SAPM PSDA 1&2 - new.docx

SECURITY ANALYSIS & PORTFOLIO MANAGEMENT – PSDA 1&2
________________________________________________________________
MBA (FINANCE) 2021-23
Submitted By: Submitted To:
Anshika Aggarwal- 347221A26 Dr. Ashima Agarwal
Geetika Sharma – 347221A05
Himanshu Arora – 347221A51
Janhavi Vasti – 347221A09
Mayank Sachdeva - 347221A44
AMITY BUSINESS SCHOOL
AMITY UNIVERSITY UTTAR PRADESH
NOIDA

EIC (Economic, Industry & Company) Analysis of TATA Steel Ltd.
History:
TATA Steel Ltd. participates occupied with assembling and advertising of steel and associated
items. The organization works through three portions: Steel, Ferro Alloys, and Minerals and
Other. The Steel portion produces unrefined steel and associated items, which incorporate level
and long items, like steel and wire poles. The Ferro Alloys and Minerals fragment participates
in the creation and product of chrome and manganese compounds. The Other section involve
tubes, direction, refractories, shades, port tasks, town administrations and speculation
exercises. It sells its items, like hot moved loops, cold moved curls, stimulated loops, rebar,
wires, ferro combinations and minerals in the global business sectors like Middle East, South
Africa, Japan, China, Korea, Southeast Asia, Europe, and SAARC nations. The organization
serves the car, development, purchaser products, designing, bundling, lifting, and uncovering,
energy and power, aviation, shipbuilding, rail and protection and security areas. TATA Steel
was established by Jamshedji Nusserwanji Tata on August 26, 1907, and is settled in Mumbai,
India."
TATA Steel story:
The tale of Tata Steel is exceptionally old. As is the tale of steel in India. Carved with the
dreams and difficulties of a solitary man, the story has coursed through ages to re-characterize
steel inside and out. The adventure, what began in 1907, finished a hundred years of confidence
in 2007 and continues. Throughout the long term this one organization has found various roads
of compelling steel usage and its story characterizes and yet again characterizes the tried-and-
true way of thinking in a greater number of ways than one.
As India was left marginally amazed and overpowered right after the Industrial Revolution in
England the main Indian savvy people of the nineteenth century trusted that if India somehow
managed to stay up with the world it would need to dominate the forefront logical techniques
for the West. It was this vision of valuable change that drove Jamshedji Nusserwanji Tata to
leave on an excursion of development that cleared the way for industrialization in India. Within
his lifetime, Jamshedji was to observe the introduction of a progressive Indian patriotism that
would aid the rise of free India, the soul of which could as of now be felt when he passed on in
1904."

Evaluating the Environment
External Environment – PESTLE Analysis
1. Political
 As a component of their business development, Tata Steel made a few high gamble
interests in nations like Bangladesh, Iran. For instance: the arrangement set up in
the Bangladesh is getting deferred by the topic of gas supply, while the issue of rent
of the mining of the iron mineral in the Iran nation is answerable for the expansion
in the expense of the creation.
 By working on the foundation of the country, Tata Steel and other steel
organizations can save some sum, as they spend huge sums on the cargo and
transportation.
 There are no quantitative limitations on import of iron and steel things. The main
system directing the imports is the levy instrument. Advance Licensing Scheme
permits obligation free import of natural substances for trades. Iron and Steel
industry has been remembered for the rundown of 'high need' ventures for
programmed endorsement for unfamiliar value speculation up to 100 percent. Cost
and dissemination of steel were liberated from January 1992.
 The public authority goes about as an asset allocator (the mining approaches of the
Government), as Competitor (the public area steel organizations) and as Regulator
to TATA Steel.
2. Economic
 Due to the subprime emergency in US, European business sectors dealt with the
issues of the downturn this makes the awful effect on the Tata steel as the
Netherlands, United Kingdom and Germany are the primary business sectors for
the CORUS.
 Steel industry may get impacted because of the repeating monetary condition on the
grounds that numerous ventures like vehicles, apparatuses and development relies
upon the steel business and assuming enterprises faces any sort of decline in the
economy Tata steel additionally may likewise confront the misfortunes.
 Steel creation process are subject to the energy market which can influence the Tata
steel in the monetary way. With the securing of CORUS organization acquired the
development planned in nature at the same time, the expense of procurement goes
past the monetary assumptions.
 The Government presented 'Special Economic Zones' (SEZ) in June 2005,
determined to make serious monetary areas. TATA Steel plants in the SEZs are not
expose to excessive typical regulations with the end goal of commodity tasks and
furthermore get extra benefits including charge occasions. Opportunity to source

