investor presentation 13 jan 2011
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Investor PresentationJanuary 2011
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Agenda
Tata Group Overview
Introduction to Tata Steel
Global Steel Sector Update
Investment Highlights
Recent Developments
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Agenda
Tata Group Overview
Introduction to Tata Steel
Global Steel Sector Update
Investment Highlights
Recent Developments
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The Tata Group - Leadership with Trust
ENGINEERING MATERIALS ENERGY CHEMICALS CONSUMER PRODUCTS SERVICESCOMMUNICATION
AND INFO SYSTEMS
One of the worlds largest steel companies globally with
27.2 mtpa of steel production capacity
Principally engaged in providing information technology (IT)
and IT enabled services
Engaged in generation, transmission and distribution of
electrical energy and manufacture of electronic equipment Engaged in the business of operation of a group of hotels
Substantial resence in India and also owns Ja uar and Land O erates an inte rated bevera e business with a ortfolio
Leading Conglomerate with an Established Global Presence
5
Rover premium passenger vehicles brands
Largest automobile manufacturer by revenue in India
of strong brands
Second largest producer of soda ash in the world with
manufacturing facilities in India, UK, Kenya and USA
Indias leading crop nutrients player
Leading global provider of telecommunications solutions
serving the voice, data and next generation service needs
of carriers, enterprises and consumers across the world
PROMOTER COMPANIES ACTIVITY
Engaged in the business of promotion ofventures in several sectors
Tata Sons Shareholding in Major Operating Companies
Owner of the Tata brand name and the Tatatrademarks used by most of the Tatacompanies
Tata Industries
GROUP STRUCTURE
ACTIVITY
Incorporated on November 8, 1917
66% owned by public philanthropic trustsendowed by members of the Tata family
Two largest shareholder trusts are DorabjiTata Trust and the Sir Ratan Tata Trust
Engaged in the business of promotion ofventures in several sectors
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Agenda
Tata Group Overview
Introduction to Tata Steel
Global Steel Sector Update
Investment Highlights
Recent Developments
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Tata Steel Group: A Global Steel Player One of the flagship companies of the Tata Group and worlds
7th largest steel company in terms of crude steel production
volume(1)
One of the most geographically diversified steel producers with
crude steel capacity of approximately 27.2 mn tonnes
Commercial presence in over 50 countries and operations in 26
countries
Presence across entire value chain of steel manufacturing
Employee strength of approximately 81,000
Net Sales (H1FY11): Rs. 558,399 mn (US$12.4 bn)
Total Assets (as of September 30, 2010): Rs. 1,213,678 mn
(US$26.9 bn)
PAT* (H1FY11): Rs. 37,978 mn (US$ 844 mn)
Profit after taxes, minority interests and share of profit of associates(1) In 2009, according to WSA
Leading Steel Producer With ~27 mt of Annual Capacity Across Global Steel Facilities
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Netherlands ThailandSingapore and AsiaPacific
USUK EU (ex UK &Netherlands)
Three production facilities
Capacity: 10.7 mtpa
Distribution centres
One production facility
Capacity: 7.7 mtpa
Distribution centres
One production facility
Capacity: 0.75mtpa
2 mtpa finishing capacityin 5 countries
Distribution centres
Three production facilities
Capacity: 1.2 mtpa(finishing capacity1.7mtpa)
Distribution centres
Distribution centres Distributioncentres
GlobalFacilitiesand
DiverseProductMix
Conversion Rate USDINR 45
India
One production facility
Capacity: 6.8 mtpa
Distribution centres
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Agenda
Tata Group Overview
Introduction to Tata Steel
Global Steel Sector Update
Investment Highlights
Recent Developments
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Industry Update
Easing monetary conditions globally are driving commodity prices higher
The global steel market is recovering, however most developed markets face a long recovery.
Emerging markets, particularly India and China are expected to continue to have robust growth
China is a major influence on the global steel market, and this influence will grow further in the
medium term. It is also a key driver of raw material prices
Quarterly contracted prices of raw materials have added to earnings volatility of non integrated
steel manufacturers
This volatility has led to steel manufacturers seeking captive mining resources to safeguard
business interests
Lower cost of production and vast domestic market makes India an attractive location for steel
manufacturers
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Global Steel Consumption Outlook
25%
8%
19%
27%
31%28%
7%
14% 13%
6%
11%9% 9%
4%
14%
5%
0%
10%
20%
30%
40%
2009 2010 2011
Worldsteel Apparent Consumption Forecast 2010E & 2011E(% Change y-o-y)
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-36%
-28%
-36%
-24%
-7%
-40%
-30%
-20%
-10%
en ra ou
America
na n a o a
Source: WSA Short Range Outlook for Apparent Steel Use October 2010 Tables
Continued real demand growth in emerging markets expected to contribute to demand going into 2011. The BRICcountries are expected to contribute 37.4% and 50.5% respectively of the incremental demand in 2010 and 2011.
