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Tata Chemicals Limited
LeaderFocused
ProgressiveEstablished
Inorganic Chemicals
Fertilizers
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•The Tata Group
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The Tata Group
Engineering25%
Materials21%
Energy9%
Services10%
Comm & info systems
23%
Chemicals5%
Consumer products
7%
Figures in %Segmental distribution - sales
4
Financial insight
1,497
2,707
805
10,774
11,206
8,986
10,524
USD million –
FY 2003
Net forex earnings
Exports
PAT
Sales
Total income
Gross Block
Value of assetsCapital market perspective
• 31 Tata companies listed on
various stock exchanges
• Accounts for approx 3.5% of
the total market capitalization
of all listed companies in India
• Over 2.1 million shareholders
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•Tata Chemicals
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Business portfolio
Urea37%
Cement7%Salt
14%
Soda ash34%
Others8%
Figures in %Sales distribution
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Perspective - Key businesses
Soda Ash
One of the largest single site soda ash producer globallyPlant capacity: 875,000 MTLargest market share in IndiaMultiple product variants addressing diverse markets
Salt
Urea
Pioneer in branded salt market in IndiaLargest salt brand in IndiaHigh brand equity and premium perception
Most energy efficient manufacturing facility in IndiaPlant capacity: 864,000 MTLeading presence in high demand centersClose association with target consumer
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•Business perspective
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Sector dynamics
20051987
2396 2501
16841835 1877
2140
51 43 158 99
190518181730
2371
0
500
1000
1500
2000
2500
3000
FY '00 FY '01 FY '02 FY '03
in '0
00
M
Demand Domestic capacity Domestic production Imports
• Demand presently short of supply, average capacity utilization of Indian industry: 81%
• Glass is the fastest growing customer segment
• Threat of increasing import volumes, with custom duties expected to be reduced in line with
WTO recommendations making efficiencies key
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Tata Chemicals perspective
• Account manager concept: Single pointcontact for key customersensures well entrenched business relationships
• Aggressive outlook towardsinternational markets: Exports have trebled over the last 2 years
• Capacity utilization 87.5% in FY04
• Value based services-quality, packing, packaging
MarketingOperations
• Project Manthan and otheroperational efficiency initiatives drive downinput and energy costsenabling company to become a strong global player as well as combat imports
• Operational savingsFY2003: Rs 580 mn9M FY2004: Rs 440 mn
• Implementation of SAP andother IT initiatives ensurehighly effective SupplyChain Management
# 1
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•Salt
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The Indian Salt industry
Anapoorna23%
Tata Salt39%
Other28%
Nirma6%
Dandi4%
Branded iodised
27%
Loose unbranded
73%
• Total demand for edible salt in India: 5.46 million tonnes, Demand for branded edible salt: 0.7
mil tonnes
• Education and awareness gradually altering consumption patterns towards iodized salt
• National brands growing at 7%
November 2003
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Tata Chemicals perspective
Contributed Rs 3.5million towards social & community programme
Reorganizedset-up from 1national to 29
distributors and 24 CFAs – increases
penetration
Revamped marketingteam, specialized skillsbrand mgt, marketing, promotion, etc
Samundar ‘crystal salt’ expands presence in
segment
# 1
Highlights
• Tata Salt ranked No. 6
in the Brand Equity
survey of India’s most
trusted brands
• Ranked No. 1 in the
Food Additives segment
• Ranked 18th in A C Nielsen
Global Brand Equity Index
• Marketshare greater than
the combined share of
next three national branded
players
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•Fertiliser
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The Indian fertiliser sector
• Third largest producer and consumer of fertiliser in the world
• Dominated by PSUs and Co operatives
• Installed capacity of approximately 20 million MT
• Highly complex industry with plants using a wide variety of feedstock, varying capacity, technology and vintage
• Consumption patterns presently heavily skewed towards nitrogenous fertilisers. NPK ratio of 7:2:1 as against an average of 5:2:3 internationally
• Urea constitutes 85% of nitrogenous fertiliser consumption and 58% of total consumption
• Sector emerging from being highly protected to a more liberalized and efficiency encouraging environment
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….The Indian fertiliser sector
• Nitrogenous fertiliser segment regulated through price controls based on stipulated norms
• Manufacturers assured of 12% returns on Net Worth
• Production not more than assessed capacity
• Supply limited to corecommand areas
• Industry classified into 6groups, based on vintageand feedstock
• Concessions based on weighted average retentionprice computed
• Special treatment given to outliers having a retention price of 20% over Group avg
• No special treatment for outliers post April 2004
Policy designedto encourageefficiencies and
eventual decontrol
Retention pricing
- 2003
Group Pricing Policy
2003 -
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Tata Chemicals perspective
5.53
5.73
5.55 5.53
5.375.3
4.8
5
5.2
5.4
5.6
5.8
6
FY '98 FY '99 FY '00 FY '01 FY '02 FY '03
Gcal/
tonn
e
Tata Chem
Estimated sector Gcal/Tonne ~6.0Highlights
• Tata Chemicals possessesthe most efficient fertiliserplant in India
• Least water consumption andeffluent generation-ISO 14001and ISO 9002 certified
• Operates on both naphthaand natural gas
• Plant supplies fertiliser to highconsumption areas of Bihar,UP and Jharkhand
• TKK network - one stop shopfor agri solutions for farmers
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9M FY 2003-04 Financial Results January 2004
•Financials
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RatiosQ3 2003 FY2003 FY2002
CURRENT RATIO 3.56:1 3.23:1 2.63:1
DEBTORS TURNOVER RATIO 7.62:1 6.16:1 3.68:1
CREDITORS TURNOVER RATIO 5.84:1 10.7:1 10.27:1
INVENTORY TURNOVER RATIO 5.3:1 6.4:1 4.52:!
