manac report_tata steel

8/10/2019 Manac Report_Tata Steel

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MANAC-1

GROUP

ASSIGNMENT

COMPANY

TATA STEEL LIMITED

SUBMITTED BY

PRATEEK GIRIA B14100

PRATYUSH PANKAJ B14101

SHRIYA SUKALIKAR B14112

SUDEEPTI SRIVASTAVA B14116

SUMEDHA SAHANI B14118

VATSAL GUPTA B14120


2/12

STATEMENT OF PROFIT/ LOSS

(All amounts are in Crores)

FOR YEAR

ENDED

31.03.2014

FOR YEAR

ENDED

31.03.2013

REVENUE

(a) Revenue from operations 46,309.34 42,317.24

Less: Excise duty 4,598.31 4,117.81

41,711.03 38,199.43

(b) Other income 787.64 902.04

TOTAL REVENUE 42,498.67 39,101.47

EXPENSES

(a) Raw materials consumed 9,677.71 9,877.40

(b) Purchase of finished, semi-finished and other products 352.63 453.34

(c) Changes in inventories of finished goods, work-in-progress

and stock-in-trade

(155.18) (404.60)

(d) Employee benefits expense 3,673.08 3,602.27

(e) Depreciation and amortisation expense 1,928.70 1,640.38

(f) Finance costs 1,820.58 1,876.77

(g) Other expenses 16,375.81 14,420.91

33,673.33 31,466.47

(h) Less: Expenditure (other than interest) transferred to capital and

other accounts

1,029.92 876.13

TOTAL EXPENSES 32643.41 30,590.34

PROFIT BEFORE EXCEPTIONAL ITEMS AND TAX 9,855.26 8,511.13

EXCEPTIONAL ITEMS(a) Provision for diminution in the value of investments/

doubtful advances

(141.76) (686.86)

(b) Profit on sale of non-current investments 12.33

(141.76) (674.53)

PROFIT BEFORE TAX 9,713.50 7,836.60

TAX EXPENSE

(a) Current tax

3,098.02 1,770.54

(b) MAT credit (399.84)

(c) Deferred tax 203.29 1,402.93

3,301.31 2,773.63PROFIT AFTER TAX 6,412.19 5,062.97

NOMINAL VALUE PER SHARE (`) 10.00 10.00

BASIC EARNINGS PER SHARE (`) 64.21 50.28


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Balance Sheet as at 31st March, 2014


AS ON

30.03.2014

AS ON

30.03.2013

EQUITY AND LIABILITIES

SHAREHOLDERS' FUNDS

(a) Share capital 971.41 971.41

(b) Reserves and surplus 60,176.58 54,238.27

61,147.99 55,209.68

HYBRID PERPETUAL SECURITIES 2,275.00 2,275.00

NON-CURRENT LIABILITIES

(a) Long-term borrowings 23,808.09 23,565.57

(b) Deferred tax liabilities (net) 2,038.98 1,843.74

(c) Other long-term liabilities 983.52 380.87

(d) Long-term provisions 1,905.05 2,113.42

28,735.64 27,903.60CURRENT LIABILITIES

(a) Short-term borrowings 43.69 70.94

(b) Trade payables 8,263.61 6,363.66

(c) Other current liabilities 8,671.67 8,509.79

(d) Short-term provisions 1,902.81 1,544.26

18,881.78 16,488.65

1,11,040.41 1,01,876.93

ASSETS

NON CURRENT ASSETS

(a) Fixed assets

(i) Tangible assets

24,064.43 24,650.54

(ii) Intangible assets 201.32 224.51

(iii) Capital work-in-progress 18,509.40 8,722.29

42,775.15 33,597.34

(b) Non-current investments 52,318.56 49,984.80

(c) Long-term loans and advances 4,080.07 6,574.15

(d) Other non-current assets 302.03 215.79

99,475.81 90,372.08

CURRENT ASSETS

(a) Current investments 2,343.24 434

(b) Inventories 6,007.81 5,257.94

(c) Trade receivables 770.81 796.92

(d) Cash and bank balances 961.16 2,192.36

(e) Short-term loans and advances 1,299.20 2,207.83

(f) Other current assets 182.38 615.8

11,564.60 11,504.85

1,11,040.41 1,01,876.93


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Cash Flow Statement for the year ended 31st March, 2014


