Annual Report - Tata Steel - 2008-2009

TATA STEEL LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

To
The Members,

The Directors hereby present their 102nd annual report on the business and
operations of the Company along with the standalone and consolidated
financial accounts for the year ended 31st March, 2009.

Figures in Rupees crore

Tata Steel Standalone Tata Steel Group

2008-09 2007-08 2008-09 2007-08

Net Sales/Income 24,315.77 19,691.03 147,329.26 131,533.63

Total expenditure
before depreciation
(net of expenditure
transferred to
capital) 15,182.34 11,677.25 129,201.59 113,751.20

Operating Profit 9,133.43 8,013.78 18,127.67 17,782.43

Add: Dividend and
Other Income 308.27 242.80 265.67 475.86

Profit before
Interest,
Depreciation,
Exceptional Items
and Taxes 9,441.70 8,256.58 18,393.34 18,258.29

Less: Net Finance
Charges 1,152.69 786.50 3,290.18 4,085.41

Profit before
Depreciation,
Exceptional Items
and Taxes 8,289.01 7,470.08 15,103.16 14,172.88

Less: Depreciation 973.40 834.61 4,265.39 4,136.95

Profit before
Exception Items
and Taxes 7,315.61 6,635.47 10,837.77 10,035.93

Add/(Less):
Exceptional Items - 430.89 (4,094.53) 6,335.13

Profit before taxes 7,315.61 7,066.36 6,743.24 16,371.06

Less: Provision for
current taxation 2,173.00 2,252.00 1,997.12 3,353.73

Less: Provision for
deferred taxation (75.13) 108.33 (121.93) 674.58

Less: Provision for
Fringe Benefit tax 16.00 19.00 18.81 20.99

Profit after taxes 5,201.74 4,687.03 4,849.24 12,321.76

Less: Minority
interest - - (40.94) 139.94

Add: Share of profit
of Associates - - 60.72 168.16

Profit after
minority interest
and share of profit
of Associates - - 4,950.90 12,349.98

Add: Balance brought
forward from the
previous year 6,387.46 4,593.98 8,234.03 4,840.39

Balance 11,589.20 9,281.01 13,184.93 17,190.37

Which the Directors
have appropriated
as under to: -

(i) Proposed
dividend 1,168.95 1,168.93 1,167.88 1,167.86

(ii) Dividend on
Compulsory Cumulative
Preference Shares 109.45 22.19 109.45 22.19

(iii) Tax on Dividend 214.10 202.43 217.64 207.75

(iv) Special Reserve - - 4.24 6.32

(v) Actuarial
gain/(Loss) - - - 5,906.84

(vi) Statutory Reserve - - 51.53 96.30

(vii) General Reserve 600.00 1,500.00 672.23 1,549.08

Total 2,092.50 2,893.55 2,222.97 8,956.34

Balance to be carried
forward 9,496.70 6,387.46 10,961.96 8,234.03

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GLOBAL ECONOMY:

After a period of robust global economic expansion for the last four years,
the global economy slipped into a recession in the second half of 2008,
lowering world GDP growth to 2.1% in 2008 (The IMF considers growth less
than 3% as a recession). The financial meltdown resulting from the US
housing crisis precipitated the recession leading to lower trade finance,
lower purchasing power and falling demand in advanced economies with world
trade growth dipping to 3.3% (6% in 2007). The IMF expects world trade to
fall by 11% in 2009, recovering to positive growth of 0.6% in 2010.

Governments the world over have committed to provide significant liquidity
and stimulus packages to support their fragile economies. Major nations
through the G-20 forum have also committed to greater transparency in
accounting practices by the banks and hedge funds and also closer
monitoring of tax havens.

The Gross Domestic Product (GDP) in the Organisation of Economic and Co-
operation and Development (OECD) area fell by 4.8% in the first quarter of
calendar 2009 on a year-on-year basis following a fall of 1.7% in the
fourth quarter of 2008. US GDP increased by 1.1% in 2008 but is expected to
fall in 2009. A fiscal recovery package of around $800 billion was
announced by the US government which included a combination of spending
incentives and tax rebates to boost consumer spending. The Federal Reserve
was very aggressive in cutting interest rates during the end of 2008 and
early 2009, bringing down the Federal Funds rate to a current low of 0.18%.

The Euro currency grew by 0.85% in 2008 and is still likely to post
negative growth in 2009, before a mild recovery in 2010. The UK GDP slowed
to 0.7% in 2008 and is expected to fall further in 2009 with a slight
improvement in 2010. Investment spending declined in the UK in the fourth
quarter of 2008 as businesses facing weaker demand and tighter financing
conditions cut back on production and employment. Automotive manufacturers
and the steel producers were particularly badly hit resulting in layoffs
and factory closures.

World GDP growth was sustained by the emerging and the developing
economies, which grew at 6.1% in 2008, though this is projected to fall
sharply in 2009. Growth in the Asian powerhouse, China, slowed down to 9%
in 2008 and is expected to fall further to around 6.5-7% in 2009. The
Chinese government is hoping that the stimulus package of $600 billion it
announced in February 2009, would raise the growth rate to 8%, with the
domestic economy picking up the slack in exports. The Indian economy which
grew at an average rate of 8.8% between 2003-04 and 2007-08, saw the growth
dip to 6.7% in 2008-09, mainly on account of a sharp dip in exports. The
newly elected government has emphasised an expenditure and investment
focussed agenda to enable the country return to an 8% growth in the near
future.

STEEL INDUSTRY:

While most steel companies across geographies enjoyed strong demand and
record earnings in the first half of 2008, the demand for steel weakened
significantly after August 2008 with the global financial crisis adversely
impacting the construction sector and capital spending. Steel companies
across all major geographies announced substantial production cuts to align
inventory levels with underlying demand. This affected the capacity
utilisation level of the global steel industry. Further, tight credit
conditions in the second half of the year and the need to generate cash
flows resulted in a severe level of industry-wide destocking.

Steel prices also declined significantly across the world with more than a
50% reduction in the second half, compared to the first half of 2008-09.
Similarly, the spot prices for iron ore and metallurgical coal also came
down significantly in the latter part of 2008. It is very likely that the
annual benchmark rates in 2009 for iron ore and metallurgical coal will be
settled at a significantly lower level. For most of the world, the overall
downward trend continued into the first quarter of 2009 in tandem with the
global downturn. World steel production in the first quarter of calendar
2009 was 269 million tonnes, a decrease of 22.8% over the first quarter of
calender 2008. The largest decline in steel demand was felt in the US,
Europe and Japan.

Reduced demand and falling prices put extreme pressure on the profits,
margins and liquidity of the steel companies. Capacity has been idled and
capital expenditure has been curtailed for 2009 and onwards. Many
manufacturers have utilised this downtime for overhaul and maintenance.
Long-term contracts are being renegotiated with producers using the
economic downturn to negotiate price concessions from raw material
suppliers and vendors. Some steel companies are acquiring iron ore and coal
mines to insulate themselves from the price volatility and to ensure a
dependable supply of raw materials.

The slowdown in the real economy the world over is likely to delay recovery
in the steel industry in 2009. Steel demand is likely to stabilise in the
latter part of 2009 leading to a mild recovery in 2010.

Emerging economies were also affected by the economic crisis, but to a
lesser degree. Steel consumption in the BRIC countries (Brazil, Russia,
India and China) is expected to fall by 5.9% in 2009, with China, which has
been the source of much of the global increase in steel demand, too seeing
negative growth of about 5% in 2009.

The Indian economy, which is recovering faster than its global peers from
the current slowdown, appears better positioned with the World Steel
Association forecasting a 2% growth in the country's steel consumption in
2009.

With India's GDP growth forecast to grow around 6.5% in 2009-10 on the back
of robust infrastructure spending, it is likely that the World Steel
Association's forecast may turn out to be too modest.

BUSINESS RESULTS:

Tata Steel Group:

The steel deliveries of the Tata Steel Group for the financial year 2008-09
at 28.54 million tonnes were 10% lower compared to 31.68 million tonnes
during the financial year 2007-08. The Group recorded a turnover of
Rs.147,329 crore (US$ 28,962 mn) for the financial year 2008-09, 12% higher
than the turnover of Rs. 131,534 crore (US$ 25,857 mn) for the financial
year 2007-08.

* The EBITDA for the Group at Rs. 18,495 crore (US$ 3,636 mn) for the
financial year 2008-09 was 1% higher than the EBITDA of Rs.18,287 crore
(US$ 3,595 mn) recorded during the financial year 2007-08.

* Profit before taxes and exceptional items was Rs.10,838 crore (US$ 2,130
mn) during the financial year 2008-09 against Rs.10,036 crore (US$ 1,973
mn) for the financial year 2007-08.

* Exceptional items during the financial year 2008-09 was a loss of
Rs.4,095 crore (US$ 805 mn) representing restructuring, impairment and
disposals' relating to the disposal/impairment of assets and restructuring
arising out of the Fit for Future' programme at Tata Steel Europe.

Tata Steel - Indian Operations:

The Steel Division of the Indian operations posted an increase of around
10% in its finished steel production and sales during 2008-09 riding high
on the performances of the newly commissioned H' Blast Furnace, the Sinter
Plant, the steel melting shops LD Shop 1 and LD Shop 2 and the Finishing
Mills at both Flat and Long product divisions.

Total sales at 5.231 million tonnes were 9% higher than the previous year.
Long products sales at 2.00 million tonnes increased by 25%. Flat products
recorded a sales of 3.23 million tonnes, slightly higher than the previous
year.

The Indian operations achieved a significant reduction in the consumption
of coke, following increased production from the larger Blast Furnaces with
higher productivity.

The Tubes Division commissioned a state-of-the-art 2' Mill during FY 09.
This improved its operational efficiency, productivity and energy
consumption and enabled it to offer improved products. With the
installation of the new mill, the Tubes division capacity increased to
300,000 tonnes per annum. The division has started manufacturing high end
precision tubes with the commissioning of the hydroforming facilities and
has recently initiated the supplies of Engine Cradles for Tata Nano cars,
tubes for Telescopic Front Fork (TFF) & Propeller Shaft applications.

The Bearings Division of the Company sold 26.34 million bearings during FY
09, 5% lower than the previous year. The Bearings division's major customer
segment is the automobile sector and its performance is linked to the
performance of the automobile industry. The automotive segment saw a robust
growth of 12.7% during the first half of the financial year, but witnessed
a steep decline of 13% in the third quarter before recovering marginally in
the fourth quarter. The division put in place several cost reduction
measures to meet the challenges of the highly competitive bearing market.
It also introduced new products and branded grease in the market during the
year.

Tata Steel Europe (TSE) - (Corus Group):

Tata Steel Europe's liquid steel production in 2008-09 at 16 million tonnes
was 20% lower than that of 2007-08. The production for the first six months
was 10 million tonnes, which however fell to 6 million tonnes during the
second half of the year, reflecting the planned reduction of production to
match the sharp contraction in the demand environment during the second
half of the year. The selling price of the steel products also dropped
substantially with margins adversely affected because of the fixed annual
contracts for raw material supplies.

The TSE Group turnover for the period was Rs. 1,09,570 crore (US$ 21,539
mn) [2007-08: Rs. 1,00,218 crore (US$ 19,701 mn)]. Average revenue per
tonne increased for each of the Group's steel divisions by over 30%.
Conversely, deliveries reduced sharply by approximately 18%. However, these
overall movements indicated significant quarterly variations, as at first
the buoyant steel market saw prices and volumes grow, followed by a market
collapse in the second half of the year.

The TSE Group's operating profit for 2008-09 was Rs. 5,953 crore (US$ 1,170
mn) [2007-08: Rs. 6,041 crore (US$ 1,188 mn)]. The significant
deterioration over the previous year was due to a combination of the fall
in deliveries and a high level of net realisable value provisions against
inventories, as prices fell sharply. Within the year, a similar pattern to
the turnover of a buoyant first half followed by a substantial
deterioration in the second half was evident in the result. The loss before
tax of TSE amounted to Rs. 184 crore (US$ 36 mn) as against a profit of
Rs.9,187 crore (US$ 1,806 mn) in the previous year.

TSE's estimated UK market share in 2008-09 for main carbon steel products
was 50% (2007-08: 49%). It is estimated that the other UK steel companies
had a 4% market share, with imports amounting to 46%.

NatSteel Holdings:

The Tata Steel Group's Singapore operations consist of an Electric Arc
Furnace-based steel making and rolling operations with a production
capacity of about 750,000 tonnes per annum. During the financial year 2008-
09 Singapore sold about 956,000 tonnes of steel, 6% more than the previous
financial year, and achieved a market share of about 58%. The downstream
facilities in Singapore sold over 4,75,000 tonnes in FY 09, 20% more
compared to the previous year. Among other operations of the NatSteel
Holdings, the Xiamen operations in China, a 100% subsidiary of NatSteel,
sold 426,000 tonnes of rolled products during FY 09, 17% higher than the
previous year and the Australian operations of NatSteel sold around 188,000
tonnes (12% higher than the previous year) of steel in straight length
rebars, mesh, cut & bend and other accessories.

During the year, the Singapore operations focussed on working capital
management to ensure adequate liquidity and also improved the operating
parameters including an improvement in yield and downstream tonnages with
an estimated benefit of S$14 million (US$ 9 million).

Tata Steel Thailand:

Production during FY 09 at 1.07 million tonnes was lower by 22%, while
sales at 1.1 million tonnes were about 20% lower than the previous year.
The political instability in Thailand and the economic downturn
significantly impacted the construction industry in Thailand. Tata Steel
Thailand took significant steps to readjust to the emerging economic
environment including writing down of higher value inventory focussing on
cost reduction in the Rolling Process Scheme by optimising the roll
consumption cost and in Alloy Consumption at the steel shop and re-
engineering working capital management.

ENDURING THE DOWNTURN:

Every steel maker worldwide faced an unprecedented decline in demand after
October 2008 following the global economic downturn. The Tata Steel Group
made a quick risk assessment of the consequential financial impact and
initiated programmes labelled Weathering the Storm' and becoming Fit for
Future', so as to remain competitive in the future.

Indian & South East Asian operations:

While India was not structurally impacted by the global financial crisis,
the Indian economy slowed down considerably in the second half of the year.
In order to retain its competitive position, the Indian operations
initiated several cost reduction measures with targeted savings of about
Rs. 440 crore which was achieved during the year. In line with the above,
the output from the large Blast Furnaces were increased and the production
from the smaller furnaces were scaled down to lower overall costs. The
Company also focussed on gaining market share through increased volumes at
competitive costs, a better product mix with increased flat product volumes
and a reduction in maintenance costs. It also reduced the cost of hot metal
production by improving the production of coke by 5% through better coke
oven utilisation, reduced cost at the sinter plant, reduced use of
refractories and reducing the power consumption at the Blast Furnaces.

