Tata Steel Ltd 144A

and gentlemen, good day and welcome to the Tata Steel Analyst Call. Please note that this meeting is being recorded. All the attendees' audio and video has been disabled from the backend and will be enabled subsequently. Would now like to hand the conference over to Ms. Samita Shah. Thank you and over to you, ma'am.

You're on mute, Samita.

I hope I can be heard now. So good afternoon, good afternoon everybody. And welcome to this call to discuss our results for the second quarter of FY24. We published our results yesterday and there was a detailed presentation explaining the same as well uploaded on our website. I hope you had a chance to go through it. We had quite a few announcements also with the results and we would be happy to share the details and provide you any clarifications you may require. We would be joined on this call by our CEO and Managing Director, Mr. T.V. Narendran, and our EDM CFO, Mr. Kaushik Chatterjee. Before I hand it over to them, I would like to remind you that this entire conversation today will be covered by the Safe Harbor Clause on page two of our presentation. Thank you, and over to you, Narendra.

A few comments before I, sorry, I think I forgot to unmute myself. Good afternoon. Good morning or good evening, depending on where you are. Thank you for joining the call. I'm going to make a few comments and then hand over to Kaushik. So Tara Steel, as you know, is focused on creating sustainable value and our strategic priorities embodies a commitment to responsible growth while creating an equitable shared and prosperous future for all. We continue to make steady progress on this value creation journey, leveraging digitization and an agile business model. During the quarter, the steel prices across regions moderated on slowdown in economic activity, and in the US and EU, elevated interest rates to manage inflation has adversely affected the demand, while in China, the persistent weakness in the property market continue to have an overhang on the prices. In India, the steel prices were impacted by the global sentiment, but given the resilient demand, it witnessed a lower drop in prices, 3% quarter-on-quarter than the rest of the key markets. And as a result, our net realization in India declined by about 2,400 rupees per ton quarter-on-quarter. We had guided about 3,000 rupees per ton, so it's slightly better than that. Moving to our performance, India crude steel production was around 5 million tons. Production was broadly stable on a quarter on quarter basis, but up 5% on year on year basis. India deliveries grew by about 6% year on year, having been close to 5 million tons in the last three quarters. Amongst the segments, the automotive segment had the best second quarter sales and was up 7% quarter on quarter. And we started producing full art cold roll coils at the Kalinganagar cold rolling mill and have started receiving approvals from the automotive OEMs for our cold roll steel from Kalinganagar. Our retail sales, primarily to home builders, have continued to grow and have crossed 3 million tons in the last 12 months. Our well-established brands, such as Tata Discount, Tata Steelium, and Tata Astrum, had the best of our second quarter sales. And revenues from Tata Steel, Asiana, the e-commerce platform for individual home builders, witnessed an increase of more than 70% on quarter-on-quarter basis. And in the last 12 months, the revenues have exceeded 1700 crores. In Europe, steel deliveries were around 1.8M tons in the second quarter on subdued demand and the revenue per ton was down about 50 to 60 pounds per ton in UK and Netherlands on a quarter on quarter basis. This has weighed on the performance in both geographies. The ongoing realign of one of the blast furnaces at Imodin in Netherlands, which accounts for 40% of our production there, has also impacted the Tata Steel Netherlands realizations because of the adverse product mix and other expenses. The realigning is expected to be completed in the third quarter of FY24, which is this quarter. And in terms of growth, multiple projects are underway across India, ranging from the 5 million ton per annum expansion at Kalinga Nagar, as well as growth in the downstream portfolio. The downstream portfolio, which consists of our tubes business, our wires business, our packaging or tin plate business, and the DI pipes business is expected to grow from over 2 million tonnes to 7 million tonnes, which enables better product mix enrichment. And we recently had a groundbreaking ceremony for the 0.75 million tonnes per annum EF project at Louisiana and the targeting to start the plant in 2026. We are committed to achievement 0 by 2045 and a pursuing decarbonization of operations in a face manner calibrated to the regulatory framework, resources, government support and customers in each of the geographies that we are in. Accordingly, in September, we announced a proposed plan to invest in a state of the art scrap based at Port Talbot, UK at a cost of 1.25Million pounds with a government grant of 500Million pounds. This is subject to relevant regulatory approvals, information and consultation process and finalization of detailed terms and conditions. The transition to EF based team making will result in the reduction of about 50Million tons of direct carbon emissions over a decade. There will also be impairment and restructuring costs, which Kaushik will explain in more detail. Tata Steel Netherlands has been working intensely with the Government of Netherlands on the contours of decarbonisation project covering emissions and health standards. Tata Steel Netherlands will shortly be submitting the detailed decarbonisation proposal to the Government of Netherlands seeking regulatory and financial support, which is critical to build a long-term and strong business case. The Board of Tata Steel will duly consider the project for approval at an appropriate time. In India, we are entering into an agreement to source about 379 megawatts of renewable energy, renewable power for our operations, which will enable reduction of 50 million tons of carbon over the next 25 years, carbon emissions over the next 25 years. This will significantly reduce our dependence on coal-based power plants. Looking ahead, in India, net realizations are expected to improve by about 2,200 rupees per ton quarter on quarter, aided by domestic demand, which has shown great resilience. And despite the renewed volatility in the global sentiment, the coking coal consumption cost is likely to increase by about $10 per ton quarter on quarter. In United Kingdom and Netherlands, improvement in costs are likely to offset the drop in NRs and drive an improvement in the performance on a quarter-on-quarter basis. I'm happy to share that Tata Steel has received the Safety and Health Excellence Recognition for 2023 by World Steel. We were recognized for our innovative approach to real-time visualization of risk movement that aims to provide real-time insights and alerts. These initiatives display our commitment to achieve zero harm. Thank you, and with that, I'll hand over to Kaushik.

