This document provides an overview of the metal industry and analysis of Tata Steel Ltd. It begins with an introduction to the global metal sector and lists the top 10 mining companies by revenue. It then discusses the impact of the 2008 financial crisis on metal prices and industry. The document analyzes key metal commodities, performs a Porter's Five Forces analysis of the industry, and lists new developments. It provides an in-depth company analysis of Tata Steel Ltd, including financials, ratios, management, and compares it to competitors. The document concludes with benefits and how to perform a competitive landscape analysis.

1. B E A C O N
A Newsletter by SIMCON– SIMSREE Consulting Club
Volume : 2
Issue : 12 October 2014
Inside this issue:
Industry Analysis: Metal
Company Analysis: Tata Steel
Concept of the Month
Quiz
Did You Know?

2. Volume: 2 BEACON : Page 1
Issue : 12 Oct. 2014
INTRODUCTION
The metal sector is one of the main pillars of the global economy for it acts as the initial supplier to a wide range of industries. In addition, the sector also provides financial in- vestors with attractive investment opportunities since its prod- ucts are traded commodities. Many of the most significant mines are in the hands of very large, often publicly-listed cor- porations with strong government connections. The reason why small-scale companies do not play an important role in this sector is the high amount of initial capital costs required to operate mines. The top ten largest mining companies and their last twelve months (LTM) revenues are listed below. All of them are publicly traded; together they currently generate around USD 525 billion in annual revenues. Several of these companies – including Rio Tinto Ltd, BHP Billiton, and An- glo American among the top ten - are headquartered in Lon- don, the UK.
Despite the sector‘s several attractions described above, it is important to note that the industry is highly sensitive to glob- al hit by the global crisis which arose in 2008 and triggered rapid contraction in industrial production. As the demand from industrial organizations for mining products declined due to the recession, the prices of these products also fell. Copper and aluminium were among the commodities most drastically affected, their values dropping around 60-70 per cent during the period July 2008-June 2009.
Consequently, the recession caused – as it did for many oth- er industries – the mining sector to experience substantial financial distress. However, as the global economy has been recovering from the recession, the mining industry also started to rebound.
MAJOR COMMODITIES
Metal industry forms an indispensable part of the economy and it is considered to be the backbone of the industrial devel- opment of any country. Metal is the crucial sector for any economy as it meets the requirements of various other sectors.
http://www.ibef.org/download/Metals-and-Mining-March- 220313.pdf
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INDUSTRY ANALYSIS:
Metal
Global Main Players
Company Name
Head- quarters
LTM Rev- enue (billion USD)
LTM Date
Glencore Xtrata
Switzer- land
245.90
Mar-31-2014
BHP Bil- liton Ltd.
United Kingdom, Australia
54.50
Dec-31-2013
Rio Tinto Ltd.
United Kingdom , Australia
54.10
Dec-31-2013
Shenhua Group Co. Ltd.
China
46.90
Mar-31-2014
Vale S.A.
Brazil
43.00
Mar-31-2014
Anglo American PLC
United Kingdom
31.00
Dec-31-2013
Freeport- McMo- Ran Cop- per & Gold Inc.
United States
18.30
Mar-31-2014
Barric Gold
Canada
12.50
Dec-31-2013
Coal In- dia Ltd.
India
11.00
Mar-31-2014
Fortescue Metals Group
Australia
10.69
Dec-31-2013

