Mergers & acquisition

• Grasping for the company simply because its on the market, or because competitor wants to buy

• Overpayment Or misguidance

• Inability to integrate well

• Diverse business Or unmanageable

• Leap without looking at the value

Profile of TATA Steel

• Vision:- “we aspire to be global steel industry benchmark for value creation & Corporate citizenship”

• Global presence in South East Asia, China, Australia

• It acquired Natsteel Singapore for $486.4 Million

• It bought 67% stake in Thailand based Millenium Steel

• Low cost producers in the world

• Strong retail & distribution network in India & South east Asia

Profile of pre merger

TATA STEEL Corus 102 years in steel Bazaar Worlds 6Th largest

Presence in 26 Nations Presence in 50 Nations

Capacity 30 Million 371 rank in fortune 500 list

Worlds 56th largest 2nd in Europe, No.1 in UK

Founder J N TATA 40,000 workforce worldwide

Synergies of Operation

• Significant cost of saving Expected by exporting Cheaper input (slabs)

• Combined entity emerge as second most geographically diversified

• Synergy result from sharing manufacturing practice, shared services and purchasing

• Also sharing complementary strength• Strong R&D & product development capabilities

for value added products in Auto, construction & packaging (which compliments growing markets such as Asia)

Corus TATA STEEL

J P Morgan ABN Amro

Cazenovt Deutche bank

HSBC Standard chartered bank

Five year Financial Performance of TATA

Category Unit 2002 03 04 05 06

Production ‘000 MT 3.636 3.941 4.089 4.109 4.552

Revenue $In Millions 1583 2150 2755 3532 3884

EBIT $In Millions 283 516 840 1378 1401

EBIT MARG % 20 27 34 42 40

PBT $In Millions 52 277 616 1178 1187

Net Profit $In Millions 43 222 404 773 794

Net profitmargins

% 3 12 16 24 23

EVA $In Millions .96 34 156 528 529

Five year Financial Performance of CORUS

Category Unit 2002 03 04 05 06

Production ‘000 MT 17.1 19.4 19.5 18.7 18.8

Revenue ($) In Millions 11456 10018 12165 10845 12845

EBIT ($) In Millions 512 305 1251 1142 1846

EBIT MARG % -4.47 3.04 10.28 10.53 14.37

PBT ($) In Millions -644 -321 766 649 610.35

Net Profit ($) In Millions -741 -388 593 512 446

Net profitmargins

% -6.47 -3.87 4.87 4.72 3.47

Company TATA ($) CORUS ($)

Turnover 4546 18979

EBITDA 1704 1846

PBT 1440 610.35

PAT 971 446

NP Margins 23.1% 2.35%

EPS 1.70 .41

Dividend 254 134

EVA Calculation pre & post merger

Particulars 2006-07 2007-08

Risk free rate 8.00% 5.27%

Market Premium 6.50% 9.00%

Assumed Beta 1.12 1.5

Cost of Equity 15.28% 18.77%

Equity 37.03% 35%

Cost of debt 8.0% 8.0%

After cost of Debt 5.28% 6.0%

Debt 63% 65%

WACC 8.98% 10.4695%

Capital Employed 42074.75 92161.62

Net profit 4165.61 12321.76

Total weighted cost 3778.313 9648.861

EVA 387.297 2672.9

Particulars 2006-07 07-08 08-09

EBIT 31.14% 14.08% 12.55%

PBT (in Crores) 6313 16371 6743

PAT (in Crores) 4165 12321 4849.24

PBT (Turnover) 24.61% 12.39% 7.43%

Interest Coverage ratio

16.35 3.46 4.32

EPS 64.66 177.18 66

Debt/Equity 0.71 1.99 1.65

P/E 6.95 3.91 3.12

“we had taken a view that we wouldn’t go beyond a point. We didn’t reach that point .If we reached that point we would walked away. over bidding (or) not is subjective when it comes to judgment class”.

Questions?

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