inputs locally or remotely with next to no endorsement or obligation payable and
deals charge repayment on domestic buys.
3. Socio- cultural
 TATA Steel got granted for the responsibilities in the business moral way of
behaving and working on the existences of the representatives and their families.
For this reason, Tata steel got granted by the GOLDEN PEACOCK GLOBAL
AWARD.
 TATA Steel likewise engaged to establish the social climate. They continually
made the enhancements in the medical problems, monetary prosperity and
schooling offices gave to the country. This arrangement works out in close to eight
hundred towns in Jharkhand, Odisha, and Chhattisgarh.
 Emergency clinic on wheels is the essential advancement of the Tata's though Tata
is likewise answerable for the home in ghetto regions in metropolitan creating urban
areas.
 'Activity Muskaan', a venture started by Tata Steel, under which many individuals
brought into the world with congenital fissures or congenital fissures were worked
free of charge of cost.
4. Technological
 'METAL JUNCTION', an e-gateway framework began by Tata Steel which is
useful for not exclusively to Tata steel yet additionally to whole industry. With the
assistance of this innovation e-market is the greatest market for the buying and
selling of the steel on the planet.
 To lessen the emanation of the Co2 in the climate Tata steel has contributed
colossally with the examination of the super low carbon steel.
 TATA is likewise drawn in with the goal of the energy preservation plans where
Tata is doing research to lessen the energy utilization in the creation interaction.
 Hostage iron metal is one of the greatest upper hands of Tata Steel. Nevertheless,
this unrefined substance has phosphorus content at .080%, which is not OK by
numerous purchasers. By changing the converter blowing system, base infusion
practice, and the spear math, Tata Steel brought the level down in stages, in this
manner utilizing mechanical advancement to expand on the upper hand.
5. Legal
 TATA Steel, with its hostage mines in Odisha and Jharkhand meet its whole
necessity of iron metal and 65 percent of its coal needs.
 Mines and Minerals (Regulation and Development and Regulation) Bill, 2010,
requires mining organizations to share 26% of its benefit with nearby occupants.
Sovereignties represented, 4 percent of Tata Steel's independent costs the year
before. The recent charges could represent nine percent of their absolute use and
cost them 5-6 percent of their working benefits.
 TATA steel guarantees the EHS (Environmental health and security) under which
every single worker's action is overseen by the EHS system.
 Unsteady government in Jharkhand and different ancestral protestors are making a
few lawful issues for the Tata steel to set up 12 MTPA green field plant.

