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Tata - Corus –A case of

Acquisition

Submitted To:
Dr.R.Sahu

By :
Jitesh Maharwal(2004 IPG 29 )
Nikhil Garg(2004 IPG 44)
Harendra Singh(2004 IPG 83)
Sunny Tyagi(2004 IPG 83)
Contents
TATA & CORUS: A Case of Acquisition .......................................................................... 3
Steel Industry Background .............................................................................................. 6
Tata and Indian Steel Industry ........................................................................................ 9
SWOT Analysis: ....................................................................................................... 11
Global Steel Industry .................................................................................................... 12
Competition: US, Europe and Emerging Markets ........................................................ 12
Corus and Steel Production in the U.K ......................................................................... 13
Restoring Success ..................................................................................................... 14
SWOT Analysis: ....................................................................................................... 14
The Deal ........................................................................................................................ 16
Structuring and Pricing a deal ....................................................................................... 19
Demand Analysis ...................................................................................................... 20
Global Market ........................................................................................................... 21
Post Acquisition Tata .................................................................................................... 22
Appendix ....................................................................................................................... 23
Exhibit – 2 ................................................................................................................. 23
Exhibit –3 .................................................................................................................. 25
Exhibit – 4 ................................................................................................................. 27
Exhibit – 5 ................................................................................................................. 28
Exhibit – 6 ................................................................................................................. 29
Exhibit – 8 ................................................................................................................. 30
Exhibit – 9 ................................................................................................................. 31
Exhibit – 10 ............................................................................................................... 33
TATA & CORUS: A Case of Acquisition
“There are not many opportunities for producers in emerging low-cost markets to gain
access to the markets of Europe other than by acquiring a company like Corus,”
John Quigley (Editor, Industry Publication Steel week)
Finance minister P. Chidambaram offered unspecified help, if needed, to close the deal;
fellow steel magnate Lakshmi Niwas Mittal cheered the acquisition, and excited TV
newsreaders gushed. India’s first Fortune 500 MNC was born.
Tata acquired Corus, which is four times larger than its size and the largest steel producer in
the U.K. The deal, which creates the world's fifth-largest steelmaker, is India's largest ever
foreign takeover and follows Mittal Steel's $31 billion acquisition of rival Arcelor in the
same year. Over the past five years, Indian companies had made global acquisitions for
over $10 billion. The Tata bid almost equals this amount. Most of them have averaged $100
to 200 million.
"It is a two-way street now," Kamal Nath (Commerce Minister, India) said. "Not only India
is seeking foreign investment, but Indian companies are emerging investors in other
countries."
Ratan Tata has said he is confident the two companies have “a cultural fit and similar work
practices.” Nearly 30 years ago J.R.D Tata had lured away a young engineer from Corus’s
predecessor company, British Steel, to work at Tata Steel. That young Sheffield-educated
engineer – Sir Jamshed J. Irani (knighted by the Queen 10 years ago) – was Tata Steel’s
managing director until six years ago.
Until the 1990s, not many Indian companies had contemplated spreading their wings
abroad. An Indian corporate or group company acquiring a business in Europe or the U.K.
seemed possible only in the realm of fantasy. Recent reports of United Nations Conference
on Trade and Development (UNCTAD) and other organizations have recorded the fact that
nowadays Foreign Direct Investment (FDI) is more likely to flow in through cross border
mergers (and not through Greenfield Projects). Though Corus is four times bigger than
Tata but in the year 2006 the operating profit for Tata was $840 million, whereas in case of
Corus it was $860 million. There are some major inputs, which leads Tata towards this
huge profit.
On October 20 2006, the boards of Tata Steel and Corus announced their agreement on the
terms of the recommended acquisition of the entire issued and to be issued share capital of
Corus at a price of 455 pence in cash for each Corus Share, valuing Corus at £4.3 billion.
Tata Steel said its 455-pence-a-share offer for Corus represents on an enterprise value, a
price earning ratio of 7.9 times Corus’ ’06 earnings and includes a premium of
approximately 26.2% to the average closing mid-market price of 360.5 pence. Details of the
merger were likely to be decided by a strategic and integration committee that would
develop and execute the integration and growth plans for the combined entity. Corus is
much larger than Tata Steel, both in volumes and sales figures. Globally, it is ranked ninth
in terms of volume. Tata Steel, in comparison, is ranked 58.
Ratan Tata, Chairman of Tata Steel, said:
“This proposed acquisition represents a defining moment for Tata Steel and is entirely
consistent with our strategy of growth through international expansion. Corus and Tata
Steel are companies with long, proud histories. We have compatible cultures of
commitment to stakeholders and complementary strengths in technology, efficiency,
product mix and geographical spread. Together we will be even better equipped to remain at
the leading edge of the fast changing steel industry.”
Jim Leng, Chairman of Corus, said:
“This offer from Tata Steel reflects the substantial value created for Corus shareholders
since the placing and open offer and launch of our “Restoring Success” programme in 2003.
In the middle of last year, my board agreed a strategic way forward for Corus to seek access
to low cost production and high growth markets. Consistent with this, the Company held
talks with a number of parties from Brazil, Russia and India. This transaction represents the
culmination of these talks. This combination with Tata, for Corus shareholders and
employees alike, represents the right partner at the right time at the right price and on the
right terms. This creates a well balanced company, strategically well placed to compete in
an increasingly competitive global environment.”
Tata Steel offered to fund upfront the IAS 19 deficit on the Corus Engineering Steels
Pension Scheme by paying £126 million into the scheme; and to increase the contribution
rate on the British Steel Pension Scheme from 10 percent. to 12 percent until 31 March
2009. The Acquisition would be made by Tata Steel UK, a wholly-owned indirect
subsidiary of Tata Steel.
The Corus Directors unanimously recommended that Corus Shareholders vote in favor of
the Scheme after taking advice from Credit Suisse, J P Morgan Cazenove and HSBC. If the
deal sailed through, they would be fifth largest global steel producer with pro forma crude
steel production of 23.5 million tonnes in 2005. Tata Steel announced that it was keen to
retain Corus’s management, including chief executive Philippe Varin. The combination is
strategically compelling, creating a vertically integrated global steel group.
The acquisition would position the combined group as the fifth largest steel company in the
world by production, with a meaningful presence in both Europe and Asia. The powerful
combination of low cost upstream production in India with the high end downstream
processing facilities of Corus will improve the competitiveness of the European operations
of Corus significantly. The combination will also allow the cross-fertilization of research
and development capabilities in the automotive, packaging and construction sectors and
there will be a transfer, from Europe to India, of technology, best practices and expertise of
senior Corus management. In addition, Tata Steel will retain access to low cost raw
materials and slab for the enlarged group, and exposure to high growth in emerging
markets, whilst gaining price stability in developed markets.
As per the agreement, 75 per cent of Corus shareholders would have to tender their shares
for the acquisition to be complete. When complete, this would be the largest takeover by an
Indian company overseas. The deal would also catapult the combined entity to among the
world's largest steel companies with a total capacity of about 24 million tonnes per year.
The new, combined entity of Tata Steel-Corus would have a capacity of 40 million tonne by
2011-12. and a turnover of $32 billion by 2011-12 with an EBIDTA margin of 25%". The
Tata Steel has developed a six-pronged strategy in 2003 where the target was to increase
capacity from 4 million tonne then to 30 million tonne by 2015. The $8 billion Tata
Steel-Corus deal would be at No 5 among the top deals witnessed by the steel industry over
the last few years.
Tata acquired Corus on the 2nd of April 2007 for a price of $12 billion making the Indian
company the world’s fifth largest steel producer. This acquisition process has started long
back in the year 2005. However, Corus was involved in a considerable number of Merger &
Acquisition (M&A) deals and joint ventures (JVs) before Tata. This process started in the
year 2000 and with Tata it came to an end. In a period of seven years Corus was involved in
14 deals apart from Tata. (Refer Exhibit – 1 for the details about M&A deals by Corus). In
2005, when the deal was started the price per share was 455 pence. But during the time of
acquisition held in 2007, the price per share was 608 pence, which is 33.6% higher than the
first offer. For this deal Tata has financed only $4 billion, although the total price of this
deal was $12billion. Here the important point is how Tata could manage to get such a huge
amount for this deal?
However as stated by Muthuraman (the Managing Director of Tata Steel), the bid made to
Corus was unanimously supported by the management of the company and recommended
to its shareholders.
In an interview to CNBC India, B Muthuraman also said that they are acquiring Corus for
synergy and not for tonnage. "There are synergies in operations, manufacturing, marketing
etc."
Steel Industry Background
Steel is an alloy of iron and carbon containing less than 2% carbon and 1% manganese and
small amounts of silicon, phosphorus, sulphur and oxygen. Steel is the most important
engineering and construction material in the world. It is used in every aspect of our lives,
from automotive manufacture to construction products, from steel toecaps for protective
footwear to refrigerators and washing machines and from cargo ships to the finest scalpel
for hospital surgery.
Most steel is made via one of two basic routes:
Integrated (blast furnace and basic oxygen furnace).
Electric arc furnace (EAF).
The integrated route uses raw materials (that is, iron ore, limestone and coke) and scrap to
create steel. The EAF method uses scrap as its principal input.
The EAF method is much easier and faster since it only requires scrap steel. Recycled steel
is introduced into a furnace and re-melted along with some other additions to produce the
end product.
Steel can be produced by other methods such as open hearth. However, the amount of steel
produced by these methods decreases every year.
Of the steel produced in 2005, 65.4% was produced via the integrated route, 31.7% via
EAF and 2.9% via the open hearth and other methods.
At a steel mill, the crude steel production process turns molten steel into ingots, blooms,
billets or slabs. These are called semi-finished products. Semi-finished products are solid
blocks of steel, usually with a square or rectangular cross section.
Finished steel products are forged from semi-finished products. They are classified as
follows:
Cold-finished bars and flats (bright bars)
Cold-finished sections including forged and cold-formed sections
Cold-rolled narrow strip
Cold-rolled plate and sheet in coil and lengths
Deformed reinforcing bars