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Agenda
Tata Group Overview
Introduction to Tata Steel
Global Steel Sector Update
Investment Highlights
Recent Developments
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Investment Highlights
Control Over Logistics
5 2
Strong Position in the IndianMarket
Enhanced Competitivenessthrough
Continuous Improvement
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Raw Material Security
3
Diversified Product Offering
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Presence In Developed
And Developing Markets
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Strong Position in the Indian Market
Expansion Projects Currently Ongoing:
Capacity expansion is a key strategy for Tata Steel in India, where it derives much of its competitive advantage as a low-cost producer from its access to raw materials and a skilled workforce at a relatively low cost of labour
Work is currently under way to increase steelmaking capacity at Jamshedpur to 9.7mtpa by 2012
Looking further into the future, the Company plans to continue to increase its capacity significantly through greenfield
developments
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Jamshedpur Brownfield Expansions Greenfield Expansions
15.7
1.8 mtpa completed
Orissa Ph-1
2.9 mtpa
Orissa Ph-2
Expansion Projects in Pipeline:
Chattisgarh (5 mtpa) and Karnataka (3 mtpa)
2007 - 08 2008 - 09 2011 - 12 >2014
13Conversion Rate USDINR 44.935
9.7
12.7
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Expansion Projects To Enhance Capacity
Jamshedpur: Brownfield Expansion Project
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Orissa : Greenfield Expansion Project
6 mtpa of flat products integrated steel plantin two phases of 3 mtpa each
2.9 mtpa expansion
Expected to be completed by the end of FY 2012
'I' blast furnace progress Structural erection of JK bay inprogress at LD 3-tscr site
Grinding stack at pellet plant View of Soil test at Sinter plant Area
View of Soil test at Sinter plant Area View of inward material section
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Enhance Competitiveness Through Continuous Improvement
The Company undertook a series of measures to counter recessionary pressures in FY09 and FY10 to reduce cost
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Key Initiatives
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One Company OperatingModel
Product Development AndMarketing Cost Saving Initiatives Strong Retail Management
Implemented, and plans to
continue to implement, strategic
cost-saving measures to
improve the long-term
competitiveness of its business
Fit for the Future initiatives for
its European operations
Works closely with retail and
wholesale customers to ensure
value by scheduling deliveries
on a just-in-time basis
Been able to reduce customers
inventory stock and increase
their margins
Through research and
development initiatives working
to capture market share in a
number of potential high growth
areas
Customer First strategy
In the process of transforming its
operations to directly align its
marketing, sales and distribution
teams with major industries and
sectors
Transforming its supply chain in
Europe
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Raw Material Security
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Investments in Minerals Assets Improving Raw Material SecurityMozambique
Motambo substation , EDM power line
Riversdale Benga Project :Core Yard & Construction Camp
Beira Port
New Millennium Corporation
Field site Exploration
Community and people
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NML (Holdco)
Canada
TS Equity Stake: 27%NML JV (iron ore)
TS Equity Stake: 80%
Status: Initiated project development
Offtake rights: 100%
TSL has an exclusive right to
negotiate and settle a proposed
transaction in respect of NMLs
LabMag Project
RML (Holdco)
Australia
TS Equity Stake: ~24%RivMoz
Partner: RML
TS Equity Stake: 35%
Status: Project development
commenced
Coking coal
Offtake rights: 40% of the coking
coal
CDJV
Australia
Partners: Vale, JFE, NSC,Posco
TS Equity Stake: 5%
Offtake rights: 5 to 20%
Coking coal
Iron Ore
Coal
TSCI
Ivory Coast
Partner: Sodemi TS Equity Stake: 85%
Status: Pre-feasibility
Increasing Higher Raw Material Security
India: Captive mines
Significant amounts of raw
material requirements for FY10sourced from leased captive
mines
Iron Ore: 100%
Coal: 49%
Significant amount offerro alloy
requirements
Current resources
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Diversified Product Offering: Branding and Positioning4
Brand Management IndiaTata Steel Europe: Diversified Product Offerings
Rail
Packa in
Aerospace
Automotive
Add value to its steel operations by increasing the sale of branded
products, particularly from its Indian facilities
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Shipbilding Consumer Products
Energy and Power Operations Engineering
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Diversified Product Offering: Downstream Operations
Tata Steel Processing &DistributionLtd (TSPDL)
100% subsidiary of Tata Steel since July 2009
Five processing units located across India with a processing capacity of ~2 million tonnes per annum
Also engaged in the business of high-end plate fabrication for major equipment manufacturers including Caterpillar and JBP Group
Tata Bluescope Tata Bluescope Steel Limited (TBSL) a 50:50 JV with Bluescope Steel Limited
Engaged in the business of manufacturing building products & solutions from metal & color coated steel.
