UK 4QFY26-exit-breakeven unwound across four quarters as cost program lands 95% at Rs 10,868 cr.

I'll start with the bookkeeping one. If you can share what is the price and cost outlook in the coming quarter vs. what we've seen in 1Q in India, UK and Netherlands?

Sumangal, as far as the price is concerned, the guidance we're giving for India is that the net realisations will be about Rs 2,000 per ton less in 2Q as compared to 1Q. As far as UK and Netherlands are concerned, it will be flat or slightly higher. As far as cost is concerned, the coking coal costs are expected to be about $10 per ton lower in each of these geographies from a consumption point of view. And in Netherlands, the iron ore cost is also expected to be about $7 to $8 per ton lower from a consumption point of view for 2Q compared to 1Q.

The next question is on the cost transformation. Congratulations on delivering on 1Q . I just wanted to understand, one, how is the breakup between India, UK and Netherlands in 1Q. And when we're saying breakeven in UK if you can share what's the latest thoughts by when? Is it still 2Q? And this cost transformation, is it in addition to breakeven in terms of we going into positive in UK as well? Or this is basically, including the cost transformation, we will be approaching breakeven?

I gave the breakup in the cost transformation between regions in my narrative, but I can repeat it again. It's about Rs 1,100 crores in India, Netherlands at about Rs 1,400 crores, and the UK at about Rs 400 crores. See, when we chase breakeven, I presume you're talking about UK. Fundamentally, you cannot have breakeven and then something else, something else then leads to the breakeven. So , this core transformation is also a very important part to achieve the breakeven. The goal of getting the breakeven is very important for us as a company and we continue to cha se that. The market has been very volatile, and you understand that, including the uncertainties on tariffs, because the tariffs affect not just us directly, but also indirectly our customers. Therefore, in UK, there has been a 15% reduction in the automotive sales or automotive demand in the last quarter. We're seeing multiple elements to that. But there is an effort to ensure that we get to the breakeven by the end of this year, for sure.

Last question on expansion. We have not yet announced or taken Board approval for NINL expansion. So just want to understand what is holding us back, given we are already ramping up Kalinganagar and maybe in 18 - 24 months, we will be running at a rated capacity. So, when do we expect some announcement on expansion?

One of the things which is important for us , what we do now is we do the front -end work a lot more than what we used to do earlier. Earlier, we used to announce and then do the environment clearance, then the basic engineering and all the approvals, etc. Currently, we are in the engineering part and its very advanced as well as the environ ment clearance process. There is a public hearing that has already happened. So, the process for the EC is getting completed, it will take a couple of months more and once we are done with all this, when we go for FID or the final investment decision, that time, we are execution ready. That's our approach, which was not the case earlier and which we used to suffer from time delays as well as cost delays. So, we've changed the process and that is what is happening in the NINL process. Naren, you want to add something? T. V. Narendran: I think you articulated it. Basically, once we get the FID, we are ready to move to order placement and construction. I think that's what we're looking for. Whereas earlier, once you've got the Board approval, you waited for another year, 1.5 years to get the work started until you got all the approvals. So that's a shift in our approach. Neelachal is at a very advanced stage. I think we are ready to go to the Board maybe by October, November as soon as we get the environment clearance. What you will see over the next 12 months is, of course, the Ludhiana plant coming into action that will add another 0.75 million tons and the Combi mill in Jamshedpur, which is 0.5 million tons, which converts some of the extra billets we have in the Gamharia plant into steel. So, you'll see a lot more value addition and some volume growth in lo ng products before the Neelachal one comes in.

Indian steel prices seem to be at a 10% discount to China prices despite safeguard duty and we have not yet seen any improvement in trade prices. So , does this mean that the seasonal impact this time is quite bad and as a corollary, how are we seeing the government spending, especially state governments . Some states are facing fiscal pressure. So, can we see some price hikes happening or would it happen once monsoon is behind us?

