/-i 7/ IIV-> F117 PRD

APPENDIX 4 L-172- RESTRICTED Public Disclosure Authorized i his report is restricted to use within the Bank.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

Public Disclosure Authorized FILECOPY

TECHNICAL REPORT

ON THE

IISCO-SCOB IRON AND STEEL PROJECT

IN Public Disclosure Authorized

December 4, 1952 Public Disclosure Authorized

Loan Department Rate of Exchange of Indian Currency

1 Indian rupee a US $0.21

1 US dollar * Rs. 4.762

1 lakh of ruJees . US $21,000 (Rs. 100,000)

1 crore of rupees . US $2,100,000 (Rs. 10,000,000) TECHNICALREPORT

ON

IISCO-SCOB IRON AND STEEL PROJECT

I N D I A

Page

I. Purpose and Scope of Report 1

II. India's Iron and Steel Program 1

III. The Borrower 2

IV. Description of the Project 3

V. Raw Materials 5

VI. Transport 6

VII. Power 7

VIII. Market 7

IX. Estimated Cost of Construction 9

X. Estimates of Cost of Production 9

XI. Schedule of Constructionand Disbursement1R

XII. MHethod of Financing 11

XIII, Justificationof the Project 19

XIV. Conclusions 20 TECHNICALREPORT

ON

IISCO-SCOB IRON AND STEEL PROJECT

I N D I A

I. Purpose and Scope of Report

1. In June, 1952, the Bank sent a llissionto India to examine the problems connectedwith the proposed expansion of the steel industry and to report on the specific projects as the basis for a possible loan. The llissionstudied:

(a) the need for expansion of Indiats iron and steel industry;

(b) the best methods of ac'omplishingthis expansion; and

(c) the extent to which Bank financingmight be required.

2. In the course of its investigations,the PMIissiondiscussed India's iron and steel problems with Government officials, officers of steel com- panies and others. Miethodsof financing the overall and individual programs were also explored.

II. India's Iron and Steel Program

3. The producers of iron and steel in India, in the order of their 1951 production,are: Finished Pig Steel 1/ Iron 1/ The Tata Iron and Steel Company, Ltd. kTons) (Tatas) 793,000 _ Indian Iron and Steel Company, Ltd. (IISCO) 2/ - 640o,ooo Steel Corporationof Bengal, Ltd. (SCOB)2/ 254,ooo - M,ysoreIron and Steel Wlorks 29,000 9,000

4. The overall industry also includes about 25 "Re-follers",wvhose aggregate primary production is small.

5. The plant of the Tata Iron and Steel Company, Limited is located at Jamshedpur,about 150 miles from Calcutta. This is the largest inte-

1/ All tons in this report are 2,240 pounds.

2/ Of the iron production shown for IISCO, 330,000 tons were supplied to SCOB for steel making. -2- grated steel mill in India and makes a broad range of iron and steel pro- ducts* The plant, in maintaining maximum production during the war, suffered greatly through lack of proper maintenance. Tatas, now that material is available,have starteda 7-yearprogram primarily of modernization,al- thoughthey are addingto plant capacitywhere possible. Tatastprogram, when completed, is estimated to increase production from 750,000 to 931,000 tons of finished steel products per year, The Governmentrequested Tatas, if possible, to expedite their program. Since the program was being financed from earnings, Tatas was unableto c?ply with the Government's request without an increase in the retention - price of steel.

6. Since July 1, 1952, the Government increased the consumer price of steel (insteadof the retentionprice) by Rs. 100 per ton for the purpose of makingsufficient funds availablein the EqualizationFund to finance India'ssteel expansionprogram. Becauseof the Government'saction in raisingthe price of steel,Tatas is now in a positionto obtainadvances from the EqualizationFund which the Governmentof India has offeredto them, and to acceleratetheir expansionprograms 7. MysoreIron and SteelWorks wrasfound to have its expansionpro- gram alreadyunder way with the aid of Governmentfinancing. Any expansion of the "Re-rollers"could be financedby ordinarydomestic means.

8. The IISCO-SCOBprogram presented, in the Ilission'sview, the most favorablepossibility for rapid and economicexpansion of India'siron and steel capacity. Accordingly,this reportis limitedto the projected expansionof IISCO-SCOB.

III. The Borrower

9. IISCO-SCOBare physicallyintegrated; but, they are, at present, legallyand financiallyindependent corporate entities. However,under the provisionsof the Iron and Steel CompaniesAmalgamation Ordinance, 1952, the two companieswill be amalgamatedas of January1, 1953 by the transferof the undertaking,assets and liabilitiesof SCOB to IISCOwhich will then carry on the combined undertaking; SCOBwill then cease to exist and the loan is proposedto be made to IISCO as the survivingcom- pany. This mergerhas been approvedby the shareholdersof both companies.

10. IISCO and SCOB togetherconstitute the secondlargest steel producerin India. SCOBtspresent annual steel capacity is about 25% of Indiaastotal output. IISCO producesabout 64o,000 tons of iron annually, or about43% of India'stotal production. 11. IISCO-SCOBis located in the general area of Burnpur, near Calcutta. The two companiesbesides being physicallyintegrated are furtherinter- lockedby havingcommon managing agents (IMlartin Burn, Ltd. of Calcutta), by a profit-sharingagreement whereby IISCC receives20% of the net profits of SCOB, and by IISCO#sownership of about 30% of the outstandingshares of SCOB.

1/ See Paragraph 39, page 12 -3-

12. IISCO ovms and operatestwo plants. The oldest,established at in 1874, is used exclusively for the manufacture of foundry iron. The main plant at Burnpur was constructed in 1919 and is used primarily in supplying hot metal to SCOBfor the making of steel. About half the iron output of the tvwo Kulti blast furnaces supplies its own foundry re- quirements and the remainder is produced for sale.

13. IISCOts main works at Burnpur, consisting of two blast furnaces, coke ovensand othernecessary auxiliaries, supply hot iron to SCOBunder an agreementbetween the two companieson a cost plus profit-sharingbasis, Iron not neededby SCOB is availablefor sale. IISCOalso, under the same agreement,furnishes SCOB all utilityand other servicerequirements.

14. IISCO also owns and operates threecollieries and two iron ore mines. 15. SCOB, organizedin 1937 by the managingagents of IISCO,started productionof steelin 1939, Its pIant was initiallylaid out for an ultimatecapacity through expansion of about 1 million tons per year. Pro- ductionat the presenttime is about 350,000tons. The SCOB plant con- sists of a duplexmelting shop, a bloomingmill, structural,rail, merchant and sheetmills, and a galvanizingplant. 16. The directorsof IISCO-SCOB'smanaging agency are men of wide experiencein their respectivefields. The presentworks managementis also well qualifiedand no additionalkey personnelwould be requiredto operatethe expandedfacilities.

17. Both IISCOand SCOB show a sound financial condition. 1I\hile the ratio of debt to equityin IISCO'spresent capitalization is somewhat above average,SCOB is more conservativein this respect. Summaryearn- ings and balancesheets for IISCO and SCOB are given in SchedulesIII and XIII.

IV. Descri2tionof the Project

18. The projectunder consideration is one of major expansionof the Burnpurworks and modernizationof Kulti. The projectis designedto increaseannual iron productionfrom about 640,000to 1,400,000tons (400,000 tons being for sale), and finished steel from about 350,000 to 700,000 tons per year as shown in the following table: Products for Sale (Tousands of Tons)

1953 1957 FiniiThe;T Finished Iron Steel Iron Steel Burnpur orks 60 350 300 700 Kulti -orks 100 - 1.0 -

IISCO-SCOB Total 160 350 400 700 19. The additional facilitiesneeded by IISCO-SCOBto increase their iron and steel production by the proposed amount are as follows:

Burnpur ;orks

(a) Coke Ovens

New coke ovens, increasingpresent output by 115%, would consist of t-iobatteries of seventy-eightovens each iath one battery replacing a 40-oven battery vwhichhas been in service since 1929. All ovens would be arranged to use blast furnace gas. The by-products plant would be corres- pondingly increa-sedto serve the new ovens.

