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Tata Steel Ltd.

BSE: 500470 Sector: Metals & Mining
NSE: TATASTEEL ISIN Code: INE081A01012
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OPEN 690.00
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VOLUME 138542
52-Week high 734.90
52-Week low 377.45
P/E 13.00
Mkt Cap.(Rs cr) 66,936
Buy Price 689.10
Buy Qty 41.00
Sell Price 689.20
Sell Qty 50.00
OPEN 690.00
CLOSE 689.20
VOLUME 138542
52-Week high 734.90
52-Week low 377.45
P/E 13.00
Mkt Cap.(Rs cr) 66,936
Buy Price 689.10
Buy Qty 41.00
Sell Price 689.20
Sell Qty 50.00

Tata Steel Ltd. (TATASTEEL) - Director Report

Company director report

To the Members

Your Directors take pleasure in presenting the 2nd Integrated Report (prepared as perthe framework set forth by the International Integrated Reporting Council) and the 110thAnnual Accounts on the business and operations of the Company along with the summary ofstandalone and consolidated financial statements for the year ended March 31 2017.

A. FINANCIAL RESULTS

(` crore)
Particulars Tata Steel Standalone Tata Steel Group
2016-17 2015-16 2016-17 2015-16
Gross revenue from operations 53260.96 42697.44 117419.94 106339.92
Total expenditure before finance cost depreciation (net of expenditure transferred to capital) 41385.01 35085.65 100412.12 98371.59
Operating Profit 11875.95 7611.79 17007.82 7968.33
Add: Other income 414.46 391.16 527.47 412.22
Profit before finance cost depreciation exceptional items and taxes 12290.41 8002.95 17535.29 8380.55
Less: Finance costs 2688.55 1848.05 5072.20 4221.41
Profit before depreciation exceptional items and taxes 9601.86 6154.90 12463.09 4159.14
Less: Depreciation 3541.55 2962.28 5672.88 5306.35
Profit/(Loss) before share of profit/(loss) of joint ventures & associates exceptional items & tax 6060.31 3192.62 6790.21 (1147.21)
Share of profit / (loss) of Joint Ventures & Associates - - 7.65 (110.42)
Profit/(Loss) before exceptional items & tax 6060.31 3192.62 6797.86 (1257.63)
Add/(Less): Exceptional Items (703.38) (1649.28) (4324.23) 3990.38
Profit before taxes 5356.93 1543.34 2473.63 2732.75
Less: Tax Expense 1912.38 587.69 2778.01 689.96
(A) Profit/(Loss) after taxes - from Continuing operations 3444.55 955.65 (304.38) 2042.79
Profit/(loss) before tax from Discontinued operations - - (770.86) (2485.45)
Less: Tax expense of Discontinued Operations - - 8.01 54.43
Profit/(Loss) after tax from Discontinued Operations - - (778.87) (2539.88)
Profit/(Loss) on Disposal of Discontinued Operations - - (3085.32) -
(B) Net Profit/(loss) after tax - from Discontinued operations - - (3864.19) (2539.88)
(C) Net Profit/(Loss) for the Period [ A + B ] 3444.55 955.65 (4168.57) (497.09)
Total Profit/(Loss) for the period attributable to:
Owners of the Company - - (4240.80) (382.78)
Non controlling interests - - 72.23 (114.31)
(D) Total other comprehensive income 675.79 (3407.13) (563.06) (1898.17)
(E) Total comprehensive income for the period [ C + D ] 4120.34 (2451.48) (4731.63) (2395.26)
Retained Earnings: Balance brought forward from the previous year 10075.75 6852.56 (2415.49) (5925.75)
Add: Profit for the period 3444.55 955.65 (4240.80) (382.78)
Less: Distribution on Hybrid perpetual securities 266.10 266.17 266.10 266.17
Add: Tax effect on distribution of Hybrid perpetual securities 92.09 92.11 92.09 92.11
Add: Other Comprehensive Income recognised in Retained Earnings (142.42) (3.28) (3549.43) 1644.93
Add: Other movements within equity 1.75 3371.15 (142.57) 3348.44
Balance 13205.62 11002.02 (10522.30) (1489.22)
Which the Directors have apportioned as under to:-
(i) Dividend on Ordinary Shares 776.97 776.97 776.97 776.97
(ii) Tax on dividends 147.74 149.30 147.74 149.30
Total Appropriations 924.71 926.27 924.71 926.27
Retained Earnings: Balance to be carried forward 12280.91 10075.75 (11447.01) (2415.49)

The Company has adopted Indian Accounting Standard (‘Ind AS') with effectfrom April 1 2016 and accordingly these financial results along with the comparativeshave been prepared in accordance with the recognition and measurement principles statedtherein prescribed under Section 133 of the Companies Act 2013 read with the relevantrules issued thereunder and the other accounting principles generally accepted in India.

Note:

During the year the exceptional items primarily include: a) Provision for demands andclaims (`218 crore) charge on account of Employee Separation Scheme (‘ESS')under Sunehere Bhavishya Ki Yojana (‘SBKY') scheme (`207 crore) provision foradvances given for repurchase of Equity shares in Tata Teleservices Ltd. from NTT DoCoMoInc. (`125 crore) at Tata Steel India. b) Impairment Charges (`268 crore) in respect ofproperty plant and equipment (including CWIP) and intangible assets mainly relating toEuropean & South-East Asian Operations. c) Restructuring and other provisions (`3614crore) primarily include curtailment charge relating to closure of Tata Steel Europe'sBritish Steel Pension Scheme (‘BSPS') to future accrual. d) Profit on sale ofinvestments in subsidiaries associates and joint ventures (`23 crore) and Profiton sale of assets of a subsidiary in South-East Asia on liquidation (`86 crore).

The exceptional items in Financial Year 2015-16 primarily represents: a) Provision fordemands and claims (`880 crore) charge on account of Employee Separation Scheme (‘ESS')under Sunehere Bhavishya Ki Yojana (‘SBKY') scheme (`556 crore) provision inrespect of advances related to a project which the Company has decided to discontinue (`73crore) at Tata Steel India. b) Impairment Charges (`1530 crore) in respect of propertyplant and equipment (including CWIP) and intangible assets mainly at certain SubsidiariesTata Steel Europe & Tata Steel India. c) Net gain (`6983 crore) primarily on accountof changes to BSPS and Stichting Pensioenfonds Hoogovens (‘SPH') scheme andother restructuring exercise relating to the European operations. d) Profit on sale ofinvestments in subsidiaries associates and joint ventures (`47 crore).

1. Dividend

The Board recommended a dividend of `10 per Ordinary Share on 971215889 OrdinaryShares of `10 each for the year ended March 31 2017. (Financial Year 2015-16: `8 perOrdinary Share on 971215439 Ordinary Shares of `10 each).

The dividend on Ordinary Shares is subject to the approval of the shareholders at theAnnual General Meeting (‘AGM') scheduled to be held on August 8 2017. Thedividend will be paid on and from August 10 2017. The total dividend pay-out works out to34% (Previous Year: 97%) of the net profit for the standalone results. The Register ofMembers and Share Transfer Books will remain closed from July 22 2017 to August 8 2017(both days inclusive) for the purpose of payment of the dividend for the Financial Yearended March 31 2017 and the AGM.

2. Dividend Distribution Policy

The Securities and Exchange Board of India (‘SEBI') vide its notificationdated July 8 2016 requires the top 500 listed entities (based on the marketcapitalization calculated as on March 31 of every financial year) to formulate a dividenddistribution policy and disclose the same in their annual reports and on their websites.

In terms of the above requirement the Board of Directors of the Company haveformulated a Dividend Distribution Policy (‘the Policy'). As per the policythe Company endeavours to pay dividend up to 50% of profit after tax of the Company (asdetermined by the Board of Directors and approved by the shareholders) subject to theapplicable rules and regulations. The detailed policy is annexed to this report (Annexure1) and is also available on our website www.tatasteel.com

3. Transfer to Reserves

The Board of Directors has decided to retain the entire amount of profits in the profitand loss account.

4. Capex and Liquidity

During the year the Company on a consolidated basis spent

`7716 crore on capital projects across India Europe South-East Asia Canada andAfrica largely towards essential sustenance and replacement as also on growth projects inIndia and Netherlands. Despite this significant spend the Company was able to keep thegross debt level stable during the year.

The Company's liquidity position remains strong at `19777 crore as on March 31 2017which includes undrawn lines.

5. Management Discussion and Analysis

The Management Discussion and Analysis as required by the Securities and Exchange Boardof India (Listing Obligations and Disclosure Requirements) Regulations 2015 (‘ListingRegulations') is incorporated herein by reference and forms an integral part of thisreport. (Annexure 2)

B. INTEGRATED REPORT

In keeping with the Company's valued tradition - "thinking about society and notjust the business" the Company in the previous reporting year moved fromcompliance based reporting to governance based reporting. The Company adopted the<IR> framework developed by the International Integrated Reporting Council andpresented to its stakeholders the 1st Integrated Report for the period ended May 2016.

The Board is happy to present the 2nd Integrated Report which endeavours tocomprehensively articulate the measures that contribute to long-term sustainable value andthe role the Company plays in the society.

C. EXTERNAL ENVIRONMENT

1. Macro-Economic Environment

During the Financial Year 2016-17 the global economy continued its modest pace ofgrowth at 3% amidst weak international trade subdued industrial production andinvestment. The advanced economies witnessed recovery in manufacturing and trade otherthan industrial production at different points in time. The emerging and developingeconomies grew at a diverse pace due to the global trade related policy measures andcommodity price movement. The United States of America (‘USA') witnessedeconomic growth of 1.6% slowest in the past three years. Better than expected economicindicators such as lower unemployment business activity and improved sentiment post thePresidential elections did not translate into increased spending. Eurozone continued its14th consecutive quarter of growth of 1.8% as business confidence continued to remainresilient despite Britain's vote to leave the European Union (‘EU'). In Japanstrong domestic demand and net exports helped achieve growth of 1%. Among the emerging anddeveloping economies China continued to maintain its growth rate at ~7% aided by policysupport while growth in India slowed down to 7.1% due to the temporary impact ofdemonetization on key sectors including construction and financial services. Growth inMiddle East and sub-Saharan Africa was impacted by geo-political/ domestic confiicts. Therise in commodity prices in latter part of the year helped trigger cyclical recovery incertain regions and thus helped overall global growth.

2. Economic Outlook

According to International Monetary Fund (‘IMF') global growth isprojected to rise to 3.5% in 2017 and 3.6% in 2018 moving closer to the long-term growthtrend of 4%. The outlook indicates a likely up cycle of modest recovery after threesuccessive shocks – the global financial crisis of 2007-09 the Eurozone crisis of2009-13 and decline in commodity prices during 2014-15. However the uncertainty withrespect to sustainable growth remains. While the continued recovery and gradual closing ofoutput gaps are likely to maintain growth momentum in the advanced economies over the nextfew years supportive policy and adjusting to current price levels by commodity exportingcountries are expected to aid growth in emerging and developing economies.

