Summer Training Research Project Report

on

Critical skill mapping of employee based on 4Q

Toyota model at TATA STEEL ltd. jamshedpur

For the partial fulfillment of the requirement of

MASTER OF BUSINESS ADMINISTRATION

Affiliated to Mahamaya Technical University, Noida (U.P.)

(2010-2012)

Under The Guidance of: Under the Supervision of:

Ms.Alka Mr. Bhavuk Gupta
(Manager IR CSI)

Submitted By:
SUDHIR SINGH
Roll No.1068470104

GNIT Management School

6-C, Knowledge Park-II, Greater Noida ( G. B. Nagar)

1
 GNIT Management School
6-C, Knowledge Park-II, Greater Noida (G. B. Nagar

Date:11.11.2011

To Whom It May Concern

This is to certify that Mr. SUDHIR SINGH student of

M.B.A. course (2010-12) at GNIT Management School with dual specialization in

Marketing & HR has satisfactorily completed the summer

Research project on “Critical skill mapping of employees based on 4Q toyota

model TATA STEEL Ltd. jamshedpur”

This study is done under the guidance of the undersigned by partial fulfillment for the
award of M.B.A. I wish him/her all the best for bright future ahead.

Faculty Supervisor Director

Ms. Alka Dr. Savita Mohan

2
 DECLARATION

I sudhir singh declare that the project entitled “critical skill mapping of employees

based on 4Q Toyota model at TATA STEEL LTD.jamshedpur” is my original work

being submitted to the MAHAMAYA.TECHNICAL UNIVERSITY for the partial

fulfillment of the requirement for the degree of the Master of Business Administration is my

own endeavors and it has not being submitted earlier to any institute/university for any

degree.

PLACE: Greater Noida NAME-SUDHIR SINGH

DATE: 11-11 2011 ROLL NO-1068470104

I.D. NO.-684067

3
 ACKNOWLEDGEMENT

This project is a team project, while my name is on the cover page

of this project, literally many of the people have contributed to
this research report. Every work requires commitment, but this
commitment goes in vein when there is no guidance.

I am short of words in expressing my sincere thanks to respected Mr.

Bhavuk gupta (manager IR CSI) for his encouragement and support
for the fulfillment of my project.

Last but not the least I also acknowledge with thanks director
mam Ms. Savita Mohan and under the guidance of Ms. Alka for his
valuable suggestions and I am also indebted to the faculty of GNITMS
for making me worth this work.

4
 Preface
The research is on the basis of A STUDY ON ‘SKILL MAPPING OF EMPLOYEES
WITH 4Q MODEL OF PELLET PLANT EMPLOYEES IN TATA STEEL LTD.
JAMSHEDPUR.

 It is used to study the skill level of employees in their job level. Skill matrix is a
tool to assess training needs.

 It is a table that shows skills of individuals in a team and any gaps between
the skills of employees and the job roles they have.

 It is also known as a competency framework. If behind the maximum level,

retrain and evaluate.

 The study was based on the descriptive research design. The sampling
design being used here is Simple Random Sampling

 Thus this report seeks to utilize primary research, through

questionnaires, Observation and secondary method involves data collection
through magazines and websites.

 The tools being used for analysis and interpretation is Percentage analysis.

 The Suggestion made by the employees where mostly implemented whenever they
were applicable.

5
 Index
Sl.no. Topics Page Number

Institute’s certificate
Company’s certificate
Acknowledgement
Declaration
Preface
From To
1 Introduction 1
17
About the topic
Objective of the study
Methods employed
Significance of the study
2 Industry Profile 18
30
3 Company Profile 31
52
4 Financial analysis of the company 53
95
5 Data analysis and interpretation 96
102
6 findings 103
7 Conclusion 104
105

6
8 Suggestion
106 108
9 Limitation of the study 109
10 Appendices 110
118
Questionnaires
Organizational Structure
12 Bibliography 119

INTRODUCTION

7
 INTRODUCTION

In today’s competitive business scenario and era of flatter organization, structures

enabling high quality performance/contribution from each individual have become

essential because skill level of employees is critical to the performance of any

organization.

The leader’s role in motivating, guiding and facilitating employees in raising

their performance and realizing their potential has assumed greater significance.

Further, managers are called upon to develop the ‘softer’ skill, attitudes and

behaviours so as to ensure that each individual integrates well with the team and the

overall organization culture. Also, employees today expect their manager to play an

active and effective role in their career planning and professional development.

8
 Thus for knowing the needs of the training and development of the

employees, Toyota Motor, Japan has introduced the concept of Critical Skill Mapping

by Four-Quadrant Model. By the use of model managers are able to evaluate and

analyze the progress of skill index of a group of employees of same profile. In order to

improve the skill level of employees, the Toyota model (4 quadrant) model of skill

assessment has been adopted. This help in identifying the gaps and the training the

Critical skills are those minimum skills required to successfully accomplish the

assigned work/job. If skill of worker or employees lies below the critical skill, then the

productivity of workers is hampered and the organizational output will be affected.

Non-critical skills are those skills, which help in enhancing the efficiency and

effectiveness of an organization. It helps in achieving the benchmark of productivity of

an organizational output.

9
 ABOUT THE TOPIC

QUADRANT MODEL OF CRITICAL SKILL MAPPING

Toyota Motor, Japan recently developed the four-quadrant model of critical skill

mapping. The skill of workers is mapped on quadrant of a circle from 0 to 4. Each

quadrant defines the level of skills of a worker. The specification of each quadrant

is given below:

Definition of Quadrants

No of
quadrants Symbol Definition
to be filled

0 Is not trained on the subject

1 Has been given basic training on the subject.

Has the working knowledge of the subject and can work

2
under supervision.

Has adequate knowledge of the subject and can work

3
independently on the job.

4 Is an expert of the subject and can give training to others.

10
THE TOYOTA MODEL (4 QUADRANT PROCESS)

 Identifying skills required for each position.

 Assign desired level of proficiency against each position and skill.

 Assess each employees proficiency against this skills.

 Identify gaps based on assessment of proficiency.

 Identify training need for each employees based on the gap

 Prepare training plan, imparting training and assess improvement.

Critical skill Minimum reqired

skill to complete job
Non critical skill Additional skill
to achieve benchmarking

Critical skill are those minimum skill required to successfully accomplish the

assigned work / job. So this is known as critical skill. If skill of workers/employees

lies below the critical skill, then the productivity of work and workers hampered

and the organizational output will be affected.

11
Non critical skill are those skill which help in enhancing the efficiency and

effectiveness of an organization . It help in achieving the benchmarking of

productivity of an organizational output.

12
Skill Matrix Template of Toyota 4Q model.

 Skill matrix is a tool to assess training needs. It is a table that shows skills

of individuals in a team and any gaps between the skills of employees and

the job roles they have. It is also known as a competency framework. If

behind the maximum level, retrain and evaluate. Skill matrix is nothing but

the competencies you want to rate your employees. They include like

communication, leadership, job knowledge, organizational culture, self

development, critical thinking, decision making , initiations etc....we have to

provide ratings for each competency starting from 1 to 10 (low to high). This

competency helps the organization to understand the areas of improvement

for the employee and also identifies the training needs required for the

employee. This helps and encourages employee to improve along with team

spirit. This skill matrix is one of the tools to understand whether employee

is able to think out of box or not. Skill matrix is a simple and visual tool to

show who has training and experience in what skill. Here is an example of a

skill matrix that is used in office, and here is a skill matrix template.

 Here is a skill matrix template in Microsoft Excel format. We The skill matrix

is a very broadly useful visual management tool for people development.

 At industry we are using this new format to track the personal development

goals for knowledge and skills in the Tata steel Production System, project

management, assessments, facilitation, simulations, business software, and

problem solving charts, as well as others. The Job Instruction method and job

breakdown method explained in the Toyota Talent book has helped us take use

of the skill matrix at tata to a higher level.

13
  We have used squares instead of circles since we do not know how to make

circles appear in Microsoft Excel. In our format for consulting skills there are

levels 0 through 4 starting with a blank (white) matrix, levels 1 through 4 being

blue.

Here is a sample of what this skill matrix template looks like.

This free skill matrix template is easy to edit and easy to fill in. There are no macros and

no automated features, you simply enter the values for Name and Skill and color in the

matrix section as you like. It is formatted to 11 inches by 17 inches size paper for

printing purposes. This accommodates a large number (thirty) of skills and

competencies. You can format this sheet smaller or larger to suit your needs.

14
Hopefully the more prominent positioning and titling of this free skill matrix

template will make it easier for people to find, reducing the muda of searching.

Other articles we have written about the skill matrix now also include a link to this

free skill matrix template.