(b) Blast Furnaces

The number of blast furnaces would be doubled by the addition of two units, each having a daily output of 1,200 tons of iron. There also would be included the necessary new stoves, steam-drivenblowers, and gas cleaning equip- ment.

(c) Duplex Converter House

The present building would be extended and equipped for the installation of a third 25-ton (per charge) acid- lined converter thereby increasing converter capacity by 50%.

(d) Steel Making Shop

The present steel making capacity would be increased by a second melting shop consisting of two 240-ton (per tap) tilting basic open hearth furnaces. This would require a new building equipped laiththe necessary cranes, ladles, and scrap cars.

(e) Additions to Steel Rolling Sills

The number of soaking pits would be increased from 8 to 11. The finishing departments of both the 34" and 18" mills wrould be extended to handle additional tonnages,

(f) Services

Ancillary services such as water, gas, power and steam would be increased to serve the plant's additional facilities.

Kulti _.orks

The Kulti furnaces are very high cost producers and, unless modernized, vwould have to be abandoned. hiodernization would con- sist of (1) scrapping of the existing coke ovens (coke in the future would come fron Burnpur); (2) installationof gas cleaning equipment; (3) installation of a 5,000 Kw. steam turbine generator to permit the utilization of waste blast furnace gas as fuel. -5-

20. The InternationalConstruction Company, Ltd., of London, the Company's consulting engineers,have completed all of the necessarypre- liminary engineeringon the project and are prepared to proceed immediately with detail design and procurement.

V. Raw M1aterials

21. India is rich in the necessary raw materials for the making of steel. The proximity of these materials makes the assembly costs on a ton- mile basis among the lowest in any steel producing country, These marerials are also of excellent quality. The iron ore carries an especially high iron content averaging about 60% as mined.

(a) Coal

The IISCO-SCOBplant is in the center of India's metal- lurgical coal fields. The Company ovms and operates three collierieswhich could supply about one-fourth of the expanded plant's coal requirementsfor a period of 25 years. The additionalcoal required would come from other privately owned collieriesin the immediatevicinity.

The Committee on the Conservationof iJ,etallurgicalCoal in their report dated 1950 show Indiars reserves in working collieries to be 2,100 million tons. At the present rate of consumptionI/ of 11.0 million tons per year, these reserves will last about 190 years. Reserves will be in- creased if plans to limit the railroads to non-coking coal are implemented.

(b) Iron Ore

All of the iron ore used by IISCO-SCOB comes from the Gua area about 150 miles by rail from Burnpur. About 55% comes from the Companyls own mines and the remainder from other sources. The proposed project includes expansion of the Company's mine at Gua to take care of its total future needs.

The reserves in the Gua area are estimated to be 470 million tons above the 2,260 foot level or equal to about an 80-year supply at the estimated 1956 rate of consumption.

(c) Scrap

The Duplex Process, in which pig iron is first treated in a Bessemer converter and subsequently in an open hearth furnace, uses very little scrap and has been almost univer- sally adopted in India as the method of making steel with the type of pig iron produced. In this process, the open hearth is used to remove phosphorus and condition the heat for tapping, the charge being in the furnace about three hours.

17 The railroads consum-eabout 6 million tons of coking coal per year. -6-

The Blo=n Letal Process could be used instead of the Duplex Process. The Blown iJetalProcess would permit the use of large quantities of scrap3 however, the charge would be in the open hearth furnace from 6 to 10 hours, To use more scrap therefore would require a greater amount of open hearth capacity, In proposed process this additional capacity is being provided ;or and in the future no mill scrap will accumulate!Y. Use of mill scrap will increase ingot tonnage by about 20% without the need of increasing pig iron capacity.

It is believed by Government that the "Re-rollers"vill take most of the national scrap as it becomes available for use in their own electric furnaces. Accordingly, present plans do not contemplateits use by the large steel producers, although it wlouldbe done should it become available in sufficientamounts to warrant its use.

(d) Limestone

All the limestone now used by the Burnpur works come from a privately owned quarry at Gangpur about 150 miles from the plant. There are rmany other limestone deposits of suitable quality throughoutIndia which in the aggre- gate greatly exceed the steel industry's needs.

(e) ilanganese Ore

liostlarge steel producing countries includingthe U.S. are without sufficientreserves of manganese. India, on the other hand, has large deposits in most of the provinces and is the free world!s chief source of manganese ore sith exports novwaveraging about 1,000,000 tons per year k.I Estimates of reserves vary widely, but the reserves are more than adequate for this project.

All the manganese ore needed by IISCO-SCOBcomes from their omn mine at Gua.

(f) ,iateer

The IISCO-SCOB plant is located Very close tb the } which is an adequate source of water,

VI. Trans2ort

22. The Burnpur plant is located about 4 miles from the railroad center of from which main lines of the National hailroad go directly to Calcutta, Delhi, Bombay and Iadras. The location is excellent, not only for the assembly of raw material, but also for distributionof steel to the main consuming areas without rehandlingor re-shipping.

1/ Accumulated mill scrap is novwabout 400,000 tons for the entire steel industry. 2/ The U.S, imports about 2,000,000 tons of manganese ore per year from all sources. -7-

VII. Power

23. The presentpower demand of IISCO-SCOB is 23,000Kw, lihenthe proposedproject is completed,the demandwill be about 33,000Kw. The presentthermal powver plant with a generatingcapacity of 116,000Kw, will be ample to meet the new load requirements.The marginof reserve,how- ever, would not be adequate. Accordingly,there will be a tie-inline to the DamodarValley electric grid systemwith additionalelectric powier being purchasedwhen needed. The tie-inline and 20,000Kw. sub-station vill be suppliedby the DamodarValley Corporation.

VIII. Miarket

24. The fact that steel is novrbeing allocatedis evidenceof a serious shortage. If not corrected,this condition will lead eitherto further curtailmentin the use of steel or to an increasein foreignexchange expenditureto importlarger quantities. 25. Variousfields of engineeringwere studiedto determinepossible changes in future steel requirements. E'timated changes in unit production of the steel consuming engineering fields are as follows: AnnualUnit Production Actual1951 EstimTated1956 HeavyEngineering Locomotives 170 LocomotiveBoilers - 100 Automobiles 12,768 25t,000 Ships (8,000 Ton d.w.t.) 2 5

Light Engineering IIachine Tools 1,100 4,600 Looms - 8,000 Ring Frames - 1,000 Carding Yiachines 6oo Pumps 36,260 78,120 Diesel Engines 5,540 50,060 Bicycles 99,000 500,000 Construction

Cement (Milliontons) 3.1 5.5 26. The Governmenthas estimateda demandfor finishedsteel for 1952 of 2.34 milliontons and for 1957 of 2.80 milliontons. Demandin India is particularlysensitive to price changes. This is evidencedby the fact that very few consumersimport steel directly at prevailingCIF prices -8-

although permitted to do so by the Steel AllocationsOffice. Instead, most consumerselect to go through the delays in obtaining an allocation in order to take advantage of lower subsidizedprices.

27. hile the need for greater utilizationof steel in India is quite apparent, it is doubtful whether tonnages greatly in excess of those now being consumed could be purchased immediately. Increase in the demand for steel rrouldtherefore probably occur gradually as in the past but may accelerate because of the effect of the 5-year Plan.

