TATA STEEL (FSAR PROECT)

Q. 1. Assess Tata Steel with Porter's 5 forces model.

1. Threat of New Entrants: Low

The Steel Industry requires significant capital investment to set up manufacturing plants, acquire
technology, and meet environmental regulations. Due to its extensive operations, Tata Steel
enjoys economies of scale, which makes it challenging for new competitors to compete with
them. The industry also faces significant obstacles because of the specialized knowledge needed
and the stringent compliance rules and regulations which protect established players like Tata
Steel. Long term client or customer relationship and brand reputations also prevent new
competitors from entering the market.

2. Bargaining Power of Suppliers: Moderate

Tata Steel sources raw materials like iron, ore, coal, and other minerals which are essential to the
production of steel. They own its own mines for some of these resources such as iron ore, which
is vertically integrated, however the corporation may be subject to price volatility for other
minerals such as coking coal, if it depends on outside suppliers. Tata Steel has some negotiating
leverage because to its large supplier network capacity to handle procurement and ability to
obtain long term contracts. AS a result, this force is kept in moderate.

3. Bargaining Power of Buyers: High

In the steel industry, customers like automotive companies, construction firms and infrastructure
developers demand quality products at competitive prices. Since steel products are somewhat
standardized, buyers have the flexibility to switch suppliers if they find better terms elsewhere,
which gives them more bargaining power. Tata Steel mitigates this to some extent by offering
premium, high- quality products and services, coupled with strong customer relationship.

4. Threat of Substitutes: Moderate to High

Materials like aluminium, composites, and plastics can be used as steel substitutes in the
building and automobile industries. These substitutes are less heavy and occasionally provide
superior toughness or resistance to rust. Depending on the particular use case, there may be
some substitution, but Tata Steel's innovative high-strength and corrosion-resistant steel products
help it to stay competitive. However, because alternative materials are becoming more
advanced, the threat of substitutes is still moderate to high.

5. Industry Rivalry: High

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The steel industry is highly competitive, with players like ArcelorMittal, JSW Steel, and SAIL
(Steel Authority of India) constantly vying for market share. The industry operates on tight
margins due to overcapacity and price competition. Tata Steel maintains its edge by being one of
the lowest-cost producers globally, focusing on operational efficiency, vertical integration, and
premium product offerings. However, intense competition from domestic and international
players keeps the rivalry high.

Q. 2. SWOT Analysis of Tata Steel

Strengths:
1. Vertical Integration: Tata Steel has access to its own iron ore and coal mines which ensures
cost effective and steady raw material supply.
2. Global Presence: The company operation spans more than 50 countries, providing it with a
diverse market and reducing its reliance on any one economy.
3. Technological Innovation: Tata Steel makes significant investments in Research and
Development, which allows it to manufacture steel superior quality as well as cutting edge
solutions like lightweight, high strength steel.
4. Strong Brand Reputation: Tata Steel has been in business for more than a century and is a
valued supplier in numerous industries thanks to its solid reputation for quality and
dependability.

Weakness:
1. High Debt Levels: Due in part to its acquisition of Corus (now Tata Steel Europe), Tata Steel
has a significant debt load. It can be difficult to manage this debt while sustaining growth.
2. Dependence on Cyclical Industries: The company is dependent on sectors of the economy
that are prone to economic cycles, like construction and automobiles.
3. Operational Challenges in Europe: Tata Steel Europe has experienced difficulties with
profitability as a result of high operating costs, rising energy costs, and stringent environmental
laws

Opportunities:
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1. Infrastructure Growth in India: India offers a substantial opportunity for steel consumption
due to its emphasis on infrastructure development.
2. Sustainability Initiatives: Tata Steel is in a good position to benefit from the growing
emphasis on sustainability around the world by creating recyclable and environmentally
friendly steel products.
3. Product Diversification: Potential expansion possibilities for the company could include
diversifying into more specialized, value-added steel products for sectors like aerospace and
renewable energy.

Threats:

1. Global Steel Overcapacity: Overproduction in nations such as China may result in price
dumping, which would hurt Tata Steel's bottom line.
2. Environmental Regulations: Stringent environmental norms in Europe and increasing
regulations globally could raise operational costs for Tata Steel.
3. Economic Slowdowns: The demand for steel products may decline if important markets
contract, particularly those in the building and automobile industries.

