ATS Research Desk

ATS Research Desk Fundamental Report Company Name- TATA STEEL

Company Profile: Tata Steel Limited, an Indian multinational steel making company headquartered in Mumbai, is a diversified steel producer. The Company is engaged in the business of steel making, including raw material and finishing operations. Its operations predominantly relate to manufacture of steel. Other business segment comprises tubes, bearings, refractories, pigments, port operations and town services. Its products include flat products, including hot rolled, cold rolled, metallic coated, direct rolled, tubes, pre-finished steels, packaging steels, electro plated steels, electrical steels and narrow strip; construction products, including structural steel, floors, walls, roofs, modular and building components; agricultural implements, and bearings. Founded in 1907, Tata Steel Limited is among the top ten global steel companies producing 25.9 million tonnes finished steel. Tata Steel acquired Corus, an UK based steel producer in 2007, marking one of the largest international acquisitions by an Indian company.

Investment Rationale: CMP as on 28/6/2017 52 Week High/Low Market Cap (Cr) Equity Capital (Cr) Face Value Share Holding Pattern Promoter Holding (%) Instiuton Holding (%) Retail Shareholders (%) Grand Total

520.60 531.20/312.10 51,431.4 970.24 10 31.86 45.47 22.67 100

 High quality, low cost iron ore availability.  Focus of Government on infrastructure and “Make In India” initiative.  Commencement of Kalinganagar Phase-2 including downstream.  Anti-dumping duty boosting domestic consumption and export.

Financial Summary FY-12

Net Sales Profit Before Tax PAT EPS

132,899.70 8,584.98 4,948.52 54.00

FY-13

134,711.54 (4,132.95) (7,362.39) -75.00

FY-14

148,613.55 6,722.13 3,663.97 35.00

FY-15

139,503.73 (1,388.09) (3,955.50) -42.00

FY16

117,151.59 (1,674.04) (3,179.00) -33.00

Outlook The net sales of the Company during FY16 at Rs.117,151.59 crores were down significantly by 16.0% due to lower revenue from across geographies due to lower domestic consumption and lower price realizations. PAT at Rs.3,179 crores was up by 19.6% compared to that during FY15 on account of lower MAT credit and deferred taxation. The EPS, on face value of Rs.10 has increased from Rs. -42.0 for FY15 to Rs. -33.0 for FY16. The Company has paid dividend of Rs. 8 per ordinary shares for FY16. ATS Wealth Managers Pvt Ltd.

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Company Overview: Tata Steel established in 1907 was Asia’s first integrated steel company. With operations in 26 countries and commercial presence in 50 countries, it’s now the world’s second-most geographically diversified company. The group recorded a turnover of Rs. 1,17,152 crores employing over 77,000 employees. The group is among top 11 world’s biggest steel producer with annual crude steel production capacity of over 25.9 million tonnes per annum. Tata Steel Limited (India), Tata Steel Europe Liited (Formerly Corus), NatSteel Singapore and Tata Steel Thailand (TSTH) are operating companies within the Tata Steel Group. “Value Creation” and “Corporate Citizenship” through the excellence of its people, its innovative approach and professional conduct and being world’s steel industry benchmark is the Group’s vision. Tata Steel won the Deming Grand Prize in 2012, first by any integrated company outside Japan, conducted by the Japanese Union of Scientists and Engineers. Indian Operations

Jamshedpur, Tata Steel established its first steel plant and has a production capacity of 9.5 million tonnes per annum. In the states of Jharkhand and Chhattisgarh, two new Greenfield steel projects are planned. Tata Steel is adding new production capacity by 3 million tonnes per annum at Kalinganagar project in the first phase. Tata Steel gets a distinct advantage in raw material sourcing as Iron Ore mines are located at Noamundi (Jharkhand) and Joda (Odisha) which is at close proximity from the plant. The Company’s captive coal mines are located at Jharia and West Bokaro (Jharkhand). European Operations

Backed by a sophisticated global network of sales offices and service centers Tata Steel Europe has manufacturing operations in Western Europe, the United Kingdom, Netherlands, Germany, France and Belgium with overall steel production capacity of 18 million tonnes per annum. South East Asian Operations

With over 40 years of Steel making experience, Tata Steel started its operations in 2004 in the region and has presence in Singapore, Thailand, China, Malaysia, The Philippines and Australia. Tata Steel Singapore and Tata Steel Thailand is one of the most prominent steel producers in the South East Asian Operations.

