CHAPTER-1

INTRODUCTION

The net working capital of a business is its current assets less its current liabilities.
Current Assets include:
- Stocks of raw materials
- Work-in-progress
- Finished goods
- Trade debtors
- Prepayments
- Cash balances
Current Liabilities include:
- Trade creditors
- Accruals
- Taxation payable
- Dividends payable
- Short term loans
Every business needs adequate liquid resources in order to maintain day-to-day cash flow. It
needs enough cash to pay wages and salaries as they fall due and to pay creditors if it is to keep
its workforce and ensure its supplies.
Maintaining adequate working capital is not just important in the short-term. Sufficient liquidity
must be maintained in order to ensure the survival of the business in the long-term as well.
Even a profitable business may fail if it does not have adequate cash flow to meet its liabilities
as they fall due.
Therefore, when businesses make investment decisions they must not only consider the financial
outlay involved with acquiring the new machine or the new building, etc, but must also take
account of the additional current assets that are usually involved with any expansion of activity.
Increased production tends to engender a need to hold additional stocks of raw materials and
work in progress. Increased sales usually mean that the level of debtors will increase. A general
increase in the firm’s scale of operations tends to imply a need for greater levels of cash.
Then we should know, why should the managers of a business pay special attention to working
capital?
Management must ensure that a business has sufficient working capital. Too little will result in
cash flow problems highlighted by an organization exceeding its agreed overdraft limit, failing
to
pay suppliers on time and being unable to claim discounts for prompt payment. In the long run, a
business with insufficient working capital will be unable to meet its current obligations and will
be forced to cease trading even if it remains profitable on paper.

On the other hand, if an organization ties up too much of its resources in working capital it will
earn a lower than expected rate of return on capital employed. Again this is not a desirable
situation.
The three components, which put affects on working capital, are as:
1. Inventory
2. Receivable
3. Cash
Operating cycle

For a manufacturing company like; steel industry; cement industry and many other
manufacturing companies, Inventory management is the most crucial part for the organization.
Inventories which may classified as:
1. Raw material
2. Work-in-progress
3. Finished goods
Whereas receivable and cash management can be done after sales but inventory management
must be done before sale. It requires appropriate forecasting of production and sales. As it is
based on forecasting, so it becomes difficult task for any financial manager for any organization.

Inventory Management must be designed to meet the dictates of market place and support the
company’s Strategic Plan. The many changes in the market demand, new opportunities due to
worldwide marketing, global sourcing of materials and new manufacturing technology means
many companies need to change their Inventory Management approach and change the process
for Inventory Control.

Inventory Management system provides information to efficiently manage the flow of materials,
effectively utilize people and equipment, coordinate internal activities and communicate with
customers. Inventory Management does not make decisions or manage operations; they provide
the information to managers who make more accurate and timely decisions to manage their
operations.

The Inventory Management system and the Inventory Control Process provides information to
efficiently manage the flow of materials, effectively utilize people and equipment, coordinate
internal activities, and communicate with customers. Inventory Management and the activities of
Inventory Control do not make decisions or manage operations; they provide the information to
Managers who make more accurate and timely decisions to manage their operations.

The basic building blocks for the Inventory Management system and Inventory Control
activities are:

1) Sales Forecasting or Demand Management

2) Sales and Operations Planning
3)Production Planning
4)Material Requirements Planning
5)Inventory Reduction
If we see for TATA STEEL, company is maintaining more than 5% inventories in their hand.
Also the company consuming raw material more than 20% of sale value in the last year. So
inventory management is one of the essential for the organization.

CHAPTER-2
MAJOR TYPES OF INVENTORY

2.1>Raw material
Raw materials are inventory items that are used in the manufacturer's conversion process to
produce components, subassemblies, or finished products. These inventory items may be
commodities or extracted materials that the firm or its subsidiary has produced or extracted.
They also may be objects or elements that the firm has purchased from outside the organization.
Even if the item is partially assembled or is considered a finished good to the supplier, the
purchaser may classify it as a raw material if his or her firm had no input into its production.
Typically, raw materials are commodities such as ore, grain, minerals, petroleum, chemicals,
paper, wood, paint, steel, and food items. However, items such as nuts and bolts, ball bearings,
key stock, casters, seats, wheels, and even engines may be regarded as raw materials if they are
purchased from outside the firm.

2.2>Work-in-process
Work-in-process (WIP) is made up of all the materials, parts (components), assemblies, and
subassemblies that are being processed or are waiting to be processed within the system. This
generally includes all material—from raw material that has been released for initial processing
up to material that has been completely processed and is awaiting final inspection and
acceptance before inclusion in finished goods.

Any item that has a parent but is not a raw material is considered to be work-in-process. A
glance at the rolling cart product structure tree example reveals that work-in-process in this
situation consists of tops, leg assemblies, frames, legs, and casters. Actually, the leg assembly
and casters are labeled as subassemblies because the leg assembly consists of legs and casters
and the casters are assembled from wheels, ball bearings, axles, and caster frames.

2.3>Finished goods
A finished good is a completed part that is ready for a customer order. Therefore, finished goods
inventory is the stock of completed products. These goods have been inspected and have passed
final inspection requirements so that they can be transferred out of work-in-process and into
finished goods inventory. From this point, finished goods can be sold directly to their final user,
sold to retailers, sold to wholesalers, sent to distribution centers, or held in anticipation of a
customer order.

CHAPTER-3
ACCOUNTING POLICY FOR VALUATION OF INVENTORY(as per IAS-2)

3.1>Measurement of Inventories
Inventories should be valued at the lower of cost and net realizable value.

3.2>Cost of Inventories
The cost of inventories should comprise all costs of purchase, costs of conversion and other
costs incurred in bringing the inventories to their present location and condition.
3.3>Costs of Purchase
The costs of purchase consist of the purchase price including duties and taxes (other than those
subsequently recoverable by the enterprise from the taxing authorities), freight inwards and
other expenditure directly attributable to the acquisition. Trade discounts, rebates, duty
drawbacks and
Other similar items are deducted in determining the costs of purchase.

3.4>Costs of Conversion
The costs of conversion of inventories include costs directly related to the units of production,
such as direct labor. They also include a systematic allocation of fixed and variable production
overheads that are incurred in converting materials into finished goods. Fixed production
overheads are those indirect costs of production that remain relatively constant regardless of the
volume of production, such as depreciation and maintenance of factory buildings and the cost of
factory management and administration. Variable production overheads are those indirect costs
of production that vary directly, or nearly directly, with the volume of production, such as
indirect materials and indirect labour.

The allocation of fixed production overheads for the purpose of their inclusion in the costs of
conversion is based on the normal capacity of the production facilities. Normal capacity is the
production expected to be achieved on an average over a number of periods or seasons under
normal circumstances, taking into account the loss of capacity resulting from planned
maintenance. The actual level of production may be used if it approximates normal capacity.
The amount of fixed production overheads allocated to each unit of production is not increased
as a consequence of low production or idle plant. Unallocated overheads are recognized as an
expense in the period in which they are incurred. In periods of abnormally high production, the
amount of fixed production overheads allocated to each unit of production is decreased so that
inventories are not measured above cost. Variable production overheads are assigned to each
unit of production on the basis of the actual use of the production facilities.

A production process may result in more than one product being produced simultaneously. This
is the case, for example, when joint products are produced or when there is a main product and a
by-product. When the costs of conversion of each product are not separately identifiable, they
are
allocated between the products on a rational and consistent basis. The allocation may be based,
for example, on the relative sales value of each product either at the stage in the production
process when the products become separately identifiable, or at the completion of production.
Most by-products as well as scrap or waste materials, by their nature, are immaterial. When this
is the case, they are often measured at net realizable value and this value is deducted from the
cost of the main product. As a result, the carrying amount of the main product is not materially
different from its cost.

3.5>Other Costs
Other costs are included in the cost of inventories only to the extent that they are incurred in
bringing the inventories to their present location and condition. For example, it may be
appropriate to include overheads other than production overheads or the costs of designing
products for specific customers in the cost of inventories.

3.6>Cost Formulas
The cost of inventories of items that are not ordinarily interchangeable and goods or services
produced and segregated for specific projects should be assigned by specific identification of
their individual costs.

Specific identification of cost means that specific costs are attributed to identified items of
inventory. This is an appropriate treatment for items that are segregated for a specific project,
regardless of whether they have been purchased or produced. However, when there are large
numbers of items of inventory which are ordinarily interchangeable, specific identification of
Costs are inappropriate since, in such circumstances, an enterprise could obtain predetermined
effects on the net profit or loss for the period by selecting a particular method of ascertaining the
items that remain in inventories.

The cost of inventories, other than those dealt with in paragraph 14 of IAS-2, should be assigned
by using the first-in, first-out (FIFO), or weighted average cost formula. The formula used
should reflect the fairest possible approximation to the cost incurred in bringing the items of
inventory to their present location and condition.

A variety of cost formulas is used to determine the cost of inventories other than those for which
specific identification of individual costs is appropriate. The formula used in determining the
cost of an item of inventory needs to be selected with a view to providing the fairest possible
approximation to the cost incurred in bringing the item to its present location and condition. The
FIFO formula assumes that the items of inventory which were purchased or produced first are
consumed or sold first, and consequently the items remaining in inventory at the end of the
period are those most recently purchased or produced. Under the weighted average cost formula,
The cost of each item is determined from the weighted average of the cost of similar items at the
beginning of a period and the cost of similar items purchased or produced during the period. The
average may be calculated on a periodic basis, or as each additional shipment is received,
depending upon the circumstances of the enterprise.
3.7>Techniques for the Measurement of Cost
Techniques for the measurement of the cost of inventories, such as the standard cost method or
the retail method, may be used for convenience if the results approximate the actual cost.
Standard costs take into account normal levels of consumption of materials and supplies, labour,
efficiency and capacity utilization. They are regularly reviewed and, if necessary, revised in the
light of current conditions.

The retail method is often used in the retail trade for measuring inventories of large numbers of
rapidly changing items that have similar margins and for which it is impracticable to use other
costing methods. The cost of the inventory is determined by reducing from the sales value of the
inventory the appropriate percentage gross margin. The percentage used takes into consideration
inventory which has been marked down to below its original selling price. An average
percentage for each retail department is often used.

3.8>Net Realizable Value

The cost of inventories may not be recoverable if those inventories are damaged, if they have
become wholly or partially obsolete, or if their selling prices have declined. The cost of
inventories may also not be recoverable if the estimated costs of completion or the estimated
costs necessary to make the sale have increased. The practice of writing down inventories below
cost to net realisable value is consistent with the view that assets should not be carried in excess
of amounts expected to be realised from their sale or use.

Inventories are usually written down to net realisable value on an item by item basis. In some
circumstances, however, it may be appropriate to group similar or related items. This may be the
case with items of inventory relating to the same product line that have similar purposes or end
uses and are produced and marketed in the same geographical area and cannot be practicably
evaluated separately from other items in that product line. It is not appropriate to write down
inventories based on a classification of inventory, for example, finished goods, or all the
inventories in a particular business segment.
Estimates of net realisable value are based on the most reliable evidence available at the time the
estimates are made as to the amount the inventories are expected to realise. These estimates take
into consideration fluctuations of price or cost directly relating to events occurring after the
balance sheet date to the extent that such events confirm the conditions existing at the balance
sheet date.

Estimates of net realisable value also take into consideration the purpose for which the
inventory is held. For example, the net realisable value of the quantity of inventory held to
satisfy firm sales or service contracts is based on the contract price. If the sales contracts are for
less than the inventory quantities held, the net realisable value of the excess inventory is based
on general selling prices. Contingent losses on firm sales contracts in excess of inventory
quantities held and contingent losses on firm purchase contracts are dealt with in accordance
with the principles enunciated in Accounting Standard (AS) 4, Contingencies and Events
Occurring after the Balance Sheet Date.

Materials and other supplies held for use in the production of inventories are not written down
below cost if the finished products in which they will be incorporated are expected to be sold at
or above cost. However, when there has been a decline in the price of materials and it is
estimated value, the materials are written down to net realisable value. In such circumstances,
the replacement cost of the materials may be the best available measure of their net realisable
value.

An assessment is made of net realisable value as at each balance sheet date.

3.9>Disclosure
The financial statements should disclose:
(a) The accounting policies adopted in measuring inventories, including the cost formula used;
and,
(b) The total carrying amount of inventories and its classification appropriate to the enterprise.

