Tata Steel Ltd 144A

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

Thank you, Kinshuk. Good afternoon, good morning and good evening to all our viewers joining us from different parts of the world. On behalf of Tata Steel, I'm delighted to welcome you to this call to discuss our results for the fourth quarter and the full year financial year of FY25. We declared our results yesterday and there's a detailed presentation along with the SEBI release, detailed presentation on our website which discusses the results. During this call, we will walk you through some of the details and also take on any questions you may have. Before I move on, I just want to remind all of you that the entire discussion today will be covered by the Safe Harbor Clause, which is on page two of the presentation. This call today is led by our CEO and Managing Director, Mr. T.V. Narendran, and our ED and CFO, Mr. Kaushik Chatterjee. Thank you very much again for joining us today. And I will now request Naren to make a few opening comments before we throw the floor open for questions. Thanks and over to you, Naren.

Thanks. Thanks, Amita. And hello, everyone. I'll make a few comments and then pass on to Kaushik. FI25 has been an important year for Tata Steel and it demonstrates ability to navigate challenging operating environment and progress on our stated objectives across geographies. For most of the year, the steel fundamentals diverged across regions with increasing exports from China, which weighed on the price sentiment. And since January, the evolution of the U.S. policy and the nations, different nations focusing on protecting the local industry has led to varied price momentum across India, Europe, and U.K. And at the same time, China continues to struggle with declining steel consumption. Regions like UK, which are yet to review the quotas that they have, have struggled a little bit more because, as you may be aware, in Europe, they have refined the quotas that are available for imports, which has acted to limit the imports. In India also, there's a safeguard duty, which has helped us. Amongst operating geographies, India remains a structurally attractive market and we are committed to leadership in chosen segments. And annual performance has been aided by the commissioning of India's largest blast furnace at Kalinga Nagar, coupled with initiatives to enhance the cost competitiveness and product mix. We achieved the highest ever crude steel production of 21.7 million tons and deliveries of 20.9 million tons for the full year. And across our sites, including in Kalinganagar, which is under ramp-up, we operated close to, excluding Kalinganagar, which is ramping up, we operated close to 100% capacity utilization. And that is an outcome of the way we design our plants, our best-in-class maintenance practices, and our superior marketing and sales network, which helps us maximize our deliveries across cycles in the domestic market. Coming specifically to some of the segments, the deliveries to the auto segment, automotive segment were aided by the focus on new product development, especially the high-strength steels and enhanced capabilities on account of the new continuous annealing line at Kalinga Nagar. We became the first company to localize select automotive product grade CP780 through joint venture J-CAP CPL, and we've come in supplying DP780 grade also to automotive OEMs to support them in their lightweighting initiatives. We also cater to the growing requirements of high-quality wire rods for the auto industry. And these deliveries were also positively impacted by the successful commissioning of the world's longest Elmore conveyor in a wire rod plant in Jhanshikpur. We expect further progress in the product mix with the 0.5 million ton combi mill, which is being set up in Jhanshikpur, which will use the steel that is made out of the erstwhile Ushra Martin plant, which is called Tattersil Kamariya. We expect the furnace has already been commissioned of this point family and over the next few months, the other facilities will also be commissioned. Our branded products and retail vertical achieved volumes of around 7 million tons, aided by the best-ever sales of Tata Tiscon, Tata Astrum, and Tata Stelium. Tata Tiscon volumes grew by about 19% year-on-year. It is the second year in succession that they've had double-digit growth, and it has reached 2.4 million tons, while our hot-roll brand, Tata Astrum, and the cold-roll brand, Tata Stelium, together achieved record sales of 3.8 million tons. Our e-commerce platform, Asiana, served more than 1,000,000 unique customers customers during the year with a gross merchandise value of over 3,500 crores. Moving on to the industrial products and projects engineering, it witnessed a double-digit growth and contributed to the construction of around 2,500 kilometers of oil and gas pipelines. Once the Kalinganagar plant was commissioned, we had said that we will focus on oil and gas because that's also a high-end approval-based business, just like the automotive business. In line with our focus to grow in chosen segments, we have also forayed now into commercial shipbuilding, supplying grades to various shipbuilders in India, including Mazatom Dock Shipbuilders, Garden Beach Shipbuilders, Cochin Shipyard, and Shoft Shipyards. Our capacity enhancements investments are also progressing well across sites. At Kalinga Nagar, the 5 million ton blast furnace continues to ramp up and the civil work is in progress in the electric arc furnace site in Lugyana, which we hope to commission in the next 12 months. Specific to downstream, the continuous galvanizing lines are expected to be commissioned in the coming months while the ramp up is in progress for the 100,000 ton per annum tubular structural mill that we've set up in Jagshipur. In the UK, we have safely decommissioned both the blast furnaces at Port Talbot and smoothly transitioned to serving customers via downstream processing of the purchase substrate. Our delivery stood at 2.5 million tons, and we were lower on year-on-year basis. UK steel prices are still 8% below the levels that we saw last year due to the import pressures and the subdued demand situation in the UK. As such, we focused on transforming operations towards a sustainable model. And the shift in the operating model, coupled with our focus on controllable costs, has led to the improvement in the fixed cost by over 230 million pounds on an annual basis. But unfortunately, this is not visible as yet in the performance due to the market dynamics. With respect to the proposed transition to green steel making, we have also received the planning permission for the electric arc furnace and are gearing up for the civil work and the construction activity to begin by July. In Netherlands, the liquid steel production was at near capacity, full capacity at 6.75 million tons, the highest in many years. And this is when part has led to a 17% year-on-year increase in deliveries to 6.25 million tons for the full year. EBITDA remains positive on a full year basis and deliveries for the quarter at 1.75 million tons were the highest quarterly volumes in the last six years. We recently launched a cost competitiveness program targeting 500 million euros of savings in FY26, And the transformation is a building block to ensure that Tata Steel Netherlands becomes one of the most efficient and sustainable sites in Europe. We are engaged with the government team to support our integrated decarbonization and environment measurement projects. And I'm happy to share that Tata Steel has been recognized by World Steel as a sustainability champion for the eighth year in a row. With that, I hand over to Kaushik for his comments. Thank you.