I think Prateek what's happening is a lot of capacities which were down because of maintenance shutdowns because pretty much most of the major steel companies are doing shutdowns and maintenance work in 1Q. So that is back by end of June, and that coincided to some extent with the onset of early onset of monsoons. That's why there was some sort of pressure. Internationally, if you look at it, [inaudible] China domestic prices have gone up about $35 to $40 per ton in the last few days with the announcements that they made on 1st July. So, we are seeing internationally a bit more stability on the pricing. Domestic demand is traditionally weak in this quarter, as you said, but we expect it to pick up once the monsoon ends for two reasons. One is, it looks like a good monsoon year and secondly, once monsoon is over, construction activity will start, and thirdly, the festival season is on to us. So, we are more optimistic about the prices going forward. This wil l be a slightly difficult quarter because of what I j ust described. The other thing you should keep in mind is because international prices are low, the exports out of India is much less. So, earlier from India we use to export anything between 7 to 10 million ton s of steel, that's not happening , because international prices are not great. So pretty much all Indian producers are selling most of what they produce in the domestic market. And that's why we say there's enough supply in the domestic market, leading to some price pressures as we felt last month, but I think we see things improving from next quarter.

Koushik, you mentioned in UK, we are optimi sing on the cost of substrate. If you can elaborate a bit more on that . Given it's a commodity, what else are we thinking about? Is it going better?

The model in UK, obviously has changed since last September because we are buying substrate, which is slabs and then converting it to downstream products. Some part of it or a large part of it goes from India and some of it from Netherlands, but there are also external purchases that we do from our peers across the globe. Given where the price points are , we also want to ensure that our model on pricing spreads and the stock levels are correct so that we do not have a mismatch in terms of the price at which the substrate comes in, and the price at which we convert and sell it to the customers. That optimisation model took some time, and it is still maturing and that is something that we need to do right, which also means that how we plan for the sup ply chain in terms of procurement of substrate, the grades at which we buy, v s. the grades that we sell, ensuring that the product mix that is done during the planning and during the actual sales is similar so that we don't downgrade the product at any point in time just to ensure that we have to get the volumes out. So, those are the kind of initiatives which we are currently doing, and it is backed by investments in the IT platform so that we have real-time data for the decision makers at the time of procurement and sales.

First question is on the profitability of mini mills in general in UK and Ludhiana. During this transition, we are obviously importing substrate and running it through, the only constraint being the safeguard quota in UK, which is pulling the overall profabi lity down and maybe not reali sing the breakeven EBITDA in the near term . Is that the only constraint? And if that is not solved, could that maybe a structural constraint. Just trying to understand in the UK and Ludhiana which is again on EAF, as we don't really have a lot of cases of EAF profitability. So , if you can maybe guide as to how do we look at profitability of Ludhiana, once it comes up?

