final tata report

8/7/2019 final tata report

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ANALYSIS OF

FINANCIAL REPORT

SUBMITTED TO: SUBMITTED BY:

PROFESSOR SHILP SHAH

MAYANK UPADHAYA SHOUNIK VIG

SANKET PATEL

HITESH KESHKANI

GAURAV BAGARIA


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ACKNOWLEDGEMENT

Though in the completion of the project report many people have helped usbut there are few names which are to be mentioned in person.

Therefore,

We would thank our parents, who have been our role models and the prime

inspiration behind our zeal to work hard.

Then we would like to thank our professors, our guides and our well

wishers, people who taught us and the best way to learn the latest, new an d

best: Mr. Mayank Upadhyaya, professor finance.

We would also like to mention our college which provided us with the base,the platform upon which we stand and hence could develop this project:

Entrepreneurship Development Institute of India (EDI)

In the end we thank GOD almightywho did give us strength, knowledgeand showed us the right path.

We would also like to apologize if anyone would have been hurt in the due

course of the project report.


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Table of contents

Background of the steel sector01-02

Analysis of the sector.03-04

Brief introduction of Tata steels.05-06

Balance sheet.07

Profit and loss account08

Ratio analysis..09-27

Conclusion28-29

Bibliography30


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1

BACKGROUND OF THE STEEL SECTOR

The Indian iron and steel industry is nearly a century old, with Tata Iron & Steel

Co (Tata Steel) as the first integrated steel plant to be set up in 1907. It was thefirst core sector to be completely freed from the licensing regime (in 1990-91)and the pricing and distribution controls. The steel industry is expandingworldwide. For a number of years it has been benefiting from the exceptionally buoyant Asian economies (mainly India and China). The economicmodernization processes in these countries are driving the sharp rise in demandfor steel.

The New Industrial policy adopted by the Government of India has opened upthe iron and steel sector for private investment by removing it from the list of

industries reserved for public sector and exempting it from compulsorylicensing. Imports of foreign technology as well as foreign direct investment arefreely permitted up to certain limits under an automatic route.

This, along with the other initiatives taken by the Government has given adefinite impetus for entry, participation and growth of the private sector in thesteel industry. While the existing units are being modernized/expanded, a largenumber of new/Greenfield steel plants have also come up in different parts ofthe country based on modern, cost effective, state of-the-art technologies.Soaring demand by sectors like infrastructure, real estate and automobiles, at

home and abroad, has put India's steel industry on the world map.

Dominating the Indian horizon is steel giant Tata Steel, whose takeover of theUK-Dutch steel company Corus is the country's biggest buyout. Meanwhile, theLN Mittal-owned Mittal Steel acquired French steel company Arcelor to createthe world's number one steel company, Arcelor Mittal and Korean steel giantPOSCO is pumping money into mines and steel plants in Orissa to emerge asone of the biggest steel plants in the state.

CONSUMPTIONAlready, India's consumption of stainless steel is much higher at 14 per cent,compared to the global consumption of six per cent in the last 15 years.Domestic consumption of finished (carbon) steel is on the rise, driven by aboom in the automobile sector and a nation-wide thrust on infrastructure andreal estate.Source: International Iron and Steel Institute


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During April and October2005-06, domestic consumption of steel stood at21.25 MT as compared to 19.53 MT in the corresponding period of the previousyear.Corporate Catalyst India A report on Indian Iron and Steel Industry

INDUSTRY STRUCTUREIndian Iron and steel Industry can be divided into two main sectors Publicsector and Private sector. Further on the basis of routes of production, theIndian steel industry can be divided into two types of producers.


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ANALYSIS OF THESECTOR

India is a reputed name in the world steel industry; the countrys steel industry

is catching up the pace and luring the steel majors from all over the world. The

industry has gained strength from the strong Indian economy, and strong sectors

like infrastructure, construction and automobile. Although India consumes less

steel as compared to other Asian countries, it was ranked the fifth major crude

steel producer in the world in 2008. Thus, the country offers vast scope for the

steel industry in future.

SWOT ANALYSIS:

STRENGTHS Strongly globalised industry and emerging global competitiveness

Modern new plants & modernized old plants

Strong DRI production base

Regionally dispersed merchant rolling mills

Abundant resources of iron ore

Low cost and efficient labor force

Strong managerial capability

WEAKNESSES Labor laws

infrastructure

higher rates of duties and taxes

Quality of coking coal

High cost of energy Dependence on imports for steel manufacturing equipments & technology

Slow statutory clearances for development of mines


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OPPORTUNITIES Huge Infrastructure demand

Rapid urbanization

Increasing demand for consumer durables

Untapped rural demand Increasing interest of foreign steel producers in India

THREATS Slow growth in infrastructure development

Market fluctuations and Chinas export possibilities

Global economic slowdown.


