Tata Steel to invest $2.11 bn in Singapore unit to repay overseas debt, fund UK transition

Tata Steel Ltd will invest ₹17,408 crore ($2.11 billion) in its Singapore unit, T Steel Holdings Pte Ltd, to fund the restructuring of its struggling UK business as well as repay the debt of its offshore entities.

Tata Steel will also be writing off $565 million of existing debt to T Steel, converting it into equity shares, Asia’s oldest steelmaker said in regulatory disclosures on Wednesday. 

The investment in T Steel, a holding company for the shares of Tata Steel’s overseas subsidiaries, will be done over the course of 2024-25.

Tata Steel reported a 65% year-on-year decline in its consolidated profit, to ₹554 crore, for the quarter ended 31 March, missing Street estimates. Analysts polled by Bloomberg had a consensus estimate of ₹890 crore profit.

Europe in the red

The financials were dragged down in part by the company’s two European units, which reported a combined EBITDA loss of just under ₹650 crore. EBITDA stands for earnings before interest, tax, depreciation and amortization.

Tata Steel’s Dutch unit was in the red on account of a relining of one of its blast furnaces, which curtailed production for the better part of the January-March period. The UK operations have been consistently in the red on account of high structural costs in the country, including higher energy prices.

Also read | Europe business to continue to dent Tata Steel’s earnings

Tata Steels’ consolidated revenue for the fourth quarter at ₹58,687 crore was 7% lower compared to the corresponding period last year. Analysts had estimated a topline of ₹58,375 crore.

Again, the laggards were the two European units, where sales volumes dropped year-on-year, even as sales volume improved in India. The company sold 5.42 million tonnes of steel in India, up from 5.15 tonnes in the same quarter last year. 

India to the rescue

“FY2024 has been a year of progress for Tata Steel with transition towards stated goals in India and abroad despite the challenging operating environment,” Tata Steel managing director T.V. Narendran said in a statement. 

“In India, which is a structurally attractive market, we have delivered improved margins and continued to expand our footprint in terms of volumes as well as product portfolio.”

Also read | Tata Steel: Riding India's infra wave, facing global commodity downturn

Consolidated delivery volumes for the fourth quarter were at 7.98 million tonnes, up from 7.78 million tonnes last year.

“Overall, India deliveries now make up 68% of total deliveries and will continue to grow with incremental volumes from 5 (million tonnes per annum) capacity expansion at Kalinganagar,” Narendran said. 

Tata Steel recorded its best-ever sales in India during FY24 at around 19 million tonnes, which was a 9% growth year-on-year, he said.

Creeping debt 

Tata Steel’s net debt increased to ₹77,550 crore as of 31 March from ₹67,810 crore a year ago. Net debt to EBITDA ratio worsened from 2.07 to 3.31. 

The company’s debt position has been on an upward trend since the end of FY22, when a commodity upcycle helped the company deleverage its books sharply. Tata Steel has set a target of keeping its debt to less than 2.5 times its EBITDA.

During the fourth quarter, the company recorded capital expenditure of ₹4,850 crore. For the full year, the expenditure was ₹18,207 crore, up 29% on-year.

Tata Steel declared a dividend of ₹3.6 per share, setting 21 June as the record date.

Shares of Tata Steel ended 0.37% lower at ₹174.2 each on BSE on Wednesday. The results were declared post trading hours. The stock has gained nearly 25% since the beginning of the year, beating its peer JSW Steel Ltd but lagging Jindal Steel and Power Ltd.