Ladies and gentlemen, good day and welcome to the Tata Steel analyst call. Please note that this meeting is being recorded. All the attendees' audio and video has been disabled from the back end and will be enabled subsequently. I would now like to hand the conference over to Ms. Samita Shah. Thank you, and over to you, ma'am.
Good afternoon to all our viewers in India and a very good evening to those of you joining us from the Far East, and a good morning to our viewers from the West. On behalf of Tata Steel, I'm delighted to welcome you all to this call, particularly our shareholders and shareholders of Tata Steel Long Products. Thank you for taking the time out on this call to discuss our results for the fourth quarter of FY 2022. Our results, including a presentation explaining the performance, has been uploaded on our website, and hopefully many of you have had a chance to go through it. To discuss our results, we have with us our CEO and MD, Mr. T.V. Narendran, and our ED and CFO, Mr. Kaushik Chatterjee. They will take you through our results and answer any questions you may have.
Just before we move on, just want to inform you that on the audio queue we will take questions on audio as well as chat. Please do type in your name, your email address, so that the operator can unmute your line. Of course, you know, if you have chat questions, please type them in as well. As always, this entire discussion will be covered by the safe harbor clause, which is on page two of our presentation. Thank you, and over to you, Narendran.
Thank you, Samita. Good morning, good afternoon, and good evening, depending on where you're joining from. I'll make a few comments, hand over to Kaushik, and then we'll be ready to answer the questions that you may have. The pack is already there with all of you. As you know, commodities in general and steel markets in particular have been very volatile over the last quarter. The ongoing Russia-Ukraine crisis, coupled with the COVID wave in China, obviously have added complexities to the supply chain. It has, of course, kept the demand-supply balance in some sense a bit volatile. The reality is, with Russian and Ukrainian steel out of the market, in Eastern Europe we're seeing a certain tightness in the supply.
The coking coal prices witnessed a renewed volatility with a steep rise, followed by a decline towards the end of the quarter. They still remain at around $500, which is quite high considering what we've seen over the last many years and decades. With recovering demand in Europe and the U.S., steel prices in the Western markets rose sharply in the January to March quarter. In China, the lockdown in key markets had an impact on demand and led to a broadly stable steel prices. As a result, Western spot spreads have been elevated while Chinese steel spreads have softened. In India, the steel demand rose 4% quarter-on-quarter, and automotive production, especially in passenger and commercial vehicles, improved while the infrastructure construction goods witnessed steady growth.
Against this backdrop, Tata Steel delivered record performance during the quarter and the year, with strong performance across geographies. In India, our crude steel production crossed 19 million tons for the first time, with quarterly production being close to 5 million tons. Our deliveries at 5.12 million tons in the quarter were the highest ever. I'm happy to point out that in addition to higher volumes, we were able to also deliver better net realizations than our guidance. Against our guidance of a drop of around INR 3,500 per ton, we were able to limit the drop to about INR 1,500 a ton. The performance was broad-based, with all segments doing well, and our market share in auto is now the highest. In branded products in retail also, we crossed 5.2 million tons.
In the industrial products and products segment and engineering segment, we crossed 6.3 million tons, with a sustained focus on high-end sales. Our downstream portfolios across tubes, wires, tinplate, et c, is also expanding well. Just to give you a sense, we now sell over 1 million tons of tubes on the back of strong growth and structural and high-end base. In fact, those of you who've seen the pack, the picture that you see on the front page of the pack is basically a steel structure. It's a tubular section which goes under the brand name Tata Structura. It's a tribute to JRD Tata in the JRD Tata Park in Jamshedpur. Moving to Europe, we've had a very good quarter and delivered strong performance, with an EBITDA for the year exceeding GBP 1.2 billion.
Deliveries were up 9% during the quarter compared to the third quarter. Steel prices remain elevated, and our net realization quarter on quarter was higher by about GBP 53 per ton, which is better than both our guidance and the movement in the one month lagged Northwest Europe HRC spot price benchmark index. I have previously explained how our contract and product mix has meant that NR performance tends to be different from the benchmark. We have a different mix of long-term contracts. In fact, we have a different mix in Netherlands as compared to the U.K. Netherlands is more dependent on the packaging and the auto sectors and hence have a greater mix of long-term contracts.
Previously, the improvements on our net realizations in Europe were lower than the benchmark, but the trend is now reversed, and the same is expected to continue in the next quarter as well. We remain watchful on input costs, including energy prices in the near term. In terms of projects, we should commission the 6 million ton pellet plant in Kalinganagar by early third quarter of this year, which has an impact on our costs, beneficial impact on our costs. We will also commission the cold rolling mill. We will start with the cold rolling mill and follow it with the continuous and annealing line and the galvanizing lines. Again, the PLTCM, which is a cold rolling mill per se, should get commissioned by the third quarter of this financial year.
In the next financial year, we will commission all the balance facilities in Kalinganagar. The Neelachal acquisition should also close this quarter. As mentioned earlier, it gives us a fourth site in India. In fact, it's next to the Kalinganagar site. It's just across the road. The Neelachal Ispat acquisition gives us access to 6,000 acres of land between Neelachal and the existing Kalinganagar site, which gives us the optionality to build a complex of at least 25 million tons in Kalinganagar. In addition, we are also setting up one of our first EAF facilities in the north, which will be supported by the scrap recycling facility that we've already set up in Rourkela. The EAF facility is likely to come up in Punjab.
We will be replicating this model of making steel through the recycling route in the other geographies as well, which is the west and the south. In the east, we will largely be iron ore-based production of steel. All of this will enable us to reach 40 million tons in India by 2030. We want to do it in a sustainable manner. To enable this, we've taken multiple initiatives throughout the year, not only from using higher scrap in our furnaces in Jamshedpur, Kalinganagar and Angul, but also we've been working with multiple startups on various carbon capture and usage facilities. We've already commissioned a 5-ton-per-day CO2 plant at Jamshedpur.
We are also using multiple modes of transport to reduce our carbon footprint, including using electric vehicles as well as inland waterways for transporting material. I'm happy to share that in recognition of this sustained effort, Tata Steel has now been recognized as a steel sustainability champion for the fifth year in a row by the worldsteel , and is now also a member of the new sustainability charter. I'll now hand over to Koushik for his comments. Thank you.
Thank you, Naren. Good afternoon and good morning to everybody who's joined in. A few comments on the financial performance. Tata Steel's consistent performance across quarters during this financial year has led to a record performance for the year, with more than 100% growth in the consolidated EBITDA and four times the growth in the profit after tax compared to the previous year. This is despite the fact that the complex global operating environment that has led to surge in the input prices, as you are aware. The consolidated EBITDA for the full year stood at INR 63,830 crore, which works out to be a margin of 26% and the EBITDA per ton of around INR 21,626.
