Tata Steel expects margin expansion in India, driven by demand

Tata Steel posted a consolidated net loss of Rs 6,511 crore in the second quarter of FY24

Tata Steel expects margin expansion from its India business unit on the back of buoyant domestic demand from the automotive and construction sectors, managing director TV Narendran said in an exclusive interview with Moneycontrol.

Indian steel demand remained steady, helped by robust government spending on infrastructure projects ahead of elections, helping steelmakers to rake in a profit in the country while global demand reflected a bleak picture.

Domestic steel consumption was up about 10 percent in the quarter that ended September from the previous quarter, according to the company’s investor presentation.

“That's because all engines are firing," Narendran said, referring to the growth. "Automotive has been strong for the last six to eight months. Even two-wheelers, which have been weak, have come back, which is also a reflection that the rural markets are picking up because of motorcycle sales.”

Domestic deliveries for the quarter jumped 6 percent YoY, the company said.

The India business generated a higher margin of about 20 percent, EBITDA of Rs 6,841 crore and crude steel production of about 5 million tonnes, offsetting the grim results in Europe. However, Narendran flagged that actual costs in the country will go up as low-cost coal had already been consumed in the quarter.

"So there will be margin expansion in India to some extent," added Narendran.

The company anticipates a net realisation increase of about Rs 2,200 per tonne in India in Q3 as compared to Q2.

The more than 100-year-old steelmaker posted a consolidated net loss of Rs 6,511 crore in the second quarter of FY24 – higher than the street’s estimates –  against a net profit of Rs 1,297 crore a year ago. The company was hit by impairment charges and shrinking margins in Europe.