Tata Steel Ltd (NSE: TATASTEEL) Q4 2025 Earnings Call dated May. 13, 2025
Corporate Participants:
Kinshuk Tripathi — Senior Manager, Digital Communications
Samita Shah — Vice President, Corporate Finance, Treasury & Risk Management
T. V. Narendran — Chief Executive Officer and Managing Director
Koushik Chatterjee — Chief Financial Officer and Executive Director
Analysts:
Prateek Singh — Analyst
Ritesh Shah — Analyst
Satyadeep Jain — Analyst
Amit Dixit — Analyst
Ashish Jain — Analyst
Amit Murarka — Analyst
Sumangal Nevatia — Analyst
Presentation:
Kinshuk Tripathi — Senior Manager, Digital Communications
Ladies and gentlemen, good day, and welcome to the Tata Steel Analyst Call. Please note that this meeting is being recorded [Operator Instructions]
I would now like to hand the conference over to Ms. Samita Shah. Thank you. And over to you, ma’am.
Samita Shah — Vice President, Corporate Finance, Treasury & Risk Management
Thank you, Kinshuk. Good afternoon, good morning and good evening to all our viewers joining us from different parts of the world.
On behalf of Tata Steel, I’m delighted to welcome you to this call to discuss our results for the fourth quarter and the full-year financial year of FY ’25. We declared our results yesterday, and there’s a detailed presentation along with the SEBI release, detailed presentation on our website, which discusses the results.
During this call, we will walk you through some of the details and also take on any questions you may have. Before I move on, I just want to remind all of you that the entire discussion today will be covered by the safe harbor clause, which is on Page 2 of the presentation.
This call today is led by our CEO and Managing Director, Mr. T.V. Narendran; and our ED and CFO, Mr. Koushik Chatterjee. Thank you very much again for joining us today. And I will now request Naren to make a few opening comments before we throw the floor open for questions.
Thanks. And over to you, Naren.
T. V. Narendran — Chief Executive Officer and Managing Director
Thanks, Samita, and hello, everyone. I’ll make a few comments and then pass on to Koushik.
FY ’25 has been an important year for Tata Steel, and it demonstrates our ability to navigate a challenging operating environment and progress on our stated objectives across geographies. For most of the year, the steel fundamentals diverged across regions with increasing exports from China, which weighed on the price sentiment. And since January, the evolution of the U.S. policy and the nations — different nations focusing on protecting the local industry has led to varied price momentum across India, Europe and U.K. And at the same time, China continues to struggle with declining steel consumption.
Regions like U.K., which are yet to review the quotas that they have, have struggled a little bit more because as you may be aware, in Europe, they have refined the quotas that are available for imports, which has acted to limit the imports. In India, also, there’s a safeguard duty, which has helped us. Amongst the operating geographies, India remains a structurally attractive market and we are committed to leadership in chosen segments. And our annual performance has been aided by the commissioning of India’s largest blast furnace at Kalinganagar, coupled with the initiatives to enhance the cost competitiveness and product mix.
We achieved the highest ever crude steel production of 21.7 million tonnes and deliveries of 20.9 million tonnes for the full year. And across our sites, including in Kalinganagar, which is under ramp-up, we operated close to — excluding Kalinganagar, which is ramping up, we operated close to 100% capacity utilization. And that is an outcome of the way we design our plants, our best-in-class maintenance practices and our superior marketing and sales network, which helps us maximize our deliveries across cycles in the domestic market.
Coming specifically to some of the segments, the deliveries to the auto segment — automotive segment were aided by the focus on new product development, especially the high-strength steels and enhanced capabilities on account of the new continuous annealing line at Kalinganagar. We became the first company to localize select automotive product grades, CP780, through our joint venture JCAPCPL and it come in supplying DP780 grade also to automotive OEMs to support them in their light-weighting initiatives.
We also cater to the growing requirements of high-quality wire rods for the auto industry, and these deliveries were also positively impacted by the successful commissioning of the world’s longest Stelmor Conveyor in our wire rod plant in Jamshedpur. We expect further progress in the product mix with the 0.5 million tonne combi mill, which is being set up in Jamshedpur, which will use the steel that is made out of the erstwhile Usha Martin plant, which is called Tata Steel Gamharia. We expect — the furnace has already been commissioned of this 0.5 million tonne combi mill. And over the next few months, the other facilities will also be commissioned.
Our branded products and retail vertical achieved volumes of around 7 million tonnes aided by the best ever sales of Tata Tiscon, Tata Astrum and Tata Steelium. Tata Tiscon volumes grew by about 19% year-on-year. It is a second year in succession that they’ve had double-digit growth, and it has reached 2.4 million tonnes, while our hot-rolled brand, Tata Astrum, and the cold-rolled brand, Tata Steelium, together achieved record sales of 3.8 million tonnes. Our e-commerce platform, Aashiyana, served more than 1 lakh unique customers during the year with a gross merchandise value of over INR3,500 crores.
Moving on to the Industrial Products & Projects, engineering, it witnessed a double-digit growth and contributed to the construction of around 2,500 kilometers of oil and gas pipelines. Once the Kalinganagar plant was commissioned, we had said that we will focus on oil and gas because that’s also a high-end approval-based business, just like the automotive business. In line with our focus to grow in chosen segments, we have also forayed now into commercial shipbuilding, supplying grades to various shipbuilders in India, including Mazagon Dock Shipbuilders, Garden Reach Shipbuilders, Cochin Shipyard and Shoft Shipyard.
Our capacity enhancements investments are also progressing well across sites. At Kalinganagar, the 5 million tonne blast furnace continues to ramp up, and the civil work is in progress in the electric arc furnace site in Ludhiana, which we hope to commission in the next 12 months. Specific to downstream, the Continuous Galvanizing lines are expected to be commissioned in the coming months, while the ramp-up is in progress for the 100,000 tonne per annum structural mill that we’ve — tubular structural mill that we’ve set up in Jamshedpur.
In the U.K., we have safely decommissioned both the blast furnaces at Port Talbot and smoothly transitioned to serving customers via downstream processing of the purchase substrate. Our delivery stood at 2.5 million tonnes, and we were lower on a year-on-year basis. U.K. steel prices are still 8% below the levels that we saw last year due to the import pressures and the subdued demand situation in the U.K.
As such, we focused on transforming operations towards a sustainable model and the shift in the operating model, coupled with our focus on controllable costs, has led to the improvement in the fixed cost base by about GBP230 million on an annual basis. But unfortunately, this is not visible as yet in the performance due to the market dynamics.
With respect to the proposed transition to green steel making, we have also received a planning permission for the electric arc furnace and are gearing up for the civil work and the construction activity to begin by July. In Netherlands, the liquid steel production was at near capacity, full capacity at 6.75 million tonnes, the highest in many years. And this, in part, has led to a 17% year-on-year increase in deliveries to 6.25 million tonnes for the full year.
EBITDA remains positive on a full-year basis and deliveries for the quarter at 1.75 million tonnes were the highest quarterly volumes in the last six years. We recently launched a cost competitiveness program targeting EUR500 million of savings in FY ’26. And the transformation is a building block to ensure that Tata Steel Netherlands becomes one of the most efficient and sustainable sites in Europe. We are engaged with the government team to support our integrated decarbonization and environment measures — measurement projects. And I’m happy to share that Tata Steel has been recognized by World Steel as a Sustainability Champion for the eighth year in a row.
With that, I hand over to Koushik for his comments. Thank you.
Koushik Chatterjee — Chief Financial Officer and Executive Director
Thank you, Naren. Good afternoon, good evening to all those who have joined in.
I will cover essentially three themes; firstly, the performance; secondly, our cost transformation program across geographies, what we have done so far and what we are targeting in the next 12 months to 18 months; and thirdly, update on the decarbonization strategy and actions in the U.K. and Netherlands.
Let me start with our production performance for the quarter and the year FY ’25. While you would have seen the production filings that we do, I wanted to highlight that for the full year in India, we’ve increased our production from Tata Steel Kalinganagar by 1 million tonnes. And for the India business, our production increased by about 0.9 million tonnes, taking into account the shutdown that we have taken for our G Blast Furnace realigning, which is currently on, and we should hope to complete it by July.
In Netherlands, the crude steel production for the year was 6.75 million tonnes, which is almost at capacity level. As you know, in the U.K., our business model has actually changed and we are now operating as a finishing facility with purchase substrate, including from India, Netherlands and external sources.