Thank you. Good morning. Good afternoon and good evening to all those who have joined in. I will begin the quarterly performance provided on slide 25. Our consolidated revenue stood at 55,682 crores and the consolidated EBITDA was 4,315 crores, which translates to a consolidated EBITDA margin of about 8%. Standalone performance was broadly stable, but the UK and the Netherlands performance has been adversely impacted during this quarter. Before we get into the numbers, uh, I just want to also mention, we have received sanction for the amalgamation of dynasty long products that and mining with limited accordingly, the standalone financial statements, uh, that has have been restated from 1st of April 2022. To reflect the merger with this, the major process for the 2 entities have been largely completed. And now the 5 are in progress as highlighted in slide 20. This portfolio simplification process will drive efficiencies and prevent value. For the quarter, Tata Steel standalone EBITDA stood at about 6,917 crores. Which translates to an EBITDA per ton of about 14,365 excluding the forex gains of about 464 crores. The EBITDA margin was broadly stable at about 19% on quarter on quarter basis. has provided on slide 31 the drop in steel realization was offset by a lower cost the standalone nrs declined by about 2 400 rupees per ton on quarter and quarter basis due to market dynamics and seasonal factors the cooking coal consumption cost was down by about 59 dollars per ton on a quarter and quarter basis and the conversion costs went down By about 2600 rupees per ton on a quarter and quarter basis. Our conversion costs have been fairly stable over the last 3 years. Despite the inflationary pressures in the economy. At Tata Steel UK, the EBITDA loss was about 132 million pounds compared to a loss of 41 million pounds in quarter one. On a ton basis, per ton basis, the EBITDA moved lower by about 127 pounds per ton quarter on quarter. As shown in slide 34, the steel production was lower due to the operational issues and the shutdown of the center plant. This has weighed on the cost profile of the operations and led to elevated costs. Which offset the decline in the cooking coal consumption cost. And natural gas spend coupled with drop in realization. This has resulted in lower spreads on a quarter on quarter basis. In Tennessee, in Netherlands, the loss to that about 110Million compared to 114Million in the 1st quarter. As shown in the slide 33, the drop in realization was offset by improvement in costs. Revenue decreased by about 60 pounds per ton on subdued demand. But was fully offset on lower raw material cost and decline of cooking cold consumption costs. And lower conversion costs primarily on decline in the national gas spend along with the repairs and maintenance reduction costs. Looking ahead with the completion of last 1 is 6 in the 3rd quarter, which is this quarter. It should drive the liquid steel production and further improvements in the product mix and cost. As previously explained, we have hedges in place for energy at both UK and Netherlands. And the drop in spot natural gas prices has been reflected in the 2nd quarter with a lag. I would also now like to brief you about the UK developments to supplement what Marina said. Subsequent to the announcement of the agreement with the UK government for the decarbonization project in September. We are currently in discussion and consolidation with the union and the employee representatives in the UK. In relation to the restructuring of the business, it's configuration within the transition time. And the eventual investment towards decarbonization. The restructuring and the transition would commence after this consultation. Given our proposed plan to change the businessman model and the route for steel making. The existing heavy and assets at UK. We can only be used for a defined period. Accordingly, we have taken an impairment charge against the investments in the standalone financial statements in relation to the UK business. We have also recorded an impairment of assets and provisions for potential restructuring, closure and redundancy costs. In the consolidated financial statements in relation to the UK business. The impairment charge in data steel standalone is 12,961. And the charge in the consolidated books is about 3,255 grows. Let me explain the difference in standalone the discounted cash flow value of every business is compared to the net carrying value of the investment made in that business. A deficit in that leads to impairment such impairment and standalone gets reversed in the consolidated statement. In the consolidated financial statement, the discounted cash flow of the individual businesses. Is compared to the carrying value of the or the plant and equipment and the fixed assets. In the above case, the carrying value and standalone was higher than the consolidated business. And that's why this difference. Um, moving to taxes, uh, there was a sharp drop this quarter. The current tax was about 1105 growth and broadly in line with the tax. On the profitability of the India operations, the deferred tax credit of 1333 grows has been driven by the merger and the completion of the British steel pension scheme. Taxes should get normalized post all these mergers. This the tax includes credits on account of and the merger on mining and there are other tax adjustments, which we can explain to you offline. Um, moving to the cash flows, the operating cash flow for the quarter stood at about 4,658 floors and in part was driven by the favorable working capital movement. In the 2nd quarter, there was a working capital release driven by the fall in the cooking coal inventory and in volumes. Around 200,000 tons and in prices. Uh, drop in steel prices and reduction in debtors. We spend about 4,553 crews and capital expenditure during the quarter. And about 8,642 grows on the 1st, half basis. As we keep practicing growth in India, including expansion of the downstream portfolio across wires tubes. Dr and pipe and template businesses. Overall, the operating performance at Tennessee, Netherlands and UK. Higher topics and dividend payout have led to a decline in the cash and cash equivalent by about 66,352 grows. As a result, the gross state has remained stable on quarter and quarter basis, but net debt has increased by about 5,600 grows. Our finance costs are broadly stable on a quarter and quarter basis. The group liquidity remains strong at about 27,637 gross. Including about, uh. 12,691 pros of cash and cash equivalent. As you're aware movies about upgraded credit rating to investment grade in the month of September 23. With that, I finished my comments and thank you and over to the floor for question and answers.

Thank you, sir. We will now begin with the question and answer session. We will be taking questions on audio and chat. To join the audio questions queue, please mention your full name and email ID in the chat box. Kindly stick to a maximum of two questions per participant and rejoin the queue should you have a follow-up question. We will unmute your mic so that you can ask your question. To ask questions on chat, please type in your questions along with your full name and email ID in the chat box. We will wait for a moment as the queue assembles. The first question is from Sumangal Nematia of Kotak. Sumangal, please go ahead.

Yeah, am I audible?

Yeah.

Yeah. Good afternoon and thanks for the opportunity. The first question is with respect to the developments in the UK. So one is we've taken the restructuring provisions, but what's the status of the discussion with employees and when is it likely to conclude? And also just want to understand over 3 years when, when the construction of the new plan will happen, uh, in the previous discussions, we shared that we look to use the downstream assets of UK. So, what sort of volume and a bit, uh, of just rolling, uh, do we expect over over the interim period?

Yeah, so, uh, so the 1st is, as we mentioned. Uh, pretty detailed in our release yesterday, uh. The conversation and the consultation process, uh. Uh, has started, uh, ever since our announcement, uh. On 15th of September, uh, there is a, a proper, uh, process that we have to follow, uh, which is stipulated even legally. And we are doing that and we will do that and it is a meaningful consultation. So we will obviously, as a responsible corporate, uh, continue to hear their point of view or any other suggestions or advice or. Any point that they may have on our proposal. And once we have looked at it, uh, over the next couple of weeks, uh. Uh, we will certainly, uh, progress this, uh, conversation. So, uh, I think as I can say that this is progressing, um, as per plan, uh, it is dealing with a very sensitive subject and we are mindful about that. Uh, and, but it is also about getting the investment process, uh, in place. So we continue to engage with the unions and we'll continue to do so. Uh, till it gets formally completed, uh, the formal process takes about, uh. 45 days at the minimum as per legal requirements, but that formal process starts after a certain period. Uh, the 1st, the informal process continues and give opportunities to both sides to explain positions. We have. Also, uh, had detailed engagement with the advisors of the unions and we have, uh. shown them the counterfactual positions and our issues in relating to sustaining the business in its current vulnerable form and also the operational risk and the market risk that we face. So it is a very intense and an exhaustive process, which we are currently in. And then we hope to complete as per the timelines that we have set for ourselves as far as the transition period. Yes, you're right. As per the proposal that we have agreed with the government and the proposal that we put forward to the. Uh, to the, uh, unions, uh, it is important for us to continue to ensure market protection. And for which we will continue to focus on ensuring a stable supply chain to run the downstream unit. The volume should be in the ballpark region of 2 and a half 1Million tons to 2.6Million tons. Um, but more details on this, I would be in a better position to give. Once the consultation gets over, um, and ensure that we have tied up all the. And as far as, uh, sourcing production, all of that is concerned. So. I think this will be a, it will be a good time to talk about it in the next earnings call rather than now.