Thank you, Naren. Good afternoon. Good evening to all those who have joined in. I will cover essentially three themes. Firstly, the performance. Secondly, our cost transformation program across geographies, what we have done so far and what we are targeting in the next 12 to 18 months. And thirdly, update on the decarbonization strategy and actions in the UK and Netherlands. Let me start with our production performance for the quarter and the year FY25. While you would have seen the production filings that we do, I wanted to highlight that for the full year in India, we've increased our production from Tata Steel Kalinganagar by a million tons. And for the India business, our production increased by about 0.9 million tons, taking into account the shutdown that we've taken for our G-plus one is relining, which is currently on and we should hope to complete it by July. In Netherlands, the crude steel production for the year was 6.75 million tons, which is almost at capacity level. As you know, in the UK, our business model has actually changed and we are now operating as a finishing facility with purchase substrate, including from India, Netherlands and external sources. Moving to the financial performance for the quarter and full year, our consolidated performance for the quarter has been provided in slide 23 of the presentation. Consolidated revenues for the Jan to March quarter stood at about 56,218 crores, which were up by 5% quarter-on-quarter, primarily driven by the seasonality and the seasonally strong volumes in India and Netherlands. The steel realization improved in India. by around 600 rupees per ton, but revenue per ton was down by about 53 pounds per ton in the UK and 79 euros per ton in Netherlands on quarter-on-quarter basis. The consolidated EBITDA for the quarter was about 6,762 crores, which translates to a margin of 12% up by about 100 basis points quarter-on-quarter. India EBITDA margin was higher at 21% and translates to 7,418 crores. And Netherlands was about 125 crores, which was partly offset by the EBITDA loss in Tata Steel UK. In India, the Tata Steel Netherlands EBITDA, sorry, Tata Steel standalone EBITDA for the quarter was 7,105 crores, which translates to around 12,700 rupees per tonne. As I mentioned during the third quarter earnings call, there was a non-cash credit of 1413 crores or 2670 rupees per ton. Excluding this, the standalone EBITDA is actually improved by close to rupees 1000 per ton on a quarter on quarter basis. I want to continue to make a special mention about the Nilachal Ispatnikam or NINL performance. It has consistently improved across the quarters and recorded an increase in EBITDA of 9% quarter-on-quarter to 323 crores, which is a margin of about 23%. The most heartening part in NINL is that it has achieved 1,000 crore EBITDA in the year reflecting an EBITDA margin of 19% and a cash flow of 1,000 crores even in these challenging market conditions. NINL will remain as one of Tata Steel's most promising growth prospects in the coming years as we are working on its expansion plans. In our overseas operations, efforts towards cost reduction, operational KPI improvements, and product mix optimization are showing visible benefits despite spreads moving to a multi-year low. In Netherlands, the fourth quarter EBITDA improved to 14 million euros and coupled with a working capital release of 300 million. leading to a free cash flow of over 200 million. In UK, our fixed costs improved by 69 pounds per ton quarter-on-quarter, but this was more than offset in the drop in the revenue per ton and the higher substrate prices, leading to an EBITDA loss of 80 million in the fourth quarter. The UK underlying EBITDA loss in the fourth quarter trended down compared to Q3, When I speak about our cost transformation program in a short while, I will cover further efforts in the UK. Our consolidated operating cash flow after interest and adjustment for the quarter stood at 7,700 crores, aided by EBITDA performance and a very sharp focus on working capital that ensured a cash release of 4,300 crores. Let me now move to the full year performance, which has been provided in slide 25 of the presentation. There are four big headlines I would like to highlight. Firstly, in spite of a multi-year low in steel prices and reduced steel raw material spreads, our consolidated EBITDA for the year was 25,802 crores versus 23,402 crores in financial year 24, which is a growth of 10%. This reflects a 200 basis point increase in the consolidated EBITDA versus financial year 24. Secondly, the structural cost takeout across all entities of Tata Steel during financial year 25 was about 6,600 crores, focusing on fixed cost takeout, efficiencies in manufacturing, procurement, raw material optimization with leaner coal blends and fixed overheads. This is a company-wide program, and I'll talk shortly on what we aim to do in the next 12 to 18 months. Thirdly, and even more important, is to demonstrate the cash flow orientation of the entire company. Our operating cash flows after interest and adjustment for the year increased by 37% compared to previous year from 12,941 crores to 17,700 crores in spite of challenging market conditions. Fourthly, our... Netherlands operation marked a significant turnaround in EBITDA during the year from a negative EBITDA of 426 million in financial year 24 to a generation of 90 million in financial year 25, an improvement of more than 500 million. If I consider the operating turnaround at the financial year 24 prices and spreads, it would actually be a 900 million turnaround. While there is lots to do, The direction of the movement is very clear and we continue in this path. India EBITDA for the full year stood at 29,285 crores with standalone EBITDA of 28,217 crores. Standalone EBITDA stood at 13,500 per tonne. The EBITDA performance got aided by 5% increase in volumes, lower raw material and operating costs and special actions that I talked earlier. Total cost improved by more than Rs. 5,700 per ton. Our UK operations too are progressing as per stated plan, while the full year EBITDA was minus Rs. 385 million. It is a tale of two halves with the EBITDA in second half improving by 90 million versus the first half. The closure of the heavy and steel making by September and concerted efforts to optimize costs led to the reduction in fixed costs by around 160 million in second half and 230 million for the full year. Now, let me provide some details on our cost transformation program. The structural cost takeouts in financial year 25, as I mentioned earlier, was about 6,600 crores versus financial year 24. Looking ahead to financial year 26, our focus continues to be on controllable factors, and we are targeting further cost takeouts of almost 11,500 crores roughly about $1.3 billion across geographies by focusing on controllable costs. And let me outline some of the specifics. Firstly, in India, we intend to deliver savings of 4,000 crores by focusing on operating KPIs. employee productivity, supply chain optimization, coupled with investment in projects with low payback period. There is specific focus on conversion costs, and our aim is to optimize conversion costs by about 1,000 to 1,200 rupees per ton. We have identified a pipeline of low capex, high RR projects, totaling less than 500 crores that will improve operational costs and be completed in a short span of time. In the UK, we intend to continue progressing on achieving a lean structure by further reduction in fixed costs of 29% year-on-year of around 220 million. Key levers range from optimizing the cost of substrate and the coil mix, upgradation of IT infrastructure to reduce corporate overheads, and rationalization of downstream operations to improve the profitability. Our total fixed cost in FY24 was about 995 million, which reduced to about 762 million in financial year 25, and we target to bring it to around 540 million in the next financial year. In Netherlands, we intend to achieve savings of around 500 million euros, And the program encompasses multiple areas, such as volume maximization, product mix, repair and maintenance, employee productivity, and others. We are also in discussions with the unions on the transformation project. Let me now touch upon the capital allocation before moving to the decarbonization update. Of the generated cash flows of financial year 2025, We spend about 15,671 crores on capital expenditure. Our net debt stands at about 82,579, which has come down from 88,870. crores in September 24 by about 6,200 crores in the last six months. We plan to spend about 15,000 crores of capital expenditure in the next financial year. And of this close to 75% is for projects to be completed in India, including the last part of the Tata Steel Kalinga Nagar spend on the third cluster and the related facilities. The electric arc furnace project in Ludhiana is being focused and there are several smaller projects which are also meant for asset reliability and performance efficiency. Our work on engineering for the next phase of expansion in NINL is currently ongoing and the regulatory clearance process on environment are also underway. Our capital allocation will continue to be prioritized towards the capacity growth and downstream facilities in structurally attractive Indian markets. In UK and Europe, the focus is largely on decarbonization with material support from the government. As you are aware, we have secured a 500 million support from the UK government. for the transition to scrap-based electric manufacturing. We have now got the planning approvals, identified the technology providers, and the design engineering work is almost complete. We have spent about 35 million on the project in financial year 25, and we will commence site activities in the next few months. On Netherlands, we are in intense discussion with the Netherlands government to secure funding and policy support. To enable the decarbonization and environmental project, the Dutch government has completed the pre-notification filing with the European Commission regarding the project, and all stakeholders are working on various subjects relating to the project. The Dutch government has updated its parliament, confirming talks with us and the European Commission relating to the project. I would now like to work you through an accounting change that we have made in the standalone financial statements in order to have a clearer view of the underlying business performance going forward. The valuation of investments and subsidiaries is tested against the present value of the future cash flows over the long term. For this, it is necessary to take a view on the business landscape in the decade beyond 2030. Tata Steel UK has transitioned its business model to a downstream only play and is undertaking an investment to build the electric arc furnace project in Port Talbot by financial year 27-28 end. Tata Steel Netherlands is in discussions with the government for the project to replace one of the two blast furnaces and coke ovens with a DRI-EAF combination by around 2030 end. The primary drivers of the profitability for the future businesses will therefore change from the traditional steel price to iron ore and coal basket spread to the following. It will be influenced by the carbon border adjustment mechanism, the infrastructure and the availability of clean fluid and the carbon capture options, local availability and pricing of scrap. willingness and ability of customers to pay additional premium for low CO2, steel and circularity, other regulatory costs, including fixed cost network for electricity, hydrogen and natural gas. These factors, which will be the primary drivers of the business in Europe, are all currently evolving with significant changes in market regulations being implemented. There are multiple risks and opportunities with relation to how they will play out over the next few years. impacting the current value of the business at this point of time. The company has therefore concluded that carrying these investments in UK and Netherlands at historical costless impairment under INDAS 27 is no longer appropriate. Tata Steel has therefore voluntarily changed its accounting policy to carry the equity investment in subsidies at fair value under INDAS 109. This also addresses the reliability issues that INDAS 8 talks about. The move to fair valuation more accurately reflects the underlying value of the business, including the potential upside in valuation in the coming years as the uncertainty over the regulatory and market factor reduces. Having opted to account these investments at fair value under NDIS 109, the company has also opted to route the fair value changes between accounting periods through the other comprehensive income. This allows the company to to keep the movements in fair value of the long-term strategic assets distinct from the underlying financial performance of the company's regular business activities. Based on the fair value assessment, Tata Steel has recognized an adjustment in the fair value in the investment in subsidies only in the standalone financial statements through the OCI of around 24,829 crores in the quarter and 23,606 crores in the year ended 31st March 25 respectively. This is a non-cash adjustment and there is no impact on the consolidated financial statements. The losses sustained by the Tata Steel UK and recently by Tata Steel Netherlands in the last few years have already been reflected in the consolidated financial statement. As a result of the change in the accounting policy, there will be greater consistency between the consolidated and the standalone financial statements as of March 25th. The standalone network stands at 1,23,544 crores, while the consolidated network is at 87,770 crores. Finally, with relation to the U.S.-U.K. trade deal, steel-aluminum tariffs on the U.K.-origin goods are now eliminated, and this has a positive, although limited, impact on Tata Steel U.K., which exports mostly packaging products of a small quantity. There is a larger positive indirect impact through our customers in the automotive tariffs, which has been reduced to 10% for a defined quota of vehicles. The automotive sector in the UK is also likely to be positively impacted within the UK-India trade deal. After the closure of the blast furnaces in the UK, Tata Steel UK is now servicing its customers on the basis of imported slabs and HR coils, especially from India, after processing them at the local downstream facilities. We expect no material change or impact on our supply chain on the trade basis. With this, I end my presentation and open the floors for questions. Thank you so much.

