Tata Steel Ltd 144A

and welcome to the Tata Steel analyst call. Please note that this meeting is being recorded.

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I would now like to hand the conference over to Ms. Samitarsha. Thank you and over to you, ma'am.

Good morning, good afternoon, good evening to all our participants listening onto the call. On behalf of Tata Steel, I'm delighted to welcome you to this call to discuss our results for the second quarter of FY25. I'm sure you've gone through the presentation, which has been uploaded on the website, and have questions, which we'll be happy to take. Before I hand it over and introduce our other participants, I would just like to remind you that the entire proceedings are governed by the Safe Harbor Clause on page 2 of the presentation. We have with us, of course, our CEO and MD, Mr. P. Narendra, and our Executive Director and CFO, Mr. Kaushik Chatterjee. who will, both of them will make some opening comments and then we will take questions, first in audio mode and then in chat mode. Thank you and over to you, Murit. You're on mute, Murit.

Thanks, Amita. Sorry about that. Good afternoon and good morning to everyone. I'm going to make a few comments and then pass it on to Parvashik for his comments and then we'll put them at the Q&A. The global operating environment has remained challenging due to the subdued economic activity, inflation and sustained geopolitical tensions. The US and EU have initiated trade cuts and China has announced stimulus measures. However, elevated steel exports from China has distorted the dynamics of the global steel trade and have weighed on the regional prices across the world. Chinese steel exports for September were 10 million tons. It's an eight-year high, and the year-to-date exports are about 100 million tons, or rather on an annualized basis, it's about 100 million tons. In response, various nations, including India, have initiated anti-dumping investigations on selected steel products, and while Indian steel demand has continued to remain strong, steel prices have witnessed moderation. Moving to our performance, Tata Steel India's crude steel production goes 5% year-on-year to 5.3 million tons. For the quarter, deliveries stood at around 5.1 million tons and was aided by a 6% year-on-year growth in domestic deliveries across business verticals. The automotive and special products volume for the quarter was aided by the increase in sales of high-end products and a well-established retail brand talent discount witnessed a 20% year-on-year growth aided by enhanced leads and a scale of other consumer-connected programs. During the quarter, our e-commerce portal, Asiana, expanded its service offerings And two new construction service centres have also been launched, taking the total to 35 construction steel service centres across India. This will aid in scaling up our ready-to-build solutions for the B2B customers. We remain focused on simplifying our customers' journey and experience in construction. There are industrial products and products business with strong growth across value-added creative segments, with engineering registering a 28% year-on-year growth. We've also executed a number of orders for railways, including the first one for the Amrith Bharat Express, which India Railways has launched. We've made strategic progress during the quarter on the commissioning of the 5 million tonne blast furnace at Kalinga Nagar. The blast furnace is operating. It's only producing about 7,500 tons a day. And Kalinga Nagar expansion is an important milestone in our journey to scale up the high-margin business. A state-of-the-art coal rolling mill is already running. The leading lines are getting commissioned this month, and the galvanizing lines will get commissioned in the next couple of quarters, one galvanizing line for March and the other by June next year. The new blast furnace, along with the coal rolling mill complex, will boost our production capabilities and aid in strengthening our position as a market leader in high-end value-added steel segments. And further, facilities such as a 6-million-ton pellet plant are cost-reliable as well as In the UK we have safely decommissioned both the blast furnaces at a Port Albert plant and this paves the way for a green steel making project that we are executing. A planned investment of £1.25 billion will be partly supported by the £500 million grant from the UK government which has been signed during the last quarter. And this investment will aid in preserving steel making in the region as well as sustain more than 5,000 jobs in the UK. We remain committed to supporting affected employees and offer the best of a package of support in Tata Steel UK and The restructuring as we speak is going on and you will see the benefits of it over the next few quarters. In Netherlands, the subdued demand side has weighed on the prices and their performance. Kaarsik will elaborate about the same and we have initiated a number of saving measures to offset the weakness in market conditions. The production is back on track after the blast and is realigning. We are committed to sustainable value creation and are dynamically calibrating our decarbonisation journey to the operating level field. In India, we are committed to responsible growth and the new blast furnace in Kalinga Nadar has an eco-friendly design and utilises an evaporative cooling system. For the first time in India, something like this is being used. This is expected to lower specific water and power consumption by approximately 20% compared to conventional designs. We have set up satellite R&D centres to leverage national and global technology systems in strategic focus areas such as hydrogen and mining and many other areas. And in UK, we have done transition to scrap based EF that directs CO2 emissions and reduce by 50 million tonnes over a decade. And similarly, in Netherlands, we have now came up with a transition plan with the government in Netherlands. So with that, I thank you and hand over to Babshik.

