We will now begin the Q&A session, and the first question is from Prateek Singh of DAM Capital. Prateek Singh, DAM Capital Advisors I wanted to get a sense of how prices have moved currently vs. the last quarter, both in Europe and in India?
CEO & MD - Tata Steel Limited In India, we are guiding that prices this quarter will be about Rs. 3,000 per ton higher than what it was last quarter. In Europe, it's about €20 – 30 per ton higher than last quarter. Prateek Singh, DAM Capital Advisors Given we have long-term contracts, how should we see it? Prices in the spot market have gone about $150 p er ton over the last 2 - 3 months. Would you be seeing the full impact 2 - 3 quarters down the line? Or is it futile to track those prices and prices will change at the year end?
CEO & MD - Tata Steel Limited I don't think it has gone up in spot markets by that much. Having said that, I think more to your specific question, we have our annual contracts, which are normally negotiated in November - December. They are typically the packaging and automotive contracts. These 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 price impact maybe about 30 - 40% of the volume in Netherlands and a similar level, maybe slightly higher in UK. 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. If you look at steel prices, it has fluctuated in a $50 per ton range. If you look at China, if you look at Southeast Asia, it's gone up and down in the $50 per ton range over the last few months. What has helped is actually the coking coal price is going down, which has helped spreads more than steel price itself moving up too much. Prateek Singh, DAM Capital Advisors My second question is a medium-term question. What is your view on Jamshedpur given the legacy cost issues and a bit of operational disadvantage we have given smaller blast furnaces there? Is there a medium -term plan here? We do have some legacy costs in Jamshedpur, but a lot of work is going on to address that. Having said that, if you distribute some of the costs which we incur in Jamshedpur over the other side, the gap is not as much as it may seem because, for instance, all the R&D facilities are located in Jamshedpur. Procurement facilities are largely located in Jamshedpur. There are some of those costs which Jamshedpur bears more than the others. The advantage, as you said, in Kalinganagar is you have bigger facilities, two blast furnaces, making 8 MTPA, one steel melt shop making 8 MTPA. You start with productivity advantage; you also start with the younger workforce. These are the advantages Kalinganagar has over Jamshedpur. So, when I look at a cost on HRC basis, the gap is now reducing between Jamshedpur and the other sites because of many of the actions that we have taken 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 unioni sed workers in Jamshedpur every year, between Jamshedpur and the raw material location, that also helps us bring down the legacy cost because since 2007, the rate structure in Tata Steel is very different from what it was before that.
The next question is from Ritesh Shah of Investec Ritesh Shah, Investec 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 where we have funding from the government in UK. And Netherlands, you have a transformation program in place. If you could please help us understand that?
This is similar to what we did last year. It is not new investment. It is rebalancing the debt between overseas debt and India debt. 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 debt that sits in various parts of the overseas entities, including in UK [inaudible] to be more from an India perspective because they are anyways serviced currently out of India. Therefore, it is a rebalancing exercise, no new investment. Only a small sliver of that investment will be the investment that is going on in the UK, which is relating to the EAF projects which is 40% shared by the government and 60% is on our account. But that number this year is not going to be significant. Fundamentally, the principle is to onshore more of the debt. Ritesh Shah, Investec My second question is on the cost takeout. In the prior call, we had indicated for Tata Steel Netherlands around €500 million. In this presentation, we have given a number of Rs. 4,500 crores. Is it the same number? Or is it a top up? It is the same number. Ritesh Shah, Investec Okay. Specifically for UK, again, we have given a number of around Rs. 3,000 crores. This effectively implies 36% of the cost base ex raw material, which effectively could translate to nearly $100 [inaudible]. What are the underlying variables that we are looking at over here? Is this an exit rate that you are looking for FY2026?
It is indeed the exit rate, but it is the total cost takeout. As I mentioned in my comments that we have a total fixed cost of £995 million when we were running on an integrated basis. We reduced it to £760 million this year, and our intent is to further reduce the cost to about £540 million. If I give you a sense of the itemised part, this is all fixed cost. 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 FY2024. We stepped down in FY2025 and expect to go down even more in FY2026. This is the year end number that I'm talking about. Ritesh Shah, Investec Specifically on cost take out. Historically, we have given disclosure for Indian operations. Likewise, if you look at Tata Steel Europe, we had indicated cost transformation programs in year FY20 20, FY2021, and FY 2024. I think the cumulative number is almost like £700 million plus. However, when we look at the implied cost, ex raw mat erial, ex power & fuel, we don't see the stickiness of the cost savings, be it for Tata Steel Europe. How to better understand or appreciate the stuff that you're doing?
