Tata Steel outlines Rs 10,000-12,000 cr annual India capex over next 5 yrs

Tata Steel is poised for the next phase of growth even as it continues to stay the course on deleveraging.

Over the next five years, the average India capital expenditure is estimated at Rs 10,000-12,000 crore per annum and that excludes potential acquisitions. As against a $1 billion annual debt reduction target, the company is likely to reduce gross debt by over $2 billion in FY22.

Koushik Chatterjee, executive director and chief financial officer, Tata Steel, told investors on Tuesday that the company would continue to deleverage and make its balance sheet stronger in order to position for the next phase of growth.

“This year, I can certainly say that it will be much more than our announced policy of $1 billion,” he said during the investor meet.

The investor presentation mentioned that among FY22 deleveraging priorities, over $2 billion gross debt reduction and prioritising offshore debt pre-payments.

In the June quarter also, the company had made material repayments in the Singapore and European balance-sheets, said Chatterjee.

In FY21, Tata Steel had reduced net debt by $4 billion. Chatterjee said that for the next 2-3 years, the priority would be at least a $1 billion of repayment each year prior to the allocation of surpluses towards growth. If there are acquisition opportunities, we will revisit the level, he said.

He also pointed out that net debt had been restored to FY18 level of Rs 75,000 crore despite the Bhushan Steel and Usha Martin acquisitions of above Rs 40,000 crore in the interim period.  

The company was able to record gross debt/EBITDA of 2.9x and net debt/EBITDA around 2.5x. However, it has set a target net debt/EBITDA at 2x.

However, even as Tata Steel has set a stiff target, it will pursue growth opportunities.

T V Narendran, managing director and chief executive officer, Tata Steel, told investors that growth in India would be through organic and inorganic.

“We have three active sites between Kaliganagar, Jamshedpur and Angul. Between the three sites, we can go up to 40 million tonnes, if we have the EBITDA, balance-sheet and demand to support,” he said.

Tata Steel has a current capacity of 19.6 million tonnes in India. The second phase of expansion at Kaliganagar of five million tonnes is expected to be completed by FY24.

“Between FY25 and FY30, both organic and inorganic growth opportunities will be pursued. Even if we do organic, we can go up to 40 million tonne based on available land in Jamshedpur, Kaliganagar and Angul,” said Narendran.

He added that the company would also be participating in organic growth opportunities, particularly in long products.  

The company submitted an exp­ression of interest for the strategic sale of government stake in Neelachal Ispat Nigam Ltd and may also be interested in Rashtriya Ispat Nigam Ltd when it comes up for privatisation.

At the same time, Narendran said that the company would look at setting up more electric arc furnace-based units in the north, west and southern India.

“Our whole approach on circularity and recycling is to set up recycling units in the north, west and southern India where there is scrap available,” he said.

It’s an outsourced model, so it will not be capital intensive, he pointed out.

It’s also a model that will not be dependent on iron ore.

Tata Steel’s existing iron ore mines would be available with the company till 2030. Narendran said that the company will be astute in bidding for mines that will come up in the next 10 years.

“Between now and then, we will be careful about what we bid for,” he said.  

As far as overseas operations were concerned, the focus would be to drive efficiencies and make Europe and S E Asia self-sustaining.