“We think we started on sound and straightforward business principles,

considering the interests of the shareholders our own and the health and

welfare of the employees, the sure foundation of our success.”

- Jamsetji N Tata, Founder

Financial Statement Analysis
of

Anupam Kaushik (16)

Niket Khatri (17)

Subodh Mallya (18)

Jaimin Patwa (19)

Dhruvin Shah (20)

 Scope of Presentation

Reports
Corus Acquisition
Financial Statements
Balance Sheet
Profit & Loss Account
Cash Flow Statement

Ratios & Interpretation

 Corporate Governance
Freedom to Executives to run the Enterprises without undue restraints
Freedom of Management within a framework of effective accountability
Utilize resources in a manner that meets stakeholders’ aspirations and societal
expectations.

Corporate Governance Structure

Board of Directors
Sharpens the accountability of the Management
Protect/enhance Shareholder’s wealth
Set Strategic Goals.

Corporate Management Committee

Operates under strategic supervision of the Board
Towards achievement of goals

Strategic Business Units

Enhance quality, efficiency and effectiveness of the business
Realize objectives of the Organizations.
 Director’s Report and MDA

Milestones achieved during 2006-07:

Entered into its Centenary year. Incorporated on 17th August 1907.

Highest turnover and profits.

Acquired the Corus Group.

Global Economic Scene:

Global growth momentum.

Global economy growth in 2006-07 was 3.9% due to continuation of strong growth
in developing and emerging economies as well as recovery in the Euro area. Asia
prime mover of growth, with China and India dominating the world economic
scene. Indian economy growing @9.4%; Second highest only after China.
 Director’s Report
World Steel Scenario
Accelerated in the last 4-5 years.
World’s steel consumption increased by 50% from 775 MT in 2001 to 1113 MT in 2006.
Representing 7.5% CAGR, as compared to modest 1% CAGR in the previous 3 decades till
the year 2000.
World steel production kept pace with an increase of 8.9% during 2006 over the previous
year.

Domestic Steel Scenario:

Domestic steel production –up by 11.1%
Domestic Steel Consumption – up by 11.7%
Indian economy could sustain an annual growth of 8-9% in the long term. This could
translate into a 10% rise in
annual steel demand over the next 10 years.

Main drivers of growth:

Expected large investment in Infrastructure
Large-Scale construction activities.
Sustained rise in demand for auto and white goods from rising middle class in the country.
Robust steel demand globally enabled steel price to remain buoyant
But there is significant pressure on margins from increased raw material prices on non-
integrated steel players.
 Steel Outlook for next 5 years

Growth in Automobiles Growth in Capital Goods

Growth in Construction
Source : Adapted Reports from Tata Steel
 Director’s Report
Business Results:
• Best ever Sales turnover and profitability.
• Jamshedpur plant became 1st Plant in India to produce more than 5
million tonnes of crude steel in a year
• Robust Indian economy, firm steel prices, higher volumes and
several improvement initiatives contributed to record performance.
• Finished steel sales = 4.51 Million tonnes (11.33% up).
• Average price realization improved due to higher price of hot rolled
coils/ sheets.
• Higher operating profits of Rs 6973 Cr (up 17%)
• Upgraded ‘G’ Blast furnace produced over 2 million tonnes of hot
metal (its capacity is 1.8 million tonnes).
• Rs 152 Crores provided toward employees separation scheme (up
three fold from Rs 53 Crores)
 Director’s Report

Dividend Details
Recommended 130% dividend and Special dividend
of 25%.
Dividend payout work out to be 26.15% (against
23.4% last yr)
 Director’s Report

Financial Health of Tata Steel

No major borrowings undertaken
Entire funds for capital expenditure were met from internal generation.
Surplus Cash reserves –temporarily invested in money market mutual funds
to facilitate liquidity.
Propose to infuse USD 4.1 billion as equity to part finance the transaction.
Undertaken a long-term debt of USD 6.14 billion from a consortium of banks
through Tata Steels –UK (its subsidiary)

Review of Operations (Best ever production)

7.3% increase in Production of Hot metals (5.55 million tonnes)
6.7% increase in the production of Crude Steel
8.3% increase in the saleable steel (4.93 million tonnes)
5% increase in the production of Hot Strip mills (3.24 million tonnes)
Set up a modern beneficiation plant to reduce the alumina content in the
iron-ore.
Corus Deal - - Position in Steel Cycle