Let’s take E urope first. So in Europe, the cost takeouts w here there is also an offsetting factor. When, for example, the Ukraine War began, the gas prices changed very significantly. The inflation numbers were very high. So we had 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 2022 - 23. That has been one of the most important elements. In India, [inaudible] is actually an anti-inflationary KPI improvement process. S0, when we look at individual physical KPIs, we were always looking at improving the KPIs and monetising 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. Absolute cost takeouts have actually been supplemented on top of it to make it more accountable so that you can trace it from your financial statements. That's how we are looking at it.
CEO & MD - Tata Steel Limited Let me put it this way. When we look at improvement, we look at KPIs and are the KPIs improving. If that KPI has improved, how much is the cost saving s, and that is what is normally reported in Shikhar and any of our [inaudible] programs. But let's say, if the coal price in one year is $200 per ton and the coal price in another year is $300 per ton, even if you've improved your coke rate by 10 - 15 kilos, that improvement, which is there gets wiped out by the increased coal price and the coke rate. A lower coke rate at a higher coke price offsets you know, what you had at a higher coke rate and a lower price. So just to give you an example of that. Secondly, in Europe, one thing which has gone up over the years is the CO2 costs, which used to be maybe five years back, €14 – 15, which went up to €80 - 90, and now it's down to about €70. There are some elements of costs which have gone up. There are many KPIs where we have improved, particularly in India. In Europe, I think we are still early in this journey, particularly 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, did we really pin in on some of these things . In UK, of course, it's been an ongoing activity. Even if I take the Netherlands and UK numbers, while Netherlands has shown an improvement in EBITDA from maybe €430 million or something negative EBITDA to about €80 - 90 million positive EBITDA. If the prices were the same as last year, it would have been actually €500 million positive . B ecause of the price drop, you've actually seen negation of some of the improvement. Similarly, in the UK, a lot of this cost takeout is not visible because again, the prices have dropped and wiped out whatever this £200 - 300 million cost take out that we take. I think your point is how do we reconcile this better. Maybe we'll discuss [inaudible] 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.
The next question is from Satyadeep Jain of Ambit Capital. Satyadeep Jain, Ambit Capital This question basically comes from the fact that Tata Steel has been around for decades. Now these anti-inflationary cost takeout that you are talking about, which are different from the earlier ones. What has led you to now look at these cost savings that the company had not seen before? Is it the prolonged downturn that is making steelmakers like yourself look at some takeouts? If that's the case, what is unique about the takeouts you are doing ? If the entire industry, including the Chinese also look at improving coke rate because of the downturn, then everybody's cost goes down, then who's the beneficiaries? I wanted to understand what is unique to what Tata Steel is doing, what others might not be able to replicate? And why now? Why couldn't you do it earlier?