US growth is expected to recover as investments increase and domestic policies aidgrowth. The euro area recovery is expected to proceed at a broadly similar pace in2017–18 as in 2016. The modest recovery is projected to be supported by a mildlyexpansionary _scal stance accommodative financial conditions and a weaker euro. Themedium-term outlook for the euro area is likely to be impacted by weak productivityadverse demographics and in some countries unresolved legacy problems of public andprivate debt overhang with a high level of non-performing loans. Further uncertaintyabout the European Union's future relationship with the United Kingdom (‘UK')is expected to weigh on economic activity. China is expected to continue its gradualeconomic transition to a more service economy and coupled with partial recovery incommodity prices it is expected to drive growth in certain emerging and developingeconomies. As per IMF India is expected to grow at 7.2% in 2017 and surpass the UK andFrance in 2017 to become the world's _fth largest economy. The macro-economic stabilitywith in_ation below 5% continues to be the foundation of economic success which isreffected by growth in its key sectors - agriculture industrial and services. Governmentinitiatives like Make-in-India Invest India Start Up India and e-biz Mission ModeProject under the national e-governance plan are helping to improve ease of doing businessin the country. In addition the biggest tax reform since Independence Goods and ServicesTax (‘GST') will help simplify India's tax regime and is likely to boost GDPand reduce in_ation in the long-term despite the threat of a potential slowdown ineconomic activity during the transition to the GST in the near term. However structuralissues continue to pose a significant risk to the growth cycle. Firstly initiative of theUS Government of advancing ‘Buy American Hire American' and political trends inEurope and elsewhere suggest a rising wave of protectionism which may lead to reversals oftrade liberalization and geo-political confiicts. Secondly economic policy uncertaintycontinues to be high given USA's expansive pro-growth reforms and China taking lead inglobalization 2.0. This poses a risk of high level of volatility in the financial markets.Thirdly debt and defficits among emerging market and developing economies are on the risemaking them susceptible to increase in borrowing costs. Fourthly outcome of the Brexitnegotiations is likely to impact the pace of recovery in UK as well as Eurozone economy.

D. STEEL INDUSTRY

1. Global Steel Industry

Global steel markets recovered during Financial Year 2016-17 registering better thanestimated production & demand growth. During the year the global steel demand grew by1% to 1.52 billion tonnes on the back of stronger than expected demand growth inChina (1.3%) coupled with optimism on supply-side structural reforms and restocking. Thecrude steel production was 1.63 billion tonnes up by 0.8% compared to the previous year.China remains the world's largest crude steel producer with the production at 0.8 billiontonnes. China's apparent steel consumption has continued to remain structurally below itsproduction level leading to exports of 0.1 billion tonnes in spite of globalprotectionism. The global capacity utilization ratio remained around 70% in spite ofproactive measures being undertaken in China and Europe. For instance Chinese Governmentintends to reduce steel production capacity by 100-150 million tonnes by 2020 and hasalso announced merger of two major Chinese steel producers in the previous year. Theovercapacity of steel production in the developing world particularly in China has weighedon global steel prices for quite some time. During the year under review the raw materialprices remained volatile especially for coking coal due to supply related issues. Inaddition prolonged oversupply in iron ore has led to lower level for raw material pricesdespite steel realizations getting support from cost push as raw material pricesfluctuated on supply issues in the second half of 2016. However regulatory measuresannounced by the Indian Government during the year have continued to aid domestic steelprices. The Indian steel industry has increased its capacity in the recent years thoughthe demand growth has remained muted. This has resulted in financial stress in the balancesheet of the steel players. The Government of India and the Reserve Bank of India iscurrently deeply engaged to find a structural solution to the above issue. The domesticcrude steel capacity rose to 122 million tonnes an increase of 11% year-on-year while theproduction of finished steel was around 101 million tonnes. The Financial Year 2016-17saw a modest consumption growth of 3% due to low growth in construction sector and impactof demonetisation and a sharp decline in imports as domestic supply rebounded to theextent that India became a net exporter of steel after a gap of three years.

In Europe anti-dumping legislation currency movement growth in apparent demand andlow inventory levels have led to an increase in demand by 2% to 155 million tonnescompared to 2015. During the year the total activity in the steel end use sectorsespecially automotive rose by 1.7% similar to the previous two years.

2. Outlook For Steel Industry

As per the World Steel Association (‘WSA') global steel demand is expectedto grow at 1.3% in 2017 to 1.54 billion tonnes and a further 0.9% in 2018 to 1.55 billiontonnes. Recovery in developed economies and accelerating growth in emerging and developingmarkets especially Russia Brazil and India is expected to aid demand growth and keepinventory levels low which in turn is expected to support global steel prices. Howeverlow level of capacity reduction than targeted by nations and continued oversupply in rawmaterials especially iron ore are likely to weigh down on the prices in the absence ofeffective trade measures and/ or increase in steel demand.

China's steel demand which accounts for 45% of global steel demand is expected to beflat this year at 681 million tonnes while falling by 2% to 667 million tonnes in 2018.However as per WSA steel demand in emerging and developing economies excluding China isexpected to grow at 4-5% per annum in the next two years to 475 million tonnes. Inaddition the advanced economies are expected to grow at 1% for the next two years.

India's prospects continue to remain bright albeit with few short-term headwinds in theform of imports and surplus capacity. Proactive policy measures by the Government areexpected to address most of these concerns. For instance a Steel Price MonitoringCommittee was formed by the Government with an aim to monitor price rationalizationanalyse price fluctuations and advise all concerned regarding any irrational pricebehaviour of steel commodity. As per WSA steel demand in India is expected to grow at6-7% per annum in the next two years compared to 4% in 2016.

European prospects for 2017 and 2018 are mildly positive. As per WSA EU is expected togrow at 0.5–1.5% per annum in the next two years due to improving domestic demandwith private consumption as key driver in 2017 and investment taking over the lead in2018. The Government measures to counter cheap imports would support domestic prices inthe near term. In addition weaker euro is expected to improve domestic competitivenessagainst imports.

E. OPERATIONS AND PERFORMANCE

1. Tata Steel Group

During the year under review the Tata Steel Group (‘the Group') recordedtotal deliveries of 23.88 million tonnes (previous year - 23.54 million tonnes). The steeldeliveries increased at Tata Steel India by 15% primarily due to ramp up of theKalinganagar Steel Plant. This increase was offset by lower deliveries at Tata SteelEurope by 9% due to sale of the long products business and closure of Llanwern mill tofocus on higher value sales mix. During the year the turnover for the Group was at`117420 crore an increase of 10% over the previous year. The growth is largely drivenby strong performance from Indian Operations with volume growth in steel and ferro alloysbusiness and supportive global pricing environment. The Group EBITDA was `17025 crore anincrease of 114% compared to previous year EBITDA of `7951 crore. This improvement comeson the back of strong global market conditions strong volume growth in India and theimpact of the implementation of transformation program and restructuring efforts in Europeto improve the underlying performance.

During the year the industry witnessed recovery in steel prices mainly driven byincrease in coking coal and iron ore prices improvement in underlying global demand andlower seaborne imports. However the timing and extent of continued price recovery or thesustenance of the current demand cycle is uncertain. In response to recent declines andhigher volatility in steel and raw material prices the Company has implemented a numberof cost-saving measures intended to improve operating income as well as measures toenhance cash generation from the business.

The Group reported a consolidated loss after tax (including discontinuing operations)of `4169 crore as against a loss of `497 crore in the previous year. The year'sloss includes an exceptional charge of `4324 crore mainly due to British Steel PensionScheme (‘BSPS') curtailment charges while an exceptional gain of `3990 crorewas recorded in the Financial Year 2015-16.

2. India

In Financial Year 2016-17 Tata Steel India deliveries grew by 15% significantlybetter than the broader market and reached a level of 11 million tonnes (previous year -9.5 million tonnes). This is a testament of the strength of the business model of theIndian operations the strength of the business relationships the power of the productbrands and the robustness of the distribution channel. The Company's sales to theautomotive segment increased by approximately 9% over previous year as the Companycontinued to partner with its automotive customers in the drive towards localization. Newmodel launches aided by a strong growth in the passenger vehicle segment also helped theCompany to increase the market share in the automotive space. Similarly the Company'sIndustrial Products Projects and Exports vertical witnessed a 47% year-on-year growth.

The Company's branded products portfolio has been growing strongly and the Companycontinues to invest in this portfolio with the aim of gaining greater market share. InIndia the Company launched 31 new products and the branded products contributed to around45% of the revenue. The newly launched ‘Services & Solutions' business isperforming as per plan and the Company is optimistic about its potential to generate 20%of its revenue in the future. The Company is already engaged in development of severalsolution products based on steel including doors windows modular housing toilets andwater ATMs etc. The Company is also foraying into furniture space and the products wouldhave wood or wood-like finish but blended steel structure. During the yearrevenues from Indian operations increased to ` 53261 crore (previous year – `42697crore). The EBITDA was ` 11953 crore 53% higher than the previous year EBITDA of `7792 crore. The Profit after tax was also higher at `3445 crore (previous year– `956 crore). During the year the various improvement initiatives includingShikhar25 contributed improvement savings of over `3400 crore.

The strong performance during the year under review is due to supportive realisationsand strong growth in deliveries due to ramp up of the Kalinganagar plant. The Kalinganagaroperations continues to ramp up well both in terms of quantity and quality. The plantcrossed 2.2 million tonnes of Hot Metal and 1.5 million tonnes of Hot Rolled Coilproduction since commissioning in May 2016. Moreover the performance of the Ferro Alloys& Minerals division registered sharp improvement backed by improved market conditions.The full year operating profit of the division at `1165 crore was higher by `1040 crorecompared to the previous year.

3. Europe

During the year the mild steel demand growth in the European Union was fully absorbedby imports with import volumes at historically high levels although anti-dumpingmeasures provided some relief in the market prices supported by lower raw material costs.

Several strategic and critical re-structuring initiatives were undertaken in TSE duringthe year such as the sale of Long Products business to Greybull Capital LLP closure ofLlanwern Mill in the UK right sizing of manpower announcement of collaboration withstrategic players sale of Speciality Steel business to Liberty House and closure of thedefined Benefit Pension Scheme to the future accruals.

On the operational front TSE launched a number of new digital services to transformthe customer experience and deliver value viz. Tata Steel in Europe Customer Portal TataSteel in Europe eShop Connecting Systems and Building Information Modelling.

TSE also launched 20 new products and was able to increase the share of differentiatedproducts to 37% and of new products to 8%. TSE's focus remains on developingdifferentiated products and services like Serica and MagiZinc products which improve carbody appearance and performance.

The Hot Strip Mill at Port Talbot in the UK broke its previous financial year volumerecord of 3.22 kt to produce 3.32 kt in the current financial year. The Galvanising Line 3in IJmuiden Netherlands broke its previous financial year volume record of 552 kt toproduce 562 kt in the current financial year. The customer complaints for the year in theStrip Products business in Mainland Europe were the lowest at 0.18%.

During the year the revenues remained flat at `52085 crore compared to previous year– at `53555 crore while the EBITDA improved very significantly to `4705 crore fromthe EBITDA loss of `513 crore in the previous year. The strong performance is due tostronger market conditions during the year focussed transformation program in the UK andsustainable profit program in the Netherlands including the supply chain transformationprogramme which went live during the year. During the year TSE was recognized as the bestsupplier of steel and nominated for future supplies by Renault Ford and Toyota. TSE wasalso awarded the "Quality through Excellence award" by Volvo a first time awardgiven to a steel supplier. The ‘PeopleLink' project team within TSE was selected asthe Gold Winner of the SAP UKI Quality Awards in the HR Cloud Category.

4. South-East Asia

During the year the performance in South-East Asia was strong on the back of continuedthrust by the Government on infrastructure projects particularly in Thailand. Therevenues stood at `8245 crore (previous year – `7851 crore) the EBITDA was `528crore (previous year – `222 crore) and the Profit after tax was `175 crore (previousyear – loss of `237 crore). The improvement in performance is mainly attributable toimproved realizations better spread management and cost rationalization initiatives.

