Company Overview–
Tata Steel Limited is an Indian multinational steel-making company headquartered in Mumbai, Maharashtra, India, and a subsidiary of the Tata Group. It was established in 1907 as Asia’s first integrated private sector steel company. Tata Steel Group is among the top-ten global steel companies with an annual crude steel capacity of over 30 million tonnes per annum. It is now the world’s second-most geographically-diversified steel producer, with operations in 26 countries and a commercial presence in over 50 countries. The Tata Steel Group, with a turnover of Rs. 1, 48,614 crores in FY 14, has over 80,000 employees across five continents and is a Fortune 500 company.
There have been joint ventures, subsidiaries and associates that have expanded the company’s presence in the global arena since 2004. Today, the company has a manufacturing and marketing network that covers Europe, Southeast Asia and the Pacific Rim countries. Operating companies within the Group include Tata Steel Limited (India), Tata Steel Europe Limited (formerly Corus), Tata Steel Singapore and Tata Steel Thailand.
In 2008, Tata Steel India became the first integrated steel plant in the world, outside Japan, to be awarded the Deming Application Prize 2008 for excellence in Total Quality Management. In 2012, Tata Steel became the first integrated steel company in the world, outside Japan, to win the Deming Grand Prize 2012 instituted by the Japanese Union of Scientists and Engineers.
Shareholding Pattern–
Management–
| Name | Designation |
| Cyrus Mistry | Chairman |
| T V Narendran | Managing Director |
| Andrew Robb | Director |
| NusliWadia | Director |
| Karl-Ulrich Koehler | Director |
| Subodh Bhargava | Director |
| Jacobus Schraven | Director |
| B Muthuraman | Vice Chairman |
| Koushik Chatterjee | Executive Director |
| Mallika Srinivasan | Director |
| D K Mehrotra | Director |
| O P Bhatt | Director |
| Ishaat Hussain | Director |
SWOT Analysis–
Strengths
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Weakness
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Opportunity
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Threats
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Competitor Analysis-
The steel industry is quite crowded consisting of more than 8 players in the large scale sector and many medium size firms. Thus, competition does exist. But the intensity is far too low due to very large demand supply gap. The amount of investment that exists and will exist in the long run is huge and this will serve as the exit barrier and further increasing rivalry. Thus, the profit potential of Steel Industry in the short run is high but it may be reduced in the long run owing to better bargaining power of buyer for reasons stated earlier.
Tata steel is the largest company in terms of market capitalization in the BSE in the Steel-Large sector. The market capitalization as of 1st November 2014 is close to Rs.47500 Cr. SAIL, with market capitalization of around Rs.34000 Cr. , is its closest competitor. Other companies in the Steel-Large sector are JSW Steel, Steel Exchange, Visa Steel and Facor Steel.
Market capitalization as of 1st November 2014 in Steel-Large sector-
| Company | Market Capitalization (in Rs Cr) |
| Tata Steel | 47526 |
| SAIL | 34324 |
| JSW Steel | 30495 |
| Steel Exchange | 287 |
| Visa Steel | 221 |
| Facor Steel | 14 |
Source: http://www.moneycontrol.com/stocks/marketinfo/marketcap/bse/steel-large.html
The EBITDA margin of Tata Steel is 27.53% as of FY14 and that of SAIL is around 9%. Since Tata Steel has much higher EBITDA margin, it can be inferred that it is performing better than SAIL. So there are less operating expenses eating into the company’s bottom line leading to a more profitable operation. However, SAIL is among the 7 Maharatnas of the country’s public sector. It is not actually operating for profit maximization.
JSW Steel has an EBITDA margin of 17.9% in FY14. So JSW Steel scores less in terms of performance as compared to Tata Steel.Tata Steel has a commercial presence in over 50 countries. JSW steel has presence in over 100 countries. The distribution network of JSW Steel is better than Tata Steel.
