Tata Steel Targeting Rs 11,500 Crore 'Cost Takeouts' Across Geographies: CFO

Tata Steel, which is expanding operations in India and is in a transition phase in Europe, is targeting "cost takeouts" of Rs 11,500 crore (about USD 1.3 billion) across geographies by focusing on controllable costs, the company's ED and CFO Koushik Chatterjee said.

In financial terms, cost takeout refers to strategic cost reduction measures taken by companies by removing unnecessary expenses to improve profitability and efficiency.

Addressing an analyst call, Koushik said he will cover the company's cost transformation programme across geographies as to what has been done so far and what has been targeted in the next 12-18 months.

The structural cost takeout across all entities of Tata Steel during FY25 was about Rs 6,600 crore focusing on fixed cost takeout, efficiencies in manufacturing, procurement, raw material optimisation with leaner coal blends and fixed overheads, he said.

"Looking ahead to FY2026, our focus continues to be on controllable factors, and we are targeting further cost takeouts of almost Rs 11,500 crores, roughly about Rs 1.3 billion across geographies by focusing on controllable costs," the CFO said.

The statement has come at a time when the company is expanding its Kalinganagar plant capacity to 8 million tonnes amid transition to green steel making processes in the UK and the Netherlands.

In the two foreign markets, the company has already announced job cuts.

In Q4 FY25, Tata Steel reduced expenses to Rs 54,167.61 crore from Rs 56,496.88 crore in the year-ago period. The company has also posted an over two-fold increase in consolidated net profit at Rs 1,200.88 crore in the March 2025 quarter.

Speaking further on cost takeouts, Koushik said that in India, the company intends to deliver savings of Rs 4,000 crore by focusing on operating KPIs (key performance indicators), employee productivity, supply chain optimisation, coupled with investment in projects with low payback period. There is a specific focus on conversion cost, and aim is to optimise conversion costs by about Rs 1,000 - 1,200 per tonne.

In the UK, Tata Steel intends to continue progressing on achieving a lean structure by further reduction in fixed costs of 29 per cent YoY of around 220 million pounds. Key levers range from optimising the cost of substrate and upgradation of IT infrastructure to reduce corporate overheads and rationalisation of downstream operations to improve the profitability.

"Our total fixed cost in FY2024 was about 995 million pounds, which reduced to about 762 million in FY2025 pounds, and we target to bring it to around 540 million pounds in the next financial year," he said.

The company has secured 500 million pounds support from the UK government for the transition to scrap-based electric arc manufacturing.

Sharing an update on the UK project, he said "We have now got the planning approvals, identified the technology providers, and the design engineering work is almost complete. We have spent about 35 million pound on the project in FY2025, and we will commence site activities in the next few months." India-based Tata Steel owns the UK's largest steelworks of 3 million tonnes per annum (MTPA) at Port Talbot in South Wales and employs around 8,000 people across all its operations in that country.

As part of its efforts to reduce carbon emissions, the company is transitioning from the blast furnace route to the low-emission electric arc furnace process, which will utilise the locally available scrap.

In the Netherlands, Tata Steel owns a steel manufacturing plant at IJmuiden, which produced an estimated 6.75 MTPA of liquid steel in FY25.

The company has adopted a comprehensive transformation programme to maximise production efficiencies, lower fixed costs and optimise product mix and margins at the Netherlands facility.

Speaking further, Koushik said in Netherlands, intention is to achieve savings of around 500 million pounds, and the programme encompasses multiple areas such as volume maximisation, product mix, repair and maintenance, employee productivity and others.

"We are also in discussions with the unions on the transformation project," he said.

The company is in intense discussions with the Netherlands government to secure funding and policy support to enable the decarbonisation and environmental project.

The Dutch government has completed the pre-notification filing with the European Commission regarding the project and all stakeholders are working on various subjects relating to the project, he said.

The Dutch government has updated its parliament, confirming talks with Tata Steel and the European Commission relating to the project.

Tata Steel has earmarked a capital expenditure of Rs 15,000 crore for its operations in India, the UK and the Netherlands in the current financial year. Of the total, around 80 per cent will be spent on ongoing projects in India.

The company's net debt stands at about Rs 82,579 crore as of March 2025, down from Rs 88,870 crore in September 2024, by about Rs 6,200 crore in the last six months.