Existing operations include three facilities with a total installed capacity of 136,000 TPA in Pune, Bhiwandi and Chennai, to manufacture
products for the Indian construction industry
Presently implementing a Greenfield project for setting up of a metal coating (capacity of 250,000 tpa) and color coating (150,000 tpa)
facilities at Jamshedpur, to be operational by April 2011
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Tinplate Company
TCIL is commissioning Cold Roll Mill in 2011
The project involves capacity expansion to 390,000 tpa
Tata Steel holds ~45% equity
Wires Division
Steelworks facility in Tarapur, Maharashtra
Wire drawing plants at Indore and Bengaluru
Caters to the Indian construction and automotive segments for products such as springs, pre-stressed concrete and conductors
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Control Over Logistics
Tata NYK Shipping
Ship anchored at the portDhamra Port
Dhamra Port Company Ltd (DPCL) a 50:50 JV with L&T
Deep sea port at Dhamra, Orissa
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A 50:50 JV between Tata Steel and Nippon Yusen Kabushiki Kaisha (NYK Line),
Japan, currently operating 12 chartered and 2 owned vessels
Focused on shipping dry bulk and break bulk cargo
Trial operations commenced in September 2010
Expected to be capable of handling 13 mtpa of coking coal and 6 mtpa of iron ore
TM Intl Logistics
Partnership between Tata Steel, NYK and Martrade
Engaged in the business of port operations, cargo handling and other related
services
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Agenda
Tata Group Overview
Introduction to Tata Steel
Global Steel Sector Update
Investment Highlights
Recent Developments
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$1,781
$1,232
$1,989$2,030
40.6%40.7%37.6%
35.8%
FY2008 FY2009 FY2010 H1 FY2011
$1,042
$810
$1,122$1,156
26.7%23.8%21.4%
20.2%
FY2008 FY2009 FY2010 H1 FY2011
Key Financials India Standalone (US$)
Net Sales (US$ mn) EBITDA (US$ mn) and EBITDA Margin (%) (1) PAT (US$ mn) and PAT Margin (%)(5)
$4,376
$5,404 $5,560
$3,035
FY2008 FY2009 FY2010 H1 FY2011
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Net Debt (US$ mn) (2)
$3,901
$5,369$5,635
$4,890
FY2008 FY2009 FY2010 H1 FY2011
Net Debt
Capex (US$ mn) (4)
$546
$473
$619
$467
FY2008 FY2009 FY 2010 H1 FY2011
Capex
Revenue
Net Debt / EBITDA (3)
2.2x 2.2x
2.8x
2.5x
FY2008 FY2009 FY2010 H1 FY2011
Net Debt / EBITDAConversion Rate USDINR 45(1) EBITDA = Net Sales - Total expenditure + Depreciation + Net Finance Charges
(2) Net Debt = Secured Loan + Non Secured Loans Cash and bank balances(3) Net Debt / EBITDA for H1FY2011 is using a annualized figure of EBITDA(4) Capex = Purchase of fixed assets(5) PAT = Net Profit after Tax post Prior Period Adjustments (Adjusted for Tax)
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$3,952
$1,801
$1,787
$4,028
14.5%
13.5%12.3%
7.9%
FY2008 FY2009 FY2010 H1 FY2011
Key Financials Consolidated (US$)
Net Income from Operations (US$ mn) EBITDA (US$ mn) and EBITDA Margin (%) (1) PAT (US$ mn) and PAT Margin (%)(5)
$29,230$32,740
$22,754
$12,409
FY2008 FY2009 FY2010 H1 FY2011
$1,663
$844
($448)
$779
6.8%
5.7%
2.4%
-2.0%
PAT % Margin
EBITDA % Margin
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Net Debt (US$ mn) (2)
Revenue
$10,976$10,842
$11,945
$10,286
FY2008 FY2009 FY2010 H1 FY2011
Net Debt
Capex (US$ mn) (4)
$1,871
$1,106
$1,874
$1,589
FY2008 FY2009 FY2010 H1 FY2011
CapexConversion Rate USDINR 45(1) EBITDA = Net Income from Operations - Total expenditure + Depreciation + Net Finance Charges
(2) Net Debt = Secured Loan + Non Secured Loans Cash and bank balances(3) Net Debt / EBITDA for H1FY2011 is using a annualized figure of EBITDA(4) Capex = Purchase of fixed assets(5) PAT = Profit / (Loss) as Restated after Minority Interest and Share of Profits of Associates
Net Debt / EBITDA (3)
2.8x3.0x3.0x
5.8x
FY2008 FY2009 FY2010 H1 FY2011