15
Process For The 4 Quadrant Skill Assessment:

find out the desired 4Q

identify position for which
scores of various skill at
skills are requried
different position

identify skills that may actual 4 Q score for all the

identify function and sub
prevent these errors worker in the department
function related to job

based on actual 4Q score

identify human error that
list down the KPIs related to
may lead to deviation from
each of this sub function
KPIs
and desired 4Qscore
identity the various trining
to be imparted to each
employee

16
OBJECTIVE OF THE STUDY:
Setting an Objective is the first and one of the most important stages of any

report. This is because poorly defined problem will not yield useful results and

causes confusion. Theme of our study is to “study and analyze the Debt and Capital

Structure of Orient Paper and Industries Ltd. And find out its financial position.

The objectives of our study are strengths and weaknesses”.

 Critical skill mapping of a (executive) employee of operation of pellet plant

 Preparation of quadrant chart for every employee working in operation

section

 A Mechanical Department.

 B Electrical Department

 C Operation Department

 Analysis of quadrant chart

17
METHODS EMPLOYED
RESEARCH METHODLOGY:

Definition of research:
Research means scientific and systematic search for pertinent information on a specific

topic. According to CLIFFORD WOODY research comprises defining and redefining

problem, formulation hypothesis or suggest solution, collecting, organizing and

evaluation data; making deductions and reaching conclusion; and at last carefully

testing the conclusions to determine whether they fit the formulation hypothesis.

Objectives of a Research:

 To gain familiarity with a phenomenon or to achieve new insights into it.

 To portray accurately the characteristics of a particular indivisual , situation or

group.

 To determine the frequently with which sometime occurs or with which it

is associated with something else.

 To test a hypothesis of a casual relationship between variables.

 Research Methodology is a way to systematically solve the research problem.

It may be understood as a science of studying how research is done

scientifically. In it we study the various steps that are generally adopted by

researcher in studying his research problem along with the logic behind

them. It is necessary for the researcher to know not only the research

methods/ techniques but also the methodology.

18
Data Collection Method:

For the survey I have taken the help of primary and secondary data.

Primary Data:

For primary data collection I have used the following methods:

1.Questinnaire in form of job modules:

I have developed a questionnaire for section head and supervisor for job module

evaluation of worker critical skill .The number of modules to successfully accomplish

the jobs is same for similar designation or group of similar kind of jobs.

19
The evaluation was done from zero to four quadrants. The specification of quadrant is

as;

No of
quadrents Symbol Definition
to be filled

0 Is not trained on the subject

1 Has been given basic training on the subject.

Has the working knowledge of the subject and

2
can work under supervision.

Has adequate knowledge of the subject and

3
can work independently on the job.

Is an expert of the subject and can give

4
training to others.

2.Observation Method:

Observation and scaling (from 0 to 4) of critical skill on quadrant was

given by the sectional head and supervisors of workers .The scale defines the

competency of employee in particular job modules .For examples A.K.Tiwary ,Foreman

of mechanical department ,G-Blast furnace got second quadrant scale in MS-Word ,MS –

Power point, SAP Module it means that he have working knowledge of this module ,but

they can’t work independently .they need supervision for working on this module
20
The procedure for scaling is given below:

Procedure:

Given the names of all employees to be covered under

Positional Training in column "B" under the heading
1 "Names".

Written the topics of all the "Training Modules / Topics" to

be covered under Positional Training in row "9" under the
2 heading "Training Modules / Topics".

Selected the cell to be filled e.g. "H11" for 'PLC drives' for
'Ram'.
3

Decided the competency of the person (Ram) on the subject

(PLC Drives). The above said matrix to be used for this.
4

Based on the above, click on the appropriate 'Quadrant

Button' given on the top of the 'Data' sheet.
5

Selected next cell and continued.

6

Secondary Data:

 For secondary data I referred to the company profiles ,previous year report,

literatures, journal, periodicals, internet, interanet, etc.

21
Sample size:

The sample size of my survey consisted of 47 employees of ‘pellet plant.’

Number of supervisors & workers surveyed in internal = 15

Number of supervisors &workers surveyed in external = 26

Number of supervisors & workers surveyed in JET&TA = 6

This sample size consists of 100%of the total employees of ‘pellet plant’

22
 SIGNIFICANCE OF THE STUDY:

Skill matrix is a tool to assess training needs. The study also analysis the

performance level of each employees. It helps the company to access where the

Operators are lacking .

It is a table that shows skills of individuals in a team and any gaps between the

skills of employees and the job roles they have. It is also known as a competency

framework. If behind the maximum level, retrain and evaluate.

Critical skills are those minimum skills required to successfully accomplish the

assigned work/job. If skill of worker or employees lies below the critical skill, then

the productivity of workers is hampered and the organizational output will be

affected.

During the study the researcher was directly in contact with the Operators and

Supervisors and has got a remarkable practical experience in this period of 30 days

23
.

INDUSTRY
PROFILE

24
What are Pellets ?
Pellets are approximately spherical lumps formed by

agglomeration of crushed iron ore fines in presence of

moisture and binder, on subsequent induration at

around 1300°C, which suit the requirements of downstream processes e .g. Blast

Furnaces & Direct Reduction.

25
Need of Pellet Plant for Tata Steel:

• To increase hot metal output to meet 10 MTPA Crude Steel Production

• To improve blast furnace performance

a. Increase in blast furnace productivity

b. Decrease in blast furnace fuel rate

c. Decrease in hot metal quality

d. Decrease in Slag Rate

• Extending the life of iron Ore Reserves.

26
Detail of facility, input and output requirement:

INPUT MAJOR UNIT OUTPUT

•iron ore fines FACILITIES •product pellet
•• Limestone •2 impact mill (30tph) •pellet fines
•• Anthracite Coal •2 Dryers (5 m X 35 m)
•2 Grinding Mills (6 m X 12
•• Anthracite Coal m)
•• Bentonite •2 ROKSH Separators
•• CO Gas •2 Process Bag Houses
•• BF Gas •2 Mixers (620 tph each)
•• Coal Tar •10 Disc Pelletizers (156
•• Power tph each)
•• Process Water •Single deck Roller Screen
•• Grinding media •Induration Machine
•Single deck Roller Screen
•Induration Machine Hood
•6 Process Gas Fans
•3 Process ESPs & 1 Plant
DedusESP
•2 Product Screens

27
perameters pellet sinter
Iron Ore Fines Size 80% < 0.045 mm < 8-10 mm
coal/ coke size 80% < 0.045 mm < 3.15 mm
lime stone, pyroxinete 80% < 0.045 mm < 3.15 mm
agglomiration process Induration Sintering
product size,mm 6-16 mm 6-40 mm
tumbler index( TI),% >92 65mm
Reduction Degradation Index (RDI), % <12 27-30
Reducibility Index (RI), % 65 65
Swelling Index, % <18

Pellet v/s sinter

Advantages of Four Quadrant skill mapping over Spider Chart.:

• Spider chart shows only one employees skill level at a time, whereas four

quadrant skill mapping shows the skill level of a group of employees of same

profile.

• The complexity regarding depiction of a spider chart is reduced in four quadrant

skill mapping.

• Evaluating and analyzing the progress of skill index of a group of employees of

same profile becomes easier.

• We can analyse the status of each module for a group through four quadrant skill

mapping.

28
• Since it is a software based module updating it becomes simpler Four quadrant

skill mapping is very useful tool for employees as job rotation is ensured

29
Pellet plant structure:

30
 Process flow:

PROCESS FLOW
FLUXES

SOLID FUEL

DRYING GRINDING BAG HOUSE

IRON ORE FINES SIZE GROUND
CONCENTRATE
CLASSIFICATION STROAGE

STORAGE & RECLAIMING

PELLET SCREENING DISK GREEN BALL MIXING

FORMATION

INDURATION

INTERMIDEATE STORAGE CUSTOMER : B.FCE BENTONITE GRINDING PLANT

31
 Process stage of pellet plant :

Three process stages are involved to produce pellets from raw materials:

1. Raw material preparation

2. Formation of green pellets

3. Induration of green pellets

Successful pellet production calls for an optimum efficiency and harmony between

all above three stages with preceding stage highly influencing the subsequent one.

32
Stage 1: Raw Material Preparation

A. Raw Materials Receiving Circuit

B. Additives (Limestone & Coal)Crushing Circuit.

C. Drying Circuit

D. Grinding Circuit

33
 Stage: 2 Formation of green pellet

“ The purpose of the green ball formation is to obtain pellets

of the desired size range ( 9 -16 mm) and having a mechanical

strength which enable them to be safely transported from the

balling equipment to the induration machine”

34
 Stage:3 Induration of green pellet

• Green pellets have low mechanical strength – hence need for

hardening for further processes

• Method for hardening pellets is Induration in which pellets

are heated to 1300-1350°C in controlled manner.