The Capital Expenditure plan was also reviewed to focus only on those
capital projects which had a higher Internal Rate of Return (IRR). Based on
the above review, the 2.9 million tonnes per annum (mtpa) Jamshedpur
project and the global raw material projects have been accorded priority
and would be completed as per plan.

Tata Steel's South East Asian operations undertook various steps for cash
conservation and liquidity enhancement such as the securitisation of
receivables and reduction in net working capital. It also undertook several
initiatives towards cost control and cost reduction by reducing the
maintenance cost of the plant, and reducing administrative, employee and
travel costs.

European Operations: Launch of the Weathering the Storm' Programme:

With a view to counter the adverse impact of the economic downturn, the
European operations undertook a very significant initiative during the
second half of the financial year under the Weathering the Storm'
programme. Consequent to a lower volume of production, the focus under this
programme was to review and reduce costs in manufacturing, material usage
and employee related areas including a one-off monetisation of hedges.
During the six month period of October 2008 to March 2009, the extent of
value from the 'Weathering the Storm' initiative was around Pount 700 mn
($1 bn).

In January 2009, the restructuring of European assets was accelerated
through the launch of the Fit for Future' programme that focusses
primarily on three areas: divestments, asset restructuring and a company-
wide efficiency and overhead review.

TATA STEEL - CORUS INTEGRATION:

During the year, considerable progress was made in institutionalising an
integrated approach in various functional areas. In procurement, Lead
Buyers have been appointed for high value items. Joint sourcing has
resulted in renewed contracts with a savings of over $40 mn.

In manufacturing, knowledge exchange and synergy identification has been
driven through Performance Improvement Teams (PITs) in 15 different areas.
Recognising that the economic downturn would affect realisation of volume
related synergies at Tata Steel Europe (TSE) sites, the PITs redirected
their efforts to new cost related projects, the most important being the
use of low cost coal for coke production and increased recycling of steel
plant wastes. These initiatives contributed significantly to the
realisation of $103 mn in manufacturing synergy against a target of $113
mn.

The total synergy realised in FY 09 was $256 mn comprising of
manufacturing, procurement, corporate centre, and tax savings. The Group
target is to achieve a synergy of $450 mn by March 2010.

With the outbound supply chain being strengthened at TSE with information
technology (IT) support provided by Tata Steel India, IT teams of both
entities are also working together to create online visibility of operating
performance on a common platform.

During the course of the year, the Research, Development & Technology
(RD&T) function was integrated into one function across the Tata Steel
Group with a focus on Thrust Area Projects' of long-term value to the
Group.

CENTENARY YEAR OF JHARIA COALFIELDS:

The Jharia Division of Tata Steel India celebrates a century of sustainable
mining in 2010. The division started its operations in its Bhelatand A'
collieries in 1910. The Jharia coalfields, spread across 5,500 acres, have
been fulfilling the coal requirements of Tata Steel India. The Jharia
division has pioneered several technological innovations which have
revolutionised underground coal mining in India. Coal mining and
beneficiation at Jharia are a benchmark in mining in India.

DIVIDEND:

The Board, for the year ended 31st March, 2009, has recommended Dividends
as under:

(i) Rs. 2 per Convertible Cumulative Preference Shares (CCPS) on
547,266,011 CCPS of Rs. 100 each. (2007-08 Re. 0.41 pro rata from the date
of allotment i.e. 18th January, 2008) on 547,251,605 CCPS of Rs. 100 each.

(ii) Rs. 16 per Ordinary Share on 730,592,471 Ordinary Shares (2007-08 on
730,584,320 Ordinary Shares @ Rs.16 per share).

The Dividends on CCPS and Ordinary Shares are subject to the approvals of
the shareholders at the Annual General Meeting.

The total dividend payout works out to 29% (2007-08: 30%) for the
standalone company and on a consolidated basis is 30% (2007-08: 11%).

COMPULSORILY CONVERTIBLE CUMULATIVE PREFERENCE SHARES (CCPS):

Six CCPS of face value of Rs.100 each will be compulsorily and
automatically converted into one Ordinary Share of Rs.10 each, at a premium
of Rs. 590 on September 1, 2009 without any application or further action
on the part of the CCPS holders.

The Company will not issue any fractional certificates to CCPS holders on
its conversion to Ordinary Shares. All such fractional entitlements to
which the CCPS holders will be entitled to on allotment of the Ordinary
Shares, will be consolidated and the Company will issue and allot Ordinary
Shares in lieu thereof to a authorised person, which would be sold in the
market within 15 days from the date of allotment. The sale proceeds thereof
will be distributed proportionately to those persons who are entitled to
fractional entitlements.

The CCPS holders will be eligible, as on record date, to the pro rata
dividend from 1st April, 2009 to 31st August, 2009.

FINANCE:

During FY 09, the Company restructured its overseas investments into Tata
Steel Global Holdings Pte Limited (TSGH), domiciled in Singapore. The major
subsidiaries of TSGH include Tata Steel Europe (Corus), NatSteel Holdings,
Tata Steel Thailand and Tata Steel Global Minerals, which includes all of
Tata Steel's major overseas raw material ventures in Mozambique, Ivory
Coast, Canada, Oman and Australia. In early 2008, the unprecedented
increase in the prices of input costs, particularly raw materials,
substantially increased the working capital requirements in the overseas
businesses. In a complete reversal, a sharp decline in steel demand and
prices globally adversely impacted the operating margins and cash flows in
late 2008. Reduced capacity utilisation in Europe put further pressures on
the operating margins. As a result, the Company focussed on maintaining
adequate liquidity to cope with these challenges as well as for necessary
capital expenditure and on significant cost reduction programmes and asset
disposals. This allowed Tata Steel UK (TSUK) to comply with conditions
stipulated under the senior (acquisition) debt up to March 2009. However,
the reduction in profitability would have made it increasingly difficult
for the company to comply with its financial covenants in the coming three
quarters. As a result, TSUK approached its lenders with an amendment and
waiver proposal. This proposal did not seek any new capital from the banks
or any extended repayment profile. TSUK would also continue to meet
interest and amortisation payments as they fall due.

As per the agreement reached with the banks, testing of the facility's
earnings related covenants would largely be suspended till March 2010 and
would then resume with significantly higher flexibility than in the case of
the original covenants. Furthermore, there would be no increase in the
current level of interest costs for the remaining life of the loan. The
revised covenant package does not involve any additional finance from the
lenders or rescheduling of its debt-servicing commitments. As part of these
amendments, Tata Steel further infused GBP 200 mn in June 2009 and has
committed to an additional GBP 225 mn by close of September 2009.

Tata Steel placed Non-Convertible Debentures totalling upto Rs. 2,000 crore
in May 2008 comprising of 3 series having phased maturities. The Company
further raised a 2-year term loan of Rs. 2,000 crore in May 2008. In
November 2008, the Company raised Rs. 1,250 crore through Non-Convertible
Debentures privately placed with the Life Insurance Corporation of India,
repayable in equal instalments at the end of the 6th, 7th and 8th years. In
April 2009, the Company further raised Rs. 2,000 crore from a term loan and
in May 2009, it privately placed Rs. 2,150 crore of Non-Convertible
Debentures repayable after 10 years. Thus the Company raised Rs. 9,400
crore in a year marked by tight liquidity.

The Company hedged the foreign currency risk on repayment of the major part
of the USD 1.65 billion of external commercial borrowings drawn in FY 07.
The foreign currency repayment risk on the Convertible Alternative
Reference Securities (CARS) remains un-hedged, since they may be converted
to underlying securities in FY 12 and FY 13. The Company has also
selectively hedged a portion of the interest rate risk on its US dollar
loans.

The Company's Credit Ratings have recently been revised downwards by its
Rating Agencies. In the fourth quarter of FY 09, Moody's and S&P have
downgraded Tata Steel to below investment grade (Ba2 and BB- respectively
with a negative outlook). Fitch lowered the Company's credit rating to BB+
(with a negative outlook). The debt in the Company's consolidated balance
sheet has increased considerably after the Corus acquisition. At the same
time, the downturn in global steel markets has severely impacted the near
term earnings of the overseas operations of the Company. As on 31st March,
2009, the cash and cash equivalents in Tata Steel Limited were Rs. 1,591
crore. The April 2009 Rs. 2,000 crore term loan and the May 2009 private
placement of Rs. 2,150 crore of Non-Convertible Debentures may be used by
the company for various purposes.

SUBSIDIARIES:

Pursuant to the Accounting Standards AS-21 issued by the Institute of
Chartered Accountants of India, the consolidated financial statements
presented by the Company includes financial information of its
subsidiaries. The Company has made an application to the Government of
India seeking exemption under Section 212(8) of the Companies Act, 1956,
from attaching the balance sheet, profit and loss account and other
documents of the subsidiary companies to the balance sheet of the Company.
The Company will make available these documents/details upon request by any
member of the Company.

A list of the Company's subsidiaries is given on page numbers 218-227 of
this Report.

EXPANSION PROJECTS:

BROWNFIELD PROJECT:

Brownfield Project of Tata Steel, Indian Operations:

The Company is in the process of increasing its crude steel capacity to 10
mtpa at its Jamshedpur Works by the year 2011. As part of this programme,
the first phase which entails reaching a crude steel capacity of 6.8 mtpa
has essentially been completed. Major facilities that were commissioned
during this phase included the Sinter Plant No. 4, the H' Blast Furnace
and the Continuous Caster No. 3 at LD Shop-1.

Project work pertaining to taking the capacity from 6.8 million tonnes to
9.7 million tonnes is moving at a rapid pace. This includes setting up a
new I' Blast Furnace, a Pellet Plant with a capacity of 6 mtpa, Thin Slab
Casters and Rolling Mill, two new Lime Kilns as well as augmentation of the
iron ore mines at Noamundi and Joda. Orders for the supply of equipment
have been placed. Site work is in progress for most of the facilities. The
Company has committed an amount of Rs. 9,100 crore against the approved
project cost of Rs. 13,900 crore towards various supplies and services
pertaining to the project.

Simultaneously, the Company also has a few major capital projects underway
like the capacity augmentation of the Hot Strip Mill, Coke Dry Quenching at
Coke Ovens Batteries 5, 6 & 7 and setting up a new mill at Bara for
producing Full Hard Cold Rolled (FHCR) coils.

GREENFIELD PROJECTS:

Kalinganagar Project:

Preliminary work on the 6 mtpa capacity greenfield steel plant at
Kalinganagar, Orissa focussing on land acquisition, rehabilitation and
resettlement work is in progress. In order to enhance the employment
opportunities of the people in the area including the displaced families,

the Company is conducting skill development training programmes at
Kalinganagar to enable them to seek gainful employment.

As the Company has fulfilled its obligation of placing the order for
equipment and services stipulated in the MOU signed with the Orissa state
government, it is seeking the grant of the mining lease for iron ore from
the Government.

Chhattisgarh & Jharkhand Projects:

The Company has also signed MOUs for setting up greenfield integrated steel
plants with the State Governments of Chhattisgarh and Jharkhand for which
the Company is pursuing with the respective State Governments for the
acquisition of land and allotment of mining leases for iron ore and coal.
The Company has also applied for environment clearances and other licenses.

OTHER PROJECTS:

Hooghly Met Coke and Power Company Ltd. (HMPCL):

Incorporated in 2005, Hooghly Met Coke and Power Company Ltd. (HMCPCL) is a
100% subsidiary of Tata Steel. The company was set up to produce low ash
metallurgical coke by adopting the heat recovery route, for Tata Steel's
requirements at its Jamshedpur plant and also to supply hot gases to Tata
Power for electricity generation by adopting heat recovery route. The plant
is located in Haldia, West Bengal, on the banks of river Hooghly. Close
proximity to the Haldia Dock Complex offers several advantages, including
the import of coking coal in a more cost effective manner.

The company currently has a production capacity of 1.2 mtpa of coke and its
capacity is likely to be increased to 1.6 mtpa in 2009.

Tata BlueScope Steel Limited:

Tata BlueScope Steel Limited (TBSL) is an equal stake joint venture between
Tata Steel and BlueScope Steel Australia in the field of coated steel,
steel building solutions and related building products. The company
operates in the South Asian Association for Regional Cooperation (SAARC)
region.

TBSL has two business divisions, the Buildings Division which is further
divided into Building Solutions and Building Products and Distribution and
the Coated Steel Division. This division has set up three manufacturing
facilities one each at Pune, Chennai and Bhiwadi. TBSL executes building
solutions projects under the Brand name of BUTLER(TM), Durashine(TM),
PEBLite(TM), SMARTBUILD(R), and SMARTRUSS(R). Building Solutions division
was awarded the Best Pre-Engineered Building project trophy on a national
level at the Infrastructure Excellence Awards.

All the three manufacturing facilities of downstream business at Hinjewadi,
Bhiwadi and Chennai are now certified for QMS (ISO 9001), EMS (ISI14001) &
OHSAS (ISO 18001). The manufacturing facility for Coated Steel is under
construction at Jamshedpur and is expected to be completed by March 2010.
The Metal Coating line will manufacture ZINCALUME(R) brand and the Color
Coated line will manufacture COLORBOND(R) brand.'

The project to set up a Coated Steel manufacturing facility at Jamshedpur
is well in progress and will be operational in the first quarter of 2010.
This Joint Venture (JV) is a step in the direction of value addition to
Tata Steel's hot rolled coil and offering the Indian consumer a world class
product.

Dhamra Port Company Limited:

Tata Steel and Larsen & Toubro Limited have formed a 50:50 joint venture
for the development of a deep water port in Dhamra, Orissa. The project is
being developed on a 'Build, Own, Operate, Share and Transfer' (BOOST)
basis, under a concession awarded by the Government of Orissa. The project
will provide Tata Steel a competitive advantage in the logistics chain
given the ongoing expansion and greenfield projects which will lead to an
increased volume of imported raw material. The project is located on the
eastern coast of India approximately 225 km southwest of Kolkata by sea
route and is 205 km from Bhubaneswar by road.

Acquisition proceedings for a private land for the railway corridor have
been largely completed in respect of a total of 2,033 acres and the
construction of the port is more than 50% complete. The port is expected to
be operational by April 2010.

Having received necessary environmental clearances, the port is taking a
number of safeguards and measures under the direct advice and supervision
of the International Union for Conservation of Nature (IUCN), the world's
premier scientific body in environment and wildlife, to ensure that the
construction and operation of the port does not pose any threat to the
ecology of the area.

