Tata Steel Ltd 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 financial year 2020-21. This report 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, (Act) and regulations issued by the Securities and Exchange Board of India (SEBI), each as amended from time to time.

II. External Environment

1. Macroeconomic condition

Global GDP contracted by 3.5% in 2020 as governments in both developed and emerging economies took measures to contain the spread of the COVID-19 virus. While the decline was sharper than the global financial crisis in 2009, but the scale of the fiscal response to the COVID-19 crisis was unprecedented and three times bigger than 2008-09 financial crisis. The response by policy makers prevented a collapse that would have been at least three times worse, and the medium-term losses for the global economy are expected to be smaller than the global financial crisis.

While China is forecasted to continue its rapid growth in 2021, Latin America and the Eurozone is expected to lag behind. US saw overall GDP decline of 3.5%. Indias economy rebounded quickly from one of the worlds longest and most stringent lockdowns, which also came with steepest fall in GDP in Q2. Real GDP grew by 0.4% in Q3FY2021 after a contraction in the previous two quarters. Real GDP is estimated to have contracted by ~8% in FY 2020-21.

2. Economic Outlook

The accelerating rollout of COVID-19 vaccines in many advanced economies has set the stage for rapid recovery in the second half of this year and into 2022. Advanced economies will remain less affected by the virus this year and beyond, with low-income countries and emerging markets suffering more which is a contrast to 2009. While, the global economy is expected to recover to its pre-pandemic level of output in 2022,

the emerging-market and developing economies are expected to take until 2023 to recover to the pre-pandemic level.

Policy rates in the United States, Eurozone, United Kingdom, and Japan will remain near zero, well beyond 2021. Emerging- market and developing economies may take until 2023 to recover to the pre-pandemic level. Divergent recovery paths are likely to create wider gaps in living standards across countries compared to pre-pandemic expectations.

3. Indian Economy

India witnessed a gradual resumption of economic activity from Q2FY2021. The initial recovery was driven by government spending on infrastructure, exports and rural economy. The recovery gained momentum since August 2020 with pickup in consumption demand driven by festive buying and return of urban consumption. However, the growth projections for FY 2021-22 have been revised to be below 11% due to the acute resurgence of the virus in the country, as many cities and states went into lockdown. While the growth will depend upon the trajectory of the pandemic, the overall impact on the economy is expected to be less severe than last year.

India is expected to witness a full economic recovery in H2FY2022 driven by (a) ongoing vaccination supporting the current recovery momentum; (b) restart of investment cycle with significant spending on infrastructure and (c) continued recovery in consumption supported by urban demand, accentuated by work-from-home and preferences for personal mobility along with rising rural income and affordability. However, normal growth levels would be seen in FY 2022-23 only, provided no further economic disruption occurs and success of the ongoing vaccination drive.

III. Steel Industry 1. Global Steel Industry

Disruption on both demand and supply resulted in global steel demand in 2020 to fall by 0.2% against a growth of 3.7% in 2019. The total demand in 2020 was 1,772 MnT against 1,775 MnT in 2019. The impact of COVID-19 has been much more benign for the steel industry due to resurgent demand in China and better than expected post lockdown recovery globally in second half of 2020. China and Turkey were two key countries that saw an increase in finished steel demand of 9% and 13% respectively in 2020. North America and the European Union (EU) have experienced strong decline in steel demand owing to the COVID-19 pandemic. Both regions experienced demand decline of around 11%-16%. India also contributed to global decline, as

steel consumption in India declined by 13.7% to 88.5 MnT in

2020 against 102.6 MnT in 2019.

Up to 30% of global steelmaking capacity (excluding China) was idled or production at steel mills significantly reduced in response to a pandemic-induced drop in demand. However, the recovery in automotive production and white goods manufacturing was quicker than expected when the strictest lockdown measures were lifted. The construction sector was less affected, as it was supported by government stimulus schemes in many regions. As a result, steel prices rallied in all regions in late 2020.

2. Outlook for steel industry

Steel demand is expected to be strong due to recovery in manufacturing businesses around the world and global fiscal stimulus supporting infrastructure projects. The outlook for

2021 is expected to be positive because of the unprecedented fiscal stimulus provided by the governments across Europe, the US, Japan, Korea, Russia and China. These stimulus packages are expected to spur growth in these nations respective infrastructure sectors, boosting steel demand. China is expected to grow by 5% in 2021 with continuation of healthy demand conditions especially in the first half of 2021. Steel demand in key emerging economies (like India, Turkey) and Europe is expected to witness double digit recovery while Asia and Middle-East are likely to grow by 5%.

While it is expected that steel prices will consolidate closer to historical levels, prices are likely to remain high supported by (i) strong iron ore prices, (ii) rebound in coking coal prices, (iii) positive impact from stimulus plans, and (iv) improved business confidence from the roll-out of vaccines. Strong rebound of demand in 2021, in addition to supply-side reforms in China could lead to higher steel prices globally.

Political and geopolitical developments, such as a reduction in government stimulus programmes, policies to cut emissions and trade wars, could increase pressure on the steel sector.

3. Indian Steel Industry

Indias steel industry has also suffered the production loss due to lockdown last year and recovered gradually since then, initially driven by export followed by gradual recovery in domestic demand. Strong rebound in manufacturing and infrastructure development activity has led to a sharp rise in both production and consumption of steel in India. In 2021, Indias steel demand is expected to grow by 20% over 2020, taking the demand higher than the pre-pandemic level of 103 MnT, driven by strong infrastructure spending and sustained demand of automotive and consumer durables.

The key opportunities boosting the steel demand are as follows:

• Governments focus on strengthening the domestic manufacturing base under the flagship "Atmanirbhar

Bharat" programme. The Production Linked Incentive scheme has been introduced to boost the manufacturing sector in industries like automobile & auto components, consumer durables, solar equipment, telecom, etc. These are expected to boost steel consumption.

• Government has announced an investment of over Rs.1 trillion in infrastructure over the next 5 years. This would be a key growth driver not only for steel industry but will also be a multiplier of growth across the sectors, boosting steel demand from sectors such as transportation, real estate and infrastructure.

• Emergence of new trends after COVID-19 such as work from home, preference to physical distancing would create additional demand for furniture, personal mobility, etc. In addition, the rise in e-commerce activity will support the growth of warehousing and light commercial vehicles.

However, the downside to these opportunities are as follows:

• Resurgence of infections leading to fresh lockdowns, both localised as well as regional / national level resulting in disruption in economic activity.

• Heavy dependence of agriculture sector on monsoon. In last 2 years, a normal monsoon has supported the growth in agriculture sector.

• Slower recovery in contact-based services, which is an integral part of Indian economy and affects lives & livelihood of service sector.

IV. Operational Performance

1. Tata Steel Group

During the year under review, the consolidated steel production for Tata Steel Group (TSG) was 28.54 MnT recording a 7% decrease over that of the previous year, primarily due to disruptions arising out of COVID-19. TSG recorded total deliveries of 28.50 MnT as against 28.88 MnT in the previous year which was marginally lower by 1%. The steel deliveries decreased at Tata Steel Europe by 5% and at NatSteel Holdings by 25% due to lower demand. This decrease was off-set by higher deliveries at Tata Steel BSL Limited (TSBSL) by 4%. Further, deliveries at Tata Steel Long Products Limited (formerly Tata Sponge Iron Limited) increased by 25% and at Tata Steel Thailand by 9% due to higher availability of finished products and higher demand. The deliveries at Tata Steel (Standalone) were at par, despite disruptions arising out of COVID-19.

The turnover of TSG was at Rs.1,56,294 crore during FY 2020-21, an increase of 5% over the previous financial year due to increase in realisations across geographies, partly offset by marginal decline in deliveries.

The EBITDA of TSG was Rs.30,892 crore during the FY 2020-21 as compared to Rs.18,103 crore in the previous year

due to improvement in realisations along with lower cost and favourable exchange rate movement at other foreign entities.

TSG reported a consolidated profit after tax of Rs.8,190 crore during FY 2020-21 as against a profit of Rs.1,172 crore in FY 2019-20. The increase was mainly due to higher operating profits attributable to increase in the steel prices across geographies during FY 2020-21 along with lower cost and lower exceptional charge as compared to that of the previous year, partly offset by higher tax expenses mainly at Tata Steel (Standalone) due to higher profits. Moreover, the previous year included re-measurement of deferred tax liabilities based on the new lower rate of Income tax prescribed under Section 115BAA of the Income Tax Act, 1961 along with creation of deferred tax assets at some of the foreign entities as against creation of deferred tax liabilities during the current fiscal primarily at Tata Steel Europe.

2. Tata Steel Limited (Standalone)

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

During the year under review, the saleable steel production stood at 12.04 MnT which is ~6% lower over previous year and saleable steel sales stood at 12.36 MnT which is marginally higher than FY 2019-20. The hot metal production stood at 13.24 MnT which is ~6% lower than that of previous year as the plant operated at lower levels due to nation-wide COVID-19 lockdown.

i) Tata Steel Jamshedpur

During the year under review, Tata Steel Jamshedpur (TSJ) had produced crude steel of 9.34 MnT, lower than 10.19 MnT produced during FY 2019-20 due to COVID-19 lockdowns and business disruption. During FY 2020-21, there have been certain operational improvements such as increase in agglomerate consumption, lower consumption of ferro alloys, lime, refractories and specific energy. The Company has continuous operational improvement programmes through Shikhar 25, which is a focused EBIDTA improvement programme which works across departments of Tata Steel to improve operational efficiency, lower costs, optimise product mix, reduce and recycle waste and energy efficiency.

ii) Tata Steel Kalinganagar

During the year under review, Tata Steel Kalinganagar (TSK) had produced lower crude steel of 2.85 MnT as against 2.96 MnT in previous year, due to COVID-19 lockdowns and business interruptions. During the year under review, TSK achieved best ever power generation in house, captive power plant and Coke Dry Quenching power thereby reducing the purchased power requirement. The product mix in FY 2020-21 comprised low carbon, medium & high carbon, IF and peritectic micro alloy grades, which served different market segments such as LPG, Tube making, Tin plating, Construction & Projects, Lifting and Excavation, Automotives, Heavy Engineering, etc.

TSK has embarked upon second phase of expansion which will take its production capacity to 8 MnT per annum. Pellet Plant and Cold Rolling Mill (CRM) construction activities have gained momentum including the augmentation of raw material handling facilities.

TSK ensures better socio-economic development of the people in the peripheral areas of its operations, focusing on health, education, infrastructure development, livelihoods, skill upgradation and women empowerment among others.

b) Marketing and Sales Initiatives

During the year under review, the Company recorded sales of 12.36 MnT, which is marginally higher over the previous year. This increase is attributable to higher ex ports during the beginning of the financial year to combat the adverse impact of COVID-19 and nation-wide lockdown. Demand started to pick up from the second half of the financial year.

(Rs. crore)

FY 21 FY 20
Turnover 64,869 60,436
EBITDA 21,952 15,096
Profit before tax (PBT), before exceptional 15,022 8,315
Profit before tax (PBT) 17,795 6,611
Profit after tax (PAT), before exceptional 10,834 8,447
Profit after tax (PAT) 13,607 6,744
a) Operations
(mn tonnes)
FY 21 FY 20 Change (%)
Hot Metal 13.24 14.09 (6)
Crude Steel 12.19 13.16 (7)
Saleable Steel 12.04 12.88 (6)
Sales 12.36 12.32 0

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

Production and Sales of Steel Division (kt)

• Production

The break-up of sales in our various segments and the break-up of domestic sales to exports are as follows:

(Rs. crore)

FY 21 FY 20
Automotive & Special products 1.57 1.45
Branded Products, Retail & Solutions 3.42 3.82
Industrial Products & Projects 4.05 4.61
Domestic 9.04 9.88
Exports 2.41 1.50
Domestic + Exports 11.45 11.38
Transfers (Wires, Tubes, IBMD, Agrico) 0.91 0.94
Total Deliveries 12.36 12.32

The key business initiatives and achievements in the FY 2020-21 are given below:

Automotive and Special Products: The year under review started on a daunting note with demand plunging by 44% and 57% in Personal Vehicle (PV) and Commercial Vehicle (CV) segment respectively on a Y-o-Y basis by H1FY2021. However, the onset of the festive season in September 2020 brought significant uptick in demand also supported by the need for personal mobility in pandemic times. The impressive revival in demand in H2FY2021 ensured that the sector ended the year with a de-growth of only 11% and 18% in PV and CV respectively (Y-o-Y). Tata Steel registered annual sales of 1.57 MnT with an increase in market share over FY 2019-20 across all products (including outer skin panel, high tensile steel segment). The year ended with an overall market share of 43% as against 35% in FY 2019-20 on standalone basis. Tata Steel continues to command market leadership with high SOB (Share of Business) 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 including an enhanced focus on ancillary space by bringing in corporate level focus in large ancillaries, solution oriented offerings and broadening supply chain capabilities through new processing partners. It has helped us improve the sales experience of our customers when they do business with us. Also, the launch of a first of its kind digital VAVE (Value Analysis & Value Engineering) platform "e-DRIVE" helped take our customer engagement to a new level in these tough times.

Branded Products and Retail: During the year under review, Branded Products sales was 3.42 MnT (38% of total domestic sales of FY 2020-21).

The B2C segment achieved sales volume of 1.51 MnT in FY 2020-21. Tata Shaktee achieved a sales growth of ~4% over FY 2019-20 with a volume of 190kT from TSJ against 183 kT in FY 2019-20, with the scale up of new products such as WAMA (for walling application) and Long Length GC sheets contributing to the increase in sales. Tata KOSH has achieved

sales of 27 kT in FY 2020-21, despite COVID-19 led disruptions. In addition, TSBSL integration led to 27 kT (11% of Total Sales) of Tata Shaktee Sales and 43kT (61% of total Sales) of Tata Kosh sales through the Companys channel in FY 2020-21.

