Tata Steel has earmarked a capital expenditure of Rs 16,000 crore for FY24 and intends to reduce debt by $1 billion during the year, even as its European operations are likely to post negative Ebitda in Q1. The Tata group company is optimistic about the current fiscal, with the company seeing improvements from Q2 onwards.
Of the total capex outlay, Rs 12,000 crore would be earmarked for Indian operations of Tata Steel and its subsidiaries, and about Rs 4,000 crore for Europe. Of which, Rs 3,000 crore would be set aside for the Netherlands and the remaining for the UK, TV Narendran, CEO & MD , Tata Steel, told FE in an interaction.
In India, about Rs 7,000 crore would be used for expansion of its Kalinganagar facility and Rs 2,000 crore for its subsidiaries, while balance would be used for raw materials (including mining), sustenance capital and ancillary pipeline among others.
“The capex in the Netherlands would be used for relining of the blast furnace. We have enough internal generations for capex,” he said. Tata Steel’s total capex for FY23 stood at Rs 14,000 crore.
Tata Steel, which had planned for a debt reduction of about $1 billion, will “stick by its plans” for this year too, he added.
On the company’s talks with the UK government on ‘green steel’ package, he said that the offer on the table was not even close to Tata Steel’s expectations.
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“We are still in discussions because unless we get what we have asked for, it really doesn’t make any sense. We have not reached any conclusion. The clock is ticking as some of the assets will see end of their life in the next 12-24 months. At some point, we will have to shut it down because it won’t be safe to run them,” he added.
“Status quo is not an option. We have to take a call in the next 12-24 months,” he added.
For the fourth quarter ended March 31, Tata Steel posted an 84.07% fall in consolidated net profit at Rs 1,566.24 crore, compared with a net profit of Rs 9,835.12 crore a year ago.
“There were multiple challenges we have had to deal with in the last 12 months. In India, we had the export duty, which hurt us in Q2 and Q3. And because of the Ukraine war, coal prices shot up to $650 in March last year, which impacted steel prices. In Europe, electricity and gas prices went up 4-5 times, and demand got compressed because of the war and inflation, among others,” he said.
However, the comparison to Q1 of last year is “unfair” as it recorded the highest-ever quarterly profit in Tata Steel’s history, he added.
With the company operating with only one blast furnace, not able to take full advantage of the lower energy prices and a slow improvement in demand would result in the firm posting negative Ebitda in Europe in Q1 too.
The forecast for FY24 is that it will be better than last year, with improvements expected from the second quarter, he added.
