Tata Steel Ltd Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Satyadeep Jain - Ambit Capital Pvt Ltd - Analyst : Yes. Just wanted to start off with UK. Koushik, you mentioned, we're looking at a reduction in fixed cost of $1,000 per tonne in the coming quarters. Can you maybe give some clarity or insight into 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.

Question: Satyadeep Jain - Ambit Capital Pvt Ltd - Analyst : Okay. Second question would be on cash flows. So we've seen significant buildup in debt -- working capital in the last 6 months. Net debt has increased almost INR10,000 crores. Just wanted to understand, when you look at working capital buildup in UK, I would assume that it's the other entities within Tata Steel that are giving raw materials. So why is working capital at the consol level going up because of inventory buildup in UK? And also, when you look at how much inventory has been built up in UK, now what kind of working capital release can we see? And also tied to debt and cash flow would be when do you start incurring CapEx on Netherlands decarbonization. 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?

Question: Satyadeep Jain - Ambit Capital Pvt Ltd - Analyst : Just want to get summary. 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? What could be potential deleveraging? Or is that something in the minds of -- is further deleveraging possible from here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 6:30AM, TISC.NS - Q2 2025 Tata Steel Ltd Earnings Call

Question: Sumangal Nevatia - Kotak Securities (Institutional Equities) - Analyst : Sir, my first question is on UK. Now we are saying that the cost takeout 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 INR1,000 crores, INR1,500-odd crores to continue with a declining trend? Maybe if you can add some more color for the next 2, three quarters? That's my first question.

Question: Sumangal Nevatia - Kotak Securities (Institutional Equities) - Analyst : Okay. And Koushik, 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? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 6:30AM, TISC.NS - Q2 2025 Tata Steel Ltd Earnings Call

Question: Sumangal Nevatia - Kotak Securities (Institutional Equities) - Analyst : Sir, at the current market situation.

Question: Sumangal Nevatia - Kotak Securities (Institutional Equities) - Analyst : Okay. Understood. Next question is on Netherlands. Now that our plant is stabilized, how do we see the spreads or, say, EBITDA per tonne shaping up in the 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?

Question: Sumangal Nevatia - Kotak Securities (Institutional Equities) - Analyst : Got it. 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 expansion. So don't we think we are slower than desired in taking up growth projects in India? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 6:30AM, TISC.NS - Q2 2025 Tata Steel Ltd Earnings Call

Question: Amit Dixit - ICICI Securities Limited - Analyst : 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, I mean, the USD-INRmovement 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.

Question: Amit Dixit - ICICI Securities Limited - Analyst : Okay. Understood. The second point is on KPO 2. 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?

Question: Amit Dixit - ICICI Securities Limited - Analyst : Okay. One more, if I can squeeze in. You mentioned that in stand-alone statements, the operating cost benefit -- sorry, other operating cost benefit was to the extent of INR2,000 per tonne. 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?

Question: Ritesh Shah - Investec Bank (UK) Plc - Analyst : A couple of questions. First, for Narendran sir. So 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?

Question: Ritesh Shah - Investec Bank (UK) Plc - Analyst : That's quite useful. My second question was for Koushik. Sir, you indicated FY26, the focus will be higher production, lower CapEx. And you also indicated that we will strive for a $1 billion target. Probably to my understanding, it would be back in FY27. Is it possible you give some guidance for FY26 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 are looking at it?

Question: Ritesh Shah - Investec Bank (UK) Plc - Analyst : Sure. And the last question, you indicated for Tata Steel Netherlands, we don't see any CapEx coming for next 6 to 12 months. I'm just trying to understand --

Question: Ritesh Shah - Investec Bank (UK) Plc - Analyst : 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 coking gas plant two by 2030. So we had specifically indicated a time line over here. And now when we say that we don't see any CapEx coming for, say, next 12 months, what is it that has changed from a regulatory standpoint? How should we look at it?

