Assignment on

“ONE OF NIFTY 50 LISTED COMPANIES”

“TATA STEEL”
Submitted in partial fulfillment of
Master of Business Administration Program (2009-2011)

University School of Management Studies

Guru Gobind Singh Indraprastha University
Kashmere Gate, Delhi-110006

Submitted By Submitted To

TARUN JAIN Prof. K.L. DHAIYA

Enrolment # 06016608509
MBA (General)
 FUNDAMENTAL ANALYSIS OF TATA STEEL
The fundamental analysis consists of three parts; they are economic, industry and company. All the
factors are involved in this analysis were identified and studied carefully to identify the factors in the
existing environment. The data or information collected was based on the personal interaction with the
guide of the company.

Economic analysis was a task to be studied as it affected the company’s tax, and it will effect on the
revenue of the industry. Also other factors are considered in the economic analysis. And it will interpret
for the fundamental analysis.

Industry analysis was a challenging factor for the research of the fundamental analysis. All the sub-
factors of the industry analysis were taken up from the secondary source to analyses the each factor with
the industry. And was related those factors with the company. It also analyses the competitiveness of the
each company’s strength, like. Quality, services, cost of R/m, etc.

Company analysis is last factors of the fundamental analysis and it is one of the most important parts of
the company. An approach was made to understand the existing company and its impact on company’s
market share an its performance.

The following are some important factors which should be taken into account while
Doing fundamental analysis:

1. Economic Growth

2. Per capita income

3. Industrial Production

4. Inflation

5. Interest Rates

6. Foreign Exchange Reserves

7. Budgetary Deficit
 INDIAN ECONOMY ANALYSIS
INDIA GDP GROWTH RATE

1. India Gross Domestic Product (GDP) expanded 8.9% over the last 4 quarters.
2. The India Gross Domestic Product is worth Rs 800 core (US$ 175.7 million).
World economy, according to the World Bank.
3. India's diverse economy encompasses traditional village farming, modern agriculture,
handicrafts, a wide range of modern industries, and a multitude of services. Services are
the major source of economic growth, accounting for more than half of India's output
with less than one third of its labor force.

Inflation rate The inflation rate in India was last reported at 9.7 percent in October of 2010.
IT refers to a general rise in prices measured against a standard level of purchasing power. The
most well known measures of Inflation are the CPI which measures consumer prices index, and
the GDP deflator, which measures inflation in the whole of the domestic economy. India's
diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a
wide range of modern industries, and a multitude of services. Services are the major source of
economic growth, accounting for more than half of India's output with less than one third of its
labor force. The economy has posted an average growth rate of more than 7% in the decade since
1997, reducing poverty by about 10 percentage points

Economic Growth :- India's gross domestic product (GDP) growth rate significantly slowed
to 6.7 percent in 2008-09, but subsequently recovered to 7.2% in 2009-10, while the fiscal deficit
rose from 5.9% to a high 6.5% during the same period. India's large service industry accounts for
57.2% of the country's GDP

Industrial Production:-Industrial Production Increases 7.1% in India

IMPACT OF BUDGET ON IRON & STEEL INDUSTRY

• The union budget for 2010-11 is largely neutral for the steel industry, Tata Steel
managing director H.M. Nerurkar said.
• Increase in petro-fuel and energy costs, however, may have an inflationary impact on
consumers or margin squeeze for suppliers,
• Similarly, roll-back of excise duties to 10 per cent will partially negate the impetus given
to infrastructure and construction due to rise in cost of steel, cement and power
• The Steel industry is disappointed that its request for taking physical and fiscal measures
for the conservation of iron ore resources for the benefit of the country has been
overlooked.
• This is essential as the steel industry apprehends that iron ore resources in India may not
last until 2030 if ore exports continue at the current rate
• Besides, a slash in excise duty from 8 per cent to 10 per cent and a waiver of the import
duty on some inputs will partially meet the demand of the steel industry.
• CST reduction from three per cent to two per cent will generate positive sentiments in the
market,
 INDUSTRY ANALYSIS

The purpose of industry analysis is to review prevailing conditions within specific industry and
its segments. The company's industry obviously influences the outlook for the company. Even
the best stocks can post mediocre returns if they are in an industry that is struggling.

To assess the industry group potential, an investor would want to consider the overall growth
rate, market size, and its importance to economy. While the individual company is still
important, its industry group is likely to exert as much as, or more, influence on the stock price.
When stock move the usually move as groups; there are very few lone guns out there. An
understanding of the industry sector involved, including the maturity of the sector and any
cyclical effects that the overall economies have on it, is also necessary.

