Bombay House 24 Homi Mody Street Mumbai 400 001 www.tatasteel.com 106th Annual Report 2012-2013 e Bu Th sine ss M o d e l k loo ut O Risks a nd O p p o r t u n i t i e s Communicating tegic O Value tra bje S ct Transparently iv e s a n d S t r a P t e e r g f i o e r s m ance G o v e rn an ce NVG Principles The journey towards enduring sustainability The Deming Grand Prize INTEGRATED REPORTING Communicating Value Transparently At the very core of the conceptThe of Business Integrated Model ReportingThe Operating Context (IR) – , is the growing Risks and Opportunities recognition that a number of factors determine the value of an organisation – some of these are nancial or tangible in nature and are easy to account for in nancial statements. However others, like people, natural resources, intellectual capital, markets, competition, etc., are harder to measure. Future Outlook This is where the concept of Integrated Reporting comes in. IR enables an Yellow Green Red organisation to communicate in a clear manner on how it is utilising its resources Performance 70% 70% 70% and relationships to create, preserve and grow value in the short, medium and 40% 40% 40% Pantone 137C Pantone 361C Pantone 032C C0 M50 Y100 K0 C90 M0 Y90 K0 C0 M100 Y80 K0 long-term. And thus helping investors to manage risks and allocate resources R255 G161 B0 R52 G178 B51 R237 G41 B57 Hex # FF9900 Hex # 009900 Hex # FF0000 Dulux 05YY 42/727 Dulux 43GY 24/566 Dulux 16YR 18/587 RAL 070 70 80 RAL 140 60 70 RAL 030 50 60 most eciently. and strategies Strategic objectives Marine Neutral Deep Blue e Bu Governance Systems Th sine ss 70% 70% 70% The IR reporting framework covers six parameters: M o d e l 40% 40% 40% Pantone 314C Pantone 7535C Pantone 2965C C100 M5 Y14 K17 C10 M11 Y23 K19 C100 M30 Y0 K80 v Organisational Overview of the Business Model R0 G131 B169 R190 G185 B166 R0 G43 B69 k Hex # 0083A9 Hex # BEB9A6 Hex # 002B45 loo ut Dulux 85RB 09/313 Dulux 20YY 58/082 Dulux 10BB 07/150 O Risks a RAL 330 30 30 RAL 7032 RAL 250 20 25 nd O p p o Violet Silver v Operating Context, Risks and Opportunities r t u n i t i 70% 70% e s v Strategic Objectives and Strategies 40% 40% Communicating Pantone 261C Pantone 877C tegic O C55 M100 Y0 K55 C0 M0 Y0 K40 Value tra bje R90 G36 B90 R153 G153 B153 S ct Transparently iv Hex # 5A245A Hex # 999999 e s Dulux 85RB 09/313 Dulux Represented by metal a RAL 330 30 30 RAL 9006 v Governance n d S t r a P t e e r g f i o e r s m v Performance ance G o v Outlook v e rn an ce NVG Principles This Annual Report is Tata Steel’s maiden attempt to report in accordance with the above parameters. It is in keeping with Tata Steel’s own belief in transparency, accountability and ethics. A belief that Tata Steel has held strong for over a century. Tata Steel is the rst integrated steel company in the world, outside of Japan, to win the Deming Grand Prize. The Deming Prize is considered to be the highest award in the area of Total Quality Management. Winning the 2012 Deming Grand Prize is a testimony to our ongoing eorts at achieving excellence in business. The journey towards enduring sustainability Tata Steel has embarked on the journey toward sustainability with the objective of building a sustainable business while generating long-term value for its stakeholders. Responsible businesses are increasingly seen as corporate citizens who must set examples, actively contribute to the well-being of society, not just in economic terms, but also through actions that are aimed at conserving the environment and contributing to the growth of society. As boundaries of responsibility are redened, businesses must be proactive, they must dene and drive a vision that welds the goals of the society in which they function, with their own aspirations for growth. What does sustainability mean to us at Tata Steel? Tata Steel has been one of the rst companies in India to adopt sustainability as a policy. It is a core value, built on our respect for people, our desire for growth and our respect for the environment. Building further on this vision, Tata Steel is the rst Indian company to be a part of the International Integrated Reporting Council (IIRC) – an international initiative towards voluntary communication on how an organisation’s strategy, governance, performance and prospects lead to the creation of value over the short, medium and long-term. INTEGRATED REPORTING Helping stakeholders to understand an organisation’s strategy, governance, performance and prospects that will lead to the creation of value over the short, medium and long-term. An integrated report thus communicates the factors most important to the creation of value over time. Organisational Overview