SYMBIOSIS INSTITUTE OF
MANAGEMENT STUDIES
SUBJECT: BASIC OF FINANCIAL MANAGEMENT
INTERNAL EVALUATION 2
SUBMITTED TO: PROF. MANISHA
SANGHVI
SUBMITTED BY:
NAME: BISHAL KUMAR BHUYAN
DIVISION & ROLL NO.: ECHO_13
PRN: 20020441069
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INTRODUCTION
Tata Steel was established in 1907 is one of the world's largest steel companies with a crude
steel production capacity of approximately 18.2 million tonnes per annum (MnTPA) as on 31
March 2020. The company is a diversified steel producer with major operations in India Europe
and South East Asia. The company has manufacturing units in 26 countries and a commercial
presence in over 50 countries. The company together with its subsidiaries is engaged in the
manufacture and sale of steel products in India and internationally. They offer hot and cold
rolled coils and sheets galvanized sheets tubes wire rods construction rebars and bearings. Tata
Steel is one of the few steel companies that are fully integrated - from mining to the
manufacturing and marketing of finished products. The company also involves in prospecting
discovering and mining iron ore coal ferro alloys and other minerals; designing and
manufacturing plants and equipment for steel oil and natural gas energy and power mining
railways ports aviation and space industries; and agricultural implements.
HISTORY
Tata Iron and Steel Company (TISCO) was founded by Jamshetji Tata and established
by Dorabji Tata on 26 August 1907. TISCO started pig iron production in 1911 and began
producing steel in 1912 as a branch of Jamsetji's Tata Group. The first steel ingot was
manufactured on 16 February 1912. During the First World War (1914-1918), the company
made rapid progress. By 1939, it operated the largest steel plant in the British Empire. The
company launched a major modernization and expansion program in 1951. Later, in 1958, the
program was upgraded to 2 million metric tonnes per annum (MTPA) project. By 1970, the
company employed around 40,000 people at Jamshedpur, and a further 20,000 in the
neighbouring coal mines. In 1971 and 1979, there were unsuccessful attempts to nationalise
the company. In 1990, the company began to expand, and established its subsidiary, Tata Inc.,
in New York. The company changed its name from TISCO to Tata Steel Ltd. in 2005.
Tata Steel on Thursday, 12 February 2015 announced buying three strip product services
centres in Sweden, Finland and Norway from SSAB to strengthen its offering in Nordic region.
The company, however, did not disclose the value of the transactions.
In September 2017, ThyssenKrupp of Germany and Tata Steel announced plans to combine
their European steel-making businesses. The deal will structure the European assets as
Thyssenkrupp Tata Steel, an equal joint venture. The announcement estimated that the
company would be Europe's second-largest steelmaker, and listed future headquarters
in Amsterdam.
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CAPITAL STRUCTURE
Period Instrument Authorised Issued PAIDUP
capital Capital
From To (Rs. Cr) (Rs. Cr) Shares(nos) Face Capital
Value
2018 2019 Equity 2100 1205.22 1,126,489,680 10 1126.49
Share
2017 2018 Equity 2100 1205.22 77,634,625 3 19.41
Share
2016 2017 Equity 2100 972.13 971,215,439 10 971.22
Share
2015 2016 Equity 2100 972.13 971,215,439 10 971.22
Share
2014 2015 Equity 2100 972.13 971,215,439 10 971.22
Share
STAKEHOLDER PATTERN
2020 2019 2018 2017 2016
Promoter Nos. of 10 10 12 12 12
and shareholders
Promoter Total no. of 414,358,657 398,823,600 39,98,54,574 30,45,01,341 30,45,01,341
Group share held
%of total no. 34.41% 33.12% 33.21% 31.35 31.35
of share
held
Public Nos. of 8,96,909 8,09,568 7,81,380 8,44,417 9,69,251
shareholders
Total no. of 789,768,342 805,302,785 80,42,64,866 66,67,13,098 66,67,13,098
share held
Nos. of 65.59% 66.88% 66.79% 68.65 68.65
shareholders
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Shareholders Name % of Share Holding
Promoters 34.41%
Foreign Institutions 11.45%
Nbanks Mutual Funds 13.06%
Central Govt. 0.25%
Others 5.33%
General Public 18.69%
Financial Institutions 16.81%
STOCK PRICE ANALYSIS
The company’s shares have 52 weeks price band of INR 250-505. The shares have a P/E ratio
of 12.49 (2019-20).