In FY 2020-21, B2ECA (Business to Emerging Corporate Accounts) business clocked a volume of 1.91 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) and introduction of segment specific 41 new products. ECA business launched 3 New Coated Brands from Tata Steel BSL "GalvaRoS, Galvanova and Colornova" for entry into new product and market segments like Appliances, Solar, Commercial Building. The New Coated Brands promote sustainability in line with the changing consumer requirements. DigEca, a digital solution for ECA business, has created real-time, segmental visibility of sales by channel partners to ECA customers.

Industrial Products, Projects and Exports: The vertical registered a strong performance on the back of exports in H1FY2021 and recovery in Construction, Engineering and Valued Added segments in H2FY2021 resulting in sales of 6.46 MnT for the year (~6% growth Y-o-Y).

Tata Steel continued its focus on Engineering segments and Value-Added Products (VAP) through an enriched product portfolio. Precision Tubes segment grew by 12% Y-o-Y from 107 kT to 120 kT registering the highest ever sales in any fiscal year. Despite the impact of the pandemic, sales in MCHC (Medium Carbon / High Carbon) and LPG segment also grew marginally over FY 2019-20. Sales of high strength and corrosion resistant rebars together grew by 39% Y-o-Y. Engineering Segment also achieved best ever sales with a growth of 5% Y-o-Y driven by 3.5 times growth in Oil & Gas segment through approvals from major Oil Marketing Companies for API X65 & API X70. The Company increased its market share in Lifting & Excavation segments with a growth of 14% Y-o-Y and increased its presence in niche segments comprising of solar, transmission towers, crash barriers and special structural grades with a growth of 58% Y-o-Y. Engineering Segments also increased dispatches through costal route by 25% over last year bringing in cost savings.

In Construction space, the Company has maintained its focus on offering services and solutions through Cut & Bend with Tiscon Readybuild sales at 106 kT in FY 2020-21. The Company has also supplied ~109 kT rebars (~11% of total project sales) to 29 Marquee projects in India.

Steel exports in FY 2020-21 increased to —2.41 MnT to combat the pandemic affected H1FY2021 and contributed to —20% of Tata Steel sales. In order to maximise exports, the Company started using two more ports (Kolkata & Vishakhapatnam)

in addition to the regular ports for break-bulk shipments. Customers from 7 new countries were added to the Companys portfolio which helped increase exports during Q1FY2021. In its pursuit to enrich sales mix, the Company doubled its VAP export sales in FY 2020-21 to 240 kT. In our drive to improve agility, the Company concluded an end-to-end paperless trade transaction enabled by Blockchain. It is a first of its kind transaction in the steel industry and has helped reduce the payment cycle time from 2 weeks to 4 working days.

Services & Solutions: During the year under review, the Company has consolidated its position in the Services & Solutions space through continuous innovation, to provide customer-centric offerings and better consumer experience in a pandemic affected uncertain market. In FY 2020-21, Tata Pravesh Doors and Windows registered a system turnover of Rs.145 core. The installation figures have increased to 80K units in FY 2020-21, a Y-o-Y increase of 40%. Nest-In, the construction solutions brand from Services & Solutions, has received an order book of Rs.104 crore and executed orders worth Rs.55 crore in FY 2020-21. In response to a stagnating sanitation market, Nest-In successfully scaled up its shelter solutions, registering a growth of ~113% in this segment (?38 crore in FY 2019-20 as against Rs.81 crore in FY 2020-21).

Digital Initiatives: Tata Steel Aashiyana an initiative providing early inspiration, engagement & e-commerce for Individual Home Builder (IHB) achieved turnover of Rs.726 crore in FY 2020-21 with growth of 122% over FY 2019-20. Tata Basera has expanded its reach to 255+ districts. The Tata Basera programme offers special benefits from 5 Tata Group companies to IHB across 7 brands. These digital initiatives have helped serve 5,545 unique pin code thus allowing us to serve new markets and enabled meeting customer requirement specially during pandemic period.

Apart from Aashiyana, Tata Steel has also scaled up various digital initiatives in multiple customer segments viz (B2C, B2B & B2ECA). Compass, a digital supply chain visibility solution was rolled out to B2B customers & DigEca, an initiative that captures lead management for ECAs received traction from its distributors & customers. Digital projects such as Magibox have helped improve product value realisation.

c) Engineering & Projects

Engineering & Projects (E&P) continued to support Tata Steels growth and sustenance plan by ensuring project progress amidst the COVID-19 pandemic. In line with the Companys long-term vision to attain leadership position in India, capacity expansion project of Tata Steel Kalinganagar phase 2 (3 MnTPA to 8 MnTPA), 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 our downstream capabilities, increase high added value capacities and reduce costs. Besides these, the compliance related projects on improving the environment related parameters were pursued.

During FY 2020-21, the team focused on building a future ready organisation with the driving theme being Agility, Value creation, Building Deep Capabilities, adapting Future ready construction practices and indigenisation while achieving manufacturing excellence. We strengthened our master plans across locations through effective and efficient conceptualisation, design and engineering capabilities and considering efficient technologies, environment and sustainability.

In digitalisation journey, capex programmes customised various digital initiatives such as Integrated Project Management System, which aimed at integrating project information at a common platform; i3M, Connected Man, Machines and Materials for better traceability of critical enablers, 2D to 3D modeling conversion, for creating 3D based assembly sequence & constructability validation and Virtual Reality platform, virtual construction, virtual assembly and virtual commissioning. Smart construction practices such as digital work platform was adapted which enabled online monitoring of remote work place activities.

Various initiatives were undertaken to ensure adherence to COVID-19 protocols while continuing construction at project sites and manufacturing work. Adapting quickly to the new normal, all the capability building sessions and awareness programmes were conducted online. Detailed planning was done after assessment of shift-wise and location-wise minimum manpower requirements. Support facilities such as canteen, transportation and medical service arrangements were geared up with strict adherence to COVID-19 protocol including extensive sanitisation and social distancing norms. Central CCTV monitoring for all locations helped to ensure compliance to utilisation of personal protective equipment and kits (including masks) by the people at work sites.

Other daily management activities were seamlessly carried out through virtual platforms. Collaboration was done with supplier partners to workout win-win situation in terms of revising delivery schedules of material. Restricted movement from employee residences and labour camps, sanitisation of sites and transport vehicles helped in containment of the pandemic at our project construction sites to a large extent.

d) Sustainable Steel Business Initiatives i) New Materials Business

The New Materials Business (NMB) was set up with the vision of making the Company future ready by insulating revenues from the cyclicity of the steel business and to explore advanced material solutions. NMB has currently three material verticals - Composites, Graphene and Medical Materials & Devices.

Fibre Reinforced Polymer (FRP) Composites: The business is focused on an asset light model with successful tie ups with partners of choice for production and supply of composite products. NMB Composites has marked its presence already in the Industrial, Infrastructure and Railway segments.

The business focusses on building scale in the industrial sector through internal capability development and building long-term relationship with customers. Successful large project executions would enable the Composites to establish itself as one of the leading players in the industry. Leveraging on group synergies would further strengthen this position in the market.

The division also plays a significant role in providing the nation with clean drinking water with the offerings of FRP Pipes and Pressure Vessels. The other key areas of growth in the infrastructure is building smart cities with modern solutions which are functionally superior and aesthetically appealing.

The Railways segment focusses on providing the best-in-class railway interiors to the Indian passenger. With the successful roll-out of the interior furnishing of the AC I coach to Modern Coach Factory in FY 2020-21, the journey is set to provide comfort and luxury to Indian railway passengers.

In FY 2020-21, NMB Composites division registered a substantial growth in revenue over the previous year.

Graphene: The journey of commercialisation has commenced and the graphene business crossed the revenue mark of $2 million sales in FY 2020-21. The business has also commissioned its 100 TPA integrated graphene manufacturing plant in March 2021. The division has demonstrated significant value across ten different graphene enriched products.

Medical Material and Devices: NMB has ventured into affordable medical material and devices to take up the role of aggregator for the domestic manufacturers in creating holistic medical device solutions at global standard. The vision is to empower the medical device manufacturing ecosystem in India to fit the demography and in lieu of the inverted duty structure, create affordable and global standard health technology solutions for India and the World. This would make India self-reliant in the medical technology space.

The initial business scope covers medical consumables, in - vitro diagnostics, implantables, prosthetics & orthotics and medical device components. Among materials, advanced ceramics and biologics which are among the largely imported and priority list for Indian population and market form part of the business scope.

ii) Steel Recycling Business

The Steel Recycling Business is an initiative and a definitive step by Tata Steel towards sustainable steel production and a quantum leap towards circular economy. The steel produced through the recycled route entails significantly lower carbon emissions (63%), resource consumption (68%) and energy utilisation (58%). The initiative aims to provide the much- needed raw material l fillip to Steel Industry by making available quality processed ferrous scrap, streamlining the currently unorganised scrap supply chain, enhancing the transparency and lowering the dependency on imports.

Steel Recycling Business commissioned its first Steel Scrap Recycling plant of 0.5 MnTPA capacity in September 2020 at Rohtak, Haryana. It is a state-of-the-art plant with mechanised equipment such as Shredder, Baler, Material Handler, etc. for processing, handling and producing top quality scrap. Steel scraps are procured from various market segments such as End-of-Life Vehicle scrap, Obsolete Household Scrap, Construction & Demolition scrap, Industrial Scrap, etc. Digital App based supply chains facilitate procurement of scrap in a fair and transparent manner. This scrap is processed through mechanised equipment and the high quality processed scrap is supplied to Electric Arc Furnaces, Induction Furnaces and Foundries for downstream Steel making, satiating their long-standing demand.

Various initiatives have been launched to raise the bar in the scrap industry. Tata FerroBaled and Tata FerroShred are first of-its-kind brands in the world for Ferrous Scrap launched by Tata Steel. FerroHaat™ App, again a first-of-its-kind in the world, to source steel scrap from the traders has been launched. These initiatives reinforce Tata Steels commitment to foster trust, transparency and ease of doing business in the scrap industry.

Steel recycling route is dovetailed with the long product growth strategy of the Company.

e) Performance of business units

i) 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 ~500 kilo tonnes. The three main lines of businesses are conveyance tubes (Tata Pipes), structural tubes (Tata Structura) and precision tubes for auto and boiler segments.

FY 2020-21 was a unique year which started with a zero base, as almost all segments and markets were shut down due to the pandemic and impending lockdown in April 2020. Subsequently, the demand centres also shifted more towards rural and less-restrictive zones during Q1FY2021. Automotive sector recovered from Q3FY2021 onwards. However, the construction and infrastructure recovered after Q3FY2021.

The production and sales performance is as below:

During the FY 2020-21, the production was at 458 kt as against 518 kt in FY 2019-20, lower by 60 kt and the division achieved sales of 468 kt in FY 2020-21 as against 509 kt in FY 2019-20, lower by 41 kt due to plant shutdown during Q1FY2021 due to pandemic.

Key Business Highlights:

Through its digital platform, the division achieved sales of ~20,000 Mt in FY 2020-21 (6300 Mt in FY 2019-20) from the Aashiyana Portal, which is ~10% of our Brands & Retail Sales.

Recognition:

Tata Structura Tata Steels premium hollow section brand received the Times Business Award for Best Manufacturer of Structural Tubes.

ii) 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:

FY 2020-21 was a challenging year with economic slowdown (due to lockdown causing business disruption) followed by quick economic recovery post Q1FY2021. The challenges posed by the pandemic situation also enabled the business to come up with innovative ideas of managing the crisis and showcased the agility of the entire system. The division achieved a production of 350 kt during FY 2020-21 lower as compared to FY 2019-20 by 27 kt and achieved deliveries at 355 kt during FY 2020-21 lower from FY 2019-20 by 18 kt due to lockdown in April 2020.

Key Business Highlights:

• Online sales through Aashiyana grew 85% YoY with 5 KT+ sales in FY 2020-21 and crossed the milestone revenue of Rs.50 crore with Y-o-Y growth of 150%. Two new products - GI wire and Binding wire - added to the existing portfolio on Aashiyana.

• Developed special grade of Wire Rod for high tensile spring steel for Alcomex Springs, which led to an increase in sales by 150%.

• "Tata Wiron" brand was restructured and relaunched to suit the changing stakeholder expectations, bringing B2B products also under the brand umbrella.

• Seamless dispatches were ensured during lockdown by enabling direct dispatches to key sub distributors to counter logistic challenges amidst national lockdowns.

• Successful commissioning of a new product line for Induction Hardened and Tempered Wires and Zero Liquid Discharge Plant at GWI, Tarapur for sustainable operations.

Recognition:

• Tata Wiron was awarded the Prestigious Rising Brands of Asia 2020 award by Herald Global - ERTC Media.

• Won the Most Admired Brand of the Year award in the 9th edition of ACEF Asian Leader Awards for Branding & Marketing in the manufacturing industry category.

• Won two awards in 7th edition of National Awards for Excellence in Digital Marketing by CMO Asia.

• Won for Best Use of Social Media for the campaign Binding Together at 11th edition of Flame Awards Asia organised by Rural Marketing Association of India.

• Won an award in the Best Brand category in the 5th edition of the India 5000 Business Awards 2020, held by TQV Private Limited.

iii) Industrial By-Products and Management Division

The Industrial By-Product Management Division (IBMD) champions the sustainability endeavours of the organisation through efficient waste utilisation while concurrently creating value from waste. The division manages the solid wastes or by-products generated across the steel value chain. Operating on 3R (Reduce, Reuse, Recycle) principles of circular economy, it handled around -12 MnT of by-products in previous year which saw pandemic led disruptions. Through its dedicated marketing and sales initiatives, the division witnessed a 16% Y-o-Y increase in the revenue and ensured sustainable value creation for the Company. Today, the product portfolio of IBMD spans across 25+ categories with more than 250 SKUs. IBMD endeavours to remain an industry benchmark in managing by-products by adopting new technology to produce value-added downstream products and leveraging digital with a focus to increase efficiency & customer delight.

During the year under review, the One IBMD strategy has helped to augment value creation across plants through horizontal deployment of major operational KPIs and Customer & Contract Realignment. Automation in operations and supply chain through initiatives such as unmanned weighbridges, paperless supply chains has helped improving operational efficiency. These connected systems now form the backbone of IBMDs digital future and synergy efforts.