Moving to the financial performance for the quarter and full year. Our consolidated performance for the quarter has been provided in Slide 23 of the presentation. Consolidated revenues for the Jan to March quarter stood at about INR56,218 crores, which were up by 5% quarter-on-quarter, primarily driven by the seasonality and the seasonally strong volumes in India and Netherlands. The steel realization improved in India by around INR600 per tonne, but revenue per tonne was down by about GBP53 per tonne in the U.K. and EUR79 per tonne in Netherlands on a quarter-on-quarter basis.
The consolidated EBITDA for the quarter was about INR6,762 crores, which translates to a margin of 12%, up by about 100 basis points quarter-on-quarter. India EBITDA margin was higher at 21% and translates to INR7,418 crores, and Netherlands was about INR125 crores, which was partly offset by the EBITDA loss in Tata Steel U.K.
In India, the Tata Steel Netherlands’ EBITDA — sorry, Tata Steel standalone EBITDA for the quarter was INR7,105 crores, which translates to around INR12,700 per tonne. As I mentioned during the third quarter earnings call, there was a non-cash credit of INR1,413 crores or INR2,670 per tonne. Excluding this, the standalone EBITDA has actually improved by close to INR1,000 per tonne on a quarter-on-quarter basis.
I want to continue to make a special mention about the Neelachal Ispat Nigam Limited, or NINL, performance. It has consistently improved across the quarters and recorded an increase in EBITDA of 9% quarter-on-quarter to INR323 crores, which is a margin of about 23%. The most heartening part in NINL is that it has achieved INR1,000 crores EBITDA in the year, reflecting an EBITDA margin of 19% and a cash flow of INR1,000 crores even in these challenging market conditions. NINL will remain as one of Tata Steel’s most promising growth prospects in the coming years as we are working on its expansion plans.
In our overseas operations, efforts towards cost reduction, operational KPI improvements and product mix optimization are showing visible benefits despite spreads moving to a multi-year low. In Netherlands, the fourth quarter EBITDA improved to EUR14 million and coupled with a working capital release of EUR300 million, leading to a free cash flow of over EUR200 million.
In U.K., our fixed cost improved by GBP69 per tonne quarter-on-quarter, but this was more than offset in the drop in the revenue per tonne and the higher substrate prices leading to an EBITDA loss of GBP80 million in the fourth quarter. The U.K. underlying EBITDA loss in the fourth quarter trended down compared to Q3. When I speak about our cost transformation program in a short while, I will cover further efforts in the U.K. Our consolidated operating cash flow after interest and adjustment for the quarter stood at INR7,700 crores, aided by EBITDA performance and a very sharp focus on working capital that ensured a cash release of INR4,300 crores.
Let me now move to the full-year performance, which has been provided in Slide 25 of the presentation. There are four big headlines I would like to highlight. Firstly, in spite of our multi-year low in steel prices and reduced steel raw material spreads, our consolidated EBITDA for the year was INR25,802 crores versus INR23,402 crores in financial year ’24, which is a growth of 10%. This reflects a 200 basis point increase in the consolidated EBITDA versus financial year ’24.
Secondly, the structural cost take-out across all entities of Tata Steel during financial year ’25 was about INR6,600 crores, focusing on fixed cost take-out, efficiencies in manufacturing, procurement, raw material optimization with leaner coal blends and fixed overheads. This is a company-wide program, and I’ll talk shortly on what we aim to do in the next 12 months to 18 months.
Thirdly, and even more important, is to demonstrate the cash flow orientation of the entire company. Our operating cash flows after interest and adjustment for the year increased by 37% compared to previous year from INR12,941 crores to INR17,700 crores in spite of challenging market conditions.
Fourthly, our Netherlands operation marked a significant turnaround in EBITDA during the year from a negative EBITDA of EUR426 million in financial year ’24 to a generation of EUR90 million in financial year ’25, an improvement of more than EUR500 million. If I consider the operating turnaround at the financial year ’24 prices and spreads, it would actually be a EUR900 million turnaround. While there is lots to do, the direction of the movement is very clear and we continue in this path.
India EBITDA for the full year stood at INR29,285 crores, with standalone EBITDA of INR28,217 crores. Standalone EBITDA stood at INR13,500 per tonne. The EBITDA performance was aided by a 5% increase in volumes, lower raw material and operating costs and special actions that I talked earlier. Total costs improved by more than INR5,700 per tonne.
Our U.K. operations too are progressing as per stated plan. While the full-year EBITDA was minus GBP385 million, it is a tale of two halves, with EBITDA in second half improving by GBP90 million versus the first half. The closure of the heavy end steelmaking by September and concerted efforts to optimize costs led to the reduction in fixed costs by around GBP160 million in second half and GBP230 million for the full year.
Now, let me provide some details on our cost transformation program. The structural cost take-outs in financial year ’25, as I mentioned earlier, was about INR6,600 crores versus financial year ’24. Looking ahead to financial year ’26. Our focus continues to be on controllable factors, and we are targeting further cost take-outs of almost INR11,500 crores, roughly about $1.3 billion across geographies by focusing on controllable costs. And let me outline some of the specifics.
Firstly, in India, we intend to deliver savings of INR4,000 crores by focusing on operating KPIs, employee productivity, supply chain optimization, coupled with investment in projects with low payback period. There is a specific focus on conversion cost, and our aim is to optimize conversion costs by about INR1,000 to INR1,200 per tonne. We have identified a pipeline of low capex, high-IRR projects totaling less than INR500 crores that will improve operational cost and be completed in a short span of time.
In the U.K., we intend to continue progressing on achieving a lean structure by further reduction in fixed costs of 29% year-on-year of around $220 million. Key levers range from optimizing the cost of substrate and the coil mix, upgradation of IT infrastructure to reduce corporate overheads and rationalization of downstream operations to improve the profitability. Our total fixed cost in FY ’24 was about GBP995 million, which reduced to about GBP762 million in financial year ’25 million, and we target to bring it to around GBP540 million in the next financial year.
In Netherlands, we intend to achieve savings of around EUR500 million, and the program encompasses multiple areas such as volume maximization, product mix, repair and maintenance, employee productivity and others. We are also in discussions with the unions on the transformation project.
Let me now touch upon the capital allocation before moving to the decarbonization update. Of the generated cash flows of financial year ’25, we spent about INR15,671 crores on capital expenditure. Our net debt stands at about INR82,579 crores, which has come down from INR88,870 crores in September ’24 by about INR6,200 crores in the last six months. We plan to spend about INR15,000 crores of capital expenditure in the next financial year. And of this, close to 75% is for projects to be completed in India, including the last part of the Tata Steel Kalinganagar spend on the third caster and the related facilities.
The electric arc finance project in Ludhiana is being focused, and there are several smaller projects, which are also meant for asset reliability and performance efficiency. Our work on engineering for the next phase of expansion in NINL is currently ongoing and the regulatory clearance process on environment are also underway.
Our capital allocation will continue to be prioritized towards the capacity growth and downstream facilities in structurally attractive Indian markets. In U.K. and Europe, the focus is largely on decarbonization, with material support from the government. As you are aware, we have secured a GBP500 million support from the U.K. government for the transition to scrap-based electric arc manufacturing. We have now got the planning approvals, identifying the technology providers and the design engineering work is almost complete. We have spent about GBP35 million on the project in financial year ’25, and we will commence site activities in the next few months.
On Netherlands, we are in intense discussion with the Netherlands government to secure funding and policy support to enable the decarbonization and environmental project. The Dutch government has completed the pre-notification filing with the European Commission regarding the project and all stakeholders are working on various subjects relating to the project. The Dutch government has been updated — has updated its parliament, confirming talks with us and the European Commission relating to the project.
I would now like to walk you through an accounting change that we have made in the standalone financial statements in order to have a clearer view of the underlying business performance going forward. The valuation of investments in subsidiaries is tested against the present value of the future cash flows over the long term. For this, it is necessary to take a view on the business landscape in the decade beyond 2030.
Tata Steel U.K. has transitioned its business model to a downstream-only play and is undertaking an investment to build the electric arc furnace project in Port Talbot by financial year ’27-’28 end. Tata Steel Netherlands is in discussions with the government for the project to replace one of the two blast furnaces and coke ovens with a DRI-EAF combination by around 2030. The primary drivers of the profitability for the future businesses will, therefore, change from the traditional steel price to iron ore and coal basket spread to the following; it will be influenced by the Carbon Border Adjustment Mechanism, the infrastructure and the availability of clean fuel and the carbon capture options, local availability and pricing of scrap, willingness and ability of customers to pay additional premium for low CO2 steel and circularity.
