Top Indian Companies: Tata Steel Ltd

Tata Steel Limited is an Indian multinational steel-making company based in Jamshedpur, Jharkhand, and is headquartered in Mumbai, Maharashtra, India. It is a subsidiary of the Tata Group. Tata Steel is a Nifty 50 company with a weightage of 1.14% on the index.

Formerly known as Tata Iron and Steel Company Limited (TISCO), Tata Steel is among the top steel producing companies in the world with an annual crude steel capacity of 34 million tonnes per annum.

It is one of the world's most geographically-diversified steel producers, with operations and commercial presence across the world.

Its largest plant (10 MTPA capacity) is located in Jamshedpur, Jharkhand.

Tata Iron and Steel Company (TISCO) was founded by Jamsetji Nusserwanji Tata and established by Sir Dorabji Tata on 26 August 1907. In 1920, The Tata Iron & Steel Company also incorporated The Tinplate Company of India Ltd (TCIL), as a joint venture with then Burmah Shell to manufacture Tinplate. TCIL is now Tata Tinplate and holds 70% market share in India.

By 1939, it operated the largest steel plant in the British Empire. The company launched a major modernisation and expansion program in 1951.

In 1990, the company began to expand, and established its subsidiary, Tata Inc., in New York. The company changed its name from TISCO to Tata Steel Ltd. in 2005

Acquisitions

NatSteel in 2004: Tata Steel agreed to acquire the steel making operations of the Singapore-based NatSteel for $486.4 million in cash. NatSteel had ended 2003 with turnover of $1.4 billion and a profit before tax of $47 million.

Millennium Steel in 2005: Tata Steel acquired a majority stake in the Thailand-based steelmaker Millennium Steel for a total cost of $130 million.

Corus in 2006: Tata Steel signed a deal with Anglo-Dutch company, Corus to buy 100% stake at £4.3 billion ($8.1 billion) at 455 pence per share.

Tayo Rolls in 2008, formerly Tata-Yodogawa Limited is a metal fabrication and processing company headquartered in Jamshedpur, India. It was founded in 1968 as a joint venture between Tata Steel and the Japan-based Yodogawa Steels.

Steel Engineering and Vinausteel in 2007: Tata Steel through its wholly owned Singapore subsidiary, NatSteel Asia Pte Ltd, acquired controlling stake in both rolling mill companies located in Vietnam.

Bhushan Steel in 2018: Tata Steel acquired the entire company in 2017–18,

Tata steel emerged as the highest bidder and took over the company through its wholly owned subsidiary Bamnipal Steel Ltd. The company was renamed as Tata Steel BSL.

Nilachala Ispat Nigam Ltd in 2022: Tata Steel through its wholly owned subsidiary, Tata Steel Long Products (TSLP), acquired controlling stake in NINL.

Products

Steel plant produces:

1. Automation related products

2. Bearings

3. Pipes[

4. Precision Tubes

5. car related materials

6. Locomotive parts

7. Agricultural equipment

8. Machinery, tinplate

9. Cable and wire

10. Rebars

11. Branded products and solutions like Pravesh Doors Nest-in building structures

Shareholding Pattern

Holder's Name No of Shares % Share Holding

No of Shares 1221543546 100%

Promoters 414358657 33.92%

Foreign Institutions 260975556 21.36%

Banks/Mutual Funds 126643701 10.37%

Central Govt 1176935 0.1%

Others 93226249 7.63%

General Public 230639929 18.88%

Financial Institutions 94522519 7.74%

FY2023 Q4 and Full Year Results

Tata Steel on Tuesday posted a steep fall of 84 per cent in its consolidated net profit at Rs 1,566.24 crore during the quarter ended March 2023, dragged by lower income.

The steel major had reported a net profit of Rs 9,835.12 crore in the year-ago quarter, it said in a BSE filing.

Tata Steel's total income trimmed to Rs 63,131.08 crore from Rs 69,615.70 crore in January-March period of the financial year 2022-23.

The company's total expenses rose to Rs 59,918.15 crore from Rs 57,635.79 crore a year ago.