Understood. That's very helpful. Second question, continuing on the Europe division, I mean, we've seen Netherlands and UK both the losses are kind of increasing. So one is if you could just share some outlook on margins near maybe next quarter and also over next two to three quarters. How should it shape up after the re-lining and is this re-lining also getting a bit extended into 3Q? These are the two questions on Europe.

Yeah, so, Sumangal, I think on Netherlands, yes, the blasphemous relining has extended to this quarter, as Kaushik mentioned. We are expecting that by the end of November, latest by the first week of December, we'll have the blasphemous up and running. We expect the numbers of this quarter of Netherlands to be better than last quarter. but we expect it to be EBITDA positive only from next quarter, you know, which is Q4. So there are a few things. Obviously, the blast furnace which is down accounts for 40% of our volume. So you're carrying fixed costs with 60% of the volume. So that has an impact, which is seen. Secondly, as we mentioned last time, uh you know we work on a forward hedge on gas prices etc so our energy cost gas prices in the second half should be lower than what it was in the first half in netherlands so that should help uh so these are the so volume should be better spray i mean the costs should also be better and the spreads of course the spot spreads are a concern in europe just now but we expect that given the current levels as you know in europe some of the producers have already put down blast furnaces so there will be a better balance between demand and supply so either cooking coal prices have to come down the steel prices have to go up so that's what we expect to happen in q4 yeah understood and in the uk uh existing furnace uh which quarter do we mount ball it uh do we run it entirely in the second half

So, I think a safe thing to say is that we will run it fully in this quarter, which is a 3rd quarter and post consultation. I think we will be in a better position to tell you that when and how we are going to deal with the, uh, heavy end. Uh, and that would be a better way to kind of, uh, stay on this, but I think that in the transition period, as I said, we will continue to operate downstream facilities.

Got it. Thank you so much. I'll join the queue back. Thank you and all the best.

The next question is from Tarang Agarwal of Old Bridge Capital. Tarang, please go ahead.

Hi, good afternoon. A couple of questions from me. One on Netherlands. You know, what is the sustainability capex outlay that you're looking at and You know, would you expect a similar support that we've seen for some of the other European governments that have extended to your peers? So that's on Netherlands, the value of Capex. The second is on UK. You know, if you could give us the net cash outflow and the timing of these cash flows, you know, as the transition plan starts, how is it going to be staggered over the next three year period and what is the quantum of it? Yeah, my sense is, you know, there'll be settlements, there'll be capex, but you know, you'll have a reduced maintenance capex also. So summation of that would be helpful. Thank you.

I said, I let Kashi answer the 2nd, 1 on the 1st, 1, uh, we don't want to give you a specific numbers now, but I'll give you a few principles. I think, uh, uh, in Europe, uh, when any steel producer is making submissions to government. I think the ask is 40 to 60% of the capex. that is required for the transition. That is one. Secondly, on OPEX, it depends on the country and the advantages or disadvantages that the country has. So it's more a question of creating a level playing field because different countries are giving different supports to the company. So you don't want to end up at the other end of the transition at an operational disadvantage compared to where your peers are. So these are the two principles on which The, uh, ask is curated, uh, the specific amounts we will, uh, not want to discuss just not simply because there's a conversation going on with the government. And, uh, once we have somewhere close to, uh, you know, being able to share that, it's more definite. We also need to go to a board and discuss a proposal in its entirety. We will come back, but the principle is this.

Yeah, so that can be on the 2nd, part of the question, which is on the cash outflows. So, the project cash outflow, which is about 1.25Billion. Of which 750 will be born by data steel and about 500 will be run from the UK government. And that spend, um, will start more around. The 2nd, half of, uh, 525. Um, because, uh, we, we are currently in the detail engineering phase. And, uh, this engineering work takes a couple of months, uh, about 5 months or so. And once that is got completed, then, uh, the grant, uh, agreement becomes effective. And then we start spending the money. So, the initial spend is obviously done by the steel, but, uh, that money comes in areas of a quarter, et cetera. And it may go almost hand in hand. So, uh, that 750 million follows typically how a normal, um, organic growth project is, which is over a 4 year period. Even I mean, last 20% is after commissioning. That is how the thumb rule is. So, I think that is how we should take it in the meanwhile, what would happen is the restructuring cost will is obviously, uh, more front loaded than, uh, than the capex spend and the restructuring cost will be spent in the 1st, half of, uh. The financial year 2425. And that is the, the amount of that restructuring is something that. Is will be negotiated or agreed upon. Uh, especially in relation to what relates to employee, uh, impact, uh, during the consultation phase, we wouldn't want to talk about it because it's commercially sensitive at this point of time. Uh, and we will obviously have to discuss, uh, the specifics of it. We know the numbers in our head, but I think commercially, it would be important to talk about it once the consultant is over.

I understand that just so would this also entail reduction in your current capital outlay for the portal capacity? Because essentially a part of the capacity will be more for trade. So to that extent, you should save some. You should see some savings on that capex maintenance capex per se.

So the total capex in Port Talbot used to be typically around 80, 80 to 90 million pounds a year. So, with the heavy and, uh, um, in question, uh, in future years are doing transition. The investment in our mind is only on the downstream, which is pretty. Small compared to, um, the heavy end. So, other than the category 1 and category 2 CapEx, the heavy and currently, which is essentially for license to operate and and safety and. ensuring the quality of the condition of the assets can continue to operate as we are in consultation. Beyond that, big investments on the current assets are not in place.

Also, I think there will be a saving on the maintenance OPEX, you know, because there's significant maintenance OPEX also currently which goes in UK for the heavy end.

That's good.

Okay, thank you.

The next question is from Amit Dixit of ICICI Securities. Amit, please go ahead. Amit, we are unable to hear you. We request you to please send in your question via chat or rejoin the queue. We will now move on to our next question. The next question is from Satyadeep Jain of Ambit. Satyadeep, please go ahead.

Hi, am I audible? Yes, I just, uh, switching gears to, uh, to India for a bit. Uh, just wanted to see what's the progress on KPO to, uh. Is it on time and budget?

