6 February 2015
3QFY15 Results Update | Sector:
Metals
Tata Steel
BSE SENSEX
28,851
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD
b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val(INR M)/Vol ‘000
S&P CNX
8,712
TATA IN
971.2
368.5/6.0
579/332
-13/-45/-39
297/241
68.7
CMP: INR369
TP: INR424 (+15%)
Buy
Steel price and iron ore cost paining; TSE improves; TP cut 27%
The operating performance was badly hit by closure of iron ore mines and steel
prices correction at India business (TSI), while Europe (TSE) performed better-
than-expected on lagged benefit of expanded spread, reduction in operating cost
and product mix improvement.
Consolidated EBITDA declined 21% QoQ to INR30.8b (v/s est. of INR34.9b) as both
volume and realization declined 3% each, while costs increased on account of iron
ore purchases in India.
TSI EBITDA declined 36% QoQ to INR20b. South East Asia and intersegment (SEA)
EBITDA losses widened 50% to INR2.1b. TSI EBITDA/t declined 36% QoQ to
USD151/t, while TSE EBITDA/t increased 40% QoQ to USD64/t. TSE sales declined
1% QoQ to 3.3mt and realization declined 4% QoQ to USD950/t.
Most of the iron ore mines (except Khondbond) have started operations latest by
Jan 1, 2015. Resultantly, the cost of iron is expected to decline gradually over the
next few quarters as 2.5mt of outstanding purchased ore inventories get depleted.
Indian steel demand remains weak in a seasonally strong quarter. Steel realization
is expected to decline by INR2,000/t (with further risk) on cheaper imports. TSI
EBITDA/t is expected to improve only marginally over the next two to three
quarters as most of the benefits of lower cost captive iron ore will be diluted by
falling realization.
Europe demand is expected to improve modestly in 2015, but margins are under
pressure from cheaper Chinese and Russian imports. Weaker Euro, lower oil prices
and product mix improvement are the key positives.
We have reduced FY16E EBITDA by 11% to INR174b on weaker steel prices. Target
price is cut by 27% to INR424/share based on FY16E SOTP (15% upside). The
3mtpa KPO is likely to drive volume growth in FY17. Maintain
Buy.
Free float (%)
Financials & Valuation (INR Billion)
Y/E MAR
Sales
EBITDA
Adj. PAT
EPS (INR)
EPS Gr(%)
BV/Sh. (INR)
RoE (%)
P/E (x)
P/BV
EV/EBITDA(x)
2015E 2016E 2017E
1,421
151
19
19.7
-44.5
321
6.8
18.7
1.1
7.5
1,396
174
43
44.4
125.4
356
13.1
8.3
1.0
6.7
1,496
230
77
79.5
79.1
425
20.4
4.6
0.9
5.1
Estimate change
TP change
Rating change
20%
27%
Sanjay Jain
(SanjayJain@MotilalOswal.com); +91 22 3982 5412
Dhruv Muchhal
(Dhruv.Muchhal@MotilalOswal.com); +91 22 3027 8033
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.

Tata Steel
3QFY15 result review
TSI margins squeezed between higher iron ore cost and steel price fall
Tata Steel 3Q consolidated EBITDA came at INR30.7b (-21% QoQ, -23% YoY), a miss
of 12% to our estimate. Sharp decline in India business margins, owing to 3
rd
party
raw material sourcing and drop in blended realization, and sharp drop in volumes at
other businesses (NatSteel and Thailand, down 16% QoQ combined) led to the miss
at EBITDA. Europe business EBITDA was well ahead of our estimate – EBITDA/t of
USD64 v/s our estimate of USD41 and 2QFY15 of USD46 – on back of slightly better
volumes (1% beat at 3.3mt) and lower raw material and other operating costs. India
business steel EBITDA/t was down ~INR5,000 QoQ to ~INR9,293 (USD151), the
lowest over the past 5 years. Weak performance in India was also on account of
~INR3,900/t decline in blended steel realization (pure steel realization was down
~INR2,500/t) v/s our estimate of ~INR1,700 QoQ decline.
Consolidated steel sales declined 3% QoQ to 6.3mt but India business sales were up
1% QoQ (to 2.1mt) which was encouraging considering weak domestic demand and
imports pressure. Adj. PAT was down 73% QoQ (69% YoY) to INR1.5b. Net debt at
the end of 3QFY15 stood at INR735b.
