WARSAW UNIVERSITY OF TECHNOLOGY

GLOBAL PRODUCTION ENGINEERING AND

MANAGEMENT

INAFE
A REPORT ON
Financial Analysis of TATA STEEL
By
VAMSI KRISHNA.AMARAVADI
KEVAL DESAI

Table of contents

Executive summary
Introduction
Overview of TATA STEEL
Horizontal and Vertical Balance sheet Analysis
Working capital Analysis
Income statement analysis
Operating and Financial Leverages
Ratio Analysis part-1
Ratio Analysis part-2
DUPONT Analysis
Conclusion
Bibliography

Executive Summary
TATA Steel SEZ project has been envisaged as an integral fit with State Governments vision of
enabling sustainable economic and industrial growth in Modish. Being a pioneering state in
2

terms of mineral richness and workforce availability Odisha has the opportunity to grow as a
wide spectrum of industrial activities in the region. Tata Steel Special Economic Zone Ltd, a
100% subsidiary of Tata Steel is the developer for the project. Tata Steel Group (as part of their
development initiative) in order to create a favourable economic environment and promote
industrialization in the Gopalpur region has proposed development of a Special Economic Zone
and an Industrial Park. For the same, the group has acquired approx. 2493 acres of land in
Gopalpur, Odisha. The aim is to develop a modern eco-friendly and smart Industrial Park & a
Multi-product Special Economic Zone with state-of-the-art infrastructure with a comprehensive
strategic study background in line with the states and regions economic potential. For Gopalpur
SEZ extensive market research and on ground assessment has been conducted to identify suitable
industrial sectors and clusters categorized as core industries ( Basic Metals, Fabricated Metal
Products, Machinery & Equipment, Food & Beverage) base industries (Chemical Products,
Other Non-Metallic Mineral Products, Apparel & Auto Components), ancillary industries
( Information Technology, Plastics, Repair & Installation of Machinery & Equipment) and
logistics (Warehousing ,Container Freight System) et

Overview of TISCO
3

The Tata Iron and Steel Company Limited was formed in 1907 at Mumbai. The
Company manufactures rails, fishplates, bars, light structurals, heavy structurals,
plates, black sheets, galvanised sheets, tin bars, sleeper bars, sleepers, blooms,
billets, sheet bars, wheels, tyres and axles, skelp and strip, and special steels tools
such as picks, beaters, hammers and shovels and red-oxide, coal
tar, sulphate of ammonia, etc.
Iron and steel are made by the open hearth, duplex electric and acombination of
these processes, and the steel is rolled into finishedproducts. Tata Steel has
launched an innovative and stronger structural steel tube product in Europe
-Tata Steel Minerals Canada Limited acquires balance 49% participating interest in
Howse Deposit
-Tata Steel has set up a new company to attract global electronics and electrical
component makers from China and Southeast Asia
-Tata Steel, has commenced the production of coke at its Kalinganagar project in
Odisha
-Tata Steel has got the Environment Ministry approval for more than doubling the
capacity of its Jamshedpur-based cold rolling mill at an investment of Rs 126 crore
-Tata Steel Ltd has approved the Scheme of amalgamation between Tata Steel
Limited and Tata Metaliks Limited and Tata Metaliks Dl Pipes Limited
-Tata Steel has entered into partnership with Abu Dhabi-based International
Development Company (IDC) to expand its market base for energy sector products
in the Middle East
-Tata Steel received green nod for expansion as well as setting up of two units at its
Joda plant in Keonjhar district, Odisha
-Tata Steel UK Limited signs Letter of Intent regarding Long Products
Europe business

Introduction
Origin of Study:
As a students of Production Engineering and Management, we need to gain the recent
4

knowledge on the financial condition of various big organizations around the world. This report,
titled TATA IRON AND STEEL COMPANY LIMITED is done to learn the financial
performance of this auto maker giant.
Objective of Study:
Mentioned in the executive summary, TATA STEEL is one of the corporation which still
profitable in the world recession. The main objective of preparing this paper is to
1. Measure the financial performance of TATA STEEL of last 5 years.
2. Measure its financial condition for future sustainability.
3. Measure the effect of TATA STEEL financial performance.
Methodology of Study:
The data uses to measure the financial performance of the TATA STEELare mainly collected
from the financial statement of the TATA STEEL of the year 2011.., 2012. 2013.., 2014.., and
2015. For analysis the financial condition of the TATA STEEL we use
1.