Yeah, so I think, uh, uh, what we mentioned, uh, the pellet plant is already operating. 1 line is, uh. Pull out the 2nd line will start this month. So, by the plant is operational controlling mill is operational. These are the 2 that we prioritized. The, the that we make out of the cold rolling mill is only getting approved by automotive customers after we've. Uh, the last 1 is, uh, should start in the next, uh, 6 months or so. In fact, earlier the better, but we are basically targeting that. By, uh, you know, uh, in the next 6 months, we will start the. Uh, we are also starting the 2nd cluster in the steel melt shop. Uh. This quarter, so that will give us another few, uh, 100,000, I mean, at least. Some additional volume, because the last 1 is the capacity with the existing last 1 is we can produce a little bit more. So, I think 1 by 1, all the facilities are coming on stream. Uh, you know, uh, the will start then you'll have the. 3rd cost of in the steel mill shop coming on, et cetera, and the, uh, galvanizing lines and the kneeling lines in coming another also coming on next year. So. Next financial year, you will see, uh, all the most of the critical facilities being commissioned and different stages of ramp up.

Okay, secondly, coming back to Europe, uh, just, uh, you mentioned, uh, uh, that you'll finalize the of the numbers and operating drivers during the transition period in the next quarter. But, uh, on the volume guidance also broadly, you do expect to be cash break even at least. during the entire transition period and also you've taken write downs based on comparing DCF with the carrying value. Given the life of Netherlands is also another six, seven years and maybe your discounted value is higher right now, would you look at, if you have to take a look at impairment, have you taken full impairment of heavy end assets in UK, which means they've been driven down to zero? What could kind of potential could be there in the, in the next couple of years or so, um, in any other asset.

So, uh, I think, um. As far as, uh, UK is concerned, uh, given the fact that this is our, uh, it is a. Definitive play, uh, as you know, that, uh, once you sign up with the term sheet. Uh, with the government providers of capital, and then it's a procedures to move on. I think, uh, the, the upstream gets, uh, very much defined in terms of its. Operational longevity, certainly financial longevity. And that's the basis on which we have taken the, uh, right down entire done of the. Upstream, uh, as part of this impairment that you see. Uh, which is both the asset side and obviously from the investment side in the standalone. Um, in Netherlands, we are not in that state at this point of time. In fact, as. And I mentioned in the early part, we are relying the blasphemous. So therefore that, uh, it's a renewal of, uh. Of life as far as blasphemous 6 is concerned, uh, in Netherlands, the decarbonization project is, uh. Uh, in base is high, but in in terms of timeline is behind UK at this point of time and therefore. Once the, uh, transition plan is finalized and once the transition, uh, configuration is finalized. Uh, that is the time when we will keep doing the assessment and then and and hopefully we will be able because Netherlands is fundamentally more profitable. So it's ability to. Have a more, uh, a more stable economically stable transition is. Much higher than in the UK, because these assets in the UK. Uh, have actually, uh, from a condition of the asset perspective and the ability to create. Or generate cash flows have been lagging for some time as you would be aware. So I think Netherlands and UK are in different stages at this point of time. Uh, we will be looking at, uh, the feedback from the government and as we continue to engage with them very intensely. Understand the pace and the flow of the transition. Uh, come back to the, you keep the in India board and and then. We will know that how the pacing of it will work. So, I think that is. It's a slightly different in Netherlands compared to the UK and Netherlands also has a very rich downstream asset portfolio. Um, which is linked and with the new blast one is coming in, it is a slightly different story.

Just a clarification on that, um, cash cash flow during transition period just, uh, broadly, uh, you expect it to be cash flow positive.

Yeah, sorry, you asked that question. So I think, yes, broadly based on our assumptions, whether it is the way we've been planning is that this business has to sustain during the transition. So it would, our assumption is that we would be sourcing, converting, taking out cost in a manner such that it's very lean during the transition and hence be neutral on its cash flows. other than the one-offs, which is the restructuring cost and the project cost.

Thank you.

The next question is from Kirtan Mehta of B.O.B. CAP. Kirtan, please go ahead.

Thank you, sir, for the opportunity. One question as a follow-up on the UK transition cost. Currently, we are running our With the shutdown of the blast furnace in the Netherlands, we are currently running in a slab. What would be the growth spread that we are currently earning there? As of now, it's not sufficient to cover the high. Associated sort of the fixed cost that that's the reason we are running into the losses, but how that that growth spread compared with the UK when we operate only in this lab mode.

So, yeah, go ahead. Go ahead. Now the current spreads, there's a spot spread and there's a fell spread. The fell spread is around 240 euros. The spot spreads are what are very much lower than that. That's because the coking coal prices are high and the steel prices are low. But the spread at which we operate is around 240-250. And we are making a loss in Netherlands because obviously, when you run it 60% capacity, the fixed costs get distributed over. Smaller volumes and 240 euros, you can't be making. Money, uh, uh, you know, and that's where we are making losses. Uh, as far as you are, I mean, you case concerned, I think the larger point, which is making is. Obviously, this is all subject to consultations and where we end with the unions. But broadly, the plan is whatever we do, how can we do the transition in a cash neutral or cash positive way? I think that's primarily the objective, whether it is labs or coins or whatever. Uh, is it that we bring it because there are 2, 3 objectives of the transition. How can we be cash neutral or cash positive to us? How can we keep the downstream units running? because that also has an impact. 50% of the workforce in the UK works in the downstream units. And the third and most important is how do we make sure that our customers are serviced?

Thank you. Just one clarification. 240 spread when we are talking about it's an operation on the integrated spread. But if we are not sort of having a blast furnace and operating only on slab, then what would be the conversion spread that we earn from slab while we in the Netherlands currently? Would we have any idea around that number?

So, I know, of course, she wants to answer that, but, uh, broadly, you know, the slabs that we used honestly are high cost labs. Which we produced last year, uh, and kept in stock in anticipation of the relay. So that's part of the reason why we have. a negative EBITDA or we've had NRV losses in the last 2-3 quarters because you had to produce slabs when you could. And that was last year and gas prices and everything else were at its highest level. We built slab stocks of about 700,000 tons before the last one is real land. Now we've drawn down the stocks that translates into working capital release, but they were all high cost slabs and also contributed to the financial performance of Netherlands over the last years. But typically slab hot roll coil gaps are not so great and nobody would in Europe on an ongoing basis be looking at bringing slabs and making hot roll coils and sell. And a lot of our hot roll coils are also sell to customers who seek approvals, etc. So that's more a temporary situation than something that we look for as a long term solution. I don't know if you want to add more color to it.

Well, I just wanted to, I, I think I was just guessing is a question answer that you are trying to get is. If in an European situation, it purchased raw materials in an integrated basis, the average of it up, but a percentage is about 8% 6 to 8%. In case of a, um. Conversion model that falls down to somewhere around 3%. So, I think that is broadly the way in which it works.

