To the Members,
Your Directors take pleasure in presenting the 2nd Integrated Report (prepared as per
the framework set forth by the International Integrated Reporting Council) and the 110th
Annual Accounts on the business and operations of the Company, along with the summary of
standalone and consolidated financial statements for the year ended March 31, 2017.
A. FINANCIAL RESULTS
||Tata Steel Standalone
||Tata Steel Group
|Gross revenue from operations
|Total expenditure before finance cost, depreciation (net of expenditure transferred to
|Add: Other income
|Profit before finance cost, depreciation, exceptional items and taxes
|Less: Finance costs
|Profit before depreciation, exceptional items and taxes
|Profit/(Loss) before share of profit/(loss) of joint ventures & associates,
exceptional items & tax
|Share of profit / (loss) of Joint Ventures & Associates
|Profit/(Loss) before exceptional items & tax
|Add/(Less): Exceptional Items
|Profit before taxes
|Less: Tax Expense
|(A) Profit/(Loss) after taxes - from Continuing operations
|Profit/(loss) before tax from Discontinued operations
|Less: Tax expense of Discontinued Operations
|Profit/(Loss) after tax from Discontinued Operations
|Profit/(Loss) on Disposal of Discontinued Operations
|(B) Net Profit/(loss) after tax - from Discontinued operations
|(C) Net Profit/(Loss) for the Period [ A + B ]
|Total Profit/(Loss) for the period attributable to:
|Owners of the Company
|Non controlling interests
|(D) Total other comprehensive income
|(E) Total comprehensive income for the period [ C + D ]
|Retained Earnings: Balance brought forward from the previous year
|Add: Profit for the period
|Less: Distribution on Hybrid perpetual securities
|Add: Tax effect on distribution of Hybrid perpetual securities
|Add: Other Comprehensive Income recognised in Retained Earnings
|Add: Other movements within equity
|Which the Directors have apportioned as under to:-
|(i) Dividend on Ordinary Shares
|(ii) Tax on dividends
|Retained Earnings: Balance to be carried forward
The Company has adopted Indian Accounting Standard (Ind AS') with effect
from April 1, 2016 and accordingly these financial results along with the comparatives
have been prepared in accordance with the recognition and measurement principles stated
therein, prescribed under Section 133 of the Companies Act, 2013 read with the relevant
rules issued thereunder and the other accounting principles generally accepted in India.
During the year, the exceptional items primarily include: a) Provision for demands and
claims (`218 crore), charge on account of Employee Separation Scheme (ESS')
under Sunehere Bhavishya Ki Yojana (SBKY') scheme (`207 crore), provision for
advances given for repurchase of Equity shares in Tata Teleservices Ltd. from NTT DoCoMo
Inc. (`125 crore) at Tata Steel India. b) Impairment Charges (`268 crore) in respect of
property, plant and equipment (including CWIP) and intangible assets mainly relating to
European & South-East Asian Operations. c) Restructuring and other provisions (`3,614
crore) primarily include curtailment charge relating to closure of Tata Steel Europe's
British Steel Pension Scheme (BSPS') to future accrual. d) Profit on sale of
investments in subsidiaries, associates and joint ventures (`23 crore) and Profit
on sale of assets of a subsidiary in South-East Asia on liquidation (`86 crore).
The exceptional items in Financial Year 2015-16 primarily represents: a) Provision for
demands and claims (`880 crore), charge on account of Employee Separation Scheme (ESS')
under Sunehere Bhavishya Ki Yojana (SBKY') scheme (`556 crore), provision in
respect of advances related to a project which the Company has decided to discontinue (`73
crore) at Tata Steel India. b) Impairment Charges (`1,530 crore) in respect of property,
plant and equipment (including CWIP) and intangible assets mainly at certain Subsidiaries,
Tata Steel Europe & Tata Steel India. c) Net gain (`6,983 crore) primarily on account
of changes to BSPS and Stichting Pensioenfonds Hoogovens (SPH') scheme and
other restructuring exercise relating to the European operations. d) Profit on sale of
investments in subsidiaries, associates and joint ventures (`47 crore).
The Board recommended a dividend of `10 per Ordinary Share on 97,12,15,889 Ordinary
Shares of `10 each for the year ended March 31, 2017. (Financial Year 2015-16: `8 per
Ordinary Share on 97,12,15,439 Ordinary Shares of `10 each).
The dividend on Ordinary Shares is subject to the approval of the shareholders at the
Annual General Meeting (AGM') scheduled to be held on August 8, 2017. The
dividend will be paid on and from August 10, 2017. The total dividend pay-out works out to
34% (Previous Year: 97%) of the net profit for the standalone results. The Register of
Members and Share Transfer Books will remain closed from July 22, 2017 to August 8, 2017
(both days inclusive) for the purpose of payment of the dividend for the Financial Year
ended March 31, 2017 and the AGM.
2. Dividend Distribution Policy
The Securities and Exchange Board of India (SEBI') vide its notification
dated July 8, 2016, requires the top 500 listed entities (based on the market
capitalization calculated as on March 31 of every financial year) to formulate a dividend
distribution policy and disclose the same in their annual reports and on their websites.
In terms of the above requirement, the Board of Directors of the Company have
formulated a Dividend Distribution Policy (the Policy'). As per the policy,
the Company endeavours to pay dividend up to 50% of profit after tax of the Company (as
determined by the Board of Directors and approved by the shareholders) subject to the
applicable rules and regulations. The detailed policy is annexed to this report (Annexure
1) and is also available on our website www.tatasteel.com
3. Transfer to Reserves
The Board of Directors has decided to retain the entire amount of profits in the profit
and loss account.
4. Capex and Liquidity
During the year, the Company on a consolidated basis spent
`7,716 crore on capital projects across India, Europe, South-East Asia, Canada and
Africa largely towards essential sustenance and replacement as also on growth projects in
India and Netherlands. Despite this significant spend, the Company was able to keep the
gross debt level stable during the year.
The Company's liquidity position remains strong at `19,777 crore as on March 31, 2017,
which includes undrawn lines.
5. Management Discussion and Analysis
The Management Discussion and Analysis as required by the Securities and Exchange Board
of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing
Regulations') is incorporated herein by reference and forms an integral part of this
report. (Annexure 2)
B. INTEGRATED REPORT
In keeping with the Company's valued tradition - "thinking about society and not
just the business", the Company, in the previous reporting year, moved from
compliance based reporting to governance based reporting. The Company adopted the
<IR> framework developed by the International Integrated Reporting Council and
presented to its stakeholders the 1st Integrated Report for the period ended May 2016.
The Board is happy to present the 2nd Integrated Report which endeavours to
comprehensively articulate the measures that contribute to long-term sustainable value and
the role the Company plays in the society.
C. EXTERNAL ENVIRONMENT
1. Macro-Economic Environment
During the Financial Year 2016-17, the global economy continued its modest pace of
growth at 3% amidst weak international trade, subdued industrial production and
investment. The advanced economies witnessed recovery in manufacturing and trade other
than industrial production at different points in time. The emerging and developing
economies grew at a diverse pace due to the global trade related policy measures and
commodity price movement. The United States of America (USA') witnessed
economic growth of 1.6%, slowest in the past three years. Better than expected economic
indicators such as lower unemployment, business activity and improved sentiment post the
Presidential elections did not translate into increased spending. Eurozone continued its
14th consecutive quarter of growth of 1.8%, as business confidence continued to remain
resilient despite Britain's vote to leave the European Union (EU'). In Japan,
strong domestic demand and net exports helped achieve growth of 1%. Among the emerging and
developing economies, China continued to maintain its growth rate at ~7%, aided by policy
support, while growth in India slowed down to 7.1% due to the temporary impact of
demonetization on key sectors including construction and financial services. Growth in
Middle East and sub-Saharan Africa was impacted by geo-political/ domestic confiicts. The
rise in commodity prices in latter part of the year helped trigger cyclical recovery in
certain regions and thus helped overall global growth.
2. Economic Outlook
According to International Monetary Fund (IMF'), global growth is
projected to rise to 3.5% in 2017 and 3.6% in 2018, moving closer to the long-term growth
trend of 4%. The outlook indicates a likely up cycle of modest recovery after three
successive shocks the global financial crisis of 2007-09, the Eurozone crisis of
2009-13 and decline in commodity prices during 2014-15. However, the uncertainty with
respect to sustainable growth remains. While the continued recovery and gradual closing of
output gaps are likely to maintain growth momentum in the advanced economies over the next
few years, supportive policy and adjusting to current price levels by commodity exporting
countries are expected to aid growth in emerging and developing economies.
US growth is expected to recover as investments increase and domestic policies aid
growth. The euro area recovery is expected to proceed at a broadly similar pace in
201718 as in 2016. The modest recovery is projected to be supported by a mildly
expansionary _scal stance, accommodative financial conditions and a weaker euro. The
medium-term outlook for the euro area is likely to be impacted by weak productivity,
adverse demographics, and, in some countries, unresolved legacy problems of public and
private debt overhang, with a high level of non-performing loans. Further, uncertainty
about the European Union's future relationship with the United Kingdom (UK')
is expected to weigh on economic activity. China is expected to continue its gradual
economic transition to a more service economy and coupled with partial recovery in
commodity prices, it is expected to drive growth in certain emerging and developing
economies. As per IMF, India is expected to grow at 7.2% in 2017 and surpass the UK and
France in 2017 to become the world's _fth largest economy. The macro-economic stability
with in_ation below 5% continues to be the foundation of economic success which is
reffected by growth in its key sectors - agriculture, industrial and services. Government
initiatives like Make-in-India, Invest India, Start Up India and e-biz Mission Mode
Project under the national e-governance plan are helping to improve ease of doing business
in the country. In addition, the biggest tax reform since Independence, Goods and Services
Tax (GST') will help simplify India's tax regime and is likely to boost GDP
and reduce in_ation in the long-term despite the threat of a potential slowdown in
economic activity during the transition to the GST in the near term. However, structural
issues continue to pose a significant risk to the growth cycle. Firstly, initiative of the
US Government of advancing Buy American Hire American' and political trends in
Europe and elsewhere suggest a rising wave of protectionism which may lead to reversals of
trade liberalization and geo-political confiicts. Secondly, economic policy uncertainty
continues to be high, given USA's expansive pro-growth reforms and China taking lead in
globalization 2.0. This poses a risk of high level of volatility in the financial markets.
Thirdly, debt and defficits among emerging market and developing economies are on the rise
making them susceptible to increase in borrowing costs. Fourthly, outcome of the Brexit
negotiations is likely to impact the pace of recovery in UK as well as Eurozone economy.
D. STEEL INDUSTRY
1. Global Steel Industry
Global steel markets recovered during Financial Year 2016-17 registering better than
estimated production & demand growth. During the year, the global steel demand grew by
1% to 1.52 billion tonnes on the back of stronger than expected demand growth in
China (1.3%) coupled with optimism on supply-side structural reforms and restocking. The
crude steel production was 1.63 billion tonnes, up by 0.8% compared to the previous year.
