Tata Steel Limited (500470) Earnings Call Transcript & Summary

Good afternoon, good evening and good morning to all of you who have dialed in. I'm Samita Shah, and on behalf of Tata Steel, I'm delighted to welcome you all to our Investor Day 2021. This forum gives us an connect with a larger number of investors and analysts, and we are delighted to see so many of you joining us not just from Mumbai, but from Hong Kong, Singapore and many other cities in the world. This event is being live telecast on our website as well, so you can listen in on that as well. Once again, welcome, and let me start with the agenda for today. Next slide, please. As you can see on the slide, we will start with walking you through our road map 2013, then we will touch upon our financial strategy. We'll have a Q&A session before we break at 4. We resume at 4:15 India time and then go on to a few sessions to introduce you to some new fascinates of Tata Steel. We will talk about our market leadership, our approach to ESG and, of course, introduce you to our technology team. We then have a larger -- longer Q&A session before we end the session at 6:30. Next slide, please. Before we start, I would like to mention that the entire discussion today will be governed by the safe harbor clause, which you see on the slide in front of you and which is now on the screen. And we will now start with the sessions. Next slide, please. The steel industry, as you know, is going through several structural changes as multiple global trends play out together. I know many of you are keen to understand our long-term plans and how we plan to leverage the opportunities, which the Indian market offers. And to walk you through this, I will request Mr. T.V. Narendran, CEO and Managing Director, Tata Steel, to share his thoughts. Thank you, and over to you, Naren.

Thanks. Good morning, good afternoon and good evening, depending on where you're joining in. Thank you for joining us today. Can we move on to the next slide, please. Yes. So I'll take you through a few slides, which we'll try to articulate to may be thinking of the next few years and what are our priorities and what is it that we are pursuing. So fundamentally, obviously, Tata Steel is focused on creating sustainable value and our starting point is, of course, our employees, whether it's the health of our employees or the safety of employees, we aspire to be a 0 harm company. We are already a leader on safety in our industry, but we still have some distance to go before we can call ourselves a zero harm company. Our work during the pandemic has also demonstrated our commitment to our employees, and the multiple practices that we brought in place to deal with the challenges of the last 1 year make sure that our employees were reassured about them being the primary focus. As far as India is concerned, we want to be a leader. For us, leadership doesn't mean just size. Leadership means being the leader in the more discerning segments, in the tougher parts of the market, which value quality, value service, value technology. It also means leveraging the equity that we built with the B2C customers that we have. It also means leveraging the distribution network and the physical distribution network that we've built. So in multiple ways, we are looking at leadership in India. And why India? Because India has always been one of our most profitable businesses. The India business has led global steel industry as far as the financials are concerned. And the India business is one of the most cost producers of steel in the world. So it's well positioned in a cyclical industry. And because of our equity in the marketplace, because of our relationships and our product mix, we also try to get the best revenues available in the marketplace. Financial -- robust financial health. A lot of work has been done over the last few years. We've demonstrated last year that we are focused on deleveraging even if it means like we did last year, putting a pause on some of our growth. I think the deleveraging is very important as far as our plans are concerned. We've demonstrated that over the last few years, and we'll continue to demonstrate that going forward. Sustainability is, again, core to our business. We are conscious that we are in a hard-to-abate sector. We are already a leader in the geographies that we are in, whether it's in Europe or in India, we plan to continue to be the leader and keep raising the bar, and you will see some of those ambitions in the subsequent slides. And as we do all this, we also want to make sure that as an organization, we are culturally future-ready. Some of what I've described so far and what I'll describe in the future will tell you how structurally we are becoming future ready. But I think being culturally future-ready, being relevant, to attract talent, being one of the best places to work in, in the manufacturing industry in India, these are all ambitions that we have for the India business. And of course, in Europe, we continue to leverage equity that we already have. So the Tata Steel assets have been recognized as global lighthouses by the World Economic Forum because of the way we've adopted and adapted to digital technologies. And we are also embedding a culture which is driven by agility, innovation and technology and digital leadership, and I'll talk a bit more about that as we go through the subsequent slides. Next slide, please. So I'll start talking through the next slide, while we get the next slide on the screen. So the next slide talks about the global steel industry witnessing structural changes. I think there are 3 or 4 things which are happening globally, which is, in some sense, impacting the way the industry is operating or the way companies like us are operating. First and foremost, post-pandemic, pretty much most governments, which can afford to spend on infrastructure, are spending on infrastructure, whether it's the U.S., whether it's Europe, whether it's China, whether it's India, I think multiple governments have announced big infrastructure spends, which is good for the steel industry because infrastructure spend is always steel intensive. So that's one thing and which is also reflected in growing capacity utilization that you can see in the graph. The second point is decarbonization. It's manifesting itself in different ways in different geographies. In China, they have set a net 0 goal for 2060. And as they develop the road map for that goal, they're also realizing that it makes little sense to import iron ore and coal and leave a carbon footprint behind to export steel. So China is discouraging exports of steel. China is driving its industry to more carbon efficiency, which also means that the cost of producing steel in China going up. The third aspect, which is impacting cost structures in China, the geopolitical issues. China is buying coal from Mongolia and Russia at not less than $300 a tonne. Australian coals are much cheaper and available to the other coal importing countries like India. So this is also adding to the cost structure in China and hence, China has less motivation to sell at low prices as they used to a few years back. So we've seen China exports drop. China being more disciplined on pricing. And other countries like Japan, for instance, have also decided that they don't want to be exporting so much steel. And then you have the carbon cost of producing steel in Europe, which adds to the cost structures in Europe and make sure that European producers are also selling taking into consideration the different cost structure than they've had a few years back. In India, of course, the demand continues to be strong and will continue, I mean apart from the blip that we had last month or last year. But I think fundamentally, with the focus on infrastructure-led growth, investment-led growth as opposed to traditional consumption-led growth in India, we're also expecting steel demand in India to be quite strong. So because of these reasons, we believe that the decade ahead will be better than the last decade. If you look at 2000 to 2010, it was driven more by the China growth story. Commodity prices were linked to that. 2010 to 2020 was driven more by China slowing down a bit and exporting a lot of extra production that they had. But we believe the next decade, we'll see more discipline in the global markets because fewer people will be exporting steel at low prices and more and more countries will be consuming more steel because of the focus on infrastructure and that will bring a better balance overall in the steel industry as far as global trade is concerned and demand and supply is concerned. Can I move on to the next slide? There are other obvious mega trends, which we are leveraging. Urbanization is again good for steel industry. Steel intensity of cities are much higher than steel intensity in the country side. Even if you look at India, the steel consumption in rural India is 10% of the steel consumption in urban India. So urbanization is good for the steel industry. Shifting economic power in terms of India, China, Southeast Asia and maybe sometime later Africa or some countries in Africa at least growing means the steel intensity or the steel consumption is going to shift. The central gravity of consumption has already shifted to the east and will continue to stay here. And the Asia Pacific region, particularly South Asia, for instance, will continue to account for a greater share of steel consumption. Technology is going to be a big differentiator, a great opportunity, a big disruptor. We are a process industry. We've traditionally captured a fraction of the information we generate, and we traditionally used a fraction of the information that we capture. And as Tata Steel has been on this journey on Industry 4.0. As I said, we've been recognized as a lighthouse by the World Economic Forum, the only steel company in the world to have 3 sites called as lighthouses. We see that there's a huge amount of value that we can derive out of embedding technologies. It's not just about embedding technologies and processes, but rethinking processes, leveraging the technologies that are available. Demographic change. Again, a younger population in our home market, like in India, is also a great opportunity for us, not only from a talent point of view, but also to let consumption-led growth. And climate change is both a challenge and an opportunity. It's going to reshape the industry in many ways, and I think we are well positioned to make this transition. It's going to be complex. But I think we have the operating discipline as well as the track record to make sure that we continue on this journey and continue to be a leader in this journey. Next slide, please. So now I'll get into a little bit more detail on some of the points that I made about the India business. As I said, the growth in India is both through organic and inorganic growth. Even in the last decade, you saw us grow organically in Kalinganagar. We are one of the few steel companies who've been able to start a new greenfield site in at least in the last few decades. And we are well poised now to capitalize on the growth opportunities in India. We have 3 active sites between Kalinganagar, Jamshedpur and Angul. And between these 3 sites, we can grow to 40 million tonnes if we have the appetite and the balance sheet and the demand to support that. So let's say, 10 years back, Tata Steel in India was limited because we were limited to 1 site in Jamshedpur. We could only grow sequentially. Whereas, now we have an option to grow parallelly if we choose to. We continue to be a global cost leader. Of course, having our own iron ore helps. That was a strategic choice we made, and we've continued to obviously leverage that over the last few years. And we will -- we believe we will be very astute in bidding for the mines, which are going to come up over the next 10 years. Our existing mines available with us until 2030. Between now and then, we will be very careful about what we bid for. And we are quite confident that we will be able to continue to get raw materials at competitive prices, even if it's higher than what it is today. In addition to that, we are obviously driving greater efficiency in use of raw materials. We are pretty much a benchmark on many of the metrices, whether it's on coal consumption or other conversion efficiencies. And in addition, as I'll talk to you later, we are also developing a business based out of recycling. So that our dependence on iron ore becomes less, and we are more prepared for a circular economy going forward. And if I look at some of the adjacent businesses that we are getting into. As we continue to strengthen our cost position and our revenue by focus on discerning segments and thereby improve the spread that we realize, we are also investing in businesses which are less dependent on the steel cycle, the Services & Solutions business, the New Materials business, mining where we have a 100-year experience and we have 1 of the biggest mining companies in India is also something that we want to leverage. So these are -- if you look at the Services & Solutions and New Materials business, I'll again talk about that a bit later, these are businesses which are not dependent on the steel price. And they are less vulnerable to steel cycles, and we want to grow revenues in some of these businesses to buffer up our exposure to the steel business. In terms of sustainability, I'll talk about it a bit later again. We want to be the benchmark in CO2 emissions and in water consumption. And we are also building business models on the circular economy, as the opportunities at the circular economy throws up for us. We aspire to be the best place for manufacturing in India. We have recently been recognized as one of the 10 best places to work in employer branch by Randstad. And here we are the only manufacturing company in the top 10. All the others are pretty much tech companies. So we are proud that we are competing across industries and not just with our industry. Like I said, we've already been recognized as a digital leader, but there's a lot more that we want to continue to do. Technology leadership is something we are working on. There are technology leadership areas that we've identified, whether it's on coatings, whether it is on hydrogen, whether it is on use of low-quality raw material and making high-quality steel. I think a number of areas, we are doing a lot of work on, I'll talk a little bit more about that slightly later, and also fostering a culture which is future ready and can attract the best of young talent. Next slide, please. So this is a little bit more on to the numbers. We are currently at 19.6. I think what I want to emphasize here is our production is pretty close to our capacity. I think oftentimes, We keep talking about capacity. I think what is more important is what we produce and what we sell. And we are pretty close to what we have as capacity. And if I look at 2025, we will have the Kalinganagar project completed by then, and we hope to have about 1 million tonnes of electric arc furnace based steel making setup. And our whole approach on circularity and recycling is to set up recycling units in Northwest and Southern India, where there is scrap available. Looking at units which can be created in 50 to 100 acres, you don't need much land. Already in the North, our recycling facility is world class. It's an outsourced model, so it's not so capital intensive. And we optimize on freight because you bring in scrap from within 100 kilometers, convert it. Just now we are operating a scrap recycling facility. But tomorrow, you could set up a steel melt shop next to it and sell steel within 100, 200, 300-kilometer range. So you could have multiple smaller units set up in parts of the country where there is scrap being generated and steel being consumed, and thereby optimize not only on the carbon footprint, but also in other costs like freight. Between FY '25 and '30, both organic and inorganic growth opportunities will be pursued. Organic, like I said, even if we just choose to do organic, we can go to 40 based on available land at Kalinganagar, Angul and Jamshedpur. But obviously, we'll be participating in inorganic growth opportunities that will come up, particularly in Long Products. And we will also be looking at setting up more EAF-based units in Northwest and Southern India. The other important part of this journey is that the India business will continue to increase its share in the overall portfolio. This is -- makes Tata Steel structurally stronger because this is obviously one of the most profitable businesses in the industry in the world, the India Steel business for us, and that will account for by 2030, 75% of our revenues, assuming the rest of the footprint is where it is. In Europe and in Southeast Asia, for now, the focus will be on continuing to drive efficiencies, making them self-sustaining and self-sufficient and be able to stand on their own. Between Long Products and Flat Products, we are skewed more towards Flat Products now. We will continue to grow in Flat Products to support the growth in automobile and oil and gas and other user segments. But we will also build a portfolio in Long Products, as we've shown on this slide. Next slide, please. So I think when we talk of leadership, the point I want to make is our market share in this earnings segment should be higher than our overall market share. So even if we are 20% of India and 20 million and 100 million market, we have 58% in auto. And I think that is important to us. So the high-end segments are what we focus on. Our market share in the chosen segments, which are the more discerning segments, should certainly be higher than our overall market share, and that's how we want to make sure that we drive leadership. Secondly, we continue to find different ways to connect with our customers. I think in many ways, Tata Steel is pioneered servicing the B2C markets, pioneered servicing the SME segment with our offerings over the last 20 years. We have a INR 12,000 crores strong B2C business. Now we are, say, using digital technologies to connect with customers. Aashiyana has seen 130% year-on-year growth. We're doing INR 720 crores, which is more than $100 million of business. Last year, it was half of that the year before. And this year, it's expected to be double of that. So this is business happening online. We are opening up new customers. There are people sitting overseas and ordering steel for delivery in different parts of India for somebody building a home, maybe they're relatives, and they're paying online. We are tying up with banks. So it's a very different way of doing business. And these are the individual house builders who buy 2, 3, 4 tonnes of steel, and they prefer to pay us a premium for convenience for the trust that they have in the brand. Compass, DigECA, Sampoorna, these are all other platforms that we are creating to connect with B2B customers with the ECA customers. Basically, the point is once you deal with Tata Steel, I mean you find it so convenient, so easy that apart from the steel that you are buying and you are buying from us because of the experience that you get. We are also working with the Tata Group, the larger Tata Group on driving synergies. Basera is a platform where the Tata Steels connect with the individual house builders are being leveraged by other Tata Group companies like Voltas or even Tata AIA. If you want to sell anything to somebody building a house, we have access to them. We have a relationship with them. And the rest of the Tata Group is trying to see how to leverage that relationship to sell other products to them. And similarly, Nexarc is a platform being created at the group level to deal with the SME customers. And again, the Tata Steel connect with the SME customers as well as Tata Steel's vendor base of SMEs are being integrated with the group initiatives. So there are multiple areas we are working with the group also to connect with customers and suppliers in very different ways. And it's becoming more and more technology-intensive and knowledge intensive is concerned. We are looking at different steels for -- looking at the future of mobility in a very integrated way. As I will talk to you later, and you will hear later, we're not limiting ourselves to steel. We are also looking at other composite materials and various other materials that we can supply to customers or segments with whom we already have a relationship. We're also looking at new technologies, ready-to-paint technology, which is so critical for many of our customers. We have also got into graphene. We've set up a factory for graphene. Again, graphene coated rebars, graphene-doped material. We are creating multiple brands around that. These are knowledge intensive businesses, which we are nurturing and developing and which will help us differentiate ourselves. Next slide, please. So if you -- continuous improvement has been in the culture of Tata Steel for the last 30 years. It continues. We continue to drive different efficiencies. And this is just a snapshot of what we've got -- if you -- even if those of you who have been tracking us for the last few years, just look at the coke rates of Tata Steel 5, 6 years back and look at it today. And you will see that we have saved over 100 kilos as far as coke consumption is concerned. Oftentimes in our reports, it's seen as raw material advantage, but it is not raw material advantage because when you use less raw material, that translates into lower raw material input. So oftentimes, it assumed that lower raw material input is because we have raw materials available cheap. But even if you buy at market price and make more efficient use of it, that reflects in lower raw material input. So some of this is sometimes hidden in the report, but we track it extremely closely, and that's why we shared with you the coke rates and things like that, which will tell you how we are improving year-on-year. Tata Steel Europe has done a lot of good work over the last many years in a very challenging environment. We have obviously tried to simplify the business. We continued to do that. The whole objective is to make it cash positive -- EBITDA positive and cash positive and be able to stand on its own. And I think we are pretty much there. Of course, this year, we held by steel prices. But I think overall, a lot of good work has been done over the years and our efforts now to separate the U.K. and the Netherlands business will also help us drive greater focus and greater efficiencies across these footprints. Next slide, please. Yes, a little bit more on the Services & Solutions. Some of you are familiar with our Doors business, our Nest-in business. These are businesses which take a long time to curate. Today, we are doing between the 2 businesses about INR 20 crores, INR 25 crores a month. And I think these businesses have been growing at pretty much 100%. And that's to me the opportunity for us. Getting started obviously takes a bit more time. But I think it's a big market. The doors and windows market, the addressable market is INR 11,000 crores. Nest-in is a huge opportunity even in the last year. Because of the pandemic, we built so many structures and we continue to increase our offerings. What you see there is a factory of a graphite plant that we built in Jamshedpur, which was inaugurated a couple of months back. We've started not graphite -- graphene, and we've started using the graphene that we produced graphene solutions, graphene liquids, working with many people, whether it's in embedding doping graphene, using graphene as coating. Dr. Debashish will talk about it a bit more later. Mining is something people know us less for, but we have 100 years of experience in mining in India. We are one of the largest miners in India doing about 30 million, 35 million tonnes now. And we do an open cast underground. We know how to do coal, chrome ore, iron ore, dolomite. So I think manganese. So we have a lot of experience in mining, and that's why Tata Steel Mining was created to leverage that experience that we have, participated in the opening up of the sector, look at opportunities particularly in Jharkand and Orissa, where we have very strong equity with the local communities and then develop these businesses. So this is going to be another area for us to leverage our existing knowledge. Next slide, please. So on sustainability, more specifically the goals that we are chasing. These are ambitious goals. We are already the benchmark in India as far as the carbon -- CO2 is concerned, the Jamshedpur plant. But we want to go below 2 by 2025 and below 1.8 by 2030. Tata Steel Europe also has its goals. Tata Steel Europe, the IJmuiden plant is one of the most efficient carbon -- top 5 in the world. And again, there, we are -- aggressive goals to reduce in line with the national commitments. Even on water, we are pretty much a benchmark, but we've set ourselves aggressive goals. As I said, circular economy is a great opportunity. And we are -- we have the experience in recycling businesses. We've been running recycling facilities in Singapore. NatSteel has been running it for 50 years. We've been running it for the last 15 years. We are also a big user of scrap in Thailand. So we are leveraging that knowledge and experience to build the recycling business in India. And as I said, the first facility is already up and running in Rohtak. And biodiversity is, again, an area for us to focus on given our mining footprint. And again, our mines, our iron ore mines are seen as a benchmark for sustainable mining in India, and we'll continue to do the good work there. We will also work with our supply chain. We are part of responsible steel. We are part of many other global initiatives and are recognized by the World Steel Association as one of the leaders in sustainability. Next slide, please. So on technology and digital. Technology, again, we've identified technology leadership areas to work on. There are 40-plus projects, some of them leveraging external ecosystems, leveraging start-ups, leveraging alliances that we have with academic institutions in India and overseas, research institutions in India and overseas. We have also started to initiate to monetize in-house IP. We are starting Tata Steel Industrial Consulting, which is more opportunity for us to generate revenues, leveraging internal capabilities and knowledge. We're building a lot of -- doing a lot of work on innovation. Within the Tata Group, we are -- over the last 3 years, we've been the biggest winner of innovation awards. And even in terms of patents, last year alone we had more than 100 patents. And over the last 5 years, 45% of the patents that Tata Steel has got -- has been got in the last 5 years. So there's a lot of progress happening in this. We have a lot of young and highly passionate talent working on multiple areas. In terms of digital, like I said, our investments in digital technology over the last 3, 4 years made us -- helped us transition very easily and smoothly to work from home. We are investing more and more in remote operations so that -- one of the challenges we faced is to attract good quality talent to some of our remote locations. But using technology, we can now run many of these remote locations without physically be sitting there all the time. So I think there are a lot of opportunities there for us as well. And like I said, we've got a lot of these improvements without using all these technologies, the improvements that we can get by using these technologies also is a tremendous opportunity. So connected workforce, connected processes, connected assets and a lot of great work is being done in this area. Next slide, please. And being culturally future-ready, this to me is always the most challenging part. Preserving parts of our culture that we are proud of, which we need to have, which are relevant for the future, while at the same time, embedding elements of culture, which are very important for the future. Tata Steel has always been an organization which is strong on continuous improvement. We want to have more and more breakthrough and innovation in the organization. We are doing a lot of work on that. Agility is something, I know many organizations are working on it. We've already done a lot of work on it. The pandemic also was a test case for us. And in terms of productivity, we continue to chase the benchmarks. And basically, we are looking at how can we leverage good practices from across industry, embed them in Tata Steel and be able to attract and retain the best of talent who wants to work in manufacturing industry. And I think digital and analytics also helps us attract and retain good quality talent. Next slide, please. So this is my final slide. So if you look at Tata Steel for the future, firstly, strong noncyclical free cash flow is driving best-in-class valuation. And I think as the India business grows stronger and stronger, we will be -- we are confident we'll be able to support our growth without having to take on more debt in the balance sheet. Secondly, we are recognized as a technology and innovation leaders by customers, peers, employees, investors, suppliers, all stakeholders. And I think that's something we aspire to do. Sustainable practices. We've always been seen as a responsible corporate citizen. Many dimensions of sustainable practices have been embedded in the way we run our businesses over the last 100 years. But I think the definition of sustainable practices keeps changing, we want to be -- we want to continue to be a leader there. A customer-obsessed organization, both B2C, B2 -- SMEs, what we call ECAs, different routes to market, different ways of order generation, different ways of order fulfillment, and I think we want to know our customers and markets better than anybody else. I think we've been doing that for some time. And we've been very innovative in some of the work that we've done in the marketplace, and we'll continue to do that, create the cultures and values that are relevant for the new generation and be a global benchmark on corporate citizenship, work with the communities. That also gives us the license to operate, particularly since we operate in some of the poorest parts of the country. So with that, I end my presentation. I'm available later for the Q&A. Thank you very much. Over to you, Samita.

