A Project Report On

Published on July 2016 | Categories: Documents | Downloads: 44 | Comments: 0 | Views: 381
of 36
Download PDF   Embed   Report

Comments

Content

A PROJECT REPORT ON “ANNUAL REPORT OF MUTHOOT FINANCE LTD.”

SUBMITTED BY DAKSHATA KOTIAN ROLL NO: 38

FOR THE DEGREE OF M.COM (PART I) ACCOUNTS

UNDER THE GUIDANCE OF PROF. NEETA NERURKAR

M.L.DAHANUKAR COLLEGE OF COMMERCE,

DIXIT ROAD, VILE PARLE, EAST, MUMBAI 57
ACADEMIC YEAR 2013-14

1

DECLARATION

I, MS. DAKSHATA KOTIAN STUYDING IN M.L.DAHANUKAR COLLEGE OF COMMERCE STUDENT OF M.COM PART- I (SEMISTER 1ST). HERE BY DECLARE THAT I HAVE COMPLETED PROJECT ON “ANNUAL REPORT OF MUTHOOT FINANCE LTD.” FOR THE ACADEMIC YEAR 2013-14, AS PER THE REQUIREMNETS OF THE UNIVERSITY OF MUMBAI AS A PART OF MASTER OF COMMERCE- 1 (M.COM) PROGRAMME. THE INFORMATION SUBMITTED IS TRUE AND ORIGINAL TO THE BEST OF MY KNOWLEDGE.

DATE:

PLACE:

(DAKSHATA KOTIAN)

2

ACKNOWLEDGEMENT

This satisfaction that accomplishes the successful completion of any work is when we say thank you to the people who made it possible, whose constant encouragement and guidance has been a source of inspiration throughtout the Completion of project.

Firstly I extend my thanks to the various people who have shared their opinion and experiences through which I received the required information which is Crucial for my project.

Finally, I express my thanks to Professor FULMALI opportunity to learn the subject and guided me with valuable suggestions

who gave me this

3

A project on

Entrepreneurship management

of

Tata iron & steel co.

4

INDEX

5

Sr no. 1 2 3. 4 5. 6 7. 8. 9. 10. 11.

Particulars introduction history Major happenings Various policies of Tata steels Modernization programme Future projects National steel policy Swot analysis Business plan Product life cycle Bibliography

\INTRODUCTION: Contribution in the development of India‟s economic growth:

Major Happening: Political:
6

In the 1920s and 1930s, when it was still called Tata Iron and Steel Company, TISCO's largely tribal workers fought pitched battles with the European or Parsi management. Work conditions and the right to organize were important rallying issues, and over the years, the company developed a reputation for union-busting, often by violent means. The value of Dorabji‟s Expansion Programmed came to be appreciated only during the phase when world was reeling under the pressure of the Great Depression. The Tata‟s survived the depression and supplied nearly ¾ of the country‟s steel requirements. By the Second World War, Tata‟s‟ production capacities had expanded enough to make their prices lower than those of steel produced in England raising them to an authoritarian position. By the 1980s, the government was clearly in control of what had come to be called the commanding heights of economy. More than 45% of output in organized industry came from the public sector as well as bank and other long-lending institution. In 1981-82, eight of the largest firms in India were in the public sector, as were 24 out of the top 30 in terms of total capital employee. In this sense it could be said that Nehru‟s goals when he had began the planning process had been achieved. But this success has to be seen in the context of the fact that industrial growth rates had lagged at about 4% per annum between 1964-65 and 1975-76.This rate was in sharp contrast to what was happening in the Asian economies and in Southeast Asia. These countries had achieved consistent high growth by opening up their markets and by abandoning policies of import substitution. Indira Gandhi in her second stint as prime minister was not willing to inaugurate a new industrial policy that departed from the socialist pattern put in place by her father. Yet she was far too astute not to recognize the signs of crises that were waiting in the wings. She made the gesture that her government supports the expansion and modernization of the private sector.

The basic elements of the new policy began to emerge against the background of the India Special Drawing Rights billion-dollar loan agreement with the International Monetary Fund to cope with the balance of payment deficits. Tata Iron & Steel Company Rajiv Gandhi- Both internal & external finance shortages were worsening. Trade deficit increased from 10 billion in 1983-84 to Rs. 34 billion in 1985-86 so it became difficult to repay loan.
7

Economic:
TATA Steel, formerly Tata Iron and Steel Company Ltd (Tisco), the company around which the entire township of Jamshedpur was built, was registered in Bombay (now Mumbai) on August 26, 1907. It had an initial capacity of 160,000 tones of pig iron, 100,000 tones of ingot steel, 70,000 tones of rails, beams and shapes and 20,000 tones of bars, hoops androids. It also had a powerhouse, auxiliary facilities and a laboratory. It was in 1955 that Tata Steel began its two million-tone expansion programmed the largest project in the private sector at that time. The project was completed in December 1958. Beginning in the 1980s, the company undertook in various phases an ambitious modernization programmed. The first phase, between 1981 and 1985, involved a total project cost of Rs.223 crores. This phase, among other things, saw the installation of two 130 tone LD converters, two 250 tone a day oxygen plants, a bar forging machine, two vertical twin-shaft lime kilns and a tardolo brick plant. Significantly, a six-strand billet caster and a 130-tone vacuum arc refining unit were installed, that too in the integrated steel plant. The second phase (1985-1992), involving a project cost of Rs.780 crores, saw for the first time in India coal injection in blast furnaces and coke oven battery with 54 ovens using stamp-charging technology. Apart from this, a 0.3 mtpa (million tone per annum) wire rod mill, a 2.5 mtpa sinter plant, a bedding and blending plant and a waste recycling plant of 1mtpa were installed. The cost of the third phase (1992-1996) of the project was a whopping Rs.3, 600 crores, and that of the fourth phase (1996-2000) Rs.1,300 crores. The company recently commissioned its 1.2 mt (million tones) capacity Cold Rolling Mill Complex at a project cost of Rs.1, 600crores. This four-phase modernization programmed has enabled Tata Steel to be equipped with the most modern steel-making facilities in the world. As of today, the Tata Steel facility has a hot metal capacity of 3.8 mtpa and a crude steel capacity of 3.5 mtpa, corresponding toa salable steel capacity of 3.4 mtpa. Tata Steel has been in the forefront of India‟s indus trialization and an engine of growth. It is part of Tata Group, a prestigious, family-owned Indian multinational with 2005 revenues of $17.8 billion, the equivalent of about 2.8% of India's GDP.