28. Steel consumptionsince the war has increased at the rate of approxi- mately 6% per annum but this rate would probably have been somewhat greater had larger quantities of lower priced domestic steel been available, On the basis of available data, the market will probably increase at a rate of about 7% per annum, as projected in the following table:

Annual Finished Steel Consumption (Iillions of Tons)

Actual Estimated Year Tonnage Year Toage

1947 0,99 1952 1.30 1948 0.87 1953 1.39 1949 1.07 1954 1.49 1950 1.19 1955 1.60 1951 1,23 1956 1.701/

29. Demand for foundry iron is not increasing as rapidly as the demand for steel. The critical shortage of foundry iron results from the use of a greater percentage of blast furnace capacity to produce pig iron for steel making with correspondingly less capacity to make foundry iron, For this reason, output and consumption of foundry iron has been falling off since 1949. On the other hand, steel production at IISCO-SCOB (the major producer of foundry iron) has increased in proportionto the decrease in foundry iron.

Foundry Iron Consumption

Year 1947 1948 1949 1950 1951 Tons (000) 347 356 427 290 287

30. Information indicates that foundry iron was not cfitically short in 1949. The market for foundry iron in 1956 is estimated at about 500 thousand tons, 31. The projected expansion of existing plants to produce about 1,700,000 tons of saleable steel and 500,000 tons of f£Qltl.z- JLror.by 1956 should satisfy Indiats short term steel and iron requiremen-,s.

1/ Approximatel;y 65% more than present production capacity. -9-

IX. Es"imated Cost of Construction

32. Estimates of the constructioncost of the project are based on the recent quotationsreceived by the InternationalConstruction Company from major equipmentand machinery manufacturersand on present construction costs at IISCO-SCOB, From all available data, the estimated cost of con- structionbroken down into local and foreign exchange is as follows:

Estimated Cost of Construction (Crores of Indian Rupees)

Item Local* Foreign* Total*

Coke Ovens 3.30 2.50 5.80 Blast Furnaces 3.80 2.90 6.70 Blast Furnaces (Kulti) 2,20 .80 3.00 Bessemer Plant .39 .26 .65 lMeltingShop 3.06 1.29 4.35 Rolling 11ills 1.50 .50 2.00 Services,for plant 1.35 1.45 2.80 lMines .45 1,55 2.00 Engineering - .60 .6o

Sub Total 16.05 11.85 27.90 Contingencies 2.69 1.15 3.84 Sub Total 18.74 13.00 31.74 Interestduring construction 1.25 2.00 3.25 Grand Total 19.99 15.00 34.99

7 Freight included, and installed prices.

X. Estimatesof Cost of Production

33. Iron and steelproduction costs are extremelyfavorable in India, mainlybecause of low cost, high qualityraw materials,relatively low labor costs and volumetonnages. For example,IISCO has a works cost on pig iron of aboutRs. 75 (Ml5.85)per ton wrhileSCOB has a works cost on steel ingotsof about Rs. 160 (i33.6O)per ton. These costsare consider- ably lower than correspondingcosts in most steelproducing countries.

34. IISCOtsworks costs,after the proposedexpansion has been com- pleted,should be at least10%l less than presentday costsbecause of larger,more efficientfacilities and also becauseof a reductionin overhead. -10-

XI. Schedule of Construction and Disbursement

35. Constructionof the projectwould requirea periodof five years. The firstblast furnace,however, or one-halfof the new capacity,would be finishedand go into operationat the end of the fourthyear.

Construction Schedule

Year 1953 1954 1955 1956 1957

First blast furnace Start - -R- Finish -

Second blast furnace - Start - - Finish

36. Disbursements would be scheduled approximately 9% in the first year, 24% in the secondyear, 39% in the third, 18% in the fourth, and 10% in the fifth year. -11-

XII. Inethod of Financing

(a)_ TotalCash Requirementsover Five-YearConstruction Period

37. IISCOts total cash requirementsover the five year construction period 1953-1957 are estimated at 55.14 crores of rupees, equivalent to U.S. 4115,794,000. Some 81 percent of this sum,,44.91 crores (U.S. equivalent $94,311,000)represents the cost of the projected expansion program, current extensions,minor capital works, additionalworking capital requirements,and interest during construction,as set forth below:

Equivalent Crores of Millions of Rupees U.S. Dollars Percent

Projected Expansion

Foreign currency costs Constructioncosts 13.00 $ 27.30 29 % Interestduring construction (Interestand commitment charge) 2,00 4.20 4

Total foreign 15.00 31.50 33

Domestic currency costs Constructioncosts 18.74 39.35 42 Interest during construction (To be accumulated on Govt. loan) 1.25 2.63 3

Total domestic 19.99 14.98 45

Total projected expansion 34.99 73.48 78

Current ConstructionCosts 3.30 6.93 7

iMinorCapital Works 2.50 5.25 6

Housing .60 126 1

Additional1,iorking Capital Requirements (cash and inventories) 3.52 7.39 8

Total hL.91 $ 94.31 100

38. The remaining 19 percent of total cash requirements,or 10.23 crores (U.S. equivalent$21,483,000) represents; income taxes, 3 crores; other interest, .82 crore; labor profit sharing bonus, .85 crore; managing agents and directors remuneration,.83 crore; redemptions,1.48 crores; and dividends (preferredand ordinary shares), 3.25 crores. -12-

(b) Cash Generation over Five-Year Construction Period

39. Cash generation over the five-yearperiod, as representedby gross income, is estimatedto amount to 19.21 crores of rupees (U.S. equivalent ,401,341P,000).Of this amount, 10.56 crores comes from an estimated 8 percent annual return on gross block (originalcost of property with periodic additions by the Tariff Commission), 6.60 crores from depreciation (calculatedat an annual rate of approximately5 per- cent on gross block under Tariff Commissionallowances), 1.05 crores from the annual interest allowance on working capital, and I crore from five years profits from the Kulti foundries.

(c) New Capital Requirements

4o. This leaves a balance to be raised of 35.93 crores of rupees (U.S. equivalent'4375P453,000). It is proposed that the capital require- ments be raised by the following means:

0quivalent Crores of .illionsof New Capital Requirements Rupees U.S. Dollars Percent

IBRD Loan (to cover foreign currency constructionneeds) 15.00 $ 31,50 42 %

Government of India Additional Loan 1/ 5.40 11.34 15 Accumulated Interestduring construction 1.25 2.62 3 Housing Loan .30 .63 1

Advances from 3qualization Fund 10.00 21.00 28

Domestic Bank Borrowings 1.78 3.74 5

Sale of i4arketable Securities (Ordinary shares of IISCO now held in treasury) 2.20 4.62 6

Total 35.93 $ 75.45 100

41. In summary, of the total amount of cash required for all purposes amounting to 55.14 crores of rupees, approximately27 percent is to be provided by the IBRD loan, 31 percent by the in the form of an additional loan, accumulatinginterest during construction,and advances from the Equalization Fund, 3 percent from domestic bank borrowings, 4 percent from sale of marketable securities,and 35 percent from gross

1/ The Government of India has already agreed to advance the Company 5 crores, of which 2.40 crores has so far been drawn, and under the Agree- ment with the Company will increase the amount to be drawn upon to 7.90 crores. -13- earnings. Of the 35.93 croresof new capitalneeded, appro4imately 42 percentis to be providedby the IBRD loan,47 percentby the Government of India in the form of an additional loan, accumulatinginterest during construction, and advancesfrom the Equalization Fund, 5 percent from domesticbank borrowings,and 6 percent from the sale of marketable securities,

(d) Description of New Capital

42. IISC0has requested that a loan be made by the Bank to cover the foreign exchange costs of the projectincluding interest and commitment charge during construction. The proposed IBRD loan, estimatedto amount to the equivalentof U.S. 3l,5OO,000(including interest and commitment chargeduring construction), has been assumedto be for a term of fifteen years, repayable in semi-annual payments starting in the year 1959, with level payments in the years 1959, 1960 and 1961 equally reduced, along with a proportionate reduction in p.iAncipal repayment on the Government of India loan, to permit acceleratedretirement of the Companytssterling loan, and with level payments over the remaining years 1962-1967 inclusive increased by the amount of principal deferment. This gives an average life of 11.17 years and retires 93 percent of the issue by maturivr. For the purposes of this report, the interest rate has been assumed at 4 3/14 percentper annum, including the one percent statutory commission, an.dthe commitmentcharge 3/4 of one percent. Paymentof principal, interest,and other chargeson the loan is to be guaranteedby the Govern- ment of India.

