TATASTEEL - TATA STEEL LIMITED Share Price

In the 1QFY2026 earnings discussion, Tata Steel management provided an optimistic outlook, emphasizing their strong operational improvements. T.V. Narendran, CEO & MD, noted that crude steel production in India was 5.24 million tons with deliveries at 4.75 million tons even amidst seasonal challenges and maintenance shutdowns. They experienced a net steel realization increase of approximately Rs 2,600 per ton quarter-on-quarter (QoQ), retaining an EBITDA margin around 24%.

For the upcoming quarter (2Q), management projected a decrease in net realizations by Rs 2,000 per ton compared to 1Q due to softer pricing. However, they expect lower coking coal costs, estimated to be $10 per ton lower per geography, and a reduction in iron ore costs in the Netherlands by $7-8 per ton. The CFO, Koushik Chatterjee, highlighted successful cost transformation initiatives resulting in a traceable improvement of about Rs 2,900 crores, with India contributing Rs 1,100 crores, Netherlands Rs 1,400 crores, and UK Rs 400 crores.

Management reaffirmed their commitment to deleverage by reducing net debt by Rs 6,000 to Rs 8,000 crores for FY2026. They expect significant volume growth driven by the ramp-up at Kalinganagar to contribute an estimated 6.7 to 6.8 million tons of crude steel production and the completion of other projects over the next financial year. Additionally, UK operations showed signs of improvement, with management targeting breakeven by the end of the current fiscal year as they optimize costs and navigate tariff uncertainties.

The overall approach indicates confidence in navigating market dynamics while focusing on sustainable growth, operational efficiency, and maintaining robust financial health.

1. Question: "If you can share what is the price and cost outlook in the coming quarter vs. what we've seen in 1Q in India, UK and Netherlands?"

Answer: "In India, we expect net realisations to decrease by about Rs 2,000 per ton in 2Q compared to 1Q. For both the UK and Netherlands, price outlook appears flat or slightly higher. Regarding costs, we anticipate coking coal costs to drop by approximately $10 per ton across all regions, while in the Netherlands, iron ore costs are likely to decrease by about $7 to $8 per ton in 2Q relative to 1Q."

2. Question: "What's the breakup between India, UK and Netherlands in cost transformation for 1Q and the target for breakeven in the UK?"

Answer: "The cost transformation deliverables for 1Q were approximately Rs 1,100 crores in India, Rs 1,400 crores in the Netherlands, and Rs 400 crores in the UK. We're focused on achieving breakeven in the UK by year-end. This cost transformation is crucial for this goal, intensifying our efforts amidst volatile market conditions."

3. Question: "What is holding back the NINL expansion and when can we expect an announcement?"

Answer: "Currently, we are prioritizing environmental clearances, which are nearing completion, adding a couple of months to the process. We've changed our approach by preparing thoroughly before seeking Board approval. We anticipate making an announcement by October or November, with ongoing projects at Kalinganagar helping offset volumes in the interim."

4. Question: "Given the seasonal impact in India, what are the expectations for price hikes post-monsoon?"

Answer: "In India, traditionally weak demand coincided with maintenance shutdowns in 1Q, contributing to price pressures. However, recovery is expected post-monsoon as construction activity resumes and demands pick up during the festive season. International prices have recently stabilized, providing a hopeful outlook for domestic pricing."

5. Question: "Could you elaborate on the cost optimization in the UK, particularly regarding substrate procurement?"

Answer: "Our UK operations have shifted to a model where we buy slabs and convert them into downstream products. We're optimizing substrate costs by ensuring we procure the right grades and maintain stock levels that align with customer pricing. This optimization also involves real-time data management for enhanced procurement and timely sales."

6. Question: "What outlook can you provide regarding profitability for both the UK mini mills and Ludhiana EAF?"

Answer: "In the UK, several challenges include tariffs and reduced automotive demand. However, we're targeting breakeven by year-end amidst these conditions. Ludhiana's profitability, despite higher production costs via EAF, is mitigated by strategic market positioning and logistical efficiencies, which should enable competitiveness against traditional production methods."

7. Question: "What updates can you share about the CBAM rollout and its expected impact?"

Answer: "The CBAM is on track for implementation by January 2026. The EU is focused on ensuring its regulations are robust and leakage-proof. The EU governments are investing heavily in the transition, and we anticipate that necessary adjustments will be made to smooth the rollout, benefiting both producers and consumers."

8. Question: "Given your guidance on tax implications of debt waiver at Tata Steel BSL, can you quantify potential impacts?"

Answer: "The tax implications of the debt waiver are currently in legal discussions. Our stance is that such waivers should not be classified as income and therefore shouldn't incur taxes. However, as these matters are sub judice, we cannot provide specific quantification at this time."

9. Question: "What are the strategies in place for iron ore sourcing post-2030, especially without captive mines?"

Answer: "We'll adapt our approach to iron ore sourcing based on cost efficiency and market conditions. While we continue to bid for new mining opportunities, we are also optimizing our sourcing strategy by considering imports, especially when it becomes economically viable."

These detailed Q&A segments furnish insights from the earnings transcript of Tata Steel, reflecting on price outlooks, cost management, operational strategies, and market conditions.