20 - 05 - 2026

Tata Steel plans ₹20,000 crore organic capex for FY27

Tata Steel has budgeted for a higher organic capital expenditure (capex) of ₹20,000 crore for FY27, a 36.99 per cent rise from organic capex of ₹14,600 crore earmarked in the previous year, according to a report.

The spending will be largely internally funded, with 60 per cent directed towards capacity expansion in India to increase output to 40 million tonnes per annum (MTPA) by 2030 from the present 27.4 MTPA and to develop downstream facilities. The steelmaker consistently meets its investment targets, according to a research note by CreditSights.

The company’s top management expects a constructive earnings outlook for FY27, anticipating a recovery in steel spreads, minimum domestic volume growth of 9 per cent YoY, continued cost savings, and narrower losses at the UK unit. These are expected to mitigate freight and energy cost pressures stemming from the Middle East conflict, and as a regulatory-imposed outage of about 2.5 months in the Netherlands due to carbon emission breaches.

The transition of the UK unit towards an electric arc furnace (EAF) has faced a delay of about 6-8 months from its original late-2027 or early-2028 timeline because of grid connectivity delays by the UK National Grid.

Free cash flows improved during FY26 due to strong EBITDA, working capital release, and lower organic capex of ₹14,600 crore, which offset ₹2,800 crore spent on downstream joint venture acquisitions. Completed projects included the 0.75 MTPA Ludhiana EAF and the 2.2 MTPA Kalinganagar cold rolling mill.

Strong FY26

The company reported a strong financial performance for FY26, surpassing market expectations. Total revenue rose 6 per cent year-on-year (YoY) to ₹2,32,100 crore, while earnings before interest, taxes, depreciation, and amortisation (EBITDA) jumped 45 per cent YoY to ₹37,900 crore.

Financial leverage improved significantly, with gross leverage dropping to 2.4x and net leverage descending to 2.2x, driven by strong EBITDA growth of 17 per cent in India and 230 per cent in the Netherlands.

Sales volumes in India grew 8 per cent YoY, supported by the automotive sector (up 11 per cent), energy and engineering goods (up 10 per cent), and the home vertical (up 3 per cent). These gains offset a 2 per cent decline in construction and infrastructure volumes, which were affected by monsoon-related project delays. Domestic volumes were also lifted by the production ramp-up at the Kalinganagar facility, which added 5 MTPA at the end of the first half of the financial year 2025 (F1H25). Deliveries remained domestically focused, with exports comprising 9 per cent of the mix.

In contrast, sales volumes in the Netherlands and the United Kingdom fell by 2 per cent and 12 per cent YoY, respectively. Steel spreads expanded in the fourth quarter of FY26. European spreads benefited from steel price recoveries following tighter safeguard measures and the implementation of the carbon border adjustment mechanism (CBAM). Indian spreads were primarily driven by lower raw material costs for iron ore and coking coal.