43. The presentcapital structure of IISCO alreadycontains a series of chargesupon Companyassets. The followingtable sets forth IISCO's capitalstructure as of December31, 1952 (the start of the construction period),as of December31, 1957 (the completionof the constructionperiod and the approximttepeak of detb obligations),as of December31, 1961 (afterretirement of the sterlingloan), and as of December31, 1967 (after retirementof the IBRD and Governmentof Indialoans). Estimated Capital Structure of Indian Iron and Steel Company, Ltd. at Various Periods

12/31/67 12/31/52 (a) 12/31/57 12/31/61 After IBRD Beginning of After After Sterling & Govt.Loan Construction Construction Loan Retirement Retirement

Crores % Crores % Crores % Crores % Deb

Sterling Loan 1.47(b) 9 1.22 2 - 15-yr IBiAD Loan - 15,00 30 11.03 24 - Domestic Bank borrowings 1.19 8 1.78 4 -

Government of India 6 Loan 2.50 7.90) 6.26 Accumulated int. - 1.25) Housing Loan - .26 __ .35 .17

Total Govt. 2.50 16 9.41 19 6.61 15 .17

Total Debt 5.16 33 27.41 55 17.64 39 .17

Advance from EqualizationFund - 10.00 20 10.00 22 10.00 26

Capital Stock

5% Cumulative Preference (RslOO) 2.70 2.70 2.70 2.70 Ordinary Shares (RslO) 5.18 5.18 5.18 5.18

Total capital stock 7.88 50 7.88 16 7.88 17 7.88 21

Surplus .12 .73 5.65 15.89

General Reserves 2.49 3.59 4.52 4.52

Total surplus and general reserves 2.61 17 4.32 9 10.17 22 20.41 53

Total cap.stk.,surp., gen.res.,& Bqualiz. Fund 10.49 67 22.20 45 26.05 61 38.29 100

Total Capitalization 15.65 100 49.61 100 15.69 100 38.46 100

a) Estimate based on Sept. 30, 1952 consolidatedbalance sheet excluding inter-companyitems and allowing for final quarter adjustments. b) After anticipationof July 1, 1953 sinking fund. -15-

44. The Company's 1st Mortgage 4% Debenturesdue 1966, referred to in the capital structure as the Sterling Loan, carried a first mortgage and first floater on IISCO1s original assets before merger with SCOB. NTowoutstanding in the amount of 1.h7 crores, the sinking fund schedule called for an annual retirement of approximately.05 crore over the thirteen years 1953-1965 and a final payment of around .82 crore in 1966.

45. In the interests of corporate simplification,the first mortgage bondholderswere offered and they have accepted an increase in the interest rate to that assumed on the proposed IBRD loan (4 3/4%) and the option of being repaid at par on December 31, 1961 in exchange for granting the proposed IBRD loan, in effect, a pari passu mortgage and floater position on the combined assets of IISCO and SCOB. The InternationalBank and the Governmentof India enabled this offer to be made by agreeing to adjust the amortizationschedules on their own respectiveloans. The revised redemptionschedule on the Sterling Loan now calls for the retirementof approximately.05 crore annually over the eight years 1953-1960 and the balance of 1.07 crores in 1961, on the assumptionthat all debenture holderswill exercise their option.

46. The Governmentof India's consolidatedloan (2.50 crores now outstandingand to be increased to 7.90 crores exclusiveof accumulated interest) is to carry mortgage rights, ranking below those of the Sterling Loan and the IBRD Loan but pari passu with the Imperial Bank debentures (domesticbank borrowings). The Governmentloan is to carry compound interest at the same rate per annum as on the loan from the International Bank, and these interest charges will be allowed to accumulateduring the constructionperiod. The loan is to be repayable by equal annual instal- ments spread over the same period as on the loan from the International Bank (1959-1967inclusive as scheduled on the cash flow sheet attached) with a proportionatereduction in the years 1959, 1960, and 1961 to allo-w for the acceleratedretirement of the Sterling Loan in 1961, with the reduction to be added equally over the level amortizationschedule of the remaining six years.

47. The Company has a program to provide additionalhousing and townsite facilities along with the expanded operation. The Company has various electives under the proposed Housing Act, but expects to borrow 50 percent of the cost of these added facilitiesdirectly from Government. Of the total cost of the housing project of 1 crore, 60 percent is now scheduled to be built during the five-year construction period and the remaining 40 percent over 1957 and 1958. This would mean borrowing an additional .30 crore during construction and .20 crore afterwards. Each loan is scheduled to have a 15-year maturity, carry 4 3/4 percent interest rate, and will be amortized over each individual 15-year period.

48. The Companyts domestic bank borrowingsat the end of 1952 are expected to total 1.19 crores in order to maintain an adequate cash position, About .29 crore of this amount is expected to be repaid in 1953 and the balance .90 crore in 1954. Assuming the sale of marketable securities as scheduled on the cash flow sheet IISCO will not have to go to the banks for working capital until 1956 when 1.78 crores will be required. This in turn is scheduled for repayment in 1958. Under the Loan Agreement the Company is permitted to borrow up to 5 crores against inventories. -16-

49. From its holdings of SCOB shares IISCO will receive approx- imately 880,000 shares of its own ordinary stock in the merger. Previously these had been eliminated in a shrinkage of the capital structure,but under the Indian CompaniesAct it was found that the shares could not be cancelled. Through the device of an intermediarycompany it is planned to market these shares over the next three years raising an estimated 2.2 crores over the period, thereby reducing the amount of borrowing for working capital previously considered needed.

50. The remaining amount to be raised, 10 crores of rupees, is to come from the Government'sEqualization Fund. This advance has been treated as equity in projecting the pro-forma capitalizationof the Company. It provides a further cushion under the IBRD loan as well as relief to the Company from a too heavy maturity schedule through 1967. This Advance, as provided in the Agreement between the Governmentof India and The Indian Iron and Steel Company, Ltd., will not carry interest during the period of constructionand has no maturity date. If interest and/or repayment of principal is required thereafter,to the extent these are not met by sale of share capital, they are to be met only to the extent that the Government of India on the advice of the Tariff Commission permits additionalallowances over and above the normal retention prices. If the Advance is not paid by Mlarch 31, 1969, the Government of India shall decide, on the advice of the Tariff Commission, whether the balance shall be paid by raising of capital or through additionalallowances.

51. The Government of India also agrees- (a) to render such further financial assistance on such terms as may be mutually agreed in order to enable the Company to complete its expansion program; and (b) to maintain the Company in sound operating condition; provided such sums as may be necessary cannot be raised from private sources,

(e) Government'sPosition in Steel Industry

52. The EqualizationFund in itself is an essential feature of the Government'ssystem of price control for steel which requires that all producers sell at a uniform consumer price. Steel producers in turn are allowed "retentionprices" which are based on operating and various over- head costs allowed by the Governmentin addition to the fixed return on gross block, The differencebetween the retention and the consumer price is paid into the EqualizationFut±d and is used to subsidize higher cost producers and imports of steel so that such steel can also be sold at the uniform consumer price. To generate the funds needed to finance advances to the steel companies for further plant expansion and to create funds for future expansion, the Tariff Commission has uniformly increased consumer prices by Rs. 100 (in two Rs. 50 steps) per ton since June 30, 1952. Additionalfunds estimatedat 9.00 to 10.20 crores of rupees per year will accrue to the EqualizationFund on the basis of l,020,000 tons of finished steel production. -17-

53. The Government dominates the domestic demand for steel, since it now consumes about 50 percent of the available supplies. Also, through the Tariff Commission, the Government regulates retention and consumer prices, and through these and other devices conurols the profits of the steel companies. During the period of controls, therefore, the Government has the responsibility of adjusting profits and other allowances as needed from time to time to permit proper service of the IBRD loan and to maintain the Company in a sound financial and physical condition. The Government alreacy has advised that they have fixed the retention price for three years on recommendation of the Tariff Commission, and will request that the Tariff Commission include some form of production incentives in -ts determinationof retention price. Projected earnings,balance shieetdata, and the cash flow, as calculated for the years 1953 through 1967, indicate that the IBRD loan will be adequately protected.