China remains the world's largest crude steel producer with the production at 0.8 billion
tonnes. China's apparent steel consumption has continued to remain structurally below its
production level leading to exports of 0.1 billion tonnes in spite of global
protectionism. The global capacity utilization ratio remained around 70% in spite of
proactive measures being undertaken in China and Europe. For instance, Chinese Government
intends to reduce steel production capacity by 100-150 million tonnes by 2020, and has
also announced merger of two major Chinese steel producers in the previous year. The
overcapacity of steel production in the developing world particularly in China has weighed
on global steel prices for quite some time. During the year under review, the raw material
prices remained volatile especially for coking coal due to supply related issues. In
addition, prolonged oversupply in iron ore has led to lower level for raw material prices
despite steel realizations getting support from cost push as raw material prices
fluctuated on supply issues in the second half of 2016. However, regulatory measures
announced by the Indian Government during the year have continued to aid domestic steel
prices. The Indian steel industry has increased its capacity in the recent years, though
the demand growth has remained muted. This has resulted in financial stress in the balance
sheet of the steel players. The Government of India and the Reserve Bank of India is
currently deeply engaged to find a structural solution to the above issue. The domestic
crude steel capacity rose to 122 million tonnes, an increase of 11% year-on-year while the
production of finished steel was around 101 million tonnes. The Financial Year 2016-17,
saw a modest consumption growth of 3% due to low growth in construction sector and impact
of demonetisation and a sharp decline in imports as domestic supply rebounded to the
extent that India became a net exporter of steel, after a gap of three years.
In Europe, anti-dumping legislation, currency movement, growth in apparent demand and
low inventory levels have led to an increase in demand by 2% to 155 million tonnes
compared to 2015. During the year, the total activity in the steel end use sectors
especially automotive rose by 1.7%, similar to the previous two years.
2. Outlook For Steel Industry
As per the World Steel Association (WSA'), global steel demand is expected
to grow at 1.3% in 2017 to 1.54 billion tonnes and a further 0.9% in 2018 to 1.55 billion
tonnes. Recovery in developed economies and accelerating growth in emerging and developing
markets especially Russia, Brazil and India is expected to aid demand growth and keep
inventory levels low which in turn is expected to support global steel prices. However,
low level of capacity reduction than targeted by nations and continued oversupply in raw
materials especially iron ore are likely to weigh down on the prices in the absence of
effective trade measures and/ or increase in steel demand.
China's steel demand which accounts for 45% of global steel demand is expected to be
flat this year at 681 million tonnes while falling by 2% to 667 million tonnes in 2018.
However, as per WSA, steel demand in emerging and developing economies excluding China is
expected to grow at 4-5% per annum in the next two years to 475 million tonnes. In
addition, the advanced economies are expected to grow at 1% for the next two years.
India's prospects continue to remain bright albeit with few short-term headwinds in the
form of imports and surplus capacity. Proactive policy measures by the Government are
expected to address most of these concerns. For instance, a Steel Price Monitoring
Committee was formed by the Government with an aim to monitor price rationalization,
analyse price fluctuations and advise all concerned regarding any irrational price
behaviour of steel commodity. As per WSA, steel demand in India is expected to grow at
6-7% per annum in the next two years, compared to 4% in 2016.
European prospects for 2017 and 2018 are mildly positive. As per WSA, EU is expected to
grow at 0.51.5% per annum in the next two years due to improving domestic demand
with private consumption as key driver in 2017 and investment taking over the lead in
2018. The Government measures to counter cheap imports would support domestic prices in
the near term. In addition, weaker euro is expected to improve domestic competitiveness
E. OPERATIONS AND PERFORMANCE
1. Tata Steel Group
During the year under review, the Tata Steel Group (the Group') recorded
total deliveries of 23.88 million tonnes (previous year - 23.54 million tonnes). The steel
deliveries increased at Tata Steel India by 15%, primarily due to ramp up of the
Kalinganagar Steel Plant. This increase was offset by lower deliveries at Tata Steel
Europe by 9% due to sale of the long products business and closure of Llanwern mill to
focus on higher value sales mix. During the year, the turnover for the Group was at
`1,17,420 crore, an increase of 10% over the previous year. The growth is largely driven
by strong performance from Indian Operations with volume growth in steel and ferro alloys
business and supportive global pricing environment. The Group EBITDA was `17,025 crore, an
increase of 114% compared to previous year EBITDA of `7,951 crore. This improvement comes
on the back of strong global market conditions, strong volume growth in India and the
impact of the implementation of transformation program and restructuring efforts in Europe
to improve the underlying performance.
During the year, the industry witnessed recovery in steel prices mainly driven by
increase in coking coal and iron ore prices improvement in underlying global demand and
lower seaborne imports. However, the timing and extent of continued price recovery or the
sustenance of the current demand cycle is uncertain. In response to recent declines and
higher volatility in steel and raw material prices, the Company has implemented a number
of cost-saving measures intended to improve operating income as well as measures to
enhance cash generation from the business.
The Group reported a consolidated loss after tax (including discontinuing operations)
of `4,169 crore as against a loss of `497 crore in the previous year. The year's
loss includes an exceptional charge of `4,324 crore mainly due to British Steel Pension
Scheme (BSPS') curtailment charges, while an exceptional gain of `3,990 crore
was recorded in the Financial Year 2015-16.
In Financial Year 2016-17, Tata Steel India deliveries grew by 15%, significantly
better than the broader market and reached a level of 11 million tonnes (previous year -
9.5 million tonnes). This is a testament of the strength of the business model of the
Indian operations, the strength of the business relationships, the power of the product
brands and the robustness of the distribution channel. The Company's sales to the
automotive segment increased by approximately 9% over previous year, as the Company
continued to partner with its automotive customers in the drive towards localization. New
model launches, aided by a strong growth in the passenger vehicle segment, also helped the
Company to increase the market share in the automotive space. Similarly, the Company's
Industrial Products, Projects and Exports vertical witnessed a 47% year-on-year growth.
The Company's branded products portfolio has been growing strongly and the Company
continues to invest in this portfolio with the aim of gaining greater market share. In
India, the Company launched 31 new products and the branded products contributed to around
45% of the revenue. The newly launched Services & Solutions' business is
performing as per plan and the Company is optimistic about its potential to generate 20%
of its revenue in the future. The Company is already engaged in development of several
solution products based on steel, including doors, windows, modular housing, toilets and
water ATMs etc. The Company is also foraying into furniture space and the products would
have wood or wood-like finish but blended steel structure. During the year,
revenues from Indian operations increased to ` 53,261 crore (previous year `42,697
crore). The EBITDA was ` 11,953 crore, 53% higher than the previous year EBITDA of `
7,792 crore. The Profit after tax was also higher at `3,445 crore (previous year
`956 crore). During the year, the various improvement initiatives including
Shikhar25 contributed improvement savings of over `3,400 crore.
The strong performance during the year under review is due to supportive realisations
and strong growth in deliveries due to ramp up of the Kalinganagar plant. The Kalinganagar
operations continues to ramp up well both in terms of quantity and quality. The plant
crossed 2.2 million tonnes of Hot Metal and 1.5 million tonnes of Hot Rolled Coil
production since commissioning in May 2016. Moreover, the performance of the Ferro Alloys
& Minerals division registered sharp improvement backed by improved market conditions.
The full year operating profit of the division at `1,165 crore was higher by `1,040 crore
compared to the previous year.
During the year, the mild steel demand growth in the European Union was fully absorbed
by imports, with import volumes at historically high levels, although anti-dumping
measures provided some relief in the market prices, supported by lower raw material costs.
Several strategic and critical re-structuring initiatives were undertaken in TSE during
the year, such as the sale of Long Products business to Greybull Capital LLP, closure of
Llanwern Mill in the UK, right sizing of manpower, announcement of collaboration with
strategic players, sale of Speciality Steel business to Liberty House and closure of the
defined Benefit Pension Scheme to the future accruals.
On the operational front, TSE launched a number of new digital services to transform
the customer experience and deliver value viz. Tata Steel in Europe Customer Portal, Tata
Steel in Europe eShop, Connecting Systems and Building Information Modelling.
TSE also launched 20 new products and was able to increase the share of differentiated
products to 37% and of new products to 8%. TSE's focus remains on developing
differentiated products and services like Serica and MagiZinc products which improve car
body appearance and performance.
The Hot Strip Mill at Port Talbot in the UK broke its previous financial year volume
record of 3.22 kt to produce 3.32 kt in the current financial year. The Galvanising Line 3
in IJmuiden, Netherlands broke its previous financial year volume record of 552 kt to
produce 562 kt in the current financial year. The customer complaints for the year in the
Strip Products business in Mainland Europe were the lowest at 0.18%.
During the year, the revenues remained flat at `52,085 crore compared to previous year
at `53,555 crore while the EBITDA improved very significantly to `4,705 crore from
the EBITDA loss of `513 crore in the previous year. The strong performance is due to
stronger market conditions during the year, focussed transformation program in the UK and
sustainable profit program in the Netherlands, including the supply chain transformation
programme which went live during the year. During the year, TSE was recognized as the best
supplier of steel and nominated for future supplies by Renault, Ford and Toyota. TSE was
also awarded the "Quality through Excellence award" by Volvo, a first time award
given to a steel supplier. The PeopleLink' project team within TSE was selected as
the Gold Winner of the SAP UKI Quality Awards in the HR Cloud Category.
4. South-East Asia
During the year, the performance in South-East Asia was strong on the back of continued
thrust by the Government on infrastructure projects, particularly in Thailand. The
revenues stood at `8,245 crore (previous year `7,851 crore), the EBITDA was `528
crore (previous year `222 crore) and the Profit after tax was `175 crore (previous
year loss of `237 crore). The improvement in performance is mainly attributable to
improved realizations, better spread management and cost rationalization initiatives.
NatSteel Holdings (NSH') operations improved significantly. Domestic
market demand for steel bars remained weak in Financial Year 2016-17 due to sluggish
construction market. Continuous cost reduction initiatives, including re-alignment of
optimal capacity level with demand achieved a fixed cost saving of S$20m. Mothball of
NatSteel Xiamen (NSX') operations in mid Financial Year 2015-16 had improved
EBITDA. Further, during the year, NSX sold its land and other assets and has realized `86
crore. During the year, Tata Steel Thailand (TSTH') delivered better
performance on all fronts as compared to previous year. TSTH achieved reduction in
conversion costs both at steel plant and rolling mill stage. TSTH is committed to deliver
value added products and services to its customers. In this regard sale of High Tensiles,
Siesmic and cut and bend Rebars surpassed the previous records. TSTH invested in phase 3
of state-of-the art cut and bend facility at NTS plant and completed the project in March
During the year, sale of new products at TSTH touched new heights. Wire rods business
saw a significant improvement in the second half of the financial year due to higher
import prices from China, anti-dumping duties announced by Thai Government and strong
customer relationship. During the year, TSTH collected more than a million tonnes of
domestic scrap and also developed billet sources from India, Russia, South America and
While Financial Year 2015-16 saw a contraction in global steel demand, steel demand
grew by 1% in the Financial Year 2016-17 largely driven by strong growth in India and
South-East Asia. Despite a recovery in steel prices on the back of better than expected
Chinese steel demand, concerns regarding excess capacity and uncertainty in Chinese steel
demand over the medium-term persist and contribute towards increased volatility in prices.
The Company continues to pursue its vision to become the global benchmark in
value creation' and corporate citizenship' in the steel industry and aims to
develop long-term partnerships with customers in the chosen markets. It endeavours to make
the most of the growing demand for steel by investing in new facilities. Expansion plans
for both Kalinganagar and Jamshedpur sites are in development. Along with volume
growth, the Company is committed to move towards more value added products and offer
services and solutions to further enhance revenues and reduce the linkage of revenues to
volatile steel prices.