The by-product utilisation at the plant and sales are given below:

During the lockdown, IBMD took a series of initiatives for dispatch of critical by-products to ensure smooth operations of the plants and to improve cash generation. On the process technology front, the accelerated weathering facility for LD slag has enabled to significantly ramp up the utilisation of processed slag in construction of national highways and downstream products like paver blocks etc. A Value-creation centre equipped with modern infrastructure has been created in Jamshedpur to develop a pipeline of new products having higher value multipliers. As part of by-product value addition initiatives, sale of Ground Granulated Blast Furnace Slag commenced from the Kalinganagar facility. The product has been successfully established in the market and comes with the prestigious GreenPro certification, qualifying as an eco-friendly product for building applications. Value-added

Scrap sales have been significantly scaled up with addition of new capacities enhancing our capability to deliver tailored offerings to customers.

Digital order booking through SAHAJ app, RFID enabled touchless delivery helped register highest ever sales of Coal By-products in Retail segment.

Recognition:

Won the prestigious CII 3R Awards 2020 in CII International Conference for demonstrating the 3R (Reduce, Reuse, Recycle) principles in By-products management.

iv) Ferro Alloys and Minerals Division

During FY 2020-21, Sukinda Chromite mine and Gomardih Dolomite mine leases expired as per the mining regulations on March 31, 2020. The Sukinda Chromite Mines were put up for auction. Tata Steel Mining Limited (formerly TS Alloys Limited), a subsidiary of Tata Steel Limited had participated in mining auction in Odisha and won the auction for the mine. The Gomardih Dolomite mine is yet to be auctioned.

During FY 2020-21 the saleable production was lower by 672 kt and sales were lower by 807 kt compared to FY 2019-20 as the Chrome and Dolomite leases with Tata Steel Limited expired in March 2020. However, as the lease for chrome mines is with Tata Steel Mining Limited, a subsidiary of Tata Steel Limited, the entire chrome business is now under Tata Steel Mining Limited.

v) Bearings Division

Our Bearings Division is one of Indias largest manufacturers of quality bearings, 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 assemblies 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 2020-21, the Auto Industry witnessed a 18% decline in sales and 19% decline in production. Tractor industrys volume grew by 15% in FY 2020-21 due to pandemic situation.

The production and sales performance is as below:

During the year, the division produced 27 million numbers as against 30.05 million numbers in FY 2019-20, lower by 3.05 million numbers and achieved sales of 27.98 million numbers as against 30.33 million numbers in FY 2019-20, lower by 2.35 million numbers, mainly due to disruptions due to COVID-19.

Key Business Highlights:

• Digital Medium was leveraged to create new stockists in aftermarkets during the pandemic. The technical team of the Company engaged with Mechanics & Retailers in aftermarkets via WhatsApp & Google Meets where technical queries were answered.

• New facilities like auto noise inspection machines, auto radial clearance inspection machine and auto laser marking machine to enrich the manufacturing facilities.

f) Business Improvement Initiatives

i) Total Quality Management and Shikhar 25 (operational improvement programmes)

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

TQM orientation in the Company has led to various recognitions for the Company at different forums. Tata Steel won 5 awards across different categories in Tata InnoVista 2020, making it the 3rd consecutive year of winning the highest number of awards by any Company across Tata Group. Tata Steel was recognised

for the Excellence in Knowledge Management, 2020 by APQC (American Productivity & Quality Centre), the worlds foremost authority on Benchmarking, Best Practices, Knowledge Management, Process and Performance Improvement. Tata Steel scored level 4 out of 5 in the enterprise level assessment.

Shikhar25 is a focused EBIDTA improvement programme which promotes efficiency, sustenance and right behaviours across departments of Tata Steel. The programme is aimed at improving operational efficiency, energy efficiency, lower costs, optimising product mix, reduce and recycle waste through impact centres across the Company. The current year being impacted by the pandemic pushed us to keep evolving with the changing business needs. The impetus was on relooking the various aspects of fixed cost to ensure reduced expenditure and maintaining healthy cashflow. Also, with the increased production capacities, the emphasis was on simplifying and synergising operations across sites for optimal utilisation of resources to reduce cost. During the year under review, the Company, through its Shikhar 25 programme, achieved performance improvements of Rs.3,274 Crore (including Rs.1,247 Crore value protection initiative).

Fostering culture of innovation and preparing the workforce for Industry 4.0

Tata Steel has been on a multi-year digitally enabled business transformation journey intending to be the leader in steel making. In the process, we have made significant investments to develop capability as well as infrastructure. The financial year 2020-21 has been a testimony to our efforts in these areas with the recognition of Tata Steel Jamshedpur steel plant as World Economic Forums Advanced 4th Industrial Revolution Lighthouse for displaying leadership in applying advanced technologies to drive financial and operational impact. With this new milestone, Tata Steel is one of the few enterprises with three manufacturing sites in the Global Lighthouse network, with Tata Steel Kalinganagar Plant (India) and IJmuiden (the Netherlands) being the other two sites.

Further, the Company is making steady progress in using Industry 4.0 techniques in the following areas:

• Plant Operations: Digital Twins to improve process efficiency by multivariate optimisation, predictive modelling for defect detection, through-process optimisation to maximise throughput and improve yield, prescriptive modelling to reduce specific consumption of materials.

• Maintenance: Smart plant maintenance through

Maintenance Technology Roadmap and Smart Asset Management System.

• Energy: Energy Management System to improve energy efficiency, power sourcing optimisation to reduce cost.

• Procurement & Supply Chain: Agile & insights based buying through price prediction & e-auctioning, digital negotiation factory, prescriptive analytics to reduce total cost to serve, advanced analytics based network optimisation for iron ore (VISTAR), unified platform for Integrated Shipping and Port Operations (ISOP), text analytics to improve export documentation cycle time.

• Marketing & Sales: Digitally enabled product sales and customer engagement across B2C, B2SME and B2B segments through platforms like Aashiyana, DigEca and Compass, analytics powered retail sales acceleration (PARAS and ASCEND), improvement in value realisation from co-products through prescriptive and predictive analytics (AMRIT), online bidding platform for ETO inventory.

• Finance: Digital readiness for statutory changes,

optimisation of cost and interests through online visibility and system-based controls.

ii) Strategic Procurement Initiatives

• The Company took several new initiatives for its raw material procurement which resulted in substantial savings in cost and working capital.

• 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 the disruption caused by the COVID-19 pandemic to steel production.

• 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. This helped in creating a positive impact of -Rs.103 crore. The Company was recognised by World Economic Forum as a leader in applying fourth industrial revolution technologies due to this initiative.

• 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 resulting in freeing-up of non-fund based working capital lines above Rs.500 crore.

• Group synergies through centralised procurement, technical optimisation and knowledge sharing continued to result in substantial savings and efficiency improvement. With Tata Steel Long Products and Tata Metaliks integrated (in addition to Tata Steel BSL integrated earlier), blend improvements, new product development and coal commonality related initiatives brought about ~ Rs.300 crore savings this year.

3. Performance of Major Subsidiaries

i) Tata Steel BSL Limited (TSBSL)

The turnover and profit / (loss) of TSBSL for the FY 2020-21 are as follows:

(Rs. crore)
FY 21 FY 20
Turnover : 21,419 18,199
EBITDA 5,481 2,370
Profit before tax (PBT), before exceptional items 2,517 (686)
Profit before tax (PBT) 2,517 (617)
Profit after tax (PAT), before exceptional items 2,516 (686)
Profit after tax (PAT) 2,516 (617)

The production and sales performance of TSBSL is given below:

(mn tonnes)
FY 21 FY 20 Change (%)
Crude Steel 4.08 4.46 (9)
Saleable Steel 4.07 4.25 (4)
Sales 4.31 4.14 4

Despite the pandemic during the FY 2020-21, the deliveries registered an increase of 4% over previous year from 4.14 MnT in FY 2019-20 to 4.31 MnT in FY 2020-21 due to improvement in demand in domestic markets and higher exports during the year. However, saleable steel production stood at 4.07 MnT and crude steel production stood at 4.08 MnT recording a decrease of 4 % and 9 % respectively as compared to that of the previous year. The decrease in production at TSBSL is due to slowdown in the activities and operations due to the pandemic.

The extra-ordinary performance of TSBSL during the year, including increase in revenue by 18% and in EBITDA by 131% Y-o-Y was driven by increase in deliveries and improvement in realisations. Higher profits in line with increase in operating profits along with lower finance cost due to pre-payments, earned free cashflow of 1.25 times of EBITDA which further led to significant gross debt rationalisation.

Post acquisition, many improvement projects have been were undertaken at TSBSL for optimum sweating of all the assets and to reach higher level of capacity utilisation. Value creation through synergy initiatives were undertaken jointly by technical and quality teams of Tata Steel Limited and TSBSL which are as under:

Operational Excellence: Bel Programme

The Be1 Programme - the flagship multi-dimensional excellence programme driving operational, commercial, financial and capability excellence continued in its 3rd year at the Company. Despite the onset of the COVID-19 pandemic, the programme has been expanded to 26 operational impact centres in

FY 2020-21 covering the entire value chain with an estimated combined savings of ~?1,400 crore in FY 2020-21. This was enabled by building a robust pipeline of improvement initiatives which will continue to deliver value in FY 2021-22, strengthening the financial position.

The idea pipeline was built by conducting idea generation workshops ensuring the engagement of employees across all levels of the organisation. Due to restrictions during the pandemic and lockdown, the primary focus of the initiatives was on cost optimisation and cash conservation, along with throughput de-bottlenecking and value creation for ensuring long-term sustainability.

• Key initiatives on cost that drove value across the organisation include - Coking coal blend optimisation, IBRM (Iron Bearing Raw Materials) mix optimisation, efficient energy management, raw materials cost optimisation, fixed cost & working capital rationalisation, contract consolidations, alternate sourcing of materials, rail and road network optimisation and various advocacy measures.

• Key initiatives on throughput include de-bottlenecking across upstream units like RMHS (Raw Material Handling System), SMS (Steel Melting Shop), HSM (Hot Strip Mill) etc. and multiple downstream units, maximising the utilisation of DRI (Direct Reduced Iron) kilns (7 kilns in operation), reliability improvement by horizontal deployment of standardised maintenance practices for critical equipment. Besides these, initiatives focused on value creation including customer diversification in multiple segments, ramping up volumes of branded products (including launching of three new brands - ColorNova, GalvaNova, GalvaRos), increasing the sales of VAP (Value Added Products), external sales of DRI and various by-products (1st ever dispatch by rakes).

In addition, the programme focused on leveraging group synergies with TSG to increase use of captive raw material, optimisation of product mix to maximise system benefits, horizontal deployment of best practices across the value chain, manufacturing of the Company branded products at the plants and leveraging the channel and distribution network of the Company for increasing the share of branded product. The plant achieved multiple BPDs (best-demonstrated- performance) throughout the year across multiple cost & throughput parameters which accelerated the journey towards 5.2 MTPA of crude steel production.

In addition to these, the journey towards TQM as a way of working has been initiated through the deployment of quality circles for SGA (Small Group Activity), DM (Daily Management) practices and VWM (Visual Workplace Management).

The organisation has also started deploying multiple Digital Initiatives in the field of automation, visualisation, simulation and optimisation to create sustainable value. It has developed a five year digital roadmap with more than 80 projects identified and several pilot projects have already been deployed. A few key highlights from digital initiatives include the Video Wall project at BOF (Basic Oxygen Furnace), Loco Scheduling Optimisation for logistics cost reduction, Metallic Fe-Bearing IMM (Integrated Margin Management) module which led to cost reduction and optimisation.

Product Development:

Hot Rolled Product: TSBSL developed 50CrV4 & 58CrV4 at Angul for replacement of POSCO materials (localisation strategy). In Auto segment, BSK 46 for chassis application and Fe 360 & WIR019 grades for Disc & Rim application were developed for our key customers.

Cold Rolled and Coated Product:

• CRCA: TSBSL developed and received approval of 10 Skin Panel grades for CV segment of a leading automobile customer in Pune. Further development of IF grade CRCA material for two-wheeler rear and front fenders for a leading auto maker was also carried out and commercial supplies of HSLA 340 grade steel having application in commercial vehicle floor panels was also commenced.

• Colour Coated Products: Developed colour coated products for body panels of washing machines and refrigerators for a few leading multinational companies in the appliance business. TSBSL also developed colour coated coil brand named Colornova.

• Tubes & Pipes: Propeller Shaft Tubes were developed and approved for commercial supplies for a leading Auto Manufacturer and dent resistance ERW tube was also developed.

• Galvanised products: Developed high strength GPCS (Galvanised Plain Crushed Spangle) material for PEB (Pre-engineered Building) segment.

ii) Tata Steel Long Products Limited (TSLP)

TSLPs current product portfolio is unique in nature and complementary to Tata Steels product basket. It primarily deals in two products viz. DRI (Direct Reduced Iron / Sponge Iron) and Special Steel. DRI on one hand is highly commoditised in nature and used as a raw material (substitute to 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 forgings, bearings, fasteners, springs etc. This enabled Tata Steel Limited 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.

TSLP, immediately after acquisition of Usha Martins Steel business, had been engaged in transformation programme. TSLP launched "Shikhar" (a multi-divisional, cross functional improvement initiative that aims to drive break-through improvement projects) to achieve operational excellence, and achieve the synergy benefits for long-term sustainability. The programme has generated more than 1,100 ideas and majority of the ideas have been successfully implemented resulting in total savings of ~ Rs.300 crore.