CEO & MD - Tata Steel Limited Firstly, in our kind of business, which is cyclical, you always have to be the last man standin g. Cost takeout will go on forever. Ten years later, also, you'll be talking of cost takeout because you'll always have to dig deeper to see how you take out costs. When you compare with the Chinese, the challenge we are facing, is that the Chinese are able to sell steel at 3 - 4% EBITDA margin or negative EBITDA margin and continue to grow. They still have money to invest in growth. It's not a model, which is market driven. There are supports, which are sometimes not visibl e. That has been our submission to the government. It's not about competitiveness. It's about what the cost structure is and how do these businesses survive with such low margins and still continue to grow where the cashflow is only there to invest to grow . We have to do what we have to do to keep improving the situation. For us, it's about that. The India business because of our backward integration, we continue to be one of the lowest cost producer s 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 rouble is where it is, and Russia has its own iron ore and coal . Globally, if you look at the Indian steel industry, not just at Tata Steel, we are favourably positioned as a country to make steel, and Tata Steel is certainly one of the most favo urably positioned. In Europe, the cost structures are higher. Prices are also higher. Typically, prices in Europe are $100 per ton higher than in India because of the fact that there are limitations on how much you can sell into Europe . Everyone's cost structure in Europe is there. 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 a European operation. But you can try to be the last man standing in Europe, and which is what our Dutch business traditionally used to be apart from the problems we've had in the last couple of years. To go back to your question, if I look at it, UK 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 the steel industry has gone through cycles, particularly in the last 6 - 7 years with China exporting 100 million tons. We've gone through cycles, which you've not seen in the past. What was done in the past is never enough, we need to do more. In India, when we acquired these new assets, whether it's Bhushan, whether it's Neelachal, we've had a lot to do to take out costs . While Jamshedpur does what it has to do, if I look at it on a consolidated basis, in each of these whe ther its Usha Martin plant that we acquired , the Bhushan plant that we have acquired, Neelachal plant [inaudible]. The Neelachal plant alone, we've taken out almost Rs. 30,000 of cost per ton. That's why Neelachal today, a plant which was shut down because it was not financially viable, is today making Rs. 1,000 crores EBITDA and Rs. 1,000 crores cashflows. When you acquire new assets, you obviously have to do a lot of work on cost takeouts, 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. There will always be something new to do . 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. For instance, on maintenance, we have moved from preventive to predictive to prescriptive maintenance . Then the asset utilisation improves. You have far more insights because you have far more data than you had even five years back. You can plan your cost takeouts very differently. You can optimise on your blends of coal very differently than you could five years back because we have a lot more data. 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. Obviously, if you can do it better than the others, you continue to be the last man standing. Our objective in India, our assets should be one of the last man standing in the world. In Europe, it should be the last man standing in Europe. In UK, as Koushik said, and which we said before, when we closed the blast furnace and moved to an EAF, we have said that structurally, our cost improves by at least £150 per ton. 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 £400 million. In the next down cycle, UK will be in a much better position. Otherwise, typically when steel prices drop, the first place in our portfolio to lose money is UK. Second place to lose money is Netherlands. [inaudible] India, as you know, even in the last two years, EBITDA margin is 20% plus. Within our assets also, we try to see how we can, in the geographies that we are in, be the last man standing or last person standing. 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.
Just to add, Satyadeep, to what Naren articulated, the cost takeout 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 larger in size. [inaudible] it started in 1995 and never stopped. I think we are just being cognizant of the fact that uncertainties of the market need us to step up the game, whether it is 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, higher regulatory costs, CO 2 costs in particular, it requires a structural change. There also, while it has been efficient itself, but post BF6 reline, it is actually Netherlands 2.0. We are looking at a different cost structure, a different way of making and delivering steel. And in UK, it ’s completely structural change. We need to ensure that we have to be ready for FY2027 - 28. [inaudible] We are pursuing the goal of ensuring, on an underlying basis, Tata Steel UK becomes EBITDA positive and sustaining from a cashflow point of view. So, these are the drivers which are pushing us to ensure that we relook at it in a very different context. Satyadeep Jain, Ambit Capital I get the point. We are trying to figure out if everybody is trying to be the last man standing, challenge is one year later everybody looks at cost, but EBITDA doesn't change. That the fundamental reality in commodity business? I want to add a little bit to that. One is the cost side, which we described. The other side is on revenue. That's why the product mix is important . Like you said, in cost, the opportunity is not infinite. It's finite. Whereas on the other side, you have a lot more you can do . 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. There is a lever on the revenue side to supplement the lever on the cost side. Both are important. Satyadeep Jain, Ambit Capital Last question from my side, just putting you on the spot, let's say, one year down the line, everything remains the same . Prices are the same, raw material prices, coal, power, should we be look ing €100 per ton EBITDA for Netherlands given cost takeout. You were talking about €500 million, which is about €70 per ton and the cost savings. Everything remaining the same, you are saying we should be looking at €100 per ton EBITDA for Netherlands?
€70 - 80 per ton is what we are seeing in Netherlands, we will move towards. Eventually, yes, we should be aiming towards €100 per ton but €70 - 80 per ton is what we have basically said we should be chasing. In UK, all things remaining same, just through the cost takeouts etc. we should be EBITDA neutral or EBITDA positive, which if the steel prices have not dropped so much in the last few quarters, we would have already achieved. I think that is where we are.
CEO & MD - Tata Steel Limited That's correct.
Next question is from Amit Dixit of ICICI Securities. Amit Dixit, ICICI Securities Could you please tell us the volume guidance for India and consolidated for FY2026?