Information about the carrying amounts held in different classifications of inventories and the
extent of the changes in these assets is useful to financial statement users. Common
classifications of inventories are raw materials and components, work in progress, finished
goods, stores and spares, and loose tools.

CHAPTER-4
HISTORY OF INDIAN STEEL SECTOR
Steel is an important indicator to analyze the economic development of a country. The steel
industry is highly scientific and technology oriented. Technological advancement is very
important for the overall health of the steel industry.

4.1>Indian Steel Industry

4.1.1>During Ancient Period

The history of iron and steel making in India goes back by several centuries. It dates to 480 BC
when archers in India used arrows tipped with steel. The iron pillar of Dhar near Indore in
Madhya Pradesh dates back to about 321 AD, the iron pillar of Kutab Minar near Delhi dates
back to about 400 AD and the iron beams of Sun temple of Konark in Orissa dates back to 13th
century. These pillars are a testimony to ancient India's expertise in the making of steel.

4.1.2>Before Independence
The roots of the Indian Steel industry in modern times can be traced to the year 1874, when a
company called Bengal Iron works at Kulti near Asansol in West Bengal produced iron. One of
the most important landmarks in the history of Indian steel industry was the commencement of
the Tata Iron and Steel Company at Jamshedpur in the state of Bihar in 1907.The other
prominent steel manufacturers before independence were Indian Iron and Steel Company
(1922),Mysore Iron and Steel Works(1923) and Steel Corporation of Bengal (1937).

4.1.3>After Independence
India found it difficult to sustain development in steel sector after independence on its own due
to the lack of technological development. The high cost of developing technology in this sector
proved to be a major hindrance. That's when the government decided to go for synergy with
other countries for technology transfer. Some of the prominent steel plant set up then was in
Rourkela in collaboration with West Germany and in Bokaro in collaboration with Russia.
These steel plants came under the purview of public sector enterprises.

4.1.4>Post Liberalization
The post liberalization scenario in the Indian Steel industry has witnessed a monumental shift.
Some of the salient features are:
• The need for license for increasing capacity has been abolished.
• Steel industry has been removed from the list of Industries under the control of state
sector.
• Foreign equity investment in steel has gone up to 74%.
• In January 1992 the price and distribution controls were removed.
• Policies like convertibility of rupee on trade account, freedom to mobilize resources from
overseas financial markets and restructuring of existing tax structure have immensely
benefited the industry.
4.2>Milestone
The Indian steel industry has come a long way since its humble beginnings. The takeover of the
British steel giant Corus steel by Tata Steel and the acquisition of Arcelor by Mittal Steel
herald a new beginning for the Indian steel industry. These events signify the fact that the Indian
steel industry has acquired a global identity and are today extremely competitive globally.

Some of the prominent steel producers today are Posco, Tata Steel, Essar, Ispat, Sail and Rinl.

4.3>Future trends
• It has to be said that the global recession has affected the Indian steel industry especially
stainless steel, but the steel industry is trying to offset the negative effect of the recession
by focusing on transportation and construction projects which are usually funded by the
government.
• India is the only country globally to record a positive overall growth in crude steel
production at 1.01 per cent for the period January -March 2009.
• It is estimated that India's steel consumption will grow at nearly 16% annually till 2012.
• The National Steel Policy has forecasted the demand for steel would reach 110 million
tons by 2019-2020.
 CHAPTER-5
SCENARIO OF PRESENT STEEL INDUSTRY IN INDIA

• The Indian steel industry have entered into a new development stage from 2005-06,
riding high on the resurgent economy and rising demand for steel. Rapid rise in
production has resulted in India becoming the 5th largest producer of steel.
• It has been estimated by certain major investment houses, such as Credit Suisse that,
India’s steel consumption will continue to grow at nearly 16% rate annually, till 2012,
fuelled by demand for construction projects worth US$ 1 trillion. The scope for raising
the total consumption of steel is huge, given that per capita steel consumption is only 40
kg – compared to 150 kg across the world and 250 kg in China.
• The National Steel Policy has envisaged steel production to reach 110 million tonnes by
2019-20. However, based on the assessment of the current ongoing projects, both in
Greenfield and Brownfield, Ministry of Steel has projected that the steel capacity in the
county is likely to be 124.06 million tonnes by 2011-12. Further, based on the status of
MOUs signed by the private producers with the various State Governments, it is
expected that India’s steel capacity would be nearly 293 million tonne by 2020.
5.1>Production
• Steel industry was delicensed and decontrolled in 1991 & 1992 respectively.
• Today, India is the 7th largest crude steel producer of steel in the world.
• In 2010-09, production of Finished (Carbon) Steel was 59.02 million tonnes.
• Production of Pig Iron in 2010-09 was 5.299 Million Tonnes.
• Last 5 year's production of pig iron and finished (carbon) steel is given below:
(in million tonnes)
Category 2004-05 2005-06 2006-07 2007-08 2010-09
Pig Iron 3.228 4.695 4.993 5.314 5.289
Finished Carbon Steel 40.055 44.544 55.416 58.233 59.02
(Source: Joint Plant Committee)

5.2>Demand - Availability Projection

• Demand – Availability of iron and steel in the country is projected by Ministry of Steel
annually.
• Gaps in Availability are met mostly through imports.
• Interface with consumers by way of a Steel Consumer Council exists, which is
conducted on regular basis.
• Interface helps in redressing availability problems, complaints related to quality.
5.3>Steel Prices
• Price regulation of iron & steel was abolished on 16.1.1992. Since then steel prices are
determined by the interplay of market forces.
• There has been an up-trend in the domestic steel prices since 2006-07 and the trend
accentuated since January this year.
• Rise in raw material prices, strong demand in the international and domestic market and
up-trend in the global steel prices have been some of the reasons cited by the industry for
increase in the steel prices in the domestic market.
• The mismatch in demand and supply is considered to be the main reason on the demand
side for the rise in steel prices. Honorable Steel Minister has held discussion with all
major steel investors including Arcellor-Mittal, POSCO, Tata Steel, Essar, Ispat and also
SAIL, RINL to explore the possibility of expediting the ongoing as well as envisaged
steel projects.
• The Government also took various fiscal and other measures for stabilizing the steel
prices like exempting pig iron, non alloy steel and steel making inputs like zinc, ferro-
alloys and met coke from customs duty; withdrawing DEPB benefits on export of
various categories of steel products and bringing back railway freight on iron ore from
classification 180 to 170 for domestic steel producers.
• In May 2010, the Government imposed 15% export duty on semi-finished products, and
hot rolled coils/sheet, 10% export duty on cold rolled coils/sheets and pipes and tubes
and 5% export duty on galvanized steel in coil/sheet form in order to further curtail rising
prices and increase supply of steel in the domestic market.
5.4>Imports of Iron & Steel
• Iron & Steel are freely importable as per the extant policy.
• Last five years import of Finished (Carbon) Steel is given below:-
Year Qty. (In Million Tonnes)
2004-2005 2.109
2005-2006 3.850
2006-2007 4.436
(Partly estimated)
2007-08 6.581
2010-2009 5149
(Partly estimated)
(Source: Joint Plant Committee)
5.5>Exports of Iron & Steel
• Iron & Steel are freely exportable.
• Advance Licensing Scheme allows duty free import of raw materials for exports.
• Duty Entitlement Pass Book Scheme (DEPB) introduced to facilitate exports. Under this
scheme exporters on the basis of notified entitlement rates, are granted due credits which
would entitle them to import duty free goods. The DEPB benefit on export of various
categories of steel items scheme has been temporarily withdrawn from 27th March 2010,
to increase availability in the domestic market.
• Exports of finished carbon steel and pig iron during the last five years and the current
year is as :
Exports (Qty. in Million Tonnes)
Year Finished (Carbon) Steel Pig Iron
2004-2005 4.381 0.393
2005-2006 4.478 0.440
2006-2007 4.750 0.350
(Prov.estimated)
2007-2010 4.627 0.560
2010-2009 3.482 0.350
(Prov.estimated)
(Source: Joint Plant Committee)
 CHAPTER-6
ABOUT TATA STEEL

6.1>Company profile
Managing a global workforce and setting global benchmarks is primarily about managing
diversity. In a process of inclusive growth, every person contributes to the blueprint of the future
and is truly committed to the stated objectives. And one of the key requisites for successful
diversity management is a shared vision.
6.2>Present scenario of TATA steel
The Tata Steel Group has always believed that mutual benefit of countries, corporations and
communities is the most effective route to growth. Tata Steel has not limited its operations and
businesses within India but has built an imposing presence around the globe as well. With the
acquisition of Corus in 2007 leading to commencement of Tata Steel's European operations, the
Company today, is among the top ten steel producers in the world with an existing annual crude
steel production capacity of around 30 million tonnes per annum and employee strength of
above 80,000 across five continents. The Group recorded a turnover of Rs.147, 329 Crores (US$
28,962 million) in 2010 - 2009. The Company has always had significant impact on the
economic development in India and now seeks to strengthen its position of pre-eminence in
international domain by continuing to lead by example of responsibility and trust.
6.3>Projects and operations: India
The Tata Steel Group’s growth and globalization strategy is driven by its business expansion
while maintaining profitability and mitigating risks. The Tata Steel Group over the years has
focused on enhancing raw material security and announced major joint ventures in various parts
of the globe.
Tata Steel’s Indian operations are one of the most competitive assets in the global steel industry
and therefore, capacity expansion in India is one of the key strategies for Tata Steel. The Indian
operations draws its greatest strength and its competitive position as one of the lowest cost
producers of steel in the world from the quality and yield of its raw material units. The mines
have successfully offered raw material security and have partially insulated Tata Steel from the
volatility of the global markets. The Company has, therefore, continuously modernized and
expanded its raw material facilities right from the 1950s, when it had launched its two million
tonne expansion programme.
In the financial year 2010-09, the Company commissioned its 1.8 million tonnes of crude steel
making capacity at Jamshedpur, which will be further augmented by 3 million tonnes through
the ongoing brown field expansion, by 2011. The 3-mtpa expansion at Jamshedpur will enable
Tata Steel to strengthen its market share in the Flat Products segment and simultaneously reduce
the operating costs over a large volume of production. The long-term strategy is to continue to
pursue capacity expansion in India through Greenfield projects as well.
Therefore the India growth strategy remains a fundamental part of the long-term strategy of the
Tata Steel Group.

Jharkhand
1. Seraikela Plant
Greenfield Project
Project Highlights:
• Setting up a 12 million tonnes per annum Greenfield integrated steel plant in the state.
• The Greenfield project is to be set up in two phases. The first phase of 6 mtpa is likely to
be set up within 36 months to 54 months from the date of obtaining all statutory
clearances.
Capacity: 12 mtpa integrated steel plant.
Project Update: Tata Steel is awaiting the R&R Policy from the State Government for its
Greenfield project.
Press Releases
• Telemedicine centre inaugurated at Tata Main Hospital.
• Tribal cultural centre, Tata Steel organized the award ceremony for Jyoti Fellowship and
Moodie Endowment.
• Graduation ceremony of trainees at Tata Steel’s technical training centre in Seraikela.
• Jharkhand honors Tata Steel Sports Persons.

1. Jamshedpur Plant
Brownfield Project
Project Highlights
MoUs with the Government of Jharkhand was signed in 2005 for:-
• Expansion of Tata Steel's existing plant at Jamshedpur from 5 mtpa to 10 mtpa.
• Co-operation in the area of Human Resource Development through Industrial Training
Institutes.
• The project includes the development of iron ore mines and other raw materials sources
including coal and logistic linkages for this plant.
Project Update: The first phase which entails reaching a crude steel capacity of 6.8 mtpa has
essentially been completed. The capacity of the Jamshedpur plant is expected to become 10
mtpa by December 2011.
Commissioning of Coated Steel Manufacturing Plant
 Project Highlights: The manufacturing facility for coated steel of Tata BlueScope Steel Ltd. is
under construction at Jamshedpur and is expected to be completed by March 2010. Tata
BlueScope Steel Ltd. is a 50:50 joint venture between Tata Steel Ltd. and BlueScope Steel
Australia.

