Tata Steel's results will first come on the screens. The numbers were good. I have given the breakup in percentages. Let's bring the results, you are bringing the stock. Year on year, quarter on quarter performance of Tata Steel is on your screens. Sequentially also, year on year, there was good momentum. Good numbers. And what is driving that? For the past several quarters, India operations, the standalone performance, is driving that, and Europe's losses are reducing. So numbers were good. But this morning we were discussing when we were discussing Tata Steel, it was possible that the best of India performance is behind us? Let's show T. Narendran sir on screen. Narendran sir, hi, good afternoon. Thank you so much for taking time for CNBC Awaaz. The highlight of this quarter for me was your strong operational performance in expansion margins. What were the reasons behind that? Industry tailwinds, your realization improving, raw material prices in Q4 were at least under control. On top of that, you were working on your cost efficiencies. Were these the reasons for margin expansion? And as a follow-up, how much of this is sustainable structural efficiency? I mean, if crude oil prices, raw material costs start increasing, coal etc., how will you defend margins? How much can you sustain this?
So, there are one or two things. One is that we have been working very hard on cost takeouts both in Europe and India for the last two years. So last year we had said that the target was 11,000 crore. I think we ended up at around 10,500 crore. So pretty close to our target. So there are many initiatives. One is the blend of coal that we use. So you were asking that if coal price increases, it will definitely have an impact. But we have been working for the last few years to make sure that we use optimal blend. So the coal price impact gets reduced. You can see that in Netherlands, quarter on quarter, the coal consumption cost has gone down largely because of better blend use. So that's one thing. The second thing is that our expansion at Kalinganagar: Kalinganagar is one of our lowest cost facilities because it does not have the legacy cost of Jamshedpur. And it is one of our most productive plants. So as volume increases there, it is an advantage overall cost for us. Third thing is that in Europe we have also done a lot. In UK, almost 400 million pounds of fixed cost we have brought down over the last two to three years through structural changes. Same in Netherlands, we brought about a lot of improvement. Because earlier we were not producing more than 6 million tonnes. Last year we have done 6.7 million, which is close to the capacity of 7 million tonnes. So many initiatives we have taken will benefit us for the future also. So for now, certainly we had some advantage of steel tailwinds and steel prices, but overall we think we are in a better place than we were two to three years back.
Narendran sir, when I was looking at your numbers, the results presentation you uploaded, deliveries quarter on quarter, year on year, a strong improvement, in fact sequentially strong, but production sequentially fell. Is that the impact of the West Asia crisis? Fuel availability was low? Or are you going slow assessing the near-term outlook? What is the matter?
No, overall, if you look, production in India has gone up. India has gone up. It is only in Europe production had come down a little bit. But overall, it's not like that. The impact of West Asia is not on main steel production. It is on cost. Not on production. There is some impact on downstream facilities because we use propane in downstream facilities. That propane used to come from the Middle East. So there are cost impacts more than production impacts. And I think it's normal quarter on quarter, sometimes there are shutdowns, some planned and scheduled shutdowns happen. So at a fundamental level, there is not much issue. And I think this year we have guidance that you'll produce...
India business, the affiliate of Tata Steel, is driving the performance. That is your growth driver. But this morning we were discussing the results on the channel, and there was an interesting point. Has the peak been made in Indian markets with Q4 performance? Is that a risk? How do you see it?
No, demand will keep increasing because India is still at an early stage of infrastructure development and the government's focus on infrastructure is showing effect in steel consumption. And normally in developing countries, steel consumption has to grow at a rate faster than GDP growth rate. So if our GDP is growing at 6-7%, I would expect steel consumption to grow at 8-10%. So I think India demand will be strong. Of course, demand being strong is not necessarily good enough because prices also need to be right. For the past two quarters, we have seen some improvement, but otherwise steel prices in India have been very low over the last few years. So I think demand side is fine. Profitability, of course, we need to see how it looks going forward, but we are quite bullish about India, and India is a good place to make steel because India has iron ore and demand.
I actually wanted to ask in follow-up, that FY27 will steel industry grow faster than GDP? It will grow, at least for FY27 you are confident, but are we staring at a phase where business optimism is moderating, Narendran sir?
Not yet, but there is some concern because the main thing is how long will this war continue? I think that is obviously a concern. But Tata Steel's future plans, we have announced, we always like to have the optionality for growth. We have Kalinganagar, Neelachal, Meramandali, all these facilities, we can add a lot of capacity. But our focus in the last one or two years and going forward will be more and more on product mix, going more downstream, more value-added, because it is not just about making steel, it is about how much value can you unlock from the value chain that we have, and we will focus on that. So our approach is a bit more nuanced. We are not just chasing capacity in itself; we are looking at what is the product mix, and we want to be number one in all the attractive markets.
Narendran sir, to put it differently. For the last two quarters, we have been discussing on this program, assessing your results. I used to ask you repeatedly where we are in the cycle, and for the last two quarters you were very confident about the steel cycle. Has that confidence moderated a bit in this changing situation? Has it happened?
