E NTREPRENEURSHIP AND M ANAGEMENT OF S MALL M EDIUM E NTERPRISES

AND

Presented By:Aghila Alex-15

Yesha Gala-31 Anuj Kandoi-43 Bharat Kothari-51

P ROFILE OF RATAN TATA

Background
Born on December 28, 1937 to Soonoo & Naval Tata Brought up by grand mother Engineering degree from Cornell University and Management Programme from Harvard in 1974-75 Turned down job in IBM to join his own business.

Was given 2 sick units Nelco, Central India Textiles

In 1991, he took over as group Chairman from the legendary J.R.D. Tata, pushing out the old guard and ushering in youthful managers. Since then, he has been instrumental in reshaping the fortunes of the most respected conglomerate of India.

Tata undertook acquisitions to expand its horizons.

In 2000 he shelled out $435 million for Tetley Tea, making Tata the world's No. 2 tea company.

Two years later he paid $530 million for a 46% stake in VSNL, India's state-owned international telecom carrier. He bought Daewoo Motor Co.'s truck unit, Daewoo Commercial Vehicle Co., for $120 million.

 In July 2004, the company made another splash: the initial public offering of Tata Consultancy Services, raised $1.1 billion
Under him Tata Consultancy Services went public and Tata Motors was listed in the New York Stock Exchange His dream of manufacturing a car costing Rs 1 lakh came true. Ratan Tata retired from his executive post in 2003 after turning 65, as per the rules he set.

 Down-to-earth, witty and startlingly straightforward, Tata upholds the group's traditions and refuses to pay bribes to get a job done.

His commitment to ethics and values has permeated through the organization.
In India's corporate circles he is known for his credible business practices. The price of integrity has been high. Even his critics accept that Tata is a determined and persistent manager

It was his determination that gave him an upper hand in his fight with Russi Mody and his persistence that saw the successful creation of the Indica. Talk cars to Ratan Tata and his face lights up immediately. He has an undying passion for automobiles. "I like a car with a lot of power and torque Tata has personally led the company for almost 15 years and set up the Tata Business Excellence Model to trade best practices.

"We should become a younger organization, an organization of our time, more risk-taking, less risk averse."

Tata-Corus Merger

Outline
Tata Steel Swot Analysis Corus Swot Analysis Reasons behind the Deal

Financing of the Deal

Synergies and Integration Efforts Pitfall and Road Ahead Critical Analysis

Introduction
There are not many opportunities for producers in emerging low cost market to gain access to the market of Europe other than by acquiring a company like Corus - John Quigley ( Editor, Industry Publication Steel Week ) Tata acquired Corus which is 3 times larger than its size and largest Steel producer in UK. The deal which creates worlds 5th largest steel maker is Indias largest foreign takeover worth US $ 13.7 billion

TATA S TEEL B ACKGROUND

Part of the Tata group

Founded in 1907,by Jamshedji Nusserwanji Tata.

Started with a production capacity of 1,00,000 tones, has transformed into a global giant

Largest integrated steel producer in the private sector.

In February 2005, Tata steel acquired the Singapore based steel manufacturer NatSteel. Tata steel acquired the Thailand based Millennium Steel in December 2005.

SWOT A NALYSIS O F TATA S TEEL

-Low Cost production. -Easy access to raw material. - Quality of Steel was not of International standards. -Non availability of latest R&D facility

- Low Debt Equity Ratio.

SWOT

- To become a World leader in low cost and high quality steel products.

- To Compete with other big global players

R EASONS TO B ID

FOR

TATA S TEEL

To tap European Mature Market. Cost of acquisition is lower than setting up of Green field plant & marketing and distribution channel. TATA manufactures Low Value ,long and flat steel products ,while Corus produce High Value Stripped products.

Helped TATA to feature in Top 10 players in world. Technology Benefit. Economies of scale. Corus holds number of patents and R&D facilities.

C ORUS B ACKGROUND

Formed on 6th October 1999, through the merger of two companies, British Steel and Koninklijke Hoogovens, Company had four divisions: Strip product , Long product , Aluminium and Distribution and Building system. Major plants located in the UK, The Netherlands, Germany, France, Norway and Belgium Supplier to many of the most demanding markets worldwide including construction, automotive, packaging, engineering

SWOT A NALYSIS
Worlds ninth largest and Europes second largest steel producer. - Wide range of products of high technology.

- High operational Cost.