Chhattisgarh
1. Jagdalpur Plant (Bastar)
Project Highlights
• MoUs with the Chhattisgarh government was signed on June 04, 2005.
• The integrated steel plant will have an ultimate capacity of 5 mtpa of steel with 2 mtpa in
the first phase.
• The project also includes development of captive iron ore mines to meet the iron ore
requirements of this plant.
Capacity: 5 mtpa Greenfield integrated steel plant.
Project Updates: The process of acquiring land is under progress. The Company has also
applied for environmental clearances and other licenses.

Orissa
1. Greenfield Project at Kalinganagar
Project Update: Preliminary work focusing on land acquisition, rehabilitation and resettlement
work is in progress. The order for equipment and services has been placed in accordance to the
stipulations in the MoUs signed with the Orissa State Government. A grant for the mining lease
of iron ore has been sought.
Capacity: Greenfield Steel Plant of capacity 6mtpa.

2. Port Project at Dhamra

The Dhamra Port Company Ltd. is a 50:50 joint venture between Tata Steel Ltd. and Larsen and
Toubro for the development of a deep water port in Dhamra, Orissa.

West Bengal
1. Haldia Plant
Project Highlights: Hoogly Met Coke and Power Company Ltd. (incorporated in 2005), is a
100% subsidiary of Tata Steel. The Company was set up to produce low ash metallurgical coke
primarily to meet Tata Steel’s requirement at its Jamshedpur plant and also to supply hot gases
to Tata Power for electricity generation by adopting heat recovery route.
Capacity: 1.2 mpta of coke.
Project Update: Capacity of plant is likely to be increased to 1.6 mtpa in 2009.

Tamil Nadu
1. Tuticorin Mines
Project Highlights
• MoUs with the Government of Tamil Nadu signed on June 27, 2002.
• Titania project involves mining, mineral separation and value addition i.e. pigments
production in phases subject to techno- economic viability.
• Prospecting license over 80 sq.km area granted by the Government of Tamil Nadu in the
districts of Tirunelveli and Tuticorin with due approval from Government of India.
• The feasibility study conducted with the help of Consortium Partners comprising
Outokumpu Finland's physical separation division based in USA, Outokumpu-Lurgi,
Germany, Pincock Allen and Holt, USA, a resource and mining consulting company and
L&T.
• Environmental Impact Assessment of the project carried out and Environmental
Management Plan drawn with the assistance of MIN-MEC Consultancy.
Capacity: 60,000 tonnes per annum of titanium di-oxide.
Press Releases
• Tata Steel committed to its Titanium-dioxide project in Tuticorin and Tirunelveli.
• Tata Steel signs MoUs with Tamil Nadu Government for its Titanium Oxide project.
• “TATA COLONY” at Koottappanai Village, Tirunelveli, inaugurated.
Tata Relief Committee initiative for Tsunami affected victims of Tamil Nadu.

6.4>Projects and operations: International

The Tata Steel Group’s growth and globalization strategy is driven by its business expansion
while maintaining profitability and mitigating risks. The Tata Steel Group over the years has
focused on enhancing raw material security and announced major joint ventures in various parts
of the globe.
Australia
1. Bowen Basin Project
Location: Bowen Basin in Central Queensland.
Project Highlights
• Tata Steel has a joint venture with Vale in Australia for a Coking Coal Mine.
• Tata Steel on December 14, 2005 signed agreements to buy a 5% interest in the
Carborough Downs Coal Project located in Queensland, Australia.
• Tata Steel and Vale, along with other joint venture partners (Nippon steel, JFE and
POSCO) have undertaken a large scale expansion of the Carborough Downs Coal Mine
near Moranbah in Central Queensland in Australia.
• The Carborough Downs coal project is majority owned and operated by a subsidiary of
AMCI Holdings Australia Pty Ltd.
• The project life is currently estimated to be 14 years and approximately 58 million
tonnes of raw coal is expected to be mined during this period.
• There is a further potential resource of 100 million tonnes of raw coal in the unexplored
areas and deeper seams.
• The clean coal envisaged to be produced would be low-ash coking coal and PCI coal,
highly suitable for steel making.
• Tata Steel also signed an off take agreement for a proportion of the production over life
of the project.
• The first raw coal production started in August 2006 and the mine is currently producing
around 1 mtpa.
Capacity: Mining capacity of 58 million tonnes of raw coal for 14 years.
Project Updates
• Commissioning of the large scale and new mining equipment (Long wall), which will be
one of the largest in Australia, is expected by mid 2009.
• The second phase of expansion has been undertaken, at the end of which the company is
expected to produce 3.7mtpa of coking coal and PCI coal.
Press Releases
• Tata Steel's investment for the expansion of production at Carborough downs coal mine
in Australia.
• Tata Steel acquires stake in Australian coal mines.
Canada
1. Iron ore project
Location: Northern Quebec, Labrador and Newfoundland provinces.
Project highlights:
• Tata Steel, through its subsidiaries, signed a Heads of Agreement memorandum with
New Millennium Capital Corporation, Canada.
• The aim was to develop iron ore projects in the region.
• Tata Steel holds a 19.9% stake in NML with an option to acquire an 80% equity interest
in NML’s Direct Shipping Ore project.
• The agreement also provides exclusivity to Tata Steel in the Labmag taconite iron ore
property.
• Tata Steel will have 100% off take rights to the produce of the mine at the time of
production commencement.
• The iron ore from this project will serve Tata Steel’s European facilities.
Capacity: The DSO resource is estimated to be approximately 100 million tonnes. The LabMag
deposit consists of 3.5 billion tonnes of proven and potential mineral reserves. These reserves
are contained in the 4.6 billion tonnes of measured and indicated resources and 1.2 billion tonnes
of inferred resources.
Project Update: Tata Steel, along with NML is trying to work out an economically viable
solution to advance the project. The feasibility study for the DSO project is progressing and
production is expected to commence in 2011.

Ivory Coast
1. Nimba Iron ore Project
Location: Nimba Iron ore deposits in Ivory Coast.
Project Highlights:
• Tata Steel Limited and SODEMI (State Owned Company for Mineral Development), on
December 11, 2007 entered into Joint Venture agreement for the development of Mount
Nimba Iron ore deposits in Ivory Coast (West Africa).
• The project will be implemented by a joint venture company – Tata Steel Cote d’ivoire,
wherein Tata Steel will have a major shareholding (75%).
• The Mt. Nimba deposit spread over 3 countries – Liberia, Guinea and Ivory Coast is one
of the biggest iron ore deposits in West Africa.
• The initial phase will involve exploration and detailed feasibility assessments followed
by construction of the mine and beneficiation facilities.
 • The iron ore from this project will be supplied to Tata Steel Group facilities especially
those located in the United Kingdom and The Netherlands.
Capacity: To be assessed.
Project Update: The project is in its initial phase that involves exploration and detailed
feasibility assessments followed by construction of the mine and beneficiation facilities.
Press Releases: Tata Steel’s joint venture in Ivory Coast for Mount Nimba Iron Ore.

Mozambique
1. Key coal exploration tenements
Location: Key coal exploration tenements (the Benga and Tete licensees) held by Riversdale in
Mozambique.
Project Highlights
• Tata Steel and Riversdale Mining Ltd. Australia signed a joint venture agreement on
November 30, 2007.
• Under the terms of agreement, Tata Steel will pay AUD100 million (approximately 88.2
million USD) to acquire 35% of Riversdale's Benga and Tete licenses.
• The JV comprises two licenses (the Benga and Tete licenses) and covers an area of
24,960 hectares (approximately 96.7 square miles).
• The coking coal derived from this project will be supplied to the Tata Steel Group's
facilities in Europe, Asia and elsewhere.
• The Government of Mozambique has approved the mining contract for the tenements,
which is a signal for the Benga Coal project to commence.
Capacity: Potential to extract 720 million tonnes by open-cut methods from a major coal
resource in the Benga License.
Project Update: The feasibility study for the project is in progress.
Press Releases
• Tata Steel Signs MoUs with Riversdale Mining Limited.
• Tata Steel signs JV with Riversdale Mining for Mozambique Coal Project

The Netherlands
 Operations: The IJmuiden Steelworks is Corus’ largest and most cost-efficient steel making
facility, with a production capacity of 7.6mtpa.
Projects: A number of capital expenditure schemes are in progress at IJmuiden. Among them is
a €20m pilot plant that is being jointly funded with ULCOS, the European Commission and the
Dutch government. The 60,000tpa pilot plant is intended to prove the commercial and technical
viability of a new iron making process called Hisarna. If successful, the project will
considerably reduce the carbon dioxide emissions of the existing integrated steelmaking process.
Hisarna would also be more energy efficient than existing technology and use cheaper and more
abundant raw materials.
Oman
1. Limestone Project
Location: Uyun region in the Salalah province.
Project Highlights
• Tata Steel Limited and the members of the Al Bahja Group, a leading business house of
Oman signed a Joint Venture Agreement on January 16, 2010 – Tata Steel has a 70%
stake in the joint venture.
• The project envisages mining of limestone in the Uyun region (limestone is the key raw
material for producing good quality steel), which lies in the Salalah province of Oman
and has large deposits of limestone.
• Capacity: To be assessed.
Updates: Exploration and feasibility studies are in progress.
Press Releases: Tata Steel’s joint venture in the Sultanate of Oman for Uyun limestone.

Singapore
1. Tata NYK Shipping Pvt Ltd.
Tata NYK Shipping Pte Limited is a Singapore based 50:50 joint ventures between Tata Steel
and Nippon Yusen Kabushiki Kaisha (NYK line), Japanese shipping major.
Project Highlights
• The JV was set up to cater to ship bulk cargo such as coal, iron ore and steel.
• The shipping firm would handle the Tata Steel Group’s requirements for moving raw
materials and steel.
• The Company would ensure a strategic control over logistics in the future.
• Tata NYK has entered into a long term charter for 8 Supramax / Panamax vessels.
• Orders have been placed for building two new Supramax vessels.
• The Company handled a total of 4.48 million tonnes of cargo in FY 09.
Project Update:
 As part of its long-term strategy, the Company plans to enter into a long term charter for capsize
vessels in 2009.
1. NatSteel Holdings
NatSteel, a 100% subsidiary of the Tata Steel Group, is headquartered in Singapore and has
presence in Vietnam, Thailand, Australia, China, Malaysia, Philippines and Singapore. The
Singapore operations comprise steel making and rolling operations of capacity 7, 50,000 tonnes
per annum and have a well-established downstream business. The downstream business
comprising direct sales to contractors uses 45 knowledge-centric services and consists of a cut
and bend facility and products like mesh, cages and couplers which benefits the customers in
terms of higher yields, higher productivity, and lesser space requirement and just in time steel in
desired sizes. The downstream facility in Singapore, produces over 4, 00,000 tonnes per annum
of cut and bends bars, mesh, pre-cages, bore pile cages etc., and is the largest single location
facility in the world.

Of the two units operating in China, one is a rolling mill at Xiamen producing about 5,00,000
tonnes of bars and rods and the other is a wire drawing plant at Wuxi, with a capacity of
1,00,000 tonnes per year. In the Xiamen city, the market share is about 25%.

South Africa
1. Tata Steel (KZN) (PTY) Ltd.
TSKZN is a South Africa based subsidiary of Tata Steel, in the business of producing Ferro
Chrome and Charge Chrome.
Location: Richards Bay (in uMhlathuze Municipality)
Project Highlights
• The ground-breaking ceremony of Ferro Chrome Project was held at Richards Bay on
August 21, 2006.
• A Ferro Chrome Plant was commissioned at Richards Bay in 2010 to produce High
Carbon Ferro Chrome, for global consumers.
• The business model of the plant includes taking high quality Chrome Ore from India and
elsewhere, converting it into Ferro Chrome in Richards Bay, and exporting the finished
product to various customer destinations.
• The proposed plant in South Africa will manufacture High Carbon Ferro Chrome with a
Chrome content of +64%, and the annual production capacity will be 134,500 Metric
Tonnes Per Annum (mtpa) in Phase I.
• The briquette technology being used by the company is environment friendly and
relatively new to South Africa. TSKZN is one of the most environment compliant plants
globally.
 • TSKZN commenced commercial production on 1st July, 2010 and in the first year it has
achieved a production of 63,479 mtpa of saleable grade Charge Chrome.
Capacity: 1, 51,000 tonnes per annum.
Project Update: The Ferro Chrome used in the manufacture of stainless steel will be exported
to Tata Steel’s customers in Asia, Europe, the USA and in other parts of the world.
Press Release
• Tata Steel steps into South Africa.
• Nine ex-cadets of TFA to represent India in South Africa.

