Tata Steel's expansion pipeline supports favourable post-expansion outlook

Tata Steel is stacking up projects to take domestic capacity to 40 mtpa by 2030, with NINL expansion, downstream additions and pellet supplies, even as near-term steel prices stay weak

While steel prices continue to be under pressure, Tata Steel is looking at various moves to ensure domestic capacity expansion to 40 million tonnes per annum (mtpa) by 2030 from the current 26.6 mtpa.

 

The Board has granted in-principle approval for 4.8 mtpa capacity expansion at Neelachal Ispat Nigam (NINL) with ore requirements to be met from NINL’s captive Koira mine.

 

The Board has also approved funds for design and engineering of a 2.5 mtpa thin slab caster and rolling facility at Meramandali.

 

The company is also acquiring a majority stake in Thriveni Pellets (TPPL) for a cash consideration of ₹640 crore.

 

TPPL owns 100 per cent of Brahmani River Pellets (BRPL), which operates a 4 mtpa pellet plant in Jajpur, Odisha, and a 212 km slurry pipeline. This is subject to approval from the Competition Commission of India (CCI).

 

Tata Steel has also signed a pact with Lloyds Metals & Energy (LMEL) for joint exploration of mining operations in Gadchiroli district of Maharashtra, for possible development of 6.0 mtpa greenfield capacity in the state.

 

The LMEL pact supports the strategy of expanding near demand centres in western India where Tata Steel currently does not have capacity. 

 

Approval to set up a 0.7 mtpa hot rolled pickling and galvanising line (HRPGL) at Tarapur has also been granted. This supports auto sector import substitution and the investment falls under Tata Steel BlueScope’s colour-coated business, which was recently consolidated.

 

The company has about 500-600 MT of iron ore reserves available beyond the 2030 expiry of captive mines. The Board has approved the 50.01 per cent acquisition of TPPL for cash consideration of ₹640 crore, with 49.99 per cent acquired by LMEL. BRPL’s pellet plant is close to Tata Steel's Kalinganagar plant, and the 212 km slurry pipeline helps with pellet supplies. This facility is expected to see monthly savings of ₹60 crore for payback in a year.

 

Tata Steel reported incurring ₹7,000 crore of capex in H1FY26 (for Kalinganagar expansion, Ludhiana Electric Arc Furnace, and Port Talbot plant construction).

 

The consolidated net debt at the end of Q2FY26 increased by 2.6 per cent sequentially to ₹87,040 crore (₹848.4 crore at the end Q1FY26).

 

But net debt to operating profit improved quarter-on-quarter (Q-o-Q) to 2.97 times from 3.21 times at the end of Q1FY26. The target is debt/operating profit of between 2.75-3 times. The capex outlay on NINL expansion would occur over three-four years which can be financed from internal accruals.

 

The Kalinganagar 5 mtpa ramp-up and 2.2 mtpa CRM complex expansion would support profitability. Higher long product volumes from NINL, and a focus on downstream value-added capacities will reduce impact of steel cyclicality and aid margins.

 

Meanwhile Europe operations are improving as well. The transition to green steel in the UK and structural cost reduction initiatives in the Netherlands would lead to European operations sustaining positive operating profit and this may drive a big re-rating.

 

The expansion at NINL will strengthen its presence in long steels along with a 2.5 million tonne flat steel downstream facility at Bhushan Steel and a 0.7 million tonne galvanising line under the Tata BlueScope JV at Tarapur, Maharashtra. Capex in value-added products should push up margin.

 

Operationally, Tata Steel is using its proprietary HIsarna technology (from Tata Steel Netherlands) to reduce capex, opex, and carbon emissions.

 

It will establish a 1 million tonne plant employing HIsarna,to process low-grade ore.

 

The capex may be lower than that of a traditional blast furnace and also lower emissions and is compatible with carbon capture technologies.

 

The management expects NINL to be commissioned in 3-4 years and believes that global steel prices should improve gradually. Most volume growth would kick in only from FY29. So, these would be volume accretive and improve margins only in the long term.

 

Near-term challenges exist with uncertainty around tariff escalations and low global prices. Key risks include execution complexity, slower deleveraging, and persistent challenges in Europe. Analysts are cutting near-term earnings projections while being optimistic about the post expansion scenario.