35
Evaluation of pellet plant:

• Tests for physical properties

–Crushing Strength: 250 kg/pellet

–Tumble & Abrasion Index

• Tumble Index (TI) >92% for the fraction +6 3 mm

•Tumble Index (TI) >92% for the fraction +6.3 mm

• Abrasion Index (AI) <5% for the fraction -0.5 mm

–Size Distribution

• +16 mm < 3 %

• +6 mm to -16 mm >90 %

• -6mm < 3 %

• Tests for metallurgical properties

–Reduction Degradation Index (RDI), <12 % for -3.15 mm

fraction

–Reducibility Index (RI), >65 %

–Swelling Index (SI), <18 %

36
COMPANY
PROFILE

37
TATA STEEL-AN INTRODUCTION
FOUNDER: JAMSHETJI NUSSERWANJI TATA

(1839-1904)

Jamshetji Nusserwanji Tata ranks among the

greatest visionaries of industrial enterprise of all time. Gifted with the most

extraordinary imagination and prescience helaid the foundations of Indian industry,

contributed to its consolidation and became a key figure in India’s industrial

renaissance. Born on 3rd March 1839, in a family descended from Parsi priests in

Navsari, a centre for age-old Parsi culture, he was educated in Elphinstone College,

Bombay (now as Mumbai).

38
 Initiated early into the techniques of trade by his father, he traveled wide,

gained a scientific outlook and first set up textile business in India, introducing

new machinery that vastly improved the production of cotton yarn in the country.

He however realized that India’s real freedom depend upon her self-sufficiency in

scientific knowledge, power and steel and thus devoted the major parts of his life and

fortune to three great enterprises- Indian Institute of Science at Bangalore, Hydro-

electric schemes and the iron and steel work at Jamshedpur.

Wealth to him was not the end, but the means to an end- the increased

prosperity of India. His attitude to labour was remarkably ahead of his times,

constantly reinforcing the norms that the success of the industry depended upon

sound and straightforward business principles, the interest of the shareholders, the

health and welfare of the employees. As early as 1892, he established J.N. Tata

endowment for higher education abroad of outstanding Indian students.

A pioneer in town planning, he was mainly responsible for modernizing

Bombay (now as Mumbai);he envisaged and conceived a steel town to the very last

detail, the town that was later to be named Jamshedpur after him.

The first stake for the steel plant was driven on a forest-covered plateau

in Sakchi on 27th February 1908. The dream had come alive, but the dreamer

himself was no more for. Jamshetji had died at Nauheim in Germany in 1904 after

his successors to preserve the family name. His spirit continued to inspire his sons

to carry their father’s dreams to fruition well after his death.

He is one of the most widely traveled Indians of his time, said to possess

knowledge that was encyclopedia. Not only did he have a great love for it, he also had

a passion to impart it to others, for, as early as 1892, he established the J.N. Tata

endowment for higher education abroad of outstanding Indian students.

39
Jamshetji Tata won himself an enduring place in India’s history with his unique

courage, commitment and vision.

TATA STEEL was established in 1907

by its founder JN Tata, Asia’s first and India’s largest integrated private sector steel

company. The company’s four- phase modernization programme has enabled it to

acquire the most modern steel making facilities in the world. The highly productive

blast furnaces along with the LD converters and its downstream continuous casting

facilities provide a distinct edge that will enable Tata Steel to achieve its vision of

becoming the world’s lowest cost producer of steel .The coke ovens with stamp

40
charging technology have helped it to produce coke at the least cost in the world and

drastically reduce wastage and also emission of pollutants.

As Tata Steel commissioned its 1.2 million tonne cold rolling mill complex at

‘Global Speed and Cost’ in April 2000 it re-christened the future as

‘Steelennium’reiterated its belief in- “Steel is the essence of life”. The tie-up with Nippon

Steel Posdata, Flour Daniel etc. To establish the mill is a reaffirmation of the immense

faiththat the international partners repose in Tata Steel. The fifth phase of the

modernization programme launched recently seeks to leverage the intellectual

capabilities of the employees. Thus Tata Steel by better knowledge management

initiatives hopes to shift focus of its employees from creating new physical assets to

utilizing them with ingenuity and a sturdy business sense.

As a web enabled enterprise, Tata Steel is rapidly linking up with its customers

and suppliers. The implementation of SAP, an enterprise resource planning software

package, has changed the process of conducting the business. It will ensure better

customer order management and fulfilment .

At Tata Steel the internet is the opportunity to enhance productivity and

improve business effectiveness. This is being done through robust B2B market places

and has among others, created one for Steel, jointly with SAIL and Kalyani Steels.

The company’s community based activities far exceed its business mandate. Its

numerous socially responsible activities are aimed at those living in and around the

vicinity of its area of operations, including the ore mines and collieries. The company’s

41
community development and social welfare, rural and tribal services, centre for family

initiatives and sports departments run programmes, which are designed to improve the

living conditions of the socially and economically under privileged. The initiatives taken

by the company are self-sustaining and involve the maximum participation of the total

population.

The balance between growth and sustainable development of the environment

at the Tata Steel is manifest in ISO-14000 certification to the four critical units of the

company- the Sukinda Chromite Mines, Noramundi and Joda Iron Ore Mines and West

Bokaro Collieries and the steel works in division.

Envisioned by the great patriot, Jamshetji Nusserwanji Tata, founded in

1907,

Tata Steel has played a pioneering role in integrating sound professional business

practice with exemplary corporate citizenship programmes in India.

The company’s steel works, located in Jamshedpur is Asia’s first and the largest

integrated private sector steel plant in the country. Set up with an initial capacity of

200-tonne blast furnaces, four 4- tonne steam driven blooming mills and a rail and

structural mill, it is now a state-of-the-art plant with a rated capacity of 3 million

tones of crude steel. At present it produces steel mainly in the form of flats, wire rods

and bars. In addition to steel, the company is in the business of diverse products, such

as bearings, capital steel plant equipment and spares, cement, tubes etc. The captive

mines and collieries located mainly in Bihar and Orissa, supply the finest grades of

feedstock to the steel plant. Customer satisfaction of Tata Steel begins with raw material

42
preparations and is meticulously interlinked by a quality chain at every stage of its

operations. The on going fourth phase of modernization programme and the 1.2

million tonne world class cold rolling mill project, scheduled to be completed by June

2000 will add value to the present product mix, strengthen market leadership and

enable it to penetrate new markets by constantly upgrading, improving and fine tuning

its marketing, sales global network, Tata Steel strives to meet its customer

requirements and expectations, in the country and overseas. Its sales of product and

services stood at Rs.64, 334.9 million in 1997-98. The total export turnover, in spite

of the financial crisis in South East Asia and sluggish demand in national as well as

international market, at Rs.7, 220 million was higher by 9%than the previous year.

For a company fully “mindful of its social responsibilities” the universe of

stakeholders extends beyond the realm of customers, shareholders and employees.

43
Backed by 100 glorious years of experience in steel making, Tata Steel is among the top

ten steel producers in the world with an existing annual crude steel production capacity

of 30 Million Tonnes Per Annum (MTPA). Established in 1907, it is the first integrated

steel plant in Asia and is now the world`s second most geographically diversified steel

producer and a Fortune 500 Company.

Tata Steel has a balanced global presence in over 50 developed European and fast

growing Asian markets, with manufacturing units in 26 countries.

It was the vision of the founder; Jamsetji Nusserwanji Tata., that on 27th February,

1908, the first stake was driven into the soil of Sakchi. His vision helped Tata Steel

overcome several periods of adversity and strive to

improve against all odds.

Tata Steel`s Jamshedpur (India) Works has a crude

steel production capacity of 6.8 MTPA which is

slated to increase to 10 MTPA by 2010.

The Company also has proposed three Greenfield

steel projects in the states of Jharkhand, Orissa and

Chhattisgarh in India with additional capacity of 23

MTPA and a Greenfield project in Vietnam.

Through investments in Corus, Millennium Steel (renamed Tata Steel Thailand) and

NatSteel Holdings, Singapore, Tata Steel has created a manufacturing and marketing

44
network in Europe, South East Asia and the pacific-rim countries. Corus, which

manufactured over 20 MTPA of steel in 2008, has operations in the UK, the Netherlands,

Germany, France, Norway and Belgium.

Tata Steel Thailand is the largest producer of long steel products in Thailand, with a

manufacturing capacity of 1.7 MTPA. Tata Steel has proposed a 0.5 MTPA mini blast

furnace project in Thailand. NatSteel Holdings produces about 2 MTPA of steel products

across its regional operations in seven countries.

Tata Steel, through its joint venture with Tata BlueScope Steel Limited, has also entered

the steel building and construction applications market.

The iron ore mines and collieries in India give the Company a distinct advantage in raw

material sourcing. Tata Steel is also striving towards raw materials security through

joint ventures in Thailand, Australia, Mozambique, Ivory Coast (West Africa) and Oman.

Tata Steel has signed an agreement with Steel Authority of India Limited to establish a

50:50 joint venture company for coal mining in India. Also, Tata Steel has bought 19.9%

stake in New Millennium Capital Corporation, Canada for iron ore mining.

Exploration of opportunities in titanium dioxide business in Tamil Nadu, ferro-chrome

plant in South Africa and setting up of a deep-sea port in coastal Orissa are integral to

the Growth and Globalisation objective of Tata Steel.

Tata Steel’s vision is to be the global steel industry benchmark for Value Creation and

Corporate Citizenship.