2014 ` 2013

A. Cash Flow from Operating Activities: Profit before tax 9,713.50 7,836.60

Adjustments for:Depreciation and amortisation expense 1,928.70 1,640.38

Impairment of fixed assets 0.33 4.01

(Profit)/Loss on assets sold/discarded 48.61 3

Provision for diminution in the value of investments 141.76 90.13

Provision for doubtful advances in the nature of loans 56.69 610.63

Profit on sale of non-current investments (24.78) (12.33)

(Gain)/Loss on cancellation of forwards, swaps and options 18.01 127.93

Interest and income from current investments (348.46) (330.62)

Income from non-current investments (481.02) (702.35)

Finance costs 1,820.58 1,876.77Provision for wealth tax 2 2

Exchange (gain)/loss on revaluation of foreign currency loans and

swaps

360.51 440.75

3,522.93 3,750.30

Operating Profit before Working Capital Changes 13,236.43 11,586.90

Adjustments for:

Trade and other receivables

752.32 873.33

Inventories (749.87) (398.95)

Trade payables and other liabilities 1,641.16 987.33

1,643.61 1,461.71Cash Generated from Operations 14,880.04 13,048.61

Direct tax paid (2,447.24) (1,979.94)

Net Cash Flow from/(used in) Operating Activities 12,432.80 11,068.67

B. Cash Flow from Investing Activities:

Purchase of fixed assets(1)

(9,549.13) (7,508.55)

Sale of fixed assets 24.5 14.51

Advance received against sale of asset 135.5

Purchase of investments in subsidiaries(2) (94.35) (2,123.81)

Purchase of other non-current investments (451.37) (255.41)

Sale of non-current investments 1,241.52 0.87

Sale/Redemption of investments in subsidiaries 54.95 231.32

(Purchase)/Sale of current investments (net) (1,697.44) 991.7

Inter-corporate deposits/Shareholders' loan given (131.40) (127.30)

Repayment of inter-corporate deposits/shareholders' loan 45 50

Interest received 93.02 59.09

Dividend received 491.78 145.18

Net Cash Flow from/(used in) Investing Activities (9,837.42) (8,522.40)


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Cash Flow from Financing Activities:

Issue of Equity Shares

0.01 0.02

Capital contributions received 2.74 5.58

Proceeds from borrowings 5,325.46 6,087.61

Repayment of borrowings (6,469.94) (7,181.00)

Amount received/(paid) on cancellation of forwards, swaps and

options

(18.04) (122.81)

Expenses (incurred)/reimbursed on issue of equity instruments 3.87 2.4

Distribution on Hybrid Perpetual Securities (266.13) (265.76)

Interest paid(1) (1,503.41) (1,456.42)

Dividend paid (776.97) (1,165.46)

Tax on dividend paid (123.57) (185.75)

Net Cash Flow from/(used in) Financing Activities (3,825.98) (4,281.59)

Net increase/(decrease) in Cash and Cash Equivalents (1,230.60) (1,735.32)

Opening Cash and Cash Equivalents

[Note 19, Page 163]

2,139.93(3) 3,874.78

Closing Cash and Cash Equivalents

[Note 19, Page 163]

909.33 2,139.46


6/12

IMPORTANT FINANCIAL INFORMATION EXTRACTED FROM THE REPORT

1. Profit After Tax: Tata Steel recorded a profit after tax of Rs. 6,412 crores during Financial Year

2013-14 as compared to Rs. 5,063 crores in Financial Year 2012-13 primarily due to higher deliveries

at 8.52 million tonnes.

