Tata Steel

Tata Steel delivered a strong performance in FY26, with consolidated EBITDA increasing by 35% YoY to ₹34,848 crores. The consolidated EBITDA margin expanded by 320 bps, reaching ~15%. This improvement was significantly driven by a cost transformation program that achieved ₹10,868 crores in savings across all geographies. Operating cashflows before capex and dividend rose from ₹17,700 crores in FY25 to ₹29,254 crores in FY26, resulting in robust free cash flows of ₹10,738 crores.

India remains the key anchor of Tata Steel's growth strategy, contributing approximately 74% of total crude steel production. Annual crude steel production and deliveries in India increased by 8% YoY to around 23 million tons in FY26. The company successfully ramped up its 5 MTPA expansion at Kalinganagar and commissioned downstream facilities. The strategy emphasizes value-led growth, focusing on attractive segments like automotive and special products, and aims to increase downstream businesses to 50-60% of total volume.

In the UK, annual deliveries were ~2.2 million tons, with losses narrowing to £217 million in FY26. New safeguard measures are expected to support market recovery. Netherlands liquid steel production was ~6.7 million tons, and EBITDA almost tripled to €267 million. However, the Netherlands operations face material uncertainty due to potential permit revocation for Coke and Gas Plants, and the UK EAF commissioning is delayed by 6-8 months due to electrical infrastructure issues.

Consolidated capex for FY26 was ₹14,000 crores, with plans to increase to ~₹20,000 crores in FY27, with over 60% allocated to India. Gross debt stood at ~₹92,382 crores and net debt at ~₹80,100 crores. The company prepaid ~₹9,100 crores of debt from internal cash during the year and reduced overseas debt from 50% in FY21 to 18% in FY26. The Net Debt to EBITDA ratio improved to 2.3x from 3.3x two years prior.

Tata Steel is committed to strengthening its entire value chain, including logistics. TMILL, a port operations and shipping logistics company, now generates 80% of its revenue from ground and rail movement and plans to double its capacity. The company is also consolidating its operations by buying out JV partners, as evidenced by the Board's approval to merge NINL with Tata Steel Limited and the acquisition of Colors. This strategy aims to enhance competitiveness and control across the value chain.

India's steel demand is projected to remain strong, primarily driven by infrastructure-led growth. While previous expectations were for 8-10% growth, potential recalibration of GDP growth might lead to a slightly lower steel demand growth. The automotive and special products segments continue to perform strongly. However, the construction sector and MSMEs have experienced some slowdown, partly due to elections and labor movement, and pressure on the value chain.

The Hisarna project is considered crucial for the future, enabling the use of lower-quality iron ore and coal without traditional coke ovens or sinter plants. The pilot plant in the Netherlands is performing well, and Nucor is interested in collaborating on a commercial-scale plant in India. This initiative is expected to be a game-changer for raw material optionality. The company will continue to prudently participate in iron ore auctions and explore imports and its own leases post-2030 to secure raw material supply.

For 1QFY27, realizations are expected to increase significantly: India by ~₹6,000/t, UK by ~£80/t, and Netherlands by ~€80/t compared to 4QFY26. However, coal consumption costs are also projected to rise by ~$15/t in India and ~$10/t in Netherlands, with Netherlands iron ore costs increasing by ~$5/t. Overall, margin expansion is anticipated in India and the UK, while Netherlands may see some compression due to production loss from the temporary plant suspension.