September 30, 2008

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FINANCIAL MANAGEMENT I
A RISK ANALYSIS OF

Under the Aegis of:

PGDM 2008-10

SUBMITTED TO:

PROF.A.K.MALHOTRA

SUBMITTED BY: PIYUSH KEJRIWAL(065) SAUMIL SINGH(094) SUDIPTO DAS(105) RAVI AGARWAL(084) SUBHADEEP BAGCHI(103) TARUN GOEL(108)

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CONTENTS
TOPIC
INDIAN STEEL INDUSTRY COMPANY OVERVIEW FINANCIALS RATIO ANALYSIS RISK ASSESSMENT CONCLUSION

PAGE NO.
3 3 5 6 8 21

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INDIAN STEEL INDUSTRY

The Indian steel industry is 100 years old. Till 1990, the Indian steel industry operated under a regulated environment with insulated markets and large scale capacities reserved for the public sector. Production and prices were determined and regulated by the Government. With capital investments of over $23.3bn, the Indian steel industry currently provides direct/indirect employment to over 2 million people.

The target steel production in India for 2011 is 66 MT. With massive scale of infrastructural development happening all across the country, Indian steel Industry has a large scope for development. The India steel industry has further plans of development. Plans are being chalked out for setting up of 3 pig iron manufacturing units of a combined capacity of 6 lakh tons per year and a steel manufacturing unit of the capacity of producing 1 million ton yearly in West Bengal, with the technical and financial support of China. The Government of India continues to be supportive towards the industry. The Ministry of Steel has set a target output of 110 MT of steel by 2020 at CAGR of 7.1% from 2004-05. Steel industry still continues to be unattractive for investors and a recent study by CRIS INFAC suggests that any new projects with target price below $270/MT will be economically unattractive.

COMPANY OVERVIEW
Established in 1907, Tata Iron and Steel Company Ltd (Tata Steel), after it had acquired Corus became the worlds sixth largest steel Company, with proforma crude steel production of 27 mn tones in FY07. Corus acquisition, which was concluded on April 2, 2007, propelled the Company onto the global platform. The combined entity has a diverse presence in both emerging and developed economies. Tata Steel's product range includes hot and cold rolled coils and sheets, galvanised sheets, tubes, wire rods, construction rebars, rings and bearings. The Company is trying to decommoditise steel by launching specific brands like Tata Steelium (Cold Rolled Steel), Tata Shaktee (Galvanised Corrugated Sheets), Tata Tiscon (re-bars), Tata Bearings, Tata Agrico (hand tools and implements), Tata Wiron (galvanised wire products), Tata Pipes (pipes for construction) and Tata Structura (a contemporary construction material). Corus, now Tata Steels subsidiary, was established on October 6, 1999 as a result of the
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merger of British Steel with Koninklijke Hoogovens. It is Europes second largest and the worlds ninth largest steel producer, having a crude steel capacity of 21.2 mn tonnes in the UK and the Netherlands. It has four business segments: Strip Products, Long Products, Distribution & Building Systems, and Aluminium. The Strip Products division manufactures hot rolled steel strip, cold rolled steel, tubes and pre-finished steels. The Long Products division manufactures plates, sections, wire rods, slabs and billets. The Distribution & Building division offers further material processing, building systems, tailored solutions and consultancy services to the steel industry. The Company has developed a presence in south-east Asia through the acquisitions of NatSteel Asia Pte. Ltd and Tata Steel (Thailand) Public Co. Ltd. (formerly Millenium Steel) in 2005 and 2006 respectively. Of late Tata Steel expanded its presence into Vietnam, entering into MoU with Vietnam Steel Corporation for proposed steel and mining projects in Vietnam.

Future Direction:
Tata Steel plans to grow and globalize through organic and inorganic routes. The Company intends to be a 15 million ton Company by 2010 through organic growth and acquisitions in India and overseas. Its 5 million tonnes per annum (MTPA) Jamshedpur Works plans to double its capacity by 2010. The Company also has three greenfield steel projects in the states of Jharkhand, Orissa and Chhattisgarh and proposed steel making facilities in Vietnam and Bangladesh.