8

Tata Steel's acquisition of Corus was a marriage made in heaven. Tata acquired Corus, which is 4 times larger than its size and the largest steel producer inU.K. The deal, which creates the world‟s fifth largest steelmaker, is India‟s largest ever foreign takeover and follow Mittal steel‟s $31 billion acquisition of rival Arcelor in sameyear. Tata acquires corus on the of April 2007 for a price of $12 billion. The price per sharewas 608 pence, which is 33.6% higher the first offer which was 455 pence.For the fiscal year ended March 2006, the company generated revenues of $3,693.6million(IR17,144.22 Crores), an increase of 0.1% over the previous fiscal year. The company saw anet income of $755.4 million (IR3,506.38 Crores), an increase of 8%over fiscal 2005months

Social: Social responsiveness became integral to organizational objectives of Tata Steel, even before the company was established in 1907. In 1970, however, Tata Steel formally incorporated its commitment to the stakeholder concerns, including those of the nation, and environment, in its Articles of Association. „The Company shall have among its objectives the promotion and growth of the national economy through increased productivity, effective utilization of materials and manpower resources and continued application of modern scientific and managerial techniques in keeping with the national aspirations, and the Company shall be mindful of its social and moral responsibilities to the consumers, employees, shareholders, society and the local community. For Jamsetji Tata, the progress of enterprise, welfare of people and the health of the enterprise were inextricably linked. Wealth and the generation of wealth have never "been ends in themselves, but a means to an end, for the increased prosperity of India. Tata Steel‟s efforts at environment management are well recognized. It‟s Steel Works in Jamshedpur, all its mines, collieries and manufacturing divisions in its out locations are certified to ISO-14001. Jamshedpur is the only town in the country which has an ISO-14001certified service provider. Significant achievements by the Company include an improvement in environment and resource conservation, including a reduction in greenhouse erosion, raw materials and water consumption. The Company has increased waste reuse and recycling. The heritage of returning to society what they earn evokes trust among consumers, employees, shareholders and the community. This heritage will be continuously enriched by formalizing the high standards of behavior expected
9

from employees and companies. The TATA name is a unique asset representing Leadership with Trust. Leveraging this asset to enhance group synergy and become globally competitive is the route to sustained growth and long term success. Values Trusteeship Integrity Respect for Individual Credibility Excellence.

Various Policies of Tata Steel: • • • • • • • •

Quality Policy

Safety Occupational Health and Environmental Policy

Human Resource Policy

Social Accountability Policy

Corporate Social Responsibility Policy

Drug & Alcohol Policy

HIV+ & AIDS Control Policy

Energy Policy

Towards organization: Tata was the 1st company to amend its articles of association including the clause of social welfare.

Towards shareholders:
10

Equal participation, straight forward business policy.

Towards employees: Pioneer of P.F. scheme, free medical and workmen‟s corporationfund.

Towards Society: India should not be a economic super power but a happy country. Towards government: Suggestions of economic reforms and high tax Payer Company.

Towards consumers: Consumer is the king of market. Quality products & services timely solutions of problems Tata Steel is a signatory to the United Nations Global Compact, and abides by its 9 principles that address issues on Human Rights, Labor Rights and Environment, etc

Tata Iron & Steel Company Plantation of 1 lakh trees in and around Mumbai in collaboration with the NationalSociety of the Friends of the Trees Special project with M/s NEERI, in order to assess the carrying capacity of theregion and to ensure sustainable development in the region

Technology: Tata Steel has been fortunate to have leaders and a rich reservoir of committed people whocould see clearly through the future and transformed the plant into a modern technologicalgiant with the power of their meticulous envisioning, strategy and planning, through severalmodernization programmes having spent more than Rs. 70000 millions on environment-friendly technologies since 1980. Installation of a modern Cold Rolling Mill Complex, builtat global speed and cost, is not only the epitome of Tata Steel‟s modernization programme, but also remains a global benchmark in project management of its kind. It is also worthwhileto mention that the Company lost dearly for their decision on the installation of EOF(Energy Optimizing Furnace) at Jamshedpur Works, and CRM (Cold Rolling Mill) at Gopalpur in Orrisa. The Tatas made a great contribution in manpower development field too. From the very beginning the Tatas invested
11

substantial time, money and resources in training schemes. In1921, the Jamshedpur Technical Institute was set up with a purpose to replace foreign technical experts with their Indian counterparts. Furnished with super-sophisticated labs, advanced training aids and other infrastructural facilities, the Technical Training Institutes in Jamshedpur is today one of the best in the country. Recently, a new Management Development Centre has been built at Dimna to impart advanced management training to middle and senior level managers in the Company.

Modernization Programmed

Tata Iron & Steel Company Installation of a modern Cold Rolling Mill Complex, built at global speed and cost, is not only the highlight of Tata Steel‟s modernization programme, but also remains a global benchmark in project management of its kind. Besides, the Company has also completely revamped its information technology infrastructure to suit its modernized plant. It spent close to Rs. 40 crores on SAP implementation alone. Tata Steel‟s modernization programmers are detailed in the section, „Technology at its Best‟ of the chapter, „Imperatives of Change Management‟.

Natural disaster: Disaster Management & Relief Tata Steel has a long history of providing relief during natural calamities. Social consciousness runs deep down to the last employee of the Company. Every employee contributes to such causes, complemented by an equal, or more, amount from the Company. Besides, employees also volunteer to administer relief operations and provide disaster management services to other agencies involved.

