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Edited Transcript of TATASTEEL.NSE earnings conference call or presentation 7-Aug-19 1:00pm GMT

Q1 2020 Tata Steel Ltd Earnings Call

Mumbai Aug 14, 2019 (Thomson StreetEvents) -- Edited Transcript of Tata Steel Ltd earnings conference call or presentation Wednesday, August 7, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Koushik Chatterjee

Tata Steel Limited - CFO & Executive Director

* Samita Shah

Tata Steel Limited - Group Head of Corporate Finance & Risk Management

* Thachat Viswanath Narendran

Tata Steel Limited - CEO, MD & Director

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Conference Call Participants

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* Abhijit Mitra

ICICI Securities Limited, Research Division - Analyst

* Amit A. Dixit

Edelweiss Securities Ltd., Research Division - Financial Analyst

* Dhruv Muchhal

Motilal Oswal Securities Limited, Research Division - Research Analyst

* Indrajit Agarwal

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Pinakin M. Parekh

JP Morgan Chase & Co, Research Division - Associate

* Raashi Chopra

Citigroup Inc, Research Division - Director and Analyst

* Rajesh V. Lachhani

HSBC, Research Division - Analyst

* Ritesh Shah

Investec Bank plc, Research Division - Analyst

* Saumil Mehta

BNPP Asset Management India Private Ltd - Research Analyst of Equities

* Sumangal Nevatia

Kotak Securities (Institutional Equities) - Analyst

* Vikash Singh

PhillipCapital (India) Pvt. Ltd., Research Division - VP of Metals & Mining

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Tata Steel Limited Q1 FY '20 Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded. I now hand the conference over to Ms. Samita Shah. Thank you, and over to you, ma'am.

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Samita Shah, Tata Steel Limited - Group Head of Corporate Finance & Risk Management [2]

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Thank you. Good evening, ladies and gentlemen this is Samita Shah and on behalf of our team welcome to the call to discuss our results from the first quarter of FY '20. For the team, my sincere apologies for the delay in starting the call, and thank you very much for bearing with us. I hope you had a chance to go through our results as well as the presentation which is uploaded on our website.

As you know on this call, we will discuss the performance and address questions on Tata Steel as well as Tata Steel BSL. From this quarter onwards, we will also be including Tata's performance in Sri Lanka. To walk you through the results, we have with us Mr. T.V. Narendran, CEO and MD Tata Steel; Mr. Koushik Chatterjee, ED and CFO Tata Steel, and senior members of the management.

Before I hand it over to them, I would like to draw your attention to the safe harbor clause on Page 2 of the presentation, which will cover the discussions. Thank you, and over to you.

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [3]

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Thanks, Samita. I will start with the macroeconomic and industry situation. As you know, the global economic growth has softened significantly over the last few months, which has affected steel prices. This coincided with the sharp rise in iron ore price and elevated coking coal prices and led to a decline in the (inaudible) wide spreads by over $80 to $100 in key markets.

In Europe, steel demand continues to decline compared to last year as uncertainty around Brexit and trade conflict weighed heavily on the economy. This coupled with rising share of imports and rising input costs have significantly impacted the steel prices in the region.

In India, the steel demand shrunk during the quarter as liquidity issues negatively impacted domestic consumption and business sentiment apart from seasonal slowdowns. While Q2 will be subdued, we expect increased government spending and resolution of the liquidity crunch to revive the steel demand in India in the second half of the year, which will give us a lift to domestic steel prices.

Moving on to the performance during the quarter. Tata Steel continues to grow in India despite the headwind I just mentioned. During the quarter, our crude steel production in India increased by 23% on a year-on-year basis to 4.5 million tonnes and deliveries grew by 18% to 3.96 million tonnes. Our India volumes now account for more than 60% of our consolidated volumes. As you know, the auto sector is a key segment for us and has witnessed a significant slowdown. I'm happy to say that we were able to counter the slowdown effectively by selling larger volumes in other segments like Industrial Products and Project segment and the branded Products segment. Retail & Solutions segment sales also grew by over 26% and 20%, respectively. Sorry, I meant that the Industrial Products and Projects segment and the branded products retail and solution segment sale, this grew by over 26% and 20%, respectively. This is a vindication of the strength of our marketing franchise and our business model in India.

In addition, our focus on operational excellence has helped us to reduce the impact of adverse market conditions on our margins. Tata Steel Europe profitability has dropped sharply during the quarter partly due to the operational issues and partly due to weak market conditions. We have initiated a transformation plan with an aim to make the firm self-sufficient and cash positive. This will commence on our key subsidiaries and large projects. Tata Steel BSL continues to see improvement in capacity utilization as well as operational performance. They also completed the acquisition of Bhushan Energy, which will help them reduce their power costs.

Our subsidiary, Tata Sponge Limited, has completed the acquisition of the key business of Usha Martin Limited and is focused on stabilizing and ramping up operations.

Our Kalinganagar plant Phase 2 expansion is progressing well and is scheduled for completion in FY '22. A 2.2 million tonnes cold rolling mill complex and the pellet plant has been prioritized to improve the product mix and the cost structure.

As you know, the definitive agreement with HBIS group for the sale of 70% in our Southeast Asia business had to be called off as we could not secure the requisite approvals. Today, we have executed an MOU with Synergy Metals and Mining Funds to divest 70% of our stake in Tata Steel Thailand.

In India, we are recognizing our footprint. In addition -- we are reorganizing, sorry -- in India, we are reorganizing our footprint, and in addition to the merger with Tata Steel BSL, we are also holding our multiple unlisted subsidiaries into 4 verticals: one for long products, the second one for the downstream products, third one for mining and the fourth for infrastructure. This will help us drive scale, synergies and simplification. And we're also closing around 100 subsidiaries in Europe to drive simplification.

I will hand over to Koushik, who will elaborate on this as well as on our financial performance.