Recent Achievements:
Tata Steel received the Company of The Year awarded by ET in 2008 for the fiscal year 2007-08. Tata Steel, through its joint venture with Tata BlueScope Steel Limited, has also entered the steel building and construction applications market. Tata Steel is one of the few steel companies in the world that is Economic Value Added (EVA) positive. It was ranked the "World's Best Steel Maker", for the third time by World Steel Dynamics in its annual listing in February, 2006. Tata Steel has been conferred the Prime Minister of India's Trophy for the Best Integrated Steel Plant five times.

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FINANCIALS
There has been an increase in sales of 15.3% from FY06. EBTDA has increased 18% over last year. There has been a marginal increase in depreciation; interest expense has almost doubled. Reported profit for FY07 is USD 0.98. EPS stands good at USD 1.7; P/E ratio for the CY is 7.72. Investments and inventory have grown at 35% and 13%, (as a percentage of sales) over previous year, respectively. Secured loans/ sales has come down drastically to 39%, from 87.1% last year. Assets have also increased compared to equity share capital, thus bringing the equity share capital/ total assets down to 2.5%, compared to 4.5% in FY06. Cash flow has again shown a huge difference over last year. It is in negative currently. This is expected to improve in the next two years, with the highest being in FY09. Overall, it has been a good year for TATA Steel.

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Ratio Analysis
Profitability & Return Ratios: ROCE and ROE will both fall because of a large increase in asset base in the next two years. We can break the ROCE into two sub ratios: Profit margin and Asset turnover. Operating expenses are expected to increase marginally, resulting in an EBITDA margin of 38.7%, which is below that of last year. Depreciation, interest expenses are estimated to reduce from last year, resulting in a net profit margin of 26.6%, an increase of almost 10%. There has been an increase in sales by 8.4%, but that has been more than offset by increase in fixed assets of 15%. This has resulted in fixed asset turnover reducing from last year. This will continue into FY08. This is because of the fact that new assets need to be given more time to start generating revenue. TATA Steel would reap benefits from the new machinery from FY09. EV/ EBITDA would also show an increase over previous years.

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Debt and Gearing Ratios: Debt-equity ratio remains constant at 0.69. The interest cover will increase to 28.1 for FY08 and 29.0 in FY09, from 27.19 last year. This is due to an increase in EBITDA in the future years that would offset the marginal increase in interest charges. Liquidity Ratios: We peg the current ratio at almost 1.5 times prior year ratio. This is because of an increase in inventory holdings and investments. Though there is a outflow for this year, the cash flow ratio will improve over the next two years. Stock Market Ratios: EPS is the reported profit over the number of shareholders in the year. This year, it will increase to 87, a rise of over 19% from last year, and is expected to touch 104 by FY09. The P/E ratio is expected to double in FY 08. This could due to anticipation of increased profits and dividend payouts in FY08 and FY09.

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RISK ASSESSMENT
Tata Steel has been on a path of accelerated growth with foray into several geographies. Associated with such growth is the resultant change in the risk profile. The Company today faces greater complexities/challenges and even greater expectations from its stakeholders. The Company, therefore, needs to evaluate how much risk the company is taking in light of its growth initiatives. In other terms, the residual risk in the expected return needs to be formally recognised and disclosed. Thus, the following are the risk associated with the company and their related suggestions:

1. Corus Acquisition Financing

During FY 2007-08, the financing structure of the Corus transaction has been reorganised to achieve fiscal unity in the Netherlands and consequent tax efficiencies. The Corus businesses in UK and Netherlands are now organised under fully owned subsidiaries of Tata Steel Netherlands B.V., which in turn is an indirectly fully owned subsidiary of Tata Steel Limited. By the close of April 2008, the financing for the Corus acquisition has been completed with all the recourse bridge funding contracted for the acquisition having been paid off through a mix of debt, equity and internal accruals and the non-recourse funding syndicated during the year. In September 2007, the Company issued USD 0.875 billion of 1% Foreign Currency Convertible Alternative Reference Securities (CARS). Between September 4, 2011 and August 6, 2012, each security is convertible at the option of holder of the security, at a conversion price of Rs. 758.10 into a Qualifying Security issued by the Company. The Company must redeem all outstanding CARS at 123.349% of their principal amount together with accrued and unpaid interest no later than September 5, 2012. The Company raised an amount of Rs. 9121 crores through a Rights and Cumulative Compulsorily Convertible Preference Share Issue and Rs. 25 billion through a long term loan. The syndication of the GBP 3.67 billion senior facility consisting of multiple tranches of term loans and a GBP 0.5 Billion five year revolving credit facility, secured by the assets of Corus was successfully closed in December 2007 by which time, a large number of banks as well as institutions had come into the transaction. The deal was widely recognised as a landmark deal and won numerous awards and recognition from financial journals. Tata Steel also privately placed Non-Convertible Debentures totalling up to Rs. 2,000

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crores in May 2008. The deemed date of allotment of these debentures was 7th May, 2008 and they consist of 3 series: 3 year floating (MIBOR-linked) notes (Rs. 1,090 crores), 7 year fixed rate notes (Rs. 620 crores) and 3 year fixed 83 rate notes (Rs. 290 crores). These funds may be used by the company for various corporate needs. The Company hedged the foreign currency risk on repayment of the major part of the USD 1.65 billion of external commercial borrowings drawn in FY 2006-07. The foreign currency repayment risk on the CARS remains unhedged since they may be converted to underlying securities in FY 2012 and FY 2013. Tata Steel Netherlands, the entity in whose books the nonrecourse debt has been taken was successful in encouraging a high proportion of investors to voluntarily convert their debt to Euro via the re-denomination route. The majority of the balance debt was then swapped to Euro from GBP so that foreign currency risk could be minimised. Tata Steel Netherlands also hedged the majority of its Euro interest rate risk.

Rights Issues

During the year under review, the Company allotted the Cumulative Convertible Preference Shares (CCPS) and Ordinary Shares on a Rights basis to the shareholders of the Company as under: 121,611,464 Ordinary Shares of Rs.10 each at a premium of Rs.290 per share in the ratio of 1:5, aggregating to Rs. 3,648 crores. 547,251,605 2% Convertible Cumulative Preference Shares (CCPS) of Rs. 100 each at an issue price of Rs. 100 each, in the ratio of 9:10, aggregating to Rs. 5,473 crores. As per the terms of the issue, six CCPS of Rs.100 each are compulsorily and automatically convertible on 1st September, 2009, into one Ordinary Share of Rs. 10 each, at a premium of Rs. 590 per share. The proceeds of the Rights Issue have been utilised to repay the short term Bridge Loan availed by the Company from the State Bank of India.

Company initiative In order to finance their planned capital expenditure, the Tata Steel Group continues to follow prudent financial practices of focusing on higher generation and conservation of internal capital, improvement in the working capital management and allocation of capital to value creating projects. Their Brownfield expansions in India and the ongoing capital expenditure programmes globally are on track and the financing of the same are
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fundamentally premised on internal generations of the Group. The Company will consider raising external capital for the other growth projects as and when required based on the Companys long term financing strategy which focuses on ensuring that the capital structure remains robust in the long term, the financing plan provides flexibility to the balance sheet for future needs and is earnings accretive in the long term. The Tata Steel Group has set itself an ambitious target to improve the return on invested capital of its existing assets to 30% from the current 19% over the next 5 years. The Group will pursue the optimisation of its European assets, dispose and restructure assets that are of low profitability and pursue differentiation of products and services. It will also continue towards achieving benefits through continuous improvement of processes and products; from the synergies from the acquisition of Corus. Plans are in place to meet the initial synergy target of USD 450 million per annum. The Tata Steel Group has already begun converting this strategy into action. For example, in April 2008, the Tata Steel Group disclosed a programme to restore the long term competitiveness of its packaging assets in Europe with the closure of its Bergen site (Norway), and the restructuring of its Trostre operation (United Kingdom). Other examples are the major investments that are currently being implemented at its plants in Ijmuiden, Port Talbot and Scunthorpe which will drive the Group towards product differentiation and improve operational efficiency to reinforce its existing competitive position. The Tata Steel Group will pursue strategic growth through capacity expansions and securing access to raw materials. The Group is expanding its capacity in India through the expansion of its operations in Jamshedpur to 10 million tonnes per annum and through the construction of a 6 million tonnes per annum Greenfield site in Orissa. Other Greenfield opportunities in India and across Asia are being assessed.