The Company has identified Digital as a driver to enhance customer centricity,
productivity and sustainable performance. A large number of projects across the value
chain have been identified where value can be created via utilization of existing and
emerging digital technologies. The Company is working on leveraging its online presence to
enhance customer experience via creation of platform to onboard stakeholders, facilitate
peer reviews and ease access. Capabilities in data analytics are being built via its
Analytics Centre of Excellence. Jamshedpur has been LORAWAN (Low Power WAN) enabled
allowing the Company to explore Internet of things (IOT').
In the medium-term, the Company expects the external environment to remain challenging.
In response, the Company is working towards rationalizing it's existing operations and
designing new facilities to maximize productivity and improve cost competitiveness. It has
set the following five priorities for the medium-term to help attain its vision and goals
(a) Customer Focus, (b) Innovation, (c) Operational Excellence, (d)
Responsible behaviour and (e) People.
Customer focus: The Company has plans in place to keep pace with the growing needs
of customers across sectors with a special focus on automotive and attractive segments in
the construction sector eg. Individual House Builder. New facilities planned will
ensure that shift of demand to wider, lighter and high strength steel in the automotive
sector is adequately met. The Company is also expanding its presence in other attractive
segments like Oil & Gas and Lifting & Excavation enabled by it's new plant at
Kalinganagar. The Company also aims to leverage its brands to increase revenues from B2C
sales including increasing reach in rural markets. It further aims to enhance value
for customers through services and solutions and value added products.
Innovation: The focus area for research is to develop new and differentiated
products and services for customer segments, reduce carbon footprint, optimally use
inferior raw materials, utilize solid waste and move towards a system of Zero Water
Discharge. The Company conducts research programmes through strategic collaboration with
academic institutions in India and overseas. It has made a breakthrough in low cost
graphene production and graphene based coating solutions for steel. Going ahead it is
investing in scaling these solutions and developing other applications.
Operational excellence: It is the Company's endeavor to establish best-in-class
facilities and it constantly invests to upgrade its manufacturing and distribution
facilities in order to improve performance and cost competitiveness. The focus areas are
achieving superior steel properties, higher efficiency in iron ore & coal
benefficiation, lower carbon rate in iron-making, optimized product mix, reducing waste
generation, energy efficient processes and higher material utilisation.
Responsible behaviour: The Company acts responsibly towards the environment,
focusing on sustainable usage of raw materials, water and energy conservation, waste
utilization, emissions reduction and land reclamation. It explores and supports the
development of breakthrough technologies to deal with the challenge of carbon emissions
through energy conservation emissions. Reduction of CO2 remains the prime corporate
strategy to ensure business sustainability while mitigating climate change. Jamshedpur
Steel Works is the National Benchmark in emission intensity and Specific Energy CO2
Consumption within Steel Sector (Coal based Integrated Works, BF-BO). The
Company supports the communities it operates by promoting sports & education,
sustainable livelihood, health and ethnicity. It also supports the economic, environmental
and social development of its communities through financial support, provision of
materials and the time and enthusiasm of its employees.
People: The safety of the people who work on the Company's sites is number one
priority. The Company is committed to the people who are instrumental to its success.
Committed to Zero is Company's top priority, with the target of having Zero Lost Time
Injuries (LTIs'). The Company has taken safety and health strategic
initiatives on capability building, leadership development, contractor safety, process
risk, rail & road safety and employee health. The Company fosters teamwork, nurtures
talent, enhances leadership capability and encourages employees to act with pace, pride
and passion. There is an increased focus on encouraging diversity and inclusion in terms
of gender and representation of the underprivileged sections of the community as well as
people who are specially abled.
G. KEY DEVELOPMENTS
Kalinganagar Steel Plant
During the year, the Company commenced commercial production at its Kalinganagar Steel
Plant. The facility produces flat steel for high-end applications enabling the Company to
expand its product portfolio in the ship building, defence equipment, energy & power,
infrastructure and aviation sectors. This plant will help the Company to consolidate its
leadership position in the domestic automotive segment. Tata Steel Kalinganagar (TSK')
has achieved one of the fastest ramp-up in a Greenfield project in India. Crude steel
production in Financial Year 2016-17 was 1.68MnTPA while, crude steel capacity was ramped
up to 88% with the Coke Plant & Hot Strip Mill reaching 100% capacity in Financial
Year 2016-17. The Coke Plant at Kalinganagar achieved 1.5 million tonnes of gross coke
production and generated revenue worth
`70 crore through the sale of coal tar during Financial Year 2016-17. The
facility dispatched first rake of HR coils on June 8, 2016 and first rake of
Ferro-shots on September 12, 2016. During the year, the Sinter Plant at Kalinganagar
achieved production of 2 million tonnes of net Sinter. The Blast Furnace achieved 2
million tonnes of hot metal production and started Top Recovery Turbine. It achieved
lowest ever monthly average coke rate in all coke operation of 532 kg/t of hot metal. The
Hot Strip Mill at Kalinganagar, achieved production of 1.5 million tonnes of HR coil and
crossed ABP target of 1.54 million tonnes in Financial Year 2016-17 by achieving
production of 1.78 million tonnes. The capacity of the Plant can be expanded further to
meet the customer needs and make Tata Steel more profitable and sustainable in the future.
Brahmani River Pellets Limited
In order to make the Kalinganagar Steel Plant more competitive, in December 2016, the
Company executed a definitive agreement to acquire 100% equity shares of Brahmani River
Pellets Limited (BRPL') for a value of `900 crore plus closing adjustments.
BRPL owns a 4MnTPA pellet plant in Jajpur, Odisha and 4.7MnTPA iron ore benefficiation
plant in Barbil, Odisha connected through a 220 km underground slurry pipeline. The
above transaction is currently pending regulatory approvals.
Subarnarekha Port Private Limited
Logistics is a critical element in the supply-chain of an integrated steel facility.
Considering the future logistics needs of the Indian Operations, in January 2017, the
Company executed a definitive agreement to acquire 51% equity stake in Creative Port
Development Private Limited for the development of Subarnarekha Port at Odisha through a
Subarnarekha Port Private Limited. Given the location of the proposed port, the
acquisition will enhance competitive position of Indian operations and de-risk the
in-bound and out-bound supply-chain. This is a greenfield project and currently the
Company is undertaking detailed feasibility studies.
TM Harbour Services Pvt. Ltd
On December 7, 2016, TM International Logistics Limited, a Tata Steel Group company
divested its entire stake in its wholly-owned step down subsidiary TM Harbour Services
Pvt. Ltd. (TMHSPL') to Adani Ports and Special Economic Zone Limited for a
total consideration of `106.27 crore. TMHSPL was engaged in the business of providing Tug
services at Dhamra Port and owned 3 tug boats.
Issue of Debt Securities
On October 4, 2016, the Company allotted 8.15% 10,000 Unsecured, Redeemable,
Non-Convertible Debentures having a face value of `10 lakh each for an amount aggregating
to `1,000 crore on private placement basis to identified investors.
In October 2016, Brickworks revised the rating for Non-Convertible Debentures from BWR
AA+'/ Outlook Stable to BWR AA'/ Outlook Negative as well as downgraded the
ratings for Perpetual Hybrid Securities from BWR AA'/ Outlook stable to BWR
AA'/ Outlook negative. As per the Ratings Agency, the change in ratings was due to
the uncertainty consequent to the change in top management at the Tata Group level which
could in turn slow down vital decisions such as cost cutting and deleveraging the Balance
Sheet concerning the unprofitable UK operations and restructuring of the European
In January 2017, CARE has revised the ratings for Non-Convertible Debentures and
long-term rupee loans from CARE AA+'/ Outlook stable to CARE AA'/ Outlook
stable and for Perpetual Hybrid Securities from CARE AA'/ Outlook stable to
AA-' / Outlook stable. This revision in rating was triggered due to uncertainties
relating to the restructuring of the Company's UK business.
British Steel Pension Scheme
On March 7, 2017, Tata Steel UK (TSUK'), a wholly-owned indirect
subsidiary of Tata Steel Limited and the principal sponsor of the British Steel Pension
Scheme (BSPS') completed consultation with its employees with regard to the
closure of the defined benefit section of the BSPS to future accruals with effect from
April 1, 2017. This followed an agreement between TSUK and the trade unions in December
2016 in the same regard, where it was also agreed that subject to the structural
de-risking and de-linking of the BSPS from the business, TSUK will continue the existing
blast furnace configuration of Port Talbot until 2021 and, based on achieving the
necessary financial performance and cash flows as per the transformation plan of the UK
business, it will also continue its investment to enhance its competitive position in
European steel industry. An employment pact was also offered until 2021. Subsequently,
after prolonged and intense discussions and negotiations with the BSPS Trustee(s), The
Pensions Regulator (TPR') and the Pension Protection Fund (PPF'),
the key commercial terms of a Regulated Apportionment Arrangement (RAA') were
agreed in-principle between TSUK and the BSPS Trustee(s). These terms are in line with the
published principles of TPR and PPF. However, as of May 16, 2017, the RAA remains subject
to detailed documentation, formal approval by TPR, non-objection from the PPF and the
formal agreement of the individual entities who would be party to the RAA. These parties
are in positive discussions and are hopeful of reaching final agreement shortly. If an
agreement is reached and the necessary approvals are obtained, the RAA will become
effective once agreed conditions are satis_ed, including the payment by a member of the
Tata Steel Group of an agreed settlement amount of GBP 550 million to the BSPS and the
provision of a 33% equity stake in TSUK. TSUK has also agreed in principle, that
subsequent to the RAA, TSUK would sponsor a closed new pension scheme (the New
Scheme'). TSUK sponsorship of the New Scheme is conditional upon satisfaction of
certain qualifying conditions. If those conditions are satis_ed, members of the BSPS would
be offered an option to transfer to the New Scheme. The New Scheme would have lower future
annual increases for pensioners and deferred members than the BSPS and therefore an
improved funding position which would pose significantly less risk for TSUK. There is
presently no certainty with regards to the eventual existence, size, terms or form of the
New Scheme and the funding position and membership of any New Scheme would be dependent on
a voluntary membership transfer exercise.
Sale of Long Products Europe Business
TSUK signed an agreement on April 11, 2016, to sell its Long Products Europe Business
to Greybull Capital LLP for a nominal consideration. On May 31, 2016, TSUK completed the
sale of Long Products Europe business, which will trade under the name of British Steel.
The Long Products business in the UK includes the Scunthorpe steelworks, two mills in
Teesside, an engineering workshop in Workington, a design consultancy in York, associated
distribution facilities as well as a rail mill in northern France. With this, Tata Steel
Europe crude steel capacity stood at 12.9 million tonnes.
TSUK's Speciality Steel Business
As an overall restructuring strategy of the UK portfolio, TSUK (an indirect
subsidiary of the Company) signed a Letter of Intent on November 28, 2016 and a
definitive sale agreement on February 9, 2017 with Liberty House Group for sale of
Speciality Steel business for a total consideration of GBP 100 million. The sale covers
several South Yorkshire based assets including electric arc steelworks and bar mill at
Rotherham, the steel purifying facility in Stocksbridge, a mill in Brinsworth and service
centres in Bolton and Wednesbury, UK and in Suzhou and Xi'an, China. The sale was
completed on May 2, 2017. Speciality Steel business directly employed about 1,700 people
making steel for aerospace, automotive and the oil and gas industries. With this, Tata
Steel Europe crude steel capacity stands at 12.1 million tonnes.