Thank you, Naren. Good morning, good afternoon, and good evening to all those who have joined in. I will begin with the half-yearly performance. Our consolidated revenues for the half-year were about 108,676 crores, and the EBITDA was 13,046 crores, which translates to an EBITDA margin of around 12%. The EBITDA margin actually improved by about 300 basis points year-on-year. aided by steady performance in India and better profitability in Netherlands compared to the previous year. Moving now to the quarter, our performance has been provided on slide number 25 of the presentation circulated. Consolidated revenues stood at 53,905 crores and an EBITDA of 6,224 crores, which translates to an EBITDA margin of 12%. Before I dwell into the numbers across geographies, I would like to mention that we have received approvals for the amalgamation of the Indian Steel and Wire Products Limited, ISWP, and the standalone financial statements for the quarter reflect the merger and past periods have been restated as applicable. Moving to Tata Steel, standalone EBITDA for the quarter was about 6,734 crores, which translates to an EBITDA margin of 21%. On a per ton basis, the standalone EBITDA was around 13,176 rupees per ton. As provided in slide number 31, EBITDA on absolute basis was broadly similar to the previous quarter despite the seasonal factors. Higher volumes and improvement in total cost more than offset the drop in the realizations. I would like to elaborate a bit more on the cost. There has been a decrease in the valuation of chrome ore inventory as on 30th of September 2024 and this is primarily on account of lower accrual of the royalty charges. This has led to a non-cash charge in the raw materials and also a decrease in the other expenses which includes the royalty related expenses. So broadly it is P&L neutral. Excluding the chromor effect, the material cost declined by around Rs. 600 per tonne due to the decline in the cooking coal consumption cost and lower purchases. However, this has been partly offset by the inventory movement and the raw material build-up for starting the new blast furnace at Kalinganagar, as Naren just mentioned. The conversion cost, excluding royalty, declined by about Rs. 2,000 per tonne. primarily on account of lower employee benefit costs, consumables, rates, and taxes. Overall, this led to an improvement in the total cost structure. The NINL, or the Nilachal Ispat Nigam Limited Performance, which is part of the consolidated performance, produced at its rated capacity on an annualized basis of around 1 million ton, and its operating parameters have now stabilized and have resulted in EBITDA margin of 13%. We are obviously looking forward to growing this part of the asset in the future. In Netherlands, the EBITDA generated was about 22 million pounds in quarter two compared to about 43 million pounds in quarter one. EBITDA on per ton basis declined by about 14 pounds per ton on quarter basis. The EU steel demand has been weighed by subdued economic activities, including the weakness in the industrial output. If you have seen, the PMI is now at about 42. At the same time, steel imports have remained steady and the China dynamics continues to weigh in on the global steel prices. Given this, the revenue per tonne was down by about 43 pounds per tonne on a quarter-on-quarter basis. However, this was partly offset by the material cost, primarily driven by the lower cooking coal consumption cost to the tune of $27 per ton, and the iron ore consumption cost to the extent of $14 per ton. The other conversion costs were broadly stable. Looking ahead, liquid steel production numbers in Netherlands will be much higher than previous years because, as Nadhim mentioned, the last one is... is operating which was not operating at capacity. The market conditions though remain challenging with spreads contracting in the near term and therefore the efforts are on across the company on improvement of the cost. In the UK the loss EBITDA loss widened from about 91 million pounds in the first quarter to about 147 million pounds in the second quarter. EBITDA on per ton basis declined by about 100 pounds per ton. One of the fundamental reasons is that this is a transition quarter for the UK, and I'll explain a little bit more. The revenue per ton was broadly stable, while total cost increased by about 100 pounds per ton. Within cost, the raw material cost consumed plus the purchases declined by about 59 pounds per ton, given the shutdown of one of the blast furnaces. But this was more than offset by the inventory movement that led to a quarter and quarter increase of about 151 pounds per ton. Inventory movement was primarily due to the buildup of stock in Q2 versus Q1. Overall, the material cost increase was about 100 pounds per ton. This, as I mentioned, has been a transition quarter where we operated one blast furnace and also purchased slabs and coils. So the fixed costs have not declined as yet because the grant funding agreement and the completion of the union consultation got extended by four months due to the elections. It's been done now. So far we have been issuing letters post the formal consultation at the union level to the individual level or to the voluntary redundancy candidates. And in the coming quarters we expect that about 100 pounds per ton of reduction in fixed cost from the current level that we see. Moving to the cash flows, we've spent about 4,800 crores on capital expenditure during the quarter and about 8,585 crores for the half year, mostly in India. We've commissioned our second blast furnace in Kalinga Nagar, as Narendra mentioned, which costs about, the entire complex costs about 3,900 crores. In the later part of the year, we will be commissioning associated facilities in Kalinganagar expansion amounting to almost about 19,000 crores in this current financial year. So the work is in progress. It's a completion part. It's not that we have to spend 19,000 crores. Associated facilities including the continuous annealing line, continuous galvanizing line and the air separation unit to name a few. Separately, we have placed equipment orders for the 0.85 million tons EAF plant in Ludhiana, and have started receiving select orders also. During the quarter, we have also had, after pursuing for about three years, income tax refund, and the principal amount of the refund was about 1500 crores, which has been adjusted directly in the tax assets in the balance sheet. This pertains to the Bhushan merger of financial year 2020. While for the full half year you would see working capital negative, for that quarter we have actually released about 850 crores of inventory fee and 1,000 crores of debtors resulting to better cash flows from the gross working capital release. So overall, the operating performance at standalone and Netherlands was offset by the UK performance and coupled with the working capital and dividend payout led to a marginal quarter-on-quarter decline in the cash and cash equivalent of about 485 crores. Our net debt stands at about 88,817 crores and our group liquidity remains strong at about 26,000 crores. As Nareen mentioned, we signed the grant funding agreement with the UK government for the 500 grant support for building the year. And we are progressing on setting up the project. We have signed a contract with Tenover to deliver a state-of-the-art electric arc furnace and have completed the public consultation process on the planning application. We expect to commence groundwork at the site around July 2025. In the interim, we will operate the UK downstream operation by utilizing substrates sourced from our own operation and external market. This will help us sustain our significant market presence across steel end-use segments in the UK. And we are obviously committed to supporting the affected employees and are providing best ever support package and reskilling. We are also focused on ensuring that we will continue to work on the cost side to take out fixed costs which is more appropriate to the operating model for the next three or four years till the EEF comes in. In Netherlands, as Naren mentioned, we are engaged with the government on potential support for the decarbonization project. Moving on finally to the Obele side in India, it is the tax judgment that you would have seen. unclear at this point of time the manner in which the Odisha 2004 Act will have to be re-enacted once the decision of the Honourable High Court of Odisha the verdict is considered by the regular bench of the Supreme Court which is currently pending. We are also in the process of filing a curative petition with the Honourable Supreme Court and is in active discussion with the government in Odisha as well as in Delhi. on the way forward. Given the above background, we would not be able to assess any financial impact at this point of time and will consider the same in due course. Presently, there is no legal obligation in respect of the levy related to the ORISET Act and accordingly, we have not recognized any provision in the standalone or consolidated financial statements. With this, I'll end my comments and open the floor to questions. Thank you, sir.

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 question along with your full name and email ID in the chat box.

We will now wait for a moment as the queue assembles. First question is from Satyajit N. of Ambit Capital. Satyajit, request you to please go ahead. Hi, thank you. Am I audible? Yes. Yes, Naren Kaushik. I just want to start off with UK. Kaushik, you mentioned we're looking at reduction in fixed costs of $1,000 per ton in the coming quarters. Can you maybe give some clarity or insight into when by when can these fixed costs be taken out and by when are we, just the trajectory of earnings in UK over the next two quarters, by when can we expect breakeven EBITDA and cash flow there in UK? That's the first question.

Yes, definitely. Thanks. Can you hear me?

Yes.

Okay. So what I mentioned is 100 pounds per ton of fixed costs take out. over the next two quarters. It has broad components. So if I were to just take one minute to explain that now we are buying the substrate, whether it's supplied from India, Netherlands, external markets, and then taking out the conversion and doing the conversion and then selling into our customers. So the fixed cost base has to come down because that's the only way to beat the conversion cost value added that we have from the market. So some of the natural outcome of closing the heavy end is that the maintenance cost comes down, the stores repairs comes down, the hire and leasing comes down, and of course the people cost comes down. So these are broadly the four levers and these are the areas that we are working on. And as I said that between Q3 and Q4, we will be looking at this. This may not be the end of the cost-taker because we will have to continue to do the same. And our sense is that we are four months extended because of the delay in the grant funding agreement. Of course, the market is a big impact, but our objective is during the three-year or three-and-a-half years of transition, we want to ensure that we achieve a neutral to positive breakeven. And it's not that at the end of three years, but it is more around the first quarter or second quarter of next year that we should be able to do that. The cost takeout is the primary goal at this point of time. in the UK so that and there are enough levers to do that. So we are focusing on that. So to give a short answer, it's essentially by June of 2025 we should be looking at it. Hopefully the market should also support us in giving us.

