Tata Steel Limited (500470) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Tata Steel Limited 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.

Thank you. Good evening, good afternoon, good morning, ladies and gentlemen. This is Samita here. And on behalf of Tata Steel, welcome to this call to discuss our results for the fourth quarter and the full year FY '20. Firstly, I hope for all of you and your families are safe. It has been a challenging time for all of us, but hopefully, we will all get through this. Moving on to our results. We have with us Mr. T.V. Narendran, CEO and Managing Director of Tata Steel, and some of my senior colleagues. We will make a few opening remarks, and then we will open the call for questions. As before on this call, we will discuss the performance and take questions on Tata Steel as well as Tata Steel BSL and Tata Steel Long Products. Before I hand it over to them, I would like to draw your attention to the safe harbor clause on page of the presentation which will cover the entire discussion. Thank you, and over to you, Naren.

Thanks, Samita. Good morning, good afternoon and good evening to all of you, and thank you for joining us. So I start with COVID. I think in these times, the first and foremost priority has been the healthy and -- health and safety of all our employees and the communities in which we operate. And we've been focused on running our operations safely and efficiently and on servicing our customers to the best extent possible. Due to the pandemic, countries imposed severe restrictions on movement leading to a disruption in the manufacturing activity, and a sharp drop in demand across the world was observed. Industries are estimated to have lost about 2 to 3 months of output, and governments have announced measures to address liquidity and demand. And while these have stabilized the financial market, the underlying economic activity will take some time to recover. In India, the nationwide lockdown from the 25th of March severely impacted manufacturing activities, including steel consuming sectors. This is normally a peak season for the steel industry because, normally, January to June is the best time for us. And we believe that about 20 million to 30 million -- 20 million to 23 million tons of steel demand has been lost over the last few months because of the lockdown. The government of India and the Reserve Bank of India have taken steps to improve liquidity and kickstart economic activity, and a phased relaxation and mobility restriction has also started. While it is early days, we have seen some signs of recovery in steel demand and expect this to continue with an increase in infrastructure spend and stronger rural demand. In Europe, the steel demand was already weak, and the outbreak of COVID-19 has further accentuated this. Auto and construction has been badly affected, though on the upside, there has been a certain demand for steel for packaging. The share of imports to total steel consumption in EU continues to remain at elevated levels, which is a cause of concern. China seems to be recovering faster than the rest of the world on the back of investments in infrastructure and real estate. And the Chinese steel production reached an all-time high in the month of May. And they also, in addition, imported about 1.28 million tons of steel in May. However, these are unprecedented times, and many experts are opine that nations may go through multiple waves of infection. So we cannot afford to be sanguine, and the need of the hour is to be agile and ready to adapt to a fluid environment. Accordingly, from a planning perspective, we have assessed multiple scenarios so that we can recalibrate our operations as the situation evolves. In terms of operations, we've been optimizing our utilization levels in line with the economic activity while keeping a close eye on the cash flows. In India, we operated at around 50% capacity utilization levels in April, and we have now improved the utilization levels to over 80%. While there will be a drop in our sales volume in the first quarter, we expect to go to normal levels from the second quarter onwards. And if there are no further lockdowns, et cetera, we aim to come close to our FY '20 sales volumes despite the overall reduction in steel consumption in India during the year. In Europe, we are currently operating at about 70% utilization level. From a market perspective, we've taken a tactical call to increase exports to counter the lockdown in India. With the phased relaxation in lockdown measures and pickup in domestic demand, we will -- this will be rebalanced over time. We've been extremely focused on cash flows and liquidity management through this crisis, and Koushik will elaborate on the same shortly. We have looked at deferring payments while squeezing our expenses and restricting spend to the minimum. Given the uncertain business environment, CapEx is being curtailed sharply and restricted to safety and sustenance projects. We will revisit our CapEx plans in the second half of the current financial year or when the business conditions normalize. We also firmly believe that every crisis provides opportunities to create value, and we have several initiatives underway to identify and implement such opportunity. During the lockdown, we consciously chose not to curtail production at our captive mines or at our pellet plant so that we can further reduce for future purchases of both iron ore and pellets and improve our profitability. We are also exploring changes in the way we work, which will help us reduce our cost base and come out of this crisis as a stronger and sharper company. Some quick comments on our performance during FY '20 and the fourth quarter of FY '20. Our India crude steel production, which includes Tata Steel Standalone, Tata Steel BSL and Tata Steel Long Products, grew by about 8% year-on-year in FY '20 to 18.2 million tons. This was supported by the ramp-up at Tata Steel BSL and the acquisition of Usha Martin steel business by Tata Steel Long Products company. In fourth quarter FY '20, we grew at 6% quarter-on-quarter. The India deliveries grew by 4% year-on-year in FY '20 to 16.97 million tons, and they would have been significantly higher if not for the nationwide lockdown in the late -- in late March '20. Fourth quarter deliveries shrank by 17% quarter-on-quarter. Both our acquisitions are doing well. Tata Steel BSL could ramp up crude steel production by 25% year-on-year in FY '20 on the back of improved maintenance practices and operating practices. We hope to complete the merger this year. And Tata Steel Long Products has also delivered a sharp improvement in operating KPIs, which has helped in cutting costs and delivering better profitability, which is evident in Q4. Moving to Europe. Tata Steel Europe showed a turnaround in performance with an EBITDA of about GBP 8 million in Q4. And while the transformation plan is underway, profitability was obviously affected by the weak market conditions coupled with the outbreak of COVID-19. I will now hand over to Koushik to comment on our financial performance and our financial management. Thank you.