BALANCE SHEET (Horizontal, Vertical analysis)

2.

WORKING CAPITAL

3.

INCOME STATEMENT(Horizontal, Vertical analysis)

4.

RATIO ANALYSIS

5.

DU PONT ANALYSIS.
Overview of TATA STEEL
This company founded and established in the year 1907 is known to be one of the leading steel
giants in the country offering multiple products and successfully running many subsidiary
corporations. The company is dedicated to providing laudable services to the This company
founded and established in the year 1907 is known to stakeholders improve on the quality and as
thrive for innovations and improvements constantly.
Tata Steel limited formerly Tata Iron and Steel Company Limited (TISCO) is Indian
multinational steel -making company head quarter in Mumbai Maharashtra, India, and a
subsidiary of the Tata group. It was the 11th largest steel producing in India in 2013, with an
annual crude steel capacity of 25.3 million tonnes, and the second largest steel company in India
(measured by domestic production) with an annual capacity of 9.7 million tonnes after sail
5

Tata Steel has manufacturing operations in 26 countries, including Australia, China, India, the
Netherlands, Singapore, Thailand and the United Kingdom, and employs around 80,500 people.
Its largest plant is located in Jamshedpur, jarkand In 2007 Tata Steel acquired the UK-based steel
maker Corus which was the largest international acquisition. By Indian Company
It was ranked 486th in the 2014 get good ranking of the world's biggest corporations. It was the
seventh most valuable Indian brand of 2013 as per brand finance.

Product Overview:

Hot Rolled

Figure a http://www.tatasteel.com/products-and-processes/flat-products/hot-rolled.asp

Tata Steel offers Hot Rolled Coil and Sheet steels in a wide variety of
specifications, manufactured to meet international standards and a wide range of
market requirements like forming, bending, deep drawing, laser cutting and
welding. High carbon grades are especially suited to meet challenging wear and
fatigue performance.
The main benefits of Tata Steels hot-rolled steel both for end-products and
customer processes include improved end-product performance, longer product life,
cost optimization, better processing facilities and more durable products. All the
production lines are equipped with the latest technologies and have robust quality
control mechanisms to check any abnormality in the process which might hamper
the product quality

Structural Steel
6

Figure b http://www.tatasteel.com/products-and-processes/construction-products/structural-steel.asp

Tata Steel offers a comprehensive range of structural steel products. Tata Steel Europes product
portfolio in this segment includes Advance Sections, Hollow Sections, and Plates. The recent
introduction of asymmetric beams and Bi-Steel indicate that Tata Steel structural steel products
continue to deliver in an industry where speed of construction and cost are critical factors.

While Slimdek is an engineered flooring solution, the Advance section range has been
developed to reflect current structural design practice. Tata Steel Europe is one of the world's
leading producers of welded steel tube. It has been producing hot finished and cold formed
hollow sections for more than 50 years. The brands include Celsius 355, Hybox 355, and
Strongbox 235. Corefast is an innovative modular construction system that enables structural
cores in multi-storey building to be created in Bi-Steel up to six times faster than reinforced
concrete

Bearings

A wide variety of bearings and auto assemblies are manufactured by Tata Steel at its Bearings
Division in India, which has a production capacity of 30 million bearing numbers per annum.
Over the years, a highly performance-driven approach has helped Tata Bearings achieve an
influential and crucial position in its target industry segment. Tata Bearings Division of Tata
Steel Limited is one of India's largest quality bearing manufacturers, with a production capacity
of 37 million bearing numbers. It is the only bearings manufacturer in India to win the TPM
Award (2004) from Japan Institute of Plant Maintenance, Tokyo.

