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Submitted to:
Shantanu Gokhle Sir

VISION

Managing a global workforce and setting global

benchmarks is primarily about managing
diversity. The ability to maximise business
opportunities and meet challenges so that value
can be created for stakeholders is something
that can be achieved through a process of
inclusive growth, one in which every person contributes to the blueprint for the
future and is truly committed to the stated objectives. And one of the key
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requisites for successful diversity management is a shared vision.

The Vision 2012 for the Tata Steel Group was co-created by its people across its
various locations – from Jamshedpur in India, to the United Kingdom, to South
East Asia, to the Netherlands. Driven as much by its commitment to society as by
its performance and profits, the Tata Steel Vision aspires to make the Group the
global industry benchmark for both Value Creation and Corporate Citizenship.

The key drivers of the Group Vision will manifest themselves in the goals and
objectives the Group sets for itself in the coming years.

This shared Vision is a call to action for Tata Steel’s people, to work together to a
future that holds a promise of tremendous growth for all its constituents and the
world at large.

GOAL 2012
Consolidated Financial Highlights 2007-08*
Net Turnover Operating Profit Profit
After Tax
(Rs. in crores) (Rs. in crores) (Rs. in
crores)

150000 15000 15000

13,856
132,110 12,350

120000 12000 12000

90000 9000 9000

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 60000 6000 6,439 6000

4,177
30000 25,650 3000 3000

0 0 0
2006-07 2007-08 2006-07 2007-08 2006-07 2007-08

Net Turnover= Sales - Excise Duty Operating Profit after Depreciation

+ Other Income

*2006-07 figures exclude Corus

Geographical Distribution of Revenue

UK
EU excluding UK
37%
32%

Rest of World 5%

India Asia excluding India

15% 12%

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BUSINESS REVIEW
Established in 1907, Tata Steel completed 100 years in the financial year
2007-08. On 2nd April, 2007, the Company completed the acquisition of
Corus Group plc, Steel Company headquartered at UK for an Enterprise
Value of USD 14.7 billion. Post the acquisition of Corus, Tata Steel Group
is now the world’s 6th largest steel company with current steel deliveries
of 32 million tonnes. Set up as Asia’s first integrated steel plant and
India’s largest integrated private sector steel company, a century ago, it
is now the world’s second most geographically diversified steel producer,
with operations in 24 countries and commercial presence in over 50
countries. The Jamshedpur operations in India is increasing its capacity
from 5 mtpa to 10 mtpa by end 2010 and the Company has also signed
MoUs to set up four greenfield steel projects in the states of Jharkhand,
Orissa and Chhattisgarh in India and one in Vietnam.

Few years back, Tata Steel embarked on a journey to pursue Growth and
Globalisation through organic and inorganic strategy to increase its
capacity in excess of 50 mtpa by 2015. bonds and equities has been
dampened by reduced The Company identified several strategic levers
including confidence in both the liquidity of and the returns on building a
stronger base in India, acquisitions in both growing such assets,
weakening of US growth prospects and and developed markets,
strategic investments in raw material interest rate cuts. The main
counterpart to the decline of assets and focus on branding.

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 AWARDS AND RECOGNISATIONS
Finance function @ TATA Steel
The primary responsibility of a world class finance function is to achieve a
meaningful balance of its trusteeship role in the oversight and implementation of
effective controls as also to act as a steward of the company’s capital towards
efficient asset allocation for the long term growth of the organisation. As the
centres of economic activity become more distributed around the globe for an
emerging market multinational like the Tata Steel Group, the organization re-
orients its priorities taking into account the diversity across borders, cultures,
regulatory environments and time zones. To meet these challenges, the finance
function in the Tata Steel Group focuses on a value centered strategy to align its
capabilities and resources most effectively with the needs of the business. This
alignment is critical to enable the Company to pursue the path set by the Tata
Steel Group Vision 2012 which aims to deliver significantly higher Return on
Invested Capital (ROIC) to its shareholders over the next 5 years. The
incremental ROIC would be generated from better margins from the existing
assets through the performance improvement Programmes that are currently
underway, sweating of the existing capital employed in the business and efficient
asset deployment in the new growth projects across the Group.

