Q4 20/21

May 5, 2021

Ladies and gentlemen, good day and welcome to the Tata Steel Limited Q4 FY 2021 Earnings Conference Call. As a reminder, all participant lines will be in listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Ms. Samita Shah. Thank you and over to you ma'am. Yes. Thank you. Good evening, good afternoon and good morning to all of you. Firstly, I hope you and your loved ones are in good health. Thank you very much for joining us before today to discuss the Tata Steel results for the Q4 of FY 2021. We will also answer any queries you may have on the performance Tata Steel DSL and Tata Steel Long Products. The call is being led by Mr. Tighe Naranjan, CEO and Managing Director, Tata Steel and Kaushik Chatterjee, Executive Director and CFO, Tarifi. The call is also open to our retail shareholders. So please feel free to type in your questions and we will try and answer as many questions As always, the entire discussion will be covered by the Safe Harbor clause on Page 2 of the results presentation, which has been uploaded on our website. Thank you and over to you, Nayan. Thanks, Amita, and good afternoon, good evening and good morning to all of you depending on where you've dialed in from. And again, Echo, Samita, and I hope all of you are safe and your families as well. So as far as the Tata Steel performance is concerned, the first half of the financial year twenty twenty one was The challenging period with the uncertainties and complexities brought on by the COVID-nineteen pandemic and since then the global economy has been recovering driven by the accommodative policies followed by progressive vaccination. India has also seen a sharp recovery driven by government spending, accommodative policy and improving liquidity. However, currently India is facing a severe second wave of COVID-nineteen and in these difficult times we are working to minimize the impact on our employees, communities and customers. We have also been working towards supply more oxygen to collectively fight against the pandemic and we are currently supplying about 1,000 tonnes a month of liquid 1,000 tonnes a day of liquid The different parts of the country are going to about 8 states and so far we've supplied about 40,000 tonnes already since the 1st April. As far as the industry is concerned, the Chinese steel demand remains robust, driven by strong fundamental economic fundamentals on the back of policy support, While supply appears to be tighter on pollution control led production curves. In the rest of the world also supply improvement is lagging demand recovery. As a result, the steel prices continue to increase across regions and regional steel spot spreads have also seen upward improvement. China has recently announced removal of rebates from steel export, which is likely to further support regional steel prices. During the Q4 FY 2021, Indian steel demand improved about 0.6% quarter on quarter and 19.5% year on year, Most of the steel consuming sectors are witnessing a broad based economy. Domestic steel prices continue to improve amidst robust demand, Supply tightness, iron ore cost pressures and higher international steel prices. Current prices are still at a large discount to import parity prices and the onset of the 2nd wave of COVID-nineteen is of course a key risk for the ongoing demand recovery. Moving on to our performance during the quarter. During the quarter, we achieved best ever quarterly crude steel production of 4,750,000 tonnes in India. So FY 2021 production was lower due to the pandemic driven disruptions in the Q1. However, we achieved highest annual delivery volumes of 17,300,000 tonnes in India And our quarterly deliveries improved 16% on year on year basis to 4,670,000 tonnes. All our segments have performed extremely well due to our Our focus on building strong customer relationships, superior distribution network, brands and new product developments. During the quarter, we achieved highest ever quarterly delivery volumes in Automotive and Special Products segment and our Branded Products and Retail segment also grew positively on both Quarter on quarter and year on year basis. We are also making good progress on our various initiatives to de risk the business. Asciana, which is one of our digital marketing platforms, Clocked over INR 726 crores of revenue this year and is helping us reach new markets and be future ready. In fact, we are at INR 80 crores a month now in terms of Monthly revenues. We continue to work on our strategic priorities to maximize shareholder value. The business has generated very strong cash flows and as committed, We have used it to deleverage sharply this year. This will continue to be a priority, though we will complement it by investing in future growth and profitability. Firstly, we expect to increase the India sales volume in FY 2022 by over 1,000,000 tonnes to around 18,300,000 tonnes through debottlenecking and capacity ramp up across our various sites. As mentioned earlier, we have already restarted work on the pellet plant and the cold rolling mill complex, which is progressing well. And we are also restarting the other part of the Kalinganagar project, which is the balance of the 5,000,000 tonne expansion and this is expected to be commissioned in FY 2024. While this will increase the CapEx, it will be phased out over the next few years. The economic activities and the overall steel demand has been recovering gradually. We ramped up our steel production with the improving market conditions and our steel sales volume increased by 17% quarter on quarter to 2,470,000 tonnes in the March quarter. The spot hot rolled coil gross spend improved during the quarter with higher steel prices, which have started translating into the profitability of our steel mills. Our reported EBITDA at Tata Steel Europe sharply improved in the March quarter, while underlying performance was much stronger. This should Improve further in the coming quarters. In this March, we received shareholders approval to go ahead with the merger of Tata Steel BSL with Tata Steel And we filed a joint LCLC to sanction the merger scheme with effect from 1st April 2019. We continue to move ahead with the reorganization of our Indian subsidiaries to the 4 verticals to drive scale, synergies and simplification. We have transferred our investments held in JCAP CPL, a joint venture with Zippel Steel and also Tata Blues Group to Tata Steel Downstream Products Limited, a wholly owned subsidiary of The merger process of Tata Metallics and ISWP into TATA Steel Long Products is also progressing well. I will now hand it over to Kaushik to comment on our financial performance. Thank you, Narin, and good afternoon, good evening, good morning to all of you. Let me talk about the few comments on the financial side. Despite the unprecedented challenges this year due To be on-site of COVID-nineteen pandemic, Tata Steel has emerged financially much stronger. We have delivered strong financial performance during this Quarter with the highest ever consolidated EBITDA supported by highest ever EBITDA from the Indian operations. This quarter, you would have noticed that we have now included Southeast Asia back as a continuing operations. Our consolidated revenue increased During the quarter by 19% Q on Q and 39% year on year to INR 49,977 crores. Our consolidated EBITDA grew by about 48% quarter on quarter and 196% year on year to INR 14,290 crores with strong underlying performance in both India and Europe. Our India operations, which includes standalone Tata Steel BSL and Tata Steel Long Product generated revenues of INR 30,070 crores, which translated to a 19% quarter on quarter 54% year on year growth. We achieved EBITDA of INR 12,295 crores During this quarter driven by higher prices, better product mix in the domestic market. This translated into an EBITDA per ton of 26,309 and an EBITDA margin of 40.9%. The Tata Steel standalone revenues improved 18% quarter on quarter and 49% year on year to about INR 21,203 crores, EBITDA grew by about 37% quarter on quarter and 151% year on year INR 9200 crores, which translates to an EBITDA margin of 43.4% and an EBITDA per tonne of 27,800 and Stand alone operations generated a free cash flow about INR 6,700 crores during the quarter. Our key subsidiaries, Tata Steel BSL and Tata Steel Long Products have also delivered strong operating performance. Tata Steel BSL generated an EBITDA of INR 2,583 crores, which translates into an EBITDA per ton of INR 21,648 While Tata Steel Long Products generated an EBITDA of INR506 crores, which translates into an EBITDA per tonne of INR 29,439. Both entities generated free cash flows of more than INR 3,000 crores and INR 4 100 crores respectively. Our other Indian subsidiaries like Tata Metallics, Tin Plate and other downstream subsidiaries also reported strong results with combined EBITDA increasing by 38 Quarter on quarter to INR 425 crores. Moving to Europe, the