The company is foremost in the manufacturing of a wide variety of bearings and auto assemblies
and the product range includes Bearings & Auto Assemblies Components, Ball Bearings,
Tapered Roller Bearings, Magneto Bearings, Clutch Release Assemblies, Fan Support
Assemblies and Cylindrical Roller Bearings.

VERTICAL AND HORIZONTAL ANALYSIS BALANCE STATEMENT

Horizontal analysis focuses on trends and changes in financial statement items over time. Along
with the dollar amounts presented in the financial statements, horizontal analysis can help a
financial statement user to see relative changes over time and identify positive or perhaps
troubling trends. So we will use the income statement information for TATA STEEL to explain a
five years horizontal analysis.

Horizontal analysis is used for the following purpose

Study of percent changes in accounts from year-to-year
Select a base year and then express each item or account as a percent of the base-year
value of that item.
Used for trend analysis

Balance sheet:

Horizontal and vertical analysis

Conclusions of HA and VA from Balance sheet

The finds from the financial analysis and the financial statement (Balance sheet) of TATA
STEEL can be discussed under two categories with its advantages and disadvantages.
From the Balance sheet we can notice that the, Financial performance in terms of sales
and revenue is quite satisfactory in time of recession.
Control over cost of manufacturing is very well.
Plant and equipment are stated at acquisition or at manufacturing cost with less
9

accumulated depreciation and impairment losses.

From the table it is clear that Total assets are increasing from 2011 to 2013.
Negatives that we noticed in this analysis are:
Increase in the Current assets and decrease in the non-current assets.
Decrease in the revenue reserves, as a result of Global Financial Recession.
Huge contingent Liabilities.
Do not make proper disclosure of the assets segments and liabilities segments.

6. OtherCurrentAssets
5. Short Term Loans And Advances
4.Cash And Cash Equivalents
3.Trade Receivables
2. Inventories
1.Current Investments
c. Other Non-Current Assets
b. Long Term Loans And Advances
a. Non-Current Investments
4. Intangible Assets Under Development

2015
2014
2013
2012
2011

3. Capital Work-In-Progress
2. Intangible Assets
1. Tangible Assets
0.00% 10.00% 20.00% 30.00% 40.00% 50.00%

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-1000.00%

0.00%

1000.00%

2000.00%

3000.00%

4000.00%

WORKING CAPITAL
Working Capital is measure of company efficiency and operating liquidity. The working capital
is usually calculated by subtracting Current Liabilities from Current Assets. It is important
indicator of the firm ability to continue its normal operations without additional debt obligations.
Below shown how to calculate working capital:

Gross working capital = Current assets

Gross Working Capital (GWC) represents investment in current assets

(Net) working capital = Current assets Current liabilities
Working Capital is measure of company efficiency and operating liquidity.

(Net) working capital = Current assets Short term Liabilities

Working capital for 2015: 810.96

2014: 1,969.98
2013: 3,918.05
2012: 10,705.79
2011: 6,012.8
11

Analysis of the Working Capital

From the balance sheet analysis we can say that the position of Working capital is much
better in 2012, TATA STEEL increases the Current assets (CA) and reduces the Current
Liabilities from the previous years.

We can see that the working capital from the year 2011 is increased till 2012 but in the
year 2013 the working capital again decreased.

Based on the increment in the working capital from the year 2011 to 2012 we can
conclude that the company has ability to meet operating expenses highly.(High company
efficiency)

But in 2013 the Working capital decreased compared to the 3 previous years that means
the company has less ability to meet operating expenses.(Low company efficiency)
Pros of WC Policy J

Signifies efficient working capital management.

Saving in interest expenses.

Less risk of Bad-debt.

Cons of WC policy J

Risk of failure to meet short-term obligation.

May result in lower credit rating because of failure/delay in payments.

Bank may charge higher interest rate.

Matrix Conclusion

As per working capital analysis from balance sheet we got Conservative Working capital
throughout the 4 following years, from this we can conclude that ..