The year 2007-08 has been a historic year for Tata Steel in many ways. It was
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the centenary year of the company which marks a very important milestone in
the company’s history and we are very proud to be part of this great institution.
The year also marked the completion of the Corus acquisition process on April 2,
2007 which till date is the largest transaction by an Indian company.

During the year, the Company completed the long term financing Programme for
the Corus acquisition. Of the total Enterprise Value of USD 14.2 billion, at the
close of the Corus acquisition process on April 2, 2007, the financing included
around USD 10.5 billion as bridge funding, the balance being applied out of Tata
Steel’s own cash and borrowings. Despite very volatile credit markets globally,
the company raised around USD 6.2 billion of term debt with an average life of
around 5 years at very competitive terms. This debt being non - recourse in
nature was determined based on the cash flow servicing capability of our
European operations and will be serviced by the Tata Steel UK (Corus) cash
flows. The syndication of the above debt was completed during the year with
more than 25 banks and institutions participating in the process. On the equity
side, Tata Steel raised around USD 2.27 billion (Rs. 9,120 Crores) of equity and

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convertible preference shares on a rights basis. The Company further raised
around USD 875 million in Convertible Alternate Reference Securities (CARS)
which is a 5 years convertible instrument with a coupon of 1% and a conversion
premium of 35% to the prevailing market price in August 2007. As a result of the
above, this Company raised around USD 10 billion during the year and
completed the long term financing for the Corus acquisition.

As recognition of the above, this Company won several international awards

during the year for the Corus acquisition financing including the International
Financing Review (IFR) Awards for the Asia Pacific Loan of the year and the Asia
Pacific Leverage Loan of the year, Finance Asia award for the Best Deal of the
year, AAA Asset Magazine’s award for the Best Corporate Issuer effective
Performance amongst others.

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For the finance function of the Tata Steel Group, effective Performance
Management and Capital Stewardship are efficient Capital Stewardship are the
key enablers towards building a sustainable value centric the key enablers
towards culture. Several initiatives are currently on towards enhancing the
technology effectiveness of building a sustainable the function of which the SAP
implementation in Corus UK and South East Asia and the Hyperion value centric
culture. Financial systems across the Group are prominent. These projects will
improve the performance management process of the Company very
significantly in the future.

CALCULATION ON LIQUIDITY AND TURNOVER

RATIO
Whole calculations are in crores*
1. CURRENT RATIO = (current assets-advance against equity)/current
liability.
= (36962.44-(30326.12+570.04))/6768.78
= .896
= .90

2. LIQUIDITY RATIO = (6066.28-(2047.31+557.67))/6768.78

= 3434.3/6768.78
= .507

3. NET DEBT TO EQUTY= Net debt/Equity

Where,
Debt = secured loan unsecured loan-cash and bank balance-current investment
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Equity = shareholder’s fund-miscellaneous expenses

Debt= 3520.58+14501.11
(18021.69-465.04)
=16519.85

Equity= 27300.73-155.11= 27145.62

Net debt/Equity= 16519.85/27145.62= .608=.61

4. CAPITAL TURNOVER RATIO= earnings before interest and tax/average

capital
Employed.

= 6845.23/29318.58
=.23

5. WORKING CAPITAL TURNOVER RATIO= net sales/working capital

Where,
Working capital= current assets-current liabilities
= 36962.44-6768.78
= 30193.66

Net sales= 19693

WCTR= 19693/30193.66

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 =.652

6. AVERAGE DEBTOR TO TURNOVER= Average debtors/Gross sales

= 543-48/19693.28
=.0275
= 2.75%

7. AVERAGE INVENTORY TURNOVER RATIO = Average inventory/Gross

sales

=average inventory/543.48

8. ASSET TURNOVER RATIO=

(Net sales +other income-investment income)/(Net
Fixed assets+ current assets+ advance against

Equity +loans and advances)

