Management Discussion and Analysis 2013-14
h) Purchase of power
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Purchase of power | 2,565 | 2,321 | 10 |
Power purchased cost has increased during the Financial Year 2013-14 primarily due to increase in the power cost for both captive units and purchased fuel. Increase in captive power cost was largely attributed to higher power consumption on account of higher production volumes.
i) Freight and handling charges
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Freight and handling charges | 2,755 | 2,261 | 22 |
The freight and handling charges were higher mainly on account of increase in volumes and rates of both rail and road dispatches.
j) Royalty
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Royalty | 1,130 | 1,152 | (2) |
Royalty charges were lower in the Financial Year 2013-14 mainly on account of lower royalty rates of iron ore notified by Indian Bureau of Mines (IBM). This was partly offset by higher volumes and additional provision for royalty arising out of a demand confirmed by Jharkhand High Court.
k) Rates and Taxes
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Rates and taxes | 509 | 423 | 20 |
Rates and taxes increased primarily due to the provision on account of the BST sales tax assessment from January 2002 to March 2004 and of Financial Year 2004-05 and Financial Year 2005-06.
l) Other expenses
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Other expenses | 2,346 | 2,157 | 9 |
Other expenses increased primarily due to increase in packing charges, technical consultancy charges and various other expense heads.
m) Finance costs and Net Finance charges
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Finance costs | 1,821 | 1,877 | (3) |
| Net finance charges | 1,472 | 1,546 | (5) |
Both the gross finance costs and net finance charges were lower over Financial Year 2012-13 primarily due to higher interest capitalisation partly offset by net increase in interest outgo.
n) Exceptional items
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Exceptional items | (142) | (675) | (79) |
The exceptional items in Financial Year 2013-14 represents provision on account of diminution in value of investments of Rs.97.53 crores in TAYO Rolls Limited, Rs.24.71 crores in Strategic Energy Technology Systems Private Limited and Rs.19.52 crores in Gopalpur SEZ Limited. The exceptional items in Financial Year 2012-13 primarily reflect the diminution in the value of the investments in TSKZN (Rs.687 crores) partly offset by the profit on sale of stake in Sila Eastern Pvt. Ltd. (Rs.2.7 crores).
o) Fixed assets
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Gross Block | 58,153 | 47,254 | 23 |
| Less: Impairment | 137 | 137 | – |
| Less: Depreciation | 15,241 | 13,520 | 13 |
| Net Block | 42,775 | 33,597 | 27 |
The increase in fixed assets represents primarily capital expenditures towards Kalinganagar project at Odisha.
p) Investments
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Trade investments | 2,328 | 2,184 | 7 |
| Investments in subsidiary companies | 49,991 | 47,801 | 5 |
| Investment in mutual funds | 2,343 | 434 | 440 |
| Total investments | 54,662 | 50,419 | 8 |
During the year, the Company converted advance against equity given to its subsidiary Tata Steel Holdings into equity. Investment in the Mutual Funds as on 31st March, 2014 was Rs.2,343 crores up from Rs.434 crores of 31st March, 2013.
q) Inventories
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Stores & Spares | 1,718 | 1,473 | 17 |
| Stock-in-trade | 4,290 | 3,785 | 13 |
| Total investments | 6,008 | 5,258 | 14 |
Increase in stores and spares was primarily due to increase in mechanical and electrical spares stock to support the operations post 3 million tonnes expansion at Jamshedpur. Raw materials inventories have increased as compared to March 2013 mainly due to increase in stock of imported coal, limestone, and zinc and tin.
r) Sundry Debtors
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Gross Debtors | 787 | 811 | (3) |
| Less: Provision for doubtful debts | 16 | 14 | 11 |
| Sundry Debtors | 771 | 797 | (3) |
Reduction in debtors balance is primarily due to the decrease in the export debtors as Financial Year 2012-13 included higher month end sales in March 2013.
s) Loans and advances
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Loans and advances | 5,379 | 8,782 | (39) |
Decrease in loans and advances is primarily on account of conversion of advance against equity to Tata Steel Holdings to equity and utilisation of MAT credit entitlement.
t) Cash flow and Net debt
Cash flow
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Net Cash flow from operating activities | 12,432 | 11,069 | 1 |
| Net Cash flow from investing activities | (9,837) | (8,522) | 15 |
| Net Cash flow from financing activities | (3,826) | (4,282) | (11) |
| Net increase/(decrease) in cash & cash equivalents | (1,231) | (1,735) | (29) |
Net cash flow from operating activities
The net cash from operating activities was Rs.12,433 crores during Financial Year 2013-14 as compared to Rs.11,069 crores during Financial Year 2012-13. The cash operating profit before working capital changes and direct taxes during Financial Year 2013-14 was Rs.13,236 crores as compared to Rs.11,587 crores during Financial Year 2012-13 due to improved profitability. Decrease in the trade and other receivables and increase in the trade payables were partly offset by the increase in inventories in the current period resulting in the overall decrease in working capital during Financial Year 2013-14 (Rs.1,644 crores). The income taxes paid during Financial Year 2013-14 was Rs.2,447 crores as compared to Rs.1,980 crores during Financial Year 2012-13.