The cash flow for the year, the free cash flow for the year was about INR 27,185 crores. During the quarter, the consolidated EBITDA stood at about INR 15,774 crores and was marginally lower compared to the previous year. If we exclude the Forex impact and the Adjusted EBITDA was flat at about INR 15,891 crores, compared to the third quarter. At Tata Steel standalone, higher material costs were driven by inventory liquidation that we did during the fourth quarter and the elevated coal prices, partly offset by royalty. The Forex gains stood at about INR 597 crores, in the quarter. Again, excluding this, the Adjusted EBITDA stood at about INR 11,766 crores, which translates to an EBITDA per ton of about INR 23,670.
At Tata Steel Europe, we have seen an expansion in the margin compared to the third quarter. The third quarter EBITDA numbers were about 13%. The EBITDA margin for this quarter is about 16%. The material costs were up by about GBP 40 per ton, primarily again driven by the inventory liquidation, higher energy prices and employee related costs. This was partly offset by the lower raw material costs and the other expense. The rise in coking coal consumption costs was offset by the decline in the iron ore prices. Overall costs were up by only about GBP 8 per ton, while steel realizations were higher by about GBP 53 per ton, leading to an EBITDA per ton increase of about GBP 45, which translates to GBP 430 million.
The EBITDA performance has led to a strong cash flow performance of about INR 13,971 crores, despite an increase in the working capital of about INR 9,600 crores. While there has been an increase in the absolute value of the inventory and the debtors due to the higher prices, the working capital management has led to a decline in terms of holding base, both on a quarter-on-quarter as well as a year-on-year basis. The capital expenditure was about INR 10,522 crores, which is well within our guidance of 10,000-12,000 that we did earlier during the year.
Finance costs were about INR 1,099 crores, lower by about INR 434 crores, as there were charges related to prepayment of ACIP debt in Tata Steel Europe in the third quarter. Taxes paid were INR 2,000 crores, lower primarily due to tax credit in Europe. Coming to the TSLP acquisition of Neelachal Ispat, we expect to close the transaction in the first quarter. We would have liked to infuse equity into TSLP, but due to regulatory constraints, what we have done is we have infused the funding through non-convertible redeemable preference shares to limit the cash burden on the TSLP balance sheet. We continue to focus on our deleveraging while advancing our strategic growth priorities that Naren highlighted a little while back.
At the start of this financial year, we had set a target of achieving the investment grade rating. Given our financial metrics, we achieved it within the first six months. Against our deleveraging target that we have announced of $1 billion every year, we have actually repaid double of that, about INR 15,000 crore during the year.
Our net debt PBITDA has now further improved to 0.8x, and our financial metrics continue to be well within the investment grade level. Our group liquidity position remains strong at about INR 37,470 crores with about INR 24,500 crores of cash and cash equivalent. We are obviously holding the higher cash due to the impending NINL acquisition, and it will normalize over time. As mentioned in the press release and would be aware by now, the board has recommended a record dividend of INR 51 per share and has also approved the splitting of the shares to rupee one per share face value on a 10:1 split. With this, I would like to end my comments and open the floor for questions. Thank you.
Thank you, sir. We will now begin with the question and answer session. We will be taking questions on audio and chat. As mentioned, to join the audio queue, please mention your full name and email ID in the chat box. Kindly stick to a maximum of two questions per participant and rejoin the queue should you have a follow-up question. We will unmute your mic so that you can ask your question. To ask questions on chat, please type in your question along with your full name and email ID in the chat box. We will now wait for a moment as the queue assembles. Our first question is from Amit Dixit of Edelweiss. Please go ahead. Amit, are you able to hear us? It looks like we have lost our line with Amit. Yeah. Sure, Amit. Please go ahead.
Yeah. Thanks for the opportunity, sir. I have two questions. The first one is on coking coal price. What was the increase in coking coal price in TSE and Indian operations in Q4? And what is the kind of increase we expect in Q1 of this year? That is the first question. The second question is essentially you mentioned about 40 million tons capacity by CY 2030. Just wanted to understand how much of this production would be through traditional route and how much would be through scrap-based route.
Amit, on your first question, basically in Q4 the coking coal price increased of about $50 compared to the previous quarter as far as India is concerned, and as far as Europe is concerned, it was about EUR 50, but Q4 compared to Q3. Q1 compared to Q4 in India we expect to be about $100. Again, in Europe, about EUR 50 to EUR 60. That's the consumption cost impact I'm talking about, not the paying cost. This is largely controlled coal cost item. As far as 40 million tons is concerned, the first capacity of about 0.75 million tons will be announced in a few weeks, and announced next two year. We are looking at replicating this.
I mean, you look at replicating it, you can replicate it at different scopes. Depending on the success of this model, we can scale it. Say perhaps we'll add 1 million tons a year if we want. We will take that call in the next one or two years depending on how the capacity performs. I know there will be a lot of echo and feedback in the call, so maybe.
Yeah, no, I could hear you, sir. I have more questions. I will get back in the queue. Thank you.
Our next question is from Sumangal Nevatia of Kotak. Please go ahead.
Coking coal, I mean, what sort of cost headwinds are we seeing both in India and Europe? If you could just elaborate a little bit on how this entire energy issue is impacting our European business in coming quarters. What is the exposure? How do we hedge or these details, please? Thank you.
Sumangal, I missed the first part of your question. I just picked it up from where you said coking coal. Did you say something before that?
No. We understood about coking coal.
Okay.
hear about other cost headwinds, both in India.
Sure.
Also in Europe. Yeah.
Sure. I think pretty much all input costs have been going up across geographies because inflation is something which impacts us also. Obviously you try and offset as much of that as possible through what you can get from the market, not only through price increases, but also in terms of deciding which markets to sell in. For instance, just now the prices in Europe are higher than the prices in Asia, even if you want to export, right? We've been doing all that, and we are quite comfortable or confident that the cost increases for this quarter can be covered by the price increases that we've got or will get in this quarter, both in Europe and in India. As far as energy costs are concerned, yes, we also hedge energy costs in Europe.
We, our exposed cost part is very little. Typically last quarter, I think we were 90% hedged. This quarter we are at least 75%-80% hedged. We don't as yet see a significant impact given our hedging as well as given the costs which have already come through in the last quarter. If you look at this quarter compared to last quarter, as of now, on energy, we are seeing stable input costs at obviously a higher level than we've seen in the past.
The next question is from Pinakin Parekh. Please go ahead.
