Tata Steel has powered its balance sheet with a strong debt reduction of ₹50,188 crore in the last two years despite the volatility in prices and Covid-19 restrictions. At the end of the June quarter, the country’s largest steel maker had a gross debt of ₹82,597 crore and net debt of ₹54,504 crore.
The steelmaker has reduced ₹24,340 crore net debt in the financial year 2021-22 (FY22). In the previous year, the debt was lowered by ₹29,390 crore. The company, which has been struggling with the $12 billion legacy acquisition of Corus Plc in 2007, had a debt of ₹104,692 crore in June 2020, when the country witnessed the first lockdown.
Even after spending ₹17,500 crore as capital expenditure in the last two financial years, Tata Steel has been able to cut down the debt massively, said the officials. The net debt to EBITDA stood at 0.87 times and net debt to equity at 0.48 times in June.
Tata Steel posted a consolidated profit of ₹7,765 crore in June ended quarter. The net profit was lower by 12.8%, compared to ₹8,907 crore recorded a year back. On a sequential basis, it fell 20.4% from ₹9,756 crore profit in the March-ended quarter. The revenue rose 18.6% to ₹63,430 crore from ₹53,465 crore a year-ago.
The performance for June quarter was impacted by higher pet coke prices which increased the operating costs. The export duty imposed by the government also had a negative impact on the volumes. T V Narendran, Chief Executive Officer and Managing Director said, April-June was a challenging quarter for the global and Indian economy with rising interest rates, supply chain constraints and a slowdown in China due to Covid-19. The global steel prices which went up to $2,100 a tonne have fallen to $1,200 a tonne in the last one year.
The European business delivered a sharp improvement in performance in the June quarter as long term contracts and product mix helped drive a strong increase in realisations. The company is geared towards commissioning the 6 MTPA pellet plant at Kalinganagar by December and it will drive cost savings followed by the CRM complex and the 5 MTPA expansion project.
It is interesting to note that the company is in a strong financial position despite spending on acquisitions like Bhushan Steel and the steel business of Usha Martin. The experts say that Tata Steel will be able to further cut the debt and make the balance sheet stronger with the recovery in steel prices.
The global research firm JP Morgan said the July-September quarter is seasonally weak for the steel companies. So they expect a rebound of Tata Steel in the second half of this financial year with improved steel prices.