TSI EBITDA/t down ~INR5,000 to INR9,293; a 5 year low
Net sales down 8% QoQ:
Net sales declined 8% QoQ (-2% YoY) to INR98.9b,
coming 4% below our estimate. Sharp fall in blended net steel business
realization of 8% QoQ (and 5% below our estimate) was partly offset by 1% QoQ
growth in volume (to 2.12mt), drove the QoQ decline in net sales.
Blended steel business realization drop by INR3,900/t QoQ:
Although blended
steel division realization shows a decline of 8% QoQ (~INR3,900/t), adjusted for
by-product sales and other sales, pure steel division realization was down by
INR2,500/t QoQ. This was still steeper than our estimate of ~INR1,700/t decline.
Ferro alloy division sales were weak as expected.
EBITDA/t at 5 year low:
Sharp rise in raw material cost (due to 3
rd
party iron ore
sourcing) led to higher than expected increase in cost of production. Resultantly,
steel division EBITDA/t was down from INR14,300 in 2QFY15 to ~INR9,300 and
below our estimate of ~INR11,800. This was the worst EBITDA/t for Tata Steel
India over the last 5 years.
EBITDA down 36% QoQ:
EBITDA was down 36% QoQ (-33% YoY) to INR19.8b
with lower ferro alloy division profitability (EBIT loss of INR199m against profit
of INR557m in 2Q) adding to weak steel business EBITDA.
Adjusted PAT was down 44% QoQ (-42% YoY) to INR8.8b as against our estimate
of INR12.5b. Interest cost and depreciation was down by 5%/4% to
INR4.6b/INR4.5b respectively.
Tata Steel has spent INR198b on Kalinganagar project (KPO) by Q3FY15 with
INR9b additional spend in the quarter. Target for commissioning by 1QFY16
remains unchanged although there are still few lose ends which may lead to
delays.
6 February 2015
2

Tata Steel
Exhibit 1: Quarterly performance (Standalone)
Y/E March
1Q
Steel Production ('000
tons)
Change (YoY %)
Steel Sales ('000 tons)
Avg Seg.Realn. (INR/tss)
Net Sales
EBITDA
(% of Net Sales)
Steel EBITDA(INR/tss)
Steel EBITDA(USD/tss)
Interest
Depreciation
Other Income
PBT (after EO Inc.)
Total Tax
% Tax
Reported PAT
Adjusted PAT
2,145
23.3
2,005
44,719
94,554
28,343
30.0
13,493
241
4,664
4,596
1,442
20,525
6,964
33.9
13,561
13,561
FY14
2Q
3Q
4Q
1Q
FY15
2Q
FY14
3Q
4QE
INR million
FY15E
FY15 vs Est
3QE (%)
2,206
2,150
2,430
18.0
3.9
7.4
2,038
2,066
2,407
44,742 45,011 46,966
99,210 101,434 121,912
29,379 29,359 41,088
29.6
28.9
33.7
13,284 13,010 15,920
214
210
258
4,366
4,529
4,646
5,510
4,565
4,616
3,257
2,648
530
22,760 22,913 30,937
7,173
7,726 11,151
31.5
33.7
36.0
15,587 15,188 19,786
15,587 15,188 21,204
2,250
2,213 2,221
2,481
8,931
9,165 2,221
4.9
0.3
3.3
2.1
12.5
2.6
3.3
2,100
2,110 2,129
2,387
8,516
8,726 2,129
47,462 49,233 45,337 43,706 45,430 46,344 47,509
-5
104,683 107,851 98,968 109,108 417,110 420,609 103,432
-4
32,559 30,941 19,799 25,109 128,169 108,408 25,914
-24
31.1
28.7
20.0
23.0
30.7
25.8
25.1 -20
14,899 14,300 9,293
9,961 14,134 12,156 11,835 -21
249
236
151
161
234
199
192
-21
4,923
4,888 4,624
4,671 18,206 19,106 4,937
-6
4,933
4,746 4,573
4,619 19,287 18,870 4,793
-5
1,435
2,624 1,083
532
7,876
5,674 2,661 -59
32,017 33,106 11,685 16,352 97,135 93,160 18,845
-38
9,337
8,342 2,878
5,534 33,013 26,092 6,378 -55
29.2
25.2
24.6
33.8
34.0
28.0
33.8 -27
22,680 24,764 8,806 10,818 64,122 67,068 12,468
-29
14,800 15,589 8,806 10,818 65,540 50,014 12,468
-29
Source: MOSL, Company
Europe: EBITDA/t up USD18 QoQ to USD64 – best since FY13
Net sale realization was weal as expected; down 4.3% QoQ to USD950/t. Sales
volumes were slightly ahead of our estimate, but down 1% QoQ (+3.8% YoY) to
3.3mt.