Porters Five Forces Model
1. Potential of new entrants into the industry -- Suppliers items have a couple replaces.
Compelling clients can apply strain to drive down costs, or work on the important quality for
the very same rate, thus decrease benefits in an organization. Portage's clients essentially assist
with recognizing the organization. Supplier power is no issue for McDonald's in the fast-food
market. The dealing force of suppliers is high in the occasion the buyer doesn't address an
enormous piece of the provider's deals.
The fact of the matter is that the negotiating force of the provider in an industry impacts the
cutthroat climate for the buyer and influences the purchaser's capacity to make progress.
Shoppers have power at whatever point there are certainly not various them, yet a lot of
venders, notwithstanding when it isn't hard to change from 1 association's things or
administrations to another. Buyer Power Low Consumers have restricted control over console
designers, considering that the assortment of potential purchasers is significant, the
organization isn't excessively worried about losing clients.
In your master little assistance conversations, a particular should introduce arrangements in
view of the performed investigation of the business venture. Doorman's five powers
investigation is a huge instrument for everyone attempting to assess the strategic remaining of
an existent business or pondering a fresh out of the new plastic pursuit into a current industry.
The investigation working with the Porter's five powers examination should be a premise where
the firm finds and executes their methodology which should help their serious advantage.
2. Competition in the industry -- The secret to fostering a serious strategy is to understand
the sources of the cutthroat powers. Thing progression methodology should be used assuming
that the current market improvement is slow, and the business is immersed. As fast as your
investigation is done, now is the ideal time to complete a technique to grow your serious
advantage.
Clients have power at whatever point there aren't an assortment of them, but bunches of
merchants, notwithstanding when it is easy to change from 1 business' administrations or items
to another. They are probably going to continue to utilize your administrations in the event that
they get rewards. They stay in a far much preferable situation to bargain over ever previously.
Purchaser Power Low Consumers have confined control over console architects, considering
that the scope of forthcoming buyers is enormous, the organization isn't excessively stressed
over losing clients. A rising business sector and the limit with regards to high incomes
instigates shiny new organizations to go into a market and officeholder organizations to further
develop creation. Remember that 5 powers affect different business sectors another way and
along these lines don't use exactly similar results of investigation for even identical enterprises.
3.Bargaining Power of suppliers -- The key to laying out a serious procedure is to understand
the wellsprings of the cutthroat powers. It is additionally convenient for assisting you with
modifying your method to accommodate your cutthroat climate, and to expand your
conceivable benefit. Item advancement strategy should be utilized on the off chance that the
current market improvement is drowsy, and the market is immersed.
At the point when an industry is fulfilling, or alluring in a drawn-out essential design, then, at
that point, it will be appealing to perfect associations. As a conditions, the carrier business has
extreme rivalry among the 2 makers, Airplane and Boeing. Remember that five powers

influence various enterprises distinctively and thus don't utilize precisely exactly the same
consequences of examination for even comparable business sectors.
On the off chance that today firms don't permit it to be hard for others to join with the market,
the achievement will more often than not fall towards positively no. Organizations can
underwrite by diminishing and raising the cost of the thing yet having temporary benefits for
the most part required. No matter what the truth that it doesn't sound incredibly engaging for
organizations to go into the carrier administration, it's certainly feasible.
To cut the gamble of spic and span section, the business should make a great brand picture. It
is very trying for an organization to enter the Automobile business and complete with one of
the greatest businesses on earth. While taking a gander at the enormous sources of info that
carrier organization associations need, we see that they're especially dependent upon fuel and
airplanes.
4. Bargaining Power of Customers -- How about we investigate all of the five powers in a
touch more detail to explain the methodology by which they work. It is continually difficult to
find which power is the urgent one. 5 Forces assesses the feasibility of a specific thing or help.
Subsequent to analysing the powers, you really want to track down strategies to influence the
powers.
5. Threat of Substitutes -- In your expert little association introductions, a particular should
introduce arrangements in light of the performed examination of the organization undertaking.
TATA Steel Limited Porter's 5 powers investigation is an impressive device for everyone
endeavouring to look at the essential remaining of an existent business or thinking about
another undertaking into a current market.