Understood, sir. And just one more clarification. I think you mentioned in the opening remarks about the cooking coal reduction that we cooking coal cost increase that we can see in Q3. I missed that number. Would you be able to sort of indicate that number again?

So it's different in different operating units. In India, Q3 is going to be about $11 per ton, $10 to $11 per ton higher than uh q2 in netherlands it's going to be about 60 65 dollars per tonne lower i'm talking of consumption because the netherlands last quarter a lot of higher cost coal was used and in uk i think it's going to be about 20 per tonne lower in q3 compared to q2

Right, so against the $50-$60 increase, $100 increase that we are seeing in the cooking coal reduction in India, we are only anticipating $10-$11. So we are benefiting from a sort of availability of the higher inventory in the cooking coal in India's operations?

No, I mean basically you are using the cooking coal that you bought last quarter. Right so last quarter, the prices were dropping till September if I remember right. Uh, then it started going up from September. So, what do you bought in July and August, which comes typically, you will get the cooking cold 2 to 3 months after you buy it or you contract it. So, that's the, uh, that's what comes into the consumption. So. You had, uh, a higher reduction, uh, uh, I think we had a 60 dollar reduction in Q2 compared to Q1. And we have a 11 dollar increase in Q3 compared to Q2. And the reverse is true in Netherlands where we consumed some of the higher cost goals. So we had only a $7 reduction in Q2 compared to Q1, but we have a $60 reduction in Q3 compared to Q2. So it's basically the inventory flowing through.

It's a lag effect.

Understood, sir. Thank you. Thanks for the question.

The next question from Amit Muradka of Access Capital. Amit, please go ahead. Smith, we are unable to hear you. We request you to please send in your question via chat or rejoin the queue. We will now move on to the next question. The next question is from Ashish Jain of Macquarie. Ashish, please go ahead.

Hello. Yes, Ashish, we can hear you. Hi, good afternoon, everyone. So my first question is, you know, in UK, one, you know, this provision that we have taken off roughly 2425 crores, that includes some provision towards the one time cost that you might incur in UK related to employees. Is that the right way to understand?

So there are two elements in the provisions that we have taken in the UK. The 1st, 1 is in relation to the, which is in relation to the. Um, the, the, the way in which impairment is taken. The 2nd is in relation to potential constructive obligations. Triggering out of the redundancies and closures. Uh, and restructuring costs, so both have been taken. Right.

So my focus is that, you know, 2425 number that is our current assessment or best case judgment of what the one time employee related cost could be. Is that the right way to think?

It has got multiple elements in that. It has got it's got it's a broad bracket of restructuring. So it has got closure potentially if there is a closure or a restructuring, if there is a contract termination, if there is a people numbers. So all it's like a basket of provisions.

Got it. So secondly, you know, in terms of, you know, so we spoke about where our costs might go down in the UK in terms of lower maintenance and all, which is well understood. But, you know, let's assume, you know, this employee negotiation gets over in one queue next calendar year. Shall we also assume that whatever is the redundancy, the cost related to that also goes out from 2Q itself and hence our fixed costs will decline sharply in UK? Is that the way to think?

So the, it's a You know, it's a bit of a sensitive subject to talk about just now before we kind of complete the. Consultation, because it also involves the nature of people being impacted. In the context of the fact that. And there is a phasing. That may happen based on our proposal at this point of time with Pre consultation. And post consultation, it might stay, but normally. what happens is it's not a it's not a switch off it is a phasing and it Is the cost these costs will be incurred over, uh, maybe 2 or 3 quarters, uh, in in a proportionately sliding scale basis. Based on the numbers that we agree, et cetera, but I think. Uh, in the provisions that has been taken is to take it on a gross basis and as in, when the. Uh, restructuring is agreed upon, uh, or. Negotiated with the unions, it will be the numbers will the cash out who will happen. So I sense that it will the bulk of the cash out who will be in the 1st half of the financial year 2425.

So, Kaushik, sorry to harp on this, you know, but just to clarify this, so I understand that the maybe bulk of the, you know, one-time outgo happens in first half next year or whatever will be the timeframe. But whenever that happens, from that, sorry, since then, Shall we assume the fixed cost will decline? You know, the reason I'm asking is, you know, because if I, let's say, take a, you know, 24 month, 36 month kind of a time frame where we will be importing steel and servicing. Uh, you know, the, the UK market should we assume that because if the fixed cost doesn't come down, let's say from day 1 or day 2, would it be a continuous drag to the cash flows in the UK is, you know, where I'm coming from, you know, just to get clarity on that.

Yeah, so your understanding is absolutely correct. That once that, uh, agreed timeframe of reduction is concerned, so the whole focus of this whole restructuring reinvestment. For the transition period, as I mentioned. Is to run the business in transition, which does not drag on cash flows. So, therefore, fixed cost is a very important part because once the, once you don't have the heavy end, which is the bleed end of. And you would certainly reduce the fixed cost in 1 go, but effect of that takes 2 quarters. But whenever, as you said, since it happens, it will certainly come down very sharply. Across the organization, and therefore that is how it will sustain itself. As I said, mentioned a while back. Because the fundamental spreads also come down and in that you have to make, uh, profits or, uh, cash flows. You have to ensure that your entire fixed cost overhead, everything runs very, very tightly.

Right, right. And my just my 2nd question, it's a very small question. Just if I, if I, you know, extend the current, uh, spreads in the Netherlands to Q4. When, you know, we will be fully operational and, you know, our maintenance and all will be behind us, relining done, everything. On current spread basis, we would be making losses in Q4 also, I guess, right?

Not in the EBITDA level. We will be EBITDA positive.

In Netherlands. Oh, is that? Okay. Okay, okay. I'll come back in the queue for more questions. Thank you so much. Thank you.

The next question is from Amit Bikshit of ICICI Securities. Smith, please go ahead.

Good afternoon, everyone. Am I audible now?

Yes, please.

Yeah. So it's after a long time that I've got an opportunity to ask the question actually. Three or four calls I've been missing on it. Anyways, I have a couple of questions. The first one is essentially if you could bridge the gap between EBITDA, TSE EBITDA actually, for last quarter and this quarter in three buckets, realization, coking coal and relining costs. That would be great. That is the first question I have.

So when you say EBITDA bridge in what, you want the EBITDA bridge to what cash flows or EBITDA bridge to? No, no, no.

So EBITDA, what was there in last quarter and EBITDA loss in this quarter. So for $96, for example, from $96 to $170. So what is the bridge? How do we break it into three buckets? Realization decline, cooking coal decline and cooking coal increase or and basically the relining cost.