reported EBITDA for the quarter was £125,000,000 With improved steel prices and higher deliveries, in the quarter, we had also taken a 47,000,000 Charge due to the sale of CO2 emission rights, which were sold earlier in the Q1 of 2021. This is more a one off charge And will not have any impact in the coming financial year. During the quarter, we took a non cash impairment charge of INR 7.23 crores, Primarily with respect to our overseas operating entity, this is included in the exceptional item of consolidated accounts. You would have noticed that there is a gain on transfer of investments held in JCAP CPL and Tata BlueScope in the standalone accounts. As it is a subsidiary of Tata Steel, it gets eliminated at the consolidated level. With strong underlying operating performance in India and disciplined Capital allocation, we were able to generate about free cash flows of about INR8,800 crores During the quarter, the annual free cash flow generation was about INR 24,000 crores in financial years 2021, Driven by our enterprise strategy on debt management, we deleveraged our balance sheet extensively and aggressively, Prepaid debt our gross debt was reduced by INR 27,827 crores, While our net debt was reduced by more than 28% to INR 75,389 crores in financial year 2021, Our credit metrics have improved significantly with net debt to equity improving to 2.4x As on 31st March 2021, my net gearing stood at less than 1 at about 0.98. This will also reduce our interest costs going forward and we continue to intend deleveraging the balance sheet as we move on in the next Financial year. Our liquidity position was more than INR 20,000 crores at the end of March 21. We had further deleveraging scheduled in April, which has We remain very disciplined on CapEx spend during this year. We spend about INR 2,350 crores On consolidated CapEx during the March quarter, which takes the full year CapEx to about INR 7,000 crores in financial year 2021. As Narin mentioned, we have decided to restart our work on the upstream facilities in Kalininganagar. Our financial year 2022 consolidated CapEx Will be broadly around INR 11,000 crores including INR 7,500 crores in India. As you would have also noticed that the Board of Directors on the basis The performance of the year has declared a dividend of INR25 per share for the year 2021. With this, I will end here and open the floor to the questions. Thank you. Thank you very much. We will now begin the question and answer session. Ladies and gentlemen, we will wait for a moment while the question queue assembles. A reminder to the participants, Please limit your questions to 2 per participant. Should you have any follow-up, we would request you to rejoin the queue. The first question is from the line of Anoop Singla from Bank of America. Please go ahead. Mr. Anup Singla, your line is in talk mode. Kindly go ahead with your question, please. I was on mute. Thank you very much for the opportunity, sir. Amit, Tahiti, the first question for you. The carbon credit expense in Europe, insurance of 1 off seems to be recurring on a quarter on quarter basis. There have been multiple quarters we have seen that. What kind of provisioning should we be building into the next year? So is it I do understand that there is a declining trajectory of the carbon credit allocation in Europe as well. So based on your analysis, what we would have done for the next year, what Kind of impact will you see it for the full year next year? So Anuj, we What I mentioned as one off is because we had monetized some of the carbon credits in the first quarter, Which we have to we had to top up or true up during all the quarters during the year. So that is why I said it is one off. It's not something that we would do in a normal course. And that part will not be the case in the coming year Or the years ahead. What is there in your second part of the question, In Europe, the fee allowances will keep coming down and it depends on the production level actually And what is the level of production that companies will do? And it is on that basis, it could be It's going to be part of the operating cost. It's not going to stick up like this. And in the operating cost, you would See somewhere around £20,000,000,000 in a quarter, but that is part of Already is for example in the $125,000,000 reported EBITDA that includes about $20,000,000 on account of The normal operating pull up of the carbon cost. Okay. As There was news for that in Europe we have started putting a carbon surcharge for the customers as well. This was basically towards passing on some of these costs to the end customer. How successful you have been about efforts in there in that regard? So currently yes, sorry, go ahead, Nayan. Go ahead, Nayan. So the as the carbon differential Is emanating in Europe? The Tata Steel Europe has put a £12 per tonne carbon surcharge on the price and that is being recovered The customers at this point of time. Okay. So that's already been implemented and customers are paying that? Yes. Okay. Understood. That's part of the overall price increase that's happening in Europe. Okay, understood. The second question on capital allocation, you spoke about Kaliningrad being resumed about there. But this is going to be, as Mr. Nadeem mentioned, FY24 story. And then we have probably FY2023 2024 in terms of volume growth. It might be subdued. So are you looking for any inorganic growth opportunities as well, while the organic growth opportunities take time to materialize? Yes. So Anuj, basically, telling another yes, As I said, FY 2024 is when the blast furnace should be coming in. Over the next year or so, we will start getting the cost advantages of the As a pellet plant is commissioned and by during the next financial year the cold rolling mill will get commissioned and that should help us in the margin enhancement and revenue enhancement Even if the volume enhancement is not there. In terms of additional volumes, we've guided that this year we will in India have at least 1,000,000 tonnes more than last year because that's the production that we lost in the beginning of the year. So a part of it is coming from there. The second opportunity for us, of course, just now the international prices are better than the domestic prices. But last year, we exported more than we normally do. So we exported about 3,500,000 tonnes, whereas probably we export about 1,000,000,000, 1,500,000 tonnes. So that is additional volume available for us to divert from the international markets the domestic market, if the demand picks up and the prices are good. In organic, yes, we are certainly Interested in the opportunities that come our way. We have said that we will focus more on long products assets because we have a good Opportunity to grow flat products in Angul and in Kalininganagar. And so we'll be looking for opportunities more Understood. And lastly, Mr. Chatterjee, on the working? So sorry The next question is from the line of Pinakin from JPMorgan. Please go ahead. Yes. Thank you very much. So my first question is that if you look at this Once in a lifetime steel environment, the cash flows of the company are very, very strong. While Tata Steel has restarted Another Phase 2 project. Can we get a better sense of how the company is looking at the various growth optionalities over the next 2 to 3 years and basically stack it up against the balance sheet. What we would like to understand is that what is the hierarchy of growth projects that the company would pursue or would like pursue, there is Angul, there is Kaliningana, there is Jamshedpur, there is Longsteam Products. And what are the markers that the company will want to see before it goes ahead with those Is it a certain amount of net debt? It is government approvals? Is it policy clarity? So how should we look at the growth pipeline and how the company progresses over it? Thanks, Pirankin. So fundamentally, while you said this is a once in a lifetime, Yes, steel price is just now very high, but there are some structural changes also which we should appreciate. So I think the next 10 years is going to be different from the last 10 years. Firstly, we are already seeing the impact of China discouraging exports because China is committed to reduce its carbon footprint and one of the Easier ways to reduce the exports of steel and that's what they started acting on. Secondly, because of geopolitical issues, the cost structure in China continues to be high because they're buying Coal from other sources other than Australia. Thirdly, as we just discussed, in Europe as well because of carbon costs, It is less appetite to sell at prices lower than what has been there previously, Arun. So people are looking at building in these carbon costs into The pricing. For multiple reasons, we expect the cost structures and pricing structures to be at a very different level over the next year. 2nd point is with the significant investment happening in infrastructure