Tata Steel Minerals Canada
Tata Steel Minerals Canada Ltd. (TSMC') is engaged in development of iron
ore deposits in Quebec and Newfoundland & Labrador in Canada. The investment is
deployed towards setting up mining operations and multiple processing facilities including
the state-of-the-art benefficiation plant. The project has also enabled the development of
infrastructure facilities including rail, roads, telecommunications and port that has had
significant positive impact in the socio-economic landscape in Quebec, Newfoundland and
In October 2016, TSMC signed the definitive agreements with Government of Quebec's
investment entities, Resource Quebec and Investment Quebec respectively for providing
C$175 million financial assistance in the form of equity and debt. With this investment,
the Government of Quebec holds 18% stake in TSMC and the balance is held between the
Company (77.66%) and New Millennium (4.32%), a publicly owned Canadian mining company. On
March 24, 2017, TSMC signed a multi-user-concept based non-binding MOU between
PPP's partners: Society of Plan Nord (SPN') and other mining players, which
will facilitate the connectivity of the existing material handling facilities at Point
Noire to the new Multi User Deep Sea Terminal (MUD') and further enable
detailed assessment of improvements to the infrastructure, cost-efficient Port operations,
scalability in volume and asset allocation among others. The Company has been awarded John
T Ryan Award for Safe Mining for two consecutive years 2015 and 2016 by the
Canadian Institute of Mining, Metallurgy and Petroleum (CIM').
4. South-East Asia Divestments
Kalzip Guanzhou Limited
In March 2017, Kalzip Guanzhou Limited, a wholly-owned subsidiary of the Company,
divested its entire stake to Shanghai Qinheng International Trace Co. Ltd. for a net
consideration of Euro
5.2 million. Kalzip Guanzhou Limited was engaged in the business of supplying aluminum
roofs for construction projects in China.
In the words of the Company's founder, J N Tata In a free enterprise the
community is not just another stakeholder in business, but is in fact the very purpose of
its existence.' This belief has been embedded in the Company's vision and values as it
continues to strike a balance between value creation and being a leader in corporate
citizenship. Sustainability is at the very heart of what the Company does. As one of the
world's leading steel producers, the Company is dedicated to both managing its operations
responsibly and striving towards continuous improvement. The Company is committed to
designing more sustainable products which are lighter, long lasting and require fewer
resources to be produced. The Company's steel goes into the world's most sustainable
buildings and transport infrastructure and supports the performance of the most efficient
vehicles in the market. Above all, the Company operates in a way that is safe for all
employees and respectful to the environment. The Company's endeavour is to act with utmost
responsibility and care towards the communities surrounding it which are impacted by its
operations. The Company's sustainability approach as articulated in the Sustainability
Policy reinforces the triple bottom-line approach in its systems and processes.
The Company has also established various platforms for engaging with its stakeholders
to recognize their concerns and opinions that are then prioritized and embedded in its
business objectives and strategies. The Company is actively associated with various
industry bodies like Confederation of Indian Industry (CII'), Global
Reporting Initiative (GRI'), International Integrated Reporting Council (IIRC')
and the Taskforce on Climate-related Financial Disclosures (TCFD') of the
Financial Stability Board in order to mainstream the best practices on sustainability in
different functions and processes across the organization. The Company has a dedicated
Corporate Sustainability Group that tracks the global best practices related to
sustainability and facilitates its incorporation in the key processes of the Company. The
Group also drives various external assessments and makes comprehensive disclosures on
sustainability to stakeholders. In December 2016, the Jamshedpur Works underwent the
GreenCo assessment conducted by CII-Green Business Council and was awarded with Platinum
rating (the highest rating on the GreenCo rating scale) thus making it the first and only
Integrated Steel Plant to be awarded the Platinum rating. Globally, the Company has been
adjudged as the Industry Leader by the Dow Jones Sustainability Index (the most trusted
and widely accepted rating by investors globally) for the year 2016. Aligned with the UN
Global Sustainable Development Goals, the Company is now taking on the challenge of
further reducing its carbon and water footprints and enhancing the impact of its CSR
activities in the Company's areas of presence.
Respecting and safeguarding the environment is a fundamental principle held by all Tata
Group companies. The Company has implemented environmental management systems that meet
the requirements of international standard ISO14001 at all its leading manufacturing
sites. These systems provide the Company with a framework for managing compliance and
achieving continuous improvement. The Group-wide leadership in environmental matters is
provided by the Board's Safety, Health and Environment Committee and its overall
performance is subject to on-going and detailed scrutiny of the Board of Directors.
The Company's first priority is to be fully compliant with conditions for environmental
permits and with other legal requirements that are applicable within the jurisdictions in
which it operates. The Company's efforts are channelized towards adopting sustainable
practices and ensuring continuous improvement in environmental performance. It continues
to focus on operational excellence aimed at resource efficiency through "Recovery,
Reuse and Recycle" approach to minimize the ecological footprint. In India, during
the previous financial year, the Company adopted the maiden Biodiversity Policy and
revised the Energy Policy to include therein Renewable & Non-Conventional Energy. The
Company is member of World Steel Association Environment Policy Committee, Central
Pollution Control Board's National Taskforce, Indian Steel Association and various other
organizations and it continues to pursue advocacy on policy and regulatory issues through
these forums. During the year, the Company actively participated in the Taskforce of
Climate related Financial Disclosure (TCFD') formed by the Financial
Stability Board aiming to make markets more efficient and economies more stable and
resilient through increased disclosure and transparency. The Company is engaging with
International Union for Conservation of Nature (IUCN'), the world's largest
global environmental network, to implement biodiversity conservation plans at its mining
locations. The Company has completed a pilot program on natural capital valuation as part
of its capacity building program. It also has a dedicated Research & Development team
to work on Life Cycle Assessment. The Company has commenced valuation of carbon emissions
with the introduction of shadow price at US$ 15/tCO2e which will enable it to consider the
environmental aspects of projects before it decides to pursue them. This is being used for
appraisal of all capital expenditure proposals including growth plans.
In Europe, the Company is a leading member of ULCOS (Ultra-Low CO2 Steel-making)
a pioneering partnership of 48 companies and organizations from 15 European countries that
recently completed the first phase of a co-operative research initiative to achieve a
emissions from steel-making. The ultimate and step change in CO2 ambitious aim of the
ULCOS project, which began in 2004 and which is supported by the European Commission, is
to reduce CO2 emissions per tonnes of steel produced by at least 50% by 2050.
2. Climate Change
Climate change is one of the most pressing issues the world faces today. Climate change
is a global phenomenon which requires global measures in the long-term to effectively deal
with this real threat to sustainable human life. Tata Steel aims to play a leadership role
in addressing challenges of climate change. Climate change is the defining issue of the
early 21st Century and the Company recognizes that it has an obligation to minimize its
own contribution to climate change. However, the Company also understands that steel
products will be an integral part of the solution to climate change and that local,
short-term action will not necessarily help to tackle this global, long-term issue.
Considering all these factors, the Company has formulated a climate change strategy based
on 5 key themes as listed below:
Emissions Reduction: The Company will continue to improve its current processes to
increase its energy efficiency and to reduce its carbon footprint. The Company targets to
reduce its carbon dioxide emissions per tonnes of liquid steel by at least 20% compared to
Investing in Technology: The Company will continue to invest in long-term
breakthrough technologies through initiatives such as ULCOS.
Market Opportunities: The Company endeavors to develop such new products and
services that reduces the environmental impact over its products' life-cycles and helps
its customers to reduce their carbon footprints.
Employee Engagement: The Company will actively engage its workforce and encourage
everyone to contribute to its strategy.
Lead by Example: The Company will further develop its pro-active role in
global steel sector initiatives through the World Steel Association.
3. Health and Safety
Health and safety remains the Company's top most priority and the Company aspires to be
the industry benchmark in safety. The Company has made some significant achievements
through the Committed to Zero' programme. The Company's strategic efforts are
directed towards ensuring committed leadership, engaged employees and effective systems in
order to minimize risk. At the Group level, the Company has achieved 39% decline in Lost
Time Injury Frequency Rate (LTIFR') from 2010.
The Company also continues to focus on its competency development programs in health
and safety leadership. In collaboration with Ashome Hill, UK, safety and health excellence
programmes were conducted for leaders across levels of the Company and Members of the
Union from all locations of Tata Steel India. A total of 3,200 Officers and 505
union committee members were trained. This programme has been utilized in all regions and
was recognized as H&S excellence by World Steel Association in October 2016.
Leadership engagement at the shop _oor has improved by way of safety line walks with
Find It Own It - Fix It' approach. Alongside leadership, the Company's
strategic priorities include contractor management, process safety management, industrial
hygiene and road & rail safety management. Five high-hazard departments have started
the Process Safety Centre of Excellence in collaboration with the TSE team. Similarly, two
departments have started quantitative and qualitative study on Industrial Hygiene with
cross learning from TSE. NSH also achieved a 22% decline in LTIFR as compared to previous
year while TSTH finished the year with zero loss time injury to any employee or contract
workmen. Deploying long-term safety improvement plan, regular sharing of best practices
and learning from incidents from other companies in the Tata Group has strengthened the
occupational safety, health and environment process in both TSTH and NSH.
4. Research and Development
The Company has best-in-class research facilities to develop and deliver high quality
value added products for its customers and significant process improvements for its
business units. During the year, the Company undertook several initiatives in India to
help the business units achieve their goals and some of these initiatives have been
successfully executed at the plant level. JK DM Cyclone is one such initiative which has
been operational since November 2016 in stream No. 1 of washery#3 at West Bokaro. The JK
DM Cyclone process helps in better separation of clean coal from middlings. This process
is expected to reap an annual benefit of approximately `10 crore in one washery on
complete implementation and is now considered to be a global benchmark. Another such
initiative is the setting up of the Nano Membrane UHLA Desalination pilot plant in Haldia
for removal of chloride by tailor made ion through selectively charged Nano filtration
membrane. This initiative, being a first of its kind, has helped to reduce the operational
cost by at least 50%. The Company has undertaken many other research initiatives during
the year which are expected to provide fruitful solutions in the future.
In Europe, the Company is continuously engaged in various research and technology
initiatives. To illustrate, the Company invests in short to medium term energy efficiency
improvements emission through HIsarna project i.e. a aimed at reduction in CO2
collaborative project amongst the major steelmakers in Europe to develop a more flexible
new smelting reduction technology to produce steel from lower grade raw materials without
the need for coke making or agglomeration processes. In Singapore, the Company is focusing
on solution driven value propositions and piloting Building Information Modeling (BIM')
as well as Developing Mobile Apps for select customers for complete visibility of the
projects across the value chain leading to increased productivity & efficiency.
R&D activities are mostly focusing on developing advanced wire materials for
construction and automotive applications. The Company is building a new Research and
Development Centre at wire factory in Thailand which will focus on development of new wire
and related products for the group. The Company is also exploring ways to make Graphene
based value-add products, with a focus on development of high value niche market segments
for coated products. Further, during the year, the Company's process technology program
focused on creating robust and stable manufacturing processes, making better use of raw
materials and finding solutions to quality issues and thereby also supporting its
differentiated product strategy.
5. New Product Development
The Company recognizes that to become a long-term partner to its customers, it must
develop an in-depth understanding of their needs. Above and beyond meeting certification
and legislative requirements, customers are also seeking to improve the sustainability
performance of their operations and products. There is a growing emphasis on being able to
rely on a responsible supplier.