Q. 3. Tata Steel’s Competitive Advantage

1. Vertical Integration and Raw Material Security:

Through its owned mines, Tata Steel is in control of its primary raw materials, including coal
and iron ore. Due to its substantial reduction in reliance on outside suppliers, reduced
production costs, and secure supply chain, vertical integration offers the business a distinct
cost advantage over rivals.
2. Low-Cost Production and Operational Efficiency:
The company is known for being one of the most cost-efficient steel producers globally. Its
focus on continuous improvement in operations, lean manufacturing, and adoption of
advanced technologies like automation and digitization allows it to produce steel at lower
costs while maintaining high-quality standards.
3. Innovation and Research & Development (R&D):
Tata Steel prioritizes innovation and makes constant investments in R&D to create cutting-
edge steel products. The company supplies a broad variety of corrosion-resistant, lightweight,
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and high-strength steels to the infrastructure, building, and automotive industries. Tata Steel's
emphasis on innovation allows it to maintain a competitive edge in terms of product offers.
4. Sustainability and Green Steel Initiatives:
Tata Steel’s proactive approach to sustainability gives it a competitive edge in an industry that
is increasingly focusing on reducing carbon emissions. The company is leading initiatives in
green steel production, including carbon capture and recycling technologies, positioning it as
a forward-thinking player in the evolving steel market.
5. Diversified Product Portfolio:
The company’s product range extends from basic steel to highly specialized, value-added
steel products for niche markets like aerospace, automotive, and renewable energy. This
diversified portfolio allows Tata Steel to tap into different customer segments and industry
needs, driving higher margins and reducing reliance on commodity steel prices.

Q. 4. Future Benefits and Prospects for Tata Steel.

1. Growing Demand from India’s Infrastructure Development:

India’s aggressive push toward infrastructure development through initiatives like the
National Infrastructure Pipeline (NIP) and the Smart Cities Mission will drive substantial
demand for steel in the coming years. As a key player in the Indian market, Tata Steel stands
to benefit significantly from the rising consumption of steel for roads, bridges, railways,
airports, and urban infrastructure projects.

2. Leadership in Green Steel and Sustainability:

Tata Steel is at the forefront of the worldwide movement towards sustainability due to its
investments in carbon-neutral technologies and green steel production. The company will
have a competitive advantage thanks to its efforts on carbon capture, energy-efficient
procedures, and environmentally friendly product improvements. These efforts will also be in
line with future regulatory norms and draw in environmentally concerned consumers.

3. Expansion into Value-Added Products:

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Tata Steel is actively increasing its focus on producing value-added steel products, which
offer higher margins compared to commodity-grade steel. These specialized products—used
in industries like automotive, construction, aerospace, and renewable energy—are expected to
contribute to the company's long-term profitability and growth by catering to more
sophisticated market needs.

4. Growing Global Market for Steel in Emerging Economies:

Steel consumption is rising as a result of the fast industrialization and urbanization of

emerging nations in Asia and Africa. Tata Steel has a strategic advantage to enter these
expanding markets because of its long-standing presence in these areas. The company's future
growth will be greatly influenced by its capacity to meet both local and global demand.

5. Continued Digital Transformation and Operational Efficiency:

Tata Steel is adopting Industry 4.0 technologies, including IoT (Internet of Things), AI
(Artificial Intelligence), and robotics, to improve operational efficiency and enhance product
quality. These digital initiatives not only lower costs but also improve customer satisfaction
by offering customized, precision-engineered steel products. This transformation will drive
future growth and profitability.

6. Deleveraging and Financial Strengthening:

Tata Steel has been concentrating on increasing its cash flow and selling non-core businesses
in order to lower its debt load. By strengthening its financial position, the company will be
able to deploy resources toward growth possibilities more effectively thanks to its
deleveraging plan. The company will be more robust to industry volatility and economic
downturns with a stronger balance sheet.