Tata NYK Shipping Pte Limited:

Tata NYK Shipping Pte Limited is a Singapore based 50:50 joint venture
between Tata Steel and Nippon Yusen Kabushiki Kaisha (NYK Line), a Japanese
shipping major. The joint venture was set up to cater to the ship bulk
cargo such as coal, iron ore and steel arriving in and departing from
Indian shores. The shipping firm would cater to the needs of the Tata Steel
Group for moving raw materials and finished steel. In future, Tata Steel
would require to transport large quantities of raw materials and finished
steel, which would necessitate strategic control over logistics and this
joint venture is a step in that direction. Progressing towards the goal of
achieving logistics control, Tata NYK has entered into a long-term charter
for 8 Supramax/Panamax vessels and orders have been placed for building two
new Supramax vessels. As part of its long term strategy, the Company plans
to enter into a long term charter for capesize vessels in 2009.

The Company has handled a total of 4.48 million tonnes of cargo during the
year ended 31st March, 2009, which included 1.98 million tonnes of cargo
for the Tata Group. The global financial crisis has severely affected the
shipping industry with the Baltic Dry Index (BDI) hitting a 20 year low
after reaching a peak of more than 12000 in May 2008. Increase in demand
for steel related raw materials is critical for improving the BDI.

Tata Steel (KZN) (Pty) Ltd.:

Tata Steel KZN (TSKZN) is a South Africa-based subsidiary of Tata Steel
that is in the business of producing high carbon ferrochrome and charge
chrome. The plant, located at Richards Bay on the KwaZulu-Natal coast of
South Africa was commissioned in 2008 with an annual production capacity of
1,51,000 tonnes. The briquette technology being used by the company is new
to South Africa and is environmental friendly compared to the other
competing technologies of agglomeration.

The ferro-chrome used in the manufacture of stainless steel will be
exported to Tata Steel's customers in Asia, Europe, the US and elsewhere.
TSKZN commenced commercial production on 1st July, 2008 and is one of the
most environment compliant plants globally. It has a fully covered storage
area for all fine raw materials, a wet gas scrubbing system (with 100%
redundancy) linked with a closed furnace. This plant set new standards in
environment management. In its first year of operations, TSKZN achieved a
production of 63,479 mt of saleable grade charge chrome during the
financial year 31st March, 2009.

RAW MATERIAL SECURITY:

Over the years, the Tata Steel Group's growth and globalisation strategy
has been built upon a balanced focus on every node of the value chain -
from raw material security to steel making to value added products to
control over logistics. During 2008-09 the focus was not only on tapping
new raw material opportunities but was also on consolidation of existing
ventures. As a further step towards increasing its iron ore security for
the European operations, two new iron ore projects were identified - one in
Canada and the another in South Africa. Tata Steel also increased its
equity stake in the Riversdale Mining Limited, Australia, which is
currently progressing with its coking coal project in Mozambique. Another
milestone was achieved when the Company's ferro-chrome venture in South
Africa became operational during the financial year. With the signing of a
definitive agreement for a steel project in Vietnam, Tata Steel took a
significant step towards increasing its footprint in South East Asia. The
Company continues to look for suitable downstream projects in geographies
of interest, in order to add value to its steel.

The Tata Steel Group is currently self-sufficient to the extent of 25% for
its iron ore requirements. With iron ore becoming available from its
overseas mines at New Millennium Corporation in Canada and potentially from
the Ivory Coast over a longer term, the iron ore security would gradually
increase to around 62% by 2015. Iron ore from these mines will be primarily
supplied to Tata Steel's European Operations.

Overall raw material security would reach approximately 50% by 2015
increasing to around 60% by 2018 from its current level of 25%. For this
purpose, the Company would be required to make substantial investment in a
phased manner to secure the raw material from its overseas mines. The
Company is also evaluating several other mineral projects in Brazil and
Australia.

The status of various ongoing raw material projects is as follows:

Coal Projects:

Coking Coal Project in Mozambique (Riversdale):

Tata Steel has formed a Joint Venture (JV) with Riversdale Mining Limited,
Australia for a 35% stake in two coal tenements in Mozambique - Benga and
Tete including off-take rights to 40% of the coking coal produced from
these mines. The JV owns 24,960 hectares of coal tenements out of which the
Benga license near Tete covers an area of 4,560 hectares. As per the press
release of Riversdale, inferred resource in the Benga licence area is
currently estimated at 4 billion tonnes compared to 1.2 billion tonnes
estimated at the time of signing of definitive agreements. There is a
potential for the resource base going up further. The government of
Mozambique has approved the mining contract for the tenements which
represents a significant step towards commencement of the Benga coal
project.

The feasibility study for the project is in progress. The production from
the Benga mine is expected to commence in 2017. Tata Steel plans to supply
hard coking coal from this project to its facilities in Europe and also for
the Company's enhanced requirements in India in the future.

Tata Steel also holds a 14.99% equity stake in the parent company,
Riversdale Mining Limited.

Coal Mining Project in Australia (CDJV):

Tata Steel has a strategic interest of 5% in the coal mining project in
Australia in partnership with Vale, Nippon Steel, JFE and POSCO with 20%
off-take rights. The Joint Venture was formed for the development of a
greenfield underground coal project in Bowen Basin, Queensland. The first
raw coal production started in August 2006 and the mine is currently
producing around 1 mtpa. During the year, the JV company had undertaken the
second phase of expansion. On completion of the second phase, it is
expected to produce 3.7 mtpa of coking coal and PCI coal.

Joint Venture with SAIL for coking coal properties SAIL and Tata Steel
formed a 50:50 Joint Venture company, S&T Mining Co. in September, 2008
with its registered office in Kolkata. The company has been working towards
acquiring the coal blocks as per the recommendations of the joint working
group of SAIL and Tata Steel and has identified some coal blocks for
acquisition.

S&T Mining is also participating in tenders that are floated by PSUs who
have been allotted coal blocks by the Government and who are looking for JV
partners for mining and selling the coal. The JV company intends to
leverage the mining strengths of both SAIL and Tata Steel in order to
acquire coal mines to fulfill the increased requirements of its promoters.

Iron Ore Projects:

Iron Ore Project in Canada (New Millennium Capital Corp.):

In September 2008, Tata Steel through its subsidiaries had signed a Heads
of Agreement memorandum with New Millennium Capital Corporation (NML), a
Canadian listed mining company aiming to develop iron ore projects in
Northern Quebec, Labrador and Newfoundland provinces. Tata Steel holds a
19.9% stake in NML with an option to acquire an 80% equity interest in
NML's Direct Shipping Ore project (DSO Project) located in the Province of
Newfoundland and Labrador (NL) and the Province of Quebec (QC). The
agreement provides exclusivity to Tata Steel with respect to both the DSO
Project and the LabMag taconite iron ore property located in NL, with an
80:20 ownership by NML and Naskapi Nation of Kawawachikamach respectively.

The DSO resource is estimated to be approximately a 100 million tonnes. The
feasibility study for the DSO Project is progressing and the production is
expected to commence in 2011. Tata Steel will have 100% off take rights to
the produce of the mine. The iron ore from this project will be supplied to
Tata Steel Group's facilities located in Europe.

The LabMag deposit consists of 3.5 billion tonnes of proven and probable
mineral reserves. These reserves are contained in the 4.6 billion tonnes of
measured and indicated resources and 1.2 billion tonnes of inferred
resources. Tata Steel is jointly working with NML to find an economically
viable solution to advance the LabMag Project.

Limestone Projects:

Limestone Project in Oman:

Limestone is a key raw material for producing quality steel. Tata Steel has
so far been sourcing limestone from central India, Thailand and the Middle
Eastern countries for its Indian operations. In order to reduce dependence
on purchased limestone, Tata Steel signed a Joint Venture (JV) agreement
with Al Bahja Group, Oman for a 70% stake in the JV. The project envisages
mining in limestone in the Uyun region, believed to be rich in limestone
deposits and is located in the Salalah province of Oman. Exploration and
feasibility studies are in progress.

HEALTH AND SAFETY:

The Tata Steel Group is committed to ensuring the health and safety of its
employees, its plants and its surrounding communities at all its operation
sites. The Group constantly endeavours to provide safe and hygienic working
conditions for its employees as well as its contract workers. It takes an
integrated and systematic approach to managing health and safety, which is
encompassed in the Tata Steel Safety Programme and the Corus Health and
Safety Management System with a successful delivery reliant on employee
engagement and felt leadership. Both the programmes have been developed
with the support and expertise of DuPont consultants.

Since 2005, with the help of the DuPont Safety Resources organisation, a
quantum jump has been achieved in the safety culture of the organisation
through the implementation of the behavioural safety model'. Potentially
fatal situations have been rectified with a focussed Fatality Risk Control
Programme' (FRCP). Pursuing this initiative will help the Company realise
its goal of becoming a fatality free organisation in the near future.

For the sustainability of its operations, the 'Process Safety & Risk
Management' (PSRM) programme has been started for the high hazard
operations and processes, in order to ensure freedom from a high
consequence, low frequency process incidents. PSRM will be implemented in
all facilities by FY 12.

Tata Steel is also extending support to the community for improving their
safety standards with the help of the Safety Awareness For Everyone (SAFE)
organisation. School children are being given special training on road &
behaviour safety. A safety curriculum has been introduced in the schools in
Jamshedpur to generate an awakening within the community.

With these initiatives, the Company has been able to reduce the Lost Time
Injury Frequency Rate (LTIFR), an accepted measure of safety performance
worldwide, to 0.80 for FY'09 from 1.70 in FY'08 and is confident of
achieving its target of 0.40 LTIFR by 2012.

ENVIRONMENT:

Climate change is one of the most important issues facing the world today.
The steel industry is a significant contributor to man-made greenhouse gas
emissions as the manufacture of steel unavoidably produces carbon dioxide
(CO2). Tata Steel along with its subsidiaries and associate companies
believe that respect for the environment is critical to the success of its
business. It is committed to minimising the environmental impact of its
operations and its products through the adoption of sustainable practices
and continuous improvements in environmental performance.

The Tata Steel Group has set itself a target for reduction in CO2 emission
level to 1.5 tonnes of CO2 per ton of liquid steel for its Indian
operations by 2015 against the present level of 2.1 tonnes/tls. Several
energy efficiency measures have been taken to reduce CO2 emission during
the year including a detailed carbon footprint exercise. A notable
achievement was the registration of the G' Blast Furnace Top Pressure
Recovery Turbine project of Jamshedpur unit at UNFCCC as a CDM project.

Tata Steel's European operations have taken several steps to reduce its
total energy consumption. It has signed a voluntary agreement with the
Dutch government for achieving an energy efficiency improvement of 2% per
annum. In the UK, an agreement has been reached with the Government to
reduce energy consumption by 15.8% by 2010 as compared to the 1997 levels.
The Group is making an investment of approximately Pound 60 million in
energy management technology at its Port Talbot site to enable the plant
reduce its CO2 emission from the current year's level.

DIRECTORS:

Mr. Kirby Adams and Mr. H.M. Nerurkar were appointed additional Directors
on the Board of the Company with effect from 9th April, 2009.

Mr. Kirby Adams has been appointed as the CEO of Tata Steel Europe Limited,
a wholly owned indirect subsidiary of the Company. He would oversee the
operations of Tata Steel in Europe. In addition, he would also be
responsible for the Global Raw Material pursuits of Tata Steel. Mr. Adams
was formerly the Chief Executive of BlueScope Steel, Australia.

Mr. H.M. Nerurkar was the Chief Operating Officer of the Company prior to
his appointment as Executive Director, India and South East Asia. He would
be responsible for the Indian and South East Asian operations of the
Company. He joined the Company in 1972 and has held various posts since
then. He is also on the Board of some of the Tata Steel Group companies.

The Directors believe that the appointments of the above mentioned
directors on the Board of the Company would bring in a rich and varied
experience that would enable it to manage a business of this size and
complexity.

Dr. T. Mukherjee stepped down from the Board of the Company effective 31st
March, 2009. The Board records its appreciation of the contribution made by
Dr. Mukherjee during his tenure as a director of the Company.

Mr. Philippe Varin, on taking charge as Chairman of the Management Board of
PSA Peugeot Citroen, France, stepped down from the Board of the Company
effective 27th May, 2009. The Board records its appreciation of the
contribution made by Mr. Varin during his tenure with the Company.

Dr. J.J. Irani received the coveted Life Time Achievement Award from the
Government of India in acknowledgement of his services and the outstanding
contributions made by him in the area of metallurgy.

In accordance with the provisions of the Companies Act, 1956, and the
Company's Articles of Association, Mr. R.N. Tata, Mr. Nusli N. Wadia, Mr.
Subodh Bhargava and Mr. Jacobus Schraven retire by rotation and are
eligible for re-appointment.

ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE:

Details of energy conservation and research and development activities
undertaken by the Company along with the information in accordance with the
provisions of Section 217(1)(e) of the Companies Act, 1956, read with the
Companies (Disclosure of Particulars in the Report of Board of Directors)
Rules, 1988, are given in Annexure A' to the Directors' Report.

PARTICULARS OF EMPLOYEES:

Information in accordance with the provisions of Section 217(2A) of the
Companies Act, 1956, read with the Companies (Particulars of Employees)
Rules, 1975.

CORPORATE GOVERNANCE:

Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, a
Management Discussion and Analysis, Corporate Governance Report, Managing
Director's and Auditors' Certificate regarding compliance of conditions of
Corporate Governance are made a part of the Annual Report. A note on the
Company's corporate sustainability initiatives is also included.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors,
based on the representations received from the Operating Management,
confirm that:

1. in the preparation of the annual accounts, the applicable accounting
standards have been followed and that there are no material departures;

2. they have, in the selection of the Accounting Policies, consulted the
Statutory Auditors and have applied them consistently and made judgements
and estimates that are reasonable and prudent so as to give a true and fair
view of the state of affairs of the Company at the end of the financial
year and of the profit of the Company for that period;

3. they have taken proper and sufficient care to the best of their
knowledge and ability for the maintenance of adequate accounting records in
accordance with the provisions of the Companies Act, 1956, for safeguarding
the assets of the Company and for preventing and detecting fraud and other
irregularities;

4. they have prepared the annual accounts on a going concern basis.