of the Business Model Governance This provides a perspective of the The ethical standards of a company are core business of the company so that an important aspect that a stakeholder stakeholders have a clear understanding of is concerned about when investing. what the company does – and how it does it. Transparent reporting on the governance process helps reassure stakeholders and builds trust. Operating Risks and Opportunities It is important for every stakeholder to understand and weigh for themselves the risks the company is exposed to – as well as the Performance opportunities that come its way. Performance – whether it is operational, quality, delivery, innovation or CSR – is of paramount importance for the investing community. Strategic Objectives and Strategies One of the key aspects of Outlook understanding a company is the The macro economic environment globally knowledge of its strategies and continues to be uncertain and volatile. growth plans. Under such conditions it is important for the stakeholders to be appreciative of the company's long-term plans. 2 Tata Steel Limited The journey towards enduring sustainability CONTENTS Chairman’s Statement 4 Dividend Statistics 114 Board of Directors 6 Independent Auditors’ Report 115 Consolidated Financial Highlights 8 Annexure to the Independent Management Speak 10 Auditors’ Report 117 Organisational Overview of the Business Model 14 Balance Sheet 120 Operating Context, Risks and Opportunities 18 Statement of Prot and Loss 121 Strategic Objectives and Strategies 22 Governance Systems 26 Cash Flow Statement 122 Performance 27 Notes to Balance Sheet and Statement Outlook 28 of Prot and Loss 124 NVG Principles 29 Auditors' Report on Consolidated Notice 33 Financial Statements 166 Directors’ Report 39 Consolidated Balance Sheet 168 Management Discussion and Analysis 55 Consolidated Statement of Prot and Loss 169 Corporate Governance Report 79 Consolidated Cash Flow Statement 170 Business Responsibility Report 101 Highlights 109 Notes to Consolidated Balance Sheet and Statement of Prot and Loss 172 Sources and Utilisation of Funds 110 Financial Ratios 111 Summary of Financial Information Production Statistics 112 of Subsidiary Companies 215 Financial Statistics 113 Proxy/Attendance Slip 223 The Annual General Meeting will be held on Wednesday, 14th August, 2013 at Birla Matushri Sabhagar at 3.00 p.m. As a measure of economy, copies of the Annual Report will not be distributed at the Annual General Meeting. Shareholders are requested to kindly bring their copies to the meeting. Visit us at: www.tatasteel.com E-mail: [email protected] Tel.: +91 22 66658282 Annual Report 2012-13 3 CHAIRMAN'S STATEMENT Dear Shareholders, During the year, the world economy has struggled on a path to uniform and widespread economic stability. Most emerging markets and developing economies have shown moderate growth, whereas the developed economies have moved on divergent paths, with pickup in growth in the US and weak economic conditions in the euro zone area. The Indian economy has slowed down in the last 12 months and some of the sectors including the automotive and capital goods have been faced with demand slowdown that is unlikely to turnaround quickly. The Chinese economy too has witnessed a moderation in its growth rate and it is widely expected that following the political transition, China would look at rebalancing the economy to a sustainable level. In 2012, the world’s crude steel production stood at 1.54 billion tonnes, an increase of roughly 0.7% over the previous year. This has been the slowest rate of growth since the crisis of 2008. The overhang of the economic crisis and signicant overcapacity in regions like Europe and China continues to stress global capacity utilisation and the demand supply balance. In our The operational key overseas markets of Europe and UK where the Company has signicant initiatives across the manufacturing presence, the economic downturn has signicantly aected steel demand, which is now almost 30% lower than the pre-2008 nancial crisis Group are aimed to level. The outlook for the euro zone area currently continues to be depressed make the Tata Steel and we have had to revise our cash ow expectation and valuations of the Group a stronger and Group’s European operations. It is in this context, that we took an impairment charge in the last quarter. A clear industrial policy with special emphasis on more competitive manufacturing competitiveness and infrastructure spending will be the key business that can requirement for revival of demand in markets like the UK. withstand external On the operational front, we have made signicant progress in the last year.