NatSteel Holdings (‘NSH') operations improved significantly. Domesticmarket demand for steel bars remained weak in Financial Year 2016-17 due to sluggishconstruction market. Continuous cost reduction initiatives including re-alignment ofoptimal capacity level with demand achieved a fixed cost saving of S$20m. Mothball ofNatSteel Xiamen (‘NSX') operations in mid Financial Year 2015-16 had improvedEBITDA. Further during the year NSX sold its land and other assets and has realized `86crore. During the year Tata Steel Thailand (‘TSTH') delivered betterperformance on all fronts as compared to previous year. TSTH achieved reduction inconversion costs both at steel plant and rolling mill stage. TSTH is committed to delivervalue added products and services to its customers. In this regard sale of High TensilesSiesmic and cut and bend Rebars surpassed the previous records. TSTH invested in phase 3of state-of-the art cut and bend facility at NTS plant and completed the project in March2017.

During the year sale of new products at TSTH touched new heights. Wire rods businesssaw a significant improvement in the second half of the financial year due to higherimport prices from China anti-dumping duties announced by Thai Government and strongcustomer relationship. During the year TSTH collected more than a million tonnes ofdomestic scrap and also developed billet sources from India Russia South America andother regions.

F. STRATEGY

While Financial Year 2015-16 saw a contraction in global steel demand steel demandgrew by 1% in the Financial Year 2016-17 largely driven by strong growth in India andSouth-East Asia. Despite a recovery in steel prices on the back of better than expectedChinese steel demand concerns regarding excess capacity and uncertainty in Chinese steeldemand over the medium-term persist and contribute towards increased volatility in prices.

The Company continues to pursue its vision to become the global benchmark in‘value creation' and ‘corporate citizenship' in the steel industry and aims todevelop long-term partnerships with customers in the chosen markets. It endeavours to makethe most of the growing demand for steel by investing in new facilities. Expansion plansfor both – Kalinganagar and Jamshedpur sites are in development. Along with volumegrowth the Company is committed to move towards more value added products and offerservices and solutions to further enhance revenues and reduce the linkage of revenues tovolatile steel prices.

The Company has identified Digital as a driver to enhance customer centricityproductivity and sustainable performance. A large number of projects across the valuechain have been identified where value can be created via utilization of existing andemerging digital technologies. The Company is working on leveraging its online presence toenhance customer experience via creation of platform to onboard stakeholders facilitatepeer reviews and ease access. Capabilities in data analytics are being built via itsAnalytics Centre of Excellence. Jamshedpur has been LORAWAN (Low Power WAN) enabledallowing the Company to explore Internet of things (‘IOT').

In the medium-term the Company expects the external environment to remain challenging.In response the Company is working towards rationalizing it's existing operations anddesigning new facilities to maximize productivity and improve cost competitiveness. It hasset the following five priorities for the medium-term to help attain its vision and goals– (a) Customer Focus (b) Innovation (c) Operational Excellence (d)Responsible behaviour and (e) People.

Customer focus: The Company has plans in place to keep pace with the growing needsof customers across sectors with a special focus on automotive and attractive segments inthe construction sector eg. Individual House Builder. New facilities planned willensure that shift of demand to wider lighter and high strength steel in the automotivesector is adequately met. The Company is also expanding its presence in other attractivesegments like Oil & Gas and Lifting & Excavation enabled by it's new plant atKalinganagar. The Company also aims to leverage its brands to increase revenues from B2Csales – including increasing reach in rural markets. It further aims to enhance valuefor customers through services and solutions and value added products.

Innovation: The focus area for research is to develop new and differentiatedproducts and services for customer segments reduce carbon footprint optimally useinferior raw materials utilize solid waste and move towards a system of Zero WaterDischarge. The Company conducts research programmes through strategic collaboration withacademic institutions in India and overseas. It has made a breakthrough in low costgraphene production and graphene based coating solutions for steel. Going ahead it isinvesting in scaling these solutions and developing other applications.

Operational excellence: It is the Company's endeavor to establish best-in-classfacilities and it constantly invests to upgrade its manufacturing and distributionfacilities in order to improve performance and cost competitiveness. The focus areas areachieving superior steel properties higher efficiency in iron ore & coalbenefficiation lower carbon rate in iron-making optimized product mix reducing wastegeneration energy efficient processes and higher material utilisation.

Responsible behaviour: The Company acts responsibly towards the environmentfocusing on sustainable usage of raw materials water and energy conservation wasteutilization emissions reduction and land reclamation. It explores and supports thedevelopment of breakthrough technologies to deal with the challenge of carbon emissionsthrough energy conservation emissions. Reduction of CO2 remains the prime corporatestrategy to ensure business sustainability while mitigating climate change. JamshedpurSteel Works is the National Benchmark in emission intensity and Specific Energy CO2

Consumption within Steel Sector (Coal based Integrated Works BF-BO). TheCompany supports the communities it operates by promoting sports & educationsustainable livelihood health and ethnicity. It also supports the economic environmentaland social development of its communities through financial support provision ofmaterials and the time and enthusiasm of its employees.

People: The safety of the people who work on the Company's sites is number onepriority. The Company is committed to the people who are instrumental to its success.Committed to Zero is Company's top priority with the target of having Zero Lost TimeInjuries (‘LTIs'). The Company has taken safety and health strategicinitiatives on capability building leadership development contractor safety processrisk rail & road safety and employee health. The Company fosters teamwork nurturestalent enhances leadership capability and encourages employees to act with pace prideand passion. There is an increased focus on encouraging diversity and inclusion in termsof gender and representation of the underprivileged sections of the community as well aspeople who are specially abled.

G. KEY DEVELOPMENTS

1. India

Kalinganagar Steel Plant

During the year the Company commenced commercial production at its Kalinganagar SteelPlant. The facility produces flat steel for high-end applications enabling the Company toexpand its product portfolio in the ship building defence equipment energy & powerinfrastructure and aviation sectors. This plant will help the Company to consolidate itsleadership position in the domestic automotive segment. Tata Steel Kalinganagar (‘TSK')has achieved one of the fastest ramp-up in a Greenfield project in India. Crude steelproduction in Financial Year 2016-17 was 1.68MnTPA while crude steel capacity was rampedup to 88% with the Coke Plant & Hot Strip Mill reaching 100% capacity in FinancialYear 2016-17. The Coke Plant at Kalinganagar achieved 1.5 million tonnes of gross cokeproduction and generated revenue worth

`70 crore through the sale of coal tar during Financial Year 2016-17. Thefacility dispatched first rake of HR coils on June 8 2016 and first rake ofFerro-shots on September 12 2016. During the year the Sinter Plant at Kalinganagarachieved production of 2 million tonnes of net Sinter. The Blast Furnace achieved 2million tonnes of hot metal production and started Top Recovery Turbine. It achievedlowest ever monthly average coke rate in all coke operation of 532 kg/t of hot metal. TheHot Strip Mill at Kalinganagar achieved production of 1.5 million tonnes of HR coil andcrossed ABP target of 1.54 million tonnes in Financial Year 2016-17 by achievingproduction of 1.78 million tonnes. The capacity of the Plant can be expanded further tomeet the customer needs and make Tata Steel more profitable and sustainable in the future.

Acquisitions

Brahmani River Pellets Limited

In order to make the Kalinganagar Steel Plant more competitive in December 2016 theCompany executed a definitive agreement to acquire 100% equity shares of Brahmani RiverPellets Limited (‘BRPL') for a value of `900 crore plus closing adjustments.BRPL owns a 4MnTPA pellet plant in Jajpur Odisha and 4.7MnTPA iron ore benefficiationplant in Barbil Odisha connected through a 220 km underground slurry pipeline. Theabove transaction is currently pending regulatory approvals.

Subarnarekha Port Private Limited

Logistics is a critical element in the supply-chain of an integrated steel facility.Considering the future logistics needs of the Indian Operations in January 2017 theCompany executed a definitive agreement to acquire 51% equity stake in Creative PortDevelopment Private Limited for the development of Subarnarekha Port at Odisha through awholly-owned subsidiary

Subarnarekha Port Private Limited. Given the location of the proposed port theacquisition will enhance competitive position of Indian operations and de-risk thein-bound and out-bound supply-chain. This is a greenfield project and currently theCompany is undertaking detailed feasibility studies.

Divestments

TM Harbour Services Pvt. Ltd

On December 7 2016 TM International Logistics Limited a Tata Steel Group companydivested its entire stake in its wholly-owned step down subsidiary TM Harbour ServicesPvt. Ltd. (‘TMHSPL') to Adani Ports and Special Economic Zone Limited for atotal consideration of `106.27 crore. TMHSPL was engaged in the business of providing Tugservices at Dhamra Port and owned 3 tug boats.

Issue of Debt Securities

On October 4 2016 the Company allotted 8.15% 10000 Unsecured RedeemableNon-Convertible Debentures having a face value of `10 lakh each for an amount aggregatingto `1000 crore on private placement basis to identified investors.

Credit Ratings

In October 2016 Brickworks revised the rating for Non-Convertible Debentures from BWR‘AA+'/ Outlook Stable to BWR ‘AA'/ Outlook Negative as well as downgraded theratings for Perpetual Hybrid Securities from BWR ‘AA'/ Outlook stable to BWR‘AA'/ Outlook negative. As per the Ratings Agency the change in ratings was due tothe uncertainty consequent to the change in top management at the Tata Group level whichcould in turn slow down vital decisions such as cost cutting and deleveraging the BalanceSheet concerning the unprofitable UK operations and restructuring of the Europeanbusiness.

In January 2017 CARE has revised the ratings for Non-Convertible Debentures andlong-term rupee loans from CARE ‘AA+'/ Outlook stable to CARE ‘AA'/ Outlookstable and for Perpetual Hybrid Securities from CARE ‘AA'/ Outlook stable to‘AA-' / Outlook stable. This revision in rating was triggered due to uncertaintiesrelating to the restructuring of the Company's UK business.

2. Europe

British Steel Pension Scheme

On March 7 2017 Tata Steel UK (‘TSUK') a wholly-owned indirectsubsidiary of Tata Steel Limited and the principal sponsor of the British Steel PensionScheme (‘BSPS') completed consultation with its employees with regard to theclosure of the defined benefit section of the BSPS to future accruals with effect fromApril 1 2017. This followed an agreement between TSUK and the trade unions in December2016 in the same regard where it was also agreed that subject to the structuralde-risking and de-linking of the BSPS from the business TSUK will continue the existingblast furnace configuration of Port Talbot until 2021 and based on achieving thenecessary financial performance and cash flows as per the transformation plan of the UKbusiness it will also continue its investment to enhance its competitive position inEuropean steel industry. An employment pact was also offered until 2021. Subsequentlyafter prolonged and intense discussions and negotiations with the BSPS Trustee(s) ThePensions Regulator (‘TPR') and the Pension Protection Fund (‘PPF')the key commercial terms of a Regulated Apportionment Arrangement (‘RAA') wereagreed in-principle between TSUK and the BSPS Trustee(s). These terms are in line with thepublished principles of TPR and PPF. However as of May 16 2017 the RAA remains subjectto detailed documentation formal approval by TPR non-objection from the PPF and theformal agreement of the individual entities who would be party to the RAA. These partiesare in positive discussions and are hopeful of reaching final agreement shortly. If anagreement is reached and the necessary approvals are obtained the RAA will becomeeffective once agreed conditions are satis_ed including the payment by a member of theTata Steel Group of an agreed settlement amount of GBP 550 million to the BSPS and theprovision of a 33% equity stake in TSUK. TSUK has also agreed in principle thatsubsequent to the RAA TSUK would sponsor a closed new pension scheme (the ‘NewScheme'). TSUK sponsorship of the New Scheme is conditional upon satisfaction ofcertain qualifying conditions. If those conditions are satis_ed members of the BSPS wouldbe offered an option to transfer to the New Scheme. The New Scheme would have lower futureannual increases for pensioners and deferred members than the BSPS and therefore animproved funding position which would pose significantly less risk for TSUK. There ispresently no certainty with regards to the eventual existence size terms or form of theNew Scheme and the funding position and membership of any New Scheme would be dependent ona voluntary membership transfer exercise.