ATS Wealth Managers Pvt Ltd.

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Key Ratio Tata Steel’s long term debt to equity ratio in FY 2016 is 2.94 times which signifies that the group is vulnerable to economic slowdowns as it has been facing since last few quarters. In its annual report dated 31 March 2016, Tata Steel reported a promoter holding of 31.86 %. At the same time, institutional holding in the Company stood at 45.47% (FII+DII) which indicates the seasoned investor’s confidence in the stock. While, on the contrary, it increases volatility in the stock price as buy and sell claims of seasoned investors will be larger than that of the retail participants.

Key Ratios Debt-Equity Ratio

FY-12 1.17

FY-13 1.61

FY-14 1.69

FY-15 2.21

FY-16 2.94

Current Ratio Turnover Ratio Inventory Total Asset Turnover Ratio

1.20

1.04

0.90

1.17

0.94

5.19 90.49

5.59 91.69

5.53 86.58

5.55 87.76

5.76 71.76

EBIDTM (%) EBITM (%) ROCE (%) RONW (%)

10.52 7.12 5.42 12.64

9.50 5.36 -7.45 -20.65

11.39 7.46 3.34 8.86

9.55 5.29 -3.47 -12.52

9.82 5.48 -2.70 -10.70

Payout (%) Price/Book Value(P/BV) EV/EBITDA Market Cap/ Sales

21.62 1.07 6.14 0.34

-11.00 0.89 6.02 0.23

27.01 0.94 5.89 0.26

-19.79 0.98 6.98 0.22

-25.44 1.09 9.53 0.26


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Key Management Profile

Key Personnel

Designation &Experience

Auditors

Mr.O.P.Bhatt Mr. Om Prakash Bhatt is Independent M/s. Deloitte Haskins Chairman of the Board of Tata Steel Limited. and Sells LLP Mr. O. P. Bhatt was the former Chairman of State Bank of India, which is India's commercial bank. Mr. Om Prakash Bhatt is now on the Boards of reputed Indian and foreign companies. Mr. Bimlendra Jha

Mr. Bimlendra Jha is Chief Executive Officer of Tata Steel UK of the Company. Mr Jha is currently Executive Chairman of Tata Steel Europe's Long Products Europe business and has successfully led the divestment process that resulted in the signing of a Sale and Purchase Agreement with Greybull Capital on April 11. Mr. Jha is a Ceramic Engineer from IT-BHU, Varanasi, and has a Post-Graduate Diploma in Business Management from XLRI, Jamshedpur.

Mr. T.V. Narendran

Mr. Thachat Viswanath Narendran has been appointed as Managing Director - Designate, Additional Director of Tata Steel Limited effective November 1, 2013. Mr. Narendran worked in the International Trading Division of Tata Steel from 1988 to 1997 wherein he spent five years in Dubai looking after Tata Steels' exports to the Middle East. Until 2001, he spent time in Tata Steels' marketing and sales division and was involved in market development work for the Cold Rolling Mill Project, Supply Chain Management, Sales Planning etc.