On behalf of the Board of Directors

RATAN N. TATA
Place : Mumbai, Chairman
Date : 25th June, 2009

Annexure 'A' to Directors' Report:

Particulars Required Under the Companies (Disclosure of Particulars in the
Report of the Board of Directors) Rules, 1988:

A. Conservation of Energy:

a. Energy Conservation measures taken:

i. Installation and commissioning of Top Recovery Turbine in 'H' Blast
Furnace to generate electrical energy.

ii. Application of fuel catalyst in Loco's to reduce HSD consumption.

iii. Injection of Propane in C.O. Gas for better CV control of Mixed Gas,
thereby increasing the productivity of furnace & energy saving.

b. Additional investments and proposal for reduction of consumption of
energy:

i. Installation and commissioning of Power House #6 on By-Product gases as
a fuel, for 100% utilisation of By-Product gases.

ii. Installation and commissioning of Top Recovery Turbine at G' Blast
Furnace.

iii. Upgradation of L.D. Gas export system to enhance L.D. Gas recovery.

iv. Recovery of sensible heat of coke by installation of Coke Dry Quenching
system in Batteries 5, 6, 7, 8 & 9 at Coke Plant.

v. B.F. Gas fired re-heating furnace at Hot Strip Mill.

vi. Shut down of old & inefficient Blast Furnaces.

c. Impact of the above measures:

Energy Conservation measures during 2008-2009 has resulted in achieving:

i. Lowest ever Plant Specific Energy Consumption i.e. 6.587 Gcal/tcs.

ii. Lowest ever boiler coal consumption i.e. 24.84 kg/tss.

iii. Higher LD Gas Recovery i.e. 38,595 Nm3/hr.

iv. Higher combine boiler efficiency i.e. 84.76%.

Form - A:

Form for disclosure of particulars with respect to Conservation of Energy :
2007-2008

Particulars 2008-2009 2007-2008

A. POWER AND FUEL CONSUMPTION:

1. ELECTRICITY:

(a) Purchased:

Units (M. KWH) 2,194.54 2,031.07

Total Amount (Rs. Lakhs) # 63,605.96 55,934.67

Average Rate/Unit (Rs./KWH) 2.90 2.75

(b) Own Generation:

(i) Through Diesel Generator:

Units (M. KWH) 12.48 14.05

Units per litre of Diesel Oil (KWH) 3.91 3.91

Average Cost/Unit (Rs./KWH) 15.91 12.27

(ii) Through Steam Turbine/Generator:

Units (M. KWH) 1,069.45 996.85

Units per tonne of Coal (KWH) 6,638 4,294

Average Cost/Unit (Rs./KWH) 2.05 1.88

(* This includes generation of PH4 359.59 325.52
in M. KWH * which is operated on
by-product gases upto 95%)

2. COAL:

(i) Coking Coal & Cookeries:

Quantity (Million Tonnes) 4.75 3.37

Total cost (Rs. Lakhs) 2,87,419.20 98,770.88

Average Rate (Rs./Tonne) 6,055.07 2,929.54

(ii) Blast Furnace Injection Coal:

Quantity (Million Tonnes) 0.52 0.39

Total cost (Rs. Lakhs) 35,974.50 15,946.06

Average Rate (Rs./Tonne) 6,884.06 4,122.84

(iii) Middling Coal and ROM:

Quantity (Million Tonnes) 0.14 0.20

Total cost (Rs. Lakhs) 1,509.39 1,892.64

Average Rate (Rs./Tonne) 1,107.85 942.33

3. FURNACE OIL:

Quantity (Kilo litres) 12,520.19 12,701.73

Total Amount (Rs. Lakhs) 3,020.91 2,300.14

Average Rate (Rs./KL) 24,128.28 18,108.91

4. OTHERS:

L.D.O.:

Quantity (Kilo litres) 6,221.55 7,920.11

Total cost (Rs. Lakhs) 2,394.17 2,294.54

Average Rate (Rs./KL) 38,481.86 28,971.05

5. OTHERS:

L.P.G.:

Quantity (Tonnes) 3,837.75 4,292.69

Total cost (Rs. Lakhs) 1,611.53 1,512.48

Average Rate (Rs./Tonnes) 41,991.53 35,233.88

6. OTHERS:

NG:

Quantity (Tonnes) 2,204.84 2,217.40

Total cost (Rs. Lakhs) 240.77 242.14

Average Rate (Rs./Tonnes) 10,920.07 10,920.00

# Excludes electricity duty paid on purchases.

Form for disclosure of particulars with respect to Conservation of Energy :
2007-2008:

B. CONSUMPTION PER UNIT OF PRODUCTION:

Particulars A B C D E F G

Electricity (KWH) 431.91 114.00 0.66 3704.34 463.87 137.51 214.94
412.06 108.00 0.76 3556.70 528.98 133.11 229.06

Furnace Oil - 16.94 7.41 24.76
(Litres) - 21.99 7.03 21.99

Coking Coal 0.66
(Tonnes) 0.66

Others:

Light Diesel 0.83 1.30 - 6.90
Oil (Litres) 1.21 1.21 - 7.82

High Speed
Diesel Oil
(Litres):

L.P.G. (kg) 12.92 10.39
13.25 10.08

NG (kg) 26.77
23.21

A = Steel (per tonne)
B = Tubes (per tonne)
C = Bearings (per no.)
D = F.A.M.D. (per tonne)
E = Growth Shop (per tonne)
F = CRC West (per tonne)
G = Wire Div. (per tonne)

Form - B:

Form for disclosure of particulars with respect of Technology Absorption
2008-09:

Research and Development:

1. Specific Areas in which R&D was carried out by the Company:

R & D recognise energy and environment as the biggest single issue ever to
confront our industry and we are determined to provide the solutions and
aimed at reducing CO2 emissions from the existing process technologies. R &
D has taken projects in various areas which are broadly classified in 3
categories, 1) Raw Materials, 2) Processes and 3) Products, with the aim to
achieve the goal.

2. Benefits derived:

In order to address challenges, three thrust area projects were taken up:

* Hydrogen Harvesting
* Nano Fluids
* Power reduction in Ferro Chrome production

Progress achieved in the above areas is briefly mentioned below:

Hydrogen Harvesting:

'Several studies have been conducted to develop a process for recovery of
waste heat causing environmental problems. One of the source of waste heat
is molten slags. However, no process has been commercialised to recover
thermal energy from molten slag, in spite of its huge potential. The
extremely high temperature (>1500 degree Celcuse) of slag prevents the
efficient recovery by conventional technology. Therefore a novel H2H
technology is developed at Research & Development Department, Tata Steel
Ltd., which can generate hydrogen (H2)-rich gas by utilising the waste heat
of molten slag. This is a step forward towards cleaner steel industry.
Being an environmental friendly resource, H2 is considered as an
alternative source of energy. Presently most of the commercial processes
used for production of H2 rely on fossil fuel (coal, natural gas, etc.) or
electricity. These processes generate CO2 gas, hence not environment
friendly and require additional process for separation and sequestration of
CO2 which increase the cost of production. On the other hand, the capital
investment and cost of production of alternative energy resources (nuclear,
solar, wind, tidal, etc.) make these techniques commercially less
attractive. This novel H2H method of Tata Steel Ltd. has the potential to
generate low cost hydrogen as by-product. Furthermore, it will contribute
in promoting energy conservation in the steelmaking industry as hydrogen
generated in the process will reduce the consumption of fossil fuels in
steel plant or it will save the amount of energy consumed in production of
hydrogen in the chemical industry. Thus, this novel process has the
potential of solving an environmental problem besides offering substantial
cost benefits to the steel industry.

Presently research team is focusing on setting-up of technology
demonstration plant at FAP, Bamnipal and for development of commercial
technology package for steel making slag. The team is also actively
pursuing research project on generation of hydrogen and CO2 sequestration
of blast furnace gas in collaboration with Indian Institute of Technology
(IIT), Kharagpur.'

Nano-Fluids : Energy Efficient Fluids using nanofluids : Developments and
Applications:

A nanofluid is defined as a fluid in which nanometer-sized particles are
suspended. Research at Tata Steel in the area of nanofluids focuses on
energy reduction, primarily through the development of efficient coolants
and lubricants for rolling.

In early 2007, commercially available metal-oxide nanoparticles were used
along with additives. The use of commercially available nanoparticles
resulted in a better size control and the use of additives resulted in
controlled pH and a stable dispersion of more than 240 hours. Five to ten
litres of nanofluids were prepared using lab-scale sonicators. These
nanofluids were tried out in low temperature regimes using the heat
exchanger design and in high temperature regimes of cooling stationary
instrumented hot plates. In both cases, the results were encouraging. In
the low temperature regimes, overall heat transfer was of the order of 2.5
times that of water. In the high temperature regime, the heat transfer was

1.8 times more efficient. However, scale up was restricted because of
handling issues, large scale production.

One of the innovations was to make an effervescent tablet that would
disperse in water in five seconds. This was accomplished and first of its
kind. A patent is being filed along with a plan for pilot scale manufacture
and supply. The other innovation was to use a novel concept of high speed
shear mixer for bulk nanofluid generation. This was accomplished in October
2008 and was first demonstrated for 20,000 litres for use in wire box
cooling in the wire rod mill of Indian Steel and Wire Products Limited,
Jamshedpur. The stable solution was produced in bulk with stability of more
than 240 hours. This is also first of its kind. In the application of water
box cooling in wire rod mill, a higher cooling rate (by approximately 100
degree C/sec) compared to normal water was achieved. This opens up a range
of applications for new process control and product design.

A parallel application is presently ongoing in the batch annealing furnace
of the cold rolling mill (CRM). Here, savings of one hour is being
envisaged that would result in a cost saving of 5.67 crores per annum if
the technology is applied to all bases. The target is to complete the
installation for one base and take the trails in the first week of January
2009. The Research team is working closely with Tata Chemicals Innovation
Centre to explore the use of custom designed nano-formulations. The trial
at CRM will use one of the nano-particles designed at TCIC along with the
commercially available nano-particles for the nanofluid formulation.

The Research team is also actively pursuing the following areas of
application for nano-coolants.

(a) Increasing cooling rates at hot strip mill to enable low cost
manufacturing of Dual Phase (DP) steels.

(b) Possibility of stove cooling in blast furnaces.

(c) Possibility of heat recovery from waste gases, exhaust pipes.

(d) Possibility of energy storage and recovery.

Ferro-chrome : Reduction in specific power and coke consumption in
Ferrochrome production:

Smelting-reduction process is used at Ferro Alloys Plant (FAP), Bamnipal
for production of high-carbon ferrochrome from Sukinda chromite ores.
Chromite ore is refractory in nature and therefore difficult to reduce.
Current process at FAP, Bamnipal uses Submerged electric Arc Furnace (SAF)
for smelt-reduction of chromite ore. This process is highly energy
intensive and requires low-ash coke as a reducing agent. Low-ash coke and
electricity are both expensive and there is also scarcity of these
resources. Although Tata Steel has captive raw material (Chromite mine in
Sukinda), power and coke availability/cost limits FAP, Bamnipal in global
market completion. Therefore, a novel process technology is developed in
R&D department which is capable for generating products that can be used
either for direct production of stainless steel or for the production of
ferrochrome in SAF with lower specific power and coke consumption.

Challenges : (New process):

* Engineering for implementation
* Improve process efficiency
* Utilisation of secondary energy/by-product (slag)

Benefit Potential : (Combined process):

* Value added product for FAMD for export
* 20% reduction in power consumption in SAF
* 30% reduction in coke consumption in SAF

3. Projects in the areas of environment:

The following projects have been taken in the areas of environment are:

Reduction in CO2 Emission - Carbonation of Slag:

It is globally acknowledged that reductions of CO2 emissions are required
for climate change mitigation. Steel industry is one of the major sources
of emissions of pollutants where CO2 emissions are concentrated in one
location. At the same time, resources required for CO2 absorptions or
utilisation is also concentrated in the same location. For example,
availability of lime in steelmaking slags provides an opportunity for
carbonation using emitted CO2. Significant reductions in CO2 emission could
be achieved by using steelmaking slag for carbon dioxide mineralisation,
(i.e. mineral carbonation), and thereby enable realisation of Goal-3 of
VISION-2012.

The main objective of the current work was to study feasibility of CO2
absorption in steelmaking slag and to develop a functional sequestration
process using steelmaking slag to permanently capture carbon dioxide
emitted in steel plant. The study included thermodynamic feasibility and
laboratory scale experiments followed by microstructural investigation for
developing a functional CO2 sequestration process through aqueous
carbonation of steelmaking slag. All carbonation experiments were performed
under atmospheric condition in a laboratory experimental set-up.

The study showed potential for CO2 sequestration through carbonation of LD
slag. Based on laboratory-scale data obtained for aqueous carbonation of LD
slag at ambient temperature and pressure for 3 hrs reaction time, estimates
show CO2 capture potential to the tune of 30,000 tons of CO2/year for 6 MT
crude steel productions at Jamshedpur if all the slag is utilised for
carbonation purpose.

Further studies are required primarily to enhance the kinetics of reaction
for maximising rate of carbonation of slags and to arrive at optimum
carbonation process parameters.

CO2 harvesting and utilisation:

As part of the company's vision, the reduction in the emissions of Carbon-
di-oxide is attracting significant importance as a corporate strategy. This
can be achieved either by improving the performance of the processes or
using the emissions for producing valuable products. A number of
initiatives have been taken plant-wide to improve the performance of the
processes. However, the options in producing valuable products from the
emissions are limited. First major challenge is segregating the Carbon-di-
oxide from the flue gases of the stack. There are established technologies
available to concentrate the Carbon-di-oxide to purity levels as high as
99.9%. It is also necessary to evaluate the cost of recovering pure Carbon-
di-oxide from the various gas sources available within the plant such as
blast furnace gas, LD gas, coke-oven gas and various other stacks. From the
initial studies, the blast furnace gas and the stack of the lime
calcination units show promising potentials to recover Carbon-di-oxide in
large quantities.

At present, a techno-commercial feasibility study is carried out to
establish the cost of recovery of Carbon-di-oxide from the different gas
sources within the plant. Subsequently, this study will also provide the
feasibility of utilising the recovered Carbon-di-oxide in producing
chemicals of value. The study results are expected to be available by May
2009.

4. Expenditure on R&D:

(Rs. crores)

Capital 1.89
Recurring 39.70
Total 41.59
Total R&D expenditure as a % of Total Turnover 0.17

(a) Technology Absorption, Adaptation and Innovation:

Efforts made On the Process Front...

Hydrogen Harvesting:

At Bamnipal 'Hydrogen Harvesting' trials were conducted by utilising the
waste heat.

The purpose of the trials was to produce Hydrogen from the waste heat and
utilise the gas to pre heat the ladles initially and extend further to dry
the chrome ore.

We were successful in producing Hydrogen gas and also storing it tanker for
a couple of hours. The second phase of the trial is to utilise the gas for
Ladle heating which is likely to take place during May 2009.

JODA:

The following technological changes/new product developments were carried
out:

1) Process for production of +75 grade FeMn was established. This will
allow us to increase the market share. This product will help us to enter
into international FeMn market. Increased NR is also expected.

2) Improvement in water quality by modifying the water treatment system.
New equipments were also installed for the same.

3) Improvement in the pneumatic arrangement to reduce the down time (due to
obsolete equipments)

Raw Materials:

Column flotation studies were carried out on different seams of coal of
West Bokaro. On the implementation of the study results, the prime coal
yield in the fine circuit will improve. This provides an opportunity to
replace the inefficient mechanical cells.