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 wait for a moment as the queue assembles. The first question is from Prateek Singh of DAM Capital. Prateek, I request you to go ahead and ask your question.

Hi, good afternoon. Am I audible? Yes. Sure. So just wanted to get a sense of how prices have moved currently versus the last quarter, both in Europe and in India. That was the first question.

Yeah. So in India, we are guiding that prices this quarter will be about 3,000 rupees per ton higher than what it was last quarter. And in Europe, it's about 20 to 30 euros higher than last quarter.

So given we have long-term contracts, Naren, so how should we see it? Because prices in the spot market have gone up by $150 per tonne over the last two, three months. So is it like two, three quarters down the line we would be seeing the full impact or it's futile to track those prices and prices will change over the year end? So how should we see it?

But it has not gone up by $150 per tonne. So I don't think it's gone up in spot markets also by that much. But having said that, I think more to your specific question, basically we have our annual contracts which are normally negotiated in November, December. And so they are typically the packaging and automotive contracts. And Actually, the packaging and automotive contracts typically are much higher than the spot prices. So when you go up and down also in those contracts, it may be up and down compared to the previous contract, but typically higher than the spot prices. The spot prices impact maybe about 30 to 40 percent of the volume in Netherlands and a similar level, maybe slightly higher in the UK. So that's where the spot impact comes in, which is more the monthly prices on what we supply to engineering or what we supply to some of the other segments. But if you look at steel prices, basically it has fluctuated in a $50 range. You know, if you look at China, if you look at Southeast Asia, it's gone up and down in a $50 range over the last few months. What has helped is actually the cooking coal prices going down, which has helped the spreads more than the steel price itself moving up too much.

Sure. And my second question is just a bit of a medium-term question. So what is your view on Jamshedpur given the legacy cost issues and a bit of operational disadvantages that we have given smaller blast furnaces there? Is there a medium-term plan there?

Yeah. So there are a few things. We do have legacy costs, some legacy costs in Jamshedpur. But a lot of work is going on to address that. But having said that, if you distribute some of the costs which we incur in Jamshedpur over the other sites, the gap is not as much as it may seem. Because, for instance, all the R&D facilities are located in Jamshedpur. You know, there are the procurement facilities are largely located in Jamshedpur. So there are some of those costs which Jamshedpur bears more than the others. But the advantage, as you said, in a Kalinga Nagar is you have bigger facilities, you know, two blast furnaces making 8 million tons, one steel melt shop making 8 million tons. So you have you start with productivity advantage. You also start with a younger workforce. So these are the advantages, let's say, Kalinganagar has over Jamshedpur. So when I look at a cost on a hot roll coil basis, the gap is now reducing between Jamshedpur and the other sides because of many of the cost takeout actions that we've done over the years. But this work continues. Also, we should keep in mind that we have almost 1,000 employees. people retiring from Tata Steel amongst the unionized workers in Jamshedpur every year. So that also between Jamshedpur and the raw material location, that also helps us bring down the legacy cost because since 2007, the wage structure in Tata Steel is very different from what it was before that.

Thank you, sir. The next question is from Ritesh Shah of Investec. Ritesh, please go ahead.

Yeah, hi, sir. Thanks for the opportunity. A couple of questions. First, I think we have taken an approval of infusing another $2.5 billion into Europe. Any specific reason for the same given we already are on a route when we have funding from the government in UK and Netherlands also you have a transformation program in place. If could please help us understand that.

Yeah, Ritesh. So This is similar to what we did last year. It is not new investment. It is actually rebalancing the debt between overseas debt and India debt. And effectively, that makes a lot of sense because A, to reduce currency fluctuation, B, to get post-tax costs down. We are effectively looking at the debt that sits in various parts of the overseas entities, including in UK, etc., to be more from an India perspective because there are any service currently out of India. And therefore, it is a rebalancing exercise, no new investment. The only small sliver of that investment will be the investment that is going on in the UK. which is relating to the EIF projects, which 40% is shared by the government and 60% is on our account. But that number this year is not going to be significant. But fundamentally, the principle is to ensure more of the debt.

Sure. My second question is on the cost takeout. A couple of clarifications over here. In the prior call, we had indicated for Tata Steel New Zealand's around 500 million euro number. In this presentation, we have given a number of 4,000 crores. Is it the same number or is it a top-up? I presume it's the same number, right? It is the same number. Okay. Specifically for UK, again, we have given a number of around 3,000 crores. This effectively implies 36% of the cost weighs X ROMAT, which effectively could translate to nearly $100. what are the underlying variables that we are looking at over here and is this exit rate that we are looking for FY26?

It is indeed the exit rate, but it is the total cost takeout. So, as I mentioned in my comments that We have a total fixed cost of 955 million when we were running on an integrated basis. We reduced it to 760 million this year. And our intent is to further reduce the cost to about 540 million. Most part of that, if I look at, if I give you a sense of the itemized part, it is the fixed cost, which this is all fixed cost. And therefore, like the maintenance, hire and leasing, some part of it is the employment. And then there are other operating charges. These are the ones which will be going down significantly compared to financial year 24. which has stepped down in 25 and going to go down even more in 26. And this is the year-end number that I'm talking about.

Sure. And I'll just squeeze in one specifically on the cost takeout. So historically, we have seen a given disclosure around Shikhar for the Indian operations. Likewise, if you look at Tata Steel Europe, we had indicated cost transformation programs in year FY20, FY21, and FY24. I think the cumulative number is almost like $700 million plus. However, when we look at the implied cost, X ROM at X power and fuel, we don't see that stickiness of the cost savings, be it for Shikar, be it for Tata Steel Europe. How to better understand or appreciate the stuff that you're doing?