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5

BRIEFINTRODUCTION

ABOUT

T

AT

ASTEE

LS

VISION

We

aspire

to be

the

global stee

l industry be

nchmarkfor Value Creation and Corporate Citizenship

Tata steel one of the most reputed names in steel making since a century andmore in India as well over the world has an annual production capacity toproduce around 30 million metric tonnes per annum and expected to be 50metric tonnes in few years. It was established in 1907. It is the Asias firstintegrated steel plant and one of the most geographically spread company and is

listed in fortune 500 companies.

Tata Steel has a balanced global presence in over 50 developed European andfast growing Asian markets, with manufacturing units in 26 countries.

It was the vision of the founder; Jamsetji Nusserwanji Tata., that on 27thFebruary, 1908, the first stake was driven into the soil of Sakchi. His visionhelped Tata Steel overcome several periods of adversity and strive to improveagainst all odds.

Tata Steel`s Jamshedpur (India) Works has a crude steel production capacity of10 MTPA. The Company also has proposed three Greenfield steel projects inthe states of Jharkhand, Orissa and Chhattisgarh in India with additionalcapacity of23 MTPA and a Greenfield project in Vietnam.

Through investments in Corus, Millennium Steel (renamed Tata Steel Thailand)and NatSteel Holdings, Singapore, Tata Steel has created a manufacturing andmarketing network in Europe, South East Asia and the pacific -rim countries.


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Corus, which manufactured over20 MTPA of steel in 2008, has operations inthe UK, the Netherlands, Germany, France, Norway and Belgium.

Tata Steel Thailand is the largest producer of long steel products in Thailand,with a manufacturing capacity of 1.7 MTPA. Tata Steel has proposed a 0.5

MTPA mini blast furnace project in Thailand. NatSteel Holdings producesabout 2 MTPA of steel products across its regional operations in sevencountries.

Tata Steel, through its joint venture with Tata BlueScope Steel Limited, has alsoentered the steel building and construction applications market

The iron ore mines and collieries in India give the Company a distinctadvantage in raw material sourcing. Tata Steel is also striving towards rawmaterials security through joint ventures in Thailand, Australia, Mozambique,Ivory Coast (West Africa) and Oman. Tata Steel has signed an agreement withSteel Authority of India Limited to establish a 50:50 joint venture company forcoal mining in India. Also, Tata Steel has bought 19.9% s take in NewMillennium Capital Corporation, Canada for iron ore mining.

Exploration of opportunities in titanium dioxide business in Tamil Nadu, ferro -chrome plant in South Africa and setting up of a deep-sea port in coastal Orissaare integral to the Growth and Globalisation objective of Tata Steel.

Tata Steels vision is to be the global steel industry benchmark for Value

Creation and Corporate Citizenship.


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7

Balance Sheet

March,

2010 March, 2009 March, 2008 March, 2007 March, 2006

FUNDS EMPLOYED

SHARE CAPITAL 887.41 6203.45 6,203.30 580.67 553.67

SHARE WARRANTS 147.06

RESERVES AND SURPLUS 36074.38 23972.81 21,097.43 13368.42 9201.63

TOTAL SHAREHOLDERS' FUNDS 36961.80 30176.26 27,300.73 14096.15 9755.3

LOANS

Secured 2259.32 3913.05 3,520.58 3758.92 2191.74

Unsecured 22979.88 23033.13 14,501.11 5886.41 324.41

Total Loans 25239.20 26946.18 18,021.69 9645.33 2516.15

DEFERRED TAX LIABILITY 867.67 585.73 681.8 748.94 957

PROVISION FOR EMPLOYEE SEPARATION 957.16 1033.6 1,071.30 1107.08 1388.71

COMPENSATION

TOTAL FUNDS EMPLOYED 64232.78 58741.77 47,075.52 25597.5 14617.16

APPLICATION OF FUNDS :