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Industry Overview: India now enjoys the tag of world’s third largest steel producer in 2016. The growth is primarily driven by domestic availability of raw materials, low cost human capital and levy of anti dumping duties on certain products. Steel sector had been contributing strongly to the India’s manufacturing output. The total finished steel production increased from FY 2012-2016 at a compounded annual growth of 4.7% to 90.98 million tonnes per annum. Further, it expects to become second largest crude steel producer in 2017 on back of strengthening of steel production both by public and private sector in view of rising demand. In the next ten years the crude steel capacity is anticipated to reach 300 million tonnes per annum. Products and Process: Hot Rolled: Tata Steel offers Hot Rolled Coil and Sheet steels in a wide variety of specifications, manufactured to meet international standards and a wide range of market requirements like forming, bending, deep drawing, laser cutting and welding. High carbon grades are especially suited to meet challenging wear and fatigue performance. The main benefits of Tata Steel’s hot-rolled steel both for end-products and customer processes include improved end-product performance, longer product life, cost optimization, better processing facilities and more durable products Cold Rolled: A product of the Flat Products line, Tata Steelium was launched in 2003 as the world's first branded cold rolled steel (CRS). Since then, the brand has gone a long way in meeting the challenge of gaining a sustainable competitive edge in the marketplace. Pre-Finished Steel: Pre-finished steel is a strip steel product and can provide a number of environmental, manufacturing, technological, and design advantages over post painted steel. Pre-finished steel products are made up of a series of layers, each with a specific function. These comprise a metal base (the substrate), an optional metallic layer, then layers of pretreatment and primer before a final polymer based paint or film finish is applied to the top and bottom surface. Packaging and Electrical Steel: Steel is an excellent choice for the packaging industry, including specialty packaging applications. Tata Steel Europe has an extensive range of high quality packaging steels in various widths, gauges and coatings. Electrical Steels play a vital role in the generation, transmission, distribution, and use of power as their high magnetic permeability and low iron core losses are forged on the molecular level. Electrical steel properties are achieved by processing extremely pure steel through hot rolling, cold rolling, and annealing. Construction Products: Tata Steel offers a comprehensive range of structural steel, floors, walls, roofs, modular, building components, agricultural implements and bearings products. Tata Steel Europe's product portfolio in this segment includes Structural Hollow Sections, and Building Systems.


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Consulting Services: Tata Steel Europe's business services include providing expertise and knowledge in a wide range of iron, steel and metals related matter that cover the entire steel value chain. Tata Steel Consulting also warrants technology developed for Tata Steel's internal production facilities and processes. Business planning assistance is provided to a range of industrial sectors, operating independently or along with other groups within the consulting business and sometimes in alliance with external bodies.

Revenue 4%

3% 3%

33%

Tata Steel India Tata Steel Europe NatSteel Holdings Tata Steel Thailand

57%

Other & Eliminations

Investment Rationale: Increasing demand from Emerging and Developing Economies: In the backdrop of the weakening global environment, India’s prospect seems bright with Government of India takeing several policy measures to support manufacturing, infrastructure and foreign investment. As per WSA, steel demand in the emerging and developing economies (excluding China) is expected to grow by 1.8% and 4.8% respectively in 2017. Attractive opportunities in India: There is significant scope for new mining capacities in iron ore, bauxite & coal. The Ministry of Steel aims to increase the steel production capacity to 142.3 million tonnes by the end of 2017 indicating new opportunities in the sector. India’s coal ministry allowed private companies into mining activities for commercial purpose while allowing 100% FDI under the Automatic Route in the mining sector & exploration of metal & non metal ores. Under the Union Budget 2016-17, the Government changed customs & excise duty on certain mineral fuels & mineral oils. Tata Steel has signed an agreement to purchase a majority 51 per cent stake in Creative Port Development (CPDPL), to develop approximately 10 million tonnes per annum with Odisha government on concession agreement.


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Competitive Advantage: Total finished steel production in India has increased at a CAGR of 4.70 per cent during FY12– 16, with country’s steel production reaching to 90.98 million tonnes per annum (MTPA) in FY16. The country became the 3 rd largest crude steel producer in 2015 Moreover, capacity has increased to 121.97 million tonnes (MT) in FY16, which is 11 per cent more than FY15, while in the coming 10 years the country is anticipated to produce 300 MT of steel. Manufacturing plant close proximity to iron ore reserves along with availability of low cost manpower makes India competitive in the global set up. Company’s diversified product portfolio, backward integrated India operations in the form of captive iron ore and coal mines making it one of the lowest cost producers of steel, large market share in Steel Industry, commencement of operations in Kalinganagar plant in Odisha, Minimum Import Price (MIP) introduced by Government of India is expected to improve price realizations.