across the world, whether it's the U. S. Or India, Multiple other geographies, we expect the steel intensity to be strong as far as demand is concerned. So that is one part of it. Coming specifically to the growth, For us, immediate focus is on completing Kalininga Nagar because that is work in progress already. The groundwork has started. I mean, not groundwork, a lot of the equipment has already come in. We've already done all the ordering. We've configured the plant. So everything is ready to go and we are already on the job. So that's the quickest way for us to get Growth and like I said in the next 2 years or next 24 months, we should complete what is left of that project. That gives us additional 5,000,000 tonnes. In terms of Angul and Jamshedpur, the opportunities are there, but we will take a call based on what are the other opportunities which are Coming away in terms of inorganic growth, particularly in long products. We stay committed to our goal of deleveraging by at least $1,000,000,000 a year And all growth will be pursued after we are comfortable that we will be achieving those goals. And I think So deleverage is there. We believe we can deleverage and grow at the same time because the steel cycle is at a better place than it was for most of the last 10 years. Sure. Thank you. So my second question is that in Base Metals and Energy, the companies have an option to book in realizations or hedge their volumes. Now steel is heterogeneous and that option is not available. But is it possible for the company to, for example, lock coking coal at $110 for a much longer time frame than it does or basically also book in steel realizations for a lot of Ryzen. Basically lock in some of the Current profitability beyond the normal 2 to 3 months that we see, is that option available on the table? Not so much in terms of using instruments that are available and maybe some of the other metals or maybe stay. But we have different kinds of contracts as well. We have different index contracts and so we try to manage the risk through that. In Europe, we do have an option particularly to iron ore because we get into a lot of long term contracts on packaging and automotive. So there are I know more options available, I guess, than coal. And we exercise some of those options in Europe, particularly when we have Long term contracts for packaging steel and automotive. In India, to some extent, we are hedged because the contract renewals are typically Apart from auto, which is maybe 6 months, most of the others are 1 month to 3 months. So we can ride the market in a better way. And we have the advantage, of course, Of hiding our own iron ore and some of our own coal. Understood. Thank you very much. Thank you. The next question is from the line of Indrajit Agarwal from CLSA. Please go ahead. Hi, good afternoon. Thank you for the opportunity. I have a couple of questions. First, sir, you mentioned about deleveraging a little over $1,000,000,000 But if you look at the current EBITDA run rate and the CapEx guidance that you have given, We may end up with a much higher cash balance than what we are guiding for. So of the remaining of over and over of the $1,000,000,000 what would be the hierarchy in use of cash? Will we be looking to repay back shareholders by the even higher dividends, some buyback or we will be actively scouted for the Northern proportion? So, yes, so I think, Indranil, the point that we have mentioned and in his So opening comments mentioned that we will do at least $1,000,000,000 and that has been our long term plan irrespective of the market that $1,000,000,000 will be paid off. I think our long term net debt to EBITDA target is about 2.5 across cycles. There will be times when that will be Much lower because of, as you rightly said, the way in which cash generation is expected to happen over the next 12 months. We will continue to evaluate opportunities to both take out more debt as well as to look at building up the Appetite for growth on an aggressive basis, but we will be very clear on our value judgment on those growth. So I think from a point of balance sheet, the opportunities for more deleveraging as it comes about, we will certainly take that. As I said, our net debt number that we are looking at always is about 2.5 And if it will go down because if the cash comes in then the net debt number will go down more. But our process of deleveraging has not Stopped and therefore deleveraging for the moment will certainly be an important and the first priority before We take something very significant on CapEx, but we are focused on ensuring the completion of Kaliningrad Phase 2, and that's where most of our capital allocation will go, apart from the raw material projects that are also underway. So I think it's important for us to, 1st, set the goal of ensuring that our balance sheet is in good shape. 2nd, to create the appetite in the balance sheet to go for growth. As you know, inorganic growths are normally lumpy. Organic growths are more linear across time. So we will be ready whenever there are opportunities in India On the inorganic growth. Sure. Thanks. My second question is on the carbon cost, not on the exceptional part, But on a steady state basis, on a quarterly run rate, how has carbon cost increased, say, from last year average? Because we see that carbon cost otherwise have doubled That means mark prices. So do we have a like for like impact or it is much lower for us? So I think if we did not have to monetize last year because of COVID and liquidity issues and so on, Then that cost would be 0. The one which will be there is there are reallocations under The scheme in both Mainland Europe as well as in the Europe in UK, which is just now forming its own scheme after Brexit. But that is only a topping up cost and that's not a very large cost. As I mentioned in Anuj's reply That last quarter is the topping up that is required. We did it by about $20,000,000 but that's not like every quarter. That is because we get the allowance on the basis of the average of last couple of years, 3 years. And when we Produced on that basis and if you are at that level, you don't have to buy anything from the market. So that could be potentially be 0. If it is if you are monetizing it and then buying it back, then there is a cost to it and you are open to the market movements. So that is how one should look at it. It's not that it will be a big cost in the short term. In Netherlands, the government has announced carbon tax 5 years from then. And at that point of time, I guess we will be looking at how the spreads Pan out because it's not only a cost issue because EU is also looking at border adjustment tax. So there is a Inherently neutralizing factor between these two, but that's like 5 years from now that's not going to hit us in the next few years. So just to clarify, if you have that $9,000,000 to $9,500,000 it's just a clarification earlier, Ashwun Ji. So if you have a $9,000,000 to $9,500,000 in production under it, there will be no incremental. Is that correct, Constan? It may be, but it will be small. It is just a topping up number. That is also In Netherlands and not in U. K. Sure. Thanks. In U. K, we are producing much less. Thanks. Thank you. The next question is from the line of Sawmill Mehta from BNP Mutual Fund. Please go ahead. Yes. Thanks for the opportunity. Congrats on a very great set of numbers. Two questions from my side. 1 on Europe. First of all, apologies, I joined the call late, you might have answered. What we see is, if I look at the Q4, Europe realization is about $64, 65 Dollar improvement on a sequential basis, but when I see Europe prices from Q3 to Q4, they were much higher as even From March level, the prices have gone up by about another $80 to $100 So while I understand there is a There is a lead impact lag, but at what point in time do we believe that at least a large part of the increase can be factored? Will it Happened in Q1 or it will happen in Q1 or Q2? And substitute to that, have the auto contract For this calendar year 2021 being finalized and at what level was Q over FY 2020? So are you asking to go to your second question, are you asking about auto contracts in Europe or auto contracts in India? In Europe, I believe there are annual contracts in Europe which are typically signed. So what is the number ballpark we are looking at for this particular year versus CY 2020? Yes. So couple of comments on that on your first question and then on to your Second question. Yes. So basically in Europe, the contract 10 years are very different. We have annual contracts, half yearly contracts, quarterly contracts and very few spot contracts. So the flow through of price increases typically has a lag depending on the time of the contract and the tenure of the contract Because all the contracts are also not it's not contracted at the same time. There are different contracts at different quarters. So the