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Though TSG's performance in the first half of fiscal 2009-10 was disappointing: the company believed that the demand for steel products was reviving. In the second quarter of financial year 2009-10, TSO reported higher deliveries of 6.22 million tonnes as compared to 5.34 million tonnes in the first quarter 0[2009·10, a growth of 17%. The company expected to utilize 100% capacity by the end of' March 2010. Murhurarnan said, "In October, the capacity utilization had touched 80%. It should be 85% by the end of November and 100 per cent by the end of this financial year, Demand is coming back.,,26

The operations of Tala Steel had been good since mid-200S backed by growth in rural construction and the auto and infrastructure sectors, Automobiles had been registering healthy sales since April 2008, helping in the revival of the steel sector to an extent. The Indian government's expenditure on infrastructure and rural development also favored the domestic steel sector. Banks had aggressively slashed lending rates to increase the credit off-take, which had helped the real estate and the auto sectors in India in 2009. Analysts estimated that steel consumption in India would grow by 5-6% in 2009 while production would grow by 4-5%. Tara Steel had expanded its production capacities by 20% in the fiscal 2008~09. It planned to increase its market share with the expanded capacities.

However, the global demand For steel, especially the demand from rbe developed nations, remained under pressure. Even though developed nations had deployed high amounts as stimulus packages, the scope for infrastructure development which required large volumes of steel, was low as they already had good infrastructure. The focus of the governments there was to increase consumption and employment. The auto sector in the US and the UK were ailing because of low demand and union related issues. Moreover, the auto companies in developed nations were facing challenges of high debts and had to cut down production significantly.

However, TSG was optimistic about the future. It stated that the global steel demand was reviving as companies had started building inventories. However, it stated that it would take several years lor the consumption to reach the peak levels of2007. Moreover, analysts had revised their estimate of a decline in demand for steel in the calendar year 2009 to 8% in October 2009 from their previous estimate of a decline of 15% in April 2009.

Going forward, industry analysts had mixed opinions about the future performance of TSG. According to Abhijeet Naik and Alok Rawat, Analysts at CLSA27 Asia-Pacific markets, "Tata Steel's aggressive cost-cutting measures in Europe will ensure that COTUS will emerge from the current downturn with a far-improved cost structure. While the restructuring charges will keep FY I0 profits under pressure, we see a sharp profit recovery in FY II and FY 12.,,28

26 ~I~~f10~~~elSees Full Capacity Utilization at Corus on Demand Revival," http://.steelguru.com, November

27 Founded in [986, CLSA is a leading brokerage and investment group in Asia. It is headquartered in Hong Kong.

28 Sarish John, "Tata Steel Profit Falls; Revamp of Corus Working," www.livemillt.com.July 30, 2009.

TATA STEEL'S ACQUISITION OF CORUS (8)

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Exhibit I

Quarterly Performance of Tata Steel Group

o11 Rs. Million) Quarter ended June 30 2009 2008

Net Sales/Income from Operations 231805.1 433745.2

Other Operating Income 11i8.0 1216.5

Total Income 232923.1 434961.7

Total Expenditure 244111.5 372655.9

Operating Profit (11188.4) 62305.8

Other Income 2039.0 526.9

Operating Profit before Net Finance (91494) 62832.7 Charges, Exceptional Items and tax

Net Financing Charges 8818.9 8242.7

ProfiV(Loss) before exceptional items (17968.3) 54590.0

Exceptional Items (2187.6) (6513.9)

Profit Before Tax (20155.9) 48076.1

Tax 2229.4 8929.9

Net Profit (22086.8) 39009.0

Source: www.tafos/eel.com.

Exhibit U Top Ten Steel Producing Companies in the World

Rank Production

2008 2007 Company 2008 2007

I I ArcelorMittal 101.6 116.4

2 2 Nippon Steel 37.5 35.7

3 6 Baosteel Group 35.4 28.6

4 4 Hebei Steel Group 33.3 31.1

3 JFE 32.4 34

5 Posco 31.7 31.1

II Wuhan Steel Group 27.7 20.2

7 Tata Steel 24.4 26.5

8 Shandong Steel group 23.8

23.8 9 8

10 US Steel 23.2 21.5

10 Source: )1lWW. worfdslee/.org.

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Exhibit JI]

Tata Steel Group - Income Statement (2007-09) (In Rs. Million)

Financial Year Ending 2009 2008 2007

Sales of products and services 1,499,849.4 1,340,867.7 2,74,372.9

Less: Excise DUly (26,556.8) (25,531.4) (22,249.1)