So I'll give you two of the three, we'll think of the third one on the realization Q2 over Q1 for Netherlands was minus 61 pounds per ton. Okay. Q2 over Q1. That's the last quarter over the previous quarter. As far as coking coal is concerned, it was minus seven, I think. Yeah, minus a little dollars a ton. Okay. Relining, basically the impact is volumes. So Q1, we didn't have any, I think we had slightly more volume in Q2 because maybe we sold more or whatever, but production wise, not so much difference between Q1 and Q2, but both Q1 and Q2 were bad because you were only operating one blast furnace. So the costs get distributed over lower volumes, but I don't know if Samitra or Kaushik has a specific number to give.

Okay, Sheldon, go ahead. No, no, I was just substantiating that, that the volume impact between Q1 and Q2, we have sold about 100,000 tons lower in Q2 compared to Q1. The realization, as Naren mentioned, was about 60 euros per ton lower. And then, um, there were the other, uh, costs for pool, for example, was. In the, um, it largely on the reduction level. And there were, uh, gas prices and energy prices were also lower, uh, repair maintenance prices were slightly lower. Uh, so that's broadly the bridge that, uh, you have. There were no 1 offs included in this.

The second question is essentially on net debt. So while we have seen net debt going up this quarter, despite the operating cash flow being almost at par with capex, now going ahead, the performance is going to improve in India as well as in Europe. So is this the peak net debt level that we are seeing for the current year and for next three, four quarters, maybe?

For the next 2 quarters, I would say that, you know, in the assumption that the Netherlands, uh, comes back, uh, in the way that we are, uh, planning. The net debt number should be around this. They could be plus minuses. We will certainly want to reduce, uh, net it from where we are, but. Uh, I'm given the market conditions, especially internationally. Uh, and also, depending on where the restructuring expenses are. Uh, when it is going out, I think it is broadly in the, in this range, it will be for the next 2 quarters. Uh, but our long term goal of reducing net debt remains, uh, you know, we've been. Pushed back by certain events and circumstances in the market. But I think we will continue to focus on reducing the net debt, uh. From where we are.

But X of restructuring and X of Capex, whatever we will incur at TS UK, I think it is safe to assume that, you know, given the market conditions, net debt level should come down from here. X of restructuring.

That is correct. That's what we are saying.

Sure. Last one, if I may, if you can explain the BSPS related provision in the notes and is there a cash outflow also associated with it? Because we thought that BSPS step is over now, but suddenly we saw this provision again.

No, so this is not a provision as such. So you see was sitting in our books on. Can we close the buying in the 1st quarter? What's the buying getting completed? There was a certain amount of surplus, which actually belongs to the. Uh, to the members. So, that surplus has has to be, uh, as part of taking out of the, uh, balance sheet effectively. That surplus is the 1, which has gone in, so it's not a provision. It's of the surplus was at some point in time was created to the balance sheet. So now it's gone away from the balance sheet. And there was a deferred tax impact on account of that. So the BSPS, there's no cash outgo. The BSPS is a done story at this point of time. What in Q1, it was completed. The buy-in was completed. Now the separation has been completed in some ways. Great.

Thank you and all the best. That's it.

Next question is from Ritesh Shah of Investec. Ritesh, please go ahead. Ritesh, we are unable to hear you. We request you to please send in your question via chat or rejoin the queue. We will now move on to our next question. The next question is from Ashish Kejriwal of Nuwama. Ashish, please go ahead. We are unable to hear you. We request you to please send in your question via chat or rejoin the queue. We will now move on to the next question. The next question is from Ashish Jain of Macquarie. Ashish, we request you to please go ahead.

Hi, am I audible? Yes. Sir, my question is on India growth plans. I think you clarified that the Kalinga Nagar 5 million ton will come in the next six months or so.

I said the blast furnace will start and then it will ramp up. So you would see next year as a year of ramp up of Kalinga Nagar, next financial year. Right.

So, sir, what are we planning in terms of our next phase of growth? Because we have a well laid out plan in terms of where we want to be in financial year 30 in terms of domestic capacity. So what is the thought process in terms of when do we take up the next phase of expansion? Because there is a three, four year time frame for that.

Sure, so 1 is the ongoing projects are, like I said, and, uh, the project, which the groundbreaking has just been done and in the next 2 years. We should have that capacity up that's 0.75. so these are. Clear cut for the next 2 years, uh, over the next 6 months, uh, we will be finalizing the plans, uh, for expansion. And also working on the other phase 3, so, in terms of, uh, opportunity. Uh, we can grow from 1Million to 5Million over the next few years and the plans are being developed will be taken to the board in the next few months. we have an opportunity to take Kalinga Nagar from 8 to 13. As we finish this expansion, you can move seamlessly into the next phase. And the Bhushan plant in Meera Mandli, which can go from 5 to 6.5 as a first phase. The second phase moving it from 6.5 to 10 will need a little bit more land in the surrounding area. So if you look at Bhushan going to 6.5, Kalinga Nagar going to 13, Going to 5, uh, you're, uh, already at about 25 is already at 11. So, you have 36, you have at least 1 year, which is the Louisiana. So you're pretty close to 37. And, uh, beyond that to 40, you have an option of scaling up other years. We are already looking at South as the next location.

Sorry, I understand the roadmap and all because we have been talking about it. My point was more like why are we kind of delaying taking up the expansion? Are we kind of going slow because of our balance sheet focus? Because if I compare with what our peers are doing in terms of expansion, at least at this moment seem to be a bit more aggressive or ahead of time and especially given the India growth story and the volume expectation and all, do we think that we are running the risk of kind of losing market share from at least from a capacity point of view?

Not really. I think of course we will keep an eye on the balance sheet and we want to make sure that we drive that balance between our debt levels balance sheet and the growth. But India's value accretive growth. So I think India business is always cash positive and we can in some sense fund the growth. So to that extent the India growth will always get priority. But we are also Uh, you know, going through a process where a lot of detail engineering is done. So we are trying to reduce the cash to cash cycle in our. Expansion projects, so to that extent, we are doing a lot more engineering work before we start spending, taking it to a higher FEL levels before we start the spend. So the work is going on continuously. There's no slowdown in the pace of work, but we will obviously time it appropriately. And we have said we will be 40 million or we can be 40 million tons by 2030. So that is very much on track.

And if you can comment on it, are we likely to kind of prioritize NINL first just to optimize the cost there because the current scale is quite small or we are open to everything at this moment?

I think in terms of sequence, apart from the EAF projects which can operate independently, I think after Kalinganagar 5 million, which is moving from 3 to 8, the next phase is most likely to be Nilachal expansion. And then you have both Bhushan and the Kalinganagar 8 to 13 happening parallelly. Great. Thank you so much.

Excellent. Thank you, sir. I would now like to hand over the conference to Ms. Samita Shah for the chat questions. Over to you, ma'am.

Thanks. Thanks, Kinshuk. So we'll start with the questions. I think many questions on TSUK. Is the restructuring now done and does it include employee separation costs? And what will be the CAPEX guidance now for FY25?