SWOT Analysis of TATA Steel
Strengths of Tata Steel
An organization's assets are the inward factors that give it a benefit in laying out a bigger client
base and high productivity. We should take a glance at how Tata Steel looks at to its
companions concerning serious strength –
Incorporated activities in India: The whole course of extraction from mines and minerals to
creating completed steel material is coordinated in India however it's a specialized part, they
have that hardware support. The incorporated activities save huge loads of your time and cost
and furthermore keep up with the predefined quality.
Market Position: Tata Steel is one of among chief significant steel makers in the world and in
this way the world's second-most geologically enhanced steel maker. It has a solid presence in
Asia-pacific and Europe.
Item Portfolio: You can see that Tata Steel includes a wide choice of items beginning from
level steel items, horticultural carries out, development items, and some more. A differentiated
item portfolio guarantees income because of various business sectors all over the planet.
Trust of TATA: Tata is one among the first trusted and famous brands in India as well as
wherever in the world in light of their quality. The relationship of the name gives huge brand
value to the partnership simultaneously.
Worldwide impression: Tata Steel has a presence in north of 50 nations with activities in more
than 26 nations which increment its infiltration and offer.
Capacity and Adaptability: Every year this Company raises more than 14 million tons of metals
from its hostage collieries, iron metal mines, and quarries. A quick changing climate is the
fundamental flexibility of the organization. Activities in 26 nations and an announcement
presence in north of 50 nations.
Weakness of Tata Steel
Shortcomings are characteristics of a business or brand that should be gotten to the next level.
Coming up next are some of Tata Steel significant imperfections:
Over-reliance on Europe: Though it's an Indian brand, you might be aware more than 50% of
Tata Steel's business comes from Europe and in this manner any financial stoppage inside
Europe influences Tata Steel's incomes.
Mistry's disaster: The aftermath between Ratan Tata and Cyrus Mistry has harmed the picture
of the Tata bunch which likewise means Tata Steel. Disintegrated activities in Europe:
Although Tata Steel's tasks in India are coordinated; its activities in Europe are deteriorated
and consequently are guided into different providers from different nations. Consequently, this
influences control on quality and inflated costs.
Useful Issues: Operational proficiency isn't comparable to worldwide pioneers. Marginally
slacking on the innovative front.

Opportunities for Tata Steel
Amazing open doors are potential regions that offer a firm the chance to work on its results,
increment deals, and benefit. TATA Steel has the accompanying open doors:
Adjust more up to date innovations: Tata Steel lingers behind its rivals inside the innovation
front and gets an opportunity to embrace more up to date advancements like the Cortex
interaction, Hismelt process, Direct iron metal refining, and so forth.
Expanding interest for steel in India: The steel market in India is anticipated to develop inside
the following 4 years on account of the extension inside the lodging business and assembling
offices in India. This will positively help Tata Steel.
Worldwide Expansion: Growth in the assembling, development and auto industry inside the
future will drive the extension inside the business and Tata Steel is set to profit from it. Public-
private partnership. Acquisition of coal blocks in Asia, Africa, and so on.
Threats to Tata Steel
Dangers are outer elements that might affect an organization's development. Coming up next
are some of Tata Steel dangers:
Extraordinary rivalry: JSW Steel, Essar Steel, and ArcelorMittal, and so on are as yet the
principal contenders of Tata Steel. This lessens its portion of the overall industry overall as per
the past experience.
Government and Environmental guidelines: Increases consistence costs for the corporate
reason Tata Steel is exposed to severe legislative and natural guidelines in mining likewise as
creation.
Diminishing worldwide steel costs: Excess creation in China implied that it provided steel less
expensive to the planet which constrained the strategy to drop down all through the planet.
Rising coking coal costs.
Various issues: India is tormented with fierce disturbance against land securing. Government
and administrative standards. Worldwide contest additionally hampers their business.

BCG matrix Analysis of TATA Steel ltd
STAR
The Ferro composites and minerals division in the TATA STEEL LTD would fall into the class
of stars of the BCG Matrix. The making in this division is 1.302millions tones and the general
deals has surpassed to 1.508 million tons. Infrastructural investment in Asia brought about
progress in the interest for stainless steel. Chrome Alloys sends out touched an all-time high
and the division recorded its most noteworthy ever worldwide portion of the overall industry
of 6% in FY10. The first overseas point of TSL was laid out in South Korea. In India our Ferro
Alloys and minerals division is the market chief in Ferro Chrome Business with a market
portion of around 27%. Manganese Alloys sales recorded an untouched high in the financial
year 2009-2010 and TATA Steel achieved the situation with being the largest producer of
Manganese Alloys in India.
CASH COW
The steel division of the organization falls into the class of cash cow of the BCG Matrix. The
creation is 6.439 million tonnes however the overall deals are 6.170 million tonnes. Despite
deals being lower than the creation in the FY 10. The overall deals developed by 18% over last
year (5.232 million tonnes in the FY09).
QUESTION MARK
The bearing division and the cylinders division fall into the classification of question mark in
the BCG Matrix. They are developing quickly however have low market item share. They have
the potential to acquire portion of the overall industry and become a star. It can likewise become
cash cow when the market development eases back.
DOG
None of the divisions of the TATA Steel can be arranged into dogs. Every one of them have
great portion of the overall industry and great market development.

