tata steel ltd share price Management discussions


I. Overview

The objective of this report is to convey the Managements perspective on the external environment and steel industry, as well as strategy, operating and financial performance, material developments in human resources and industrial relations, risks and opportunities and internal control systems and their adequacy in the Company during the FY 2021-22. This should be read in conjunction with the Companys financial statements, the schedules and notes thereto and other information included elsewhere in the Integrated Report. The Companys financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) complying with the requirements of the Companies Act, 2013, as amended and regulations issued by the Securities and Exchange Board of India (SEBI) from time to time.

II. External Environment

1. Global Economy

The global economy enters 2022 in a weaker position than previously expected. As the new Omicron COVID-19 variant spreads, countries have reimposed mobility restrictions. Rising energy prices and supply disruptions have resulted in higher and more broad-based inflation than anticipated, notably in the United States and many emerging market and developing economies. Further, the ongoing retrenchment of Chinas real estate sector and slower-than-expected recovery of private consumption and the ongoing tension between Russia and Ukraine have limited the growth prospects.

Outlook

Global growth is projected to slow-down from an estimated 6.1% in 2021 to 3.6% in 2022—0.8 percentage-point lower than what was envisioned in the last World Economic Outlook (WEO) of January 2022, largely reflecting forecast markdowns in USA and China. In USA, a revised assumption of removing the Build Back Better fiscal policy package from the baseline, earlier withdrawal of monetary accommodation, and continued supply shortages have induced a downgrade in the outlook by 1.2 percentage-points. In China, pandemic-induced disruptions related to the zero-tolerance COVID-19 policy and protracted financial stress among property developers have induced a 0.8 percentage-point downgrade. Global growth is expected to slow down to 3.6% in 2023.

Elevated inflation is expected to persist longer, with ongoing supply chain disruptions and high energy prices continuing in 2022. Risks to the global baseline are tilted to the downside which is primarily brought by the new COVID-19 variant which may prolong the pandemic and induce renewed economic disruptions. Moreover, supply chain disruptions, energy price volatility, and localized wage pressures have enhanced the uncertainty around inflation and policy paths. Other global risks may crystallize with the surging geopolitical tensions, and the ongoing adverse climate conditions leading to the probability for natural disasters.

With the pandemic continuing to maintain its grip, the emphasis on an effective global health strategy is more salient than ever. Worldwide access to vaccines, tests, and treatments have become essential to mitigate the risks posed by new variants of COVID-19. Monetary policy in many countries will need to curb inflationary pressures, while fiscal policy will need to prioritize health and social spending.

2. Indian Economy

Amidst the challenges brought by the COVID-19 pandemic leading to disruptions in supply chain and surging inflation rate, the Indian Government introduced various policies to cushion the impact on the domestic economy and in specific vulnerable sections of society and the business sector. Through its policies, the Government significantly increased capital expenditure on infrastructure projects to build back medium-term demand and aggressively implemented supply-side measures to prepare the economy for a sustained long-term expansion. With the vaccination programme having covered the majority of the population, recovering economic momentum and the likely long-term benefits of supply-side reforms in the pipeline, the Indian economy is in a good position to witness GDP growth of around 8.0%-8.5% in 2022-23.

III. Steel Industry

1. Global Steel Industry

The global steel industry has partially recovered with increase in global steel production by 3.7% during 2021, compared to 2020. This is primarily due to economies opening up after wide scale vaccinations, gradual commencement of economic activity, and significant change in retail consumer behaviour mainly in automotive and construction sectors. Further, increase in raw material prices mainly concerning coking coal, iron ore and oil & fuel have pushed the market prices of steel. Global crude steel production reached at 1,951 MnT in 2021, which was higher by 70 MnT than 2020. While China continued to be the largest global crude steel producer, there were moderate growth in steel production in countries such as India, Japan, USA, Germany and Brazil, amongst others, signifying normalcy in operations during the pandemic.

The details of top 10 steel producing nations are as follows:

(mn tonnes)

Rank Country 2022 2021 Change (%)
1 China 1,033 1,065 (3.0)
2 India 118 100 17.7
3 Japan 96 83 15.7
4 Russia 76 72 6.1
5 United States 86 73 18.3
6 South Korea 71 67 5.2
7 Turkey 40 36 12.8
8 Germany 40 36 12.3
9 Brazil 36 31 16.1
10 Iran 29 29 (1.7)

Source: World Steel Association (WSA)

2. Demand Outlook

The Short-Range Outlook (SRO) by worldsteel had forecasted that steel demand will grow by 4.5% in 2021 and reach 1,855.4 MnT. It is expected that in 2022, the steel demand will see a further increase of 2.2% to 1,896.4 MnT. The current forecast assumes that, with the progress of vaccinations across the world, the spread of variants of the COVID -19 virus will be less damaging and disruptive than seen in previous waves. Strong manufacturing activity bolstered by pent-up demand will remain as a significant contributor. The developed economies have outperformed the expectations by a larger margin than the developing economies, reflecting the positive benefit of higher vaccination rates and government support measures. In the emerging economies, especially in Asia, the recovery momentum was interrupted by the resurgence of pandemic.

While the manufacturing sectors recovery remained more resilient to the new waves of infection than expected, supply- side constraints led to a levelling off the recovery in the second half of the year thereby preventing a stronger recovery in 2021. However, with high backlog orders combined with a rebuilding of inventories and further progress in vaccinations in developing countries, we expect steel demand will continue to recover in 2022. Persistent rising inflation, continued slow vaccination progress in developing countries and further growth deceleration in China continues to pose threat to this forecast.

3. Steel Consuming Sectors

The construction sector has remained more resilient than the manufacturing sector to the pandemic shock. However, in many developing economies, construction activity was severely disrupted by a total stoppage of projects. However, in 2021, backed with domestic policies, the global construction sector remained resilient to the impact of pandemic. The sector saw robust recovery backed by low interest rates and domestic governments focusing on infrastructure projects. However, the recovery plans were affected by two conflicting forces. While few governments, specially in developing nations, pumped in funds in infrastructure sector making it a recovery tool aligned with green initiatives, on the other side, governments were hit with poor fiscal standing due to the pandemic, thereby affecting the ability towards financing infrastructure projects.

The residential sector has benefited from accumulated savings during the lockdown and the spread of working from home, which has resulted in rising demand for home space. However, the non-residential sector will see a sluggish recovery due to reduced demand for office space.

The automotive sector, which saw the sharpest decline among the steel using sectors during the first phase of pandemic saw a strong recovery subsequently. Although supply chain disruption is still evident in some markets, the recovery is driven by pent-up demand and increased household savings. The disruption in the supply chain is significantly undermining the global automotive industrys recovery. With pent-up demand dissipating, the growth in auto production in 2022 will decelerate, though high order backlogs will provide some support.

4. World Steel Price Trends

The Russia-Ukraine conflict has caused panic in the market about supply shortage with the result that prices have moved north radically, be it iron ore or coking coal. Prices of steel have also responded to the crisis but its northward movement so far has been limited. Increasing risk of procurement, constraints of financial approval, non-accessibility due to port blockage, growing uncertainty about availability, rising safety and security concerns are among the major factors that have driven sentiments in the commodity markets around the world. To what extent, steel prices would be impacted hinges significantly on the extent of aggravation of the Russia-Ukraine crisis and its longevity.

5. Global Raw Material Market (Iron Ore and metallurgical coal)

The raw materials market in the FY 2021-22 was markedly volatile driven by policy changes and a shift in global trade flows primarily in the coal markets.

i) Demand & Supply

Total global crude steel production for 2021 stood at 1.033Bt, or 3% lower on the year. However, in second half of 2021, production was up by 11.6% compared to the same period in 2020. Chinese steel production mainly led this increase due to a continually recovering economy post COVID -19. However, in the later half of 2021, Chinese steel production declined due to efforts on decarbonisation.

Chinas iron ore imports ended 3.9% weaker on the year to 1.12Bt, largely due to the lower overall steel production. Additional factors were also that major miners faced several port and mining disruptions, like Rio Tintos five-week Dampier port maintenance and Vales mine stoppages at Timbopeba and Alegria in second half of 2021.

Global trade flows in coking coal saw major shifts from a year prior, post Chinas informal ban on Australian coking coal till October 2020. Chinas coking coal imports were down ~25% on the year at 54.7Mt, with fresh Australian imports effectively at zero compared to 35Mt the year prior.

The result led to a surge in demand for Atlantic coals, with Chinese mills willing to pay high premiums for seaborne PLV. The rise in CFR China sentiment had supportive impacts on Australian FOB prices as Ex-China buyers were replacing lost Atlantic tonnages with Australian material. Australian coking coal exports in 2021 were at the same time 2.5% lower on the year at 166.1Mt.

China had also embarked on an aggressive coal production regime towards the end of 2021 due to peaking import prices. This saw production volumes on a steady uptrend from August 2021, eventually hitting record highs of 384Mt in December 2021. The government has held a similar focus on improving domestic supply in 2022, with production hitting a new record high of 395Mt in March 2022.

Australian iron ore exploration spending surged 41% to $557.5mn in 2021, as cost of exploration got elevated due to higher fuel costs and a shortage of skilled labour. Record high iron ore prices in 2021 had also encouraged sellers to look at growth options, boosting spending on iron ore exploration.

Meanwhile, spending on Australian coal plunged to 3-year- low at $225.4mn in 2021, down 22.7% on year, as financing on coal projects thinned out with major banks and coal importing countries such as China, Japan and South Korea adopting carbon neutrality goals.

ii. Prices

Seaborne Iron ore prices hit historically high levels in 2021. 62% Fe CFR China prices ranged between $87.20/t and $233.1/t. Average iron ore prices stood at ~$160.1/t for the year, an increase from ~$109/t for 2020.

Record high iron ore prices were noted in May 2021 as crude steel production was on an uptrend and also hitting its highest monthly levels of 99.5MnT in the same month. Prices in the later half of 2021 however declined sharply as the government began to enforce strict production curbs to cap 2021 output at 2020 levels.

Iron ore prices started to recover in Q1 FY 2022, as Chinese steel production recovered q-o-q due to the refreshing of a new steel quota. On the supply end, Brazil faced extreme wet weather in the south eastern regions, which caused shipments to fall 13.5% y-o-y.

Into 2022, Iron ore prices stand near yearly highs as market participants hold optimism on downstream recovery, considering government focus on sustaining economic growth. Upside potential however has been curbed by several factors viz., i) Re-emergence of COVID variants in China, ii) Sluggish real estate and auto sector, iii) government intention to further reduce 2022 crude steel production y-o-y.

Seaborne Coking coal prices were largely firm for 2021. PHCC FOB Australian prices ranged between $102/t and $408.5/t in 2021. Average coking coal prices stood at $313.4/t for the year, up from $117.1/t the year prior.

FOB Australian prices were largely driven by an unprecedented rally in Chinas domestic coal prices, as the nation struggled with tight local and seaborne supply. This saw CFR China PLV prices skyrocketing 203% from start of 2021 to peak at $615/t mid-October 2021. Prices however started to tumble 45% till the end-December 2021 to $337.5/t CFR China as Chinas NDRC stepped into intervene and stabilize coal prices.

In second half of 2021, persistent tight availability of spot cargoes from major miners led Ex-China buyers to contend for material. BHP had several maintenances during July-December 2021 for its PHCC mines like Grosvenor and Peak Downs, which caused overall production to be 8.8% lower y-o-y.

Meanwhile, global steel production and demand for raw materials recovered swiftly in 2021, which created a disequilibrium between supply and demand dynamics.

In 2022, Coking coal prices have seen huge volatility over developments surrounding EU sanctions over Russia. Prices however are likely to cool from the record highs of ~$670/t seen in the January-March quarter 2022, with Australian supply expected to improve in coming quarters. Market participants are also becoming less anxious of supply tightness, with Russian coal expected to be rediverted to markets like China and India.

Initiatives by Tata Steel

The Company took several key initiatives in its raw material procurement.

• Tata Steels strategic engagement and relationship management with Raw Material suppliers has led to efficient inventory control thereby managing/avoiding any adverse effect due to major global events such as Indonesias ban on coal exports.

• Tata Steel invested in developing a predictive analytics tool for forecasting coking coal prices incorporating 13,000+ data inputs. This has been integrated with the Companys customised e-auction tool to mainly execute metallurgical coal spot trades and better adjust Laycan timing of term cargoes.

• As a result of Chinas ban on Australian coal, stranded Australian cargoes were available at attractive prices. This opportunity was utilised to procure ex-China cargoes.

• The Company continued to reduce its working capital requirement on account of raw materials. This was through implementation of Vendor Managed Inventory at Indian ports for coal and supplier credit enhancement.

• Group synergies through centralized procurement, technical optimization and knowledge sharing continued to result in substantial savings and efficiency improvement.

• Discussions have been initiated with leading coal suppliers on sustainability which is expected to introduce various technologies in reducing carbon footprint.

IV. Tata Steel Group Operations

Major Highlights

During the year under review, the consolidated crude steel production for Tata Steel Group (TSG) was 31.03 MnT as against 28.54 MnT of FY 2020-21, an increase of 9% primarily due to better steel demand. The production increased at Tata Steel (Standalone) to 18.38 MnT which was higher by 13% (FY 2020-21: 16.28 MnT), Tata Steel Europe produced 10.11 MnT, higher by 6% (FY 2020-21: 9.56 MnT), Tata Steel Long Products produced 0.68 MnT (FY 2020-21: 0.65 MnT), partly offset by lower production at South-East Asia by 10% at 1.86 MnT (FY 2020-21: 2.06 MnT) due to disposal of Singapore operations of NatSteel Holdings Pte. Ltd. (NSH) during the year. The consolidated steel deliveries of TSG was at 29.52 MnT in FY 2021-22 as against 28.50 MnT in FY 2020-21, an increase of 4% primarily at Tata Steel (Standalone) and TSE due to increase in steel demand.

The Turnover of TSG was higher over FY 2020-21 by Rs.87,482 crore (56%) on account of higher steel realizations across geographies attributable to increase in demand, along with higher steel deliveries by 1.01 MnT.

The EBITDA was higher over FY 2020-21 by Rs.32,938 crore (107%) in line with higher revenues which was offset by increase in input cost mainly in coking coal and iron ore along with adverse foreign exchange rate movement at other foreign entities.

TSG reported a consolidated Profit after Tax of Rs.41,749 crore which was significantly higher (>5x) over FY 2020-21 in line with significant increase in EBITDA, along with lower net finance charges by Rs.2,082 crore which is primarily due to pre-payments of loans and lower exceptional charges of Rs.134 crore in FY 2021-22 against a charge of Rs.1,043 crore in FY 2020-21, partly offset by higher tax charge by Rs.2,824 crore mainly at Tata Steel (Standalone) (net of deferred tax credit at TSE).

1. Tata Steel Limited (Standalone)

The turnover and profit/(loss) figures of Tata Steel Limited are given below:

(Rs. crore)

FY 22 FY 21
Turnover 129,021 84,133
EBITDA 51,456 27,340
Profit before tax (PBT), before exceptional 44,326 17,869
Profit before tax (PBT) 44,091 18,610
Profit after tax (PAT), before exceptional 33,247 16,337
Profit after tax (PAT) 33,011 17,078

a) Operations

(mn tonnes)

FY 22 FY 21 Change (%)
Hot Metal 18.90 17.14 10
Crude Steel 18.38 16.28 13
Saleable Steel 17.91 15.96 12
Sales 17.62 16.66 6

The saleable steel production and sales trend over the years is as follows:

Production and Sales of Steel Division (kt)

*Note: Production and sales of FY21 and FY22 includes TSM post-merger

The combined saleable steel production of FY 2021-22 stood at 17.91 MnT which was higher than that of FY 2020-21 by 12% and the combined steel sales of FY 2021-22 stood at 17.62 MnT, higher by ~6% over FY 2020-21 (16.66 MnT).

i) Tata Steel Jamshedpur

Tata Steel Jamshedpur (TSJ) produced crude steel of 10.25 MnT in FY 2021-22 as against 9.34 MnT in FY 2020-21 which was higher by ~ 10%. The hot metal production of FY 2021-22 stood at 10.83 MnT as against 9.87 MnT in FY 2020-21 higher by ~10%. The Blast Furnaces operated at a fuel rate of 535 kg/ thm in FY 2021-22 as against 538 kg/thm in FY 2020-21 which was better by 3 kg/thm. In steel making, scrap consumption increased to 83kg/tcs in FY 2021-22 from 78 kg/tcs in FY 2020-21 with an objective of achieving lower CO2 emission.

During FY 2021-22, there have been few operational improvements such as increase in agglomerate consumption, lower consumption of ferro alloys, lime, refractories and specific energy. The Company has continuous operational improvement programs through Shikhar 25, a focused EBITDA improvement program which works across departments of Tata Steel to improve operational efficiency, lower costs, optimize product mix, reduce and recycle waste and energy efficiency.

ii) Tata Steel Kalinganagar

Phase-1 (3 MTPA) of Tata Steel Kalinganagar (TSK) had started commercial production in June 2016 and attained the production levels at its rated capacity in less than two years. During the previous year, in the midst of the second wave of the pandemic, TSK followed the existing controls, discipline of the workforce, and the learnings from the first wave helped TSK deal with the pandemic without disrupting operations. TSK aided the community by helping with the supply of liquid oxygen and the augmentation of TS Medica Hospitals. A great deal of agility was demonstrated while making the COVID care home for employees inside the plant and the same was made functional in less than a month.

By having all the COVID protocols in place and maintaining raw material stocks through robust supply chain management, TSK operated without any major hurdles. FY 2021-22 had been a great year in terms of production and operating KPIs. Almost all the operating units achieved their best ever annual production figures. The production volumes reached by the various plants (FY 2020-21 numbers in bracket) are - Coke Plant - 1.55 (1.46)MnT of Gross Coke, Blast Furnace - 3.47 (3.36) MnT hot metal, Steel Melting Shop - 3.24 (2.85) MnT crude steel, and Hot Strip Mill - 3.27 (2.81) MnT of Hot Rolled Coils. After the admittance into the Global Lighthouse Network in FY 2019-20, TSK continued its digital journey in all areas with a special focus on the capability development of employees in digital. The Digital Asset Monitoring System (DAMS) at TSK was well appreciated during the Tata Business Excellence Model (TBEM) and Data and Analytics Target Operating Model (DATOM) assessments.

During the year under review, the product mix comprised of Medium and Low Carbon, Interstitial-free (IF), peritectic and micro-alloy grades, which served different market segments with a special focus on High Tensile for Auto, API for Oil and Gas Sector, Structural grades for Solar, Crash Barrier, Pre-Engineered Building, Lifting and Excavation Segment. Successful trials for casting and rolling of 0.6% Si Electrical steel were carried out, and 1.2% and 2.4% Si trials are planned in Q1 FY 2022-23. This grade will help Tata Steel foray into the fast-growing EV industry.

Robotics applications were implemented in wagon tippler to eliminate man and machine interface during the coupling of wagons. To enhance workplace safety, 5S and Visual Workplace Management was strongly driven across all the departments in TSK.

More than 2 lakh plantations were carried out in FY 2022. TSK achieved the best-ever figures in CO2 emission intensity (2.38 tCO2/tcs) and specific water consumption (3.35m3/tcs). The coming years focus is on executing the Zero Effluent Discharge projects.

TSK has embarked upon the second phase of expansion which will ramp-up the production capacity to 8 MTPA. Pellet Plant & Cold Rolling Mill (CRM) are expected to be commissioned in the second half FY 2022-23. The Pellet plant will support the agglomerate mix for the Blast Furnace, and CRM will cater to high-strength cold-rolled products to meet the requirements of the auto customer. Construction activity at BF-2, Coke ovens, and Caster - 2 has also caught momentum.

To ensure better socio-economic development of the people in the peripheral areas of its operations, TSK focussed on Health, Education, Infrastructure Development, Livelihoods, skill upgradation and Women Empowerment among others.

iii. Tata Steel Meramandali (TSM)

The Board of Directors of the Company, at its meeting held on April 25, 2019, approved a Composite Scheme of Amalgamation of Bamnipal Steel Limited and Tata Steel BSL Limited (formerly known as Bhushan Steel Limited) into and with the Company. The Mumbai Bench of the National Company Law Tribunal (NCLT), through its order dated October 29, 2021 has approved the scheme. Accordingly, the Company has accounted for the merger using the pooling of interest method retrospectively for all periods presented in the standalone financial statements as prescribed in Ind AS 103. The previous periods figures in the standalone financial statements have been accordingly restated from April 01, 2020.