FIXED ASSETS

Gross Block 26149.66 23544.69 20,847.04 18526.93 16564.9

Less Impairment 106.07 100.47 100.47 100.41 94.19

Less Depreciation 10037.56 8962 8,123.01 7385.96 6605.66

Net Block 16006.03 14482.22 12,623.56 11040.56 9865.05

INVESTMENTS 44979.67 42371.78 4,103.19 6106.18 4069.96

CURRENT ASSETS

Stores and spare parts 623.76 612.19 557.67 505.44 442.66

Stock-in-trade 2453.99 2868.28 2,047.31 1827.54 1732.09

Sundry debtors 434.83 635.98 543.48 631.63 539.4

Interest accrued on investments 0.29 0.2 0.2 0.2

Cash and Bank balances 3234.14 1590.6 465.04 7681.35 288.39

6747.01 5707.05 3,613.70 10646.16 3002.74

LOANS AND ADVANCES 5499.68 4578.04 33,348.74 3055.73 1234.86

12246.69 10285.09 36,962.44 13701.89 4237.6Less:CURRENT LIABILITIES AND

PROVISIONS

Current Liabilities 6653.09 6039.86 3,855.26 3523.2 2835.99

Provisions 2346.52 2934.19 2,913.52 1930.46 972.73

8999.61 8974.05 6,768.78 5453.66 3808.72

NET CURRENT ASSETS 3247.08 1311.04 30,193.66 8248.23 428.88

MISCELLANEOUS EXPENDITURE

Employee Separation Compensation - 105.07 155.11 202.53 253.27

TOTAL ASSETS 64232.78 58741.77 47,075.52 25597.5 14617.16


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Profit and LossAccount

March, 2010 March, 2009 March, 2008 March, 2007 March, 2006

INCOME :

SALE OF PRODUCTS ANDSERVICES 26757.80 26843.73 22,191.80 19762.57 17144.22

Less Excise Duty 1735.82 2527.96 2,498.52 2210.55 2004.83

25875.77 24315.77 19,693.28 17552.02 15139.39

OTHER INCOME 853.79 308.27 335 433.67 254.76

25875.77 24624.04 20,028.28 17985.69 15394.15

EXPENDITURE :

MANUFACTURING AND OTHER EXPENSES 16396.00 15525.99 11,645.24 10814.77 9320.5

DEPRECIATION 1083.18 973.4 834.61 819.29 775.1

17479.18 16499.39 12,479.85 11634.06 10095.6

Less EXPENDITURE 326.11 343.65 175.5 236.02 112.62

17153.07 16155.74 12,304.35 11398.04 9982.98

INTEREST 1508.40 1152.69 878.7 173.9 118.44

TOTAL EXPENDITURE 18661.47 17308 13,183.05 11571.94 10101.42PROFIT BEFORE TAXES & EXCEPTIONALITEMS 7214.30 7315.61 6,845.23 6413.75 5292.73

EMPLOYEE SEPARATION COMPENSATION - -226.18 -152.1 -52.77

-150

EXCHANGE GAIN/(LOSS)-

597.31

PROFIT BEFORE TAXES 7214.30 7315.61 7,066.36 6261.65 5239.96

TAXES

CURRENT TAX 1998.00 2173 2,252.00 2076.01 1579

DEFERRED TAX 169.50 -75.13 108.33 -52.51 127.58

FRINGE BENEFITS TAX - 16 19 16 27

2167.50 2113.87 2,379.33 2039.5 1733.58

PROFIT AFTER TAXES 5046.80 5201.74 4,687.03 4222.15 3506.38BALANCE BROUGHT FORWARD FROM

LAST y 9508.98 6387.46 4,593.98 2976.16 1790.21AMOUNT AVAILABLE FOR

APPROPRIATIONS 14555.78 11589.2 9,281.01 7198.31 5296.59

APPROPRIATIONS :

PROPOSED DIVIDENDS 709.77 1168.95 1,168.93 943.91 719.51

DIVIDEND ON CUMULATIVE CONVERTIBLE45.88

109.45 22.19PREFERENCE SHARES

TAX ON DIVIDENDS 122.80 214.1 202.43 160.42 100.92

GENERAL RESERVE400

504.68 600 1,500.00 1500 1500

1783.13 2090.5 2,893.55 2604.33 2320.43

BALANCE CARRIED TO BALANCE

SHEET 12772.65 9496.7 6,387.46 4593.98 2976.16

Basic Earnings per Share Rs. 60.26 69.45 67.17 73.76 63.35


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9

RATIOS ANDTHEIR

INTERPRETATIONS

There are different types of ratios that constitute ratio analysis. Theycan be classified as Liquidity Ratios, Activity ratios, Profitabilityratios and Solvency ratios. Lets we discuss about various types ofratios used in ratio analysis.