CEO & MD - Tata Steel Limited The volume guidance is roughly 1.5 million tons of additional deliveries. Most of it is in India because UK will be flat, Netherlands will be slightly higher. In India, basically, we'll have about 2 million tons extra out of Kalinganagar, but we have the H blast furnace reline due in Jamshedpur. This year, we had G blast furnace relining. So, net - net, the volume increase guidance is 1.5 million tons. Amit Dixit, ICICI Securities Are there any additional volumes from Ludhiana? Not yet. We are hoping to commission the plant by the end of this financial year, but nothing material. You will see the volume impact next year. You will see the complete Kalinganagar volume impact next year. This year, we will finish Kalinganagar at close to 7 million tons; 6.8 million tons of steel and 7.5 million tons of hot metal. By next year, we will have a ramp-up because the steel melt shop will be complete. 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, ICICI Securities In terms of cost, again, our Jamshedpur and India operation is, I would say, one of the most efficient operations, not only in India, but the world. Just wanted to understand the Rs. 4,000 crores that we have targeted for the year. Is there any tangible scope to reduce the cost further? If so, what are the broad buckets? Is it procurement? Is it supplier optimisation? Considering that you achieved Rs. 4,000 crores of saving, and as you said, it is a continuous process, will there be further targets for Jamshedpur or India operations to reduce cost?
CEO & MD - Tata Steel Limited So I think I'll let Koushik give you more details. Broadly, this is not just Jamshedpur. This is India operations. When we say Rs. 4,000 crores, there is a lot which we are doing through, for instance, optimi sation of our contracts because we have multiple sites now. Each site used to have its own contracting for maintenance, services, et c. 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. There are a lot of these kind of initiatives, which will benefit all four sites, and there are smaller sites like Ludhiana which will come into play. Jamshedpur will continue to benefit from the reduction in wage bill because most of the older workers are i n Jamshedpur, and when they retire, there is a benefit. These are conversion costs. They are not linked to raw materials. You may change a blend of coal that you buy and get cost benefit but this Rs. 4,000 crores is not hoping that coal prices drop and things like that. It is more on the conversion side.
Amit, just to give you slightly additional flavor on this. One, this Rs. 4,000 crores is based on multiple areas. Stores, repairs, maintenance, fixed cost. In fact, we have taken Rs. 533 odd crores of exceptional charge, which is last quarter we had about 1,100 people leaving the company. There is a people reduction cost. There is a store, spares, repairs cost reduction. The model in how we procure has changed. As Naren mentioned in one of the answers , we are 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 and our OEM suppliers. There are multiple area s, and it is now across all sites. It is in K alinganagar, Meramandali, Jamshedpur and across mines and co llieries. It is a full [inaudible] of it, and we are targeting that on a monthly basis [inaudible]. This journey is unlikely to spend and 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 are going to work the pieces to ensure that we get to the next level. As we go in the future, there are opportunities which are investment led. So you take this, low capex & high IRR or low payback period investments, which gives almost back in six months' time etc. Now there are times and opportunities when these come up because when we have multiple shutdowns, we can do this kind of stuff. I think that is the theme in which we are working. We will continue to work these work streams going forward too. This is not just a one year target. We have now remodelled our improvement programs. The same is happening in Netherlands also. We are also doing cross learning between India, UK and Netherlands. There are some areas where we are looking at vendors, we are looking at procurement. So, it is cross-functional, cross-site and cross-entity now. It is a lot of hard work, but I think there is a big price to chase for.
Next question is from Ashish Jain, Macquarie. Ashish Jain, Macquarie Sir, my first question is on infusion of $2.5 billion. You gave some of the drivers of that infusion. Should we think that this is the final number given Netherlands will hopefully become self -sufficient from a cashflow point of view, UK cashflows should improve. From a 3 - 5 year perspective, is this final support from India balance sheet to European operations? I also have a question on cost. If I look at our EBITDA for this year, on a consolidated level it is Rs. 25,000 crores, by and large. If I look at the last two years, each year, we have spoken about roughly Rs. 6,000 - odd crores of cost saving s. Should we think that if not for these cost savings our EBITDA would have been like Rs. 12,000 crores? Is this cost really translating one-on-one in P&L and cashflows as well or is there a slightly different way to think about the historical cost savings? My last question is about Rs. 4,000 crores of saving in India. It translates to roughly Rs. 2,000 per ton of EBITDA. Again, does it reset India base case or worst case EBITDA per to n assuming last year was the worst case EBITDA at around Rs. 12,000 - Rs. 13,000 is the [inaudible] EBITDA? Is that the way one should think about it?