Drawn wire
Forged bars
Forgings (unworked)
Heavy sections, piling and welded structural sections
Hot-rolled bars and flats in lengths
Hot-rolled light sections
Hot-rolled narrow strip including universal plates
Hot-rolled rod in a coil (including reinforcement bar in a coil)
Hot-rolled wide strip, plate and sheet
Points, switches, crossings, tyres, wheels and axles
Rails and rolled accessories
Silicon electrical sheet and strip
Steel castings (unworked)
Steel tubes (seamless and welded, and steel tube fittings)
Tinmill products
Zinc- and other-coated sheet and strip
A flat steel product is typically made by rolling steel through sets of rollers to produce the
final thickness. There are two types of flat steel products:
Plate products. Vary in thickness from 10 mm to 200 mm. Plate products are used for ship
building, construction, large diameter welded pipes and boiler applications.
Strip products. Can be hot or cold rolled and vary in thickness from 1 mm to 10 mm. Thin
flat products are used in automotive body panels, domestic white goods (for example,
refrigerators and washing machines), steel (or tin) cans, and a number of other products
from office furniture to heart pacemakers.
A long product is a rod, a bar or a section. Typical rod products are the reinforcing rods
used in concrete, engineering products, gears, tools etc. are typical of bar products and.
Sections are the large rolled steel joists (RSJ) that are used in building projects. Wiredrawn
products and seamless pipes are also part of the long products group. Supply of raw
materials is a key issue for the world steel industry. IISI manages projects which look at the
availability of raw materials such as iron ore, coking coal, freight and scrap.
Scrap iron is mainly used in electric arc furnace steelmaking. As well as scrap arising in the
making and using of steel, obsolete scrap from demolished structures and end-of life
vehicles and machinery is recycled to make new steel. About 500 million tons of scrap are
melted each year.
Iron ore and coking coal are used mainly in the blast furnace process of iron making. For
this process, coking coal is turned into coke, an almost pure form of carbon which is used as
the main fuel and reductant in a blast furnace.
Typically, it takes 1.5 tons of iron ore and about 450kg of coke to produce a ton of pig iron,
the raw iron that comes out of a blast furnace. Some of the coke can be replaced by
injecting pulverized coal into the blast furnace.
Iron is a common mineral on the earth’s surface. Most iron ore is extracted in opencast
mines in Australia and Brazil, carried to dedicated ports by rail, and then shipped to steel
plants in Asia and Europe.
Iron ore and coking coal are primarily shipped in capesize vessels, huge bulk carriers that
can hold a cargo of 140,000 ton or more. Sea freight is an area of major concern for
steelmakers today, as the high demand for raw materials is causing backlogs at ports, with
vessels delayed in queues.
Since the World War II, the steel industry has experienced three distinct phases- growth
(1950-73), stagnation (1974-2001) and boom (2002-2006). The demand for steel grew at
an annual rate of 5.8% during 1950-73 as the industrializing nations were building their
civil infrastructure. The oil shocks of 1973 through 1979 slowed consumption in the
second phase. The production of crude steel grew at 0.6% p.a. over the entire period. Steel
prices declined by 2-3 % p.a. During 1999-2001 the industry’s overcapacity hovered near
25% globally. Only a few companies were able to sustain.
Since 2002 the annual steel production has grown at 7-8% driven almost entirely by the
double digit growth in China. The huge demand from china has caused a commensurate
leap in steel prices.
The industry has experienced a drop in the over capacity from 23% in 2001 to about 17%
from 2003-2005. But the demand from China has also witnessed a structural change. From
2002-2004 China’s capacity for producing crude steel increased on average by 55%. By
2005 China became a net exporter of steel. In the first half of 2006 China overtook Japan,
Russia and the EU 25 to become the world’s largest steel exporting country.
Exhibit 3 provides a list of Global Steel Manufacturers and a brief description of top five
steel companies. Exhibit 4 provides a comparison of financial indicators of major steel
firms.
Tata and Indian Steel Industry
Tata Steel has established by Indian Parsi Businessman Jamsetji Tata in 1907, exactly in
the year when British American Tobacco (BAT) has started its first factory in India. But
it started operating in the year 1912. Tata Steel holds a very vital place in Indian business
history, because it has introduced some of the unique concepts like 8-hour working days,
leave with pay and pension system for the first time in India and the first player to start
rapid industrialization process. In the later part the concepts invented and implemented by
Tata became lawful and compulsory practice for the Indian employees. From Tata Steel,
Tata has started investing in various other businesses like; Oil mills, Airlines, Publishing,
Motors, Consultancy services etc in a short span of 30 years. In the year 1945 Tata entered
into tea business by the name of Tata Tea, which was called as Tata Finlay earlier. Tata
also entered into exports as Tata Exports, which is the most successful and the largest
export house in India. During the entire business in India Tata has seen many ups and
downs, in different fields of business. If we will look at the company’s financial
status/condition, it will give some idea about the condition and performance of the
company across the years. (Refer Exhibit – 2, 3 & 4 for the detail about the company’s
performance from 1997-2006)
Tata Steel is the largest, flagship company of the Tata Group of companies, headquartered
in Mumbai, India2. The Tata Group is the oldest, largest, most respected industrial house in
India. At last count, it had 96 operating companies categorized into 7 businesses, and
include India’s largest companies in the fields of steel, automobiles, chemicals, hotels,
software,
Established in 1907, Tata Steel is Asia's first and India's largest private sector steel
company. Tata Steel is among the lowest cost producers of steel in the world and one of the
few select steel companies in the world that is EVA-positive (Economic Value Added).
Concerns over the availability of iron ore and coal, and the resultant volatility in prices,
meant that most Indian steel producers had to integrate backwards in order to have greater
access and pricing power over these commodities. Tata Steel has its own iron ore, coal and
chrome mines and reserves (on long term leases from the Government of India), and hence
is largely self-sufficient in most critical raw materials. However, it does not have the right
to export the ores and coal outside India.
Its captive raw material resources and the state-of-the-art 5 MTPA (million tonne per
annum) plant at Jamshedpur, in Jharkhand State, India gives it a competitive edge.
Determined to be a major global steel player, Tata Steel has recently included in its fold
NatSteel, Asia (2 MTPA) and Millennium Steel (1.7 MTPA) creating a manufacturing
network in eight markets in South East Asia and Pacific Rim countries. The Jamshedpur
plant is expected to expand its capacity from 5 MTPA to 7 MTPA by 2008. The Company
plans to enhance its capacity, manifold through organic growth and investments. The
Company's wire manufacturing unit in Sri Lanka is known as Lanka Special Steel, while
the joint venture in Thailand for limestone mining is known as Sila Eastern. Tata Steel's
products are targeted at the quality conscious auto sector and the burgeoning construction
industry. With wire manufacturing facilities in India, Sri Lanka and Thailand, the
Company plans to emerge as a major global player in the wire business. Tata Steel's
products include hot and cold rolled coils and sheets, galvanised sheets, tubes, wire rods,
construction rebars, rings and bearings. In an attempt to 'decommoditise' steel, the
company has introduced brands like Tata Steelium (the world's first branded Cold Rolled
Steel), Tata Shaktee (Galvanised Corrugated Sheets), Tata Tiscon (re-bars), Tata Bearings,
Tata Agrico (hand tools and implements), Tata Wiron (galvanised wire products), Tata
Pipes (pipes for construction) and Tata Structura (contemporary construction material).
The company has launched the Customer Value Management initiative with the objective
of creating complete understanding of customer problems and finding solutions jointly.
The company's Retail Value Management addresses the needs of distributors, retailers and
end consumers. The company has also launched India's first steel retail store – steel
junction - for making steel shopping a happy and memorable experience.
Tata Steel’s profitability ranks among the best in the industry. It posted comparatively
good results for the year ended March ’06. Consolidated sales grew at 26% to Rs 20,244
crore. Operating margins were a robust 31% in fiscal 2006. Consolidated profits for the
year stood at Rs 3,721 crore, an increase of 4%. It bought NatSteel in 2004 for Rs 1,313
crore and Millennium Steel for Rs 675 crore in 2005.
In 2006 Tata Steel was ranked once again the best steel making company in the world by
World Steel Dynamics Inc. USA (WSD) based on a study of 22 world class steel makers
-consecutively for the second time. The WSD report of February 2006 covered the study of
all the leading steel manufacturing companies across the globe including POSCO, Arcelor,
Nippon Steel, Bao Steel, Thyssen Krupp on 20 different parameters. Emerging out of the
study, Tata Steel was ranked first with a weighted average score of 8.51 as against a score
of 8.11 in 2005. POSCO of South Korea followed in the second place with 8.41. Tata Steel
has been continuously marching towards becoming a global steel enterprise and aspires to
become a 15 MT steel producer by 2010. It is also developing a deep-sea port in Orissa
along with Larsen & Toubro to facilitate the flow of inbound and outbound commodities.
Apart from the main steel division, Tata Steel's operations are grouped under strategic
profit centres like tubes, growth shop (for its steel plant and material handling equipment),
bearings, ferro alloys and minerals, rings, agrico and wires.
Tata Steel's products include hot and cold rolled coils and sheets, tubes, wire rods,
construction bars, structurals, forging quality steel, rings and bearings. In an attempt to
'decommoditise' steel, the company has recently introduced brands like Tata Steelium
(India's first branded cold rolled steel), Tata Shaktee (galvanised corrugated sheets), Tata
Tiscon (re-rolled bars), Tata pipes, Tata bearings, Tata Wiron (galvanised wire products)
and Tata Agrico (hand tools and implements). Tata Steel is also exploring opportunities in
the ferro-chrome and titanium businesses.
Tata Steel has numerous joint ventures and subsidiaries. Among them are:
Tinplate Company of India
Tayo Rolls
Tata Ryerson
Tata Refactories
Tata Sponge Iron
Tata Metaliks
Tata Pigments
Jamipol
TM International Logistics
mjunction services
TRF
Jamshedpur Utility and Service Company (JUSCO)
The Indian Steel and Wire Products(ISWP)
Lanka Special Steel
Sila Eastern Company
The Indian Steel industry is regarded as the most important component for the
development of nation, because steel industry (heavy industry) is considered as a very
important and influential parameter for the development of any modern economy. The
finished steel production in India has grown from 1.1 million tones in 1951 to 31.63
million tones in 2001-02, which can be regarded as a remarkable example of India’s
development in economic activities. Tata played a vital role in the improvement of steel
production also. For that reason in the development of India’s economy, Tata played a
significant role. As a result the consumption level of steel from 1990 to 2002 was
continuously in an increasing order, but in 2003 it was not like earlier. In respect to the per
capita income and consumption of steel it is very less in India with compare to other
countries. (Refer Exhibit – 5 for the details about steel consumption level)
India’s major market for steel and steel items include USA, Canada, Indonesia, Italy, West
Asia, Nepal, Taiwan, Thailand, Japan, Sri Lanka and Belgium. The major steel items of
export include HR coils, plates, CR and galvanized products, pipes, stainless steel, wire
rods and wires. With the fall in prices along with depressed domestic demand, India has
been increasing exports to overcome the excess supply situation. This has resulted in
antidumping actions being taken by developed countries like USA, EU and Canada. The
trade action by some countries against Indian steel industry has, to some extent, affected
India’s exports to these countries. The Government of India and the Indian steel producers
are trying to combat such actions despite such efforts being very expensive and involving
time-consuming procedures. (Refer Exhibit – 6 for the detailed about steel production by
Tata in India)