Okay. Second question would be on cash flows. So you've seen significant build up in debt, working capital in the last six months. Net debt has increased almost 10,000 crore. Just want to understand, when you look at working capital build up in UK, I would assume that it's the other entities within Tata's team that are giving raw materials. Why is working capital at the console level going up because of inventory build up at UK? And also, when you look at how much inventory has been built up in UK, now what kind of working capital lease can we see? and also tied to debt and cash flow would be when do you start incurring capex on Netherlands decarbonisation. So all of this is tied to basically what kind of net debt levels are we looking at in the next 12 months or so.

So if I were to again deconstruct that question, the first step is the working capital level increase that happened did not happen only in the UK. We were also building up inventory levels for India for coal. I'm talking about Q2. Q1, we were also, we had a significant amount of creditors to be paid off because of the BF6 payment for the Reliant, which extended. So when your creditors go down, so you see a net working capital increase because your creditors are actually being paid off. So you see double impact of that. In the UK, the stock release has also happened in terms of the raw materials, the iron ore, coal that was there. We have released it. The slabs stock buildup was happening to be ready for the closure. Second is that during, we were also running blast furnace for as much as we could. and building up the stock so that the supply chain buffer is there for the next couple of months. If you look at it, 2 to 2.5 million tons of slabs and coil imports are coming in, are not small volumes. So the system takes time to normalize. That's why I said this is a transition quarter and possibly another quarter of transition. I think once the Kalinga Nagar ramp-up happens, which is already on its path, and we commission more of the downstream allied and associated facilities, we will see stabilization of that working capital. So that is certainly going to happen. You would see working capital build-up is not always because of the debtors and inventory or finished goods. It also happens because of the movement of the creditors. So we just need to take that into account because the creditors have also got to be paid out. So it is a function of both. In fact, our number of days of gross working capital is being very tight as far as India is concerned. And it will continue to go down in Netherlands and the same stable in the UK also. I think as you see this quarter, we have released about 850 crores on account of inventory and about 1,000 crores of debtors. So 1,800 crores have come down in this quarter. You refer to the half-year number, which is what you would see in the semi-release. But for the quarter, it is about 1,800 crores of gross working capital release. And taking into account the creditors, it is still a positive about 400 crores. So I think that's the trajectory we will move. The other thing, which is the second part of the question, is you talked about the Netherlands CAPEX. We don't see Netherlands CAPEX, decarbonization CAPEX coming in in the next six, eight months or even one year from today. Because we are in negotiations with the Netherlands government. There is a process by which the Grant numbers will be decided by the government based on our application. The negotiation is on also with the European Commission on stated issues. So all this will take some months to finalize. Once that gets finalized, then the question will be on the ground, the permitting process, the detail engineering process, etc. So I don't see a Netherlands CAPEX coming into the play in the next 12 months. UK capex will start happening, but typically in this kind of project, the first 18 months or 24 months of spend or 20 months of spend are not very significant. It's the last 12, 16 months of spend which actually starts picking up. So 2025, will be mostly completion of completion payments of Kalinga Nagar because as I mentioned that there is almost about 19,000 crores of capex which will get completed over the next few months so those payments will come and then it will be more sustained so next year it will be a much more capex light year compared to the last two years But sustainence capex has to be spent, bolt-on capex has to be spent, improvement capex has to be spent, but the aggregate of all that will be much lower. UK will start spending, but you will also get 40% grant on a quarterly basis, so the net spending in the UK will also be not so significant.

Just to follow up, when we tie all of this together, Tata Steel historically had this $1 billion deleveraging target, now it's become deleveraging in the last 12 months or so, more than that. So when we look at all the Capex requirements and maybe working capital, would you say this is the peak debt or is there, what could be potential deleveraging or is that something in the minds of, is more deleveraging possible from here?

No, it is certainly not possible. It's also the target. So if you look at the gross debt numbers in FY22, when we took out almost about $4 billion of deleveraging, it was about 75,000 crores. And for a growing company, I think that will be the level at which we would be comfortable from a gross debt perspective. between 75 and 80,000 crores. So we will certainly, that's why I said the underlying indication of the next year being a capex light year and a year in which we will have higher production numbers from India for sure and the benefits on cost takeouts both in UK and Netherlands. We would certainly want to resume the long-term targets that we have of a billion dollars of repayments. That's certainly on something that we are planning at this point of time.

Thank you so much. I wish you all the best. Thank you. Thank you. The next question is from Sumangal Nevathia of Kotak Securities. Sumangal, I request you to please go ahead.

from everyone and thanks for this chance. So my first question is on UK. Now we're seeing that the cost take out would be gradual over the next three to four quarters. Just want to understand how will the P&L of UK will look like? I mean, should we expect these losses of 1500 odd crores to continue with a declining trend? Maybe if you can add some more color for the next two, three quarters. That's my first question. Yeah, so I think it would be fair to say that, see, if we were in good market conditions, we would certainly have been in a much better position. But I think that we are somewhat peaking in terms of the losses in this quarter. And our target, as I said, is to take out more and more costs. Actually, it has got, other than the people cost, all the other fixed cost takeouts are... being pushed but in people cost it has a certain process and that process is essentially in terms of individual consultation. So if a person is identified as redundant or will have to move towards or has volunteered to take redundancy, there is a process of engaging with that person over multiple rounds. So that takes time. And that's why that four months I mentioned was important because four months is a lot of time to engage with those people. So we see that a significant tranche of people will move out by end of March and there will be a stub left who would possibly go off in June of next year and some more maybe after that. So the people reduction, so we have signed up with the government that 5,000 people will continue. Our aim is to essentially come as close to that. Today the number is much higher because we are coming down from a base level of 8,000 plus. So we have to give that time for the next two quarters, but that's not the, and given the pressure on the market, We are seeing the fact that you would possibly look at assuming that the level of losses will come down over the next three quarters. And as I mentioned a little bit back, our target is to ensure that we are neutral as far as EBITDA is concerned and also as neutral as possible cash flows by June 2025. Okay and Kaushik in that assumption are we expecting market to improve or in the current state of the market also we are confident that we would be breaking even at the EBITDA level and cash level? At this point of time I guess I can't take a view on the market but... No, at the current market situation. Yeah, my assumption is on the current market situation because only thing is I would assume that the market wouldn't be worse off than where we are today. That assumption gets even worse. But I'm basing the assumption that it is actually the internal levers on fixed cost which is the most important issue. Okay, understood. Next question is on Netherlands. Now that our plant is stabilized, how do we see the spreads or say EBITDA pattern shaping up in next few quarters? We used to say $80-$100 as through cycle margins. How far are we from that level in the current market situation? So the through cycle margins were not 80-100. I would say through cycle margins were more around 60-80. Peak levels 120-140 through cycle at that level. What has happened in Netherlands is there are some structural regulatory costs which has also started coming in including while carbon is still much higher than the historical level. So when that 60-80 we used to talk the carbon prices used to be more around 18, 20, 25 dollars. Just now I think it's more around 60, 65 euros. So that's one impact but that's not the only impact. So there also we are looking at significant fixed cost take out and not just next two quarters but it will continue because we need to take out a lot more fixed cost. Improve the efficiencies, the operating efficiencies. There are certain areas including the maintenance costs etc. So my point would be that the goal post hasn't shifted. We still want to get to that $68. Of course, the market conditions today, if you look at it, the spreads are really declining in this quarter compared to first quarter. And it is also showing up in the third quarter. The other thing which happens on the spreads is the fact that the contract prices get settled in this quarter and next quarter for the next one year. And if the base levels are low, then the contract prices does get affected. So we certainly see that the next two quarters to be volatile as far as Europe is concerned. And we therefore are focusing more internally than externally. But the target of that 60 euros per ton continues to be the same. If I may just squeeze in one more on the India expansion. Now that we've commissioned KPO almost we've still not started the next phase of an expansion. So don't we think we are slower than desired in taking up growth projects in India? So maybe Narin can add to it and then I'll Yeah.