Process was developed for the washing of Jhama coal to obtain consistency
in yield and ash level and this facilitated its regular use in sinter plant
as a replacement of imported anthracite.

Laboratory study was made for the direct utilisation of the briquetting of
iron ore slime. The trials were successful and we are in the process of
developing a party for the commercial production of briquettes. Cold bonded
briquettes, produced out of iron ore slime will be used in steel making as
coolant to replace prime iron ore, which is being used currently.

'Jhama' - a naturally partially burnt' coal found at Jharia, having low
volatile matter content, was mined and washed separately; and successfully
applied as substitute for imported anthracite in sintermaking.

Iron Making:

Application of local raw materials - viz. higher alumina bearing iron ore
and higher ash coals - to ironmaking at large scale. The operation of 3800
m3 H' BF was stabilised at competitive levels of performance. This was the
first example, worldwide, of such a large BF being operated with these
levels of alumina and ash loading - and is a landmark development for
ironmaking in India.

HBF, the largest BF in India, with latest technological features such as
stave cooling in stack, 4 tap hole operation, INBA slag granulation system,
1200 degree Celcuse blast temperature, 2.5 bar high top pressure, use of
electrical blowers for cold blast etc. has given record production and

productivity in its very first year of operation.

A number of innovative techniques were developed to slow down' processes
while continuing to maintain stability of operations in cokemaking and
ironmaking. While these were prompted by developments arising from economic
slowdown in European plants, the new knowledge developed on use of cheaper
coal blends and pre-emptive steps required for slowing or shutting down BFs
were leveraged in Indian operations as well.

Presence of carbonaceous materials present in ESP dust of sinter plants was
identified as the possible cause of fire in the ESP. These were caused by
presence of volatiles in the recycled wastes and solid fuels used in
sintering. The study resulted in control over the type and quantity of
fuels used in sintering.

SteelMaking:

A new ladle furnace has been commissioned at Steelmaking Shop #1.

A new 6-strand billet caster has been commissioned at Steelmaking Shop #1
with Deburring, Billet Marking, Mould & Final EMS Facilities.

Steelmaking Shop #1 started and stabilised 2/2 vessel operations to
increase shop production which is not very common in the world.

Casting sequence length increased by 12.6% and 6% for Billet Caster-1 and
Billet Caster-2 respectively.

Casting of 150mm square billet has been stabilised at Steelmaking Shop #1.

Installation of hot metal tracking system for display of torpedo position
and hot metal buffer available at Steelmaking Shop #2.

Adoption of 100% usage of coated mould in caster B and C in Steelmaking
Shop #2 resulting improved surface quality of cast slabs.

Additional tilter installed in the ladle bay to improve ladle management.
Better control on superheat has been achieved.

A portable mini-scan technology has been installed to assess online the
left over refractory thickness of the vessel and facilitate repair of hot
spots.

Highest ever refractory life of 5014 heats for the vessel achieved at
Steelmaking Shop #2.

Highest ever slab production of 3.52 MT achieved at Steelmaking Shop #2.

Long Product:

High carbon wire rods with reduced variation in UTS (<40 Mpa) within a lap.

WRM:

Increase in yield of TMT rebars at WRM by nearly 1% by improved performance
of water boxes.

TMT facilities introduced at WRM (W) and production of rebars started.

Product Development:

Obtained CARES certification for reinforcement bars from the Long Product
Rolling Mills.

Non-microalloyed, non-TMT, air-cooled reinforcement bars produced for
stirrup application for the first time.

Development of Low calcium wire rods for superior welding electrode
performance.

Development of Plasma coated rebars for improved corrosion
performance in concrete environment.

Flat Products:

LD-2:

Development of CR grade 440 by batch annealing for the automobile
application.

High Strength formable grade such as SPRC-35 for skin panel applications in
passenger car segment.

High Strength Steel with UTS 600 MPa with good hole expansion properties
for wheel application.

Development of Chrome free passivation for export market.

Development of coated Dual Phase Steel with 600 MPa strength.

Technology Upgradation and Absorption in Tubes Division - 2007-08.

In Tubes division, the following efforts are made to improve operational
efficiency.

ST Mills:

Installation of state-of-the-art HF3 Mill size range 1/2 'NB to 2' NB as a
replacement of old FM mill.

Modernisation of Galvanising Bath no. 2.

Installation of screwing socketing and Mair packing machine.
ITW Signode auto strapping unit at HF 1.

PT Mills:

Installation of state-of-the-art Schuler German make Hydroforming unit with
automatic & robotic control.

Installation of YLM Taiwan make tube bending machine for feeding to main
hydroforming unit.

SOCO machine for precision unit length cutting of high end application
tubes.

Replacement of 3' mill cut off machine by OTO make cold saw cutting
machine.

Hexagonal automatic tube packing line for auto and cold draw tubes.

Installation of express Lab at PT4 for in-process metallographic of weld
quality.

Some Major New products Developed through new technology absorption:

* Number of new products developed PT 47 and ST 17.

* Development and commercialisation of TFF tubes in single pass 30.25 OD x
24 ID, 31.25 OD x 24 ID.

* Engine Cradle by hydro forming for NANO Car.

* Development of 152.40 mm Idler tubes at ST by in house modification in
roll pass design.

* Usage of boron bearing steel for replacement of FM Tubes.

* Development and commercialisation of the 57 x 5 Graziano tube.

* Development of 50 x 6 & 40 x 6 for Rane Madras and TML as replacement of
seamless tubes.

* Development of galvanised structural tube from pre-coated strip for Marco
polo bus body.

* Development of 100 x 100 x 6.000 mm thick structura tube of Yst 310
grade.

Efforts for Energy Conservation at Jharia:

Power generation from Fluidised Bed Power Plant was 55.42 million units in
2008-2009 by using coal washery rejects having more than 60% ash and low
calorific value.

The following energy saving measure have been taken in jharia Division:

a. Rearrangement of pumping station at Digwadih and Jamadoba colliery.

b. Reduction in idle running of washing plant.

c. Introduction of power saver CFL Lamp in place of ordinary lamp in
lighting load circuit.

The above measures have resulted to maintain the specific power consumption
up to 17.79 KWH/ton of Clean coal.

Annual cost of power generation from Fluidised Bed Power Plant was only
Rs.1.95 paisa per unit as against Rs. 3.34 paisa per unit of purchased
power.

Particulars of technology imported during last five years:

Steel Division Status of
Absorption Implementation

a) Upgradation of G' blast
furnace (SMS Demag, Germany) 2004 Commissioned

b) Upgradation of HSM 2004 Commissioned

c) Upgradation of billet
caster-1 at LD1 (Concast, Zurich) 2004 Commissioned

d) Ladle furnace-2 at LD1
(SMS Demag, Germany) 2004 Commissioned

e) New Rabar Mill (Morgan, USA) 2004 Commissioned

f) Upgradation of caster at LD2
(Voest Alpine, Astria) 2004 Commissioned

g) Imported design and engineering 2005 Commissioned
for hot metal desulphurisation
unit at LD1 (Kuettner GmbH)

h) Supply of imported engineering 2005 Commissioned
for new induced draught fans,
electrics & accessories for the LD
Converter GCP at LD1 (Ebara Corporation)

i) Adequacy checking BOF converters for 2005 Commissioned
augmentation of heat size at LD2
(SMS Demag, Germany)

j) Imported design and engineering for 2005 Commissioned
upgradation of Caster 2 & 3 at LD2
(VAI, Astria)

k) Imported design and engineering for 2005 Commissioned
hot metal desulphurisation unit 2 & 3
at LD2 (Kuettner GmbH)

l) Imported design and engineering for 2005 Commissioned
capacity increase of slab reheating
furnace nos. 1 & 2 of HSM (Techint)

m) Supply of design and engineering 2005 Commissioned
and training for 150 tph walking beam
furnace to Rebar Mill (Bricmont)

n) Imported design and engineering 2005 Commissioned
(Mother well Bridge - Clayton walker)

o) Supply of imported design and 2005 Commissioned
engineering for LD gas boosters
(Howden Power Ltd. U.K.)

p) Supply of imported design and 2005 Commissioned
drawing for Technology control
system at HSM (SMS Demag, Germany)

q) Supply of imported design and 2005 Commissioned
drawing for Basic level automation
at HSM (Alstom, USA)

r) Supply of imported design and 2005 Commissioned
drawing for dual zinc pot at CRM
(CMI, Belgium)

s) Supply of imported design and 2005 Commissioned
drawing for BAF, CRM (LOI, Germany)

t) Supply of imported design and 2006 Commissioned
drawing for 4th Stove of G' Blast
Furnace (Paul Wurth Italia, Italy)

u) Supply of imported design and 2006 Commissioned
drawing for H' Blast Furnace (Paul
Wurth Italia, Italy)

v) Supply of imported design and 2006 Commissioned
drawing for Sinter Plant No. 4
(Outokumpu Technology, Germany)

w) Supply of imported design and 2006 Commissioned
drawing for LD2 expansion project.
(SMS Demag, Germany)

x) Supply of imported design and 2006 Commissioned
drawings for convertor gas cleaning
plants in LD shop 1 & 2 (SMS Demag,
Germany)

y) Facility for quantitative 2006 Commissioned
estimation of minerals through
Scanning Electron Microscope
(Intellection Pty. Ltd., Australia)

z) Polarising Microscope with 2006 Commissioned
Photometer and Imaging at R&D (Leica
Mikrosysteme Vertrieb GmbH, Germany
and PRESI S.A., France)

aa) Variable Frequency Drive for 2007 Commissioned
Descaling Pump Motor at Hot Strip
Mill (ABB, India)

ab) Sinter Plant No. 4, having a bed 2007 Commissioned
area of 204 sq. mtr. with ESP having
lesser emission of 50 mg/Nm3

ac) Double Jaw Eye Vertical Tong For 2007 Commissioned
Batch Annealing Furnace at CRM

ad) SCADA System for Water Utilities 2007 Commissioned

ae) Quantitative Estimation of
Minerals by SEM (Scanning Electron
Microscope) 2007 Commissioned

af) XRD (X-Ray Defraction) for 2007 Commissioned
quantitative phase and texture
analysis

ag) Electric Blowers for 'H' Blast 2009 Commissioned
Furnace

ah) Top Gas Recovery Turbine for 2009 Commissioned
'H' Blast Furnaces

ai) Flat Cast House Design for 'H' 2009 Commissioned
Blast Furnace

aj) Internal Stoves for 'H' Blast Furnace 2009 Commissioned

ak) Use of mixed gas in place for CO gas, 2009 Commissioned
for firing in 7th Lime Kiln

al) New Billet Caster having all the 2009 Commissioned
latest facilities and having 9 m casting
radius installed in an existing building
suitable for 6 m casting radius, by
going underground and taking the pass
line to (-)3.3 m level.

am) Use of hydraulic mould occilator and 2009 Commissioned
hydraulically operated turn over cooling
bed at CC 3 at LD Shop 1

an) Robotised Sample Testing Laboratory 2009 Commissioned
at LD Shop No 1.

Management Discussion and Analysis 2008-09:

Business Review:

Tata Steel Limited, Asia's first integrated private sector Steel Company,
is the world's second most geographically diversified steel producer with
major operations in India, Europe and South East Asia. Listed as a Fortune
500 company and with an annual crude steel capacity of around 31 million
tonnes, the Company has manufacturing units in 26 countries and a strong
presence in 50 European and Asian markets. Tata Steel India is the first
integrated steel company in the world, outside of Japan, to be awarded the
coveted Deming Application Prize 2008 for excellence in Total Quality
Management.

Over the past decades, the Company has carried out several modernisation
and expansion programmes - including the acquisition of businesses in
Europe and South East Asia, which have helped it to grow and diversify.

The strategic focus of the Company has been to increase the steel making
capacity in excess of 50 million tonnes by 2015 through organic and
inorganic growth. The key enablers identified to achieve the strategic goal
and to build a sustainable value centric culture are:

* Being the employer of choice.
* Oneness with the society.
* Leadership & talent management.
* Adaptability to changes in the external environment.
* Security of raw materials.
* Research & development and technological upgradation.
* Branding.
* Financial prudence through capital stewardship & performance management.

Tata Steel Group Performance:

A. Business Overview:

a. Tata Steel India:

1. Steel Division:

The production and sales figures of the Steel division of the Company are
shown in the following table:

Figures in million tonnes

FY 09 FY 08 Change %

Hot Metal 6.25 5.51 14%
Crude Steel 5.65 5.01 13%
Saleable Steel 5.37 4.86 11%
Sales 5.23 4.78 9%

The division posted an increase of around 11% in its Finished Steel
production and 9% in sales during the financial year 2008-09 owing to the
newly commissioned H' Blast Furnace, Sinter Plant #4, Billet Caster #3
etc. The major production and sales highlights for the financial year 2008-
09 are shown below:

Production:

* Best ever Hot metal (6.25 million tonnes), Crude steel (5.65 million
tonnes) and saleable steel (5.37 million tonnes) production.

* Newly commissioned Blast Furnace (H' furnace) in its very first year of
operation surpassed its yearly target and is running above the rated
capacity.

* One of the Steel Melting Shops (LD#2 & Slab Caster) achieved the best
ever slab production of 3.52 million tonnes (previous best 3.35 million
tonnes in FY 08).

* LD#1, another Steel Melting Shop also achieved the best ever annual
billet production of 2.12 million tonnes (previous best 1.76 million tonnes
in FY 07).

* Sinter Plant produced 6.5 million tonnes sinter which is the best ever
(previous best 5.88 million tonnes in FY 08). Highest ever solid waste
utilisation at 90% (previous best 85.4% in FY 08).

* One of the finishing mills i.e. New Bar Mill achieved highest ever
production of 0.611 million tonnes (previous best 0.549 million tonnes in
FY 08).

Sales:

* Overall sales at 5.231 million tonnes, grew by 9% over last year (4.782
million tonnes in FY 08).

* 25% increase in Long products sales at 2.00 million tonnes (1.60 million
tonnes in FY 08).

* Highest ever sales of Flat products at 3.23 million tonnes (3.18 million
tonnes in FY 08).

Other major highlights of the division were:

* Maximisation of production from bigger Blast Furnaces with higher
productivity resulting in a significant reduction in the coke rate.

* Increased vessel life in both the steel making shops.

* The revenue generation through sale of by-products was enhanced as
compared to the previous year.

* Reduction in dust emission per tonne of crude steel compared to FY 08.