(f) Pro-Forma Interest Coverage

54. Dcclusiveof any interest on the advance from the Equalization Fund (which would be provided by a separate allowance) interest coverage -would work out on a pro-forma basis as follows:

Interest Requirements Balance Avail. Interest Requirements Times Earned Year for Interest Sterling Govt. and Sterling Period of after Deprec. and Other and Construction and Taxes IBrD Loan Loans Total TBRDLoan Total

(in Crores of Pupees) -

1953 1.37 .22 .16 .38 6.2 3.7 1954 1.63 .34 .16 .50 4.8 3.3 1955 1.73 .55 .19 .74 3.1 2.3 1956 1.88 .68 .47 1.15 2.8 1.6 1957 3-00 .76 .54 1.30 4.o 2.3

Remaining Life of IBRD Loan

1958 3.68 .77 .51 1.28 4.8 2.9 1959 3.76 .76 .44 1.20 5.0 3.1 1960 3.75 .70 .4o 1.10 5.3 3.4 1961 3.71 .63 .35 .98 5.9 3.8 1962 3.73 .50 .31 ..81 7.5 4.6 1963 3.68 .43 .25 .68 8.6 5.4 1964 3.62 .34 .20 .54 10.7 6.7 1965 3.65 .26 .15 .41 14.0 8.9 1966 3.60 .17 .10 .27 21.2 13.3 1967 3.54 .07 .05 .12 50.6 29.5 - 18 -

(g) Funds Available for Debt Retirement

55. Funds available for debt retirement,repayment schedules,annual net excess cash, and cash accumulationin relation to the amount of the Sterling and I3BM loans outstandingare set forth below:

Funds Available for Debt Retirement (in Crores of Rupees)

Annual Excess of Sterling Cash Inflow Repayment Schedules Annual & I9RD Years Over Oatgo Govt. Loan Overdrefts net Cash Loans Ended Before Debt Sterl. 1BRD & Accum. & Housing Excess Accumu- Amt.out- Dec. 31 Retirement Loan Loan Interest Loan Total Cash lation standing

1952 ------.59 1.47 Construce Period 1953 .34 .05 - - .-29 .34 - .59 2.87 1954 1.45 .05 - - .90 .95 .50 1.09 6.05 1955 .68 .05 - - .01 .o6 .62 1.71 11.58 1956 -1.o6 .05 - - .01 .06 -1.12 .59 14.21 1957 .14 .05 - - .02 .07 .o7 .66 16.22

Remaining Life of I3RD Loan 1958 2.06 .05 - - 1.80 1.85 .21 .87 16.17 1959 3.55 .05 1.26 .96 .03 2.30 1.25 2.12 14.91 1960 3.72 ,05 1.32 .96 .03 2.36 1.36 3.48 13.45 1961 3.79 1.07 1.39 .97 .03 3.46 .33 3.81 11.03 1962 4.03 - 1.63 1.04 .03 2.70 1.33 5.14 9.4o 1963 4.09 - 1.71 1.04 .03 2.78 1.31 6.45 7.69 1964 4.16 - 1.79 1.04 .03 2.86 1.30 7.75 5.90 1965 4.37 - 1.87 1.04 .03 2.94 1.43 9.18 4.03 1966 4.44 - 1.97 1.04 .03 3.04 1.40 10.58 2.06 1967 4.51 - 2.06 1.o6 .03 3.15 1.36 11.94 _

40.27 1.47 15.00 9.15 3.30 28.92 11.35

56. irearlyall of the excess cash generation, as the precedine table shows, falls within the ten years 1958-1967, the years in which the contri- bution of the added facilitiesis fully reflected. Yet excess cash devel- oped after debt repayments over this ten-year period totals 11.28 crores of rupees, as only .07 crore will have been developed up to the end of 1957 due to the heavy outgo. This is eouivalentto about 75 percent of the pro- posed ITRD loan. In other words, the cash flow sheet indicates that over the one year of grace and tine-year amortizationperiod total available cash Vill be equivalent to 1 3/4 times the principal amount of the loan, and by 1964 the Companyls cash accumulation in itself should be sufficientto take care of the remainder of the loan even if no further escess cash developed. -19-

(h) Pro-FormaAsset Protectionof IBRD Loan

57. The IBRD loan would also appear to be well protected in terms of tangible and net current assets based on projected balance sheets as of December 31, 1957 (the completion of the constructionperiod) and as of December 31, 1961 (when the IBRD loan is the only first mortgage issue still outstanding). This is set forth belov:

As of December 31 1957 1961 (Croresof Rupees)

Gross property (cost) 59.28 60.98 Less, High Courtreduction and depreciation 16.75 28.40 Net property 42.53 32.58 Less,reserves on spec. accounts 1.85 1.85 Revisednet property 40.68 30.73 Net currentassets 9.66 14.9

Net tangibleassets 50.34 45.69

SterlingLoan 1.22 - IBRD Loan 15.00 11.03

Totalprior liens 16.22 11.03 Per Core of Debt Net currentassets .60 1.36 Tangibleassets 3.10 4.L4

58. cKpressedin dollarsfor each dollarof firstmortgage debt outstandingat the end of 1957, the projectedbalance sheet indicates60 cents of net current assetsand $3.10 of tangibleassets. At the end of 1961 for eachdollar of the ITBRDloan then outstanding,the projected balancesheet indicates$1.36 )f net currentassets and $4.14of total net tangibleassets.

XIII. Justificationof the Project

59. Demandfor steel in Indiais considerablylarger than the productivecapacity of India's steelproducers and necessitatesyearly an increasingexpenditure in foreignexchange to meet the most urgentsteel requirements. This is shown by the CIF cost of steel importsduring the past three years in the table Which follows: -20-

AnnualCost of Steel Imports (Equiv,1,1illions of U.S.Dollars)

Year 1949 1950 1951 Cost 18.4 23.3 33.2

60. Had the IISCO-SCOBand Tatas expansionprograms been completed in 1951, importswould have been the equivalentof about U.S. $8.0 million insteadof U.S. $33.2 million,or a savingof approximatelythe equivalent of U.S. $25.o millionin foreignexchange. About one-thirdof the savingswould have come from the IISCO-SCOBproject and the remainderfrom Tatas,mainly because Tatas' project includes a tube mill. 61. Indiais rich in the materialsneeded to make steel. The market also has becomelarge enoughto justifyplants of economicsize lvhich,when combinedwith relativelycheap labor,gives extremelyfavorable costs of production. It becomesvery important,therefore, that Indiamake use of thesenatural advantages to producemore domesticsteel, at considerable savingto the consumer. 62. The II$CO-SCOBproject will make availableat least400,000 tons per year of foundryiron for the use of India'snumerous foundries and at least 250,000tons per year of tin bar and billetsfor the "Re-rollers".

63. Failureto increasethe domesticsupply of steelwill seriously jeopardize carefully considered Government plans:to increase production of food grains; to expand agriculture, engineering industries, transportation and public utilities; and to relieve the housing shortage.

XIV. Conclusions

1. The project is technically feasible and offers the most rapid and least costlymeans of relievingIndia's immediate shortages of iron and steel. 2. The proposedmeans of financingare consideredadequate for the project.

3. The projectis well engineeredand couldbe startedpromptly. 4. The projectwould be self-supportingbased on presentrates of returnallowed by the Government.