Earnings per share (EPS) is calculated as a company's profit divided by the outstanding shares
of its common stock. The resulting number serves as an indicator of a company's profitability.
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The higher a company's EPS, the more profitable it is considered to be. EPS ratio of 57.11 and
a dividend yield of 10% for the FY 2019-20.
The company has given a breakout from a coup and handle pattern in the month September till
now (2020). It has also broken out from the long-term downtrend.
If we compare the stock price of all the big steel producing companies (like JSW steel,
Hindalco, Jindal steel, TATA steel) then the tata steel share prices are the highest amongst all
i.e. 492.10.
Y-O-Y RATIO ANALYSIS COMPARED TO INDUSTRY
RATIO
Margin Ratio 2020 2019 2018 2017 2016
%
Operating 24.59 29.12 26.46 24.74 18.87
Margin(%)
Gross Profit 18.10 23.73 20.21 17.36 13.81
Margin(%)
Net Profit 11.15 14.91 6.99 15.88 19.99
Margin(%)
Operating Margin
Operating margin measures how much profit a company makes from sales after paying
for variable costs of production, such as wages and raw materials, but before paying interest or
tax. It is calculated by dividing a company’s operating income by its net sales. From the table
we can see that it is very fluctuating every year. It the financial year 2018-19 the operating
margin was highest 29.12 in the 5-year sample because of the low variable cost in that year.
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Gross profit margin
It is a metric analysts use to assess a company's financial health by calculating the amount of
money left over from product sales after subtracting the cost of goods sold (COGS).
Gross Profit Margin = (Revenue- Cost Revenue) / Revenue
The gross profit margin was highest in the FY 2018-19 that is 23.73.
Net profit margin
It tells us the profitability of the company and also the proportion of sales revenue. If the
company is making a profit margin of 10% then its performance is average whereas if it is
20% then the performance of the company is high i.e. the company is efficiently managing
its net profit margin. Due to the lockdown the performance of Tata Steel had been average in
terms of the net profit margins as for the FY 2019-20 it was 11.15.It was much better in the
FY 2018-19.
Profitability 2020 2019 2018 2017 2016
Ratio
Return on 9.04 14.95 6.77 6.93 6.95
Equity(%)
Return on 9.49 17.12 12.87 9.89 8.97
Capital
Employed
(%)
Return on 4.48 7.66 3.33 3.09 3.97
Assets (%)
Return on Equity
Return on Equity (ROE) measures the amount of net profit which the company
generates on money invested by the equity shareholders. From an investor's
perspective, ROE is a key ratio. The ROE (after subtracting preferred shares) tells
common shareholders how effectively their money is being employed. More ROE
means better return the shareholders are getting. Due to the pandemic the
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profitability ratio has been adversely affected. From the table we can see that the
ROE has been increasing and it was maximum in the FY 2018-19 i.e. 14.95. After
that there is a drop of 5.91% in the year 2019-2020.
Return on capital Employed.
The ROCE measures the ability of a firm to generate profits from its total capital (shareholder
capital plus debt capital) employed in the company. The ROCE for the company declined and
down at 9.49% during FY20, from 17.12% during FY19.
Return on Assets
The ROA measures how efficiently the company uses its assets to generate
earnings. which holds good in the case of FY 2018-19 i.e. at 7.66%.
Liquidity 2020 2019 2018 2017 2016
Ratio (%)
Current 0.65 0.60 1.35 0.87 0.68
Ratio
Interest 3.71 6.75 4.47 3.26 2.61
coverage
Ratio
Debt-Equity 0.48 0.42 0.51 0.66 0.51
Ratio
Quick Ratio 0.30 0.23 0.92 0.43 0.35
Current Ratio:
The company's current ratio improved and stood at 0.65 during FY20, from 0.60 during FY19.
The current ratio measures the company's ability to pay short-term and long-term obligations.
Ideally the current ratio should be greater than 1.5. Avoid investing in companies whose current
ratio is less than 1. There are exceptions to this rule, some good companies can have less than
1 or even a negative current ratio when they receive money faster from their customers than
they have to pay to their vendors.