Prices. North European HRC is up nearly EUR 400. India domestic HRC prices at a spot level are up by INR 10,000 a ton. Now, Tata has, you know, multiple contracts, multiple segment consumers. Can you just walk us through what kind of NFR increases can we expect in the next two quarters, both in India and Europe?
Pinakin, basically, to come to the last part of your question, we are expecting realizations in India this quarter to be about INR 8,000-INR 8,500 per ton higher than the last quarter. In Europe, we are expecting it to be about EUR 60 per ton higher than the previous quarter. I am not yet going to give a guidance for next quarter. We'll do that closer to the end.
It would be fair to say that the NFR increase will not fully reflect the spot steel price increase, right?
It's like this, right? If you look at Europe, you know, in Europe, the contracted prices, which we contracted again in November, December, the auto and the packaging contracts were actually higher than the spot prices of January, okay? Because we have got significant price increases, which are closer to the spot prices of November, December, which were quite high. Now the spot prices in Europe have also gone up, thanks to what's happening in Ukraine, and it's come close to our contracted prices. We had expected this year the spot prices to be less than the contracted prices. Last year, the contracted prices were lower than the spot prices. Today, where it stands is both the spot prices and the contracted prices are close to each other and are at a high level in Europe.
As the spot prices, if and when they drop, you will see that impact. 60%-70% of Netherlands mix is more on long-term contracted prices. In U.K., it's a bit less. Maybe about 40% is on long-term contracted prices. We are a little bit more riding with the wave, as far as spot prices are concerned. In India, we are about 20%-30% on, you know, contracts beyond a month, those are largely the auto contracts. Those are still getting negotiated for H1. Yeah, Q1 or H1. Those negotiations are going on. Yeah.
Thank you for this detailed answer. My second question is, if you go back to slide nine, where the company has laid out the plan till 2030. Now, existing capacity is 21 million tons. The KP of 5 million tons will come through over the next 12-18 months. That takes it to roughly 26 million tons. That leaves 14 million tons of capacity addition over the next seven to eight years. Some of it, as you have highlighted, would be electric arc furnace. Now, the land for all this expansion is now already been acquired, whether it's Neelachal or Bhushan. It's fair to say that the CapEx per ton should be lower than $1,000, which was the benchmark.
If you look at the remaining capacity addition of 14 million tons or so and assume a $750 a ton, that basically means that the growth CapEx should be ballparked $10 billion over the next seven years or so. Now, obviously, it will not be linear. There will be years of more CapEx and less CapEx. Given where the balance sheet is today and given where steel cash flows are today, do you see that this growth CapEx at some point of time gets, you know, upsized far higher? Does Tata look at growth beyond steel, given where the cash flows are?
I think, you know where we are, like you said, given the optionalities, we are in a very comfortable place, right? Between Neelachal, Kalinganagar, we can take it from 1 million-10 million during this decade. Kalinganagar, we can take it from 8 million-16 million during the decade. Angul, we can take it from 5 million-10 million during the decade. We can choose where do we wanna grow depending on what is the most optimal way to grow for us. In addition, we have the optionality to grow through these electric arc furnace units, and that is going to be capital-light growth for us because we have partners who are willing to set up these facilities for us.
You know, because it's more about the ecosystem which we manage, the brand that we have and the distribution network that we have than the assets that we create in that model. We have an optionality to have capital-light growth there. If the first one operates well, then we can scale it up very fast. The 40 million roadmap has multiple options. The options that I've just articulated can take us beyond 40. We have those optionalities, and we will exercise whatever is the most capital efficient and the value-accretive way to grow. As far as cash flows are concerned, as you can see, the India cash flows have always been strong.
As we scale up the India business, we believe that we can generate enough cash to take care of our growth without having to borrow, right? In fact, as Koushik said, we are basically confident that we can grow as well as deleverage at the same time. We are already investing in what we call knowledge-intensive growth, which is basically new materials. We are already into Fibre Reinforced Polymer. We are into medical materials. So basically, we are looking at materials which are more knowledge-intensive and capital-intensive. We are into graphene. These are all businesses which are scaling up. You know, the revenues is already from pretty much close to zero two, three years back is crossing INR 500 crore this year and will cross four digits in the near future.
These are businesses which are growing, which supplement our growth in steel. You must also remember, we will also be growing in mining. We are currently at about 35 million tons of mining. We'll take it about 65 million tons to support the steel growth. It's more for captive consumption. I think we feel that keeping the balance sheet health intact, we can continue to grow in India from the cash flows that we generate in India, and that will help us realize our ambitions. As of now, this is the plan. Koushik, I don't know if you want to supplement.
No, I think you've said it all. I think all that in one single sentence, I would just tell Pinakin that, yes, there is a realistic expectation for upscaling the capital allocation on growth in the coming years. Most of these are getting finalized. As far as specific execution plan is concerned. We have started this year with the allocation guidance of INR 12,000 crore, but we will review it in the first six months and come back and see as to what. There is an upside bias potentially to accelerate some of the growth projects.
Understood. Thank you very much for this.
Before we take the next question, I would like to inform the participants to please limit your audio questions to two per participant. I would also request you to please keep your background clear to avoid any disturbance. Should you have a follow-up question, you are requested to rejoin the queue or post it in the chat box. The next question is from Abhijit Mitra of ICICI Securities. Please go ahead.
Yeah. I hope I'm audible.
Yeah.
Yeah. First question is on shareholder returns. Any framework that we should look at it? I mean, it's great to see INR 51 in dividend this year, but what's the framework to look at it? Should we sort of take this payout ratio or because clearly, you know, over the next couple of years it seems like you know, your cash flow generation would you know, be much higher than probably what you can probably allocate towards your growth capital projects. Any framework that you can give on that? That's my first question. Second question is a bit you know, offbeat and probably to Mr. Narendran.
Given your air separation units in Jamshedpur and Kalinganagar, is there any possibility to sort of look at production of these inert gases like neon and others? You know, have you sort of looked at it? Any thoughts on that would be great. Thanks.
Sure. I'll answer the second one and let Koushik answer the first one. We did, when I heard that neon gas is basically made in steel plants in Ukraine, that was one of the first things we looked at to see if there is something that can be done there. But actually what we understood is, you know, it calls for significant investment because the separation units that we use currently for oxygen, nitrogen, et c, in a steel plant, you need to have one which is, you know, in some sense far bigger in intensity or capacity, however you describe it. It needs to do a lot more to get neon out of it. I understand the economic value is not there so much, just now there is a shortage.
Typically in Ukraine also it has been a government-supported initiative. Obviously they had a lot of spare capacity which they leveraged, and there was a government support and hence you have a strong production of neon. It doesn't really make commercial sense as far as we know. Just now maybe, but that's only as long as there's no neon gas coming out of Ukraine. We did look at that, but for now we are not pursuing it. Koushik?