Other regulatory costs, including fixed cost network for electricity, hydrogen and natural gas. These factors, which will be the primary drivers of the business in Europe are all currently evolving, with significant changes in market regulations being implemented. There are multiple risks and opportunities with relation to how they will play out over the next few years, impacting the current value of the business at this point of time.
The company has, therefore, concluded that carrying these investments in U.K. and Netherlands at historical cost less impairment under Ind AS 27 is no longer appropriate. Tata Steel has, therefore, voluntarily changed its accounting policy to carry the equity investment in subsidiaries at fair value under Ind AS 109. This also addresses the reliability issues that Ind AS 8 talks about. The move to fair valuation more accurately reflects the underlying value of the business, including the potential upside in valuation in the coming years as the uncertainty over the regulatory and market factor reduces.
Having opted to account these investments at fair value under Ind AS 109, the company has also opted to route the fair value changes between accounting periods through the other comprehensive income. This allows the company to keep the movements in fair value of the long-term strategic assets distinct from the underlying financial performance of the company’s regular business activities.
Based on the fair value assessment, Tata Steel has recognized an adjustment in the fair value in the investment in subsidiaries only in the standalone financial statements through the OCI of around INR24,829 crores in the quarter and INR23,606 crores in the year ended 31 March, ’25, respectively. This is a non-cash adjustment, and there is no impact on the consolidated financial statements.
The losses sustained by the Tata Steel U.K. and recently by Tata Steel Netherlands in the last few years have already been reflected in the consolidated financial statement. As a result of the change in the accounting policy, there will be greater consistency between the consolidated and the standalone financial statements. As of March ’25, the standalone net worth stands at INR1,23,544 crores, where the consolidated net worth is at INR87,770 crores.
Finally, with relation to the U.S.-U.K. trade deal, steel, aluminum tariffs on the U.K. origin goods are now eliminated. And this is a positive, although limited impact on Tata Steel U.K., which exports mostly packaging products of a small quantity. There is a larger positive indirect impact through our customers in the automotive tariffs, which has been reduced to 10% for a defined quota of vehicles.
The automotive sector in the U.K. is also likely to be positively impacted within the U.K.-India trade deal. After the closure of the blast furnaces in the U.K., Tata Steel U.K. is now servicing its customers on the basis of imported slabs and HR coils, especially from India after processing them at the local downstream facilities. We expect no material change or impact on our supply chain on the trade basis.
With this, I end my presentation and open the floors for questions. Thank you so much.
Questions and Answers:
Kinshuk Tripathi
Thank you, sir. We will now begin with the question-and-answer session. We will be taking questions on audio and chat. To join the audio questions queue, please mention your full name and email ID in the chat box. Kindly stick to a maximum of two questions per participant and rejoin the queue should you have a follow-up question. We will unmute your mic so that you can ask your question. To ask questions on chat, please type in your question along with your full name and email ID in the chat box. We will wait for a moment as the queue assembles.
The first question is from Prateek Singh of DAM Capital. Prateek, request you to go ahead and ask your question.
Prateek Singh
Hi. Good afternoon. Am I audible?
Kinshuk Tripathi
Yes.
Samita Shah
Yes.
T. V. Narendran
Yes.
Prateek Singh
Sure. So just wanted to get a sense of how prices have moved currently versus the last quarter, both in Europe and in India? That will be the first question.
T. V. Narendran
Yeah. So in India, we are guiding that prices this quarter will be about INR3,000 per tonne higher than what it was last quarter. And in Europe, it’s about EUR20 to EUR30 higher than last quarter.
Prateek Singh
So given we have long-term contracts, Naren, so how should we see it? Because prices in the spot market have gone about $150 per tonne over the last two months, three months. So is it like two, three quarters down the line, you’d be seeing the full impact? Or it’s futile to track those prices and prices will change only at the year-end? So how should we see it?
T. V. Narendran
But it has not gone up by $150, so I don’t think it’s gone up in spot markets also by that much. But having said that, I think more to your specific question, basically, we have our annual contracts, which are normally negotiated in November, December. And so they are typically the packaging and the automotive contracts. And actually, the packaging and automotive contracts typically are much higher than the spot prices. So when you go up and down also in those contracts, it may be up and down compared to the previous contract, but typically higher than the spot prices.
The spot prices impact maybe about 30% to 40% of the volume in Netherlands and a similar level, maybe slightly higher in the U.K. So, that’s where the spot impact comes in, which is more the monthly prices on what we supply to engineering or what we supply to some of the other segments. But if you look at steel prices, basically, it has fluctuated in a $50 range. If you look at China, if you look at Southeast Asia, it’s gone up and down in a $50 range over the last few months. What has helped is actually the coking coal prices going down, which has helped the spreads more than the steel price itself moving up too much.
Prateek Singh
Sure. And my second question is just a bit of a medium-term question. So what is your view on Jamshedpur, given the legacy cost issues and a bit of an operational disadvantage that we have given smaller blast furnaces there? Is there a medium-term plan there?
T. V. Narendran
Yeah. So, there are few things. We do have legacy costs, some legacy costs in Jamshedpur, but a lot of work is going on to address that. But having said that, if you distribute some of the costs which we incur in Jamshedpur over the other sites, the gap is not as much as it may seem because, for instance, all the R&D facilities are located in Jamshedpur. The procurement facilities are largely located in Jamshedpur. So, there are some of those costs which Jamshedpur bears more than the others. But the advantage, as you said, in a Kalinganagar, is you have bigger facilities, two blast furnaces making 8 million tonnes, one steel melt shop making 8 million tonnes. So you have — you start with productivity advantage. You also start with a younger workforce. So, these are the advantages, let’s say, Kalinganagar has over Jamshedpur.
So, when I look at a cost on a hot-rolled coil basis, the gap is now reducing between Jamshedpur and the other sides because of many of the cost take-out actions that we’ve done over the years. But this work continues. Also, we should keep in mind that we have almost 1,000 people retiring from Tata Steel amongst the unionized workers in Jamshedpur every year. So that also — between Jamshedpur and the raw material location, that also helps us bring down the legacy cost because since 2007, the wage structure in Tata Steel is very different from what it was before that.
Kinshuk Tripathi
Thank you, sir. The next question is from Ritesh Shah of Investec. Ritesh, please go ahead.
Ritesh Shah
Thank you. Hi, sir. Thanks for the opportunity. Couple of questions. First, I think we have taken an approval of infusing another $2.5 billion into Europe. Any specific reason for the same, given we already are on a route when we have funding from the government in U.K. and Netherlands also you have a transformation program in place, if could please help us understand that?
Koushik Chatterjee
Yeah, Ritesh. So, this is similar to what we did last year. It is not new investment. It is actually rebalancing the debt between overseas debt and India debt. And effectively, that makes a lot of sense because, a, to reduce currency fluctuation; b, to get post-tax cost down. We are effectively looking at the debt that sits in various parts in the overseas entities, including in U.K., etc., to be more from an India perspective because they are anyway serviced currently out of India. And therefore, it is a rebalancing exercise, no new investment. The only small sliver of that investment will be the investment that is going on in the U.K., which is relating to the EAF projects, which 40% is shared by the government and 60% is on our account. But that number this year is not going to be significant. But fundamentally, the principle is to onshore more of the debt.
Ritesh Shah
Sure. My second question is on the cost take-out. A couple of clarifications over here. In the prior call, we had indicated for Tata Steel Netherlands around EUR500 million number. In this presentation, we have given a number of INR4,000 crores. Is it the same number? Or is it a top up? I presume it’s the same number, right?
Koushik Chatterjee
It is the same number.
Ritesh Shah
Okay. Specifically for U.K., again, we have given a number of around INR3,000 crores. This effectively implies 36% of the cost base ex-raw mat, which effectively could translate to nearly $100. What are the underlying variables that we are looking at over here, and is this the exit rate that we are looking for FY ’26?
Koushik Chatterjee
It is indeed the exit rate, but it is the total cost take-out. So as I mentioned in my comments that we have a total fixed cost of EUR955 million when we were running on an integrated basis. We reduced it to EUR760 million this year. And our intent is to further reduce the cost to about EUR540 million. Most part of that, if I look at it — if I give you a sense of the itemized part, it is the fixed cost, which — this is all fixed cost. And therefore, like the maintenance, hire and leasing, some part of it is the employment and then there are other operating charges. These are the ones, which will be going down significantly compared to financial year ’24, which has stepped down in ’25 and going to go down even more in ’26. And this is the year-end number that I’m talking about.