EBITDA/t rose sharply to USD64 from USD46 in 2QFY15 and USD43 in 3QFY14 on
back of lower raw material and other operating cost.
EBITDA rose 41% QoQ (52% YoY) to INR13.0b, coming 56% ahead of our
estimate.
INR million
1Q
3,700
-1.1
3,200
1.9
1,085
11.8
207,410
-14.9
9,950
4.8
52
FY15
FY14
FY15E
FY15 vs Est
2Q
3Q
4QE
3QE
(%)
3,820
3,740
3,750 15,550 15,010
3,384
11
-1.0
-4.3
-7.2
15.2
-3.5
-13.4
3,360
3,310
3,641 13,860 13,511
3,286
1
-2.9
3.8
-10.5
6.0
-2.5
3.0 25.4
992
950
916
1,011
983
955
-1
-8.5
-4.3
-3.6
-7.8
-2.8
-3.8
202,020 193,990 206,676 846,660 810,096 193,553
0
-2.6
-4.0
6.5
8.5
-4.3
-4.2 -5.2
9,290 13,080 13,881 30,080 46,201
8,377
56
4.6
6.7
6.7
3.6
5.7
4.3
46
64
61
36
56
41
55
Source: MOSL, Company
Exhibit 2: Europe business quarterly performance
Y/E March
1Q
Production (000 tons)
3,740
Change (YoY %)
5.9
Sales (000 tons)
3,140
Change (YoY %)
-2.2
Avg. Realn. (USD/t)
1,050
Change (QoQ %)
1.7
Net Sales
184,320
Change (QoQ %)
-3.8
EBITDA
7,770
As % of Net Sales
4.2
Steel EBITDA(USD/tss)
44
FY14
2Q
3Q
4Q
3,860
3,910
4,040
15.6
25.7
14.7
3,460
3,190
4,070
1.2
5.6
19.0
984
1,047
970
-6.3
6.4
-7.3
211,490 207,090 243,760
14.7
-2.1
17.7
5,540
8,600
8,170
2.6
4.2
3.4
26
43
33
Other businesses: Volume down 16% QoQ; Losses increase
Other business performance was much weaker than expected. EBITDA/t was at a
loss of USD40, increasing from USD22 in 2Q. Sales volume was down by 16% QoQ
(23% YoY) to 861 kt, miss of 24% to our estimate. Political turmoil in Thailand and
impact of competitive steel exports by China impacted volumes. With scrap prices
correcting over the last couple of weeks, we expect EBITDA to improve moving
ahead.
6 February 2015
3

Tata Steel
Exhibit 3: Other subsidiaries quarterly performance
Y/E March
Sales (000 tons)
Realization (USD/t)
Net Sales
EBITDA
EBITDA (USD/t)
1Q
935
941
49,174
767
15
FY14
2Q
3Q
982
1,124
914
844
55,749 58,834
2,134
2,107
35
30
4Q
1,143
831
58,608
853
12
1Q
1,160
753
52,180
217
3
FY15
2Q
3Q
1,030
861
767
816
47,900 43,375
-1,403 -2,105
-22
-40
FY14
4QE
950
787
46,371
-417
-7
4,184
880
222,365
5,861
23
INR million
FY15 vs Est
3QE
(%)
4,001 1,135
-24
778
757
8
189,825 53,033
-18
-3,709
640 -429
-15
9 -534
Source: MOSL, Company
FY15E
Management’s Commentary is bearish for Indian business
Mr T V Narendran, Managing Director of Tata Steel India and South East Asia, said:
“Indian steel demand remained subdued during the quarter and domestic steel
prices witnessed further deterioration due to the continued softening of global steel
prices coupled with significant imports from China and Russia. Despite this, Tata
Steel registered marginally higher deliveries over the previous quarter as our
continued investment in our customers, markets and product mix yielded dividends.
The fall in realisations coupled with the disruptions in our captive mining operations
adversely affected our profitability during the quarter.
We hope the government continues its thrust on reforms and takes proactive steps
to stimulate economic growth and boost the investment cycle leading to revival of
the Indian steel industry.
South East Asian performance continues to be impacted by increased exports from
China but was partly compensated by improvement in spreads.
We are working towards commissioning the KPO project in mid-2015. While there
are some challenges in securing all the necessary linkages, we are addressing them
in co-operation with the government.”