There is Plenty of Cash in the Bank.(Bank liabilities)

If we analysed that the WC as Conservative that indicates policies it should be buffered

against the risk.

We can conclude that the Company is full of Inventories.

All the payables are all up to date.

Finally we say that, In WC Ratio if Current assets is divided by Current Liabilities, a

Conservative WC might yield some ratio i.ewe have more than the obtained ratio in
Current assets for every quantity of the Short term liabilities.

12

600.00%
500.00%
400.00%
300.00%

Current asset
Fixed asset

200.00%
100.00%
0.00%
1

Horizontal and Vertical Analysis of INCOME STATEMENT

13

From Horizontal Analysis

The HA shows the decrease in the Revenues approximately 2.0798 (2015-14) 92.39, iin 2013-12
which results increase in CGS, due to this the Gross Profit decreased in 2011 to 8,856.05
Reported Net Profit costs are also decreased to 0.331932 From 2013 to 2014 but increased in
2014to 2.209956 ,Compared to 2011-10 (1.446339).
The other operating expenses goes on decreasing but decreased to very low to 9.256012 during
2012-13.
Due to this only the NET PROFIT is 8,856.05

From Vertical Analysis

In vertical analysis of income statement shows that the sales are increased and cost of
goods sold is more than the previous years.
This means that the TATA STEEL has stable Inventory or they are purchasing materials at
reasonable rates.
The other operating income and expenses remains stationary. The increase in cost of sales from
2014 to 2014 caused to increase in NET PROFIT from 0.216801 and again decreases to0.42065 in 2015 because due to increase in Revenues.

Common Conclusions
Net profit in the year 2011 is 8,856.05 high as compared to the other years.
14

The gross profit in the year 2012 is 4,948.52by which all the revenue and the cost of sales have the
direct impact on the gross profit which can be seen in all the years. Variations may increase the
net profit of the company.

The other taxes have direct impact on net profit which has the reduced profit values as
compared to above profit without activities.

OPERATING AND FINANCIAL LEVERAGES

DOL: - The degree of operating leverage measures the percent change of a company's earnings
before interest and taxes relative to a percent change in its sales.
A high degree of operating leverage indicates that the earnings before interest and taxes
experience more fluctuations given a percent change in sales.
SO we can conclude that for every changes in 1% of sales in respective years 2013, 2012,
2012 and 2011 results in changes in value of EBIT as follows.
8,856.05 in 2011
4,948.52 in 2013
3,663.97 in 2015
The calculated DOL for following 4 years are as follows

Since the degree of operating leverage is high in 2013, the company will experience high
volatility for a small percentage change in sales. Therefore, a 1% change in sales will cause
company profits to fluctuate by 3.124%.
DOL in 2011 is 8,856.05

The DOL in 2011 is again higher with 3.2 that indicate company will experience high profit in
given changes of sales.
The degree of operating leverage in 2011 for company will experience a lower level
of volatility in its profits given a percent change in sales. If there is a 1% increase in sales,
company profit will only increase by 2.485%,
Whereas company will have a increase in profit during 2015. 0.204807
15

RATIO ANALYSIS PART-1

From the balance sheet for 5 years, we calculate the Profitability Ratios :-

Gross Profit % = Gross Profit * 100

Net Sales
Net Profit % = Net Profit BeforeTax * 100
Net Sales
Return on Assets =

Net Profit Before Tax* 100

Total Assets

Return on Equity =

Net Profit Before Tax

*100

Total Equity
From the calculated table

Current Ratio and Quick ratio

2015

2014
2013

2012

Current
Ratio=CA/CL

Quick Ratio=Invt/CL

0.71
0.612474036

0.652624341
0.294293758

0.69930528
0.761049099

0.380422897
0.473596811

1.383107219

1.081198758

2011

CURRENT RATIO ANALYSIS:

From the above table we can analyze that the Current ratio in the annual year 2012
with 0.761049099 is higher than the three remaining annual years.
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 So we can conclude that, this Ratio tell us to pay 1 liability which company has
0.761049099 Current asset.
Although in 5 years the position of the company is better in its Short term debts.
In 2012 the company increases their current asset and minimizes their current

liabilities and hence the companys current ratio is better in 2012 compared to other 4
respective years.
QUICK RATIO ANALYSIS:
From the table we can conclude that the Quick ratio in the same year 2012 with
0.473596811 is good and it is higher than other remaining years.