Relief Operations Tata Steel‟s relief and rehabilitation programme, largely executed by the Tata Relief committee, is carefully planned and time-tested to counter unforeseen devastation caused by floods, drought and other natural calamities, serving both immediate and long-term needs of those affected, by
12

offering them food, medical aid, rehabilitation, etc. It has even designed and constructed buildings that can withstand natural calamities such as earthquakes. Company India is a developing country and its economy is growing very fast. Instead of this economical growth there is need for infrastructure to sustain this growth. The Government envisions India becoming a developed nation by 2020 with a per capita GDP of $154010.For a nation that is economically strong, free of the problems of underdevelopment and plays a meaningful role in the world as befits a nation of over one billion people, the groundwork would have to begin right now. The Indian steel industry will be required and is willing to play a critical role in achieving this target. If the steel industry gears up in about 3 to 4 years, Indian steel can be both in Indian and foreign markets. Steel industry has seen a sunrise after a bad and cloudy night. Worries of financial institutions are over and have taken an exposure in this sector. Indian government has planned for pumping in a lot of money in infrastructure in coming years, hence steel consumption will go up manifold.

GDP per capita to increase from USD 2500 and USD 5000 in 2020.

Population growth rate of 1.3 - 1.5%

Continuously improving macro economic factors

A strong demographic profile: with a large consumer base

Growing urbanization

Stable social and political environment

FUTURE PROJECTS

Indian Steel production likely to triple in next 15 years National Steel Policy Projections

13

Global crude steel consumption is projected to increase to approximately1,730 mtpa by 2020, driven by developing countries, including China. (Chart-3) •While China is becoming the new source of demand, the developed economies as a whole still remain the largest portion of the world‟s steel consumption.(Chart-3) •Positive demand fundamentals in development economics. (Chart-3)

Roads and power: The existing road network needs to be expanded and strengthened considerably for reducing transaction costs of the Indian steel producers. The steel plants and mines need to be integrated with the on-going programmes of national highway development and also with the proposed rural road schemes for expanding the delivery chain of steel across the country, especially the rural areas. The additional requirement of power for the steel industry would be 7000 MW by 2019-2020, requiring an additional investment of Rs 24500 crore. In order to achieve the goal of 110 million tones of steel production by 2019-20, the NSP seeks to remove the supply-side constraints to the growth of this industry in an open, globally integrated and competitive environment. The country would need an investment in the range of Rs.1 lakh to 1.2 lakh crore in creation of additional steel capacities by 2011-12.Related areas like mining and power will require an additional investment of Rs. 25,000 to30,000 crore. Further, there is a need to retain flexibilities in the financial system to encourage innovation. There are many areas of technology development and adoption, which can be risky but also highly rewarding. Venture capitalism needs to be promoted at a greater pace for early adoption of emerging technologies.

PEST Analysis of Steel Sector: Political Factors: On 19th Nov. 2008, 5% import duty slapped on steel to save the domestic market. In Oct., the government also removed a 15% export duty on long steel products use by the construction of
14

two sectors road and power. Present government commitment that to make India an economic super power for that they inspire globalization and brass industries to improve GDP growth rate 8% to 10%.Ministry of Steel had no scheme to implement directly till 10th Plan (2002-07). In the 11thPlan (2007- 12) a new scheme named „Scheme for promotion of Research & Development in Iron and Steel sector‟ has been included with a budgetary provision of Rs. 118.00 crore for promotion of research & development in the domestic iron and steel sector. The schemes presently at formulation stage.

Tata Iron & Steel Company Changing in government policy increase competition which benefits to the consumers. Before BJP government as ruler in 1999, there were no benefits got by steel industry. After 1999 when BJP came the industrial people would have got the benefits from EXIM as taxrelief. When Narendra Modi became the Chief Minister the steel industry has started growing rapidly and the profit increased by Rs 9 to Rs. 13 per Kg. The existing regime of liberalization, decontrol and deregulation of industry in the country has opened up new opportunities for the expansion of the steel industry. With a view to accelerating the growth of the steel sector and attaining the vision of India becoming a developed economy by 2020, the Ministry of Steel formulated a

National Steel Policy(NSP) in 2005. The following are the salient features of the NSP:-(1) The NSP set out a broad roadmap for the Indian Steel Industry in its journey towards reform, restructuring and globalization.(2) The long-term goal of the NSP is that India should have a modern and efficient steel industry of world standards, catering to diversified steel demand. The focus of the policy is to achieve global competitiveness not only in terms of cost, quality and product-mix but also in terms of global benchmarks of efficiency and productivity. Government has a scheme for routing the allocation of steel material from main producer slike SAIL, RINL, and TATA STEEL to SSI units, and other government departments (up to30% of the total allocation) through the small scale industries corporation, SSICs and also through National Steel Industry Corporation NSIC where SSICs are either defunct or not inexistence. In order to ensure that small scale industries obtain these raw materials as reasonable prices, the government provided nominal handling charges of approximately Rs.500 per tone to the corporation so that the corporation supply the steel material as the doorstep of the SSI units. Political compulsions
15

were the only reason for steel companies to cut prices. Otherwise, steel prices have been looking up quite some time now and there has been good demand of steel in domestic as well as international markets. Instead of prices going up, they are declining. The government had recently affected a 5% customs duty cut on non-alloy steel.

Steel prices to go up as Railways increases iron ore freight rates in a move that may increase input cost for steel cos like Tata Steel, Essar, Jindal and IspatIndustries, Indian Railways has decided to increase the freight rate of iron ore by around5%. The decision would push up freight rates by about Rs 100-200 per tone depending on the distance. The decision was taken to soothe the inflationary pressure. The price of the ore comprises between 30% to 45% (depending on the kind of iron and steel) of the total price of steel. Currently, the price of steel is around $750-900 per tone in the global market. The government has been fighting inflation due to rise in prices of various raw materials, iron ore being one of them. The Railways transported 53.59 million tone of iron ore for exports in2007-08.