A balanced outlook for Europe despite challenges of demand and imports
Dr Karl-Ulrich Köhler, MD & CEO of Tata Steel in Europe said: “The improvement in
our financial performance has been gathering strength. A significant contributor to
this has been the transformation of our product mix towards advanced steel
products that give our customers a competitive edge. “We have just passed a
significant milestone in this journey after launching the 100th new product in our
portfolio which has been achieved through a new product development process.
“European steel demand continued to recover in 2014 and should improve modestly
again this year. But margins remain under pressure, with imports having risen from
countries like China and Russia. “We see opportunities to further improve our
performance this quarter, and we will continue to enhance our portfolio to
strengthen our position in Europe.”
6 February 2015
4

Tata Steel
Valuation and views
TP: INR 424, upside: 15%; Maintain Buy
Outlook and valuation
Tata Steel is relatively better placed amidst the dismal steel environment owing
to its (a) largely debt-free capacity expansion (b) likelihood of improving
demand in Europe amid the recently announced quantitative easing (c) low cost
raw material availability and (d) strong market positioning.
While steel prices are likely to remain weak (we expect realization to decline),
capacity expansion at Kalinganagar of 3mt and its strong market positioning will
drive its India steel sales volume to 11.2mt by FY17E from 8.7mt in FY15E, in our
view.
Most of iron ore mines (except Khondbond) have started operations latest by
1st Jan 2015. Resultantly, the cost of iron is expected to decline gradually over
next few quarters as 2.5mt of outstanding purchased ore inventories get
depleted.
Indian steel demand remains weak in seasonally strong quarter. Steel realization
is expected to decline by INR2000/t (with further risk) on cheaper imports. TSI
EBITDA/t is expected to improve only marginally over next 2-3 quarters as most
of the benefits of lower cost captive iron ore will be washed by falling
realization.
Europe demand is expected to improve modestly in 2015, but margins are under
pressure from cheaper Chinese and Russian imports. Weaker Euro, lower oil
prices, and product mix improvement are key positives.
We have reduced FY16 EBITDA by 11% to INR174b on weaker steel prices.
Target price is cut by 27% to INR424/share based on FY16 SOTP (15% upside).
3mtpa KPO is likely to drive volumes growth in FY17.
Maintain BUY.
Key catalyst over the next 12 months
Timely commissioning of Kalinganagar steel plant (3mt)
EUR depreciation to USD
Trade/Non-trade announcements like anti-dumping duty/BIS checks to protect
the domestic steel industry from growing Chinese/CIS imports
Further progress on plants to sell European long product business
Key risks
Decline in international iron ore prices
Delay in Kalinganagar commissioning
6 February 2015
5

Tata Steel
Exhibit 4: Target price derivation
2013
India
EBITDA per ton (USD)
Sales (m tons)
EBITDA-India
Target EBITDA multiple
EV (India) - (a)
INR/share
TSE and other subs.
EBITDA per ton (USD)
Depreciation per ton (USD)
EBIT per ton (USD)
Sales (m tons)
EBIT
Target EV/EBIT multiple
EV (TSE) - (b)
INR/share
Target EV (c=a+b)
Net Debt (d)
INR/share
D/E x (adj for goodwill)
CWIP (e)
INR/share
(d1) Discount (%)
Investments (f)
INR/share
(d2) Discount (%)
TP (c-d+e*(1-d1)+f*(1-d2))
Target Price (INR /share)
263
7.5
113,232
5.5
622,778
641
11
43
-32
16.7
-29,370
7.0
-205,588
-212
417,190
601,496
619
2.8
2014
234
8.5
128,169
5.5
704,930
726
33
36
-3
18.0
-3,184
7.0
-22,289
-23
682,641
739,219
761
3.0
2015E
199
8.7
108,408
6.5
704,653
725
40
38
2
17.5
2,251
7.0
15,757
16
720,410
776,832
800
2.5
344,477
355
95,135
98
20