2. Ferro Alloys and Minerals Division (FAMD):

The production and sales volume of Ferro Alloys and Minerals Division for
the financial year 2008-09 against the last financial year are shown in the
following tables:

Saleable Production:

Figures in million tonnes

Products FY 09 FY 08 Change %

Chrome Concentrate 0.270 0.379 (29)%
Ferro-chrome 0.170 0.202 (16)%
Ferro Manganese 0.055 0.055 (1)%
Pyroxenite 0.229 0.235 (3)%
Dolomite 0.362 0.467 (23)%
Silico Manganese 0.071 0.070 1%
Total 1.157 1.409 (18)%

Sales Performance:

Figures in million tonnes

Products FY 09 FY 08 Change %

Chrome Concentrate 0.254 0.392 (35)%
Ferro-chrome 0.177 0.186 (5)%
Ferro Manganese 0.034 0.041 (16)%
Dolomite 0.342 0.468 (27)%
Silico Manganese 0.042 0.040 (5)%
Total 0.867 1.143 (24)%

Robust demand for ferroalloys and consequent higher prices during the first
half of FY 09 were affected by the market slowdown during the second half.
In spite of the slowdown, the division ranked sixth among ferro-chrome
producers in the world at the end of the financial year. Cost
competitiveness and market and product developments were the key enablers
in increasing the customer base and expanding the market reach.

Global ferro-chrome producers struggled to meet the soaring demand from
consumers and for the first time in the history of its business, High
Carbon Ferro-Chrome spot market prices crossed the level of US $2 / lb CIF
in the first half of FY 09. The Company's ferro-chrome exports touched an
all time high and the division recorded its highest ever global market
share of 4% in FY 09. In India, FAMD is the market leader in the ferro-
chrome business with a market share of around 36%.

Shortage of the High Grade Manganese Ore and rising costs led to a
substantial appreciation in both Silico Manganese and Ferro Manganese
prices in FY 09.

Manganese alloys sales recorded an all time high in FY 09. FAMD with its
unique advantage of being the lowest cost Manganese alloy producer in
India, has attained the status of being the largest producer of Manganese
alloys in India with a market share of approximately 14%.

While the prices of Chrome Concentrate almost doubled over FY 08, ferro-
chrome prices moved north by 35% and Ferro Manganese & Silico Manganese
prices increased by 75% and 72% respectively over the last financial year.

3. Tubes Division:

The production and sales performance of the division are shown below:

Figures in million tonnes

Production FY 09 FY 08 Change %

Commercial Tubes 0.163 0.169 (4)%
Precision Tubes 0.085 0.087 (2)%
Structural Tubes 0.068 0.066 3%
Total 0.316 0.322 (2)%

Figures in million tonnes

Sales FY 09 FY 08 Change %

Commercial Tubes 0.163 0.172 (5)%
Precision Tubes 0.068 0.063 8%
Structural Tubes 0.087 0.088 (1)%
Total 0.318 0.323 (2)%

Trend of Sales volume over the last few years is shown below:

Trend of Tubes sales volume: ('000 tonnes)

FY 05 FY 06 FY 07 FY 08 FY 09

Commercial 145 172 184 172 163
Precision 44 49 59 63 68
Structural 31 37 60 88 87

The division commissioned a second state-of-the-art Mill during FY 09 in
order to improve manpower productivity, lower energy consumption, increase
operational efficiency and offer improved products. The division's thrust
in High end Precision Tubes started to bear fruit, with the commissioning
of the Hydroforming facilities and has recently initiated the supplies of
Engine Cradles for the Tata Nano car, production of tubes for Telescopic
Front Fork (TFF) & Propeller Shaft applications.

There was a substantial progress in Customer Relationship Building and IT
based solutions. Some highlights include the implementation of web based
VMI, replenishment system for all distributors and EVI with large
construction companies. Inspite of the market slowdown especially in
construction activities during the second half of FY 09, the sales volume
remained at the same level as that of FY 08 mainly due to the development
of new products and sizes for Structural applications under the 'TATA
STRUCTURA' brand.

While the tubes industry witnessed a negative growth of 3-4%, the Tubes
division maintained its volume at FY 08 levels. In line with recent
investments, the Precision tubes business of the division grew by 7% even
though growth in the industry was largely stagnant. In the Commercial tubes
segment, in spite of a drop in volumes, the market share grew by 2% over FY
08 in the retail trade.

4. Bearings Division:

The production and sales performance of the division are shown below:

Figures in million numbers

FY 09 FY 08 Change Change %

Production 27.40 26.36 1.04 4%
Sales 26.34 27.61 (1.27) (5%)

A major customer segment for the Bearings Division of the Company is the
automobile sector. In the first half of FY 09, the automotive segment saw a
robust growth of 12.7% but witnessed a steep 13% negative growth in the
third quarter before recovering to a 1% growth in the fourth quarter.

b. Tata Steel Europe (TSE):

Tata Steel Europe is Europe's second largest steel producer operating three
main divisions - Strip Products, Long Products and Distribution & Building
Systems. The fourth division - Primary Aluminium was hived off to Klesch &
Company during February 2009.

The production and sales performance of TSE is shown below:

Figures in million tonnes

FY 09 FY 08 Change Change %

Liquid Steel:

Production 16 20 (4) (20)%

Sales 20 23 (3) (14)%

TSE's liquid steel production in FY 09 was around 16 million tonnes, 20%
lower than FY 08. While during the first half of FY 09 the production was
around 10 million tonnes, almost at the same level of FY 08, the production
for the second half of FY 09 was 6 million tonnes against the level of
around 10 million tonnes recorded during FY 08.

The sales for FY 09 at around 20 million tonnes were lower by 14% as
compared to sales of 23 million tonnes registered during FY 08.

The demand for TSE's carbon steel products was around 8.9 million tonnes,
lower by 15% than FY 08. The drop in demand was mainly due to the sharp
downturn in steel consumption during the second half of the financial year
along with the effects of the stock correction, particularly for strip
products.

c. NatSteel Holdings:

The Singapore operations are an Electric Arc Furnace (EAF) based steel
making and rolling operations with a production capacity of about 0.750
million tonnes per annum.

The first half of the financial year saw a rise in the prices and volume
due to buoyant market conditions. However, in the second half of FY 09,
South East Asia experienced the effects of the global slowdown bringing
down the volume as well as prices significantly, offsetting the increases
achieved during the first half.

During the year, the Singapore operations mainly focussed on yield
improvement, reduction in power consumption and improvement in downstream
tonnages.

The Singapore operations sold about 0.956 million tonnes of steel during FY
09, 6% more than the last financial year. Out of total sales, the sales of
the downstream facility in Singapore, the world's largest single cut-and-
bend operations facility, were around 0.475 million tonnes, 20% higher as
compared to the previous year.

The Chinese subsidiary of NatSteel sold 0.426 million tonnes of rolled
products during FY 09, 17% higher than the previous year.

In Australia, NatSteel Australia and Best Bar sold around 0.188 million
tonnes (12% higher than FY 08) of steel in the form of straight length
rebars, mesh, cut-and-bend and other accessories.

d. Tata Steel Thailand:

Production during FY 09 at 1.07 million tonnes was lower by 22% than FY 08
while sales at 1.1 million tonnes were about 20% lower compared to the
previous year. While the first half of FY 09 witnessed a rise in demand,
the latter half saw a drastic drop in the prices of domestic and
international scrap, which in turn led to a decrease in prices for finished
products. The high stocks in the supply chain also added to the adverse
performance. During the year, the operations in Thailand focussed on cost
reduction in the Rolling Process by optimising the roll consumption cost
and in the Alloy Consumption at the steel shop.

e. Tata Refractories Ltd.:

Tata Refractories Ltd. (TRL), is India's No 1 Refractories Producer with
service backup for Total Refractory Solutions (Design & Application) &
Total Refractories Management. The company also has a manufacturing
facility in China.

The company has a wide range of refractory products like Basic
refractories, Dolomite refractories, Flow Control refractories, High
Alumina refractories, Monolithic refractories and Silica Refractories. With
operations in China, Gujarat, Jamshedpur, Salem and Belpahar, TRL has been
meeting the growing needs of a wide variety of customers in different
markets viz., Steel, Cement, Glass, Copper, Zinc, Aluminium, and the
Petrochemical industry.

During FY 09, the production was lower by 1% from 234 k tonnes during FY 08
to 231 k tonnes in FY 09 while the sales were higher by 1% from 264 k
tonnes during FY 08 to 267 k tonnes in FY 09.

f. TM International Logistics Limited:

TM International Logistics Limited is involved in the activity of running
port operations at the Ports of Haldia and Paradip on the east coast of
India backed by a fully dedicated customs clearance and shipping agency
services at both ports. The company runs a clean dry cargo terminal at
berth # 12 at Haldia which is equipped with modern handling facilities
including heavy equipments, shore cranes and vast large open storage area
as well as covered warehousing facilities.

The main performance highlights of the company during the financial year
2008-09 are the following:

FY 09 FY 08 Growth

Port Million
Operations tonnes 7.01 6.04 16%

Shipping Million 2.28 1.87 22%
tonnes

Clearing & Rs. crore 4,047 3,667 10%
Inland Logistics

Freight Volume in 25,495 26,106 (2%)
forwarding TEUs

g. Tata Metaliks Limited:

Tata Metaliks Limited became a subsidiary of Tata Steel Ltd. w.e.f 1st
Februrary, 2008 and is the largest producer of foundry grade Pig Iron in
the country. The company, which has an annual total capacity of 650,000
tonnes, is the largest producer of foundry grade Pig Iron in the country
and has two plants: one at Kharagpur, West Bengal and the other at Redi,
Maharashtra. The company also has a joint venture Tata Metaliks Kubota
Pipes Limited with M/s. Kubota Corporation, Japan for producing ductile
iron pipes with an annual capacity of 110,000 tonnes.

During the last two financial years, the company has graduated from low-end
ballast weight castings to high-end crank case castings. The operational
highlights of the company during the financial year 2008-09 are shown
below:

Figures in 000 tonnes

Hot Metal Production 387
Pig Iron (capacity) 650
Pig Iron Production 378
Sales 379

During FY 09, while the Kharagpur unit of the company operated at 78% of
the total capacity (92% in the first half and 62% in the second half), the
Redi unit operated at 20% of its capacity primarily due to the complete
shutdown of one furnace throughout the year and slowdown of automotive
sector during the second half of the financial year.

Raw Materials:

India:

Tata Steel India is self-sufficient in iron ore due to its captive mines.
With regard to coking coal, the company is self-sufficient to an extent of
52%, the balance amount being procured mostly through imports largely
covered by annual contracts. At the Jharia collieries, the raw coal
production was slightly higher than FY 08 (1.582 million tonnes) at 1.587
million tonnes with flexibility in ash% between 16.5% to 17.0% in Jamadoba
and 15.5% to 17.0% in Bhelatand. The West Bokaro division achieved the
highest ever raw coal production at 5.68 million tonnes (1.96 million
tonnes of clean coal at 13.96% ash). The iron ore sized production was 4.14
million tonnes and the fines production was higher by 8% to reach a level
of 5.91 million tonnes.

Europe:

During FY 09, approximately 22 million tonnes of iron ore and 11 million
tonnes of coal were imported by TSE. While iron ore was imported mainly
from Australia, Canada, South Africa and South America, coal was
principally imported from Australia, Canada and the US.

Supply contracts lasting typically anywhere between three and ten years are
entered into for certain raw materials for steel production wherein the
prices are generally agreed upon on an annual basis. The TSE policy for
these raw materials is to ensure that at least 60% of the requirement is
accounted for by long-term contracts. The remaining raw materials are
purchased through one year contracts, options and spot purchases at market
rates providing flexibility and commercial leverage.

The market reference price of iron ore fines for the calendar year 2008 saw
increases of around 65% as compared to 2007. This significant increase in
price was driven by growth in demand, predominantly from China. The price
of hard coking coal increased even more significantly, by more than 200% in
2008 compared to 2007. Severe flooding in Australia, which resulted in a
massive under supply of coal further exacerbated the unprecedented increase
in price. During the second half of 2008, the global demand for steel and
therefore, steel making raw materials deteriorated sharply and spot prices
fell. As a result, significant contract price reductions are anticipated
for both iron ore and coal in 2009.

B. STRATEGY:

In February 2008, the Tata Steel Group launched a new Vision with the aim
of setting a world benchmark in Value Creation and Corporate Citizenship.

With regard to Value Creation, the Tata Steel Group set itself a target of
increasing the return on invested capital of its existing assets to 30% by
2012-13 and to generate selective growth. In order to meet this target, the
Group has developed a two-fold strategy:

* In order to increase the quality of earnings of its existing assets, the
Group will pursue the optimisation of its European assets, restructure low
profitability assets and continue to derive benefits through continuous
improvement and synergies across the Group.

* In order to generate selective growth, the Group will pursue capacity
expansions and securing access to raw materials. The Group is increasing
its capacity in India, through expansion of its current operations in
Jamshedpur and through the construction of a greenfield site in Orissa, and
assessment of raw material investment opportunities as and when they arise.

Corporate citizenship involves providing a safe working place, respecting
the environment, caring for its communities and demonstrating high ethical
standards.

The Group wants to be a part of the climate change solution and has set a
target to reduce its CO2 emission from the current 2.07 tonnes of CO2 per
tonne of liquid steel to 1.5 tonnes of CO2 per tonne of liquid steel by
2012 through process improvements, breakthrough technologies and
development of new products and services. More specifically, the emission
target is planned to be achieved through:

* Large investments including BOS gas recovery and back pressure valves at
Port Talbot and a new ladle furnace at IJmuiden.

* Burden optimisation, e.g. through switching to pellet feed, increased
scrap ratio, reduced slag volume and increased coal injection.

* Smaller investments and housekeeping actions e.g. yield improvements,
lighting efficiency and variable speed drives across all entities.

During the year, the Group has continued to execute its long-term strategy
and the tactical planning for development of new markets is well underway.
South East Asia is one of the key growth regions and the Group is focussed
on developing a greenfield expansion in Vietnam and optimising operations
in both NatSteel and Tata Steel Thailand. In the construction sector, the
Group is exploring options to develop strong positions in India and in
South East Asia through leveraging its European expertise. The Group also
continued to explore raw material opportunities to improve the cost
competitiveness of its European and South East Asian operations.

