|
Due to an easier access to global sources of low-cost capital,
a paradigm shift from `operational excellence' to `performance
in financial markets' has occurred in the Indian steel sector.
Tata Steel being a leading player also became the first
Indian company to incorporate Economic Value Added (EVA)
into its vision for 2007. In the light of Tata Steel's recent
M&A drive, the study elaborates on the necessity of
EVA and the company's approach towards incorporating a financial
measure like EVA into the everyday decision-making system.
Additionally, it provides empirical evidences, using primary
and secondary data, for the impact of EVA on Tata Steel's
overall performance.
"The shareholder value for Tata Steel should have
been higher than what it is today. I feel sorry that the
share today is only priced at Rs. 100. I think it should
be at least double that figure."
Not often does the senior leadership of the Tata group
publicly express their concern about any of their companies.
When J J Irani was retiring in 2001, after a span of nine
years in the office as a managing director, he was leaving
behind a legacy of highly productive and world-class infrastructure.
However, a few fuzzy issues, which led to no accord in the
perception of the shareholders, and the vision of the company
prompted him to say the aforementioned words. Tata Steel is one of the forerunners in the post-independence
industrial revolution of India. Since its very inception
in 1907, it has fuelled the development and growth of the
country's infrastructure. In the year ending March 31, 2006,
Tata Steel generated revenues of INR 202 bn ($4.5 bn) and
a net profit of INR 37 bn ($824.3 mn). Under the able management
of top leaders during the last three decades, the company
has set newer and higher landmarks and continuously added
value to the existing operations. Such efforts have further
driven the company towards the goal of establishing itself
at the pinnacle of the Indian steel industry.
Unlike Irani, his successor B Muthuraman began his career
in Tata Steel as early as 1966, and his stints in various
divisions of the company like operation of blast furnaces,
new project development and project planning earned him
a wealth of experience. His rise to the top management was
a mark of acknowledgment of his expertise and leadership
skills. An immediate challenge he faced was to derive a
set of policy decisions which would help the company gain
better response from the share market, which had thus been
almost lukewarm to its performance and development initiatives.
|