Tata Steel India is the first integrated steel company in the world, outside Japan, to be

awarded the Deming Application Prize 2008 for excellence in Total Quality

management.

45
In tune with the vision of its founder, Tata Steel is a role model in fulfilling

corporate social responsibilities. Tata Steel is also committed to sustainable

development and recognizes the need to pursue progressive environment

management policies to preserve ecological balance a biodiversity in areas in the

vicinity of its operations. A recent and unique initiative in this direction was the

launch of the green millennium countdown programme, which seeks to ensure

that a million healthy new trees survive in the next millennium by planting 1000

trees each for the next 1000 days.

The quest for scaling new heights of excellence in the area of its key

business responsibilities has yielded rich dividends for Tata Steel. The National

Energy Conservation Award from the ministry of Steel, CSI National Award for

best usage of information technology, SAIL Gold Medal, Coal India Productivity

Award. The Economic Times outstanding corporate citizen, etc point in this

direction. Over the years the company has transited seamlessly as a globally

competitive enterprise by a constantly benchmarking against the best operating

practices, adopting cutting-edge technologies and implementing modern and

innovative management practices. More recently Tata Steel has sought to

accelerate the pace of transformation through the ‘TOP’ (Total Operating

Programme) which recognizes and addresses the attributes of judicious

anticipation of rapid adaptability to market forces in the emerging ‘connected’

economy

46
 Mission

Consistent with the vision and values of the founder Jamshetji Tata, Tata

Steel strives to strengthen India’s industrial base through the effective utilization

of men and matters. The means envisaged to achieve this are high technology and

productivity consistent with modern management practices.

Tata Steel recognizes that while honesty and integrity are the essential

ingredients of a strong and stable enterprise and profitability provides the main

spark for economic activity. Overall, the company seeks to scale the heights of

excellence in all that it does in an atmosphere free from fear and thereby

reaffirms its faith in democratic values

Values

1.Respect for individuals

2. Integrity

3. Credibility

4. Trusteeship

5. Excellence

47
THE TATA GROUP
Before we discuss at the length of the company, we would like to throw some light on

the Tata Group of companies in present day India.

Tata Steel is one of the ventures of the Tata Group but it has many successful companies

under one umbrella. Some of the other notable Tata concerns and their lines of

businesses are shown below.

48
VISION OF THE COMPANY:

49
COMPETITION

Tata Steel is undoubtedly the best steelmaker in the wrold. It produces the cheapest and
best quality of steel in the world. In the last seven years the position of Tata Steel has
reduced drastically because of Corus acquisition. The results of the acquistion will be
profitable after 2010.

50
MAJOR LOCAL STEEL PLAYERS:

51
MANAGEMENT EFFICIENCY:

The structure of the Board was recently modified in 2007 post the acquisition of

Corus acquisition to suitable incorporate changes which will lead to the adequate

realization of synergies from the deal within the given stipulated time frame to

reap the benefits from the much talked about and criticized deal.

BOARD OF DIRECTORS

 14 Board of Directors

 8 independent, 6 non

independent

 No of independent

directors is more than one

52
third of total number of directors.

LEGAL ENVIRONMENT

Global operations require compliance with multiple and complex laws and regulations.

In countries where the political systems are still evolving, frequent changes in economic

policy are common, investment guarantees and property rights are secured, any

unforeseen changes can expose the Group’s businesses to uncertainties. The Group

operations are primarily in countries where investment flows are freer and where there

are established political, business and legal frameworks in place. There is an established

due process to independently evaluate country risk exposures for investments in

emerging economies

53
TATA STEEL – PRODUCTS

54
Financing and Liquidity Strategy of the Tata Steel Group

in response to the global economic crisis:

They have responded by increasing production post commissioning of the 1.8 mtpa

programme and focusing on performance improvement to neutralise the effect of

reduced realizations, whereas in South East Asia, the focus is on working capital

management and cost reduction. In Europe we have cut production by idling blast

furnaces at three sites in order to align production with demand as a part of the

“Weathering the Storm” initiative which resulted in cash savings of £712 million

(US$1.02 billion) in the second half of the financial year 2008-09. Further, these efforts

have been supplemented by a strategic restructuring initiative launched as “Fit for

Future” programme which when completed, will result in improvement of the operating

profit of around £200 million annually. In all sites across the Group, the journey of

‘Continuous Improvement’ stays on course

Recognizing the uncertain financing environment and the fragile state of the global

banking industry, they focussed on both internal and external levers. Internally as an

organisation, the company placed primary importance on conserving liquidity through

reduced spend management and sharp reduction in working capital levels. They also

focussed on improvement in the productivity levels and reduction in overheads. On

capital expenditure, they have re-prioritised on the most value creating and critical

projects and reworked the capital planning strategy.

On the external front, the company raised long term capital which acted as a liquidity

buffer in the current circumstance and would be deployed in value creating long term

55
assets. The above actions ensured that the Tata Steel Group had adequate liquidity and

also financial flexibility for growth and exigencies. The liquidity position of the Group at

the year end was approximately US$1.9 billion of cash and cash equivalents and

undrawn lines.

THE EIC APPROACH:

1. ECONOMY

The steel industry has traditionally been very sensitive to the changing economic

conditions. The recent economic meltdown has created several challenges – which

when addressed appropriately, can be countered to positive eff ect. However, unlike the

previous global recessions, this time around, all the countries have come together and

taken action. Additionally, there has been a tremendous amount of governmental

response to the global depression which is helping to bring about a possible easing of

the situation.

The global downturn also had a major effect on various industries dependant on steel.

Major contraction in the construction projects, automobiles, white goods demand from

the third quarter of 2008-09 resulted in the global demand for steel dropping by 21%

compared to the level consumed in the same quarter of the previous year.

The demand for steel declined by 26% in the UK and Europe in the third quarter

compared to a year earlier and after a further contraction in the fourth quarter, demand

had fallen by 57% in the UK and 44% in Europe compared with a year ago. This

reflected in a sharp downturn in private construction projects, as well as large falls in

automotive and mechanical engineering, amplified by severe destocking by both end

users and service centers.

56
2.INDUSTRY

Some of the major sectors are:

Indian steel production has increased by 5 million tones every year. The economic

reforms initiated by the government since 1991 have added new dimensions to

industrial growth in general and steel industry in particular. Steel industry has been

removed from the list of industries reserved for the public sector.

Automatic approval of foreign equity investment up to 100% is now available. Price and

distribution controls have been removed from January 1992, with a view to make the

steel industry efficient and competitive.

57
Company :

The year 2008-09 was a historical one epitomised by the acute global financial

imbalance which initially appeared to have spared India only to impact the markets

adversely as the year rolled on. The global economic slowdown has impacted the steel

sector as well. Amidst the turmoil in the global marketplace, Jamshedpur Works

performed remarkably creating many records on the way.

Indian operations witnessed a less pronounced drop in demand of 11% in the third

quarter, reflecting the reduced activity in infrastructure and commercial vehicles. Steel

is required by various industries as an important raw material constituent.

Tata Steel has taken aggressive steps to meet the challenges of these difficult times

through major initiatives in cost reduction, process improvement and production

rationalisation. The highest priority is being given to expanding steel producing

capacity in Jamshedpur, and ensuring raw material security for the European

operations which do not have captive iron ore and coal resources. The Tata Steel Group

has developed a pipeline of high quality projects, which will be executed, though we will

re-phase the sequence. Projects like the 3 million tone expansion in Jamshedpur, the

proposed steel plant in Orissa and raw material projects in Mozambique, South Africa

and Canada are key drivers of our future value creation.

58
FINANCIAL ANALYSIS OF
THE COMPANY

59
Financial analysis of a company:

It was started in the year 1908. The company's steelmaking

and finishing facilities have the capacity to produce more than 30 million tons of

crude steel.

Backed by 100 glorious years of experience in steel making, Tata Steel is the world’s

6th largest steel company

Tata Steel has a balanced global presence in over 50

developed European and fast growing Asian markets, with

manufacturing units in 26 countries.

60
61
62
Balance Sheet Analysis:
ASSET SIDE

Capital budgeting

Tata Steel
The ratio required to calculate
0.9
capital budgeting is mainly Debt-
0.8
Equity ratio. Tata steel has
0.7
increasing debts. So the company

has gone in for debt financing and 0.6

thus, the company is having a 0.5

comparatively higher borrowing

0.4

from the market. Basically the

0.3
Debt-Equity ratio has to be as high
0.2
as possible so that the company
0.1
has lower borrowings and has to

pay less interest. 0

2006-07 2007-08 2008- 09
Tata Steel 0.26 0.69 0.81
Tata steel has increasing debts. So

the company has gone in for debt financing and thus, the company is having a

comparatively higher borrowing from the market. Basically the Debt-Equity ratio has to

be as low as possible so that the company has lower borrowings and has to pay less

interest.

