Tata Steel’s provisional consolidated sales in the third quarter of FY26 stood at 8.3 million tonnes, in line with street expectations. According to the Axis Securities report, the higher volume growth in the quarter will aid consolidated revenue, which is partially offset by the lower HRC (Hot Rolled Coil) prices.
Axis Securities expects Tata Steel’s consolidated revenue in Q3 FY26 to grow by 14 per cent on a yearly basis and 4 per cent on a quarterly basis. Further, Tata Steel’s EBITDA is expected to increase by 46 per cent on a yearly basis but decline by 3 per cent on a quarterly basis.
Key reasons behind profit decline
The primary reasons behind Tata Steel’s quarterly EBITDA reduction are lower price realisation and higher coal costs, Axis Securities said.
The average domestic price of HRC (a benchmark steel product used in autos, construction, appliances) declined by 5 per cent QoQ and 1.5 per cent YoY. Axis Securities states that the prices were offset primarily due to uncertainty over the imposition of the steel safeguard duty.
Furthermore, the extended monsoon and increased production, coupled with low consumption, also affected HRC prices in the quarter. Additionally, the higher coking coal consumption costs impacted the earnings of steelmakers in the quarter.
Axis Securities outlines that in the first seven months of FY26, the domestic steel production grew by 11 per cent YoY, while on the other hand, the steel consumption grew by 8 per cent YoY during the same period.
These industrywide factors are likely to bring down Tata Steel’s India EBITDA per tonne by 7% QoQ to Rs 14,617 per tonne in the December quarter. In the European market also Tata Steel’s EBITDA per tonne is also likely to remain muted in the quarter.
Tata Steel strategy and headwinds
After a December board meeting, Tata Steel said that it will prioritise investment in volume growth. The company said that it will invest in a value-added downstream portfolio and has identified mining assets and infrastructure. The company added that it will invest in low-carbon, low-capital, low-capital-intensity process technologies for sustainable steelmaking.
The company’s board recently approved the 4.8 MTPA capacity expansion at Neelachal Ispat Nigam. Further, to increase the finished steel capacity in the flats products, Tata Steel’s board recently approved capex to set up a 2.5-million-tonne Thin Slab Caster and Rolling facilities at Meramandali.
While the company plans its long-term production, it faces an unprecedented challenge in the short term. The company faces an allegation of breaching antitrust law by the Competition Commission of India, which could reportedly result in a hefty fine.
As per a Reuters report on January 6, Tata Steel, along with JSW Steel, SAIL and 25 other steel firms, colluded on steel selling prices between 2015 and 2023.
The report states that CCI has held 56 top executives of Indian steel firms, including Tata Steel CEO T.V. Narendran, liable for price collusion.