So if I look at reversing your order of the questions, First is, if you look at India, we have often said that in down cycle, we've been around 20 - 22% EBITDA margin, in medium cycle, we've typically been at 25 - 28% and in up cycle close to 38 - 40%. 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 will come . As TSK ramps up, our downstream facilities ramp up, our revenue per to n will increase even on a mid-cycle basis. Often when we look at EBITDA, it clouds our mind that we are good in 22 - 28%. It often takes away the fact that in the cost side, we need to drive it on an individual basis. Honestly, in a historical way, certain costs have increased because of different reasons. When we acquired Bhushan, we had to do a lot more maintenance work compared to the plan. It took a few years. Now we are in a different state. We are bringing in more digital and analytics. Our maintenance standards will be different compared to the past. Then when we are looking at procurement, we had non - standardised procurement because each site was doing it differently b ased on its need. Now we are saying that we are in a steady state. We can look at standardisation 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 it independently. These are all practices. We have been a growing company. We've grown through acquisitions, and we're growing organically. When we have to settle on a rhythm, then it takes a bit of time. There comes a time when you can look at it when you reset the rhythm rather than reset only the cost structure. That's exactly what we've been doing for the last 12 months. This journey will continue. The rhythm will change because we'll continue to grow, NINL will continue to become bigger, e tc. That is effectively how we are looking at the cost part of the game. We're using a lot more analytics to get this cost down. This is helping us in a huge manner in recent times. I just want to add one more point. Maybe 8 - 10 years back, we used to look at $600 per ton as the all-weather steel price and Rs. 14,000 as the all -weather EBITDA per ton . Today, if we cross $500 per ton, we are happy . But we have not changed the EBITDA per ton of Rs. 14,000 per ton , that we always chase . The average steel price at which we are expected to survive or do well or deliver 20% EBITDA margin has come down. So that 20 - 22% EBITDA margin and Rs. 14,000 EBITDA per ton is being delivered, though the steel price has been dropping and today is between $450 - 500 per ton. I'm talking of the HRC price in Southeast Asia. That's the range and that's why we have to constantly look at cost because those prices are defined by who is willing to sell at what price. Particularly with China coming in a big way since 2015, we have to contend with that.
On the $2.5 billion, to answer your question looking forward, the Netherlands will be very soon be debt-free on a net debt basis because they are now generating enough cashflows . They had always historically been debt -free. When we went into relining BF6, we were sitting on €600-700 million of cash. That was an outlier year, and its effect went through next two years. In the last 6 - 8 months, we are in a much better position despite a very difficult market. Netherlands, as far as underlying conditions are concerned, will be free of debt. It may have some working capital debt, but it will have its own cash. We are not sending money to Netherlands at this point in time. When we sign up to the negotiations with the Dutch government, we will see how the financing stacks up. As far as UK is concerned, we have debt, which we want to take out through this infusion. There will be small debt. When UK becomes, on an underlying basis, self -sustaining, hopefully, we don't have to give any further debt. As far as capex is concerned, we're committed to about £750 million. That has not started yet in a meaningful way. That spend will happen in the future over the next three years. Other than that, we have overseas foreign currency bonds, which is in Singapore, which will also have to be repaid. Some of it is nex t year, and then in 2028, it finishes everything. Only for those specific requirements, which is anyway part of our Tata Steel obligation and consolidated debt. Other than that, most important for you to take note of is the fact that what we are working towards underlying cashflows of overseas businesses not requiring any funding support. That's our target. That's what we are close to as far as Netherlands is concerned. In fact, Ne therlands never needed money, even when they were not performing well. They had taken short -term money, which they have repaid to us. The whole question is sorting the UK bit . When it becomes sustainable, we don't need to put in money. The overseas debt, whatever we have, other than Netherlands, we will onshore it, especially in Singapore, which is a Tata Steel foreign currency debt . Ashish Jain, Macquarie Will this $2.5 billion be incremental investment from India or some of it is already there and in the form of debt or something and will be converted to equity?