The turnover and profit / (loss) of TSLP for the financial year 2020-21 are as follows:

(Rs. crore)

FY 21 FY 20
Turnover : 4,750 3,490
EBITDA 1,154 184
Profit before tax (PBT), before exceptional items 615 (369)
Profit before tax (PBT) 615 (530)
Profit after tax (PAT), before exceptional items 572 (355)
Profit after tax (PAT) 572 (516)
The Steel Business of Usha Martin Ltd. was acquired on April 9, 2019.
The production and sales performance is given below:
(mn tonnes)
FY 21 FY 20 Change (%)
Crude Steel 0.65 0.58 11
Saleable Steel 0.53 0.48 12
Sales 0.64 0.51 25

During the FY 2020-21, TSLP produced 797kt of sponge iron and 648kt of crude steel, higher by 32kt and 63kt respectively due to higher productivity and demand. The deliveries of sponge iron were at 632kt and 639kt of steel. The steel deliveries were higher by 128kt despite disruptions caused by COVID-19 due to increase in demand and higher availability of finished goods. The turnover of the current year increased by 36% primarily due to higher volumes of steel along with increase in steel and sponge iron prices. TSLP reported Profit Before Tax of Rs.615 crore as against loss of Rs.530 crore during the previous year, mainly due to higher operating profits along with lower finance cost due to pre-payments of loans and lower exceptional charges during the year under review. Previous year included exceptional charge of Rs.161 crore.

iii) Tata Steel Europe (TSE)

Economic growth in 2020 was highly impacted by the COVID-19 pandemic and, whilst the impact of the national lockdowns was somewhat mitigated by various forms of government stimulus, global GDP contraction in 2020 was 3.5% down from growth of 2.5% in 2019. In the European Union (EU), the economy declined by 6.3% in 2020 compared to growth of 1.5% in 2019 and in the United Kingdom the economy declined by 9.8% compared to growth of 1.4% in 2019. Both services and manufacturing were negatively impacted by the national lockdowns and although the recovery for manufacturing was relatively quick, the recovery for services has been slower.

Demand for steel in the European Union declined in 2020 by 11.4% compared to a reduction of 5.4% in 2019. The automotive sector was impacted significantly by national lockdowns in the first half of 2020 and the production of vehicles came almost to a standstill in April 2020. For the full year, the number of vehicles produced declined by 24.2%. Machinery and construction were also impacted by the pandemic and output declined by 12.3% and 4.4% respectively. Nevertheless, European steel spot prices, based on Hot Rolled Coil (HRC) in Germany (parity point), improved during the year to €534/t, an increase of €65/t. The increase was driven by higher demand in the second half of the financial year whilst supply was limited. In 2021 global economic growth is expected to be high as COVID-19 restrictions are eased. The World Steel Association predicts that growth of global steel demand will recover to 5.8% with EU steel demand expected to recover by 10.2%.

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

FY 21 FY 20
Turnover 56,051 55,939
EBITDA (618) (664)
Profit before tax (PBT), before exceptional items (4,565) (5,012)
Profit before tax (PBT) (5,907) 9,837
Profit after tax (PAT), before exceptional items (6,155) (3,511)
Profit after tax (PAT) (7,497) 11,337

The production and sales performance of TSE (continuing operations) is given below:

FY 21 FY 20 Change (%)
Liquid Steel Production 9.55 10.26 (7)
Deliveries 8.82 9.29 (5)

TSEs production in the FY 2020-21 was down 0.7 MnT (7%) compared to the previous year due to the impact of COVID-19 pandemic on demand for the Groups steel products. The deliveries were lower by 5% over the previous year.

During the year under review, the revenue was at Rs.56,051 crore, almost at par as the decrease in revenue from that of previous year was due to decline in deliveries by 469kt along with marginal decrease in average revenue per tonne caused by lower prices and less favourable sales mix attributable to the impact of COVID-19 during the first half of the year, was almost offset by favourable exchange impact on translation. In the second half of the financial year, demand increased back to pre-COVID-19 levels and selling prices in the fourth quarter of the financial year staged a strong recovery to finish the year at a high level. Despite the headwinds from COVID-19 and the higher cost of emission rights, EBITDA improved due to tight control of costs and benefits from the transformation programme along with government employment cost support of 61m. The profit before tax in FY 2020-21 was significantly lower primarily on account of gain from interest waiver of 1.12 billion (?10,088 crore) on the waived inter-company loan of 0.77 billion (?6,981 crore) due to restructuring of inter-company debt during the second quarter of FY 2019-20. However, the same was eliminated on consolidation in the group accounts. Exceptional charge mainly on impairment of PPE was lower than that of the previous year.

The principal activities of TSE in FY 2020-21 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 FY 2020-21, these plants produced 9.6 MnT (previous year: 10.3 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.

Strip Products Mainland Europe - Liquid steel production at IJmuiden Steel Works, Netherlands during 2020-21 at 6.2mt was 0.6mt lower than the previous year reflecting the impact of the COVID-19 pandemic, especially in the first half of the financial year. During 2020-21, Strip Products Mainland Europe 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 - albeit at a slower than anticipated pace due to COVID-19 also achieved in its Strategic Asset Roadmap 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. In December 2020, the Roadmap Plus was launched, which contains a series of measures to eliminate the environmental impact (noise, dust, odour) of Strip Products Mainland Europe. It includes a set of new measures, but also an acceleration of the measures which were announced in 2019 as part of the Roadmap 2030.

Strip Products UK - Liquid steel production at Port Talbot Steel Works, Wales during the FY 2020-21 at 3.4mt was 0.1mt lower than the previous year impacted by demand reductions in the first half of the year associated with the COVID-19 pandemic. Although restricted by the disruption seen during the year, the transformation programme continued with further Y-o-Y benefits adding to the significant improvements in prior years. Building upon the work of "Sustainable Operational Excellence" Strip Products UK broke a number of operational records during 2020-21, not limited to daily, shift, and weekly production on the Hot Strip Mill and weekly production on the Zodiac galvanising line. During the year, Morfa coke ovens made its 1.5 millionth push since commissioning in 1981.

New Products

During the year, TSE introduced 16 new products into the Groups product portfolio. Major new products are:

• VALAST 450: abrasion resistant steel grade for the engineering sector;

• XPF 800 for tubes: cost-effective high-strength alternative to Boron steel;

• MagiZinc 310: products with superior corrosion protection, even at cut edges.

Differentiated products accounted for 38% of TSEs portfolio. Strategic Activities

TSE started the FY 2020-21 against the backdrop of the COVID-19 pandemic which caused a significant drop in demand for the Groups steel products and created challenges for TSEs production facilities and for the health and safety of employees. In the first quarter of FY 2020-21, demand for the Groups steel products was down by about 20% due to COVID-19 with certain sectors such as automotive experiencing a sharper decline than others, such as packaging, where demand was largely unaffected. TSE also received government support where available including the Coronavirus Job Retention Scheme in the UK, the Noodmaatregel Overbrugging voor Werkbehoud (NOW scheme) in the Netherlands, and in the form of agreed deferrals to payroll taxes and VAT in both the UK and Netherlands. TSE ensured a co-ordinated and agile approach in order to protect the health and well-being of its employees with those who could work from home doing so, supported by the appropriate tools, systems, policies and guidelines in line with the national requirements. The manufacturing processes continued to operate with new social distancing practices and solutions deployed, underpinned by management of change and daily communication from leaders at all levels across TSE.

Throughout the year TSE continued to build on its successful company-wide Transformation programme to improve the performance of the business, helping it to become more sustainable and enabling investments necessary to secure its long-term future. Improvements in performance came from productivity improvements, increased sales of higher-value steels, and employment cost savings. In the FY 2020-21, the Transformation programme delivered over 200m worth of sustainable benefits in addition to the over 200 million worth of benefits delivered in FY 2019-20.

On November 13, 2020, the Company announced that it had initiated discussions with SSAB in Sweden based on interest received for the potential acquisition of TSEs Netherlands business. Additionally, as part of Tata Steels efforts to arrive at a strategic resolution for its European portfolio, during the year under review, Tata Steel had discussions with SSAB Sweden for the potential divestment of Tata Steels Netherland business including Ijmuiden steelworks. However, the discussions did not materialise. Tata Steel is committed to making the European operations simpler, leaner, and sustainable.

Recognition

TSE has been recognised by World Steel Association as a Steel Sustainability Champion for the fourth 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.

iv) NatSteel Holdings (NSH)

Singapore experienced the COVID-19 impact with the government imposing a lockdown during Q1FY2021 to contain the spread of the virus. Thereafter, strict safe distancing measures at work places resulted in slow resumption of construction industry due to shortage of migrant workers. Thereafter, market had improved only progressively in Q3FY2021.

The turnover and profit / (loss) of NSH for the FY 2020-21 are as follows:

FY 21 FY 20
Turnover 4,326 5,328
EBITDA 224 189
Profit before tax (PBT), before exceptional items 48 (13)
Profit before tax (PBT) 48 1
Profit after tax (PAT), before exceptional items 42 (14)
Profit after tax (PAT) 42 (0)

The production and sales performance of NSH is given below:

FY 21 FY 20 Change (%)
Saleable Steel 0.73 0.96 (24)
Sales 0.90 1.20 (25)

During FY 2020-21, the production and deliveries were lower than FY 2019-20 due to the lockdown imposed in Q1FY2021 due to COVID-19. The turnover was lower than FY 2019-20, due to lower sales volume as realisations were at par. The profit before tax was higher than that of the previous year due to lower expenses, financial support from Government and decrease in finance cost.

v) Tata Steel Thailand (TSTH)

The turnover and profit / (loss) of TSTH for the FY 2020-21 are as follows:

FY 21 FY 20
Turnover 5,264 4,617
EBITDA 325 177
Profit before tax (PBT), before exceptional items 193 40
Profit before tax (PBT) 165 25
Profit after tax (PAT), before exceptional items 179 26
Profit after tax (PAT) 151 10

The production and sales performance of TSTH is given below:

FY 21 FY 20 Change (%)
Saleable Steel 1.33 1.21 10
Sales 1.30 1.20 9

During FY 2020-21 after initial business interruptions all the plants operated at full capacity. The production and deliveries in FY 2020-21 were higher than that of the previous year due to increased steel demand as there was a shortfall in the supplies as major steel producing countries were under periodic/ frequent lockdowns to prevent the spread of COVID-19. The turnover was higher by 14% mainly on account of higher volumes along with increase in prices. The profit before tax was higher mainly due to higher revenues along with lower conversion cost and lower cost of raw materials.

The company is in the midst of various digital initiatives like HR Easy Connect, E-RFX, Tata App, Remote monitoring of operations etc. The company has launched new products - DB Stirrup and ready-made precast footings.

Recognition:

• TSTH received "Thailand Sustainability Investment (THSI) Award 2020" from the Stock Exchange of Thailand.

• NTS won "Thailand Labour Management Excellence Award 2020" in National Level from Department of Labour Protection & Welfare, Ministry of Labour.

vi) Tata Metaliks Limited

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

The COVID-19 pandemic impacted overall business environment across all industries during the first quarter of

FY 2020-21 due to the nationwide lockdown. With gradual relaxation of lockdown from June 2020, business resumed, foundries started ramping up their production but were constrained due to acute shortage of labour. Pig Iron market witnessed a strong bounce back in terms of demand, which sustained throughout the year. Pig Iron markets have seen an unprecedented surge with net realisations crossing those of DI.

In Digital Transformation journey, TML has in FY 2020-21 implemented some key real-time data and analytics focused projects such as Manufacturing Execution System for DIP, Energy Management System and CRM (Customer Relationship Management) Solution. TML has 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. TML currently has three robots operational in its DIP production lines with several others likely to be deployed in coming financial year.

In FY 2020-21, TML has successfully commissioned 15 MW captive power plant which will enhance energy efficiency and utilisation of waste heat and flue gas generated from its coke ovens and blast furnaces. It also completed the expansion of Coke Plant.

The turnover and profit / (loss) figures of TML for the FY 2020-21 are as follows:

FY 21 FY 20
Turnover 1,917 2,051
Profit before tax (PBT) 306 201
Profit after tax (PAT) 220 166

During the FY 2020-21, due to the COVID-19 lockdown and disruptions during Q1FY2021, the production of Pig Iron (PI) was about 283kt lower by 37kt than that of the previous year and production of ductile iron pipes (DI) was at 187kt, lower by 38kt than that of the previous year. Deliveries of PI were at 287kt, lower by 27kt than that of the previous year and deliveries of ductile iron pipes were at 194 kt lower by 24kt than that of the previous year in line with lower production and demand.

The turnover declined by 7% due to decrease in volumes along with lower realisation of DI partly offset by increase in prices of PI due to strong demand and increase in iron ore prices. Profit before tax increased by T105 crore (52% higher) despite decline in revenues, mainly driven by better operational performance and efficiencies and lower raw material prices.

During COVID-19 situation, TML had provided interim relief in the form of Dry Ration Kits to the affected community in the region where it operates and donated Rs.1 crore towards State Governments COVID relief fund.

vii) 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. TCIL 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 379kt of tinplate and tin- free steel.

The year under review experienced unprecedented uncertainties due to the pandemic, leading to an impact on the operating performance of TCIL. The major impact of the pandemic was felt in Q1FY2021 especially in the month of April 2020, due to the imposition of a complete lockdown.

The turnover and profit / (loss) figures of TCIL for the FY 2020-21 are as follows:

(Rs. crore)

FY 21 FY 20
Turnover 2,297 2,123
Profit before tax (PBT) 132 104
Profit after tax (PAT) 98 95

During the FY 2020-21, the production was 291 kt, lower by 49 kt than that of the previous year, with an overall lower capacity utilisation primarily on account of nation-wide lockdown during Q1FY2021. However, deliveries were higher by 5kt at 316kt, attributable to higher demand primarily in the domestic market. The turnover increased by 8% mainly due to increase in market realisation along with marginally higher volumes. Profit before tax increased by 27% than that of the previous year due to higher operating profits and lower finance cost.

Key Business Highlights:

• Developed new packaging configuration.

• The company continued to work on quality improvement projects leading to improvement in surface quality, improvement in prime yield and a reduction in quality complaints.

• Accelerated the adoption of various IT enabled applications in the areas of production planning, digitisation, communication, and review process across the organisation.

• The cost management initiative has been driven by two methodologies - TPM and Disha initiative, led to costs savings in several areas including power and roll consumption.

• TCIL successfully implemented its pilot solar power project - Phase 1 (200 kwp).