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Interest coverage Ratio
An interest coverage ratio less than 1.5 is a red flag. The higher the ratio the less a company is
burdened by debt. If a company has no debt or the loan interest is being paid by interest income
from investments or other activities the ratio is zero which of course is excellent. A negative
ratio tells us that the company cannot even pay its interest on loans from its operating income,
stay far away from such companies.
Interest Coverage Ratio = Operating Income/Interest
The interest coverage ratio is declined to 3.71 in the FY2019-20 from 6.75 in the FY 2018-19
but still it is greater than 1.5. and from the year 2016-19 it the ratio has increased exponentially.
Debt-Equity Ratio:
Companies operating with high debt to equity on their balance sheets are vulnerable to
economic cycles. In times of slowdown in economy, companies with high levels of debt find
it increasingly difficult to service the interest on their borrowings as profit margins decline.
The long-term debt to equity ratio higher than 0.6 – 0.8 could affect the business of a company
and its results of operations. But that is not the case here and so the Company operates with
very low level of debt and is placed well to withstand economic slowdowns.
Quick Ratio:
The company Quick Ratio is improved by 0.07% and stood at 0.30 in the FY2019-20 from
0.23 in the FY2018-19. The quick ratio tells us the preparedness of the company within 90
days and we don’t take into consideration the inventory for calculating the ratio. If the value
of the quick ratio is more than 1, then it means the company is well prepared to deal with the
liquidity as then the company would have more assets than the current liabilities.
ACQUISITION (2019-20)
Acquisition of Bhushan Steel Limited (renamed Tata Steel BSL Limited)
During the year under review, the Company through its wholly-owned subsidiary, Bamnipal
Steel Limited (‘BNPL’) completed the acquisition of controlling stake of 72.65% in Bhushan
Steel Limited (renamed Tata Steel BSL Limited) (‘TSBSL’), pursuant to the Resolution Plan
(‘RP’) as approved by the National Company Law Tribunal vide its Order dated May 15, 2018,
under Corporate Insolvency and Resolution Process (‘CIRP’) of the Insolvency and
Bankruptcy Code, 2016 (‘IBC’).
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In March 2019, the Company acquired 1070,00,00,000 - 11.09% Non-Convertible Redeemable
Preference Shares of face value Rs.10 each, aggregating to Rs.10,700 crore, in two tranches
and 900,00,00,000 - 8.89% Optionally Convertible Redeemable Preference Shares of face
value Rs.10 each, aggregating to Rs.9,000 crore, in two tranches, of TSBSL.
Further, on April 25, 2019, the Board of Directors of the Company approved the amalgamation
of BNPL and TSBSL into and with the
Company by way of a composite scheme of amalgamation and have recommended a merger
ratio of 1 equity share of Rs.10 each fully paid up of the Company for every 15 equity shares
of Rs.2 each fully paid up held by the public shareholders of TSBSL.
As part of the scheme, the equity shares held by BNPL and the preference shares held by the
Company in TSBSL shall stand cancelled. The equity shares held by the Company in BNPL
shall also stand cancelled. The amalgamation is subject to shareholders and other regulatory
approvals.
Acquisition of Creative Port Development Private Limited
In January 2017, the Company entered into definitive agreement to acquire 51% equity stake
in Creative Port Development Private Limited (‘CPDPL’) for the development of Subarnarekha
Port at Odisha through a wholly-owned subsidiary Subarnarekha Port Private Limited. On
September 18, 2018, the Company completed the acquisition of 51% equity stake in CPDPL,
a proposed greenfield port project.
Acquisition of Steel Business of Usha Martin Limited
On September 22, 2018, the Company, as a part of its strategy to grow in long products,
executed definitive agreements for acquisition of steel business of Usha Martin Limited
(‘UML’), a special steel and wire rope manufacturer, through a slump sale on a going concern
basis.
Tata Sponge Iron Limited (‘TSIL’), a 54.5% subsidiary company engaged in the sponge iron
business, had been evaluating various strategic options to enhance its product portfolio and had
identified an entry into steel manufacturing in long products as a route to ensure sustainable
value creation for its shareholders.
On October 24, 2018, the Company extended support for TSIL’s entry into steel business and
identified it as the strategic vehicle for acquisition of steel business of UML.