SWOT Analysis:

Strengths Opportunities
•Lowest Cost Producer in •Consolidation trend in Steel
world Industry
•Experience of TATA group in •CSN’s tarnished image after
doing global acquisitions failure of 2002 negotiations
•Stable balance sheet( Low •To get exposed to the global
debt to equity ratio) steel market ( will save time
and learning space for them)

Weaknesses Threats
•Corus was triple the size of •Brazilian player CSN
TATA steels in terms of •Russian player Severstal
production •No committed financers to
support the possible deal
Global Steel Industry
In global steel industry the consumption of steel has been decreased drastically in 2007, in
comparison to 2006. According to International Iron and Steel Institute (IISI) till 2010 the
average demand for steel would be 4.9 per cent per year. But during 2010 and 2015 the
growth is expected to be 4.2 per cent. In fact IISI forecasts the global steel demand would
be 1.32 billion tones by 2010 and 1.62 billion tones by 2015. Much of this demand growth is
expected to be generated from countries like China and India. Among the major steel
producing countries the production of steel has increased from 2005-2006 except Brazil.
China is the highest steel producing country in the world with a production of 355.8 million
tones in 2005 and 418.8 million tones in 2006. And for this increasing demand of steel
market it is not possible for a single company to capture the market alone. (Refer Exhibit –
7 for the details about the steel production by different companies of the world) In that
production process Tata may play a vital role. For that reason IISI is giving its opinion in
favor of Tata.
For 2007, S&P projects GDP growth of 2.4%, versus GDP growth of 3.3% in 2006.
Through April 2007, motor vehicle sales fell 3.0% while motor vehicle production
declined 5.5%. In 2006, motor vehicle sales fell 2.6%, while production was down 2.8%.
As predicted, lower sales for all of 2007 will lead to reduced demand from this key end
market for steel. Presumably, car manufacturers will be working to reduce unsold car
inventory and will be cutting production, which will reduce demand for steel. According to
the numerical data, through May, 2007 the S&P Steel Index increased 35.1%, compared to
a 6.6% increase for the S&P 1500 Index and a 14.9% rise in the S&P
Materials Index. In 2006, the S&P Steel Index increased 58.2%, versus a 13.3% increase
for the 1500 and a 16.6% increase in the S&P Materials Index. In the long term, there is a
strong possibility for the industry to benefit from greater pricing power resulting from
further expected consolidation, a lower cost structure, and a continuation of the cyclical
decline of the U.S. dollar. (Refer Exhibit – 8 for the detailed about the production of steel by
different countries of the world)
Competition: US, Europe and Emerging Markets
In the past, industry consolidation contributed to reduced cyclicality. The top 10 steel
makers represent about 28% of global production. Besides Arcelor Mittal, four of the top
10 are in Asia, three in Europe and two in the U.S. In addition to China’s plan for
consolidation many of the leading steel producers have ambitious growth plans that will
entail further consolidation. Lakshmi Mittal, the CEO of Arcelor Mittal stated in June 2006
that winning companies in the steel industry will have somewhere between 150m-200m
tons of annual capacity by 2015 and that scale is crucial in the pursuit of value.
Shanghai Baosteel, which, although founded in 1998, is already the world’s fifth largest
steel maker producing 22.7 m tons in 2005. The potential acquisition of Corus by Tata
Steel would create a new entity with a production volume close to Baosteel’s.
Corus and Steel Production in the U.K
Corus Group plc was formed on 6th October 1999, through the merger of two companies,
British Steel and Koninklijke Hoogovens, following the privatization of many steelworks
companies by the U.K. government. The company consists of four divisions which
include: Strip Products, Long Products, Aluminum and Distribution and Building Systems.
With headquarters in London, Corus operates as an international company, satisfying the
demand of many steel customers worldwide. Its core business comprises of manufacturing,
development and allocation of steel and aluminum products and services. The company has
a wide variety of products and services which comprise of the manufacturing of electrical
steel, narrow strip, plates, packaging steel, plated steel strip, semi finished steel, tube
products, wire rod and rail products and services. However, the company is also engaged in
providing a variety of services including design, technology and consultancy services.
Corus’ products and services are acquired by customers from diverse fields such as
commercial and military aerospace ventures, the automotive, construction, engineering,
defense and security, as well as the rail and shipbuilding industry. In terms of performance,
the company is regarded as the largest steel producer in the UK with £10,142 million of
annual revenue (for 2005) and a work force of 50 000 employees. In order to sustain and
run its global steelmaking, processing and distribution operations the company makes
annual investments of over £6 million for the purchase of various goods and services, such
as iron ore and coal, alloys, refractory, rolls and paint. Looking at the financial status of the
company from 1996-2005, a degree of fluctuation between the years can be seen. But
irrespective of all these factors Corus continue the business as it was continuing. (Refer
Exhibit – 9 & 10 for the details of financial performance of the company across the years)
In 1990, the Hoogovens group had five divisions; Steel, Aluminum, Technical Services,
Subcontracting, and the newly formed Steel Processing and trading. In 1999, the trend
towards greater rationalization in the European steel industry led to the merger discussions
with British Steel. At that time Hoogovens had 17 business units with a turnover of 4.9 b
Euro.
The British Steel Corporation was formed from the UK’s 14 main steel producing
companies. In 1987, the UK government formally announced its intention to privatize the
British Steel Corporation. The British Steel Act 1988 transferred the assets of the
corporation to British Steel, a company registered under the Companies Act. The early
1990s saw reduced demand and it was not until 1993 that growth in the UK economy
gradually gathered pace and was reflected in a partial recovery in steel demand and prices.
The trend continued into 1994 and helped by continuing efficiency and productivity gains,
British Steel returned to profit. On October 6, 1999, the merger of Hoogovens with British
steel to form Corus came into effect.
Corus has manufacturing operations in many countries with major plants located in the
UK, The Netherlands, Germany, France, Norway and Belgium. The company produced
around 18 million tonnes of crude steel in 2005, which represented approximately 10% of
total EU production and positioned the company as the 9th largest steel producer in the
world and the 2nd largest producer in Europe. Corus produces carbon steel by the basic
oxygen steelmaking method in the UK at Port Talbot, Teesside and Scunthorpe and in The
Netherlands at IJ muiden. In addition, carbon steel is produced by the electric arc furnace
method in the UK at Rotherham. Corus has approximately 50% of the UK carbon steels
market and around 11% of the European (including UK) carbon steels market.
In 2005 Corus generated turnover of £9.1 billion and produced 19 million tonnes of steel
and delivered over 0.6mt of aluminum. At the end of December 2005 Corus had 47,300
employees. From October 2003 Corus has been structured into four main divisions: Strip
Products, Long Products, Aluminium and Distribution and Building Systems.Corus has a
strategy focused around carbon steel, with the intention of: Ensuring that upstream
steelmaking facilities are optimized and that the leading position of its I J muiden site is
maintained. Pursuing selective growth of downstream businesses seeking opportunities to
participate in the ongoing consolidation of the world's steel industry. Following his
appointment as Chief Executive of Corus with effect from 1 May 2003, Philippe Varin
carried out an intensive and detailed review of the Group's activities. As a result a number
of key initiatives were launched, known as the 'Restoring Success' initiatives. These focus
on introducing new leadership and instilling a new corporate culture across the Group,
aligning the financial resources available to the Group with its future strategic needs, and
returning all parts of the Group to acceptable levels of profitability. The latter will be done
by building on our 'Restoring Success' initiatives -existing cost reduction programmes,
implementing restructuring proposals for the UK asset base and initiating Group-wide
efficiency measures.

