EVA

TATA SSL & TATA STEEL

-Megha Harbhajanka
-Aarushi Kapur
-Vishal Dhaduk
TATA SSL Background
• Incorporated in May '58 Special Steels (SSL)
• It was a subsidiary of Tata Steel (TISCO)
• It was the largest manufacturer of steel wires in the
organized sector
• TATA SSL had over 30% market share and was the largest
exporter of steel wires from India.
• The company manufactured high carbon steel wires, steel
wire rods, mild and special billets/ingots, CR Strips, high
precision Hot Rolled profiles etc etc
TATA STEEL Background
 Tata Steel is the world's 6th largest steel producing company.

 It is a Asia's 1st and as well as India's largest integrated steel

company in private sector with operations in 24 countries and
commercial presence in over 50 countries.

 Tata Steel's operations are grouped under six Strategic Business

Units include

◦ Bearings Division
◦ Ferro Alloys and Minerals Division
◦ Agrico Division
◦ Tata Growth Shop (TGS)
◦ Tubes Division and
◦ Wire Division
About the Deal

 The Tata Iron & Steel Co. Ltd. (Tata Steel)

made an offer for the purchase of 55.24%
Equity Shares of TATA SSL.

 The objective of the offer is to enable Tata Steel

to provide or procure substantially the
resources required for restructuring of Tata
SSL's operations in order to help the
Company to achieve sustainable profit
growth.
About the Deal
 Further along with its subsidairies it increased
its stake to 83.03% i.e 2,63,19,751 equity
shares.

 Again on 28 october 2001 it made a cash open

offer increasing its stake to 92.92% in TATA SSL.

 TATA STEEL made the third and final open offer

and raised its stake to 94.72%.

 TATA SSL merged with TATA STEEL with a swap

ratio of 5:1 on 22nd april 2003.
SYNERGY for TATA SSL & TATA
STEEL
 Economies of scale

 Higher Growth in new and existing markets

 Greater Pricing Power

 Combination of different functional strengths

 Debt Capacity

 Tax benefits

 Diversification
RATIOS
 Revenue Trend

  Pre-Tata SSL   Pre-Tata Steel   Post

  2000 2001 2002   2000 2001 2002   2003 2004 2005 2006
Total Rev 583.43 581.48 573.78  6315.26 7188.18 6993.83  9016.93 11116.1 14833.7 15492.88

    PRE-Tata SSL   PRE-Tata Steel   Post

    200003 200103 200203   200003 200103 200203   200303 200403 200503 200603
Raw Materials   297.42 304.05 303.06   1155.38 1247.24 1400.61   1749.97 2245.42 3020.42 3024.38
Power & Fuel Cost   88.65 95.03 91.95   636.75 688.45 719.18   787.75 724.62 778.3 897.57
Employee Cost   57.24 57.92 58.3   1114.05 1121.08 1322.07   1444.96 1575.71 1403.84 1397.39
Total operating expenses   500.55 512.78 511.26   4006.22 4265.88 4510.42   5300.04 6095.67 7150.56 7410.01
Selling and Administration Expenses   15.61 16.45 15.38   797.32 819.84 817.7   972.29 1055.47 1304.05 1373.71
General Ratios
 Operating Efficiency

 Total Asset Turnover = Net Sales/Total Asset

(Asset turnover measures a firm's efficiency at using its assets in generating sales)

 Net Fixed Asset Turnover = Net Sales/Net Block

(How effective the investment in the fixed assets was)

 Equity Turnover = PAT/(Share cap + R&S)

(Determine efficiency of using stockholder's equity to generate revenue)

 Debt/Equity ratio = L.T. Debt/( Net worth + DTL)

Operating Efficiency Ratios
 Operating Profitability
 Gross Profit Margin = Gross Profit/Net Sales
(Assess a firm's financial health)

 Operating Profit Margin = EBIT(1-T)/Net Sales

(Company's revenue is left over after paying for variable costs)

 Net Profit Margin = PAT/Net Sales

(Used for internal comparison)

 ROC = EBIT(1-t)/(Netwoth+L.T. Debt+DTL)

 ROE = PAT/Shareholders Equity

(How much profit a company generates with the money shareholders have invested)
Operating Profitability Ratios
EVA
  EVA
  2000 2001 2002 2003 2004 2005 2006
Pre-Tata SSL -2.57908 -19.2061 -22.0833        
Pre-Tata Steel -178.927 194.9375 -216.914        
Post 0 0 0 490.4679 866.6348 1974.945 1863.207