Singa
JAPA
pore
N
EU
US
A

CHIN
A

INDI
A

Source : Adapted Reports from Tata Steel

 Corus Deal - Financing
Details of Financing of Corus Deal
• The Net Funding Requirement of Corus is
100 %
Rs.56,150 crores (USD 12.90 billion)
• Tata Steel gave a loan to Tata Steel Asia
Holdings (TSAH) of Rs. 11,750 crores
100 %
• TSAH raised bridge loans of Rs. 10,900 crores
• Tulip UK Holding raised a mezzanine loan of
100 % Rs. 2,600 crores.
• Thus a total of Rs. 25,250 crores were infused
into Tata Steel UK Limited by way of Equity.
100 %
• Tata Steel UK Limited raised senior debts and
mezzanine loans of 30,900 crores. The total of
Rs. 56,150 crores was used to pay for the Corus
Acquisition
 Corus Deal – Impact

Key Points:
The estimates suggest that the combined entity would
continue to generate a growth rate in excess of 28%.
The ROCE & ROE would dip significantly on the merger, but
would then start increasing.
Most Importantly, the huge Interest and Principal Repayment
obligations would be met.

Source: ENAM Securities

 Profit & Loss Account
Consolidated Profit & Loss Account for year ended 31st March, 2007
 Profit & Loss Account
Consolidated Profit & Loss Account for year ended 31st March, 2007

Mar Mar %age

Year
07(12)  06(12)  Change
INCOME:

  Sales Turnover 23%

27,437.29 22,272.14
Excise Duty 14%
2,319.51 2,027.71
  Net Sales 24%
25,117.78 20,244.43
  Other Income 107%
723.42 348.98
  Stock Adjustments 1049%
540.22 47.00
  Total Income 26,381.4 28%
20,640.41
2
 Profit & Loss Account
Consolidated Profit & Loss Account for year ended 31st March, 2007

  EXPENDITURE:
Mar Mar %age
Year
07(12)  06(12)  Change
 Raw Materials 37%
9,171.39 6,705.76
  Power & Fuel Cost 41%
1,600.71 1,133.70
  Employee Cost 18%
2,030.03 1,719.77
  Other Manufacturing Expenses 27%
2,653.73 2,084.09
  Selling & Administration Expenses 18%
1,916.90 1,625.33
  Miscellaneous Expenses 44%
  Less: Pre-operative Expenses 1,404.19 978.51
86%
Capitalised 353.60 189.66
  Total Expenditure 31%
18,423.35 14,057.50
  Operating Profit 21%
7,958.07 6,582.91
  Interest 205%
634.07 207.56
  Gross Profit 15%
7,324.00 6,375.35
  Depreciation 18%
1,010.98 860.37
  Profit Before Tax 14%
6,313.02 5,514.98
Profit & Loss Account - Analysis

Debenture Interest
Increased even with
Decrease in Debentures
 Profit & Loss Account
Consolidated Profit & Loss Account for year ended 31st March, 2007
Mar %age
Year Mar 06(12) 
07(12)  Change
  Profit Before Tax 14%
6,313.02 5,514.98
  Tax 31%
2,162.93 1,648.96
  Deferred Tax -111%
-15.52 144.95
  Net Profit before Minority Interest 12%
4,165.61 3,721.07
  Minority Interest 262%
67.52 18.64
  Net Profit After Minority Interest 11%
4,098.09 3,702.43
  Extraordinary Items 7958%
-76.55 -0.95
Adjusted Net Profit 13%
4,174.64 3,703.38
  Adjst. below Net Profit -14%
11.66 13.55
  P&L Balance brought forward 72%
3,298.06 1,920.31
  Appropriations 12%
2,634.94 2,356.87
  P&L Balance carried down 47%
4,840.39 3,298.06
  Dividend 31%
942.87 718.64
  Equity Dividend(%) 19%
155.00 130.00
  EPS before Minority Interest (Unit Curr.) 5%
69.00 65.42
  EPSafterMinorityInterest(UnitCurr.) 4%
67.84 65.08
Profit & Loss Account - Analysis
Balance Sheet
 Balance Sheet
Consolidated Balance Sheet as on year ended 31st March, 2007