• The operations of TCIL are certified to Integrated Management Systems.

viii) Tata Steel Downstream Products Limited

Tata Steel Downstream Products Limited (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:

Efficiency in working capital management yielded robust cash flows and better financial performance post Q1FY2021. The performance post Q1FY2021, offset the entire loss incurred in Q1FY2020-21 due to the lockdown.

During the year under review, EBITDA improvement initiative Lakshya 25 resulted in operational efficiency, cost management and profitability resulting in cost savings of about Rs.4 crore. The Management believes that these initiatives will in the long run unleash added value to the Companys stakeholders.

The turnover and profit / (loss) figures of TSDPL for the FY 2020-21 are as follows:

(Rs. crore)

FY 21 FY 20
Turnover 3,620 3,108
Profit before tax (PBT) 97 95
Profit after tax (PAT) 81 61

During the year under review, the production from tolling business was at 1,825kt marginally lower by 11kt than that of previous year and distribution business was at 636kt, higher by 9kt than that of the previous year due to increase in demand from second half of the financial year in the auto segment. The deliveries from tolling business were 1,651 kt which was lower than that of the previous year by 8% due to the impact of COVID-19. The deliveries in distribution business were 661 kt, higher by 52kt (9%) than that of the previous year due to improvement in demand from auto segment. The turnover for the financial year increased by 16% due to improvement in market conditions, attributable to increase in steel prices and higher volumes from distribution business, partly offset by lower tolling volumes. The profit before tax was almost at par with the previous year mainly due to lower margin from conversion business offset by lower finance cost.

During COVID-19 lockdowns and business interruptions, the volumes fell by ~70% in Q1FY2021 resulting in loss of contribution of Rs.54 crore, total unabsorbed cost of Rs.21 crore and additional spend for combating COVID-19 and safety of employees.

ix) Bhubaneshwar Power Private Limited (BPPL) Uninterrupted 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 Limited and Tata Steel Mining Limited (formerly T S Alloys Limited).

The turnover and profit / (loss) figures of BPPL for the FY 202021 are as follows:

(Rs. crore)

FY 21 FY 20
Turnover 489 510
Profit before tax (PBT) 28 (9)
Profit after tax (PAT) 20 25

During the year under review, power generation increased to 971 million units as against 931 million units in FY 2019-20. The sale of power increased to 860 million units in FY 2020-21 as against 822 million units in FY 2019-20. The plant operated at a better load factor of 82.14% as against 78.21% in FY 2019-20. Station heat rate has decreased to 2,793 kcal/Kwh from 2,889 kcal/kwh and auxilliary power consumption in FY 2020-21 was lower at 11.40% as compared to 11.72% in FY 2019-20.

During the year under review, the turnover of BPPL was ~4% lower than that of the previous year, due to lower cost of generation due to the cost plus contract revenue model. Profit before tax increased mainly due to lower depreciation and amortisation charges on intangible assets being fully depreciated during the year along with lower finance cost due to repayments and lower rates. However, profit after tax decreased due to an accounting credit on re-assessment of deferred tax assets and liabilities post adoption of lower tax rate which were announced in the previous year.

x) Creative Port Development Private Limited Creative Port Development Private Limited (CPDPL) is in possession of a 54 year 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.

xi) 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. The company had participated in the auction process of the chrome mines whose leases had expired on March 31, 2020 and have bagged three leases of chromite mines viz Sukinda, Saruabil and Kamarda mines situated in the Jajpur district of Odisha. The lease period for these leases is fifty years.

TSML has a ferro-chrome plant in Athagarh and Gopalpur in Odisha. TSML has been working with conversion partners in India, supply chain and the marketing & sales function to deliver value to its domestic and overseas customers. SAP Hana was also implemented during the year. TSML has started the operational excellence programme "Shikhar" to build a competitive cost structure across value chain.

Amidst the COVID-19 pandemic, Sukinda Mines started operations from September 2020 through an asset light business model. A mine development operator has been deployed under long-term contract to carry out mining operations in all the three mines viz. Sukinda, Saruabil and Kamarda. In FY 2020-21, all three mines together produced ~1 MnT of chromite ore. Since December 2020, the Company has started producing from its plant at Athagarh and is selling High Carbon Ferro Chrome. The company sold around 28kt High Carbon Ferro Chrome in national and international markets in FY 2020-21.

Due to COVID-19, the plant production was affected for a fortnight with six months delay in start-up of the mining operations as there were challenges in resource mobilisation, vendor onboarding, regulatory formalities / approval etc. which led to a financial impact of ~8 crore.

V. Financial Performance

1. Tata Steel Limited (Standalone)

During the FY 2020-21, the Company recorded a profit after tax of Rs.13,607 crore (previous year Rs.6,744 crore). The increase is primarily on account of improvement in realisations, lower cost of production, and higher exceptional gain against charge as compared to that of the previous year. The basic and diluted earnings for the FY 2020-21 were at ^117.04 per share and Rs.117.03 per share respectively (previous year: basic and diluted: Rs.57.11 per share).

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

a) Revenue from operations

FY 21 FY 20 Change (%)
Sale of products 62,277 57,168 9
Sale of power and water 1,467 1,648 (11)
Other operating revenue 1,125 1,620 (31)
Total revenue from operations 64,869 60,436 7

During the year under review, sale of products was higher as compared to the previous year, primarily due to increase in realisations in domestic as well as export markets and higher sale of iron ore to Group Companies along with increase in prices. Ferro Alloys and Mineral Division (FAMD) registered lower revenue owing to lower volumes of Ferro Chrome along with decline in prices of manganese alloys, partly offset by higher prices of Ferro Chrome. Sale of power and water declined due to lower demand owing to lockdown. Other operating revenue decreased mainly due to lower benefits arising out of exports.

b) Purchases of stock-in-trade

(Rs. crore)

FY 21 FY 20 Change (%)
Purchases of stock-in-trade : 1,146 1,563 (27)

During the year under review, Purchases of stock-in-trade was lower as compared to previous financial year due to lower purchases of imported rebars, wire rods and billets, hot rolled coils and structural steel owing to lower requirement, partly offset by increase in purchases at sustainable businesses including New Materials Business, Services & Solutions and Steel Recycling Business.

c) Cost of materials consumed

FY 21 FY 20 Change (%)
Cost of materials consumed : 13,869 17,407 (20)

During the year under review, cost of materials consumed decreased primarily due to lower prices of imported coal, along with lower consumption of coal and purchased pellet, ferro alloys and other raw materials due to lower production owing to lockdown during Q1FY2021.

d) Employee benefits expense

FY 21 FY 20 Change (%)
Employee benefits expense : 5,199 5,037 3

During the year under review, the employee benefits expense increased post finalisation of wage agreements in the previous year and its consequential impact on the retirement provisions.

e) Depreciation and amortisation expense

FY 21 FY 20 Change (%)
Depreciation and amortisation expense 3,987 3,920 2

The depreciation charge during the year is marginally higher than the previous year mainly due to higher amortisation charge on capitalisation of stamp duty on expired portion of lease along with fresh capitalisation, offset by assets fully being depreciated during the year.

f) Other expenses

FY 21 FY 20 Change (%)
Other expenses 21,426 22,132 (3)

Other expenditure represents the following expenditure:

FY 21 FY 20 Change (%)
Consumption of stores and spares 4,112 4,616 (11)
Repairs to buildings 17 65 (73)
Repairs to machinery 2,967 3,181 (7)
Relining expenses 73 94 (22)
Fuel oil consumed 125 198 (37)
Purchase of power 2,634 2,906 (9)
Conversion charges 2,250 2,795 (20)
Freight and handling charges 3,866 4,047 (4)
Rent 71 59 22
Royalty 2,195 1,751 25
Rates and taxes 1,102 832 32
Insurance charges 146 147 (1)
Commission, discounts and rebates 172 180 (4)
Allowance for credit losses/ provision for advances 40 2 1,773
Other expenses 2,977 2,929 2
Less: Expenditure (other than interest) transferred to capital & other accounts (1,321) (1,671) (21)
Total Other expenses 21,426 22,132 (3)

Other expenses were lower as compared to the previous year due to lower level of activities owing to lockdown caused by COVID-19, primarily on account of lower conversion charges mainly at FAMD, lower consumption of stores and spares, lower power cost, lower freight and handling charges due to lower

domestic shipments, lower repairs to machinery as previous year included IT transformation initiatives along with lower other general expenses, partly offset by higher royalty expense due to increase in prices along with increase in rates and taxes and lower one-time gains / reversals present in the previous year not present in the current year.

g) Finance costs and net finance costs

FY 21 FY 20 Change (%)
Finance costs 3,394 3,031 12
Net Finance costs 2,942 2,861 3

During the year under review, finance costs increased mainly on account of higher interest on fresh issue of Non-Convertible Debentures along with higher interest on short-term borrowings, unsecured foreign loans, higher interest under provisions of Income Tax Act, 1961 and interest on export advance, partly offset by lower charge on Commercial Papers and higher capitalisation of interest. Interest on domestic term loans were almost at par as the decrease on account of repayments towards the end of financial year was offset by higher charge on fresh loans at the beginning of the financial year.

Net finance charges were marginally higher in line with higher finance cost offset by higher interest income on intercorporate deposits, interest on income tax refund received for earlier years along with higher gain on sale of mutual funds.

h) Exceptional items

FY 21 FY 20 Change (%)
Exceptional items ^¦2,773 (1,704) N.A.

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

• Provision reversal for impairment of investments / doubtful advances of Rs.150 crore provided earlier in respect of a subsidiary (previous year: Rs.1,150 crore relating to provision recognised for impairment of investments in subsidiaries and joint ventures, net of reversal of Rs.1 crore on account of recovery of advances made to a joint venture).

• Provision for demands and claims - Nil (previous year: Rs.196 crore) relating to certain statutory demands and claims on environment and mining matters and Sabka Vishwas Legal Dispute Resolution Scheme.

• Net Provision for Employee Separation scheme (ESS) under Sunehere Bhavishya Ki Yojana (SBKY) scheme and Special Separation scheme at Companys Jharia Collieries amounting to Rs.444 crore (previous year: Rs.107 crore).

• Fair valuation gain on preference share investment held by the Company in some of its affiliates Rs.2,032 crore (previous year: Loss Rs.250 crore).

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

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

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

FY 21 FY 20 Change (%)
Property, Plant and Equipment 64,032 66,392 (4)
Capital work-in-progress 10,057 8,070 25
Intangible assets 840 728 15
Intangible assets under development 409 177 131
Right of use Assets 3,906 4,113 (5)
Total PPE inlcuding intangibles & right of use assets 79,244 79,480 (0)

The movement in total PPE including intangible is lower primarily on account of depreciation and amortisation charge during the year, partly offset by increase in capital work-inprogress mainly at Kalinganagar Phase-II and normal additions during the year. The increase in intangible assets is for the additional stamp duty on iron-ore leases for enhancement of its production capacity.

j) Investments

FY 21 FY 20 Change (%)
Investment in Subsidiary, JVs and Associates 28,445 26,578 7
Investments - Non-current 22,622 20,283 12
Investments - current 6,404 3,235 98
Total Investments 57,471 50,096 15

The increase in investments was predominantly on account of increase in current investments in mutual funds along with increase in other non-current investments mainly in the preference shares of Tata Steel BSL Limited primarily on account of fair valuation gain.

Increase in investments in Subsidiary, Joint Ventures and Associates is mainly on account of increase in value of investment at Tata Steel Downstream Products Limited on transfer of investment held in two Joint Ventures at a premium

along with increase in investment in Tata Steel Mining Limited and Tata Metaliks Limited, reduced by investments being classified as held for sale primarily in Tata Steel Special Economic Zone Limited (TSSEZ).

k) Inventories

FY 21 FY 20 Change (%)
Finished and semi-finished goods including stock-in-trade 3,320 4,777 (31)
Work-in-progress 0 7 (100)
Raw materials 2,990 3,586 (17)
Stores and spares 2,294 2,347 (2)
Total Inventories 8,604 10,717 (20)

Finished and semi-finished inventory decreased as compared to previous year mainly due to increase in sales volumes. Q4FY2020 was impacted due to lockdown resulting in higher inventory build-up.

Raw material inventories have decreased over previous year mainly due to decrease in inventory at FAMD on account of higher consumption of chrome ore inventory post expiry of mining leases along with lower inventory of ferro chrome and lower coke inventory mainly at TSK.

Stores and spares inventory decreased mainly on account of planned reduction.

l) Trade receivables

FY 21 FY 20 Change (%)
Gross trade receivables 3,906 1,050 272
Less: allowance for credit losses 43 33 30
Net trade receivables 3,863 1,017 280

Trade receivables increased significantly as compared to the previous year primarily due to increase in group company receivables for sale of iron ore and coal and discontinuation of discounting of group company receivables along with higher year-end sale during FY 2020-21.

m) Gross debt and Net debt

FY 21 FY 20 Change (%)
Gross debt 28,348 41,423 (32)
Less: Cash and Bank balances (incl. Non-current balances) 1,725 1,281 35
Less: Current investments 6,404 3,235 98
Net Debt 20,219 36,907 (45)

Gross debt was lower due to pre-payments and repayments of various term loans, non-convertible debentures, short-term loans, commercial papers, and External Commercial Borrowings (ECB). These were partly offset by drawal of other domestic term loans and ECB along with issue of non-convertible debentures during the year.

Net debt was lower as compared to previous year. This is attributable to decrease in gross debt, along with increase in current investments and cash and bank balances.

n) Cash Flows

(Rs. crore)

FY 21 FY 20 Change (%)
Net Cash from / (used in) operating activities 29,369 13,454 118
Net Cash from / (used in) investing activities (13,008) (17,635) 26
Net Cash from / (used in) financing activities (15,852) 4,630 (442)
Net increase / (decrease) in cash and cash equivalents 508 449 13

Net cash flow from / (used in) operating activities

During the year under review, the net cash generated from operating activities was Rs.29,369 crore as compared to Rs.13,454 crore during the previous year. The cash inflow from operating profit before working capital changes and direct taxes during the current year was ^21,832 crore as compared to inflow of Rs.13,768 crore during the previous year due to higher operating profits. Cash inflow from working capital changes in FY 2020-21 is mainly due to decrease in inventories by Rs.2,106 crore, along with increase in Non-current / current financial and other liabilities / provisions by Rs.7,850 crore which primarily includes advance from customers for a long-term export order, partly offset by increase in Non-current / Current financial and other assets by Rs.2,058 crore, primarily in trade receivables. The income tax paid during the current year was Rs.361 crore (net of refund received for earlier years) as compared to Rs.1,819 crore 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.13,008 crore as compared to Rs.17,635 crore during the previous year. The outflow during the current year broadly represents, net purchase of current investments of Rs.2,974 crore, capex of Rs.2,122 crore, Inter Corporate Deposits given net of realisation amounting to Rs.7,326 crore mainly to T Steel Holdings, investments in subsidiaries and Joint Ventures Rs.1,000 crore.