1,473,292.6 1,315,336.3 2,52,123.8

Other Income 2,656.7 4,758.6 4,380.7

1,475,949.3 1,320,094.9 2,56,504.5

Manufacturing & other Expenses 1,299,846.6 1,142,989.6 1,81,158.3

Depreciation 42,653.9 41,369.5 10,109.8

1,342,500.5 1,184,359.1 19,126.81

Less-Expenditure(other then interest) transferred 7,830.7 5,477.6 3,536.0 to capital and other accounts

1,33,466.98 1,178,881.5 1,87,732.1

Net Finance Charges 32,901.8 40,854.1 4,111.9

Total Expenditure 1,367,571.6 1,219,735.6 1,91,844.0

Profit Before taxes and exceptional items 1,08,377.7 1,00,359.3 64,660.5

Employee Separation Compensation . (1,530.3) Contribution for Sports Infrastructure . (1,500.0) .

Exchange Gain/Loss . 5,782.9 .-. Actuarial Gainl (Loss) on funds for employee 59,068.4 benefits

Restructuring, impairment and disposals (40,945.3)

Profit Before Taxes 67,432.4 1,63,710.6 63,130.2 Taxes 18,940.0 40,493.0 21,474.1 Profit after taxes 48,492.4 1,23,217.6 41,656.1 Source. Tata Steel Annual Reports, 2008-09.

_______-------------------------T::A~T~A s~T~EE::l::'sACQUISITIONOfCORUs(8)

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Exhibit IV

Tata Steel Group - Balance Sbeet (2007-09)

n I IOn

Financial Year Ending 2009 2008 2007 Sources of Funds

Total Share Capital 62,027.8 62,026.3 7,270.6

Reserves & Surplus 2,15,115.0 2,79,713.5 1,38,951.4

Networth 2,77,142.8 3,41,739.8 1,46,222.0

Warrants issued by H subsidiary company - - 174.6 Minority interest - - 5,983.9

Secured Loans 3,43,292.6 3,54,149.9 49,612.3

Unsecured Loans 2,55,712.4 1,82,097.5 1,99,643.0

Totol Debt 5,99,005.0 5,36,247.4 2,49,255.3

Deferred Tax Liobility 17,855.5 24,646.8 7,928.7

Provision for Employee Separation 10,424.1 10,800.5 11,183.0 Compensation

Total Liabilities 9,13,550.8 9,21,936.1 4,20,747.5

Application of Funds

Gross Block 1,083,887.4 1,051,287.1 2,34, I01.5

Less-Impainnent 32,250.7 32,235.0 1,004.1

Less- Depreciation 5,98,580.9 5,99,389.2 90,892.1

Net Block 4,53,055.8 4,19,662.9 1,42,205.3

Investments 64,111.0 33,674.3 1,64,975.0

Foreign currency monetary item translation 4,716.6 -

difference account

Goodwill on consolidation 1,53,649.2 1,80,499.6 920.7

Purchased Goodwill 1,275.9

761.2 102.6 69.3 Deferred tax assets

18,527.1 16,549.7 6,929.7 Stores and spare parts

1,98,159.9 2,14,093.7 3,1951.6 Stock-in-trade

1,30,316.3 1,86,978.2 16,865.3 Sundry Debtors

• 68.1 89.6 11.6 Interest accrued on investments

(/ Rs Mil' )

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Cash and Bank Balance 61,483.6 42,318.6 1,08,879.6

Total Current Assets 4,08,555.0 4,60,029.8 1,64,637.8

Loans and Advances 1,30,157.3 1,54,598.1 19,803.4

Total CA, Loans & Advances 5,38,712.3 6,14,627.9 1,84,441.2

Current Liabilities 2,30,933.0 2,63,607.4 54,441.9

Provisions 71,577.1 64,580.1 20,795.7

Total CL & Provisions 3,02,510.1 3,28,187.5 75,237.6

Net Current Assets 2,36,202,2 2,86,440,4 1,09,203.6

Miscellaneous Expenses 1,054.8 1,556.3 2,097.7

Total Assets 9,13,550.8 9,21,936.1 4,20,747.5 Source: Tata Steel Annual Reports, 2008-09.

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~ fY\~ 1M

400

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~ f200 - - -- - 145 VV·

JanOS Nau08 SenOS Jan09 Mau09 SeD09

Exhibit V

Tata Steel's Stock Price Chart (November 2007 - October 2009)

Source. hlfp./lfinance.yahoo.com

X·Axis- Time Period Y-Axis- Price in Rs

____ _____-------------------------::'TA~T~A.::ST~E~El~'S!.A~CQ~U~IS~11l~O~N~O~f~CORUSIB)

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