2. Earnings Per Share:The basic and diluted earnings per share were at Rs. 64.22 for Financial Year

2013-14 as compared Rs. 50.28 to Financial Year 2012-13.

3. Net Sales and Other Operating Income: The increase in the Net Sales increased by 9% from Rs.

38,199 crores in the financial year 2012-13 to Rs. 41,711 crores in the financial year 2013-14. The

increase was primarily due to increase in volumes of Flat products (post commissioning of TSCR).

The increase was partly offset by lower volumes of Long products and lower realizations of both Flat

and Long products due to adverse market conditions and mix impact. Higher volumes partly offset

by lower realizations at Tubes Division and at Wires Division also contributed to the increases.

The division wise net sales increased from financial year 2012-13 to year 2013-14 by the following

percentages:

Net Sales Change %

Steel 10

Tubes 8

Ferro Alloys and Minerals 2

Bearings 5

4. Finished, semi-finished steel and other products: Purchase of finished and semi-finished materials

decreased over Financial Year 2012-13 due to lower purchases at Growth Shop (on account of

Odisha projects and external orders) at Wires and CRC West Division. The decreases were partly

offset by purchase of imported rebarsat Steel Divisionand higher purchases at Tubes Division.

5. Raw Materials Consumed: Raw Materials consumed decreased by 2 % from Rs. 9877 crores to Rs.

9678 crores. The decrease was primarily due to lower cost and consumption of purchased coke. The

decreases were partly offset by higher consumption of imported coal, higher cost and consumption

of imported limestone, Ferro Alloys and other raw materials along with higher freight and handling

costs of own material.


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6. Employee Expenses: The employee benefits expense in the current period increased by 2% over

Financial Year 2012-13 primarily on account of normal salary revision. The increase was partly offset

by reduction in retiring provisions on account of change in actuarial estimates due to change in

discounting rates.

7.

Fixed Assets: A huge increase in Fixed assets was recorded from Rs. 33597 crores(2012-13) to Rs.42775 crores(2013-14), making the percentage increase to 27 %. The increase in fixed assets

represents primarily capital expenditures towards Kalinganagar project at Odisha.

8. Investments: The company increased its financial investments from 50,419 crores(FY13) to 54662

crores(FY 14) making the percentage increase to 8%. During the year, the Company converted

advance against equity given to its subsidiary Tata Steel Holdings into equity. Investment in the

Mutual Funds as on 31st March, 2014 was 2,343 crores up from 434 crores of 31st March, 2013.

9. Sundry Debtors: The overall value of debtors decreased by 3% due to the decrease in the export

debtors.

10.

Net Cash Flow from Operating Activities: The net cash from operating activities was 12,433crores during Financial Year 2013-14 as compared to 11,069 crores during Financial Year 2012-13.

The cash operating profit before working capital changes and direct taxes during Financial Year

2013-14 was 13,236 crores as compared to 11,587 crores during Financial Year 2012-13 due to

improved profitability. Decrease in the trade and other receivables and increase in the trade

payables were partly offset by the increase in inventories in the current period resulting in the

overall decrease in working capital during Financial Year 2013-14 (Rs. 1,644 crores). The income

taxes paid during Financial Year 2013-14 was Rs. 2,447 crores as compared to 1,980 crores during

Financial Year 2012-13.

11.

Net Cash from Investing Activities: The net cash outflow from investing activities amounted to

9,837 crores in Financial Year 2013-14 as compared to an outflow of 8,522 crores during Financial

Year 2012-13.The outflow during Financial Year 2013-14 broadly represents capex primarily on

account of Kalinganagar project at Odisha (9,549 crores) and purchase (net of sale) of current

investment (1,697 crores) partly offset by dividend received (492 crores).

12. Net Cash from Financing Activities: The net cash outflow from financing activities was Rs. 3,826

crores during Financial Year 2013-14 as compared to an outflow of 4,282 crores during Financial

Year 2012-13. The outflows during the current period were mainly due to the repayment of

borrowings (6,470 crores), interest payments (1,503 crores) and dividend payments (901 crores)

partly offset by fresh drawls (5,325 crores).