So I, sorry.

Go ahead, go ahead Kaushik, then I'll simplify.

One other thing which in Europe I must say, let's take Europe first. So in Europe, the cost takeouts where there is also an offsetting factor. And when the, for example, the Ukraine war came in, The gas price changed very significantly. The inflation numbers were very high. So we had an inflation as far as employment cost is concerned. And the inflation impact on the conversion cost was very clearly reflected, which did not get compensated by any price increases in steel post-22-23. So that has been one of the most important elements. In India, the Sikar is actually an anti-inflationary KPI improvement process. So when we look at individual physical KPIs, we were always looking at it on improving the KPIs and monetizing or giving the monetary value on standard cost basis. While that continues and that has actually become much larger, We are now also tracking absolute costs and absolute cost takeouts have actually been supplemented on top of Shikar to make it more accountable so that you can actually trace it from your financial statements. So that's how we are looking at it. Yeah.

So let me put it this way. When we look at improvement, we look at KPIs and are the KPIs improving? And if that KPI has improved, how much is the cost saving? And that is what is normally reported in Shikar and any of our investment programs. But let's say if the coal price in one year is $200 and the coal price in another year is $300. Even if you've improved your coke rate by 10 kilos or 15 kilos, that improvement which is there gets wiped out by the increased coal price and the coke rate, a lower coke rate and a higher coke price offsets, you know, what you had a higher coke rate and a lower price. You know, so just to give an example of that. Secondly, in Europe, one thing which has gone up over the years is the CO2 costs. You know, which used to be maybe five years back, 14 euros, 15 euros, which has went up to 80, 90 euros. And now it's down to about 70. So there are some elements of costs which have gone up. There are many KPIs where we've improved, particularly in India. In Europe, I think we are still early in this journey, particularly in Netherlands. And we are running with it just now because traditionally Netherlands has always been a bit down cash positive. Only the last couple of years when things went south, did we really improve. pin in on some of these things. In UK, of course, it's been an ongoing activity. Even if I take the Netherlands and UK numbers, while Netherlands has shown an improvement in EBITDA from maybe 480 or something negative EBITDA to about 80 or 90 positive EBITDA, if the prices were the same as last year, it would have been actually 500 million positive EBITDA. So because of the price drop, you've actually seen negation of some of the improvements. Similarly, in the UK, A lot of this cost takeout is not visible because, again, the prices have dropped and wiped out whatever this 200 million, 300 million cost takeout that you take. But we can reconcile this. I think your point is how do we reconcile this better? Maybe we'll discuss it, Samita, to see how when we present it, we can separate out the improvements from the external factors which kind of distort some of these improvements.

Thank you, sir. The next question is from Satyadeep Jain of Ambit Capital. Satyadeep, please go ahead.

Hi, am I audible? Yes. Hi, just a follow-up on the cost takeouts. I know this question basically comes from the fact that Tata Steel has been around for decades. Now, these inflationary, anti-inflationary cost takeouts that you are talking about, which are different from the earlier ones, What has led you to now look at these cost savings, which the company had not seen before? Is it the prolonged downturn that maybe steelmakers like yourself are looking at? Maybe some takeouts which industry didn't look at earlier. And if that's the case, then what is unique about the takeouts you are doing, which if the entire industry, the Chinese also and others look at improving coke rate because of the downturn, then everybody's cost goes down, then who's the beneficiaries? Just wanted to understand what is unique to what Tata Steel is doing, what others might not be able to replicate, and why now, why couldn't you do it earlier?

Sure. So let me address that, Satyadeep. See, firstly, in our kind of business, which is cyclical, you always have to be the last man standing, right? I think that's... So cost takeout is a... you know it will go on forever 10 years later also we'll be talking about cost takeout because you will always have to dig deeper to see how do you take out costs when you compare with the chinese the challenge we are facing not just us anyone in the industry is facing is that the chinese are able to sell steel at three percent four percent ebitda margin or negative ebitda margin and continue to grow Right. I mean, they still have money to invest in growth, etc. So it's not a model which is obviously market driven. There are supports which are sometimes not visible. Right. And that has been our submission to the government. It's not it's not about competitiveness. It's about. you know, something about what is the cost structure and how do these businesses survive with such low margins and still continue to grow where the cash flows won't be there to invest to grow. Right. So but we have to do what we have to do to keep improving the situation. So for us, it's about that. I think the India business, because of our backward integration, etc. We continue to be one of the lowest cost producers of steel in the world. The Russians are the only ones who are maybe slightly better from a cost point of view compared to the Indian steel makers because the ruble is where it is and Russia has its own iron ore and coal, right? So globally, if you look at the Indian steel industry, not just at Tata Steel, we are favorably positioned as a country to make steel and Tata Steel is only... one of the most favorably positioned. In Europe, the cost structures are higher. Prices are also higher. Typically, prices in Europe are $100 higher than in India because of the fact that there are limitations on how much you can sell into Europe, etc. And everyone's cost structure in Europe is there. So in Europe, the effort is always to be the last man standing in Europe. You cannot be the last man standing in the world out of a European operation, but you can try to be the last man standing in Europe, which is what a Dutch business traditionally used to be, apart from the problems we've had in the last couple of years. So to go back to your question, if I look at it, UK has always been doing this. Through restructuring, we've taken out costs, they've sold some of the assets, and we continue to restructure. But steel industry has gone through cycles, particularly in the last six, seven years with China exporting 100 million tons. We've gone through cycles which we've not seen in the past. So what was done in the past is never enough. We need to do more. In India, when we've acquired these new assets, whether it's Bhushan, whether it's Nilachal, we've had a lot to do to take out costs, right? So while Jamshidpur does what it has to do, if I look at it on a consolidated basis, you know, in each of these, whether it's the Usha Martin plant that we acquired, the Bhushan plant that we acquired, Nilachal plant. Nilachal plant alone, we've taken out almost 30,000 rupees of cost per tonne. That's why Nilachal today, a plant which was shut down because it was not financially viable, is today making 1,000 crores EBITDA, 1,000 crore cash flows, right? So when you acquire new assets, you obviously have to do a lot of work on cost takeout, which is what we are doing in India. When you build new assets, you can build it more cost efficiently like we built today. So there will always be something new to do because there will always be. And today technology allows us to see costs in far more detail than before. The analytics that we are doing, the AI that we have in our systems, etc. For instance, on maintenance, we have moved from preventive to predictive to prescriptive maintenance. Right? So then the asset utilization improves. You have far more insights because you have far more data than you had even five years back. So you can plan your cost takeoffs very differently. You can optimize on your blends of coal very differently than you could five years back because you have a lot more data. So using technology, using the learnings from the past, learnings from different assets, this is something that we are constantly pushing ourselves. Everyone else also does that, but obviously... you know, if you can do it better than the others, you continue to be the last man standing. So our objective is in India, our asset should be one of the last men standing in the world. And in Europe, it should be the last man standing in Europe. And in UK, as Kaushik said, and which we said before, when we close up last one is move to an EF, we have said that structurally our cost improves by at least 150 pounds a tonne. Because instead of importing iron ore and coal and making steel there, you're using locally available scrap. You're reducing the fixed cost like we've described by 400 million pounds. So in the next down cycle, UK will be in a much better position. Otherwise, typically when steel prices drop, the first place in our portfolio to lose money is UK. Second place to lose money is Netherlands. India loses, I mean, India, as you know, even in the last two years, EBITDA margin is 20% plus. Right. So within our assets also, we try to see how can we in the geographies that we are in be the last man standing or last person standing. And in the Indian context, we have the potential to be the last man standing in the world. And that's what we always aspire to.