Brief on Financials
 Recent steel price upsurge has restored the company’s balance sheet - Tata steel
achieved massive deleveraging, post which, the company’s net debt has come down
from the peak of ~Rs 1 Lc Cr in FY20 to Rs 62,869 Cr as of Dec’21. Strong steel prices,
disciplined Capex outflow, and working capital management has put the company’s
balance sheet on solid footing. We expect its Net debt/EBITDA to decline to 0.95x
from the peak of 5.8x in FY20 (FY21 at 2.4x), much below the cycle average target of
2.0x, putting the company in a comfortable position to pursue growth Capex moving
forward.
 Sufficient growth optionality and journey towards 40mtpa is visible now - Tata
intends to double its capacity from 19.6mtpa to ~40mtpa through a combination of
organic/inorganic expansion in India. Post the recent acquisition of Bhushan Steel,
Usha martin steel business and NINL (Neelanchal Ispat Nigam ltd.), the company has
got sufficient land bank and iron ore mines which would provide it with sufficient
optionality to enhance its production capacity. It is currently pursuing growth Capex at
the Kalinganagar phase II to expand from 3mtpa to 5mtpa, (completion expected by the
end of FY24). It continues to focus on ramping up the existing 1mtpa plant at NINL
and front-loading the Capex to simultaneously expand it to 4.5mtpa. Growth optionality
would enable Tata Steel to manage cash flows towards Capex as well as maintain the
capital discipline through the steel cycle. However, because it had focussed on
deleveraging in the last few years, the volume growth will be muted till FY24.
 Margins off the peak but remains above cycle average - Group EBITDA/tonne
peaked at Rs 24,112/tonne in Q2FY22, driven by strong steel prices. While we don’t
foresee a repeat of the peak margin level, mainly due to higher coking coal prices, the
future margin trajectory continues to be strong as resilient steel prices aid in maintaining
the margins above the historical average. We expect EBITDA to jump 114% YoY in
FY22E at Rs 66,202 Cr and decline from the peak in FY23E/24E at Rs 49,504 Cr and
Rs 41,327 Cr respectively. These levels, nonetheless, are much above the historical
EBITDA levels in the past decade (FY18/19/20 at Rs 21,369/29,770/18,103 Cr).
 Regional steelprices to remain resilient in the near term - Regional steel prices have
increased recently due to the escalated Russia-Ukraine conflict. Indian domestic HRC
prices have increased by 13% MoM in India, +40% in Europe, 34% in the US and 5%
in China (export FOBprice). The steel price hike is sharp in Europe which incentivised
the Indian steel mills for exports to the EU. China’s decarbonisation leading to lower
steel exports is creating opportunities for Indian steel mills to fill the volumes. Coking
coal prices have stood strong eating into the steel mills' margins, due to supply shortage
from Australia. However, the Apr’22 and May’22 coking coal contracts are pointing
towards price correction. SGX FOB Premium Hard coking coal active contract prices
are at $593/tonne (down from the peak of $635/tonne in Mid-March). Apr’22 and
May’22 futures prices are at $480/$443/tonne, drop-in spot coking coal prices would
be a positive catalyst for the stock.
 Valuation & Recommendation – Coverage is initiated with a BUY rating and value
the company using SoTP by assigning 1 year forward EV/EBITDA based on its
geographical segments. We ascribe 6.0x, 5.0x and 3.5x multiple to India standalone,

other operations (excel standalone) and Europe on FY24E EBITDA to arrive at 1 year
forward TP of Rs 1,700/share, implying an upside potential of 26% from the CMP