5. The projectis suitableas the basis for a loan in foreign exchangeequivalent to about U.S. 031.5 million.

December41 1952 SCHEDULES ATTACHED

I. Capital Expenditure Chart, 1953-1957

II. Source and Application of Funds (Cash Flow Sheet), Years 1953-1967 inclusive,

III. Calculation of IISCOIs Gross Block and Estimate of Gross Income Based on Return Expected from Tariff Commission.

IV. Estimate of profits, 1953-1958 inclusive.

V. Estimate of profits, 1959-1967 inclusive.

VI. Pro-formaBalance Sheets as of December 31, 1952, 1957, 1961 and 1967.

VII. ConsolidatedBalance Sheet of Merged Companies (intercompany items eliminated) as of September 30, 1952 (unaudited),

VIII. Disbursementand AmortizationSchedule for Proposed IB3D Loan.

IX. Government Loan Drawings and Advances from Equalization F'und.

XI GovernmentLoan Repayment Schedule.

XI. Drawings and Repayment of Government Housing Loan,

XII. Sunmary of Past Earnings and Balance Sheets of The Indian Iron & Steel Company, Limited.

XIII. Summary of Past Earnings and Balance Sheets of The Steel Corporation of Bengal, Limited. Schedule I

C&PITALEXPNITURE CHART (In Lakhs of Rupees)

1953 1954 1S 1956 19S7 Total 19$8 95

Projected Expansion

Foreign Currency 130 300 520 210 140 1,300

Indian Currency 160 450 730 i184 1.874

290 750 1,250 560 324 3,174

Current Extensions

IIsco 80

sCOB 250 -30 620 750 1,250 560 324 3,504

Minor Capital Works 50 50 50 50 50 250 50 50

Housing and Town 12 12 12 _ 12 12 60 20 20

682 812 1,312 622 386 3,814 70 70 THE INDIAN IRON AND STZEL COMPANY.Ltd. SCHEDULEII SOURCEAND AkPLICATION OF FUNDS, 1953 - 1967 (In crores of rupees)

SOURCE OF FUNDS 1953 1954 1955 1956 1957 1958 1959 1960 i161 1962 1963 1964 1965 1966 1967 Free cash& Govts.at beginning .59 .59 1.09 1.71 .59 .66 .87 2.12 3.48 3.81 5.14 6.45 7.75 9.18 10.58 Gross Income 8/'Oon block 1.51 1.86 1.86 1.86 3.47 4.52 4.70 4.70 4.70 4.84 4.84 4.84 4.98 L.98 4.98 Depreciationat 5o .95 1.16 1.16 1.16 2.17 2.83 2.94 2.94 2.94 3.02 3.02 3.02 3.10 3.10 3.10 Intereston workingcapital .20 .20 .20 .20 .25 .30 .30 -30 . .3.30 oj .30 -30 .30 Totalgross income 2.66 3.22 3.22 3.22 5.89 7.65 7.94 7.94 7.94 8.16 8.16 8.16 8.38 8.38 8.38 Profiton Kultifoundries .20 .20 .20 .20 .20 .20 .20 -25 .25 .25 -25 .25 .25 .25 .25 Total income 2.86 3.42 3.42 3.42 6.09 7.85 8.14 8.19 8.19 8.41 8.41 8.41 8.63 8.63 8.63

Sale of MarketableSecurities .74 .73 .73 ------New Money For capital expenditures Intll Bank for Recon. & Dev. Drawdownof principal 1.30 3.00 5.20 2.10 1.40 - Advance of int. during const.1 _.21 .38 .8 .66 ------_ Total from I.B.R.D. 1.45 3.23 5.58 2.68 2.026- Government of India Drawrdownof loan - - 5.40 ------Int. accum.on loan .12 .13 .18 .40 .42 ------Housing loan .06 .06 .06 .06 .06 .10 .10 - - EqualizationFund(10 crore) 4 1.4 - , - _ _ _ - _ - - _ - Total 4.28 4.69 Z.04 _46 .48 .10 .10 _ - _ - _

Total for capital expend.. 5.73 7.92 12.62 3.14 2.54 .10 .10 - For working canital Government of India ------Imperial Bankof India - - - 1.78 ------National Bank of India, Ltd. - - - - _ _ _ - - - - _ Total for working capital - _ - 1.78_ _ _ -

Total new money 5.73 7.92 12.62 4.92 2.a4 .54 .10 _ - - - - _ - .-

Total 9.92 12.66 17.8610.05 9.22 8.61 9.11 _ 1 UL._212.2213.51 4.86 1 17.81 19.21 THE INDIAN IRON AND STEEL COMPANY. Ltd. SOURCE A'D APPLICATIONOF Fl?DS, 1953 - 1967 SCHEDULE II (Cont) (In crores of rupees) APPLICATION OF FUNDS 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 Plant and 7hui_ment 4roJectedExpansion Foreign currency (13.00) 1.30 3.00 5.2 2.1001.40

Domestic currency (18.74) 1.60 L -0 Z.-0 3.50 1.84 _ - - _ - - Total projected 2.90 7.50 12.50 5.60 3.24 - - - Minor capital works .50 .50 .50 .50 .50 *50 .50 .50 *50 .50 .50 .50 .50 .50 .50 Housing and town .12 .12 .12 .12 .12 .20 .20 ------Current extensions 0 - . ------Total plant and equipment 6.82 8.12 13.12 6.22 3.86 .70 .70 .50 .50 .50 .50 .50 .50 .50 .50 Interest 1st Mort. Deben. (Sterling Loan) .06 .o6 .o6 .o6 .o6 .o6 .o6 .o6 .o6 ------Int'l Bank (incl. commitmentfees) .16 .28 .49 .62 .70 .71 .70 .64 .57 .50 .43 .34 .26 .17 .07 Government of India Loan .12 .13 .18 .40 .42 .43 .42 .38 .33 .29 .2h .19 .14 .09 .04 Housing Loan - .01 .01 .01 .01 .02 .02 .02 .02 .02 .01 .01 .01 .01 .01 EqualizationFund ------Payable t"ereafter only to extent that a special allow- ance is made in the retention price. Bank Overdrafts .04 .02 - .o6 _.1i .o6 - - - -=- - - Total Interest .38 .50 .74 1.15 1.30 1.28 1.20 1.10 .98 .81 .68 .54 .41 .27 .12 Labor profit sharing bonus .15 *15 *15 .15 .25 .30 .30 .30 .30 .30 .30 .30 .30 .30 .30 M4anagingAgents & Dir. Remuneration .15 .17 .15 .10 .26 .37 .40 .42 .43 .46 .48 .49 ,52 .54 .56 Taxes .54 .63 .53 .38 .92 1.34 1.44 1.50 1.54 1.66 1.71 1.77 1.88 1.93 1.99 Dividends - Preferenceat 5% .13 .13 .13 .13 .13 .13 .13 .13 .13 .13 .13 .13 .13 .13 .13 - Ordinary at 10% .52 .52.52 . 2 .55.2 .52 52 .S.2..2.-. 2.2. .. 2 Total .65 .65 .65 .65 .65 .65 .65 .65 .65 .65 .65 .65 .65 .65 .65 Inventories (4.70) .30 .40 .75 .75 1.25 1.25 Redemptions

