Tata Steel Limited (500470) Earnings Call Transcript & Summary

Good evening. And on behalf of Tata Steel, a very warm welcome to all of you who dialed in to listen to our call to discuss our results for the third quarter of FY '20. The management team is led by our CEO and MD, Mr. T.V. Narendran; and our ED and CFO, Mr. Koushik Chatterjee, and we are joined by several members of the team. Before I hand it over to them, I'd just like to make a couple of announcements. Firstly, like before, we will be taking call -- questions, not just on Tata Steel, but also on Tata Steel BSL and Tata Steel LP or Long Products. Secondly, we also have a link for retail investors who can key in their questions. And if they are not answered during the course of the call, we will also take those questions. Lastly, the entire discussion today will be governed by the safe harbor clause on the presentation, which will cover the entire discussion today. So with that, thank you, and I will hand it over to you, Naren.

Thanks, Samita. Good evening, everyone. I'll start with the macroeconomic situation and a bit of a commentary on the industry. As you all know, the global economic growth slowed down further amidst the rise in the U.S.-China trade war tensions at that point in time. However, Chinese apparent steel consumption remains steady and despite higher production, the steel export stabilized below 5 million tonnes a month. In fact, this quarter, it was not China, but exporters from India, Russia and Turkey who set the prices and as some of these markets stabilized, we saw Asian steel spot prices improve from mid-November. In Europe, the overall slowdown was more pronounced due to seasonal weaknesses. Gross spot price for Hot Rolled Coil dropped sharply from quarter 2 peak as benefits of softness in raw material prices were offset by the steep decline in steel prices. And Hot Rolled Coil prices went below $470 as unfairly priced imports remained at an elevated level in Europe. During the quarter, Indian economy remained weak and domestic steel prices reached its lowest level in a long time in October 2019. However, steel prices have since started moving up from the middle of November and with inventory rationalization and increase in government spending and -- I think we look forward to some positive months ahead. Moving on to our performance. During the quarter, India, which is Tata Steel Standalone, Tata Steel BSL, Tata Steel Long Products put together, delivery showed a strong volume growth of 17% quarter-on-quarter to 4.85 million tonnes, and this was in a market which shrunk by 3%, which shows the strength of our business model. And to counter the market slowdown, we successfully ramped up our sales growth. Sales in Branded Products & Retail segment by 22% quarter-on-quarter and Industrial Products & Projects segment by a healthy 12% quarter-on-quarter. Also, despite the continued weakness in the automotive industry, we maintained our sales volume in Automotive and Special Products segment. Tata Steel Europe's profitability remained weak, mainly due to the weak market conditions, coupled with -- by the seasonal -- coupled with the seasonal slowdown. We have initiated a transformation plan, which we aim to make the business stronger and more sustainable with a focus on boosting productivity, reducing the bureaucracy and increasing the sales of higher-value steel products. Some comments on our key subsidiaries and large projects. Tata Steel BSL achieved its highest quarterly sales at 1.26 million tonnes and continues to improve its operating KPIs. We are now operating at a level of 5 million tonnes, which is what we have promised to within 24 months of acquisition. We've done it in time, if not slightly earlier. Tata Steel Long Products continues to focus on stabilizing of the newly acquired facilities and improving parameters. This quarter, we ramped up production at its captive iron ore mine, which has helped in improving the cost structure and turn EBITDA positive. It has also started commercial production at the pellet plant. Moving on to our Kalinganagar Phase 2 expansion. In light of the slowdown in the market, we -- and our intent to deleverage, we have prioritized the pellet plant and the cold rolling mill because the pellet plant helps us take -- bring down cost efficiencies -- further cost efficiencies in Kalinganagar and the cold rolling mill helps us add value to the product mix that -- and we maintain our target to commission the same in about a year from now. As involved earlier, we are working towards ensuring the continuity of our ferroalloys business. We have successfully won the Saruabil and Kamarda cold rolled mines, which will enable us to service our ferro chrome customers over the medium term. I will now hand over to Koushik to comment on our financial performance.

