100th Annual Report 2006-2007 - Tata Steel

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Management Discussion and Analysis controlling inflationary pressures may be a challenge for the Indian Government. The International Iron and Steel Institute (IISI) forecasts global steel consumption to grow by 5.9% in 2007 and 6.1% in 2008, driven by strong demand from Asia, Africa and South America. The apparent steel demand is likely to increase by 65 million tonnes in 2007 and 72 million tonnes in 2008 to reach a level of 1,250 million tonnes in 2008. China is expected to remain the largest market with steel demand likely to increase by 13% (46 million tonnes) in 2007, which represents 71% of global steel consumption growth in 2007. Apparent Steel Demand Growth 2006 2007(F) 2008(F) 2006/07 2007/08 European Union (25) 184.7 187.4 191.0 1.5% 1.9% Other Europe 27.9 29.8 31.7 6.5% 6.4% C.I.S. 48.4 51.4 54.4 6.1% 6% N.A.F.T.A. 154.9 150.1 156.6 -3.1% 4.3% Central & South America 36.0 38.2 40.5 6.1% 6% Africa 21.6 23.1 24.9 6.95 7.8% Middle East 36.8 40.2 43.6 9.1% 8.4% China 356.2 402.5 442.8 13% 10% India 43.1 47.5 52.8 10.2% 11.2% Asia excl. India & China 195.6 200.5 204.4 2.5% 1.9% Oceania 7.9 8.0 8.0 1.8% 0% World 1113.2 1178.7 1250.6 5.9% 6.1% World exc. China 756.9 776.1 807.8 2.5% 4.1% Source: IISI, March 2007 The Committee on Infrastructure in India constituted under the Chairmanship of the Prime Minister in August 2004 planned for an expenditure of approximately Rs. 14,50,000 crores (USD 320 billion) in the 11th Five Year Plan (2007-2012) on Irrigation, Urban Infrastructure, Power, Roads, Railways, Ports, Airports, Telecom projects etc. This may lead to increased steel consumption in foreseeable future. India’s steel consumption is expected to increase to 65 million tonnes by FY 2009-10 and over 125 million tonnes by FY 2014-15. D) Tata Steel’s Growth Strategy During the 1990s, the Company re-engineered its business processes, established its cost leadership in a liberalised scenario and modernised its operations to become one of the most efficient steel producers in the world. After a period of recessionary conditions in the early part of the century, the steel industry scenario changed dramatically in 2003 led by the strong growth in China. The Company was prepared to participate in this opportunity and set out on the growth and globalisation path in the 21st century. The Company realised the need to grow in size and regional diversity to match global players. In 2005, the Company made long term plans of becoming a 50 million tonne steel producer by 2015 having multi-locational manufacturing facilities with strong regional presence focusing mainly on auto, packaging and construction sectors across the global markets. The long term growth plans of Tata Steel are focused on the following levers: The Indian Steel Industry is now believed to be at an inflexion point. It is poised for a demand growth of 10% in FY 2007-08. Demand for flat products and long products is expected to grow by 12% and 9% respectively. Rise in personal disposable incomes and easy access to funds from banks has led to new housing projects in last 3-5 years. The Automotive sector also grew at a significant rate of over 15% due to easy availability of consumer finance, excise duty reduction and higher disposal income with households. Recent increase in interest rates is likely to dampen this sentiment somewhat, but the growth rate is likely to remain robust. • Single Location • World class • Small in size 2005 • 5 mtpa • Dominant in selected domestic markets • EVA + Strong Base in India Primary steel making in countries rich in Iron Ore and/or Coal/Gas Overseas acquisitions in growing & mature markets Ownership of strategic raw materials More from Steel and Branding Control over Logistics Participation in Alternate Technology World Class Organisation/Structure • Multi Location • Strong regional presence • Auto & Packaging & Construction led 2015 • 50 mtpa capacity • De-integrated production • Strong Brands • EVA + 92
The Company plans to achieve these long term objectives through various strategic initiatives which are discussed below: 1. Strong Base in India India is the seventh largest steel producer in the world and among the fastest growing steel producers globally. India is one of the best countries to produce steel at a competitive cost by virtue of availability of key raw materials viz. iron-ore, coal (to some extent) and skilled labour. Steel consumption in India is likely to increase at a rapid pace in the future due to large investments planned in infrastructure development, increased urbanisation and growth in key steel consuming sectors viz. automotive, construction, capital goods and other manufacturing sectors. The per capita steel consumption in India is quite low compared to the world average and also compared to the countries like China, USA, Europe, Japan and others. Considering the future economic climate in India, the per capita consumption of steel in the next decade is expected to increase significantly from the current levels. As part of its strategy to retain its pre-eminent position in the Indian markets, the Company has drawn elaborate plans to significantly enhance its presence in India in the near future. The Company’s plans for expanding its capacity is based on brownfield expansion in Jamshedpur and greenfield projects as discussed in the following paragraphs. a) Brownfield projects in India After successful completion of the 1 million tonne steel expansion in Jamshedpur, the Company is currently expanding its crude steel making capacity from 5 million tonnes to 6.8 million tonnes which will be commissioned by June 2008. The current expansion will enhance the Company’s capacity to produce billets and slabs by 1.5 million tonnes and 0.3 million tonnes respectively which will be rolled into finished products in various finishing mills within the fold of the Company. The project cost is estimated at Rs. 4,550 crores. To leverage the potential of Jamshedpur further, the Company is planning to expand its crude steel production capacity from 6.8 million tonnes to 9.7 million tonnes by 2010. This expansion is likely to be cost competitive (both in terms of capital cost and operating cost) since the Company is planning to upgrade the capacity of its existing blast furnaces and other facilities. As part of this expansion, the Company will install a new Thin Slab Caster Rolling (TSCR) facility in Jamshedpur, which will increase Flat Products capacity by 2.9 million tonnes. The project cost is estimated at around Rs. 9,100 crores. b) Greenfield Projects in India The Company is planning to set up a 6 million tonne integrated steel project at Kalinganagar in the state of Orissa. This project will be executed in two phases of 3 million tonnes each, with the first phase to be commissioned by 2010. The Company has placed orders for major equipments viz. Blast Furnace and Steel Melting Shop and is in the process of completing land acquisition and rehabilitation of families residing on the land. The Company has made an application for fresh 93
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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
Page 43 and 44: The Tata Steel works, mines, collie
Page 45 and 46: An aerial view of the planned indus
Page 47 and 48: The Cold Rolling Complex at Jamshed
Page 49 and 50: 1933 Two new roughing and finishing
Page 51 and 52: From the early days, the Tata Steel
Page 53 and 54: Production Highlights • The best
Page 55 and 56: 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: of 8%. In 2006, China produced 422.
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
Page 107 and 108: m) Stores and Spare Parts and Stock
Page 109 and 110: The Company generated EVA of Rs. 2,
Page 111 and 112: Business and Operational Risk The m
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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
Page 121 and 122: (xii) In our opinion and according
Page 123 and 124: Profit and Loss Account for the yea
Page 125 and 126: Cash Flow Statement for the year en
Page 127 and 128: Schedule forming part of the profit
Page 129 and 130: Schedule forming part of the balanc
Page 141 and 142: Schedules forming part of the balan
Page 143 and 144: 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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