The Company is responding to customer needs by including sustainability principles in
its new product development process, focusing on lowering greenhouse gas emissions over
the full life cycle of steel products, reducing water consumption, avoiding the use of
hazardous and potentially toxic chemicals, optimising resource efficiency and reducing
waste in production, improving the circularity of products, ensuring responsible supply
and increasing the social value of products and optimising total cost of ownership. During
the year, in India the Company's efforts in the area of new product development has been
directed towards increasing customer satisfaction and having products with differentiated
quality. About 37 new products were developed in the Flat Products area, the major ones
being in the hot rolled category. The most noteworthy amongst these is the DP600 low Si,
which is expected to reduce scale issues and thereby increase customer satisfaction. The
HS800 in 5 mm section has been specifically developed for commercial vehicles in the
automotive segment and is in the final stage of trials. The IF390 in cold rolled category
is another significant example of a new product of a high strength grade developed for
automotive customers. The focus at the Company's Kalinganagar facility has been to develop
and increase the sales of value added products by leveraging the plant's superior
capabilities. In the Long products area, it has been making concerted efforts to increase
productivity. During the year, it has developed high strength SAW Wire Rods, Low Manganese
High carbon Wire Rods and Couplers for Construction segment. In India, the Company
launched 31 new products during the year.
In Europe, the Company launched 20 new products in the year. These launches include
major developments for the automotive, construction, engineering and packaging markets.
Prominent examples of product launches include XPF800 and Trimawall. XPF800 is its new
range of breakthrough steels aimed at helping car makers reduce the weight of
undercarriages and increase fuel efficiency. Trimawall caters to the construction
segment, offering a foam insulated wall sandwich panel with a completely flat outer
surface, providing customers with an architecturally state-of-the-art flat panel. In the
last five years, Tata Steel Europe has introduced over 160 new products. The share of
differentiated products in Financial Year 2016-17 increased by 3% as compared to previous
year and reached 37% of prime sales. These differentiated products give customers enhanced
capabilities for specific applications and are manufactured by only a few steel producers.
In Singapore, the Company's operations got certification for Malaysia Authorities' New
Standard for bars requiring 5m cycle of fatigue tests for export of bars to Malaysia and
also rolled out grade 600 bars, Steel Carpet and Fan Mesh to multiple projects in
Singapore construction sector. The wire units in Thailand (Siam Industrial wires and TSN
wires) launched zinc aluminium for _shery tools & poultry cages, low carbon automotive
wires, barbed wires, sprig wires and galvanised PC strand for rock engineering in local
Thai markets as well as international markets. In continuation of its efforts towards
branding its products, SENTEC brand was launched for galvanised wires.
6. Customer Relationship
The Company endeavors to build sustainable long-term value-creating partnerships with
its customers and channel partners through a wide range of product offerings, innovative
services and unique solutions. In India, the Company's customers are segmented into three
categories i.e. B2B, B2C and B2ECA (Emerging Corporate Accounts'). These
categories are then micro-segmented based on applications and buying behavior. The
Company's focus is to understand the expectations and requirements of current and
potential customers/market segments, to deliver customer-specific products & services
and to provide collaborative value-creating solutions. The Company engages with B2B
customers through cross-functional customer service teams to generate value-creating
ideas, develop new products and focus on quality improvements thereby helping to achieve
operational excellence. By leveraging its investments in Research & Development
facilities, the Company has deepened its engagement with key automotive customers to
provide cost and weight reduction solutions and advanced product application support. This
has enabled the Company to partner with its customers for their future product launches.
The Company has also enhanced its engagement with Emerging Corporate Accounts by
facilitating direct interactions with Subject Matter Experts (SMEs') through
programs such as "ECafez Webinars" and "Skills4 India".
The Company's B2C brands have embraced digital solutions to substantially enhance the
consumer buying experience. Tata Tiscon has built an online e-sales platform to
reach out to around 2.5 lakh consumers. To overcome the cash crunch post demonetization in
November 2016, the Company's B2C brands have installed over 1,500 Point-of-Sales (POS')
machines across its dealer network. To reach out to the rural consumers at the last mile,
intensive mobile marketing campaigns were conducted under the program of "Ek Kadam
Parivartan ki Ore" where the consumers were educated about the benefits of Tata
Shaktee vis-a-vis other roo_ng solutions prevalent in the region. The Group Rural
Action Mission (GRAM') focuses on harnessing synergies with other group
companies for creating rural consumers awareness and lead generation programs.
Knowledge-sharing platforms such as "Driving Steel", "Wired 2 Win",
"Steelopedia" are organized to provide insights on current and future industry
trends and promotes new services & solution offerings. The senior leadership team
frequently interacts with strategic and key customers in customer meets, seminars, during
plant visits undertaken by the customers and celebration events to commemorate the
In Europe, the Company aims to develop long-term partnerships with customers by
unlocking the potential of steel. The Company is focused on strengthening customer
relationships by continuously introducing new, innovative and high quality steel products,
jointly developing smart solutions for products and services to unlock customer value and
creating new partnerships to optimize the supply chain. A number of new digital services
have been launched to make it easier for customers to do business including eShop and
Electronic Data Interchange (EDI') connections.
To increase customer focus, the Company is convinced that advancing strategy of
customer intimacy, building strong partnerships with satis_ed loyal customers will be as
important as any other factor to shape a successful, sustainable future for the business.
To do so, insights gained from the Tata Business Excellence Model assessment, an Employee
Survey and a Customer Satisfaction Survey were taken and integrated into a consistent,
cross-functional approach across Europe. The Journey to Commercial Excellence programme is
central to the ambition to develop a culture that is customer focused and performance
driven. To develop a service based decisive competitive advantage, the Company is focusing
on increasing its delivery performance to the market. This business change is being
supported by transformation of IT under the Supply Chain Transformation programme. The
first phase of this initiative went live in September 2016. Tata Steel UK is pursuing a
transformation programme "Delivering Our future" to increase customer value and
reduce operating costs.
In Singapore, the Company's Reinforcing Knowledge Cluster team is working very closely
with customers and project managers for driving solutions and services. The Company
continues to strengthen its relationship through various projects in Singapore as well as
with international customers through Customer Value Management.
During the year, the Company entered the B2C wire markets in Thailand and Indonesia
with the appointment of distributors and retailers to serve the wire customers at the
retail level. In Vietnam, Retail Value Management remains the key focus in Independent
House Builders (IHB') segment. In Thailand, customer relationship was
strengthened further through dedicated Customer Service Teams. The Company also engaged
with Engineering Institute of Thailand and leading Universities in the country for
research and promotion of specialized Rebars.
7. Human Resources Management & Industrial Relations
From its foundation over a century ago, Tata Steel Group's employment philosophy and
practices have been based on the recognition that its people are the primary source of its
The Group consistently abides by human resources policy that is found on a set of
following principles: equality of opportunity, continuing personal development, fairness,
mutual trust and teamwork. These principles are, in turn, underpinned by the five Tata
Group core Values of Pioneering, Integrity, Excellence, Unity and Responsibility. The
Company also believes as a matter of principle that, diversity within its workforce
greatly enhances its overall capabilities. The Company is an equal opportunity employer
and it does not discriminate on the basis of race, caste, religion, colour, ancestry,
gender, marital status, sexual orientation, age, nationality, ethnic origin or disability.
All decisions relating to promotion, compensation and any other forms of reward and
recognition are based entirely on performance and merits.
The Company's ambition is to be a modern employer offering employees long-term
prospects for a meaningful professional career. This is why the Company's collective
labour agreement focuses on four aspects: health & vitality, career development &
skills, employee productivity and employment conditions.
During the year, the Company focused on improvement in areas related to diversity &
inclusion and training & development. Many initiatives were undertaken to bring about
a change in the mind-set of the workforce regarding these aspects. In India, the Company's
efforts to improve gender diversity included Women of Mettle', an engagement and
scholarship program for recruiting women talent from technical schools, revision of
maternity benefits, work from home option, extension of additional privilege leave to
non-officer lady employees and many other measures taken to retain and attract its women
employees and cater to their needs for adequate balance between work and personal duties.
Under the Company's Afirmative Action programs, it introduced the Tata Steel scholarship
program under which it gave pre-placement offers to 17 Afirmative Action candidates who
hold under-graduate degree in engineering. The Company's focus on learning &
development underwent a shift in pedagogy this year. The Company introduced various
e-learning courses on managerial and functional competencies through the Skillsoft
learning platform. It also rolled out other initiatives such as Lunch & Learn',
NPTEL technical skill modules', modules on Internet of Things/Big Data, etc. In
continuation with the previous years, 17 new academies were rolled out during the year to
institutionalize the academy approach of learning and development. During the year, the
Company also commenced a program called Felt Leadership Training, wherein senior leaders
as trainers share with the workforce their learning and experiences on matters pertaining
to health and safety.
The Company is concentrating its efforts on leveraging digitalization to enhance
Productivity, Predictability, Capability, Stakeholder Experience and Safety in its
business through constant discussions with the members of the Unions. The Company's
achievements in Human Resource Management were recognized through several accolades.
Business Today has, for the 2nd time in a row, declared the Company as the Best
Place to Work' in the Core Sector. The Company has also been certified as a Great
Place to Work' as per the Great Place to Work study conducted for the year 2017. The
Company bagged the BML Munjal Award for Business Excellence through Learning &
Development under Sustained Excellence Category and was also adjudged Best Training
Establishment of India by CII in 28th National Works Skill Competition held in Bangalore.
During the year, Capability Development group also secured the certification of ISO
9001:2015 Quality Management System standard.
TSE promotes a healthy work environment and lifestyle through various initiatives such
as central and local fitness programmes, training to prevent and deal with stress and
local labour conditions improvement initiatives. The career development and skills
initiative is focused in stimulating long-term employability and creating a
flexible workforce through career counselling, pension advice and Matching' bureau
to identify options for part-time working. TSE also emphasises on employment conditions
and industrial relations by focusing on creating modern employment conditions that ensure
healthy long-term employability. This is achieved through flexible working hours at the
Hot Strip Mill and reviewing overtime arrangements. The Tata Steel Academy in Europe
focuses on strengthening the organisation's competitive advantage by enabling its people
to achieve the highest standards of technical and professional expertise. The Academy uses
an approach known as blended learning' a mix of practical, computer-based and
classroom training. The majority of training remains on the job', but is structured
through the creation of 12 distinct faculties focused on leadership, health & safety,
sales & marketing, manufacturing, engineering, technical, supply chain, finance, HR,
IT, procurement and total quality management. The Company's South-East Asian entities
focused initiatives towards enhancing technical knowledge in the areas of steel making,
rolling and maintenance with the support of external experts. Regular best practices
sharing with other companies in Tata Group facilitated horizontal deployment. Coaching and
mentoring ability of the leadership team was also enhanced. The Company continues to be
very constructively engaged with the Unions in all geographies where it operates including
the Tata Workers Union in Jamshedpur, the European Works Council for the TSE and all other
unions in different parts of the world. Employees and unions are very important
stakeholders for the Company and the Management team is in continuous engagement through
the year to ensure seamless and transparent communication on all important issues that
relates to the employees and the future of the Company.
8. Corporate Social Responsibility
The Company's vision is to be a global benchmark in value creation' and
corporate citizenship'. The objective of the Company's Corporate Social
Responsibility (CSR') initiatives is to improve the quality of life of
communities through long-term value creation for all stakeholders. This objective is in
alignment with the Tata Group core purpose.
For decades, the Company has pioneered various CSR initiatives. The Company continues
to remain focused on improving the quality of life and engaging communities through
health, education, sports and infrastructure development. During the year, it spent `194
crore on CSR activities. The Annual Report on CSR activities, in terms of Section 135 of
the Companies Act, 2013, is annexed to this report (Annexure 3).
