Management Discussion & Analysis
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g) Status of Projects
Brownfield Projects of Tata Steel
The Company is on its way to reach a crude steel capacity of 10 million tonnes per annum by FY 2011. The first phase of reaching the crude steel capacity of 6.8 million tonnes per annum is nearing completion. The new Sinter Plant No. 4 was commissioned in 2007 and the new H-Blast Furnace was blown-in on 31st May, 2008. The expansion programme for LD1 Shop to raise the capacity of the Shop to 3.3 million tonnes per annum is under execution along with other units like the 3rd Billet Caster and auxiliary facilities like
the De-sulphurisation plant, Slag handling system, Hot Metal handling system etc.
The Company has simultaneously initiated work on the second phase expansion programme of 3 million tonnes per annum. This programme includes the upgradation of Iron Making facilities along with setting up of new facilities such as steel making shop, Thin Slab Casting & Rolling Mill (TSCR) and a palletizing plant with a capacity of 6 million tonnes per annum capacity. Major orders for supply of equipment for steel making shop and TSCR have been placed. The concept and implementation strategy for up-gradation of old blast furnaces and setting up of Palletising plant is under finalisation. The project is progressing as per schedule.
Greenfield Projects of Tata Steel
The Company has begun the process of building a new integrated steel plant at Kalinganagar, Orissa with a total capacity of 6 million tonnes per annum to be set up in two phases of 3 million tonnes per annum each. The land acquisition and rehabilitation and resettlement work is in progress. Till May 2008, 86% of land has been registered in the name of the Company. As a part of rehabilitation and resettlement activity, 640 families out of 1,195 displaced families have been shifted to rehabilitation colonies and transit camps. To accommodate them, two rehabilitation colonies and five transit camps are operational. 310 nominees have been trained in skill development centres and 270 trained youth are already engaged with construction partners. A letter has been submitted to the Government of Orissa confirming fulfillment of MoU conditions with request for recommendation of the mining lease.
The Company has begun the process of building a new integrated steel plant at Kalinganagar, Orissa with a total capacity of 6 million tonnes per annum to be set up in two phases of 3 million tonnes per annum each. The land acquisition and rehabilitation and resettlement work is in progress. Till May 2008, 86% of land has been registered in the name of the Company. As a part of rehabilitation and resettlement activity, 640 families out of 1,195 displaced families have been shifted to rehabilitation colonies and transit camps. To accommodate them, two rehabilitation colonies and five transit camps are operational. 310 nominees have been trained in skill development centres and 270 trained youth are already engaged with construction partners. A letter has been submitted to the Government of Orissa confirming fulfillment of MoU conditions with request for recommendation of the mining lease.The Company has also entered into a Memorandum of Understanding with the State Governments of Chhattisgarh and Jharkhand for setting up steel plants. The process of submitting applications for various licenses for mining leases and environmental clearance has been initiated. The State Governments have prepared and offered the rehabilitation policy and compensation packages to the project affected families. The process of acquisition of land in both the states is in progress.
Raw Materials Projects
Global Mineral Resources (GMR) group identified various iron ore and coal opportunities and is in the process of evaluating these projects. Status of coal, iron ore and limestonnee projects is as follows.
Global Mineral Resources (GMR) group identified various iron ore and coal opportunities and is in the process of evaluating these projects. Status of coal, iron ore and limestonnee projects is as follows. Riversdale, Mozambique, November 2007 – Tata Steel and Riversdale Mining Limited entered into a Joint Venture under which Tata Steel has a 35% stake in Mozambique Coal Project. The licences of the joint venture cover an area of 24,960 hectares. The feasibility studies for the project are in progress.
Mount Nimba Iron Ore, Ivory Coast, December 2007 – Tata Steel entered into a Joint Venture for development of Nimba Iron Ore project in Cote d’Ivoire with with Tata Steel having a major shareholding. Exploration and feasibility studies would commence in the year 2009.
Uyun Limestonnee Project, Oman, January 2008 – Tata Steel entered into a Joint Venture agreement with shareholders of Al Rimal LLC for 70% stake in Al Rimal LLC. Application for exploration license has been made and feasibility studies would be taken up soon on grant of exploration license.
