Company profileIn 1907, Tata Steel Ltd (TSL) was incorporated in Jamshedpur by Tata Sons, as Asia's first integrated private-sector steel company. The company has an annual

crude steel capacity of 29.3 million tonnes per annum (mtpa). Tata Steel's operations are spread across 26 countries and manufacturing facilities located in India,

the UK, Netherlands, Thailand, Singapore, China and Australia. Tata Steel had acquired UK-based Corus Plc for $12.9 billion in 2007. With its investments in Corus

(renamed as Tata Steel Europe), Millennium Steel (renamed as Tata Steel Thailand) and NatSteel Holdings (Singapore), Tata Steel has become one of the top ten

global steel companies.

Shareholding pattern as on September 30, 2014

Source: Company annual report

Business profileThe total crude steel capacity of TSL (on a consolidated basis) stands at 29.3 mtpa and is spread across India, Europe and South-East Asia. The company has

captive iron ore mines in Odisha (Joda, Khondbond and Katamati, with an annual capacity of about 14 mtpa) and Jharkhand (Noamundi, with an annual capacity of

about 2-3 mtpa). These mines meet the annual ore requirement of its domestic operations.

The Ferro Alloys and Minerals Division of the company has fully integrated facilities to manufacture manganese alloys and chrome alloys. The division meets the

complete requirement for manganese alloys from the domestic and South-East Asian operations.

Plant location and capacity (as of March 2014)

Source: Company Reports

Product mix

The company manufactures a wide range of products and has presence across 50 countries. It produces steel through the blast furnace/BOF route and has highly

efficient production processes. It has modern CR mills to produce CR and galvanised products. Its main offerings are value-added steel products, such as HR

strips, coils, sheets, plates, bars, rods and structurals. It also manufactures and sells semis, viz. billets, blooms and slabs.

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Tata Steel's production (in million tonnes)

Source: Company Report

Note: Production numbers for South-East Asian operations were not available

Tata Steel India contributed about 28 per cent to the consolidated total revenues in 2013-14, whereas its share in EBITDA was comparatively much higher, at 83

per cent. Tata Steel Europe, on the other hand, accounted for a huge 57 per cent of sales, but formed a mere 18 per cent of EBITDA. Other subsidiaries such as

Natsteel Holdings, Tata Steel Thailand, Tata Metaliks, NTS Steel Group, and Siam Iron & Steel Co (SISCO) made up for the remaining sales and EBITDA.

Tata Steel Ltd revenue mix (2013-14)

Source: Company reports

 Expansion plans

The company is undertaking a major greenfield expansion worth ~Rs 500 billion at Odisha, under which a steel plant with 6 MTPA capacity is proposed to be set up

in Kalinganagar in two phases.

Capacity expansion plans

Source: Company reports, CRISIL Research

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Financial profile

During 2013-14, Tata Steel's consolidated revenues rose by about 10 per cent y-o-y, largely due to better sales volumes. The increase in deliveries was

visible across all geographies with those from Tata Steel India, Tata Steel Europe, NatSteel Holding and Tata Steel Thailand growing by 14 per cent, 6 per

cent, 39 per cent and 10 per cent, respectively.

During 2013-14, operating margins rose by 177 basis points (bps) due to slightly higher realisations and lower raw material costs.

During the year, Tata Steel reported net profits of Rs 36,210 million as against a net loss of Rs 83,370 million in 2012-13 (mainly on account of the goodwill

impairment undertaken in the fourth quarter of 2012-13.)

Despite ongoing capex plans and a stretched balance sheet, Tata Steel's credit profile is expected to remain strong on account of   :

Improved profitability of European operations, owing to higher raw material integration.

Higher contribution to revenues and earnings from India operations, which is more profitable

Strong parent support (the Tata Group holds a 31.4 per cent stake in Tata Steel). 

Peer comparison (2013-14)

Key news and updates

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In September 2014, the State Government of Jharkhand issued ordered a shutdown of 12 out of 17 mines operational in the state, following the Centre's directives

to states to clamp down on mines operating under deemed extensions, due for second renewals. Among the 12 mines, one of TSLs mines (Noamundi- producing

about 2-3 million tonnes annually) has been ordered to remain shut, till leases are renewed.

This document is being provided for the exclusive use of Shubhi Singh at Indian Institute of Management Indore

No part of this Report may be published/reproduced/distributed in any form without CRISIL's prior written approval