On merger, the plants and supporting units of erstwhile Tata Steel BSL will now be known as Tata Steel Meramandali. TSM has produced hot metal during FY 2021-22 of 4.59 MnT as against 3.90 MnT during FY 2020-21, an increase by ~18% and production of saleable steel stood at 4.61 MnT in FY 2021-22 as against 3.92 MnT in FY 2020-21 thereby registering an increase in production by 18%. The sales for FY 2021-22 stood at 4.70 MnT as against 4.31 MnT in FY 2020-21, thereby registering an increase by ~9% over previous year.

b) Marketing and Sales

During the FY 2021-22, the Company recorded sales of 17.62 MnT, which is marginally higher over the previous year by 6%. Sales performance are summarised as below:

(mn tonnes)

FY 22 FY 21
Automotive & Special products 2.22 1.74
Branded Products, Retail & Solutions 5.28 4.77
Industrial Products & Projects 6.10 5.45
Domestic 13.60 11.96
Exports 2.61 3.53
Domestic + Exports 16.21 15.49
Transfers (Wires, Tubes, IBMD, Agrico) 1.41 1.17
Total Deliveries 17.62 16.66

Automotive and Special Products: While FY 2020-21 had ended with bullish Automotive production in Q4 across all segments, FY 2021-22 started off on a negative note with the impact of COVID second wave, delayed post- COVID demand recovery (especially in rural markets), and sustained shortage in semiconductor supplies. In first half of FY 2021-22, production across Personal Vehicle (PV) and Commercial Vehicle (CV) segments were 15%-25% lower than corresponding numbers in Q4 FY 2020-21. Demand recovered in the second half of FY 2021-22 backed by strong festive season retail sales, easing of semiconductor supply situation and pickup in industrial activities across construction, infrastructure projects and mining sectors. The sector ended the year with overall growths of 20% and 28% in PV and CV respectively (Y-o-Y).

Automotive sales constitute 16%-20% of Tata Steels annual domestic sales. It registered sales of 2.22 MnT in FY 2021-22, a Y-o-Y growth of 28% (including 115 k tonnes of PV outer panels and 190 k tonnes of high tensile steels). The segment continues to command market leadership with overall market share of 48.4% and high SOB in all new model launches, including entry into import intensive OEMs.

Tata Steel continues to be a differentiator through its offerings to Automotive customers amidst changing business realities. Also, multiple digital initiatives have been able to enhance value driven engagements with customers in these tough times.

Branded Products and Retail (BPR): BPR sales during FY 2021-22 was 5.28 MnT, a Y-o-Y growth of 11% (which is ~39% of domestic sales of FY 2021-22).

The B2C segment achieved sales volume of 1.9 MnT in FY 2021-22. Tata Tiscon became 1st rebar brand to introduce 550 SD (superior & differentiated product offering), enabling savings (upto 6%) for the Individual House Building consumer. The Pan India distribution network was further strengthened by expanding physical & virtual reach (appointment of 1000+ dealers, 600+ express counters, 1280+ new pin codes served via Aashiyana). This enabled achievement of best ever annual sales of 1.5 MnT in FY 2021-22 in Retail segment with a Y-o-Y growth of 15% over FY 2020-21. Tata Tiscon also became the 1st Green Pro certified rebar brand in India. Tata Kosh, the Retail GP brand has achieved best-ever sales of 211 k tonnes in FY 2021- 22 through brand building, consumer/fabricator engagement activities and channel augmentation. Social media presence for Tata Shaktee and Tata Kosh helped reach out to over 2 crore consumers digitally, enabled by the launch of Online Reputation Management, Lead Capturing, Audience Acquisition campaigns and Tata Shaktees first ever Facebook live event.

During FY 2021-22, B2ECA (Business to Emerging Corporate Accounts) business clocked a volume of 3.3 MnT and in the process serviced 9,000+ customers. Value Added Products contributed 24% of overall ECA Volumes. This was achieved through market development and access to key micro segments (Railways, Wagons, Transmission Line tower, PEB, Solar, Appliances).

Leveraging synergy benefits, Tata Astrum (HR brand) & Tata Steelium Super (CR Retail brand) was launched from TSM. In its first year, Tata Astrum from TSM achieved 80KT sales (1% increase in Market Share) and Tata Steelium Super achieved 16KT sales (2% market share) while setting up a new network of 500+dealers. The ECA Coated brands GalvaRoS, Galvanova & Colornova (launched from TSM in FY 2020-21) achieved a Y-o-Y growth of 105% and a turnover of ~Rs.1,300 crore.

Industrial Products, Projects and Exports (IPPE): IPPE is made up of four segments - commercial, engineering, downstream and exports. IPPE sales during FY 2021-22 was 8.71 MnT, a Y-o-Y degrowth of 3% only. With revival of domestic demand, exports reduced contributing to the degrowth.

Engineering segment: Tata Steel continued its focus on Engineering segments and Value-Added Products (VAP) through an enriched product portfolio. Engineering Segment also achieved best ever sales with a growth of 29% Y-o-Y driven by 2X supplies of high-end grades API X70 in Oil & Gas segment. Tata Steel increased its market share in Lifting & Excavation and Pre-Engineering Building segments with a growth of 28% and 25% Y-o-Y respectively and increased its presence in niche segments comprising of solar, transmission towers, crash barriers and water pipeline with a combined growth of 36% Y-o-Y. Overall, the segment is estimated to have contributed towards construction of 2,300 kms of O&G pipeline, ~300Mn sq ft of PEB structures and ~22,000 L&E equipment in FY 2021-22.

Downstream: Downstream business contributed

~700 k tonnes sales in FY 2021-22, a growth of 5% over FY 2020-21. In our effort to position ourselves as a leading supplier and serving to Indian Appliance, Solar, Packaging, and General Engineering industries, we focus on serviceability and customization of products for all our customers. In FY 2021-22, supplies to building and construction segments was 135 k tonnes against previous year supplies of 113 k tonnes, on a similar path high value medium and high carbon supplies increased to 22 k tonnes against previous year sales of 20 k tonnes. In a journey towards supporting green initiatives supplies to solar segment increased to 27 k tonnes in FY 2021-22 against earlier milestone of 13 k tonnes in FY 2020-21. Tiscon Readybuild, the Downstream solution provided by Tata Steel as Cut & Bend rebars, achieved highest ever volume of 148 k tonnes in FY 2021-22 and was used in key marquee projects like Delhi-Meerut RRTS, Bullet Train Package, PWD Covid hospitals & Light House project in Ranchi.

Exports: Steel exports contributed ~2.6 MnT sales in FY 2021-22. In our efforts to increase the geographical footprint, HRC exports were done to France, S. Korea & UK. In neighbouring markets, a y-o-y growth of 30% over FY 2020-21 was registered by enabling highest ever barge shipments to Bangladesh and highest ever HRC sales to Nepal. Steel exports ventured into new agile ways of transforming the order to cash cycle by executing and broad-basing blockchain based paper- less transactions in geographies viz. Bangladesh, Europe and Middle East covering three different shipment modes viz. Road, Breakbulk and Containers.

Services & Solutions: In FY 2021-22, Tata Pravesh Doors and Windows registered Gross Merchandise Value of Rs.250 crore. The installation figures have increased to 107K units in FY 2021-22, a Y-o-Y increase of 34%. In FY 2021-22, Nest-In also achieved an order book & execution of Rs.325 crore and Rs.200 crore respectively against a plan of Rs.180 crore and Rs.135 crore, with almost 2X growth over FY 2020-21.

Digital Initiatives: Tata Steel Aashiyana, an early engagement & e-commerce platform for Individual Home Builders (IHB) achieved a growth of 109% over FY 2020-21. Aashiyana has helped serve customers from 7466 pin codes, out of which 2966 pin codes had no physical dealership presence, thereby increasing reach of Tata Steel B2C brands. Tata Steel rolled out its channel and sales management application, Sampoorna, across its retail business verticals during the year under review.

Tata Steel has scaled up its lead management platform for distributors, DigEca, and now offers it to ECAs, allowing a direct Tata Steel driven touchpoint for ECAs to place enquiries, interact with distributors and track their orders. The platform has helped Tata Steel track and reduce sales loss from an average of 22% in FY 2020-21 to 9% in FY 2021-22. For ECA distributors, MagicBox, an online bidding platform, offered an average of 14KT of non-prime orders per month in FY 2021-22, helping Tata Steel improve value realization for co-products generated for its B2B customers. Tata Steel rolled-out its end to end supply chain visibility platform, Compass, to a larger set of customers across flat products, long products, Automotive, Tubes and Wires verticals.

c) Engineering & Projects

Engineering & Projects (E&P) continued to support Tata Steels growth and sustenance plan by ensuring project progress amidst COVID-19 pandemic. In line with Companys long-term vision to attain leadership position in India, capacity expansion project of Tata Steel Kalinganagar phase 2 (3 MTPA to 8 MTPA), some Raw Material locations, sustenance projects at Tata Steel Jamshedpur and other locations were continued. Quick adaptation to the new normal was done and commissioning of various projects were successfully completed with limited local and remote support from technology supplier. The Company continued to focus on attractive opportunities to deploy capital optimally to increase the future returns of the business. These projects will enhance the downstream capabilities, increase value added capacities and reduce costs. Besides these the compliance related projects on improving the Environment related parameters were pursued.

During FY 2021-22, the division has successfully completed the following projects:

• Expansion of Khonbond Iron Ore Mine project from 1 MTPA to 8 MTPA (Run of Mines) - The Crushing and Washing plant with auxiliary facilities was commissioned and commenced production in Q3 FY 2022

• Enhancement of Dispatch capacity in Noamundi Iron Ore Mine - Upgradation of 3000 TPH (tons per hour) Dispatch Circuit, 500 TPH Dispatch Circuit and Barrel Reclaimer

• Sustenance and Environment improvement related projects at Jamshedpur, Kalinganagar and Meramandali locations

The key projects currently under execution are:

• Capacity expansion at Tata Steel Kalinganagar (TSK) Phase 2 (3 MTPA to 8 MTPA) with a target of commissioning key facilities: Pellet Plant and part of Cold Rolling Mill in FY 2023

• Iron Ore Expansion up to 49 MTPA

• Rebuilding of Coke Oven Batteries (1 MTPA) and installation of Air Separation Unit (1800 TPD) at Jamshedpur

• Construction of Coke Dry Quenching#1 and other environment related projects at Meramandali

• Installation of Solar Power Plants

The Division has also undertaken Capability Building Initiatives.

Significant initiatives are mentioned below:

• Strengthening in-house Design and Engineering capability to promote standardization and adapting state of the art engineering tools.

• Leveraging digital technologies to commence trials and commission facilities

• Revisiting the processes through Program for Accelerated Capital Execution to ensure consistent project delivery across locations.

Tata Steel aspires to double its crude steel capacity to ~ 40MTPA. To achieve this, the company is preparing itself to be future ready by ensuring safety at all touch points, strengthening its supply & service base, building vendor partnership, focussing on standardization and strengthening its in-house capability for equipment manufacturing.

d) Sustainable Steel Business Initiatives

i) New Materials Business

The New Materials Business (NMB) was set up with the vision of making Tata Steel future ready by seeding and scaling up businesses in new materials of future and to counter cyclicality of the steel business. NMB has three material verticals - Composites, Graphene and Medical Materials & Devices.

 

Fibre Reinforced Polymer (FRP) Composites

Composites industry in India is dominated by institutional businesses and is largely dependent on infrastructure, industrial and railway sectors.

FY 2021-22 was challenging for the composites business not only due to the immediate disruptions and uncertainty caused by repeated waves of pandemic but also due to the steep increase in cost of raw materials including crude oil-based resins and glass fiber.

One of the key initiatives of the business was to convert to FRP many applications where steel is currently being used. Value proposition of this is the lower life cycle cost of FRP because of its higher corrosion resistance and lower maintenance cost. With this initiative, sales to the industrial sector grew by 5X over the previous year. Railways has been a promising customer for the division. The division has been leveraging group synergies for the railway business by offering integrated solutions jointly with other Tata Group companies. The composites division has registered a substantial growth in business revenues in FY 2021- 22 over previous year.

 

Graphene

During FY 2021-22, the graphene business had an overall 7X growth over the last year. Graphene business has significant number of applications under development as "Design in the pipe-line". However, it has successfully established Graphene enriched poly vinyl chloride and high-density polyethylene pipes in the market, branded as WONDRA. Industrial products from range of Elastomers & Polymers enriched with graphene are under market validation. Applications of graphene in the areas of energy, lifestyle and well-being are under evaluation.

 

Medical Material and Devices

During the year under review, the division consolidated its position in the import dominated Advanced Ceramics material market with a dedicated bio-ceramic production facility. Medical grade approval of the finished product was achieved during the year. This is in line with the vision to create affordable and global standard health technology solutions for India and the World and making India self-reliant in the medical technology space. The first sales were clocked in FY 2021-22 for thermal spray grade Hydroxyapatite powder. The division also has a pipeline of Medical Materials and Medical Devices under development and validation in collaboration with premiere research institutes and start-ups.

ii) Steel Recycling Business

The Steel Recycling Business (SRB) completed its first year of operations from its Rohtak Plant. It is a 0.5 MTPA state-of-the- art plant with mechanised equipment such as Shredder, Baler, Material Handler etc. for processing, handling & producing top quality scrap. The plant clocked ~112 k tonnes dispatch with a revenue of ~Rs.460 crore in FY 2021-22.

Going forward, the focus would be to ramp up the Rohtak Unit and expand the footprints of SRB through additional units in South & West India.

Both its products- Shredded and Baled ferrous scrap have received good traction & feedback from the market. The products have also been used internally in Tata Steel plants at Jamshedpur, Kalinganagar & Meramandali.

The scrap is procured through the digital FerroHaat App, a first of its kind in the world. Over 180 vendors have been registered in the app for supply of scrap.

Indian scrap market is poised to grow at a CAGR of ~7% to reach ~40 MTPA by 2027. Policies like Vehicle scrappage policy and Steel Scrap Recycling Policy are likely to give an impetus to this sector. Further scrap imports are likely to become more difficult owing to protectionist measures by Exporting countries. Accordingly, the role of SRB gains prominence in securitizing the supply chain of scrap which is one of the future raw material for steel production. Besides Sustainability benefits, the steel recycling route is also dovetailed with the long product growth strategy of Tata Steel. Plans are afoot to set up EAFs & Mini Mills for forward integration into long products. This would pave the way for growth of long products in a sustainable manner.

e) Tubes Division

The Companys Tubes Strategic Business Unit is a leading manufacturer of pipes and tubes in India having its manufacturing facility situated at Jamshedpur with an annual production capacity of around ~500 k tonnes. The three main lines of businesses are conveyance tubes (Tata Pipes), structural tubes (Tata Structura), precision tubes for auto and boiler segments.

Post-amalgamation the annual production capacity increased from 612 k tonnes to 1,034 k tonnes. The Khopoli unit has a Large Dia Tube plant, designed to serve the high-end Oil & Gas (O&G), water pipelines and infrastructure segments. These are value-added products and it is a strategic segment considering the growing demand of energy and expansion of oil and gas companies.

The industry witnessed a V-shape recovery post the removal of restrictions in Q4 FY 2022. However, in FY 2021-22, the second wave of COVID-19 posed a major setback especially to the domestic retail and automotive sector. Amidst these uncertainties, passenger vehicles recovered progressively but two-wheeler demand was hit significantly leading to third consecutive de-growth Y-o-Y. However, electric two wheelers have witnessed a significant growth post pandemic. Further, supply chain constraints led to reduced sales in passenger vehicle segment across the original equipment manufacturers. In the construction & infrastructure - government spending on infrastructure was the hallmark of this segment in FY 2021-22 - Airport and metro-rail projects were executed where hollow sections were used. Telecom towers segment had a slow growth within the country. The railways and refineries segments did not see the growth as anticipated.

The production and sales performance is as below: Production and Sales of Tubes Division (kt)

Note: Tubes represents Jamshedpur tubes division

During the FY 2021-22, the production and deliveries of Jamshedpur were better by 46 k tonnes and 48 k tonnes respectively over FY 2020-21. The tubes and pipes of TSM was reported under steel, which is being discontinued post-merger and now is being reported under tubes.

Key Business Highlights:

• Aashiyana Portal, the digital platform of the division achieved sales of ~30,000 Mt in FY 2021-22 (FY 2020-21: ~20,000 Mt) which was ~20% of Brands & Retail Sales.

• Successfully implemented Block Chain based Digital Test Certificates for Boiler Sales to Channel Partners (first time).

• Launched a new product TATA EZYFIT, a unique product of steel tubes used in Door/Window frame application.

• 25% increase in sales of API coated pipes (in Oil & Gas) ~ 80 k tonnes in FY 2021-22 (FY 2020-21: 64 k tonnes).

Recognition:

• Tata Pipes and Tata Structura have been coveted with the Super-brand 2022 Award.

• Tata Pipes Jeevan has been accredited by National Awards for Excellence in Branding & Marketing - Marketing campaign of the year (water management) for its "Boond Boond Pani Jeevan Ki Kahani".

f) Wires Division

The Companys Global Wires India (GWI) Business Unit is the largest manufacturer of steel wires in India. The manufacturing plants are located at Tarapur, Pithampur and Jamshedpur, and contribute to nearly 65% of its sales volume, with remaining 35% being catered by Wires Processing Centres. GWI caters to the requirements of the Indian Automobile, Construction and the rural markets with various products.

The production and sales performance is as below: Production and Sales of Wires Division (kt)

During the FY 2021-22, the division achieved a production of 437 k tonnes, higher by 87 k tonnes over FY 2020-21 and deliveries of 439 k tonnes higher by 84 k tonnes over FY 2020- 21 as the previous year was affected by lockdowns due to COVID-19 pandemic.

Key Business Highlights:

• Induction Hardened Tempered (IHT) Wire making capacity of 7 KTPA is added to GWI product portfolio in line with focus towards Atma Nirbhar Bharat by replacing imports in Two-Wheeler Segment.

• New product "Tata Wiron DuoCoat" was introduced for grape farming in Nasik in our endeavor to improve customer centricity and stay ahead of the competition.

• Commercially launched its new fencing product "Knotted Fence" in January 2022 for high strength and durability.

• Online sales through Aashiyana grew 30% YoY with more than 6 KT Sales during FY 2021-22

• Acid Recycling Plant (400MnT/month of WPL is being treated) and Effluent Recycling Plant (Operating at the rated output of 400 m3/day) set-up in Tarapur.

Recognition:

• Tata Wiron received the Campaign of the Year Award by CMO Asia for the film #RozaanaKiDhun that celebrates the unputdownable resilience of the small businesses in India.

• Tata Wiron was awarded for the case "Electricity generation from the unutilized steam pressure to reduce the carbon footprint" in the field of innovative sustainability practice at Supplier meet conducted by JK Tyres.

• Spring Steel Plant received "GOLD" award in National Award for Manufacturing Competitiveness assessment organized by International Research Institute of Manufacturing.

g) Industrial By-Products and Management Division

Industrial By-product Management Division (IBMD) manages the solid wastes or by-products generated across the steel value chain. It endeavours to create value from waste, operating on 3R (Reduce, Reuse, Recycle) principles of circular economy. During the year under review, the division handled around ~15 MnT of by-products. Through its dedicated marketing and sales initiatives, the division witnessed a 65% Y-o-Y increase in the revenue and ensured sustainable value creation for the company. Currently, the product portfolio of IBMD spans across 25+ categories with more than 250 SKUs. IBMD strives to remain an industry benchmark in managing by-products and believes in investing and deploying state-of-the-art technology to continuously innovate new products and solutions.

During FY 2021-22, IBMD focussed on implementation of One IBMD strategy through smooth integration of TSM unit. The division played a significant role in driving the initiatives for reduction in CO2 emission intensity by recycling higher quantity of steel scrap in steel melt shops. To facilitate the transition, IBMD sourced ~425 k tonnes of scrap from external markets in FY 2021-22, as compared to previous best of 78 KT in FY 2020-21. This was achieved through development of sources to procure ready-to-feed scrap, a digitally enabled agile supply chain and augmentation of infrastructure for handling of scrap.

IBMD continues its effort to de-commoditize the by-products generated in the steel value chain. There has been significant ramp-up of sales of Tata Aggreto and Tata Nirman - the branded steel slag products, through extensive usage in construction of national highways. This has helped in conserving natural aggregates and minimizing our environmental footprint. For safe and sustainable handling and storage of slags, a well- equipped site has been developed at Bhatkunda near the Jamshedpur plant. The processing and sales yard at Marine Drive, Jamshedpur has been augmented with new facilities for further value enhancement of by-products. Through horizontal deployment of best operational practices, steam-based steel slag weathering facility has been erected at TSK plant and is under commissioning stage.

Recognition:

• Won the "Excellence in 3R (Reduce, Reuse, Recycle)" Award by CII during International Conference on Waste to Worth 2021 for the second consecutive year under the manufacturing category for demonstrating innovative 3R initiatives in managing own wastes.

• Adjudged winner of "Indian Circular Economy Award 2021" under Large Enterprise Category during Circular Economy Symposium organized by FICCI, which recognizes companys practices to accelerate its business towards a circular model as most innovative and impactful.

h) Ferro Alloys and Minerals Division

The Sukinda Chromite mine and Gomardih Dolomite mine leases expired as per the mining regulations on March 31, 2020. The Sukinda Chromite Mines was put up for auction. Tata Steel Mining Limited (formerly TS Alloys Limited), a wholly-owned subsidiary of Tata Steel Limited had participated in mining auction in Odisha for Sukinda Chromite Mine and won the auction for the mine. The Gomardih Dolomite mine is yet to be auctioned.

The production and sales performance is as below: Production and Sales of FAMD (kt)

During the year under review, saleable production was lower by 271k tonnes and sales were lower by 321k tonnes primarily due to shift of chrome business under Tata Steel Mining Limited. The Mines and Minerals (Development and Regulation) Amendment Act, 2021 allowed captive lessee to sell up to 50% of total mineral produced in a year after meeting the requirement of captive plant. The Company has sold 17k tonnes low grade manganese ore during the financial year under review.