h) Financial Analysis of Tata Steel
(Standalone entity in India)
1. Net Sales/Income from Operations
| FY08 | FY07 | Change | Change % | |
| Sales of products Sale of power and water Income from services, sale of miscellaneous goods, stores and rent etc. Total sale of products and services Less : Excise Duty |
21,395 546 251 22,192 2,499 |
19,018 514 230 19,763 2,211 |
2,377 32 20 2,429 287 |
12% 6% 9% 12% 13% |
| Net sales/income from operations | 19,693 | 17,551 | 2,142 | 12% |
Product wise net sales are as follows:
| FY08 | FY07 | Change | Change % | |
| Steel Tubes Ferro Alloys and Minerals Bearings |
16,541 1,217 1,808 127 |
14,858 1,099 1,454 140 |
1,683 117 354 (13) |
11% 11% 24% (9%) |
| Total | 19,693 | 17,551 | 2,142 | 12% |
The sale of products and services of the company increased by 12% from Rs.19,108 crores in FY 2006-07 to Rs. 21,395 crores in FY 2007-08. The net sales in the Steel division increased by 11% over FY 2006-07 to Rs. 16,541 crores mainly due to increase in the domestic prices of the products across segments over the FY 2006-07 level. The net sales of Tubes division increased by 11% over FY 2006-07 to Rs. 1,217 crores in FY 2007-08. The increase in the net sales of Tubes division was due to the increase in both the volume as well as prices. The Ferro Alloys and Minerals division of the company registered a growth of 24% in terms of value though there was a decline in terms of quantity due to the company’s decision during the year to stop the sale of ores. There was a decline in the net sales of the Bearings division of the company mainly due to lower offtake by the automotive sector, which is a major customer sector of the division. The sale of power and water increased mainly due to increase in the power trading activities.
2. Raw Materials Consumed
Figures in Rs. crores
| FY08 | FY07 | Change | Change % | |
| Raw materials consumed | 3,430 | 3,121 | 308 | 10% |
The raw materials consumption of the company increased by 10% from Rs. 3,121 crores in FY 2006-07 to Rs. 3,430 crores in FY 2007-08. The increases were primarily due to higher use of coke imported at high prices during FY 2007-08, mainly to make up for shortfall during refurbishment of the Coke Plant of the company. The increase in the raw material consumption due to import of coke was partly made good by lower cost of imported coal and zinc.
3. Payments to and Provisions for Employees
Figures in Rs. crores
| FY08 | FY07 | Change | Change % | |
| Payments to and provisions for employees | 1,590 | 1,455 | 135 | 9% |
The payments to and provisions for employees increased by 10% from Rs.1,455 crores in FY 2006-07 to Rs. 1,590 crores in FY 2007-08 mainly due to annual increments, basic wages and dearness allowances. The increases were partly made good by a reduction in the manpower from 37,205 as on 31st March, 2007 to 35,870 as on 31st March, 2008.
4. Conversion Charges
Figures in Rs. crores
| FY08 | FY07 | Change | Change % | |
| Conversion charges | 848 | 745 | 103 | 14% |
The conversion charges increased by 14% from Rs. 745 crores in FY 2006-07 to Rs. 848 crores in FY 2007-08. The increase of Rs. 103 crores was mainly due to increase in the conversion activity at the company’s Ferro Alloys and Minerals Division partly made good by lower conversion charges at the Wires unit in Western India and also the lower conversion volume in the Long Products area. During FY 2007-08, the Company had decided to sell value added ferro chrome and ferro manganese in place of ores, and thus there was an increase in the conversion volumes of the Ferro Alloys and Minerals division.
5. Other expenses
Figures in Rs. crores
| FY08 | FY07 | Change | Change % | |
| Other expenses | 1,089 | 838 | 251 | 30% |
The other expenses increased by 29% from Rs. 838 crores in FY 2006-07 to Rs. 1,089 crores in FY 2007-08. The major reasons for such increases were a) increase in liability for employees benefits as measured under Accounting Standard (AS) 15, b) expenses in connection with celebration of the Centenary Year of the company, c) expenses on raising of loans/rights issue, and d) expenditure on consultancy/feasibility studies etc.
6. Interest
Figures in Rs. crores
| FY08 | FY07 | Change | Change % | |
| Gross interest Less: Interest capitalised Less: Interest received on sundry advances, receipts and others |
941 12 50 |
251 0 77 |
690 12 (27) |
275% 17386% (35%) |
The net interest charges were higher by Rs. 705 crores from Rs. 174 crores in FY 2006-07 to Rs. 879 crores in
FY 2007-08. The major reasons for the high interest cost was the increase in loans taken for funding the acquisition of Corus. There were increases in the short-term loans from SBI and IDBI along with 1% Convertible Alternate Reference Securities–USD 875 million.
7. Exceptional Items
Figures in Rs. crores
| Exceptional items | FY08 | FY07 | Change | Change % |
| Employee separation compensation Contribution towards Sports infrastructure Exchange gain/(loss) |
(226) (150) 597 |
(152) - - |
(74) (150) 597 |
49% - - |
| Total | 221 | (152) | 373 | (245%) |
The Employee separation compensation was higher by 49% from Rs. 152 crores in FY 2006-07 to Rs. 2 26 crores in FY 2007-08. The increases were mainly due to inclusion of fresh cases and changes in discounting rates in FY 2007-08 over FY 2006-07.
