Shares of Tata Steel Ltd have gained about 6% over the past three trading days after its board approved a slew of projects, along with an acquisition and a memorandum of understanding (MoU). Together, these initiatives aim to enhance scale, expand the product portfolio, strengthen backward and forward integration, and reduce the company’s carbon footprint.
Among the largest is a 4.8 million tonnes per annum (mtpa) expansion project, along with associated mines, at Neelachal Ispat Nigam Ltd, which currently has a capacity of 1 mtpa. The expansion would allow Tata Steel to significantly scale up its long products portfolio, primarily catering to the retail construction sector, a higher-margin and high-growth segment.
Long products account for 55-60% of India’s total steel demand, even though they make up only around 15% of Tata Steel’s total production. Two other projects include a 2.5 mtpa thin slab caster and rolling mill at Meramandali, Odisha, and a 0.7 mtpa hot-rolled pickling and galvanizing line (HRPGL) unit at its existing facility in Tarapur, Maharashtra. The HRPGL unit would manufacture advanced grades of steel for the automotive segment, demand for which is currently met through imports.
Yet, the most significant project is the proposed 1 mtpa plant based on HIsarna technology, a low-carbon steelmaking process that uses inferior-quality iron ore along with steel slag and eliminates the use of coke. Tata Steel holds a patent for the technology and has been operating a pilot plant for about a decade. The process offers cost savings of about ₹3,000 per tonne and, if successfully scaled up commercially, could provide a meaningful competitive advantage.
In addition, Tata Steel has announced the acquisition of a 50.01% stake in Thriveni Pellets Pvt. Ltd for ₹636 crore, which would help secure pellet supplies for its operations. Thriveni operates a 4 mtpa pellet plant at Jajpur, Odisha, located close to Tata Steel’s Kalinganagar plant. The company also signed an MoU with Lloyds Metals & Energy, which holds the remaining stake in Thriveni. The MoU entails collaboration in iron ore mining in Gadchiroli, Maharashtra, marking Tata Steel’s entry into western India. It also involves supporting Lloyds in setting up its upcoming steel plant, in addition to exploring the joint development of a 6 mtpa greenfield steel plant.
Despite the potential gains, Tata Steel risks stretching its finances as multiple large projects are set to commence simultaneously.
“Tata Steel is embarking on a very high capital expenditure (capex) spree at a time when steel margins are depressed, thus, exposing the company to financial risk,” noted an ICICI Securities report. The report estimates Tata Steel to incur capex of ₹45,000-50,000 crore over the three to four years, excluding the Lloyds MoU.
While Nuvama Institutional Equities estimates Tata Steel’s net debt/Ebitda to be comfortable at 1.7x at end-FY28, it is contingent upon a recovery in steel prices. At the end of September quarter (Q2FY26), net debt/Ebitda stood at 3x, lower than 3.2x in Q1. The company targets to maintain the ratio at 2.75-3x on a sustained basis.
Tata Steel’s stock trades at an enterprise value of 6.5-7x times various brokerages’ estimated FY27 Ebitda, close to its long-term average multiple. Besides, given subdued steel prices currently, Nuvama has cut its FY26 and FY27 estimated Ebitda by 5% and 3%, respectively. Against this backdrop, sustained growth in domestic demand is key for the stock’s near-term performance.
