Tata Steel Heats Up 5% On Mega Expansion Plans, Hopes for Better Growth

Shares of steelmaker Tata Steel surged 5% in trade on May 14 as investors bet on improved growth expectations in the quarters ahead, while cheering for the company’s Rs 15,000 crore mega capital expenditure drive.

The management revealed in a post-earnings call that the capex is expected to drive the company’s expansion across India, the UK and the Netherlands, with around 80% to be targeted towards ongoing projects in the domestic market.

Of the total, Rs 11,000 crore would be directed towards Tata Steel’s domestic operations, Rs 1,900 crore for the UK, and the remainder for the Netherlands. In FY25, Tata Steel's total capital expenditure stood at Rs 15,671 crore, including Rs 3,220 crore that was spent in the March quarter.

Furthermore, while the company’s Q4 earnings bore the brunt of sluggish steel prices, which weighed on its revenue, analysts remain hopeful to see an improvement in earnings hereon.

Tata Steel posted an over twofold jump in consolidated net profit to Rs 1,200.88 crore for the March quarter, up from Rs 554.56 crore in the same period last year. The growth was driven largely by a decline in input costs, particularly coking coal and improved sales volumes across both domestic and international markets.

However, even though margins witnessed an uptick, sluggish steel prices dragged consolidated revenue down over 4% on year to Rs 56,218.11 crore.

Looking ahead, the management expects an increase in steel realisation by Rs 3,000/t on quarter along with a further decline in coking coal cost by $10 sequentially, driving EBITDA/t expansion in Q1 FY26.

To that effect, Nuvama Institutional Equities upgraded its rating on the stock to a ‘buy,’ with a fresh target price of Rs 177, which happens to be 8% higher than the previous target.

Nuvama also expect Tata Steel’s Kalinganagar plant to ramp-up to drive India volume CAGR of 8% over FY25–27. Furthermore, it believes Europe should also start delivering positive EBITDA from Q1 FY26 driven by higher profitability in the Netherlands and a breakeven in UK (Q2 FY26). “Overall, we expect a consolidated EBITDA CAGR of 31% over FY25–27,” Nuvama wrote.