We can say that the both Current ratio and Quick ratio are directly proportional to
each other.
The Quick ratio shows also the better position in 2012 and this is because the TATA
STEEL decreased the Inventory from previous years.
It is to be noted important that the Current asset are been going on increasing from
year to year.

Gross Profit Margin Ratio: From the calculations the Gross profit margin ratio
in the years are as follows.

Profitable Ratios
Gross profit margin
ratio

YEARS

Net profit Margin Ratio

Gross profit/net
sales*100

EBT/net sales*100

2015

25.34

15.51

2014

32.61

15.37

2013

31.48

13.25

2012

36.61

19.25

2011

40.85

23.35

17

Gross profit/net sales*100

In 2011 it was 40.80*100
2012 it was

36.61*100

2013 it was

31.48*100

2014 it was

32.61*100

2015 it was

25.34*100

From the above values we can say that the Gross profit margin is slightly increased
from year to year from 19% at the beginning year and 36.61*100 at the end in 2012.
From 2011 to 2015, the GPM for the business slightly decreased from 40.80*100 to
25.34*100which means the business is slightly getting better at controlling Cost of
Goods Sold.
The Gross profit margin will be good when the goods produced by the TATA STEEL
are sold with better controlling cost.

Net Profit Margin: The NPM in the corresponding years are as follows
In 2011 it was

23.25

2012 it was

19.25

2013 it was

13.25

2014 it was

15.37

2015 it was

15.31

From above we can say that the NPM was decreased from 19.25 to 13.25 in 2013and
then to15.37 in 2014 and again decreased to 15.37 in 2015, it means that
This ratio gives a measure of Net income generated by each dollar of sales.
This ratio shows that the weakness of the company and their net income is varied in
annual years i..ewith increasing when analyzed from 2014-2015 and again slightly
decreased by 1% in 2013.
Between the period of 2013to 2014, the NPM has increased from 13.25 to 15.37 which
means the business is getting better at Controlling expenses.
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CONCLUSIONS BASED ON ROA, ROE AND ROI:

The ROA has 7.66, 6.96, 4.96, 5.77, and 5.56, respectively in 2011-2015.
The Return on Asset ratio measures the firms ability to utilize its Assets to create
profits by comparing Profits with assets that generates profits.
This analyze shows that the company has strong with profit because the Return on
Asset is increased simultaneously from 2011 to 2012 and has weak in profit in 2013
because of decreasing ROA.

Annual Years

ROE

Returns on
Equity=EBT/Total
equity*100
2011

2012
2013
2014

2015

ROI

ROI
9.65

10.48
9.17
12.72
14.62

6.5

6.95
5.92
8.44
8.97

The above graph shows variation of ROE and ROI of respective 5annual years.
We can say that the ROE and ROI simultaneously increased from 2011 to 2015 and
slightly decreased in 2013.
During the year 2011 to 2012, the ROE has increased from 9.65 to 10.48 This means the
owner is receiving a higher earning on his capital in the year 2012 than 2011 and
again in 2013 the owner earning decreases due to decrease in ROE.

19

 ROI in 2012 is good when compared to 2011 because of huge increase in EBT and
Interest when compared to 2011.
We can also notice that there is slight increase in Equity in 2011.
In 2013 the ROI is again decreased, it means there is a huge increase in Equity and
decrease in profit before tax (EBT) which has greater influence on Return on
Interest.
IN 2011 and 2012 ROE>ROI.therefore results in Negative Financial Leverage.
IN 2012 and 2013 ROE<ROI which results in Positive Financial Leverage.