364,162
375
2016E
198
9.3
118,703
6.5
771,567
794
50
36
13
18.0
14,860
7.0
104,022
107
875,589
803,703
827
2.3
263,477
271
2017E
230
11.2
165,636
6.5
1,076,636
1,108
58
36
22
18.0
24,169
7.0
169,182
174
1,245,819
804,956
829
2.0
232,477
239
95,135
95,135
98
98
20
20
411,471
749,447
424
772
Source: MOSL, Company
Exhibit 5: Metal sector valuation
Rating
Steel
Tata Steel
SAIL
JSW Steel
JSPL
NMDC
Non-Ferrous
Hindalco
SSLT
Hindustan Zinc
Nalco
Buy
Neutral
Buy
Neutral
Buy
Buy
Buy
Buy
Buy
Price MCAP
EPS
(INR) (USD M) FY14E FY15E FY16E
369
74
961
142
141
147
211
170
49
5,774
4,886
3,740
2,092
8,981
4,897
10,049
11,571
2,045
35.5
4.6
38.6
20.9
16.1
12.5
17.2
16.3
2.6
19.7
6.3
95.5
9.5
17.2
13.7
20.6
20.4
5.6
44.4
5.6
81.6
3.8
14.9
15.1
18.9
18.8
6.8
P/E (x)
FY15E FY16E
18.8
11.6
10.1
14.9
8.2
10.7
10.2
8.3
8.9
8.3
13.1
11.8
37.0
9.5
9.8
11.1
9.0
7.2
EV/EBITDA (x)
FY15E FY16E
7.5
9.0
6.5
8.8
4.4
7.9
6.4
5.1
3.2
6.7
8.0
6.7
9.1
5.3
P/B(x)
FY14E FY15E
1.4
0.7
1.1
0.6
1.9
1.1
0.7
1.0
0.6
1.7
6.7
1.3
1.2
5.8
0.8
0.8
4.2
1.6
1.4
2.0
0.9
0.9
Source: MOSL, Company
6 February 2015
6

Tata Steel
Story in charts
Exhibit 6: Capacity expansion to drive sales vols (mt)
India
24
4
14
7
FY12
24
4
13
7
FY13
27
4
14
9
FY14
Europe
26
4
14
9
FY15E
Others
27
4
14
9
FY16E
29
4
14
36
FY14
347
263
234
199
56
198
57
230
Exhibit 7: EBITDA/t (USD) to improve on operating leverage
India
Europe
11
FY17E
66
16
FY12
11
FY13
FY15E
FY16E
FY17E
Source: MOSL, Company
Source: MOSL, Company
Exhibit 8: Asset commissioning to drive returns
ROCE pre-tax (%)
ROE (%)
20.4
15.0
9.2
7.9
FY12
6.8
9.2
FY14
7.3
FY15E
8.4
FY16E
FY17E
13.1
Exhibit 9: Expect PAT to more than double by FY17E
PAT - INR b
77.2
43.1
19.1
1.5
FY13
FY14
FY15E
FY16E
FY17E
6.6
0.7
FY13
34.5
11.4
Source: MOSL, Company
Source: MOSL, Company
Exhibit 10: EUR depreciation will protect from imports
EURUSD
1.60
1.45
1.30
1.15
1.00
Exhibit 11: Tata Steel 1yr fwd EV/EBITDA
11.0
8.5
6.0
5.4
3.5
1.0
1.6
5.9
EV/EBDITA(x)
Peak(x)
Avg(x)
Min(x)
9.2
Source: MOSL, Company
Source: MOSL, Company
6 February 2015
7

Tata Steel
Financials and valuations
Income Statement (Consolidated)
Y/E March
Net Sales
Change (%)
EBITDA
% of Net Sales
Depn. & Amortization
EBIT
Finace cost
Other income
PBT before EO
EO income
PBT after EO
Tax
Rate (%)
Reported PAT
Minority interest P/L
Share of asso. PAT
PAT (After MI & asso.)
Div. on/Hybrid Sec.
Adjusted PAT
Change (%)
2010
1,023,931
-30.5
80,427
7.9
44,917
35,509
30,221
6,859
12,147
-11,837
310
21,518
6,941
-21,208
152
1,269
-20,092
-8,255
-109.1
2011
1,187,531
16.0
159,956
13.5
44,148
115,808
27,700
2,809
90,917
30,103
121,020
32,459
26.8
88,561
-603
664
89,827
59,724
-n/a-
2012
1,328,997
11.9
124,168
9.3
45,167
79,001
42,501
15,730
52,231
33,619
85,850
36,365
42.4
49,485
-1,731
2,681
53,898
2,225
18,054
-69.8
2013
1,347,115
1.4
123,212
9.1
55,753
67,459
39,681
4,792
32,569
-73,899
-41,330
32,294
-78.1
-73,624
-2,145
903
-70,576
1,798
1,524
-91.6
2014
1,486,136
10.3
164,110
11.0
58,412
105,698
43,368
5,168
67,498
-1,418
66,080
30,582
46.3
35,499
-80
-718
34,860
1,798
34,479
2,162.2
2015E
1,420,530
-4.4
150,901
10.6
59,112
91,789
48,027
7,676
51,437
17,054
68,492
30,259
44.2
38,233
-323
-576
37,980
1,798
19,127
-44.5
(INR Million)
2016E
1,395,615
-1.8
174,119
12.5
59,974
114,146
46,137
6,028
74,036
74,036
28,605
38.6
45,430
-94
-612
44,913
1,798
43,115
125.4
2017E
1,496,111
7.2
230,370
15.4
67,562
162,807
46,956
5,780
121,632
121,632
42,006
34.5
79,626
-17
-636
79,006
1,798
77,208
79.1
Balance Sheet (Consolidated)
Y/E March
Share Capital
Reserves
Net Worth
Minority Interest
Total Loans
Deferred Tax Liability
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Investments
Goodwill on
consolidation
Curr. Assets
Inventory
Account Receivables
Cash & liquid
investment
Others
Curr. Liability & Prov.