Comparing some of the important financial parameters of the companies-
| Company | Revenue (Rs Cr) | Net Profit (Rs Cr) | Net Profit Margin (%) | Gross profit Margin (%) | Net Worth (Rs Cr) | R0A (%) | RoE (%) | Debt/Equity ratio | Interest Coverage ratio |
| Tata Steel | 149130.4 | 3594.9 | 2.4% | 11% | 40532 | 4.6% | 8.9% | 1.3 | 2.6 |
| SAIL | 479017 | 2651.1 | 5.6% | 9.2% | 43306.7 | 3.9% | 6.1% | 0.3 | 3.1 |
| JSW Steel | 51305.4 | 452 | 0.9% | 17.9% | 21173.9 | 4.5% | 2.1% | 1.3 | 2.0 |
Source: http://www.equitymaster.com
In terms of Total revenue, Tata Steel is better but it has lower net profit margin as compared to SAIL. The ROE is higher for Tata Steel. Return on Assets for Tata Steel is 4.6% which is higher than the other two companies. It suggests that Tata Steel makes better use of its assets. SAIL is the least leveraged and it can borrow funds more easily than Tata Steel and JSW Steel. The interest coverage ratio for SAIL is better and this suggests that it can pay interest on outstanding debt more easily than the other two companies.
Steel production capacity of the companies are as given below—
| Company | Crude steel production capacity for year 2014 (in million tonnes) |
| Tata Steel | 30 |
| JSW Steel | 14.3 |
| SAIL | 24.6 |
Financial Statements Of The Company-
RATIOS-
A valuation ratio of a company’s current share price compared to its per-share earnings.
The P/E is sometimes referred to as the “multiple”, because it shows how much investors are willing to pay per dollar of earnings.
The asset turnover ratio is a measure of a company’s ability to use its assets to generate sales or revenue, and is a calculation of the amount of sales or revenue generated per dollar of assets.
The portion of a company’s profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company’s profitability.
A financial ratio that shows profitability compared to investments made in new capital is known as “Return on average Capital Employed”
The ratio is mainly used to give an idea of the company’s ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations.
Group Performance Highlights–
- Group steel deliveries in FY’14 increased to 26.56 mn tonnes from 24.13 mntonnes in FY’13. Deliveries in Q4 FY’14 increased to 7.62 mn tonnes compared to 6.38 mn tonnes in Q3 FY’14.
- Group consolidated turnover in FY’14 was Rs.1,48,614 Cr. versus Rs.1,34,712 Cr. in FY’13.
- FY’14 Group EBITDA was Rs.16,377 Cr. compared to Rs.12,654 Cr. in FY’13 which is an increase of 29%.
- Group PAT in FY’14 increasedto Rs.3,595Cr.versus the loss of Rs.7,058 Cr. in FY’13. FY’14 results included exceptional expense of Rs.28 Cr. compared to Rs.7,390 Cr. in FY’13.
- The Group’s Basic and Diluted Earnings PerShare for FY’14 increased to Rs.35.19 from the loss of Rs.74.54 in FY’13.
- Cash and cash equivalents as on March 31, 2014 were Rs.11,373 Cr. and net debt was at Rs.67,326 Cr.
New Developments–
- Tata Steel has signed a memorandum of understanding with the Geneva-based Klesch group for the sale of its products business in Europe and associated distribution activities. This division has accounted for 25 per cent of Tata Steel’s European operations.
- World crude steel production grew at 3.6% in 2013. Lower growth in steel consumption in large emerging economies like China and India were countered by growth in mature markets like the USA. However, disinflationary pressures and financial fragility continue to be a concern in the Eurozone. In light of the above, global steel demand is forecast to grow by 3.1% in 2014. With the sale of its products business in Europe, Tata Steel would not benefit from this absolute increase in demand.
- Growth in Chinahas tempered as the country pursues a ”sustainable” model of development. Deviations in the growth trajectory of China willdefinitely impact global steel demand-supply because it is the largest producer of steel globally.
- Tata Steel is aggressively pursuing completion of the first phase of the 6 million tonnes per annum green field project in Kalinganagar. Stage-wise commissioning is expected to start by FY’15.
- Gopalpur is expected to be the single biggest ferrochrome producing site in Asia through the establishment of two units with a capacity of 0.3 million tonne per annum (tpa). Tata steelhad earlier announced 55,000 tpa ferrochrome facility at Gopalpur. But it has now decided to add another unit of 240,000 tpa capacity.
References–
http://www.tatasteel.com/about-us/company-profile.asp
MotilalOswal research report
http://articles.economictimes.indiatimes.com/keyword/tata-steel
http://in.reuters.com/article/2014/08/13/india-tata-steel-results-idINKBN0GD0T820140813
http://www.tatasteel.com/investors/pdf/Q4-FY13-14.pdf
http://www.tatasteel.com/investors/annual-report-2013-14/html/cons-profit-loss.html
www.tatasteel.com/investors/annual-report-2013-14/html/balance-sheet.html
http://www.tatasteel.com/investors/performance/charts/interactive-charts.asp
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