1st Mort. Deben. (SterlingLoan) .05 .05 .05 .05 .05 .05 .05 .05 1.07 - - InternationalBank Loan ------1.26 1.32 1.39 i.6-31.71 1.79 1.87 1.97 2.o6 Government- Loan ------.96 .96 .97 1.04 i.o4 1.0 i.o4 1.04 1.01 - Housing Loan (a) - - .01 .01 .02 .02 .03 .03 .03 .03 .03 .03 .03 .03 603 - Er,ualization Fund. - - - - - Payable thereafter only to extent tb1t a special allowV.- ance is made in the retention pric-e or from proceeds of future ecuity sales. Overdrafts .29 .90 _ - 1.78 - - _ _ _ _ _ Total redemptions .34 .95 .06 .06.07 1.85 2.'3073 Y4& 2.70 2.78 2.86 2.9 3o4 3., Free cash Governmentsat end .591.0 1 .59 .66 . 2.12 3.48 3.81 2.18 10.58 ll.94 Total 9.9212.66 10.05 9.22 8.61 9.11J 11.67 12.22 13.55 4.86 16.38 1228119.21 (a) Each loan amortized over 15-year period from date of issue. CALCULATIONOF GROSS ELOCK AND ESTIMATE OF GROSS INCOME ON IRON Schedule III AND STEEL BASED ON RETURN EXPECTPDFRCM TIU TARIFF CO0'IIAISSION (In Lakhs of Rupees) 8'p on Block Deprec. Interest on Gross Income at Charae at 5% WlorkingCaDital Total Year Current Block IISCO-SCOBat 31.3.52 895 Kulti as assessed by Tariff Commission 219 1,114 SCOB at 31.12.51 780 At charge end 1952 1,894 151 95 20 266 1953 ComPleted Installations 1953 Current Extensions - IISCO 80 SCOB 3U° 430 At charge end 1953 2,324 186 116 20 322 1954 At charge end 1954 2,324 186 116 20 322 1955 At charge end j9a 2,324 186 116 20 322 1956

1956 - Minor capital works 1953 62 1954 62 1955 62 1956 62 lat blast furnace 1.770 At charge end of 6 4,342 347 217 25 589 1957

.122- 2nd blast furnace 1,100 1st Kulti blast furnace 150 Minor capital works 62 At rharge end of 1957 5,654 452 283 30 765 1958

195 - 2nd Kulti blast furnace 150 Minor capital works 70 At chaxge end of 1928 5,874 470 294 30 794 Schedule IV ESTIMATE OF PROFITS (In Lakhs of Rs.)

1963 1954 1955 1956 22 1958

Gross Income on Iron and Steel 266 322 322 322 589 765

Kulti Foundries 20 20 20 20 20 20

286 342 342 2 02 785

Depreciation 95 116 116 116 217 283

Loan Interest World Bank (16) (28) (49) (62) (70) 71 Government- Straight Loan (12) (13) (18) (40) (42) 43 - Housing Loan - 1 1 1 1 2

Interest on Bank Overdraft 4 2 - 6 11 6

Debenture Interest 6 6 6 6 6 6

Labor Bonus 15 15 15 15 25 30

Managing Agency & Directors Fees 15 17 15 10 26 37

Taxation S4 _ 3 38 92 134

2 261 2 294 90 612

Profit 69 81 69 48 119 173 SCHEUL$ V PROPIT :0,STIMATC (In Lakhs of Rse. )

1959 1960 1961 1962 1 1964 1965 1966 1967

Block 5,874 5,874 5,874 6,o44 6,044 6,044 6,194 6,194 6,194

Gross Return on Block 794 794 794 816 816 816 838 838 838

Kulti 20 2-5 25 25 25 _25 ,25 25 - 25

814 819 819 841 841 841 863 863 863

Depreciation 294 294 294 302 302 302 310 310 310

Loan Interest IWorld 3ank 70 64 , 50 43 54 26 17 7 Government - Straight Loan 42 58 33 29 24 19 14 9 4 - Housing Loan 2 2 2 2 1 1 1 1 1

Debenture Interest 6 6 6 ------

Labor Bonus 30 30 30 30 30 30 30 30 30

Managing Agency & Directors Fees 40 42 43 46 48 49 52 54 56

Taxation 144 150 154 166 7 177 188 222 199

628 § jil bg 6ig 612 621 614 60O?

Profit 186 ZO 200 216 229 249 256 PRO-FORA BALANCE SHMTS OF IISCO D MI YI. As of December 31 (In Lakhs of Rupees) ASSETS 1952 1957 1961 1967 ProDerty AcSount Cost 2,018 5.928 6,098 6,398 Less, High Court reduction _137137 137 137 1,881 5,791 5.961 6,261 Less, depreciation 878 1.N28 2203 4.532 1,003 4,253 3,258 1,722 Capital works in progress 129 - - Net Property Accounts 1,132 4,253 3,258 1,722 gurrent Assets Cash 59 66 381 1194

Investmentsat realizablevalue 220 - - Inventories,etc, 600 945 1,070 1,070 Net debtors - 45 44 879 1,011 1,496 t304 less, net creditors 103 45 - _ Net current assets 776 966 1,49. 2005 TOTAL ASSETS LIABILITIES Debt Sterling loan 147 122 - IBAD loan - 1,500 1,10 Government of India - Loan 250 915 620 - Housing Loan - 26 35 17 Domestic bank overdrafts 119 178 - Total debt 516 2,741 1,764 17 Advances from EqualizationFund - 1,000 1,000 1,000 Reserves - on speeial accounts 185 185 185 185 - General 249 359 452 452 - Profits on investments 110 - - - Debenture sinking fund 48 73 -- Canital Stock - Preference (Rs. 100) 270 270 270 270 - Ordinary (Rs. 10)318 518 51 Total Caoital Stockc 788 788 788 788 Surplus (profitand loss account) 12 73 S Ia TOTAL LUABILITIES 1,08 5.219 4 1 SCHEDULE VII IISCO-SCOB

ADproximate ConsolidatedBalance Sheet as of September 30, 1952 (On merger basis, intercompanyitems eliminated)

(It Lakhs of Rupees)

ASSETS LIABILITIES

Debt Fixed capital expenditure at First mortgage Debentures 153 depreciated cost, less less bought in for redemption High Court reductions 1,023 at July 1, 1953 6 147 Government of India loan 250 Capital works in progress 121 Imperial Bank of India overdraft 25

Free investmentsat cost Total debt 422 Government securities 60 Shares 110 Reserves On special accounts 185 General 241 Current Assets Total 426 Cash 59 Stocks and stores i9 Debeature sinking fund 47

Total current assets 654 Capital stock. Preference 270 Less, net creditors and - Ordinary S18 credit balances X Total capital stock 788

Net current assets 478 Profit and loss account 109

Total Assets 1,792 Total Liabilities 1,792 SCIiEDULEVIII

Proposed Rs. 150,000,000 IP.:T) Loan 4 3/4%, 1953-1967 U n L . ees)

Disbursed & Total Year Disbursements Outstanding Undisbursed Principa1 Interest Commitment Char es

1953 7,500,000 7,5O0,OOO 142,500,000 - 712,500 534,375 712,500 1953 7,500,000 15,000,000135,000,000 - 862,500 506,250 862,500 1954 17,310,000 32,310,000 117,690,000 - 1,208,701 441,3381,208,701 1954 177310,i000 49,620,000 100,380,000 - 1,554,900 376,4251,554,9o0 1955 30,000,000 79,620,000 70,380,000 - 2,154,900 263,9252,154,900 1255 30,000,000109,620,000 40,380,000 - 2,75h,900 151,4252,754,9OO 1956 12,120,000121,740,000 28,260,000 4 2,997,300 105,9752,997,300 1956 12,120,000133,860,000 6,140o,0o0 _ 3,239,700 60,5253,239,700 1957 8,070,000 141,930,000 8,070,000 - 3,401,101 30,2633,401,101 1957 8,070,000 150,000,000 - 3,562,500 3,562,500 1958 150,000,000 - 3,562,500 3,562,500 1958 150,000,000 - 3,562,500 3,562,500 1959 150,000,000 6,242,8513,562,500 9,805,351 1959 143,757,149 6,390,4703,414,232 9;804,702 1960 137J,366,679 6,542,8513,262,458 9,805,309 1960 130,823,828 6,695,2313,107,065 9,802,296 1961 124,128,597 6,857,1362,948,054 9,805,190 1961 117,271,461 7,019,0412,785,197 9,804,238 1962 110,252,420 8,047,6112,618,494 io,666,1o5 1962 102,204,809 8,238,0872,427,364 10,665,451 1963 93,966,722 8,433,3252,231,709 10,665,034 1963 85,533,397 8,638,0872,031,418 10,669,505 1964 76,895,310 8,842,848 1,826,263 10,669,111 1964 68,052,462 9,052,372 1,616,245 10,668,617 1965 59,000,090 9,266,657 1,401,252 10,667,o09 1965 49,733,433 9,485,7051,181,169 lo,666,874 1966 40,247,728 9,709,514 955,883 10,665,397 1966 30,538,214 9,942,847 725,282 10,668,129 1967 20,595,367 10,176,180 489,139 10,665,319 1967 10,419,187 10,419,187 247,455 10,666,642 SCHEDULEIX