13. Inventories: The value of inventory was increased from Rs. 5258 (financial year 2012-13) crore to

Rs. 6008 crore(financial year 2013-14). The steep increase of 14% was attributed to increase in

mechanical and electrical spares stock to support the operations post 3 million tonnes expansion at

Jamshedpur.


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SPECIFIC AREAS OF STRENGTHS

1.Gross Profit Ratio: The gross profit ratio which is the ratio of gross profit to sales has increased to

47.56% in financial year 2013-14 from 46.99% in the financial year 2012-13. This shows that the

profit generated per unit of sales made is now higher despite the adverse market conditions.

2.Net Sales and Other Operating Income: The increase in the Net Sales increased by 9% from Rs.

38,199 crores in the financial year 2012-13 to Rs. 41,711 crores in the financial year 2013-14. The

increase was partly offset by lower volumes of Long products and lower realizations of both Flat and

Long products due to adverse market conditions and mix impact. Higher volumes partly offset by

lower realisations at Tubes Division and at Wires Division also contributed to the increases.

3.Return on Investment: Return on investment measures a corporation's profitability by revealing

how much profit a company generates with the money shareholders have invested. The ROI hasincrease from 11.13% in financial year 2012-13 to 12.94% in 2013-14

4.Earnings Per Share: The earnings per share has shown a steep increase to 66.02 in FY14 as

compared to 52.13 in its previous year. Since there is no indication of a buy-back, the increased EPS

shows that the company has raised its profit earnings and is healthy for investments.

5.Dividend Coverage Ratio: It is a very important factor that indicates the capacity of an organization

to pay out profit attributable to shareholders. The steep increase of the Dividend Coverage Ration

from 4.34(2012-13) to 8.25(2013-14) shows the increased security for the shareholders getting their

dividends.

6.

Earning Power: A business's ability to generate profit from conducting its operations. Earnings

power is used to analyze stocks to assess whether the underlying company is worthy of

investment. The increased value of Earning Power from 5.12% (2012-13) to 6.02% (2013-14)

indicate an increased attractiveness of the company in terms of investment.

7.Proprietary Ratio:The proprietary ratio shows the contribution of stockholders in total capital of

the company. The increase of proprietary ratio from 0.4 to 0.47 despite the increase in total assets,

therefore, indicates a strong financial position of the company and greater security for creditors.

8.Capital Turnover Ratio: The capital turnover ratio has increased from 45.72% in financial year 2012-

13 to 46.28% in the financial year 2013-14. This indicates a increased efficiency in the usage of thestockholders equity to generate revenue.

9.Interest Coverage Ratio: A ratio used to determine how easily a company can pay interest on

outstanding debt. The ratio is healthy for both years and has increased from FY13 to FY 14 from

6.38 to 7.46


9/12

SPECIFIC AREAS OF WEAKNESS

1. Slow growth in European Market: The Groups financial performance is influenced by the economic

climate in India, UK, the European mainland, SouthEast Asia and by changes in the global steel

market. A large proportion of the Groups manufacturing facilities are in Europe, which is a

relatively high cost area and where demand growth for steel products is much lower than in

developing parts of the world The European steel demand continues to be weak due to dipping

economy even as steel imports rise from countries with low cost of production e.g. China, Russia

etc.

2. Financing: Tata Steel Groups expansion projects require significant investment which in turn is

funded from internal cash generation and capital raised externally (including debt). Also, the

Company in 2007, funded its acquisition of Corus in significant part by debt, raised both in India and

overseas, as a result of which the Company has sizeable repayment and debt servicing obligations

on an ongoing basis. Recent depressed market conditions (especially in Europe) have meant that

the cash generation across the Tata Steel Group has been constrained, thereby increasing the risk

inherent in the capital structure of the business.