On April 9, 2019, TSIL completed the acquisition of steel business undertaking including
captive power plants, for a cash consideration of Rs.4,094 crore, which is subject to further
hold backs of Rs.640 crore, pending transfer of some of the assets including mines and certain
land parcels.
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Investment in TRF Limited
In March 2019, the Company acquired 25,00,00,000, 12.5% Non-Convertible Redeemable
Preference Shares of face value Rs.10 each of TRF Limited on private placement basis,
aggregating to Rs.250 crore.
Investment in Tata Metaliks Limited
In March 2019, the Company acquired 27,97,000 equity shares of face value Rs.10 each of
Tata Metaliks Limited at a price of Rs.642 per equity share aggregating to Rs.179.57 crore and
34,92,500 Warrants of face value Rs.10 each at a price of Rs.642 per Warrant, with a right
exercisable by the Company to subscribe for one equity share per Warrant of face value of
Rs.10 each, aggregating to Rs.224.22 crore (25% paid on application).
FINDINGS
During the year under review, the Company, on a consolidated basis spent Rs.9,091 crore on
capital projects across India, Europe and Canada largely towards essential sustenance,
replacement and on-growth projects in India (Kalinganagar plant and Tata Steel BSL Limited),
and in the Netherlands. Despite this significant spend, the Company was able to keep the gross
debt level stable during the year.
The Company’s liquidity position remains strong at Rs.15,284 crore as on March 31, 2019,
comprising Rs.5,937 crore in cash and cash equivalent and Rs.9,347 crore in undrawn bank
lines.
On March 1, 2019, the Company allotted 43,150 - 9.8359% Unsecured Redeemable, Rated,
Listed, Non-Convertible Debentures (‘NCDs’) having face value Rs.10 lakh each for an
amount aggregating to Rs.4,315 crore, to identified investors on private placement basis.
Moody’s Investors Services upgraded long-term Corporate Family Rating of the Company by
one notch from Ba3 to Ba2 while S&P has revised its ratings outlook on the Company from
‘Stable’ to ‘Positive’ and affirmed the long-term credit rating of ‘BB-’.
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ANNEXURE
TATA steel Balance sheet
▪ The company's current liabilities during FY20 stood at Rs 61,660 cr as compared
to Rs 61,034 cr in FY19, thereby witnessing an increase of 1.015%.
▪ Current assets decrease and stood at Rs 58,732cr, while fixed assets rose 7.8%
and stood at Rs 149,992cr in FY20.
Income Statement
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• The company sales has been increased from the year 2016 to 2019, then in the next
year it decreased from 157,668cr to 139,816cr due to which the net profit also
decreased by a huge margin i.e. from 8962cr to 2148cr.
• Other income grew by 29.78% in FY 2019-20.
Cash flow statement
• cash flow from operating activities (CFO) during FY20 stood at Rs 20,168cr on a
YoY basis. when we compared the last 5 year data it was highest in the FY2019 i.e.
25,335cr.
• Overall, net cash flows for the company during FY20 stood at Rs 4462cr.
REFERENCE
1) https://www.moneycontrol.com/india/stockpricequote/steel-
large/tatasteel/TIS#sec_finanl
2) https://money.rediff.com/companies/Tata-Steel-Ltd/15510001/ratio
3) https://www.tatasteel.com/investors/integrated-reportannual-
report/?gclid=Cj0KCQiAnb79BRDgARIsAOVbhRo67AWmxskwFgOhK0XXDLdG
ItMu0eqCTr9ruHTk-zPu-AziR8JF7TEaAuP_EALw_wcB
4) https://in.tradingview.com/chart/TATASTEEL/Gh2W7wT4-Cup-Handle-in-Tatasteel/
5) https://www.equitymaster.com/research-it/annual-results-analysis/TISCO/TATA-
STEEL-2019-20-Annual-Report-Analysis/844
6) https://www.valueresearchonline.com/stocks/4043/tata-steel-ltd#snapshot
7) https://www1.nseindia.com/live_market/dynaContent/live_watch/get_quote/GetQuote
.jsp?symbol=TATASTEEL
8) https://www.tatasteel.com/investors/investor-information/share-prices-charts/
9) https://economictimes.indiatimes.com/tata-steel-ltd/stocks/companyid-12902.cms
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