So I think the work is already going on our approach to capital projects is now more about doing all the detailed engineering, get the environment clearances ahead of going to the board for approvals because that gives us more certainty in the execution because often times we take the board approval and then take longer than planned on environment clearances etc. So the work is already going on of that. In fact in end November we have the public hearing for the Milachal I think it's on November 29th, and that's for expanding Nilachal to 10 million tonnes. So once we have the EC on that, then obviously we can progress as fast as we want. And a lot of the engineering work is already going on. So we have not announced the project because we will do that after the board approval, but the work is already going on. The board has already approved expenses to be incurred for all this preliminary work. So basically immediately after this the focus will be on the Lachal expansion which will take it from 1 to 5 million tonnes. After that of course we have the Kalinga Nagar option from 8 to 13 and the Bhushan option, Rangul plant option from 5 to 7. So again the engineering work is, some of the work is already going on on those two as well. Immediately after this Kalinga Nagar expansion the next facility to come on stream, there are two facilities coming on stream. One is the Ludhiana Steel Plant, which is a 0.8 million ton steel plant, which should be ready by 2026. The work is going on from this team. And in Jhanshikpur, we're setting up a half a million ton mill to service, which is going to be downstream of the Usha Martin Steel business, which we have acquired, the Gamaria Steel Plant. That is more to cater to the high-end forging quality requirements of the passenger car vehicles and two-wheelers. We are already servicing the commercial vehicles. So these projects are going on. So I think, we think the base is just right for the current market conditions. Got it, got it.

Thank you so much and all the best.

Thank you. Next question is from Amit Dixit of ICICI Securities. Amit, request you to please go ahead.

Good afternoon and thanks for the opportunity. I have a couple of questions. The first one is on the Forex movement in this quarter. So if I look at the adjusted EBITDA versus the reported EBITDA, there is a significant gap, although the USD-INR movement was not that stark. So just wanted to get your view on this, why there is so much gap in adjusted EBITDA versus reported EBITDA. And I know it's very difficult to quantify how is it going to be, but some of the factors that led to that would be very helpful.

So, yes, there has been a, this is all the translation changes that we see in the forex, which is why we adjust that. And it has happened because if you look at the September end, 30th September, 29th, 30th September movements, That's where the translation impact has come in. It's been fairly steady, but it is more at the end. I don't know if, Samita, you want to expand it.

Yeah. So, Amit, while the – it's not the INR-USD, actually, but the console-level impact is significantly driven by USD-euro, and that has been volatile, and that has actually reflected into such a large amount. Okay, understood. The second point is on KPO2.

How is the ramp up going on? What were the incremental volumes in this quarter, if any, and how do we expect this to take place in Q3 and Q4 of this year?

So as far as Kalinga Nagar is concerned, the last one, as we mentioned, is the largest one in India. Steady state production should be 15,000 tons a day. We are already at 7,500 tons a day. I mean there is a ramp up that we have planned. It's as per the plan. Next step is to take it to 10,000 and so on and so forth. By Q4 of this year we will be running at 15,000 tons a day. So that's the plan. It means I think this year we will have about 1.1 million tons additional volume coming out of Kalinga Nagar. Next year it will be closer to 4 million, 3.5 to 4 million. And the year after will be the full 5 million. The reason why 3.5 to 4 million next year is because the third caster in the steel mill shop will be commissioned by September next year. So it's a step-by-step volume growth. The other facilities being commissioned this quarter are the coke ovens are being commissioned this quarter. The coal rolling mill was commissioned earlier, but the annealing line is being commissioned this quarter. And the next two quarters, the two galvanizing lines will also be commissioned. So, volumes are as per the guidance I've just given you, but the ramp up is going on well. Of course, in any big steel plant, when you ramp up, you hit different bottlenecks at different points in time, just not the bottleneck of oxygen supply which you are sorting out, so on and so forth. So, I think that's where it is, largely on track as we had planned.

Okay, one more if I can squeeze in, you mentioned that in standalone statements, the operating cost benefit, sorry, other operating cost benefit was to the extent of 2000 rupees per ton. So, just wanted to understand how much of it would be recurring because some of it is due to rate and taxes that might not recur in the next quarter. So, on that, Amit, so we are actually beyond the rates and taxes, you are right, that may not, that will not have a It will keep going up and down, but fundamentally we are undertaking a significant cost takeout program which focuses on the stores, repairs, maintenance. Now we have five sites, so we are optimizing across five sites. We are looking at our, not looking, but working on our purchase on stores, spares, consumption patterns, predictability on maintenance what gets done within and external. And then there are rework on many of our additional processing costs which is done externally, conversion costs, etc. So there is a menu of cost takeouts that we are working on in India fundamentally to look at reduction in the costs. I would say that this cost takeout is going to sustain after some time. So this trend will continue, and we are rebasing and structurally addressing the cost. So I think that is the only thing that you can do at this point of time when the markets are so challenging. So we will continue that direction of travel. Apart from the rates and taxes, the other structural costs will continue to remain. Great. Thank you so much and all the best.

Thank you.

Thank you. The next question is from Ritesh Shah of Investec. Ritesh, I request you to please go ahead. Prashant, a couple of questions. First, for Narayan sir, you indicated we'll go from 7,500 to 15,000. What is the sort of cost benefit that we can see on operating leverage for the India operations with KPO going full throttle?

I don't know if Samitha or Kaushik has an exact number, but basically at a broader level, you know, the Kalinga level plant is going to be producing 8 billion tons with 4,000 people, 4,000, 4,500 people. You know, so that is one big leverage. So in terms of labor productivity will be comparable to the best in the world. Secondly, the coke rates for these large blast furnaces, two blast furnaces operating will be much better than many of our smaller blast furnaces, let's say in Jamshedpur, etc. So we have the advantage of that. Thirdly, Kalinga Nagar itself, the conversion cost will come down and Kalinga Nagar will now become the most competitive site for us as far as steel because today Kalinga Nagar carries a lot of costs at the 3 million ton level which will get distributed over 8 billion tonnes because infrastructure was built for 8 billion tonnes. So I do see at least, you know, with this blast furnace coming in, at least 3 to 4 thousand would be a kind of benefit for the steel coming out of Kallikarnagar. On a consolidated basis, we'll have to calculate to see what is the status to India level so we can come back to you on that.

