Interview: Comfortable with current debt position, says Tata Steel management, even as prices may drop in Q3

The company's net debt increased in the September quarter

Metals major Tata Steel's MD and CEO T.V. Narendran and executive director and chief financial officer said in an interaction with Moneycontrol that the company remains comfortable with its debt levels as it continues to ramp up capital expenditure both in India and its overseas operations in the United Kingdom and the Netherlands. At the end of September 30, 2025, net debt stood at Rs 87,040 crore, higher than the Rs 84,835 crore reported at the end of the June quarter.

They noted during the interaction that the company remains in the comfort zone regarding the debt as well as key metrics such as the net-debt-to-EBITDA ratio. He added that some spikes and decline in the debt levels per quarter are expected in the journey of capital expenditure and dividend payments.

Edited excerpts:

Q: What were the driving factors for the good set of results for Q2?

Narendran: If you compare to last year, one is India has got better numbers because the Kalinganagar ramp up is well on its way. Last year, this time we had just started the blast furnace, the other facilities had not ramped up. That's one reason why the India numbers are better. We had said that we are going to do about Rs 11,000 crores of cost take-outs across all the sites. That's also going as per plan.

Q2 in Netherlands was better year-on-year. Last year we were just coming out of the blast furnace relining, now it's running pretty much at full capacity at 7 MTPA. And while UK is negative, the losses in UK are half of what it was last year this time. So it's moving in the right direction, not as fast as we would have liked it.

While we've taken the actions we had planned to take in terms of cost take-outs in the UK, the market conditions have been much worse than we had anticipated. That's why we are still in the red in the UK. We are working with the government to see what is the support they can give, because in EU, they have already reduced the quotas for imports. US has done what it has to do, India has safeguard duty... we are telling the UK government they also need to take some actions because these are abnormal times.

Q: Do you see room for further EBITDA expansion?

Narendran: What we've guided is that the prices in Q3 will be lower than Q2, both in India and Europe. But we expect prices in Europe to certainly go up in Q4 because of these announcements that they've made. In India, we are hoping and expecting that nil growth impact will happen, because normally January to June is the best part of the year for steel consumption and activity. We are expecting prices to start picking up maybe by December or January. So we will not see the impact in Q3.

While there may be some margin compression in Q3, we will have additional volumes in the quarter, particularly in India. We will have half-a-million tonne more in Q3 than Q2 because the G blast furnace in India (Jamshedpur), which is down for relining for six months, has come back into operations in the middle of Q2.

And the Kalinganagar ramp up is going on fine. Hopefully the additional volumes will make up for some of the margin compression because of the spreads getting thinner.

Q: Are you comfortable with your net debt numbers, or does the figure need to change for you?

Chatterjee: We have been managing net debt-to-EBITDA (ratio) at around 2.75 to 3.3 and that is the level that we are comfortable with. This quarter, our net-debt-to-EBITDA ratio was at 3.0. It is a function of how do we manage our cash flows and and our earnings.

At about 3.0 we are fine. This quarter we paid Rs 4,500 crore of dividend, so you will see some spike up again. It will manage itself over the next six months. At the matrix level, net debt-to-EBITDA of about 3.0 for a company which is investing and growing is within the comfort zone.

Q: India was a net importer this quarter. How are you seeing the market condition?

Narendran: The demand is strong in India, it is just that the pricing is weak because there's a lot of domestic supply which has come on stream and little bit of imports while India's a net importer, but still the import volumes are in that half-a-million tonne-a month range. But even small quantities have the potential to disrupt the balance in the market.

That's why we constantly say that the government needs to take actions to ensure that the industry is profitable and hence can invest in the growth projects that all of us have announced.

Q: You have signed an agreement regarding decarbonisation with the Dutch authorities. Where do you stand on the decarbonisation journey in the Netherlands?

Chatterjee: The agreement that we have signed is non-binding at this point of time. It is basically a framework of the investment journey that we will have over the next few years as the government was a kind of a caretaker government. The budget had been allocated for the grant, and if we wanted to carry on that allocation, the JLOI (joint letter of intent) was important. It was blessed by the parliament, it has bipartisan support.

When we closed the JLOI, it had a few conditions to be fulfilled by us in terms of our coke and gas plant, and a few conditions to be fulfilled by the government when we sign the tailor-made agreement, which are policy-related, in terms of network cost, tariff, levy on coal, etc.

Now when the new government takes form, and historically it takes six months to form a new government, we will re-engage with them on the specifics of the binding agreement. At our end and at the government's end, work is going on. We are also looking at how do we phase the capex and project and how do we optimize it, and what is the priority in which we will do the phasing.