Chart Title
1.50
1.00
0.50
0.00
2015

2014

2013

Current Ratio=CA/CL

2012

2011

Quick Ratio=Invt/CL

Chart Title
50
40
30
20
10
0
2015

2014

2013

2012

2011

Profitable Ratios Gross profit margin ratio Gross profit/net sales*100

Profitable Ratios Net profit Margin Ratio EBT/net sales*100

20

Chart Title
16
14
12
10
8
6
4
2
0

2015

2014

2013
#REF!

2012

2011

ROI

21

RATIO ANALYSIS PART-2

Efficiency Ratios includes the calculations of Asset turnover, Inventory turnover, Average
collection period, Average payment period.
The ASSET TURN OVER in four annual years is as follows
2013
2012
2011
2011

1.791026211
1.839668387
1.999672822
1.880103508

The Asset turnover ratio measures the activity of the assets and the liability of the firm
to generate sales through the use of assets.
From the analysis we can say that the ratio increased from 1.88 to 1.99 in the year 2011
and this conclude that it is strong for TATA STEEL in 2011.
But again in 2012 and 2013 the ratio decreased continuously to 1.79 and it is weak for
TATA STEEL.
The INVENTORY TURNOVER for the respective years is as follows
2013

12.18405384

2012
2011
2011

12.33715658
11.53661784
11.39153114

It Means the rate at which a companys stock is turned over.

Inventory Ratio indicates the Liquidity or Inventory.
The Inventory turnover ratio for the following years are calculated and shown in the
above table.
From the analysis we can conclude that the Inventory turnover ratio is quite increasing
from year to year and it going good and some fraction of decrease in 2013.
In year 2012 the Inventory turnover ratio is going better for TATA STEEL.
The stable increase in ratio holds good for TATA STEEL.

The Average collection period is as follows

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2013
2012
2011

3.97749446
5.325567554
4.837293435

2011

5.31874686

This ratio measures the receivables collection period of a business.

From the analysis we can that in the year 2011 the ratio is low (decreased) and this
indicates debtors pay back their debts in a short period of time.
We can say that the company TATA STEEL may have sufficient liquid fund.
Again in the year 2012 the ratio is increased to 5.325 and this indicates the high ratio for
the corresponding year.
This high ratio indicates a poor credit control and a high risk of bad debts i.e..,
receivables.
Again in 2013 results low ratio means again debtors pay back their debts in short time.
The Average payment period is as follows
2013
2012
2011
2011

37.36312066
30.77704748
24.77146814
23.4386532

The Average payment period for TATA STEEL for the 4 annual years from 2011 to 2013
is shown in the above table.
From analysis we can predict that in 2011 there is short payment period of 23.43 and
the following corresponding years are going on increasing.
Average Payment Period in 2011 is 24.77
2012 is 30.77
2013 is 37.36
The explanation for Shorter and Longer payment period is analyzed below

23

 A shorter payment period indicates prompt payments to creditors, like accounts

payable turnover ratio, average payment period also indicates the creditworthiness of the
company.
But a very short payment period may be an indication that the company is not taking
full advantage of the credit terms allowed by suppliers.
Managers try to make payments promptly to avail the discount offered by suppliers.
Where the discount is available for early payment, the amount of discount should be
compared with the benefit of the length of the credit period allowed by suppliers.

Conclusions on Solvency ratios

Solvency ratio is also known as financial structure and it includes the analyses of Long term
debt ratio, Total debt ratio, Equity ratio and Total interest earned.

Analysis of Long term debt ratio- The analysis for annual years is as follows
2013

14%

2012

14%

2011

11%

2011

7%

This ratio determines the company long term debt paying ability.
The company paying debt ability in 2011 is weak when compared to the previous years.
A ratio greater than 2.0 means that the company borrows a lot to finance operations.

24

 It means that creditors have twice as much money in the company as equity holders.
Such a ratio may suggest a dangerous amount of leverage. For some industries though,
high debt to equity ratios are appropriate.
Finance companies may also have high debt to equity ratios because they borrow
money at low rates and lend at higher rates.
Thus we can conclude that company TATA STEEL often borrows money to buy raw
materials for manufacturing.