It will be financed basically.
Koushik, if I can just interrupt you. Maybe you want to explain that because the money is going as equity, I think people are interpreting it as equity. Not equity. I said that in the beginning that it is not an equity investment, it's rebalancing of debt. We are not putting 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, Macquarie From the standalone balance sheet point of view, is it further money investment in the entity?
Yes, but that's how you have to account for it anyway.
Thank you, sir. I would now like to hand over the conference to Ms. Samita Shah for chat question s. Over to you ma'am.
There are questions regarding the impact of recent tariffs in China and the US on steel markets overall. Additionally, whether we are seeing benefits from the safeguard duty. Are these benefits fully reflected in the guidance provided for the next quarter, or is there more to anticipate? Could you elaborate on that?
CEO & MD – Tata Steel Limited The guidance that I gave is based on things as they stand today 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 US, China, at a broader level, helps, because it tempers down the market and the concerns of volatility, the inflationary pressures, also what the high tariffs do to the Chinese economy. If the US and China can come to some understanding and trade flows both ways, and the Chinese economy is not hit more than required, then 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 tons of exports, which continues out of China in March and April that happened and we are expecting that, that number should come down . If the US and China reach a deal on tariffs, we have a better chance of that number coming down. 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 were not the markets pulling a lot of steel earlier. That is reducing some pressure on Southeast Asia and India as far as Chinese exports are concerned. As far as US tariffs are conce rned, UK – US understanding will help us. We sell about 70,000 - 80,000 tons of steel from UK to the US. We sell about 700,000 tons of steel from Netherlands to the US. That will depend on the EU - US trade deal whenever that happens. Some of the steel that we send from Netherlands to US is not made in the US. That’s how we are able to pass on some of the tariff impact to our customers because they need to import, and they can't buy locally. So that’s the situation as it is, and we hope that the EU and US will come to a deal soon. Regarding the medium to long -term impact in the US, we are seeing that the EU is increasingly investing domestically to build industry, defence, and infrastructure, which is more positive for the steel industry in the medium to long-term.
The next question is about Tata Tiscon specifically. For all the audience, we don't give guidance on specific realisations for any product categories, so we won't be commenting on that. The question people are asking is about the individual house builder segment, which has seen 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 realisation? As I said, we will not comment on realisations, but maybe you could give a broad sense of the dynamics?
CEO & MD – Tata Steel Limited Tata Tiscon has just celebrated 25 years since its launch because we identified this as a segment where people are willing to pay a premium to reduce the risk of purchase. It's an individual buying 3 - 4 tons of steel to build a house. In semi-urban and rural India, people build homes rather than buy homes. It's a very personal journey, with people putting their life's investments into building their house. We saw an opportunity to tell them to be careful about the steel they buy and that they can trust us. It has worked well. Today, it's a 2 ,00,000 tons per month business. It started as a 6,000 tons per year business. Generally, the same steel sold to a large construction company is about Rs. 5,000 - 6,000 per ton less because the large company will just go by the test certificate and not pay much of a premium for the product. They will pay a premium for the service. It's been a good story. We have a network of about 80 - 90 distributors, covering all the districts in India. We have about 5,000 - 6,000 dealers. We are doing about Rs. 3,500 crores of GMV, 90% of it is Tata Tiscon. People are ordering Tata Tiscon from the US, Canada, and the Middle East, and we deliver within 48 - 72 hours to any location in India. We are getting a lot of orders from overseas for delivery in India. We are still only at 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 tons, so we are looking at how we can keep expanding this business. We are also looking at different operating models because this has really taken off well. In the last two years, we've grown in double digits. Once the Ludhiana plant comes online, we'll get another 1 million tons, all of which will be sold as Tata Tiscon. The model in Ludhiana is to sell all the steel within 200 - 300 kilometres of Ludhiana to avoid spending [inaudible] moving Tata Tiscon from Jamshedpur to Ludhiana. We save on transportation costs and collect scrap in that neighbourhood to sell steel in that neighbourhood. If that model works, we will set up similar plants in other parts of India where there is scrap. It's a good business for us. It's a Rs.10,000 crore brand and growing at 20%.