63
INVESTMENTS:

It can be seen that investments in the last year has increased drastically from negative

cash flows to positive cash flows in investment. This was result of investing subsidiary

companies especially Tata Steel Holdings PTE. It made an investment of about Rs

35,633 crores against Rs 72 lakhs. This has lead to increase in investments.

45000
Tata Steel
40000

35000

30000

25000

20000

15000

10000

5000

-5000
2005-06 2006-07 2007-08 2008- 09
Tata Steel 1637 2036.22 -2002 38269

64
Cash management:
Tata Steel
This requires cash ratio, which includes cash 0.3

0.25
and cash equivalent / current liabilities. Over
0.2
years this company has managed to keep up 0.15

their cash management at par with other 0.1

0.05
companies. In recent times this company has
0
2006-07 2007-08 2008- 09
raised their cash ratio as compared to Tata Steel 0.21 0.12 0.26

previous years.

Debtors Management:

Tata Steel
40 This requires Debtor’s turnover ratio
35
30 which is calculated by, Debtors/Sales.
25
This ratio has to be as low as possible so
20
15
as to gain maximum liquidity for the
10
5 company. This means that the debtors
0
2006-07 2007-08 2008- 09
will return money in these many days.
Tata Steel 26.99 29.81 33.45

Tata steel took over Corus in recent past and had taken a loan for that purpose and due

to this loan their Debtor’s turnover ratio just shot up from 29.81 to 33.45.

65
Inventory Management:
Tata Steel
We get inventory turnover ratio by, Cost of 12
10
Goods Sold/Average or Current Period 8

Inventory. High turnover ratio is usually 6

4
beneficial for any company as products
2

tend to deteriorate as they are kept in a 0

2006-07 2007-08 2008- 09
Tata Steel 7.08 7.69 10.84
warehouse.

Tata steel has managed to keep their inventory management very efficient during these

years as we can see below that it keeps on increasing and that is what every company

needs, a very efficient inventory management system.

LIABILITIES:
1.SHARE CAPITAL

 EQUITY CAPITAL

66
 In the current year the company issues equity capital of Rs 4881 cr as against

1393 crores, this led to the sharp increase in equity capital. The company has a

mix of debt and equity for fund raising. In last four years company raised money

through right s and debentures but this year they preferred equity capital.

 PREFERNCE CAPITAL

In 2007-08 the company issued preference shares of Rs 5472 crores and issued

60, 00,000 2% Cumulative Convertible Preference Shares. Also, 2,85,00,000

shares of face value of Rs. 10 per share allotted to Tata Sons Limited on a

preferential basis during the year 2007-08.

67
  RESERVES AND SURPLUS

There was a steep increase in reserves in 2008-09 due to increase in foreign

currency translation reserve, but in 2008-09, the company gained Rs 40 crores in

foreign exchange fluctuation reserve. On the other side the company faced losses

of Rs 5496 crores as actual loss.

Reserves & Surplus

25000

20000

15000

10000

5000

0
2004 2005 2006 2007 2008
Series1 4146.68 6506.25 9201.63 13368.42 21097.43

Over the years the company has been increasing its income in share premium

account, through conversion of warrants and preference shares.

SECURED LOANS

Debentures

Tata Steel placed Non-Convertible Debentures totaling upto Rs. 2,000 crore in

May 2008 comprising of 3 series having phased maturities. The Company further

raised a 2-year term loan of Rs. 2,000 crore in May 2008. In November 2008, the

68
Company raised Rs. 1,250 crore through Non-Convertible Debentures privately

placed with the Life Insurance Corporation of India, repayable in equal

installments at the end of the 6th, 7th and 8th years.

In April 2009, the Company further raised Rs. 2,000 crore from a term loan and

in May 2009, it privately placed Rs. 2,150 crore of Non-Convertible Debentures

repayable after 10 years. Thus the Company raised Rs. 9,400 crore in a year

marked by tight liquidity.

One important thing to note is that the interest on debentures is increasing

every year even though the amount of debentures has reduced

considerably.

69
 LOANS and ADVANCES

The debt in the Company’s consolidated balance sheet has increased considerably after

the Corus acquisition. The gross debt in the Tata Steel Group was US$10.54 billion in

March 2008 which increased to US$11.78 billion as at the end of March 2009. Tata Steel

has about $9 billion of debt in its books and has to repay $795 million in 2009-10 and

$1.3 billion in 2010-11; however, the company is free from repayment until December

BORROWINGS
20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
2003 2004 2005 2006 2007 2008
Total Borrowings 2003 2004 2005 2006 2007 2008
Tata Steel 4225 3382 2739 2516 9792 18021

2009. It has $1.9 billion cash and cash equivalents in its books, and requires $1.2 billion

for its capital expenditure during this fiscal.

The increase was primarily on account of raising of new loans to the tune of US$2.07

billion, during the year in Tata Steel India, to fund growth projects and to ensure an

adequate liquidity buffer in the wake of global liquidity crisis.

During the year, the company repaid debts to the extent of US$ 1.66 billion including a

prepayment of debt in Tata Steel Europe of around £150 m (US$215 million). The entire

foreign currency term debt in Tata Steel India is hedged into rupees at acceptable levels.

70
Therefore the company was unaffected by the volatile movement of the rupee on

account of the above loans.

The gross debt as on March 2009, showed an increase of US$830 million, which was

primarily on account of revaluation, due to currency movements. Taking into account

the liquid equivalents of US$1.9 billion, the net consolidated debt as at March 31, 2009

was US$9.9 billion.

LOANS AND ADVANCES

25000

20000

15000

10000

5000

0
2004 2005 2006 2007 2008
Loans & Advances 2004 2005 2006 2007 2008
Tata Steel 6506 9201 13368 21097 18021

If the performance of previous years is compared it can be seen that the loans and

advances reduced substantially as the advance against equity was converted into

investments during the

financial year and accordingly there was an increase in the investments.

71
The Company entered into a loan agreement with the State Bank of India and other

banks for Rs. 9,500 crores. In January 2008 Rs. 9,000 crores was repaid with proceeds

from the Company’s Rights Issue and Rs. 500 crores was repaid on 28th February,

2008.􀁺 In November 2007, the Company made a rights issue offering to shareholders in

India, (i) 1 ordinary share for every five ordinary shares at a price of Rs. 300 per share

and (ii) 9 cumulative compulsorily convertible preference shares (“CCPS”) for every 10

ordinary shares at a price of Rs. 100 each.

72
Unsecured Loans:
In the year 2008, Tata Steel raised $500 million equivalent seven-year senior unsecured

bank loan facility in yen to fund production capacity expansion and also acquisitions.

Unsecured Loans

25000

20000

15000
In crores

10000

5000

0
2008 2007 2006 2005 2004
Unsecured Loans 23033 14501 5886 324 271

The Company issued USD 0.875 billion of 1% Foreign Currency Convertible Alternative

Reference Securities (“CARS”). The CARS accrue interest on the outstanding principal

amount at a rate equal to 1% per annum and are classified as unsecured debt on the

balance sheet of the Company.

During the current fiscal year, the secured and unsecured loans increased by Rs. 8,924

crore as compared to the balances as on 31st March, 2008 mainly due to issue of

privately placed non-convertible debentures, term loans taken from Banks and other

short term borrowings.

73
In 2007 the loans increased from Rs 324 crores to Rs 5562 crores due to new

syndicate foreign currency loans drawn for funding the acquisition of Corus Group plc.

The Company has drawn foreign currency syndicate loans of Rs. 7,225 crores (USD 1.65

billion) during the year as per details given below:

1. JPY Syndicated External Commercial Borrowings of USD 495 million equivalent: Rs.

2,162.66 crores (unsecured loan)

2. External Commercial Borrowings of USD 5 million equivalent: Rs. 21.77 crores

(unsecured loan)

3. JPY Syndicated External Commercial Borrowings of USD 750 million equivalent: Rs.

3,298.88 crores (unsecured loan)

4. International Finance Corporation, Washington - A Loan USD 100 million equivalent:

Rs. 435.35 crores (secured loan)

74
CURRENT LIABILITIES:

CURRENT LIABILITIES
7000

6000

5000

4000
In crores

3000

2000

1000

0
2008 2007 2006 2005 2004
Tata Steel 6039 3855 3523 2835 2689

The current liabilities increased by Rs. 577 crores from a level of Rs. 3,523 crores as on

31st March, 2007 to Rs, 855 crores as on 31st March, 2008. The increase was mainly

due to increase in the value of purchases/services on account of expansion projects.

75
I. PROFIT AND LOSS A/C:

Increase in Profit % from 2003 to 2008.

Increase in Profits


 50

 45

 40

 35

 30

 25 49.74%
42.03%
20

15

10 16.95%
0.91% 9.92%
5
0%
0
2003 2004 2005 2006 2007 2008

 Tata steel showed steady rate in profit.

 Its profit increased by 1012.31 to 4687.03 from 2003 to 2008 i.e. by Rs

3674.72 crores.

 From the above table TATA STEEL has given good profits in the year 2004 and

2005.