Ritesh Shah
Sure. And I’ll just squeeze in one, specifically on the cost take-out. So historically, we have seen — given disclosure around Shikhar for the Indian operations. Likewise, if you look at Tata Steel Europe, we had indicated cost transformation programs in year FY ’20, FY ’21 and FY ’24. I think the cumulative number is almost like $700 million plus. However, when we look at the implied cost, ex-raw mat, ex-power and fuel, we don’t see the stickiness of the cost savings, be it for Shikhar, be it for Tata Steel Europe. How to better understand or appreciate the stuff that you’re doing?
Koushik Chatterjee
So, I — sorry.
T. V. Narendran
Go ahead, Koushik. Then I will simplify it.
Koushik Chatterjee
One of the thing, which in Europe, I must say — let’s take Europe first. So in Europe, the cost take-outs where — there is also an offsetting factor. And when the — for example, the Ukraine war came in, the gas price changed very significantly. The inflation numbers were very high. So, we had an inflation as far as employment cost is concerned. And the inflation impact on the conversion cost was very clearly reflected, which did not get compensated by any price increases in steel post ’22, ’23. So, that has been one of the most important elements.
In India, the Shikhar is actually an anti-inflationary KPI improvement process. So when we look at individual physical KPIs, we were always looking at it on improving the KPIs and monetizing or giving the monetary value on standard cost basis. While that continues and that has actually become much larger, we are now also tracking absolute costs and absolute cost take-outs have actually been supplemented on top of Shikhar to make it more accountable so that you can actually trace it from your financial statements. So, that’s how we are looking at it.
Naren will answer.
T. V. Narendran
Yeah. So let me put it this way. When we look at improvement, we look at KPIs. And are the KPIs improving? And if that KPI has improved, how much is the cost saving, and that is what is normally reported in Shikhar and any of our investment programs. But let’s say, if the coal price in one year is $200 and the coal price in another year is $300. Even if you’ve improved your coke rate by 10 kilos or 15 kilos, that improvement which is there gets wiped out by the increased coal price and the coke rate — a lower coke rate and a higher coke price offsets what you had a higher coke rate and a lower price. So, just to give an example of that.
Secondly, in Europe, one thing which has gone up over the years is the CO2 cost, which used to be maybe five years back, EUR14, EUR15, which has went up to EUR80, EUR90, and now it’s down to about EUR70. So, there are some elements of costs which have gone up. There are many KPIs where we’ve improved, particularly in India. In Europe, I think we are still early in this journey, particularly in Netherlands and we are running with it just now because traditionally, Netherlands has always been EBITDA and cash positive. Only in the last couple of years when things went south that we really pin in on some of these things.
In U.K., of course, it’s been an ongoing activity even as — even if I take the Netherlands and U.K. numbers, while Netherlands has shown an improvement in EBITDA from maybe GBP480 million or something negative EBITDA to about GBP80 million or GBP90 million positive EBITDA. If the prices were the same as last year, it would have been actually GBP500 million positive EBITDA. right? So because of the price drop, you’ve actually seen negation of some of the improvement.
Similarly, in the U.K., a lot of this cost take-out is not visible because, again, the prices have dropped and wiped out whatever this GBP200 million, GBP300 million cost take-out that we take. But we can reconcile this. I think your point is how do we reconcile this better? Maybe we’ll discuss with Samita to see how when we present it, we can separate out the improvements from the external factors, which kind of distort some of these improvements.
Kinshuk Tripathi
Thank you, sir. The next question is from Satyadeep of Ambit Capital. Satyadeep, please go ahead.
Satyadeep Jain
Hi. Am I audible?
Kinshuk Tripathi
Yes.
T. V. Narendran
Yes.
Satyadeep Jain
Hi. Just a follow-up on the cost take-outs. This question basically comes from the fact that Tata Steel has been around for decades. Now these inflationary — anti-inflationary cost take-out that you are talking about, which are different from the earlier ones, what has led you to now look at these cost savings, which you were not — the company had not seen before? Is it the prolonged downturn that maybe steelmakers like yourself are looking at? Maybe some take-outs, which industry didn’t look at earlier? And if that’s the case, then I — what is unique about the take-outs you are doing, which if the entire industry, let’s say, Chinese also and others look at improving coke rate because of the downturn, then everybody’s cost goes down, then who’s the beneficiaries? Just wanted to understand what is unique to what Tata Steel is doing, what others might not be able to replicate? And why now, which — why couldn’t you do it earlier?
T. V. Narendran
Sure. So let me address that, Satyadeep. See, firstly, in our kind of business, which is cyclical, you always have to be the last man standing, right? I think that’s — so cost take-out is a — it will go on forever. 10 years later also, you’ll be talking of cost take-out because you’ll always have to dig deeper to see how do you take out costs. When you compare with the Chinese, the challenge we are facing, not just us, anyone in the industry is facing is that the Chinese are able to sell steel at 3%, 4% EBITDA margin or negative EBITDA margin and continue to grow, right? I mean, they still have money to invest in growth, etc. So it’s not a model which is obviously market-driven. There are supports, which are sometimes not visible, right? And that has been our submission to the government. It’s not about competitiveness.
It’s about something about what is the cost structure and how do these businesses survive with such low margins and still continue to grow where the cash flows won’t be there to invest to grow, right? But we have to do what we have to do to keep improving the situation. So for us, it’s about that. I think the India business because of our backward integration, etc., we continue to be one of the lowest cost producers of steel in the world. The Russians are the only ones who are maybe slightly better from a cost point of view compared to the Indian steelmakers because the ruble is where it is and Russia has its own iron ore and coal, right?
So globally, if you look at the Indian steel industry, not just at Tata Steel, we are favorably positioned as a country to make steel, and Tata Steel is certainly one of the most favorably positioned. In Europe, the cost structures are higher. Prices are also higher. Typically, prices in Europe are $100 higher than in India because of the fact that there are limitations on how much you can sell into Europe, etc. And everyone’s cost structure in Europe is there. So in Europe, the effort is always to be the last man standing in Europe. You cannot be the last man standing in the world out of an European operation. But you can try to be the last man standing in Europe, which is what our Dutch business traditionally used to be, apart from the problems we’ve had in the last couple of years.
So to go back to your question, if I look at it, U.K. has always been doing this. Through restructuring, we’ve taken out costs, we’ve sold some of the assets and we continue to restructure. But steel industry has gone through cycles, particularly in the last six years, seven years with China exporting 100 million tonnes. We’ve gone through cycles, which you’ve not seen in the past. So what was done in the past is never enough, we need to do more. In India, when we’ve acquired these new assets, whether it’s Bhushan, whether it’s Neelachal, we’ve had a lot to do to take out costs, right? So while Jamshedpur does what it has to do, if I look at it on a consolidated basis, in each of these, whether it’s Usha Martin plant that we acquired, the Bhushan plant that we have acquired, Neelachal plant. The Neelachal plant alone, we’ve taken out almost INR30,000 of cost per tonne. That’s why Neelachal today — a plant which was shut down because it was not financially viable is today making INR1,000 crores EBITDA, INR1,000 crores cash flows, right?
So when you acquire new assets, you obviously have to do a lot of work on cost take-outs, which is what we are doing in India. When you build new assets, you can build it more cost efficiently like we built in Kalinganagar. So, there will always be something new to do because there will always be. And today, technology allows us to see costs in far more detail than before. The analytics that we are doing, the AI that we have in our systems, etc. For instance, on maintenance, we have moved from preventive to predictive to prescriptive maintenance, right? So then the asset utilization improves. You have far more insights because you have far more data than you had even five years back. So, you can plan your cost take-outs very differently. You can optimize on your blends of coal very differently than you could five years back because we have a lot more data.
So using technology, using the learnings from the past, learnings from different assets, this is something that we are constantly pushing ourselves. Everyone else also does that. But obviously, if you can do it better than the others, you continue to be the last man standing. So our objective is, in India, our assets should be one of the last man standing in the world. And in Europe, it should be the last man standing in Europe. And in U.K., as Koushik said, and which we said before, when we close the blast furnace, move to an EAF, we have said that structurally, our cost improves by at least GBP150 a tonne, right? Because instead of importing iron ore and coal and making steel there, you’re using locally available scrap. You’re reducing the fixed costs like we’ve described by GBP400 million, right?
So in the next down cycle, U.K. will be in a much better position. Otherwise, typically when steel prices drop, the first place in our portfolio to lose money is U.K. Second place to lose money is Netherlands. India loses — I mean, India, as you know, even in the last two years, EBITDA margin is 20% plus, right? So within our assets also, we try to see how can we, in the geographies that we are in, be the last man standing or last person standing. And in the Indian context, we have the potential to be the last man standing in the world and that’s what we always aspire to do.