Thank you, Naren, and good afternoon, good morning and good evening to all. I hope you're all safe and well. Before I comment on our financial performance for the fourth quarter of financial year 2020, I would like to explain how we are trying to manage the financial risk arising out of the COVID-19 pandemic. As Naren mentioned, these are unprecedented times, and the business environment is extremely fluid. While one hopes that the worst will soon be behind us, the risk is there could be second or repeated waves of infection and disruptions. From a finance perspective, therefore, our objective has been to [ focus ] our liquidity and ensure we are well placed to deal with disruptions should they rise. We have pursued several initiatives to achieve this target. To start with, in the immediate aftermath of the lockdown, we sought to run our cash-neutral operations. All business decisions across the supply chains were devoted around cash, setting up war room and stringent protocols. We're focused on driving collections, cutting our spends and renegotiating payment terms with vendors. It took us some time to drive this change, but I'm happy to state that we've been successful in this. And as of Q1, despite the 68-day national -- nationwide lockdown in India, the India business will be cash positive. Post the lockdown, we also raised funds with the primary objective of building a contingency liquidity buffer. As a result, there is an increase in our gross debt by about INR 6,461 crores to about INR 1,16,328 crores. However, the net debt remains broadly at the December '19 levels at INR 1,04,779 crores even after the addition of the new leases of INR 280 crores and an adverse FX impact of INR 1,057 crores. To reiterate, this cash buildup is for contingency purposes only. And if there are no disruptions in business environment, we will use the surplus cash to repay the debt and reduce the gross leverage. As of 31st of March 2020, our liquidity was about INR 17,745 crores, of which about INR 11,550 crores comprised of cash and cash equivalents and the balance in undrawn bank lines. I would like to highlight that there are no significant repayments on the financing side. We have completed the senior facilities refinancing in Tara Steel Europe in February 20, which reduced the headline interest cost because the spread was finer than the original one. We have always worked on having a well-spread debt maturity profile. And our long-term debt repayments across the group are less than 250 million each in 2020-'21 and '21-'22. We have also cut down sharply on CapEx, restricting the spend to safety and sustenance project. The CapEx plan, as Naren mentioned, will be revisited in the second half or when the business conditions improve and normalize. In Europe, the governments have announced the various schemes to provide direct cash support, some of which we have availed of. We have started getting wage reimbursement, both in Netherlands and U.K. as well as deferment of some statutory payments. We are in discussion with both the governments including to seek further support, which may be necessary for the business to operate in a sustainable manner. Coming on to our financial performance for the fourth quarter 2020. Our consolidated revenues for the quarter were INR 33,770 crores, which was broadly lower by about 5% on a Q-on-Q basis largely due to lower deliveries in India and weak realizations at TSE. As you are aware, at the end March, 10 days in June, a period where the maximum dispatches happened and that's exactly when the national lockdown happened in India. Despite that, our consolidated adjusted EBITDA grew by about 85% quarter-on-quarter to INR 4,869 crores with improvement in realizations in India and lower raw material costs across geographies. These numbers do not include our Southeast Asian operations as they continue to be classified as assets held for sale, and we are working on certain options as regarding these assets. This quarter, we took a noncash charge of INR 3,406 crores. Deteriorating business conditions drove impairments at Tata Steel Europe which was about INR 2,200 crores; and Tata Steel Minerals Canada, of about INR 678 crores; and the Tata Steel Special Economic Zone in India, of about INR 150 crores. It also includes a loss on -- notional loss on fair valuation of preference shares held in TRF of about INR 272 crores. You would have noticed that there is a similar loss on BSL and Standalone accounts, but as it is a subsidiary of Tata Steel, it can cancels out at the consolidated level, but TRF, being an associate, is equity accounted and has not been canceled. Tata Steel India, which includes Tata Steel Standalone, TSBSL and TSLP recorded revenues of INR 19,493 crores. The adjusted EBITDA for the quarter grew by about 21% quarter-on-quarter and stood at INR 4,568 crores. The Tata Steel Standalone revenues declined by 7% quarter-on-quarter to INR 14,211 crores due to lower deliveries due to the lockdown at the end of March. The increase in steel revenue per ton was about INR 3,100 over the third quarter. The Tata Steel Standalone EBITDA stood at INR 3,661 crores with an EBITDA margin of 25.8%. This translates into an adjusted EBITDA per ton of about INR 12,574, an increase of INR 2,451 per ton sequentially quarter-on-quarter and during this year. As you know previously, EBITDA and stand-alone operations used to be adjusted for fair value changes due to exchange rate movement on preference shares investments in Tata Steel Holding in Singapore. The preference shares are converted into equity in the third quarter of financial year '20, eliminating the need for such adjustments from the fourth quarter onwards. In this quarter, the performance of our key subsidiaries in India, Tata Steel BSL, Tata Steel LP, have improved significantly on the back of a lot of internal measures across the enterprise especially on cost takeout and optimization programs. While the EBITDA of Tata Steel BSL improved to INR 775 crores, a 173% quarter-on-quarter increase, Tata Steel Long Products too saw a sharp increase in the EBITDA compared to the last quarter at about INR 132 crores, which is 3.6x. Moving on to Europe. Our revenues trend to [ GBP 1.46 billion ] in the fourth quarter of FY '20 primarily due to a drop in the European steel prices, which was partially offset by higher deliveries and better product mix. EBITDA for the quarter improved and stood at the positive level as compared to a loss in the previous quarter primarily due to lower material costs. Tata Steel Europe's employee costs have also come down by about GBP 60 million in the last 6 months. We continue to carry the transformation program to make our European businesses self-sufficient. And while we have made good progress, the pandemic has certainly added to the complexity. This quarter, we spent about INR 2,636 crores on capital expenditure, of which INR 1,606 crores was spent by Tata Steel India, inclusive of INR 762 crores on the Kalinganagar Phase 2 expansion. In terms of our cash flows. So fourth quarter, we generated INR 5,322 crores from operations, of which INR 4,669 crores and INR 653 crores from the release of working capital. The key outflows in the quarter included INR 2,636 crores on CapEx, INR 2,746 crores on interest and INR 782 crores on taxes. After adjusting INR 1,400 crores on account of FX and other noncash items, we generated a net cash of INR 473 crores. With this, I will end my comments and open the floor for questions. Thank you.

[Operator Instructions] We take the first question from the line of Amit Dixit from Edelweiss.

Congratulations for a good set of numbers in very challenging times. I have 2 questions. The first one is on Tata Steel Europe results, which were quite impressive and, I would say, ahead of many of your European peers. So just wanted to understand if there is any element of carbon credit sales or write-back of provisions made earlier. Or I mean any one-off element in this?

So Amit, thank you for your question. No, I think this -- essentially, if you look at the sequential improvement, the EBITDA was higher by about 49 million -- GBP 49 per ton primarily because there was a lower material cost because of the lag effect, which is almost about GBP 80 per ton, which is partially offset by some of the lower revenues per ton, which was about GBP 24 per ton. And that's the net that you saw. And there was small numbers on account of higher other expenses. But there is no one-off elements that have come in as far as the numbers are concerned.

Wonderful. Sir, the second question is again on Tata Steel Europe. You have mentioned the transformation plan underway. So what is the kind of cost-benefit we got in Q4? And what are the expectations for FY '21 and '22? And how long it will run, this transformation program?

