(122.81)

3.87
(266.13)
(1,503.41)
(776.97)
(123.57)
(3,825.98)
(1,230.60)
2,139.93(3)

2.4
(265.76)
(1,456.42)
(1,165.46)
(185.75)
(4,281.59)
(1,735.32)
3,874.78

909.33

2,139.46

IMPORTANT FINANCIAL INFORMATION EXTRACTED FROM THE REPORT

1. Profit After Tax: Tata Steel recorded a profit after tax of Rs. 6,412 crores during Financial Year
2013-14 as compared to Rs. 5,063 crores in Financial Year 2012-13 primarily due to higher deliveries
at 8.52 million tonnes.
2. Earnings Per Share: The basic and diluted earnings per share were at Rs. 64.22 for Financial Year
2013-14 as compared Rs. 50.28 to Financial Year 2012-13.
3. Net Sales and Other Operating Income: The increase in the Net Sales increased by 9% from Rs.
38,199 crores in the financial year 2012-13 to Rs. 41,711 crores in the financial year 2013-14. The
increase was primarily due to increase in volumes of Flat products (post commissioning of TSCR).
The increase was partly offset by lower volumes of Long products and lower realizations of both Flat
and Long products due to adverse market conditions and mix impact. Higher volumes partly offset
by lower realizations at Tubes Division and at Wires Division also contributed to the increases.
The division wise net sales increased from financial year 2012-13 to year 2013-14 by the following
percentages:
Net Sales
Steel
Tubes
Ferro Alloys and Minerals
Bearings

Change %
10
8
2
5

4. Finished, semi-finished steel and other products: Purchase of finished and semi-finished materials
decreased over Financial Year 2012-13 due to lower purchases at Growth Shop (on account of
Odisha projects and external orders) at Wires and CRC West Division. The decreases were partly
offset by purchase of imported rebars at Steel Division and higher purchases at Tubes Division.
5. Raw Materials Consumed: Raw Materials consumed decreased by 2 % from Rs. 9877 crores to Rs.
9678 crores. The decrease was primarily due to lower cost and consumption of purchased coke. The
decreases were partly offset by higher consumption of imported coal, higher cost and consumption
of imported limestone, Ferro Alloys and other raw materials along with higher freight and handling
costs of own material.

6. Employee Expenses: The employee benefits expense in the current period increased by 2% over
Financial Year 2012-13 primarily on account of normal salary revision. The increase was partly offset
by reduction in retiring provisions on account of change in actuarial estimates due to change in
discounting rates.
7. Fixed Assets: A huge increase in Fixed assets was recorded from Rs. 33597 crores(2012-13) to Rs.
42775 crores(2013-14), making the percentage increase to 27 %. The increase in fixed assets
represents primarily capital expenditures towards Kalinganagar project at Odisha.
8. Investments: The company increased its financial investments from 50,419 crores(FY13) to 54662
crores(FY 14) making the percentage increase to 8%. During the year, the Company converted
advance against equity given to its subsidiary Tata Steel Holdings into equity. Investment in the
Mutual Funds as on 31st March, 2014 was 2,343 crores up from 434 crores of 31st March, 2013.
9. Sundry Debtors: The overall value of debtors decreased by 3% due to the decrease in the export
debtors.
10. Net Cash Flow from Operating Activities: The net cash from operating activities was 12,433
crores during Financial Year 2013-14 as compared to 11,069 crores during Financial Year 2012-13.
The cash operating profit before working capital changes and direct taxes during Financial Year
2013-14 was 13,236 crores as compared to 11,587 crores during Financial Year 2012-13 due to
improved profitability. Decrease in the trade and other receivables and increase in the trade
payables were partly offset by the increase in inventories in the current period resulting in the
overall decrease in working capital during Financial Year 2013-14 (Rs. 1,644 crores). The income
taxes paid during Financial Year 2013-14 was Rs. 2,447 crores as compared to 1,980 crores during
Financial Year 2012-13.
11. Net Cash from Investing Activities: The net cash outflow from investing activities amounted to
9,837 crores in Financial Year 2013-14 as compared to an outflow of 8,522 crores during Financial
Year 2012-13.The outflow during Financial Year 2013-14 broadly represents capex primarily on
account of Kalinganagar project at Odisha (9,549 crores) and purchase (net of sale) of current
investment (1,697 crores) partly offset by dividend received (492 crores).
12. Net Cash from Financing Activities: The net cash outflow from financing activities was Rs. 3,826
crores during Financial Year 2013-14 as compared to an outflow of 4,282 crores during Financial
Year 2012-13. The outflows during the current period were mainly due to the repayment of
borrowings (6,470 crores), interest payments (1,503 crores) and dividend payments (901 crores)
partly offset by fresh drawls (5,325 crores).
13. Inventories: The value of inventory was increased from Rs. 5258 (financial year 2012-13) crore to
Rs. 6008 crore(financial year 2013-14). The steep increase of 14% was attributed to increase in
mechanical and electrical spares stock to support the operations post 3 million tonnes expansion at
Jamshedpur.