Divestments

Sale of Long Products Europe Business

TSUK signed an agreement on April 11 2016 to sell its Long Products Europe Businessto Greybull Capital LLP for a nominal consideration. On May 31 2016 TSUK completed thesale of Long Products Europe business which will trade under the name of British Steel.The Long Products business in the UK includes the Scunthorpe steelworks two mills inTeesside an engineering workshop in Workington a design consultancy in York associateddistribution facilities as well as a rail mill in northern France. With this Tata SteelEurope crude steel capacity stood at 12.9 million tonnes.

TSUK's Speciality Steel Business

As an overall restructuring strategy of the UK portfolio TSUK (an indirectsubsidiary of the Company) signed a Letter of Intent on November 28 2016 and adefinitive sale agreement on February 9 2017 with Liberty House Group for sale ofSpeciality Steel business for a total consideration of GBP 100 million. The sale coversseveral South Yorkshire based assets including electric arc steelworks and bar mill atRotherham the steel purifying facility in Stocksbridge a mill in Brinsworth and servicecentres in Bolton and Wednesbury UK and in Suzhou and Xi'an China. The sale wascompleted on May 2 2017. Speciality Steel business directly employed about 1700 peoplemaking steel for aerospace automotive and the oil and gas industries. With this TataSteel Europe crude steel capacity stands at 12.1 million tonnes.

3. Canada

Tata Steel Minerals Canada

Tata Steel Minerals Canada Ltd. (‘TSMC') is engaged in development of ironore deposits in Quebec and Newfoundland & Labrador in Canada. The investment isdeployed towards setting up mining operations and multiple processing facilities includingthe state-of-the-art benefficiation plant. The project has also enabled the development ofinfrastructure facilities including rail roads telecommunications and port that has hadsignificant positive impact in the socio-economic landscape in Quebec Newfoundland andLabrador.

In October 2016 TSMC signed the definitive agreements with Government of Quebec'sinvestment entities Resource Quebec and Investment Quebec respectively for providingC$175 million financial assistance in the form of equity and debt. With this investmentthe Government of Quebec holds 18% stake in TSMC and the balance is held between theCompany (77.66%) and New Millennium (4.32%) a publicly owned Canadian mining company. OnMarch 24 2017 TSMC signed a multi-user-concept based non-binding MOU betweenPPP's partners: Society of Plan Nord (‘SPN') and other mining players whichwill facilitate the connectivity of the existing material handling facilities at PointNoire to the new Multi User Deep Sea Terminal (‘MUD') and further enabledetailed assessment of improvements to the infrastructure cost-efficient Port operationsscalability in volume and asset allocation among others. The Company has been awarded JohnT Ryan Award for Safe Mining for two consecutive years – 2015 and 2016 by theCanadian Institute of Mining Metallurgy and Petroleum (‘CIM').

4. South-East Asia Divestments

Kalzip Guanzhou Limited

In March 2017 Kalzip Guanzhou Limited a wholly-owned subsidiary of the Companydivested its entire stake to Shanghai Qinheng International Trace Co. Ltd. for a netconsideration of Euro

5.2 million. Kalzip Guanzhou Limited was engaged in the business of supplying aluminumroofs for construction projects in China.

H. SUSTAINABILITY

In the words of the Company's founder J N Tata – ‘In a free enterprise thecommunity is not just another stakeholder in business but is in fact the very purpose ofits existence.' This belief has been embedded in the Company's vision and values as itcontinues to strike a balance between value creation and being a leader in corporatecitizenship. Sustainability is at the very heart of what the Company does. As one of theworld's leading steel producers the Company is dedicated to both managing its operationsresponsibly and striving towards continuous improvement. The Company is committed todesigning more sustainable products which are lighter long lasting and require fewerresources to be produced. The Company's steel goes into the world's most sustainablebuildings and transport infrastructure and supports the performance of the most efficientvehicles in the market. Above all the Company operates in a way that is safe for allemployees and respectful to the environment. The Company's endeavour is to act with utmostresponsibility and care towards the communities surrounding it which are impacted by itsoperations. The Company's sustainability approach as articulated in the SustainabilityPolicy reinforces the triple bottom-line approach in its systems and processes.

The Company has also established various platforms for engaging with its stakeholdersto recognize their concerns and opinions that are then prioritized and embedded in itsbusiness objectives and strategies. The Company is actively associated with variousindustry bodies like Confederation of Indian Industry (‘CII') GlobalReporting Initiative (‘GRI') International Integrated Reporting Council (‘IIRC')and the Taskforce on Climate-related Financial Disclosures (‘TCFD') of theFinancial Stability Board in order to mainstream the best practices on sustainability indifferent functions and processes across the organization. The Company has a dedicatedCorporate Sustainability Group that tracks the global best practices related tosustainability and facilitates its incorporation in the key processes of the Company. TheGroup also drives various external assessments and makes comprehensive disclosures onsustainability to stakeholders. In December 2016 the Jamshedpur Works underwent theGreenCo assessment conducted by CII-Green Business Council and was awarded with Platinumrating (the highest rating on the GreenCo rating scale) thus making it the first and onlyIntegrated Steel Plant to be awarded the Platinum rating. Globally the Company has beenadjudged as the Industry Leader by the Dow Jones Sustainability Index (the most trustedand widely accepted rating by investors globally) for the year 2016. Aligned with the UNGlobal Sustainable Development Goals the Company is now taking on the challenge offurther reducing its carbon and water footprints and enhancing the impact of its CSRactivities in the Company's areas of presence.

1. Environment

Respecting and safeguarding the environment is a fundamental principle held by all TataGroup companies. The Company has implemented environmental management systems that meetthe requirements of international standard ISO14001 at all its leading manufacturingsites. These systems provide the Company with a framework for managing compliance andachieving continuous improvement. The Group-wide leadership in environmental matters isprovided by the Board's Safety Health and Environment Committee and its overallperformance is subject to on-going and detailed scrutiny of the Board of Directors.

The Company's first priority is to be fully compliant with conditions for environmentalpermits and with other legal requirements that are applicable within the jurisdictions inwhich it operates. The Company's efforts are channelized towards adopting sustainablepractices and ensuring continuous improvement in environmental performance. It continuesto focus on operational excellence aimed at resource efficiency through "RecoveryReuse and Recycle" approach to minimize the ecological footprint. In India duringthe previous financial year the Company adopted the maiden Biodiversity Policy andrevised the Energy Policy to include therein Renewable & Non-Conventional Energy. TheCompany is member of World Steel Association Environment Policy Committee CentralPollution Control Board's National Taskforce Indian Steel Association and various otherorganizations and it continues to pursue advocacy on policy and regulatory issues throughthese forums. During the year the Company actively participated in the Taskforce ofClimate related Financial Disclosure (‘TCFD') formed by the FinancialStability Board aiming to make markets more efficient and economies more stable andresilient through increased disclosure and transparency. The Company is engaging withInternational Union for Conservation of Nature (‘IUCN') the world's largestglobal environmental network to implement biodiversity conservation plans at its mininglocations. The Company has completed a pilot program on natural capital valuation as partof its capacity building program. It also has a dedicated Research & Development teamto work on Life Cycle Assessment. The Company has commenced valuation of carbon emissionswith the introduction of shadow price at US$ 15/tCO2e which will enable it to consider theenvironmental aspects of projects before it decides to pursue them. This is being used forappraisal of all capital expenditure proposals including growth plans.

In Europe the Company is a leading member of ULCOS (Ultra-Low CO2 Steel-making) –a pioneering partnership of 48 companies and organizations from 15 European countries thatrecently completed the first phase of a co-operative research initiative to achieve aemissions from steel-making. The ultimate and step change in CO2 ambitious aim of theULCOS project which began in 2004 and which is supported by the European Commission isto reduce CO2 emissions per tonnes of steel produced by at least 50% by 2050.

2. Climate Change

Climate change is one of the most pressing issues the world faces today. Climate changeis a global phenomenon which requires global measures in the long-term to effectively dealwith this real threat to sustainable human life. Tata Steel aims to play a leadership rolein addressing challenges of climate change. Climate change is the defining issue of theearly 21st Century and the Company recognizes that it has an obligation to minimize itsown contribution to climate change. However the Company also understands that steelproducts will be an integral part of the solution to climate change and that localshort-term action will not necessarily help to tackle this global long-term issue.Considering all these factors the Company has formulated a climate change strategy basedon 5 key themes as listed below:

Emissions Reduction: The Company will continue to improve its current processes toincrease its energy efficiency and to reduce its carbon footprint. The Company targets toreduce its carbon dioxide emissions per tonnes of liquid steel by at least 20% compared to1990 levels.

Investing in Technology: The Company will continue to invest in long-termbreakthrough technologies through initiatives such as ULCOS.

Market Opportunities: The Company endeavors to develop such new products andservices that reduces the environmental impact over its products' life-cycles and helpsits customers to reduce their carbon footprints.

Employee Engagement: The Company will actively engage its workforce and encourageeveryone to contribute to its strategy.

Lead by Example: The Company will further develop its pro-active role inglobal steel sector initiatives through the World Steel Association.

3. Health and Safety

Health and safety remains the Company's top most priority and the Company aspires to bethe industry benchmark in safety. The Company has made some significant achievementsthrough the ‘Committed to Zero' programme. The Company's strategic efforts aredirected towards ensuring committed leadership engaged employees and effective systems inorder to minimize risk. At the Group level the Company has achieved 39% decline in LostTime Injury Frequency Rate (‘LTIFR') from 2010.

The Company also continues to focus on its competency development programs in healthand safety leadership. In collaboration with Ashome Hill UK safety and health excellenceprogrammes were conducted for leaders across levels of the Company and Members of theUnion from all locations of Tata Steel India. A total of 3200 Officers and 505union committee members were trained. This programme has been utilized in all regions andwas recognized as H&S excellence by World Steel Association in October 2016.Leadership engagement at the shop _oor has improved by way of safety line walks with‘Find It – Own It - Fix It' approach. Alongside leadership the Company'sstrategic priorities include contractor management process safety management industrialhygiene and road & rail safety management. Five high-hazard departments have startedthe Process Safety Centre of Excellence in collaboration with the TSE team. Similarly twodepartments have started quantitative and qualitative study on Industrial Hygiene withcross learning from TSE. NSH also achieved a 22% decline in LTIFR as compared to previousyear while TSTH finished the year with zero loss time injury to any employee or contractworkmen. Deploying long-term safety improvement plan regular sharing of best practicesand learning from incidents from other companies in the Tata Group has strengthened theoccupational safety health and environment process in both TSTH and NSH.

4. Research and Development

The Company has best-in-class research facilities to develop and deliver high qualityvalue added products for its customers and significant process improvements for itsbusiness units. During the year the Company undertook several initiatives in India tohelp the business units achieve their goals and some of these initiatives have beensuccessfully executed at the plant level. JK DM Cyclone is one such initiative which hasbeen operational since November 2016 in stream No. 1 of washery#3 at West Bokaro. The JKDM Cyclone process helps in better separation of clean coal from middlings. This processis expected to reap an annual benefit of approximately `10 crore in one washery oncomplete implementation and is now considered to be a global benchmark. Another suchinitiative is the setting up of the Nano Membrane UHLA Desalination pilot plant in Haldiafor removal of chloride by tailor made ion through selectively charged Nano filtrationmembrane. This initiative being a first of its kind has helped to reduce the operationalcost by at least 50%. The Company has undertaken many other research initiatives duringthe year which are expected to provide fruitful solutions in the future.

