100th Annual Report 2006-2007 - Tata Steel

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Management Discussion and Analysis r) Appropriation The Company has transferred Rs. 1,500 crores to the General Reserve during FY 2006-07 (FY 2005-06 : Rs. 1,500 crores). s) Dividend The Board of Directors of the Company have recommended a dividend @ 130% (Rs. 13 per share) for the year ended 31st March, 2007, and a special dividend @ 25% (Rs. 2.50 per share), subject to the approval of the shareholders at the Annual General Meeting. The dividend cash-outgo (including tax on dividend) would be Rs. 1,104.33 crores. The dividend payout as % of Net Profit works out to 26% as compared to 23% in the previous year. The dividend payout during the last 10 years is as illustrated below : t) EVA The Company in pursuance of its Vision to create value for its shareholders, has adopted the EVA based methodology for performance management and also for capital expenditure evaluation based on the recommendations of Stern Stewart & Co. Economic Value Added (EVA) is defined as the excess of Return on Invested Capital (ROIC) over weighted average cost of Capital (WACC); viz Return on Invested Capital (ROIC) = Net Operating Profit after Taxes but before interest costs (NOPAT) Average Invested Capital Weighted average cost of Capital (post tax) = Average Adjusted Equity * Cost of Equity (%) + Average debts (including Prov. for ESS Compensation and deferred tax liability) *Cost of Debts (%) Average Adjusted Equity + Average debts The Cost of Equity is determined under the CAPM method while the cost of debt is based on the actual cost of borrowings. The EVA spread was 22.23% as compared to 23.54% in the previous year. The calculation of EVA spread is as follows: Particulars FY 2006-07 FY 2005-06 Change Return on Invested Capital 32.64% 34.99% (2.35)% Weighted Average cost of Capital 10.41% 11.45% (1.04)% EVA Spread (%) 22.23% 23.54% (1.33)% EVA - Rs. crores 2,707 2,324 383 Average Dividend Payout : 28% of Net Profit Rs. crores 1200 180 1000 155% 130% 130% 1104 160 140 800 600 72% 80% 100% 821 820 120 100 80 400 200 50% 58% 40% 40% 162 163 50% 40% 40% 37% 39% 164 205 147 333 33% 416 24% 24% 23% 26% 60 40 20 0 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 0 106 Dividend incl. Tax (Rs. crores) Dividend (%) Dividend payout (%)
The Company generated EVA of Rs. 2,707 crores as compared to Rs. 2,324 crores in the previous year. The Return on Invested Capital was 32.64%. The Net Operating Profit after Tax (NOPAT) to Sales was 20.11% as compared to 20.15% in the previous year. Net operating profit after tax increased by 15% but the average capital employed increased by 23% in FY 2006-07. The weighted average cost of capital decreased to 10.41% as compared to 11.45% for the previous year due to increase in proportion of debt in the total capital employed and reduction in the average cost of debt. II) Internal Controls & Systems The Company has in place adequate internal control systems and procedures commensurate with the size and nature of its business. The effectiveness of the internal controls is continuously monitored by the Corporate Audit Division of the Company. The Corporate Audit’s main objective is to provide to the Audit Committee and the Board of Directors, an independent, objective and reasonable assurance of the adequacy and effectiveness of the organisation’s risk management, control and governance processes. The Corporate Audit Group also follows up on the implementation of corrective actions and improvements in business processes after review by the Audit Committee and Senior Management. The scope and authority of the Corporate Audit Division is derived from the Audit Charter approved by the Audit Committee. The Charter is designed in a manner that the Audit Plan is focused on the following objectives: • Review of the identification and management of Risks. • All operational and related activities are performed efficiently and effectively. • Significant financial, managerial and operating information is relevant, accurate, reliable and is provided timely. • Resources are acquired economically, used efficiently and safeguarded adequately. • Employees’ actions are in accordance with the Company’s policies, procedures, Tata Code of Conduct and applicable laws and regulations. • Significant legislative and regulatory provisions impacting the organisation are recognised and addressed appropriately. • Opportunities identified during audits, for improving management control, business targets and profitability, process efficiency and the organisation’s image, are communicated to the appropriate level of management. • Shareholders’ and other Stakeholders’ wealth and welfare are preserved, protected and enhanced. 107
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A Century of Trust 100th Annual Rep
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Tata Steel is Asia’s first and In
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Redefining steel with world-class p
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in a manner that ring-fences the Co
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Board of Directors Mr. R. N. Tata C
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The state-of-the-art Hot Strip Mill
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Distribution of Revenue 2006 - 2007
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1907-2007 JRD Tata with Pandit Jawa
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1907-2007 Tata Steel’s state-of-t