Yes. Thank you, Naren. That was a lot of information and investors and analysts since who are absorbing it. I can see a lot of questions coming in, which we will take in the Q&A session. If I can have the next slide, please. I think 1 question which a lot of people have on is how do we finance these growth plans? And what will it do to our balance sheet? I will now request Mr. Koushik Chatterjee, Executive Director and CFO, Tata Steel, to walk you through our financial strategy. Over to you, Koushik.

Thank you, Samita, and good morning, good afternoon, good evening to all of you. I hope you and your families are safe and well. I now propose to spend the next 30 minutes speaking about the financial strategy of Tata Steel, both in terms of where we are and how it will underpin the strategic road map to 2030. If I can move to the next slide, please. So to start with, I would like to recap certain key aspects of our financial performance of 2021, which you are already aware. Not only did we bounce back strongly from the disruptions of the Q1 and Q2 of last financial year to record best-ever deliveries, we also recorded our highest ever EBITDA in the last decade at about INR 31,000 crores, highest ever consolidated EBITDA margin of 20%, highest ever EBITDA of Indian operations of nearly INR 29,000 crores. We maintained a very disciplined approach last year to working capital management and our volume approach to cash management. We were able to keep a very low effective tax rate in Tata Steel of only 4% during the previous financial year on the impending merger of Tata Steel BSL. We maintained a prudent approach to capital expenditure, which was less than about INR 7,000 crores in FY '21 given the risks of the subsequent waves of pandemic and focusing on preserving cash flows. These measures meant that we recorded our best ever free cash flow of INR 23,700 crores, and we're able to have a reduction of net debt in excess of INR 29,000 crores, which is almost 28%. The net debt has now been restored to the FY '18 level of INR 75,000 crores despite the Bhushan Steel and the Usha Martin acquisitions for about INR 40,000 crores in the interim period. We have now been able to also record a consolidated gross debt to EBITDA of 2.9 and a net debt-to-EBITDA at investment-grade levels of 2.5x. We have also reverted to a consolidated net debt to equity, which has been a long-term position of 1:1. If you can go to the next slide. I would now like to talk to you through the building blocks and pillars of our financial strategy. I'll summarize these before returning to each of them in more detail. The first one is obviously the balance sheet management. We continue to deleverage and derisk beyond the levels achieved in financial year '21. This will be accompanied by a reduction in interest loss, which along with the continuing focus on the cash volume and working capital, we have cash for further investments. We are prioritizing our liquidity requirements to maintain the sudden disruptions and enhancement of credit rating metrices before additional large investments. The second one is on capital allocation. We will be prioritizing critical CapEx schemes, high return projects and increasing our share on the value-added products and solution related CapEx. We are focusing on simplifying and increasing scale and also in the other subsidiary and associated businesses. The third one is the operational excellence. Naren talked about it and for a little bit detail, which is focused around giving us sector-leading returns. Tata Steel has -- actually had a long history of more than 2 decades of continuous improvement, which has been successfully now rolled to TSBSL and to TSLP after their acquisitions. This has been a core part of our operating philosophy, a continuing focus on reduction of overheads and fixed costs, and keeping the conversion costs under control. We have -- these programs are very structured programs across all our businesses to achieve this with defined targets, time lines and measurements. And in a way, these operational excellence foundation has supported the integration of our acquisitions, which has now become an effective playbook for the future. If I move on to the next one. I would now like to deal with the specifics of some of each of these pillars. Let's start again with the balance sheet management. As I said, we successfully reduced debt by INR 29,000 crores, including offshore repayments of about GBP 1 billion -- $1 billion. We continue to further deleverage and make our balance sheet stronger in order to position the company for future growth. Within this, we will be prioritizing our offshore debts. In the June quarter also, we have made some material repayments in the Singapore and the European balance sheets. We have not identified any specific number as the debt target, and we will take a call sometime in the future. But for the next 2 to 3 years, we intend to prioritize at least about $1 billion of repayment in each year, prior to the allocation of surpluses towards growth. Of course, if there are acquisition opportunities, we will revisit that level depending on the size of the opportunity. We plan to significantly reduce the interest cost year-on-year. We reduced it by about INR 600 crores in FY '21, and you will see more reduction during the current year. During FY '21, we were presented with the opportunity to exercise the call option on the residual amount of the partly paid shares, which yielded us something around INR 3,000 crores. This actually resolved a critical issue, which was creating also an overhang on the share prices. We have no current plan for additional equity raising at this point of time given the near-term view of the cash flows and the capital allocation in progress. I will return to that in a minute. At the beginning of financial year 2021, post the outbreak of the pandemic, rating agencies had downgraded Tata Steel given the leverage, perceived the impact of the pandemic and the uncertainty on cash flows. However, during FY '21, S&P moved their outlook to stable, and then April '21 upgraded the rating by 1 notch to BB-. Moody's changed their outlook from negative to stable. In FY '21, our volume-like approach on cash management and disciplined day-to-day management released about INR 10,000 crores of working capital. Despite the higher prices and finished goods this year, our endeavor is to ensure that we continue to run the working capital levels tight. Additionally, as I would explain in the next slide, the capital expenditure is likely to be about 40% to 50% higher compared to last year. And finally, we will be paying taxes close to the marginal tax rate in the India business this year, which all have to be fed into the cash flow numbers for the year. If we go to the next slide, let me walk you through the capital allocation strategy. In order to set some context, I want to also speak about our capital spend over the last 5 years. Over this period, the vast majority of the spend has been on growth in India. This includes also about INR 40,000 crores on acquisitions of Tata Steel BSL and Usha Martin at an opportune time in the cycle, which has now helped us to take advantage of the market upturn following a very effective integration process run by the management team. On the other hand, in Europe, the majority of the capital spend has been on sustainance, improvement, environment and safety, which are very, very critical to run the business and the operations smoothly. We have also spent some CapEx in Europe on the downstream capabilities, largely on the margin enhancement through our STAR program, and that is going to give us results in the future. Today, we are well positioned with a stronger balance sheet, improved cash flows, enhanced steelmaking capacity in India. And we have identified some key priorities, which Naren has already spoken earlier. First, being maintaining market share, which is to complete the Kalinganagar expansion on priority; the margin enhancement, which is the prioritization on our pellet plant, our cold rolling mill complex, and our raw material expansion projects. The last is important to ensure the availability of captive ore as we grow in India in the future. And finally, the value addition and the margin improvement projects, which we are investing essentially on the downstream whether it's the packaging, the tubes and wires. We are also positioned to enhance the focus on our new and allied businesses and is apparent. We have so far only committed seed investments here. Naren talked about the Services & Solutions business and the graphene and composites. While we will continue to follow an asset-light model in relation to these, we have an aggressive plan to grow, doubling our volumes and revenues over the next few years. Also, with regard to our ferrochrome business and our strategic raw materials play, our minerals play, we expect a reasonable spend on expansion in the next couple of years. We are actively looking and expanding in the electric arc based steelmaking business on the back of our new recycling business, which we have set up in North of India. Overall, we expect that the capital expenditure on CapEx to be about INR 10,000 crores per annum over the next 5 years. It could go plus/minus 10% or 15% depending on the pace at which the project gets completed. Of course, I'm not factoring in also acquisitions, which may or may not come in the future. Whilst the cyclicality in the steel industry is inherent, our investment strategy is based on at least a 12% carbon-adjusted IRR. I will revisit the strategy around internal carbon pricing very shortly. But this is fundamentally important to ensure that all our capital allocation are done in a value-accretive manner. If I move to the next slide, the focus on the portfolio strategy has been to reduce the valuation overhang and improve the outcome for our shareholders. This has been borne out of the fact by the Tata Sponge's transformation into Tata Steel Long Products, and that of Tata Metaliks from a virgin iron ore -- iron producer to a key player in the Ductile Iron Pipe segment, which is also now expanding and doubling its capacity. We have made a decision to consolidate business in 4 clusters and business adjacencies. So Long Products, which is already almost done. Downstream business, which is work in progress. Mining is also being carved out. And utilities and infrastructure, which is getting consolidated. The objective is to implement faster decision-making, reduce compliance load and cost reduce, operating costs through network optimization, common procurement, shared services, improved customer focus and use of capital in a more optimal manner. In Tata Steel, we have successfully implemented also an outsourced shared service center for commercial finance and transaction processing, and we are extending to these subsidiaries, which will ensure scale of operations. We are also planning out to roll out the same in other support functions like HR procurement. And this model moving forward will work for the new clusters and new businesses as well. In financial year '22, we are focused on completing the merger of Tata Steel BSL with Tata Steel. We are currently awaiting the final hearings by the NCLT, after which the scheme will likely get closed and sanctioned. This year, we also intend to complete the merger of Tata Metaliks with TSLP and consolidate the downstream cluster also. As Naren mentioned, and I talked about it a little while back, we have commissioned the 0.5 million tonnes scrap recycling business this year on an asset-light basis. We intend to vertically integrate by building in the electric arc-based steel manufacturing in the future. This is certainly going to be a focus area over the next couple of years. Our ability to put this in place is linked to the scrap sourcing as well as the power supply at the right prices, and that's when the location of the facilities will be based on. Naren talked about the 2030 target of 40 million tonnes. This will need additional logistics capability, especially in terms of port capacity in the Eastern Seaboard. We are working with partners to bring in a new port in Orissa and hope to complete that as we build our steel capacities. During the course of the last year, we have decided to separate the U.K. and Netherlands business from each other, given -- and follow their different strategic paths. We are delayering the management, unwinding certain overhead structures and costs, and enhancing local accountability to drive business. The business will continue to have the benefit of the Tata Steel ecosystem and a commonly determined strategy and coordination of sales between common customers. The design for the separation has been completed and the local consultation process is getting underway. We plan to complete the separation maybe in the next 4 months or 5 months. An area which has of less financial impact, but nonetheless important, from a management viewpoint, is the simplification of the holding structure of our businesses. We have either merged or placed in liquidation or be registered around 100 subsidiary companies over the last 2 years, a majority of them in Europe. We believe this journey will reduce the cost and complexity of the business and give us more management bandwidth to look at more important things. This will continue over the following years, though in a smaller scale, even though we grow in terms of capacity and revenues over the next 5 years. If I move to the next slide on operational excellence. Shikhar 25 is a focused EBITDA improvement program, which promotes efficiency, sustenance and right behaviors across various functions in the company. It is centrally overseen, target-driven, continuously monitored, robust and audited. Shikhar teams constantly question various aspects of fixed cost, operating KPIs and also seek to drive productivity and synergy ideas as soon as they are identified. Ideas are encouraged. Their development into project is facilitated and the success rates are tracked very, very deeply. During the year under review, the company through its Shikhar program achieved performance improvement of about INR 3,200-odd crores in FY '21. Cumulative over 5 years, we have realized about INR 18,000 crores through this program. We intend to reduce the overhead costs further and at least by 10% in the coming 5 years in the India business. Similar to Shikhar in FY '20, we had launched the transformation program to strengthen our European business with a target to make it self-sufficient in terms of cash flows and profitability. The overall transformation program is aimed at about delivering about GBP 700 million of benefit over a few years. We have realized already about GBP 400 million of benefits to this program and are targeting further improvements in the next financial year. This program actually focuses on improving the product mix, realizing efficiency gains by optimizing the production process, lowering employee costs and reducing the procurement costs. If I can turn to the next slide. This is an important one and an emerging one. Tata Steel recognizes fully the challenges posed by climate change and the need to have a transition plan to low carbon manufacturing with specific milestones. Given the enormity of the climate change challenges, Tata Steel's financial strategy will incorporate best-in-class practices to facilitate this transition. We intend to use carbon-based return calculations for all our investments across businesses. I mentioned in an earlier slide that a threshold return of 12% on carbon adjusted IRR is the norm for all investment consideration in the company. Tata Steel transitioned from a compliance-based reporting to a governance-based reporting and published the country's first integrated report in 2016, which received the Best Integrated Report Award by many agencies who reviewed it. It has been actively participating in several ESG assessments, like the Dow Jones Sustainability Index in the last 9 years, the Carbon Disclosure project for the last 15 years. It is also one of the early participants in the development of the TCFD framework, and we intend to actually transition into a reporting standard in accordance with the frameworks once finalized. In FY '22, we decided to work on the implementation of an SDG measurement framework and measurement of benchmark set up by the external agencies or in-quarter principles. We understand the need of many of our investors in this area, and we look to actively engage with external agencies to secure robust ESG ratings. Finally, we are giving very serious thought in putting in place a sustainable financing framework to underpin our future fundraising as we start to green our balance sheet in the future as we grow. In the next slide, I would like to emphasize some key messages on how we see the financial performance of FY '22 and our target metrices for the medium term. I spoke earlier about our continuing engagement with rating agencies and an improvement in the ratings being a priority for a year -- for this year. I also mentioned that while we may not have the same sort of proportion of EBITDA to cash flow ratio as we did last year, we do intend to continue to retire debt and well exceed our $1 billion annual target very shortly. We also intend to prioritize the repayment of the less efficient offshore debt and make the debt profile a lot more sustainable in the future. The earnings outlook for FY '22 remains strong. We have reasonable visibility for Q2 and early Q3. And I'm sure that if there are no further disruptions, we'll continue our strong performance in the next couple of quarters. I'm aware that several people have queried whether we have long-term net debt target. I wish to address that by saying that we look at our earnings profile on an average through the cycle, ideally, on an average basis, we would like to have a net debt-to-EBITDA of approximately 2x, also because we are a growing company, and as Naren mentioned, it's a company which will need capital for its growth aspirations. We believe that this may take another year or so to achieve based on the increased level of investments in the India business. I'm also aware that several investors are curious as to what is our dividend policy. Ideally, we would like to continue our robust dividend payout as we have seen this year. And hopefully, our earnings will support that principle going forward. Finally, in the last slide, I would like to just sum up. These are our financial goals for the long term. Leverage management remains as a nice priority. Our capital allocation is focused on growth and derisking with additional capacity. We certainly are focusing on industry benchmark return profile. We have started to work on greening our balance sheet because this will become a very important part as we move towards transition to a lower carbon economy and target financial metrices in line with the investment grading rating profile. With that, thank you for listening into me. Stay safe and well, and return -- I would like to return to Samita.