Net Debt / EBITDA
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Rs 196,910
Rs 243,158 Rs 250,220
Rs 136,582
FY2008 FY2009 FY2010 H1 FY2011
Rs 80,138
Rs 55,455
Rs 89,521Rs 91,334
40.6%40.7%37.6%
35.8%
FY2008 FY2009 FY2010 H1 FY2011
Rs 36,445
Rs 46,870Rs 50,468
Rs 52,01726.7%23.8%
21.4% 20.2%
FY2008 FY2009 FY2010 H1 FY2011
Key Financials India Standalone (Rupees)
Net Sales (Rs mn) EBITDA (Rs mn) and EBITDA Margin (%) (1) PAT (Rs mn) and PAT Margin (%)(5)
Revenue
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Net Debt (Rs mn) (2)
Rs 175,567
Rs 241,615Rs 253,556
Rs 220,051
FY2008 FY2009 FY2010 H1 FY2011
Net Debt
Capex (Rs mn) (4)
Rs 24,590
Rs 21,265
Rs 27,863
Rs 21,020
FY2008 FY2009 FY2010 H1 FY2011
Capex
Net Debt / EBITDA (3)
2.2x 2.2x
2.8x
2.5x
FY2008 FY2009 FY2010 H1 FY2011
Net Debt / EBITDA(1) EBITDA = Net Sales - Total expenditure + Depreciation + Net Finance Charges
(2) Net Debt = Secured Loan + Non Secured Loans Cash and bank balances(3) Net Debt / EBITDA for H1FY2011 is using a annualized figure of EBITDA(4) Capex = Purchase of fixed assets(5) PAT = Net Profit after Tax post Prior Period Adjustments (Adjusted for Tax)
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Rs 177,824
Rs 81,049
Rs 80,427
Rs 181,277
14.5%
13.5%12.3%
7.9%
FY2008 FY2009 FY2010 H1 FY2011
Key Financials Consolidated (Rupees)
Net Income from Operations (Rs mn) EBITDA (Rs mn) and EBITDA Margin (%) (1) PAT (Rs mn) and PAT Margin (%)(5)
Rs 1,315,336
Rs 1,023,931
Rs 558,399
Rs 1,473,293
FY2008 FY2009 FY2010 H1 FY2011
Rs 74,845
Rs 37,978
(Rs 20,147)
Rs 35,042
6.8%
5.7%
2.4%
-2.0%
PAT % Margin
EBITDA % Margin
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Net Debt (Rs mn) (2)
Revenue
Rs 493,929Rs 487,906
Rs 537,521
Rs 462,852
FY2008 FY2009 FY2010 H1 FY2011
Net Debt
Capex (Rs mn) (4)
Rs 84,197
Rs 49,751
Rs 84,337
Rs 71,495
FY2008 FY2009 FY2010 H1 FY2011
Capex
(1) EBITDA = Net Income from Operations - Total expenditure + Depreciation + Net Finance Charges
(2) Net Debt = Secured Loan + Non Secured Loans Cash and bank balances(3) Net Debt / EBITDA for H1FY2011 is using a annualized figure of EBITDA(4) Capex = Purchase of fixed assets(5) PAT = Profit / (Loss) as Restated after Minority Interest and Share of Profits of Associates
Net Debt / EBITDA (3)
2.8x3.0x3.0x
5.8x
FY2008 FY2009 FY2010 H1 FY2011
Net Debt / EBITDA
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Agenda
Tata Group Overview
Introduction to Tata Steel
Global Steel Sector Update
Investment Highlights
Recent Developments
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Recent Developments
Q3 FY2011 QuarterlyPerformance
Tata Steel and Nippon Steel Corporation have signed a JV agreement (51:49) to set up Indias first CAPL for production of 600,000 tpa of
Indian Operations
Third-quarter deliveries at 1.637 million tonnes were nearly 3% higher compared to the corresponding period of last year and about 1%
lower than the second (September) quarter of FY11
The pricing environment in India in the third quarter was mixed, with prices for flat products being marginally lower compared to the
second quarter, while prices for some long products increased
European Operations
Production and deliveries in the third quarter of FY11 were in line with the first half of FY11
Higher raw material prices and reduced apparent demand due to seasonal slowdown, amongst other factors, adversely affected
margins
Group-wide performance
Volume of steel products sold declined marginally, and net sales expected to be flat compared to the second quarter
Operating results expected to decline somewhat in comparison to the second quarter due to increased raw material prices
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Continuous Annealing
and Processing Line(CAPL)
Update on Teesside CastProducts
Fire at Ijmuiden,Netherlands
automotive cold rolled steel at Jamshedpur