Net cash from investing activities
The net cash outflow from investing activities amounted to Rs.9,837 crores in Financial Year 2013-14 as compared to an outflow of Rs.8,522 crores during Financial Year 2012-13. The outflow during Financial Year 2013-14 broadly represents capex primarily on account of Kalinganagar project at Odisha (Rs.9,549 crores) and purchase (net of sale) of current investment (Rs.1,697 crores) partly offset by dividend received (Rs.492 crores).
Net cash from financing activities
The net cash outflow from financing activities was Rs.3,826 crores during Financial Year 2013-14 as compared to an outflow of Rs.4,282 crores during Financial Year 2012-13. The outflows during the current period were mainly due to the repayment of borrowings (Rs.6,470 crores), interest payments (Rs.1,503 crores) and dividend payments (Rs.901 crores) partly offset by fresh drawls (Rs.5,325 crores).
Net Debt
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Gross Debts | 27,917 | 27,508 | 1 |
| Less: Cash and Bank balances | 990 | 2,221 | (55) |
| Less: Current investments | 2,343 | 434 | 440 |
| Net Debt | 24,584 | 24,853 | (1) |
Net debt as on 31st March, 2014 was Rs.24,584 crores compared to Rs.24,853 crores as on 31st March, 2013.
During the Financial Year 2013-14, gross debt has increased marginally by Rs.410 crores compared to previous year primarily due to fresh drawls and foreign exchange impact of loan revaluation partly offset by repayments of some secured and unsecured loans during the period. Current investment and cash balance was higher by Rs.678 crores as compared to 31st March, 2013 resulting in the decrease in net debts.
2. Tata Steel Group
Tata Steel Group posted a consolidated profit after tax (after minority interest and share of profit of associates) of Rs.3,595 crores against a loss of Rs.7,058 crores in the previous year. This is after considering an impairment charge of Rs.46 crore as against the impairment charge of Rs.8,356 crores during Financial Year 2012-13.
a) Net sales and other operating income
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Tata Steel | 41,711 | 38,199 | 9 |
| Tata Steel Europe | 84,666 | 78,012 | 9 |
| NatSteel Holding | 12,128 | 9,393 | 29 |
| Tata Steel Thailand | 4,860 | 4,436 | 10 |
| Others | 34,476 | 28,255 | 22 |
| Eliminations & adjustments | (29,227) | (23,583) | 24 |
| Group Total | 1,48,614 | 1,34,712 | 10 |
Tata Steel, India recorded a turnover growth of 9% primarily on account of higher volumes which was partly offset by lower realisations. Turnover of Tata Steel Europe (TSE) was 3% lower than previous year in GBP terms reflecting 7% decrease in realisations due to weak market conditions. However TSE turnover is higher by 9% in Rupee terms due to exchange benefit on translation. Turnover of NSH has increased by 29% reflecting an improved performance by its operating entities at China and Vietnam. Increase at TSTH is primarily on account of higher volumes.
b) Purchase of finished, semi-finished and other products
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Tata Steel | 353 | 453 | (22) |
| Tata Steel Europe | 3,994 | 7,633 | (48) |
| NatSteel Holding | 9,814 | 7,050 | 39 |
| Tata Steel Thailand | 3,059 | 2,700 | 13 |
| Others | 3,296 | 4,267 | (23) |
| Eliminations & adjustments | (3,508) | (3,629) | (3) |
| Group Total | 17,008 | 18,474 | (8) |
Purchases at the Indian operations decreased primarily on account of lower purchases relating to project activities at Kalinganagar. Purchases at TSE reduced reflecting the closure of the Global Positioning business in November 2012 along with the reduced purchases at Distribution and Sales Network. Higher purchases at NSH and TSTH were primarily due to higher sales volumes.
c) Raw materials consumed
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Tata Steel | 9,678 | 9,877 | (2) |
| Tata Steel Europe | 35,106 | 29,674 | 18 |
| NatSteel Holding | 72 | 93 | (23) |
| Tata Steel Thailand | 260 | 246 | 6 |
| Others | 23,160 | 17,449 | 33 |
| Eliminations & adjustments | (22,033) | (16,696) | 32 |
| Group Total | 46,243 | 40,643 | 14 |
The decrease at Tata Steel India reflects lower cost and consumption of purchased coke, which was partly offset by higher consumption of imported coal. Increase in raw material consumption at TSE is largely attributable to the impact of foreign exchange translation as the absolute raw material consumption in GBP terms has increased only by 6%. Reduction in raw material consumption in NSH is primarily on account of lower consumption due to lower production.
