Tata Steel sets sights on growth opportunities after paring its debt

Riding the steel cycle as the commodity price reached record high of around ₹67,000 a tonne last week, Tata Steel has pared its debt far beyond its targets and successfully integrated key acquisitions in 2020-21, group chairman N Chandrasekaran has said.

“Tata Steel is well-positioned for both inorganic and organic growth opportunities,” Chandrasekaran said in the company’s annual report for FY21. “As part of the enterprise deleveraging plan, Tata Steel completed deleveraging of net debt by ₹29,390 crore in FY 2020-21.”

The company’s net debt-to-Ebitda ratio dropped to 2.4 times in 2020-21 from 5.8 times in 2019-20 and 3.2 times in 2018-19. “Despite challenging market conditions, deliveries at Tata Steel India increased 2% over FY 2019-20, enabled by a seamless shift to exports in the first half of the year,” the Tata Group chairman said.

The company reported its highest consolidated earnings before interest, taxes, depreciation and amortisation (Ebitda) of ₹30,892 crore in FY21, a 71% jump from the previous year, with an Ebitda margin of around 20%.

“This success has enabled us to continue critical capital expenditure focused on India, including the ongoing pellet plant and cold roll mill commissioning at Tata Steel Kalinganagar,” Chandrasekaran said. These investments will help expand margins by boosting value-added products into the existing mix, he said.

The company has reclassified Tata Steel South East Asia operations to ‘continuing operations’ from ‘held for sale’ after the unit reported a 50% increase in its Ebitda to ₹549 crore. This was enabled by higher prices and a focus on raw material cost reduction, Chandrasekaran said.

Following the termination of its discussions with Swedish company SSAB on Tata Steel Netherlands, the company is focused on performance and cash flows in the immediate term.