Thanks, Naren, and good evening to all of you. I would like to share some highlights of our financial performance. Our consolidated revenue for the quarter were around INR 35,520 crores, and our consolidated reported EBITDA was INR 3,659 crores. These numbers do not include our Southeast Asian operations as they continue to be classified as assets held for sale. Tata Steel India, which includes Tata Steel Standalone, Tata Steel BSL and Tata Steel LP, recorded revenues of INR 21,299 crores, and the reported EBITDA for the quarter was INR 4,111 crores. Tata Steel Standalone revenue were INR 15,262 crores. While the operating revenue per tonne appears to have dropped by INR 5,486 per tonne over the second quarter of the financial year, the -- actually, the drop in steel revenue per tonne is about INR 3,500 per tonne. The rest of the drop is on account of lower nonsteel revenues, which is lower revenues from the ferroalloys business as the prices in ferroalloys have come down, tubes, power sales, et cetera, which has depressed the numerator when the denominator has expanded due to higher steel deliveries. Tata Steel Standalone EBITDA was INR 3,791 crores, which is an EBITDA margin of 24.8%. However, if you strip the FX impact on our intergroup preference shareholdings, the adjusted EBITDA was down to about INR 3,471 crores. This translates into an adjusted EBITDA per tonne of INR 10,124, a drop of about INR 1,077 crores (sic) [ INR 1,077 ] over the second quarter. Tata Steel BSL and Tata Steel LP continues to focus on operational improvements and better working capital management. Both have generated positive cash flow this quarter, which has been used to repay some part of their debt by an amount of around INR 800 crores. Significant cost improvement initiatives are underway in both facilities. And we continue to see better operating performance from both. Moving to Europe. The revenue stood at about GBP 1.49 billion in the third quarter of this financial year as compared to GBP 1.62 billion in the second quarter. The revenue declined due to a sharp drop in the European steel prices by almost about GBP 75 per tonne and average sales mix resulted in -- and a lower adverse sales mix resulted in a loss of about GBP 108 million at the EBITDA level. Year-to-date, the impact on the market on 9 months has been almost about GBP 500 million. As mentioned earlier, we are carrying out the transformation program to make our European operations more profitable and self-sufficient as far as cash flows are concerned. Tata Steel's employee costs have come down in Europe by around GBP 32 million on a quarter-on-quarter basis, with reduction in both payroll and temporary labor. This quarter, we have spent about INR 2,777 crores on capital expenditure, which takes the year-to-date number to INR 7,762 crores for the 9-month period. During the quarter, we have spent around INR 1,367 crores in India, which includes about INR 935 crores expenditure in Kalinganagar. As you will remember, in April 2009, we had guided towards an FX -- towards a CapEx of about INR 8,000 crores for the financial year FY '20 and an additional spend of around GBP 300 million in Tata Steel Europe. During the second quarter results call, we have revised our CapEx guidance to around INR 8,300 crores across all entities. And some of the CapEx is really committed in TSE. The actual spend has been a bit higher, and we're looking at the year-end to be more around INR 9,000 crores. But we are also looking at the capital allocation very sharply for next year. I want to spend some time walking you through our cash flows. We generated about INR 3,659 crores from the operations in EBITDA and INR 6,355 crores from release of working capital. This has been very significant during this quarter. Tata Steel India has reduced by about INR 2,100 crores. TSE and others have reduced their working capital and released cash by about INR 4,900 crores. So the key outflow in the quarter was about INR 2,777 crores on CapEx, INR 1,356 crores on interest. Charge to P&L was about INR 1,931 crores. Cash outflow was more around INR 1,356 crores and INR 500 crores on taxes. The net cash generated during the quarter was around INR 4,261 crores after adjusting for INR 1,142 crores on FX impacting -- FX impact, it's a swing on fair valuation in Tata Steel Holding and Tata Steel Global Holdings. We have also reduced our borrowing by about INR 3,368 crores. However, the leases increased the overall leverage by about INR 312 crores and an adverse FX-translated impact of INR 1,373 crores. As a result, our net debt reduced by about INR 2,324 crores to INR 104,628 crores. I would like to mention here that post December, we have further repaid about $500 million of the 2020 bonds, which will further reduce our gross debt by approximately about INR 3,500 crores. Our liquidity remains robust at INR 14,027 crores, comprising of cash and cash equivalents of INR 5,239 crores and undrawn bank lines of INR 8,788 crores. Earlier this month, we also refinanced the external debt of Tata Steel Europe by raising about EUR 1.75 billion. This has been done at more favorable terms and prices, and it also extends our overall maturity profile. Deleveraging the consolidated balance sheet remains an enterprise strategy and priority, and we will continue to plan and act in that direction, even in these challenging times. With this, I will end my comments. And open the floor for questions.

[Operator Instructions] The first question is from the line of Amit Dixit from Edelweiss.