The basic kinds of Classifications under which various ratios canbe placed are as follows:

A. Liquidity RatiosB. Leverage Ratios

C. Profitability RatiosD. Turnover RatiosE. Valuation Ratios


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LIQUIDITY RATIOS:

Liquidity Ratio is the ability of a firm to satisfy its currentor short term obligations as they become due. The ratios

which indicate the liquidity of a firm are:

y Net working capital,

y Current ratios,y Acid test\quick ratios,y Super quick ratios,

y Defensive interval ratios,y Cash flow from operations ratio etc.

The above has a special relationship with Liquidity & hencethere establishes again a direct relationship between Liquidity

& investments in Current Assets, as higher the Current Assetshigher would be an Organizations liquidity, since it resemblesthat there are enough of working capital to meet day to dayobligations.


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CURRENT RATIO:

MEANINGThe Current Ratio is a measure of liquidity calculated dividing the current assets by the current ratio. Current ratio represents the liquidity position of the

company. Higher the ratio, higher the ability of the company to meets its shortterm obligations keeping the ratio higher means the company has tocompromise towards its profitability.

Working NoteTotal Current Assets

Current Ratio = ____________________Total Current Liabilities

Working Note-1Current Ratio

Types of Ratio March,2010

March,

2009

March,

2008

March,

2007

March,

2006

CURRENT ASSETS


Stock-in-trade 2453.99 2868.28 2,047.31

1827.54 1732.09

Sundry debtors 434.83 635.98 543.48 631.63 539.4Interest accrued on investments 0.29 0.2 0.2 0.2


6747.01 5707.05 3,613.70 10646.16

3002.74

LOANSANDADVANCES 5499.68 4578.04 33,348.74

3055.73 1234.86

12246.6

910285.0

936,962.4

413701.8

94237.6

Less:CURRENT LIABILITIESAND

PROVISIONS

Current Liabilities 6653.09 6039.86 3,855.26

3523.2 2835.99

Provisions 2346.52 2934.19 2,913.52

1930.46 972.73

8999.61 8974.05 6,768.78 5453.66 3808.72NET CURRENT ASSETS 3247.08 1311.04 30,193.6

68248.23 428.88

Advance against equity - 247.61 30,896.16

- -

Current Ratio 1.36 1.11 5.46 2.51 1.11


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Interpretation for Tata steel

This ration shows that company has high bank balance

or cash on hand. This ration is higher than the normal

mark of 1.33 the ratio of the company is 1.36 this showsthat they have money but they are not investing. They

have recovered money from the debtors and their bank

balance is very high so they can use that money for

increase in operational activity or reduce their liability.

LIQUIDRATIO:

Working NoteTotal Liquid Assets

Liquid Ratio = ____________________Total Liquid Liabilities

Working Note-1Liquid Ratio

Types of Ratio March,2010

March,

2009

March,

2008

March,

2007

March,

2006

Liquid ASSETS



Cash and Bank balances 3234.14 1590.6 465.04 7681.35 288.396747.01 5707.05 3,613.70 10646.1

63002.74

LOANSANDADVANCES 5499.68 4578.04 33,348.74

3055.73 1234.86

9792.7 7416.81 34,915.1

3

11874.3

5

2505.51

Less:CURRENT LIABILITIESANDPROVISIONS

Current Liabilities 6653.09 6039.86 3,855.26

3523.2 2835.99

Provisions 2346.52 2934.19 2,913.52

1930.46 972.73

8999.61 8974.05 6,768.78 5453.66 3808.72


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Liquid Ratio 1.080.83

5.15 2.18 0.66

Liquid ratioThis ratio shows the companys capacity of paying. Liquid ratioideally it should be 1:1 but for the Tata steel the liquid ratio is 1:1.08.

This position shows that tata steel has excess liquidity. They shouldinvest their amount in other activity or as an investment.


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LEVERAGERATIOS:-

The second category of financial ratios is leverage or capital

structure ratios. The Long term lenders\creditors would judgethe soundness of a firm on the basis of the long term financialstrength measured in terms of its ability to pay the interest

regularly as well as repays the installment of the principal ondue dates or in one lump sum at the time of maturity.

The ratios which are included in the leverage ratios are:-

Debt-Equity Ratio

Debt-asset RatioInterest Coverage Ratio


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1. DEBT-EQUITY RATIO

The relationship between borrowed funds and owners capital isa popular measure of the long-term financial solvency of a firm. The relationship is shown by the debt -equity ratios. The ratio

reflects the relative claims of creditor or share holders againstthe assets of firms & relatively indicates the proportions of debt& equity in financing the assets of a firm.

The relationship between outsiders claims and owners capitalcan be shown in different ways and, accordingly, there are many

variants of the debt-equity ratio.

