Tata Chemicals Limited Focused Inorganic Chemicals Leader Established Fertilizers Progressive 1
The Tata Group 2
The Tata Group Comm & info systems 23% Engineering 25% Services 10% Consumer products 7% Chemicals 5% Energy 9% Materials 21% Segmental distribution - sales Figures in % 3
Financial insight USD million FY 2003 Value of assets Gross Block Total income Sales PAT Exports Net forex earnings 10,524 8,986 11,206 10,774 805 2,707 1,497 Capital 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 4
Tata Chemicals 5
Business portfolio Others 8% Soda ash 34% Urea 37% Salt 14% Cement 7% Sales distribution Figures in % 6
Perspective - Key businesses Soda Ash One of the largest single site soda ash producer globally Plant capacity: 875,000 MT Largest market share in India Multiple product variants addressing diverse markets Salt Pioneer in branded salt market in India Largest salt brand in India High brand equity and premium perception Urea Most energy efficient manufacturing facility in India Plant capacity: 864,000 MT Leading presence in high demand centers Close association with target consumer 7
Business perspective 8
in '000 M Sector dynamics 3000 2500 2000 1500 1000 2371 2396 1987 1905 1730 1818 1835 1877 1684 2005 2501 2140 500 0 51 43 158 99 FY '00 FY '01 FY '02 FY '03 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 9
Tata Chemicals perspective Project Manthan and other operational efficiency initiatives drive down input and energy costs enabling company to become a strong global player as well as combat imports Operational savings FY2003: Rs 580 mn 9M FY2004: Rs 440 mn Implementation of SAP and other IT initiatives ensure highly effective Supply Chain Management Operations # 1 Marketing Account manager concept: Single point contact for key customers ensures well entrenched business relationships Aggressive outlook towards international markets: Exports have trebled over the last 2 years Capacity utilization 87.5% in FY04 Value based servicesquality, packing, packaging 10
Salt 11
The Indian Salt industry Branded iodised 27% Loose unbranded 73% November 2003 Other 28% Dandi 4% Nirma 6% Anapoorna 23% Tata Salt 39% 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% 12
Tata Chemicals perspective Reorganized set-up from 1 national to 29 distributors and 24 CFAs increases penetration Highlights Tata Salt ranked No. 6 in the Brand Equity survey of India s most trusted brands Revamped marketing team, specialized skills brand mgt, marketing, promotion, etc # 1 Contributed Rs 3.5 million towards social & community programme Ranked No. 1 in the Food Additives segment Ranked 18 th in A C Nielsen Global Brand Equity Index Marketshare greater than Samundar crystal salt expands presence in segment the combined share of next three national branded players 13
Fertiliser 14
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 15
.The Indian fertiliser sector Retention pricing - 2003 Group Pricing Policy 2003 - 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 core command areas Policy designed to encourage efficiencies and eventual decontrol Industry classified into 6 groups, based on vintage and feedstock Concessions based on weighted average retention price computed Special treatment given to outliers having a retention price of 20% over Group avg No special treatment for outliers post April 2004 16
Tata Chemicals perspective Gcal/ tonne 6 5.8 5.6 5.4 5.2 5 4.8 Estimated sector Gcal/Tonne ~6.0 5.73 5.53 5.55 5.53 5.37 5.3 Tata Chem FY '98 FY '99 FY '00 FY '01 FY '02 FY '03 Highlights Tata Chemicals possesses the most efficient fertiliser plant in India Least water consumption and effluent generation-iso 14001 and ISO 9002 certified Operates on both naphtha and natural gas Plant supplies fertiliser to high consumption areas of Bihar, UP and Jharkhand TKK network - one stop shop for agri solutions for farmers 17
Financials 9M FY 2003-04 Financial Results January 2004 18
Ratios Q3 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 19
9M FY 2003-04 Results 9M FY 2003-04 Financial Results January 2004 20
Revenue performance 14000 12000 9M FY 2004 Q3 FY 2004 5000 12580 4375 11816 4672 4000 Rs. mn 10000 8000 Rs. mn 3000 6000 4000 9M FY2003 9M FY2004 2000 Q3 FY2003 Q3FY2004 6% 7% 21
Profit from operations 4000 3000 9M FY 2004 Q3 FY 2004 1500 3651 50 3379 1200 40 1167 1149 27 25 35 28 Rs mn 2000 29 29 30 20 % Rs mn 900 600 21 14 1000 10 300 7 0 9M FY2003 9M FY2004 0 0 Q3 FY2003 Q3 FY2004 0 EBITDA Margin 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) 22
PAT 9M FY 2004 Q3 FY 2004 2000 1880 12 600 555 590 5 1500 1365 10.41 9 450 4 Rs mn 1000 7.56 6 % Rs mn 300 3.07 3.26 3 2 % 500 3 150 1 0 9M FY2003 9M FY2004 0 0 Q3 FY2003 Q3 FY2004 0 PAT EPS PAT EPS 38% 6% 23
Financial Management 12000 1.0 10000 0.8 Rs mn 8000 6000 4000 2000 0.54 9270 0.51 6170 0.29 4910 0.6 0.4 0.2 % 0 31-Dec-02 30-Sep-03 31-Dec-03 Debt Debt-equity ratio 0.0 Close to 50% debt reduction between Dec 2002 and Dec 2003 24
Financial Management 25 12 10.1 20 8.4 8.5 9 Rs mn 15 10 20 6 % 5 10 8.5 3 0 Q3 FY03 Q2 FY04 Q3 FY04 0 Interest Cost of borrowing Over 50% decline in interest costs YOY 25
Perspective of proposed merger with Hind Lever Chemicals 9M FY 2003-04 Financial Results January 2004 26
Hind Lever Chemicals Limited Leader in its chosen product segments Largest STPP player with a nation-wide customer base and significant market share Chemicals World-class integrated manufacturing facility, with high asset productivity and strong safety/environment management systems Well entrenched distribution network in key consumption markets Fertilizers Pioneer in branding comprehensive range of products under Paras brand, high customer loyalty 27
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 superior operating model and business profile by strengthening the Company s position in its defined areas 28
Growth outlook Inorganic chemicals Soda Ash Food additives Exploring international markets Enhancing relationships with key customers, strengthening global and domestic competitive position Reach out to all market segments Expand offerings e.g. cooking soda Fertiliser Capacity enhancement Inorganic growth opportunities Continuous enhancement of financial & operational efficiencies 29