interview of tata cfo
TRANSCRIPT
8/7/2019 INTERVIEW OF TATA CFO
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OCTOBER 2009 Richard Dobbs and Rajat GuptaSource: Corporate Finance Practice
Presented by:-GAGANDEEP SINGH.
AABIR AHMED.NU-MBA.
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TATA STEEL
y Tata Steel , formerly known as TISCO and Tata Ironand Steel Company Limited , is the world's seventh
largest steel company.y An annual crude steel capacity of 31 million tonnes.y Ranked 258th on Fortune Global 500 , it is based
in Jamshedpur , Jharkhand , India.
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TATA STEELTYPE PUBLIC
INDUSTRY STEELFOUNDED 1907
Headquarters MUMBAI,INDIA
KEY PEOPLE RATTAN TATA (CHAIRMAN)
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Koushik Chatterjee
y Born in 1968 , Mr. Chatterjee is an Honours Graduatein Commerce from Calcutta University and a FellowMember of the Institute of Chartered Accountants of India.
y Mr. Kousik Chatterjee joined Tata Steel in 1995. Duringhis stint in the Company , he worked in the areas of Corporate Finance and Planning.
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Fast facts
y Member of board of several Tata Steel Group companiesincluding Tata Steel Europe , NatSteel Asia , Tata SteelThailand , Southern Steel Berhad.
y Named one of India s best CFOs by Business Today (2005and 2006) and by CNBC (2007 and 2008) Is a frequentspeaker in various conferences in India and abroadincluding the McKinsey Global CFO Forum and theConfederation of Indian Industry (CII) conferences.
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TOPIC OF DISCUSSIONy Chatterjee discussed this approach with McKinsey
directors Richard Dobbs and Rajat Gupta.y During the conversation , he explained the impetusbehind the group s acquisitions abroad , the effects of
the global financial crisis on the steel industry andTata Steel , and the company s efforts to improve the
efficiency of its operations.y The crisis , Chatterjee notes , makes opportunities
more apparent and restructuring more critical forthe company s long-term health.
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Globalization of TATA STEELy Koushik Chatterjee: India is clearly a very large country
with a significant population and a big market , and theTata Group s companies in a number of sectors have apretty significant market share. India remains themain base for future growth for Tata Steel Group , andwe have substantial investment plans in India , whichare currently being pursued.
y
But he says nor are there many opportunities forgrowth through acquisitions in India , particularly insectors like steel , where the value to be captured islimited.
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Globalization of TATA STEELy So to pursue our overall growth strategy , they needed
to go beyond India.y
Acquired NatSteel Asia,
headquartered out of Singapore , in 2004 , it gave them immediate access tosix markets in the region , including Vietnam , thePhilippines , and Malaysia.
y These first regional acquisitions also let them test thewaters of M&A and taught us how to run atransnational business , to understand the culturalissues , and to integrate larger organizations.
y Corus deal.
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CORUS DEALy Corus:one part of the company had very efficient
operations , and the other part had lots of potential for
improvement.y He compares it with TATA STEEL saying:Tata Steel
itself went through a phase , in the 1990s , when ittransformed itself into the most globally competitive
company in its sector from a not-so-competitive one.y They feel that there is a similar transformational
journey ahead for Corus.
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CORUSy Corus is a subsidiary of Tata Steel , part of India's Tata
Group , one of the world's largest steel producers , with
headquarters in London , England.y The Company was formed from the merger
of Koninklijke Hoogovens.N.V. with British Steel PLCon 6 October 1999. It was once a constituent of
the FTSE 100 Index , but was taken over by Tata in2007.
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CORUS DEALy British Steel was a major British steel producer. It
originated as a nationalized industry , the BritishSteel Corporation (BSC), formed in 1967. This wasconverted to a limited company , British Steel PLC , andprivatized in 1988. It was once a constituent of the FTSE 100 Index but following mergers , thebusiness is now owned by Corus , a Tata Steel company.
y
The FTSE 100 Index also called FTSE 100, FTSE, or, informally , the ' footsie is a share index of the100 most highly capitalized UK companies listed onthe London Stock Exchange.
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APPROACH TO ACQUISITIONSy Tend to look at an acquisition as a partnership rather
than an acquisition.y
They don t send planeloads of people into a newcompany. Instead , we only send in a few integrators.That s been the key interface.
y For example , after they closed the transaction for
Corus , on April 2 , 2007, they worked together for thenext six months on co creating a vision for the enlargedenterprise.
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CULTURAL BARRIERS IN ACQUIRIN G
EUROPEAN COMPANIESy There will be differences in cultures one cannot make a
single-culture organization. But it is critical to build a
uniform performance culture. By that , he mean howwe think as one enterprise and set targets for the largerorganization.
y Setting of benchmark performance and and setting
group vision.y These things are especially relevant now because thereare no standard operating procedures for overcoming aglobal financial crisis.
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Plans adopted for acquisitions by TATA s
y Acquisition requires a lot of maturity from the senior leadership on allsides , as it depends on a great deal of adaptability to new situations , cultures , and sensitivities. Hence a concrete action plan is required.
y Lot of time is required to positively influence a large organization oreven to establish trust in the sincerity of the shared vision.
y TATA s shared and adopted good practices across the organizationthrough performance improvement teams , lending credibility to theconcept of shared change. Hence this provided the employees in theorganization a sense of confidence.
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Wh at are t h e effects of t h e financial crisesy The crisis had different effect on different regions(i.e. Europe , Asia & India).
y Europe has been affected the worst , as the size and impact of the contraction hasbeen severe. At Tata Steel Europe , the production cuts have been significant.
y Southeast Asia is kind of a mixed bag . Thailand , for example , had been affected by the crisis much earlier than elsewhere in the region because of the political andgeneral economic situation there whereas Singapore market was stable in the crises .
y In India , TATA s are actually increasing their production base for steel , even as the
rest of the world is contracting.y For the entire Southeast Asian business , TATA s are focusing more on cost
competitiveness through improved operating practices and tight working-capitalmanagement.
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M anagement tactics during recessiony Lot of time is spend focusing on performance management , capital allocation ,
and liquidity management.
y
Raised equity , which will be deployed in some very attractive capital projects , especially the growth projects in India.
y Extremely focused on generating cash savings in the organization.Improvements to ensure further reductions in working capital and spendingmanagement.
y Pipeline of capital projects especially the Indian expansion projects and themining projects , which are value creating under any economic conditions andtherefore have to prioritize their capital needs.
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Align organization wit h a complex agenday Communication has played an important part in ensuring
that the organization is geared up to the challenges.
y The key is to make finance and to do this , we use the fiveCs: costs, contribution , capital expenditure , capitalpreservation , and cash flows.
y Alert the Union Leaders in India to the forthcomingchallenges , so that they could in turn communicate thesame to the wider workforce.
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THANK YOU
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