=132110.09/(41963.12+36962.44+30326.12
+15485.46
= 132110.09/124737.14

= 105.9%
= 106%

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 CALCULATION ON GROSS & NET OPERATING
CYCLE

9.GROSS OPERATING PERIOD=

Raw material storage period + Work in progress + Conversion period

finished goods storage + Period debtor’s collection period

10.RMSP= AVG RM VALUE/DAILY CONSUMPTION

AVG STOCK= (720.52+901.56)2

= 811.04
TOTAL RAW MATERIAL CONSUMED= 3429.52/360
= 9.52
RMSP= 811.04/9.52
= 85.19 DAYS
11.WIPCP = AVG WIP/ DAILY WIP CONSUMPTION

AVG WIP= (28.94+71.48)/2 = 50.21

ANNUAL WIP CONSUMPTION= 28.94+3429.52+6217.73-71.48

= 9604.71

WIPCP= 50.21/9604.71
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 = 5.23

12.FGSP=Average finished good/Daily sales of FG

AVERAGE FINISHED GOOD= (1078.08+ 1074,27)/2

=1076.17

ANNUAL COST OF SALE= OPENING STOCK OF F.G+COST OF

PRODUCTAION+ SELLING
ADMINISTRATION AND FINANTIAL+CUSTOM
AND EXCISE DUTIES-CLOSING STOCK OF F.G.
=1078.08+13183.05-1074.27
= 13186.86
SO, Daily cost of Sales= 13186.86 /360= 36.63

FGSP= 1076.17/36.63= 29.37

DEBTORS CONVERSION PERIOD=( 631.63+543.48)/2

=587.55(AVG BOOK DEBT)

ANNUAL SALES= 131535.88

DAILY= 131535.88/360 = 365.37

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 587.55/365.37= 1.60 DAYS

GROSS PERIOD= RMSP+WIPCP+FGSP+DCP

= 85.19 DAYS+5.23+29.37+1.60

= 121.39 DAYS

INDUSTRY ANALYSIS

Barriers to entry: We believe that the barriers to entry are medium. Following are the factors that vindicate our
view.

1. Capital Requirement: Steel industry is a capital intensive business. It is estimated that to set up 1 mtpa
capacity of integrated steel plant, it requires between Rs 25 bn to Rs 30 bn depending upon the location of
the plant and technology used.

2. Economies of scale: As far as the sector forces go, scale of operation does matter. Benefits of
economies of scale are derived in the form of lower costs, R& D expenses and better bargaining power

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 while sourcing raw materials. It may be noted that those steel companies, which are integrated, have their
own mines for key raw materials such as iron ore and coal and this protects them for the potential threat
for new entrants to a significant extent.

3. Government Policy: The government has a favorable policy for steel manufacturers. However, there are
certain discrepancies involved in allocation of iron ore mines and land acquisitions. Furthermore, the
regulatory clearances and other issues are some of the major problems for the new entrants.

4. Product differentiation: Steel has very low barriers in terms of product differentiation as it doesn’t fall into
the luxury or specialty goods and thus does not have any substantial price difference. However, certain
companies like Tata Steel still enjoy a premium for their products because of its quality and its brand value
created more than 100 years back. Bargaining power of buyers: Unlike the FMCG or retail sectors, the
buyers have a low bargaining power. However, the government may curb or put a ceiling on prices if it
feels the need to do so. The steel companies either sell the steel directly to the user industries or through
their own distribution networks. Some companies also do exports.

Bargaining power of suppliers: The bargaining power of suppliers is low for the fully integrated steel plants as
they have their own mines of key raw material like iron ore coal for example Tata Steel. However, those who are
non-integrated or semi integrated has to depend on suppliers. An example could be SAIL, which imports coking
coal.

Competition: It is medium in the domestic steel industry as demand still exceeds the supply. India is a net
importer of steel. However, a threat from dumping of cheaper products does exist.

Threat of substitutes: It is medium to low. Although usage of aluminum has been rising continuously in the
automobile and consumer durables sectors, it still does not pose any significant threat to steel as the latter cannot
be replaced completely and the cost differential is also very high.

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