Satyadeep as far as UK is concerned, there are 2-3 issues. What we are facing currently is the tariffs that have been announced by President Trump on the UK, not only on us but on our customers and as that settles, there's been some disruption and some reduction in production forecast of automotive manufacturers in UK, etc . The second is that, even today, there is a discussion between U S and UK on the melt and pour issue because today, the US is insisting on melt and pour in UK, whereas our point is till 2027, we are going to be bringing the slabs from Netherlands or India. And so that's a part of the US - UK discussion. The third part is the quotas in the UK was set at a point in time when the demand was much more. Since then, the demand has shrunk, but the quotas have not. As a consequence, imports into the UK which are allowed, sometimes exceeds the requirement. So, UK has seen a divergence of prices as compared to Germany and other such places, as Koushik mentioned. So, these are the issues which we've taken up with the government, and the government is addressing them. I think on the quotas, they've already announced some changes. Some of it will take effect over the next few months because it's not just, as you know, t he UK government is now running what was earlier British steel. So, they are themselves feeling the pinch. We do expect that some of these policy issues will get sorted out. Going forward, when the EAF is there, we are going to use locally available scrap which is one of the reasons why we set up the EAF where UK is a big exporter of scrap. So that's a big part of the cost, and we believe we will be much more competitive buying local scrap than importing scrap or the earlier model of bringing in iron or coal and running it in the UK and we had guided earlier that we expect the cost to decline by at least £150 per ton once we shift to the EAF. The second part is energy cost in the UK. Here again, the UK government has recently announced some more concessions, and that's going to help us as well. That was one of our asks. So, by the time the EAF comes up, we will have the benefit of energy costs, which are lower than it is today. These are the reasons why we believe that the UK business during the transition as well as once the EAF is up, should be EBITDA positive. As far as Ludhiana is concerned, we know that the cost of producing steel through the EAF will be higher than the cost of producing steel through the blast furnace route. But the model here is slightly different. Firstly, we are targeting the reta il markets where our realizations are much higher. We are also looking at setting up these furnaces in p laces where there is scrap and hence, the scrap processing facility in Rohtak and the steel plant in Ludhiana. Thirdly, we are also looking to sell all the steel that we produce within 300 kilometres of where we have produced it. So, we will also save Rs 2,000-3,000 per ton on transportation, which we incur today in shipping the steel from Jamshedpur or NINL to some of these markets. So, we believe that these mitigation actions will bring down the cost disadvantage of EAF v s. the regular rout es of production.

Just a follow-up on this quota. This decision on the transition in UK company took some time back and the safeguard quotas were already in place at that time. Would you slow down since you're already committing capital before there is a review of safeguard?

Satyadeep, the issue at that time was that we did not have the actions that the US is taking now. So, the issue is because of the trade actions being taken for the US and the increased exports from China, you have a lot more trade flows looking for markets and EU has changed its quotas once this has happened. So, we're telling the UK government to what the EU has done. So, they are sensitive to that and they are open to that. So, the situation has changed and hence, we ask of them to look at the quotas. So that's where it is. Nothing changes from our point of view because in the long term, we don't expect this to be a big issue. Koushik, do you want to add to that? Koushik Chatterjee: I think the quota discussion was t here, and it has been on the table for the UK government. The previous government when we signed the term sheet and then the new government. The trade related authorities, the UK TRA, was fully involved in that. In fact, they allowed us bespoke import of slabs and for HR coil because there was import duty on the HRC earlier, which they kind of created for the transition. So, it has been on the table. It's that, as Naren mentioned, the trade dynamics did change significantly post January 2025 and it needs to be addressed more in a customized manner, which is what the UK government is currently doing.

I wanted to know a bit about the rollout of CBAM. We are now only five months away, like I was reading some reports that the government has exempted up to 50 million ton s of annual imports by any customer, which exempts 90% of the customers from the obligations of CBAM. Could you just throw some light about how do you think the rollout is shaping up to be and are we on track for a timely rollout of January 2026?

I think, CBAM for January rollout, which is currently a reporting stage. There is no single government as it is decided by EC and all the other (27 EU countries) actually sign for the CBAM. I presume you're talking about Europe and not about another geography or UK, because EC is very clear it will be done. There is a consultation process , they are initiating in order to make CBAM more watertight. That is something that has been one of the ask from the players because in Europe, we do not want to see CBAM where there is a work around CBAM regulations and imports into Europe. [inaudible] I think EC is currently working on it and in the next couple of months, will be opening up for a consultant. But the current CBAM anyways is scheduled to get online for 1st Jan 2026 implementation. T. V. Narendran: In fact, if I were to add to that, across European countries and in UK, the government is putting money into this transition . So, they're putting taxpayers' money into this transition on the assumption that there is a CBAM and all that. So, it's in the government's interest also to be consistent on the policy based on which these investments are being made. So, I don't think there's going to be any deviation.