way we see it, obviously, Q4 to Q3, there was a jump. Q1 to Q4, there will be a jump and there will continue to be a jump going forward. And there will be a lag, which is what you've also seen from the numbers. So we expect a lot of the price levels to come in by The next quarter, that is Q1 we will get some of the benefits. In Q2 we will continue to see the rising prices. And if the prices continue to rise then we will continue to see that in Q3 and Q4 as well. A lot of the auto contracts were due in January, packaging contracts were due around that time as well. Some of them are getting renegotiated. We're getting different prices. So it's an ongoing activity. So I think the market is conscious. The customers are So conscious that the prices are going up and wherever possible we are getting the benefit of that. So basically we will start seeing improvements and realization Continue at least for the next 2 quarters, if not more. Okay, okay. But any ballpark initial rough estimate I'm sure there will be an ask from our side versus what the customer will quote and hopefully it will settle somewhere in between. Ballpark, what is the kind of delta we are looking at on the wireline? Yes. So basically there are if you look at Q1 versus Q4 in terms of I think it's better to talk of spreads because there are also costs going up in some cases like in iron ore etcetera. So the spreads, we expect the Netherlands to improve by at least €70 between this quarter and the previous quarter and At least £40 in UK, the spreads improvement. And then I don't want to give you a Q2 guidance now, but Q1 this is what we see. Sure. And my second and last question while you made about growth plans, so what we also read from the press report is our interest to bid for RINL and NINL, I mean any initial synergies what we are looking at other than long products and maybe NINL Being in the same state where we are? Yes. So NINL for us is Pretty much in labor. It's just across the road for us in Kalininganagar. And it's a long product facility, which is not fully completed as an asset. Hello? Hello? Mr. Mehta, I request you to please stay connected. The line for the management is disconnected. Participants are requested to please stay connected. Ladies and gentlemen, thank you for patiently waiting. The line for the management is reconnected. Over to you, sir. We're waiting for the next question. Yes. Thank you. I'll now hand the conference over to Ms. Amrita Shah for retail questions. Over to you, ma'am. Yes. Thanks. So there are some retail there are questions from quite a few Investors actually about the impact on domestic demand into the 2nd wave of COVID and whether exposure is possible and how do we see that Playing now. Yes. So should I answer that, Tamika? I mean, is that the question? Yes. So As of now, we are seeing some sort of concern in the market, simply because 1 is activity levels are a bit depressed given the severity of the crisis. So that is 1. Secondly, the stoppage of liquid oxygen for industrial use is impacting some of the fabrication units etcetera. So there are there is some concern, but not yet very material. We'll wait to see what happens in the next 2 to 3 weeks to see if it Is it a significant impact or it is just something which will blow over from a demand point of view. But having said that, since international markets are very strong And we already have orders in hand. We don't expect any slowdown in the domestic market to have any material impact Production of sales because actually the international prices are even stronger than the domestic prices at this point in time And international market is readjusting to the fact that China is not going to be a negative player for some time to come. So that's the situation. Yes, thanks. We'll take the next question, please. Thank you. The next question is from the line of Sumangal Nivedhya from Otech Securities. Please go ahead. Yes. Good evening, everyone, and congratulations on a strong I have two questions. First on the India business, So you can share the MSR increase expected in 1Q over 4Q and also the cost movement. And then if you can share some sense again on domestic demand, how that was before the second wave reacting to the strong prices? I mean, are there any channels where we are seeing some pushback? And also, do we see any risk of any government policy action against the current prices? Yes. So, Tunagal, in terms of Q1 versus quarter 4, we expect the Realization should be about INR 6,000 to INR 7000 higher, but cost will be about INR 2,000 to INR 2,500 higher. By the high prices, not really, simply because everyone sees what's happening in the international markets. And as I said yesterday, India has probably the cheapest steel price in the world even today, even after all these increases. You know the steel prices in USA are $1500 In Europe, it's heading towards €1,000 So across and if you look at the prices in China or Southeast Asia, Bhakti shares in the $952,000 range, hotel price. So if you look at steel prices across, it's quite high. So domestic customers are conscious of that. And if there are domestic customers who are buying steel in India and exporting their products out of India, they are in a very good position just now Because they have much better margins than anybody else anywhere in the world. So the demand has been has not been impacted by the high prices. In terms of will the government take any actions, whether that's for the government to decide. But like I said, I think Indian producers, Despite very attractive steel prices internationally have been selling most of the steel that they have in the domestic markets. And like I said, the domestic prices are still the lowest that they are available in the world. So that's what I would like to respond. Understand, understand. Next question is on the CapEx. Just want to understand your confidence on this 7,500 crores CapEx this year because first half looks like will be gone in COVID and then in monsoon. So you just have want to spend that. And earlier, our understanding was whenever we start KPO, it would take 36 months, but Based on your opening remarks, you shared 24 months to commission. So if you can just elaborate that, that if we will have Large part of FY24 to benefit from the volumes of KPO2? So If you look at the KPO plan, basically, we had started work before things started going back, I mean, so last year we took a pause. But when I say took a pause, there were some activity which continued at a low level where we had minimum CapEx to go, but a lot of preparatory work, a lot of Other work went on with the CapEx line. So that's why and even if I look at the pellet plant and coal rolling well, we had Focused on that before we did a full pause. And so a lot of the work has been done, the equipment has been ordered, a lot of the equipment has already come in. So in the next 12 to 18 months, like I said, we should be able to get the pellet plant and the co rolling will started, which is more cost Benefits are on cost side and margin side. The blast furnace, everything else has been ordered. And so if you look at the KPNO Phase 2, the New thing which is being added was a big blast furnace. That was already ordered and we had asked the supplier to hold on to it over the last year and now we've asked them to go ahead and Ship it to us as soon as possible. In terms of steel mill shop, this is the same steel milling shop. We are just adding another vessel. So you're not having to build a steel mill shop. In terms of the Hochschild Mill, it's the same Hochschild Mill. We are just adding some facilities. So it's not so difficult for us to ramp up once we get the blast furnace In place and that's what we are going to focus on over the next 24 months. In terms of when we get most of the benefit in FY 2024, I think the commissioning will be more towards the second half of FY twenty twenty four. So the full benefit in terms of volumes Assuming a certain ramp up which will happen will be in the year after, we will get some of the benefit we will get a cost and margin benefit in FY 2021 because the pellet plant and Full rolling mill will be in place and we will start getting some of the volumes will benefit in FY24, but most of the volume benefit in FY25. So just a small clarification for Kaushik. The tax expense this year has gone down significantly. So is there any adjustment or any credit of unabsorbed loss of Bhushan already used this year? Yes, that's correct. Because Bhushan is at an advanced stage of getting more and post the shareholders approval In March, we have, as Narayan in his comments mentioned that we have also filed for the joint petition. So It's now at a very advanced position, which enabled us to take that as a part of our overall tax plan. Got it. That's useful. Thanks and all the best. Thank you. The next question is from the line of Amit Dixit from Edelweiss. Please go ahead. Yes. Hi. Thanks for the