TATASTEEL - TATA STEEL LIMITED Share Price

Management Outlook and Major Points:

1. India Operations:

• Growth & Capacity Expansion: Focus on ramping up the new 5 MTPA blast furnace at Kalinganagar (Phase 2), targeting full utilization by mid-2026. Downstream expansions, including cold rolling and galvanizing lines, to enhance product mix (e.g., automotive-grade steel).
• Cost Optimization: Kalinganagar's newer assets to drive lower conversion costs vs. legacy sites. Coking coal costs expected to decline, aiding margins.
• Market Leadership: Strong retail growth (Tata Tiscon, Steelium) and investments in digital platforms (Aashiyana) to bolster customer engagement.

2. European Operations:

• UK Transition: Shift to EAF (electric arc furnace) by 2027 to reduce costs by £100"“150/ton. Fixed costs cut by £80/ton in Q3; EBITDA loss narrowed to -£67M. Targeting breakeven by mid-2025.
• Netherlands Decarbonization: Awaiting government support for gas-based DRP-EAF transition. Cost takeout initiatives underway amid weak spreads (~€170/ton).

3. Financial Strategy:

• Debt Management: Prioritizing high-IRR projects (India expansion, UK EAF) while targeting net debt/EBITDA of 2.75"“3x. Working capital optimization released Rs.4,000 crore in Q3.
• Capex Focus: FY2026 capex includes completing Kalinganagar Phase 2 (~Rs.3,000 crore), Ludhiana EAF, and UK EAF civil works. European capex contingent on government grants.

4. Market Dynamics:

• Steel Prices: India realizations to remain flat near-term; potential upside if safeguard duties curb imports. EU prices under pressure from Chinese exports, but CBAM (2026) may stabilize margins.
• Regulatory Actions: Awaiting DGTR decision on import duties in India; EU carbon costs (ETS/CBAM) to influence long-term pricing.

5. Sustainability & ESG:

• Emission reduction via UK closure, biochar in blast furnaces, and decarbonization projects. Netherlands' coke plant compliance efforts ongoing.

Key Risks: Subdued global demand, Chinese export volatility, and EU policy delays.

Question 1: (Satyadeep Jain, Ambit Capital)
Question Text: "One of the largest players in the region has talked about delaying decarbonisation investments... how are you evaluating your allocation to capital in both UK and Netherlands? Are you going to go ahead with capex till you get more clarity or any support from the government?"
Answer Summary: Tata Steel remains committed to UK's transition to scrap-based EAFs due to cost benefits (£100"“150/ton improvement) and CBAM advantages. In the Netherlands, discussions with the government focus on gas-based decarbonization (not hydrogen-dependent), with final investment decisions pending clarity on policy and support.

Question 2: (Sumangal Nevatia, Kotak Securities)
Question Text: "In case we don't reach these levels, what sort of financial impact are we looking at in the next 3"“4 years on an annual basis?" (regarding environmental non-compliance penalties in the Netherlands).
Answer Summary: Financial impacts are uncertain, but penalties relate to emissions beyond regulatory norms. Tata Steel is pursuing technical solutions, legal appeals, and dialogues. Penalty timelines may align with planned coke plant closures (~2029), minimizing immediate financial risks.

Question 3: (Sumangal Nevatia, Kotak Securities)
Question Text: "How should we look at overall prices and cost movement guidance for India, Netherlands, and UK?"
Answer Summary: India realizations to stay flat unless safeguards boost prices; coking coal costs may drop $10/ton. UK/Netherlands realizations to decline due to annual contracts, but cost cuts (e.g., coking coal down $20/ton in Netherlands) and operational improvements (7 MTPA production) will aid margins.

Question 4: (Amit Murarka, Axis Capital)
Question Text: "In the reported numbers, the fall was looking much lower. Was the NR decline lower than what you thought?"
Answer Summary: India steel net realizations fell steeper (-Rs.2,400/ton vs. Rs.2,000/ton guidance), but diversified revenue streams (e.g., FAMD) softened the impact. Adjusted EBITDA excludes FX impacts.

Question 5: (Vikash Singh, Phillip Capital)
Question Text: "How should we look at our carbon credits? How should we look at cost of production post introduction of CBAM in Netherlands?"
Answer Summary: CBAM will raise EU steel prices to offset carbon differentials (e.g., €140/ton for 2-ton CO2 emissions). Netherlands' free carbon allowances will phase out, but cost mitigations (e.g., improved blends, restructuring) and potential price hikes post-2026 will balance impacts.

Question 6: (Ritesh Shah, Investec)
Question Text: "The last DGTR application did not mention Tata Steel... What are the expectations on tariff and non-tariff measures?"
Answer Summary: Tata Steel contributed data via India Steel Association. Urgent safeguards/antidumping duties are needed to counter cheap imports. Government engagement is ongoing, with potential measures expected post-budget.

Question 7: (Indrajit Agarwal, CLSA)
Question Text: "Can you quantify the conversion cost differential between Kalinganagar Phase 2 vs. current operations?"
Answer Summary: Kalinganagar's Phase 2 (8 MTPA) benefits from scalability (lower labor/logistics costs), modern assets (e.g., doubled melt shop capacity), and no legacy costs. It will be the company's lowest-cost site, though exact figures aren't disclosed.

Question 8: (Ashish Kejriwal, Nuvama)
Question Text: "Regarding surrender of the Sukinda mines, what do we plan to do with the furnaces?"
Answer Summary: Surrendering Sukinda mines will stabilize FAMD operations by aligning production with MDPA limits. Tata Steel aims to reduce losses through operational adjustments and mine closure processes.