Yes. Thank you, Koushik. And that was -- I think, the pathway to investment-grade metrices has been very clearly specified, and I know a lot of investors will take a lot of comfort from that. We will now move into the Q&A session, and I will move quite a few questions on the chat. So I will take a few of them before -- if we have time, we will shift to audio questions as well.

So the first question, I think we have from many people is how will we prioritize between organic and inorganic growth? A lot of advice that we should focus on organic growth, just because inorganic growth is harder to time and can be pricier. So a lot of advice for us that we should focus on organic growth. But I think the general question is, how will we prioritize between the various opportunities, particularly longs and flats as well as organic and inorganic?

Yes. Thanks, Samita. So basically, first and foremost, we will continue to grow to not only maintain our overall market share, but also to keep growing our market share in the discerning segments. So organic growth is certainly the way forward for us for Flat Products because we have Kalinganagar available. You can grow to 16 million tonnes. There is 3,500 acres of land. Just to give you a sense, Jamshedpur is 1,700 acres of land, and we're producing 11 million tonnes. Angul is another 1,700, 1,800 acres of land. We're producing 5 million tonnes. So we have opportunities for organic growth. We prefer to grow in Flat Products in both Kalinganagar and Angul because it's easier to run a steel plant with either Flat Products or Long Products rather than mix up both from an operating philosophy point of view. In Jamshedpur, if we have to grow beyond 11, we have an opportunity to grow in Long Products as well. We also have organic growth opportunities through the steel recycling group, which we articulated. Inorganic opportunities, if at all, we will look at Long Products. We are currently not looking at Flat Products for inorganic growth. And in those Long Products, opportunities are there's Neelachal and at some point in time, RINL. We'll take a call. I think we will be careful about what we bid for because like I said, we have options to grow in other sites as well. So we think the feedback, and organic growth allows us to grow every year and not depend on the opportunities that come our way.

Ms. Shah, may we request you to please unmute your connection.

Yes. Sorry, thank you. The next question is on the scrap recycling business. I think people are very enthused to hear about it. The question is how scalable is this? And is there any target for 2030?

Yes. So the recycling business. So we started with the recycling facility, which should have been up earlier, if not for the pandemic. Actually, we this thought -- we started working on about 3, 4 years back and we set up the first facility in Rohtak with a shredder and a baler. India doesn't have such a facility. It was also set up before the end-of-life vehicle regulation, et cetera, came in. We believe that there's a great opportunity for us to first scale up this recycling business. These are 0.5 million tonne units. Even if you look at setting up a steel plant based on recycling, if you look at a plant in Singapore, NatSteel, it's over 80 acres, you collect 60% of the scrap in Singapore, you melt it, roll it, fabricate it and sell value-added products, right? So typically, these units can be built over 80 to 100 acres. So the requirement of land is not like building a Kalinganagar site or an Angul site. So you can -- 100 acres, you can get quite easily in most states in India, right? Secondly, we obviously want to pick the location carefully because it has to be a location where there is scrap being generated, which means it has to be close to industrial activity. And thirdly, of course, we look at places where we can sell the product, either the scrap or the steel that we produce. So we've already identified locations in Northern India and Western India. Like I said, the first recycling facility set up in Rohtak. We are looking at setting up a steel facility. We have not decided where, but somewhere close by. Multiple states are also interested in inviting us to set up these facilities. It's scalable because again, it doesn't have to happen sequentially. You can start if this -- if you want to scale up, we can start multiple units at the same time. So that's the advantage of this. It will be a bit of a cookie-cutter approach. We will standardize on the equipment. We will standardize on the equipment supplier, so that you don't have to go through the cycle every time starting from scratch. You can place order saying that I'm ordering 1 now, but I'll order a repeat of this every year or every 6 months. So there's a great opportunity to scale. The capital required is not significant. The land required is not significant. Of course, what is important is availability of scrap. What is important is energy source. The cost of energy is an important input in this process. So when we look at different states inviting us to set up facilities, we also look at what are the incentives that we get from the states and what are the power costs in those states. So it's very scalable. And what we said is we need to be chasing anything at a minimum 5 million tonnes and maximum 10 million tonnes by 2030.

Yes. With that there is a question on the downstream portfolio enhancement, which we've talked about. So I think Koushik your slide gave some details. So there are questions around the time line for that.

So I think along with the upstream growth that Naren talked about, it's just not volume, but we also chase value. And the value comes from the fact that our downstream portfolio is very diverse and very valuable. And we are looking at growth in tubes, in wires and in tinplate, as also in other areas like wire rods and in case of solutions, which -- Services & Solutions, which will be the premium -- the premiumization of the revenue, which I'm sure, Peeyush is going to talk more. But our capital allocation philosophy is fundamentally based on an integrated way. And we look at funding these projects in a -- on a system basis because we are, in most cases, provide the substrate for these downstream units. So essentially, our plan is to grow in all of these downstream in tandem with our growth in our upstream.

Okay. Thank you. The next question is on the assets at Netherlands and U.K. Are there any specific targets for overhead and fixed cost reduction at TS U.K. and TS Netherlands?

Yes, we've -- through the transformation program, taken out about EUR 200 million of savings, which includes both fixed cost as well as operational efficiencies. Also, we believe that as we separate the units into Tata Steel Netherlands and Tata Steel U.K., we will have more opportunities to take out a lot of overheads and fixed costs. That process is currently going on. So ultimately, the objective is for these businesses to be able to stand on its own in normal times, not just in times like these when the steel prices are good. At average spreads, we should be able to be not only EBITDA positive but also cash positive. So it's a continuous journey like it is in India. A lot of that has been achieved over the last 10 years in Europe by restructuring, by, in some sense, shrinking the footprint, particularly in the U.K. But going forward, I think, in -- of course, in IJmuiden we have one of the most efficient steel plants in Europe, and Port Talbot is probably the best located steel plant in U.K. So we want to leverage the opportunities in both U.K. and in the continent from sustainable cost positions in both these units.

Okay. Thank you. The next question is in terms of -- is on TSK. Sales in terms of leadership and premium segments, can you talk about the likely change in the product mix with the TSK downstream coming on stream? Also in terms of costs, what are the key aspects component, which we'll see benefits from the pellet plant and the rest of the facilities?

Yes. So basically, what -- TSK expansion is about taking the capacity from 3 million to 8 million, which means adding 1 of the largest blast furnaces in the country or probably the largest blast furnace. So if you look at it from a configuration point of view, at 8 million tonnes, Kalinganagar will have 2 blast furnaces and 1 steel melt shop and 1 hot ship mill, so it's kind of as efficient as it can get. So as we come to that scale, our cost efficiencies will be comparable with the best in the world, both in terms of manpower productivity, labor costs, conversion costs, et cetera. So that's to me one of the big advantages of this expansion. The second one is you'll have the best cold rolling mill in the country coming up there, which would be ready by next year this time. And that will help us with as continues to hearing line, auto gall lines, coating line. So it's got everything that you need, which will take care of the needs of our customers for the next 5, 10 years, at least. The pellet plant is particularly important also because we are today a buyer of pellets, and it helps us leverage the iron ore mines that we have to make pellets that we can use. And having pellets, more pellets available helps us improve the burden in the blast furnaces, helps us bring down the coke rates and again, improve conversion efficiencies. So not only are we going to have greater cost efficiencies because of the fact that you're going to expand to 8 million tonnes, you're also going to have greater cost efficiencies because of the pellet plant and more margin enhancement because of the cold rolling mill. Kalinganagar plant was designed originally for 6 million. So a lot of the costs, infrastructure costs, the utilities were all designed for 6 million, and we're taking it to 8 million. But I say when you operate it at 3 million, you are not fully realizing the benefits of the plant, which has been the story for the last few years. While it's done very well, ramped up very well, but this scaling up from 3 million to 8 million really helps us optimize the configuration.

Okay. Thank you. The next question, I think, is for you, Koushik. So there are a few questions around this, and I'm just going to summarize it. Why is the debt-to-EBITDA target only 2 and not much lower given the strong earnings expected? Is there some large acquisition plan, which is why it is so high? I think -- the people are expecting, I think, higher earnings, and therefore, the target is seen as being very low.

So I think if you noticed in the slide, I have mentioned it is across the cycle. So when we are on the up cycle, we often forget the other side of the story. So -- and at that time, what we are saying is we would continue our secular growth in organic and inorganic to chase the volumes. So in which case, we are saying that up to 2 is a reasonably sustainable and comfortable position of keeping the net debt-to-EBITDA. Of course, in the year that is ahead of us, you might see us given where the market is and our cash flows are, we would be possibly much lower than what that number is. And it doesn't mean that, that is the level at which we get stuck because if there are opportunities of growth, including CapEx opportunities of growth, and if at a point in time the cash flows for a year or 2 years go lower than what we have been getting, say, last year or this year, then we must have the ability to move. And it's linked to the EBITDA mind you. It's not linked to only -- it's not a debt equity number that I've talked about. If it was debt equity number, it is more static. Whereas it's a debt-to-EBITDA number means it is -- it moves along with the cycle and the earnings. So what I'm essentially focusing on is you have to look at across the cycle. I'm not talking about a quarter, 3 quarters or even 1 year. I'm talking across the cycle, which is multiple years. And our endeavor, as I've said, the enterprise focus on balance sheet management is the first one. So if there are opportunities, we'll certainly keep reducing our debt. If required, we will scale up the balance sheet to fund for growth. But you don't need to suspect that there is a large acquisition. If there is a large acquisition, it will be out there. And I don't see, honestly, any large acquisition in front of us. So it is fundamentally saying that it is across the cycle, 2x. If we come to a level where we reduce our debt even more, it will gradually go down. There is no -- I mean there's no doubt about that fact. So we have said that given our large pipeline of CapEx, which we have been slow in the last couple of years because of the market, because of our leverage, we want to ensure that we have sufficient appetite in our balance sheet to fund all the growth that we are talking about, all the details that Naren talked about. And most of it is organic. So therefore, you would need to pace it up with your cash flows.

Okay. That should press that question. The next question is on TSC. So I think the concern here is that the assets of the business in Netherlands as well as U.K. will be affected by high carbon taxes, which will affect it as well as the existing high cost structure. Why is there a rethink in the strategy? And does it not make more sense to actually continue to look at potential buyers themselves?

Yes. So it's not that we did not pursue options in the past, right? But there are -- we are conscious of the fact that in Europe, there is a competition commission, which will have a view, which limits the options that you have, while we fundamentally felt that Europe should have a more consolidated steel industry. Obviously, there are challenges in achieving the goal with or without us, right? Now having said that, even as we were pursuing those options, we were continuing to improve the European business. And we believe we've now reached a stage where on all the spreads, we should be able to run at EBITDA positive, cash positive. So the pressure on us, which was maybe there a few years back is not there, and we can choose the right way forward at the right time, right? That is one thing. Second point is, yes, there is a cost of decarbonization in Europe, but that's not just for Tata Steel. That's for the whole industry. And European governments are conscious of that. Because ultimately, the cost of transition has to be shared between the industry, the governments and the customers because everyone in Europe is going to go through that transition, it's going to incur cost in the transition, and hence, the conversation with the European government is also about carbon modern adjustment mechanisms, how do you make sure that there's a level playing field for industry who's invested. And our case in point is our IJmuiden plant, which is one of the most carbon efficient in the world. Why should it be penalized on carbon costs and you allow steel to come into the country, which is less carbon efficient? So I think this -- the government is conscious of that. The governments are supportive. At a European level and at national levels, they've worked out schemes to help industry transition. Minister in Netherlands has told us we want to decarbonize without deindustrializing. And I think that's a very important statement because we're conscious that there is a cost of transition and that needs -- industry needs to be helped to make the transition. So both in the U.K. and in the Netherlands, there are conversations going on with the government on how they can play a role in this transition. And as you're aware, in Europe, we've already started a carbon premium or a carbon surcharge, whatever you call it, to help us deal with this cost. And customers so far have been willing to pay a premium for a greener product or pay some sort of a premium for the factor in the carbon cost in the price epic.

Okay. The next question is on Services & Solutions. So we are very excited to see this. By when will it be 25% of your revenues in India.

Yes. So when we set this goal, our revenues were not so high. At that time, we didn't have Bhushan, we didn't have Usha Martin. So we've also been growing in revenues as much as we've been growing in Services & Solutions. Secondly, these businesses start from a low base. So while the growth is pretty close to 100% every year, it starts on a low base. So by the time it catches up to 25% by the original, ambition was we should there somewhere in the middle of this decade. It looks -- if you ask me, honestly, it looks more like 10%, 15% by the end of the decade. But having said that, that's on a larger base, of a larger production base of India. What we've grown as per the plan is the downstream businesses, which are 25% to 30% of our revenues. So when we said Services & Solutions, some of them are also part of our downstream businesses. So for us, there's a -- while we are growing the existing businesses, each of which will be more than INR 1,000 crores in the next few years, which is the Doors business, the Nest-in business, in the next 3, 4 years, all of them will be INR 1,000 crores kind of businesses. We also have a pipeline of businesses, innovative ideas. We have a solution, for instance, called Agronest, which is to store onions. And that's being tested out as we speak. So there are multiple products and solutions in the pipeline, which are coming in. Part of it is also focused at increasing the steel consumption in rural India. Like I said, only 10% of the steel consumed -- in India is consumed rural India. Per capita is very low. We see a lot of opportunities for steel as a solution. You're not competing with other steel producers. You're competing with other materials. Like, Pravesh Doors is competing with wooden doors. It's not competing with other steel doors, right? So -- and there are functionalities why a Pravesh Door is popular because in India where you have a termite problem, Pravesh Door doesn't have a termite problem, right? So things like that. So I think it also means organizing an unorganized sector in many of these spaces, whether it's windows, doors, many of these solutions, we are operating in unorganized sectors. It's a bit like what Titan has done to some of those sectors that they are operating in. So sometimes it takes a while. But I think once you get in, you have a differentiated offering and a deep equity in the market, which we can leverage and grow. So that's where the opportunity is for us.

Okay. Thank you. There are 2 questions, more finance related. So one is how is carbon adjusted IRR computed? And secondly, there is a question, which I will just walk you through, which says Europe has been funding India via Singapore. When will there be a hard stock to that? Koushik, would you take that?

Second one is actually reversed. It's -- I think Europe has been funded by India through Singapore.

Funded by -- yes. Yes, I think.

So I think, I can only -- so I can say that as European business is becoming more and more self-sufficient and self sustaining, that's obviously -- for example, last year, we did not have any requirement to fund and Europe found its own ways to do that. One important thing, which is we used to have our global procurement financing arm in Singapore, which is to essentially do the working capital for both India and our European business from a raw material procurement purchase. We have now stopped the financing activity. So Europe is very much in the future going to be within its means of working capital lines and access to capital to itself, and not using the Singapore route as the mechanism. So that activity will stop from -- has already stopped from 1st of July. So I think you don't see at least the Singapore leg going out of the equation as far as working capital is concerned. The whole focus, as Naren mentioned and I had mentioned in my presentation that, it is important for us to be cash neutral and cash positive in Europe. Netherlands is in a better position and has been so for many, many years. Europe -- in U.K., we are undertaking very severe -- very significant transformation program to take out fixed costs. In fact, this year, we would be looking at targeting somewhere around 50 million, 60 million. So these are blocks in which it will grow. And even when it's in a good part of the cycle or not, we will certainly be able to take out these costs. So once that happens and as we are seeing that very clearly, this year also, Europe should actually be in a cash flow positive zone rather than taking any cash flows from support. And I think that's the target that as a management team, all of us, including our colleagues in Europe are working towards. So I think the Singapore leg is certainly stopping from July 1 as far as the raw material financing is concerned. On your point on carbon adjusted IRR, so we have our own internal carbon price. And if we -- when we evaluate a project and if there is an increase in CO2 emission from that project, penalty of equivalent number of the carbon price is applied to it as a negative from the cash flow evaluation and that's when -- that's how the IRR is calculated. If it has a positive impact, it gets a positive bump up because if it is something which helps in the decarbonization journey, then it improves the IRR. So that's how the carbon-adjusted IRR works in principle and that's how we have been putting it across all our projects and putting that filter as a fundamental filter for capital allocation.