Restoring Success
The Restoring Success programme, launched in June 2003, was designed to deliver a
£680m improvement in earnings before interest, tax and amortization by the end of 2006.
During 2005 the company continued to make good progress and achieved approximately
80% of the overall target.
As well as savings through cost reduction and improved operational efficiency, action
plans are also focused on improving our safety record and achieving best in class customer
service.
Safety During 2005, Corus saw a further 24% reduction in the frequency of lost time
injuries, a good lead indicator of performance. Service As part of its Restoring Success
programme, Corus set out to improve the percentage of deliveries made on time, from 74%
in 2003, to 90% by the end of 2006. Significant and sustainable progress was made in this
area, with 85% of deliveries having met this target during 2005.
Savings By the end of December 2005 Corus had achieved nearly 80% (£555m) of the
£680m per annum savings that it had committed to deliver by the end of 2006.
The Group's aim is to close the competitive gap that currently exists between Corus and its
European peer group. Corus estimates that this gap in 2003 was some 6% at the EBITDA
margin level (i.e. EBITDA to turnover) when measured against the average of its European
competitors.
Full implementation of the 'Restoring Success' initiatives above is designed to close the
current competitive gap by the end of 2006.

SWOT Analysis:
Strengths: Opportunities:
•World’s ninth largest and •Consolidation trend in Steel
Europe’s second largest steel Industry
producer •To get right price at a time
•Wide range of products when market is less volatile
•Presence of operating
facilities spread in whole EU

Weaknesses: Threats:
•Corus was bleeding because of •Huge pension liability might have
high operational costs led to collapse of the deal
•Section 201 tariff imposed by •Disagreement of Labor and
Bush in 2002 led to loss in Corus government due to possibility of
clientele job cut
The Deal
The deal (between Tata & Corus) was officially announced on April 2nd, 2007 at a price of
608 pence per ordinary share in cash. This deal is a 100% acquisition and the new entity
will be run by one of Tata’s steel subsidiaries. As stated by Tata, the initial motive behind
the completion of the deal was not Corus’ revenue size, but rather its market value. Even
though Corus is larger in size compared to Tata, the company was valued less than Tata (at
approximately $6 billion) at the time when the deal negotiations started. But from Corus’
point of view, as the management has stated that the basic reason for supporting this deal
were the expected synergies between the two entities. Corus has supported the Tata
acquisition due to different motives. However, with the Tata acquisition Corus has gained
a great and profitable opportunity to make an exit as the company has been looking out for
a potential buyer for quite some time.
The total value of this acquisition amounted to ₤6.2 billion (US$12 billion). Tata Steel the
winner of the auction for Corus declares a bid of 608 pence per share surpassed the final
bid from Brazilian Steel maker Companhia Siderurgica Nacional (CSN) of 603 pence per
share. Prior to the beginning of the deal negotiations, both Tata Steel and Corus were
interested in entering into an M&A deal due to several reasons. The official press release
issued by both the company states that the combined entity will have a pro forma crude
steel production of 27 million tones in 2007, with 84,000 employees across four continents
and a joint presence in 45 countries, which makes it a serious rival to other steel giants.
The official declaration of the completed transaction between the two companies was
announced to be effective by Court of Justice in England and Wales and consistent with the
Scheme of Arrangement of the Tata Steel Scheme on April 2, 2007. According the Scheme
regulations, Tata Steel is required to deliver a consideration not later than 2 weeks
following the official date of the completion of the transaction.
The process has started on September 20, 2006 and completed on July 2, 2007. In the
process both the companies have faced many ups and downs. The details of this process
has described below

: Corus Steel has decided to


September 20, 2006
acquire a strategic partnership
with a Company that is a low cost
producer

October 5, 2006 : The Indian steel giant, Tata Steel


wants to fulfill its ambition to
expand its business further.

October 6, 2006
: The initial offer from Tata Steel
is considered to be too low both
by Corus and analysts.

October 17, 2006


: Tata Steel has kept its offer to
455p per share.
October 18, 2006
: Tata still doesn’t react to Corus
and its bid price remains the
same.

October 20, 2006


: Corus accepts terms of ₤ 4.3
billion takeover bid from Tata
Steel

October 23, 2006


: The Brazilian Steel Group CSN
recruits a leading investment
bank to offer advice on possible
counter-offer to Tata Steel’s bid.

October 27, 2006


: Corus is criticized by the
chairman of JCB, Sir Anthony
Bamford, for its decision to
accept an offer from Tata.