3. Debt Equity Ratio: The value of the debt equity ratio has been low in both the years. Such low

values indicate that the company is not taking advantage of the increased profits that

financialleverage may bring. Moreover, for a highly capital intensive company like Tata Steel it is

very important to have a higher debt-equity ratio as it must purchase more property, plants and

equipment to operate.

4. Current Ratio: Current Ratio is a liquidity ratio that measures company's ability to pay its debt over

the next 12 months or its business cycle. It has shown a decreasing trend from FY13 to FY14

reducing from 0.88 to 0.62.

5. Fixed Asset Turnover:The fixed-asset turnover ratio measures a company's ability to generate net

sales from fixed-asset investments. The value has decreased from 1.13 to 0.97. The value could be

attributed the expansion activities of brownfield in Jamshedpur and greenfield in Odisha.

6. Inventory Holding Period: The inventory holding period has gone up to 94.07 days (2013-14) from

91.25 days (2012-13), resulting in increased holding costs.

7. Debt Service Coverage Ratio: The debt service coverage ratio (DSCR)measures how effectively a

company's operations-generated income is able to cover outstandingdebt payments. The drasticreduction in the value of DSCR from 10.22 to 1.55 indicates decreased capability to cover

outstanding debt payments.

8. Net Working Capital: The Net working capital is negative for both the years. Working capital is

essential to maintain smooth running of a business. It is important for the solvency capability of the

company, its goodwill as well as capability to obtain loans. The negative working capital is a

negative indication of these fronts.
http://www.investinganswers.com/financial-dictionary/debt-bankruptcy/leverage-61http://www.investinganswers.com/financial-dictionary/personal-finance/income-5798http://www.investinganswers.com/financial-dictionary/debt-bankruptcy/debt-5752http://www.investinganswers.com/financial-dictionary/debt-bankruptcy/debt-5752http://www.investinganswers.com/financial-dictionary/personal-finance/income-5798http://www.investinganswers.com/financial-dictionary/debt-bankruptcy/leverage-61


10/12

SUGGESTIONS TO THE COMPANY

1. Other long term liabilities have increased from Rs. 380.87 cr to Rs. 983.52 cr primarily on

account of Creditors for capital supplies/services. The company should keep a check on the

same.

2. Trade payables have gone up to Rs. 8263.24 cr from Rs. 6363.24 cr on account of increase in

Creditors for supplies/services by Rs. 1465.79 cr. The increase in creditors should be kept in

control by the organization.

3. Rupee liability has increased by Rs. 264.98 crores (net) (2012-13: Rs. 77.79 crores) arising out

of realignment of the value of long term foreign currency loans and vendor retention liability

for procurement of fixed assets. In such cases the liabilities should be paid off as and when the

Indian currency improves.

4.

Tata Steel should further diversify its current investments, and not only invest in mutual funds

(although it reduces the risk associated with market fluctuations with respect to its

professionally managed, diversified portfolios of equities, bonds and other securities.

5. Other income from investments in its subsidiaries has decreased to Rs. 352.97 cr to Rs. 627.60

cr as compared to previous year. Instead it would be beneficial for the company if it reaps

higher benefits from investing in other avenues.


11/12


12/12

Debt Service Coverage

Ratio (DSCR)

Net Operating Income/Total

Debt Service12432.8/7973.35 = 1.55 21462/2100 = 10.22

Inventory Turnover COGS/Average Inventory 21869.88/5632.87 = 3.88 11068.67/8367.42 = 4

Net Working Capital Current Assets-CurrentLiabilities

11564.6-18881.78=-7317.18 11504.85-16488.65 =-4983.9

Fixed asset turnover Net Sales/Fixed Assets 41711/42775= 0.97 38199/33597=1.13

Inventory Holding

Period365*(Avg. Inventory/COGS) 94.07 days 91.25 days

Operating Leverage Contribution/EBIT 21483.36/11216.91=2.45 20183.46/9293.02=2.38

Financial Levearge EBIT/PBT 11216.91/9713.5=1.15 9293.02/7836.6=1.18

Combined Leverage OL*FL 2.81 2.82

manac report_tata steel

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