JAIN

STRATEGIC ARCHIT
FINANCIAL
1411406
5 BBA A
MANAGEMENT
CIA - 3

ABOUT TATA STEEL

Established in 1907 as Asia's first integrated private sector steel company, Tata Steel Group is
among the top-ten global steel companies with an annual crude steel capacity of over 29
million tonnes per annum. It is now the world's second-most geographically-diversified steel
producer, with operations in 26 countries and a commercial presence in over 50 countries.
The Tata Steel Group, with a turnover of Rs. 1, 48,614 crores in FY 14, has over 80,000
employees across five continents and is a Fortune 500 company.
Tata Steels larger production facilities comprise those in India, the UK, the Netherlands,
Thailand, Singapore, China and Australia. Operating companies within the Group include
Tata Steel Limited (India), Tata Steel Europe Limited (formerly Corus), Tata Steel Singapore
and Tata Steel Thailand.
The Tata Steel Groups vision is to be the worlds steel industry benchmark in Value
Creation and Corporate Citizenship through the excellence of its people, its innovative
approach and overall conduct. Underpinning this vision is a performance culture committed
to aspiration targets, safety and social responsibility, continuous improvement, openness and
transparency.
In 2008, Tata Steel India became the first integrated steel plant in the world, outside Japan, to
be awarded the Deming Application Prize 2008 for excellence in Total Quality Management.
In 2012, Tata Steel became the first integrated steel company in the world, outside Japan, to
win the Deming Grand Prize 2012 instituted by the Japanese Union of Scientists and
Engineers.
Indian Operations
Tata Steel founded Indias first industrial city, now Jamshedpur, where it established Indias
first integrated steel plant in 1907. The Jamshedpur Works currently comprises of a 9.7 mtpa
crude steel production facility and a variety of finishing mills.
Two new Greenfield steel projects are planned in the states of Jharkhand and Chhattisgarh.
Kalinganagar project is underway, it is set to augment production capacity by 3 MnTPA in the
first phase.

Mines and collieries in India give the Company a distinct advantage in raw material sourcing.
Iron Ore mines are located at Noamundi (Jharkhand) and Joda (Odisha) both located within a
distance of 150 km from Jamshedpur. The Companys captive coal mines are located at Jharia
and West Bokaro (Jharkhand

DIVIDEND POLICY
The Company recommended a dividend of `8 per Ordinary Share on 97,12,15,439 Ordinary
Shares of `10 each for the year ended March 31, 2016. (Financial Year 2014-15: `8 per
Ordinary Share on 97,12,15,439 Ordinary Shares of `10 each).
The dividend on Ordinary Shares was subject to the approval of the shareholders at the
Annual General Meeting (AGM) scheduled to be held on August 12, 2016. The dividend will
be paid on August 16, 2016. The total dividend pay-out works out to 19% (Financial Year
2014-15:14%) of the net profit for the standalone results.

HISTORICAL DIVIDENDS DECLARED

Announcement

Effective

Date
26-05-2016

Date
Type
28-07-2016 Final

20-05-2015

23-07-2015 Final

share(80%)Dividend
80% Rs.8.0000 per

14-07-2014 Final

share(80%)Dividend
100% Rs.10.0000 per

23-05-2013

15-07-2013 Final

share(100%)Dividen
80% Rs.8.0000 per

18-05-2012
26-05-2011
27-05-2010
25-06-2009
26-06-2008
17-05-2007

16-07-2012
04-07-2011
12-07-2010
06-07-2009
18-07-2008
08-06-2007

14-05-2014

Dividend

Final
Final
Final
Final
Final
Final

Dividend(%

Remarks

Column
1

80% Rs.8.0000 per

share(80%)Dividend
120%
120%
80%
160%
160% AGM
155% 155% Dividend ( 130%
for the year 2006-07
and special dividend of
25% on occasion of the
2

Cenetenary year of the

15-05-2006
19-05-2005
07-05-2004
08-05-2003
30-05-2002
02-04-2002
08-05-2001
23-03-2000
20-05-1999
22-05-1998
23-05-1997