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [4]

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Thank you, Naren, and good evening to all of you. I would like to share some highlights of our financial performance and related subjects. Consolidated figures for quarter 1 FY '20 includes figures of recently acquired Usha Martin Steel business on 9th of April 2019. It also continues to be adjusted for Southeast Asia and operating entities of the same was classified as assets held for sale and Naren just gave you an update on the developments today as far as the Thailand asset -- Thailand investment is concerned.

Our consolidated revenue was about INR 35,947 crores for the quarter and consolidated adjusted EBITDA was INR 5,530 crores. Tata Steel India, which includes Tata Steel BSL, was formally (inaudible) with Tata Steel Limited recorded revenues of INR 21,129 crores. The reported adjusted EBITDA for the quarter was INR 5,117 crores. Therefore, the EBITDA margin stood at about 22.2% and the average EBITDA per tonne was about INR 12,890. This is actually about 7% increase on a quarter-to-quarter and reflects the robustness of the business and the operating model that Naren has talked about.

Moving to Europe, these revenues declined to about GBP 1.6 billion in line with the lower deliveries. Rising iron ore and elevated coal cost position impacted the EBITDA apart from some of the operational issues for the quarter, which stood around $7 million. However, as mentioned earlier, we are working to make it self sufficient and cash positive, and a lot of actions have been initiated in this regard.

Consolidated reported after-tax profit for the quarter stood at INR 702 crores, which translates into a diluted EPS of INR 5.83 per share. And including the liquidity position of the group remains very strong with over INR 10,000 crores of liquidity in cash and cash equivalents as well as on the undrawn bank lines.

The capital expenditure for the quarter was INR 2,450 crores. We had earlier guided for about INR 8,000 crores of CapEx in FY '20 and another GBP 300-plus million of CapEx for Europe. Keeping in mind the market conditions and the cash flow trajectory, we have calibrated it down to by about 25%. In addition, the spend on KPO has been made more back-ended by prioritizing the cold rolling mill complex and the pellet plant over the upstream assets.

Our consolidated gross debt during the quarter increased by about INR 5,800 crores, which was primarily due to the reclassification of the lease obligations under IndAs 116, impacting by almost about INR 2,900 crores. And the short-term debt for Tata Sponge acquisition and Usha Martin Steel business are the 2 main reasons for the increase in the debt. However, the rights issue proceeds, which we received in end-July, the leverage at Tata Sponge will also come down.

In terms of financing, development and portfolio, Tata Sponge completed the refinancing of the short-term debt it had taken for the acquisition in July 2019. They raised about INR 2,600 crores from long-term loans and about INR 1,485 crores to a rights issue, which was supported by Tata Steel. Following the rights issue, our stake in the company has increased to 75.9%.

We are also restructuring our India footprint as Naren just mentioned to drive scale, synergy and simplicity. Tata Steel's operating and complex organization model is being reconstructed to ensure that the new structure will make it easier to follow from investors like yourself. This reorganization will start with our unlisted entities and process, which will take some time.

The Tata Steel BSL merger is also expected to continue in its journey, as announced earlier. And hopefully, the regulatory approvals will get completed soon.

With this, I'll end here, and open the floor for questions.

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Questions and Answers

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Operator [1]

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Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) The first question is from the line from Amit Dixit from Edelweiss.

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Amit A. Dixit, Edelweiss Securities Ltd., Research Division - Financial Analyst [2]

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I have 2 questions. The first one relates to the deleveraging target that we have of almost $1 billion. Now given that Q2 is also expected to be soft, we have commitment for KPO 2. And the deal in Southeast Asia is also off table. Just wanted to understand how we are going to achieve this kind of deleveraging?

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [3]

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What's your second question?

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Amit A. Dixit, Edelweiss Securities Ltd., Research Division - Financial Analyst [4]

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Yes. The second question is on -- with respect to Tata Steel Europe. Last year, we had some -- we had a lot of benefit from the sale of carbon credit. Just wanted to understand given the merger with Thyssenkrupp is now called off, will there be a need to purchase additional carbon credit in this year?

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [5]

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Okay. So let me take the first one, and possibly also answer the second one. So I can only say, Amit, at this point of time, that as both Naren and I mentioned in our commentary that we -- starting during the first quarter and we are looking at -- we are looking at recalibrating our cash flows to ensure that we progress towards the deleveraging. So there are initiatives which have been undertaken in terms of working capital release, which is almost about more than INR 1,500 crores to be about INR 2,000 crores. Then we are talking about recalibrating CapEx. I just mentioned that the CapEx number will be lower for the year by about 20%, 25%. We are also looking at some of the portfolios that we just talked about today. In fact, this evening, we've signed MOU with the Synergy Metal and Mining Fund for our 70% share of our holding in Tata Steel Thailand, which we expect to hopefully get completed during the year. So there are multiple actions on that.

And even if you look at comparing a range of EBITDA, which was -- maybe the compared is what we had last year, like even at a moderately lower end of, say, INR 12,000 per tonne of EBITDA from an India business perspective, there is enough headroom to still pursue the deleveraging target. So that's why I said, this is the first quarter; admittedly the second quarter is also soft, but then the nonearnings-based capital release should help us in beefing up our cash flows. And therefore, we stick to our target at this point of time. If we feel that there is anything which is subtractive, we can talk about it in the next quarter call. But at this point of time, I would certainly say that we continue to pursue this.

The second one, second question that you had, that whether we will have to buy. The answer is yes. And Tata Steel Europe did take a provision of EUR 16 million in this quarter on account of the emission charges given the need to buy emission options for the company. So it has not yet made any purchase of carbon credits. But the provision made of EUR 16 million.

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Amit A. Dixit, Edelweiss Securities Ltd., Research Division - Financial Analyst [6]

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16 million dollars or pounds, sir?

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [7]

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Pounds, pounds.

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Operator [8]

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We'll move on to the next question. That is from the line of Pinakin with JPMorgan.