November 3, 2006
: The Russian steel giant Severstal
announces officially that it will
not make a bid for Corus

November 18, 2006


: The battle over Corus intensifies
when Brazilian group CSN
approached the board of the
company with a bid of 475p per
share

November 27, 2006


: The board of Corus decides that
it is in the best interest of its will
shareholders to give more time to
CSN to satisfy the preconditions
and decide whether it issue
forward a formal offer

December 18, 2006


: Within hours of Tata Steel
increasing its original bid for
Corus to
500 pence per share, Brazil's CSN
made its formal counter bid for
Corus at 515 pence per share in
cash, 3% more than Tata Steel's
Offer
January 31, 2007 : Britain's Takeover Panel
announces in an e-mailed
statement that after an auction
Tata Steel had agreed to offer
Corus investors 608 pence per
share in cash

April 2, 2007 : Tata Steel manages to win the


acquisition to CSN and has the
full
voting support form Corus’
shareholders
Structuring and Pricing a deal
Financing Structure Financing India's largest leveraged buyout comprised of a $3.88 billion equity
contribution from Tata Steel, a fully underwritten non-recourse debt package of $5.63 billion, and a
revolving credit facility of $669 million.
As per the acquisition plan a special purpose vehicle, a wholly owned subsidiary, called Tata Steel UK
would be set up by Tata Steel. The acquisition was proposed to be effected under section 425 of the
English Companies Act 1985 and upon approval from the Corus shareholders. Tata Steel UK would
offer a price of 455 pence per Corus share valuing Corus at £4.3b ($8.04b). This price represented a
multiple of 7.9 times the EBITDA of Corus from continuing operations for the twelve months to July 1,
2006. The acquisition was to be structured as a 100 percent leveraged buy out funded through cash
resources and loans raised by Tata Steel and the SPV. Under the plan Tata Steel UK would arrange a
loan of £1.6 b ($3056m), a revolving credit facility and a bridge loan and the rest would come from Tata
Steel (to the SPV).

Tata Steel appointed Credit Suisse, ABN Amro and Deutsche Bank to arrange financing. Of the £3.3
billion of financing being raised at the SPV level, Credit Suisse would provide 45% and ABN AMRO
and Deutsche 27.5% each. The $1.8 billion bridge debt being raised at the Tata Steel level in India
would be shared between Standard Chartered and ABN AMRO.
The financing structure and the break up of sources are shown in Exhibits 13 and 14.
Operational Structure One of the biggest concerns Tata executives had was whether the inevitable
cultural conflicts between the organizations would pose significant operating problems. Integrating a
large company that operated on a different continent with diverse cultures and operating environments
was going to be no small task. Exacerbating this problem was the fact that Corus itself was formed by
the merger of an English and a Dutch company that had different cultures and profitability.
In line with the Tata Group’s approach to acquisitions, Tata Steel announced its intention to continue
with the senior management of Corus. Appointments to the Tata Steel and Corus were to provide
common platform for strategy and integration. According to the plan Ratan Tata would be the chairman
of both Tata Steel and Corus and Jim Leng would serve as deputy chairman of Tata Steel and Corus.
Three board members (including the CEOs) of each company would serve on the other company’s
board. A strategic and integration committee comprising of Ratan Tata, the CEOs and senior
management professionals of both companies was formed to develop and execute the integration plan
and further growth plans. Appropriate cross functional teams were to be formed to execute the
integration plan.
Strategy Muthuraman, the Managing Director of Tata Steel had a number of things to consider in
negotiating a deal for Corus. First of all, Tata Steel could not make an all cash offer and assume the
assets and liabilities of Corus on its balance sheet because of the sheer size. Second, both companies
had to convince their shareholders about the strategic and financial benefits to the companies.
Shareholders would be concerned about the size of the premium and the potential dilution in earnings
per share. Muthuraman explained in a conference:
While we have been talking about strategy in this world of consolidation and growing in size, both in
geography and in size, Tata Steel has been planning its long-term strategy. Tata Steel’s strategy, in
terms of what it wanted to do over a period of time of 10 years, between 2002-03 and 2015, was to grow
from four million tonnes per annum, which we were at that time, to about 30 million tonnes plus,
beyond the shores of India, multinational, and continuing to be in a low-cost position and continuing to
be EVA positive. That strategy had six elements. One of them was that we would build a strong base in
India, which is why we’re expanding Jamshedpur from five to 10 million, and we’re building three
greenfield projects.
The second part of the strategy was that we’d adopt a de-integrated strategy where we believed that the
world steel industry, over the last 150 years or so, had adopted a certain model of making from iron to
finished steel in one location, irrespective of where the raw materials were. We always believed that this
model will change, because steel has to compete with other materials and, for the sustainable
competitiveness of steel, it is necessary that this business model will undergo a change. We wanted to be
at the forefront of that change in business model, so we said we would look for private steelmaking in
countries which are rich in iron ore and coal or gas. So we thought of plants in India, we thought of
plants in Bangladesh, we thought of plants in Iran.
The third part of the strategy was raw material security. It’s important that we have raw material
security to be competitive and sustainable in this world. We have raw material security on a 100% basis
for our existing operations in Jamshedpur. We have a large extent of self-sufficiency for coal. Each of
our three greenfield projects in India will carry with it raw material iron ore security. We have some
strategic types and some strategic positions in terms of coal and limestone beyond the shores of India.
We said we should continue to look for raw material security, both in India and overseas.
The next part of our strategy was getting more out of steel, which is by branding, by going downstream,
by positioning the products, getting into construction solutions and so on. It is with that aim we formed
the joint venture with BlueScope. It is with that strategy that we started having a joint venture with
Ryerson of the US, for going downstream into processed materials.
The next part of the strategy was control over logistics. No large company – no large steel company –
can be sustainably competitive over a period of time without some control on the efficiency and costs of
logistics, so we decided to build a port in Orissa to connect Indian operations with our overseas
operations. We decided to start a shipping company with NYK of Japan, and these are all in progress.
Our acquisition of Corus and our partner in Corus to form a joint entity is part of this strategy, and it is
part of this strategy that we have been talking about for the last few years. Just like Mr Leng mentioned,
Corus had a strategy, and the partnership with Tata Steel was part of that strategy. We have looked at it
exactly in the same manner, and we believe that this entity, which will become, in terms of scale,
number five in the world, has the potential to consolidate the steel industry even further.
Indeed there was very little shared territory in the markets the companies served. Tata Steel has a strong
position in India, Singapore, Thailand and other parts of Asia whereas Corus has a strong presence in
Europe.
Exhibit 15 presents a summary of production and distribution facilities of the combined entity.
Synergy The merger of Tata Steel with Corus was expected to lead to a saving of $130 million savings
in 2007 till March 2008 and $400 million to the company every year after three years. The Corus group
has developed a breakthrough technology to reduce cost of steel production and Tata Steel was
planning to adopt the technology in the near future.