Koushik Chatterjee
I’d just add, Satyadeep, to what Naren articulated, the cost take-out in Tata Steel India started in 1995 and never stopped. All that we are saying is, we are upping the game to make it more structural and make it more larger in size. And I think earlier, Ritesh’s question on Shikhar, Shikhar in different forms that started in 1995 onwards, never stopped. So, I think we are just being cognizant of the fact that the uncertainties of the market needs us to step up the game, whether it’s unique or not, that is for others to say, but for our own sake, we need to do that.
In Netherlands also, with the uncertainties in the market, the higher regulatory costs, CO2 cost, in particular, it requires a structural change in the way Netherlands have seen in the past. So there also, while it has been efficient itself, but post the blast furnace 6, it’s actually Netherlands 2.0. So we’re looking at a different cost structure, a different way of making and delivering steel. And in U.K., it’s a completely structural change. And I think we just need to ensure that we have to be ready for ’27-’28. We cannot be ready in ’27-’28. We have to be ready much earlier. And I think we are pursuing the goal of ensuring that we, on an underlying basis, becomes EBITDA positive and on an underlying basis become sustaining from a cash flow point of view. So these are drivers actually, which are pushing us to ensure that we relook at it in a very different context.
Satyadeep Jain
Yeah, no, fair enough. I get the point. I think for us, we analysts, we’re trying to figure out if everybody is trying to be the last man standing, the challenge is one year down the line, everybody looks at cost, but EBITDA part doesn’t change. That’s the fundamental reality sometimes in the commodity business.
T. V. Narendran
So, I want to add a little bit to that. One is the cost side, which we described. But the other side is on the revenue side. That’s why the product mix is important, right? So like you said, cost, the opportunity is not infinite. It’s finite. Whereas on the other side, you have a lot more you can do. And that’s why, let’s say, we say we look at the high-end markets, the approval-based markets, we look at our branded and distribution business. We look at downstream businesses, so on and so forth. So, there is a lever on the revenue side to supplement the lever on the cost side. So both are important.
Satyadeep Jain
Just to put you on the spot — last question from my side, just putting you on the spot, let’s say, one year down the line, everything remains the same. We are here one year down the line in May ’26, everything is the same, prices are the same, raw material prices, coal, power, should we be looking at EUR100 per tonne, $100 per tonne EBITDA for Netherlands, given the cost take-out, you’re talking about EUR500 million, which is about EUR70 per tonne and the price savings you’re talking about in first? So everything remaining the same, you are saying we should be looking at EUR100 per tonne EBITDA for Netherlands in 1Q?
T. V. Narendran
We are looking at more EUR70, EUR80 per tonne is what we are seeing, Netherlands, we will move towards. Eventually, yes, we should be aiming towards EUR100, around that level. But EUR70, EUR80 is what we have basically said we should be chasing. And in U.K., all things remaining the same, just through the cost take-outs, etc., we should be EBITDA neutral or EBITDA positive, which honestly, if the steel prices had not dropped so much in the last few quarters, we would have already achieved that, right? So, I think that is where we are.
Koushik Chatterjee
That’s correct.
Satyadeep Jain
Thank you. Wish you all the best.
T. V. Narendran
Thanks.
Kinshuk Tripathi
Thank you, sir. The next question is from Amit Dixit of ICICI Securities. Amit, please go ahead.
Amit Dixit
Am I audible?
Koushik Chatterjee
Yes.
T. V. Narendran
Yes.
Amit Dixit
Yeah. So, couple of questions. The first one is more of a bookkeeping question. If you could let us know the volume guidance that standalone India and consolidated for FY ’26?
T. V. Narendran
The volume guidance is roughly 1.5 million tonnes additional deliveries. Pretty much all of it — most of it is in India because U.K. will be flat, Netherlands will be slightly higher. In India, basically, we’ll have about 2 million tonnes extra out of Kalinganagar, but we have a blast furnace — H-Blast Furnace relining due in Jamshedpur. This year, we had a G-blast furnace relining. So that will — so net-net, the volume increase guidance is 1.5 million tonnes.
Amit Dixit
And no additional volume from Ludhiana are included in this guidance?
T. V. Narendran
Not yet. We are hoping to commission the plant by the end of this financial year, but nothing material. I mean, you will see the volume impact next year. You will see the complete Kalinganagar volume impact next year. I mean — this year, we will finish Kalinganagar at close to 7 million tonnes, 6.8 million tonnes of steel and 7.5 million tonnes of hot metal. And by next year, we will have a ramp-up because the steel melt shop will complete — I mean, the third caster and everything else will come by September. And next year, you will start seeing the additional volume coming out of Ludhiana as well.
Amit Dixit
Great. The second question, again, I will move to the flavor of the call that is cost. So in terms of cost, again, Jamshedpur is one of the most efficient plant possible — our India operations, I would say, one of the most efficient, not only in India, but the world. So, just wanted to understand the INR4,000 crores that we have targeted for the year. First of all, I mean, is there any tangible scope to reduce the costs further? And if so, where — I mean, broad buckets, is it procurement? Is it supplier optimization? So, just wanted to get my head around that. And considering that you achieved INR4,000 crores, going down further, as you said, it’s a continuous process, will there be further targets for Jamshedpur or India operations to reduce costs?
T. V. Narendran
So, I think I’ll let Koushik give you more details. But at a broad level, this is not just Jamshedpur. This is India operation. When we say INR4,000 crores, I think there’s a lot which we are doing through, for instance, optimization of our contracts because we have multiple sites now. And each site used to have its own contracting, let’s say, for maintenance, services, etc. So, we’re doing a lot of work on that. We are doing a lot of work on vendor development so that we are not dependent more and more on proprietary items. It can be sourced from elsewhere. So, there are a lot of these kind of initiatives, which will benefit all three sites, whether it’s Kalinganagar, Meramandali — in fact, four sites, Neelachal and Jamshedpur, and there are smaller sites like Gamharia and Ludhiana, etc., which will come into play. So, these benefits are from that.
Jamshedpur will continue to benefit from the reduction in the wage bill because most of the older workers are in Jamshedpur. And when they retire, there is a benefit for Jamshedpur. But I’ll let Koushik give you more color on the costs. And all these are conversion costs. They are not linked to raw materials. You may change a blend of coal that you buy and get cost, but we are not — this INR4,000 crores is not hoping that coal prices drop and things like that. It’s more on the conversion side.
Yeah, Koushik?
Koushik Chatterjee
Yeah. No, just to, I mean, give you a slightly additional flavor on this. So, one, this INR4,000 crores is based on multiple areas, so stores repairs, maintenance, fixed cost. In fact, if you see, we have taken up INR533 odd crores of exceptional charge, which is last quarter, we had about 1,100 people leaving the company. So, there is a people reduction cost. There is a store space repairing cost reduction. There is also the model in which how we procure is changed, as Naren mentioned in one of the answers. We’re using a lot more digital and analytics to figure out, which model works better in terms of procurement.
We are doing a lot more with our vendors. We’re doing a lot more with our OEM suppliers. So there is a multiple area, and it is now across all sites. So it is in Kalinganagar, it is in Meramandali, it is in Jamshedpur, it is across mines and collieries. So it’s a full slew of it, and we are targeting that on a monthly basis, and the way it’s been drilled down, manages a program within the company. And I think that is — and this journey is unlikely to spend — kind of get over. What happens is the first year, which was the last year, we could deep dive in and get some which are very apparent. This year, we’re going to work the pieces to ensure that we get to the next level. And as we go in the future, whatever is the opportunities and there are also some which gives — which are investment led.
So, you take this low capex, high IRR or low payback period investments, which gives — almost pays back in six months’ time, etc. Now, there are time and opportunities when these come up because when we have the multiple shutdowns, we can do those kind of stuff. So, I think that is the theme in which we are working. And we will continue to work these work streams going forward too. This is not just a one-year kind of a target. It is going to go through. We have now remodeled our improvement programs. And the same is happening in Netherlands also. We are also doing cross lining between Netherlands and in India between India, Europe, U.K. and Netherlands. So, there are some areas where we are looking at vendors. We’re looking at procurement. So it is a cross-functional, cross-site and cross-entity now. And I think that’s the way — it’s a lot of hard work, but I think there is a big price to chase for.
Amit Dixit
Wonderful. Thank you so much, and all the best.
Koushik Chatterjee
Thanks.
Kinshuk Tripathi
Thank you, sir. The next question is from Ashish Jain of Macquarie. Ashish, please go ahead.
Ashish Jain
Hi. Am I audible?
T. V. Narendran
Yes.