That's quite useful. My second question was for Kaushik. Sir, you indicated FY26 the focus will be higher production, lower capex and you also indicated that we will strive for a billion dollar target probably to my understanding it would be back in FY27. Is it possible you give some guidance for FI26 for UK, Netherlands separately. You already indicated for KPO. And when we say lower CAPEX, is it possible to break it up for, say, India, Netherlands, and UK, what we are looking at for 25 and 26? I'm just trying to understand the debt profile and how we're looking at it. So I would be, as every year, when we get past the third quarter, when we are planning numbers are in place, we give that guidance. And I think the direction of travel is what I mentioned. Specific, I would be able to give it to you in January or February. Because fundamentally, there are some moving parts as far as Netherlands is concerned and UK is concerned. So we need to stabilize that, push that, and ensure that we are doing that. As far as the CapEx Light is concerned, it's because, as Naren mentioned, we're doing the engineering work for the NINL expansion, but fundamentally closing and completing the TSK Phase 2, there's only one part that will remain, which will happen in August or so, which is the Caster 3 in TSK. But other than that, most of the facilities would be commissioned. So we certainly get to, not to the full capacity in 26 out of KPO, but a significant proportion of the capacity. So four out of the five million tons we should be able to get there. Sure. And the last question, you indicated for Tata Steel Netherlands, we don't see any CapEx coming for next six to 12 months. Just trying to understand based decarbonization CapEx, yes. So just trying to understand, I think what we had proposed the government based on the consultation, what's publicly available, we were looking to replace the Blast Furnace 7 as well as the cooking gas plant 2 by 2030. So we had specifically indicated a timeline over here and now when we say that we don't see any CAPEX coming for the next 12 months, what is it that has changed from a regulatory standpoint? How should we look at it? So when I say that the CAPEX is not there, the first 18 months is spent on the engineering work, the site preparation work, the permitting part, etc., which is happening even in the UK. If you look at the UK when we sign or when we are saying July 26, we will start work on the ground. All this time before that is on permitting, etc. So I think that is the lead time that is required. What we call here is environment clearance. Here is a permitting time there. It's the same kind of stuff. So what I said is it's not that the work will not start. But the spend is not significant on that at this point of time for the next 12 months. But based on it, we have to comply with the 2030 guidelines anyways. And the build period is typically three and a half years. So if you factor that in, you would see that this is broadly in line that we will complete it around 2029, 2030. Sure. Can you repeat that sentence? Sure. If I can just squeeze one, I presume, I think you will indicate that we have not finalized the configuration for Tata Sea Netherlands. But hypothetically, if we had to go for, say, only a EF or a hydrogen-based DRI, what are the broader parameters in the marketplace from a CAPEX intensity standpoint one can look at, from an industry standpoint, not specific to Tata Sea Netherlands? I'm just trying to understand what can be the potential CAPEX outgo pertaining to decarbonization over here? So if I look at the, if I tell you that it's not that we have not identified the configuration. We have actually submitted our application to the government. It is actually a DRF tie EAF combination. In UK it was an EAF combination because we have a pellet plant in Netherlands and the mix of Netherlands is different. So we've submitted that. It's not that we've not kind of done and hydrogen is not a fuel which is available in either available in the price or quantity at this point. Europe is building up the hydrogen infrastructure at this point and they have themselves, the EU themselves want companies to commit to the tapping in or conversion from natural gas to hydrogen over the next 15 years. So all that we are doing is in designing it we are enabling the conversion to use hydrogen when it is available. But Naren you want to add something?

So I think that the other reason why we are building a DRI or proposing to build a DRI plant in Netherlands is Netherlands has gas available. And the way it has been configured is the DRI plant that we build in Netherlands will use gas and as and when hydrogen is available in plenty and competitively as Kaushik said, you can always switch from gas to hydrogen. So that's a call that will be taken based on the economics of it and that's also part of the discussion with the government because the price at which hydrogen is available is important to make the choice. But the configuration is all fixed and that's part of the proposal to the government.

Kimpix intensity indicator if possible? We would do that surely. As you know in UK we have done a 10 over contract. When we get into that stage it is much easier to give that intensity but as far as the EF is concerned it will be of the similar number as UK which is about 1.2 billion and the DRI of the similar configuration is about a billion. billion, billion point two. So that is no hold. But given the fact that it is an asset where it is an existing plant, in UK we shut down the heavy end and building. Whereas here we are going to continue to run the blast furnace and build next to it. So the infrastructure requirement or the ability to actually build around a running plant will have its impact on the infra and the enabling facilities, which is what is being determined as part of the detailed engineering. Thank you, sir. Before we take the next question, I would like to remind the participants to please limit your audio questions to two per participant. Should you have a follow-up question, you are requested to rejoin the queue or post the same in the chat box.

Next question from Tarang Agarwal of Old Bridge Asset Management. Tarang, over to you.

Thank you, sir. A couple of questions on cash flows and one on India. So on cash flow, sir, how much of 27,000 crores of KPO2 has been spent till 30th September 21st? So roughly about... So spend or you're looking at the completion? Cash outflow. How much of the cash is moved out of the business? So we would have spent almost about 18,000 crores of cash on attempt of KPO. Closer to 20. So 18 to 20,000 but it also includes the iron ore circuit, etc. So there are, if you take all of that, we have another 7,000 crores to spend, but a lot of it is also spent after the commissioning as part of performance guarantee, retention money, etc. Correct. So the second question is on the cash burn in H1 in Europe and overall how should we look at cash flows for Europe in FY25 and a subsequent one, When do we expect the cash payouts for the settlement with the Port Talbot Employee Union? So that will happen over the next three quarters. So some of them will be there in Q3, but mostly Q4 and Q1 of next year is what we will look at. That cash will come in. Okay, and Europe, overall cash flow in H1 and overall for F525, current estimates? So, I think we, you know, it would be more appropriate to talk about it when we finish the Q3 because there are certain transition cash flows that we are also building up including the redundancies because when you do voluntary redundancies, you don't, you can't be precise because We want to complete the redundancy process over the next two quarters. So it will depend if we can complete that with VR. Otherwise, there will be a compulsory redundancy training program, et cetera. So that is a big thing as far as the UK is concerned. As far as Netherlands is concerned, I think it's the operating cash flows are in Q3 will be negative but will come back because the spreads are at about 200 euros at this point of time so at 200 euros the fixed cost numbers are or the operating cost and fixed cost numbers are significantly higher so we will have to look at Q3 Q4 we expect the turnaround to happen and In the meanwhile, we are tightening up the working capital and also another thing which helps is the lower level of iron ore and coal cost. So, we see at best a neutral cash flow as far as Netherlands is concerned by the second half.

Next question is from Kirtan Mehta of BHOB Caps. Kirtan, I request you to please go ahead.