Implementation of the National Steel Policy (NSP), 2005:

Tata Iron & Steel Company Freight equalization Scheme was withdrawn in January, 1992. However, with the coming up of new steel plants in different parts of the country, iron and steel products are freely available in the domestic market. Recent years have witnessed unprecedented turmoil in the global steel market. The crisis in the international steel market might be attributed to the misbalance between capacity, demand and production and consequent drop in prices. Throughout the world there is an apparent over capacity (estimated to be between 100 Mt-150 Mt) in the steel sector. According to the IISI, the companies have been selling their products below costs to survive in global competition. Since 2001, while growth has been negative in most mature markets, Asia has maintained steady growth rate. The Asian production growth has mainly been driven by the surge in steel demand and production in China. The huge Chinese appetite for steel has led the 10.2%surge in output. The growth in Chinese steel demand, generated mainly by demand from infrastructure sector is a beacon for Indian steel since both the nations are comparable on many counts.

16

The Indian steel manufacturers are faced with some major problems and concerns, which work as inhibiting factors to their effort towards gaining the competitive edge. A few of these are:

Unremunerative Prices: Stagnating demand, domestic oversupply and falling prices in the last few years have hit Indian steel makers. Barring the sporadic rise in demand in the recent months, it has suffered from unremunerative prices to the extent that companies have been finding it difficult to maintain capital costs.

Stagnating Demand for Steel: According to Mc-Kinsey and Co the domestic steel industry is set to witness a 33% over capacity in the hot rolled coil sector by the year 2003 when the domestic capacity currently at 45%, in long products and semis is expected to drop at 22% by that year. The non-flat products are also likely to face an over capacity of over 21.4%.

Lower Consumption: Steel consumption in India over a period of time has exhibited as strategy correlation to GDP growth (correlation coefficient of 0.9855 between 1960-1961and 1996-1997) and gross domestic capital formation (0.981).The correlation with GDCF has been 1.0 for the period FY 1994 to 1999. As investments declined from 1996-1997 onwards, steel consumption also decreased. Failure to Develop Trade Especially International Trade. The countries which have achieved major growth including growth in steel industry, like Japan, China and South Korea have largely used their trading houses to develop their markets abroad. In India, they have singularly failed to do so. As a result, Indian steel industry does not have a major presence even in the neighboring countries. The reasons for the same include lack of profit motive, wrong scale of assets, little or no co-ordination between plants and markets, inappropriate logistics/locations, over-manning, poor investment decisions, lack of innovation and inadequate investment in requisite areas. Slow Industry Growth: The linkage between the economic growth of a country and the growth of its steel industry is strong. The Indian steel industry is no exception. The growth of the domestic steel industry
17

between 1970 and 1990 was similar to the growth of the economy, which as a whole was sluggish. This sluggish growth in the steel industry has resulted in enhanced rivalry among existing firms. As the industry is not growing the only other way to grow is by increasing one‟s market share. Consequently, the Indian steel industry has witnessed spurts of price wars and heavy trade discounts, which has done Indian steel industry no good.

Social Factors: Corporate Social Responsibility (CSR) has been to develop the villages as model steel villages. All profitable steel PSUs have made commitments to the cause of CSR and have earmarked at least 2% of their distributable surplus for CSR activities. The total budget allocated for CSR in respect of the PSUs for 2007-08 is around Rs. 230.00 crore. CSR activities focusing on environmental care, education, health care, cultural efflorescence and peripheral development, family welfare, social initiatives and other measures are underway in the PSUs. In view of the calamity brought in by the floods in UP, Bihar and Assam, some of the PSUs organized immediate relief measures in these affected states . SAIL, NMDC Ltd. and RINL contributed Rs.5 crore, Rs.4 crore and Rs.2 crore respectively towards the flood relief measures. All the main producers have been urged by the Ministry to adopt villages around their plant and as part of their CSR activity and help. Use of steel has been emphasized in items such as storage beans, bullock carts, buildings such as school buildings, panchayat halls, health centre buildings, water tanks, waiting sheds etc. 129 villages are being developed into model steel villages.

Child labour is the issues of small scale sector of the steel industry. Children were exploited by paying them low wages. A decision was taken to have at least one dealer in each district in order to make available steel items to common man. In order to ensure the availability of commonly used items of steel in the rural areas across the country, SAIL and RINL are expanding their distribution networks at a fast pace with the objective of having dealers in all the districts of the country. Preference for SC, ST and OBC ent and occupation. Aside its long history, Tata Steel has “written the book” on welfare measures in Indian Industry many of which, have been subsequently followed by others i
18

Safety Measures For improvement in the overall safety situation in the Iron & Steel industries in India following remedial measures need to be taken up: policy, whether by public sector or private sector, does not go unrealized. The system of factory inspectorate, safety officers and legal framework has to be refurbished accordingly. There should be up-gradation in legal provisions to take care of changes in technologies / work environment so that loopholes are plugged as far as possible. be adopted in all plants. are still being practiced in some steel plants. These processes are hazardous to personnel working there and it is required to phase these out immediately to improve safety in such plants. Apart from this, new technological development will also facilitate attainment of safe work environment.

inherent risk/ hazard:

Social Audit (2002-03) The Social Audit being reported, for the period 1991 – 2001, was conducted during the period 2002- 03 within the framework of the same „Terms of Reference‟ as that of the 2ndSocial Audit. The Audit Panel comprised of the following members recommended by theBoard: Ms. Pheroza Godrej Justice S. K. Mohanty The late Justice D. N. Mehta (Retd.) – (Chaired the Panel until June 2003, when he suddenly Passed away)

Ms. Tarjani Vakil, MD, EXIM Bank (opted out during the initial phase of the Audit)The Company nominated Mr. Ajit Jha, Resident Representative, New Delhi, Tata Steel, asthe Secretary and Chief, Co-ordination, 3rd Social Audit, to provide management support tothe
19

Audit Panel, and later in the evaluation process, his role mandated to be independent of intracompany domain. Subsequently, Mr. S. K. Suman, Head, Co-ordination, Tata Steel, was nominated by the management to provide research and report assistance to the 6