- Lack of Access to raw material

SWOT
- To merge with a company to eliminate duplication and remove overlaps in marketing, accounting etc. - To get access to raw material and growth markets through merger. - Increasing losses resulting to winding up of company

REASONS FOR CORUS FOR ACCEPTING BIDS

To extend its Global reach through TATA. To get access to Indian Ore reserves, as well as virgin market for steel. To get access to low cost materials. Saturated market of Europe. Decline in market share and profit.

A BOUT T HE D EAL

TATA Acquired CORUS on 2nd April 2007 .

The deal price was US $ 13.7 Billion.

On 17 Oct, 2006 TATAs bidded at 455 pence per share and price per share was 390 pence at that time.

TATA Steel, the winner of the auction for CORUS declares a bid of 608 Pence per share.
TATA Surpassed the final bid from Brazilian steel maker COMPANHIA SIDERURGICA NACIONAL (CSN) of 603 pence per share. The combined entity has become the worlds fifth largest steelmaker after the deal.

FINANCING THE DEAL

Total Tata Corus deal - US $13.7 billion

Equity component US $ 7.56 billion.

Debt Component - US $ 6.14 billion. Acquisition was completed through Tata Steels UK Special Purpose vehicle(SPV) named Tata Steel UK. This SPV raised US $ 6.14 billion through a mix of high yield mezzanine and long term debt funding. For immediate financing Tata Steel UK raised US $ 2.66 bn through bridge loans.

WHY CASH DEAL????

Immediate takeover was required. Share Swap deal would have been less attractive to the Corus shareholders. Share Swap would have meant FDI and that brings a lot of regulatory hassles which might not have been accepted by Corus shareholders. Share Swap would have diluted Tata Steels Equity base which was not in favour of Tata shareholders. Cost of equity at around 15% is higher than that of debt of around 8%, so paying in cash brings down the cost of acquisition.

Post Acquisition Strategies

Integration Efforts
Tata steel's Continuous Improvement Program Aspire with the core values :Trusteeship, Integrity, respect for individual, credibility and excellence. Corus's Continuous Improvement Program The Corus Way with the core values : code of ethics, integrity, creating value in steel, customer focus, selective growth and respect for our people.
As the core values of the two companies were same so Tata used Light Handed Integration Approach.

Top management of the company remained same.

Synergies from the deal

Tata was one of the lowest cost steel producers & Corus was fighting to keep its productions costs under control . Tata had a strong retail and distribution network in India and SE Asia.

Technology transfer and cross-fertilization of R&D capabilities .

There was a strong culture fit between the two organizations both of which highly emphasized on continuous improvement and Ethics. Economies of Scale. Increase in profitability. Backward integration for Corus and Forward integration for Tata Steel.

Pitfalls of the deal

High value paid. Approximately 7.7 times its Enterprise Value. Corus EBITDA was at 8% which was much lower as compared to Tata Steels 30%. Tatas debt equity ratio was adversely affected to 2.74:1 from 1.1 which it was maintaining earlier. Fast consumption of Tata Steels captive iron ore reserves as production capacity increased from 5.3 million ( estimated for 50 years at this capacity) to 27 million tons of steel per annum.

The Road Ahead

Integration has to be fast and efficient.
Increasing reach to joint entity to 4 continents and 45 countries including high value market of Europe. Increasing the EBITDA to 25% for joint entity by executing Tata steels brownfield and greenfield projects well in time. Increasing the capacity of the company beyond 50 million tons by 2015 so as to become one of 3 top steel producers in the world.

Critical Analysis
Strengths : Easy Access to quality raw material. New technology for producing high value products. Reach in 4 continents and 45 countries. Economies of Scale and production. Weakness : Cost of production per unit bound to increase. High Debt equity ratio. High dependability on the growth of market. A lot of stress on the cash flows of combined entity.

Opportunities : To become global player in steel industry. Takeover more companies successfully. Increase in production capacity beyond 56 mn tons by 2015

Threats : Cultural Diversifications are not easy to integrate. Markets should continue to grow. Rising cost of raw material. Rising terrorism and political unrest among nations.

A final word on this deal

If TATA steel were to create, from scratch, 19 million tonnes of steel making capacity comparable in quality to what Corus possesses, It would end up investing 70% to 85% more than it is paying now. Besides, setting up a new factory, a 3 to 5 years project if everything goes well, has great execution risk. With Corus in its fold, Tata steel can confidently target becoming one of the top 3 steel makers globally by 2015 .

The company would have an aggregate capacity beyond 50 million tones per annum, if all the planned Greenfield capacities go on stream by then.

 I believe this will be the first step in showing that Indian industry can step outside the shores of India in an international market place and acquit itself as a global player

- Ratan Tata