The Company has always had a very visible presence in its communities. In Europe, the
Company is committed to working with local communities to support their social and
economic well-being. The Company puts future generations at the centre of its local
community strategy, which has three anchors: education & learning, health &
well-being and environment & sustainability. The Company has formed education and
learning partnerships with local organisations. The Company works with them and aims to
increase the social skills and confidence of young people, boost pupils' level of
understanding about the steel industry and improve understanding & ambition of
students particularly girls in STEM (Science, Technology, Engineering and
Math) subjects. The Company also runs, its own vocational school in IJmuiden. Every year,
about 100 students start their education in mechanics, electro or process technology. The
Company has partnerships with organizations such as Age Cymru and Young Careers Network
whose work helps to combat some of the issues such as lack of access to good health,
protection from crime and clean & safe environment. The Company also helps fund Port
Talbot Women's Aid in their on-going work with children affected by domestic violence. The
Company has had a long-standing partnership with the Triathlon Trust in the UK and hosted
free-to-access junior triathlons for 8-14 year olds across the country. It also is a
partner in the Steel Valley Project which aims to help people understand and care for
their local environment to create healthy and sustainable communities.
In Singapore, the Company organizes monthly outings with its benefficiaries, namely,
The Society for the Physically Disabled, Fernvale Gardens School catering to children with
intellectual disability. The Company has also partnered with the initiative Food
from the Heart', a non-profit voluntary group which distributes food to those in need.
In Thailand, initiatives in the area of education such as Grow Smart with Tata
Steel' reached 248 schools in 52 provinces. As a responsible citizen, the Company along
with its employees also supported the Government relief initiatives post the _oods in
I. CORPORATE GOVERNANCE
The Company constantly endeavours to follow the corporate governance guidelines and
best practices sincerely and disclose the same transparently. The Board is conscious of
its inherent responsibility to disclose timely and accurate information regarding the
Company's operations, performance, material corporate events as well as on the leadership
and governance matters relating to the Company.
During the second half of the year under review, the Company faced challenges owing to
leadership change at Tata Sons (the Promoter). Amidst the leadership transition, there
were references to involvement of Tata Trusts and Tata Sons in the business and operations
of the Company. The Board likes to categorically state that the Company upholds the
highest standards of corporate governance, has very robust processes and has a duly
constituted and independent Board of Directors (Board') that conducts itself
independently keeping in line the best tradition of a Tata company. The Board, at all
times exercises its independence both, in letter and in spirit and the Directors fully
understand their _duciary duties. The Directors have always acted in the best interest of
the Company and will continue to do so in the future. It is equally important to state
that the Company has a professional and competent leadership team for the management of
the business. The Board guides, supports and compliments the Management team towards
achieving the set objectives to make the enterprise more sustainable and valuable in the
During the course of the leadership transition in Tata Sons, clarifications were also
sought by Regulators with respect to sharing of information with the Chairman Emeritus and
the Board of Tata Sons. The Board would like to state clearly that the Company has robust
systems and processes in place to ensure compliance with applicable rules and regulations
on sharing of information. The Board confirms that the Company has acted in accordance
with the applicable regulatory framework at all times. The Company ensures that
confidential information is handled with due care and is shared on a need-to-know basis in
furtherance of legitimate purpose of Company's business. Certain allegations were also
made to investment decisions with respect to acquisition of Corus Group Plc (Corus')
in 2007 and its subsequent performance. The Board wishes to place on record that the
acquisition and subsequent financing arrangements were undertaken following due governance
processes and under the supervision and oversight of the Board. The acquisition of Corus
was based on the long-term strategy of the Company to pursue growth through international
expansion and enhance the portfolio of value-added products. The Board discussed the
acquisition proposal and financing requirements at various meetings held between October
12, 2006 and April 17, 2007 and approved the same without dissent from any Member of the
Board. Being a responsible listed company, necessary disclosures were made in this regard
to the Regulators. The performance of Corus in the two years post acquisition validated
the Company's growth strategy. The black swan' event in the form of the global
financial crisis structurally impacted the underlying demand across many geographies and
had a significant impact across the global steel industry and more specifically to the
European steel industry which witnessed 30% structural reduction in demand. In response to
the above challenges, the Management of the Company has undertaken several strategic and
operational interventions to ensure the future sustenance of the European business
including restructuring of the portfolio, investment in improving asset quality and
reliability, manpower rightsizing to improve productivity, focusing on significantly
enhancing the product portfolio and differentiate offering to the customers and new
product development. The Board did undertake detailed review and based on such review
supports the Management in all its endeavours. The macroeconomic condition and its impact
on the Company's European operations in general, on the UK operations in particular and
the various interventions of the Board were disclosed each year in the Directors' Report
between Financial Years 2009 through 2016.
Certain questions were also raised on independence of Mr. Jacobus Schraven, Mr.
Andrew Robb and Ms. Mallika Srinivasan. The Board reviewed the issues raised, sought
advice from eminent jurists/legal counsels. Based on the review of documents and the
advice so received, the Board was fully satis_ed of the independence of these directors.
All three Directors are eminent personalities with extraordinary business acumen and
exhibit very high sense of integrity. The three Directors during their tenure have added
enormous value to the Board deliberations and the Board has immensely benefitted from
their knowledge, experience and insights.
The Board closely monitored the events that unfolded during the leadership transition.
The Audit Committee of the Board (Committee') reviewed the aforementioned
issues including the correspondence between the Regulators and the Company including the
queries raised on the representations made by Mr. Cyrus P. Mistry and Mr. Nusli N. Wadia
in terms of Section 169 of the Companies Act, 2013 and allegations made in this regard in
the proceedings before the National Company Law Tribunal initiated against the Promoter.
The Committee also reviewed the Company's interventions, the processes implemented and
followed with respect to various compliances and disclosures and the rigours applied when
such strategic investment decisions were taken. After due deliberations with relevant
stakeholders and review of relevant documents, the Committee expressed its confidence in
the Company's processes to ensure compliance with the provisions of SEBI Regulations. The
Committee noted that appropriate procedures were followed by the Company in preparing its
financial statements and addressing the business risk issues and that there has been
compliance with all legal requirements and corporate governance standards. It follows
therefore to conclude that the Company at all points has followed the due corporate
governance process and the Board and Management of the Company has conducted the business
with due care and in the best interest of the Company.
1. Extra-Ordinary General Meeting
Upon the Requisition and Special Notice received from Tata Sons Limited, Company's
Principal Shareholder, the Company convened an Extra-Ordinary General Meeting (EGM')
on December 21, 2016. The Requisitionist placed proposals for removal of Mr. Cyrus P.
Mistry and Mr. Nusli N. Wadia as Directors of the Company.
The Company held the EGM at 3:00 PM (IST) on December 21, 2016. A total of 1,868
shareholders (including 5 authorised representatives of the Promoter and Promoter Group)
were present in person and through proxies.
Resolution No. 1 in the notice convening the EGM relating to removal of Mr. Cyrus P
Mistry was dropped at the EGM since the same was rendered infructuous upon the resignation
submitted by Mr. Mistry on December 19, 2016.
The Meeting considered Resolution No. 2, relating to removal of Mr. Nusli N. Wadia as a
Director of the Company. Mr. Wadia was not present at the meeting but had sent a
communication to the Company Secretary and had requested that the same be read out to the
shareholders. The Company Secretary read the said communication verbatim.
A total of 88 members spoke at length at the meeting. At the end of the meeting, the
Chairman of the Meeting, Mr. O P Bhatt, Independent Director, responded to all the
questions raised by the Members. The meeting concluded at 9:30 PM (IST).
The result of the shareholders vote is given below:
||Total Votes polled
||Votes cast in favour
||Votes cast against
||No. of votes
||No. of votes
||No. of votes
Pursuant to the Listing Regulations, the Corporate Governance Report and the Auditors'
Certificate regarding compliance of conditions of Corporate Governance are annexed to this
report (Annexure 4).
2. Board Meetings
For seamless scheduling of meetings, a calendar is prepared and circulated in advance.
The Board has also adopted an activity guidance giving them visibility on the upcoming
topics for discussions.
The Board met 11 times during the year, the details of which are given in the Corporate
Governance Report. The intervening gap between the meetings was within the period
prescribed under the Companies Act, 2013 and the Listing Regulations.
3. Selection of New Directors and Board Membership Criteria
The Nomination and Remuneration Committee (NRC') works with the Board to
determine the appropriate attributes, skills and experience for the Board as a
whole and its individual members with the objective of having a Board with diverse
backgrounds and experience in business, government, education and public service.
Characteristics expected of all Directors include independence, integrity, high personal
and professional ethics, sound business judgment, ability to participate constructively in
deliberations and willingness to exercise authority in a collective manner. The Policy on
appointment & removal of Directors and determining Directors' independence was adopted
by the Board on March 31, 2015 and was annexed to the Board Report of Financial Year
2014-15. During the year, there have been no changes to the Policy. Hence, the same is not
annexed to this Report, but is available on the website at www.tatasteel.com
4. Familiarization Programme for Independent Directors
All new Independent Directors (IDs') inducted on the Board go through a
structured orientation programme. Presentations are made by Executive Directors and Senior
Management giving an overview of our operations to familiarize the new IDs with the
Company's business operations. The new IDs are given an orientation on the Company's
products, group structure and subsidiaries, Board constitution and procedures, matters
reserved for the Board, and the major risks and risk management strategy. Details of
orientation given to the existing IDs in areas of strategy, operations & governance,
safety, health and environment, industry & regulatory trends, competition and future
outlook are provided in the Corporate Governance Report and is also available on the
website at www.tatasteel.com
The Board evaluated the effectiveness of its functioning, that of the Committees and of
individual Directors. The Board, through NRC, sought the feedback of Directors on various
parameters such as: Degree of fulfillment of key responsibilities towards stakeholders (by
way of monitoring corporate governance practices, participation in the long-term strategic
planning, etc.); The structure, composition and role clarity of the Board and
Committees; Extent of co-ordination and cohesiveness between the Board and its Committees;
Effectiveness of the deliberations and process management; Board/Committee culture and
dynamics; and Quality of relationship between Board Members and the Management.
The Chairman of the Board had one-on-one meetings with the IDs and the Chairman of NRC
had one-on-one meetings with the Executive and Non-Executive Directors. These meetings
were intended to obtain Directors' inputs on effectiveness of the Board/Committee
The Board considered and discussed the inputs received from the Directors. Also, the
IDs at their meeting reviewed the performance of the Board, Chairman of the Board and that
of Non-Executive Directors. The evaluation process endorsed the Board Members' confidence
in the ethical standards of the Company, the resilience of the Board and Management in
navigating the Company during challenging times, cohesiveness amongst the Board Members,
constructive relationship between the Board and the Management and the openness of the
Management in sharing strategic information to enable Board Members to discharge their
responsibilities. In the coming year, the Board intends to enhance focus on diversity of
the Board through the process of succession planning, strategic plan for portfolio
restructuring of Tata Steel Europe and exploring new drivers of growth for the Group.
6. Compensation Policy for the Board and Senior Management
Based on the recommendations of NRC, the Board has approved the Remuneration Policy for
Directors, Key Managerial Personnel (KMP') and all other employees of the
Company. As part of the policy, the Company strives to ensure that: the level and
composition of remuneration is reasonable and sufficient to attract, retain and motivate
Directors of the quality required to run the Company successfully; relationship between
remuneration and performance is clear and meets appropriate performance benchmarks; and
remuneration to Directors, KMP and Senior Management involves a balance between fixed and
incentive pay, reffecting short, medium and long-term performance objectives appropriate
to the working of the Company and its goals.