As a strategy to augment ferro alloys processing capacities, the Company acquired assets of Stork Ferro and Mineral Industries Private Limited (SFML) having a current production capacity of ~53 Ktpa located at Balasore, Odisha at a capex spend of Rs.155 crore + applicable taxes. In addition, TSML has acquired 90% stake in Rohit Ferro Tech Limited through the IBC process.

i) Bearings Division

Our Bearings Division is one of the Indias largest quality bearing manufacturers, having its manufacturing facility situated at Kharagpur, West Bengal with an annual production capacity of 40 million bearing numbers. The Company is foremost in the manufacturing of a wide variety of bearings and auto assembles and the product range includes Ball Bearings, Taper Roller Bearings, Hub Unit Bearings, Clutch Release Bearings, Double Row Angular Contact Bearings, Centre Bearings and Magneto Bearings. The division is the only bearings manufacturer in India to win the TPM Award (2004) from Japan Institute of Plant Maintenance, Tokyo.

During FY 2021-22, auto industry witnessed a marginal growth over FY 2020-21, while the tractor industry remained muted.

The production and sales performance is as below: Production and Sales of Bearings Division (mn nos)

During the year under review, the division produced ~30 million numbers and achieved deliveries of ~29 million numbers which were higher over FY 2020-21 by ~2.7 million numbers in production and by ~ 1 million numbers in deliveries respectively due to increase in demand.

Key Business Highlights:

• The division designed and developed Double lip rubber seal bearing required for specific models of scooter.

• Launched multipurpose grease NLGI Grade 3.

j) Business Improvement Initiatives i) Total Quality Management

The Total Quality Management (TQM) way of working has become a part of the DNA of Tata Steel (TSL) for the past several years. The integrated TQM framework is used as the guiding principle to drive TQM practices in the Company.

TQM group continues to raise the bar of Excellence at Tata Steel, enabling the organisations systems and processes to continuously improve and outperform past performance levels. This has helped Tata Steel in its quest to "Be the Benchmark".

While we continued to institutionalise TQM fundamentals at new locations, we also leveraged opportunities to customise the existing tools and to add new initiatives to enlarge our TQM repertoire and take them to the next level of maturity.

 

Recognitions and Felicitations: • Tata Steel is the second company in the group to have been recognised as Benchmark Leader with a score of 755 out of 1000 in an enterprise-wide Tata Business Excellence Model (TBEM) Assessment completed in NovemberRs 2021.

• Forerunner for data excellence based on TCS proprietary framework DATOM (Data and Analytics Target Operating Model) amongst 19 participating group companies. In February 2022, Tata Steel featured in the "Synergized" category by securing 3.8 out of 5

• Six innovative projects got recognised as Tata Steel (4 projects) and its group companies (1 each by Jamipol & Tata Steel Utilities and Infrastructure Services Limited) bagged awards in the categories of Sustainability, Piloted Technology and Implemented Innovation in November 2021 at Tata InnoVista Awards function. This was the fourth consecutive year of Tata Steel winning the highest (6 out of 15) number of awards in the function

• Recognized for being the top contributor and implementer of "Best Practices" at the Business Excellence Convention held on December 14, 2021, two of our senior leaders were also felicitated in the same convention for their contributions in DATOM assessment and Best Practice Sharing

• Recognized at ICQCC (International Convention on Quality Control Circles): Four SGA (Small Group Activity) and one MASS (Manthan Ab Shopfloor Se) teams secured the highest category "Par Excellence" award in 46th ICQCC held in November 2021. Tata Steel was also recognised for its consistent participation in the forum during the last decade

• Felicitated at ISQ (Indian Society for Quality) in December 2021, with "Harsha Award" for contributions in effective implementation of quality management principles, concepts, techniques and practices at Tata Steel

 

Strengthening TQM Fundamentals in New Areas:

• Total Productive Maintenance (TPM) activities were strengthened at TSK (Tata Steel Kalinganagar) and a Steering Committee was constituted for policy and direction setting

• Theory of Constraints (TOC) based project management approach has been deployed for the first time on pilot basis in growth projects at TSK Cold Rolling Mill (CRM) and Industrial Structures Business (ISB) for efficient project management

• Total 3,742 ASPIRE (Aspirational Initiatives to Retain Excellence) improvement projects covering various methodologies (TOC, Green Belt projects, Self-initiated projects) were completed.

 

Treading New Paths:

• Touching the lives of employees, societies and communities we serve through usage of advance analytics:

i) TQM, Safety and Medical Services teams entered collaboration with SUTRA [Susceptible, Undetected, Tested (positive) and Removed Approach] team to work on COVID-19 third wave prediction model, which helped Tata Steel to proactively ward-off peak medical response requirements during the third wave at all its operating locations

ii) Data analytics helped us understand the correlation between 5S observations logged and safety incidents. TQM and Safety departments jointly launched Rs 5S & Visual Workplace Management Assessments" under the aegis of Apex Safety Management System and Audit Sub-committee to reduce the number of incidents at shop-floor.

• Agility in TQM: In order to grow at an accelerated pace Tata Steel adopted an Agile Framework for project execution. The Agile Way of Working (AWOW) approach was introduced and is being institutionalised for the deployment of APEX long-term projects (LTP). Top 10 APEX LTP projects have been taken up with AWOW approach, supported by Agile coaches deployed by TQM.

ii) Shikhar 25 (operational improvement programs)

The Company, in its growth path, has used techniques of Total Quality Management (TQM) across the value chain to achieve consistent quality and efficient performance.

The Shikhar25 program, a multi-divisional, multi-location, cross functional program, is an EBITDA focused improvement program which aims on delivering superior product quality, optimizing product mix, improving operational efficiency, lowering carbon footprint, reducing waste generation, and maximizing energy efficiency through a chain of impact centers across all locations of the Company. It intends to drive break through improvement projects with focus on safety, environment, people standards and in collaboration with internal/external stakeholders to achieve best in class operational performance. The key themes for improvement during the year under review were Optimization of cost of mining, minimisation of purchased metallics, monetizing raw material capability, increase in yield & throughput of both upstream and downstream facilities, value-in-use for procured materials, power sourcing & optimization.

During the year under review, the Company achieved performance improvements of Rs.5,463 crore (including Rs.2,881 crore value protection initiative). With continued effect of pandemic, it was important to be agile enough to learn and evolve faster, to keep pace with the changing business needs. The impetus was on driving value by enabling global optima and resource synergy for the Tata Steel group resulting in Synergy benefit of Rs.579 crore. The program was extended with the launch of new IMPACT Centres at TSML, JCAPCPL, etc.

iii) Improvement Initiatives by Strategic Procurement - Raw Materials

The division has achieved substantial savings from the following improvement initiatives:

• In view of Chinas ban on Australian coal, stranded Australian cargoes were available at attractive prices, which was utilised to procure Ex-China cargoes that resulted in benefits of above or US$20Mn.

• Implementation of Vendor Managed Inventory at Indian ports for coal and supplier credit enhancement resulting in free up of non-fund based working capital lines above or US$200 Mn.

• Group synergies through centralized procurement, technical optimization and knowledge sharing continued to result in substantial savings and efficiency improvement. Tata Steel along with its group companies led to a combined synergy of blend improvements, new product development and coal commonality related initiatives which led to aggregate savings of around Rs.300 crore.

k) Safety Health & Sustainability

Safety: Tata Steel aspires to be the global steel industry benchmark for "Value Creation and Corporate Citizenship" with its employees and community at the core. This is derived from its people first ethos; hence, the safety and wellbeing of its employees are of utmost priority to Tata Steel. Tata Steel aspires to achieve Zero Harm by 2030 and become an industry leader in Safety and Health. The Companys safety policies are aligned to its aspirations as the policies provide clear direction, sound safety governance structure, robust management and reporting systems, training and communication mechanisms, along with well-defined performance measures and indicators to track its Safety & Health performance. Tata Steels value-based system drives its safety culture with risk-based thinking being reinforced in recent years across locations. The Companys integrated value chain, from mining, iron & steel making, to the delivery of products to customers, as well as large project requirements for growth and expansion, demand constant oversight on Safety & Health to achieve its goal.

Be it the deployment of process safety Centre of Excellence (COE) framework or developing capabilities through state of art Safety Leadership Development Centre or ensuring business continuity during emergency situations through Tactical Centre, Tata Steel, as an organization, is focused towards making safety a way of life. Digital solutions such as Connected Workforce, safety wearables reiterate the Companys commitment towards culturally future ready. Few strategic interventions introduced are simplification of safety standards and development of E-learning modules, reward & recognition policy, intelligent video analytics to improve road safety etc.

Addressing COVID-19: A culture of compliance to Safety guidelines and established Safety & Health systems enabled Tata Steel to rapidly roll out initiatives that achieved a balance between workforce safety and business continuity. The setting up of an empowered committee of the Senior Leadership Team (SLT) to tackle the COVID-19 pandemic facilitated agile decision- making and quick deployment of initiatives organization- wide. The design and deployment of Digital Covid Safety Tracks, creation of a Covid Impact Centre, formulation of Standard Operating Guidelines (SOG)s and implementation of an innovative POD concept ensured that Tata Steel could operate at business usual level. Tata Steel has been recognized by World Steel Association in Safety & Health Excellence Recognition program 2021 for Ensuring Workforce Safety & Business Continuity by mitigating COVID-19 Risk at Tata Steel India workplace.

Tata Steels enduring pursuit of excellence in Safety & Health has resulted in the steady improvement of its safety performance. It remains consistently better than that at the apex level of the global steel industry, as represented by the figures of Tata Steel vis-a-vis World Steel Association (WSA). The LTIFR performance has reached a plateau and the addition of newer facilities, reinforced focus of the Company towards enhancing its safety performance way forward. During the year under review, average number of fatalities per year have reduced and various hazards such as Confined Space, Fire, Drowning, Gas Exposure, Electrical Flash & Explosion have sustained Zero Fatalities for more than 6 years. Behavioral safety along with the operation of heavy vehicles, mobile equipment and moving machinery remain continuing challenges for the Company. Tata Steel strives to address these by promoting a risk-based thinking culture, leveraging digital technologies and pursuing strategic interventions.

Occupational Health & Safety: Tata Steel implemented a comprehensive Industrial Hygiene program which includes identification of occupational health hazards & risk analysis, assessment of actual exposure through hazard quantification and implementation of hazard control measures to maintain minimum exposure level and to reduce occupational health related risks. Tata Steel also conducted Ergonomics risk assessment and implemented Ergonomics control measures in Jamshedpur in order to achieve the best mutual adjustment of man and his work. Tata Steel has conducted regular COVID-19 health screening of employees, contract employees, truck drivers & food handlers to mitigate the effect of COVID-19 pandemic at workplace. To improve health & wellbeing of employees, we have taken several initiatives like periodic medical examination, regular follow-up of high-risk cases, theme-based health awareness campaign, Doctor online program, Outdoor physical fitness program, Yoga & pranayama program amongst others.

Through all these initiatives the Health Index improved from 12.83 in FY 2020-21 to 12.91 in FY 2021-22.

Sustainability: The Companys philosophy of steel production is deep rooted in the principles of resource efficiency, circular economy, minimizing ecological footprint, zero harm (health of safety of workforce) and care for community. The United Nations Sustainable Development Goals (UN SDGs) form an integral part of the Companys long-term strategy and during the year under review, the Company has undertaken an internal assessment for prioritizing the goals and link targets relevant to its business in terms of impact and opportunity to create greater impact. Aspirations of taking its carbon emissions to <1.8 CO2/tcs by 2030, mitigating dependence on fresh water by lowering specific freshwater consumption to <1.5 m3/tcs by 2030, enhancing value proposition on circular economy, no net loss on biodiversity and coverage of 100% critical supply chain partners for ESG risk assessment are significant targets which forms part of the business strategy of the Company. In Europe Tata Steel is committed to achieve net neutrality by 2050.

Tata Steel supports and complies with the domestic and international standards and regulations/laws including those related to labour and human rights, such as the Universal Declaration of Human Rights, the UN Principles on Business and Human Rights, and the International Labour Organization Convention. Tata Steel values human rights, not only for those working within its premises but for all those who are even indirectly related with the Company. Tata Steel practices social responsibility in all aspects of its business, and continuously endeavour to communicate with myriad stakeholders to achieve inclusive growth. Additionally, this year Tata Steel have notified the Business & Human Rights policy and institutionalised a governance structure parallel to management of business ethics to have more focus.

Tata Steel has introduced a policy and a framework for shared growth between suppliers, distributors and Company for supply chain management with ESG perspective through the deployment of Responsible Supply Chain Policy. In FY 2021-22, the Company have assessed nearly 50% of its critical vendor partners and the process is ongoing. All new incumbents are trained on the subject and have to sign the Business associate code of conduct before starting to partner with the organisation. Tata Steel aspire to integrate the sustainability score in its business decision making in the area of Supply chain.

To accelerate the efforts in becoming a leader in sustainability, Tata Steel strive to use Life Cycle Assessment (LCA) tool effectively to understand its products environmental impact as well as to use its outcome for product related environmental disclosures. LCA studies are based on World steel LCA methodology which are guided by ISO 14040 and ISO 14044. During the year under review, the Company has completed the LCA study for products manufactured at TSM, CRM Bara (Jamshedpur) and Tata Steel Long Products Limited, Gamharia covering a total of 8 different product categories. The Company has also carried out LCA study for our structural tubes and hollow section products under the brand Tata Structura manufactured at Tata Steel Tubes division along with its seven different production units. Tata Steel has also carried out a LCA study for one of its Fibre Reinforced Polymer (FRP) product to understand its life cycle environmental impact. In FY 2021-22, Tata Tiscon became Indias first GreenPro certified TMT rebar brand. In the coming years, Tata Steel aim to receive eco-labels (GreenPro and EPD) for its key products as well as maximum coverage of its products across sites under LCA to support its customers with product related sustainability information.

In order to serve the customer better, Tata Steel Europe has published Environmental Product Declarations (EPD) with entire product range of the European operations certified with BES 6001 sustainable sourcing standard. Environmental characteristics of products throughout their life cycle, for a large number of its products are declared for the use of all stakeholders, particularly customers. Tata Steel is increasingly working towards publishing EPD for many more products in its offerings. With its steel product analysis system, Tata Steel will respond proactively to the needs of its customers, who demand eco-friendly steel.

The Company has aligned its actions with the India National Biodiversity Targets set in 2014, Aichi Biodiversity Targets set in 2010 (Global level) and Sustainable Development Goals to integrate biodiversity into its business ecosystem. To augment Companys efforts in biodiversity conservation, Tata Steel has set up Biodiversity Management Plans (BMPs) for 13 locations till date. Tata Steel is supporting Task Force on Nature Related Disclosures (TNFD) in developing a risk management and disclosure framework to address the current need of the organizations to factor nature-related risks and opportunities into financial and business decisions.

Both Tata Steel Limited and Tata Steel Europe have been recognized as Sustainability Champions by World Steel Association for five consecutive years. Tata Steel is a member of the UN Global Compact (UNGC) and have been submitting Communication on Progress annually through its Integrated Report.

Climate Change: Tackling climate change is one of the biggest challenges the world faces today. Working on Climate change is a cornerstone in achieving a better sustainable future. Steel industries being one of the significant contributors to carbon emission, decarbonisation measures must be implemented within the industry to keep the planet sustainable.

The Company is committed to being aligned with Indias nationally determined contribution and the European Unions commitment on Climate Change. It also has taken note and working towards steps discussed in COP26 by Prime minister of India. Tata Steel is focused on its path for net neutrality in Tata Steel Europe by 2050 and committed to <1.8 tCO2/tcs for Tata Steel India by 2030. To achieve the target, Tata Steel is making a range of efforts across the organisation for GHG emission reduction activities that include increasing efficiency of operations, use of more recycling scraps, carbon capture, utilization, storage (CCUS), and hydrogen-based steelmaking.

The Company is signatory to the Task Force on Climate-related Financial Disclosures (TCFD) for climate change and has identified transition risks and opportunities to decarbonise operations over a period. Specific mitigation and contingency plans for each of the identified risks have been integrated within the Companys long-term strategy. To move closer towards lower carbon pathway, both in Europe & India, we are working towards installing Natural gas based DRI kiln and be future-ready in use of Hydrogen by replacing Natural gas. We are continuously working to integrate Hydrogen gas in ironmaking processes as a non-fossil fuel and reductant. We are discussing on the possible ways of Hydrogen generation and injection into Blast Furnace thereby becoming one of the worlds first in this field. During the year under review, Tata Steel has successfully tried injection of Coal Bed Methane (type of natural gas) in one of the Blast Furnaces and able to reduce carbon intensity by replacing metallurgical coke.

Tata Steel Indias R&D in collaboration with startups, academia and other organisations of repute are working to develop various projects focusing on decarbonization. During the year under review, Tata Steel, commissioned the Carbon Capture Use (CCU) pilot plant at Jamshedpur works, the countrys first steel company to adopt carbon capture technology that extracts CO2 directly from the BF gas. Once separated, the same could be transported to different places for use in industry. Tata Steel will move forward to emerge as a business leader across the hydrogen and Carbon capture and utilization (CCU) value chain.

In its effort towards decarbonisation, Tata Steel is also working towards minimising scope 2 & 3 emissions. With the advent of electrification of vehicles and renewable energy system, we are working to increase our renewable energy share along with inclusion of high range electric mobility system. As part of its sustainability initiative, Tata Steel has tied up with an Indian startup in deploying EVs in transporting steel products. In FY22, Tata Steel became the first steel producer in India in transporting steel products in EV with a minimum carrying capacity 35 tonnes of steel.

Tata Steel is collaborating with wide range of organisations and developing the ecosystem to mitigate climate change transition risk. The Company is also working on the assessment of the physical risks at its sites of operation and developing adaption strategies for the same. The Company is also working on the opportunities arising out of climate change with specific projects to leverage.

l) Corporate Social Responsibility

The utmost priority for Tata Steel at the very start of the global pandemic, was to ensure accurate and timely communication with all its stakeholders and collaborating with our extended stakeholder network, in order to ensure that both the internal and external communication channels were regularly updated, in the interest of safety and business continuity.

To provide an overview of the measures within its plant gates at Tata Steel, an empowered committee of the senior leadership team was immediately set up to facilitate agile decision-making and quick deployment of preventive initiatives, across the organisation. Immediately thereafter, the Company introduced manpower modulisation via PODs, to protect the health and safety of its employees.

Tata Steel also designed and deployed a tableau-based manpower monitoring system, called Digital COVID Safety Tracks, created a COVID Impact Centre and formulated Standard Operating Guidelines, that were widely communicated across internal and external stakeholders. These broad efforts with their multiple levels of initiatives helped the Company immensely to create a capacity to sustain operations, at a business-as-usual level.

Tata Steels past investments in digital technology for a Connected Workforce, Connected Assets and Connected Operations platforms, enabled it to seamlessly respond to COVID-19 impacts.

Some of the interventions that were introduced during the period are:

Team Support: Speak Up, a Coronavirus Guidelines Violation Reporting Helpline was established and used extensively to report violations of quarantine rules.

Tata Steel set up a COVID-19 Medical Task Force, to augment and constantly review the preparedness of its hospitals and related infrastructure that were set up to cater to the needs of its employees, as well as the communities. The five key initiatives launched for the communities, in the aftermath of the lockdown, are as follows:

#DigitalBridges Gram Panchayats & 2.0: By creating an empathetic network to solve pressing challenges of stranded migrant workers across India.

#ThoughtForFood and #HopeSprings: Mobilisation by Tata Steel Foundation ensured that at least one warm wholesome meal a day was made available to the most vulnerable sections during the lockdown and that no migrant labourer passing through Jamshedpur remained hungry, thirsty or lonesome. This resulted in 27 lakh such meals being served across locations.

#StitchInTime: Local capacity was created to produce 1,00,000 three-ply cloth masks across our operational areas, catering to communities most exposed to the outbreak.

#StrongerTogether: Collaborations across peers and public systems enabled Tata Steel to identify skilling and re-skilling needs and provide job linkage opportunities. This turned out to be an extremely successful effort that impacted ~75,000 individuals in the East Singbhum District of Jharkhand.

#FarRishta: A national network of positivity, Far Rishta comprised of 50,000 employees across 19 states, all of whom worked under the motto of "being social from a distance".

The various initiatives are undertaken by the Corporate Services division are stated in the effects of COVID-19 pandemic on the Company.

Tata Steel Foundation (TSF) continues to play a key role in mobilising people and spreading awareness, coordinating, and facilitating mass testing, organising vaccination drives, while facilitating sustainable livelihood opportunities. Over 2.3 lac vaccine doses have been administered by TSF in various operating geographies of Jharkhand and Odisha

2. Tata Steel Long Products Limited (TSLP)

TSLPs current product portfolio is unique in nature and complementary to Tata Steel product basket. It primarily deals in two products viz. DRI (Direct Reduced Iron/ Sponge Iron) and Special Steel. DRI on the one hand is highly commoditized in nature and used as a Raw material (substitute to the steel scrap) in the electric arc furnaces or induction furnaces. While on the other hand, special steel is used for hi-end and critical applications such as forging, bearings, fasteners, spring etc. This enabled Tata Steel to complete its offering in the Automotive sector for critical long products-based components apart from being a dominant leader for Flat products-based parts/ components.