Ashish Jain
Okay. Hi. Sir, my first question is on infusion of $2.5 billion. Sir, you gave some of the drivers of that infusion. But is this — should we think that this is the final number, given Netherlands will hopefully become self-sufficient from a cash flow point of view, U.K. cash flows should improve? So from a three-, five-year perspective, is this the final support goes from India balance sheet to European operations? Or we could say…
Koushik Chatterjee
Yeah. So, do you have any other question or should I address this one?
Ashish Jain
Yeah. I also had a question on costs. Sir, to ask the way I’m thinking about it, if I look at our EBITDA for this year, consol, it is INR25,000 crores, by and large, right? And if I look at the last two years, each year, we have spoken about roughly INR6,000 odd crores of cost saving. So should we think that if not for these cost savings, our EBITDA would have been like INR12,000 crores? Is that the way to think like? Is this cost really translating one-on-one in P&L, cash flows as well or there’s a slightly different way to think about the historical cost savings?
And my last question is with INR4,000 crores of saving in India, I mean, it translates to roughly INR2,000 EBITDA per tonne. So again, does it reset India base case or worst case EBITDA per tonne assuming last year was the worst case EBITDA at like INR12,000, INR13,000 is the worst case EBITDA? Is that the way one should think about it?
Koushik Chatterjee
So if I look at reversing your order of the questions, first is, if you look at the India, as Naren mentioned, and we have often said that in the down cycle, we’ve been more around 20% to 22% EBITDA margin. I think what we want — and in a medium cycle, we’ve been typically been 25% to 28% and in an up cycle close to 38%, 40%. The question that I would like to — your question is about whether it resets. I think we are looking at the cost side, not linking it to the revenue side because the revenue side will come because as our TSK ramps up, as our downstream facilities ramps up, our revenue per tonne will increase even on a mid-cycle basis.
But what we are looking at is — and often when we look at EBITDA, it often clouds our mind that, okay, we are good in 22% or 28%, it often takes away the fact that in the cost side, we need to drive it on an individual basis. And honestly, in a historical way, certain costs have increased because of different reasons. It is like when we acquired Bhushan, we had to take out — we have to do a lot more maintenance work compared to the plant that we took. It took a few years.
Now, we are in a different state. We are bringing in more digital and analytics. So, our maintenance standards in Meramandali will be different compared to the past. So then when we are looking at procurement, we had non-standardized procurement because each site was doing it differently because each site needed it differently. Now, we are saying now that we are in a steady state, we can look at standardization of procurement. We are looking at questioning that if spares are available in one of the other sites, then why are we not using it on a consolidated basis, why do an indenting. So these are all practices. See, we have been a growing company. We’ve grown through acquisitions, and we’re growing organically.
So when we have to settle on a rhythm, then it takes a bit of time. So it’s no fault of anybody or no issues of not looking at it. There comes a time when you can look at it when you reset the rhythm rather than reset only the cost structure. And that’s exactly what we’ve been doing for the last 12 months. And this journey will continue. The rhythm will change because we’ll continue to grow. NINL will continue to become bigger, etc. So, I think that is effectively how we are looking at the cost part of the game. And this is how we need to look at it, and we’re using a lot more analytics to get this cost down. And this is helping us in a huge manner in recent times. And that’s how I would look at answering your cost question.
I don’t know if, Naren, you want to add something. You are on mute.
T. V. Narendran
I just want to add one more point. Maybe eight years, 10 years back, we used to look at $600 as the all-weather steel price.
Ashish Jain
Right.
T. V. Narendran
Okay? And INR14,000 as the all-weather EBITDA per tonne, okay? Today, that steel price is, if we cross INR500, we are happy, right? But we have not changed the INR14,000 EBITDA, that’s what we always chase, right? So that comes only — so to go back to the earlier questions also, the average steel price at which we are expected to survive or do well or deliver 20% EBITDA has come down, right? And so that 20%, 22% EBITDA is being delivered — INR14,000 per tonne is being delivered, though the steel price last three years, at least, has been dropping. And today is between $450 and $500, I’m talking of the hot-rolled coil price in Southeast Asia, whatever. So that’s the range. So, that’s why we have to constantly look at cost because those prices are defined by who is willing to sell at what price. And particularly with China coming in, in a big way since 2015, we have to contend with that.
Koushik, you can go back to the other question.
Koushik Chatterjee
Yeah. So going to your first question, which is on the $2.5 billion, I’m not repeating the part that I’ve done already. But to answer your question on forward looking, on Netherlands, actually, the Netherlands will be very soon be debt-free because they are on a net debt basis because they are generating now enough cash flows to — they had always historically been debt-free. But because of the BF VI issues, and post — in fact, when they went into BF VI, when we went into relining, we were sitting on EUR600 million, EUR700 million of cash. But that was a very outlier year and it’s effect kind of went through next two years. Now in the last six months, eight months, we are in a much better position in spite of a very difficult market. So Netherlands, as far as its underlying conditions are concerned, it will be free of debt. It may have some working capital debt, but it will have its own cash, etc. We are not sending money for Netherlands at this point of time. When we sign up to the negotiations with the Dutch government, we will see how the financing actually stacks up.
As far as U.K. is concerned, U.K. is where we are — we have some — we have debt, which we want to take out through this infusion. There will be small debt. And when U.K. becomes, on an underlying basis, self-sustaining, hopefully, we don’t have to give any further debt. But as far as capex is concerned, we’re committed to about EUR750 million. That has not started as yet in a meaningful way. That spend will happen in the future years, over the next three years rather. Other than that, we have overseas foreign currency bonds, which is in Singapore, which will also have to be repaid. Some of it is in next year, and then ’28, it finishes everything.
So only for those specific requirements, which is anyway part of our Tata Steel obligation and Tata Steel’s consolidated debt. Those are the reasons why we will do that. Other than that, most important for you to actually take note of is the fact that what we are working towards is the underlying cash flows of overseas businesses do not require any funding support. That’s our target. And that’s we are kind of close to it as far as Netherlands is concerned. In fact, Netherlands never needed the money, even when they didn’t kind of — were not performing well, they had taken a short-term money, but they have actually repaid back to us. So the whole question is sorting the U.K. bit, when it’s become sustainable, we don’t need to put in money. But the overseas debt, what we have, whatever we have, other than Netherlands, we will onshore it, especially in Singapore, which is a Tata Steel foreign currency debt.
Ashish Jain
Koushik, just one clarification. So, this $2.5 billion will be incremental investment from India or some of it is already there in the form of debt or something and will be converted to equity? Or this is totally…
Koushik Chatterjee
It will be incremental. It will be refinanced basically.
Samita Shah
Koushik, if I can just interrupt you.
Koushik Chatterjee
Yes. Sure.
Samita Shah
Maybe you want to explain that because the money is going as equity, I think people are interpreting it as equity.
Koushik Chatterjee
Investment. Yeah. It’s not an equity investment. I said that in the beginning that it is not an equity investment. It’s actually rebalancing of debt. We are not making new money in for new investments or new assets or even for any other purposes. It’s essentially putting in money to take that debt out and putting it under the India balance sheet..
Ashish Jain
Yeah, yeah, I understood. But from India standalone balance sheet point of view, it is further money investment in the Singapore entity.
Koushik Chatterjee
Yeah. Yeah.
Ashish Jain
Yeah. That’s what. Yeah, yeah.
Koushik Chatterjee
But that’s how you have to account for it anyways.
Ashish Jain
Yes, yes. Got it. Thank you so much. Thanks.
Kinshuk Tripathi
Thank you, sir. I would now like to hand over the conference to Mr. Samita Shah for the chat questions. Over to you, ma’am.
Samita Shah
Thank you, Kinshuk. So, Naren, the first question, I think, is for you. There are some questions in terms of the impact of the recent tariffs, both in China and U.S. on steel markets in general and whether we are seeing any benefits of the safeguard duty? So is that reflected fully in the guidance you gave for NRs for next quarter? Or do you see more of that? So a little bit on that?
T. V. Narendran
So, I think the guidance that I gave is as things stand today based on the safeguard duty, which is already there in India and what we’ve experienced so far in this quarter and what we think we’ll experience in the next six weeks. The U.S., China, at a broader level, helps, because it tempers down the market and the concerns of volatility, the inflationary pressures, also what does the high tariffs do to the Chinese economy, etc., etc. So if the U.S. and China can come to some understanding and trade flows both ways, I think — and the Chinese economy is not hit more than required, then I think we are in a better place because, obviously, China needs to take care of the construction industry, if it has to make a positive difference to steel and if they are distracted by many other issues, then that’s a challenge.