Q. 5. PESTEL for Tata Steel.

1. Political Factors
Government infrastructure initiatives:
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Government programs that support local manufacturing and infrastructure development, such
"Made in India" and India's National Infrastructure Pipeline (NIP), are advantageous to Tata
Steel. Steel is in high demand in the defence, transit, and construction industries due to these
policies.
Regulatory Challenges:
Political instability in some of Tata Steel’s international markets such as the UK and the EU
can impact operations. Global trade policies, tariffs and anti-dumping measures, particularly
from countries like the US and China, affect export opportunities.
Environmental Regulations:
Government worldwide including India and the EU, are enforcing stricter environmental
regulations demanding companies reduce emissions and adopt sustainable practices. Tata steel
faces increasing pressure to comply with these regulations, especially in regions like Europe.

2. Economic factors:
1. Global Steel Demand:
Tata Steel’s revenue is heavily influenced by global economic trends, especially in
industries like construction, automotive, and manufacturing. Economic slowdowns,
particularly in developed markets, could reduce demand for steel, while growth in
emerging markets like India and southeast Asia presents significant opportunities.
2. Currency Fluctuations:
Tata Steel is subject to currency concerns due to its global operations, particularly in
regions such as the US and Europe. Exchange rate fluctuations can have an impact on
pricing strategies and profit margins.
3. Cost of Raw Materials:
The prices of iron ore, coal and other raw materials are critical to Tata Steel’s cost
structure. Economic Shifts that impact the global supply and demand for these materials
can influence production costs and profitability. However, Tata Steel mitigates this risk
through vertical integration, especially in iron ore.
3. Social factors:
1. Sustainability and Corporate Social Responsibility (CSR):
Tata Steel’s strong commitment to CSR and community development enhances its brand
image. It invests in education, healthcare, and rural development, particularly in india,
which positively impacts its relationships with stakeholders.
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2. Urbanization and Population Growth:

Demand for steel is driven by population growth and rising urbanization, particularly in India,
which affects infrastructure, transportation, and housing. As cities grow and prosper, Tata
Steel stands to gain from increased steel consumption.

3. Changing Consumer Preferences:

Consumer interest for environmentally friendly items is rising. Tata steel’s commitment to
environmentally friendly manufacturing methods and sustainable practices follows this
trend, attracting investors and consumers that prioritize sustainability.

4. Technological factors:
1. Sustainability Technologies:
Tata Steel is striving toward producing green steel by investigating carbon capture,
utilization, and storage (CCUS) technology. With the aid of these technical developments,
the business will be able to comply with environmental laws and provide customers who
are interested in eco-friendly goods.
2. Industry 4.0 and Digital Transformation:
Tata Steel is adopting digital technologies to optimize production, cut costs, and increase
operational efficiency. These technologies include automation, big data analytics, IoT
(Internet of Things), and artificial intelligence (AI). By investing in these technologies, it
will be able to produce products that are more responsive to changes in the market.
5. Environmental factors:
1. Climate Change:
The operations and supply chain Tata Steel may be affected by extreme weather condition
linked to climate change. Mining and transportation maybe impacted by floods or
droughts in the areas where raw materials are sourced.
2. Resource Scarcity and Efficiency:
Tata Steel is focused on resources efficiency, including recycling and minimizing waste to
address growing environmental concerns. The circular economy approach- recycling scrap
steel to produce new steel -is a key strategy for reducing environmental impact and
meeting global sustainability goals.
6. Legal factors:
1. Environmental compliance:
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Tata Steel must comply with stringent environmental laws, especially in Europe, where
regulations regarding emissions, waste management, and sustainable production practices
are strict. Non-compliance could lead to fines, legal challenges, or the need for costly
technological upgrades.
2. Trade Regulations and Tariffs:
The global steel industry is subject to fluctuating tariffs and trade restrictions. Changes in
trade agreements, anti-dumping duties, and protectionist measures in various countries can
impact Tata Steel’s export and import strategies. Navigating these legal challenges is
critical for the company’s international operations.
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Interpretation of ratios:

Liquidity Ratio
Liquidity Ratio

FY20 FY21 FY22 FY23 FY24

20009.1 31289.5 33949.5 36765.1
CA 9 29274.4 7 2 4
53664.8
CL 30871.3 30067.6 3 46437.3 50640.4
Current Ratio = CA/CL 0.648 0.974 0.583 0.731 0.726

