Capital Structure Analysis and Financial Strategy

Jun 21st, 2015
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Tata Steel Ltd. has long and significant history of more than 100 years in the Indian business context. However, with littlesignificant development by the company in recent history.

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Group - 3, Section ACase Synopsis Professor Kunal Corporate Finance 23rd February 2014Capital Structure Analysis and Financial Strategy: Tata Steel LtdTata Steel Ltd. has long and significant history of more than 100 years in the Indian business context. However, with little significant development by the company in recent history, it was a tough task for the CFO, Kaushik Chatterjee, to decide on the expansion plan and investment strategy of Tata Steel Ltd. According to the CFO, surviving amidst volatility was the highest priority. The steel market is volatile for two basic reasons: raw material price and volatile buying behavior of the consumer. For instance, Automobile consumption patterns are unstable and they care about the exposures they take, he says. Volatility in raw material prices makes it very difficult for steel industry to keep up with those trends where reorder of raw material has lead time of 45 days to reach the plant and another 35 days in steel making process to produce steel. So, by the time steel comes out of the production unit, prices and market situation are completely different. Moreover, uncertainty in the global market leaves little cushion but to invest in new raw material sources and choose product mix which are less sensitive to price increase by managing fixed costs through in-sourcing and outsourcing, by consolidating sites and by optimizing operations at each site. More significantly, there are no overnight solutions to what

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