The turnover and profit/(loss) of TSLP for the FY 2021-22 are as follows:

(Rs. crore)

FY 22 FY 21
Turnover 6,802 4,750
EBITDA 1,288 1,154
Profit before tax (PBT), before exceptional 885 615
Profit before tax (PBT) 858 615
Profit after tax (PAT), before exceptional 657 572
Profit after tax (PAT) 630 572

The production and sales performance is given below:

(mn tonnes)

FY 22 FY 21 Change (%)
Crude Steel 0.68 0.65 6
Saleable Steel 0.67 0.53 25
Sales 0.65 0.64 2

TSLP continues its journey of operational excellence through Shikhar program. While operational robustness was visible in the companys performance in FY 2021-22. The company has undertaken numerous customer facing and operational initiatives to improve performance.

Key Business Highlights:

• Twenty new trials were conducted across the plant to establish new operating paradigm (Polymer usage to reduce coal blend cost and usage of alternate fluxes in Blast Furnaces for improved productivity.

• In by-products, few campaigns to make the departments free from plastic and E-waste were successfully launched and driven to generate revenue for the company.

• Undertaken impactful actions to make its quality control process robust and reduce customer claims, launched customer satisfaction team for key customers to enhance engagement and provide quick resolution of the complaints.

The Shikhar program has achieved improvement savings of Rs.503 crore in FY 2021-22, which contributed to improvement of EBITDA which had been pivotal in staging a successful turnaround of the financials of the company.

The company has embarked upon digitally enabled business transformation journey - Digital Twin for DRI which has been initiated to improve process efficiency by multivariate optimization, predictive modelling for loss detection, process optimization to maximize throughput and improve yield.

During the year, the company had developed 29 new products out of which the 3 first time products in India viz., Lead free steel, PC300k - Alloy LRPC and Grade 3 cable wire for horseshoe nails and DTH cables.

During FY 2021-22, TSLP had produced 839 k tonnes of sponge and 684 k tonnes of steel as against 797 k tonnes of sponge and 648 k tonnes of steel in FY 2020-21, whereas deliveries of FY 2021-22 for sponge was 594 k tonnes as against 632 k tonnes FY 2020-21, due to lower demand for sponge and steel deliveries was 652 k tonnes as against 639 k tonnes FY 2020-21 in view of higher demand. The turnover of FY 2021-22 had increased over FY 2020-21 by Rs.2,052 crore primarily due to increase in average net realisation of sponge iron and of steel while the steel deliveries were marginally higher. The Profit before tax of FY 2021-22 was higher by Rs.243 crore over FY 2020-21 primarily due to increased EBITDA and reduction in finance cost on account of repayment of loan.

Strategic growth in Long Products through Acquisition of Neelachal Ispat Nigam Ltd.

Department of Investment and Public Asset Management (DIPAM), Ministry of Finance had invited bids for strategic divestment of Neelachal Ispat Nigam Limited (NINL). TSLP participated in the bid process and submitted its financial bid on December 23, 2021 for the acquisition of 93.71% equity shares of NINL for a total consideration of ^12,100 crore. DIPAM declared TSLP as the highest bidder, issued a Letter of Award, which company accepted and then executed the share purchase agreement and escrow agreement on March 10, 2022. The company has deposited 10% of the consideration in an escrow account. Currently, both the companies are in the process of completing various conditions required for closing of the transaction.

3. Tata Steel Europe (TSE)

Economic growth recovered in all regions of the world in 2021 after the economy was strongly impacted in 2020 by the COVID-19 pandemic. The recovery was strong despite continuing supply chain issues and COVID waves. Global GDP growth increased by 5.9% (2020: -3.4%). In China GDP growth accelerated to 8.1% (2020: 2.2%). Whilst China achieved strong GDP growth of 12.7% in the first half-year of 2021, the Chinese economy decelerated sharply in the second half, recording only 4.0% growth in the fourth quarter of 2021. The deceleration was mainly due to the weak real estate market and stagnant infrastructure investment, together with continued COVID waves. The EU economy grew by 5.3% (2020: -6.1%) and the UK economy by 7.4% (2020: -9.3%). The EU and UK economies recovered as vaccination allowed a progressive opening of the economies. In the first part of 2021, the economies rebounded strongly from the recession of 2020, but GDP growth decelerated in the second half due to increasing energy prices, inflation and supply chain issues.

Global steel demand increased by 2.7% in 2021 in line with the improving macroeconomic conditions (2020: 0.5%). Demand in China decreased by -5.4% (2020: 10.4%) as growth in the construction sector slowed down. Demand in the EU recovered by 16.8% (2020: -11.6%). In CY2021 the steel-using industries in the EU experienced a strong rebound in output, which peaked in the second quarter. The recovery of automotive was particularly strong. However, issues with the supply chain (especially shortage of semiconductors) negatively affected output in the automotive sector in the second half of the year. In 2021 global steel production increased by 3.6% (2020: -0.1%). Steel production in China decreased by -3.1% (2020: 6.9%) and equated to 54% of global steel production. In the EU production was increased by 15.4% (2020: -12.0%) as the idled Blast Furnaces were brought back online.

The market reference price for iron ore fines (China CFR 62%) increased in FY 2021-22 to US$154/t (+$26/t). The price was particularly high in the first half of the year with an all-time high in June 2021 of US$215/t as demand from Chinese mills was strong. The hard coking coal spot price (Australia FOB) increased to US$313/t (+$196/t). The price increased during the year due to a combination of strong seaborne demand from India, Japan, South Korea and Europe as industrial output improved, high demand for non-Australian coals from China and limited

supply in the spot market. The price was at an all-time high of 594 US$/t in March due to the loss of supply from Russia as a result of the war in the Ukraine. The German benchmark scrap price (Sorte 2/8) increased to €437/t (+€196/t) compared to the previous financial year. The price of CO2 increased in 2021-22 to €65/t (+€36/t), reaching an all-time high in February 2022 at €91/t. Increasing industrial output and reforms of the EU Emissions Trading System, reducing the supply of permits, have caused the price to rise. The European steel spot Hot Rolled Coil price (Germany, parity point) increased in 2021-22 to €1,055/t (+€520/t). The price increased strongly as demand for steel was high whilst supply was limited. In March 2022 the steel price was at an all-time high of €1,240/t due to the loss of supply from Ukraine and Russia.

For 2022 the outlook is highly uncertain due to the war in the Ukraine. The war in the Ukraine has a major impact on the EU due to its reliance on Russian energy and its geographic proximity to the conflict area. There are further downside risks from COVID virus infections and rising interest rates. The World Steel Association predicts that steel demand will increase 0.4% globally. Demand in the EU is expected to decline by -1.3%.

The turnover and profit/(loss) figures of TSE are given below:

(Rs. crore)

FY 22 FY 21
Turnover 90,023 56,051
EBITDA 12,164 (618)
Profit before tax (PBT), before exceptional 8,362 (4,565)
Profit before tax (PBT) 8,114 (5,907)
Profit after tax (PAT), before exceptional 9,235 (6,155)
Profit after tax (PAT) 8,986 (7,497)

The production and sales performance of TSE is given below:

(mn tonnes)

FY 22 FY 21 Change (%)
Liquid Steel Production 10.11 9.55 6
Deliveries 9.02 8.82 2

TSEs production in FY 2021-22 was up 0.6 MnT (6%) compared to the previous year due to the impact of COVID-19 pandemic on demand in FY 2020-21 on the Groups steel products. The deliveries increased by 2% over the previous year driven by broad based improvement in most steel consuming sectors.

During the year under review, the revenue stood at Rs.90,023 crore reflecting a significant improvement of 61% over FY 2020-21 primarily due to improved average revenue per tonne and higher deliveries attributable to the recovery of the European steel market aided by the improvement in the sales mix. In addition, favourable exchange impact on translation also supported higher revenue during FY 2021-22. TSE reported positive EBITDA of Rs.12,164 crore during FY 2021-22 as against operating loss of Rs.618 crore in FY 2020-21 mainly due to significantly higher steel margin and improved market conditions partly offset by increase in energy and maintenance expenditures. Improved operating profits led to profit before tax of Rs.8,114 crore in FY 2021-22 against a loss of Rs.5,907 crore in FY 2020-21. Exceptional charge was lower than that of the previous year mainly due to lower impairment on PPE.

Strategic Actions

TSE started the FY 2021-22 operating in a much improved steel market which, along with many other industries, was severely affected in FY 2020-21 following the restrictions imposed on the economy to contain the COVID-19 health crisis. TSE was well placed to serve the strong demand from the market following the economic recovery once restrictions were lifted because, whilst production was reduced in FY 2020-21, no permanent capacity reductions were made. TSEs focus during the year was to improve operational stability and respond to demand whilst managing the significant pressures on working capital arising from increases in input costs.

Through the first half of the year, TSE progressed with its plans to separate its businesses in the UK and the Netherlands into two Value Chains, with their own governance structures to allow each businesses to pursue different strategic paths and give them greater agility and focus, while still benefiting from operating together under the Tata Steel brand to provide a coordinated approach to customers. The separation took effect from October 1, 2021.

During the year Tata Steel announced plans to pursue a fully sustainable future for its steelworks in Ijmuiden by adopting a hydrogen route which would involve the introduction of direct reduced iron (DRI) technology which can make iron using natural gas or hydrogen before it is converted to steel in one or more electric furnaces to be invested in the future. TSE is pursuing with its ambition in IJmuiden to reduce CO2 emissions by five million tonnes a year by 2030 and had been exploring various technological options to achieve this, including the capture and storage of CO2 or a hydrogen route. With the announcement, the company is now undertaking a detailed assessment of the hydrogen route in IJmuiden and is in discussions with all stakeholders involved to further develop this route. In the UK, Tata Steel continues to have discussions with the UK government to seek support for the transition to low-carbon steelmaking, which is a vital part of securing a long- term sustainable future for the business.

The principal activities of TSE in the FY 2021-22 comprised the manufacture and sale of steel products. TSEs operations produced carbon steel by the basic oxygen steelmaking method at its integrated steelworks in the Netherlands at IJmuiden and in the UK at Port Talbot. During the FY 2021-22, these plants produced 10.1 MnT (previous year: 9.6 MnT) of liquid steel. Whilst TSE seeks to increase its differentiated / premium business, which is less dependent on market price movements, it still retains focus in both the UK and Netherlands on improving its operations, consistency, and taking measures to protect against unplanned interruptions and property damage.

Tata Steel Netherlands (TSN) - Liquid steel production at IJmuiden Steel Works, Netherlands during FY 2021-22 at 6.6MnT was - despite some operational issues - 0.4MnT higher than the previous year reflecting the easing of the COVID-19 impact. Market demand was robust, although some weakness was noticeable in the automotive sector due to the global chip shortages. During FY 2021-2022 TSN continued with the Transformation Programme which is targeting improvements to delivery and yield performance, commercial mix, and reducing operating costs and unplanned downtime. Further progress was also achieved in its Strategic Asset Roadmap (STAR) capital investment programme to support the strategic growth of differentiated, high value products in the automotive, lifting and excavating, and energy and power market sectors. Continuous Caster 23, the largest investment scheme within the STAR-programme, was commissioned in October 2021. The other main items within the STAR-programme will be realised in FY 2023 and the preparations have started to operationalise the Blast Furnace#6 in 2023. Furthermore, significant progress was achieved in Roadmap Plus, which contains a series of measures to eliminate the environmental impact (noise, dust, odour) of the IJmuiden Steel Works.

Tata Steel UK (TSUK) - Liquid steel production at Port Talbot Steel Works, Wales during the FY 2021-22 at 3.5 MnT was 0.2 MnT higher than the previous year which was partly impacted by demand reductions associated with the COVID-19 pandemic. During FY 2021-22 TSUK commissioned a new turbine within the power plant with capability of 30Mwe internal power generation helping to reduce the reliance on external energy purchases. During the year, the Transformation programme continued to deliver benefits and TSUK broke a number of operational records including weekly production on the Hot Strip Mill and monthly production on the Zodiac galvanising line.

New Products

In TSE, 13 new products were launched during the FY 2021-22. These launches include major developments for the Automotive, Construction and Engineering end markets.

In the Automotive sector, TSE continued to maintain its leadership position in the outer panel full finish segment. It has further improved the chemistry and product performance of its Serica? range offering premium surface finish for market-leading paint appearance for Automotive outer body applications. Additionally, TSE launched a new offering of heavy gauge Nickel-plated steel for application in rechargeable batteries in premium Electric Vehicles.

In the Construction sector, TSE launched five new products. This included extended the capability of our Linepipe offerings for offshore Oil & Gas application in the X65/X70 grade range and extended the dimensional range of premium cold- formed Hybox? tubes. Further, TSE improved the sustainability credentials of the Contiflo? range of precision tubes with an odour free and low environmental impact internal coating aligned to latest environmental standards. Through the latest Building Systems facility in the Netherlands, TSE continued to enhance its product portfolio with the launch of a Sinusoidal Roof Panel which offers economic, functional, aesthetic and sustainable solutions with optimum building performance. The product provides a future-proof solution for asbestos roof replacement market.

Moreover, with the launch of two additional hot-rolled grades 27MnB5 and 38MnB5, the Engineering sector further extended its heat treatable, manganese boron portfolio. The new products offer increased wear resistance and higher strength when quenched and tempered after forming, in agriculture wear parts application.

Recognition:

TSE has been recognised by World Steel Association as a Steel Sustainability Champion for the fifth year in succession. The award recognises TSE as a company leading the way to create a truly sustainable steel industry and society and that clearly demonstrates its commitment to sustainable development and the circular economy.

4. Natsteel Holdings (NSH)

TS Global Holdings (TSGH) Singapore, a 100% indirect subsidiary of Tata Steel Limited, had divested its equity stake in NSH to a Singapore based steel and iron ore trading company for an Equity Value of Rs.1,275 crore. The wires business of NatSteel in Thailand (Siam Industrial Wires) has been retained by the company as part of the downstream wires portfolio. The transaction was completed on September 30, 2021.

The turnover and profit/(loss) of NSH for the Financial Year 2021- 22 (up to September 30, 2021) are as follows:

(Rs. crore)

FY 22 FY 21
Turnover 3,485 4,326
EBITDA 365 224
Profit before tax (PBT), before exceptional 275 48
Profit before tax (PBT) (738) 48
Profit after tax (PAT), before exceptional 225 42
Profit after tax (PAT) (787) 42

The production and sales performance of NSH is given below:

(mn tonnes)

FY 22 FY 21 Change (%)
Saleable Steel 0.44 0.73 (39)
Sales 0.55 0.90 (39)

5. Tata Steel Thailand (TSTH)

During FY 2021-22, the demand for steel in Thailand was at 18.6 MnT, higher by 13% over the previous year, met through higher steel imports at 12.4 MnT. The demand for long products was at 6.5 MnT, higher by 3% y-o-y.

The turnover and profit/(loss) of TSTH for the FY 2021-22 are as follows:

(Rs. crore)

FY 22 FY 21
Turnover 7,431 5,264
EBITDA 736 325
Profit before tax (PBT), before exceptional 611 193
Profit before tax (PBT) 593 165
Profit after tax (PAT), before exceptional 612 179
Profit after tax (PAT) 594 151

The production and sales performance of TSTH is given below:

(mn tonnes)

FY 22 FY 21 Change (%)
Saleable Steel 1.29 1.33 (3)
Sales 1.33 1.30 2

During the FY 2021-22 the saleable steel production decreased by 0.04 MnT and sales improved by 0.03 MnT over FY 2020-21. The turnover increased by Rs.2,167 crore primarily due to increase in steel prices. The profit before tax was higher by Rs.428 crore on account of higher operating profits, lower finance cost and lower exceptional charge.

Key Business Highlights

• Exported billets for the first time. The company has entered Canada and is in the process of getting certification to enter Australian and New Zealand markets.

• Initiated migration of standard rebar to Seismic rebar in retail market. Launched E-Commerce platform "BaanClickBuild.

• The company has digitalized many processess like HR Easy Connect, ERFX, Tata App, E-commerce, E-Tax invoice and E-Receipt, E-learning for training during COVID-19 as well as, internal workflow to simplify operations and prevent human errors.

Recognition: • TSTH received "Thailand Sustainability Investment 2021" from The Stock Exchange of Thailand. • TSTH received "The Thai Chamber of Commerce Business Ethics Standard Test Awards 2021" from The Thai Chamber of Commerce.

6. Tata Metaliks Limited

Tata Metaliks Limited (TML) has its manufacturing plant at Kharagpur, West Bengal, India which produces annually 300 k tonnes of pig iron and 200 k tonnes of ductile iron pipes. Pig iron is marketed in the brand name Tata eFee (worlds first brand) and ductile iron pipe is marketed in the brand name Tata Ductura.

The Pig iron demand got severely impacted in Q1 FY 2021-22 due to second wave of COVID -19 as operations in all major foundry clusters got curtailed and domestic FG (Foundry Grade) PI prices remained volatile in line with related commodities viz. steel, scrap, sponge iron etc. Demand started recovering from mid-July 2021 onwards with average utilization levels reaching ~70%-80% at all major foundry clusters. In Q3 FY 2021-22, demand was moderate due to festive season and recovery from second wave of COVID and it ultimately showed sign of recovery in Q4 FY 2021-22 when utilization levels improved to 80%-90% in the foundries. However, the PI prices remained volatile throughout the year and reached all-time high levels due to unprecedented rise in raw material prices especially coking coal and coke.

In the Ductile Iron Pipe (DIP) segment, despite sufficient volume of dispatchable orders and fund clearances from the government, DIP industry witnessed muted dispatches in Q1 FY 2021-22 due to Covid induced lockdowns. With rising demand and buoyant commodity prices, DIP prices witnessed a positive movement from the beginning of FY 2021-22 and the rising trend continued throughout the year. In the second and third quarter of the year industry witnessed moderate increase in dispatches. During FY 2021-22 the industry sales was 1,996 k tonnes with TMLs sale of 237 k tonnes having market share of ~12%.

Key Business Highlights:

• The hot metal production, fuel rate, coal injection of the Blast furnaces were marginally lower than the targets, as one of the Blast Furnaces took longer duration to stabilize post a maintenance shutdown.

• DIP plant performance was excellent in terms of production, yield and consumption parameters.

• Despite several challenges due to Covid restrictions, the company could complete most of the installation of Phase 1 of its new DI Pipe plant at Kharagpur. To be future ready, the company is running trials and commissioning plant equipments across locations.

Digitisation and automation: TML started its digital transformation journey in FY 2018-19 and developed a Long- term Digital Strategy Roadmap that focused on three themes— Real-time data analytics, Smart machines and Business on Mobile. In FY 2021-22 the Company took some key strategic initiatives such as (a) Data Strategy Design, with an objective to streamline different source systems and create a single source of truth for the organization and (b) Project ARUNA, another strategic initiative to drive EBITDA improvement data analytics projects across the organisation. TML has also implemented Level II Automation System for MBF 1 which is first time in any mini Blast Furnaces in India. The Company strengthened its capability in area of robotics and developed in-house robotics solutions which are being implemented for the first time in DIP industry in the country. The company currently has seven robots operational in its DIP production lines.

The turnover and profit/(loss) figures for the FY 2021-22 are as follows:

(Rs. crore)

FY 22 FY 21
Turnover 2,746 1,917
Profit before tax (PBT) 339 306
Profit after tax (PAT) 237 220

During the FY 2021-22, the production of Pig Iron (PI) was 344 k tonnes as against 283 k tonnes in FY 2020-21 and production of ductile iron pipes (DI) was 236 k tonnes during FY 2021-22 as against 187 k tonnes in previous year. The deliveries of Pig Iron (PI) increased by 54 k tonnes and that of DI pipes were higher by 44 k tonnes.

The turnover during FY 2021-22 was Rs.2,746 crore, was higher by Rs.829 crore over previous year primarily due to higher prices of pig iron and DI pipes along with higher deliveries. The profit before tax during FY 2021-22 at Rs.339 crore, was higher by Rs.33 crore over previous year due to exceptional gain of Rs.31 crore on account of sell of land and lower finance cost.

Recognition:

• Silver Recognition under Manufacturing Sector in 6th CIINational Competition on Digitalisation, Robotics & Automation.

• 2nd Runner Up in Best Digitisation Kaizen under Manufacturing Sector in 5th CIINational Kaizen Circle Competition 2022.

7. The Tinplate Company of India Limited

The Tinplate Company of India Limited (TCIL) is the largest indigenous producer of tin-coated and tin free steel used for metal packaging. The Company has also been value-adding its products by way of providing printing and lacquering facility to reach closer to food processors/fillers. TCIL has two Cold Rolling Mills and two electrolytic tinning lines with an installed annual production capacity of around 379 k tonnes of tinplate and tin- free steel.