opportunity and congratulations for a very good set of numbers. I have a couple of questions. The first one is on your ESG initiatives, particularly in Europe. We find that most of your peers are basically moving towards reducing carbon content in the steel. What specific steps we are taking In Europe, particularly when most of our plants are like I mean all the plants are basically black furnace plants. So that is the first question. I'll ask the second one later. So Amit, basically if you look at what's happening in Europe is different countries having different strategies to reduce the carbon footprint, Okay. So if you look at Sweden where SSAB has announced that they'll make green steel, basically they are using hydel energy, which is green energy to make Green hydrogen, which they are using in a DRI gas based DRI plant where they will use hydrogen and hence reduce iron, which will be green and use that in an electric Furnace is scrap and melted using green energy, right? So that is a process route. They said that it will cost them at least €1,000,000,000 I think and will be ready by 2025 and be 1,000,000 tonnes, right? So I think one is whatever steps are being taken are still not enough 50,000,000,000 tonnes, which is the requirement of the European Steel Industry. Everyone is taking different steps. Partial or missile has announced Again, the number of steps, it includes, again, using hydrogen, etcetera. In France, the approach is more to use nuclear energy And reduce nuclear energy, green energy to melt scrap, that's also in some sense greener steel than a blast furnace. In Europe, our footprint, Imogen plant firstly is one of the most carbon efficient plants in the world even as it stands. It's one of the top 5 in the world in terms of carbon efficiency. Secondly, the Dutch government is focused more on carbon capture and storage as a technology as a way forward because Netherlands is on the coast and there is an opportunity to Store the carbon in the North Sea oil wells that there are. So the government that conversation with the Dutch government is about How can we work together and the Dutch government is supportive of industries which use carbon capture and storage technology to reduce the carbon footprint And they're willing to support that. And that is a conversation going on with the Dutch government. So our road map for Netherlands to reduce carbon From the current level by 40% to 50% involves use of hydrogen, hydrogen generated using the windmills Off the coast of Netherlands, use of carbon capture storage technology, also we're working with some chemical companies for the carbon capture and use. And we also have a Hitharna Process Group, which is basically more carbon efficient and generates carbon, which is easier to store. So our approach is different. It's more on carbon capture and storage, more on use of hydrogen and more on use of visarna. So we have our plans as well. We are working with the government and we'll announce Comprehensive roadmap once our conversations with government are coming. In Europe, I mean the UK is a little bit more of exploring what are the other possibilities of making significant. So all of our peers are pursuing different options. And as Kaushik said earlier, We are also waiting to see the carbon border adjustment mechanism, which is expected to put in place because All these new processes by all of us, including our peers, should not put the European Steel Industry At a disadvantage compared to others who are not investing in the deeper technologies outside of Europe, and the governments are supportive of that. They don't want to deindustrialize as a decarbonate. Okay, great. That's helpful. The second question is on a Southeast Asian operation. So They have been reclassified as continuing operations. So what is the change in stance there? Are we not willing to sell it now or we have parked it for a while? So I think, yes, so I think Amit, I think the point is We've been looking at it for some time. We have had offers, multiple offers actually. And the level of offers that came in at that point of time was also much lower than what we thought would be Most appropriate from a long term perspective because that business is a self sufficient business, it produces, makes profit, makes cash flows, But it was one of our levers to deleverage at that point of time. So at this point of time, we have Discontinued that process because we have also been working on the business for some time and there are opportunities that we have seen. However, if there are opportunities for strategic calls with more appropriate valuations, we will certainly look But at this point of time, there's nothing on the table that makes us believe that we will continue as a head for sale, which is why we reverse. Thanks a lot for your reply and all the best. Thank you. The next question is from the line of Mahesh Gandhi from Kennerobek or Mutual Fund. Please go ahead. Hi. Thanks for taking my question. I had just two questions. 1 on the KPO side, have we quantified how much CapEx will be required for the next 5,000,000 tonne? Yes. We have the original yes, go ahead, Prashant. So our original Capital expenditure, including infrastructure and raw material expansion to match up to that was INR 23,000 crores. So that we have the in fact couple of years back when we announced the project we had mentioned. And how much has already been spent on that of that 23,000 which year? Yes. So roughly about INR 7,000 crores 8,000 crores have been spent and is being spent now. We will be spending a significant part of our next year's capital allocation, primarily on the cold rolling mill project and the pellet front, which were part of the INR 23,000 and also on the upstream part that's done in Spain a while back. Okay, okay. Thanks. And one last question. Do we share as to what is the spreads that we are making in Europe Current, I mean at current prices or at current realization. And can you also share what is the fixed cost per tonne for the business? Current spreads in Europe? Yes, yes. Because there is a lead and lag, so honestly, what we see on the P and L is different from what is there in the market. So we just thought maybe if you could help us understand At current realizations, what are there in the market? What kind of spreads do we make? And also if you could help us understand what is the fixed cost per ton for that business? So I'll just answer the spread that Kaushik answers you on the fixed cost. So what We call what is called the Felix spread. The Felix spread is a spread that we experienced, which is based on the contracts that we are servicing Both on the sales side as well as the contract you're servicing on the buy side, right? So just to give you a sense, the expense price in Q4 was about 2 euros in Netherlands and it's expected to be €285 in Q1. And as far as UK is concerned, it's £213 in Q4 and about £2.57 in Q1. So that's The delta that I gave earlier when somebody asked a question about £70.40 roughly it is anything from This quarter, I mean, as compared to the previous quarter. And this will keep changing as the Prices which are available in the market close back to us. Okay. And will it be possible to share what is the actual fixed Cost for that business. I'm just trying to understand at what levels of realization or spread or EBITDA per ton that part of the business becomes self sufficient? So the I don't have the exact number just now, I'll give it to you outside, but broadly The business mix is about EBITDA neutral at around €210 per ton, €210 €10,000,000 to €212,000,000 Okay. Thanks a lot. That's it for my Thank you. The next question is from the line of Prateek Singh from Credit Suisse. Please go ahead. Yes. Good morning and good evening, sir. So my first question is on the EO emission. So from what you understand, every year we are getting around 3,000,000 tonnes EO2 units Over and above what we have needed and most of the surplus lying in Netherlands. So is it fair to assume that we would still have some square credits to sell this year Without needing to buy them back? That's my first question. The EU emission comes out of 3 sorry, the 3 allowances come on a Basis of the last 3 years, as I mentioned, a little while back. And Netherlands normally is goes Pull out as much as it can based on our market conditions. And that is why sometimes as it is ramping up just now, for example, in the last 2 quarters, they needed more emission certificates to continue that And therefore, they purchased. I don't think we have free allowances because free allowances To sell our surplus to our requirement and now with the UK and Netherlands being completely separate because of the Brexit, The 2 will be in a very different position. So the UK allowance regime is just now getting finalized And we are waiting to see as to how it will be. But in general, the free allowances over the next few years will start coming down. So