Analysis of Total debt ratio of TATA STEEL for the 4 annual years
2013

45%

2012
2011
2011

46%
42%
43%

The above table shows the debt ratio of 4 corresponding years.

From the table calculations we can say that the Debt ratio is not exceeded 50% in any
year, so that the company can obtain further financing and it is also have heavy burden
of interest expense.
From the above calculated values we can say that the ratio in 2011 is decreased compared
to 2011.This means that debt level has gone down.
Again in 2012 it is increased to 46% and that means the debt level has gone up.
This ratio tells us that the company TATA STEEL total asset is decreasing but in the
opposite direction total liabilities are also increasing.
This is the weakness of TATA STEEL.
Equity Ratio analysis- The ratio analysis of equity is as follows
25

2013

31%

2012

31%

2011

30%

2011

29%

From the calculated table we can say that the Equity ratio from 2011 to 2013 is slightly
going on increasing.
Equity is the percentage of a company that is owned by investors.
It is often made up of common stock, preferred stock, and bonds.
The equity ratio reveals the percentage of a company's assets that are financed by
equity.
The equity ratio in the year 2011 is 29%, in 2011 it is 30% and in 2011 and 2012 it has
31%.
A high percentage can reveal an unhealthy situation and the company's inability to
fulfill its obligations to stockholders.
Some of the best methods to improve an equity ratio are to reduce debt and increase the
value of a company's assets.
In order to improve the ratio, an increase in assets or a decrease in equity is needed.

Total Interest earned- The analysis is as follows

2013
2012
2011
2011

13.08231707
49.45454545
7.070676692
7.402739726

26

 This ratio indicates how many times a company can cover its interest charges on a
pretax basis.
This ratio tells us TATA STEEL has 7% earnings to past their interest expenses in the
years 2011 and 2011 respectively.
In 2012 the ratio was 49% earnings to their past interest expenses and this means that in
this year the companys earnings are going down.
A total interest earned ratio is deemed too high, the only way to effectively lower it is to
increase interest payment obligations and acquire more debt.

DUPONT ANALYSIS

27

From the calculated world file chart the DUPONT values the ROE in annual years are as follows
In 2015 is 0.215334
In 2014 is 0.275595
In 2012 is 0.252423
In 2011 is 0.169815
DuPont analysis tells us that ROE is affected by three things:
- Operating efficiency, which is measured by profit margin
- Asset use efficiency, which is measured by total asset turnover
- Financial leverage, which is measured by the equity multiplier
In this ratio we will view the operating income margin with operating asset turnover.
From the above values we can say that ROE is increasing from 2011 to 2012.
Then again in 2013 it increases when compared to previous years. From this we can conclude the
following way..means
28

In 2013 the ROE is decreased because of Accumulated depreciation.

In 2013 the DUPONT (ROE) is minimizing due to less operating income margin.
With this method, assets are measured at their gross book value rather than at net book value in
order to produce a higher return on equity (ROE).
It is believed that measuring assets at gross book value removes the incentive to avoid investing
in new assets.
New asset avoidance can occur as financial accounting depreciation methods artificially
produce lower ROEs in the initial years that an asset is placed into service.
If ROE is unsatisfactory, the DuPont analysis helps locate the part of the business that is
underperforming.

SWOT Analysis
SWOT analysis
The SWOT analysis is a sum up of the external and internal analysis. Moreover, the SWOT
analysis will be used to manipulate the strategic findings in order to identify which areas are of
particular interest for the TISCO Group. This covers both the identification of the best
opportunities and the biggest threats to the organization. The SWOT analysis will put things into
perspective by identifying, which threats and opportunities should be dealt with right now and
which should be a concern for the organization in the future.

A reduction of the total life-cycle cost. Of refractory, in terms of Rs/thm, hasbeen done by proper
selection of material, optimization of its amount toachieve the guaranteed throughput and
finally by knowledge-basednegotiation.

