CORPORATE FINANCE PROJECT

Presented By:

Group-1

Amal Dev V (191066)

Amit Gandhi (191068)

Anirban Samaddar (191070)

Dhananjay Kumar (191083)

Hardeep Singh (191086)

Hiralal Senapati (191087)

INTRODUCTION

Established in 1907 by Jamshetji N Tata in Jamshedpur.

Formerly known as Tata Iron and Steel Company Limited (TISCO).

It is Asia’s First and India’s largest steel company in the private Sector.

28.1 million tonnes per annum of crude steel production capacity.

Tata Steel is world’s 6th largest steel producer.

Ranked “ Best Steel Maker” by World Steel Dynamics in 2006, 2005 and

2001.

Ranked 315th on Fortune Global 500 (post the Corus acquisition).

82,700 employees (2007).

Listen on BSE and NSE.

Headquartered in Jamshedpur, Jharkhand and registered office in Mumbai.

PRODUCTION COMPARISON IN 2009-10

SAIL TATA Steel

RINL Bhushan Steel

JSPL0

2

4

6

8

10

12

14

Chart Title

Production(in million tonnes)

CAPITAL STRUCTURE

To understand and analyse the capital structure of Tata

steel.

Compare the trends with that of industry.

Impact of capital structure on stock prices.

To analyse the ownership (shareholding) patterns of

the company.

Cross holding pattern

Market Capitalization

Promoter's holding32%

Institutional investors43%

Other investors4%

Public21%

ShareHolding Pattern

WORKING CAPITAL

Hypothesis I: There is no difference in the efficiency of working capital to generate sales turnover for Tata Steel and firms in the same Industry.

Null hypothesis H0: That efficiency of working capital to generate sales turnover is same for Tata Steel and firms in the same Industry.

Alternative hypothesis being H1: Efficiency of working capital to generate sales differs between Tata Steel and firms in the same Industry.

Hypothesis II: Working capital leverages of Tata Steel and firms in the same Industry do not affect in the same way.

Null hypothesis H0: There is no significant difference between the effects of working capital leverages of Tata Steel and firms in the same Industry.

Alternative hypothesis H1: The effects of working capital leverages of Tata Steel and firms in the same Industry are different.

DIVIDEND POLICY

To analyse the dividend policy of the company.

How frequently company gives dividend

Trend of Buyback shares.

Other policies like: Bonus shares, ESOPs, Stock Split

Impact of dividend on stock prices.

DIVIDEND POLICY

20012002

20032004

20052006

20072008

20092010

0

20

40

60

80

100

120

140

160

180

DividendEPSD/E

FINDINGS

Signaling Hypothesis

Issuance of New Securities.

DIVIDEND PAYOUT VS DIVIDEND YIELD

20012002

20032004

20052006

20072008

20092010

0

10

20

30

40

50

60

70

80

Dividend payout

Dividend Yield

IMPACT OF DIVIDEND ON MARKET PRICE

FY 2008-2009 Dividend Declaration Date: 26/06/2009 Ex Dividend Date: 06/07/2009 Holder of record Date: 08/07/2009 Dividend Payment Date: 27/08/2009 Dividend: 160 % (` 16 per share)

STOCK PRICE VARIATION

Market price par share:26/05/2010: 484.4527/05/2010: 493

THE GORDAN GROWTH MODEL

Value of Equity:

g = CAGR of Dividend (last 9 yrs) = 13.8r = Cost of Capital = 16.43D0 = last year dividend = ` 8 per share

Valuation as per Gordon’s Model = ` 346.16 ` 346.16 < ` 595.06 (Current Market Price) Hence, OVERPRICED

WALTER’S FORMULA

Value of Equity: D + {Ra/Rc}*(E – D)

P = ------------------------------ RcD = last year dividend = ` 8E = Earning per share = ` 60.26Ra = Rate of equity = 23.67 %Rc = Cost of Capital = 16.43 %Value of equity = ` 506.93` 506.93 < ` 595.06 (Current Market Price)Hence, OVERPRICED

FINDINGS

Here Ra > Rc So the company can increase mps by

providing less dividend payout.

INVESTMENT POLICY

Greenfield Projects:

Orissa,

Chhattisgarh and

Expansion of Jamshedpur Plants

M & A

MERGER AND ACQUISITION

In February 2005, Company acquired the Singapore based steel manufacturer, NatSteel.

Tata Steel acquired Thailand based Millennium Steel in December 2005.

Tata Steel acquired Corus on 2nd April, 2007 for a price of $ 12 bn.

Opportunities & Risks evaluation

Calculation of beta value (Before and After M & A)

FINANCING POLICY

How the company raises money for the projects.

Pecking Order Theory

VALUE OF THE FIRM

Weighted Average Cost of Capital (WACC)

Free Cash Flow to the Firm