Demand Analysis
Domestic Market To establish a base case analysts and investment bankers made use of base case
forecasts of production and demand for steel in India and the rest of the world as well as the outlook for
steel prices. According to government estimates, domestic consumption of steel in India was expected
to go up to 60 mt by 2010 from the prevailing 35 mt, and to 100 mt by 2020. The planned capacity
expansions would lead to a capacity of 70 mt by 2020. Assuming a CAGR growth of 6 per cent in steel
demand, the domestic demand should be around 90 million tonnes by 2020. Also most steel companies
in India have strong balance-sheets, which will help them carry on with their expansion plans. For
example, companies like Steel Authority of India Ltd are almost debt free.
India has a per capita consumption of steel of around 30 kgs against 180 kgs in China and an average of
over 400 kgs in the developed countries. Analysts point out that India's steel consumption has stagnated
at around 30 kgs, despite increasing steel production, mainly because of an increasing population.
According to a report by Organisation for Economic Co-operation and Development, world steel
supply was likely to expand dramatically over the next two to four years. According to the report, much
of this unprecedented investment is occurring as a result of decisions by governments to support the
expansion of domestic steel-making capability. The report warned that these state-supported
expansions would lead to growing steel trade disputes and a return of overcapacity conditions within
the next few years. It also noted that the planned capacity expansions would represent a structural
problem for the global steel industry to the extent that production exceeds the projected increase in
demand for steel between 2005 and 2008. The OECD report projects Indian steel consumption to grow
by only 3.5 per cent in 2005 from the levels a year ago. It says the gap between demand and supply
would mean that the vast majority of India's new production capacity will be for export.
According to some analysts, demand from the US, Japan and China is expected to slow down, which,
coupled with the tightening availability of raw materials, will lead to softer prices in the short to
medium term. Further, new capacities were expected to come into play only around 2008. So analysts
expected a drop in prices around that time. But in the short-term they expected HRC (hot rolled coil)
prices to hover around $480-500 range in the short term. But there were worries about the long term.
Global Market
Global apparent consumption of steel increased at an average pace of more than 7 percent per annum
since 2002 to reach a record level of 1.113 billion tonnes in 2006. To meet this rise in demand, steel
production growth has accelerated sharply, reaching 1.24 billion tonnes in 2006, up by as much as 393
million tonnes (or 46%) compared to its level of 850 million tonnes in 2001. This growth in demand for
steel is creating a favorable situation for many steelmakers. Steel prices and the prices of some raw
materials in some markets are two times higher or more compared to levels prevailing in 2001.
China’s apparent crude steel consumption has doubled between 2000 and 2005 to reach 398 million
tonnes in 2006. The economy now accounts for around 32 percent of the world’s apparent steel
consumption. The rapid expansion of China’s industrial production and its strong urbanization trend
will ensure that steel consumption continues to rise, though growth should moderate slightly in coming
years from the double-digit rates observed in recent years.
In India, there is enormous potential for growth in steel consumption. Heavy investment in developing
the country’s infrastructure, such as railways, ports, and roads will fuel growth in the steel-intensive
construction sector. In Russia, steel consumption prospects are favorable, supported by the consumer
boom, which is now spreading to automobiles and housing, as well as the replacement of ageing
infrastructure. Brazilian demand for steel will continue to be supported in the future by the country’s
automotive and construction sectors.
Steel consumption in the Middle East is expanding rapidly from a relatively low level of 37 million
tonnes. Massive infrastructure and other building activity are driving this development.
In NAFTA, housing market problems and a slowdown in manufacturing activity in the U.S. could
contribute to a reduction in steel consumption this year from around 155 million tonnes in 2006, while a
recovery in demand could take place in 2008 as economic growth reaccelerates. Steel consumption in
the EU-27 is expected to stay on a gradual growth path in 2007 and 2008, thanks to the relatively
healthy outlook for domestic as well as external demand for products manufactured in steel-using
industries.
Post Acquisition Tata
Tata Steel has formed a seven-member integration committee to spearhead its union with Corus group.
While Ratan Tata, chairman of the Tata group, heads the committee, three of the members are from
Tata Steel and the other three are from Corus group. Members of the integration committee from Tata
Steel include managing director B Muthuraman, deputy managing director (steel) T Mukherjee, and
chief financial officer Kaushik Chatterjee. The Corus group is represented in the committee by CEO
Phillipe Varin, executive director (finance) David Lloyd, and division director (strip products) Rauke
Henstra.
The acquisition by Tata amounted to a total of 608 pence per ordinary share or ₤6.2 billion (US $12
billion) which was paid in cash. First of all, the general assumption is that the acquisition was not cheap
for Tata. The price that they paid represents a very high 49% premium over the closing mid market share
price of Corus on 4 October, 2006 and a premium of over 68% over the average closing market share
price over the twelve month period. Moreover, since the deal was paid for in cash automatically makes
it more expensive, implying a cash outflow from Tata Steel in the amount of £1.84 billion.
Tata has reportedly financed only $4 billion of the Corus purchase from internal company resources,
meaning that more than two-thirds of the deal has had to be financed through loans from major banks.
The day after the acquisition was officially announced, Tata Steel’s share fell by 10.7 percent on the
Bombay stock market. Despite its four times smaller size and smaller capacity, Tata Steel’s operating
profit for 2006, earning $840 million on sales of 5.3 million tones, were very close in amount to those
generated by Corus ($860 million in profits on sales of 18.6 million tons).
Tata’s new debt amounting to $8 billion due to the acquisition, financed with Corus’ cash flows, is
expected to generate up to $640 million in annual interest charges (8% annual interest cost). This
amount combined with Corus’ existing interest debt charges of $400 million on an annual basis implies
that the combined entity’s interest obligation will amount to approximately $725 million after the
acquisition.
The debate whether Tata Steel has overpaid for acquiring Corus is most likely to be certain, since just
based on the numbers alone it turns out that at the end of the bidding conflict with CSN Tata ended up
paying approximately 68% above the average price of Corus’shares. Another pressing issue resulting
for this deal that has created a dilemma between experts and analysts opinions is whether this
acquisition for the right move for Tata Steel in the first place. The fact that Tata has managed to acquire
a British steel maker that has been a symbol of Britain’s industrial power and at the same time its
dominion over India has been perceived as quite ironic. Only time will show whether Tata will be able
to truly benefit from the many expected synergies for the deal and not make the typical mistakes made
in many large M&A deal during this beginning period.
“I believe this will be the first step in showing that Indian industry can in fact step outside the shores of
India in an international marketplace and acquit itself as a global player.”
Ratan Tata
Appendix

Exhibit – 2 Financial 10 Yr. Balance Sheet Report

Tata Steel Limited Symbol: (C000009156)


http://www.tatasteel.com CUSIP: Price 3/22/2007 Shrs Out (th) Mkt Cap
(th)
Exchang BOM DCN: T080399284 442.00 580,000 249,690
e: IND ISIN:
Country: INE081A01012
DJ Sector: PE Ratio Tot Ret 1Yr Beta

DJ Industry: IRON AND STEEL FORGINGS 6.54 6.01 #N/A

Company Status: Active Source: Thomson Financial

Scaling Factor : 1000000 INR Currency:


INR
BALANCE SHEET 3/31/2006 - 3/31/2002
ASSETS 03/31/06 03/31/05 03/31/04 03/31/03 03/31/02

Cash And ST Investments 7,767.50 4,657.30 2,778.70 4,103.00 2,473.10


Receivables (Net) 21,983.80 20,209.30 13,873.80 16,510.10 17,538.20
Total Inventories 27,733.10 24,899.00 13,740.40 12,134.70 11,809.80
Other Current Assets 11 6.6 2.9 1698 1801.9
Current Assets - Total 59,080.60 50,719.70 43,701.60 38,781.50 35,623.30
Property Plant & Equipment - Net 107340.8 96807.1 80172.3 76600.8 77722.6
Total Investments #N/A #N/A #N/A #N/A #N/A
Other Assets 4,240.30 3,564.50 1,565.10 106.60 10,134.40
Total Assets 205,450.70 177,033.10 147,988.70 127,600.80 131,372.60

LIABILITIES & SHAREHOLDERS' EQUITY 03/31/06 03/31/05 03/31/04 03/31/03 03/31/02

Accounts Payable 30,278.20 32,051.30 21,513.50 18,364.20 4,917.40


ST Debt & Current Portion of LT Debt 3,752.60 3,362.90 2,433.30 4,325.30 5,617.60
Income Taxes Payable 3369.3 3434.9 14252.3 4855.6 1803.6
Other Current Liabilities 4,771.00 4,824.80 3,976.10 1,531.40 8,848.20
Current Liabilities - Total 49,573.00 51,006.00 45,998.80 32,147.60 27,254.90
Long Term Debt 27,876.20 27,902.60 30,598.80 38,953.20 44,338.10
Other Liabilities 0.00 0.00 0.00 0.00 0.00
Total Liabilities 101,396.60 102,726.30 100,935.30 94,347.10 95,950.80

Shareholders' Equity

Minority Interest 1,235.70 935.20 486.60 309.70 236.30

Preferred Stock 0.00 0.00 0.00 0.00 0.00


Common Equity 102,818.40 73,371.60 46,566.80 32,944.00 35,185.50
Retained Earnings 11.20 11.20 #N/A #N/A #N/A
Total Liabilities & Shareholders' Equity 205,450.70 177,033.10 147,988.70 127,600.80 131,372.60
Rate Used to Translate From INR to INR 1.00 1.00 1.00 1.00 1.00

BALANCE SHEET 3/31/2001 - 03/31/01 03/31/00 03/31/99 03/31/98 03/31/97

3/31/1997 ASSETS

Cash And ST Investments 2,392.30 4,089.00 3,361.90 4,294.10 2,513.80


Receivables (Net) 19,186.50 12,727.13 13,449.78 14,244.30 17,566.42
Total Inventories 8,955.70 9,226.60 9,936.50 10,397.00 10,211.10
Other Current Assets 262.90 4,990.87 3,929.72 3,921.20 3,336.68
Current Assets - Total 32,256.10 32,406.30 32,302.80 34,201.40 34,512.50
Property Plant & Equipment - Net 75380.9 74240.6 70585.8 63000.4 55264
Total Investments #N/A #N/A #N/A #N/A #N/A
Other Assets 9,202.90 8,281.20 5,540.00 2,970.70 2,783.20
Total Assets 125,309.10 120,803.90 114,283.00 106,407.00 99,208.70
LIABILITIES & SHAREHOLDERS' EQUITY 03/31/01 03/31/00 03/31/99 03/31/98 03/31/97

Accounts Payable 3,100.40 3,155.30 3,874.00 3,405.40 3,529.00


ST Debt & Current Portion of LT Debt 787.40 6,997.20 9,404.40 6,120.10 782.80
Income Taxes Payable 1,802.00 1,670.40 1,855.30 1,505.80 1,114.00
Other Current Liabilities 9,803.00 7,843.40 6,827.60 7,084.30 7,414.30
Current Liabilities - Total 49,573.00 25,195.20 27,364.30 23,245.00 17,407.10
Long Term Debt 45,932.70 42,073.10 39,982.90 39,669.70 40,043.10
Other Liabilities 0.00 0.00 0.00 0.00 0.00
Total Liabilities 76,424.80 75,219.90 72,638.80 65,758.20 59,468.50
Shareholders' Equity 0.00 0.00 0.00 0.00 0.00
Minority Interest