3. Volume: 2 BEACON : Page 2
Issue : 12 Oct. 2014
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INDUSTRY ANALYSIS:
Metal
Iron & Steel
The iron & steel segment is more than a century old, with Tata Iron & Steel Co as the very first integrated steel plant to be set up in India in 1907. India is currently the 4th largest producer of steel and is slated to be the 2nd largest by 2015. The production for sale of total finished steel (alloy + non alloy) in 2013-14 was 87.67 MT while the production for sale of Pig Iron in 2013-14 was 7.95 MT. India is the largest producer of sponge iron in the world and of the total sponge iron production in the country, 88% is accounted by the coal based route.
Aluminium
Aluminium is the most abundant metallic element on earth, mak- ing up approximately 8% of the planet‘s crust. However, alumin- ium itself does not exist in nature as a metal. It is found in the form of bauxite, the term for the ore carrying large amounts of aluminium oxide or alumina. Although bauxite ore is relatively easy to mine, the aluminium production process is much more complex, with the current process discovered and patented by Martin Hall and Pall Heroult (the Hall-Heroult process) in 1886. This process remains the primary method used to produce alu- minium. Some of the many uses of aluminium include transpor- tation, packaging, construction, consumer durables, electrical transmission lines, and machinery.
Copper
Copper, from the Greek word kyprios, is one of the oldest metals known to civilization. In fact, the earliest recorded existence of known copper is around 9000 BC. However, the glorious period for copper began in the Bronze Age (possibly as early as 3900 BC), when copper was mixed with tin to create bronze, which then became heavily used in applications from construction to the production of weapons, tools, and castings. Since then, the use of copper has increased significantly and is found in a vast range of applications ranging from brass musical instruments to electrical wiring, electric dynamos, and solar cells.
PORTER’S FIVE FORCES ANALYSIS
Threat of new entrants - LOW
Low in the metal sector due to high capital requirements
The gestation period is also high and hence it will deter new
players in the industry.
Bargaining power of customers - MEDIUM
Being a commodity, the bargaining power of customers does
exists as prices are determined by price and supply.
Bargaining power of suppliers – MEDIUM
Most of the domestic players in this sector operate integrated
plants and hence the bargaining power is Medium
Competition – MEDIUM
The competition is primarily on price and quality as
differentiation is difficult, being a commodity.
Threat of substitutes –LOW
All of these metals have unique physical properties which suit certain applications more than other substitutes.
NEW DEVELOPMENTS
1-In order to promote collaborative programmes in the industry, the Union Government has decided to set up a research centre for the steel industry. It will spearhead research in priority areas such as natural resources conservation, optimum energy conser- vation, design development, etc. The participating companies include SAIL, TATA Steel, JSW Steel, etc.
2-Mr Narendra Singh Tomar, Minister for Mines & Steel, re- cently made an announcement about forming special purpose vehicles with iron ore rich state for de bottlenecking the clear- ance procedures for mining projects in order to revive invest- ment in the steel sector.
3-Due to the shortage of floating stock, aluminium is attracting premium in the international market. This is benefitting Indian aluminium producers such as Hindalco Industries and state owned National Aluminium Company.
4-Asset Reconstruction Company of India Ltd (ARCIL) has invited bids for Jhagdia Copper Ltd (JCL), the largest secondary copper smelting unit in the country and located in Gujarat. Ac- cording to reports, JCL is values at Rs 1000 Crores at current market prices with an implementation period lasting 2 years.
REFERENCES
IBEF—Metals & Findings
STEEL Overview
India Govt. Initiatives

4. Volume: 2 BEACON : Page 3
Issue : 12 Oct. 2014
Company Overview
Tata Steel Limited is an Indian multinational steel-making com- pany headquartered in Mumbai, Maharashtra, India, and a sub- sidiary of the Tata Group. It was established in 1907 as Asia's first integrated private sector steel company. Tata Steel Group is among the top-ten global steel companies with an annual crude steel capacity of over 30 million tonnes per annum.
It is now the world's second-most geographically-diversified steel producer, with operations in 26 countries and a commer- cial presence in over 50 countries. The Tata Steel Group, with a turnover of Rs. 1, 48,614 crores in FY 14, has over 80,000 em- ployees across five continents and is a Fortune 500 company.
Shareholding Pattern
Management
SWOT Analysis
Financials
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COMPANY ANALYSIS:
Tata Steel Ltd
Strengths
 Operations in 26 coun tries and commercial pres- ence in over 50 countries
 Pioneer of steel business in India
 Brand equity
 Advantage of value- chain efficiency because of multiple companies under the same banner
 World‘s second-most geographically diversified steel producer
Weakness
 Increasing Debt/Equity ratio i.e. Most assets are fi- nanced by Debt
 Largely dependent on European markets (52% of its total revenue)
Opportunity
 Government‘s thrust on development of core indus- tries like housing and infra- structure should boost steel demand
 Newer technologies that are adapted by Tata steel due to its acquisitions is likely to benefit them
Threats
 Clampdown on iron ore mining and controversy sur- rounding allocation of coal blocks could hurt its domes- tic business
 Competition from interna- tional players like Arcelor Mittal, Posco is likely to eat into its market share
Name
Designation
Cyrus Mistry
Chairman
T V Narendran
Managing Director
Andrew Robb
Director
NusliWadia
Director
Karl-Ulrich Koehler
Director
Subodh Bhargava
Director
Jacobus Schraven
Director
B Muthuraman
Vice Chairman
Koushik Chatterjee
Executive Director
Mallika Srinivasan
Director
D K Mehrotra
Director
O P Bhatt
Director
Ishaat Hussain
Director
Particulars
FY 13
Rs Million
FY 14
Rs Million
Growth
Operating Rev- enues
134711.54
148613.55
10.31%
Expenditure
122390.33
132202.54
8.01%
Operating Profit (EBITDA)
12321.21
16411.01
33.19%
PAT after ex- ceptional items
(7362.39)
3663.97
(1.57%)