In Europe the Company is continuously engaged in various research and technologyinitiatives. To illustrate the Company invests in short to medium term energy efficiencyimprovements emission through HIsarna project i.e. a aimed at reduction in CO2collaborative project amongst the major steelmakers in Europe to develop a more flexiblenew smelting reduction technology to produce steel from lower grade raw materials withoutthe need for coke making or agglomeration processes. In Singapore the Company is focusingon solution driven value propositions and piloting Building Information Modeling (‘BIM')as well as Developing Mobile Apps for select customers for complete visibility of theprojects across the value chain leading to increased productivity & efficiency.R&D activities are mostly focusing on developing advanced wire materials forconstruction and automotive applications. The Company is building a new Research andDevelopment Centre at wire factory in Thailand which will focus on development of new wireand related products for the group. The Company is also exploring ways to make Graphenebased value-add products with a focus on development of high value niche market segmentsfor coated products. Further during the year the Company's process technology programfocused on creating robust and stable manufacturing processes making better use of rawmaterials and finding solutions to quality issues and thereby also supporting itsdifferentiated product strategy.

5. New Product Development

The Company recognizes that to become a long-term partner to its customers it mustdevelop an in-depth understanding of their needs. Above and beyond meeting certificationand legislative requirements customers are also seeking to improve the sustainabilityperformance of their operations and products. There is a growing emphasis on being able torely on a responsible supplier.

The Company is responding to customer needs by including sustainability principles inits new product development process focusing on lowering greenhouse gas emissions overthe full life cycle of steel products reducing water consumption avoiding the use ofhazardous and potentially toxic chemicals optimising resource efficiency and reducingwaste in production improving the circularity of products ensuring responsible supplyand increasing the social value of products and optimising total cost of ownership. Duringthe year in India the Company's efforts in the area of new product development has beendirected towards increasing customer satisfaction and having products with differentiatedquality. About 37 new products were developed in the Flat Products area the major onesbeing in the hot rolled category. The most noteworthy amongst these is the DP600 low Siwhich is expected to reduce scale issues and thereby increase customer satisfaction. TheHS800 in 5 mm section has been specifically developed for commercial vehicles in theautomotive segment and is in the final stage of trials. The IF390 in cold rolled categoryis another significant example of a new product of a high strength grade developed forautomotive customers. The focus at the Company's Kalinganagar facility has been to developand increase the sales of value added products by leveraging the plant's superiorcapabilities. In the Long products area it has been making concerted efforts to increaseproductivity. During the year it has developed high strength SAW Wire Rods Low ManganeseHigh carbon Wire Rods and Couplers for Construction segment. In India the Companylaunched 31 new products during the year.

In Europe the Company launched 20 new products in the year. These launches includemajor developments for the automotive construction engineering and packaging markets.Prominent examples of product launches include XPF800 and Trimawall. XPF800 is its newrange of breakthrough steels aimed at helping car makers reduce the weight ofundercarriages and increase fuel efficiency. Trimawall caters to the constructionsegment offering a foam insulated wall sandwich panel with a completely flat outersurface providing customers with an architecturally state-of-the-art flat panel. In thelast five years Tata Steel Europe has introduced over 160 new products. The share ofdifferentiated products in Financial Year 2016-17 increased by 3% as compared to previousyear and reached 37% of prime sales. These differentiated products give customers enhancedcapabilities for specific applications and are manufactured by only a few steel producers.

In Singapore the Company's operations got certification for Malaysia Authorities' NewStandard for bars requiring 5m cycle of fatigue tests for export of bars to Malaysia andalso rolled out grade 600 bars Steel Carpet and Fan Mesh to multiple projects inSingapore construction sector. The wire units in Thailand (Siam Industrial wires and TSNwires) launched zinc aluminium for _shery tools & poultry cages low carbon automotivewires barbed wires sprig wires and galvanised PC strand for rock engineering in localThai markets as well as international markets. In continuation of its efforts towardsbranding its products SENTEC brand was launched for galvanised wires.

6. Customer Relationship

The Company endeavors to build sustainable long-term value-creating partnerships withits customers and channel partners through a wide range of product offerings innovativeservices and unique solutions. In India the Company's customers are segmented into threecategories i.e. B2B B2C and B2ECA (‘Emerging Corporate Accounts'). Thesecategories are then micro-segmented based on applications and buying behavior. TheCompany's focus is to understand the expectations and requirements of current andpotential customers/market segments to deliver customer-specific products & servicesand to provide collaborative value-creating solutions. The Company engages with B2Bcustomers through cross-functional customer service teams to generate value-creatingideas develop new products and focus on quality improvements thereby helping to achieveoperational excellence. By leveraging its investments in Research & Developmentfacilities the Company has deepened its engagement with key automotive customers toprovide cost and weight reduction solutions and advanced product application support. Thishas enabled the Company to partner with its customers for their future product launches.The Company has also enhanced its engagement with Emerging Corporate Accounts byfacilitating direct interactions with Subject Matter Experts (‘SMEs') throughprograms such as "ECafez Webinars" and "Skills4 India".

The Company's B2C brands have embraced digital solutions to substantially enhance theconsumer buying experience. Tata Tiscon has built an online e-sales platform toreach out to around 2.5 lakh consumers. To overcome the cash crunch post demonetization inNovember 2016 the Company's B2C brands have installed over 1500 Point-of-Sales (‘POS')machines across its dealer network. To reach out to the rural consumers at the last mileintensive mobile marketing campaigns were conducted under the program of "Ek KadamParivartan ki Ore" where the consumers were educated about the benefits of TataShaktee vis-a-vis other roo_ng solutions prevalent in the region. The Group RuralAction Mission (‘GRAM') focuses on harnessing synergies with other groupcompanies for creating rural consumers awareness and lead generation programs.Knowledge-sharing platforms such as "Driving Steel" "Wired 2 Win""Steelopedia" are organized to provide insights on current and future industrytrends and promotes new services & solution offerings. The senior leadership teamfrequently interacts with strategic and key customers in customer meets seminars duringplant visits undertaken by the customers and celebration events to commemorate themilestones achieved.

In Europe the Company aims to develop long-term partnerships with customers byunlocking the potential of steel. The Company is focused on strengthening customerrelationships by continuously introducing new innovative and high quality steel productsjointly developing smart solutions for products and services to unlock customer value andcreating new partnerships to optimize the supply chain. A number of new digital serviceshave been launched to make it easier for customers to do business including eShop andElectronic Data Interchange (‘EDI') connections.

To increase customer focus the Company is convinced that advancing strategy ofcustomer intimacy building strong partnerships with satis_ed loyal customers will be asimportant as any other factor to shape a successful sustainable future for the business.To do so insights gained from the Tata Business Excellence Model assessment an EmployeeSurvey and a Customer Satisfaction Survey were taken and integrated into a consistentcross-functional approach across Europe. The Journey to Commercial Excellence programme iscentral to the ambition to develop a culture that is customer focused and performancedriven. To develop a service based decisive competitive advantage the Company is focusingon increasing its delivery performance to the market. This business change is beingsupported by transformation of IT under the Supply Chain Transformation programme. Thefirst phase of this initiative went live in September 2016. Tata Steel UK is pursuing atransformation programme "Delivering Our future" to increase customer value andreduce operating costs.

In Singapore the Company's Reinforcing Knowledge Cluster team is working very closelywith customers and project managers for driving solutions and services. The Companycontinues to strengthen its relationship through various projects in Singapore as well aswith international customers through Customer Value Management.

During the year the Company entered the B2C wire markets in Thailand and Indonesiawith the appointment of distributors and retailers to serve the wire customers at theretail level. In Vietnam Retail Value Management remains the key focus in IndependentHouse Builders (‘IHB') segment. In Thailand customer relationship wasstrengthened further through dedicated Customer Service Teams. The Company also engagedwith Engineering Institute of Thailand and leading Universities in the country forresearch and promotion of specialized Rebars.

7. Human Resources Management & Industrial Relations

From its foundation over a century ago Tata Steel Group's employment philosophy andpractices have been based on the recognition that its people are the primary source of itscompetitiveness.

The Group consistently abides by human resources policy that is found on a set offollowing principles: equality of opportunity continuing personal development fairnessmutual trust and teamwork. These principles are in turn underpinned by the five TataGroup core Values of Pioneering Integrity Excellence Unity and Responsibility. TheCompany also believes as a matter of principle that diversity within its workforcegreatly enhances its overall capabilities. The Company is an equal opportunity employerand it does not discriminate on the basis of race caste religion colour ancestrygender marital status sexual orientation age nationality ethnic origin or disability.All decisions relating to promotion compensation and any other forms of reward andrecognition are based entirely on performance and merits.

The Company's ambition is to be a modern employer offering employees long-termprospects for a meaningful professional career. This is why the Company's collectivelabour agreement focuses on four aspects: health & vitality career development &skills employee productivity and employment conditions.

During the year the Company focused on improvement in areas related to diversity &inclusion and training & development. Many initiatives were undertaken to bring abouta change in the mind-set of the workforce regarding these aspects. In India the Company'sefforts to improve gender diversity included ‘Women of Mettle' an engagement andscholarship program for recruiting women talent from technical schools revision ofmaternity benefits work from home option extension of additional privilege leave tonon-officer lady employees and many other measures taken to retain and attract its womenemployees and cater to their needs for adequate balance between work and personal duties.Under the Company's Afirmative Action programs it introduced the Tata Steel scholarshipprogram under which it gave pre-placement offers to 17 Afirmative Action candidates whohold under-graduate degree in engineering. The Company's focus on learning &development underwent a shift in pedagogy this year. The Company introduced variouse-learning courses on managerial and functional competencies through the Skillsoftlearning platform. It also rolled out other initiatives such as ‘Lunch & Learn'‘NPTEL technical skill modules' modules on Internet of Things/Big Data etc. Incontinuation with the previous years 17 new academies were rolled out during the year toinstitutionalize the academy approach of learning and development. During the year theCompany also commenced a program called Felt Leadership Training wherein senior leadersas trainers share with the workforce their learning and experiences on matters pertainingto health and safety.

The Company is concentrating its efforts on leveraging digitalization to enhanceProductivity Predictability Capability Stakeholder Experience and Safety in itsbusiness through constant discussions with the members of the Unions. The Company'sachievements in Human Resource Management were recognized through several accolades.Business Today has for the 2nd time in a row declared the Company as the ‘BestPlace to Work' in the Core Sector. The Company has also been certified as a ‘GreatPlace to Work' as per the Great Place to Work study conducted for the year 2017. TheCompany bagged the BML Munjal Award for Business Excellence through Learning &Development under Sustained Excellence Category and was also adjudged Best TrainingEstablishment of India by CII in 28th National Works Skill Competition held in Bangalore.During the year Capability Development group also secured the certification of ISO9001:2015 Quality Management System standard.

TSE promotes a healthy work environment and lifestyle through various initiatives suchas central and local fitness programmes training to prevent and deal with stress andlocal labour conditions improvement initiatives. The career development and skillsinitiative is focused in stimulating long-term employability and creating aflexible workforce through career counselling pension advice and ‘Matching' bureauto identify options for part-time working. TSE also emphasises on employment conditionsand industrial relations by focusing on creating modern employment conditions that ensurehealthy long-term employability. This is achieved through flexible working hours at theHot Strip Mill and reviewing overtime arrangements. The Tata Steel Academy in Europefocuses on strengthening the organisation's competitive advantage by enabling its peopleto achieve the highest standards of technical and professional expertise. The Academy usesan approach known as ‘blended learning' – a mix of practical computer-based andclassroom training. The majority of training remains ‘on the job' but is structuredthrough the creation of 12 distinct faculties focused on leadership health & safetysales & marketing manufacturing engineering technical supply chain finance HRIT procurement and total quality management. The Company's South-East Asian entitiesfocused initiatives towards enhancing technical knowledge in the areas of steel makingrolling and maintenance with the support of external experts. Regular best practicessharing with other companies in Tata Group facilitated horizontal deployment. Coaching andmentoring ability of the leadership team was also enhanced. The Company continues to bevery constructively engaged with the Unions in all geographies where it operates includingthe Tata Workers Union in Jamshedpur the European Works Council for the TSE and all otherunions in different parts of the world. Employees and unions are very importantstakeholders for the Company and the Management team is in continuous engagement throughthe year to ensure seamless and transparent communication on all important issues thatrelates to the employees and the future of the Company.