I just add, Satyadeep, to what Naren articulated. The cost takeout in Tata Steel India started in 1995 and never stopped. All that we are saying is we are upping the game to make it more structural and make it more larger in size. And I think earlier Hitesh's question on Shikhar, Shikhar in different forms had started in 1995 onwards, never stopped. So I think we are just being cognizant of the fact that the uncertainties of the market needs us to step up the game. Whether it's unique or not, that is for others to say. But for our own sake, we need to do that. In Netherlands also, with the uncertainties in the market, the higher regulatory costs, CO2 costs in particular, it requires a structural change in the way Netherlands have seen in the past. So there also, while it had been efficient itself, But post the blast furnace 6, it's actually a Netherlands 2.0. So we're looking at a different cost structure, different way of delivering, making and delivering steel. And in UK, it's a completely structural change. And I think we just need to ensure that we have to be ready for 27-28. We cannot be ready in 27-28. We have to be ready much earlier. And I think we are pursuing the goal of ensuring that we, on an underlying basis, becomes EBITDA positive and on an underlying basis become sustaining from a cash flow point of view. So these are drivers, actually, which are pushing us to ensure that we relocate it in a very different context.

Yeah, no, fair enough. I get the point. I think for us, we analyze, we're trying to figure out if everybody is trying to be the last man standing. The challenge is one year down the line, you, everybody looks at costs, but EBITDA doesn't change. That's the fundamental reality sometimes in a commodity business.

So I want to add a little bit to that. One is the cost side, which we described, but the other side is on the revenue side. That's why the product mix is important. So like you said, cost, the opportunity is not infinite. It's finite. Whereas on the other side, you have a lot more you can do. And that's why, let's say, we say we look at the high-end markets, the approval-based markets. We look at the branded and distribution business. We look at downstream businesses, so on and so forth. So there is a lever on the revenue side to supplement the lever on the cost side. So both are important.

Just to put you on the spot, last question from my side. Just putting you on the spot, let's say one year down the line, everything remains the same. We are here one year down the line in May 26. Everything is the same. Prices are the same. Raw material prices, coal power. Should we be looking at 100 euro per ton, 100 dollars per ton EBITDA for Netherlands? Given the cost takeout, you're talking about 500 million, which is about 70 euro per ton. And the price savings you're talking about in first place. So everything remaining the same, you are saying we should be looking at 100 euro per tonne EBITDA for Netherlands in one year?

We are looking at more 70, 70, 80 euros per tonne is what we are saying. Netherlands, we will move towards. Eventually, yes, we should be aiming towards 100 around that level. But 70, 80 is what we have basically said we should be chasing. And in UK, all things remaining the same, just through the cost takeouts, et cetera, we should be EBITDA neutral or EBITDA positive, which honestly, if the steel prices had not dropped so much in the last few quarters, we would have already achieved that. So I think that is where we are. That's correct.

Thank you, Vishu. All the best.

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

Am I audible?

Yes. Yes.

Yeah. So a couple of questions. The first one is more of a bookkeeping question. If you could let us know the volume guidance at India and console level for FI2DX.

The volume guidance is roughly 1.5 million tons, additional deliveries. Pretty much all of it, most of it is in India because UK will be flat, Netherlands will be slightly higher. In India, basically we'll have about 2 million tons extra out of Kalinga Nagar, but we have a blast furnace, H blast furnace relining due in Jamshedpur. This year we had a G blast furnace relining. So net-net the volume increase guidance is 1.5 million tons.

And no additional volume from Lodhiana are inflicted in this category?

Not yet. We are hoping to commission the plant by the end of this financial year. But nothing material. I mean, you will see the volume impact next year. You will see the complete Kalinga Nagar volume impact next year. I mean, this year we will finish Kalinga Nagar at close to 7 million tons, 6.8 million tons of steel and 7.5 million tons of hot metal. And by next year, we will have a ramp-up because the steel milk shop will complete. I mean, the third caster and everything else will come by September. And next year, you will start seeing the additional volume coming out of Ludhiana as well.

Great. The second question, again, I will move to the flavor of the call, that is cost. So in terms of cost, again, Jamshedpur is one of the most efficient land possible. India operations, I would say, one of the most efficient, not only in India, but the world. So just wanted to understand the 4,000 crores that we have targeted for the year. First of all, I mean, is there any tangible scope to reduce the cost further? And if so, where, I mean, broad buckets, is it procurement? Is it supplier optimization? So just wanted to get my head around that. And considering that you achieved 4,000 crores, Going down further, as you said, it's a continuous process. Will there be further target for dump shaper or indoor operations to reduce cost?

So I think I'll let Kaushik give you more details. But at a broad level, this is not just Jamshilpur. This is India operation. When we say 4,000 crore, I think there's a lot which we are doing through, for instance, optimization of our contracts. Because we have multiple sites now. And each site used to have its own contracting, let's say, for maintenance, services, etc. So we're doing a lot of work on that. We're doing a lot of work on vendor development so that... We are not dependent more and more on proprietary items which can be sourced from elsewhere. So there are a lot of these kind of initiatives which will benefit all three sites, whether it's Kalinganagar, Miramandli, in fact, four sites, Nilachal and Jamshedpur. And there are smaller sites like Gamariya and Ludhiana, etc., which will come into play. So these benefits are from that. Jamshedpur will continue to benefit from the reduction in The wage bill, because most of the older workers are in Jamshedpur and when they retire, there is a benefit for Jamshedpur. But I'll let Kaushik give you more color on the cost. And all these are conversion costs. They are not linked to raw materials. You may change the blend of coal that you buy and get costs. But we are not, this 4,000 crores is not hoping that coal prices drop and things like that. It's more on the conversion side. Yeah, Kaushik.

Yeah, no, just to... I mean, give you a slightly additional flavor on this. So one, this 4,000 crores is based on multiple areas. So stores, repairs, maintenance, fixed costs. In fact, if you see, we have taken up 533 odd crores of exceptional charge, which is last quarter. We had about 1,100 people lost. leaving the company. So there is a people reduction cost. There is a store space repairing cost reduction. There is also the model in which how we procure is changed, as Naren mentioned in one of the answers. We're using a lot more digital and analytics to figure out which model works better in terms of procurement. We're doing a lot more With our vendors, we're doing a lot more with our OEM suppliers. So there is a multiple area and it is now across all sites. So it is in Kalinga Nagar, it is in Mehra Mandli, it is in Jamshedpur, it is across mines and collieries. So It's a full slew of it, and we are targeting that on a monthly basis in the way it's been drilled down, manages the program within the company. And I think that is, and this journey is unlikely to spend and kind of get over. What happens is the first year, which was the last year, we could deep dive in and get some which are very apparent. This year, we're going to work the pieces to ensure that we get to the next level. And as we go in, in the future, whatever is the opportunities, and there are also some which gives, which are investment led. So you take these low CapEx, high IRR or low payback period investments, which gives, you know, almost pays back in six months time, et cetera. Now there are time and opportunities when these come up, because when we have the multiple shutdowns, we can do those kinds of stuff. So, I think that is the theme in which we are working and we will continue to work these work streams going forward too. This is not just a one-year kind of a target. It is going to go through. We have now remodeled our improvement programs and the same happening in Netherlands also. We are also doing cross-learning between Netherlands and India, between India, Europe, UK, and Netherlands. So there are some areas where we are looking at vendors. We're looking at procurements. So it is a cross-functional, cross-site, and cross-entity now. And I think that's the way. It's a lot of hard work, but I think there is a big price to chase for.

Wonderful. Thank you so much and all the best.

Thank you, sir. The next question is from Ashish Jain of Macquarie. Ashish, please go ahead.

Hi, am I audible? Yes. Hi. So my first question is on, you know, infusion of two and a half billion dollars. So you gave some of the drivers of that infusion. But is this, should we think that this is the final number? Even Netherlands will hopefully become self-sufficient from a cash flow point of view. UK cash flows should improve. So from a three, five year perspective, this is the final support goes from India balance sheet to European operations. Yeah.