Preferred Stock 1,400.00 1,500.00 0.00 0.00 0.00


Common Equity 47,484.30 44,084.00 41,644.20 40,648.80 39,740.20
Retained Earnings #N/A #N/A #N/A #N/A #N/A
Total Liabilities & Shareholders' Equity 125,309.10 120,803.90 114,283.00 106,407.00 99,208.70
Rate Used to Translate From INR to INR 1.00 1.00 1.00 1.00 1.00
Exhibit –3 Financial 10 Yr. Income Statement

Indu strial
Template
Tata Steel Limited Symbol (C00000915
http://www.tatasteel.com CUSIP: Price 3/22/2007 : Out (th)
Shrs 6) (th)
Mkt Cap

Exchange BOM DCN: 442.00 580,000 249,690


: Country: T080399284 IND PE Ratio Tot Ret 1Yr Beta
DJ ISIN: INE081A01012
Sector:
DJ Industry: IRON AND STEEL FORGINGS 6.54 6.01 #N/A

Company Status: Active


Source: ThomsonFinancial
Currency: INR
Scaling Factor : 1000000 INR
03/31/03
10 YR INCOME STATEMENT
03/31/05
03/31/06 03/31/04

Net Sales or Revenues 202,444.30 159,986.10 111,294.40 91,368.20 74,279.10


Cost of Goods Sold 128,736.00 90,227.60 70,419.40 63,572.20 56,950.00
Depreciation, Depletion & Amortization 8,603.70 6,454.60 6,405.50 5,696.90 5,473.20
Gross Income 65,104.60 63,303.90 34,469.50 22,099.10 11,855.90
Selling, General & Admin Expenses #N/A #N/A #N/A #N/A #N/A
Operating Expenses - Total 147,701.00 104,427.80 82,010.60 74,016.30 66,473.10
Operating Income 54,743.30 55,558.30 29,283.80 17,351.90 7,806.00
Non-Operating Interest Income 459.60 404.70 191.30 381.80 307.50
Earnings Before Interest And Taxes (EBIT) 56,874.80 56,810.40 28,633.00 16,325.30 6,761.70
Interest Expense On Debt 2,064.10 2,386.00 1,519.20 3,633.30 4,499.10
Pretax Income 54,859.90 54,424.40 27,148.70 12,789.60 2,422.70
IncomeTaxes 17,649.20 18,712.40 9,362.50 2,566.80 487.00
Minority Interest 186.40 259.60 192.80 67.60 11.50
Equity In Earnings 321.90 580.20 294.40 151.30 0.00
Net Income Before Extra Items/Preferred Div 37,346.20 36,032.60 17,887.80 10,306.50 1,924.20
Extr Items & Gain(Loss) Sale of Assets 0.00 0.00 0.00 0.00 0.00

Net Income Before Preferred Dividends 37,346.20 36,032.60 17,887.80 10,306.50 1,924.20

Preferred Dividend Requirements 0.00 0.00 0.00 0.00 22.80


Net Income Available to Common 37,346.20 36,032.60 17,887.80 10,306.50 1,901.40
Rate Used to Translate From INR to INR 1.00 1.00 1.00 1.00 1.00

10 YR INCOME STATEMENT 03/31/01 03/31/00 03/31/99 03/31/98 03/31/97

Net Sales or Revenues


Cost of Goods Sold 61,019.60 55,737.60 51,067.60 51,992.30 51,206.20

Depreciation, Depletion & 38,372.70 38,584.68 37,517.45 38,090.89 35,994.73


Amortization 6,937.70 5,840.40 4,971.50 4,551.00 4,108.20
Gross Income 15,709.20 11,312.52 8,578.65 9,350.41 11,103.27

Selling, General & Admin Expenses #N/A #N/A #N/A #N/A #N/A
Operating Expenses - Total 48,984.50 47,694.20 45,501.90 45,467.20 42,747.60
Operating Income 12,035.10 8,043.40 5,565.70 6,525.10 8,458.60
Non-Operating Interest Income 357.80 390.10 967.30 1,188.80 1,614.90
Earnings Before Interest And 10,148.30 8,654.40 6,760.80 6,871.50 9,320.40
Taxes (EBIT)
Interest Expense On Debt 4,819.00 5,290.00 5,229.40 4,651.40 4,639.50
Pretax Income 6,024.40 4,770.90 3,157.30 3,637.30 5,429.60
IncomeTaxes 490.00 540.00 330.00 412.50 730.00
Minority Interest 0.00 0.00 0.00 0.00 0.00
Equity In Earnings 0.00 0.00 0.00 0.00 0.00
Net Income Before 5,534.40 4,225.90 2,822.30 3,220.80 4,692.10
Extra Items/Preferred
Div
Extr Items & Gain(Loss) Sale 0.00 0.00 0.00 0.00 0.00
of Assets
Net Income Before 5,534.40 4,225.90 2,822.30 3,220.80 4,692.10
Preferred Dividends
Preferred Dividend Requirements 122.00 86.10 0.00 0.00 0.00
Net Income Available to Common 5,412.40 4,139.80 2,822.30 3,220.80 4,692.10

Rate Used to Translate From INR to INR 1.00 1.00 1.00 1.00 1.00
Exhibit – 4 Financial Trend & Growth Rate Report

Tata Steel Limited Symbol:


http://www.tatasteel.com CUSIP:
(C000009156)
Price
Exchange: BOM DCN: T080399284 3/22/2007
Mkt Cap
INE081A01012 442.00 (th)
Country: IND ISIN:
249,690,000
DJ Sector: Basic Materials PE Ratio

6.05 Beta
DJ Industry: Steel
#N/A
Company Status: Active
Shrs Out (th)
Scaling Factor : 1000000 INR 03/31/04
TREND 03/31/06 580,000
03/31/03
03/31/05
111,294.40
Sales Tot Ret 1Yr
29,283.80 91,368.20
202,444.30
Operating Income After Depreciation 17,887.80 17,351.90 6.01
159,986.10
54,743.30 55,558.30 10,306.50
NetIncome
29,713.60
37,346.20 36,032.60 Source:
20,825.90 18,416.90
Net Cash Flow From Operating Activities 36,996.20 30,751.90 ThomsonFina
-10,215.80 8,689.00 ncial
Net Cash Flow From Investing Activities 27,285.90 21,191.30 -8,131.30 Currency: INR
03/31/01
Net Cash Flow From Financing Activities -6,808.60 -8,906.80
03/31/02

74,279.10 61,019.60

7,806.00 12,035.10

1,901.40 5,412.40

#N/A 11,223.30

#N/A 6,763.60

#N/A -4,001.20

205,450.70 177,033.10 147,988.70 127,600.80


TotalAssets 131,372.60
101,396.60 102,726.30 100,935.30 94,347.10
TotalLiabilities 125,309.10 95,950.80
76,424.80

5 Yr GROWTH RATES 03/31/06 03/31/05 03/31/04 03/31/03 03/31/02 03/31/01

Sales 231.77% 187.03% 117.94% 75.73% 45.06% 27.97


%
NetIncome 590.01% 770.39% 533.80% 220.00% -59.48% -4.34
%
Net Cash Flow From Operating Activities 381.05% 259.59% 223.04% 132.41% #N/A 92.02
%
TotalAssets 63.96% 46.55% 29.49% 19.92% 32.42% 36.06
1.00 1.00 1.00 1.00 1.00 % 1.00
Rate Used to Translate From INR to INR

Financials are not restated.


Exhibit – 5

Year (In Consumption Levels

million tones)

1990-91 14.37
1991-92 14.83 (3.2%)
1992-93 15.00 (1.2%)
1993-94 15.32 (2.0%)
1994-95 18.66 (21.8%)
1995-96 21.65 (16.0%)
1996-97 22.13 (2.2%)
1997-98 22.63 (2.6%)
1998-99 23.54(4.02%)
1999-2000 25.01(6.24%)
2000-2001 26.53(6.08%)
2001-2002 27.44(3.39%)
2002-2003 20.65 (5.0%)
Source: The Indian Ministry of Steel (the number in brackets indicate the percentage increase from
the previous year).