The followings are some important factors which should be considered in

Fundamental Analysis
• Growth: A growing industry gives room for profitability.
• Profitability: Average profitability of the industry should be attractive.
• Demand-Supply: the wider demand supply gap, the better is the industry’s fortune in the future
• Entry barrier
• Competition and Market share:
• Technology trends
• Government Policy
• Capacity Utilization
• Bargaining power of buyer
 INDIAN STEEL INDUSTRY
India is the fifth largest producer of steel in the world. India Steel Industry has grown by leaps
and bounds, especially in recent times with Indian firms buying steel companies overseas. The
scope for steel industry is huge and industry estimates indicate that the industry will continue
will to grow reasonably in the coming years with huge demands for stainless steel in the
construction of new airports and metro rail projects. The government is planning a massive
enhancement of the steel production capacity of India with the modernization of the existing
steel plants.
Government targets to increase the production capacity from 56 million tones annually to 124
MT in the first phase which will come to an end by 2011 - 12. Currently with a production of 56
million tones India accounts for over 7% of the total steel produced globally, while it accounts to
about 5% of global steel consumption. The steel sector in India grew by 5.3% in May 2009.
Globally India is the only country to post a positive overall growth in the production of crude
steel at 1.01% for the period of January - March in 2009.

Policies of Steel industry in India

In the new Industrial Policy announced in July, 1991 Iron and Steel industry, among others,
was removed from the list of industries reserved for the public sector and also exempted from the
provisions of compulsory licensing under the Industries (Development and Regulation) Act,
1951.
 With effect from 24.5.92, Iron and Steel industry has been included in the list of `high
priority' industries for automatic approval for foreign equity investment upto 51%. This limit has
been recently increased to 100%.
 Price and distribution of steel were deregulated from January 1992. At the same time, it was
ensured that priority continued to be accorded for meeting the requirements of small scale
industries, exporters of engineering goods and North Eastern Region of the country, besides
strategic sectors such as Defence and Railways.
 The trade policy has been liberalised and import and export of iron and steel is freely allowed.
There are no quantitative restrictions on import of iron and steel items, covered under Chapter
No. 72 of the ITC(HS) Code. The only mechanism regulating the imports is the tariff
mechanism. Tariffs on various items of iron and steel have drastically come down since 1991-92
levels and the government is committed to bring them down to the international levels. In
Chapter 72 there are two items viz. 72042110 and 72042910, which fall in the restricted list of
imports.
 Iron & Steel are freely importable as per the Extant Policy.
 Iron & Steel are freely exportable.
 Advance Licensing Scheme allows duty free import of raw materials for exports.
 The floor price for seconds and defectives continues till date.

GROWTH OF STEEL INDUSTRY IN INDIA

• The Indian steel industry have entered into a new development stage from 2005-06,
riding high on the resurgent economy and rising demand for steel. Rapid rise in
production has resulted in India becoming the 5 th largest producer of steel.

• It has been estimated by certain major investment houses, such as Credit Suisse that,
India’s steel consumption will continue to grow at nearly 16% rate annually, till 2012,
fuelled by demand for construction projects worth US$ 1 trillion. The scope for raising
the total consumption of steel is huge, given that per capita steel consumption is only 40
kg – compared to 150 kg across the world and 250 kg in China.

• The National Steel Policy has envisaged steel production to reach 110 million tonnes by
2019-20. However, based on the assessment of the current ongoing projects, both in
greenfield and brownfield, Ministry of Steel has projected that the steel capacity in the
county is likely to be 124.06 million tonnes by 2011-12. Further, based on the status of
MOUs signed by the private producers with the various State Governments, it is expected
that India’s steel capacity would be nearly 293 million tonne by 2020.
 COMPANY ANALYSIS

After determining the economic and industry conditions, the company itself is
analyzed to determine its financial health. This is usually done by studying the company's
financial statements. From these statements a number of useful ratios can be calculated.
The ratios fall under five main categories: profitability, price, liquidity, leverage, and
efficiency. When performing ratio analysis on a company, the ratios should be compared
to other companies within the same or similar industry to get a feel for what is considered
"normal." These are quantitative factors of company analysis; there are also some
qualitative factors which should be considered also.

Last in this process of studying the fundamentals includes looking at the company
individually. This includes looking at unit sales, prices, new products, earnings and any chance
of debt or equity occurring.
 COMPANY ANALYSIS OF TATA STEEL

The Tata Group of Companies has always believed strongly in the concept of
collaborative growth, and this vision has seen it emerge as one of India's and the world's most
respected and successful business conglomerates. The Tata Group has traced a route of growth
that spans through six continents and embraces diverse cultures. The total revenue of Tata
companies, taken together, was 67.4 billion USD (around Rs319,534 crore) in 2008-09, with
56.9 per cent of this coming from business outside India. In the face of trying economic
challenges in recent times, the Tata Group has steered India’s ascent in the global map through
its unwavering focus on sustainable development. Over 363,039 people worldwide are currently
employed in the seven business sectors in which the Tata Group Companies operate. It is the
largest employer in India in the Private Sector and continues to lead with the same commitment
towards social and community responsibilities that it has shown in the past.

Tata Steel
• Tata Steel (BSE:660),
• Tata Steel is the world’s 6th largest steel making company with an existing annual crude
steel production capacity of 30 Million Tonnes per Annum (MTPA).
• Tata Steel has a balanced global presence in over 50 developed European and fast
growing Asian markets, with manufacturing units in 26 countries.
• 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.
• Corus, which manufactured over 20 MTPA of steel in 2008, has operations in the UK, the
Netherlands, Germany, France, Norway and Belgium.