Tata Steel 10-mln-tn capacity add to be domestic, says Chandrasekaran

28 Jun 2022

Tata Steel Ltd’s targeted expansion of annual steel capacity by 10 mln tn will take place over a long period and it will all be within the country, its chairman, N Chandrasekaran, told shareholders in the company’s annual general meeting today.

The expansion will raise the domestic annual steel capacity to around 30 mln tn from 20 mln tn, he said.

The company was currently focused on increasing annual capacity in Kalinganagar to 8 mln tn from 3 mln tn, according to its annual report for 2021-22 (Apr-Mar).

Its capital expenditure in last financial year was 62.9 bln rupees primarily on account of the expansion project in Kalinganagar.

Tata Steel had recently acquired Neelachal Ispat Nigam whose site was in proximity to the company’s Kalinganagar site. Chandrasekaran told shareholders that the company “will endeavour to ramp up the operations of NINL (Neelachal Ispat Nigam) to its rated capacity of 1.1 million ton per annum within the next 1 year, subject to obtaining statutory clearances.”

There were no plans to increase steel capacity in its facilities in Europe and UK, he said.

In October last year, Tata Steel had spun off its UK and Netherlands operations into two independent subsidiaries “pursuing separate strategic paths”, according to its annual report.

Addressing shareholder queries on how soon the company intends to have zero net debt, Chandrasekaran said the company’s intent was not to take the net debt levels to zero as that would make its capital allocation inefficient.

He said Tata Steel was comfortable with the current capital allocation policy goal of bringing down debt by $1 bln (nearly 79 bln rupees) every year. At the end of 2021-22, the company’s consolidated net debt was 510.5 bln rupees, down from 753.9 bln rupees a year ago.

Responding to shareholder questions on the trend in price of steel in Apr-Jun quarter, so far, for the company, Chandrasekaran said there was a downward correction of 15%.

Lower steel prices will translate into reduced revenues for Tata Steel.

“But there is also a correction in coking coal price to the extent of 30-35%,” he said. Coking coal makes up for 40% of Tata Steel’s production costs and the company imports 80% of its coal requirement.

The fall in coal prices will cancel out the impact of fall in steel price on the operating margin, according to Chandrasekaran.

In response to a shareholder’s query on speculation that Tata Steel has been importing coal from Russia, Chandrasekaran said that it was not the case and that the company was importing coal only from Australia “at this point in time”.