Debt Equity RatioDebt

Debt Equity Ratio = ____________________

Equity (Net worth)

March, 2010 March, 2009 March, 2008 March,

2007

March,

2006

FUNDSEMPLOYED

SHARE CAPITAL 887.41 6203.45 6,203.30 580.67 553.67

SHARE WARRANTS 147.06

RESERVES AND SURPLUS 36074.39 23972.81 21,097.43 13368.42 9201.63

Less misc expenditure - 105.07 155.11 202.53 253.27

TOTALSHAREHOLDERS'FUNDS

36961.80 30071.19 27,145.62 13893.62 9502.03

LOANS

Secured 2259.32 3913.05 3,520.58 3758.92 2191.74

Unsecured 22979.88 23033.13 14,501.11 5886.41 324.41

Total Loans 25239.20 26946.18 18,021.69 9645.33 2516.15

Debt Equity Ratio 0.68 0.90 0.66 0.69 0.26

Debt equity ratio

Debt to equity ratio indicates the proportionate claims of owners and theoutsiders against the firms assets. The purpose is to get an idea of the cushionavailable to outsiders on the liquidation of the firm. However, the interpretationof the ratio depends upon the financial and business policy of the company. Theowners want to do the business with maximum of outsider's funds in order totake lesser risk of their investment and to increase their earnings (per share) bypaying a lower fixed rate of interest to outsiders. The outsiders (creditors) onthe other hand, want that shareholders (owners) should invest and risk their


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share of proportionate investments. A ratio of 1:1 is usually considered to besatisfactory ratio although there cannot be rule of t humb or standard norm forall types of businesses. Theoretically if the owners interests are greater thanthat of creditors, the financial position is highly solvent. In analysis of the long -term financial position it enjoys the same importance as the cur rent ratio in the

analysis of the short-term financial position. In the tata steel the debt is lowerthan the equity borrowing. This gives cushion to the debtors.


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2. DEBT ASSETRATIO:

DebtDebt Asset Ratio = ____________________

Total assetDebt Asset Ratio

Fixed Assets March, 2010 March, 2009 March, 2008 March,2007

March, 2006

Gross Block 26149.66 23,544.69 20,847.04 18526.93 16564.90

Less : Impairment 106.07 100.47 100.47 100.41 94.19

Less : Depreciation 10,037.56 8962 8123.01 7385.96 6605.66

Net Block 16,006.03 14482.22 12623.56 11040.56 9865.05

Investment 44979.67 42,371.78 4103.19 6106.18 4069.96

CURRENT ASSETS


Stock-in-trade 2453.99 2868.28 2,047.31 1827.54 1732.09



6747.01 5707.05 3,613.70 10646.16 3002.74

LOANSANDADVANCES 5499.68 4578.04 33,348.74 3055.73 1234.86

12246.69 10285.09 36,962.44 13701.89 4237.6

Less:CURRENT LIABILITIESAND

PROVISIONS

Current Liabilities 6653.09 6039.86 3,855.26 3523.2 2835.99

Provisions 2346.52 2934.19 2,913.52 1930.46 972.73

8999.61 8974.05 6,768.78 5453.66 3808.72

NET CURRENT ASSETS 3247.08 1311.04 30,193.66 8248.23 428.88

Misc expenditure - 105.07 155.11 202.53 253.27

Total asset 64232.78 58741.77 47,075.52 25,597.50 14,617.16

LOANS

Secured 2259.32 3913.05 3,520.58 3758.92 2191.74

Unsecured 22979.88 23033.13 14,501.11 5886.41 324.41

Total Loans25239.20 26946.18 18,021.69 9645.33 2516.15

Debt Asset Ratio 0.39 0.46 0.38 0.38 0.17


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3. INTEREST COVERAGERATIO:

It is the second category of leverage ratios. It is also known as

time-interest earned ratio. This ratio measures the debt servicingcapacity of a firm in so far as fixed interest on long-term is

concerned. It is determined by dividing the operating profits orearnings before interest and taxes (EBIT) by the fixed interest

charges on loan. This ratio, as the name suggests, shows howmany times the interest charges are covered by the EBIT out of

which they will be paid. In other words, it indicates the extent towhich a fall in EBIT is tolerable in the sense that the ability of thefirm to service its interest payments would not be adverselyaffected.