So do you have any other question or should I address this?

Yeah. I also had a question on cost, you know. So, you know, to ask the way I am thinking about it, if I look at our EBITDA for this year console, it is 25,000. Crores by and large, right? And if I look at the last two years, each year we have spoken about roughly six or thousand crores of cost saving. So should we think that if not for this cost savings, our EBITDA would have been like 12,000 crores? Is that the way to think? Like, is this cost really translating one-on-one in P&L cash flows as well? Or there's a slightly different way to, you know, think about the historical cost saving? And my last question is, you know, with 4,000 crores of saving in India, I mean, it translates to roughly, you know, 2,000 rupees EBITDA per ton. So, again, does it reset India base case or worst case EBITDA per ton? You know, assuming, you know, last year was the worst case EBITDA at like 12, 13,000 rupees is the worst case EBITDA. Is that the way one should think about it?

So if I look at reversing your order of the questions, first is if you look at the India, as Narin mentioned, and we have often said that in the down cycle, we've been more around 20 to 22 percent EBITDA margin. I think what we want, and in a medium cycle, we've been typically in 25 to 28, and in an up cycle, close to 38, 40%. The question that I would like to, your question is about whether it resets. I think we are looking at the cost side, not linking it to the revenue side because the revenue side will come because as our TSK ramps up, as our downstream facilities ramps up, our revenue per ton will increase even on a mid-cycle basis. But what we are looking at is, and often when we look at EBITDA, it often clouds our mind that, okay, we are good in 22% or 28%. It often takes away the fact that in the cost side, we need to drive it on an individual basis. And honestly, in the historical way, certain costs have increased because of different reasons. It is like when we acquired Bhushan, we had to take out. We have to do a lot more maintenance work compared to the plant that we took. It took a few years. Now we are in a different state. We are bringing in more digital and analytics. So our maintenance standards in Menomandli will be different compared to the past. So then when we are looking at procurement, we had non-standardized procurement because each site was doing it differently because each site needed it differently. Now we are saying now that we are in a steady state, we can look at standardization of procurement. We are looking at questioning that if spares are available in one of the other sites, then why are we not using it on a consolidated basis? Why do an indenting? So these are all practices. See, we have been a growing company. We've grown through acquisitions and we're growing organically. So when we have to settle on a rhythm, then it takes a bit of time. So it's no fault of anybody or no issues of not looking at it. There comes a time when you can look at it, when you reset the rhythm rather than reset only the cost structure. And that's exactly what we've been doing for the last 12 months. And this journey will continue. The rhythm will change because we'll continue to grow and INL will continue to become bigger, etc. So I think That is effectively how we are looking at the cost part of the game. And this is how we need to look at it. And we're using a lot more analytics to get this cost down. And this is helping us in a huge manner in recent times. And that's how I would look at answering your cost question. I don't know if Naren you want to add something.

You're on mute. I just want to add one more point. You know, maybe 8, 10 years back, we used to look at $600 as the all-weather steel price. Right. Okay. And 14,000 rupees as the all-weather EBITDA per ton. Okay. Today, that steel price is, if we cross 500, we are happy. Right. But we have not changed the 14,000 EBITDA. That's what we always chase. Right. So that comes only, so to go back to the earlier questions also, the average steel price at which we are expected to survive or do well or deliver 20% EBITDA has come down, right? And so that 20-22% EBITDA is being delivered, 14,000 rupees per ton is being delivered, though the steel price last three years at least has been dropping and today is... you know, between $450 and $500. You know, I'm talking about the hot roll coil price in Southeast Asia or whatever. So, you know, that's the range. So that's why we have to constantly look at costs because those prices are defined by who's willing to sell at what price. And particularly with China coming in in a big way since 2015, we have to contend with that. Kaushik, you can go back to the other question.

So going to your first question, which is on the 2.5 billion, I'm not repeating the part that I've done already. But to answer your question on forward looking, on Netherlands, actually the Netherlands will be very strong. soon be debt-free because they are on a net debt basis because they are generating now enough cash flows to, they had always historically been debt-free, but because of the BF6 issues and post, in fact, when they went into BF6, when we went into relining, we were sitting on 600-700 million euros of cash. But that was a very outlier year and it affected kind of went through next two years. Now, in the last six, eight months, we are in a much better position in spite of a very difficult market. So Netherlands, as far as its underlying conditions are concerned, it will be free of debt. It may have some working capital debt, but it will have its own cash, etc. We are not sending money for Netherlands at this point of time. When we sign up to the negotiations with the Dutch government, we will see how the financing actually stacks up. As far as UK is concerned, UK is where we have debt, which we want to take out through this infusion. There will be small debt. And when UK becomes on an underlying basis self-sustaining, hopefully we don't have to give any further debt. But as far as CapEx is concerned, we are committed to about 750 million. That has not started as yet in a meaningful way. That spend will happen in the future years. Over the next three years, rather. Other than that, we have overseas foreign currency bonds, which is in Singapore, which will also have to be repaid. Some of it is in next year and then 28, it finishes everything. So only for those specific requirements, which is anyway part of our Tata Steel obligation and Tata Steel consolidated debt. Those are the reasons why we will do that. Other than that, most important for you to actually take note of is the fact that what we are working towards is the underlying cash flows of overseas businesses do not require any funding support. That's our target. And that's where we're kind of close to it as far as Netherlands is concerned. In fact, Netherlands never needed the money. Even when they were not performing well, they had taken a short-term money, but they have actually repaid back to us. So the whole question is sorting the UK bit. When it becomes sustainable, we don't need to put in money. But the overseas debt, what we have, whatever we have other than Netherlands, we will insure it, especially in Singapore, which is a tariff steel foreign currency debt.

Kaushik, just one clarification. So this $2.5 billion debt, will be incremental investment from India or some of it is already there and in form of debt or something and will be converted to equity?

No, it will be incremental. It will be refinanced, basically.

Parshya, if I can just interrupt you. Maybe you want to explain that, you know, because the money is going as equity, I think people are interpreting it as equity.

Investment. Yeah, it's not an equity investment. I said that in the beginning, that it is not an equity investment. It's actually a rebalancing of debt. We are not making new money in for new investments or new assets or even for any other purposes. This is essentially putting in money to take that debt out and putting it under the India balance sheet.

Okay, I understand. But from India's standalone balance sheet point of view, it is further money investment in the Singapore entity. Yeah, that's all.

That's how you have to account for it anyways.

Yes, yes. Got it. Thank you so much. Thanks.

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.

Thank you, Kinshuk. So, Naren, the first question I think is for you. There are some questions in terms of the impact of the recent tariffs, both in China and U.S., on steel markets in general, and whether we are seeing any benefits of the safeguard duty. So is that reflected fully in the guidance you gave for NRs for next quarter, or do you see more of that? So a little bit on that. Sure.