Naren, you want to take it?

Yes. So the overall transformation program is about -- delivering about GBP 600 million of benefit, but that's spread over a period of time. So if you see last quarter, I would say a lot of the benefit was more because of the raw material change that Koushik talked about, some of it is because of the cost takeouts. I must also add here that you had asked about the emissions. Actually, last quarter, we had a cost because of emissions, not a gain. So actually, operating numbers are even slightly better than what has been reported. So to me, I would say the numbers are flowing in, but it is also offset by the fact that we are operating at 70% capacity utilization in Europe. So some of the improvement in the metrics are not so visible yet. But I can say that from an operations point of view, we have seen far more stability in the last 6 months, let's say, starting November or December than we've seen on a continuous basis in the last 2, 3 years. So there's a lot of transformation program which is showing as a benefit. In terms of specific quantification, I don't know if Koushik has any numbers which he can share.

So the full year, this year, the entire impact of transformation was almost about GBP 370 million for the full year. There were one-off or other tactical moves in that. But there are also -- this is half-half, I can say. There are many which are structural and will continue to go forward. I think this program is very deeply analyzed to create a better competitive position for Tata Steel Europe, both in U.K. and in Netherlands. The market headwinds have been very significant during the year, especially in the third quarter, but it continues to be so in the fourth quarter. And -- but I think the complexity of implementing that transformation in the fourth quarter was also high, but the -- I think all credit to Heinrich and the leadership team in TSE to be steadfast on that journey. It's a very difficult environment, but the journey is still on. So this will -- this year also, there is a significant amount of transformation plans which are currently underway, maybe slower than what we would have normally thought, but it's well defined at this point of time.

So when you said GBP 600 million, I mean, when the program is fully rolled out, so do you expect this GBP 600 million benefit to accrue year-on-year, every year, that kind of a benefit, I mean, considering the base level today?

It's not the base level today, it was the base stable of last year. And the GBP 600 million is actually programmed around costs on operations, on productivity improvements, on marketing and sales, everything. So overheads, it includes support function rationalization and so on. So it is the overall program which will finally lead us to GBP 600 million, but the challenge in Europe has also been that the market has been -- headwinds have been very, very significant. So I think we would give you updates on as we move forward. And when -- once we get into -- the last year was the first year. So this year, I think towards the end, we would be in a better position to tell you what the trajectory is and what that delta would be on a spread basis.

[Operator Instructions] We take the next question from the line of Ashwani Kumar from Nippon India.

This -- the question is for Mr. Narendran. Sir, in India, there is demand compression in some sectors where Tata Steel is present. And some sectors will normalize faster than these sectors like automotive, particularly passenger vehicles and segments of consumer durables. In terms of your product mix, how will you be able to, let's say, address the volume situation in Tata Steel so that you are able to produce at 90%, 95% of the capacity and export profitably some of the end -- to the end markets, where the domestic demand is low? Are you able to manage this in the next 2, 3 quarters in your opinion?

Yes. So basically, we are offsetting the compression in domestic demand with exports, okay? So if you look at the export percentage of Tata Steel India in a typical year, it is 10% to 15% of production, okay?

That's right.

So we are currently -- we will finish this quarter maybe at 50% export levels, okay? And Q2 will be at maybe 30% exports. So quarter-on-quarter, as the domestic demand slowly comes back, you will see us exporting less going back to a long-term normal of 10% to 15% exports, okay? So -- but we still find it worthwhile to export because we make money at those prices and because Tata Steel in India is one of the most competitive producers of steel. And international prices have also gone up by about $50 in the last 3, 4 months, right? So it's profitable for us to export, and it helps us utilize our capacity fully. Of course, there will be margin compression because, on one hand, you are substituting automotive sales with exports in effect because the segment which has shrunk the most is automotive, particularly commercial vehicles. But there are sectors in India which are showing demand growth. Anything to do with rural markets is strong, and we have a fairly strong franchise in the rural markets with Tata Shaktee roofing sheets and Tata Tiscon rebars for the house builders. So that's about 15%, 20% of our sales, and that's looking quite strong. Anything related to government expenditure, whether it is oil and gas segment, railways, water pipelines, et cetera, is also kind of looking good. So there are parts of the Indian economy, which seem to be coming back sooner than we -- sooner than the other parts. But we'll obviously wait for the auto demand to come back, and that may only happen in the second half or the later part of the year. Within auto, tractors is strong, tractors is quite strong.

Yes. Sir, in your initial remarks, you also commented upon that you'll be able to get to the volume growth close to the last year. So are you saying that the deliveries which have fallen short in the first quarter, you will be able to make up a very large part of it in the next 9 months?

Yes. So what's going to happen is we had built up some inventory end of March because of the suddenness of the lockdown and the fact that our customers are closed. So if you see last year's numbers, there is a gap between production and sales, right? And while part of it is normal, part of it is abnormal because of the conditions, right? So we're going to dip into those inventories to make up for some of the losses in production over April and May and a bit of June. So what we are chasing is the sales numbers of last year for sales numbers of this year. So the production numbers of this year will be lower than the production numbers of last year.

The next question is from the line of Indrajit Agarwal from CLSA.

A couple of questions from my side. First, on Europe, you mentioned that you have started getting base reimbursements. Can you explain when have you started getting these base reimbursements? And can you quantify like what is the monthly run rate kind of reimbursement that you are getting both in Netherlands and in U.K.?

So Indrajit, this is only this quarter. This as in the current quarter, not in the fourth quarter. And there is -- so there is a method in which it is calculated because in U.K., one is supposed to get the people furloughed, which is go home and stay, and there's a cap on how it is taken on. I think it's about GBP 2,500 entitlement. So once you do it, there is a certain percentage of which, which comes in. That's not too big in the sense it's about -- I think, about 3 million to 5 million. And the one in Netherlands is a reimbursement of employment provided we're not doing any retrenchment. And that covers, I think, 70% to 80% of the employment cost for some months. I think it's to get over in June, but this is a -- this quarter, this will not -- what you see in the results last quarter.

Sure. That is very helpful. Second is what we understand is some of the auto contracts would have started coming up for negotiations. So how have the negotiations been? What is the kind of -- so last we did it in October. So versus October, how have the prices been in this time?