Risks and Concerns: Sluggish demand growth in Europe, volatility in prices of raw materials and high dependence on imports of raw materials for European operation may pose some challenges.

Consolidated Income Statement

INCOME Revenue From Operations Less: Excise/Service Tax/Other Levies Revenue From Operations [Net] Other Operating Revenues Total Operating Revenues Other Income Total Revenue EXPENSES Cost Of Materials Consumed Purchase Of Stock-In Trade Changes In Inventories Of FG,WIP And Stock-In Trade Employee Benefit Expenses Finance Costs Depreciation And Amortization Expenses Other Expenses Less: Amounts Transfer To Capital Accounts Total Expenses ATS Wealth Managers Pvt Ltd.

2012

2013

2014

2015

2016

135,333.22

137,526.20

151,946.52

143,113.54

120,418.57

3,075.86

4,109.60

4,599.24

4,794.63

4,466.83

132,257.36 642.34 132,899.70 1,573.03

133,416.60 1,294.94 134,711.54 479.15

147,347.28 1,266.27 148,613.55 516.81

138,318.91 1,184.82 139,503.73 796.18

115,951.74 1,199.85 117,151.59 3,925.66

134,472.73

135,190.69

149,130.36

140,299.91

121,077.25

45,457.54

40,643.46

46,242.98

40,770.27

32,188.30

21,073.43

18,473.87

17,008.21

13,804.22

10,174.01

-785.93 17,228.64 4,250.11

1,418.93 18,918.25 3,968.11

-514.67 20,303.41 4,336.83

1,092.95 21,407.64 4,847.75

2,453.82 19,966.80 4,128.64

4,516.65

5,575.32

5,841.22

5,943.60

5,081.84

38,366.86

44,252.81

50,689.40

51,061.09

45,905.32

857.63 129,249.67

1,316.99 131,933.76

1,526.79 142,380.59

1,168.19 137,759.33

1,122.31 118,776.42 Page 8

Profit/Loss Before Exceptional, Extraordinary Items And Tax Exceptional Items Profit/Loss Before Tax Tax Expenses-Continued Operations Current Tax Less: MAT Credit Entitlement Deferred Tax Tax For Earlier Years Total Tax Expenses Profit/Loss After Tax And Before Extraordinary Items Profit/Loss From Continuing Operations Profit/Loss For The Period Minority Interest Share Of Profit/Loss Of Associates Consolidated Profit/Loss After MI And Associates EARNINGS PER SHARE

5,223.06 3,361.92 8,584.98

3,256.93 -7,389.88 -4,132.95

6,749.77 -27.64 6,722.13

2,540.58 -3,928.67 -1,388.09

2,300.83 -3,974.87 -1,674.04

3,517.65 5.41 124.22 0 3,636.46

2,325.40 410.12 1,314.16 0 3,229.44

3,381.29 0.21 -424.27 101.35 3,058.16

2,214.71 117.32 470.02 0 2,567.41

1,631.14 152.56 26.38 0 1,504.96

4,948.52

-7,362.39

3,663.97

-3,955.50

-3,179.00

4,948.52 4,948.52 173.14

-7,362.39 -7,362.39 214.46

3,663.97 3,663.97 -69.92

-3,955.50 -3,955.50 13.29

-3,179.00 -3,179.00 108.94

268.11

90.31

0.84

16.69

20.74

5,389.77

-7,057.62

3,594.89

-3,925.52

-3,049.32

54 54

-75 -75

35 35

-42 -42

-33 -33

Basic EPS (Rs.) Diluted EPS (Rs.)