I think, you know, you would have seen last year also we scaled up our payout and the dividend percentage and also the dividend per share to INR 25, which was one of the highest in recent history. I think we are basically triangulating the capital allocation between deleveraging, return to shareholders and growth for growth CapEx. I think that's the triangulation. I think the heavy lifting on the deleveraging has happened. We continue on the same journey of $1 billion every year. We've been overperforming in the last few years. Therefore it is important now to look at the return to shareholders commensurate with earnings, and that's being addressed this year.
Our stated policy has been 50% of the PAT, up to 50%, that's been the ceiling, but we've been progressing on that basis. Good thing is our consolidated earnings is what is being focused on. This year we are on a standalone basis, we have been about 19%-20%. We continue to look at this to A, be consistent, and B, to be commensurate with the earnings. Three, to also prioritize the future value of the company, which is through the growth CapEx. It's not a simple formula, but it's effectively a triangulation of priorities and ensuring that we can optimize on the same.
That's a approach that we are taking and we'll continue to consistently apply that approach in the future.
Sure. Thanks. That's all from me.
The next question is from Vishal of Motilal Oswal. Please go ahead.
I will.
Yeah.
My first question was with regards to your long-term carbon plans for Europe. Given the fact that your competitors, SSAB, Thyssenkrupp, et c, have all lined up CapEx of about $4-$5 billion over the next four, five years to transition into green steel. What would be our strategy in Europe in that regard? That's the first question.
Vishal, basically, the approach is different for U.K. and for Netherlands. In Netherlands, in both places there are plans which have been made, and there are conversations which are going on with their respective governments. In Netherlands, the roadmap that we've already articulated in some sense is about transitioning from coal to gas to hydrogen, right? That the starting point is there needs to be gas available in plenty and at the right price, which was there. Now with what's happening with Ukraine and Russia, and the calls that the European governments are going to take, we are waiting to see what their plan is.
Because Netherlands does depend on Russian gas and I think it's about 30%-40% of the gas used in Netherlands comes from Russia. We're waiting to see what happens. There is a view in Europe that they may transition faster into hydrogen. We'll wait and see what happens and then decide our plans. We do have the plans already in place, and I think the cash flows that we are generating in Netherlands will be used to support this transition. I think the Dutch business is generating the EBITDAs and the cash will generate the cash that we feel should support this transition. Of course, we will also look at certainty and support from the government, if not in CapEx and OpEx.
As far as U.K. is concerned, the transition plan is more around making better use of the scrap that is available in the U.K. U.K. is one of those countries which exports scrap. How can you again transition into a process route which uses more scrap? Unlike in the Netherlands, where the business, the existing business can support the transition, in U.K., this transition cannot happen unless it's supported by the government. That's a conversation going on with the government. We will, you know, move ahead based on how we are progressing in these conversations. In the meanwhile, at least as far as the Netherlands is concerned, we will continue to build the corpus that is required for the transition.
Thank you very much for this elaborate answer, sir. My second question was with regard to the steel cycle. Now, we have been looking at never like before steel prices in Europe, in the Asian market, but China has started slowing down and it's not known whether and how much of stimulus they will do. In that scenario, do you think it would be more prudent to bring down the leverage or the absolute debt levels significantly low before embarking on the growth CapEx? Because once we commit to a growth CapEx beyond a certain point in time, we enter into a point of no return. The CapEx has to be committed.
Overall, in the past cycles also, we have seen steel companies have committed to large amount of growth CapEx at the peak of the cycle. After the cycle has turned around, it has been very difficult in managing the debt subsequently. Just wanted your thoughts on how do we think because steel is a cycle. The prices will never stay at the current levels for a long time. It has to come down.
Vishal, I just want to respond with two to three points. One is at a very fundamental level, the steel industry is structurally in a different place, right? I'm not saying steel prices will stay at this level forever. The disruptors of the past, which has largely been significant capacity being added, which was happening in China. You know, 50-60 million tons of capacity was being added a year in 10 years back or 15 years back. And secondly, exports out of China was the biggest disruptor. Today, you don't have that situation. Even though steel prices are high, apart from in India, nobody else is really adding capacity. Okay? The supply demand imbalance that is created by a lot of capacity coming quickly on stream will not happen.
No other country will be able to add capacity as fast as China did. Even if India wants to add 50 million tons a year, it won't be able to. Right? To me, that is one change from the past when steel prices were high. The second fact is a lot of capital is being invested to transition to green. Steel companies, the cost, operating cost of steel companies are also going up not only because of input costs, but also because of CapEx being spent, as you asked or it was asked earlier in this call of others spending CapEx. There is a bit of a downside kind of what do you call it? A bottom below which steel companies will not be motivated to sell steel prices.
With China not being a big exporter at cheap prices, there is nobody else who's disruptor. The other big disrupt, to some extent, low prices were available from Ukraine and Russia, and that is also not there. The third point I want to make is, you know, when you look at steel companies growing, when it's inorganic growth, there's a lot of money spent in a short period of time. Then if the steel cycle turns, you struggle. When you're doing organic growth, you have an option, which we did. For instance, that's what we did in Kalinganagar. We slowed down the project when we felt that there is a need to focus more on deleveraging after the Bhushan acquisition. We did that and brought down our debt. Now today we are able to ramp up.
We have that optionality. Even if we start projects in the multiple sites that we have, we have an optionality to slow it down if we feel that things are not going the way we see it. Having said that, given that the India business is double the size it was five years back or 10 years back and is continuing to grow, the cash flows that you will generate in a down cycle for Tata Steel is going to be much higher than it was in the past. Even in the lowest point of the last cycle, the EBITDA margin of the steel business in India was 20%. Okay?
Now the base on which you're generating 20% EBITDA margin has doubled and is increasing. From a structural point of view, Tata Steel is also in a very different place than it was five years back or seven, eight years back. That's what gives us the confidence that we should be able to grow without adding to our debt. We can pace our growth well because we have multiple sites and optionalities available.
Yeah. Just to follow up on this, you mentioned that, you know, there is no more capacity addition happening, and therefore, you know, there is no such disruptor. At the same time, the counterpoint over here, what we also hear is that, the consumption has also slowed down significantly, not only in China but across the world and therefore. The mills which are already have been commissioned over the last decade or two continue to churn out the same amount of steel. Therefore, on one hand, while there are no more, additional capacities being built, the existing capacities themselves are sufficient enough to flood the market. Just wanted to, you know-
Sure.
From that line.
