The strong growth of Tata Steel in India has always been interrupted by the resistance of its European activities. The company is now positioned to improve profitability from Europe and India through a cost-out program of £ 11,500 crore. The transition to the production of green steel in the UK in the next three years offers a strong upward optionality for the UK and even the Netherlands where discussions are underway. The capacity expansion in India is underway and the recently announced import duties will arrest the fall in steel prices.
The share is trading with a 15 percent discount on peers at 7.8 times FY26 EV/EBITDA, but is still a premium of 18 percent to its historical levels. Given the growth and upward optionality tempered by premium valuations, we recommend collecting investors on the shares on Dips. The stock trading at Stalen Upcycle valuations can not allow any margin for errors and investors can accumulate at 15 percent lower prices if market corrections offer opportunities to praise in safety. The recent announcement of Trump of 50 percent rate about steel should not affect the British activities that fall under the US-OK Trade Agreement. But the Netherlands has a significant exposure to the US, which means that the US trade agreement must be resolved. The company can pass on the costs to American importers and offers a lever to manage the impact. Tata Steel India has minimal exposure to American markets.
The company has reported a turnover and pat CAGR of -5 percent and -37 percent between FY23 and FY25, due to losses in Europe and lower steel prices. The company is ready for a change with a lower headwind of the two factors.
Cost reduction
The cost registration is spread over India (£ 4,000 crore), the UK (£ 3,000 crore) and the Netherlands (£ 4,500 crore). The Indian arm will focus on low Capex, rapid sales projects (worth £ 500 crore) to improve the conversion costs by approximately £ 1,000 per ton compared to FY25 EBITDA per tonne £ 13,420. The program will also focus on serving KPIs, productivity of employees and optimization of supply chain who will also consolidate efforts in the Netherlands and the VK. The British activities are already in the middle of a cost recovery program with the costs by around £ 170 per tonne in the past two quarters by improving the purchase costs of Substraat and reducing the overhead costs of companies. The British activities have reduced the number of employees from 8,000 to 5,000 in the past year with further scope to lower costs.
Although the last size of the cost improvement must be checked, profitability on a growth path on a growth path, on a growth path, on a growth path, on a growth path, on a growth path, on a growth path.
Segment scope
In India, Tata Steel Kalinganagar factory started the activities in H2FY25 of the extensive factory of 8 million tons per year (MTPA), which was previously at 3 MTPA. The slope is underway and production is expected to increase by 2 MTPA in FY26 (FY25 sales on 21 MTPA for Tata Steel India). This green field project will be the largest and cheap producer of steel in India.
After this expansion, the Focus will focus on Neelanchal factory, which wants to expand Tata Steel from 1 MTPA currently to 5 MTPA and project in the longer term. The pre-expansion regulatory legwork, including environmental and other processes, are underway. The company wants to spend 75 percent of the intended £ 15,000-crore consolidated Capex in India in FY26. This includes electricity and efficiency projects, apart from the expansion of headline capacity.
The steel prices are expected to supplement the capacity expansion of this. The steel prices are influenced by the import of Chinese steel and have had a falling trend; -5/-11 percent on an annual basis of the FY24 and FY25. With the imposition of steel import tasks, the price decrease is expected to stop and prices in Q1FY26 can also rise by 5 percent. The operating costs have fallen -7/-10 percent in the last two taxes. If the raw materials remain the course, the higher operational leverage, higher steel prices and lower conversion costs must support the expansion of the margin.
The UK and the Netherlands
The European arm is focused on carbon. The British factory has taken out two blast furnaces (which use coal) and are busy building a 3-MTPA electric arc oven or EAF (uses scrap steel and cleaner energy sources), which should be ready in the next three years. The project costs of £ 1.25 billion are financed by the British government (£ 500 million) and the company.
In the meantime, the company buys the substrate of India, the Netherlands and other sources to retain its customer base. This caused the resistance to profitability together with the costs of the employees. As stated, the company is a cost-saving phase and expects to reach EBITDA-Break-Even in FY26-end.
The Dutch activities reported 17 percent growth on an annual basis in steel sales in FY25, because production is online again after refining his blast furnace. Further volume growth of capacity can also be expected in FY26. Both the UK and the Netherlands are expected to benefit from the steel price increases in FY26 comparable to Indian conditions. The drag for profitability as a result of maintenance will also stop, return to higher volumes and higher steel prices. The EBITDA per ton is expected to recover from a fixed level in FY25 to £ 8,000 per ton in FY26. In consideration is a plan to convert one of the two blast furnaces in the Netherlands into EAF of Associated Plant by 2030, again with the support of the Dutch government that is considering a cost edition that is comparable to the UK project. The discussions and due diligence are underway with the government.
While the carbon protection projects are a longer period of time, Tata Steel with the first groundwork will be among the last to be in Europe with a green steel profile. The steady progress in India, although in coal-based factories, is starting to be supplemented with an EAF factory of 0.85 MTPA EAF in the following year.
Published on May 31, 2025
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