And just a bookkeeping question. Like in 1Q, like how much cost did you book for the Jamshedpur relining cost on the relining expense?

I think it was about Rs 600 crores or thereabouts somewhere half around it because bulk of it is between 1Q and the previous year 4Q and that will be capitalised in this quarter once the furnace gets up and running.

Secondly, but let's just say, for NINL, whenever we announced, can you at least given the preparedness, we're talking about at the time of announcing the Capex, shall we think that the execution timeline could come down to between 2 to 2.5 years or that's too aggressive in terms of the execution period?

So normally, if you've seen a typical integrated plant, like Koushik said, you would say 3 to 5 years. So that would include at least 1 year and 1.5 years of all the approvals, etc. So that's the one you will save. So, that will be for an integrated steel plant. If you look at the Ludhiana plant, we're building it within two years because that's a simpler plant. In an integrated plant, it's not ju st a steel plant, you have to plan all the logistics, raw material movement , and in NINL, we're talking of moving it from 1 million to 4.5 million. So, there's a lot of work and like we do it in Jamshedpur, it is being constructed as an operating plant. So, there are some complexities related to that. So that's why we would typically look at a time in that range, around 3 to 3.5 years is what we think is realistic. But if we had started from scratch, it would have been 4 to 5 years for sure.

Just one question on the FX side. So given the debt-to-equity refinancing, is FX volatility expected to reduce because this quarter had a lot of adverse movements in both pound and euro, but it looks like we didn't have impact.

Yes. So, with more and more onshoring of FX debt into rupee debt that will certainly show up as a benefit and the volatility will certainly be lower in the future. The trade-related FX are different. Samita Shah: He is referring to the intercompany FX variations. Koushik Chatterjee: That we have converted into equity. So therefore, that doesn't come into our account.

The first one is on the sales volume. So , if I look at FY 2026, the start has been relatively subdued, of course, due to the maintenance shutdowns and all. What kind of volume do we expect in FY2026? And what will be the contribution of KPO II in this volume?

We guided at the beginning of the year about 1.5 to 1.6 million tons more this year compared to last year. This is despite the fact that you have one of the biggest blast furnaces in Jamshedpur down for relining, and so we are losing volumes there. If you look at Kalinganagar, I think the forecast is around 6.7 to 6.8 million tons of crude steel production this year, which is at least 2 million tons more than last year. So that's broadly the numbers. Kalinganagar like we said, it's ramping up. So, the third vessel is up in May. The third caster is up next month. So , at least from a steelmaking point of view, we will have all the facilities up during this quarter. The cold rolling mill is up and that continuous annealing line and one of the galvanizing lines are al so up. So, you will see not only the volumes growth in Kalinganagar, but the mix also improving over the next few months.

In TSUK, we expected some of the benefits to come from the employee cost restructuring. Does this number that you mentioned include that? Or we will see some more benefit of the employee cost restructuring going ahead? Also related one is that do we expect , provided things remain where they are , TSUK to become EBITDA level positive from next quarter?

On the employee cost restructuring, we had about 400 people leaving the company in 1Q. So, we are releasing the provisions that we had made based on the people leaving. There is going to be the full year impact of the employee leaving which will mostly be seen from H2 because that's when we started last year. So, you will see some of the full year impact in FY2026. The program that we had looked at was 1,800 people leaving the company is almost done, and there are some natural attritions, which also happen anywhere. The employee part is largely done. There are some tail end of it that will continue to happen in 2Q. As far as the breakeven, if I take the market conditions average of last year, we would have certainly looked at maybe second quarter or third quarter changes. But the market has been really tough especially as we discussed earlier in the call, what Naren mentioned, and I talked about. But we still want to ensure that the FY2026 exit in 4Q is on a breakeven. That's actually the focus there. We see ways to do it in terms of areas to look at it. Cost takeout is fundamentally the most important. We're talking about, as I mentioned in May '25 call, £200 million from UK. But more importantly, we're looking at how do we manage the spreads now that we are on a conversion model on substrates and therefore, to get some more work to be done on the supply chain side, which will get us there.