5. Volume: 2 BEACON : Page 4
Issue : 12 Oct. 2014
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Ratios
Group Performance Highlights-
 Group steel deliveries in FY‘14 increased to 26.56 mil- lion tonnes from 24.13 million tonnes in FY‘13. Deliver- ies in Q4 FY‘14 increased to 7.62 million tonnes com- pared to 6.38 million tonnes in Q3 FY‘14.
 Group consolidated turnover in FY‘14 was Rs.1,48,614 Cr. versus Rs.1,34,712 Cr. in FY‘13.
 FY‘14 Group EBITDA was Rs.16,377 Cr. compared to Rs.12,654 Cr. in FY‘13 which is an increase of 29%.
 Group PAT in FY‘14 increased to Rs.3,595Cr.versus the loss of Rs.7,058 Cr. in FY‘13. FY‘14 results included exceptional expense of Rs.28 Cr. compared to Rs.7,390 Cr. in FY‘13.
Competitor Analysis
The steel industry is quite crowded consisting of more than 8 players in the large scale sector and many medium size firms. Thus, competition does exist. But the intensity is far too low due to very large demand supply gap. The amount of investment that exists and will exist in the long run is huge and this will serve as the exit barrier and further increasing rivalry.
In terms of Total revenue, Tata Steel is better but it has lower net profit margin as compared to SAIL. Since the ROE is higher for Tata Steel, its profitability is also higher. Return on Assets for Tata Steel is 4.6% which is higher than the other two com- panies. It suggests that Tata Steel makes better use of its assets. SAIL is the least leveraged and it can borrow funds more easily than Tata Steel and JSW Steel. The interest coverage ratio for SAIL is better and this suggests that it can pay interest on out- standing debt more easily than the other two companies.
New Developments
1. Tata Steel has signed a memorandum of understanding with the Geneva-based Klesch group for the sale of its products business in Europe and associated distribution activities. This division accounted for 25 per cent of Tata Steel‘s European operations.
2. Global steel demand is forecast to grow by 3.1% in 2014. With the sale of its products business in Europe, Tata Steel would not benefit from this increase in de- mand.
3. Growth in China has tempered as the country pursues a ‗sustainable‘ model of development. Deviations in the growth trajectory of China will impact global steel de- mand-supply because it is the largest producer of steel globally.
4. Tata Steel is aggressively pursuing completion of the first phase of the 6 million tonnes per annum project in Kalinganagar, with stage-wise commissioning expected to start by end of FY‘15.
References:
TATA Steel Company Profile
TATA Steel on Economic Times
TATA Steel Results
Annual Report
COMPANY ANALYSIS:
Tata Steel Ltd
Ratios
FY14
FY13
FY12
Return on capital em- ployed
9.98
7.9
9.96
Current ratio
1.24
0.99
0.71
Quick Ratio
0.65
0.69
0.74
Debt equity ratio
1.74
1.68
1.23
Inventory turnover ratio
5.53
5.59
5.19
Debtors turnover
9.91
9.33
8.95
Asset turnover ratio
1.44
1.42
1.37
Company
Revenue (Rs Cr)
Net Profit (Rs Cr)
Net Profit Margin (%)
Net Worth (Rs Cr)
RoE (%)
Tata Steel
149130.4
3594.9
2.4%
40532
8.9%
SAIL
479017
2651.1
5.6%
43306.7
6.1%
JSW Steel
51305.4
452
0.9%
21173.9
2.1%

