Tata Steel capex guidance for this FY is ₹15,000 cr: Narendran & Chatterjee

TV Narendran and Koushik Chatterjee discusses a range of issues from the performance to debt reduction and capex

A day after Tata Steel doubled its consolidated net profit in Q4FY25, TV Narendran, managing director and chief executive officer, and Koushik Chatterjee, executive director and chief financial officer, discuss a range of issues with Ishita Ayan Dutt during a video interview. Edited excerpts:

 

Tata Steel’s net profit in Q4FY25 jumped 112.7 per cent year-on-year (Y-o-Y). What led to this performance?

 

Narendran: In Europe, the Netherlands moved from negative earnings before interest, taxes, depreciation and amortisation (Ebitda) to a positive Ebitda over the last few quarters. The UK has not improved much in terms of Ebitda, but will start improving. We will see the impact of all the cost takeouts playing out. And, we have seen margins and spreads stabilising and improving a bit because in the last quarter coking coal prices went down. In India, because of the safeguard duty, steel prices stabilised and started moving up. Overall, the volumes have grown. In the Netherlands, volumes have gone up significantly compared to the previous year. In India, volumes have risen because of Kalinganagar

 

In the UK, your Ebitda loss has widened both Y-o-Y and quarter-on-quarter (Q-o-Q) even after the closure of heavy-end operations. When do you see break-even?

 

Narendran: We have taken out more than 200 million pounds of fixed costs in the last year. We will take out another 200 million pounds this year. For most of last year, we had the blast furnaces running. The impact of fixed cost takeouts will be felt now. The markets have been quite tough in the UK. So, some of the benefits that we had in the cost takeout were negated.

  Unlike Europe, which has put in quotas to protect itself against imports post the tariff action in the US, the UK has not yet put in any quotas. We are working with the government on that. But we expect the situation to change and the UK to be Ebitda neutral or Ebitda positive during the year.

 

Chatterjee: If we compare Q4FY24 with Q4FY25, prices are down by about ₹4,200 per tonne. That is a big swing from a UK perspective. In Q4FY24, there was a credit of CO2 on account of closure announcement of the blast furnaces. The fixed cost in the UK in FY24 was about 955 million pounds. And in FY25, it's about 750 million pounds. So, there's been a huge cost takeout. But the market spreads collapsed in the UK and elsewhere also. 

We are focused on further cost takeout this year by another 200 million pounds to reduce the base fixed cost to around 550 million pounds. Our plan is to significantly reduce the UK cost base and that’s the basic premise for transition to break-even.

 

The internal cost transformation programme led to savings of around ₹6,600 crore in FY25. What kind of savings is expected in FY26?

 

Chatterjee: The ₹6,600 crore cost takeout is across three regions – India, the UK and the Netherlands. The target for the next 12-18 months is over ₹11,000 crore.

 

In India steel prices have moved up in the wake of safeguard duty. Prices have increased in Europe as well. Is there a rebound?

 

Narendran: In Europe, the spreads have improved a bit for two reasons. One is that the European Union (EU) has tightened the quotas so that there's no flood of imports because of the actions in the US. That has helped stabilise the sentiment. Second, the spreads have improved because the (coking) coal prices have come down.

  The third is a medium-to-longer term impact, due to the friction between the US and the EU. The EU is going to spend a lot more on building its own defence industry, manufacturing, infrastructure and that is positive for steel consumption in Europe. That’s not going to impact us this year. But overall, we feel the worst is behind us.

 

Gross debt has come down from ₹98,919 crore at the end of December 2024 to ₹94,804 crore at the end of March 2025. Where do you see it in FY26?

 

Chatterjee: We should target gross debt to go below ₹90,000 crore. The peak net debt in September was about ₹88,000 crore, whereas we closed the year at about ₹82,000 crore. So, in the last six months, we have taken out about ₹6,000 crore from a net debt perspective. This journey will continue.

 

Will the safeguard duty prompt you to take up your next phase of expansion projects?

 

Narendran: During the year, we hope to finalise a plan on the Neelachal expansion because we have already gone through the public hearing for expansion. As far as ongoing projects are concerned, we will complete the Kalinganagar and the Ludhiana EAF project. We have a half a million tonne combi mill coming up in Jamshedpur.

  So, we have a number of projects, that's why the capex guidance for this year is also ₹15,000 crore. About 80 per cent of that is in India. 

Then, we will work on the next set of projects. We will find a balance between our balance sheet and our ambition to grow. The best thing is we now have the runway available – whether it's Kalinganagar, Neelachal or Meramandali.

 

You have announced a fund infusion of about ₹21,410 crore in T Steel Holdings (TSHP). Last year, the board had approved an infusion of ₹17,407 crore. Is this in addition?

  Chatterjee: This is primarily rebalancing existing overseas debt as part of our overall risk mitigation strategy on forex fluctuations and more efficient post-tax interest costs, taking the opportunity of better interest rate management.

  There is no impact on the overall consolidated debt. In that respect, it’s not a new infusion but a broader rebalancing.

  We had done this last year also. The balance of the residual funds will be towards restructuring in the UK, which is almost at the tail end of it, in terms of people, etc. The third element is the capex in the UK for the electric arc furnace project – we will be starting our site activities in July – the amount is not very significant this year.

 

Earlier this month, the Supreme Court came out with an order rejecting JSW Steel’s resolution plan for Bhushan Power and Steel, four years after the acquisition and ordered liquidation. As an investor, does it make you apprehensive about acquiring assets through the Insolvency and Bankruptcy Code (IBC)? In the event that it's liquidated, would you look at it?

 

Chatterjee: Actually, it doesn't change the IBC ground rules. It is a specific judgment in a specific matter. The IBC framework is pretty clear and robust.

 

Narendran: It's more unique to this case than to the IBC framework. On the second part of the question, as of now, they (court) have said, liquidate. We have enough runway with our existing sites. Between Kalinganagar, Neelachal Bhushan (Steel) and Jamshedpur plants, we can go to 45-46 million tonnes (mt). So, we don't need any new site to meet our growth aspirations. But we will obviously wait and see what happens there.

 

In the wake of the Pakistan conflict, did you have to beef up security arrangements?

 

Narendran: We were concerned about our teams in some of these cities – many of our distributors operate in the border areas. We also have an EAF being constructed in Ludhiana. We had to stop the activity for a few days because of the blackouts as we were advised not to keep the construction site lit up at night. 

There was a fair amount of fear among migrant labourers (contract) – they were wanting to go back to wherever they came from. Those are issues that we had to deal with. We also had a travel advisory to stop people from travelling unless essential. We took these precautions, but things seem to be getting back to normal.