 Due to deal with CORUS and NATSTEEL company’s profits declined sharply

but after 2006 the profit rate increased gradually.

 Decline in profits in year 2007 to 2008 is because of Recession hit the market.

76
Gross Profit

Year 2008-09 2008-07 2007-06

Amount (Rs in Crs) 9778.51 8830.00 1497.81

8289.01
8400

8200
7900.97
8000

7800

7600
Amount (Rs in Crs)
7400
7080.94
7200

7000

6800

6600

6400
2008-09 2008-07 2007-06

The Gross Profit has increased over the period of 3 years however the change in Gross

Profit from 2008-09 and 2007-08 was less as compared to 2006-07 and 2007-08. The

Graph shows the increase in Gross Profit 2006-07 to 2008-09.

Profit before Depreciation & Tax

Year 2008-09 2008-07 2007-06

Amount (Rs in Crs) 8289.01 7900.97 7080.94

77
The Profit before depreciation and Tax increased at a rate of 11.84% from 2006-07 to

2007-08 and 4.91% from 2007-08 to 2008-09. The fall in the PBDT was mainly due to

the market crunch and global recession which left it’s a mark on the company’s

Financial Statements’. However it was observed that the company’s Profits after

depreciation and tax followed a stable increase i.e. an average increase of 11%.

Gross Profit Margin:

The GP Margin for 2006-07 was 7.58% followed by 39.79% in 2007-08 and 36.43% in

2008-09.

8289.01
8400

8200
7900.97
8000

7800

7600

7400 Amount (Rs in Crs)

7200 7080.94

7000

6800

6600

6400
2008-09 2008-07 2007-06

78
Depreciation:

Capital Assets whose ownership does not west in the company is depreciated over the

estimated useful; life or five years whichever is less.

In respect of other assets depreciation is provided on a straight line basis applying the

rate specified in Schedule 14 to the Companies Act 1956 or based on estimated useful

life whichever is higher. However, asset value up to Rs 25000 is fully depreciated in the

year of acquisition. The details of estimated life of each category of assets are as under:

 Building 30 – 60 years.

 Plant & Machinery 6 – 21 years.

 Railway Sidings 21 years.

 Vehicles and Aircrafts 5 – 18 years.

 Furniture, Fixture & Office Equipments 5 years.

 Intangibles (computer software) 5 – 10 years.

 Development of property for development of mines and collieries are

depreciated over the useful life of the mine or lease period whichever is

less, subject to a maximum of 10 years.

 Blast furnace relining is depreciated over a period of 10 years (average

expected Life).

 Total depreciation for the Financial Year 2006-07 accounted to Rs. 819.29

crs followed by Rs. 834.61 crs in 2007-08 and Rs. 973.40 crs in 2008-09.

79
 Detail of profit and loss account:

Net Sales RS. in Crores

2009 24,348.52
2010 24,940.85

Total Income

2009 25,289.30
2010 26,093.79

Total Expenditure

2009 15,510.79
2010 15,948.12

80
 Detail of profit and loss account:

Operating Profitb Rs. in Crores

2009 9,778.51
2010 10,145.67

‡ Gross Profit

2009 8,289.01
2010 8,297.48

‡ Net profit

2009 4,981.50
2010 4,421.95

81
 Detail of balance sheet:

Total Shareholders Fund Rs. in Crores

2009 30,176.26
2010 36,961.80
‡
Total Debt

2009 26,946.18
2010 25,239.20

‡ Total Liabilities

2009 57,122.44
2010 62,201.00

82
 Detail of balance sheet:

Net Block Rs. in Crores

2009 10,994.54
2010 12,162.44
‡
Total Current Assets

2009 10,739.75
2010 12,246.69
‡
Total Current Liabilities

2009 9,990.41
2010 10,163.58

83
 Dividend and capital structure:

Dividend Dividend Per Share

2009 8.0
2010 16
‡ Capital Structure

Year Authorized Issued Subscribed CalledPaidUp Face

Capital Up Value

2010 1750 888.13 887.41 887.21 10

Rs. In Crores

84
II. FINANCIAL RISK:
TAX AND INTEREST RATE ANYALSIS

From the above balance sheet Interest charged in 2008 is 41,493 (Rs mn) and in

2009 it decrease to 38,283 (Rs mn) i.e. Change of -8.4%.

Tax charged in 2008 was 40,493 (Rs mn) and in 2009 it decrease to 39,751 (Rs

mn) due to decrease in gross profit.

Finance for the Corus acquisition was raised through bridge loans and later

refinanced by Tata Steel which has led to a dramatic increase in the interest

85
 outflow; in the April-June quarter the interest outflow was Rs241.7 crore

compared to Rs41.6 crore for the same quarter last year.

Dividend Policy:

Tata Steel has been continuously providing dividend to its shareholders to maximize its

wealth. In the year 2008-09 the company paid a dividend of Rs 1168.95 crores. The

payment of dividend is always fixed by the company irrespective of profits or losses.

Tata Steel is giving a significant higher rate of dividend year after year in comparison to

its nearest competitor’s.

In 2006-07 the year the company completed 100 years a dividend of 25% was issued to

the shareholders.

Tata Steel
180

160

140

120

100

80

60

40

20

0
2003 2004 2005 2006 2007 2008
Dividend 80 100 130 130 150 160

86
Tata Steel was initially giving higher amount of dividend initially on its PAT. But over a

period of time, it decided to change its strategy and putting back all its earnings on

development of the company.

Dividend

Year Month Dividend (%)

2011 May 120

2010 May 80

2009 Jun 160

2008 Jun 160

2007 May 155

2006 May 130

2005 May 130

2004 May 100

2003 May 80

2002 May -

2002 Apr 40

2001 May 50

2000 Mar 40

1999 May 40

1998 May 40

1997 May 45

87
Fund Flow & Cash Flow Statements:

88
Analysis of Funds Flow and Cash Flow Statements:

SOURCES OF FUNDS

The profit after taxes has been consistently increasing in the past five years despite the

global crisis and acquisition of Corus in 2007.So the total PAT available in 2009 is Rs

21091 crores. Since Tata Steel has a lot of fixed assets in terms of plants and machinery

the depreciation is also increasing at a slower rate, one more reason is that they

introduced two blast furnaces in Jamshedpur this year, which led ot increase In

depreciation this year.

In the last 5 years the share capital of the company was very good, but due to issuing of

new shares the share capital is now negative.

Borrowings have been consistent. The way the company managed its borrowings was

amazing. From negative balances, they turned into Rs 5000 crores positive balances;

this was as a result of loans taken to finance Corus deal. Some installments are to be

paid after 2011, so there is not too much burden on Balance Sheet.

APPLICATION OF FUNDS

The capital expenditure was normal in all the years, not much movement is seen in

terms of investment in plant and machinery.

Investments increased significantly. It can be seen that investments in the last year has

increased drastically from negative cash flows to positive cash flows in investment. This

was result of investing subsidiary companies especially Tata Steel Holdings PTE. It

made an investment of about Rs 35,633 crores against Rs 72 lakhs.

89
The company also announces dividends to the shareholders. Every year it gives

dividends in the range of 100 to 160 %. This year they gave a dividend of 13 Rs per

share, due to which the total outlay was Rs 5632 cr.

The biggest contributor in Utilization of Funds was because of increase in working

capital expenses. In early 2008, the unprecedented increase in the prices of input costs,

particularly raw materials, substantially increased the working capital requirements.

The change in working capital, during the financial year, was mainly due to increase in

inventories on account of volumes and prices partly offset by an increase in creditors.

The working capital during FY 09 reduced by Rs. 225 crore, mainly due to a reduction in

Inventory (with reduction in finished and semi-finished inventory and increase in raw

materials inventory) and Debtors.

90
FINANCIAL RATIOS:

91
Ratio Analysis:

Operating expenses are expected to increase marginally resulting in increase of EBITDA

margin of 38.7%.But compared to previous year the EBITDA/Turnover has reduced

because the profits were higher than last years.

ROCE over the years has reduced because of slowdown as well as huge inventories of

stock and new plants introduced in Jamshedpur.

Asset Turnover is very good In last four years the assets were utilized to the fullest but

in the last year due to less demand, it reduced by 1%, but in overall terms it is optimally

used all resources.

Debt Equity Ratio:

Debt Equity Ratio

45

40 42.43
35

30

25 27.28
20 Debt Equity Ratio
15
15.34
10 12.71
11.43
5

0
2004 2005 2006 2007 2008

92
Tata Steel over the years has been increasing its debt in order to finance the Corus deal.

They took a loan of $ 8 Billion from the bank to acquire Corus.

Current Ratio:

Current Ratio
45

40

35

30
Tata Steel

25

20

15

10

0
2004 2005 2006 2007 2008
Debt Equity Ratio 42.43 27.28 15.34 12.71 11.43

The current ratio is a financial ratio that measures whether or not the firm has enough

resources to pay its debts over the next 12 months. It compares a firm’s current assets

to its current liabilities. Tata Steel has a high amount of unutilized current assets. The

company has high level of inventory or WIP. Since the demand for steel has reduced

93
drastically the company is having huge inventory and because of this the liquid ratio is

low.

