Indian Steel Industry

Weakening demand and lower realisations in its international trading operations will mean continuing pressure on Tata marks financials. The last time Tata Steel reported a deterioration in revenues and a significant drop in net profits was in 2001 and 2002. This was mainly on reckon of a global recession and falling steel prices, resulting in lower demand for steel and significant erosion in margins. The turnaround came in 2003 as it reported higher gross revenue and net profits. It seems to have come full circle at once again. Recently, the companys rating was downgraded by Moodys Investors Service. This time, the concerns argon more on account of its international operations and worsening global steel outlook, resulting in deterioration in the companys financial conditions. The operating parameters like EBIDTA margins are decelerating quickly. Also, its high debt of $13-14 billion is a concern in dead of very little visibility oer future cash flow on account of a sharp fall in steel demand and prices, says Ivan Palacios, assistant vice death chair analyst, Moodys Singapore. So, will it do an encore? afield worries During Q3FY09, Tata Steel reported a 42.5 per cent drop in consolidated net profit to Rs 810 crore, which was better than analysts expectations of a loss.

The outperformance, to an extent, was as well on account of hedging gains (in Corus, UK) reported in Q3. With concerns over international operations not expected to ease anytime soon, analysts consider that the performance in FY10 will be hit significantly. Today, the biggest altercate for Tata Steel is its international operations. The company currently has total vernacular steel capacity of about 30 million tonnes. Since over 70 per cent is accounted for by its operations in europium and South East Asia, these regions have a significant strength on consolidated financials of the company. For instance, during the first nine months of FY09, the EBDITA margins for the consolidated entity stood at 15 per cent,... If you want to get a full essay, revision it on our website: Orderessay

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