2. THE MITTAL FEAR

Tata Group has a holding of approximately 34 % in Tata Steels, which exposes it to the fear of being taken over by any global steel producer. We all know what has happened in the past (refer to Mittal Arcelor story) and there is a great chance that there can be a hostile bid by Mittal-Arcelor or some other company like Nippon, Posco etc. Hostile bids are a new trend nowadays which makes it a even bigger threat, one of the most recent hostile takeover bid has been that of BHP (The worlds biggest Mining Company) for Rio Tinto which stood at $147 billion.

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Company Initiatives Steel industry is highly fragmented and considerably vulnerable. The only safeguard is to increase the founding family's stake over time," Mr. Tata told the shareholders of Tata Steel. In 2006 Tatas stake was 27.48%. Currently it has risen to 33.94% achieved by the issue of preferential shares.

3. Land acquisition problem

Due to its ongoing Greenfield and Brownfield in states like Orissa, Chhattisgarh and Jharkhand, Tata steel requires huge chunk of land. Sudden spree of other big corporate houses for grabbing land makes the situation even more competitive some reports also suggests that there is a vicious circle working intentionally delaying the project. In this regard it can be compared with Singur, drama as mentioned by some top Tata executives. Police firing in Kalinganagar in Orissa and subsequent death of protestors make the situation complex. Unstable Jharkhand government and Tribal protestors at an increase worsening the situation. Representatives of environmental activist group Greenpeace stormed into the AGM in the guise of shareholders of Tata Steel, got on to the podium and alleged that the proposed port at Dhamra on the Orissa coast will kill the migratory Olive Ridley turtles there.

Company initiative Tata steel is undergoing a project for human skill development programme through adoption of ITI and various steel development programmes among villagers near project sites. Attractive remuneration package and job assurance for land losers. Purchase of land directly by company without involving government agencies.

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4. Cyclical nature of the steel industry

The steel industry is highly cyclical, receptive to general economic conditions and reliant on the condition of a number of other industries, including the automotive, appliance, construction and energy industries. If these industries experience a downturn, Tata Steel too would too take a hit, thus negatively impacting its rating.

Company initiative Taking into account of Mittal,s way of business of global consolidation Tata steel first adopted string of pearls acquisition policy while acquiring assets of less than five million tonnes through NatSteel, Singapore and Millennium steel in Thailand. After acquiring small scale firms in south East Asia Tata steel acquired iconic British Dutch steel steelmaker Corus and became the sixth largest steelmaker in the world. Just like crude oil this consolidation can help to sustain a player stable price for steel avoiding the cyclical nature of the business. Suggestion By acquiring Corus, though Tata steel attained a global size its assets are mainly based in developed market with limited growth opportunity. To remain competitive in global steel arena it has to expand its footprint throughout highly fragmented steel industry of china.