EBITIntrest coverage Ratio = ____________________

interestInterest coverage ratio

March,

2010

March, 2009 March, 2008 March, 2007 March,

2006

EXPENDITURE :

MANUFACTURING AND OTHER

EXPENSES8658.41 15525.99 11,645.24 10814.77 9320.5

DEPRECIATION 618.78 973.4 834.61 819.29 775.19277.19 16499.39 12,479.85 11634.06 10095.6

Less EXPENDITURE 204.82 343.65 175.5 236.02 112.62

9072.37 16155.74 12,304.35 11398.04 9982.98

INTEREST 186.8 1152.69 878.7 173.9 118.44

TOTAL EXPENDITURE 9259.17 17308 13,183.05 11571.94 10101.42PROFIT BEFORE TAXES & EXCEPTIONAL

ITEMS5387.81 7315.61 6,845.23 6413.75 5292.73

EMPLOYEE SEPARATION COMPENSATION -226.18 -152.1 -52.77 -119.11CONTRIBUTION FOR SPORTS INFRASTRUCTURE -150

EXCHANGE GAIN/(LOSS) 597.31 28.58PROFIT BEFORE TAXES 7315.61 7,066.36 6261.65 5239.96 5297.28

1152.69 878.7 173.9 118.44 186.8PROFIT BEFORE INERESTTAXES

8468.3 7,945.06 6435.55 5358.4 5484.08

Interest coverage ratio 7.34 9.04 37.00 45.24 29.36


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Interest coverage ratio:

Interest Coverage Ratio indicates the extent to which a fall in EBIT is

tolerable in the sense that the ability of the firm to service its interestpayments would not be adversely affected. In the early 3 years

interest coverage ratio was 29.36 but it decreased to 7.34 in the year08-09 which shows that the company is using excessive debt and doesnot have the ability to offer assured payment of interest to the

creditors.


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C. PROFITABILITY RATIOS:

The operating efficiency of the business firm is measured on the basis ofprofit earned during any financial year. The management and the owners ofthe company are always eager to measure profit as the efficiency of themanagement and return on investment of owners both depend upon theprofit. The profitability of the firm is measured by profitable ratios. Thepurpose of study and analysis of profitability ratios are to help assessing theadequacy of profits earned by the company and also to disco ver whetherprofitability is increasing or declining. The profitability ratios show thecombined effects of liquidity asset management and debt management onoperating results. Profitability ratios are measured with reference to sales,

capital employed, total assets, employed shareholders funds etc. The majorprofitability ratios are as follows:-

EBIDTA / Turnover Ratio

Gross Profit Ratio

Net Profit Ratio

Operating Profit Ratio

Operating ratio

Expenses ratio

Returns on Shareholders funds

Return on Total Assets

Return on Capital Employed


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1.NET PROFIT MARGIN

Net profit ratio is also known as net margin. This measures therelationship between net profits and sales of a firm. To ascertain

the value of the ratio, the Profit after Tax is divided by net sales

and then their percentage is taken.

The net profit margin is indicative of managements ability to

operate the business with sufficient success not only to recover

from revenue of the period but also earning profit afterdeducting all expenses, depreciation, financial charges andtaxes.

Working Note-4

Net profit after taxNet Profit Ratio = ____________________

Net sales

Net Profit Margin (%)

March, 2010 March, 2009 March, 2008

March,

2007

March,

2006

Net Sales24,940.6

524,348.3

219,654.4

117452.6

615132.0

9

PROFIT AFTER TAXES 5046.80 5201.74 4,687.03 4222.15 3506.38

Net Profit Margin (%) 20.23 21.36 23.84 24.19 23.17

Net profit ratio

In this year sales of tata steel has increase but net profit decline

shows that the companys operating expense has increased thisyear and therefore the net profit as percentage has gone down

from 21.36% to 20.23%.


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EBDITA Ratio:

Working Note- 8

EBDITA ratio PBDITEBDITA Ratio = ____________________

NETSALES


Net Sales 24940.65 24,348.32 19,654.41 15132.09 17452.66

Add: Other income 1241.08 603.07 586.41 252.58 362.12

Add: Stock adjustment -134.97 289.27 38.73 104.91 82.47

Total income 26,046.76 25,240..66 20,279.55 15,489.58 17,897.25

Less expenditure

Raw materials 8,356.45 8568.71 6,063.53 4,766.44 5,762.42

Power & fuel cost 1383.44 1222.48 1038.77 897.57 1,027.84

Employee cost 2361.48 2305.81 1589.77 1,351.51 1,454.83

Other manufacturingexpenses

2,419.89 2127.48 1654.96 1466.83 1,561.40

Selling & adminexpenses

417.90 400.24 247.77 255.93 244.92

Misc expenses 1,287.04 1180.08 1029.30 727.12 805.99

Preoperative expcapitalized

-326.11 -343.65 -175.50 -112.62 -236.02

Total expenses 15,900.09 15,461.15 11,448.60 9,352.78 10,621.38

PBDIT 10,146.67 9,779.51 8,830.95 6,136.80 7,275.87

EBDITARATIO 40.68% 40.17% 44.93% 40.55% 41.67%

EBDITA interpretation

This ratio shows about the companys operating expenses. The above ratiosshow that the companys operating expenses has increased around 0.5 % fromthe last year. In last five year companys operating expenses were fluctuatingand it ranged between 40% to 45%.