C. FINANCIAL ANALYSIS OF TATA STEEL INDIAN OPERATIONS:

(Standalone entity in India):

1. Net Sales/Income from Operations:

Figures in Rs. crore

FY 09 FY 08 Change Change %

Sale of products 25,945 21,392 4,553 21%

Sale of power and water 566 546 20 4%

Income from town, medical
and other services 41 41 (0) 0%

Other operating income 291 210 81 39%

Total Sale of products
and services 26,844 22,190 4,654 21%

Less: Excise Duty 2,528 2,499 29 1%

Net sales/Income from 24,316 19,691 4,625 23%
Operations

The net sales increased by 23% during FY 09 over FY 08 mainly due to higher
prices realised on Steel as well as other products during the first half of
the financial year. While realisation declined following the global
economic slowdown, Steel volumes improved significantly in the second half
as can be seen from the following table:

Figures in million tonnes

Steel volume H1 H2 Change %

FY 09 2.38 2.85 20%
FY 08 2.26 2.52 12%

The divisional net sales of the Company are shown below:

Figures in Rs. crore

Net Sales FY 09 FY 08 Change Change %

Steel 20,456 16,539 3,917 24%
Tubes 1,410 1,217 193 16%
Ferroalloys and Minerals 2,324 1,808 516 29%
Bearings 127 127 (0) 0%
Total 24,316 19,691 4,625 23%

As explained above net sales in the Steel division increased by 23% due to
increase in prices in the first half of FY 09 and increase in volume in the
second half of FY 09. Similarly sales of Tubes and Ferroalloys improved
mainly due to higher realisations experienced during the year on account of
increase in prices with lower volumes as compared to the last year.

2. Raw Materials Consumed:

Figures in Rs. crore

FY 09 FY 08 Change Change %

consumed 5,710 3,355 2,355 70%

Raw Materials consumption showed significant increase over the previous
year mainly due to higher prices of Coal and Coke and also due to higher
production resulting from the commissioning of H' Blast Furnace as well as
other facilities and operational improvements. Increase in the prices of
Ferroalloys also contributed to the increase in raw materials consumed.

3. Payments to and Provisions for Employees:

Figures in Rs. crore

FY 09 FY 08 Change Change %

Payments to and provisions 2,306 1,816 490 27%
for employees

The increase of staff cost over last financial year represents the revised
wages, arrears and impact of change in discounting rate for valuation of
employee benefits as per Accounting Standards (AS15).

4. Conversion Charges:

Figures in Rs. crore

FY 09 FY 08 Change Change %

Conversion charges 1,042 857 185 22%

Conversion charges increased by 22% over FY 08 mainly due to an increase in
the conversion activities at the Long Products division as well as an
increase in the conversion of tin coated products.

5. Stores and Spares Consumed:

Figures in Rs. crore

FY 09 FY 08 Change Change %

Stores consumed 1,249 936 313 33%

Stores consumption has gone up by 33% as compared to FY 08 primarily on
account of higher production which was due to the commissioning of H'
Blast Furnace as well as other facilities and operational improvements and
an increase in the price of operational refractories in Steel melting
shops.

6. Purchase of Power:

Figures in Rs. crore

FY 09 FY 08 Change Change %

Purchase of 1,091 933 159 17%
Power

There was an increase in expenses related to the purchase of power at the
Jamshedpur Works during the year as fourth unit of Tata Power was shutdown
for maintenance activities and the Company (Tata Steel) had to purchase
power at higher rate from alternate sources. Increase in production,
increase in sale of power to other consumers also led to higher purchase of
power.

7. Other Expenses:

Figures in Rs. crore

FY 09 FY 08 Change Change %

Other expenses 1,266 1,069 196 18%

Other expenses have gone up mainly due to consultancy charges, exchange
fluctuation on raw material supplies, port charges due to increased
exports, increase in brand equity payment, software development charges,
packing charges due to increase in prices of steel packing materials and
higher payments for contractual jobs.

8. Net Finance Charges:

Figures in Rs. crore

FY 09 FY 08 Change Change %

Net Finance charges 1,153 787 366 47%

The net finance charges were higher by 47% over the previous financial year
mainly due to interest on new non-convertible debentures issued during the
year, interest on fresh term loans taken during the year, interest on
working capital loans partly offset by the increase in interest income from
current investments, advances, and deposits.

9. Fixed Assets:

Figures in Rs. crore

FY 09 FY 08 Change Change %

Gross Block 23,545 20,847 2,698 13%
Less: Impairment 100 100 - 0%
Less: Depreciation 8,962 8,123 839 10%
Net Block 14,482 12,624 1,859 15%

The Gross Block increased during the year primarily on account of the 1.8
million tonne steel expansion programme and the 3 million tonne steel
expansion programme (commenced in the last quarter of FY 09) at Jamshedpur.

10. Investments:

Figures in Rs. crore

FY 09 FY 08 Change Change %

Trade investments 1,744 1,152 592 51%

Investment in subsidiary 37,359 1,914 35,444 1852%
companies

Investment in 3,269 1,028 2,241 218%
mutual funds

Other current investments - 9 (9) (100%)

Total 42,372 4,103 38,269 933%
investments

Increase in Investments in subsidiary companies was due to conversion of
advance against equity to Tata Steel Holdings (included in loans and
advances as on 31.3.08) and also on account of further contributions to the
capital of Tata Steel Holdings apart from contributions to equity of some
subsidiary companies in India.

11. Stock-in-trade and Stores & Spares:

Figures in Rs. crore

FY 09 FY 08 Change Change %

Stock-in-trade 2,868 2,047 821 40%
Stores & Spares 612 558 55 10%
Total inventories 3,480 2,605 875 34%

The Stock-in-trade as on 31st March, 2009 was higher than the level of 31st
March, 2008 by Rs. 821 crore primarily due to increase in the stock of
finished and semi-finished materials (Rs. 289 crore) as well as increase in
stock of raw materials (Rs. 532 crore).

The finished, semi-finished and scrap inventory went up at the Works and
Conversion agents. The raw materials inventory was higher than last year
for the steel works and at the Ferro Alloys and Minerals Division due to a
significant increase in the prices of imported coal and coke as on 31st
March, 2009 as compared to prices as on 31st March, 2008. The increase was
also partly due to increase in the stock level to support higher volume of
operations.

The stores stock has gone up by Rs. 55 crore as on 31st March, 2009 over
31st March, 2008 mainly due to an increase in stores and spares required to
support the upgraded Steel Melting Shops and Hot Strip Mill, new facilities
like the H' Blast Furnace and Sinter Plant #4 etc.

12. Sundry Debtors:

Figures in Rs. crore

FY 09 FY 08 Change Change %

Gross Debtors 662 577 85 15%

Less: Provision for 26 34 (8) (23%)
doubtful debts

Net Debtors 636 543 93 17%

The debtors as on 31st March, 2009 was higher by Rs. 93 crore than the
level of 31st March, 2008. The increase is in line with the increase in
turnover.

13. Loans and Advances:

Figures in Rs. Crore

FY 09 FY 08 Change Change %

Loans and advances 4,578 33,349 (28,771) (86%)

The loans and advances reduced substantially as the advance against equity
was converted into investments during the financial year and accordingly
there was an increase in the investments.

14. Cash Flow and Net Debt:

Net cash flow from operating activities: The net cash from operating
activities was Rs. 7,397 crore during FY 09 as compared to Rs. 6,254 crore
during FY 08. The cash operating profit before working capital changes and
direct taxes during FY 09 was Rs. 9,457 crore, as compared to Rs. 8,138
crore during the previous year (Depreciation was Rs. 973 crore in FY 09, FY
08: Rs. 835 crore). The change in working capital, during the financial
year, was mainly due to increase in inventories on account of volumes and
prices partly offset by an increase in creditors. The payment of income
taxes during FY 09 was higher than in FY 08 by Rs. 737 crore.

Net cash from investing activities: The net cash outflow from investing
activities amounted to Rs. 9,428 crore in FY 09. The outflow broadly
represents a capex of Rs. 2,786 crore, increase in investments in mutual
funds of Rs. 2,241 crore and an incremental investment in Tata Steel
Holdings of Rs. 4,286 crore.

Net cash from financing activities: The net cash from financing activities
was Rs. 3,156 crore during FY 09 as compared to Rs. 15,848 crore during FY
08. The incremental borrowing of Rs. 6,494 crore in the current year is
mainly from the issue of non-convertible debentures and term loans from
Banks partly offset by interest payment of Rs. 1,214 crore and a dividend
payment of Rs. 1,187 crore.

Net Debt:

Figures in Rs. crore

FY 09 FY 08 Change

Secured loans 3,913 3,521 392

Unsecured loans 23,033 14,501 8,532

Total Debt 26,946 18,022 8,924

Less : Cash and Bank 1,591 465 1,126
balances

Less: Current investments 3,269 1,037 2,233

Net Debt 22,086 16,520 5,566

Net debt as on 31st March, 2009 stood at Rs. 22,086 crore as compared to
Rs. 16,520 crore as on 31st March, 2008. During the current fiscal year,
the secured and unsecured loans increased by Rs. 8,924 crore as compared to
the balances as on 31st March, 2008 mainly due to issue of privately placed
non-convertible debentures, term loans taken from Banks and other short
term borrowings.

D. FINANCIAL ANALYSIS OF THE TATA STEEL GROUP:

1. Net Sales/Income from Operations:

Figures in Rs. crore

FY 09 FY 08 Change

Tata Steel 24,316 19,691 4,625

Tata Steel Europe 109,570 100,218 9,351

NatSteel 13,468 7,658 5,811

Tata Steel Thailand 3,965 4,077 (112)

Others 4,606 3,327 1,279

Eliminations & (8,596) (3,438) (5,159)
Adjustments

Total 147,329 131,534 15,796

Sales (net of duties) increased by 12% during FY 09 primarily due to higher
sales during the first six months partly offset by lower sales in the
second half on account of the impact of the global slowdown. Other than
Tata Steel India, all other steel units had a lower volume of sales during
FY 09 as compared to FY 08. NatSteel had higher sales from the minerals
business. Tata Metaliks Limited, which became a subsidiary of Tata Steel in
Q4FY 08 contributed Rs. 805 crore to the increase in net sales.

2. Purchase of Finished, Semi-finished and Other Products:

Figures in Rs. crore

FY 09 FY 08 Change

Tata Steel 359 388 (29)
Tata Steel Europe 23,513 19,151 4,362
NatSteel 6,817 4,876 1,941
Tata Steel Thailand 2,652 2,500 152
Others 795 1,063 (268)
Eliminations & Adjustments (2,731) (1,009) (1,722)
Total 31,406 26,969 4,437

The purchase of finished and semi-finished products increased by 16% during
FY 09 over FY 08 mainly on account of increases in prices experienced in
Tata Steel Europe, NatSteel and Tata Steel Thailand (TSTH), especially
during the first half year of the current fiscal partly offset during Q3
and Q4 of FY 09 by lower volume of operations on account of pullback of
demand.

3. Raw Materials consumed:

Figures in Rs. crore

FY 09 FY 08 Change

Tata Steel 5,710 3,355 2,355
Tata Steel Europe 34,063 29,317 4,746
NatSteel 4,907 1,694 3,213
Tata Steel Thailand 225 165 60
Others 1,498 428 1,071
Eliminations & Adjustments (4,872) (1,700) (3,172)
Total 41,532 33,259 8,272

Raw Materials consumed increased by 25% primarily due to an increase in the
prices of raw materials (especially iron ore, coal, and coke) partly offset
by the reduction in the production volume of TSE and South East Asia.

4. Payments to and Provisions for Employees:

Figures in Rs. crore

FY 09 FY 08 Change

Tata Steel 2,306 1,816 490
Tata Steel Europe 14,931 14,513 418
NatSteel 364 303 61
Tata Steel Thailand 79 75 4
Others 295 193 102
Eliminations & Adjustments - 0 (0)
Total 17,975 16,900 1,075

The staff cost increased by 6% mainly due to the increase of Rs. 418 crore
in Tata Steel Europe and Rs. 490 crore in Tata Steel India. The increases
in Tata Steel Europe were on account of increase in the average number of
employees in the first half of the year, offset by the fall in employment
costs experienced in Q4FY 09 as a result of the production cutbacks. The
increases in Tata Steel Indian operations were for revised wages, arrears
and impact of change in discounting rate for valuation of employee benefits
as per Accounting Standards (AS15).

5. Purchase of Power:

Figures in Rs. crore

FY 09 FY 08 Change

Tata Steel 1,091 933 159
Tata Steel Europe 4,288 3,448 840
NatSteel 212 211 0
Tata Steel Thailand 237 271 (34)
Others 150 83 67
Eliminations & Adjustments (20) (16) (4)
Total 5,957 4,929 1,028

Power charges increased by 21% mainly due to increase in electricity prices
over the last 12 months in Tata Steel Europe and in the Indian Operations
due to higher purchase of power expenses at the Jamshedpur Works as a
fourth unit of Tata Power was shutdown for maintenance activities and the
company (Tata Steel) had to purchase power at higher rates from alternate
sources. Increase in production, increase in sale of power to other
consumers also led to higher consumption of power at the Indian operations.

6. Freight and Handling Charges:

Figures in Rs. crore

FY 09 FY 08 Change

Tata Steel 1,251 1,141 111
Tata Steel Europe 4,134 4,269 (135)
NatSteel 257 218 39
Tata Steel Thailand 29 50 (21)
Others 613 545 68
Eliminations & Adjustments (260) (184) (76)
Total 6,025 6,039 (14)

Increase in freight and handling charges on account of increase in sales
volume for Indian operations was offset by reduction in volume at Tata
Steel Europe.

7. Other Expenditure:

Figures in Rs. crore

FY 09 FY 08 Change

Tata Steel 4,754 4,083 671
Tata Steel Europe 17,882 21,978 (4,097)
NatSteel 577 531 46
Tata Steel Thailand 411 525 (114)
Others 1,378 712 666
Eliminations & Adjustments (672) (526) (146)
Total 24,331 27,304 (2,974)

Other Expenditure represents the following expenses:

Figures in Rs. crore

FY 09 FY 08 Change

Stores and Spares consumed 9,520 8,413 1,107
Fuel Oil Consumed 1,028 719 309
Repairs to Buildings 576 432 144
Repairs to Machinery 5,817 6,345 (528)
Relining Expenses 101 63 38
Conversion Charges 1,086 880 206
Rent 3,689 3,757 (68)
Royalty 235 178 57
Rates and Taxes 627 571 56
Others(*) 1,652 5,947 (4,294)
Total 24,331 27,304 (2,974)

(*) includes Insurance charges, commissions, discounts and rebates,
provision for wealth tax, adjustments relating to previous years, other
expenses, provision for doubtful debts and advances, excise duty and
expenditure transferred to capital.

The other expenditure during FY 09 was lower by 11% as compared to FY 08.
Decrease in other expenditure of Tata Steel Europe was due to Gains on
financial derivatives and foreign exchange fluctuation more than offsetting
increases in stores consumption (on account of increase in energy costs),
repairs, rent and rates, legal and professional fees and other
administrative expenses, resulting in overall decrease in other expenses.
Increases in Other Expenditure for Tata Steel India were mainly on account
of increase in stores consumption on account of increase in volume of
operations, higher maintenance expenses, conversion charges for Ferroalloys
and tin coated products, export duty on steel exports, higher royalty
charges, exchange fluctuation on supplies etc.