My first question is on domestic demand. So while like Q3, you have shared that various demand segments moved down. So is it possible to share the corresponding numbers that you are seeing in Q4? And also whether the demand is more due to restocking? Or do you see some real demand also inching up?

Sorry, I think I was giving you a story when I was on mute. Anyway, let me start again. So basically, if you look at Q4 and starting from Q3, we've seen some positive movement in some segments. So let me break it up for you. So one is, if I look at construction, and if I split construction into infrastructure, commercial, residential and industrial, we are seeing positive activity in industrial, which basically is for warehousing, supply chain investments. We're seeing positive activity in commercial because there's a lot of private equity investment coming in there. Residential is not so great, but affordable housing is picking up. And infrastructure, again, we haven't seen much money coming in. But given the government's focus on it, we expect things to pick up. If I look at automotive, things are still quite weak. Hopefully, things will get better quarter-on-quarter, but still not enough to offset the reduction that we've seen in the past. Some other areas where we're seeing positive activity are railways, where the government is spending. Oil and gas pipelines, where again, the government is -- I mean, there are projects. Also, water conveyance is still -- so there are subsegments where there is positive activity. Appliances has been reasonably strong as well. So basically there is restocking, which had happened in November and December when the steel prices went up, but there are also areas where we're seeing demand growth.

Okay. Great. The second question is on KPO expansion. So while pellet and CRC are coming up, is there any thought to maybe delay the Phase 2 expansion because the leverage still remains quite high?

Yes. So like we said, we are prioritizing these 2. And the other work, we will phase it out depending on how the market conditions are. If the market improves rapidly next year, then we will be in a more comfortable position. So for now, the focus for next year is on the pellet plant and the cold rolling mill. Work is going on at a slower pace in all the other areas, but it's not that work has completely stopped. But we will take that call depending on how the market plays out over the next few months.

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

Two questions from my side. First on Europe. Can you shed some more light what exactly is the trajectory that you're looking at in terms of profitability because when you look at your closest peer in that region, they have reported kind of stable profitability quarter-over-quarter. So what exactly can we do better? And what kind of trajectory you are looking at going forward?

Sure. So Indrajit, we've had, obviously, a very challenging quarter. I think the spreads and the market conditions continue to be weak. And we have launched a transformation program a few months back, which has got us some benefits, but not enough to offset the deterioration in market conditions. So while we do expect Q4 to be better than Q3, I must also guide you that in this year, we will -- just like in India, the auto contracts and long-term contracts are renegotiated and takes effect from October, in Europe, it takes effect from January. So to that extent, we will see a bit of squeezing further of our spreads, but we expect to more than make up for it by cost takeout and slightly better volumes in Q4 because Q4 seasonally is a better quarter than Q3. The transformation program is pretty deep program, which we are driving. I know we've done many of these in the past. But this is another one which is focused both on Netherlands as well as U.K. I think in the past, we've been more focused on U.K. This time, we are focused on the U.K. certainly, but also on Netherlands, where the operating performance has slipped a bit over the last couple of years. So I think the focus of the management team there, Henrik and Sandip, is to again drive the transformation program. Our stated ambition is to be cash positive in Europe, and that's what we are focusing on. And I hope that in the next 6 to 12 months, we will start seeing some of the results. We've also released a fair amount of working capital there. We are operating at a much more efficient level now. So there's a lot of work to do. Some of it has been done. Some of it is visible, may not be visible in the numbers, but it's kind of starting to get visible to us at an operating level. There is also operational stability far more in the last 2, 3 months than we had before. So that's as far as the guidance on Europe is concerned.

Is there an adverse carbon credit impact in the European numbers? Or that is...

Compared to the previous year, yes. Because last year, which is the last financial year, we had a positive impact. This year and next year, we will have a negative impact.

My second question is on the India business. Can you highlight what kind of price increases we have taken so far? So NSR at the spot, how much is it higher than the average of December quarter?

Average of?

December quarter, third quarter.

Yes. So we expect this quarter on an average to be about INR 3,000 higher than last quarter average.

[Operator Instructions] The next question is from the line of Pinakin Parekh from JPMorgan.

My first question, again, is on Europe. I mean, this is one of the largest ever EBITDA losses reported in recent history. When the thyssen JV was called off, there was a commitment by the company in terms of ability to deliver a positive free cash flow. Now that obviously does not look like happening anytime soon. In terms of the transformation program, can we get more granular clarity and guidance as to, over the next 2 to 3 quarters on an absolute basis, what kind of savings or a positive uplift to EBITDA can we see?