Vishal, basically what if you see the World Steel Association forecast, the steel consumption is forecasted to continue to grow, but where it is growing is changing. You know, the growth outside China is today more than the growth in China. Okay, so China's pretty flat growth. But also we should keep in mind if you know, China grows 1%, that itself is 8-10 billion tons, you know? So that's the kind of thing which is happening today. We are not seeing. A lot of capacities which you see are coming up even in China, electric arc furnace capacity is replacing the smaller blast furnaces, the induction furnaces which they closed.
That's why China's exports are stuck at 4-5 million tons for the last few years, right? It's not increasing, right? Even if consumption has not been growing so much, but consumption is still at 950 million tons to a billion tons. In India, the consumption is growing. In Southeast Asia, it's growing. Africa has not even started. It's 1 billion people consuming 40 million tons of steel, right? And a lot of, you know, consumption yet to come in many other parts of the world. There is a view that, I mean, if you see the World Steel Association long-term forecast, the steel consumption is going to continue to grow. Like I said, capacity addition is nowhere near what it was, what was happening when China was growing, right?
That's where, I mean, we can debate this point, but we feel that the situation is different today than it was 15 years back.
If I may just add to your previous question, Vishal. I think the other point, since you started the point by saying, why not deleverage more? At no point are we saying that we have stopped deleveraging. We are saying that we'll continue our deleveraging path, and we are not saying that our leverage will be the provider of capital for our growth. Our balance sheet priority remains the same. All that we are saying is that we would allocate capital more for accelerating. First priority is to complete Kalinganagar, which helps us to complete our existing project, and then look at an upward bias, taking all the factors. I'm just replying or adding to what I replied to Abhijit.
It's a triangulation of deleveraging, return to shareholders as well as CapEx, because there is a need to continue to grow capacity competitively, looking at new technologies and looking at different business models. That builds in lot more sustainability to Tata Steel in the future. I think that is something that we would continue to focus on. It's not that it's one or the other. It is a combination of and balancing of priorities.
is from Prashant Kumar of Dolat Capital. Please go ahead. It looks like we have lost our line with Prashant. We will now proceed to our next question. The next question is from Anuj Singla of Bank of America. Please go ahead.
Can you hear me?
Yeah. Yeah.
Yeah. Thank you very much for the opportunity. Koushik, I think this quarter again a very impressive performance on deleveraging. What took me by surprise was the working capital reduction. Can you talk about you know what steps are being taken? You talked about the debtor and the inventory days being brought down as well. Can we expect this to sustain in the next year given where coking coal prices are and you know we have also seen iron ore pricing being elevated. How sustainable are these working capital initiatives going into next year?
Anuj, I think all of these initiatives are sustainable, provided we look at it from a full year perspective and not from a quarter-on-quarter perspective. Because the volatility, the way it is running. For example, our purchase price of coal in March is going to reflect in the consumption cost in this quarter. Similarly, it happens with a lag. There is also, in terms of the debtors, the value of the debtors is much higher, not because of the tonnages represented by it, but because of the prices. Certainly we are looking very sharply and continue to look at it, and I think it is more structural than just being a one-off measure. I think you have to look at it across.
For example, just now I would urge that we look at the first half in totality as we move forward, but and then the second half. Then for the full year, I think the full year basis, I think we are very confident that we'll continue on the same path.
Okay, got it. The second question is with regards to the capital allocation. Mr. T.V. Narendran did point about the growth optionality on the organic side. Now, there are a couple of assets which are on the block on the inorganic side, NMDC plant, RINL plant. I mean, yeah, we have asked this question before as well, but just want to, you know, get your thoughts again. What is the strategy around that in terms of bidding? Are we now very comfortable with the organic growth pipeline and they will take a back seat? How do we look at the growth trajectory for the 40 million tons, you know, target which we have over the next decade?
I think.
Go ahead.
Sorry.
Go ahead. Go ahead, sir. Go ahead.
I think, if I were to look at our current footprint that Naren elaborated on between Neelachal, Kalinganagar and in Meramandali, which is the ex Bhushan Steel facility. There are significant opportunities for scaling up growth in each of these sites using state-of-the-art technologies, using carbon-friendly approaches or paths that helps us to reduce our intensity. Add to that the greenfield sites that we are talking about as far as the electric arc furnace process is concerned. Pretty much set for now. If there are opportunities, we'll have a look at it for sure. I think our base plan considers these organic growths. I think that's where the capital allocation will be helpful. That's where the trade-off and the paybacks are much better.
It's all brownfield. It can be paced, and it can be allocated as we earn. I think that's our base plan. Opportunities come about in various areas. We look at it. It has to meet some hurdle rates given our counterfactual on the organic growth.
Got it, sir. Last question, if I may. On the global footprint, we were earlier looking for some kind of strategic solution to the European assets. Given where steel prices and spreads are right now, are we comfortable with the kind of profits and cash flows we are making there, and does that plan take a back seat now, or we continue to explore opportunities there? Thank you.
I think, you know, to be fair, at this point of time, we've gone through a strategic restructuring of our European business. We have separated the Netherlands and the U.K. Each one of them are pursuing their transformation plan and their decarbonization plan. That's a very important part of the long-term value of Tata Steel in the Netherlands and Tata Steel in the U.K. As part of that, our focus is currently on getting these things right, pushing for higher value through the cash flows and the earnings. If there are opportunities as part of this, we'll certainly look at it. It has to be done in a manner where the priority is the decarbonization. Priority is the way in which we are generating profits and cash flows.
I think that remains the single most important thing for the local management as well as for us in, as a shareholder. Therefore, I wouldn't kind of say that we are comfortable or not comfortable. That's not how we look at it. We look at it, what's the immediate priority. I think in Netherlands as well as in the U.K., getting the best of the current situation in the market and getting cost out, getting the transformation programs continue to deliver, is the most important priority so that we can ensure that we any way create value out of these enterprises.
Thank you very much.
The next question is from Sagar Doshi. Please go ahead.
The question is regarding the CapEx at Kalinganagar plant. What top line addition will we get by completing this CapEx? What could I expect in, let's say, the last quarter of FY23 once this CapEx is done? That's the first question.
Yeah. Sagar, basically this year we will complete the pellet plant, which has more of a cost impact than a revenue impact. It will have a significant cost impact once we commission it. The cold rolling mill, what we call the PLTCM, will get commissioned. That will give us what we call full hard cold rolled product, which will have to be annealed and galvanized. Annealing and galvanizing facilities will come up in the, you know, last quarter of this year and the first two quarters of the next financial year. The revenue side impact will be felt more in FY 2024 than in FY 2023.
In FY 2023, we'll start realizing the cost benefits of Kalinganagar, and the full revenue impacts will start flowing through from the subsequent years when the blast furnace is up and you have 5 million tons additional production in place.