8. Corporate Social Responsibility

The Company's vision is to be a global benchmark in ‘value creation' and‘corporate citizenship'. The objective of the Company's Corporate SocialResponsibility (‘CSR') initiatives is to improve the quality of life ofcommunities through long-term value creation for all stakeholders. This objective is inalignment with the Tata Group core purpose.

For decades the Company has pioneered various CSR initiatives. The Company continuesto remain focused on improving the quality of life and engaging communities throughhealth education sports and infrastructure development. During the year it spent `194crore on CSR activities. The Annual Report on CSR activities in terms of Section 135 ofthe Companies Act 2013 is annexed to this report (Annexure 3).

The Company has always had a very visible presence in its communities. In Europe theCompany is committed to working with local communities to support their social andeconomic well-being. The Company puts future generations at the centre of its localcommunity strategy which has three anchors: education & learning health &well-being and environment & sustainability. The Company has formed education andlearning partnerships with local organisations. The Company works with them and aims toincrease the social skills and confidence of young people boost pupils' level ofunderstanding about the steel industry and improve understanding & ambition ofstudents – particularly girls – in STEM (Science Technology Engineering andMath) subjects. The Company also runs its own vocational school in IJmuiden. Every yearabout 100 students start their education in mechanics electro or process technology. TheCompany has partnerships with organizations such as Age Cymru and Young Careers Networkwhose work helps to combat some of the issues such as lack of access to good healthprotection from crime and clean & safe environment. The Company also helps fund PortTalbot Women's Aid in their on-going work with children affected by domestic violence. TheCompany has had a long-standing partnership with the Triathlon Trust in the UK and hostedfree-to-access junior triathlons for 8-14 year olds across the country. It also is apartner in the Steel Valley Project which aims to help people understand and care fortheir local environment to create healthy and sustainable communities.

In Singapore the Company organizes monthly outings with its benefficiaries namelyThe Society for the Physically Disabled Fernvale Gardens School catering to children withintellectual disability. The Company has also partnered with the initiative ‘Foodfrom the Heart' a non-profit voluntary group which distributes food to those in need.

In Thailand initiatives in the area of education such as ‘Grow Smart with TataSteel' reached 248 schools in 52 provinces. As a responsible citizen the Company alongwith its employees also supported the Government relief initiatives post the _oods inSouthern Thailand.

I. CORPORATE GOVERNANCE

The Company constantly endeavours to follow the corporate governance guidelines andbest practices sincerely and disclose the same transparently. The Board is conscious ofits inherent responsibility to disclose timely and accurate information regarding theCompany's operations performance material corporate events as well as on the leadershipand governance matters relating to the Company.

During the second half of the year under review the Company faced challenges owing toleadership change at Tata Sons (the Promoter). Amidst the leadership transition therewere references to involvement of Tata Trusts and Tata Sons in the business and operationsof the Company. The Board likes to categorically state that the Company upholds thehighest standards of corporate governance has very robust processes and has a dulyconstituted and independent Board of Directors (‘Board') that conducts itselfindependently keeping in line the best tradition of a Tata company. The Board at alltimes exercises its independence both in letter and in spirit and the Directors fullyunderstand their _duciary duties. The Directors have always acted in the best interest ofthe Company and will continue to do so in the future. It is equally important to statethat the Company has a professional and competent leadership team for the management ofthe business. The Board guides supports and compliments the Management team towardsachieving the set objectives to make the enterprise more sustainable and valuable in thefuture.

During the course of the leadership transition in Tata Sons clarifications were alsosought by Regulators with respect to sharing of information with the Chairman Emeritus andthe Board of Tata Sons. The Board would like to state clearly that the Company has robustsystems and processes in place to ensure compliance with applicable rules and regulationson sharing of information. The Board confirms that the Company has acted in accordancewith the applicable regulatory framework at all times. The Company ensures thatconfidential information is handled with due care and is shared on a need-to-know basis infurtherance of legitimate purpose of Company's business. Certain allegations were alsomade to investment decisions with respect to acquisition of Corus Group Plc (‘Corus')in 2007 and its subsequent performance. The Board wishes to place on record that theacquisition and subsequent financing arrangements were undertaken following due governanceprocesses and under the supervision and oversight of the Board. The acquisition of Coruswas based on the long-term strategy of the Company to pursue growth through internationalexpansion and enhance the portfolio of value-added products. The Board discussed theacquisition proposal and financing requirements at various meetings held between October12 2006 and April 17 2007 and approved the same without dissent from any Member of theBoard. Being a responsible listed company necessary disclosures were made in this regardto the Regulators. The performance of Corus in the two years post acquisition validatedthe Company's growth strategy. The ‘black swan' event in the form of the globalfinancial crisis structurally impacted the underlying demand across many geographies andhad a significant impact across the global steel industry and more specifically to theEuropean steel industry which witnessed 30% structural reduction in demand. In response tothe above challenges the Management of the Company has undertaken several strategic andoperational interventions to ensure the future sustenance of the European businessincluding restructuring of the portfolio investment in improving asset quality andreliability manpower rightsizing to improve productivity focusing on significantlyenhancing the product portfolio and differentiate offering to the customers and newproduct development. The Board did undertake detailed review and based on such reviewsupports the Management in all its endeavours. The macroeconomic condition and its impacton the Company's European operations in general on the UK operations in particular andthe various interventions of the Board were disclosed each year in the Directors' Reportbetween Financial Years 2009 through 2016.

Certain questions were also raised on independence of Mr. Jacobus Schraven Mr.Andrew Robb and Ms. Mallika Srinivasan. The Board reviewed the issues raised soughtadvice from eminent jurists/legal counsels. Based on the review of documents and theadvice so received the Board was fully satis_ed of the independence of these directors.All three Directors are eminent personalities with extraordinary business acumen andexhibit very high sense of integrity. The three Directors during their tenure have addedenormous value to the Board deliberations and the Board has immensely benefitted fromtheir knowledge experience and insights.

The Board closely monitored the events that unfolded during the leadership transition.The Audit Committee of the Board (‘Committee') reviewed the aforementionedissues including the correspondence between the Regulators and the Company including thequeries raised on the representations made by Mr. Cyrus P. Mistry and Mr. Nusli N. Wadiain terms of Section 169 of the Companies Act 2013 and allegations made in this regard inthe proceedings before the National Company Law Tribunal initiated against the Promoter.The Committee also reviewed the Company's interventions the processes implemented andfollowed with respect to various compliances and disclosures and the rigours applied whensuch strategic investment decisions were taken. After due deliberations with relevantstakeholders and review of relevant documents the Committee expressed its confidence inthe Company's processes to ensure compliance with the provisions of SEBI Regulations. TheCommittee noted that appropriate procedures were followed by the Company in preparing itsfinancial statements and addressing the business risk issues and that there has beencompliance with all legal requirements and corporate governance standards. It followstherefore to conclude that the Company at all points has followed the due corporategovernance process and the Board and Management of the Company has conducted the businesswith due care and in the best interest of the Company.

1. Extra-Ordinary General Meeting

Upon the Requisition and Special Notice received from Tata Sons Limited Company'sPrincipal Shareholder the Company convened an Extra-Ordinary General Meeting (‘EGM')on December 21 2016. The Requisitionist placed proposals for removal of Mr. Cyrus P.Mistry and Mr. Nusli N. Wadia as Directors of the Company.

The Company held the EGM at 3:00 PM (IST) on December 21 2016. A total of 1868shareholders (including 5 authorised representatives of the Promoter and Promoter Group)were present in person and through proxies.

Resolution No. 1 in the notice convening the EGM relating to removal of Mr. Cyrus PMistry was dropped at the EGM since the same was rendered infructuous upon the resignationsubmitted by Mr. Mistry on December 19 2016.

The Meeting considered Resolution No. 2 relating to removal of Mr. Nusli N. Wadia as aDirector of the Company. Mr. Wadia was not present at the meeting but had sent acommunication to the Company Secretary and had requested that the same be read out to theshareholders. The Company Secretary read the said communication verbatim.

A total of 88 members spoke at length at the meeting. At the end of the meeting theChairman of the Meeting Mr. O P Bhatt Independent Director responded to all thequestions raised by the Members. The meeting concluded at 9:30 PM (IST).

The result of the shareholders vote is given below:

Category Total Votes polled Votes cast in favour Votes cast against
No. of votes % No. of votes % No. of votes %
Promoters 295917367 97.18 295917367 100.00 - -
Institutions 319925078 75.02 263877467 82.48 56047611 17.52
Retail Shareholders 9614960 4.00 8121947 84.47 1493013 15.53
All Shareholders 625457405 64.40 567916781 90.80 57540624 9.20

Pursuant to the Listing Regulations the Corporate Governance Report and the Auditors'Certificate regarding compliance of conditions of Corporate Governance are annexed to thisreport (Annexure 4).

2. Board Meetings

For seamless scheduling of meetings a calendar is prepared and circulated in advance.The Board has also adopted an activity guidance giving them visibility on the upcomingtopics for discussions.

The Board met 11 times during the year the details of which are given in the CorporateGovernance Report. The intervening gap between the meetings was within the periodprescribed under the Companies Act 2013 and the Listing Regulations.

3. Selection of New Directors and Board Membership Criteria

The Nomination and Remuneration Committee (‘NRC') works with the Board todetermine the appropriate attributes skills and experience for the Board as awhole and its individual members with the objective of having a Board with diversebackgrounds and experience in business government education and public service.Characteristics expected of all Directors include independence integrity high personaland professional ethics sound business judgment ability to participate constructively indeliberations and willingness to exercise authority in a collective manner. The Policy onappointment & removal of Directors and determining Directors' independence was adoptedby the Board on March 31 2015 and was annexed to the Board Report of Financial Year2014-15. During the year there have been no changes to the Policy. Hence the same is notannexed to this Report but is available on the website at www.tatasteel.com

4. Familiarization Programme for Independent Directors

All new Independent Directors (‘IDs') inducted on the Board go through astructured orientation programme. Presentations are made by Executive Directors and SeniorManagement giving an overview of our operations to familiarize the new IDs with theCompany's business operations. The new IDs are given an orientation on the Company'sproducts group structure and subsidiaries Board constitution and procedures mattersreserved for the Board and the major risks and risk management strategy. Details oforientation given to the existing IDs in areas of strategy operations & governancesafety health and environment industry & regulatory trends competition and futureoutlook are provided in the Corporate Governance Report and is also available on thewebsite at www.tatasteel.com

5. Evaluation

The Board evaluated the effectiveness of its functioning that of the Committees and ofindividual Directors. The Board through NRC sought the feedback of Directors on variousparameters such as: Degree of fulfillment of key responsibilities towards stakeholders (byway of monitoring corporate governance practices participation in the long-term strategicplanning etc.); The structure composition and role clarity of the Board andCommittees; Extent of co-ordination and cohesiveness between the Board and its Committees;Effectiveness of the deliberations and process management; Board/Committee culture anddynamics; and Quality of relationship between Board Members and the Management.

The Chairman of the Board had one-on-one meetings with the IDs and the Chairman of NRChad one-on-one meetings with the Executive and Non-Executive Directors. These meetingswere intended to obtain Directors' inputs on effectiveness of the Board/Committeeprocesses.

