Tata Steel back with a bang in Q4; shows Rs 6,644-cr PAT

Overall, Tata Steel becomes the seventh non-financial firm, including four oil PSUs to report quarterly revenues of Rs 50,000 crore.

Tata Steel reported a higher-than-expected consolidated net profit, attributable to owners of the company, at Rs 6,644 crore in the March quarter (Q4) of FY21, against a net loss of Rs 1,481 crore in the corresponding period last year.

The company’s performance was best-ever across metrics such as revenue, Ebitda (earnings before interest, taxes, depreciation, and amortisation), and net profit (excluding exceptional items).

Revenue from operations jumped 39 per cent year-on-year (YoY) to Rs 49,977 crore on the back of higher steel prices and strong volumes, leading to strong operational gains.

With this, Tata Steel has become the third private sector firm in India to report quarterly revenues of Rs 50,000 crore after RIL and Tata Motors.

The steel maker reported total consolidated revenue of Rs 50,250 crore, including other income of Rs 272.2 crore.

Overall, Tata Steel becomes the seventh non-financial firm, including four oil PSUs to report quarterly revenues of Rs 50,000 crore.

According to the management, domestic steel prices are still far lower compared to import parity, and that the consumer in India is getting the best price point for the commodity at present.

“Steel prices in India are cheapest compared to anywhere in the world. So, exporting steel could be a good opportunity and exporters would be most comfortable in the current price scenario.

"The current domestic steel prices are simply reflecting the demand in the market,” T V Narendran, MD and CEO of Tata Steel, said in the earnings call on Tuesday.

According to Bloomberg, Tata Steel’s top line was seen at Rs 46,105 crore, Ebitda at Rs 12,820 crore, and net income (GAAP) at Rs 6,509 crore.

Net profit was restricted by exceptional expenses of Rs 991.13 crore.

Exceptional items include provision of Rs 723 crore for impairment of non-current assets, and an employee separation compensation of Rs 233 crore.

The year-ago quarter had exceptional items of Rs 3,853 crore, a key reason for the loss at the net level in the year-ago period.

Consolidated Ebitda of Rs 14,607 crore, up 135 per cent YoY, was the highest-ever consolidated quarterly Ebitda.

The previous high in terms of quarterly Ebitda was Rs 8,038 crore in September quarter of 2008.

The consolidated net profit of Rs 7,162 crore in Q4FY21 was also its highest ever, beating the previous high of Rs 4,804 crore in Q2FY09.

Tata Steel has also become the second-most profitable in the Tata group, after Tata Consultancy Services (TCS).

Tata Steel’s Ebitda is, however, higher than that of TCS.

“The Q4 performance has been outstanding in terms of both earnings and cash flows.

"It helped the company report one of the highest underlying performances for the full year in spite of the disruptions during the first half of the fiscal year,” said Koushik Chatterjee, ED and CFO, Tata Steel.

Consolidated free cash flows stood at Rs 8,826 crore in Q4 and at Rs 23,748 crore in FY21, helping in lowering debt.

Tata Steel’s dividend payout in FY21 will also be its highest ever. It announced a dividend payout of 250 per cent or Rs 25 per share to shareholders, beating the previous high of Rs 16 per share in FY08.

This translates to a total pay-out of Rs 2,862 crore for FY21, beating the previous high of Rs 1,490 crore in FY19.

A third of this (Rs 956 crore), will accrue to Tata Sons in lieu of its 33.41 per cent stake in the company.

Net debt fell Rs 29,390 crore to Rs 75,389 crore for FY21 — 28 per cent lower than to FY20.

Of this, a Rs 10,781-crore reduction happened in Q4 alone.

Net debt/Ebitda improved to 2.44x, while net debt/equity improved to 0.98x for the financial year.

In India operations, the company achieved highest-ever quarterly crude steel production of 4.75 million tonne (Mt) in Q4, up 3 per cent sequentially.

Steel deliveries grew 16 per cent YoY to 4.67 Mt in Q4FY21.

Tata Steel standalone also registered the highest-ever quarterly Ebitda at Rs 9,206 crore, with 37 per cent quarter-on-quarter and 2.5x YoY in Q4.

This translated into an Ebitda per tonne of Rs 27,828 (again highest-ever) and an Ebitda margin of 43.4 per cent.

Alongside, steel deliveries at Tata Steel Europe grew 17 per cent sequentially and 3 per cent YoY to 2.47 Mt in Q4FY21; Ebitda improved sharply to £125 million.

With regard to separation of Tata Steel’s Netherlands and UK operations, the management said in the next two months, the company would be in a more finite position with regard to the status.

“The focus is on separation and post separation, how the transformation works,” Chatterjee said.

For FY21, consolidated top line was at Rs 156,294 crore (up 4.9 per cent), Ebitda at Rs 30,892 crore (up 71 per cent) and net profit attributable to owners of the firm stood at Rs 7,490 crore (up 381 per cent).

Tata Steel’s dividend payout in FY21 will also be its highest ever. The steel maker has announced a dividend payout of 250 per cent or Rs 25 per share to its shareholders, beating the previous high of Rs 16 per share in FY08.

This will translate into total dividend pay-out of Rs 2,862 crore for FY21 beating the previous high of Rs 1,490 crore in FY19.

A third of this amount, around Rs 956 crore, will accrue to Tata Sons in lieu of its 33.41 per cent stake in the company.

Meanwhile, shareholders have approved the merger of Tata Steel BSL with Tata Steel.

A joint “Scheme Petition” has been filed with the NCLT to sanction the scheme with effect from April, 1, 2019, the company said.

The merger of Tata Metaliks and Indian Steel and Wire Products with Tata Steel Long Products is also underway, it said.

With regard to inorganic growth options, the management informed the company would be interested in long product facilities such as Neelachal Ispat Nigam and is not keen on flat product inorganic growth route as the existing facilities at Kalinganagar and Angul provide enough room to up capacity.

As part of organic expansion, the company's pellet plant and cold roll mill complex at Kalinganagar is under construction.

The 5-Mt expansion project has been restarted.

As on March 31, 2021, in respect of NatSteel Holdings Pte and Tata Steel (Thailand) Public, the businesses were reclassified from "Held for sale" and re-presented from "Discontinued operations" to "continuing operations" during the quarter.

Consequent to reclassification, the South-East Asian Operations is presented as a separate segment, the company added.

Photograph: Danish Siddiqui/Reuters