Yes. Thank you. The next question is on the U.K. Netherlands demerger. What are the benefits of doing so? And can you enumerate the cost savings from consolidation of over 100 subsidiaries?

Koushik?

Yes. So I think -- so first of all, we're not demerging. We are -- these 2 are separate legal entities. Tata Steel Netherlands, a separate legal entity, Tata Steel U.K. is a separate legal entity. All that we are doing is to reduce the impact of the corporate of Tata Steel Europe. And as we have Kalinganagar in India, Jamshedpur in India, Angul in India, we run them as sites. Our intention is to run these 2 units as sites. So it is -- it has very little or minimal corporate requirements only to comply with the legal requirements of the local geographies. Otherwise, it is run like sites. And we focus is like an SBU within a company. That itself has helped in taking out and as we are progressing, taking out a significant amount of the overhead costs, especially at the delayering of the management, and much more sharper orientation and oversight as far as the performance is concerned. So we will have a benefit, which is in overhead costs, taking out fixed cost, decorporatizing effectively the 2 businesses and run it more lean and mean in the future.

Okay. Thank you. We have a question which says, can you detail the road map to carbon intensity, technology and process involved to taking it to less than 2 for TSI and the costs of doing so for TSC? But we have a detailed session on this post the break, so I suggest that we wait for that. And after that, if there are still any more questions, we will take it in the second chat session. The next question is on the long-term vision for new materials, which I think the people are very excited about, say, 5 to 10 years later. So again, we have a presentation on this. We will take any subsequent questions maybe later. The third question is on our view towards our iron ore mines in India. So people are aware that the mines -- the lease expires in 2030, and therefore what is our strategy towards the integration going forward? And how do we see that really changing the business model?

Yes. So yes, irone ore is there with us till 2030. We will continue to expand our mining -- iron ore mining to fully support the steel manufacturing. So we had originally planned the expansion of the iron ore mines to coincide with the Kalinganagar expansion. But then the inorganic opportunities came in. And while just now there is some flexibility on selling iron ore from captive mines, though it's not yet been notified at the local level, but earlier when you didn't have that opportunity, it made no sense to expand ahead of the need because you couldn't have sold the iron ore, right? So having said that, over the next 10 years, we will optimize the use of iron ore to make sure that we leverage that footprint and monetize the value as much as we can. We will continue to participate in the auctions like we had done in the past, but we will be prudent about how we bid because we know that when you bid for the iron ore mine, you're effectively setting yourself a tax, which you'll pay for the next 50 years. The premium that you've made is the tax that you're paying to the government for the next 50 years. So we are conscious of that. It has to make sense for us to bid the premiums that we will bid. We believe that there will be enough iron ore mines available over the next 10 years. India is iron ore rich country. We also believe that some of the, what do you call it, excitement that there is about iron ore today may not be there 10 years from now because iron ore is available in plenty all over the world. And if you remember till 2005 nobody wanted iron ore mines in India. Tata Steel was being criticized for sticking with its iron ore mines till 2005. So it's only in the last 15 years that suddenly iron ore has become such a premium property. I think it will continue to be a bit of a premium property for some time, but things will level out over the years. 2, 3 things are going to happen. One is, as China switches move to electric arc furnace, the rest of the world switches also away from blast furnaces to other alternate technologies, I think the requirement for iron ore will change, the dynamics of the iron ore market will change. And like I said, there's plenty of iron ore in India and across the world. Second point is even in India, as you can see, we are also going to be investing more and more in the recycling business. So at least as far as the Long Products business is concerned, we do see pursuing growth opportunities using the electric arc furnace route. So that also reduces our dependence on iron ore to that extent. So I think we are reasonably well positioned. We have 10 years to participate in the auctions bid prudently so that what we get we have for some time. We have it on a competitive basis. So we are confident we'll be able to make the transition smoothly. In the meanwhile, we are also continuing to improve our conversion efficiency because Jamshedpur is only plant which had legacy costs. And those legacy costs are also going away as the -- we make the plant more efficient and improve the productivity. And the newer plants have conversion costs, which are comparable with the best in the world.

Thank you. We also have some more questions on EAF. So I think people are very excited about that and welcome that expansion. What is the fuel source you're looking at? What is the kind of investment that is envisaged? And what kind of returns are we aiming for?

Was the first question fuel source?

Fuel source for the EAF for business. What is the fuel source? And concerns about usage of thermal coal given the sustainability impact?

No. So it's like this. So basically, when you look at an electric arc furnace, the energy source is electricity, okay? And so then it depends on what is the source of electricity. And that's why when we are having conversations with different states, the source of power, the cost of that power is a very important part of the conversation because typically 10% to 15% of the cost is energy cost. So that's why we get to be careful about the locations we pick and the power cost is an important one and the source of that power is important. So if that state has a lot of power coming from renewable sources, that also helps, right? If it is thermal, I take your point. When you look at the carbon footprint, then you look at the source of energy. So we have those options to pursue. Typically, these are businesses where the EBITDA margins are lower. But if you run it well, you can write the cycle well, right, because it's a low fixed cost business, the margins may be low. But if you run it well, you can ride the cycle well because you can -- when steel price drops, the scrap price drop. And when the steel price goes up, scrap price goes up or the other way around. So there is a spread and you need to live within that spread and you can run it with a minimum of overhead costs. So we believe we can drive a lot of efficiencies if we standardize on the plant, the lay out, the equipment, the way we run it. And like I said, our Southeast Asian businesses are an example of the business that we have in terms of scrap conversion basis. In India, it's slightly different because if you look at the northern part of India or you look at parts of the country where there's no iron ore or it's far away from a port and there is scrap, then these are ideal locations for you to set up an EAF-based business as long as we have power available. So you have the -- you're not limited in choosing a site for a 3,000-acre steel plant. You can look for a 50, 100-acre plot and build this. So it gives us a lot of flexibility in picking location and helps us develop a very agile and nimble business model. And like I said, for this kind of capital intensity, it can easily be outsourced. There are enough partners out there willing to set this up for us. So neither we don't need to build the spend on the plant, even though the capital required may not be so much. And not only that, the value for us, particularly in some of these products, the rebars comes from a distribution network and the brand and less -- and the quality that we will ensure through our QA processes. And so the asset is not as critical as the brand and the distribution. The value is more in the product the distribution network and the brand. So GÃ¥rdhave has done this quite well in Brazil. So it's not something which has not worked in other parts of the world, and I think -- we think we can make it work in India.

Thank you. We will take 1 last question and this is for you, Koushik. The 2x net debt-to-EBITDA question, I think, is troubling a lot of people. So the question says -- and people are looking, I think, for more clarity here, that while the 2x net debt-to-EBITDA is the long-term target. What would be the upper level of net debt to say long-term average EBITDA that will make Tata Steel choose balance sheet over growth and probably deprioritize CapEx? Is there a level of debt or a level of ratio, which will not be crossed, which you can publicly commit to?

It sometimes seems, I'm in the church. But I think it's a point that I wanted to highlight is that, in fact, if you look at the slide which says net debt-to-EBITDA at 2, it's -- as I said, it's kind of a boundary limit that we should not be crossing to. Again, I repeat the point that it is across the cycle. It's not about -- see, today, I can look at and set up a time or a level of debt and say this is the level of debt. But tomorrow, if there are opportunities, we should not be prioritizing that and being hostage to it and not pursuing growth, which is of great value. For example, what we have seen in the past is the whole acquisition of TSBSL. Many people had said this is a costly acquisition. But 3 years down the line, with full integration and with the improvement in the market conditions, we have been able to leverage that acquisition very, very significantly. And this acquisition is now going to become the, one of the locations for the future growth for Tata Steel in India. So I think it is a question of judging at the right time as to what is the level of financial indebtedness that one can take on the balance sheet based on the strength of the underlying business. So Tata Steel's underlying business in India is a very dominant one, and it is very strong. And therefore, what I am merely giving a pointer that 2x net debt-to-EBITDA is more likely the boundary within which we will be. We closed last year with 2.45 or 2.49, just under 2.5, which, if I had told all of you 2 years back, you would have possibly laughed at me. But the fact is that it is part of resetting the balance sheet in a certain manner to make it more and more derisked. On the other hand, I must also say that a zero-debt option for a company like Tata Steel as a case in point, is not also financially worthwhile because we look, we take out the entire tax shield on the interest profile. So there is a balance that we need to build. I think post-March 22, we will be in a good position to say that where we will be, if we have to reset the boundaries below 2 at a point in time in the future. But I certainly don't want to compromise the growth opportunities of the company, if we are in a comfortable zone as far as the balance sheet is concerned. And 2x net debt-to-EBITDA is not something anybody should be complaining about for a company which wants to double its capacity over the next 10 years. So I think -- if I take all the building blocks together, I think this is a list of the point to be first brought as far as I'm concerned because we are on that track, and we will continue to reduce our debt. And if there are opportunities where it gives us -- I have talked about also the hurdle rates which we follow for our capital allocation projects. So if those hurdle rates are complied with and if my balance sheet is in good shape, I will certainly pursue the growth. And that's why I said 2x across the cycle because we are a cyclical business. We are not a business where you come to a level and it doesn't kind of change. And more importantly, I will repeat again that it is a net debt to EBITDA, which is a dynamic ratio rather than net debt to equity. If you ask me net debt to equity, I would possibly say it will be somewhere around 0.4, 0.5. But if it is net debt to EBITDA, it does fluctuate year-on-year, and I think that's the whole point. Our target this year will be certainly be much, much lower than 2x. But going forward, we need to understand what are the -- what is the level that our investments and pursue growth. We will set up. And I think March '22, as I said, it's a good time to reset it for the long term because we would have 2 good years of performance, which will reset the balance sheet on a more permanent basis.

Thank you. So we have taken a lot of the chat questions. In the next Q&A session, we will take the audio questions. So please do feel free to raise them and join the audio queue for the next session. We will now take the break and resume at 4:15 India Time. Thank you very much for joining and look forward to the next session. [Break]

Welcome back to our audience. I hope you've had a chance to grab a quick cup of coffee to recharge for our next session. We saw a lot of questions in the chat queue, and we look forward to answering more of your audio questions in this session. So as many of you know and I keep saying this in many of our new things. We also alluded to it earlier in whole. Tata Steel is constrained by its production capacity and market in India. We have an impressive track record of selling the volumes we produce in the segments we want to, all the while commanding a very impressive premium over our competitors. I will now call upon Mr. Peeyush Gupta, Vice President Marketing and Sales, to explain to you how he and his team have been able to do this so successfully quarter-over-quarter, year after year. Over to you, Peeyush.