26-05-2006
07-06-2005
08-06-2004
09-06-2003
28-06-2002
28-05-2002
24-05-2001

Final
Final
Final
Final
Final
Interim
Final
Interim
Final
Final
Final

130%
130%
100%
80%
N.A.%

company.)
AGM
AGM
AGM
AGM
Nil Final Dividend

40%
50% AGM
40%
40% AGM & Dividend
40%
45% Dividend Declared

LAST 5 YEARS EPS OF THE COMPANY:

Per share ratios
Adjusted EPS (Rs)
Adjusted cash EPS (Rs)
Reported EPS (Rs)
Reported cash EPS (Rs)

Mar ' 16

Mar ' 15

Mar ' 14

Mar ' 13

Mar ' 12

66.76
86.66
50.46
70.37

46.83
67.4
66.3
86.87

67.48
87.34
66.02
85.88

59.08
75.97
52.13
69.02

63.69
75.54
68.95
80.8

ANALYSIS OF DIVIDEND PAYOUT RATIO:

Dividend payout ratio (net

15.85

12.06

15.14

17.88

17.4

profit)
Dividend payout ratio (cash

11.36

9.2

11.64

13.51

14.85

profit)

The dividend payout ratio is the amount of dividends paid to shareholders relative to

the amount of total net profit of a company.

Tata Steel have paid the dividends regularly to their shareholders every year.
In the year 2012 the company gave their best returns to the shareholders
Gave the best returns in 2012 and was able to continue it for the nest year also.
Except 2015, company was consistent with their returns.