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Pinakin M. Parekh, JP Morgan Chase & Co, Research Division - Associate [9]

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Now just looking at India operations given that now there is Tata Steel, Kalinganagar, Jamshedpur, Bhushan Steel, Tata Sponge and Usha Martin and the consolidated EBITDA of the India operations work out to as per the presentation around INR 12,900 per tonne. Now going forward, if we do not see the Indian demand improve and autos remains as weak as it is, how do you see this profitability ranging over the course of the year? I mean we understand 2Q will be seasonally weak. But over the next 6 to 12 months, is this a base level profitability in the current environment? Or it can fall sharply if we do not see a demand improvement?

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [10]

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Yes. So Pinakin, basically there are 2, 3 aspects to what you asked. One is the price outlook. The second is the demand side. And the third is impact of our book. And the fourth probability I want to add is the cost actions that have been taken. So if I look at the demand outlook, our expectation is while Q2 may not show as much because Q2 is typically a weak quarter because of monsoons, et cetera. But we expect the second half of the year to be better, festive season plus we believe monsoons have caught up and so rural market to be slightly better. Infrastructure spend, already in this quarter the infrastructure -- or last quarter, the infrastructure has been slightly better than the quarter before that. So Q4 -- Q1 has been better than Q4 of last year from an infrastructure offtake point of view. So we are expecting second half to be better for construction, and we are hoping that Auto will not continue to drop the way it has done. So we are more optimistic on the demand for the second quarter.

As far as prices are concerned, I think globally, if you look at it, we've been fluctuating in the $480 to $520 range for the last few months. Iron ore prices and coal prices are still high. I know iron ore prices have come off a bit, but it's still quite high to sustain prices below $500. And frankly, it's not as if the Chinese are disrupting the market. So I think it's partly Indians and the Turks who are exporting more in Southeast Asia. And so we -- a lot will depend if the Indian demand looks better in H2. I don't think India will be exporting so much and adding to the pressure on the international prices.

The third part is on the cost side. I think there are a number of actions which are being taken in all our facilities, whether it is Bhushan, Tata Steel or Usha Martin, which is today Tata Sponge or in Tata Steel Bhushan, so apart from the normal cost actions, there are also improvements that we expect in the second half of the year on iron ore supply from our mines both to Bhushan and to Tata Sponge because Tata Sponge also has a 2.5 million tonne mining operation, which has got all the necessary permissions and from July supply of iron ore has started to the Usha Martin -- erstwhile Usha Martin plant. From Bhushan point of view -- Tata Steel Bhushan point of view, they were supposed to buy about 4 million tonnes of iron ore for the year and get the balance from Tata Steel, I think at the rate of about 200,000 to 250,000 a month. The iron ore dispatches have started. Logistics is still an issue. So it's getting better. We are also participating in the GPWIS scheme, so we are going to be a subsidiary. PMI level is going to be owning rigs, and they'll be deploying about 10, 15 rigs by the second half of the year. So that will also help. So apart from the cost actions on improving efficiency, we expect coal prices to be a bit softer in the second half. We expect more iron ore supplies from our own mines. And we expect the markets to be a bit better. So while this quarter may see a price drop of about INR 3,000 compared to Q1 because if you really see Q1 was better than Q4 in terms of prices. So if you look at the numbers, we think Q2 will be about INR 3,000 lower. Also because in Q2, we'll probably be exporting a bit more than we did in Q1. But we expect Q3 and Q4 to be better from a demand point of view, from a price point of view and also from a cost point of view.

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Pinakin M. Parekh, JP Morgan Chase & Co, Research Division - Associate [11]

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And secondly, I mean when the Thyssen JV was called off, the cash breakeven at Tata Europe, if I remember correctly, was around EUR 400 million. And obviously, it's not running at that stage. So as of now given where we -- where the European market is, do you think we should expect Tata Steel India to support Tata Europe like it was being done in the 2009 through '13, '14 period?

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [12]

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Basically, guidance to the team in Europe, we have a new CEO, Henrik, who's also sitting with us here. Basically has been that, yes, markets are tough with credits are depressed. So EBITDA is getting squeezed, but we have to be cash positive. So there are levers, which go beyond EBITDA. There is a lever available in terms of working capital. There is a lever available in terms of CapEx and there is a lever available in terms of cost takeoffs and also any other portfolio choices that we make within the European footprint. So the management team is working on all these levers. I'm trying to ensure that we are cash positive despite the EBITDA being compressed because the spreads are compressed. So I think what we have said is that while we will continue to work on improving the operations, the management is working hard to ensure that we don't have to send any more money from India.

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Pinakin M. Parekh, JP Morgan Chase & Co, Research Division - Associate [13]

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Understood. And just to clarify, you mentioned INR 3,000 price decline on a Q-on-Q basis in the second quarter. Would that completely flow through to margins? Or should we expect correspondingly some cost declines as well across the India portfolio?

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [14]

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There will be some cost declines. So everything need not flow to the margins.

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Operator [15]

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We'll move on to the next question that is from the line for Ritesh Shah from Investec Capital.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [16]

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Sir, can you provide some more color on the comments that you made for restructuring India footprint? What can one expect over here going forward and any timelines?

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [17]

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Yes. So if you look at the Tata Steel number of subsidiaries, investments, JVs, et cetera, they are -- broadly can be classified into a couple of buckets. One, let me take the first big one, which is Tata Steel BSL, which as you know already, the merger has been announced. So effectively, within Tata Steel Limited apart from Jamshedpur and Kalinganagar, Angul will be another hub for us after the merger.

The second is there are multiple downstream entities. A few of them are listed and many of them are unlisted. So what we are looking at is, as Naren mentioned that, under the long products business, we will consolidate on the long products entities. Under the downstream entities, we will reorient all the downstream assets of the business and drive it in a more focused manner, take out costs and synergies between these entities because there would be an adjacency strategy in those assets and investments. A number of legal entities to come down. And then there are some assets which are there due to the services that Tata Steel takes from infrastructure services, logistical services and so on. So those will be consolidated within one entity. And then mining is an opportunity as Tata Steel has been in 100 years in mining. And therefore, we will be ready for the future mining strategy going forward.