Tata Iron & Steel Company Panel. Mr. Jha and Mr. Suman assiduously checked the facts and figures contained in thisreport7

SWOT ANALYSIS

Earlier known as Tata Iron & Steel Company upto 2005 Strengths of TATA STEEL: 1. Mineral Reserves – Tata Steel has two collieries i n West Bokaro and Jharia, inthe state of Jharkhand. The iron ore units are located in Noamundi, Joda and Katamandi in the states of Jharkhand and Orissa. Tata Steel Limited also has manganese mines and dolomite quarries in Orissa. These mines are located at an approximate distance of 150 kms from Jamshedpur, home to the steel company's manufacturing facility. The Steel Company's iron ore units produce 9 million tons per annum of various grades of high quality iron ore including rich blue dust ore. The company in India is having mines of 281 million tones reserves in its mines in Jharkhand and thus having minerals to cater its needs for more than 20 years. The company has also been acquiring stake overseas in Canada, Mozambique, Australiaetc. to boast its reserves for clean coking coal which is rarely available in India.

2. Management Team - Tata Steel has a highly credible management team who has displayed their skills in expanding the company through inorganic route. The company has successfully acquired Nat Steel of
20

Indonesia, Millennium Steel of Thailand and more importantly Corus. The company‟s virtuoso s of finance have been able to find innovative ways to tackle the company‟s burgeoning debt and keep the bottom line in the green zone despite lowering demand and huge debts accumulated.

3. Information Technology - The entire mining operation of the Company is safeguarded against accident occurrence. Proactive measures are undertaken to ensure the employee's health and productivity through ergonomically designed work stations and by protecting them from occupational hazards. All its mines are ISO-14001 -Environmental Management System Certified. Tata Steel's collieries use 'Surpac', a state-of-the-art mine planning software that estimates the volume of coal in every seam. This software is coupled with qualitative detailing that focuses on output consistency. To maximize productivity and utilization, a voice and data equipped Global Positioning System is used, which helps to supervise mining activity for machine movement and engine status.

4. Innovativeness of TATA Steel with respect to its competitors - Tata Steel has the lowest operating cost for steel manufacture in the world Further it has displayed effective means in adopting an eco-friendly and sustainable approach towards the manufacture of steel thus proactive measures are undertaken to ensure the employee's health and productivity through ergonomically designed work stations and by protecting them from occupational hazards.

5. Adaptability of the company in the fast change of the environment - Tata Steel has displayed immense agility in the recent past during the global financial tsunami. Its virtuosos of various fields have adopted various methods like lowering of production and even shutting down of steel plant sowing to the lack of demand, managing the balance sheet efficiently etc. The company has 70% of its procurement of raw materials for its operations in Asia through long term contracts and so its margins can be shielded from the nuances of the volatility of the financial markets. 6. Brand value

21

- The TATA brand owing to its highly ethical and a socialistic approach to business have made its name synonymous to trust. After the acquisition of Corus another powerful brand, the brand value of the company has enhanced further.

7. Corporate governance - Tata Steel has had an impeccable record for corporate governance. It has set the benchmark in global corporate governance principles of transparency, accountability and equity for others to follow. Tata Steel has been consistently receiving prestigious awards at both the national and the international arena. Recently it bagged the Best Governed Company Award for corporate practices presented by Asian Centre for Corporate Governance.

8. Excellent integration with Corus – Corus has a great reserve of around2000 metallurgists and technology which could be exploited by Tata Steel on several fronts.

9. Excellent procurement philosophy - Tata Steel has around 70% of its supplies through long term contracts. Thus it can be shielded from the volatility of the financial markets.

10. Spawning upon opportunities - Tata Steel has been amongst the earliest to spot the escalation in the demand for steel in the forthcoming years. It has hence invested heavily in the expansion of its existing facility at Jamshedpur and is setting up other green field projects at Orissa, Jharkhand etc

Weaknesses of TATA Steel22

1.Huge debt burden - Tata Steel is having a total debt of 10.2 billion USD in its books. It has a debt equity ratio 0f 1.6 which means that the assets of the company is largely financed through debt. With the inflation on a rise the central banks of most all the countries are intending to tighten in the liquidity in the money markets. As a result of which the interest rates are on a rise. In India the banks are mulling the option of a rate hike and most analysts feel that the RBI is going to increase the repo rate by almost 100 bps further after CRR hike of 75 bps in late February this year. Thus it would add to the interest burden of the company which would further increase the liabilities of the company and thus degrade the quality of its balance sheet further.2. High attrition rate - Tata Steel has traditionally faced the brunt of high attrition rate. In its Jamshedpur plant many engineers constantly change their jobs to SAIL in Bokaro and vice-versa. Thus the formation of a core team of capable individuals across all departments is very difficult as the size of the team is ever changing.3. Products in the portfolio lacking demandThe company has certain products in its portfolio like aerospace steel which lacked demand in the recent past. Primarily due to the slowdown of the aviation sector which led to delay in the delivery of aircrafts as a result of cutting of capacity by airlines. The company also had certain Cast products largely marketing in the UK which has been witnessing slowdown in demand since 2001. Hence the company had to close down its Tee Side plant.4. Degradation in brand value owing to job lossesTATA group has madeits name synonymous to job security of it employees. But the shutdown of its plants in the UK and The Netherlands will dent its image to a certain extent. As a result of which around 1600 employees would lose their daily livelihood.5. Low cost recovery – There are specific products like the aerospace steel and cast products which has received feeble response in the past. The company has failed to recover costs in this business front.6. Laggard in technological front - Companies like SAIL has efficiently introduced the XRF (X-Ray Fluorescence) in its plants at Durgapur and Bokaroover 12 months back which the Tata Steel has failed to do.7.
23