The Board considered and discussed the inputs received from the Directors. Also theIDs at their meeting reviewed the performance of the Board Chairman of the Board and thatof Non-Executive Directors. The evaluation process endorsed the Board Members' confidencein the ethical standards of the Company the resilience of the Board and Management innavigating the Company during challenging times cohesiveness amongst the Board Membersconstructive relationship between the Board and the Management and the openness of theManagement in sharing strategic information to enable Board Members to discharge theirresponsibilities. In the coming year the Board intends to enhance focus on diversity ofthe Board through the process of succession planning strategic plan for portfoliorestructuring of Tata Steel Europe and exploring new drivers of growth for the Group.

6. Compensation Policy for the Board and Senior Management

Based on the recommendations of NRC the Board has approved the Remuneration Policy forDirectors Key Managerial Personnel (‘KMP') and all other employees of theCompany. As part of the policy the Company strives to ensure that: the level andcomposition of remuneration is reasonable and sufficient to attract retain and motivateDirectors of the quality required to run the Company successfully; relationship betweenremuneration and performance is clear and meets appropriate performance benchmarks; andremuneration to Directors KMP and Senior Management involves a balance between fixed andincentive pay reffecting short medium and long-term performance objectives appropriateto the working of the Company and its goals.

The Remuneration Policy for Directors KMP and other Employees was adopted by the Boardon March 31 2015 and was annexed to the Board Report of Financial Year 2014-15. Duringthe year there have been no changes to the Policy. Hence the same is not annexed to thisReport but is available on our website at www.tatasteel.com

7. Particulars of Employees

Disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are annexed to this report. In terms ofthe provisions of Section 197(12) of the Companies Act 2013 read with Rules 5(2) and 5(3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 astatement showing the names and other particulars of employees drawing remuneration inexcess of the limits set out in the said Rules forms part of the report (Annexure 5).

8. Independent Directors' Declaration

The Company has received the necessary declaration from each ID in accordance withSection 149(7) of the Companies Act 2013 that he/she meets the criteria of independenceas laid out in Section 149(6) of the Companies Act 2013 and the Listing Regulations.

9. Directors

The year under review saw major changes to the Board of Directors (‘Board')including that of the position of the Chair of the Board. The Board on November 25 2016appointed Mr. O. P. Bhatt as the Chairman of the Board in place of Mr. Cyrus P. Mistry.The Board appointed Mr. Bhatt as the Chairman keeping in mind the principles ofgood corporate governance and to provide impartial leadership to the Company in itspreparation and conduct of the EGM. The Company convened and held the EGM on December 212016 upon the Requisition and Special Notice received from Tata Sons Company's PrincipalShareholder (‘Requisitionist'). The Requisitionist placed proposals forremoval of Mr. Cyrus P. Mistry and Mr. Nusli N. Wadia as Directors of the Company.

The appointment of Mr. Bhatt as the Chairman was also to ensure stability to theCompany and in the larger interest of Company's stakeholders including but not limited toemployees trading partners financial stakeholders and local community around Company'soperations. Mr. Bhatt served as the Chairman of the Board through December 22 2016.

The Board placed on record its deep appreciation towards Mr. Bhatt for his leadershipduring challenging times.

Inductions to the Board

On the recommendations of the Nomination and Remuneration Committee the Boardappointed: Mr. N. Chandrasekaran as Additional (Non-Executive) Director of the Companyeffective January 13 2017 and as the Chairman of the Board effective February 72017.

Mr. Chandrasekaran brings to the Board his extensive and outstanding experience insuccessfully leading and managing a large and valuable global corporation.

On February 7 2017 the Board appointed Dr. Peter (Petrus) Blauwhoff as Additional(Independent) Director of the Company. The appointment was effective immediately. Dr.Blauwhoff brings a wealth of experience to the Board with his knowledge of the globalmanufacturing industry technology focus in general and of the energy oil and gasbusiness in particular. Dr. Blauwhoff brings valuable insights and guidance in the areasof safety health and environment. On March 29 2017 the Board appointed Mr. Aman Mehtaas Additional (Independent) Director of the Company. The appointment was effectiveimmediately. Mr. Mehta brings a wealth of experience to the Board with his extensiveexperience in the field of banking & finance and proven track record of successfullymanaging large multinational enterprises. On March 29 2017 the Board appointed Mr.Deepak Kapoor as Additional (Independent) Director of the Company. The appointment waseffective April 1 2017.

Mr. Kapoor brings to the Board his experience in successfully steering the Indian armof a Global Consulting and Advisory firm during very challenging times and strengtheningthe firm's footprint in India. The Board will also draw on his extensive global experiencein the audit function as well as business advisory related work encompassing multipleindustries.

The resolution(s) for confirming the above appointments will come before you at theensuing Annual General Meeting (‘AGM') scheduled to be held on August 8 2017.We seek your support and hope you will enthusiastically vote in confirming the aboveappointments to the Board.

Re-appointments

As per the provisions of the Companies Act 2013 Mr. D. K. Mehrotra and Mr. KoushikChatterjee will retire at the ensuing AGM and being eligible seek re-appointment. TheBoard recommends and seeks your support in confirming re-appointment of Mr. D. K. Mehrotraand Mr. Koushik Chatterjee. The profile and particulars of experience attributes andskills that qualify all of the above Directors for the Board membership is disclosed inthe Notice convening the AGM.

Cessation

In accordance with the retirement policy applicable for the Company's Board ofDirectors (Independent Directors to retire on attaining 75 years of age) Mr.Jacobus Schraven and Mr. Subodh Bhargava Independent Directors retired from theBoard on February 7 2017 and March 29 2017 respectively. _ Mr. Cyrus P. Mistry resignedas the Member of the Board effective December 19 2016. _ Mr. Nusli N. Wadia in terms ofa shareholder vote ceased to be the Member of the Board effective December 21 2016. TheBoard of Directors place on record their deep appreciation for the contribution of theseDirectors during their tenure.

10. Key Managerial Personnel

Pursuant to Section 203 of the Companies Act 2013 the Key Managerial Personnel of theCompany are – Mr. T. V. Narendran Managing Director (India and South-East Asia) Mr.Koushik Chatterjee Group Executive Director (Finance Corporate & Europe) and Mr.Parvatheesam K Company Secretary. During the year there has been no change in the KeyManagerial Personnel.

11. Audit Committee

The Audit Committee was constituted in the year 1986. The Committee has adopted aCharter for its functioning. The primary objective of the Committee is to monitor andprovide effective supervision of the Management's financial reporting process to ensureaccurate and timely disclosures with the highest levels of transparency integrity andquality of financial reporting.

The Committee met 7 times during the year the details of which are given in theCorporate Governance Report. As on date of this Report the Committee comprises Mr. O. P.Bhatt (Chairman) Mr. Ishaat Hussain Mr. Andrew Robb and Mr. Aman Mehta.

12. Internal Control Systems

The Board of Directors of the Company is responsible for ensuring that InternalFinancial Controls have been laid down in the Company and that such controls are adequateand operating effectively. The foundation of Internal Financial Controls (‘IFC')lies in the Tata Code of Conduct (‘TCoC') policies and procedures adopted bythe Management corporate strategies annual business planning process managementreviews management system certifications and the risk management framework.

The Company has IFC framework commensurate with the size scale and complexity of itsoperations. The framework has been designed to provide reasonable assurance with respectto recording and providing reliable financial and operational information complying withapplicable laws safeguarding assets from unauthorized use executing transactions withproper authorization and ensuring compliance with corporate policies. The controls basedon the prevailing business conditions and processes have been tested during the year andno reportable material weakness in the design or effectiveness was observed. The frameworkon IFC over Financial Reporting has been reviewed by the internal and external auditors.

The Company uses various IT platforms to keep the IFC framework robust and theInformation Management Policy governs these IT platforms. The systems standard operatingprocedures and controls are implemented by the executive leadership team and are reviewedby the internal audit team whose findings and recommendations are placed before the AuditCommittee.

The scope and authority of the Internal Audit function is defined in the Internal AuditCharter. To maintain its objectivity and independence the Internal Audit function reportsto the Chairman of the Audit Committee. The Internal Audit team develops an annual auditplan based on the risk profile of the business activities. The Internal Audit plan isapproved by the Audit Committee which also reviews compliance to the plan.

The Internal Audit team monitors and evaluates the e_cacy and adequacy of internalcontrol systems in the Company its compliance with operating systems accountingprocedures and policies at all locations of the Company and its subsidiaries. Based on thereport of internal audit function process owners undertake corrective action(s) in theirrespective area(s) and thereby strengthen the controls. Significant audit observations andcorrective action(s) thereon are presented to the Audit Committee.

The Audit Committee reviews the reports submitted by the Internal Auditors in each ofits meeting. Also the Audit Committee at frequent intervals has independent sessions withthe external auditor and the Management to discuss the adequacy and effectiveness of IFC.

13. Risk Management

Risk is an essential part of business and taking risk is a fundamental driving force inbusiness. In fact it is the unique differentiator between companies who thrive and thosewho merely survive or otherwise. This has never been more important than in today's VUCA(Volatility Uncertainty Complexity and Ambiguity) world. There are several rapidunprecedented and unpredictable changes taking place all the time. The size scale andscope of these changes in today's world are enormous. Many of these are driven by changesin technology and have consequential impacts on supply chain manufacturing assemblinglogistics and costs. The geo-political environment is extremely volatile and regulatoryframework uncertain which in-turn is leading to changes in the supply-demand equationcommodity prices market forces and competition. The aforementioned uncertainties warrantrobust process and framework to minimize the threats and capture opportunities to createsustainable value for the organization. The Company follows a robust 5 step EnterpriseRisk Management (‘ERM') process to address the risks associated with itsbusiness. The ERM process framework has evolved and matured over the years and is based oninternational standards such as ISO 31000 and Committee of Sponsoring Organizations of theTreadway Commission (‘COSO') with inputs drawn from the best practices ofleading companies across industries. The ERM is aimed at developing a "RiskIntelligent Organization" that supports risk informed business decisions strengthensorganizational risk resiliency and provides agility to the organization for preserving aswell as enhancing long term value for all stakeholders. In order to achieve the stated ERMobjectives the Company has constituted a robust governance structure comprising of threelevels of risk management responsibilities as: Risk Oversight Risk Infrastructure andRisk Ownership. The Risk Oversight function consists of the Board Risk ManagementCommittee (‘RMC') and Group Risk Review Committee (‘GRRC') thatprovide clear directions and guidelines for spearheading the ERM framework & policyacross the organization. The RMC of Board assists the Board in framing the Risk ManagementPlan for the Company and reviewing and guiding the risk policy. It also reviews key risksto the Tata Steel Group and actions deployed by the Management with respect to theiridentification impact assessment mitigation and monitoring. GRRC is a ManagementCommittee comprising Senior Management personnel as its members. The GRRC has the primaryresponsibility of implementing the Risk Management Policy of the Company and achieving thestated objective of developing a risk intelligent culture that helps improve the Company'sperformance.

The Company has laid down a strong foundation for a successful risk management processby setting up the risk infrastructure in the form of a dedicated organizational unitcalled ERM headed by Group Head – Corporate Finance & Risk Management who actsas the Chief Risk Officer (‘CRO') of the Company. The ownership of risktracking and mitigation rests with the senior executives of various functional units whoas the risk owners review and monitor key risks of the division periodically in order toavoid any undue deviations or adverse events by designing and implementing suitablemitigation plans proactively. Regular and extensive reviews at business units lead torobust implementation of mitigation plans which ultimately create value for the business.