So that will be another business to drive. So effectively these 4 companies or businesses, which will essentially consolidate, so we will start the process and hopefully, we will be fairly advanced by the end of this year. However, some of it is dependent on the legal and regulatory processes. So it's not entirely in our hands, but this is the step and the direction that we will continue to pursue. So that's the overall intent in this consolidation.

Other than that then, if you look at our annual report, you will find a significant number of subsidiaries. So our intent is to take a target of reducing about 100 subsidiaries on Tata Steel Group consolidated. That's more elimination, consolidation, divestment and so on.

So this is a 2-part. This is essentially a drive towards simplification and towards focusing a strategy which is more aligned to within its own vertical.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [18]

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Sir, would this also mean that we might move long products from Tata Steel India to something like Tata Sponge? That's one follow-up.

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [19]

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No, no. Answer is no because anything which is in the asset there at Jamshedpur was -- cannot be broken up or cannot be carved out because of huge issues in terms of -- in multiple forms whether extrapolate your others. So it's all about the assets outside Jamshedpur plant. So there are many, as you would know, and those are the ones that we are focusing on. But there could be an operating model, which would look at managing it with high degree of synergy. So once we achieve the consolidation, then the level of synergies across businesses -- even today, we have a huge synergy in between Tata Steel BSL and Tata Steel on the commercial front, marketing front, procurement and so on. So we would be focused on driving those synergies, which will be value for the system.

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [20]

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And growth in long products could be done through the same.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [21]

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That's helpful. Koushik, specifically on the BSL merger, given the accumulated losses and depreciation that we have, can one expect a lower tax rate for the India operations going forward, and that could also help the deleveraging story that we are talking about?

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [22]

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So you have to make your own judgment on that because I think we need to first look at the whole process and then whatever synergies, both operational, financial, overheads, shared services, all of it will flow through. So it's actually quite a -- very comprehensive strategic integration process, and we are currently very engaged between the 2 teams to develop the framework for a smooth transition on one hand, and the regulatory costs on the other hand.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [23]

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That's helpful. Just one question for Narendran, sir. DGTR has refuted the claims about any investigation on safeguard duties on steel. Sir, what is the status over here? And are we expecting any trade measures on steel going forward looking at the import-to-export ratios.

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [24]

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I think the Indian Steel Association has represented to the government for a 25% duty, safeguard duty. I think as far as we know, it is being considered. It's under consideration. We don't have any conclusion yet. Obviously, Europe from an industry point of view, we continue to be a net importer. And our concern is always that with the countries with whom we have an FTA, there is continued growth of steel coming in, and it's not as if those are steel which are not made in India. 90% of the steel being imported into India are easily made in India. So I think that's primarily been the submission of the industry. The industry has invested tens of thousands of crores over the last few years, and the industry feels that in difficult times there needs to be some support.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [25]

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Sir, just last one question. Specifically on the provisions on carbon credits that you indicated for this quarter. It's such a significant number. If one had to look at an annualized number over here, how should one approach this specific variable for European operations?

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [26]

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Yes. So I would -- it's difficult to hazard a guess at this point because there is also the moving price on those. So it is also depending on how much production we do. What the market condition remains. So it's best to do it on a quarter-on-quarter rather than on a full year basis. You can be tempted to multiply by 4, but that may be a bit arithmetically unnecessary. The figure is not feasible. I think you need to think through -- and I would -- it's difficult for me to give a guidance at this point of time on this. But let's see as to how -- and I would also say that Q2 and Q3 are also slower seasons in Europe because of this summer shutdowns and the winter breaks that happen. So it all depends on the production number there.

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Ritesh Shah, Investec Bank plc, Research Division - Analyst [27]

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Sir, I would appreciate if you could provide more color over here.

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Operator [28]

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(inaudible) Mr. Shah.

(Operator Instructions) The next question is from the line of Rajesh Lachhani from HSBC.

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Rajesh V. Lachhani, HSBC, Research Division - Analyst [29]

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So 2 questions from my side. First one is basically on the coking coal purchase and consumption price that we saw in 1Q and the trend for Q2. If you can throw some light on that?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [30]

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Yes. So effectively, we expect the purchase price to be about $10 lower, but the consumption maybe about $4 to $5 per tonne lower Q2 to Q3.

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Rajesh V. Lachhani, HSBC, Research Division - Analyst [31]

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Okay. And sir, the second is with regards to the deal cancellation for the Southeast Asian operations. So just want to understand, were there any other reasons apart from the approval from the Hebei government for the cancellation of deal? Because the reason I asked this is that HBIS is a state-owned enterprise. So initially when we entered into the deal, there would be some consent in a way from the Hebei government. So just wanted to understand where there any other reasons?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [32]

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No, so we have been very deeply and intensely engaged with HBIS. As you know, they are a large company, but we would have assumed that it would have gone through because there were no other issues between the 2 companies as we have very good regard for each other. But I think there is some issue between -- in the government as far as investing outside of China, et cetera. Which could be best kind of explained by HBIS. But unfortunately, they mentioned that they didn't get the requisite approval process.

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Rajesh V. Lachhani, HSBC, Research Division - Analyst [33]

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Okay. And sir, given the weak market conditions, do you think there could be a risk to completing this transaction with the MOU that you have signed with Synergy Metals and Mining?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [34]

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So I think all that I can say is Synergy Metals and Mining Fund has -- is founded by people who have very long experience in the steel industry and very credible experience. And they also have 2.5 million tonnes of steel capacity in Thailand, and therefore, I would believe that they understand the Thai market and that's what they have -- we have had a very good engagement so far. So it is our intent to continue to pursue these strategic options. We know that the market is uncertain and has several volatility, but I think it's -- from what we understand and what we get is the fact that they are very keen, and we hope to move forward on that basis.

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [35]

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And I think they were part of the initial state of (inaudible).

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [36]

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So they are familiar with the asset because they were also with Hebei as part of the initial interaction and bidding, so they have -- they know the lay of the land as well as the asset. They were bidders in the first process. And therefore, I believe that their familiarity will help us to complete the transaction.