I don't think we will be in a Position to have too many of the surplus credits to sell. Great. Thanks very much, sir. My second question is on Arunore. So with the likely optionality to sell the 50% objective core, Are we looking to ramp up our minds beyond KPO2 need so that we can sell in the market? In that case, What's the approval limit? So we are doing 35 MTPA now, Varunort. And I think that our approvals are 6,500,000 tons. So where do we see this production on it to 5 years from now? I know, yes, we are currently expanding, I know, but that's more to keep pace with our requirement because the original plan was to expand for Kaleena, but in the meanwhile we also acquired Tata Steel BSL, right. So that was another 5,000,000 tonnes, whereas The regional expansion plan was aligned only for 5,000,000 tons of steel whereas we are now planning I know for 10,000,000 tons additional, which is coming on our Phase 2 and Tata Steel, yes. So we are expanding our iron ore capacity, which is currently at production levels of 30,000,000, 32,000,000. We'll take it to about $50,000,000 over the next few years, but that will only help us cater to what we think we need To support our growth organically and inorganically, we are exploring opportunities to grow further depending on the recent announcements. We are also seeking some clarifications, some further clarifications. We do have some opportunities already from some of our existing mines because we also have fines which can sell both in terms of the Vijaya mines which we acquired along with Tata Steel Long Products, which is part of the Usha Martin steel business And our Kornbourn mines and some of the other mines. So there are opportunities even as we speak. We are waiting for some clarifications. In terms of expansion, yes, we will expand as much as we think we need to do. We are allowed to sell 50% of what we Can consume and we are only allowed to sell after we have fulfilled our own captive needs. So these are the conditions that are put in, but there are some more clarifications that we see. So that explain yes, that's an opportunity for us available for the future. Sure. Thanks a lot, sir, and all the best. Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead. Hi, sir. Thanks for the opportunity. Sir, I had two questions. 1, a couple of years back, you had given certain initiatives to To get the revenue of strong steel cyclicity, you had indicated about expansion of downstream products and you had given a target of more than 30% of volumes from downstream. 2nd was service and solutions, so 20% revenues by 2025 and third was grow beyond steel, new materials as a segment and 10% revenues by 2025. So the first question is what are the on these three particular variables? Yes. So I think some of them are interlinked, Ritesh. So if I look at downstream, a lot of the service solutions are also linked to downstream. So downstream, we continue to grow in 2 different models. If you look at our pipes business, we are one of the largest in the country now and acquiring Tata Steel BSL has almost done that capacity and brought us into very high end segments. We are also the largest in the wires business, which is also a downstream business. We are also one of the largest in terms of rebar fabrication or not one of the largest, we are the largest. So a lot of these efforts Very much on track and so we continue to grow downstream. We are also looking at expanding our capacity in tinplate packaging steel. So there are multiple initiatives going on in all our downstream areas. And Tata Steel BSL actually had a very strong downstream play and that was one of the reasons why We acquired the press release because in addition to pipes, it also has color coded steel, galvanized steel, etcetera. So there are a number of downstream products that we've gotten with that acquisition with TSVSS. In terms of services and solutions, yes, we are growing. We are it's a small base, but we are pretty much doubling every year And we continue to grow in the Praveesh Doors, Nesting Solutions, the business is now about INR 400 crores and Growing quite fast. Our new materials business, which is fiber reinforced polymers, graphene, etcetera, is also growing every year starting from a low base. Yes, over the last year in some of these new businesses, we have faced challenges because of COVID and because of the fact that A lot of these businesses are capital light for us. They are knowledge intensive and relationship intensive and capital light. So we work through a lot of Vendor partners who and so some of those some of that activity got impacted because of For COVID, but we are continuing to pursue those revenue streams and it's growing quite well. We may you must also Appreciate that our top line has also grown. So when we set that goal of 20%, 25% of our revenue should come from all these businesses, we are at a very different top line And now our top line is very different. So it's a moving target. So we are still some distance away from that, but the direction and the intent is still very strong. That's quite useful. My second question again goes back to the carbon thing. I think Kaushik said he made a statement of £20,000,000 per quarter As a normal operating cost and you also said it's a function of production levels. Now this broadly equipped assuming 10,000,000 tons, it's only $10 per ton. That looks like a pretty low number. If I have to compare this versus say carbon intensity for UK, which is 2.22, Netherlands 1.86 And the average value of the 10 most efficient installations is at only 1.3. So if one does a broad math and if you don't have any allowances, Based on the current spot carbon pricing, it could imply a deficit of nearly $400,000,000 if you don't have any allowances. So it would be great if you could provide some clarity on how much is the allowances that we have in stock. In the last call, you had indicated $6,450,000 for UK. So it will be great to have some color on this number. So one query, one Clarification, Piyush, to the query that you had, Ritesh. As I mentioned that this quarter Netherlands had a provision Of around $20,000,000 $22,000,000 but that's not every quarter. 2nd, I think the pre allowances are continuing And we'll continue in the new regime till about 2025 or even 2030 Progressively and we are still continuing to get it on the same basis. There's no change as of now. But when the production numbers, it comes on a certain Actual production for the last 3 years, on that basis the CERs are allocated. So if somebody is to produce At a higher number, then that company or that entity or that site will have to buy that to comply with it. So this is the framework within which it works and that will be continue at least for the next few years. And therefore, it is not that it is stopping and there is a $400,000,000 gap. That's not happening. 3rd point is, as you saw that Tata Steel Europe As part of its price increase is also put in a carbon surcharge in the price, which is a way in which the spreads of the business Across the industry is also expanding. Part of it is taking care of the carbon cost that is increasing. Ritesh, you said something about 1.3? I missed that. What were you saying? That was average value of 10% of the most efficient installations in 2016, 2017, that's a benchmark what the European Commission is talking about and they have invited suggestions on that. So, I think that's why I wanted to clarify that. So there are 2 process routes, right? You make Steel 2 and electric car furnace route or you make Steel 2 or blast furnace route. The car furnace route are most efficient It's around 1.7, 1.8 and our plant in IMO will live in that range, okay, and the top 5 in the world. So nobody is 1.3, this is the best Through the blast furnace route. If you go through the electric car furnace route, then you can produce depending on the source of energy between 0.4 to 0.8, okay? So when you take the average of glass furnace and the electric arc furnace, then you can say it's 1.3, but the process rules are different. The electric arc furnace route typically the cost is at least $100 per tonne more than the last one is route. So till first time in some sense that the carbon cost covers the gap, From a cost point of view, you will always be more preferring the blast furnace room. So that's the advantage that's likely to be there because the 1.3 is not a Number which can be finished as a reference, which will depend on the process. Okay. Guys, just a clarification Sorry to interrupt, sir, but any follow-up, may be requested to rejoin the queue, please. The next question is from the line of Anand Shah from ICICI Prudential Asset Management. Please go ahead. Hi, thank you very much for taking my question. Am I audible? Yes, sir, you are. Yes. Thank you. Just wanted to understand, we do hear about this €1,000,000, dollars 1200 HRC price about Europe and $1500 in U. S, but we also understand that