The contributions to sports infrastructure was pertaining to the amount contributed towards the development of sports infrastructure for the National Games in the state of Jharkhand.
The exchange gain consisted primarily of reduction in the value of foreign currency debt as a result of appreciation of the Rupee against the US Dollar and the Japanese Yen.
8. Fixed Assets
Figures in Rs. crores
| As on 31st March ‘08 | As on 31st March ‘07 | Change | Change % | |
| Gross block Less: Depreciation and impairment |
20,847 8,223) |
18,527 7,486 |
2,320 737 |
13% 10% |
| Net Block | 12,624 | 11,041 | 1,583 | 14% |
Gross Block increased during the year primarily due to capital expenditure on the 1.8 million tonnes steel expansion project in Jamshedpur.
9. Investments
Figures in Rs. crores
| Investments | As on 31st March ‘08 | As on 31st March ‘07 | Change | Change % |
| Trade investments Investments in sub- sidiary companies Other investments Investments in Mutual Funds – a) Income Funds b) Liquid Funds Net investments in Mutual Funds |
1,156 1,911 9 - 1,028 1,028 |
1,025 1,389 9 117 3,567 3,684 |
131 522 - (117) (2,539) (2,656) |
13% 38% 0% (100%) (71%) (72%) |
| Total Investments | 4,103 | 6,106 | (2,003) | (33%) |
The investments of the company reduced by Rs. 2,003 crores from Rs. 6,106 crores as on 31st March, 2007 to
Rs. 4,103 crores as on 31st March, 2008. The main reason for such decrease was use of the liquid funds for funding the acquisition of Corus.
10. Stores & Spare parts and Stock-in-Trade
Figures in Rs. crores
| As on 31st March ‘08 |
As on 31st March ‘07 | Change | Change % | |
| Stores and spare parts Stock-in -trade |
558 2,047 |
505 1,828 |
52 220 |
10% 12% |
| Total | 2,605 | 2,333 | 272 | 22% |
The Stock-in-trade increased by Rs. 220 crores from Rs. 1,828 crores as on 31st March, 2007 to Rs. 2,047 crores as on 31st March, 2008 primarily due to increase in the raw material stocks at Jamshedpur Works, Ports and at the Ferro Alloys and Minerals division. The average inventory holding in terms of number of days as on 31st March, 2008 was 45 days as compared to 49 days as on 31st March, 2007. The increase in Stores and spare parts is mainly due to increased maintenance activities.
11. Sundry Debtors
Figures in Rs. crores
| Sundry Debtors | As on 31st March ‘08 |
As on 31st March ‘07 | Change | Change % |
| Gross Debtors Less: Provision for doubtful debts |
577 34 |
667 36 |
(90) (2) |
(14%) (6%) |
| Net Debtors | 543 | 632k | (88) | (14%) |
The net debtors level reduced by Rs. 88 crores from Rs. 632 crores as on 31st March, 2007 to Rs. 543 crores as on 31st March, 2008. The reductions were in the areas of Flat Products and Long products in the Steel division mainly due to continuous monitoring coupled with introduction of insurance-backed factoring facility. The average debtors in terms of number of days as on 31st March, 2008 was 12 days as compared to 14 days as on 31st March, 2007.
12. Loans and Advances
Figures in Rs. crores
| As on 31st March ‘08 |
As on 31st March ‘07 | Change | Change % | |
| Loans and Advances | 33,349 | 3,056 | 30,293 | 991% |
The loans and advances increased by Rs. 30,293 crores from Rs. 3,056 crores as on 31st March, 2007 to Rs. 33,349 crores as on 31st March, 2008. The increase was mainly due to the advance made against equity to Tata Steel Asia Holdings Pte. Ltd.
13. Current Liabilities
Figures in Rs. crores
| As on 31st March ‘08 |
As on 31st March ‘07 | Change | Change % | |
| Current Liabilities | 3,855 | 3,523 | 332 | 9% |
The current liabilities increased by Rs. 577 crores from a level of Rs. 3,523 crores as on 31st March, 2007 to Rs. 3,855 crores as on 31st March, 2008. The increase was mainly due to increase in the value of purchases/services on account of expansion projects.
14. Secured and Unsecured Loan
Figures in Rs. crores
| As on 31st March ‘08 |
As on 31st March ‘07 | Change | Change % | |
| Secured Loans Unsecured Loans |
3,521 14,501 |
3,759 5,886 |
(238) 8,615 |
(6%) 146% |
| Total | 18,022 | 9,645 | 8,376 | 87% |
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