Debtors Turnover Ratio

Financial ratio analysis of tata steel:

Ratios Year
2009 2010

1) Current Ratio 0.94 1.1

2)Quick Ratio 0.57 0.76

3)Gross Profit Ratio 33.69% 31.36%

4)Operating Profit Margin 37.68% 35.70 %

5) Net Profit Ratio 21.09% 19.96 %

6) Fixed Asset turnover Ratio 1.22% 1.12 %

7) Total asset Turnover Ratio 0.43% 0.40 %

8)Debtor Turnover Ratio 41.29 46.58

9)Debt Equity Ratio 1.34 0.68

10)Price Earning Ratio 2.97 9.36

11)Earnings Per Share 66.80 56.37

94
 DEBTORS/CREDITORS
TURNOVER Ratio
120

100

80

60

40

20

0
Year 2003 2004 2005 2006 2007
Debtors (days) 42.43 27.28 15.34 12.71 11.43 10.23
Creditors ( days) 88.14 89.1 90.7 88.6 95.42 92.18

The stakeholders of the company like distributors and suppliers have a lot of

confidence in the company. This shows the creditworthiness and brand value of

the company. Since debtors are paying back in comparatively less number of

days shows faster movement of goods in the market.

EBITDA/TURNOVER RATIO

The EBITDA for the Group at Rs. 18,495 crores (US$ 3,636 mn) for the financial

year 2008-09 was1% higher than the EBITDA of Rs.18, 287 Crores (US$ 3,595

mn) recorded during the financial year 2007-08.

95
EPS RATIO

EPS is the reported profit over the number of shareholders in the company. In

the last 5 years EPS has doubled from 31 to 66 and it is expected to reach 104 in

FY10.

P/E RATIO

P/E RATIO IS expected to double in 2010 because of higher profitability and

dividend payouts in the previous years.

96
Future Prospects:

The Company has embarked upon setting up three green field steel plants in eastern

India:

 12 MTPA* plant in Jharkhand

 6 MTPA plant in Orissa

 5 MTPA plant in Chhattisgarh

 Jamshedpur Steel Works will become a 10 MTPA unit by 2010.

*MTPA = million tonnes per annum

Solution for Sales (SFS) offers based on the Theory of Constraints (TOC) concept saw

stabilisation in the steel division. The replenishment module was extended to cover

100% of the retail channel of TATA TISCON, achieved 90% coverage in TATA SHAKTEE

and 60% in TATA Steelium. This resulted in a reduction of stock outs in retail shops

and more significantly, a reduction in channel stocks. Reliability solutions were

extended to direct customers in the Steelium distribution. For the Construction

Projects segment, an S-DBR (Simplified Drum Buff er Rope) mechanism was

implemented under the Theory of strains supply chain improvement initiative which

97
improved the availability of rebars at the warehouses, thereby reducing instances of

delays and loss of orders.

The term focus is on the implementation of the “Fit for Future” restructuring in Europe,

to continue with the 3 mtpa expansion project in Jamshedpur and overseas raw

material projects, to increase production volume in India and optimise working capital

management across the Group to preserve liquidity

Looking towards the future, the steel industry’s main contribution to the reduction of

CO2 emissions should be to further develop the use of by-products and to work with its

customers to help design well, long lasting, more energy and material efficient products.

Additionally, improvements in areas other than primary steel production may offer

further opportunities for CO2 reduction

98
 Shareholding:
Holding in%

: Indian Promoters 31

Banks Fin. Inst. and Insurance 20.69

‡ FII's 18.97

‡ Private Corporate Bodies 3.40

‡ NRI's/OCB's/ForeignOthers 0.17

‡ Govt 0.01

‡ others 0.59

‡ General public 20.81

‡ Total 100

99
Current market position:

Market Capital is Rs. 47,311.73 Crores.

Current share price is Rs. 533.15

Allotted of 150 lakh ordinary shares and 120 lakh

Warrants at a price of Rs. 594 per share/warrant to

Tata Sons.

100
101
DATA ANALYSIS
AND
INTERPRETATION

102
 DATA ANALYSIS AND INTERPRETATION

There are 47 employees in the Operation Section of pellet plant structure with

different designations. The HR department has identified different modules or critical

skills for each designation. The designations and the respective number of modules

are given below:

DESIGNATION NO. OF EMPLOYEES NO.OF MODULES

Foreman 4 3

Technician 02 10

Jr, executive 27 6

Sr. executive 18 3

Operator 23 10

According to the above data we have analyzed the skills of the employees of the

Operation Section by Four Quadrant Model which are given in the following tables. We

have mapped the critical skills of the employees according to modules identified by the

HR Department. These data, when analyzed, provide clearly the skill levels of the

employees, the modules in which they are lacking or they are good in.

103
 Designation wise training:

ms word/excel
3
gas safety
leadership

0
foremen Sr.associate Jr.associate office associate

104
 Foreman module wise training index:

4.5

3.5

2.5
Series 1
Column2
2 Column1

1.5

0.5

0
leadership gas safety awareness problem positive ms
program solving isolation word/excel

105
 Sr. associate module wise training:

Series 1

4.5

3.5

2.5 Series 1

1.5

0.5

0
gas safety awereness ms positive shut down green operation
program word/excel isolation operation pelletising of
operatin conveying

106
 Jr. Associate module wise training:

Series 1
5

4.5

3.5

2.5
Series 1

1.5

0.5

0
gas safety awereness shutdown positive isola. green ms
prog. pelletising word/excel

107
FOUR QUADRANT CRITICAL SKILL MAPPING OF PELLET PLANT
EMPLOYEES:

FOR EEI

PELLET
PLANT

Overall Training Index 0.634

Module Wise Index 65.9% 75.0% 65.9% 84.1% 68.2% 56.8% 70.5% 61.4% 40.9% 47.7% 61.4%

Training Modules / Topics

Name Wise Index

AC Motors & Drives

MS-word, Excel (ITN

Mass Spectrometer
ESP & DE System

Profilometer OPC
Weighing System

Instrumentation

ABB Analyser
Power System
Experion PKS
SAP (SITT 03)
NAMES
Sl. No

03)

S. Ghosh
1 77.3%
3 3 3 4 4 3 3 2 4 3 2
B. N. Oraon
2 54.5%
3 3 2 3 3 3 3 2 0 0 2
S. K. Ghosh
3 79.5%
3 3 3 4 3 3 3 2 4 4 3
P. K. Thakur
4 52.3%
2 3 2 4 2 2 2 2 0 2 2
D.Kumar
5 61.4%
3 3 3 2 3 2 3 3 0 2 3
S. Sannat
6 70.5%
3 3 3 4 3 3 3 3 2 2 2
K. D. Singh
7 43.2%
2 3 2 3 2 1 2 2 0 0 2
K V. C. Jha
8 68.2%
3 3 3 4 2 2 3 3 2 2 3
R. M. N. Tiwary
9 65.9%
3 3 3 3 3 2 3 3 2 2 2
M. K. Singh
10 65.9%
2 3 3 3 3 2 3 3 2 2 3
S. K. Mandal
11 59.1%
2 3 2 3 2 2 3 2 2 2 3

108
 FINDINGS

1.The critical skill mapping study reveals the various skills of workers in which they

are expert or they are lacking.

2.. We have found from our study that HR executive operators are lacking in

positive isolation and gas safety process and shut down operation process

3.There should be no provision for sending the operators outside the company for

training program

4. the prior information about the technology change and should provide prior

information

5.advance technical program for personnel should be conducted.

109
 CONCLUSION

Tata Iron & Steel Co. Ltd., today stands proud as a modern integrated steel producing

company. It is more than a company; it is an institution concerned with the interest of

its all stakeholders as well as its employees.

The future of an organization largely depends upon its productivity;

productivity depends upon its employees. Thus employees should be trained in best

possible way to increase the productivity. For this purpose, Tata Steel possesses an

effective training center that takes the responsibility of training the employees. The

responsibility of a training organization does not end at imparting training but also it is

extended to the evaluation of the training program, which is most neglected factor in

every organization. So every organization should conduct the training effectiveness

survey like critical skill mapping each time.

Critical skill mapping helps to indicate the image of management in the mind

of employees as well as their capabilities and attitudes. As it has been found out from

the survey and its analysis that the training programme in this department is

effective, still some weaknesses have been discovered for which some suggestions

have been given. But most of the employees demand that they should be given

more technical training, which can be applied in a more practical way in their

work. They also demand training programmes from national and international

companies. So step should be taken towards it fulfilment .

110
One of the reasons for our project was to discover the skills possessed by the

employees. The evaluation of these data would help the company to critically

analyze the skills in their employees and recognize the need of training. Research

into all these factors would provide clues to improve the quality of work.