So normally, you're right, it's a half yearly contract in India, which typically is from October to April and April to October. So the negotiations are going well until the pandemic hit us. So now we are obviously restarting the negotiations. Let's see where it goes. I don't want to comment until we conclude the negotiations. Obviously, with the auto industry, we always look a little bit long term, and we support each other whenever we can. But I think the way the steel industry looks at it is that there were downward corrections in the second half of last year, and certainly, we're looking at picking up some of that in the first half of this year.

The next question is from the line of Rajesh Lachhani from HSBC.

Sir, my first question is we are seeing the seaborne iron ore prices rising, and like obviously, it will have a lag effect for the operations in Europe. So just want to understand when will these high seaborne iron ore prices hit us.

So I mean, obviously, it is -- we typically have anything from 60 days of stock there, 60 to 80 days of stock. So -- but normally, in Europe, we obviously look at the spreads. And where the spreads are, the spreads are in excess of EUR 200 yet, so it's not the lowest we've seen, it's lower than what we saw some time back. So we'll be watchful. Also keep in mind that in Europe, the contracting is slightly different. So some of the contracting was done earlier, and it's valid for quite some time. So -- and we also do some hedging wherever we can. So there are multiple aspects to it. Koushik, do you want to give a more specific comment on this?

No, I think it's typically a 3-month lag or 3- to 4-months lag. So I think it would come towards the end of second quarter is what I [ think the result hits ]. It also depends on how the spot prices move. And as we've seen that the coal prices have softened, where the iron ore prices have held. So it's -- it could have some impact on the total spread, but it will take a few months to hit the P&L.

Understood. Sir, so -- and then my second question is actually on CapEx. So you have commented that you are planning to curtail CapEx by close to 50%. And if I look at your cash flow number in FY '20, we had a CapEx of around INR 10,400 crores.

Yes.

So are we looking at the CapEx of INR 5,000 crore next year? And what will be the breakup between Europe CapEx and India CapEx?

So what I commented on is that our CapEx numbers have been -- we will look at more than 50% cut, which certainly will be lower than INR 5,000 crores. It could be in the range of INR 4,000 crores to INR 5,000 crores. As far as the India CapEx is concerned, India was obviously working on -- apart from sustenance CapEx, it was focused on the Kalinganagar expansion. So that has -- that will be reviewed in the second half of the year. So the breakup, this would -- I think it will be fair to say the breakup will be more around 60% of that will be -- 50-50 is a better answer at this point, INR 2,000 crores and INR 2,000 crores, INR 2,500 crores and INR 2,500 crores. But I must tell you that we are still not done as far as the review is concerned, and there would be opportunities to cut back CapEx even more than that. In India, we are focusing primarily on the sustenance CapEx and the very critical CapEx and very critical, high IRR CapEx. In Europe too, that is the focus. So growth CapEx has been cut very, very significantly.

Understood. Understood. Sir, so just a follow-up on this CapEx. Like what is the reason why we have such a high amount of CapEx in Europe? So if I look at FY '18 numbers, FY '19 and, I think, FY '20 also, we have around INR 3,500 crores of CapEx in Europe, where we have a capacity which is quite low compared to the India capacity. So I just want to understand. And are you doing some growth CapEx -- significant growth CapEx there as well?

No. Naren, do you want to take that?

Yes. So there are 2 aspects to the CapEx in Europe. One is in the U.K., it's more related to ensuring the safety of the plant, the minimum operating conditions. Because it has been an under-invested plant over the years, and so there is a lot of safety and compliance-related CapEx that we spend there. The second part is 2, 3 years back, we have spent money on the blast furnace rework that we did there. So those are one-off kind of things. In Netherlands, it's more about upgrading the product mix. And over the last few years, we have spent money in what is called the STAR program and which has helped us gain market share with the automotive sector. Maybe it worked against us during the conversation with Thyssen and the competition commission because we were seen by the auto companies as a strong supplier to the auto industry because of the investments we've made over the years. And so most of the increased CapEx in Netherlands is related to the STAR program and upgrading the facilities to serve the highest quality requirements of the auto customers there. There's no growth CapEx in either of these places.

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

Two questions, one with respect to Europe; and the other, India operation. First one, with Europe, now we see a lot of news flows with regards to employee protests at Netherlands, et cetera. And also we are seeking some financial package from both the governments, U.K. and Europe. So I just wanted to know if -- I mean where do we stand with respect to a plan of reducing employee by around 3,000 part? And how does that change in the current environment? And also, what exactly is our ask with both the governments which we are currently in discussions with?

Yes. So in terms of the transformation plan, one stream of the transformation plan was to look at the productivity and to see what we can do on the workforce, right? So that is a part which gets talked about a lot. But that's only one of the streams. And now in that stream, I think there have been discussions with the unions, and the discussion focuses just now on forced redundancies. And we've said that we will not insist on forced redundancies for now, and that's a position we've taken given the pandemic and given the situation there. That doesn't mean we will not have improvements in productivity because there is a natural attrition, and people are also leaving as it is. So there is -- that journey gets slowed down a bit, but it's not totally stopped. And I think we are sensitive to the issues being raised by the unions. The second part is, yes, there are some -- we've had some union action over the last few weeks. There are conversations going on with the union. I think it's a site which the employees are very proud of and we are also very proud of, and we're trying to see how can we find a common path to take it to where it belongs because I think the point of view of Tata Steel has been it's a great site, a fantastic site with a very good configuration. But operationally, it had slipped a bit in the last 2, 3 years, and we want to get it back to the best position that it needs to be in, which is to be the best-performing site in Europe. It has the potential to do that. I think the unions agree with that, but how do we get there is probably where there are different views. I think there are conversations going on, and we are hopeful that we'll find solutions as we work together. As far as the governments are concerned, again, our submission to both the governments have been that we have been a very committed owner of these assets. We have seen through 2 big crisis in the past, 2008 as well as 2015. This is the third one. So it's not inappropriate for us to seek some support from the government, both short term and long term. And the government also has various schemes, as Koushik mentioned earlier, in both U.K. and Netherlands. So some of it we are already availing. But particularly in the U.K., the request is more on a little bit more of a long-term kind of support. I think the details are still being discussed, so it will be inappropriate for us to discuss it at this stage. But basically, the U.K. government is also keen to support the industry, not just Tata Steel, and they're looking at what is the best way they can do it in a way that is fair to the taxpayer as well as fair to the industry and ensure long-term competitiveness. So this is a conversation going on in the U.K. Let's see how it goes. And I think we are seeing, so far, we've been backing both these assets, and this is a time for us to get some support.