Account Payables
Provisions & Others
Net Current Assets
Appl. of Funds
E: MOSL Estimates
2010
8,867
221,516
230,383
8,841
531,004
16,541
786,768
976,290
608,126
368,164
89,795
54,178
145,418
438,678
186,866
116,240
67,878
67,694
309,464
233,886
75,578
129,214
786,768
2011
9,587
346,226
355,814
8,889
634,184
20,126
1,019,013
981,023
615,338
365,685
135,508
46,881
152,982
652,071
240,552
148,119
140,183
123,216
(INR Million)
2012
9,714
416,623
426,337
10,912
647,385
24,424
1,109,058
1,133,047
712,043
421,003
200,280
26,229
173,546
609,675
255,980
148,785
121,972
82,938
2013
9,714
332,008
341,722
16,694
707,696
31,185
1,097,297
1,352,650
798,379
554,271
137,862
24,974
130,650
580,338
240,912
139,940
106,200
93,287
2014
9,714
395,606
405,320
17,377
851,948
25,550
1,300,195
1,570,087
969,844
600,242
259,564
24,251
157,488
642,562
268,800
160,058
112,729
100,976
2015E
9,714
459,924
469,638
17,054
890,420
28,075
1,405,188
1,661,338
1,028,956
632,382
344,477
24,251
157,488
603,750
233,512
155,674
113,588
100,976
357,160
202,377
154,783
246,590
1,405,188
2016E
9,714
493,186
502,900
16,960
890,420
28,787
1,439,067
1,866,338
1,088,930
777,409
263,477
24,251
157,488
570,054
229,416
152,944
86,718
100,976
353,611
198,827
154,783
216,443
1,439,067
2017E
9,714
560,565
570,279
16,943
890,420
29,825
1,507,467
2,021,338
1,156,492
864,846
232,477
24,251
157,488
596,334
245,936
163,957
85,464
100,976
367,928
213,145
154,783
228,406
1,507,467
334,114
171,162
162,952
317,957
1,019,013
321,675
183,200
138,475
288,000
1,109,058
330,797
197,774
133,023
249,541
1,097,297
383,912
229,129
154,783
258,650
1,300,195
6 February 2015
8

Tata Steel
Financials and valuations
Ratios (Consolidated)
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
Return Ratios (%)
EBITDA Margins (%)
Net Profit Margins (%)
RoE
RoCE (pre-tax)
RoIC (pre-tax)
Working Capital Ratios
Asset Turnover (x)
Debtor (Days)
Inventory (Days)
Payables (Days)
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Net Debt/Equity
E: MOSt Estimates
2010
(9.3)
26.7
95.7
8.0
(106.4)
2011
62.3
138.3
211.4
12.0
21.9
5.9
2.7
1.7
0.7
5.3
3.3
7.9
(0.8)
(7.2)
5.2
5.6
1.3
41.4
67
83.4
1.4
1.2
5.5
13.5
5.0
40.5
13.2
18.2
1.2
45.5
73.9
52.6
2.0
4.2
2.4
2012
18.6
97.4
260.2
12.0
74.6
19.9
3.8
1.4
0.7
7.1
3.3
9.3
1.4
7.9
9.2
10.8
1.2
40.9
70.3
50.3
1.9
1.9
2.1
2013
1.6
-18.4
217.3
8.0
886.5
235.2
-20.1
1.7
0.7
7.8
2.2
9.1
0.1
0.7
6.6
8.5
1.2
37.9
65.3
53.6
1.8
1.7
2.8
2014
35.5
96.7
255.1
8.0
39.2
10.4
3.8
1.4
0.7
6.7
2.2
11.0
2.3
15.0
9.2
12.2
1.1
39.3
66.0
56.3
1.7
2.4
3.0
2015E
19.7
100.2
321.3
8.0
70.7
18.7
3.7
1.1
0.8
7.5
2.2
10.6
1.3
6.8
7.3
10.1
1.0
40.0
60.0
52.0
1.7
1.9
2.5
2016E
44.4
108.5
355.6
9.0
34.0
8.3
3.4
1.0
0.8
6.7
2.4
12.5
3.1
13.1
8.4
11.5
1.0
40.0
60.0
52.0
1.6
2.5
2.3
2017E
79.5
151.5
424.9
9.0
19.0
4.6
2.4
0.9
0.8
5.1
2.4
15.4
5.2
20.4
11.4
14.6
1.0
40.0
60.0
52.0
1.6
3.5
2.0
Cash Flow Statement (Consolidated)
Y/E March
EBITDA
(Inc)/Dec in Wkg. Cap.