The next question, and I'm just reminding our audience again that we do not give guidance on specific product categories or sites. The question is on long products versus flat products, focusing on margins and realisations. How do the broader dynamics differ between long products and flat products? The idea is to see which is more profitable.
CEO & MD – Tata Steel Limited So, it goes through cycles. Traditionally, flat products tend to fetch higher prices, and you have segments like automotive and oil and gas, which are more approval -based businesses. 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 fixed [inaudible]. The second big shift in flat products globally is that when China used to export a lot of steel 10 - 15 years ago, it was mainly long products. Today, it is all flat products because the Chinese steel industry has switched from long s to flats, and flat products travel better than long. So, you see HRC going all over the world. Rebars don't travel so much or wire rods maybe a little bit more . So, that dynamics is changing . But if you look at India, its largely a local business, and 50% of the long product suppl ies comes from the secondary sector, whose cost structures and drivers are different. In the last 2 - 3 years, when thermal coal prices were much lower, with thermal coal to coking coal at 1:3, secondary producers were more competitive. As the ratio narrowed, primary producers became more competitive. Currently, long product prices are higher in India than flat product prices on a commercial grade basis because most of the 100 million tons of steel China is exporting are flat products, which has depressed inte rnational flat product prices. All flat products produced in India are being sold in India, depressing flat product prices. From a return on invested capital point of view, long products are better because you can set up a long product plant for less money. If you're getting better EBITDA for that, then you are better off. But over the long term, bigger companies tend to gravitate towards flat products.
Another question, which is slightly more long -term in nature: Do we see India risking or becoming an overcapacity steel market in the next 5 - 6 years given the expansion plans which everybody has announced?
CEO & MD – Tata Steel Limited Honestly, I don't think so because it's not easy to build steel plants in India. It takes time, assuming you have land. If you are going to start a greenfield site, it takes even longer time. India will never be able to build capacity as fast as China did. At its peak, China was building 50 million tons of capacity per year. India does not have the capacity to build because our processes take much longer , the approval processes, acquiring land, the public hearing, everything takes much longer. The ability to build plants is also limited. So, 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 of 8 %, 9%, 10%, think India will struggle to build 15 - 20 million tons of capacity every year, forget 50 million tons. So I do believe that we will have a better balance. India will never be a big threat in international markets as a big exporter like China because whatever capacity we build in India will be just about enough for India.
What is our guidance for coking coal and iron ore consumption for 1QFY26.
CEO & MD – Tata Steel Limited For coking coal, the guidance is that it will be about $10 per ton 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 per ton better, both in Europe and India. Iron ore is relevant only for Europe, specifically for Netherlands, because we've shut the blast furnaces in the UK. Iron ore is expected to be about $10 per ton higher in Netherlands consumption.
Now there are a bunch of questions on the developments around the BPSL judgment. The first question is whether the Tata Steel Bhushan resolution plan is at risk of the same risks. What are the differences, and do we run the same risks? There is no litigation on this matter as far as Tata Steel Bhushan is concerned. We've gone through two rounds. First, when the acquisition, we've done this as guided by the C oC within the timeline of the IBC. And subsequently, we have also gone through the full process of merging the business within Tata Steel. So there is nothing on a similar basis .
The second question is if this asset comes up again on the block, would Tata Steel be interested in acquiring it .
We would rather not answer that question because it is related to a different company, and it ’s not fair to answer.
What are our deleveraging targets? Is there a plan to deleverage for the next year?
We've always said that our target remains to continue deleveraging while investing in growth projects. In September 2024, at the peak of the downturn, we were at about Rs. 88,000 crores consolidated net debt. Now, we are at about Rs. 82,570 crores. We've reduced more than Rs. 6,000 crores of debt across entities and geographies in the last six months. We will continue this pathway into FY2026. 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 .
There is a question on why our interest costs have gone up. I would like to remind the audience that global interest rates have increased by almost 400 basis points. But I think there is a broader question regarding our interest costs and their direction.
The net finance cost for FY2024 was ~Rs. 6,700 crores, and the net finance cost for FY 2025 is ~Rs. 6,300 crores. So, I didn't see any increase in interest costs. 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 [inaudible].
There are still many people lined up for the audio questions. We will take a couple. Back to you.