5. Raw material price fluctuations

Corus follows the policy of entering into long term supply contracts with raw materials vendors. Thus there can be a huge time gap between variation in prices under purchase contracts and the time when Corus can make a corresponding price change under its sales contacts with its consumers. Moreover, Corus may not be able to pass on the increased raw materials costs to its customers. Such developments would lead to a downside in our rating. Company initiative Your Company is self-sufficient in iron ore for 100% and 60%for coking coal i.e. an average of 80% raw material security for its Indian operations. After the acquisition of Corus the extent of captive raw material for the combined entity stands at around 22%. Having a reasonable level of raw material security is imperative for long term sustainability especially during
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downturns. Tata Steel, in line with its strategy, is continuously exploring various raw material opportunities across the globe. Further, the increase in global steel demand mainly driven by China and other Asian countries has pushed the global steel prices upward sharply, which led to an increase of price of iron ore, coal, coke, scrap, etc. The initiatives of the Tata Steel Group to maintain cost competitiveness in the global arena, as well as to increase its raw material security are as under Tata Steel took strategic interest of 5% in coal mining project in Australia, in partnership with AMCI, Nippon Steel, JFE and POSCO in September 2005 with 20% off take rights. The Joint Venture was formed for development of Greenfield underground coal project in Bowen Basin, Queensland. In November 2007, the Company entered into a Joint Venture Agreement with Riversdale Mining Limited for 35% stake in two coal tenements - Benga and Tete in Mozambique. The Company has also secured a right for 40% share of the coking coal. The coking coal derived from this project would be supplied to the Tata Steel Groups facilities in Europe, Asia and elsewhere. In December 2007, Tata Steel entered into JV with Sodemi for 85% stake for development of Mount Nimba Iron Ore deposit in Ivory Coast. The initial phase would involve exploration and detailed feasibility assessment followed by construction of the mines and beneficiation facilities. Iron ore from this project will be supplied to Corus facilities in Europe. The JV company in the name of Tata Steel Cote d Ivoire S. A has been formed. About 40% to 50% of the present requirement of limestone of Tata Steel is being sourced from indigenous sources and the balance is being imported. The Company has been continuously evaluating options to own limestone mines for its captive use. In January 2008, Tata Steel acquired 70% stake in Al Rimal Mining LLC, an existing company of Al Bahja Group of Oman. The JV will undertake mining of limestone in Uyun in Salalah. In January 2008, Tata Steel entered into 50:50 joint ventures with SAIL for development of coal blocks to meet their captive coal requirements. The Joint Venture would acquire and develop coal blocks.

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6. Increasing energy costs

Steel production processes are energy dependent and price movements in the energy market would accordingly affect Tata Steels bottom line, and thus affecting our rating. Company initiatives Particulars Required under the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988. Conservation of Energy a) Energy Conservation Measures Taken : Conversion of boiler no. 7 & 8 stoker coal fired boilers at Power House No. 3 into byproduct gas fired boilers. Electrical energy saved through installation of V/F drives at LD Shop and Hot Strip Mill.

b) Additional Investments and Proposal for Reduction of Consumption of Energy: Installation of Top Recovery Turbine (TRT) at G & H Blast Furnace. Recovery of sensible heat of coke by installation of Coke Dry Quenching system in Batteries 5, 6, 7, 8 & 9 at Coke Plant. Enhancing waste heat recovery at Sinter Plants to reduce energy consumption and reduce CO2 emission. BF Gas fired re-heating furnace at Hot Strip Mill. Elimination of heat not recovered due to parallel blow to improve LD Gas recovery, so as to reduce coal consumption in boilers.

Impact of the above measures: Energy Conservation measures during 2007-2008 has resulted in achieving: Lowest ever Plant Specific Energy Consumption of 6.655 Gcal/tcs.

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Lowest ever boiler coal consumption of 38.97 kg/tss. Higher LD Gas Recovery of 66.80 Nm3/tcs. Higher combine boiler efficiency of 83.67%.

One most notable move for energy conservation is NatSteel, across its operations in Australia, China, Vietnam, Thailand and Singapore has also undertaken several initiatives toward environment care. Harvesting rainwater on a large scale, ensuring that 90% of the steel is recycled, instituting green buildings with energy saving solutions, various waste management programmes, purifying emissions through treatments these are among the various initiatives being taken on a continuous basis by the NatSteels various operations across the globe.

7. High Capacity expansion from the competition

All the major domestic competitors like SAIL, ESSAR, JSW, JSPL have announced massive expansion plans recently: SAIL has announced that it will achieve production capacity of 40 Million Tons by 2020. JSW plans to expand its production to 32 Million Tons by 2020 Other players such as JSPL, ESSAR have similar production expansion plans which will contribute in overall achievement of 200 Million Tons steel production by the year 2020.

Companies Initiative: Company has responded with its own domestic expansion plans along with its global production plans. They plan to reach production capacity of around 35 Million Tons by 2020.

Suggestion Company should try to see that so much of production doesnt create over supply of steel in the market as it will drive down the prices, rather it can aim at making Specialty Steels products like stainless steels, Tool Steels, Die Steels, Valve Steels etc.