Bad raw material procurement philosophy of its subsidiariesThe largest subsidiary of Tata Steel, Corus has high exposure to spot prices and a higher operational gearing among the larger European steel companies. Hence it has the risk of volatility associated with pricing, one of the key elements in determining profitability of a commodity Opportunities .Competitive position of the companyTata Steel is the second largest producer of steel in India and the sixth largest producer in the world.2. Newer technologies – i)The Corex process combines an iron melter/coal gasifier vessel witha pre-reduction shaft to produce a liquid product that is very similar toblast furnace hot metal. Coal, oxygen, and pre-reduced iron are fed into the melter/gasifier to melt the iron and produce a highly reducing off-gas

.ii) The His melt process Iron reduction and coal gasification take place in a liquid metal bath. The fundamental processes of His melt began with early experiments in Germany with bottom-blown oxygen steelmaking converters (LD, LD-AC, KMS, among others) to allow for coal, lime, and/or iron ore injection through the bottom nozzles.

iii)Direct Iron Ore Smelting (DIOS) process in Japan and the AISI direct steelmaking process in North America produced two similar routes tohot metal production. Both processes utilize a smelting reactor where the primary reactions occur in a deep slag bath as opposed to in the metal phase.3.

Opportunities in the field-

24

India has geared up for rapid expansion in the field of infrastructure. The Government of India (GoI) has earmarked Rs.1, 70,000 crore for infrastructural spending for the fiscal year 20102011 and the trend is set to escalate up to the fiscal year 2025 when India is slated to become the third largest economy in the world. Further many private players either independently or by undergoing public private partnerships (PPP) has also come into the fray. The consumption of steel has been steadily increasing with the rapid investment in the infrastructure and real estate projects. The annual steel production of India has touched 200MT and according to governments steel policy is expected to touch around 250 MT by 2013-2014. The demand for Indian made steel is escalating overseas out of the 200 MT of steel currently produced in India around 50% of it is exported. In the first six months of the fiscal year 2009-2010 the Indian steel export almost doubled to 9.3MT from 4.4MT in the same period the previous fiscal year. The country‟s iron ore exports during April-October 2009 period grew 20 per cent over the year ago period to 53 million tons.

4. Acquisition opportunities In the aftermath of the financial tsunami various mineral assets are available globally at a price which is just a shade of their prime valuations. The government of various countries has been putting up coal blocks under the hammer. Tata Steel has been very active in the asset acquisition space and has bagged various coal blocks in Asia, Africaetc. Which is essential for its security of raw materials.

5. Opportunities for demand of higher prices - The demand for steel is on arise both domestically and internationally as a result of the enhanced focus upon infrastructural development. Secondly with other steel projects of international giants POSCO, ARCELOR MITTAL stalled due to land acquisition problems the prices of steel are slated to soar. In the month of April 2010 the steel prices were increased by Rs.2500/ton and this is just the brink of the U-Shaped economic recovery and the prices are slated to rise further in the near future.

6.The movement of Tata Steel in the value chain front25

India is the only country in the world where steel can be made cheaper and there is consumption. Then there are other countries like Ukraine, Iran, Brazil, Australia and Bangladesh where steel can be made cheap because of the availability of iron ore and coal. Tata Steel has been to Iran, Ukraine, and Bangladesh - all in the last year and is looking at China for finishing capabilities Ukraine is like India, where the factors of production are competitive. The sustainable level of demand in Ukraine is 12 million tons (MT),but one can make much more steel because of the availability of ore. Secondly, the labor is cheap in India and so is the cost of energy . Hence, Tata Steel's strategy is based on breaking up this value chain and putting each part where it's the most cost-effective. So primary steel will be produced in India, where there are large deposits of iron ore. But the Asian markets, now a key focus for Tata Steel, will begetter addressed by taking the semi-finished steel to these countries for finishing and then selling there. For now, Jamshedpur will provide the semi-finished steel forth NatSteel bases. Tomorrow, it could well come from Iran or Ukraine; these countries have abundant iron ore and are therefore ideal for primary steel making. 7. Improvement in the quality of operations, products, inventory management – 7.1 Strategic Sourcing Approach Tata Steel‟s approach is based on the principle that strategic procurement is an exercise beyond cost reduction. Commodities used for steel-making processes and their allied services are being selected and prioritized for study using strategic sourcing tools, before their annual procurement, depending upon their annual purchase value and criticality of application. After the selection of the commodities, a Commodity Competence Team(CCT) is formed which is a cross-functional team wherein people from different departments such as User/Operation, Research and Development, Quality Control, MRO, Supply Management and Finance come together to formulate sourcing strategies for a commodity purely on a techno-commercial basis. After the formation of the CCT, the commodity studies are carried out based on different technical and commercial parameters as

Strategic Sourcing Levers
26

Strategic sourcing requires the application and interpretation of sophisticated strategic sourcing tools and techniques. Tata Steel follows a variety of sourcing strategies, as shown in Figure 5, with multifarious objectives which are mentioned below:• Decrease specific consumption and specific cost of commodities on life-cycle costing basis.• Source consistent quality products.• Ensure continuous supply of materials.• To increase the productivity of blast furnaces or steel Melting shops by decreasing the down time through the use of improved quality, cost-effective materials, wherever applicable

3 Total Refractory Management Concepts To ensure the quality of refractory, proper service and the life of cast house runners which are directly related to the hot metal production and also to decrease the total cost of ownership on a life-cycle costing basis, a strategic decision was taken to go for „total refractory management‟. In the total refractory management of cast house troughs for high-capacity blast furnaces, the supplier is responsible for the supply of the entire refractory material for all the locations of cast house troughs, initial installation, regular supervision, maintenance of troughs through casting till guaranteed throughput hot metal is achieved and the supply of all kinds of equipments required for installation and maintenance of cast houses.

7.3.1 Vendor Selection through comparative assessment A comparative analysis of the suppliers was carried out based on parameters, which includes total throughput commitment of hot metal, throughput of hot metal committed in between two repairs, total down time of trough runners, a reference list of a supplier‟s customers, quality of refractory to be used and life-cycle cost of refractory in terms of Rs/ ton of hot metal (Rs/thm).

7.3.2 Reduction of Life-cycle cost

7.3 Total Refractory Management Concept To ensure the quality of refractory, proper service and the life of cast house runners which are directly related to the hot metal production and also to decrease the total cost of ownership on a life-cycle costing basis, a strategic decision was taken to go for „total refractory management‟.