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Rajesh V. Lachhani, HSBC, Research Division - Analyst [37]

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And also, any guidance on the valuation given the market conditions?

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [38]

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So I think it would be fair to wait for the due diligence to get completed. And once that happens, and we sign a definitive agreement, then we should be able to give a better indication of the valuation because these are steps which are important before we talk about it. We may have expectations of a certain number, but I think it would be best to wait for these processes to get completed.

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Operator [39]

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The next question is from the line of Sumangal Nevatia from Kotak Securities.

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Sumangal Nevatia, Kotak Securities (Institutional Equities) - Analyst [40]

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The first question is with respect to prices. You said INR 3,000 lower Q-o-Q and also said that exports will be higher. So does this include the lower export prices also? And the second part of the question is with respect to auto volumes. Now I believe we have 6-month contract for most of the volumes of around 2 to 2.5 million tonnes. So what is the headwind in terms of price rise will be witnessed for our auto segment? And will this headwind extend beyond 2Q as well?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [41]

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Yes. So firstly, the price guidance is factored in the exports. So whatever -- and exports is typically already booked because normally would book 45 days to 60 days ahead. So that is already factored in into the guidance that I gave. As far as auto is concerned, yes, some of our contracts are quarterly, but most of them are half yearly. So we will get into the negotiation sometime in September, October.

Auto prices go up and down. I mean so I think what we look -- what our customers look for is stability of supply, quality of supply. And obviously, we will haggle on the prices. So second half, H2 prices will be largely driven by what is the sentiment in September. If the sentiment is positive, that makes it easier for us to negotiate direct prices with the auto companies for the second half, but if the sentiment is negative and the auto industry is still not showing any kind of recovery, then obviously we will have to look at it (inaudible).

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Sumangal Nevatia, Kotak Securities (Institutional Equities) - Analyst [42]

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Is it right to assume that given the current 6 months has been a down-trending price trajectory. So even if domestic prices stabilized at these levels, September is reset, so auto would be at much lower prices?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [43]

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Well, so it also depends on how do we see the prices between September and March because it is a 6-month contract. So it will not be driven -- it is oftentimes driven by the sentiment and the average that they expect for the 6 months. So it's not -- it's not just reflection of thought. So I think -- so let's see how it goes. I think I don't want to provide any questioning position even before we get into the negotiations.

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Sumangal Nevatia, Kotak Securities (Institutional Equities) - Analyst [44]

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Sure. Sure, I understand. Okay. So with respect to the Bhushan merger, last quarter we guided for 6 to 9 months. Has there been any progress in the last 3 to 4 months? And does that guidance of 6 to 9 months closure stand?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [45]

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Yes, that guidance of 6 to 9 months still stands. We have progressed on a fair bit of (inaudible) as far as documentation and so on. There are some filings at [the levy] which we are waiting for and we will -- once we are ready, we will file with the NCLT to get into the next stage.

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Sumangal Nevatia, Kotak Securities (Institutional Equities) - Analyst [46]

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Okay. Sir, one question with respect to Tata Sponge. Next 6 to 9 months, we will be witnessing the efficiency improvement journey and volume ramp up. Is it possible to elaborate a little bit on that how we did for Bhushan at the time of acquisition?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [47]

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Yes. I think we have a set way to deal with it. We normally send our teams, and they work with the local management teams. So similarly, as we did for Bhushan, a team is already in place in Tata Sponge. We also have a set way of doing the improvement programs in Tata Steel, which has been deployed in Bhushan, and the same thing has already been deployed in Tata Sponge. In addition, in Tata Sponge, where we have an advantage more than we had in Bhushan is from raw materials. Tata Sponge has its own iron ore mines. We have got it activated and the supplies have started. They also have a coal mine, which will not start immediately, but before the end of the financial year, we hope to get that started as well. So that allows us an advantage. Then we have a pellet plant, which was -- not been running for the last 3, 4 months in Usha Martin. We are getting it started by October or November latest. And that will help us get almost -- I mean that has an annual capacity of about 1 million tonnes of pellets. So that will help us because Tata Steel and Bhushan buy pellets from the market. So we use the iron ore that is available from our iron ore mines or from Usha Martin's iron ore mines and make pellets and supply that helps. Usha Martin doesn't need those pellets, but Tata Steel and Bhushan can use those pellets.

There are also significant benefits accruing from [the Oman] site by plugging into the procurement processes and the teams of Tata Steel, we are getting the benefits in coal purchases as well as all other purchases, whether it's limestone, (inaudible) many other things. And on the market side, it's -- unfortunately, the auto market is bad. But otherwise Usha Martin -- I mean what was Usha Martin's Steel division, it's a big supplier to the auto industry for long products, so Tata Steel is also working to get back a lot of the approvals, Tata Steel and Tata Sponge, which had been lost. So there are marquee customers who used to buy from Usha Martin earlier and who have not bought from them in the last 2, 3 years. And we have revived some of them. We are getting all the approvals in place. So when the auto market starts picking up, Tata Sponge steel division will be in a good position to service them.

So there are multiple actions. And most of the improvements, you will see it coming in, in Q3 and Q4. I mean certainly we expect it to flow through. And operationally also, there are a number of things that we are doing. Because while the plant is currently running at around 0.6 million but eventually, the plan is to take it to over 1 million tonnes, and the capacity is 1.3 million. So that's the journey we are on over the next 2 years.

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Operator [48]

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The next question is from the line of Indrajit Agarwal with Goldman Sachs.

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Indrajit Agarwal, Goldman Sachs Group Inc., Research Division - Equity Analyst [49]

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2 questions. First, on the domestic steel prices. Over the last couple of weeks, we have seen our domestic steel prices correcting, but global steel prices have been range bound. Now with iron ore falling and global spread strengthening, do you think the pressure on global steel prices will be much more accentuated on the domestic prices or domestic prices will hold on in these levels?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [50]

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Yes. So there are 2 aspects to it. One is, how do we see the imports coming into the country. I think imports have slowed down. It is still at maybe about 400,000 tonnes a month, but it used to be about 600,000 to 700,000 tonnes a month. Because there is also some concern about safeguards and people don't want to get exposed to that. So that is one thing which is happening. So we see the supply from imports being a bit tighter than it was over the last few months. And at today's domestic prices, I don't think imports are very attractive. I don't think there is good (inaudible) in the rupee, the weakening is also not helping people take positions on imports.