The board of the company also recommended a dividend of Rs 3.60 per equity share of Re 1 each to the shareholders for FY23, the filing said.

Tata Steel Europe Limited (TSE), a wholly-owned indirect subsidiary of the company, has assessed the potential impact of the economic downturn in Europe caused by external factors, including higher inflation, higher interest rates and supply-chain disruption triggered by the war in Ukraine on its future business outlook for the UK and Mainland Europe (MLE) value chains.

The board has considered reasonably possible scenarios to stress test the financial position of both the UK and MLE businesses, including the impact of lower steel margins against the annual plan and the mitigating actions the Group could take to limit any adverse consequences to liquidity in the annual impairment assessments.

Based on the assessment, the MLE business is expected to have adequate liquidity under all the reasonably possible scenarios considered. The outlook for Tata Steel UK Limited (TSUK"), a wholly-owned indirect subsidiary of TSE, however, is expected to be adversely impacted towards meeting its liquidity requirements and accordingly with respect to its ability to continue as a going concern.

In response to the challenging market and business conditions, TSUK continues to implement various measures aimed at improving its business performance and conserving cash including but not limited to ensuring adequate liquidity, if required, through available financing options, management of working capital, implementation of cost reduction measures and discussions with the UK government to seek adequate support for transition to green steel as part of its decarbonisation strategy.

The progress of discussions with the UK government is also being monitored closely given that based on the initial and subsequent discussions it remains uncertain whether adequate support for the decarbonisation strategy would be agreed.

Given the risks and challenges associated with the underlying market and business conditions, the uncommitted nature of available financing options and the uncertainty with respect to whether adequate government support would be agreed, there exists a material uncertainty surrounding the impact of such adversities on the financial situation of TSUK.

In a separate statement, the company said its net debt stands at Rs 67,810 crore.

Tata Steel CEO & MD T V Narendran said FY23 saw India crude steel production growing to around 19.9 million tonnes (MT) with a 65 per cent share of company's overall volumes. Deliveries were in line with production with domestic deliveries growing 11 per cent y-o-y and driving product mix improvement.

The quarter also saw strong momentum with deliveries growing by 9 per cent q-o-q to 5.15 MT. The company has multiple projects ongoing at various locations in India as Tata Steel works towards 40 MTPA by 2030, he said.

Company's ED & CFO Koushik Chatterjee said "Our consolidated revenues for the financial year were USD 30 billion. Revenues were broadly stable on y-o-y basis despite the heightened volatility in the operating environment. Consolidated EBITDA stood at Rs 32,698 crore, which translates to an EBITDA margin of 13 per cent and EBITDA per tonne of Rs 11,358."

"In Europe, margins were broadly similar on q-o-q basis as improvement in costs was offset by drop in revenues, in part due to delay in ramp up of cold mill at Ijmuiden. Cash flow from operations before interest stood at Rs 11,260 crore driven by favourable working capital movement."

During the quarter, the company's production was at 5.15 MT, up from 4.90 MT in January-March 2022, while sales rose to 5.15 MT over 5.12 MT a year ago

Tata Steel is among the top six steel producing companies in India.

Brokerage Outlook

Brokerage, Centrum, expect profitability remains higher than historical average; deleveraging on; reiterate BUY TSI’s profitability though is expected to fall further (Q4 EBITDA/t may fall by ~Rs4,700/t QoQ to ~Rs24,000) but should remain at elevated levels even in FY23 (FY23E EBITDA/t of Rs19,862). Centrum, Brokerage, retain BUY, with a revised target price of Rs1,586.

ESG and Sustainability

As global initiatives in promoting responsible business gathers momentum, Tata Steel stands proud for its social and environmental initiatives, not just in India, but in the World as well.

Tata Steel strides forward in this direction with renewed commitment by integrating its economic, environmental and social performance. Environmental issues include ensuring environmental sustainability, with particular emphasis on reduction of raw material consumption, energy consumption and water consumption, ambient air quality management, reduction in global warming, besides minimizing environmental impacts.