The turnover and profit/(loss) figures of TCIL for the FY 2021-22 are as follows:

(Rs. crore)

FY 22 FY 21
Turnover 4,272 2,297
Profit before tax (PBT) 471 132
Profit after tax (PAT) 353 98

During the FY 2021-22, the production at 374 k tonnes, was higher over FY 2020-21 by 83 k tonnes and deliveries at 373 k tonnes, were higher by 57 k tonnes over the previous year. The turnover during FY 2021-22 was Rs.4,272 crore higher by Rs.1,975 crore over previous year on account of increase in average realisation along with higher deliveries. Profit before tax during FY 2021-22 was Rs.471 crore, higher by Rs.339 crore over previous year due to higher operating profit and higher finance income.

Key Business Highlights:

• Execution of critical capital projects like Offline Shearing Facility (SHL) at Electrolytic Tinning Lines (ETLs) and upgradation of oiler at Electrolytic Tinning Line - 1 (ETL-1), key infrastructure reinforcement projects in the Cold Rolling Mill (CRM) complex.

• Efforts to leverage benefits through collaborative work with Tata Steel Europe (TSE) and Tata Steel Jamshedpur (TSJ) brought about improvement in prime yield, reduction in quality complaints, improvement in product quality and costs notably in the consumption of Tin and Rolls

• SSPQCO (Steel and Steel Products Quality Control Order) was implemented in July 2021. The company proactively brought in changes in operating practices for transiting seamlessly to the new system.

• The companys focus has been on consistently improving its efficiency performance. Disha initiative has been instrumental in generating, reviewing, implementing and monitoring of breakthrough ideas for efficiency improvement whilst TPM has been the base for continual improvement.

8. Tata Steel Downstream Products Limited (TSDPL)

TSDPL (formerly Tata Steel Processing and Distribution Limited) is a leader in the organised Steel Service Centre business in India. TSDPL has a pan India presence with ten steel processing plants and thirteen distribution and sales locations. Value- added offerings of TSDPL include slitting, cut-to-length, blanking, corrugation, plate burning, fabrication, component manufacturing and steel intensive products and applications. TSDPLs products and services conform to world class quality

standards in meeting customers demand. Its entire operations including supply chain runs on a state-of-the-art ERP (Enterprise Resource Planning) system.

Key Business Highlights:

• Achieved a milestone of processing 3 million tonnes.

• During the year under review, the company continues with the EBITDA improvement initiative Lakshya 25 towards achieving operational efficiency and improvement in cost effectiveness resulting in significant savings in cost.

• The company has been engaged in various activities to expand in the western region, upgrades of the existing plants to enhance the overall processing capacities, digitalisation of its operations and sustainable business initiatives.

The turnover and profit/(loss) figures for the FY 2021-22 are as follows:

(Rs. crore)

FY 22 FY 21
Turnover 6,805 3,620
Profit before tax (PBT) 194 97
Profit after tax (PAT) 144 81

During the year under review, the production from tolling business was at 2,265 k tonnes, higher by 440 k tonnes than that of the previous year and for distribution business, the production was at 890 k tonnes, significantly higher by 254 k tonnes over FY 2020-21. The deliveries of the tolling business were at 2265 k tonnes, higher by 613 k tonnes and that of distribution business stood at 894 k tonnes which was higher by 233 k tonnes (35%) attributable to the improvement in the demand from the auto segment. Turnover was higher by Rs.3,185 crore mainly due to higher realisation from the distribution business supported by higher sales volume. Profit before tax was higher by Rs.97 crore due to higher operating profits partly offset by higher finance cost.

Recognition:

TSDPL was given certifications for its plants across locations such as IATF 16949, ISO 14001, ISO 9001, ISO 45001 and OHSAAS 18001.

9. Bhubaneshwar Power Private Limited (BPPL)

Un-interrupted power supply and cost of power is a challenge for large power intensive process industries. Industries which produce 365 days per annum, continue to depend on thermal power plants for their base load requirements.

BPPL is in the business of generation of power. It owns 135 MW (2x67.5 MW) coal based power plant in Odisha. BPPL supplies 120.5 MW power to Tata Steel and Tata Steel Mining Limited.

Key Business Highlights:

• Power generation increased to 1011 million units as against 971 million units in FY 2020-21.

• Sale of power increased to 897 million units as against 860 million units in FY 2020-21,

• Plant operated at a better load factor of 85.48% as against 82.14% in FY 2020-21,

• Station heat rate have decreased to 2789 kcal/Kwh from 2793 kcal/Kwh in FY 2020-21,

• Auxilliary power consumption reduced to 11.29% from 11.40 % in FY 2020-21,

• Higher usage of primary coal from Mahanadi Coalfield Ltd (MCL) at marginally higher rate over previous year.

The turnover and profit/(loss) figures for the FY 2021-22 are as follows:

(Rs. crore)

FY 22 FY 21
Turnover 516 489
Profit before tax (PBT) 52 28
Profit after tax (PAT) 39 20

During the FY 2021-22, the turnover was Rs.516 crore, higher by Rs.27 crore over previous year due to lower rebate to customer, higher energy charges and higher sale to energy exchange grid. The Profit before tax during the FY 2021-22 at Rs.52 crore, was higher by Rs.24 crore over previous year primarily due to lower finance cost and marginally higher operating profit.

Recognition:

BPPL bagged Kalinga Safety Award (Gold category) for excellent Safety Management System among power plant under 500 MW category in Odisha at the 12th Odisha State Safety Conclave 2021.

10. Tata Steel Mining Limited (TSML)

TSML is in the business of mining chrome ore and converting it to value added product-ferro chrome to serve the global stainless- steel producers. Currently, the company has long term mining leases of chromite mines viz Sukinda, Saruabil and Kamarda in Jajpur district, Odisha. The company is working in compliance with the terms of Mine Development and Production Agreement signed with Government of Odisha when the leases were allotted. The company has made progress towards getting environmental clearance for expansion of Saruabil and Kamarda Mines to 1 MTPA & 0.3 MTPA respectively.

The company has a ferro-chrome plants in Athagarh and Gopalpur in Odisha. TSML had entered into long term sales contracts with the domestic and overseas customers and also continuously working with conversion partners in India, supply chain and marketing & sales division for timely supply of right quality products to its customers. The company has structured productivity and operational excellence program "Shikhar" through various projects in the areas of cost reduction, energy efficiency, throughput improvement and procurement optimisation, resulted in improvements during the current year.

Key Business Highlights:

• Scaled up ferro chrome production to 373 k tonnes in FY 2021-22 from 37 k tonnes in FY 2020-21

• Launched ferrochrome brand "TATA IndiCrome"

• Successfully received Integrated Management Certificate (IMS) on Quality, Safety and Environment for its 3 mines, 2 plants and various functions.

Strategic growth in ferro chrome business through acquisitions of Rohit Ferro Tech

The Company was exploring opportunities to meet its production target for ferro alloys and considering the strategic attractiveness, competitive intensity and expected synergy benefits, identified Rohit Ferro-Tech Limited (RFT) as a target company to be acquired through Tata Steel Mining Limited (TSML), wholly-owned subsidiary of Tata Steel, under the Corporate Insolvency Resolution Process (CIRP) of the Insolvency and Bankruptcy Code, 2016 (Code).

On June 5, 2021, the Committee of Creditors, in terms of the CIRP of the Code, declared TSML as the successful resolution applicant for the acquisition of RFT, subject to necessary regulatory approvals including approval from the Honble National Company Law Tribunal, Kolkata bench (NCLT). On April 7, 2022, the NCLT pronounced the Order approving the Resolution Plan submitted by TSML for acquisition of RFT. As per the Resolution Plan, TSML acquired 90% equity stake in RFT for ~Rs.617 crore.

On April 11, 2022, in terms of the Resolution Plan, the Company (through TSML, its wholly-owned subsidiary) completed the acquisition of 90% stake in RFT and the remaining 10% stake was acquired by the assenting financial creditors of RFT towards conversion of a portion of their loans. For the purpose of this acquisition, the Company, as one of the funding modes, infused Rs.625 crore into TSML by acquiring 32,63,70,757 equity shares of TSML of face value Rs.10/- each for a premium of Rs.9.15 per share.

The turnover and profit/(loss) figures for the FY 2021-22 are as follows:

(Rs. crore)

FY 22 FY 21
Turnover 4,605 535
Profit before tax (PBT) (1,131) 14
Profit after tax (PAT) (883) 11

During the FY 2021-22, the turnover was Rs.4,605 crore significantly higher over previous year by Rs.4,070 crore owing to higher volumes and prices of ferro chrome. The company during the financial year 2021-22 reported loss before tax amounting to Rs.1,131 crore as against profit of Rs.14 crore in previous year on account of provision for low grade inventory having no market value along with higher provisions for royalties as per Mine Development and Production Agreement.

Recognition:

Ferro Alloy Plant of TSML at Athagarh in Odisha was awarded awarded the Silver Award in Manufacturing (Medium Sector) at the 9th FICCI Safety Systems Excellence Awards.

11. Creative Port Development Private Limited

Creative Port Development Private Limited (CPDPL) is in possession of a 54 years concession from the Government of Odisha for development of a Greenfield Seaport at Chaumukh Village, in Balasore District, Odisha on a "BOOST" basis (Build, Own, Operate, Share & Transfer). CPDPL is availing this concession through a Special Purpose company "Subarnarekha Port Private Limited" and is in possession of all the statutory approvals for the project. In Phase - 1, the port will have an initial capacity of 25 MnT per annum with a potential to expand to 150 MnT per annum. CPDPL is already in possession of the port land and is in the advanced stage of getting the required land for railway corridor and construction of access road. In the year under review, the company has made substantial progress in private land acquisition. The company is planning to start construction of road.

V. Financial Performance

1. Tata Steel Limited (Standalone)

During the Financial Year 2021-22, the Company recorded a profit after tax of Rs.33,011 crore (previous year Rs.17,078 crore). The increase is primarily on account of improvement in realisations and lower finance cost due to repayment of loans, which was partly offset by higher cost of production due to increase in raw material prices along with higher exceptional charge against gain as compared to that of the previous year. The basic and diluted earnings for the Financial Year 2021-22 were at Rs.270.33 per share and Rs.270.13 per share respectively (previous year: basic and diluted: Rs.145.00 per share and Rs.144.99 per share respectively).

The analysis of major items of the financial statements is given below:

a) Revenue from operations

(Rs. crore)

FY 22 FY 21 Change (%)
Sale of products 126,070 81,361 55
Sale of power and water 1,611 1,467 10
Other operating revenue 1,340 1,305 3
Total revenue from operations 129,021 84,133 53

During the year under review, sale of products was higher as compared to that of the previous year, primarily due to significant increase in realisations in domestic as well as export markets along with higher deliveries as previous year was impacted due to COVID-19. Ferro Alloys and Mineral Division (FAMD) registered lower revenue owing to lower volumes of Ferro Chrome due to transfer of Ferro Chrome business to one of the Group entities. Sale of power and water increased due to higher demand.

b) Purchases of stock-in-trade

(Rs. crore)

FY 22 FY 21 Change (%)
Purchases of stock-in- trade 4,089 1,689 142

During the year under review, Purchases of stock-in-trade was significantly higher as compared to that of the previous financial year primarily due to higher purchases of scrap for reducing carbon emissions along with higher scrap prices. Purchases also increased at other sustainable businesses.

c) Cost of materials consumed

(Rs. crore)

FY 22 FY 21 Change (%)
Cost of materials consumed 35,257 20,757 70

During the year under review, cost of materials consumed increased primarily due to higher imported coal prices, along with higher consumption of coal, purchased pellet, ferro alloys and other raw materials due to higher prices and higher production during the year.

d) Employee benefits expense

(Rs. crore)

FY 22 FY 21 Change (%)
Employee benefits expense 6,366 5,742 11

During the year under review, the employee benefits expense increased primarily due to higher bonus provisions on account of increased profitability, along with higher staff welfare expenses. These were partially offset by lower charge due to change in the actuarial estimates owing to change in discounting rates.

e) Depreciation and amortisation expense

(Rs. crore)

FY 22 FY 21 Change (%)
Depreciation and amortisation expense 5,464 5,469 (0)

The depreciation charge during the year is at par with the previous year as the lower charge for assets fully depreciated during the year was offset by additions during the year.

f) Other expenses

(Rs. crore)

FY 22 FY 21 Change (%)
Other expenses 34,001 26,645 28

Other expenditure represents the following expenditure:

(Rs. crore)

FY 22 FY 21 Change (%)
Consumption of stores and spares 6,960 5,432 28
Repairs to buildings 47 37 25
Repairs to machinery 3,973 3,194 24
Relining expenses 204 144 42
Fuel oil consumed 377 232 63
Purchase of power 4,286 3,514 22
Conversion charges 1,798 2,249 (20)
Freight and handling charges 6,632 5,288 25
Rent 86 73 17
Royalty 5,506 2,195 151
Rates and taxes 2,066 1,234 67
Insurance charges 203 197 3
Commission, discounts and rebates 288 255 13
Allowance for credit losses/ provision for advances 63 56 13
Other expenses 3,970 3,866 3
Less:-Expenditure (other than interest) transferred to capital & other accounts (2,458) (1,321) 86
Total Other expenses 34,001 26,645 28

Other expenses were higher as compared to the previous financial year primarily due to higher royalty charges mainly on account of implementation of additional royalty on sale of iron ore along with increase in rates of iron ore leading to higher royalty charge during the year. Rates and Taxes increased in line with higher royalty and higher electricity duty due to increase in rates. Higher freight and handling charges due to increase in deliveries. Higher purchase of power and fuel along with higher repairs to machinery owing to higher production during the year. Consumption of stores and spares increased primarily on account of charging of project expenses for Kalinganagar Phase-II, majorly eliminated through transfer to capital account. Conversion charges declined mainly at FAMD due to lower level of activities.

g) Finance costs and net finance costs

(Rs. crore)

FY 22 FY 21 Change (%)
Finance costs 2,792 4,541 (39)
Net Finance costs 1,667 4,002 (58)

During the year under review, finance costs decreased significantly primarily on account of lower interest on domestic term loans owing to repayments/prepayments towards the end of previous financial year as well as in the current financial year. Interest on Non-Convertible Debentures reduced due to repayments during previous financial year, along with lower interest on short-term borrowings, unsecured foreign loans, and others, partly offset by higher charge on Commercial Papers discounting due to higher balances during the year.

Net finance charges were lower in line with lower finance cost along with higher interest income on inter- corporate deposits (ICD), partly offset by lower interest income on income tax refund received for earlier years and lower gain on sale of mutual funds.

h) Exceptional items

(Rs. crore)

FY 22 FY 21 Change (%)
Exceptional items (235) 741 -

The details of exceptional items for the current year and previous year are as follows:

• Profit on sale of investments held in Subsidiaries and Joint Ventures Rs.344 crore (previous year: Rs.1,085 crore).

• Provision for Impairment of investments/doubtful advances (net of reversals) Rs.93 crore (previous year: Rs.150 crore relating to provision reversal for Impairment of investments/doubtful advances provided earlier in respect of a subsidiary).

• Restructuring and other provisions Rs.205 crore primarily includes charge on Employees Family Protection Scheme for COVID-19 (previous year: Nil).

• Provision for Employee Separation scheme (ESS) under Sunehere Bhavishya Ki Yojana (SBKY) scheme amounting to Rs.208 crore and second innings scheme amounting to Rs.123 crore (previous year: Rs.444 crore).

• Fair valuation gain on debentures held by the Company in one of its Joint Ventures Rs.50 crore (previous year: loss of Rs.50 crore).

i) Property, Plant and Equipment (PPE) including intangibles and right of use assets

(Rs. crore)

FY 22 FY 21 Change (%)
Property, Plant and Equipment 87,946 90,405 (3)
Capital work-in- progress 14,159 10,499 35
Intangible assets 806 856 (6)
Intangible assets under development 383 409 (6)
Right of use Assets 5,538 5,883 (6)
Total PPE including intangibles & right of use assets 108,832 108,052 1

The movement in total PPE including intangible is marginally higher primarily on account of increase in capital work- in-progress mainly at Kalinganagar Phase-II and normal additions during the year, which was offset by depreciation and amortisation charge during the year.

j) Investments

(Rs. crore)

FY 22 FY 21 Change (%)
Investment in Subsidiary, JVs and Associates 29,167 28,197 3
Investments - Non current 14,234 890 1,499
Investments - Current 96 7,097 (99)
Total Investments 43,498 36,184 20

The increase in investments was predominantly on account of increase in Non-current investments mainly in preference shares of Tata Steel Long Products Limited and increase in value of other quoted non current investments. Increase in investments in Subsidiary, JVs and Associates is mainly on account of increase in investment at Tata Steel Utilities and Infrastructure Services Limited on transfer of investment held in Subsidiaries, Joint Ventures and Associates at a premium.

Decrease in current investments is on account of sale of mutual fund investments.

k) Inventories

(Rs. crore)

FY 22 FY 21 Change (%)
Finished and semi- finished goods including stock in trade 6,731 4,910 37
Work-in-progress (0) 0 na
Raw materials 9,289 4,370 113
Stores and spares 3,923 3,578 10
Total Inventories 19,943 12,858 55

Finished and semi-finished inventory increased as compared to previous year mainly due to increase in rates of finished and semi-finished attributable to increase in raw material prices. Partly offset by lower quantities due to increase in sales volumes.

Raw material inventories have increased over the previous year primarily on account of increase in the prices of imported coal and coke during the year.

Stores and spares inventory increased due to higher requirement. l) Trade receivables

(Rs. crore)

FY 22 FY 21 Change (%)
Gross trade receivables 3,453 3,024 14
Less: allowance for credit losses 173 145 19
Net trade receivables 3,280 2,879 14

Trade receivables increased as compared to that of the previous year primarily due to increase in group company receivables for sale of iron ore and coal, partly offset by decrease in receivables from external customers due to higher financing.

m) Gross debt and Net debt

(Rs. crore)

FY 22 FY 21 Change (%)
Gross debt 36,525 37,065 (1)
Less: Cash and Bank balances (incl. Non- current balances) 2,935 2,461 19
Less: Current investments 96 7,097 (99)
Net Debt 33,494 27,507 22

Gross debt was marginally lower due to pre-payments and repayments of various term loans and External Commercial Borrowings, partly offset by increase in short term borrowings and commercial papers.

Net debt was comparatively higher as compared to previous year. This is attributable to decrease in current investments which was used for investment in Preference Shares of Tata Steel Long Products, partly offset by decrease in Gross debt, and increase in and cash and bank balances.

n) Cash Flows

(Rs. crore)

FY 22 FY 21 Change (%)
Net Cash from/(used in) operating activities 41,986 37,555 12
Net Cash from/(used in) investing activities (34,168) (13,665) (150)
Net Cash from/(used in) financing activities (7,368) (23,386) 68
Net increase/(decrease) in cash and cash equivalents 450 504 (11)

Net cash flow from/(used in) operating activities

During the year under review, the net cash generated from operating activities was Rs.41,986 crore as compared to Rs.37,555 crore during the previous year. The cash inflow from operating profit before working capital changes and direct taxes during the current year was Rs.50,307 crore as compared to inflow of Rs.27,227 crore during the previous year due to higher operating profits. Cash inflow from working capital changes in FY 2021-22 is mainly due to increase in Non-current/current financial and other liabilities/provisions by ^11,112 crore primarily due to increase in trade payables on account of coal purchases, partly offset by increase in inventories by Rs.7,073 crore due to increase in rates, along with increase in Non-current/Current financial and other assets by Rs.1,119 crore, in trade receivables and other advances with public bodies. The income taxes paid during the current year was ^11,240 crore as compared to Rs.372 crore (net of refund received for earlier years) during previous financial year.

Net cash flow from/(used in) investing activities

During the year under review, the net cash outflow from investing activities amounted to Rs.34,168 crore as compared to Rs.13,665 crore during the previous year. The outflow during the current year broadly represents Inter Corporate Deposits given net of realisation amounting to Rs.22,621 crore mainly to T Steel Holdings, capex of Rs.6,288 crore, investments in Subsidiaries Rs.12,897 crore mainly in preference shares of TSLP, partly offset by net sale of current investments of Rs.7,183 crore.

Net cash flow from/(used in) financing activities

During the year under review, the net cash outflow from financing activities was Rs.7,368 crore as compared to an outflow of Rs.23,386 crore during the previous year. The outflow during the current year broadly represents repayment of borrowings including finance lease (net of proceeds) Rs.1,033 crore, along with payment of interest Rs.2,868 crore, payment of dividend Rs.3,007 crore, repayment of Hybrid Perpetual Securities Rs.775 crore. These were offset by proceeds from partly paid up equity shares Rs.326 crore.

o) Changes in Key Financial Ratios

The change in the key financial ratios as compared to previous year is stated below:

FY 22 FY 21 Change (%)
Inventory Turnover 1 (days) 47 64 (27)
Debtors Turnover (days) 9 10 (10)
Current Ratio 2 (Times) 0.62 1.00 (38)
Interest Coverage Ratio 3 (Times) 22.84 5.81 293
Debt Equity (Times) 0.33 0.43 (23)
Net Debt Equity (Times) 0.30 0.32 (5)
EBITDA Margin (%) 39.88 32.50 23
Net Profit Margin 4 (%) 25.59 20.30 26
Return on average Net worth 4 (%) 29.93 19.80 51

1) Inventory Turnover Ratio: Decreased primarily on account of increase in turnover during the current year owing to increase in steel prices.