27

In the total refractory management of cast house troughs for high-capacity blast furnaces, the supplier is responsible for the supply of the entire refractory material for all the locations of cast house troughs, initial installation, regular supervision, maintenance of troughs through casting till guaranteed throughput hot metal is achieved and the supply of all kinds of equipments required for installation and maintenance of cast houses.

7.3.1 Vendor Selection through comparative assessment A comparative analysis of the suppliers was carried out based on parameters, which includes total throughput commitment of hot metal, throughput of hot metal committed in between two repairs, total down time of trough runners, a reference list of a supplier‟s customers, quality of refractory to be used and life-cycle cost of refractory in terms of Rs/ ton of hot metal (Rs/thm A reduction of the total life-cycle cost. Of refractory, in terms of Rs/them, has-been done by proper selection of material, optimization of its amount to achieve the guaranteed throughput and finally by knowledge-based negotiation.

7.3.3 Benefit to Tata Steel • Reduced down time of the trough runners leading to higher rate of production.• Reduced specific consumption of refractory in terms of kg/them.• Reduced overall cost of ownership due to higher campaign life of refractoriness and also due to higher rate of production, as the productivity of the blast furnace largely depends on the quality of refractoriness used at the cast house. Different Sourcing Levers Applied for Procurement of High Value and Critical Commodities

8. Time for diversificationWith the demand for various products of steel soaring presents us with the right time for upstream diversification. Threats faced by Tata Steel1. Resources to cushion the from business environmental changeTata Steel is a company floated by Tata Sons whose assets are valued at around 108 billion USD and thus the company has enough reserves to cushion itself from market fluctuations. 2. International competition28

Companies like the Indian Steel magnate Lakshmi Mittal‟s Arcelor Mittal, Posco has landed in the shores of India and have proposed to set up 8 MT and 12 MT respectively. These are amongst the largest steel producers in the world and have a high chance of eating into the market share of Tata Steel. Indian market is also plagued with cheaper Chinese made steel which is ubiquitously available and insignificantly munching through the pie of all Indian steel makers including Tata Steel. 3. Financial Crises Tata Steel is having a huge debt of 10.2 billion USD in its books and hence a huge interest burden. With the volatility of the financial markets and the tightening of the liquidity by the central banks this rate is slated to go up and hence would further increase the interest burden of the company. 4. Adoptability of the company to technological changes – Tata Steel has shown immense integration abilities in the past. With the acquisition of it has been able to imbibe the high end technological knowledge to its production facilities and hence has been able to produce high quality steel at least prices and significantly bettered its operating margins. 5. Regulatory normsThe government of India has chalked a strict norm for the clearance of a plant through environmental impact assessment (EIA). To get clearance from the concerned authority demands more than eight months thus leads to delay and project cost escalation. Albeit the governments‟ steel policy has been pro industry in order to increase the steel capacity at a brisk pace. 6. Adverse effects of land acquisition picketingIndia is plagued with violent agitation against land acquisition. The land acquisition process of the company‟s plant in Orissa has been stalled primarily due to the uprising of the land losers in the concerned area. Albeit the company is providing with attractive compensation packages, the uprising is primarily due to the cheap politics of the local leaders to come into the limelight. This will severely dent the company‟s expansion plans of the future. 7. Decrement in the sales volumesSome of the Tata Steel products (like aerospace steel) have witnessed a severe reduction in sales and as result of which the production facilities of the company in the UK and The Netherlands is facing the brunt of shut down.
29

8. Brand equity of the productsTata Steel brand is a very powerful one, can only take a product very far. Beyond that it will be necessary for theroduct to strike ahead with its own brand. He says, "A villager who goes to buy steel in the marketplace does not know what Tata Steel is bringing to this steel. All he knows is that it is a Tata product." That villager needs to be told about the superiority of Tata Steel‟s product over others. This is the work of the brand. Branding has begun to yield rich dividends. Last year Tata Steel sold about 345,000 tons of branded steel, which represented about 12 per cent of its total steel sales, as against 265,000tons, representing 9 per cent of total steel sales, the previous year. This year the company plans to more than double its volume of branded steel. Although the resultant increase in turnover of branded products will be enormous, there are miles to go before Tata Steel can rest on its laurels.

30

BUSINESS PLAN

Tata Steel Consulting provides business planning services to a range of industrial sectors, including: • • • • • • • • • • Iron and steel - all long and flat products Tube and pipe Foundry and forge products Rail products Iron ore mining Engineering steels Wire products Metal fabrication industries Steel distribution and service centres Ferro alloys

The business planning group operates independently or in tandem with other groups within Tata Steel Consulting and sometimes in collaboration with external organisations such as management consultants and investment banks. As a result it can always call upon an exceptional range of skills and experience to meet the diverse requirements of its clients.

Clients The business planning group has assisted a broad range of clients, in public and private sectors, situated in a large number of countries.

Expertise Assignments undertaken are diverse in terms of the problems and issues addressed. Tata Steel Consulting has provided strategic assistance to numerous manufacturing companies.

Methodologies A wide range of expertise and methodologies is employed by the business planning consultancy group. The first stage of assignments often requires detailed analysis of market prospects for the client company.
31

This can involve extensive interview programmes in the metals consuming sectors as well as economic and demand forecasts.