SPECIFIC AREAS OF STRENGTHS

1. Gross Profit Ratio: The gross profit ratio which is the ratio of gross profit to sales has increased to
47.56% in financial year 2013-14 from 46.99% in the financial year 2012-13. This shows that the
profit generated per unit of sales made is now higher despite the adverse market conditions.

2. Net Sales and Other Operating Income: The increase in the Net Sales increased by 9% from Rs.
38,199 crores in the financial year 2012-13 to Rs. 41,711 crores in the financial year 2013-14. The
increase was partly offset by lower volumes of Long products and lower realizations of both Flat and
Long products due to adverse market conditions and mix impact. Higher volumes partly offset by
lower realisations at Tubes Division and at Wires Division also contributed to the increases.

3. Return on Investment: Return on investment measures a corporation's profitability by revealing

how much profit a company generates with the money shareholders have invested. The ROI has
increase from 11.13% in financial year 2012-13 to 12.94% in 2013-14

4. Earnings Per Share: The earnings per share has shown a steep increase to 66.02 in FY14 as
compared to 52.13 in its previous year. Since there is no indication of a buy-back, the increased EPS
shows that the company has raised its profit earnings and is healthy for investments.

5. Dividend Coverage Ratio: It is a very important factor that indicates the capacity of an organization
to pay out profit attributable to shareholders. The steep increase of the Dividend Coverage Ration
from 4.34(2012-13) to 8.25(2013-14) shows the increased security for the shareholders getting their
dividends.

6. Earning Power: A business's ability to generate profit from conducting its operations. Earnings
power is used to analyze stocks to assess whether the underlying company is worthy of
investment. The increased value of Earning Power from 5.12% (2012-13) to 6.02% (2013-14)
indicate an increased attractiveness of the company in terms of investment.

7. Proprietary Ratio: The proprietary ratio shows the contribution of stockholders in total capital of
the company. The increase of proprietary ratio from 0.4 to 0.47 despite the increase in total assets,
therefore, indicates a strong financial position of the company and greater security for creditors.

8. Capital Turnover Ratio: The capital turnover ratio has increased from 45.72% in financial year 201213 to 46.28% in the financial year 2013-14. This indicates a increased efficiency in the usage of the
stockholders equity to generate revenue.

9. Interest Coverage Ratio: A ratio used to determine how easily a company can pay interest on
outstanding debt. The ratio is healthy for both years and has increased from FY13 to FY 14 from
6.38 to 7.46

SPECIFIC AREAS OF WEAKNESS

1. Slow growth in European Market: The Groups financial performance is influenced by the economic
climate in India, UK, the European mainland, SouthEast Asia and by changes in the global steel
market. A large proportion of the Groups manufacturing facilities are in Europe, which is a
relatively high cost area and where demand growth for steel products is much lower than in
developing parts of the world The European steel demand continues to be weak due to dipping
economy even as steel imports rise from countries with low cost of production e.g. China, Russia
etc.
2. Financing: Tata Steel Groups expansion projects require significant investment which in turn is
funded from internal cash generation and capital raised externally (including debt). Also, the
Company in 2007, funded its acquisition of Corus in significant part by debt, raised both in India and
overseas, as a result of which the Company has sizeable repayment and debt servicing obligations
on an ongoing basis. Recent depressed market conditions (especially in Europe) have meant that
the cash generation across the Tata Steel Group has been constrained, thereby increasing the risk
inherent in the capital structure of the business.
3. Debt Equity Ratio: The value of the debt equity ratio has been low in both the years. Such low
values indicate that the company is not taking advantage of the increased profits that
financial leverage may bring. Moreover, for a highly capital intensive company like Tata Steel it is
very important to have a higher debt-equity ratio as it must purchase more property, plants and
equipment to operate.
4. Current Ratio: Current Ratio is a liquidity ratio that measures company's ability to pay its debt over
the next 12 months or its business cycle. It has shown a decreasing trend from FY13 to FY14
reducing from 0.88 to 0.62.
5. Fixed Asset Turnover: The fixed-asset turnover ratio measures a company's ability to generate net
sales from fixed-asset investments. The value has decreased from 1.13 to 0.97. The value could be
attributed the expansion activities of brownfield in Jamshedpur and greenfield in Odisha.
6. Inventory Holding Period: The inventory holding period has gone up to 94.07 days (2013-14) from
91.25 days (2012-13), resulting in increased holding costs.
7. Debt Service Coverage Ratio: The debt service coverage ratio (DSCR) measures how effectively a
company's operations-generated income is able to cover outstanding debt payments. The drastic
reduction in the value of DSCR from 10.22 to 1.55 indicates decreased capability to cover
outstanding debt payments.
8. Net Working Capital: The Net working capital is negative for both the years. Working capital is
essential to maintain smooth running of a business. It is important for the solvency capability of the
company, its goodwill as well as capability to obtain loans. The negative working capital is a
negative indication of these fronts.