Thank you, Samita. Good evening, good afternoon, and good morning to those who have joined in from different geographies. So this presentation over the next 30 minutes, I will walk you over on market leadership initiatives what we've undertaken and how it has made us future-fit in terms of our strategy. Next, please. Yes. Naren talked about some of these aspects. I have picked up 4 of these important structural changes which have happened and various companies have seen this, and this is what steel industry experienced over the last year as we fought the pandemic. First, on the top left, crude steel output across the world had a different line. China was doing very well, fought the pandemic very well and compared to rest of the world. But this is by far one of the highest numbers of the utilization levels. And this is deeply connected with the graph below this, which is at the bottom left to talk about the steel demand. So while rest of the world still waited for the demand to come back to prepandemic, China galloped ahead. And this is also one of the reasons why China has started to become into a domestic-focused company. We have a -- country. We have also seen this kind of a domestic focus and regionalization of the trade, which has started to happen. So on the top left, on the top right on our graph, we see world exports. This is 100% stack graph because the world trade stays around 400 million to 425 million tonnes. But what has happened over the last 2 years is China's position has been taken on by India, Turkey and Russia. And this is a significant movement because what China has shown is that they want to be focused on the domestic buyers and leave a little quantity in the form of exports. The right on the below graph is talking about the spread. And this shows as to how situation in the world has changed as we started to use and the steel companies across the world started to use different kinds of raw materials. So while China was focused on local coal, which was being purchased at a higher price, whereas rest of the world was taking the Australian coal. And consequently, while the premium between a Japanese mill and a Chinese mill remained nearly the same, but Japanese companies were able to or Korean companies for that matter were able to enjoy a higher price and high spread. And this is, again, a movement, which we have seen over the last 3 quarters, as you see a different color of yellow and blue to come in. This is continuing even in this current quarter as well as we're expecting it to continue in quarter 2 as well. And so long as this thing is there, we will continue to see a different kind of prosperity, which will be there in the world steel markets. Next, please. In the Indian market, also, there were 4 significant changes and developments which happened. First, there's a difference between secondary producers and integrated steel producers. Any steel company, which has got raw material access or a blast furnace-based route was able to see a better utilization levels. And overall utilization levels stayed above 75-odd percent. Now again, this shows the utilization levels are less affected by pandemic in a growing country like India. Steel consumption indeed got affected last year. We saw a negative 6%, and it started to improve, and we're expecting as we are fighting the wave 2, and looking at the consumption numbers to come back, we will see an improvement, which will happen in the steel consumption in the country. Net exports is an important metric. As a country, we used to be a net importer of steel, and this position changed. It not only changed just about in a smaller positive number, but a significant positive number to see 17 million tonnes of exports. And we're expecting this thing to remain there. And this actually establishes and puts to rest many doubts which world steel industry has that whether India can be a competitive place to make steel or export steel. It also establishes the quality consciousness, which is there in the steel producers in the country. And the right at the bottom-right graph shows you the difference between what as a domestic customer you will experience in India in terms of the steel prices. As you all know, steel prices in the country used to be closely tracked to the import arrivers. But this picture changed. And we saw a much higher delta in terms of the prices, what was experienced by the world markets compared to domestic market. And this is why the domestic price was at a discount and it also showed as to how domestic steel industry continue to focus on their domestic customers, and they maintained a certain kind of exports for balancing out the capacities, which were being used to produce the steel. Next, please. Yes. So this slide has actually 2 parts. The left side of it will show you what anybody in the steel industry would look at as the steel business. And sure enough, the pie chart shows you the steel consumption, which is there in the market, whether you're a domestic company or in any international company, you will see this kind of a pie chart spread across various segments. What's important to appreciate is how Tata Steel looks at it. So while we look at construction and automotive, but our composition of our pie chart is very different from what the steel consumption is, and that's why you see a much larger blue part of the pie, which is there in Tata Steel play, which is corresponding to automotive. We are, of course, presenting construction. But in the general engineering, which is also an important segment because of the SME play which we have in the country. So the wagon wheel, which we have for Tata Steel is very uniquely designed and that's the first start of the differentiation, which we do in the marketplace. The second thing which we do in the marketplace in this -- in the form of our customer mix. So while everybody believes that steel is more of a B2B play, but we have looked at 3 kinds of customer groups. The B2B markets; B2C markets, which is B2consumer; and also B2SME, which is also called as B2ECA for us. And you can see this on the lower pie chart as to how it has started to take, from nearly less than 5% 20 years back to almost 50% -- 40% is coming in from this part. This is only for the steel business. And if you add on to the downstream businesses, where also we look at our customers in these 3 blocks of B2B, B2C and B2ECA. I also want to touch upon on the bar graph, which you see, right at the bottom left part of it, wherein it shows how the sectoral demand is there in terms of the flat products and long products. And you can see pretty much we straddle about 87% of the markets, which means we have a full comprehensive range supported by all the 4 sites from where we make our steel. We are present in most of the demanding segments and discerning our customer markets. And that's what also helps us in causing the differentiation of the marketplace. And the last point, which I want to draw your attention to, is in the waterfall chart, which is showing domestic sales mix. This shows as to how we have done the segmentation of the market because we do not operate only in the commodity markets, which is right at the bottom in terms of HR commercial, which is hot roll commercial coils. But as you straddle it up and you see how we have looked at various other segments and more we do up, we start to find increasing margins or improving value, which we'll get from these markets. The X axis of this will show you the width of the bar, which is the percentage sales which we do in these segments. So this has been a journey, which has taken us a few years. And as we started to add on our mills and our product mix, we started to break this one composite market into the micro markets into these segments, which you see in the form of wagon wheels as well as through the different customer groups. In the subsequent slides, I'm going to talk about how we have caused the differentiation to be experienced by our consumers who are spread across the country. Next, please. This is the recap of the journey which Tata Steel has undertaken. The blue bars tells you about the domestic play which Tata Steel has shown, wherein our growth rate has been higher compared to the India growth rate, which the country has seen. It's nearly double of it, which has been a journey for last 10 or 11 years. It has been aided by our expansion programs as well as our acquisition strategy. And here, what's important is to be relevant in the markets of choice. We are not really only chasing the denominator in the form of the million tons but it should be in those customer markets and those discerning products which give us the competitive edge of the differentiation. When you see the stickers over there in the form of the green and the Bhushan Steel acquisition and Usha Martin, these have been carefully taken in and very quick ramp-up of these, whether it's in terms of the volumes or the quality, and you will see in the subsequent slides as to how we have used them to do brand ramp-up as well, have really caused the differentiation for us. The yellow sticker shows you also the export strategy and Tata Steel has not been new into export markets. While we were able to push the ante up last year when we were hit by the pandemic, but we have been in the export markets in very discerning markets like Japan, Korea or Europe or Middle East, since 1988. And we've chosen the products in these markets. We have placed these markets in strategic areas, worked with our customers with long-standing relationships and every time we need that support in the form of either designing the products for them or selling to them, we are able to do that. We make use of our eastern coast in terms of our shipments and contrary to many of the other companies and countries, which look at free-onboard shipments, we are one of the few companies which look at CFR, which is cost and freight shipments, which means we do our own shipping and chartering. And this is also one area of competitive advantage for us because we are able to give almost an assurance to the customers in international markets of a steady movement of the cargo or a consistent presence in these markets. Next, please. So these slides tell you about our journey and 3 important pieces of our strategy in terms of ensuring the leadership: capacity enhancement, brand rejuvenation and decommoditization. I'm going to spend a minute each on all the 3 words. Capacity enhancement has been done by our own expansion program, organic or through acquisition. And wherever we have done this, it has aided us in our expansion in th1e marketplace in the form of market share. So what you see on the top left is the automotive market share. We used to be below 50%. And as we got added on with TSBSL, we expanded this out. This market share is across the frac products, which is hot rolled, cold rolled and galvanized. Quite obviously, it is highest in hot rolled. But as we bring in the Kalinganagar cold rolling mill, we will also push this up in cold roll and galvanized products. And this is also one of the reasons why capacity enhancement has to be done in chosen markets and chosen product areas. The gray bar shows you the high-end products. Again, this is an important piece because India is going to see very different kind of cold rolled products or for that matter galvanized products, which our consumers will use. So as we start to appraise electric vehicles, we start to use lightweighting, country will start to use high tensile steels. We've done a start in the form of Jamshedpur line, which is done with the help of Nippon Steel joint venture, and we are taking on the cold-rolled products to a very different level in the country by activating the TSK CRM or the cold rolling mill at Kalinganagar project. On the bright side, it shows you as to how we have continued to dominate or show the leadership in the segments which are very exacting. So liquid paraffin gas, which is the petroleum gas, which is there for the LPG cylinder markets, while the numbers will go -- come and go because of the government policy to buy the cylinders, what's important is the market share. And our market shares have remained despite the pandemic. And the green piece tells you as to how we have started to move in, in our areas, which are specifically aided by our focused products, in this case, continuous welding electrodes. And along with the downstream products as well as what we do with the help of Kalinganagar project, we start to focus on these areas, which allows us to do a leadership play in these areas. Brands, which have been there for the last 20 years, they have been rejuvenated, every time we saw either a competition chasing us or a consumer is wanting various other things to happen. So in gas of galvanized corrugated sheets, we have almost a 50% market share play. This has been enabled largely due to help of TSBSL after the acquisition came in. But to occupy a rural marketplace with almost a 40%, 45% market share is something which shows the distribution might which we have. In case of Tata Tiscon, which is an INR 8,000 crore brand in a market which is worth INR 50,000 crores. We already have a leading play with 15% market share. And it also shows the headroom which we have in this market. And as electric arc furnace rebars come in, we will be able to occupy that headroom with the products. We've also started to use electric arc furnace-produced rebars which are made at our Southeast Asian operations. We bring them over into Southeast Asia -- into southern part of India from Southeast Asia and they are being introduced, and they're occupying that market as a rebar, which is done with Tata Tiscon brand name. Tata Tiscon brand name is not only restricted to India, it also occupies its position in Southeast Asia, in Thailand as well as in Singapore. So the brand play is an important part of continuously relevant in the market. So if you go back into how steel was designed in the form of reinforcing bars, we have steadily started to do higher strength rebars in the market as well as done various differentiation initiatives, what I'm going to take you through as we come to the B2C slides. And the last piece, which I want to draw your attention on has been about decommoditization. Sure enough, a hot-rolled coil is a hot-rolled coil, provided you cannot differentiate it. Tata Steel has been one of the few companies which have tried to differentiate its hot-rolled and cold-rolled products. So when you pick up a cold-rolled coil from Tata Steel, it will show its unique branding like a watermark on the coil printed from the mill. And we are the only ones with which do -- who do unique laser marking on the hot-rolled coil. Again, this allows not only authenticity of the product into the market, but it also tells the consumer or an SME, who is present across the country that this product comes from Tata Steel. This is one of the reasons why Tata Steel occupies its place because as a consumer, you want to be satisfied on the product which is coming out -- or the mill which is being used to manufacture this product. This kind of a branding has been extended on to Tata Steel 3 locations, which is Jamshedpur, Kalinganagar and the Angul plant of TSBSL. So these 3 pillars of capacity enhancement and brand remuneration and decommoditization have really caused us to occupy the leadership, and we propose to continue with these things even in the coming years. Next, please. Going into the specifics as to what we are intending to do and what we are doing, these are the 5 blocks which I want to take you through. Come next, please. On the B2B market, which is the first leadership enabler, we've designed multiple routes to reach the market. Naren talked about our ability to connect and transact and engage with the customer groups. All these routes are enabled digitally, as you can see with the WiFi sign. The unique part of Tata Steel is in the way we are distributed across the country in the form of the hubs and the spokes which we have, product application support, which we extend to our customers across the country. We are present in 95% districts of the country, with over 12,000 retailers. We've got fleet covered by vehicle tracking system because today, a consumer wants to know or an SME wants to know where is the material. We've got service centers, which are done with the partnerships with our customers or with our distributors for the last-point processing, and we have enabled everything to deal with constraints. So these are the 6 big levers which allow us to occupy this place in the market and have a country-wide coverage. So a lot of companies talk about product mix. We also talk about geographic mix. And if we have a differentiated geographies, it allows us to go into those markets which can get affected by pandemic or can get closed due to different reasons. But so long as the markets are open, we are able to make the sales. Next. The second enabler is, again, what we have tried to do here is the pioneering practices and what is unique in India. Sure enough, we work with our customers because these are demanding customers, discerning. They would like Tata Steel to support them with not only with the new vehicles which they are wanting to launch, but also in the form of various projects which will reduce the cost of steel which goes in a car. And that's what we try to do through value analysis and value engineering. We are involved in the new launches. We have made specific investments in the assets. I mentioned about JCAPCPL and TSK CRM. And also what we have done is extensive network within the geographies in which these customers are located. Customer obsession in the form of our dispatch efficiency with the help of various supply chain modes, which we have. And for -- we've introduced a digital enabler in the form of COMPASS, which tells the customer that where is the value-added product in their mix and where exactly is the seal as they place the order to us. This has all been enabled by customer engagement programs. We do customer service teams. And of course, we have created very unique platforms, which are first of its kind as a pioneering practice, whether for automotive or construction customers, including introduced introduction of new materials in the form of Mat-e-Reality. Next, please. This is a specific enabler about the SMEs. And this segment has been underserved. There are macro segments which are present. So if today, we have automotive as one segment or construction as another big segment, we have over 40 micro segments in this category of SMEs. They require a very different kind of engagement. We cannot do those only value engineering programs, but we can carry out very unique initiatives. We have titled them as e-cafes, which is a knowledge-based platform for them to talk to us. This creates industry experts. And these -- customers do not have access to these. And by Tata Steel and with Tata Steel, they are able to do that. We are wanting to create differentiation for them, which means they want those steels, which nobody else is able to supply to them. They have over 9,000 customers. And because we are able to reach out to them across the geography, we can -- and do this through these various programs, including the digitally enabled program called DIGECA. Micro segmentation is an important piece because you can design the steel using the mills which we have and reach out to those segments, which are unique in its character. And augmented channel, which is with the help of processing centers, everything cannot be processed by us. Entire steel, which goes into SME needs to be processed nearing the last mile connect, which is there. They require those certified service centers and Tata Steel has taken the step to formalize that whole set of service centers across the country. We've also created financing requirements. This whole initiative took a major step last year when the liquidity was a big crisis, and we created a program called Urja, and this has really enabled our SMEs to buy from us and also manage their liquid needs as they serve their SMEs. Next, please. In the B2C enabler, what we have created in the form of superior consumer experience on multiple points of friction. This friction comes in, in the form of -- and the customer goes to the shop to buy, they are looking for convenience because they cannot step out due to pandemic or otherwise. We've created very unique customized solutions. The Aashiyana platform, which guarantees 72-hour delivery anywhere in the country, if you place an order. We are only able to do this because we are the only ones who sell by piece. So as a customer, you don't have to weigh the steel when it is delivered. You can count the number of pieces. You can tell your security guy to count it at the site, and it will be delivered. And it is enabled through a very attractive payment platform. Asking expert, which is whether architects or special construction workers, it can be done in the form of designing of houses. I mentioned about Tata Tiscon in the high tensile steels, and also we are trying to do with the graphene coating on certain steel items. Various programs which you've done with the help of other Tata Group companies, both in the rural space and the urban space. So with the help of Tata Global Beverages, which is Tata Consumer Products now, we have done a Gao Chalo program because along with that tea and a hardware shop or at a multipurpose shop, even a GC sheet can be sold. And of course, we have done with the help of Rallis which is in to space for insecticides and pesticides, Kisan Kutumb program. We have created thatch to steel migration in the country, 1/3 of the steel and 1/3 of the routes are made of thatch and dials, and we want to migrate that customer or a consumer on to steel. We've done various programs to augment our channel, especially enabling them digitally and of course, carrying out various initiatives and the capability, which is with the help of the GenY which is there in our team or creating a Gurukul program. All of these are and many of these are pioneering practices and quite unique in India, and it shows the distribution as well as the consumer connect, which we have. So month-on-month or quarter-on-quarter, we can start to track the volatilities much less in case of such broker kind of sales because we can maintain the trajectory of our sales because of the spread to B2C and B2SME. Next, please. I want to spend a minute or 2 on the business context of what we were wanting to do as part of the service and solutions. The left side shows you as to what are the challenges which are being faced by any steel company. Sure, we are under pressure to improve profitability. Everybody has nearly the similar kind of a mill they are wanting to do a narrowing of broader differentiation. The market access is getting better and easier. And of course, consumer is starting to pay a premium on convenience and comfort. They want to order steel today on the click of a button. And when you are trying to do this, people are also wanting to create solutions, which are based on societal problems. And that is what led to -- all these 6 points led to our solutions, which you see on the right side of the slide. So these are illustrations of it. Naren talked about Tata Pravesh doors and windows. I'm just going to spend some time to tell you about this whole space of services solutions, is extending on to water ATMs. Toilet program, which has been there. We are one of the largest seller of these toilets. These are completely built units, which allow a toilet to be used for months and months together because they've got proper sanitation and hygiene. The AgroNest which is a smart onion warehouse, especially required for a country like India, which has got twice a year production of onions and they got spoiled during the summer months. We created rural Anganwadi which are important for creating schools for our -- in the rural markets for our children as well as we have created hospitals as well as steel security cabins, and these are all can be done in a record time with no effort of concrete and other requirement of materials, which will take 45 to 60 days for the house or the construction to happen. The lower part of the slide tells you why this is so attractive. Steel as a proportion of it on the solution is just about 1/10. And therefore, even if the steel prices go up and down, what is important is the solution has a price to it. So whether it is Tata Pravesh or a construction solution, or what we are wanting to do in the form of Nest-In, we supply steel, but more importantly, what the consumer is connected with is the solution for which they pay 8 to 10 times. And this is something which allows us to decommoditize also and to continue to sell our steel, but also for those solutions, which will not be competing in the commodity space of only steel. Because when you go to a customer, they will want to buy that particular steel or that particular solution and steel is just an ingredient for it. And this is one of the reasons also why this is caught on as a big theme, which has caused the differentiation in the marketplace. What you see on the slide is not the only thing which we do. We provide such kind of solutions, and this is the theme under which we work, whether it is wires. So we do various kinds of poultry and farm and vineyard cages. We do various kinds of tubular solutions, and we also carry this out in our solutions, which we do for our industrial byproducts areas as well as what we do in the steel products. So the theme of our whole business is going after the customers in the form of B2B, B2C and B2SME and also straddle out in the form of services and solutions across the product chain what we have. That's all I wanted to share with you. Thank you for your attention. Over to you, Samita. You are on mute.

Ms. Shah, we request you to unmute your microphone.

Is it better? Can you hear me?

Mam, the volume is very low.

Yes. I hope this is better.

Mam, it's still -- the volume is really very low.

Fine. Sanjiv, as I am not audible can you just invite him to join the conference?

Yes. Thank you, Samita. So mercy has hit you now. It had hit me a little while ago. Hopefully, we'll continue through this presentation at least. So greetings from me to everybody who is connected in this call. I hope I am audible?

Yes, you are sir.

Okay. So I'll begin our discussion on sustainability at Tata Steel with the Tata Ethos. Can we move to the main slide, please, the next slide? This Ethos we have inherited as legacy over the decades right from our founder, Jamsetji Nusserwanji Tata who believed that in a free enterprise, the community is not just another stakeholder in the business. But in fact, the very purpose of its existence. He is quoted as saying that we do not claim to be more unselfish, more generous or more philanthropic than other people. But we think we started on sound and straightforward business principles, considering the interest of the shareholders our own and health and welfare of our employees, the sure foundation of our success. Those are simpler times, way back in 1895, sustainability had not been discovered as a management jargon. However, the principles of care for people be it community or our own employees was seen as core to business as core as the attention to interest our shareholders. Over the years, as environment became an equally critical concern, this maxim got naturally extended to care for environment as well. Our sustainability framework is based on -- can you move to the next slide? As we move to the next slide, our sustainability framework is based on our vision to be the global steel industry benchmark for value creation and corporate citizenship. And this is supported on the pillars of environment, health, safety and welfare of our employees, the community and governance, which completes the troika of people, planet and profits this troika of sustainability. Our approach to sustainability is defined in the sustainability policy, which requires us to periodically call out material issues around environment, social and governance through a third-party assessment based on the globally accepted standard. These key material issues are then woven into our strategic development process, our strategic objectives and strategic enablers which then get deployed through our annual business plan and long-term plan. Next. I'll take you through these key material issues one by one in the forthcoming slides. Our CEO and Managing Director, Mr. Narendran has spoken to you regarding our carbon strategies. You'll notice he has spoken about it that our carbon footprint is the best in class in the geographies we operate in. The IJmuiden Steel Works in Netherlands is amongst the best as far as carbon emission intensity is concerned at 1.76 tonnes of CO2 per tonne of crude steel. Jamshedpur is an Indian benchmark at 2.29. And NatSteel at Singapore is one of the more energy-efficient EAF's, electric arc furnaces, in the world at around 0.5 tonnes of CO2 per tonne of crude steel. I believe somebody was asking questions as to what would be our enablers to take us forward to achieve our targets of 1.8 tonnes of CO2 per tonne of crude steel in India by 2030 and a 30% reduction by 2030 in Europe and carbon neutrality by 2050. So our key enablers will be adoption of the best available technologies to improve our efficiencies going forward, maximizing scrap use, continuously improving our raw material quality, greening our power mix. Naren has spoken about our scrap strategy going forward, scrap strategies going forward. And further down on deep decarbonization strategies, we are looking for collaborations with technology providers, startups and academia. And Dr. Debashish Bhattacharjee will be talking more about that. Next slide. Water is a material issue for us in Tata Steel India, not so much in Europe. And we have reduced our specific water consumption by more than 50% in the last 15 years. The Jamshedpur steel works stands out, where our freshwater intake at 10 million tonnes per annum capacity is less than half of what it was at 5 million tonnes, a 66% reduction in Jamshedpur since 2005. A 46% reduction in freshwater consumption at Kalinganagar since 2013. Going forward, we are looking to target a freshwater consumption of 1.5-meter cube per tonne of crude steel by 2030. And it would be very much in the better side of the world performances on water. We're also looking for achieving water neutrality going forward. Next slide. We have made significant improvement in air quality as well, especially at Jamshedpur, where our specific stack dust emissions have come down by 75% since 2005. At Kalinganagar, too, we have done considerable improvement as have we done in Europe -- our European plants as well. We are striving for benchmark status on specific stack dust emissions by 2030 at all our geographic locations. Next slide. Steel lends itself handsomely to the principles of circular economy, and we aim to leverage that to the health. Our material efficiencies are pretty much close to 100%, and we look to sustain that performance going forward. We are also looking to maximize our EBITDAs from a byproduct business, looking to double it in the coming decade. Naren spoke about setting up of the steel recycling business to harness the future recycling opportunities in India, and the first plant has been set up in Rohtak, and we've rolled out 2 brands of scrap, Tata FerroBaled and Tata FerroShred. We're looking to scale up the scrap base steel recycling business rapidly in the coming few years. Being an extractive industry, next slide, conservation and restoration of biodiversity is integral to our operations, especially our raw material operations. And we were one of the first companies in India who have a biodiversity policy. All our raw material locations have biodiversity management plans, which we have developed in collaboration with IUCN. I've listed down some key -- biodiversity restoration projects that we have accomplished in the past few years. Going forward, our aim is to develop these biodiversity management plans for all our operating sites, including the integrated steel operating sites and to achieve no net loss of biodiversity going forward. Next slide. We are committed to reduction of environmental footprint of our products using the life cycle approach. In that direction, we have developed India's first green certification trade framework in collaboration with CII Green Building Council. And our Tata Tiscon is the first GreenPro certified rebar brand in India. Our peers and our competitors are following suit now. Our EPD program in Europe, at Tata Steel Europe is around 15 years old and is one of the oldest in the industry. And it has been recognized and feated by worldsteel with the Steelie Award for Excellence in LCA. Going forward, we are looking to disclose environmental performance of 100% of our products, use LCA approach to differentiate our products and brands and influence consumer behavior by creating awareness on eco-friendly products. Next slide. We are committed to building a sustainable and resilient supply chain by proactively engaging with our supply chain partners. We have recently released the responsible supply chain policy to formalize our expectation on sustainability with our supply chain partners on the principles of fair business practices, health and safety, human rights and environmental protection. Going forward, we aim to cover 100% of our supply chain partners for ESG risk assessment as per these principles. And we're also looking to integrate ESG performance of supply chain partners in our future decision-making processes. Recently, Tata Steel has also become a member of ResponsibleSteel. ResponsibleSteel is a not-for-profit organization. And industry's first and only global multi-stakeholder standard and certification initiative with the objective to support responsible sourcing and production of steel to maximize steel's contribution to a sustainable society. We believe that this organization will shepherd the transition of the steel industry to a more sustainable paradigm. And we intend to get all our sites certified under ResponsibleSteel by 2025. Occupational health and safety has always been our highest parity. Next slide. And we have a robust governance mechanism from the Board to downwards to deploy our well thought-through strategies across the entire organization. And this has resulted in considerable improvement in the last few years as is visible from our LTIFR performance since 2005 in India, close to an 80% reduction and around a 44% reduction in Europe. Going forward, our aim surely is to achieve 0 harm, but we are some distance away from that. And all our efforts are aligned towards achieving that. Next slide. Our employers -- our employees are our biggest assets. And we invest a lot of time and resources in harnessing their full potential and empowering them to deliver their best, which has reflected extremely well in our employee engagement scores, which are best in the manufacturing sector. Our diversity and inclusion practices have also been attracting a lot of attention of late. We've recently launched MOSAIC. It's the organization-wide diversity resource group; WINGS, which is an employee resource group for the LGBTQ+ community; the equal opportunity policy, which focuses on persons with disability. We have deployed women in mining and manufacturing, and we have been engaging in employment, employability, education and entrepreneurship for the affirmative action community in our workforce. Going forward, we are looking to sustain our status as the best workplace in manufacturing sector in India and also sustain our benchmark status in employee engagement. We're also looking to improve diversity in workforce, targeting 25% gender diversity in manufacturing and mining locations. Next slide. On corporate social responsibility, we are pretty much a benchmark where we allocate our best talent and resources who engage for collaborations, which now deepen the SDG 2030 agenda amongst the communities through deployment of large-scale, replicable change models addressing core development gaps. We have achieved -- or we have reached 1.6 million lives last year through our CSR initiatives. And going forward, we are looking to facilitate transformative, efficient and lasting solutions to the development challenges of 10 million people per year by 2030. Our CSR spend has consistently been beyond the statutory mandate provided in India, and we are looking to establish Tata Steel Foundation as a partner of choice for deeper societal impact in Eastern India. We are also looking to foster an active community of change makers. Next slide. During the last 1.5 years, the world has seen once-in-a-century kind of a pandemic across the world, and India was hit particularly hard. The company has stood with the nation through this period, reaching out to 1.65 million lives, our employees dedicating their personal time volunteering around 15,000 hours. Materially, we have provided around 61,000 tonnes of liquid medical oxygen to the people through central and state governments. We have built medical -- additional medical support and COVID care facilities in all the geographies where we operate. 1,100-plus beds at Jamshedpur, COVID care facilities; 150 beds at Kalinganagar; 500 beds at Jajpur; 230 at Angul; more than 600 beds across all our operational areas in Jharia, West Bokaro, Noamundi, Joda and Gopalpur. We have supported the community through provision of meals, livelihood schemes, aid for migrant labor, education for children in remote villages and developing collaborative systems to overcome vaccination and early diagnosis hesitation in the rural communities. And finally, a slide on governance, completing the troika of the ESG. Next slide. We have a strong Board oversight with different Board committees overseeing various aspects of business, 50% independent directors, 10% women directors. We have policies to roll out our ESG agenda across the organization. Our conduct is guided by the Tata Code of Conduct, and we have deployed the Management of Business Ethics framework that reflects our commitment to shared values and principles. We look out for being the best in transparency and disclosures. One of our -- we were one of the first companies in India to adopt the GRI framework for sustainability reporting in 2000; one of the first companies in India to publish the integrated report in 2015/'16. We have been disclosing on the Dow Jones Sustainability Index since 2012 and on CDP on climate change since 2006 and on water since 2014. Next slide. We have been recognized for our efforts on sustainability globally as well as locally. And these are some of the accolades that we are very proud of. This is what I would like to say on sustainability. Thank you so much.