Understood. Understood. Sir, next question, second one is with respect to the India operations. If you could share what would be our EBITDA coming from the chrome ore mines and how that should change from '21 onwards on the revised royalty rates. And second, on the Bhushan merger, we've not heard anything in the last 6 months. So is there any update or any revised time lines?

So I'll ask Koushik to comment on the Bhushan time lines. But before that, the federalized division, traditionally on a -- I mean I won't comment on EBITDA but it's -- from a Tata Steel point of view, it's traditionally been INR 800 crores to INR 1,000 crores margin kind of business. It's a profit center which is probably -- I mean it is the most profitable profit center for Tata Steel. Obviously, with the royalty that we are paying, we will see in the initial 1 or 2 years a dip in that. Maybe it comes down to about 50% of what it was in the past. But we are also changing the operating model. We are going to produce more and more through outsourced capacities, leased-out capacities, that the cost structures are very different. So in the next 3 to 4 years, we expect to get the margins to the levels that it was before the auctions. Koushik, on the Bhushan?

Yes. So to supplement what Naren mentioned that, as you know, we've also posted auction of some of the new mines. We have got back Sukinda, and we have floated the new company, Tata Steel Mining, on which these new mines, there are 3 of them, and we will develop these mines and operate them in the new company, which is a 100% subsidiary, which enables us to manage the agility of a new entity and without legacy costs and also ensure that we can grow this business in the future. On the Bhushan merger, we've -- we had filed it with the NCLT. The NCLT hearing has been done. They have [indiscernible] now asked us for a date. And the next hearing is sometime in July. And we are looking at ways in which we can progress this during this year. It may have been a little -- it maybe a little bit more complex in the context of what is happening on the pandemic, but we are focusing it, and this year, we will hopefully be able to continue the merger.

The next question is from the line of Satyadeep Jain from AMBIT Capital.

First of all, a clarification, did you say Tata Steel India would be cash positive in first quarter? Or is it the end of first quarter?

Yes, what I said is that the way we looked at it when the pandemic -- or the national lockdown happened was that you -- we had almost a period of 10 days or so where there was no dispatches, after which we recalibrated and started working on exports, et cetera. Our focus has been on a month-on-month basis, we need to be cash-neutral so that we don't dip into the contingency capital that we have raised. And what I mentioned is, by the end of June, we've already been cash positive on a cash basis, ways and means basis, on -- in May, and we intend to do so in the month of June. It's not the accrual basis, it's a cash basis we've been positive.

Okay. And secondly, on Sukinda, any idea around how much CapEx you will need to incur on taking it underground?

So we will take that call later because one advantage we have is now we have in addition to Sukinda 2 other mines, right? Earlier, before the auction, we only had Sukinda, and the only way to go was underground. Now with these 3 mines, we are able to plan better, we will think a bit more long term, go underground as late as possible because we are able to optimize on a 3-mines basis rather than just on 1 mine. So I think it allows us a lot of possibilities, which was the strategic value of the other 2 mines in addition to what we know on Sukinda. So I don't see CapEx coming in the next 3, 4 years in a big way for underground. We will decide after that.

Okay. I have one more question. I'll join back in the queue.

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

So I have a few questions. First, if you can help me with the trend of exports over the past 2, 3 months in terms of volumes, product mix and destination.

Sure. So when you look at it in a percentage term, in April, 80% was exported. In -- but for the quarter, it will be 50%, okay, because the April production volumes are very low. So in May, the production volumes were higher, and the export percentage was lower; and in June, similarly. So when you look at the Q1 volumes, you will find that the exports is about 50% of what we produced. In the next quarter, it will be 30% of what we produced. We have not yet planned for Q3, but we hope if the domestic market keeps picking up, we will keep reducing the export percentage to the 10%, 15% levels, which is our long-term goal, right? In terms of mix, it's largely Southeast Asia and China. In April and May, when the domestic demand was really low, we've exported a lot more semis than we normally do. We normally don't sell or export semis. But that is coming down, both billets and slabs. And a lot of those semis billets and slabs went to China. Of course, we have also sold some hot-rolled coils into China. Otherwise, Southeast Asia continues to be the biggest market. And of course, we sell in Middle East and some quantities into Southern Europe, where we don't compete with Tata Steel Europe. So that's as far as the export volumes and mix. And most of it is hot-rolled coils. There is some cold-rolled coils. And like I said, April, May and June saw some slabs and billets, but going forward, you will not see slabs and billets.

Okay. My second question is on your mining entity, Tata Steel Mining Limited. Now do you see a start of something here? They already see chrome mines, and I'm sure with the existing coal mines also, the new coal mines also coming up for auction, stage is set to participate in the coal mine auction as well. So how big of an entity can this be over the next 2 to 3 years in terms of your thought process? Or how -- what kind of revenues are you targeting for this entity? Can it sort of derisk the business a bit because we clearly see it as less volatile, higher return part of the segment? Or do you think that normally, what we are seeing is competition sort of doesn't allow this kind of top line acquisitions to happen? So what's your thought on this?

So this company, Tata Steel Mining, is going to be a vehicle for our mining activities, and any new auctions that we participate in, we would like to participate through this company, okay? So having said that, chrome ore was our first objective, and I think we've been successful in the 3 auctions, and we'll start with the chrome ore business. Coal, you asked about coal. Frankly, we are only interested in metallurgical coal. We are not interested in thermal coal. This company, if it does commercial mining, will focus on iron ore for commercial mining and not so much on coal. But even the iron ore commercial mining, we will take a call because when we prioritize CapEx, we would obviously like to prioritize to complete the unfinished projects in Kalinganagar and elsewhere before we assign capital to new verticals and new businesses. But the attraction of this company is that it can give us a different operating model, a different cost model to operate our mines. And when our captive mines come up for auction in 2030, we hopefully will have a strong mining company with a good cost structure which is able to participate in the auctions at that time for those iron ore mines. And in the interim between now and 2030 when there are iron ore auctions for captive or commercial, if we need iron ore for our existing plants, we will use this vehicle to participate. So it is basically the nucleus of a mining company which will focus on servicing Tata Steel's needs rather than get into mining as a trading activity.

Okay. Okay. And any restructuring or any reduction in the manpower which is deployed within the mining ecosystem today? Can we expect that? I mean, for example, the 34,000 or 33,000 employees that we see in India, is there a scope of pruning it down further for this restructuring? Or that's not sort of what you're looking at?