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8. Cost of Integration of Corus:

Tata Steel became 6th biggest Steel Producer in the World after acquiring Corus, but the cost of the integration goes much more beyond the financial aspect. There are other factors such as which will add to overall integration costs such as: Cross Cultural Integration Employer-Employee Relationship General tendency of Human Beings to resist change in the environment around them

Company initiative Our aim for the future is to be ranked among the top preferred employers across all industries and we will continue to invest in both our people and Human Resources processes as we strive to achieve this goal. As part of this, we have adopted four pillars for our Performance Culture across Tata Steel and Corus : Aspirational Targets to stretch business potential and achieve value-added growth; Safety and Social Responsibility, providing a safe workplace that respects the environment and local community; Continuous Improvement, enhancing performance at all levels; and Openness and Transparency, creating an environment of trust which encourages debate and respects individual opinion.

9. GLOBAL POLITICAL SCENARIO:

Tata committed a huge amount of investment in politically unstable country like Bangladesh, Iran, Mozambique and Thailand. The entire process of setting up plans getting delayed in question of gas supply (in Bangladesh) , Iron or mine lease in Iran is escalating the project cost.

Suggestions: In future Company should pay attention in choosing the project site preferably in less troublesome areas. Resource reach Latin America could be good option so company should try to make acquisition especially in Brazil, Bolivia believe to have accessible deposit of titanium elements.

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10. SLOWING ECONOMY OF EUROPE

Due To Subprime Crisis in USA an subsequent tremor all along the world, specially in developed market in Western Europe make the vulnerable position of Corus even more riskier. UK, Germany, Netherland the main market for Corus products are facing the fear for recession on negative growth.

Company Initiatives : As historic available data shows that Corus is a high cost producer of Steel and its margin been dragged by long term contract with various automotive and aeronautical industries. Though company is trying hard to allure buyers by selling their quality products but with little hope for dramatical improvement in future.

Suggestions : To shift the gravity of market from developed to developing world (like in case of aeronautical industry next hub for aircraft manufacturing would be Brazil and China). In that market the specialty steel is a premium commodity. Corus should give emphasis to penetrate in that high potential market.

11.TATA Ethically Wrong?

Tata, the world over is respected for its ethical practices, CSR (not just for the name sake) but in true sense. It is very difficult to find any issues in TATAs hundred year old history regarding unethical practices or behavior. One of the many examples of TATA being socially responsible is the deployment of Companys mobile medical unit (Hospital on Wheels) and treating more than 145600 habitats in urban slums and remote rural areas. But of late the Company is suffering from Land Acquisition problem in Singur, West Bengal. Although its not a problem directly related to TATA STEEL but the dilution in brand TATA has a significant effect on the share prices of Tata Steel. Company Initiatives: Tata group is trying its best to give the farmers of Singur, the best deal which suites both the parties and it has tried to strike a balance between financial losses and people sentiments.
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Suggestions: In future before venturing into any state proper due-diligence should be conducted to avoid such controversies which affects TATAs image in any manner. It should consider the leader of the opposition along with the party in power of the concerned state.

12. High interest cost

Corus acquisition is being financed by a substantial amount of debt. This puts pressure on the Companys bottom line, and should the business environment deteriorate, the necessity to service this debt could restrain Tata Steel in its future investment and capacity expansion plans. In addition it could also limit the Companys inorganic growth options. Company initiative The Company actively monitors Foreign Exchange and Interest Rate exposure. Based on an informed view and assessment of these risks, it has developed a Risk Management Policy. The Risk Management policy of the Company operates to achieve greater predictability of earnings and provides a stable planning environment. Coruss main financial risks are related to the availability of funds to meet its business needs and movements in interest and currency exchange rates as well as commodity costs. The Company hedged the foreign currency risk (in Japanese Yen and US Dollar) on repayment of the major part of the USD 1.65 billion of external commercial borrowings drawn in FY 2006-07. The Company also drew down USD 875 million through a convertible bond issue (CARS), which may be converted to the underlying securities in FY 2011-12 and FY 2012-13. The repayment of this liability is uncertain and accordingly the foreign currency exposure remains unhedged. The Company also actively and selectively hedged its export receivables and import payables during the last financial year.