So I think the guidance that I gave is as things stand today based on the safeguard duty, which is already there in India and what we've experienced so far in this quarter and what we think we'll experience in the next six weeks. The U.S., China at a broader level helps because it tempers down the market and the concerns of volatility, the inflationary pressures, etc. Also, what does the high tariffs do to the Chinese economy, etc., etc.? So if the U.S. and China can come to some understanding and trade flows both ways, I think, and the Chinese economy is not hit more than required, then I think we are in a better place because obviously, you know, China needs to, take care of the construction industry if it has to make a positive difference to steel. And if they are distracted by many other issues, then that's a challenge. So we are a bit concerned about the 10 million tons of exports which continues out of China in March and April that happened. And we are expecting that that number should come down. And I think if the U.S. and China reach a deal on tariffs, we have a better chance of that number coming down. But the good thing of China, not good thing, I would say one of the reasons why this kind of volume has happened without much coming into India is also because a lot of Chinese exports are now going to Middle East and Africa. which are not markets pulling in a lot of steel earlier. So that is reducing some pressure on Southeast Asia and India as far as Chinese exports are concerned. As far as U.S. tariffs are concerned, in U.K., U.S., the understanding will help us. We sell about 70,000, 80,000 tons of steel from U.K. to the U.S. We sell about 700,000 tons of steel from Netherlands to the U.S., that will depend on the EU-US trade deal whenever that happens. But some of the steels that we send from Netherlands to US is not made in the US. So we are able to pass on some of the tariff impact to our customers because they need to import because they can't buy locally. So that's the situation as it is. And we hope that the EU and US will also come to a deal soon. The again, medium, longer term impact in the EU is we are seeing that the EU is looking a bit more at investing in domestically to build industry, build defense industry, build infrastructure, which is in the medium to longer term more positive for the state industry.

Thank you. The next question is actually more about Tara Discon specifically. So just for all the audience, we don't give guidance on specific realizations for any particular product category. So we're not going to be commenting on that. But I think the question which people are asking is in the individual house builder segment, there has been a lot of traction over the last few years, as you have explained. Can you give us some sense of the industry dynamics here and Tara Tiscon's positioning and realizations? Like I said, we will not comment on realizations, but maybe you could just give a broad sense of the dynamics. Sure.

You know, so Tarantuscon has just celebrated 25 years, okay, since its launch, because we had identified this as a segment where people are willing to pay a premium to reduce the risk of purchase, right? It's an individual who's buying three tons, four tons of steel to build a house. In semi-urban and rural India, people build homes rather than buy homes. And that person who, and it's a very personal journey, people are putting their life's investments, so they are involved in the process of building the house. And we saw an opportunity to tell them that they should be careful of what steel they buy and they can trust us. It has worked well. Today, it's 200,000 tons a month business. It started as a 6,000 tons a year business, right? And generally, you know, the same steel sold to a large construction company is about 5,000, 6,000 rupees per ton less, right? Because the large company will just go by the test certificate and you know, not really pay you much of a premium for the product. They'll pay you a premium for the service. So it's been a good story. We have a network of about 80 or 90 distributors. We are pretty much covering all the districts in India and, We have, I think, about 5,000, 6,000 dealers. We have Asiana now. We are doing about 3,500 crores of GMV through Asiana. 90% of it is data discount. People are ordering data discount from the U.S., from Canada, from Middle East. And we deliver within 48 hours to 72 hours to any location in India. So we're getting a lot of orders from overseas for delivery in India of this product. So we are still only 14% market share in the retail business. It's a very fragmented business. We have been limited by our supply. And but acquiring Nilachal has given us another million tons. So we are also looking at how can we keep expanding this business. We are also looking at different operating models because this is really taken off well now. Last two years, we've grown at double digits. Once the Ludhiana plant comes, we'll get another million tons. All of that will be sold at a starter discount. The model in Ludhiana is also that we will sell pretty much all the steel within 200 or 300 kilometers of Ludhiana so that we don't spend 3,000 rupees moving Tata Discon from Jamshedpur to Ludhiana. We save on that transportation cost and collect the scrap in that neighborhood and sell steel in that neighborhood. And if the model works, we will set up similar plants in other parts of India where there is scrap. So it's a good business for us. It's a 10,000 crore brand. and growing at 20%. Thank you.

The next question again, and I'm just reminding our audience again that we do not give guidance on specific product categories or specific sites. But the question here, again, you might like to take it is on long products versus flat products. And the question is on margins and realizations. But I think broader dynamics, how do they change or how are they different between long products and flat products? And I think the idea is to try and see which is more profitable.

So it goes through, again, cycles. Traditionally, flat products tends to fetch you higher prices and, you know. you have segments like automotive, oil and gas, which is a little bit more approval-based businesses, right? So bigger steel companies tend to gravitate towards flat products. But the flip side is flat products is higher fixed cost business. So in a down cycle, you know, people are just trying to cover variable costs and contribute to fixed. So that's one thing. The second big shift which has happened in flat products globally is When China used to export a lot of steel 10, 15 years back, it used to be mainly long products. Today, it is all flat products because the Chinese steel industry has also switched a lot from long to flat. And flat travels better than long. So you see hot roll coils going all over the world. Rebars don't travel so much or wire rods maybe a little bit more. So that dynamic is changing. But longs, if you look at India as largely a local business, and 50% of the long product supply is from the secondary sector, whose cost structures are different, their drivers, of course, are different. So if you've seen the last two, three years, when thermal coal prices were much lower, you know, the coking coal to thermal coal ratio was almost 1 is to, thermal coal to coking coal was 1 is to 3, you saw that the secondary producers were more competitive. But as that has narrowed, the primary producers have become more competitive. So it becomes, it's a changing dynamic. Just now the long product prices are higher. in India than the flat product prices on a commercial grade basis, simply because of the fact that most of the 100 million tons of steel which China is exporting as flat products and has depressed international prices for flat. So all the flat products is being sold in India, which is being produced in India and hence has depressed the flat product prices. So just now, if you look at it from a return on invested capital point of view, I would assume longs will be better because you can set up a long product plant for less money. And if you're getting better EBITDAs for that, then you are better off. But over the long term, bigger companies tend to gravitate towards flat products.

Thank you. Another question, which is, I think, slightly more long term in nature. Do we see India risking or becoming an overcapacity steel market in the next five, six years, given the expansion plans which everybody has announced?

Honestly, I don't think so because it's not easy to build steel plants in India. It takes time. I mean, this is assuming if you have land, if you are going to start a greenfield site, it takes even longer time. So India will never be able to build a capacity as fast as China did. China in its peak was building 50 million tons of capacity a year. India does not have the capacity to build that capacity, you know, because our processes take much longer. The approval processes, acquiring land, the public hearing, everything takes much longer. And then the ability to build the plants is also limited. So I think if India continues at a GDP growth of 6, 7, 8 percent, and as a developing economy focusing on infrastructure, steel consumption grows at a higher rate than that 8, 9, 10 percent, I think India will struggle to build 15, 20 million tons of capacity every year, forget 50 million tons. So I do believe that we will have a better balance. So India will never be a big threat in the international markets as a big exporter like China is, because I think whatever capacity we build in India will be just about enough for India.

Thank you. One question which is more, I think, which we typically answered in terms of guidance, but we haven't so far. This is our guidance for cooking coal and iron ore consumption for first quarter. Sure.

So, coking coal, we are guiding that it will be about $10 lower on a consumption basis. Though the coking coal prices have gone up in the last few weeks, but on a consumption basis, it will be $10 better, both in Europe and India. Iron ore is relevant only for Europe, not only, it's only relevant for Netherlands, because we've shut the blast furnaces in UK. Iron ore is expected to be about $10 higher in Netherlands consumption.

Thank you. Now, there are a bunch of questions on the BPSL guidance or, you know, I would say the developments which have happened around the BPSL judgment. The first question is, I think, whether the Tata Steel Bhushan resolution plan is at risk, you know, of the same risks. And are there any what what are the differences? And, you know, do we run the same risks?

No, so there is no litigation on this matter as far as Bhushan is concerned. We've gone through two rounds. First from the acquisition, we've done this as guided by the COC within the timeline of the IBC. And subsequently, we have also gone through the full process on merging the business within Tata Steel. So there is nothing on a similar basis.

Thank you. And I think the second question is, if this asset comes up again on the block, would Tata Steel be interested in acquiring it?

We would rather not answer that question because it's related to a different company and it's not fair to answer that question.