IMPACT OF DIVIDEND PAYOUTS ON THE SHARE PRICE

3

Prices
Date

Open

High

Low

Close

Volume

Adj

Aug, 2016
02-Aug-16
01-Aug-16

364.65
366.45
356.15

366.45
370.7
366.6

354.9
360.1
354.2

358.05
361.85
364.85

57,46,700
81,08,000
100,82,30

Close*
358.05
361.85
364.85

359

5
351.0

355.05

0
83,49,200

355.05

359.2

5
348.6

349.85

105,26,70

349.85

29-Jul-16

351.05

28-Jul-16

358

28-Jul-16
27-Jul-16

8.00 Dividend
368.9

26-Jul-16

363.9

370.5

354.1

0
363.05

103,59,00

355.05
359.7

375

363.0

367.8

0
77,98,700

363.65

56,76,400

355.64

25-Jul-16

365

367.8

5
362.1

22-Jul-16

362.3

368.9

5
356.4

365.45

73,72,900

357.4

21-Jul-16

370

370

5
361.1

362.3

53,43,300

354.32

29-Jul-15
28-Jul-15
27-Jul-15

251
251
263

254.65
252.45
263.2

249.4
246.4
250.0

250.55
249.25
250.75

40,03,400
55,38,500
76,48,400

245.03
243.76
245.22

265.05
269.9

38,10,200
69,61,200

259.21
263.95

24-Jul-15
23-Jul-15
23-Jul-15

269.7
274
8.00 Dividend

271.65
274.45

5
264.2
269.3

22-Jul-15
21-Jul-15

271.25
284.1

281
284.1

268.7
273.8

280.4
274.7

59,10,800
50,95,100

266.4
260.98

20-Jul-15
17-Jul-15
16-Jul-15

285
282
285.1

287.7
286.35
286.5

5
283
280
280.1

283.55
284.05
280.8

37,33,700
64,49,900
63,13,300

269.39
269.87
266.78

18-Jul-14
17-Jul-14

556
543

568.5
560

549.2
540.2

563
558.8

72,95,300
70,26,500

534.89
530.89

546

5
525.5

542.7

44,08,600

515.6

16-Jul-14

531.5

15-Jul-14
14-Jul-14

518.8
496.8

14-Jul-14

10.00 Dividend

11-Jul-14

520

530
517.4

514.4
492.2

527.15
513.4

44,48,800
76,59,500

500.83
487.76

10-Jul-14

520

524.25

499.2

501.9

60,94,400

467.34

537.85

5
510.0

521.4

68,31,300

485.49

51,87,700
36,22,100
25,44,100

482.65
478.18
499.13

09-Jul-14
08-Jul-14
07-Jul-14

516
538
537.1

526.75
539.7
542.9

5
511.15 518.35
510
513.55
533.6 536.05

19-Jul-13
18-Jul-13

244.55
243.35

248.2
245.6

240
239.6

241
244.7

44,84,000
37,54,100

224.4
227.85

243.2
251.6
257.45

44,26,600
31,91,100
50,57,100

226.45
234.27
239.72

17-Jul-13
16-Jul-13
15-Jul-13
15-Jul-13

251.6
253.4
254.5
8.00 Dividend

253.45
256.1
259.5

5
242.2
250.7
251.9

12-Jul-13
11-Jul-13
10-Jul-13

261.5
262
263

264
265.35
263.05

258.5
259.1
255.2

262.65
261.05
256.2

37,13,200
54,20,100
49,15,300

237.11
235.67
231.29

09-Jul-13

262.6

264.1

5
260.1

261.65

33,90,500

236.21

259.9

39,04,600

234.63

08-Jul-13

262.9

262.9

5
258

20-Jul-12
19-Jul-12

411.5
416

417.9
416.9

411.5
412.7

415.95
414.45

23,38,100
26,92,600

375.51
374.15

413.75
413.65

5
404.3
404.8

411.65
405.8

33,57,600
33,94,300

371.63
366.34

5
406.2

407.95

40,11,700

368.29

424.1
427.0

425
428.5

33,17,100
35,17,000

372.84
375.92

5
435.1
432.5

436
438.8

30,46,500
37,75,900

382.49
384.95

18-Jul-12
17-Jul-12

405
411

16-Jul-12
16-Jul-12
13-Jul-12
12-Jul-12

417.5
418.7
12.00 Dividend
430
433
434.8
436.5

11-Jul-12
10-Jul-12

437.05
437

443.35
441.8

09-Jul-12

445

445

5
435.2

437.6

20,83,600

383.9

The companys market price has every time decreased after the dividend payment .
The share value has decreased in all the 5 years except in July 2014, otherwise the
share price has shown a negative movement in the price after every dividend

payment.
So we can say that the dividend policy of the company does effect the share price in a
negative way.

THEORIES OF DIVIDEND POLICY:

Walters model:
Assumptions of the Walter model. Retained earnings are the only source of financing
investments in the firm, there is no external finance involved. The cost of capital, k e and the
rate of return on investment, rare constant i.e. even if new investments decisions are taken,
the risks of the business remains same.
1. The firm finances all investment through retained earnings; that is debt or new equity is
not issued;
2. The firms internal rate of return (r), and its cost of capital (k) are constant;
3. All earnings are either distributed as dividend or reinvested internally immediately.
4. Beginning earnings and dividends never change. The values of the earnings per share (E),
and the divided per share (D) may be changed in the model to determine results, but any
given values of E and D are assumed to remain constant forever in determining a given value.
5. The firm has a very long or infinite life.
Because of the above assumptions the model cannot be compared to the dividend policy of
Tata Steel
Gordons model:

The Gordon growth model is used to determine the intrinsic value of a stock based on a
future series of dividends that grow at a constant rate. Given a dividend per share that is
payable in one year, and the assumption the dividend grows at a constant rate in perpetuity
Assumptions:
Gordons model is based on the following assumptions.
1. The firm is an all Equity firm
2. No external financing is available
3. The internal rate of return (r) of the firm is constant.
4. The appropriate discount rate (K) of the firm remains constant.
5. The firm and its stream of earnings are perpetual
6. The corporate taxes do not exist.
7. The retention ratio (b), once decided upon, is constant. Thus, the growth rate (g) = br is
constant forever.
8. K > br = g if this condition is not fulfilled, we cannot get a meaningful value for the share.
Above assumptions makes it difficult to formulate the model with respect to Tata Steel.
Modigliani and millers hypothesis:
Assumptions:
Modigliani and Millers hypothesis:
According to Modigliani and Miller (M-M), dividend policy of a firm is irrelevant as it does
not affect the wealth of the shareholders. They argue that the value of the firm depends on the
firms earnings which result from its investment policy.
1. The firm operates in perfect capital market
2. Taxes do not exist
3. The firm has a fixed investment policy
7

Again, because of flexible dividend policy system the model cannot be used as well.

CONCLUSION

The firms dividend returns are constant.

This certainly shows that management of the company is very strong and reliable
Tata steel have shown an enormous growth in the past 5 years and one can invest in

the companys share for short and medium term.

It will be suggested to invest in the company for a long period to get a good return and

fair income with dividends pay out

Because the pay-out ratio shows the constant returns
It would be suggested to invest in Tata Steel Ltd.