OPERATING PROFIT MARGIN (operating income considered not incl of cost of goods sold) 27.5% 25.5% 26.2%
NET PROFIT RATIO 13.5% 11.5% 8.4%
INTEREST SERVICE COVERAGE RATIO 9.39:1 3.9:1 4.16:1
RETURN ON CAPITAL EMPLOYED (Operation 12.2% 12.0% 13.1%
RETURN ON Net worth 10.3% 12.0% 8.2%
DEBT/EQUITY RATIO 0.27 0.50 0.68
ASSETS COVERAGE RATIO 4.11 2.88 2.35
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9M FY 2003-04 Financial Results January 2004
•9M FY 2003-04 Results
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Revenue performance
1258011816
4000
6000
8000
10000
12000
14000
9M FY2003 9M FY2004
Rs.
mn
4672
4375
2000
3000
4000
5000
Q3 FY2003 Q3FY2004
Rs.
mn
6% 7%
9M FY 2004 Q3 FY 2004
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Profit from operations
9M FY 2004 Q3 FY 20043651
3379
2929
0
1000
2000
3000
4000
9M FY2003 9M FY2004
Rs
mn
0
10
20
30
40
50
%EBITDA Margin
11491167
27 25
0
300
600
900
1200
1500
Q3 FY2003 Q3 FY2004
Rs
mn
0
7
14
21
28
35
%
EBITDA Margin
Marginal decline in profit from operations in Q3 FY2004 attributable mainly to • Withdrawal of sales tax benefit on soda ash • implementation of Group Pricing Policy (The Group Pricing Policy is however
expected to have a positive influence on Tata Chemicals in the long term)
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PAT
38% 6%
9M FY 2004 Q3 FY 20041880
1365
7.56
10.41
0
500
1000
1500
2000
9M FY2003 9M FY2004
Rs
mn
0
3
6
9
12
%PAT EPS
590555
3.073.26
0
150
300
450
600
Q3 FY2003 Q3 FY2004
Rs
mn
0
1
2
3
4
5
%
PAT EPS
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Financial Management
9270
61704910
0.54
0.51
0.29
0
2000
4000
6000
8000
10000
12000
31-Dec-02 30-Sep-03 31-Dec-03
Rs
mn
0.0
0.2
0.4
0.6
0.8
1.0
%
Debt Debt-equity ratio
Close to 50% debt reduction between Dec 2002 and Dec 2003
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…Financial Management
8.510
20
8.5
10.1
8.4
0
5
10
15
20
25
Q3 FY03 Q2 FY04 Q3 FY04
Rs
mn
0
3
6
9
12
%
Interest Cost of borrowing
Over 50% decline in interest costs YOY
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9M FY 2003-04 Financial Results January 2004
•Perspective of proposed merger
•with Hind Lever Chemicals
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Hind Lever Chemicals Limited
Leader in its chosen product segments
Chemicals
Fertilizers
Largest STPP player with a nation-wide customer base and significant market
share
Well entrenched distribution network in
key consumption markets
World-class integrated manufacturing facility,
with high asset productivity and strong
safety/environment management systems
Pioneer in ‘branding’ –comprehensive range
of products under ‘Paras’ brand, high customer loyalty
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Overview
• Both companies possess natural operating synergies across their key operating activities in the chemicals and agri inputs sectors
• The merger ratio has been defined at 2.5:1 by independent financial advisors (2.5 shares of TCL for every 1 share of HLCL)
• The transaction will enable the development of a superioroperating model and business profile by strengthening the Company’s position in its defined areas
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Growth outlook
• Capacity enhancement• Inorganic growth opportunitiesFertiliser
• Exploring international markets• Enhancing relationships with key customers,
strengthening global and domestic competitive positionInorganic
chemicals
Soda Ash
Food additives• Reach out to all market segments• Expand offerings e.g. cooking soda
Continuous enhancement of financial & operational efficiencies
