Studying the Profitability of Kalinganagar Integrated Greenfield Project by Tata Steel(Using Excel)

PRESENTED BY

BISMAY MISHRA

About the Company

Established- 1907 as Asia’s first Integrated Private Sector Steel Company

Operations in 26 countries and a commercial Presence in over 50 Countries

Jamshedpur Works have a Capacity of a 9.7 mtpa crude steel

Awarded with Deming Application Prize 2008 for excellence in TQM

Awarded with Deming Grand Prize 2012 by JUSE

About the Project

Signed MoU in 2004 with Govt of Odisha

Plant Location- Kalinganagar Industrial Location in Jajpur District

Capacity - 6 mtpa (in two phases of 3 mtpa each)

Capital Structure – Rs 32700 Crores of Rs 9900 crores as Equity and Rs 22800 crores as Debt

Lenders- a Consortium of 21 FIs

Repayment- First phase in 12 years and second phase within 10.5 years

Credit Rating- AA+ by CARE

Hindrance- Land Acquisition

Formulas Used and Assumptions

CAPM (Capital Assets Pricing Model)

Return from Security= Riskless Return+Beta*(Return from Market- Riskless Return)

Riskless Return- 91 days T-Bill auction rate

Growth Rate= (New Figure- Old Figure)/Old Figure

Capital Employed= Shareholder’s Funds+Debt Liabilities

Net Sales to Capital Employed proportion will be maintained

Average Growth rate of Sales of past years will be maintained for next years

Mining License of 30 years will be taken as total Life of Project

Summation of Variable cost and Fixed Cost is taken as Operating Expenditure

Analysis & Interpretation

Return on Market is based 1 year data, if reduced to 3 months data then it will increase the Cost of Equity as we saw a high trend in last 3 months

The problem of Land acquisition is a major hindrance, it may create problem while commissioning second phase.

The Growth Rate will vary a lot due to the Standard deviation of 9.328%

The company will make more profit if the project will be extended for some more years as there is no interest cost

The project will contribute to growth rates of both company, country and steel production

References

http://www.moneycontrol.com/financials/tatasteel/balance-sheet/TIS#TIS for 10 years Balance Sheet

http://www.moneycontrol.com/financials/tatasteel/profit-loss/TIS#TIS for 10 years Profit & Loss

http://www.nseindia.com/products/content/equities/indices/historical_index_data.htm for 1 year nifty

Tata Steel Annual Report 2012-13

The Economics Times

OdishaDiary

http://www.tatasteel.com/about-us/company-profile.asp

Businesstoday

The Hindu