Okay. Got it. Also, just one more thing on coking coal. As we see that, its increase in the price has escalated. How much of the coking coal requirements that we have is, let's say, sourced in-house and how much we need to buy from outside? What is the ratio? And do we have any steps to increase our in-house production at this stage?
The in-house, in India it's 25% in-house, 75%, bought out. In Europe it's of course 100% bought out. In India we are planning to increase our capacity, double our capacity, but because our steel production is also going to double, the percentages will be in the 20%-25%.
Okay. Thank you, sir.
I would now like to hand over the conference to Ms. Shah for the chat questions. Over to you, ma'am.
Yeah. Thank you, Kinshuk. I think we have a number of chat questions, and let's try and answer as many as we can. The first question is on the recent coal shortage in India. Is there any impact on operations or customer operations and orders? Naren, would you like to take this?
Yeah.
You know, what we buy is largely metallurgical coal, which we import. There we are not impacted by the coal shortage. The DRI operations that we have in Bhushan, erstwhile Bhushan, which is what we call Tata Steel Meramandali, and the Gamharia operations, which is the Tata Steel Long Products operation, buys DRI. That also we import a lot from South Africa, et c. There is sometimes a bit of a challenge, I mean, it's a challenge, that's all. It's not that we have to shut down the operations because coal is not available. As far as the customers are concerned, you know, I think wherever the states there are power cuts, yes, some of the customers are impacted.
It also impacts producers, because a lot of secondary steel producers are also dependent on power supply. As of now, we are not seeing the demand impact significant, or material. You know, so it's something we are watching, but not yet having a direct impact on us.
Yeah. Thank you. There are a couple of questions on our guidance on sales. This is for FY23 for Tata Steel in general. There's also a question on NINL in terms of sales from NINL expected in this year.
The guidance on sales for this year is, without NINL, about 0.5 million tons more, because we are pretty much running full out across all our capacity. Till the 5 million tons comes out of Kalinganagar, whatever incremental sales we do is more through debottlenecking. Of course, there will be significant value addition once the cold rolling mill comes in Kalinganagar, because that's adding value to the existing sales mix. We will of course continue to enrich the sales mix also through more sales to the more value accretive segment. All that continues. As far as Neelachal is concerned, the capacity is 1 million tons, but the plant has not been operational for the last two years.
We are confident that we can get the plant started, at least the blast furnace started, within three months of getting ownership of the facilities, which we hope to have during this quarter. The coke ovens there will need a bit more time. By the end of this financial year, we hope to be operating at the rate, which is 100,000 tons, 80,000-100,000 tons a month. How much of production will we have during the year? I think we'll be in a better position to give that guidance once we have ownership of the place. I think when we do the Q1 call, maybe we'll be able to give you a more specific guidance.
Thank you. Couple of questions on the financials. First one is, what is the net debt target for FY23 and FY24? I think you answered that question, but I think it's coming consistently, so maybe you just want to re-clarify.
I keep saying it again that we have an announced policy of $1 billion, and let's stick to it. We just started the year. We'll see how the market and the business works and the cash flows. Based on that, we'll take a call. Certainly $1 billion, and that's something which we have committed to.
Thank you. The other question is on the swing in EBITDA of other India operations, which we have in other India and other trade related operations. Can you explain why there has been such a huge swing, and how do you see this going forward?
Are you talking of the other income?
No, other EBITDA. India, Europe and the other EBITDA.
The other EBITDA effectively reflects our other subsidiary companies. I think most of them are doing significantly well. Apart from one or two companies, I think most of them have performed well. I think consistently, we should have an additional other income from subsidiaries, which would continue to beef up our consolidated EBITDA.
Thank you. There is a question which we have on Russia. What is the rationale behind cutting ties with Russia for Indian operations, especially when their coking coal can be procured at a discount at a time when coking coal costs are at a record peak and has squeezed margins?
Yeah. I think, you know, obviously there were operational issues and other complexities because we are a global company operating across footprints. Certainly in Europe, we couldn't be buying from Russia. In India also, it was not that we were buying significant volumes. There was also lack of clarity in between on how can we transact. As a company and a part of group which has a global footprint, a call was taken that we will not be transacting with Russia for now.
Thank you.
Also, we use the procurement always on a value and use basis. Given our long contracts and supplier relationships with their existing suppliers, it was a prudent thing to do.
Thank you. There's a question on Europe which we will take. Just trying to get greater clarity on the performance. It says, in terms of operations, what has really driven quarter-over-quarter profitability for Europe? Because realizations did not move materially, as the EBITDA per ton, because there was a steep hike in all cost items. Was the offset on iron ore quarter-over-quarter decline so material?
There was about 100 million pounds lower than cost of raw materials, which is essentially because the lower cost of iron ore offset the higher cost of coal. That's been one of the areas. The liquidation of inventory, which was there, is the other element. Actually, the prices have also increased. I'm not sure why they're saying that the revenues have not increased, because the contracted prices have been reflected. The contracts which were renewed in December in the third quarter have fully reflected in the fourth quarter. I think it's been a spread increase which reflected in the EBITDA increase.
Thank you. There are a couple of questions on the subsidiaries. The first question is on Tata Steel Long Products. Is there a business case to merge Tata Steel Long Products with Tata Steel post the changes in the MMDR Act, which are leading to a higher royalty incidence on Tata Steel Long Products? The second question is a request for an update on the merger with Tata Metaliks. I think last time we had said we are reviewing it. You know, the question is on an update on the same.
As far as the first one is concerned, we continue to look at options as to what is best to avoid any value leakage. There are other operating models that we are also evaluating, which, if it is economically viable, will be implemented. Tata Steel Long Products, as everyone knows, is also the company which bid for NINL, and there are certain restrictions at this point of time as part of the process to do any corporate actions. We will continuously review it, which is also indicative of the Tata Metaliks merger process, because the entity which was used for valuation at that point of time is very different at this point of time. Therefore, we are looking at all of this.
It's taking a bit of time because we first want to close the NINL and then take a call on the whole consolidation play for the Long Products and other subsidiaries.
Thank you. There is a question on our performance and EBITDA per ton. You know, as everybody knows, we don't give any guidance, but I think maybe a slightly more deeper flavor. The question is, we expect in Q1 the NRs we have indicated will increase by around INR 8 and half thousand per ton, but we also say that coking coal consumption costs to increase by about $100. Is it fair to assume that the EBITDA per ton sequentially can be maintained?
Yes.
Answer is yes.
Thank you. And I think we'll take one more chat question before moving back to audio. So the question is, do you have any update or any targets in terms of revenues for your new material businesses, the graphene, ceramics, etc ? And similarly, do you have a target for your downstream revenues by 2025?
