Missing the deadline? Why analysts doubt Tata Steel's 40 mtpa capacity target
Tata Steel has an ambitious target to raise its domestic steel capacity to 40 mtpa by FY30. However, analysts are skeptical. Beyond the immediate Kalinganagar and Neelachal (NINL) expansions, the company has not announced specific capacity plans.
Tata Steel Ltd's ambitious plan to boost steelmaking is facing scepticism, as execution roadmaps beyond its immediate pipeline remain unclear. At the close of FY25, Tata Steel's local capacity stood at just 26.6 mtpa, far from the target of 40 mtpa by FY30 that chairman N. Chandrasekaran set in July 2024.
Apart from the two expansion projects already announced for Kalinganagar and subsidiary Neelachal Ispat Nigam Ltd (NNL), the company's road to 40 mtpa remains unclear, analysts said.
The main goal is to ramp up Kalinganagar to full capacity utilization of 8 mtpa by the end of 2025. This is a critical step, as the expansion helps Tata Steel serve demand in the near term. The other is to scale up NINL. While its expansion is critical—it will help Tata Steel sell long steel used in construction, infrastructure and appliance industries—the clearances to expand its capacity from 1 mtpa to 5 mtpa are still awaited.
Once both expansion projects are completed, Tata Steel will achieve a capacity of 31-32 mtpa, still far from its target.
Chief executive officer (CEO) TV Narendran indicated in a post-earnings call for the June quarter that the company is "ready to go to the board maybe by October, November as soon as we get the environment clearance."
What analysts said
"The 40 mtpa capacity target is an ambitious goal the company has set for itself," said Aditya Welekar, senior research analyst at Axis Securities. "In India, the immediate priority is the NINL Phase-1 expansion, which remains the only project currently in the pipeline. Other projects are not yet at a definitive stage."
Tata Steel's latest annual report speaks of further expansion at Meramandali and Kalinganagar after NINL Phase-1, but formal announcements detailing scope, budget, and construction timelines are missing.
Kotak Securities noted that board approval, tentatively set for 3QFY26 after detailed engineering and land acquisition are complete, would precede a 3 to 3.5-year commissioning period, pushing the unit's operational date to around 2029.
According to analysts, what’s missing are announcements around execution details and timelines.
Tata Steel’s European operations could also weigh on its ability to fund domestic expansions as they transition towards low-carbon and sustainable steel production overseas.
Welekar of Axis pointed out that Tata Steel's British and Dutch operations are also undergoing restructuring, "which might delay the capex for the Indian expansion projects."
Tata Steel acquired NINL nearly three years ago through a privatization process. It has turned around the loss-making unit company into an Ebitda-positive unit. In FY25, the NINL unit reported ₹1,000 crore Ebitda. The acquisition helped the steelmaker expand further in long steel products.
Kalinganagar is Tata Steel’s greenfield project. It is currently running at 4.5-5mtpa capacity. The Phase-II expansion aims to add 5mtpa capacity to existing 3 mtpa, taking it to 8 mtpa.
Tata Steel operates five major manufacturing units in India, including integrated plants at Jamshedpur and Kalinganagar, and facilities at Gamharia, Meramandali, and NINL.
Similar sentiments about missing execution announcements were echoed by at least two more brokerage houses.
Tata Steel could face capacity constraints after FY28 if project execution does not speed up, especially since domestic steel demand remains strong, said Tushar Chaudhari and Satyam Kesarwani, analysts at Prabhudas Lilladher Capital in a note dated 29 September.
"Tata aims to grow India capacity to 40 mtpa by FY30, while its execution timelines appear to be slipping," analysts at Axis Capital wrote in a note dated 26 September, adding that in the absence of any announced expansion, Tata Steel has the weakest volume growth visibility compared to its private sector rivals.
“With the newly commissioned 5 mtpa KPO-II (Kalinganagar) plant expected to ramp up fully by FY27E, volume is expected to nearly flatten from FY28E onwards," wrote Amit Murarka, Atishay Santhalia, and Darshan Mehta in their note. To be sure, at least one brokerage firm disagrees.
Tata Steel is more reserved and its approach is about execution rather than constant announcements, said Suman Kumar, vice-president, metals at Philip Capital. "The Tata Group would not commit to such targets publicly unless they had a clear plan. Even if not revealed explicitly, one can assume they have something in the pipeline," said Kumar.
Tata Steel did not respond to Mint’s queries seeking comments.
Sustainability steps
Meanwhile, Tata Steel has started the construction of an electric arc furnaces (EAF) in Ludhiana, which will be commissioned by 2027. Following its completion, Tata Steel plans to take up two more EAF projects on a fast-track basis, depending on the operational success of the Ludhiana plant. However, there is no timeline of this project.
Blast furnaces use coke to heat and convert iron ore into molten metal for making steel, while electric furnaces use electricity instead of coke, helping reduce emissions.
In the Netherlands, the company has secured up to €2 billion in funding support from the Dutch government as it transitions its Dutch operations towards sustainable steel production, additional capex will be its own cash flows, project debt, and support from Tata Steel.
In the UK, Tata Steel started constructing an electric arc furnace in Port Talbot this year. It had received a £500 million grant provided by the UK government in 2024 for its £1.25 billion green steel project in Port Talbot.
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