16416.8 11346.6 13153.9 12217.9

CA-Inventories 9292.53 9 3 6 4
53664.8
CL 30871.3 30067.6 3 46437.3 50640.4
Quick Ratio = CA-
Inventories/CL 0.301 0.546 0.211 0.283 0.241

Cash & Cash equivalent 1226.87 2396.9 2855.29 1077.33 5954.68

53664.8
CL 30871.3 30067.6 3 46437.3 50640.4
Cash Ratio = C&CE/CL 0.040 0.080 0.053 0.023 0.118

Let's quickly review the meaning of each ratio before getting into the year-by-year
interpretation:
 Current Ratio (CR): This ratio measures a company's ability to pay off its short-term
liabilities with its current assets. A higher CR generally indicates better liquidity.
 Quick Ratio (QR): Also known as the acid-test ratio, this ratio excludes inventories
from current assets. It provides a more conservative view of liquidity, as inventories
may not be easily convertible to cash.
 Cash Ratio: This ratio measures the proportion of short-term assets that are
immediately available as cash. A higher cash ratio suggests a stronger liquidity
position.

The enhanced liquidity position of the borrowing company was demonstrated by the high
increase of the CR from 0.648 in 2020 to 0.974 in 2021; however, loss in solvents was
evidenced by its drop to 0.583 in the year 2022.
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Thereafter, it advanced to 0.731 in 2023 and then noticeably reduced to 0.726 in 2024,
indicating some improvement but still below the desired ceiling of 1.0.

Profitability Ratio

Profitability Ratio

20 21 22 23 24
profit margin = profit/net sales
profit 6743.8 17077.97 33011.18 15495.11 4807.4
net
sales 58815.57 82828.16 127681.4 127466.52 139197.6
Profit Margin 11% 21% 26% 12% 3%

return on assests = PAT/TA 20 21 22 23 24

PAT 6743.8 17077.97 33011.18 15495.11 4807.4
150392.5 221986.2
TA 6 180490.93 2 23379.142 245634.06
Return On Assets 4% 9% 15% 66% 2%

return on equity = PAT/total net worth 20 21 22 23 24

PAT 6743.8 17077.97 33011.18 15495.11 4807.4
125433.7
total net worth 74563.12 94406.34 6 134797.51 137693.65
Return on Equity 9% 18% 26% 11% 3%

EARNING PER SHARE = PAT/[Link]

SHARE OUTSTANDING 20 21 22 23 24
PAT 6743.8 17077.97 33011.18 15495.11 4807.4
[Link] SHARE OUTSTANDING
EPS 57..11 144.99 270.13 12.67 3.85

To interpret the profitability ratios year-wise from the data, we have analyse
1. Profit Margin = Profit/Net Sales
2. Return on Assets = PAT /Total Asset
3. Return on Equity = PAT/Total Net Worth
4. EPS = Pat/ NO, of Share Outstanding.
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Profit Margin
The Profit Margin in the financial year 2020 was 11% and it grew dramatically to 26% in financial year
2020 which shows improved efficiency in turning sales into profit. In financial year 2023 and in 2024,
there was a notable drop, indicating possible problem with pricing or cost control.

Return on Asset

The ROA improved progressively over the years until 2023 where it peaked at 66% which is indicative
of an exceptional asset to profit effectiveness. The drastic dip in the year 2024 indicates either a
severe decline in earned income or in the utilization of assets.

Earnings Per Share (EPS)

Between the years 2020 and 2022 both the shares of the firm and the earnings per share rose
significantly and reached 57.11 and 270.13 respectively thereby indicating how profitable the firm
was per share. However, the sharp decline in 2023 and 2024 raises concerns about the company’s
earnings capacity.

Overall Interpretation:

Based on the profitability metrics of the company, it can be stated that there is a positive trend
lasting until the 2022 year which demonstrates a phase of improved financial performance of the
company. Meanwhile, all metrics indicate a sharp drop in the following years making an impression
that the company’s profitability has gone down.

Possible Reason for the Decline:

• Economic Issues: Situations like economic recessions and specific challenges faced by related
industries could be the external determinants due to which the company’s performance could not be
favourable.

• Operational Challenges: Failures such as inefficiency, cost overruns and management errors can
also account for the downward shift in earnings resulting from these internal factors.