Question: Ritesh Shah - Investec Bank (UK) Plc - Analyst : Sure. If I can just squeeze one. I presume, I think you will indicate that we have not finalized the configuration for Tata Steel Netherlands. But hypothetically, if we had to go for, say, only an EAF 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 Steel Netherland? I'm just trying to understand what can be the potential CapEx outgo pertaining to decarbonization over here?

Question: Ritesh Shah - Investec Bank (UK) Plc - Analyst : CapEx intensity indicative, if possible?

Question: Kirtan Mehta - BOB Capital Markets Ltd. - Analyst : In terms of the India operations, we have started generating a very significant sort of the EBITDA margin in the range of INR12,000 to INR15,000 per tonne. And this is coming because of our advantage of the iron ore security, value-added products, retail presence -- improving retail presence. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 6:30AM, TISC.NS - Q2 2025 Tata Steel Ltd Earnings Call 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.

Question: Kirtan Mehta - BOB Capital Markets Ltd. - Analyst : 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 on 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?

Question: Kirtan Mehta - BOB Capital Markets Ltd. - Analyst : And what would be the full potential of CRM facility in terms of the EBITDA generation?

Question: Amit Murarka - Axis Capital Limited - Analyst : Actually, my first question is on the guidances that you usually provide for the next quarter. Maybe I missed it if you've already given, like what's the guidance on coking coal cost and also the realization?

Question: Amit Murarka - Axis Capital Limited - Analyst : Sure. I got it. That's helpful. 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? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 6:30AM, TISC.NS - Q2 2025 Tata Steel Ltd Earnings Call

Question: Amit Murarka - Axis Capital Limited - Analyst : Yes. And in Q2, I mean, your other expenses seem to have dropped, even though volume is similar. So at least if you could just help understand that, maybe even later is okay.

Question: Amit Murarka - Axis Capital Limited - Analyst : Sure. And on the cash outflow for the TSUK restructuring as of now, like you are -- I mean, any guidance that you can provide for H2?

Question: Amit Murarka - Axis Capital Limited - Analyst : Koushik, just to first confirm this number. So the GBP150 million redundancy related is what we are currently factoring as a cash outlay in the next two to three quarters in UK?

Question: Amit Murarka - Axis Capital Limited - Analyst : Is that like high visibility for that? Or do we think there would be like meaningful upside risk to this number?

Question: Amit Murarka - Axis Capital Limited - Analyst : Right. Secondly, based upon the numbers you spoke about in terms of KPO cash outlay for the CapEx. So let's say, roughly $900 million is pending for KPO, 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 two, three years and all? Or there could be new projects which we could take up in that time frame itself?

Question: Amit Murarka - Axis Capital Limited - Analyst : Got it. My last question, the comments which Narendran sir made earlier that KPO cost would come down by INR4,000 to INR5,000 once it is fully ramped up. And if I also factor the commissioning of pellet plant, the product mix which will improve with everything ramp-up, should we think that India business EBITDA per tonne can improve easily by INR1,500-odd purely on the back of this INR1,500 to INR2,000 in the next, say, 24 months or so? Or that's very aggressive?

Question: Amit Murarka - Axis Capital Limited - Analyst : I'm not looking for a guidance. I mean, I know the dynamic business nature. But I'm just saying about INR3,000 to INR4,000 on let's say 8 million tonne capacity, which is 30% of India capacity, that itself is like roughly INR1,200, INR1,300, just from that simple math. Then pellet plant, product mix improvement. If I put all that together, INR1,500 looks a fair safe assumption. That's the reason I just want to confirm this.

Question: Amit Murarka - Axis Capital Limited - Analyst : Okay. Okay. Got it. That's helpful. And Koushik, that clarification on other expenses, actually, even I was looking for that. I think you referred to some one-off in 1Q in India business, at least I thought so. So maybe --

Question: Indrajit Agarwal - CLSA - Analyst : 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?

Question: Indrajit Agarwal - CLSA - Analyst : So from the troughs of say, August, September, have we taken any price increase so far?