Tata Steel's expansion plan provides clear growth path, debt not a concern: Anand Rathi Institutional Equities

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Tata Steel's recently announced expansion plans have provided a clear growth trajectory for the company, with financing unlikely to be a major hurdle, according to market expert Parthiv Jhonsa. In an interview with CNBC TV18, Parthiv Jhonsa, Vice President, Anand Rathi Institutional Equities, lauded the management for laying out a detailed roadmap that not only focuses on legacy facilities but also on new, efficient projects.

Jhonsa highlighted three key components of the growth strategy. The first involves organically expanding the capacity of Neelachal Ispat Nigam Limited (NINL) at Meramundli from 1 million tonnes to 4.5 million tonnes. The second is a tie-up with Lloyds Metal for a slurry pipeline connecting its Barbil mines to the Kalinganagar facility, which has the potential for further extension to a port-based pipeline. The third, and perhaps most innovative, is a 1-million-tonne pilot project in Jamshedpur using a low-carbon technology developed in the Netherlands. This technology is notably efficient. The projected capital expenditure is at ₹2,500-3,000 crore per million tonne, about one-third of the ₹7,000-9,000 crore typically required for a greenfield project.

Regarding the financial implications, Jhonsa noted that while the management will provide firm numbers for the large NINL expansion in the coming months, the overall capex is expected to be substantially lower than a typical greenfield project due to existing land, mines, and engineering work. He expressed confidence that debt would not be a problem for Tata Steel. "Your domestic has at a very good space… you are already doing a good ₹14,000-15,000 kind of an EBITDA (earnings before interest, tax, depreciation, and amortisation) and that would keep on continuing going forward," Jhonsa stated, adding that the company should be able to finance the expansion while staying within its stated debt thresholds.

Addressing the broader steel market, he shared insights from his channel checks regarding the potential impact of safeguard duties. He explained that even without the duty, landed costs of imported Chinese Hot-Rolled Coil (HRC) are currently about 10% higher than domestic prices. With a recent $14 hike by Chinese major Baosteel expected to filter through to India in January, domestic prices are already seeing upward momentum. A price hike of about ₹500 per tonne has been observed in key markets, and Jonsa anticipates a further increase of ₹1,000-1,500 in the coming weeks, leading to a total month-on-month hike of ₹1,500-2,000 by early January.

Looking ahead to the broader metals space, Jonsa identified copper as his top pick for the next two to three years. He cited a global copper crunch, a lack of new major mines, and no significant reserve discoveries in the past two years as key drivers. He sees the LME price at around $11,000 per tonne. Following copper, his preference is for aluminium, which is benefiting from strong demand from both legacy sectors like infrastructure and new-age sectors like renewables and electric vehicles. Zinc ranks third, with its demand being closely tied to the Indian steel cycle, followed by nickel and lead.