No. There are 2 things happening. If you look at Tata Steel's activity, there is an underground coal mine in Jharia where we have reduced the workforce from 12,000 to 2,500 over the last 10 years, okay? But there is a West Bokaro open-cast coal mine which is growing. So we are at 3 million, and we are expanding to 5 million, 6 million. So there, we've not increased the number of people. There are 3,000, 4,000 people there, but we're increasing the production and hence improving the productivity. The third and the biggest mining activity we have is iron ore mining, which, even if you see last year's numbers, we've increased from 23 million to 27 million or 28 million. And this will grow to keep pace with the requirements of our steel business, and the potential is to grow it to about 45 million, 50 million tons in the next 5, 6 years. Here, again, we will not be reducing the manpower. We will be producing more using the existing manpower and hiring if required. But what we've done is the Sukinda business has now changed totally, and -- because we had to surrender the mines, which we surrendered and run it back in the auctions. Now we will run it very differently. So there, there have been some reductions, which will, as I said earlier, will change the cost structure of this business and help us get back the profitability that we had until recently.

[Operator Instructions] The next question is from the line of Ritesh Shah from Investec Capital.

Sir, I had a couple of questions. First was on European operations. In the notes to accounts, auditors have opined on the going concern for Tata Steel Europe. And there's a number also which has been given at INR 20,000 crores. Sir, how should one interpret this? That's the first question.

So the way to see the -- to understand the background, in the context of the pandemic that has broken out, the -- obviously, every company and the auditors are looking at also the going concern and what is the material uncertainty issues on any of the underlying company. And then going through the full test, the scenarios are being tested, cash flows are being tested, different assumptions are being tested because when you sign off the accounts, you do it on a going concern basis. That's the fundamental principle. So if there are situations or if there are risks to that, then one has to still disclose then what is the basis of preparation of the financials. Is it on going concern basis, a confirmation, which is what has been given? Then this is -- this -- these accounts of Europe has been prepared on a going concern basis. And there are tests which has been done. The situation and the environment is uncertain, and that's a reality and that's been -- also been disclosed. That INR 20,000 crores is essentially the investment of Tata Steel in Standalone. Tata Steel investment in Tata Steel Holdings Singapore is about INR 21,000 crores. It was INR 22,800 crores after the about INR 1,000 crores of impairment in the Standalone, which you see as an exceptional item. [indiscernible] includes that INR 986 crores. So that's the -- so their point is, if the European performance is at risk at any point in time, this is your investment, which we may have a risk. So that is the explanation in tying up of what is happening in Europe, how does it flow in back into the investments of Tata Steel Standalone. So Tata Steel Standalone holds the investment in Tata Steel Holding. Then there is other funding in Singapore and then the equity is held into Tata Steel Europe. Tata Steel Europe has 2 legal entities, Tata Steel Netherlands and Tata Steel U.K. And the element of risk identified is on a component basis. And therefore, that is what they have highlighted.

Okay. Sir, just a clarification over here. Does the Indian entity provide any guarantees for the debt which is being raised at the Singapore entities to fund the European operations?

It is mostly on letter of comfort.

It is -- sorry, I missed it.

It's mostly based on letter of comfort.

Okay. Sir, my second question is, how should one look at the pension situation right now? I understand that 10 bps decrease in discount implies around 1.4% increase in liabilities. And March-end of last year, it was something which was in a positive zone. Given the change in macro, sir, how are we positioned over here right now?

The pension fund in BSPS, which is British Steel Pension Scheme or the new scheme, the new scheme, is significantly in surplus on a IAS 19 basis. I think it is more around GBP 2.9 billion of surplus. So that's been done on the basis of the assumptions stipulated in IAS 19. Even on a funding basis, it's not too far away. So I think the pension fund is in a much better state at this point of time. And these assumptions -- because the way we have changed the terms of the pension scheme post the RAA process, or Regulated Apportionment Arrangement process, with the pension regulators in financial year '17 is the liability is not going to increase in the manner in which it was doing so. And we -- therefore, the asset value is -- asset value has continued to be the similar, but the liability has reduced significantly. So that's the basis on which the surplus has -- got generated.

That's comforting. And sir, last one, if I may squeeze in. Sir, how do you usually advance fee and supply agreement? I think there was a Bloomberg notification which stated you have raised around $1.2 billion. I just wanted to understand the context of this particular trade finance arrangement. And what does it imply on the debt that we give out on the balance sheet? And if at all, it has an impact on the covenants.

Yes. No. So what was your last point on that? The last sentence that you mentioned?

Sir, the impact on covenants, if at all. It has advanced fee and supply agreement?

Yes. So no, there's no impact on covenants. See, as Naren mentioned -- and I think there was a question from Ashwani or -- on the -- or maybe somebody else on the trend of exports that we have done. I think it was Abhijit's question. So the point is we have certainly looking at exports in the near term. And this is -- we are looking at ensuring that we have the upfront liquidity as far as the exports are concerned. So it's an arrangement that we are doing. We've not drawn that -- on that financing at all. It is actually export advance to be received ahead of the exports, and there are commitments of exports. And the percentage which is the underlying is very small compared to the exports that we normally do. I'm not talking about even today because today, our export levels are significantly higher. But in the normal circumstances, the exports that we do, so -- which has been in the region of, say, 1.2 million tons to 1.5 million tons, this arrangement is only reflecting roughly about 400,000 tons a year. So I think that's the coverage that we have. And we're essentially talking about monetizing it upfront over a -- for the committed exports that we have. But that has got no implications on either the balance sheet or on the covenants.

The next question is from the line of Gaurav Rateria from Morgan Stanley.

Sir, 2 questions. Firstly, how has inventory level moved in India operations versus March level compared to the current level?

You mean March to end of June, is it?

Yes.

Yes. So I would say the quality of inventory has improved. It's maybe come down a little bit but not so much because you must keep in mind that we've also been ramping up production so that we don't miss out on capacity because our steelmaking capacities are constrained in India. So if we lose that capacity, we can't make up. So when we saw that the market was picking up and export orders were strong, we started ramping up, in fact, I would say, by the middle of June. So we are pretty much at similar levels as far as the steel inventory is concerned. Maybe the raw material inventory would have come down during the quarter. I don't know if Koushik has more specific numbers.

That's correct.

Yes.