Benefit to Tata Steel

Reduced down time of the trough runners leading to higher rate of production. Reduced
specific consumption of refractory in terms of kg/thm. Reduced overall cost of ownership due to
higher campaign life of refractories and also due to higher rate of production, as the productivity
of the blast furnace largely depends on the quality of refractories used at thecast house. Different
Sourcing Levers Applied for Procurement of High Value and CriticalCommodities
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Time for diversificationWith the demand for various products of steelsoaring presents us with the right time for upstream
diversification.

Threats faced by Tata Steel1. Resources to cushion the from business environmental changeTata Steel is a company floated by Tata Sons whose assets are valued at around 108 billion USD and thus
the company has enough reserves tocushion itself from market fluctuations.

2. International competitionCompanies like the Indian Steel magnateLakshmi Mittals Arcelor Mittal, Posco has landed in
the shores of India andhave proposed to set up 8 MT and 12 MT respectively. These are
amongstthe largest steel producers in the world and have a high chance of eatinginto the market
share of Tata Steel. Indian market is also plagued withcheaper Chinese made steel which is
ubiquitously available and issignificantly munching through the pie of all Indian steel makers
including Tata Steel.

3. Financial Crises Tata Steel is having a huge debt of 10.2 billion USD inits books and hence a huge interest
burden. With the volatility of thefinancial markets and the tightening of the liquidity by
the central banksthis rate is slated to go up and hence would further increase the interestburden
of the company.

4. Adoptability of the company to technological changes

Tata Steelhas shown immense integration abilities in the past. With the acquisitionof it has
been able to imbibe the high end technological knowledge to itsproduction facilities and hence
has been able to produce high quality steelat least prices and significantly bettered its operating
margins.

5.Regulatory normsThe government of India has chalked a strict normfor the clearance of a plant through
environmental impact assessment(EIA). To get clearance from the concerned authority demands
more thaneight months thus leads to delay and project cost escalation. Albeit thegovernments
steel policy has been pro industry in order to increase thesteel capacity at a brisk pace.

6. Adverse effects of land acquisition picketing-

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India is plagued withviolent agitation against land acquisition. The land acquisition process
of the companys plant in Orissa has been stalled primarily due to theuprising of the land losers
in the concerned area. Albeit the company isproviding with attractive compensation packages,
the uprising is primarilydue to the cheap politics of the local leaders to come into the
limelight. This will severely dent the companys expansion plans of the future.

7. Decrement in the sales volumesSome of the Tata Steel products(likeaerospace steel) have witnessed a severe reduction in sales
and as aresult of which the production facilities of the company in the UK and TheNetherlands is
facing the brunt of shut down.

8. Brand equity of the productsTata Steel brand is a very powerful one,can only take a product very far. Beyond that it will be
necessary for the product to strike ahead with its own brand. He says, "A villager who goesto buy
steel in the marketplace does not know what Tata Steel is bringingto this steel. All he knows is
that it is a Tata product." That villager needsto be told about the superiority of Tata Steels
product over others. This isthe work of the brand. Branding has begun to yield rich dividends.
Lastyear Tata Steel sold about 345,000 tons of branded steel, whichrepresented about 12 per cent
of its total steel sales, as against 265,000tons, representing 9 per cent of total steel sales, the
previous year. Thisyear the company plans to more than double its volume of branded
steel.Although the resultant increase in turnover of branded products will beenormous, there are
miles to go before Tata Steel can rest on its laurels.

CONCLUSION

From the above analysis this conclusion can be drawn that the performance of the Tata Steel is
very satisfactory in time of recessions.
31

They can retain their profitability and employees in that time. On the other hand reduction in
sales and revenues were low compared to other automaker around the world. And they can
control their cost with the sales.

They also maintain a high dividend payment to the shareholders that means Tata Steel is
committed to the shareholders for adding value to them.

But there is some inconsistence in the performance of the Tata Steel.

Higher current assets compared to the noncurrent assets.

Improper financial disclosure and decreasing trends of sales, revenues and profits,
inconsistency in earnings, huge contingent liabilities and no indication of cash flow in recent
years make it difficult to make comment on future profitability of the Tata Steel.

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