Thailand
Tata Steel Group’s equity in Tata Steel Thailand is 67.1%. Headquartered in Bangkok, its three
main subsidiaries are SISCO, NTS and SCSC. In the year 2010, Tata Steel Thailand registered
sales of 1.4 million tonnes. The Company’s predominant market is in Thailand and its market
share in 2010 was 31% in the long products business. The Company also has been improving
continuously in the past few years with its various initiatives focused on reducing cost,
improving productivity and quality. Production during FY 09 was at 1.07 million tonnes while
sales at 1.1 million tonnes.
Tata Steel Thailand is committed to moving forward in the journey for excellence and social
accountability. The Company continuously improves its business processes and systems in
accordance with its commitment to environmental responsibilities.

United Kingdom
1. Corus
Corus, the European arm of the Tata Steel Group, is headquartered in London in the United
Kingdom. Corus’ crude steel capacity in the UK is in the region of 13mtpa.

Operations: Corus produces carbon steel by the basic oxygen steel making method at three
integrated steelworks in the UK at Port Talbot, Scunthorpe and Teesside (currently mothballed),
and special and alloy steels through the electric arc furnace method in Rotherham. In addition,
there are a number of downstream rolling, coating and processing facilities.

Performance: Liquid steel production in 2010-09 at 16 million tonnes was 20% lower than that
of 2007-08. Turnover for the period was Rs.1,09,570 crore (US$ 21,539m).
Projects: A number of capital expenditure schemes are in progress in the UK. Among them is
the £60m BOS gas recovery plant at Port Talbot, which is expected to significantly reduce
natural gas and electricity purchases and materially reduce carbon dioxide emissions at the site
through the utilization of gas generated inside the Basic Oxygen Steel plant.

Vietnam
1. Ha Tinh Project
Location: Ha Tinh province.
Project Highlights
• A proposed steel complex with an estimated capacity of 4.5 million tonnes per year.
• Tata Steel signed a MoUs with Vietnam Steel Corporation (VSC) on May 29, 2010 to
develop a steel complex in Ha Tinh. Another MOU was signed to set up a cold rolling
mill in Ha Tinh province.
• Tata Steel is partnering with VSC in establishing a steel complex in Ha Tinh province,
which will be phased over 10 years. On the successful completion of the study and
financial closure, Tata Steel will have a stake of minimum 65% and VSC will have a
stake of 35% in the Steel complex.
• Tata Steel will also have a stake of 30% in Thach Khe Iron Ore Joint Stock Company,
which would undertake mining in the Thach Khe iron ore mine.
Capacity: A proposed steel complex with an estimated capacity of 4.5 million tonnes per year.

1. VNSteel
Overview: Established in 995 by a merger of Metal Corporation and Steel Corporation,
VNSteel is Vietnam’s largest steel company and has various manufacturing plants and a
distribution system across the country. The total capacity of VNSteel including that of its joint
ventures is around 2.2 million tonnes with a product mix ranging from crude steel, high quality
construction steel to sheet and plate products serving other economic sectors.
Project Updates: The Company has completed the feasibility study for the steel complex, to be
developed in 3 phases. Tata Steel, in collaboration with VNSteel and VICEM has also
completed the detailed project report for Phase1, which is the cold rolling mill.
Press Releases
• JV between Tata Steel, Vietnam Steel Corporation and Vietnam Cement Industries.
• Vietnam Steel Corporation and Tata Steel sign a MoUs.
• Vietnam Steel Corporation and Tata Steel sign a Memorandum of Cooperation.
 • Vietnam Prime Minister visits Tata Steel.

CHAPTER-7
HISTORICAL ACHIEVEMENT OF TATA STEEL

Below is a chronological list of major business decisions in the history of Tata Steel ltd.

1907

The Tata iron and steel company was formed at Mumbai.

1917

During the year 1, 50,000 equity shares were issued at par and 26,250 deferred shares were
issued at a premium of Rs.370 per share.

1973

With the effect from 1st April, the wholly owned subsidiary, West Bokaro Ltd. was
amalgamated with the company.

1983

During the year Indian tube company Ltd. was amalgamated with the company.

During the year Tata steel agreed to purchase the bearing manufacturing plant of Metal box
India of Kharagpur.

1985

With the effect from 1st October, Indian Tube co ltd. was amalgamated with TISCO.

1987

On 2nd March, 300000 tonnes capacity bar and rod mill costing about Rs.78 crores was
commissioned under the second phase of modernization.

On 11th August, approval were received for investment of Rs. 16 crores in the capital of Tata
Timken ltd. , a company promoted by Tata steel.

1988
During the period the company, installed a new sinter plant with a capacity of 1.3 million tones
per annum.

1992

During the year company privately placed with UTI, LIC, Army group insurance fund and GIC
and its subsidiaries 17.5% non-convertible debenture worth Rs.185 crores.

1995

30,018,246 no. of equity shares allotted to Tata sons ltd. and their associate companies on
exercise of warrant held by them.

1997

Tata steel’s international trading division was awarded the prestigious ISO-9002 certification by
the Indian Register Quality System (IQRS).

1998

As of March 31,1998, 7,37,99,584 ordinary shares of the company have been dematerialized..

Tisco acquired the cold rolled steel unit of Rs 776 crore named as Tata SSL ltd in Tarapur,
Maharashtra.

2000

Tata steel, the flagship of Tata group, has entered into understanding with Tata International to
export 30% of production at Tata steel major’s new 1.2 million tones cold rolling in Jamshedpur.

Tata steel has tied up with the POSCO-Hyundai steel processing venture located in Chennai for
getting its cold rolled coil process.

Tata steel has launched its largest branded steel product. Tata Tiscon, a specially construction
grade steel, which will be available in the retail market.

2001

Tata SSL has become a subsidiary of Tata Iron and steel company, following a successful open
offer to the shareholder of TSSL.

2002
TISCO entered into a power distribution business. TISCO has began distribution power in
Jamshedpur.

2004

Tata steel started METAL JUNCTION-the online trading and procurement with the joint
venture of SAIL.

Tata steel ranked among global companies in the world’s most respected companies survey.

Tata steel launched “WIRON”, a branded galvanized brand, aiming at sales target of three lakh
tons.

Tata steel bought Singapore’s NatSteel.

Tata steel and L&T signs definitive agreement to form a 50:50 joint venture for setting up a port
at Dhamra in Orissa on 29th October.

2005

TISCO signs joint venture agreement with Iranian Mines and Mining Industries Development
and Renovation Organization to join them in proposed steel making projects and mining
operations in Iran.

Tata steel has signed a memorandum of understanding with Nippon steel.

Corporation of Japan for its proposed 6 million tones per annum steel plant in Kalinga Nagar in
Orissa.

2006

Tata steel sets up Jiggling and Hydro-cyclone plant.

TISCO establishes processing unit at Noamundi Mine.

Acquisition of Millennium steel, Thailand.

Tata steel launched India’s first steel retail store, named Steel Junction.

2007

Tata steel’s hard-fought, 6.2 billion- pound acquisition of Corus, the seven- year old Anglo-
Dutch company formerly known as the British steel, had created the world’s fifth largest steel
maker, the second most global steel company and dramatically put India on the corporate
world’s take over map.

Tata steel completed 100 years of glorious existence on August 26th.

2010-09

Jamshedpur plant’s crude steel making capacity from 6.8 mtpa to 9.7 mtpa, at an estimated cost
of Rs.13,900 crore. The scheduled date for completion of the project is April 2011.

CHAPTER-7
LEGENDARY HEROES OF THE TATA STEEL
Here is the story of some heroes/ tycoons who thought to build India. They believe building
India means not only earning money but also to increase the wealth o the country’s people. It is
the story of struggle, anxiety, adventure and achievement.

JAMSHETJI NUSSERWANJI TATA

The founder of TATA Steel began with a textile mill in central India in 1870’s. At the age of 43,
Jamsetji read a report by a German Geologist Ritter Von Schwartz on the availability of iron ore
in Chanda district in central provinces, which gave him the idea of giving India a steel plant.

SIR DORABJI TATA

J. N. Tata had exhorted to his sons to pursue and develop his life’s work his elder son, through
his endeavors in setting up TATA steel and TATA power. Sir Dorabji Tata was instrumental in
transforming his father’s grand vision into reality. He was the first chairman of gigantic Tata.

JEHANGIR RATANJI DADABHAI TATA

The late chairman of the TATA group pioneered civil aviation on the subcontinent in 1932 by
launching TATA airlines, now known as Air India. Under his control, the number of TATA
venture grew from 13 to 80, encompassing steel, power generation, hotel, consultancy services,
information technology etc.

RATAN NAVAL TATA

Mr. Ratan N Tata is the present chairman of TATA group of sons, with his efficient leadership
TATA group is soaring new heights, from Corus take over to brands like Jaguar and Land
Rover.
BOARD OF DIRECTORS
AS ON 25 JUNE 2009

• MR. Ratan N. Tata (Chairman)

• Mr. B. Muthuraman (Vice Chairman)
• Mr. James Leng
• Mr. Nusli N. Wadia
• Mr. S. M. Palia
• Mr. Jacobus Schraven
• Dr. Anthony Hayward
• Mr. Andrew Robb
• Mr. Suresh Krishna
• Mr. Ishaat Hussain
• Dr. Jamshed J. Irani
• Mr. Subodh Bhargava
• Mr. Kirby Adams
• Mr. H.M. Nerurkar

SENIOR MANAGEMENT
 • Mr. B. Muthuraman(Managing Director)
• Kirby Adams (Chief executive officer)
• H.M Nerurkar
• Kaushik Chatterjee
• Jean-Sebastien Jacques
• Arun Baijal
• Manzer Hussain
• Avneesh Gupta
• R. P. Singh
• Marjan Oudeman
• Anand Sen
• Scott MacDonald
• Varun Jha
• Phil Dryden
• Abanindra M. Misra
• Frank Royle
• Om Narayan
• Tor Farquhar
• Radhakrishnan Nair
• Partha Sengupta
• Hridayeshwar Jha
• N. K. Misra
• Binay Kumar Singh
• Santi Charnkolrawee
• T. V. Narendran
• V. S. N. Murty
• Helen Matheson
• Sandip Biswas
• Lim Say Yan
• Bimlendra Jha
• Dr. Debashish Bhattacharjee

CHAPTER-8
TOP COMPETITORS OF TATA STEEL
 • Jindal Steel
• SAIL
• Essar steel

SOME OTHER MAJOR PLAYER IN THIS INDUSTRY

• Saw pipes
• Uttam steel ltd
• Ispat industry ltd
• Mukand ltd
• Mahindra Ugine steel co.ltd
• Usha ispat ltd
• Kalyani steel ltd
• Electro steel casting ltd
• Sesa Goa ltd
• NMDC
• Llyod steel industry ltd
 CHAPTER-9
VISION AND MISSION STATEMENT OF TATA STEEL

Vision
We aspire to be the global steel industry benchmark for
Value Creation and Corporate Citizenship
We make the difference through:
Our people, by fostering team work, nurturing talent, enhancing leadership capability and acting
with pace, pride and passion.
Our offer, by becoming the supplier of choice, delivering premium products and services, and
creating value for our customers.
Our innovative approach, by developing leading edge solutions in technology, processes and
products.
Our conduct, by providing a safe working place, respecting the environment, caring for our
communities and demonstrating high ethical standards.

Mission
Consistent with the vision and values of the founder Jamsetji Tata, Tata Steel strives to
strengthen India’s industrial base through the effective utilization of staff and materials. The
means envisaged to achieve this are high technology and productivity, consistent with modern
management practices.

CHAPTER-10
MAJOR BRANDs OF TATA STEEL
Brands
The Tata Steel Group’s Brand building endeavors have always been directed at building
assurance, reliability and superior product quality in every segment. Outstanding performance
by the Company’s different divisions have surpassed their own brand standards and created
higher quality parameters for each other.

Galvano™ is Galvanized Plain (GP) steel offering available in sheet and coil
forms for all customer segments like white goods, panels, bus bodies etc. Galvano™ meets the
diverse and specific needs of the general engineering segment. Unlike the ordinary spangled and
crushed spangled products available in the market, Galvano™ is a Zero spangled product with
unmatched surface finish and mechanical properties.