Thank you, sir, for this opportunity. In terms of the India operations, we have started generating a very significant sort of the EBITDA margin in the range of 12,000 to 15,000 rupees per ton. And this is coming because of our advantage of the INR security, value added products, retail presence, improving retail presence. Is it possible to bifurcate now our EBITDA margin into sort of the commodity component and additional uplift that we get from each component on a quarterly basis? would be very helpful to understand how the volatility is getting reduced and what is our relative competitive advantage to our peers.

We will do some work on that. I don't think we can share that with you just yet. But yes, internally we do track it very differently. I think we, like you said, there is an iron ore advantage which is less visible when iron ore prices are low and more visible when iron ore prices are high. So if you look at iron ore prices at 100, the difference is not so much. When the iron ore prices 150 or 200, it's more. So that is all part of it. But the other part is typically you look at Tata Steel's sales. Typically 90, 85, 90, 95% of our sales is in the domestic market largely because we have a very strong franchise. Even though we have incremental volumes that will be sold in the domestic today. In fact, most of the exports that you see is not going to be UK. The third thing is that downstream, we have a significant presence in tubes, wires, etc., which gives us an advantage. In our retail presence, now we sell almost 200,000 tons a month of steel, that have to spawn to the retail segment. You know, through our network of dealers and distributors, we have over 12,000 dealers now across the country. So these are the advantages that we have, and those are 50% market share to the auto segment, which will increase further with the cold rolling well coming in because we are a bit short on cold rolled and galvanized products for the autumn but with that 230 billion ton cold rolling well in Kalinga Nagar that will get enhanced. The other approval based business we sell to is oil and gas which again is growing thanks to Kalinga Nagar. So we will see what is the best way to you know capture this in a manner that is helpful to you. We will work on that. Sure sir.

The second question was about the CRM complex. You have now given a detailed guidance in terms of the ramp up of the KPO phase 2. Would it also be possible to sort of give similar guidance of the CRM both on volumes as well as sort of the margin potential that we can achieve and how do we ramp up to the full margin potential of the CRM?

Sure. So the coal burning mill itself has been operating for the last few months. So that is going on, you know, as per plan. There's no issue there. But the annealing line is getting commissioned this month. So that means you can then have the anneal product. Otherwise you had what was called the full hard CR which we were using in other facilities of Tata Steel or selling. We will have the galvanizing, one galvanizing line coming in March and the other one by June. That will help us in the mix as well. But obviously one is the volume ramp up which we can give you most as we guidance on each of these. But the quality ramp up is more a question of the approvals by customers. So typically with auto customers, it's a new facility. Even if you are an approved supplier, you need to go through an approval process. So that will go on. So you will probably get the best product mix out of the plant maybe in another year and a half or two years because that's when it takes to get all the approvals in place. But the fact that customers are waiting for us to ramp up these facilities to us that we will get the approvals as fast as possible and we have the experience to make that those kind of quality products. So that we can come back more specifically on the ramp up of the good running metal at a more specific level.

What would be the full potential of CRM facility in terms of the emitter generation?

Typically when you look at it in the long term, for base CR grades, you look at a 100 dollar difference between CR and HR. But as you go up the product mix, you get a better value for two reasons. You will obviously get a better price when you make these very high end products. And secondly, as you know, the author contracts are typically six months. So you have stability. So the gap looks better in a falling market because the author price is fixed and the commodity price drops. But in a rising market, that margin may get squeezed. So that's why the benefit will vary. But I would say $100 to $200 is typically the range that you would look at within which to play. Of course, there is a conversion cost in that, so you can take out 50% of that to increase the conversion cost. But this is just broad-level numbers.

Thank you, sir. The next question is from Amit Notarka of Access Capital. Amit, I request you to please go ahead.

Good afternoon and thanks for the opportunity. Actually, my first question is on the guidance that you should provide for the next quarter. Maybe I'm already given like what's the guidance for people's cost and also the realization.

Okay. So I think basically in India we are saying that the net realisation should be around 2000 rupees lower in Q3 compared to Q2 largely because in Q2 July prices were quite high and then it dropped till September. In October steel prices started going up but we don't expect prices in December to be the same as what was in July. So on an average basis it will be around 2000 rupees lower. Also because of the fact that now the auto contracts now are on the new terms. In the first half we had the benefit of the first April prices. So these are the reasons why the guidance in India is 2,000 rupees lower. Coal prices are expected to be about $20 lower consumption-wise for Q3 compared to Q2. As far as Europe is concerned, I think the guidance for Netherlands is I think about 45%. pounds per tonne lower. Sorry, for UK's I think about Q3 is about 55 pounds per tonne lower and for Netherlands about 70 pounds per tonne lower. And again in terms of cooking coal, Netherlands will be about $10 per tonne lower. Iron ore will be again about $10 per tonne lower. And for UK, these numbers don't matter because we are no longer using iron ore and coal in UK. It's more the substrate that goes out of Netherlands and India.

And also about the reasons for the lower other expenses, sorry I didn't capture it too well. What did you really mention on that and how much of that is one-off? Lower other expenses, maybe I'll have to get back to you, but there are not too many one-offs. but I can get back to you separately. Yeah, and in Q2, I mean, your other expenses seem to have dropped. Even the volume is similar. And that may be even though it is okay. Yeah. Sure. And on the cash flow, cash flow for the DSUK, restructuring as of now, like you are, I mean, any guidance that you can provide for H2? Yes, so I think the restructuring cost, we had budgeted about 250 million pounds as a total restructuring cost, of which some, of which about 150 and 60 million pounds was an account of the redundancies. That spend has not happened. The contract termination etc. has been spent. So I think it is more about that and the people component of it which is due which is what I just said that it will flow out slowly between Q3, Q4 and Q1 of next year as we get into the people numbers.

Hello. Hello, hi. Hello, am I audible? Yeah.

Just to first confirm this number, so the 150 million redundancy related is what we are currently factoring as a cash outlay in the next three quarters in the UK? Yes. Is that like high visibility for that or we think that would be like meaningful upside risk, this number? No, it will be between 150 and 160. That's the number that we are looking at. Over the three quarters. Because that's effectively determined on the number of people who will either take BR or take CR. Right.

Secondly, you know, based upon the numbers you spoke about in terms of KPU cash outlay for the CapEx, let's say roughly $900 million is pending for KPU and we will have some CapEx for UK as well.

Am I thinking right that next year the capex would decline quite substantially versus what we have been doing in the last 2-3 years and all? Or there could be new projects which would take up in that time frame itself? So that's what I mentioned that next year we compared to the last 2 years we expect that the capex cycle to slow before we start again. in the year after because honestly once you complete the Kalinga Nagar phase 2 there is no big start as far as the CAPEX is concerned. There are a lot of enabling work like the NINL engineering work is happening etc. But it will not end so much as in the next 12 months. So is Netherlands. UK even when the site work starts in June 26th it will not be a significant pickup. And anyway, it is 60% of the capex, not 100% of the capex on us. So on a quarterly basis, it will be much, much lower. Got it, got it. My last question, you know, the comments which Narendran sir made earlier that KBO costs would come down by 4,000 to 5,000 rupees once it is fully ramped up.