The JV will address the localization needs of Indian Automotive customers for high grade cold rolled steel sheet
Expected to come on stream in 2013
Received a partial final award in TSUKs favour in an ongoing arbitration proceeding between TSUK and certain off-takers of its Teesside
Cast Products Plant on January 05, 2011
The arbitral tribunal amongst other things found that the off-takers did not validly terminate their off-take agreements
The arbitration proceedings are being held under the auspices of the ICC International Court of Arbitration
The arbitration proceedings will now move to the next phase of determining the amount of damages
Fire occurred in one of Tata Steels pickling lines at Ijmuiden plant in the Netherlands
Although Tata Steel expects customer deliveries to be met by diverting scheduled production to alternative facilities, it has declared force
majeure on deliveries of certain strip products from the Ijmuiden site
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Offering Summary
Further Public Issue of 57,000,000 Equity Shares comprising of:
A Net Issue to the public of 55,500,000 Equity Shares
An Employee Reservation Portion of 1,500,000 Equity Shares for purchase by Eligible Employees
IssueIssue
Tata Steel Limited (Tata Steel or the Company)IssuerIssuer
100% Book Building Process under Schedule XI of the SEBI Regulations
Price band: Rs. 594 to Rs. 610 / equity share of face value Rs. 10 each The floor price is 59.4 times the face value and the cap price is 61 times the face value
Bids can be made for minimum of 10 equity shares and in multiples of 10 equity shares thereafter
Price BandPrice Band
BookBookRunning LeadRunning Lead
ManagersManagers
The Issue shall constitute approximately 5.94% of the post-Offer paid up equity share capital of the CompanyIssue %Issue %
Price Band to be announced at least 1 working day prior to the Offer Opening Date, all categories of investors to bid
within the Price Band
Allotment to be made to Non-Institutional Bidders and QIBs proportionately at the Offer Price
Retail Individual Bidders and Eligible Employees have the option of applying at the Cut-Off Price
IssueIssue
ProcedureProcedure
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Offering Summary (Contd)
QIB Portion :
Not more than 50% of the Net Issue or 27,750,000 Equity Shares will be allocated on a proportionate basis to Qualified
Institutional Buyers (QIB Portion) provided that the Company may allocate up to 15% of the QIB Portion to Anchor
Investors on a discretionary basis (Anchor Investor Portion), out of which at least 5% would be available for allocation
to domestic Mutual Funds only
FII participation allowed in the Net Offer
Non-Institutional Portion : Not less than 15% of the Net Issue or 8,325,000 Equity Shares
Retail Portion : Not less than 35% of the Net Issue or 19,425,000 Equity Shares
Issue StructureIssue Structure
January 19, 2011 to January 21, 2011
Anchor book opens and closes on January 18Issue PeriodIssue Period
Part finance the capital expenditure for expansion of the Companys existing works at Jamshedpur; (Rs. 18,750 mn)
Payment of redemption amounts on maturity of certain redeemable non-convertible debentures issued by the
Company on a private placement basis (Rs. 10,900 mn); and
General corporate purposes
Object of theObject of the
IssueIssue
Employee Reservation Portion: 1,500,000 Equity Shares (2.6% of the Issue)
There is no requirement for minimum Promoters contribution under Regulation 34 (b) of the SEBI Regulations
Further, except for the 15,000,000 Equity Shares held by the Promoter which are locked-in till July 22, 2013 and
258,422,225 Equity Shares held by Promoter which are locked in till January 27, 2011 pursuant to Regulation 78 of
the SEBI Regulations, the Equity Shares held by the Promoter shall not be subject to any lock-in
LockLock--inin
RequirementsRequirements
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