2) Current Ratio: Decreased primarily on account of increase in current liabilities and provisions mainly due to increase in raw material prices and effective working capital management.

3) Interest Coverage Ratio: Increased primarily on account of increase in operating profits along with lower finance cost due to prepayment of loans.

4) Net Profit Margin and Return on average net worth:

Increased primarily on account of increase in net profits mainly attributable to higher operating profits and lower net finance charge during the current year.

2. Tata Steel Limited (Consolidated)

The consolidated profit after tax of the Company was Rs.41,749 crore as against Rs.8,190 crore in the previous year. The increase was mainly due to higher operating profits attributable to improvement in steel prices across geographies during the year along with decrease in finance cost due to repayment of loans and lower exceptional charge as compared to that of the previous year, partly offset by increase in raw material prices and higher tax expenses during the year due to higher profits.

The analysis of major items of the financial statements is given below.

Note: Consequent to the re-classification of South East Asian (SEA) operations from "Held for Sale" during the year ended March 31, 2021, results from "Continuing Operations" for the

previous periods wherever applicable have been re-stated to include these businesses which were earlier presented as "Discontinued Operations". On September 30, 2021, T S Global Holdings Pte. Ltd. (TSGH) (an indirect wholly owned subsidiary of the Company) divested its entire stake in Nat Steel Holdings, while the wires business in Thailand which was owned by NSH was retained within the Group.

a) Revenue from operations

(Rs. crore)

FY 22 FY 21 Change (%)
Tata Steel (Standalone) 129,021 84,133 53
TSE 90,023 56,051 61
TSLP 6,802 4,750 43
South East Asia 12,195 9,589 27
Others 82,269 40,901 101
Eliminations & Adjustments (76,351) (38,947) (96)
Total revenue from operations 243,959 156,477 56

The consolidated revenue from operations was higher by 56% as compared to that of the previous year primarily due to significant increase in realisations across geographies along with higher deliveries mainly at Standalone and TSE, partly offset by lower deliveries at South East Asia (SEA) due to sale of Nat Steel Holdings Pte. Ltd. (NSH) during the year.

Others primarily include increase at TS Global Procurement which are majorly eliminated on consolidation.

b) Purchases of stock-in-trade

(Rs. crore)

FY 22 FY 21 Change (%)
Tata Steel (Standalone) 4,089 1,689 142
TSE 4,883 2,540 92
TSLP 0 0 N.A.
South East Asia 7,425 6,702 11
Others 9,733 5,106 91
Eliminations & Adjustments (10,817) (6,229) (74)
Total purchases of stock-in-trade 15,313 9,808 56

Expense was higher mainly at Tata Steel (Standalone) attributable to increase in purchases of scrap owing to higher quantities coupled with higher prices. Increase at TSE was mainly due to increase in external steel purchases consistent with increase in deliveries along with adverse exchange impact on translation. South East Asia (SEA) increased despite the divestment of Singapore operations at NSH, due to increase in billet production at TSTH along with increase in input metallic prices.

Others primarily include transactions at TCIL, TSDPL which are majorly eliminated on consolidation.

c) Cost of materials consumed

(Rs. crore)

FY 22 FY 21 Change (%)
Tata Steel (Standalone) 35,257 20,757 70
TSE 35,306 22,121 60
TSLP 3,930 2,182 80
South East Asia 1,248 341 266
Others 62,082 29,274 112
Eliminations & Adjustments (62,059) (29,382) (111)
Total cost of materials consumed 75,764 45,293 67

Consumption was higher across all major entities mainly due to higher cost of consumption of imported coal & other raw materials owing to higher prices and higher consumption due to higher production. TSE reported increase in GBP terms primarily due to increase in production along with higher coal and coke prices, higher iron ore and scrap prices and adverse exchange impact on translation. Increase at South East Asia was mainly on account of re-grouping of certain expenses from purchases during the year.

Others primarily reflects increase in transactions at T S Global Procurement which are majorly eliminated on consolidation.

d) Employee benefits expense

(Rs. crore)

FY 22 FY 21 Change (%)
Tata Steel (Standalone) 6,366 5,742 11
TSE 14,879 12,314 21
TSLP 216 215 1
South East Asia 554 573 (3)
Others 1,171 1,008 16
Eliminations & Adjustments 78 57 36
Total employee benefits expense 23,264 19,909 17

Increase in expenses was mainly at Tata Steel (Standalone) owing to increase in bonus provision on account of increased profitability, along with the higher staff welfare expenses.

Increase at TSE was mainly due to increase in bonus provision due to increased profitability along with adverse exchange impact on translation.

Marginal decrease at SEA was mainly due to divestment of Singapore operations at NSH in Q2 FY 2022, partly offset by higher bonus provisions at Thailand.

e) Depreciation and amortisation expense

(Rs. crore)

FY 22 FY 21 Change (%)
Tata Steel (Standalone) 5,464 5,469 (0)
TSE 2,451 2,521 (3)
TSLP 320 327 (2)
South East Asia 199 259 (23)
Others 735 744 (1)
Eliminations & Adjustments (68) (86) 21
Total depreciation and amortisation expense 9,101 9,234 (1)

Expense was marginally lower than that of previous year mainly on account of lower depreciation charge at TSE, partly offset by adverse exchange impact on translation.

Expense at SEA decreased mainly due to sale of Nat Steel Holdings Pte. Ltd. during the year.

f) Other expenses

(Rs. crore)

FY 22 FY 21 Change (%)
Tata Steel (Standalone) 34,001 26,645 28
TSE 27,910 19,790 41
TSLP 1,562 1,185 32
South East Asia 2,195 2,102 4
Others 11,831 2,745 331
Eliminations & Adjustments (3,773) (3,020) 25
Total other expenses 73,726 49,447 49

Other expenditure represents the following expenditure:

(Rs. crore)

FY 22 FY 21 Change (%)
Consumption of stores and spares 15,959 10,868 47
Repairs to buildings 117 123 (5)
Repairs to machinery 9,572 7,399 29
Relining expenses 320 242 32
Fuel oil consumed 1,057 709 49
Purchase of power 6,971 4,999 39
Conversion charges 2,866 2,112 36
Freight and handling charges 12,139 9,354 30
Rent 2,672 2,249 19
Royalty 9,311 3,484 167
Rates and taxes 2,517 1,611 56
Insurance charges 481 510 (6)
Commission, discounts and rebates 326 304 7
Allowance for credit losses/ provision for advances 83 85 (2)
Other expenses 12,225 7,164 71
Less:-Expenditure (other than interest) transferred to capital & other accounts (2,890) (1,766) 64
Total Other expenses 73,726 49,447 49

Expense was higher at Tata Steel (Standalone) on account of higher royalty and rates and taxes, higher freight & handling, higher consumption of stores and spares, higher power cost, along with higher CSR & other general expenses. Partly offset by lower conversion charges mainly at FAMD in the current year.

TSE reported increase mainly on account of higher consumption of stores & spares primarily on account of higher prices of gases (energy cost), higher cost of purchase power, higher repairs to machinery and higher freight and handling charges. Net increase in cost of emission rights as previous year included sale of emission rights, increase in demurrage and other general expenses, along with adverse exchange impact on translation.

Increased at TSLP mainly due to higher consumption of stores and spares due to higher prices, increase in fuel prices and higher power cost owing to higher purchase and higher repair & maintenance expenses.

Increased at SEA was mainly at Thailand primarily for higher consumption of stores & spares due to electrode prices, higher power and fuel cost due to increase in billet production and higher fuel prices, partly offset by lower expenses due to divestment of Singapore operations at NSH.

Increase in Others was mainly at Tata Steel Global Holdings on account of adverse exchange rate movements over previous year, along with increase at T S Mining Limited due to higher royalty charge and other provisions coupled with increase in activities post allotment of mines.

g) Finance costs

(Rs. crore)

FY 22 FY 21 Change (%)
Tata Steel (Standalone) 2,792 4,541 (39)
TSE 1,945 1,499 30
TSLP 110 235 (53)
South East Asia 34 52 (35)
Others 4,158 3,189 30
Eliminations & Adjustments (3,577) (1,909) 87
Finance costs 5,462 7,607 (28)

h) Net Finance costs

(Rs. crore)

FY 22 FY 21 Change (%)
Tata Steel (Standalone) 1,667 4,002 (58)
TSE 1,480 1,462 1
TSLP 83 212 (61)
South East Asia 30 49 (39)
Others 1,797 1,752 3
Eliminations & Adjustments (40) (378) (89)
Net Finance costs 5,017 7,099 (29)

Finance cost reduced by 28%. Decrease at Tata Steel (Standalone) was mainly on account of lower interest on Domestic Term Loans owing to repayments/prepayments and lower interest on Non-Convertible Debentures due to repayments in the previous year, lower interest on short term borrowings, unsecured foreign loans and others, partly offset by increase in discounting charge on Commercial Papers.

Decrease at TSLP primarily due to prepayment of loans.

Decrease at SEA primarily due to divestment of NSH in Q2 FY 2022 and reduction in finance charges at TSTH.

Increase at TSE was mainly due to increased amortisation of loan issue expenses on account of prepayment of Senior Financing Arrangement (SFA).

Net finance charge was lower in line with lower finance cost due to repayments/prepayments of loan over the period.

i) Exceptional items

(Rs. crore)

FY 22 FY 21 Change (%)
Tata Steel (Standalone) (235) 741 -
TSE (248) (1,342) -
TSLP (27) 0 -
South East Asia (18) (28) -
Others 21 (557) -
Eliminations & Adjustments 373 143 -
Total exceptional items (134) (1,043) -

Exceptional items during the financial year 2021-22 primarily represents:

• Restructuring and other provisions includes charge on Employees Family Protection Scheme for COVID-19 amounting to Rs.215 crore at Tata Steel Limited (Standalone), Tata Steel Downstream Products Limited (TSDPL) and at Tata Steel Utilities and Infrastructure Limited (TSUISL).

• Expenses incurred in stamp duty and registration fees for a portion of land parcels and mines acquired as part of business combination amounting to Rs.27 crore at Tata Steel Long Products Limited (TSLP).

• Redundancy provisions at Tata Steel Europe (TSE) amounting to Rs.14 crore.

• Impairment charges (net of reversal) Rs.172 crore in respect of property, plant and equipment (including capital work- in-progress), right-of-use assets and other assets primarily at TSE and Tata Steel Thailand (TSTH).

• Net Provision for Employee Separation Scheme (ESS) amounting to Rs.331 crore primarily under Second Innings Scheme Rs.123 crore along with charge for ESS under Sunehere Bhavishya Ki Yojana (SBKY) scheme amounting to Rs.208 crore at Tata Steel Limited (Standalone).

• Impairment of Inter Corporate Deposits (ICDs) given to an Associate of the Company Rs.100 crore at Tata Steel Limited (Standalone).

• Impairment on outstanding deferred consideration at TSE Rs.81 crore.

Partly offset by,

• Profit on sale of subsidiaries and non-current investments in NatSteel Holdings Pte. Ltd. (NSH) Rs.725 crore.

• Reversal of fair valuation loss previously taken on investment in debentures of a joint venture of the Company amounting to Rs.50 crore at Tata Steel Limited (Standalone).

• Gain on sale of Land amounting to Rs.31 crore at Tata Metaliks Limited (TML).

The exceptional items in FY 2020-21 primarily represents:

• Impairment charges (net of reversal) Rs.1,954 crore in respect of property, plant and equipment (including capital work- in-progress), right-of-use assets and other assets primarily at TSE, mining operations carried out in Canada, South-East Asian Operations, offset by reversal at Tata Steel Special Economic Zone Limited.

• Loss on liquidation of subsidiaries amounting to Rs.10 crore at TSE.

• Net Provision for Employee Separation Scheme (ESS) amounting to Rs.444 crore primarily under Special Scheme at Jharia Rs.467 crore, offset by credit for ESS under Sunehere Bhavishya Ki Yojana (SBKY) scheme amounting to Rs.23 crore at Tata Steel (Standalone).

• Fair valuation loss on investment in debentures of a joint venture of the Company amounting to Rs.50 crore at Tata Steel Limited (Standalone).

Partly offset by,

• Restructuring and write back of provisions which primarily includes write-back of provisions at TSE Rs.88 crore.

• Reversal of fair value loss Rs.1,230 crore on reclassification of South East Asia businesses, earlier recognised as held for sale.

• Reversal of impairment of investments provided earlier in one of the associates of the Group Rs.70 crore.

• Profit on sale of subsidiaries includes profit of Rs.26 crore on realisation of deferred consideration at TSE.

j) Property, Plant and Equipment (PPE) including intangibles and right of use assets

(Rs. crore)

FY 22 FY 21 Change (%)
Tata Steel (Standalone) 108,832 108,052 1
TSE 26,246 25,920 1
TSLP 4,132 4,360 (5)
South East Asia 969 1,485 (35)
Others 11,823 11,829 (0)
Eliminations & Adjustments (980) (1,208) 19
Total PPE inlcuding intangibles & right of use assets 151,022 150,438 0

PPE and intangibles were almost at par. Increased marginally at Tata Steel Standalone due to increase in capital work-in- progress mainly at Kalinganagar Phase-II and normal additions, which was offset by depreciation and amortisation charge during the year. TSE was marginally higher mainly on accounl of fresh additions during the year partly offset by adverse exchange impact on translation along with depreciation and amortisation charge during the year.

Decrease at SEA was mainly due to sale of Nat Steel Holdings Pte. Ltd. during the year.

Decrease at TSLP and Others was mainly on account of depreciation and amortisation charge, partly offset by regular additions during the year.

k) Inventories

(Rs. crore)

FY 22 FY 21 Change (%)
Finished and semi- finished goods including stock in Trade 16,131 11,992 35
Work-in-progress 6,602 4,563 45
Raw materials 20,441 11,527 77
Stores and spares 5,650 5,194 9
Total Inventories 48,824 33,276 47

(Rs. crore)

FY 22 FY 21 Change (%)
Tata Steel (Standalone) 19,943 12,858 55
TSE 22,622 13,780 64
TSLP 1,350 813 66
South East Asia 1,385 1,787 (22)
Others 3,921 4,259 (8)
Eliminations & Adjustments (397) (221) (80)
Inventories 48,824 33,276 47

Increase was primarily at TSE attributable to increase in quantities along with rates of raw materials and increase in rates of Finished goods, partly offset by favourable exchange movement on translation. Increase at Tata Steel Standalone mainly on account of higher rates of Finished and Semi-finished goods along with increase in coking coal and coke prices over the previous year.

Inventory at TSLP increased mainly due to increase in raw materials inventory attributable to higher coal prices along with higher quantities and rates of iron ore along with increase in inventory of finished and semi-finished goods due to higher rates.

Decrease in SEA was primarily on account of divestment of NSH operation during the year.

Decrease in others was primarily on account of lower inventory at TS Global Procurement, partly offset by increase in raw material inventory at TS mining Limited.

l) Trade receivables

(Rs. crore)

FY 22 FY 21 Change (%)
Tata Steel (Standalone) 3,280 2,879 14
TSE 8,611 5,390 60
TSLP 60 75 (20)
South East Asia 1,103 842 31
Others 11,716 12,944 (9)
Eliminations & Adjustments (12,524) (12,590) 1
Net trade receivables 12,246 9,540 28

Increase was primarily at TSE mainly due to higher revenues attributable to increase in steel prices over the period. Increase at Tata Steel (Standalone) was primarily due to increase in group company receivables for sale of iron ore and coal (majorly eliminated on consolidation). Increased at SEA mainly at Thailand due to reduction in factoring of trade receivables due to healthy cash position. Decrease in Others was primarily at Tata Steel Global Procurement (TSGP) majorly eliminated on consolidation.

m) Gross debt and Net debt

(Rs. crore)

FY 22 FY 21 Change (%)
Gross debt 75,561 88,501 (15)
Less: Cash and Bank balances (incl. Non- current balances) 15,988 5,893 171
Less: Current investments 8,524 7,219 18
Net debt 51,049 75,389 (32)

Net debt was lower by Rs.24,340 crore over previous year.

Gross Debt at Rs.75,561 crore was lower by Rs.12,940 crore as compared to the previous year. Decrease in Gross Debt was mainly due to repayment/pre-payment of borrowings including lease liabilities. These decreases were partly offset by addition to leases (mainly at TSE) along with higher amortisation of loan issue expenses, primarily due to pre-payments of loans along with adverse exchange rate movements.

The decrease in Net Debt was in line with decrease in gross debt along with increase in cash and cash equivalents including current investments mainly at TSLP and TSE, partly offset by decrease at Tata Steel (standalone).

n) Cash Flows

(Rs. crore)

FY 22 FY 21 Change (%)
Net Cash from/(used in) operating activities 44,381 44,327 0
Net Cash from/(used in) investing activities (10,881) (9,323) (17)
Net Cash from/(used in) financing activities (23,401) (37,090) 37
Net increase / (decrease) in cash and cash equivalents 10,099 (2,086) 584

Net cash flow from/(used in) operating activities

During the year under review, the net cash from operating activities was Rs.44,381 crore as compared to Rs.44,327 crore during the previous year. The cash inflow from operating profit before working capital changes and direct taxes during the current year was Rs.65,900 crore as against Rs.28,540 crore during the previous year reflecting higher operating profits during the current year. Cash outflow from working capital changes during the current period was Rs.9,618 crore primarily due to increase in inventory by Rs.16,917 crore, increase in current/non-current financial and other assets by Rs.6,220 crore, partly offset by increase in Non-current/Current financial and other liabilities/

provisions by Rs.13,519 crore primarily in trade payables. The payments of income taxes during the year under review were ^11,902 crore as compared to Rs.704 crore during the previous year mainly at Tata Steel Standalone.

Net cash flow from/(used in) investing activities

During the year under review, the net cash outflow from investing activities was Rs.10,881 crore as against an outflow of Rs.9,323 crore during the previous year. The outflow during the year broadly represents capex of Rs.10,522 crore and purchase (net of sale) of current investments amounting to Rs.1,104 crore. Advance against Equity of Rs.1,210 crore at TSLP, Inflow from sale of stake from subsidiaries / undertakings Rs.1,208 crore (mainly divestment of NSH operations), Inflow on account of sale of capital assets Rs.569 crore along with interest and dividend receipt Rs.299 crore.

Net cash flow from/(used in) financing activities

During the year under review, net cash outflow from financing activities amounted to Rs.23,401 crore as against outflow of Rs.37,090 crore during the previous year. The net outflow primarily represents repayment of borrowings including finance lease (net of proceeds) Rs.15,232 crore, repayment of Hybrid Perpetual Securities Rs.775 crore, interest payment Rs.4,687 crore and payment of dividend Rs.3,020 crore. These were offset by proceeds from partly paid equity shares Rs.326 crore.

o) Changes in Key Financial Ratios

The change in the key financial ratios as compared to previous year is stated below:

FY 22 FY 21 Change (%)
Inventory Turnover (days) 62 78 (21)
Debtors Turnover (days) 16 21 (22)
Current Ratio (Times) 1.07 0.94 14
Interest Coverage Ratio 1 (Times) 12.82 3.39 278
Debt Equity 2 (Times) 0.78 1.15 (32)
Net Debt Equity 2 (Times) 0.52 0.98 (47)
EBITDA Margin 3 (%) 26.16 19.74 33
Net Profit Margin 4 (%) 17.11 5.23 227
Return on average Net worth 4 (%) 42.91 10.66 303

1) Interest Coverage Ratio: Increased primarily on account of increase in operating profits along with lower finance cost due to prepayment of loans.

2) Debt Equity Ratio and Net Debt Equity Ratio: Decreased primarily on account of prepayment and repayment of borrowings during the year. Net debt further decreased due to higher current investments & cash and bank balances.

3) EBITDA Margin: Increased primarily on account of increase in operating profits across geographies due to higher prices partly offset by increase in raw material costs.

4) Net Profit Margin and Return on average net worth:

Increased primarily on account of increase in net profits mainly attributable to higher operating profits, lower net finance charge and lower exceptional charges as compared to that of the previous year.

VI. Effect of COVID-19 Pandemic on the Company

During FY 2020-21, the outbreak of novel Corona Virus has impacted the economy and businesses not only in India, but across the globe. The rapid spread of the infection amongst the Indian population forced Government of India to announce the imposition of nation-wide lockdowns from March, 2020, later followed by partial lockdowns by the states, during FY 2021- 22, depending on the infection spread. The nation-wide lockdown brought business and economy to a complete halt barring exemption notified by the Government and subject to following the hygiene standards and social distancing norms as notified by health ministry.

Based on strict interventions of the governments of various countries and scientific research, vaccines were developed for commercial usage during later part of FY 2020-21. While Indian government launched a nationwide rapid vaccination drive for its citizens (to reduce the mortality rate) during FY 2021-22, the second wave of the pandemic hit the nation during the first quarter of FY 2021-22. India was amongst the worst hit nations in the world with high fatalities. During the second wave, the operations of the Company continued at normal levels following the Covid protocols without much of disruptions as was experienced in the first wave of the pandemic. The Engineering and Projects division of the Company overcame the challenges posed by the pandemic by ensuring immunization and following appropriate protocols at all project sites. The impact of supply chain disruptions and steep increase in input prices were mitigated to a large extent by close cooperation with key vendor partners.