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This photograph taken by a Tata Ste
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Profit Sharing Bonus was granted fo
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A modern swimming pool at the G Tow
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steeljunction in Kolkata - India’
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Tata Steel has introduced high-end
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Tata Structura is a new-age constru
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Shareholder interaction at an Annua
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Within three weeks of the announcem
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It was 1956. The company was faced
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Community and environment : Improvi
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A Critical Care Unit, in the 850-be
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The Tata Steel Family Initiatives F
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The Tata Steel works, mines, collie
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An aerial view of the planned indus
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The Cold Rolling Complex at Jamshed
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1933 Two new roughing and finishing
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From the early days, the Tata Steel
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Production Highlights • The best
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Aspire with T3 With the objective o
Page 57 and 58: Operational Highlights NSA increase
Page 59 and 60: was above the average total score o
Page 61 and 62: Blast furnaces at Corus’ integrat
Page 63 and 64: Corus produces strong, light steel
Page 65 and 66: Corus is British Triathlon’s main
Page 67 and 68: Review of Corporate Sustainability
Page 69 and 70: TSRDS focused on popularising repro
Page 71 and 72: Centenary Year The founder, Jamsetj
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Page 75 and 76: convertible preference shares and a
Page 77 and 78: expansion of crude steel making cap
Page 79 and 80: The bulk cargo berths are being des
Page 81 and 82: Corporate Governance Pursuant to Cl
Page 83 and 84: Annexure 'A' to Directors’ Report
Page 85 and 86: Form - B Form for disclosure of par
Page 87 and 88: 6 am 2 pm 12 noon 10 am 8 am 8 pm 6
Page 89 and 90: Particulars of technology imported
Page 91 and 92: Management Discussion and Analysis
Page 93 and 94: of 8%. In 2006, China produced 422.
Page 95 and 96: The Company plans to achieve these
Page 97 and 98: I. Strategic Rationale for acquisit
Page 99 and 100: Steelium (India’s first branded c
Page 101 and 102: The “G” Blast Furnace in Jamshe
Page 103 and 104: Sales of manganese ore in the domes
Page 105 and 106: d) Payments and Provisions to Emplo
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Page 111 and 112: Business and Operational Risk The m
Page 113 and 114: • Raising cost efficient funds fo
Page 115 and 116: Highlights 2006-07 2005-06 Rupees R
Page 117 and 118: Auditors’ Report TO THE MEMBERS O
Page 119 and 120: (b) In our opinion and having regar
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Page 125 and 126: Cash Flow Statement for the year en
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SCHEDULE M : NOTES ON BALANCE SHEET
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SCHEDULE M : NOTES ON BALANCE SHEET
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Balance Sheet Abstract and Company'
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CAPITAL ACCOUNTS Financial Statisti
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Financial Ratios 2006-07 2005-06 20
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Name Category No. of Whether No. of
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the Tata Code of Conduct, which req
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Shareholding of the Directors in th
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Committees In addition to the above
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employees to report concerns about
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Market Information Market Price Dat
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Distribution of Shareholding Number
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Address for Correspondence : Tata S
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Certificate To the Members of TATA
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Statement pursuant to Section 212(8
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4. Subject to the matters referred
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Consolidated Profit and Loss Accoun
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Consolidated Cash Flow Statement fo
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Schedule forming part of the Consol
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Schedules forming part of the Conso
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SCHEDULE N : NOTES TO THE CONSOLIDA
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The Dimna reservoir near Jamshedpur
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100th Annual Report 2006-2007 - Tata Steel

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