Tata Steel ( FM )

8/14/2019 Tata Steel ( FM )

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TATA STEEL

FINANCIAL ANALYSIS ON TATA STEEL

Presented bySanjay Mangunde


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ACKNOWLEDGEMENTS

We would like to express our heartfelt gratitude and immense

respect to MAM. SAJIDA (Faculty, Financial management). We

wish to thank her for making us understand the financialconcepts in a lucid and simple manner and for her patience in

clearing all our doubts.


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SUMMARY OF TATA STEEL

The project assigned to us was to performthe financial analysis of TATA STEEL and studythe environment in which it operates.

A comparative study of various players wasmade to understand the actual dynamics ofthe working of the steel sector in INDIA.


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HISTORY OF INDIAN STEEL SECTOR

Steel role plays a vital role in the development of the anymodern economy.

The per capita consumption of steel is generally accepted ofa yardstick to measure the level of socio- economicdevelopment and living a standards of the people .

As such, no developing country can afford to ignore the steelindustry.


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TATA STEEL -THE COMPANY

Tata Steel Limited, incorporated in 1907 by Shri Dorabji Tata, is

India's largest private sector steel company belonging to the

Tata Group.

The company manufactures finished steel, both long and flat

products like hot and cold rolled coils and sheets, tubes, wire

rods, construction re-bars, rings and bearings.


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The company markets its products inbrands like "Tata Steelium, Tata Tiscon,Tata Pipes, etc.

Its main plant is located in Jamshedpur,having manufacturing capacity of 5 MTPA(million tonne per annum) while its

processing units, captive iron ore and coalmines are located in the states of Orissa,Jharkhand, Maharashtra, Gujarat and WestBengal.


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With its head office located in Mumbai, the companyfunctions through a network consisting of tradingarms and operation and projects sites spread across

countries in the continents of Asia, Europe andAmerica.

The company is among the lowest cost producers ofsteel in the world.


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INCOME STATEMENT TATA STEEL

2007-2006 2005-2006 2004-2005

SALES 175520.20 202444.20 159986

COGS 91713.90 67057.60 41648.30

Operating Expense 10606.90 69770.509 55413.80

Deprecation 8843.90 8910.10 6518.30

PBIT 64355.50 56705.10 56405.70

Interest 1739.00 1555.30 1981.30

PBT 62616.50 55149.80 54424.40

TAX 20395.00 17939.10 18712.40

INCOME STATEMENT


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Ratio Analysis of TATA STEEL

Liquidity Ratios

Ability of the firm to meet short term obligation comes from holding of liquid

assets which are readily convertible into cash. It is the responsibility of the

treasury manager to maintain the right balance between investments andliabilities to get the maximum liquidity. It involves constant monitoring of

cash flow position. We will analyze the two popular measures of the liquidity

of the company.

Current Ratio:

Current Ratio = Current Assets / Current Liabilities


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Quick ratio:

Quick ratio = (Current assets - Inventories) / Current

Liabilities.

It s more reliable then current ratio because it considersonly the most liquid assets and does not include the hiddenfactors like window dressing that may skew the actual

scenario.


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2007 2006 2005

CA 139044.20 44908.70 52902.10

CL 54536.60 38087.20 45752.30

Debtor 6316.30 12187.20 13240.70

Inventories 38881.30 27733.10 24899.00

Current ratio 2.55 1.18 1.16

Liquid ratio 1.84 0.45 0.61

Absolute cashratio

1.72 0.13 0.32

There has been a substantial increase in cash items in Current Assets

for the year 2006-2007. This accounts for almost 80% of the increase in

Current Assets. This has led to the substantial increase in Liquidity

ratios for the year 2006-2007


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Working Capital:

Working Capital = Current Assets Current Liabilities

2007 2006 2005

CA 139044.20 44908.70 52902.10

CL 54536.60 38087.20 45752.30

WC 84507.60 6821.50 7149.80

Working Capital is showing a significant rise during the year

due to borrowings to the tune of Rs. 80436 million.


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Profitability Ratio

Profitability Ratios show how successful a company is in terms

of generating returns or profits on the Investment that it has

made in the business i.e. the Profitability ratios speak about the

profitability of the company. The higher these ratios the better it

is for the company.

profit Margin ratios

o Operating Profit Margin ratio

o Net Profit Margin ratioRate of Return ratios

o Return on Total Assets (ROTA)

o Return on Capital Employed (ROCE)

o Return on Net Worth (RONW)

There are two types of profitability ratios:


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CONCLUSION

The acquisition of Corus was a significantevent, a long term and strategicinvestment decision which has affectedthe financial position of the company forthe year 2006-2007

Tata Steel ( FM )

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