Consolidated Balance Sheet Equities And Liabilities SHAREHOLDER'S FUNDS Equity Share Capital Total Share Capital Reserves and Surplus Total Reserves and Surplus Total Shareholders’ Funds Hybrid/Debt/Other Securities Non-Current Liabilities Long Term Borrowings Deferred Tax Liabilities [Net] Other Long Term Liabilities Long Term Provisions Total Non-Current Liabilities

2012

2013

2014

2015

2016

971.41 971.41 51,649.95

971.41 971.41 54,238.27

971.41 971.41 60,176.58

971.41 971.41 65,692.48

971.41 971.41 69,505.31

51,649.95 52,621.36 2,275.00

54,238.27 55,209.68 2,275.00

60,176.58 61,147.99 2,275.00

65,692.48 66,663.89 2,275.00

69,505.31 70,476.72 2,275.00

21,353.20

23,565.57

23,808.09

23,900.37

23,457.77

970.51 216.05 1,851.30

1,843.74 380.87 2,113.42

2,038.98 983.52 1,905.05

2,250.41 1,087.74 2,875.92

2,179.83 842.66 2,888.18

24,391.06

27,903.60

28,735.64

30,114.44

29,368.44

CURRENT LIABILITIES ATS Wealth Managers Pvt Ltd.

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Short Term Borrowings Trade Payables Other Current Liabilities Short Term Provisions Total Current Liabilities Total Capital And Liabilities ASSETS NON-CURRENT ASSETS Tangible Assets Intangible Assets Capital Work-In-Progress Fixed Assets Non-Current Investments Long Term Loans And Advances Other Non-Current Assets Total Non-Current Assets Foreign Currency Monetary Item Translation Difference A/C Current Assets Current Investments Inventories Trade Receivables Cash And Cash Equivalents Short Term Loans And Advances OtherCurrentAssets Total Current Assets Total Assets


65.62 5,973.23 8,798.55 2,066.24 16,903.64

70.94 6,369.91 8,503.54 1,544.26 16,488.65

43.69 8,263.61 8,671.67 1,902.81 18,881.78

34.88 5,801.98 9,111.52 1,675.41 16,623.79

5,261.02 7,706.13 6,115.81 2,005.03 21,087.99

96,191.06 101,876.93 111,040.41 115,677.12 123,208.15

11,142.36 223.9 16,058.49 27,424.75 49,078.35

24,650.54 224.51 8,722.29 33,597.34 49,984.80

24,064.43 201.32 18,509.40 42,775.15 52,318.56

25,071.38 177.14 23,036.67 48,285.19 52,164.24

24,901.24 527.35 26,982.37 52,410.96 52,360.42

6,415.80

6,574.15

4,080.07

3,166.77

3,787.88

2.76 82,921.66

190.04 90,346.33

404.9

0

0

0

0

1,204.17 4,858.99 904.08 3,946.99

434 5,257.94 796.92 2,218.11

2,343.24 6,007.81 770.81 961.16

1,000.08 8,042.00 491.46 478.59

4,320.17 7,083.81 632.8 1,014.67

1,828.09

2,207.83

1,299.20

1,781.77

1,243.48

302.03 211.75 227.4 99,475.81 103,827.95 108,786.66

122.18 615.8 182.38 55.27 126.56 12,864.50 11,530.60 11,564.60 11,849.17 14,421.49 96,191.06 101,876.93 111,040.41 115,677.12 123,208.15

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TATA SONS: Tata Sons is the promoter of the major operating Tata companies and holds significant shareholdings in these companies. Tata companies are commonly referred to as the Tata group and the Chairman of Tata Sons as Chairman of the Tata group.


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Stock Performance Chart:

Research Analyst: Ronak Vyas Equity Research Analyst Disclaimer: This report is only for the information of our customers. Recommendations, opinions or suggestions are given with the understanding that readers acting on this information assume all risks involved. The information provided herein is not to be constructed as an offer to buy or sell securities of any kind. ATS and/or its group companies do not as assume any responsibility or liability resulting from the use of such information


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