8. Net Finance Charges:

Figures in Rs. crore

FY 09 FY 08 Change

Tata Steel 1,153 786 366
Tata Steel Europe 2,043 2,760 (718)
NatSteel 74 56 17
Tata Steel Thailand 23 32 (9)
Others (2) 450 (453)
Total 3,290 4,085 (795)

The reduction in net finance charges is primarily on account of benefit of
interest rate reduction achieved in Tata Steel Europe as a part of
redenomination of the senior loan facilities during end 2007 partly offset
by the term loans taken and NCDs issued during the year by Tata Steel
India.

9. Stock-in-trade:

Figures in Rs. crore

Stock-in-trade FY 09 FY 08 Inc./(Dec.)

Tata Steel 2,868 2,047 821
Tata Steel Europe 14,931 17,447 (2,516)
NatSteel 1,115 1,005 110
Tata Steel Thailand 428 450 (22)
Others 474 460 14
Total 19,816 21,409 (1,593)

Stock-in-trade (Raw materials, WIP and Finished and semi finished) for the
Group was lower on 31st March, 2009 as compared to 31st March, 2008,
primarily on account of a net realisable value provision at TSE. The stock
value was higher in Tata Steel India primarily due to higher valued raw
material stock (imported coal and coke) and increase in finished, semi-
finished and scrap inventory at Works and with conversion agents.

10. Stores and Spares Stock:

Figures in Rs. crore

Stores and Spaces FY 09 FY 08 Inc./(Dec.)

Tata Steel 612 558 55
Tata Steel Europe 780 845 (65)
NatSteel 77 55 23
Tata Steel Thailand 298 158 140
Others 85 39 46
Total 1,853 1,655 198

The Stores stock was higher in Indian operations due to an increase in
stores and spares for new and upgraded facilities (CC3 in LD1, Hot Strip
Mill (rolls), H' Blast Furnace etc.). Tata Steel Thailand experienced
stock increases due to a decrease in stores consumption on account of lower
volume.

11. Debtors:

Figures in Rs. crore

Debtors FY 09 FY 08 Inc./(Dec.)

Tata Steel 636 543 93
Tata Steel Europe 11,480 16,951 (5,471)
NatSteel 924 648 276
Tata Steel Thailand 73 305 (232)
Others (81) 251 (331)
Total 13,032 18,698 (5,666)

The debtors balances for the Group decreased by Rs. 5,666 crore at the end
of March, 2009 over the level at the end of March 2008 mainly due to a
decrease in debtors balances in Tata Steel Europe on account of lower sales
during the fourth quarter.

12. Cash Flow and Net Debt:

Net cash flow from operating activities: The net cash from operating
activities was Rs. 15,630 crore during FY 09 as compared to Rs. 13,394
crore during FY 08. The cash operating profit before working capital
changes and direct taxes during FY 09 was Rs. 18,792 crore as compared to
Rs. 18,302 crore during FY 08. The working capital during FY 09 reduced by
Rs. 225 crore, mainly due to a reduction in Inventory (with reduction in
finished and semi-finished inventory and increase in raw materials
inventory) and Debtors.

Net cash from investing activities: The net cash outflow from investing
activities amounted to Rs. 10,757 crore in FY 09 as against an outflow of
Rs. 46,198 crore in FY 08. The outflow during the current year represents
capital expenditure of Rs. 8,433 crore and investments in mutual funds of
Rs. 2,825 crore (net of sale). The outflow in the previous year was on
account of capital expenditure of Rs. 8,420 crore and Rs. 40,740 crore
towards acquisition of Corus Group plc.

Net cash from financing activities: The net cash outflow from financing
activities was Rs. 2,754 crore during FY 09 as compared to inflow of
Rs.20,543 crore during FY 08. There is a net borrowing (net of payments) of
Rs. 2,052 crore during the current year mainly from the issue of
debentures, term loan from Banks and other borrowings partly offset by
repayment of external debts and other repayments. The last year's
borrowings represent the loans taken for funding the acquisition of Corus
Group Plc.

Net Debt:

Figures in Rs. crore

FY 09 FY 08 Change

Secured loans 34,329 35,415 (1,086)
Unsecured loans 25,571 18,210 7,361
Total Debt 59,901 53,625 6,276
Less: Cash and Bank Balances 6,148 4,232 1,917
Less: Current investments 3,398 1,134 2,264
Net Debt 50,354 48,259 2,095

The increase in net debt by Rs. 2,095 crore represents an increase in the
gross debt by Rs. 6,276 crore due to the issue of non-convertible
debentures and term loans taken from Banks, by Tata Steel India, partly
compensated by repayment of external debts at Tata Steel Europe. The
increase in gross debts was offset by an increase in current investments
(in growth funds) by Rs. 2,264 crore and an increase in the cash and bank
balance by Rs. 1,917 crore.

E. INTERNAL CONTROLS & SYSTEMS:

Indian Operations:

The Company has adequate internal control systems and procedures in place
commensurate with the size and nature of its business. The effectiveness of
the internal controls is continuously monitored by the Corporate Audit
Division of the Company. Corporate Audit's main objective is to provide to
the Audit Committee and the Board of Directors, an independent, objective
and reasonable assurance of the adequacy and effectiveness of the
organisation's risk management, control and governance processes. Corporate
Audit also assesses opportunities for improvement in business processes,
systems & controls and may provide recommendations, designed to add value
to the organisation. The division also follows up on the implementation of
corrective actions and improvements in business processes after review by
the Audit Committee and Senior Management.

The scope and authority of the Corporate Audit division is derived from the
Audit Charter approved by the Audit Committee. The Charter is designed in a
manner that the Audit Plan is focussed on the following objectives:

* Review of the identification and management of Risks.

* All operational and related activities are performed efficiently and
effectively.

* Significant financial, managerial and operating information is relevant,
accurate, reliable and is provided timely.

* Resources are acquired economically, used efficiently and safeguarded
adequately.

* Employees' actions are in accordance with the Company's policies and
procedures, the Tata Code of Conduct and applicable laws and regulations.

* Significant legislative and regulatory provisions impacting the
organisation are recognised and addressed appropriately.

* Opportunities identified during audits, for improving management control,
business targets and profitability, process efficiency and the
organisation's image, are communicated to the appropriate level of
management.

* Shareholders' and other Stakeholders' wealth and welfare are preserved,
protected and enhanced.

The audit activities are undertaken as per the Annual Audit Plan developed
by Corporate Audit based on the risk profile of business processes/sub-
processes of various functions. The Audit Plan is approved by the Audit
Committee which regularly reviews compliance to the Plan.

During the year, the Audit Committee met regularly to review the reports
submitted by the Corporate Audit Division. All significant audit
observations and follow-up actions thereon were reported to the Audit
Committee.

The Audit Committee also met the Company's Statutory Auditors to ascertain
their views on the adequacy of internal control systems in the Company and
their observations on financial reports. The Audit Committee's observations
and suggestions were acted upon by the Management.

UK & European Operations:

TSE has a well-established internal audit function that reports to the
Director Finance on a day-to-day basis and has direct access to the
chairman of the Audit Committee, who meets with the Director Audit several
times each year. The Audit Committee receives reports from the internal
audit function four times a year and also considers the terms of reference,
plans and effectiveness of the function. The internal audit function works
closely with the external auditors. It provides independent and objective
assurance to the Board, the Audit Committee and the Executive Committee on
the systems of internal control employed in the Group, and provides a
systematic, disciplined approach to evaluating and improving the
effectiveness of risk management, control and governance procedures.

The Board of Directors is responsible for TSE's system of internal control
and reviewing its effectiveness.

There were no changes in internal control over financial reporting that
occurred during the period under review that have materially affected, or
are reasonably likely to materially affect, internal control over financial
reporting. However, the asset protection function has been reorganised and
strengthened during the year.

TSE's system of internal control has been designed in order to provide the
directors with reasonable assurance that its assets are safeguarded, that
transactions are authorised and properly recorded and that material errors
and irregularities are either prevented or detected within a timely period.

F. RISK MANAGEMENT:

Industry Cyclicality:

The steel industry is subject to cyclical swings arising from factors such
as excessive capacity expansion, volatile demand swings etc.

The current global economic crisis which accelerated during the second half
of the financial year resulted in a sharp contraction in global steel
demand, especially in the construction and automotive sectors of the
developed economies of UK, Europe and United States. To align with
significantly lower demand, TSE quickly implemented reductions in output
and put in place programmes aimed at short term cost reduction as well as
streamlining operations and assets with a view to positioning the
operational readiness for the eventual market recovery. Such measures are
now substantially in place and are already accruing savings and have
allowed the Group to avert the worst effects of this sharp and sudden
downturn.

The Group has profitable operations in India that are expected to
experience positive growth in steel demand and in South East Asia which are
expected to recover more quickly from the current downturn and this
diversity will help the Group to cushion the shortfall in the UK and
European sphere.

Raw Materials Security and Price Volatility:

During the first half of FY 09 strong economic growth experienced by the
global economies, led by China and India led to strong demand for steel
worldwide. Even as the mining and shipping industry struggled to respond to
the massive growth in demand, prices for iron making materials like iron
ore, coal, Ferroalloys, scrap and freight climbed relentlessly. Although
the economic downturn has dampened short-term sentiments, the underlying
demand for scarce resources is expected to resume once the world economies
progressively recover.

The Group has therefore identified it as a priority to increase its overall
raw material security threshold from its current level of 25% to 60% within
the next few years. To this end, the group's 35% stake in the Benga Coal
Project with Riversdale Mining in Mozambique is a major step. The
Government of Mozambique has approved the Mining Contract for the tenements
which represents a significant step towards commencement of the project.
Under the offtake agreement with Riversdale, the Group has rights to 40% of
the mine's output. Tata Steel also holds 14.99% equity stake in the parent
company Riversdale Mining Limited. The Group is also well positioned to
benefit from the Direct Shipping Ore ('DSO') project with New Millennium
Capital Corp ('NML') in Canada.

Operationally, the Group enters into long-term contracts and annual
benchmark pricing contracts for its key raw material requirements. This
approach provides price certainty and an objective basis for the recovery
of cost increases from its customers.

Growth Strategy:

The Company's growth strategy comprises of various capital expenditure
programmes and/or acquisitions in different locations. Integration and
project execution risks therefore exist.

In light of the current economic situation, except for critical raw
material related investments and those approved capital expenditure
programmes at the Jamshedpur site which are expected to deliver immediate
incremental earnings on completion, all other major group investments and
capital projects have been put on hold. This prudent approach will allow
the accumulation of cash resources and its subsequent deployment will be
based on new priorities of profit contributions and quick time to market
principles.

The integration of TSE post 2007 is critical to achieving the promised
synergies for the Tata Steel Group. It is now two years in the making and
the integration process is proceeding well at all levels of interaction.

Health, Safety & Environmental Risks:

The manufacture of steel involves steps that are potentially hazardous and
which are likely to cause disruptions to normal operations if not executed
with due care. The Company's businesses are subject to numerous laws,
regulations and contractual commitments relating to health, safety and the
environment in the countries in which it operates. These rules are becoming
more stringent.

The Group has set specific goals to be achieved by 2012 in the areas of CO2
emissions (1.5 tonnes per tonne of liquid steel) and LTIF (below 0.4).

Technology Risks:

One of the biggest risks before the Group is to ensure that the its plants
are equipped with upto date technologies that can give it cost
competitiveness and R & D leadership.

For this purpose, the Group has not cut back the necessary capital
investments in relation to the same and continues to enhance and deploy R&D
capabilities.

Regulatory & Compliance Risks:

Global operations require compliance with multiple and complex laws and
regulations. In countries where the political systems are still evolving,
frequent changes in economic policy are common, investment guarantees and
property rights are secured, any unforeseen changes can expose the Group's
businesses to uncertainties.

The Group operations are primarily in countries where investment flows are
freer and where there are established political, business and legal
frameworks in place. There is an established due process to independently
evaluate country risk exposures for investments in emerging economies.

Financing:

The Company funded the acquisition of Corus with a significant level of
debt that was assumed at the acquired company level. Sharp decline in steel
demand and prices particularly during the second half of the financial year
has adversely affected the cash flow generation of TSE and potentially put
a strain on its ability to meet the current scheduled debt repayment
obligations under the existing Senior Facility Agreement.

The Group has successfully renegotiated specific terms relating to debt
repayments and financial covenant measurements. Unless the current economic
crisis does not get protracted, these reset criteria are expected to
provide TSE with the necessary space and time to work towards returning to
sustainable profit levels.

Pensions:

The Tata Steel business in Europe provides retirement benefits for
substantially all of its employees, including defined benefit plans. The
market value of pension assets and liabilities is significantly greater
than the net assets of TSE and therefore, any change can have a material
impact on the financial statements as well as impacting the level of
company pension contributions.

Despite the steep decline encountered in the financial markets, none of the
Group's funded schemes are in under-funded positions. In its continuing
search to ensure that pension obligations remain sustainable and
affordable, it was decided to close the UK defined benefit scheme to new
members and replace it with a defined contribution arrangement.

Forex, Credit, Liquidity and Counterparty Risks:

Through its global operations, the Group operates in several currency
areas. The major currencies used in its sales and procurement activities
are the US Dollar, Euro and Sterling pound. Any major fluctuations or
change in currency trends can greatly affect not only the Group's short-
term trading positions but the long-term economic competitive position vis-
a-vis imports. The current economic crisis has also raised credit and
counterparty risks, especially with the withdrawal of credit insurance.

The Group has a hedging policy in place to protect its trading and
manufacturing margins against rapid and significant movements in its major
trading currencies. Under current market conditions, all cash is swept into
regional centres for more effective concentration and deployment. The Group
does not enter into leveraged derivative instruments.

G. STATUTORY COMPLIANCE:

The Managing Director makes a declaration at each Board Meeting regarding
the compliance with provisions of various statutes after obtaining
confirmation from all the units of the company. The Company Secretary
ensures compliance with the SEBI regulations and provisions of the Listing
Agreement. The Group Chief Financial Officer as the Compliance Officer
ensures compliance with the guidelines on the insider trading for
prevention of insider trading.

H. CAUTIONARY STATEMENT:

Statements in the Management Discussion and Analysis describing the
Company's objectives, projections, estimates, expectations may be 'forward-
looking statements' within the meaning of applicable securities laws and
regulations. Actual results could differ materially from those expressed or
implied. Important factors that could make a difference to the Company's
operations include economic conditions affecting demand/supply and price
conditions in the domestic and overseas markets in which the Company
operates, changes in the Government regulations, tax laws and other
statutes and incidental factors.