We worked very hard, it's the best proposal: Tata Steel CEO T V Narendran

Impairment and restructuring costs related to an impending transition in the UK to electric arc furnace-based steelmaking operations dragged Tata Steel into a net loss of Rs 6,196 crore in Q2FY24. In a video interview, Tata Steel Managing Director and Chief Executive Officer T V Narendran told Ishita Ayan Dutt that its restructuring proposal for the UK was aimed at creating a sustainable business. Edited excerpts:

The impairment charge in standalone financial statements is Rs 12,560 crore and Rs 2,746 crore in the consolidated one. Can you explain the difference? And does this complete the provisioning for the UK?
 

The answer to the second part of the question is “yes”. The reason why it (impairment charge) is different is that when you look at things on a consolidated basis, it is basically dependent on the assets in the UK. And in the past, we impaired a lot of it. In standalone, it is more a valuation of the money that you put in, so in some sense that includes the loss funding.
 

When do you mothball the blast furnace in the UK?
 

This is what the consultation is about. We are required by law to go through a consultation process and the precondition is that we should be open to all suggestions. So it would be better to give a timeline after the consultation process. But some of the assets are at the end of life there and we have been saying that for a long time. So, from a union point of view, mothballing means loss of jobs, sooner rather than later. For us, some of those assets are at the end of life, so we will have to take them down.
 

But you have put a number in terms of restructuring cost, which is Rs 2,425 crore, and it includes potential redundancies …
 

This is based on our assessment. We have made some assumptions and made those provisions.
 

The unions are opposed to any kind of job cut, so how do you propose to push through this restructuring?
 

We are going through a pre-consultation process. It’s an informal consultation where, typically, the unions appoint an independent consultant, who looks at all the details of our proposal. This has been going on for the past six weeks. Now, they have to come back to us with a counter proposal. 
 

If it’s technically and financially better than what we are proposing, we are obliged to consider it or, at least, have a discussion with them to understand it. We think we worked very hard on this proposal and  this is the best proposal that there is.

Unions are obviously reflecting the sentiments of their members. One way to look at it is there are many jobs which are saved, but for the people who may be losing jobs, it’s an emotional issue.

How do you see the UK operations once the transition is over?

What we are negotiating with the unions is the transition period. At the end of it all, the configuration of the plant that we expect to have is a 3-million tonne (mt) electric arc furnace (EAF). 
 

With the reduction in workforce, which we hope to negotiate with the unions, and the savings in capex and opex on the heavy end assets, and usage of local scrap, which will reduce the cyclicality, we expect the cost of our UK operations to reduce from the current levels by £100-150 per tonne. That puts us in a competitive position and creates a business which is Ebitda-positive and cash-positive.
 

Tata Steel’s net debt/Ebidta has increased quite sharply from 2.07x to 3.53x in H1FY24. Given the circumstances, would you slow growth plans?
 

The Kalinganagar project is coming close to completion. We have the Ludhiana project, where groundbreaking has happened … There is no change to that. 

The new plans are on Neelachal, Kalinganagar Phase III, and Meramandali. The Neelachal plan will be ready in a few months.