Thank you so much, Sanjiv. I hope my audio is better now. Firstly, apologies for the issues. I've had some technical problems. Our next speaker is Dr. Debashish Bhattacharjee, Vice President, Technology and New Materials Business. This is a facet of Tata Steel, which is not really in the public domain, but it is, so to speak, one of our hidden jewels. And I would request Dr. Bhattacharjee to actually walk us through how he and his team are innovating and transforming Tata Steel. Over to you, Debashish. Thank you.

Dr. Bhattacharjee, may we request you to please unmute your microphone and your video and proceed. Dr. Bhattacharjee?

Yes, hello, I can see myself.

Yes, sir. Please proceed.

Can you hear me?

Yes, sir.

Okay. So I'll start again. Good morning, good afternoon, good evening to everyone wherever you are, and I hope your -- you and your families and friends are safe. So I'll speak on Technology & New Materials business, which is, as Samita briefly mentioned is, something that's new to this audience. So I'll cover -- I'll start by covering -- by looking at the history briefly and then moving fast forward on -- with a focus on intellectual property to the current and then expand a bit on the technology leadership areas that Naren has mentioned in his talk at the beginning, looking at New Materials business and then touching upon the resources, both internal and external in the ecosystem that we leverage. Next one, please. So this is history. Tata Steel has always had a keen focus on technology and product development, and this is just around the year 1940. For the second world war, armored -- steels were developed for armored vehicles; steels and rivets were developed for the iconic Howrah bridge in Kolkata; around 1936, 1937, Asia's first corporate R&D in the steel sector was set up, which still stands today; and around 1938 or at the same time, the company's first intellectual property filing was made. Now flying fast forward on intellectual property, next one, please. Coming to the present. As has been mentioned before, we now file roughly more than 100 patents every year. Now there are companies in the East that file much more, and there are companies in the West that file much less. This is a strategy we take together with publications in renowned journals based on the defensive protection of our intellectual property arena. And we cover innovation and original work for the value of the company across the value chain from -- so roughly 32% of our intellectual property is filed in the raw materials areas; roughly 25% of the intellectual property is in the products domain; and just as an indicator of how much we collaborate with the ecosystem, roughly 10% of our intellectual property is in collaboration with other players. Next one, please. So over the years, we have been recognized for our innovativeness, for our intellectual property basket and the link to strategy by Reuters -- by Thomson Reuters, by CII. And within the group, as again Naren has mentioned before, we are one of the top most winners of Innovista Awards. Next one, please. So while -- yes, thank you. So while most of the intellectual property is used defensively to earn value for the company and is applied within the value chain of steel and its products, there is, of course, because of the nature of innovation, intellectual property that is generated in the slip streams of the main process, and these don't get engrossed and then engulfed the main stream. Yet there is value. And so we have set up an incubation system where these intellectual properties are incubated and value extracted. So one of the examples is value extraction from a new method for utilization of steelmaking slag. And as some of you may know, the steelmaking slag is difficult to dispose of. Yet, here is a technology that allows steelmaking slag to be used as a soil conditioner and is a valuable commodity. So we are now test marketing it in the eastern part of India. In the pipeline is also another waste product that comes out of the pickling lines before cold rolling, whether these are iron dust, normally used in painting flower pots, very low end use, which is our intellectual property. This can be used in metal injection molding with incredibly high value. And these are, of course, all explicit intellectual property, but there is a huge amount of passive intellectual property and the experience and knowledge of people, which we then -- we are now attempting to monetize through establishment of Tata Steel Industrial Consultancy, which is a new vertical that is formed, and the entire company's intellectual property knowledge is being attempted to be monetized through providing consultancy to other companies in whichever sector. Next one, please. Moving forward from now and looking into the future, there are areas which would need us to work on technologies that are not available, those solutions are not available today. So -- and in these areas, we wish to achieve technology leadership, as has been mentioned before. And some of these areas, there are 7 of them that we selected, are as follows: utilization of low-quality raw materials; carbon capture and utilization; hydrogen, which is generation of clean, green, cheap hydrogen; mobility; water neutrality; coatings, which add value to steel; and of course, application of digital in achieving first-time right and very high levels of performance in products areas. Next one, please. So in the next few slides, I will explain to you in some detail some of these areas, just to give you a feel of what goes on inside these domains. As I've explained before, roughly 32% of our intellectual property is in the area of raw materials. So needless to say, this is an area, which is very strong. And not only do we work on coal and iron ore, which are mainstream for us, we also have started working on adjacent areas, and these are the examples. So we are working on chromite overburden, which is the soil covering on the mine, which contains nickel and cobalt in small amounts. Now this has become useful and valuable because of the electric vehicle battery. The world is moving, and India is moving forward in a unidirectional manner towards electric vehicles and, of course, batteries will become very important. So when batteries happen and when the battery -- volumes of battery grows, India will have to look at -- we have to transit from one imported energy material, which is oil, petrol, to another set of imported energy materials, which are lithium, nickel, cobalt, high-grade manganese. And all these are imported today, with very little raw materials base in India. And yet, we have here in very low-grade raw materials, nickel, cobalt and the possibility of having high-grade manganese. So we have a whole series of projects at pilot scale, which attempts to extract nickel and cobalt and high-grade manganese from our own mines and the rejects of our own mines. And these will all go for use in battery materials. Just to give an example of how we deal with our mainstream materials, such as coal and coke. So coke is expensive, as you would know. Replacing hard coking coal with noncoking coal and yet getting the coke properties would be useful because you're replacing a cheaper material -- replacing a costlier material with a cheaper material. So our researchers in the raw materials area found out a polymer, which when added to coke mix -- coal mix, would enable the use of low-grade coal, noncoking coal and replace prime coking coal to the extent that at this moment, this has reached commercial level and is being applied in the plant. 10% of hard coking coal has been replaced. This is being tried out at commercial level in Jamshedpur, and the total annual savings would be around INR 150 crores to INR 200 crores. Next one, please. CO2 has been mentioned many times by the previous speakers. And the problem occurs because iron ore is an oxide, and you could take the oxygen out to get the iron. And the easiest way to take oxygen out is by providing it with carbon, carbon becomes carbon dioxide, leaving iron behind. And this carbon dioxide is a problem today. So roughly per tonne of steel, we get 2 tonnes, 2.2 tonnes of carbon dioxide, which in order to abate this carbon dioxide, you need to capture it. But just capturing is not enough. What you do with that CO2, you therefore need to utilize it or sequestrate it. So we have a huge range of programs in the research domain, research and technology development domain where we're attempting to capture the CO2 at scale, which is millions of tonnes and then utilize the CO2. This is an example of a first pilot plant that has been set up in Jamshedpur, which works at a 5 tonne per day level, which is small because it's just a pilot plant. And this carbon dioxide is captured directly from the blast furnace of cast and the utilization is within the steel plant itself. A further upscale of this will be set up in Kalinganagar plant during the course of this financial year. Just touching upon hydrogen. If we have to get rid of carbon as a remover of oxygen, we need to have hydrogen as a remover of oxygen, you get water, which is good. But how do we get hydrogen? One way is to electrolyze water, but then electrolysis needs electricity, which is not green today, not in India. And therefore, that doesn't solve the problem really. So we are looking at multiple other ways of generating clean, green, cheap hydrogen. And one of the routes is biomass and municipal waste, which generates a mixture of CO, that's carbon monoxide, and hydrogen, and you can vary the mixture to get the ratio of hydrogen that you want. And this pilot plant is again being set up in Kalinganagar at a 10 tonne per day scale. Next, one, please. Going on to mobility. 25% of our intellectual property is generated in the products area. And most of these products are driven -- product innovation is driven by automotive. It's just high strength steels, high formable steels and, more recently, composite materials are coming in this domain. But developing these products is one thing and taking it to the customer is another. So picture here is the example of value-added engineering that we do along with the engineering and design team of the automotive companies. VAVE and early vendor involvement work, which enables us to advise the automakers to use our solutions. And this way, we not only develop the steels and the materials, we also enable the use of this material in automotives. Recently, a Japanese steel company asked us using our expertise in this area to pare down -- to do pare down, give them the pare down service of vehicles and analyze the materials that have gone into that vehicle. Our European R&D center is deeply involved in the cutting-edge mass mobility solution of hyperloop. They're developing steels and steel joining technologies that can contain the high levels of vacuum that are needed for these hyperloop vehicles. They're also developing high -- the rail steels that would tolerate the high speeds, at least in the initial part, of the movement of these vehicles, so on and so forth. Next one, please. Yes. So Sanjiv mentioned about water, and the aim in here is, of course, water neutrality. To achieve that as -- we have achieved significant reduction in water consumption, but there's a long way to go. Our aim is to be world benchmark across sectors in water utilization. And so we need to work on water -- decreasing water consumption in various process steps and also cleaning water, cleaning reject water. So these are specific technology interventions in decreasing water consumption through more efficient cooling or cleaning up reject water without leaving mass residues. So this is a patented technology that was -- that has been developed and is being -- as we speak, being implemented in the Angul plant, where ultraviolet rays of certain wave length are being used to oxidize the cyanide in water and leave it clean for reuse. Coatings on steels has been mentioned, and this is the first in world, developed through technology leadership, area projects, which helps in decreasing number of layers of coatings and number of steps in coating at the customer's premise. And therefore, this becomes a much more easily usable steel substrate. Next one, please. Coming on to new materials business. Naren has mentioned in his talk about why we have moved into -- we have chosen to go into new materials, for addressing the cyclicality of the steel business, about taking advantage of the emerging trends along with various dimensions of lightweighting, et cetera. So we carried out an extensive selection process of which material to focus on, and we found 3: composites, graphene and medical materials. And some of the filters that we used was size of the market, the potential to innovate and therefore take a leadership position in these materials and the profitability in these materials. Next one, please. So composites today has entered its third year of business, and it addresses 3 sectors: the railway sector, the infrastructure and industry. So in railway sector, for example, we are working with Indian Railways to transform the inside of passenger coaches into FRP and honeycomb-based composite materials. So this is an example of the first First AC coach, First Class AC coach, at the Modern Coach Factory in Raebareli that was entirely fitted by us with our material. On the left is an example of the infrastructure sector where, together with Nest-In, the composite business provided several tens of cabins for the hospital at Kasaragod. These were 40 feet long by 10 feet wide cabins, which were transported from the manufacturing site on trucks to the hospital site. On the right-hand side is another example of the application in infrastructure, which are the bridges which can be bespoke, they're light, easily fitted, easily carried, et cetera, and there are multiple other applications today in composites. We are also working on carbon fiber from the byproducts of the steel industry. So using coal tar, which is a byproduct of the coke ovens, using that to produce carbon fiber. And that would be a synergy between composites and steel. Next one, please. So graphene is where we have our own intellectual property. It came out as one of the examples of intellectual property that was on the slipstream of steel innovation. Today, we have 50 patents filed across 10 countries. The picture here shows the 100 tonne per annum facility that we put up and is one of the biggest graphene production facilities in the world. And currently, we are using -- commercially using graphene in materials handling, which are conveyor belts and the idler rollers below the conveyor belts. We're using it in HDPE pipes to increase their longevity and wear resistance and in coatings, as Peeyush has mentioned, on rebars and stirrups or rebars to increase corrosion resistance. And finally, it's a new material that we have gone into this year, which is medical materials, and we have chosen 2. The first is hydroxyapatite, which is a bone replacement. India does not make high-grade hydroxyapatite. Nearly 75% of high-grade materials for medical applications in India is imported. So here we are, we have worked with technology from Indian Institute of Science along with a start-up company and produced one of the world's best-quality hydroxyapatite, which is currently being tested out and -- as a coating on one of the implants in an establishment in India. The other material we are working on is collagen. Collagen is a skin replacement. It's an artificial skin. It can be used as flesh. Traditionally, technically, collagen is produced from cow or pig bone. Not very user-friendly in a country like India. So this is a technology, which produces collagen from fish scales, which is much more acceptable as a source. And again, together with a start-up company, we have started our work on producing user-friendly collagen for the Indian and global market. Next one, please. So the last part here is touching up on leveraging the ecosystem, external ecosystem. Our internal ecosystem is made up of about 280 researchers, most of whom are Masters degree or PhD holders. We roughly spend 300 -- INR 275 crores to INR 300 crores on research funds. But going forward, with -- of the pilot plants that are -- that I've talked about and the research domain in the technology leadership area, we have a plan of roughly INR 1,200 crores in capital and INR 1,500 crores in revenue budget. But of course, we leverage the external system to a large extent. We have Tata Steel Chair Professors at the University of Cambridge, at IIT Kharagpur and at Shibpur, as we leverage the professors themselves and their research groups for fundamental work. We have Umbrella Memorandum of Understanding with the CSIR Labs, which are Central Scientific and Industrial Research labs of the Government of India for multiple area -- with research at the pilot scale in multiple areas. And we have set up an R&D center co-located at the Indian Institute of Technology in Madras, and it's called Tata Steel Advanced Materials Research Center, which works very, very closely with the research groups of the IIT and Indian Institute of Science, Bangalore on -- in advanced materials research at the fundamental level. Next one, please. And lastly, not to forget the burgeoning start-up ecosystem. We have set up a vertical, which is dedicated to deal with the start-ups, both India and abroad. Currently, we are dealing with 300 start-ups with around 25 proof of concepts -- around 20 proof of concepts. And the 2 medical material examples I mentioned about have actually come out of the start-up ecosystem and are becoming commercial this year. Next one, please. So we are building further on a strong technology legacy and shaping the future through research, technology development and knowledge. Thank you very much.