As far as exports is concerned, frankly as I mentioned earlier, India and Turkey are the more dominant players in the international markets in the neighborhood. It is not China who is disrupting prices. So I think it's more about at what price do Indian exporters want to export. And we've all been exporting because it helps us as a safety valve for the inventory buildup if there is inventory buildup in India. So the demand has not been so great, right? So international prices are currently in the $510 range. And I don't think -- I know prices need to fall a lot more for it to make sense at $510, so just now let's wait and see how much more it will fall. Because the spreads, as you know, are pretty much the lowest we've seen in about 3, 4 years. So I don't think at these spreads, most steel companies are making money. And that's evident from some of the results which have come out in the last couple of weeks globally.

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Indrajit Agarwal, Goldman Sachs Group Inc., Research Division - Equity Analyst [51]

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Sure. That helps. Secondly, sir, on Europe profitability last quarter, we did some around $90 a tonne. This quarter, we are at $5 a tonne. Can you give the division as to how much is because of spread compression and how much is because of the carbon credit impact?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [52]

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I would say 50% to 60% is because of the spread compression and balance is because while we have had more stable operations in U.K. and more than in Netherlands, we've not had the stability that we normally expect from there. So that is impacted the rest. As Koushik said, while we made some provision for carbon, I don't think we've utilized that provision. So it's not the carbon cost which is hitting us.

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Indrajit Agarwal, Goldman Sachs Group Inc., Research Division - Equity Analyst [53]

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Just a follow-up. Can you remind us again, what is the lag in terms of the iron ore and coking coal consumption in Europe? So when does this current lower prices flow in to our costs?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [54]

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Typically 4 months.

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [55]

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4 to 5 months.

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Operator [56]

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The next question is from the line of Raashi Chopra from Citigroup.

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Raashi Chopra, Citigroup Inc, Research Division - Director and Analyst [57]

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My first question is on the European business. The impact of the planned and the unplanned shutdown, is that still ongoing? Or is that largely behind us?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [58]

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Well, as far as the operations in Netherlands is concerned, we are expecting more stability in Q2 than we had in Q1. But there is a plant shutdown in U.K., which is going on for the steel metal shop, which should get in here -- which should finish by this month. That was a 60-day shutdown for one of the lesser (inaudible) shop in U.K. that started end of June and should finish this month. So beyond this, I hope we are moving forward to more stable locations from a operations point of view. Because the market conditions have been weak, we've not been hurt as much as it could have been by the instability, though numbers are not so great. But I hope that the rest of the year, we will see far more stability and all the major plant shutdowns are behind us.

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Raashi Chopra, Citigroup Inc, Research Division - Director and Analyst [59]

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And the second thing is on the CapEx plan. Have you cut down Europe also by 20%, 25% or that was just for India?

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [60]

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Yes. I think it is across the board, be it in Europe or in India. And I think there will be -- so there are many ways to look at this full CapEx issue. Especially in Europe, one has to look at leveraging and developing synergies with India because as India is spending a significant amount of CapEx it has leveraged with suppliers. So there is a commercial leverage that is happening. And then there is also looking at the overall absolute phasing -- rephasing of some of the CapEx and focusing only on critical CapEx. So the recalibration is across the board in all entities.

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Raashi Chopra, Citigroup Inc, Research Division - Director and Analyst [61]

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Okay. And the carbon credit provision number that you mentioned was 16, 1, 6?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [62]

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Yes, yes.

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Raashi Chopra, Citigroup Inc, Research Division - Director and Analyst [63]

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Okay. And just one last question. This lease accounting change has a benefit on the EBITDA? And if so, by how much?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [64]

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Yes. So the EBITDA impact is about INR 170 crores. The EBD is negative by about INR 22 crores, and the debt increase is about INR 2,900 crores.

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Operator [65]

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The next question is from the line of Abhijit Mitra from ICICI Securities.

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Abhijit Mitra, ICICI Securities Limited, Research Division - Analyst [66]

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So the first question is on the pricing side, especially on the long products. Are you maintaining your premium vis-à-vis the secondary market prices, especially on the reverse? If not, what kind of movement you have seen over the past quarter on that? That's the first question. Second is vis-a-vis landed parity. Do you see the discount for the domestic prices increasing on flats? Any trend that you would like to highlight? Third and last of all, I think in the large down cycle, the standalone EBITDA reached INR 7,500 per tonne. That is 2015, '16 and it was without any sort of protection in place. So current antidumping duties in place, I'm sure you would have done some internal assessment as to given the current coking coal and the duties that are already in place. To what level do you see -- at what level do you see standalone EBITDA getting resilient and not going below?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [67]

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Thank you, Abhijit. So basically, the premium stands. It's a fact that the secondary steel prices have dropped significantly, but our premium stands because frankly our franchise is very strong at the retailer. And that's been our strength in long products. We don't sell much to the projects, which is more -- far more price sensitive. So we sell more than 100,000 tonnes a month to the retail segment where customers buy 2 tonnes, 3 tonnes and where we continue to fetch a premium. But the premium is linked to the secondary prices. So I wouldn't say the prices are immune to secondary prices, but typically we get about INR 10,000 to INR 12,000 per tonne more than the secondary prices.

The second part is on the landed prices. Today -- frankly, at today's domestic prices, I don't think it makes sense to import. Certainly not from China and anywhere else. Maybe from Korea because the import duties are lower. But even then the risk is a bit on the higher side and that is why we don't see too many parcels being booked around the way. So I think over the next 2, 3 months, we will see fewer shipments coming in than we've seen in the last few months. And as we said earlier, the rupee getting a bit weaker will also spook importers a bit.