Note: The consumption of steel is arrived at by subtracting export of steel from the total of domestic
production and adding the import of steel in the country
Exhibit – 6
Tata Steel - Corus : Projected
capacity (in million tones per
annum)

Corus Group (in UK and The 19


Netherlands)
Tata Steel - Jamshedpur 10
Tata Steel - Jharkhand 12
Tata Steel - Orissa 6
Tata Steel - Chattisgarh 5
NatSteel – Singapore 2
Millennium Steel – Thailand 1.7
Aggregate projected capacity 55.7

Source: International Iron and Steel Institute

Exhibit – 7
Exhibit – 8
Exhibit – 9

Corus Group PLC


Balance Sheet (1996- 2005)
ASSETS 12/31/05 12/31/04 12/31/03 12/31/02 12/31/01

Cash And ST Investments 956.00 600.00 380.00 270.00 184.00


Receivables (Net) 1,533.00 1,393.00 1,133.00 1,241.00 1,396.00
Total Inventories 1,954.00 1,732.00 1,404.00 1,337.00 1,320.00
Other Current Assets 3 0 0 0 0
Current Assets - Total 4,446.00 3,725.00 2,917.00 2,848.00 2,900.00
Property Plant & Equipment - Net 2820 2811 2729 2871 3064
Total Investments #N/A #N/A #N/A #N/A #N/A
Other Assets 296.00 408.00 432.00 425.00 426.00
Total Assets 7,770.00 7,119.00 6,237.00 6,294.00 6,941.00

LIABILITIES & SHAREHOLDERS' EQUITY 12/31/05 12/31/04 12/31/03 12/31/02 12/31/01

Accounts Payable 1,271.00 1,188.00 986.00 1,047.00 1,052.00


ST Debt & Current Portion of LT Debt 384.00 47.00 113.00 78.00 132.00
Income Taxes Payable 79 117 94 121 108
Other Current Liabilities 733.00 531.00 390.00 390.00 437.00
Current Liabilities - Total 2,467.00 1,883.00 1,583.00 1,636.00 1,729.00
Long Term Debt 1,308.00 1,407.00 1,280.00 1,428.00 1,612.00
Other Liabilities 46.00 26.00 28.00 36.00 34.00
Total Liabilities 4,392.00 3,786.00 3,353.00 3,485.00 3,774.00
Shareholders' Equity 26.00 42.00 47.00 47.00 60.00
Minority Interest

Preferred Stock 0.00 0.00 0.00 0.00 0.00


Common Equity 3,352.00 3,258.00 2,797.00 2,722.00 3,061.00
Retained Earnings 1,199.00 -1,145.00 -1,605.00 -1,389.00 -1,047.00

Total Liabilities & Shareholders' Equity 7,770.00 7,119.00 6,237.00 6,294.00 6,941.0

ASSETS 12/31/00 03/31/99 03/31/98 03/31/97 0


Cash And ST Investments 273.00 1,369.00 1,206.00 1,477.00 1,350.00
Receivables (Net) 1,794.00 1,231.00 1,526.00 1,494.00 1,717.00
03/31/9
Total Inventories 1,719.00 1,007.00 1,222.00 1,224.00 1,391.00
Other Current Assets 0.00 0.00 0.00 0.00 0.00
Current Assets - Total 3,877.00 3,607.00 3,954.00 4,195.00 4,458.00
6
Property Plant & Equipment - Net 3763 3240 3335 3259 3265
Total Investments #N/A #N/A #N/A #N/A #N/A
Other Assets 375.00 84.00 117.00 116.00 107.00

21
Total Assets 8,243.00 7,171.00 7,700.00 7,876.00 8,143.00

LIABILITIES & SHAREHOLDERS' EQUITY 12/31/00 03/31/99 03/31/98 03/31/97 03/31/96

Accounts Payable 1,086.00 733.00 853.00 836.00 928.00


ST Debt & Current Portion of LT Debt 183.00 81.00 73.00 74.00 126.00
Income Taxes Payable 1.00 18.00 83.00 155.00 305.00
Other Current Liabilities 564.00 387.00 526.00 496.00 523.00
Current Liabilities - Total 2,467.00 1,359.00 1,672.00 1,705.00 2,025.00
Long Term Debt 1,766.00 825.00 687.00 618.00 534.00
Other Liabilities 71.00 27.00 36.00 19.00 17.00
Total Liabilities 4,344.00 2,464.00 2,687.00 2,683.00 2,898.00
Shareholders' Equity 402.00 311.00 351.00 367.00 442.00
Minority Interest

Preferred Stock 0.00 0.00 0.00 0.00 0.00


Common Equity 3,440.00 4,346.00 4,604.00 4,757.00 4,723.00
Retained Earnings -665.00 919.00 1,195.00 1,383.00 1,350.00
Total Liabilities & Shareholders' Equity 8,243.00 7,171.00 7,700.00 7,876.00 8,143.00
Currency: GBP; Source: Thomson Financial
Exhibit – 10 Financial 10 Yr. Income Statement
Industrial Template
Symbol:
Corus Group PLC CUSIP: (C000087290)
http://www.corusgroup.com
DCN: C793773750 Price 3/22/2007 Shrs Out (th)
Exchange: LON ISIN: Mkt Cap (th)
605.00 946,200
Country: DJ GBR GB00B127GF29
5,729
Sector:
PE Ratio Tot Ret 1Yr
STEEL WORKS & BLAST FURNACES Beta
DJ Industry: 11.90 70.98
Active 2.17
Company Status:
Source:
ThomsonFinancial

12/31/02 12/31/01

12/31/05 12/31/04

12/31/03
10 YR INCOME STATEMENT

Net Sales or Revenues 10,140.00 9,332.00 7,953.00 7,188.00 7,699.00


Cost of Goods Sold 8,343.00 7,658.00 7,124.00 6,575.00 6,941.00
Depreciation, Depletion & Amortization 312.00 294.00 323.00 350.00 386.00
Gross Income 1,485.00 1,380.00 506.00 263.00 372.00
Selling, General & Admin Expenses 765.00 759.00 565.00 649.00 749.00
Operating Expenses - Total 9,420.00 8,711.00 8,012.00 7,574.00 8,076.00
Operating Income 720.00 621.00 -59.00 -386.00 -377.00
Non-Operating Interest Income 31.00 13.00 13.00 17.00 15.00
Earnings Before Interest And Taxes (EBIT) 707.00 663.00 -150.00 -314.00 -351.00
Interest Expense On Debt 128.00 131.00 111.00 109.00 118.00
Pretax Income 579.00 532.00 -261.00 -423.00 -469.00
IncomeTaxes 129.00 113.00 52.00 55.00 -48.00
Minority Interest -1.00 -6.00 -3.00 -7.00 0.00
Equity In Earnings 1.00 21.00 5.00 13.00 2.00
Net Income Before Extra Items/Preferred Div 452.00 446.00 -305.00 -458.00 -419.00
Extr Items & Gain(Loss) Sale of 0.00 0.00 0.00 0.00 0.00
Assets
Net Income Before 452.00 446.00 -305.00 -458.00 -419.00
Preferred Dividends
Preferred Dividend Requirements 0.00 0.00 0.00 0.00 0.00
Net Income Available to Common 452.00 446.00 -305.00 -458.00 -419.00

Currency: GBP; Source: Thomson Financial


10 YR INCOME STATEMENT 12/31/00 03/31/99 03/31/98 03/31/97 03/31/96

Net Sales or Revenues


Cost of Goods Sold 9,358.40 6,259.00 6,947.00 7,224.00 7,048.00

Depreciation, Depletion & 7,711.20 5,280.00 5,443.00 5,606.00 4,999.00


Amortization 939.20 313.00 306.00 298.00 281.00
Gross Income 708.00 666.00 1,198.00 1,320.00 1,768.00

Selling, General & Admin Expenses 803.20 408.00 457.00 424.00 508.00
Operating Expenses - Total 9,453.60 6,377.00 6,640.00 6,787.00 6,107.00
Operating Income -95.20 -118.00 307.00 437.00 941.00
Non-Operating Interest Income 31.20 92.00 91.00 90.00 67.00
Earnings Before Interest And -885.60 -70.00 369.00 486.00 1,019.00
Taxes (EBIT)
Interest Expense On Debt 126.40 66.00 52.00 48.00 45.00
Pretax Income -1,012.00 -136.00 317.00 438.00 974.00
IncomeTaxes 4.80 -23.00 77.00 140.00 243.00
Minority Interest 56.00 -42.00 7.00 -3.00 49.00
Equity In Earnings -6.40 -10.00 -7.00 9.00 95.00
Net Income Before -1,079.20 -81.00 226.00 310.00 777.00
Extra Items/Preferred
Div
Extr Items & Gain(Loss) Sale #N/A 0.00 0.00 0.00 0.00
of Assets
Net Income Before -1,079.20 -81.00 226.00 310.00 777.00
Preferred Dividends
Preferred Dividend Requirements 0.00 0.00 0.00 0.00 0.00
Net Income Available to Common -1,079.20 -81.00 226.00 310.00 777.00