In annual report, there was a contingent liability with respect to ORISED, which was around Rs 16,500 crores, it has been taken off. How should one read into this?

Fundamentally, there was a basis when it was first demanded, and we were also disclosing it as in a manner in which that was transparent. However, it is important to understand that the principles of ORISED has been interpreted differently by the courts. It is still in the courts, and we will see what is more applicable also in context of the fact beyond 2015 when the MMDR act came in with a new format. These issues relate to regulatory dues from the mining activity , which have also been articulated pretty clear ly. We have complied with that, and we will continue to comply with that because it's part of our mining operations. So, in the prudence of not being speculative ti ll the courts and the governments decide, it was important to mention about it but not continue on a mechanical basis a number which is becoming more theoretical.

Your target to contain debt by Rs 6,000 crore to Rs 8,000 crores for FY2026, that remains?

Indeed, yes. If I were to reword your question, our enterprise strategy to contain debt by about Rs 6,000 to Rs 8,000 crores is not getting deprioritised. But markets being where they are and honestly, last couple of years we could have achieved that. However, on the other side, we would n't have had the ability to invest in Kalinganagar. So sometimes, we look at what comes ahead to get us more cash. For example, there were a lot of questions today on NINL. When NINL comes in, in the initial years, the spends will be lower, but there will be a year or two when it will be peak year where the construction has to be completed. At that point of time, if markets are good, the deleveraging will also continue. If markets have softened and moderated, our interest and priority is to complete the project first, because we can always do that deleveraging in the year after when the commissioning is done. So that's how we look at it, honestly. But from a structural point of view, the fact that we will keep our balance sheet derisked through deleveraging, does not change by the season.

In 4Q, you had commented that the gross spreads in the Europe market have been at a multi -quarter low. Has that trend continued? How has that played out in 1Q? And Europe has been fairly sluggish now for almo st two years. Has there been a change in the structure of the industry in terms of participants in the industry or the financial health of the industry?

The spreads improved during the last quarter, partly because the prices improved a bit as well as the costs c ame down, not only in terms of conversion costs which is more relevant to us, but more in terms of input costs when you look at the spreads. So, iron ore and coal came down and steel prices stabili sed a bit, and that's why the spreads improved last quarter. This quarter also, we expect the spreads to be around that level, maybe dip a bit, but largely okay. There is not much of a concern and It's moving closer to the €225 to €250 per ton which, is a long-term average, whereas when Koushik commented last time, it was we had gone down to even €150 to €160 per ton levels which was very low. What we see in Europe is over the la st one year, certainly there is a lot more interest in preserving the steel industry in Europe because of the issues that Europe is facing with Russia, which used to be a supplier of substrate before. More recent focus in Europe is to build a defence industry. And also, the focus to try and become self -sufficient in some sense of the term and not depend on other geographies for critical inputs. And steel being a base industry feeding into all critical industries across European countries, we are seeing a lo t more interest in preserving the steel industry in Europe and hence, the support that they're willing to give, and the safeguards and all that. So, we are seeing that there's more support for the industry in Europe. Not everyone who's producing steel today will be there 10 years from now. So, we do expect this r estructuring of the steel industry to help the demand -supply equation more than the fact that demand is going to take off certainly.

Chat question: do we have any visibility on which green steel projects are actually progressing and in terms of timelines, commissioning etc.

I think maybe the investments by Salzgitter , Voestalpine are going more or less as per schedule thyssenkrupp is progressing, but I'm not so sure if it's on schedule. The Scandinavian projects are all delayed that you must have read about. I think whether it's to green steel, SSAB etc. SSAB has already announced, I think a 1-1.5-year delay. So, that's what we see , and parallelly ArcelorMittal has called off some investments , and in some investments, they will build the EAF and not the DRI. So, there is obviously a bit of a mix bag there. I think future progress I see most are Voestalpine and Salzgitter.

