Tata Steel to Invest $2.11 Billion in Major Debt Reduction and UK Transition Plan

Tata Steel announced on Wednesday that it plans to invest $2.11 billion in its Singapore unit, T Steel Holdings Pte Ltd, over the next financial year to help repay debt and support the transition of its UK operations. Additionally, Tata Steel will convert $565 million of existing debt to T Steel into equity shares.

Financial Performance

For the quarter ending March 31, Tata Steel reported a 65% year-on-year drop in consolidated profit to ₹554 crore, falling short of analysts’ expectations of ₹890 crore.

European Challenges

The decline was partly due to losses from its European units, which recorded a combined EBITDA loss of nearly ₹650 crore. EBITDA refers to earnings before interest, tax, depreciation, and amortization. Tata Steel’s Dutch unit faced production cuts due to relining a blast furnace, while the UK unit struggled with high structural costs, including energy prices.

Revenue and Sales

The company’s consolidated revenue for the fourth quarter was ₹58,687 crore, down 7% from the same period last year, although analysts had predicted ₹58,375 crore. While sales volumes fell in Europe, they improved in India, where Tata Steel sold 5.42 million tonnes of steel, up from 5.15 million tonnes last year.

India’s Strong Performance

Tata Steel’s managing director, T.V. Narendran, highlighted the company’s progress despite challenging conditions. In India, which is seen as a strong market, the company delivered better margins and increased its footprint in terms of volume and product range. The company recorded its best-ever sales in India during FY24 at around 19 million tonnes, a 9% increase year-on-year.

Rising Debt

Tata Steel’s net debt rose to ₹77,550 crore as of March 31, up from ₹67,810 crore a year earlier, with the net debt to EBITDA ratio worsening from 2.07 to 3.31. The company’s debt has been rising since the end of FY22, following a period of debt reduction. Tata Steel aims to keep its debt to less than 2.5 times its EBITDA.

Capital Expenditure and Dividend

The company reported capital expenditure of ₹4,850 crore for the fourth quarter and ₹18,207 crore for the full year, a 29% increase year-on-year. Tata Steel declared a dividend of ₹3.6 per share, with a record date of June 21.

Stock Performance

Shares of Tata Steel closed 0.37% lower at ₹174.2 each on the BSE on Wednesday. Despite the drop, the stock has gained nearly 25% since the start of the year, outperforming JSW Steel Ltd but trailing Jindal Steel and Power Ltd.