The Company continued to support the society and served communities across many locations through its three- pronged communication strategy - awareness, engagement and reinforcement, via real-time and focussed communication in different languages through traditional and new media, to achieve maximum reach and impact across all stakeholders. Few of the Companys initiatives are:

• Introduced platforms for leadership engagement and short audio capsules such as audiograms of doctors interviews were developed in-house for circulation. To address the scale of queries and concerns on COVID-19, a 24x7 employee helpline assistance called People Care was set up.

• Large Scale Testing: The Company shouldered the responsibility of facilitating COVID-19 testing for its workforce, so as to isolate individuals who were infected. The Tata Main Hospital (TMH) Jamshedpur was the first private hospital in Jharkhand to be certified by Indian Council of Medical Research (ICMR) for RT-PCR diagnostic test for COVID-19. The Companys medical services has conducted ~3.3 lakh COVID-19 tests (RT-PCR, TruNat, Antigen) during past two years.

• Augmenting Healthcare Consumables: 3,78,000 testing kits, ~50,000 home isolation kits, 10 ventilators and oxygen concentrators were provided by the Company.

• Dedicated COVID Care Facilities: The Company coordinated with state governments and the local administration to establish COVID Care facilities across its operating locations. The 1,000-bed TMH at Jamshedpur in Jharkhand has 450 oxygen beds and 78 ventilator beds dedicated solely to COVID care. In addition, 100 oxygen beds have been provided to two of its subsidiarys hospitals and a 150-bed COVID Care Centre, set up for asymptomatic patients, or those with mild symptoms. In Odisha, the Tata Medica Super Specialty Hospital in Kalinganagar dedicated 120 beds with oxygen support and ventilators to COVID Care, including a 15-bed ICU facility. In a coordinated effort with the Odisha Government and district administration, at Jajpur, 200-bed COVID Care Centre was developed. Similar, facilities were developed at erswhile Tata Steel BSLs plant in Dhenkanal, raw material and other locations across Jharia, West Bokaro and Noamundi in Jharkhand, as well as Joda and Gopalpur in Odisha.

• Liquid Medical Oxygen and Oxygen Plants: All steel plants in the country, throughout both waves of the pandemic, collaborated with the Central and State Governments to augment the supply of Liquid Medical Oxygen (LMO). All three manufacturing locations of the Company in Jharkhand and Kalinganagar and Dhenkanal in Odisha, were sources of LMO. During first half of FY 2021-22, more than 60,000 tons of liquid oxygen had been supplied for medical purposes. The Company has already commissioned 19 state-of-the-art Pressure Swing Adsorption (PSA) oxygen plants at various locations to maintain the oxygen supply.

• Vaccinations: The Company purchased adequate doses from the Government and administered these to its employees and their families. This also included health workers and frontline workers across Company-owned hospitals. More than 3 lakh COVID-19 vaccines have been administered by TMH till date.

VII. Strategy

During the year under review, Tata Steel continued to focus on operational and marketing excellence to achieve its aspiration of becoming the most respected and valuable steel company globally. Supported by a buoyant commodity market, Tata Steel recorded its best-ever performance in FY 2021-22.

During the first quarter of FY 2021-22, when India was hit by the second wave of pandemic, the Company dealt with COVID-19 with agility and determination, keeping its employees and the community at the core of its response. Medical infrastructure in Jharkhand and Odisha was ramped up, creating more isolation beds. More than 80,000 tonnes of liquid medical oxygen was supplied to multiple states to support the community. In the year gone by, the Company achieved significant strategic milestones. The balance sheet was significantly deleveraged with net debt-to-EBITDA at 0.8 times at the end of FY 2021-22. Further, the Company received investment-grade credit rating. The Company continues its focus on strengthening the balance sheet and executing the growth plans in India. Simplification of portfolio continues with completion of the amalgamation of Tata Steel BSL Limited into and with Tata Steel, divestment of its stake in NatSteel Holdings and segregation of TSE into TSN and TSUK. In Q4 FY 2021-22, the Russia-Ukraine war strained raw material prices globally, especially coking coal prices. In the year ahead, the Company will stay focused on execution of its strategic priorities including growth projects, achieve excellence at all touch points and enhance agility.

The Company remains committed to execute the following Long Term Plans by 2030:

Leadership in India:

Companys focus on domestic markets aligns with the increasing prominence of India in the global economy and steel industry. During the year under review, Tata Steel through its subsidiary Tata Steel Long Products Limited, acquired Neelachal Ispat Nigam Ltd to increase its market share in long products business. The Company aspires to increase its production capacity to reach 40 MnTPA by FY 2030. The Company also aims to be the most respected and preferred steel supplier to discerning customers in Indian markets. Companys leadership aspirations establishes the need to be ahead of the curve on digital disruptions, changing consumer behaviour, and building a culture of customer obsession throughout the organisation. Key attributes of leadership includes delivering innovative products & services, serving existing and emerging customer needs and providing the best customer experience.

Consolidate position as global cost leader:

The ongoing Russia-Ukraine conflict along with the China-Australia trade war has resulted in extreme swings in the raw material and steel prices in the International market. To make the Companys performance more resilient, the Company is focussing on both operational and structural cost improvement initiatives. Several initiatives like Aspire, Shikhar 25 have led Tata Steel to operate at global / Indian benchmark levels on multiple KPIs. Cost leadership can be achieved through execution of structural cost reduction initiatives such as investments in augmenting the raw material portfolio to meet increasing demand, strengthening logistics networks and fixed cost reduction among others.

Attain leadership position in adjacent businesses: It is important to explore and lead in adjacent businesses that leverage the Companys capabilities and market opportunities. The Companys approach is to differentiate from its competitors, through deep understanding of customer needs, technology and knowledge. Adjacent businesses where the Company aspires to attain leadership position are:

1) Services & Solutions (S&S): Leveraging the Companys deep knowledge and expertise in steel applications to create solutions for construction and household applications such as doors, windows, and housing solutions.

2) New Materials Business (NMB): Taking advantage of growth in non-steel materials driven by mega trends (such as light-weighting, cleaner environment), NMB will create technology-driven businesses in identified materials. The business is focusing on composites, graphene, and advanced ceramics for medical materials.

3) Commercial Mining (through its wholly owned subsidiary Tata Steel Mining Ltd.): The Company aspires to leverage the opportunities arising from the Governments "Atmanirbhar Bharat" Programme and regulatory changes to meet captive raw material requirements beyond 2030 by creating a sustainable mining business.

Leadership in sustainability: Sustainability is a key issue for steel industry. Tata Steel aspires to achieve leadership in the following areas of sustainability: reduction in specific carbon emission intensity across the value chain, reduction in specific water consumption, reduction of specific dust emissions, enhancing circular economy as a business model, and enriching the biodiversity in areas of our operations. The Company has taken aspirational targets in each of these areas. Use of technology and innovation in existing processes and business models will be critical to achieve the targets.

In pursuit of its strategic objectives, the Company remains committed towards working on four key strategic enablers. Building a workforce which is future ready along with enabling policies and infrastructure to support future of work and workplace will be critical to attain and retain the best talent in the industry. To create a safe and healthy environment for all employees, the Company is focusing on reducing unsafe incidents at the workplace through process and technology interventions. Connected platforms with analytics and system generated insights and alerts play a pivotal role in our safety journey. Digital has significant potential of creating and unlocking value in existing processes. Tata Steel has made significant progress on the digital journey and has three World Economic Forum Industry 4.0 lighthouse sites. Tata Steel aspires to be a digital leader in the steel industry globally. The Company recognises that technology led differentiation in products and processes is going to be key to attain and sustain a leadership position in the industry. To this effect, it aspires to be among the top 5 in steel technology globally. This will enable the Company to meet the emerging needs of existing and new segments and meet challenges like reduction of carbon emissions and Green House gas emissions. Fostering a culture towards agility, innovation, digital, environment, diversity, and safety will be critical for the Company to achieve its strategic objectives and be future ready.

VIII. Human Resource Management and Industrial Relations

Human resources have always been one of the most valued stakeholders and employee centric culture has been a key differentiator for Tata Steel. The Companys goal of becoming the Best Workplace in Manufacturing has led us on a path of new world of possibilities, requiring us to work on new set of challenges for future ready workforce.

Tata Steel has a culture of working together through joint consultation between Union and Management and has a very strong commitment towards community development. Its people practices have enabled the Company in creating an environment of collaboration and connect which has aided Tata Steel to achieve industrial harmony for over 93 years. Continuing its people centric philosophy, the Company has successfully completed the human resource integration of Tata Steel Meramandali during the year under review.

Despite the pandemic bringing new challenges before the Company, it continued to evolve its people practices in supporting its employees through the challenging times. The Company pursued vaccination of its workforce and their family members and achieved the vaccination coverage of over 99% of own and contract employees across all location and businesses. COVID-19 Family Protection Scheme was introduced to support the family of employees who succumbed to death due to COVID. COVID-19 brought digitalization into sharp focus with many projects being implemented to ensure employee safety & wellbeing and new way of working.

To remain competitive, improving employee productivity is of utmost importance to the organization and Tata Steel strive to achieve benchmark performance in this area by undertaking initiatives like revised "Sunehere Bhavishya Ki Yojana 2.0" and Internal Talent Bank for redundancy management. During FY 2021-22, the overall Employee Productivity for the Company increased from 745 tonnes to 854 tonnes of crude steel/ employee/year.

During the year under review, the Company implemented some major initiatives to promote inclusion and diversity. The Company deployed the batch of 14 transgender trainees as heavy machinery operators at West Bokaro Coal Mines and 12 transgender trainees at Kalinganagar Plant. Women@

Mines coverage was extended to West Bokaro location and 16 female trainees were onboarded. Tata Steel has rolled out various sensitization initiatives for inclusion of LGBTQ+ workforce. Efforts have also been taken on creating digital infrastructure for diverse workforce as well as retaining and developing women leaders to create a pool of diverse talent in the organization. Our continuous efforts were recognized and we were declared IWEI GOLD Employer for LGBT Inclusion 2021 and amongst 100 Best Companies for Women 2021 by AVTAR & Working Mother.

Tata Steel continues to be focussed on employee well-being. "Take Care" - An employee well-being initiative was introduced to sensitize the workforce on mental well-being. "Moment that Matters" was introduced to celebrate key moments in employees journey.

Tata Steel is committed to improving the quality of life of the communities it serves through long-term stakeholder value creation based on the ethos of the Tata Group - Leadership with Trust. Respecting and upholding human rights of all stakeholders is integral to this commitment. Tata Steel have adopted the Tata Steel Business and Human Rights Policy in FY 2021-22 which sets out its commitment towards respecting and upholding human rights of various stakeholders. This policy has six commitments on human rights, viz establishing governance, integration in strategy & risk management, sensitization, advocacy, grievance redressal and public disclosure. The Senior Management has an oversight on protection of human rights in Tata Steel and an Apex Business & Human Rights Committee has been established for deployment of this Policy within the company.

Multiple initiatives for skill building of employees were undertaken during the year. Step Up - An AI Based Talent Marketplace was rolled out to enable employees to get exposure in various cross functional projects of their preference. 8 new school of excellence were launched in the prioritized area and evening diploma program was introduced for the employees.

Tata Steel was once again certified as Great Place to Work? in the Great Place to Work study and was declared as one of the top 30 Indias Best Workplaces in the Manufacturing sector by Great Place to Work? for the 5th time. Tata Steel was also recognized Indias Best Employers Among Nation builders by Great Place To Work?. This year, Tata Steel was also adjudged as amongst Top 5 Employer Brand by Randstad Employer Brand Research. Tata Steel was also recognized as Best Companies to Work for in India by Business Todays BT-Taggd survey and also held the top rank in Manufacturing Sector in the survey.

IX. Digital Transformation

With the onset of COVID-19, the rate of digital transformation has only accelerated with enablement of digital technologies. The lines between the physical, digital and biological have been substantially blurred by a fusion of technologies that are enabling the 4th Industrial Revolution.

Data is fueling the 4th Industrial Revolution (4IR) - The ability to generate, store, process and consume data has grown exponentially. Proliferation of smart sensors, digital apps, high speed & inexpensive connectivity, near-unconstrained computing capacity & human ingenuity are propelling humankind towards an era that will be integrated across time & space, eliminate information & knowledge asymmetry and underpinned by sustainable living. The Company made a commitment to Cloud, Data and Artificial Intelligence as the building blocks of the digital transformation journey as it moved ~85% of its servers to cloud over the last four years.

The second critical component of the transformation is talent - The Company undertook major step for retaining talent is bringing work to talent irrespective of work location in the form of work from home, virtual command centers for manufacturing and mining, simulation training in mills. Digital skills are essential for transformation and their need is here to stay, so the Company is continuously providing various online training initiatives and platforms for upskilling, reskilling including training on blockchain technology and judiciously purchasing talent with these skills.

One of the most critical component of the transformation is business centricity. Though technological advancement is a component of intelligent and agile behavior, business transformation shall always keep its primary focus on the strategic goals of the Company. Towards this, the leadership team shall encourage ideation & innovation. Further, concepts like Reverse Mentoring, which was recognized as an Industry best practice by the World Economic Forum, can help stimulate leadership thinking. Under this program a Senior Leader is mentored by a Millennial / Zoomer (Gen Z) on the possibilities of how digital technologies can be used in the business functions. Additionally, a robust program governance brings in the required amount of time & mind share of the leadership to build and sustain the momentum for change. Organizations would need to get their Technology, Talent and Governance strategies right to be able to ride the ensuing wave of Industry 4.0 and reap timely and handsome benefits. The key to success for any business is the ability to make timely decisions and for that to happen it is imperative that the decision makers across levels have access to the right information & insights at the right time. Digital technologies enhances the flow of real time information sharing for better decision making. Quality and quantity of data coupled with Data Science techniques provide decision makers with insights from the past which enables them to take realistic decisions. Hence, the differentiator for businesses today and way forward will be their ability to harness the latent strength of Data. Robust use of digital technology has the potential to significantly uplift operational efficiency, productivity, throughput & organizational agility to deliver seamless & hyper-personalized experience to all their stakeholders through their products and services.

As Tata Steel continue to leverage the power of Data and ride the 4th wave of Industrial Revolution, it is increasingly becoming apparent as to the steps businesses need to take going forward to stay relevant and be more conscious in their business processes and dealings. Whether it is environmental sustainability or people centricity, a sustainable and profitable business would need to assimilate further into the conscience of the community they operate in, all of which are possible through the application of Industry 4.0 technologies. These aspects of sustainability & community centricity coupled with harmonized human-machine interface and responsible usage of digital technologies together forms part of 5th Industrial Revolution. This is expected to bring greater economic prosperity and better standards of living.

X. Corporate Finance

The International Monetary Fund has estimated that the global economy is projected to grow at 4.9% in 2022. Beyond 2022 global growth is projected to moderate to about 3.3% over the medium term. Advanced economy output is forecasted to exceed pre-pandemic medium-term projections largely reflecting sizeable policy support in USA. By contrast, persistent output losses are anticipated for the emerging market and developing economies due to slower vaccine rollouts and generally less favorable policy support compared to advanced economies.

On the domestic front, GDP is expected to grow by 7.2% in FY 2022-23. Further in FY 2023-24, assuming a normal monsoon, and no major exogenous or policy shocks, the GDP growth is estimated at 6.3% with quarterly growth rates in the range of 5.9%-6.8%.

The GDP growth estimates are subject to certain upside and downside risks. Upside risks could emanate from stronger and sustained expansion in domestic demand. Domestic demand is expected to be led by the governments thrust on capital expenditure, healthier corporate balance sheets leading to private investments and re-start of contact intensive services. On the contrary, the heightened geopolitical tensions leading to high commodity prices including crude oil and the loss of momentum in global trade and demand pose sizeable downside risks to the baseline growth path. Renewed COVID-19 infections, pandemic-related global supply bottlenecks and advanced economies monetary policy normalization also add to the downside risks.

Financial Markets:

Global financial markets experienced dramatic swings from buoyancy to a whirlpool of volatility amidst heightened uncertainties over Delta and Omicron variant in Q1 and Q3 of FY 2021-22. Imminent tapering of asset purchases and rate hikes by the US Federal Reserve and other leading central banks also kept continued rise in financial markets under check. During Q4 FY 2021-22, the sharp escalation of geopolitical tensions culminating in military intervention in Ukraine stunned global markets across asset classes. Global oil and commodity prices spiked to multiyear highs, equity markets in several economies experienced sharp declines, sovereign bond yields in large economies like US fell as investors looked for safety. The US dollar also strengthened on safe-haven demand while emerging market currencies weakened.

On the domestic front, financial markets remained volatile because of the outbreak of new variants of COVID-19, domestic inflation, bearishness about the large government borrowing programme and, existing geopolitical conflicts. Domestic equities witnessed sharp sell-offs in the second half of February 2022 over Ukraine-Russia tensions but recovered in the second half of March 2022. Overall, the BSE Sensex scaled above 60K in January 2022 compared to previous year, a growth of 20%. However, the geopolitical event led correction in the stock prices, coupled with higher corporate earnings, led to the price-to-earnings ratio (of BSE Sensex) falling to 25.1 by end- March 2022 from 27.6 in end-September 2021, moderating the valuation premium over its long-term average.

In the bond markets, interest rate tightening is visible with ten years of G-sec yields hardening in the second half of the year by 63 bps. Higher than expected state govt/UT borrowings, rise in US yields, increase in international crude oil and other commodity prices over escalating geopolitical tensions have pushed G-Sec yields higher. Tracking G-sec yields, Corporate bond yields also moved higher and risk premia compressed amidst moderation in new issuances due to lower demand as the capex cycle still remains at a nascent stage. Corporates resorted to increased overseas issuances and bank loans to take advantage of lower prices resulting in lesser bond issuances in domestic market.

Central Banks and Monetary Policy:

COVID-19 saw an unprecedented policy response mounted by governments and central banks. The IMF estimates that US$16.9 trillion or 16.4% of global GDP had been pledged as fiscal support in response to the pandemic, with US$14.5 trillion by advanced economies and US$2.4 trillion by emerging economies, including the low-income developing countries. However, post-vaccination recovery, the demand rush and supply gaps have pushed inflation higher with the Bloomberg commodity price index hitting 8 year high in early March. With the Russia-Ukraine war propelling outright supply losses, Crude Oil has hit 133$/barrel in March 2022 which has remained in the $110/barrel range. Food prices also hit an all-time high with a 20.7% year on year increase since February 2021.

In the US, headline inflation hit 40 years high at 7.9%. With its alarming increase, Fed raised the target range for the Federal Funds rate by 25 bps to 0.25%-0.5% in March 2022, the first-rate

hike since December 2018. Similarly, in the Euro area also, CPI inflation scaled a historical high of 7.5% in March 2021. UK also struggled with high inflation at 6.4% - the highest in the last 25 years. Bank of England, raised rates by 15bps in December 2021, 25 bps in February 2022 and 25 bps again in March 2022, clearly suggesting that interest rates are headed higher.

Closer home, the upper tolerance limit for CPI inflation of 6% was breached in February 2022. Though, the MPC of the RBInoted that the domestic recovery needed to be nurtured assiduously through all policy channels and decided unanimously to keep the policy repo rate unchanged at 4%. However, in the latest action, it has incentivized banks to park funds with RBI by increasing Standing Deposit Facility rates. This is aimed at decreasing liquidity in the system and will also propel higher overnight rates. This indicates RBIs focus is moving towards controlling inflation rather than nurturing growth.

Financing:

COVID-19 pandemic in FY 2020-21 necessitated a sharp focus on cash flows. The cash flow focus in the Companys business processes has helped in optimizing its working capital through better inventory management, faster collection from debtors and extended credit period from suppliers.

China has been contracting its steel capacities to reduce carbon emissions. This has led to structural changes in the steel industry giving rise to higher regional production and consumption, thereby reducing export capacities and increasing international prices. In response to the pandemic, governments across the world rolled out large stimulus packages including by way of developing infrastructure projects. The combination of lower supplies and strong stimulus by the economies have taken steel prices higher across the world. Taking the advantage of the upcycle, Tata Steel continues the pace of deleveraging in FY 2021-22.

During the FY 2021-22, debt levels of the Company were significantly reduced as the Company repaid its debt of Rs.15,232 crore on a consolidated basis. The Company had outstanding Gross Debt of Rs.88,501 crore as at March 31, 2021 which has now reduced to Rs.75,561 crore as at March 31, 2022. The deleveraging has significantly strengthened the balance sheet and cash flow planning of the Company.

The Company has restarted its capital expenditure program across various business units. The Cold Rolling Mill and Pellet Plant in Kalinganagar is expected to be operationalized shortly which will be margin accretive to the existing business.

Credit Ratings:

During the year under review, international rating agency S&P Global Ratings upgraded Tata Steels Corporate Family Rating by four notches to BBB- Outlook: Stable from B+ Outlook: Stable. With the upgrade, Tata Steel has become an investment- grade rated entity in the international markets. Further, Moodys also upgraded the rating by one notch to Bal Outlook: Stable from Ba2 Outlook: Stable due to its better-than-anticipated operational performance and reduction in gross debt during Fiscal 2022. Domestic rating agencies upgraded Tata Steel Ratings by one notch: India Ratings upgraded Tata Steels long- term credit rating by one notch to AA+ Outlook: Stable from AA Outlook: Stable. CARE Ratings upgraded Tata Steels long- term credit rating by one notch to AA+ Outlook: Stable from AA Outlook: Negative. Brickwork Ratings also upgraded Tata Steels long-term credit rating to AA+ Outlook: Stable from AA Outlook: Stable.