there is very little material with the mills to sell. So Just wanted to get a sense of are we are the steel companies actually able to sell the steel at this size or as in when Your contracts get over and you have a material to sell, so these prices will then settle down lower? No. I think the way it happens is there are spot prices. And if you want to buy steel today From somebody who has steel available to sell, this is the price that you will have to pay. So all this will have maybe some availability or something Available, but most of the European Lids would have already been contracted, right? So that's why the prices are quite high Because there's hardly any availability. So this flow through, as we said, the flow through will take 3 to 6 months normally. If the steel price stays at this level, then over the next 2 quarters you will start seeing what we call the felt spreads or the prices with the steel company get Coming closer to this level. So this is one part of it. The second reason why in Europe it is very high is because In U. S, the steel prices are so high that anybody who can export steel to the U. S. And who is not having any antidumping duty on them Would prefer to export to the U. S. And so there is very little imports or there is not as much imports coming into Europe as it used to be earlier at lower prices. So there is this is the price indicated in the margin. What percentage of steel is invoiced at this price, I don't know. But certainly, there would be some quantities which would be Invoice at this question. Yes, but we also understand that now the contracts for September December quarter are also being Sort of signed. So would that sort of realization be available for the September, December contract? I'm just Getting a sense of whether actual buying is happening at this price by the consumer? Yes. I mean, there are obviously people Contracting for later deliveries and I think we are pretty comfortable till September in terms of Prices at good prices and that will start flowing through into our performance both in this quarter and next quarter. But like I said, in Europe, Most steel companies, particularly the high end steel companies who make high end products have quarterly, half yearly and annual contracts. So the flow through We'll cover these to the spot orders, which may be 10%, 20% or 30% of the overall volumes. Sure. Thank you. And my last question was on the spreads. I think you said the spreads are around €285,000 but if I understand €1000 If that were to be a spot price and that can be a realization into the future, can the spread of €1,000 be far higher than €285, right? That's true. Yes. Thanks. So that's the spread what we are getting today. And but yes, if the price stays at €1,000 you'll start seeing the felt spread come closer and closer to much higher levels. Of course, it also depends on What is the raw material price at that point in time? Thank you. The next question is from the line of Bhavin Jada from INAM Holdings. Please go ahead. Yes, sir. So regarding the Europe capacity, if I In the past presentations and all that, if I roughly remember between Netherlands and UK, the capacity is actually around 12,000,000 tonnes. And if I analyze this quarter's run rate also, you can produce over 10,000,000 tons, but we have been more doing around 9. So what kind of production ramp up if at all can happen at European operation? So we actually have just on the guidance that India yes, as we guided in India, we'll be at least 1,000,000 tonnes Additional this year compared to last year. In Europe also, the guidance is it will be about 1,000,000 tons higher this year compared to last year. And that will take us closer to the capacity at least in Netherlands we'll be running full out. U. K. We will optimize based on the margins and things like that. Okay. And the second question was on the lower tax, which was paid as Mr. Chatterjee also clarified it was using the accumulated losses of Bhushan. So what's the pending number of Accumulated losses of Bhushan, which will be available to offset in FY 2022 also? Materially not much or almost none. So we will be almost on a full tax basis next year? For 1 year, yes. Before the commissioning of the pellet plant and CRM comes in, We will not have that cover. And pellet and CRM will kick in, in FY 2023 first half? Yes. Okay. Thank you. Thank you. The next question is from the line of Satyadeep from Ambit Capital. Please go ahead. Hi, thank you for taking the question. Couple of questions. First on Europe, as I understand, I think there would have been shortage of almost 9,000,000 to 10,000,000 tons of carbon credit in the year. And if my I would believe that Tata Steel had to buy this back By March or April 2021, first of all, did the cash flow include buying back those CO2 credits In March or have you bought them back in April? That's the first question. Yes. So it was not a shortfall. It was, as I said, it was monetized to provide liquidity in Q1. It has been complied for in the month of April. In the month of April, okay. Secondly, you mentioned the on field optionality across different projects. So what is the kind of optionality once you're done with KPO2? What kind of optionality across operations, across BS Angol and Kalininganagar And even long thought it can be assumed going forward? And is it fair to say that you would look at greenfield Investment only after you exhaust all your downfield optionality cross options? Yes, that's right. So in terms of I don't think we are looking at investing in any greenfield side because if you look at it In Kaliningrad, we have the option to go up to 16,000,000 tons in the land that we have there. In Jamshedpur, we have the optionality to take it from 11,000,000 to about 14,000,000 tonnes. And in Angul, we have the optionality to take it from 5,000,000 tonnes to 10,000,000 tonnes. So between these three sites, we have an opportunity to go to about 40 land trust, right? So that means we don't really need to Start a new greenfield site for some time. Inorganic growth opportunities, like I said, in long products is something that we would be interested in because Both Kaliningalagar and Amgul will be flat products, right? We don't want to mix up long products and flat products in the same side. Yamshikur already has longs and flat in the same side. So We have an optionality when we go from 11 to 14 to maybe add long products there if you want. But that's why inorganic opportunities in long products Would interest us more. Okay. Thank you so much. Thank you. I now hand the conference over to Mr. Samita Shah for retail questions. Over to you, ma'am. Yes. Thanks. So there are a lot of questions coming in about The impact of COVID on domestic demand, I think people have dialed in a little late. We've already answered this question and I'll request you to go back And listen to the transcript, please pull it up. There are lots of questions also in terms of our strategy over international. I think particularly comments that since Southeast Asia is back and included in the numbers, does this mean we have changed our In terms of international assets or will we still consider exiting from Broken House? So I think as far as I was concerned, as Kaushik explained, at that point in time, let's put it this way, Europe, We pursued 2 opportunities because we did believe and we do believe that consolidation helps the European Steel Industry. But in the current circumstances, given that we have exhausted 2 options to consolidate in Europe And given the current market conditions and given the fact that we are already separating Netherlands and UK and believe that we can unlock more value that way, We will continue in this direction. For now, the businesses even last year were pretty much cash neutral. That was our primary objective and in the current conditions will no longer depend on India for cash. And so that is a good Space to be in, we will continue to unlock value in Europe and then decide later if we want to pursue any other options. As far as Southeast Asia is concerned, again, as Kaushik said, Southeast Asia was never a cash drain on India. It was always cash neutral or cash positive. But We did have interest and hence we pursued that. But given that and you were also at that time looking at what is a quicker way to deleverage And we wanted to pursue all possibilities to deleverage. Now that a lot of our deleveraging ambitions are getting fulfilled By last year's performance and expected performance this year, we are not in a hurry to divest Southeast Asia. The business Can stand on its own. So we will continue to run that and decide at a later date whether We need to pursue any other option there. So for now, it's not that we are looking at growing in the international markets, but existing assets can stand on their own. So we will continue to work with them and decide later if we want to do anything which is strategically unlocking