Tata Agrico, a division of Tata Steel is the pioneer manufacturer of superior

quality agricultural implements in the country under the brand name 'Agrico'. Since 1925, it has
been the leading brand in shovels, powrahs, crowbars, kudalies, pickaxe and hammers. These
implements cater to the needs of Agricultural, Horticulture Industry, maintenance of roads,
dams, railway- tracks, collieries etc. in India and abroad. The Agrico products are the first in
India to be manufactured with ISO: 9002 Certification. All Tata Agrico implements are
guaranteed against manufacturing defects and are distributed all over the country through a
network of consignment agents and distributors. The Agrico division recently expanded its
product offerings by launching three new products and many more variants in the existing
category.

Tata Bearings manufactures a wide variety of bearings and auto assemblies, like
Ball Bearings, Tapered Roller Bearings, Magneto Bearings, Double Row Angular Contact
Bearings, Clutch Release Assemblies, Fan Support Assemblies and Cylindrical Roller Bearings.
It is the only Bearings Manufacturer in India to win TPM Award from Japan Institute of Plant
Maintenance, Tokyo and is amongst the largest bearing manufacturers in India.
 Tata Pipes has matured into a fully bloomed brand since 1996. A deeply thought
out branding exercise was undertaken in order to unleash the power of the ‘Tata Pipes' Brand.
Tata Pipes are manufactured with the HFIW process in the Long Products Division's high-tech
facility at Jamshedpur.

Tata Shaktee is Tata Steel’s flagship brand in the field of galvanised corrugated
sheets. Since Tata Shaktee was launched in Feb 2000, the brand has been consistently delivering
on its promises of longevity and strength. Tata Shaktee is the only brand, which produces 4 ft
wide GC sheets called "Tata Shaktee Wider GC Sheets".

Tata Steelium is another brand of the Flat Products Division of Tata Steel. Apart
from providing a certain level of quality the name also assures the customer of the genuineness
of the product. It goes a long way in meeting the challenge of gaining a sustainable competitive
edge in the marketplace. The brand has acquired new customers in retail untapped areas and
made an aggressive entry into the retail segment through exclusive shops called Steelium zones.
Customer relationship building programmes are undertaken with a view to increasing market
share.

Tata Tiscon is the first Thermo Mechanically Treated (TMT) rebar in the
country. Every Tata Tiscon rebar is made from pure steel, with the most advanced TMT
technology from Tempcore, Belgium. Tata Tiscon is available for both residential and project
applications. It has the best combination of strength, ductility and unparalleled quality
consistency. Tata Tiscon forms an unbreakable and unshakeable bond with cement (atoot jod),
and together they lend a strong foundation for building construction.
Tata Tiscon became the first rebar in India to be awarded the ‘Superbrand' status in the
construction rebar category. Retail sales have received a boost through new marketing initiatives
and consumer schemes launched as a result of continuous monitoring of consumer sales.

Tata Steel Wire Division is the leading producer of steel wires under the brand
name Tata Wiron, with a 30% market share of the organized wire market in India. It
manufactures a wide range of wires catering to the needs of the various industry segments such
as automobile, infrastructure, power and general engineering. The products are well established
across the markets of Europe, USA, Middle East Asia, Australasia, South Asia and Far East
Asia. Tata Wiron GI wires have a distinct brand identity of being a valued business partner for
its consumers.

CHAPTER-11
RESEARCH METHODOLOGY
The study is based on descriptive and applied research. The efficiency of inventory management
model at TATA Steel requires a thorough knowledge of iron making process and expertise in
identifying the materials. The accounting is as well as in planning the control of inventory is
thoroughly studied by ratio analysis.

Data collection method

I. Primary source
• Personal interview
• Finance and Accounts department
• Purchase department
• Plant visit
I. Secondary source
• Concern data
• Website
• Annual report
• Company records
• Intranet of company

Presentation of data

• Data is presented in the form of tables, diagram and trend lines.

• Data analysis and interpretation.
• The data analysis has been done using various inventory ratios.

Limitation of the studies

• The study is based on the comparison across companies. This company follows various
accounting policies. Hence the choice of accounting for the companies to an extent
distort the inter company comparison.
• Ratio alone cannot show whether performance is good or bad.
• The data is pertaining up to the year 2009.
• Ratio does not take into account the impact of certain non-financial parameters. The
study is limited

CHAPTER-12
12.1>INVENTORY MANAGEMENT IN TATA STEEL
Inventory management is one of the most important managerial activities. TATA steel has its
own mines and querries in India and also in some other countries. The raw material inventory
includes materials from its own source as well as purchased from others. Raw material
inventory, therefore lies both at works and its place of extraction. These are transported to works
both by road and rail.

To maintain the minimum required inventory is not an easy task. There are many reasons for
each different organization as to what the quantity should be maintained. TATA STEEL’s raw
material inventory consist of mainly coal and iron ore, but there are many other things included
in it in small quantities. TATA STEEL has its transportation system which helps in carrying the
materials from different locations to Jamshedpur works.

Each types of production department maintain separate inventory level. TATA steel maintains
different types of inventory i.e. raw material, WIP, finished goods, transit inventory, buffer
inventory, anticipation inventory and cycle inventory.

For valuation of inventory TATA Steel generally uses FIFO method and for ordering, they use
EOQ method.

First in first out (FIFO): A method of valuation of inventory, by which the cost are allocated
on the assumption that goods are consumed or sold in the order in which they are received and
taken in to stock.

Economic Ordering Quantity (EOQ): It is the optimum quantity of goods for which if orders
are placed, the aggregate order placing cost and the aggregate inventory carrying cost will be
equal and economical. There will not be any loss by either way. For any item of goods, annual
requirement in units, cost of placing one order, cost of carrying one unit in inventory for one
year are the influencing factors. Any change in one or more of them will change the EOQ of that
item.

To find out EOQ; the formula is= √2AO/C

Where; A= Annual consumption; O= ordering cost, C= carrying cost

Channels of ordering raw material:

12.2>Policies maintained by TATA STEEL for inventories
• Finished and semi-finished products produced and purchased by the Company are
carried at lower of cost and net realizable Value.
• Work-in-progress is carried at lower of cost and net realizable value.
• Coal, iron ore and other raw materials produced and purchased by the Company are
carried at lower of cost and net realizable value.
• Stores and spare parts are carried at cost. Necessary provision is made and charged to
revenue in case of identified obsolete and non-moving items.
• Cost of inventories is generally ascertained on the ‘weighted average’ basis. Work-in-
progress and finished and semi-finished products are valued on full absorption cost basis.

TATA STEEL has own electric plant, water preserver and gas preserver for regular production.
Dimna lake is one of the advance point for Jamshedpur plant.

12.3>Balance sheet of TATA Steel

 Rs in
Crores
31st MAR 31st MAR 31st MAR 31st MAR 31st MAR
Particulars
09 08 07 06 05
Share capital 6203.45 6203.3 727.73 553.67 553.67
Reserve and Surplus 23176.26 21097.43 13368.42 9201.63 6506.25
Total share holder's fund 30176.26 27300.73 14096.15 9755.3 7059.92
Loans 26946.18 18021.69 9645.33 2516.15 2739.7
Deferred tax liabilities 585.73 681.8 748.94 957 829.42
Provision for employee separation 1033.6 1071.3 1107.08 1388.71 1541.26
Total funds employed 58741.77 47075.52 25597.5 14617.16 12143.3

Application of funds
Fixed asset 14482.22 12623.56 11040.56 9865.05 9112.24
Investments 42371.78 4103.19 6106.18 4069.96 2432.65
Foreign currency translation diff
471.66
a/c
Current assets 5707.05 3613.7 10646.16 3002.74 2701.14
Loans and advances 4578.04 33348.74 3055.73 1234.86 1382.44
(-) Current liabilities and
-8974.05 -6768.78 -5453.66 -3808.72 -3699.99
provisions
Net current assets 1311.04 30193.66 8248.23 428.88 383.59
Miscellaneous expenditure 105.07 155.11 202.53 253.27 214.82
Total assets 58741.77 47075.52 25597.5 14617.16 12143.3
12.4>Profit & Loss a/c of TATA Steel
 Rs in Crore
Particulars 2010-09 2007-08 2006-07 2005-06 2004-05
Sales and other operating expenses 24315.77 19691.03 17551.09 15139.39 14498.95
Other income 308.27 242.8 433.67 254.76 148.03
Total Income 24624.04 19933.83 17984.76 15394.15 14646.98

Expenditure
Manufacturing and other expenses 15525.99 11852.75 10813.84 9320.5 8658.41
Depreciation 973.4 834.61 819.29 775.1 618.78
(-)Expenditure transferred to capital a/c -343.65 -175.5 -236.02 -112.62 -204.82
Net financial charges 1152.69 786.5 173.9 118.44 186.8
Total expenditure 17308.43 13298.36 11571.01 10101.42 9259.17
Profit before taxes and exceptional items 7315.61 6635.47 6413.75 5292.73 5387.81
Profit before taxes 7315.61 7066.36 6261.65 5239.96 5297.28
(-) Taxes -2113.87 -2379.33 -2039.5 -1733.58 -1823.12
Profit after tax 5201.74 4687.03 4222.15 3506.38 3474.16
 Rs in
12.5>COST SHEET OF TATA STEEL crore
Particulars 2010-09 2007-08 2006-07 2005-06 2004-05
Raw material consumed 5709.91 3429.52 3121.46 2368.3 1715.44
Payment and provision for
employee 2305.81 1589.77 1454.83 1351.51 1291
Operation and other expenses 6213.58 5068.88 4647.28 4038.71 3687.17
(-)Commission -61.49 -52.53 -64.71 -80.75 -86.18
(-)Provision for wealth tax -1 -0.95 -0.97 -0.8 -0.7
Freight and handling charges 1251.23 1098.19 1117.45 1004.32 936.68
Excise duty 2527.96 2498.52 2210.55 2004.83 1377.92
Depreciation 973.4 834.61 819.29 775.1 618.78
Adjustment of WIP
(+) Opening stock of WIP 71.48 28.94 23.93 32.42 9.28
(-) Closing stock of WIP -73.17 -71.48 -28.94 -23.93 -32.42
COST OF PRODUCTION 18917.71 14423.47 13300.17 11469.71 9516.97
Adjustment of finished goods
(+)Opening stock of finished
goods 1074.27 1078.08 1000.62 887.22 620.81
(+) Purchase of finished goods 358.87 446.95 450.6 656.08 1305.28
(-)Closing stock of finished goods -1361.85 -1074.27 -1078.08 -1000.62 -887.82
COST OF GOODS SOLD 18989 14874.23 13673.31 12012.39 10555.24
CHAPTER-13
 FINANACIAL ANALYSIS OF TATA STEEL
RELATED TO INVENTORY

Ratio analysis is the major and efficient tool for management to analyze the data. So here some
ratios are given which are related to inventories and with analysis.

13.1>Raw material conversion period

This ratio shows in how many day raw materials is used to manufacturing.

To find this ratio, the formula is;

Average stock of raw material x 365

Total raw material consumed
Where average stock of raw material = (Op. stock of raw mat.+ Cl. Stock of raw mat.)/2

Particulars 2010-09 2007-08 2006-07 2005-06 2004-05

Opening stock of raw material 901.56 720.52 707.54 603.7 287.02
Closing stock of raw material 1433.26 901.56 720.52 707.54 603.7
Average stock of raw material 1167.41 811.04 714.03 655.62 445.36
Total raw material consumed 5709.91 3429.52 3121.46 2368.3 1715.14

If we look towards for the year 2004-05, then we can easily observe that, the raw material
conversion period is too high than the year 2010-09. This trend is showing that the period for
conversion of raw material is decreasing year by year. It very good sign for the company.
Because as soon as raw material is used for production the storing cost will be less. So this chart
is showing how efficiently TATA steel is reducing it’s storing cost and how fast raw material is
used for production.

13.2>WIP conversion period

This ratio shows, in how many days the WIP converted into finished products.

To find out this ratio, the formula is;

Average stock of work-in-process x 365

Cost of production
Where average stock of WIP = (Op. stock of WIP+ Cl. Stock of WIP)/2

Particulars 2010-09 2007-08 2006-07 2005-06 2004-05

Opening stock of WIP 71.48 28.94 23.93 32.42 13.76
Closing stock of WIP 73.17 71.48 28.94 23.93 32.42
Average stock of WIP 72.325 50.21 26.44 28.18 23.09
Cost of production 18917.71 14423.47 13300.17 11469.71 9516.97

As we can see in the chart that WIP converted into finished product within a day in the year
2004-05 to 2006-07. But in recent year it is taking more than one day. If we measure this chart,
we can say that the efficiency level of TATA steel is reducing year by year to convert WIP to
finished goods.