XI. Risks and Mitigation Strategy

Tata Steel operates in an interconnected world with stringent regulatory and environmental requirements, increased geopolitical risks and fast-paced technological disruptions that could have a material impact across the value chain of the organisation. Tata Steel has implemented an Enterprise Risk Management (ERM) process to provide a holistic view of aggregated risk exposures as well as to facilitate more informed decision-making.

In its journey towards risk intelligence, a robust governance structure has been developed across the organisation. The Board of Directors has constituted a Committee of the Board called Risk Management Committee. At the Senior Management level, an Apex Risk Committee (ARC) has been constituted to drive the ERM process across the Tata Steel Group.

Information regarding key risks facing Tata Steel and their mitigation strategies is given here:

Financial Risks

Inflation concerns have been mounting globally particularly in the US and Europe. The recent war in eastern Europe has also disrupted supply chains and led to heightened volatility in financial markets which has further exacerbated the inflation concerns. Central banks throughout the world have begun hiking rates in response.

As the Company is on a growth path and has large capital requirements, the cost of financing may be adversely affected by the rising rate environment.

The Company is also exposed to currency volatility given the import requirements, foreign currency debt and offshore operations.

Development in climate change regulation and disclosure standards reduces access to capital and increases cost of funding.

Mitigation strategies

The Company has been generating strong cashflows on the back of strong operating performance and focused working capital management. It has been aggressively deleveraging over the last few years which has improved its credit metrics significantly and reduced its vulnerability to financial market volatility and rising interest rates.

The Company endeavors to strike a balance between growth and deleveraging and to optimize its financial plan to meet this objective. It has a robust capital allocation strategy which prioritizes margin accretive projects with shorter payback periods. In line with this policy, the Company has also exited its operations in Singapore. Our 5 MnTPA TSK phase - II expansion has been financed largely by internal cashflows. Our subsidiary, TSLP was selected as preferred bidder for NINL, a 1 MnTPA long products steel plant. The acquisition is being financed by Tata Steel through a combination of internal accruals and bridge loans which are expected to be paid down through internal cash generation over the next few quarters.

At the start of this financial year, we had set a target of achieving investment grade level financial metrics and we were able to achieve the same within 6 months of this financial year. In October 2021, S&P upgraded Tata Steel to investment grade level BBB-.

The Company has a robust hedging policy which defines the risk management framework and the risk appetite of the Company. Based on this policy, a dedicated and experienced Treasury team manages the currency and interest rate exposure on operating and project flows and on offshore debt. The Company is also actively de-risking its currency exposure by prioritizing repayment of offshore debt. During FY 2021-22, US$ 2.1 Bn of offshore debt was reduced.

To keep ourselves ahead of the climate change risks, we intend to reduce our carbon footprint and have set our decarbonisation targets. We also continue to improve upon our disclosure of environmental, social and governance factors. We are also driving monitoring and compliance towards various emission parameters as per the guidelines of global financial institutions.

Regulatory Risks

The steel sector is subject to an extensive, complex and evolving regulatory framework that may have material impact on operations.

Any deviation in compliance and adherence has the potential to not only impact the Companys operating performance but also impact its reputation adversely.

Global disruptions, emerging trade patterns and evolving environmental & sustainability policies, etc. could influence business decisions and market footprint. The aim is to protect and enable business to generate value.

Mitigation strategies

The Company is constantly monitoring the regulatory landscape to proactively assess the impact of changing laws and policies and evolving government mindset on matters affecting Companys operations.

We are committed to complying with existing laws and regulations, promoting environmental stewardship and have a policy of zero tolerance to non-compliance. It is an integral part of our culture and operating philosophy.

The Company has a robust compliance management system to ensure awareness and compliance. The Company has invested in benchmark systems and processes that are accessible to all to steer compliance across the organization. The roles and responsibilities have been clearly defined for providing due focus and ensuring compliance.

Policy Advocacy is undertaken to advocate best available practices, simplify guidelines to reduce cost of doing business and improve ease of doing business in a manner that promotes the best interest of the industry and the country.

Technology is being utilised to track compliance, timelines with suitable escalations, action plans and reviews. Investments needed to comply with regulatory requirements are prioritized within the capital expenditure approval framework.

Macroeconomic and Market risks

Steel demand is affected by high inflation, especially for energy and commodities, trade barriers and protectionist policies. Re-imposition of mobility restrictions amidst spread of new variants may also affect demand and supply chains potentially impacting sales. Fast-paced technological changes and shifting customer preferences may necessitate adoption of newer grades of steel and alternate materials.

Mitigation strategies

The Company undertook numerous steps to deal with the challenges in the operating as well as the macro-environment arising out of the COVID-19 second wave and the ensuing localized restrictions imposed by the state governments. Scenario-based risk assessment was conducted to assess and plan for a range of outcomes. In periods of softness in domestic demand, Tata Steel opted for higher proportion of exports. This year, we focused on diversification of exports in terms of geographies and products (downstream). As the restrictions eased out and domestic demand improved, domestic deliveries were increased. A real-time digital dashboard was also put up during the COVID-19 second wave for monitoring and updates of the risks arising out of the resurgence of the pandemic and mitigations were pursued accordingly. We remain vigilant of the evolving market conditions and its impact on steel-intensive sectors. There was increase in cold rolled and coated market share across key OEMs and ancillaries. The Company also focused on enhancing channel capacity (reach) and capability. TISCON is the first Indian rebar to be awarded GreenPro certificate. In our endeavor to enhance footprint in India, we have built a diversified portfolio of product offerings for customers from a range of industries to leverage the growing opportunities in these segments.

Dedicated marketing and sales teams service customers and build deep customer engagement by customizing products, improving reliability and providing value added services. Tata Steel has invested in building a strong marketing franchise with well-regarded brands and a large network of distributors and dealers across the country. This helps in increasing the stickiness of sales and reduces the exposure to business cycles. It has also built distribution channels internationally to enable exports as and when desired. Steel is a cyclical industry and the only way to beat this cyclicality is by offering solutions. We have forayed into ready-to-use steel for construction industry and introduced products such as steel doors and windows, furniture to enhance our retail customer base. Sustainable coated products such as GalvaRoS, & Colornova and customized solutions help meet unique requirements of our discerning customers. We are also diversifying our product offering beyond steel by introducing new materials such as Composites, Fiber Reinforced Products, etc.

Operational Risks

Disruption to Tata Steels manufacturing processes caused due to various factors such as equipment failures, natural disasters, epidemics or pandemics or extreme weather events, etc. could adversely affect its operations and customer service levels.

Mitigation strategies

The Company is focused on adopting advanced maintenance practices to improve plant availability and reliability. There is a dedicated team that analyses benchmark practices for formulation and execution of advanced maintenance practices. The Maintenance Technology Roadmap is well in progress for transitioning to Predictive Maintenance based practices. This is helping in improved asset reliability across the steel value chain. Robust digital ecosystem to enable leveraging data science and IoT for real-time shutdown management continues to be operational for ensuring optimal coordination.

Recognition of Tata Steels Jamshedpur Plant along with Kalinganagar Plant in India and the IJmuiden Plant in the Netherlands as Advanced 4th Industrial Revolution Lighthouse by World Economic Forum is a testimony to the effectiveness of the organizations investments in state-of the-art equipment and processes. Digital initiatives have been undertaken to optimize inventory and improve process efficiencies to achieve benchmark availability at optimal cost. Focused drive towards indigenization of spares has helped in self-reliance and is also aligned to Make-in-India concept. Accordingly, several vendor partners are being developed to supply benchmark quality spares with optimum lead time. We remain vigilant of the volatile pandemic situation and have taken several measures towards employee health and safety while ensuring continuity of business operations. We also have disaster plan and related SOPs to pro-actively respond to natural disasters, epidemics or extreme weather events.

Safety Risks

Inconsistent adherence to process & workforce safety requirements, safety laws and regulation may have adverse impact on business continuity and operation. The implications of the risks increase manifold with the growth and diversification of our business and operations at multiple locations that subjects the Company to various stringent safety laws and regulations.

COVID-19 contagion poses risk to workforce health and safety and may lead to business disruptions.

Mitigation strategies

With the motto of "Committed to Zero", we have remained steadfast to our belief of safeguarding people. To meet this target, the Company has continuously fortified the Safety Management and governance mechanism and built a safety focused culture across business operations. Risk reduction at the workplace and improvement in the risk perception of the workforce has been the focus area in last financial year. A robust risk management framework is in place and continuous efforts have been put to improve the risk visualization among workforce. Improving the behavior of the workforce through experiential learning and focus on dissemination of safety standards has been the key to improve risk perception. Reinforcing this culture through rewards & recognition as well as sensitising the workforce to the extent of reaching out to their families through programs such as Ghar se Ghar tak have gone hand in hand. Various campaigns such as National Road Safety Month and those related to mitigation of risks associated with top hazards were undertaken. The employees are provided awareness and engaged through online quizzes, mass mailers and SMS, message by senior executives, various competitions etc. Further, Tata Steel stresses upon the capability development of all stakeholders such as employees, vendor & business partners and trainees at regular intervals.

Tata Steel has institutionalized business continuity management through development of tactical center for response to any major onsite emergency and developed CoE (Centre of Excellence) in Process Safety Management to deploy standardized process safety management across the organization. Workplace Safety & Process Safety Management in Tata Steel have matured over the years through adoption of various robotic and technological solutions. Digital platforms have been continuously enhanced to address and mitigate key concerns.

Tata Steel launched POD system - a multi-layer protection to break the transmission circuit of COVID-19 virus at the workplace in August 2020. During the second and third waves also, the workforce has been modalized into 5,000 PODs and inter-POD movement is restricted to prevent contamination

among majority of the workforce in case someone tests positive. POD breaches and deviations are well tracked in the IT system. POD members maintain social distance and frequently sanitize their equipment, making for a more secure tomorrow.

Tata Steel has been recognized for efficiently handling COVID-19 by the World Steel Association for its application on Ensuring Workforce Safety & Business Continuity by mitigating COVID-19 Risk.

Community Risks

Our operations foster a shared societal context with communities proximate to our locations and are guided by an aspiration of significant and lasting betterment in the well-being of the region. This is fostered through continuous dialogue, understanding of vulnerabilities, recognition of aspirations and appreciation of cultural nuances leading to a relationship based on trust. An erosion of trust with communities will slow down societal impact and lead to consequent loss of reputation or business continuity for us.

Mitigation strategies

Tata Steel anchors one of the deepest and most diverse societal development efforts based on a combination of programmes and platforms reaching more than 2.8 million lives, including more than 1.8 million people reached through #CombatCovid19 programmes. The Company adopts a Board- led strategic approach to deepening trust and commits talent and resources through the Tata Steel Foundation towards enabling dialogue with and impact for the least served and most silent. The key impact programmes, each being large scale change models for core development challenges in India, span rural & urban education, household health & nutrition, tribal cultural heritage, livelihoods, agriculture, water resources, dignity for disabled, grassroot rural governance, grassroot sports, women & youth empowerment, public infrastructure etc. are closely aligned to the Sustainable Development Goals 2030 agenda. These have yielded significant long-term results including more than 2,400 habitations being declared child labor free zones, 40% decline in maternal and child mortality rates in remote tribal regions, more than 9 million cubic feet of water conserved annually through watershed led programmes, more than 25,000 learners of tribal languages et al while curating positive social capital and effective leadership amongst communities. The key driver of this approach are multiple structured forums for dialogue with communities which are convened periodically to discuss and co-create a shared impact agenda.

The Company, also, has a portfolio of products which is aimed at addressing societal challenges such as affordable housing and farm income enhancement, while key business processes are also designed to have a clear diversity and affirmative action perspective. Tata Steel Thailand is one of the first 30 companies that joined UNICEF in Child Friendly Business in "The Children Sustainability Forum" to make a commitment in protecting childrens rights. Tata Steel Europes Community Partnership Programme Future Generations, with sub-themes of education, environment, health and well-being, works across the UK, assisting job and wealth creation by supporting small and medium businesses with finance and business premises.

Our efforts have been recognized across national and global platforms including Government of India, Dun & Bradstreet, Confederation of Indian Industry and BRICS Business Council.

Commodity Risks

Volatility in raw material prices (mainly coal and iron ore) significantly impacts the input costs in steelmaking and therefore, profitability.

Dependence on global supply chains as well as geo-political events requires close tracking of potential risks. Chinas continued ban on Australian coal, Indonesias ban on coal exports in January 2022 and ongoing Russia-Ukraine conflict have already resulted in a shift in global metallurgical coal trade flows.

Such political events in combination with other events such as changing weather patterns, COVID-19 related production issues, long wall moves or maintenance in various mines, increasing financialization of commodities markets etc. have led to demand-supply gap and elevated prices of these commodities.

Mitigation strategies

Steel prices have a significant correlation with raw material prices. Changing prices of coal and iron ore generally reflect through adjustments in steel prices, which in effect acts as a natural hedge against volatility. However, there may be a lead and lag factor involved and hence several steps are being taken to manage the price volatility. For iron ore buy from external market, we hedge the spread between the bought-out ore and confirmed steel orders. For metallurgical coal, we use predictive analytics tool to have advance information on price direction and optimize the timing of our spot buys through Reverse auctions.

Captive/domestic raw materials provide another avenue to guard against volatility as they have relatively stable cost/ price. Risk assessment for key vendors is also undertaken to assess the capability of vendors in meeting the supply requirements. We proactively engage on assessing the risk of single geography/ proprietary sourcing and mitigations have been put in place to diversify sourcing (with focus on indigenisation) and/ or finding alternate materials.

Supply Chain Risks

Tata Steel has one of the most complex integrated value chains extending from mining to customers (finished steel products and downstream processing). The continuous growth strategy through inorganic and organic routes has added to the complexities and expanse of the Supply Chain. Our raw materials are sourced from diverse geographies while some requirements are also concentrated in specific geographies, thus any weather disruptions or geopolitical instability puts a threat on the material availability. The political instability coupled with intermittent waves of pandemic is not only a threat to the raw material supplies but also has an adverse impact on ship and container freights and availability. Further, 40% of the steel capacity is concentrated in Eastern India, whereas the consumption points are largely in North, South and Western part of India. Thus, the common logistics infrastructure resources such as ports and Indian Railways are constrained in terms of capacity and our dependency on these poses a risk to supply chain disruptions especially during circumstances such as power crisis which has now become a regular event. The statutory norms are getting more stringent and there is an emerging need to address Environmental and Social Governance issues to be able to sustain business in the long run.

Mitigation strategies

Although the Tata Steel supply chain is complex, it provides opportunities for value maximisation through global optima, the need for which is more apparent and obvious with operations getting multi-site and multi-locational. Thus, to bring an integrated approach and achieve global optima, "One Supply Chain division" was formed. One Supply Chain works in synergy with various divisions with an overall focus on enhancement of supply chain performance for all sites. Digitalisation and Optimization are the key levers being used to enhance visualisation and bring about integration. This is helping Tata Steel to take proactive decisions, keeping system view in mind and achieving integrated margin management. Tata Steel continues to work towards diversification in sourcing and expansion of the vendor base to manage the supply chain disruptions. In order to mitigate the impact of market volatilities on our cost, Supply Chain has adopted hedging as a strategy in Shipping and Bunkers in addition to the long-term contracts already in place. In order to keep up with the production growth strategy, Tata Steel is developing its own port- Subarnarekha Port Private Limited to de-risk the import supply chain. To improve reliability of supplies Tata Steel has invested in private freight train schemes-GPWIS (General Purpose Wagon Investment Scheme) and SFTO (Special Freight Train Operator) and deployed its own rakes which is further being increased. Tata Steel is making all endeavors to keep itself ahead of statutory sustainability norms and moving towards a greener Supply Chain. Tata Steel is one of the few companies to measure end to end scope 3 emissions in all modes of transportation giving it an equal focus as scope 1 and scope 2 emissions. Tata Steel became the first steel producing signatory and 24th organization to join the Sea Cargo Charter to measure and reduce environmental impacts of global seaborne cargo. Tata Steel has deployed about 54 CNG/LNG based vehicles (road) for last mile delivery to reduce its CO2 footprint. As a first mover to deploy electric vehicles in freight segment, Tata Steel has tied up with an Indian start-up and deployed four electric trailers for last mile delivery. Tata Steel has onboarded its partners for steel processing in the journey of Responsible Supply Chain Policy for identifying gap and deploying action plan to ensure minimum standards in fair business practices, health and safety, human rights and environmental performance.

Thus, Tata Steel is adopting a three-pronged strategy of Service Reliability, Infrastructure Resilience and Cost Optimisation for a future-ready Green Supply Chain.

Information Security Risks

The Company focuses on enhancing our digital footprint through our value chain, including customers, suppliers and other stakeholders of the Company. Transition to remote working models and accelerated adoption of digital technologies has increased vulnerability to cyber-attacks.

Non-compliance to IT legislations and regulations may lead to business disruption and imposition of penalties.

Mitigation strategies

Over the years, the Company has made several investments for digital transformation. SAP and other Corporate systems which were On-Premise have been migrated to Cloud. We have a distributed Hybrid Multi Cloud Environment with SAP and other Corporate Applications on IBM cloud, Analytics applications on GCP (Google cloud), Data Visualization Platform on AWS and Collaborations Platform on Azure. The Edge Computing systems such as MES (Mill Execution Systems) are by design kept On-Premise.

Our Network Topology is a multi-layered & ring-fenced network architecture. The Company is evaluating SDWAN (Software Defined Wide Area Network) to build capacity and resilience in network.

Adoption of next Generation SOC controls and technologies has resulted in proactive detection of unwarranted system breach and timely mitigation of the same, ensuring business continuity which is being planned for roll out in Tata Steel Group Companies. These controls are being continuously updated and reviewed to take care of new vulnerabilities such as Supply chain attacks and cyber threats arising out of current geopolitical situations (e.g., Russia-Ukraine conflict). The Company has engaged with best-in-class service providers for SOC services with maker and checker concept for implementation of security safeguards & controls and subsequent identification of security deployment gaps.

End-Of-Life (EOL) Systems are being replaced with new systems as part of refresh. Over the years, the Company is continuously building enough resiliency & capacity in Network. Significant efforts have been made to increase awareness amongst workforce with respect to cybersecurity. This ensured seamless migration of our work processes to remote working models across the Company locations during the pandemic. The Company has also implemented Advanced Threat Protection (ATP) for protecting from Phishing/Spam mails, Data Leak Prevention (DLP) over internet connections via cloud proxy and WFH (work from home) seamless and secure connectivity over zero-trust architecture.

The Company has enacted various policies and procedures to ensure data privacy. Proactive software asset management is being carried out to ensure compliance.

XII. Internal Financial Control Systems and Internal Audit

The Company has an Internal Financial Controls (IFC) framework, commensurate with the size, scale, and complexity of the Companys operations. The Board of Directors of the Company is responsible for ensuring that Internal Financial Controls (IFC) have been laid down by the Company and that such controls are adequate and operating effectively. The internal control 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 Companys internal financial control framework is commensurate with the size and operations of the business and is in line with requirements of the Companies Act, 2013. The Company has laid down Standard Operating Procedures and policies to guide the operations of each of its functions. Business heads are responsible to ensure compliance with these policies and procedures. Robust and continuous internal monitoring mechanisms ensure timely identification of risks and issues. To make the controls more robust and comprehensive, IFC standardization & rationalization project was undertaken in FY 2020-21 which has ensured comprehensive coverage cutting across all functions of the company. In order to reduce manual time and efforts involved in control testing, improve confidence in testing results, increase the frequency of testing and resort to full checking of the data as compared to sample testing, automation of controls was also undertaken in FY 2021- 22 whereby around 30% of the controls have been automated and will be tested in automated fashion going forward. The management, statutory auditors and internal auditors have also carried out adequate due diligence of the control environment of the Company through rigorous testing.

The Company has deployed SAP Governance, Risk and Compliance (GRC) Module and other IT platforms to keep the IFC framework robust and our Information Management Policy governs these IT platforms. IFC has been documented and embedded in the business processes and such controls have been assessed during the year under review and no material weaknesses were observed.

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 efficacy 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 at its meetings reviews the reports submitted by the Internal Auditor. Also, the Audit Committee at frequent intervals has independent sessions with the statutory auditor and the Management to discuss the adequacy and effectiveness of internal financial controls.

XIII. Statutory Compliance

The Company has in place adequate systems and processes to ensure that it is in compliance with all applicable laws. The Company Secretary & Chief Legal Officer (Corporate & Compliance) is responsible for implementing the systems and processes for monitoring compliance with the applicable laws and for ensuring that the systems and processes are operating effectively. The Chief Executive Officer and Managing Director, places before the Board, at each meeting, a certificate of compliance with the applicable laws. The Company Secretary & Chief Legal Officer (Corporate & Compliance) also confirms compliance with Company law, SEBI Regulations and other corporate laws applicable to the Company.