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TURNOVER RATIOS:

Turnover Ratio is used in how quickly certain current assets areconverted into cash. It can also be said as a measurement of

effectiveness with which a firm uses its available resources. It

measures how effectively the firm employs its resources. It involvecomparison between the level of sales and i nvestment in variousaccounts- inventories, debtors, fixed assets, etc., activity ratios are

used to measure the speed with which various accounts are

converted into sales or cash. The following activity ratios arecalculated for analysis:-

Inventory Turnover Ratio Fixed Assets Turnover Ratio

Working Capital Turnover Ratio Total Assets Turnover Ratio Net Worth Turnover Ratio

Debtors Turnover Ratio


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1. TOTALASSETS TURNOVERRATIO

The amount invested in business is invested in all assets jointly andsales are affected through them to earn profits. So, in order to find outrelation between total assets to COGS it is used. This ratio is

important to know the overall efficiency of the business. The higherthe ratio, it shows that with less amount of investment the total assetsthe business has a capacity to sell more and as such its probability is

also known.

Working Note- 8

Assets turnover ratio Net salesAssets turnover Ratio = ____________________

Avg total assets


Net Sales 24,940.65 24,348.32 19,654.41 17452.66 15132.09

Avg total assets 61487.275 52,908.64 36,336.51 20,107.33 13,380.23

Assets turnover ratio % 40.56 46.01 54.08 86.79 113

2. FIXED ASSET TURNOVER RATIO

Working Note- 8

Fixed Assets turnover ratio Net salesFixed Assets turnover Ratio = ____________________

Avg total Fixed assets


Net Sales 24,940.65 24,348.32 19,654.41 17452.66 15132.09

Avg fixed assets 15244.125 13,552.89 11,832.06 10,452.805 9488.645

Assets turnover ratio % 163.6 179.06 166.1 166.9 159.4


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VALUATION RATIOS

The valuation ratios related the firms stock price to its earnings andbook value per share. These ratios give management an indication ofwhat investors think of the company past performance and future

prospectus. If firms profitability, solvency and turnover ratios aregood, then the valuation ratios will be high and its share price is also

expected to be high. This ratio is also known as Market Test Ratio.Valuation Ratios are as follows:-

Dividend Yield Ratio

Dividend Payout Ratio Price Earnings Ratio

Return on asset Ratio


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1. PRICEEARNINGSRATIO

It is the most common measure of how expensive a stock is. The PriceEarnings ratio is equal to a stocks market dividend divided by its after tax

earnings over a 12 months period, usually the trailing period butoccasionally the current or forward period. The value is the same whether

the calculation is done for the whole company or on per share basis. Thehigher the Price Earnings ratio, the more the market is willing to pay for

each dollar of annual earnings. Companies that are not currently profitabledo not have a Price Earnings ratio at all. The market price per share for each

rupee of currently has reported Earning per Share. In other words, thePrice Earnings ratio measures investors expectations and the market

appraisal performance of a firm.

Working Note- 9

Market price of shareP\E Ratio = ____________________

EPS

Price/equity ratio

March,

2010 March, 2009

March,

2008 March, 2007

March,

2006

Market price of share 618.10 206.26 693.38 449.77 536.51

Earnings Per share(Rs) 56.37 69.70 63.85 76.29 63.36

P/E ratio 10.965 2.95 10.86 5.89 8.46


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2. RETURN ON ASSETRATIO:

Working Note- 8

Return on Asset ratio PATEBDITA Ratio = ____________________

Average total asset


Average Total Asset 61,487,275 52,908.64 36,336.51 13,380.23 20,107.33

Net Sales 24940.65 24,348.32 19,654.41 15132.09 17452.66

Add: Other income 1241.08 603.07 586.41 252.58 362.12

Add: Stockadjustment

-134.97 289.27 38.73 104.91 82.47

Total income 26,046.76 25,240..66 20,279.55 15,489.58 17,897.25

Less expenditure

Raw materials 8,356.45 8568.71 6,063.53 4,766.44 5,762.42

Power & fuel cost 1383.44 1222.48 1038.77 897.57 1,027.84

Employee cost 2361.48 2305.81 1589.77 1,351.51 1,454.83

Other manufacturingexpenses

2,419.89 2127.48 1654.96 1466.83 1,561.40

Selling & admin

expenses

417.90 400.24 247.77 255.93 244.92

Misc expenses 1,287.04 1180.08 1029.30 727.12 805.99

Preoperative expcapitalized

-326.11 -343.65 -175.50 -112.62 -236.02

Total expenses 15,900.09 15,461.15 11,448.60 9,352.78 10,621.38

PBDIT 10,146.67 9,779.51 8,830.95 6,136.80 7,275.87

Less interset 1,848.19 1489.50 929.03 168.44 251.25

PBDT 8,298.48 8290.01 7,901.92 5,968.36 7,024.62

Less Depreciation 1,083.18 973.40 834.61 775.10 819.29

PBT 7,215.30 7,316.61 7,067.31 5193.26 6,205.33

Add extra ord items 0.00 0.00 0.00 47.50 57.29

PBT(Post extra orditem)

0.00 0.00 0.00 5,240.76 6,262.62

Less tax 2,168.50 2,114.87 2,380.28 1,734.38 2,040.47

Pat 5,046.80 5,201.74 4,687.03 3,506.38 4,222.15

Return on asset 8.207% 9.83% 12.898% 26.21% 20.998%


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CONCLUSIONThe Role ofIron and Steel Industry in India GDP is very important for the

development of the country. In India the visionary Shri Jamshedji Tata set upthe first Iron and Steel manufacturing unit called Tata Iron and SteelCompany, at Jamshedpur in Jharkhand. Iron and steel are among the mostimportant components required for the infrastructure development in thecountry.

Role ofIron and Steel Industry in India GDP-Facts

y The Iron and Steel Industry in India is one of the fastest growingsectors

y The demand drivers for the Indian Iron and Steel industry are increase

in the activities of the automobiles industry, real estates industry,transportation system, aircraft industry, ship building industry, etc.

y India ranks 5th in the world in terms of production of steely The amount of crude steel produced in 2006 -07 was 50.71 million

tones.y The amount of finished steel produced in 2006-07 was 51.9 million

tones.y The production of finished steel was increased by 16.52%y The production of finished carbon steel was 24.8 million tonnes in the

year2006-07

y It is expected that India would become the second biggest producer ofsteel within the year2016 and the production per year would be 137million tones.

y The exports pertaining to the steel industry was 6.26 % during theperiod 2006-07

Role ofIron and Steel Industry in India GDP-Consumption

y The domestic consumption of steel has grown by12.5% in the pastthree years

y The domestic steel consumption in the year2006-07 was 41.14 milliontonnes.

y The average growth rate of the Indian Iron and Steel Industry is11.36%

y The construction projects all over India are major consumer of steely The per capita consumption of steel in India is 35kgsy As the per capita consumption of steel is lower than other countries, so

the steel industry has huge opportunities in the future


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Role ofIron and Steel Industry in India GDP-Growth in Future

y The Arcelor Mittal, which is the largest steelmaker in the world, hasplans of establishing two Greenfield steel projects with capacity of 12million tonnes annually, in India

y Acerinox SA, one of the important stainless steel manufacturers incollaboration with Nisshin Steel, Japan is setting up a steel plant inIndia

y The Tata Steel ranks 5th in the world steel production and thecompany have plans of expanding its capacity by the year2015

y SAIL, India's biggest producer of steel has plans of increasing theproduction to 24.98 million tonnes annually

y Sinosteel Corp, China are planning to invest US$ 4 billion to set up a 5million tonnes capacity Greenfield steel plant

y The acquisition of the Corus, the Anglo-Dutch steel manufacturer by

the Tata Steely The Algoma Steel, Canada was acquired by Essar Global for US$ 1.63

billion


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BIBILIOGRAPHY

For preparing this project, we have referred to information regarding theTATA STEEL LIMITED that was available easily on Internet, which hasmade a major contribution to the project report.

Books like:

FINANCIAL MANAGEMENT (3RD

EDITION)

by M.Y. KHAN & P.K. JAIN

FINANCIAL MANAGEMENT (7TH

EDITION)

By PRASANNA CHANDRA

FINANCIAL MANAGEMENT

By P.C Tulsian

We have also referred this book, which have been of great help gettingtheoretical information to be added in the project report.

Moreover we have referred following websites:

www.tatasteel.com

www.google.co.in www.wikipedia.org

final tata report

Documents

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