TATASTEEL - TATA STEEL LIMITED Share Price

In the earnings discussion for the fourth quarter and full year FY2025, management provided an optimistic outlook for Tata Steel, emphasizing key operational and financial metrics. Notably, the company achieved its highest-ever crude steel production of approximately 21.7 million tons and deliveries of about 20.9 million tons for the fiscal year. The focus remains on enhancing cost competitiveness, especially following the commissioning of India's largest blast furnace at Kalinganagar.

Tata Steel India plans to deliver an incremental 1.5 million tons in FY2026, with about 2 million tons expected from Kalinganagar, though Jamshedpur's output will face constraints due to blast furnace relining. The company's cost transformation program is targeting significant savings, with approximately Rs. 4,000 crores expected from Indian operations alone. In Europe, anticipated cost takeouts are around €500 million for FY2026, with net EBITDA targets of €70-100 per ton.

Management highlighted a shift in operational strategy in the UK, with an ongoing transition towards a green steelmaking model, positively impacting fixed costs. They expect to capture an EBITDA neutral status as cost efficiencies improve. Key performance indicators are being closely monitored, with November-December generally being the period for price negotiations.

In terms of capital allocation, the company intends to spend Rs. 15,000 crores in FY2026, with a focus on growth projects and sustainability initiatives, particularly in decarbonization efforts. The management indicated a strong commitment to deleverage, with net debt reduced to around Rs. 82,579 crores, reflecting a proactive financial strategy amidst a fluctuating market environment.

Q&A Summary from Tata Steel Earnings Call Transcript (May 13, 2025)

1. Question (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?

Answer (T. V. Narendran, CEO):
In India, we are guiding that prices this quarter will be about Rs.3,000 per ton higher than the last quarter. In Europe, prices are about €20-30 per ton higher than last quarter.

2. Question (Prateek Singh, DAM Capital Advisors):
What is your view on Jamshedpur given the legacy cost issues and operational disadvantages?

Answer (T. V. Narendran, CEO):
While Jamshedpur has legacy costs, we've been addressing them. The gap between Jamshedpur and other sites is narrowing due to R&D and procurement efficiencies. The retirement of older workers further aids in reducing costs.

3. Question (Ritesh Shah, Investec):
Could you help us understand the recent approval to infuse another $2.5 billion into Europe?

Answer (Koushik Chatterjee, CFO):
This is a rebalancing of debt"”not new investment. It aims to reduce currency fluctuation and post-tax costs while supporting ongoing projects, such as EAF in the UK, which is partly funded by the government.

4. Question (Ritesh Shah, Investec):
What are the underlying variables for the cost takeout for the UK operations?

Answer (Koushik Chatterjee, CFO):
We aim to reduce total fixed costs by £540 million. This includes maintenance, operations, and other charges, reflecting an exit rate rather than just annualized costs, addressing ongoing expense improvements.

5. Question (Satyadeep Jain, Ambit Capital):
What is unique about the cost takeout approach now compared to before?

Answer (T. V. Narendran, CEO):
Cost reduction is cyclical; it will continue indefinitely. The focus on technology and data analytics today provides deeper insights for cost efficiencies that we couldn't achieve before.

6. Question (Amit Dixit, ICICI Securities):
Can you tell us the volume guidance for India and consolidated for FY2026?

Answer (T. V. Narendran, CEO):
We anticipate a net increase of about 1.5 million tons of additional deliveries, mainly in India, with flat volumes expected in the UK and slight growth in the Netherlands.

7. Question (Ashish Jain, Macquarie):
Is the infusion of $2.5 billion the final support from India's balance sheet to European operations?

Answer (Koushik Chatterjee, CFO):
The Netherlands should soon be debt-free as it generates cash flows, while UK operations still require support. The goal is to ensure future fundraising is minimal as we work toward stability.

8. Question (Sumangal Nevatia, Kotak Securities):
What is the expected impact of reduced carbon allowances in FY2026?

Answer (Koushik Chatterjee, CFO):
In the UK, there will be no impact from carbon allowances, while in the Netherlands, we anticipate an increased cost of around €80 million due to a reduction in carbon allowances.

This summary captures key questions and responses regarding price movements, cost efficiencies, and strategic planning for Tata Steel.