New Delhi: The world's seventh largest steel maker Tata Steel Ltd, a part of India's diversified business conglomerate Tata Sons Ltd, plans to sell its stake in various group companies, including Tata Motors Ltd, to raise fund for expansion and repay high cost loans, the Business Standard reported citing unidentified bankers. The steel major may garner as much as Rs 72 billion via selling its stake in group companies, the bankers told the paper. Presently, Tata Steel owns 5.6% equity stake, worth Rs 50.14 billion, in Tata Motors. Besides, it also holds 51% stake in Tata Sponge; 73.4% in Tinplate India; 54.5% in Tayo Rolls; 32.5% in TRF Ltd; 0.7% in Tata Power and 50% in Dhamra Ports. The steel making company may sell these stakes to the holding company Tata Sons Ltd to raise funds, which will be utilized for expansion in the Odisha state and repay higher cost loans, bankers told the daily. Early this year, Tata Steel was holding discussion with Adani Group to divest its holding in the Dhamra port project (Odisha), media reports said, adding that the company is now awaiting the Odisha government's approval to raise capacity so that it gets a better valuation for the lossmaking port company. Tata Steel plans to spend around Rs 420 billion in its Odisha plant in two phases. Total expenditure for the phase I has risen up to Rs 240 billion from the earlier estimated Rs 190 billion on account of currency fluctuation and other cost overrun Tata Steel Europe has won an order to manufacture 60,000 tonnes of high-quality rail for a new high-speed line linking the two holy cities of Makkah and Madinah in Saudi Arabia. The new railway will allow millions of pilgrims to cross the 444km between the two cities at speeds of 320kmh. The line will cross desert, withstanding temperatures ranging from freezing to 50C, as well as sand storms, flash flooding and shifting dunes, a statement said. Gérard Glas, rail sector head for Tata Steel, said: "This is a prestigious project which will see the holy cities being linked by rail for the first time.

32

"Tata Steel is delighted to be contributing to this high-speed line, which will have to overcome some major challenges presented by building a high-capacity rail line across some of the most extreme terrain in the world." Steel for the project will be made at Tata Steel's Scunthorpe plant in the UK before being rolled into rail in lengths of 25 meters both there and at the company's plant in Hayange, Northern France, he said. Work on producing the rail will start at the end of this year and is expected to continue throughout 2014. Tata Steel rail has already been used successfully in similarly challenging conditions for projects in Brazil and Mauritania, the statement added. Last year the Saudi Railways Organisation awarded the contract for the final phase of completing, running and maintaining the Haramain High-Speed Rail Project to a group of Spanish infrastructure, construction and technology companies. The new line is expected to carry around 160,000 people a day - and even more during the Hajj pilgrimage. They will be transported on a fleet of 35 new high-speed trains. The project started in 2009, with an estimated cost of more than €12bn. The new rail line is set to open to the public in late 2014 or early 2015. Besides the two holy cities, the line will have three other stops, two in Jeddah for commuters and one in Saudi Arabia's new King Abdullah Economic City, a residential, industrial and commercial macro-complex that is still being built. Spanish construction companies Copasa, Imathia and OHL are responsible for building the line's superstructure and the track bases, as well as for the line's mechanisms.

33

PRODUCT LIFE CYCLE

Life Cycle Assessment In recent years concern for the environment has grown among national governments, industry and the general public. In consequence, there is pressure to improve manufacturing systems and change consumer behavior to progress towards sustainable development. Life Cycle Assessment (LCA) has emerged as a leading tool for quantitative analysis of environmental impacts of products and processes, which are often very complex. LCA measures the impact on the environment over the course of a products‟ lifetime, from the parts and materials that are used in its manufacture through to its assembly, shipment, use, and ultimate disposal. Major drivers for the increased use of LCA include: Assessing and Improving Environmental Performance LCA provides a holistic understanding of environmental performance; the impact on the environment can be reduced not just in certain process stages, but from the viewpoint of the products‟ total lifetime.

Legislation Governments are increasingly requiring LCAs to be carried out to demonstrate compliance with existing legislation.

Marketing and Eco-Labels LCA results can be used to promote products based on environmental criteria. Environmental Product Declarations are eco-labels based on LCA results and are an increasingly popular way of differentiating products from competitors by emphasizing environmental performance.

Improvements to Process and Product Design LCA provides a strategic tool for the identification of process and product design improvements. Tata Steel has Life Cycle Inventory (LCI) data for steel industry products. This includes materials and energy balances, as well as an evaluation of emissions to air, water and land in the

34

supply chain industries (i.e. mining, transport, power, chemicals etc). The LCI was compiled in accordance with ISO 14041 guidelines on conducting LCAs.

Tata Steel can provide the following LCA Services: LCA Studies (to ISO 14041 Standards) Defining the scope and the boundaries of the project, developing a software model of the system being studied, compiling the LCI, conducting the Life Cycle Impact Assessment (LCIA) studies, analyzing sensitivity to assumptions and data quality and interpretation of results.

Critical Reviews of LCAs Internally generated LCAs should be reviewed critically by external parties to ensure compliance with ISO 14041 standard.

Advice on Existing LCA Studies / Methodologies Tata Steel can comment on the results or methodology used in external LCA studies.

Related Activities Tata Steel can assist with the Life Cycle Costing or Whole Life Costing of products. Tata Steel can provide service and support to Works, commercial and technical functions, customers and designers who use steel products and those who wish to evaluate using steel in their products and services.

35

BIBLIOGRAPHY : Websites: (1)http://steel.nic.in/Perfomance%20budget%20(2005-06)Englishchap2.pdf (2)http://www.ieIndia.orgpdf8989MM104.pdf (3)http://article.wn.com(4)http://steel.nic.in/(5)http://www.tatasteel.com(6)http://greenbussinessc entre.com/images/photos/Exp48.pdf (7)http://www.tatasteel.com/newsroom/awards.asp(8)http://www.ieIndia.orgpdf8989MM104.pdf (9)http://www.tatasteel.cominvestorrelations2002pdfsmda.pdf (10)http://steel.nic.in/Performance%20Budget%20(200506)Englishchap2.PDF(11)http://www.tatasteel.cominvestorrelationsan200708investorpresentation-feb08.pdf (12)http://www.slideshare.net/pankajhambarde/tata-corus-ppt-

presentation(13http://www.tata.com/company/Articles/inside.aspx?artid=KfibEhYKXcET

36

Sponsor Documents

Or use your account on DocShare.tips

Hide

Forgot your password?

Or register your new account on DocShare.tips

Hide

Lost your password? Please enter your email address. You will receive a link to create a new password.

Back to log-in

Close