The new materials business has crossed INR 500 crore and, you know, we expect it to cross about INR 1,000 crore over the next few years. We've just invested in medical materials, which we think is a great hydroxyapatite and things like that, which we think has great potential for growth because a lot of it is imported today. We're doing a lot of work on that. There's very aggressive growth plans, certainly four-digit kind of numbers very quickly, and then, let's see how we can scale it up further. They are newer businesses for us, so we've had good traction so far.
At one point in time, we were chasing 10% of our revenues from new materials, but since then, our own existing revenues have gone up very significantly, so we will revisit that. The ambition is there. There's going to be very significant growth, obviously double-digit CAGR, if not more. Right? Yeah. What was the other one, Samita? That on the subsidiary, on the downstream. Yeah. Kaushik, you want to take that?
downstream subsidiary, are you talking? I don't know whether the question relates to the SPDL.
Actually, I think it's referring to our downstream volumes.
Okay.
Not subsidiaries, but, you know, the tubes part. Yeah.
Let me take that. Basically, if you look at it, we are a very strong player in many downstream businesses. In tubes, with the Bhushan acquisition, we have now become a very big player. We were already quite big. We are one of the largest in India, both in precision tubes, regular pipes, structural pipes, et c. We are more than 1 million tons and continuing to grow. In wires, again, we are the largest in India, and we are again, chasing 1 million tons of wires. The Neelachal acquisition will give us an upstream that is required to further support growth in downstream. In tinplate and packaging, we are doubling. We are in the middle of an expansion. In galvanized products also, we are significantly expanding, with Kalinganagar.
The Bhushan acquisition will also help us grow the color-coated footprint that we have, which will also more than double. Currently, we are on the joint venture with BlueScope, but this facility together with that more than doubles our footprint in coated products. Pretty much in all the downstream businesses we are in. In addition, of course, we are moving more and more into solutions, whether it is nesting solutions, which is again a business which is doubling every year, which is now, you know. Also our doors, windows, those kind of solutions for the house builder with whom we already have a relationship. Again, this is a business, all these businesses have grown to about INR 500 crores now, and again will cross 1,000 crores very quickly.
We believe that going more downstream, going more into solutions, will help us ride the cyclicality much better.
Thank you. I think there are a couple of questions which I will just take and then move back to audio. I think some clarity in terms of NR increase. I think India we've said and Europe as well, but seems to be a lot of questions. Maybe just a flavor of what we expect on the NR side in Europe particularly.
About EUR 60 a ton, Q1 compared to Q4. In India we said about INR 8,000-INR 8,500 per ton, Q1 compared to Q4.
Thank you. With this we will go back to audio questions and over to you, Kinshuk.
Thank you, ma'am. The next question is from Ritesh Shah of Investec. Please go ahead.
Hello. Am I audible?
Yes.
Yeah. Hi. Sir, I had a couple of questions. First was any timelines on the relining of the furnace for Tata Steel Netherlands? And will it have any impact on volumes? How should one look at the CapEx related to that? That's one. Secondly, you also did indicate about moving from coal to gas to hydrogen. What are the timelines that we are looking at, and how should one understand this in a better way if one is taking a three to five year call on the company?
As far as the Netherlands is concerned, the blast furnace six is actually due for a reline. It was due some time back, and we've extended it as much as possible. It's being prepared for a reline sometime next year. In anticipation of that, we've been building slab stocks. Some of the working capital increase that you see in Europe is because of the slab stocks that we've been building. When the furnace goes down, the downstream facilities will continue to have the feedstock that is required. The volume impact will be minimized. It is going to happen towards the end of this financial year, and you know, we'll give more specific guidance on that. Largely, like I said, we are trying to insulate the volume impact by building up the slab stock.
In fact, there'll be a cash re-release as you use up the working capital, which is pretty locked in those slab stocks. The BF7, which is a bigger blast furnace, when it comes up for relining, that is the one which we want to transition first. You know, but again, that needs to now be reconciled with the gas situation in Europe and whether the gas that was available earlier is going to continue to be available, given this issue between EU and Russia as far as gas supply is concerned. So we'll take that call. This is something we are working very closely with the government, and we will take that decision to transition to gas once we have clarity and comfort that gas is available.
Hydrogen was due to be available to us by the end of the decade. It may happen earlier if EU wants to transition quicker to hydrogen. We will align our timelines with the timelines of availability of both gas and hydrogen and plan accordingly.
Sure. Sir, my second question was on mining capacities. We have indicated that it will go to 60 million-65 million tons by 2030. I think we already have the growth optionality to put more into the market. How should one look at merchant sales, say, three years, five years out? Because that's one variable which we do not capture in our models.
As far as iron ore is concerned, we have two kinds of mines with us. The ones which we have from the past, which are captive mines. There is an optionality if you are fully meeting your requirements to sell some at a higher premium, etc . Today, you know, the rate at which you're building steel capacity, I think the mining capacity is just about able to keep pace with it. The second one is what we bid and won, and we have deliberately bid for what are more greenfield mines, which takes a few years to develop. Because we wanted that capacity to be in place as we come closer to 2030 when our existing mines will go up for auction.
We may not have much available to sell in the market apart from some fines, et c, you know, out of some of the mines. It's not going to be very material, you know. The merchant mine opportunity is not going to be very material for us, at least for the next few years. Post 2030, of course, that's certainly an optionality which we can leverage. It's an optionality for us in the chrome ore side, where we've got the mines. Of course, there also we would prefer to value add than sell the ore.
The next question is from Indrajit Agarwal of CLSA. Please go ahead.
Hello, can you hear me?
Yeah, yeah. Yeah, we can.
Sorry.
There was some voice in the background. Yeah.
Sorry. Two questions from my side. First, can you help us understand the carbon situation in Europe currently? What is the availability, the allocation, and would we have to end up buying something for FY23, and what kind of cost impact would it have?
Yeah.
Okay.
In Europe, as you know, there's a mechanism whereby we get the free allowances from the government or the regulator based on the average production for the last three years. Then there is the gap to the free allowances, which you have to buy from the market. As far as Netherlands and U.K. are concerned, in Netherlands in particular, we produce about 6.9 million tons of liquid steel, and therefore there is an emission of about 12 million tons. The allocation is about 10 million tons. There is a gap of 2 million-2.3 million tons, and that's something that is built into the plan to purchase from the market.
The EU ETS price, and I'm talking about last year's numbers, and the EU ETS price gone up to, say 80 EUR per tonne. That's been factored in the performance that you see in the year. Typically, that is, that's something that will continue for the future, and which is why the decarbonization is going to work. We expect a gap of about 1.5 million-2 million tons in Europe, in Netherlands and also in the U.K. That's the part that you have to buy from the market to put to kind of meet the requirements.