Thank you very much, Debashish. We will now go into the audio chat -- audio question mode. And I would request Enba to help us with that. Thank you.

[Operator Instructions] Our first question is from Pinakin Parekh from JPMorgan.

My first question is on basically the CapEx numbers that were given out in the beginning of the call of INR 10,000 crores to INR 12,000 crores a year. What will be the CapEx on a consolidated basis, including Europe, including Southeast Asia operations? What will that number be? And associated with that, over the 5 -- next 5 years, how do we break that spending on a cumulative basis in terms of what will be the upstream steel capacity? What will be the downstream steel capacity? What will be the mining? How should we look at that CapEx split?

Yes. So Pinakin, I think the -- if I were to look at the first question that you had, which is the -- if you include Southeast Asia and Europe, Europe is typically around the zone of GBP 350 million, which is about, say, INR 3,500 crores on an annual basis on a regular sustenance CapEx license to operate safety, improvement, that bucket. And it also has some part of the strategic CapEx that is being built for the -- some part for the necessary transition from a low carbon perspective, but not the full part of it. But roughly GBP 350 million would be the number. And as far as Southeast Asia is concerned, it's much, much smaller. It's only in the zone of, I think, $50 million, $60 million. So I don't see Southeast Asia is counting in that whole frame. As far as the INR 10,000 crores to INR 12,000 crores is concerned, I said that as an average. Because when, for example, we are going to peak up and complete Kalinganagar project, for example, it typically has a delta of another, say, INR 2,000 crores for a year or 2 years. So -- but then again, it peaks down. This INR 10,000 crores to INR 12,000 crores actually also includes a significant part of the growth plan, which includes a brownfield expansion like Kalinganagar, the expansion relating to the downstream. So in my chart, I had shown that we are going to increase in tinplate. We want to aspire for a 1 million tonne in wires, in tubes and all of them doubling capacities. So those are all kind of captured within that INR 10,000 crores to INR 12,000 crores. And of course, the big integrated expansion like Kalinganagar; in future, when we take up the Angul, as an example. So those will all be subsumed within that INR 12,000 crores of CapEx. That's how we should look at it.

So sir, just to clarify, over the next 2 to 3 years, would there be work starting on any upstream steel capacity expansion beyond KPO Phase 2 in India?

Yes. So in our master plan, we do have, as Naren showed, the way forward to 25 million tonnes and then to 40 million tonnes, there could be probabilities of some starting on a parallel basis. Actually, when you start an upstream or an integrated site, you have first 18 months, which takes a lot of preparatory spends, which don't peak up. So we would like to ensure that the peak CapEx or the peak capital deployments are within that level. So one peaks up and comes down, the other one peaks up. So that's the way in which we can plan. And as I mentioned and Naren mentioned that we have the master plan to grow organically year-on-year. We have -- we also have the EAF-based steel recycling business and the EAF-based steelmaking. So all of that is there in our template. And we will calibrate it in a manner such that it gets faster to accelerate and yet maintains the discipline of capital allocation of around INR 10,000 crores, INR 12,000 crores.

Our next question is from Vishal Chandak from DAM Capital Advisor.

Sir just wanted to understand what is the total carbon allowance, which is available for...

Sorry to interrupt. Mr. Chandak, I'm sorry, but may we request you to please mute your webcast connection as it's causing disturbance in the call.

Sure. So sir just wanted to understand what is the total carbon allowance for U.K. and Netherlands separately for FY '22? And would this be sufficient to cover our production? Or we would be buying something? And if that's the case, then what is the shortfall?

So see the formulation of carbon allowances or free allowances under the European regime as well as now the U.K. regime is based on your actual production levels for the last 3 years. So that's how the carbon allowances are allocated largely. And if one produces more than that allowances, then one has to buy for that shortfall. So typically, in good markets and good times, Netherlands obviously increased its production numbers. And that's why in the last year also, we had some amount of purchase to be done. And this year, depending on how the market flows in the second half, in particular, we will -- we may have to buy it. But that's something that will be assessed as we go forward. The price at which it is bought is obviously at the EU-ETS traded price.

Okay. And this would effectively will not have an impact on [indiscernible] because incremental production with an incremental higher cost, would it not compromise the EBITDA?

No. So the understanding is, the way one looks at incremental production is whether it is marginally contribution-plus or profit-plus. So therefore, if you were to do that, and that factors in the carbon costs also.

We'll take our next question from Satyadeep Jain from AMBIT Capital.

Just a couple of questions. First, thanks for all the insights on different businesses. Globally, we are seeing some companies pivot to roofing panel businesses, whether you have the Cornerstone Building Solutions in U.S. and Ruukki Construction in Europe. Have you looked at potential for similar or maybe other businesses through organic or inorganic growth? That's my first question.

Yes. So in some sense, we are already in that space through our joint venture, Tata Blue Scope, which is basically into roofs and some industrial solutions. But for us, it's more value addition to existing product lines plus leveraging the relationships we have in the marketplace with the customers and trying to give them a solution and trying to sell them convenience in some sense rather than a product. So that's the way we are approaching it. And I think we feel we have enough opportunity to expand our revenues by monetizing that relationship as it exists. More specifically, the way Ruukki or somebody else has gone into it more and more into the -- an industrial business, well, that's not exactly where we are going. I think we are leveraging a little bit more the B2C side of the business, which is not so prevalent in the developed world. In the developing world, there is a great opportunity for us to monetize relationships in the B2C business, where the Tata brand and our distribution network and our niche gives us an advantage over many others.

Next question on the ESG. Thank you for all the insights on new material development. And so any update on HIsarna, where we are progressing on that front? And related to that would be, EU would be announcing the -- proposing carbon border mechanism next week. What's your expectation? When the bill -- when it was initially announced, the expectation was the free allowances would go out. Do you think free allowances have a possibility of staying in a new mechanism? And if they were to be removed, that means substantially higher carbon cost for consumers relative to the carbon surcharge you have. Is there a potential that, that could be absorbed by the customers longer term?

So as far as HIsarna is concerned, we have a pilot facility, which we've been running with over the last few years in Netherlands. In between, we had stopped the facility as we were dealing with other challenges in Netherlands. Now we've started that facility again. And we are also planning to build a HIsarna -- a scaled up portion of HIsarna because that facility is 60,000 tonnes per annum kind of small facility. We are planning to build a 400,000 to 500,000 tonne kind of facility in Jamshedpur. The advantage for -- advantage in having HIsarna in India is that HIsarna gives you a lot of flexibility in the use of raw materials, different kinds of raw materials. Indian iron ore has high alumina, high silica. So HIsarna helps us use that kind of material. So apart from the fact that the carbon which comes out of the HIsarna process is purer and hence more amenable to capture, it gives us a lot of flexibility in the use of raw materials that are available in India. So for multiple reasons, we think HIsarna could be a good option in India. And hence, we're building 400,000 to 500,000 tonne facility here. As we make that successful, then the next scale would be about 1 million tonnes. Whether we build it in Europe, I mean those are possibilities that we are exploring as we plan the transition in Europe into a low-carbon regime. Your second point on the carbon border adjustment mechanism, yes, we are engaged with the governments in Europe. We believe that some mechanism is required to create a level-playing field. As I said earlier, our facilities in Europe, particularly the one in IJmuiden are amongst the most carbon efficient to the world. So our submission to the governments have been that they should not be penalized by carbon costs when imports are coming in without that carbon cost, right? So the governments at the EU level and at the local level are supportive. Obviously, they need to work this out with the global community because there are many countries who are not in favor of border adjustment mechanism. Those discussions are going on. As far as phasing out the credits are concerned, even if it happens, it will be done over a period of time because, obviously, it defeats the purpose of trying to create a level-playing field. We are conscious of the conversation asking if it is double counting, et cetera. But I think governments there are supportive of managing this transition well, so that the industry in Europe is not disadvantaged. And like I said before, while part of the costs will be borne by the industry across Europe, not just Tata Steel, it will also be borne partly by the government and also partly by the customers. So I think the road map for Europe to transition into a low-carbon economy will certainly be something that the rest of the world will watch, and it will help us be better prepared for a road map when it's developed in India. When I say developed in India, by the Indian Government.

Our next question is from Abhijit Mitra from ICICI Securities. Mr. Abhijit Mitra, could you please unmute your connection and go ahead with your question. There seems to be no response. We'll take our next question. That's from Amit Murarka from Motilal Oswal.

My question was on your CapEx outlook. You mentioned INR 10,000 crore to INR 12,000 crore annual CapEx for the next 5 years. So would you be able to break it out between India and Europe as well as how much of this will be like environmental or sustainability-related CapEx?

So this INR 10,000 crores to INR 12,000 crores is -- what I have mentioned is, in India business taken together. It does not include Europe. This year, it would be more around tariffs and then the European part, but we will calibrate it yearly. So that's the ballpark name at which we will keep our CapEx to -- especially to complete our Kalinganagar facilities and our raw material expansion in a faster manner. And obviously, the downstream CapEx is something, which is much lower in intensity, but it's something, which is wider in terms of different product mix, be it wires, be it tinplate or tubes and so on.

Sure. So -- and how much then will be like overseas CapEx then, particularly for Europe? Would it be a similar number?

I just mentioned to, I think, Pinakin that overseas is roughly at about GBP 350 million, which is, say, about INR 3,500 crores. That's the cash CapEx, doesn't include much of the accounting on leases, et cetera, also happens. So this is essentially on the cash flow out of CapEx.

Sure. And like you mentioned a 12% IRR for CapEx threshold. So does the Europe CapEx meet that threshold or that's exempted?

No. So what we do is essentially the CAIRR is what we apply in India largely because the European CapEx, the nature of the CapEx is very sustenance in nature. It is not the large CapEx that we have in India. We are not setting up a new downstream big mill or an upstream capacity, et cetera. So the nature of the CapEx in Europe is more sustenance, license to operate, safety, improvement and a couple of enhancement to the operation -- operating assets in enhancing the asset reliability. So they are not the ones -- the nature of the CapEx is very different between India and Europe.

No, no, I understand, but are you evaluating...

Sorry.

Yes, what I meant was like have you evaluated it against future costs? Let's say, in case you don't do this CapEx and, in that sense, your carbon allocations, obviously, reduce and there's a hit on carbon costs. So you evaluated that CapEx against, let's say, a 5-year or whatever, 7-year outlook on...

Yes, that's exactly the point I'm mentioning that we use this for the purpose of investing in Europe to ensure that the asset reliabilities are such that the productivity is better, the carbon emissions transit to a lower level. There are investments that are made on environment to comply with the environment standards. So those you cannot do a CAIRR at 12%. So those are fundamentally mandatory kind of CapEx. And there are CapEx, which are meant to ensure that our emission norms -- in Netherlands, for example, it is already at some levels of the benchmark in carbon emissions at about 1.7. So there are some more investments that have been done to keep that emission level lower and lower. So those are looked at it from a different lens compared to what we look at it in India. But -- and it gets a direct reflection in Europe because if you are -- as I said earlier, if you're producing at a higher volume, you have to buy it from the EU-ETS market, which is trading at a certain level, whether it's EUR 40, EUR 45 per tonne. So we are very conscious of the fact that every tonne of additional production has to actually give a higher value in terms of margins and contribution to overcome that as also as a cost.

Our next question is from Abhijit Mitra from ICICI Securities.

The first question is on the net debt-to-EBITDA target of 2x. I think sort of from where we stand and especially given that the Chinese rebates are off, we are looking at a sustainable EBITDA through cycle, which sort of makes us think whether this is the sort of lowest net debt number that we are seeing now because if we are looking at a through-cycle EBITDA of INR 35,000 crores, INR 40,000 crores, that means a net debt of INR 80,000 crores through cycle. So are we missing something? Or is there more of a cyclical element to it, it goes down much lower before it comes up? I mean some thoughts on that.

No, Abhijit, so the net debt number of INR 80,000 crores is not the level that we will -- we are talking about. We are certainly -- as I said, March '22, you will see our net debt number which is much lower and a net debt to EBITDA number, which is much, much lower than the 2x. But if there are opportunities for a faster growth across cycle, and that's why I repeat the point of across cycle because at a time like this, we should not underestimate the cyclicality impact, even though if it is higher. So what we said is, at this point of time, we came from a very large number. We came down to under 2.5. We said that let's look at it till March '22. At this point of time, we think that net debt-to-EBITDA of about 2x is a comfortable number even with a lot of CapEx. And then when we look at March '22 and we have reset the balance sheet even further, we will take a call. I mean there is nothing to stop us. It's not that we are putting money outside somewhere. We are just saying that our debt level will continuously go down. That's why I said there is [indiscernible] target debt level to go to. We will continue to keep repaying our debt. We will continue to invest in our organic growth, and then we'll recalibrate and see what is the level it should go to. If you come to a level of say 1, just as an example, you might say, why 1, it should be 0.5. So there is the -- this is a dynamic matrix, which will change with the cyclicality of the business. But we are very clear that the debt level in absolute terms will continue to go down significantly from where we have started in 1st of April 2021. And we'll continue this deleveraging process for the next couple of years. And this year, I can certainly say that it will be much more than our announced policy of $1 billion. So if you triangulate all of these, you will find that this net debt number is likely to go down in the short term very significantly. But if there are opportunities, it should be like a barrier -- like a [Foreign Language] that beyond 2x, we would not cross. So I think that's how we should be looking at it.

That was the last question on audio. I now hand over the proceedings back to Ms. Samita Shah. Over to you, ma'am.

Yes. Thank you. So we have a lot of questions in the chat queue, I can see. We will start by addressing some of the questions, which were received in the pre-break session and then take the other chat questions. So there is this question which has come about world steel dynamics. So Russia has imposed a 15% export duty on metals, including steel. China is also clamping down on exports. If the 2 -- top 2 exporters are not promoting steel exports, what will be the implications on the steel industry? And I think the specific question is whether steel consumers will face steel shortages for a longer period of time and hence need to pay a premium.

So I think what we said earlier as well is that the global steel trade dynamic is going to change, right, as -- because the biggest exporters of steel, as you rightly said, have been China, Japan, Korea, Russia, et cetera. Of all these countries, the only country which had its own raw material and could export steel based on its in-house raw material was Russia. All the others are importing raw materials and exporting steel. So countries, who are importing raw materials and exporting steel and who have a net zero target or a net zero road map, will certainly discourage exports of steel, which is what we are seeing in China, Japan, and I would assume sooner than later, you'll see it in Korea as well, right? What does that mean? Russia is, I think, a little bit more of a temporary measure, more to look at availability of steel and prices of steel here. But otherwise Russia is fundamentally a good place to produce steel. In fact, India and Russia are the best places to produce steel, India even better because India has a domestic market. But Russia also has raw materials like India does. So what does it do to the global trade? Well, Russia's actions will have certainly an impact on Europe, a positive impact on Europe because Russia sells a lot there. Russia sells a lot into Africa, Middle East and sometimes into Southeast Asia. The actions of Japan, Korea -- Korea not yet, Japan and China will have a greater impact in Southeast Asia, which is a big steel importing region. 30 million, 40 million tonnes of steel is imported every year from most of these countries. So that's why you -- we've seen steel prices be quite stable in Southeast Asia apart from the last few weeks. We are seeing new capacities coming up in Southeast Asia, whether it's in Vietnam or in Indonesia. So going forward, we see this industry to become more and more localized. People will have local production capacities to service local markets. And India would be potentially exporter of steel because India is a great place to produce steel. And already India is a net exporter of steel last year and this year. And there's no reason why it should not continue, but only challenge for India is, as the demand in India picks up, it's not going to be easy to build capacity so fast in India, like China did. So I do believe that India will never be an aggressive exporter like Japan or China or Korea, and there will be greater balance in the world steel trade on steel, which is good for us.

Thank you. The next question is a clarification, which was sought on Shikhar. So the Shikhar program has generated savings of INR 214 billion over the last 5 years. What does it mean? And can you highlight the through cycle improvement in the India EBITDA due to the program?

Yes. So every year, we typically see -- I mean, out of the EBITDA we deliver, maybe a couple of thousand crores comes from Shikhar. So that's pretty much what it contributes to the EBITDA every year. Now I think the question is also related to how do you measure it. So every year, when you take on a Shikhar program, you're benchmarking with the previous year, right? So it's not that you look at the coke rate of 5 years back and start. So if you already improve your coke rates and then you do another Shikhar program around the coke rate, you look at last year's coke rate and improve on that. So that's why every year, whatever comes in is for that particular year. Second thing is the program is focused on KPI improvement, right? So you may improve the coke rate. But if the coal price has gone up by $100, that improvement may not be so visible because you're consuming less coal, but the coal per tonne has gone up, right? And that is not in your control. So Shikhar programs are focused on KPI improvement rather than just looking at the cost because your cost can go down because your input price has gone down, not because you've improved efficiency. So it's an efficiency focused kind of program. What it also does is it drives the culture deep down in the organization. It harvests ideas, which come bottom up in the organization because people on the shop floor and operating people are involved in ideation, in the execution. So more than anything else, it drives a certain engagement, a certain culture of continuous improvement across the organization. And we also look at it as a mass training program because anyone who's -- and most line managers, in fact, many of us sitting here as well, I can certainly think of Sanjiv and Peeyush, have driven these programs at different points in their career. They've been full-time driving these improvement programs. So many of our leaders have been through these programs on a full-time basis, and we see it as an important leadership development program. So there is INR 2,000 crores to INR 3,000 crores every year, which comes in, plus a lot of unmeasurable benefit, which comes from the many things that I said.