6. Introduction
A competitive landscape (also known as "competitive intelligence") provides cohesive, detailed information on what your competi- tors are doing including:
Who your real competitors are
What their products are
How your customers perceive the competition
What your competitors' business model is
You and your company need this vital information to plan and market profitable products that beat the competition. All companies engage in some form of competitive analysis or another. It might not be apparent because they are doing it informally e.g. by sub- scribing to news, going to conferences, buying reports or plain old observational research.
Competitive Landscape Analysis (CLA) is a technique for analysis of the competition in the industry you work in. It helps for a quick turnaround in the overview of any industry in terms of what the trends and gaps are. It acts as a strong tool to design a stepwise approach towards knowing the strengths, weaknesses, opportunities and threats (SWOT) of the company by knowing the competi- tion.
The Benefits
The three key benefits of Competitive Landscape Analysis:
Effective Marketing:
A CLA will give help identify a clear and fact based product positioning statement enabling your customers to easily relate with your product, find some important differentiating point to choose your product over the competitor‘s. For example ―A shampoo so rich you only need to lather once‖.
Improved ROI on Sales Effort:
It is important to know how customers are making buying decisions. Many companies write sales proposals in a hurry without any CLA and wonder why their win rate is low. Cost of sales in large deals can be very high with several hundreds of expensive hours going just into writing proposals. CLA, thus, help reduce the expenditure and improve the ROI.
Pipeline of New Products:
With changing times and economic conditions, consumer needs evolve. This automatically creates gaps or new opportunities. The first one to ferret out an upcoming customer need will have a first mover advantage. Most companies think that they know their market and dream up new products without a reality check.
How to perform your own CLA?
1. Set up a set of objectives to do your research on:
This is the most important step in the CLA as without knowing the boundaries of your research you may just end up boiling the whole ocean.
2. Find out the ‘manufacturer goals’ for the industry:
These are a set of goals that a manufacturer keeps in mind in terms of growing in that industry. E.g. in an ‗OTC Healthcare Products‘ industry the manufacturer goals can be: Enhanced or Diversified product portfolio, Strong retail network or partnership, Create strong brand equity and credibility, etc.
3. Identify the consumer needs and preferences for the products and services offered by the industry:
E.g. the consumer preferences in above industry can be: Safety and quality, convenient storage & usage, product life, etc.
4. Create a matrix of ‘manufacturer goals’ vs ‘consumer preferences’:
Taking a combination of each manufacturer goal and consumer preference, a research is conducted on a set of competitors as to whether it is satisfying the research objective or not. If the competitor satisfies the research objective, it is entered in the matrix. Likewise this is done for each combination of manufacturer goals and consumer preference. The research objectives keep the re- search focused on only what is required. These are like a set of questions that we set up to proceed to research for a combination of goals and preference.
5. Conclude by identifying gaps and best practices:
At the end of research, we get a completed matrix wherein, we have listed the name of the competitors in the cells where they satisfy the research objective. We also specify the degree- high, medium and low- to which they satisfy that research objective by specifying their name in Bold and italics. Bold refers to high degree of compliance with the objective while italics show a medium to low de- gree of compliance. The cells in matrix where there are all or most of the companies are in bold specify the best practices in the in- dustry as most of them are following that. If our company doesn‘t follow them, then that can be termed as gaps in our company. The cells where some companies are bold and the rest are in italics or are not present, specify the opportunities for our company.
Thus, using this analysis, we can gauge on the competition in the industry as well as find the opportunities and gaps for our compa- ny. CLA provides a structured approach towards research of the latest industry trends.
Volume: 2 BEACON : Page 5
Issue : 12 Oct. 2014
CONCEPT OF THE MONTH
Competitive Landscape Analysis

7. QUIZ
1. This company‘s warehouse can hold more than 10,000 Olympic Pools. Name the company.
2. Identify the type of mortgage where a home equity loan is taken by the borrower along with the primary mortgage or re-finance.
3. This Danish company‘s head of ‗New Business Group‘ agreed to having committed an ‗innovation suicide‘ with their prod-ucts
in early to mid 2000s. Identify the company.
4. X was acquired by an ecommerce giant Y in 2002. In Sept 2014, it was announced that both of these would now be separat-ed
and traded as independent publicly-traded companies. Identify X & Y.
5. This ex-editor of a leading US daily, who died recently, was most famous for his work in challenging the US Government
in 1971 & 1972. Identify this person.
 50% of the ownership of Domino‘s Pizza, was traded by James
Monaghan to his brother Tom Monaghan for a used Volkswagen
Beetle.
 The first & original google computer storage was created out of
LEGO.
 UPS was founded in Seattle, Washington, as ‗American Mes-senger
Company‘ by Claude Ryan & James Casey with a bicycle and
$100 borrowed from a friend.
Volume: 2 BEACON : Page 6
Issue : 12 Oct. 2014
Contributions invited:
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Winner:-
Saurabh Agarwal
SIMSREE
ANSWERS : SEPTEMBER ISSUE
Answer To: simcon.simsree@gmail.com with Subject= SIMCON_Quiz_October_2014
Winner will be recognized.
All Correct Answers will be published in next month’s Edition.
1. Germany
2. Unocoin
3. Kailash Satyarthi
4. X=Sun Pharma Y=Ranbaxy
5. Intel