Yes. So Pinakin, I think one point we must keep in mind is the average spread in the last financial year was EUR 270, EUR 280. And this year so far is this EUR 185. If you just do the math on that, that EUR 100 into 10 million tonnes or itself will give you what we've lost out purely in terms of externalities, in terms of the spread squeeze. So anything that we've done is obviously not visible because whatever has happened is offset that. And when we say, we are chasing cash positive, I don't think we realize that there would be such a big drop in spreads. Because normally, long-term spreads are in the EUR 220 to EUR 240. So this is pretty much one of the lowest spreads that we have ourselves seen. Obviously, we expect next year the spreads to be slightly better, and that will help us. But we are not hoping or expecting it will go anywhere near the EUR 270, EUR 280 that we've seen in the year before. It will be somewhere in between EUR 180 and EUR 270, right? So that is one, maybe in the early 200s rather than anywhere else. The second part is the transformation plan has multiple streams, including workforce reduction, which has been talked about in -- it's there in the public space. Then there is the work that we're doing on the procurement side, there is work that we're doing on the operations side. And I would say there are 5 work streams, each of them are in the EUR 100 million to EUR 150 million range that we are working on. I must tell you that we have, since the beginning of the year, reduced our workforce by 800 already. So some of it is happening. There are obviously some difficult discussions going on as well because it's never easy to reduce the workforce, and we've done a lot of that in the past as well. So I think the -- and we've also pruned on the CapEx at least in the last 6 months. Most of the CapEx that you see in Europe was what was done in the early part of the year. So when we look at driving the business as cash positive, it is obviously also about optimizing between CapEx, working capital and Europe and seeing that the EBITDA can cover that. So obviously, we have not been able to deliver on that this year. But if the transformation plan, the way we see it, if it progresses as it has progressed so far and continues to progress this year for the next 12 months and the spreads come to around EUR 220-odd levels next year, then I think we will be cash positive for next year.

Sure. My second question is on Tata Bhushan Steel. The performance -- operating performance has steadily deteriorated over the last 4 to 5 quarters. Now we understand that there is a steel pricing environment which is at play. But the difference between the company's profitability and other nonintegrated steel companies' profitability has widened. So are there any issues in terms of operating performance which has led to such a sharp drop in terms of profitability?

So if you look at it from an operating performance point of view, the production volumes are now, as you can see from the numbers, are at 5 million levels, pretty much at 5 million level. In fact, December, I think we produced 410,00 or 420,000 right? So what -- so one of the targets was to take it from 3 million to 5 million in 24 months. I think that has happened. The second is to see the iron ore supply for Bhushan that has, now for the last 2 months or so, we have not had to buy any iron ore from the market. Of course, the benefits is not -- are not visible in Bhushan because that benefit accrues to Tata Steel. Third is, from a cost point of view, even during the year, we've taken out about INR 6,000 per tonne of cost. Again, the net realization drop has been to the tune of about INR 10,000. So again, the cost takeout is not so visible. Fourth is, Bhushan, TSBSL has also had to bear the brunt of exports because the export percentage has gone up significantly over the last few months as the market slowed down. And the impact was felt a bit more there. So -- but your point about the difference between the other nonintegrated players and Bhushan, I think it is true of last quarter. But if you look at the earlier quarters, I think we are about INR 1,000 behind the peers who are not integrated as far as the EBITDA per tonne is concerned. And that's, I think -- the aim is obviously to make that up, and I think we are confident we can make that up.

And just to follow-up, sir, that recently Orissa iron ore auctions have taken place at a very high premium. Now are there any implications for the Tata Bhushan and the Tata Usha Martin assets that do -- will they need to buy iron ore, will that cost lower? Or that is -- this is not an issue for the group at an India level?

At the India level, it's not an issue because between the Usha Martin iron ore mine which we've got when we acquired the company, and the Tata Steel assets, we have enough to cover our needs for Kalinganagar Phase 1, Phase 2 as well as Bhushan and TSL -- the Usha Martin assets as well as Jamshedpur. So we should not get affected by that.

The next question is from the line of Rahul Jain from Systematix. There seems to be no response from the line of Mr. Rahul Jain. We'll move to the next question. The next question is from the line of Ritesh Shah from Investec Capital.

I wanted to understand on the balance sheet deleveraging target that what we have laid at the start of the year, where we are and specifically on Southeast Asia sales, which is expected by March, where we are?

