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Tata Steel seeks to increase its annual capacity in India from the existing 34 million tonnes per annum (mtpa) to 55 million tonnes, or 73% of its global production, by 2030, the company said during an investor presentation Tuesday. The India business will also account for 75% of its revenues by 2030, it added.

“The India business continues to increase its share in the overall portfolio. This has made Tata Steel structurally stronger and is one of the most profitable businesses for us," said T.V. Narendran, chief executive and managing director, Tata Steel. The company also plans to invest in businesses that are less dependent on the steel cycle, such as services and solutions, new materials, and commercial mining.

T.V. Narendran, chief executive and MD, Tata Steel.
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T.V. Narendran, chief executive and MD, Tata Steel.

Tata Steel India has set an annual capex plan of 10,000-12,000 crore over five years, excluding potential acquisitions, the company said. It will target over $2 billion reductions in gross debt during the current financial year, while prioritizing off-shore debt pre-payment.

“Today we are well-positioned with a stronger balance sheet, improved cashflow and enhanced steelmaking capacity, and we have identified a few key priorities like maintaining market share, margin enhancement and ensuring the availability of captive ore as we grow in India in the future," said Koushik Chatterjee, executive director and chief financial officer, Tata Steel.

Over the next five years, Tata Steel will focus on augmenting raw material production capacity, strengthening logistics network, and increasing steel manufacturing, besides focusing on cutting costs. Growing de-carbonization focus, especially in Europe and China, will increase its cost of operations, the company said.

As per a Crisil study of top five steelmakers– accounting for 58% of domestic production in FY20, despite a capex ramp-up and stronger balance sheet to support a positive credit outlook, the sharp increase in the prices of steel will lift the operating margins of primary steel manufacturers by 500 basis points (bps) to 32-33% from FY21.

“While this will drive steelmakers to double down on capex, robust accruals will help them continue deleveraging and strengthening of balance sheets, leading to a positive credit outlook," it added.

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