Thank you. There are a couple of questions which are more on the balance sheet side. So is there, you know, what are our deleveraging targets or is there a plan to deleverage for the next year?

So I think we've always said that our target remains to continue our deleveraging while putting money into growth projects. If you look at it from September 24, with the peak of the downturn, we were at about 88,000 consolidated net debt. From there, we are at about 82,570 is where we closed. So we've taken out more than 6,000 crores of debt across entities and geographies in the last six months. We will continue to look at this kind of pathway going into future. And we want to just ensure that the, in fact, somebody asked the question, why certainly the cost initiatives? Well, this is one part of also using the cash flows for deleveraging. Thank you.

And there's a question on why our interest costs have gone up. I would just like to remind the audience that we've gone through an era of global interest rates actually going up by almost 400 basis points. But I think there's a broader question in terms of our interest costs and what is the direction for them?

So the next net finance cost for FI24 was 6,700 crores, and the net finance cost for 25 is 6,300 crores. So I didn't see any increase as far as interest is concerned. But there is one point that I would like to say, that when we are doing more and more onshoring, you would find that the headline cost increasing, but the effective post-tax cost going down. So it may not show in the P&L, but effectively from a net post-tax basis, because we pay marginal tax, that will be lower.

Thank you. I think there are still lots of people lined up for the audio questions. We'll maybe just take a couple. Back to you, Kinshuk.

Thank you, ma'am. For the next set of audio questions, first we have Amit Murarka from Access Capital. Amit, please go ahead.

Yeah, hi. Thanks for the opportunity. I just wanted to kind of get a sense now on expansion plans. I believe F526K fix is guided at 15,000 crore, which I understand doesn't include any planned new expansion projects in India. So where do we stand on the NIL and KPO3 and such expansions, particularly in the context of 35 to 40 million ton capacity target we are given for F530? Yeah.

So the CAPEX here, yes, is largely focused on raw materials, is focused on Kalinganagar completion. It includes the Ludhiana plant, which is 1.8 million, but we hope to push it to 1 million. So if you look at it from a growth point of view, that is the one which is there for next year after Kalinganagar this year. We have some downstream expansions. We have a combi mill, half a million ton combi mill, which will convert some of the billets that we are making in the Urstoy-Ushamartin facility into special bars for the automotive industry. So that's another thing. In terms of the major expansion projects, the next one which will go to our board is the Nilachal one. We have already gone through the public hearing. Now, the way we look at expansion projects is we go to the board only after we get all the regulatory approvals. Earlier, it used to be the other way around. You get the board approval and then get the regulatory approvals. So which used to bring a lot more uncertainty into the schedules. Whereas we've already done the public hearing and have applied for an environment clearance of going up to 9.5 million for Nilachal. So that will be first on the thing. We are then working on the Kalinganagar next phase as well as a Bhushan expansion from five to six and a half. So these are the two projects which will follow the Nilachal one. But the one which is most ready is the Nilachal one, which during this year we will go to the board.

I should. And so is it fair to say that probably it looks more like 30 million done than by FY30 rather than the earlier number of 35 to 40 that we were expecting?

So what we expect to have by FY30 is all these projects at different stages. Hopefully we start the Nilachal project now that will at least the first phase will finish and we can start the other two which will be at different degrees of finishing in FY30, FY31. Yeah. We will not have completed capacity by FY30.

If I can add, Naren, fundamentally when we look at what we used to do earlier is to announce projects, then do the design engineering and the regulatory approval and then do the project construction. I think when we will announce projects now, we will be ready to start construction. So there is a different phasing that we have done. We have tweaked it to make it more certain and make it more focused on the completion timeline. So the preparatory work post-announcement is being changed to pre-announcement and then working straight away into the execution stage.

Thank you, sir. The next question is from Sumangal Renvatia of Kotak Securities. Sumangal, I request you to please go ahead and ask your question.

Yeah, thanks for the chance. First question is on the Europe operations. Is it possible to share and explain what is the impact of reduction in Kabul allowances in FY26 and what would be the likely cost impact of that?

So as far as, sorry, Naren, you want to take it? No, no, go ahead, go ahead. So you talked about the reduction in carbon free allowances. That's right, yeah. Yeah, so as far as UK is concerned, it's now zero. There is no impact of CO2 on UK. There is a certain amount of free allowances UK will get. And that is good enough for the downstream entities to compensate for it. So, in fact, what we see today is from FY25-26, there will be no impact of CO2 as far as UK is concerned till the start of 27-28 when the next phase of COVID the EAF starts and that will be of a different nature. As far as Netherlands is concerned, there is a deficit that happened till last year. It will gradually converge, but there is an increased cost on account of carbon and that is happening because of the fact that the allowances are reducing and there is also a CO2 levy that is being coming in as far as Netherlands is concerned. So it is close to about 80 million euros a year.

But Kaushik, this carbon allowances will reduce along with CBAM, right?

Yes, next year onwards, what happens is that on a longer term or a medium term, once the CBAM comes, it will neutralize the cost because arithmetically, the cost of the steel prices will reflect the CBAM, which will cover up for the cost of the carbon.

Understood. I have one question on the entire cost-saving topic. So how is it expected to phase in FY26? Is it more of a gradual thing or back-ended? And as Naren mentioned, 70-80 euro for Europe. Given the 4,000 crore number for India, keeping the spreads aside, can we expect 1,500 to 2,000 rupees increase in the EBITDA on a portent basis?

So I think first of all, as far as Netherlands is concerned, that project has just kicked off. As I mentioned in my commentary that one of the important part of that is also the productivity gains. The productivity gains involves a process of consultation with the works council, etc. So that the Netherlands part, while some part has been realized and many of the non-productivity gains Our work streams are moving forward. It is more a second quarter plus onwards, but it is not so secular because it is something that will happen more around the Q3, Q4 levels. As far as India is concerned, we started this project last year. And as I said that we've taken out 1800 crores of cost plus 900 crores on coal optimization. That is a lot more secular in India. But it is more towards from June onwards, June after June onwards, we should see the results in the papers, in the financial statements. And to your question, I think your last question was whether you can see the improvement on a pertinent basis. The answer is yes. CETR is parables. Everything else remains the same.

Yeah, and just one last clarification. Given that today, I mean, there's a continuous pressure on Chinese steel prices. Our calculations are suggesting our domestic prices at 2000, 3000 rupees premium. So are we sensing a similar peakish kind of steel prices and some pressure going forward? I understand 3000 rupees is what we are expecting in 1Q. But on spot basis, what are your thoughts?

So obviously, this gap is there now because Chinese prices again dropped. It's been fluctuating, like I said, in a $50 range. But imports are still not coming in in a big way yet because people are concerned about the dollar. The dollar has been also all over the place. And also the risk in a You know, you buy a book today and it comes in after two, three months. You don't know the price. Then you have a monsoon season coming. Do you want import cargo coming in during monsoons? So I expect things to be, you know, I don't see imports flooding in just yet. And of course, you know, when we went to the government with the safeguard request, the original request from the Indian Steel Association was 25 percent. The government said 12 because it wanted to keep all other stakeholders' interests in mind. But this is something if we again see a flood of Chinese imports, we will certainly go back to the government and see what can be done. Because the private sector investment in India in some sense is being led by the steel industry. So you saw that we are saying 15,000 crore capex. Up here they're also putting in big capex. So the industry needs to be financially healthy to be able to put in this kind of money in new capacities. And I think that's a submission to the government.

Got it. Thank you and all the best. Thank you.

Thank you, sir. That was the last question for today. I would now like to hand the conference back to Ms. Samitasha for closing comments. Over to you, ma'am.

Thank you, Kanchuk. Thank you, everyone, for your participation and your questions. We hope we were able to address your queries. Look forward to connecting again next quarter. Thank you.

Thank you.

Thank you.