Tax Paid
CF from Op. Activity
(Inc)/Dec in FA + CWIP
(Pur)/Sale of Investments
Acquisition in subsidiaries
Int. & Divident Income
Other investing activities
CF from Inv. Activity
Equity raised/(repaid)
Debt raised/(repaid)
Dividend (incl. tax)
Interest & equiv. paid
CF from Fin. Activity
(Inc)/Dec in Cash
Add: opening Balance
Closing Balance
2010
80,427
46,465
-24,586
104,710
-71,495
25,016
-3,538
3,054
-46,964
24,465
-29,944
-13,209
-32,662
-51,350
6,396
61,482
67,878
2011
159,956
-71,749
-32,351
64,629
-104,160
17,505
-647
3,518
46,531
-37,254
45,568
37,874
-7,146
-31,366
44,930
72,305
67,878
140,183
2012
124,168
11,590
-36,524
112,838
-121,360
78,503
6,194
-11,343
-48,006
6,045
-39,803
-11,639
-37,646
-83,043
-18,212
140,183
121,972
2013
123,212
31,293
-25,690
133,239
-154,715
29,484
-1,557
3,576
-5,352
-128,564
2,646
25,153
-13,590
-34,657
-20,448
-15,772
121,972
106,200
2014
164,110
-12,696
-30,127
131,459
-164,201
-3,829
-1
3,519
29,436
-135,075
156
58,658
-9,244
-39,424
10,146
6,529
106,200
112,729
2015E
150,901
12,920
-27,734
136,086
-159,913
39,084
17,054
7,676
-96,099
20,000
-9,302
-49,826
-39,128
859
112,729
113,588
(INR Million)
2016E
174,119
3,276
-27,893
149,502
-124,000
2017E
230,370
-13,216
-40,968
176,185
-124,000
6,028
-117,972
5,780
-118,220
-10,465
-47,936
-58,401
-26,871
113,588
86,718
-10,465
-48,754
-59,219
-1,253
86,718
85,464
6 February 2015
9

Tata Steel
Corporate profile
Company description
Tata Steel is the lowest cost steel producer in India.
Globally, it is the 12th largest steel company, with
24.1m tons of steel sales in FY13. It has operations
spread over Europe, the UK, Asia, North America
and rest of the world, with an annual capacity of
27m tons. On a consolidated level, it has ~22% raw
material security. Annual production is likely to
increase to 29-30m tons with the help of
Greenfield projects in Orissa.