So, we are a bit concerned about the 10 million tonnes of exports, which continues out of China in March and April that happened. And we are expecting that, that number should come down. And I think if the U.S. and China reach a deal on tariffs, we have a better chance of that number coming down. But the good thing of China — not a good thing, I would say, one of the reasons why this kind of volume has happened without much coming into India is also because a lot of Chinese exports are now going to Middle East and Africa, which are not markets pulling in a lot of steel earlier. So, that is reducing some pressure on Southeast Asia and India as far as Chinese exports are concerned.
As far as U.S. tariffs are concerned, in U.K., U.S., the understanding will help us. We sell about 70,000 tonnes, 80,000 tonnes of steel from U.K. to the U.S. We sell about 700,000 tonnes of steel from Netherlands to the U.S. That will depend on the EU-U.S. trade deal whenever that happens. But some of the steels that we send from Netherlands to U.S. is not made in the U.S. So, we are able to pass on some of the tariff impact to our customers because they need to import because they can’t buy locally. So, that’s the situation as it is, and we hope that the EU and U.S. will also come to a deal soon. The again, medium, longer-term impact in EU is we are seeing that the EU is looking a bit more at investing domestically to build industry, build defense industry, build infrastructure, which is in the medium to longer term, more positive for the steel industry.
Samita Shah
Thank you. The next question is actually more about Tata Tiscon specifically. So just for all the audience, we don’t give guidance on specific realizations for any particular product categories. So, we’re not going to be commenting on that. But I think the question which people are asking is in the individual house builder segment, there has been a lot of traction over the last few years as you have explained. Can you give us some sense of the industry dynamics here and Tata Tiscon’s positioning and realization? So like I said, we will not come into realizations, but maybe you could just give a broad sense of the dynamics.
T. V. Narendran
So, Tata Tiscon has just celebrated 25 years, okay, since its launch because we had identified this as a segment where people are willing to pay a premium to reduce the risk of purchase, right? It’s an individual who’s buying 3 tonnes, 4 tonnes of steel to build a house. In semi-urban and rural India, people build homes rather than buy homes. And that person who — and it’s a very personal journey. People are putting their life’s investments. So, they are involved in the process of building the house. And we saw an opportunity to tell them that they should be careful of what steel they buy and they can trust us.
It has worked well. Today, it’s 200,000 tonnes a month business. It started as a 6,000 tonnes a year business, right? And with our — generally, the same steel sold to a large construction company is about INR5,000, INR6,000 per tonne less, right? Because the large company will just go by the test certificate and not really pay you much of a premium for the product. They will pay you a premium for the service. So it’s been a good story. We have a network of about 80 or 90 distributors. We are pretty much covering all the districts in India. We have, I think, about 5,000, 6,000 dealers. We have Aashiyana now. We are doing about INR3,500 crores of GMV through Aashiyana. 90% of it is Tata Tiscon.
People are ordering Tata Tiscon from the U.S., from Canada, from Middle East, and we deliver within 48 hours to 72 hours to any location in India. So, we’re getting a lot of orders from overseas for delivery in India of this product. So, we are still only 14% market share in the retail business. It’s a very fragmented business. We have been limited by our supply, but acquiring Neelachal has given us another 1 million tonnes. So, we are also looking at how can we keep expanding this business.
We are also looking at different operating models because this has really taken off well now. Last two years, we’ve grown at double digits. Once the Ludhiana plant comes, we’ll get another 1 million tonnes. All of that will be sold as Tata Tiscon. The model in Ludhiana is also that we will sell pretty much all the steel within 200 or 300 kilometers of Ludhiana so that we don’t spend INR3,000 moving Tata Tiscon from Jamshedpur to Ludhiana. We save on that transportation cost and collect the scrap in that neighborhood and sell steel in that neighborhood. And if that model works, we will set up similar plants in other parts of India where there is scrap. So it’s a good business for us. It’s a INR10,000 crores brand and growing at 20%.
Samita Shah
Thank you. The next question — again, I’m just reminding our audience again that we do not give guidance on specific product categories or specific sites. But the question here, again, Naren, you might like to take it, is on long products versus flat products. And the question is on margins and realizations. But I think broader dynamics, how do they change — or how are they different between long products and flat products? And I think the idea is to try and see which is more profitable.
T. V. Narendran
So it goes through, again, cycles. Traditionally, flat products tends to fetch you higher prices, and you have segments like automotive, oil and gas, which is a little bit more approval-based businesses, right? So, bigger steel companies tend to gravitate towards flat products. But the flip side is flat products is higher fixed cost business. So in a down cycle, people are just trying to cover variable costs and contribute to fix. So that’s one thing.
The second big shift which has happened in flat products globally is when China used to export a lot of steel, 10 years, 15 years back, it used to be mainly long products. Today, it is all flat products because the Chinese steel industry has also switched a lot from long to flat, and flat travels better than long. So, you see hot-rolled coils going all over the world. Rebars don’t travel so much or wire rods maybe a little bit more. So that dynamic is changing.
But longs, if you look at India, it’s largely a local business and 50% of the long product supply is from the secondary sector, whose cost structures are different, their drivers of costs are different. So if you’ve seen in the last two years, three years, when thermal coal prices were much lower, the coking coal to thermal coal ratio was almost — or thermal coal to coking coal was 1:3, you saw that the secondary producers were more competitive. But as that has narrowed, the primary producers have become more competitive.
So it becomes — it’s a changing dynamic. Just now the long product prices are higher in India than the flat product prices on a commercial grade basis, simply because of the fact that most of the 100 million tonnes of steel, which China is exporting is flat products and has depressed international prices for flat. So all the flat products is being sold in India, which is being produced in India and hence, has depressed the flat product prices. So just now, if you look at it from a return on invested capital point of view, I would assume longs will be better because you can set up a long product plan for less money. And if you’re getting better EBITDAs for that, then you are better off, but over the long term, bigger companies tend to gravitate towards flat products.
Samita Shah
Thank you. Another question, which is, I think, slightly more long term in nature, do we see India risking becoming an overcapacity steel market in the next five years, six years, given the expansion plans which everybody has announced?
T. V. Narendran
Honestly, I don’t think so because it’s not easy to build steel plants in India. It takes time. I mean, this is assuming if you have land. If you are going to start a greenfield site, it takes even longer time. So, India will never be able to build the capacity as fast as China did. China in its peak was building 50 million tonnes of capacity per year. India does not have the capacity to build that capacity because our processes take much longer, the approval processes, acquiring land, the public hearing, everything takes much longer and then the ability to build the plants is also limited.
So, I think if India continues at a GDP growth of 6%, 7%, 8%, and as a developing economy focusing on infrastructure, steel consumption grows at a higher rate than that 8%, 9%, 10%, I think India will struggle to build 15 million, 20 million tonnes of capacity every year, forget 50 million tonnes. So, I do believe that we will have a better balance. So, India will never be a big threat in the international markets as a big exporter like China is because I think whatever capacity we build in India will be just about enough for India.
Samita Shah
Thank you. One question, which is more, I think, which we typically answered in terms of guidance, but we haven’t so far. This is our guidance for coking coal and iron ore consumption for first quarter..
T. V. Narendran
So coking coal, we are guiding that it will be about $10 lower on a consumption basis, though the coking coal prices have gone up in the last few weeks, but on a consumption basis will be $10 better, both in Europe and India. Iron ore is relevant only for Europe, not only — it’s only relevant for Netherlands because we’ve shut the blast furnaces in U.K. Iron ore is expected to be about $10 higher in Netherlands consumption.
Samita Shah
Thank you. Now, there are a bunch of questions on the BPSL guidance or — I would say, the developments which have happened around the BPSL judgment. The first question is, I think whether the Tata Steel Bhushan resolution plan is at risk — of the same risks? And are there any — what are the differences and do we run the same risks?
Koushik Chatterjee
So, there is no litigation on this matter as far as Bhushan is concerned. We’ve gone through 2 rounds. First, from the acquisition, we’ve done this as guided by the CoC within the timeline of the IBC. And subsequently, we have also gone through the full process on merging the business within Tata Steel. So, there is nothing on a similar basis.
Samita Shah
Thank you. And I think the second question is if this asset comes up again on the block, would Tata Steel be interested in acquiring it?
Koushik Chatterjee
We would rather not answer that question because there is — it’s related to a different company, and it’s not fair to answer that question.
Samita Shah
Thank you. There are couple of questions, which are more on the balance sheet side. So is there — what are our deleveraging targets? Or is there a plan to deleverage for the next year?