Chat question: Kalinganagar forecast for FY2026 and broader volume growth over the next couple of years.

So Kalinganagar will ramp up and the exit rate at the end of the year will be at the max rate. So that's not the issue at least as far as steelmaking is concerned, and that allows us to send slabs to the UK as we are doing today because the hot strip mill will produce about 6 - 6.2 million ton, and so you will have some slabs extra. And one of the other projects which we look at once the UK starts or around the same time is how do we add more value to the slabs with a plate mill or something like that. So that's one track. The cold rolling mill will certainly ramp up, and it's one of the most advanced cold-rolling mills in the country along with galvanizing lines. So, you'll have a very good product coming out of that and already auto companies have approved the products out of continuous annealing line , and we are working with them on the galvanising lines. So I think the volume side is up, I think the part which you need to factor in, like in this year and for next few years is that we have a few blast furnace relining coming up in Jamshedpur. So, you have the G furnace happening this year. You have the H furnace, which will happen sometime in the next financial year.

Chat question: Sukinda surrender and what is the view going forward for FAMD?

I think the surrender of Sukinda mines, was planned and we had already submitted it last year and we were waiting for the government approvals. The process is going on. It's at a very advanced stage. We are recalibrating the ferrous alloys business because we are looking at it, more as to how do we optimise the capacities that we have, given the mines that we will retain and how do we bring this business back to profitability and not be subjected to the various demands that we get from the government on various regulations . We are simplifying the business and recalibrating it so that it's profitable.

Chat question: iron ore strategy post 2030 and how we will sort of manage without the captive mines.

Captive mines make sense from a cost efficiency point of view, if it adds value, if it's value accretive. Some of the premiums that are being bid, it really doesn't make sense to have iron ore available at that cost just , so that you can say you have a captive mine. So, we believe that it's worth having a captive mind if it's value accretive to the business. In the past, we used to be 70% captive for c oal. Today, we have 20% captive coal. So we have gone through this journey for another critical input, and we believe we can go through this journey, and we will optimi se around the costs, whether it is signing up with merchant players in India or looking at imports because at very high premiums, it actually makes sense to import the iron ore. You get better quality iron ore sometimes lower alumina iron ore, which is going to be very important for the future. So, we are looking at it from that point of view. We'll continue to bid for the mines that are coming up.

Chat question: Neelachal (NINL) - capacity utilization and whether we see the profitability of Neelachal moving in line with India profitability. And some questions about whether Neelachal is just selling pig iron.

No. Basically, Neelachal (NINL), as you saw last year delivered more than Rs. 1,000 crores of EBITDA. This year also, we expect it to deliver similarly. What Neelachal doesn't have is a rolling mill. So, what we do is we take the billets from Neelachal. The blast furnaces are running full out. We make the billets, and we convert it into finished products, like Tata TISCON at our accredited conversion agents who produce for us and the product is in the market. pig iron is not on a planned basis, but if there is some extra material which comes out of some imbalance temporarily, of course, we try to use it in some of our other plants rather than sell it in the market. So that's where it is. But Neelachal is running full out.

Chat question: when the second air separation unit will get operational at Kalinganagar?

I think there is a process in which both from a finishing point of view, completion of the project and the contracting etc. So sometime in the 2nd or 3rd quarter of this year, we should be in that zone. And the agreements are in place between Tata Steel and Linde.

Chat question: out of the Rs. 11,500 crores of cost savings which you have announced. Is half of that in FY 2025?

We said in May '25 that Rs 11,500 crores is over the next 12 to 18 months. And whatever has happened in FY2025 is banked already. The baseline is from FY 2025. I just wanted to ensure that we understand that this process started not after the new financial year started. We had started it last year but got more structured and built into our annual plans and been followed up vigorously on that basis.