So, the restructuring is not done. We have taken provisioning as. And I mentioned that we are undergoing a consultation process that is the. Process laid by the law of the land in the UK. And that process involves was the informal consultation and then the formal consultation. We've over the last one and a half months been in informal consultation with the unions, their advisors, their reps at the ground level. And we will shortly commence. Informal consultation when we finish the informal consultation of hearing them and then getting us. On our way forward and the transition plan as well as the. Financial impact, uh, that the running of the business is causing. So, the restructuring is, uh, is planned, but it's not in not in the execution phase. It will happen. Uh, in some in the way that we are proposing, uh, and in agreement with the, uh, union, the unions obviously are very sensitive to the impact of the restructuring. And we recognize that and as, as I said earlier, as a responsible corporate, we'll do all that we can do in a coordinated manner. So, it's not, uh, not completed me, but we have a constructive obligation arising out of. The fact that, uh, any restructuring, uh, poses and that's what's been provided.

Yeah, thank you. The other question was on the capex for a 525.

Yeah, so I think it would be best to talk about it in, uh, in the next call and in the 1st quarter, because that's when the plan gets finalized. Obviously, the priority wise calling another is, uh, the number 1 priority to get completed. We want to ensure that the facilities get started. So that's the main priority. And we can see that FY25, that will rank the highest. This year, our spend has been higher on India CapEx, and it will continue to be so in the next year too.

Thank you. There is another question on TSUK. I think you answered it, but maybe you could reiterate. Have we taken complete provision for impairment?

In the UK, yes, we've taken, I think there was a question earlier that have you taken complete provision for the heavy end? The answer to that is yes. And we have both on the asset side as well as on the investment side. As far as UK is concerned, we've taken the provisions.

Thank you. The next question is also on UK. It says the International Steel Traders Association have raised concerns about Tata Steel UK utilizing most of the safeguard quotas in the past few quarters. So how will Tata Steel UK continue to import steel and how will that actually work?

So I think there are safeguard quotas at this point of time and we are uh we will look to engage with formally with the trade regulatory authorities at appropriate time and because the quotas are also in the context of the fact that if the upstream in the uk does not operate we are the only flat product producer so from a trade perspective that will be addressed in due course of time okay thank you there is a question on chinese steel imports which i

suppose this is for India, it says we have seen, no, it might not be for India. It says we have seen over a million tons of imports in the first half of the fiscal year. Do you think the government will start an anti-dumping investigation?

So I think the government has recently also mentioned that they'll be looking at the certifications that are required and whether the steel coming in has those appropriate certifications. So, to me, yes, imports is higher than it has been last year. We've seen worse in the past. Uh, the larger concern. To me is less of Chinese important to India more of Chinese exports across the world. Because that's, uh, already 8Million tons for the last few months. Uh, which is not a good situation, uh, from an international price point of view, the Indian market has been strong and so. domestic prices have been stable because everyone's able to sell what they produce. But internationally, we are hoping and expecting that China will be exporting less over the next few months than they did in the last six months. If they go back to the 5-6 million tons a month level, then you'll have more stable steel prices. In the past, we've seen 10 million tons a month level. Now we have last four months, five months, it's been at 8 million tons a month. In India, yes, we are watching the imports. If it, of course, keeps going up, then there is certainly a case for looking at it and we will talk to the government at that time.

Thank you. Next two questions are on India. This is about the subsidiaries and the mergers. The first one is when do we plan to integrate NINL with Standalone? And do we get any tax benefits because of the mergers of Tarasti, Longfrogs and other entities?

Yeah, so first question on NINL, as part of the DPM divestment process, there was a cooling off period of three years before, and this is not for NINL, it's generally. Uh, and therefore we will have to wait for that period, uh, before we consider that. But in the meanwhile. Uh, the, as mentioned. The expansion, the stabilization and the. Sweating of the assets are continuing. So, yes, there is a time period. After which we can consider that, um. And the, the tax losses of, etc are part of the integration. planning in which you see some of it also reflected in the balance sheet.

Thank you. The next question is on our AAPJA bonds. What are your plans to refinance the 2024 bond maturities? And also another question, whether the CAPEX and working capital trends will continue to reduce cash balance in the next quarter?

So, the 1st, 1, the bonds, uh, we are looking certainly as it forms part of our deleveraging. There are. 3 elements of that bond and, uh. We will certainly look at, um, our cash flow planning for next year and, uh. If we are, uh, confident about. Uh, repaying some part of it and refinancing the balance. Um, we would certainly want to reduce. And and get the ones, uh, paid off, uh, in, in, in due course of time, whenever they're due, uh, mostly next year and then in 2028. Um, and that's how we, we, we are planning our financials on that basis. Uh, as far as capex, uh, is concerned, uh, and the cash burn is the cash levels are concerned. I think the capex, uh, will soon turn into the, and into. Generation of capex as the phase 2 expansion of, uh, comes in. So we should start seeing that benefit from 2425 2nd, half in particular. And then as the ramp up reaches 25, 26 should be the one where we will get the maximum benefit. So once those kind of things happen, the debt levels will certainly start looking down.

Thank you. The next question is back on Europe. What kind of sales volume do we expect from TS UK and Netherlands in FY24 and FY25?

So, if 524 and 25. I think 524 numbers, uh. We are guided for a year.

I think the projection now is about 8.5Million. Yeah, that is total. Yeah, that's right. Twenty five, I think, uh, hopefully we'll go back to the longer term level because it's eight point five factors in that. We had a blast from this down for quite some time. So, I can share with you the, uh. Yeah, 9 between 9 and 10. yeah.

Um, the next question again is on volumes for 25 and we don't really give them solely, but I'll just, uh, take this question. What is the timeline?

kpo2 blast furnace commissioning which i think you answered how much commercial volumes expected in fy25 so i think this is more related to tsk or phase two yeah so i think we'll uh probably give better guidance in the next uh call uh blast furnaces ramp up fast uh we have uh then the steel mill shops and the hot strip mills also to In fact, we will probably have a bit of extra slabs for some time. But I think we'll be in a better position to give guidance in the next analyst call for next year's volumes.

Thank you. Again, your questions on UK. I'll just club a couple of them. What will be the cash outflow in one-time restructuring, excluding the staff-related cost? And what is the funding plan for the 750 million CAPEX needs of UK transition? And will there be any further impairment charges expected?

So, the last 1, 1st, I don't expect, uh, we don't expect any. For the impairment charges in the UK, we've taken all of that. Um. The funding plan for 750 will be a mix of, uh. Uh, 1st, the equity from India and, uh, part of it could be debt. Uh, that is something that we are working on. I think the. The cash flows are strong enough as projected. Uh, to support that, uh, so we will combine the 2, um. But there will be a larger equity component from India to support it and then we can replace the same. I, what was the 1st question that he said something.