13.3>Finished goods conversion period

It refers to the time in which the finished goods are converted into sales or in other way we can
say that the time period between production and sales when the finished goods kept in the ware
house before the actual sale is made.

So formula for FGCP is;

Average stock of finished goods x 365

Cost of goods sold
Where average stock of finished goods

= (Op. stock of finished goods +Cl. Stock of finished goods)/2

Particulars 2010-09 2007-08 2006-07 2005-06 2004-05

Opening stock of finished goods 1074.27 1078.08 1000.62 887.82 622.13
Closing stock of finished goods 1361.85 1074.27 1078.08 1000.62 887.82
 Average stock of finished goods 1218.06 1076.18 1039.35 944.22 754.975
Cost of goods sold 18989 14874.23 13673.31 12012.39 10555.24

From the table and the chart we can easily observed that, though in the year 2005-06 the
conversion period increased than the year 2004-05. But fortunately the recession period couldn’t
hit the sales for the year 2006-07 to 2010-09. The finished goods were converted into sales even
less than only 25 days in the year 2010-09. It shows the efficiency of not only quality of the steel
but also the efficiency of marketing department of TATA steel.

13.4>Raw material to current asset

It indicates the percentage of raw materials in the current asset of the company.

To find out this;

Raw material(closing) x 100

Current asset

Particulars 2010-09 2007-08 2006-07 2005-06 2004-05

Raw material(Closing) 1433.26 901.56 720.52 707.54 603.7
Current asset 10047.48 6636.28 13701.89 4237.6 4083.58
This chart and table can show the one unexpected downfall in the year 2006-07, which is less
than 6%. If we observe carefully then we can see that, in the year 2006-07, the raw material
trend is nearly same to other years, but due to huge cash in hand increase the current asset.
Which reduce the percentage of raw material to current asset.

13.5>Finished goods to current asset

It indicates the percentage of finished goods in the current assets of the company. Finished
goods are such a component of the current assets which can be easily converted into cash.

So the formula is;

Finished goods(closing) x 100

Current asset

Particulars 2010-09 2007-08 2006-07 2005-06 2004-05

 Finished goods(Closing) 1361.85 1074.27 1078.08 1000.62 887.22
Current asset 10047.48 6636.28 13701.89 4237.6 4083.58

As we saw in the raw material to current assets, which is same as finished goods to current
assets. Due to huge amount of cash held in the year 2006-07, the percentage of finished goods is
lesser than the other years. But in the year 2005-06 it is near to 25%. But the percentage is going
downwards in the year 2010-09, which is less than 15%.

13.6>Average inventory turnover ratio

It indicates the percentages of inventory with gross sales.

The formula is;

Average inventory x 100

Gross sales
Where average inventory = (Op. inventory+ Cl. Inventory)/2
 Particulars 2010-09 2007-08 2006-07 2005-06 2004-05
Opening inventory 2047.31 1827.54 1732.09 1532.34 922.91
Closing inventory 2868.28 2047.31 1827.54 1732.09 1532.34
Average inventory 2457.80 1937.43 1779.82 1632.22 1227.63
Gross sales 26843 22191.8 19762.57 17144.22 15876.87

As we can observed that, the trend is showing nearly constant, except the year 2004-05. The
inventory level is increasing as well as the gross sales. It shows the constant growth of sales and
inventory.

13.7>Stock turnover ratio

Every firm has to maintain a certain level of inventory of finished goods so as to be able to meet
the requirements of the business. But the level of inventory should neither be too high nor too
low.
The stock turnover ratio measures the number of times a company sells its inventory during the
year.

The formula for stock turnover ratio is;

Cost of goods sold

Average stock
Where average stock = (Op. inventory+ Cl. Inventory)/2

Particulars 2010-09 2007-08 2006-07 2005-06 2004-05

Cost of goods sold 18989 14874.23 13673.31 12012.39 10555.24
Average stock 2457.8 1937.43 1779.82 1632.22 1227.63

As we can find out that in the year 2004-05 the ratio was very high as compare to other years. In
the year 2005-06 it is even less than 7.5, but after that TATA steel maintained the consistency on
its growth.

13.8>Average age of stock

This ratio shows how many days stock are kept as inventory in the company before sales.
To find out the average age of stock is;

365
Stock turnover ratio

Particulars 2010-09 2007-08 2006-07 2005-06 2004-05

Stock turnover ratio 7.72 7.67 7.68 7.37 8.63

From the chart as given below, we can see that average age of stock is not more than 50 day in
any of the year. But in year 2004-05 it is near to 40 days where, in the year 2005-06 it is near to
50 days. But in the recent year it is near to 48 day. TATA steel needs to reduce the day, through
its sale with the help of marketing department.
13.9>Spare parts index

It shows the index of spare parts, which are used to fixed asset.

To find out spare parts index, the formula is;

Stores and spares parts(closing) x 100

Net block of fixed asset

Particulars 2010-09 2007-08 2006-07 2005-06 2004-05

Stores and spares parts(closing) 505.44 442.66 505.44 442.66 349.06
Net block of fixed assets 11040.56 9865.05 11040.56 9865.05 9112.24

This index is showing downwards in recent years. But in the year 2004-05 it is less than 4. And
in the year 2006-07 it is more than 4.5. So TATA steel should try to reduce this index. But the
chart is showing very impressive that index is reducing year by year.
13.10>Inventory conversion period

This ratio shows in how many days inventories are converted into sales. It is major ratio analysis
for cash conversion period. Because it is the first component of the cash conversion period.

The formula is;

Inventories(closing)
Sales/365

Particulars 2010-09 2007-08 2006-07 2005-06 2004-05

Inventories(Closing) 2868.28 2047.31 1827.54 1732.09 1523.34
Sales 24315.77 19693.28 17551.09 15139.39 14498.95

From this chart we can observed that in the year 2007-08 and 2006-07, the inventory was most
efficiently converted into sales. But unfortunately it is very high in the year 2010-09. So it
shows the inefficiency for the company.
13.11>Current ratio

This ratio is used to judge the short term solvency of a company and is worked out by dividing
the aggregate Current Assets by its aggregate Current Liabilities.

To find out the current ratio, the formula is;

Current asset
Current liabilities

Particulars 2010-09 2007-08 2006-07 2005-06 2004-05

Current asset 10047.48 6636.28 13701.89 4237.6 4083.58
Current liability 8974.05 6768.78 5453.66 3808.72 3699.99

In the year 2006-07 this ratio is too high due to huge amount cash held in the company. From
here we can say that company has huge liquidity but in other sense we can say that company
blocked this huge amount of cash without investing. Again it is very good sign for the company,
because the recession hit the world in the year 2007-08 and company has huge amount of
liquidity to face the crisis moment. Again we can see that the in the year 2007-08 the ratio is
even less than 1. So 2006-07 heavy cash amount saved in the year 2007-08. Rest of the year
maintained the consistency, which is just above 1.
13.12>Acid test ratio

It measures the company’s most liquidity against the current liability. Here we exclude the
inventory from the current asset. Because inventory is less liquidity than other current assets. So
it indicates the coverage of current liabilities with quick realizable assets.

The formula to find acid test ratio;

Current assets- Inventories

Current liabilities

Particulars 2010-09 2007-08 2006-07 2005-06 2004-05

Current assets 10047.48 6636.28 13701.89 4237.6 4083.58
Inventories 2868.28 2047.31 1827.54 1732.09 1523.34
Current liability 8974.05 6768.78 5453.66 3808.72 3699.99

As we have seen in the current ratio, in the year 2006-07 is highest than the others. Here also
this ratio is highest than the other due to heavy amount of cash, which shows the most liquidity.
Here we can see that the current ratio of the year 2005-06 and 2010-09 was same. But due to
less inventory percentage in current assets the acid test ratio is higher than the year 2005-06.
2005-06 ratio is even less than the year 2007-08. So for the year 2007-08 liquidity is little bit
better than 2005-06, after facing the crisis period. And it is slowly moving upwards in the year
2010-09.
13.13>Total inventories to total assets

This ratio shows the percentage level of inventories in compare to total asset.

The formula is;

Total Inventories(closing) x 100

Total assets

Particulars 2010-09 2007-08 2006-07 2005-06 2004-05

Total inventory 2868.28 2047.31 1827.54 1732.09 1523.34
Total Assets 58741.77 47075.52 25597.5 14617.16 12143.3

The percentage level is decreasing year by year to increase the liquidity level. But in the year
2007-08, it is very low because of recession period to increase the liquidity percentage.
 CHAPTER-14

RAW MATERIAL CONSUMPTION OF TATA STEEL

Raw material is important for any kind of manufacturing industry. That may be steel industry or
may be cement industry or any kind of manufacturing industry. Same way, TATA steel is also
consuming raw material from various sources. Major part of raw material is taken from its own
mines and some from various country i.e. Australia. Australia is major supplier of coal. Below
all the details of raw material is given.

Here all the details of amount of raw material consumption, value of raw material and price per
tonne of raw material are given with charts and analysis.

14.1>RAW MATERIAL CONSUMPTION

Tonnes
Types of raw material 2010-09 2007-08 2006-07 2005-06 2004-05
Iron ore 9545665 8681492 8724458 8486755 5986753
Coal 751972 706076 713982 1019483 841649
Coke 3315206 3088582 3133450 2773807 2422875
Limestone and Dolomite 1949523 1865223 1729070 1863757 1464970
Ferro Manganese 18895 16165 15824 16516 16844
Zinc and Zinc Alloys 22137 22325 19299 20692 21327
Spelter, Sulphur and
1200105 1157095 784802 798141 487102
Others
To produce steel iron ore, coal, coke, ferro manganese, zinc alloys and spelters, sulpphur
are required mostly. All these raw material are required to produce in a systematic manner.

In year 2010-09 iron ore and spelters, sulphurs, coke and ferro manganese are purchased more
than the others. Whereas, zinc and alloys are purchased more in the year 2007-08. In the last
year due to heavy production, raw material consumption is more than others.

Total cost of
Rs in Crore
raw material
Types of raw material 2010-09 2007-08 2006-07 2005-06 2004-05
Iron ore 504.52 445.35 368.29 273.53 181.78
Coal 455.32 206.85 287.91 226.56 92.1
Coke 3695 1873.6 1510.72 1093.71 834.65
Limestone and Dolomite 391.89 318.45 316.76 300.48 217.87
Ferro Manganese 62.99 48.52 50.94 71.84 102.47
Zinc and Zinc Alloys 210.03 345.3 327 159.36 134.63
Spelter, Sulphur and
877.3 529.48 557.84 513.79 362.03
Others
*Pie charts are showing the percentage of expenses
From the above chart we can see that the expenses percentage on coke is reducing year by year.
Whereas, limestone and dolomite expenses percentage is increasing.

Price per
Tonnes
Types of raw material 2010-09 2007-08 2006-07 2005-06 2004-05
 Iron ore 528.53 512.98 422.14 322.3 303.63
Coal 6055.01 2929.57 4032.45 2222.3 1094.28
Coke 11145.61 6066.21 4821.27 3942.99 3444.87
Limestone and Dolomite 2010.18 1707.3 1831.97 1612.22 1487.2
Ferro Manganese 33336.86 30015.5 32191.61 43497.21 60834.71
Zinc and Zinc Alloys 94877.35 154669.65 169438.83 75966.94 63126.55
Spelter, Sulphur and
7310.2 4575.94 7108.03 6437.33 7423.18
Others
*values are in rupees
In the year 2006-07 the entire material rate is hiked. But the ferro manganese price per tonne is
showing downwards. It is becoming cheaper year by year. Iron ore is cheapest raw material for
TATA STEEL. From coal, coke is prepared. But coal is near to half price than coke. The entire
raw material price is increasing except ferro manganese and zinc and alloys.

Rs in
14.2>Raw material imported
crore
2010-09 2007-08 2006-07 2005-06 2004-05
4146.7 1542.7 1592.2 1226.8
878.12
5 9 5 2

Here we can observe that, importing raw material is increasing year by year. Even in the year
2010-09 more than two times than the last year.