And if I also factor the commissioning of pellet plant, the product mix which will improve with everything ramped up,

Should we think that India business EBITDA pattern can improve easily by 1500 or rupees only on the back of this 1500 to 2000 in the next say 24 months or so? That's very aggressive.

No, firstly I said 3 to 4 thousand, but anyway, Samita.

Sir, as the RTC as we know, we don't really give a guidance in terms of overall number. I think it was giving you directionally the kind of numbers. Obviously, it depends on a whole lot of other factors, but... Samita, I'm not looking for a guidance.

I know the dynamic business nature, but I'm just saying 3 to 4 thousand on, let's say, 8 million ton capacity, which is 30% of India. capacity, you know, that itself is like 1,500, 1,200, 1,300 rupees just from that simple match, then pellet plant, product mix improvement. If I put all that together, 1,500 looks a fair, safe assumption. That's the reason I just want to confirm this. Not far. Okay. Okay. Okay. Got it. That's helpful. And, Kaushik, that, you know, clarification on other expenses, actually, when I was looking for that, I think you referred to some one-off in India business, at least I thought so. Yeah, there are.

I think it's at Subha, the water tax subject.

Yeah, there is a 400 crore non-cash part which is there on account of settlement of water charges with the government of Jharkhand. So, Jharkhand is to draw water from the river for a century. And there was a charge that kept on increasing for a long period of time by the government of Jharkhand and therefore there is a element which went to litigation because the rate at which it was increasing was significant and that got settled because of a high court order to ask us to commercially settle it but we have been providing it on the basis of the notified price or the cost per gallon of water drawn. So now that it's got settled, that is an excess. So that will be rebasing itself. So that will not happen again because it's one. But there are other administration, administrative and contract costs which are also there which are more sustainable in the future.

Next question is from Indrajit Agarwal of CLSA. Rajit, request you to please go ahead and ask your question. Rajit, we are unable to hear you. Can you hear me now? Yes, we can hear you now. Hi, thank you for the chance. Good afternoon, sir. So, two questions. First, can you talk a little bit more about the current market environment in India? In terms of how are you seeing the demand post the festive season, are we seeing pickup already? And as I understand, current domestic price is at a discount to import parity.

What kind of discussions you are having with the government or what kind of pricing outlook for the market do you see in the next 6-12 months?

Yeah, so in really the demand side is reasonably strong. For 6 months, was weaker than we thought simply because construction activity was a bit slower than we thought. I think partly monsoons, partly because the government expenditure was a bit less, maybe because of elections and things like that, right? So which, you know, we've been told that the second half will be much better. And that's good for construction, which is good for steel because 60% of the steel goes there. Automotive started the year well, has struggled a bit in the last couple of months. In automotive, motorcycles which have struggled for the last 2-3 years has started picking up well over the last few months which suggests that the rural demand is back. The urban demand is what has struggled a bit more. In automotive, commercial vehicles will pick up once construction activity picks up, passenger vehicles, the expectation is it should start picking up. But these are areas where there is a little bit of concern. Other government areas are railways, which is strong. Spending is strong. Oil and gas will also pick up. So we expect second half to be better. And of course, if India's GDP grows at 7%, steel consumption in India should grow at 8-9%. So that's our expectation. Our concern is more about unfairly priced imports. China is exporting 100 million tons of steel. Most other countries have already taken action. So our submission to the government is to take action. I think government is looking at it because obviously China is selling steel at these prices and not making money at these prices. So they shouldn't expose that problem to us. So I think that's where it is. That's a conversation going on. But otherwise, I think demand we are quite optimistic about. And pricing, we'll wait and see what happens. I also think that China is also taking actions. They've expected to cut production by about 4%, which is 40 million tons this year. and if that continues for another 2-3 years then some of the surplus which is finding its way to global markets will come down because China has also stopped approving any new projects on steel even if it is for replacing capacity. So that's the other action they've taken. So I think there are actions being taken in China and now with the US presidential election I think China would be even more concerned about its trade options and I'm sure will take some action to reduce some of these excesses. So that's the way we see it. So more positive on demand, pricing, let's wait and see. We have, I think we've hit the lowest that we did maybe in September, October since the prices have gone up. We see more, we are more optimistic about long product prices because that is less dependent on China, impacted by China exports because China's exports is mainly flat products. And long's consumption is more dependent on construction. So, we are more positive at launch prices than flat prices. But flat prices also seem to be picking up now.

So, from the drops of this August-September, have we taken any price increase so far?

Yes, we have. In both long and flat, we have taken price increases in October. But like I said earlier, when you look quarter to quarter, the July prices were quite high. It dropped significantly in August-September. So even if you get some price increases in October, November and December, I don't think we will reach July prices by December. That's why I'm saying that the guidance for this quarter is lower than last quarter. Second thing is the auto contracts which were at a higher price in the last half year and some of the adjustments etc. will play out in this quarter. So that's the reason why the NR guidance is lower. But if you look at the international prices, this quarter is higher than last quarter because it hit 450 levels. Now, it is in the 480 to 520 levels.

Thank you, Indrajit. I would now like to hand over the conference to Ms. Samita Shah for the chat questions.

Over to you, ma'am. So, some of the questions on the chat have already been answered. So, we'll just take the ones which are yet to be answered. So, Naren, this one is for you. I think there are some questions on our overall guidance in terms of volumes for the year. You did mention about Kalinga Nagar, but at a console level, what... you know, what do the volumes look like for the year?

I think at the console level we are in that region of 1 to 1.4 million for a couple of reasons. We have a blast furnace relining coming up in Japshipur and which was due to go down in Q4. We are trying to see how we can fine tune those dates to make up for shortfalls elsewhere. This last quarter we lost some volumes in Japshipur because there was a significant power outage in Japshipur. not, I mean Tata Steel was more the victim than the cause of it but we had a problem there, we lost some production there. So overall we are seeing 1 to 1.4 million on a consult basis.

Thank you. There are some questions on broader markets which also I will request you to answer. So one is I think in terms of overall market conditions in India and the kind of pricing we are seeing and the margin regime, does this incentivize greenfield investments in India because the ROCE of integrated players is coming down. So some comments on what does this pricing regime really do to our future investments or broader investments in the sector?