Secondly, sir, on the Tata Steel Europe operations, what would have been the free cash flow loss in FY '20? And you talked about in the past achieving a free cash flow-neutral situation with the transformation program undergoing. When do you think that happens? Or under what spread assumptions that happens?

So the free cash flow for the -- I think the spread assumptions will be more around EUR 250 per ton. That's when they would head towards it. A lot of that is also depending on the level of CapEx. I think the attempt to make it cash flow self-sufficient is a continuous one. Obviously, when outside events impact, that becomes difficult. And I think that is essentially the case. In fact, if you look at this year, the pricing impact on steel was about GBP 575 million, which is very difficult to offset from internal steps. But even then, the transformation uplift for the year was -- as I mentioned now, was about GBP 400-plus million, and that is what kept helping neutralizing the price impact. And there will -- there is also market-related volume impact of almost about GBP 100 million. So if I take all of this together, then the work that has happened to neutralize it by taking out costs, working capital, reduction in overheads, et cetera, has been very, very significant. I think we are entering into a phase where the transformation will become the foundation for the future competitiveness and profitability of this company, and all of it is -- or almost all of it is actually cash based. So if the market spreads improve, I think we will be in a better position going forward to be cash neutral. Netherlands -- or within the Tata Steel Europe, Netherlands is the -- has the fastest pickup on that. And in U.K., too, we are looking at how we can bring that to a cash-neutral situation. It is tough and challenging, but I think the teams are up to the job.

Just to supplement to my earlier answer, I think it's -- for India, basically, there's a 400,000-ton reduction in steel inventories during the quarter -- during this quarter.

I would now like to hand the conference over to Ms. Samita Shah for further questions.

Right. So we have many investors who have dialed in on the audio line and who have been typing in their questions. Quite a few of them have common questions, so I thought I'd just pick one now before we go back to the queue. The question really is around equity. So the question is, "Given headwinds ahead and the leverage levels, do you plan on raising any additional equity for the company?"

So my answer is not considered now. I think we still have several actions to be taken both on the internal front and strategic front. We need to ensure that we raise equity when it makes sense. And I think the underlying capability or the underlying strength or value of Tata Steel, especially the Indian operations, is significantly more than what is reflected, and, therefore, we would not look at equity at this point of time. We raised equity 1.5 years back when we acquired Bhushan. I think the results of -- the operating results in Bhushan has been very, very encouraging, and we've kind of ramped up as we promised. So the market has moved very differently and a lot of externalities have come in. So at this point of time, I think we are looking more at internal measures and ensuring that we remain liquid. And we take comfort from the fact that those actions that we are talking, whether it's a transformation in Europe or the kind of performance improvements that we are doing in Tata Steel, Bhushan and LP, will help us to be more competitive and not take equity to dilute the earnings of our shareholders at this point of time. So we would -- we are not looking at it at this point of time. And since we do not have any large repayments to look at, that's not an emerging need at this point. We would rather focus internally and take steps to build our competitive platform.

Okay. And there's another question, which is -- which many investors have asked. In terms of NRs, if you can give us a sense of NRs likely in Q1 and your thoughts about Q2 as well?

Yes. So in India, basically -- I mean, as you know, we didn't transact anything in April. So if you look at it on a quarter-on-quarter basis, the domestic NRs have maybe dropped by about INR 500 in this quarter compared to the last quarter. But the impact will be seen more in terms of the mix because we are exporting significantly more than we did in Q4 and we traditionally do. So the impact of that -- so the mix impact more than the price impact will be about INR 4,000 to INR 4,500 a ton. We see this picking up a bit, though the domestic NRs are kind of at a delicate point. But in terms of the exports, volumes will come down as a percentage next quarter. So the mix impact will be positive for next quarter, maybe a pickup of about INR 1,000 to INR 1,500 at least. And the rest will depend on the domestic NRs, the way it pans out. I think we'll be watchful on that. It's a -- typically, monsoon is not a great time of the year in India for steel sales. But at the same time, we are seeing some of the sectors coming back. More and more SMEs are slowly coming back, so we are hopeful that we can balance out the domestic prices a bit. And also, the domestic prices are already at a significant -- I mean, if you look at it compared to the Japanese or the Korean prices, we are INR 2,000 to INR 3,000 below that currently. And if you look at Chinese prices, we are maybe INR 4,000, INR 5,000 below that domestic versus import parity. So -- and the international prices have been quite strong. As I said, in the last 2, 3 months, it has gone up $50 a ton, and it's still quite strong because China is pulling quite well. So next quarter, there'll be an upside because of mix. There could have been a downside because of domestic prices softening a bit, but we are waiting to see how that pans out.

The next question is from the line of Prashanth Kumar (sic) [ Prashanth Kota ] from CGS-CIMB.

Congrats for a good result both on the P&L and as well as the balance sheet front. Sir, I was surprised to see the net debt hasn't increased despite the sharp depreciation of INR, and you have a lot of ForEx and external debt outside of India. So could you please help us throw some light on that as well?

So we -- EBITDA does have a translation impact of around INR 1,400 crores included in that and the mark-to-market impact of the movement in FX. So that was captured within the EBITDA. But the net -- the earlier question of net debt not increasing, because I think one of the focus areas has been the working capital management, and Europe has done well on that. We've renegotiated terms. We have had opportunities to raise our capital from the working capital front. But other than that -- and that's why we've been able to keep it flat, and that's the intent at least, to keep it flat at this point of time because with these uncertain market conditions, we need to ensure that the net debt numbers don't balloon up.

Great, sir. Sir, the next one, I just wanted to understand the benefits on the U.K. furlough scheme. So you said it's not significant. But is there a cap on the number of employees we can put on the furlough scheme? Or we -- I do understand that there's a GBP 2,500 cap on the cost per employee. But then is there a cap on the number of employees you can put through the program?

There are certain categories of employees whose overall compensation is -- so people who are not the white collars who can get into it, it's a blue collar in a certain overall compensation cap, those employees qualify for this scheme. And that is the basis on which this furlough is given.

The next question is from the line of Vishal Chandak from Emkay Global.

Just quick 2 housekeeping questions. One, on the other income side, we've seen a sharp spike in the other income at the subsidiary level because on a stand-alone, the numbers are not very high. And second, on the OCI, there's about a INR 500,000 crores positive that is coming if -- that's the first question.

Yes. I don't have the numbers just now, but I can -- Samita can give you those numbers for the quarter.