14.3>Comparison of various segment related to inventory

 Comparing details 2010-09 2007-08 2006-07 2005-06 2004-05 CGPA
Total raw material
5709.91 3429.52 3121.46 2368.3 1715.14 35.077%
consumed
Cost of production 18917.71 14423.47 13300.17 11469.71 9516.97 18.739%
Cost of goods sold 18989 14874.23 13673.31 12012.39 10555.24 15.813%
Current asset 10047.48 6636.28 13701.89 4237.6 4083.58 25.243%
Inventories(Closing) 2868.28 2047.31 1827.54 1732.09 1523.34 17.140%
Sales 24315.77 19693.28 17551.09 15139.39 14498.95 13.799%
Profit after tax 5201.74 4687.03 4222.15 3506.38 3474.16 10.618%

Here we have calculated the CGPA (compounded growth per annum). For this calculation we
have taken the last 5 year data of each segment. This CGPA shows compounded growth or
average growth.

So here we can observed that as raw material consumption price increasing more than 35%, but
compare to sales and profit after tax is very high. Cost of production and cost of goods sold is
compare to same with each other.

14.4>Revenue generated by TATA Steel, Geographically

Revenue generated by geographical market
Regio 2006-
2010-09 2007-08 2005-06 2004-05
n 07
20914.0 17491.9 13160.3 12187.8
India 15506
2 7 5 2
Other 2045.0
3401.75 2201.31 1979.04 2311.13
s 9
*The rupee values are in crore
TATA STEEL is one of the biggest importers but this company is big seller in international
market. Here we can see in a regular basis the revenue in other country is increasing year by
year. Even in the year 2010-09 it crossed Rs 3000cr. It is a very good sign for TATA STEEL.
Here we can see that revenue in Indian market. It crossed more than Rs 20000cr. It shows not
only the improvement of TATA STEEL’s sales but also it is showing how Indian people per
capita consumption on steel is increasing. I personally prey that this should increase year after
year.

CHAPTER-15
 COMPARISON WITH OTHER COMPANIES
Here I am doing comparison with three other major players in this sector. As per
me, they are
• JINDAL STEEL
• ESSAR STEEL
• SAIL
So first of all, we should understand about that company in brief.

JINDAL STEEL
In the world of business, the Jindal Organization is a celebrity. Ranked sixth amongst the top
Indian Business Houses in terms of assets, the Group today is a US $10 Billion conglomerate.

Jindal Organization, set up in 1970 by the steel visionary Mr. O.P. Jindal, has grown from an
indigenous single-unit steel plant in Hisar, Haryana to the present multi-billion, multi-locational
and multiproduct steel conglomerate. The organization is still expanding, integrating,
amalgamating and growing. New directions, new objectives... but the Jindal motto remains the
same- "We are the Future of Steel ".

The group has been technology-driven and has a broad product portfolio. Yet, the focus at Jindal
has always been steel. From mining of iron-ore to the manufacturing of value added steel
products, Jindal has a pre-eminent position in the flat steel segment in India and is on its way to
be a major global player, with its overseas manufacturing facilities and strategic manufacturing
and marketing alliances with other world leaders.
Jindal Organization aims to be a global player. In pursuance of its objectives, it is committed to
maintain world-class quality standards, efficient delivery schedules, competitive price and
excellent after sales service.
Financial data of Jindal steel

Balance sheet

Rs. In crore
31st MAR 31st MAR 31st MAR 31st MAR 31st MAR
Particulars
09 08 07 06 05

Sources of funds
Owner's fund
Equity share capital 15.47 15.4 15.4 15.4 15.4
Preference share capital - - - - 1
Reserves & surplus 5,399.85 3,740.98 2,481.33 1,829.31 1,302.98
Loan funds
Secured loans 2,105.49 1,783.39 2,115.61 1,780.77 1,159.51
Unsecured loans 2,857.16 2,079.96 1,392.11 964.6 336.35
Total 10,377.97 7,619.73 6,004.45 4,590.08 2,815.24

Uses of funds
Fixed assets
Gross block 7,362.90 5,918.94 4,929.03 3,243.05 2,530.28
Less : accumulated
depreciation 1,617.00 1,183.11 781.75 542.33 361.76
Net block 5,745.90 4,735.83 4,147.28 2,700.72 2,168.53
Capital work-in-progress 2,318.01 660.48 937.84 1,146.27 345.7
Investments 1,233.40 1,036.19 709.82 430.3 33.38
Net current assets
Current assets, loans &
advances 5,189.28 3,299.57 1,801.66 1,490.50 1,036.30
Less : current liabilities &
provisions 4,111.64 2,115.48 1,595.39 1,178.45 769.67
Total net current assets 1,077.64 1,184.09 206.27 312.05 266.62
Miscellaneous expenses not
written 3.02 3.14 3.24 0.74 1.01
Total 10,377.97 7,619.73 6,004.45 4,590.08 2,815.24
 Profit and loss account

Particulars 2010-09 2007-08 2006-07 2005-06 2004-05

Income
7,677.8 5,368.1 3,523.0 2,565.0 2,253.6
Operating income 3 4 8 4 0
Expenses
3,419.4 1,727.4 1,068.5
Material consumed 2 0 0 536.71 528.2
Manufacturing expenses 773.84 670.87 510.96 545.44 514.13
Personnel expenses 181.46 132.2 90.14 79.74 50.85
Selling expenses 327.76 264.73 276.47 222.18 171.87
Adminstrative expenses 337.49 277.03 167.2 148.16 72.42
5,039.9 3,072.2 2,113.2 1,532.2 1,337.4
Cost of sales 7 3 7 3 6
2,637.8 2,295.9 1,409.8 1,032.8
Operating profit 6 1 1 1 916.15
Other recurring income 199.46 57.31 36.08 26.02 19.34
2,837.3 2,353.2 1,445.8 1,058.8
Adjusted PBDIT 2 2 9 3 935.49
Financial expenses 267.89 243.02 173.19 108.02 92.51
Depreciation 433.03 451.51 336.47 219.17 152.48
Other write offs 0.2 0.27 0.27 0.27 0.31
2,136.2 1,658.4
Adjusted PBT 0 2 935.96 731.37 690.18
Tax charges 465.4 265.55 241.85 154.91 158.11
1,670.8 1,392.8
Adjusted PAT 0 7 694.11 576.46 532.08
Non recurring items -144.78 -144.57 7.78 -12 -12.48
Other non cash adjustments 10.46 -11.34 1.1 8.48 -3.9
1,536.4 1,236.9
Reported net profit 8 6 702.99 572.94 515.7
4,584.2 3,239.5 2,136.0 1,528.7 1,057.6
Earnigs before appropriation 8 4 5 7 0
Equity dividend 85.33 62.02 55.43 46.19 46.19
Dividend tax - 10.55 8.87 6.48 6.33
Profit carried to balance sheet 4,498.9 3,166.9 2,071.7 1,476.1 1,005.0
5 7 5 0 8
 ESSAR STEEL
Essar Steel is one of India's largest exporters of flat products, exporting to
the highly demanding US and European markets, and to the growing
markets of South East Asia and the Middle East.

A number of major client companies have approved our steel for their use,
including Caterpillar, Hyundai, Swaraj Mazda, the Konkan Railway, and
Maruti Suzuki. Essar Steel has acquired extensive quality accreditations.
Our lean team gives us one of the highest productivities and lowest
manpower costs among steel plants internationally.
Seamless integration
A major strategic advantage is our high level of forward and backward integration. We are
totally integrated - from raw material to finished products, adding value at every stage of the
manufacturing process.
Bailadilla facility: Iron ore beneficiation
At Bailadilla, where some of the world's richest and finest ore is available, we have set up a
beneficiation plant of 8 MTPA capacity, which ensures the highest quality iron ore. The iron ore
slurry is pumped through a 267 km pipeline (the second longest in the world) to the pellet plant,
yielding advantages in quality, cost and real time inventory management.
Visakhapatnam facility: Pelletization
The slurry is received at our pellet plant at Visakhapatnam, which has a capacity of 8 MTPA,
providing vital raw material for the steel plant at Hazira.
Hazira facility
Our steel complex at Hazira, Gujarat, houses a 5.0 MTPA sponge iron
plant, the world's largest gas-based sponge iron plant in single location.
The plant provides raw materials for our state-of-the-art 4.6 MTPA hot
rolled coil (HRC) plant, the first and largest of India's new generation steel
mills. This plant is fed with inputs from four electric arc furnaces and three
casters. The complex's sophisticated infrastructure includes independent
water supply and power, oxygen and lime plants, a township and a captive
port capable of handling up to 8 MTPA of cargo with modern handling equipment like barges
and floating cranes.
Financial data

Balance sheet

31st 31st 31st 31st 31st

Particulars MAR 09 MAR 08 MAR 07 MAR 06 MAR 05

Sources of funds
Owner's fund
Equity share capital 1,140.48 1,140.48 1,140.48 581.17 507.98
Preference share capital 43.6 43.6 246.52 2,204.12 530.27
Reserves & surplus 3,554.28 3,447.25 3,080.95 1,246.18 686.54

Loan funds
Secured loans 6,317.62 5,383.11 6,533.32 7,355.20 4,126.32
Unsecured loans 993.77 733.47 409.92 650.46 684.27
Total 12,049.75 10,747.91 11,411.19 12,037.13 6,535.38

Uses of funds
Fixed assets
Gross block 15,367.85 14,688.87 13,554.19 10,447.54 6,940.24
Less : revaluation reserve - - - - 0.07
Less : accumulated depreciation 6,239.03 5,414.98 4,664.60 4,049.09 3,691.34
Net block 9,128.82 9,273.89 8,889.59 6,398.45 3,248.83
Capital work-in-progress 549.61 575.12 1,107.78 2,887.36 589.64
Investments 791.31 515.22 433.43 182.97 768.38

Net current assets

Current assets, loans & advances 5,465.23 4,829.42 5,592.66 5,229.78 3,689.80
Less : current liabilities &
provisions 3,885.22 4,445.74 4,612.27 2,661.43 1,761.27
Total net current assets 1,580.01 383.68 980.39 2,568.35 1,928.53
Total 12,049.75 10,747.91 11,411.19 12,037.13 6,535.38
 Profit and loss account

Particulars 2010-09 2007-08 2006-07 2005-06 2004-05

Income
11,717.4 10,763.3
Operating income 0 5 8,087.48 6,168.66 6,098.39
Expenses
Material consumed 3,983.17 4,108.57 2,722.02 2,249.70 2,005.67
Manufacturing expenses 4,426.80 3,587.56 2,721.65 1,918.04 1,505.72
Personnel expenses 233.07 225.8 152.8 99.75 76.09
Selling expenses 291.73 215.12 337.13 234.9 244.64
Administrative expenses 269.98 265.5 151.69 171.24 317.13
Cost of sales 9,204.75 8,402.55 6,085.29 4,673.63 4,149.25
Operating profit 2,512.65 2,360.80 2,002.19 1,495.03 1,949.14
Other recurring income 124.48 41.15 59.83 38.56 1.36
Adjusted PBDIT 2,637.13 2,401.95 2,062.02 1,533.59 1,950.50
Financial expenses 861.63 890.01 772.04 440.01 570.48
Depreciation 828.11 766.52 631.04 482.1 394.29
Adjusted PBT 947.39 745.42 658.94 611.48 985.73
Tax charges 110.32 383.07 248.19 165.94 204.09
Adjusted PAT 837.07 362.35 410.75 445.54 781.64
Nonrecurring items -707.01 84.16 39.77 172.95 2.98
Other non cash adjustments 55.14 -16.02 -14.03 -88.31 -184.72
Reported net profit 185.2 430.49 436.49 530.18 599.9
Earnings before appropriation 1,859.10 1,874.78 436.49 530.18 -874.78
Preference dividend - 11.5 - - -
Dividend tax - 1.96 - - -
Profit carried to balance
sheet 1,859.10 1,861.32 436.49 530.18 -874.78
 STEEL AUTHORITY OF INDIA

Steel Authority of India Limited (SAIL) is the leading steel-making company in India. It is a
fully integrated iron and steel maker, producing both basic and special steels for domestic
construction, engineering, power, railway, automotive and defense industries and for sale in
export markets.