The robust governance structure has also helped in the integration of the ERM processwith the Company's strategy & planning processes where emerging risks are used asinputs in the strategy and planning process. Risk is also integrated with the capitalallocation process and risk assessments form important considerations for key decisions oninvestment proposals for organic and inorganic growth. During the year the Company hasundertaken various focused initiatives and process improvements aimed at strengtheningwidening & deepening the scope and coverage of ERM across the

Company. The risk maturity assessment process has been rolled out to the domestic andoverseas subsidiaries and the process has been strengthened through a customized in-housebuilt IT solution to facilitate real time reporting of risks provide visibilitydrill-down and appropriate escalation mechanisms across the Enterprise. During the yearthe Company undertook various external and internal training programs/sessions along withcommunication campaigns to promote awareness of the ERM process. The Board is happy toreport that the Company has been conferred the honour of the ‘Best Risk ManagementPractice' in the category of Metals & Mining at the 3rd India Risk Management Awards2017. This is indicative of the Company's commitment towards cultivating a robust andproactive risk intelligent culture.

14. Vigil Mechanism

The Company's Vigil Mechanism provides a formal mechanism for all Directors employeesand business associates to approach the Ethics Counselor / Chairman of the Audit Committeeand make protective disclosures about the unethical behaviour actual or suspected fraudor violation of the TCoC.

The Vigil Mechanism comprises 3 policies viz. the Whistle Blower Policy for Directors& Employees Whistle Blower Policy for Business Associates and Whistle Blower Reward& Recognition Policy for Employees. The same is available on our website www.tatasteel.comThe Whistle Blower Policy for Directors & employees is an extension of the TCoC thatrequires every Director or employee to promptly report to the Management any actual orpossible violation of the TCoC or any event wherein he or she becomes aware of that whichcould affect the business or reputation of the Company.

The Whistle Blower Policy for Business Associates provides protection to vendors fromany victimization or unfair trade practices by the Company.

The Whistle Blower Reward and Recognition Policy for Employees has been implemented inorder to encourage employees to genuinely blow the whistle on any misconduct or unethicalactivity taking place in the Company. The disclosures reported are addressed in the mannerand within the time frames prescribed in the Whistle Blower Policy. During the year aseries of communication awareness on the "Code of Conduct" of the Company weresent to business associates and "Neeti Katha" i.e. storytelling through snippetseries were mailed to employees as part of the awareness campaign. Each snippet consistedof a short story based on situations related with accepting of gifts and hospitality frombusiness associates.

As a tribute to late Mr. J R D Tata for over a decade the Company has beencelebrating the month of July as Ethics Month. This practice has helped in reinforcingemployee involvement and passion in driving the Management of Business Ethics. A workshopon Tata Values Tata Code of Conduct and Governance process was initiated with anobjective of training employees.

During the year the Company also adopted the Confiict of Interest Policy. The policyrequires employees to act in the best interest of the Company without any confiicts anddeclare confiicts if any (real potential or perceived) to the Ethics Counsellor.

During the year the Company received 382 whistle-blower complaints of which 348 wereinvestigated and appropriate action was taken. Investigations are underway for theremaining complaints.

15. Related Party Transactions

There have been no materially significant related party transactions between theCompany and the Directors the Management the subsidiaries or the relatives except forthose disclosed in the financial statements.

Accordingly particulars of contracts or arrangements with related parties referred toin Section 188(1) along with the justification for entering into such contracts orarrangements in Form AOC-2 does not form part of the Report.

16. Disclosure as per the Sexual Harassment of Women at Workplace (PreventionProhibition And Redressal) Act 2013

The Company has zero tolerance towards sexual harassment at the workplace and hasadopted a policy on prevention prohibition and redressal of sexual harassment atworkplace in line with the provisions of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 and the Rules thereunder.

During the year the Company received 26 complaints of sexual harassment out of which19 complaints have been resolved by taking appropriate actions. The remaining 7 complaintsare under investigation.

17. Directors' Responsibility Statement

Based on the framework of internal financial controls established and maintained by theCompany work performed by the internal statutory cost and secretarial auditors andexternal agencies including audit of internal financial controls over financial reportingby the statutory auditors and the reviews performed by the Management and the relevantBoard Committees including the Audit Committee the Board is of the opinion that theCompany's internal financial controls were adequate and effective during Financial Year2016-17. Accordingly pursuant to Section 134(5) of the Companies Act 2013 the Board ofDirectors to the best of their knowledge and ability confirm:

a) that in the preparation of the annual accounts the applicable accounting standardshave been followed along with proper explanation relating to material departures;

b) that we have selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company at the end of the financial year and of theprofit or loss of the Company for that period;

c) that proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

d) that the annual accounts have been prepared on a going concern basis;

e) that proper systems to ensure compliance with the provisions of all applicable lawswere in place and that such systems were adequate and operating effectively; and f) thatproper internal financial controls were laid down and that such internal financialcontrols are adequate and were operating effectively.

18. Business Responsibility Report

The Securities and Exchange Board of India (‘SEBI') requires companies toprepare and present to stakeholders a Business Responsibility Report (‘BRR')in the prescribed format. SEBI however allows companies to follow an internationallyrecognized framework to report on the environmental and social initiatives undertaken bythe Company. Further SEBI has on February 6 2017 advised Companies that are required toprepare BRR to transition towards an Integrated Report. As stated earlier in the Reportthe Company has followed the framework of the International Integrated Reporting Councilto report on all the six capitals that it uses to create long-term stakeholder value. TheCompany's Integrated Report has been assessed and Bureau Veritas (India) Private Limitedhas provided the required assurance. The Company has also provided the requisite mappingof principles between the Integrated Report the Global Reporting Initiative (‘GRI')and the Business Responsibility Report as prescribed by SEBI. The same is available on thewebsite www.tatasteel.com.

19. Subsidiaries Joint Ventures and Associates

The Company has 255 subsidiaries 19 joint ventures and 22 associate companies as onMarch 31 2017. During the year the Board of Directors reviewed the affairs of materialsubsidiaries. The Company has in accordance with Section 129(3) of the Companies Act2013 prepared consolidated financial statements of the Company and all its subsidiarieswhich form part of the Integrated Report. Further the report on the performance andfinancial position of each of the subsidiary associate and joint venture and salientfeatures of the financial statements in the prescribed Form AOC-1 is annexed to thisreport (Annexure 6).

In accordance with Section 136 of the Companies Act 2013 the audited financialstatements including the consolidated financial statements and related information of theCompany and financial statements of each of the subsidiary will be available on ourwebsite www.tatasteel.com. These documents will also be available for inspection duringbusiness hours at the Registered Office of the Company.

The names of companies that have become or ceased to be subsidiaries joint venturesand associates are disclosed in the annexure to this report (Annexure 7).

20. Auditors

Statutory Auditors

In terms of the provisions of the Companies Act 2013 (‘Act') statutoryauditors need to be rotated on completion of two consecutive terms of five years each. Forthose of the companies that have firms audit their accounts for more than ten years as ofApril 1 2014 the Act provided such companies a transition period of three years tocomply with the provisions of the Act. The current statutory auditors M/s DeloitteHaskins & Sells LLP (‘DHS LLP') completed two consecutive terms as ofApril 1 2014 and hence the Company availed the benefit of the transition period whichcame to an end on March 31 2017. Accordingly the Company would need to appoint a newaudit firm to audit its books of account for the year ending March 31 2018 and onwards.The Management under the guidance of the Audit Committee initiated the process ofselection of auditors and had detailed interactions with certain eligible audit firms andassessed them against a defined eligibility and evaluation criteria. The assessment wasundertaken by a Steering Committee constituted for this purpose.

The Audit Committee of the Board considered the findings of the Steering Committee andhas decided to appoint Price Waterhouse & Co Chartered Accountants LLP (‘PW')as the statutory auditors of the Company for a period of five years commencing from theconclusion of the ensuing 110th Annual General Meeting scheduled to be held on August 82017 through the conclusion of 115th Annual General Meeting of the Company to be held inthe year 2022. The Board at its meeting held on May 16 2017 considered therecommendations/decision of the Audit Committee with respect to the appointment of PW asthe statutory auditor. Based on due consideration the Board recommends for your approvalthe appointment of PW as the statutory auditor of the Company. The Audit Committee and theBoard of Directors considered the following factors in recommending the appointment of PWas the statutory auditor of the Company: Experience of the firm in handling audits oflarge global metal and mining corporations; Competence of the leadership and the proposedaudit team of the firm in auditing the financial statements of the Company; Ability of thefirm to seamlessly scale and understand the Company's operations systems and processes;and

Geographical presence and ability of the firm in servicing the Company and itssubsidiaries at multiple locations.

The Board seeks your support in approving the appointment of PW as the new statutoryauditor of the Company.

DHS LLP Chartered Accountants are the auditors of the Company and will hold officeuntil the conclusion of the ensuing AGM. On your behalf and on our own behalf we place onrecord our sincere appreciation for the services rendered by DHS LLP during its longassociation with the Company.

Cost Auditors

As per Section 148 of the Companies Act 2013 (‘Act') the Company isrequired to have the audit of its cost records conducted by a Cost Accountant in practice.In this connection the Board of Directors of the Company has on the recommendation of theAudit Committee approved the appointment of M/s Shome & Banerjee as the cost auditorsof the Company for the year ending March 31 2018. In accordance with the provisions ofSection 148(3) of the Act read with Rule 14 of the Companies (Audit and Auditors) Rules2014 the remuneration payable to the Cost Auditors as recommended by the Audit Committeeand approved by the Board has to be rati_ed by the members of the Company. Accordinglyappropriate resolution forms part of the Notice convening the AGM. The Board seeks yoursupport in approving the proposed remuneration of `18 lakh plus out-of-pocket expensespayable to the Cost Auditors for the Financial Year ending March 31 2018. M/s Shome &Banerjee have vast experience in the field of cost audit and have conducted the audit ofthe cost records of the Company for the past several years under the provisions of theerstwhile Companies Act 1956.

The due date for _ling the Cost Audit Report of the Company for the Financial Yearended March 31 2016 was September 30 2016 and the same was _led in XBRL mode by the CostAuditor on September 2 2016.

Secretarial Auditors

Section 204 of the Companies Act 2013 inter-alia requires every listed companyto annex with its Board's report a Secretarial Audit Report given by a Company Secretaryin practice in the prescribed form.

The Board appointed Parikh & Associates practicing Company Secretaries asSecretarial Auditor to conduct Secretarial Audit of the Company for the Financial Year2016-17 and their report is annexed to this report (Annexure 8). There are noqualifications/ observations/reservations/adverse remarks in the said report. The Boardhas also appointed Parikh & Associates as Secretarial Auditor to conduct SecretarialAudit of the Company for Financial Year 2017-18.

21. Extract of the Annual Return

The details forming part of the extract of the Annual Return in Form MGT 9 as perprovisions of the Companies Act 2013 and Rules thereto are annexed to this report (Annexure9).

22. Significant and Material orders passed by the Regulators or Courts

There have been no significant and material orders passed by the regulators or courtsor tribunals impacting the going concern status and the Company's operations. HoweverMembers' attention is drawn to the statement on contingent liabilities commitments in thenotes forming part of the Financial Statements.

23. Particulars of Loans Guarantees or Investments

Particulars of loans guarantees given and investments made during the year inaccordance with Section 186 of the Companies Act 2013 is annexed to this report (Annexure10).

24. Energy Conservation Technology Absorption and Foreign Exchange Earnings and Outgo

Details of the energy conservation technology absorption and foreign exchange earningsand outgo are annexed to this report (Annexure 11).

25. Deposits

During the year the Company has not accepted any public deposits under the CompaniesAct 2013.

J. ACKNOWLEDGEMENTS

We thank our customers vendors dealers investors business associates and bankersfor their continued support during the year. We place on record our appreciation of thecontribution made by employees at all levels. The Company's resilience to meet challengeswas made possible by their hard work solidarity co-operation and support.

We thank the Government of India the State Governments where we have operations andother government agencies for their support and look forward to their continued support inthe future.

On behalf of the Board of Directors

sd/-
N. Chandrasekaran
Mumbai Chairman
May 16 2017 (DIN: 00121863)