So Ritesh, when we started the year, we said that on the back of last year's second half, we had repaid about INR 18,000 crore, and we said we will continue to repay about $1 billion per annum. And that continues to be the target from, as I mentioned, in my enterprise level. Obviously, this year, we've been deeply impacted by the market movements on internal cash flows and internal generations. We started back from a peak of INR 1,11,000 crores in September post the acquisition of Usha Martin and the changes in the lease accounting, which is the 2 big impacts that moved from the March to September. And since then, we've started looking at tightening up the cash flows through working capital release, through reduction in CapEx to the extent possible and trying to repay as much debt as we can. In this quarter, we've repaid gross debt of about INR 3,500 crores. The impact that you see in balance sheet will be because it is after the translation in changes of about INR 1,300 crores. So what you see is about INR 2,300-odd crores number. We continue to look at what opportunities we can develop to repay further. It may not hit the full $1 billion number. But in January end, we have also repaid another $500 million of our ABJA bonds 2020. And we are seeing what else we can do till March of 2020. As I said, that given the underlying generation issues, it is the -- these surpluses are not coming up from the operating cash flows, but through working capital and reduction of spend. We are looking at alternate options. And as in the end of March, you will see some more movements hopefully. But continuing on a multiyear theme, I think I can say that as an organization, we will be focused on $1 billion of repayment every year. We need Europe to be self-sufficient in cash and cash flows, and that's the effort that is being pursued there through the transformation program. All efforts are on cash related savings or cost takeouts. And it will have an impact, we believe, in subsequent quarters. And also in India, as Naren highlighted in his commentary that our focus on CapEx is on the Kalinganagar, very specific facilities and not the entire volume expansion at this point of time. We would certainly go back and calibrate that once we are in -- the market conditions are more stable. And at this point, there is a very sharp look at the capital allocation for CapEx along with working capital. And the efforts that I think Pinakin asked the question about the cost -- about the performance of Bhushan. I think Bhushan and Tata Steel Long Products, given the focus on cost reduction, will have the effect on internal cash flow generation going forward once the market recovers a little bit. At mid-cycle level, I think we would be better placed. But we will continue to look at deleveraging at all entities, so that the gross deleveraging is about $1 billion. That goal, we are not changing. We might as well -- we might be lower than that this year, but that stands. In the second part, on the Southeast Asia, we are talking to multiple parties. That's why we continue to classify it as assets held for sale. As and when we get to a more final position, we will be making appropriate disclosures.

Sir, looking into the deleveraging targets into next fiscal, how should one look at the potential tax gains on back of Bhushan merger? I'm not sure of the timing over here. And secondly, how should one look at the rights issue. I think the second tranche is still pending. If you could some -- provide some color over there?

So I think when I say deleveraging of $1 billion, I'm not taking either into account at this point of time. We're only focusing on operating level cash flows to be used for delevering. The whole merger process is regulatory driven. And I can't comment on that at this point. I can only say that it is certainly not in March 2020. As far as the rights issue is concerned, it has a certain trigger, in the sense that it is based on a certain market price of Tata Steel. Since we are away from it at this point of time, we've not -- the Board of the company has not considered to exercise its option to call for those rights. So I would say, more operationally, we are focused on the deleveraging, not taking these 2 into account. If these happen, it will have a different implication.

Sir, possible for you to classify the cash flow impact, the benefit which will be there on back of the accumulated losses or the Bhushan merger? I'm just trying to understand the cash flow. If at all this event had to materialize, what will be the cash flow benefit that will come to us?

No, I wouldn't like to do that because it's based on how much of underlying profits would be there on the combined entity and that's how we'll have to calculate that. So I would suggest that you don't model that at this point of time and take it when it actually happens.

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

Sir, first question is, your strategy over the next 2 to 3 years. I mean, Kalinganagar Phase 2 looks to be coming only end of FY '23 or even FY '24 now. So next 3 years, assuming market still continues to grow at 5%, 6%, clearly we'll be losing market share as we won't have steel volumes to sell. So one is, if you can share your strategy to offset this?

Yes. So the full benefit of Bhushan running at full capacity will be felt next year because it was only towards the end of this year that we started operating at close to 5 million run rate. So you'll get additional volume from there. You will get additional volume from Tata Steel Long Products, which is the Usha Martin steel business. We also have the option to reduce our exports because we've done significant exports this year. And so we don't need to do that. We can always bring that down. And if the markets are strong next year and prices are good, we can always pull back on Kalinganagar because it's not that the work had not started. I think a lot of the work has been done. We have just rolled it down, so we can always accelerate that. So these are the levers in our hand. And we'll take a call depending on how things play out over the next few months.