Koushik Chatterjee
So, I think we’ve always said that our target remains to continue our deleveraging while putting money into growth projects. If you look at it from September ’24, with the peak of the downturn, we were at about INR88,000 crores consolidated net debt. From there, we are at about INR82,570 crores where we closed. So, we’ve taken out more than INR6,000 crores of debt across entities and geographies in the last six months. We will continue to look at this kind of a pathway going into FY ’26. And we want to just ensure that the — in fact, somebody asked that question, why certainly the cost initiatives? Well, this is one part of also using the cash flows for deleveraging.
Samita Shah
Thank you. And there is a question on why our interest costs have gone up. I would just like to remind the audience that we have gone through an era of global interest rates actually going up by almost 400 basis points. But I think there’s a broader question in terms of our interest costs and what is the direction for them?
Koushik Chatterjee
So the net finance cost for FY ’24 was INR6,700 crores, and the net finance cost for ’25 is INR6,300 crores. So, I didn’t see any increase as far as interest is concerned. But there is one point that I would like to say that when we are doing more and more onshoring, you would find that the headline cost increasing, but the effective post-tax cost going down. So it may not show in the P&L, but effectively from a net post-tax basis because we pay marginal tax that will be lower.
Samita Shah
Thank you. I think there are still lots of people lined up for the audio questions. We’ll maybe just take a couple. Back to you, Kinshuk.
Kinshuk Tripathi
Sure. Thank you, ma’am. The next set of audio questions, first, we have Amit Murarka from Axis Capital. Amit, please go ahead.
Amit Murarka
Yeah. Hi. So, good afternoon. Thanks for the opportunity. So, I just wanted to kind of get a sense now on expansion plans. I believe FY ’26 capex is guided INR15,000 crores, which I understand doesn’t include any planned new expansion projects in India. So where do we stand on the NINL and KPO3 and such expansions, particularly in the context of 35 million to 40 million tonne capacity target we had given for FY ’30?
T. V. Narendran
Yeah. So the capex here, yes, is largely focused on raw materials, is focused on Kalinganagar completion. It includes the Ludhiana plant, which is 1 million — 0.8 million, but we hope to push it to 1 million. So if you look at it from a growth point of view, that is the one which is there for next year after Kalinganagar this year. We have some downstream expansions. We have a combi mill — 0.5 million tonne combi mill, which will convert some of the billets that we are making in the erstwhile Usha Martin facility into special bars for the automotive industry. So, that’s another thing.
In terms of the major expansion projects, the next one, which will go to our board is the Neelachal one. We have already gone through the public hearing. Now the way we look at expansion projects as we go to the Board only after we get all the regulatory approvals. Earlier, it used to be the other way around. We get the board approval and then get the regulatory approvals, so which used to bring a lot more uncertainty into the schedules, whereas we’ve already done the public hearing and have applied for an environment clearance, so going up to 9.5 million for Neelachal. So, that will be first on the thing. We are then working on the Kalinganagar next phase, as well as Bhushan expansion from 5 million to 6.5 million. So these are the two projects which will follow the Neelachal one, but the one which is most ready is the Neelachal one, which during this year, we will go to the Board.
Amit Murarka
Understood. And so is it fair to say about that probably it looks more like 30 million tonne then by FY ’30 rather than the earlier number of 35 million to 40 million that we were expecting?
T. V. Narendran
So, what we expect to have by FY ’30 is all these projects at different stages. Hopefully, we start the Neelachal project now. That will — at least the first phase will finish and we can start the other 2, which will be a different degrees of finishing in FY ’30, FY ’31, yeah. We will not have completed capacity by FY ’30.
Koushik Chatterjee
If I can add, Naren, fundamentally, when we look at what we used to do earlier is to announce projects, then do the design engineering and the regulatory approval and then do the project construction. I think when we will announce projects now, we will be ready to start construction. So, there is a different phasing that we have done. We’ve tweaked it to make it more certain and make it more focused on the completion timeline. So the preparatory work post-announcement is being changed to pre-announcement and then working on the — straight away into the execution stage.
Kinshuk Tripathi
Thank you, sir. The next question is from Sumangal Nevatia of Kotak Securities. Sumangal, request you to please go ahead and ask your question.
Sumangal Nevatia
Yeah. Thanks for the chance. First question is on the Europe operations. Is it possible to share and explain what is the impact of reduction in carbon allowances in FY ’26, and what would be the likely cost impact of that?
Koushik Chatterjee
So as far as — sorry, Naren, you want to take it?
T. V. Narendran
No, no. Go ahead, go ahead.
Koushik Chatterjee
So, you talked about the reduction in carbon-free allowances?
Sumangal Nevatia
That’s right, yeah.
Koushik Chatterjee
Yeah. So as far as U.K. is concerned, it’s now zero. There is no impact of CO2 in U.K. There is a certain amount of reallowances U.K. will get and that is good enough for the downstream entities to compensate for it. So in fact, what we see today is from FY ’25-’26, there will be no impact of CO2 as far as U.K. is concerned till the start of ’27-’28 when the next phase of the EAF starts, and that will be of a different nature.
So far as Netherlands is concerned, there is a deficit that happened until last year. It will gradually converge, but there is an increased cost on account of carbon, and that is happening because of the fact that the allowances are reducing and there is also a CO2 levy that has been coming in as far as the Netherlands is concerned. So it is close to about EUR80 million a year.
T. V. Narendran
But Koushik, this carbon allowances will reduce along with CBAM, right? It comes along…
Koushik Chatterjee
Yes. So next year onwards, what happens is, on a longer term or a medium term, once the CBAM comes, it will neutralize the cost because arithmetically, the cost of the steel prices will reflect the CBAM, which will cover up for the cost of the carbon.
T. V. Narendran
Correct.
Sumangal Nevatia
Understood. Understood. I have one question on the entire cost saving topic. So, how is it expected to phase in FY ’26? Is it more of a gradual thing or back-ended? And as Naren mentioned, EUR70, EUR80 for Europe, given the INR4,000 crores number for India, keeping the spreads aside, can we expect INR1,500 to INR2,000 increase in the EBITDA on a per tonne basis?
Koushik Chatterjee
So, I think, first of all, as far as Netherlands is concerned, that project has just kicked off, as I mentioned in my commentary that one of the important part of that is also the productivity gains. The productivity gains involves the process of consultation with the works council, etc. So the Netherlands part, while some part has been realized and many of the non-productivity work streams are moving forward, it is more a second quarter plus onwards, but it is not so secular because it is something that will happen more around the Q3, Q4 levels..
As far as India is concerned, we started this project last year. And as I said, that we’ve taken out INR1,800 crores of cost, plus INR900 crores on coal optimization. That is a lot more secular in India, but it is more towards from June onwards — June — after June onwards, we should see the results in the papers — in the financial statements. And to your question — I think your last question was whether you can see the improvement on a per tonne basis. The answer is yes, ceteris paribus, everything else remains the same.
Sumangal Nevatia
Yes. And just one last clarification. Given that today, I mean, there’s a continuous pressure on Chinese steel prices, our calculations are suggesting our domestic prices at INR2,000, INR3,000 premium. So, are we sensing a similar peak-ish kind of steel prices and some pressure going forward? I understand INR3,000 is what we are expecting in 1Q. But on a spot basis, what are your thoughts?
T. V. Narendran
So obviously, this gap is there now because Chinese prices again dropped. It’s been fluctuating, like I said, in a $50 range. But imports are still not coming in, in a big way yet because people are concerned about the dollar. The dollar has been also all over the place. And also the risk in — you buy a book today and it comes in after two months, thre months, you don’t know the price then. You have a monsoon season coming. Do you want to — import cargo coming in during monsoons. So, I expect things to be — I don’t see imports flooding in just yet.
And of course, when we went to the government with a safeguard request, the original request from the Indian Steel Association was 25%, the government said 12% because it wanted to keep all other stakeholders’ interest in mind. But this is something if we, again, see a flood of Chinese imports, we will certainly go back to the government and see what can be done because the private sector investment in India in some sense is being led by the steel industry. So, you saw that we are seeing INR15,000 crores capex. Our peers are also putting in big capex. So the industry needs to be financially healthy to be able to put in this kind of money and new capacities. And I think that’s a submission to the government.
Sumangal Nevatia
Got it. Thank you, and all the best.
T. V. Narendran
Thank you.
Kinshuk Tripathi
Thank you, sir. That was the last question for today. I would now like to hand the conference back to Ms. Samita Shah for closing comments. Over to you, ma’am.
Samita Shah
Thank you, Kinshuk. Thank you, everyone, for your participation and your questions. We hope we were able to address your queries. Look forward to connecting again next quarter. Thank you.
T. V. Narendran
Thank you.
Koushik Chatterjee
Thank you.