   Year Mar 07  Mar 06 

  SOURCES OF FUNDS :    
 Share Capital 580.00 553.00
  Reserves Total 13,895.14 9,728.84
  Total Shareholders Funds
14,475.14 10,281.84
   Minority Interest 598.39 123.57
 Secured Loans 4,961.23 2,503.39
  Unsecured Loans 19,964.30 874.04
  Total Debt
24,925.53 3,377.43
   Total Liabilities
39,999.06 13,782.84
 Balance Sheet
Consolidated Balance Sheet as on year ended 31st March, 2007
  APPLICATION OF FUNDS :    
 Gross Block 20,303.44 16,744.68
   Less: Accumulated Depreciation 9,189.62 7,199.99
  Net Block 11,113.82 9,544.69
   Lease Adjustment - -
 Capital Work in Progress 3,326.37 1,357.41
  Investments 16,497.50 3,478.90
  Current Assets, Loans & Advances    
 Inventories 3,888.13 2,773.31
  Sundry Debtors 1,686.53 1,218.72
 Cash and Bank 10,887.96 776.75
  Loans and Advances 1,981.50 1,139.28
  Total Current Assets 18,444.12 5,908.06
   Less : Current Liabilities and Provisions    
  Current Liabilities 5,608.71 3,292.51
 Provisions 3,197.87 2,477.54
   Total Current Liabilities 8,806.58 5,770.05
  Net Current Assets 9,637.54 138.01
  Miscellaneous Expenses not written off 209.77 256.01
  Deferred Tax Assets 989.19 779.31
   Deferred Tax Liability 1,775.13 1,771.49
  Net Deferred Tax -785.94 -992.18
   Total Assets 39,999.06 13,782.84
 Contingent Liabilities 2,477.64 2,383.09
 Balance Sheet - Analysis
CRISIL - Rating of Loans & Advances by Tata Steel Limited
 Cash Flow Statement

Objective of Cash Flow Analysis

The Cash Flow Analysis is aimed at Analyzing the Inflow and Outflow of Cash of the
company from its Operating, Investing & Financing Activities

We hope to clear the following aspects of the Cash Flow Statement of Tata Steel from
our Analysis:

How strong is the Cash Flow of the Company

Does the Cash Flow of the company have the ability to meet its short term and
long term objectives such as Interest Payments

Did the Company have enough funds to pay the Dividend through Internal
Sources or did it need external debt.

Does the company generate excess cash from operating activities.

 Cash Flow Statement - Analysis

Cash Flow Summary

Cash and Cash Equivalents at Beginning of
1,192.90
the year
Net Cash from Operating Activities 5,503.01

Net Cash Used in Investing Activities -16,288.23

Net Cash Used in Financing Activities 20,480.28

Net Inc/(Dec) in Cash and Cash Equivalent 9,695.06

Cash and Cash Equivalents at End of the
10,887.96
year
Cash Flow Statement
Cash Flow Statement …..cont’d
 Accounting Ratios

Financial Performance Measures By Area & User

 Accounting Ratios
Operational Analysis
• Gross Profit Margin
• Net Profit Margin

Resource Management
• Asset Turnover
• Inventory Turnover

Profitability & Disposition of Earnings

• Return on Assets
• Return on Equity
• EPS

Liquidity
• Current Ratio
Financial Leverage
• Debt to Equity
Accounting Ratios

Gross Profit Margin

Expressed as a Ratio between

Net Sales (Sales – Cost of
Sales) Turnover

Net Profit Margin

Expressed as a Ratio between

EBITDA (Net Sales –
Expenses)
Turnover

Analysis
Percentage of Selling &
Administrative Expenses have
remained constant at around
16-17%. Manufacturing Costs
are range bound between 40
– 43 % for past 3 years
Accounting Ratios

Earnings Per Share

Expressed as a Ratio between

Profit After Tax
Total Number of Shares
Outstanding
Price – Earnings Ratio

Expressed as a Ratio between

Market Price of Share
EPS

Analysis
The Earnings of the Company
has increased, yet the PE
Multiple has decreased. One
of the reasons is that the
Price of the Share has not
gone up as much as the profit
Accounting Ratios
SWOT Analysis
 SWOT Analysis – Tata Steel
Strengths
• 6th Largest Steel Manufacturer
in the World
• Combined Capacity of 28.2
Million Tonnes – 3 times current
capacity
• More than 100 years
experience in the Steel Industry
Opportunities
• UK Steel Market is available to
Tata Steel for selling its products
• Consistent Growth Rate could
take the TATA-CORUS combine to
4th place within the next 3-4
years
Weaknesses
Large debt of Rs.35,000 crores
after CORUS acquisition
Pressure on Margins due to
Increased Capacity
Short Term Operational Issues,
till CORUS Takeover synergies
start working.
Threats
Bringing Operational Synergies
within the Leverage Return Time
Consolidation in the Top 3
positions that might hurt margins
even further
Arcelor Mittal’s Presence in
Markets in the UK poses an
imminent threat
Thank You

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