Understand. So by the end of this year, how much CapEx we would have spent on KPO 2.

Total spend on KPO is about -- roughly about INR 1,500 crores...

For this year.

For this year.

So CWIP of KPO 2 will be...

No, it will be a little higher because if you include last year's spend also, last year, we had spent roughly about -- total will be about INR 3,500 crores on KPO Phase 2.

Understand. Okay. Sir, second question, with respect to Europe, now assuming for next 1, 2 years, the spreads remain around EUR 200, EUR 225, what sort of cash burn should we model in FY '21, '22?

So as Naren mentioned earlier, that at about EUR 220 spread plus, the target impact on the transformation, we should move towards a cash-neutral position by the end of 2021. That's our target for which a couple of things have to happen. One is, the CapEx will have to get recalibrated down from the current year. Second, the working capital release have to sustain irrespective of increase in spread or increase in prices. And third is the operating part of the transformation program has to deliver. This year, to be fair to Tata Steel Europe, we did have transformation benefits of almost 300 to 400 -- GBP 380 million, of which there are repetitive ones, which is almost about 200 -- GBP 170 million, GBP 180 million, which will continue in subsequent years, and there were some tactical positioning, which will not continue in next year. Next year, what we will have is replacement of these tactical by more structural benefits. And if we do have that delivered, which is -- and the team and us are very bullish about that we will be able to get through there, then along with CapEx and working capital, we should be able to reach the cash neutrality from a free cash flow perspective.

Understand. So if I understand correctly, FY '22 should be -- I mean, we should benefit from all these and FY '21 could most likely be a transitional year unless and until the spreads expand dramatically?

No, we are saying FY '21 to be that period. So the all of -- these are actions which have already started and will continue over the next, if I take today as February, then over the next 13 months, and we should get to that position. Our assumption on the spreading expansion is therefore very modest, if you compare to EUR 270, et cetera, which existed 12 months back. So on those assumptions, we feel that TSE can be cash neutral for themselves.

Understand. Sir, last question is with respect to the ongoing auctions. I mean, in terms of reserves, major -- largely the operating mines are -- the auctions have kind of completed, and we've not had any success yet. So if you could just share, I mean, what is our thought process? And do we think that the current clearing price is quite irrational?

Obviously, whoever bids those prices have some logic for it. But we certainly did not want to bid at those levels. I think that's very clear. We -- where we sense there is value, we bid aggressively, which is the chrome ore auctions. I think iron ore -- we obviously participated, but did not want to go to the levels at which it has gone. So we'll wait and see, and this is not the end of the iron ore auctions. There will be many more, and we will wait and see. We will be picky on what we want to chase and what we want, we've been certainly been aggressive before.

Understand. Just to confirm, Bhushan -- for Bhushan, we do not require any external purchase from next year onwards?

Hopefully not, we will minimize it. Obviously, like for the last few months, we've not had to buy anything, at least since September -- I mean, since October, I think we haven't had to buy anything. We will maybe buy some small volumes here and there, but nothing very material. It will also depend -- see, oftentimes, the problem is not the iron ore. The problem is the logistics. So getting the material on time because Eastern region is a bit challenged as far as movement of material is concerned. And so sometimes those are the bottlenecks. So the intent is not to buy anything, but I would budget 0.5 million tonnes to 1 million tonnes between the multiple units. Because sometimes even in Kalinganagar, we buy small volumes locally because it's better when the market prices are low and -- because there are iron ore mines very close to Kalinganagar as well. So we'll take that call. But we obviously will minimize as much as possible.

[Operator Instructions] The next question is from the line of Ashwani Kumar from Nippon Indian Mutual Fund.

My question was that, is there a delay in, let's say, likely commissioning of the expansion in Kalinganagar by any chance? This is reflected?

Yes, Ashwani, basically, what we said is we will focus on the cold rolling mill and pellet plant, both of which we are targeting to commission in the next financial year. All the other facilities for now will be looked at the year after, but we will take that call. If markets suddenly improve and cash flows improve very significantly, we can always try to accelerate that.

Because sir, this slowdown in India is pretty old. Basically, this started somewhere in '18 and -- middle of '18, that's your August, September '18. And now if the initiatives of the government are to improve infrastructure or put more money in manufacturing in due course of time, I was thinking that you should have -- you should actually advance the whole thing because the kind of steel intensive demand opportunities which could come the way of Tata Steel and with its distributions, you have any thoughts on this, sir? At least on the volume side? We are not talking price?