Third part is standalone EBITDA. Yes, I think the lowest we have hit in the last few years is about INR 7,000. I don't see us heading there just now. So to me it's -- see, at today's -- firstly, I think at that time, the steel price had even gone down to about $350. But the iron ore and coking coal prices were much lower. And today the steel prices are higher, but so are the iron ore and coking coal prices. So the spreads, if you see the spreads, today versus the spreads which we had at that time, they are not very different. The price ranges are different, but the spreads are not so different. But even over the last -- since then, the coke rates in Tata Steel are down at least 60, 70 kilos if not 100 kilos. So there are significant cost improvements that we brought in. When you see the consolidated India EBITDA, you must factor in that this includes Tata Sponge steel, Tata Steel Bhushan and Tata Steel, so both -- Bhushan buys 60% to 70% of iron ore from the market, and Tata Sponge till recently was buying from the market. So to me, those are also factors. So whatever EBITDA you're seeing is despite all that.

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Abhijit Mitra, ICICI Securities Limited, Research Division - Analyst [68]

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Yes. But on a like-to-like standalone entity alone analysis. What's your sense? And if the (inaudible) price is to hold? I mean which I think is another $70 to $80 from here if not more. So.....

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [69]

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I don't -- I don't see a repeat of the prices of the -- the EBITDA numbers of 2015. But what is not as good as 2015 is the demand. I think in 2015 while the prices were under pressure, the demand was reasonably strong. I think now the prices are not under the kind of pressure we saw at that time, but at that time prices are impacted more by the international prices. Today the international prices are not falling. In fact, like I said, India has been the most aggressive player in Southeast Asian markets, and China is only exporting 5 million tonnes a month, which is something we can live with. Those days, China was exporting 10 million tonnes a month and China was setting the prices in the international markets. So I don't think we are in that situation. And hence, international prices are set more by us as Indians than by anybody else. So -- and I don't think Indian players will price as irrationally as the Chinese exporters did in 2015.

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Operator [70]

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The next question is from the line of Saumil Mehta from BNP Paribas.

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Saumil Mehta, BNPP Asset Management India Private Ltd - Research Analyst of Equities [71]

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Just wanted to check for this particular quarter, what will be iron ore consumption in Europe, and how (inaudible) Q-on-Q basis?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [72]

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Did you get my answer?

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Saumil Mehta, BNPP Asset Management India Private Ltd - Research Analyst of Equities [73]

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Not really.

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [74]

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Okay. No, but you are asking about the iron ore volumes or the iron ore cost.

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Saumil Mehta, BNPP Asset Management India Private Ltd - Research Analyst of Equities [75]

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The iron ore cost, the consumption cost for this particular quarter.

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [76]

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Okay. For -- you said for Europe, right?

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Saumil Mehta, BNPP Asset Management India Private Ltd - Research Analyst of Equities [77]

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Yes.

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [78]

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Yes. So iron ore purchase price for Q1 was about $107. And for Q2, it is expected to be around the same level. Consumption cost is about $85 for Q1 and expected to be about $93 level.

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Saumil Mehta, BNPP Asset Management India Private Ltd - Research Analyst of Equities [79]

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Now what was that number in Q4 FY '19, iron ore consumption cost?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [80]

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Consumption cost was $72.

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [81]

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$72.

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Saumil Mehta, BNPP Asset Management India Private Ltd - Research Analyst of Equities [82]

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Okay. And the last question is on leverage. Now we have touched about INR 1,10,000 net debt as on June. And given things stand today, we are close to between 4.5x and 5x net debt to EBITDA, Q2 being very soft. How should we look at this overall situation because in the past, these levels that have been several issues in terms of multiple [dating] or some sort of a possible capital raising if need be. So how should we look at that overall situation now?

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [83]

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So first of all, there is -- I don't see that to be a rating issue at all. Secondly, I think as I mentioned to an earlier question that given that it is the first quarter of the year, we continue to keep the same level of reduction in leverage for the full year. This quarter, there has been an increase to see the true impacts on that increase. One is the fact that the Usha Martin acquisition happened. So there is a short-term debt, which has come into. Which post the rights issue would have gone down. So you will see that.

Secondly, the IndAs 116 effect is almost about INR 2,900 crores. So these were the 2 major reasons for the increase in the debt numbers. I think, so one is of course noncash in that particularly way. So our -- as I mentioned, again, I don't know if you heard that answer that we are certainly looking at several initiatives to raise capital beyond the earnings level, which is through release of working capital, reduction in CapEx and other portfolio actions. So once they get crystallized, I think before the end of the year, we would continue to be in a position to deliver around that number. I think we will have to look at what is the journey as far as the earnings are concerned, especially from a market point of view because there are very severe cost reduction measures that are being undertaken or plan to be undertaken, and we will see some of these as we go forward coming out. And because it will have implication also. So taking all of these into account, you will -- I think it is fair to say at this point of time that we will stick to the deleveraging number. And hopefully, achieve it because we are backed up by the plans to internally release capital. And even the EBITDA numbers, what you see in first quarter and the softness that exists in the market today, but Q3 onwards, the cost takeout actions will start reflecting. So I'm not talking about the market because we don't have any figures at this point of time. But even at the current market, if the cost figures do flow in it will certainly help the earnings. So all of that taking together, I think it is fair, as I said again that had we been in third quarter without any action plans then I would have relooked at the deleveraging, but given that it is the first quarter, we have almost about 8 months to go, I would still keep that target and as we are pushing our various initiatives.

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Saumil Mehta, BNPP Asset Management India Private Ltd - Research Analyst of Equities [84]

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Sure. Perfect. So just to confirm, you're looking at a INR 1,500 crores working capital release and closer to INR 2,000 crores, INR 2,500 crores reduction in CapEx for the full year. Is that (inaudible) right?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [85]

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It could be higher (inaudible) CapEx (inaudible).

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Operator [86]

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The next question is from the line of Dhruv Muchhal from Motilal Oswal Securities.