Net cash flow from / (used in) financing activities

During the year under review, the net cash outflow from financing activities was Rs.15,852 crore as compared to an inflow of Rs.4,630 crore during the previous year. The outflow during the current year broadly represents repayment of borrowings including finance lease (net of proceeds) Rs.13,229 crore, along with payment of interest Rs.2,983 crore, payment of dividend Rs.1,146 crore, repayment of Hybrid Perpetual Securities Rs.1,500 crore. These were offset by proceeds from partly paid up equity shares Rs.3,241 crore.

o) Changes in Key Financial Ratios

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

FY 21 FY 20 Change (%)
Inventory Turnover (days) 57 70 (20)
Debtors Turnover1 (days) 14 7 91
Current Ratio (Times) 0.61 0.81 (24)
Interest Coverage Ratio2 (Times) 6.94 4.37 59
Debt Equity3 (Times) 0.34 0.55 (39)
Net Debt Equity3 (Times) 0.24 0.49 (51)
EBITDA Margin4 (%) 33.84 24.98 35
Net Profit Margin5 (%) 20.98 11.16 88
Return on average Net worth5 (%) 16.19 9.02 80

1) Debtors Turnover Ratio: Increased primarily on account of increase in debtors mainly from group companies.

2) Interest Coverage Ratio: Increased primarily on account of increase in operating profits.

3) 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 and cash and bank balances.

4) EBITDA Margin: Increased primarily on account of increase in operating profits due to higher prices and decline in raw material costs.

5) 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 higher exceptional gains as compared to charge in the previous year.

2. Tata Steel Limited (Consolidated)

The consolidated profit after tax of the Company was Rs.8,190 crore as against Rs.1,172 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 decline in operating cost and lower exceptional charge as compared to the previous year, partly offset by higher tax expenses during the year due to higher profits at Tata Steel (Standalone). Moreover, previous year included re-measurement of deferred tax liabilities based on the new lower rate of Income tax prescribed under Section 115BAA of the Income Tax Act, 1961 along with creation of deferred tax assets at some of the foreign entities as against creation of deferred tax liabilities during the current year primarily at Tata Steel Europe.

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

(Note: The financials of Tata Steel Long Products Limited (TSLP) contain the steel business of Usha Martin Limited (UML) which was acquired on April 9,2019. South-East Asian (SEA1) operations have been reclassified as continuing operations during the current year and the profit and loss items includes SEA operations for the current and comparative periods. The Balance Sheet of current year includes Assets and Liabilities of SEA operation which were earlier classified under held for sale).

a) Revenue from operations

FY 21 FY 20 Change (%)
Tata Steel (Standalone) 64,869 60,436 7
TSBSL 21,419 18,199 18
TSE 56,051 55,939 0
TSLP 4,750 3,490 36
South East Asia 9,589 9,945 (4)
Others 40,567 41,787 (3)
Eliminations & Adjustments (40,951) (40,824) (0)
Total revenue from operations 156,294 148,972 5

The consolidated revenue from operations was higher by 5% as compared to the previous year primarily due to increase in realisations across geographies along with higher deliveries at TSBSL, TSLP and TSTH, partly offset by marginal decline in deliveries mainly at TSE and NSH.

Tata Steel Europe revenue was at par as the decrease due to decline in deliveries along with marginal decrease in average revenue per tonne was almost offset by favourable forex impact on translation.

Decrease at SEA was mainly due to lower volumes at NSH, partly offset by higher volumes at TSTH.

Others primarily include decrease at TS Global Procurement and NatSteel Asia which are majorly eliminated on consolidation.

b) Purchases of stock-in-trade

FY 21 FY 20 Change (%)
Tata Steel (Standalone) 1,146 1,563 (27)
TSBSL 0 3 (100)
TSE 2,540 3,110 (18)
TSLP 0 0 N.A.
South East Asia 6,702 6,500 3
Others 5,106 4,198 22
Eliminations & Adjustments (6,259) (4,870) (29)
Total purchases of stock-intrade 9,235 10,504 (12)

Expense was lower at Tata Steel Europe mainly due to decrease in external steel purchases across a number of operating units, consistent with lower deliveries offset by adverse exchange impact on translation. At Tata Steel (Standalone) the expense was lower due to lower purchases of imported rebars, wire rods and billets and structural steel owing to lower requirement, partly offset by increase at other sustainable businesses. This was offset by increase in expense at South East Asia mainly at TSTH due to increase in production, while at NatSteel Holding, expense was lower on account of lower production. Others primarily include transactions at TCIL and TSDPL which are majorly eliminated on consolidation and increase at Tata Steel Minerals Canada Limited post commencement of operations during the year.

c) Cost of materials consumed

FY 21 FY 20 Change (%)
Tata Steel (Standalone) 13,869 17,407 (20)
TSBSL 10,024 10,816 (7)
TSE 22,121 22,784 (3)
TSLP 2,182 2,392 (9)
South East Asia 341 349 (2)
Others 29,273 31,981 (8)
Eliminations & Adjustments (31,622) (32,136) 2
Total cost of materials consumed 46,188 53,593 (14)

Consumption was lower across all major entities mainly due to lower cost of consumption of imported coal owing to lower prices and lower production attributable to lock-down and lower consumption and prices of other raw materials, partly offset by increase in iron ore prices mainly at TSBSL and TSLP. Tata Steel Europe reported decrease in GBP terms due to decline in production along with lower coal and coke prices offset by higher iron ore prices and adverse exchange impact on translation.

Others primarily reflects decline in transactions at T S Global Procurement and NatSteel Asia which are majorly eliminated on consolidation, along with decrease at Tata Steel Mining Limited due to higher inventory of raw materials, partly offset by increase at TSMC post commencement of operations during the year.

d) Employee benefits expense

FY 21 FY 20 Change (%)
Tata Steel (Standalone) 5,199 5,037 3
TSBSL 649 410 58
TSE 12,314 11,961 3
TSLP 215 192 12
South East Asia 573 619 (7)
Others 824 825 (0)
Eliminations & Adjustments 135 108 25
Total employee benefits expense 19,909 19,152 4

Increase in expenses was mainly at TSBSL owing to increase in activities at two other subsidiaries along with higher bonus charge.

The increase at TSE is mainly due to adverse exchange impact on translation, partly offset by the Government employment support for COVID-19.

At Tata Steel (Standalone) expense increased post finalisation of wage agreements in the previous year and its consequential impact on the retirement provisions, partially offset by lower charge due to change in the actuarial estimates owing to change in discounting rates.

At Tata Steel Long Products the increase was mainly due to change in actuarial estimates and higher bonus charge.

At South East Asia the decrease was mainly at NatSteel Holding due to receipt of COVID-19 Government support for shut down of plant.

e) Depreciation and amortisation expense

FY 21 FY 20 Change (%)
Tata Steel (Standalone) 3,987 3,920 2
TSBSL 1,493 1,452 3
TSE 2,521 2,355 7
TSLP 327 311 5
South East Asia 259 267 (3)
Others 647 403 60
Total depreciation and amortisation expense 9,234 8,708 6

Expense was higher than the previous year mainly on account of higher depreciation charge at TSMC post capitalisation of facilities during the year.

The expense at TSE increased mainly due to adverse exchange impact on translation.

Expense at TSBSL increased mainly due to higher amortisation on power tolling agreement with Angul Energy Limited.

f) Other expenses

FY 21 FY 20 Change (%)
Tata Steel (Standalone) 21,426 22,132 (3)
TSBSL 4,603 4,875 (6)
TSE 19,790 18,205 9
TSLP 1,185 962 23
South East Asia 2,102 2,040 3
Others 2,710 2,360 15
Eliminations & Adjustments (2,875) (2,189) 31
Total other expenses 48,941 48,385 1

Other expenditure represents the following expenditure:

FY 21 FY 20 Change (%)
Consumption of stores and spares 10,868 11,875 (8)
Repairs to buildings 123 110 12
Repairs to machinery 7,470 6,987 7
Relining expenses 171 198 (14)
Fuel oil consumed 602 821 (27)
Purchase of power 5,187 5,523 (6)
Conversion charges 2,112 2,688 (21)
Freight and handling charges 8,848 9,120 (3)
Rent 2,249 2,353 (4)
Royalty 3,484 1,825 91
Rates and taxes 1,530 1,186 29
Insurance charges 510 370 38
Commission, discounts and rebates 304 241 26
Allowance for credit losses/ provision for advances 85 6 1,368
Other expenses 7,164 7,400 (3)
Less :-Expenditure (other than interest) transferred to capital & other accounts (1,766) (2,318) (24)
Total Other expenses 48,941 48,385 1

Expense was lower at Tata Steel (Standalone) on account of lower conversion charges, lower consumption of stores and spares, lower power cost, lower freight and handling charges, lower repairs to machinery along with lower other general expenses, partly offset by higher royalty expense along with increase in rates and taxes and lower one-time gains / reversals in the current year.

TSE reported increase in other expenses mainly on account of adverse exchange impact on translation along with higher provision for purchase of emission rights and higher repairs to machinery. These were partly offset by lower consumption of stores and spares, lower freight and handling charges, lower power cost, and lower other general expenses.

Increase in Others was mainly at Tata Steel Mining Limited due to higher Royalty charge coupled with increase in activities post allotment of mines, partly offset by decrease mainly at Tata Steel Global Holdings on account of favourable exchange rate movement.

Decrease at TSBSL was mainly due to decrease in contractors payment (employees were taken on roll of subsidiary companies), lower consumption of stores and spares, lower power cost and lower freight and handling charges owing to lower activities. Decrease in other general expenses, partly offset by higher repairs and rates and taxes.

Increased at TSLP was mainly due to increase in freight and handling charges along with higher royalty charges and increase in rates and taxes, higher repairs and higher consumption of power and fuel due to increased production.

g) Finance costs

FY 21 FY 20 Change (%)
Tata Steel (Standalone) 3,394 3,031 12
TSBSL 1,529 1,655 (8)
TSE 1,499 3,249 (54)
TSLP 235 293 (20)
South East Asia 52 75 (31)
Others 3,160 4,610 (31)
Eliminations & Adjustments (2,262) (5,332) (58)
Finance costs 7,607 7,581 0

h) Net Finance costs

FY 21 FY 20 Change (%)
Tata Steel (Standalone) 2,942 2,861 3
TSBSL 1,470 1,604 (8)
TSE 1,462 2,024 (28)
TSLP 212 242 (12)
South East Asia 49 72 (31)
Others 1,725 1,069 61
Eliminations & Adjustments (761) (1,838) (59)
Net Finance costs 7,099 6,034 18

Finance cost was almost at par. Decrease at TSE was mainly due to decrease in borrowings post restructuring of debt

in September 2019, which was majorly eliminated on consolidation.

Decrease at TSBSL and TSLP was primarily due to prepayment of loans.

Increase at Tata Steel (Standalone) was mainly on account of higher interest on Non-Convertible Debentures due to fresh issue, along with higher interest on short-term borrowings, unsecured foreign loans, and higher interest under provisions of Income Tax Act, 1961 and interest on export advance, partly offset by lower charge on Commercial Papers and higher capitalisation of interest.

Net finance charge was higher mainly at TSE due to higher finance income on refinancing of Senior Facilities Agreement (SFA) during the previous year. Finance cost was almost at par, partly offset by higher finance income mainly at Tata Steel (Standalone).

i) Exceptional items

FY 21 FY 20 Change (%)
Tata Steel (Standalone) 2,773 (1,704) N.A.
TSBSL 0 69 N.A.
TSE (1,342) (2,221) N.A.
TSLP 0 (161) N.A.
South East Asia (28) (2) N.A.
Others (557) (659) N.A.
Eliminations & Adjustments (1,889) (252) N.A.
Total exceptional items (1,043) (4,930) N.A.

Exceptional items during the FY 2020-21 primarily represents:

• Impairment charges (net of reversal) of 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 Companys Jharia Collieries 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 (Standalone).w

Partly offset by,

• Restructuring and write back of provisions which primarily includes write-back of provisions at TSE T88 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 T70 crore.

• Profit on sale of subsidiaries includes profit of T26 crore on realisation of deferred consideration at TSE.

The exceptional items in FY 2019-20 primarily include:

• Impairment charges T3,197 crore in respect of property, plant and equipment (including capital work-in-progress and capital advances, right of use assets and intangible asset) primarily at TSE, mining operations carried out in Canada, Tata Steel Special Economic Zone Limited, and at TSBSL along with impairment of Goodwill at Bhubaneshwar Power Private Limited.

• Fair value loss of non-current assets classified as held for sale of South-East Asian operations T1,175 crore.

• Provision for demands and claims amounting to Rs.196 crore relating to certain statutory demands and claims on environment and mining matters including Rs.86 crore relating to Sabka Vishwas Legal Dispute Resolution Scheme at Tata Steel (Standalone).

• Provision for Employee Separation Scheme (ESS) under Sunehere Bhavishya Ki Yojana (SBKY) scheme amounting to T107 crore at Tata Steel (Standalone).

• Restructuring provisions amounting to T161 crore at TSE.

• Expenses incurred on stamp duty and registration fees for a portion of land parcels and mines acquired as part of business combination T27 crore and provision for coal block performance guarantee T134 crore at Tata Steel Long Products Limited (formerly Tata Sponge Iron Limited).

