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Informist, Tuesday, May 13, 2025

By Sunil Raghu and Ashutosh Pati

AHMEDABAD/MUMBAI – Tata Steel Ltd. seeks to cut costs by INR 110 billion across the geographies it is present in and invest INR 150 billion in capital expenditure during 2025-26 (Apr-Mar), the company's management said in its post-earnings analyst call Tuesday.

Firstly, in India the company's intent is to deliver savings of INR 40 billion by focussing on operating key performance initiatives, employee productivity, supply chain optimisation, coupled with investment in projects with low payback period. In the UK, the company intends to continue progressing on achieving a lean structure by further reducing its fixed costs of 29% year-on-year, amounting to $220 million. For the Netherlands, the company claimed that it has recently launched a cost competitiveness programme targeting 500 million euros of savings in FY26.

Of the total INR-150-billion capital expenditure planned for FY26, around 75% is to complete the projects in India, including the last part of Tata Steel Kalinganagar in Odisha, electric arc furnace project in Ludhiana, and the next phase of expansion of Nilanchal Ispat Nigam Ltd. For the UK and Europe, the focus is largely on decarbonisation with material support from the government, the company's management said.

The company plans to make proposed investments using its cash flow and liquidity. The operating cash flows after interest and adjustments improved 37% on year to INR 177 billion. As per the post-earnings investor presentation, India's biggest steelmaker has liquidity of around INR 387.9 billion. The company spent INR 156.7 billion on capital expenditure during FY25.

For the financial year ended Mar. 31, the steel-maker reported a 5% rise in crude steel production in India to 21.75 million tonnes, following the commissioning of the blast furnace at Kalinganagar in Odisha and higher steel production at Neelachal Ispat Nigam Ltd. In line with the growth in production volumes, deliveries for 2024-25 (Apr-Mar) rose 5.2% to 20.94 million tonnes. This made up 68% of overall volumes for the company. It now expects this production to go up by 1.5 million tonnes in FY26, primarily led by India, with the UK likely to remain flat at 2.5 million tonnes and the Netherlands slightly higher.

For FY25, the Netherlands unit's liquid steel production surged over 40% to 6.75 million tonnes and deliveries rose around 17% to 6.22 million tonnes. The year-on-year growth in production and deliveries was on the back of a return to normal operating levels post completion of the reline of Blast Furnace in February 2024, Tata Steel said. Financially, the company management is hopeful that the Netherlands would 'very soon' be debt free basis its cash flow and would not require any funds from its Indian parent, as is the case at present. Tata Steel had to bail out its European subsidiaries as they were finding it tough to achieve positive cash flows due to multiple issues, led by impact of geopolitical tensions as Ukraine-Russia war on demand in Europe.

The company said it was committed to a capex of $750 mln in the UK over the next 3 years. Talking about impact of US-China tariff war, Tata Steel management said that while its guidance for India stands, the tariff war at the broader level helps temper down the market and concern about volatility and inflationary pressures. However, if the US and China do come to an understanding, trade flows both ways and Chinese economy is not hit 'more than required', it would see Indian steel makers in a 'better place' as China would focus on its construction industry. "...if they (China) 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," the company management said. Tata Steel does not see steel from China flooding India, as China has primarily been selling its steel to Africa and other Asian markets.

As for the understanding between the US and the UK on tariffs, Tata Steel management said that it would be of help as they sell about 70,000 tonnes to 80,000 tonnes of steel from the UK to the US and 700,000 tonnes of steel from the Netherlands to the US. However, as the US does not make particular kind of steel which is made in the Netherlands, the customers there are willing to pay higher tariffs for import of Tata Steel products made at the Netherlands facility.

On being asked how the cost cutting steps would be phased out over FY26 or would it be gradual, the company management said that it had started the work last year and saved nearly INR 27 billion, including INR 9 billion on coal optimisation. "After June onwards, we should see the results in the papers, in the financial statements," the management said.

As for guidance on coking coal and iron ore for the June quarter, Tata Steel management said that they expect coking coal to be lower by about $10 per tonne on a consumption basis and iron ore to be $10 per tonne higher in the Netherlands on consumption basis. It would not have any impact on the UK as the company has shut the blast furnaces, the management said.

The shares of Tata Steel end trade at INR 149.43 per share on the National Stock Exchange, down 1.45%.  End

US$1 = INR 85.33

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Akul Nishant Akhoury

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