GOVERIMENTLOAN DRAWINGSAND ADVANCESFROM EQUALIZATION FUND (In Lakhs of Rupees)

Year Net Loan Advance Loan Running Interest Annual Loan Advance Drawings Drawines at Interest at 4 3/14% Interest

1953 790 1,000 250 330 250 5.9 80 255.9 6.1 12.0 Accumulated

1954 225 262.0 6.2 225 268.2 6.4 12.6 do

1955 225 140 274.6 6.5 315 506.1 12.0 18.5 do

1956 833.1 19.8 852.9 20.3 40.1 do

1957 873.2 20.7 893.9 21.2 41.9 do 125.1

1958 915.1 21.7 915.1 21.7 43.4 Paid in cash

1959 6 915.1

790 1,000 GOVEYNI T LOANREPAYMENT SCHMfL1JlEX Commencing at Rs. 96 per annum, 1st Repayment 30.6.59 (First three years to be reduced by 17 Lakhs spread evenly over the poriod to take care of Government's proportion of meeting advanced payment of Sterling loan in 1961*) Principal interest OQtstanding Average at 4 31/4 Renayment 915 ) 891 42.3 1959 96 30. ~~~~~~~~867) 1960 96 ) ,i2tg 819 ) 795 37.8 10. . 771 ) 1961 97 723 ) 699 33.2 1962 104 675 ) 1963 104 31.12.61 626 14.9 ) Balance of 17 Lakhs to be repaid equally over 6 yrs. at Rs.104 per annum ) 28.5 1964 1o4 30.6.62 574 13.6 ) 1965 104 31.12.62 522 ) 496 23.6 30,6.63 470.) 1966 104 31.12.63 418 ) 392 18.6 1967 106 30.6.64 366 ) 915 31.12.64 314 ) 288 13.7 30.6.65 262 ) 31.12.65 210 ) 184 8.7 30.6.66 158 )

31.12.66 106 ) 79.5 3.8 30.6.67 53 )

31.12,67 _

* Of advanced repayment of Sterling Loan in 1961 of 1.07 crores, .56 crore is to come from earnings, .34 crore from reductionof IBRD principal payments over 3 years 1959-1961and .17 crore from reductionf governmentloan principalpayments over 1959-1961. SCH2IDULEXI. GOVBB1':bNTHOUSING LOANI OF Rs.*;0 LAKHS

ANIXUALDRAWINIGS REPAYABLE OVER 1S YEARS

Drawing Repayment Running at Interest Int. at 4 3f4l

1953 6 _ 6 .28 1954 6 .4 11.6 .55

1955 6 .8 16.8 .80

1956 6 1.2 21.6 1.03

1957 6 1.6 26.4 1.26

1958 10 2.0 34.4 1.64

1959 10 2.7 41.7 1.98

1960 _ 3.3 38.4 1.83 1961 3.3 35.1 1.67

1962 3.3 31.8 1.52 1963 3.3 28.5 1.35

1964 3.3 25.2 1.20 1965 3.4 21.8 1.04 1966 3.3 18.5 .88 1967 3.3 15.2 .73

1968 3.3 11.9 .57 SCIEDULEXII

THE INDIAN IRON & STEEL COMPCANY,LII1iTED

Summary of Earnings (Crores of Indian Rupees)

Year Ended Total Depre- Net Income Interest Dividends Additions to ±.iarch31 Revenue ciation after Taxes Paid Paid* Surplus and Available for Reserves Interest 1947 4.33 .20 .27 .07 .10 .10 1948 8.22 .30 .45 .10 .19 .16 1949 9.29 ,30 .54 .11 .26 .17 1950 13.08 .33 .90go .13 .26 .51** 1951 10.65 .40 .81** .17 .28 .36 fi 1952 11.89 .40 .86 *'* .12 .33 .41** SummaryBalance Sheets as of hi.arch31 (Croresof IndianEupees)

19b1 1946 1950 1951 1952 ASSETS: Current Assets 2.66 3.43 4.68 4.68 6.22 Fixed Assets 5.53 6.06 10.54 10.91 11.23 less: depreciation 1.23 2.52 3.09 3.47 3.86 NetFixed Assets 30 _373 7.45 7744 7.37 Other Assets 1.35 1.33 1.23 1.19 1.20 TotalAssets 8.31 8.30 13.36 13.31 14.79

LIABILITIES: CurrentLiabilities .65 1.36 3.00 2.79 3.48 OtherLiabilities .31 .48 .62 .62 .87 Long-termDebt 2.06 1.83 4.75 3.20 3.35 CapitalStock 2.54 2.55 2.55 4.05 4.05 Surplusand Reserves 2.75 2,08 2.44 2.65 3.04 Total Liabilitiesand Equity 8.31 8.30 13.36 13,31 14.79

Net CurrentAssets 2.01 2*07 1.68 1.89 2.74

Above tablesbased on statementsof Price,Waterhouse, Peat & Co.

* Dividends on OrdinaryShares are declaredin year indicated: actualpay- ment is made in followingyear.

-F, Due to extra allowrances for depreciation, the Company did not pay any IncomeTaxes in these years. In place thereof a reserve for future taxation contingencies was created.

-k** The Company added .175 crores to the reserve for future taxation con- tingencies, in addition to providing.348 croresfor taxationfor fiscal 1952. SCHEDULEXIII

THE STEEL CORVORATIONOF BENGAL, LIlITED

Summary of Earnings (Crores of Indian Rupees)

Year Ended Total Depre- Net Income Interest Dividends Additions to December 31 Revenue ciation after Taxes Paid paid* Surplus and Available for Reserves Interest

1946 3.25 .30 .27 .02 .22 .03 1947 4.71 *40 .14 .03 .o6 .06 1948 5.31 .40 .24 .03 .18 .03 1949 7.43 .40 .34 04 .27 .03 1950 7.66 .40 .33 .03 .27 .02 1951 9.49 .247 .242 .04 .31 .07

Summary Balance Sheets as of December 31 iCrores of Indian Rupees)

19240 1945 1949 1950 1951 ASSETS:

Current Assets .75 2.47 3.17 3.84 4.53 Fixed Assets 4.724 6.46 7.78 7.84 8.12 less; depreciation .05 1.95 3.445 3.84 4.25 Net Fixed Assets 4.51 4.33 3.88 Other Assets .42 .43 .31 .49 .85

Total Assets 5.86 7.41 7.81 8.33 9.26

LIABILITIES:

Current Liabilities .55 1.50 1.93 2.11 2.88 Other Liabilities .10 .65 .43 .36 .52 Long-term Debt 1.12 .49 .67 1.00 1.00 Capital Stock 4.oo 24.25 4.49 4,49 24.49 Surplus and Reserves .09 .52 .39 .37 .37

Total Liabilities 5.86 7.41 7.81 8.33 9.26

Net Current Assets .20 .97 1.34 1.73 1.65

Above tables based on statements of Lovelock & Lewes.

* Dividends on Ordinary Shares are declared in year indicated; actual payment is made in following year.