• Provision for impairment of doubtful capital advances amounting to T42 crore at TSBSL.

• Provisions for severance pay amounting to T16 crore at Tata Steel Thailand.

• Fair valuation loss on investment in preference shares held at one of the associate companies amounting to T250 crore at Tata Steel (Standalone).

Partly offset by,

• Restructuring and write-back of provisions which primarily includes write-back of liabilities no longer required at Tata Steel BSL Limited T154 crore and settlement credit received at The Indian Steel & Wire Products Ltd. T18 crore.

• Profit on sale of subsidiaries amounting to T149 crore and profit on liquidation of group companies amounting to T41 crore at TSE.

• Net gain on disposal of Subsidiaries amounting to T13 crore at NatSteel Holdings.

• Gain on recovery of advances earlier provided for amounting to T1 crore at Tata Steel (Standalone).

j) Property, Plant and Equipment (PPE) including intangibles

and right of use assets

FY 21 FY 20 Change (%)
Tata Steel (Standalone) 79,244 79,480 (0)
TSBSL 29,114 30,491 (5)
TSE 25,920 24,158 7
TSLP 4,360 4,646 (6)
South East Asia 1,485 0 N.A.
Others 10,769 11,488 (6)
Eliminations & Adjustments (454) (270) (68)
Total PPE inlcuding intangibles & right of use 150,438 149,993 0
assets

PPE and intangibles were almost at par. Increase at Tata Steel Europe was mainly on account of exchange impact on translation along with additions and increase in Capital Work-in-Progress , offset by depreciation and amortisation charge during the year. Increase at South East Asia as it was classified as held for sale in the previous year and hence was not included.

Decrease at Others was mainly on account of depreciation and amortisation charge, partly offset by additions.

Decrease at Tata Steel (Standalone) was primarily on account of depreciation and amortisation charge during the year, partly offset by increase in capital work-in-progress mainly at Kalinganagar Phase-II and normal additions during the year.

k) Inventories

FY 21 FY 20 Change (%)
Finished and semi-finished goods including stock-in-trade 11,992 12,520 (4)
Work-in-progress 4,563 4,273 7
Raw materials 11,527 9,513 21
Stores and spares 5,194 4,763 9
Total Inventories 33,276 31,069 7
(Rs. crore)
FY 21 FY 20 Change (%)
Tata Steel (Standalone) 8,604 10,717 (20)
TSBSL 4,374 4,839 (10)
TSE 13,780 12,859 7
TSLP 813 797 2
South East Asia 1,787 0 N.A.
Others 4,252 1,990 114
Eliminations & Adjustments (334) (133) (151)
Inventories 33,276 31,069 7

Increase was primarily at South East Asia as it was classified as held for sale in the previous year. Increase in Others was primarily on account of higher inventory at Tata Steel Mining Limited along with increase at TS Global Procurement and TSMC. Tata Steel Europe reported increase mainly on account of exchange impact on translation as the inventory of finished and semi-finished goods were lower which was offset by higher raw materials inventory. Decrease at Tata Steel (Standalone) mainly in finished and semi-finished goods due to lower quantities along with lower raw materials inventory and stores and spares. Inventory at TSBSL was lower mainly due to lower stock of finished and semi-finished goods, partly offset by increase in Raw Materials inventory. Inventory at TSLP was at par as the increase in raw materials inventory was offset by decrease in inventory of finished and semi-finished goods.

l) Trade receivables

FY 21 FY 20 Change (%)
Tata Steel (Standalone) 3,863 1,017 280
TSBSL 423 702 (40)
TSE 5,390 5,645 (5)
TSLP 75 156 (52)
South East Asia 842 0 N.A.
Others 12,849 10,690 20
Eliminations & Adjustments (13,902) (10,325) (35)
Net trade receivables 9,540 7,885 21

Increase was primarily at SEA as it was classified as held for sale in the previous year. Increase at Tata Steel (Standalone) was primarily due to increase in group company receivables for sale of iron ore and coal and discontinuation of discounting for group company receivables (majorly eliminated on consolidation) along with higher year-end sale during the current year. Increase in Others was primarily at Tata Steel Global Procurement majorly eliminated on consolidation. These increases were partly offset by decrease at TSBSL and TSLP due to higher collection. TSE was lower mainly on account of decrease in debtors owing to higher collections, partly offset by adverse exchange impact on translation.

m) Gross debt and Net debt

FY 21 FY 20 Change (%)
Gross debt 88,501 116,328 (24)
Less: Cash and Bank balances (incl. Non-current balances) 5,893 8,117 (27)
Less: Current investments 7,219 3,432 110
Net debt 75,389 104,779 (28)

Net debt was lower by Rs.29,390 crore over previous year.

Gross Debt at Rs.88,501 crore was lower by Rs.27,827 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 and increase due to re-classification of SEA operations into continuing operations from held for sale.

The decrease in Net Debt was in line with decrease in gross debt along with increase in current investments mainly at Tata Steel (Standalone) and at TSBSL, partly offset by decrease in cash and bank balances mainly at Tata Steel Global Holdings.

n) Cash Flows

(Rs. crore)
FY 21 FY 20 Change (%)
Net Cash from / (used in) operating activities 44,327 20,169 120
Net Cash from / (used in) investing activities (9,323) (14,530) 36
Net Cash from / (used in) financing activities (37,090) (1,695) (2,089)
Net increase / (decrease) in cash and cash equivalents (2,086) 3,944 (153)

Net cash flow from / (used in) operating activities

During the year under review, the net cash from operating activities was Rs.44,327 crore as compared to Rs.20,169 crore during the previous year. The cash inflow from operating profit before working capital changes and direct taxes during the current year was Rs.28,540 crore as against Rs.18,078 crore during the previous year reflecting higher operating profits during the current year. Cash inflow from working capital changes during the current period was Rs.16,491 crore primarily due to increase in Non-current / Current financial and other liabilities / provisions by Rs.16,267 crore which includes advance from customers for a long-term export order at Tata Steel (Standalone) along with increase at TSE, TSBSL and TSLP. Decrease in inventories by Rs.46 crore along with decrease in Non-current / Current financial and other assets Rs.178 crore. The payments of income taxes

during the year under review were Rs.704 crore as compared to Rs.2,106 crore during the previous year.

Net cash flow from / (used in) investing activities

During the year under review, the net cash outflow from investing activities was Rs.9,323 crore as against an outflow of Rs.14,530 crore during the previous year. The outflow during the year broadly represents capex of Rs.6,979 crore and purchase (net of sale) of current investments amounting to Rs.3,560 crore. Previous year included acquisition of subsidiaries / undertakings Rs.4,433 crore mainly at TSLPs acquisition of steel business of UML, BEL acquisition at TSBSL against Nil during the year. Inflow on account of sale of capital assets Rs.445 crore along with interest and dividend receipt Rs.401 crore.

Net cash flow from / (used in) financing activities

During the year under review, net cash outflow from financing activities amounted to Rs.37,090 crore as against outflow of Rs.1,695 crore during the previous year. The net outflow primarily represents repayment of borrowings including finance lease (net of proceeds) Rs.30,661 crore, repayment of Hybrid Perpetual Securities Rs.1,500 crore, interest payment Rs.6,804 crore and payment of dividend Rs.1,151 crore. These were offset by proceeds from partly paid equity shares Rs.3,239 crore net of share issue expenses.

o) Changes in Key Financial Ratios

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

FY 21 FY 20 Change (%)
Inventory Turnover (days) 79 83 (5)
Debtors Turnover (days) 21 26 (18)
Current Ratio1 (Times) 0.97 1.40 (31)
Interest Coverage Ratio2 (Times) 3.39 1.68 102
Debt Equity3 (Times) 1.15 1.58 (27)
Net Debt Equity3 (Times) 0.98 1.42 (31)
EBITDA Margin4 (%) 19.77 12.15 63
Net Profit Margin5 (%) 5.24 0.79 566
Return on average Net worth5 (%) 10.66 1.59 570

1) Current Ratio : Decreased primarily on account of increase in current liabilities mainly trade payables and other current financial and non-financial liabilities and increase in provisions along with decrease in current assets mainly cash and cash equivalents.

2) Interest Coverage Ratio: Increased primarily on account of increase in operating profits.

3) 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 offset by lower cash and bank balances.

4) EBITDA Margin: Increased primarily on account of increase in operating profits across geographies due to higher prices and decline in raw material costs.

5) 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 exceptional charges as compared to that of the previous year.

VI. Strategy

Few existing companies were there when the last global pandemic hit in 1918. Tata Steel Limited is one of them. A century later, the Company dealt with COVID-19 with equal determination and trust, keeping our employees and the community at the core of our response. Medical infrastructure in Jharkhand and Orissa was ramped up, creating more isolation beds and providing Personal Protective Equipment. Tata Bridgital platform was deployed for proactive testing of high-risk frontline employees. Stranded migrant workers were provided help across many states. The Company collaborated with peers and public systems to identity and provide job opportunities for people impacted by the pandemic. Within the workforce, the Company pioneered the use of job clusters or PODs to ensure business continuity. Ensuring health and safety of the workforce and workplace was key to our resilience.

During the year under review, production reduced due to lockdowns, but the year ended with production at full capacity and the highest quarterly earnings till date leading to significant deleveraging. The pandemic showed the importance of investing in future-ready capabilities. Investments in digital infrastructure and cloud network over the last few years enabled a seamless transition of a large part of the employee base to work from home. Suraksha App enabled real-time tracking of people to ensure COVID-19 protocol compliance. Connected assets, operations and demand platforms ensured asset reliability, uninterrupted operations with skeletal on-site workforce and demand generation using digital platforms. An agile response allowed the supply chain to handle disruptions, manage the surge in export volumes and exploit opportunities to improve profitability.

Tata Steels strategy is focused on becoming future ready structurally, financially and culturally. Over the last decade, the Company has consolidated and rebalanced its portfolio in favour of higher capacity in India. We are in the process of simplifying the organisation at the Tata Steel Group level, while In India the portfolio is being simplified into four clusters. Adjacent businesses (New Materials, Services & Solutions) were established. Foundations of a technology enabled sustainable business model, digital and technology leadership were also laid. During the year under review, the Company has taken

significant steps towards improving financial strength through deleveraging. The Company remains committed to become the most valuable and respected steel Company globally, by 2030. In pursuit of its goal, the Company has refreshed its longterm strategies to extend its strategic horizon to 2030. The priority for the next five years is to improve the structural and financial strength of the Company. This will be the foundation for significant growth thereafter.

The Company aspires to achieve its long-term goals by pursuing the following strategic objectives:

Leadership in India: Companys focus on India aligns with the increasing prominence of India in the global steel industry. The Company aims to lead in the Indian market by being the most respected and preferred steel supplier to discerning customers. This ambition 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 include delivering innovative products & services, serving existing and emerging customer needs and providing the best customer experience.

Consolidate position as global cost leader: As the steel industry faces extreme business cycles which significantly impact pricing and hence profitability, it is important for Tata Steel to prepare for and generate profits even in times of prolonged low steel prices. Operational efficiency is key to Tata Steels cost leadership position. Several initiatives like Aspire, Shikhar 25 have led several KPIs to be at global / Indian benchmark levels. Cost leadership is also the outcome of innovation and execution of structural cost reduction initiatives such as investment in strengthening logistics networks, fixed cost reduction, etc.

Attain leadership position in adjacent businesses: To achieve Tata Steels vision of the future, it is important to explore and lead in adjacent businesses that leverage our capability and market opportunity. The approach is to have a capex-lite business models and differentiating through deep understating 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 megatrends (such as light-weighting, cleaner environment), NMB will create technology-driven businesses in identified materials.

3) Commercial Mining (through its wholly-owned subsidiary Tata Steel Mining Ltd.) - The Company aspires to leverage, the

opportunities arriving from the Governments "Atmanirbhar Bharat" Programme, regulatory changes and the need to meet captive raw material requirements beyond 2030 by creating a sustainable mining business.

Leadership in sustainability: Sustainability is a key issue for the steel industry. The Company aspires to take leadership role in sustainability in the steel industry and use technology to address the challenge of climate change. The goal is to significantly reduce the carbon intensity of our operations going forward and also reduce fresh water usage. Creating a positive impact on biodiversity in India and working with our partners to create a sustainable supply chain are also key priorities. Tata Steel is taking up key technology projects in the areas of clean hydrogen and carbon capture & usage to facilitate achievement of the carbon emission goals.

To achieve its strategic objectives, the Company has identified four strategic enablers. Tata Steel aspires to be the Best Place to Work for in Manufacturing in India with a workforce that is future ready, engaged, and high performing. The steel industry is becoming smarter and more agile, evolving towards Industry 4.0. COVID-19 has accelerated this trend significantly. Tata Steel which has already embarked on a digital journey and has 3 World Economic Forum Industry 4.0 lighthouse sites, 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 sustainability. Fostering a culture which makes Tata Steel future ready across agility, innovation, digital, environment, diversity, and safety will be critical for the Company to achieve its strategic objectives.

VII. Human Resources Management and Industrial Relations

Human resource has always been one of the most valued stakeholders and 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 re-define our agenda through our collaborated actions to make it more employee centric.

To enable the organisation to attain its full potential, it is imperative for us to create and maintain an ideal work culture thus creating an engaged and skilled workforce capable of delivering on the commitments to our stakeholders and in the process, making us Future Ready- structurally, financially and culturally. Tata Steel has a culture of working together through joint consultation between Union and Management and has a very strong commitment towards community development. Our people practices have enabled us in creating an environment of collaboration and connect which has aided us to achieve industrial harmony of over 92 years.

The COVID-19 pandemic accelerated our journey of being Digital leader in Steel industry globally. For us, COVID-19 brought digitalisation into sharp focus with many projects being implemented to ensure employee safety through data driven decision-making. One such project Connected Workforce system was implemented with focus on improving safety of contract workforce engaged in our plants. POD working system, remote working for employees to the extent possible and Suraksha app were introduced in the Company to ensure employee safety and well-being. People Care - a 24*7 helpline was also introduced to provide accurate and quick information on COVID-19 and address grievances / queries of employees. The Company was also recognised by UN GCNI for its efforts on Being Focused on People during and post COVID-19.