Thank you. The next question, again, I think, is a clarification on the shipping and freight. So the question is, to what extent does Tata Steel reply -- rely on its own shipping and freight to [ service its customers ]? What kind of cost savings and speed benefits does this translate into?

So I'll give you a broader level answer, then Peeyush can supplement. So firstly, as far as our customers are concerned, we try to maximize the rail movement to our stockyards and that gives us an advantage because rail is cheaper than road, and then do the last mile delivery on road. As far as railway -- rail is concerned, we have a subsidiary called TMILL, which runs a few rakes as well because the government policy now allows you to run rakes. They run some of it for finished goods and some of it for raw materials. But beyond that, all the movement is outsourced. I mean, either to railways or if it is to transporters, those transporters are people who are partners in some sense. They invest in the trucks, they invest in the vehicles, they run it, but we don't deal much in the spot market. So we have people who invest in vehicles that qualify to carry our cargo, and we are not in the spot market trying to buy trucks from the market every day to ship material. So I think we look for people to own their own vehicles and transport them. We have our own network of stockyards, and the last mile delivery is also done. So we don't own the transportation. We own the physical distribution network through a network of stockyards, et cetera. Our logistics cost, inbound, outbound put together in the India context is, I think, about INR 10,000 crores on a cost base, I think, of about INR 60,000 crores. Peeyush, anything you want to add to that?

So 2 points to be added. First on the domestic piece, it's almost 100% coverage, which we provide to the customer, including the last-mile delivery. And that is how we have done it for the B2C businesses. Consumer does not care who is going to carry it. They just want it to be delivered. So to your question, it's 100% in the domestic market and judicious mix of rail and road what Mr. Narendran mentioned. On the international piece, also, we do almost 100% accountability for the movement of materials through ships. And this is something which we invested in over 2 decades back. We own -- we have tie-ups as well as we have our own berths in the east coast of the country. In the good times, which are non-pandemic times, we were doing 6 to 8 weeks from the order to delivery. In the pandemic time, we even shrunk it to 4 weeks, so from the day we took the order to on the ship, and that was a great example of how much control do we have because of the tie-ups, which we have in the 3 ports. As you know, we have got 3 plants in the East Coast, Jamshedpur, Kalinganagar and Angul, and we will use 3 places, which is Paradip, Dhamra and Haldia for making the shipments. But pretty much, we take 100% responsibility for material to be delivered through the ships as well. And it relates into inventory benefits for the customers, timely delivery of the product and we can do it much -- we can do a much better job because of the tie-ups which we have with the ports of shipment. Thank you.

The next question is on the different ballpark premiums we received for each of our category of customers. And there's also a question on the cost. But as you all know, we don't actually give the EBITDA guidance for any category. So maybe we can give you a sense of what is the pricing -- or ballpark pricing that we have for different segments.

Peeyush? You're on mute.

No. I'm -- is it okay now?

Yes.

For the B2C businesses, our premiums are higher. So we operate at rate of about 15% to 20% premium over the next best brand, which is there. And this is for Tata Tiscon and galvanized corrugated sheets, which is called as Tata Shaktee brand. And of course, in the color coated sheets, which we do through our joint venture company called Tata BlueScope. So in the B2C market, that's the premium which we have. In the B2SME markets, the premium levels are lower, about 5% to 7%. And wherever we are now moving in, we will operate with more of the solutions, the premium levels go up. So that's the range which we have.

The next question is about the PEB segment and what role does Tata Steel play? And what is our approach towards this market and our outlook towards the same?

Peeyush?

So pre-engineered buildings has been a very exciting place. And you can see from the topography of the country, how -- whether it's warehouse or fast speed of construction has come about, we have 4 points of play in pre-engineered buildings. First is supply of basic steel, which goes in for making the pillars as well as what goes in for the making the purlins. So since we have Kalinganagar operations, we have high-tensile steels, which go in. Secondly, we have also seen usage of welded sections. It's far better for any PEB manufacturer to weld 2 plates as opposed to taking a rolled section. The third area is coated steels as through our expansion as well as through TSBSL, we are able to provide that. And of course, we can do color-coated products, which are important for making the roofs of these pre-engineered buildings. So we have a 4-point play in that, and this is how we are working with most of the construction companies which are into PEB. Many of them are SMEs, and they require, again, the last mile connect and an ability to supply them ready-to-use material. So because of the service center network which we have around the country, we are able to do this piece as well. So they will have a so-called a bill of materials, and we can supply them as for the capsule or as per the module, which they want to erect out. And timely delivery is a critical thing because these projects come with very strong delivery window, and they have to hand over the projects to the final client. So we work very closely with them in this manner.

The next question is on ESG. On the environmental trend blast -- front, blast furnace has its own limitations in terms of reducing the carbon emission. When you look at new expansions, would you move away from the blast furnace route of steel generation?

So as we've said, even as we expand in Kalinganagar Phase 2 and look at options beyond Phase 2 in Kalinganagar and Angul and Jamshedpur, we are pursuing a recycling-based expansion also for long products. Having said that, the alternative to blast furnace in India could only be gas-based DRI at some point in time when gas is available in Eastern India. We understand in the next 2 to 3 years, there could be gas available. GAIL is in contact with us. They are building the infrastructure. We obviously need to be comfortable about availability of gas, the pricing of gas before we explore gas-based DRI as a viable alternative. Beyond that, of course, with the blast furnaces, the carbon capture and usage, et cetera, carbon capture storage may not be so viable in Eastern India, but carbon capture and usage is something that we explore. So eventually, the transition for steel industry will involve multiple solutions, will involve hydrogen, will involve some CCU&S, will involve gas-based DRI, and we will be pursuing all options depending on policy -- the policy evolution in India. Because India has not yet announced a net 0 goal, so we are wanting to see that because the policy has to evolve to support some of these investments. The infrastructure has to evolve to support some of these investments, like I said, if gas has to be available, then that infrastructure has to be built. But yes, theoretically, gas-based DRI could be -- and in that gas over a period of time when hydrogen is available, you could replace gas with hydrogen.

There's one more question on ESG, which is in terms of government support. How do you see government policy action to enable steel companies to really use and rely and push emerging technologies?

So we are obviously present both in Europe and in India. In India, the government engagement and policy evolution is much ahead because Europe, in many ways, is leading the way on this transition, right? So there is a different experience there, more advanced conversations going on. Different governments are backing different technologies in Europe, depending on the contextual and geographic advantages or disadvantageous. So let's say, if you look at Netherlands, the incentive structure is more towards carbon capture and storage, carbon capture and usage. So there are different policies evolving in different European countries. In India, I think the view of the government so far is a bit more that we have stuck to our end of the bargain as far as Paris is concerned. The developed world was to support the developing world in this transition with some funding for the transition, that has not happened. And I think the government's view is still we have a better understanding of whether what was promised in Paris from the developed world is coming in the way of the developing world. India is also thinking through what its goals are going to be. So we will wait for the Government of India to take a stand. As you are aware, they have not announced any net 0 goal yet. Obviously, our investment plans will have to be aligned with the evolution of policy because this transition, the cost of transition cannot just be borne by the industry. I'm not talking just Tata Steel, I'm saying steel industry. So policy has to support it, create a level playing field, and obviously, customers also should be willing to pay more for steel whose cost of production is higher. So I think this transition, like I said, is happening in Europe more than in anywhere else. And we -- as and when India transitions, we will be more than ready for it and that's why we are investing in all these new technologies today.

Sir, it's is a question on aluminum and high-strength steels. So it says aluminum seems to be making significant strides in future cars. Similarly, it appears that high-strength steel and ultra high-strength steel is expected to increase its share in the autobody mass at the cost of steel. How are you looking at this? And can you comment on it?

No, that's -- I mean, I think high-strength steels are the way to go, and it's been part of our journey. I will ask Debashish to maybe talk a little bit more in detail. We're doing a lot of work in that. Aluminum has always been a competing metal to steel. But I think depends on if you look at carbon footprint only in terms of tailpipe emissions, then you will have one answer. But if you look at it end-to-end, 1 tonne of aluminum emits 6 tons -- 6 times the amount of carbon as 1 tonne of steel does, right? So if you really look at it from a Scope 1, 2, 3 kind of thing, then you will come maybe with a different answer. So I think that subject is still out there. So far aluminum has made some inroads, but steel -- more than aluminum, I think maybe there would be composites and other materials which are used, and that's why we are also getting into adjacencies and in composites and other new materials in addition to steel, but I'll -- Debashish will elaborate a bit more. Debashish?

So as you rightly said, the high-strength steels are going to be progressively used more and more in automotive. We have ourselves progressed significantly in steel metallurgy going to higher and higher strengths, up to 700, 800 megapascals, and recently more than 1,000 megapascal. Going to high strength together with increasing ductility, and that's where the research direction is today across the world and also in Tata Steel. So we are working closely, as I said in my talk closely with the automakers themselves to find the right solution. So that's one part. The other part of the question, which is aluminum. I totally agree with Naren's view on that, which is aluminum doesn't really solve the CO2 problem. We see the world going towards multi-material solutions with steel to give the cost preference and strength and composite material to give 1/6 the density in terms of significant weight reduction. So that's the direction we see the world going. So high-strength steels together with composites.

The next question is on the new materials business. Are there any significant complementaries to the new material business? Or is it a completely new line of business to counter the cyclicality associated with steel?

So I'll answer that, and again, Debashish can supplement what I'm saying. When we were looking at materials beyond steel. I mean, we looked at a lot of materials, and there are a few things we look for. One is we wanted materials which are more knowledge-intensive than capital intensive because we were already in a capital-intensive business, right? Secondly, we wanted materials where China was not already a dominant player because we said that if somebody has scale much beyond what we can create in a period of time, and we are always competing on cost and it's not so different from the industry that we're already in, right? And thirdly, we said that we should be able to pick material where we can sell in India, build scale in India and then look beyond India, if required. So we went through multiple options and then we narrowed down on a list of few. Then we also started looking at how can we leverage relationships that we have or equity that we have in the marketplace, and that's where, like for instance, auto industry. We already have strong relationships with the auto customers. We are deeply engaged with them in development. A lot of work we do together. So how can we leverage that relationship to get a bigger share of the money they spend on materials and not limited to steel. Similarly with infrastructure, similarly with railways. These are all relationships we have, and we are already servicing these customer bases. So a multitude of these factors helped us narrow down on composites, on -- graphene, of course, was a little bit more drawn out of some R&D work we had done. It's based on an indigenous input, that's why this graphene is different from graphene that you would see elsewhere in the world. So there's a local advantage we have of an indigenous input to make the graphene. It's a patented process that we have. And we looked at composites, and we actually looked at fiber reinforced polymers. So this is what we narrowed down. And now what Debashish is saying a little bit material. Material is again driven by our process knowledge on materials and opportunity in India. Even if you look at Atmanirbharta as a concept. These are all materials being imported into India. There's an opportunity for us to develop it using the knowledge that we have and the technical strength that we have as far as materials is concerned. So I think this was the thought process. Debashish, you want to add to anything that I said?

No, I think you have covered it sufficiently. Nothing more to add. Thank you.

I think there's a follow-up question on that in terms of the size of the addressable market, profitability and growth outlook for the new materials business.

Yes. So the size -- so we are chasing big numbers, but I don't want to give you those numbers just now because it is still at a very early stage, right? But I think what we are looking for in these businesses is to grow at least 100%, 150% a year because the base is small. And each of these businesses should be worth at least INR 3,000 crores, INR 4,000 crores in the next 5, 6 years. That's what we're chasing. Otherwise, it is not worth putting that effort for any of these businesses. So we -- that's also a factor in our consideration. If at the end of the day, after 10 years, you have a small business, then it's, I think, not worth Tata Steel's while to invest in it. So I think these are some of the yardsticks we have used to get -- to set these goals. So at least I would say INR 3,000 crores to INR 4,000 crores for each of these businesses in the next 5 years is what we're chasing.

The next question is on the ROIC. And it says that the target ROIC mentioned at 15% is not very different. Is this a very conservative target? And how flexible is your CapEx for the next 5 years given the volatility of steel cycles?

Koushik?

So -- Yes. So I think the ROIC is being kept at 15% plus, so 15% to 20%, again, depending on how the cycle unfolds over the next 3, 4 years. Also important to understand that we are going to spend on building capacity. So the investment capital of the company will increase. So during the build phase and thereafter, while in ROIC calculation, we normally take out the capital WIP, but it has a scale up time of 3 to 4 years after which it matures. So I think it is important for us to keep, again, across the cycle number, which is 15% to 20%. Last year, we had scaled up, and this is on consolidated IC. It's not only on the India IC. So it is appropriate to keep it at a level that is aspirationally maintainable because if a company in a steel context is consistently at a range of 15% to 20%, I think it is in a top quartile performance as far as its benchmark peers are concerned. So I think -- and growing. So if you have to add another 5 million tonnes capacity over the next 5 years, we are looking at downstream. So there is, as I mentioned, INR 10,000 crore to INR 12,000 crores of CapEx coming in. The invested capital is not going to zoom up because it will take time to realize that capacity and then start being stable. So that's why it's in that range of 15% to 20%.

The next question is on TSE. And in light of the higher spreads as well as the cost rationalizations which have been undertaken, do you have any long-term visibility in terms of TSE EBITDA per tonne? Can you give us a sense of what that number could be?

No, no, go ahead.

No, I think, obviously, the minimum is we need to be cash positive, right? That's the minimum we are chasing, right, in an all-weather basis. So when in the past, I think we've guided that at EUR 240, EUR 250 a tonne is what Europe can be cash positive. So obviously, we think we are there. We are almost there. Netherlands, as Koushik said, has always been cash positive. A couple of years in between we had some challenges. U.K. is where we've had a bigger challenge, but U.K. has been EBITDA positive a couple of times in the last few years, but I think we are -- certainly, this year, we'll be cash positive in both the Netherlands and U.K. But going forward, we want to make sure that U.K. is also cash positive. And I think a lot of the cost takeouts will ensure that has happened. Rest is dependent on the spread, right? I mean, to me, it depends on what you take as a spread assumption. Today's spread is much higher. But like I said, we want to be cash positive by EUR 240, EUR 250 a tonne. That's what we're chasing.

And the last question, I think, which we will take for today is essentially on TSE as well as Northeast Asia. Southeast Asia is again consolidated back in the group. And does it imply a change in the strategy? And away from being focused purely in India, are you saying that restructuring of the European and the Southeast Asian assets is completely off the table?

No, I think I would put it slightly differently. So what were the drivers, right? I mean -- so one is, if you look at Southeast Asia, I think our fundamental point was that we were a bit subscale there. And we said that if you were to invest, we would rather invest in India. So we did not want to invest in Southeast Asia to grow. But the Southeast Asian business was always cash neutral or cash positive, did not require any support from India. So we explored possibilities. It didn't happen. It's not a drain on India. We have local teams, which run the business quite well. So we will keep it with us unless there's somebody who comes and has a good strategic story and it makes sense for Tata Steel. So there is no pressure on us. It's not a drain on our resources in any which way, stands on its own. But yes, it's in the long term, it's subscale. And if somebody has a better plan for Southeast Asia and that business has a better future with somebody else, we can explore that, right? But there is no pressure in terms of it being cash negative or anything. Europe, the pressure was more because it was cash negative. And Europe also, we felt strategically that the European steel industry needed to consolidate. But obviously, that's easier said than done because customers in Europe were not supportive of the steel industry in Europe consolidating. And hence, that this transaction didn't go through. SSAB didn't go through for other reasons. So again, but in the meanwhile, we've also made the European business cash positive even if steel prices are not so high. We believe this year we would have been cash positive in Europe. Last year, as Koushik said, we did not give any support even though the conditions were quite bad, right? So again, that -- and splitting U.K. and Netherlands allows us more strategic options for Europe. It's not thinking about what you do with Tata Steel Europe, you could have a strategy for Tata Steel Netherlands, you could have a strategy for Tata Steel U.K. The whole conversation around transitioning into a greener future also involves governments, depends on what is the support we get from the government. So I think we are at a stage where we are not under pressure because of cash burn from any of these businesses and that [Technical Difficulty] flat business. We want to create a sustainable future for each of those businesses going forward. And we will do whatever is right to create the sustainable business and which doesn't draw on India for cash. And that, hence, will make sure we are not distracted from growth options in India. Koushik, you want to say anything else, supplement?

No, no. I just wanted to say that there is no change in strategy. It's just that we are consolidating the business and doing a transformation as far as its competitive position is concerned. And in Southeast Asia, if, as you rightly mentioned, that if -- the time when we're looking at from a sales perspective, the valuations at that point of time were significantly lower than what we should expect on an elevated basis in the future. So that's the reason why we stopped that process. And we are working to consolidate that business between Thailand and Singapore. And if there are better opportunities in the future, we'll certainly look at it.

Thank you. So we have answered, I think, most of the questions which we had, and we will end the session here. Thank you very much to all of you who dialed in and took your time out to engage with us. We really enjoyed this. We found -- hope you found it insightful and interesting, and we look forward to connecting with you again. Take care. Good night, and good evening to all of you. Bye-bye.