Ranked amongst the top ten public sector

companies in India in terms of turnover, SAIL
manufactures and sells a broad range of steel
products, including hot and cold rolled sheets
and coils, galvanised sheets, electrical sheets,
structural, railway products, plates, bars and
rods, stainless steel and other alloy steels. SAIL
produces iron and steel at five integrated plants
and three special steel plants, located principally
in the eastern and central regions of India and
situated close to domestic sources of raw
materials, including the Company's iron ore,
limestone and dolomite mines. The company has the distinction of being India’s second
largest producer of iron ore and of having the country’s second largest mines network. This
gives SAIL a competitive edge in terms of captive availability of iron ore, limestone, and
dolomite which are inputs for steel making.
SAIL's wide range of long and flat steel products are much in demand in the domestic as well
as the international market. This vital responsibility is carried out by SAIL's own Central
Marketing Organisation (CMO) that transacts business through its network of 37 Branch
Sales Offices spread across the four regions, 25 Departmental Warehouses, 42 Consignment
Agents and 27 Customer Contact Offices. CMO’s domestic marketing effort is supplemented
by its ever widening network of rural dealers who meet the demands of the smallest
customers in the remotest corners of the country. With the total number of dealers over 2000 ,
SAIL's wide marketing spread ensures availability of quality steel in virtually all the districts
of the country.
SAIL's International Trade Division ( ITD), in New Delhi- an ISO 9001:2000 accredited unit
of CMO, undertakes exports of Mild Steel products and Pig Iron from SAIL’s five integrated
steel plants.
With technical and managerial expertise and know-how in steel making gained over four
decades, SAIL's Consultancy Division (SAILCON) at New Delhi offers services and
consultancy to clients world-wide.
SAIL has a well-equipped Research and Development Centre for Iron and Steel (RDCIS) at
Ranchi which helps to produce quality steel and develop new technologies for the steel
industry. Besides, SAIL has its own in-house Centre for Engineering and Technology (CET),
Management Training Institute (MTI) and Safety Organization at Ranchi. Our captive mines
are under the control of the Raw Materials Division in Kolkata. The Environment
Management Division and Growth Division of SAIL operate from their headquarters in
Kolkata. Almost all our plants and major units are ISO Certified.

Financial data

Balance sheet

31st MAR 31st MAR 31st MAR 31st MAR 31 st MAR

Particulars 09 08 07 06 05
Sources of funds
Owner's fund
Equity share capital 4,130.40 4,130.40 4,130.40 4,130.40 4,130.40
Reserves & surplus 23,853.70 18,933.17 13,182.75 8,471.01 6,176.25
Loan funds
Secured loans 1,473.60 925.31 1,556.39 1,122.16 1,603.98
Unsecured loans 6,065.19 2,119.93 2,624.13 3,175.46 4,165.81
Total 35,522.89 26,108.81 21,493.67 16,899.03 16,076.44

Uses of funds
Fixed assets
Gross block 32,728.69 30,922.73 29,912.71 29,360.46 28,043.48
Less : accumulated depreciation 20,459.86 19,351.42 18,315.00 17,198.32 15,558.41
Net block 12,268.83 11,571.31 11,597.71 12,162.14 12,485.07
Capital work-in-progress 6,544.24 2,389.55 1,236.04 757.94 366.48
Investments 652.7 538.2 513.79 292 606.71
Net current assets
Current assets, loans & advances 35,666.84 27,309.01 21,673.75 18,788.80 15,521.37
Less : current liabilities &
provisions 19,609.72 15,758.74 13,656.77 15,317.67 13,198.12
Total net current assets 16,057.12 11,550.27 8,016.98 3,471.13 2,323.25
Miscellaneous expenses not written - 59.48 129.15 215.82 294.93
Total 35,522.89 26,108.81 21,493.67 16,899.03 16,076.44

Profit and loss account

Particulars 2010-09 2007-08 2006-07 2005-06 2004-05

Income
43,798.5 39,958.6 34,328.7 28,200.4 28,714.3
Operating income 8 7 7 8 0
Expenses
22,042.5 16,821.3 15,963.1 13,903.2 11,155.3
Material consumed 8 9 3 3 3
Manufacturing expenses 3,762.77 3,317.74 2,925.43 2,793.45 2,427.11
Personnel expenses 8,401.73 7,919.28 5,087.76 4,156.97 3,811.75
Selling expenses 935.68 1,143.90 1,066.73 1,108.12 971.78
Administrative expenses 1,644.78 1,321.44 1,064.29 1,035.99 780.67
Expenses capitalized -1,930.40 -1,832.22 -1,423.08 -1,352.05 -921.71
34,857.1 28,691.5 24,684.2 21,645.7 18,224.9
Cost of sales 4 3 6 1 3
11,267.1 10,489.3
Operating profit 8,941.44 4 9,644.51 6,554.77 7
Other recurring income 2,279.89 1,539.69 1,354.96 892.3 676.55
11,221.3 12,806.8 10,999.4 11,165.9
Adjusted PBDIT 3 3 7 7,447.07 2
Financial expenses 253.24 250.94 332.13 467.76 605.05
 Depreciation 1,285.12 1,235.48 1,211.48 1,207.30 1,126.95
Other write offs 128.02 75.49 128.59 181.44 184.89
11,244.9
Adjusted PBT 9,554.95 2 9,327.27 5,590.57 9,249.03
Tax charges 3,284.28 3,934.65 3,253.80 1,694.36 2,592.37
Adjusted PAT 6,270.67 7,310.27 6,073.47 3,896.21 6,656.66
Nonrecurring items -277.12 161.9 53.75 45.64 -14.35
Other non cash adjustments 181.26 64.61 60.57 71.12 174.66
Reported net profit 6,174.81 7,536.78 6,187.79 4,012.97 6,816.97
Earnings before 22,052.4 18,348.4 12,886.6
appropriation 7 3 3 7,861.47 6,839.66
Equity dividend 1,073.90 1,528.25 1,280.42 826.08 1,363.03
Dividend tax 181.26 258.91 197.98 115.86 185.24
Profit carried to balance
sheet 20,797.3 16,561.3 11,408.2 6,919.5 5,291.4

15.1> Here for comparison the best method is the comparison is ratio analysis of these company
and TATA Steel ltd.

JI
T ES
N S
Ratio A S
D AI
analysis T A
A L
A R
L
Raw
14
material to 17 5. 8.
.2
current .3 72 83
6
asset
Finished
13 17 12 33
goods to
.5 .0 .2 .4
current
5 2 8 5
asset
Stock 7. 7. 5. 5.
 turnover ratio 72 77 48 08
Average age of stock 47.28 46.97 66.6 71.85
Inventory conversion period 39 53.49 67.38 85.61
Current ratio 1.12 0.61 1.68 2.01
Acid test ratio 0.79 0.34 0.89 1.42
Total inventories to total asset 5% 9.93% 17.44% 27.46%
Sales 24315.77 14001.25 11688.3 43150.08
Profit after tax 5201.74 4,498.95 1859.1 20,797.3

It will easy to understand when it will put into chart. So, all the necessary charts are given
below.

If we compare for TATA STEEL with other companies, then we can see that TATA STEEL’s
raw material to current asset is neither too high nor too low. It is maintaining a required amount
of raw material in hand. Where ESSAR STEEL is maintaining very low amount of raw material
in hand.
Here we can see that SAIL is playing a defensive role in case of finished goods. But still TATA
steel has limited finished goods to sell. TATA STEEL never tried to block its capital.

Both TATA STEEL and JINDAL STEEL have the good stock turnover ratio. In this case
TATA STEEL is far ahead than ESSAR STEEL and SAIL.
As the stock turnover ratio is too high, so the average age of stock is less than 50 days. Where
SAIL and ESSAR age of stock is too high. Even SAIL age of stock is more than 70 days.

Inventory conversion period is lowest than other company for TATA STEEL. So from here we
can conclude TATA STEEL is the fastest converter company for Inventory.
Current ratio of TATA STEEL is in standard position. Where JINDAL steel’s current ratio is
less than 1 and SAIL’s current ratio is more than 2. Where SAIL is blocking its working capital
there TATA STEEL is keeping appropriate coverage for current liability.
TATA STEEL maintained exact amount of highly liquid money in hand, where SAIL
maintained huge amount of highly liquid money. So in this case TATA STEEL is good enough
to maintain the highly liquid money.

TATA STEEL has less inventories percentage to total asset than other companies. It is a good
sign for TATA STEEL. This company never tried to block its current money. From this chart it
is clearly shown that SAIL is always maintaining a defensive position.
Here it is clear that SAIL’s sale and profit is higher than other companies. But if we see TATA
STEEL and JINDAL steel, the percentage of profit against sale is high for JINDAL Steel than
TATA STEEL. But the sale price of TATA STEEL is less than JINDAL Steel. So, that the sale
is higher than JINDAL steel and ESSAR Steel. As SAIL is Government undertaking
organization, it is getting lot of subsidiaries and also other facilities from Government. But still
TATA STEEL is in second position.

CHAPTER-16

Conclusion
During my project, I personally learned a lot of things i.e. how TATA STEEL is working in case
production, raw material consumption etc. I also learned about inventory management in TATA
STEEL. I am happy to work here for last two months. It gave me nice experience as well as a
value addition to my carrier.

During this period I found some good points and some which I think will help in improving the
performance of the company. These are as follows:

My observations:
• TATA STEEL is maintaining three major types of inventories i.e. raw material, work-in-
process and finished goods.
• Cost of inventories is valued under ‘weighted average method’.
• TATA STEEL has prepared high quality inventory storing house to minimize the cost
relating to it.
• TATA STEEL’s inventory conversation period is too efficient than its competitors. It is
very less than the others.
• As per my concern, TATA STEEL is maintaining an appropriate amount of liquidity to
cover its current liability while we see its current ratio and acid test ratio. It shows its
aggressiveness. It never tried to block its money unnecessarily.
• The raw material inventory of SAIL is very low in percentage in comparison to TATA
STEEL.
• TATA STEEL is managing its inventory very cleverly. It is keeping only 5% of its total
asset, which is lesser than other competitors. It shows efficiency level of TATA STEEL.
 • The Compounded Annual Growth Per Annum of the value of raw material consumed is
more than 35% but sales value is not increasing that much. But it is far efficient than the
others.
• All the raw material price is increasing except ferro manganese and zinc alloys.
• Raw material conversion period is decreasing year by year. It shows its efficiency level.
• Expenses on coke are increasing year by year. Where percentage of expenses on ferro
manganese is decreasing.
• Import of raw material is the maximum in the year 2010-09. Where in rest of the year
TATA STEEL was using own mines for raw material.
• Where finished goods conversion period and raw material conversion period is
decreasing, there work in process conversion period is increasing.

My suggestion:
• For better inventory control TATA STEEL must apply VED analysis or ABC analysis.
• TATA STEEL must keep eye on its WIP conversion period.
• TATA STEEL should try to minimize its inventory conversion period and also try to
minimize the average age of stock to reduce the cost of inventories.
• As sale price per unit is lesser than the competitors it must keep trend increasing mode of
sales to reduce the blockage of its price in its inventory.
• Try to make same CGPA of closing stock of inventory and profit after tax. Because PAT
CGPA is still 5% less than Inventory CGPA.
• Cost of production and Cost of goods sold CGPA should tally. Because cost of goods
sold CGPA is still less than 3% than Cost of production CGPA.
• Inside the plant one quotation is there ‘work must but safety first’. It should be obeyed by
all the employees at least who are working in production and inventory maintenance
departments.
• Try to generate more revenue from other country.
• TATA STEEL should try for acquisition of more mines in India to reduce the raw
material outsourcing or import cost.

* ABC Analysis: It is a part of inventory management in which, the items included in the
inventory are classified into different categories as items of higher value occupying lesser space,
lower value occupying more space and others.

*VED Analysis: V=Vital, E=Essential, D=Desirable. It is the one of the major part of inventory
management. Inventories should divide according to their importance.
 Bibliography

Books

• Financial management by Prasanna Chandra

• Fundamental Financial management by Bringham & Houston

Websites

• www.tatasteel.com
• www.sail.co.in
• www.jindalsteel.com
• www.essarsteel.com
• www.wikipedia.com
• www.steel.nic.in
• www.economywatch.com

Other references

• Annual report of TATA STEEL for the year 2004-05, 2005-06,

2006-07, 2007-08, 2010-09.
 • Annual report of SAIL, JINDAL, ESSAR steel for the year
2010-09.

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