The Remuneration Policy for Directors, KMP and other Employees was adopted by the Board
on March 31, 2015 and was annexed to the Board Report of Financial Year 2014-15. During
the year, there have been no changes to the Policy. Hence, the same is not annexed to this
Report, but is available on our website at www.tatasteel.com
7. Particulars of Employees
Disclosures pertaining to remuneration and other details as required under Section
197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014 are annexed to this report. In terms of
the provisions of Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3)
of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a
statement showing the names and other particulars of employees drawing remuneration in
excess of the limits set out in the said Rules forms part of the report (Annexure 5).
8. Independent Directors' Declaration
The Company has received the necessary declaration from each ID in accordance with
Section 149(7) of the Companies Act, 2013, that he/she meets the criteria of independence
as laid out in Section 149(6) of the Companies Act, 2013 and the Listing Regulations.
The year under review saw major changes to the Board of Directors (Board'),
including that of the position of the Chair of the Board. The Board, on November 25, 2016,
appointed Mr. O. P. Bhatt as the Chairman of the Board in place of Mr. Cyrus P. Mistry.
The Board appointed Mr. Bhatt as the Chairman keeping in mind the principles of
good corporate governance and to provide impartial leadership to the Company in its
preparation and conduct of the EGM. The Company convened and held the EGM on December 21,
2016 upon the Requisition and Special Notice received from Tata Sons, Company's Principal
Shareholder (Requisitionist'). The Requisitionist placed proposals for
removal of Mr. Cyrus P. Mistry and Mr. Nusli N. Wadia as Directors of the Company.
The appointment of Mr. Bhatt as the Chairman was also to ensure stability to the
Company and in the larger interest of Company's stakeholders, including but not limited to
employees, trading partners, financial stakeholders and local community around Company's
operations. Mr. Bhatt served as the Chairman of the Board through December 22, 2016.
The Board placed on record its deep appreciation towards Mr. Bhatt for his leadership
during challenging times.
Inductions to the Board
On the recommendations of the Nomination and Remuneration Committee, the Board
appointed: Mr. N. Chandrasekaran as Additional (Non-Executive) Director of the Company
effective January 13, 2017 and as the Chairman of the Board effective February 7,
Mr. Chandrasekaran brings to the Board his extensive and outstanding experience in
successfully leading and managing a large and valuable global corporation.
On February 7, 2017, the Board appointed Dr. Peter (Petrus) Blauwhoff as Additional
(Independent) Director of the Company. The appointment was effective immediately. Dr.
Blauwhoff brings a wealth of experience to the Board with his knowledge of the global
manufacturing industry, technology focus in general and of the energy, oil and gas
business in particular. Dr. Blauwhoff brings valuable insights and guidance in the areas
of safety, health and environment. On March 29, 2017, the Board appointed Mr. Aman Mehta
as Additional (Independent) Director of the Company. The appointment was effective
immediately. Mr. Mehta brings a wealth of experience to the Board with his extensive
experience in the field of banking & finance and proven track record of successfully
managing large multinational enterprises. On March 29, 2017, the Board appointed Mr.
Deepak Kapoor as Additional (Independent) Director of the Company. The appointment was
effective April 1, 2017.
Mr. Kapoor brings to the Board his experience in successfully steering the Indian arm
of a Global Consulting and Advisory firm during very challenging times and strengthening
the firm's footprint in India. The Board will also draw on his extensive global experience
in the audit function as well as business advisory related work encompassing multiple
The resolution(s) for confirming the above appointments will come before you at the
ensuing Annual General Meeting (AGM') scheduled to be held on August 8, 2017.
We seek your support and hope you will enthusiastically vote in confirming the above
appointments to the Board.
As per the provisions of the Companies Act, 2013, Mr. D. K. Mehrotra and Mr. Koushik
Chatterjee will retire at the ensuing AGM and being eligible, seek re-appointment. The
Board recommends and seeks your support in confirming re-appointment of Mr. D. K. Mehrotra
and Mr. Koushik Chatterjee. The profile and particulars of experience, attributes and
skills that qualify all of the above Directors for the Board membership is disclosed in
the Notice convening the AGM.
In accordance with the retirement policy applicable for the Company's Board of
Directors (Independent Directors to retire on attaining 75 years of age), Mr.
Jacobus Schraven and Mr. Subodh Bhargava, Independent Directors, retired from the
Board on February 7, 2017 and March 29, 2017 respectively. _ Mr. Cyrus P. Mistry resigned
as the Member of the Board effective December 19, 2016. _ Mr. Nusli N. Wadia, in terms of
a shareholder vote ceased to be the Member of the Board effective December 21, 2016. The
Board of Directors place on record their deep appreciation for the contribution of these
Directors during their tenure.
10. Key Managerial Personnel
Pursuant to Section 203 of the Companies Act, 2013, the Key Managerial Personnel of the
Company are Mr. T. V. Narendran, Managing Director (India and South-East Asia), Mr.
Koushik Chatterjee, Group Executive Director (Finance, Corporate & Europe) and Mr.
Parvatheesam K, Company Secretary. During the year, there has been no change in the Key
11. Audit Committee
The Audit Committee was constituted in the year 1986. The Committee has adopted a
Charter for its functioning. The primary objective of the Committee is to monitor and
provide effective supervision of the Management's financial reporting process, to ensure
accurate and timely disclosures, with the highest levels of transparency, integrity and
quality of financial reporting.
The Committee met 7 times during the year, the details of which are given in the
Corporate Governance Report. As on date of this Report, the Committee comprises Mr. O. P.
Bhatt (Chairman), Mr. Ishaat Hussain, Mr. Andrew Robb and Mr. Aman Mehta.
12. Internal Control Systems
The Board of Directors of the Company is responsible for ensuring that Internal
Financial Controls have been laid down in the Company and that such controls are adequate
and operating effectively. The foundation of Internal Financial Controls (IFC')
lies in the Tata Code of Conduct (TCoC'), policies and procedures adopted by
the Management, corporate strategies, annual business planning process, management
reviews, management system certifications and the risk management framework.
The Company has IFC framework, commensurate with the size, scale and complexity of its
operations. The framework has been designed to provide reasonable assurance with respect
to recording and providing reliable financial and operational information, complying with
applicable laws, safeguarding assets from unauthorized use, executing transactions with
proper authorization and ensuring compliance with corporate policies. The controls, based
on the prevailing business conditions and processes have been tested during the year and
no reportable material weakness in the design or effectiveness was observed. The framework
on IFC over Financial Reporting has been reviewed by the internal and external auditors.
The Company uses various IT platforms to keep the IFC framework robust and the
Information Management Policy governs these IT platforms. The systems, standard operating
procedures and controls are implemented by the executive leadership team and are reviewed
by the internal audit team whose findings and recommendations are placed before the Audit
The scope and authority of the Internal Audit function is defined in the Internal Audit
Charter. To maintain its objectivity and independence, the Internal Audit function reports
to the Chairman of the Audit Committee. The Internal Audit team develops an annual audit
plan based on the risk profile of the business activities. The Internal Audit plan is
approved by the Audit Committee, which also reviews compliance to the plan.
The Internal Audit team monitors and evaluates the e_cacy and adequacy of internal
control systems in the Company, its compliance with operating systems, accounting
procedures and policies at all locations of the Company and its subsidiaries. Based on the
report of internal audit function, process owners undertake corrective action(s) in their
respective area(s) and thereby strengthen the controls. Significant audit observations and
corrective action(s) thereon are presented to the Audit Committee.
The Audit Committee reviews the reports submitted by the Internal Auditors in each of
its meeting. Also, the Audit Committee at frequent intervals has independent sessions with
the external auditor and the Management to discuss the adequacy and effectiveness of IFC.
13. Risk Management
Risk is an essential part of business and taking risk is a fundamental driving force in
business. In fact, it is the unique differentiator between companies who thrive and those
who merely survive or otherwise. This has never been more important than in today's VUCA
(Volatility, Uncertainty, Complexity and Ambiguity) world. There are several rapid,
unprecedented and unpredictable changes taking place all the time. The size, scale and
scope of these changes in today's world are enormous. Many of these are driven by changes
in technology and have consequential impacts on supply chain, manufacturing, assembling,
logistics and costs. The geo-political environment is extremely volatile and regulatory
framework uncertain which in-turn is leading to changes in the supply-demand equation,
commodity prices, market forces and competition. The aforementioned uncertainties warrant
robust process and framework to minimize the threats and capture opportunities to create
sustainable value for the organization. The Company follows a robust 5 step Enterprise
Risk Management (ERM') process to address the risks associated with its
business. The ERM process framework has evolved and matured over the years and is based on
international standards such as ISO 31000 and Committee of Sponsoring Organizations of the
Treadway Commission (COSO') with inputs drawn from the best practices of
leading companies across industries. The ERM is aimed at developing a "Risk
Intelligent Organization" that supports risk informed business decisions, strengthens
organizational risk resiliency and provides agility to the organization for preserving as
well as enhancing long term value for all stakeholders. In order to achieve the stated ERM
objectives, the Company has constituted a robust governance structure comprising of three
levels of risk management responsibilities as: Risk Oversight, Risk Infrastructure and
Risk Ownership. The Risk Oversight function consists of the Board, Risk Management
Committee (RMC') and Group Risk Review Committee (GRRC') that
provide clear directions and guidelines for spearheading the ERM framework & policy
across the organization. The RMC of Board assists the Board in framing the Risk Management
Plan for the Company and reviewing and guiding the risk policy. It also reviews key risks
to the Tata Steel Group and actions deployed by the Management with respect to their
identification, impact assessment, mitigation and monitoring. GRRC is a Management
Committee comprising Senior Management personnel as its members. The GRRC has the primary
responsibility of implementing the Risk Management Policy of the Company and achieving the
stated objective of developing a risk intelligent culture that helps improve the Company's
The Company has laid down a strong foundation for a successful risk management process
by setting up the risk infrastructure in the form of a dedicated organizational unit
called ERM headed by Group Head Corporate Finance & Risk Management, who acts
as the Chief Risk Officer (CRO') of the Company. The ownership of risk
tracking and mitigation rests with the senior executives of various functional units who
as the risk owners review and monitor key risks of the division periodically in order to
avoid any undue deviations or adverse events by designing and implementing suitable
mitigation plans proactively. Regular and extensive reviews at business units lead to
robust implementation of mitigation plans which ultimately create value for the business.
The robust governance structure has also helped in the integration of the ERM process
with the Company's strategy & planning processes where emerging risks are used as
inputs in the strategy and planning process. Risk is also integrated with the capital
allocation process and risk assessments form important considerations for key decisions on
investment proposals for organic and inorganic growth. During the year, the Company has
undertaken various focused initiatives and process improvements aimed at strengthening,
widening & deepening the scope and coverage of ERM across the
Company. The risk maturity assessment process has been rolled out to the domestic and
overseas subsidiaries and the process has been strengthened through a customized in-house
built IT solution to facilitate real time reporting of risks, provide visibility,
drill-down and appropriate escalation mechanisms across the Enterprise. During the year,
the Company undertook various external and internal training programs/sessions along with
communication campaigns to promote awareness of the ERM process. The Board is happy to
report that the Company has been conferred the honour of the Best Risk Management
Practice' in the category of Metals & Mining at the 3rd India Risk Management Awards
2017. This is indicative of the Company's commitment towards cultivating a robust and
proactive risk intelligent culture.