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Dhruv Muchhal, Motilal Oswal Securities Limited, Research Division - Research Analyst [87]

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So on the lease accounting, you mentioned the impact is about INR 170 crores on EBITDA. That still benefit to EBITDA, right?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [88]

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Yes, correct.

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Dhruv Muchhal, Motilal Oswal Securities Limited, Research Division - Research Analyst [89]

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Yes. Sir, secondly, as you mentioned, for India, the decline in steel prices in 2Q. If you can give a similar number for Europe and the likely offset in cost just to see how the margins could trend?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [90]

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I think in Europe, we're driven a bit more by the spread than the price, absolute price per se.

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [91]

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So the spread has a compression effect in the second quarter. And that's why we said that there is other levers that we need to exercise because on an unmitigated basis, there would be a spread, (inaudible). This would be about EUR (inaudible) or more. So I think we need to look at the other levers, which will offset the same and ensure that we have a better performance than Q1. Also, you would also take into account that the better operating performance in Q2 would help that process so -- from a cost point of view. So we are looking at all these actions that we are -- that we need to take on board to ensure that we sustain a better performance in Q1 in Europe.

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [92]

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Also in Q -- I mean basically in Europe, the focus is first on cash and then on EBITDA. Ideally both EBITDA and cash. But basically, cash is the focus for sure.

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Dhruv Muchhal, Motilal Oswal Securities Limited, Research Division - Research Analyst [93]

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Sure. And sir, lastly, on the carbon -- the carbon credits. We hear reports -- we read reports that there will be even stricter carbon emission norms probably coming in Europe soon. So any preliminary impact assessment, any structural impact of that, if you have done that?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [94]

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Yes. So I think what Europe, European governments or the regulators have been talking about is carbon costs to go up over a period of time. But what the industry is also engaged with regulators is that obviously, that needs to come along with some sort of protection because it doesn't help anyone, if you put the cost on very efficient -- carbon efficient facilities like the ones we have. I know the plant is one of the most carbon efficient steel plants in the world. And you can't put a cost on them and allow steel to come from other countries which don't have that tax. Today 30 million tonnes of steel comes into Europe from other countries who don't have the carbon tax. So I think the regulators are listening to us. And hopefully, if they decide to do something, this will also get factored in because as they are penalizing more efficient production facilities and allowing more carbon inefficient production facilities to ship steel to Europe. So we expect both to go hand-in-hand.

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Operator [95]

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Mr. Muchhal, are you done with your questions? Hello, Mr. Muchhal? Ladies and gentlemen, the line for the participant seems to have dropped off.

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Samita Shah, Tata Steel Limited - Group Head of Corporate Finance & Risk Management [96]

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Hi, do we have any questions? Any more questions or we are done?

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Operator [97]

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We have one more question. The next question is from the line of Vikash Singh from PhillipCapital.

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Vikash Singh, PhillipCapital (India) Pvt. Ltd., Research Division - VP of Metals & Mining [98]

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Sir, I want to understand 2 things. Firstly, this is the second time we have not been able to go through with our planned with the hyping of the assets. Don't you have any breakup fee or any other clauses in this context? And secondly, I want to understand we were talking -- last year, you spoke about the integration of Bhushan and Usha Martin would give us some synergy benefits. So what kind of synergy benefit we have already realized in Bhushan? And what are the pending ones?

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [99]

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So I think on the first point that you talked about. See primarily, if you look at the reason for both, they external to both the parties, right? So even if you look at TK, [the thin one], it fell through because the regulators did not approve it. So there's nothing could have done or we could have done about it. And similarly even with the one with Hebei, it's about approvals, which are in this condition precedent for concluding the transaction. So it has not fallen through because the partners lost interest, it is more because of factors external to us. I think that we live with in a highly regulated industry like us, where we deal with companies who are owned by the state like it was in Hebei.

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [100]

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And this is -- the break fee is normally applicable for a willful action by another party. Whereas these are actually outside, as Naren mentioned from a perspective of regulatory approval whether it was the EC or a government approval for [an SOE].

On your second question, I think we have almost -- in last year, we had almost about INR 750 crores of benefit through the initiatives on revenue, cost reduction, efficiency issues, of which 50% was on costs. And in Bhushan today, we also are running a transformation program on cost and various issues. So we are looking at similar kind of numbers this year too, which can only go up if everything works in tandem.

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Vikash Singh, PhillipCapital (India) Pvt. Ltd., Research Division - VP of Metals & Mining [101]

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So what kind of additional we can realize from Bhushan and Usha Martin? Can you put any number to it?

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [102]

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So if you see the Bhushan, EBITDA first quarter already captured some part of these and over the next few quarters, we'll continue to do so.

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [103]

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So if you look at the steel prices today compared to the same quarter last year, it's at least INR 6,000 to INR 7,000 more. But if you look at our EBITDA, in fact the Bhushan EBITDA is probably better than it was last year at this time. And of course, Tata Sponge is still early days. And even if you look at the Tata Steel EBITDA, they are better than if you compare, it was better than Q4. And it's also better than if you take last year's same quarter and reduce the prices by (inaudible).

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Vikash Singh, PhillipCapital (India) Pvt. Ltd., Research Division - VP of Metals & Mining [104]

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Just one more thing. So due to unplanned shutdown in Europe, what kind of losses we have incurred during the quarter in EBITDA terms?

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Koushik Chatterjee, Tata Steel Limited - CFO & Executive Director [105]

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So 50%. If you compare the EBITDA percent from last quarter. I would imagine there is a market impact, which would be 50% of the drop. And operational issues and unplanned shutdown will be another 40% to 50%.

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Operator [106]

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Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments.

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Samita Shah, Tata Steel Limited - Group Head of Corporate Finance & Risk Management [107]

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Thank you very much. Good night.

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Thachat Viswanath Narendran, Tata Steel Limited - CEO, MD & Director [108]

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Thank you.

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Operator [109]

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Thank you. Ladies and gentlemen, on behalf of Tata Steel Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.