This explains the forecasting of profitability of Tata Steel in Kalinga Nagar with certain assumptions.

1. Studying the Profitability of Kalinganagar
Integrated Greenfield Project by Tata
Steel
(Using Excel)
PRESENTED BY
BISMAY MISHRA

2. About the Company
 Established- 1907 as Asia’s first Integrated Private Sector Steel
Company
 Operations in 26 countries and a commercial Presence in over 50
Countries
 Jamshedpur Works have a Capacity of a 9.7 mtpa crude steel
 Awarded with Deming Application Prize 2008 for excellence in TQM
 Awarded with Deming Grand Prize 2012 by JUSE

3. About the Project
 Signed MoU in 2004 with Govt of Odisha
 Plant Location- Kalinganagar Industrial Location in Jajpur District
 Capacity - 6 mtpa (in two phases of 3 mtpa each)
 Capital Structure – Rs 32700 Crores of Rs 9900 crores as Equity and Rs
22800 crores as Debt
 Lenders- a Consortium of 21 FIs
 Repayment- First phase in 12 years and second phase within 10.5
years
 Credit Rating- AA+ by CARE
 Hindrance- Land Acquisition

4. Formulas Used and Assumptions
 CAPM (Capital Assets Pricing Model)
Return from Security= Riskless Return+Beta*(Return from Market-
Riskless Return)
 Riskless Return- 91 days T-Bill auction rate
 Growth Rate= (New Figure- Old Figure)/Old Figure
 Capital Employed= Shareholder’s Funds+Debt Liabilities
 Net Sales to Capital Employed proportion will be maintained
 Average Growth rate of Sales of past years will be maintained for next
years
 Mining License of 30 years will be taken as total Life of Project
 Summation of Variable cost and Fixed Cost is taken as Operating
Expenditure

5. Analysis & Interpretation
 Return on Market is based 1 year data, if reduced to 3 months data
then it will increase the Cost of Equity as we saw a high trend in last
3 months
 The problem of Land acquisition is a major hindrance, it may create
problem while commissioning second phase.
 The Growth Rate will vary a lot due to the Standard deviation of
9.328%
 The company will make more profit if the project will be extended
for some more years as there is no interest cost
 The project will contribute to growth rates of both company, country
and steel production

6. References
 http://www.moneycontrol.com/financials/tatasteel/balance-
sheet/TIS#TIS for 10 years Balance Sheet
 http://www.moneycontrol.com/financials/tatasteel/profit-loss/TIS#TIS for
10 years Profit & Loss
 http://www.nseindia.com/products/content/equities/indices/historical_i
ndex_data.htm for 1 year nifty
 Tata Steel Annual Report 2012-13
 The Economics Times
 OdishaDiary
 http://www.tatasteel.com/about-us/company-profile.asp
 Businesstoday
 The Hindu