14. Vigil Mechanism
The Company's Vigil Mechanism provides a formal mechanism for all Directors, employees
and business associates to approach the Ethics Counselor / Chairman of the Audit Committee
and make protective disclosures about the unethical behaviour, actual or suspected fraud
or violation of the TCoC.
The Vigil Mechanism comprises 3 policies viz., the Whistle Blower Policy for Directors
& Employees, Whistle Blower Policy for Business Associates and Whistle Blower Reward
& Recognition Policy for Employees. The same is available on our website www.tatasteel.com
The Whistle Blower Policy for Directors & employees is an extension of the TCoC that
requires every Director or employee to promptly report to the Management any actual or
possible violation of the TCoC or any event wherein he or she becomes aware of that which
could affect the business or reputation of the Company.
The Whistle Blower Policy for Business Associates provides protection to vendors from
any victimization or unfair trade practices by the Company.
The Whistle Blower Reward and Recognition Policy for Employees has been implemented in
order to encourage employees to genuinely blow the whistle on any misconduct or unethical
activity taking place in the Company. The disclosures reported are addressed in the manner
and within the time frames prescribed in the Whistle Blower Policy. During the year, a
series of communication awareness on the "Code of Conduct" of the Company were
sent to business associates and "Neeti Katha" i.e. storytelling through snippet
series were mailed to employees as part of the awareness campaign. Each snippet consisted
of a short story based on situations related with accepting of gifts and hospitality from
As a tribute to late Mr. J R D Tata, for over a decade, the Company has been
celebrating the month of July as Ethics Month. This practice has helped in reinforcing
employee involvement and passion in driving the Management of Business Ethics. A workshop
on Tata Values, Tata Code of Conduct and Governance process was initiated with an
objective of training employees.
During the year, the Company also adopted the Confiict of Interest Policy. The policy
requires employees to act in the best interest of the Company without any confiicts and
declare confiicts, if any (real, potential or perceived), to the Ethics Counsellor.
During the year, the Company received 382 whistle-blower complaints of which 348 were
investigated and appropriate action was taken. Investigations are underway for the
15. Related Party Transactions
There have been no materially significant related party transactions between the
Company and the Directors, the Management, the subsidiaries or the relatives except for
those disclosed in the financial statements.
Accordingly, particulars of contracts or arrangements with related parties referred to
in Section 188(1) along with the justification for entering into such contracts or
arrangements in Form AOC-2 does not form part of the Report.
16. Disclosure as per the Sexual Harassment of Women at Workplace (Prevention,
Prohibition And Redressal) Act, 2013
The Company has zero tolerance towards sexual harassment at the workplace and has
adopted a policy on prevention, prohibition and redressal of sexual harassment at
workplace in line with the provisions of the Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder.
During the year, the Company received 26 complaints of sexual harassment, out of which
19 complaints have been resolved by taking appropriate actions. The remaining 7 complaints
are under investigation.
17. Directors' Responsibility Statement
Based on the framework of internal financial controls established and maintained by the
Company, work performed by the internal, statutory, cost and secretarial auditors and
external agencies including audit of internal financial controls over financial reporting
by the statutory auditors and the reviews performed by the Management and the relevant
Board Committees, including the Audit Committee, the Board is of the opinion that the
Company's internal financial controls were adequate and effective during Financial Year
2016-17. Accordingly, pursuant to Section 134(5) of the Companies Act, 2013, the Board of
Directors, to the best of their knowledge and ability confirm:
a) that in the preparation of the annual accounts, the applicable accounting standards
have been followed along with proper explanation relating to material departures;
b) that we have selected such accounting policies and applied them consistently and
made judgments and estimates that are reasonable and prudent so as to give a true and fair
view of the state of affairs of the Company at the end of the financial year and of the
profit or loss of the Company for that period;
c) that proper and sufficient care has been taken for the maintenance of adequate
accounting records in accordance with the provisions of the Companies Act, 2013 for
safeguarding the assets of the Company and for preventing and detecting fraud and other
d) that the annual accounts have been prepared on a going concern basis;
e) that proper systems to ensure compliance with the provisions of all applicable laws
were in place and that such systems were adequate and operating effectively; and f) that
proper internal financial controls were laid down and that such internal financial
controls are adequate and were operating effectively.
18. Business Responsibility Report
The Securities and Exchange Board of India (SEBI') requires companies to
prepare and present to stakeholders a Business Responsibility Report (BRR')
in the prescribed format. SEBI, however, allows companies to follow an internationally
recognized framework to report on the environmental and social initiatives undertaken by
the Company. Further, SEBI has on February 6, 2017 advised Companies that are required to
prepare BRR to transition towards an Integrated Report. As stated earlier in the Report,
the Company has followed the framework of the International Integrated Reporting Council
to report on all the six capitals that it uses to create long-term stakeholder value. The
Company's Integrated Report has been assessed and Bureau Veritas (India) Private Limited
has provided the required assurance. The Company has also provided the requisite mapping
of principles between the Integrated Report, the Global Reporting Initiative (GRI')
and the Business Responsibility Report as prescribed by SEBI. The same is available on the
19. Subsidiaries, Joint Ventures and Associates
The Company has 255 subsidiaries, 19 joint ventures and 22 associate companies as on
March 31, 2017. During the year, the Board of Directors reviewed the affairs of material
subsidiaries. The Company has, in accordance with Section 129(3) of the Companies Act,
2013 prepared consolidated financial statements of the Company and all its subsidiaries,
which form part of the Integrated Report. Further, the report on the performance and
financial position of each of the subsidiary, associate and joint venture and salient
features of the financial statements in the prescribed Form AOC-1 is annexed to this
report (Annexure 6).
In accordance with Section 136 of the Companies Act, 2013, the audited financial
statements, including the consolidated financial statements and related information of the
Company and financial statements of each of the subsidiary will be available on our
website www.tatasteel.com. These documents will also be available for inspection during
business hours at the Registered Office of the Company.
The names of companies that have become or ceased to be subsidiaries, joint ventures
and associates are disclosed in the annexure to this report (Annexure 7).
In terms of the provisions of the Companies Act, 2013 (Act'), statutory
auditors need to be rotated on completion of two consecutive terms of five years each. For
those of the companies that have firms audit their accounts for more than ten years as of
April 1, 2014, the Act provided such companies a transition period of three years to
comply with the provisions of the Act. The current statutory auditors, M/s Deloitte
Haskins & Sells LLP (DHS LLP') completed two consecutive terms as of
April 1, 2014 and hence the Company availed the benefit of the transition period which
came to an end on March 31, 2017. Accordingly, the Company would need to appoint a new
audit firm to audit its books of account for the year ending March 31, 2018 and onwards.
The Management under the guidance of the Audit Committee initiated the process of
selection of auditors and had detailed interactions with certain eligible audit firms and
assessed them against a defined eligibility and evaluation criteria. The assessment was
undertaken by a Steering Committee constituted for this purpose.
The Audit Committee of the Board considered the findings of the Steering Committee and
has decided to appoint Price Waterhouse & Co Chartered Accountants LLP (PW')
as the statutory auditors of the Company for a period of five years commencing from the
conclusion of the ensuing 110th Annual General Meeting scheduled to be held on August 8,
2017 through the conclusion of 115th Annual General Meeting of the Company to be held in
the year 2022. The Board, at its meeting held on May 16, 2017, considered the
recommendations/decision of the Audit Committee with respect to the appointment of PW as
the statutory auditor. Based on due consideration, the Board recommends for your approval
the appointment of PW as the statutory auditor of the Company. The Audit Committee and the
Board of Directors considered the following factors in recommending the appointment of PW
as the statutory auditor of the Company: Experience of the firm in handling audits of
large global metal and mining corporations; Competence of the leadership and the proposed
audit team of the firm in auditing the financial statements of the Company; Ability of the
firm to seamlessly scale and understand the Company's operations, systems and processes;
Geographical presence and ability of the firm in servicing the Company and its
subsidiaries at multiple locations.
The Board seeks your support in approving the appointment of PW as the new statutory
auditor of the Company.
DHS LLP, Chartered Accountants, are the auditors of the Company and will hold office
until the conclusion of the ensuing AGM. On your behalf and on our own behalf we place on
record our sincere appreciation for the services rendered by DHS LLP during its long
association with the Company.
As per Section 148 of the Companies Act, 2013 (Act'), the Company is
required to have the audit of its cost records conducted by a Cost Accountant in practice.
In this connection, the Board of Directors of the Company has on the recommendation of the
Audit Committee, approved the appointment of M/s Shome & Banerjee as the cost auditors
of the Company for the year ending March 31, 2018. In accordance with the provisions of
Section 148(3) of the Act read with Rule 14 of the Companies (Audit and Auditors) Rules,
2014, the remuneration payable to the Cost Auditors as recommended by the Audit Committee
and approved by the Board has to be rati_ed by the members of the Company. Accordingly,
appropriate resolution forms part of the Notice convening the AGM. The Board seeks your
support in approving the proposed remuneration of `18 lakh plus out-of-pocket expenses
payable to the Cost Auditors for the Financial Year ending March 31, 2018. M/s Shome &
Banerjee have vast experience in the field of cost audit and have conducted the audit of
the cost records of the Company for the past several years under the provisions of the
erstwhile Companies Act, 1956.
The due date for _ling the Cost Audit Report of the Company for the Financial Year
ended March 31, 2016 was September 30, 2016 and the same was _led in XBRL mode by the Cost
Auditor on September 2, 2016.
Section 204 of the Companies Act, 2013 inter-alia requires every listed company
to annex with its Board's report, a Secretarial Audit Report given by a Company Secretary
in practice, in the prescribed form.
The Board appointed Parikh & Associates, practicing Company Secretaries as
Secretarial Auditor to conduct Secretarial Audit of the Company for the Financial Year
2016-17 and their report is annexed to this report (Annexure 8). There are no
qualifications/ observations/reservations/adverse remarks in the said report. The Board
has also appointed Parikh & Associates as Secretarial Auditor to conduct Secretarial
Audit of the Company for Financial Year 2017-18.
21. Extract of the Annual Return
The details forming part of the extract of the Annual Return in Form MGT 9 as per
provisions of the Companies Act, 2013 and Rules thereto are annexed to this report (Annexure
22. Significant and Material orders passed by the Regulators or Courts
There have been no significant and material orders passed by the regulators or courts
or tribunals impacting the going concern status and the Company's operations. However,
Members' attention is drawn to the statement on contingent liabilities, commitments in the
notes forming part of the Financial Statements.
23. Particulars of Loans, Guarantees or Investments
Particulars of loans, guarantees given and investments made during the year in
accordance with Section 186 of the Companies Act, 2013 is annexed to this report (Annexure
24. Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo
Details of the energy conservation, technology absorption and foreign exchange earnings
and outgo are annexed to this report (Annexure 11).
During the year, the Company has not accepted any public deposits under the Companies
We thank our customers, vendors, dealers, investors, business associates and bankers
for their continued support during the year. We place on record our appreciation of the
contribution made by employees at all levels. The Company's resilience to meet challenges
was made possible by their hard work, solidarity, co-operation and support.
We thank the Government of India, the State Governments where we have operations and
other government agencies for their support and look forward to their continued support in
On behalf of the Board of Directors
|May 16, 2017