Sure. And sir, my second question is a little more strategic. In terms of -- sir, in U.K., we have tried running several initiative programs right from the time of acquisition, [indiscernible] for the Future, to name one of them, and many others through the crisis. But every time the prices spring up, we are again back to where we are again, looking at the spreads. So on a sustainable basis, what should we look at as a sustainable business model for U.K. especially?

Yes. So I think a couple of things. If you look at the story in U.K. for the last 10 years, one thing which has happened is we shrunk the business from 10 million tons to 3 million tons, okay? So when we acquired Corus, it was 10 million in U.K. and 7 million in Netherlands. So to that extent, the challenging part of the business is today 3 million tons out of Tata Steel's total of about 30 million tons as compared to -- at that time, it was 10 million out of maybe 22 million, 23 million tons, right? So the size of the problem in some sense has shrunk even as we went around addressing the issue. The second issue was in terms of operational stability because the U.K., from a configuration point of view, has had a number of disadvantages. Netherlands has a pellet plant. U.K. doesn't have a pellet plant. U.K. is coke deficit, so it has to buy coke. And the power costs in U.K. are much higher than it is in the continent. So there are a number of structural issues with U.K., and hence the problems are not so easy to solve. But what has been brought about is more operational improvements, stability in operations. A lot of good work has been done on using more and more optimal blends in the blast furnaces and the coke ovens, et cetera. And as a consequence, they have been able to keep improving their costs. So if you see, U.K., in the earlier period in crisis times, used to be -- I mean, it's even hit a GBP 300 million to GBP 500 million negative kind of thing. So from there, it came to EBITDA positive about 2 years back with all these efforts. But obviously, as you said, as the spreads shrink, we again slipped back. So from EBITDA positive, we've slipped to EBITDA negative, nowhere near what we've seen in the earlier years during a crisis. So every crisis, obviously, we hit a low, which is a fact. But the only consolation is that low is not as low as in the previous crisis. So it's a long journey, a lot of effort is going on. The easy way to solve the problem is to spend a lot of CapEx, but that is not affordable or advisable. So we're trying to find the most CapEx-optimal way of solving the problem, and that's what the teams there are working on. And there are some other investments going forward that can -- trying to convert a continuous annealing line into a galvanizing line, but all that is dependent on the affordability, and we will take those calls. In the long term, obviously, as Koushik said, Netherlands has traditionally been cash positive. So how can we make U.K. cash neutral is what we've been chasing not very successfully, but we're coming closer to -- we were coming closer to the goal till this crisis hit us. And some of the discussions with the U.K. government are also about the cost of running the steel business in U.K., which includes the power costs, which includes many other charges that we pay the government which is higher than what we pay in the continent. So these are all part of the discussions with the U.K. government to see what is the support we can get from them.

If I may squeeze in just one last question. Sir, in terms of carbon credits, what kind of benefit or expenditure do we expect in FY '21 and '22, maybe '21?

Last year, the number was about GBP 40 million. Carbon credit also depends on the level of operations. And with plants running at 70%, there could be opportunities for having excess. But typically, these are all long-term requirements. So we -- if we are self-sufficient, there will be no additional cost. If we are not, then there will be a cost that will come in. So we would rather take it as a self-balancing item rather than look at it from a monetizing perspective if it is required in the future. So we would always like to ensure that it is -- it kind of balances out because at the end of the day, when the operating level goes up, then we need these carbon credits. So we would utilize them. If it is going to come down at a lower level, then, of course, we will have surplus.

So we can, sir, fairly assume at 70% we would be more or less neutral, at 70% utilization levels?

Somewhat, yes. But I wouldn't say that for '22 because the regime is also changing and the carbon costs are increasing. So at this point of time, you can say that it is -- it would be neutral, but I wouldn't kind of hazard a guess on exact numbers.

I just want to correct a comment I made to one of the earlier questions. I just want to guide that the inventory levels on finished goods in India will remain the same during the quarter. I go back to my original answer. Sorry about that.

We'll be able to take one last question. We take the last question from the line of Sumangal Nevatia from Kotak Securities.

One on KPO. Under the 2 scenarios, say we start with the normal CapEx run rate in second half and the second scenario will start only in FY '22. What could be the revised commissioning period?

So we will prioritize the pellet plant first. The first focus will be on the pellet plant because that has an impact on the cost in Kalinganagar. So that will be priority one. Priority 2 will be the cold rolling mill, which adds value to the products that we make there. But obviously, we will align the investment on the cold rolling mill also to the recovery of the auto demand in India because that cold rolling mill is basically targeting the auto industry. And then we will go for the growth CapEx, which is the additional blast furnace, et cetera. So I think we'll prioritize. And based on affordability, cash flows, et cetera, we can do that sequence. I think we'll be in a better position to give a guidance in the second half because just now, most of it is on pause apart from what's going on, on the ground a little bit on the pellet plant and the cold rolling mill.

Got it. And out of the INR 8,000 crores of CWIP, how much would -- I mean, majority would be of the pellet and CR mill? Is that the right understanding?

Majority would be outlook for the second phase. And yes, I think 2/3 will be on pellet plant and CRM.

Got it. Got it. And just one last question. On the partly paid up shares which we have, I mean, do we have any plans to call that? And is there any restriction that we cannot dilute further unless and until that is redeemed?

Yes. I mean I guess we will not be able to issue new shares until we have sorted out the partly paid up issue. Because you cannot have 2 -- technically, it's still open. Therefore, we need to resolve it. We are working on it, and hopefully we'll find some solution in the next few months or maybe sometime during the year. And that's something which we will be -- we are mindful of when we look at equity. It's not a restriction. We can -- but I think it's something that we would not want to do as a company until we close this other -- the previous issue. I just wanted to -- since you talked about the pellet plant and work in progress, the number of pellet plant and the CRM will be even lower. So it will be -- because the pellet plant by itself is more around INR 1,400 crores, INR 1,500 crores. So the -- it's not that bulk of it is this. There is a -- our mining projects also, which is the Khondbond and others which also have a -- has been on the CWIP, and there are environment projects which are also on the capital work in progress. So it's a mix of everything.

We'll take that as the last question. I would now like to hand the conference back to the management team for closing comments.

Yes. Thank you, everyone, for listening into our call, and we look forward to connecting with you again at the next call. Thank you.

Thank you.

Thank you very much.

Thank you very much. On behalf of Tata Steel Limited, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.