There are ways in which you can mitigate it or spread it over time, because you also get free allowances ahead of the usage. That's why you would see us working to optimize that model. Fundamentally, we have a gap to the free allowances. Over a period of time, these free allowances somewhere around 2030-2032 or 2033 will eventually come down. By which time we must have our configuration ready, where we don't depend on the external purchase.
Sure. Thank you. That's helpful. Secondly, can you throw some light on how European steel demand has been, particularly given the sharp rise in prices over there? Are you seeing some pushbacks in terms of demand getting weaker gradually?
I think the demand has been quite strong actually. The challenge has been more with the auto sector because they have struggled a bit because of semiconductor issues, etc . Otherwise, so far the demand has not been an issue. In fact, what's also happening is on the supply side, as you know, Russia and Ukraine are no longer in the European market, and that has created a gap on the supply side, which is why the prices in Europe shot up lately. The demand supply balance is there. You know, it's not disrupted.
Sure. One last question, if I may. You highlighted about several EAF-based capacity expansion in India, particularly the northern and western side. How confident are you on the scrap availability or the raw material availability domestically? Or do you think you will have to bank a lot on imports for this?
Currently the thinking is more to leverage what is available domestically. We believe that the scrap collection and recycling ecosystem in India can be better organized. Also the ELV, end-of-life vehicle thing which is coming in is also going to generate a lot of scrap. We will partner with dismantlers. Auto companies are themselves setting up dismantling facilities. We are not interested in dismantling. The steel component of the car is something we are interested in, and so we will tie up with dismantlers, take the scrap. In addition to that, there is prompt scrap which is generated from manufacturing practices.
We will set up the scrap processing centers closer to where we feel scrap will be generated, and hence the first one in Rohtak, and we are looking at other sites in the west and south where scrap is being generated. The whole approach is about collecting the scrap, melting it, rolling it, casting it, fabricating it, etc , and selling it within the same vicinity. Not only do you produce steel through a more carbon efficient route, the carbon footprint of the whole supply chain is also minimized because there's not much of movement of either the input or the output. That's the model. We believe it's going to be important to have a more carbon efficient footprint going forward. It's easier for us to scale up faster once we get the model and the operations right.
Before we take the next question, I would like to remind the participants to please limit your audio questions to two per participant. Should you have a follow-up question, we request you to please rejoin the queue or post it in the chat box. The next question is from Chetan Mehta of BOB Capital. Please go ahead.
For me?
Yes, please.
Yeah. I had a sort of question on the NINL. You have indicated that your first priority is to sort of take it up to a rated volume of 1 million ton, and in the longer term there is an optionality to increase it to 10 million ton. Would it be possible to share the options that you would be considering to develop your long products portfolio at this point of time? What could come over next two, three years?
Chetan, there are a few things which are happening. One is, there's already a project ongoing to add a rolling mill to the what is called Tata Steel Long Products. That will add about 400,000 tons of rolling capacity. Because we have steelmaking capacity which is not fully utilized, so we can leverage that. That is one thing which is going on, and it will help us supply steels to the passenger car industry, forging quality steels to the passenger car industry. The second one is Neelachal. Neelachal, like I said, has a footprint of about 1 million tons currently. We can very quickly ramp it up to 4 million tons. It will all be long products. All the Neelachal expansion will be long products, just like expansion in Kalinganagar or Angul or Meramandali will be flat products.
Meramandali and Angul is the same place. The long products opportunities are threefold. One is value addition in existing Tata Steel Long Products. Two is the electric arc furnace facility which we talked about, and using scrap recycling. The third is the Neelachal expansion. These are the three opportunities that we will pursue for long products.
Right. On long products at Neelachal, to take it up to 4 million tons, what level of CapEx would it require? Some initial color.
It is like building any greenfield site. It will of course be a bit less because it's long products. Normally, the flat products cost is much higher. You know, if you're looking at adding about 4 million tons, maybe about INR 25,000 crores is what we think. But we will come to a better estimate once we get into the site and do a more detailed analysis.
The next question is from Anupam Gupta of IIFL. Please go ahead. Anupam, there seems to be a network issue at your end, as we are unable to hear you clearly. We request you to please find a stable connection and rejoin the queue. We will now move to Kamlesh Bagmar from Prabhudas Lilladher. Please go ahead.
Thanks for the opportunity. Kaushik, one question for you, sir. Like, say, how much spending is left on Kalinganagar Phase 2? I believe it was INR 23,500 crore, which we had to plan to spend on that expansion. How much is left now till now, sir?
About half of it. We also re-scoped it based on the current requirements, etc . Roughly about half of it is there.
Okay. Sir, secondly, on this provision related to Tata Steel Mining. How much have we provided in this particular quarter? Sir, can you give us some clarity that the way the swing has been there in this other Indian operations. Like, say, from INR 400 crore, it moved down to, like say, INR -900 crore. Can you provide some clarity on that part, how it can move going forward? Or like, say, so that we can factor in something for that in our quarterly earnings.
I think I would say that there are two parts to Tata Steel Mining. One is relating to the stock or inventory that was there, which came from the previous mining in Sukinda when we had gone in, and we had enhanced our mining. What we have done is we have taken a net realizable value adjustment, which is one-time, that's INR 540 crores. Second, is as part of the MDPA, there has been a certain amount of penalty and demands that is being asked to from a compliance point of view because the law changed post our acquisition. The law was the MDPA to be paid on production. Thereafter it changed to dispatch. Then COVID happened.
We couldn't kind of use it for exports, because it has got prohibitive export duty. Now with Rohit Ferro-Tech, we have the ability to actually use it for downstream ferrochrome conversion. That was almost about 600-800 crore INR of provisioning. Both are one time. The underlying business of all other subsidiaries have been very strong in India. I think you can safely assume that this is one time and wouldn't get repeated. About 800-1300 crore INR of this.
Okay, great. Great. Thanks a lot, sir. Thanks a lot.
The next question is from Pallav Agarwal of Antique Stock Broking Limited. Please go ahead. It looks like we have lost our line with Pallav. We will now proceed to our next question. The next question is from Ashish Kejriwal of Centrum Broking. Please go ahead.
I think it's getting closer to lunch break.
Yeah, I was about to say that.
Ashish, if you can hear us, I think there is some audio connectivity issue at your end. If you can hear us, please do let us know.
There's a connectivity issue, so I think with that, we will end the call. Thank you everyone for joining us on the call today. I hope we could answer all your questions, and I hope you found it useful and informative. Thank you. Take care, and we will join again next time. Bye-bye.
Thank you.
Bye-bye.