more value for us than we are unlocking today by ourselves. Thank you. Back to the queue, we'll take 2 or 3 questions. Thank you. The next question is from the line of Ashish Jain from Macquarie. Please go ahead. Hi, sir. Good evening. Sir, firstly, on Europe, again, like Kaushik said that The carbon requirement there will become more stringent. Now this 12 pound that we have levied, do we see that as a mechanism to offset that impact? Is the customer response on that? Or should we think that the carbon impact would intensify as we go ahead from a cash flow point of view? So I think the £12 I mean, 12, you know that we arrived at using the current carbon price and using a formula setting of Allowing is that we're getting in the negative spot that will euros which is being charged, it's a surcharge on the customer. And the customers obviously have paid for it and we expect that this will become an industry practice and people will Charge for it because ultimately the transition to green means Whether the government, whether the customer, everyone has to be part of it because it's something which is impacting the whole industry. And I think at least at a retail level we believe customers, people who are buying cars or people who are buying products made out of steel We'll probably won't mind paying a bit more for what not this carbon fuel challenge. But anyway, let us see how it goes. But we do believe that The spreads in Europe will also change given this additional cost component coming into the cost. Okay, great. Thank you so much. Thank you. Ladies and gentlemen, due to paucity of time, we'll be taking the last two questions. The next question is from the line of Amit Muradka from Motilal Oswal Asset Management. Please go ahead. Yes. Hi, Yaron. Good evening. So my first question was on the asset divestment strategy. So Hi, Karl. You're looking to drive Southeast Asia and even Middle and UK. So I have mentioned that was Motive's mission behind thinking of divestments only to reduce Leverage or was it also because you see these as weaker assets and you were looking to kind of move to a more core India strategy? Yes. So I think there were 2 key drivers for it. Like I said in Europe, the driver was a bit more that a consolidated European Steel Industry is in a better position to deal with Chinese exports and other exports etcetera. But obviously, there are different views there. The competition commission had a different view and hence, Sissen JV didn't go through SSAB was a different So the driver in Europe was more to create a sustainable European business. But we believe that If that option like I said we've exhausted 2 options that are not so many options in Europe, then we are better off Splitting the business and running it differently, which is what we're doing, and we believe we can unlock more value and have a sharper focus there. And over the last few years, we've been doing a lot of good work on transformation and some of that is flipping out. We have been Even last year, pretty much cash neutral for the European business. So as a spreads improve, we do believe that these businesses can stand on their own And allow us more time to decide on what is the best long term strategic option and how we can unlock value either By running it ourselves along with somebody else. As far as Southeast Asia is concerned, again, it was partly driven by the fact that You know it's a fragmented geography. We had been there for a long time, but did not have the scale that Maybe it was more important or more relevant. And since we wanted to focus on growth in India, we said that, hey, if there is Somebody is interested in that asset, we can divest of it. But we are not in any desperation to sell it. We will continue to run it and continue to unlock value and take a call at a later stage if it's an opportunity. So is it fair to say you're no longer looking for a buyer, but if some good offer comes only then maybe you'll evaluate? At this point of time, so I think it is important to clarify and supplement what Narin mentioned that at this point of time, we are not aggressively running a process. But as we go along, if there are offers which comes in, we will certainly consider them and look at whether it meets our expectations. As I mentioned that the companies have been always been profitable and cash generating companies. So we will take a call based on the offer that comes in. So These things are often part of it, but the core part of India growth is something that we are always focusing on. And just another question on the global supply. So given that the spreads are now at a record high, Like do you see risk of like the high cost or idle capacities coming back into the system as these become viable now? So there are not so high cost capacities, are you talking in Europe or Where are you? In Europe, U. S, I mean, in these geographies where, I guess, generally, we have seen a little environmental reasons, The costs have been going up. So some of the capacities have been like hot idled or something like that. So could they come back now that the spreads are quite high? So it depends. So actually what's happening globally in the steel industry is The biggest the elephant in the room was always China, right? So a lot of the capacity overhang that we talked Coffee industry was in China, right? And but what is happening is in China there's a fundamental shift. They don't see any value in Importing steel, importing iron ore and coal, leaving a big carbon footprint in China and exporting steel. So that's why they are discouraging exports, Which they've been doing and consolidating the industry, driving greater carbon efficiency, pursuing more electric car furnaces, etcetera. So if China is not such an active player in the global steel market that's 50,000,000, 60,000,000 tonnes of steel exports Going away. The other big exporters are Japan and Korea. And Japan again has announced that they are going to shut blast furnace capacities in Japan again For the reasons of carbon footprint in Japan, right? So what we are seeing is more and more steel becoming a little bit more of Domestic geographic kind of place. So in Europe, you will find a lot of European suppliers and some imports. Europe at its Peak had 30% import. We are seeing now at 10%, 15%. U. S, most of the players in the U. S. Are expanding and selling in U. S. Players are not really exporting Steve, so it's a little bit more regional play rather than a lot of flow across things happening. And honestly, If you look at high cost capacities, it depends. Are they high variable cost capacities or high fixed cost capacities? If they are high fixed cost capacities, Then they will come back. If they are high variable cost capacities, I'm not sure they will come back in a hurry. And a lot of steel capacities, Even if you look at in India, there's a lot of steel capacity, which is a high variable cost capacity, which will not come back just because the steel prices are higher, spreads are higher for some time. Sure. Thanks. Thank you. We take the last question from the line of Sanjay Parekh from Nippon India Asset Management. Please go ahead. Yes. Thank you, sir, and congratulations on a great set of numbers. Just on the expansion, since we have a potential at Angul, Sarashedpur and Orissa, And clearly, we are short as a country. Can we explore a proprietary capacity done so when you actually want to expand The time to expand in those areas would be limited. Can we feel that in the next So, this is fairly comfortable, ease of leverage. What will be your thoughts, sir? So certainly we are always in all these sites we always have a master plan So we have to expand some of the work is already done or ongoing in terms of the master planning, what is the configuration, what are the facilities you want, What will the layout look like? So that work is always ongoing. So it's not if we want to if the steel prices are strong and Our balance sheet is good and the cash flows are strong and we can grow not compromising on our deleveraging opportunities, we can always expand in any of these places quite fast and parallelly as well, will not happen sequentially. But the advantage of having multiple sites for most Since about 10 years back, till Kaliningrad really started, we were constrained by having just one site And there you can only expand sequentially. Now that we have 3 sites we can expand primarily if required. Thank you very much. Thank you. I now hand the conference over to Ms. Samita Shah for closing comments. Over to you, ma'am. Yes. Thank you. Thank you everyone for joining us on this call. We hope you found clarification useful. Look forward to connecting with you in the next Sir, Courtland, stay safe and take care. Thank you. Thank you. Thank you. Thank you. Ladies and gentlemen, on behalf of Tata Steel Limited, that concludes this conference. Thank you all for joining us and you may now disconnect your lines.