Technical Analysis
Historic Price:
This is a graphical representation of historic prices of TATA Steel of 3 major era’s namingly
pre-covid, during covid & post-covid. As we can see 1 candle is representing 1 month. In Pre-
Covid era the prices were revolving around 400 and ever since they have been volatile during
the Lockdown duration and post the restrictions were eased the prices have seen a surge.
Price Chart:
This is a 15 min time frame graph showcasing the 2 indicators – RSI & EMA. As on the day
of report preparation the trend was downwards. As we can see the price is following both the
EMA trend lines. The RSI is at 32.17 which means the stock is oversold at that particular point
of time.

Current price:
Price as on 28th
April 2022 - ₹1315.90
Axis Bank initiated coverage on Tata Steel with a
BUY recommendation and a Target Price (TP) of Rs
1,700/share, implying an upside of 26% from the
CMP. The stock is currently trading at 4.6x
EV/EBITDA (consensus 1-Year forward) below its
10Y average of 6.3x. Steel prices are expected to
remain resilient which would drive strong cash flows
for the company in the upcoming quarters and allow it
to continue deleveraging even after pursuing its growth Capex. Although higher coking coal
prices would impact the margins in 1HFY23, the margin trajectory continues to be robust and
above the historical average, thereby driving profitability for the company.
Stock vs Index graph:
This is the stock Vs Index graph which represents TATA steel gave 2.88x more returns in
comparison to SENSEX & 2.50x more returns than BSE500. As we know SENSEX comprises
of 30 largest & most actively traded stocks on the BSE & provides a gauge of Indian economy.

Competition:
Name Last Price
Market Cap.
(Rs. cr.)
Sales
Turnover
Net Profit Total Assets
JSW Steel 738.85 178,596.33 78,059.00 7,872.00 97,875.00
Tata Steel 1,314.25 160,559.78 153,308.39 7,862.45 159,409.35
Hindalco 545.00 122,470.91 131,985.00 3,478.00 131,557.00
Jindal Steel 556.95 56,813.81 38,988.63 4,267.04 52,488.17
NMDC 170.00 49,820.30 15,370.06 6,247.47 31,892.06
SAIL 101.90 42,090.05 69,113.61 3,680.39 80,982.5
Future Strategies
As part of strategy planning process, the external environment was scanned for megatrends
and understand how these trends influence the steel sector. Then identify the risks and
opportunities that could disrupt the industry. Materiality assessment provides further insights
to the changing needs of all our stakeholders.
The integrated strategy planning process drives strategy formulation and implementation
across the short to long-term horizon.
JSW Steel
TATA Steel
Hindalco
Jindal Steel
NMDC
SAIL
MARKET CAPITALIZATION

While Tata Steel has consistently been one of the most profitable and lowest cost producers of
steel1 in the world, the Company needs to address challenges such as improving productivity,
maintaining cost competitiveness, and being agile and innovative in a rapidly evolving business
environment. Tata Steel aspires to further strengthen its leadership position, and for this
purpose, has defined a set of Strategic Objectives (SOs). To achieve the SOs, we have also
identified a set of core capabilities, known as ‘Strategic Enablers’.
Conclusion:
Tata Steel delivered one of its best financial performances ever in the third quarter of the current
financial year and surpassed its deleveraging target of $1 billion. The underlying performance
has been very strong during the last quarter, and they have improved further from the recovery
in the second quarter. The near-term outlook on the demand side remains fairly strong and they
continue to focus on cost take outs, improvement of the product mix including launching new
grades, better working capital management and focused capital allocation. Their margin
momentum and cash flow generation continues to be strong, and it is expected to continue in
Q4.

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