111
 SUGGESTIONS

After critical skill mapping of the employees of operation section of the TATA STEEL

Ltd. department, the following are our recommendations to this department:

1.The critical skill mapping study reveals the various skills of workers in which they

are expert or they are lacking. Special training program should be arranged for those

employees who are lacking in their respective modules.

2.. We have found from our study that HR executive operators are lacking in

positive isolation and gas safety process and shut down operation process. Thus

special attention must be given in this process training.

3 The mapping is done by the supervision of the department.HR .senior executive

manager. Thus it should be shared with all the operators so that they come to know

about their skill level and try to improve it.

4.There should be no provision for sending the operators outside the company for

training program because tata steel is a big organization and can provide such training

with in the premises of working by appointing some expert.

5. All training modules should be evaluated at proper time and this activity should

be carried out regularly.

112
6. Training should be as per work requirement and should be given at the right

time.

7.The prior information for the training programs should be given to the workers. So

care must be taken in this matter and prior notice that is before 2-3 days should be

given to all the operators for training.

8.There should be transparency in organizing training program and should be arranged

for operators according to the work requirement.

9.More emphasis on ON-THE-JOB training should be given.

10.The selection criteria for training should be suitable. It should match with the

qualification of the employees. For example if he is less qualified and sent to higher

technical training program, it will prove ineffective. Hence, training should be provided

by taking into account the platform and background of the employee.

11.Many a times workers are given training on a particular module; later on they are

transferred to other job, which does not have any relation to the training attended by

them. They don’t even get a chance to perform what they have learnt from previous

training program.

12.Training schedules should be prepared according to the availability of candidate.

13.Advance skill program for personnel should be conducted.

113
14.The concerned faculty should come and understand the working condition and

environment before the program

15.It must have equal proportion of technical and managerial inputs

114
 LIMITATION OF THE STUDY

 Time is the most important constraints in carrying out this project.

 The busy schedule of Operators and supervisors is also a limitation.

 The supervisors are uncomfortable in assessing skill level of some employees.

 Personnel bias can one of the limitation of study because manager or supervisor

can provide a wrong profile of employee due to some bias

 The section-heads and supervisors are uncomfortable in assessing skill level of

some employees.

 Problem in skill mapping of worker arises due to inter-departmental transfer of

workers

115
APPENDICES

116
 Questionnaires

A training questionnaire is a written document created by organisations or companies

so as to analyse the progress made by a trainee during the training program. This type

of a questionnaire deals with basic questions that are simple to answer and is aimed at

getting a clear response from the trainee.

A training questionnaire should be framed with precision as it is important that the

questions are clear and do not confuse the person answering the paper. Such a

questionnaire must start with extracting basic information about the trainee such as the

name and address. Proceed onto asking for the details of the job and department that

the trainee has worked for. The last few questions must focus upon what the trainee has

learnt so far and if he would like to continue or not.

A training questionnaire can be of multiple kinds depending upon the kind of training.

The following are a few examples:

 Marketing training questionnaire

 Clerical training questionnaire

. Media training questionnaire

 Etc…

These questionnaires are basically the analysis of the person’s training experience and

are focussed at achieving an over view of the kind of training that is being provided by

the various trainers. The language of these questionnaires must be kept easy and

writing long questions should be avoided.

117
Annexure:

Questionnaire

Name……………………………………….

Designation…………………………………

Department………………………………..

Objective

•This is sent to you as a part of my MBA project I am undertaking in this organization

on the topic ‘

Criticall skill mapping with 4Q model

’ from Human Resource perspective.

•From the organizational point of view this questionnaire is a part of development

exercise to know the strength and the areas needing improvements (possible blind

spots) in terms of various competencies at various levels of the Manufacturing

department, namely top level, managerial level, executive level, and staff level.

(Pleasereturnthe completedquestionnaireto me onor before…………………)

Please rate each competency using the 5-point rating scale 0 to 4

118
No of

quadrants
Symbol Definition
to be

filled

0 Is not trained on the subject

1 Has been given basic training on the subject.

Has the working knowledge of the subject and

2
can work under supervision.

Has adequate knowledge of the subject and can

3
work independently on the job.

Is an expert of the subject and can give training

4
to others.

119
Questionnaire use for both self and other rating:

 Please ( tick) what you fill most appropriate

Competence at executive level

technical expertise :know in detail about the technology used in

production 5 4 3 2 1

product knowledge: know the physical structure of each product and its

part 5 4 3 2 1

knowledge on the latest design 5 4 3 2 1

stress tolerance : cop up with the situation of breakdown , work load

and pressure. 5 4 3 2 1

knowledge on production concept SOP 5 4 3 2 1

knowledge on product standerd and specification 5 4 3 2 1

positive isolation\ 5 4 3 2 1

detail knowledge of material and tools used in production 5 4 3 2 1

operational of machine 5 4 3 2 1

work always with quality awareness 5 4 3 2 1

iso 140000 awareness program 5 4 3 2 1

HGG operation 5 4 3 2 1

co and bf gas line maintainence 5 4 3 2 1

coal tar tank line maintanence 5 4 3 2 1

green pelletizing operation 5 4 3 2 1

repairing inside HGG 5 4 3 2 1

operation of impact mill 5 4 3 2 1

120
reciveing storage and supply of coal tar 5 4 3 2 1

operation of compressor 5 4 3 2 1

TPM horizon workshop 5 4 3 2 1

inspection/checking in process plan 5 4 3 2 1

gas safety 5 4 3 2 1

ms word/excel 5 4 3 2 1

maintainence of contrifugal pump 5 4 3 2 1

burner operation 5 4 3 2 1

operation of padle feeder 5 4 3 2 1

operation of dryer 5 4 3 2 1

cogas/coal tal filter changing 5 4 3 2 1

safe working 5 4 3 2 1

maintenance of air pump 5 4 3 2 1

121
 ORGANISATIONAL STRUCTURE OF TATA STEEL

The entire structure of the organization of Tata Steel can be broadly divided into 3

levels, each level having separate roles and responsibilities. These 3 levels are

upper management, senior management and the middle management. Each of these

lower levels is responsible to perform Its functions and there by report to the next

higher level in the organization on a periodic basis. Overall, we can say that the

company has a flat structure, beginning from the top management to the lowest

level of management. The Upper Management of the company has designation like

the Managing Director of the entire company and the Group Executive officer. The

Senior Management has the various Vice Presidents of the different departments

which come directly under the Managing Director. Under the Vice Presidents we

have the Chiefs of the various functions who coordinate the activities of its

function along with the other departments. There can be more than one chief in a

department depending upon the number of line of the products. This is seen in

the Long Products Departments. The Chiefs are also accompanied by the Heads in

some of the departments. Under these Chiefs and Heads, we have the various

Sectional Heads who are the Unit Leaders, the Managers or the Officers. This

structure is prevalent in the entire organization on a national scale. In the Finance

and Accounts Department of Tata Center, Kolkata, the functions are handled by

the Head of Marketing and Finance. Then, there are the various Manager Accounts

who handle the different aspects of the department. Under these Managers are the

officers who carry out the actual accounting work of the department.

122
- Tata Steel Group has announced a new organization structure effective from January

01, 2008 as follows:

Tata Steel Group comprises of two entities, namely, Tata Steel (including Tata Steel

Thailand and NatSteel Asia) and Corus Group Ltd. In order to realise this ambition, a

new organisation is announced on November 28, 2007, which is effective from January

01, 2008.

* The Chairman of Tata Steel, Mr. Ratan Tata will continue to chair the Strategy and

Integration Committee. Mr. Jim Leng, Mr. B Muthuraman, Mr. Philippe Varin, Dr.

Tridibesh Mukherjee, Mr. Rauke Henstra, Mr. Hemant Nerurkar, Mr. Koushik Chatterjee

and Mr. Jean-Sebastien Jacques are members of this Committee.

* A Group Centre is created for functions that are to be performed with a common

approach across the Tata Steel Group. These functions are Technology & Integration,

Finance, Strategy, Corporate Relations & Communications and Global Minerals. The

executives responsible for these functions will report to the MD of Tata Steel and the

CEO of Corus:

- Dr. Tridibesh Mukherjee is appointed as Group Director, Technology & Integration

- Mr. Koushik Chatterjee is appointed as Group Chief Financial Officer

- Mr. Jean-Sebastien Jacques is appointed as Group Director, Strategy

123
- Mr. Manzer Hussain is appointed as Group Director, Communications

- Mr. Arun D Baijal is appointed as Group Director Global Minerals

* Both Tata Steel and Corus entities will have Executive Committees chaired by the MD,

Mr. B Muthuraman and the CEO, Mr. Philippe Varin respectively.

* A Joint Executive Committee for Tata Steel Group will meet quarterly to review overall

performance against the Group ambition. This committee will be co-chaired by the MD

of Tata Steel and the CEO of Corus.

124
 BIBLIOGRAPHY

•Human Resource Management

-Gary Dessler, Prentice Hall EEE

•Human Behaviour at Work

-David K, Tata McGraw Hill

•TMDC Library, jamshedpur

•www.tatasteel.com

125