To remain competitive, improving employee productivity is of utmost importance to the organisation and we strive to achieve benchmark performance in this area through continuous efforts with initiatives like customised "Sunehre Bhavishya Ki Yojana" for redundancy management and Team Performance Reward which was introduced during the year. The overall Employees on Roll (EOR) for the Company reduced from 32,364 to 31,189 in FY 2020-21.

During the year under review we implemented some major initiatives to promote inclusion and diversity. We deployed the first batch of 22 women as heavy machinery operators at Noamundi iron mine and extended Women@Mines coverage in Raw Materials Division. We have rolled out various initiatives for LGBTQ+ community like developing a site for the LGBTQ+ community and the allies to connect, interact and share their experiences and make a difference. 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 organisation. Our continuous efforts in this direction have led to the increase in gender diversity from 6.5% to 7.4% and reduction in attrition of female employees from 8% to 6%.

We ensured that we stay ahead of the curve, with our focused employee experience initiatives such as Agile working policy, to enable employees to work remotely, Rewards Hub, a one stop solution for all officers related policies and benefits, etc. To measure our performance, eNPS (Net Promoter Score) for HR processes was launched companywide. We also launched Alumni Portal to engage with superannuated and separated officers. Real-time dashboards using analytics were implemented to provide insights on employee cost, diversity & workforce productivity. Also, various cost optimisation and deferment initiatives were undertaken in FY 2020-21.

Multiple interventions for skill building of our own and contract employees were undertaken during the year. Action learning projects through School of Excellence, were rolled out in prioritised areas of Steel Plant Operations and Maintenance with the objective of developing world-class technical competencies and maximise business performance. Tata Steel Digi-e-shala, an intrapreneurial venture by offering learning and development services to external world was launched. The initiative won the World Steelie Award2020 constituted by World Steel Association for Excellence in Education and Training.

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 4th time. Tata Steel was also recognised as India Workplace Equality Index (IWEI) Top Employers 2020 for the commitment demonstrated towards advancing equality for LGBTQ+ people.

VIII. Digital Transformation

Tata Steel as an organisation has always been an early adopter of the latest technologies. Over the last few years, the Company has been driving Business Transformation through adoption of Digital Technologies. The Company aspires to be the Global Digital Leader in Steel Manufacturing by 2030 through digital interventions across its value chain, remodel work practices by enhancing digital maturity and in the process, be more insightful, intelligent and agile as an organisation.

Tata Steel banked upon Cloud, Data and Artificial Intelligence (AI) as the building blocks of its digital transformation journey and made substantial investments to augment its network, computing, and cyber security capabilities. The Company moved ~85% of its servers to cloud over the last 3 years in one of the biggest cloud migration programmes in Asia. The Companys cyber security cell was equipped with the necessary expertise & tools to pre-empt cyber threats & intrusions. The investments made on building up the sturdy infrastructure proved to be a lifesaver over the last year, when all were forced to operate remotely due to the pandemic. Without any special efforts, the Company has been able to seamlessly connect to the Companys network while working from home and continued production even with a skeletal workforce physically present at the mines and plants. The employees logging into enterprise applications and virtual meetings taking place each day, the Company has been running business as usual with no adverse impact on employee productivity.

Along with Digital Transformation, the division has parallelly focused on transforming the Company from being process driven to data driven. The idea is to use data to generate better business insights and drive decision-making coupled with streamlined and robust business processes. The 4th Industrial Revolution Advanced Global Lighthouse recognition by World Economic Forum conferred on Tata Steel Jamshedpur only strengthens our belief on the transformational journey we are undertaking. On the Digital Maturity front, Gartners Digital Execution Scorecard Report compared the Companys Digital Execution journey with globally comparable industry sectors over a 12 months horizon and rated our digital maturity to be better than the market average.

In Tata Steel, well defined & lean processes have always been one of the strongest pillars driving operational excellence. Over the last year, we have focused towards building multiple business platforms to consolidate bespoke IT solutions, analyse the data generated to aid intelligent decision-making and enable process efficiencies, thereby ensuring global optima.

The company uses Connected Workforce platform designed to cover employees and contract workers in the areas of safety, security and productivity. The platform gives us end-to-end visibility of the work patterns of the contract workforce across plants and helps pre-empt unsafe incidents while improving the workforce productivity through analytics.

Our e-commerce platforms such as Aashiyana, DigECA, Compass etc. have already proved their mettle and drove sales and customer connect over the last year. Aashiyana clocked record business during COVID-19 delivering a 7 times growth over FY 2018-19. Through digital interventions we have been able to achieve a reduction of 30% in customer complain resolution time.

The Company has developed multiple asset-specific algorithms to predict failures as well as residual life of equipment. This has minimised failure scenarios for mission critical equipment and eliminated unplanned downtime. The Smart Asset Maintenance Platform is helping to achieve higher asset availability at lower maintenance cost, across equipment from mines to rolling mills through enhanced sensorisation & building predictive analytics solutions.

The Company has revamped its procurement process by introducing digital catalogue-based buying, commodity price prediction aided buying, analytics powered negotiation tools for the Category Managers, and end-to-end contract lifecycle management & analytics. The Procurement 4.0 platform has enabled ~50% reduction in vendor registration cycle time and ~20% reduction in Purchase requisition to purchase order cycle time.

The COVID-19 pandemic came as a challenge for one and all. At Tata Steel, we undertook multiple Digital Safety Initiatives with utmost urgency to cope up with the threats of the virus. Through the Suraksha Platform, we ensured health and safety of our employees, from them entering companys premises through their work hours. Camera feeds were used to identify people without face coverings through an AI based Face Mask

Detection solution and pre-empt & detect violation of Social distancing at shop floors, canteens & on roads. The Crowd Sensing solution sent out alerts if any section of the workplace had a large group of people. The same was also getting tracked through a real-time digital heatmap. Suraksha Scanners empowered Security personnel at entry gates scan RFID cards through smart phones and extract relevant information on Travel Declaration and Suraksha Compliance of our Contract workmen thereby preventing high risk people from entering our premises. All these initiatives were bundled up and accessed through one single dashboard thereby helping in immediate response. The Tata Steels digital response to COVID-19 was ranked amongst the top 6% globally by one of the surveys conducted by Gartner.

IX. Effect of COVID-19 Pandemic on the Company

The outbreak of COVID-19 has impacted the economy and businesses not only in India, but all over the World. The rapid spread of the infection amongst the Indian population, forced Government of India to announce the imposition of nation-wide lockdown from March 25, 2020. This brought all logistics, businesses establishments and industries to a grinding halt except where the government had notified that essential services and process industries where the continuous operations of the plant facilities are important (including Integrated steel plants), are exempt from the lockdown measures and can continue to operate subject to the hygiene standards and social distancing norms being followed.

However, the crisis of the pandemic continued throughout the year under review. In current phase the crisis has become severe with the onset of second wave of the pandemic.

a) Impact on the operations

The Company adopted safety and hygiene standards at shop floor and offices and implemented social distancing norms, work from home, workforce deployment plan, staggered shift timing for safety of the employees. The Company has instantly moved all essential activities to digital platform. The blast furnace and steel making operations at Jamshedpur and Kalinganagar operated at production levels lower than normal due to suspension of the downstream facilities as despatches of finished goods could not be done to customer operations in automotive, construction and other segments as they were closed due to lockdown. Even the Strategic Business Units (SBUs) of Steel like Bearings, Tubes, Wires were also closed. The supply chain activities were affected as all despatches were stopped.

b) Impact on the profitability, cash flow, liquidity and financials

The closure of business led to decline in steel deliveries which resulted in lower earnings and piling up of the finished goods inventory. Post lockdown, the plant production was gradually ramping up and the inventory was getting liquidated based on market demand and off-take. In view of ramping up of the production, there is no threat of redundancies of the existing assets. The Companys robust digital initiatives have enabled compliance of the internal financial controls and reporting of the Company. The Company has been fulfilling its legal obligations as required for execution of the existing contracts / agreements, so there is no effect of the lockdown on the business.

The Company has continued to have a strong liquidity position. In response to the COVID-19, the Company has sharpened its focus on cash. A cash war room exercise has been undertaken with an aim of running cash neutral operations. Outflows are monitored to have it minimised by cutting down on non-essential expenditure, renegotiating payment terms with vendors, improving working capital management and reducing capex. However, given the uncertainty, the Company has also sought to create a liquidity buffer. The Company raised funds in April and May 2020 through issue of Non-Convertible Debentures. The Company has secured short-term borrowings to handle any situation of shortage of liquidity.

The Company has always strived to have a balanced maturity profile and a judicious mix of funding instruments which help in minimising costs while providing flexibility in managing cashflows. Taking its cashflows and liquidity position into account, the Company is confident that it will be able to service its debt and other financing arrangements. The company has chosen not to avail the moratorium offered by RBI on interest and principal payments, demonstrating its ability to service its debt obligations.

c) Corporate Social Responsibility - helping the community in the wake of COVID-19 pandemic

The Company through Tata Steel Foundation (TSF) and District Administration have reached out to the citizens of the Companys operational areas Jharkhand and Odisha through various initiatives such as food, sustainable livelihood to the communities & migrant labourers of the region, provided ration and safety support to the vulnerable communities, augmented the medical facilities at the designated hospitals for medical treatment and so on. In the recent crisis of supply of oxygen to various hospitals, the Company is supplying oxygen from its own oxygen plant at Jamshedpur and Kalinganagar. The Company had incurred expenses towards hospital infrastructure, sanitisation activities in town and contribution towards COVID-19 relief.

X. Risks and Opportunities

The Companys Enterprise Risk Management (ERM) process is based on international standards like Committee of Sponsoring Organization of the Treadway Commission (COSO) and ISO

31000. The Company follows coordinated risk assurance and the ERM process is integrated with Corporate Audit, Strategy & Business Planning, Corporate Legal & Compliance functions. This brings further rigour in driving the process across the organisation and Tata Steel Group (TSG) companies. An inhouse built IT system is in place across the organisation to enable recording and review of risks through live dashboards and real-time monitoring of data.

Risk Management Committee (RMC) of the Board provides oversight and sets the tone for implementing the ERM framework across the organisation. It reviews the status of key risks, progress of ERM implementation across locations and any specific exceptions as flagged to it, on quarterly basis.

The risk appetite of the organisation is aligned to the TSL Vision. Risk Appetite is driven by the following:

• Health and safety of our employees and the communities in which we operate are our prime concern and our operating strategy is focused on the above objective

• All business decisions are aligned to the Tata Code of Conduct

• Management actions are focused on continuous improvement

• Environment and Climate Change impacts are assessed on a continuous basis and business decisions support systems including capital allocation consider impact of climate impact through the internal carbon pricing framework

• The long-term strategy of the Company is focused on generating profitable growth and sustainable cashflows that creates long-term stakeholder value

Risk Owners may accept risk exposure to their Annual and Long-term business plans, which after implementation of mitigation strategies, is aligned to our risk appetite.

For better focus on Risk Governance and ERM implementation, the Company has set up a Management Committee called Group Risk Review Committee (GRRC). GRRC has the primary responsibility of implementing the Risk Management Policy of TSL and developing a risk intelligent culture.

A dedicated business vertical has been set up to ensure deployment of the ERM process across the organisation. The team is led by Group Head - Corporate Finance & Risk Management who acts as the Chief Risk Officer (CRO) of the Company. The ERM team continuously scans the external environment for developments which may throw up risks for the organisation and risk flags are sent out to the Business Units (BU). BUs engage in identification and management of bottom-up risks, which are periodically reviewed as per defined ERM process. The risks are escalated and aggregated for reporting to GRRC and RMC. This is complemented by a top-down process, which helps in identification of strategic, enterprise level risks.

To assess the maturity of our ERM process, Risk Maturity Assessment was undertaken through an external partner in FY 2020-21. We are pleased to report that with a score of 4.63 on a scale of 5, TSL has been recognised to be much ahead in the maturity curve compared to its peers in mining & metal sector and marginally behind the organisations with leading score (across sectors).

TSL has also been adjudged Masters of Risk in Metals & Mining and Risk Technology categories, at the 7th edition of The India Risk Management Awards.

Risk intelligent culture of TSL enabled it to manage the uncertainties in an unprecedented business environment in FY 2020-21. As the Covid situation evolved, "scenario-based risk assessment" was facilitated across the Company.

Business decisions were pivoted to achieve cash neutrality in operations by reducing spend, managing working capital and reducing capital expenditures. Operating regime was recalibrated in response to the decline in domestic demand. Supply chain disruptions were managed through obtaining necessary licenses to ensure movement of raw materials and finished goods. In view of sluggish domestic steel demand, risk to sales was mitigated through enhanced exports and new international markets were targeted.

To reduce dependence on global commodity supply chains, captive coal, iron ore and pellet inventory were ramped up to reduce the buy post normalisation of operations and improve profitability. Investments made by the Company over the years on digital transformation, ensured seamless migration of our work processes to remote working models across the Company locations. The Company also engaged in assessing the risk of single geography sourcing and mitigations have been put in place to diversify sourcing and / or find alternate materials.

Implementation of focused risk mitigation strategies coupled with improvement in the global and domestic macro environment has significantly improved TSL risk profile in H2 FY 2020-21. Despite the challenges posed by COVID-19, the Company has been able to deleverage beyond the target set for the year.

The Company continues to be vigilant of the evolving pandemic situation to proactively manage risks, as they emerge in FY 2021-22. Health and safety of employees and the communities in the vicinity of our operations, continues to be the top-most priority for the Company, whilst simultaneously ensuring continuity of our business operations.

A detailed overview on the risk landscape and mitigation strategies as well as the strategies for capitalising on opportunities in business is provided in the "Risk and Opportunities" Section forming part of the Integrated Report.

XI. 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 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 unauthorised use, executing transactions with proper authorisation 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 standardisation & rationalisation project was undertaken in FY 2020-21 which has ensured comprehensive coverage cutting across all functions of the Company. 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 have 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.

XII. 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.