13. Exchange Rate Fluctuations

Corus derives the significant amount of its revenue from Europe (including the UK) with 81% of the groups total turnover coming from Europe in 2006. Steel prices in Europe, including the UK, are set in Euros, where as the bulk of Coruss costs in the UK are not

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influenced by the GBP-EUR exchange rate. Thus fluctuations in the GBP-EUR exchange rate impact Corus UK earnings considerably. Corus derives most of its revenue in the EU, but has substantial assets and sales in the UK, which is not a member of the euro-zone. Major raw material supplies purchases are, however, denominated mainly in US dollars. As a result, Corus is impacted by the relationship between the Sterling, the Euro and the US dollar. Corus operates a hedging policy to minimise the volatility of rapid and significant movements in these exchange rates.

14. Post Acquisition Integration Risk

Post Acquisition, Tata Steel recognises that there could be considerable risk emanating from a possible lack of adequate alignment of management on strategic issues and in common functional areas. Company Initiatives The Tata Steel Group has therefore taken some substantive measures to mitigate the above risks: a) An Operating Model has been instituted to govern management collaboration and decision making in areas such as Finance, Strategy, IT, HR, Continuous Improvement. A Joint Executive Committee, comprising executive leadership of both entities, provides high level direction and guidance. b) To ensure that synergies in operations are identified and implemented for pre-defi ned bottom line impact, the following enabling mechanisms have been set up soon after the acquisition transaction was completed: Focused integration teams Setting up of a Strategy and Integration Committee Setting up an Integration Programme Office to facilitate synergy identification and enable smooth working of integration teams An external independent party has been engaged to audit implementation plans and to track synergy realisation. Review of synergy implementation and realisation The above approaches are expected to mitigate risks associated with realisation of synergies

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15. Technology Risks:

Tata Steel with its modernisation plans has ensured that it deploys the best technologies to ensure quality, cost-efficiency and environment friendly processes. Through acquisition of Corus and with new Greenfield ventures, Tata Steel has ensured that it has diversified the concentration risk in single technology of Iron & Steel making. Moreover the Research & Development team of Corus addresses the need for greater R&D capability of the company.

16.Regulatory & Compliance Risks:

The Government plays a key role in the economics of a Steel industry. It has a role as a resource allocator (the mining policies of the Government), as Competitor (the public sector steel companies) and as Regulator. In volatile times the regulatory risk rises with measures like reduction in import duties, levy of export duties and withdrawal of DEPB benefits, threats of price curbs etc. Tata Steel counters this risk by being a role-model corporate citizen and playing an important role in contributing to the Nation building. Tata Steel is the second largest steel producer in terms of Geographical spread of its facilities. The Company recognises that this spread across various countries increases the compliance risk and hence the Company has set up a focused team headed by a Group Head for Corporate Assurance and Compliances to proactively deal with and mitigate all such potential concerns and issues.

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CONCLUSION
While doing our analysis of Tata Steels Annual report, it was found that due to its inception as a huge Brand all across the Globe, it has certain standards to maintain and along with it, it also has to keep ahead of its competitors and also provide premium class and quality product to its customers. For this it maintains certain Models of Excellence. Tata Steel has been on a path of accelerated growth with foray into several geographies. Associated with such growth is the resultant change in the risk profile. The Company today faces greater complexities/challenges and even greater expectations from its stakeholders. The Company, therefore, needs to evaluate how much risk the company is taking in light of its growth initiatives. In other terms, the residual risk in the expected return needs to be formally recognised and disclosed. In the past, the Companys Risk Management framework was based on the Tata Business Excellence Model (TBEM). This framework has served us very well as the Company modernised, pursued the goal of being one of the lowest cost producers of steel and adopted an approach of Value Based Management in order to maximise the shareholders value. Given the pace and complexity of the current growth with its associated risks, Tata Steel now is in the process of implementing a more structured approach in the form of Enterprise Risk Management (ERM). Thus, we would rate Tata Steel at medium risk.

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