d) Employee benefits expense
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Tata Steel | 3,673 | 3,602 | 2 |
| Tata Steel Europe | 14,946 | 13,762 | 9 |
| NatSteel Holding | 723 | 664 | 9 |
| Tata Steel Thailand | 147 | 131 | 12 |
| Others | 823 | 753 | 9 |
| Eliminations & adjustments | – | – | – |
| Group Total | 20,312 | 18,912 | 7 |
The increase in Tata Steel, India was on account of normal salary increases and consequential increase in retiral provisions, partly offset on account of change in actuarial estimates due to change in discounting rates. The wage cost at TSE was lower in GBP terms as a result of one off credit of GBP 31 million in pension cost and lower headcount but reflects increases on account of exchange rate impact on translation.
e) Purchase of power
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Tata Steel | 2,565 | 2,321 | 10 |
| Tata Steel Europe | 2,238 | 1,995 | 12 |
| NatSteel Holding | 352 | 418 | (16) |
| Tata Steel Thailand | 516 | 432 | 19 |
| Others | 618 | 558 | 11 |
| Eliminations & adjustments | (253) | (170) | 49 |
| Group Total | 6,036 | 5,554 | 9 |
Increase in volume to support higher production and increase in rates resulted in the higher power cost at Tata Steel, India. Increase at TSE is primarily due to exchange impact on translation. Increase at TSTH is primarily due to higher consumption to support higher production. These increases were partly offset by lower consumption in NSH due to shutdown of meltshop and rolling mills for upgradation.
f) Freight and handling charges
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Tata Steel | 2,755 | 2,261 | 22 |
| Tata Steel Europe | 4,730 | 3,922 | 21 |
| NatSteel Holding | 244 | 168 | 45 |
| Tata Steel Thailand | 39 | 34 | 16 |
| Others | 1,345 | 1,155 | 16 |
| Eliminations & adjustments | (105) | (106) | (1) |
| Group Total | 9,008 | 7,434 | 21 |
Increase in volumes and rates of rail and road despatches resulted in an increase in Tata Steel India. Increase at TSE is 8% in GBP terms, primarily due to higher deliveries and increase in carriage and shipping rates but reflects higher increase due to exchange impact on translation. Increase at NSH is primarily on account of 39% higher deliveries compared to last year.
g) Other expenditure
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Tata Steel | 10,018 | 8,963 | 12 |
| Tata Steel Europe | 21,039 | 18,626 | 13 |
| NatSteel Holding | 797 | 774 | 3 |
| Tata Steel Thailand | 607 | 543 | 12 |
| Others | 3,330 | 2,620 | 27 |
| Eliminations & adjustments | (1,681) | (1,572) | 7 |
| Group Total | 34,110 | 29,954 | 14 |
Other expenditure represents the following expenditure:
| in Rs.crores | |||
| FY 14 | FY 13 | Change % | |
| Stores & spares consumed | 11,995 | 9,838 | 22 |
| Repairs to Building | 503 | 512 | (2) |
| Repairs to Machinery | 5,925 | 5,152 | 15 |
| Relining expenses | 137 | 131 | 5 |
| Fuel oil consumed | 1,089 | 990 | 10 |
| Conversion charges | 2,028 | 1,931 | 5 |
| Rent | 4,019 | 3,386 | 19 |
| Royalty | 1,211 | 1,199 | 1 |
| Rates & Taxes | 1,095 | 980 | 12 |
| Insurance charges | 475 | 332 | 43 |
| Commission, discounts and rebates | 292 | 271 | 8 |
| Provision for wealth tax | 2 | 2 | – |
| Provision for doubtful debts and advances | 79 | 116 | (32) |
| Excise Duties | 74 | 142 | (48) |
| Other expenses | 6,713 | 6,289 | 7 |
| Less: Expenditure (other than interest) transferred to capital and other accounts | 1,527 | 1,317 | 16 |
| Group Total | 34,110 | 29,954 | 14 |
Expenditure in TSE increased by 4% in GBP terms primarily due to higher stores and spares consumed (higher increase in rupee terms due to exchange rate impact on translation). The increase in Tata Steel India was mainly due to the increase in consumption of stores and spares, higher royalty charges and higher conversion charges. The increase in 'Others' is primarily due to restructuring charges of vessels at Tata NYK during the current year and increase in freight and handling charges and conversion charges in one of the affiliates.