Yeah. So I think this is the point we've been making with the government. I think the private sector investment in some sense in India, the recovery of it is actually being led by the steel industry and of course electronics, et cetera, because of the electronics in PLI schemes, et cetera. But I think largely steel, between Carter Steel and all the other steel makers have committed or announced significant capacity expansion plans. But the steel prices stay at $450-$500 levels. It will be difficult for any steel company to support very significant expansion. You can keep expanding but it will not be as value-added as one would expect it to be. A good place for steel prices is between 550 and 600, or 550 and 650 dollars. And which is where it will be when China's exports come down to about 50, 60 million tons. You know, so that's where we are pushing hard to say that we need some sort of comfort there, and which is what other countries are doing, right? So, yes, to answer your question, if steel prices stay at today's level, it will be very difficult to expand to the tens of millions of tons that everyone is talking about. It will be more muted for sure. The cash flows won't support that kind of growth. But if it goes back to where it was even two years back, like I said, closer to $550, $600, then there's a justification for those kind of investments. So we have the advantage of having all the options open, right? Like I described, Nilachal, of course, we need to take it forward simply because we are short on long products. We need more long products in our mix. And because we have three sites now, we can expand anywhere, which we didn't have earlier. Ten years back, we had only jump ship routes, so all expansions had to happen sequentially. Now that you have a Kalinga Nagar site and a Lachil site and a Anul site, if the markets are good, the cash flows are great, we can start expansion in all three sites at the same time. So the growth need not be sequential. And that's a big difference for us.

Okay. There are a few questions on the European market as well. So there are some comments that the European auto giants are going through a lot of turbulence. How does that affect our business in Netherlands? And in light of these changes, are we recalibrating our strategy for investing in Europe?

Yeah. So two or three things are happening in Europe. Yes, the largest economy in Europe, Germany, is struggling. And Germany has had the advantage of low energy prices and strong export markets and a lot of workers from Poland and places like that all these things have changed a lot of Polish workers have gone back to Poland energy prices are high, export markets particularly into China has not been so great so we are seeing the impact of all that in Germany and also the closure which Volkswagen has announced so there is that disruption going on we are watching that space, we have a product mix which is rich in Netherlands, so hence the quality of consumption of the European market is important for us. But you are also seeing supply-side restructuring in Europe. You are seeing that some of our peers are having their own challenges in Europe. And not everyone in Europe will be able to make this transition because it depends on support of the government, the financial strength of the companies, and the product mix in the markets they serve. It's going to be a period of some disruption both on the market side and on the supply side. Structurally we are well positioned because we are on the coast. We have traditionally been a very competitive plant. So we are watching the space and of course the investments in Netherlands will depend a lot on the support we get from the Dutch government. Same as the investments in UK were dependent on the support we got from the UK government. So that's a conversation we are having with the Dutch government. And let's see where that goes and then when we have submitted our proposal, let's see what the extent of support is and then we'll take a call.

Thank you. There is a question on CAPEX guidance for FI 26 and 27. I think Kaushik has already directionally mentioned it could be lower. We will give you specific guidance after our, in the first quarter of next year. There is a question on the tax rate. Of course, if you would like to take it. It says essentially that the PBT is around 2,164 crores, whereas the current tax is 11.42 crores, which is 53%. So why is it not the corporate tax rate of 25%?

So you shouldn't see it from a quarter to quarter. On a yearly basis, we are at the effective tax rate is at the marginal tax of 25%. During each quarter, there are different tax adjustments that comes in with different tax assets. So fundamentally, tax rates remains, the ETR is at 25%.

Thank you. There is a broader question again on the markets in terms of competing with Chinese players in the export markets. What is our strategy and how do we actually do that?

Yeah, so firstly, traditionally Tata Steel's exports has typically been about 10% of its production. For the next couple of years, our exports, actually most of our volumes of exports will go to UK because UK indeed is taking at least a million tons of steel from Tata Steel in India and another six, seven hundred thousand tons from Netherlands. In the international markets, like I said, at these prices, the Chinese steel companies are not making money. And we don't want to export at prices at which we lose money. So that's why when on the earlier question of expansion, there's no point expanding if you have to export a lot into markets which are priced like this. So it's not just about the return on capital in the domestic markets. You have to look at how much are you exporting and what's the return on capital on that. So hence, the next six months will be crucial to see what happens in China. Will they go back to that 50, 60 million ton export level? you know, and that's where it is. On a cost basis, we are more competitive than the Chinese. Because even at produce prices, status fields domestic business is at 20% EBITDA margin. I don't think there's any Chinese company making even 5% EBITDA margin. Right? So, it's not about cost, it's about the price at which we are willing to sell at. Which is why, you know, we look at it from that perspective. We are one of the lowest cost producers of steel in the world and so, that allows us to make money even at these prices in India.

Thank you. Amitabh, one clarification is I think the numbers on tax, what I just saw is I think the person who is asking the question has seen the consoled profits, which is why he is saying 50%, because in consolidation, the tax is actually being paid out of India. So in India, if you look at it, the PBT is $4,700 and the tax is $1,100. So I think because in Europe and UK, we don't have any tax payability and they were in losses in any case.

Thank you. There's a question on the sales mix between long and flat. And Narendra, maybe you want to give it just as an annual basis because that's quarter-wise is less relevant.

Yeah, so I think if you look at data steel today in India, we are producing about 21 million tons. I mean, capacity-wise, after the Kalimala expansion, we will be at 26 million tons. In that 26 million tons, we are about 5 million tons long, and the balance is flat, right? 5 to 6 million tons is long, because you have about 3, 3.5 in Jamshedpur, another million in the the Maria plant which is Osha Martin plant that we acquired and another million in Nilachal which we acquired. So that's the 5-5.5 million of long. The Ludhiana plant will come up by March of 26. So that will add another 800,000. And hence the next expansion that we have planned is Nilachal which will take it from 1 to 5 million. So that will make our if you look at India 30 million, 31 million you will have loans that may be 8-9 million for us and flats at 20-21 million.

Thank you. There is a question on our gas requirements regarding to Kalinganagar expansion. You know, what are the requirements and what are the kind of arrangements you have in place?

We don't need gas because we are still building, we are expanding in Kalinganagar using glass furnaces. So, we use coal, coking coal and And the gases that we generate from our operations is used within the operation. But we don't need to buy natural gas of any significant volume from anywhere. So we are not dependent on gas as an input cost for Kalinga level.

I think they probably are referring to oxygen.

Oxygen, okay. So oxygen is an important part of a steelmaker's cost. I think if I remember right, so maybe about 2000 rupees per tonne or something like that. So it is an important part of the cost. And there we typically work with global leaders. We outsource the oxygen production. We bid out the capacity. They build it for us, run it for us and we have a contract with them where the oxygen price is also dependent on the energy prices. So typically the electricity cost is a pass-through. And so that's a contract we have in all our steel plants and I think Linda is the supplier for Pelling and Heller. I don't know what is the specific question, but those are contacts.

Thank you. And we'll have the last question which we will take, which is there are two questions, but they're both relating to the same issue. So one is the jump in other income, and the second question is in the segmental EBIT, other trade-related operations, there's a significant jump. So can you please clarify? So the question may be you'd like to take it. You can explain that. Yeah, so this is an account of foreign exchange translation, what we talked about earlier. There is a loan which we have, which is a Euro-USD loan, and the difference when the currency moves, that is what gets reflected. So it comes in the segmental sort of allocation. It comes under trade-related operations. That's what's driving a bulk of the increase, and that's the same which is featuring in our other income as well. So with that, I think we've answered all the questions. Thank you to all our viewers and the participants for all your questions. We look forward to connecting with you again next quarter. Thank you and have a good day.