This was about the cash outflow in terms of the restructuring costs at UK, excluding employee costs.

Well, that's like trying to slice the cake. I think we just need to go through the consultation process first and then we will be able to firm that up. I can give you the elements of that restructuring, which will be elements like decommissioning or mothballing any of the facilities, especially as in our current context, the hot strip mill will have to be upgraded. The caster has to be upgraded. So, during the time, these are graded, um, they will be, uh, decommissioned, uh, motherboard. To facilitate that in that 1, so I think those are the ones I would. Say that the redundancy provisions or the restructuring costs largely relates to the people, but. We don't yet have a handle on on the number till we complete the consultation process.

Thank you. The next question is on India, on the NRs and market conditions. I think you mentioned it in your speech, Naren, but maybe you can elaborate about it and the outlook for the rest of the quarter as well.

I think what we've guided is Q3 will be about 2,200 rupees per ton higher than Q2 as far as realizations are concerned. Like I said, demand is strong. We've seen 10% growth in consumption year on year because all engines are firing, automotive is strong, construction is good, rural markets are picking up. So I think the only kind of tap is a little bit more on what's happening in the international markets and international prices. But domestic is quite strong.

Thank you. We've moved to Netherlands, where there are questions about the potential decarbonization project. What will be the CAPEX? What is the configuration we are looking at? Would there be a production loss in the interim? And how will we fund it? I've just clubbed three, four questions.

So, sorry, you want to go? No, go ahead, Kaushik. I think the, um, just now we are in conversation with the government on the configuration. And the, and based on that configuration, the capex will be finalized. And, uh, it is, uh, the intent is, as I, as we said earlier that the last 1 is 6. We'll continue because it's a new new furnace and then, uh, 1 of the other furnace will get replaced. Um, so what is the configuration exactly is something that we will be looking at, but roughly. Uh, from a volume terms, it will be the 1st phase will be a 3Million done, uh, transition. But I think the, uh, the funding, the etc is the matter of, uh, negotiation and discussion with the government. And, uh, we are deeply engaged in in it. The submission of the broader plan is going to happen shortly. And then, based on the feedback, as I mentioned, we will go through the. Uh, phase during which the negotiation for the. Uh, support is discussed and the balance will be by by by the company. Uh, largely in out of dynasty Netherlands and. And that's the funding plan that we will finally come about and disclose. So there's some time to do that. It's not happening imminently, but it will certainly happen in the near future.

Thank you. There is a question on India now, which is more about our strategy vis-a-vis downstream assets. Is it about market share? Is it about profitable growth? Can you explain how you see this growth panning out in India?

So I think downstream has always been an important part of our strategy because we see that as you have more downstream businesses, you're closer to the customers, final consumers. You are also insulated to some extent. from the cyclicality or at least there is a lag in the cycles and that helps us. So our biggest downstream presence is in the tubes business, the pipes business, which is today a million tons and we want to take it to about four million tons by the end of the decade. And that will keep pace with our hot rolling capacity when we are at 40 million tons of steel, we will have about 27 million tons of flat products. So we think a 4 to 5 million ton cube business is a good footprint in downstream to support the upstream as well as add value to the upstream. The second big downstream business is we have the wires business, which is more linked to long products, where again, we are a large player with more than half a million tons and a strong market share in segments like the stranded wires and tied bead wires, etc. There again, we want to double it in the next few years and that will also be aligned with the Nilachal expansion. The third one is the packaging of the tin plate business, where again we are about 400,000 and we want to take it to about a million tons. That will also support the flat products business because it's a downstream of the flat products business. I'm talking only of India because we have this big packaging business in Europe as well. The last one is, of course, linked to metallics, which is a DI pipes business that is downstream for the pig iron that we make through the mini blast furnaces that we have in Tata Metallics. There again, uh, we are a big player and we aim to become crushing about a 1M tons. I think, uh, yeah. 1M tons over the next year, so we think these businesses, which are always traditionally. Added value these may be. The EBITDA margins of downstream are lower than the typical steel business, but the ROIC tends to be higher because these businesses are run like that and I think that's our ambition as far as downstream. There are many other smaller things that we do, but these are the four big ones.

Thank you. We have some more questions on the bonds. I think we have either some bond investors or some banks on the call. Uh, so this is in terms of the bond maturities for next year. Would you come offshore or will you look to do on short financing?

So, I think it's premature to say that, but, um. We would certainly 1st, look at what we can do internally. And then, and the balance outside, but, uh. Typically, we'll 1st, look at, uh, also look at options, uh. And the India balance sheet. in preference to anything offshore.

Thank you. And I think the last question is on TSN. This is about, again, the performance in this quarter. And I think we mentioned about slabs, et cetera. So there are a few questions on how do we manage really the slab inventory? Do we have a policy and what is our approach towards managing the price risk for TSN as well as TSUK because if they buy slabs?

So, normally, we don't buy slabs. Uh, it's just that we talked up on slabs because we knew the blast furnace was going down and we needed the slabs to take care of our customers and our orders. But otherwise, it's a fairly balanced, uh, facility. We make as much labs as we can consume. And if there are extra slides, we can always look at selling it, but we don't necessarily buy slabs in Netherlands. UK also, we don't buy slabs, but going forward, depending on, as Kaushik said, the outcome of the consultations and the way we plan the transition, we will decide what to do and when. But again, I repeat what Kaushik and I have said, whatever we do, we will try to make sure that the business is run in a cash neutral or cash positive way.

Thank you. There's one more question, I think, in terms of Tata template. So this essentially says that results have been poor at a time when the demand has been quite strong. Is there an excess supply of template in the Indian market? And can you comment on the market position?

Um, so I think the fundamentally 2 points 1 is that the value addition, which is the gap between. The, uh, and the template has in compared to the previous quarter. Significantly, and the, there is a issue on not on supply of prime templates because, uh. That's not the point there. The issue has been there has been a lot of. Import of, uh, non prime template into India. And that has created a, uh, supply and demand, uh, imbalance. Which is, uh, which is also from a health point of view and, uh, product quality point of view has been taken up. And hopefully this will, uh, get, uh, reversed in the future, but we also see, um. A certain amount of forming up of the value addition and improvement from the value addition that was there in the 2nd quarter. The 2nd quarter was. Uh, really difficult because it's it's suddenly, uh. Shrunk, but as I said, it's not because of supply of. prime template from us and our peers, but it was more on the non-prime imports that came in.

Thank you. I think that ends the questions we have, so we will end the call now. Thank you very much, everybody, for joining us today, and I hope we were able to provide you all the clarifications you sought. Until the next call, thank you.

Thank you.

Thank you, everyone.