SUGGESTIONS TO THE COMPANY

1. Other long term liabilities have increased from Rs. 380.87 cr to Rs. 983.52 cr primarily on
account of Creditors for capital supplies/services. The company should keep a check on the
same.
2. Trade payables have gone up to Rs. 8263.24 cr from Rs. 6363.24 cr on account of increase in
Creditors for supplies/services by Rs. 1465.79 cr. The increase in creditors should be kept in
control by the organization.
3. Rupee liability has increased by Rs. 264.98 crores (net) (2012-13: Rs. 77.79 crores) arising out
of realignment of the value of long term foreign currency loans and vendor retention liability
for procurement of fixed assets. In such cases the liabilities should be paid off as and when the
Indian currency improves.
4. Tata Steel should further diversify its current investments, and not only invest in mutual funds
(although it reduces the risk associated with market fluctuations with respect to its
professionally managed, diversified portfolios of equities, bonds and other securities.
5. Other income from investments in its subsidiaries has decreased to Rs. 352.97 cr to Rs. 627.60
cr as compared to previous year. Instead it would be beneficial for the company if it reaps
higher benefits from investing in other avenues.

Ratio

Definition

2014

2013

Gross Profit Ratio

Gross Profit/Sales

19841.15/41711.03*100=47.
56%

17951.29/38199.43*100=46.9
9%

Net Profit Ratio

PAT/Sales

6412/41711.03*100=15.37%

5062.97/38199.43*100=13.25
%

Capital turnover Ratio

Net Sales/Capital Employed

41711.03/90119.64=46.28%

38199.43/83544.54=45.72%

Return on Investment
(ROI)

EBIT-Taxes)/Net Assets

(7893-3301.31)/(42775.157317)=12.94%

(5959.83-2773.63)/(33597.344983.8)= 11.13%

Return on Equity (ROE)

PAT/Equity

6412.19/63423=10.1%

5062.97/57484.68=8.8%

Return on Net Worth

(RONW)

PAT/Net Worth

6412.19/61148=10.48%

5062.97/55209.68=9.17%

Return on Total Assets

Return on Total Assets

6412.91/106458.67=6.02%

5062.97/98839.96=5.12%

Return on Capital
Employed (ROCE)

Net Profit/Capital Employed

6412.91/90119.64=7.11%

5062.97/83544.54=6.06%

Earnings per Share

(EPS)

PAT/Number of equity shares

6412.91/971215405*100000
00 = 66.02

5062.97/971215405*1000000
0 = 52.13

Earning Power

EBIT/Total Assets

7893/106458.67=7.41%

5958.83/98839.96=6.02%

Quick Ratio

(Current Assets Prepaid

Expenses)/(Current Liabilities
Short Term Bank Overdraft)

4257.59/18881.78=0.22

4039.08/16488.65=.24

Current Ratio

Current Assets / Current

Liabilities

11564.60/18881.78=0.62

11504/16488.65=0.88

Debt Equity Ratio

Debts/Equity

(23808.09+1905.05+43.69)/6
1147.99=0.41

(23565.57+380+70.94)/55209.
68=0.44

Proprietary Ratio

Stockholder's Equity/Total
Assets

42715/90119= 0.47

33597/83544= 0.4

Dividend Coverage
Ratio

(Profit after tax - Dividend

paid on Irredeemable
Preference Shares)/Dividend
paid to Ordinary Shareholders

6412.91/777 = 8.25

5062.97/1165.46 = 4.34

Interest Coverage

EBIT/Interest Expense

11216.91/1503.41=7.46

9293.02/1456.42=6.38

Debt Service Coverage

Ratio (DSCR)

Net Operating Income/Total

Debt Service

12432.8/7973.35 = 1.55

21462/2100 = 10.22

Inventory Turnover

COGS/Average Inventory

21869.88/5632.87 = 3.88

11068.67/8367.42 = 4

Net Working Capital

Current Assets-Current
Liabilities

11564.6-18881.78 =-7317.18

11504.85-16488.65 =-4983.9

Fixed asset turnover

Net Sales/Fixed Assets

41711/42775= 0.97

38199/33597=1.13

Inventory Holding
Period

365*(Avg. Inventory/COGS)

94.07 days

91.25 days

Operating Leverage

Contribution/EBIT

21483.36/11216.91=2.45

20183.46/9293.02=2.38

Financial Levearge

EBIT/PBT

11216.91/9713.5=1.15

9293.02/7836.6=1.18

Combined Leverage

OL*FL

2.81

2.82