Exhibit 8: Sensex rebased
Exhibit 13: Shareholding pattern (%)
Dec-14
Promoter
DII
FII
Others
31.4
25.4
19.1
24.1
Sep-14
31.4
24.3
20.8
23.5
Dec-13
31.4
25.3
19.1
24.2
Exhibit 14: Top holders
Holder Name
Life Insurance Corporation Of India
National Insurance Company Ltd
The New India Assurance Company Limited
% Holding
14.6
1.1
1.1
Note: FII Includes depository receipts
Exhibit 15: Top management
Name
Cyrus P Mistry
Ratan N Tata
T V Narendran
Karl Ulrich Koehler
Koushik Chatterjee
Designation
Chairman
Chairman Emeritus
Managing Director
Managing Director & CEO
Executive Director & CFO
Exhibit 16: Directors
Name
Cyrus P Mistry
Ratan N Tata
T V Narendran
Karl Ulrich Koehler
O P Bhatt*
Andrew Robb*
D K Mehrotra*
*Independent
Name
Nusli N Wadia*
Ishaat Hussain
Subodh Bhargava*
Jacobus Schraven*
Mallika Srinivasan*
Koushik Chatterjee
Exhibit 17: Auditors
Name
Deloitte Haskins & Sells LLP
Shome & Banerjee
Type
Statutory
Cost Auditor
Exhibit 18: MOSL forecast v/s consensus
EPS
(INR)
FY15
FY16
FY17
MOSL
forecast
19.7
44.4
79.5
Consensus
forecast
35.8
47.3
56.7
Variation
(%)
-45.0
-6.1
40.2
6 February 2015
10

Tata Steel
NOTES
6 February 2015
11

Disclosures
This document has been prepared by Motilal Oswal Securities Limited (hereinafter referred to as Most) to provide information about the company(ies) and/sector(s), if any, covered in the report and may be
distributed by it and/or its affiliated company(ies). This report is for personal information of the selected recipient/s and does not construe to be any investment, legal or taxation advice to you. This research report does
not constitute an offer, invitation or inducement to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not
for public distribution and has been furnished to you solely for your general information and should not be reproduced or redistributed to any other person in any form. This report does not constitute a personal
recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, investors should consider
whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as
up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur.
MOSt and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We and our affiliates have investment banking and other business relationships with a
some companies covered by our Research Department. Our research professionals may provide input into our investment banking and other business selection processes. Investors should assume that MOSt and/or
its affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this
material may educate investors on investments in such business. The research professionals responsible for the preparation of this document may interact with trading desk personnel, sales personnel and other
parties for the purpose of gathering, applying and interpreting information. Our research professionals are paid on the profitability of MOSt which may include earnings from investment banking and other business.
MOSt generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
Additionally, MOSt generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders,
and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary
trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing
among other things, may give rise to real or potential conflicts of interest. MOSt and its affiliated company(ies), their directors and employees and their relatives may; (a) from time to time, have a long or short position
in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation
or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with
respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations
made by the analyst(s) are completely independent of the views of the affiliates of MOSt even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
Reports based on technical and derivative analysis center on studying charts company's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as
such, may not match with a report on a company's fundamental analysis. In addition MOST has different business segments / Divisions with independent research separated by Chinese walls catering to different set
of customers having various objectives, risk profiles, investment horizon, etc, and therefore may at times have different contrary views on stocks sectors and markets.
Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates or
employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt or any of
its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The information contained herein is
based on publicly available data or other sources believed to be reliable. Any statements contained in this report attributed to a third party represent MOSt’s interpretation of the data, information and/or opinions
provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party. This Report is not intended to be a complete statement or
summary of the securities, markets or developments referred to in the document. While we would endeavor to update the information herein on reasonable basis, MOSt and/or its affiliates are under no obligation to
update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its affiliates or employees shall not be in any way
responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. MOSt or any of its affiliates or employees do not provide, at any time,
any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement.
The recipients of this report should rely on their own investigations.
This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision based on
this report or for any necessary explanation of its contents.
Most and it’s associates may have managed or co-managed public offering of securities, may have received compensation for investment banking or merchant banking or brokerage services, may have received any
compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months.
Most and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report.
Subject Company may have been a client of Most or its associates during twelve months preceding the date of distribution of the research report
MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise of over 1 % at the end of the month immediately preceding the date of publication of the research in the securities
mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the
report.
Motilal Oswal Securities Limited is under the process of seeking registration under SEBI (Research Analyst) Regulations, 2014.
There are no material disciplinary action that been taken by any regulatory authority impacting equity research analysis activities
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be
directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible for preparation
of MOSt research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues
Disclosure of Interest Statement
Analyst ownership of the stock
Served as an officer, director or employee
TATA STEEL
No
No
Tata Steel
Regional Disclosures (outside India)
For U.S.
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law,
regulation or which would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In
addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the
United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or
intended for U.S. persons.
This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional
investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major
institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the
"Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning
agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this
chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL,
and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors
Regulations and is a subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to
accredited investors, as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.
In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Anosh Koppikar
Kadambari Balachandran
Email : anosh.Koppikar@motilaloswal.com
Email : kadambari.balachandran@motilaloswal.com
Contact : (+65)68189232
Contact : (+65) 68189233 / 65249115
Office Address : 21 (Suite 31),16 Collyer Quay,Singapore 04931
For Singapore
6 February 2015
Motilal Oswal Securities Ltd
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com
12