Next question is from Amit Murarka of Axis Capital. Amit Murarka, Axis Capital I just wanted to get a sense now on expansion plans, I believe FY 2026 capex guided is Rs. 15,000 crores, which I understand doesn't include any planned new expansion projects in India. Where do we stand on the NINL and KPO3 and such expansions, particularly in the context of 35 - 40 MTPA capacity target we had given for FY2030.
CEO & MD - Tata Steel Limited The capex here is largely focused on raw materials and on Kalinganagar completion. It includes the Ludhiana plant, which is ~0.8 MTPA, but we hope to push it to 1 MTPA. If you look at it from a growth point of view, after Kalinganagar this year, we have some downstream expansions. We have the 0.5 MTPA 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. In terms of 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, you 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, to go up to 9.5 MTPA for Neelachal. That will be first. We are then working on the Kalinganagar next phase as well as Bhushan expansion from 5 MTPA to 6.5 MTPA. 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 ye ar, we will go to the Board. Amit Murarka, Axis Capital Is it fair to say that it looks more like 30 MTPA by FY2030 rather than the earlier 35 - 40 MTPA that we were expecting?
CEO & MD - Tata Steel Limited What we expect to have by FY2030 is all these projects at different stages. Hopefully, we start the Neelachal project now. At least the first phase will finish, and we can start the other two, which will be a t different degrees of finishing in FY2030 - 31. Yes, we will not have completed capacity by FY30.
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. 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, t he preparatory work post -announcement has been changed to pre - announcement and then straight away into the execution stage.
Next question is from Sumangal Nevatia of Kotak Securities. Sumangal Nevatia, Kotak Securities First question is on the Europe operations. Is it possible to share and explain what is the impact of reduction in carbon allowances in FY2026? What would be the likely cost impact of that? So as far as UK is concerned, it's now zero. There is no impact of CO2 in UK. There is a certain amount of free allowances UK will get and that is good enough for the downstream entities to compensate for it. In fact, what we see today is from FY2025-26, there will be no impact of CO 2 as far as UK is concerned till the start of FY2027-28, when the next phase of the EAF starts, and that will be of different nature. As 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 CO 2 levy that has been coming in as far as the Netherlands is concerned. So, it is close to about €80 million a year.
CEO & MD - Tata Steel Limited This carbon allowances will reduce along with CBAM, right?
Next year onwards, what happens is that on a longer term or a medium term, when the CBAM comes, it will neutralise the cost because arithmetically, the cost of the steel prices will reflect CBAM, which will cover up for the cost of the carbon. Sumangal Nevatia, Kotak Securities Understood. I have one question on the entire cost savings topic. So how is it expected to phase in FY2026? Is it more of a gradual thing or back -ended? As Naren mentioned, EBITDA of €70 - 80 per ton for Europe, given the Rs. 4,000 crore number for India, keeping the spreads aside, can we expect Rs. 1,500 - 2,000 increase in the EBITDA on a per ton basis?
First of all, as far as Netherlands is concerned, that project has just kicked off, as I mentioned in my commentary . One of the important parts of that is also the productivity gains . The productivity gains involves the process of consultation with the works council, etc. So, in Netherlands, while some part has been reali sed 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 3Q - 4Q. As far as India is concerned, we started this project last year. As I said, we've taken out Rs. 1,800 crores of cost plus Rs. 900 crores on coal optimisation. That is a lot more secular in India, but it is more from June onwards. After June, we should see the results in the financial statements. I think your last question was whether you can see the improvement on a per ton basis. The answer is yes, ceteris paribus, everything else remains the same. Sumangal Nevatia, Kotak Securities Just one last clarification. Given that today, there's a continuous pressure on Chinese steel prices, our calculations are suggesting domestic prices are at Rs. 2,000 - 3,000 premium. So, are we sensing a peak in steel prices and some pressure going forward? I understand Rs. 3,000 is what we are expecting in 1Q. On a spot basis, what are your thoughts? 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 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 book today, and it comes in after two, three months, you don't know the price then. You have a monsoon season coming and do you want to import cargo coming in during monsoons. I don't see imports flooding in just yet. 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. 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. We are seeing Rs. 15,000 crore capex, peers are also putting in big capex. The industry needs to be financially healthy to be able to put in this kind of money and new capacities. I think that's a submission to the government .
That was the last question for today. I would now like to hand the conference back to Ms. Samita Shah for closing comment. Over to you, ma'am.
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. Thank you. Thank you.